Terrie's Take 523 -- Blood in the REITs, ebiz news from Japan

Sun Jun 28 22:54:17 JST 2009

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, June 28, 2009 Issue No. 523

+++ INDEX

- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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+++ WHAT'S NEW

It's been an ugly few months for the Japanese real estate
market, and in particular for condo developers who had
become so used to easy, low-interest money that when the
Lehman shock hit last year, they were collectively caught
with their pants half down. In October the first of many
funds, developers and operators went belly up, in the form
of New City Residence Investment Corporation. Since then
at least a dozen or more major firms have turned the lights
out, leaving about JPY400bn of bad debts behind -- and some
very unhappy banks and empty-handed investors.

The Japanese government is obviously very worried about
this ongoing rout in the real estate market, and given that
the sector is such a major employer and source of taxes, it
is an area that they have decided needs "saving". The
opening shot in their turn-around efforts came with the
April announcement of an JPY800bn public-private fund to be
established by the Development Bank of Japan (DBJ), to fund
REIT projects, back residential mortgages, and to directly
purchase REIT assets.

Since April, other government pronouncements have been
flowing on a regular basis, leading to the passing just
week of a bill allowing the so-called Banks' Shareholdings
Purchase Corp. to buy listed REIT shares both in the
marketplace and also from the banks. Although the Financial
Services Agency (FSA) is fighting a rearguard action to
slow down the purchases by this organization by
controlling at which level of creditworthiness REITs can
benefit from its largesse, it is clear that the politicians
intend to dump some serious cash into the sector, by hook
or by crook. As a result, as of this week, real estate
companies' stock prices were starting to bounce back.

[Continued below...]

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www.lincmedia.co.jp
-----------------------------------------------------------

[...Article continues]

As mentioned, the bureaucrats don't like this unbridled
bail-out effort, preferring the markets to work themselves
out. But global sentiment is such that they can't stem the
flow of tax-payer cash going out to those who are "too big
to fail", and instead their efforts are only slowing things
down a little. While we're reluctant to say it, we agree
with the bureaucrats. The government has no place
bolstering the property market. The REITs were built on
speculation and cheap money, and it's no one's fault in
particular that that era is over. The current actions just
prolong the inevitable -- which is that there is going to
be a further major market correction in Japanese property.

Against this background there are some property companies
that have decided to not wait for a government rescue,
which in any case could take months. Instead, they are
dumping any tangible assets they might own, so as to
generate badly needed cash, then going to creditors with
innovative work-out plans that encourage the creditors to
let them recover, rather than forcing them into bankruptcy.

One such company is Cosmos Initia, a leading condo
developer that used to be part of the Recruit Group. Cosmos
got badly beaten up in the financial downturn last year
and in April announced a loss of JPY11bn on consolidated
revenues of JPY191.6bn. Their losses primarily came from a
sudden slump on condo inventory valuations, which have
caused a huge cash crunch and a resulting panic by their
lenders. The normal situation would be that Cosmos Initia
would now be forced into bankruptcy and either go out of
business or get taken over by a "sponsor". Either way, the
assets would be sold off at low prices, the investors would
get nothing, and the banks would rack up another slate of
bad loans.

But something unusual is going on with Cosmos Initia. They
have approached an organization called the Japan
Association of Turnaround Professionals (JATP), a
government certified "alternative dispute resolution" (ADR)
organization, and have asked JATP to help negotiate with
their creditors to give the company time to rehabilitate
and thus repay its loans. This is the first time in the
property market that such an approach has been tried, and
many are watching the process with interest.

If it works, and so far creditors seem to be supportive of
the company's actions, then Cosmos Initia will be able to
continue trading, borrow more money, and get back on track.
No doubt the creditors are noticing that the market is
picking up and that investors are returning to property
stocks -- so they have every reason to wait for Cosmos
Initia, an otherwise well-run company, to recover.

While Cosmos Initia tries out its experiment in creditor
reasoning/communication, the bankruptcies in the sector
continue apace. On June 12th, property developer/leasing
firm Sea Capital filed for bankruptcy, with debts of
JPY15.52bn (US$162m). On June 11th, Hokkaido-based
condominium developer Miyakawa Construction filed for
bankruptcy with debts of JPY10.4bn (US$107m). And on May
29th, condo developer Joint Corp., filed for bankruptcy
with debts of JPY168bn (US$1.74bn).

It's quite a blood bath out there at the moment...

********************
Read the interesting Reader Feedback at the end of
this newsletter, on Overstayers and problems that
they can cause to the health care system.

********************
Terrie's Take is proud to be a supporter of The Japan
Helpline. To get help 24 hours assistance with any
problem, whether personal, legal, or financial, any time,
go to www.jhelp.com and click `help`.

To donate:
https://www.lincmedia.co.jp/jhelp?lang=en
Your support keeps The Japan Helpline going.

...The information janitors/

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+++ NEWS

- Rakuten gets big brands
- BT tie-up boosts IT co., stock
- PepsiCo buys into Calbee
- Trade surplus falls again
- Tax Office gets Switzerland and Bermuda tax cooperation

-> Rakuten gets big brands

In a development that we believe will be reversed in the
future, Japanese major product brands are increasingly
opening stores on the Rakuten shopping mall. Apparently
this is part of a wider trend for physical retailers of all
sizes, who are desperately seeking more sales. Rakuten now
has approximately 28,000 stores, with a normal growth rate
in openings of 10%-20%. However, it says that openings hit
30% year-on-year since March, and that June is expected to
be a record month for such openings. ***Ed: The problem
with bigger brand retailers (versus the makers) moving
completely away from their own web resources and on to the
Rakuten platform is that they suffer serious brand
dilution. Further, on the web, the size and capability of a
company means little in terms of financial performance,
compared to engaging content and smart presentation.**
(Source: TT commentary from nikkei, Jun 27, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20090626D26JFA05.htm

-> BT tie-up boosts IT co., stock

Proving that Japanese companies are once again looking
abroad for salvation and growth, news that IT Holdings (the
April integration of Intec Holdings and Toyo Joho Systems)
has forged an alliance with British Telecom has
significantly boosted the company's stock price. Apparently
the shares jumped almost 10% over the last few days, half
of that coming immediately after the company's Thursday
announcement of the tie-up. ***Ed: The perplexing thing is
that the tie-up appears to be pretty much one-way, with ITH
having to find Japanese clients who want to implement
projects abroad, then using BT's resources. This doesn't
sound like a radical improvement over what competitors are
already offering, so what's all the fuss about?** (Source: TT
commentary from nikkei.co.jp, Jun 26, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20090626D26SS658.htm

-> PepsiCo buys into Calbee

PepsiCo has announced that it will buy into leading potato
snack maker Calbee, by exchanging its Frito-Lay Japan
business for 20% of Calbee's stock. PepsiCo's stock rose
slightly, around 4 cents, on the news. Market commentators
are saying this is a good deal for PepsiCo, as it values
the company's JPY10bn Frito-Lay business in Japan as being
worth JPY20bn of Calbee's JPY130bn Japan business. ***Ed:
Why the difference? Most likely Calbee's Japan market share
is stagnant, while a global platform would give them a
significant pick up in sales. Or, maybe Frito-Lay Japan is
growing faster and is just a better business...?** (Source:
TT commentary from bloomberg.com, Jun 24, 2009)

http://www.bloomberg.com/apps/news?pid=20601101&sid=ayj04A2LEN6k

-> Trade surplus falls again

According to the Ministry of Finance, Japan's May trade
surplus fell 12.1% from last year, to JPY299.8bn
(US$3.14bn). Overall, exports fell 40.9% over last year, so
the surplus figure points to the fact that imports also
fell dramatically and thus Japanese inventories are under
reasonable control. Of the export losses, trade with the
U.S. plummeted 52.9% and with Europe an even worse 75.4%.
(Source: TT commentary from marketwatch.com, Jun 23, 2009)

http://tinyurl.com/mxr9bh

-> Tax Office gets Switzerland and Bermuda tax cooperation

The Finance Ministry has announced that it has signed basic
agreements with both Switzerland and Bermuda to exchange
tax information between the countries. The agreements come
as G20 finance ministers follow up on undertakings they
made in London in April, to take steps to reduce tax
evasion through low-tax and low-disclosure financial
jurisdictions. ***Ed: Although the agreements are now in
place, the biggest problem now confronting the Japan Tax
Office will be how to actually identify tax evaders when
they are using foreign dummy corporations. (Source: TT
commentary from japantimes.co.jp, Jun 27, 2009)

http://search.japantimes.co.jp/cgi-bin/nb20090627a5.html

NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.

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***------------------------****-------------------------***

+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a Division of the LINC Media group, is actively
marketing the following positions for customers setting up
or expanding in Japan, as well as other employers of
bilinguals.

** HIGHLIGHTED POSITION(S)

BiOS is looking for a highly skilled and experienced
Procurement Officer to join our team and service one of our
major clients in implementing a new cost cutting regime
within their current purchasing structure. You will be
tasked primarily with delivering savings across a variety
of purchasing areas, ranging from foodstuffs and IT
supplies to Telecoms and hotel stays. As well as this you
will be looking at how to consolidate or cut contracts
where appropriate, and to maximize our client’s spending
power and produce large savings across the board.

The ideal candidate for this role will have at least 6
years experience in purchasing and supply chain
management, and will be extremely skilled in negotiating
favorable terms as well as spotting opportunities to roll
several vendors into one supplier. In addition to this,
you will need to have a strong but discreet approach
towards political or historical issues that might arise
through your work, and have the ability to make the end
purchasers happy while still delivering the bottom line
savings required. As such, extremely strong communication
skills, a self starter attitude and the ability to cut
through the issues and deliver from Day One are an absolute
must to succeed in this role

Remuneration is JPY4.5m – JPY6m, based on your experience,
in addition to an extremely appealing commission package

** POSITIONS VACANT

- Localization engineer, intnl translation company, JPY6m
- Oracle 10g Data Base engineer – JPY6m – JPY9m
- Account Manager, LINC Media/BiOS, JPY3m – JPY5m+ commiss.
- Web Apps, multinational fiber optics co., JPY4.5m
- Web Apps developer, LINC Media – JPY3m – JPY4m

Interested individuals may e-mail resumes to:
stuart.gibson at biosjp.com

** BiOS Job Mail

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+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------ Terrie's Take in Okayama, Kobe ---------------

For the first time, serial entrepreneur Terrie Lloyd brings
his extremely popular business seminars to Okayama and to
Kobe. The Okayama seminar, entitled Innovative Business
Leaders Seminar, will be held on Saturday July 25 at the
Kurashiki Chamber of Commerce.

On Sunday July 26, Terrie will hold his Enrepreneurs
Handbook Seminar at the Kobe International House.

>From JR Sannomiya Station it's just a short 5 min walk down
Flower Road. To register, email seminar at japaninc.com.
For more information please go to:
http://www.japaninc.com/entrepreneur_handbook_seminar
-----------------------------------------------------------

------------------- ICA Event - July 30 -------------------

Event: Summer Networking Party! Open to all

Details: Complete event details at http://www.icajapan.jp/
(RSVP Required)

Date: Thursday, July 30, 2009

Time: 19:00 - 21:00 Open Bar and Finger Food Included
Cost: 1,000 yen (members), 2,500 yen (non-members)
Open to all - venue is Zest Iikura
http://www.zest-cantina.jp/en/iikura/home/location
-----------------------------------------------------------

-------------------- EA Meeting in July -------------------

The Entrepreneur Association of Tokyo is a proud supporter
of NetTokyo 2009 - summer charity networking event.

2009 marks the 5th year of NetTokyo - and this year it will
be another amazing event with 500 people expected!
What is NetTokyo?
The biggest summer, Saturday afternoon, network-of-networks
charity networking event for the Japanese and international
community in Tokyo.

The core concepts of NetTokyo are:

1) Bring members of various business groups together once
a year to help each organization and their members expand
their networks.

2) Raise money for deserving charities with each organizer
designating the charity of their choice.

3) Have a fun and casual summer afternoon party that is
family-friendly and a welcoming environment for all people.

Registration: http://www.nettokyo.jp
Date: Saturday, July 11, 2009
Time: 14:00 - 18:00
Venue: Monsoon Cafe Daikanyama
Price: 4000 yen in advance; 5000 yen at the door
-----------------------------------------------------------

----------------- Stay Ahead of the Game ------------------

COST-CUTTING STRATEGIES FOR FOREIGN BUSINESS
PEOPLE IN JAPAN

As Japan enters its tenth year of economic malaise, and with
the global economy also under strain, senior managers in Japan
are under pressure like never before to reduce costs and
increase efficiency.

Japan Inc Communications and Nomura Real Estate Development
are proud to announce a seminar designed to help foreign
business people find solutions that can be used in everyday
business planning and structuring.
The seminar will cover topics ranging from daily management
issues, IT structuring costs and office relocation to
distribution and other cost reduction.

Date: July 29th
Language: English
Venue: PMO Hatchobori, 3-22-13 Hatchobori, Chuo-ku, Tokyo
Time: 3pm - 6pm
Free registration.
For more information contact seminar at japaninc.com

-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors at terrie.com.

=> In TT522, we ran a news article that the government had
passed new laws to track foreign residents. Several people
wrote to point out that the bill had only passed the Lower
House at the time of writing. While this is true, the fact
is that the LDP has a majority in the Lower House and can
ram through any legislation they want. And they certainly
do want to beat up the foreigners at present.

Another reader had a different take, though, which we found
very interesting...

*** Reader feedback:
Hospitals are seeing an increase in those who overstay
their visas then come to the emergency room with an urgent
or life-threatening medical condition.  Of course, most
hospitals don’t refuse this kind of care, but the number
of cases is climbing and costing real money that can't be
reimbursed.

For example, a hospital known to me had an over-stayer
patient who needed urgent open heart surgery. The
operation cost the hospital JPY8m to perform -- and none
of this got paid for. Needless to say, they couldn't
place a claim with the government.

In another incident in the same hospital (and you can
multiply this situation by hundreds if not thousands of
hospitals around the country), a patient required
neurosurgery costing the hospital around JPY6m. Again,
no compensation other than a grateful smile.

I understand if these illegal immigrants need compassion,
and certainly they have been getting it from the municipal
office, since they have been getting basic services despite
the stamp on their expired Alien Registration Card that
says “No right to stay.” Getting their kids into school
doesn't really hurt anyone, but serious health care issues
do come out of someone's pocket and it causes huge feelings
of conflict by the health care givers involved. Reducing
the incidence of such overstayers would certainly resolve
this situation.

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-----------------------------------------------------------

***********************************************************
END

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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