March 1, 2011 To All Concerned Parties Name of REIT Issuer: Nippon Building Fund, Inc. Sadafumi Abe, Executive Director (TSE Code : 8951) Contact: Asset Management Company Nippon Building Fund Management, Ltd. Koichi Nishiyama, President and CEO Person to Contact: Yasushi Akimoto, General Manager (TEL. +81-3-6259-8681)
Notice of Acquisition of Assets (Mitsubishi Heavy Industries Head Office Building)
Nippon Building Fund, Inc. (“NBF”) hereby provides notice of its decision on February 25, 2011 to acquire assets as follows:
Descriptions 1 Outline of the Acquisition 1) Acquired Assets: quasi co-ownership of beneficiary interests in trust assets comprised mainly of real estate ※the Property will be placed in trust by the seller prior to the delivery thereof, and NBF, together with a certain institutional investor in Japan, will acquire the said trust beneficiary interests. (ratio of quasi co-ownership: 60% for NBF; 40% for the other institutional investor in Japan) 2) Name of Acquired Assets: Mitsubishi Heavy Industries Head Office Building (hereinafter, “the Property”) 3) Acquisition Price: ¥36,300,000,000 (provided, however, that miscellaneous acquisition costs, fixed assets tax, city-planning tax and consumption tax are not included in this amount) 4) Date of Contract: during March 2011 (anticipated) 5) Delivery: by the end of September 2011 (anticipated) 6) Acquired From: Mitsubishi Heavy Industries, Ltd. (please refer to Section 4. hereinbelow for a description of the seller) 7) Acquisition Funds: Existing capital plus loans etc. (anticipated) 8) Intermediaries (anticipated): Mitsubishi UFJ Trust and Banking Corporation, Tamachi Building Co., Ltd. and Ryoju Estate Co., Ltd. (please refer to Section 6 hereinbelow for a description of the intermediaries) ※The intermediaries’ compensation for intermediation is not disclosed due to the fact that the intermediaries’ consent to disclosure has not been obtained. 9) Payment Method: Lump-sum payment at the time of delivery 10) Miscellaneous (i) By entering into a sale and purchase contract, the current acquisition constitutes a forward commitment etc. (payment and delivery shall be made after one month has elapsed from the 1
date of contract). The terms of a penalty payable in the event of cancellation of the sale and purchase contract due to any breach of the purchasers’ obligations thereunder (which will be assumed jointly and severally by NBF and the co-purchaser which is an institutional investor in Japan) will be set forth in such sale and purchase contract. The execution of such sale and purchase contract will be decided after details thereof have been confirmed, and the fact of such execution as well as the terms of such penalty payment will be announced to the public. (ii) The acquisition price was decided taking into consideration costs of remodeling the Property into a general rental office building in the future.
2 Points of Acquisition The acquisition is being undertaken with the intention of enhancing NBF’s portfolio in the Tokyo central business districts (CBDs) in accordance with the asset management objectives and policies set forth in NBF’s Articles of Incorporation. In deciding to acquire the Property, the following points were especially attractive. 1) Location The area near the east exit of the “Shinagawa” station where the Property is located is a relatively newly developed business area, gathering the headquarters of manufacturers as well as telecommunication and IT-related companies. The Property has direct access via pedestrian walkways, being 5 minutes walk from the nearest station e.g. “Shinagawa” station of JR and Keihin Express. The “Shinagawa” station also has excellent convenience of transportation such as the JR Yamanote-line, Keihintohoku-line, Keihin Express-line, Asakusa-line of Tokyo Metro and so forth leading to central Tokyo, JR Tokai-line etc. leading to the Greater Tokyo area, the Tokaido Shinkansen leading to major cities of Japan, as well as to major domestic and international cities via Haneda Airport. In addition, the “Narita Sky Access”, a new express railway to Narita which started operations in July 2010 provides further convenient access to major international cities from the Narita Airport. Due to its superb domestic transportation convenience, the area can be expected to further develop in the future.
2) Building and Facilities The Property is located in the “Shinagawa Grand Commons”, a redevelopment area adjacent to the east exit of the Shinagawa station, and is characterized by its stylish facade of granite-clad precast concrete boards and aluminum curtain walls. The Property is highly competitive as a modern office building having sufficient specifications such as a standard floor rentable area of approximately 414 tsubo (1,368m2) and ceiling heights of 2,800mm (in addition, 250mm sub-floor cavity for OA connection) etc.
3 Outline of Assets 1) Type of Specified Assets quasi co-ownership of beneficiary interests in trust assets comprised mainly of real estate ※ the Property will be placed in trusted by the seller prior to the delivery thereof, and NBF, together with a certain institutional investor in Japan, will acquire the said trust beneficiary interests. (ratio of quasi co-ownership: 60% for NBF; 40% for the other institutional investor in Japan) 2
2) Trustee Mitsubishi UFJ Trust and Banking Corporation (anticipated) 3) Address of the Property (Description in Real Property Registry) Land: 16-ban 3, 16-ban 13, 16-ban 14,10-ban 204, Konan 2-chome, Minato-ku, Tokyo Building: 16-banchi 3, 16-banchi 14, Konan 2-chome, Minato-ku, Tokyo (Street Address) 16-5, Konan 2-chome, Minato-ku, Tokyo 4) Use (primary use) Offices and retail stores 5) Type of Ownership The type of ownership of the Property is condominium interests in one building comprising the Property and the adjacent Shinagawa Grand Central Tower, ratio of its condominium interests (ratio of co-ownership equity in common areas) and the site area being 16/53 (approximately 30%). NBF will acquire quasi co-ownership (60%) of beneficiary interests in trust assets comprised of the said portion of the condominium interests and co-ownership of the site area. (i) Land: co-ownership interests (ii) Building: condominium interests ※ certain superficies have been established on a part of the land for installation of underground road and parking facilities, area-wide cooling and heating facilities, storm-water reservoir facilities and planting trees. ※In addition to the above, NBF will acquire co-ownership interests (approximately 9%) of parking facilities, public spaces, area-wide cooling and heating facilities, pedestrian walkways etc. which are co-owned by the owners of the buildings located in the Shinagawa Grand Commons, as well as the portion of superficies etc. on the site area where those facilities are established. 6) Area (i) Land: site area: 20,476.14m2 (entire site for the entire building) of which approximately 18.1% will be acquired (16/53 (approx. 30%) of co-ownership interests of the Property × quasi co-ownership interests (60%)) (ii) Building: total floor space of the building: 222,346.26 m2 (entire building) of which approximately 18.1% will be acquired (16/53 (approx. 30%) of condominium interests of the Property × quasi co-ownership interests (60%)) 7) Structure Steel framed, steel framed reinforced concrete and steel reinforced concrete structure, flat roof, 33 floors above ground and 3 floors below ground (entire building) 8) Completion April 1, 2003 9) Design and construction Design: Mitsubishi Estate Co., Ltd., 1st Class Registered Architect Office Construction: Takenaka Corporation, Taisei Corporation
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10) Valuation Valuation prepared by Daiwa Real Estate Appraisal Co., Ltd. Appraisal Value: ¥37,900,000,000 (representing NBF’s quasi co-ownership (60%)) Date of Valuation: February 1, 2011 Summary of Valuation Item Value Profit price ¥37,900,000,000 Price based on direct capitalization method ¥40,400,000,000 Net revenue ¥1,699,724,000 Cap rate 4. 2% Price based on DCF method ¥36,800,000,000 Discount rate 4. 1% Terminal cap rate 4. 4% Integration value ¥35,700,000,000 Percentage for land 78. 2% Percentage for building 21. 8%
11) Earthquake PML 1.7% (obtained from the building condition investigation report prepared by Engineering & Risk Services Corporation) 12) Existence of Secured Interests (liens) None. 13) Description of Tenants It is agreed that the office area of the rentable floor area will be entirely leased to the seller (please refer to Section 4. hereinbelow for a description of the seller), and the following is based upon such agreement (a lease agreement for that portion has yet to be executed). Total number and summary of lessees: 12 companies (seller and 11 other stores) Total rental revenues: not disclosed due to the fact that the lessee’s consent to disclosure has not been obtained. Total rentable area: (i) office area: 56,978.86m2 (NBF’s quasi co-ownership interests equivalent to 34,187.32m2) (ii) store area: 2,422.77m2 (NBF’s quasi co-ownership interests equivalent to 1,453.66m2) Total leased area: (i) office area: 56,978.86m2 (NBF’s quasi co-ownership interests equivalent to 34,187.32m2) (ii) store area: 2,422.77m2 (NBF’s quasi co-ownership interests equivalent to 1,453.66m2) Occupancy Rate: 100% Total lease deposit: not disclosed due to the fact that the lessee’s consent to disclosure has not been obtained.
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4 Outline of Seller 1. Name Mitsubishi Heavy Industries, Ltd. 2. Location 16-5, Konan 2-chome, Minato-ku, Tokyo （Mitsubishi Heavy Industries Head Office Building） 3. Name and Title of Hideaki Omiya, President Representative: 4. Description of Business manufacturing etc. in businesses of shipbuilding & ocean development, power systems, machinery & steel structures, aerospace, mass and medium-level manufacture of products 5. Capital ¥265,600 million (as of March 31, 2010) 6. Date of Establishment January 11, 1950 7. Relations with NBF/NBFM Capital Relationship None Personnel None Business Relationship None does not fall under the category of related parties of either NBF or Related parties NBFM.
5 Status of Owner etc. The current acquisition of the Property is not an acquisition from a party which falls under the category of any specially interested party of NBF or its asset management company.
6 Summary of Intermediaries
Mitsubishi UFJ Trust and Banking Corporation 1. Name Mitsubishi UFJ Trust and Banking Corporation 2. Location 4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 3. Name and Title of Kinya Okauchi, President Representative: 4. Description of Business trust & banking business and other businesses (sale and purchase of trust beneficiary interests, brokerage of sale and purchase of real estate etc.) 5. Capital ¥324,279 million (as of March 31, 2010) 6. Date of Establishment March 10, 1927 7. Relations with NBF/NBFM Capital Relationship None Personnel None Business Relationship None does not fall under the category of related parties of either NBF or Related parties NBFM.
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Tamachi Building Co., Ltd. 1. Name Tamachi Building Co., Ltd. 2. Location 34-7, Shiba 5-chome, Minato-ku, Tokyo 3. Name and Title of Kazuyuki Kato, President Representative: 4. Description of Business building leasing business, building management business etc. 5. Capital ¥3,000 million (as of March 31, 2010) 6. Date of Establishment March 10, 1964 7. Relations with NBF/NBFM Capital Relationship None Personnel None Business Relationship None does not fall under the category of related parties of either NBF or Related parties NBFM.
Ryoju Estate Co., Ltd. 1. Name Ryoju Estate Co., Ltd. 2. Location 34-6, Shiba 5-chome, Minato-ku, Tokyo 3. Name and Title of Eiichi Ishii, President Representative: 4. Description of Business design, administration and construction of civil engineering and construction work development, distribution, intermediation, brokerage of real estate leasing of real estate such as offices and condominiums management & operation service, security services, utility service for reusable waste etc., repair and maintenance service etc. for welfare facilities etc. of Mitsubishi Heavy Industries, Ltd. 5. Capital ¥250 million (as of March 31, 2010) 6. Date of Establishment October 31, 1966 7. Relations with NBF/NBFM Capital Relationship None Personnel None Business Relationship None does not fall under the category of related parties of either NBF or Related parties NBFM.
7 Acquisition Schedule February 25, 2011: Determination to make acquisition During March 2011: Execution of sale and purchase agreement concerning trust beneficiary interests (anticipated) By the end of September 2011: Delivery (anticipated)
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8 Forecasted Management Situation as at the close of June, 2011 This acquisition does not change the forecasted management situation of NBF during the period ending June 30, 2011. Forecast of management situation for the period ending December 31, 2011 will be announced as soon as the same becomes available. End
This English language notice is a translation of the Japanese language notice dated February 25, 2011 and was prepared solely for the convenience of, and reference by, overseas investors. Neither NBF nor Nippon Building Fund Management Ltd. makes any warranties as to its accuracy or completeness.
1) Property NOI (Net Operating Income): ¥1,568 million 2) The above figures represent annualized revenues and expenses based on assumptions made as of this date after exclusion of extraordinary factors for the year of acquisition, and revenues are premised on an occupancy rate of 100% (and are not estimated figures for the following fiscal year).
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