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.
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
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 ¥31.7 billion as of the end of January 2022, and the Investment Corporation currently issues ¥3.7 billion as social bonds and borrows \2.0 billion as social loan as of April 11, 2022.
The figures as of the end of January 2022 are as follows.
| Aquisition price
|| ¥277.5 billion (165 properties)
| Assets eligible for social finance
|| ¥61.6 billion (28 properties)
| Debt eligible for social finance
|| ¥31.7 billion
Allocation report of social finance
As of April 11 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”）
Kenedix Residential Next Investment Corporation Seventh Series Unsecured Investment Corporation Bonds（the “social bond”）
As of April 11 2022, the allocation report about social loan are as follows.
Total amount of outstanding social loan: ¥ 2,000 million
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
The Investment Corporation discloses the following output indicators and outcome indicators.
| 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
＜Impact (Qualitative Targets)＞
■J-REIT and its Healthcare market size（Acquisition price)
Source： Japan Real Estate Securitization Association 「ARES J-REIT Databook（February 2022) 」
■Overview of unitholder benefits (promotion of understanding and use of healthcare facilities through unitholder benefits)
Please click here for further details.
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.