Starts Proceed Investment : REIT Financial Report for 32nd Fiscal Period

REIT Financial Report for 32nd Fiscal Period

			December 15, 2021
REIT Securities Issuer:	Starts Proceed Investment Corporation	Listing: Tokyo Stock Exchange
Securities Code:	8979	URL:https://www.sp-inv.co.jp
Representative:	Kazuya Hiraide, Executive Director
Asset Management Company:	Starts Asset Management Co., Ltd.
Representative:	Kazuya Hiraide, President
Contact:	Hideki Hamaguchi,
	General Manager of Financial Control and Administration Division
	TEL: [phone] (main)
Scheduled date of submission of securities report:	January 27, 2022
Scheduled date of commencement of distribution payout:	January 17, 2022
Preparation of supplementary explanatory materials on financial results:	Yes	/ No
Holding of briefing session on financial results:	Yes	/ No
		(for analysts and institutional investors)

[Amounts are rounded down to the nearest million yen]

1. Status of Management and Assets in 32nd Fiscal Period

Starts Proceed Investment Corporation's 32nd fiscal period is the period from May 1, 2021, to October 31, 2021.

(1) Management Status			[% figures represent the increase (decrease) compared with the previous period]
Fiscal	Operating revenue		Operating income	Ordinary income		Net income
period
	million yen	%		million yen	%	million yen	%	million	%
				yen
32nd	3,177	0.5		1,370	0.6	1,159		(0.3)		1,157	(2.1)
31st	3,160	(5.7)		1,362	(13.9)	1,163		(16.6)		1,183	(15.0)
				Ratio of	Ratio of				Ratio of
Fiscal	Net income		net income to	ordinary income to
	ordinary income to
period	per unit			equity	total assets
			operating revenue
				[Return on equity]	[Return on assets]
		yen				%			%				%
32nd		4,562				2.7			1.3				36.5
31st		4,662				2.7			1.3				36.8
(2) Distributions Status
	Distribution		Total		Distribution	Total						Ratio of
Fiscal			in excess of	distributions		Distribution
per unit	distributions				distributions to
period		earnings	in excess of		payout ratio
[excluding distribution	[excluding distributions					net assets
	in excess of earnings]	in excess of earnings]		per unit	earnings
	yen		million yen		yen	million yen			%		%
32nd	4,563		1,157		-	-			100.0			2.7
31st	4,663		1,183		-	-			100.0			2.7

Note: Distribution payout ratio is rounded down to one decimal place.

(3) Financial Position

Fiscal	Total assets	Net assets	Equity ratio	Net assets per unit
period
	million yen	million yen	%	yen
32nd	90,258	43,341	48.0	170,785
31st	90,191	43,366	48.1	170,886
(4) Status of Cash Flows
Fiscal	Net cash	Net cash	Net cash	Cash and
provided by (used in)	provided by (used in)	provided by (used in)	cash equivalents
period
operating activities	investing activities	financing activities	at end of period
	million yen	million yen	million yen	million yen
32nd	2,145	(732)	(1,182)	3,539
31st	2,533	(1,256)	(1,401)	3,309

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2. Forecast for Management Status in 33rd Fiscal Period and 34th Fiscal Period

Starts Proceed Investment Corporation's 33rd fiscal period is the period from November 1, 2021, to April 30, 2022. Starts Proceed Investment Corporation's 34th fiscal period is the period from May 1, 2022, to October 31, 2022.

[% figures represent the increase (decrease) compared with the previous period]

Fiscal	Operating revenue	Operating income	Ordinary income	Net income
period
	million yen	%	million yen	%	million yen	%	million yen	%
33rd	3,133	(1.4)	1,369	(0.1)	1,149	(0.9)	1,147	(0.9)
34th	3,121	(0.4)	1,369	0.0	1,149	0.0	1,147	0.0

Fiscal	Distribution per unit	Distribution in excess of earnings per unit
period	[excluding distribution in excess of earnings]
		yen		yen
33rd		4,520		-
34th		4,520		-
[Reference] Forecast net income per unit	33rd fiscal period: 4,520 yen	34th fiscal period: 4,520 yen

3. Other

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

(a) Changes in accounting policies accompanying amendments to accounting standards, etc.: Yes

(b) Changes in accounting policies other than in (a):	None
(c) Changes in accounting estimates:	None
(d) Retrospective restatement:	None

1. Total Number of Investment Units Issued and Outstanding

1. Total number of investment units (including own investment units) issued and outstanding at end of period

32nd fiscal period:	253,777 units	31st fiscal period:	253,777 units
(b) Number of own investment units at end of period
32nd fiscal period:	-	31st fiscal period:	-

• Financial reports are not subject to audit by a certified public accountant or an audit company.
• Special notations

The outlook for management status and other forward-looking statements contained in this report are based on information currently available to and certain assumptions deemed reasonable by Starts Proceed Investment Corporation ("SPI"). Accordingly, actual management status and other results may differ materially due to a variety of factors. In addition, the forecast is not a guarantee of the amount of distributions.

For the assumptions underlying the forecast for management status, please refer to "Assumptions Underlying Forecast for Management Status in 33rd Fiscal Period and 34th Fiscal Period" presented on pages 10 to 11.

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Starts Proceed Investment Corporation (8979) Financial Report for 32nd Fiscal Period

Table of Contents
1. Management Status .....................................................................................................................................	4
A. Management Status....................................................................................................................................................	4
(1)	Overview of Fiscal Period under Review ....................................................................................................................	4
(2)	Outlook for Next Fiscal Period ....................................................................................................................................	6
B. Investment Risks ......................................................................................................................................................	11
2. Financial Statements ..................................................................................................................................	12
(1)	Balance Sheets.........................................................................................................................................................	12
(2)	Statements of Income...............................................................................................................................................	14
(3)	Statements of Changes in Unitholders' Equity..........................................................................................................	15
(4)	Statements of Cash Distributions..............................................................................................................................	17
(5)	Statements of Cash Flows ........................................................................................................................................	18

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Starts Proceed Investment Corporation (8979) Financial Report for 32nd Fiscal Period

1. Management Status

A. Management Status

1. Overview of Fiscal Period under Review

1. Brief Background of the Investment Corporation
   SPI was established on May 2, 2005, with 150 million yen in capital (750 units) based on the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951; including amendments thereto) (the "Investment Trust Act"), completed registration with the Kanto Local Finance Bureau based on Article 187 of the Investment Trust Act on June 15, 2005 (Registration No. 37 issued by the Director- General of the Kanto Local Finance Bureau), implemented additional issuance of investment units through public offering (21,600 units) on November 29, 2005, and listed on Jasdaq Securities Exchange, Inc. (currently Tokyo Stock Exchange, Inc. JASDAQ Market) (Securities Code: 8979) the next day. After three capital increases through public offering and other developments since listing on the JASDAQ Market, SPI listed on the Tokyo Stock Exchange, Inc. Real Estate Investment Trust Securities Market (Securities Code: 8979) on July 27, 2010, and this was accompanied by an application for delisting being filed with the JASDAQ Market on August 10, 2010, and the delisting from the JASDAQ Market taking effect on October 1, 2010.
   SPI entrusts asset management to Starts Asset Management Co., Ltd. (the "Asset Management Company") and sets the focus of management on investment in real estate of which the principal use is use as rental housing ("rental housing") as well as specified assets (the meaning provided in Article 2, Paragraph 1 of the Investment Trust Act; the same hereinafter) backed mainly by rental housing. In addition, SPI also invests in monthly rental apartments, serviced apartments, hotels, residential facilities for the elderly (collectively referred to as "rental housing, etc." together with "rental housing"), which are related to rental housing, and real estate from which income can be expected due to other leasing revenue or specified assets backed by such real estate. In investment in rental housing, etc., SPI adopts the basic policy of particularly setting rental housing for average-income households, the demand for which SPI believes to be the most stable, as the primary investment target. In addition, SPI takes measures, such as leveraging the capabilities of the Starts Group, to achieve enhancement of management efficiency, with an aim to secure steady growth and stable revenue of assets under management over the medium to long term.
   As of the end of the fiscal period under review (32nd fiscal period: from May 1, 2021, to October 31, 2021), the total number of investment units issued and outstanding is 253,777 units, total assets amount to 90,258 million yen, and unitholders' capital (net amount) amounts to 41,684 million yen.
2. Investment Environment
   In the 32nd fiscal period, the Japanese economy continued to experience a harsh situation with the decrease in individual consumption as well as sluggish exports and capital investments due to the impact of the re-spread of COVID-19 and the declaration of state of emergency caused by it, but the number of COVID-19 cases decreased and the state of emergency was lifted in September, and a recovery trend was seen with the resumption of economic activities. However, being a REIT specializing in housing, SPI does not foresee concerns regarding the impact of the COVID-19 pandemic on its operations in the short term given the extremely limited impact of decrease in revenue from rent and such found at this point in time.
   Under such circumstances, demand trends in the market for rental housing in which SPI invests have continued to be stable in the Tokyo metropolitan area, Osaka, Nagoya, Fukuoka, Sendai, and other major metropolitan areas, and rental apartments owned by listed REITs specializing in housing have also maintained high occupancy rates.
   In the secondary real estate market, while a robust investment appetite continued to be seen among listed REITs, private REITs and other investors in Japan and abroad amid the ongoing favorable fund procurement environment, competition in property acquisition has remained intense with limited supply of quality properties, leaving transaction prices at a high level.
3. Management Performance
   In the 32nd fiscal period, SPI conducted asset replacement through disposition of (C-40) Proceed Motoyawata (disposition price: 336 million yen) on July 1, 2021, and acquisition of (C-86) Proceed Shinkawa (acquisition price: 500 million yen) on July 2, 2021, to avoid increase in costs for major repairs, etc. seen as necessary as properties age in addition to risk of a future drop in prices due to a decline in competitiveness, etc. caused by aging facilities.
   As a result, SPI's portfolio as of the end of the 32nd fiscal period consists of 106 properties with acquisition prices totaling 88,461 million yen and a total leasable floor area of 192,143.94 m2.

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Starts Proceed Investment Corporation (8979) Financial Report for 32nd Fiscal Period

In close collaboration with the property management company Starts Amenity Co., Ltd., the Asset Management Company made efforts to reduce building maintenance and management costs while striving to improve the rent levels and increase the receipt of key money and other revenue. In addition, with finely tuned leasing conditions set based on understanding of regional characteristics and advantages of individual properties as well as thorough comparative analyses of nearby competitive properties, leasing activities in coordination with leasing agents were promoted. Furthermore, ongoing efforts were made to put vacant space into service quickly with an aim of maintaining the high occupancy rate. These measures worked to maintain the occupancy rate of the entire portfolio at a stable level of over 95.0%, the target level, throughout the period and resulted in a period-average occupancy rate of 95.8% and period-end occupancy rate of 96.4%.

As the most recent ESG initiative, SPI acquired the Building-HousingEnergy-Efficiency Labeling System (BELS) Certification for two properties ((C-83) Proceed Monzennakacho and (C-84) Proceed Maihama) in June 2021. In addition, SPI established the "Green Finance Framework" with an aim to strengthen the funding platform by expanding the investor base interested in ESG investment and lending, along with promoting sustainability initiatives, by procuring funds through green financing. SPI has been assigned "Green 1 (F)", the highest evaluation grade in the "JCR Green Finance Framework Evaluation", by Japan Credit Rating Agency, Ltd. (JCR) as the third-party evaluation of the said framework.

1. Status of Fund Procurement
   In the 32nd fiscal period, SPI borrowed a long-term loan of 2,159 million yen (term: 2 years) and a long-
   term loan of 2,161 million yen (term: 3 years) to repay a long-term loan of 4,320 million yen due for repayment on May 24, 2021.
   As a result, as of the end of the 32nd fiscal period, the current portion of long-term loans payable is 10,093 million yen, long-term loans payable is 33,552 million yen and investment corporation bonds is 2,000 million yen. The period-end balance for interest-bearing liabilities is 45,646 million yen and the period-end LTV ratio is 50.6%.

As of the date of this document, SPI has acquired the following credit ratings.

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

1. Overview of Business Performance and Distributions
   As a result of the management described above, business performance recorded for the 32nd fiscal period was operating revenue of 3,177 million yen, operating income of 1,370 million yen, ordinary income of 1,159 million yen and net income of 1,157 million yen.
   Concerning distributions, to ensure that the maximum amount of distributions of earnings is included in deductible expenses based on application of Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957; including amendments thereto) (the "Special Taxation Measures Act"), SPI distributes the entire amount of unappropriated retained earnings, excluding fractions of distribution per investment unit of less than 1 yen. Accordingly, SPI declared a distribution per investment unit of 4,563 yen.

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