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Finance Strategy
[Financial Characteristics of J-REITs]
In general, REITs require an enormous amount of funds to acquire and operate assets in order to construct a portfolio comprising many properties. Thus, they conduct fund procurement through a balance between equity finance (capital increases through the issuance of investment units to obtain funds from the capital market) and debt finance (borrowings and refinancing from financial institutions and the issuance of corporate bonds).
In addition, with regard to debt finance, PIC takes into consideration the following.
1) Reduce liquidity risks by diversifying repayment dates
2) Conduct stable procurement centering on long-term loans
3) Reduce interest rate fluctuation risks by focusing on fixed interest rate loans
[Current Status of Financial Environment]
The financial environment surrounding J-REITs has improved significantly, as the Public-Private Real Estate Market Stabilization Fund and other government-led safety nets were established to provide a broad sense of assuredness and the loose monetary policy implemented by authorities encouraged financial institutions to take a positive stance toward lending for real estate investment. J-REITs recommenced fund procurement in the capital markets, such as public offerings of new investment units and issuances of corporate bonds, and the financial environment has arguably weathered the worst period.
[PIC Financial Strategy]
In consideration of such financial conditions, PIC has been implementing the financial strategy below.
| 1) | Reconstruct a well-balanced fund procurement scheme (public offerings, corporate bonds and borrowings) based on the recovery of capital markets |
|---|---|
| - | Regarding redemption of corporate bonds (15 billion yen) maturing in September 2010 PIC conducted refinancing with 7.0 billion yen of corporate bonds and 8.0 billion yen of borrowings. |
| 2) | Reinforce relations with financial institutions |
| - | PIC continues its efforts to expand lenders and started transactions with Mitsubishi UFJ Trust and Banking Corporation, Mizuho Corporate Bank, Ltd. and The Norinchukin Bank in September 2010 and with NTT Finance Corporation in December 2010. |
| 3) | Utilize the credibility of NTT Urban Development Corporation (NTTUD), the new sponsor of the asset management company |
| - | Aim to reinforce fund procurement capabilities and reduce procurement costs by reinforcing credibility. |
Focuses for the Future
- Establish a financial strategy in line with improvements in the financial environment and reduced costs of fund procurement.
- Create and propose a new scenario for growth, with equity financing as a possible option, based on the credibility of NTTUD.
