We, ORIX JREIT Inc., and our asset management company, ORIX Asset Management Corporation, would like to express our sincere gratitude to our unitholders for their continued loyal patronage and support.
The domestic economic environment in which OJR operates continues to show signs of moderate recovery, with the trend in corporate earnings being one of overall improvement. However, although personal consumption is showing some resilience, the recovery lacks strength and prices remain soft. Under the circumstances, monetary easing policies such as negative interest rates have remained in place, but the risk of an increase in the domestic interest rate is rising as a result of rising interest rates in the US. In addition, there is a continued strong sense of poor visibility with regard to overseas politics and economics, such as the policies of the new administration in the US and their impact on emerging economies, the outcome of national elections in major European countries and the negotiations for the UK to leave the EU, and there is concern regarding their effects on the Japanese economy.
In the domestic real estate market, expected yields for all asset types remain stable at low levels and superior properties are scarce. On the other hand, firm employment conditions have driven strong demand in the rental real estate market, and in central Tokyo and the major regional cities, the vacancy rate is generally falling for offices, while rents are in a moderate rising trend. However, going forward the real estate market is suffering from reduced visibility due to such factors as large-scale supply of high-class offices in central Tokyo.
In this environment, OJR is pushing ahead with various initiatives to enhance our portfolio quality and strengthen financial stability, such as a diversification of growth opportunities and our property replacement strategy. In the 30th fiscal period, we leveraged our acquisition capacity to make agile purchases of two hotels with significant rarity value for a total of 31.6 billion yen, including SUNROUTE PLAZA TOKYO, an official hotel of the Tokyo Disney Resort. Conversely, having considered issues of property competitiveness in the future, we sold one office property and allocated part of the proceeds from the sale to internal reserves to further reinforce our financial stability. In addition, although vacations from existing office properties increased, due to the application of direct PM leasing, the occupancy rate at the end of the 30th fiscal period remained at a high 98.7%. We were able to achieve internal growth by implementing higher rents through both replacement of tenants and rent renewals. As a result of the above, with regard to distributions, we are able to pay out ¥3,252 per unit, an increase of ¥252 over the ¥3,000 that was forecast at the time of the previous financial results announcement.
In March 2017, we implemented a public offering for the 9th consecutive fiscal period, with the aim of lowering our LTV based on total assets, strengthening our financial stability, and increasing our acquisition capacity.
We aim to achieve sustainable growth of unitholder’s value for the medium to long term by continuing to implement the various strategies that anticipate the changes in the environment.
Again, we would like to thank our unitholders, and deeply appreciate your continued understanding and support.