Pacific Asset Management
Investing in real estate can be a hassle in Japan, but not when you use the services of a company like Pacific Asset Management. Established two years ago, Pacific Asset Management offers both Japanese and foreign clients a full range of real estate services, such as sourcing properties, arranging financing, finding tenants and looking after the property, among others.
Pacific Asset Management is headed by CEO Hideki Izutsu, who was born in Kobe. Before establishing Pacific Asset Management, Izutsu managed investment property at developers and REIT (real estate investment trust) companies for more than 10 years.
Japan Today visits Izutsu at his office in Roppongi to hear more.
Prior to establishing your company, you were working at a REIT during the Lehman shock. What did you learn from that experience?
At that time, I was an asset manager. Looking back, what I learned is that private investors should focus on only income gain that can be generated from the property, not capital gain. Even though the prices of some residential buildings went down to half of the asking prices after the Lehman shock, it did not have much impact on the rent.
There would be no impact on the owners in particular either even if the property prices drop temporarily, as individuals are able to take out 30-year bank loans and also it’s the bank that has to book valuation losses. In addition, who makes a profit when property prices go up? No one but the property owners.
What are Pacific Asset Management’s main services?
Our main service is sourcing properties and introducing those properties to our clients who are typically business people living in Japan, including foreigners. We arrange financing and after they purchase the property, we do property management to maximize cash flow.
What percentage of your clients are foreign? Did many of them leave Japan after last year’s March 11 disaster?
About 50% of our clients are foreign. Many foreigners did leave Tokyo but our clients tend to be long-term residents and they stayed. Overall, the March 11 disaster didn’t have a huge effect on our business. However, a lot of clients thought property prices might go down and that it would be a good opportunity to invest.
What is your company’s strong point?
Very few companies provide the service we do in Japan, for example, introducing properties to foreigners who don’t have permanent residence and arranging finance. That is one strong point. Plus we offer a whole range of real estate services, from finding tenants, looking after maintenance and helping to optimize client’s return on investment.
Is Tokyo a good place to invest in real estate?
Yes. Investing in Japanese real estate is better here on a cash flow basis than other countries. Basically what this means is you buy a property, find a renter and your expected yield should be net 8% to make it a worthy investment. If you’re able to borrow 100% of the purchase price from a bank, then you basically own a property and get 8% cash in your bank at the end of every month using none of your own capital.
When you invest in properties in developed countries, the interest rate is very high, whereas the gross yield is probably low. In Tokyo, you can get a property with gross yield of over 10% and interest rates are very low. So the cash flow is much better
What are the hottest areas for real estate investment in the Kanto area?
The suburban areas in Tokyo are good for property investment for private investors, as well as places like Chiba, Kanagawa and Saitama. Property prices in the major central wards have been going up and getting back to where they were before the Lehman shock. Needless to say, property asset value is higher in places like Chiyoda, Minato, Chuo wards and so on, than in the outlying areas, but their profitability is lower because of the low yield and rapid turnover of tenants.
On the other hand, properties in suburban areas have a higher yield than the ones in the central areas, and also you can expect a stable income as people who rent in those areas tend to live in the same premises longer than those who live in the central Tokyo areas. Properties in Chiba, Kanagawa, Saitama or the west side of Tokyo have a gross yield of over 10%, which means a higher cash flow.
When potential foreign clients first come to you, what do they usually want to know?
Foreigners always want to know if they can really get bank loans if they don’t have permanent residency. The answer is yes. There is a bank loan available that can give you 100% financing for a property. Now, that is not widely known, and one of our services is to help clients arrange the loan.
How do you market your company?
The main way we attract new clients is through the introduction of existing clients. We also hold real estate seminars once or twice a month, at which we provide the latest information on real estate trends. So far, we have only held them in Japanese, but we are thinking to do a seminar in English in the future. Each seminar usually attracts 10-20 people. I like to keep them small so we can communicate well.
How many staff do you have?
Right now, about 10 but we are planning to add another 10-15 by the end of the year for asset management and sourcing properties by using their own network of real estate companies. We also are looking to expand our business in foreign real estate markets.
What is a typical day for you?
I show up at the office at 10 a.m. I have meetings, check emails, go out to meet clients and sometimes inspect properties. I finish at about 8 p.m.
When you are not working, how do you relax?
I do karate, tennis, futsal and golf and I am into photography. I go to a photography school twice a week.