ORIX JREIT Announces Property Acquisition

Transcription

1 REIT Issuer: ORIX JREIT Inc. (TSE: 8954) Teruo Ozaki Executive Director Asset Management Company: ORIX Asset Management Corporation Yoshitaka Kamemoto President and CEO Inquiries: Shinji Yamana Executive Officer TEL: ORIX JREIT Announces Property Acquisition 1. Summary of the Property Property Hotel Universal Port Type Hotels and Others Area (Note2) Other Areas (Osaka-shi, Osaka) Seller (Note3) Price to be acquired (million yen) Appraisal Value (million yen) NOI Yield (Note4) (%) Yield after Depreciation (Note5) Sponsor 34,000 34, Existing Portfolio (Note6) (%) Notes: 1. Property refers to the property to be acquired in the above. 2. Other Areas refers to areas other than the 6 Central Tokyo Wards, Remaining Tokyo Wards and Other Parts of the Greater Tokyo Area. 6 Central Tokyo Wards refers to Chiyoda, Chuo, Minato, Shinjuku, Shibuya and Shinagawa wards and Remaining Tokyo Wards refers to the remaining Tokyo wards other than the 6 Central Tokyo Wards. Other Parts of the Greater Tokyo Area refers to parts of Tokyo other than the 6 Central Tokyo Wards and Remaining Tokyo Wards, Kanagawa, Saitama and Chiba Prefectures The 6. 1/16

2 2/16 ORIX Synergy refers to the cooperative relationship between OAM and Sponsor.

3 3. Property features (a) Location/Property features Note: The Average Daily Rate(ADR) represents the amount calculated by dividing the total revenue from the hotel accommodation division during a certain period excluding service fees by the total number of rooms sold during the same period. And figure of "ADR" is rounded off to less than 100 yen. Annual Attendance at USJ FY 2015 FY 2016 FY 2017 Premium floor A special floor offering luxurious hotel stays with elevator restriction using a dedicated room key, early check-in, an exclusive check-in corner, and breakfast in a priority area. A wide variety of concept rooms These rooms meet a variety of accommodation needs with rooms for families with children, rooms that boldly incorporate USJ character motifs, and rooms with bunk beds for large groups. Regular floors These floors offer a park side view enabling visitors to continue enjoying USJ, or harbor side views overlooking Osaka bay area. Some rooms can be connected to accommodate up to eight guests. Corner Palace WAKU WAKU Wonder Room Deluxe Room 3/16

4 Note: TripAdvisor is a website on the internet containing travel related reviews, and operated by an affiliate company of TripAdvisor, Inc. (a US corporation listed on the Nasdaq Stock Market) (the Japanese-language website is hereinafter referred to as TripAdvisor ). According to explanations provided on the TripAdvisor website, the rankings of Travelers Choice Awards for Hotels are determined using TripAdvisor s original algorithm, based on the number of reviews and scores collected over the past 12 months from travelers around the world. The TripAdvisor Best Breakfast Hotels in Japan 2017 ranking is, according to the explanations provided, based on reviews written in Japanese which were submitted to TripAdvisor from January to December of From these reviews, words associated with breakfast were picked out, which were then classified into favorable and negative feedback, scored according to the total numbers, frequency, and other factors, and determined using TripAdvisor s original algorithm. The Certificate of Excellence, according to TripAdvisor website, is based on the quality, quantity, and recency of travelers reviews submitted to TripAdvisor during a 12-month period, with additional consideration given to such factors as the number of years in operation and popularity ranking, and decided on using TripAdvisor s original algorithm. It is explained that the award winners must maintain an overall TripAdvisor bubble rating of at least four out of five, must have a minimum number of reviews, and must have been listed on TripAdvisor for at least 12 months. It is also explained that the Hall of Fame award recognizes facilities which have received the Certificate of Excellence for five consecutive years. Source: Prepared by OAM based on news releases by ORIX Group and USJ Co., Ltd. Main New Attractions At USJ including scheduled ones July 2014 The Wizarding World of Harry Potter TM March 2016 The Flying DINOSAUR April 2017 MINIONS PARK 2018 Spring UNIVERSAL SPECTACLE NIGHT PARADE Best of Holly wood (Scheduled) Until 2020 SUPER NINTENDO WORLD Investment amount over 60 billion yen (Scheduled) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Sales amount ADR Approx. 21,900yen Guest room occupancy rate Approx. 93% FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Jan. - Dec /16

5 (b) Tenant features 5-year fixed-term lease ayreement ( ) Note: The Gross Operating Profit (GOP) represents the amount calculated by deducting costs related to hotel operations such as management commission, labor cost, utilities charge, advertising and others from hotel sales. : : : February 26, 2018 (Note 1) : April 2, 2018 : ORIX Golf Management Corporation : Proceeds from the issuance of new investment units through public offering (Note2), proceeds from the issuance of new investment units through public offering and third-party allotment resolved at OJR board meeting as of February 10, 2017 (Note3) and cash on hand : 100% on delivery Notes 1: The trust beneficial interest sale and purchase agreement for Property to be acquired (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 Agreements where the settlement and delivery of the properties 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 Agreements have 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 be obliged to compensate or indemnify for the resulting damages, etc. of the counterparty within the scope of an equivalent cause-andeffect relationship. 2: For details, please refer to the press release ORIX JREIT Announces Issue of New Investment Units and Secondary Offering of Units to be announced at a later date. 3: For details, please refer to the press release ORIX JREIT Announces the Pricing for the Issue of New Investment Units and Secondary Offering as of February 20, 2017 and ORIX JREIT Announces the Determination of the Number of New Investment Units to be Issued through Third Party Allotment as of March 23, /16

6 April 2, 2018 Public transit access Earthquake resistance (with or without earthquake insurance) (Note 1) Elevator: 9 Parking: 148 Hotel guest rooms: 600 rooms ( ORIX Golf Management Corporation CBRE, K.K. 6/16

7 None ( ) after the Acquisition : A: Fixed rent: 1,050 B: Variable rent (Sales-linked rent): The variable rent will be calculated and received by OJR by the method below, based on the sales amount for each half-year period (the Sales ), which period is defined as the first half-year from April to Septemper and the second half-year from October to March of the following year. <Base Amount> million yen 1) In case the Sales is more than 3,450 million yen: Add Base Amount, 80 million yen and 17% of the amount obtained by deducting 3,450 million yen from the Sales. 2) In case the Sales is more than 3,050 million yen but is not more than 3,450 million yen: Add Base Amount and 20% of the amount obtained by deducting 3,050 million yen from the Sales. 3) In case the Sales is 3,050 million yen: Base Amount 4) In case the Sales is 2,650 million yen or more but less than 3,050 million yen: Add Base Amount and then subtract 20% of the amount obtained by deducting the Sales from 3,050 million yen. 5) In case the Sales is less than 2,650 million yen: Add Base Amount and then subtract 17% of the amount obtained by deducting the Sales from 2,650 million yen. The variable rent for each of the first half-year period and the second half-year period is calculated separately, and no adjustments are made throughout the relevant year. In addition, in case the variable rent as calculated above includes any fraction of less than one (1) yen, such fraction is rounded up to one (1) yen, and the minimum variable rent is zero. 7/16

8 -Rent receiving method- A: Fixed rent: OJR will receive one twelfth (1/12) of the annual fixed rent each month. B: Variable rent: OJR will receive the variable rent at (i) the end of June and (ii) the end of December of each year. <Calculation period regarding variable rent> (i) Variable rent to be received at the end of June will be calculated based on the Sales for the period from October of the preceding year to March of the current year. (ii) Variable rent to be received at the end of December will be calculated based on the Sales for the period from April to September of the current year. Please note that, with respect to the variable rent which OJR will receive in the fiscal period ending August 31, 2018, normally no variable rent would accrue, because OJR will not own the Property during such calculation period regarding the variable rent; however, in order to stabilize cash distributions, it has been agreed that OJR shall receive 200 million yen, in addition to the fixed rent for such period and that 200 million yen shall be deducted from the variable rent which OJR would receive in the fiscal period ending February 28, If the amount obtained by deducting 200 million yen from the variable rent for the fiscal period ending February 28, 2019 is zero yen or less, no variable rent shall accrue for the fiscal period ending February 28, million 35, excluding parking and others 35, excluding parking and others 100% (as of November 30 th, 2017) (Note3) 1,903 million per annum 1. : Notes 1: PML (Probable Maximum Loss) shows the ratio (%) of cost of recovering a building after the damage to its state before the damage occurred against replacement cost, 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. 2: Figures are rounded down to the nearest million yen. 3: OJR plans to conclude 5-year fixed-term lease agreement with the lessee (hotel management company) described in the column of Gross rental income after the acquisition and occupancy rate after the acquisition is supposed to be 100%. 8/16

9 (million yen) Salse amount of hotel half-year period (X) Base amount Adding and Subtructing (a) Adding and Subtructing (b) 1) more than 3, (X-3,450) 17% 2) more than 3,050 but not more than3, (X-3,050) 20% 3) Base 3, ) 2,650 or more but less than 3, (3,050-X) 20% 5) less than 2, (2,650-X) 17% Rents (fixed and variable rent) to be received by OJR per fiscal period (million yen) 5) 4) 3) 2) 1) The minimum hotel sales amount and rent estimated by OAM for five years after the acquisition is 2,941 million yen, and 1,020 million yen, respectively. 1,200 1,150 1,100 1,050 1, Stabilized hotel sales amount and rent stated in the appraisal report is 3,174 million yen and 1,067 million yen, respectively. Stabilized hotel sales amount and rent estimated by OAM is 3,118 million yen and 1,056 million yen, respectively. The maximum hotel sales amount and rent estimated by OAM for five years after the acquisition is 3,276 million yen, and 1,087 million yen, respectively. Hotel sales amount per fiscal period (million yen) 900 2,500 2,550 2,600 2,650 2,700 2,750 2,800 2,850 2,900 2,950 3,000 3,050 3,100 3,150 3,200 3,250 3,300 3,350 3,400 3,450 3,500 3,550 3,600 A range of hotel sales amount per half year estimated by OAM for the fixed term building lease agreement (i.e., five years after the acquisition) ending August 31, 2018 ending February 28, /16

10 Hotels and Others 14.1% Logistics Facilities 5.5% Residential Properties 10.2% Retail Facilities 16.5% Other Areas 29.8% ± ± Offices 53.7% Other Parts of the Grteater Tokyo Area 18.9% 6 Central Tokyo Wards 40.7% Remaining Tokyo Wards 10.6% Greater Tokyo Area 70.2% Variable rent 3.5% Fixed rent 96.5% The above pie chart represents the ratio of Fixed rent and Variable rent in the portfolio overall. Figures are rounded to one decimal place. Fixed rent in properties continuously owned by OJR from the first day in the 30 th fiscal period ended February 28, 2017 to the last day in the 31 st fiscal period ended August 31, 2017 is calculated according to monthly rents which stand for the total of monthly rents and common service fees as well as management fees stipulated in agreements as of November 30, Variable rent in the property is calculated by dividing the total of actual variable rents, including sales-linked rent from the 30 th fiscal period ended February 28, 2017 to the 31 st fiscal period ended August 31, 2017, by twelve. In addition, Fixed rent and Variable rent in properties acquired from the 30 th fiscal period ended February 28, 2017 to the 31 st fiscal period ended August 31, 2017 is calculated by dividing fixed rents calculated according to monthly rents stipulated in agreements as of November 30, 2017 by twelve, and by dividing variable rent in properties according to the direct capitalization method indicated in the appraisal reports as of the end of the 31 st fiscal period ended on August 31, 2017 by twelve, respectively. 10/16

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13 There is no business relationship required for reporting between OJR or OAM and the Company. 13/16

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15 Name of Property Date of Value Appraisal Value (In thousands of yen) Appraiser Item Content Capitalization Method 34,100,000 Valuation by the Direct 34,600,000 (2)Gross Operating Revenue [(1)-(g)-(h)] 2,137,960 Hotel Universal Port January 1, ,100,000 Japan Real Estate Institute Grounds (In thousands of yen) (a)effective Gross Revenue 2,134,957 Recorded rent revenue considering that the rent level calculated based on the rent level and Fixed rent 1,050,000 the content of the lease agreement to be entered and attribute of lessee can be achieved stably over the medium to long term. Variable rent 1,084,957 Referrence: Annual sales amount that should be assumption of the rent level is calculated 6,349,787 thousand yen. (b)common Service Fees Revenue 0 (c) [(a)+(b)] (d)utility Expense Income (e) Parking Lot Income (f)other Revenue 2,134,957 Utility expense income is not recorded as the lessee will directly pay utility expense 0 pursuant to the lease agreement to be entered. 0 Parking lot income is not recorded as it is included in the rent revenue. 3,003 Base-station antenna income is included as other revenue. (1)Potential Gross Revenue [(c)+(d)+(e)+(f)] 2,137,960 As for building leasing related to hotel, it is common to enter contracts under the Hotel Occupancy Rate 100% assumption that management will be conducted over the long term. No vacancy loss is recorded as the vacancy risk associated with tenant departure is considered appropriate (g)vacancy Loss 0 given the cap-rate adapted. (h)credit Loss Recording of credit loss is judged to be unnecessary considering the status of the lessee, 0 etc. (3)Operating Expenses [(i)+(j)+(k)+(l)+(m)+(n)+(o)+(p)] (i)maintenance Expenses (j)utility Expenses (k)repair Expenses (l)property Management Fee (m)tenant Advertisement Cost Land 177,261 Maintenance expenses comprised of cleaning expenses, facility management expenses and 0 security expenses are not recorded as it shall be borne by the lessee pursuant to the lease agreement to be entered. Utility expenses are not recorded as it shall be borne by the lessee pursuant to the lease 0 agreement to be entered. Recorded considering management plans in the future and the fee level of similar properties 72,435 as well as annual average amount of renewal maintenance fees in the engineering report by reference to the past actual records. Property management fee, the commission paid to the subcontractor that controls tenant and building management businesses, is recorded considering the fee rate of similar 8,814 properties and the specific characteristics of the subject property upon referring fees based on the property management agreement to be entered. Tenant advertisement cost is not recorded judging cost incurred upon tenant replacement 0 or renewal should be considered in cap rate as the building is leased to one tenant for long term pursuant to the lease agreement to be entered. 10,341 Recorded based on the documents related to tax and public dues. (n)tax and Public Dues (o)casualty Insurance (p)other Expenses Building Depreciation Assets 79,424 Recorded based on the documents related to tax and public dues. 4,063 Recorded based on the documents related to tax and public dues. Recorded considering the insurance fee based on the insurance contract to be entered as 2,184 well as the rate of insurance fees of similar buildings 0 None. 15/16

16 (4)Net Operating Income [(2)-(3)] (q)profit from Managing Security Deposit (r)capital Expenditure (s)ff&e Reserve (5)Net Revenue [(4)+(q)-(r)-(s)] (6)Cap Rate DCF Method Discount Rate Terminal Cap Rate Cost Approach Ratio of Land Ratio of Building Any special considerations made in the reconciliation of estimated value 1,960,699 Assessed by multiplying the remaining amount of the deposit according to the fixed-term lease agreement to be entered by its management yield. Management yield considered 3,500 appropriate for fund management during the deposit period is assessed as 1.0% with consideration to the interest rate levels of both fund management and procurement. Renewal costs necessary for functional maintenance of buildings actually incur irregularly but are calculated under an assumption that expected expenditure is accumulated every 170,739 term on average, considering the level of capital expenditure and age of similar properties and annual average amount of repair and renewal costs in the engineering report. Renewal costs necessary for functional maintenance of FF&E actually incur irregularly but are calculated under an assumption that expected expenditure is accumulated every term 305,000 on average, considering the level of FF&E reserve and plans on strategic investment in similar properties. 1,488,460 Cap rate is assessed considering uncertainty in the future and transaction yields of similar properties with adjustment for spread arising from the competitiveness as a hotel such as locational condition and building conditions including age, gross floor area and equipment 4.3% level of the subject property as well as terms and conditions of contracts, rights of the land and building and other conditions based on the base rate in each area which is set by the appraiser. 33,500,000 Calculated comprehensively considering specific characteristics of the subject property by 4.1% referring to investment yields for transactions of similar properties and others. Assessed comprehensively considering future trends of investment yields, risks in the subject property as an investment target, general forecasts for economic growth rate and 4.5% trends in property prices and rents, etc. by referring to transaction yields of similar properties and others. 13,500, % 39.8% Including furniture, fixtures, and equipment Determined using the Income Approach Value with the Cost Approach Value used only for reference considering that the Income Approach Value is more convincing because the price determination process is accurately reproduced with respect to earnings. 16/16