Nippon Building Fund, Inc. · TSE:8951

Nippon Building Fund — H2 2016 Earnings Presentation

64 slides from Nippon Building Fund's earnings presentation, Feb 16, 2017

  1. Slide 1: Results for July-December 2016 (31st Period) Investors Presentation

    Results for July-December 2016 (31st Period) Investors Presentation February 16, 2017 Nippon Building Fund Inc. Nippon Building Fund Management Ltd.

  2. Slide 2: Contents

    CONTENTS 1. Overview of NBF 5. Appendix 1-1 Features and Basic Policies 3 1 Trends in the Office Building Leasing Market (1/4) 31 1 Trends in the Office Building Leasing Market (2/4) 32 2. Financial Results & Forecast 1 Trends in the Office Building Leasing Market (3/4) 33 2-1 2H/2016 (31st Period)

  3. Slide 3: 1. Overview of NBF

    im Overview of NBF NBF

  4. Slide 4: Features and Basic Policies

    1-1 Features and Basic Policies NBF is an office-specialized J-REIT, sponsored by Mitsui Fudosan. (As of December. 31, 2016) Portfolio Quality Financial Fundamentals Focused investment in competitive premium office buildings LTV Ratio of investment in 5 wards of central Tokyo: 50.4% LTV (ratio of in

  5. Slide 5: 2. Financial Results & Forecast

    2. Financial Results & Forecast Definition of Term Fiscal period Terms Definitions Property Name 2 properties acquired (one property is an additional acquisition) during Ueno East Tower, 5 new the period ended June 30, 2016 (30th period), and 3 properties acquired Kowa Nishi-Shinbashi Bldg. B(additi

  6. Slide 6: 2H/2016 (31st Period) Financial Highlights (1/2)

    2-1 2H/2016 (31st Period) Financial Highlights (1/2) 1H/2014 2H/2014 1H/2015 2H/2015 1H/2016 2H/2016 PoP (26th Period) (27th Period) (28th Period) (29th Period) (30th Period) (31st Period) Change (%) Total operating revenues 36,561 34,806 34,593 34,640 35,671 35,849 +0.5％ (Profits from dispositions)

  7. Slide 7: 2H/2016 (31st Period) Financial Highlights (2/2)

    2-1 2H/2016 (31st Period) Financial Highlights (2/2) (million yen) Total Operating Revenues (million yen) Net Income (billion yen) Total Assets (Period End) 40,000 14,000 1,100 12,771 12,808 12,520 1,040.5 36,561 35,671 35,849 (11,856) 1,022.9 1,022.3 1,012.7 1,029.0 1,030.4 12,000 (10,869) 10,846 1

  8. Slide 8: 2H/2016 (31st Period) Statement of Income

    2-2 2H/2016 (31st Period) Statement of Income ● Statement of Income ● Summary of PoP Change (million yen) (million yen) +177 1H/2016 2H/2016 PoP Change Total operating revenues (30th Period) (31st Period) Amount Percentage Total operating revenues 35,671 35,849 177 0.5% Rental revenues +821 Operatin

  9. Slide 9: 2H/2016 (31st Period) Balance Sheet

    2-3 2H/2016 (31st Period) Balance Sheet ● Balance Sheet ● Summary of PoP Change (million yen) Assets (million yen) +1,389 June 30,2016 December 31,2016 PoP Change Total assets: (30th Period end) (31st Period end) Amount Percentage Current assets 19,570 13,136 -6,434 -32.9% Current assets ー6,434 Cash

  10. Slide 10: 2H/2016 (31st Period) Financial Position

    2-4 2H/2016 (31st Period) Financial Position ● Financial Data 1H/2016 2H/2016 PoP Change (30th Period) (31st Period) LTV 42.1% 41.9%* -0.2pt Long-Term Fixed-Rate Debt Ratio 93.8％ 94.0％ +0.2pt Short-Term Debt 7,000million yen Average interest Rate 0.94％ 0.93％ -0.01pt Average Maturity Investment Long-

  11. Slide 11: 2H/2016 (31st Period) Appraisal Value Assessment

    2-5 2H/2016 (31st Period) Appraisal Value Assessment ● Appraisal Value ● Appraisal Value & Book Value (billion yen) 1H/2016 2H/2016 PoP 1,400 (30th Period) (31st Period) Change Book value (period end) Number of Appraisal value (period end) 73 75 2 properties Appraisal value 1,162.9 billion yen 1,188

  12. Slide 12: 1H/2017 (32nd Period) Forecast

    2-6 1H/2017 (32nd Period) Forecast ● Results Forecast ● Summary of PoP change for 1H/2017 (million yen) (million yen) 2H/2016 (Actual) 1H/2017 （Forecast） PoP Change 2H/2017 （Reference） PoP Change Total operating revenues: +201 (31st Period) (32nd Period) Amount Percentage (33rd Period) Amount Percen

  13. Slide 13: Reference: Performance Indicators

    Reference: Performance Indicators Rental Revenue DPU & Net Income 72 existing properties 5 acquisitions 2 dispositions DPU(left scale) Net income(right scale) (million yen) (yen) (million yen) (Forecast) (Forecast) 33,500 9,500 13,500 Profits from disposition(Provision of 33,060 reserve for advanced

  14. Slide 14: Memo

    | Nippon Buliding Fund (MEMO) 13

  15. Slide 15: 3. Operating Results & Outlook

    3. Operating Results & Outlook 14

  16. Slide 16: 3-1 Occupancy, Floor Space of Tenants Moving in and out

    3-1 Occupancy, Floor Space of Tenants Moving in and out ● 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) Percentage of floor space of tenants moving in (lef

  17. Slide 17: 3-2 Rental Revenue

    3-2 Rental Revenue ● Breakdown of Change in Leasing Revenues ● Breakdown of Change in Leasing Revenues at (External and Internal Growth) Existing Properties (replacement and rent revision) (PoP) (PoP) 10% 2% （Forecast） （Forecast） External growth replacement External growth rent revision (properties

  18. Slide 18: 3-3 Properties acquired in the 31st Period (1/2)

    3-3 Properties acquired in the 31st Period (1/2) Osaki Bright Core-Bright Plaza Location Kita Shinagawa, Shinagawa-ku, Tokyo ●Osaki Bright Core exterior ● Floor Plan Bright Core： April 1, 2015 Completion Bright Plaza： April 17, 2015 Bright Core： 12,986tsubo (42,929m ) 2 Total floor space Bright Plaz

  19. Slide 19: 3-3 Properties acquired in the 31st Period (2/2)

    3-3 Properties acquired in the 31st Period (2/2) Toyo-cho Center Bldg. ● Property Features Location Toyo, Koto-ku, Tokyo Location Completion March 18, 1994  The Toyo-cho area offers excellent Total floor space 5,757 tsubo (19,033m2) access to Nihonbashi, Otemachi and the Contract date July 29, 2016

  20. Slide 20: 3-4 Financial Management

    3-4 Financial Management ● New Funding & Repayment ● Long-Term Debt Procured in 2H/2016 (31st Period) 2H/2016 (31st Period) Long-Term Borrowings & Investment Corporation Bonds • Long-term borrowings Repayment Overview New Funding Overview Borrowing Amount Term Fixed/ Interest Lender Date (million ye

  21. Slide 21: 4. NBF's Strengths & Strategies

    4. NBF’s Strengths & Strategies 20

  22. Slide 22: 4-1 Portfolio Strategy (1/3) – Quality

    4-1 Portfolio Strategy (1/3) – Quality Focused investment in competitive premium office buildings ●Investment Ratio by Area ●Continued Appraisal Value & Floor Space (Acquisition price basis; as of December 31, 2016) (21 properties over 10,000 tsubo) Continued Appraisal 23 Wards of Tokyo Other Greate

  23. Slide 23: 4-1 Portfolio Strategy (2/3) – Size

    4-1 Portfolio Strategy (2/3) – Size Diversity, stability and liquidity as the largest J-REIT NBF’s J-REIT Market Share (As of December 31, 2016) ● Total Acquisition Price ● Market Capitalization By Asset Type By Type of Investment Corporation Other (infrastructure, seniors) 3.7% 7.5% Hotels 7.1% 5.3

  24. Slide 24: 4-1 Portfolio Strategy (3/3) – Pipeline

    4-1 Portfolio Strategy (3/3) – Pipeline We are aggressively acquiring and flexibly selling properties. Since our IPO, we have acquired approximately 60% of our properties from the Mitsui Fudosan Group (acquisitions and brokerage). ●Total Acquisitions by Seller ●Co-Existence Model with Mitsui Fudosan

  25. Slide 25: 4-2 Leasing Strategy

    4-2 Leasing Strategy Conduct leasing promotion and existing tenant relations by fully using the sales capabilities of the Mitsui Fudosan Group. ● Average Occupancy Rate during the Period & Total Rentable Area （%） NBF’s average occupancy rate during the period1 (left scale) （10 thousand ㎡） 100 Refere

  26. Slide 26: 4-3 Property Management Strategy (1/2) – Organization & Additional Investment

    4-3 Property Management Strategy (1/2) – Organization & Additional Investment We use the comprehensive capabilities of the Mitsui Fudosan Group and strategically make additional investments. ●Property Management Structure ●Strategic Additional Investment with Clear Objectives • Formulate & execute m

  27. Slide 27: 4-3 Property Management Strategy (2/2) – Management & Operation Quality

    4-3 Property Management Strategy (2/2) – Management & Operation Quality We create trusting relationships with tenants by providing high-quality operations that tenants and office workers appreciate. ●Program to Raise Management & Operation Quality ●Overall Customer Satisfaction Demonstrated by (PDCA

  28. Slide 28: 4-4 Financial Strategy (1/2) – LTV and Long-Term Fixed-Rate Debt Ratio

    4-4 Financial Strategy (1/2) – LTV and Long-Term Fixed-Rate Debt Ratio 36-46% (maximum of 56%) for LTV 90% or higher for the long-term fixed-rate debt ratio ●LTV & Long-Term Fixed-Rate Debt Ratio ●Average Maturity (Long-Term Interest-Bearing Debt) (％) (Years) 100 6 99.6 96.4 97.7 96.5 5 94.7 95.2 93

  29. Slide 29: 4-4 Financial Strategy (2/2) – Debt Maturity Diversification

    4-4 Financial Strategy (2/2) – Debt Maturity Diversification Reduced refinancing risk through diversification of debt maturity ●Debt Maturity Schedule (As of December 31, 2016) (billion yen) 70.0 Short-term debt Long-term debt Investment corporation bonds Funds procured in 2H/2016 (31st Period) 60.0

  30. Slide 30: 4-5 Strategies (Conclusion)

    4-5 Strategies (Conclusion) Four strategies for the goal of increasing unitholder value Portfolio Strategy Financial Strategy • Aggressive property acquisitions & flexible • Conservative LTV level (36-46%) and a high disposition long-term fixed-rate debt ratio (90% or higher) • Focused investment in

  31. Slide 31: 5. Appendix

    WED Appendix NBF 30

  32. Slide 32: Trends in the Office Building Leasing Market (1/4)

    1 Trends in the Office Building Leasing Market (1/4) ●Average Vacancy Rate in Tokyo, ●Average Asking Rent in Tokyo CBD Osaka & Nagoya CBDs (%) (Yen/tsubo) 16 40,000 35,000 12 30,000 ¥28,479 8 6.10% 25,000 4.85% 4 3.74％ 20,000 ¥18,582 ¥18,306 0 15,000 '02.1 '03.1 '04.1 '05.1 '06.1 '07.1 '08.1 '09.1 '

  33. Slide 33: Trends in the Office Building Leasing Market (2/4)

    1 Trends in the Office Building Leasing Market (2/4) ●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 （'12.6） （'03.6・8） （'08.8） 9.00 8.00 7.00 20,000 ¥18,582 （'17.1） 6.00 5.00 ¥17,526 （'04.10）

  34. Slide 34: Trends in the Office Building Leasing Market (3/4)

    1 Trends in the Office Building Leasing Market (3/4) ●Office Space Supply & Demand (Net Absorption) in the 23 Wards of Tokyo (10,000 tsubo) 60 Supply Demand 40 20 0 -20 -40 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Compiled by asset management company from Sanko Estate

  35. Slide 35: Trends in the Office Building Leasing Market (4/4)

    1 Trends in the Office Building Leasing Market (4/4) ●New Supply of Large-Scale Office Buildings in the 23 Wards of Tokyo Source: Prepared by Nippon Building Fund Management using data （万㎡） (10 thousand m2) from Mori Building Co., Ltd. as of April 21, 2016 300 (Forecast) 250 216 Average of 1.14 mill

  36. Slide 36: Trends in the Property Acquisition Market

    2 Trends in the Property Acquisition Market ●Acquisitions of Assets by J-REITs （billion yen） 1,000 800 ■Office ■Housing ■Retail ■Logistics ■Hotels ■Other 600 400 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012 2013 2014 2015 2016 Source: Compi

  37. Slide 37: Unit Price, Distributions per Unit & NAV per Unit

    3 Unit Price, Distributions per Unit & NAV per Unit ● Unit Price (Note1) （yen） 1,500,000 1,000,000 500,000 0 ● Distributions per Unit (Note1) (yen) 12,000 11,27411,126 10,887 9,513 9,695 10,064 9,836 9,612 9,904 8,645 8,867 8,645 8,523 8,562 9,000 8,126 8,446 8,427 8,152 8,036 8,397 8,001 7,683 7,59

  38. Slide 38: Asset Scale & Period Average Occupancy Rate

    4 Asset Scale (Total Acquisition Price) & Period Average Occupancy Rate Period average occupancy rate (right scale) 23 wards of Tokyo (left scale) Other greater Tokyo (left scale) Central 5 Wards （billion yen） Other cities (left scale) (incl. in above) (left scale) (%) 1,300 98.2 100 98.7 97.9 1,200

  39. Slide 39: 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) （%） 600 100 94.2 93.8 94.0 92.9 92.2 99.6 550 97.5 97.7 96.4 97.7 96.5 85.8 95.2 87.3 87.0 84

  40. Slide 40: Lenders & Borrowings

    6 Lenders & Borrowings (million yen) 1H/2016 2H/2016 Repayment Lender Other 30th Period End 31st Period End Method Shinkin Central Bank - 4,000 Resona Bank, Ltd. - 1,000 Lump sum Unsecured, Short-Term Shinsei Bank, Ltd. - 1,000 repayment on unguaranteed, Borrowings The Yamanashi Chuo Bank, Ltd. 1,00

  41. Slide 41: Floor Space of Tenants Moving in and out by Property

    1,000 1,500 2,000 2,500 -2,500 -2,000 -1,500 -1,000 0 500 -500 Area(Tsubo) 7 NBF Osaki Bldg. NBF Hibiya Bldg. Gate City Ohsaki Nishi-Shinjuku Mitsui Bldg. Nakanosakaue Sunbright Twin Mitsubishi Heavy Industries Head Office Bldg. NBF Toyosu Canal Front Shiba NBF Tower NBF Platinum Tower NBF Minami-Ao

  42. Slide 42: Top 10 Tenants (Leased Floor Space Basis)

    8 Top 10 Tenants (Leased Floor Space Basis) (As of December 31, 2016) Ratio of Total Tenant Name Leased Property Leased Areas (m 2) Rentable Area (%) Gate City Ohsaki and 11 other 1. Mitsui Fudosan Co., Ltd.(Note) 229,457 21.2 properties (Note) Mitsui Fudosan Co., Ltd. 2. Sony Corporation NBF Osaki

  43. Slide 43: Tenants by Industry

    9 Tenants by Industry (As of December 31, 2016) Share of Industry Main Companies Floor Space 1. Service 21.3% Transcosmos inc., Hakuhodo DY Holdings Inc. Information & 2. 11.6% NS Solutions Corporation, Softbank Corp. communications Warehousing & Electrical transportation 3. 11.5% Sony Corporation,

  44. Slide 44: Property Age

    10 Property Age June 30, 2016 December 31, 2016 (30th Period End) (31st Period End) 20.1% 22.5% 39.3% 43.4% Average Property Age Average Property Age 17.89 years 18.36 years 36.5% 38.2% Under 10 years Over 10 years but under 20 years 20 years or older 43

  45. Slide 45: Achievements: Environmental Evaluation & Certification

    11 Achievements: Environmental Evaluation & Certification GRESB DBJ Green Building The Global Real Estate Sustainability Benchmark (GRESB) survey is DBJ Green Building Certification is a certification system established by an indicator that evaluates the sustainability initiatives of real estate the

  46. Slide 46: Sustainability Initiatives (1/2)

    12 Sustainability Initiatives (1/2) Improving Business Continuity and Creating Added Value Disaster Prevention and BCP Measures Earthquake-resistance improvement Renewal of Disaster Prevention Facilities and renewal of elevators Installation and renewal of earthquake sensors and control mechanism Up

  47. Slide 47: Sustainability Initiatives (2/2)

    12 Sustainability Initiatives (2/2) Achieving occupant comfort while minimizing environmental impacts / Community engagements Energy efficiency improvement CS improvement and Community Engagement Programs Common Area Exterior Area Various Events Lighting Upgrades Improvements Saving energy consumpti

  48. Slide 48: Overview of Unit Ownership

    13 Overview of Unit Ownership Ownership by Unitholder Number of Unitholders by Type Jun. 30, 2016 Dec. 31, 2016 Jun. 30, 2016 Dec. 31, 2016 PoP Change PoP Change Uniholder Category (30th Period end) (31st Period end) Uniholder Category (30th Period end) (31st Period end) Units % Units % Units % Unit

  49. Slide 49: Historical Summary of Main Management Indicators and Other Data

    14 Historical Summary of Main Management Indicators and Other Data 2H/2014 1H/2015 2H/2015 1H/2016 2H/2016 27th Period 28th Period 29th Period 30th Period 31st Period Operating revenues (million y en) 34,806 34,593 34,640 35,671 35,849 Note 1: Figures in parentheses are annualized from monthly data.

  50. Slide 50: Property Portfolio Overview (1/2) – 23 Wards of Tokyo

    15 Property Portfolio Overview (1/2) – 23 Wards of Tokyo  23 Wards of Tokyo Total Leased Total Leased Total Rentable Occupancy rate at Total Number Total Rentable Occupancy rate at Total Number Property Name Area (㎡) PML (%) Property Name Area (㎡) PML (%) Area (㎡) end of period (%) of Tenants Area

  51. Slide 51: Property Portfolio Overview (2/2) – Other Greater Tokyo & Other Cities

    15 Property Portfolio Overview (2/2) – Other Greater Tokyo & Other Cities  Other Greater Tokyo  Other Cities Total Leased Total Leased Total Rentable Occupancy rate at Total Number Total Rentable Occupancy rate at Total Number Property Name Area (㎡) PML (%) Property Name Area (㎡) PML (%) Area (㎡)

  52. Slide 52: Appraisal Value (1/2) – 23 Wards of Tokyo

    16 Appraisal Value (1/2) – 23 Wards of Tokyo  23 Wards of Tokyo (million yen) (1) Book Value at (2) Appraisal Value (3) Appraisal Value Unrealized gain PoP change in (1) Book Value at (2) Appraisal Value (3) Appraisal Value Unrealized gain PoP change in Property Name Acquisition Price 2H/2016 at 2H

  53. Slide 53: Appraisal Value (2/2) – Other Greater Tokyo & Other Cities

    16 Appraisal Value (2/2) – Other Greater Tokyo & Other Cities  Other Greater Tokyo  Other Cities (million yen) (1) Book Value at (2) Appraisal Value (3) Appraisal Value Unrealized gain PoP change in (1) Book Value at (2) Appraisal Value (3) Appraisal Value Unrealized gain PoP change in Property Na

  54. Slide 54: Appraisal Rate (1/2) – 23 Wards of Tokyo

    17 Appraisal Rate (1/2) – 23 Wards of Tokyo  23 Wards of Tokyo Appraisal Value at Direct Return Method DCF Method Appraisal Value at Direct Return Method DCF Method Appraisal Value at Direct Return Method DCF Method Appraisal Value at Direct Return Method DCF Method 2H/2016 1H/2016 2H/2016 1H/2016

  55. Slide 55: Appraisal Rate (2/2) – Other Greater Tokyo & Other Cities

    17 Appraisal Rate (2/2) – Other Greater Tokyo & Other Cities  Other Greater Tokyo  Other Cities Appraisal Value at Direct Return Method DCF Method Appraisal Value at Direct Return Method DCF Method Appraisal Value at Direct Return Method DCF Method Appraisal Value at Direct Return Method DCF Metho

  56. Slide 56: Revenue by Property (1/3) – 23 Wards of Tokyo

    18 Revenue by Property (1/3) – 23 Wards of Tokyo  23 Wards of Tokyo (million yen) Mitsubishi Heavy Nishi-Shinjuku Nakanosakaue NBF Toyosu Canal NBF Platinum NBF Minami- NBF COMODIO NBF Toyosu Toranomon Nakameguro GT Celestine Shiba NBF Ochanomizu NBF Shibuya NBF Osaki Bldg. NBF Hibiya Bldg. Gate Ci

  57. Slide 57: Revenue by Property (2/3) – 23 Wards of Tokyo & Other Greater Tokyo

    18 Revenue by Property (2/3) – 23 Wards of Tokyo & Other Greater Tokyo  23 Wards of Tokyo (million yen) NBF Shibakouen NBF Sumitomo Panasonic Tokyo Nihonbashi Total of 23 Wards NBF Higashi-Ginza NBF Ogawamachi NBF Ikebukuro Osaki Bright Core- NBF Ikebukuro City Jingumae Daimon Street Kandasudacho D

  58. Slide 58: Revenue by Property (3/3) – Other Cities

    18 Revenue by Property (3/3) – Other Cities  Other Cities (million yen) Sumitomo Mitsui Sakaisuji- NBF Sapporo NBF Niigata NBF Nagoya Aqua Dojima NBF Nakanoshima Shinanobashi Sun Mullion NBF NBF Hiroshima Hiroshima Sapporo L-Plaza NBF Unix Bldg. Banking Nagoya Honmachi Center Aqua Dojima East Minam

  59. Slide 59: Portfolio Map

    19 Portfolio Map (As of December 31, 2016) Other Greater Tokyo Note: Numbers on the maps correspond to property numbers on pages 59-62. 58

  60. Slide 60: Properties (1/4) – 23 Wards of Tokyo

    20 Properties (1/4) – 23 Wards of Tokyo 59

  61. Slide 61: Properties (2/4) – 23 Wards of Tokyo

    20 Properties (2/4) – 23 Wards of Tokyo 60

  62. Slide 62: Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo

    20 Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo 61

  63. Slide 63: Properties (4/4) – Other Cities

    20 Properties (4/4) – Other Cities 62

  64. Slide 64: 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

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