Breaking Down Heiwa Real Estate REIT, Inc. Financial Health: Key Insights for Investors

Rooted in Tokyo's 23 wards since its founding in 2005, Heiwa Real Estate REIT, Inc. (8966.T) has grown into a focused REIT managing 134 properties (as of December 5, 2025) with an industry-leading occupancy of 97.76% (as of November 30, 2025), driven by a mission to maximize unitholder interests through medium-sized offices and compact residential assets, robust capital-efficiency measures and ESG integration; the REIT's July 2025 medium-term targets include a bold DPU goal of ¥4,200 and an internal rental income growth target of 5% annually, building on early achievement of its NEXT VISION financial targets (DPU target of ¥3,300 reached by January 2024, excluding the ¥300 billion asset-size goal) and tangible progress-DPU of ¥3,850 by July 2025-while pursuing a resilient portfolio strategy, deepening ties with the Heiwa Real Estate Group, and committing to a 90% GHG reduction by 2030 and a 100% renewable energy transition to support sustainable urban revitalization and stakeholder co-creation.

Heiwa Real Estate REIT, Inc. (8966.T) - Intro

• Primary focus: medium-sized offices and compact residential units in Tokyo 23 wards
• Establishment: 2005
• Strategic pillars: capital efficiency, maximize unitholder value, portfolio resilience
• Group affiliation: leverages Heiwa Real Estate Group for external and internal growth

• Capital efficiency initiatives: optimizing asset management, active lease-up strategies, selective acquisition/disposition aligned with urban demand.
• Unitholder value levers: internal rental growth (5% target), disciplined financing, and DPU enhancement to ¥4,200 in the medium term.
• Resilience measures: high occupancy (97.76%), diversified tenant mix across office/residential assets, and central Tokyo locations that support stable cash flows.
• Sustainability programs: portfolio-level energy upgrades, decarbonization planning targeting 90% GHG reduction by 2030, and a roadmap to 100% renewable energy sourcing.

Heiwa Real Estate REIT, Inc. (8966.T) - Overview

• Core investment focus: medium-sized offices and compact residential assets in Tokyo's 23 wards, targeting rent stability and high occupancy.
• Risk management objective: build a portfolio resilient to inflation and interest-rate volatility through staggered lease maturities, diversified tenant base, and active cost control.
• ESG integration: promote energy efficiency, tenant engagement, and governance transparency to enhance long-term asset value and community outcomes.

• Asset size target: 300 billion yen.
• Distribution per unit (DPU) target: 3,300 yen.

• Deliver consistent, inflation-resilient distributions while growing asset quality and income stability.
• Expand selectively toward the 300 billion JPY asset-size goal, prioritizing accretive acquisitions in Tokyo's core and inner-ward submarkets.
• Be recognized as a sustainability-minded REIT that contributes to viable urban communities and long-term unitholder value.

• Unitholder-first governance: decisions anchored to long-term income stability and transparent communication with investors.
• Prudent financial management: conservative leverage, diversified funding sources, and active interest-rate risk controls.
• Operational excellence: proactive asset management, tenant retention programs, and cost discipline to protect distributions under inflationary pressure.
• ESG commitment: pursue energy efficiency upgrades, disaster-resilient building standards, and community engagement initiatives across portfolio properties.

• Portfolio repositioning: targeted acquisitions of mid-sized offices and compact residential units in high-demand Tokyo wards to boost rental growth potential.
• Lease and revenue management: staggered expiries and diversified tenant mix to mitigate cash-flow volatility from interest-rate swings.
• Capital strategy: maintain LTV in the high-30% range, use fixed-rate and hedged borrowings, and opportunistic equity issuance only when accretive.
• ESG actions: energy-saving retrofits, green certifications on eligible assets, and tenant sustainability programs to reduce operating costs and enhance asset desirability.

Heiwa Real Estate REIT, Inc. (8966.T) - Mission Statement

• Deliver stable and growing distributions through conservative leverage and active portfolio management.
• Prioritize environmental performance: target 90% reduction in greenhouse gas emissions by 2030 and 100% transition to renewable energy sources.
• Enhance capital efficiency via selective acquisitions, asset recycling, and operational cost improvements to maximize unitholder value.
• Foster resilient portfolios designed to withstand economic cycles and preserve investor capital.
• Support urban revitalization and community vibrancy in alignment with the Heiwa Real Estate Group's broader mission.

• Integrity - transparent governance and alignment with unitholder interests.
• Sustainability - measurable ESG targets and investment in carbon reduction.
• Discipline - rigorous underwriting, risk control, and balance-sheet prudence.
• Community - projects that enhance urban vitality and tenant well‑being.
• Innovation - deploying technologies and management practices that improve efficiency and returns.

• Accelerate energy-efficiency retrofits and on-site renewables installation across key assets.
• Optimize capital structure via low-cost financing and opportunistic asset recycling.
• Pursue selective acquisitions in resilient sub-sectors and high-demand urban locations to bolster cash flow and occupancy.
• Roll out tenant-focused amenities and community programs to increase retention and rental premiums.
• Enhance ESG reporting and third-party verification to track progress toward the 2030 targets.

Heiwa Real Estate REIT, Inc. (8966.T) - Vision Statement

• Trust - Building a foundation of reliability via transparent governance, stable occupancy of landmark assets (including stock exchange-related properties), and long-term tenant relationships.
• Forward Thinking - Anticipating urban and market shifts to reposition assets, adopt flexible lease structures, and pursue adaptive reuse where appropriate.
• Co-creation - Partnering with tenants, local governments, and service providers to enhance property value through mixed-use synergies, events and community programming.
• Sustainability - Integrating environmental, social and governance (ESG) measures across portfolio operations to reduce carbon footprint and support resilient communities.
• Customer Commitment - Prioritizing tenant needs with responsive property services, amenities and tenant retention initiatives to sustain high satisfaction and low turnover.
• Innovation - Leveraging proptech, energy management systems and data-driven asset management to improve efficiency, lower operating costs and enhance tenant experiences.

• Stabilize and grow recurring distributable income via high-quality, centrally located commercial assets.
• Maintain conservative leverage and liquidity to protect distributions through cycles.
• Enhance asset value through targeted capex, re-tenanting and selective redevelopment.
• Embed measurable ESG targets across energy, waste and community engagement metrics.

• Energy intensity reduction target: -15% vs. baseline within five years via LED retrofits and HVAC optimization.
• Green lease adoption: target to include ESG clauses in new and renewing leases to align tenant behavior with building sustainability goals.
• Community engagement: programming and partnerships to activate ground-floor spaces and support local economic activity.

• Independent board oversight, regular disclosure of portfolio performance and third-party valuations to ensure transparency.
• Conservative debt policy with staggered maturities to mitigate refinancing risk.
• Tenant-focused KPIs-response times, retention rates and satisfaction surveys-tracked and reported annually.

• Deployment of smart building systems for energy monitoring and tenant comfort management.
• Digitized leasing and facilities workflows to reduce operating costs and accelerate decision-making.
• Use of data analytics to inform capex prioritization and market rent-setting.