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Message from the Executive Director

On behalf of HEIWA REAL ESTATE REIT, Inc., and HEIWA REAL ESTATE Asset Management CO., LTD., I would like to express our sincere appreciation to all of our investors for your continued patronage and support.
  It is with great pleasure that I take this opportunity to report briefly on our operating performance and financial results for the 31st Fiscal Period (ended May 31, 2017).
  Backed by the solid sponsorship of HEIWA REAL ESTATE CO., LTD., we achieved steady progress in implementing a number of strategies aimed at securing financing and ensuring internal and external growth during the fiscal period. We also succeeded in reducing costs, particularly those associated with financial procurement, while maintaining a high occupancy rate for the property portfolio. As a result, during the period under review, we posted operating revenues of ¥5,827 million, ordinary income of ¥2,007 million, and net income of ¥2,007 million. We also decided on a distribution per unit of ¥2,017
  During the fiscal period, rising real estate prices and other factors made it more difficult to make new investments for the industry as a whole.
  Nevertheless, we further improved the quality of our portfolio by looking for external growth. We completed the replacement of properties that we have been working on since the previous fiscal period, and acquired two new residential buildings, one each in the cities of Fukuoka and Sendai. To achieve internal growth, we focused on increasing rents at office buildings under management, and succeeded in raising the average rental amount for the fourth consecutive year. The occupancy for office buildings was practically full during the period, with the average occupancy rate reaching 99.5%.
  Meanwhile, rental rates of residential properties under management remained firm; the average occupancy rate steadily changed about 96% to 97% over the fiscal period under review.
  On the financial front, we refinanced loans and obtained new loans for acquiring properties, and in both cases, secured borrowing rates at far lower levels than before. Furthermore, we issued investment corporation bonds at the beginning of the 32nd fiscal period to diversify the way we procure funds and to lengthen the fund period.
  Due to the sudden rise in real estate prices, attaining rapid external growth will be extremely challenging in the current investment climate. Nevertheless, in line with our basic management philosophy, we will work to steadily expand assets under management and secure stable profits over the medium and long terms, with the goal of maximizing value for investors. As we carry out these endeavors, we look forward to your continued encouragement and support.

Masaaki Higashihara
Executive Director
HEIWA REAL ESTATE REIT, Inc.

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