March 17, 2022
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 (Meguro Higashiyama Building) of 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 domestic real estate (referred to as the "Acquisition"). Brief details are as follows.
1. Acquisition Details
Property Name | Meguro Higashiyama Building |
Location | 1-4-4, Higashiyama, Meguro-ku, Tokyo |
Acquisition Price | ¥8,100 million |
(Excluding acquisition-related costs, property tax, city planning tax, etc.) | |
Seller | Domestic company (Please refer to "5. Seller Profile") |
Brokerage | Yes |
Decision of Acquisition | March 17, 2022 |
Contract Date | March 17, 2022 |
Acquisition Date | March 24, 2022 |
Payment of | March 24, 2022 |
Acquisition Costs | |
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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 Nakameguro area, in which Meguro Higashiyama Building (the "Asset to Be Acquired") is located, is a flourishing area with many offices of IT, apparel and entertainment companies as well as restaurants and such.
The Asset to Be Acquired is a highly visible office building facing Yamate-dori Avenue and located approximately a six- minute walk from Naka-meguro Station on the Tokyu Toyoko Line and Tokyo Metro Hibiya Line. With a total rentable area of 6,152.43 m2, it is exceptionally large for an office building in the Nakameguro area. While the building is 27 years old, it is well maintained, receiving appropriate large-scale renovation work such as the replacement of air-conditioning equipment and lighting. 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 3.8%, 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
Type of Specified Asset
Meguro Higashiyama Building
Domestic real estate
Location
Registered
Land: | 1-1316-1,1-1318-1,1-1318-2,1-1318-3,1-1318-4,1-1319-1,1-1319-2, |
1-1319-3,1-1319-4, Higashiyama, Meguro-ku, Tokyo | |
Building: | 1-1316-1,1-1318-1,1-1318-2,1-1318-3,1-1318-4,1-1319-1,1-1319-2, |
1-1319-3,1-1319-4, Higashiyama, Meguro-ku, Tokyo | |
Residential
Access
Use
Area Classification
Site/Floor Area (Registered)
1-4-4, Higashiyama, Meguro-ku, Tokyo
Approximately a six-minute walk from Naka-meguro Station on the Tokyu Toyoko Line and Tokyo Metro Hibiya Line
Office
Commercial district
Land: | 1,572.38 m2 |
Building: | 8,540.29 m2 |
Structure (Registered) | SRC/S/RC, 8F | |
Completion Date (Registered) | March 1995 | |
Design Company | Azusa Sekkei Co., Ltd. | |
Construction Company | Mitsui Construction Industry Co., Ltd. | |
Inspection Authority | Tokyo Metropolitan Government | |
PML (Probable Maximum Loss) of 5.0% is based on the earthquake risk assessment | ||
(detailed) report prepared by Engineering and Risk Services Corporation and OYO | ||
RMS Corporation (as of February 22, 2022). PML refers to the expected damages | ||
caused by earthquakes. Although there is no single authoritative definition of PML, | ||
Earthquake Resistance | 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. | ||
Type of Ownership | Land: | Proprietary ownership (Note 1) |
Building: | Compartmentalized Ownership (Note 2) | |
Acquisition Date | March 24, 2022 | |
Acquisition Price | ¥8,100 million | |
Appraisal Value | ¥8,330 million (effective date of value: February 1, 2022) | |
Appraiser: Japan Real Estate Institute | ||
Building Assessment Reporter
Date of Building Assessment Report
Property Management Company
Security/Guarantee
Special Items
Tokio Marine dR Co., Ltd.
February 21, 2022
TOKYU CORPORATION
TOKYU REIT has no plan to pledge collateral after the acquisition.
- The current owner has been granted subsidies for an energy-saving promotion business from the Environmentally Symbiotic Housing Promotion Council. If the property is to be transferred, etc. during a period of 10 years from March 31, 2016, the approval of the Environmentally Symbiotic Housing Promotion Council is required. This is relevant in this case as TOKYU REIT is inheriting the position of the seller.
- An area of the boundary between the property and an adjoining property has not been confirmed with that property's owner, but there is a boundary confirmation agreement with part of the co-owners of that property. The applicable Legal Affairs Bureau has filed a land survey map for both properties.
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Special Items
Total Number of Tenants | |
Assumed Total Rental Income | |
Lease Deposits and | |
Guarantee Deposits | |
Estimated NOI | |
Details | |
Estimated NOI after | |
Depreciation | |
Lease | Total Leased Area |
Total Rentable Area | |
Occupancy Rate | |
Occupancy Rates | |
over the Last Five Years |
- As part of the site was sold as project land for a city planning road, the building has become a non-conforming building and therefore may not be in accord with building laws and regulations. In particular, the building's floor area ratio is at approximately 570% while the designated floor area ratio is 500%, so it is possible that the building may not maintain its current size upon reconstruction.
- A previous owner had conducted a soil contamination survey for the land. The results showed that the land's elution of fluorine and cyanide exceeding the standard level. In acquiring the property, TOKYU REIT commissioned Tokio Marine dR Co., Ltd. to conduct a soil contamination risk survey. The company reported that the groundwater was not found to be used for drinking and that there is thought to be little health risk as the ground surface is covered.
- There is a remaining registration of a building which no longer exists on the land. Procedures for registration of loss of property is currently underway and is scheduled to be completed by the day before the delivery of the property.
- Malfunction of an exhaust fan in the rooftop elevator machine room has been found, but this is scheduled to be resolved by the day before the delivery of the property at the seller's expense and responsibility.
- An outdoor advertisement permit for a first-floor tenant's outdoor advertisement could not be confirmed, but the situation is scheduled to be resolved at the seller's expense and responsibility by the end of April 2022 by ensuring that the outdoor advertisement is not in violation of any laws.
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¥420 million a year
¥306 million
¥310 million a year
¥275 million a year
4,742.40 m2
6,152.43 m2
77.1 %
As of | As of | As of | As of | As of |
January 31, | January 31, | January 31, | January 31, | January 31, |
2018 | 2019 | 2020 | 2021 | 2022 |
86.5 % | 100.0 % | 100.0 % | 93.9 % | 77.1 % |
(Note 1) A part of the southwest side of the subject land (Approximately 100.86 m2) is used for passage as a road based on Article 42, Paragraph 2 of the Building Standards Act (Paragraph 2 road).
(Note 2) All compartmentalized ownership of the building is scheduled to be acquired.
*The total number of tenants, total leased area, lease deposits/guarantee deposits, and occupancy rate are as of the end of January 2022.
- 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 (95.7%) as of the acquisition date (March 24, 2022).
- 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: Meguro Higashiyama Building | Estimation | Notes | |||||
Appraisal Firm: Japan Real Estate Institute | |||||||
Effective Date of Value | Feb. 1, 2022 | - | |||||
Type of Value | Market Value | - | |||||
Appraisal Value | ¥8,330,000 | The value indicted by the income approach | |||||
Value Indicated by Income Capitalization Approach | ¥8,330,000 | The same weight on both the value indicated by the direct | |||||
capitalization method and that by the DCF method. | |||||||
Value Indicated by Direct Capitalization Method | ¥8,380,000 | - | |||||
(1) Operating Revenue (a.−b.) | ¥441,137 | - | |||||
a. Potential Gross Income | The stabilized rent and common area maintenance charges, | ||||||
(rental income, common area charges | ¥467,566 | which were based on the current rents and the market | |||||
income, utilities reimbursement, etc.) | rent/CAM charges | ||||||
The stabilized occupancy rate, which was based on the past | |||||||
b. Vacancy Loss | ¥26,429 | occupancy rate of the subject property and its future | |||||
prediction as well as the occupancy rate of similar properties | |||||||
in the local market
(2) Operating Expenses (c.+d.+e.+f.+g.+h.+i. +j.) | ¥112,994 | |
c. Building Maintenance Cost | ¥32,400 | |
d. Utilities Expenses | ¥20,590 | |
e. Repair Expenses | ¥12,495 | |
f. Property Management Fee | ¥9,232 |
-
The characteristics of the subject property, its previous years' numbers, and the maintenance cost of similar properties
The previous years' numbers of the subject property and its occupancy rate of rentable space
The past figures of the subject property in addition to its future management plan, the cost levels of similar buildings, and the annual average repair/replacement costs in the available engineering report of the subject property.
The characteristics of the subject property and the management fees of similar properties as well as the previous years' numbers of the subject property
g. Tenant Solicitation Expenses, etc.
h. Property Taxes
i. Property Insurance
j. Other Expenses
- Net Operating Income (NOI) ((1)−(2))
- Investment Profits from Refundable Deposits
- Capital Expenditure
¥2,994
¥34,211
¥446
¥626
¥328,143
¥3,839
¥30,230
The annual average amount of the subject property based on the expected turnover rate of tenants
Estimated taxes payable based on the subject property's taxable assessed value, which is listed in its property tax information, and its tax increment limit
The subject property's current premiums and those of similar properties
The actual figure of the subject property
-
(The outstanding deposit amount based on the stabilized security deposit and occupancy rate) x (An invested yield of 1.0% per annum)
We assumed that a constant amount for capital expenditures would be set aside on a yearly basis considering the building age of the subject property, typical annual expenditures of similar properties, and the amount of repair/replacement expenditures estimated in the engineering report.
(6) Net Cash Flow (NCF) ((3)+(4)−(5)) | ¥301,752 | - | |||
(7) Overall Capitalization Rate | 3.6% | - | |||
Value Indicated by DCF Method | ¥8,280,000 | - | |||
Discount Rate | 3.3% | - | |||
Terminal Capitalization Rate | 3.6% | - | |||
Value Indicated by Cost Approach | ¥8,200,000 | - | |||
Ratio of Land Value | 90.0% | - | |||
Ratio of Building Value | 10.0% | - |
We placed the most emphasis on the value indicated by the income capitalization | |
Reconciliation before Arriving at the Value Conclusion | approach, which we judged better reflects the actual price formation process in |
the commercial real estate market. We used the value indicated by the cost | |
approach for reference only. | |
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
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Tokyu REIT Inc. published this content on 17 March 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 March 2022 06:30:06 UTC.