Nippon Building Fund, Inc. · TSE:8951

Nippon Building Fund — 1H 2013 Earnings Presentation

65 slides from Nippon Building Fund's earnings presentation, Aug 15, 2013

  1. Slide 1: Nippon Building Fund 24th Period (1H 2013) Results Briefing

    ⽇本ビルファンド投資法⼈ 22 （2012年6⽉期） 決算説明会 0

  2. Slide 2: Contents

    CONTENTS 1. Overview of NBF 5. Appendix 1-1: Features & Policies 3 1: Trends in the Office Building Leasing Market (1/2) 33 1: Trends in the Office Building Leasing Market (2/2) 34 2. Financial Results & Forecast 2. Real Estate Acquisition Market Trends 35 2-1: 1H/2013 (24th Period) Financial Highli

  3. Slide 3: 1. Overview of NBF

    1. Overview of NBF NBF Nippon Building Fund

  4. Slide 4: 1-1: Features and Policies

    1-1: Features and Policies An office-specialized J-REIT, sponsored by Mitsui Fudosan Co., Ltd. (As of June 30, 2013) Portfolio Quality Financial Fundamentals Focused on superior office buildings, primarily in Tokyo High Credit Ratings central business districts (CBDs) R&I: AA S&P: A+ Moody’s: A2 Rat

  5. Slide 5: 2. Financial Results & Forecast

    2. Financial Results & Forecast [Property Portfolio Assumptions] 24th Period Results (Properties at period end: 74) 8 new properties: 8 properties acquired during the 24th Period Shinbashi M-SQUARE, Sumitomo Mitsui Banking Nagoya Bldg., NBF Osaki Bldg., Panasonic Tokyo Shiodome Bldg., Gate City Ohsa

  6. Slide 6: 2-1: Financial Highlights (1/2)

    2-1: 1H/2013 (24th Period) Financial Highlights (1/2) (JPY millions, except percentages and unit data) Period on 2H/2010 1H/2011 2H/2011 1H/2012 2H/2012 1H/2013 Period (PoP) (19th Period) (20th Period) (21st Period) (22nd Period) (23rd Period) (24th Period) Change (%) Total operating revenues 27,314

  7. Slide 7: 2-1: Financial Highlights (2/2)

    2-1: 1H/2013 (24th Period) Financial Highlights (2/2) Total Operating Revenues Net Income Total Assets (Period End) (JPY millions） (JPY millions) (JPY billions) 40,000 14,000 1,100.0 12,941 1,048.0 35,720 35,000 12,000 1,000.0 31,530 29,774 30,244 899.1 30,000 28,081 10,000 9,657 900.0 27,314 9,489

  8. Slide 8: 2-2: Statement of Income

    2-2: 1H/2013 (24th Period) Statement of Income  Statement of Income (JPY millions)  Summary of PoP Change (JPY millions) 2H/2012 1H/2013 PoP Operating revenues: + 4,190 (23rd Period) (24th Period) Change Total operating revenues 31,530 35,720 4,190 Rental revenues + 2,236 Operating revenues 31,530

  9. Slide 9: 2-3: Balance Sheets

    2-3: 1H/2013 (24th Period) Balance Sheets  Balance Sheets  Summary of PoP Change Assets (JPY millions) (JPY millions) Dec. 31, 2012 June 30, 2013 PoP (23rd Period) (24th Period) Change Assets: + 148,868 Current assets 38,188 42,514 4,325 Fixed assets + 144,500 Cash and cash equivalents 37,265 39,7

  10. Slide 10: 2-4: Financial Position

    2-4: 1H/2013 (24th Period) Financial Position  Financial Data 2H/2012 1H/2013 PoP (23rd Period) (24th Period) Change LTV 44.4% 45.2% +0.8 pts Long-term fixed interest- bearing debt ratio 95.0% 94.7% -0.3 pts Short-term debt Average interest rate 1.44% 1.32% -0.12 pts Investment ¥25,000 million corp

  11. Slide 11: 2-5: Appraisal Value Assessment

    2-5: 1H/2013 (24th Period) Appraisal Value Assessment  Appraisal Value  Appraisal Value & Book Value 2H/2012 1H/2013 PoP (JPY billion) （％） (23rd Period) (24th Period) Change 1,200 12 Book value (end of period) (Left Axis) Number of properties 68 74 +6 Appraisal value (end of period) (Left Axis) Ap

  12. Slide 12: 2-6: 25th Period Forecast

    2-6: 2H/2013 (25th Period) Forecast  Results Forecast (JPY millions)  PoP Change Compared with 24th Period (JPY millions) 2H/2013 1H/2014 1H/2013 PoP PoP Operating revenues: + 1,149 (Forecast) Change (Reference) Change (24th Period) (25th Period) (26th Period) Rental revenues + 726 Total operating

  13. Slide 13: 3. Operating Results & Outlook

    3. Operating Results & Outlook

  14. Slide 14: 3-1: Occupancy & Turnover Rates

    3-1: Occupancy & Turnover Rates Occupancy rate remains high  Occupancy Rate for NBF at Period End  Turnover Rate for NBF (%) (%) 100 10 (Forecast) (Forecast) 97.8 97.6 97.5 98 96.9 97.0 97.0 8 96.4 95.6 96 5.8 5.7 94.7 6 95.0 94 93.5 93.2 4 3.2 3.3 92 2.9 2.8 2.6 2.6 2.3 2.1 2.1 1.8 2 90 88 0 2H/2

  15. Slide 15: 3-2: Rental Revenue

    3-2: Rental Revenue NBF forecasts that the decrease in revenue will abate at existing properties after bottoming in 2H/2013 (25th Period)  Rental Revenue Composition & Percentage Change  Rental Revenue Composition & Percentage Change at (Annualized PoP Comparison) Existing Properties (Annualized P

  16. Slide 16: 3-3: Property Acquisition Track Record

    3-3: Property Acquisition Track Record Large-scale acquisitions ahead of office leasing market improvement  Property Acquisitions by Region in 1H/2013  Asset Scale (Total Acquisition Price) （JPY Billion） (24th Period) 1,200 Other Cities ¥14.9 billion (9.5%) Acquisition during the period Property d

  17. Slide 17: 3-4: Acquisitions (1/2)

    3-4: 1H/2013 (24th Period) Acquisitions (1/2) Property acquisitions announced when the issue of new investment units was announced (January 7, 2013)  Celestine Shiba Mitsui Bldg.  Gate City Ohsaki (additional acquisition) Location Minato-ku, Tokyo Osaki, Shinagawa-ku, Location Tokyo Acquisition Ac

  18. Slide 18: 3-4: Acquisitions (2/2)

    3-4: 1H/2013 (24th Period) Acquisitions (2/2) Property acquisitions since the issue of new investment units was announced  NBF Osaki Bldg. (formerly Sony City Osaki)  Panasonic Tokyo Shiodome Bldg. Osaki, Shinagawa-ku, Higashi Shinbashi, Location Location Tokyo Minato-ku, Tokyo Acquisition Acquisi

  19. Slide 19: 3-5: Property Dispositions

    3-5: Property Dispositions Flexible, well-timed property dispositions  Overview of Dispositions 1H/2013 2H/2013 1H/2014 (24th Period) (25th Period) (26th Period) Delivery May 2013 (completed) August 2013 (completed) January 2014 (planned) 644.31m2 of 5,335.28m2 of NBF Nihonbashi Muromachi NBF Nihon

  20. Slide 20: 3-6: Financial Management (1/2)

    3-6: Financial Management (1/2) We conducted a large-scale issue of new investment units to make large-scale property acquisitions  Summary of Equity Financing  LTV & Acquisition Capacity （％） New investment units 50 issues, 4 properties acquired, 1 property Summary disposed of1 45.2 44.4 44% level

  21. Slide 21: 3-6: Financial Management (2/2)

    3-6: Financial Management (2/2) Reduced borrowing costs along with a longer maturity  Long-Term Borrowings in 1H/2013 (24th Period)  13th Issue of Investment Corporation Bonds Amount Spread Borrowing Term Interest Summary Lender (Millions of (over Date (Years) Rate yen) swap rate) Sumitomo Mitsui

  22. Slide 22: Reference: Distributions per Unit Forecast

    Reference: Distributions per Unit Forecast  DPU 1H/2013 (24th Period) 2H/2013 (25th Period) 1H/2014 (26th Period) (Actual) (Forecast) (Reference) ¥16,854 ¥17,300 ¥16,000 PoP＋¥1,100 PoP＋¥446 PoP-¥1,300  Factors in PoP Change in DPU ¥1,200 ¥0 ¥1,200 (250) ¥17,300 -¥254 ¥16,854 (950) -¥350 -¥700 -¥50

  23. Slide 23: NBF's Strengths & Strategies

    NBF’s Strengths & Strategies

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

    4-1: Portfolio Strategy (1/3) – Quality Focused investment in highly competitive office buildings, primarily in Tokyo CBDs  Investment by Region Continued Appraisal Value & Floor Space (Over 10,000 tsubo) (Acquisition price basis; as of June 30, 2013) Tokyo CBDs Other Greater Tokyo Other Cities *Th

  25. Slide 25: 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 (Total Acquisition Price) NBF’s J-REIT Market Share (Market Capitalization) By Asset Type By Type of Investment Corporation Other (infrastructure, seniors) 10.3% 12.3% Hotels 1.0％

  26. Slide 26: 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 Fudo

  27. Slide 27: 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  Occupancy Rate & Total Rentable Area （%） （10 thousand ㎡） 100 180 98.1 97.6 97.8 97.1 97.3 96.9 96.9 97.0 96.9 97.0 96.4 96.1 95.4 95.6 95.0 96.5 94.7 95 9

  28. Slide 28: 4-3: Property Management Strategy (1/2)

    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

  29. Slide 29: 4-3: Property Management Strategy (2/2)

    4-3: Property Management Strategy (2/2) – Quality Property Management Operations We build relationships with tenants by providing quality operations that tenants appreciate  Overall Level of Satisfaction in CS Surveys Programs to Raise the Quality of Operations and Management (Average of Totals) (P

  30. Slide 30: 4-4: Financial Strategy (1/2) – LTV and Fixed Debt Ratio

    4-4: Financial Strategy (1/2) – LTV and Long-Term Fixed Interest-Bearing Debt Ratio Levels of 36-46% (maximum of 56%) for LTV 90% or higher for the long-term fixed interest-bearing debt ratio  LTV & Long-Term Fixed Interest-Bearing Debt Ratio  Average Maturity (Long-Term Interest-Bearing Debt) (％)

  31. Slide 31: 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  Overview of Commitment Lines （JPY BIllion） 70 Procured in 1H/2013 (24th Period) Maximum Short-term debt borrowing ¥40.0 billion ¥20.0 billion Inv

  32. Slide 32: 4-5: NBF's Strategies (Conclusion)

    4-5: NBF’s 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 disposition high long-term fixed-rate debt ratio (90% or • Focused investment in

  33. Slide 33: 5. Appendix

    5. Appendix Nippon Building Fund

  34. Slide 34: 1: Trends in the Office Building Leasing Market (1/2)

    1: Trends in the Office Building Leasing Market (1/2)  Average Vacancy Rate in Tokyo,  Average Asking Rent in Tokyo CBD Osaka & Nagoya CBDs (Yen/tsubo) （%） 16 40,000 Tokyo business districts: Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku, Shibuya-ku Osaka business districts: Umeda area, Minamimorima

  35. Slide 35: 1: Trends in the Office Building Leasing Market (2/2)

    1: Trends in the Office Building Leasing Market (2/2)  Office Space Supply & Demand (Net Absorption) in the 23 Wards of Tokyo (10,000 tsubo) 60 (Forecast) Supply Demand 40 20 0 Jan.-June Actual -20 -40 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 • Area supply is the total renta

  36. Slide 36: 2: Real Estate Acquisition Market Trends

    2: Real Estate Acquisition Market Trends  Acquisitions of Assets by J-REITs ■ Transaction Yields According to Real Estate Investor Questionnaire (A Class Buildings in the Marunouchi and Otemachi Areas) (JPY Billions) （％） 900 5.0 799.9 800 4.5 4.3 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 700 4.0 4.0 600 4.0

  37. Slide 37: 3: Historical Unit Price

    3: Historical Unit Price （Yen） (Points) 2,500,000 4,000 NBF unit price (left scale) TSE REIT Index (right scale) 2,000,000 3,000 1,500,000 2,000 1,000,000 1,000 500,000 (Units) 0 0 25,000 NBF trading volume 20,000 15,000 10,000 5,000 0 Sep.2001 Sep.2002 Sep.2003 Sep.2004 Sep.2005 Sep.2006 Sep.2007 S

  38. Slide 38: 4: Global REIT Ranking

    4: Global REIT Ranking  Global Top 25 REITs by Market Capitalizations  Global Top 26 REITs by Total Acquisition Price (the 3rd Largest in Office REITs) (the 3rd Largest in Office REITs) Market Cap Assets Rank Ticker Company Name Sector Country Rank Ticker Company Name Sector Country (USD millions)

  39. Slide 39: 5: NBF's Track Record

    5: NBF’s Track Record  DPU （Yen） 22,252 21,775 25,000 19,026 19,391 19,224 19,809 20,129 22,549 19,672 17,291 16,893 17,046 17,125 20,000 16,003 16,253 15,367 14,582 15,185 15,495 15,138 15,200 15,480 15,754 16,854 15,000 10,000  Asset Scale (Total Acquisition Price) & Occupancy Rate (JPY billion)

  40. Slide 40: 6: Property Portfolio Overview (1/2) – Tokyo CBDs

    6: Property Portfolio Overview (1/2) –Tokyo Central Business Districts  Tokyo CBDs Total Leased Occupancy Rate Total Leased Occupancy Rate Total Rentable Total Number of Total Rentable Total Number of Building Name Area（㎡） PML（%） Property Name Area（㎡） PML（%） Area (㎡) （%） Tenants Area (㎡) （%） Tenant

  41. Slide 41: 6: Property Portfolio Overview (2/2)

    6: Property Portfolio Overview (2/2) – Other Greater Tokyo & Other Cities  Other Greater Tokyo  Other Cities Total Leased Occupancy Rate Total Leased Occupancy Rate Total Rentable Total Number of Total Rentable Total Number of Property Name Area（㎡） PML（%） Property Name Area（㎡） PML（%） Area (㎡) （%）

  42. Slide 42: 7: Floor Space under New Contract and Turnover by Property

    -10,000 2,000 4,000 6,000 8,000 -8,000 -6,000 -4,000 -2,000 0 10,000 Area（㎡） NBF Osaki Bldg. NBF Hibiya Bldg. Gate City Ohsaki Nishi-Shinjuku Mitsui Bldg. Mitsubishi Heavy Industries Head Office Bldg. Shiba NBF Tower NBF Platinum Tower NBF Minami-Aoyama Bldg. NBF COMODIO Shiodome Toranomon Kotohira

  43. Slide 43: 8: Property Age

    8: Property Age December 31, 2012 (23rd Period End) June 30, 2013 (24th Period End) 8.0% 13.9% 25.4% Average Property Age Average Property Age 19.6% 16.67 years 15.64 years 66.6% 66.5% Under 5 years Over 5 years but under 10 years 10 years or older 42

  44. Slide 44: 9: Appraisal Value (1/2) – Tokyo CBDs

    9: Appraisal Value (1/2) –Tokyo Central Business Districts  Tokyo CBDs (JPY millions) (1) Appraisal (2) Appraisal (1) Appraisal (2) Appraisal Book Value at Book Value at Acquisition Value at Value at Acquisition Value at Value at Property Name 1H/2013 (1) - (2) Property Name 1H/2013 (1) - (2) Price

  45. Slide 45: 9: Appraisal Value (2/2)

    9: Appraisal Value (2/2) – Other Greater Tokyo & Other Cities  Other Greater Tokyo  Other Cities Note 1: Appraisal value at the end of the 23rd Period is based on real estate appraisal value information as of December 31, 2012 for properties owned as of December 31, 2012. However, the assessment o

  46. Slide 46: 10: Appraisal Rate (1/2) – Tokyo CBDs

    10: Appraisal Rate (1/2) –Tokyo Central Business Districts  Tokyo CBDs Appraisal Value Direct Return DCF Method Appraisal Value Direct Return DCF Method Appraisal Value Direct Return DCF Method Appraisal Value Direct Return DCF Method at 1H/2013 Method at 2H/2012 Method at 1H/2013 Method at 2H/2012

  47. Slide 47: 10: Appraisal Rate (2/2)

    10: Appraisal Rate (2/2) – Other Greater Tokyo & Other Cities  Other Greater Tokyo  Other Cities Appraisal Value Direct Return DCF Method Appraisal Value Direct Return DCF Method Appraisal Value Direct Return DCF Method Appraisal Value Direct Return DCF Method at 1H/2013 Method at 2H/2012 Method a

  48. Slide 48: 11: Top 10 Tenants

    11: Top 10 Tenants (Leased Floor Space Basis) (As of June 30, 2013) Floor Space Tenant Name Leased Property Floor Space (m2) Share* Gate City Ohsaki and 12 other 1. Mitsui Fudosan Co., Ltd.1 226,991 21.9% properties 1. Mitsui Fudosan Co., Ltd. 2. Sony Corporation NBF Osaki Bldg. 74,425 7.2% Mitsui F

  49. Slide 49: 12: Tenants by Industry

    12: Tenants by Industry (As of June 30, 2013) Share of Industry Main Companies Floor Space 1. Service 19.2% Transcosmos inc., Hakuhodo DY Holdings Inc. Information & IBM Japan, Ltd., NS Solutions Corporation 2. 13.5% communications Other, 10.8% Electrical 3. 12.2% Sony Corporation, Panasonic Corpora

  50. Slide 50: 13: Renewal Investment

    13: Renewal Investment  Major Renewal Investments in 1H/2013 (24th Period) Common Area Renewal: Nishi-Shinjuku Mitsui Bldg. Smoking Room Installation: NBF ALLIANCE ◆ Created a dignified atmosphere, raised customer satisfaction, and reduced ◆Responded to the needs of tenant company employees by prov

  51. Slide 51: 14: Customer Satisfaction Events

    14: Customer Satisfaction Events Exhibit Caravan (March) NBF Concert (May) Umbrella Loan (June-July) Placed photographs of famous cherry blossom Held NBF Concerts at the entrance of nine Provided umbrellas for loan during the rainy spots throughout Japan in building properties nationwide season for

  52. Slide 52: 15: Historical Overview of Financial Management

    15: Historical Overview of Financial Management (JPY Billions) Investment corporation Long-term fixed-rate debt ratio (right scale) (%) bonds (left scale) 550 Borrowings (left scale) LTV (Interest-bearing debt / total assets; right scale) 120 500 94.7 97.5 97.7 95.2 95.1 95.2 94.2 95.0 450 92.9 92.2

  53. Slide 53: 16: Lenders & Borrowings

    16: Lenders & Borrowings (JPY millions) 2H/2012 1H/2013 Lender Repayment Method Other 23rd Period End 24th Period End Sumitomo Mitsui Trust Bank, Ltd. 7,000 10,000 Sumitomo Mitsui Banking Corporation - 10,000 Mitsubishi UFJ Trust and Banking Corporation 5,000 5,000 Lump sum Unsecured, Shinkin Centra

  54. Slide 54: 17: Revenue by Property (1/3) – Tokyo CBDs

    17: Revenue by Property (1/3) –Tokyo Central Business Districts  Tokyo CBDs (JPY millions) Mitsubishi Heavy Mitsuiseimei Kowa Nishi- NBF Osaki Bldg. NBF Hibiya Gate City Nishi-Shinjuku Shiba NBF NBF Platinum NBF Minami- NBF COMODIO Toranomon Nakameguro GT Celestine Shiba Shibuya Garden NBF Ginza Sh

  55. Slide 55: 17: Revenue by Property (2/3) – Other Greater Tokyo

    17: Revenue by Property (2/3) – Other Greater Tokyo  Other Greater Tokyo (JPY millions) Nakanosakaue NBF Toyosu Canal NBF Toyosu Garden Chofu South Gate Shin-Kawasaki Tsukuba Mitsui NBF Utsunomiya S-ino Omiya North NBF Ueno Bldg. Yokohama ST Bldg. Parale Mitsui Bldg. NBF Atsugi Bldg. Sunbright Twin

  56. Slide 56: 17: Revenue by Property (3/3) – Other Cities

    17: Revenue by Property (3/3) – Other Cities  Other Cities (JPY millions) Sumitomo Mitsui Sakaisuji- NBF Sapporo NBF Sendai NBF Niigata NBF Nagoya Aqua Dojima NBF Shinanobashi Sun Mullion NBF NBF Sakai-Higashi NBF Shijo Sapporo L-Plaza NBF Unix Bldg. Banking Nagoya Honmachi Center Aqua Dojima East

  57. Slide 57: 18: Overview of Unit Ownership

    18: Overview of Unit Ownership Ownership by Unitholder Number of Unitholders by Type December 31, 2012 June 30, 2013 December 31, 2012 June 30, 2013 Change Change Uniholder Category (23rd Period End) (24th Period End) Uniholder Category (23rd Period End) (24th Period End) Units % of Total Units % of

  58. Slide 58: 19: Historical Summary of Results and Financial Position

    19: Historical Summary of Results and Financial Position 1H/2011 2H/2011 1H/2012 2H/2012 1H/2013 20th Period 21st Period 22nd Period 23rd Period 24th Period Operating revenues JPY millions 28,080 29,773 30,243 31,529 35,719 Leasing revenues JPY millions 28,080 29,773 30,243 31,529 33,622 Note 1: Fig

  59. Slide 59: 20: Portfolio Map

    20: Portfolio Map NBF Nippon Building Fund _f a sia a 19 3 Minato-ku @& Setagaya-ku arc 29,34) V / Las a. / ( ‘te Shinagawa-ku x. ae | 40 properties ¥736.1 billion Ns ~ ies s I <4 Bunkyo-ku > L i es qe S Talto-ku/” sumida-ku | Nakano-ku / Se fe s, b Shinjuku-ku ra ? b> @ orden Tokyo CBDs / Ras Other

  60. Slide 60: 21: Properties (1/4) – Tokyo CBDs

    21: Properties (1/4) – Tokyo Central Business Districts 59

  61. Slide 61: 21: Properties (2/4) – Tokyo CBDs

    21: Properties (2/4) – Tokyo Central Business Districts 60

  62. Slide 62: 21: Properties (3/4) – Other Greater Tokyo

    21: Properties (3/4) – Other Greater Tokyo 61

  63. Slide 63: 21: Properties (4/4) – Other Cities

    21: 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 August 15, 2013 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

  65. Slide 65: NBF Nippon Building Fund

    NBF Nippon Building Fund

Nippon Building Fund — 1H 2013 Earnings Presentation on 6ix