To Our Unitholders

Shuichi Namba  President and Executive Director, Japan Retail Fund Investment Corporation

I would like to take this opportunity to express my sincere gratitude to all investors for their ongoing support of Japan Retail Fund Investment Corporation (JRF).

In terms of domestic macroeconomic trends during the six months ended February 29, 2020 (36th fiscal period), although Gross Domestic Product (GDP) for the July to September 2019 quarter recorded growth for the third consecutive quarter, GDP for the October to December 2019 quarter fell sharply from the previous fiscal quarter in reaction to the last-minute surge in demand ahead of the consumption tax hike and due to the effects of a large typhoon. GDP for the January to March 2020 quarter was expected to recover, but is highly likely to have fallen from the previous fiscal quarter, affected by the spread of infection with the novel coronavirus ("COVID-19"). The J-REIT market generally remained firm through mid-February 2020, although weakening temporarily from November onwards. However, following a rapid fall in the risk tolerance of the capital market worldwide in line with the global spread of COVID-19, the J-REIT market has plunged since late February.

Under the market environment described above, JRF announced the acquisition of one new property (Machinoma Omori) and completed the sale of one property (Ito-Yokado Nishikicho; 45% quasi-coownership of trust beneficiary interest) already announced in the 35th fiscal period as a part of portfolio asset replacement measures. As a result, during this fiscal period, operating revenue decreased by 9.7% compared to the previous fiscal period to 32,007 million yen, while net income decreased by 0.1% to 12,800 million yen, affected by a gap from the planned timing of the opening of renovated properties.

Total distributions for the six months ended February 29, 2020 amounted to 11,781 million yen by adding 31 million yen in reversal of reserves for temporary difference adjustments and by deducting reserve for dividends amounting to 1,050 million yen from unappropriated retained earnings at the end of the period. As a result, distributions per unit were 4,500 yen.

A decrease in revenues is anticipated from the next fiscal period onwards due to the impact of COVID-19.
However, we will make efforts to deliver stable distributions by using gains on sales of property and reserves while paying attention to how the impact of COVID-19 will change the environment surrounding commercial properties and implementing measures that are appropriate to the circumstances.

We will continue to strive to live up to investors’ expectations, together with the asset manager, Mitsubishi Corp.-UBS Realty Inc., and look forward to receiving your continued support.

Shuichi Namba
Executive Director, Japan Retail Fund Investment Corporation