INTERVIEW-Nomura Real Estate Asset: wants REIT equity financing

* CEO says want equity financing for company's 2 REITs

* Says office, apartment market may bottom out in H2 2009/10

* Aims to cut non-Tokyo office portfolio

TOKYO, Aug 19 - Japan's Nomura Real Estate Asset Management said the two real estate investment trusts it manages may raise up to 50 billion yen ($528 million) via a new share issue amid signs of a recovery in the domestic REIT market.

The asset management company runs the Nomura Real Estate Office Fund, the fourth-largest of Japan's 41 listed REITs, and the Nomura Real Estate Residential Fund, which has 139 apartment buildings in its portfolio.

"We want to do it (equity financing) when the capital market recovers a bit more," said Tatsuo Inoue, president and CEO of Nomura Real Estate Asset Management, a wholly owned subsidiary of Nomura Real Estate Holdings Inc.

"REITs should grow through equity financing to expand and produce returns for investors... we want to get back to that growth cycle as early as possible," Inoue told Reuters in an interview. He added that he expects capital markets to recover by next March.

The amount of the fundraising may depend on market conditions, Inoue said, but added that 30 billion yen for the company's office REIT and 20 billion yen for its residential REIT would be the maximum in view of the possible dilution impact.

Inoue did not give details of the financing's timing, but said the residential REIT would likely tap the market first as he sees more investment opportunities in the residential area.

Asked about the recovery timing for Japan's lease office and apartment markets, Inoue said both markets would likely bottom out in the second half of the financial year to the end of March after a sharp deterioration triggered by the global financial crisis.

Along with property stocks, Japan's REIT market was hit hard as the global credit crunch pushed down property values and squeezed financing, driving investors away.

But investors began returning earlier this year amid hopes that Japan's plan to set up a public-private fund, initially aimed at between 300 billion to 500 billion yen, would start providing funding support to the trusts.

AIMING FOR MORE GROWTH

Investor sentiment has improved since Nippon Residential Investment Corp announced a merger with Advance Residence Investment Corp earlier this month in Japan's first REIT merger, fanning hopes for an industry realignment.

The Tokyo Stock Exchange's REIT subindex has gained 10 percent since the start of this year to hover around a 10-month high, although the subindex is still down about 60 percent compared with its May 2007 peak.

REITs in Japan, the largest market for the securities in Asia, offer an average yield of 5.8 percent. The yield on benchmark 10-year Japanese government bonds is around 1.34 percent.

"When talking to investors, I see their stance on investment has changed since last autumn. They are now looking for a place to invest, and REIT yields are attracting them," Inoue said. "As investors become more willing to invest in REITs, I also see their expectations for public offerings growing," he said.

With a capital boost, Inoue said he aims to increase the value of Nomura's office REIT to 500 billion yen in the next few years from about 400 billion yen currently. He aims to expand the company's residential REIT to 300 billion yen from 130 billion yen.

Nomura's office REIT aims to reduce its exposure to non-Tokyo properties to 20 percent from 26 percent currently with more investments in Tokyo-area properties, he added.