November 22, 2021
Real Estate Investment Trust Unit Issuer:
TOKYU REIT, Inc.
1-12-1, Dogenzaka,
Shibuya-ku, Tokyo, 150-0043, Japan
Kazuyoshi Kashiwazaki
Executive Director
(Securities Code: 8957)
Investment Management Company:
Tokyu Real Estate Investment Management Inc.
Representative:
Kazuyoshi Kashiwazaki
Representative Director & President, Chief Executive Officer
Inquiries:
Yuji Shimizu
General Manager, Finance and IR
TEL: +81-3-5428-5828
Notice Concerning Acquisition (Aoyama Oval Building)
of Trust Beneficiary Interest in Domestic Real Estate
TOKYU REIT, Inc. ("TOKYU REIT") today announced that its investment management company, Tokyu Real Estate Investment Management Inc. ("Tokyu REIM"), had decided to acquire trust beneficiary interest in domestic real estate (referred to as the "Acquisition"). Brief details are as follows.
1. Acquisition Details
Property Name | Aoyama Oval Building |
Location | 5-52-2 Jingumae, Shibuya-ku, Tokyo |
Acquisition Ratio | Quasi co-ownership ratio of trust beneficiary interest (sectional ownership ratio of building: 97.1%, |
land ownership ratio: 97.9%): 47.5% | |
Acquisition Price | ¥18,600 million |
(Excluding acquisition-related costs, property tax, city planning tax, etc.) | |
Seller | Domestic company (Please refer to "5. Seller Profile") |
Brokerage | No |
Decision of Acquisition | November 22, 2021 |
Contract Date | November 22, 2021 |
Acquisition Date | December 10, 2021 |
Payment of | December 10, 2021 |
Acquisition Costs | |
(Note) The above sectional ownership ratio of the building and land ownership ratio are based on the areas recorded in the register, and the numbers are rounded to the nearest first decimal place.
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2. Rationale
TOKYU REIT strives to improve the quality of its portfolio, taking into consideration trends in the capital market and real estate investment market as well as the growth potential of the portfolio's cash flow in the medium to long term. The Acquisition will be conducted as part of these efforts in accordance with the "Scope and Policy of Investment Management" as outlined in the Articles of Incorporation of TOKYU REIT.
The Omotesando and Aoyama area, in which Aoyama Oval Building (the "Asset to Be Acquired") is located, is commercially flourishing and highly demanded by business tenants for opening stores and by apparel, IT, and other businesses in the office market for relocating their offices to the area.
The Asset to Be Acquired is an office building located in a flourishing area four minutes on foot from Omote-sando Station on the Tokyo Metro Ginza Line, Chiyoda Line, and Hanzomon Line and is a highly visible property facing Aoyama-dori Avenue. The land area is approximately 4,700 m2, which is a rare, large commercial site in central Tokyo. The location offers high potential for redevelopment projects in the future. While the building is 33 years old, it is well maintained, receiving appropriate large repair work such as elevator renewal and bathroom and kitchenette improvement, and remains competitive in the market. In addition, a medium to long term increase in value of the Asset to Be Acquired can be expected thanks to its location in a priority investment target area of TOKYU REIT and in Greater SHIBUYA (Note 1), in which redevelopment led by Tokyu Group is under way.
The NOI yield for the latest one year calculated by excluding special factors based on estimated rent level and occupancy rate as of the acquisition date is 3.0%, and stable profit contribution over the medium to long term is expected.
TOKYU REIT judged the Acquisition would further stabilize cashflow and increase total returns (Note 2).
TOKYU REIT will continue to conduct investment management while closely monitoring trends in capital and real estate investment markets, all the while adhering to its investment policy. TOKYU REIT will strive to build a portfolio that leads to improvement in asset value and growth of net income per investment unit.
(Note 1) Within a 2.5-km radius of Shibuya Station
(Note 2) Total income comprising income returns (rental income, etc.) and future capital returns (sale income) of each fiscal period.
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3. Details of Asset to Be Acquired
Property Name | Aoyama Oval Building | ||||
Type of Specified Asset | Quasi-co-ownership of trust beneficiary interest in domestic real estate | ||||
Trustee | Mizuho Trust & Banking Co., Ltd. | ||||
Trust Period | March 30, 2018 to December 31, 2031 | ||||
Land: | 5-52-1,5-52-32,5-52-35,5-52-36,5-52-37,5-52-41,5-53-14, | ||||
Registered | Jingumae, Shibuya-ku, Tokyo | ||||
Location | Building: | 5-52-1,5-52-32,5-52-35,5-52-36,5-52-37,5-52-41,5-53-14, | |||
Jingumae, Shibuya-ku, Tokyo | |||||
Residential | 5-52-2 Jingumae, Shibuya-ku, Tokyo | ||||
Access | Approximately a four-minute walk from Omote-sando Station on the Tokyo Metro | ||||
Ginza Line, etc. | |||||
Use | Office and retail | ||||
Area Classification | Commercial district / Residential Classification 2 | ||||
Site/Floor Area (Registered) | Land: | 4,702.82 m2 | |||
Building: | 28,629.19 m2 | ||||
Structure (Registered) | S/SRC, B2/16F | ||||
Completion Date (Registered) | October 1988 | ||||
Design Company | Nihon Building Project Co., Inc. (office of first-class registered architect) | ||||
Construction Company | Tokyo Branch, TOKYU CONSTRUCTION CO., LTD. | ||||
Inspection Authority | Tokyo Metropolitan Government | ||||
PML (Probable Maximum Loss) of 2.4 % is based on the earthquake risk assessment | |||||
(detailed) report prepared by Engineering and Risk Services Corporation and OYO | |||||
RMS Corporation (as of November 10, 2021). PML refers to the expected damages | |||||
Earthquake Resistance | caused by earthquakes. Although there is no single authoritative definition of PML, | ||||
it refers to the percentage of expected damages caused by a small- to large-scale | |||||
earthquake that may happen within the next 475 years to the replacement value. | |||||
Calculations also include data relating to individual property surveys, assessment of | |||||
building conditions, conformity to architectural design, ground conditions of the | |||||
relevant site, surveys of local factors and structural evaluation. | |||||
Land: | Proprietary ownership (quasi co-ownership ratio of trust beneficiary | ||||
Type of Ownership | interest with ownership ratio of 97.9% as assets in trust: 47.5%) | ||||
Building: | Proprietary ownership (quasi co-ownership ratio of trust beneficiary | ||||
interest with ownership ratio of 97.1% as assets in trust: 47.5%) | |||||
Acquisition Date | December 10, 2021 | ||||
Acquisition Price | ¥18,600 million | ||||
Appraisal Value | ¥18,800 million (effective date of value: November 1, 2021) | ||||
Appraiser: Japan Valuers Co., Ltd. | |||||
Building Assessment Reporter | Tokio Marine dR Co., Ltd. | ||||
Date of Building Assessment Report | November 10, 2021 | ||||
Property Management Company | TOKYU CORPORATION | ||||
Master Lessee Company | TOKYU CORPORATION | ||||
Type of Master Lease Agreement | Pass-through | ||||
Security/Guarantee | TOKYU REIT has no plan to pledge collateral after the acquisition. | ||||
1. The building is a sectionally owned building, and six of seven plots of land | |||||
registered in the location section of | the registration of the sectionally owned | ||||
Special Items | building are owned by trustees and | one plot is jointly owned by trustees, | |||
individuals, and corporations (the "Joint Land Owners"). While the land is not | |||||
leased land, a land use lease agreement was signed between the then owner of the | |||||
land and the then owner of the building. |
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Lease Details
- In the case of selling all or part of ownership, the unit owners of the building except the trustees and the Joint Land Owners are required to prioritize the unit owners of the building over a third party when holding negotiations for selling and buying.
- Tokyu Corporation engages in the management of the property on behalf of other parties while there are no management rules.
- Spraying material containing asbestos is used on a part of the building in trust. While a measure to prevent the scattering of the spraying material containing asbestos will be required by law when demolishing or otherwise disposing of the building, the current condition of use does not require a special measure. The condition is periodically inspected and corrective actions will be taken as necessary.
- TOKYU REIT concludes with Tokyu Corporation and the trustees a trust beneficiary interest agreement among quasi co-owners on November 22, 2021, for the acquisition of quasi co-ownership interest of trust beneficiary interest having a sectionally owned building as a trust property (Quasi co-ownership ratio of Tokyu
Corporation after the acquisition by TOKYU REIT is 52.5%). The trust beneficiary
Special Itemsinterest agreement among quasi co-owners requires 1, not demanding division of the trust beneficiary interest, 2, prioritizing other quasi co-owners in holding negotiations when selling all or part of the quasi co-ownership interest of the trust beneficiary interest to a third party, 3, having the buyer succeed to the position under the agreement when selling quasi co-ownership interest, 4, that the beneficiary holding the largest share of the ownership of the beneficiary interest (including quasi co-ownership interest) holds the authority to give instructions to trustees based on a trust agreement and other beneficiaries do not hold such authority unless there is a separate agreement that a party other than the representative beneficiary holds such authority, and 5, that some of matters determined by beneficiary require the consent of all beneficiaries or advance consultation.
6. Tokyu Corporation, a quasi co-owner, is responsible for resolving all of the multiple problems related to legal compliance pointed out in the periodical inspection reports on building facilities, fire protection and fire-control facilities, etc. and building assessment reports at its expense no later than the last calendar day of the fourth month from the delivery of the property.
Total Number of Tenants | 25 | ||||
Assumed Total Rental Income | ¥856 million a year | ||||
Lease Deposits and | ¥1,189 million | ||||
Guarantee Deposits | |||||
Estimated NOI | ¥558 million a year | ||||
Estimated NOI after | ¥502 million a year | ||||
Depreciation | |||||
Total Leased Area | 16,686.06 m2 | ||||
Total Rentable Area | 17,953.41 m2 | ||||
Occupancy Rate | 92.9 % | ||||
As of | As of | As of | As of | As of | |
Occupancy Rates | October 31, | October 31, | October 31, | October 31, | October 31, |
over the Last Five Years | 2017 | 2018 | 2019 | 2020 | 2021 |
100.0 % | 100.0 % | 100.0 % | 97.9 % | 92.9 % | |
(Note) The above sectional ownership ratio of the building and land ownership ratio are based on the areas recorded in the register, and the numbers are rounded to the nearest first decimal place.
*The above lease deposits, guarantee deposits, total leased area, and total rentable area are total values for the entire trust beneficiary interest of this acquisition (including leasehold held by other unit owners).
*The total number of tenants, total leased area, lease deposits/guarantee deposits, and occupancy rate are as of the end of October 2021.
- Assumed total rental income, Estimated NOI and Estimated NOI after depreciation are the estimated annual figure excluding special factors from the revenue and expenditure of the acquisition fiscal year (not the forecast figure for the current fiscal period) and are based on the following assumptions.
- Total rental income is the estimated figures of total income from the property based on an expected annual average occupancy rate (96.3%) as of the acquisition date (December 10, 2021).
- Taxes and public dues are projected to be the same amount as the fiscal 2021 assessment amount.
- Repairs and maintenance expenses are calculated based on expected figures assumed for the next one-year period.
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4. Property Appraisal Summary
(JPY in thousands) (rounded down to the nearest specified unit)
Property Name: Aoyama Oval building | Estimation | Notes | ||||
Appraisal Firm: Japan Valuers Co., Ltd. | ||||||
Effective Date of Value | November 1, 2021 | - | ||||
Type of Value | Market Value | |||||
Appraisal Value | 18,800,000 | By the Income Approach (after | ||||
consideration of the share ratio) | ||||||
Value Indicated by Income Approach | 39,600,000 | Reconciled with the value by DCF Method | ||||
and the value by Direct Capitalization Method | ||||||
Value Indicated by Direct Capitalization Method | 40,400,000 | - | ||||
(1) Operating Revenue (a.−b.) | 1,877,822 | - | ||||
a. Potential Gross Income | Assessed based on both existing rent level | |||||
(rental income, common area charges income, | 1,946,296 | |||||
and market rent level. | ||||||
utilities reimbursement, etc.) | ||||||
Assessed based on both terms of existing | ||||||
b. Vacancy Loss | 68,473 | lease agreement as well as market standard in | ||||
the subject vicinity | ||||||
(2) Operating Expenses (c.+d.+e.+f.+g.+h.+i.+j.) | 658,447 | - | ||||
c. Building Maintenance Cost | 126,000 | On actual basis | ||||
d. Utilities Expenses | 119,337 | On actual basis | ||||
Based on the annual repairs and restoration | ||||||
e. Repair Expenses | 16,501 | cost estimate sourced from the engineering | ||||
report | ||||||
f. Property Management Fee | 57,648 | Based on the fee ratio from scheduled | ||||
agreement | ||||||
g. Tenant Solicitation Expenses, etc. | 10,838 | Assessed based on assumed turnover rate | ||||
h. Property Taxes | 315,161 | On actual basis in 2021 | ||||
i. Property Insurance | 1,922 | On actual basis | ||||
j. Other Expenses | 11,036 | On actual basis | ||||
(3) Net Operating Income (NOI) ((1)−(2)) | 1,219,375 | - | ||||
(4) Investment Profits from Refundable Deposits | 12,898 | 1.0% interest rate on the deposit outstanding | ||||
Based on the annual repairs and restoration | ||||||
(5) Capital Expenditure | 60,579 | cost estimate sourced from the engineering | ||||
report | ||||||
(6) Net Cash Flow (NCF) ((3)+(4)−(5)) | 1,171,693 | - | ||||
(7) Overall Capitalization Rate | 2.90% | - | ||||
Value Indicated by DCF Method | 38,800,000 | - | ||||
Discount Rate | 2.60% | - | ||||
Terminal Capitalization Rate | 3.10% | - | ||||
Value Indicated by Cost Approach | 64,700,000 | - | ||||
Ratio of Land Value | 98.2% | - | ||||
Ratio of Building Value | 1.8% | - | ||||
The indicated value by Cost Approach looks into cost aspect of a real | ||||||
property. On the other hand, the indicated value by Income Approach is | ||||||
derived from profitability of a real property. In regard to an income- | ||||||
Reconciliation before Arriving at the Value Conclusion | producing property valuation, the utmost importance should be placed | |||||
on the value by the Income Approach. In conclusion, we have regarded | ||||||
the value by Cost Approach only as guide, and our concluded value is fully | ||||||
based on the Income Approach. The subject share ratio is then considered | ||||||
to arrive at the value conclusion. |
The above appraisal value conclusion is a value opinion as of the effective date of value, indicated by the licensed real estate appraiser in conformity with the Japanese Real Estate Appraisal Act and Real Estate Appraisal Standards. A reappraisal of the same property could result in another value if it were carried out either by a different appraiser, with different methods, or at a different time. This appraisal does not guarantee or assure, at present or in the future, any sales transactions at the concluded value.
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Tokyu REIT Inc. published this content on 22 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 November 2021 06:33:08 UTC.