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The unique structure of Japanese real estate investment trusts (J-REITs) in Japan requires that an investment corporation be established as a fund vehicle and a separate asset manager be established and entrusted with managing the portfolio's assets and developing a financial strategy. This is known as external management and in this structure Kenedix REIT Management, Inc. (KRM) is the asset manager for Kenedix Realty Investment Corporation (KRI), which is the legal owner of the assets.
KRM was established through the sponsorship of Kenedix, Inc. (previously Kennedy-Wilson Japan Co., Ltd.), one of the first companies to securitize real estate and provide real estate services in Japan. As one of a limited number of professional teams that boast specialized know-how in both real estate and finance, Kenedix, Inc. and its partners have earned the confidence of domestic and overseas investors based on their established track record in both the real estate and REIT markets in Japan. KRM is operated from the fundamental philosophy of providing asset management services from the investor's perspective and has significantly contributed to increased liquidity in the Japanese real estate market.
The role of J-REITS as managers of mutual funds of securitized real estate in contrast to the emphasis of many overseas REITs as property developers places more importance on a J-REIT's ability to maintain an effective portfolio of assets through an accurate and flexible investment strategy, prudent financial policy, practical experience and trusted recognition in the real estate market. KRM pursues a policy of optimal portfolio management for securing medium- and long-term profits with a suitable risk and return balance. This is achieved by utilizing the resources of the Kenedix Group and effectively applying the strengths of the Kenedix Group and KRM's asset and property management expertise in office buildings.
KRM conducted an assessment of its asset management strategy in December 2006 after hundreds of meetings with institutional investors around the world and concluded that it was essential to further concentrate KRI's assets in mid-sized office buildings in the Tokyo Metropolitan Area. This conclusion was reached based on recognition of numerous benefits in this promising sub-sector, including an abundance of acquisition opportunities in the Tokyo Metropolitan Area, strong tenant demand, unparalleled tenant diversity as well as the Kenedix Group's expertise and track record in this sector. This core focus has also enabled asset management services to be consolidated along with property management and leasing management to achieve significantly lower overall expenditures and enable efficiency and economy of scale from a large portfolio.
KRM possesses a unique ability to accurately identify highly competitive mid-sized office buildings through our property sourcing agreement with Kenedix, Inc. and the proven expertise of our Group staff in this sub-sector. KRM also benefits from Kenedix, Inc.'s robust warehousing function, whereby the asset manager can request the sponsor company to purchase and temporarily hold an investment property in cases when KRI is not able to complete the acquisition in the required time period due to the timing of financing and/or to carry out full due diligence.
KRM pursues stable financial management through diversifying debt repayment periods, maintaining long-term debt ratios above prudent level and extending the average life of its debt. Moreover, KRM will undertake stable fund procurement based on existing favorable relationships with financial institutions, especially megabanks, trust banks and Development Bank of Japan Inc.
Accurate and reliable information disclosure through active communication between investors and management remains a priority so that investors can be properly informed. KRM has also long considered proper corporate governance to be important, and a dedicated Compliance Officer manages all compliance procedures including creation of the compliance program as well as verification that all internal rules and regulations as well as general business laws and regulations are being strictly observed.
We at KRM remain optimistic that office buildings in Japan will continue to experience an increase in demand and value. KRM is dedicated to strengthening KRI's portfolio as we stake out a leading position among J-REITs in the mid-sized office real estate market.
Taisuke Miyajima
CEO and President
Kenedix REIT Management, Inc.
Management Philosophy
