DAIWA HOUSE REIT INVESTMENT CORPORATION NEWS RELEASE
Nov 27, 2015
Rating and Investment Information, Inc. (R&I) has announced the following:
ISSUER: Daiwa House Residential Investment Corp. Issuer Rating: A+, Affirmed Rating Outlook: StableDaiwa House Residential Investment Corp. (DHI) is a residential REIT sponsored by Daiwa House Industry Co., Ltd. As a result of a merger with New City Residence Investment Corp. in April 2010, its asset size expanded significantly.
DHI invests in rental condominiums located in convenient areas, which are primarily in Tokyo's 23 wards. Properties in Tokyo's 23 wards account for 68% of total on an acquisition price basis, and the average building age is 9.8 years (as of August 2015). The asset size exceeds 250 billion yen, and the diversification of the portfolio is well underway.
In May 2015, DHI acquired five properties including a high-rise condominium in Yokohama City from Daiwa House Industry for 17.7 billion yen. All of them are relatively new properties developed by the sponsor, and the acquisition price was substantially lower than the appraisal value. DHI's strength lies in being able to capitalize on the sponsor's pipelines even amid the difficult acquisition environment.
The occupancy rate of DHI's properties is stably trending at a high level of above 95%. The rent level at times of tenant rotation is on the rise, albeit marginally. Although any particular influence of the aging of properties is not observed at this moment, the REIT plans to maintain and improve the properties' competitiveness through large maintenance and value-add construction works.
While DHI set an LTV target of 50-55%, the ratio has risen to 54.8% because it acquired properties through borrowing. The REIT intends, however, to reduce the LTV ratio through public offerings and property sales. The appraisal value of existing properties has improved, and unrealized gains have increased to 27.3 billion yen as of August 2015.
Funding conditions remain favorable. On the back of the sponsor's high creditworthiness, DHI successfully reduced financing costs every time it refinanced debts. Although debt maturities are concentrated in 2016, there is no special concern, given the current financing environment.
The Rating Outlook is Stable. Thanks to its well-diversified, quality portfolio, DHI's cash flow is stable.
Despite the severe property acquisition environment, the REIT will likely continue to acquire properties steadily from the sponsor group. DHI's funding base is solid, but the LTV ratio has been rising. R&I will thus keep eyes on its leverage control.
The primary rating methodology applied to this rating is provided at 'Rating Methodology for J-REIT'. The methodology is available at the web site listed below, together with other rating methodologies that are taken into consideration when assigning the rating.
http://www.r-i.co.jp/eng/cfp/about/methodology/index.html
■Contact : Investors Service Division TEL.+81-(0)3-3276-3511 E-mail. infodept@r-i.co.jp
■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438
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