For the six-month period ended January 31, 2026
May 2026
Management Discussion and Analysis
Asset Management Status
Summary of Results for the six-month period ended January 31, 2026 (The 41st Period)
Background of JLF
JLF is the first J- REIT dedicated to "logistics properties" with real estate and other assets used for logistic facilities primarily in the Tokyo Metropolitan, Osaka, Nagoya and Fukuoka areas as investment targets. Based on the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951; including revisions enforced thereafter) (hereinafter, "the Investment Trust Act"), JLF was founded on February 22, 2005 with Mitsui & Co., Logistics Partners Ltd. (hereinafter referred to as "MLP") as the founding planner, and was listed on the REIT section of the Tokyo Stock Exchange, Inc. (hereinafter, "Tokyo Stock Exchange") on May 9 of the same year (security code: 8967).
As of January 31, 2026 (the end of the 41st Period), JLF owns 52 properties under management with a total acquisition price of 293,467 million yen and total assets of 274,137 million yen.
Investment Environment and Management Performance
The Japanese economy is recovering at a moderate pace despite some areas of weakness, while the global economy continues to grow modestly overall as it absorbs the impact of trade policies among major economies. Exports and industrial production remain generally flat. Corporate earnings have been sustained at high levels, and business sentiment remains favorable, supporting an upward trend in capital expenditures. Consumer prices (excluding fresh foods) have recently increased at a year-on-year rate in the mid 2% range, driven primarily by higher prices for rice and other food products as rising labor costs are passed on to sales prices.
Against this backdrop, the TSE REIT Index has enjoyed bottom support as expectations of rental growth and initiatives aimed at increasing distributions offset the impact of long-term interest rates rising above 2% toward the end of 2025, reflecting expansionary fiscal policies and expectations of accelerated rate hikes. Thereafter, however, the Index fell and has since shown softness, after long-term rates rose further heading into the end of January 2026. The overall J-REIT market continues to trade at a discount to NAV.
Looking at the logistics leasing market, in the Tokyo Metropolitan Area, the vacancy rate continues to improve modestly as large lease contracts have been signed in the field of consumer goods, absorbing some of the hangover from vacant inventory in existing properties. Rents along the National Route 16 and Ken-O Expressway have remained stable, while rental growth has been observed where vacancy rates have declined in the Tokyo Bay Area and along the Tokyo Gaikan Expressway. In the Greater Osaka area, leasing demand has remained strong central areas. This has been reinforced by declining vacancies in the bay area and peripheral areas, providing bottom support to rents at convenient facilities and properties close to transportation. In the Greater Nagoya area, despite high levels of new supply, rents have trended upward in geographical areas that enjoy strong demand, thanks to absorption of existing supply driven by lease signings across a broad range of industries, from manufacturing to food and beverage and daily sundries. In the Greater Fukuoka area, limited new supply in and around Fukuoka has facilitated absorption of vacant space. Rents have grown gradually, making space feel less affordable. More recently, rents have flattened.
Amid this environment, JLF continues to pursue stability and sustainable growth in DPU and NAVPU. JLF's unit price is trading at a discount to NAV, and MLP recognizes a recovery in JLF's unit price as an important challenge. During the period under review, we completed part of the swap transaction approved in January 2025. Also, in December 2025, we acquired (a 45% quasi-co-ownership interest in) the Ishikari Logistics Center and sold the Kadoma Logistics Center. Meanwhile, we continued to implement an investment unit buyback program from September 2025 through March 2026. In terms of portfolio
operations, we have achieved strong profit growth on positive re-leasing spreads at multiple properties.
Overview of Financial Strategy
Through borrowing funds or issuing investment corporation bonds, JLF has increased its resistance to rising interest rate fluctuations by fixing interest rates and diversifying repayment dates.
As of the end of the period under review, total interest-bearing liabilities stood at 121,100 million yen, and LTV (loan to value) was 44.2% based on total assets (Note1) and 29.0% based on appraisal value (Note2), maintaining stable financial operations.
Furthermore, during the six-month period under review, based on the judgment that JLF's investment unit price was undervalued compared to NAVPU, in September and December 2025 we decided to implement an investment unit buyback program to increase unitholder value over the medium to long term. The investment unit buyback program was executed under a purchase agreement entered into with a securities brokerage, where the broker purchased investment units from the market on the Tokyo Stock Exchange. Although JLF had resolved to cancel all investment units acquired during the period, no cancellation was carried out, as the total number of investment units acquired during the period was zero.
Compared to other assets, logistics facilities, which are the primary investment targets of JLF, generally have a high ratio of building value to land value and high depreciation expenses, while the ratio of equipment to building value is low and capital expenditures are limited. In light of these characteristics, JLF makes distributions in excess of earnings based on certain rules to ensure efficient cash management and return of earnings to unitholders. In addition, distributions in excess of earnings will not be made if JLF has reserves for reduction entry of special provisions of replaced property, reserves for tax purpose reduction entry or other retained earnings. In principle, the level of ongoing distributions in excess of earnings shall be capped at an amount equivalent to 60% of depreciation expenses for the applicable fiscal period. However, in cases where the level of distribution per unit is expected to temporarily decrease to a certain degree, JLF may make temporary distributions in excess of earnings, in addition to ongoing distributions in excess of earnings, for the purpose of equalizing the amount of distributions per unit. The total amount of ongoing and temporary distributions in excess of earnings shall not exceed an amount equivalent to 60% of depreciation expenses for the applicable fiscal period.
(Note 1) Total assets-based LTV (%) = Interest-bearing debt / total assets x 100 (figures are rounded off to one decimal place)
(Note 2) Appraisal value-based LTV (%) = Interest-bearing debt / appraisal value at the end of the six-month period x 100 (figures are rounded off to one decimal place)
Credit rating of JLF as of January 31, 2026
Credit Rating Agency
Rating
Rating and Investment Information, Inc. (R&I)
Issuer rating
AA-
(Outlook: Stable)
Long-term bond rating
#3rd unsecured investment corporation bonds AA-
#5th unsecured investment corporation bonds
AA-
Japan Credit Rating Agency, Ltd. (JCR)
Long-term Issuer rating
AA
(Outlook: Stable)
Bond rating
#6th unsecured investment corporation bonds
AA
#7th unsecured investment corporation bonds (Green Bonds)
AA
Performance and Distributions
As a result of the above, JLF posted operating revenue of 11,933 million yen, operating income of 6,874 million yen,
ordinary income of 6,407 million yen and net income of 6,406 million yen.
Note that, in the current fiscal period, a portion of the reserve for reduction entry of special provisions of replaced property (443 million yen) recorded in prior periods was reversed due to the sale of land of the Ichikawa Logistics Center II (quasi co-ownership interest: 18%). In addition, under Article 65-8 of the Act on Special Measures Concerning Taxation "Special Provisions on Taxation in Cases Where a Special Account Is Established in Connection with the Transfer of Specific Assets" a portion of the gains (533 million yen) from the December 2025 sale of the Kadoma Logistics Center was retained as reserve for tax purpose reduction entry. Accordingly, JLF decided to distribute 6,316 million yen, which is the amount remaining after deducting the 533 million yen transferred from unappropriated retained earnings (including the reversal of reserve for reduction entry of special provisions of replaced property) to the reserve for reduction entry within the limits on reserve for reduction entries stipulated in Article 65-8 of the Act on Special Measures Concerning Taxation. As a result, the distribution per unit was 2,300 yen.
In addition, pursuant to its distribution policy specified in its Articles of Incorporation, JLF, in principle, plans to continuously make distributions in excess of earnings in each fiscal period (contribution refunds that fall under distributions accompanying a decrease in capital under tax law). However, in the current fiscal period, since JLF has internal reserves (reserve for reduction entry of special provisions of replaced property and reserve for tax purpose reduction entry etc.), it will not make distributions in excess of earnings.
Outlook for the Next Six-month Period
Recognition of the Environment
Japan's economy is expected to continue modest growth despite the effects of international trade policies thanks to strengthening tailwinds such as a return to growth among overseas economies, economic policies from Japan's government, an accommodative financial environment, and a virtuous cycle of increased income and expenditures. Although uncertainties related to trade policies have subsided, the effects of trade policies implemented to date on global trade activity and international financial and capital markets could weigh on the global economy, warranting careful and sustained observation. Further, recent moves toward fiscal expansion in the US, Europe and elsewhere should be noted for their potential to boost the global economy. Import prices could move higher as trade policies lead to disruptions in the global flow of goods. Also, geopolitical factors and weather events could lead to the risk of substantial swings in the prices of grains and natural resources. In Japan, demographic shifts have intensified perceptions of labor shortages, fueling investments in automation and tilting the scale between labor and capital. Nevertheless, lackluster progress toward those ends threatens to dampen growth rates. We need to continue to closely monitor a variety of risk factors inside and outside Japan.
Looking at the logistics leasing market, in the Tokyo Metropolitan Area, the vacancy rate, which has been rising since January 2021, has turned downward as new supply has dissipated, leading toward an improvement in the balance between supply and demand. In the Greater Osaka area, demand has been stable along the bay and inland, feeding expectations for continued strength in leasing conditions. In the Greater Nagoya area, the vacancy rate is expected to spike as a concentration of new supply is brought online in the first half of fiscal 2026. In Kyushu, looser supply-demand dynamics are expected as new supply in 2026 surpasses that of 2025.
In the logistics acquisition market, the environment is expected to remain harsh, backed by demand from investors for the defensive nature of cash flows from logistics properties and the large yield gap relative to global comparators.
As inflation and interest rate increases persist, JLF recognizes as a continued challenge the need to improve its investment unit price, which has been trending weakly. In response to this challenge, we strive to maintain a DPU above JPY 2,150 and target annual growth of 2.2% or more in FFO per unit (Note) to gain trust in the sustainability of DPU and growth in portfolio profits. To achieve these goals, we will aim to grow portfolio cash flows by advancing rental growth, suppressing cost
increases from higher interest rates and inflation, etc., and continuing property dispositions, leveraging JLF's abundant paper gains, which in turn fund re-investment. We hope these efforts will lead to DPU growth and investment unit price appreciation. (Note) FFO = Net income (for the period) + Depreciation & amortization costs (for the period) + Loss on disposal of fixed assets (for the
period) + Capital losses on real estate sales - Capital gains on real estate sales etc. - Gain on exchanges of real estate properties etc.
Future Asset Management Policies and Issues to be Addressed
In such an investment environment, JLF will pursue asset management aimed at achieving stable earnings over the medium to long term based on the following policies.
Operational management of portfolio properties
・Leasing management
When renewing leases, we strive to stabilize and grow revenues. We advance long-term leases to stabilize revenues and conduct rent negotiations with an eye on the market environment and tenant circumstances to grow revenues. When a tenant decides to move out, JLF will perform leasing activities based on this policy so that leases are maintained without any discontinuity and revenues are secured by leveraging its sponsor network, intermediary companies well versed in logistics properties and in tenant information for respective regions, as well as the network of MLP.
The properties currently held by JLF have an average leasing period of 5.2 years when calculated on a weighted average basis using annual rent, indicating that JLF will continue to earn stable income.
・Strengthening of tenant relations
JLF will promote the improvement of the overall satisfaction level of tenants by maintaining close contact with existing tenants. Specifically, JLF responds to tenants' needs for expanding rental space and improving the property conditions of existing logistics facilities, making functional improvements in line with the needs of tenants and the industry and implementing renewals.
・Appropriate property maintenance and additional investment
JLF conducts repairs and renovations of properties owned by keeping related costs at a certain level. In addition, JLF strives to maintain an optimal level of maintenance management of its properties by selecting appropriate property management companies that can provide efficient management in line with the characteristics of each property, improving the management quality of MLP, and standardizing various procedures.
Furthermore, JLF considers Own Book Redevelopment (OBR) (Note) , disposition, and asset reshuffle if necessary, taking into consideration tenant requests, the leasing needs of facilities, floor area ratios, and other factors in determining portfolio properties that have locational advantages in the leasing market and those that can gain higher competitiveness through building/facility renewal while identifying properties that no longer offer economic benefits due to the increased maintenance cost burden caused by deterioration over time.
(Note) "OBR" (Own Book Redevelopment) is the redevelopment of properties owned by JLF itself. "Redevelopment" refers to the act of JLF building a new building on land that JLF owns after the existing building has been demolished. JLF collaborates with players such as construction companies, who build the new building on land JLF owns. After the building is complete, JLF acquires said building at the timing of its discretion. The same applies hereafter.
Acquisition of new properties
・Sourcing of property information
Unlike other asset types, logistics properties have limited transaction volumes in the market. Therefore, JLF believes that collecting a broad range of information and making precise investment decisions based on the information gathered lead to achieving high competitiveness. In order to avoid unnecessary price competition, JLF will work to obtain early access to