For Immediate Release

Transcription

1 For Immediate Release REIT Issuer: ORIX JREIT Inc. (TSE: 8954) Yutaka Okazoe President and Executive Director Asset Management Company: ORIX Asset Management Corporation Hiroshi Nishio President and CEO Inquiries: Hajime Nakamura General Manager Corporate Planning Department TEL: ORIX JREIT Announces Acquisition of Silent Partnership Equity Interest (Godo Kaisha Kitahiroshima Property) TOKYO, June 10, 2013 We, ORIX JREIT Inc. ( OJR ) announces the decision to acquire the following silent partnership equity interest, as described below. 1. Acquisition Summary Asset to be acquired : Silent partnership equity interest investing in real estate trust beneficial interest (the Equity Interest ) Name of asset Silent partnership equity interest in Godo Kaisha Kitahiroshima : (Note 1) Property Real estate in trust (Note 2) : intervillage OH! MAGARI Acquisition price : 260 million (17.8% silent partnership equity interest ratio) Date of Contract : June 10, 2013 Date of acquisition : June 12, 2013 Seller : ORIX Real Estate Corporation Funding method : Cash on hand Payment date : June 12, 2013 (Note 1) This is a silent partnership equity interest operated by Godo Kaisha Kitahiroshima Property (the GK ). For details of the silent partnership please refer to 4. Details of Equity Interest to be Acquired (1) Outline of the Silent Partnership. (Note 2) The GK owns the abovementioned real estate trust beneficial interest. Hereafter, the trust beneficial interest owned by the GK will be referred to as the Trust Beneficial Interest and the real estate in trust will be referred to as the Property. In addition, the Trust Beneficial Interest and the Property will collectively be referred to as the Trust Beneficial Interest, etc. 1/12

2 2. Purpose of the Acquisition In order to realize the stable growth of unitholder value, OJR is advancing an external growth strategy that aims to improve both the portfolio s profitability and stability by utilizing the diversification of sectors and regions as a diversified portfolio REIT, replacement of assets and the ORIX synergy. While continuing investment primarily focused on office properties and properties in the Tokyo Metropolitan Area from the perspective of emphasizing liquidity and medium- to long-term growth, we have invested in prime non-office and other areas properties with capital raised from public offerings and such in order to construct a portfolio that has both the stability and growth potential compatible with the cyclical real estate market and that is also highly profitable. Recently, in the retail facilities transaction market, since there have been a number of acquisitions of properties associated with specialized portfolio REITs and complex-type REITs that incorporate retail facilities, it has been thought that the liquidity of these properties has been increasing and that competition in property acquisitions has been increasing as well. On the other hand, retail facilities are considered by investors that are able to assess risk and that have sufficient operational abilities to be an investment target that provide an opportunity for high revenues (yields) compared with the substantial risk due to the fact that retail facilities are an asset class that requires expertise of operation and management skills in view of the particularities of the rental market. Aiming to increase the profitability and stability of the portfolio under such understandings of the environment of the real estate market, we have decided to acquire the Equity Interest. By acquiring the Equity Interest, OJR will receive profits in the form of dividends, backed by rental income and other income from the Equity Interest (assumed dividend yield: about 14% (Note) ) (see 4. Details of Equity Interest to be Acquired (2) Outline of the Trust Beneficial Interest, etc. ). (Note) The assumed dividend yield is computed based on the total amount of assumed dividend including gain/loss, etc. on the sale of the Trust Beneficiary Interest from the silent partnership which OJR will receive if the GK sells the Trust Beneficiary Interest on March 31, 2015 at a scheduled price based on the current management plan, divided by the investment amount ( 260 million) and annualized. The assumed dividend yield that does not take into account the gain/loss, etc. on the sale of the Trust Beneficiary Interest is approximately 6%. These assumed dividend yield may be changed by a sales price/period of the Trust Beneficiary Interest, rental income and other income from the property. In addition, with the acquisition of the Equity Interest, OJR will obtain preferential negotiation rights for the future acquisition of the Trust Beneficial Interest, etc. These are only rights for preferential negotiations and OJR is not obliged to acquire the Trust Beneficial Interest, etc. The acquisition of the preferential negotiation right is deemed to enhance the potential of acquiring an excellent property and thus contributes to the external growth of OJR. Please refer to 3. Preferential Negotiation Right of the Trust Beneficial Interest, etc. below for details of such preferential negotiation right. As this is the first acquisition by OJR of a silent partnership equity interest, the deal is significant in terms of diversification of investment methods and efforts toward future external growth. OJR will continue to develop a portfolio that is backed by profitability and stability in order to continue to realize the stable growth of unitholders value in the future. (1) Location and Trade Area The Property is located on the western edge of Kitahiroshima City near the border of Sapporo City in an area near crossing Omagari Kogyo Danchi Utsukushigaoka line (Hitsujigaoka-dori) and Omagari-Saiwai-dori, which is a road connecting to the Hokkaido Expressway Kitahiroshima IC. The area is a street commercial district with large specialty stores such as an outlet mall and other stores along Hitsujigaoka-dori and National Route 36. With potential customers from a vast area including central Sapporo and the New Chitose Airport district, further attraction of customers and growth is expected to go 2/12

3 forward. (2) Special Features of Tenants The Property is a neighborhood shopping center (Note) comprised of 20 tenants including clothing and drug stores and with four core tenants: a supermarket, home electronics store, home center and furniture store. Long fixed-term lease contracts are concluded with the anchor tenants and therefore stable revenues are expected. The building has two floors above ground and ample parking space in front of the facility as well as on the rooftop. (Note) Neighborhood shopping center refers to a shopping center comprised of drug stores, home centers and other tenants with anchor tenants comprised of a supermarket, etc. targeting a small trade area of neighboring residential districts, etc. 3. Preferential Negotiation Right of the Trust Beneficial Interest, etc. An overview of the preferential negotiation rights (the Preferential Negotiation Rights ) regarding the Trust Beneficial Interest, etc., set forth in the preferential negotiation agreement to be granted to OJR (the Preferential Negotiation Agreement ), in connection with the acquisition of the Equity Interest by OJR, is as follows. Effective period of the Preferential Negotiation From June 10, 2013 to March 31, 2015 Agreement Rights to acquire the Trust Beneficial Interest, etc. (see 4. Details of Equity Interest to be Acquired (2) Outline of the Trust Beneficial Interest, etc. for details) owned by the GK (i) by January 31, 2014, OJR receives a purchase intention confirmation Outline of Preferential notice of the Trust Beneficial Interest from the GK, or (ii) between February 1, 2014 Negotiation Rights granted and March 31, 2015, OJR requests to purchase the Trust Beneficial Interest regardless to OJR under the of receiving a purchase intention confirmation notice from the GK or not, for a price Preferential Negotiation of 5,100 million or more (excluding related costs, consumption tax and local Agreement consumption tax) (however, excluding situations such as where a sale of the Trust Beneficial Interest, etc. is forced or foreclosed by its lenders (including a sale by private contract) in accordance with the GK s agreement with its lenders). Furthermore, the Preferential Negotiation Rights apply as rights only and do not oblige OJR to acquire the Trust Beneficial Interest, etc. in the future. Also, even if OJR exercises its Preferential Negotiation Rights, this does not necessarily mean that OJR will be able to acquire the Trust Beneficial Interest, etc. as it may be sold to a third party in the event that the sale is forced or foreclosed by the lenders (including a sale by private contract) or conditions, etc. are not met in negotiations. As a considerable amount of time remains until the end of the period for which OJR can execute its Preferential Negotiation Rights, OJR will carefully deliberate on the execution of its Preferential Negotiation Rights and acquisition of the Trust Beneficial Interest upon consideration of factors of the business environment surrounding OJR such as the stock market, financial market and real estate market conditions, etc. and watching the impact that the decisions will have on the overall portfolio s composition and profitability. 3/12

4 4. Details of Equity Interest to be Acquired (1) Outline of the Silent Partnership Name of operator Godo Kaisha Kitahiroshima Property Total amount of silent 1,460 million partnership equity Overview of silent partnership agreement Effective period of silent partnership agreement Overview of the silent partnership is as follows Godo Kaisha Kitahiroshima Property Real estate trust beneficial interest, etc. Non-recourse loan 3,918 million 5,378 million Silent partnership equity (Note 3) 1,460 million (Note 1) The GK has acquired the Trust Beneficial Interest from Sun Diamond TMK on April 2, Please refer to (2) Outline of the Trust Beneficial Interest and the Property, etc for details. (Note 2) The appraisal value of the Property as of May 1, 2013 is 5,736 million. Please refer to the attached Reference Materials II. Appraisal summary. (Note 3) With regard to the silent partnership equity, ORIX Real Estate Corporation contributed 260 million yen (17.8% ownership ratio) and OJR is scheduled to acquire the silent partnership equity interest. In case of the acquisition and the transfer of the silent partnership equity, the approval by the GK will be required. (Note 4) ORIX Real Estate Investment Advisors Corporation which is the asset manager of the GK is the subsidiary of ORIX Corporation, the parent company of ORIX Asset Management Corporation ( OAM ), falls under the category of related party, etc. under the Investment Trusts and Investment Corporations Act (the Investment Trust Act ). Moreover, ORIX Real Estate Investment Advisors Corporation falls under the category of related party as stipulated in the Affiliated Company Transaction Regulations, which are the in-house regulations of OAM. Computation period: Every three months of each year, from December 1 to the end of next February, from March 1 to the end of May, from June 1 to the end of August and from September 1 to the end of November. Distribution of profit and loss: The operator will distribute all of the computation period s profit, if any, to the silent partnership investors according to their contribution ratio on the last day of the computation period. Moreover, if losses arise in the computation period, such will be distributed with the amount of the loss as the maximum according to contribution ratios on the last day of the computation period. However, if the accumulated amount of loss distributed to the investors exceeds the total amount of investment, such will be the maximum and the remaining loss will be distributed to the operator. Valid through March 31, 2016 (2) Outline of the Trust Beneficial Interest, etc. Specific asset category Real estate trust beneficial interest Trustee Sumitomo Mitsui Trust Bank, Limited Term of trust agreement August 31, 2009 to March 31, 2023 Address 6-1 Omagari-Saiwai-cho, Kitahiroshima-shi, Hokkaido 4/12

5 Registered usage Registered area Retail, Machine room, Storeroom Land: 71,255.32m 2 Building: [Main building] 38,617.44m 2 (total floor area, includes 9.80 m 2 Machine room) [Annex] m 2 (total floor area, includes 4.70 m 2 Storeroom) [Main building] Steel-framed, reinforced concrete, flat roof, 2 floors with 1 Registered construction underground floor [Annex] Steel-framed, flat roof, single floor Registered completion date June 4, 2008 Type of ownership Free simple ownership Appraisal value 5,736 million Appraisal date May 1, 2013 Appraiser Public transit access Usage restrictions Architects Structural engineers General contractors Building inspection agency Main facilities and specifications Chuo Real Estate Appraisal Co., Ltd. Approx. 0.5 km from Kitahiroshima IC on the Hokkaido Expressway Approx. 9.5 km from Kitahiroshima Station on the JR Chitose Line Approx. 8.2 km from Fukuzumi Station on the Sapporo Municipal Subway Toho Line Neighborhood commercial district, Secondary-fire zone Nishimatsu Construction Co. Ltd., Sapporo Branch, First-Class Architect Office Nishimatsu Construction Co. Ltd., Sapporo Branch, First-Class Architect Office Nishimatsu Construction Co. Ltd., Sapporo Branch Japan ERI Co., Ltd. Elevator: 5 (3 for passengers and 2 for freight/passenger) Escalator: 2 Parking: Parking space for 1,533 Earthquake resistance PML 6% (Note 1) (based on Sompo Japan Nipponkoa Risk Management, Inc. report) Collateral None Special notes None No. of tenants (Note 2) 1 (as of May 31, 2013) Gross rental income (Note 3) 48 million per month (May 31, 2013) Security deposits (Note 3) 483 million Total rent space 41,674.44m 2 (as of May 31, 2013) Total rentable space 41,674.44m 2 (as of May 31, 2013) Occupancy rate 100% (May 31, 2013) Assumed Net Operating Income (NOI) 376 million annual (Note) The Net Operating Income (NOI) represents anticipated revenue/expenditure balance under stabilized occupancy, based on the terms of the lease contract, etc. at the scheduled acquisition date, but excluding extraordinary factors that may occur during the first year of acquisition. The preconditions are as below. (These figures are not what OJR expects for the current fiscal year.) 1) Occupancy rate: 99.1% 2) Taxes: Taxes are calculated on the standard tax amount for fiscal (Note 1) PML (Probable Maximum Loss) shows the ratio (%) of cost of recovering a building after being damaged to its state before the damage occurred against repurchase price, when assuming an earthquake that may occur once in 475 years in average in probability statistics (recurrence interval of 475 years). In evaluating earthquake risk of a building, risk curve that show relationship of amount of expected loss (horizontal axis) and probability for the loss to exceed the year (vertical axis) will be calculated. However, the risk curve has variability because loss evaluation comes with uncertainties in earthquake resistance performance of the building, behavior of earthquake vibration, etc. PLM above uses the risk curve with credibility level of 90%, and shows upper limit of the expected loss, not the average figure. PML is rounded to the first decimal place. 5/12

6 (Note 2) A pass through-type master lease agreement is concluded between Sumitomo Mitsui Trust Bank, Limited, the trustee, and ORIX Real Estate Corporation. (Note 3) Amounts lower than 1 million yen are rounded off. (3) Overview of the Operator of the Silent Partnership (as of June 7, 2013) Company name Godo Kaisha Kitahiroshima Property Nihombashi, Chuo-ku, Tokyo Address Nihombashi 1-chome Building Representative partner: General Incorporated Association Kitahiroshima Representative Functional Manager: Akira Sugai 1. Acquisition, management, holding and sale of real estate trust beneficial interest Primary businesses 2. Transaction, lease, holding, management, acquisition, disposal and use of real estate 3. Other businesses incidental or relating to the aforementioned items Shareholders equity 200,000 Date of establishment March 14, 2013 Relationship with OJR or its asset management company Capital relationships There is no capital relationship required for reporting between OJR and the GK. Personal relationships There is no personal relationship required for reporting between OJR or OAM and the GK. Business relationships Applicability to related parties There is no business relationship required for reporting between OJR or OAM and the GK. The GK does not fall under the definition of OJR s related party. However, ORIX Real Estate Investment Advisors Corporation (a related party of OAM as stipulated in the Investment Trust Act) to which the GK entrusts asset management, and the GK, fall under the definition of related party as stipulated in the Affiliated Company Transaction Regulations which are the in-house regulations of OAM. 5. Profile of Seller (as of June 7, 2013) Company name ORIX Real Estate Corporation ( the Company ) Address 14-5 Shiba 2-chome, Minato-ku, Tokyo Representative Representative Yoshiyuku Yamaya Development and sale of condominiums, detached houses and office Primary businesses buildings. Leasing and management of condominiums, shops, offices, etc. Shareholders equity 200 million Date of establishment March 11, 1999 Major shareholder and equity ratio ORIX Corporation 100% Net assets None Total assets None 6/12

7 Relationship with OJR or its asset management company Capital relationships Personal relationships Business relationships Applicability to related parties There is no capital relationship required for reporting between OJR and the Company. However, as the Company is a subsidiary of ORIX Corporation, the parent company of OAM, the Company falls under the definition of related parties as stipulated in the Investment Trust Act. There is no personal relationship required for reporting between OJR or OAM and the Company. During the period ending February 2013, OJR acquired a property (total acquisition price: 3,300 million) from the Company, and also during the period ending August 2013, OJR acquired three properties (total acquisition price: 28,870 million) from the Company. The Company does not fall under the definition of OJR s related party. As mentioned above, the Company falls under the definition of related parties of OAM as stipulated in the Investment Trust Act. 6. Information on Previous Ownership, etc Previous Owner Company name ORIX Real Estate Corporation Special relationships involved See 5. Profile of Seller above Background to and reason for acquisition Invested when the GK was formed Investment date April 1, 2013 Investment value 260 million None Owner before previous owner 7. Profile of Intermediary None 8. Closing Method Funding method: Acquisition using cash on hand Payment condition: 100% on delivery 9. Transaction with Related Party The Equity Interest will be acquired from ORIX Real Estate Corporation. In accordance with the Affiliated Company Transaction Regulations, the acquisition of the Equity Interest has been approved by OJR s board of directors after being examined by the Risk Management and Compliance Committee and the board of directors at OAM. For details of related parties and such please refer to 5. Profile of Seller above. 10. Acquisition Schedule June 12, 2013 (scheduled): Acquisition of equity interest in silent partnership 11. Future Outlook The impact of the acquisition of this asset on the financial results for 23 rd fiscal period (March 1, /12

8 through August 31, 2013) and the 24 th fiscal period (September 1, 2013 through February 28, 2014) is minimal. Accordingly, no change has been made to the financial forecasts from those announced in the 22 nd period financial results (September 1, 2012 through February 28, 2013). Reference Materials I. Property photo and map II. Appraisal summary III. Portfolio summary after acquisition of the silent partnership equity interest Note: 1. This is the English translation of original Japanese documents and is provided solely for information purposes. If there are any discrepancies between the translation and the Japanese original, the latter shall prevail. 2. The original Japanese version of this announcement was distributed today to the Kabuto Club, the Ministry of Land, Infrastructure, Transport and Tourism Press Club, and the Ministry of Land, Infrastructure, Transport and Tourism Construction Specialty Publication Press Club. 8/12

9 Ⅰ.Property photo and map 9/12

10 Ⅱ.Appraisal summary Appraised value (In millions of yen) Appraised value 5,736 Appraisal date May 1, 2013 Appraiser Chuo Real Estate Appraisal Co., Ltd. Valuations by method (In millions of yen) Cost Method 6,011 Income Method DCF value 5,736 Net operating income for the first fiscal year in the DCF method 312 Net income for the first fiscal year in the DCF method 308 Discount Rate (%) 6.0 Terminal Capitalization Rate (%) 6.8 DC Value 5,928 Net income in the DC method 379 Capitalization Rate (%) 6.4 Income projection (In millions of yen) (Note) (1) Gross revenue (a-b) 740 a. Effective gross revenue 742 b. Vacancy loss 1 (2) Total costs (c+d+e+f) 356 c. Management /maintenance fee (management fee, utility expenses, 270 PM fees, etc.) d. Taxes 71 e. Casualty insurance premium 2 f. Other costs 12 (3) Net revenue (1-2) 383 (4) Lump sum revenue 9 (5) Capital expenditure 14 (6) Net income (3+4-5) 379 (Note) The income projection is for a fiscal year income based on the income approach (direct capitalization approach) shown on the Appraisal Report for the Property. Long Term Projected Repairs According to the Engineering Report by Tokyo Marine & Nichido Risk Consulting Co., Ltd. the maintenance cost over the next 12 years will be 316,176 thousand. 10/12

11 III. Portfolio summary after acquisition of the silent partnership equity interest Property (Note 2) Acquisition % to (Note 1) Date Price( million) Total Acquisition Price Offices 6 Central Aoyama Suncrest Building December , Tokyo Wards Round-Cross Ichi-bancho December , Round-Cross Nishi Shinjuku December , DT Gaien December , Nihonbashi East Building December , Yoyogi Forest Building December , Round-Cross Minami Azabu December , Round-Cross Akasaka January , Round-Cross Mita January , Shiba Daimon Building January , Round-Cross Tsukiji January , ORIX Shiba 2-chome Building September , Aoyama 246 Building March , Round-Cross Shinjuku April , Seafort Square Center Building September April , ORIX Akasaka 2-chome Building June December , Round-Cross Shinjuku 5-chome April , Nihonbashi Honcho 1-chome Building March , Round-Cross Shibuya March , ORIX Suidobashi Building March , ORIX Shinagawa Building June , ORIX Real Estate Nishi Shinjuku Building March , OX Tamachi Building March , Subtotal 144, Remaining Carrot Tower December , Tokyo Wards Toyo MK Building December , Beside Kiba December , ORIX Ikebukuro Building April , Round-Cross Kamata March , KN Jiyugaoka Plaza May , ORIX Meguro Building July , Akihabara Business Center June , Subtotal 42, Other Parts of Neo City Mitaka December , the Greater Tokyo Area Round-Cross Kawasaki April , Omiya Miyacho Building March , Omiya Shimocho 1-chome Building March , Subtotal 14, Other Areas Nagoya Itochu Building September , ORIX Koraibashi Building April , Lunar Sendai June , ORIX Nagoya Nishiki Building September , ORE Sapporo Building October , ORIX Kobe Sannomiya Building September , Subtotal 39, Offices Total 241, /12

12 Logistics Facilities Retail Facilities Property (Note 2) Acquisition % to (Note 1) Date Price( million) Total Acquisition Price Other Parts of Toda Logistics Center March , the Greater Tokyo Area Ichikawa Logistics Center September , Subtotal 17, Other Areas Sakai Logistics Center North Building March , Komaki Logistics Center June , Subtotal 12, Logistics Facilities Total 30, Central Nihon Jisho Minami Aoyama Building October , Tokyo Wards CUBE Daikanyama March , ORE Yurakucho April , Subtotal 14, Other Parts of aune Kohoku March , the Greater Tokyo Area aune Makuhari March , Maruetsu Sagamino March , CROSS GARDEN KAWASAKI March , Tecc Land Totsuka (Land) April , Subtotal 28, Other Areas Kobe Momoyamadai Shopping Center (Land) March , Okayama Kume Retail Facility January , Home Center Musashi Sendai Izumi (Land) January , Aune Sapporo Ekimae June , Morioka Minami Shopping Center Sansa July , The Kitahama Plaza April , Subtotal 16, Retail Facilities Total 60, Apartment 6 Central Park Axis Nishi Azabu Stage December , We Will Hatchobori June , Shibaura Island Air Tower July , Belle Face Togoshi Statio May , Belle Face Meguro October , Subtotal 15, Remaining Belle Face Kamata June , Tokyo Wards Belle Face Hongo Yumicho June , Belle Face Mishuku March , Subtotal 8, Other Areas Belle Face Osaka Shinmachi June , Belle Face Amagasaki June , Belle Face Miyamachi April , Belle Face Bansui-street April Subtotal 9, Residential Total 33, Others Other Parts of Cross Gate January , the Greater Tokyo Area GOOD TIME LIVING Shin-urayasu September , Subtotal 16, Others Total 16, Grand Total 73 properties 383, Silent Partnership Other Areas Silent Partnership Equity Intrest operated by the * June 12, 2013(scheduled) 260 Godo Kaisha Kitahiroshima Property Silent Partnership Total *Newly acquisition (Note1) Acquisition price above refers to sale price (fractions rounded down) specified in the sale and purchase contract. Consumption taxes are not included in the price. (Note2) Percentage of total acquisition cost refers to the acquisition price of each property under management as a proportion of the total acquisition price, and it is rounded to two decimal places. Totals for the Percentage of total acquisition cost may not tally as a result of this rounding. 12/12