PDF:4,174KB

Japan Logistics Fund, Inc.

Financial Results Briefing for the Fiscal Period Ended January 2026 (41st Fiscal Period) Video March 17, 2026

Event Summary [Company Name] Japan Logistics Fund, Inc. [Company ID] 8967-QCODE [Event Language] JPN [Event Type] Earnings Announcement [Event Name] Financial Results Briefing for the Fiscal Period Ended January 2026 (41st

Fiscal Period) Video

[Date] March 17, 2026 [Time] 16:30 - 17:01

(Total: 31 minutes, Presentation: 31 minutes)

[Venue] Webcast [Number of Speakers] 1

Seiichi Suzuki President and CEO

Presentation

Suzuki: I am Suzuki from Mitsui & Co., Logistics Partners Ltd. I would now like to explain the financial results of Japan Logistics Fund, Inc. for the period ended January 31, 2026. Thank you.

First of all, I would like to express my deepest gratitude to our unitholders, business partners, and all other stakeholders who continue to support JLF's efforts on a daily basis.

At the outset, I would like to talk about our perception of the present situation and the direction we are aiming for.

Since last year, there have been signs of a gradual recovery in logistics REIT unit prices. We believe this is due to growing expectations for an improvement in the supply-demand balance in the logistics property leasing market.

Unit prices reflect expectations for future growth. We must give shape to these expectations in the form of solid results. We believe this is our responsibility as an asset management company.

JLF has been steadily working to strengthen its foothold, even when market conditions have been difficult. We have been working on improving capital efficiency, persistently increasing rents, and accelerating capital recycling, and we have been building up our growth strategies one by one in response to the environment.

We have also prepared several growth scenarios in advance to prepare for changes in market conditions, ensuring operational options and flexibility. Whether the market recovery is faster than expected or, conversely, takes more time, we will select the most appropriate measures in response to the situation at the time and ensure that they lead to results.

A consistent focus of our operations is sustainable growth in FFO per unit. We believe that continuously and steadily enhancing the portfolio's cash-generating capacity will lead to an increase in unitholder value over the long term.

We will continue to respond flexibly to changes in the environment and steadily accumulate results. Through the accumulation of these efforts, we hope to continue to be a stock that our unitholders trust and continue to choose for a long time.

We appreciate your continued support for JLF.

Now, let me explain the summary.

The distribution per unit for the period ended January 31, 2026 was JPY2,300, an increase of 7% from the previous period. The realization of the sale of the property at a price significantly higher than the appraisal resulted in a high level of profit distribution.

For the period ending January 31, 2027, we are projecting 2.8% FFO per unit growth, well above our growth target and on track. In addition, the FFO target per unit for the period ending January 31, 2028 is set at JPY2,500.

Regarding rental growth, we maintain solid momentum, with an expected rental growth rate of plus 7.4% for the fiscal period ending July 31, 2026. We are also building a track record of success in obtaining other incremental opportunities.

Regarding capital recycling, in addition to the property exchange transactions being executed, we continue to recycle 1% to 2% of AUM per year to expand revenues and growth potential.

In the Tokyo metropolitan area, the largest market in the rental market, vacancy rates began to decline in H2 of last year. With new supply expected to decrease significantly in 2027, the possibility of an accelerated improvement in the supply-demand environment is becoming more realistic .

Currently, the closer to the city center, the more favorable the supply-demand environment is, and we believe that JLF's portfolio, mainly in the suburbs of the Tokyo metropolitan area, will be able to further demonstrate its competitive advantage in the future, as supply is expected to decrease.

These are the highlights.

I will now explain our growth strategy.

JLF recognizes that increasing the portfolio's cash-generating capacity continuously is of paramount importance to sustainable unitholder value enhancement.

For FFO per unit, a measure of this growth, we have set a target of at least 2.2% growth per year.

JLF is currently making steady progress at a speed that is well above its target and is forecasting JPY2,440 for the fiscal period ending January 31, 2027, a YoY growth rate of plus 2.8%.

In order to further clarify the degree of progress, we have decided to aim to reach JPY2,500 in the fiscal period ending January 31, 2028 as a medium-term absolute level guideline.

The distribution per unit is set at JPY2,150 at the lower limit for the time being, but for the period under review, the distribution was increased by JPY150 to JPY2,300, partly due to capital gains that exceeded our expectations.

The earnings forecast calls for JPY2,150 over the period ending January 31, 2027, but depending on the results of future property sales, we will consider increasing the dividend as well.

In addition, there is no change in our policy to improve distributions in line with the growth of FFO per unit after the first fiscal period of 2028. The cruising FFO payout ratio at that time is assumed to be about 85%.

The various initiatives for growing FFO per unit are shown on this slide.

The core will continue to be rental growth and capital recycling, and we aim to achieve JPY2,500 at first, creating an average annual growth of more than 2.2% FFO per unit in total, while controlling costs.

As for the progress made so far for each initiative, they are all on track. We expect a positive 1.9% contribution in terms of FFO per unit toward the fiscal period ending January 31, 2027 in terms of rental growth, and the same positive 1.9% contribution in terms of capital recycling.

With regard to costs, while there will be an increase in costs associated with the refinancing of debt and an increase in costs associated with the increase in outstanding balance, other costs are expected to decrease, and progress is expected to be made within the target range.

As an additional growth opportunity, we are considering a phased use with respect to LTV capacity.

In the event of another recovery in unit prices, we would like to consider deals that will contribute to FFO per unit growth, NAV per unit growth, and expansion of growth opportunities.

We will continue to make steady progress on our core tactics while monitoring trends in the real estate and financial markets to capture additional growth opportunities.

Next, I will explain the amendments to the articles of incorporation that will be proposed at the general meeting of unitholders scheduled to be held in April this year.

The main changes are the expansion of investment targets and changes to the asset management fee structure.

The investment targets will be expanded to include LP investments in real estate funds and real estate-related loans. This will provide access to a variety of investment opportunities and expand growth opportunities that will contribute to improved profitability and investment efficiency.

Regarding the management fee structure, Asset Management Fee 2 will be changed from being linked to current profit and distributions to being linked to FFO per unit, which is the source of distributions. This strengthens the alignment with JLF's growth strategy, which aims for sustainable cash flow growth, and the linkage with unitholders' interests.

On the other hand, since this change will not take into account gains on sale, a new capital gain-linked fee will be established and designed to provide an incentive to sell the property at a higher price, which will also be consistent with unitholders' interests.

The impact of these changes on asset management fees is estimated to be slightly lower than if the changes were not made, based on the assumptions for the forecasted financial results for the fiscal periods ending July 31, 2026 and January 31, 2027.

Through the design of compensation linked to growth opportunities and their outcomes, we will pursue higher investment returns by pursuing our growth strategy in the same direction as our unitholders.

This slide explains the supply-demand balance of logistics facilities.

The supply-demand environment for logistics facilities is currently improving.

The graph on the left shows supply-demand trends and vacancy rates in the Tokyo metropolitan area, the largest market. The vacancy rate shown in the dark blue line has already peaked out and is now on a downward trend.

Underlying this is a decrease in the new supply area. See the graph on the right. This chart shows the forecast of the new supply area.

Comparing the forecast as of December 2024, shown in white, with the actual and projected supply as of December 2025, shown in gray, we can see that the supply forecast has been revised downward. In particular, the supply area in 2027 has been significantly reduced to less than half of what was projected a year ago.

Under these changes in the environment, the supply-demand balance may improve at a faster pace than previously assumed.

Current vacancy rates vary from area to area. This slide shows the vacancy rate for each of the 14 areas in the Tokyo metropolitan area.

We consider a vacancy rate of 10% to be a turning point between rising and falling market rents. Below this level, we believe that rents are likely to be subject to upward pressure.

As of December 31, 2025, the vacancy rate is below 10% in the 11 areas shown in blue.

Applying this to JLF's portfolio, 93.8% of the leases expiring within the next three years in the Tokyo metropolitan area are concentrated in areas with vacancy rates of 10% or less. This means that a large portion of JLF's portfolio is in a supply-demand environment where rents are expected to rise.

Taking advantage of this improved market environment, we want to take an aggressive approach to rent revisions in contract renewal negotiations, which will lead to internal growth.

We will explain the rental income growth policy.

Six months ago, we raised our leasing revenue growth target and set a policy to grow rental income by 1.1% per year, or 1.7% in terms of FFO per unit.

Currently, its progress is exceeding the target, and internal growth is steadily being realized.

The biggest factor supporting this growth is a solid leasing platform. We work closely with our in-house leasing teams to achieve high results through rapid decision-making. Brokerage commissions are incentivized to be linked to rents and the range of increases, thereby aligning with unitholders' interests. 99% of all contracts are realized under this system, creating a virtuous cycle of accumulating know-how and strengthening relationships with tenants.

Another major advantage is that approximately 64% of the portfolio is concentrated inside National Route 16, where the supply and demand environment is relatively favorable. By taking advantage of our location advantage, we are able to negotiate strategic terms and conditions in many contracts, such as controlling contract terms and introducing CPI-linked clauses.

In addition, JLF has an earnings structure where rental growth is easily linked directly to FFO per unit growth. Logistics facilities tend to have a low ratio of leasing expenses, compared to other asset types, and a high ratio of the FFO margin.

Moreover , JLF's portfolio is highly resilient to cost inflation, as approximately 82% of its leasing expenses are composed of expenses that are less sensitive to inflation.

Going forward, we will continue to leverage our three strengths of leasing power, location superiority, and a structure that makes it easy to link income growth directly to profits to achieve sustainable internal growth even in an inflationary environment.

In fact, we have shown on this slide the extent to which rent increases have been achieved.

We expect a rent increase of positive 7.4% in the fiscal period ending July 2026, maintaining a steady rent increase momentum.

In recent years, the feasibility of increasing rents has been enhanced by developing a multifaceted approach in lease renewal negotiations that also includes tenant turnover as an option.

In lease renewal, we conduct strategic negotiations, based on surrounding market trends and the tenant's business environment, and negotiate to raise the rent to the target rent level.

On the other hand, if a sufficient increase in rent cannot be expected, re-tenanting is an option to accelerate the catch-up to market rents.

With the rent gap still in the mid-single-digit percentile and an improving supply-demand environment, we are aiming for further growth.

We will then explain our efforts and performance regarding contract renewal rates.

In order to steadily grow rental income in an inflationary environment, JLF is working to increase the frequency of contract renewals in addition to setting high rent increase targets.

In recent years, as shown in the upper left pie chart, 87% of all contracts signed in the past three and a half years have a term of five years or less and contain a CPI reference clause, indicating that the contract terms are well controlled.

The CPI reference clauses are being introduced with emphasis on contracts with long lease terms and have been successfully introduced in more than 60% of contracts with terms of five years or more.

As a result of these efforts, the percentage of fixed-term lease contracts maturing within three years has increased to 53%.

In addition, more than 11% of contracts now have a rent review timing of three years or less under the CPI clause.

Furthermore , we are also increasing rents by proactively proposing CAPEX to tenants. We call it CAPEX plus. Unlike regular CAPEX, which aims to maintain and preserve asset value, this investment measure aims to create additional value, leading to increased earnings.

As in the case of property acquisitions, we have established investment criteria, such as the expectation of a return above the implied cap rate, and we promote this strategy with discipline.

Multiple results have been accumulated in the past six months, and in the case shown at the bottom right, we expect a high double-digit percent ROI and a significant increase in NOI.

In this way, JLF strategically creates rent increase opportunities through various approaches, such as controlling renewal rates, introducing CPI clauses, and CAPEX plus.

Next, I will explain our policy and progress in capital recycling, another growth driver.

Capital recycling aims to grow FFO per unit by 1.7% per year by selling properties that we believe have maximized their asset value through our management at or above their appraised value and redirecting the proceeds to more investment efficient assets.

Through this cycle, we are also strengthening returns to unitholders by using capital gains as a source of funds and reinforcing our growth base by investing in properties with growth potential.

Currently, there are approximately JPY46 billion in candidate properties for sale that we believe have maximized cash flow, subject to capital recycling.

We have reinvestment targets of over JPY100 billion, and we are also running a program at the same time to automatically acquire our own investment units when the implied cap rate is high.

In terms of yield, the acquisition means is averaging in the upper 4% range, compared to the overall portfolio's appraisal NOI yield of 4.1%, and the acquisition of own investment units is expected to take place at an implied cap rate of 4.5% or higher, both of which will ensure that the reinvestment yield is higher than that of the existing portfolio. In both cases, the reinvestment yields are higher than those of the existing portfolio, preparing the portfolio for growth opportunities.

The bottom row summarizes the results and outlook for capital recycling.

For the period from the fiscal period ended July 31, 2024 to the fiscal period ending July 31, 2027, we expect cash inflows to total over JPY34 billion from the sale of the five listed properties and cash outflows to total over JPY40 billion from the acquisition of eight properties and investment unit buybacks, based on deals already executed or decided.

In addition to this, we intend to promote capital recycling with a target of an additional 1% to 2% of annual AUM.

Here is a summary of the asset reshuffling that took place in the fiscal period ended January 31, 2026.

We sold Kadoma Logistics Center, shown on the right, at a yield of 3.2% and acquired Ishikari Logistics Center, shown on the left, at a yield of 7.1%, improving our investment efficiency.

Kadoma LC was sold at a price 44% higher than the appraised value after raising rents and increasing asset value in the most recent renewal. This resulted in an IRR of 9.4% during the holding period.

Ishikari LC is a property sourced through off-market transactions using our proprietary network. With the acquisition of an additional 45% interest, JLF now owns 100%, allowing for more agile and flexible operations.

Given the rent gap and the short average remaining term of the lease contracts, we believe there is room for earnings growth in the near future.

A portion of the gain on sale earned will be returned to unitholders, and the distribution for the fiscal period ended January 31, 2026 was raised by JPY150 to JPY2,300.

Next, I will explain the status of investment unit buybacks as a reinvestment option.

To date, JLF has acquired its own investment units for a cumulative total of JPY9.5 billion, equivalent to 4.2% of the total number of investment units issued, over the past six times.

Since the fourth buyback, we have positioned the acquisition of investment unit buybacks as a strategic reinvestment measure to raise capital efficiency, and we have been running a buyback program to acquire own investment units at unit price levels that have high investment appeal, based on the implied cap rate.

However, no purchases were made in the sixth and seventh, the most recent one, against the backdrop of a recovery in unit prices.

In this ongoing environment, we have determined that it is reasonable to allocate funds to the acquisition of properties with higher investment efficiency and profitability improvement potential, and we have decided to acquire the two properties listed on this slide on March 23.

Both properties will be acquired through relative transactions through our proprietary channels at a discount and at a yield level higher than the implied cap rate.

Both properties have lease contracts with CPI-linked clauses that automatically revise rents even during the contract period in response to price fluctuations, and earnings growth can be expected even in an inflationary environment.

After acquiring such properties with potential for growth, the best thing we can do is to increase their value through management, which is where we can really demonstrate its capabilities.

In the lower right-hand corner, we have provided an example of the improved profitability of a property acquired last year. The rent increases and cost rationalization implemented after the acquisition have firmly improved profitability.

We will continue to pursue sustainable growth of FFO per unit through both capital recycling and subsequent management.

We will then discuss the status of acquisition means.

JLF has established a system in which not only the sponsor supplies properties, but also the asset management company autonomously and proactively selects the most appropriate means from among various acquisition means, according to the real estate market environment at the time, and continues to create opportunities to acquire properties at relatively superior yields.

In the last three years, we have created pipelines of approximately JPY140 billion and have secured pipelines of over JPY100 billion in the current period.

The pipeline yield levels are summarized in the upper left corner of the slide. Our pipeline properties have an average yield in the high 4% range, which is a relative advantage compared to market transaction yields and yields on properties recently acquired by logistics REITs.

We have also been successful in pipelining at lower prices than the appraised value.

Here is a list of pipeline properties created through our unique approach of collaborative development with our business partners.

By assisting our business partners in developing logistics facilities, such as finding suitable land for logistics facilities, product planning for logistics facilities, and attracting tenants, we create opportunities to acquire prime properties at competitive yields without using JLF's balance sheet.

Here is a list of pipeline properties sourced through various other methods.

Three new properties, Atsugi, Amagasaki II, and Okayama Hayashima, have been added in the past six months, further increasing the depth of the pipeline.

These pipelines utilize bridge functions, such as leasing companies, to ensure flexibility in the timing and scale of acquisitions by JLF.

We hope to utilize this flexibility to steadily advance capital recycling, which is the core of our strategy, while also exploring additional growth opportunities, depending on trends in the real estate and financial markets.

Next, we will explain how to deal with rising interest costs.

The basic policy of debt procurement remains unchanged. We continue to strive to diversify maturities, maintain debt durations, and maintain a high percentage of debt on fixed rates.

The left side of the slide summarizes the changes in the debt portfolio. As you can see, JLF has been able to keep its cost of debt at a low level while maintaining a high percentage of debt on fixed rates compared to the J-REIT average.

The most recent procurement results are listed on the right. As a specific response to rising interest costs, we are executing borrowing at partially floating interest rates, recruiting new lenders, and leveraging a commitment line.

In light of the current large difference between the long-term SWAP rate and short-term interest rates, we are considering the option of borrowing at variable interest rates for approximately 15% to 20% of our interest-bearing debt.

The number of lenders was expanded from 17 to 20 by recruiting three new lenders. We procure from all lenders directly, selecting the term and fixed and floating terms in which each company has the greatest strength, thereby limiting cost increases.

In addition, while responding to flexible property acquisitions by leveraging a commitment line, we are lengthening or fixing the maturities of our loans at the optimal timing while keeping an eye on the level of interest rates.

JLF will moderate the impact of rising interest rates through flexible debt management while maintaining a foundation of stability.

Finally, I will explain our results for the fiscal period ended January 31, 2026 and our forecasts for the fiscal periods ending July 31, 2026 and January 31, 2027.

First, the results for the fiscal period ended January 31, 2026.

During the period under review, rental revenue increased by JPY61 million from the previous period to JPY10,215 million, and FFO increased by JPY72 million from the previous period to JPY6,517 million, mainly due to rent increases and the effect of property replacements.

The factors for the increase or decrease compared to the previous period are shown on the right side of the slide.

FFO per unit increased by JPY26 from the previous period to JPY2,373, and distribution per unit increased by JPY150 from the previous period to JPY2,300.

Next is the forecast for the fiscal period ending July 2026.

We forecast that, due to factors such as rent increases and property reshuffling during the current period, rental business revenue will increase by JPY49 million YoY to JPY10,264 million, and FFO will increase by JPY96 million YoY to JPY6,613 million.

FFO per unit is expected to increase by JPY35 from the previous period to JPY2,408, and distribution per unit is expected to be JPY2,150, based on the assumption that there will be no gain on sale, etc., which is significantly higher than expected.

Next is the forecast for the fiscal period ending January 2027.

Due to factors such as rent increases and property reshuffling during the current period, rental business revenue is forecasted to increase JPY177 million YoY to JPY10,441 million and FFO to increase by JPY86 million YoY to JPY6,700 million.

FFO per unit is also forecasted to increase by JPY32 YoY to JPY2,440, while distributions per unit to remain unchanged YoY at JPY2,150.

As I mentioned at the beginning, it is the sustainable growth of FFO per unit that JLF considers the most important.

Even if the market recovers more slowly than we expect, or takes more time to recover, we will take the best measures according to the situations to lead to the result steadily.

We appreciate your continued support for JLF. This is the end of my explanation. Thank you. [END]