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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 32nd Fiscal Period (ended November 30, 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 cutting 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 ¥5,881 million, ordinary income of ¥2,048 million, and net income of ¥1,904 million. We also decided on a distribution per unit of ¥2,054.
  During the 32nd Fiscal Period, external growth was difficult to achieve due to persistently high real estate prices, among other factors. Nevertheless, we actively replaced properties with a focus on improving the quality of the portfolio. Specifically, we sold off one office building that offered no prospects for improving its low profitability, and acquired the HF TABATA RESIDENCE, a very high-quality property and the first that our sponsor, HEIWA REAL ESTATE CO., LTD., planned and developed with the purpose of transferring it to HEIWA REAL ESTATE REIT. In addition, we entered into portfolio replacement transactions that included the sale of one office building and the acquisition of two residential buildings, including the HF RYOGOKU RESIDENCE, a relatively new building that was planned and developed by our sponsor. Acquisition and transfer dates are scheduled for the 33rd Fiscal Period.
  To achieve internal growth, we focused on increasing rents at office buildings under management, and succeeded in continuing to raise the average rental amount for the fifth consecutive year. The occupancy of office buildings was virtually full during the period, with the average occupancy rate reaching 99.65%. Rental rates of residential properties under management held firm, and the average occupancy rate remained at about 96% during the fiscal period under review.
  On the financial front, HEIWA REAL ESTATE REIT issued investment corporation bonds for the first time since its sponsor changed. The purpose of the issuance was to diversify our methods for procuring funds and lengthen the period of fund procurement. Concurrently, we made progress in substantially reducing fund procurement costs by refinancing loans during the fiscal period.
  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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