For Immediate Release

Transcription

1 For Immediate Release ORIX JREIT Announces Asset Acquisition DOJIMA PLAZA BLDG. REIT Issuer: ORIX JREIT Inc. (TSE: 8954) Hiroshi Yasuda President and Executive Director Asset Management Company: ORIX Asset Management Corporation Yoshitaka Kamemoto President and CEO Inquiries: Junko Kanazawa Director, Corporate Senior Vice President TEL: TOKYO, October 10, 2014 ORIX JREIT Inc. ( OJR ) announced that our asset management company, ORIX Asset Management Corporation ( OAM ), resolved to propose the following asset acquisitions at OAM board meeting held on October 10, 2014 and that OJR resolved to acquire at OJR board meeting held on the same day. 1. Acquisition Summary DOJIMA PLAZA BLDG. Asset to be acquired : (Note 1) Real estate trust beneficial interest (scheduled) Scheduled acquisition price : 9,500,000,000 (excluding national and local consumption taxes, etc.) Scheduled purchase and sales agreement date : October 10, 2014 Scheduled acquisition date (Note 2) : December 22, 2014 Current owner and seller (Note 3) : A Japanese company Funding method : Borrowings (scheduled) (Note 4) and cash on hand Payment terms : 100% on delivery 1. As of today, no trust has been established. OJR plans to establish the trust for this asset upon the acquisition. 2. The trust beneficial interest purchase and sales agreement for DOJIMA PLAZA BLDG. (the Purchase and Sales Agreements ) fall under the category of Forward Commitment, etc. as provided in the Comprehensive Guideline for Supervision of Financial Instruments Business Operators, etc. set by the Financial Services Agency as they are postdated Purchase and Sales agreement where the settlement and delivery of the asset are to take place one month or more after the conclusion of agreement and such. Financial Impact on OJR in the Event that it Fails to Fulfill the Forward Commitment, Etc. In this regard, the Purchase and Sales Agreement has cancellation provisions that set forth the following conditions. i. When either the seller or the buyer breaches the provisions of the Purchase and Sales Agreement (such a party referred to as the Breaching Party ), the counterparty shall set a certain period and demand the Breaching Party to meet its obligations within the period. If the Breaching Party fails to correct its violations within that period, the counterparty shall be able to cancel the Purchase and Sales Agreement. ii. When either the seller or the buyer breaches the provisions of the Purchase and Sales Agreement, the Breaching Party shall pay 1,900,000,000 yen (amount equivalent to 20% of purchase/sales price) as penalty fee to the counterparty and shall be obliged to compensate for the resulting damages incurred by the counterparty. 3. It is not disclosed as the consent has not been obtained from the seller. 4. The details of the borrowings shall be announced at a later date, as soon as it is determined. 1/11

2 Reference: Overview of Profitability etc. of the Scheduled Acquisition Asset Property Name Type Area Seller Scheduled acquisition date Scheduled acquisition yen Appraisal yen (1/2) vs. Appraisal Value (%) NOI (Note 2) Yeild (%) Yeild after Depreciation (Note 3) (%) DOJIMA PLAZA BLDG. Office Other Areas (Osaka-shi) A third party (Note 1) December 22, ,500 9, % 3.7% (Note 4) Existing Portfolio 5.1% 3.8% 1. A third party is indicated for the asset to be acquired by except the ORIX Group, which refers to ORIX Corporation and its group companies. 2. The "NOI Yield of scheduled acquisition asset is calculated by using the formula: Annualized Net Revenue in the direct capitalization method recorded in the appraisal report at the time of decision to acquire / Scheduled acquisition price; the figures are rounded to the first decimal place. 3. The " Yield after Depreciation of scheduled acquisition properties is calculated by using the formula: ( Annualized Net Revenue in the direct capitalization method recorded in the appraisal reports at the time of decision to acquire Depreciation assumed by OJR) / Scheduled acquisition price; the figures are rounded to the first decimal place. 4. Existing portfolio is the total of properties owned as of August 31, 2014 and six properties ORE Nishiki 2-chome Bldg., ORE Ikebukuro, SO-CAL LINK OMOTESANDO, Friend Town Fukaebashi (Land), R-Styles Musashi-Kosugi, and Iwatsuki Losigtics Center acquired after September 1, NOI Yield and Yield after Depreciation of existing portfolio are calculated based on the annualized actual figures for properties owned as of August 31, 2014 and the figures for the six properties acquired after September 1, 2014 are calculated based on the appraisal reports at the acquisition times. 2. Purpose of the Acquisition and Lease The current economic environment surrounding OJR is considered to be on the moderate recovery trend breaking away from deflation with the effects of Abenomics and expectations from Tokyo s successful bid to host the Olympic Games. However, there still remain downward factors such as the additional consumption tax hike and concerns over economic slowdowns in China and other nations. Under such environment perception, OJR aims to realize the stable growth of unitholders value under any environment by promoting various strategies and managing risks through the utilization of the ORIX synergy (Note 1) and the strength of being a diversified portfolio REIT. As to the internal and external growth strategies, OJR promotes the establishment of a portfolio which encompasses growth potential, profitability, stability, etc. by drawing various operational strategies with an understanding of the following real estate market environment. Environment perceptions Although the timing for turnaround to full-scale rent rise is still unpredictable, some rent rises have been observed centering on office buildings in central Tokyo. OJR has been expanding the number of leases with increased rents for properties other than offices and in regions as well through its Direct PM (Note 2). OJR believes, during the first phase of economic recovery, that i) properties with scarcity, ii) economic-sensitive tenants and iii) flexible leasing are the keys to realize internal growth regardless of property types and areas. Competition for real estate acquisition including REITs continues to be overheated and the cap rates are on a declining trend for all property types due to the shortage of prime properties. Management Tactics OJR will work to improve contract lease conditions by deciding whether to focus on occupancy rate or unit rent for each property. OJR will aim to increase property competitiveness and to strengthen relationship with tenants through its Direct PM by utilizing the ORIX Group s nationwide network. OJR will make selective investment by assessing growth potential and risks of each property based on strong management abilities backed by its track record. 2/11

3 Under such environment perception and tactics as above, OJR has decided to acquire one office building which is located close to Osaka s Umeda area, a center of the Kansai region boasting the second largest economic scale in Japan, from an outside source. It is relatively new and has high specifications generating high expectations for future growth. Furthermore, OJR believes it is possible to maintain and improve profitability and stability through utilizing the expertise and nationwide network (the ORIX synergy) of the ORIX Group, Direct PM, etc. even after the acquisition. In order to realize the stable growth of unitholder value going forward, OJR will strive to improve profitability and stability of the portfolio under the market environment where acquisition competition is intensifying, by taking advantage of the acquisition routes both inside and outside the ORIX Group. 1. The ORIX Synergy refers to the cooperative relationship between ORIX Group companies and OJR. 2. Direct PM is the support of property management operations by OAM, through leasing activities, adding of value to roperties and other means while utilizing the ORIX synergy. 3/11

4 3.Summary of Acquisition Properties (Note 1) Specified asset category Real estate trust beneficial interest (scheduled) Trustee (scheduled) Term of trust agreement (scheduled) Address Land Building Previous owner Sumitomo Mitsui Trust Bank, Limited. December 22, 2014 December 21, Dojima, Kita-ku, Osaka-shi, Osaka Registered Area 2, m 2 Type of ownership Registered usage Registered completion date Fee simple ownership Office, Retail, Parking February, 2012 Type of ownership Fee simple ownership Registered Area 15, m 2 Registered construction Scheduled acquisition price Appraised value 9,800,000,000 Appraisal date September 1, 2014 Appraiser Steel-frame, Steel-frame reinforced concrete with flat roof, 12 floors with 2 underground floors A Japanese company *Not disclosed as consent has not been obtained from the previous owner. 9,500,000,000 (excluding national and local consumption taxes, etc.) Japan Real Estate Institute Scheduled acquisition date December 22, 2014 Public transit access Usage restrictions Architect Structural engineer General contractor Building inspection agency Property Manager (scheduled) Main facilities and specifications Earthquake resistance Collateral Special notes Approx. 4-minute walk from Nishiumeda Station on Osaka municipal subway Approx. 4-minute walk from Kitashinchi Station on JR Approx. 5-minute walk from Watanabebashi Station on Keihan Line Approx. 8-minute walk from Osaka Station on JR Approx. 10-minute walk from Umeda Station on Osaka municipal subway Commercial zone Takenaka Corporation First-Class Architect Office Takenaka Corporation First-Class Architect Office Takenaka Corporation General Building Research Corporation of Japan ORIX Corporation Elevator: 4 Parking: 41 vehicles (mechanical parking system:25, ground space:16) Leased area (Standard floor area): Approx. 792 m 2 (Approx. 240 tsubo) Ceiling height Standard floor area: 2,800 mm, Raised floors for computer wiring:100 mm Others: Individually controlled air conditioning PML: 10% (based on Sompo Japan Nipponkoa Risk Management, Inc. (Note 2) report) None The seller of the asset has concluded on June 29, 2010 a development management agreement with the owner of the hotel building on the adjacent land, which was jointly developed with the asset under the system of comprehensive designing of a single housing complex. In accordance with the agreement, OJR is to succeed the arrangement that the preferential negotiation right be granted to the counterparty in case the asset is to be transferred. 4/11

5 Special features of the asset No. of tenants Gross rental income The asset is located approx. a 4-minute walk from Nishi-Umeda Station on Osaka municipal subway. Its basement floor is directly connected to JR Osaka Station via the underground passage boasting high convenience with JR lines, private railways and subways available for use. The asset which is relatively new with high specifications is rare in Dojima, Osaka s major business area, where relatively a large number of old office buildings line up. Flexible leasing to meet tenants needs is possible since the regular shaped floors with approx tsubo of standard floor area can be divided up to six sections (minimum area of approx. 30 tsubo). Although the office market in Osaka experienced a temporary increase in vacancy rate due to large supply in 2013, elimination of vacancy has progressed recently enabling to anticipate turnaround in rent levels. The asset houses 22 diversified tenants including financial institutions, IT, advertisement and manufacturing companies. A liquor retail chain, restaurants, etc., which take advantage of the proximity to the Kitashinchi area, are currently operating. 22 (Note ) (as of August 31, 2014) (Note) The above figure does not include two tenants whose leasing starts after September 1, 2014 (leasing agreements have been concluded). The number will be 24 when including those two tenants. 33 million per month (excluding car parking space etc., as of August (Note 3) 31, 2014) (Note 3) Security deposits 388million (as of August 31, 2014) Total rent space 7, m 2 (Note ) (as of August 31, 2014) (Note) The above figure does not include two tenants whose leasing starts after September 1, 2014 or after (leasing agreements have been concluded). The number will be 8, m2 when including those two tenants. Total rentable space 10, m 2 (as of August 31, 2014) Occupancy rate 73.6% (Note ) (as of August 31, 2014) (Note) The above figure does not include two tenants whose leasing starts after September 1, 2014 or after (leasing agreements have been concluded). The number will be 80.6% when including those two tenants. (Note 3) 480 million per annum (Note) The net operating income (NOI) represents the assumed revenue/expenditure balance under stabilized occupancy, based on the terms of the lease contract, Assumed net operating etc. at the scheduled acquisition date, but excluding extraordinary factors income (NOI) that may occur during the first year of acquisition. The preconditions are as below; these figures are not what OJR expects for the current fiscal year. 1) Occupancy rate:96.0% 2) Taxes: Taxes are calculated on the standard tax amount for fiscal As of today, no trust has been established. OJR plans to establish the trust for this asset upon the acquisition. 2. PML (Probable Maximum Loss) shows the ratio (%) of cost of recovering a building after it is damaged to its state before the damage occurred against repurchase price, when assuming an earthquake that may occur once in 475 years in average in probability statistics (recurrence interval of 475 years). The earthquake risk of a building is evaluated based on the event risk curve that shows the relationship of amount of expected loss (horizontal axis) and probability for the loss to exceed the year (vertical axis). However, the risk curve has variability because loss evaluation comes with uncertainties in earthquake resistance performance of the building, behavior of earthquake vibration, etc. Accordingly, the above PML figures use the risk curve with credibility level of 90%, and are rounded to the nearest whole number. 3. Figures are rounded down to the nearest million yen. 5/11

6 Photo and map 6/11

7 4. Profile of Owner/Seller (as of September 29, 2014) It is not disclosed as consent has not been obtained from the seller. However, there are no capital, personal and business relationship between OJR and OAM and the seller. In addition, the seller, the related parties and related companies of the seller are not a related party for OJR or OAM. 6.Profile of Intermediary (as of September 29, 2014) Intermediary : Sumitomo Mitsui Trust Bank, Limited ( the Company ) Headquarters : Marunouchi, Chiyoda-ku, Tokyo Representative : President Hitoshi Tsunekage Capital : 342,037 million yen Principal business : Trust business, banking, concurrent operations including intermediary of real estate and transfer agent service, registered financial institutions services, etc. Intermediary commission : *Not disclosed as consent has not been obtained from the Company. Relationship with OJR and OAM : The Company is an asset custody company, an administrative agent, a trustee and a lender of OJR. There are no capital, personal relationship and not a related party for OJR or OAM. 7.Transaction with Related-Party, etc. In accordance with the Affiliated Company Transaction Regulations, which are internal rules of OAM, the said transactions have been approved by OJR s board meeting after being deliberated by the Risk Management and Compliance Committee and the board meeting at OAM. (1) Asset Acquisition The asset is not acquired from a party with any special interest relationships with OJR or OAM. (2) Conclusion of Master Lease Agreement and Property Management Operations Subcontracting Agreement OJR will conclude a property management operation agreement with ORIX Corporation. For the summary of the related party, etc., please see below (as of October 9, 2014) Company name ORIX Corporation ( the Company ) Address Hamamatsu-cho, Minato-ku, Tokyo Representative President and CEO: Makoto Inoue Primary business Lease, installment sales and other financial services, real estate-related businesses, etc. Shareholders equity 220,051 million Major shareholders Japan Trustee Services Bank, Ltd. (trust account) Net Assets (As of March 31, 2014) 2,095,178 million Total Assets (As of March 31, 2014) 9,069,392 million Date of establishment March 28, 1950 Relationships with OJR or its asset management company Capital relationship Personal relationships There is no capital relationship required for reporting between OJR and the Company. However, the Company is the parent company of OAM and falls under related parties of OAM as stipulated in the Act on Investment Trusts and Investment Corporations. As of September 30, 2014, 57 persons of the officers and employees of OAM are seconded from the Company Business relationships There is no business relationship required for reporting between OJR or OAM and the Company. 7/11

8 Applicability to related parties The Company does not fall under related party of OJR. As mentioned above, the Company falls under the related parties of OAM as stipulated in the Investment Trusts Act. 8.Future Outlook With regards to impact on the financial forecast for the 26th fiscal period (from September 1, 2014 through February 28, 2015) and the 27th fiscal period (from March 1, 2015 through August 31, 2015) due to the asset acquisitions, please refer to the press release ORIX Announces Financial Results for 25 th Fiscal Period announced today. Reference Materials I. Appraisal summary II. Portfolio summary after acquisition of the asset 1. This is the English translation of original Japanese documents and is provided solely for information purposes. If there are any discrepancies between the translation and the Japanese original, the latter shall prevail. 2. The original Japanese version of this announcement is being distributed today to the Kabuto Club, the Ministry of Land, Infrastructure, Transport and Tourism Press Club, and the Ministry of Land, Infrastructure, Transport and Tourism Construction Specialty Publication Press Club 8/11

9 I. Appraisal summary Appraisal Value ( In millions of yen) Appraised value 9,800 Appraisal date September 1, 2014 Appraiser Valuations by method (In millions of yen) Japan Real Estate Institute Cost Method 9,450 Income Method DCF value 9,620 Net operating income for the first fiscal year in the DCF method 376 Net income for the first fiscal year in the DCF method 373 Discount Rate (%) 4.6 Terminal Capitalization Rate (%) 5.0 DC Value 9,980 Net income in the DC method 479 Capitalization Rate (%) 4.8 Income projection (In millions of yen) (Note1) (1) Gross revenue (a-b) 635 a. Effective gross revenue 671 b. Vacancy loss 35 (2) Total costs (c+d+e+f) 155 c. Management /maintenance fee 107 d. Taxes 46 e. Casualty insurance premium 0 f. Other costs 0 (3) Net revenue (1-2) 480 (4) Lump sum revenue 9 (5) Capital expenditure 10 (6) Net income (3+4-5) The income projection is anticipated revenue/expenditure balance for the fiscal year based on the income approach (direct capitalization approach) shown on the Appraisal Report. Long-Term Projected Repairs According to the engineering reports, the maintenance and renewal cost over the next 12 years following the survey date are as follows. Property name DOJIMA PLAZA BLDG. Company name TOKIO MARINE & NICHIDO RISK CONSULTING Co., Ltd. Maintenance Cost (In thousands of yen) Replacement Cost (In thousands of yen) 180 3,914 9/11

10 II. Portfolio summary after acquisition of the asset New asset to be acquired Property (Note 2) Acquisition % to (Note 1) Date Price( million) Total Acquisition Price Offices 6 Central Aoyama Suncrest Building December , Tokyo Wards Round-Cross Ichi-bancho December , Round-Cross Nishi Shinjuku December , DT Gaien December , Nihonbashi East Building December , Yoyogi Forest Building December , Round-Cross Minami Azabu December , Round-Cross Akasaka January , Round-Cross Mita January , Shiba Daimon Building January , Round-Cross Tsukiji January , ORIX Shiba 2-chome Building September , Aoyama 246 Building March , Round-Cross Shinjuku April , Seafort Square Center Building ORIX Akasaka 2-chome Building September April June December ,000 21, Round-Cross Shinjuku 5-chome April , Nihonbashi Honcho 1-chome Building March , Round-Cross Shibuya March , ORIX Suidobashi Building March , ORIX Shinagawa Building June , ORIX Real Estate Nishi Shinjuku Building March , OX Tamachi Building March , MG Shirokanedai Building November , SHIBUYA PINE Bldg. March , MG Ichigaya Building April , Subtotal 159, Remaining Carrot Tower December , Tokyo Wards Toyo MK Building December , Beside Kiba December , ORIX Ikebukuro Building April , Round-Cross Kamata March , KN Jiyugaoka Plaza May , ORIX Meguro Building July , Akihabara Business Center June , Subtotal 42, Other Parts of Neo City Mitaka December , the Greater Tokyo Area Round-Cross Kawasaki April , Omiya Miyacho Building March , Omiya Shimocho 1-chome Building March , Subtotal 14, Other Areas Nagoya Itochu Building September , ORIX Koraibashi Building April , Lunar Sendai June , ORIX Nagoya Nishiki Building September , ORE Sapporo Building October , ORIX Kobe Sannomiya Building September , ORE Nishiki 2-chome Bldg. October , DOJIMA PLAZA BLDG. December 22, 2014 (sheduled) 9, Subtotal 59, Offices Total 276, Logistics Other Parts of Toda Logistics Center March , Facilities the Greater Tokyo Area Ichikawa Logistics Center September , Iwatsuki Logistics Center October , Subtotal 24, Other Areas Sakai Logistics Center North Building March , Komaki Logistics Center June , Subtotal 12, Logistics Facilities Total 37, /11

11 Property (Note 2) Acquisition % to (Note 1) Date Price( million) Total Acquisition Price Retail 6 Central Nihon Jisho Minami Aoyama Building October , Facilities Tokyo Wards CUBE Daikanyama March , aune Yurakucho April , Cross Avenue Harajuku November , J-ONE SQUARE January , JouLe SHIBUYA April , SO-CAL LINK OMOTESANDO October , Subtotal 31, Remaining ORE Ikebukuro September , Tokyo Wards Subtotal 6, Other Parts of aune Kohoku March , the Greater Tokyo Area aune Makuhari March , Maruetsu Sagamino March , CROSS GARDEN KAWASAKI March , Tecc Land Totsuka (Land) April , Clio Fujisawaekimae December , Subtotal 32, Other Areas Kobe Momoyamadai Shopping Center (Land) March , Okayama Kume Retail Facility January , Home Center Musashi Sendai Izumi (Land) January , aune Sapporo Ekimae June , Morioka Minami Shopping Center Sansa July , The Kitahama PLAZA (Co-Ownership:80%) April , The Kitahama PLAZA (Co-Ownership:20%) March AEON TOWN Sendai-Izumiosawa(Land) November , GRAN MART Tegata November , Cross Mall Shimonoseki-Chofu January , intervillage OH! MAGARI April , Valor Suzuka Shopping Center April , SENDAI HARVEST BLDG. June , Friend Town Fukaebashi (Land) September , Subtotal 37, Retail Facilities Total 107, Apartment 6 Central Park Axis Nishi Azabu Stage December , We Will Hatchobori June , Shibaura Island Air Tower July , Belle Face Togoshi Statio May , Belle Face Meguro October , Subtotal 15, Remaining Belle Face Kamata June , Tokyo Wards Belle Face Hongo Yumicho June , Belle Face Mishuku March , West Park Tower IKEBUKURO April , Belle Face Higashijujo April , Subtotal 32, Other Parts of R-Styles Musashi-Kosugi October , the Greater Tokyo Area Subtotal 4, Other Areas Belle Face Osaka Shinmachi June , Belle Face Amagasaki June , Belle Face Miyamachi April , Belle Face Bansui-street April Belle Face Kanazawa Kohrinbo November , Subtotal 11, Residential Total 64, Others Other Parts of Cross Gate January , the Greater Tokyo Area GOOD TIME LIVING Shin-urayasu September , Subtotal 16, Others Total 16, Grand Total 96 properties 502, Acquisition price above refers to sale price (fractions rounded down) specified in the sale and purchase contract. Consumption taxes are not included in the price. 2. Fractions are rounded to two decimal places for the Percentage of total acquisition cost. Totals for the Percentage of total acquisition cost may not tally as a result of this rounding. 11/11