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Saburo Nishiura is using Japan’s record-low borrowing costs to turn the nation’s shrinking population to his advantage.

The 67-year-old former banker is the chief executive officer of Hulic Co., a developer with a concentration of commercial properties in Tokyo’s expensive Ginza district. But the company is cutting the weighting of offices in its portfolio in favor of nursing homes, shops and hotels amid a shift in demographics and after borrowing costs that have fallen by about one-third since Prime Minister Shinzo Abe came to power in 2012.

“I don’t think office rents will rise much more because Japan’s working population is declining,” said Nishiura who, prior to joining Hulic in 2006, used to be a deputy president at Mizuho Bank Ltd. “Borrowing rates are so low you’d almost worry how banks can make a profit.”

Fortunately, that’s not his problem any more, although Mizuho Bank does continue to lease a number of properties from Hulic to use as branches.

Hulic’s office leasing revenue declined to 67 percent of total rent in the second quarter, from 70 percent in 2014 and 75 percent in 2013.

Instead, Nishiura sees greater scope for boosting returns from investing in hotels and retail properties as Japan’s postwar baby boomers retire and a record number of tourists put the nation on their must-do list.

Hulic plans to spend as much as ¥800 billion by 2018 on investments across various asset classes. The Tokyo-based company had forecast a profit of ¥39 billion this year but should beat that by about ¥1 billion, Nishiura said.

Japan’s population is set to decline by 11 percent to some 112.1 million over the next two decades and by then, one-third of those people will be 65 years or older.

Abe’s government is betting that overseas tourists will take up some of the slack, targeting a rise in international visitors to 30 million by 2030 from the 12.9 million that came in the first eight months of this year.

Hulic is also benefiting from cheap access to credit as the Bank of Japan continues to try and stimulate the economy.

Loans to property companies climbed to ¥64 trillion at the end of June, the most since 1999, according to central bank data. Around Ginza, where Hulic has 11 properties and is building a hotel it plans to operate itself, potential asking rents have doubled to about ¥120,000 per square meter at some properties in the last four years, Nishiura said.

The developer is also building and purchasing nursing homes to cater for Japan’s aging population.

A 90-room facility opened near Shinjuku Station earlier this month that charges about ¥94,000 a week for an 18-sq.-meter room.

As the pace of office rental gains in Tokyo’s central business district moderates, investors should focus on companies that can deliver higher returns in a contracting economy, according to Credit Suisse Group AG. Office rents per square meter in Tokyo’s five central districts increased 4.5 percent in August, down from a 4.8 percent advance in July, according to Miki Shoji Corp., a privately held office brokerage firm in Tokyo.

“Real estate companies can borrow at rates that are just about unprecedented,” said Masahiro Mochizuki, a Tokyo-based equities analyst at Credit Suisse. “Current bubbly conditions will continue or burst based on monetary policy, so we’re in quite dangerous territory.”

Unlike in the lead up to the 2008 global credit crisis however, Japan’s largest developers have not been piling on leverage, according to Mochizuki. Net debt-to-equity ratios at the two biggest such companies in Japan by market value — Mitsubishi Estate Co. and Mitsui Fudosan Co. — improved in the full year to March 31, data from Mizuho Securities Co. show.

The yield on 10-year bonds sold by Mitsubishi Estate in September 2014 fell to 0.455 percent as of Friday from 0.643 percent at issue, according to prices compiled by Bloomberg. Hulic’s 0.949 percent notes due 2024 are trading at a yield of 0.713 percent. Nishiura said the company aims to keep its credit score of A+ with Japan Credit Rating Agency Ltd.

Interest “rates don’t look like rising significantly any time soon,” Nishiura said. “There isn’t really a lot of bad news from a real estate perspective, at least for Hulic.”

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