United Urban Investment Corporation

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To Our Unitholders

Hitoshi Murakami
Executive Officer
United Urban Investment Corporation

I would like to take this opportunity to express my sincere gratitude to you for your support and patronage of United Urban Investment Corporation ("United Urban").

United Urban was listed in the real estate investment trust section of the Tokyo Stock Exchange (the J-REIT section) in December 2003 as a diversified J-REIT, investing in properties varied both in types of use and geographical location. Since its listing, United Urban has been making efforts to maintain or improve its revenues and reduce various risks for the purpose of obtaining stable earnings over the medium to long term. As of November 30, 2016 (at the end of the 26th fiscal period), its asset size was 590.4 billion yen, and United Urban is one of the largest among all J-REITs in terms of asset size.

As a result of vigorous acquisition activities based on our diversified investment policy, United Urban purchased “Kawagoe Logistics Center”, a logistic facility which has easy access to several major motorways (Kawagoe City, Saitama Pref.), “KURURU”, a large-scale retail facility in front of Fuchu Station (Fuchu City, Tokyo Met.), and “Asuto Nagamachi Dental Clinic” operated by Japan’s leading dental clinic group (Sendai City Miyagi Pref.) in the 26th fiscal period. The total acquisition amount of these three properties was 18.0 billion yen. United Urban invested additionally in the preferred equity securities of Tokutei Mokuteki Kaisha (TMK) that initially acquired in the previous fiscal period (25th fiscal period ended May 31, 2016). United Urban also acquired the building located on the land adjacent to our existing property, “b roppongi” attempting extension of the facility in the future (an acquisition of the adjacent land was completed in the 27th fiscal period ending May 31, 2017). Concurrently, we sold two properties under our initiatives toward improvements in quality and profitability of our properties, and got gains of 1,363 million yen on the sale.

The performance of our existing properties has been good due to the favorable business performance of Japanese corporations and increase of foreign tourists. The properties acquired during the previous fiscal period (25th fiscal period ended May 31, 2016), the increased rent revenues from the properties adopting variable rent system, and the rent increase through negotiation with existing tenants have also contributed to this fiscal period's profit increase.

In the 26th fiscal period, United Urban was able to achieve continuous revenue and profit increase with operating revenues of 22,864 million yen, operating income of 11,057 million yen and net income of 9,348 million yen. We had expected to allocate \1,068 million to cash distribution from the reserve for distribution to cover the increased costs and decrease of the rent revenues arising from large scale renovation of the “Himonya Shopping Center” (former “Daiei Himonya”) for this period, however we could dispense with such reversal thanks to the gains on sale of the aforementioned properties while increasing the dividend per unit. In order to strengthen the capability to cope with the risk, United Urban decided to retain 459 million yen, from the gains related to sale of properties as a reserve retained for distribution (corporate tax is not imposed related to this reserve). Consequently, the cash distribution per unit for the 26th fiscal period became 3,010 yen (up by 10 yen per unit from the previous period) and we could increase distribution per unit for six consecutive fiscal periods from the 21st fiscal period.

For the 27th fiscal period ending May 31, 2017, the acquisition of two new properties (total acquisition price: 3.1 billion yen) was completed on December 1 2016, and about 16.7 billion yen equity was raised through the issuance of new investment units in order to strengthen the financial standing and secure room for further external growth.

United Urban, together with its asset manager, Japan REIT Advisors Co., Ltd. ("JRA"), will do its best to secure the stability in its earnings over the medium to long term pursuant to its investment policy. Your continuous support and kind attention will be highly appreciated.

January 2017

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