Earnings Call: Q4 2026

Apr 16, 2026

Summary

Record DPU of JPY 2,405 was supported by high occupancy and strong rent revisions. Forecast DPU is JPY 2,397 and JPY 2,384 for the next two periods, with interest and cost pressures weighing on outlook.

On behalf of Mitsui Fudosan Accommodations Fund Management Company Limited, the asset management company, I welcome you to this video presentation of Mitsui Fudosan Accommodations Fund Inc's financial results for the February 2026 40th period, the 6 months from September 1, 2025, to February 28, 2026. Without further ado, I direct you to the 40th period summary on page 4 of the presentation materials. MAF's confirmed distribution per unit, or DPU, once again hit a record high of JPY 2,405 for the period under review. From an internal growth perspective, the occupancy rate came in at 97.6%, while rent changes at the time of tenant turnover and agreement renewal reached historic highs of +15.6% and +1.9%, respectively. On this basis, MAF continued to achieve both a high occupancy rate and record high rent revision rates in the February 2026 40th period. As far as the investment corporation's external growth is concerned, steps were taken to execute strategic asset recycling in both the 40th and 41st periods. In specific terms, MAF acquired 2 properties at a total acquisition price of JPY 2.6 billion and sold 1 property for JPY 700 million in the 40th period. The investment corporation acquired 3 properties at a total acquisition price of JPY 6.4 billion and sold 2 properties for JPY 2.8 billion in the 41st period. Turning to its financial strategy, MAF's weighted average interest rate, duration of long-term debt, loan-to-value, or LTV ratio, and long-term fixed rate debt ratio came in at 0.72%, 4 years, 51.3%, and 87.8%, respectively, as of the end of the period under review. Touching briefly on the investment corporation's operating policy going forward, details of which were announced in April last year, and results for the 40th period, I ask that you turn to page 7. Looking first from an internal growth perspective, and while capitalizing on a favorable Tokyo 23 wards rental market, MAF continued to implement a three-tiered optimal strategy that entails maintaining high occupancy rates, actively pursuing rent upside, and maximizing key money in the 40th period. In this manner, the investment corporation successfully maximized net operating income, or NOI, and achieved a record high DPU. At the same time, rent changes at the time of agreement renewal also hit a record high. In addition, while undertaking value enhancement investments in the private areas of Okawabata Apartment Communities, MAF has taken steps to progressively renovate the private areas at Park Cube Kameari and Park Cube Koiwa. These efforts are contributing to a substantial increase in rent. Meanwhile, the investment corporation acquired properties through the proprietary channel of the asset management company in both the 40th and 41st periods, thereby engaging in strategic asset recycling. As a result, MAF achieved external growth totaling JPY 9 billion. Accounting for each of these factors, and in similar fashion to the previous period, the investment corporation's distribution exceeded the annual average growth target set at 2%-3% in the period under review. Elaborating further on MAF's operating policy going forward, 40th period results, and distribution growth target, I ask that you turn to page 8. Based on a DPU of JPY 2,405 for the 40th period, MAF has calculated its so-called EPU, excluding such factors as return of gains on sales of properties attributable to strategic asset recycling, at JPY 2,381. When compared on this EPU basis, the investment corporation achieved growth of JPY 80, or 3.5%, compared with the 38th period. In specific terms, proactive internal growth and external growth during the 39th and 40th periods had a positive impact JPY 133 and JPY 34, respectively. In contrast, a variety of factors, including the increase in interest rates, had a negative impact of JPY 87. In addition, when compared on a so-called DPU basis, MAF achieved growth of JPY 104, or 4.5%, compared with the 38th period. As far as gains on sale of properties attributable to strategic asset recycling are concerned, a portion was retained as internal reserves, and the remainder returned to investors in the form of an increased DPU. While continuing to anticipate revenue and profit growth at the property level against the backdrop of a favorable Tokyo 23 wards rental market, such factors as cost increases on the back of upswings in crude oil, other expenses, and interest rates present a higher degree of uncertainty than previously anticipated and may have a negative impact on earnings. From an external growth perspective, we recognize that rental apartments, which allow investors to benefit from the upside of internal growth during periods of inflation, represent a highly promising investment opportunity. Although conditions surrounding the acquisition of properties remains challenging, MAF intends to accelerate the selective acquisition of properties through active strategic asset recycling to simultaneously improve the quality of its portfolio. Based on our understanding of the current environment and its impact on the investment corporation, we will maintain the DPU and EPU annual average growth target at 2%-3%. At the same time, we will target further upside by responding flexibly to prevailing circumstances at the time. Drawing your attention to page nine, I would like to comment on our outlook for distributions announced in conjunction with financial results for the 40th period. The data at the top center and bottom center of the page lays out our current outlook for distributions for the 41st and 42nd periods respectively. While MAF's DPU for the 41st period is forecast to come in at JPY 2,397, the so-called EPU, excluding such factors as the return of gains on sale of properties attributable to strategic asset recycling, is calculated at JPY 2,350. Turning to current forecasts for DPU and EPU growth, and using the distribution growth rate set in April 2025 as a baseline, we project a JPY 138 increase in the 41st period compared with the 37th period, for an average annual growth rate of 3.1%, and a JPY 83 increase in the 42nd period compared with the 38th period, for an average annual growth rate of 1.8%. While anticipating a certain level of internal growth in financial results forecasts for the 41st and 42nd periods, we will engage in strategic and proactive management to achieve even stronger growth moving forward. Furthermore, the acquisition of additional properties yet to be announced have not been factored into distribution forecasts. While continuing to adopt a selective approach toward investment targets, MAF will actively pursue external growth. Anticipating a certain increase in interest rates and other expenses, we recognize the need to continuously engage in cost management as a key issue. Looking ahead, from a distribution and DPU upside perspective, MAF will focus on the next round of strategic asset recycling in similar fashion to the 40th and 41st periods. Based on the aforementioned assumptions, we are committed to annual distribution and EPU growth of 2%-3% in both the 40th and 41st periods. Next, I would like to touch on financial highlights for the 40th period on page 11. Looking first at actual results for the 40th period at the left of the page, total revenues amounted to JPY 13,727,000,000, operating income JPY 6,893,000,000, and net income JPY 6,353,000,000. Of this, a portion of the gain on sale of properties totaling JPY 299,000,000 was allocated to internal reserves. Accounting for these factors, MAF's DPU for the period under review came in at JPY 2,405, a record high. Turning to the next page, I would like to comment on internal growth and occupancy rate trends. Directing you to the top half of the page, the thick orange line that runs across the right half of the graph plots trends in publicly disclosed occupancy rates over the 40th period and part of the 41st period ended March 2026. As you can see, occupancy rates continued to exceed 97% over the 39th and 40th periods. Moving forward, we will pursue high occupancy rates on an ongoing basis. Moving on, I would like to elaborate on MAF's internal growth and rent trends at the time of tenant turnover. Please turn to page 13. The black line graph that runs across the bottom half of the page plots the percentage change in rent for rental apartments at the time of tenant turnover for each period. As indicated, the percentage change in rent at the time of tenant turnover rose to a record high of 15.6% in the 40th period, up from 13.3% in the previous period. For details of changes in rent, I ask that you turn to page 14. As illustrated by the data by area that runs across the top half of the page, the rent of rental apartments in the Tokyo 23 wards at the time of tenant turnover exceeded 15%, while percentage change rates rose across all areas. Turning to the data by category that runs across the bottom half of the page, the percentage change rate for mainstay, single, and compact type units, which account for more than 80% of the investment corporation portfolio, rose above 14%. Moving forward, MAF will continue to actively pursue rent upside at the time of tenant turnover. The bar graph on page 15 plots the percentage change in rent for each of the Tokyo 23 wards on a map of the area. The percentage rent change for the Tokyo 23 wards was 17.1% on an occupancy rate of 97.4% in the 40th period. Compared with the previous period, the number of wards where the percentage rent change exceeded 15% also increased. In addition, MAF secured a 16.5% percentage rent change at the time of tenant turnover at its Park Axis and Park Cube series of properties. With very few exceptions, this was achieved solely through work to restore units to their original state, as opposed to the renovation of private areas. Here on page 16, we take a look at rent trends at the time of agreement renewal. As indicated by the black line graph that runs across the bottom of the page, the percentage change in rent at the time of agreement renewal in the 40th period hit a record high of 1.9%. As mentioned during our presentation for the previous period, efforts to strengthen MAF's rent revision policy at the time of agreement renewal contributed to the investment corporation's results for the entire 40th period. As far as the number of tenants to whom we sought a rent increase at the time of agreement renewal in the 40th period is concerned, the offer rate came in at 34.5%. Looking ahead, we will work diligently to increase this offer rate from the 41st period. Please turn to page 17. Directing your attention to the graph that runs across the top half of the page, and taking into account the rent increases achieved at the time of tenant turnover and agreement renewal, the unit price rent for the entire portfolio continues to increase at an accelerated pace. Turning to the percentage change in rent per tsubo data in the table at the bottom of the page, the total for rental apartments came in at +1.53% in the 40th period. As a result, MAF secured an increase in unit price rent of more than 3% for the 12 months spanning the 39th and 40th periods. As identified, MAF will secure substantial rent increases at the time of tenant turnover and agreement renewal by leveraging the high competitiveness of properties through decoupling. Looking at other aspects of internal growth, we will pursue and work to achieve further upside. As we illustrate on the left side of page 18, we achieved a substantial increase in rent on the back of renovation work at the time of tenant turnover, far exceeding our expectations at the time of acquisition. In specific terms, units at Park Cube Kameari and Koiwa were successfully leased at a 42.1% increase, surpassing our projections at the time of acquisition. We are also actively pursuing the upward revision of automobile and bicycle parking fees. These efforts led to a monthly increase of approximately JPY 1,800,000 in the 40th period. Directing your attention to the right side of the page, we outline details of future initiatives aimed at internal growth. Rather than simply rely on a favorable rental market, as the asset management company, we intend to adhere strictly to a posture of innovation and work to capitalize on further upside potential. Changing tack, I would like to comment on the investment corporation's external growth here on page 19. Buoyed by the success of its strategic asset recycling activities, MAF acquired five properties at a total acquisition price of ¥9 billion and sold three properties at a combined sales price of ¥3.6 billion during the 40th and 41st periods. As a result, MAF's assets under management increased by two properties and ¥6.3 billion, reaching 142 properties and ¥354 billion. At the same time, the percentage of properties located in the Tokyo 23 wards also increased. Furthermore, recognizing their upside potential, we are confident that each property will contribute to distribution growth. We also believe that lowering the average age of properties held will help improve portfolio quality. Here on page 20, we provide a snapshot of properties acquired in the 40th period. As part of the strategic recycling of assets, MAF acquired Park Axis Kinshicho and Park Axis Ueno Sakuragi in December last year through the asset manager's own route. Both of these properties are located in the Tokyo 23 wards and are distinguished by their relatively young age, excellent access, and lifestyle convenience. Moving on to page 21, we provide details of the acquisition of Park Axis Oshiage Residence and Park Axis Nishi Magome in April this year, once again as part of the strategic recycling of assets, in this instance, with the investment corporation's sponsor. In similar fashion to the previously mentioned properties, Park Axis Oshiage Residence and Park Axis Nishi Magome are located in the Tokyo 23 wards. Both are high-quality properties developed by Mitsui Fudosan Residential, MAF's sponsor, recently completed, and situated in ideal locations that offer excellent access and lifestyle convenience. Please turn to page 22. Pictured here on this page are details of Campus terrace Kyudai-Gakkentoshi, one of the 3 properties acquired since entering the 41st period. Acquired in March this year through the asset manager's own route, this property is a student condominium complex within walking distance to Kyūdai-Gakkentoshi Station, the nearest station to Kyushu University's Ito Campus. The area surrounding Kyūdai-Gakkentoshi Station is undergoing significant development, offering a high level of lifestyle convenience and excellent access to central Fukuoka, making it a popular area not only among students but also among the general public. While generally executed on a fixed-rent basis, lease contracts include a rent review clause applicable every 2 years. Given these terms and conditions, we anticipate the potential for rent upside. Next, I would like to comment on the investment corporation's sponsor pipeline on page 23. Looking at the Park Axis series developed by MAF's sponsor, which is estimated at around JPY 220 billion, leasing activities are currently underway at 46 completed properties comprising 5,632 units located mainly in the Tokyo 23 wards. Moving forward, we will continue to negotiate with the sponsor regarding the next acquisition. Directing your attention to the bottom line of the page, MAF's acquisition capacity as of the end of the 41st period is projected to total roughly JPY 26 billion, up to an LTV ratio of 55%. Here on page 24, we provide details of MAF's capital expenditure. As indicated in the graph at the top right of the page, capital expenditures in the 40th period totaled JPY 1 billion and JPY 54 million. Turning to the table and graph that run across the bottom half of the page, value enhancement investments in the private areas of Okawabata Apartment Communities continue to provide a stable and high return. On this basis, the percentage change in rent for units subject to value enhancement investment at the time of tenant turnover was 51.4% for the 40th period. Moving on to page 25, I would like to touch on MAF's sustainability initiatives. At the top left of the page, we provide details of the progress made in achieving quantitative targets through to 2030. First, MAF obtained green building certification at 11 properties in the 40th period. This represents an acquisition rate of 33.9%. Turning to the CO2 emission data at the center right of the page, MAF continues to promote reductions. In addition, the investment corporation remains committed to steadily advancing sustainability initiatives, beginning with GRESB as a key management priority. Turning our attention to MAF's financial strategy, I draw your attention to page 26. The balance of MAF's interest-bearing debt stood at JPY 169.7 million as of the end of the 40th period. As a result, the investment corporation's LTV to total assets came in at 51.3%, and its LTV on an appraisal value basis was 32.4%. While MAF has historically operated under a policy that looks to maintain a long-term fixed rate debt ratio of approximately 90%, taking into consideration the recent inordinate upswing in long-term interest rates and our understanding that fixed rate interest rates have temporarily hit a high level, we will look to procure funds largely on a variable rate basis for the foreseeable future. Moving forward, the investment corporation will engage in efforts to balance financial risk management with interest cost management. This includes locking in interest rates in response to rate fluctuations through the flexible use of such instruments as interest rate swaps, while focusing mainly on refinancing. Taking cost effectiveness into account, S&P Global Ratings reduced its credit rating on MAF at the investment corporation's request. Please turn to page 27. As you can see here on this page, interest rate hikes continue to impact the market, with MAF's weighted average interest rate as of the end of the 40th period climbing 0.1 of a percentage point from the 39th period to 0.72%. Meanwhile, the duration of long-term debt remains stable at four years. With an eye on unrealized profit and loss, I ask that you turn to page 28. The unrealized profit on MAF's portfolio as a whole totaled JPY 192.6 billion on an appraisal value basis as of the end of the 40th period. At the same time, the investment corporation's NAV per unit was JPY 134,000. Once again, on an appraisal value basis, the direct capitalization rate came in at 3.47%. Looking to the future, I would now like to elaborate on forecasts for the 41st and 42nd period from page 29. From a rental market perspective, conditions are projected to remain firm, especially in the central Tokyo wards. Against this backdrop, we have factored in a certain degree of rent increase at the time of tenant turnover and agreement renewal. As far as the investment corporation's earning forecasts are concerned, occupancy rates are expected to remain high at 97.5% and 97.6% in the 41st and 42nd periods respectively. Meanwhile, the impact of the property acquisitions outlined on pages 21 and 22 of the presentation materials has been factored into the investment corporation's earning forecasts. With details of additional undisclosed property acquisitions and sale yet to be finalized, estimates have not been taken into account. Casting an eye on a breakdown forecast here on page 30, I would like to touch briefly on factors that are expected to impact DPU. Looking first at the 41st period, where tenant turnover is expected to be high, we anticipate a positive impact of JPY 12. This is largely because we expect the increase in revenue from an upswing in key money and other internal growth factors will more than offset the projected rise in restoration costs and leasing expenses. Please note that the positive impact of JPY 12 attributable to internal growth is calculated after deducting the decrease in operating income from property leasing from properties sold in the 40th and 41st periods. In addition, taking into account the positive impact attributable to external growth through the acquisition of properties in the 40th and 41st periods, along with other factors, including the increase in interest rates and return of gain on sale, calculated by deducting the difference in internal reserves from the increase in gain on sale, MAF's DPU is projected to total JPY 2,397. In the 42nd period, where the incidence of tenant turnover is expected to be low, we anticipate a positive impact of JPY 82 compared with the previous period. While revenue is forecast to decline owing to the downturn in key money and other internal growth factors, this is largely due to the drop in restoration costs and leasing expenses. In similar fashion, the positive impact of JPY 82 attributable to internal growth is after deducting the decrease in operating income from property leasing from properties sold in the 41st period. Taking into account additional factors, including the positive impact attributable to external growth from the full-period contributions of properties acquired in the 41st period, along with other factors, including the increase in interest rates and the absence of any return or gain on sale, MAF's DPU is projected to total JPY 2,384. Please note that the impact of external growth yet to be disclosed has not been factored in. In closing, I would like to comment on MAF's distribution track record and LTV trends outlined here on page 31. MAF was successful in achieving a record high DPU in the 40th period. This was largely due to the focus placed on optimizing the balance between high occupancy rates and percentage changes in rent and efforts aimed at leveraging the robust rental apartment market in the Tokyo 23 wards while pursuing strategic leasing. Despite such negative factors as the increase in interest paid attributable to the upswing in interest rates, MAF is targeting an annual rate of DPU growth of between 2% and 3% for the 41st and 42nd periods. This largely reflects the investment corporation's focus on internal growth as a main driver, external growth, strategic asset recycling, cost management, and efforts to realize further upside. Through these means, MAF will work diligently to maximize unitholder value. This then concludes the presentation. I thank you for your interest and attention.