Earnings Call: Q2 2027

Sep 17, 2026

Summary

Period 20 DPU reached JPY 2,503, supported by acquisitions and rent growth; occupancy rose to 98.4%. Guidance targets JPY 2,620 DPU in periods 21 and 22, two periods ahead of plan, alongside continued asset recycling and rental growth.

I am Saka No Shita, CEO of Mitsui Fudosan Logistics REIT Management. Thank you for viewing the results briefing for the 20th fiscal period ended July 2026 for Mitsui Fudosan Logistics Park Inc. in August 2026, MFLP-REIT marked its 10th anniversary of its IPO. We believe that it is the support of stakeholders, starting with our unitholders, that has allowed us to achieve this major milestone, for which we are grateful. Thank you. Also, we used generative AI to prepare our results briefing for the previous fiscal period and have done so again this time. Going forward, we will leverage digital technologies to achieve efficient operations. Let's get started. I will use the results briefing materials for the 20th fiscal period in presenting the results. Please turn to page 4. These are the operating highlights for the 20th fiscal period. DPU for the 20th fiscal period was JPY 2,503. MFLP-REIT was able to strengthen its portfolio to improve profitability on the back of the acquisitions of MFLP Shinkiba II, a 41% stake in MFLP Tsukubamirai, MFLP•OGUD Osaka Torishima, and i Missions Park Kasugai in February 2026. Both internal and external growth contributed solidly to profitability, driving strong growth in both NOI and FFO. In addition, MFLP-REIT deployed its abundant retained earnings effectively to achieve its DPU forecast. On internal growth, we were able to raise rents on all of the leases expiring in fiscal period 20, which accounted for roughly 120,000 sq m of floor space, achieving a rent reversion of +12.7%. The demand environment for leasing is improving. Going forward, we aim to achieve sustainable and strong rent growth over time, backed by the continued competitive superiority of our portfolio. On occupancy rates, following a temporary uptick in vacancies at several properties two fiscal periods ago, we made steady progress on re-leasing. The occupancy rate improved 2 percentage points period on period to 98.4%. On the next few pages, I would like to provide a detailed explanation of the strategies MFLP-REIT is currently implementing. Please turn to page 5. MFLP-REIT is not only elevating and strengthening its strategies, but also shifting gears in response to the changing external environment in implementing a number of initiatives to enhance unitholder value. I will begin with a discussion of the key points for the gear shift. To proactively respond to near-term increases in interest expenses, we are taking a more specific strategy in recycling assets for the period up to the end of the current medium-term plan, which ends in fiscal period 23. Our aim is to step up the pace of elevating both profit growth capability and unitholder returns. The plan is to achieve the medium-term target for DPU of JPY 2,620 two fiscal periods early, thereby taking unitholder returns into a new phase. Also, as a specific asset recycling measure, we will promote the acquisition of assets with high growth potential to further strengthen the portfolio. On disposals, we will tap into our abundant unrealized gains and have begun efforts to generate further disposal gains through fiscal period 23. Enhancing unitholder value by solidly executing on asset recycling and proactively implementing measures to grow our profits and enhance unitholder returns is our top priority. We are committed to solidly delivering results. Please turn to page 6. These are the specific measures we are implementing to grow DPU. For internal growth, we aim to maximize the portfolio's profit growth capability by both continuing to raise rents and maintaining high occupancy rates. On asset turnover, we will recycle assets as appropriate in line with market trends. We aim to further elevate the portfolio's profit-generating capability and competitiveness through planned property disposals and by expanding the scope of our investments to include assets with higher growth potential. In fiscal period 20, we acquired four properties located in the three major urban areas of Japan. This time, we will acquire three properties, on-L Kyokushiisaka, MFLP Ichinomiya, and MFIP Ebina &forest. We also chose to dispose of MFLP Yokohama Daikoku in two tranches in fiscal periods 21 and 22, realizing unrealized gains. Next, under financial strategies, we aim to maintain a robust financial base while also securing capacity for growth investments by continuing to raise funds at competitive levels, even as interest rates rise. Finally, on unitholder returns, we aim to optimize capital allocation while also systematically returning disposal gains to unitholders. Combined with this, we will leverage retained earnings to achieve our fiscal period 23 DPU target of JPY 2,620 in fiscal periods 21 and 22, two fiscal periods ahead of plan. Furthermore, we will proactively seek asset recycling opportunities that will contribute to unitholder value to generate additional disposal gains. Please turn to page seven. This slide provides more detail on our DPU target. As just explained, the DPU for the 20th fiscal period was set at JPY 2,503. This level represents a growth rate in excess of the annual 4% growth target we have set for the period from fiscal period 17 to fiscal period 23. For fiscal periods 21 and 22, as a part of our initiatives to strengthen unitholder returns, we are now guiding for JPY 2,620 for each period, a level significantly higher than our initial plan. Achieving this will mean that we hit our DPU target level for fiscal period 23, the final year of the medium-term plan, two fiscal periods early. We note that achieving JPY 2,620 is merely a milestone on our roadmap toward further enhancement of returns, backed by further profit growth and proactive asset recycling. We are also targeting solid growth in NAV with our fiscal period 21 NAV per share assumption set at JPY 171,150, which would result in a 7.1% CAGR for the period from the end of the first fiscal period. We aim to continuously grow NAV over time. Please turn to page eight. I will cover the actual DPU for fiscal period 20 and our DPU guidance for fiscal periods 21 and 22 in more detail here. First, for fiscal period 20, while the disposal gains reported in the previous period dropped out, the acquisition of four properties, including MFLP Shinkiba II, boosted NOI for an incremental contribution of JPY 207 per unit. Internal growth on existing properties generated an incremental push-up of JPY 155 per unit. Through the effective use of retained earnings as well, we were able to solidly achieve our forecast of JPY 2,503. Next, for fiscal period 21, disposal gains on the sale of MFLP Yokohama Daikoku should contribute a positive JPY 440 per unit. Backed also by NOI growth from two acquisitions and internal growth at existing properties, we plan to achieve a DPU target of JPY 2,620, which was our objective for the final year of the medium-term plan. This is two fiscal periods earlier than projected. Finally, for fiscal period 22, we project a push-up of JPY 299, backed by the disposal of MFLP Yokohama Daikoku, as well as a boost to NOI from the acquisition of two properties and a contribution from retained earnings for a forecast of JPY 2,620. I will also say that we are aiming to achieve further upside beyond the JPY 2,620 level through the generation of additional disposal gains going forward. Next, I will discuss internal growth. Please turn to page nine. I will now cover the status of lease signings. On the left is a graph showing the status of lease negotiations with tenants. For fiscal period 20, contracts totaling floor space of 120,000 sq m were up for renewal. All negotiations have been completed. All tenants agreed to higher rent levels in signing. The average rent reversion rate was +12.7%. The annual rent reversion rate for fiscal periods 19 and 20 combined was also trending at a high level of 8.7%. On occupancy, we made solid progress in re-leasing vacant space, boosting occupancy as of the end of fiscal period 20 to 98.4%, a 2-percentage point improvement compared to the end of the previous fiscal period. We assume a 100% occupancy rate for the end of the fiscal period 21. We are making firm progress with lease negotiations for the current fiscal period 21 and are assuming an average rent reversion rate in a range between 5%-6%. As shown in the pie chart in the upper right, 93.4% of our current portfolio is subject to leases where it is possible to raise rents. Over the next three years, tenant leases on 40% of total floor space under contract will come up for renewal. For those contracts with more than three years remaining, the vast majority of contracts include a clause that allows for rent hikes during the lease period. If we include floor space covered by step-up contracts, the portfolio's rent growth potential is significant. We aim to realize this potential. Please turn to page 10. I will now cover the near-term leasing market conditions. For the Greater Tokyo market, the impact of surging construction costs reflecting inflation continues to depress new supply. However, demand is stable due to the impact of expanding demand from manufacturers on top of the continuous growth in demand from 3PLs and EC players. As a result, vacancy rates continue to fall. New supply in 2027 is expected to drop even further. As a result of an improved supply-demand balance and inflationary pressures, the tailwind supporting a rise in market rents is picking up. Our aim is to take maximum advantage of this opportunity to accelerate our efforts to grow rents. Next is asset recycling. Please turn to page 11. This time, we have announced we are disposing of MFLP Yokohama Daikoku and acquiring on-L Kyokushiisaka, MFLP Ichinomiya, and MFIP Ebina &forest. The acquisition of a property in Kyokushiisaka in Kumamoto Prefecture is MFLP-REIT's first non-sponsor acquisition. The chart shows the schedule and amounts for the acquisition of MFLP Tsukubamirai, announced in December 2025, and the disposal and acquisitions announced this time. Leveraging the proceeds from the sale of MFLP Yokohama Daikoku, which was acquired at the time of the IPO 10 years ago, and our LTV dry powder, we will recycle assets to acquire properties with high growth potential to drive future profit growth. Please turn to page 12. The disposal gains of JPY 2.38 billion will be split into two tranches across two fiscal periods and will be returned to unitholders. The JPY 9.45 billion book value equivalent will be strategically allocated to initiatives that will maximize unitholder value. We plan to allocate 30% of the sale proceeds to fund property acquisitions. With regard to 20% of the proceeds, out of the possible alternatives of property acquisitions, debt repayments, or buybacks, we will identify the choice that optimizes unitholder value from the perspective of capital efficiency and unitholder returns. The slides from page 13 onward provide details on the individual properties to be acquired. on-L Kyokushiisaka is MFLP-REIT's first non-sponsor acquisition. It is located in an area that is one of Japan's leading industrial clusters for semiconductor-related companies. Plans for capacity expansion of semiconductor-related production facilities have already been announced. The leasing market is likely to remain firm. Please turn to page 14. MFLP Ichinomiya is close to a major north-south route that traverses Aichi Prefecture and is a facility that can cover wide area distribution from Greater Tokyo to the Kansai areas. It has all the features of an advanced logistics facility and is advantageously located for recruiting, given it is highly convenient for commuting. Please turn to page 15. MFIP Ebina &forest is located in a new development and neighborhood creation area in walking distance from Ebina Station. In addition to logistics space, half of the property consists of multi-use space that can be used for office, R&D facilities, and lab space. MFLP-REIT supports tenants' efforts to create new industries. Please turn to page 17. This slide shows an overview of the changes to the portfolio based upon the planned acquisitions and recent acquisitions and disposals as covered today. Please turn to page 18. This is an overview of the sponsor's pipeline. As shown at the top of the page, the sponsors continue to accelerate their development of logistics facility projects. As of July 2026, Mitsui Fudosan's cumulative total investments had grown to JPY 1,400 billion for the development and operation of 88 properties, both domestic and overseas. In addition to the advanced logistics facilities targeted to date, Mitsui Fudosan is responding to the diversifying and increasingly complex needs of its customers by developing new asset types, such as multi-use facilities that can accommodate needs for office and lab space or cold storage warehouses. There are currently seven properties for a total floor area of 940,000 sq m, covered by the right of first look and preferential negotiation rights. We continue to have an abundant pipeline with access to top-class growth opportunities within the J-REIT market. In combination with assets developed by the ITOCHU Group, the pipeline of properties covered by the right of first look should be regularly topped up. We aim to further enhance the quality and growth of our portfolio, leveraging the strength of our dual sponsor structure. Please turn to page 19. This slide covers the situation for interest-bearing debt. As shown at the top of the page, outstanding interest-bearing debt was JPY 222.2 billion as of the end of fiscal period 20. While LTV was 39.9%, the average borrowing rate was 0.88%, and average debt tenor was 8.2 years. Related to funding for the acquisitions in February 2026, we added new lenders and tapped into the variable debt market to control the impact of rising interest rates on interest due. We assume an acquisition capacity at a book value LTV of 50% of JPY 101.1 billion for fiscal period 21. We rank top amongst the J-REITs in terms of financial flexibility and have sufficient capacity for growth investments. The lower part of the page shows the maturity ladder for interest-bearing debt. We have built a solid and stable financial foundation as a result of the diversification of debt repayments over a long time horizon. Average tenor of debt is 8.2 years, and average remaining time to maturity on existing debt is 4.1 years. Both have remained largely in line with previous levels and are well controlled. We aim to achieve both growth and financial soundness based on a solid grasp of the changing environment for interest rates. This completes my explanation of the fiscal period 20 results, but there are two other points I would like to highlight. The first relates to our ESG initiatives. Please turn to page 20. MFLP-REIT established its sustainability policy in 2021 and operates its business with an awareness of the need to lower its environmental burden. In terms of KPI monitoring, our figures for 2025 are as shown below. All show solid progress. We continue to build a sustainable base for growth. From July 2026, we began participating in the TNFD Forum to deepen our analysis of nature-related issues. Please turn to page 21. The second point is on our initiatives to expand our investor base. Following the merger with Advance Logistics Investment Corporation, we have seen an increase in individual investors as a result of the investment unit split and investor relations activity targeting individuals. As of fiscal period 16, we had 9,000 individual investors, but we now have more than 30,000. Together, they account for slightly under 10% of outstanding investment units. One of our recent initiatives was to participate for the first time in the J-REIT Club run by economic analyst Mariko Mabuchi in June 2026. We were able to showcase the attractiveness of MFLP-REIT through an on-stage dialogue with analyst Mabuchi. In addition, we have launched presentation videos featuring AI avatar and have guest lectured at universities to improve the recognition of J-REITs. We will continue to actively step up our efforts to communicate with and create new points of contact with investors to further expand our investor base. This completes my presentation. We position the 10th anniversary of the IPO as a new starting line. We are firmly committed to delivering results across the board for internal growth, external growth, including asset recycling and unitholder returns. We will continue to focus on solidly capturing opportunities for growth in the logistics facilities real estate market to achieve a virtuous cycle of profit growth and unitholder returns. We aim to further elevate unitholder value. Thank you.