Mori Building Co., a leading Japanese real estate developer, has announced that it is securitizing the rent coming from a pair of Tokyo apartment buildings, in what it calls Japan's first public offering backed by residential rental income.

The 24 billion ($221 million) transaction, arranged by IBJ Securities Co., is backed by income from Ark Towers East and Ark Towers West, two high-rise buildings located in the fashionable Roppongi district and owned by the developer.

Those buildings will be entrusted to Sumitomo Trust & Banking Co. in exchange for senior and subordinate trust certificates. Mori Building will keep the subordinate piece, while the senior piece will be sold to a domestic special purpose company called M's Fort, which will issue securities backed by the certificates to domestic investors.

The issue has an expected maturity of seven years and a legal final of nine years, said an IBJ banker. It will comprise five classes of fixed-rate notes rated by Standard & Poor's. Launch is set for the end of February and final closing will take place by mid-March, he added.

Other developers in Japan have securitized residential rents before, but Mori is the first to do so publicly, noted the IBJ banker. The transaction is also the first of many residential and commercial real estate-related deals expected to flow from Japan in the coming weeks, as originators rush to issue before the country's fiscal year-end in March.

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