Earnings Call: Q4 2026

Mar 17, 2026

Summary

19th fiscal period DPU rose to JPY 3,275 with disposal gains, while four acquisitions strengthen the portfolio. Rent reversions, low LTV and sponsor pipelines underpin a target of at least 4% annual DPU growth through the 23rd period.

I am Sakanoshita, CEO of Mitsui Fudosan Logistics REIT Management. Thank you for viewing the streaming video of the 19th fiscal period results briefing for Mitsui Fudosan Logistics Park Inc. Please note we have used generative AI to create this results briefing video. Going forward, we will continue to leverage digital technologies to enhance operational efficiency. Let's get started. I will use the results briefing materials for the 19th fiscal period to explain our earnings. Please turn to page 4. Here we show the operational highlights for the 19th fiscal period. With regard to distributions, in the 19th fiscal period, gains on disposals of properties such as i Missions Park Inzai allowed us to further increase our returns to unitholders for a significant rise to JPY 3,275. Going forward, we aim to further improve profitability through internal growth that captures the impact of inflation and external growth that will strengthen our portfolio. This will allow us to solidly grow FFO. We will also leverage the abundant retained earnings generated through the merger to achieve annual DPU growth of 4% or higher. On internal growth, on the 267,000 sq m of floor space, which represents approximately 13% of the portfolio, that was subject to lease expiries in the 19th fiscal period, we were able to raise rents on all contracts. The average positive rent reversion was 6.8%. The supply-demand environment for the leasing market is showing signs of improvement. Reflecting the superiority of MFLP-REIT's portfolio in terms of location and quality, we will aim to achieve further rent growth. On external growth, the activity around disposals we initiated in the 18th fiscal period for four properties was largely completed during the 19th fiscal period by the end of September. We completed the sales at a premium to appraisal prices. With regard to the proceeds from the disposals, after due consideration and given the improving share price conditions for our investment units, we chose to allocate to the acquisition of four properties that combine both growth and stability. Contracts for the four properties have been completed. The asset recycling we undertook this time has enhanced portfolio quality and elevated its future potential and stability. We will continue to leverage the abundant pipeline supported by our dual sponsor structure and take advantage of our relatively lower LTV level, as well as raise funds flexibly subject to market conditions in order to continuously strengthen our portfolio and achieve growth. I will go into more detail on the following pages. Please turn to page 5. On this page, I will provide more color on our track record for 19th fiscal period distributions, as well as our distribution forecasts for the 20th and 21st fiscal periods. As a result of the disposal of three properties, starting with i Missions Park Inzai, we returned JPY 1,229 to unitholders, boosting 19th fiscal period DPU to JPY 3,275. Relative to our previous forecast disclosed in September 2025, there was an incremental JPY 10 contribution from increased revenue from existing properties. There was a JPY 11 contribution from deposit interest resulting from the temporary investment of cash proceeds from disposals in time deposits. Initiatives to control interest expenses resulted in a JPY 15 contribution, enabling us to ultimately exceed our previous forecast by JPY 55. For the 20th fiscal period, the absence of the JPY 1,229 in disposal gains and a JPY 61 decrease in revenue due to property disposals will be mitigated by a JPY 283 contribution to revenue from the four new properties acquired and a JPY 66 contribution from internal growth on existing properties. We project EPU will rise JPY 215 from the previous fiscal period to JPY 1,779, and plan to reverse JPY 724 in retained earnings to boost our DPU forecast to JPY 2,503. For the 21st fiscal period, the follow-on acquisition of MFLP Tsukubamirai is projected to generate additional revenue for a contribution of JPY 27, combined with an JPY 88 contribution from internal growth on existing properties. EPU is projected to rise JPY 4 to JPY 1,783. A further JPY 735 reversal of retained earnings will bring forecast distributions to JPY 2,518. Please turn to page six. I will now discuss our growth target for distributions going forward. As explained on page five, we achieved a 19th fiscal period DPU of JPY 3,275 as a result of disposing of three properties at a premium to appraisal prices, effectively capturing peak asset value at this time. We project 20th fiscal period DPU at JPY 2,503 and 21st fiscal period DPU at JPY 2,518. With regard to the subsequent fiscal periods, we aim to grow FFO per unit through improved profitability, reflecting internal growth, including rent reversions that capture inflation, disciplined external growth leveraging a low LTV and an abundant pipeline, and flexible fund procurement reflecting current interest rate conditions to control interest expense. Through solid growth of FFO and measures such as leveraging retained earnings, we aim to achieve DPU growth of 4% or higher up to the 23rd fiscal period, with a target of JPY 2,620 or higher for DPU in the 23rd fiscal period. We are also achieving steady growth in NAV, projecting NAV at the end of the 20th fiscal period to be JPY 129,137, which represents an annual average growth rate of 6.9% from the first fiscal period. In tandem with DPU growth, we also aim to continuously grow NAV as well. I will now move on to discuss internal growth. Please turn to page seven. First, with regard to lease signings, on the left-hand side of the page, the graph depicts the status of lease signings with our tenants. In the 19th fiscal period, we completed contracts for lease expiries accounting for 267,000 square meters in floor space or roughly 13% of the overall portfolio. All of the tenants committed to higher rents and signing leases. The average rent reversion rate was 6.8%. On occupancy, we are making solid progress on re-leasing vacant units. Occupancy as of the end of the 19th fiscal period was 96.4%, 1.3% points higher than our previous forecast. With regard to vacant units in the 19th fiscal period, we were able to secure tenants at significantly higher rents for almost all units. With regard to the 20th fiscal period currently underway, we are making steady progress with lease signings. We expect to exceed the rent reversion rate of the previous period to achieve an average rent reversion rate of between 7%-8%. For the 21st fiscal period, we project occupancy of 100%, reflecting positive rent reversions and improved occupancy, we believe we can achieve solid internal growth. As shown in the pie chart on the upper right, for roughly 90% of the leases in our portfolio at this time, we have the ability to negotiate higher rents to reflect inflation. First, over the next three years, roughly 40% of contracts for space leased to tenants are slated to expire. For leases with more than three years remaining, the vast majority of contracts incorporate a rent review clause, making it possible to reset rent during the course of the lease. There are also leases that have step-up clauses. As such, these leases are structured to enable steady rent growth. As shown on the lower right, we are also promoting internal growth measures such as CapEx, that can strategically drive higher NOI yields and measures to improve efficiency of property management costs. Please turn to page 8. I will now cover near-term leasing market conditions. For Greater Tokyo, vacancy rates were temporarily elevated, reflecting the impact of significant new supply in 2022 and 2023. However, since 2024, inflation has been pushing up construction costs dramatically, leading to a downward trend in new supply. Demand, however, has remained stable. We continue to see not only continued growth of e-commerce-related business but rising demand from manufacturers. Vacancy rates have peaked out. New supply in 2027, reflecting the continued surge in construction costs and other factors, is expected to fall to one-third of peak levels in 2023. Going forward, on top of further progress on inflation, expected improvements to the supply-demand balance and the gradual take-up of vacant space has created an environment where market rents are expected to rise. Given this improvement in the environment, we will seek to further accelerate the rise in rents for MFLP-REIT's portfolio. Please turn to page 9. I will now cover interest-bearing debt. As shown on the upper part of the page, outstanding interest-bearing debt as of the end of the 19th fiscal period was JPY 210.2 billion. LTV was 38.1%. The average interest rate was 0.75%, and the average time to maturity was 8.2 years. We sought to control the impact of increased interest expense as a result of rising interest rates by choosing to allocate a portion of proceeds generated from disposals to pay down a significant portion of debt that was expected to come due during the 19th fiscal period. We estimate acquisition capacity if book value LTV were raised to 50% to be JPY 131 billion. Our LTV is amongst the lowest for the J-REITs. We have maintained sufficient capacity to increase leverage. On the lower left, we provide an outline of the new borrowings incurred as a result of recent property acquisitions. When we acquired four new properties in February 2026, we raised a total of JPY 14.5 billion from our lenders. As stated on the lower right, in response to the near-term sharp rise in interest rates on borrowing, we have undertaken a number of measures to control interest expense, such as expanding our base for procuring funds by developing new relationships with financial institutions, shortening maturities, and leveraging variable financing, where interest rates are relatively lower. As a result, despite base interest rates rising 106 basis points from the last time we raised debt in November 2024, we were able to limit the rise in our funding costs to 37 basis points. Our financial strategy remains focused on procuring funds on a fixed basis and ensuring that the average remaining leasing period does not exceed the average remaining loan period, maintaining a stable approach with an awareness of ALM control. Based on this policy, we will respond flexibly to rising market interest rates and proactively manage our finances to ensure that we control the impact of dramatic surges in interest rates. Next is external growth. Please turn to page 10. This is an overview of the property acquisitions we announced in December 2025. From Mitsui Fudosan, we acquired the three properties of MFLP Shinkiba II, MFLP Tsukubamirai, and MFLP OGUD Osaka Torishima. From the ITOCHU Group, we acquired one property, iMissions Park Kasugai, which brought the total to four properties for JPY 40.2 billion. We acquired properties located in each of the three major urban areas, enhancing portfolio diversification. Each property is also located within 5 kilometers of the nearest interchange. The properties have superiority in terms of ease of access. MFLP Shinkiba II and MFLP OGUD Osaka Torishima are located in the Greater Tokyo Bay Area and the Osaka Bay Area respectively, areas where market conditions are expected to remain favorable, reflecting firm demand. The properties have significant potential for rent growth. MFLP Tsukubamirai and iMissions Park Kasugai are located in proximity to the respective tenants' strategic base. Reflecting this, both properties are expected to generate stable cash flows. With the properties we acquired, we were able to achieve a good balance, with two properties that have high growth potential and two properties that have highly stable cash generating capability. Overviews of the individual properties are shown on page 11, and a summary showing the pre and post-acquisition portfolio is on page 12. In the interests of time, I will skip the explanation of these pages, but each of these properties are leading-edge logistics facilities developed by the sponsors, which contribute to the strengthening of our portfolio. Please turn to page 13. I will now provide an overview of the sponsors' pipelines and the outlook for future asset size expansion. On the upper part of the page, we show Mitsui Fudosan's continued initiatives to accelerate development of logistics facilities. As of August 2025, the number of facilities developed and operated by Mitsui Fudosan expanded to 78, for a cumulative total investment of approximately JPY 1.3 trillion. In addition to logistics facilities and data centers, Mitsui Fudosan is responding to the diversifying and increasingly complex needs of its customers by also developing new asset types such as mixed-use facilities enabled for functionalities like combined office and lab space or cold storage. The current pipeline of properties covered by the right of first look and preferential negotiation rights agreement stands at a total of nine properties for a total floor space of 1.05 million square meters, with the addition of three properties from Mitsui Fudosan in January 2026. We have a robust pipeline. Combined with properties developed by the ITOCHU Group, the right of first look properties are expected to keep continuously growing over time. We aim to leverage the strength of a dual sponsor structure to achieve external growth. MFLP-REIT will continue to capitalize on its abundant sponsor pipeline to make timely acquisitions in line with the market environment and raise funds appropriately to achieve disciplined external growth. This completes the discussion of the 19th fiscal period results, but I have two additional areas I would like to highlight. The first is on our ESG initiatives. Please turn to page 14. MFLP-REIT set out its ESG policy in 2021, mindfully managing our business to lower its environmental burden. In December 2025, we formulated a new policy on natural capital, setting out our initiatives for the conservation of biodiversity and water environment, management and revival of ecosystems, and the effective use of water resources. In addition, we were able to raise our CDP score for climate change by one notch from last year to A-minus. In our first time to respond to water security criteria, we were able to achieve the highest score level for a J-REIT of A-minus as well. Beyond this, our initiatives for social include neighborhood cleanup activities and donations of disaster supplies to local governments. Please turn to page 15. The second area I would like to highlight is our initiatives to expand our investor base. Following the merger with Advance Logistics Investment Corporation, on the back of a stock split and the impact of IR activities targeting individual investors, we have seen an increase in individual investors. As of the end of the 19th fiscal period, individual investors exceeded 30,000, accounting for close to 10% of outstanding investment units. Going forward, we aim to further expand our investor base by maintaining stable operations at MFLP-REIT and achieving continuous growth over time. Our initiatives targeting individual investors include the briefing on business operations in October 2025, following the general meeting of unitholders. Following the briefing, we set up booths to respond directly to individual questions, creating an opportunity for individual investors to engage with directors of the asset management company. We are grateful for the participation and inquiries from investors. In addition to this, we implemented many other initiatives, such as the redesigning of our website and guest lecturing at universities to raise awareness of J-REITs. This completes my presentation. Going forward, we are firmly committed to maximizing unitholder interests through strong internal growth and measures to strengthen the portfolio and elevate our future growth capability, supported by the dual sponsor structure. Thank you.