Notice concerning Asset Transfer and Lease Termination (J Tower)

Transcription

1 Translation Purposes Only To All Concerned Parties September 22, 2017 Name of REIT Issuer: One REIT, Inc Nihonbashi, Chuo-ku, Tokyo, Japan Koji Hashimoto, Executive Director (TSE Code: 3290) Contact: Asset Management Company Simplex REIT Partners Inc. Koji Hashimoto, President and Representative Director Contact Person: Takeshi Akimoto, Head of Finance & Administration Division Tel: Notice concerning Asset Transfer and Lease Termination (J Tower) One REIT, Inc. (hereafter referred to as One REIT ) announced that Simplex REIT Partners Inc., the asset management company to which One REIT entrusts management of its assets (hereafter referred to as the Asset Management Company, ) today decided to conduct an asset transfer and lease termination (hereafter referred to as the Transfer ), as described below. 1. Overview of the Transfer (1) Propety name J Tower (2) Asset to be transferred Trust beneficiary rights (3) Planned transfer price (Note 1) 25,220 million yen (4) Book value (Note 2) 24,291 million yen (5) Difference between planned transfer price (Note 3) and book value 928 million yen (6) Appraisal value (Note 4) 25,200 million yen (7) Conclusion date of transfer agreement September 22, 2017 (8) Planned transfer date October 6, 2017 (9) Buyer See 5. Overview of the buyer below (10) Settlement method Lump-sum upon execution of transfer (Note 1) The planned transfer price excludes transfer costs, adjusted amount of fixed asset tax and city planning tax, consumption tax, local consumption tax, etc. (Note 2) As of February 28, 2017 (Note 3) The figure, calculated for reference, represents the difference between the planned transfer price and the book value, and differs from the gain or loss on transfer. Furthermore, the figure is rounded down to the nearest million yen. (Note 4) Appraisal date: February 28, 2017 The asset to be transferred indicated above is sometime referred to as the Property hereafter. 2. Reason for the Transfer One REIT welcomed Mizuho Trust & Banking Co., Ltd. as its new sponsor in December 2015 and tackled various issues including portfolio diversification and strengthening the financial base for further growth in the future. One REIT s current growth strategy centers on Continuous growth of dividends and Disciplined external growth considering the portfolio and financial structure. As part of such strategy, the Asset Management 1 / 6

2 Company amended its asset management guidelines on May 19, 2017, which set core investment target areas within the investment target regions and brought out the attitude of selective investment in Middle-sized Office more clearly (Note 1). As for J Tower, a flagship property in its portfolio, efforts to maintain and improve its asset value had been made since One REIT acquired it at the time of listing. Although there was a time when its occupancy rate was unstable, its occupancy rate has recovered to 99.8% as of the end of August 2017 through efforts such as strategic construction work including installation of a cafeteria and renovation of the common space as well as leasing activities considering the characteristics of the Property, leading to understanding that such efforts to maintain and improve the asset value had been effective. On the other hand, the real estate transaction market is in a favorable condition. Considering the timing as a good opportunity to make efforts to improve the quality of One REIT s portfolio and in an aim to realize selective investment in core investment target areas of the asset management guidelines, the decision to conduct the Transfer was made after comprehensively considering long-term profitability of the Property, the outlook of real estate transaction market trends, existence of candidate properties to acquire as substitutes for the Property after the Transfer and other factors. The buyer was selected by utilizing the extensive information networks and business creation ability of Mizuho Trust & Banking Co., Ltd., which is One REIT s sponsor, and by obtaining support of Simplex Real Estate Management Inc. (supporting company,) which possesses a high level of property selection/management know-how and a wide-ranging investor network, in search for candidate buyers. Going forward, One REIT will continue its endeavors to enhance the stability and quality of its portfolio by utilizing support from the sponsor and supporting company, with an aim to increase unitholder value and medium- to long-term growth. (Note 1) Please refer to the Notice concerning Partial Amendment to Asset Management Guideline announced on May 19, 2017 for details. 3. Details of the Asset to be Transferred Asset Name J Tower Type of specified asset Trust beneficiary rights Trustee Mitsubishi UFJ Trust and Banking Corporation Expiration date of trust period October 31, 2023 Location 1-1 Nikkocho, Fuchu-shi, Tokyo (Domicile) 1-1 Nikkocho, Fuchu-shi, Tokyo Area 2 (Note 1) 7, m Land Zoning Semi-industrial area Building-to-land ratio / Floor-area 60% / 300% ratio Type of ownership Proprietary Ownership Construction / Number of floors S/RC/SRC / B2/18F Building Completed March 1992 Total floor space 53, m 2 Use Office, retail, parking lot, and factory Type of ownership Proprietary ownership Acquisition date October 10, 2013 Acquisition price 24,394 million yen 25,200 million yen Appraisal value Appraisal date: February 28, 2017 Appraiser: The Tanizawa Sogo Appraisal Co., Ltd. (Note 2) Lease status Total leasable area 34, m 2 Leased area 34, m 2 2 / 6

3 Occupancy rate August 2015 February 2016 August 2016 February 2017 August % 96.7% 82.0% 99.8% 99.8% Total number of tenants 31 Property-related operating revenue 797 million yen Lease and guarantee deposits 1,100 million yen (Note 1) Although the land area of the Property shown in the land registry is 7, m 2, the land area based on actual measurements is 15, m 2. (Note 2) The figures in Total leasable area, Leased area and Total number of tenants indicate details as of the end of August 2017 while figures in Property-related operating revenue and Lease and guarantee deposits represents the actual amount for the fiscal period ended February 2017 and the amount as of the end of February 2017, respectively. 4. Use of Proceeds from Transfer Part of the proceeds from the Transfer will be used for the repayment of existing loans (8,841,690 thousand yen in total) that will mature on October 10, As One REIT is making specific considerations on acquisition of some of the properties among properties which One REIT obtained preferential negotiation rights on as properties to acquire as substitutes for J Tower after its transfer, as well as considering early repayment of existing loans and new debt financing (hereafter referred to as the Refinancing ) during the fiscal period ending February 28, 2018 (9th fiscal period), the remaining amount of the proceeds from the transfer is assumed to be used for acquisition of substitute properties or for part of the repayment in case the Refinancing is being executed. Details of the acquisition of substitute properties or the Refinancing will be announced once determined. 5. Overview of the Buyer The buyer is a domestic godo kaisha but details are not indicated as no consent has been obtained from the buyer for disclosure of its name, etc. Furthermore, One REIT or the Asset Management Company has no capital, personnel and business relationships to note with the buyer as of today. Moreover, the buyer does not fall within the scope of the related parties of One REIT or the Asset Management Company. 6. Overview of Brokerage Name Mizuho Trust & Banking Co., Ltd. Head Office Address Yaesu, Chuo-ku, Tokyo Position / Name of Representative Tetsuo Iimori, President & CEO Nature of business Trust services, banking services Stated Capital billion yen (March 31, 2017) Date of Establishment May 9, 1925 Relationship with the Investment Corporation or the Asset Management Company Capital relations The concerned company owns 22,530 investment units of One REIT (11.9% of total number of investment units issued and outstanding) through the Asset Management Company s parent company, which is a wholly-owned subsidiary of the concerned company, and indirectly owns all of the issued shares of the Asset Management Company. Personnel relations A staff of the concerned company is serving as Executive Director of One REIT and Representative Director of the Asset Management Company. In addition, five staff of the concerned company are serving as Directors of the Asset Management Company (including Representative Director of the Asset Management Company). Business relations The concerned company concluded a sponsor support agreement with One REIT and the Asset Management Company. The concerned 3 / 6

4 Circumstances applicable to related parties Brokerage fee company is also a transfer agent, administrative agent for the administrative instruments operation business and asset custodian of One REIT, as well as trustee for some of the properties owned by One REIT. The concerned company does not fall within the scope of the related parties of One REIT. However, the concerned company falls within the scope of the parent company of the Asset Management Company. 20 million yen (excluding consumption tax) 7. Transaction with Interested Persons, etc. The buyer of the Property falls under the category of neither interested persons, etc. defined in the Act on Investment Trusts and Investment Corporations (hereafter referred to as the Investment Trusts Act ) nor an interested party defined in the internal regulation concerning trading with an interested party of the Asset Management Company. The conclusion of a brokerage agreement mentioned above falls under the category of a transaction with interested persons, etc. defined in the Investment Trusts Act and a transaction with an interested party defined in the internal regulations concerning trading with an interested party of the Asset Management Company, and thus the decision is made after predetermined procedures being taken in accordance with the internal rules and regulations of One REIT and the Asset Management Company. 8. Outlook for Financial Results As the Transfer is scheduled to be settled on October 6, 2017, there is no impact on financial results for the fiscal period ended August 2017 (8th fiscal period: March 1, 2017 to August 31, 2017). Although legitimate effects and impacts from factors such as capital gains arising and periodic earnings changing due to the Transfer are expected to be incurred on financial results for the fiscal period ending February 2018 (9th fiscal period: September 1, 2017 to February 28, 2018) and after, One REIT is making specific considerations on various endeavors including the acquisition of substitute properties and the Refinancing after the Transfer, with an eye on the concerned effects and impacts. As an increase in periodic earnings and changes in revenue and expenses such as incurrence of temporal expenses are expected in the case the concerned endeavors have been determined, the outlook for financial results will be announced once expectations on these variable factors have been determined. Forecasts of financial results for the fiscal period ending February 2018 and the fiscal period ending August 2018 (10th fiscal period: March 1, 2018 to August 31, 2018) are scheduled to be announced on October 16, 2017, the date for announcing financial results for the fiscal period ended August 2017 (8th fiscal period). However, these will be announced promptly ahead of the concerned announcement of financial results once conditions allow for such forecasts of financial results to be announced. 4 / 6

5 9. Overview of Appraisal Report Asset Name J Tower Appraised value 25,200,000,000 yen Appraiser The Tanizawa Sogo Appraisal Co., Ltd. Appraisal date February 28, 2017 (yen) Item Content Overview, etc. Income approach value 25,200,000,000 Calculated the value by considering the value based on the DCF Method as the standard value and comparing it with the value based on the direct capitalization method Value based on direct capitalization Assessed by capitalizing the net profit that can be acknowledged as being 26,500,000,000 method standard and stable (standardized net profit) with the capitalization rate Operating revenue 2,085,430,655 Maximum gross operating Assessed based on a level of appropriate rent that is believed to remain 2,186,191,017 revenue stable over the medium to long term Vacancy loss, Assessed decrease in income based on forecast of incurrence of vacancies 100,760,362 etc. and tenant replacement periods Operating expenses 786,242,779 Maintenance Recorded based on building management contract and income and 140,183,669 expenses expenditure results, etc. Utility expenses 457,742,592 Recorded based on income and expenditure results, etc. Repair expenses 21,750,000 Recorded based on engineering reports and figures for similar cases PM fees 17,198,731 Recorded based on property management contract Tenant solicitation expenses, etc. 13,647,096 Recorded value assessed based on expected turnover rates Taxes and public dues 130,878,900 Recorded based on the actual results for fiscal year of 2016 Non-life insurance fees 2,756,360 Assessed based on materials on insurance premiums Other expenses 2,085,431 Recorded based on income and expenditure results, etc. Net operating income 1,299,187,876 Gain on management of income from lump-sum 13,965,268 Assessed the value by assuming investment yield as 1% payment Capital expenditures 43,500,000 Recorded based on engineering reports and figures for similar cases Net income 1,269,653,144 Capitalization Rate 4.8% Assessed based on a comparison with transaction yields in the neighboring areas, etc. and taking forecast of variation and relationships with discount rates into consideration Value based on the DCF Method 24,600,000,000 Discount rate 4.8% Assessed by estimating the base yield of office buildings by build up approach based on yields of financial products and taking into consideration risks of the subject property Terminal capitalization rate 5.0% Assessed by adding future uncertainty to the capitalization rate Cost method value 17,700,000,000 Land ratio 64.0% Building ratio 36.0% Other items considered by appraiser upon appraisal Determined appraisal value to be the income approach value by using the income approach value that properly reflects investment profitability as the standard value and comparing it with the cost method value. One REIT corporate website: 5 / 6

6 < Reference Information> Portfolio List (after the Transfer) Category Office Property No. Property name OT-1 J Tower Fuchu City, Tokyo - OT-2 SIA Kanda Square Chiyoda-ku, Tokyo 7, OT-3 Tachikawa Nishiki-cho Building Tachikawa City, Tokyo 3, OT-4 CP10 Building Taito-ku, Tokyo 3, OT-5 Yokohama AP Building Yokohama City, Kanagawa 3, OT-6 Yushima First Genesis Building Bunkyo-ku, Tokyo 2, OT-7 Miyaji Building Nakano-ku, Tokyo 2, OT-8 36 Sankyo Building Shinjuku-ku, Tokyo 2, OT-9 Minami-Shinagawa JN Building Shinagawa-ku, Tokyo 2, OT-10 Minami-Shinagawa N Building Shinagawa-ku, Tokyo 2, OT-11 Minami-Shinagawa J Building Shinagawa-ku, Tokyo 2, OT-12 MY Atsugi Building Atsugi City, Kanagawa 1, OT-13 Hachioji SIA Building Hachioji City, Tokyo OT-14 Glass City Motoyoyogi Shibuya-ku, Tokyo 7, OT-15 Okachimachi CY Building Taito-ku, Tokyo 2, OO-1 Central Shin-Osaka Building Osaka City, Osaka 4, OO-2 Karasuma Plaza 21 Kyoto City, Kyoto 3, OO-3 Stoke Building Nagoya Nagoya City, Aichi 2, OO-4 MY Kumamoto Building Kumamoto City, Kumamoto 1, OO-5 Nagoya Fushimi Square Building Nagoya City, Aichi 4, Subtotal (19 properties) Location (Note 1) Acquisition price (million yen) (Note 2) Investment ratio (%) (Note 3) 60, R-1 fab Minami-Osawa Hachioji City, Tokyo 4, Retail R-2 Niigata Higashibori-dori Parking Building Niigata City, Niigata Subtotal (2 properties) 4, Total (21 properties) 64, Investment Security GK SIA Bridge No. 2 Silent partnership equity interest (Daihakata Building) Total (1 property) (Note 1) The Location column contains the minimum independent administrative district where each asset is located. (Note 2) Acquisition price column shows the acquisition price (excluding amount equivalent to consumption tax, etc.) described in the purchase and sale agreements of real estate or trust beneficiary interest in real estate related to acquired assets. (Note 3) Investment ratio is calculated as a percentage of the acquisition price of each acquired asset to the aggregate acquisition price of our acquired assets, and rounded to the first decimal place. Fukuoka City, Fukuoka / 6