Notice Concerning Renewal Plan at Nara Family

Transcription

1 Japan Retail Fund Investment Corporation (Tokyo Stock Exchange Company Code: 8953) News Release October 14, 2015 Notice Concerning Renewal Plan at Nara Family Mitsubishi Corp. UBS Realty Inc., the asset manager (the Asset Manager ) of Japan Retail Fund Investment Corporation ( JRF ) decided today to conduct a large-scale renewal project (the Renewal Plan ) at Nara Family (Nara-shi, Nara) (the Property ) as a part of JRF s internal growth strategy by utilizing JRF s SC management capability. 1. Purpose of the Renewal Plan JRF will conduct the large-scale renewal to bring out the maximum potential of the Property and establish a long-term stable revenue base by using the SC management capability. Purpose of the Renewal Plan To bring out the maximum potential of the Property by transforming it into a high-quality retail facility that focuses on continuity with the department store and can further strengthen the Property s position as a No. 1 store in Nara prefecture. 2. Background of the Renewal Plan Great potential as a high-quality retail facility surrounded by a large market and located in front of a terminal station The Property is situated in a location that is two minutes walk from Yamato-Saidaiji Station on Kintetsu Nara Line and is a retail facility with a total floor area of about 110,000 m 2. With Kintetsu Department Store and AEON as its core tenants, the Property consists of about 120 specialty stores. JRF acquired the Property in March The Property has a large market population of around 330,000 in the 5-km area and around 680,000 in the 10-km area. Nara-shi, Nara, where the Property is located, has one of the highest levels of savings and consumer spending per household in Japan. In addition, Nara-shi along with Ikoma-shi, Seika-cho in Kyoto, and Kizugawa-shi, which are located in the same trade area, has higher per capita taxable income than the national average. Furthermore, Kintetsu Yamato-Saidaiji Station is a rail transportation hub where Kintetsu Nara Line, Kyoto Line and Kashihara Line intersect. The opening of the Hanshin Namba Line in 2009 has provided direct access to Kobe Sannomiya in addition to Kyoto and Osaka Namba without a transfer; the area is becoming all the more convenient. Therefore, the Property, a retail facility in front of the terminal station, is considered to have a great locational potential. Given the characteristics of the trade area and location and the fact that foreign luxury brands are in Kintetsu Department Store, the core tenant of the Property, it is considered to have a great potential as a high-quality retail facility. Further strengthening the position as the No. 1 store in Nara by regaining support from customers Around the time when the Property was opened, it had the annual sales of approximately 60 billion yen and established its position as the No. 1 store in Nara prefecture. However, as a result of the outflow of customers from the existing GMS (Note) and specialty stores due to the opening of suburban shopping malls in the neighboring area, and the outflow of customers from the department store because of the opening of large-scale retail facilities in Osaka and Kyoto, the sales in the year 2014 were about 40 billion yen, although the small-scale renewal works have been done to the Property after JRF s acquisition of the Property. However, considering the Property s potential, JRF concluded that redeployment of specialty stores based on a tenant mix that has continuity with the department store and renovation of the facilities environment will transform the Property into a high-quality retail facility from a suburban-type retail facility, which allows us to bring back customers who are believed to have outflowed to other cities such as Osaka and Kyoto and suburban shopping malls in the neighboring area, and strengthen the Property s position as the number one store in Nara Prefecture. Compared to the option not to implement the Renewal Plan (i.e. continuing operations while maintaining the current tenant mix and position, or disposition or reconstruction of the Property), the Renewal Plan will contribute to the increase in profitability of the portfolio the most based on our quantitative and qualitative assessments in terms of the Property s profitability contribution to the portfolio, the long-term profitability, and the competitiveness in 1

2 tenant leasing. Therefore, JRF decided to implement the Renewal Plan. (Note)GMS (General Merchandise Store)refers to general super markets or retail stores. 3. Contents of the Renewal Plan Renewal Plan Major review of tenant mix focusing on continuity with the department store Major expansion of specialty store area Renovation of facilities environment suited for a high-quality retail facility Major review of tenant mix focusing on continuity with the department store When planning tenant replacement, JRF concluded that it was not realistic to increase the sales with the current suburban-type retail facility oriented tenant mix in the intensifying competitive environment. Through the Renewal Plan, JRF will strengthen the Property s competitiveness as a high-quality retail facility by conducting a major review of the tenant mix and attracting trend-leading multi-brand store tenants that have continuity with the department store and large-scale tenants that attract customers. Major expansion of specialty store area Of the Property s total leasable area of about 25,700 tsubo (as of the end of August 2015), a total of 3,780 tsubo, including the 1st to 4th floors of the existing specialty store area and the 3rd and 4th floors that will be renovated to expand the specialty store area, will be renewed. JRF plans to attract large scale tenants to the expanded specialty store area and this will likely to enhance the ability to pull in more customers. Renovation of facilities environment suited for a high-quality retail facility Through the Renewal Plan, the facility will be renovated to a high-quality retail facility by redoing the interior design of the common areas including the atrium space. In addition, the current floor plan will undergo a major change to create the floor plan and common passage that focus on mid- to long-term tenant substitutability and continuity. 4. Schedule of the Renewal Plan Feb period (28 th ) Aug period (29 th ) Feb period (30 th ) Sep. Oct. Nov. Dec. Jan. Feb. Mar. Arp. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Implementation plan Tenant renewal in a step by step manner Environmental work Renewal opening in Autumn

3 5. Effects of the Renewal Plan JRF estimates the effects of the renewal on the entire facility as follows: Estimated total expenditure (Note 1 ) Formula for increase in NOI Estimated increase in NOI Estimated increase in NOI / Estimated total expenditure 5.5 billion yen (Estimated NOI after renewal) ( Estimated NOI without renewal) (Estimated NOI after renewal) (Actual NOI for the year 2014) 0.45 billion (Note 2) yen/year 0.24 billion (Note 3) yen/year 8.2% 4.2% (Note 1) Estimated total expenditure is the sum of construction cost, design cost, facility replacement cost and accompanying costs, and furniture and fixtures transfer cost, removal cost, etc. (Note 2) The amount is the difference between the estimated yearly NOI for the year 2017 without the renewal and the stabilized estimated yearly NOI for the year 2017 after the renewal. The estimate annual sales in case of no renewal is calculated to be 39.0 billion yen taking into account the historical sales trends with current tenant composition unchanged, macro data released by Japan Chain Stores Association and Japan Department Stores Association, and third party report. The NOI in case of no renewal project is calculated to be 2.15 billion yen based on the estimated annual sales and on the assumption that renewal of the lease contracts with the existing tenants and partial tenant replacement will occur. (Note 3) The amount is the difference between the sum of the actual NOIs for the fiscal period ended August 2014 (the 25th period) and the fiscal period ended February 2015 (the 26th period), and the stabilized early NOI for the year 2017 after the renewal. 6. Future Outlook The impact of the Renewal Plan on our operating forecasts for the fiscal period ending February 2016 (the 28th period: September 1, February 29, 2016) and the fiscal period ending August 2016 (the 29th period: March 1, August 31, 2016) is incorporated and will be announced in Japan Retail Fund Investment Corporation Summary of Financial Results for the Six Months Ended August 31, 2015 which is scheduled to be released on October 15, About JRF: JRF is the third listed Japanese Real Estate Investment Trust ( J-REIT ) and the first J-REIT to focus exclusively on retail properties. Please refer to our website at for further details. Contacts: For further information relating to this press release as well as JRF and Mitsubishi Corp.-UBS Realty Inc., its Asset Manager, please feel free to contact: Mr. Keita Araki (Telephone Number: ), Head of Retail Division at Mitsubishi Corp.-UBS Realty Inc., Investor Relations: Telephone Number: jrf-8953.ir@mc-ubs.com This translation is for informational purposes only, and the Japanese language release should be referred to as the original. 3

4 <Reference> 1) Image after the renewal Atrium space Creation of a new facilities environment suited for a high-quality retail facility through the renovation of the atrium space to make customers want to gather around the space After (Note) Before Common passage Setting separate images for each floors, and also setting common façade throughout the facility to give a consistent look After (Note) Before (Note) The images after the renewal are based on the basic design and may differ from the actual through the execution design. 4

5 2) Ranking of savings, consumer spending and taxable income by cities and towns Savings (million yen) Consumer spending (yen) Taxable income (thousandyen) 1 Tokyo 2,515 2 Nara 2,330 3 Chiba 2,167 4 Yokohama 2,150 5 Kawasaki 2,121 6 Saitama 2,077 7 Utsunomiya 2,067 8 Sagamihara 2,053 9 Shizuoka 2, Fukui 2,018 - National average 1,798 1 Toyama 339,622 2 Kanazawa 335,861 3 Kawasaki 331,689 4 Saitama 329,448 5 Utsunomiya 329,193 6 Tokyo wards area 324,999 7 Nara 324,605 8 Tokushima 320,073 9 Kochi 319, Hamamatsu 311,903 - National average 291,194 1 Minato-ku, Tokyo 12, Ikoma-shi, Nara 3, Seika-cho, Kyoto 3, Nara-shi, Nara 3, Kidugawa-Shi, Kyoto 3,437 - National average 3,274 (Note 1) Savings are from The Ministry of International Affairs and Communications, Statistics Bureau, the 2014 Survey of Household Economy, Amounts of Savings and Liabilities Held per Household for City Groups, Districts and Cities with Prefectural Governments (Two-or-more-person Households). (Note 2) Consumer spending is from The Ministry of International Affairs and Communications, Statistics Bureau, 2014 Survey of Household Economy, Monthly Receipts and Disbursements per Household for City Groups, Districts and Cities with Prefectural Governments (Two-or-more-person Households). (Note 3) Taxable income data was compiled by the Asset Manager based on the 2014 data released by The Ministry of International Affairs and Communications, Local Tax Bureau. 3) Descriptions of the Property Location (address) 4-1, Saidaiji-higashimachi 2-chome, Nara-shi, Nara Acquisition date (Note 1, 2) March 6, 2003 October 23, 2007 February 8, 2008 June 29, 2012 Acquisition price 34,875 million yen Land area 29, m 2 Zoning Commercial district, etc. Total floor area 115, m 2 7 stories above ground and 2 basement floors, steel-reinforced concrete with deck roof; Structure/stories 7 stories above ground, steel construction with deck roof; 3 stories above ground, steel construction with slate roofing; 2 stories above ground, light-gauge steel with slate roofing Completion date November 12, 1992 / April 30, ,364 million yen Rent NOI (calculated from the total of the actual figures for the fiscal period ended August 2014 and the fiscal period ended February 2015) Net operating profit from real-estate rental 1,821 million yen (calculated from the total of the actual figures for the fiscal period ended August 2014 and the fiscal period ended February 2015) (Note 1) Part of the land (1,026.89m 2 ) is leased land with the trustee as the lessee. (Note 2) The trustee acquired the parking area (acquisition price: 50 million yen) on October 23, 2007 and also acquired the adjacent land (acquisition price: 84 million yen) on February 8, Furthermore, JRF acquired part of the leased land (3,848.89m 2, acquisition price: 3,500 million yen) on June 29, 2012 and the trust beneficiary right of the land was set on the same date. 4) Photo and map of the Property 5