Mitsui Fudosan Logistics Park : Summary of Financial Results for the Fiscal Period Ended January 31, 2022 (REIT)

Summary of Financial Results for the Fiscal Period Ended January 31, 2022 (REIT)

			March 15, 2022
REIT Securities Issuer	Mitsui Fudosan Logistics Park Inc.	Stock Exchange Listing	Tokyo Stock Exchange
Securities Code	3471	Website	https://www.mflp-r.co.jp/en/
Representative	Hiroshi Asai, Executive Director
Asset Management Company	Mitsui Fudosan Logistics REIT Management Co., Ltd.
Representative	Yukio Yoshida, President and Chief Executive Officer
Inquiries	Tatsu Makino, Director & General Manager of Finance Division
	Tel. [phone]

Scheduled date of submission of securities report:	April 26, 2022
Scheduled date of commencement of distribution payout:	April 22, 2022
Supplementary materials for financial results:	Yes
Holding investor presentation for financial results:	Yes (for analysts and institutional investors)
	(Amounts less than ¥1 million have been rounded down)

1. Financial Results for the Fiscal Period Ended January 31, 2022 (August 1, 2021 to January 31, 2022)

1. Results of Operations

(% figures denote rate of period-on-period change)

	Operating revenues	Operating income	Ordinary income	Net income
	Millions of yen	%	Millions of yen	%	Millions of yen		%	Millions of yen		%
Fiscal period ended	9,502	2.5	3,971	0.9	3,742		0.9	3,741		0.9
January 31, 2022
Fiscal period ended	9,267	13.9	3,935	3.9	3,708		3.6	3,708		3.6
July 31, 2021
	Net income per unit	Return on unitholders' equity	Ratio of ordinary income to	Ratio of ordinary income to
	total assets		operating revenues
		Yen		%			%			%
Fiscal period ended		6,902		2.0			1.3			39.4
January 31, 2022
Fiscal period ended		6,841		2.0			1.3			40.0
July 31, 2021

(2) Distributions

	Distributions per	Total amount of			Distributions per	Total amount of
	distributions		Total amount of	distributions
	unit (excluding	(excluding	Distributions in	distributions in	unit (including	(including		Ratio of
	distributions in	distributions in	excess of	excess of	distributions in	distributions in	Payout	distributions
	excess of	excess of	retained	retained	excess of	excess of	ratio	to net assets
	retained	earnings per unit	retained
	retained	earnings	retained
	earnings)		earnings)
	earnings)			earnings)
	Yen	Millions of yen	Yen	Millions of yen	Yen	Millions of yen	%	%
Fiscal period ended	6,902	3,740	993	538	7,895	4,279	100.0	2.0
January 31, 2022
Fiscal period ended	6,842	3,708	974	527	7,816	4,236	100.0	2.0
July 31, 2021

Notes:

1. The total amount of distributions in excess of retained earnings for the fiscal period ended January 31, 2022 and the fiscal period ended July 31, 2021 is entirely return of capital applicable to distribution reducing unitholders' capital for tax purposes.
2. The ratio of decreasing surplus attributable to distributions in excess of retained earnings (return of capital applicable to distribution reducing unitholders' capital for tax purposes) for the fiscal period ended January 31, 2022 and the fiscal period ended July 31, 2021 is 0.003 for each. This calculation is based on Article 23, Paragraph 1, Item 4 of the Order for Enforcement of the Corporation Tax Act.

(3) Financial Position

	Total assets	Net assets	Ratio of unitholders' equity to	Net assets per unit
	total assets
	Millions of yen	Millions of yen	%	Yen
Fiscal period ended	294,411	187,013	63.5	345,043
January 31, 2022
Fiscal period ended	296,103	187,508	63.3	345,956
July 31, 2021

(4) Cash Flows

	Cash flows from operating	Cash flows from investing	Cash flows from financing	Cash and cash equivalents
	activities	activities	activities
	Millions of yen	Millions of yen	Millions of yen	Millions of yen
Fiscal period ended	7,684	(560)	(6,238)	7,515
January 31, 2022
Fiscal period ended	8,330	(15,351)	7,108	6,629
July 31, 2021

2. Forecast for the Fiscal Period Ending July 31, 2022 (February 1, 2022 to July 31, 2022) and the Fiscal Period Ending January 31, 2023 (August 1, 2022 to January 31, 2023)

(% figures denote rate of period-on-period change)

										Distributions		Distributions
										per unit	Distributions	per unit
	Operating revenues	Operating income	Ordinary income	Net income		(excluding	in excess of	(including
		distributions	retained	distributions
										in excess of	earnings per	in excess of
										retained	unit	retained
										earnings)		earnings)
	Millions of	%	Millions of	%	Millions of	%	Millions of		%	Yen	Yen	Yen
	yen		yen		yen		yen
Fiscal period ending	10,410	9.6	4,296	8.2	4,001	6.9	4,000		6.9	6,945	1,407	8,352
July 31, 2022
Fiscal period ending	10,763	3.4	4,490	4.5	4,205	5.1	4,204		5.1	7,300	1,096	8,396
January 31, 2023

(Reference) Expected net income per unit (Expected net income/Expected number of investment units at the end of the fiscal period)

For the fiscal period ending July 31, 2022: ¥6,945

For the fiscal period ending January 31, 2023: ¥7,300

• Other
• 1. Changes in accounting policies, changes in accounting estimates, or retrospective restatements

(i)	Changes in accounting policies due to revisions to accounting standards, etc.:	Yes
(ii) Changes in accounting policies other than (i) above:	None
(iii) Changes in accounting estimates:	None
(iv)	Retrospective restatements:	None

1. Total number of investment units issued and outstanding
2. 1. Total number of investment units issued and outstanding at the end of the fiscal period (including treasury units)

Fiscal period ended January 31, 2022	542,000	units	Fiscal period ended July 31, 2021	542,000	units
(ii) Number of treasury units at the end of the fiscal period
Fiscal period ended January 31, 2022	0	units	Fiscal period ended July 31, 2021	0	units

Note:

Please refer to "Notes to Per Unit Information" on page 21 for the number of investment units used as the basis for calculating net income per unit.

• Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation.
• Special notes
  Forecasts of financial results and other forward-looking statements contained in this material are based on information currently available to and certain assumptions deemed reasonable by Mitsui Fudosan Logistics Park Inc. ("MFLP-REIT"). Actual operating performance, etc. may differ significantly from these forecasts due to a variety of factors. Furthermore, these forecasts do not guarantee the above distribution amounts.
  For details of assumptions for the above forecast figures, please refer to "Forecast Assumptions for the Fiscal Period Ending July 31, 2022 (February 1, 2022 to July 31, 2022) and the Fiscal Period Ending January 31, 2023 (August 1, 2022 to January 31, 2023)" described on page 7.

Table of contents

1.	Results of Operations ...................................................................................................................................	2
	(1)	Results of Operations .............................................................................................................................	2
		(Summary of results for the reporting period) .......................................................................................	2
		(Outlook for the fiscal period ending July 31, 2022) .............................................................................	3
2.	Financial Statements ....................................................................................................................................	9
	(1)	Balance Sheets .......................................................................................................................................	9
	(2)	Statements of Income ...........................................................................................................................	11
	(3)	Statements of Changes in Net Assets ...................................................................................................	12
	(4)	Statements of Cash Distributions .........................................................................................................	13
	(5)	Statements of Cash Flows ....................................................................................................................	14
	(6)	Notes to 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 Total Number of Investment Units Issued and Outstanding..............................................	24
3.	Reference Information ...............................................................................................................................	26
	(1)	Status of Investment .............................................................................................................................	26
	(2)	Investment Assets.................................................................................................................................	26
		i)	Major investment securities.........................................................................................................	26
		ii)	Investment properties ..................................................................................................................	26
		iii) Other major investment assets .....................................................................................................	27
			(A)	Summary of the assets held.................................................................................................	27
			(B)	Summary of lease................................................................................................................	30
			(C) Capital expenditures of real estate held...............................................................................	36
			(D) Status of individual asset earnings ......................................................................................	38

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1. Results of Operations

1. Results of Operations
2. 1. 
      (Summary of results for the reporting period)
   2. Brief history of the investment corporation
      Mitsui Fudosan Logistics Park Inc. ("MFLP-REIT"), a Japanese real estate investment corporation, was established on March 4, 2016 under the Act on Investment Trusts and Investment Corporations of Japan (Act No. 198 of 1951, including subsequent amendments; the "Investment Trust Act"), by Mitsui Fudosan Logistics REIT Management Co., Ltd. (the "Asset Management Company") as the organizer, and listed on the Real Estate Investment Trust Securities Market (J-REIT section) of Tokyo Stock Exchange, Inc. ("Tokyo Stock Exchange") on August 2, 2016 (Securities Code: 3471). MFLP-REIT held assets totaling 21 properties amounting to a total acquisition price of ¥297.6 billion as at the end of the fiscal period under review.
   3. Investment environment and management performance
      In Japan, the economic recovery is becoming clear as the effects of the novel coronavirus disease (COVID-19) inside and outside Japan gradually attenuate. Capital investment has been showing a trend of improvement except for weakness seen in certain industries. However, the employment and income environments remain weak overall. Private consumption is showing a clearer recovery with the easing of downward pressure due to COVID-19, mainly in the area of service consumption. In the logistics market, with the 3PL business (Note) specializing in outsourced logistics services expanding in market size and the needs of 3PL providers for rental of multifunctional and highly-convenient logistics facilities on the rise, while it cannot be denied that the spread of COVID-19 may have a negative effect on the future logistics market, the demand for leading-edge logistics facilities is expected to continue to increase.
      Under such circumstances, upholding a basic policy of pursuing maximization of unitholder value by achieving sustainable growth through formation of a strategic partnership in the logistics facilities business with Mitsui Fudosan Co., Ltd. ("Mitsui Fudosan"), MFLP-REIT has conducted steady management of the 21 properties held as at the end of the fiscal period under review (total acquisition price of ¥297.6 billion) to maintain an excellent occupancy rate of 100.0% for the entire portfolio as at the end of the fiscal period under review.

MFLP-REIT is promoting initiatives for ESG. In the fiscal period under review, the Asset Management Company announced its endorsement of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Note:

"3PL business" refers to the third-party logistics business (business of providing logistics services to client companies outsourcing part or all of their supply chain management functions).

iii)	Overview of financing
	In the fiscal period under review, MFLP-REIT executed debt financing of ¥3,000 million (short-term loans payable) in
	October 2021 to pay out distributions, and executed repayments of a total of ¥5,000 million (short-term loans payable) using
	funds from part of short-term loans payable procured in the fiscal period under review and internal reserve arising from
	depreciation, etc. As a result, at the end of the fiscal period under review, the balance of interest-bearing debt was ¥97,400
	million (current portion of long-term loans payable of ¥5,300 million; investment corporation bonds of ¥3,000 million; long-
	term loans payable of ¥89,100 million) and the ratio of interest-bearing debt to total assets (LTV ratio) was 33.1%.
	The following is the rating obtained by MFLP-REIT as at the end of the fiscal period under review.
	Credit rating agency	Rating details		Outlook
	Japan Credit Rating Agency, Ltd. (JCR)	Long-term issuer rating: AA		Stable
iv)	Summary of business performance and distributions
	Through the management described above, business performance for the fiscal period under review resulted in operating
	revenues of ¥9,502 million, operating income of ¥3,971 million, ordinary income of ¥3,742 million, and net income of
	¥3,741 million.

In accordance with the distribution policy as defined in the Articles of Incorporation of MFLP-REIT, distributions for the fiscal period under review shall be subject to application of special provisions for taxation of investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation). Based on this, MFLP-REIT declared the distribution of ¥3,740,884,000, which is the integral multiple of the total number of investment units issued and outstanding (542,000 units) of unappropriated retained earnings. Accordingly, MFLP-REIT declared distribution of earnings per unit of ¥6,902.

In addition, in accordance with the distribution policy as defined in the Articles of Incorporation, MFLP-REIT shall execute distributions of cash in excess of retained earnings each fiscal period on a continuous basis in principle (Note 1). Based on this, MFLP-REIT declared the distribution of ¥538 million, which is the amount almost equivalent to the remaining amount after subtracting the distribution of earnings of ¥3,740 million from ¥4,279 million or 70% of FFO (Note 2), as return of capital applicable to distribution reducing unitholders' capital for tax purposes. Accordingly, MFLP-REIT declared distribution in excess of retained earnings per unit of ¥993.

Notes:

1. In addition to the continuous distributions in excess of retained earnings, in cases where the distribution amount for distribution per unit is expected to temporarily decline by a certain degree due to such factors as the procurement of funds through the issuance of new investment units,

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etc., a temporary distribution in excess of retained earnings may be executed by MFLP-REIT in order to standardize the amount of the distribution per unit.

However, from the perspective of continuing to maintain owned assets for a long period of time, in cases where the above distribution of cash is executed, and where the amount equal to the equivalent of depreciation and amortization for the applicable operating period minus the amount of the distribution in excess of retained earnings for the applicable operating period falls below the standard amount of capital for building maintenance (Note 3), the distribution in excess of retained earnings will be decreased by a maximum amount that the distribution amount does not fall below the total equivalent of the distribution of earnings, and this may lead to cases where distribution in excess of retained earnings will not be executed.

In addition, from the perspective of continuing stable financial management, distributions in excess of retained earnings will not be executed in cases where the appraisal LTV ratio (Note 4) exceeds 60% in the event that the above distribution of cash is executed.

1. "FFO" is an acronym for funds from operations and refers to the figure calculated by adding depreciation and amortization of rental properties for the applicable operating period and loss on retirement of non-current assets to net income (excluding gain (loss) on sales of real estate properties, etc.).
2. "Standard amount of capital for building maintenance" refers to the amount that results by multiplying the six-month-equivalent amount of the 12-year-average amount of the amount equivalent to the capital expenditure amount noted in the Building Condition Evaluation Report by two.
3. Appraisal LTV ratio (%) = A/B × 100 (%)
   A = Total interest-bearing debt on the applicable accounts settlement date
   B = Total assets on the balance sheet on the applicable accounts settlement date - Amount of book value after depreciation of owned real estate on the applicable accounts settlement date + Appraisal value of owned real estate on the applicable accounts settlement date

(Outlook for the fiscal period ending July 31, 2022)

1. Future management policy and issues to be addressed
   MFLP-REIT has established a strategic and collaborative partnership in the logistics facilities business with Mitsui Fudosan, under which it seeks to maximize unitholder value by focusing investments primarily in logistics facilities as a basic policy. Based on this policy, in addition to expansion of asset size for the purpose of further stabilizing the revenues base continuing into future periods, MFLP-REIT will perform stable and efficient financial management by addressing changes in the external and internal environment to maximize unitholder value.
2. 1. External growth strategy
      "External growth based on the growth potential and extensive pipeline of Mitsui Fudosan's logistics facilities business"
      MFLP-REIT aims for continuous growth by focusing investments on MFLP facilities (leading-edge logistics facilities with Mitsui Fudosan quality (Note 1)), utilizing the right of first look and preferential negotiation based on "Right of first look and preferential negotiation agreement" that was concluded with Mitsui Fudosan, which boasts high growth in the logistics facilities business, and the Asset Management Company.

Notes:

1. 1. Based on the principles of "harmonious coexistence" and "linking diverse values" set by the Mitsui Fudosan Group (Note 2), Mitsui Fudosan's logistics facilities business keeps up efforts aimed at not only providing logistics facilities space but also creating value beyond conventional boundaries. In order to achieve this, MFLP-REIT incorporates the highly-specialized and advanced management, operational know-how, etc. accumulated in the office building business, retail properties business, etc. and the know-how, etc. accumulated through urban development as a comprehensive real estate company. It also captures the diverse needs that change with the times of the various stakeholders associated with logistics facilities (tenants, people working at the logistics facilities, and local community). MFLP-REIT refers to the quality of logistics facilities realized through these efforts by the name "Mitsui Fudosan quality."
   2. "Mitsui Fudosan Group" refers to a corporate group comprising Mitsui Fudosan, and Mitsui Fudosan's consolidated subsidiaries and Mitsui Fudosan's associates accounted for using the equity method. The same shall apply hereinafter.
2. Internal growth strategy
   "Stable management utilizing the Platform (business foundation) and client network of the Mitsui Fudosan Group"
   MFLP-REIT aims for stable management by utilizing the Platform (business foundation) and client network that the Mitsui Fudosan Group has developed over years as a comprehensive real estate company.
3. Financial strategy
   "Financial and cash management with an emphasis on stability and efficiency"
   MFLP-REIT will manage its finances stably, including funds raised through the issuance of new investment units and borrowings, and at the same time it will aim to secure both stable distribution levels and efficient cash management for distributions through continuous distributions in excess of retained earnings (return of capital) based on cash flow (FFO).

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