Star Asia Investment Corporation
http://starasia-reit.com/en/
Semi-Annual Report
for the 11th Fiscal Period
from February 1, 2021 to July 31, 2021
Star Asia Investment Corporation (Securities CODE 3468)
Atago Greem Hills MORI Tower, 18th Floor 2-5-1 Atago, Minato - ku, Tokyo, Japan
Investment
Philosophy
Basic Principles
Star Asia Investment Corporation (SAR) makes investments through a "unitholders' interest-first" mindset in principle, entrusting asset management to Star Asia Investment Management Co., Ltd., which belongs to Star Asia, an independent real estate investment group that has accumulated a track record in the Japanese real estate market.
SAR aims to maximize unitholders' interests by conducting flexible and agile portfolio management based on its unique market analyses while focusing on income stability and growth of income, and implementing highly transparent management that discloses information necessary for unitholders in a timely and appropriate manner.
Contents
To Our Unitholders | 2 | |
Portfolio Overview | 6 | |
Financial Summary | 8 | |
Balance Sheet | 10 | |
Statement of Income and Retained Earnings | 12 | STABILITY |
Statement of Changes in Unitholders' Equity | 13 | |
Statement of Cash Distributions | 14 | |
Statement of Cash Flows | 15 | |
Notes to Financial Statements | 16 | |
Supplementary Schedules | 36 | |
Independent Auditor's Report | 43 |
FUND MANAGEMENT
Characteristics of Star Asia Investment Corporation (SAR)
1. A diversified REIT
Portfolio developed with diversified assets located mainly in the Tokyo Area (Note 1)
FOR INVESTORS
2. Steady growth
Pursuit of internal growth by the Asset Manager with abundant experience and know-how as well as
external growth based on asset management performed by the Star Asia Group
3. Initiatives focusing on unitholder value
Constant, "out-of-the-box" active management
GROWTH
Investment policy
TOKYO AREA | Prioritized, | Achieving income stability | Investment primarily |
focused investment | and growth through | in middle-size assets (Note 2) | |
in the Tokyo Area (Note 1) | diversification of asset | ||
Investment ratio 70% or | types | ||
higher in the Tokyo Area |
(Note 1) "Tokyo area": "Tokyo area" refers to Tokyo's 23 wards and the cities of Kawasaki and Yokohama for office properties and retail facili- ties, and Tokyo and the three prefectures of Kanagawa, Saitama and Chiba for residential properties, logistics facilities, hotels and student residences.
(Note 2) "Middle-size assets" are properties with acquisition prices of less than JPY10bn.
To Our Unitholders
Star Asia Investment Corporation
Executive Director
Atsushi Kato
Message
We appreciate your continued support and guidance of Star Asia Investment Corporation (SAR) and the asset management company Star Asia Investment Management Co., Ltd.
We believe that there are people facing unprecedented crisis and challenges caused by the novel coronavirus (COVID-19) pandemic among our shareholders, so we would like to express our sincere hope that such conditions will be resolved, and that peaceful daily life will be regained as early as possible.
SAR achieved steady growth by continuously executing measures in pursuing to maximize unitholders' interests since its listing in April 2016. The asset size as of the end of 11th Fiscal Period is 166.7 billion yen and this was recently expanded to 179.6 billion yen (60 properties) with the acquisition of properties through a public offering executed in August 2021. The executed acquisitions of properties are positioned as the initial step towards the asset size target of 300 billion yen in the medium-term management plan established in March 2021, and we consider focusing on external growth more than ever going forward to achieve the target.
During the 11th Fiscal Period, the timing to regain peaceful daily life from the COVID-19 infection continued to be uncertain in Japan. On the other hand, SAR believes that there were signs that future economic conditions will turn upward, such as the Tokyo Olympic Games being successfully held and the increase in vaccination rate.
Under such circumstances, as a result of conducting management pursuing maximization of unitholders' interests as well as seeking to maintain and enhance rent revenue from the portfolio, reduce construction costs with increased order quantity of repair works, etc. and cost reductions with adjustments, etc., SAR posted operating revenue of 5,560 million yen, ordinary income of 2,407 million yen, net income of 2,407 million yen and cash distribution per unit of 1,462 yen.
Five-year trajectory since listing | To a new phase of growth | |||||||||||||
Basis of | R&I | Negative | JCR | Aiming further improvement of ratings and | ||||||||||
A- | Goodwill | A | ||||||||||||
growth | early inclusion in global indices | |||||||||||||
8.89 billion yen | ||||||||||||||
(Stable) | (Stable) | |||||||||||||
Diversified growth through active management | 1st Public | Pursue growth in asset size based on | ||||||||||||
Initiatives | (Three public offerings, seven asset | Offering since | support by Star Asia Group | |||||||||||
replacements, the Merger) | the Merger | (Ex: Capital recycling by Star Asia Group) | ||||||||||||
Acquisition of properties through the first Offering since the Merger
JPY 12.9 bn | JPY 179.6 bn | ||
JPY 166.7 bn | 7properties | ||
Form of Offering | |||
Domestic offering | |||
Asset size | No. of offered Investment Units | ||
(Based on | 115,000 units | ||
Acquisition | five years | ||
Issue Price (Offer Price) | |||
price) | since listing | ||
approx. 2.7x | 57,330 yen | ||
Payment Date | |||
August 17, 2021 | |||
Total No. of Issued Investment | |||
JPY 61.4 bn | Units after the Offering | ||
1,789,389 units | |||
18 | 53 | 60 | |
properties | properties | properties |
IPO | End of July 2021 | Acquisitions with | After | Medium-Term |
(April 2016) | (11th Fiscal Period) | the Offering | Acquisition | Management Plan |
(Note) | Credit ratings are the long-term issuer rating (JCR) and issuer rating (R&I) for SAR as of the date of this document, not credit ratings |
for SAR's investment units |
We would like to report on the performance results as well as express our deep gratitude to our unitholders for your support and understanding.
We thank you for your continued support and encouragement and we hope that peaceful daily life will be regained from the COVID-19 pandemic as early as possible, as well as for your good health.
2 | 3 |
To Our Unitholders
Progress of Medium-Term Management Plan
SAR believes that it entered into a new growth phase as the foundations to accelerate growth are being prepared with (1) expanding its asset size to over 165 billion yen with the realization of merger (August 2020), (2) obtaining ratings of A (stable) from Japan Credit Rating Agency, Ltd. (JCR), A- (stable) from Rating and Investment Information, Inc. (R&I), (3) attaining a gain on negative goodwill (approx. 8.89 billion yen) associated with the merger, and that it is assumed to become a constituent of a global index (FTSE EPRA/NAREIT) at an early stage.
In March 2021, about five years since listing, SAR formulated a medium-term management plan for next five years to achieve (1) an asset size of 300 billion yen and (2) a distribution per unit of 1,600 yen (approx. 2% growth per annum) by 2026.
As the first step to achieve this target, SAR acquired seven properties (total acquisition price: 12.96 billion yen) in August 2021 as mentioned above. The newly acquired properties are comprised of two office buildings that have internal growth potential, one urban retail facility with the anticipation that peaceful daily life will be regained from the COVID-19 pandemic and increased value can be expected, and four residential properties that have high ratios of family type units where stable occupancy rates can be expected. Furthermore, regarding the distribution per unit, SAR forecasts 1,476 yen for the fiscal period ending July 31, 2022, which is a 1.4% growth compared to the forecast for the fiscal period ending January 31, 2022.
SAR will, in order to realize targets of the medium-term management plan, capitalize on the support from Star Asia group regarding expansion of asset size and cooperate with the sub-sponsor NIPPON KANZAI group with regards to growth of distribution per unit as well as execute management that pursues the maximization of unitholders' interests.
Progression Status of Medium-Term Management Plan (Formulated in March 2021)
The asset size increased by 12.9 billion yen to total 179.6 billion yen due to the properties acquired in August 2021, and normal distribution per unit (forecast) increased by 1.4% to 1,476 yen (forecast for the fiscal period ending July 2022).
Initiatives Related to ESG
SAR is enhancing its initiatives related to ESG, which has become a global policy issue. SAR newly established at Star Asia Investment Management, the Sustainability Promotion Division to strengthen initiatives related ESG and organized the Sustainability Promotion Committee to clarify responsibilities related to the initiatives as well as to discuss and decide on various measures and policies.
In March 2021, lead by the Sustainability Promotion Division, SAR set up goals regarding GHG (greenhouse gases), energy consumption, water resource management and waste management with 2019 as the reference year as its initiatives related to E (environment). For these goals, SAR is continuing efforts toward achievement by asking for the cooperation of property managers and tenants of SAR's properties. Regarding the degree of goal achievement, the annual figures and how its effects will be measured are planned to be disclosed on SAR's website.
In addition, SAR participated in the 2021 GRESB Real Estate Assessment as part of its ESG-related initiatives. In its first participation, SAR was awarded "3 Stars" and "Green Star" ratings. The purpose of participation in the assessment is not about achieving a high assessment in itself, but SAR believes it is more important to fulfill its responsibilities as a J-REIT with a public nature by executing measures aiming to establish better environment (E), society (S) and governance (G) through enhancing the assessment.
ESG Policy
Our Company, as a member of the Star Asia Group, shares its Investment Philosophy and Guiding Principles. Furthermore, as the asset management company for Star Asia Investment Corporation, we engage in the real estate investment management business while giving consideration to the environment, society, and governance (hereinafter, collectively referred to as "ESG") in order to enhance corporate value and exert comprehensive competitiveness while pursuing long-term sustainability and recognizing the role Star Asia Investment Corporation has been given in society in accordance with our basic philosophy of "Client First."
1 | Action towards Climate Change |
2 | Consideration towards Resource Circulation, Water Use, and Biodiversity |
3 | Pursuit of Health, Safety, and well-being |
Assets Size
As of the end of July 2021 | 166.7 billion |
Properties acquired August 2021 | 12.9 billion |
As of the end of August 2021 | 179.6 billion |
Priority measures going forward:
- Think "outside the box" and consider all measures.
- Sponsor pipeline (The fund's assets under management of JPY 141.3 billion, pursuit development deals)
- Find deals through the asset management company's own unique network.
- Conduct asset replacements as necessary.
Asset Size (Target): JPY 300 billion
Indicative number of properties 100
Distribution Per Unit
Previous Normal Forecasted | 1,455 yen |
Distribution Per Unit (12th Fiscal Period) | |
+1.4% | |
Current Normal Forecasted | 1,476 yen |
Distribution Per Unit (13th Fiscal Period) |
Priority measures going forward:
- Cooperate with sub-sponsor (Nippon Kanzai Group)
- Resolve rent gaps in the office portfolio.
- Reduce costs leveraging on the economy of scale
- Rebuild the property management system to suit the portfolio mix.
- Optimize repair costs/ capital expenditures.
Distribution Per Unit (Target): 1,600 yen or more
Growth objective of 2% per annum
4 | Securing and Developing Human Capital |
5 | Stakeholder Engagement |
6 | Establishing and Organizing a Governance System |
New Organization of the Asset Management Company
(Establishment of Sustainability Promotion Committee and Sustainability Promotion Division)
Shareholder's Meeting
Corporate Auditor
Bord of Directors Meeting
Sustainability Promotion Committee | Compliance Committee | |
Investment Committee
President and CEO
Compliance Officer
Investment Management Division | Sustainability Promotion Division | Finance Management Division |
4 | 5 |
Portfolio Overview (As of August 31, 2021)
OFC-01 | OFC-03 | OFC-04 | OFC-06 | OFC-08 | OFC-09 | RSC-09 | RSC-10 | RSC-11 | RSC-12 | RSC-13 | RSC-14 | |||||||||||
Minami-Azabu | Honmachibashi | Nishi-Shinjuku | Shibuya MK Building | Asahi Building | Hakata-eki | Urban Park Koenji | Urban Park Ichigao | Urban Park Gyotoku | Shiroi Logiman | Urban Park Sekime | Urban Park Imazato | |||||||||||
Shibuya Building | Tower | Matsuya Building | East Place | |||||||||||||||||||
Completed: Jun. 15, 1993 | Completed: Feb. 8, 2010 | Completed: May 28, 1987 | Completed: Jul. 31, 1993 | Completed: Nov. 25, 1994 | Completed: Feb. 24, 1986 | Completed: Oct. 13, 1987 | Completed: Jul. 10, 1998 | Completed: Mar. 24, 1995 | Completed: May 9, 1995 | Completed: Aug. 18, 1989 | Completed: Dec. 20, 1991 |
OFC-10 | OFC-11 | OFC-12 | OFC-13 | OFC-14 | OFC-15 | RSC-15 | RSC-16 | RSC-17 | RSC-18 | RSC-19 | RSC-20 | |||||||||||
Nihonbashi Hamacho | Amusement Media | Higashi-Kobe | Amusement Media | Seishin BLDG. | NK BLDG. | Urban Park Yoyogi | Urban Park | Urban Park Mitsuike | Urban Park Ryogoku | Urban Park | Urban Park | |||||||||||
Park Building | Gakuin Honkan | Center Building | Gakuin Shinkan | Tokiwadai Koen | Koen | Mizonokuchi | Miyamaedaira | |||||||||||||||
Completed: Jul. 13, 1992 | Completed: Nov. 2, 1994 | Completed: Jan. 6, 1992 | Completed: Jan. 25, 1999 | Completed: Mar. 31, 1989 | Completed: Oct. 28, 1991 | Completed: Sep. 4, 2017 | Completed: Feb. 17, 1994 | Completed: Mar. 24, 1992 | Completed: Oct. 31, 1997 | Completed: Aug. 23, 1988 | Completed: Jun. 10, 2021 |
OFC-16 | OFC-17 | OFC-18 | OFC-19 | OFC-20 | OFC-21 | RSC-21 | LGC-01 | LGC-02 | LGC-03 | LGC-04 | LGC-05 | |||||||||||
Tsukasamachi | Takadanobaba | Azabu Amerex | Hiei-Kudan BLDG. | Shin-Yokohama | The Portal Akihabara | Urban Park Tsurumi | Iwatsuki Logistics | Yokohama Logistics | Funabashi Logistics | Baraki Logistics | Tokorozawa | |||||||||||
BLDG. | Access | BLDG. | Nara BLDG. | Completed: | Logistics | |||||||||||||||||
Completed: Jan. 20, 1988 | Completed: Jan. 14, 1994 | Completed: Jun. 30, 1988 | Completed: Sep. 17, 1991 | Completed: Mar. 17, 1992 | Completed: May 31, 2002 | Completed: Feb. 17, 1994 | Completed: Oct. 29, 2014 | Completed: Oct. 1, 1994 | Sep. 25, 1992 (Building 1) | Completed: Aug. 14, 2015 | Completed: Apr. 30, 1999 | |||||||||||
Aug. 5, 1997 (Building 2) | ||||||||||||||||||||||
OFC-22 | OFC-23 | RTL-01 | RTL-02 | RTL-03 | RTL-05 | LGC-07 | LGC-08 | LGC-09 | LGC-10 | HTL-01 | HTL-02 | |||||||||||
OHA Building | Urban Center | La Park Kishiwada | Suroy Mall | Seiyu Minakuchi | BAGUS Ikebukuro | Funabashi Nishiura | Matsubushi | Funabashi Hi-Tech | Funabashi Hi-Tech | R&B Hotel Umeda | Smile Hotel Namba | |||||||||||
Hakata | Chikushino | West | Logistics II | Logistics | Park Factory I | Park Factory II | East | |||||||||||||||
Completed: May 30, 1990 | Completed: Aug. 27, 2020 | Completed: Aug. 30, 1994 | Completed: Jun. 22, 2007 | Completed: May 31, 1999 | Completed: Nov. 20, 1992 | Completed: | Completed: Mar. 31, 1997 | Completed: May 19, 2003 | Completed: Sep. 5, 2001 | Completed: Oct. 20, 2000 | Completed: Feb. 6, 2008 | |||||||||||
Mar. 20, 1991 (Warehouse) | ||||||||||||||||||||||
May 15, 1972 | (Factory) | |||||||||||||||||||||
May 13, 1986 | (Office) |
RSC-01 | RSC-02 | RSC-05 | RSC-06 | RSC-07 | RSC-08 | HTL-03 | HTL-04 | HTL-05 | HTL-06 | HTL-07 | HTL-08 | |||||||||||
Urban Park | Urban Park Daikanyama | Urban Park Namba | Urban Park Gokokuji | Urban Park Kashiwa | Urban Park | BEST WESTERN | BEST WESTERN | Hotel WBF Fukuoka | GLANSIT | Best Western Tokyo | KOKO HOTEL | |||||||||||
Azabujuban | Completed: | Ryokuchi Koen | Tokyo Nishikasai | Yokohama | Tenjin Minami | AKIHABARA | Nishikasai Grande | Osaka Namba | ||||||||||||||
Completed: Nov. 29, 1999 | Nov. 15, 1982 (Existing) | Completed: Jun. 9, 2013 | Completed: Feb. 28, 1990 | Completed: Aug. 28, 1997 | Completed: Mar. 10, 1989 | Completed: Mar. 19, 1991 | Completed: Sep. 21, 1987 | Completed: Feb. 20, 2017 | Completed: Sep. 20, 2017 | Completed: Feb. 7, 2017 | Completed: Apr. 7, 2017 | |||||||||||
May 30, 2006 (Newly built) | ||||||||||||||||||||||
6 | 7 |
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Star Asia Investment Corporation published this content on 22 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 October 2021 04:33:09 UTC.