Samty Residential Investment Corporation (3459) Summary of Financial Results for Fiscal Period Ended January 2019

(REIT) Summary of Financial Results for Fiscal Period Ended January 2019
March 15, 2019
REIT Securities Issuer:
Securities Code:
Representative:

Samty Residential Investment Corporation(“Samty Residential”)
3459
Masafumi Takahashi, Executive Director

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

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

Inquiries: Hidekazu Nizawa
Director and General Manager ofBusiness Management Department
Phone: +81‐3‐5220‐3841

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

April 26, 2019
April 22, 2019

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 January 2019 (from August 1, 2018 to January 31, 2019)(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
3,216
11.4
1,606
14.4
1,321
30.6
1,320
30.7
ended Jan. 2019
Fiscal period
2,888
57.4
1,404
77.8
1,011
63.0
1,010
63.0
ended July 2018
Net income
per unit
Fiscal period
ended Jan. 2019
Fiscal period
ended July 2018

Ratio of net income
to equityyen%

Ratio of ordinary income
to total assets%

Ratio of ordinary income
to operating revenue
%

2,654

3.0

1.4

41.1

2,213

3.0

1.4

35.0

(2) Distribution Status
Distribution Distribution
Total
Total
Total
Ratio ofper unit
per unit
Distribution distribution distribution(including(excluding
in excess of(including(excluding
distribution
Payoutdistribution
ratio
todistribution distribution
earnings
distribution distribution in excess ofearnings
net assets
in excess of in excess of
per unit
in excess of in excess ofearnings)
earnings)
earnings)
earnings)
yen
yen
yen
mn yenmn yenmn yen%%Fiscal period
3,076
2,620
456
1,550
1,320
229
100.0
2.9
ended Jan. 2019
Fiscal period
2,681
2,213
468
1,224
1,010
213
100.0
2.4
ended July 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 January 2019
and the fiscal period ended July 2018 are 0.006 and 0.005, 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 Jan. 2019
Fiscal period
ended July 2018

Net assets

Equity ratio

Net assets per unit

mn yen%yen

95,79745,69647.7

90,65087,122

41,48347.6

90,853Samty Residential Investment Corporation (3459) Summary of Financial Results for Fiscal Period Ended January 2019(4) Status of Cash FlowsNet cashprovided by (used in)operating activities
mn yenFiscal period
3,616
ended Jan. 2019
Fiscal period
1,660
ended July 20182.

Net cashprovided by (used in)investing activities
mn yenNet cashprovided by (used in)financing activities
mn yen8,637)

7,173

4,663

31,302)30,4982,511

mn yenForecasts of Management Status for Fiscal Periods Ending July 2019 (from February 1, 2019 to July 31, 2019) and January 2020
(from August 1, 2019 to January 31, 2020)(% 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
3,649
13.5
1,848
15.1
1,631
23.5
1,630
23.4
ending July 2019
Fiscal period
3,15313.6) 1,440
22.1) 1,110
1,109
31.9
32.0
ending Jan. 2020
(Reference) Forecast net income per unit for fiscal period ending July 2019: 3,234 yen.
Forecast net income per unit for fiscal period ending January 2020: 2,200 yen.
*

Cash and cash equivalents
at end of period

3,722

3,234

488

2,672

2,200

472

Other
(1) Changes in Accounting Policies, Changes in Accounting Estimates and Retrospective Restatement① Changes in accounting policies accompanying amendments to accounting standards, etc.: NoNo② Changes in accounting policies other than ①:③ 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
Fiscal period ended January 2019504,100 units
Fiscal period ended July 2018456,600 units② Number of own investment units at end of period
Fiscal period ended January 2019
0 units
Fiscal period ended July 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 January 2019
Assumptions Underlying Forecasts of Management Status for Fiscal Period Ending July 2019 and for Fiscal Period Ending January 2020
Item
Fiscal period

Managed assets

Operatingrevenue

OperatingexpensesAssumption
・ Fiscal period ending July 2019 (from February 1, 2019 to July 31, 2019) (181 days)
・ Fiscal period ending January 2020 (from August 1, 2019 to January 31, 2020) (184 days)
・ For the fiscal period ending July 2019, it is assumed that Samty Residential will continue to own the real estateor the trust beneficiary interests in real estate for a total of 97 properties, including the 93 properties it owns
as of today and the 4 properties to be acquired announced in “Notice Concerning Acquisition and Lease ofDomestic Real Estate (Trust Beneficiary Interests in Real Estate and Real Estate (in Kind)) and Disposition andCancellation of Lease of Trust Beneficiary Interests in Domestic Real Estate (Asset Replacement)” (the“Notice”) dated January 25, 2019, through the end of the fiscal period ending July 2019, and that no otherproperty will be newly acquired.
For the fiscal period ending January 2020, it is assumed that Samty Residential will continue to own a total of
96 properties, after disposition of 1 property to be disposed announced in the Notice, through the end of the
fiscal period ending January 2020, 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 from the assets to be acquired is calculated by taking into account the information
provided from the current owners, etc. of the respective properties, concluded lease agreements, market
trends and other factors. Real estate rent revenue from the already acquired assets is calculated on the basisof historical data (or the past results disclosed by the previous owners, etc. for the periods for which Samty
Residential does not have past results) and by taking into account the status of leasing.
・ Gain on sale of the property to be disposed on July 31, 2019 announced in the Notice is assumed to be 429
million yen. However, the gain on sale of real estate properties is the assumption as of the date of thisdocument and may change in the future. Operating revenue is based on the assumption that there will be no
accrual of gain or loss on sale of real estate properties other than the above one property.
・ 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 1,838 million yen for the period ending July 2019
and 1,871 million yen for the period ending January 2020.
・ The property taxes and city planning taxes, etc. to be recorded as expenses are assumed to be 191 million yen
for the period ending July 2019 and 183 million yen for the period ending January 2020. In general practice,
the property taxes and city planning taxes, etc. levied on transactions of real estate properties are settled at
the time of acquisition by prorating for the period with the current owner. However, as Samty Residential
includes the amount equivalent to such settlement in the acquisition costs for the property, the amount is notrecorded as expenses. Accordingly, property taxes and city planning taxes, etc. for the 5 properties (to be)acquired in the fiscal period ending July 2019 will be recorded as expenses from the fiscal period ending July
2020, and 11 million yen is assumed to be recorded as expenses.
・ Depreciation is calculated using the straight line method and is assumed to be 703 million yen for the period
ending July 2019 and 680 million yen for the period ending January 2020.
・ Repair expenses for buildings are assumed to be 115 million yen for the period ending July 2019 and 88 million
yen for the period ending January 2020, 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.
・ With application of the provision for adjustment of the amount of the tax deductions for taxable purchase incase of significant changes in the proportion of taxable revenues (Article 33 of the Consumption Tax Act), non‐operating revenue of 130 million yen is assumed to arise in the fiscal period ending July 2019.
(Note) The Consumption Tax Act stipulates that adjustment of the amount of the tax deductions for taxable purchase should
be made in the third fiscal period of the taxable period (including the date when three years have elapsed since thefirst day of the taxable period for purchase), in case of significant increase/decrease in the proportion of taxable
revenues. Since the cumulative total of the proportion of taxable revenues from the fiscal period ended January
2017 is expected to increase significantly in the fiscal period ending July 2019, the amount of consumption tax forthe properties acquired in the fiscal period ended January 2017 is expected to be adjusted.

Non‐operating
revenue・Non‐operating
expenses

As for amortized expenses for issuance of investment units, 11 million yen in the fiscal period ending July 2019
and 7 million yen in the fiscal period ending January 2020 are assumed.
・ As for amortized expenses for issuance of investment corporation bonds, 5 million yen in the fiscal period
ending July 2019 and 6 million yen in the fiscal period ending January 2020 are assumed.
・ Interest expenses and other borrowing related expenses are assumed to be 329 million yen for the period
ending July 2019 and 317 million yen for the period ending January 2020.

Samty Residential Investment Corporation (3459) Summary of Financial Results for Fiscal Period Ended January 2019
Item

Assumption・Interest‐bearing
liabilities

・
Investment units

・Distribution
per unit(excluding
distribution
in excess ofearnings)

・・The calculation is made assuming that the entire amount of interest‐bearing liabilities maturing during the fiscal
period ending July 2019 (after the date of this document) and the fiscal period ending January 2020 will be
refinanced. In addition, 4,350 million yen is assumed to be borrowed upon the acquisition of 4 properties
announced in “Notice Concerning Borrowing of Funds” dated February 28, 2019. Of the borrowings, 3,100
million yen is scheduled to be repaid at the end of July 2019, and the total interest‐bearing liabilities is assumed
to be 50,150 million yen at the end of the fiscal period ending July 2019 and 50,150 million yen at the end of the
fiscal period ending January 2020.
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 July 2019 and through theend of the fiscal period ending January 2020.
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 January 2019
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 July 2019
and January 2020, 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 97 properties including
acquired assets (93 properties) and the Property to be Acquired (4 properties) is anticipated to be 703 million
yen in the fiscal period ending July 2019 and 680 million yen in the fiscal period ending January 2020, 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 97 properties described in the building condition survey
reports will be only 98 million yen (estimated amounts of 98 million yen for the fiscal period ending July 2019,and of 91 million yen for the fiscal period ending January 2020). Accordingly, Samty Residential expects to haveresidual 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 July 2019 and January 2020 and anticipates 246 million yen
and 238 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 80.4% and 75.3%, and total distribution in excess of earnings isanticipated to be equivalent to 35.0% 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 8th fiscal period ending July 2019 and 9th fiscal period ending January 2020 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 8th fiscal period ending July 2019 and 9th FP ending January 2020 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 8th fiscal period ending July 2019 and 9th fiscal period ending January 2020.
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 8th fiscal period ending July 2019 and 9th fiscal period ending January
2020 with payout ratio of 80.4% and 75.3%, respectively, and amount equivalent to 35.0% and 35.0% of depreciation for
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 8th fiscal period ending July 2019 and 9th fiscal period ending January 2020 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.