Property-Replacement May 23, 2018 AEON MALL Uki Himonya Shopping Center the b roppongi (Annex) the b fukuoka tenjin Musashimurayama warehouse Securities Code : 8960
Property-Replacement Strategy Improvement of the asset quality and portfolio profitability through strategic property-replacement 1. Decision making with consideration of each property s potentiality and the market 2. Enhancing our ability to cope with various risks by partial retention of gains on the property sale 3. Keeping adequate Return on Investment (4% in NOI yield after depreciation) through various devised approaches 22 nd FP ( 14/11) 28 th FP ( 17/11) 29 th FP ( 18/5) Property-replacement in the last three years Efforts at this time Acquisition in the future Disposition Acquisition Asset to be Sold Acquisition pipeline 15properties 36.7Bn yen (based on the acquisition price) 23properties 127.7Bn yen (based on the acquisition price) Total:26.4Bn yen (based on the acquisition price) AEON MALL Uki 7properties Effects of the series End of 22 nd FP ( 14/11) 108properties End of 28 th FP ( 17/11) 116properties Himonya Shopping Center 22.8Bn (based on the acquisition price) Total Acquisition Price Adjusted NOI yield Adjusted NOI yield after depreciation 519.9Bn yen 5.48% 4.14% Total Acquisition Price Adjusted NOI yield Adjusted NOI yield after depreciation 610.9Bn yen 5.63% 4.31% Estimated NOI Yield 5.6% (Average of 7 properties) 1
Summary of the Property Sale announced on May 23, 2018 Sale of 2 properties in consideration of their future prospects and the current real estate market (Bn yen) Property Name (Type of use) Location Completed Acquisition Price Book Value (Note 1) Appraisal Value (Note 2) Anticipated Sale Price (Note 3) Reason of the Sale AEON MALL Uki (Retail Properties) Himonya Shopping Center (Retail Properties) Uki, Kumamoto Meguroku, Tokyo October 1997 March 1975 11.1 9.4 6.1 6.5 2 properties will be sold with Estimated NOI yield of 4.9% (based on contracted sale price) 15.3 17.4 22.6 27.5 UUR has agreed with the tenant to enter into a long fixed-term lease agreement from August 2019 with large rent reduction.uur's rent revenues will decrease in exchange of avoidance of tenant leave risk. (Estimated NOI (yearly):before rent reduction 749Mn yen after rent reduction 504Mn yen) Receipt of the favorable purchase offer (Higher price than Appraisal Value) Concern for the property's profitability and liquidity in the future due to its location. UUR's rent revenues have increased greatly as the result of the large scale renovation work in 2016. Receipt of the favorable purchase offer based on the current increased rent. (Gains on the sale will be shown over 3 fiscal periods in installments) Concern of total floor decrease in case of rebuilding. (The building's floor-area ratio:about 480% v.s. present legal floor-area ratio: about 240%) Total/By fiscal period Date of Sale Acquisition Price Book Value (Note 1) Appraisal Value (Note 2) Anticipated Sale Price (Note 3) Estimaited Gain on sale of properties (Note 4) The use of sales profit Total 29FP(2018/5) 30FP(2018/11) 31FP(2019/5) (Note1) Book Value as of March 31, 2018. (Note2) Appraisal value as of May 1, 2018. May 24, 2018 November 1, 2018 March 1, 2019 26.4 26.8 28.7 34.0 6.0 18.9 18.3 17.6 20.5 1.3 2.9 3.3 4.2 5.2 1.8 4.5 5.2 6.7 8.2 2.9 (Note3) Anticipated Sale Price is show n w ithout miscellaneous expenses for the sale, consumption tax, etc. The w ord is used w ith the same definition in this release. (Note4) Estimaited Gain on sale of properties is different from the actual gains. Gains on the sale will be retained as "Reserve retained as distribution" to the extent not to be imposed corporate income tax. Mitigating the impact on decrease of NOI by the gains on the sale shown in 3 installments. 2
Candidates for Acquisition Increase of opportunities for property-acquisition through varied approaches Investment Candidates under consideration as of May 23, 2018 (Note) Acquisition Method Type of use Property name Location Completed Estimaited Acquisition price Utilization of the Adjacent Site and the less utilized part of the land of the Property Hotel the b roppongi building an Annex Tokyo 2019 (scheduled) Utilization of Bridge Fund Scheme Others Musashimurayama warehouse Tokyo 2001 Acquisition of properties under development (sponsors groups) Hotel non-disclosure (limited service hotel) non-disclosure (limited service hotel) the b fukuoka tenjin (limited service hotel) Hokkaido 2018 Ishikawa 2018 (scheduled) Fukuoka 2017 About 22.8 Bn yen Estimated NOI Yield 5.6% (Average of 7 properties) Acquisition of properties under development non-disclosure (limited service hotel) Tokyo 2018 Information network of the asset management company Residential Properties non-disclosure Fukuoka 2008 (Note) The properties shown above are those have been under negotiation with each owners of the properties and Japan REIT Advisors Co., Ltd. as of May 23, 2018. Therefore, there is no guarantee United Urban Investment Corporation can acquire these investment candidates. 3
Change in Asset Composition 1. Decrease of the ratio of "Retail Properties" by the effect of the Sale. 2. Expected increase of Hotel by acquisition of the candidates (new hotels with good location and high NOI yield) 3. Decreased ratio of the major corporate groups in rent revenues Improved quality and profitability of the portfolio in the long-term perspective Type Others Residential Properties 7.7% 6.8% Hotel 20.4% Before the Sale (as of May 23, 2018) 117properties 627.5Bn yen Office 32.2% Buildings Ratio of GMS(based on the acquisition price) Retail Properties 33.0% Property name Ratio Acquisition Price (Bn yen) Himonya Shopping Center 2.4% 15.3 AEON MALL Uki 1.8% 11.1 Daiei Takarazuka Nakayama 0.7% 4.2 Ito-Yokado Owariasahi 0.8% 4.8 GMS properties in total 5.6% 35.5 The whole portfolio 100.0% 627.5 Residential Others Properties 8.0% 7.4% Hotel 23.3% After the Sale and acquisition of the candidates (estimation) 121 properties About 623.9Bn yen Office Buildings Ratio of GMS(based on the acquisition price) Retail Properties 28.9% 32.3% Property name Ratio Acquisition Price (Bn yen) Daiei Takarazuka Nakayama 0.7% 4.2 Ito-Yokado Owariasahi 0.8% 4.8 GMS properties in total 1.4% 9.0 The whole portfolio 100.0% 623.9 Rent revenue from corporate groups (fixed income) 9.2% AEON Group 4.2% Solare Hotels and Resorts 4.1% Toshiba Electronic Devices & Storage 3.8% Yodobashi Camera Solare Hotels and Resorts 4.5% 4.1% AEON Group 4.1% Toshiba Electronic Devices & Storage 3.5% Yodobashi Camera 3.2% Fujita Kanko 3.2% Fujita Kanko 75.5% Top 5 tenant groups 24.5% 80.7% Top 5 tenant groups 19.3% 4
Continuous DPU Growth and Retained Earnings 1. Gains on the sales will be shown over 3 fiscal periods in installments 2. Enhancing our ability to cope with various risks by partial retention of the gains on the sale 3. Recovery and increase of NOI through internal growth and acquisition of the candidates Continuous DPU Growth 2,750 2,804 2,896 2,900 2,953 3,000 3,010 3,250 3,358 3,400 3,420 20FP 21FP 22FP 23FP 24FP 25FP 26FP 27FP 28FP 29FP 30FP 31FP ('13/11) ('14/5) ('14/11) ('15/5) ('15/11) ('16/5) ('16/11) ('17/5) ('17/11) ('18/5) ('18/11) ( 19/5) Utilize policy of retained earnings Forecast Forecast Forecast 1.Promotion of external growth with the flexible equity-raise We use our retained earnings to mitigate the influence in such case as the dilution of DPU arises by the issuance of new units and stabilize DPU level. Flexibility of equity-finance corresponding to the economic and financial markets and promotion of external growth can be expected through these initiatives. 2.Portfolio management from long-term perspective We use our retained earnings to maintain DPU level in such cases as losses on the disposition of property, sudden decreases in revenues (major tenants' leave etc.). This will enable us to build the optimum portfolio and asset management in the long perspective. 3.Coping with difference between accounting and taxation We can mitigate the risk of large amount of corporate tax due to difference between accounting and taxation such as impairment loss by using our retained earnings. 5
Disclaimer The purpose of this material is to provide information, and not to solicit or canvass for investment in any particular product or to serve as a recommendation to buy or to sell. To purchase United Urban Investment Corporation investment units, please direct requests to any securities company. Final investment decisions are entirely the responsibility of the investors themselves. This material is neither a disclosure document nor an investment report under the Act on Sales, etc of Financial Products, the Law Concerning Investment Trusts and Investment Corporations or the Security Listing Regulations of the Tokyo Stock Exchange. Data, analyses, etc., in this material are based on performance in a specific period in the past, and are not guarantees of actual future investment results, changes, etc. In addition, the forward-looking statements contained in this material does not guarantee future performance. No representations or warranties are made as to the accuracy or completeness of the information provided in this material, the content of which is subject to change or deletion without notice. Neither United Urban Investment Corporation nor Japan REIT Advisors Co., Ltd. accept any responsibility of any kind for the consequences of investment activities carried out on the basis of this material. Any reproduction or alternative use of the content of this material without prior permission is prohibited. Inquiries : Japan REIT Advisors Co., Ltd. Registration No. 336 by Kanto Local Bureau Member of The Investment Trust Association, Japan Finance Team TEL +81-3-5402-3680 FAX +81-3-5402-3199 6