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Social bond

Social Bond

Social Bond

KDR issued the J-REIT’s first social bonds in December 2019. By offering an opportunity for investors who want to make ESG investments has attracted a broader range of investors and diversified fund procurement channels. The Investment Corporation will allocate the funds procured through social finance to the acquisition of assets eligible for social finance, repayment of borrowings required for such acquisition and redemption of investment corporation bonds (including refinance).

What is a social bond

“Social bond※” refers to bonds for which the entire amount of the procured funds is allocated only to initial partial or full investment into new or existing eligible social projects or refinancing and is compliant with the four core requirements of the social bond principles (use of procured funds, evaluation and selection process of project, management of procured funds and reporting).

※ The International Capital Markets Association defined Social Bond Principles.

Social Finance Framework

■Use of funds procured through social finance
The Investment Corporation will allocate the funds procured through social finance to the acquisition of assets eligible for social finance (described in below), repayment of borrowings required for such acquisition and redemption of investment corporation bonds (including refinance).
 
■Assets eligible for social finance
 Assets eligible for social finance refer to assets fulfilling the following eligibility criteria.
 
 Senior living facilities Private senior homes
Serviced senior housing
Apartments for the elderly
Group homes for elderly with cognitive impairment
Small multi-function facilities
Daycare facilities, etc.
 Medical facilities  Hospitals
Clinics
Medical malls
Nursing and health facilities, etc.

※ Please refer to "Healthcare Facilities" in the list of portfolios for assets eligible for social finance of the Investment Corporation.
 

■Selection criteria and process of project 
The requirements of assets eligible for social finance are stipulated in the Management Guidelines of Residential REIT Division prepared by Kenedix Real Estate Fund Management, Inc., the asset management company of the Investment Corporation. In addition, as for the procurement of social finance, compliance with the eligibility criteria (eligibility criteria in (2) above) of social finance will be screened in the process of decision-making for the acquisition of assets and borrowing of funds.
 
■Management of procured funds
Debt eligible for social finance is the amount calculated by multiplying the total acquisition price of the assets eligible for social finance in the portfolio of the Investment Corporation with the ratio of interest-bearing debt to total assets, and the upper limit of social finance will be set.
 
The maximum amount of social bonds that can be issued by the Investment Corporation is ¥26.9 billion, and the Investment Corporation currently issues ¥2.0 billion as social bonds as of the end of January 2020.


The figures as of the end of January 2020 are as follows.

 Acquisition price  ¥234.7billion (144 properties)
 Assets eligible for social finance  ¥54.1billion (24 properties)
 LTV  49.7%
 Debt eligible for social finance  ¥26.9 billion

Allocation report of social bond

As of January 2020, the allocation report about social bond is as follows. 

Total amount of outstanding social bond: ¥ 2,000 million 


Kenedix Residential Next Investment Corporation Sixth Series Unsecured Investment Corporation Bonds(the “social bond”)
 
Total amount issued
 ¥ 2,000 million
Total amount of funds raised (net proceeds)
 ¥ 1,983 million
Interest rate  0.750%per annum
Issue date
 December 20, 2019
Redemption date
 December 20, 2029
Total Allocated amount
 ¥ 1,983 million (100% allocated on December 30, 2019)
Press release at pricing date
 Notice Concerning the Issuance of the Investment Corporation Bonds (Social Bond)

Evaluation by External Organization

The Investment Corporation received “Social 1(F),” the highest rating in “JCR Social Finance Framework Assessment,” from Japan Credit Rating Agency, Ltd. (JCR) with regard to the eligibility of social finance framework.

Social Finance Framework Evaluation Results by JCR

Reporting

The Investment Corporation discloses the following output indicators and outcome indicators.
 
 <Output indicator
 ① Overview of building and lease
 ② Status of tenants and overview of facility (number of rooms, capacity, number of tenants, occupancy rate, etc.)
 ③ Status of profit/loss of owned real estate (details of expenses in real estate leasing business, NOI)
 ④ Overview of operator
 ⑤ Real estate appraisal value as of the end of the fiscal period
※Such indicators will not be disclosed in cases when approval from the operator cannot be obtained.

※ For ①, ②, ④ and ⑤ above, please refer to the Financial Results for the Period Ended January 2020(16th Fiscal Period) and ③ above, please refer to the Earnings Performance of the Properties.
 
 <Outcome indicator>
   
■Asset scale of J-REITs and the percentage of healthcare facilities(Acquisition price)

   
Source: Japan Real Estate Securitization Association 「ARES J-REIT Databook(February 2020) 」

■Change in the amount invested in healthcare facilities by KDR
 
 
 
 
 
 

 
 


■Overview of unitholder benefits (promotion of understanding and use of healthcare facilities through unitholder benefits)

Please click here for further details.

 <Impact (Qualitative Targets)> 
By linking capital market needs with Healthcare Facilities operators' needs, KDR will promote the provision of superior Healthcare Facilities and contribute to the promotion of socially beneficial capital investments.