To Our Unitholders
-
Executive Director
Daiwa House REIT
Investment Corporation -
President and CEO
Daiwa House Asset
Management Co., Ltd.
We would like to report on the financial results and give an overview of operations of Daiwa House REIT Investment Corporation (hereinafter referred to as “DHR”) in the 36th fiscal period ended February 29, 2024.
DHR acquired one hotel property (acquisition price of approximately ¥5.1 billion) in September 2023 and one logistics property (acquisition price of approximately ¥3.1 billion) in October 2023. As a result, DHR’s portfolio as of the end of the current fiscal period consisted of 232 properties with an asset size of ¥905.7 billion (total acquisition price). Our occupancy rate at the end of the current fiscal period was 99.8%. In addition, DHR acquired one logistics property (acquisition price of approximately ¥30.0 billion) in March 2024, which falls in the following fiscal period.
Looking ahead, the Japanese economy, despite the current rise in prices, is expected to recover gradually due to factors that include recovery in personal consumption amid rising wages, solid capital investment, and growth in inbound tourism. Meanwhile, we must be aware of the future impact on economic activities from factors including trends in monetary policy by the Bank of Japan and other central banks in the world, the risk of economic recession in overseas economies, the trends of commercial real estate market in the United States, economic stagnation in China, and the surging resource prices.
DHR will work to continuously improve unitholder value by ensuring stable revenue and steady growth of its portfolio over the medium to long term through full utilization of its sponsor Daiwa House Group’s comprehensive strengths and knowhow regarding real-estate development.
In closing, we ask for the continued support of our unitholders and the investment community as we move forward.
Financial Highlights
Distributions
-
Distributions per Unit(Note 1)
- 36th Fiscal Period
-
¥ 5,711
(From September 1, 2023 to February 29, 2024)
*Distribution payments start date is May 13, 2024. -
Forecast Distributions per Unit(Note 2)
- 37th period
-
¥ 5,750
(From March 1, 2024 to August 31, 2024)
- 38th period
-
¥ 6,300
(From September 1, 2024 to February 28, 2025)
- Distributions per unit for the fiscal period ended February 29, 2024 include distributions in excess of earnings of ¥1,220 (including return of capital of ¥23).
- Forecast distributions per unit are as of April 16, 2024, and actual distributions per unit may vary from the forecast. These forecasts also do not guarantee the amount of distributions.
In addition, distributions per unit include distributions in excess of earnings, and we forecast distributions in excess of earnings per unit of ¥497 (including return of capital of ¥62) for the fiscal period ending August 31, 2024 and ¥1,395 (including return of capital of ¥35) for the fiscal period ending February 28, 2025.
Distributions per Unit
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Operating Results
| Fiscal period ended August 31, 2023 |
Fiscal period ended February 29, 2024 |
|
|---|---|---|
| Operating revenues | ¥29,920million | ¥29,643million |
| Operating income | ¥12,914million | ¥12,138million |
| Net income | ¥11,224million | ¥10,378million |
-
- Asset size
(acquisition price basis) -
¥ 905.7 billion
- Asset size
-
- Period-end occupancy rate
-
99.8 %
-
- LTV
(excluding goodwill) -
45.1 %
- LTV
-
- Credit rating
-
JCR: AA (Stable)R&I: AA- (Stable)
Initiatives to Pursue Growth
Execution of Growth Strategy in Response to Changing Environment
- Execution of growth strategy in response to shifts in the financial environment and economic trends
- Promotion of property replacement to enhance internal growth and flexible execution of finance strategy with a focus on cost of capital
Property replacement with sponsor group
- Acquired multi-tenant type logistics property in a prime location in the greater Tokyo area from the sponsor partially financed by green loans on favorable terms
- Selling three BTS type logistics properties (¥22.5 billion) to the fund set up by the sponsor group
DPL Urayasu III
| Location | Urayasu City, Chiba |
|---|---|
| Construction date | September 9, 2022 |
| Acquisition price | ¥30,000 million |
| Appraisal value | ¥31,100 million |
| Acquisition date | March 1, 2024 |
| Appraisal NOI yield | 3.5% |
| Forecast NOI yield(Note) | 3.9% |
- Annualized NOI (adjusted for property taxes) in the forecast for the fiscal period ending August 31, 2024 divided by acquisition price
- Located approximately 3 km from Urayasu IC on Metropolitan Expressway Wangan Route, highly convenient for covering the entire greater Tokyo area
- Located in the main area of concentrated large-scale logistics facilities and factories where the property can operate 24 hours a day
- Highly versatile multi-tenant type property equipped with refrigerating facilities on the first floor
- Awarded environmental certifications of “5 Stars” for BELS and “A” rating for CASBEE for Buildings (New Construction)
Financed green loans of ¥5.0 billion at lower spreads than before for the acquisition
Financed short-term floating-rate loans of ¥10.0 billion to control LTV and financing costs
| Lender | Amount (Yen in millions) |
Term (Interest rate type) |
|---|---|---|
| Mizuho Bank, Ltd. | 5,000 | 5.0 years (Fixed) |
| The Chiba Bank, Ltd. | ||
| The Keiyo Bank, Ltd. | ||
| The Yamaguchi Bank, Ltd. | ||
| Kansai Mirai Bank, Limited |
| Lender | Amount (Yen in millions) |
Term (Interest rate type) |
|---|---|---|
| Sumitomo Mitsui Trust Bank, Limited | 2,500 | 1.0 year (Floating) |
| Sumitomo Mitsui Banking Corporation | 2,500 | |
| MUFG Bank, Ltd. | 2,500 | |
| Mizuho Bank, Ltd. | 2,500 |
Sale of three BTS type logistics properties
|
D Project Tomisato  |
D Project Kaminokawa  |
D Project Kuki II  |
|
| Location | Tomisato City, Chiba | Kawachi District, Tochigi | Kuki City, Saitama |
| Construction date | April 23, 2015 | December 24, 2010 | June 21, 2013 |
| Anticipated sale price | ¥5,970 million | ¥6,510 million | ¥10,100 million |
| Estimated gain or loss on sale | ¥1,430 million | ¥(604) million | ¥2,330 million |
| Anticipated sale date | August 30, 2024 | August 30, 2024 | September 2, 2024 |
| NOI yield (Note) | 4.6% | 3.5% | 3.1% |
- Actual annualized NOI for the fiscal period ended February 29, 2024 divided by anticipated sale price
Significance of the sale
- Selling the properties at appraisal value to the fund set up by the sponsor group
- Replacing properties utilizing value chain of Daiwa House Group to improve portfolio quality
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Initiatives to Increase Unitholder Value
- Implementing our first repurchase of own investment units
- Aiming to increase unitholder value by improvement of portfolio quality through property replacement and flexible capital policy initiatives
- This is an estimated figure calculated based on financial results for the fiscal period ended February 29, 2024 and assuming the investment unit price at the end of March 2024 as the average purchase price. Accordingly, the actual results may deviate from such estimated figure depending on the actual total amount and number of investment units repurchased.
Portfolio
Highlights
Summary
-
- Number of properties
-
233 properties
-
- Asset size
(acquisition price basis) -
¥ 935.7 billion
- Asset size
-
- Logistics
- 68 properties ¥ 503.2 billion
-
- Residential
- 129 properties ¥ 240.3 billion
-
- Retail
- 23 properties ¥ 123.2 billion
-
- Hotel
- 7 properties ¥ 27.3 billion
-
- Other assets
- 6 properties ¥ 41.6 billion
By asset class
By area
By property age
Trends of Asset Size (Acquisition Price Basis) and Occupancy Rate at the End of the Fiscal Period
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ESG Initiatives
Improved External Evaluations by Promoting ESG Initiatives
CDP Climate Change Program
- 2023 CDP Climate Change Program: Awarded the highest score of “A” and named on the “A List” for three consecutive years
- 2023 CDP Supplier Engagement Rating: Listed on the CDP Supplier Engagement Rating Leaderboard (the highest rating) for four consecutive years
<CDP Score>
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First in J-REITs
Disclosed nature-related information aligned with the “TNFD Recommendations”
First in J-REITs
Registered as a “TNFD Adopter”
Only J-REIT to be selected
Selected as “Environmentally Sustainable Company” for two consecutive years and as “Progressive Company in Environmental Disclosure” for the first time in ESG Finance Awards Japan
Included in “Dow Jones Sustainability Asia/Pacific Index” for the first time
Awarded the “Best Recommendation Award in Governance Category” in the “ARES ESG Award 2023” for the first time
Certified as one of “Bright 500,” the top 500 corporations in the “2023 Health & Productivity Management Outstanding Organizations (SME category)” for two consecutive years (Asset manager)
Submitted PRI annual report for the first time (Asset Manager)
- ★★★★★
- Policy, governance and strategy
- ★★★★★
- Real estate
- ★★★★★
- Confidence-building measures
Initiatives for Unitholders
- DHR disclosed “Summary of Resolutions of the 14th General Meeting of Unitholders (Reference)” relating to the 14th General Meeting of Unitholders held in November 2023 on its website as the first initiative for DHR
Investor Information
Unitholders Data
- Ratios in parentheses are rounded to the nearest tenth.
Outline of the Asset Manager
| Corporate Name | Daiwa House Asset Management Co., Ltd. |
|---|---|
| Location | 7th Floor, Nissei Nagatacho Building, 2-4-8, Nagatacho, Chiyoda-ku, Tokyo 100-0014 |
| Established | September 1, 2004 |
| Paid-in Capital | ¥300 million |
| Shareholder | Daiwa House Industry Co., Ltd. (100%) |
Note for Unitholders
| Account closing date | Last day of February and August of each year |
|---|---|
| Date for determining distribution payments | Last day of February and August of each year (Distributions are to be paid within three months of each date.) |
| Unitholders’ Meeting | To be held at least once every two years |
| Date for finalizing general meeting voting rights |
Date set forth in Section 16.1 in the Articles of Incorporation by DHR |
| Listing | REIT section of the Tokyo Stock Exchange (Securities code: 8984) |
| Public notices | The “Nikkei” newspaper (Nihon Keizai Shimbun) |
| Transfer agent | 4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8233, JAPAN Sumitomo Mitsui Trust Bank, Limited |
| Inquiries |
8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063, JAPAN Stock Transfer Agency Business Planning Dept. of Sumitomo Mitsui Trust Bank, Limited TEL: 0120-782-031 (toll-free, available within Japan only) Weekdays 9 a.m. to 5 p.m. |
Procedures for Changes of Address, etc.
Please submit changes of address, name, etc., to your securities company, etc. For procedures regarding investment units registered in special accounts, please contact: Stock Transfer Agency Business Planning Dept. of Sumitomo Mitsui Trust Bank, Limited.
Receipt of Distributions
You can receive distributions when you bring your receipt for distributions to the local office of the Japan Post Bank in Japan or to a post office (bank agent). If the period for receiving distributions has elapsed, please contact the transfer agent Sumitomo Mitsui Trust Bank, Limited.
If you would like to specify an account to which future distributions will be transferred, please follow the procedures of your securities company, etc.
We will not pay and have no obligation to pay cash distributions not claimed within three years of the distribution date, as stipulated in our Articles of Incorporation. Please receive your distributions as soon as possible.
Distribution Statement
The “Distribution Statement” delivered upon payment of distributions includes the “Payment Notice,” referred to in the provisions of the Act on Special Measures Concerning Taxation. This document may be used as a document when declaring income for tax purposes. However, for unitholders who have selected the system of dividend allotment to securities company accounts in proportion to the number of shares held, the amount of withholding tax will be calculated by your securities company, etc. For supporting documents when declaring income for tax purposes, please confirm with your securities company, etc. Furthermore, unitholders who receive distributions by way of a receipt for distributions also receive a “Distribution Statement” enclosed with it.
Outline of the Social Security and Tax Number System Nicknamed “My Number System” with Regard to Investment Units
Residents in Japan are notified of their Social Security and Tax Number (nicknamed “My Number”) by their city, town or village. My Number is required when performing tax-related procedures with regard to investment units.
Use of the My Number for Investment Unit Related Business
As stipulated by laws and regulations, it is now required to state the My Number of the unitholder on payment records that are submitted to the tax office. Unitholders are therefore requested to submit their My Number to their securities company, etc.
［Contact address for inquiries on submitting My Number］
- Unitholders whose investment units are managed by a securities account
Please direct your inquiries to your securities company, etc. - Unitholders not conducting transactions via a securities companyPlease call the following toll-free phone number.
Stock Transfer Agency Business Planning Dept. of Sumitomo Mitsui Trust Bank, Limited
TEL: 0120-782-031
