We, ORIX JREIT Inc. (OJR) and its asset management company, ORIX Asset Management Corporation (OAM), are pleased to report the business performance of OJR for the 16th period to our unitholders.
While the Japanese economy has begun to show signs of recovery with corporate earnings improving and the level of business investment no longer falling, its self-sustaining momentum remains weak and severe conditions including a high unemployment rate persisted during the 16th period.
The office building leasing market continues to face a rising vacancy ratio and rent-level adjustments. It will take some time for the market to pick up. The real estate sales market also remained lackluster due to financing difficulties for real estate investments although transaction volume has started to pick up, mainly in urban areas.
Under such an environment, OJR focused on leasing to new tenants and cost reductions in the 16th period and generated ¥9,790 million in operating revenues, ¥4,502 million in operating income and ¥3,344 million in net income. The distribution per unit was ¥13,290, which exceeded our original projection. We also started preparations to achieve external growth as we consider we need to shift our focus to external growth from internal growth in order to maintain and increase distributions going forward.
During the 17th period, in March 2010, OJR sold two office buildings located in the Greater Tokyo Area considering the impact on asset value and distributions going forward. With the proceeds from these sales and the funds raised through the issuance of investment corporation bonds, we acquired a total of six properties, including two office buildings in the Greater Tokyo Area, a logistics facility, retail facilities and sokochi (leasehold land) (total acquisition price: ¥31,540 million). This was aimed at boosting the stability and profitability of our overall portfolio by: 1) making very selective investments in properties which offer stable cash flow and profitability (logistics facilities, retail facilities and sokochi) and 2) enhancing stability and profitability through replacing some of the office buildings in the Greater Tokyo Area, which are the core assets in our portfolio.
As of the announcement date of the financial results for the 16th period (April 16, 2010), OJR holds a portfolio of 53 properties with a total acquisition price of ¥296,619 million, built through external growth leveraging our fund-raising capability and strength as a diversified REIT. In addition, a cash distribution paid out in the 17th period is expected to be larger than the one paid out in the 16th period.
OJR intends to achieve further growth by flexibly and promptly responding to changes in the business environment and aims to achieve “stable distributions” and an “increase in the asset value of our portfolio” over the medium-to-long term.
We thank all our unitholders and look forward to your continued support and encouragement.
(As of May 29, 2010)
