Nippon Building Fund, Inc. · TSE:8951
Nippon Building Fund — 1H 2015 Earnings Presentation
65 slides from Nippon Building Fund's earnings presentation, Aug 17, 2015
Slide 1: Nippon Building Fund Inc.
Nippon Building Fund Inc. Nippon Building Fund Management Ltd. 0
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) 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 1H/2015 (28th 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 June 30, 2015) Portfolio Quality Financial Fundamentals Focused investment in highly competitive superior office buildin Sound LTV control Ratio of investment in 5 wards of central Tokyo:51.7% LTV (I
Slide 5: 2. Financial Results & Forecast
2. Financial Results & Forecast Definition of Terms Fiscal period Terms Definitions Building Name 1 new 1 property acquired during the period ended June 30, 2015 (28th NBF Kandasudacho Bldg. 1H 2015 (28th Period) – Actual property Period) (Properties at period end: 74) Existing 73 73 properties excl
Slide 6: 1H/2015 (28th Period) Financial Highlights (1/2)
2-1 1H/2015 (28th Period) Financial Highlights (1/2) (JPY millions) 2H/2012 1H/2013 2H/2013 1H/2014 2H/2014 1H/2015 PoP Change (23rd Period) (24th Period) (25th Period) (26th Period) (27th Period) (28th Period) (%) Total operating revenues 31,529 35,719 37,134 36,561 34,806 34,593 -0.6％ (Profits/Los
Slide 7: 1H/2015 (28th Period) Financial Highlights (2/2)
2-1 1H/2015 (28th 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 37,134 36,561 12,941 13,276 12,771 1,047.9 1,040.5 1,022.9 35,719 34,806 1,022.8 1,022.3 35,000 (34,845) (34,659) 34,593
Slide 8: 1H/2015 (28th Period) Statement of Income
2-2 1H/2015 (28th Period) Statement of Income Summary of PoP Change Statement of Income (JPY millions) (JPY millions) PoP Change 2H/2014 1H/2015 Operating revenues: -213 (27th Period) (28th Period) Amount Percentage Rental revenues -60 Total operating revenues 34,806 34,593 -213 -0.6% 73 existin
Slide 9: 1H/2015 (28th Period) Balance Sheet
2-3 1H/2015 (28th Period) Balance Sheet Balance Sheet Summary of PoP Change Assets (JPY millions) (JPY millions) December 31, 2014 June 30, 2015 PoP Change (27th Period) (28th Period) Assets: -565 Amount Percentage Current assets 22,397 20,440 -1,957 -8.7% Fixed assets +1,399 Cash and cash equiv
Slide 10: 1H/2015 (28th Period) Financial Position
2-4 1H/2015 (28th Period) Financial Position Financial Data 2H/2014 1H/2015 PoP Change (27th period) (28th period) LTV 41.9% 41.9% - Long-term fixed-rate debt ratio 97.7％ 96.5％ -1.2pt Average interest rate 1.23％ 1.18％ -0.05pt Short-term debt Average maturity (long-term 4.29 years 4.02 years -0.27
Slide 11: 1H/2015 (28th Period) Appraisal Value Assessment
2-5 1H/2015 (28th Period) Appraisal Value Assessment Appraisal Value Appraisal Value & Book Value 2H/2014 1H/2015 PoP (27th period) (28th period) Change (JPY billions) Book value (end of period) (Left Axis) (%) Number of properties 73 74 1 1,200.0 Appraisal value (end of period) (Left Axis) 12 U
Slide 12: 2H/2015 (29th Period) Forecast
2-6 2H/2015 (29th Period) Forecast Results Forecast Summary of PoP change for 2H/2015 (JPY millions) (JPY millions) 1H/2015 2H/2015 PoP Change 1H/2016 PoP Change （Actual） (Forecast) (Reference) Operating revenues: +37 (28th Period) (29th Period) Amount Percentage (30th Period) Amount Percentage
Slide 13: (Reference) Performance Forecast
(Reference) Performance Forecast Rental revenues Other revenues related to property leasing (JPY millions) (JPY millions) 31,800 3,800 73 existing properties NBF Kandasudacho Bldg. 31,572 3,600 31,600 182 3,394 31,400 3,400 31,396 31,390 31,235 3,196 31,200 3,200 153 3,018 31,000 31,082 3,000 30,800
Slide 14: Slide 14
Slide 15: 3. Operating Results & Outlook
3. Operating Results & Outlook 14
Slide 16: 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 large tenants moving out during 2H/2015 (the 29th Period) will quickly be replaced NBF’s average occupancy rate during the period, the percentage of floor space of tenants moving in and out (%) (Forecast) (%) 15.0 100 97.8 97
Slide 17: 3-2 Rental Revenue
3-2 Rental Revenue Rent revisions will turn positive from 2H/2015 (the 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% 6% (Fo
Slide 18: 3-3 Property Acquisition
3-3 Property Acquisition NBF Kandasudacho Bldg. 【Map】 【Standard floor plan】 NBF Kandasudacho Bldg. 【Property Features】 Location Kandasudacho, Chiyoda-ku, Tokyo 【Location】 Built July 30, 2013 Highly convenient location facing Yasukuni Avenue with access to multiple train lines and Contract date Janua
Slide 19: 3-4 Financial Management
3-4 Financial Management Further interest expense reductions will drive bottom line improvement New Funding & Repayment Long-Term Debt Procured in 1H/2015 (28th Period) 1H/2015 (28th Period) Long-Term Borrowings & Investment Corporation Bonds Borrowing Lender Amount Term Fixed/ Interest Date (Mi
Slide 20: Slide 20
Slide 21: 4. NBF's Strengths & Strategies
4. NBF’s Strengths & Strategies 20
Slide 22: 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 (Acquisition price basis; as of June 30, 2015) (19 properties over 10,000 tsubo) Continued Appraisal Other Cities Value (JPY billi
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 June 30, 2015) Total Acquisition Price Market Capitalization By Asset Type By Type of Investment Corporation Other (infrastructure, seniors) 7.2% 4.1% Hotels 8.0% 3.3% Di
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 Fudos
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 （%） (10 thousand ㎡) 100 180 97.8 97.6 97.9 97.5 96.8 97.1 97.0 96.8 96.7 95.5 95.4 94.7 95
Slide 26: 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 27: 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. Overall Customer Satisfaction Demonstrated by Program to Raise Management & Operation Quality the
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 Levels of 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 5 99.6 4.76 years 96.4 9
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 Overview of Commitment Lines (JPY billions) (As of June 30, 2015) 70.0 Maximum Short-term debt Long-term debt Investment corporation bonds borrowi
Slide 30: 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 long- disposition term fixed-rate debt ratio (90% or higher) enable • Focused
Slide 31: 5. Appendix
5. Appendix NBF 30
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 (%) Tokyo business districts: Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku, Shibuya-ku (Yen/tsubo) Osaka business districts: Umeda area, Minamimorimachi area, Y
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) (%) 25,000 9.43% 10 ('12.6) ¥22,901 8.57% ('08.8) ('03.6 & 8) 8 20,000 6 ¥17,467 ('15.7) ¥17,526 4.89% ('04.10) ('15.7) 4 ¥16,
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 (Forecast) Supply Demand 40 20 0 Actual results, January-June 2015 -20 -40 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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 (10 thousand m 2) 250 (Forecast) 216 200 175 Historical average (1986-2014) Average of 1.12 million m2/year 154 1.03 million m2/year (gross floor space basis) 150 (gross floor s
Slide 36: Real Estate Acquisition Market Trends
2 Real Estate Acquisition Market Trends Acquisitions of Assets by J-REITs (JPY billions) 1000 900 ■Office ■Housing ■Retail 800 ■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 Q1 Q2 2010 2011 2012 2013 2014 2015 Source: Association
Slide 37: Distribution per Unit
3 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 10,887 10,064 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 38: NBF's Track Record
4 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 97.9 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 1,080.3 95.5 95.1 95.5 95.4 1,100 1,066.4 1,074.3 1,074.3
Slide 39: Historical Overview of Financial Management
5 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 96.5 550 85.8 86.7 87.3 87.0 97.5
Slide 40: Lenders & Borrowings
6 Lenders & Borrowings (JPY millions) 2H/2014 1H/2015 Repayment Lender Other 27th Period End 28th Period End Method Sumitomo Mitsui Trust Bank, Ltd. - 4,000 Shinsei Bank, Ltd. 3,000 2,000 Short-term Resona Bank, Ltd. 1,000 1,000 borrowings Mizuho Bank, Ltd. 2,000 - The Norinchukin Bank 1,000 - Subto
Slide 41: Floor Space of Tenants Moving in and out by Property
1,000 1,500 -1,500 -1,000 0 500 -500 Area(m2) 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 42: Top 10 Tenants (Leased Floor Space Basis)
8 Top 10 Tenants (Leased Floor Space Basis) (As of June 30, 2015) 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 21.2 1. Mitsui Fudosan Co., Ltd. properties Mitsui Fudosan Co., Ltd. generall
Slide 43: Tenants by Industry
9 Tenants by Industry (As of June 30, 2015) Share of Industry Main Companies Floor Space 1. Service 20.3% Transcosmos inc., Hakuhodo DY Holdings Inc. Information & NS Solutions Corporation, 2. 12.1% communications NTT PC Communications Incorporated Electrical Other 11.5% 3. 11.5% Sony Corporation, P
Slide 44: Sustainability Initiatives (1/4)
10 Sustainability Initiatives (1/4) Nippon Building Fund Management, Ltd. (NBFM) established the “Policy for Environmental Considerations” on March 26, 2015. Overview of Policy for Sustainability coexistence model Environmental Considerations Basic Policy In recognition of the importance of environm
Slide 45: Sustainability Initiatives (2/4)
10 Sustainability Initiatives (2/4) NBF acquires environmental certification and evaluation for the properties it owns. Tokyo Metropolitan CASBEE Certification DBJ Green Building Certification Top-Level-Facility Certification CASBEE (Comprehensive Assessment DBJ Green Building Certification is a The
Slide 46: Sustainability Initiatives (3/4): Environmental Friendliness
10 Sustainability Initiatives (3/4) : Environmental Friendliness Twin perspectives of reduced environmental loading and tenant comfort Energy saving Improvement of customer satisfaction Common Area Repairs (Installation of LED Lighting) (NBF Shinkawa Bldg.) (NBF Platinum Tower) (Celestine Shiba Mits
Slide 47: Sustainability Initiatives (4/4): Social Considerations
10 Sustainability Initiatives (4/4) : Social Considerations Engagement with tenants and communities Disaster Prevention and BCP Measures Well-being for Tenants and Communities Disaster impact evaluation Photo contest NBF Concert system introduced We use seismometers installed at multiple Performance
Slide 48: Property Age
11 Property Age December 31, 2014 June 30, 2015 (27th Period End) (28th Period End) 25.1% 25.1% 36.8% 39.4% Average Property Age Average Property Age 16.88 years 17.29 years 35.5% 38.1% Under 10 years Over 10 years but under 20 years 20 years or older 47
Slide 49: Overview of Unit Ownership
12 Overview of Unit Ownership Ownership by Unitholder Number of Unitholders by Type Dec. 31, 2014 Jun. 30, 2015 Dec. 31, 2014 Jun. 30, 2015 PoP Change PoP Change Uniholder Category (27th Period end) (28th Period end) Uniholder Category (27th Period end) (28th Period end) Units % Units % Units % Unit
Slide 50: Property Portfolio Overview (1/2) – 23 Wards of Tokyo
13 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 51: Property Portfolio Overview (2/2) – Other Greater Tokyo & Other Cities
13 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 52: Appraisal Value (1/2) – 23 Wards of Tokyo
14 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 (2) Appraisal Value Acquisition Acquisition Property Name 1H/2015 at 1H/2015 at 2H/2014 (1) - (2) Property Name 1H/2015 at 1H/2015 a
Slide 53: Appraisal Value (2/2) – Other Greater Tokyo & Other Cities
14 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 (2) Appraisal Value Acquisition Acquisition Property Name 1H/2015 at 1H/2015 at 2H/2014 (1) - (2)
Slide 54: Appraisal Rate (1/2) – 23 Wards of Tokyo
15 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 1H/2015 2H/2014 1H/2015 2H/2014
Slide 55: Appraisal Rate (2/2) – Other Greater Tokyo & Other Cities
15 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 56: Revenue by Property (1/3) – 23 Wards of Tokyo
16 Revenue by Property (1/3) – 23 Wards of Tokyo 23 Wards of Tokyo (JPY millions) Mitsubishi Heavy NBF Toranomon Celestine NBF NBF Kowa Nishi- NBF Osaki NBF Hibiya Gate City Nishi-Shinjuku Nakanosakaue Industries Head NBF Toyosu Shiba NBF NBF Platinum NBF Minami- NBF Toyosu Nakameguro NBF Shibuya
Slide 57: Revenue by Property (2/3) – Other Greater Tokyo
16 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 58: Revenue by Property (3/3) – Other Cities
16 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 59: Historical Summary of Results and Financial Position
17 Historical Summary of Results and Financial Position 1H/2013 2H/2013 1H/2014 2H/2014 1H/2015 24th Period 25th Period 26th Period 27th Period 28th Period Operating revenues JPY millions 35,719 37,134 36,561 34,806 34,593 Leasing revenues JPY millions 33,622 34,844 34,659 34,806 34,593 Note 1: Figu
Slide 60: Portfolio Map
18 Portfolio Map NBF Nippon Building Fund Kita-ku y 5 ( x Panes: @D Z \ > “Arakawa-ku / ‘Shinjuku-ku j ie > / 98 & o ome ® ) y ‘ey ~ (Chiyo Ce n2 Zak. Koto-ku ash, 38) Chuo ) om \ 1 Bunkyo-ku SS Taito-ku 2 ot = @ / sumida-ku stant aN (>) . Other Cities 1 8 Properties og fcaosoo[o Foals) ¥1 33.1 bill
Slide 61: Properties (1/4) – 23 Wards of Tokyo
19 Properties (1/4) – 23 Wards of Tokyo 60
Slide 62: Properties (2/4) – 23 Wards of Tokyo
19 Properties (2/4) – 23 Wards of Tokyo 61
Slide 63: Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo
19 Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo 62
Slide 64: Properties (4/4) – Other Cities
19 Properties (4/4) – Other Cities 63
Slide 65: Disclaimer
Disclaimer This English language notice is a translation of the Japanese language Investor Presentation dated August 17, 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 acc