Limited upside for both profits and share price

Research evidence excerpt

Limited upside for both profits and share price

19 May 2026

Management comments from the FP3/26 results briefing

◼ Management stated that, given the tightness of office supply, faster declines in

vacancy rates and accelerating rent hikes suggest the office leasing market will

remain strong for at least the next one to two years. Specifically, it expects market

rents to increase by around 10% annually. In addition, while interest rates are rising

at a faster pace than expected, management believes rent growth will more than

offset this, making the achievement of its average annual growth targets for EPU

and DPU feasible.

◼ Due to rising construction and labor costs, capex is trending higher than initial

expectations. Going forward, the REIT intends to manage capex by pushing back

construction work or selling properties as needed, with the aim of keeping capex

within a range that does not significantly exceed ¥5b every six months.

◼ The reason the sale price of the Daido Life Niigata Building was approximately 8%

below its appraised value is that actual rents are lower than those assumed in the

appraisal. In the Niigata area, redevelopment around Niigata Station is progressing,

with the office district shifting toward the station area. As the above property is

located some distance from the station, its rent growth potential is limited and likely

to remain below the appraisal’s assumed rent levels.

◼ Management also noted that properties acquired from the sponsor generally offer

greater upside potential for rent hikes, given their locations and building

specifications. The REIT therefore plans to continue prioritizing pipeline acquisitions

from the sponsor, supplementing with third-party properties as needed.

ESG (environment, social, governance)

Environment