Management Strategies

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External Growth Strategies

The Investment Corporation continues to invest mainly in mid-sized office buildings in the Tokyo Metropolitan Area under the policy of capturing the trend and investing timely in a flexible and dynamic manner.

Distribution Target by Property Types

Targeted Distribution by Property Types

Distribution Target by Areas

The Investment Corporation mainly invests in real estate, etc. located in the Tokyo Metropolitan area (Tokyo and its three neighboring prefectures: Kanagawa, Saitama and Chiba), which is the largest economic area and the most densely populated region in Japan. We also make some diversified investments in real estate in the rural economic zone (major urban areas such as government-designated cities), to reduce the risk of concentrating on a certain region, such as fluctuations in the local economy and real estate market, population fluctuations and natural disasters such as earthquakes and typhoons.

Distribution Target by Areas

Target of Minimum and Maximum Investment Size per Investment Property

The Investment Corporation makes diversified investments mainly in mid-sized office buildings, while taking the following elements into account:

●  Liquidity in the real estate market
●  Ensuring a diversified tenant layer
●  Economic competitiveness in operation and management

Target minimum and maximum investment size per investment property

Regardless of the above minimum investment size, the respective investment properties meeting the following conditions will also be acquired:

●  When multiple investment properties are acquired altogether at the same time and the price range of some of them is below the minimum investment size.
●  When the appraised value exceeds the minimum investment size and the acquisition price is below the minimum investment size as a result of negotiations to acquire investment properties that meet the investment criteria.

Ensuring Various Opportunities to Acquire Investment Properties

The Investment Corporation has enriched transaction track record through a variety of sourcing route. From here on, the Investment Corporation precisely secures opportunities to acquire properties by taking advantage of various acquisition techniques and seeks the steady and stable growth of the portfolio.

Acquisition of Investment Properties by Leveraging the Asset Management Company's Proprietary Information Network

The Investment Corporation consigns the management of investment properties to Kenedix Real Estate Fund Management, Inc., a company guided by the vision of our sponsor company, Kenedix, Inc. (which seeks to provide investor-oriented management services as an independent real estate management company).
The Asset Management Company is made up of professionals such as real estate appraisers and securities analysts with a diverse range of experience working at the forefront of businesses such as real estate investment, real estate management, and finance. They specialize in a number of different areas, and possess a high level of professional expertise.
The Investment Corporation will take concrete steps to achieve stable external growth supported by the strength of the information sourced from the Asset Management Company. Its unique information network makes it possible to collect information regarding investment opportunities in the real estate market from real estate fund management companies, financial institutions, construction companies/real estate developers, and business corporations. At the same time, the Investment Corporation will seek to build up its record of business achievements with the sponsor company and its group companies, or with third party entities other than those who consign asset management operations to the sponsor company and its group companies. It will also apply the diverse experience and highly professional expertise possessed and demonstrated by the professionals at the Asset Management Company together with the broad information network unique to an independent real estate management company with extensive channels in both the real estate and finance industries.

Acquisition of Investment Properties Using the Support Line of the Sponsor Company

The Investment Corporation and the Asset Management Company have concluded the Support-Line Memorandum of Understanding with the sponsor company. This agreement allows the Investment Corporation to purchase properties from the sponsor company in a timely manner without them being picked up by competitors other than the Asset Management Company.
Please note that office buildings are the only properties to which the Support-Line Memorandum of Understanding applies.

Dynamic Acquisition of Investment Properties through the Warehousing Function

For a property which the Investment Corporation wishes to acquire, under the Support-Line Memorandum of Understanding, the Asset Management Company can (1) create a real estate investment fund and ask the sponsor company to acquire the property using the fund, and (2) ask the sponsor company to acquire or temporarily own the property for a specified certain period. The sponsor company shall give its sincere consideration to the requests it receives from the Asset Management Company.
Based on this agreement, the Investment Corporation shall be granted a preferential option to acquire properties that cannot be readily purchased by the Investment Corporation for various reasons, such as the awkward funding schedule or inconsistency with investment criteria. The purpose of this is to ensure the dynamic acquisition of properties.
(The term "warehousing" collectively refers to a series of events involving the creation of a real estate investment fund by the sponsor company or the property being acquired or held temporarily by the sponsor company, and the preferential acquisition opportunities of the Investment Corporation in relation to the corresponding real estate.)

In regards to transactions between the sponsor company and its subsidiaries, provisions for transactions with stakeholders shall be formulated in the Office REIT Department Related-party Transaction Rules. These shall ensure operational independence, compliance with regulations, and corporate governance remain in place.
The Investment Corporation shall consider lump sum deals, such as the lump sum acquisition of a group of real estate properties involving mid-sized office buildings in the Tokyo area.
Dynamic acquisition is one of the options involving collaborative efforts with the sponsor company to work on multiple acquisitions in relation to deals that do not meet the investment criteria set by the Investment Corporation, provided that these deals meet certain conditions such as the investment criteria set by the sponsor company. Capital outlay to a Japanese silent partnership (tokumei kumiai) shall also be considered jointly with the sponsor company, assuming that the Investment Corporation shall be given an opportunity to acquire properties when they are sold in the future.

In regards to individual deals other than those described above, capital shall be provided to tokumei kumiai for warehousing purposes in cooperation with the sponsor company, and dynamic acquisitions shall be made while ensuring funding balance. To achieve these aims, we will take active steps to diversify the acquisition methods (including direct acquisition, equity acquisition, and joint acquisition with the sponsor company).

Internal Growth Strategies

Promotion of Mid-sized Office Buildings Management that is Selected and Evaluated

The Investment Corporation, with an aim of becoming the owner of "selected and evaluated mid-sized office buildings", carefully invests in properties that are superior in terms of location (within walking distance from the nearest station) and specifications, and that are earthquake proof (All properties meet the new seismic standards or are equivalent to the new seismic standards). It is constantly trying to maintain and improve tenant satisfaction by exercising superior operation and management capability and making appropriate investments.

Building Management Utilizing Tenant Surveys

In order to provide an office environment that satisfies tenants, the Investment Corporation conducts a tenant surveys, and based on the survey results, gains an understanding of the tenants' needs, repairs air conditioning and common areas and undertakes other construction work for the benefit of tenants and for better customer satisfaction, to improve the property's value and competitiveness. In the future, these measures will be continued so that tenants will continue to rent the properties. By doing so, the rent level and asset value can be maintained and improved and profitability can be enhanced.

Building management utilizing CS survey

Integrated Management by the Kenedix Group

We think that Kenedix Real Estate Fund Management, Inc. (an asset management company) and Kenedix Property Management, Inc. (a property management company) of the Kenedix Group integrally provide an asset management and property management services to enhance the profitability and asset value of the property held by providing more comprehensive, high-quality office services in real estate operation and management than ever.

Leasing of Properties Aimed at Stable Earnings

Kenedix Property Management, Inc. centralizes the service representatives that support tenant companies, and directly approaches tenant companies without going through building maintenance companies and construction companies. As a result, a system that directly estimates trends and needs of the rental market and rapidly reflects the results in the operations is established.
In addition, we are working to shorten a vacancy period by leasing properties based on close communication with leasing brokers and by taking advantage of Kenedix Property Management, Inc.

Promotion of Stable Operation through Increase of Properties and Tenant Diversification

Many of tenant companies in office buildings owned by the Investment Corporation are from a variety of different industries. As a result, we think that our revenue will be stable and continuous because it is not limited to a specific number of tenant companies, and it will be unaffected by companies moving out or by sluggish performance in specific industries.

Cost Management Strategy by Leveraging Economies of Scale

While many of operators and individual building owners who hold mid-sized office buildings are believed to operate a relatively small number of properties, the Investment Corporation reduces property management costs through economies of scale, as well as renewal costs of facilities and equipment, by making batch orders.

Financial Strategies

Stable Financial Management

The Investment Corporation aims for stable financial management by taking the following measures, etc.,

●  Reduce refinance risk by diversifying maturing dates of interest-bearing debt
●  Maintain the long-term fixed interest debt ratio above a certain level
●  Control the interest-bearing debt ratio (LTV) (Note) in a conservative manner

(The Investment Corporation will aim to keep interest-bearing debt ratio (LTV) at less than 45% as a rule. However, the Investment Corporation may raise LTV to the upper 40% range in the event of debt financing conducted for the purpose of acquiring competitive properties or otherwise, considering financing environment.)

Moreover, the Investment Corporation will undertake stable fund procurement based on existing favorable relations with financial institutions, especially mega-banks, trust banks and Development Bank of Japan Inc., as well as aim for more conservative financial management. In addition, the Investment Corporation aspires to pay attention to the share of each bank and appropriately consider an introduction of transactions with new banks based on comparison with the conditions with currently transacting banks.

Note:  Interest-bearing debt ratio = Balance of Interest-bearing debt at the end of fiscal period / Total assets at the end of fiscal period × 100