Japan Prime Realty Investment Corporation (8955) announced its results for the 39th financial period. DPU (distribution per unit) was negative versus the previous period due to large tenant cancellation and temporary rent reduction upon re-declaration of the national state of emergency. Nevertheless, it exceeded its guidance as a result of progress in leasing small compartments. JPR assumes EPU (earnings per unit) recovery starting from June 2022 financial period driven by vaccine penetration and restart of social and economic activities. Execution of its growth strategy will lead to achieving 7,800 yen in DPU at an early date.

Japan Prime Realty Investment Corporation (8955) announced its results for the 39th financial period. DPU (distribution per unit) was negative versus the previous period due to large tenant cancellation and temporary rent reduction upon re-declaration of the national state of emergency. Nevertheless, it exceeded its guidance as a result of progress in leasing small compartments. JPR assumes EPU (earnings per unit) recovery starting from June 2022 financial period driven by vaccine penetration and restart of social and economic activities. Execution of its growth strategy will lead to achieving 7,800 yen in DPU at an early date.

◎Financial Highlights
・Operating revenues marked 17.3 billion yen (+1.0％ period-on-period) and operating profit 8.78 billion yen (+3.0％)
・DPU recorded 7,657yen (-93 yen)
・While asset reshuffle exercised in the 38 and 39 periods made contribution, lease cancellation of a large tenant and temporary rent reduction as a result of re-declaration of the national state of emergency impacted adversely on DPU.
・Capital gains on property sales are retained in full amount to be utilized for constant distribution of future DPU.
＜Guidance＞
・December 2021 period: Operating revenues and operating profit are guided to be 16.22 billion and 7.71 billion yen respectively.
・COVID-19: Delay in leasing and temporary rent reduction driven by prolonged pandemic will affect negatively. However, DPU is expected to remain 7,550 yen by capitalizing on internal reserves.
・June 2022 period: Operating revenues and operating profit are guided to be 16.19 billion and 7.8 billion yen respectively.
・Profit from leasing business is expected to turn around after bottoming in December 2021 period. In the event of EPU being under 7,550 yen due to adverse factors such as free rent impact, internal reserves will be utilized again to secure 7,550 yen in DPU.
▽JPR’s view on change of the environment
・Direct impact by COVID-19 will be limited. Social and economic activities will be normalized by further penetration of vaccines.
・While work from home is expected to be common to a certain extent, mainstream workplace will still be offices.
・Office leasing market will bottom out sometime from January to March 2022. Nonetheless, heed must be paid to the implications of massive office supply.

◎Growth strategy and initiatives
▽Internal growth strategy
・While focusing on occupancy rates, JPR will respond to the needs of the tenants flexibly in order to achieve swift re-tenanting.
・Negotiations on rent hike will be continued with tenants carrying positive rent gap
・Occupancy and rent levels will be sustained and improved by enhancing asset competitiveness.
▽External growth strategy
・Sponsor pipeline will be fully leveraged to acquire assets centering on offices
properties in Tokyo.
・Debt acquisition capacity is at 38.9 billion yen by gearing up to 45% in LTV.
・Asset reshuffle will be implemented in aim for portfolio quality improvement
・Retail and hotel assets are not going to be acquired for the foreseeable future.
▽Financial strategy
・Conservative LTV control
・Debt management in light of financial cost reduction and soundness
・Diversification in financing
▽Sustainability
・Cross-functional endeavors will lead to making headway on 2030 strategic goals and materiality.
・Net zero CO2 emission by 2050 will be pursed in order to realize a decarbonized society.
＜DPU strategy＞
・Internal reserves will be utilized in the event of lowered EPU（earning per unit）due to temporary factors.
・Recovery in EPU is assumed to start from June 2022 period.
・Execution of the growth strategy will lead to achieving mid-term DPU target of 7,800 yen at an early date.