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Social Finance

Social Bond

Social Finance

Under the basic philosophy of obtaining stable income and pursuing sustainable growth through a wide range of investments in “spaces where people live and stay”, KDR defines healthcare-related facilities, which become social infrastructures, as one of its main investment targets as a bridge connecting the capital market and the healthcare industry.
KDR aims to maximize unitholder value by continuously investing in these facilities and conducting stable management of them.

In Japan, a super-aging society, the shortage of healthcare facilities are urgent social issues. KDR believes that there is a growing need in society for REITs to play an important role as a purchaser and manager of healthcare facilities.
KDR is further enhancing initiatives for sustainability through the issuance of bonds and borrowing, which are limited use that make a high degree of contribution to society, and KDR also aims to contribute to the development of the domestic social financial market by providing investment opportunities to and collaborating with financial institutions who are proactively conducting ESG investment and financing.

Social Bond

KDR issued the J-REIT’s first social bonds in December 2019, and its second social bonds in May 2021. Offering an opportunity for investors who want to make ESG investments has attracted a broader range of investors and diversified fund procurement channels.

“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 available for social finance is ¥33.5 billion as of the end of July 2022, and the Investment Corporation currently issues ¥3.7 billion as social bonds and borrows \3.1 billion as social loan as of July 31, 2022.


The figures as of the end of July 2022 are as follows.

 Aquisition price  ¥290.7 billion (173 properties)
 Assets eligible for social finance  ¥66.4 billion (31 properties)
 LTV  50.5%
 Debt eligible for social finance  ¥33.5 billion

Allocation report of social finance

As of July 31 2022, the allocation report about social bond are as follows. 

Total amount of outstanding social bond: ¥ 3,700 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)

 
Kenedix Residential Next Investment Corporation Seventh Series Unsecured Investment Corporation Bonds(the “social bond”)

 Total amount issued
 ¥ 1,700 million
 Total amount of funds raised (net proceeds)
 ¥ 1,684 million
 Interest rate  0.720%per annum
 Issue date
 May 31, 2021
 Redemption date
 May 30, 2031
 Total Allocated amount
 ¥ 1,684 million (100% allocated on Jue 1, 2021)
 Press release at pricing date
 Notice Concerning the Issuance of the Investment Corporation Bonds (Social Bond)

As of July 31 2022, the allocation report about social loan are as follows. 

Total amount of outstanding social loan: ¥ 3,100 million 


Series 55-A

 Lender  Shinsei Bank, Limited
 Amount
 ¥ 1,000 million
 Interest rate  Base rate (JPY TIBOR for 3 month) +0.20000%
 Drawdown date
 July 30, 2021
 Principal repayment Date
 July 30, 2024
 Total Allocated amount
 ¥ 1,000 million (100% allocated on July 30, 2021)
 Press release
 Notice Concerning Debt Financing and Execution of Interest Rate Swap Agreement

Series 60-D

 Lender  Aozora Bank, Limited
 Amount
 ¥ 1,000 million
 Interest rate  0.52893%
 Drawdown date
 December 10, 2021
 Principal repayment Date
 May 31, 2029
 Total Allocated amount
 ¥ 1,000 million (100% allocated on December 10, 2021)
 Press release  Notice Concerning Debt Financing and Execution of Interest Rate Swap Agreement

Series 68-D

 Lender  Shinsei Bank, Limited
 Amount
 ¥ 1,100 million
 Interest rate  Base rate (JPY TIBOR for 3 month)+ 0.30000%
 Drawdown date
 July 29, 2022
 Principal repayment Date
 July 31, 2027
 Total Allocated amount
 ¥ 1,100 million(100% allocated on July 29, 2022 )
 Press release Notice Concerning Debt Financing and Execution of Interest Rate Swap Agreement
 

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 Overview of ongoing operations  (Rentable units, Capacity, Occupancy and Utilization rate)
 ③ P/L in owned facilities (details of expenses and NOI)
 ④ Operator profile
 ⑤ Property appraisal value as of the end of the fiscal period
※Note that not disclosed in case that the operator’s consent has not been obtained

※ Please refer to Social Finance Impact Report .
 
 <Outcome indicator>
   
■J-REIT and its Healthcare market size(Acquisition price)


   
Source: Japan Real Estate Securitization Association 「ARES J-REIT Databook(September 2022) 」

■KDR AUM
 
 
 
 
 
 


 
 


■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.