Samty Residential Investment : Summary of Financial Results for Fiscal Period Ended January 2022

(REIT) Summary of Financial Results for Fiscal Period Ended January 2022

March 17, 2022

REIT Securities Issuer:	Samty Residential Investment Corporation	Listing: Tokyo Stock Exchange
("Samty Residential")
Securities Code:	3459	URL:https://www.samty‐residential.com/en/
Representative:	Masafumi Takahashi, Executive Director
Asset Management Company:	Samty Asset Management Co., Ltd.	Inquiries: Hidekazu Nizawa
Representative:	Masafumi Takahashi	Director
Representative Director	Head of Business Management Division
Phone: +81‐3‐5220‐3841

Scheduled date of submission of securities report: Scheduled date of commencement of distribution payout:April 27, 2022

April 22, 2022

Preparation of supplementary financial results briefing materials: YesHolding of financial results briefing session:

Yes (for institutional investors and analysts)

(Amounts are rounded down to the nearest million yen)

1.

Status of Management and Assets for Fiscal Period Ended January 2022 (from August 1, 2021 to January 31, 2022) (1) Management Status

(% figures are the rate of period‐on‐period increase (decrease))

Operating revenue millions of yenOperating income

Ordinary income

Net incomeFiscal period ended

Jan. 2022 Fiscal period ended

4,842 4,176

% 15.9

(4.1)millions of yen 2,309 1,859

% 24.2

(14.3)

Jul. 2021

millions of yen 1,833 1,516

% millions of yen 20.8

(24.5)

1,832 1,515

% 20.9

(24.5)

Net income per unit	Ratio of net income to equity	Ratio of ordinary income to total assets	Ratio of ordinary income to operating revenue
Fiscal period ended Jan. 2022 Fiscal period ended Jul. 2021	yen 2,383 2,371	% 2.7 2.5	% 1.3 1.2	% 37.9 36.3

(2)	Distribution Status
(Note 1)	The entire amount of Total distribution in excess of earnings is refund of capital contribution to unitholders as distribution
reducing unitholders' capital for tax purpose.
(Note 2)	The ratios of decrease in surplus, etc. from implementing distribution in excess of earnings (refund of capital contribution to
unitholders as distribution reducing unitholders' capital for tax purpose) in the fiscal period ended January 2022 and the
fiscal period ended July 2021 are 0.004 and 0.004, respectively.
(Note 3)	Payout ratio is calculated by using the following formula.
Total distribution (excluding distribution in excess of earnings) ÷ Net income × 100
(3)	Financial Position

Distribution per unit (including distribution in excess of earnings)	Distribution per unit (excluding distribution in excess of earnings)	Distribution in excess of earnings per unit	Total distribution (including distribution in excess of earnings)	Total distribution (excluding distribution in excess of earnings)	Total distribution in excess of earnings	Payout ratio	Ratio of distribution to net assets
Fiscal period ended Jan. 2022 Fiscal period ended Jul. 2021	yen 2,764 2,735	yen 2,381 2,371	yen 383 364	millions of yen 2,127 1,748	millions of yen 1,832 1,515	millions of yen 294 232	% 100.0 100.0	% 2.5 2.5

Total assets	Net assets	Equity ratio	Net assets per unit
Fiscal period ended Jan. 2022 Fiscal period ended Jul. 2021	millions of yen 154,849 124,926	millions of yen 75,981 59,918	% 49.1 48.0	yen 98,725 93,724

(4) Status of Cash Flows

Cash flows from operating activities	Cash flows from investing activities	Cash flows from financing activities	Cash and cash equivalents at end of period
Fiscal period ended Jan. 2022 Fiscal period ended Jul. 2021	millions of yen 2,874 4,393	millions of yen (29,785) (2,033)	millions of yen 27,675 (2,129)	millions of yen 5,417 4,652

2.

Forecasts of Management Status for Fiscal Periods Ending July 2022 (from February 1, 2022 to July 31, 2022) and January 2023 (from August 1, 2022 to January 31, 2023)

(% figures are the rate of period‐on‐period increase (decrease))

Distribution

Operating revenue

Operating incomeOrdinary incomeNet incomeper unit (including distribution in excess of earnings)Distribution per unit (excluding distribution in excess of earnings)Distribution in excess of earnings per unit

millions of yen

% millions of yen

% millions of yen

5,383 4,985

Fiscal period ending Jul. 2022

11.2

(7.4)

2,566 2,233

11.1

2,136 1,797

% 16.6

millions of yen

%

(15.9)

2,135 1,796

16.6

yen 3,020 2,665

yen 2,774 2,333

yen 246 332

(Reference) Forecast net income per unit (forecast net income ÷ forecast number of investment units at end of period) Fiscal period ending July 2022: 2,774 yen

Fiscal period ending January 2023: 2,333 yen

* Other

(1) Changes in Accounting Policies, Changes in Accounting Estimates and Retrospective Restatement

• i) Changes in accounting policies accompanying amendments to accounting standards, etc.: Yes

• ii) Changes in accounting policies other than 1): No

• iii) Changes in accounting estimates: No

• iv) Retrospective restatement: No

(2)Total Number of Investment Units Issued and Outstanding

• i) Total number of investment units issued and outstanding (including own investment units) at end of period

  Fiscal period ended January 2022	769,626 units
  Fiscal period ended July 2021	639,300 units

• ii) Number of own investment units at end of period

Fiscal period ended January 2022	0 units
Fiscal period ended July 2021	0 units

(Note)

With regard to the number of investment units, which serves as the basis for calculating net income per unit, please refer to "Per Unit Information" on page 24.

* Summary of Financial Results is not subject to audit procedures by certified public accountants or audit corporations.

* Special note

The management status outlook and other forward‐looking statements contained in this document are based on information currently available to and certain assumptions deemed reasonable by Samty Residential, and actual management status, etc. may differ materially due to various factors. In addition, the forecast is not a guarantee of the amount of distributions.

For details of the assumptions for the above forecast, please refer to "Assumptions Underlying Forecasts of Management Status for Fiscal Period Ending July 2022 and Fiscal Period Ending January 2023" on page 7.

Table of Contents

1. Asset Management Review ............................................................................................................................................................. 2

(1) Management Status .................................................................................................................................................................. 2

(2) Investment Risks ....................................................................................................................................................................... 8

2. Financial Statements ....................................................................................................................................................................... 9

(1) Balance Sheet ........................................................................................................................................................................... 9

(2) Statement of Income and Retained Earnings ......................................................................................................................... 11

(3) Statement of Changes in Unitholders' Equity ......................................................................................................................... 12

(4) Cash Distributions ................................................................................................................................................................... 13

(5) Statement of Cash Flows ........................................................................................................................................................ 14

(6) Notes to the Going Concern Assumption ................................................................................................................................ 15

(7) Notes to Significant Accounting Policies ................................................................................................................................. 15

(8) Notes to Changes in Accounting Policies ................................................................................................................................ 16

(9) Notes to Financial Statements ................................................................................................................................................ 17

(10) Changes in Investment Units Issued and Outstanding .......................................................................................................... 25

3. Reference Information .................................................................................................................................................................. 27

(1) Samty Residential's Asset Structure ........................................................................................................................................ 27

(2) Investment Assets ................................................................................................................................................................... 27

1. Asset Management Review

(1) Management Status

(Summary of the Fiscal Period under Review)

• i) Brief History of Samty Residential

  Samty Residential was established in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended), with Samty Asset Management Co., Ltd. (hereinafter, the "the Asset Management Company") serving as the organizer, and was registered with the Kanto Local Finance Bureau on April 6, 2015 (registration number: Director of Kanto Local Finance Bureau No. 101). Subsequently, on June 30, 2015, Samty Residential was listed on the real estate investment trust market of the Tokyo Stock Exchange, Inc. (securities code: 3459).

  With rental housing (hereinafter referred to as "rental housing" or "residential properties") as the main investment target, Samty Residential has managed its assets by conducting diversified investments in wide‐ranging cities throughout Japan centering on major regional cities (Note), aiming to enhance unitholder value over the medium to long term.

  As of the end of the fiscal period ended January 2022 (hereinafter, the "end of the 13th fiscal period"), Samty Residential owned real estate, etc. consisting of 159 properties in total (total acquisition price: 146,346 million yen), with the total number of investment units issued and outstanding at 769,626 units.

  (Note) "Major regional cities" refers to the eight cities of Sapporo‐shi, Sendai‐shi, Nagoya‐shi, Kyoto‐shi, Osaka‐shi, Kobe‐ shi, Hiroshima‐shi, and Fukuoka‐shi.

• ii) Management Environment

  In the fiscal period ended January 2022 (hereinafter, the "13th fiscal period"), the Japanese economy recorded a real GDP growth rate (first preliminary estimate) for the October ‐ December 2021 period of 1.3% (seasonally adjusted, period‐on‐ period comparison), or 5.4% when annualized, and a private final consumption expenditure growth rate of 2.7% in real terms (seasonally adjusted, period‐on‐period comparison), both achieving a positive growth for the first time in two quarters. As for the employment situation, the job opening‐to‐application ratio in 2021 was 1.13 times on average.

  Looking at the fund procurement environment, outstanding loans for the real estate industry as of the end of December 2021 stood at 91.3 trillion yen, remaining at a high level, according to the quarterly Loans and Bills Discounted by Sector publicized by the Bank of Japan.

  In the real estate transaction market where the low‐interest‐rate environment continues, market participants have a strong willingness to invest, which has kept transaction prices stuck at a high level.

  In the rental housing market, supply of rental housing has been at low levels, while the number of households in the major regional cities in which Samty Residential mainly invests and manages assets has not decreased regardless of declarations of a state of emergency and pre‐emergency measures announced under the impact of the COVID‐19 pandemic. Furthermore, according to the Report on Internal Migration in Japan Derived from the Basic Resident Registration publicized by the Ministry of Internal Affairs and Communications, the 23 wards of Tokyo have seen a net out‐migration in 2021 for the first time since 2014, while major regional cities continued to record net‐migrations.

iii)Management Performance

During the 13th fiscal period, Samty Residential conducted a capital increase through public offering and third‐party allotment on August 2, 2021, and newly borrowed funds on August 3, 2021. Using the funds from these arrangements, Samty Residential acquired 24 properties of real estate, etc. (total acquisition price: 25,565 million yen). Moreover, it additionally acquired three properties of real estate, etc. (total acquisition price: 2,539 million yen) on November 30, 2021. Consequently, the assets owned by Samty Residential as of the end of the 13th fiscal period totaled 159 properties with a total acquisition price of 146,346 million yen. The investment ratio by geographical area was 73.1% for regional cities (47.3% for major regional cities and 25.8% for other regional cities) and 26.9% for the Greater Tokyo area, on an acquisition price basis.

Samty Residential conducts leasing activities in line with the characteristics and demand of respective regions and works to renovate common areas and rooms for lease in an effort to enhance such usability as comfort, convenience and safety. In conducting large‐scale construction work, Samty Residential endeavors to cooperate with the Samty Group (Note 1) to realize cost reduction.

Rent per unit after adjustment (Note 2) has remained strong, even under the environment of the COVID‐19 pandemic, as Samty Residential has cooperated with property management companies and worked on setting rents and receiving key money by taking into account the characteristics and demand of respective regions. The occupancy rate for the 13th fiscal period remained at roughly the same level as in the last year, although impacted by the declarations of a state of emergency and pre‐emergency measures announced by the government. The total rentable area at the end of the 13th fiscal period was 347,140.95 m2, with the occupancy rate standing at 95.9%.

Moreover, Samty Residential believes that making endeavors to promote sustainability in consideration of environmental, social and governance (ESG) issues should contribute to maximizing the interests of customers over the medium to long term. Under this belief, "Sustainability Policy" and "Rules on Sustainability Promotion System" were established at the Asset Management Company in order to promote preparation, including formation of internal systems, for acquiring recognition of the GRESB Real Estate Assessment.

(Note 1)The Samty Group refers to Samty Co., Ltd. (hereinafter, the "main sponsor"), the consolidated subsidiaries of the main sponsor (collectively referring to the consolidated subsidiaries stipulated in Article 2, Paragraph 4 of the Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance of the Ministry of Finance No. 28 of 1976, as amended)), and special purpose companies (other than the consolidated subsidiaries of the main sponsor) for which the main sponsor has funded on its own, but excludes Samty Residential.

The same shall apply hereinafter.

(Note 2)

Rent per unit after adjustment is calculated using the following formula, with the assumed contract period of 4 years.

Rent per unit after adjustment = [monthly rent revenue + (revenues from key money revenue ÷ assumed contract period)] ÷ contracted area

iv) Status of Fund Procurement

(A) Issuance of New Investment Units

In the 13th fiscal period, Samty Residential issued additional investment units (128,207 units) through public offering and third‐party allotment (total amount raised: 15,725 million yen) on August 2, 2021, in order to fund the acquisition of 24 newly acquired properties, etc. It also issued additional investment units (2,119 units) through third‐party allotment (total amount raised: 254 million yen) on August 24, 2021. As a result, the total number of investment units issued and outstanding at the end of the 13th fiscal stood at 769,626 units.

(B) Borrowings and Investment Corporation Bonds

In the 13th fiscal period, Samty Residential took out long‐term borrowings (Term Loans 17‐A, 17‐B, 17‐C and 17‐D) totaling 13,500 million yen from Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd., The Nishi‐Nippon City Bank, Ltd., Aozora Bank, Ltd., The Higo Bank, Ltd., Shinsei Bank, Ltd., Japan Post Bank Co., Ltd., Kansai Mirai Bank, Limited, The Kagoshima Bank, Ltd. and Resona Bank, Ltd. on August 3, 2021, in order to fund the acquisition of the 24 newly acquired properties, etc. Moreover, it took out long‐term loans (Term Loan 18) of 3,850 million yen from Sumitomo Mitsui Banking Corporation, Resona Bank, Ltd., The Juhachi‐Shinwa Bank, Ltd., The Bank of Fukuoka, Ltd., Shinsei Bank, Ltd. and The Kumamoto Bank, Ltd. on January 31, 2022, in order to partly fund the repayment of existing borrowings (Term Loan 7‐B) amounting to 5,350 million yen.

In addition, Samty Residential issued the Second Series Unsecured Investment Bonds as follows in order to lengthen the borrowing periods, fix interest rates and disperse the repayment dates of its interest‐bearing debt as well as to diversify fund procurement methods.

Name:

Second Series Unsecured Investment Bonds of Samty Residential Investment Corporation

(with pari passu conditions among specified investment corporation bonds)Total amount: 1,500 million yen Interest rate: 0.850% per annum Issue date: December 8, 2021 Redemption date: December 8, 2031

Security and guarantee: Unsecured and unguaranteed

As a result, the balance of interest‐bearing debt totaled 76,935 million yen as of the end of the 13th fiscal period, with the ratio of interest‐bearing debt to total assets ("LTV") standing at 49.7%.

As of the date of this document, Samty Residential is granted the following credit rating.

v)

Credit rating agency	Credit rating
Japan Credit Rating Agency, Ltd. (JCR)	Long‐term issuer rating A‐ (positive)

Overview of Performance

As a result of the above, Samty Residential posted operating revenue of 4,842 million yen, operating income of 2,309 million yen, ordinary income of 1,833 million yen and net income of 1,832 million yen for the 13th fiscal period.

With regard to the distribution for the 13th fiscal period, pursuant to the distribution policy stipulated in its Articles of Incorporation, Samty Residential decided to distribute the entire amount of unappropriated retained earnings, excluding fractions of distribution per investment unit of less than 1 yen, in application of the special provision on taxation of investment corporations (Article 67‐15 of the Act on Special Measures Concerning Taxation). As a result, distribution per unit came to 2,381 yen.

In addition, as part of its cash management, Samty Residential also decided to make a cash distribution in excess of earnings (hereinafter, "distribution in excess of earnings) for the 13th fiscal period, as it did for preceding fiscal periods. Based on this decision, Samty Residential determined to distribute 294,766,758 yen, which is the amount almost equivalent to 30.7/100 of 960 million yen in depreciation for the 13th fiscal period, as refund of capital contribution to unitholders. As a result, distribution in excess of earnings per unit came to 383 yen. The payout ratio (the ratio of total distribution, including distribution in excess of earnings, to net income and depreciation combined) stood at 76.2%.

(Note 1)Samty Residential shall conduct distributions in excess of earnings as part of its cash management only when the total amount of "continuous appraisal value" (referring to the appraisal value stated in the appraisal report obtained for real estate assets owned by Samty Residential, with the end of each fiscal period as the appraisal date, or the survey value (period‐end estimated value) stated in the price survey report for such; the same shall apply hereinafter) of real estate owned as of the end of the relevant calculation period (referring to Samty Residential's calculation period for which distributions of cash flows and distributions in excess of earnings are conducted by Samty Residential) exceeds the amount obtained by adding the total reserves for the planned construction cost (capital expenditures) of repairs and replacements to be conducted in the following calculation period and other planned reserves to the total amount of "book value after adjustment" (referring to the value obtained by deducting the amount equivalent to accompanying expenses upon acquiring the owned real estate from the book value of each real estate owned as of the end of the calculation period of

Samty Residential; the same shall apply hereinafter) of real estate owned as of the end of the relevant calculation period.

At the end of the 13th fiscal period, the total amount of the continuous appraisal value was 160,168,000,000 yen, while the total amount of the book value after adjustment was 141,037,587,613 yen and the total reserve for the planned construction cost of repairs and replacements to be conducted in the following calculation period was 379,301,205 yen. Accordingly, the total amount of the continuous appraisal value at the end of the 13th fiscal period (160,168,000,000 yen) exceeds the total amount of the book value after adjustment (141,037,587,613 yen) and the total reserve for the planned construction cost of repairs and replacements to be conducted in the 14th fiscal period (379,301,205 yen) combined.