Investment Policy and Basic Strategy
About IIFMENU
Investment Policy
IIF will manage the Investment Corporation’s assets with the aim of securing a stable medium-to-long-term return and steadily grow the assets under management.
Basic Strategy
IIF intends to acquire a diverse portfolio of industrial properties used for logistics and storage, manufacturing and research and development. IIF also intends to acquire infrastructure properties providing essential services, such as data storage, power generation, telecommunications, transportation, and water supply, some of which have traditionally been operated by the public sector in Japan. The following table provides information regarding how IIF expect to classify its properties, as well as several examples in each category:
This table can be scrolled sideways.
| Asset Category | Definition | Examples | |
|---|---|---|---|
| Industrial Properties |  |
Facilities used to provide intercompany distribution and sale distribution services, including transportation, shipping, storage, stockpiling, cargo handling, packaging, sorting, distribution processing and information functions |
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Facilities for research and development, raw material procurement, stockpiling, storage, manufacturing, production, assembly and processing, recycling and other purposes |
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| Infrastructure properties(*1) |  |
Facilities developed as a base for industrial activity, such as transportation, communication, energy, water and public facilities |
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*1 The examples of infrastructure properties listed include those that IIF may acquire in the future but would be difficult to do so currently due to various regulatory restrictions.
Growth Strategies
External Growth Strategies
Initially, IIF will establish a portfolio consisting primarily of logistics facilities, which are more familiar targets for investment. IIF will then actively pursue other industrial properties, such as manufacturing and research and development facilities, along with infrastructure properties held by the private sector. From there, IIF plans to expand into infrastructure properties held by the public sector with the aim of maintaining a balanced portfolio of industrial and infrastructure properties over the mid to long term.
Internal Growth Strategies
In order to maintain and increase portfolio revenues in the mid and long term, IIF will develop growth strategies based on the characteristics of each property and its asset category so that each of its properties can be managed in the most appropriate manner. IIF will ensure that its asset manager, either directly or indirectly through its property managers, works closely with its tenants to ensure that their needs are satisfied. IIF also aims to achieve portfolio growth by engaging in various activities tailored to the characteristics and surrounding environment of each property, including expanding and refurbishing the properties, so as to maintain and improve both the rental income and occupancy rate of its entire portfolio.
IIF will also engage in efforts to maximize the profitability of its properties by streamlining and improving their management as well as by reviewing and reducing expenses.
Property Selection and Target Portfolio
Investment selection policy
To create and maintain a portfolio that will provide stable revenues and achieve ongoing growth in unitholder value, the primary focus of its property selection policy will be on long-term usability and versatility. The long-term usability of a property is of particular importance, because assets such as manufacturing and research and development facilities and infrastructure facilities are often designed and constructed based on the needs of a particular tenant and are not always adaptable to other tenants.
Long-term Usability and Versatility Analysis
This table can be scrolled sideways.
| Focus of selection policy | ||||||
|---|---|---|---|---|---|---|
| Long-term usability | Future viability of the tenant’s industry | Future viability of tenant’s business | Long-term usability of the facility | |||
| Versatility | Suitability of thelocation for industrial or infrastructure facilities | General versatility of the location | ||||
By focusing on the versatility of a property’s location, IIF expects to invest largely in urban and suburban properties where versatility of the location is generally expected. IIF will also focus on properties that are located in industrial areas where suitability of the location for an industrial or infrastructure facility is expected. In certain instances, IIF may also invest in properties that are located in areas that do not fall into either of the above-mentioned categories, as described in the following table:
Asset Category
This table can be scrolled sideways.
| Location | Description |
|---|---|
| Urban and suburban properties | Properties located in Japan’s three major urban areas *1, cities designated by government ordinance *2, or similar areas |
| Industrial-area properties | Generally, properties located in industrial zones *3 that generate more than ¥1 trillion in manufactured product shipments |
| Other properties | Properties that do not fall within either of the above categories but have an expected risk/return profile suitable for investment |
*1 Japan’s three major urban areas are the greater Tokyo, Osaka and Nagoya areas. The greater Tokyo area consists of Tokyo, Kanagawa, Chiba and Saitama prefectures; the greater Osaka area consists of Shiga, Kyoto, Osaka, Hyogo, Nara and Wakayama prefectures; and the greater Nagoya area consists of Aichi, Mie and Gifu prefectures.
*2 Cities designated by government ordinance are cities with a population greater than 500,000 that have been designated by government ordinance. They currently are Kobe, Kyoto, Nagoya, Osaka, Yokohama, Kitakyushu, Fukuoka, Kawasaki, Sapporo, Hiroshima, Sendai, Chiba, Saitama, Shizuoka, Sakai, Niigata and Hamamatsu.
*3 Industrial zones means industrial zones as defined in METI’s Report of Industry Statistics.
*2 Cities designated by government ordinance are cities with a population greater than 500,000 that have been designated by government ordinance. They currently are Kobe, Kyoto, Nagoya, Osaka, Yokohama, Kitakyushu, Fukuoka, Kawasaki, Sapporo, Hiroshima, Sendai, Chiba, Saitama, Shizuoka, Sakai, Niigata and Hamamatsu.
*3 Industrial zones means industrial zones as defined in METI’s Report of Industry Statistics.
Target Portfolio
IIF has set the following guidelines for its target portfolio:
While IIF intends to satisfy the following target percentages, there may be instances, particularly after property acquisitions or dispositions, when IIF does not comply with these target percentages.
This table can be scrolled sideways.
| Asset Type (based on appraisal value) |
Logistics, manufacturing and research and development facilities | 50 - 80% |
|---|---|---|
| Infrastructure facilities | 20 - 50% | |
| Location (based on appraisal value) |
Urban and suburban properties and industrial-area properties | 80% or more |
| Other properties | 20% or less | |
| Lease Term (based on rental revenue) |
Less than 2 years | 0 - 20% |
| 2 to 10 years | 20 – 40% | |
| 10 years or more | 40% or more | |
| IIF also intends to have at least 80% of its portfolio (based on appraisal value) consist of properties that are in active operation. | ||
The assets whose purpose of use has come to fall under none of the asset categories after acquisition (“Other Assets”) (Note) may be held continuously based on the risk/return characteristics of properties with such purpose of use, their ratio in the portfolio, their reusability as an industrial property, conditions of the real estate market and the status of individual investments.
In addition, the target percentage of the Other Assets shall be calculated based on the original asset categories. When the ratio of the Other Assets exceeds 10% of the entire portfolio (appraisal value basis), proceedings necessary to eliminate such condition (including activities to sell properties) shall be carried out in principle unless there is a circumstance in which economic conditions, trends in the real estate trade market and various factors pertaining to individual properties have a material effect on the portfolio.
(Note) Including but not limited to cases in which the property had originally been acquired as a facility for research and development, etc. and was converted to office, etc. In addition, when the property after a change of use falls under any of the asset categories such as conversion of a factory into a distribution facility, the target percentage shall be calculated based on the asset category after the change.
Additionally, in order to reduce the effect of risks such as regional economic risks and earthquake risk which increases by converging on a specific region in locations of Industrial Real Estate in which IIF is to invest, IIF shall regularly review the relevant information and adequately consider the location of Industrial Real Estate to be invested in.
IIF also expects to maintain a ratio of certain types of property (i.e., real property, real property leasehold rights and surface rights, as well as trust beneficiary interests in real property, land leasehold rights or surface rights) at 75% or more of its total assets.