2013 - Land Price Rises in Big Cities and also Disaster Areas

Residential land prices in Tokyo, Osaka and Nagoya rose by an average of 0.5 percent in the 12 months to Jan. 1, while commercial land prices increased by an average of 1.6 percent, both rising for the first time in six years, the government said Tuesday.

While average residential prices nationwide edged down 0.6 percent, and commercial property dropped 0.5 percent, the number of survey locations seeing land price increases jumped to around 7,000 from about 2,000 in 2012, the Land, Infrastructure, Transport and Tourism Ministry said in an annual report.

The highest land price was ¥29.6 million per square meter at Yamano Music Co.’s head office in Tokyo’s Ginza district.

The survey showed that land prices are recovering not only in the major metropolitan areas but in other locations as well.

A ministry official attributed the recovery to rising demand for condos and offices due to the Abe administration’s aggressive economic policies and low interest rates.

Some survey locations, including in Tokyo, saw price increases of more than 10 percent, but the official denied the possibility of an economic bubble backed by speculative purchases.

While commercial prices rose in all three major metropolitan areas, residential prices edged down 0.1 percent in Osaka.

Both residential and commercial land prices increased in Sapporo, Sendai, Fukuoka, Kusatsu in Shiga Prefecture and Naha in Okinawa. However, land prices declined at more than 70 percent of the survey locations in non-metropolitan areas.

In Iwate, Miyagi and Fukushima, the three prefectures hit hardest by the March 2011 earthquake and tsunami, the number of survey locations that saw price rises increased due to growing demand for land amid reconstruction work.
Residential land prices rose 2.5 percent in Miyagi while Fukushima saw a 1.2 percent increase.

A residential location in Ishinomaki, Miyagi Prefecture, saw a 15.1 percent increase, the highest among residential locations.

http://www.japantimes.co.jp/news/2014/03/18/business/land-prices-rise-in-big-metro-areas/#.UyjvP1GSx1M

Love Hotel Operator Posts Impressive Results despite earthquake and recession

Alchemy Japan’s Japanese Leisure Hotels’ 2011 revenues grew to JPY2,074 million, a 2% improvement on 2010. EBITDA was on par with previous year, at JPY623 million, despite Japan’s biggest recorded earthquake and tsunami and its disruption on economic growth and consumer confidence.

2011 revenue growth was led by an increase in customer numbers of 6% reaching annual high water mark average occupancy rate of 272%.

In Q1 2011, Japanese GDP contracted by 3.7% (annualized) while Alchemy’s hotels posted 13% EBIDTA growth in Q1 driven by 6% revenue growth. Q2 was heavily impacted by nationwide supply chain problems caused by the 3/11 EQ and tsunami and after-effects which disrupted production and impacted consumer confidence. This also had an adverse direct impact on operations in Kanto area hotels. Q2 revenue slowed but exceeded Q1 by 2.3% and was 3% above previous year, while Q2 EBITDA was 6.8% ahead of Q1 and +3% on PY.

H2 2011 saw Alchemy’s hotels post resilient results, maintaining revenues with year on year growth in customer numbers. Bottom line results were impacted by cost inflation, particularly energy costs.

“Our hotels produced strong counter-cyclical performance achieving market share growth, sales growth and resilient earnings in 2011 despite recessionary and deflationary pressures and substantial external shocks. ” says Alchemy Japan CEO Miro Mijatovic. “While our hotels’ rate of revenue and earnings growth slowed post 3/11, bottoming out in the summer; our strong finish to 2011, with the winter holiday period posting record growth and revenue high water marks at a number of our hotels, established positive forward momentum into 2012 and provides us confidence that we can continue to produce growth in 2012.

“The improved liquidity and contracting caprates in the general Japanese property sector has started to trickle down to operational assets like Leisure Hotels. A number of deals were completed in 2011 with the return of financing to the sector subsequent to the closing of the Japan Leisure Hotels Ltd transaction in June 2011 at historically high caprates, setting a low point for valuations. On the supply side, attractive single turnaround opportunities are available from numerous operators who have not coped well with 2011’s regulatory changes and also portfolio deals where some institutional investors are looking to recycle capital on their long term holdings. We see the current trend for contraction of caprates to continue into 2012.” says Mijatovic.

http://www.propertyfundsworld.com/2012/02/08/161853/alchemy-japan-kk-japanese-leisure-hotels-continues-revenue-growth-2011

How the Japanese Media Works

It was perhaps the biggest financial story of postwar Japan — or it should have been.Yamaichi Securities, one of the nation's four top brokerages, which was among the world's six largest in the 1980s, had in 1992 started to illegally bury millions of dollars in red ink off the books, setting up dummy foreign companies to absorb the losses. For good measure, its bosses were paying off sōkaiya (corporate extortionists) to stop them blowing the whistle on this practice.

In 1994, though, after weeks of old-fashioned digging and trawling through financial statements, journalist Shigeo Abe had the scoop of a lifetime — he and a team of reporters uncovered the entire mess.

But instead of running the story with banner headlines, Abe says his bosses at the Nikkei newspaper spiked it, sent him out of the country and allowed Yamaichi to stagger on for another three years.

Yamaichi would eventually collapse in 1997, leaving creditors and taxpayers saddled with more than ¥300 billion in debt. Live on television, President Shohei Nozawa famously made a tearful apology to the nation for the company's losses. There was no mea culpa from the Nikkei.

"If we had published the story, the result for Yamaichi shareholders and people connected with the company might have been very different," says Abe today, a quietly spoken, casually dressed 63-year-old. He recalls his bewilderment, then anger, as he watched his painstakingly built story buried by a single phone call.

"The story was ready to go when it was stopped. The Yamaichi president had called the Nikkei president and pressured him to not run it. He said: 'If we go bankrupt it will cause chaos in the economy.' And that was that."

A few months later, Abe was sent to the Nikkei's office in London, a kind of five-star exile, he believes, likening it to shimanagashi, the feudal practice of sending political troublemakers away to live on remote islands. During his three years abroad, he pondered his chosen profession.

"There are no real scoops in Japanese newspapers," he says. "They are almost always authorized leaks. I wondered about whether I wanted to work for a company that only reported problems that didn't damage its business."

When he returned to Tokyo in 1997, the 25-year veteran quit and began working for the weekly press, eventually founding the monthly investigative magazine Facta, which last year out-scooped Japan's richest media to reveal the Olympus Corp. scandal.

The Olympus story must have felt like history repeating itself. Again, an elite company was involved in the same illegal practice of burying losses, known in Japan as tobashi.

And again the Nikkei, Japan's leading business daily, initially declined to report it — even after Facta published it in July, along with diagrams and alarming accusations.

It wasn't until the story made the front pages of the business press in Europe and America months later that the Nikkei and other leading vernacular newspapers began catching up.

Soon after the article appeared in Facta, and Olympus' newly appointed President and Chief Executive Officer Michael Woodford was sent a copy of the magazine's five-page story, he confronted Olympus Chairman Tsuyoshi Kikukawa about its claims. Those included one that Olympus had paid $800 million for what Woodford called "Mickey Mouse companies," and another that it had spent $687 million on advisory fees in a $2 billion deal for a British medical equipment firm named Gyrus.

"Kikukawa said I'd not been told because I was so busy, but that was ridiculous to me," Woodford said in December.

After that meeting with Kikukawa, he has described how he waited weeks for the scandal — openly published in Facta — to break in the local media, before realizing he was on his own.

Facta's claims of "bizarre acquisitions" by Olympus included a pet-food company and a face-cream maker — neither of which had turned a profit. Exactly why a camera- and optical machinery-maker had spent so much money on 100 firms with "zero synergistic" value to it is still unclear.

However, in a second exclusive article, published in August 2011, Facta offered one possible reason: payoffs to "antisocial forces," the Japanese euphemism for yakuza gangsters.

An increasingly nervous Woodford again faced off with Kikukawa — and was fired on Oct. 14, 2011.

As he walked out of the Olympus office in Shinjuku, central Tokyo, after surrendering his mobile phone and company car, Woodford reportedly said his "hands were clammy" and he feared for his safety.

He did the only thing he could think of, which was to call a foreign reporter — Jonathan Soble of The Financial Times — and met him in a public place with lots of people around. By the time Woodford arrived in London a day later, the tale was on the FT's front page.

Woodford later noted that even then it still took the mainstream Japanese media a full week to pick up the story, trailing most of the world's major news outlets in the process.

Abe says the reason is simple: Facta was able to write about Olympus because the magazine has no advertisements or commercial ties to anyone. It survives on fees from roughly 20,000 subscribers and the initial funding of anonymous donors.

"Running even a small magazine costs ¥100 million a year and most operate at a loss for the first few years," he says, recalling how one wealthy elderly woman from the Kansai region of western Japan had parted with her cash to the as-yet-unfounded magazine in 2005. "She told me, 'all this money is no good to me if our society is in danger.' "

Facta is not sold in bookstores either because, Abe explains, he would have to pay the stores to stock it.

The Olympus story was the product of the same ferreting techniques he used to dig out his Yamaichi story. "Our approach is to use the skills we've built up as financial experts over the years to follow irregularities. If you study corporate accounts long enough, something odd often pops up and you follow that trail till you find the reason."

He says a Facta freelancer — another ex-Nikkei journalist — was tipped off to the Olympus problems a year ago by a whistleblower. "It was absolutely clear something was odd," Abe explains. "They were making acquisitions and not making them public. The company's cash flow was extraordinarily high but its capital was shrinking year by year. It didn't add up."

The story was shopped around several disbelieving editors until Abe agreed to check it out and publish.

And he believes the Olympus scandal has yet to bottom out, pointing to the likely involvement of "criminal elements" — though he is careful to distinguish those from organized crime, saying, "I don't see evidence of that yet." He suspects the dummy Olympus companies were part of a money-laundering network, but that's as much as he will say for now.

He predicts, however, that other Olympus-type scandals are being protected by a wall of silence in the press. "The lack of disclosure at poorly performing Japanese companies is a key reason for the poor economy of the last 20 years. Many more should be scrutinized," he declares.

Among the many stories Abe points to as not being properly covered by the big Japanese media are the Fukushima nuclear crisis (see accompanying story) and the tremendous influence that a handful of advertising agencies and talent agencies wield over Japanese society.

"Have you ever seen an article about those agencies?" Abe inquires. "It's almost impossible to cover them or their influence in Japan. They represent a lot of clients in Japan who naturally don't want any negative publicity, so their influence on what the public reads and sees is immense. And that is largely unknown — it's terribly difficult to show their influence. I believe that kind of opacity is one of the scariest aspects of life in Japan."

http://www.japantimes.co.jp/text/fl20120108x1.html?

A similar story but covering the Japanese media coverage of Fukushima - http://www.japantimes.co.jp/text/fl20120108x3.html

Other stories - http://www.japantimes.co.jp/text/fl20120108x2.html

H1 2011/12 (April - Sept) - First Trade Deficit since Lehman Shock as 3/11 EQ Impacts Exports

 Japan registered a 1.67 trillion yen trade deficit during the first half of fiscal 2011 as exports fell sharply due to the Great East Japan Earthquake, according to data released Monday by the Finance Ministry.
The nation's trade balance fell into the red for the first time since the second half of fiscal 2008, when the bankruptcy of Lehman Brothers Holdings Inc. of the United States triggered the global economic downturn.

The 1.67 trillion yen deficit in the April-September period is the second-largest on record, after the 2.35 trillion yen deficit registered during the second half of fiscal 1979 when crude oil prices soared in the wake of the second oil crisis.

Exports of automobiles and semiconductors plunged after the March 11 quake, while imports of liquefied natural gas and other fuels increased as the electricity industry relied more on thermal power generation due to the suspension of many nuclear power plants after the quake.

Overall, exports dropped 3.8 percent from a year earlier to 32.81 trillion yen. The automobile industry slumped 18.4 percent over the period, although its exports did increase in August and September from a year earlier.

Exports of semiconductors and other electronic components declined 15.8 percent, due to a sluggish market and the aftereffects of the March quake.

In contrast, imports expanded 12.1 percent to 34.48 trillion yen. LNG and crude oil imports increased 40.3 percent and 24.9 percent, respectively, as a result of stronger demand.

Higher prices for natural resources also contributed to the increase.

The September trade balance recorded a surplus of 300.4 billion yen, moving into the black for the first time since July. Exports increased 2.4 percent from a year earlier to 5.98 trillion yen, while imports grew 12.1 percent to 5.68 trillion yen.

However, the trade surplus decreased 61.2 percent from a year earlier with growth in imports exceeding that in exports.


http://www.yomiuri.co.jp/dy/business/T111024003843.htm

Key figures related to insurance claims due to the earthquakes and tsunamis in eastern Japan

Total insurance claims paid from the 3/11 EQ and Tsunami have topped JPY1 trillion

http://www.sonpo.or.jp/en/news/2011/1109_04.html

Q2 2011 - Tokyo Disneyland Sales Plunge 43% post earthquake

Tokyo Disneyland operator Oriental Land Co. said Thursday it posted a consolidated net loss of 3.80 billion yen for the April to June quarter, remaining in the red for the second quarter in a row, as it closed the amusement park and other facilities for more than a month due to damage caused by the March 11 earthquake and tsunami. 


Oriental Land said its sales plunged 43.0 percent from a year earlier to 48.55 billion yen, due to a more than 40 percent drop in its amusement park and hotel business segments.

Visitors to Tokyo Disneyland and DisneySea in Chiba Prefecture during the first quarter of fiscal 2011 declined from the previous year, but Oriental Land said the number of customers has now recovered to its usual level.

Due to the suspension of the parks and facilities at Tokyo Disney Resort, the company posted an extraordinary loss of 3.82 billion yen including fixed labor costs during the three-month period.

The company expects an extraordinary loss of 2.14 billion yen for the July-September second quarter due to costs associated with ceasing staging of the Canadian performing art troupe Cirque du Soleil's entertainment show at the entertainment complex at the end of this year.

http://www.breitbart.com/article.php?id=D9OTA5180&show_article=1

Alchemy's Japan Leisure Hotel's Strong Performance even after Earthquake and Recession

Despite the earthquake and nuclear crisis and recession - Japanese leisure hotels are still showing excellent cash growth showing counter cyclical tendencies - 


Alchemy Japan KK Japanese Leisure Hotels’ Post Strong earnings Growth for First Half 2011
Tokyo, Japan August 1st 2011 – Alchemy Japan’s Japanese Leisure Hotels reported H1 2011 EBITDA of ¥302 million, a 7% improvement on H1 2010, from a Net Operating Income of ¥432 million, a 4% growth on previous year. H1 revenues grew to ¥1,005 billion, a 4% increase on H1 2010 as customer numbers grew by 9% to reach a 265% occupancy rate.

Despite Japan returning to recession in the January-March Quarter, on the back of supply chain disruptions caused by the nation's biggest recorded earthquake and tsunami, with a GDP fall of 0.9 percent in Q1 (3.7% annualized), Alchemy’s Leisure Hotels posted 13% EBIDTA growth in Q1 driven by 6% revenue growth.

Many analysts saw the downturn worsening in April-June, as nationwide supply chain problems continued to disrupt production and consumer confidence was impacted by the aftereffects of the quake. Notwithstanding the difficult post 3/11 conditions, Alchemy’s Leisure Hotels Q2 revenue exceeded Q1 by 2.3% and was 3% above previous year, while Q2 EBITDA was 6.8% ahead of Q1 and +3% on PY.
Two strong quarters of growth combined to post H1 4% revenue Growth - led by a 9% increase in customer numbers as H1 2011 Occupancy rate (OCR) reached 265%.

“Our hotels have shown strong counter cyclical performance achieving sales and earnings growth despite recessionary and deflationary pressures. In the face of challenging consumer demand conditions resulting from defensive consumer spending we have been able to grow market share and strengthen our market leading revenue growth performance. We have outperformed both the greater hotel sector, which has seen revenue declines reaching as high as -32.4% on PY -according to STR Global- and also the general leisure hotel industry which has shown year on year contractions of around -4.6% post earthquake -according to Leisure Hotel Magazine-” said Alchemy Japan CEO Miro Mijatovic.
“While our rate of revenue and earnings growth has slowed in Q2 post 3/11, our revenue and earnings outlook for the rest of 2011 is positive. In June, industrial production had returned to pre-quake levels and there are signs that various other economic indicators (consumption and employment) had also recovered and so we anticipate the second half of 2011 to outperform H1 and also previous year” continued Mijatovic.

“The outstanding performance of the LH sector, during unprecedented conditions following the 3/11 earthquake and its after effects, confirms the attractiveness of this high yielding sector of the Japanese real estate market as a defensive investment.

Furthermore, while the broader Japan real estate sector has seen improved liquidity and contracting caprates, this trend has not yet trickled down to operational assets like Leisure Hotels where debt and equity are still scarce.

However we foresee a contraction of caprates in the future as we believe that the Japan Leisure Hotels Ltd transaction which closed in June 2011 at historically high caprates, has set a low point for valuations in this caprate cycle. This deal has also set a benchmark for buyer bids which has stimulated interest from new potential investors looking for defensive investment, due to the high cash yields and the counter-cyclical nature of the demand, both specific to the LH asset class” said Mijatovic.


http://www.propertyfundsworld.com/2011/08/09/127320/alchemys-japanese-leisure-hotels-post-strong-earnings-growth-1h-2011