Nippon Building Fund, Inc. · TSE:8951
Nippon Building Fund — H2 2017 Earnings Presentation
69 slides from Nippon Building Fund's earnings presentation, Feb 16, 2018
Slide 1: July-December 2017 (33rd Period) Investor Presentation
July-December 2017 (33rd Period) Investor Presentation February 16, 2018 NBF Nippon Building Fund Inc. Nippon Building Fund Nippon Building Management Ltd.
Slide 2: Contents
CONTENTS 1. Financial Highlights 6-2 The Largest J-REIT in Size 34 1-1 Financial Highlights (1/3) 3 6-3 A Portfolio Focused on Tokyo 35 1-1 Financial Highlights (2/3) 4 6-4 Collaboration with Sponsor (Mitsui Fudosan Group)(1/3)Pipeline 36 1-1 Financial Highlights (3/3) 5 6-4 Collaboration with Spons
Slide 3: 1. Financial Highlights
1. Financial Highlights 2
Slide 4: Financial Highlights (1/3)
1-1 Financial Highlights (1/3) Actual Forecast 2H/2017 1H/2018 2H/2018 (33rd Period) (34th Period) (35th Period) (Reference) PoP Change Total operating revenues 42,125 million yen +5,715 million yen +15.7% 36,559 million yen 36,635 million yen Operating Income 16,552 million yen +1,438 million yen +
Slide 5: Financial Highlights (2/3)
1-1 Financial Highlights (2/3) （As of December 31,2017） Average Occupancy Unrealized gain Total assets on appraisal value Location Rate during the Period Note 1 Asset 23 wards of Tokyo:80.2% 1,013.8billion yen 214.0 billion yen Central 5 wards of Tokyo: 50.6% 98.8% Long-term fixed-rate Average LTV A
Slide 6: Financial Highlights (3/3)
1-1 Financial Highlights (3/3) Distributions per Unit (DPU) NAV per Unit （yen） （yen） 10,000 550,000 9,370 523,821 9,129 505,308 497,513 9,000 8,867 500,000 484,767 8,397 460,478 8,036 444,359 8,000 7,787 450,000 (7,773) 7,000 400,000 6,000 350,000 5,000 0 0 0 300,000 1H/'15 2H/'15 1H/'16 2H/'16 1H/'
Slide 7: 2. Financial Results
2. Financial Results 【Definition of Term】 Fiscal period Terms Definitions Property Name 1 new 1 property acquired (additional acquisition) during the period ended Kowa Nishi-Shinbashi Bldg. B (additional acquisition) property June 30, 2017 (32nd Period). 1 property disposed during the period ended J
Slide 8: 2H/2017 (33rd Period) Statement of Income
2-1 2H/2017 (33rd Period) Statement of Income (million yen) 1H/2017 2H/2017 PoP Change ●Summary of PoP Change (32nd Period） (33rd Period） Amount Percentage (million yen) Total operating revenues 36,409 42,125 5,715 15.7% Operating revenues 36,189 36,560 370 1.0% Total operating revenues +5,715 Renta
Slide 9: 2H/2017 (33rd Period) Balance Sheet
2-2 2H/2017 (33rd Period) Balance Sheet Assets (million yen) PoP Change ●Summary of PoP Change June 30,2017 December 31,2017 (32nd Period end） (33rd Period end） Amount Percentage (million yen) Current assets 12,516 33,318 20,802 166.2% Total assets: -10,040 Cash and cash equivalents 11,376 32,108 20
Slide 10: Memo
| Nippon Buliding Fund (MEMO)
Slide 11: 3. Operating Results & Outlook
3. Operating Results & Outlook 10
Slide 12: External Growth (1/6)
3-1 External Growth (1/6) NBF is pursuing mid-to-long term, comprehensive improvement in profitability, through a large-scale replacement of properties in the portfolio. ●Three Concurrent Initiatives 1. Improve earnings capability 2. Lower the average age of the portfolio 3. Increase NAV Acquisition
Slide 13: External Growth (2/6) Property Replacement Effect
3-1 External Growth (2/6) Property Replacement Effect 1 ●Improve earning capability Disposition properties Acquisition properties NBF Shin- Roppongi Celestine Shiba NBF Hibiya Bldg. GSK Bldg. Mitsui Bldg. Urayasu Tower T-CUBE (Acquisition of additional 52.5% share) Other Greater Central 5 Wards of T
Slide 14: External Growth (3/6) Property Replacement Effect
3-1 External Growth (3/6) Properties Replacement Effect 2 ●Lower the average age1 of the porfolio Disposition properties Acquisition properties Celestine Shiba NBF Shin- Roppongi NBF Hibiya Bldg. GSK Bldg. Mitsui Bldg. Urayasu Tower T-CUBE (Acquisition of additional 52.5% ownership) 34.00 years 27.5
Slide 15: External Growth (4/6) Property Replacement Effect
3-1 External Growth (4/6) Property Replacement Effect 3 ●Increased NAV (Net Asset Value) ●Internal Reserves* NBF Hibiya NBF Shin- GSK Bldg. Urayasu Tower Bldg. (million yen) 8,000 Reversal of reserve for advanced depreciation Provision of reserve for advanced depreciation 6,817 7,000 6,439 378 6,000
Slide 16: External Growth (5/6) Planned Property Acquisition: Roppongi T-CUBE
3-1 External Growth (5/6) Planned Property Acquisition 1 Roppongi T-CUBE Property Features ・Mitsui Fudosan led the development of this large-scale property. It will be NBF’s first investment in the Roppongi area. This new flagship property for NBF consists mainly of office space and has serviced apa
Slide 17: External Growth (6/6) Planned Property Acquisition: Celestine Shiba Mitsui Bldg.
3-1 External Growth (6/6) Planned Property Acquisition 2 Celestine Shiba Mitsui Bldg. (Acquisition of additional 52.5% share will raise ownership interest to 100%) Property Features ・NBF already owns or co-owns portions of the office and retail space. This additional acquisition gives NBF 100% owner
Slide 18: 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)Note1 99.1 Percentage of floor space of tenants moving in (left scale)Note2 98.8 98.8 98.7
Slide 19: 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 We forecast that rent revisions will be net positive PoP for the 7th consecutive period 1.0 0.0 -1
Slide 20: Finance (1/2)
3-3 Finance (１/2) ●Financial Data ●Interest-Bearing Debt （million yen） 1H/2017 2H/2017 PoP 1H/2017 2H/2017 PoP (32nd Period end) (33rd Period end) Change (32nd Period end) (33rd Period end) Change LTV 41.5% *40.8% -0.7pt Short-Term Borrowings 12,000 0 -12,000 Long-Term Fixed-Rate Long-Term Borrowing
Slide 21: Finance (2/2)
3-3 Finance (2/2) ●New Funding and Repayment ●Long-Term Borrowings Procured in 2H/2017 (33rd Period) 2H/2017 (33rd Period) Long-Term Borrowings & Investment Corporation Bonds ・Long-term borrowings Repayment Overview New Funding Overview Financing Lender Amount Term Fixed/ Interest Date (million yen)
Slide 22: Appraisal Value Assessment
3-4 Appraisal Value Assessment ●Appraisal Value ●Appraisal Value & Book Value (billion yen) 1H/2017 2H/2017 PoP 1,400 (32nd Period end) (33rd Period end) Change Book value (period end) Number of properties 74 properties 72 properties -2 properties Appraisal value (period end) Appraisal value 1,194.0
Slide 23: 4. Forecast
Forecast NBF 22
Slide 24: 1H/2018 (34th Period) Forecast
4-1 1H/2018 (34th Period) Forecast (million yen) ●Summary of PoP change for 1H/2018 2H/2017 1H/2018 PoP Change 2H/2018 PoP Change （million yen） (Actual) （Forecast） (Reference) Total operating revenues -5,566 (33rd Period) Amount Percentage Amount Percentage (34th Period） (35th Period） Total operatin
Slide 25: 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） 33,500 2,473 17,500 33,355 17,162 1,973 16,994 33,000 33,221 17,000 1,473 32,862 16,465 32,500 16,500 973 32,
Slide 26: Memo
| Nippon Buliding Fund (MEMO) 25
Slide 27: 5. Market Data
Market Data NBF 26
Slide 28: 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 10.00 8.57％ 22,901 yen （Jun. ‘12） （Jun. ’03, Aug. ’03） （Aug. ‘08） 9.00 8.00 7.00 19,338 yen 20,000 （Jan. ‘1
Slide 29: 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 Source: Compiled by asset management company using data from Mori Building Co., Ltd. as of April 25, 2017 （10 thousand ㎡ ） 300 （Forecast） 250 216 Average of 1.03 million m2/ye
Slide 30: 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 Source: Compiled by asset management company from data pu
Slide 31: 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 Sep.'01 Sep.'02 Sep.'03 Sep.'04 Sep.'05 Sep.'06 Sep.'07 Sep.'08
Slide 32: 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 31
Slide 33: 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 34: 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 10,887 12,000 11,126 10,064 9,695 9,904 9,836 9,129 9,513 8,867 9,370 8,645 8,523 9,612 8,562 8,645 8,126 8,427 8,397 9,000 8,446 7,747 8,152 8,036 8,001 7,683 7,592 7,5697,6007,7407,877 7,681 7,787 7,291 6,
Slide 35: The Largest J-REIT in Size
6-2 The Largest J-REIT in Size ●Market Capitalization （As of December 31,2017) Ratio of J-REITs （billion yen） by Type 900 778.0 Diversified and hybrid billion yen 43.4% Office buildings 800 20.3% 700 J-REIT Total Market Capitalization 600 … 11,475.1 billion yen Hotel and healthcare 5.1% 500 400 Comm
Slide 36: 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 December 31, 2017) (20 properties over 10,000 tsubo) Other Cities 23 Wards of Tokyo Other Greater Tokyo Other Cities 127.6 billion yen Continued Appraisal *The size o
Slide 37: 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 38: 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 （％） NBF’s average occupancy rate during the period (nationwide)Note 1 (left scale) （10 thousand ㎡） 100 Reference: average market occupancy rate during the periodNote 2
Slide 39: Collaboration with Sponsor (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 40: Stable Financial Management
6-5 Stable Financial Management ●LTV & Long-Term Fixed-Rate Debt Ratio ●Average Maturity (Long-Term Interest-Bearing Debt) （％） （years） 6 100 5 96.4 97.7 96.5 95.2 5.16 5.15 5.22 90 95.2 4.99 93.8 94.0 4 92.5 4.53 Target : 90% or higher for the long-term 4.29 4.11 3 4.02 fixed-rate debt ratio 80 2 1
Slide 41: 7. ESG Initiatives
7. ESG Initiatives （Initiatives by NBF and NBFM） 40
Slide 42: ESG Initiative Policy
7-1 ESG Initiative Policy 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 impor
Slide 43: Environment Initiatives (1/2)
7-2 Environment Initiatives（1/2） Environment Initiatives : Some Examples Environmental Initiatives through Real Estate Investment （ Improvement of Environmental Performance through Building / Facility Renovations / Retrofits ） Understanding and Reducing Environmental Risks HVAC Upgrades Environmenta
Slide 44: Environment Initiatives (2/2)
7-2 Environment Initiatives （2/2） Initiatives for Green Building Certification : Some Examples Policy for NBF will endeavor to acquire green building certifications for existing properties under management Green Building on an ongoing basis for the purpose of reducing the environmental risks of its
Slide 45: Social Initiatives
7-3 Social Initiatives Social Initiatives : Some Examples Initiatives for Increasing Tenant Satisfaction（Improving Security, Safety and Comfort in Buildings） Response to the Result of Conducting Customer Satisfaction Survey CS Survey: An Example FY 2017 CS Survey on Operation and Management Services
Slide 46: Governance Initiatives
7-4 Governance Initiatives Organizational Chart Flow chart for making decisions on acquisition and disposition of assets under management General Meeting of Original proposal by Investment & Finance Group Shareholders ・ Check compliance, including various risks and illegalities, using a real estat
Slide 47: Memo
| Nippon Buliding Fund (MEMO) 46
Slide 48: Appendix
8 Appendix NBF 47
Slide 49: Top 10 Tenants / Tenants by Industry
Top 10 Tenants (Leased Floor Space Basis) / 1 Tenants by Industry ●Top 10 Tenants (Leased Floor Space Basis) ●Tenants by Industry2 （As of December 31,2017) Warehousing & Transportation Ratio of Total 1.7% Other Leased Areas Tenant Name Leased Property (㎡) Rentable Other products 8.6% Area (%) 1.9％ S
Slide 50: Floor Space of Tenants Moving in and out by Property (2H/2017)
NBF Kumamoto Bldg. Hakata Gion M-SQUARE NBF Matsuyama Nichigin-mae Bldg. Hiroshima Fukuromachi Bldg. Other Cities NBF Hiroshima Tatemachi Bldg. Sun Mullion NBF Tower Number in parenthesis is an average of total rentable area at the end of each month Sakaisuji-Honmachi Center Bldg. Shinanobashi Mitsu
Slide 51: Property Age
3 Property Age 1H/2017 2H/2017 （32nd Period） （33rd Period） 17.5% 20.1% 41.8% 43.4% Average Property Age Average Property Age 18.85 years 19.13 years 36.5% 40.8% 10 years or loss 11-20 years Over 20 years 50
Slide 52: Financial Management
4 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 97.7 96.4 96.5 550 87
Slide 53: Lenders & Borrowings
5 Lenders & Borrowings （million yen） 2H/2016 2H/2017 Repayment Lender Other 31st Period End 33rd Period End Method Sumitomo Mitsui Trust Bank, Ltd. 4,000 - Unsecured, Shinkin Central Bank 3,000 - Lump sum unguaranteed, Short-Term Resona Bank, Ltd. 2,000 - repayment on ranked pari Borrowings Mizuho B
Slide 54: Overview of Unit Ownership
6 Overview of Unit Ownership Ownership by Unitholder Number of Unitholders by Type Jun. 30, 2017 Dec. 31, 2017 Jun. 30, 2017 Dec. 31, 2017 PoP Change PoP Change (32nd Period end) (33rd Period end) Uniholder Category (32nd Period end) (33rd Period end) Uniholder Category Units % Units % Units Units %
Slide 55: Historical Summary of Main Management Indicators and Other Data
7 Historical Summary of Main Management Indicators and Other Data Note 1: NOI from property leasing activities does not 29 th Period 30 th Period 31st Period 32nd Period 33rd Period include such items as gain or loss on sale of investment properties. 2H/2015 1H/2016 2H/2016 1H/2017 2H/2017 Note 2: N
Slide 56: Property Portfolio Overview (1/2) – 23 Wards of Tokyo
8 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 (㎡) (incl. subleases
Slide 57: Property Portfolio Overview (2/2) – Other Greater Tokyo & Other Cities
8 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 58: Appraisal Value (1/3) – 23 Wards of Tokyo
9 Appraisal Value (1/3) – 23 Wards of Tokyo ●23 Wards of Tokyo 2H/2017 33rd Period End 1H/2017 32nd Period End Unrealized PoP change in (1) (2) Direct (3) Direct Acquisition Price gain(loss) appraisal value Property Name Book value at Appraisal Return DCF Method Appraisal Return DCF Method （million
Slide 59: Appraisal Value (2/3) – 23 Wards of Tokyo
9 Appraisal Value (2/3) – 23 Wards of Tokyo 2H/2017 33rd Period End 1H/2017 32nd Period End Unrealized PoP change in (1) (2) Direct (3) Direct Acquisition Price gain(loss) appraisal value Property Name Book value at Appraisal Return DCF Method Appraisal Return DCF Method （million yen） (2) - (1) (2)
Slide 60: Appraisal Value (3/3) – Other Greater Tokyo & Other Cities
9 Appraisal Value (3/3) – Other Greater Tokyo & Other Cities ●Other Greater Tokyo / Other Cities 2H/2017 33rd Period End 1H/2017 32nd Period End Unrealized PoP change in (1) (2) Direct (3) Direct Acquisition Price gain(loss) appraisal value Property Name Book value at Appraisal Return DCF Method App
Slide 61: Revenue by Property (1/3) – 23 Wards of Tokyo
10 Revenue by Property (1/3) – 23 Wards of Tokyo ●23 Wards of Tokyo (million yen） Mitsubishi NBF NBF Kowa Nishi- Heavy NBF NBF Toranomon Celestine NBF NBF Shinjuku NBF NBF NBF Shiba Minami- Shibuya River City Nishi- Shinbashi Shinjuku Industries Platinum COMODIO Kotohira Shiba Mitsui Ochanomizu Ginz
Slide 62: Revenue by Property (2/3) – 23 Wards of Tokyo & Other Greater Tokyo
10 Revenue by Property (2/3) – 23 Wards of Tokyo & Other Greater Tokyo ●23 Wards of Tokyo (million yen） Total of 23 NBF Toyosu NBF Higashi NBF Osaki Bright NBF Wards of NBF Toyosu Nakameguro Ueno NBF Ueno Toyo-cho GSK Bldg. Garden Ikebukuro Gotanda Ikebukuro Core - Ikebukuro (Note 1) Tokyo Canal Fro
Slide 63: Revenue by Property (3/3) – Other Cities
10 Revenue by Property (3/3) – Other Cities ●Other Cities (million yen） Sumitomo NBF Sakaisuji- NBF NBF Total of NBF Niigata Mitsui NBF Nagoya Aqua Hiroshima NBF Sapporo Sapporo NBF Unix Nakanoshima Shinanobashi Honmachi Sun Mullion Hiroshima Matsuyama Hakata Gion Other Cities L-Plaza Minami Nijo Bl
Slide 64: Portfolio Map
Portfolio Map A Kitack a : ) 23 Wards of Tokyo ~~ “Oe as rf 47 Properties va e } a Bunkyo-| lan \ Taito-ku: .. > ¥863.7 sition 29 Shinjuku-ku / = _f 4 - ‘ y 29 eel a & g tie Sy Wr el ee ods ku ‘p Bi) @ ) 2. eee } on Other Cities ge va. iat, ei 1 6 Properties “o./ SO86O ¥1 27 6 billion Other Greater
Slide 65: Properties (1/4) – 23 Wards of Tokyo
12 Properties (1/4) – 23 Wards of Tokyo 64
Slide 66: Properties (2/4) – 23 Wards of Tokyo
12 Properties (2/4) – 23 Wards of Tokyo 65
Slide 67: Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo
12 Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo 66
Slide 68: Properties (4/4) – Other Cities
12 Properties (4/4) – Other Cities 67
Slide 69: Disclaimer
Disclaimer This English language notice is a translation of the Japanese language Investor Presentation dated February 16, 2017 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 a