Japan Prime Realty Investment Corporation
June 2018(33rd) Period Analyst Meeting［Q&A Session Summary］〔Date :August 20,2018〕
Q. Please describe future trends in rent increases. Is there a possibility of rents flattening outor turning up?
A．For the 34th fiscal period, we have set a target rent and base rent of up 2.3% and 2.5%
from the level of the previous period, respectively, and assume that such increases areachievable. Looking at each property, the target rent has been increased by 10 to 15% inthis period in some buildings. In addition, rents have just been raised in regional areas
and the outskirts of Tokyo, and we expect them to continue to rise gradually, going
forward.
Q．With regard to the policy of property acquisition, do you feel that there is no need to be
too aggressive in acquisition (acquisition at high prices) for the time being?
A．As you have pointed out, we will continue with our policy of selective investments going
forward, while at the same time assessing the appropriateness of areas and prices.
Q．Am I correct in understanding that you will make investments in hotels to the extent thatsuch investments do not exceed the proportion of investments in retail properties, to avoid
such risks as fluctuations in rents.
A．As you have pointed out, as part of investments in urban retail properties, we will
examine the possibility of investing to a weighting of 10 to 30%.
Q．You are expecting that external growth will contribute to an additional distribution of 200
yen in the medium term plan. Has there been any change in the timing and scale ofproperty purchases or the probability of acquisition, among other factors, recently?
A．There has been no particular development recently. For guidance only, we have acquired
FUNDES Suidobashi for a price of 3,250 million yen and with the NOI yield of 4.3%. We
believe that this increase is achievable if we continue to acquire FUNDES Jimbocho andFUNDES Ueno, the construction of which has been completed, from the same
perspective.
Q．Please tell me the average rate increases in the ratio of change in upward revisionpresented on page 8 of the presentation material.
A．It is nearly 6.5% for the first time, between 6.5% and 7% for the second time, and over
12% for third time. However, the increase for the third time may be attributable to separate
reasons because there are not many cases for the third time.
Q．There is a difference between the gap in rents and the gap in actual rents presented on
the same 8th page. Does this mean that JPR has set a target rate that is higher than themarket rent?
A．We set a target rent (based on which gaps in actual rents are calculated) that is close to
the upper limit of the market rents range offered by intermediary companies after
assessing buildings individually. It is impossible to fill all gaps in rents with increases.
Even so, we succeeded in raising rents for 56% of tenants in the fiscal period ended June
2018, surpassing base rent.
Q．It appears that you are increasingly dependent on Tokyo Tatemono, your main sponsor,
for the acquisition of properties. Is this attributable to timing-related factors such as thedifficulty of making acquisitions from external sources under the current market
environment or a change in the business model of the Tokyo Tatemono Group?
A．Obviously, timing-related issues are important factors. We are not looking at acquiringproperties too aggressively from external sources because the market is becoming
overheated. In addition, we think that alliances with the sponsors will be more importantfor future growth.
Q. Is it possible to acquire hotels with the cap rate higher than that for urban retailproperties?
A．We are considering the possibility of including hotels as an asset type. From ourperspective, the yield of FUNDES Suidobashi is a good reference. However, yields cannot
be decided across the board based on the use of properties. Factors such as location areimportant as well. At any rate, we will consider the possibility of including them as an asset
that contributes to the stabilization of the overall portfolio.