Pacific Holdings, which manages real estate investment trusts is racing to negotiate a Y46bn ($470m) investment from more than 10 Chinese funds, originally scheduled for last November but yet to be delivered. The company admitted in a press release last month that the injection 'is critical to the continuation of our business'.

Yesterday the group said its auditor had refused to sign its accounts, prompting a 12% drop in its share price on the day.

Pacific Holdings already has a negative net worth, its shares are down 97% in the past year and the company is being placed on the monitoring list of the Tokyo Stock Exchange.

The plight of Pacific Holdings highlights the severe credit squeeze that threatens to undermine Japan’s Y2,500bn J-Reit market.

Further failures among J-Reits not only would aggravate the downturn in the underlying real estate market, but could also have serious repercussions on the banking sector, which has a significant exposure to real estate assets.

Financial Times