Nippon Building Fund, Inc. · TSE:8951

Nippon Building Fund — H2 2015 Earnings Presentation

62 slides from Nippon Building Fund's earnings presentation, Feb 15, 2016

  1. Slide 1: Results for July-December 2015 (29th Period)

    Results for July-December 2015 (29th Period) Investor Presentation February 15, 2016 NBF Nippon Building Fund 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) 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/2015 (29th Period)

  3. Slide 3: 1. Overview of NBF

    1. Overview of NBF NBF

  4. Slide 4: 1-1 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, 2015) Portfolio Quality Financial Fundamentals Focused investment in highly competitive premium office building Sound LTV control Ratio of investment in central 5 wards: 51.7％ (acqui

  5. 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 NBF Kandasudacho Bldg. 2H 2015 (29th Period) – Actual property (28th Period) (Properties at period end: 74) Existing 73 73 properties excl

  6. Slide 6: 2-1 2H/2015 Financial Highlights (1/2)

    2-1 2H/2015 (29th Period) Financial Highlights (1/2) (million yen) 1H/2013 2H/2013 1H/2014 2H/2014 1H/2015 2H/2015 PoP Change (24th Period) (25th Period) (26th Period) (27th Period) (28th Period) (29th Period) (%) Total operating revenues 35,719 37,134 36,561 34,806 34,593 34,640 +0.1％ － (Profits/Lo

  7. Slide 7: 2-1 2H/2015 Financial Highlights (2/2)

    2-1 2H/2015 (29th Period) Financial Highlights (2/2) Total Operating Revenues Net Income Total Assets (Period End) (million yen) (million yen) (billion yen) 40,000 14,000 1,100 12,941 13,276 12,771 1,047.9 1,040.5 1,022.9 37,134 36,561 1,022.8 1,022.3 1,012.7 34,806 34,593 34,640 35,719 12,000 (10,8

  8. Slide 8: 2-2 2H/2015 Statement of Income

    2-2 2H/2015 (29th Period) Statement of Income  Statement of Income  Summary of PoP Change (million yen) (million yen) PoP Change 1H/2015 2H/2015 Total operating revenues: +47 (28th Period) (29th Period) Amount Percentage Rental revenues -127 Total operating revenues 34,593 34,640 47 0.1% 1 new pro

  9. Slide 9: 2-3 2H/2015 Balance Sheet

    2-3 2H/2015 (29th Period) Balance Sheet  Balance Sheet  Summary of PoP Change Assets (million yen) (million yen) PoP Change June 30, 2015 December 31, 2015 Total assets: -9,677 (28th Period end) (29th Period end) Amount Percentage Current assets -5,538 Current assets 20,440 14,901 -5,538 -27.1% Ca

  10. Slide 10: 2-4 2H/2015 Financial Position

    2-4 2H/2015 (29th Period) Financial Position  Financial Data 1H/2015 2H/2015 PoP Change (28th Period) (29th Period) LTV 41.9% 41.3% -0.6pt Long-Term Fixed-Rate Debt Ratio 96.5％ 95.2％ -1.3pt Short-Term Debt Average interest Rate 1.18％ 1.10％ -0.08pt 12,000 million yen Investment Average Maturity (Lon

  11. Slide 11: 2-5 2H/2015 Appraisal Value Assessment

    2-5 2H/2015 (29th Period) Appraisal Value Assessment  Appraisal Value  Appraisal Value & Book Value (billion yen) (%) 1H/2015 2H/2015 PoP (28th Period) (29th Period) Change 1,400 14 Book value (period end) (Left Axis) Number of 74 74 － Appraisal value (period end) (Left Axis) properties 12 Unreali

  12. Slide 12: 2-6 1H/2016 (30th Period) Forecast

    2-6 1H/2016 (30th Period) Forecast  Results Forecast  Summary of PoP change for 1H/2016 (million yen) (million yen) 2H/2015 1H/2016 PoP Change 2H/2016 PoP Change Total operating revenues: +132 (Actual) (Forecast) (Reference) (29th Period) (30th Period) (31st Period) Rental revenues +442 Amount Per

  13. Slide 13: Reference: Performance Indicators

    Reference: Performance Indicators Rental Revenue Other revenues related to property leasing (million yen) 3,600 73 existing properties NBF Kandasudacho Bldg (million yen) 3,372 3,400 31,800 3,196 31,711 3,200 3,062 31,600 183 3,000 31,528 2,800 31,400 31,396 31,268 2,600 0 1H/2015 2H/2015 1H/2016 31

  14. Slide 14: Intentionally blank page

    Intentionally blank page

  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  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 97.9 97.6 97.8 96.7 96.8 97.1 97.0 96.8 95.4 95 10.0 Average occupancy rate during the perio

  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) replacement External growth rent revision Internal growth We achieved

  18. Slide 18: 3-3 Financial Management

    3-3 Financial Management  New Funding & Repayment  Long-Term Debt Procured in 2H/2015 (29th Period) 2H/2015 (29th Period) Long-Term Borrowings & Investment Corporation Bonds Borrowing Lender Amount Term Fixed/ Interest Date (million yen) (years) Floating Rate Repayment Overview New Funding Overvie

  19. Slide 19: 4. NBF's Strengths & Strategies

    4. NBF’s Strengths & Strategies 18

  20. 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 Ratio by Area  Continued Appraisal Value & Floor Space (Acquisition price basis; as of December 31, 2015) (19 properties over 10,000 tsubo) Continued Appraisal Value (billions yen)

  21. 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, 2015)  Total Acquisition Price  Market Capitalization By Asset Type By Type of Investment Corporation Other (infrastructure, seniors) 7.7% 7.7% 3.8% Hotels 4.0

  22. 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

  23. 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 ㎡) 100 210 NBF’s average occupancy rate during the period1 (left scale) Re

  24. 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

  25. 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

  26. Slide 26: 4-4 Financial Strategy (1/2) – LTV and 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 5 99.6 97.7 4.76 4.73 96.4 96.5 4

  27. Slide 27: 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 (billion yen) (As of December 31, 2015) 80.0 Maximum Short-term debt Long-term debt Investment corporation bonds borr

  28. Slide 28: 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

  29. Slide 29: 5. Appendix

    5. Appendix NBF 28

  30. 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

  31. 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 ('12.6) ¥22,901 8.57% ('08.8) ('03.6 & 8) 8 20,000 6 ¥17,790 ('16.1) ¥17,526 ('04.10) 4 ¥16,207 4.01% 15,0

  32. 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 2018 Area supply is the total ren

  33. 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) 300 (Forecast) 250 216 Average of 1.19 million m2/year Historical average (1986-2014) (gross floor space basis) 200 from 2015 onward 1.03 million m2/year 183 (

  34. Slide 34: Real Estate Acquisition Market Trends

    2 Real Estate Acquisition Market Trends  Acquisitions of Assets by J-REITs (billion yen) 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 Q3 Q4 2010 2011 2012 2013 2014 2015 Source: The As

  35. Slide 35: 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 11,274 11,126 10,887 9,513 9,695 10,064 9,836 9,612 9,904 8,645 8,645 8,523 8,562 8,427 9,000 8,126 8,446 8,152 8,036 8,001 7,683 7,592 7,747 7,6

  36. Slide 36: 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) 1,300 100 1,200 98.3 98.3 98.7

  37. Slide 37: Financial Management

    5 Financial Management Investment corporation bonds (left scale) Long-term fixed-rate debt ratio (right scale) Borrowings (left scale) LTV (Interest-bearing debt to total assets) (right scale) (billion yen) (%) 600 94.2 100 92.9 92.2 99.6 97.7 96.5 95.2 550 85.8 86.7 87.3 87.0 97.5 97.7 96.4 90 95.2

  38. Slide 38: Lenders & Borrowings

    6 Lenders & Borrowings (million yen) 1H/2015 2H/2015 Repayment Lender Other 28th Period End 29th Period End Method Sumitomo Mitsui Trust Bank, Ltd. 4,000 7,000 Lump sum Unsecured, Shinsei Bank, Ltd. 2,000 3,000 Short-Term repayment on unguaranteed, Resona Bank, Ltd. 1,000 1,000 Borrowings due date r

  39. Slide 39: Floor Space of Tenants Moving in and out by Property

    -7,500 -7,000 3,500 4,000 1,000 1,500 2,000 -3,000 -2,500 -2,000 -1,500 -1,000 0 500 -500 Area(Tsubo) 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 Pla

  40. Slide 40: Top 10 Tenants (Leased Floor Space Basis)

    8 Top 10 Tenants (Leased Floor Space Basis) (As of December 31, 2015) Ratio of Total Tenant Name Leased Property Floor Space (m 2) Rentable Area (%) Gate City Ohsaki and 10 other 1. Mitsui Fudosan Co., Ltd.(Note) 226,552 21.5 properties (Note) Mitsui Fudosan Co., Ltd. 2. Sony Corporation NBF Osaki B

  41. Slide 41: Tenants by Industry

    9 Tenants by Industry (As of December 31, 2015) Share of Industry Main Companies Floor Space 1. Service 20.9% Transcosmos inc., Hakuhodo DY Holdings Inc. Electrical 2. 11.8% Sony Corporation, NEC Corporation equipment Information & NS Solutions Corporation, Other 9.5% 3. 11.3% Banking 1.9% communica

  42. Slide 42: Property Age

    10 Property Age June 30, 2015 December 31, 2015 (28th Period End) (29th Period End) 20.8% 25.1% 39.4% 39.4% Average Property Age Average Property Age 17.29 years 17.79 years 39.8% 35.5% Under 10 years Over 10 years but under 20 years 20 years or older 41

  43. Slide 43: 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 the Development an indicator that evaluates the sustainability initiatives of

  44. Slide 44: Sustainability Initiatives (1/2)

    12 Sustainability Initiatives (1/2) Improving Business Continuity and Creating Added Value Disaster Prevention and BCP Measures Improving earthquake-resistance Installing emergency power generators of elevators Installation and renewal of earthquake sensors (NBF Shinkawa Bldg. West Tower) (NBF Plati

  45. Slide 45: Sustainability Initiatives (2/2)

    12 Sustainability Initiatives (2/2) Achieving occupant comfort while minimizing environmental impacts / Community engagements CS improvement and Community Retrofit to improve energy efficiency Engagement Programs Common Area Lighting Upgrades Separation of Smoking Room Various Events (Installation o

  46. Slide 46: Overview of Unit Ownership

    13 Overview of Unit Ownership Ownership by Unitholder Number of Unitholders by Type Jun. 30, 2015 Dec. 31, 2015 Jun. 30, 2015 Dec. 31, 2015 PoP Change PoP Change Uniholder Category (28th Period end) (29th Period end) Uniholder Category (28th Period end) (29th Period end) Units % Units % Units % Unit

  47. Slide 47: Historical Summary of Results and Financial Position

    14 Historical Summary of Results and Financial Position 2H/2013 1H/2014 2H/2014 1H/2015 2H/2015 25th Period 26th Period 27th Period 28th Period 29th Period Operating revenues (million y en) 37,134 36,561 34,806 34,593 34,640 Note 1: Figures in parentheses are annualized from monthly data. Leasing re

  48. 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

  49. 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

  50. Slide 50: Appraisal Value (1/2) – 23 Wards of Tokyo

    16 Appraisal Value (1/2) – 23 Wards of Tokyo  23 Wards of Tokyo (million yen) Book Value at (1) Appraisal Value (2) Appraisal Value Book Value at (1) Appraisal Value (2) Appraisal Value Acquisition Acquisition Property Name 2H/2015 at 2H/2015 at 1H/2015 (1) - (2) Property Name 2H/2015 at 2H/2015 at

  51. 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 (million yen) Book Value at (1) Appraisal Value (2) Appraisal Value Book Value at (1) Appraisal Value (2) Appraisal Value Acquisition Acquisition Property Name 2H/2015 at 2H/2015 at 1H/2015 (1) - (2) P

  52. 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 Direct Return Method DCF Method Appraisal Value Direct Return Method DCF Method Appraisal Value Direct Return Method DCF Method Appraisal Value Direct Return Method DCF Method at 2H/2015 at 1H/2015 at 2H/2015 at 1H/2015

  53. 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

  54. 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 (million yen) 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 N

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

    18 Revenue by Property (2/3) – Other Greater Tokyo  Other Greater Tokyo (million yen) 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.

  56. Slide 56: 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 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

  57. Slide 57: Portfolio Map

    19 Portfolio Map （As of December 31, 2015) (Acquisition price basis) Note: Numbers on the maps correspond to property numbers on pages 57-60. 56

  58. Slide 58: Properties (1/4) – 23 Wards of Tokyo

    20 Properties (1/4) – 23 Wards of Tokyo 57

  59. Slide 59: Properties (2/4) – 23 Wards of Tokyo

    20 Properties (2/4) – 23 Wards of Tokyo 58

  60. Slide 60: Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo

    20 Properties (3/4) – 23 Wards of Tokyo & Other Greater Tokyo 59

  61. Slide 61: Properties (4/4) – Other Cities

    20 Properties (4/4) – Other Cities 60

  62. Slide 62: Disclaimer

    Disclaimer This English language notice is a translation of the Japanese language Investor Presentation dated February 15, 2016 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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