Nippon Building Fund, Inc. · TSE:8951
Nippon Building Fund — H1 2018 Earnings Presentation
65 slides from Nippon Building Fund's earnings presentation, Aug 16, 2018
Slide 1: Investor Presentation January-June 2018 (34th Period)
January-June 2018 (34th Period) Investor Presentation ausust+s, 2018 Pst Pcl A MT NBF Nippon Building Fund Inc. Nippon Building Management Ltd. Nippon Building Fund
Slide 2: Contents
CONTENTS 1. Financial Highlights 7. ESG Initiatives 1-1 Financial Highlights (1/3) 3 7-1 ESG Initiatives (1/3) 38 1-1 Financial Highlights (2/3) 4 7-1 ESG Initiatives (2/3) 39 1-1 Financial Highlights (3/3) 5 7-1 ESG Initiatives (3/3) 40 2. Financial Results 8. Appendix 2-1 1H/2018 (34th Period) Sta
Slide 3: Financial Highlights
1. Financial Highlights 2
Slide 4: Financial Highlights (1/3)
1-1 Financial Highlights (1/3) Actual Forecast 1H/2018 2H/2018 1H/2019 (36th Period) (34th Period) (35th Period) (Reference) PoP Change Total operating revenues 36,635 million yen -5,490 million yen -13.0% 37,258 million yen 36,895 million yen Operating income 15,774 million yen -777 million yen -4.
Slide 5: Financial Highlights (2/3)
1-1 Financial Highlights (2/3) （As of June 30, 2018） Average Occupancy Unrealized gain Total assets Location Rate during on appraisal value the Period Note 1 Assets 23 wards of Tokyo:80.8％ 1,020.2billion yen 233.5 billion yen Central 5 wards of Tokyo: 99.3% 51.0％ Long-term fixed-rate Average LTV Ave
Slide 6: Financial Highlights (3/3)
1-1 Financial Highlights (3/3) Distributions per Unit (DPU) NAV per Unit (Yen) (Yen) 11,000 550,000 537,915 523,821 10,000 9,650 505,308 9,370 500,000 497,513 9,129 484,767 9,000 8,867 8,397 460,478 8,036 8,000 450,000 (7,773) 7,000 400,000 6,000 5,000 0 0 0 350,000 2H/'15 1H/'16 2H/'16 1H/'17 2H/'1
Slide 7: Financial Results
2. Financial Results 【Definition of Term】 Fiscal period Terms Definitions Property Name Roppongi T-CUBE, 3 new 3 properties acquired (including additional acquisition) Celestine Shiba Mitsui, Bldg. (additional acquisition) properties during the period ended June 30, 2018 (34th Period). Osaki Bright
Slide 8: 1H/2018 (34th Period) Statement of Income
2-1 1H/2018 (34th Period) Statement of Income (million yen) ●Summary of PoP Change (million yen) 2H/2017 1H/2018 PoP Change Total operating revenues: -5,490 (33rd Period) (34th Period) Amount Percentage Total operating revenues 42,125 36,635 -5,490 -13.0% Rental revenues -214 Operating revenues 36,5
Slide 9: 1H/2018 (34th Period) Balance Sheet
2-2 1H/2018 (34th Period) Balance Sheet Assets (million yen) ●Summary of PoP Change (million yen) December 31,2017 June 30,2018 PoP Change Total assets: +6,376 (33rd Period end) (34th Period end) Amount Percentage Current assets 33,318 14,468 -18,850 -56.6% Current assets -18,850 Cash and cash equiv
Slide 10: Memo
— Nippon Bufiding Func (MEMO)
Slide 11: Operating Results & Outlook
3. Operating Results & Outlook 10
Slide 12: External Growth (Property Replacement in the 33rd and 34th Periods) (1/2)
3-1 External Growth (Property Replacement in the 33rd and 34th Periods)（1/2） Achieved mid-to-long term, comprehensive improvement in profitability, through a large-scale replacement of properties in the portfolio. ●Three Concurrent Initiatives Disposition properties Acquisition properties Celestine
Slide 13: External Growth (2/2)
3-1 External Growth（2/2） Osaki Bright Core – Bright Plaza (Additional acquisition) ●Osaki Bright Core Property Features ●NBF acquired a 9.44% ownership interest in Osaki Bright Core and a 16.50% ownership interest in Osaki Bright Plaza in 2016. Total investment after the recent additional acquisitio
Slide 14: Internal Growth (1/2)
3-2 Internal Growth （1/2） ●Average occupancy rate during the period, the percentage of floor space of tenants moving in and out （％） （Forecast） （％） 15.0 100 Average occupancy rate during the period (right scale)Note 1 99.3 99.4 99.0 Percentage of floor space of tenants moving in (left scale)Note 2 98
Slide 15: Internal Growth (2/2)
3-2 Internal Growth （2/2） ●Breakdown of PoP Change in Rental Revenues from Exsiting Properties(replacement and rent revisions) （％） （Forecast） 3.0 Rent revision Replacement Replacement ＋ Rent revision 2.0 1.0 0.0 We forecast that rent revisions -1.0 will be net positive PoP for the 8th consecutive pe
Slide 16: Finance (1/2)
3-3 Finance（1/2） ●Financial Data ●Interest-Bearing Debt （Million yen） 2H/2017 1H/2018 PoP 2H/2017 1H/2018 PoP (33rd Period) (34th Period) Change (33rd Period) (34th Period) Change LTV 40.8％ 40.9％* +0.1 pt Short-Term Borrowings 0 4,000 +4,000 Long-Term Fixed-Rate Long-Term Borrowings 95.2％ 93.3％ -1.9
Slide 17: Finance (2/2)
3-3 Finance（2/2） ●New Funding and Repayment ● Long-Term Borrowings Procured in 1H/2018 (34th Period) ・Long-term borrowings 1H/2018 (34th Period) Long-Term Borrowings & Investment Corporation Bonds Financing Amount Term Fixed/ Interest Lender Date （Million yen） (Years) Floating Rate Repayment Overvie
Slide 18: Appraisal Value Assessment
3-4 Appraisal Value Assessment ●Appraisal Value ●Appraisal Value & Book Value (Billion yen) 1,400 2H/2017 1H/2018 PoP (33rd Period end) (34th Period end) Change Book value (period end) Appraisal value (period end) Number of properties 72 properties 72 properties - Appraisal 1,200 value 1,187.5 billi
Slide 19: Forecast
Forecast NBF 18
Slide 20: 2H/2018 (35th Period) Forecast
4-1 2H/2018 (35th Period) Forecast ●Summary of PoP Change for 2H/2018 (Million yen） （Million yen） 1H/2018 2H/2018 PoP Change 1H/2019 PoP Change （Actual） （Forecast） (Reference) Total operating revenues +623 Amount Percentage Amount Percentage (34th Period） (35th Period） (36th Period） Rental revenues
Slide 21: Performance Forecast
(Reference) Performance Forecast Rental revenues Operating income from property leasing activities （Million yen） Previous period Internal growth External growth Rental revenues （Million yen） 18,000 34,000 Property tax portion of new properties 2,473 33,955 33,896 17,500 17,407 33,500 17,184 1,973 17
Slide 22: Memo
— Nippon Bufiding Func (MEMO) 21
Slide 23: Market Data
Market Data NBF 22
Slide 24: Trends in the Office Building Leasing Market (1/2)
5-1 Trends in the Office Building Leasing Market （1/2） ●Market Rents for Office Buildings in Tokyo Business Districts* (Average Asking Rent & Average Vacancy Rate) （Yen/tsubo） (％） 9.43％ 25,000 （Jun. ‘12） 10.00 8.57％ 22,901yen （Jun. ’03, Aug. ’03） （Aug. ‘08） 9.00 8.00 20,202yen 7.00 20,000 （Jul ‘18）
Slide 25: Trends in the Office Building Leasing Market (2/2)
5-1 Trends in the Office Building Leasing Market （2/2） ●New Supply of Large-Scale Office Buildings* in the 23 Wards of Tokyo （10 thousand m2） Source: Compiled by asset management company using data from Mori Building Co., Ltd. as of April 27, 2018 300 （Forecast） 250 216 Average of Historical average
Slide 26: Trends in the Real Estate Trading Market
5-2 Trends in the Real Estate Trading Market ●Real Estate Trading Value (Office Buildings) （Billion yen） 2,500 First half Second half 2,000 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Compiled by asset management company from da
Slide 27: NBF Unit Price, TSE REIT Index & 10-Year JGB Yields
5-3 NBF Unit Price, TSE REIT Index ＆ 10-Year Japanese Government Bond Yields ●NBF Unit Price ＆ TSE REIT Index （Yen） （Pt） 1,200,000 4,000 NBF unit price (left scale) TSE REIT Index (right scale) 900,000 3,000 600,000 2,000 300,000 1,000 0 0 '01.9 '02.9 '03.9 '04.9 '05.9 '06.9 '07.9 '08.9 '09.9 '10.9
Slide 28: Memo
— Nippon Bufiding Func (MEMO) 27
Slide 29: NBF's Competitive Advantages
6. NBF’s Competitive Advantages 6-1 J-REIT with the Longest Track Record 6-2 The Largest J-REIT in Size 6-3 A Portfolio Focused on Tokyo 6-4 Collaboration with Sponsor (Mitsui Fudosan Group) ・Pipeline ・Leasing ・Property Management 6-5 Stable Financial Management 28
Slide 30: J-REIT with the Longest Track Record (1/2)
6-1 J-REIT with the Longest Track Record (1/2) ●Asset Scale (Total Acquisition Price) & Average Occupancy Rate during the Period 23 wards of Tokyo (left scale) Other Greater Tokyo (left scale) Average occupancy rate during the period (right scale) （Billion yen） Central 5 Wards of Tokyo (incl. in abo
Slide 31: J-REIT with the Longest Track Record (2/2)
6-1 J-REIT with the Longest Track Record (2/2) ●Distributions per Unit (Note 1) （Yen） 11,274 12,000 11,126 10,064 10,887 9,904 9,836 9,650 9,513 9,695 9,612 9,370 8,645 8,446 8,523 8,867 9,129 8,562 8,427 8,645 8,152 8,397 9,000 8,001 8,126 7,683 7,747 7,569 7,600 7,740 7,877 7,681 7,787 8,036 7,592
Slide 32: The Largest J-REIT in Size
6-2 The Largest J-REIT in Size （As of June 30, 2018) ●Market Capitalization （Billion yen） Ratio of J-REITs 1000 by Type 902.2 billion yen Office buildings 900 21.3% Diversified and hybrid 800 J-REIT Total Market Capitalization 44.7% 700 … 11,465.1 billion yen 600 Logistics 11.2% 500 400 Residential
Slide 33: A Portfolio Focused on Tokyo
6-3 A Portfolio Focused on Tokyo ● Investment Ratio by Area ● Continued Appraisal Value & Floor Space (Acquisition price basis; as of June 30, 2018) (20 properties over 10,000 tsubo) 23 Wards of Tokyo Other Greater Tokyo Other Cities Continued Appraisal Other Cities Value *The size of the dot for ea
Slide 34: Collaboration with Sponsor (Mitsui Fudosan Group) (1/3) Pipeline
6-4 Collaboration with Sponsor (Mitsui Fudosan Group) (1/3) Pipeline ●Total Acquisitions by Seller ●Co-Existence Model with Mitsui Fudosan Group Since our IPO, we have acquired approximately 60% of our properties from the Mitsui Fudosan Own Group (acquisitions and brokerage). Manage （Billion yen） Ni
Slide 35: Collaboration with Sponsor (Mitsui Fudosan Group) (2/3) Leasing
6-4 Collaboration with Sponsor (Mitsui Fudosan Group) (2/3) Leasing ●Average Occupancy Rate during the Period & Total Rentable Area （％） （10 thousand m2） NBF’s Average occupancy rate during the period (nationwide)Note 1 (left scale) 100 Reference: Average market occupancy rate during the periodNote 2
Slide 36: Collaboration with Sponsor (Mitsui Fudosan Group) (3/3) Property Management
6-4 Collaboration with Sponsor (Mitsui Fudosan Group) (3/3) Property Management ●Property Management Structure ●Strategic Additional Investment with Clear Objectives • Formulate & execute management & operation plans Formulate and execute • Formulate & execute large-scale repair plans Set building g
Slide 37: Stable Financial Management
6-5 Stable Financial Management ●LTV & Long-Term Fixed-Rate Debt Ratio ●Average Maturity (Long-Term Interest-Bearing Debt) （％） （Years） 100 6 5 97.7 5.60 96.5 95.2 93.8 95.2 5.16 5.15 5.22 90 94.0 93.3 4 4.99 92.5 Target : 90% or higher for the long-term 4.29 4.11 3 4.02 80 fixed-rate debt ratio 2 1
Slide 38: ESG Initiatives
7. ESG Initiatives （Initiatives by NBF and NBFM） 37
Slide 39: ESG Initiatives (1/3) Basic Policy
7-1 ESG Initiatives（1/3） NBFM are promoting ESG initiatives, such as the reduction of environmental load in portfolio management, considerations for stakeholders such as local communities and employees, etc., in accordance with the Basic Policy for ESG Initiatives. NBFM, in recognition of the import
Slide 40: ESG Initiatives (2/3)
7-1 ESG Initiatives（2/3） ●Initiatives for Green Building Certification NBF endeavors to utilize DBJ Green Building Certifications in an aim to increase the credibility and objectivity of its efforts to reduce environmental load as well as increase the value of its buildings in the mid-to-long-term.
Slide 41: ESG Initiatives (3/3)
7-1 ESG Initiatives（3/3） ●Initiatives for Stakeholders : Examples Disaster Preparation Initiatives for Local Communities ●As a part of local communities, NBF holds initiatives such Offered a space for a disaster 【Roppongi T-CUBE】 as lunchtime concerts, water sprinkling programs for stockpile storage
Slide 42: Memo
— Nippon Bufiding Func (MEMO) 41
Slide 43: Appendix
8. Appendix 42
Slide 44: Internal Reserves
1 Internal Reserves ●Disposition Summary(34 th Period) ●Internal Reserves* NBF Hibiya Bldg. (Million yen) 8,000 Reversal of reserve for advanced depreciation 7,000 6,823 Provision of reserve for advanced depreciation 6,439 383 6,000 1,452 4,987 5,000 4,767 4,767 219 4,185 951 4,000 370 3,815 3,000 2
Slide 45: Top 10 Tenants / Tenants by Industry
Top 10 Tenants (Leased Floor Space Basis) / 2 Tenants by Industry ●Top 10 Tenants (Leased Floor Space Basis) ●Tenants by Industry2 （As of June 30, 2018) Warehousing & Transportation Ratio of Total 1.8% Other Leased Areas Tenant Name Leased Property (㎡) Rentable Other products 8.2% Area (%) 2.0％ Serv
Slide 46: Floor Space of Tenants Moving in and out by Property (1H/2018)
NBF Kumamoto Bldg. Hakata Gion M-SQUARE NBF Matsuyama Nichigin-mae Bldg. Hiroshima Fukuromachi Bldg. NBF Hiroshima Tatemachi Bldg. Other Cities Number in parenthesis is an average of total rentable area at the end of each month Sun Mullion NBF Tower Sakaisuji-Honmachi Center Bldg. Shinanobashi Mitsu
Slide 47: Property Age
4 Property Age 2H/2017 1H/2018 （33rd Period） （34th Period） 17.5% 17.5% 34.9% 41.8% Average Property Age Average Property Age 19.13 years 18.32 years 40.8% 47.6% 10 years or less 11-20 years Over 20 years 46
Slide 48: Financial Management
5 Financial Management Borrowings (left scale) Long-term fixed-rate debt ratio (right scale) Investment corporation bonds (left scale) LTV (Interest-bearing debt to total assets) (right scale) （Billion yen） 99.6 （％） 97.5 97.7 600 100 95.2 95.0 95.2 95.2 95.1 92.9 94.2 93.8 94.0 93.3 97.7 96.4 96.5 5
Slide 49: Lenders & Borrowings
6 Lenders & Borrowings （Million yen） 2H/2017 1H/2018 Repayment Lender Other 33rd Period End 34th Period End Method Sumitomo Mitsui Trust Bank, Ltd. - 1,000 Unsecured, Lump sum Shinkin Central Bank - 1,000 unguaranteed, Short-Term repayment on Resona Bank, Ltd. - 1,000 ranked pari Borrowings due date
Slide 50: Overview of Unit Ownership
7 Overview of Unit Ownership Ownership by Unitholder Number of Unitholders by Type Dec. 31, 2017 Jun. 30, 2018 Dec. 31, 2017 Jun. 30, 2018 Uniholder Category PoP Change Uniholder Category (33rd Period end) (34th Period end) PoP Change (33rd Period end) (34th Period end) Units % Units % Units Units %
Slide 51: Historical Summary of Main Management Indicators and Other Data
8 Historical Summary of Main Management Indicators and Other Data 30 th Period 31st Period 32nd Period 33rd Period 34th Period Note 1: NOI from property leasing activities does not include such items as gain or loss on sale of 1H/2016 2H/2016 1H/2017 2H/2017 1H/2018 investment properties. Operating
Slide 52: Property Portfolio Overview (1/2) – 23 Wards of Tokyo
9 Property Portfolio Overview (1/2) – 23 Wards of Tokyo ●23 Wards of Tokyo Occupancy Total Occupancy Total Total Total Leased Total Total Leased Rate at Number Rate at Number Property Name Rentable Area (㎡) PML (%) Property Name Rentable Area (㎡) PML (%) End of of End of of Area (㎡) Area (㎡) (incl.
Slide 53: Property Portfolio Overview (2/2) – Other Greater Tokyo & Other Cities
9 Property Portfolio Overview (2/2) – Other Greater Tokyo & Other Cities ●Other Greater Tokyo ●Other Cities Occupancy Total Occupancy Total Total Total Leased Total Total Leased Rate at Number Rate at Number Property Name Rentable Area (㎡) PML (%) Property Name Rentable Area (㎡) PML (%) End of of En
Slide 54: Appraisal Value (1/3) – 23 Wards of Tokyo
10 Appraisal Value (1/3) – 23 Wards of Tokyo ●23 Wards of Tokyo 1H/2018 34th Period End 2H/2017 33rd Period End Direct Direct Unrealized Gain PoP Change in (1) Acquisition Price (2) Return DCF Method (3) Return DCF Method (Loss) Appraisal Value Property Name Book Value at （million yen） Appraisal Val
Slide 55: Appraisal Value (2/3) – 23 Wards of Tokyo
10 Appraisal Value (2/3) – 23 Wards of Tokyo 1H/2018 34th Period End 2H/2017 33rd Period End Unrealized Gain PoP Change in (1) Direct Direct Acquisition Price (2) (3) (Loss) Appraisal Value Property Name Book Value at Return DCF Method Return DCF Method （million yen） Appraisal Value Appraisal Value
Slide 56: Appraisal Value (3/3) – Other Greater Tokyo & Other Cities
10 Appraisal Value (3/3) – Other Greater Tokyo & Other Cities ●Other Greater Tokyo / Other Cities 1H/2018 34th Period End 2H/2017 33rd Period End Unrealized Gain PoP Change in (1) Direct Direct Acquisition Price (2) (3) (Loss) Appraisal Value Property Name Book Value at Return DCF Method Return DCF
Slide 57: Revenue by Property (1/3) – 23 Wards of Tokyo
11 Revenue by Property (1/3) – 23 Wards of Tokyo ●23 Wards of Tokyo (Million yen） Mitsubishi Kowa NBF Celestine Heavy NBF NBF NBF Roppongi Nishi- NBF NBF Toranomon NBF Shinjuku NBF Nishi- Hibiya Shiba Mitsui Industries Shiba Minami- Shibuya Ginza Street GSK Bldg. River City T-CUBE Shinjuku Platinum
Slide 58: Revenue by Property (2/3) – 23 Wards of Tokyo & Other Greater Tokyo
11 Revenue by Property (2/3) – 23 Wards of Tokyo & Other Greater Tokyo ●23 Wards of Tokyo (Million yen） Nakano Osaki Bright Ueno NBF Higashi Toyo-cho NBF NBF Gate City sakaue NBF Toyosu NBF Toyosu Nakameguro Core - Bright NBF Ueno East Tower Ikebukuro Gotanda Center Bldg. Ikebukuro Ikebukuro Ohsaki
Slide 59: Revenue by Property (3/3) – Other Cities
11 Revenue by Property (3/3) – Other Cities ●Other Cities (Million yen） Sumitomo Sakaisuji- NBF NBF NBF Sapporo NBF Niigata NBF Nagoya Nakanoshima Hiroshima NBF Sapporo NBF Unix Mitsui Aqua Dojima Shinanobashi Honmachi Sun Mullion Hiroshima Matsuyama Hakata Gion Minami Nijo Telecom Hirokoji Central
Slide 60: Portfolio Map
Portfolio Map . Kita-ku Of nif 46) - Toshima-ku, / » 47143 2 Sumida-ku Le ™ Other Cities 1 6 Properties ¥1 27.6 billion 23 Wards of Tokyo 47 Properties ¥892.3.on f 4 Spe Other Greater Tokyo Qproperties ¥85.0 billion 59 NBF Nippon Building Fund - Acquisition Price (Total) — 72 Properties ¥1 1 05.0 bi
Slide 61: Properties (1/4) – 23 Wards of Tokyo
13 Properties (1/4) – 23 Wards of Tokyo 1 Roppongi T-CUBE 5 Shiba NBF Tower 9 Toranomon Kotohira Tower 13 Shinjuku Mitsui Bldg. No.2 17 NBF Shinkawa Bldg. 1-1, Roppongi 1-30, Shiba 2-8, Toranomon 2-11, Nishi- Location 31-1, 31-7, 20-15, Location Location Location Location 3-chome, Daimon 1-chome, Sh
Slide 62: Properties (2/4) – 23 Wards of Tokyo
13 Properties (2/4) – 23 Wards of Tokyo 21 NBF Shibuya East 25 NBF Shibakouen Daimon Street Bldg. 29 Panasonic Tokyo Shiodome Bldg. 33 Jingumae M-SQUARE 37 NBF Toyosu Canal Front 3-5, Shibuya 3- Location 8-12, Shibakouen 5-1, Higashi- 4-16, Jingumae 1- 6-52, Toyosu 5- Location Location Location Loca
Slide 63: Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo
13 Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo 41 Osaki Bright Core - Bright Plaza 45 Toyo-cho Center Bldg. 48 Chofu South Gate Bldg. 52 Tsukuba Mitsui Bldg. 56 NBF Matsudo Bldg. Bright Core: Location 48-26, Kojimacho 6-1, Takezono 1- 18-4, Hon-cho, Location Location 3-2, Toyo 2-chome
Slide 64: Properties (4/4) – Other Cities
13 Properties (4/4) – Other Cities 57 Sapporo L-Plaza 61 Sumitomo Mitsui Banking Nagoya Bldg. 65 Shinanobashi Mitsui Bldg. 69 Hiroshima Fukuromachi Bldg. 28, Kita Hachijo 18-19, Nishiki 2- 11-7, 5-25, Fukuromachi, Location Location Location Location Nishi chome, Utsubohonmachi Nakaku, 3-chome, kita-
Slide 65: Disclaimer
Disclaimer This English language notice is a translation of the Japanese language Investor Presentation dated August 16, 2018 and was prepared solely for the convenience of, and reference by, overseas investors. Neither NBF nor Nippon Building Fund Management, Ltd. makes any warranties as to its acc