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18 Jan 2013 07:00
18 January 2013
Japan Residential Investment Company Limited
("the Company")
Investment Property Valuation and Strategic Review Update
Japan Residential Investment Company Limited (AIM: JRIC) is a closed-ended Guernsey registered company established to make and hold investments in residential property in Japan. The Company, its subsidiaries and entities in which it has a beneficial interest are referred to collectively as "the Fund".
The Fund portfolio has been externally valued at ¥32,933 million (£249 million) as at 30 November 2012. Property value growth rose to 2.6% for the year ended November 2012 on a like-for-like basis, compared with a 0.1% increase over the same period one year prior. Property value gains totaled ¥806 million (£6 million) on a like-for-like basis during the period. The portfolio has benefitted from falling yields and lower operating expenses.
Lower property yields in Tokyo are driving investors back into the major regional markets. The portfolio achieved net value gains in each of the major regional categories as the asset value reflation trend, which began with Tokyo in 2011, spreads to the Osaka, Nagoya, and Other areas. Of the 52 properties in the portfolio, 44 increased in value during the fiscal year while 8 decreased in value.
The unleveraged net yield of the portfolio (appraised net operating income over value) ended at 5.79% as at 30 November 2012, down from 5.94% at the same time one year prior.
Portfolio valuation trend by region (like-for-like basis):
Change in Value YoY (%) | Property Yield (%) | ||||
2010 | 2011 | 2012 | Nov-2012 | ||
Tokyo | -5.9 | 0.8 | 3.6 | 5.3 | |
Osaka | -7.0 | -0.1 | 1.8 | 5.9 | |
Nagoya | -7.4 | -1.5 | 0.9 | 6.3 | |
Other | -8.4 | -0.3 | 2.5 | 6.7 | |
Total | -6.8 | 0.1 | 2.6 | 5.8 | |
Market fundamentals for residential property in Japan remain positive as the sector's stable cash flows continue to draw investors and the supply of product remains tight. As previously announced, the Fund has received unsolicited approaches from various parties relating to the potential purchase of the Fund portfolio. Following initial discussions, and in light of the upturn in portfolio value, improving liquidity and the overall prospects for the asset class, the Board has decided not to pursue these approaches further at this time. In advance of the impending continuation vote, the Board and the Manager continue to review strategic alternatives to maximize returns to investors including the assessment of near term options to realise value against long term prospects for the assets and the Company.
Note: Sterling values shown above are based on the exchange rate of ¥132.063/£1 as at 30 November 2012.
Enquiries:
KK Halifax Management Limited Manager
| Edward Barrow | +65 6593 8904 |
KK Halifax Asset Management Investment Adviser
| Alec Menikoff | +81 (0)3 5563 8771 |
Smith & Williamson Corporate Finance Limited Nominated Adviser
| Azhic Basirov David Jones | +44 (0)20 7131 4000 |
Liberum Capital Limited Joint Broker
| Richard Bootle | +44 (0)20 3100 2222 |
Westhouse Securities Limited Joint Broker
| Alastair Moreton Darren Vickers | +44 (0)20 7601 6100 |
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