All of us at Mori Hills REIT Investment Corporation ("MHR") wish to extend our deep appreciation to our unitholders for your continuous support of MHR. I am pleased to report on MHR’s performance for the thirty-fourth fiscal period which ended July 31, 2023.

In the thirty-fourth fiscal period, although some weaknesses were seen in consumer spending due to the downward pressure caused by price hikes, the Japanese economy continued to recover moderately against the backdrop of an upturn in automobile exports and the increase in inbound demand.

Under such an economic environment, in the rental office market, demand remained strong within the context of a steady employment situation, but vacancy rates remained at a relatively high level partially due to the impact of the supply of newly built large buildings, and rent levels maintained their sluggish conditions. As for the luxury rental housing market, occupancy rates and rent levels remained solid driven by ongoing stable demand for quality housing in central Tokyo. In terms of the real estate trading market, transaction prices continued to be high as no changes in investment appetite were seen among investors at home and abroad. The transaction amount also remained at a high level, led by large transactions by corporations and foreign investors.

In the thirty-fourth fiscal period, MHR 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, MHR maintained and enhanced occupancy rates and rents by proactively launching leasing activities targeting new and existing tenants while foreseeing trends in rental market conditions.  

MHR’s real estate portfolio, as of the end of the thirty-fourth fiscal period, was comprised of 11 properties under management with a total leasable area of 180,977.11m2. MHR has already invested 406,197 million yen (based on the acquisition price) into this portfolio. The occupancy rate at the end of the thirty-fourth fiscal period was 99.1%.

The asset management activities described above resulted in MHR recording in the thirty-fourth fiscal period 11,215 million yen in operating revenue, 6,955 million yen in operating income, 6,424 million yen in ordinary income, 6,423 million yen in net income and 3,352 yen in dividend per unit. MHR disposed of a part of Laforet Harajuku (Land) (disposition price: 2,926 million yen) on June 30, 2023. A 1,376 million yen gain was realized on the disposition and all of the gain on will be distributed.

In addition, MHR plans to dispose of a further part of Laforet Harajuku (Land) (disposition price: 2,926 million yen) on December 1, 2023. For the thirty-fifth fiscal period ending January 31, 2024, dividends per unit is expected to be 3,060 yen. 

MHR will continue to seek maximization of unitholder value by maintaining and increasing dividends continuously while retaining stability of earnings through fixed-rent master leases alongside actively pursuing external growth utilizing the property pipeline of Mori Building Group. 

I would like to ask for your continued support.