Japan Prime Realty Investment Corporation (8955): Results for June 2020 (37th financial period) attained medium-term DPU target of 7,500 yen despite COVID-19 impact, driven by internal as well as external growths.
Japan Prime Realty Investment Corporation (8955): Results for June 2020 (37th financial period)attained medium-term DPU target of 7,500 yen despite COVID-19 impact, driven by internal as well as external growths.
・Operating revenues recorded 16.36 billion yen(+2.2% vs previous period);operating profit 8.01 billion yen (+4.3%).
・Distribution per unit (DPU) marked 7,595 yen (+102 yen), showing sustained growth.
・Momentum for solid internal growth continued. External growth also contributed to substantial increase in rental income.
▽Impact of business closures due to COVID-19
・Only minor impact has hit on offices, JPR’s mainstay tenants, while temporary rent reduction was granted to some retail tenants.
・Retail store closures and shortened opening hours were conducted upon the declaration of national emergency and subsequent self-restraint request.
・Temporary support such as partial rent reduction was offered to some retail tenants.
＜Status as of end of June 2020＞
・No rent reduction was granted to office tenants.
・Prompt measures were in place to most of restaurants and some merchandise/service stores which were hit hardest. Such swift actions helped reinforce tenant relationships and prevent departures.
・Impact of temporary rent reduction on June 2020 results: -94 million yen (Approximately 0.6% of rental revenue). -49 million yen (0.3%) on December 2020 period.
・Delay in leasing has occurred as a result of voluntary restraint on private views and reconsideration on relocation plans.
・Shrink in the amount of rent increase may be expected due to prolonged rent negotiations and worsened corporate earnings results.
▽JPR’s growth strategy
・In addition to rent increase, cost control and external growth will attain continuous DPU growth.
▽Medium term target
・DPU target of 7,800 yen will be sustained.
【Review of Operations】
▽Internal growth strategy
・Occupancy of the current portfolio remains high. Steady progress was made in positive rent revision.
・Temporary rent reduction measures are expected to end in December 2020 period.
・Delay in leasing and slowdown in the pace of rent increase are anticipated due to COVID-19.
・Sustained rent increase will be pursued by reinforcing tenant relationships. At the same time, cost optimization will be initiated.
▽External growth strategy
・Amid challenging acquisition environment, selective investments will be pursued centering on sponsor pipeline.
・Acquisitions of hotels and retail properties will be passed up for the foreseeable future.
・LTV has been lowered to 39.5% as a result of public offering.
・Conservative financial management will continue based on long-term and fixed-rate borrowings.
・Endeavors will be made to obtain new rating on environmental assessment and to strengthen measures against climate change.
・December 2020 (38th financial period)：16.69 billion yen on operating revenues; 8.1 billion yen on operating profit.
・DPU guidance: 7,720 yen（+125 yen vs June 2020 actual）
・Full-term contribution of properties acquired in the previous June period will likely to render incremental DPU, despite negative factors such as delay in leasing caused by COVID-19.
・June 2021 (39th financial period)：16.47 billion yen on operating revenues; 7.86 billion yen on operating profit.
・DPU guidance: 7,500 yen(-220 yen vs December 2020 forecast)
・Decrease in DPU is forecasted due to cancellation of a large tenant and increase in property/city planning tax upon tax revaluation on fixed assets.
・Incremental DPU will be aimed at by early completion of leasing and external growth.