A REIT specializing in retail facilities, Frontier Real Estate Investment (FRI) aims to secure stable earnings over the medium to long term. While leveraging its particular strengths, as described below, FRI strives to pay stable distributions and maximize unitholder value.
1. A REIT specializing in retail facilities, sponsored by Mitsui Fudosan
The Mitsui Fudosan Group is one of Japan’s preeminent real estate groups, offering wide-ranging services and managing a broad array of businesses in areas that include retail facilities, offices, housing, logistics facilities, and hotels and resorts. As one of the largest commercial developers and operators in Japan, the Mitsui Fudosan Group maintains a retail facility business that develops and manages a great number of retail facilities across the country.
With Mitsui Fudosan as its sponsor, FRI leverages the Mitsui Fudosan Group’s expertise in retail facility management to simultaneously realize stability and growth in its portfolio. Furthermore, FRI continues to realize external growth by acquiring diverse retail facilities developed and managed by the Mitsui Fudosan Group.
2. Stable earnings base
The value and performance of a retail facility are affected by a wide variety of factors, ranging from the geographical (such as the population of a given trading area and transportation accessibility) to the property-specific (such as facility age, building condition and other tangible factors, in addition to the comprehensiveness of its offerings as a retail facility, tenant creditworthiness and other intangible factors) as well as the competitive landscape within the retail trading area, the facility’s fit with the characteristics and consumer preferences of the retail trading area, and future consumption trends. FRI selectively invests in retail facilities with medium- to long-term competitiveness (best-in-town facilities) based on the careful evaluation of their individual characteristics and risks, including the factors below, to maintain and improve the stability of its earnings base.
・Well-balanced, diversified investment
FRI maintains a high-quality portfolio that is well-balanced and diversified in terms of geographic area, property type and tenant.
・Long-term fixed rent lease contracts generating stable cash flows
Tenant contracts at retail facilities are often long-term, with fixed rent. FRI’s portfolio, too, is centered on long-term fixed rent lease contracts with highly creditworthy tenants. The ability to conclude such contracts is a major factor in maintaining stable cash flows over the medium to long term.
3. Prudent financial operations through use of tenant leasehold and security deposits
In terms of financing, FRI’s great strength is its ability to conduct financial operations by effectively utilizing the considerable leasehold and security deposits it receives from tenants, a characteristic unique to retail facilities. By carefully controlling the loan-to-value (LTV) ratio based on borrowings and leasehold and security deposits, FRI maintains prudent financial operations. In these ways, FRI has built a robust financial base and maintains high credit ratings.