◎Financial Highlights and Forecasts
Japan Prime Realty Investment Corporation (8955): Continued rent revenue growth and financing cost reduction led to DPU hike for 8 consecutive periods in the 32nd financial period
◎Result highlights and forecast
・Operating revenues and profit recorded 15.14 billion yen (+23million yen vs previous period) and 7.56 billion yen (-170million yen), respectively.
・Distribution per unit (DPU) marked 7,223 yen (+10yen vs previous period).
・Progress was made in the plan for December 2017. Resilience was enhanced toward changes in external environment. Stable growth was sustained.
・Full contribution was made by properties acquired during the previous period. Rent revenue from existing portfolio also drove growth.
・Extension of debt duration and debt cost reduction were pursed.
・Albeit hike in utilities expenses, increase in cancellation charges and reduction in financing cost resulted in 3 yen increase in DPU vs initial forecast.
・For internal growth, strong office demand led to high and stable occupancy rate. ・Successful positive rent revisions and incremental rent upon tenant turnover sustained rent growth in the office portfolio.
・Active initiatives were implemented for sustainable rent growth, increase in incidental income and cost reduction.
・Competitiveness of properties was maintained by well-planned and continual maintenance and asset enhancement investments.
・Competitive edge was secured in the market by the portfolio focusing on large- and middle-sized buildings.
・Retail properties are located in prime locations and commercially viable areas in the proximity of major train stations.
・For external growth, sponsor pipeline is leveraged for selective investments and asset reshuffle.
・Debt acquisition capacity was leveraged to promote quality-oriented external growth strategy.
・For financial strategy, levelled-out maturity schedule over a long period and debt cost reduction were both achieved.
・For sustainability, programs for tenant satisfaction (CS) and eco-friendliness were enhanced.
・Forecasts for operating revenues, operating profit and DPU in the 33rd financial period are 15.08 billion yen, 7.32 billion yen and 7,220 yen, respectively.
・Continued rent income growth is projected. Despite expected increase in expenses such as property taxes, DPU is forecasted to be in line with that in December 2017 period due to non-operating revenues.
・+220 million yen increase (vs forecast for June 2018 period) in profit from leasing business is projected for the 34th financial period.
・Due to progress in positive rent revisions and re-tenanting, significant increase in rent revenue is anticipated.
・Absence of non-operating revenues booked in the previous period will be absorbed. Further ramp-up in profit will be pursued.
◎Growth scenario to achieve medium-term targets
・Continuous internal growth, debt cost reduction and realization of external growth will lead to achieve medium-term targets.
▽Internal growth strategy
・Targets for June 2019 for growth driven by rent revenue: Over 100 yen increase in DPU (based on office rent-generating occupancy rate and rate of increase in rent revenues)
・Rent-generating office occupancy: Over 97.0%
・Rate of increase in rent revenues: Over 0.4%/period
・Increase in DPU driven by debt cost reduction Over 95 yen (debt costs assumed for upcoming refinancing)
▽External growth strategy
・Targeted increase in profit from leasing business driven by property acquisitions: Over 200 yen increase in DPU (based on post-depreciation yield and acquisition prices)
・By leveraging first rights and exercising asset reshuffle, property acquisitions will be pursued to contribute to topline for existing portfolio.
・Target acquisition values: 10 to 15 billion yen
▽DPU growth scenario
1. The path to reach medium-term targets in the initial scenario was revised in the last financial period in consideration for significant increase in expenses upon property tax revaluation in FY2018.
2. Internal growth and financial strategy projections remained unchanged. 7,300 yen is assumed to be attained in June 2019.
3. Furthermore, 7,500 yen is assumed driven by external growth. However, no time horizon is set given the current climate for property acquisitions.