June 28, 2024
For Immediate Release
Real Estate Investment Trust Securities Issuer:
Advance Residence Investment Corporation
(Securities Code:3269)
1-105Kanda-Jinbocho,Chiyoda-ku, Tokyo
Representative: Wataru Higuchi, Executive Director
Asset Management Company:
ITOCHU REIT Management Co., Ltd.
Representative: Junichi Shoji, Representative Director,
President & CEO
Inquiries: | Isao Kudo, Executive Officer |
(TEL. +81-3-6821-5483) |
Notice Concerning Acquisition of Real Estate Trust Beneficiary Interest in Japan
(RESIDIA Kunitachi)
ITOCHU REIT Management Co., Ltd. (IRM), the asset management company to which Advance Residence Investment Corporation (ADR) entrusts the management of its assets, announced its decision today to have ADR acquire an asset located in Japan (hereafter, the "Acquisition") as detailed below as part of ADR`s growth strategy. In addition, the seller of the Acquisition falls under the category of an interested party, etc. as defined in the Investment Trust and Investment Corporations Act (Act No.198 of 1951; as amended, the "Investment Trusts Act"), and also falls under the category of an interested party under the internal rules of IRM, and therefore, IRM has obtained the prior consent of ADR based on the approval of its Board of Directors.
1. Summary of the Acquisition
Property Name | RESIDIA Kunitachi |
(Type of asset) | (Beneficiary Interests in Trust) |
Acquisition Price (Note 1) | 1,260 million yen (93.3%) |
(Price / Appraisal ratio) | |
Appraisal Value (Note 2) | 1,350 million yen |
NOI Yield (Note 3) | 4.3% |
Yield after Depreciation (Note 4) | 3.5% |
Building Age (Note 5) | 6.8years |
Seller | ITOCHU Corporation |
Broker Availability | None |
Scheduled Contract Date | June 28, 2024 |
December 4, 2024 | |
Scheduled Acquisition Date | or |
a date to be separately agreed upon with the seller | |
Acquisition Financing | Borrowings and cash on hand |
(Payment Method) | (Lump-sum payment on delivery) |
(Note 1) "Acquisition Price" refers to the purchase price written in the beneficiary transfer agreements for the asset-to-be-acquired and does not include various expenses needed for the acquisition such as taxes and public dues.
(Note 2) "Appraisal Value" of the asset-to-be-acquired is as of May 31, 2024.
(Note 3) "NOI Yield" is calculated as follows: annualized NOI written in the appraisal document at the time of the acquisition of the asset-to-be acquired and calculated using direct capitalization method / acquisition price x 100. The calculated yield is rounded at the second decimal point.
(Note 4) "Yield after Deprecation" is calculated as follows: (annualized NOI written in the appraisal document at the time of the acquisition of the asset-to-be-acquired and calculated using direct capitalization method - annual depreciation cost) / acquisition price x 100. The calculated yield is rounded at the second decimal point. As in the case with the existing portfolio of ADR, the depreciation cost of the assets-to-be-acquired is calculated by ADR, using the straight-line method under certain assumptions and estimated at 10,119 thousand yen a year.
(Note 5) "Building Age" is the age of the building as of the date of this document and is rounded at the second decimal point.
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2. Reason for the Acquisition
IRM decided on the following acquisition pursuant to the target and policy of asset management as stipulated in the Articles of Incorporation of ADR, for steady increase in asset size and diversification and enhancement of the portfolio. The decision to acquire this property was based on an evaluation of Features of the Property, etc., as stated in "3. Summary of the Asset-To-Be-Acquired".
In the real estate trading market, the supply of new, high-quality rental housing in good locations is limited, and the trading prices of properties in central metropolitan areas, where stable rental demand can be expected, continue to remain high, creating a difficult acquisition environment.
In this environment, ADR has decided to acquire the property developed by IRM's sponsors, ITOCHU Corporation. The Building Age of the Asset-To-Be-Acquired is 6.8 years, which is much lower than the average Building Age of the entire portfolio of 17.0 years (Note6) as of the fiscal period ended January 31, 2024.
(Note 6) The Average Building Age for the entire portfolio is the weighted average Building Age of the properties in the portfolio, weighted by Acquisition Price and rounded to the second decimal place.
3. Summary of the Asset-To-Be-Acquired
Property Name | RESIDIA Kunitachi | Property Number | S-037 | ||||||||
Type of asset | Beneficiary Interests in Trust | ||||||||||
Trustee | Sumitomo Mitsui Trust Bank, Limited (planned) | ||||||||||
Trust Contract Period | From December 4, 2024 to December 31, 2034 (planned) | ||||||||||
Address | 1-7-10 Higashi, Kunitachi City, Tokyo | ||||||||||
Type of Ownership | Ownership | Zoning | Commercial district | ||||||||
Land | |||||||||||
Land Area | 224.79 ㎡ | FAR / Building Coverage | 600%/80%、500%/80% | ||||||||
Ratio | |||||||||||
Structure / Floors | Reinforced concrete structure with a flat-topped roof; 12 stories | ||||||||||
Type of Ownership | Ownership | Use | Apartment, store | ||||||||
Total Floor Space | 1,610.82 ㎡ | Construction Completion | September 26, 2017 | ||||||||
Date | |||||||||||
Building | Building Designer | GODA KOUMUTEN CO., Ltd. First-class Architect's Office | |||||||||
Structural Engineer | CROSS Factory Co., First-class Architect's Office, | ||||||||||
Construction | GODA KOUMUTEN CO., Ltd. Tokyo Head Office | ||||||||||
Contractor | |||||||||||
Building Certification | Good Eyes Building Inspection Organization, Inc. | ||||||||||
Agency | |||||||||||
Building Inspection | Good Eyes Building Inspection Organization, Inc. | ||||||||||
Agency | |||||||||||
Collateral | None | ||||||||||
Appraisal value | 1,350,000 thousand yen | Appraisal date | as of May 31, 2024 | ||||||||
Appraiser | Japan Real Estate Institute | ||||||||||
Property Management Company | ITOCHU Urban Community Co., Ltd.(planned) | ||||||||||
Master Lessee | ITOCHU Urban Community Co., Ltd. | Master Lease type | Pass-through | ||||||||
(planned) | |||||||||||
Lease Conditions | |||||||||||
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Total Tenants | 1 | Point in Time | As of May 31, 2024 | |||||||||||||||||||
Leasable Units | 54 | |||||||||||||||||||||
Leased Units | 52 | |||||||||||||||||||||
Leasable Floor Area | 1,230.92 ㎡ | Occupancy Rate (based | 96.6% | |||||||||||||||||||
Leased Area | 1,188.48 ㎡ | on floor area) | ||||||||||||||||||||
Total Monthly Rent | 5,623 thousand yen | |||||||||||||||||||||
Deposits, Guarantees, etc. | 16,082 thousand yen | |||||||||||||||||||||
Number of Units by Type | Single | Compact | Family | Large | Other | |||||||||||||||||
(Excluding Operated Rental | ||||||||||||||||||||||
53 | 0 | 0 | 0 | 1 | ||||||||||||||||||
Residence) | ||||||||||||||||||||||
Number of Operated Rental | 0 | |||||||||||||||||||||
Residence | ||||||||||||||||||||||
Features of the Property | ||||||||||||||||||||||
・This property is conveniently located just a 2-minute walk from Kunitachi Station on the JR Chuo Line, and with access to Kichijoji Station in 18 minutes and Shinjuku Station in 33 minutes, it is expected to be popular not only with nearby university students and working adults in the area, but also with single adults working in the city center.
・This property is located along a shopping street lined with a variety of shops, making it a convenient place to live.
Other Relevant Information
A portion of the land (approx. 27.8 ㎡) is located within the area of an urban planning road ((3, 4, 6 Kunitachi Station Higashi Line) with a planned width of 16m), and the plan was decided on October 5, 1961, but it has not been designated as a priority development route between fiscal years 2016 and 2025, and its commercialization is undecided. In the future, it is possible that the portion of the building located on the expropriated land will need to be removed due to expropriation.
Summary of Building Conditions Investigation Report
Investigator | Tokio Marine dR Co., Ltd. | Investigation Report | June 6, 2024 | |||||
Date | ||||||||
Emergency Repair Costs | - | |||||||
Short-term Repair Costs | - | |||||||
(within 1 year) | ||||||||
Long-term Repair Costs | 28,117 thousand yen | |||||||
(within 12 years) | ||||||||
Building Replacement Price | 404,000 thousand yen | |||||||
Summary of Earthquake Risk Analysis | ||||||||
Investigator | Tokio Marine dR Co., Ltd. | Investigation Report | June 6, 2024 | |||||
Date | ||||||||
Probable Maximum Loss | 4.1% | |||||||
Ratio(PML) | ||||||||
Matters concerning Earthquake Resistance, etc.
This property has been notified of the structural calculation conformity assessment by the designated structural calculation inspection institute in accordance (Tokyo Bldg-Tech Center Co.,Ltd) with the revision of the Building Standard Act that came into effect in June 2007.
Please refer to "Notes and definitions on items on the tables in the press releases for asset acquisition" on ADR`s website for details on items on the above table.
(https://www.adr-reit.com/en/ir/news/)
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4. Financial Impact on ADR in the Event of Failure to Fulfill Forward Commitment, etc.
Beneficiary Interests in Trust transfer agreements (hereafter, the "Agreement") for the asset-to-be-acquired
constitutes a forward commitment, etc.(Note) by an investment corporation defined in the Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc. published by the Financial Services Agency.
The Agreement provides that if ADR or the seller violates a provision of the Agreement, the counterparty has the right to terminate the Agreement and claim an amount equivalent to 20% of the transaction price of the asset-to-be-acquired as penalty.
However, ADR is not obliged to pay penalties to the seller for the expiration or cancellation of the Agreement except where ADR is at fault.
(Note) Refers to a postdated sales agreement under which payment and property delivery shall be made at least one month after the conclusion of the
agreement, or any other agreement similar thereto.
5. Summary of the Seller
Name | ITOCHU Corporation | ||
Address | 3-1-3 Umeda, Kita-ku, Osaka City, Osaka | ||
Representative | Keita Ishii, President and Chief Operating Officer | ||
ITOCHU is involved in domestic trading, import/export, and overseas trading of various | |||
Principal business | products such as textile, | machinery, metals, energy, chemicals, food, general product, realty, | |
information, insurance, logistics, construction, and finance, as well as business investment in | |||
Japan and overseas. | |||
Capital | 253,448 million yen | ||
Data of establishment | December 1, 1949 | ||
Total assets | 14,489,701 million yen (as of March 31, 2024) | ||
Total capital | 5,992,121 million yen (as of March 31, 2024) | ||
Major shareholders and | The Master Trust Bank of Japan, Ltd. (16.09%) etc. (as of March 31, 2024) | ||
Shareholding ratio | |||
Relationship with ADR and IRM | |||
As of the end of January 2024, the company owns 2.4% of ADR's outstanding shares. In addition, as | |||
Capital relations | of today, the company directly owns 80.0% of the total number of IRM's outstanding shares, and | ||
indirectly owns 20.0% of the total number of IRM's outstanding shares through the company's wholly | |||
owned subsidiary, ITOCHU Real Estate Development Co., Ltd | |||
As of today, the following number of IRM's executives and employees have been dispatched or | |||
Personnel relations | seconded from the company. | ||
1 full-time board member | 2 part-time board member 1 seconded employees | ||
The company has entered into an agreement with ADR and IRM concerning preferential negotiation | |||
rights. | |||
Business relations | The following is a summary of specified asset sales transactions, etc. for the fiscal period ended | ||
January 31, 2024. | |||
Bought amount 2,862 million yen, 2 properties /Sold amount 0 yen | |||
Related | Although the company is not a related party of ADR, it is a parent company of IRM and therefore a | ||
parties' status | related party of IRM under the Regulations for Consolidated Financial Statements. |
6. Status of the Seller
Status of Property Owners, | Previous owner, etc. | The time before last owner, etc. | |
etc. | |||
Name | ITOCHU Corporation | Other than those with a special interest | |
Special Interests. | Interested party as defined in the | ||
Relationship with a | - | ||
internal rules of IRM | |||
certain person | |||
Background and reason | Rental residence | - | |
for acquisition, etc. | development objectives | ||
4 |
Acquisition Price | Omitted for development purposes | - | |
(Land) | |||
Acquisition period | September 2015 | - | |
(Building) | |||
October 2017 |
7. Transactions with Interested Parties, etc.
ITOCHU Corporation, the seller for the Acquisition, falls under the category of an interested party, etc. as defined in the Investment Trust Act and the internal rules of IRM. Therefore IRM has obtained ADR's prior consent based on the approval by ADR's Board of Directors.
In addition, ITOCHU Urban Community Co., Ltd., which is scheduled to be the master lease and property management company for the asset-to-be-acquired, falls under the category of an interested party under the IRM's internal rules. Therefore, IRM has gone through the necessary deliberation, resolution and other procedures as stipulated in the internal rules.
8. Broker Profile
Not applicable.
9. Outlook
The impact of this Acquisition on the earnings forecasts for the 28th fiscal period (from February 1, 2024 to July 31, 2024) and the 29th fiscal period (from August 1 to January 31, 2025), published in the Brief Summary of Kessan Tanshin (Financial Report) dated March 14, 2024, will be negligible, and no change will be made to the forecast.
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10. Summary of the Appraisal Report
Property name | RESIDIA Kunitachi |
Appraisal Value | 1,350,000 thousand yen |
Appraiser | Japan Real Estate Institute |
Appraisal date | as of May 31, 2024 |
(thousand yen)
Items | Value | Summary | ||||
Income Capitalization Approach Value | 1,350,000 | Estimated the income value of the subject property by relating the income value obtained by the | ||||
DCF method to the income value obtained by the direct capitalization method. | ||||||
Direct Capitalization Price ((6)/(7)) | 1,360,000 | |||||
(1) Total Potential Income | 69,267 | |||||
Total Potential Income | 72,023 | |||||
Rental income | 69,959 | Appraised, taking into account the rent based on the current lease agreement and the rent that | ||||
would be paid if the subject property were newly leased, etc. | ||||||
Other income | 2,064 | Renewal fee income is recorded based on an assessment of the average annual turnover rate of | ||||
tenants and the average contract period. | ||||||
Losses from Vacancies, etc. | 2,756 | Recorded after assessing a stable mid- to long-term Occupancy rate level based on the occupancy | ||||
status and supply-demand trends of similar properties, as well as the occupancy status and future | ||||||
trends for the subject property. | ||||||
Losses from Delinquencies | 0 | The Company determined that no recording is required, taking into account the situation of the | ||||
lessee and other factors. | ||||||
(2) Expenses from rental business | 14,599 | |||||
Maintenance and Management Fees | 2,646 | The amount is recorded in consideration of the individual characteristics of the subject property, | ||||
with reference to scheduled contract and the level of similar properties. | ||||||
Utilities Costs | 800 | The amount is recorded with reference to the actual results of past fiscal years and taking into | ||||
consideration the level of similar properties and the individual characteristics of the subject | ||||||
property. | ||||||
In addition to the restoration costs based on the level of restoration costs normally incurred and | ||||||
Repair Costs | 1,313 | the lessor's share of such costs, repair and maintenance costs were recorded by taking into | ||||
consideration the actual amounts in previous years, the level of similar properties, and the annual | ||||||
average of repair and renewal costs in engineering reports, etc. | ||||||
Property Manager Fees | 1,230 | Recorded with reference to the remuneration rate based on the terms of the scheduled contract, | ||||
etc., and taking into consideration the remuneration rate for similar properties and the individual | ||||||
characteristics of the subject property. | ||||||
Administrative fees required when recruiting new tenants, with reference to contract terms and | ||||||
Leasing Expenses | 3,467 | lease terms of similar properties, and advertising expenses, etc., with reference to actual results of | ||||
previous years, and renewal fees, etc., taking into account the average annual replacement rate | ||||||
and occupancy rate, etc. | ||||||
Taxes and Public Dues | 3,958 | Recorded based on tax and public dues related documents, etc. | ||||
Insurance Premium | 85 | Recorded in consideration of premiums based on insurance policies and premium rates for | ||||
buildings similar to the subject building. | ||||||
Other Expenses | 1,100 | Internet usage fees, etc. are recorded. | ||||
(3) Net Operating Income (NOI, (1)-(2)) | 54,668 | |||||
(4) Earnings from Deposits | 157 | Appraised by multiplying the amount obtained by multiplying the occupancy rate by the number | ||||
of months of stable security deposits over the medium to long term, and then by the assumed | ||||||
investment yield of 1.0%. | ||||||
The appraisal was made based on the assumption that the expected future expenditures would be | ||||||
(5) Capital Expenditures | 1,640 | accumulated on average each period, taking into account the level of Capital Expenditures of | ||||
similar properties, Building Age, and the average annual amount of repair and renewal expenses | ||||||
in the engineering report, etc. | ||||||
(6) Net Cash Flow DCF Price | 53,185 | |||||
((3)+(4)-(5)) | ||||||
Appraised by adding/subtracting the spread resulting from the subject property's location, | ||||||
(7) Cap Rate | 3.9% | building conditions, and other conditions to/from the standard yield of each area, and also by | ||||
taking into account future uncertainties and transaction yields on similar properties, etc. | ||||||
DCF price | 1,340,000 | |||||
Discount Rate | 3.7% | Appraised by comprehensively taking into account the individual characteristics of the subject | ||||
property, etc., with reference to the investment yields, etc., in transactions with similar properties. | ||||||
Terminal Cap Rate | 4.0% | Appraised by comprehensively considering future trends of investment yields, riskiness of the | ||||
subject property as an investment, general forecasts of future economic growth rates, and trends | ||||||
of real estate prices and rents, etc., with reference to the transaction yields of similar properties. | ||||||
Cost Approach Value | 1,290,000 | |||||
Land ratio | 71.2% | |||||
Building Ratio | 28.8% | |||||
Other items considered by the appraiser in the appraisal | None | |||||
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Appendix
Appendix 1. Photos of the Asset-To-Be-Acquired
Appendix 2. Map of the Asset-To-Be-Acquired:1-7-10 Higashi, Kunitachi City, Tokyo
About Advance Residence Investment Corporation
Advance Residence Investment Corporation is the largest J-REIT specializing in residential properties and is managed by ITOCHU REIT Management Co., Ltd. (IRM), the asset management company of the ITOCHU Group, investing in over 280 rental apartments located mostly in central Tokyo and in other major cities throughout Japan (AUM over 490 billion yen). ADR can be expected have a stable dividend in the long-term and can be considered as a defensive J-REIT, on back of the stable income from residential assets and with the largest dividend reserve among J-REITs.
"Advance" is the common brand name of the real estate investment corporation managed by ITOCHU REIT Management Co., Ltd.
ADR's website:https://www.adr-reit.com/en/
IRM's website :https://www.itc-rm.co.jp/en/
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Advance Residence Investment Corporation published this content on 28 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 June 2024 08:05:57 UTC.