Japan Retail Fund Investment Corporation (Tokyo Stock Exchange Company Code: 8953)
News Release - January 26, 2017
Notice Concerning Disposition of Trust Beneficiary Right in Ito-Yokado Kamifukuoka-higashiMitsubishi Corp.-UBS Realty Inc. (the "Asset Manager"), the asset manager of Japan Retail Fund Investment Corporation ("JRF"), determined today to dispose of the trust beneficiary right in Ito-Yokado Kamifukuoka-higashi (the "Property") as outlined below.
Summary of disposition
1) Property name
Ito-Yokado Kamifukuoka-higashi
2) Type of asset
Trust beneficiary right in real estate
3) Disposition price
6,081 million yen
4) Book value (Note)
6,026 million yen
5) Difference between disposition price and book value (Note)
55 million yen
6) Purchaser
Haseko Corporation
7) Completion date of contract
January 31, 2017 (scheduled)
8) Disposition date
March 31, 2017 (scheduled)
(Note) "Book value" refers to the estimated figures as of the end of the fiscal period ended August 2016 (the 29th period).
Reason for disposition
Highlights
- Complete the disposition of all properties that require drastic measures in order to maintain tenant continuity and substitutability as a result of the increasingly competitive environment.
- Achieve stabilization of distributions and profit maximization by disposition of suburban-type assets with future uncertainties, leveraging the current favorable real estate market condition.
-
Replace properties in order to further optimize our portfolio.
Since JRF acquired the Property, the surrounding environment has become competitive and is expected to further intensify due to a competing facility planned to open diagonally across from the Property, which will possibly cause the Property's profitability to decline in the future. The Property is also financially constrained with its NOI yield after depreciation being 3.4%, which is below JRF's portfolio average NOI yield after depreciation of 3.7% and an unrealized loss. Under these circumstances, JRF has determined the Property is an asset that requires drastic measures to be taken. Recently, JRF has reached the decision that the best measure is to dispose of the Property for a price higher than its book value at the optimal timing while the real estate market conditions are favorable.
JRF, through its portfolio management, seeks to optimize the composition of its assets in line with the changes in Japan's demographics, consumption structure and behavior, and aims to increase the unitholder value by enhancing the profitability and stability of its portfolio. Under this policy, JRF is implementing its strategies of "further increase in asset size," "property replacement" and "enhancement of existing properties' value" as a measure of further growth.
This disposition will be implemented as part of the "property replacement" initiative aimed at optimizing the portfolio through the acquisition of primarily urban-type prime properties (the "Property Replacement"). The Property was determined to be an asset that requires drastic measures of suburban-type assets with risks from the viewpoint of tenant continuity and substitutability, as disclosed in "Supplemental Material on
a Series of Press Releases" dated August 2, 2016 and "The 29th Period Analyst Meeting Material (March 1, 2016 - August 31, 2016)." By the decision to dispose of the Property, JRF will complete the disposal of all properties that require drastic measures. Also that the percentage of specific tenants and GMS-type assets will decline as a result this Property Replacement and other property replacement initiatives implemented in the past.
Part of the proceeds from the disposition of the Property will be used to fund the acquisition of G-Bldg. Tenjin Nishi-dori 01, as announced in the "Notice Concerning Acquisition of Trust Beneficiary Interest in G-Bldg. Tenjin Nishi-dori 01" as of January 23, 2017 (acquisition price of 4,850 million yen and NOI yield after depreciation of 3.7%). The remaining proceeds will be used primarily to fund the acquisition of urban-type prime properties, which is part of the property replacement initiative aimed at increasing the unitholder value.
Portfolio analysis of 39 suburban properties(Note) (primarily the suburban properties leased to a single tenant)
Property with lowerNOI yield after depreciation than the portfolio average
Property with significantly higherNOI yield after depreciation than the portfolio average
Consider drastic measures
Consider reducing risks through asset replacement (meaningful realization of gains, etc.) and execution of longer‐term contracts
Eight suburban properties disposed after October 2015 (AEON MALL Yachiyo Midorigaoka, AEON Nishi-Otsu, AEON Ueda, AEON Omiya, AEON MALL Kashiihama,
Kishiwada Can Can Bayside Mall, AEON MALL Higashiura, Neyagawa(Land with leasehold))
Properties to re‐consider the
ownership and necessary means
A drastic measure needs to be considered
Properties with
Ito-Yokado economic strengths
Kamifukuoka-higashi (yield, unrealized gains)
Size of circles represents each acquisition price.
(Note) "39 suburban properties" refer to 30 suburban commercial properties (other than large-sized shopping malls) leased to a single tenant, held by JRF as of today, 8 properties disposed since October 2015 and the Property.
Portfolio development
After completion of
Property ReplacementUrban
Increase in % share of urban properties(based on the appraisal value)
23.9% Urban
45.1%
Suburban
76.1%
Suburban
54.9%
Decrease in % share of major tenants and GMS type (Note1)(based on annual rent)
Others
50.2%
AEONML
40.7%
(Note2)
9.1%
GMS type
14.7%
Others
68.5%
AEONML GMS type
24.4% 8.2%
7.1% GMS type
5.0%
Ito-YokadoML (Note3)
GMS type
6.8%
Ito-YokadoML
(Note 1) "GMS type" in the chart above refers to a shopping center that has a GMS as the anchor tenant in addition to other specialty store tenants. GMS stands for General Merchandise Stores, which are large-scale supermarkets that sell a wide variety of daily-needs products.
(Note 2) "AEON ML" in the chart above refers to the total annual rent of AEON Retail, AEON MALL, AEON Kyushu, AEON Ryukyu and AEON TOWN, which are master-lease tenants, expressed as a percentage of the total annual rent of all of the properties in our portfolio.
(Note 3) "Ito-Yokado ML" in the chart above refers to the total annual rent of Ito-Yokado, which is a master-lease tenant, expressed as a
percentage of the total annual rent of all of the properties in our portfolio.
Future outlook
The impact of the disposition of the Property on our forecasts for the fiscal periods ending February 2017 and August 2017 is minimal. As a result, the forecasts will not be revised.
Descriptions of the Property
Property name
Ito-Yokado Kamifukuoka-higashi
Type of asset
Trust beneficiary right in real estate
Trust beneficiary
Sumitomo Mitsui Trust Bank, Limited
Trust period
September 30, 2019
Use
Department stores
Location (address)
1-30 Ohara 2-chome, Fujimino-shi, Saitama
Land
Area
40,280.18 m2 (Note1)
Type of possession
Ownership/surface rights
(Note 1)
Zoning
Type 2 residential zone
Building
Structure/stories
Three floors above ground, steel construction with flat roof
Total floor area
26,951.11 m2
Type of possession
Ownership
Completion date
August 24, 1999
Appraisal value
5,850 million yen (as of August 31,2016)
Appraiser
Japan Real Estate Institute
Tenant summary (End of August 2016)
Number of tenant(s)
1 (Ito-Yokado)
Annual rent
Not disclosed (Note 2)
Tenant leasehold/security deposit
Not disclosed (Note 2)
Total leased area
28,316.18 m2
Total leasable area
28,316.18 m2
Occupancy rate (based on leased area)
End of August 2014
End of February 2015
End of August 2015
End of February 2016
End of August 2016
100.0%
100.0%
100.0%
100.0%
100.0%
Collateral conditions
A mortgage is assigned to the land and the building in order to secure the obligation to refund the tenant leasehold and security deposit to Ito-Yokado Co., Ltd., but the mortgage is not registered.
Special notes
Part of the land (approximately 65m2) is included in the city planning road, and thus, is subject to building restrictions under the City Planning Act. The building is built assuming such building restrictions.
(Note 1) The surface right for part of the land facing an arterial road (total area of 98.81m2) is included in the trust assets. (Note 2) Not disclosed as the purchaser has not agreed to the disclosure.
・"Location" represents the address of a property or the registered address of the building.
・"Land area", "Structure/stories", "Total floor area" and "Completion date" are based on descriptions in registry books.
・"Zoning" represents the classification of land by its use, stipulated in Section 1-1, Article 8 of the City Planning Act.
Overview of Purchaser
Name
Haseko Corporation
Location
Not disclosed as the purchaser has not agreed to the disclosure
Title & name of representative
Line of business
Capital
Date established
Net assets
Total assets
Major shareholder and shareholding ratio
Relationship with JRF / the Asset Manager
Capital relationships
Neither JRF nor the Asset Manager has any capital relationships to note with the company. In addition, there are no capital relationships to note between interested parties and affiliated companies of JRF or the Asset Manager and those of the company.
Personal relationships
Neither JRF nor the Asset Manager has any personal relationships to note with the company.
Business relationships
Neither JRF nor the Asset Manager has any noteworthy business relationships with the company.
Related parties
The company does not fall under the category of a related party of JRF or the Asset Manager. In addition, none of the related parties or affiliated companies of the company fall under the category of related parties of JRF or the Asset Manager.
Japan Retail Fund Investment Corporation published this content on 26 January 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 26 January 2017 09:15:08 UTC.
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