Q3 FY11/21
Financial Earnings Summary
Notice: This document is a translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail.
F i r s t B r o t h e r s C o . , L t d . ( 3 4 5 4 )
October 8, 2021
Topics for Q3 FY11/21 (1)
Portfolio of properties for lease (principal investment)
The First Brothers Group is expanding its portfolio by acquiring properties for lease that are projected to return a stable income over the medium to long term.
In cumulative Q3 FY11/21, we acquired new quality properties for lease to expand our portfolio, and sold some properties to achieve portfolio rotation.
The balance of our portfolio and corresponding book value, market value, and unrealized gain are shown below.
FY11/19 | FY11/20 | FY11/21 | Change | Change | |
from end | from end of | ||||
(end of fiscal year) | (end of fiscal year) | (end of Q3) | |||
(Unit: million yen) | of FY11/20 | FY11/20 (%) | |||
Balance*1 | 43,377 | 55,618 | 66,784 | +11,166 | +20.1% |
(number of | |||||
(49 properties) | (55 properties) | (90 properties) | |||
properties) | |||||
Increase*1 | 22,171 | 20,323 | 16,569 | - | - |
Decrease*1 | 11,807 | 8,082 | 5,403 | - | - |
Book value*2 | 44,340 | 56,179 | 67,669 | +11,490 | +20.5% |
Market value*3 | 49,990 | 64,456 | 79,959 | +15,503 | +24.1% |
Unrealized gain*3 | 5,650 | 8,276 | 12,289 | +4,013 | +48.5% |
NOI yield*4 | 6.9% | 6.6% | 6.4% | - | - |
*1 Balance and increase/decrease values are based on acquisition price (before tax). Increase values include increases from M&A and from completion of development projects.
*2 Book value is adjusted by adding transaction costs at the time of acquisition to the acquisition price, and reflecting capital expenditures and depreciation for the investment period.
*3 Market value is the most recent appraised value or assessment value based on the appraised value, and unrealized gain is the difference between this value and book value.
*4 Assumed APR for stable operation (cash-based net income from rents minus administrative expenses, etc., divided by acquisition price).
The graphs below break down the balance (acquisition price-based, as of end Q3 FY11/21) of our portfolio of properties for lease by location and use.
By location | By use*5 | |||
Residential | ||||
13.2% | Offices | |||
Tokyo | 30.6% | |||
Other major | Hotels | 商業 | ||
Metropolitan | 52.5% | |||
cities | ||||
首都圏 area | 26.2% | |||
45.0% | ||||
88.1% | 55.0% | |||
Commercial
29.9%
*5 Mixed-use properties calculated based on primary usage.
© FIRST BROTHERS Co., Ltd. All Rights Reserved. | 1 |
Topics for Q3 FY11/21 (2)
Portfolio of properties for lease / Stable income and SGA cover rate
Our policy is to expand our portfolio of properties for lease in order to increase stable gross profit from leasing*1. However, gross profit from leasing may drop temporarily due to factors such as the sale of assets for portfolio rotation and vacancy losses incidental to work to enhance property value.
In cumulative Q3 FY11/21, gross profit from leasing trended above selling, general and administrative (SGA) expenses as we made progress with expanding our portfolio of properties for lease.
Q3 FY11/18 | Q3 FY11/19 | Q3 FY11/20 | Q3 FY11/21 | |
(nine months) | (nine months) | (nine months) | (nine months) | |
Gross profit from | 884 | 1,143 | 1,536 | 1,794*3 |
leasing*1 (million yen) | ||||
SGA cover rate*2 | 89% | 105% | 133% | 134% |
*1 Net income gained from properties for lease (NOI [excluding one-time factors] - depreciation expenses)
*2 Gross profit from leasing / Selling, general and administrative expenses (excluding one-time factors)
*3 Correlation between NOI yield during stable operation (see p. 3) and gross profit from leasing (cumulative Q3 FY11/21)
・NOI during stable operation in cumulative Q3 FY11/212,983 million yen (61,201 million yen [average balance of property holdings at beginning of year/end of Q3] x 6.5% [average NOI yield
at beginning of year/end of Q3] x 9/12 months) | |
・Depreciation expenses in cumulative Q3 | -595 million yen |
・Vacancy losses incidental to work to add value to properties and rent for properties acquired during cumulative Q3, etc. -594 million yen
---------------------------------------------------------------------------------------------------------------------------------------------------
・Gross profit from leasing in cumulative Q3 FY11/21 | 1,794 million yen |
Portfolio of properties for lease / Portfolio rotation through property sale
We manage the properties for lease that we acquire, adding value to them through enhancements, and also sell some on the market as appropriate to achieve property rotation and generate capital gains.
In cumulative Q3 FY11/21, we sold several properties to partially realize gains from our portfolio. A summary of these transactions is shown below.
(million yen) | Q3 FY11/18 | Q3 FY11/19 | Q3 FY11/20 | Q3 FY11/21 | |
(nine months) | (nine months) | (nine months) | (nine months) | ||
Sales value*1 | 14,626 | 7,091 | 6,704 | 11,471 | |
Gross profit from | 3,220 | 1,427 | 1,800 | 2,614 | |
sale*1 | |||||
*1 Includes sales of real estate for sale in process (including land for development of properties for lease). | |||||
■ Fluctuations in sales value and gross profit from sale
For the purpose of portfolio rotation, we sell some of our properties to which we have successfully added significant value, or in cases where we find a buyer presenting favorable conditions. We select these properties by assessing our progress in value enhancement. Because the value of each property is relatively large and each sales transaction can be affected by a range of factors, total sales value on a quarterly or annual basis can fluctuate significantly depending on the number of executed transactions. Gross profit from sale also fluctuates, since the profit margin varies from property to property.
© FIRST BROTHERS Co., Ltd. All Rights Reserved. | 2 |
Topics for Q3 FY11/21 (3)
Portfolio of properties for lease / Financing status
Our loan balance tends to increase as investment progresses, because we take out loans when acquiring properties.
As a rule, we take out super long-term loans with repayment terms of 10 years or longer and use interest rate swaps *1 to maintain a fixed interest rate for a certain portion of our loan balance. In cumulative Q3 FY11/21, the share of loans with fixed interest rates decreased due to the expiry of some interest rate swap agreements.
*1 *While the market price of an interest rate swap contract fluctuates according to interest rate and market trends, we utilize such contracts to fix interest payments over the long term and avoid the risk of interest rates going up; the swap contracts contribute to stabilizing our cash flow.
FY11/18 | FY11/19 | FY11/20 | Q3 FY11/21 | |
(end of fiscal year) | (end of fiscal year) | (end of fiscal year) | (end of Q3) | |
Loan balance | 27,930 | 37,646 | 45,976 | 55,696 |
(million yen)*2 | ||||
(Of which, non- | 629 | 613 | 598 | 3,654 |
recourse loans) | ||||
Leverage*3 | 82.1% | 84.9% | 81.8% | 82.3% |
Weighted average | 16.2 years | 13.9 years | 12.1 years | 10.0 years |
residual period | ||||
Weighted average | 0.79% | 0.84% | 0.75% | 0.94% |
interest rate*4 | ||||
% of loans with fixed | 61.6% | 55.1% | 44.3% | 31.7% |
interest rates | ||||
*2 Loans to fund acquisitions of properties for lease | ||||
*3 Loan balance / Book value of properties for lease | ||||
*4 Before fixing interest rates |
Real estate asset management
Guided by our "Client first" rule of conduct, the First Brothers Group's top priority is to provide investment services that put client satisfaction above all else. We therefore always buy or sell investment assets for our funds at the most profitable timing. As a consequence, the Group's AUM balance changes significantly based on real estate market price movements.
In cumulative Q3 FY11/21, competition to buy relatively large-scaleproperties-our funds' target assets-was fierce compared with the market for small to mid-size properties that we invest in on our own account. As such, the Group refrained from new property acquisitions at the funds for which we manage investment independently. However, the Group's AUM balance rose due to real estate investment activities undertaken independently by investor clients, for which we provide asset management on contract for the duration of the investment period.
We are continuing our efforts to seek out new properties for acquisition at our funds for which we manage investment independently.
(million yen) | FY11/18 | FY11/19 | FY11/20 | Q3 FY11/21 |
(end of fiscal year) | (end of fiscal year) | (end of fiscal year) | (end of Q3) | |
AUM | 8,733 | 13,583 | 11,820 | 23,407 |
Increase*1 | 8,733 | 4,850 | 21,570 | 11,587 |
Decrease*1 | 0 | 0 | 23,333 | 0 |
*1 Increase/decrease include conclusion and expiration of asset management agreements.
© FIRST BROTHERS Co., Ltd. All Rights Reserved. | 3 |
Q3 FY11/21 earnings summary (1)
Consolidated income statement (summary)
In cumulative Q3 FY11/21, income and gross profit from leasing increased due to the expansion of the portfolio of properties for lease. Income and gross profit from sale also increased due to the sale of multiple properties. Meanwhile, profit attributable to owners of parent fell as there was no gain on negative goodwill (gain on bargain purchase) which boosted the bottom-line profit a year ago.
The Group's quarterly earnings results are largely affected by whether or not properties are sold during the period under review, and we therefore manage our business plan on a full-year basis. As a result, our full-year forecast for FY11/21 remains unchanged.
Cumulative Q3 | Cumulative Q3 | Cumulative Q3 | YoY | Progress rate in | ||||||||
Cumulative Q3 | ||||||||||||
(million yen) | FY11/19 | FY11/20 | FY11/21 | change | ||||||||
FY11/21 | ||||||||||||
Net sales | 9,329 | 10,020 | 15,810 | +57.8% | 52.5% | |||||||
Gross profit | 2,511 | 3,291 | 4,466 | +35.7% | 65.1% | |||||||
Selling, general and | 1,250 | 1,312 | 1,352 | +3.1% | - | |||||||
administrative expenses | ||||||||||||
Operating profit | 1,260 | 1,979 | 3,113 | +57.3% | 65.8% | |||||||
Ordinary profit | 612 | 1,418 | 2,668 | +88.2% | 66.6% | |||||||
Profit attributable to | 385 | 2,038 | 1,808 | -11.3% | 70.9% | |||||||
owners of parent | ||||||||||||
Gross profit breakdown | ||||||||||||
Cumulative Q3 | Cumulative Q3 | Cumulative Q3 | YoY change | |||||||||
(million yen) | FY11/19 | FY11/20 | FY11/21 | |||||||||
Investment Management | 81 | 210 | 194 | -7.7% | ||||||||
business | ||||||||||||
Investment Banking | 2,430 | 3,081 | 4,242 | +37.7% | ||||||||
business | ||||||||||||
Gross profit from sale | 1,427 | 1,800 | 2,614 | +45.2% | ||||||||
Gross profit from leasing | 1,011 | 1,524 | 1,587 | +4.1% | ||||||||
Other | (9)*1 | (243)*2 | 41 | N/A | ||||||||
Other business | 0 | 0 | 29 | N/A | ||||||||
Total gross profit | 2,511 | 3,291 | 4,466 | +35.7% | ||||||||
*1 Includes loss associated with silent partnership distributions in the private equity investment business. | ||||||||||||
*2 Includes loss on valuation of investment securities (JPY144mn) and loss on valuation of real estate for sale (JPY123mn). | ||||||||||||
Selling, general and administrative expenses breakdown | ||||||||||||
Cumulative Q3 | Cumulative Q3 | Cumulative Q3 | YoY change | |||||||||
(million yen) | FY11/19 | FY11/20 | FY11/21 | |||||||||
Personnel expenses | 690 | 736 | 824 | +87 | ||||||||
Rent | 131 | 128 | 143 | +14 | ||||||||
Commission expenses / | 282*1 | 216*2 | 149 | -66 | ||||||||
remuneration | ||||||||||||
Taxes and dues | 56 | 91 | 109 | +17 | ||||||||
Other | 88 | 138*3 | 126 | -12 | ||||||||
Total selling, general and | 1,250 | 1,312 | 1,352 | +40 | ||||||||
administrative expenses | ||||||||||||
*1 Includes expenses related to M&A transactions (158 million yen). | ||||||||||||
*2 Includes expenses related to M&A transactions (102 million yen). | ||||||||||||
*3 Includes provision of allowance for doubtful accounts (42 million yen). |
© FIRST BROTHERS Co., Ltd. All Rights Reserved. | 4 |
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First Brothers Co. Ltd. published this content on 13 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 October 2021 08:01:01 UTC.