Japan Logistics Fund, Inc. IR Meeting Material Autumn, 2012

Transcription

1 Japan Logistics Fund, Inc. IR Meeting Material Autumn, 2012

2 Table of Contents Executive Summary 3 CHAPTER 3. Strategies Strategy Outlook 12 CHAPTER 1. The 14 th Period and Beyond AUM Growth 13 The 14 th Actual / The 15 th and 16 th Forecasts 5 New Acquisition in the 15 th Period 14 Topics on the 14 th Period 6 Portfolio Management 15 Financial Strategy 18 CHAPTER 2. Market Environment Recognition Logistics Market Overview 8 Appendices 19 Supply-Demand Balance of Logistics Facilities 9 Acquisition / Development Market 10 2

3 Executive Summary 14 th period results With the contribution of Souka LC, JLF achieved the record profit. DPU: 17,689.- Forecasts The 15 th period DPU: 18,000 The 16 th period DPU: 17,500 Policy Focusing on improving quality of the portfolio and stabilizing dividend; Unchanged Enhance growth strategy by utilizing resources in AM as logistics focused professionals Strength Expertise in asset management of logistics properties based on proven track record Support from sponsors, unparalleled quality portfolio and sound balance sheet Vision The best logistics REIT which can satisfy various stakeholders expectations 3

4 CHAPTER 1. The 14 th Period and Beyond

5 The 14 th Actual / The 15 th & 16 th Forecasts 13 th Actual 14 th Actual 15 th Forecast*¹ 16 th Forecast*¹ From 7/1/2011 From 2/1/2012 From 8/1/2012 From 2/1/2013 To 1/31/2012 To 7/31/2012 Difference To 1/31/2013 Difference To 7/31/2013 Difference Operating Revenue 5,561 Mil. 5,637 Mil Mil. 5,865 Mil Mil. 5,839 Mil Mil. Net Income 2,595 Mil. 2,617 Mil Mil. 2,665 Mil Mil. 2,590 Mil Mil. Dividends per unit 17,538 17, , , FFO per unit 25,924 26, , , NOI yield *2 6.8% 6.7% 6.5% 6.5% Yield after depreciation *2 5.0% 4.9% 4.8% 4.7% Units outstanding 148, , , ,000 # of properties LTV *3 22.2% 25.1% 28.7% 28.7% Compared w/ the 13 th period Souka L.C. acquisition (+87) Lease termination (Yokosuka, Komaki II) (-74) Tax cost decrease (+35) Repair cost increase (-27) The 15 th period Tatsumi Acquisition / Souka full contribution Komaki II lease initiation Repair cost increase Debt cost increase (due to Tatsumi acquisition) The 16 th period Tatsumi full contribution Yachiyo lease expiration Tax incurred (Souka, Tatsumi) Funabashi value up project *¹ The forecasts are calculated under certain conditions, as of 9/7/2012. The forecasts may change due to unexpected lease termination, asset sale/purchase or financing activities. The forecasts do not guarantee any future dividends payment. *² NOI yield = Annual NOI / Book value of the asset / days in the periods x 365 Yield after depreciation = Income from real estate leasing business / Book value of the asset / days in the periods x 365 *³ LTV = Interest bearing debt / Appraisal value of the properties 100 5

6 Topics on the 14 th Period Accomplished steady AUM growth, stable portfolio management, and sound financial management Acquisition Souka Logistics Center AUM 149 Bn. Prime location in Inland Metropolitan Area Versatile property with stable lease contract Co-investment with sponsor s private fund NOI Yield (exp.) : 5.8% Portfolio Management Leasing & property management Komaki II New Tenant: ARATA Corp. 10yr+2m Fixed Term Lease Yokosuka Completion of refurbish (June 2012) Record high profit LTV control Financial Management Utilizing debt availability (6.5Bn) LTV 25.1% J-REITs average 49.4% (ARES J-REIT View as of April, 2012) Occupancy Rate 97.0% Average remaining lease term 6.3 yrs. R&I AA (Stable) Moody s A1 (Stable) *All the figures at the end of the 14 th period 6

7 CHAPTER 2. Market Environment Recognition

8 Logistics Market Overview Stability of consumer goods and Growth of 3PL/e-commerce business Cargo Volume (FY2000=100) Total Cargo Volume (Left Axis) Consumer Goods etc. (Left Axis) % of Consumer Goods etc. (Right Axis) 25.0% 20.0% Consumer goods; Relatively stable 3PL business; Continuously growing E-Commerce market; Rapidly expanding % Floor demand from these tenants increase steadily (Fiscal Year) 3PL Sales Growth 10.0% (Note) Among JLF s tenants, 90% of the cargo belongs to consumer goods Expected e-commerce Sales Growth (10 Billion JPY) 100 Major 9 Players Largest 3 Players (Trillion JPY) 20 Market Size (Left Axis) (10 thousand tsubo) 20 CAGR 2.6% 15 Floor Demand (Right Axis) CAGR 5.9% (Fiscal Year) (Year) (Source) Japan Logistics Field Institute, Inc., MLP 8

9 Supply-Demand Balance of Logistics Facilities Though several development projects come to completion, supply/demand gap stays flat Supply/demand gap in Tokyo Met. Bay Area Supply/demand gap in Osaka Area (Thousand m²) (%) (Thousand m²) (%) 1, Supply emand Supply Demand Vacancy Vacancy (Fiscal Year) (Fiscal Year) 10 0 Supply/demand gap in Tokyo Met. In-land Area (Thousand m²) (%) 1,000 Supply Demand Vacancy (Fiscal Year) Vacancy; Drastically improved from the Lehman shock impact Development; Low vacancy rate stimulated new developments of logistics properties Future Supply-Demand; Well-balanced, still should be careful about some areas where the balance mismatch exits Bifurcation; Polarized vacancy between higher grade properties and lower grade properties (Source) Japan Logistics Field Institute, Inc., MLP *Supply forecasts in fiscal year 2012 and 2013 is calculated by adding up all development projects announced as of September 7,

10 Acquisition/Development Market Logistics properties as the traditional asset class in real estate investments Acquisition Market Easy-to-judge properties encourage new entrants Tighter CAP rate due to severe competition Buyer The number of buyers increasing Non-Japanese PEs Private REITs Several logistics-focused new entrants and potential IPOs near future New entrants (buyers and developers) changed competitive landscape Should be careful in analyzing cap rate trend Sellers carefully scrutinizing the timing Intending higher price exits to raise new capital Seller Development Market Stable floor demand + low vacancy stimulated new development projects Japanese real estate majors newly enter the market 10

11 Chapter 3. Strategies

12 Strategy Outlook External Growth Portfolio Management Financial Management For realizing AUM growth For stabilizing cash flow For sustainable growth AUM Target: 300.0bn Tenant Diversification Stable cash flow Liquidity Sound B/S Conventional strategy = Building stable portfolio Portfolio Status Key Factors Debt Environment Income Stability Versatility Tenant/Cargo Quality Long-term and stable relationship with current tenants Providing solutions based on tenant needs/wants New Asset yield Unit price Leveraging accumulated know-how s/expertise Targeting In-house/out-sourced development Choose appropriate financing structures depending on market environment Structuring Sourcing Additional CapEx/full-scale renovation Control LTV by balancing business risk and return on asset 12 Focuses on improving quality of the portfolio and stabilizing dividends 12

13 AUM Growth Enhance growth strategy by utilizing resources in AM as logistics focused professionals Conventional strategy Acquisitions by leveraging accumulated know-hows/expertise of AM Targeting Structuring Sourcing Know-how advantages in Risk evaluation Providing exit strategy as a going concern Development projects M&A corporate real estate Local cities Urbanization-restricted Value up investments Low occupancy Aged Co-investment scheme with lease Co. Land (REIT) + Bld. (lease co.) Preemptive actions Development fund investment Forward commitment Kenedix Developers Mitsui & Co. Sumitomo Mitsui Trust Bank Financial institutions Stay away from bidding as much as possible Focusing on negotiated transactions 13

14 New Acquisition in the 15 th Period: Tatsumi Logistics Center Growth strategy by leveraging sponsor network Summary Price 9,000 Mil. (Expected NOI yield: 5.6%) Total leasable area 29,394.56m² Tenant Seller Fixed term (10 years), unable to cancel, unable to revise rent SPC owned by Mitsui & Co. and Mitsubishi Estate Strategic implication Intensifying competition Joint project w/ sponsor Providing know-hows accumulated in JLF Excellent properties with reasonable price Non-bidding/ negotiated transaction 14

15 Portfolio Management Proven Track Record In-House Redevelopment Improve tenant satisfaction Daito Logistics Center 40.9% Increase of rentable Tenants Long-term and stable relationship 20 yr lease contract Full-Scale Renovation Komaki Logistics Center II 10 year 2 months lease contract Communicate w/ tenant directly to identify their true needs Logistics Centers Floor/Entrance renovation Additional Cap-EX Kazo Logistics Center Funabashi Nishiura Logistics Center Yokosuka Logistics Center Mitsui & Co. Logistics Partners, Ltd. Unparalleled experience/expertise in leasing & property management Industry Trend Provide solutions based on tenant needs and industry trend (Mil. yen) % % 0 1st 11.7% 2nd 3rd CapEx Repair % to Depreciation*2 Average 24.6% 33.6% 4th 17.5% 5th 24.0% 16.4% 6th 7th 25.5% 22.1% 15.6% 12.6% 8th 9th 10th 11th 33.4% 12th 49.2% 30.4% 13th 14th 30.4% 40% 24.9% 15th 16th (E) (E) *1 The figures are calculated by deducting the following repairs and Cap-Ex; Reconstruction of Daito L.C. at 8 th : 382 Mil., Repair and Cap-Ex associated w/ the Earthquake; at 12 th 227 Mil. / at 13 th ; 53 Mil. / at 14 th (Expected) ; 19 Mil. *2 % to Depreciation = (Repair + Cap-Ex) / Depreciation x % 80% 60% 20% 0% 15

16 Portfolio Management Leasing to build long term relationship with tenants Within 3 yrs. (as automatic contract renewal phase) Within 3 yrs. (as original contract) 25.3% Avg. lease term (as of 9/7/2012) 10.7% Over 10 yrs. 26.9% Lease contracts to be expired within 1year (indicates lease contracts more than 0.5% of the portfolio s annual rent revenue) In the 15 th period Urayasu Chidori(M-5) In the 16 th period Kadoma(T-4) Yachiyo(M-11) Narashino II(M-17) :Trinet Logistics (already agreed new contract) :Kowa (already agreed new contract) :TOTO :Nakano-Shokai 3~5 yrs. 18.5% 5~10 yrs. 18.6% In the 17 th period Funabashi(M-1) :Yamato Transport, Sojitsu (Memo) Rent renewal / lease initiation after the 14 th period Occupancy rate 97.1% Avg. remaining lease term 6.57 yrs. Rent renewal Funabashi Nishiura (Tri-net Logistics), Souka (Sangetsu), Kazo (Hitachi Transport System), Daito (Settsu Warehouse), Kawasaki (Sagawa Global Logistics) Lease initiation Funabashi (Yamato Transport), Yachiyo (TOTO), Komaki II (Arata), Kadoma (Kowa) 16

17 Portfolio Management Portfolio management by leveraging expertise in leasing & property management Property Situation Priority (Tenant/ Facility) Actions M-11 Yachiyo Current lease contract ends in March 2013 High Investigating potential tenants (including current tenant) needs Aged facility Redevelopment opportunity Urgent Options: Reconstruction / Renewal / Sale M-10 Yokosuka Vacant since July 2012 Urgent Leasing activity in progress Value up CapEx finished Done From single tenant use to double tenant use M-1 Funabashi Current lease contract ends in November 2013 High Negotiating lease term extension w/ current tenant Flagship property generating 7.1% of the annual rent revenue of the portfolio Urgent Value up project for current tenant 17

18 Financial Strategy Choosing the best financing method in terms of DPU stability Basic Financial Policy AUM and LTV (Image) Key Factors LTV Existing property (Yield, risk) Debt financing environment (Interest rate, financing term) After Tatsumi 28.7% New property (Yield, timing) Unit price (PBR, P/NAV) AUM 158.6bn 300.0bn Maintain DPU stability (Note) What-If analysis of Tatsumi acquisition DPU (forecast) Financing Method 15 th Period 16 th Period LTV All Loan ( 9.0bn) 18,000 17, % Choosing financing method If financed by Equity* ( 6.0bn) and Loan ( 3.0bn) 17,100 16, % * Calculated based on issue price = 676,878 (BPS of end of 14 th period) / Not considering investment unit issuance expenses 18

19 Appendices

20 New CEO Profile Takayuki Kawashima President, CEO 1987 Joined Mitsui & Co., Ltd General Manager of REIT Project Directed foundation and IPO of Japan Logistics Fund Inc. Other track record in Asset-Management business Cambridge Industrial Trust / Non-Executive Director Challenger MBK Emerging Market Infrastructure Fund GP Ltd. / Director 20

21 JLF Profile Japan Logistics Fund, Inc. ( JLF ) was listed on TSE in May 2005 as the first J-REIT dedicated to logistics properties. The Asset Management Company operates JLF in collaboration with high-caliber sponsors that have extensive expertise in logistics, real estate and finance. JLF aims to ensure stable DPU over the medium- to long-term. Equity Listed Own Lease Investors Dividends TSE Real Estate Investment Trust Logistics Properties Rent Tenants Operation Asset Management Company Property Information Ownership Development 29% interest 51% controlling interest 20% interest 21 21

22 Features of Japan Logistics Fund Source of competitive advantage = Track records as the pioneer of logistics REIT 7 years since IPO Expert in property valuation & leasing Proven ability to buy undervalued assets The highest credit rating among J-REITs Zero leverage at IPO, maintain conservative LTV AUM growth potential by leverage up Pioneer Financial Soundness Various expertise of sponsors Business networks of Mitsui & Co. Commitment to Japanese market Sponsors Support Quality Portfolio Unrealized gain margin* : 23.1% Occupancy rate : 97.0% NOI yield : 6.7% *All figures are as of 7/31/2012 *Unrealized gain margin= (appraisal value - book value) / book value

23 Our Vision To become the best logistics REIT which can satisfy various stakeholders expectations The best logistics REIT which can satisfy various stakeholders expectations The 1 st J-REIT specializing in logistics properties 100bn AUM (accomplished) Investing in unexplored asset class with attractive price The only unlevered J-REIT backed by high portfolio yield Solid status as the pioneer of logistics REIT 300bn AUM Know-hows as a pioneer Support from sponsors High quality portfolio Sound balance sheet Accelerate growth by leveraging our resources Building long-term relationship with stakeholders Investors expectations Stable DPU flow Growing unit price Improving liquidity Tenants expectations Location Facility Long-term contract Responsibility for environment and community Phase One Phase Two Phase Three 23

24 The 15 th Period / The 16 th Period Forecasts Improving quality of the portfolio and continuing DPU stability (Yen) 20,000 cruising speed 15th (+311 yen) 19,000 18,000 17,000 17,234 17,334 before the 9 th period The 1 st period:10,000 Yen The 2 nd ~ 5 th period:13,000 Yen The 6 th ~ 8 th period:15,000 Yen Extraordinary loss on disaster 17,528 17,538 Komaki II Lease Initiation 17,689 Up Down Yokosuka Lease Souka Full Termination Contribution Tatsumi Acquisition Repair Cost Increase Others Debt Cost Increase 18,000 16th (-500 yen) Up Others Tatsumi Full Contribution Down Others Yachiyo Lease Termination Taxes on Property Increase 17,500 16,000 15,991 15,000 9th 10th 11th 12th 13th 14th 15th 16th (Forecast) (Forecast) *The graphs are illustrating the dividends fluctuation factors, and their length does not represent actual amount. 24

25 Financing Tatsumi Logistics Center acquisition Accomplished diversifying lender, extending loan maturity, and lowering debt cost simultaneously Points of emphasis Indices on debt Total 9,000 Mil. loan Diversifying Lender Extending loan maturity Resona Bank as a new lender The first 10-year loans for JLF Average loan maturity Average debt cost As of July 31, 2012 As of October 1, yrs yrs. 1.34% 1.24% Lowering debt cost Taking full advantage of current favorable credit market Maturity ladder LTV 25.1% 28.7% In calculating LTV; Total appraisal value = appraisal value of the 14 th period + appraisal value of Tatsumi L.C. at the time of acquisition Lender diversification (Billion yen) th 17th 19th 21st 23rd 25th 27th 29th 31st 33rd 35th Mitsui Sumitomo Insurance Resona Bank 1.9% 1.9% Development Bank of Japan 7.6% Mizuho Sumitomo Mitsui Corporate Bank Banking Corp. 9.5% 22.8% Sumitomo Mitsui Trust Bank Bank of Tokyo- 10.4% Mitsubishi UFJ Mitsubishi UFJ Trust 15.6% and Banking 15.2% Investment Corporation Bond 15.2% 25

26 Stability of Japan Logistics Fund J-REIT top level DPU stability and balance sheet soundness DPU stability Balance sheet soundness 20,000 10,000 0 DPU History 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th High Debt Service Coverage Ratio DSCR (x) DSCR( 倍 ) JLF JLF DSCR/LTV of J-REITs (as of July 2012) CAGR* Standard deviation* 1.9% 6.9% (Source) Bloomberg, MLP *The 1 st period DPU was adjusted for 6 months basis. CAGR and standard deviation of DPU was calculated excluding the 1 st period DPU. Low 4.0 LTV(%) High (Source) Mizuho Securities Co., Ltd. Balance Sheet Soundness LTV (%) Low 26

27 Portfolio Map 30 Properties / Billion Asset Under Management 27

28 Disclaimer Monetary amounts are rounded down to millions or thousands of yen. Percentage figures are rounded off to the first decimal place. This material contains forward-looking business results, plans, management targets, and strategies. Such forward-looking statements are based on current assumptions and premises regarding future developments and business environment trends, and these assumptions and premises may be incorrect. Future performance may differ considerably because of a variety of factors. This material has not been prepared for the purpose of soliciting the purchase of the investment securities of Japan Logistics Fund or to solicit the signing of other financial product transaction contracts. In making investments, investors should do so based on their own judgment and responsibility. The investment securities of Japan Logistics Fund are closed-end fund shares where investment units are not redeemed by JLF at the request of investors. Investors wishing to cash out will need to sell their investment securities to third parties. The market value of these investment securities will be influenced by investor supply and demand at securities exchanges and will change in accordance with the situation for interest rates, economic circumstances, real estate prices, and other market factors. It is therefore possible that these investment securities cannot be sold at their acquisition price and that investors will bear losses. JLF plans to make cash distributions to investors, but whether distributions occur or their amount are not guaranteed under any circumstances. Gains or losses on the sale of real estate, losses on the disposal of fixed assets accompanying the replacement of structures, and other factors can cause fiscal-period income to vary greatly, and distributions paid to investors can change. Information provided herein does not constitute that which is required by the Financial Instruments and Exchange Law or the Law concerning Investment Trusts and Investment Corporations nor does it constitute disclosure documents or management reports required by such regulations as the Tokyo Stock Exchange s listing regulations. This material should be read and used at the responsibility of customers. JLF and related persons involved in the creation and publication of this material will not be held responsible for any damages arising from the use of this material (neither for direct or indirect damages nor for whatever cause). While every effort has been made to avoid errors and omissions regarding the information presented in this material, the material has been created as an easy reference for customers, and the presented information may contain inaccuracies or misprints. JLF bears no responsibility for the accuracy, completeness, suitability, or fairness of the information in this material. JLF holds the copyright to the information appearing in this material. Copying, altering, publishing, distributing, appropriating, or displaying this information or its use for commercial purposes without the prior approval of JLF is prohibited. Also, trademarks (trademarks, logos, and service marks) related to JLF appearing in this material are owned by JLF, and copying, altering, publishing, distributing, appropriating, or reproducing such trademarks or their use for commercial purposes without the permission of JLF is prohibited. Photographs appearing on the cover or in this material are used as illustrations of logistics centers and are not properties held by or planned for acquisition by JLF. Japan Logistics Fund, Inc. All rights reserved. Asset Management Company: Mitsui & Co., Logistics Partners Ltd. - Financial instrument business registered with the Director of the Kanto Local Finance Bureau registration No.400 (financial instruments) - Member of the Investment Trust Association