NEWS RELEASE
March 29, 2021
For Immediate Release
Investment Corporation
Japan Real Estate Investment Corporation
Yutaka Yanagisawa, Executive Director
(TSE code: 8952)
Asset Management Company
Japan Real Estate Asset Management Co., Ltd.
Naoki Umeda, President & CEO
Contact: Masaru Motooka
Executive Officer & General Manager
Planning Department
Phone: +81‐3‐3211‐7951
Announcement of Disposition of Trust Beneficiary Interest in Domestic Real Estate
Japan Real Estate Investment Corporation ("JRE") hereby announces that Japan Real Estate Asset Management Co., Ltd. ("JRE‐AM"), the asset management company to which JRE entrusts asset investment, today decided to dispose of a trust beneficiary interest in domestic real estate as described below.
1. Outline of the Disposition
Property name | Otsuka Higashi‐Ikebukuro Building |
Disposition price (planned) | JPY 6,025 million |
Estimated book value | JPY 3,245 million |
Estimated gain on disposition | JPY 2,535 million |
Buyer | Tosei Corporation (see item 4 below) |
Brokerage | Yes (party other than an interested party) |
Decision date | March 29, 2021 |
Contract date (scheduled) | March 31, 2021 |
Transfer date (scheduled) | August 31, 2021 |
Payment date (scheduled) | August 31, 2021 |
(Notes) |
|
2. Reason for the Disposition
The roles and functions required for offices have been changing in recent years against the backdrop of the advancement in information technology, growing environmental awareness and diversifying work styles, among other factors, and the COVID‐19 pandemic underway is accelerating such changes. Looking ahead, with an eye on the shift of the business environment caused by these new trends, it is essential for JRE to focus on the competitiveness of individual buildings over the medium to long term while considering their respective characteristics, and more cautiously determine the balance between its repair and renovation investments and their returns.
Given the above, JRE has made it a medium‐ to long‐term policy to implement replacement of its portfolio properties more strategically and proactively.
The disposition of Otsuka Higashi‐Ikebukuro Building, which will be conducted as part of such asset replacement strategy, has been decided after conducting qualitative and quantitative evaluation in terms of profitability and asset value.
Although the property to be disposed of has maintained a high occupancy rate to date, its location advantage as an office building, such as accessibility from Otsuka Station on the JR Yamanote Line, the nearest station, is relatively weak in the portfolio. In addition, its repair and renewal expenses are expected to increase going forward to maintain and enhance the property's competitiveness over the medium to long term.
Under such a situation, JRE‐AM, in consideration of the fact that the buyer made a proposal of the transaction at the planned disposition price as indicated above, examined the property's capacity for future internal growth and compared the advantages of continuing to manage the property over a medium to long term and disposing it now. Consequently, JRE‐AM has decided on the disposition.
Furthermore, with regard to the proceeds to be obtained from the disposition, it is assumed that part of the gain will be returned to unitholders as dividends for the fiscal period ending September 2021, and the remaining amount will be applied for dividends for the fiscal period ending March 2022 and thereafter, future acquisition of specified assets or repayment of borrowings.
3. Outline of the Property to Be Disposed
Property name | Otsuka Higashi‐Ikebukuro Building |
Type of specified assets | Trust beneficiary interest in real estate |
Type of ownership Land BuildingOwnership Ownership | |
Location (Building address) | 2‐32‐22 Higashi‐Ikebukuro, Toshima‐ku, Tokyo |
Completion | November 1987 |
Usage | Office |
Appraisal value (Date of value) | JPY 4,850,000 thousand (as of March 1, 2021) |
Appraiser | Daiwa Real Estate Appraisal Co., Ltd. |
Outline of lease Total number of tenants Total rent revenues 5 JPY 203,055 thousand (for the September 2020 period) Security deposit JPY 172,949 thousand Total leased area Net rentable area 7,253 m27,253 m2 Occupancy rateSeptember 30, 2018 100% March 31, 2019 100% September 30, 2019 100% March 31, 2020 100% September 30, 2020 100% | |
Special notes | None |
(Notes) ・The stated usage indicates the main usage among the descriptions in the real property registry. ・Outline of lease indicates the figures as of the end of the fiscal period ended September 2020. |
4. Outline of the Buyer
Company name | Tosei Corporation |
Address | 4‐5‐4 Shibaura, Minato‐ku, Tokyo |
Representative | Seiichiro Yamaguchi, President and CEO |
Major business areas | Revitalization Business, Development Business, Rental Business, |
Fund and Consulting Business, and Hotel Business | |
Paid‐in capital | JPY 6,624,890 thousand (as of November 30, 2020) |
Date of establishment | February 2, 1950 |
Net assets | JPY 51,737 million (as of November 30, 2020) |
Total assets | JPY 148,071 million (as of November 30, 2020) |
Major shareholders and | Seiichiro Yamaguchi: 27.31% |
shareholding ratios | Zeus Capital Limited: 12.71% |
3 |
(as of November 30, 2020) | QUINTET PRIVATE BANK (EUROPE) S.A. 107704︓8.00% |
Relationship with JRE or JRE‐AMCapital relationshipNonePersonnel relationshipNoneBusiness relationship Related party or notNone No |
5. Settlement Method
Lump‐sum payment at the time of transfer
6. Future Outlook
As the scheduled date of transfer of the property belongs to the fiscal period ending September 2021, the disposition will give no impact on JRE's operating performance for the fiscal period ending March 2021 (from October 1, 2020 to March 31, 2021). JRE does not make any revision to the operating performance forecast for the fiscal period ending September 2021 (from April 1, 2021 to September 30, 2021), either, as the disposition will have only a marginal impact on the performance.
For your information, JRE assumes that, for the purpose of stabilizing future dividends, part of the gain from the disposition will be internally reserved as reserve for tax purpose reduction entry and deferred tax liabilities, in application of "Special Provisions for Taxation in Cases of Repurchase of Specified Assets" stipulated in Article 65‐7 of the Act on Special Measures Concerning Taxation but to the extent that the conduit requirements stipulated in Article 67‐15 in said act are satisfied. In addition, JRE assumes at present that there will be no return of the balance of the internal reserves based on its "Guidelines on Handling Internal Reserves" (Note) for the fiscal period ending September 2021, as dividends from the gain from the disposition are expected to more than cover the amount originally assumed.
Note: The guidelines call for distributing internal reserves to unitholders each fiscal period, with the amount equivalent to one‐twentieth of the period‐end balance of the reserves as a target. For more details, please refer to "Announcement of Proposal to Revise the Asset Management Fee Structure" dated October 29, 2020.
7. Summary of Appraisal Report
Property name | Otsuka Higashi‐Ikebukuro Building |
Appraisal value | JPY 4,850 million |
Appraiser | Daiwa Real Estate Appraisal Co., Ltd |
Date of value | March 1, 2021 |
Description
Item
Amount
Value indicated by the income approach
Indicated by the income approach, placing more weight on the DCF method that incorporates fluctuations of the
4,850,000 future net cash flow, while employing the direct capitalization method for verification
Value indicated by the direct capitalization method
(1) Operating income [① ‐②]
4,830,000 376,114
①PotenƟal rental income
Recorded on the basis of new rent levels of comparable 402,441 properties, etc.
②Vacancy loss
Recorded on the basis of losses incurred in previous 26,327 years and average vacancy rates of comparable properties, etc.
(2) Operating expenses 120,045
Maintenance and management fee Property management fee Utilities expenses
35,873
Estimated to be the equivalent of 3.0% of rental income, referring to expenses incurred in previous years for the
(note) maintenance and management fee and cases of
comparable properties for property management fee
Estimated on the basis of expenses incurred in previous 45,000 years, taking into account occupancy rates
Repair expenses
Estimated according to the average annual expenses 10,024 stated in the engineering report
Leasing cost
Recorded the amount equivalent to the 1.0‐month rent 2,116 for new tenants, in light of cases of comparable
properties
Property tax and city planning tax Insurance Premium
Estimated on the basis of the taxes levied for fiscal year 26,441 2020
Recorded the actual insurance premium rate, 590 determining it to be reasonable
Other expenses 0
(3) Net operating income [(1)‐(2)] 256,069
(4) Operating profit on lump‐sum payments
Estimated under the assumption of an interest rate of 1,666 1.0%
(5) Capital expenditures
Estimated on the basis of the average annual renewal 30,941 expenses stated in the engineering report
(6) Net cash flow [(3)+(4) ‐ (5)] 226,794
(7) Capitalization rate
Estimated in reference to the market capitalization 4.7% rates of comparable properties
Value indicated by the DCF method 4,860,000
Discount rate
Estimated from the discount rates in the transactions of 4.4% comparable properties and comparisons with the yields of other financial instruments, etc.
Terminal capitalization rate
Estimated in consideration of the marketability against 4.8% the capitalization rate of the subject property at the end of the holding period
Value indicated by the cost approach
Land ratio
Building ratio
2,580,000 79.3% 20.7%
* In thousands of yen (amounts are rounded down to the nearest thousand yen)
Any special considerations in the reconciliation between indicated values and determination of the final appraisal value | The appraisal value is calculated on the basis of the income approach rather than the cost approach. This is because the appraiser determined that the income approach will better weave into the value the profitability, which the said property has actually realized as one multiplex real estate, and better reflect the real market situation comprised of customers' attributes and behaviors. |
Note: No consent has been obtainedfrom the property management company to disclose the propertymanagement fee as a separate item. Moreover, if the property management fee for the subject property is disclosed separately, it might potentially affect other deals done by the property management company, which could negatively affect JRE in efficiently delegating property management services under its policy on the maintenance and management of target investment properties. This could in turn undermine the interests of its unitholders. Accordingly, the maintenance and management fee and the property management fee are shown by the combined amount.
This is the English translation of the announcement in Japanese dated March 29, 2021.
No assurance or warranties are given for the completeness or accuracy of this English translation.
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JREI - Japan Real Estate Investment Corporation published this content on 29 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 March 2021 07:31:02 UTC.