Stability of Cash Distributions

Cash Distributions with a Small Band of Fluctuation from Past Average and Peak Values

Generally, J-REITs are characterized by the fact that they distribute almost 100% of the profits obtained from the rent revenues of owned real estate, etc. in order to satisfy the conduit requirements (Note). In this regard, office properties are prone to be affected by the business cycle and market conditions, showing a tendency in which rents and occupancy rates increase in booming periods and decrease in recession periods, causing distribution per unit to fluctuate accordingly.
The feature that JPR’s distribution per unit has a small band of fluctuation is presumably due to the following factors.

  • JPR owns many, highly-competitive blue-chip properties.
  • Urban retail properties bolster the stability of earnings.
  • Tenants are highly diversified, with large tenants of office properties occupying a small percentage.
  • JPR made investments to newly acquire properties in the recession periods, with an aim to enhance the revenue base.

Going forward, JPR will continue its endeavors to achieve steady growth of distribution per unit.

(Note) Conduit requirements represent the requirements for corporations to be exempt from taxation. For J-REITs, the requirements include that they must distribute at least 90% of the distributable income to their investors and that the unitholding ratio of their largest unitholder is 50% or lower.

Changes in Cash Distributions

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*Factors of the decrease in cash distributions for the 15th fiscal period ended June 2009
For the 15th fiscal period, JPR recorded the cancellation penalty (1.9 billion yen) for a regional retail property it planned to acquire as extraordinary loss. This caused distribution per unit to decrease by 3,040 yen. For details of the cancellation, please refer to the press release “Notice Concerning Cancellation of Property Acquisition “KM Fukugo Building”” dated February 17, 2009.

COLUMN

Unitholders composition with a high ratio of financial institutions

Looking at the unitholding ratios by unitholder attribute, investment trusts and such financial institutions as trust banks and regional banks, etc. account for a high proportion, occupying more than half of the whole. Presumably, the reason behind this is that financial institutions find it easier to invest in JPR due to such facts as the relative stability of its distribution per unit, the size of its market capitalization standing at a certain level and high credit ratings of an AA rank it has been granted (AA- by R&I).