Japan’s first real estate security token targeting rental properties

Kenedix, SMBC Trust Bank, Nomura Securities, and BOOSTRY have completed the public offering and issuance of a real estate security token (ST) utilizing the consortium-type blockchain platform “ibet for Fin”.

This ST uses the beneficiary rights of a real estate trust as trust property, which consists of the rental detached houses of the Kolet series with smart home features provided by Kenedix, which owns Japan’s largest portfolio of rental detached houses. The securities information and transaction information related to these beneficiary rights are managed using ibet for Fin.

Overview of this ST

• Product Name: Kenedix Reality Token Kolet-1
• Investment Target Real Estate: Beneficiary rights of a real estate management and disposal trust with 484 units (462 properties) of the rental detached Kolet series located in Tokyo and three surrounding prefectures as trust property (approximately JPY 20.7bn in total)
• Number of Units Issued / Total Issue Amount: 9,251 units / JPY 9.251bn
• Issue Price / Application Unit: 1 million yen per unit / Minimum 1 unit, in 1 unit increments
• Operation Period: Approximately 5 years and 1 month (scheduled for redemption in July 2029), with early redemption possible at the discretion of the Asset Manager, or extension possible for up to 3 years
• Type of Offered Securities: Security token representing beneficiary rights of a beneficiary certificate-issuing trust
• Issuer: Trustor: KST11 Co., Ltd.; Trustee: SMBC Trust Bank
• Asset Manager: Kenedix Investment Partners, Inc.
• Handling Company: Nomura Securities
• Lender: Sumitomo Mitsui Banking Corporation

Kenedix is one of Japan’s largest real estate asset management companies, managing over JPY 3trn in real estate. In August 2021, it executed Japan’s first real estate security token offering (STO) to raise funds by issuing a real estate ST. Also in August 2021, Kenedix announced its rental detached house brand “Kolet,” pursuing new possibilities for rental detached houses in Japan. By merging these two new businesses and conducting a public offering of this ST, which targets the rental detached Kolet series as its 12th real estate STO, Kenedix has realized a project that provides new options for investors and contributes to the expansion of the real estate ST market.

With this, the total asset size of real estate STs managed by Kenedix Group companies, including this ST, amounts to approximately JPY 140bn. Kenedix will continue to promote and establish new lifestyles through next-generation rent houses via the expansion of the rental detached Kolet series business. At the same time, it aims to make real estate ST, a new investment opportunity utilizing digital technology, its “third business pillar” following REITs and private funds, with the goal of having JPY 2.5trn worth of real estate tokenized in the entire market by 2030.

Overview of Kenedix’s Rental Detached Housing “Kolet” Business

The rental detached houses incorporated into this ST are located in Tokyo, Kanagawa, Saitama, and Chiba prefectures. In the rental housing market of these four prefectures, there is a high supply of rental housing for single persons, and the proportion of rental housing with a floor area of 70 square meters or more is only about 12% of the total stock. Kenedix recognizes that it is not easy for families with children or those seeking spacious living to find rental housing with an ideal number of rooms and size.

In Japan, the spread of rental detached houses has not progressed, and the proportion of newly built rental detached houses among newly built rental houses in the four prefectures is only about 1%. However, Kenedix believes there is significant demand for rental detached houses due to diversifying lifestyles. Against this backdrop, Kenedix estimates that there is a potential market size of over 1 million rental detached houses in the four prefectures, given market factors such as rising construction prices, declining home ownership desire, and a shortage of spacious rental housing. As an industry pioneer, Kenedix is expanding its business by developing the rental detached housing brand “Kolet.”

Kolet generally features 2–3 story buildings in the four prefectures, with spacious layouts including three or more rooms in addition to the LDK (Living, Dining, Kitchen). It offers housing options that can meet diverse lifestyles, such as those concerned about noise and privacy, those who want to live with pets, those who want to live in two generations with their parents, and those who need space to enjoy their hobbies. Through the Kolet business, Kenedix is also promoting sustainability initiatives such as “adoption of virtually renewable energy-derived electricity” and “contribution to a decarbonized society through the supply of wooden rental housing,” as well as improving the safety and convenience of residents through “smart houses with pre-installed home IoT.” Kenedix aims to maximize the potential of rental detached housing and open up new rental housing markets, thereby uncovering unmet needs for more spacious living, particularly among families with children, and realizing contributions to a diverse society.

SMBC Trust Bank is developing products and services related to the issuance and management of STs backed by various assets in this field, leveraging its knowledge as a trust bank regarding real estate and securitized products to develop the STO market. SMBC Trust Bank will continue to strive to create social value through product development and business promotion, and to collaborate with companies both within and outside the SMBC Group.

Nomura Securities aims to provide products and services quickly through collaboration with various partners and multifaceted approaches in blockchain technology-based digital asset-related businesses, which are expected to become one of the new services in the capital market. Starting with the handling of Japan’s first public offering of real estate ST in July 2021, Nomura Securities has been working on the development and expansion of the ST market, including the handling of green digital bonds for institutional investors and Japan’s largest real estate ST to date. Going forward, Nomura Securities will continue to strive to provide even broader investment opportunities, including the handling of this ST backed by rental detached houses, which is a first in Japan.

BOOSTRY provides IT services centered on “ibet for Fin.” Multiple public real estate security tokens, public corporate bond security tokens, and private real estate security tokens are managed on ibet for Fin. BOOSTRY aims to create a new capital market that leads to corporate fundraising and core business support by expanding the existing capital market.

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