Questions and Answers
at the Fiscal Period July 2017 Earnings Presentation
Advance Residence Investment Corporation
Date:
Presenter:

From 15:30 to 16:30, Friday, September 8, 2017
Kenji Kousaka, President and Representative Director, AD Investment
Management Co., Ltd.

‣ The questions grouped according to the type of topic.
‣ Advance Residence Investment Corporation is abbreviated as “ADR”.
Internal Growth Related Questions
Q1. Even though, the average occupancy rate for the 14th FP was very high at 97.0%, is it
reasonable to say that the appropriate level of occupancy going forward would be closer
to 96% as in your initial earnings guidance where it was assumed to be around 96.5%?
A1.

The average occupancy rate of 97.0% in the 14th FP was stronger than expected. It will
be hard to assume that we can maintain this level. Judging from our past experiences,
we think it will be around mid 96%. Therefore, yes, I think, the occupancy rate assumed
in the earnings guidance is appropriate.

Q2. As the occupancy rate rises, I would expect the changes in rent will be more effected by
the changes in rent for renewals than at tenant replacement. If that is the case what will be
the impact on the leasing business revenue?
A2.

Although it is true that the rise in rent at tenant replacements is more likely tocontribute to revenue than the rise in rent at renewals, if occupancy rate is maintain ataround the level as in the past, we can expect a rise in rent both in tenant replacements
and renewals and can expect both to contribute to revenue increase.
As indicated in the earnings presentation material p.30, the renewal rate is maintainedat around the mid‐80% level, and there are no signs that the rent increase negotiationsat renewals are having a negative effect on the renewal rate.

Q3. Will the trend of rising capital expenditure continue as the properties age? Also how will it
affect your decision on the dividend floor raise?
A3.

Capital expenditure will increase with the aging of the properties. However, with thedepreciation per period of about 2,600 million yen, we will be able to manage theexpenditure within the available cash flow and proper scheduling. Regarding thedecision not to raise the floor of the dividend, I would like to gain a bit more visibility on
the capital expenditure and the accompanying increases in depreciation before wedecide to raise the floor.

External Growth Related Questions
Q4. I think the current real estate market provides an excellent opportunity to sell, please tell
us about your current disposal policy.
A4.

Our disposal policy has not changed. As of the end of the 14th term, there are a total of
4 properties with unrealized losses. We consider those properties as potential
candidate for disposal. However, it will be more desirable to execute the disposal aspart of an asset replacement, for example, selling the properties around the same time
when we acquire properties from the sponsor.

Questions on Other Topics
Q5. Majority of the increase in population of Tokyo is expected to come from foreign residents.
What percentage of your current tenants are foreigners, and do you have any plans on how
to meet the expected increase in demand from foreigners.
A5.

The current percentage of foreign tenants is low at around 3% of our pass‐throughproperties. We would like to first figure out which area will be most appropriate toinvest to meet the demand by studying the future inflow trends of foreigners.

Q6. There was an announcement on September 6, 2017, regarding a proposal to revise part of
the Articles of Incorporation of the investment corporation to allow ADR to invest inproperties that are used for lodging business. What is the objective of the revision?
A6.

We are not thinking of investing in properties used solely as inns or hotels. We justwanted some flexibility in our future investment activities. This revision will allow ADRto invest in properties where for example include units that are used for lodging
business or in cases where the operator of our service apartment business might start
using the units for lodging business.

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