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Message from the Management

Message from the Management

Executive Director Hideyuki Isobe

Hideyuki Isobe
Executive Director,
Mori Hills REIT
Investment Corporation

All of us at Mori Hills REIT Investment Corporation (“the Company”) wish to extend our deep appreciation to our unitholders for your continuous support of the Company. I am pleased to report on the Company’s performance for the twenty-first fiscal period which ended January 31, 2017.

In the twenty-first fiscal period, the Japanese economy continued to moderately recover, despite some weakness seen in personal consumption, backed by the steady corporate earnings along with favorable employment and income environments resulting from a pickup in exports amid the discontinuance of overseas economic slowdown in addition to the movements towards a weaker yen and higher stock prices following the outcome of the U.S. presidential election.

Within this economic environment, the rental office building market continued its ongoing improvement in supply-demand balance despite several large-scale new buildings being completed in central Tokyo. This improvement was largely due to the ongoing demand for expansion and relocation driven by the strong employment situation. In the luxury rental housing market, occupancy rates and rent levels remained solid, backed by steady demand for quality housing in central Tokyo even though the volume of new supply increased. In the real estate trading market, the number of transactions and transaction amounts show a decreasing trend due to factors such as a certain degree of disparity between the prices sought by sellers and buyers. However, transaction yields remained at a low level and transaction prices at a high level with an ongoing favorable fund procurement environment and strong investment appetite from investors at home and abroad.

In the twenty-first fiscal period, the Company strove to maintain and enhance tenant satisfaction through measures such as efficient and systematic operational management and maintenance and repair of properties in its portfolio by better understanding tenant needs. Moreover, the Company maintained and enhanced occupancy rates and rents by proactively launching leasing activities targeting new and existing tenants while foreseeing trends in rental market conditions.
The Company’s real estate portfolio, as of the end of the twenty-first fiscal period, was comprised of 10 properties under management with a total leasable area of 153,650.70m2. The Company has already invested 339,856 million yen (based on the acquisition price) into this portfolio. The occupancy rate at the end of the twenty-first fiscal period was 97.8%.
The asset management activities described above resulted in the Company recording in the twenty-first fiscal period 8,248 million yen in operating revenue, 5,207 million yen in operating income, 4,566 million yen in ordinary income and 4,562 million yen in net income and 2,606 yen in dividend per unit in the twenty-first fiscal period.

Also, the Company plans to acquire a part of Toranomon Hills Mori Tower (acquisition price: 5,070 million yen) and a part of Holland Hills Mori Tower (acquisition price: 9,330 million yen) on August 1, 2017. The Company plans to transfer Moto-Azabu Hills (transfer price: 2,030 million yen) on July 31, 2017.
These acquisition and transfer are expected to enhance the portfolio size and increase dividends. As a result, dividend per unit of 2,610 yen is forecasted for the twenty-second fiscal period ending July 31, 2017.

In addition, The Company will continue to seek to maximize unitholder value through pursuit of further improvements in profitability and stability while retaining the portfolio image of having Premium Properties in central Tokyo as its core, by progressively achieving steady internal growth with a close watch on rental market trends while actively pursuing external growth utilizing Mori Building Groups’ property pipeline.

I would like to ask for your continued support.