MIRAI Corporation

Semi Annual Report

For the Fiscal Period ended October 31, 2020 (The 9th Period)

1

To the Unitholders

- Resilience -

MIRAI Corporation has been taking various corporate actions since listing supported by the unitholders. In 2020, MIRAI further demonstrated its "responsiveness" in promoting the three "Revitalization Plan" formulated under the spread of COVID-19.

It will take some more time to finalize the "Revitalization Plan" which showed steady progress during the 9th fiscal period (fiscal period ended October 31, 2020) and we are determined to establish a firm base on which to grow anew beyond the pre-COVID-19 level following the completion of the plan.

We hope the unitholders can continue to watch over the progress of the "Revitalization Plan" which we continue to tackle demonstrating MIRAI's "responsiveness" and support our path toward growth path which lies ahead.

MIRAI Corporation Michio Suganuma, Executive Director

  • Distributions

The 9th Period

The 10th Period

The 11th Period

Actual distributions per unit

Forecast distributions per unit (Note)

Forecast distributions per unit (Note)

(Start of cash distribution payment on

(the Fiscal Period ending April 30, 2021)

(the Fiscal Period ending October 31,

January 15, 2021)

2021)

1,429 yen

1,160 yen

1,260 yen

(Note) This forecast is calculated based on certain assumptions as of December 14, 2020 and subject to change due to conditions such as change in rent income thorough tenant turnovers, acquisition and disposition of assets, and additional unit issuance. The forecast should not be construed as guarantee of DPU.

Financial Results

(billion yen)

Operationg revenue

Net profit

DPU

(yen)

6

4.9

5.3

5.4

5.3

1,800

4.4

3.9

1,563

1,561

4

3.3

1,600

1,451

1,417

1,436

1,429

2

1,293

1,400

0

1.5

1.7

1.9

2.2

2.4

2.5

2.3

1,200

3rd FP

4th FP

5th FP

6th FP

7th FP

8th FP

9th FP

(Note) MIRAI implemented a four-for-one investment unit split with April 30, 2019 as record date. For the purpose of comparison, the figures before 6th FP are post-split figures.

Primary Data (As of the End of October 2020)

  • Portfolio

MIRAI disposed one property in November 2020 after the fiscal period ended October 2020 and schedules to acquire one new property

in March 2021.

Number of properties

: 33

AUM

: 151.2 billion yen

Appraisal value

: 161.4 billion yen

Occupancy rate

: 96.2%

NOI yield (9th FP result)

: 4.3% *based on book value

Portfolio PML

: 3.0%

Ratio by Tenant

Ratio by Asset Type

Ratio by Area

(based on rent)

(based on acquisiton price)

(based on acquisiton price)

Others

Others

7.9%

Retail

Nagoya 13.8%

16.4%

area

Top 10

Core Assets

9.0%

Three

Metropolitan

38.7%

88.9%

Osaka

Others

Areas

area

86.2%

61.3%

Hotel

Office

14.4%

Tokyo

18.1%

57.6%

area

62.9%

(Note) Ratio by tenant is based on lease contract in place with end tenants as of the end of October 2020. BizMiiX Yodoyabashi (former Hotel WBF Yodoyabashi-Minami) is classified as office by adding the additional investment related to conversion on the acquisition price.

2

  • Finance

Stable financial base maintained on the back of Mitsui & Co.'s credit.

LTV (based on total assets)

: 47.5%

Long-term fixed interest debt ratio : 100%

Average interest rate

: 0.53%

Average remaining maturity

: 4.0 years

Rating

: Japan Credit Rating Agency, Ltd. (JCR) / A+ (Positive)

Rating and Investment Information, Inc. (R&I) / A (Stable)

Impact of COVID-19 and Progress of "MIRAI Revitalization Plan"

  • Operations under the COVID-19 Crisis

Topics

Occupancy remains high.

Office

Although there are some departures, succeeded in persuading some tenants to stay or re-

leasing through persistent negotiation.

Average rent is largely in line with the previous market rent.

Neighborhood shopping centers demonstrated steadiness with increasing sales trend and

Retail

stable profitability.

Venues for events such as weddings continue to face difficulties. Recent rent reduction is

already agreed on while activities are gradually resuming.

Occupancy is on gradual recovering trend due to impact of "Go To Travel" campaign and

Hotel

business travel demand. It will take time for meaningful recovery of inbound demand.

Regional hotels started gradual recovery ahead of others since fall although some area bias is

observed.

Growth

In Mi-Nara, further renewal such as change of property manager is underway.

New type assets show stability even during COVID-19 crisis.

  • Implement the Unitholder Benefit Program

MIRAI introduced the benefit program to increase unitholders' profits and support the hotel industry, which has been significantly affected by the COVID-19.

  • ESG Initiative

MIRAI strengthens ESG initiative for the realization of a sustainable society. MIRAI implements various initiatives such as obtaining of environmental certification for properties owned, sponsorship of local events and establishment governance structure, etc.

Specific examples

Environment

Social

Governance

Acquisition

of

environmental

Sponsorship of local events

Establishment of a governance structure

certification

Attracting nursery school for tenants'

that considers the interests of unitholders

*Proportion of assets with environmental

employees

Regular KPI disclosure by the asset

certification: 53% (after asset replacement)

Promotion of teleworking

manager

Installation of environmentally friendlier

equipment

Progress of MIRAI Revitalization Plan

MIRAI formulated "MIRAI Revitalization Plan" to solve the issues that emerged from the impact of COVID-19. MIRAI focuses its efforts on resolving each issue by mid-2021.

  1. Conversion of BizMiiX Yodoyabashi (former Hotel WBF Yodoyabashi-Minami) to office
    Conversion to office following the bankruptcy protection filing by the previous tenant. The office is scheduled to open in January 2021 as a high quality ready-to-use serviced office produced by IDERA Capital, sponsor of MIRAI.
  2. Further renewal of Mi-Nara
    Fundamental renewal plan is considered in order to turn the asset into a retail facility that matches the post-COVID-19 market. Change the property manager from Yamaki Group to ITOCHU Urban Community as review of operational structure in September 2020. Tenant replacements are also scheduled in large sections around spring 2021. Aim to increase customer traffic for day-to- day usage.

3

3. Portfolio reconstruction (including potential asset replacement)

Dispose a hotel at risk of being impacted by COVID-19 and acquire a defensive asset type with post-COVID-19 consideration. MIRAI will continue to reconstruct the portfolio with "defensiveness and profitability" in mind.

  • Composition of Assets of MIRAI

The 8th Period

The 9th Period

Asset type

Category

As of April 30, 2020

As of October 31, 2020

Total amount held

Ratio to total assets

Total amount held

Ratio to total assets

(Million yen)

(%)

(Million yen)

(%)

Office

86,037

53.4

86,075

54.1

Retail

27,877

17.3

25,238

15.9

Real estate in trust

Hotel

29,478

18.3

29,576

18.6

Industrial

7,936

4.9

7,884

5.0

Educational

4,061

2.5

4,060

2.6

Subtotal

155,391

96.5

152,834

96.0

Deposits and other assets

5,635

3.5

6,387

4.0

Total assets

161,027

100.0

159,222

100.0

(Note) Total amount held is based on the balance sheet carrying amount (book value after depreciation in the case of real estate in trust) as of the end of the period.

4

1 Overview of Asset Management

(1) Operating Results of MIRAI Corporation (hereinafter "MIRAI")

The 5th Period

The 6th Period

The 7th Period

The 8th Period

The 9th Period

Period

From May 1, 2018

From Nov. 1, 2018

From May 1, 2019

From Nov. 1, 2019

From May 1, 2020

to Oct. 31, 2018

to Apr. 30, 2019

to Oct. 31, 2019

to Apr. 30, 2020

to Oct. 31, 2020

Operating revenue

(Million yen)

4,417

4,959

5,340

5,448

5,367

Operating expenses

(Million yen)

2,295

2,427

2,623

2,583

2,744

Operating income

(Million yen)

2,122

2,531

2,716

2,865

2,622

Ordinary income

(Million yen)

1,867

2,270

2,474

2,595

2,378

Net income

(Million yen)

1,922

2,271

2,472

2,594

2,376

Total assets

(Million yen)

131,772

152,493

153,052

161,027

159,222

[Changes from the previous period]

(%)

[12.6]

[15.7]

[0.4]

[5.2]

[(1.1)]

Net assets

(Million yen)

61,590

70,854

70,925

75,572

75,428

[Changes from the previous period]

(%)

[15.0]

[15.0]

[0.1]

[6.6]

[0.2]

Interest-bearing debt

(Million yen)

64,200

74,700

74,700

77,700

75,700

Unitholders' capital (Note 3)

(Million yen)

59,656

69,074

69,074

73,516

73,516

Total number of outstanding investment units

(Units)

339,210

395,410

1,581,640

1,662,240

1,662,240

Net assets per unit (Note 4)

(Yen)

181,570

44,797

44,843

45,464

45,377

Total distributions

(Million yen)

1,922

2,271

2,472

2,594

2,375

Distributions per unit

(Yen)

5,668

5,745

1,563

1,561

1,429

Of which, profit distribution per unit

(Yen)

5,668

4,501

1,481

1,561

1,429

Of which, distributions in excess of earnings per unit

(Yen)

-

1,244

82

-

-

Ordinary income to total assets (Note 5)

(%)

1.5

1.6

1.6

1.7

1.5

Net income to net assets (Note 5)

(%)

3.3

3.4

3.5

3.5

3.1

Net assets to total assets at end of period (Note 5)

(%)

46.7

46.5

46.3

46.9

47.4

[Changes from the previous period]

(%)

[1.0]

[(0.3)]

[(0.1)]

[0.6]

[0.4]

Payout ratio (Note 5)

(%)

100.0

78.3

94.7

100.0

99.9

(Note 1) The fiscal period of MIRAI is six months from May 1 to October 31 and from November 1 to April 30 of the following year.

(Note 2) Unless otherwise stated, all figures are rounded down to the nearest million yen, and percentages are rounded to the first decimal place.

(Note 3) Unitholders' capital does not take into account changes in unitholders' capital due to the implementation of distributions in excess of earnings related to the reserve for adjustment of temporary differences, etc.

(Note 4) As a four-for-one unit split was conducted effective May 1, 2019, the net asset value per unit is calculated based on the assumption that the said unit split was conducted at the beginning of the 6th fiscal period.

(Note 5) Calculated based on the following formula.

Ordinary income to total assets

Ordinary income / {(Total assets at beginning of period + Total assets at end of period) / 2} * 100

Net income to net assets

Net income / {(Net assets at beginning of period + Net assets at end of period) / 2} * 100

Net assets to total assets at end of period (%)

Net assets at end of period / Total assets at end of period * 100

Payout ratio

Total distributions (excluding distributions in excess of earnings) / Net income * 100

  1. Summary of Operating Results for the Fiscal Period under Review
    (i) Main History of MIRAI
    MIRAI is diversified J-REIT. Based on the Act on Investment Trusts and Investment Corporations of Japan (Act No. 198 of 1951; including revisions enforced thereafter) (hereinafter "AITIC"), MIRAI was founded on December 4, 2015 with a capital contribution of 150 million yen (750 units), by Mitsui Bussan & IDERA Partners Co., Ltd. (hereinafter the "Asset manager") as the founding planner and was listed on the REIT section of the Tokyo Stock Exchange on December 16, 2016 (securities code: 3476). As October 31, 2020, the total number of outstanding investment units is 1,662,240 and MIRAI owns 33 properties (total acquisition price of 150,911 million yen).
    MIRAI positions assets located in the three major metropolitan areas of Japan with high population concentrations as its main investment targets and aims to obtain mid-to-long term stable cash flows and sustained growth in unitholders' value by building a portfolio centered on its "Core Assets" (Note).

(Note) "Core Assets" mean the assets that constitute the core of MIRAI's portfolio. Specifically, among traditional investment properties such as offices, retail properties, hotels, residential and logistics properties. Occupancy rates of 80% or more must be secured in principle (including cases where such occupancy rates are expected) with MIRAI to determine a stable rental income to be expected.

(ii) Operating Environment and Business Performance

During the fiscal period under review, the Japanese economy was severely affected by the spread of the COVID-19, especially in the hotel and retail facility sectors. In the hotel sector of MIRAI, the occupancy rate dropped significantly in May due to the state of emergency declaration, and has been gradually recovering from summer to autumn, mainly in hotels for business use in regional areas. However, hotels mainly for inbound and tourist use are expected to be affected by the COVID-19. In the retail facility sector, Mi-Nara, a commercial complex in Nara Prefecture, was particularly affected by the suspension of business due to the state of emergency declaration. The office leasing market has also been partially affected by the COVID-19.

In this market, as a result of the disposition of 38% of the quasi-co-ownership in "MIUMIU Kobe" (disposition price: 3,230 million yen) on June 30, 2020, MIRAI has 33 properties under management as of the end of the fiscal period under review, with a total acquisition price of 150,911 million yen, total leasable area of 245,466.94 sqm, and occupancy rate of 96.2%.

5

This is an excerpt of the original content. To continue reading it, access the original document here.

Attachments

  • Original document
  • Permalink

Disclaimer

Mirai Corporation published this content on 22 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 October 2021 06:03:03 UTC.