Notice Concerning the Acquisition of Property
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Translation Purposes Only September 26, 2018 To All Concerned Parties Name of REIT Issuer: Hulic Reit, Inc. 2-26-9 Hatchobori, Chuo-ku, Tokyo, Japan Eiji Tokita, Executive Officer (TSE Code: 3295) Contact: Asset Management Company Hulic Reit Management Co., Ltd. Eiji Tokita, President and CEO Person to Contact: Kazuaki Chokki, Director, General Manager of Corporate Planning and Administration Department Tel: +81-3-6222-7250 Notice concerning the Acquisition of Property TOKYO, September 26, 2018 – Hulic Reit, Inc. (hereinafter referred to as “Hulic Reit”) hereby announces that Hulic Reit Management Co., Ltd. (hereinafter referred to as “Hulic Reit Management”), which is entrusted with the management of the assets of Hulic Reit, has today made the decision to acquire the property listed below (hereinafter referred to as the “Property”). 1. Overview of the acquisition (1) Category Tokyo Commercial Property (Office) (2) Property name KSS Gotanda Building (3) Location Shinagawa-ku, Tokyo (4) Assets planned for acquisition Real estate (5) Anticipated acquisition price 3,450 million yen (Note 1) (6) Date of purchase and sale agreement September 26, 2018 (7) Anticipated acquisition date October 1, 2018 (Note 2) (8) Seller Undisclosed (Note 3) (9) Acquisition funds Borrowings (Note 4) and cash on hand (10) Settlement method Full payment upon delivery Notes: 1. “Anticipated acquisition price” does not include consumption or local taxes or the costs and expenses related to the acquisition. 2. “Anticipated acquisition date” is the anticipated date of acquisition stated in the relevant purchase and sale agreement. 3. “Seller” is a general company in Japan. However, we have not received consent from the seller to disclose its identity. 4. For details, please refer to “Notice Concerning the Borrowing of Funds” announced today. 1 2. Reason for acquisition In accordance with the basic policies of Hulic Reit, the purpose of acquiring the Property is to improve the portfolio. Hulic Reit Management has assessed the property based on the following factors: 1) Characteristics of the location This property is located along Yamate Street, a one-minute walk from Osaki Hirokoji Station on the Tokyu Ikegami Line, and is a six-minute walk from Gotanda Station along the JR Yamanote Line and others. This location offers excellent access to the nearest train station and major business areas. The JR Yamanote Line, which is used very heavily for business, is one of the nearest train lines, making this an area that is likely to be favored for the convenience of its access to areas such as Shibuya and Shinjuku in which IT companies are concentrated. In recent years, IT companies have left the neighborhoods around Shibuya Station and Ebisu Station as vacancy rates decline and moved to this area instead. This has raised its reputation as an IT office area, and we believe that this site thus appeals to tenants in the IT industry. 2) Characteristics of the property This property was completed in March 1996 and consists of eight floors with one underground level. The first floor is retail space and the second floor and above are office space. The property is a mid-sized office building, with a total floor area of about 4,500 m2 and a standard floor area of about 480 m2. The largest market segment for office buildings in this area is small-scale office buildings of less than about 3,300 m2, which gives this property advantages compared to the typical office buildings in this area. This property is also distinctive for its creative façade, which combines concrete and glass, and has a strong presence given its highly visible location along Yamate Street. 2 3. Overview of the Properties Specified assets category Real estate Anticipated acquisition price 3,450 million yen Nearest station One-minute walk from Osakihirokoji on Tokyu Ikegami Line Address (domicile) 1-21-8 Nishigotanda, Shinagawa-ku, Tokyo Lot number 1-21-2 Nishigotanda, Shinagawa-ku , Tokyo, and others Building-to-land ratio 100・80% (Note 2) (Note 3) Floor-area ratio 500・300% (Note 3) Land Zoning Commercial area・Semi-industrial area(Note 3) Site area 940.43 m2 (Note 4) Type of ownership Leasehold interest(85.1%)・Proprietary ownership(14.9%) Completed March 1996 Structure SRC Number of floors 8F/B1 Use Offices, stores, parking lot Building Total floor space 4,495.35 m2 (Note 5) Number of parking 39 spaces Type of ownership Proprietary ownership Collateral None PM company Hulic Co., Ltd. (anticipated) (Note 6) Master lease company Hulic Co., Ltd. (anticipated) (Note 6) Appraisal value 3,490 million yen (Date of valuation) (August 31, 2018) Appraisal company DAIWA REAL ESTATE APPRAISAL CO.,LTD. PML value 6.24% (Note 7) Details of Tenant (Note 8) Total leased floor space 3,296.01 m2 Total leasable floor space 3,296.01 m2 Occupancy rate 100% Main tenant Not disclosed (Note 9) Total number of tenants 8 Total lease income (annualized) 192 million yen (Note 10) Lease and guarantee deposits 115 million yen (Note 11) It has been agreed with the owner of the leased land to obtain its consent in Special remarks case of certan events Notes: 1 Details are as of the anticipated acquisition date, confirmed as of September 26, 2018. 2 The building-to-land ratio for the land on which this property is located, that has been designated for commercial use was originally 80%, but the actual applicable ratio was relaxed to 100% as it is a fire-resistant building located in an area with strict construction regulations to prevent fire hazards. In addition, the building-to-land ratio for the land that has been designated as a quasi-industrial district was originally 60%, but the actual applicable ratio was relaxed to 80% as its location on a corner was taken into account and it is a fire-resistant building located in an area with strict construction regulations to prevent fire hazards. 3 The portion of the property within a 30 m distance from the road on the south is designated for commercial use with a building-to-land ratio of 100% and a floor area ratio of 500%. The portion of the property that is over 30 m away from the road on the south is designated for quasi-industrial use and has a building-to-land ratio of 80% and a floor area ratio of 300%. 4 Based on the entry in the property registry. The actual status may differ in some cases. 5 Based on the entry in the property registry. 6 Hulic Co., Ltd. is an Interested Person, etc. of Hulic Reit Management, and is an interested party according to Hulic Reit Management’s Regulations on Transactions with Interested Parties. 7 The figure is based on the earthquake PML appraisal report by Sompo Risk Management & Health Care Inc. 8 Hulic Reit and the master lease company plan to enter into a pass-through master lease agreement with no rent guarantee, total leased floor space, occupancy rate, total number of tenants, total lease income, and lease and guarantee 3 deposits of the end-tenants to which space is subleased by the master lease company are indicated in the “Details of Tenant.” 9 Not disclosed because approval for disclosure has not been obtained from the tenant. 10 The annualized amount is calculated by multiplying the total amount of monthly rent in each lease agreement with end-tenants (including common services fees; limited to rent for rooms that are occupied by tenants and excluding fees for using warehouses, signboards, and parking lots; also not taking free rent, etc. into consideration and excluding consumption taxes) by 12 and rounding to the nearest million yen. 11 Total lease and guarantee deposits in each lease agreement with end-tenants are rounded to the nearest million yen. 4. Overview of the counterparty of the acquisition The property will be acquired from a general business firm located in Japan, but as the firm has not authorized the disclosure of its name, it will not be disclosed here due to unavoidable circumstances. As of the present date, there are no notable capital relationships, personnel relationships, or business relationships between the seller and Hulic Reit and Hulic Reit Management, or the parties or affiliates related to Hulic Reit and Hulic Reit Management, and the seller does not constitute a related party of Hulic Reit and Hulic Reit Management. 5. Status of the property acquirer The acquisition will not be made from any party in which Hulic Reit and Hulic Reit Management have any special interests. 6. Overview of intermediary Although it is planned that KSS Gotanda Building will be acquired through an intermediary, the intermediary is not disclosed because approval for disclosure has not been obtained from the intermediary. Note that there are no notable capital relationships, personnel relationships or business relationships between the intermediary and Hulic Reit and Hulic Reit Management, or the parties or affiliates related to Hulic Reit and Hulic Reit Management, and the intermediary does not constitute a related party of Hulic Reit, etc. In addition, there are no applicable matters for the other properties. 7. Acquisition schedule Date of purchase and sale Acquisition decision date Anticipated payment date Anticipated acquisition date agreement September 26, 2018 September 26, 2018 October 1, 2018 October 1, 2018 8. Future outlook The acquisition of the Property will not have a material impact on the outlook for the financial results for the fiscal period ending February 28, 2019 (September 1, 2018 to February 28, 2019). Accordingly, there will be no change to the forecasts of financial results for such period. 4 9. Summary of Appraisal Report Appraisal value 3,490 million yen (Note 1) Appraiser DAIWA REAL ESTATE APPRAISAL CO.,LTD.