Earnings Call: Q2 2026

Oct 20, 2025

Summary

Record 39th-period DPU of JPY 2,324 rose 5.1% YoY, driven by strong occupancy and record rent revisions. Forecast DPU is JPY 2,346 and JPY 2,335 for the next two periods, with 2%–3% growth targets.

On behalf of Mitsui Fudosan Accommodations Fund Management Co., Ltd., the asset management company, I welcome you to this video presentation, Mitsui Fudosan Accommodations Fund Inc.'s financial results for the August 2025 39th period, the six months from March 1, 2025, to August 31, 2025. Before turning to the topic at hand, I would first like to elaborate on the decision to change the investment corporation's trade name. Following a resolution passed at the general meeting of unitholders held in May this year, Nippon Accommodations Fund Inc. changed its trade name to Mitsui Fudosan Accommodations Fund Inc. In addition to raising recognition of the investment corporation's trade name and brand image, this change is designed to help strengthen collaboration with the Mitsui Fudosan Group going forward and facilitate ongoing efforts to secure stable profits and steadily grow assets under management from a medium to long-term perspective, with the aim of maximizing unitholder value. With this in mind, I would now like to comment on the investment corporation's 39th period results and ask that you turn to the summary on page 4 of the presentation materials. MAF's confirmed distribution per unit, or DPU, once again hit a record high of JPY 2,324 for the period under review. From an internal growth perspective, the occupancy rate came in at 97.3%, while rent changes at the time of tenant turnover and agreement renewal reached historic highs of +13.3% and +0.9%, respectively. On this basis, MAF achieved both a high occupancy rate and record-high rent revision rates in the August 39th period. As far as the investment corporation's external growth is concerned, MAF acquired two properties at a total acquisition price of JPY 3.9 billion in the 39th period. From a financial strategy perspective, the investment corporation's weighted average interest rate came in at 0.62%, and the duration of its long-term debt was 4.1 years. Meanwhile, MAF's loan-to-value, or LTV ratio, was 51.3%. Touching briefly on future operational policies from the 39th period, details of which were announced in April this year during our investor presentation for the previous period, I direct you to page 7. From an internal growth perspective, MAF continues to achieve extremely robust growth by engaging in strategic leasing activities while collaborating closely with PM companies against the backdrop of a firm rental apartment market in Tokyo's 23 wards. While the six months ended August 2025 represented a peak period during which tenant turnover was high, we continued to implement a three-tiered optimal strategy that entails maintaining high occupancy rates, actively pursuing rent upside, and maximizing key money. In this manner, MAF 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. Notably, after efforts to strengthen its rent revision policy for agreements subject to renewal at the end of last year took effect, the percentage change in rent came to 1.7% for the 2-month period from July to August this year, a significant jump compared with previous levels. Moreover, MAF continues to undertake value enhancement investments in the private areas of Okawabata Apartment Communities. As a result, the percentage change in rent at the time of tenant turnover for units receiving value enhancement investments was 48.8% in the 39th period. Combining this extremely robust internal growth as a main driver with the external growth achieved during the 38th and 39th periods, MAF's distribution for the 39th period climbed 5.1% year-on-year. This exceeds the annual average distribution growth target set at 2%-3%. Elaborating further on MAF's future operational policies and commenting on DPU forecasts for the 40th and 41st periods, I ask that you turn to page 8. As indicated at the top left of this page, MAF's DPU for the 39th period increased to JPY 112 compared with the 37th period. Looking at the factors that contributed to this increase, proactive efforts to secure internal growth at existing properties had a positive impact of JPY 116. At the same time, while DPU was negatively impacted JPY 52 owing to interest hikes and other factors, this was largely offset by the positive impact of JPY 48, attributable to external growth in the 38th and 39th periods. Taking each of the aforementioned into consideration, MAF was able to return roughly the entire increase in revenue and earnings generated through internal growth to investors in the form of substantial DPU growth. As far as DPU forecasts announced at the time of the investment corporation's 39th period investor presentation are concerned, our current outlook for the 40th and 41st periods are presented at the bottom center and top right of the page, respectively. From an internal growth perspective, results are expected to increase steadily in both the 40th and 41st periods. Notwithstanding this increase, MAF will engage in strategic and proactive management in a bid to secure further positive growth. Please note that the impact of additional property acquisitions is not factored into forecasts for each period. Conditions surrounding the property acquisition market remain extremely challenging. Despite these difficult conditions, we intend to focus on external growth based on a stringent selection approach. While factoring in a certain increase in interest and other costs, we recognize that cost management is a critical ongoing issue and will take steps to address as appropriate. Based on the aforementioned assumptions, we will target DPU and EPU growth of 2%-3% for both the 40th and 41st periods, driven largely by the vigorous upside inherent in the investment corporation's internal growth. At the same time, we will work diligently to secure external growth based on a stringent selection approach while engaging in cost management. Looking at the upside potential of distributions in DPU, we anticipate returning gains generated by such initiatives as a strategic recycling of assets, which we consider a viable option. As such, we'll focus on strategic asset recycling. Next, I would like to touch on financial highlights for the 39th period on page 11. Looking first at actual results at the left of the page, total revenues amounted to ¥13,195 million, operating income, ¥6,341 million, and net income, ¥5,850 million. As a result, MAF's DPU hit a record high of ¥2,324, ¥90 higher than forecast. Moving on, I would like to comment on occupancy rates. The graph that runs across the top half of page 12 plots trends in month-end occupancy rates over the past four years. The thick orange line tracks trends in occupancy rates for the 39th period, and data announced as of the end of September 2025 for the 40th period currently underway. The turnover of tenants was a feature of the 30th period. While this would typically coincide with a temporary dip in occupancy, rates never fell below 97% for the year. In addition to a reduction in the downtime attributable to tenant turnover, this reflects successful steps to secure a high percentage of rent change. Turning to the next page, I would like to elaborate on MAF's internal growth and rent trends at the time of tenant turnover. The black line in the 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 you can see, the percentage change in rent at the time of tenant turnover rose substantially and hit a record high of 13.3% in the 39th period, compared with 7.7% 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 surged dramatically in the 39th period, with a percentage change in rent exceeding 10%. Turning to the data by category that runs across the bottom half of the page, the percentage change in rent for family and large type units climbed to around 20%, while the percentage change for single and compact type units rose above 10%. 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 23 wards in Tokyo on a map of the area. Both percentage rent change and occupancy rates for the Tokyo 23 wards came in at extremely high levels, reaching 15% and 97.2% respectively. Looking at the map, the high percentage rent change rate was not limited to the Tokyo CBD or three central wards, but extended across the entire area. With very few exceptions, work is limited to restoring units to their original state. For tenants that newly moved in, MAF has secured an increase in rent of 14.6%. Please turn to page 16. Here on this page, we provide details of a value enhancement property acquired with the expectation of securing a substantial increase in rent on the back of renovation work at the time of tenant turnover. After acquiring the property in February this year, steps were immediately taken to renovate one unit and secure a new tenant. Through strategic leasing activities undertaken in collaboration with the PM companies, energies were directed toward concluding a lease agreement at a rent that is 66% higher than the level prior to renovation, and substantially higher than the 30+% rent increase anticipated at the time of acquisition. Going forward, MAF will continue to conduct renovation work while undertaking leasing activities for other units on a progressive basis. Here on page 17, we take a look at rent trends at the time of agreement renewal. As indicated in 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 39th period hit a record high of 0.9%. As previously mentioned, the aggregate percentage change in rent after strengthening the investment corporation rent revision policy at the time of agreement renewal came to 1.7% for the two-month period from July to August this year, a significant jump compared with previous levels. Looking ahead, MAF will continue to target substantial increases in rent when revising rent at the time of agreement renewal from the 40th period and beyond. Directing your attention to the graph that runs across the top half of the page, the unit price rent for the entire portfolio continues to increase at an accelerated pace. The analysis by area data that runs across the bottom half of the page shows that the unit price rent continues to increase across the board. As you can see, the rate of increase for all areas is also climbing at an increasingly rapid pace, coming in at +1.51% for the 39th period. Changing tack, I would like to comment on the investment corporation's external growth here on page 19. MAF acquired STAYAT OSAKA SHINSAIBASHI east in March this year. In addition to existing inbound demand, accommodation fees for various facilities, including hotels and private lodgings in Osaka, have risen substantially over the past six months, particularly due to the effects of the World Exposition. Buoyed by the execution of a variable rent lease with the operator, RevPAR increased substantially in the period under review, contributing positively to the investment corporation's financial results for the 39th period. Meanwhile, MAF also acquired Park Cube Koiwa in March through the proprietary channel of the asset management company. With current rents at this property extremely undervalued, the potential exists to raise rents by at least 30% by renovating private areas at the time of tenant turnover going forward. At this time, we are undertaking value enhancement work on vacated units on a progressive basis and engaging in leasing activities. Next, I would like to elaborate on the investment corporation's sponsor pipeline on page 20. Looking at the Park Axis series developed by MAF sponsor, which totals roughly JPY 200 billion, leasing activities are currently underway at 46 completed properties comprising 5,306 units located mainly in the Tokyo 23 wards. Moving forward, we will continue to discuss 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 40th period is projected to total roughly JPY 27 billion, up to an LTV ratio of 55%. Here on page 21, we provide details of MAF's capital expenditures. As indicated in the graph at the top right of the page, capital expenditures in the 39th period totaled JPY 944 million. Looking ahead, steps will be taken to manage capital expenditure levels at around 50%-60% of depreciation and amortization. In this manner, the investment corporation's policy is to continue engaging in efficient cash management. Drawing your attention to the table and graph run across the bottom half of the page, and as I explained on page 7, value enhancement investments in the private areas of Okawabata Apartment Communities continue to provide a stable and high return. As such, MAF will continue to undertake investments to the tune of around JPY 80 million each period. Next, I would like to comment on MAF's sustainability initiatives from page 22. 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 9 properties in the 39th period. This represents 30.4% on a floor area basis. Turning to the CO2 emission data at the center right of the page, MAF continued to promote reductions. As you can see, the investment corporation remains committed to a wide variety of initiatives, including GRESB and the CDP Climate Change Program. As it has in the past, MAF will continue to steadily promote sustainability initiatives as one of its important management issues. Moving on to the investment corporation's financial strategy, I ask that you turn to page 23. The balance of MAF's interest-bearing debt stood at JPY 168.5 billion as of the end of the 39th period. As a result, the investment corporation's LTV to total assets ratio came in at 51.3%, and its LTV on an appraisal value basis was 32.7%. Details of MAF's commitment line and rating status presented across the bottom half of the page remain unchanged. Please turn to page 24. Despite the incidence of interest rate hikes throughout the 39th period, the impact on the investment corporation's period-end weighted average interest rate and duration of long-term debt was limited. As a result, trends in each metric remained stable. While conditions surrounding the market environment remain uncertain going forward, MAF will continue to manage its average current cost and engage in financial management with an emphasis on medium to long-term stability. With an eye on unrealized profit and loss, I ask that you turn to page 25. The unrealized profit on MAF's portfolio as a whole totaled JPY 186.6 billion on an appraisal value basis as of the end of the 39th period. At the same time, the investment corporation's NAV per unit was ¥132,000. Once again, on an appraisal value basis, the direct capitalization rate came in at 3.5%. Looking to the future, I would now like to elaborate on forecasts for the 40th and 41st periods from page 26. 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 earnings forecast are concerned, occupancy rates are expected to remain high at 97.5% and 97.3% in the 40th and 41st periods respectively. Meanwhile, the impact of the property acquisitions outlined on page 19 of the presentation materials has been factored into the investment corporation's earnings forecasts. With plans yet to be finalized, estimates regarding other property acquisitions and dispositions have not been taken into account. Casting an eye on a breakdown of forecasts here on page 27, I would like to touch briefly on factors that are expected to impact DPU. Looking at the 40th period, the incidence of tenant turnover is projected to be low. While the increase in revenue is forecast to narrow owing to a decline in such items as key money, we anticipate this will be more than offset by decreases in restoration costs and leasing expenses. As a result, existing property internal growth is estimated to have a positive impact on DPU of JPY 68. Taking into account additional factors, including contributions for the full period from properties acquired during the 39th period, as well as increases in interest expenses and other costs, MAF's DPU in the 40th period is projected to come in at JPY 2,346. The 41st period, on the other hand, is a period during which tenant turnover is expected to be high. Despite forecast increases in restoration costs and leasing expenses, we anticipate the increase in revenue will widen. Based on the aforementioned, existing property internal growth is projected to have a positive impact on DPU of JPY 35. Once again, taking into consideration increases in interest expenses and other costs, MAF's DPU in the 41st period is forecast to total JPY 2,335. Looking ahead, we do not anticipate external growth. In closing, I would like to comment on MAF's distribution track record and LTV trends outlined here on page 28. While under normal circumstances, seasonal factors in the 39th period could have led to a downturn in the investment corporation's distribution compared with the 38th period, MAF was successful in achieving a record-high DPU. 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. For the 40th and 41st periods, MAF is targeting an annual rate of DPU growth of between 2% and 3% by focusing on internal growth as a main driver, external growth, and cost management, thereby realizing further upside. Moving forward, MAF will continue to secure steady internal and external growth in line with its future operational policies. While engaging in strategic cash management, the investment corporation will also strengthen investor relations. Through these means, every effort will be made to secure continuous DPU growth and maximize unit holder value. This then concludes the presentation. I thank you for your interest and attention.