#Japan #Tokyo #ESG Initiatives #DREAM #sustainability-linked loan

DREAM Private REIT's Sustainable Initiatives through SLL

DREAM Private REIT, managed by Diamond Realty Management Co., Ltd., has taken a significant step towards sustainable financing by establishing a Sustainability-Linked Financing Framework. This framework allows for the use of the Sustainability-Linked Loan (SLL), marking the first instance for the fund. The decision aligns with a growing recognition of sustainability as an essential element influencing fund performance.

Overview of the SLL Procurement

DREAM and DPR have always acknowledged the importance of holding sustainable properties and engaging in environmentally friendly practices. Their commitment to ESG (Environmental, Social, and Governance) and SDGs (Sustainable Development Goals) has been evident through their proactive initiatives. In January 2020, DPR executed the industry’s first green loan for private REITs, which has expanded to a balance of approximately 90 billion yen today.

With rising public interest in ESG factors, there is an increasing need for diverse sustainable financing methods. In response to this trend, DPR has developed the Sustainability-Linked Financing Framework and executed the loan to promote its ESG initiatives from a financial perspective.

The SLL differs significantly from traditional green loans, which are earmarked solely for specific environmental projects. Instead, it adjusts borrowing conditions based on the accomplishment of Sustainability Performance Targets (SPT), providing an incentive for DPR to enhance its ESG efforts.

Details of the Framework

The established framework provides a unified definition for SLL requirements, making it possible for DPR to execute loans without needing third-party evaluations each time. The rationality of the set SPT was assessed by the Japan Credit Rating Agency (JCR), a recognized third-party evaluator.

Key Components of the Framework:

• - KPI: Reduction rate of greenhouse gas (GHG) emissions per unit
• - SPT: Aiming for a reduction of GHG emissions by 75% by 2030, aligned with “Net Zero” by 2050
• - Finance Characteristics: Interest rates vary based on SPT achievement (reduction upon achievement, unchanged or increased if unmet)
• - Reporting: Annual reports on KPI results and achievements to lenders
• - Third-party Verification: External agencies will verify energy data

For detailed information on the JCR SLL evaluation report, please refer to the official site.

About the Current SLL

The current SLL represents a borrowing that meets the framework's requirements as evaluated by JCR. The SPT has been set based on DPR's defined materiality.

SLL Overview:

• - Lender: Norinchukin Bank
• - Loan Amount: 1 billion yen
• - Term: 5 years
• - Use: Refinancing existing debts
• - Interest Feature: Rate fluctuations based on SPT achievements

SPT Achievement Schedule:

• - Judgment Dates: December 2026 & December 2029
• - SPT: Achieving a 75% reduction in GHG emissions compared to 2016 levels, confirming alignment with the 2050 net-zero target.

Upon achieving the SPT, the interest rate will decrease by 0.01%. If it is not achieved, the initial rate remains, with potential increases if previously lowered.

Future Directions

Through this initiative, DREAM and DPR aim to diversify their financing options consistent with ESG principles, strengthen relationships with financial institutions, and provide investors and lenders with enhanced sustainable financing opportunities. By continuing to promote ESG and SDGs, they aspire to expand funding methods and invest in green products through SLLs and green loans.

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Company Overview

DREAM Private REIT

• - Location: 2-16-1 Hirakawacho, Chiyoda-ku, Tokyo
• - Executives: Masashi Yamano, Sōtaro Kamide
• - Established: July 2012

Diamond Realty Management Co., Ltd.

• - Headquarters: 2-16-1 Hirakawacho, Chiyoda-ku, Tokyo
• - Business Type: Asset management and advisory services for real estate funds
• - Shareholder: Mitsubishi Corporation (100%)
• - CEO: Masashi Yamano
• - Founded: October 2004

For inquiries related to this press release, please contact Diamond Realty Management Co., Ltd. at [email protected].