DAIWA SECURITIES LIVING INVESTMENT CORPORATION 32 nd | Fiscal Period Business Report | |||||
(Statement of Financial Performance) | ||||||
October 1,2021 - March 31,2022 | ||||||
https://www.daiwa-securities-living.co.jp/en/
Stock 8986
Code
6-2-1 Ginza, Chuo Ward, Tokyo https://www.daiwa-securities-living.co.jp/en/
I. Outline of the Investment Corporation
To Our Unitholders
Financial Highlights
I would like to express my sincere appreciation for your
billion) on April 1, 2022, the first for the interim period ending
Distributions per Unit
continued support of Daiwa Securities Living Investment Corporation (hereinafter the "Investment Corporation"). I would also like to offer my condolences to all those who suffered as a results of the COVID-19 pandemic and my heartfelt prayers for an early recovery.
The Investment Corporation has reached the end of another successful year, the fiscal period ended March 31,
September 30, 2022. Consequently, the Investment Corporation's asset size as of April 1, 2022 stands at 240 properties worth JPY 345.6 billion. The Investment Corporation will continue to seek asset size growth that will contribute to further improvement in unitholder value.
As for the operation status of the properties that it owns, a high occupancy rate has been maintained with an average
32nd period (ending March 2022) results
2,180 yen
Fluctuations in distributions
(yen)
2,500
33rd period (ending September 2022) forecast | 34th period (ending March 2023) forecast | |||
2,180 yen | 2,180 yen | |||
Distribution | (Distribution per unit÷Number of days under manage | |||
yield | 3.80 % ment×365) ÷Investment unit price (as of March 31,2022) |
Actual distribution per unit
Forecast of distribution per unit
2022 (32nd fiscal period). We take this opportunity to extend our deepest gratitude to our valued unitholders for their support.
Allow me to report on the Investment Corporation's financial results and provide an overview of our operations for the fiscal period ended March 31, 2022. In the fiscal period ended March 31, 2022, the Investment Corporation posted an operating revenue of JPY 11,263 million, operating profit of JPY5,324 million, ordinary profit of JPY 4,622 million, and a profit of JPY 4,621 million, with a distribution of JPY 2,180 per unit, an increase of JPY 20 from the interim period ended September 30, 2021.
During the fiscal period, the Investment Corporation acquired six properties at a total of JPY 13.3 billion (two rental housing properties and four healthcare facilities) through a public offering implemented in October 2021, and also acquired Gran Casa Tennoji EAST (Osaka, Osaka, JPY
0.8 billion) on February 1, 2022. It subsequently acquired Gran Casa Kiyosumishirakawa (Koto-ku, Tokyo, JPY 1.7
occupancy rate of 97.7% during the period and a term-end occupancy rate of 98.5% (for rental housing only in both cases) through careful operations using the Daily Occupancy Rates Forecasting System, which is a proprietary system of the Investment Corporation's asset management company.
On the financial front, the Investment Corporation worked to diversity its sources of funding, raising funds through social loans in October 2021 (JPY 0.77 billion) and social bonds in January 2022 (JPY 2.0 billion) based on the Social Finance Framework established in May 2021.
Daiwa Securities Group Inc., which is also the Investment Corporation's sponsor, will demonstrate strong sponsor commitment and will support the sustainable growth of the Investment Corporation as it seeks to further reinforce the real estate asset management business.
The Investment Corporation remains committed to maximizing returns for all of its unitholders. We would therefore like to ask our unitholders for their continued support and encouragement.
2,040 | 2,028 | 2,190 | 2,160 | 2,160 | 2,180 | 2,180 | 2,180 | ||||||||||||||||
2,000 | 1,901 | 1,920 | 1,967 | 1,964 | 1,990 | ||||||||||||||||||
1,617 | 1,761 | 1,680 | 1,747 | 1,722 | 1,700 | ||||||||||||||||||
1,471 | 1,471 | ||||||||||||||||||||||
1,500 | 1,325 | ||||||||||||||||||||||
1,263 | |||||||||||||||||||||||
1,101 | |||||||||||||||||||||||
1,000 | |||||||||||||||||||||||
500 | |||||||||||||||||||||||
0 | 12th period | 13th period | 14th period | 15th period | 16th period | 17th period | 18th period | 19th period | 20th period | 21st period | 22nd period | 23rd period | 24th period | 25th period | 26th period | 27th period | 28th period | 29th period | 30th period | 31st period | 32nd period 33rd period | 34th period | |
11th period | |||||||||||||||||||||||
(Sep. 2011) | (Mar. 2012) | (Sep. 2012) | (Mar. 2013) | (Sep. 2013) | (Mar. 2014) | (Sep. 2014) | (Mar. 2015) | (Sep. 2015) | (Mar. 2016) | (Sep. 2016) | (Mar. 2017) | (Sep. 2017) | (Mar. 2018) | (Sep. 2018) | (Mar. 2019) | (Sep. 2019) | (Mar. 2020) | (Sep. 2020) | (Mar. 2021) | (Sep. 2021) | (Mar.2022) | (Sep.2022) | (Mar.2023) |
Investment highlight - The 32nd fiscal period (ended March 2022)
27th period | 28th period | 29th period | 30th period | 31st period | 32nd period | |
(ended September 2019) | (ended March 2020) (ended September 2020) | (ended March 2021) | (ended September 2021) | (ended March 2022) | ||
Operating revenues(million yen) | 8,460 | 8,262 | 11,645 | 10,487 | 10,811 | 11,263 |
Operating income(million yen) | 3,834 | 3,762 | 4,860 | 5,101 | 5,090 | 5,324 |
Ordinary income (million yen) | 3,365 | 3,259 | 5,031 | 4,457 | 4,433 | 4,622 |
Net income(million yen) | 3,364 | 3,258 | 6,133 | 4,457 | 4,432 | 4,621 |
CONTENTS
Ⅰ . Outline of the Investment Corporation ‥‥‥‥‥‥ 2 Ⅱ. Asset Management Report ‥‥‥‥‥‥‥‥‥‥‥ 5 Ⅲ. Balance Sheets
Total assets(million yen) | 227,187 | 226,860 | 310,207 | 335,601 | 336,301 | 350,956 |
Net assets(million yen) | 108,447 | 108,369 | 151,117 | 157,466 | 157,295 | 165,372 |
Net assets per unit(yen) | 66,124 | 66,076 | 73,502 | 73,874 | 73,793 | 75,002 |
Capital adequacy ratio at the end of the period (%) | 47.7 | 47.8 | 48.7 | 46.9 | 46.8 | 47.1 |
Ⅳ. Statements of Operations
Ⅴ. Statements of Changes in Net Assets‥‥‥‥‥‥‥ 49 Ⅵ. Notes
Ⅶ. Statement of Cash Distributions Ⅷ. Independent Auditors' Report
Ⅸ. Statements of Cash Flow (Reference Information)‥‥ 74 Ⅹ. Unitholder Information
Portfolio status | Use | Area ratio | |
Hokkaido4.9% Tohoku2.1% | |||
Number of properties | Kyushu3.1% | Shinetsu0.3% | |
Healthcare | Shikoku0.7% | ||
239 properties | Chugoku1.4% | ||
Scale of assets | 29.6% | ||
Studio | |||
343.9 billion yen | Kinki | ||
47.2% | 25.4% | Kanto | |
Occupancy rate at the end of the period | 54.6% | ||
23.2% | 7.3% | ||
99.0% | |||
Family | Tokai | ||
Occupancy rate trends (rental housing only)
Age ratio
5-10years | |
9.4% | |
10-15years | |
Under 5years | 22.8% |
17.4% | Average |
building age | |
Over 20years | 13.8 year |
12.7% | 15-20years |
37.7% |
Daiwa Securities Living Investment Corporation
Executive Director Yoshio Urata
2
100% | 97.85 | 98.05 | 98.46 | ||||||||
97.35 | 96.75 | 97.11 | 97.19 | 97.11 | 97.27 | 97.19 | 97.34 | 97.59 | |||
95% |
Apr.2021 | May | Jun. | Jul. | Aug. | Sep. | Oct. | Nov. | Dec. | Jan. | Feb. | Mar. |
Occupancy rate (rental housing)
*The occupancy rate for healthcare facilities is 100% due to long-termfixed-rent agreements.
3
I. Outline of the Investment Corporation
Outline of the Newly Acquired Properties
In addition to the two rental housing properties and four healthcare facilities acquired in the public offering implemented in October 2021, we also acquired two rental properties, one in Tokyo's 23 wards and the other in Osaka city.
Properties Acquired in the Fiscal Period Ended March 31, 2022 | Property Acquired in 33rd FP | |||||||||
Gran Casa Tennoji EAST | Gran Casa Kiyosumishirakawa | |||||||||
Residence | Residence | |||||||||
Location | Osaka,Osaka | Location | Koto-ku,Tokyo | |||||||
Acquisition date | Feb 1, 2022 | Acquisition date | Apr 1, 2022 | |||||||
Acquisition Price | JPY 846 million | Acquisition Price | JPY 1,775 million | |||||||
Appraisal Value | JPY 867 million | Appraisal Value | JPY 1,830 million | |||||||
Construction date | Jan 2022 | Construction date | Mar 2019 | |||||||
# of units | 50 units | # of units | 49 units | |||||||
(Old name : EscasaTennoji Kokubuncho) | (Old name : Bienestyle Kiyosumishirakawa) | |||||||||
Located within a 6-minute walk from Teradacho Station on the Osaka Loop Line, this property | This property is located within an 11-minute walk from Kiyosumi-shirakawa Station on the Toei Oedo Line and the | |||||||||
offers excellent access to Tennoji, Kyobashi, Umeda and other vibrant areas with large-scale | Tokyo Metro Hanzomon Line, and a 10-minute walk from Suitengumae Station on the Tokyo Metro Hanzomon | |||||||||
commercial facilities and offices. Nearby, there are supermarkets and other facilities convenient | Line. Positioned within the popular Fukagawa area with its rich choice of restaurants, as well as a downtown | |||||||||
for daily use, as well as parks, forming a quiet residential neighborhood. | atmosphere and cultural facilities, it offers a pleasant environment in close vicinity to the Kiyosumi Gardens. | |||||||||
Properties Acquired in the Fiscal Period Ended March 31, 2022 (at the time of the public offering in October 2021)
Rental | Gran Casa | Serenite | Healthcare | Charm Premier | As Heim | Library | Ishinkan |
housing | Shin-Osaka SOUTH | Nippombashi Prier | Kamakurayama | Tsunashima | ShinShibamata | Kamiooka |
Location | Osaka-shi, Osaka | Osaka-shi, Osaka | Location | Kamakura City, Kanagawa | Yokohama City, Kanagawa | Edogawa-ku, Tokyo | Yokohama City, Kanagawa | |||||||
Acquisition price | 4,310 million yen | 2,606 million yen | Acquisition price | 2,550 million yen | 1,500 million yen | 1,405 million yen | 933 million yen | |||||||
Construction date | February 2021 | January 2021 | Construction date | July 2020 | January 2021 | August 2020 | August 2020 |
ESG Initiatives
Agreement with TCFD Recommendations | Social Finance | ||
The asset management company recognized | We took out social loans in October 2021 (JPY | ||
the importance of disclosing climate-related | 0.77 billion) and issued social bonds in | ||
financial information and announced its support | January 2022 (JPY 2.0 billion) based on the | ||
for the TCFD (Task Force on Climate-related | Social Finance Framework established in May | ||
Financial Disclosures) in December 2021, | 2021, and allocated this to acquisition funds for | ||
and participated the "TCFD Consortium", an | healthcare facilities. | ||
organization of domestic supporting companies. | |||
Evaluation and certification by external organizations | |||
Ⅱ. Asset Management Report
Ⅱ. Asset Management Report
Overview of Asset Management
1. Changes in Management Status of the Investment Corporation
28th period | 29th period | 30th period | 31st period | 32nd period | ||||||||
From October 1, | From April 1, | From October 1, | From April 1, | From October 1, | ||||||||
2019 | 2020 | 2020 | 2021 | 2021 | ||||||||
to March 31, | to September 30, | to March 31, | to September 30, | to March 31, | ||||||||
2020 | 2020 | 2021 | 2021 | 2022 | ||||||||
Operating revenues | Million yen | 8,262 | 11,645 | 10,487 | 10,811 | 11,263 | ||||||
(Of the above, rental revenues) | Million yen | (8,262) | (10,173) | (10,487) | (10,811) | (11,263) | ||||||
Operating expenses | Million yen | 4,500 | 6,784 | 5,386 | 5,721 | 5,938 | ||||||
(Of the above, property-related expenses) | Million yen | (3,585) | (4,580) | (4,222) | (4,524) | (4,696) | ||||||
Operating income | Million yen | 3,762 | 4,860 | 5,101 | 5,090 | 5,324 | ||||||
Ordinary income | Million yen | 3,259 | 5,031 | 4,457 | 4,433 | 4,622 | ||||||
Net income | Million yen | 3,258 | 6,133 | 4,457 | 4,432 | 4,621 | ||||||
Total assets | Million yen | 226,860 | 310,207 | 335,601 | 336,301 | 350,956 | ||||||
(Period-over-period) | ％ | (-0.1) | (36.7) | (8.2) | (0.2) | (4.4) | ||||||
Net assets | Million yen | 108,369 | 151,117 | 157,466 | 157,295 | 165,372 | ||||||
(Period-over-period) | ％ | (-0.1) | (39.4) | (4.2) | (-0.1) | (5.1) | ||||||
Total amount of investment | Million yen | 91,715 | 117,715 | 124,110 | 124,110 | 132,170 | ||||||
Number of units issued | Units | 1,640,060 | 2,055,946 | 2,131,546 | 2,131,546 | 2,204,890 | ||||||
Net assets per unit | Yen | 66,076 | 73,502 | 73,874 | 73,793 | 75,002 | ||||||
Total distributions | Million yen | 3,326 | 4,502 | 4,604 | 4,604 | 4,806 | ||||||
Distribution per unit | Yen | 2,028 | 2,190 | 2,160 | 2,160 | 2,180 | ||||||
(Of the above, distribution of profits per unit) | Yen | (2,028) | (2,190) | (2,160) | (2,160) | (2,180) | ||||||
(Of the above, excess-profit distribution per unit) | Yen | (－) | (－) | (－) | (－) | (－) | ||||||
Ratio of ordinary income to total assets (Note 2) | ％ | 1.4 | (2.9) | 1.9 | (3.7) | 1.4 | (2.8) | 1.3 | (2.6) | 1.3 | (2.7) | |
Return on equity (ROE) (Note 2) | ％ | 3.0 | (6.0) | 4.7 | (9.4) | 2.9 | (5.8) | 2.8 | (5.6) | 2.9 | (5.7) | |
Capital adequacy ratio at the end of the period | ％ | 47.8 | 48.7 | 46.9 | 46.8 | 47.1 | ||||||
(Period-over-period) | ％ | (0.0) | (0.9) | (-1.8) | (-0.1) | (0.3) | ||||||
Payout ratio | ％ | 102.1 | 73.4 | 103.3 | 103.9 | 104.0 | ||||||
[Other reference information] | 193 | 218 | 226 | 232 | 239 | |||||||
Number of investment properties | Properties | 1,853 | 2,288 | 2,366 | 2,408 | 2,497 | ||||||
Depreciation for the period | Million yen | 1,159 | 806 | 684 | 476 | 607 | ||||||
Capital expenditure for the period | Million yen | 6,530 | 7,881 | 8,632 | 8,696 | 9,064 | ||||||
Rental NOI (Net Operating Income) (Note 2) | Million yen | 3,184 | 3,211 | 3,260 | 3,268 | 3,288 | ||||||
FFO (Funds from Operation) per unit | Yen | 14.3 | 17.0 | 16.6 | 17.2 | 17.5 | ||||||
(Note 2)(Note3) | ||||||||||||
Funds from Operations (FFO) multiple (Note | Times | 14.8 | 15.8 | 15.6 | 14.5 | 14.6 | ||||||
2)(Note3) | ||||||||||||
Debt service coverage ratio (Note 2)(Note 3) | Times | 115,587 | 152,687 | 171,737 | 172,687 | 178,887 | ||||||
Interest-bearing debt(note2) | Million yen | 51.0 | 49.2 | 51.2 | 51.3 | 51.0 |
With newly obtaining DBJ Green Building certification for 2 properties, Total of 4 properties acquires environmental certifications
The Residence HonmokuYokohama Bayside | GranparkTenjin |
Promotion of Delivery Box
Participated in GRESB Real Estate
Evaluation continuously from 2018
ChijikoukanmaeTower Residence
Serenite Honmachi Grande
(Note 1) The amount is rounded down to the nearest unit shown in each column, and the ratio is rounded to the first decimal place.
(Note 2) The indicators are calculated using the formulas shown below. Annualized figures based on the number of days under management are shown in parentheses.
Ratio of ordinary income to total assets | Ordinary income / {(Total assets at the beginning of the period + Total assets at the end of the period) / 2} × 100 |
Return on equity (ROE) | Net income / {(net assets at the beginning of the period + net assets at the end of the period) / 2} × 100 |
Rental NOI | Rental revenues - property-related expenses + deprecation |
FFO per unit | FFO (= net income - gain from negative goodwill+ depreciation + amortization - gain or loss on disposition of |
real estate + impairment loss)/number of investment units issued at the end of the period | |
FFO multiple | Investment unit price at the end of the period / annualized FFO per unit |
(Net income before interest, depreciation and amortization- gain from negative goodwill - gain or loss on | |
Debt service coverage ratio | disposition of real estate +impairment loss)/interest expenses (including interest on investment corporation |
bonds) | |
Period-endinterest-bearing debt to | Interest-bearing debt at the end of the period / total assets at the end of the period × 100 |
period-end total assets ratio | |
As of the end of March 2022, the ratio of delivery boxes installed in rental housing was approximately 85.7% (based on the number of buildings).
Since this initiative will not only improve the convenience of tenants of rental housing, but will also lead to reduction of redelivery rate and CO2 reduction. DLI promotes the installation of the delivery box.
（Note）14buildings such as a single-tenant property and compartmentalized ownership property are excluded.
DeliveryBox
(Gran Casa Omori-Kaigan)
4
(Note 3) For the 29th fiscal period, net income used to calculate FFO and debt service coverage ratio includes ¥1,102 million of gain from negative goodwill.
5
Ⅱ. Asset Management Report
2. Progress of Asset Management in the Period under Review
(a) Profile of the Investment Corporation
The Investment Corporation was established on October 7, 2005, based on the provisions of the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended), and listed as a "housing- specific REIT" on the Tokyo Stock Exchange Real Estate Investment Trust market (stock code 8986) on June 22, 2006. The Investment Corporation merged with Prospect Reit Investment Corporation in an absorption-type merger on July 1, 2010, and since then, it has been seeking to steadily enhance distributions, primarily by improving the quality of its portfolio through the replacement of properties (acquiring new properties and disposing of existing properties), strengthening overall operations by improving occupancy rates and other factors, and reducing costs by decreasing expenses for interest-bearing debt and other items. Furthermore, as a result of an absorption-type merger (hereinafter the "Merger") whereby the Investment Corporation is the surviving corporation and Nippon Healthcare Investment Corporation (hereinafter "NHI") is the absorbed corporation on April 1, 2020, upon which the trade name was changed from "Japan Rental Housing Investments Inc." to "Daiwa Securities Living Investment Corporation" and healthcare facilities added to the portfolio, the Investment Corporation is now managed as a "REIT that comprehensively provides comfortable living spaces that 'support life and lifestyle of everyone' suited to each life stage."
The properties under management at the end of March 2022 consisted of 239 properties with a total acquisition price of ¥343,923 million and a total rentable floor area of 744,700.89 square meters.
-
Investment Environment
Although the Japanese economy was still in a severe condition in the fiscal period under review due to the effects of the COVID-19 pandemic, a recovery trend began to appear, such as positive growth for the first time in two quarters, with real GDP growth of 4.6% in the October-December 2021 quarter. Meanwhile, it is necessary to continue to monitor trends in the global economy, such as soaring resource prices due to the worsening situation in Ukraine and interest rate hikes by the Federal Reserve Board.
Amid such, rental residential properties owned by listed residential REITs enjoyed a relatively stable management environment as seen in their maintenance of stable occupancy rates when compared with other sectors. On the other hand, in the real estate investment market, the stable cash flows of rental residential properties attracted the enduring interests of investors and the low-interest-rate environment also continued, intensifying competition for property acquisition by domestic and foreign investors. Also, for healthcare facilities, the social demand for private nursing homes and other facilities for the elderly is increasing year by year as the proportion of the elderly population in the total population increases. - Management Performance
To enhance investment unit value, focus was placed on: a. External growth through the acquisition of new properties; b. Continuing to strengthen overall operations (the maintenance of high occupancy rates, the maximization of rent and other income and the reduction of expenses related to leasing business); c. Strengthening of financing (the extension of borrowing periods and the diversification of due dates, etc.); and d. Sustainability initiatives.
a. External growth through acquisition of new properties
In the fiscal period under review, the Investment Corporation acquired three rental housing (total acquisition price: ¥7,763 million) and four healthcare facilities (total acquisition price: ¥6,388 million), totaling seven properties (total acquisition price: ¥14,151 million) amid increasingly intensified competition for property acquisition. These properties contributed to the revenues of the Investment Corporation in the fiscal period under review and are expected to make a contribution toward expanding revenues in the next fiscal period onward.
Acquisition | |||
Property name | Property type | Acquisition date | price |
(thousand yen) | |||
(Note 1) | |||
Gran Casa Shin-Osaka SOUTH (Note 2) | Rental housing | October 1, 2021 | 4,310,000 |
Serenite Nippombashi Prier | October 1, 2021 | 2,606,771 | |
Gran Casa Tennoji EAST (Note 3) | February 1, 2022 | 846,560 | |
Rental housing total | 7,763,332 | ||
Charm Premier Kamakurayama | Healthcare | October 1, 2021 | 2,550,000 |
As Heim Tsunashima | October 1, 2021 | 1,500,000 | |
Library ShinShibamata | facilities | October 1, 2021 | 1,405,000 |
Ishinkan Kamiooka | October 1, 2021 | 933,000 | |
Healthcare facilities total | 6,388,000 | ||
Total | 14,151,332 |
6
(Note 1) Acquisition price does not include acquisition expenses, adjustments to property tax and city planning tax, and consumption tax and local consumption tax.
(Note 2) The property name of "Splendide Shin-Osaka SOUTH" was changed to "Gran Casa Shin-Osaka SOUTH" on November 1, 2021. The same applies hereinafter.
(Note 3) The property name of "Escasa Tennoji Kokubucho"was changed to "Gran Casa Tennoji EAST" on February 1, 2022. The same applies hereinafter.
-
Continuing to strengthen overall operations i. Strategy for managing rental housing
As a result of use of the Daily Occupancy Forecasting System and continued focus on a range of existing initiatives and other measures by the Asset Manager, the average occupancy rate during the period stood at 97.7% (97.1% in the previous fiscal period). In addition, as a result of continuing to focus on also increasing the rent at the time of replacement (Note), an increase in rent from the previous rent was achieved for 716 contracts out of 1,273 (the total number of new contracts) in the fiscal period under review. The percentage of contracts with higher rent (based on the number of contracts) was 56.2%. The percentage of change in rent at tenant turnover (based on rent) rose by 0.6% (an increase of 1.5% in the previous fiscal period), continuing an upward trend and contributing to higher revenues as in the previous fiscal period.
As for expenses related to leasing business, the Asset Manager focused on a range of existing initiatives, including the reduction of repair expenses and expenses for work to restore properties to their original state through the High-Cost Construction Approval Committee.
In the fiscal period under review, in consideration of the trend in the rental market with the direct impact of COVID-19 decreasing and shifting to post-pandemic lifestyles, campaigns to conclude contracts and revision of terms and conditions of contracts were carried out, resulting in occupancy rates improving from the previous period.
(Note) The rent at the time of replacement is calculated by excluding properties for which the previous rent is unknown due to newly acquired properties and the cancellation of the sublease contract and rooms for rent whose use is other than as a residence.
(Existing initiatives)
- "Daily Occupancy Forecasting System" (an IT system independently self-developed by the Asset Manager, the system predicts occupancy rates at the end of every month on a daily basis, helps understand dynamic information regarding individual vacancies, and shortens the cycle for identifying individual vacancies, conducting onsite inspections, investigating causes, taking action, and verifying effects; introduced in October 2011). With the commencement of the operation of the IT system that was upgraded to a new version in May 2015, a mechanism that is able to ascertain various types of information including occupancy rates on the Internet in real time has been set in place.
- "Three-weekRule" (minimizing opportunity losses by fully enforcing a rule to fully restore properties to their original state within three weeks of tenants vacating; introduced in October 2010)
- "Downtime 60 days" (a policy to conclude a new contract within 60 days of tenants vacating; introduced in October 2012)
- "Action 30 days" (focused response to achieve the best rent at the earliest in the first 30 days after beginning to seek tenants; focused response to vacancies of 30 days after beginning to seek tenants, which was introduced in October 2013, has been changed to a more aggressive initiative based on the "Management Policy by Property" newly introduced in April 2016) to further improve occupancy rates and profitability by shortening vacancy periods
- Taking stronger action on "Key Focus Properties (introduced in April 2011)" and "Long-term Vacancies" (vacancies over 60 days; introduced in October 2010)
- "High-CostConstruction Approval Committee" (a committee conducting a detailed, systematic examination of the content and amount of construction work for ¥1 million or more when orders are placed, to optimize expenses for high-priced construction work; introduced in April 2012)
- "Formulation of Standard Specifications for Work to Restore Properties to their Original State" (managing expenses and construction schedules and building better rooms by setting unique construction specifications for work to restore properties to their original state after tenants vacate, regarding it as a recommercialization measure; introduced in April 2012)
- "Management to Increase the Number of Properties with Full Occupancy" (further improving occupancy rates through the management of the number of properties with full occupancy; introduced in April 2014)
- "Management Policy by Property" (a policy of managing properties by drafting a basic policy for each property based on an analysis of past contract data (rent, downtime, comparison with the previous rent, key money, etc.) of each property and focusing on increasing revenue by simultaneously raising rents and shortening the downtime for each room newly contracted after cancellation through implementation in conjunction with "Action 30 days," one of the existing initiatives above; introduced in April 2016)
7
Ⅱ. Asset Management Report
ii. Strategy for managing healthcare facilities
In order for healthcare facilities to earn stable revenue and serve to maintain and enhance unitholder value, the Asset Manager monitors operators as it regards the creditworthiness, operational capabilities, etc. of the operators operating the facilities as important factors in realizing stable occupancy. Considering the impact of the new coronavirus infection, during the period under review, the Investment Corporation refrained from visiting facilities and conducted interviews using a web conference system with facility managers and head office personnel to conduct hearings and other activities. COVID-19 has had no impact on the performance of the Investment Corporation as of the end of the fiscal period under review. In addition, there are no changes to the terms and conditions of contracts, such as mid-term cancellation of lease agreements with operators, rent reduction/exemption and postponement of payment.
As a result of the above, the average occupancy rate of healthcare facilities during the period was 100.0%.
c. Strengthening of financing (the extension of borrowing periods and diversification of due dates,
etc.)
In the fiscal period under review, the Investment Corporation conducted the following issuance of new investment units, borrowing of funds, and issuance of investment corporation bonds to fund the acquisition of new properties and repayment of borrowings.
- As part of the funds for acquisition of the properties newly acquired on October 1, 2021, the Investment Corporation borrowed a total of ¥6,570 million on the same day.
-
The Investment Corporation conducted issuance of new investment units (payment date: October 1,
2021, number of investment units issued: 70,476 units, issue price: ¥113,626, total issue value: ¥7,745 million), and used such to fund part of acquisition of the properties acquired on October 1, 2021. - The Investment Corporation conducted issuance of new investment units through third-party allotment (payment date: October 20, 2021, total issue value: ¥315 million), and used such to fund part of early repayment of short-term borrowings totaling ¥370 million on November 30, 2021.
- The Investment Corporation issued Daiwa Securities Living Investment Corporation's fourth investment corporation bonds totaling ¥2,000 million on January 25, 2022, and used such to fund early repayment of short-term borrowings totaling ¥2,000 million on January 31, 2022.
- On February 28, 2022, the Investment Corporation refinanced ¥3,500 million of the bank borrowings from existing transaction banks and new transaction banks as the funds for repayment of the same
amount for a total of long-term borrowings due on the same day.
Of the financing above, the Investment Corporation concluded interest rate swap agreements and thereby fixed the interest rate payable for the ¥4,200 million in borrowings with floating interest rates as of October 1, 2021.
As a result of the above, the Investment Corporation achieved extension of borrowing periods, in addition to diversification of due dates. Furthermore, the ratio of interest-bearing debt to total assets at the end of the fiscal period under review came to 51.0%, the ratio of long-terminterest-bearing debt (excluding interest-bearing debt to be repaid within a year) came to 89.2%, and the ratio of fixed interest rates came to 77.1% on a contract basis.
d. Sustainability initiatives
Based on the recognition that the emphasis on environmental, social and corporate governance practices (collectively called "ESG") in asset management contributes to the improvement of corporate value over the medium to long term, the Investment Corporation established its Policy Regarding ESG in 2016, and the former Asset Manager of the Investment Corporation established the Sustainability Promotion Committee in 2017.
In addition, the Investment Corporation has systematically promoted sustainability initiatives, such as establishing the Sustainability Promotion Office at the Asset Manager in June 2021 with the aim of further strengthening its sustainability initiatives.
As for its environmental initiatives, the Investment Corporation is working to reduce the environmental impact of its portfolio through energy conservation and greenhouse gas emissions reduction by installing LEDs and others with high energy-saving performance, as well as effective utilization of limited resources such as water conservation.
Regarding social initiatives, the Investment Corporation is making efforts to improve tenant satisfaction and contribute to the sustainable development of local communities by building good relationships with external stakeholders related to its real estate held to collaborate with them. In the fiscal period under review, in order to promote the supply of excellent healthcare facilities in Japan, the Investment Corporation borrowed through a social loan (¥770 million) and issued social bonds (¥2,000 million) based on the Social Finance
8
Framework established in May 2021.
As part of our governance initiatives, the Asset Manager ensures prevention of conflicts of interest, management of risks, and compliance with laws and regulations, and has introduced an asset management fee system linked to the results of management, emphasizing the linkage with unitholder interests.
Since 2018, the Investment Corporation has been continuously participating in GRESB Real Estate Assessment.
The Asset Manager formulated a "Climate Change Resilience Policy" in December 2021 and expressed support for the TCFD (Task Force on Climate-related Financial Disclosures) (Note) recommendations to promote clarification of the policy on initiatives to address climate-related issues and the enhancement of disclosure of the content of such initiatives.
In January 2022, the Asset Manager joined the TCFD Consortium, an organization formed by companies in Japan expressing support for the recommendations.
(Note) TCFD (Task Force on Climate-related Financial Disclosures) is an international initiative established by the Financial Stability Board (FSB) at the request of the G20 regarding how climate-related information should be disclosed and addressed by financial institutions.
(d) Summary of Results and Distributions
As a result of the management initiatives described above, the Investment Corporation recorded operating revenue of ¥11,263 million, operating profit of ¥5,324 million, ordinary profit of ¥4,622 million and profit of ¥4,621 million.
As for distributions, the Investment Corporation will distribute unappropriated retained earnings by using the reserve for temporary difference adjustments (¥185 million) and adding it to unappropriated retained earnings according to the existing policy.
As a result, total distributions came to ¥4,806 million in the fiscal period under review, and distribution per unit was ¥2,180 (up ¥20 from the previous fiscal period).
(Note) With respect to distributions, based on the plan that the maximum amount of distribution of earnings shall be included in deductible expenses upon the application of Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, including amendments thereto; hereinafter the "Special Taxation Measures Act"), the full amount of unappropriated retained earnings except for fractions of less than one (1) yen of cash distribution per investment unit will be distributed.
9
This is an excerpt of the original content. To continue reading it, access the original document here.
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Daiwa Securities Living Investment Corporation published this content on 22 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 June 2022 08:54:08 UTC.
