Kasumigaseki Hotel REIT Investment Corporation FY2026 Q4 Earnings Report

Financial Highlights

• Operating Income: ¥309M
• Net Income: ¥61M

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

KASUMIGASEKI HOTEL REIT Investment Corporation (401A0) reported FY2026 Q4 results under JGAAP (non-consolidated) with several items undisclosed in XBRL (zeros indicate non-disclosure, not actual zero). Operating income was ¥309.3 million, ordinary income ¥61.5 million, and net income ¥60.9 million for the period, implying positive core profitability despite limited disclosed top-line data. Depreciation and amortization totaled ¥85.3 million, producing EBITDA of ¥394.6 million and an EBIT-based interest coverage of 6.1x, which is a reasonable cushion for a hotel-focused REIT in a rising-rate environment. Total assets stood at ¥53.40 billion, funded by ¥25.60 billion of liabilities and ¥27.79 billion of equity, yielding a reported debt-to-equity ratio of 0.92x and financial leverage (A/E) of about 1.92x. Liquidity is tight with current assets of ¥3.35 billion versus current liabilities of ¥5.10 billion, translating to a current ratio of 65.7% and negative working capital of ¥1.75 billion. Operating cash flow was negative at ¥-2.14 billion, while financing cash flow was a large inflow at ¥52.69 billion, suggesting substantial external funding (debt and/or equity) to support balance sheet expansion; investing cash flow was undisclosed. The combination of positive earnings, negative OCF, and sizable financing inflow points to timing effects and potential working capital outlays around portfolio formation or rebalancing, common around capital-raising or acquisition windows for J-REITs. With revenue items undisclosed, standard margin metrics (gross margin, EBITDA margin, net margin) appear as zero in the provided metrics and should not be interpreted as actual economic margins. Using available figures, implied ROE based on net income over period-end equity is approximately 0.22% for the period (not annualized), though the DuPont results supplied are not meaningful due to undisclosed revenue and asset turnover. Interest expense of ¥50.5 million against EBIT of ¥309.3 million indicates manageable financing costs relative to earnings, but the negative OCF and sub-1.0x current ratio heighten near-term liquidity monitoring needs. No cash and equivalents were disclosed, which limits precision on immediate liquidity buffers. Dividend per share and payout ratio are reported as zero, likely reflecting non-disclosure rather than a policy change, but this prevents a direct assessment of distribution sustainability for the quarter. For hotel REITs, FFO/AFFO, NOI, occupancy, ADR/RevPAR, fixed vs variable rent mix, and LTV are the pivotal indicators; most are not disclosed here. Overall, the period reflects a REIT with a growing balance sheet, positive operating earnings, moderate leverage, and healthy interest cover, offset by tight liquidity and negative OCF. Data gaps (particularly revenue, cash balance, investing CF, unit count, and distribution metrics) necessitate caution in interpreting profitability quality and dividend capacity. Continued monitoring of cash generation normalization, refinancing progress, and post-raise deployment is essential as the REIT scales.

Profitability Analysis

DuPont decomposition is constrained by undisclosed revenue and asset turnover; the provided DuPont shows net profit margin 0.00% and asset turnover 0.000 only because revenue was not reported. Using available data, period ROE approximates 0.22% (¥60.9m net income / ¥27.79bn equity), with financial leverage of 1.92x. Operating income of ¥309.3m versus interest expense of ¥50.5m results in EBIT interest coverage of 6.1x, indicating reasonable headroom. EBITDA of ¥394.6m implies D&A intensity of about 28% of EBITDA, consistent with hotel asset depreciation profiles for a relatively new portfolio. Margin quality cannot be assessed without NOI or revenue disclosure; however, positive ordinary income (¥61.5m) suggests that below-operating items (notably interest) are being absorbed. Operating leverage is unclear due to missing revenue, but the jump from EBITDA to ordinary income indicates financing costs are the primary drag rather than G&A. With limited asset turnover visibility, we infer that earnings are real-estate income driven with stable fixed-cost structure typical of J-REITs, and sensitivity will be more to occupancy/ADR (if variable leases) or tenant performance than to traditional operating leverage.

Growth Assessment

Revenue and NOI trends are not disclosed, preventing a direct assessment of top-line growth sustainability. Balance sheet expansion to ¥53.40bn assets alongside ¥52.69bn financing inflow suggests portfolio growth or recapitalization in the period. Net income of ¥60.9m is positive, but without prior-period comparables (other than the '+0.0% YoY' placeholder), quality of growth cannot be determined. If the REIT is early in its lifecycle, earnings may rise as newly acquired assets stabilize and as RevPAR recovers with inbound tourism; conversely, variable lease components could introduce volatility. The lack of investing CF disclosure clouds visibility into acquisition timing and capex needs. Outlook hinges on hotel demand normalization, operator health, and lease structures; rising room rates and inbound recovery would be supportive, while economic slowdown or event risk would weigh. We expect near-term earnings direction to be driven by occupancy and ADR trends and by the pace of deploying raised capital into income-producing assets.

Financial Health

Liquidity: Current assets ¥3.35bn vs current liabilities ¥5.10bn yields a current ratio of 0.657 and negative working capital of ¥1.75bn, indicating tight short-term liquidity. Cash balance was undisclosed, limiting assessment of immediate headroom. Solvency: Total liabilities ¥25.60bn and equity ¥27.79bn produce D/E of 0.92x; financial leverage (A/E) is 1.92x, moderate for a J-REIT. Interest burden: Interest expense ¥50.5m and EBIT ¥309.3m result in 6.1x coverage, acceptable but sensitive to rate increases. Capital structure: With assets at ¥53.40bn and liabilities at ¥25.60bn, a rough LTV proxy (assuming most liabilities are interest-bearing) is about 48%; actual LTV may differ depending on non-interest-bearing items. Maturity profile, covenants, and fixed/floating mix are not disclosed; refinancing risk assessment is therefore limited. Overall, solvency metrics are solid, but liquidity requires monitoring given sub-1.0x current ratio and negative OCF.

Cash Flow Quality

Earnings quality is mixed: positive net income of ¥60.9m contrasts with operating cash outflow of ¥-2.14bn, yielding an OCF/NI ratio of -35.2x. The gap likely reflects working capital movements (e.g., deposits, tax/interest timing, receivables/payables) and potential portfolio ramp effects; detailed drivers are undisclosed. Free cash flow cannot be computed as investing cash flows are undisclosed; reported FCF is 0 in the dataset but should be treated as not available. Financing cash inflow of ¥52.69bn indicates reliance on capital markets or bank debt, typical during acquisition phases. Absence of investing CF disclosure, despite asset growth, suggests data limitations rather than a lack of investment activity. Until OCF normalizes and AFFO is disclosed, we treat cash conversion as low visibility. Monitoring NOI-to-cash, changes in tenant/operator receivables, and timing of expenses will be key to assessing cash flow quality.

Dividend Sustainability

Reported DPS and payout ratio are zero due to non-disclosure; as a J-REIT, the entity typically targets high distribution ratios to maintain tax pass-through status. Without FFO/AFFO, NOI, or cash figures, distribution capacity for the period cannot be directly assessed. Interest coverage of 6.1x is supportive of ongoing distributions, but negative OCF and a current ratio below 1.0 raise short-term coverage considerations. FCF coverage is shown as 0.00x in the dataset but should be viewed as not available given missing investing CF and cash details. Policy outlook likely centers on distributing the majority of distributable income while preserving covenant headroom; however, the timing of large capital raises and deployment may cause near-term variability. Clarity on DPU guidance, retained cash policy, and AFFO payout will be essential once disclosures are available.

Risk Assessment

Business Risks:

• Hotel demand volatility driven by macro conditions, inbound tourism, and event calendars
• Operator credit risk and lease structure dependence (fixed vs variable rent components)
• Concentration risk by geography, brand, and tenant/operator
• Seasonality of hotel earnings impacting variable rents and cash timing
• Asset valuation risk amid changing cap rates and transaction market liquidity
• Competition from alternative accommodations and new hotel supply

Financial Risks:

• Liquidity tightness with current ratio at 0.66x and negative operating cash flow
• Refinancing and interest rate risk affecting borrowing costs and coverage
• Potential covenant constraints if NOI underperforms or valuations decline
• Exposure to appraisal declines impacting LTV and borrowing capacity
• Limited disclosure of cash, investing CF, and debt maturity profile

Key Concerns:

• Negative OCF (¥-2.14bn) versus positive earnings indicates low cash conversion in the period
• Sub-1.0x current ratio (0.657) implies need for careful short-term liquidity management
• Dividend visibility is limited due to undisclosed DPS/FFO/AFFO metrics
• Large reliance on external financing in the period (¥52.69bn inflow) amid incomplete investing disclosure
• Inability to assess revenue, NOI, and occupancy trends due to non-disclosure

Investment Implications

Key Takeaways:

• Positive operating and net income with EBIT interest coverage at 6.1x supports solvency
• Leverage appears moderate (D/E 0.92x; implied LTV ~48%), appropriate for a hotel REIT
• Liquidity is tight (current ratio 0.66x; working capital ¥-1.75bn) and warrants monitoring
• Operating cash flow is materially negative, pointing to timing/working capital or ramp effects
• Significant financing inflow suggests portfolio expansion or recapitalization during the period
• Data gaps (revenue, NOI, cash balance, investing CF, unit count, DPU) limit visibility on profitability quality and distributions

Metrics to Watch:

• NOI, FFO, and AFFO trends and disclosure timing
• Occupancy, ADR, and RevPAR across the portfolio
• LTV (market and covenant basis) and debt maturity ladder
• Fixed vs floating interest rate mix and hedging coverage
• Cash balance, OCF normalization, and working capital movements
• Distribution per unit (DPU) guidance and AFFO payout ratio
• Asset acquisition pipeline, cap rates, and deployment of raised capital

Relative Positioning: Relative to J-REIT hotel peers, the REIT exhibits moderate leverage and healthy interest cover but weaker short-term liquidity and low cash conversion this period; scale at ~¥53bn assets places it in the small-to-mid cohort, with performance sensitivity hinging on hotel demand recovery and execution on capital deployment.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis