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To our unitholders

We would like to take this opportunity to express our gratitude to our unitholders for supporting SIA REIT, Inc.

We hereby would like to report on the management status and financial results etc. for the seventh fiscal period (ended February 2017) of SIA REIT.

During the fiscal period, although there were concerns over the impact of a stronger yen and such, the Japanese economy remained on a moderate recovery path supported by reinforcement of monetary easing policy with the introduction of “Quantitative and Qualitative Monetary Easing with Yield Curve Control” by Bank of Japan, progress in weakening of the yen and high stock prices following the U.S. presidential election as well as other factors, while the employment and income situations continued to improve.

The office building leasing market has continued to show a downward trend in vacancy rate and an upward trend in rent due to persistent strong needs for office expansion against the backdrop of active corporate activities.

SIA REIT acquired three properties (Glass City Motoyoyogi, Okachimachi CY Building and Nagoya Fushimi Square Building) (total acquisition price: 15,012 million yen) on September 7, 2016. SIA REIT was obtained preferential negotiation rights pertaining to acquisition of Yamagami Building on September 9, 2016, of Tokyo Parkside Building on November 15, 2016, and of Higobashi Center Building on December 22, 2016.

On the other hand, we worked on negotiations for upward rent revisions in line with the market trends, while working to increase efficiency of property management, especially of the three newly acquired properties, by taking into account tenant needs and characteristics of the respective properties. As such, we endeavored to maintain and improve the occupancy rate of the portfolio and enhance our leasing business revenues.

Through these efforts mentioned above, the total number of properties owned by SIA REIT at the end of the seventh fiscal period stood at 22 (total acquisition price: 89,359 million yen, excluding equity interest in a silent partnership), total leasable floor area at 148,840.57㎡ and portfolio occupancy rate at 98.3%.

In the financial aspect, SIA REIT procured 7,139 million yen (total issue value) in September 2016 through public offering and 245 million yen (total issue value) in October 2016 through third-party allotment in line with the public offering. In addition, SIA REIT procured a total of 24,453 million yen from a syndicate of lenders arranged by Mizuho Trust & Banking Co., Ltd. and Mizuho Bank, Ltd. in September 2016 to fund the acquisition of the three newly acquired assets and to prepay 16,297 million yen out of existing borrowings as well as ancillary costs. These have brought the balance of borrowings as of the end of the seventh fiscal period to 49,384 million yen with the ratio of interest-bearing debt to total assets (LTV) at 51.3%

As a result of these asset management operations, SIA REIT posted operating revenue of 3,349 million yen, operating profit of 1,431 million yen, recurring profit of 1,101 million yen and net income of 1,100 million yen for the seventh fiscal period. Dividend per unit came to 11,626 yen.

SIA REIT has submitted proposals that include a change of name from SIA REIT to One REIT, Inc. and the election of an Executive Director who is from the sponsor (Mizuho Trust & Banking Co., Ltd.), to the general meeting of unitholders to be held on May 23, 2017. SIA REIT aims to maximize unitholder value by further deepening its partnership with Mizuho Financial Group, to which the sponsor belongs, and by pursuing “continuous growth of dividends” and “disciplined external growth considering the portfolio and financial structure.” We look forward to the continued support and encouragement of our unitholders.

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