RESEARCH ON IMPACTS OF PROPERTY SECURITIZATION ON EXISTING BUILDINGS' COMPLIANCE BY STUDYING DISCLOSRES IN FINAMCIAL MARKET

In late '90s, property securitization techniques brought in Japan from US to compliment deteriorated financing function of commercial banks due to huge bad loans. Now, property securitization market has been growing to roughly 30 trillion yen industry based on property value. In this paper, impacts by such movement of property securitization on compliance of existing building, which is deeply related to safe performance, are discussed. Disclosures in two major fields related to property securitization were scrutinized. One is disclosure by FSA about critical issues witnessed in the inspections on financial institutions and Financial Instruments Business Operators, which includes J-REITs' operating company. In those disclosures, total 4, 784 problematic operations through the inspection against regulated entities were scrutinized. Dozens of cases violating building compliance, largely regarding property trustees' operation, were sorted out. Against serious inappropriate operations in relation to transaction with building violation, FSA imposed administrative punishment on four entities. FSA's supervision would suppress potential inappropriate transactions relating to building violation. However the effective area of such suppression is limited to securitization transaction only and grandfathered infractions were out of scope in the FSA's inspection. Over the last two consecutive years, such building issues haven’t been described in FSA’s report, and then it’s expected that financial institutions appropriately improved their operation about those issues. And the other one is disclosure of property acquisition by J-REITs. In total 3,567 disclosures of property acquisition were scrutinized and 251 building violations by 190 properties were sorted out. Grandfathered infractions were out of scope. Intentional violations were found in these disclosures much more than the problems that need rectification by wear-and-tear or breakdown. In subsequent disclosures, with several exceptions, these issues were deleted or rectifications were described. Building violations were smaller on the buildings purchased from securitization vehicle than other in sellers' case. And the result was consistent with the assumption of operational improvement in financial institution but it wasn't significantly different by chi-square test. One previous study of Periodic Building Equipment Inspection Report, focusing on occurrence frequency of issues regarding emergency lighting equipment