Samty Residential Investment Corporation (3459) Summary of Financial Results for Fiscal Period Ended July 2018

(REIT) Summary of Financial Results for Fiscal Period Ended July 2018
September 14, 2018
REIT Securities Issuer:
Securities Code:
Representative:

Samty Residential Investment Corporation(“Samty Residential”)
3459
Tetsuro Kawamoto, Executive Director

Listing: Tokyo Stock Exchange
URL: http://www.samty‐residential.com/en/

Asset Management Company: Samty Asset Management Co., Ltd.
Representative:
Yosuke Masuda, President

Inquiries: Izumi Jozuka
General Manager
Investor Relations, Finance& Planning
Department
Phone: +81‐3‐5220‐3841

Scheduled date of submission of securities report:
Scheduled date of commencement of distribution payout:

October 30, 2018
October 22, 2018

Preparation of supplementary financial results briefing materials:
Holding of financial results briefing session:

Yes
Yes (for institutional investors and analysts)(Amounts are rounded down to the nearest million yen)1.

Status of Management and Assets for Fiscal Period Ended July 2018 (from February 1, 2018 to July 31, 2018)(1) Management Status(% figures are the rate of period‐on‐period increase (decrease))
Operating revenue
Operating income
Ordinary income
Net income
mn yen%mn yen%mn yen%mn yen%Fiscal period
2,888
57.4
1,404
77.8
1,011
63.0
1,010
63.0
ended July 2018
Fiscal period
1,834
0.3)
789
4.0
620
1.0
619
1.0
ended Jan. 2018
Net income
per unit
Fiscal period
ended July 2018
Fiscal period
ended Jan. 2018

Ratio of net income
to equityyen%

Ratio of ordinary income
to total assets%

Ratio of ordinary income
to operating revenue
%

2,213

3.0

1.4

35.0

2,190

2.4

1.1

33.8

(2) Distribution Status
Total
Total
Distribution Distribution
Ratio ofper unit
Distribution distribution distribution
Total
per unit
Payoutdistribution(excluding
distribution(including(excluding
in excess of(including
ratio
toearnings
distribution distribution in excess of
distribution distribution
net assets
per unit
in excess of in excess ofearnings
in excess of in excess ofearnings)
earnings)
earnings)
earnings)
yen
yen
yen
mn yenmn yenmn yen%%Fiscal period
2,681
2,213
468
1,224
1,010
213
100.0
2.4
ended July 2018
Fiscal period
2,675
2,191
484
757
620
136
100.0
2.4
ended Jan. 2018
(Note 1) The entire amount of Total distribution in excess of earnings is refund of capital contribution to unitholders applicable to
distribution reducing unitholders’ capital for tax purpose.
(Note 2) The ratios of decrease in surplus, etc. from implementing distribution in excess of earnings (refund of capital contribution tounitholders applicable to distribution reducing unitholders’ capital for tax purpose) in the fiscal period ended July 2018 andthe fiscal period ended January 2018 are 0.005 and 0.004, respectively.
(Note 3) Payout ratio is calculated by the following formula.
Total distribution (excluding distribution in excess of earnings) ÷ Net income × 100(3) Financial Position
Total assets
mn yenFiscal period
ended July 2018
Fiscal period
ended Jan. 2018

Net assets

Equity ratio

Net assets per unit

mn yen%yen

87,122

41,48347.6

90,85355,202

26,12647.3

92,321Samty Residential Investment Corporation (3459) Summary of Financial Results for Fiscal Period Ended July 2018(4) Status of Cash FlowsNet cashprovided by (used in)operating activities
mn yenFiscal period
1,660
ended July 2018
Fiscal period
1,028
ended Jan. 20182.

Net cashprovided by (used in)investing activities
mn yenNet cashprovided by (used in)financing activities
mn yen31,302)30,498

2,511

58)

956)

1,655

mn yenForecasts of Management Status for Fiscal Periods Ending January 2019 (from August 1, 2018 to January 31, 2019) and July 2019(from February 1, 2019 to July 31, 2019)(% figures are the rate of period‐on‐period increase (decrease))

Operatingrevenue

OperatingincomeOrdinary
incomeDistribution
Distribution
per unit
per unit Distribution(including
Net income(excluding in excess of
distribution
distribution earnings
in excess ofin excess of
per unit
earnings)
earnings)
mn yen
%
yen
yen
yen

mn yen% mn yen% mn yen%
Fiscal period
3,079
6.6
1,464
4.3
1,135
12.2
1,134
12.2
ending Jan. 2019
Fiscal period
3,167
2.9
1,404
4.1)
1,113
1,112
1.9
1.9
ending July 2019
(Reference) Forecast net income per unit for fiscal period ending January 2019: 2,250 yen.
Forecast net income per unit for fiscal period ending July 2019: 2,207 yen.
*

Cash and cash equivalents
at end of period

2,700

2,250

450

2,685

2,207

478

Other
(1) Changes in Accounting Policies, Changes in Accounting Estimates and Retrospective Restatement① Changes in accounting policies accompanying amendments to accounting standards, etc.: No② Changes in accounting policies other than ①:No③ Changes in accounting estimates:
No④ Retrospective restatement:No(2) Total Number of Investment Units Issued and Outstanding① Total number of investment units issued and outstanding (including own investment units) at end of period
456,600 units
Fiscal period ended July 2018
Fiscal period ended January 2018
283,000 units② Number of own investment units at end of period
Fiscal period ended July 2018
0 units
Fiscal period ended January 2018
0 units*

Presentation of the status of implementation of audit procedures
At the time of disclosure of this summary of financial results, audit procedures for financial statements pursuant to the Financial
Instruments and Exchange Act have not been completed.

*

Explanation of the appropriate use of the forecast of management status, and other matters of special note
The management status outlook and other forward‐looking statements contained in this document are based on information
currently available to and certain assumptions deemed reasonable by Samty Residential, and actual management status, etc.
may differ materially due to various factors. In addition, the forecast is not a guarantee of the amount of distributions.

Samty Residential Investment Corporation (3459) Summary of Financial Results for Fiscal Period Ended July 2018
Assumptions Underlying Forecasts of Management Status for Fiscal Period Ending January 2019 and for Fiscal Period Ending July 2019
Item
Fiscal period

Managed assets

Operatingrevenue

OperatingexpensesNon‐operating
expenses

Interest‐bearing
liabilities

Investment units

Distribution
per unit(excluding
distribution
in excess ofearnings)

Assumption
・ Fiscal period ending January 2019 (from August 1, 2018 to January 31, 2019) (184 days)
・ Fiscal period ending July 2019 (from February 1, 2019 to July 31, 2019) (181 days)
・ It is assumed that Samty Residential will continue to own the real estate or the trust beneficiary interests inreal estate for a total of 93 properties including the 92 properties it owns as of today and S‐RESIDENCE
Matsudo which is scheduled to be acquired on November 26, 2018 through the end of the fiscal period ending
July 2019, and that no other property will be newly acquired.
・ In practice, changes may arise due to acquisitions of new properties other than the property to be acquired or
dispositions of owned properties, etc.
・ Real estate rent revenue is calculated on the basis of historical data (or the past results disclosed by theprevious owners, etc. for the periods for which Samty Residential does not have past results) and by taking
into account the status of leasing.
・ As for S‐RESIDENCE Matsudo which is scheduled to be acquired on November 26, 2018 (the “Property to be
Acquired”), rent is scheduled to be guaranteed by Samty Co., Ltd., the seller, from the acquisition to July 31,
2019, and operating revenue is calculated based on the content of the said rent guarantee.
・ Operating revenue is based on the assumption that there will be no accrual of gain or loss on the sale of realestate or other properties.
・ Expenses related to the rent business, which are the principal operating expenses, are calculated on the basisof past results of Samty Residential (or the past results disclosed by the previous owners, etc. for the periods
for which Samty Residential does not have past results), taking into account the fluctuation factors of
expenses.
・ Real estate rent income (excluding gain on sales of real estate properties) after deducting expenses related to
the rent business (including depreciation) is assumed to be 1,866 million yen for the period ending January
2019 and 1,824 million yen for the period ending July 2019.
・ The property taxes and city planning taxes, etc. to be recorded as expenses are assumed to be 113 million yen
for the period ending January 2019 and 198 million yen for the period ending July 2019. Since the property
taxes and city planning taxes, etc. for the 33 properties acquired in February and March 2018, the 10
properties acquired in August 2018 and the Property to be Acquired in November 2018 will be settled at thetime of acquisition by prorating for the period with the seller and including in the acquisition costs, theamount will not be recorded as expenses. As for the property taxes and city planning taxes, etc. for the said 44
properties, 84 million yen is assumed to be recorded as expenses from the fiscal period ending July 2019.
・ Depreciation is calculated using the straight line method and is assumed to be 677 million yen for the period
ending January 2019 and 689 million yen for the period ending July 2019.
・ Repair expenses for buildings are assumed to be 95 million yen for the period ending January 2019 and 108
million yen for the period ending July 2019, based on the medium‐ to long‐term repair plans prepared by theasset management company. However, the amounts could differ significantly from the assumed figures, as
increased or additional repair expenses may arise due to unpredictable factors.
・ Approximately 26 million yen is expected as expenses for issuance of new investment units and secondaryoffering of investment units. It will be depreciated over three years based on the straight line method, thus 12
million yen in the fiscal period ending January 2019 and 13 million yen in the fiscal period ending July 2019 areassumed as expenses for issuance of new investment units including the abovementioned amount.
・ Expenses for issuance of investment corporation bonds of 6 million yen is expected in the fiscal period ending
January 2019 and 5 million yen in the fiscal period ending July 2019.
・ Interest expenses and other borrowing related expenses are assumed to be 310 million yen for the period
ending January 2019 and 272 million yen for the period ending July 2019.
・ Calculated under the assumption that refinancing of the entire amount of interest‐bearing liabilities maturing
during the fiscal period ending January 2019 and the fiscal period ending July 2019 are conducted, totalinterest‐bearing liabilities is assumed to be 48,900 million yen at the end of the fiscal period ending January
2019 and 48,900 million yen at the end of the fiscal period ending July 2019.
・ The total number of investment units issued and outstanding is assumed to be 504,100 units, which is thefigure as of today.
・ In addition to the above, it is assumed that there will be no change in the number of investment units due toissuance of new investment units, etc. through the end of the fiscal period ending January 2019 and throughthe end of the fiscal period ending July 2019.
・ Distribution per unit (excluding distribution in excess of earnings) is calculated on the assumption that theamount of earnings is distributed pursuant to the cash distribution method stipulated in Samty Residential’s
Articles of Incorporation.
・ There is the possibility that the distribution per unit (excluding distribution in excess of earnings) may vary due
to various factors, including changes of managed assets, variation in real estate rental revenue in accordancewith changes of tenants, and occurrence of unpredicted repairs.

Samty Residential Investment Corporation (3459) Summary of Financial Results for Fiscal Period Ended July 2018
Item

Assumption
・ Distribution in excess of earnings per unit is calculated pursuant to the cash distribution method stipulated in
Samty Residential’s Articles of Incorporation as well as the asset management company’s internal regulations.
・ As of today, Samty Residential believes that no significant deterioration is likely to take place for the current
external economic environment, the real estate market conditions and Samty Residential’s financial conditions.
・ Samty Residential anticipates that there will be ample opportunities, etc. to acquire new properties asinvestments that should contribute to increasing portfolio earnings power in the fiscal periods ending January
2019 and July 2019, although part of the real estate transaction market appears to be overheated. Accordingly,
it is highly necessary to reserve certain amounts of funds to make it possible to respond to such opportunities
flexibly. On the other hand, in consideration of such factors as Samty Residential’s financial conditions and theprospect of its ability to refinance interest‐bearing liabilities, Samty Residential considers itself not to be in aposition in the said fiscal periods to allocate funds preferentially for reinforcing its financial base through suchmeasures as reducing interest‐bearing liabilities. While depreciation for a total of 93 properties including
acquired assets (92 properties) and the Property to be Acquired (1 property) is anticipated to be 677 million
yen in the fiscal period ending January 2019 and 689 million yen in the fiscal period ending July 2019, the six‐month average of the sum total of the estimated urgent repair expenses, estimated short‐term repair expenses
and estimated long‐term repair expenses for the said 93 properties described in the building condition survey
reports will be only 95 million yen (estimated amounts of 96 million yen for the fiscal period ending January
2019, and of 95 million yen for the fiscal period ending July 2019). Accordingly, Samty Residential expects tohave residual free cash flow even after making certain reserves from the cash and deposits on hand equivalent
to the depreciation amount at the end of each of the said fiscal periods as reserves for capital expenditures(CAPEX) to maintain the building functions, etc., as funds equivalent to the estimated amount of working
capital, etc. and as reserves in preparation for investments that should contribute to increasing portfolio
earnings power as stated above.
・

Distribution
in excess ofearnings
per unit

Considering the above, Samty Residential believes as of today that it is appropriate to implement distribution
in excess of earnings for the fiscal periods ending January 2019 and July 2019 and anticipates 227 million yen
and 241 million yen as total distribution in excess of earnings for each fiscal period (Note). In this case, thepayout ratio for each period is anticipated to be 75.1% and 75.1%, and total distribution in excess of earnings isanticipated to be equivalent to 33.5% and 35.0% for each period of depreciation expected to accrue in each of
the said fiscal periods.
(Note) Distribution in excess of earnings shall be implemented only when the total continuous appraisal value of the real estate
properties owned by Samty Residential at the end of each fiscal periods (refers to the appraisal value indicated in the realestate appraisal reports (or the investigated value indicated in the valuation reports (appraised value at end of period))
obtained for the real estate properties owned by Samty Residential with the fiscal period end as the date of value; the same
follows hereafter) is greater than the total adjusted book value of the owned real estate properties (refers to the bookvalue of the respective owned real estate properties at the end of the fiscal period of Samty Residential, after deducting theamount equivalent to the incidental expenses upon acquisition of the owned real estate properties; the same follows
hereafter) plus total reserves for the planned construction work amount (capital expenditures) of the repair and renewal
expenses scheduled for the next fiscal period as well as other planned reserves (Please refer to B. Implementation Methodin < (Reference) Samty Residential’s Basic Policy and Implementation Method for Distributions in Excess of Earnings >below.). If these requirements are not satisfied, therefore, Samty Residential will not implement distribution in excess ofearnings for the 7th fiscal period ending January 2019 and 8th fiscal period ending July 2019 despite the above forecast.
Moreover, if any significant deterioration or other changes newly occur in the external economic environment, the realestate market conditions or Samty Residential’s financial conditions, etc. or if any major changes, etc. in Samty Residential’s
financial conditions (including, but not limited to, LTV level and conflicts with financial covenants established for Samty
Residential’s borrowings) occur as a result of new borrowing of funds or issuance of investment corporation bonds inaccompanying acquisition of new assets (including to‐be‐acquired assets), the policy as of today to implement distribution
in excess of earnings for the 7th fiscal period ending January 2019 as part of the cash management may be changed and,despite the above forecast, distribution in excess of earnings may not be implemented for the 7th fiscal period ending
January 2019 and 8th fiscal period ending July 2019.
In addition, Samty Residential, in pursuant to the cash management policy, has a policy to determine every fiscal period
whether to implement distribution in excess of earnings with target payout ratio (the ratio of total cash distribution,
including distribution in excess of earnings, to net income and depreciation combined) of around 70% and up to the amountequivalent to 35% of depreciation in the fiscal period. Samty Residential believes as of today that it is appropriate toimplement distribution in excess of earnings for the 7th fiscal period ending January 2019 and the 8th fiscal period ending
July 2019 with payout ratio of 75.1% and 75.1%, respectively, and amount equivalent to 33.5% and 35.0% of depreciationfor each. However, such an amount or percentage may be reviewed if there newly arises a major change in the revenue andexpense structure of the portfolio due to significant additions of new assets, etc. or important changes take place in thefinancial environment and the real estate investment trust market conditions, etc. As a result, the amount of distribution inexcess of earnings for the 7th fiscal period ending January 2019 and 8th fiscal period ending July 2019 as anticipated above
may be changed.

Other・ It is assumed that there will be no revision to laws and regulations, tax system, accounting standards,
regulations applying to publicly listed companies and rules of The Investment Trusts Association, Japan, etc.
that will impact the aforementioned forecast figures.
・ It is also assumed that there will be no unexpected material changes in general economic trends and realestate market conditions, etc.