This documentation is the English translation of the Japanese announcement on May 20, 2024
Additional Documentation for Press Release "Notice Concerning the Issuance of New Investment Units and Secondary Offering of Investment Units"
May 20, 2024
(Note) SHINWA ESAKA BUILDING: Entrance
Disclaimer
This document arranges in order details released in the Notice Concerning Issuance of New Investment Units and Secondary Offering of Investment Units, and the Notice Concerning Acquisition of Domestic Assets (Kitahama 1-Chome Heiwa Building and Kita Nijo Building) dated May 20, 2024, and additional information incidental thereto. Please refer to the Notice Concerning Issuance of New Investment Units and Secondary Offering of Investment Units dated May 20, 2024 for the details of the offerings.
This document is not a disclosure document or a report on asset management based on the Financial Instruments and Exchange Act, the Act on Investment Trusts and Investment Corporations, and Government Ordinances, Cabinet Office Ordinances and regulations incidental thereto. This document is aimed at providing information. It was not prepared as a solicitation for investment. The Investment Corporation requests that investors make investments at their own discretion and on their own responsibility after reading, without fail, the prospectus for the issuance of new investment units and the offerings of investment units, and amendments thereto (if any amendment is made) prepared by the Investment Corporation. The Investment Corporation does not aim to offer specific products, solicit them, or recommend their purchase or sale through any information at its official website where this document is published (the "Website"), or any information published thereat or at sites linked to materials published thereat.
The details of this document include the Investment Corporation's strategies, targets, forecasts, other future outlooks related to its performance, and the descriptions of estimates associated with those matters. Those forward-looking statements are based on certain suppositions, assumptions and assessments the Investment Corporation and HEIWA REAL ESTATE Asset Management Co., Ltd. (the "Asset Management Company"), the company managing assets for the Investment Corporation, made from information available at the time when this document was prepared. There are risks and uncertainties inherent in the statements, which along with suppositions and other factors may have an impact. Therefore, the strategies, targets and forecasts contained in this document do not guarantee the performance, operating results, financial position and the like of the Investment Corporation in the future. Actual results may differ materially from the performance, operating results, financial position and the like in the future indicated, explicitly or implicitly, by the presence of those statements associated with the forecasts and the like. The Investment Corporation does not guarantee or promise the achievement of the forward- looking statements, either. Please refer to the Notes stated below for suppositions and assumptions for the forward-looking statements.
This document contains charts, data, etc. prepared by the Asset Management Company based on information provided to the Investment Corporation and the Asset Management Company or published by third parties, and also contains present analyses, judgments, and other views of the Investment Corporation and the Asset Management Company. It is possible that different views may exist on these matters, and that the Investment Corporation and the Asset Manager may change their views in the future.
The Investment Corporation makes the content of this document doubly sure. However, the Investment Corporation does not guarantee the accuracy, reliability, validity and fairness of its content. Please note that the content may be subject to revision or cancellation without notice.
The Investment Corporation prohibits the duplication or other unauthorized use of the content of this document without prior consent.
Real estate investment trust issuer: HEIWA REAL ESTATE REIT, Inc. (securities code: 8966) Asset management company: HEIWA REAL ESTATE Asset Management Co., Ltd. (financial instruments business operator No. 316 (Financial Instruments Business) registered with the Director General of the Kanto Local Finance Bureau, and a member of the Investment Trusts Association, Japan)
Heiwa Real Estate REIT, Inc. makes no assurance or warranty with respect to the completeness or accuracy of this English translation. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail. For complete and accurate information, please refer to the Japanese original.
1
Intentionally Blank
2
Offering highlights
Steady Growth & Sustainable Profit
1✓ Completion of new acquisitions of assets that will provide the basis for future internal growth
- Secured growth funds to finance future internal growth through the acquisition of carefully selected properties with a high rent gap
- Significantly improved quality of portfolio through strategic asset replacement, internal growth, etc.
- Aiming to continue flexible property acquisitions by once again securing acquisition capacity through the Offering
Pursuit of internal growth of existing properties through added value renovation, aiming for
- achievement of NEXT VISION II
- Aiming to further accelerate rent increases and maximize the value of real estate through proactive value-enhancing construction
- Realized unrealized gain through continual property disposition (planning to record gain on sales for 15 consecutive fiscal periods), strengthening unitholder returns while at the same time controlling internal reserves
- Aiming for sustainable unitholder returns and dividend growth through utilization of gain on sales and internal reserves
- Potential attractiveness as a target for investment through the new NISA (Nippon Individual Savings Account: Japanese ISA)
- Delivered distribution increases for 11 consecutive years since 2012 and aiming to maintain sustainable distribution growth going forward by drawing on abundant internal reserves
- Yield is attractive compared with other J-REITs and investment products, reflecting ongoing implementation of diverse corporate actions
3
Offering summary
Summary of Assets Acquired
Number of Properties | Total Acquisition Price | Total Appraisal Value | Average NOI Yield | Average Occupancy Rate | |||
(planned) | 99.5% | ||||||
5 properties | 13.1 billion yen | 4.9% | |||||
11.5 billion yen | |||||||
(as of March 31, 2024) | |||||||
Office | Residence | ||||||
Asset to be Acquired | Asset to be Acquired | Asset Acquired in the 45th FP | Asset Acquired in the 45th FP | ||||
Asset Management | Warehousing | Sponsor | Asset Management | ||||
Company | Company |
Warehousing
Kita Nijo Building | HF HIKIFUNE RESIDENCE | |
Asset to be Acquired
100% Ownership of the
Entire Building
Sponsor
Kitahama 1-Chome Heiwa
SHINWA ESAKA BUILDINGBuildingHF KITASENJU RESIDENCE
(additional acquisition:25%)
Assets
Disposed
HF NIHONBASHI
HF NAKANOSHIMA
HAMACHO
RESIDENCE
BUILDING
Strategy for Asset Replacement
Key factors considered in the
selection of assets to be disposed by the Investment Corporation
- Assets with inferior future profitability relative to the portfolio
- Old small residence
- Assets that encompass a variety of potential risks
- Assets with high potential for unrealized gains
Continuous external growth through asset replacement
- Improvement of portfolio quality through continuous asset replacement
- Return profits from the gain on sales and control of internal reserve balance, while promoting the continuous acquisition of assets using the funds from the disposition
The End of the 44th FP | Assets Acquired | Assets Disposed | After the Transaction | ||||||
126 properties | 5 properties | 2 properties | 128 properties | ||||||
Number of Properties | |||||||||
(including one additional acquisition of | |||||||||
trust beneficiary rights) | |||||||||
Total Acquisition Price (planned) | 228.4 billion yen | 11.5 billion yen | 2.3 billion yen | 237.6 billion yen | |||||
51.2% / 48.8% | 66.3% / 33.7% | 80.7% / 19.3% | 51.6% / 48.4% | ||||||
Office / Residence Ratio | |||||||||
3.8% / 2.9% | |||||||||
NOI Yield / NOI Yield After Depreciation | 5.1% / 4.1% | 4.9% / 4.2% | 5.0% / 4.1% | ||||||
(Ratio of NOI to the scheduled disposition price) | |||||||||
LTV / Appraisal-basedLTV | 46.7% / 40.3% | 45.6% / 39.4% | |||||||
NAV per unit | 149,798 yen | 151,087 yen | |||||||
4
1 Completion of new acquisitions of assets that will provide the basis for future internal growth
SHINWA ESAKA BUILDING
5
Expanded internal growth potential of office by leveraging rent gaps through new acquisitions
- Acquired properties with a high rent gap to expand the scope for future internal growth
- Achieved early rent increases after acquisition for several properties
Track record of rent increases at office properties acquired since the 40th fiscal period (November 2021)
Rent gap of assets to be acquired
Properties
Month of increase (planned) Percentage of rent increase
Properties |
Month of increase (planned) | Percentage of rent increase |
Asset to be
Heiwa | Kitahama |
Building | -Chome |
1 |
March 2027 | Rent revision 48 tsubo | 6.3% |
March 2025 | Rent revision 48 tsubo | 6.7% |
July 2024 | Rent revision 48 tsubo | 5.6% |
March 2024 | Rent revision 48 tsubo | 6.2% |
October 2023 | Rent revision 30 tsubo | 3.4% |
(Right | IWAMOTOCHO TWINBUILDING |
) | |
October 2023 | Rent revision | 94 tsubo | 8.1% |
February 2023 | Rent revision | 94 tsubo | 3.6% |
acquired
Rent gap ratio
-53.7%
Heiwa Real Estate
Kitahama Building
SAKAE CENTER BUILDING
Shinsaibashi
FRONT
Building
September 2023 | Rent revision 48 tsubo | 4.4% |
April 2024 | Rent revision 48 tsubo | 3.3% |
October 2023 | Rent revision 48 tsubo | 14.3% |
August 2023 | Tenant replacement 25 tsubo | 28.6% |
August 2023 | Rent revision 23 tsubo | 6.7% |
December 2025 | Rent revision 40 tsubo | 9.1% |
December 2024 | Rent revision 40 tsubo | 10.0% |
July 2024 | Rent revision 70 tsubo | 4.3% |
May 2024 | Tenant replacement 19 tsubo | 13.6% |
March 2024 | Rent revision 63 tsubo | 9.1% |
March 2024 | Rent revision 127 tsubo | 4.5% |
February 2024 | Tenant replacement 42 tsubo | 18.2% |
December 2023 | Rent revision 16 tsubo | 5.0% |
May 2023 | Rent revision 84 tsubo | 9.1% |
April 2023 | Rent revision 70 tsubo | 4.5% |
April 2023 | Rent revision 42 tsubo | 4.5% |
March 2023 | Rent revision 48 tsubo | 10.0% |
September 2023 | Rent revision 74 tsubo | 6.7% |
September 2023 | Rent revision 32 tsubo | 6.7% |
September 2023 | Rent revision 40 tsubo | 5.7% |
BUILDING (Left | IWAMOTOCHO TWIN SAKAE |
) | |
Faret East Building | |
HF ESAKA BUILDING | |
OSAKI CN BUILDING |
January 2024 | Rent revision | 19 tsubo | 12.7% |
January 2024 | Rent revision | 19 tsubo | 9.1% |
December 2023 | Rent revision | 19 tsubo | 11.3% |
November 2023 | Rent revision | 19 tsubo | 6.5% |
October 2023 | Tenant replacement | 19 tsubo | 71.2% |
April 2024 | Rent revision | 46 tsubo | 1.9% |
April 2023 | Tenant replacement | 92 tsubo | 13.4% |
April 2024 | Rent revision | 84 tsubo | 10.0% |
April 2024 | Rent revision | 86 tsubo | 9.1% |
April 2024 | Rent revision | 21 tsubo | 9.1% |
April 2024 | Rent revision | 475 tsubo | 8.3% |
April 2023 | Rent revision | 53 tsubo | 22.2% |
April 2023 | Tenant replacement | 58 tsubo | 20.0% |
November 2022 | Tenant replacement | 112 tsubo | 5.0% |
June 2022 | Rent revision | 237 tsubo | 11.1% |
June 2022 | Rent revision | 114 tsubo | 11.1% |
January 2022 | Tenant replacement | 125 tsubo | 16.2% |
(As of the end of March
2024)
SHINWA ESAKA
BUILDING
-21.5%
(As of the end of March
2024)
Kitahama 1-Chome
Heiwa Building
(Addtionnal acquisition: 25%)
-16.7%
(As of the end of March
2024)
Kita Nijo Building
Achieved early rent increases after acquisition for several properties
(Note) Cases of rent reduction on tenant replacement were as follows: 2 cases (40 tsubo and 21 tsubo) at SAKAE CENTER BUILDING, 2 cases (94 tsubo and 32 tsubo) at IWAMOTOCHO TWIN BUILDING, and 1 case (19 tsubo) at IWAMOTOCHO TWIN SAKAE BUILDING.
6
Actively revised rent upward and maintained high occupancy (occupancy rate (Note) of 98.3% for offices and 98.0% for residences)
- The rent gap ratio for office buildings in the portfolio increased due to a limited decline in market rents and acquisition of properties with high rent gaps
- The rent gap ratio for residences has been -2.7% since the 45th fiscal period (contracted as of March 31, 2024), increasing compared to the end of the previous period (November 30, 2024)
Office
Residence
Rent revisions
Contracted as of March
(thousand yen) | 31, 2024 | ||||
20,000 | (Data for April and May | ||||
2024 is not reflected) | |||||
8,964 | 5,107 | ||||
5,013 | (4.8%) | ||||
10,000 | (2.9%) | ||||
(5.6%) | 13,967 | ||||
(5.5%) |
0
(thousand yen) |
20,000 |
10,000 |
2,085 |
(0.2%) |
0 |
12,094 (1.2%)
2,281
(0.3%)
13,437 (1.5%)
Contracted as of March
31, 2024
(Data for April and May 2024 is not reflected)
10,963
(1.6%)
-10,000 | -23,401 | -4,822 | ||||||
(25.0%) | ||||||||
-20,000 | (-1.9%) | |||||||
Rent increase on tenant replacement Rent increase on lease renewal Rent reduction on tenant replacement
Rent reduction on lease renewal Net rent fluctuation (%)
-4,148 | |
-10,000 | (-0.5%) |
Rent increase on tenant replacement Rent increase on lease renewal
Rent reduction on tenant replacement
Rent reduction on lease renewal Net rent fluctuation (%)
-30,000
40th FP | 41st FP | 42nd FP | 43rd FP | 44th FP | 45th FP |
Nov. 2021 | May 2022 | Nov. 2022 | May 2023 | Nov. 2023 | After 44th FP |
-20,000 | |
40th FP | 41st FP |
Nov. 2021 | May 2022 |
42nd FP | 43rd FP | 44th FP | 45th FP |
Nov. 2022 | May 2023 | Nov. 2023 | After 44th FP |
Rent gap ratio
(million yen) | (million yen) |
400 | Total contracted rent above market rent (left axis) | ) | 0% | 150 | ||||||||||||
Total contracted rent below market rent (left axis) | ) | |||||||||||||||
300 | Rent gap ratio (right axis) | |||||||||||||||
100 | ||||||||||||||||
200 | -2% | 45 | ||||||||||||||
83 | 88 | 118 | 118 | 50 | 34 | |||||||||||
100 | 64 | 68 | ||||||||||||||
0 | -4% | 0 | |||||||
-100 | -4.5% | -4.4% | -50 | -0.9% | -0.4% | ||||
-4.7% | -4.9% | ||||||||
-4.9% | |||||||||
-200 | -6% | -62 | -59 | ||||||
-194 | -208 | -222 | -226 | -100 | |||||
-300 | -6.4% | ||||||||
-279 | |||||||||
-400 | -336 | -8% | -150 | ||||||
40th FP | 41st FP | 42nd FP | 43rd FP | 44th FP | 45th FP | 40th FP | 41st FP | ||
Nov. 2021 | May 2022 | Nov. 2022 | May 2023 | Nov. 2023 | After 44th FP | Nov. 2021 | May 2022 |
Total contracted rent above market rent (left axis) | 6% | |||
Total contracted rent below market rent (left axis) | ||||
Rent gap ratio (right axis) | ||||
71 | 4% | |||
38 | 34 | 2% | ||
16 | ||||
0.4% | 0% | |||
-1.1% | -1.4% | -2% | ||
-57 | ||||
-76 | -83 | -2.7% | -4% | |
-109 | ||||
-6% | ||||
42nd FP | 43rd FP | 44th FP | 45th FP | |
Nov. 2022 | May 2023 | Nov. 2023 | After 44th FP |
(Note) Occupancy rates are as of March 31, 2024.
7
Significantly improved quality of portfolio through strategic asset replacement, internal growth, etc.
Performance in the 19th FP (after merger with JSR, 31 May 2011) | Performance after the Transaction | |||
NOI (million yen) : | 3,164 | |||||
NOI Yield : | 4.6% | |||||
Unrealized Gain/Loss: | - 8.1% | |||||
120% | ||||||
110% | ||||||
Office | :22 properties | |||||
100% | ||||||
Residence :64 properties | ||||||
90% | ||||||
Hotel | :4 properties | |||||
Unrealized | 80% | Reconstruction of portfolio | ||||
60% | and active portfolio replacement | |||||
70% | Utilization of sponsor pipeline, | |||||
continuous property acquisition | ||||||
Gain/Loss | 50% | Improved earning power | ||||
40% | Rise of occupancy rate | |||||
30% | Upward rent revisions | |||||
Cost reductions | ||||||
20% | Improvement of real estate market conditions | |||||
10% | ||||||
Decreased Cap Rate | ||||||
0% | ||||||
Improved appraisal value | ||||||
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
-10%
-20%
-30%
-40%
NOI Yield
Unrealized Gain/Loss
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%
NOI (million yen) : | 5,791 |
NOI Yield : | 5.0% |
Unrealized Gain/Loss: | +25.3% |
Office :44 properties
Residence :84 properties
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
NOI Yield
8
Overview of the assets acquired ① - Office
SHINWA ESAKA BUILDING
Other area
Asset Management Company network
- An office building that is one minute walk from Esaka Station on the Osaka Metro Midosuji Line, has a high rent gap ratio, and boasts an advantageous size in the area
Sumitomo Mitsui Bank
Esaka Branch
HANDS
Esaka Store
Mizuho Bank
Esaka Branch
MUFG Bank Esaka Branch
Acquisition date | June 14, 2024 |
Acquisition price | 5,001 million yen |
Appraisal value | 5,630 million yen |
Location | Esakacho, Suita-city, Osaka |
Access | 1-minute walk from Esaka Station on the Osaka Metro |
Midosuji Line and Kita-Osaka Kyuko Line Nanboku Line | |
Total floor space | 9,979.52㎡ |
Occupancy rates | 99.0% (as of the end of March 2024) |
Construction completion date | January 12, 1990 |
NOI yield /NOI yield after depreciation | 5.4% / 4.9% |
- An office property close to the nearest station, a one-minute walk from Esaka Station on the Osaka Metro Midosuji Line and Kita-Osaka Kyuko Line Nanboku Line, and offering good access to main business areas and commercial districts in Osaka City.
- Total floor space is approximately 3,000 tsubo, and the leasable area on the standard floor is approximately 270 tsubo, which is an advantageous size in the area where the property is located. Also highly appealing to tenants who use commercial vehicles as it has a large parking lot that can accommodate 65 cars (62 cars in mechanical parking, 2 cars in flatbed parking, and 1 visitor car).
- The property underwent renovation work of air-conditioning equipment and renewal work on the first floor entrance, etc. in 2020 and exterior wall repair work in 2023, and the rent gap ratio as of March 31, 2024 was -53.7%, suggesting a potential increase in rent income in the future.
Average vacancy rate/Average rent index in Esaka area since January 2020
Average vacancy rate (%) | Average rent index | ||
6% | (left axis) | (right axis) | 112% |
5% | 108% | ||
4% | 104% | ||
3% | 100% | ||
2% | 96% | ||
1% | 92% | ||
0% | 0% | ||
January 2020 | January 2021 January 2022 | January 2023 | January 2024 |
(Note) The average rent index is index with average rent in Esaka area in January 2020 set as 100%.
9
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
HEIWA Real Estate REIT Inc. published this content on 04 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 June 2024 05:06:09 UTC.