Message from the Executive Director

On behalf of HEIWA REAL ESTATE REIT, Inc. and HEIWA REAL ESTATE Asset Management CO., LTD., I would like to express our sincere appreciation to all of our investors for your continued patronage and support. It is with great pleasure that I take this opportunity to report briefly on our operating performance and financial results for the 34th Fiscal Period (ended November 30, 2018).

Backed by the solid sponsorship of HEIWA REAL ESTATE CO., LTD., we achieved steady progress in executing a number of strategies aimed at securing financing and ensuring internal and external growth during the fiscal period. We also succeeded in cutting costs, particularly those associated with financial procurement, while maintaining a high occupancy rate for the property portfolio. As a result, during the period under review we posted operating revenues of ¥6,215 million, ordinary income of ¥2,487 million, and net income of ¥2,487 million. We also decided on a distribution per unit of ¥2,350.

During the 34th Fiscal Period, new investment was difficult to achieve due to persistently high real estate prices, among other factors. However, we focused on expanding the asset scale actively and improving the quality of the property portfolio through replacement transactions with the sponsor to achieve external growth. As a result, we decided to acquire two quality office buildings as well as to acquire one office building and three residences at the beginning of the following 35th fiscal period. We aimed to increase distribution through the acquisition of these properties and stabilize the future distribution by retaining a portion of the gain on sales of MITA HEIWA BUILDING (leasehold land), which we transferred as internal reserves to serve as a source for future distribution payments.  

To achieve internal growth, we focused on increasing rents at office buildings under management and succeeded in continuing to raise the average rental amount for the eighth consecutive period. Office buildings were almost fully occupied during the period with the average occupancy rate reaching 99.4%. In residences under management, the average occupancy rate reached 97.0%, improving from 96.5% in the same period of the previous year, thanks to our success in translating highly robust demand from tenants during summer into leases.

On the financial front, we refinanced loans and borrowed new funds for the acquisition of properties and succeeded in reducing the average financing cost for the 16th consecutive period because interest rates of both the refinancing and new financing were lower than existing rates. We will continue to work to both cut costs and lengthen the period of fund procurement, while establishing a more stable fund procurement base by benefiting from the low interest rate environment.

In recent years, Environment, Society and Governance (ESG) gain increased attention. HEIWA REAL ESTATE REIT is also mindful of disciplined business operation, in addition to environmentally friendly property management and contributing to local communities. Moreover, in line with our basic management philosophy, we will work to steadily expand assets under management and secure stable revenues over the medium and long terms, with the goal of maximizing value for investors. As we carry out these endeavors, we look forward to your continued encouragement and support.

Masaaki Higashihara
Executive Director

HEIWA REAL ESTATE REIT, Inc.

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