Frontier Real Estate Investment : Information under Article 23 of the European Alternative Investment Fund Managers Directive (AIFMD) for UK and Dutch Investors

Information under Article 23 of the European Alternative Investment Fund Managers Directive (AIFMD) for UK and Dutch Investors

April 5, 2021

DISCLAIMER

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information under Article 23 of the European Alternative Investment Fund Managers Directive (European Directive 2011/61/EU) (the “AIFMD”) as implemented in their respective jurisdictions. Accordingly, you should not use this document for any other purpose.

Netherlands

The units of Frontier Real Estate Investments Corporation (“FRI” or the “AIF”) are being marketed in the Netherlands under Section 1:13b of the Netherlands Financial Supervision Act (Wet op het financieel toezicht, or the “Wft”). In accordance with this provision, Mitsui Fudosan Frontier REIT Management Inc. (the “AIFM”) has notified the Dutch Authority for the Financial Markets (Authoriteit Financiële Markten, the “AFM”) of its intention to offer these units in the Netherlands.. The units of FRI will not, directly or indirectly, be offered, sold, transferred or delivered in the Netherlands, except to or by individuals or entities that qualify as qualified investors (gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft. As a consequence, neither the AIFM nor FRI is subject to the license requirement pursuant to the Wft. Consequently, the AIFM and FRI are only subject to limited supervision of the AFM and the Netherlands Central Bank (De Nederlandsche Bank, “DNB”) for the compliance with the ongoing regulatory requirements as referred to in the Netherlands law implementation of Article 42 of the AIFMD. This Article 23 AIFMD Prospectus is not subject to approval by the AFM. No approved prospectus is required to be published in the Netherlands pursuant to Article 3 of the Regulation (EU) 2017/1129 (the “Prospectus Regulation”) as amended and applicable in the Netherlands.

United Kingdom

Units of FRI are being marketed in the United Kingdom pursuant to Article 59 of the United Kingdom Alternative Investment Fund Managers Regulations 2013. In accordance with this provision, the AIFM has notified the Financial Conduct Authority (the “FCA”) of its intention to offer these units in the United Kingdom.

For the purposes of the United Kingdom Financial Services and Markets Act 2000 (as amended, “FSMA”) FRI is an unregulated collective investment scheme which has not been authorized by the FCA.

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Accordingly, any communication of an invitation or inducement to invest in FRI may only be made to:

  1. investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or “the Order”; or
  2. high net worth companies falling within Articles 49(2)(a) to (d)of the Order, and other persons to whom it may lawfully be communicated (all such persons referred to under (1) and (2) of this paragraph, together being referred to as “Relevant Persons”).

In the United Kingdom, this document and its contents are directed only at Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons. The transmission of this document and its contents in the United Kingdom to any person other than a Relevant Person is unauthorized and may contravene the FSMA and other United Kingdom securities laws and regulations.

Prohibition of Sales to UK Retail Investors

In addition to the restrictions under the AIFMD, as retained by the United Kingdom in its domestic laws, the units of FRI are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the United Kingdom. For these purposes of this provision, a “retail investor” means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer within the meaning of the provisions of the FSMA and any rules or regulations made under the FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as a professional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in Article 2 of Regulation (EU) 2017/1129, as it forms part of domestic law by virtue of the EUWA; and the expression “offer” includes the communication in any form and by any means of sufficient information on the terms of the offer and the international units to be offered so as to enable an investor to decide to purchase or subscribe the international units.

Consequently no key information document required by Regulation (EU) No 1286/2014, as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”), for offering or selling the international units or otherwise making them available to retail investors in the United Kingdom has been prepared and therefore offering or selling the international units or otherwise making them available to any retail investor in the United Kingdom may be unlawful under the UK PRIIPs Regulation.

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European Economic Area

In addition to the restrictions under the AIFMD, the Units of FRI are not intended to be offered, sold or otherwise made available to and should not be offered, sold or otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); (ii) a customer within the meaning of Directive (EU) 2016/97, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation, as amended. Consequently no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or selling the Units of FRI or otherwise making them available to retail investors in the EEA has been prepared and therefore offering or selling the Units of FRI or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPs Regulation.

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Article 23 (1)(a)

Objectives of the AIF

Frontier Real Estate Investment Corporation (“FRI” or the “AIF”) is a REIT specializing in

retail facilities and aims to secure stable earnings over the medium to long term.

Investment strategy

FRI aims to achieve steady growth in distributions by strengthening its ability to respond

to changes in the real estate market and fluctuations in revenue from each property

while expanding its portfolio, enhancing the quality of its portfolio and reinforcing its

financial foundation from a long‐term perspective.

Types of assets the AIF may invest in

Real estate, trust beneficiary interests in real estate, real estate securities, specified

assets and other assets.

Techniques it may employ and all

FRI primarily considers as investment targets real estate used as suburban retail facilities

associated risks

and buildings for retail shops in urban centers and other places, and trust beneficiary

interests in such types of real estate. In order to reduce risks related to rent revenue

associated with regional economic deterioration attributable to focusing investment

properties in specific areas as well as risks related to earthquakes and other disasters, FRI

strives to conduct geographically diverse investment in an aim to stabilize cash flow. In

other words, although almost half of FRI’s properties are in Tokyo and the surrounding

prefectures that comprise the metropolitan Tokyo area, FRI invests in real estate in all

areas of Japan as well as in trust beneficiary interests in such types of real estate. FRI

generally does not consider unoccupied properties as investment targets. However, FRI

may invest in unoccupied properties, properties planned for construction, or properties

under development in the event that tenants and leasing rates have been determined

and stable earnings can be projected after the property is occupied or the building

construction is completed.

The principal risks with respect to investment in FRI are as follows:

  1. Risks Related to Marketability of FRI’s Investment Units and Investment Corporation Bonds
    1. Risks concerning market price fluctuations of the investment units or investment corporation bonds
    2. Risks concerning FRI’s ability to make cash distributions
    3. Risks concerning fluctuations in revenues and expenditures
    4. Risks concerning the rights of unitholders and shareholders not necessarily being identical
    5. Risks concerning dilution of per‐unit value through the issuance of new investment units
    6. Risks concerning transactions involving the investment units in the market

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    1. Risks concerning redemption and interest payments for the investment corporation bonds
  1. Risks Related to Management Policies of FRI
    1. Risks concerning specialized investment in retail facilities
    2. Risks concerning dependency on a limited number of tenants
    3. Risks concerning single‐tenant properties
    4. Risks concerning FRI’s ability to make real estate acquisitions or dispositions
    5. Risks concerning fund procurement through borrowings and issuance of investment corporation bonds and new investment units
    6. Risks concerning investment unit buybacks
  2. Risks Related to Affiliates and the Structure of FRI
    1. Risks concerning dependency on the Mitsui Fudosan Group and conflicts of interest
    2. Risks concerning dependency on FRI’s affiliates and conflicts of interest
    3. Risks concerning dependency on FRI’s executive director and the personnel of the asset management company
    4. Risks concerning changes to FRI’s investment policy
    5. Risks of FRI going bankrupt or its registration being cancelled
    6. Risks concerning tenant leasehold and security deposits
  3. Legal Risks Related to Real Estate and Trust Beneficiary Rights
    1. Risks concerning defects and failures of real estate, including defective title and limited or invalid ownership rights
    2. Risks concerning lease contracts
    3. Risks concerning building damage, loss and deterioration due to disasters, etc.
    4. Risks concerning ownership liabilities, repair and maintenance costs, etc., related to real estate
    5. Risks concerning administrative rules and regulations and prefectural or municipal ordinances for real estate
    6. Risks concerning establishment of new or revisions of existing laws and regulations
    7. Risks arising from bankruptcy of the seller of properties
    8. Risks concerning subleases
    9. Risks concerning the status of use of real estate by tenants, etc.

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Disclaimer

Frontier Real Estate Investment Corporation published this content on 05 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 April 2021 05:09:05 UTC.


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