COMPANY RESEARCH AND ANALYSIS REPORT

Samty Residential Investment Corporation
3459
Tokyo Stock Exchange REIT

30-Nov.-2017
FISCO Ltd. Analyst

Ikuo Shibata

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01■Overview of the REIT---------------------------------------------------------------------------------------------------------------------------------------------- 03
1. The REIT and its sponsor....................... ......................................................................................................

03

2. Investment policy and portfolio status.........................................................................................................

03■Current state of the J-REIT market---------------------------------------------------------------------------------------------------------- 06
1. What is a J-REIT?........................................................................................................................................

06

2. Points for an investment decision.......... ......................................................................................................

07■The REIT’s features-------------------------------------------------------------------------------------------------------------------------------------------------- 08
1. Growth model........................................ ......................................................................................................

08

2. Returns to investors of a distribution in excess of earnings per unit. ...........................................................

08

3. The portfolio’s characteristics and competitive advantages.........................................................................

09■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 10
1. Results trend since the listing................ ......................................................................................................

10

2. The FY7/17 (4th period) results.............. ......................................................................................................

12

3. Financial position.........................................................................................................................................

13

4. Outlook for FY1/18 (5th period) and onward. ...............................................................................................

14■Growth strategy and the progress made-------------------------------------------------------------------------------------------- 14
1. Growth strategy...........................................................................................................................................

14

2. Progress made in the growth strategy.........................................................................................................

15■Benchmarking--------------------------------------------------------------------------------------------------------------------------------------------------------------- 19

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html██SummaryCharacterized by residential investment, mainly in major regional
citiesIs realizing management performance exceeding forecasts throughsteady internal growth
Samty Residential Investment Corporation (hereafter, also “the REIT”) <3459> is a REIT sponsored by Samty Co.,
Ltd. <3244>, a Kansai-based real estate group with a rich track record of investing in major regional cities. The
REIT was established in March 2015 and in June of the same year, it was listed on the Tokyo Stock Exchange
Real Estate Investment Trust market (J-REIT market). It has two fiscal periods a year (ending in January and July).
The business of its sponsor, Samty, is based on the twin axes of the Real Estate Business (development and salesof income condominiums for investors), including its own development brand the S-RESIDENCE series, and theProperty Leasing Business (including the management of leasing condominiums). Samty also manages businesshotels and conducts other related operations. Its strengths include its track record of developing (residential) leasing
properties in major regional cities and its leasing abilities.
The REIT’s main features are that it invests primarily in residential properties in major regional cities and is supportedby the Samty Group. In particular, the stable supply of properties developed and owned by the Samty Group(to which the REIT is granted exclusive negotiating rights) and the sponsor support it receives in various areas
has become the REIT’s powerful growth engine. The assets under management were 49 properties with a totalacquisition price of ¥51,551mn, and although its portfolio is still small compared to those of other J-REITs, it has
been steadily accumulating pipeline properties toward its immediate goal of an asset size of ¥100bn.
In the FY7/17 (February 1 to July 31, 2017) results, although there was no external growth from the acquisitionof properties, operating revenue was ¥1,840mn (up 1.9% compared to FY1/17), operating income was ¥759mn(down 10.7%), ordinary income was ¥614mn (up 1.4%), net income was ¥613mn (up 1.4%), and the distribution
per unit (including the distribution in excess of earnings per unit) increased by ¥25 compared to FY1/17 to ¥2,670.
Compared to the forecasts, due to the steady internal growth, including from the higher revenues from rentals,
key money, and renewal fees, and from the cost reductions, each of operating revenue, every profit item, and the
distribution per unit (including the distribution in excess of earnings per unit) exceeded their forecasts, and the REIT
can be evaluated as having achieved a strong management performance.
The REIT has announced forecasts for FY1/18 (August 1, 2017 to January 31, 2018) and for FY7/18 (February 1
to July 31, 2018). For FY1/18, it is forecasting operating revenue of ¥1,826mn (down 0.8% compared to FY7/17),
operating income of ¥778mn (up 2.6%), ordinary income of ¥615mn (up 0.0%), net income of ¥614mn (up 0.0%),
and distribution per unit (including the distribution in excess of earnings per unit) of ¥2,670 (unchanged from FY7/17).
For FY7/18, it is forecasting operating revenue of ¥1,842mn (up 0.9% compared to FY1/18), operating income of¥794mn (up 2.0%), ordinary income of ¥615mn (up 0.0%), net income of ¥614mn (up 0.0%), and distribution perunit (including the distribution in excess of earnings per unit) of ¥2,670 (unchanged from FY1/18), so the outlook
is to continue to trend stably. At FISCO, we think that it is fully possible that it will achieve these forecasts, as theirpreconditions are reasonable and the cash flow is stable. Rather, the same as in FY7/17, the key point would seemto be to what extent the results will exceed their forecasts, from factors such as the higher rental revenue and thecost reductions.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Summary

The REIT’s growth strategy is based on the twin axes of achieving external growth by focusing on continuously
acquiring the S-RESIDENCE properties developed by its sponsor, as well as acquiring other properties owned by its
sponsor and by third parties; and achieving internal growth, including through leasing that is tailored to regional andproperty characteristics, and cost reductions. In terms of the immediate target, it is aiming to achieve an asset size
¥100bn. At FISCO, we evaluate that the target is within an achievable range from the pipeline properties (including
those under consideration) that it is steadily accumulating. For internal growth, we can expect effects from the further
improvement in management efficiency from the expansion in asset size in each of the major regional cities, whilein addition, we consider that it can achieve steady growth by accumulating management expertise that is tailored
to regional characteristics.
Compared to other J-REITs specializing in residential properties, it feels that the REIT’s investment unit price isclearly undervalued when judged from factors such as the distribution yield and the P/NAV ratio. Therefore, from theprogress being made in areas including expanding the asset size, improving name recognition, and accumulatinga management track record, we judge that there is plenty of room for the unit price to be upwardly adjusted in the
future.
Key Points
A J-REIT specializing in residential investment, mainly in major regional cities
Strengths are its stable supply of properties from the Samty Group and the sponsor support it receives invarious areas• Realized management performance exceeding the forecasts through steady internal growth in FY7/17• Aiming for an asset size of ¥100bn as its immediate target••㻾㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼞㼑㼢㼑㼚㼡㼑㻌㻔㼘㼑㼒㼠㻕

㻔¥㼙㼚㻕
㻞㻘㻜㻜㻜

㻝㻘㻢㻜㻜

㻝㻘㻠㻡㻤

㼀㼛㼠㼍㼘㻌㼐㼕㼟㼠㼞㼕㼎㼡㼠㼕㼛㼚㻌㻔㼞㼕㼓㼔㼠㻕

㻔¥㼙㼚㻕

㻝㻘㻤㻜㻢

㻝㻘㻤㻠㻜

㻝㻘㻤㻞㻢

㻝㻘㻤㻠㻞

㻝㻘㻜㻜㻜

㻣㻠㻤

㻣㻡㻡

㻣㻡㻡

㻣㻡㻡

㻤㻜㻜

㻝㻘㻝㻝㻜

㻝㻘㻞㻜㻜

㻢㻜㻜

㻠㻞㻣

㻤㻜㻜

㻠㻜㻜

㻞㻥㻡

㻠㻜㻜

㻞㻜㻜

㻜

㻜

㻲㼅㻝㻛㻝㻢

㻲㼅㻣㻛㻝㻢

㻲㼅㻝㻛㻝㻣

㻲㼅㻣㻛㻝㻣

㻲㼅㻝㻛㻝㻤㻌㻱

㻲㼅㻣㻛㻝㻤㻌㻱

Note: FY1/16 results are for 11 months, from March 16, 2015 to January 31, 2016.
Source: Prepared by FISCO from the Company's financial results and financial results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html██Overview of the REIT
A J-REIT specializing in residential investment, mainly in major
regional cities
Its strengths include the support from its sponsor, the Samty Group
1. The REIT and its sponsor
The REIT is sponsored by Samty Co., Ltd., a Kansai-based real estate company with a rich track record of investingin major regional cities, while it entrusts asset management to Samty Asset Management Co., Ltd. It was establishedin March 2015, and in June of the same year it was listed on the TSE J-REIT market. It has two fiscal periods a year
(ending in January and July).
Its sponsor, Samty, is a comprehensive real estate company established in December 1982 in Higashiyodogawa
Ward, Osaka City. Its business is based on the twin axes of its Real Estate Business for the S-RESIDENCE series,
which is a brand that it itself develops (development and sales of income condominiums for investors), and Property
Leasing Business (including the management of leasing condominiums), while it also manages business hotels andconducts other related operations. Its strengths include its track record of developing (residential) leasing properties
in major regional cities and its leasing abilities.
The REIT’s biggest features are that it invests primarily in residential properties in major regional cities and that it is
supported by the Samty Group. In particular, the stable supply of properties developed and owned by the Samty
Group (to which it is granted exclusive negotiating rights) and the sponsor support it receives in various areas has
become the REIT’s powerful growth engine. Of the 59 J-REITs, 8 specialize in residential properties, but the REIT
is the only one that focuses on major regional cities. The assets under management were 49 properties with a totalacquisition price of ¥51,551mn, and although its portfolio is still small compared to those of the other J-REITs, it has
been steadily accumulating pipeline properties toward its immediate goal of an asset size of ¥100bn.

A portfolio that creates stable cash flow from a high occupancy rate
2. Investment policy and portfolio status(1) Investment policya) Investment in accommodation assets and other facilities, mainly residential properties (leasing
residences)
In addition to incorporating 80% or more residential properties, the REIT can incorporate operating facilities (suchas hotels and health care facilities) if they are 20% or less of the portfolio (it has no such properties at the currenttime). For the residential properties, it prioritizes single and compact types* that can be expected to capture thesteady demand from single-person households.
*	Single types have an exclusive area per unit of less than 30m2, while compact types have an exclusive area of 30m2 to
59m2.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Overview of the REITb) Investment mainly in major regional cities
The policy is to have 50% or more of the properties in major regional cities (Sapporo, Sendai, Nagoya, Kyoto,
Osaka, Kobe, Hiroshima, and Fukuoka), 20% or less in other regional cities, and around 30% in the Greater
Tokyo area*.
*	Based on the acquisition price. The above investment ratios are targets, and the actual portfolio situation may deviate fromthem.

(2) Portfolio statusa) Investment ratios by area
Properties in major regional cities constitute 67.4% of the portfolio, other regional cities 15.1%, and the Greater
Tokyo area 17.5%, and the total regional city investment ratio is 82.5%. Most J-REITs concentrate their residential
investment in the Greater Tokyo area where high occupancy rates can be expected, but the REIT can be said
to have a unique presence in that it is achieving a high occupancy rate (95.6% as of the end of July 2017) for
properties mainly located in regional cities. In addition, while the ratios for Kinki and Tokai are high, at 32.0% and22.7% respectively, another feature can be said to be its nationwide development, with 12.2% in Kyushu, 9.2%
in Tohoku, 5.3% in Hokkaido and 1.2% in Kita Kanto.
b) Investment ratios by building age
The ratios by building age as of the end of July 2017 are 31.0% for less than 5 years, 30.4% for 5 years to lessthan 10 years, 31.0% for 10 years to less than 15 years, and 7.6% for 15 years to less than 20 years, so a featureof its portfolio is that the average property age is comparatively new at 8.4 years, the lowest average age among
J-REITs specializing in acquiring residential properties. The fact that it has many relatively new properties has the
merits of keeping down costs for repairs and leading to a high occupancy rate, as such properties are popularamong tenants.
c) Ratio of average area per residential unit
The single type constitutes 53.7% and the compact type 36.0%, for a combined total of 89.8%. The rest are thefamily type.
d) Investment ratios by seller
In terms of the routes for the acquisition of properties, 66.7% are from development and ownership/warehousing
by the sponsor, and for the remainder, 14.8% are from the utilization of bridge funds and 18.6% are acquired
externally. For the information routes for the owned properties, 46.7% are from the sponsor and 53.3% are fromthe REIT’s management company.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Overview of the REIT

Portfolio overview

Source: The Company's results briefing materials

Structure of owned properties

Source: The Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html██Current state of the J-REIT market
The J-REIT market is steadily expanding from favorable factors
in the external environment and the diversification of investment
targets
1. What is a J-REIT?
A J-REIT is a financial product that uses funds collected from investors to invest in income real estate (such as officebuildings, residential properties, and commercial facilities) and distributes to investors the income obtained from thisreal estate. Its features include that the investment targets are income real estate that generate stable cash flow,
and in addition, that can be expected to have a comparatively high yield*. To explain a REIT simply, it can be said
to be located in the middle ground (middle risk, middle return) between high-risk high-return shares and low-risk
low-return bonds. At the end of September 2017, the total market capitalization of all J-REITs was approximately¥11,297.8bn, and the number of J-REITs was 59. There was a phase after the global financial crisis when themarket temporarily slumped due to the effects of monetary tightening and other factors, but since 2012, it has
been expanding thanks to factors like the recovery of the Japanese economy and the effects of long-term monetaryeasing. In addition, recently there has been a diversification of the investment targets, such as to commercial
facilities and hotels for which inbound demand is expected to increase, and for long-term care facilities with an eye
to Japan’s aging population. In this way, various opportunities for investment are being created and there remains
considerable room for the market to grow.
*	As of the end of September 2017, the average distribution yield for J-REITs was 4.16% (from a FISCO survey).

㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼠㼔㼑㻌㼀㻿㻱㻌㻶㻙㻾㻱㻵㼀㻌㼕㼚㼐㼑㼤
㻟㻘㻜㻜㻜
㻞㻘㻡㻜㻜
㻞㻘㻜㻜㻜
㻝㻘㻡㻜㻜
㻝㻘㻜㻜㻜
㻡㻜㻜
㻜

Source: Prepared by FISCO from Tokyo Stock Exchange, Inc. website

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Current state of the J-REIT market

2. Points for an investment decision
The points for a decision to invest in a J-REIT can be said to be how it realizes stable and continuous growth fromthe cash flow obtained from income real estate from the viewpoints of stability, growth potential, and profitability. In
particular, since the quality of the cash flow changes greatly depending on the properties owned (the asset type),
it is necessary to pay attention to each J-REIT’s investment policy and portfolio status. Generally speaking, theresidential properties that the REIT targets for investment are comparatively unaffected by economic conditions, andbecause users are distributed small lots, the stability of cash flow can be said to be high. But on the other hand, its
profitability tends to be a little lower than the J-REITs specializing in office buildings.
The important indicators are trends (changes) in the rent unit price and occupancy rate to evaluate stability; growthin the asset balance and improvements (and room for improvements) in the rent unit price and the occupancyrate, and reductions (and room for reductions) in leasing business costs to evaluate growth potential; and the NOI
yield*1 and the profit margin to evaluate profitability. Also, the J-REIT’s financial condition (policy) is also important
information to consider in making an investment decision, since maintaining the stability of the financial base andthe ability to raise funds to acquire properties in the future while making effective use of interest bearing debt leads
to an increase in the distribution per unit. Important indicators include the total asset based LTV* 2 and the ratio of
long-term to short-term interest-bearing debt.
*1	(Real estate rental revenue + depreciation) ÷ real estate acquisition price*2	Abbreviation of “loan to value.” Interest-bearing debt ÷ total assets.

It is necessary to evaluate growth from two aspects, external growth and internal growth. External growth entails
expanding the asset size by acquiring new properties and increasing the overall cash flow. However, it is necessary
to be aware that as the number of units issued increases following a public offering, it is not always the case thatthe distribution per unit will also increase. Of course, even in such a case, the expansion in asset size can becomea factor promoting internal growth by improving management efficiency. Therefore, the key is acquiring routes tohigh-quality properties. On the other hand, internal growth entails increasing the cash flow from the properties
owned by raising the rent unit price, improving the occupancy rate, and achieving cost reductions. The key points
to achieve it are efficient management and administration and the utilization of expertise.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html██The REIT’s features
The support from its sponsor, including a stable supply of
properties, is its powerful growth engine
1. Growth model
The REIT’s growth model is, the same as for other REITs, to aim to increase cash flow from external growth andinternal growth and thereby raise the distribution per unit (including distribution in excess of earnings per unit). In
particular, the stable supply of properties from its sponsor is the REIT’s powerful growth engine for external growth.
Its policy for the future is also to strengthen its acquisition of properties from third parties, but even in these cases, it
is considered that it will utilize its major weapon of the support its receives from its sponsor in various areas, including
for the warehousing function. In addition, the key points for internal growth are that as its properties are mainly inregional cities, it conducts detailed leasing and costs reductions tailored to the regional and property characteristics,
and the surrounding market conditions.
2. Returns to investors of a distribution in excess of earnings per unit
One of the REIT’s major characteristics is its returns to investors of a distribution in excess of earnings per unit.
Normally, a REIT fundamentally returns all net income to investors through distributing the results of the asset
management. But in the case of the REIT, it adopts a distribution policy of returning to investors some of the depreciation, in addition to net income. This part in excess of the normal distribution of income is called the distribution
in excess of earnings per unit. However, originally, depreciation has the quality of being used for capital expenditure
to maintain the functions of buildings and other assets, so the REIT’s policy is to implement this distribution basedon certain cash management conditions and restrictions. In other words, after comprehensively considering a range
of factors such as the external economic environment, the real estate market conditions, and its own finances, the
REIT decides on the optimal distribution from free cash flow after the allocation of funds to capital expenditure,
working capital, and so forth, alongside investment to strengthen the financial base and to improve the portfolio’s
profitability. Also, to avoid damaging the financial base, the REIT aims for a target payout ratio of 70%, representing
the ratio of net income + depreciation (upper limit of 35%) to total distribution (including distribution in excess ofearnings per unit).
Among the J-REITs, there are few that return the distribution in excess of earnings per unit to investors, and only the
REIT does so among those that specialize in acquiring residential properties. It is the characteristics of the REIT’s
portfolio that makes this possible; namely, that as it mainly acquires regional residential properties, depreciation tends
to be a large percentage of the property’s acquisition price, and also because it has many relatively new properties,
capital expenditure (repair expenses, etc.) is small (so it can more easily generate surplus funds). At FISCO, we
think that in the future also, it will be able to return a distribution in excess of earnings per unit to investors because
it can be expected to be stably supplied with new properties by its sponsor, which can be seen as one reason why
the REIT is an attractive investment.

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

The REIT’s features

3. The portfolio’s characteristics and competitive advantages(1) Mainly invests in residential properties in major regional cities
Most of the residential investment by J-REITs, including by the other J-REITs specializing in residential properties,
is in properties in the Greater Tokyo area, so in this respect the REIT can be said to occupy a unique position.
Since the REIT was listed (on June 30, 2015), among all the properties acquired by the listed J-REIT, the REIT’s
share of the number of properties acquired in regions other than Tokyo and the Greater Tokyo area is 41.8%. The
situation in the Greater Tokyo area, where competition is fierce, is that it is difficult to acquire properties becauseof factors such as the soaring prices of real estate. So one of the merits of acquiring properties in regional cities
where there are comparatively few players is that they are easier to acquire at a reasonable price.
Conversely, compared to the Greater Tokyo area (particularly Tokyo’s 23 wards), where the population inflow andthe growth in single-person households is great, there are concerns about the occupancy rates for properties
in regional cities, while additional issues are that there may be no routes or networks to acquire properties, andmanagement efficiency after the acquisition can be low. These are the factors that have led other J-REITs to regard
regional properties as difficult to deal with. However, in the major regional cities that the REIT focuses on, thegrowth rate in the number of households and the net migration are actually comparable to in Tokyo’s 23 wards* 1.
In fact, the occupancy rate of the REIT’s properties in the major regional cities has been trending at about thesame rate as the Greater Tokyo area*2, and it is also at a high level compared to the rates of the other J-REITs
specializing in residential properties. In addition, with regard to issues of the routes and networks to acquire
properties and management efficiency, the REIT is supported by the Samty Group and can cooperate with it. If it
makes progress in expanding the asset size in each of the major regional cities in the future, we can also expect
a virtuous circle, in which the expanding asset size leads to the construction of an network and improvements inmanagement efficiency, which in turns leads to further expansion in the asset size. Recently, due to the recognitionof its investment performance in major regional cities, it has become easier for the REIT to obtain information onproperties locally, including projects that are brought to it.
*1	In the growth rates in the number of households from 2000 to 2016, the growth rate in Tokyo’s 23 wards was approximately 23.0%, while the growth rate in all of the major regional cities was 20.1%, so their respective increase trends were
nearly the same. Also, from 2000 onwards, taken as a whole the net migration into the major regional cities has been
trending stable, the same as for Tokyo’s 23 wards.
*2	As of the end of July 2017, the REIT’s occupancy rate in the major regional cities was 95.2%, and in the Greater Tokyo
area it was 97.8%.

(2) Sponsor support from the Samty GroupAs previously explained, it is the support that the REIT receives from its sponsor, the Samty Group, that makes
possible its unique portfolio. In particular, the stably supply of properties that are mainly newly-built properties,
such as the S-RESIDENCE brand series of properties being developed by the Samty Group itself, is the sourceof its competitive advantage. Also, in addition to the abundance of management expertise that the Samty Grouphas cultivated in the major regional cities, the REIT utilizes the support of the Samty Group in various areas toacquire external properties. Representative examples of this include the provision of a warehousing function,*1
support for redevelopment, provision of fixed rent master leases,*2 and the provision of leasing-support operations.
*1	A method of acquiring property acquired by a sponsor or an established SPC (bridge fund) before the acquisition by theinvestment corporation in order to stabilize income and adjust the acquisition timing*2	A lease to guarantee fixed rent to the REIT from bulk leasing (subleasing) by the master lease company.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html██Results trends
Although its portfolio is still small, it is steadily expanding leveraging
its unique position
1. Results trend since the listing
When the REIT was listed (July 1, 2015), the asset size was 28 properties (total acquisition price ¥30,500mn), butfollowing the acquisition of properties, including from the August 2016 public offering, its portfolio has steadily
expanded and, while still only small, it currently contains 49 properties (as of July 31, 2017; acquisition price,¥51,551mn).
The distribution per unit (including the distribution in excess of earnings per unit) is also steadily rising, including fromthe improvement and stabilization of the occupancy rate and the increase in the adjusted rent unit price*.
*	Calculated by {monthly rental revenue + (key money revenue ÷ assumed lease agreement period)} ÷ lease agreement area(the assumed lease agreement period is four years). The adjusted rent unit price for each area is calculated as the averageof the adjusted rent unit price for each individual property weighted by lease agreement area ratio of each property in eacharea.

Results trends
(¥mn)
IPO

FY1/16(11 months)

FY7/16

FY1/17

FY7/17

Operating revenue

-

1,458

1,110

1,806

1,840

Operating income

-

598

417

849

759

Ordinary income

-

170

331

606

614

Net income

-

168

330

605

613

Total distribution per unit (¥)

-

1,810

2,618

2,645

2,670

Distribution per unit (¥)

-

1,034

2,026

2,138

2,169

Distribution in excess of earnings per unit (¥)

-

776

592

507

501

28

29

29

49

49

Total acquisition price30,50030,96230,96251,551

51,551

Appraisal value

30,93632,43432,97555,69356,490

5.6%

5.6%

5.6%

5.6%

5.6%

7.0

7.6

8.1

7.9

8.4

Occupancy rate

92.8%*

95.2%

95.4%

97.5%

95.6%

No. of rentable units

2,297

2,345

2,345

3,754

3,754

No. of properties (buildings)

Appraisal NOI yield
Average building age (years)* The occupancy rate at the time of listing is from the end of June 2015, and the figure excludes S-FORT Tsurumai marks and S-FORT
Shonan Hiratsuka, which had just been completed, and S-FORT Gakuenmae acquired on October 1, 2015.
Source: Prepared by FISCO from the Company's financial results and financial results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Results trends㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼛㼏㼏㼡㼜㼍㼚㼏㼥㻌㼞㼍㼠㼑㼟㻌㼎㼥㻌㼍㼞㼑㼍㻹㼍㼖㼛㼞㻌㼞㼑㼓㼕㼛㼚㼍㼘㻌㼏㼕㼠㼕㼑㼟㻳㼞㼑㼍㼠㼑㼞㻌㼀㼛㼗㼥㼛㻌㼍㼞㼑㼍

（㻑）

㻝㻜㻜㻚㻜

㻻㼠㼔㼑㼞㻌㼞㼑㼓㼕㼛㼚㼍㼘㻌㼏㼕㼠㼕㼑㻻㼢㼑㼞㼍㼘㼘㻌㼜㼛㼞㼠㼒㼛㼘㼕㼛

㻥㻥㻚㻜

㻥㻤㻚㻜
㻥㻣㻚㻜
㻥㻢㻚㻜
㻥㻡㻚㻜
㻥㻠㻚㻜
㻥㻟㻚㻜
㻥㻞㻚㻜
㻥㻝㻚㻜
㻥㻜㻚㻜
㻱㼚㼐㻙㻶㼡㼚 㻱㼚㼐㻙㻿㼑㼜 㻱㼚㼐㻙㻰㼑㼏 㻱㼚㼐㻙㻹㼍㼞 㻱㼚㼐㻙㻶㼡㼚 㻱㼚㼐㻙㻿㼑㼜 㻱㼚㼐㻙㻰㼑㼏 㻱㼚㼐㻙㻹㼍㼞 㻱㼚㼐㻙㻶㼡㼚
㻞㻜㻝㻡
㻞㻜㻝㻡
㻞㻜㻝㻡
㻞㻜㻝㻢
㻞㻜㻝㻢
㻞㻜㻝㻢
㻞㻜㻝㻢
㻞㻜㻝㻣
㻞㻜㻝㻣
Note: The occupancy rate for April to August 2015 excludes S-FORT Tsurumai marks and S-FORT Shonan Hiratsuka, which
had just been completed, and S-FORT Gakuenmae acquired on October 1, 2015.
The September 2015 occupancy rate includes S-FORT Tsurumai marks and S-FORT Shonan Hiratsuka, but excludes
S-FORT Gakuenmae prior to its acquisition.
The July 2016 occupancy rate does not include the 20 properties acquired in August 2016.
The August 2016 occupancy rate excludes S-FORT Tsurumai cube, which had just been completed.
Source: Prepared by FISCO from the Company's results briefing materials㼀㼞㼑㼚㼐㼟㻌㼕㼚㻌㼠㼔㼑㻌㼍㼐㼖㼡㼟㼠㼑㼐㻌㼞㼑㼚㼠㻌㼡㼚㼕㼠㻌㼜㼞㼕㼏㼑㻹㼍㼖㼛㼞㻌㼞㼑㼓㼕㼛㼚㼍㼘㻌㼏㼕㼠㼕㼑㼟㻳㼞㼑㼍㼠㼑㼞㻌㼀㼛㼗㼥㼛㻌㼍㼞㼑㼍（㻑）㻻㼠㼔㼑㼞㻌㼞㼑㼓㼕㼛㼚㼍㼘㻌㼏㼕㼠㼕㼑㼟㻻㼢㼑㼞㼍㼘㼘㻌㼜㼛㼞㼠㼒㼛㼘㼕㼛

㻝㻜㻝㻚㻞
㻝㻜㻝㻚㻜

㻝㻜㻜㻚㻤
㻝㻜㻜㻚㻢

㻝㻜㻜㻚㻠
㻝㻜㻜㻚㻞
㻝㻜㻜㻚㻜
㻥㻥㻚㻤
㻥㻥㻚㻢
㻥㻥㻚㻠
㻱㼚㼐㻙㻶㼡㼚
㻞㻜㻝㻡㻱㼚㼐㻙㻶㼡㼘
㻞㻜㻝㻢㻱㼚㼐㻙㻿㼑㼜
㻞㻜㻝㻢㻱㼚㼐㻙㻺㼛㼢
㻞㻜㻝㻢㻱㼚㼐㻙㻶㼍㼚
㻞㻜㻝㻣㻱㼚㼐㻙㻹㼍㼞
㻞㻜㻝㻣㻱㼚㼐㻙㻹㼍㼥
㻞㻜㻝㻣㻱㼚㼐㻙㻶㼡㼘
㻞㻜㻝㻣Note: Calculated by {monthly rental revenue + (key money revenue ÷ assumed lease agreement period)} ÷ lease agreement
area (the assumed lease agreement period is four years). The adjusted rent unit price for each area is calculated as theweighted average of the adjusted rent unit price for each individual property, in accordance with the lease agreement
area ratio of each property in each area.
Source: Prepared by FISCO from the Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Results trends

The FY7/17 results trended favorably from the steady internal growth
The distribution per unit (including the distribution in excess ofearnings per unit) also increased and exceeded the forecast
2. The FY7/17 (4th period) results
In the FY7/17 (February 1 to July 31, 2017) results, although there was no external growth from the acquisitionof properties, operating revenue was ¥1,840mn (up 1.9% compared to FY1/17), operating income was ¥759mn(down 10.7%), ordinary income was ¥614mn (up 1.4%), net income was ¥613mn (up 1.4%), and the distribution
per unit (including the distribution in excess of earnings per unit) increased by ¥25 compared to FY1/17 to ¥2,670.
Compared to the forecasts, all of the items exceeded their respective forecasts, of operating revenue by ¥42mn,
operating income by ¥13mn, ordinary income by ¥18mn, net income by ¥18mn, and the distribution per unit
(including the distribution in excess of earnings per unit) by ¥45, and the REIT can be evaluated as having achieveda strong management performance.
The reasons for the differences with the forecasts are as follows.
Operating revenue exceeded its forecast because the occupancy rate and rental revenue trended favorably (up¥6mn compared to the forecast), and also other revenue (including key money revenue, renewal fees revenue, andrestoration revenue) increased (up ¥35mn) (as a whole, operating revenue was ¥42mn above its forecast). The
average occupancy rate during the period was 96.4% (the forecast was 95.5%), maintaining its high level, while inaddition, the REIT has also been able to steadily improve the adjusted rent unit price*. What is worthy of note hereis the upside in the receipt of key money revenue and renewal fees revenue. Although these are practices that are
not necessarily firmly established in the regions, it seems that the number of receipts is increasing, due to factors
including the appeal of the properties and the effectiveness of the leasing activities.
*	A t the end of FY7/17, the adjusted rent unit price (including key money revenue) had risen approximately 0.4 of apercentage point compared to the end of the previous period (end of FY1/17).

Meanwhile, operating expenses were also above the forecast, as repair expenses increased (up ¥35mn) alongside
the active upfront investment, including for construction work to improve the value of properties, although water,lighting, and heating expenses were reduced to less than the forecast (down ¥5mn compared to the forecast).
Operating expenses as a whole were up ¥29mn compared to the forecast. The construction work to improve value,
which was a factor behind the higher costs, will have the effect of creating surplus capacity toward improving profits
in the future, so it can be said to be an intentional development for the REIT.
Non-operating income was ¥4mn above the target (positive factor) as interest expenses declined. The company
had estimated the risk of a rise in the base rate conservatively, but it was not raised.
To summarize the FY7/17 results from the above, the REIT delivered a noteworthy performance. While there was noexternal growth (acquisition of properties), thanks to steady internal growth, the distribution per unit (including the
distribution in excess of earnings per unit) exceeded both the result of the previous period and the forecast. Also,
the REIT was able to supplement upfront investment (including construction work to improve the value of properties)
toward internal growth in the future.

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Results trends

FY7/17 (4th period) results(¥mn)
FY1/17 result

FY7/17 result

From end of previous fiscal
periodFY7/17 initial
forecasts

Change rate
Operating revenue

1,806

1,840

34

1.9%

1,797

42

956

1,081

124

13.0%

1,052

29

849

759

-90

-10.7%

745

13

-243

-144

99

-

-148

4

606

614

8

1.4%

596

18

Operating expenses
Operating income
Non-operating income and loss

Difference

Ordinary income

605

613

8

1.4%

595

18

Total distribution per unit (¥)

2,645

2,670

25

0.9%

2,625

45

Distribution per unit (¥)

2,138

2,169

31

1.4%

2,105

64

507

501

-6

-1.2%

520

-19

283,000

283,000--

283,000-

Net income

Distribution in excess of earnings per unit (¥)
No. of investment units

96.5%

96.4%

-0.1pt

-

95.5%

0.9pt

Capital expenditure

26

41

15

57.7%

55

-14

Depreciation

434

434

-0

-0.0%

436

-1

Payout ratio

72.0%

72.0%

-

-

72.0%

-

The average occupancy rate during the period

Source: Prepared by FISCO from the Company's financial results and results briefing materials

3. Financial position
At the end of July 2017, there had been no major changes to the financial position. Total assets were ¥55,525mn(down 0.5% on the end of the previous period) and net assets were ¥26,262mn (down 0.5%), so they trended
basically unchanged, while the equity ratio was 47.3%, also maintaining the same level (47.3% at end of previous
period). Interest bearing debt was ¥28,600mn (down 0.5%), while total asset-based LTV was 51.5% (51.5%), so
these items also trended basically unchanged, and there are no concerns about financial stability or the ability toraise funds in the future.
Balance sheet and financial indicators(¥mn)
From end of previous fiscal
periodEnd-FY1/17
resultEnd-FY7/17
resultTotal assets

55,82855,525

-303

-0.5%

Net assets

26,39726,262

-134

-0.5%

Interest-bearing debt

28,75028,600

-150

-0.5%

550

400

-150

-27.3%

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable

Change rate

-

5,000

-

-

27,20022,200-5,000-18.4%

1,000

1,000

-

-

Total asset-based LTV

51.5%

51.5%

0.0pt

-

Ratio of long-term debt

98.1%

81.1%

-17.0pt-

Ratio of fixed debt

18.1%

18.2%

0.1pt

-

2.7

2.3

-0.4

-

Investment corporation bonds

Average remaining borrowing period (years)

Source: Prepared by FISCO from the Company's financial results and results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Results trends

4. Outlook for FY1/18 (5th period) and onward
The FY1/18 (August 1, 2017 to January 31, 2018) forecasts are for operating revenue of ¥1,826mn (down 0.8%
compared to FY7/17), operating income of ¥778mn (up 2.6%), ordinary income of ¥615mn (up 0.0%), net incomeof ¥614mn (up 0.0%), and distribution per unit (including the distribution in excess of earnings per unit) of ¥2,670,
which is the same level as FY7/17. The average occupancy rate during the period is expected to be 95.5% (96.4%
in FY7/17).
The FY7/18 (February 1 to July 31, 2018) forecasts are for operating revenue of ¥1,842mn (up 0.9% compared to
FY1/18), operating income of ¥794mn (up 2.0%), ordinary income of ¥615mn (up 0.0%), net income of ¥614mn(up 0.0%), and distribution per unit (including the distribution in excess of earnings per unit) of ¥2,670. So theoutlook is for net income and the distribution per unit (including the distribution in excess of earnings per unit) totrend basically unchanged for the second consecutive period. The average occupancy rate during the period is
expected to be 95.5%.
At FISCO, we think that it is fully possible that it will achieve these forecasts, as their preconditions are reasonable
and the cash flow is stable. Rather, the same as in FY7/17, the key point would seem to be to what extent the results
will exceed the forecasts, from factors such as the higher rental revenue and the cost reductions. Also, since it issufficiently accumulating pipeline properties, it is necessary to be aware that the preconditions may change greatly,
depending on the timing of the acquisitions of new properties.

██Growth strategy and the progress madeAiming for an asset size of ¥100bn
1. Growth strategy
The REIT is aiming to achieve an asset size of ¥100bn as the immediate goal, and it will work on the measuresdescribed below for the external growth strategy, the internal growth strategy, and the financial strategy. First, toprovide an overview of the overall strategy, the strategy items will be listed and then each strategy and the progress
made for it will be explained.
(1) External growth strategya) Expand the asset size and improve the quality of the portfolio by continuously acquiring the S-RESIDENCE
properties developed by the sponsorb) Acquire properties from sponsor supportc) Acquire properties by utilizing the independent routes of the asset management companyd) Utilize a policy of constructing a differentiated portfolio(2) Internal growth strategya) Improve asset value and the profit margin by reviewing existing facilities, etc.
b) Reduce management costsc) Strengthen the competitiveness of properties and improve usability for tenants by introducing new facilitiesd) Stabilize revenue by utilizing fixed rent ML contracts

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Growth strategy and the progress made(3) Financial strategya) Make borrowing periods longer and reduce liability costsb) Expand the bank formationc) Acquire a credit rating in the future

Steadily expand pipeline properties toward external growth
2. Progress made in the growth strategy(1) Progress made in the external growth strategya) Investment in a bridge fund
The REIT invested in a silent partnership of a bridge fund (¥250mn) in March 2017, and it acquired exclusive
negotiating rights to 8 properties within this fund (exclusive negotiating rights exercise price, ¥8,786mn (upper
limit)).
b) Warehousing in cooperation with its sponsor
The REIT is continuing to work on warehousing through cooperating with its sponsor by utilizing its abundanceof routes to acquire information and properties. As of the end of July 2017, it had secured 14 properties, mainly
properties adjacent to medical facilities and universities.
c) Pipeline status
Including the above, the pipeline properties, which are the properties that are scheduled to be acquired in the
future, are as follows: 1) properties under development or already developed by the sponsor to which it has
been granted exclusive negotiating rights (7 properties), 2) properties owned by the sponsor and warehousing
properties (b, above), 3) properties for which it has acquired the exclusive negotiating rights by investing in a
bridge fund (a, above), and 4) properties owned by a third party that has concluded a sales agreement with thesponsor (2 properties). In total, it has secured 31 such properties and can be said to be steadily accumulatinga pipeline. In the future also, the REIT’s policy is to aim to secure stable revenue by continuously investing inproperties adjacent to medical facilities and universities and other educational facilities, and utilizing fixed rentmaster lease (ML) contracts.

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Growth strategy and the progress madeProperties under development or developed by the sponsor to which it has been granted exclusive negotiatingrightsProperty nameLocation

Number of units

Scheduledcompletion date

Area

Naka-ku, Nagoya City

109

Sep-17

Major regional cities

S-RESIDENCE Kikawa Higashi

Yodogawa-ku, Osaka City

177

Jan-18Major regional cities

S-RESIDENCE Nagoya-shi Higashi-ku

Higashi-ku, Nagoya City

95

Dec-18Major regional cities

S-RESIDENCE Suita-shi Esakacho

Suita City, Osaka153

Feb-19Other regional cities

S-RESIDENCE Kawasaki Kaizuka

Kawasaki-ku, Kawasaki City

43

Feb-17

Greater Tokyo area

S-RESIDENCE Motoyawata

Ichikawa City, Chiba

81

Nov-18Greater Tokyo area

S-RESIDENCE Matsudo Honcho

Matsudo City, Chiba

52

Oct-18Greater Tokyo area

S-RESIDENCE Tsurumai

Source: Prepared by FISCO from the Company's results briefing materials

Properties owned by the sponsor and from warehousing
Property nameLocation

Number of units

Completion date

Area

Mar-07

Major regional cities

60

Apr-08Major regional cities

51

Oct-08Major regional cities

Showa-ku, Nagoya City

56

Jan-17

Major regional cities

Tsu City, Mie62

Feb-06

Other regional cities

Samty Honjo

Chuo-ku, Kumamoto City99

Feb-06

Other regional cities

Samty Suizenji

Chuo-ku, Kumamoto City

119

Jul-06

Other regional cities

Oita City, Oita

92

Dec-06

Other regional cities

Uni E’terna Nishinomiya Uegahara

Nishinomiya City, Hyogo

62

Feb-07

Other regional cities

Samty Kumamoto Keitokukomae

Chuo-ku, Kumamoto City91

Jan-08Other regional cities

GRANDUKE Tsu Shinmachi

Tsu City, Mie

69

Jan-10

Other regional cities

CREST TOWER Kashiwa

Kashiwa City, Chiba

37

Mar-06

Greater Tokyo area

S-FORT Kawaguchi Namiki

Kawaguchi City, Saitama

70

Jul-16

Greater Tokyo area

Toda City, Saitama

62

Jan-17

Greater Tokyo area

Samty Nakahiro-dori

Nishi-ku, Hiroshima City

72

Samty Noborimachi

Naka-ku, Hiroshima City

Samty Tsurumi

Naka-ku, Hiroshima City

GRANDUKE Tsurumai reale
AS Residence Tsu City

Studio Square Takasagomachi

S-FORT Todakoen

Source: Prepared by FISCO from the Company's results briefing materials

Properties for which it has acquired the exclusive negotiating rights through investing in a bridge fundProperty name
S-FORT Aoba Uesugi

Location

Number of units

Aoba-ku, Sendai City

Completion date

Area

66

Oct-07

Major regional cities

S-FORT Toyohira Sanjo

Toyohira-ku, Sapporo City

63

Mar-08Major regional cities

S-RESIDENCE Midoribashi SF

Higashinari-ku, Osaka City

148

Oct-16

Major regional cities

Samty Nishinomiya Residence

Nishinomiya City, Hyogo

102

Mar-09Other regional cities

College Square Hoya

Nishitokyo City, Tokyo

60

Mar-07

Greater Tokyo area

CQ Residence Tamagawagakuen

Machida City, Tokyo60

Feb-08Greater Tokyo area

Trois Bonheur Honcho

Funabashi City, Chiba

117

Mar-08Greater Tokyo area

Kanagawa-ku, Yokohama
City

36

Nov-16

Greater Tokyo area

S-RESIDENCE Yokohama Tammachi

Source: Prepared by FISCO from the Company's results briefing materials

Properties owned by a third party that has concluded a sales agreement with the sponsor
Property nameLocation

Number of units

Scheduledcompletion date

Area

Nagoyashi Nakaku Matsubara PJ

Naka-ku, Nagoya City

84

Feb-18Major regional cities

Niigata City Chuo PJ

Chuo-ku, Niigata City

83

Mar-18Other regional cities

Note: The decisions to acquire the above-described properties are not yet facts.
Source: Prepared by FISCO from the Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Growth strategy and the progress madeIs realizing steady internal growth, including from the increase inrevenue from key money and renewal fees
(2) Progress made in the internal growth strategya) Trends in the occupancy rate and the rent unit price
The occupancy rate continues to trend at the high level of above 95% due to the competitiveness of the properties
themselves, including their locations, and the REIT’s excellent leasing capabilities. The adjusted rent unit pricealso improved by 0.4 of a percentage point on the end of the previous period because of its management thatis tailored to the properties’ characteristics. In particular, among the properties whose tenants changed (465properties), the amount increased at 275 properties (59.1% of all properties), it was unchanged at 55 properties(11.8%), and it decreased at 135 properties (29.0%). The percentage of properties with an increased amountrose 1.1% compared to FY1/17 (conversely, the percentage with a decreased amount fell 1.2%). The REIT
succeeded in increasing the amounts by measures including installing furniture and home electrical appliances,and by introducing Internet equipment. In addition, the acquisition of key money when a new tenant enters andthe elimination of the rent gap also seem to have contributed to the higher amounts. With regards the renewal
conditions at owned properties, the renewal rate is being maintained at the high level of 91.2% (number ofrenewals, 913 times), while renewal fees were collected 223 times (24.4% of all renewals), and this number has
been steadily increasing.* Moreover, key money was received 269 times, which is an increase on the 186 times in
FY1/17, and as previously stated, while this practice is not necessarily firmly established in the regions, to look at
this in other way, this can be seen as signifying that there is still room for growth in the future (toward increasing
internal growth).
*	Among the 657 renewals in the previous period (FY1/17, renewal rate, 94.3%), renewal fees were collected 99 times (15.1%of the total renewals).

b) Cost-reduction measures
The REIT is continuing to work to reduce spending through reviewing its services that are tailored to the characteristics of regions and properties. Specifically, it is reducing costs through changing the gas supply company
and reviewing the content of water supply contracts. Moreover, in areas with snowfall, it is keeping down fuelusage costs through the use of real-time, online monitoring of snowfall to control the operations of a snow-melting
system according to snowfall conditions.
c) Other measures
The REIT is providing security, safe and pleasant living environments for tenants, and improving the value of
properties by installing home delivery boxes, security cameras, intercoms, and so forth. These measures willcontribute to improved name recognition for the REIT.

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html

Growth strategy and the progress madeAcquired the DBJ Green Building certification for real estate that is
considerate to the environment and to society(3) Measures for sustainability
As part of its measures to be considerate to the environment and to society and to contribute to the improved
satisfaction of its tenants, the REIT has made some progress towards acquisition of the DBJ Green Building
certification. In particular, the fact that it acquired it for S-RESIDENCE Esaka, which was developed by the sponsor,
despite a situation in which it was difficult to do so because of the rental specifications, can be expected to not
only have the effect of improving the evaluation of the REIT, but also to contribute to the accumulation of expertiseand the improvement of motivation within the Samty Group as a whole. Amid a trend towards ESG investment,
it seems that inquiries are increasing from institutional investors and others.
*	This is a certification system established by the Development Bank of Japan (DBJ) in April 2011 to support real estate thatis considerate to the environment and to society. In addition to the environmental performance of the property, it evaluatesand certifies real estate as being required by society and the economy based on a comprehensive evaluation, including
for disaster prevention and the responses to various stakeholders, such as showing consideration to the local community,
to support measures for these aspects.

At FISCO, we evaluate that achieving an asset size of ¥100bn is in sight due to the steady accumulation of pipeline
properties. The requirements for the acquisition of pipeline properties are responding quickly to changes in themarket environment and improving the market’s valuation, and the Company’s policy is to acquire properties inthis way while paying attention to the timing of acquisitions. Moreover, an important point will be how to accelerate
the pace of growth after achieving this target of ¥100bn. In particular, in addition to the size of the potential in
major regional cities and their surrounding cities, its advance into the hotel market should be noted. The sponsor
already owns and manages several hotel properties, and their stable operations can be expected, depending on
the qualities of the properties, their operating conditions (or prospects for the future), and the type of operations(for example, utilizing fixed rent ML). Therefore, it would seem that expanding the drivers of external growth can beevaluated as a positive development in terms of accelerating the pace of growth and securing the stability of theportfolio. On the other hand, with regards to internal growth, the occupancy rate is trending at a high level and the
REIT is working on reducing costs. In addition, we can expect the rent unit price to improve in the future (includingfrom key money and renewal fees), just as it did in FY7/17. Moreover, if the asset size expands in each of the
major regional cities through external growth, we can expect effects from the further improvement in management
efficiency, while there would also seem to be still plenty of room to continuously increase the value of its properties
and to reduce costs through accumulating expertise in management tailored to regional characteristics. Goingforward, we will be focusing on how the REIT evolves the portfolio that is unique to it.

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Samty Residential Investment Corporation
3459 Tokyo Stock Exchange REIT

30-Nov.-2017
http://www.samty-residential.com/en/ir/index.html██Benchmarking
The investment unit price feels undervalued and has considerable
room to be adjusted from the expansion in asset size and theimproved name recognition
Compared to other J-REITs specializing in residential properties, the REIT’s investment unit price feels clearly
undervalued when judged from its high distribution yield (not including distribution in excess of earnings per unit)
and low P/NAV ratio. The reasons for this undervaluation are considered to be the small asset size, that its lacks
name recognition and the attractiveness of investing in its product has not been sufficiently communicated, and thatinvestors are still at the stage of observing its management performance as it is the first portfolio with properties
mainly in major regional cities. It seems highly likely that the concerns about stability will be eliminated from its steady
accumulation of pipeline properties toward an asset size of ¥100bn. It can also be expected to eliminate the issues
with regard to name recognition and investment attractiveness from its policy of actively conducting IR activities.
Further, on considering that it has now been verified that the REIT is able to generate stable cash flow from having
the first portfolio with properties mainly in major regional cities, it would seem that there is considerable room forthe investment unit price to be adjusted in the future. In addition, there would seem to be some effects from the factthat at the present time, the J-REIT market as a whole is trending somewhat weakly, and if momentum returns to
the market as a whole, we can envisage a scenario in which attention becomes immediately focused on issues thatare considered to be undervalued. Therefore, it would seem necessary to pay attention to the timing of the reversalof the investment unit price, from both the internal and external factors.
Comparison with other J-REITs specializing in residential properties from various indicators
Information as of October 17, 2017
Investment
unit price(¥)

Distributionyield

No. of units

Marketcapitalization
(¥mn)

P/NAV
ratio

Number ofproperties

Acquisition
price total(¥100mn )CodeFiscalperiodSekisui House Residential
Investment Corporation

8973

March/
September

111,800

3.97%

1,105,510

123,596

0.99

113

2,069

Starts Proceed Investment
Corporation

8979

April/
October

160,300

5.50%

256,777

41,161

0.83

106

810

Japan Rental Housing Investments
Inc.

8986

March/
September

79,4004.71%

1,640,060

130,221

1.00

199

2,258

Nippon Accommodations Fund Inc.

3226

February/
August430,000

3.81%

484,522

208,344

1.15

121

3,016

Advance Residence Investment
Corporation

3269

January/July266,400

3.87%

1,350,000

359,640

1.25

260

4,427

Kenedix Residential Investment
Corporation

3278

January/July293,000

4.64%

349,089

102,283

0.96

115

1,644

Comforia Residential REIT, Inc.

3282

January/July229,500

4.09%

563,694

129,368

1.04

111

1,885

Samty Residential Investment
Corporation

3459

January/July

87,500

4.96%
6.10%

283,000

24,763

0.86

49

515

Note: In the distribution yield for the REIT, the upper row value does not include the distribution in excess of earnings per unit, and the lower row value shows thevalue including excess of earnings.
Source: Prepared by FISCO from Real Estate Investment Trust Data Portal

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 19

Disclaimer
FISCO Ltd. (the terms “FISCO”, “we”, mean FISCO Ltd.) has legal agreements with theTokyo Stock Exchange, the Osaka Exchange,and Nikkei Inc. as to the usage of stock priceand index information. The trademark and value of the “JASDAQ INDEX” are the intellectual
properties of the Tokyo Stock Exchange, and therefore all rights to them belong to the Tokyo
Stock Exchange.
This report is based on information that we believe to be reliable, but we do not confirm or
guarantee its accuracy, timeliness,or completeness, or the value of the securities issued bycompanies cited in this report. Regardless of purpose,investors should decide how to use
this report and take full responsibility for such use. We shall not be liable for any result of its
use. We provide this report solely for the purpose of information, not to induce investment or
any other action.
This report was prepared at the request of its subject company using information provided
by the company in interviews, but the entire content of the report, including suppositions andconclusions, is the result of our analysis. The content of this report is based on informationthat was current at the time the report was produced, but this information and the content of
this report are subject to change without prior notice.
All intellectual property rights to this report, including copyrights to its text and data, areheld exclusively by FISCO. Any alteration or processing of the report or duplications of thereport, without the express written consent of FISCO, is strictly prohibited. Any transmission,
reproduction, distribution or transfer of the report or its duplications is also strictly prohibited.
The final selection of investments and determination of appropriate prices for investment
transactions are decisions for the recipients of this report.
FISCO Ltd.