• Improving growth outlook overshadowed by mixed guidance – FP4/26 results showed strong operating fundamentals, particularly on the strength of the office market in core Japanese urban centres and the resiliency of the hotel segment. The near-term guidance for FP10/26 and FP4/27 is mixed with net operating income (NOI) and distribution per unit (DPU) outlook diverging, but the underlying operating fundamentals remain very positive. MIRAI's office rent gap widened to -14.7% PoP from -11.1% in FP10/25 even as the REIT actively raised rents. We estimate closing the rent gap would translate to a meaningful +10% increase in Office NOI. This paves a very clear runway for Office NOI growth over the next 2-3 years. Furthermore, the sale of the THINGS Aoyama property at a price above appraised value hints at NAV growth upside as MIRAI continues to execute on its capital recycling strategy to fund its acquisition pipeline, driven by the rotation of capital from mature assets into assets with higher growth and value creation potential.
