Mori Hills REIT Investment Corporation told unitholders on September 14 that its per-unit distribution for the six months to July 2026 held at ¥3,100, unchanged from the prior period. That stability sits on top of a decline in the numbers that actually pay for it: net income fell 5.2% to ¥5.81bn, operating revenue slipped 2.2% to ¥11.13bn, and operating income dropped 2.8% to ¥6.69bn.
The gap between falling profit and a flat payout was closed by two levers, not by stronger rents. First, the REIT drew down ¥11mn from its compressed special reserve, a mechanism tied to Japan's tax treatment of gains on property replacement. Second, and far more consequential, it sold a 5% stake in Laforet Harajuku, the leased land under the well-known Shibuya retail building, booking a ¥1.257bn gain that was distributed in full. Excluding that gain, the REIT's disclosed forecast assumptions show the payout would not have held at ¥3,100 without it.
Management is telling investors this pattern continues. Guidance for the six months to January 2027 and the six months to July 2027 again holds the distribution at ¥3,100 per unit, but only on the assumption that the REIT sells further slices of the Laforet Harajuku land parcel, booking gains of ¥1.254bn and ¥1.271bn respectively, while also drawing down ¥280mn and ¥505mn more from the compressed reserve. Net income is guided lower in both periods, to ¥5.55bn and ¥5.32bn. The briefing materials describe the Laforet Harajuku sell-down as a staged program running with 5% tranches through 2030, an unusual multi-year mechanism for propping up payouts one land slice at a time.
| Period | Net income | Reserve drawdown | Laforet Harajuku sale gain | Distribution per unit |
|---|---|---|---|---|
| FY to Jul 2026 (actual) | ¥5.81bn | ¥11mn | ¥1.257bn | ¥3,100 |
| FY to Jan 2027 (guidance) | ¥5.55bn | ¥280mn | ¥1.254bn | ¥3,100 |
| FY to Jul 2027 (guidance) | ¥5.32bn | ¥505mn | ¥1.271bn | ¥3,100 |
The operating portfolio itself is not deteriorating. The REIT's 11 properties, most of them premium office towers in central Tokyo including Roppongi Hills Mori Tower and Toranomon Hills Mori Tower, ended the period 98.2% occupied, with office occupancy at 99.0% and rents rising on both renewal and replacement leases. Residential occupancy eased slightly to 93.7%, though rents there jumped even harder, up 11.4% on renewal and 19.6% on replacement. The catch is that in-place office rents are still running about 9.3% below the REIT's own estimate of market rent, a gap that widened from 7.5% a period earlier, meaning even strong renewal increases are chasing a moving target rather than closing it.
On the balance sheet, interest-bearing debt stood at ¥190.6bn at period end, with borrowing costs edging up as the REIT refinanced ¥12.1bn of maturing loans during the period. Roughly 69% of that debt carries a fixed rate through interest-rate swaps, and Japan Credit Rating Agency kept its AA rating with a stable outlook. Total assets were ¥411.2bn against net assets of ¥201.9bn, an equity ratio of 49.1%. The REIT also spent about ¥900mn buying back and cancelling 6,800 of its own units, a small but deliberate use of cash that trimmed units outstanding to 1,879,435.
None of this makes the distribution unsafe in the near term: the REIT has visibility on the reserve and sale-gain assumptions for two more periods. But investors reading past the headline ¥3,100 figure will notice that the recurring engine, rental income after operating and financing costs, is producing less than it did a year ago, and that the land parcel funding today's payouts will eventually run out of slices to sell.