Earnings Call: Q4 2026

Apr 21, 2026

Summary

DPU reached JPY 2,414 for the period ended February 2026, above forecast, with JPY 2,450 forecast for each of the next two periods. Rent growth, hotel demand and asset replacement underpin the 3% annual DPU growth commitment, alongside disposition gains and internal reserves.

Thank you for watching the video of the financial results briefing for the fiscal period ended February 2026 of ORIX JREIT, or OJR for short. I am Ikuya Onda, President of ORIX Asset Management Corporation, the asset management company of OJR. First, I would like to take this opportunity to express my sincere appreciation to all unitholders and stakeholders for your continued support of OJR. Please note this video of the financial results briefing has been produced using generative AI. Starting this fiscal period, we have adopted this initiative to deliver accurate information to unitholders and stakeholders more efficiently. As an asset management company, we will continue to operate in a manner that contributes to unitholder value while further promoting operational efficiency and cost reductions. We appreciate your understanding in this regard. Now, I would like to begin the presentation. Please refer to page three. I would like to walk you through the highlights of our results for this fiscal period. First, let me explain the distribution per unit, or DPU for short. The DPU for the fiscal period ended February 2026 was JPY 2,414. This represents an increase of JPY 34 compared with the forecast distribution per unit of JPY 2,380 announced at the time of the previous financial results announcement. Regarding our DPU forecasts, we project JPY 2,450 for the fiscal period ending August 2026, and likewise JPY 2,450 for the fiscal period ending February 2027. These forecasts were determined in line with the policy OJR has communicated to unitholders, growing DPU by 3% or more annually from mid- and long-term. In preparing these forecasts, we have factored in steady progress in rent increases, as well as the recognition of gains on disposition. Compared with the forecast on annual DPU growth of 3%, we expect an upside of JPY 423 for the fiscal period ending August 2026 and JPY 393 for the fiscal period ending February 2027, both substantially above the 3% growth line. For the fiscal period ending February 2027, from the standpoint of ensuring stability in distributions, we assume that a portion of the internal reserves accumulated to date will be utilized. OJR intends to continue strategic asset replacement going forward, and we will enhance distributions by utilizing gains on disposition even after the fiscal period ending February 2027. We believe one of OJR's strengths is our ability to execute a flexible DPU strategy through realizing unrealized gains and utilizing internal reserves. We have also achieved growth of more than 3% on an annual basis in NOI and rental earnings from the properties we own. I would like you to note that on a fundamental basis, excluding the impact of gains on disposition, we have firmly achieved average annual growth of 3% or more. Next, I would like to explain our asset replacement. We have continued to execute our DPU growth strategy through new property acquisitions while focusing on internal growth of the properties we own. Since the fiscal period ended August 2025, we have disposed of three properties for a total disposition price of JPY 35.1 billion and have expanded our portfolio by newly acquiring eight properties with a total acquisition price of JPY 92.3 billion. This includes the acquisitions of KAMATA PRIME, Bayside Park Osaka South Residences, and Bayside Park Osaka North Residences, and the disposition of Hamamatsu Act Tower, all of which were announced after the end of the fiscal period ended February 2026. All acquired properties have growth potential, and we will continue to steadily build DPU with NOI growth serving as the key driver. Next, I would like to explain transactions with our sponsor. In March 2025, we acquired Hotel Universal Port Vita and disposed of Aoyama Suncrest Building and Kita Aoyama Building, executing major transactions with our sponsor. As shown on page 32, the sponsor pipeline exceeds JPY 100 billion in total, and we are continuing discussions with the sponsor. Transactions with sponsor are one of our strategic initiatives to enhance unitholder value, and we will continue to engage in thorough discussions while carefully assessing the market environment and investment effects. Now, I would like to move on to a more detailed explanation. Please refer to page 4. Let me once again explain our commitment to 3% annual DPU growth, which we presented at the announcement of financial results for the fiscal period ended August 2024. In the bar chart, the dark blue section at the bottom indicates the 3% growth level based on the starting point of DPU of JPY 1,910 for the fiscal period ended August 2024, adjusted for the unit split. Of the portion above our 3% growth commitment, the gains on disposition from Aoyama Suncrest Building, Kita-Aoyama Building, and Hamamatsu ACT Tower are shown in light blue at the top of the bar, while the upside above the 3% growth line attributable to factors other than gains on disposition, such as new acquisitions and internal growth, is shown in orange in the middle of the bar. As this chart shows, since the fiscal period ended February 2025, we have achieved annual growth exceeding 3% through portfolio growth driven by rent increases and asset replacement. In addition to asset replacement that enhances portfolio quality, we will continue to achieve further growth with rent increases at our existing properties as the key growth driver. Please refer to page 5. OJR is a diversified REIT primarily focused on office. However, in order to achieve sustainable long-term DPU growth, we are building a portfolio by incorporating assets with different profitability characteristics from offices, such as hotels, retail, residential, and logistics facilities. In this diversified portfolio, each asset type complements the others in terms of earnings capability. This enables us to respond flexibly even to cyclical real estate markets and changes in the external environment, and we believe you will understand that we have built a solid portfolio that combines both stability and growth potential. In addition, regarding property acquisitions, one of the key drivers of OJR's growth, we execute timely and flexible investments by carefully assessing market conditions. In March, we announced acquisitions of offices in central Tokyo where demand is expected to remain firm, and residential properties in Osaka. In this manner, while ensuring flexibility in acquisitions, OJR will continue to build a well-diversified portfolio that reflects changes in the environment. Please refer to page 6. Next, I would like to explain rental earnings and NOI by asset type. First, for offices, we achieved steady rent increases supported by a strong market. As a result, for the fiscal period ended February 2026, we achieved a rent increase of JPY 162 million compared with the previous period. On an NOI basis, excluding the impact of temporary LED retrofitting costs, NOI increased by JPY 104 million from the previous period. The rent gap in our portfolio has also widened, and we will continue to pursue rent increases steadily from the fiscal period ending August 2026 onward. Next, in terms of hotels, it continues to be supported by robust tourism demand and became the strongest driver of portfolio growth among all asset types. In particular, for the fiscal period ended February 2026, in addition to the full-period contribution from income generated by the newly acquired hotel, Hotel Universal Port Vita, we also benefited from the contribution of Holiday Inn Express Osaka City Centre Midosuji, which we acquired in October last year, resulting in a significant increase in NOI for the hotel segment as a whole. As a result, rental earnings increased by JPY 1,232 million compared with the previous period, and NOI increased by JPY 1,299 million, strongly driving growth for the portfolio of OJR. Since November 2025, the number of Chinese tourists visiting Japan has declined due to the Chinese government's request to refrain from travel to Japan. Regarding the impact on OJR, at all our three large hotels, Tokyo Bay Maihama Hotel First Resort, Hotel Universal Port, and Hotel Universal Port Vita, domestic guests account for more than 80%. Looking at OJR's hotel portfolio as a whole, the share of Chinese guests is only a few percent, so the direct impact is limited. In addition, for the three properties with a higher inbound ratio, including Holiday Inn Express Osaka City Centre Midosuji, MIMARU Osaka Shinsaibashi East, and MIMARU SUITES Kyoto Shijo, we are working together with hotel operators to implement initiatives such as marketing strategies, and it is making steady progress in capturing inbound demand from countries and regions other than China. Looking at the year-on-year RevPAR performance of these three properties since November last year, when the request for travel restraint was issued, some properties experienced a temporary year-on-year decline in January when the growth rate bottomed out, partly due to the impact of the Lunar New Year holidays in China. Meanwhile, in the actual results for February and March, all of these properties turned positive year-on-year, indicating a recovery trend. We will continue to monitor risks, such as a potential decline in demand if high crude oil prices continue amid tensions in the Middle East, as well as margin deterioration in hotel operations due to rising utility costs. However, from a medium to long-term perspective, we expect hotel revenues to remain solid, driven primarily by expanding inbound demand. We believe the hotels OJR owns will continue to lead our growth going forward. Next, regarding retail facilities, we achieved rent increases for both urban and suburban-type retail facilities. Rental earnings increased by JPY 67 million compared with the previous period, and NOI increased by JPY 34 million. In particular, urban-type retail facilities continue to benefit from inbound demand, and in high street locations, we have achieved rent increases above our assumptions at tenant turnovers and renewals. We will continue to pursue further rent increases. For residential properties, we achieved rent increases both at tenant turnover and at renewals supported by improved rent affordability due to rising wages and continued population inflows into urban areas. As a result, rental earnings increased by JPY 58 million compared with the previous period, and NOI increased JPY 50 million. The rate of rent change at tenant turnover has risen over eight consecutive periods, and we will aim for further rent increases going forward. Finally, regarding logistics facilities, a tenant terminated its lease at Komaki Logistics Center at the end of February 2026, and the lease to new tenant commenced on April 1st following completion of repair work carried out in line with the tenant's move-out, achieving a rent increase of more than 10%. Going forward, we aim to achieve 100% occupancy across all properties by positioning our logistics facilities as stable and income-producing assets with growth potential. In this way, although performance varies by asset type, overall, we have steadily captured the strong leasing market and growing inbound demand, resulting in further NOI growth across all asset types. Please refer to page seven. I will explain our external growth and asset replacement strategy since the fiscal period ended August 2025. This slide provides an overview of our acquired properties. We acquired Hotel Universal Port Vita at the end of last March with the expectation of delivering high growth by capturing inbound demand. Subsequently, we acquired MIMARU Osaka Shinsaibashi East, MIMARU SUITES Kyoto Shijo, and Holiday Inn Express Osaka City Centre Midosuji, bringing the total of four hotels. In addition, from the perspective of achieving stable portfolio growth, we have recently proceeded with acquisitions of office properties in the Greater Tokyo area and residential properties in Osaka. At this point, I would like to add some supplemental explanation regarding the three properties we newly acquired in March. First, KAMATA PRIME is a highly scarce office property, offering excellent access to central Tokyo and Haneda Airport, as well as a large typical floor plate and high building grade. Leveraging these characteristics, we believe this property will be able to steadily capture firm office demand in the Greater Tokyo area and reliably achieve rent increases going forward. Next are Bayside Park Osaka South Residences and Bayside Park Osaka North Residences. Both properties offer excellent access to major areas such as Umeda, Namba, and Honmachi, business and commercial hubs within Osaka City, along with abundant retail and daily convenience facilities and an excellent living environment. They are residential properties with high competitiveness. All three properties are expected to deliver future growth, and we decided to acquire the assets as they will contribute to enhancing unitholder value. Next, please refer to page eight. This slide summarizes the properties we disposed of and the effects of external growth driven by asset replacement. We have disposed of properties at levels exceeding appraised values and book values over multiple fiscal periods. As a result, this has contributed to the return of distributions reflecting 3% growth with additional upside. At the same time, we have also improved portfolio quality through asset replacement with improvement of profitability and average age of properties. Leveraging the strengths of a diversified REIT, we will strive to enhance unitholder value through strategic asset replacement while carefully assessing the environment at each point in time. Please refer to page nine. Next, I would like to explain our financing strategy. As in the past, our basic policy is to raise funds primarily through long-term fixed-rate loans while spreading maturities to mitigate refinancing risk. At the same time, interest rates have risen sharply, and from the standpoint of controlling near-term interest costs, we are also implementing flexible financing measures, such as incorporating a portion of long-term floating rate loans. Going forward, we will continue cautious and disciplined financial management, placing the highest priority on stable operations centered on long-term fixed-rate debt. In addition, we have financing capacity of approximately JPY 50 billion while maintaining our current credit ratings and financial institution exposure, and we use a total asset-based LTV of 50% or less as a guideline. For reference, when total asset-based LTV is 50%, appraisal-based LTV is approximately 37%. Please refer to page 10. This slide presents a sensitivity analysis showing how DPU is affected by changes in rent at rent renewals and tenant turnovers by asset type based on the actual results for the fiscal year ended February 2026 as the reference point. As you can see, while the slide covers areas from external growth through capital management, there are no major volatility factors, highlighting once again the diversification of our portfolio. Please refer to page 12. This slide shows the main factors behind changes in DPU from the fiscal period ended August 2025 through the fiscal period ending February 2027. Although funding costs have been rising recently, the impact has been more than offset by increases in rental earnings. LED retrofitting work funded by gains on disposition is expected to be largely completed by around August 2026 after peaking in the fiscal period ended February 2026. As a result, repair costs are expected to decrease in the fiscal period ending February 2027. In addition, gains on disposition have contributed to increased DPU, and by combining the recognition of gains on disposition and the utilization of internal reserves even after the fiscal period ending February 2027, we will continue to grow DPU and steadily enhance returns to unitholders. In closing, geopolitical risks, including the situation in the Middle East, as well as the impact of monetary policy in various countries, continue to create an uncertain social and economic environment. Even under such circumstances, we will firmly uphold our commitment to unitholders to achieve medium- to long-term annual DPU growth of 3% and will continue to deliver additional upside beyond that level by leveraging the strengths of our diversified REIT structure, which enables us to respond flexibly to changes in the market environment. We would appreciate your continued support.