Mr.Takahashi has been working as a real estate appraiser since 1996. He is a Real Estat Transaction Specialist at JAREA (Japan Association of Real Estate Appraisars), where he is also a committee member. In 2002, Mr. Takahashi joined Shinsei Bank as a silent partner overseeing the investment business. Mr. Takahashi joined Takara Leben in 2014 and was later transferred to Takara Asset Management with a task to introduce Takara Leben’s Solar facilities in the infrastructure fund market. Takara Leben Infrastructure Fund, Inc. is scheduled to go public in the Tokyo Stock Exchange, on June 2 2016.
1. Takara Leben is the first to stock list solar energy assets through an infrastructure fund. Can you explain the reason for this and the benefits there will be for Takara Leben to finance solar projects in this way?
Selling unbundled solar-powered apartments is the core business of Takara Leben. By the end of February 2016, we have sold out 4407 apartments in 40 buildings, which has been the top performance in Japan’s unbundling realtor for five consecutive years. Since our involvement in utility-scale projects in 2013, we have been actively promoting the use of renewable energies based on our past top-performing experience and Takara Leben vision, which is to create an earth-friendly sustainable environment.
To further develop and expand this business, we established a fund aiming at going public. Furthermore, by going public, we would be able to provide investment opportunities for a range of investors, including individuals and doing so would also benefit Takara Leben as a group and to grow the corporation into a fee business that could effectively operationalize asset management.
2. What has been the hardest element in the process of listing the fund?
We started to prepare for the listing even before the establishment of the Infrastructure Market at the Tokyo Stock Exchange in April 2015. Since the company is the first ever to be listed there, we started everything, ranging from fund establishing, authorization acquiring to rule formulating, from scratch. All of these were challenges to us. Compared to acquiring authorization from the so-called Real Estate Investment Trust, going public did take us more time and money.
3. Can you provide some details about the fund? How would you describe the interest from investors so far?
The main investment target of our fund is renewable energy plants, with which we seek to expand the share and market of solar PV plants. At the moment, we expect to spend 90% or more of the investment funneled towards solar PV plants on O&M.
Moreover, we also aim to maximize investment returns by capitalizing the knowhow on developing and operating solar PV plants of Takara Leben--our sponsor.
Two most distinctive characters of our fund are as follow:
1. We only target renewable energy plants which have been granted FiTs and are in operation. (Less risky)
2. We would receive a minimum guaranteed rent which will in turn generate stable cash flows monthly.
or example, if a power plant goes out of operation for one month, we would still receive the minimum guaranteed rent which can be used to hedge against risks stemming from electricity retailing. If the electricity retail revenues were to exceed the minimum guarantee rent by 110%, half of the excessive revenue will be used as a so-called “performance co-varying rents”, which will be an upside for investment. This rent is likely to be a part of your investment returns.
In this way, stable dividends on your investment principles would be the biggest attraction of our fund.
4. What are your expectations for listed infrastructure funds for solar power in Japan? Do you expect this will become a mainstream way to finance solar projects? What will be the most important challenges for the market to overcome?
I think the effects caused by the growth and activation of the secondary market would be more of an issue rather than the listing per se. For the renewable energy industry, secondary market is almost non-existent. There are many developers and foreign investors who are expecting the listed companies to have something that can be benchmarked. To take the listing as opportunities, the industry would also expect the listed companies to develop more and more over time.
In addition, I believe, also from the perspective of ESG, that the option of going public could mean that new investment opportunities can be created through the securitization of infrastructure. As individual investors can also invest money in the listed companies, it would be very likely for crowdfunding to become mainstream.
If you think about solar as a listed product, then electricity generation as source of revenue would be the biggest concern. It would also be important to recognize that degrading performance of panels, i.e. PID, is becoming an inevitable problem confronting development of the solar market. For example, if the target electricity generation amount is surpassed, the present degrading problem with the panels would be emphasized. Even when surpassing target amounts, you should consider if my panels are indeed performing to the fullest, which would be a very interesting part from the perspective of securitization. I think reaction strategies to panel degradation and performance maximizing strategies for solar PV plants would be one of the most important issues for the solar market.