Robust Balance Sheet
We seek to execute a diversified and balanced financing strategy that strengthens our financial structure, while remaining adaptive to changing macroeconomic conditions, in order to produce stable profits over the medium to long term whereby achieving steady growth in the quality of our assets and increase unitholder value.
Cash Management Optimization
We have a policy of optimally allocating cash reserves equivalent to depreciation, based on the characteristics of logistics facilities (the amount of capital expenditures required tends to be small compared to the amount of depreciation). Specifically, we will aim to distribute the amount equivalent to approximately 30% of the amount of depreciation recorded in the subject fiscal period, as distributions in excess of retained earnings every fiscal period. (“continuous distributions in excess of retained earnings”).
In addition, we may also make additional distributions in excess of retained earnings (“temporary distributions in excess of retained earnings”) in cases where we expect a temporary decrease in the distributions per unit to a certain extent in order to stabilize distributions per unit or to provide unitholder return. In such case, we may make distributions of the total amount of continuous distributions in excess of retained earnings and temporary distributions in excess of retained earnings up to 60% of the amount obtained by deducting the total amount of the accumulated depreciation recorded at the end of the previous fiscal period (this excludes the accumulated depreciation recorded at the end of the previous fiscal period for assets that are no longer recorded during the subject fiscal period due to transfer, disposal, loss, or other similar reasons) from the total amount of the accumulated depreciation calculated at the end of the subject fiscal period.
| （Note） | The portion of the distribution in excess of retained earnings, which represents a return of capital to our unitholders following our voluntary determination to return such capital, is deducted from our unitholders’ tax base for future capital gains calculations. It does not represent a redemption of units, which may be required upon demand by a unitholder of an open-ended J-REIT, as we are a closed-end J-REIT with respect to which unitholders do not have such a right. The standards determined by the Investment Trusts Association, Japan Rules (“ITAJ”) set forth that a closed-end J-REIT, such as us, may distribute up to 60% of the amount obtained by deducting the total amount of the accumulated depreciation recorded at the end of the previous fiscal period (this excludes the accumulated depreciation recorded at the end of the previous fiscal period for assets that are no longer recorded during the subject fiscal period due to transfer, disposal, loss, or other similar reasons) from the total amount of the accumulated depreciation calculated at the end of the subject fiscal period in excess of retained earnings as a return of capital. In addition, we do not plan to make distributions in excess of retained earnings to the extent doing so would cause what we refer to as our “appraisal LTV”, as calculated below, to exceed 60%. Appraisal LTV(%) = A/B x 100
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Below is an illustrative diagram of a balance sheet in relation to a payment of excess distributions.
The above diagram is for illustrative purposes only. The amount of distributions in excess of our retained earnings we make is subject to change, and we may not make any distributions in excess of our retained earnings, depending on various factors, such as macroeconomic environment and trends in the real estate market as well as our portfolio status and financial conditions.