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Portfolio Structuring Policy

1. Property Type

Upon considering the following key factors, KDR will strive to achieve stabilized revenues generated by implementing diversified investments not only in rental housing, but also in company rental housing, student dormitories, student apartments, elderly-care housing where stable demand can be anticipated in accordance with the general aging of society, serviced apartments, short-term apartments and other residential real estate that require unique management organization, know-how and the provision of certain services, accommodation (hotel, etc.) and land with leasehold interest on which buildings stipulated above exist, etc. as well.

Key Factors

  • Liquidity in the real estate market and size of transaction market
  • Availability of real estate market information
  • Securing diversified tenants (singles, families, etc.)

KDR, as a rule, will lease entirely to dedicated operators, either directly or indirectly, when investing in real estate that require unique operational organization and know-how, such as elderly-care housing. KDR manages risks through the following methods:

  • Manage the credit risk of operators by monitoring the operators' business environments, operating conditions and financial conditions, including checking the maintenance of contract guarantee deposits
  • Lower the dependency risk on operators by arranging back-up operators
  • Lower the credit risk of operators and avoid risk of increases in costs such as capital investment and repairs that accompany investments in facilities, by investing only in land with leasehold interest

Investment in accommodation (hotel, etc.) is limited in accommodation where a majority of the leasable area is for accommodation use, existing core tenants with stable lease agreements occupy and equipment of western-style structure and facilities (including incidental facilities) is installed

The following table illustrates KDR's targeted portfolio breakdown by property type. The figures are based on acquisition prices:

Property TypeTarget Portfolio Breakdown
ClassificationRental HousingRental housing where a majority of the leasable area is for residential use80%~100%
Rental Housing with Facility OperatorsServiced apartments, elderly-care housing, company rental housing, student dormitories and apartments, short-term apartments, etc. where a majority of the leasable area is for residential use 0%~20%
Accommodation (Hotel, etc.)Accommodation where a majority of the leasable area is for accommodation use, existing core tenants with stable lease agreements occupy and equipment of western-style structure and facilities (including incidental facilities) is installed0%~20%
OtherLand with leasehold interests on which buildings stipulated above exist, etc.0%~20%

2. Geographic Area

KDR implements diversified investment in real estate located in the Tokyo Metropolitan Area, an area with the largest economic and population concentration in Japan. KDR also diversifies its investments by investing in real estate in other regional areas with the objective of mitigating the risk of concentrating investments in a single region subject to changes in regional economies and real estate market, earthquakes, typhoons and other natural disasters, population dynamics and other factors.

The following is KDR's targeted portfolio breakdown by region. The figures are based on acquisition prices:

Region Portfolio Breakdown
ClassificationTokyo Metropolitan AreaMajor cities in Tokyo, Kanagawa, Saitama and Chiba Prefectures 50% or more
Other Regional AreasPrimarily government-designated cities and other regional core cities 50% or less

3. Investment Size

KDR implements investments in real estate according to the following standards for investment size.

  • Liquidity in the real estate market
  • Securing diversified property size
  • Securing diversified tenants (singles, families, etc.)
  • Economics of the investment from the perspective of operation and management of the property

The following are KDR's standards for minimum investment size and maximum investment size based on acquisition prices:

ClassificationAcquisition Price
Minimum Investment SizeRental Housing and Housing with Facility Operators300 million yen or more per investment property
Accommodation (Hotel, etc.)500 million yen or more per investment property
Others100 million yen or more per investment property
Maximum Investment SizeThe ratio of acquisition price for such real estate shall be no more than 20% of the total acquisition price of the entire portfolio after such real estate is acquired

However, real estate may be acquired even when such real estate targeted for investment don't meet the minimum investment size standard, in the following cases:

  • In the event of a bulk acquisition of real estate, when the bulk includes real estate with acquisition prices that fall below the minimum investment size standard
  • In the event that, as a result of the negotiation of acquisition terms for real estate that meets the investment standard, the property's acquisition price falls below the minimum investment size standard but has an appraisal value that exceeds the minimum investment size standard

4. Earthquake Resistance

KDR, as a rule, invests in real estate that satisfy the new earthquake resistance standards or real estate that has earthquake resistance performance that satisfies or exceeds the same standards.

5. Environment, Soil Quality, etc.

KDR, as a rule, invests in real estate which have been confirmed through survey engineering reports that there are no fear of soil pollution or issues concerning the management or use of toxic substances. However, KDR still may invest when such terms are not met, if said terms can be met by conducting construction work to counter the problem.

6. Management Period

KDR as a rule acquires real estate from a medium- to long-term perspective and does not acquire real estate with the objective of selling it in the short-term. The definition used here for short-term is a period of less than a year, medium-term is a period from one year or more to five years or less and long-term is a period in excess of five years. However, the sale of owned real estate can be examined and executed soon after acquisition if said real estate suffers from one of the occurrences below.

  • When it is determined from the aspect of building the KDR portfolio that the sale of the real estate is appropriate from the perspective of the medium- to long-term strategy of KDR
  • When sale of the real estate contributes to securing revenue for KDR, such as when a potential buyer that submits a purchase price that exceeds the average market price emerges
  • When it becomes difficult to secure the rental business income and expenditures initially assumed due to significant changes in the economic situation, building damage due to disasters, etc. or aging and deterioration, etc., and it is determined that additional measures will not lead to a sufficient recovery