Notice concerning Acquisition of Asset (Godo kaisha Yokohama Office Management Silent Partnership Equity Interest)

Transcription

1 This translation of the original Japanese notice is provided solely for information purposes. Should there be any discrepancy between this translation and the Japanese original, the latter shall prevail. REIT Issuer: Daiwa Office Investment Corporation (Stock Code No.: 8976) Representative: Yoshimi Murakami, Executive Director May 23, 2017 Asset Manager: Daiwa Real Estate Asset Management Co. Ltd. Representative: Akira Yamanouchi, President and Representative Director Inquiries to: Kentaro Azumi, Head of Customer Relations Department (Tel: ) Notice concerning Acquisition of Asset (Godo kaisha Yokohama Office Management Silent Partnership Equity Interest) Daiwa Office Investment Corporation (the Investment Corporation ) hereby announces that Daiwa Real Estate Asset Management Co. Ltd., to which the Investment Corporation entrusts management of its assets (the Asset Manager ), has determined today to acquire a silent partnership equity interest (the Acquisition ) as follows. 1. Summary of Asset to be Acquired Asset Name Godo kaisha Yokohama Office Management Silent Partnership Equity Interest (Note 1) Type of Asset Equity interest in silent partnership that invests in trust beneficial interest of domestic real estate Real Estate in Trust CONCURRED Yokohama (Note 2) Acquisition Price (scheduled) 3,920 million yen (10% of total investment amount in the silent partnership) Date of Conclusion of purchase agreement (scheduled) May 23, 2017 Date of Acquisition of Equity Interest (scheduled) June 1, 2017 Funding for Acquisition of Equity Interest Cash on hand Payment Method Lump-sum payment at the time of acquisition (Note 1) (Note 2) The asset is a silent partnership equity interest (hereinafter referred to as the Silent Partnership Equity Interest ) operated by Godo kaisha Yokohama Office Management (hereinafter referred to as the GK ). For more details, please refer to 3. Details of the Asset to be Acquired The GK is scheduled to acquire a trust beneficiary interest (hereinafter referred to as the Trust Beneficiary Interest ) having quasi co-ownership that is 75% of the above mentioned real estate in trust as primary asset in trust on June 1, Reason for Acquisition The Asset Manager has determined acquisition by the Investment Corporation of an equity interest in silent partnership that invests in trust beneficial interest of the real estate pursuant to the basic policy for the asset management set forth in the Articles of Incorporation and the management policy of the Investment Corporation. In connection with the Acquisition, the Investment Corporation will be granted by the GK a preferential negotiation right concerning the acquisition of the Trust Beneficiary Interest (hereinafter referred to as the Preferential Negotiation Right ). The Investment Corporation believes that the Preferential Negotiation Right should offer an opportunity to acquire a high quality office building flexibly without obligation to acquire the real 1

2 estates in trust and should be useful to improve the quality of its portfolio such as strategic replacement of its properties. Upon Acquisition, the Investment Corporation evaluated the following points of the real estate in trust (hereinafter the Property ). (1) Location: The Property is a five-minute walk from Yokohama Station where twelve lines are available such as JR Tokaido Line, JR Yokosuka Line, JR Keihin Tohoku Line, JR Negishi Line, JR Yokohama Line, Tokyu Toyoko Line, Minato Mirai Line, Keikyu Line, Sotetsu Line and Yokohama Municipal Blue Line. Yokohama Station is one of biggest terminal stations in the Greater Tokyo area providing ultimate train availability as well as good access to various destinations in Japan through express buses departing from Yokohama City Air Terminal on the first floor of Yokohama Sky building. The area of Yokohama-East exit where the Property is located is superior in quality of office-stocks compared to the area of Yokohama-West exit which has developed with long history where aged small and medium office buildings concentrate. In comparison to the area of Minato Mirai, the traffic convenience is highly valued by the use of Yokohama Station. (2) Building Facilities: The Property has twenty floors above ground and one below with a gross floor area of 53,772.50m 2 and a leasable area of approximately 550 tsubos per floor is secured. It has 2,800mm of typical floor celling height, 100mm of OA floor and facilities including individual air conditioners. It provides with a minimum office space of 30 tsubos allowing flexible building management according to market conditions and tenants demand. < Details of the Real Estate in Trust > Property Name CONCURRED Yokohama Type of Specified Assets Trust beneficial interest in real estate Trustee (scheduled) Mitsubishi UFJ Trust and Banking Corporation Trust Period (scheduled) From September 9, 2011 to March 31, 2034 Location (Lot Number) 3-1 Kinko-cho, Kanagawa-ku, Yokohama-shi, Kanagawa Use (Real Property Registry) Office, shop, auditorium, parking space Ownership Form Site Area (Real Property Registry) Total Floor Area (Real Property Registry) Structure (Real Property Registry) Construction Date (Real Property Registry) Building Engineer Constructor i) Land: Ownership (75% of quasi co-ownership with the trust beneficial interest) ii) Building: Ownership (75% of quasi co-ownership with the trust beneficial interest) 7, m 2 (entire Property) 53, m 2 (entire Property) Steel, steel framed reinforced concrete structure with flat roof, 20 stories above ground and 1 below. February 29, 2008 Taisei Corporation Taisei Corporation 2

3 Structural-design Engineer Floor Height/Ceiling Height Air-conditioning System/OA Laying Building Inspection Agency Engineering Due Diligence Company Taisei Corporation 4,150 mm (for standard floor) / 2,800 mm (for standard floor) Each floor individual treatment air-conditioning OA-capable floor The Building Center of Japan Tokyo Bldg-Tech Center Co.,Ltd Soil Contamination Risk Survey Company Earth-Appraisal Co., Ltd. Probable Maximum Loss Level (Assessor) 0.92% (Sompo Risk Management & Health Care Inc.) 39,100 million yen (75% of quasi co-ownership with the trust beneficial Appraisal Value interest) (Appraisal Date) (as of March 31, 2017) Appraiser DAIWA REAL ESTATE APPRAISAL CO., LTD. Collateral None Summary of Tenants (Note 2) Total Number of Tenants 34 (As of March 31, 2017) (Note 1) Rent Revenue 202 million yen per month (March 2017) (Note 1) Security Deposit and Guaranty 1,861 million yen (March 31, 2017) (Note 1) Total Leased Floor Space 37, m 2 (As of March 31, 2017) (Note 1) Total Leasable Floor Space 37, m 2 (Note 1) March 31, % Trend in occupancy rates March 31, % (Note 1) March 31, % Other Relevant Information The GK is scheduled to enter into a quasi co-ownership agreement with quasi co-owner(s). It will include certain procedures and performance obligations in relation to transfer, collateral provision and other disposition of the quasi co-ownership. It will also require unanimous approval of quasi co-owners for certain important matters. (Note 1) The figures are based on the data obtained from the GK for the total leased floor space, total leasable floor space and trend in occupancy rates of the end tenants. They are linked to the entire Property. (Note 2) It is based on the sub lease contracts between the end tenants and Jones Lang LaSalle K.K., a master leaser of the Property retained under a pass-through type of the master lease agreement. 3. Details of the Asset to be Acquired (1) Summary of the Silent Partnership Equity Interest Operator Term of the silent partnership agreement Total amount of silent partnership equity Godo kaisha Yokohama Office Management Until April 30, ,200 million yen Overview of the silent partnership agreement 3

4 Godo kaisha Yokohama Office Management Silent Partnership equity (Note 2) 39,200 million yen Trust beneficiary interest in real estate in trust, etc. (Note 1) 39,200 million yen Silent partnership equity (the Investment Corporation) 3,920 million yen Silent Partnership equity (Daiwa PI Partners) 35,280 million yen Calculation Period: From March 1 to February 28(29), one year for each period; however, the first calculation period shall commence from the date of conclusion of the Silent Partnership Agreement to February 28, Distribution of Profit and Loss: The operator shall distribute the profits or the losses to the silent partners according to their respective investment ratio at the end of each calculation period. Silent Partnership Equity: Daiwa PI Partners Co., Ltd., a group company of Daiwa Securities Group Inc. who is a sponsor of the Asset Manager, is scheduled to acquire a 35,280 million yen of equity interest within a total of 39,200 million yen of equity interests in the silent partnership. Preferential Negotiation Right given with the Acquisition Other Contents of the Preferential Negotiation Right It provides the Investment Corporation with the right to negotiate the acquisition of the Trust Beneficiary Interest, which the operator is scheduled to acquire on June 1, 2017, prior to other potential buyers. Period Condition on Acquisition Price Until July 31, 2018 (scheduled) 38,100 million yen (excluding consumption tax) (Note 1) The amount of the Trust Beneficiary Interest in real estate in trust, etc. includes the establishment cost of silent partnership and the reserve fund. The appraisal value of the Property as of March 31, 2017 is 39,100 million yen. (Note 2) The Investment Corporation is scheduled to acquire a 3,920 million yen of equity interest, 10% of the silent partnership. (Note 3) HASEKO Real Estate Investment Management, inc. is an asset manager of the Asset. (2) Summary of the Operator of the Silent Partnership 4

5 Name Godo kaisha Yokohama Office Management Address Nihonbashi, Chuo-ku, Tokyo 1. Acquisition, holding, disposition of real estate trust beneficiary rights 2. Purchase and sale, leasing, management, acquisition, holding, disposition, Nature of Business utilization of real estate 3. All operations pertaining to or associated with each of business listed above Representative Partner General Incorporated Associations DRF Title/ Name of Representative Functional Manager Takanori Mishina Stated Capital 400,000 yen Date of Incorporation April 27, 2017 Relationship with the Investment Corporation/ Asset Manager There is no capital, no personnel or no business relationship to be stated with the Investment Corporation. There is no capital, no personnel to be stated with the Asset Manager, however, the Asset Manager is entrusted with auxiliary asset management services to the operator. The Asset Manager is not involved in Capital Relationship acquisition and transfer of the Trust Beneficiary Interest. (Note) Personnel Relationship In addition, the affiliated parties and the affiliated companies of the operator do not Business Relationship fall under the capital, personnel or business relationship of those of the Investment Corporation/Asset Manager. Daiwa PI Partners Co.Ltd., a subsidiary company of Daiwa Securities Group Inc. that is a parent company of the Asset Manager, is scheduled to acquire 90% of silent partnership equity interests of the GK on June 1, Status of Classification as Related Party The operator is not a related party to the Investment Corporation or the Asset Manager. Also parties related to the operator and the operator s affiliates are not related parties to the Investment Corporation or the Asset Manager. (Note) A company other than the Asset Manager is also entrusted with auxiliary asset management services to the operator (not involved in acquisition and transfer of the Trust Beneficiary Interest as well as the Asset Manager), however its identity is not disclosed as no consent has been obtained. 4. Transaction with Related Parties The Acquisition does not pertain to acquisition from any persons having a special interest in the Investment Corporation or the Asset Manager. 5. Acquisition Schedule Date of Determination of the Acquisition May 23, 2017 Date of Execution of Silent Partnership Agreement May 23, 2017 Scheduled Date of Equity Investment in Silent Partnership June 1, 2017 Scheduled Date of Trust Beneficiary Interest Transfer June 1, Future Prospect As the Asset is scheduled to be acquired on June 1, 2017, there is no impact of the acquisition of the Property on the management status forecasts for the fiscal period ending May 2017 (23rd fiscal period). The impact of the acquisition of the property on the management status forecast for the fiscal period ending November 2017 (24th fiscal period) is not significant and there are presently no revisions to the previously released forecasts. 5

6 7. Summary of Appraisal Report Appraiser DAIWA REAL ESTATE APPRAISAL CO., LTD. Appraisal Date March 31, 2017 Appraisal Value 39,100 million yen Items (million yen) (Note 1) Income Approach Value 39,100 Direct Capitalization Value 40,500 (1) Operating Revenue 2,932 Potential Annual Rent Revenue 3,085 Amount of Loss due to Vacancy 153 (2) Operating Expenses 583 Maintenance and Operation Cost, PM Fee 180 (Note 2) Outline, etc. Based on DCF method with reference/verification to direct capitalization value Mid-to-long term competitiveness is accounted for the standardized rent Stable occupancy ratio is estimated for the mid-to-long term Maintenance and operating cost is based on of peer properties and of the current contract and PM fee is based on the scheduled PM contract, with verification using the standard fee levels of peer properties Water & Utility Charges 190 Based on actual historical data Repair 9 Based on annualized repair expense on ER judged appropriate Leasing Fee 26 Based on the standard fee levels of peer properties Tax 154 Based on actual historical data Non-life Insurance 2 Based on the current contract judged appropriate Others 20 Based on fees including renewal contracts (3) Net Operating Revenue 2,348 (4) Profit from deposits/guarantees 26 Return yield is assumed at 1.0%. (5) Capital Expenditures 50 Based on annualized large-scale repair expense and renewal fee on ER taking CM fees into account (6) Net Revenue ( (3)+(4)-(5)) 2,323 (7) Capitalization Rate 4.3% Peer property comparison as well as investor sounding has been referenced (8) Co-ownership 75% Discounted Cash Flow Value 38,500 Discount Rate 4.1% Terminal Capitalization Rate 4.5% Integrated Value by Using Cost Method 31,500 Ratio of Land 76.1% Ratio of Building 23.9% Other, things appraiser noted upon valuation - Based on historical discount rates of peer properties as well as comparison with cap rate related to other financial instruments Consideration of marketability of the Property at the end of the period that the DCF valuation assumed (Note 1) The above revenue and expenses are based on the appraisal report and are not the figures forecasted by the Investment Corporation or the Asset Manager (Note 2) The breakdown of the PM Fee is not disclosed as no consent has been obtained from the prospective PM. Disclosure of the PM fee figures in a specific manner may cause adverse effects on other business operations of the prospective PM, leading to bring about negative impact on the planned efficient operation based on the maintenance policy of the investment-target property of the Investment Corporation that the Investment Corporation is to contract with the PM. This may in return further cause adverse effects on unitholders interest. Therefore, the figure presented in this column is calculated together with maintenance and operation costs. -End- 6

7 Reference Material 1 Photograph / Map <External View> 7

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9 Reference Material 2 Portfolio Overview after Acquisition of the Asset Region Name of Property Date of (Scheduled) Acquisition Acquisition Price (million yen) Investment Ratio (Note 4) Daiwa Ginza Oct 21, , % Daiwa Ginza Annex Oct 21, , % Daiwa Shibaura Oct 21, , % Daiwa Minami-Aoyama Oct 21, , % Daiwa Sarugakucho Oct 21, 2005/ Mar 30, , % Daiwa A Hamamatsucho Oct 21, , % Daiwa Jingumae Oct 21, , % Daiwa Shibadaimon Oct 21, , % Daiwa Misakicho Oct 21, , % Daiwa Shimbashi 510 Oct 21, , % Daiwa Tsukijiekimae Jan 27, , % Daiwa Tsukiji Jan 27, , % Daiwa Tsukishima Mar 24, , % Daiwa Nihombashi Horidomecho May 1, , % Daiwa Azabudai May 1, , % Daiwa Kyobashi Jul 31, , % Daiwa Kojimachi 4 Chome Oct 6, 2006 Mar 29/ May 29, , % Five Central Daiwa Onarimon Dec 1, , % Wards of Tokyo (Note 1) Shinjuku Maynds Tower Jul 13/ Nov 26, , % SHIBUYA EDGE Jul 13, , % Daiwa Kodenmacho Aug 31, , % Daiwa Jimbocho Mar 10, , % Daiwa Nishi-Shimbashi Aug 13, , % Daiwa Kayabacho Building Mar 25, , % Daiwa Jimbocho 3 Chome Mar 29, , % E SPACE TOWER Jul 8, , % Daiwa Nihonbashi Hongokucho May 11, , % shinyon curumu Dec 3, 2012/ Apr 12, , % Daiwa Akasaka Aug 9, , % Daiwa Shibuya Miyamasuzaka Sep 27, , % Azabu Green Terrace July 4, , % Daiwa Ebisu 4-chome December 1,2014 4, % LAQAS Higashi Shinjuku December 3,2014 8, % Daiwa Aoyama March 2,2015 9, % Shinsen Place March 2,2015 4, % Grass City Shibuya May 1, , % Daiwa River Gate Jun 2, , % 9

10 Five Central Wards of Tokyo (Note 1) Daiwa Hatchobori ekimae September 11,2015 2, % Daiwa Hatchobori ekimae West September 11,2015 1, % Nikko Building Mar 29, , % Kirin Nihonbashi Building May 26, , % Daiwa Higashi-Nihonbashi Jun 1, , % Square Daikanyama Building Jun 29, , % Shinjuku West Building Jul 21, % Shin Kanda Mikuracho Building Dec 21, , % Total Number of Properties located in Five Central Wards of Tokyo: , % Greater Tokyo (Note 2) Daiwa Higashi-Ikebukuro Oct 21, , % Daiwa Shinagawa North Jul 13, , % Daiwa Osaki 3 Chome Sep 18, , % Daiwa Kamiooka Mar 1, , % Integral Tower May 29, , % Daiwa Meguro Square May 1, , % Daiwa Ogikubo Jul 21, , % Total Number of Properties located in Greater Tokyo: 7 38, % Major Regional Cities (Note 3) Daiwa Meieki Feb 1, , % Daiwa Kitahama Aug 1, , % Total Number of Properties located in Major Regional Cities: 2 Total Number of Properties: 54 14, % 469, % Type of Asset Investment Securities Name Godo kaisha Yokohama Office Management Silent Partnership Equity Interest Total Number of Investment Securities: 1 Date of Acquisition (Scheduled) Acquisition Price (Scheduled) (million yen) Jun 1, , ,920.0 (Note 1) Five Central Wards of Tokyo means Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku and Shibuya-ku. (Note 2) Greater Tokyo means Tokyo excluding the Five Central Wards of Tokyo, Kanagawa, Chiba and Saitama Prefectures. (Note 3) Major Regional Cities means Osaka area (i.e., Osaka, Kyoto and Hyogo Prefectures), Nagoya area (Aichi, Mie and Gifu Prefectures), ordinance-designated cities and core cities under Local Autonomy Act. (Note 4) Figures in the Investment Ratio columns represent the percentage of the (scheduled) acquisition price of each property to the aggregate amount of the (scheduled) acquisition price, and are rounded to the first decimal place. Please note that adding up of the investment ratio of the properties may not exactly match the investment ratio for each investment regions or for the overall portfolio. * Website URL of the Investment Corporation: 10