DAIWA HOUSE REIT INVESTMENT CORPORATION Information on Sustainability Report 2021
In July 2021 we prepared our first Sustainability Report to provide an opportunity for unitholders and other stakeholders to learn more about the various ESG initiatives and approaches implemented by DHR and the Asset Manager thus far.
Sustainability Report is available on DHR's website through the URL below.
https://www.daiwahouse-reit.co.jp/en/sustainability/report.html
https://www.daiwahouse-reit.co.jp/en/
Semi-Annual Report
for the 31st Fiscal Period
From March 1, 2021 to August 31, 2021
2-4-8, Nagatacho, Chiyoda-ku, Tokyo, Japan https://www.daiwahouse-reit.co.jp/en/
Securities Code: 8984
Overview of the 31st Fiscal Period Ended August 31, 2021
Financial Highlights for the Fiscal Period Ended August 31, 2021
We would like to send our heartfelt sympathy to everyone who has fallen ill with COVID-19.
We would like to report on the financial results and give an overview of operations of Daiwa House REIT Investment Corporation (hereinafter referred to as "DHR") in the 31st fiscal period ended August 31, 2021.
In March 2021 DHR disposed of one residential property with concerns over rising expenses mainly for planned large-scale renovations (disposition price of ¥3.5 billion), recording a gain on sales of ¥2.2 billion. Furthermore, as property replacement, we acquired one relatively new logistics property (acquisition price of ¥5.9 billion) from our sponsor Daiwa House in April 2021, and worked to improve the quality of our portfolio. As a result, DHR's portfolio as of the end of the current fiscal period consisted of 227 properties with an asset size of ¥824.2 billion (total acquisition price). Our occupancy rate at the end of the current fiscal period was 99.3%.
In the Japanese economy today, an overall sense of uncertainty over the future remains due to the serious effects of COVID-19. Even amid these conditions, only a portion of DHR's tenants received rent reductions, and the effects of COVID-19 were minimal. The full-period contributions of properties acquired in the previous fiscal period and the recording of gains on sales mentioned above resulted in operating revenues of ¥29,571 million, operating income of ¥13,116 million, and net income of ¥11,619 million. The total amount of distributions was ¥13,435 million (¥6,118 per unit) after the deduction of an amount equivalent to part of the gain on sale of real estate properties, etc. from net income and the addition of an amount equivalent to amortization of goodwill of ¥1,982 million.
DHR will work to continuously improve unitholder value by ensuring stable revenue and steady growth over the medium to long term, by fully utilizing its sponsor Daiwa House Group's comprehensive strengths and knowhow regarding real-estate development, and by addressing ESG issues through asset management.
In closing, we ask for the continued support of our unitholders and the investment community as we move forward.
Toshiharu Asada
Executive Director
Daiwa House REIT Investment Corporation
Koichi Tsuchida
President and CEO
Daiwa House Asset Management Co., Ltd.
Distributions
Distributions Per Unit(Note 1) | Forecast Distributions Per Unit(Note 2) | |
31st Fiscal Period | 32nd Fiscal Period | ¥5,750 |
(From March 1, 2021 to August 31, 2021) | ||
*Distribution payments start date is November 15, 2021. | (From September 1, 2021 to February 28, 2022) | |
6,118 | (From March 1, 2022 to August 31, 2022) | ¥5,600 |
¥ | ||
33rd Fiscal Period |
(Note 1) Distributions per unit for the 31st fiscal period include distributions in excess of earnings of ¥771 (which do not apply to return of capital).
(Note 2) Forecast distributions per unit are forecasts as of October 15, 2021, and the actual amount of distributions per unit may change. These forecasts also do not guarantee the amount of distributions. Furthermore, forecast distributions per unit include distributions in excess of earnings, and we forecast distributions in excess of earnings per unit of ¥784 (which do not apply to return of capital) for the fiscal period ending February 28, 2022 and ¥849 (including return of capital of ¥58) for the fiscal period ending August 31, 2022.
Operating Results
(Yen in millions)
Fiscal period ended | Fiscal period ended | |||||||||||||||||||
February 28, 2021 | August 31, 2021 | |||||||||||||||||||
Operating revenues | 28,097 | 29,571 | ||||||||||||||||||
Operating income | 12,571 | 13,116 | ||||||||||||||||||
Net income | 11,098 | 11,619 | ||||||||||||||||||
Asset Size | Occupancy Rate | LTV | Rating | |||||||||||||||||
(Acquisition price basis) | (excluding goodwill) | |||||||||||||||||||
¥824.2 | 99.3% | 45.0% | JCR | R&I | ||||||||||||||||
billion | AA | AA- | ||||||||||||||||||
Distributions per Unit
(Yen)
7,000 | Distributions Per Unit (including distributions in excess of earnings per unit) | |||
C O N T E N T S
Overview of the 31st Fiscal Period Ended August 31, 2021 • • • 2 | Financial Status • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 12 | ||
Financial Highlights for the Fiscal Period Ended August 31, 2021 • • • 3 | I. Asset Management Report • • • • • • • • • • • • • • • • • • • • • • • • • • • • 14 | ||
External Growth/Internal Growth • • • • • • • • • • • • • • • • • • • • • • • • • • 4 | II. Balance Sheets • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 54 | ||
Public Offering • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • | • • • • • | • • • 5 | III. Statements of Income and Retained Earnings • • • • • • • • • • • 56 |
Portfolio Highlights • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 6 | IV. Statements of Changes in Net Assets • • • • • • • • • • • • • • • • • • 57 | ||
Future Growth Strategy • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 7 | V. Statements of Cash Flows • • • • • • • • • • • • • • • • • • • • • • • • • • • • 59 | ||
ESG Initiatives • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • | • • • • • | • • • 8 | VI. Notes to Financial Statements • • • • • • • • • • • • • • • • • • • • • • • • 60 |
Major Portfolio Properties • • • • • • • • • • • • • • • • • • • • • • • | • • • • • | • • • 10 | VII. Independent Auditor's Report • • • • • • • • • • • • • • • • • • • • • • • • 84 |
Portfolio Map • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • | • • • • • | • • • 11 | Investor Information • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 88 |
2
6,000 | 5,773 | 6,040 | 5,856 | 6,118 | ||||||
5,427 | 5,427 | |||||||||
5,194 | 5,046 | |||||||||
4,800 | 4,964 | |||||||||
5,000 | ||||||||||
4,000 | ||||||||||
3,000 | ||||||||||
2,000 | ||||||||||
1,000 | ||||||||||
0 | Feb. 2017 | Aug. 2017 | Feb. 2018 | Aug. 2018 | Feb. 2019 | Aug. 2019 | Feb. 2020 | Aug. 2020 | Feb. 2021 | Aug. 2021 |
3
External Growth/Internal Growth
DHR is carrying out the property replacement set forth in the Mid-Term Growth Strategy and working to improve the quality of the portfolio. In addition, a portion of the gain on sale of properties as a result of property replacement is used for early implementation of large-scale renovations, etc. in order to stabilize future NOI.
Assets Acquired in the 31st Fiscal Period
LM-005 DPL Shin-Narashino (acquired in April 2021) | Logistics (multi-tenant type) | |
Tokyo-Gaikan | ||
Expressway | ||
14 | ||
Keiyo JCT | Keiyo | |
Ichikawa IC | 296 | |
8 |
Metropolitan | Keiyo Road | |
357 | Hanawa IC | |
Expressway | Koya JCT | |
Route 7 | ||
Komatsugawa | Yatsu-FunabashiIC | 14 |
Line | ||
Public Offering
Execution of Public Offering (August 2021)
In August 2021, it was resolved to issue 124,000 new investment units through public offering, and ¥37.4 billion of equity was raised.
By raising funds through public offering and new loans, DHR acquired four properties for a total acquisition price of ¥72.3 billion.
Issuance resolution date | August 18, 2021 | Issue price determination date | August 25, 2021 | ||||
Number of new | 124,000 units | Number of investment units | |||||
investment units issued | outstanding after the public offering 2,320,000 units | ||||||
Issue price (offer price) | ¥301,791 per unit | Total issue price (offer price) | ¥37,422 million | ||||
Shin-Narashino Sta. |
Metropolitan | 15 | |
Expressway | ||
Bayshore | Higashi-Kanto | |
Route | ||
Keiyo Line | Expressway | |
Acquisition date | April 1, 2021 | |
Location | Narashino City, Chiba | |
Date of construction | November 15, 2018 | |
Acquisition price | ¥5,930 million | |
Leasable area | 12,686.32 m2 | |
Lessee | Not disclosed |
Assets Disposed of in the 31st Fiscal Period | Assets Disposed of in the 32nd Fiscal Period | ||||
Big Tower Minami Sanjo | Castalia Ohori Bay Tower | ||||
Location | Sapporo City, Hokkaido | Location | Fukuoka City, Fukuoka | ||
Disposition price | ¥3,515 million | Disposition price | ¥3,740 million | ||
Appraisal value | ¥2,760 million | Appraisal value | ¥3,740 million | ||
Gain on sale | ¥2,208 million | Expected gain on sale | ¥1,335 million | ||
Date of construction | September 1, 2007 | Date of construction | September 9, 2006 | ||
Disposition date | March 1, 2021 | Disposition date | September 30, 2021 |
Overview of Assets Acquired During September-October 2021
Total acquisition price | ¥72.3 billion |
NOI yield | 4.5% |
NOI yield after depreciation | 3.4% |
Average property age | 2.0 years |
Percentage of assets acquired from | 100.0% |
the Daiwa House Group's pipeline | |
By asset class | ||
Other assets | Logistics | |
19.9% | ||
80.1% | ||
Core assets | ||
80.1％ | ||
(Acquisition price basis) | ||
By area | ||
Core regional | Greater | |
Tokyo area | ||
cities | ||
The three major | 80.1% | |
19.9% | ||
metropolitan areas | ||
and core regional | ||
cities of Japan | ||
100.0% | ||
(Acquisition price basis) |
While pursuing steady increase in rent mainly at the residential properties, we continue to maintain stable occupancy rates.
Monthly Rent at the Time of Residential Tenant Replacement (ratio of the number of tenant replacements)
（％） | |||||||
100 | 13.0% | 16.1% | 14.3% | ||||
21.4% | 23.1% | 29.1% | |||||
80 | 12.5% | 15.8% | |||||
15.0% | 23.2% | ||||||
Rent decrease | 19.7% | ||||||
60 | 26.8% | ||||||
Unchanged | |||||||
40 | 74.5% | ||||||
Rent increase | 63.6% | 68.2% | 62.5% | 57.3% | |||
20 | 44.1% | ||||||
0 | Feb. 2019 | Aug. 2019 | Feb. 2020 | Aug. 2020 | Feb. 2021 | Aug. 2021 | |
Rent change (Yen in thousands) | +2,529 | +4,112 | +3,642 | +3,953 | +2,380 | +1,811 |
Rent change ratio | +2.4% | +3.4% | +3.3% | +3.6% | +2.2% | +1.6% |
Number of replacements (units) | 748 | 879 | 785 | 826 | 756 | 805 |
Trend of Occupancy Rate
As of August 31, 2021, the occupancy rate was 99.3%, as we continued to maintain stable operations.
(%) | …Portfolio total | …Logistics | …Residential | …Retail | …Hotel | …Other assets | ||||||||
100 |
98 |
96 |
94 |
92 |
90 |
End of Mar. | End of Apr. | End of May | End of Jun. | End of Jul. | End of Aug. |
2021 | 2021 | 2021 | 2021 | 2021 | 2021 |
Property name | Location | Acquisition price | Appraisal value | NOI | NOI yield after | Occupancy | Property | Average remaining | Acquisition | |
(Yen in millions) (Yen in millions) | yield | depreciation | rate | age | lease term | date | ||||
DPL Nagareyama III | Nagareyama | 32,000 | 32,100 | 4.5% | 3.4% | 100.0% | 1.0 year | Not disclosed | October 1, | |
City, Chiba | 2021 | |||||||||
D Project Wako A | Wako City, | 10,750 | 11,200 | 4.0% | 3.3% | 100.0% | 6.4 years | 18.6 years | September 3, | |
(50% quasi co-ownership interest) | Saitama | 2021 | ||||||||
D Project Hiratsuka | Hiratsuka City, | 15,200 | 15,200 | 4.5% | 3.4% | 100.0% | 0.5 years | Not disclosed | October 1, | |
Kanagawa | 2021 | |||||||||
GRANODE Hiroshima (additional | Hiroshima City, | 14,400 | 15,350 | 4.8% | 3.4% | 99.5% | 2.4 years | 5.9 years | September 3, | |
acquisition of 50% quasi co-ownership interest) | Hiroshima | 2021 | ||||||||
Total/Average | 72,350 | 73,850 | 4.5% | 3.4% | 100.0% | 2.0 years | 6.9 years | |||
DPL Nagareyama III | GRANODE Hiroshima | |||||||||
D Project Wako A | D Project Hiratsuka | |
4 | 5 | |||||
Portfolio Highlights
Asset Size (acquisition price basis / as of October 1, 2021)
229 properties ¥893.7 billion
Future Growth Strategy
Formulation of New Growth Strategy (announced in October 2021)
Stabilized DPU of ¥5,600, which was the target in the Mid-Term Growth Strategy announced in October 2019, is expected to be achieved through property acquisition, etc. in connection with the public offering in August 2021.
Logistics | 66 properties | ¥470.1 billion | |||||||||||||||||||||||
23 properties | ¥123.2 billion | ||||||||||||||||||||||||
Retail | |||||||||||||||||||||||||
Residential | 129 properties | ¥239.6 billion | |||||||||||||||||||||||
5 properties | ¥19.1 billion | ||||||||||||||||||||||||
Hotel | |||||||||||||||||||||||||
Aiming to maximize unitholder value, DHR formulated a future growth strategy to improve not only business value but also social value
Business value | × | Social value | = | Maximization of |
(economic value) | (non-financial value) | unitholder value | ||
Other assets | 6 properties ¥41.6 billion |
s | s | v | |||
e | |||||
n | |||||
i | |||||
s | |||||
B | u | ||||
a
lue
l | v | ||||
ia | a | ||||
c | |||||
l | |||||
o | u | ||||
e | |||||
S |
By asset class
Hotel | Other assets |
2.1% | 4.7% |
Retail | |
13.8% | |
Core assets | |
95.3% | |
Residential | Logistics |
26.8% | 52.6% |
(Acquisition price basis) |
By area
Other areas | Greater Tokyo area |
23.2% | 65.5% |
Greater | |
Osaka | The three major |
area | |
metropolitan | |
7.8% | |
areas of Japan | |
76.8% |
Greater | |
Nagoya area | |
3.4% | (Acquisition price basis) |
By property age
10 years | Less than |
or more | 5 years |
60.1% | 15.8% |
Less than | |
10 years | |
39.9% | |
5 years | |
or more | |
but less | |
than 10 years | |
24.1% |
(Acquisition price basis)
External growth
Internal growth
Finance
ESG
Trends of Asset Size (Acquisition Price) and Occupancy Rate at the End of the Fiscal Period
Assets acquired from the Daiwa House Group's pipeline | Period-end occupancy rate |
Assets acquired from third parties other than the Daiwa House Group
99.2% | 99.3% | 99.5% | 99.5% | 99.4% | 99.5% | 99.4% | 99.4% | 99.3% | ||
99.0% | Public offering | |||||||||
Public offering | ¥893.7 billion | |||||||||
Public offering | ¥819.1 billion ¥820.1 billion ¥824.2 billion | |||||||||
Public offering | ¥744.8 billion ¥745.6 billion | |||||||||
¥671.7 billion ¥683.4 billion | ||||||||||
Public offering | ||||||||||
¥577.7 billion ¥577.7 billion | ||||||||||
¥513.7 billion |
Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Feb. 2020 Aug. 2020 Feb. 2021 Aug. 2021 As of Oct. 1, 2021
External growth
Selectively acquire highly competitive properties, mainly logistics properties, by leveraging the abundant sponsor pipeline
Improve portfolio quality by promoting portfolio rebalancing utilizing the flexibility as a diversified and large-scale REIT and abundant unrealized gains
Secure property acquisition opportunities by utilizing various acquisition schemes
Internal growth
Steadily increase rent mainly at the residential properties
Increase rent by additional investment in value enhancement measures such as installation of solar power generation equipment and LED lights
Conduct strategic renovation work and planned large-scale repairs
Finance
Equity financing attentive to NAV and growth of DPU
Control LTV (excluding goodwill) at around 45% with an upper limit at 50%
Lengthen debt maturity and decrease debt financing costs
Effective use of cash on hand
ESG
Commit to promoting sustainability by introducing a sustainability index-linked fee (asset management fee and remuneration for Executive Director and officers of the Asset Manager)
Reduce GHG emissions and improve ESG rating by third parties including GRESB and CDP
Increase the ratio of properties with environmental certification (on a gross floor area basis) to 70% in a timely manner
Promote ownership of DHR units through the Investment Unit Ownership Program
6 | 7 | |||||
ESG Initiatives
Policy on ESG Initiatives
Progress on ESG Initiatives
Sustainability Target | For individual properties, reduce energy consumption and CO2 emission intensity by 10% in |
the ten years from 2018 to 2027 | |
External Evaluation and Global Initiatives on ESG | |
2021 GRESB Assessment | 2020 CDP Assessment (First-time participation) |
Proactively promoting ESG initiatives and information | Made it onto the CDP Supplier Engagement |
disclosure | Leaderboard as the first listed J-REIT to be named |
E
Consideration for the Environment
Significant reductions in greenhouse gas (GHG) emissions by switching to LED lighting, etc.
Fiscal year ended March 2021 | (32.1)% |
GHG emissions | Compared to fiscal year |
(Reduction rate of intensity) | ended March 2018 |
Examples of Initiatives
Concluding Green Lease Agreement
Promoting the introduction of green leases, aiming to reduce the environmental impact of held assets through cooperation with tenants
Green lease agreements | 90.1% |
percentage | +21.6 points compared to |
(gross floor area basis) | end of September 2020 |
(As of September 30, 2021)
Issuance of Green Bonds
Real Estate Assessment
Green Star
4 Stars
CDP Supplier Engagement
Rating
Supplier Engagement
Leader
(Highest rating)
Environmental
Reducing the environmental impact by installing solar panels and using groundwater at some properties
Installation of solar panels | Proactive groundwater usage |
(DPL Misato) | (ACROSSMALL Shinkamagaya) |
DHR issued its first green bonds in November 2019. DHR also issued green bonds in May 2020 and April 2021, and the outstanding amount of bonds issued has reached ¥15.0 billion as of the publication date of this document.
Outstanding amount of | ¥15.0 billion | |
green bonds issued | ||
(As of October 1, 2021) |
Public Disclosure Rating
CDP Climate Change Program
Initiatives Aimed at Social Contributions
A | A- | DISCLOSURE INSIGHT ACTION |
(Highest rating) | (Leadership level) | |
Offering a DHR property as a temporary evacuation facility in event of disaster (DPL Nagareyama I )
DHR has entered into an agreement with Nagareyama City, Chiba, allowing the city to use the DHR property as a temporary evacuation facility for nearby residents and others in the event of large-scale flooding or other disaster.
Environmental Certifications
Percentage of assets with environmental certification (gross floor area basis) increased to 64.0%
5 properties | 11 properties | 7 properties |
8 properties | 4 properties | 5 properties |
Publication of Sustainability Report
In July 2021, DHR published its first Sustainability Report
Our Sustainability Report was prepared to provide an opportunity for unitholders and other stakeholders to learn more about the various ESG initiatives and approaches implemented by DHR and the Asset Manager thus far.
Going forward, DHR will keep striving to further enhance its ESG initiatives with respect to its real
S
Social
There are ramps for accessing the vehicle passageways on each floor, allowing evacuees arriving by car to quickly evacuate to the vehicle passageways in the upper floors while remaining in their cars. With evacuees remaining in their cars, it can prevent the spread of COVID-19.
DPL Nagareyama I
Installation of additional storage cabinets
The latest BCP measures have been implemented, including a seismic isolation structure and back-up power supply. The facility can shelter up to 1,200 people in the event of a disaster, and keeps emergency supplies for 500 people.
Installation of additional storage cabinets to improve functionality for use during disasters (August 2021)
12 properties 4 properties |
estate investment management business, while endeavoring to appropriately disclose such
Investment Unit Ownership Program
5 properties | 14 properties | ||
4 properties | |||
Number of | 30 properties | 37 properties | 12 properties |
certified properties | |||
Certified rate | |||
(gross floor area | 48.6% | 51.1% | 27.0% |
basis) |
performance.
G
Governance
Introducing the program in the aim of raising awareness for increasing performance and continuous growth of DHR, which will eventually lead to improving medium- to long-term unitholder value by providing officers and employees of the Asset Manager and Daiwa House, which is the parent company of the Asset Manager, with opportunities to purchase investment units of DHR.
Eligibility | Introduction | |
Daiwa House officers | 19 persons | November 2018 |
(As of June 29, 2021) | ||
Asset Manager | 60 persons | |
officers and | November 2019 | |
employees | (As of April 1, 2021) | |
Daiwa House | 16,712 persons | June 2020 |
employees | (As of April 1, 2021) | |
Certified rate | |
compared with | +6.8 points +16.3 points +13.9 points |
the end of | |
September 2020 | |
(As of September 30, 2021) |
8
(Note) This report has been prepared based on information on the website as of July 2021. For the latest information thereafter, please refer to the website, which will be updated as needed.
Same Boat Investment by Daiwa House
Daiwa House has a policy of continuing to hold | |||
Daiwa House's investment in DHR | 191,200 units | ||
this investment from the perspective of shared | |||
(% of ownership) | (8.2%) | ||
interests between unitholders and DHR's sponsor | |||
(As of September 28, 2021) | |||
9
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Daiwa House REIT Investment Corporation published this content on 25 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 November 2021 07:19:08 UTC.
