Home > Kenedix Realty Investment > Core Strategies > Financial Strategy
Kenedix Realty Investment Corporation (KRI) implements a planned yet flexible financial strategy with the goal of securing stable profits for its unitholders (shareholders). We conduct financing that effectively combines stable long-term funds with dynamic short-term capital to ensure reserves for acquisition of properties, capital expenditures, distribution payments, operating expenses and repayment of borrowings, bonds, etc. Our management of cashflow is guided by the principles of capital stability, liquidity and efficiency.
Equity Financing
As part of our overall effort to diversify capital sources, KRI issues additional investment units (shares) through public offering or third party allotment from time to time. Since our IPO of 75,000 units on the Real Estate Investment Trust market of the Tokyo Stock Exchange in July 2005, we have increased our outstanding units to 233,550 units as of November 2009. We consider the balance between total assets and debt, property acquisition timing, and dilution of unit value when we consider any possible issuance of additional investment units.
Debt Financing
In order to minimize risk associated with interest rate fluctuations, KRI has taken out various types of debt including short- and long-term borrowings, and investment corporation bonds with the aim of diversifying its borrowings while also largely consolidating its debt into fixed-rate borrowings to hedge against any potential of rising interest rates in Japan. KRI also takes measures to spread out the maturities of new borrowings to avoid large repayments in any given fiscal period and in case temporary conditions in the market make refinancing those borrowings more expensive.
Diversification of Debt Maturities
(as of April 30, 2011)
KRI also borrows from a diversified group of lenders to further minimize refinancing risks. When selecting lenders, KRI obtains the best possible terms based on extensive negotiations with multiple institutions regarding the loan period, interest rate, fees and other terms in consideration of market conditions. KRI borrows from only qualified institutional investors as defined in Item (3)-1 of Article 2 of the Securities and Exchange Law.
Breakdown of Borrowing Providers (as of September 1, 2011)
Stable financing through good relationships with financial institutions, especially megabanks, trust banks and Development Bank of Japan
KRI also issues investment corporation bonds when appropriate with the goal of acquiring long-term and stable capital as well as further diversification of our capital sources. Our investment corporation bonds' are rated by the Japan Credit Rating Agency (A). The amount of borrowings and debt individually is limited to 1 trillion yen each and to 1 trillion yen in the aggregate.
Change in LTV
Capital Management
When surplus capital becomes available, KRI deposits the capital in fully insured, non-interest bearing regular savings accounts or into a regular savings deposit account at a bank with a short-term rating of P-2 or higher with Moody's Investors Services. KRI prioritizes stability and convertibility for the immediate future, and investments in marketable securities, etc. for operational purposes will not be made. Surplus capital is generally used for the acquisition of properties, capital expenditures, operating capital, payment of distributions and the repayment of debts. We strictly limit investment in futures and derivatives to investments made for the purpose of hedging against interest rate fluctuation risks related to KRI's debts or other risks.
| Fiscal Period | Unit | 6th Period ended April 2008 |
7th Period ended October 2008 |
8th Period ended April 2009 |
9th Period ended October 2009 |
10th Period ended April 2010 |
11th Period ended October 2010 |
12th Period ended April 2011 |
|---|---|---|---|---|---|---|---|---|
| Operating revenues | mn yen | 8,582 | 8,456 | 8,204 | 7,921 | 8,067 | 8,358 | 8,136 |
| Rental revenues | mn yen | 7,630 | 8,156 | 8,204 | 7,921 | 8,067 | 8,242 | 8,136 |
| Operating expenses | mn yen | 4,517 | 4,311 | 4,740 | 4,708 | 4,329 | 4,522 | 4,427 |
| Property-related expenses | mn yen | 3,447 | 3,678 | 3,603 | 3,652 | 3,714 | 3,817 | 3,767 |
| Operating income | mn yen | 4,065 | 4,144 | 3,463 | 3,213 | 3,738 | 3,835 | 3,709 |
| Ordinary income | mn yen | 3,343 | 3,124 | 2,435 | 2,103 | 2,568 | 2,608 | 2,346 |
| Net income (a) | mn yen | 3,342 | 3,123 | 2,434 | 2,102 | 2,567 | 2,607 | 2,309 |
| Total assets (b) | mn yen | 230,520 | 239,648 | 238,745 | 236,320 | 251,566 | 251,080 | 261,928 |
| Interest-bearing debt (c) | mn yen | 89,750 | 98,750 | 98,750 | 97,220 | 102,968 | 102,567 | 112,715 |
| Unitholders' equity (d) | mn yen | 128,314 | 128,087 | 127,398 | 127,067 | 135,689 | 135,732 | 135,505 |
| Unitholders' capital | mn yen | 124,973 | 124,973 | 124,973 | 124,973 | 133,129 | 133,129 | 133,129 |
| Number of investment units outstanding (e) | unit | 200,000 | 200,000 | 200,000 | 200,000 | 233,550 | 233,550 | 233,550 |
| Unitholders' equity per unit (d)/(e) | yen | 641,570 | 640,437 | 636,990 | 635,335 | 580,987 | 581,170 | 580,199 |
| Total distribution (f) | mn yen | 3,342 | 3,123 | 2,434 | 2,102 | 2,567 | 2,541 | 2,310 |
| Distribution per unit (f)/(e) | yen | 16,711 | 15,618 | 12,172 | 10,511 | 10,993 | 10,881 | 9,891 |
| Earnings distribution per unit | yen | 16,711 | 15,618 | 12,172 | 10,511 | 10,993 | 10,881 | 9,891 |
| Distribution in excess of earnings per unit | yen | - | - | - | - | - | - | - |
| Return on assets (annualized) (Note 1) (Note 2) |
% | 1.5 (3.0) | 1.3 (2.6) | 1.0 (2.1) | 0.9 (1.8) | 1.1 (2.1) | 1.0 (2.1) | 0.9 (1.8) |
| Return on unitholders' equity (annualized) (Note 2)(Note 3) |
% | 2.6 (5.2) | 2.4 (4.8) | 1.9 (3.8) | 1.7 (3.3) | 2.0 (3.9) | 1.9 (3.8) | 1.7 (3.4) |
| Ratio of unitholders' equity at end of period (d)/(b) | % | 55.7 | 53.4 | 53.4 | 53.8 | 53.9 | 54.1 | 51.7 |
| Ratio of interest-bearing debt at end of period (c)/(b) | % | 38.9 | 41.2 | 41.4 | 41.1 | 40.9 | 40.9 | 43.0 |
| Payout ratio (Note 4)(f)/(a) |
% | 99.9 | 99.9 | 100.0 | 100.0 | 99.9 | 97.4 | 100.0 |
| Other reference | ||||||||
| Number of properties (Note 5) |
Properties | 68 | 69 | 67 | 65 | 70 | 67 | 71 |
| Total leasable floor area | m2 | 248,625.52 | 256,214.30 | 250,364.42 | 254,225.04 | 271,260.81 | 267,737.33 | 286,237.93 |
| Occupancy at end of period | % | 95.9 | 95.6 | 95.7 | 94.7 | 94.4 | 93.6 | 94.6 |
| Depreciation expenses for the period | mn yen | 1,430 | 1,445 | 1,429 | 1,451 | 1,477 | 1,440 | 1,406 |
| Capital expenditure for the period | mn yen | 1,152 | 1,105 | 891 | 400 | 330 | 312 | 574 |
| Leasing NOI (net operating income) (Note 6) | mn yen | 5,612 | 5,923 | 6,030 | 5,721 | 5,830 | 5,864 | 5,776 |
| FFO (funds from operation) (Note 7) | mn yen | 4,259 | 4,269 | 4,356 | 3,994 | 4,044 | 3,995 | 3,716 |
| FFO per unit (Note 8) |
yen | 21,297 | 21,345 | 21,780 | 19,973 | 17,318 | 17,106 | 15,914 |
| Notes: | |
|---|---|
| 1. | Return on assets = Ordinary income / (Total assets at the beginning of period + Total assets at the end of period) / 2 × 100 |
| 2. | Annualized values for the sixth fiscal period are calculated based upon a period of 182 days, 184 days for the seventh fiscal piriod, 181 days for the eighth fiscal period, 184 days for the ninth fiscal period, 181 days for the tenth fiscal period, 184 days for the eleventh fiscal period and 181 days for the 12th fiscal period. |
| 3. | Return on net assets = Net income / (Total net assets at the beginning of period + Total net assets at the end of period) / 2 × 100 |
| 4. | Payout ratio is rounded down to the first decimal place. |
| 5. | Starting from disclosures pertaining to the eleventh fiscal period, A-47 KDX Shin-Yokohama 381 Building (existing tower) and A-65 KDX Shin-Yokohama 381 Building Annex Tower are indicated collectively as one property. |
| 6. | Leasing NOI = Rental revenues - Rental expenses + Depreciation expenses for the period |
| 7. | FFO = Net income + Depreciation expenses for the period - Profit on sale of trust beneficiary interests in real estate or real estate + Loss on sale of real estate. |
| 8. | FFO per unit = FFO / Number of investment units issued and outstanding (rounded down to the nearest yen) |
