Nippon Building Fund, Inc. · TSE:8951
Nippon Building Fund — H2 2014 Earnings Presentation
62 slides from Nippon Building Fund's earnings presentation, Feb 16, 2015
Slide 1: Results for July-December 2014 (27th Period)
NBF February 16, 2015 Nippon Building Fund Nippon Building Fund Inc. Nippon Building Management Ltd. Results for July-December 2014 (27th Period) Investor Presentation
Slide 2: Contents
CONTENTS 1. Overview of NBF 5. Appendix 1-1 Features and Policies 3 1 Trends in the Office Building Leasing Market (1/4) 29 1 Trends in the Office Building Leasing Market (2/4) 30 2. Financial Results & Forecast 1 Trends in the Office Building Leasing Market (3/4) 31 2-1 2H/2014 (27th Period) Financ
Slide 3: 1. Overview of NBF
1. Overview of NBF NBF
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 December 31, 2014) Portfolio Quality Financial Fundamentals Focused investment in highly competitive superior office buildings Sound LTV control Ratio of investment in 5 wards of central Tokyo: 51.5%
Slide 5: 2. Financial Results & Forecast
2. Financial Results & Forecast Definition of Terms Fiscal period Terms Definitions Building Name Sakaisujihonmachi Center Bldg. (additional 3 new 3 properties acquired during the 26th period acquisition), Jingumae M-SQUARE, and 2H 2014 (27th Period) – Actual properties (including 1 additional acqui
Slide 6: 2-1 Financial Highlights (1/2)
2-1 2H/2014 (27th Period) Financial Highlights (1/2) (JPY millions, except percentages and until data) 1H/2012 2H/2012 1H/2013 2H/2013 1H/2014 2H/2014 Period on Period (PoP) Change (22nd Period) (23rd Period) (24th Period) (25th Period) (26th Period) (27th Period) (%) Total operating revenues 30,243
Slide 7: 2-1 Financial Highlights (2/2)
2-1 2H/2014 (27th Period) Financial Highlights (2/2) Total Operating Revenues Net Income Total Assets (Period End) (JPY millions) (JPY billions) (JPY millions) 40,000 14,000 1,100 13,276 1,047.9 1,040.5 37,134 36,561 12,941 12,771 1,022.8 1,022.9 35,719 (34,845) (34,659) 34,806 1,000 35,000 (33,622)
Slide 8: 2-2 Statement of Income
2-2 2H/2014 (27th Period) Statement of Income Statement of Income (JPY millions) Summary of PoP Change (JPY millions) 1H/2014 2H/2014 PoP (26th Period) (27th Period) Change Operating revenues: -1,755 Total operating revenues 36,561 34,806 -1,755 Rental revenues -79 Operating revenues 34,659 34,8
Slide 9: 2-3 Balance Sheet
2-3 2H/2014 (27th Period) Balance Sheet Balance Sheet Summary of PoP Change Assets (JPY millions) (JPY millions) June June 30, 30, 2014 2014 December December 31, 31, 2014 2014 PoP PoP Change Change Assets: -17,620 (26th (26thPeriod) Period) (27th (27thPeriod) Period) Current assets 35,467 35,46
Slide 10: 2-4 Financial Position
2-4 2H/2014 (27th Period) Financial Position Financial Data 1H/2014 2H/2014 PoP (26th Period) (27th Period) Change LTV 43.1% 41.9% -1.2Pt Long-term fixed interest- bearing debt ratio 96.4% 97.7% 1.3Pt Average interest rate 1.25% 1.23% -0.02Pt Short-term debt Average maturity (long-term interest-be
Slide 11: 2-5 Appraisal Value Assessment
2-5 2H/2014 (27th Period) Appraisal Value Assessment Appraisal Value Appraisal Value & Book Value 1H/2014 2H/2014 PoP (26th Period) (27th Period) Change (JPY billions) Book value (end of period) (Left Axis) (%) 1,200.0 Appraisal value (end of period) (Left Axis) 12 Number of properties 73 73 - U
Slide 12: 2-6 1H/2015 (28th Period) Forecast
2-6 1H/2015 (28th Period) Forecast Results Forecast PoP Change Compared with 27th Period (JPY millions) (JPY millions) 1H/2015 2H/2015 2H/2014 (Forecast) PoP (Reference) PoP Operating revenues: -277 (27th Period) Change Change (28th Period) (29th Period) Rental revenues -73 Total operating reven
Slide 13: 3. Operating Results & Outlook
3. Operating Results & Outlook 12
Slide 14: 3-1 Occupancy, Floor Space of Tenants Moving in and out
3-1 Occupancy, Floor Space of Tenants Moving in and out We forecast that average occupancy rate during the period will remain high. NBF’s average occupancy rate during the period, the percentage of floor space of tenants moving in and out (%) (Forecast) (%) 15.0 100 97.5 97.8 97.6 97.7 97.8 96.7 9
Slide 15: 3-2 Rental Revenue
3-2 Rental Revenue We forecast a positive rent revision for 2H / 2015 (29th Period). Breakdown of Change in Leasing Revenues Breakdown of Change in Leasing Revenues at (External and Internal Growth) Existing Properties (replacement and rent revision) (PoP, annualized) (PoP, annualized) 20% 12% (
Slide 16: 3-3 Planned Property Acquisition
3-3 Planned Property Acquisition KANDASUDACHO i-Mark Building 【Map】 【Standard floor plan】 KANDASUDACHO i-Mark Building 【Property Features】 Location Kandasudacho, Chiyoda-ku, Tokyo 【Location】 Built July 30, 2013 Highly convenient location facing Yasukuni Avenue with access to multiple train Contract
Slide 17: 3-4 Financial Management
3-4 Financial Management We forecast that our borrowing costs will be reduced by refinancing with favorable terms. New Funding & Repayment Long-Term Debt Procured in 2H/2014 (27th Period) 2H/2014 (27th Period) Long-Term Borrowings & Investment Corporation Bonds Borrowing Lender Amount Term Fixed
Slide 18: 17
17
Slide 19: 4. NBF's Strengths & Strategies
4. NBF’s Strengths & Strategies 18
Slide 20: 4-1 Portfolio Strategy (1/3) – Quality
4-1 Portfolio Strategy (1/3) – Quality Focused investment in highly competitive premium office buildings Investment by Region Continued Appraisal Value & Floor Space (Over 10,000 tsubo) (Acquisition price basis; as of December 31, 2014) (JPY billions) *The size of the dot for each property 23 Wa
Slide 21: 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, 2014) Total Acquisition Price Market Capitalization By Asset Type By Type of Investment Corporation Other (infrastructure, seniors) 8.1% 3.9% 8.5% Hotels 3.2
Slide 22: 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 Fudos
Slide 23: 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 （%） (10 thousand ㎡) 100 180 97.5 97.8 97.6 96.8 97.1 97.0 96.8 96.7 95.5 95.4 95 94.3 150 9
Slide 24: 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
Slide 25: 4-3 Property Management Strategy (2/2)
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 (PD
Slide 26: 4-4 Financial Strategy (1/2)
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) (％)
Slide 27: 4-4 Financial Strategy (2/2)
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 billions) (As of December 31, 2014) 70.0 Maximum Short-term debt Long-term debt Investment corporation bonds bor
Slide 28: 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 high disposition long-term fixed-rate debt ratio (90% or • Focused investment in h
Slide 29: 5. Appendix
5. Appendix NBF 28
Slide 30: 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 (%) Tokyo business districts: Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku, Shibuya-ku (Yen/tsubo) Osaka business districts: Umeda area, Minamimorimachi area, Y
Slide 31: 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) (%) 25,000 9.43 10 8.57% ('12.6) ('03.6 & 8) ¥22,901 ('08.8) 8 20,000 6 5.47% ('14.12) ¥16,953 ¥17,526 ('14.12) ('04.10) 4 ¥16
Slide 32: 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 (Forecast) Supply Demand 40 20 0 -20 -40 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Area supply is the total rentable
Slide 33: 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 (10 thousand m 2) 250 (Forecast) 216 200 175 Historical average (1986-2013) Average of 1.06 million m2/year 154 150 1.04 million m2/year (gross floor space basis) (gross floor s
Slide 34: Real Estate Acquisition Market Trends
2 Real Estate Acquisition Market Trends Acquisitions of Assets by J-REITs (JPY billions) 900 800 ■Office ■Housing ■Retail ■Logistics ■Hotels ■Other 700 600 500 400 300 200 100 0 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 Source: Association for Real Estate
Slide 35: Global REIT Ranking
3 Global REIT Ranking (As of December 31,2014) Global Top 40 REITs by Market Capitalization Global Top 35 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
Slide 36: Distribution per Unit
4 Distribution per Unit (Yen) (Points) 1,500,000 5,000 NBF unit price (left scale) TSE REIT Index (right scale) 4,000 1,000,000 3,000 2,000 500,000 1,000 0 0 (Yen) 12,000 11,274 11,126 Distribution per Unit1 10,064 10,887 9,695 9,904 9,836 10,000 9,513 9,612 8,645 8,562 8,645 8,523 8,126 8,446 8,427
Slide 37: NBF's Track Record
5 NBF’s Track Record Asset Scale (Total Acquisition Price) & Average Occupancy Rate during the Period (JPY billions) (%) 1,300 100 1,200 98.3 98.3 98.7 97.8 97.6 97.3 97.9 98.4 97.5 97.0 95 97.1 97.0 97.3 96.8 96.7 97.1 96.9 97.2 96.8 95.5 95.5 95.4 95.1 1,100 10,664 10,743 10,743 93.9 10,507 92.4
Slide 38: Historical Overview of Financial Management
6 Historical Overview of Financial Management Investment corporation bonds (left scale) Long-term fixed-rate debt ratio (right scale) (JPY billions) Borrowings (left scale) LTV (Interest-bearing debt / total assets; right scale) (%) 600 94.2 100 92.9 92.2 99.6 97.7 550 85.8 86.7 87.3 87.0 97.5 97.7
Slide 39: Lenders & Borrowings
7 Lenders & Borrowings (JPY millions) 1H/2014 2H/2014 Repayment Lender Other 26th Period End 27th Period End Method Shinsei Bank, Ltd. 8,000 3,000 Lump sum Unsecured, Mizuho Bank, Ltd. 4,000 2,000 Short-term repayment unguaranteed, Resona Bank, Ltd. 2,000 1,000 borrowings on due date ranked pari pas
Slide 40: Floor Space of Tenants Moving in and out by Property
1,000 1,500 -1,500 -1,000 0 500 -500 Area (㎡) 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-Aoyama Bldg. NBF COMODIO Shiodome
Slide 41: Property Age
9 Property Age June 30, 2014 December 31, 2014 (26th Period End) (27th Period End) 10.7% 9.5% 15.6% 20.0% Average Property Age Average Property Age 16.38 years 16.88 years 69.3% 74.9% Under 5 years Over 5 years but under 10 years 10 years or older 40
Slide 42: Top 10 Tenants (Leased Floor Space Basis)
10 Top 10 Tenants (Leased Floor Space Basis) (As of December 31, 2014) Floor Space Share of Tenant Name Leased Property Floor Space (m2) Total Rentable Area (%) Gate City Ohsaki and 10 other 1. Mitsui Fudosan Co., Ltd.1 226,531 21.3 1. Mitsui Fudosan Co., Ltd. properties Mitsui Fudosan Co., Ltd. gen
Slide 43: Tenants by Industry
11 Tenants by Industry (As of December 31,2014) Share of Industry Main Companies Floor Space 1. Service 20.1% Transcosmos inc., Hakuhodo DY Holdings Inc. Information & 2. 12.0% IBM Japan, Ltd., NS Solutions Corporation communications Electrical 3. 11.6% Sony Corporation, Panasonic Corporation equipm
Slide 44: Sustainability Initiatives (1/2): Environmental Friendliness
12 Sustainability Initiatives (1/2) : Environmental Friendliness Twin perspectives of reduced environmental loading and tenant comfort Repairs to conserve energy and water Improved customer satisfaction Common Area Repairs Toilet Repair Work (Installation of (Installation of LED Lighting) Facilities
Slide 45: Sustainability Initiatives (2/2): Harmony with Society
12 Sustainability Initiatives (2/2) : Harmony with Society Relationships with tenants and communities Disaster and BCP Measures Recreation for Tenants and Communities Work to strengthen Emergency drills NBF Concert emergency power generators Conduct emergency drills to increase tenant (NBF Shinkawa
Slide 46: Overview of Unit Ownership
13 Overview of Unit Ownership Ownership by Unitholder Number of Unitholders by Type 26th Period End 27th Period End 26th Period End 27th Period End Change Change Uniholder Category (June 30, 2014 ) (December 31, 2014 ) Uniholder Category (June 30, 2014 ) (December 31, 2014 ) Units % of Total Units %
Slide 47: Historical Summary of Results and Financial Position
14 Historical Summary of Results and Financial Position 2H/2012 1H/2013 2H/2013 1H/2014 2H/2014 23rd Period 24th Period 25th Period 26th Period 27th Period Operating revenues JPY millions 31,529 35,719 37,134 36,561 34,806 Leasing revenues JPY millions 31,529 33,622 34,844 34,659 34,806 Note 1: Figu
Slide 48: 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 end Total Number of Total Rentable Occupancy rate at end Total Number of Building Name Area (㎡) PML (%) Building Name Area (㎡) PML (%) Area (㎡) of period (%) Tenant
Slide 49: 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 end Total Number of Total Rentable Occupancy rate at end Total Number of Building Name Area (㎡) PML (%) Building Name Area (㎡) PML
Slide 50: Appraisal Value (1/2) – 23 Wards of Tokyo
16 Appraisal Value (1/2) – 23 Wards of Tokyo 23 Wards of Tokyo (JPY millions) Book Value at (1) Appraisal Value (2) Appraisal Value Book Value at (1) Appraisal Value at (2) Appraisal Value at Acquisition Property Name 2H/2014 at 2H/2014 at 1H/2014 (1) - (2) Property Name Acquisition Price 2H/2014
Slide 51: Appraisal Value (2/2) – Other Greater Tokyo & Other Cities
16 Appraisal Value (2/2) – Other Greater Tokyo & Other Cities Other Greater Tokyo Other Cities (JPY millions) Book Value at (1) Appraisal Value (2) Appraisal Value Book Value at (1) Appraisal Value at (2) Appraisal Value at Acquisition Property Name 2H/2014 at 2H/2014 at 1H/2014 (1) - (2) Proper
Slide 52: 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/2014 1H/2014 2H/2014 1H/2014
Slide 53: 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
Slide 54: Revenue by Property (1/3) – 23 Wards of Tokyo
18 Revenue by Property (1/3) – 23 Wards of Tokyo 23 Wards of Tokyo (JPY millions) Mitsubishi Heavy NBF NBF Osaki NBF Hibiya Gate City Nishi-Shinjuku Nakanosakaue NBF Toyosu Shiba NBF NBF Platinum NBF Minami- NBF COMODIO NBF Toyosu Toranomon Nakameguro GT Celestine Shiba NBF Shibuya NBF Ginza Shinj
Slide 55: Revenue by Property (2/3) – Other Greater Tokyo
18 Revenue by Property (2/3) – Other Greater Tokyo Other Greater Tokyo (JPY millions) Chofu South Gate Shin-Kawasaki Tsukuba Mitsui NBF Utsunomiya S-ino Omiya North NBF Shin-Urayasu Yokohama ST Bldg. Parale Mitsui Bldg. NBF Atsugi Bldg. NBF Urawa Bldg. NBF Matsudo Bldg. Total of Greater Tokyo Bldg
Slide 56: Revenue by Property (3/3) – Other Cities
18 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 Nakanoshima Shinanobashi Shinanobashi NBF Hiroshima Sapporo L-Plaza NBF Unix Bldg. Banking Nagoya Honmachi Center Aqua Dojima East Minami
Slide 57: Portfolio Map
19 Portfolio Map NBF ppon Buiksing Fund y .< ‘Arakawa-ku Other Cities 1 8 Properties ¥1 33.1 billion Greater Tokyo 23 Wards of Tokyo 44 Properties ¥838.1 billion ( \ ~4 1 1 Properties ¥1 03.0 billion 56 (As of December 31, 2014) (Acquisition price basis) Investment by Region Other Cities 12.4% oe To
Slide 58: Properties (1/4) – 23 Wards of Tokyo
20 Properties (1/4) – 23 Wards of Tokyo 57
Slide 59: Properties (2/4) – 23 Wards of Tokyo
20 Properties (2/4) – 23 Wards of Tokyo 58
Slide 60: Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo
20 Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo 59
Slide 61: Properties (4/4) – Other Cities
20 Properties (4/4) – Other Cities 60
Slide 62: Disclaimer
Disclaimer This English language notice is a translation of the Japanese language Investor Presentation dated February 16, 2015 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