After posting tremendous gains both in 2009 and 2010, Asia Pacific REITs so far in 2011 have mostly stalled and retreated. Inflation fears, interest rate hikes, the Japanese earthquake and ongoing policy restrictions impacting the residential sector in Hong Kong, Singapore and China have all conspired to create mostly negative returns. Australia is the happy exception. Japanese REITs, though taking a strong hit immediately after the earthquake, staged a quick comeback. M&A activity and sponsor changes throughout the Asia Pacific region have strengthened the quality of Asian REITs, and economic growth will likely remain robust for the foreseeable future. The selective investor will find many attractive points of entry.

When one summarizes Japanese real estate, one cannot do so without touching upon the long decline of real estate values from the peak of the Japanese bubble that occurred in the early 1990s. A summary of the long-term history of Japanese real estate returns indicates that, with the exception of 2004 to 2007, Japanese real estate lost value during the past two decades. The obvious question then becomes whether such a period was the only period when investors in Japanese real estate made money. The answer is clearly: “No.” Investors were making money even with losses in real estate value.

The benchmarking of unlisted real estate funds is rarely straightforward and is frequently a bone of contention between general partners and their investors. What represents a fair comparison of the manager’s fund-level performance? Should it be the NAV return on all the alternative investment funds into which the investors might have put their money or just the return on funds that look very similar to the one being compared, on the basis that the investors’ selection of funds make them to some extent complicit in the result?