Fiscal Period Business Report Th (Statement of Financial Performance) 19 December 1, 2014 – May 31, 2015
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Fiscal Period Business Report th (Statement of Financial Performance) 19 December 1, 2014 – May 31, 2015 The Daiwa Office Investment Corporation logo symbolizes hospitality with an open door and the desire to be a bright and open investment corporation. We will continue to aim to be a highly-transparent investment corporation that is further cherished and trusted by our investors and tenants. 6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-of_ce.co.jp/en/ I. Overview of Daiwa Office Investment Corporation To Our Investors We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI). In the 19th Fiscal Period, DOI posted operating revenues of 10,387 million yen and operating income of 4,770 million yen. Our distribution per unit for the 19th Fiscal Period is 9,142 yen, an increase by 886 yen from the 18th Fiscal Period. See page 4 for financial and management highlights Average contract rent at the end of the 19th Fiscal Period increased 875 yen from the end of the previous fiscal period to 18,674 yen and greatly contributed to further internal growth. Rent revisions contributed to 5 million yen increase in monthly contracted rents from the end of the previous fiscal period, which was a 5.2% increase rate for the average monthly rent. Tenants moving in/out led to 14 million yen of net increase in monthly contracted rents from the end of the previous fiscal period, and the increase rate for the average monthly rent increased 9.2% due to replacement of tenants. Occupancy rate improved 0.1 percentage points from the end of the previous fiscal period to 97.3%. We will realize sustainable internal growth by thorough implementation of hands-on approach that continuously apply“Bonji-Tettei” as the code of conduct. See page 8 for details of internal growth During the 19th Fiscal Period, we acquired 6 properties of Daiwa Ebisu 4-chome, LAQUAS Higashi Shinjuku, Concept Aoyama, Shinsen Place, Glass City Shibuya and Meguro Place Tower (total acquisition price: 48,785 million yen) and divested 5 properties of Daiwa Nihombashi Honcho, Daiwa Ginza 1-chome, Daiwa Kinshicho, Daiwa Tsukiji 616 and Benex S-3 (total sale price: 21,810 million yen). Through such asset replacement, DOI improved the quality of its portfolio. In addition to Glass City Shibuya and Meguro Place Tower mentioned above, we acquired River Gate (acquisition during 20th Fiscal Period) using funds raised through public offering implemented in June 2015. DOI will continue to selectively acquire office properties centering on the five central wards of Tokyo in an effort to further improve the value of its portfolio. See page 12 for details of external growth In financial matters DOI promoted the lengthening of maturities, increase of rate of loans with fixed interest rates, diversification of repayment dates and decrease of LTV. DOI will continue striving to further strengthen financial structure while working to reduce future refinancing risks. See page 16 for details of financial condition DOI will continue to increase the competitiveness of its properties and aim to achieve its medium- to long-term goal of an asset size of 500 billion yen through the utilization of investment capacity from capital increase, etc. while increasing long-term EPS (net income after deducting gain on sales of properties). We wish for the continued success of our unitholders and ask for your continued support of DOI. Nobuaki Omura Executive Director of Daiwa Office Investment Corporation Contents I. Overview of Daiwa Office Investment Corporation II. Asset Management Report……………………………17 To Our Investors……………………………………………… 2 III. Balance Sheet……………………………………………22 Characteristics and Strategies of Daiwa Office Investment Corporation ………………………… 3 IV. Statements of Income and Retained Earnings…… 24 Financial and Management Highlights………………………… 4 V. Statements of Changes in Unitholders’ Equity …… … 25 Overview of Portfolio (portfolio list)…………………………… 5 VI. Statements of Cash Flows … …………………………26 Overview of Portfolio (portfolio distribution)…………………… 6 VII. Notes to Financial Statements……………………… 27 Internal Growth Measures… ………………………………… 8 ……………………… 40 External Growth Measures……………………………………12 VIII. Independent Auditors’ Report Financial Conditions… ………………………………………16 IX. Investor Information… …………………………………41 2 Characteristics and Strategies of Daiwa Office Investment Corporation Characteristics of Daiwa Office Investment Corporation Office Specialized REIT Focused on the Five REIT Central Wards of Tokyo Effective application of operational knowhow specialized in office Places priority on owning office buildings in favorable locations for buildings which there is high demand Office buildings 100.0% Major Regional Cities 4.4% Five Central Greater Tokyo Wards of Tokyo 8.0% 87.6% Based on acquisition price (Note) Please note that the percentages in the above graphs are as of June 2, 2015 Growth Strategies 500.0 Activities for solid growth (billion yen) Investment in 500 selectively chosen ・Continue acquiring Achievement of a 500 billion yen asset size 441.2 properties competitive properties 413.2 ・Leverage borrowing Keep the medium-to-long term, upper-limit 387.5 400 capacity LTV target range within 40%~50% 352.7 364.0 332.0 300 Establishment of stable revenue base ・Property management Continuation of “Bonji-Tettei” activities Thorough implementation of hands-on 200 approach Further strengthen relations with tenants ・Maintain and Capture tenant needs by reinforcing ties with 100 improve property property managers value Strategic renewals and lease-up activities ・Financial activities Reduce refinancing risk by extending 0 borrowing periods and diversifying Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period After public Medium-term repayment dates ended ended ended ended ended offering goal May 2013 November 2013 May 2014 November 2014 May 2015 Distribution per Unit Fiscal period ended May 2015 yen (actual) (19th Fiscal Period) 9,142 Fiscal period ending November 2015 yen (forecast) (Note) The forecasts on distribution are calculated based (20th Fiscal Period) 9,350 on certain assumptions and may vary due to changes in the status and other factors. Moreover, Fiscal period ending May 2016 the forecasts set forth herein should not be yen (forecast) (21st Fiscal Period) 9,750 construed as a guarantee of distribution amounts. I. Overview of Daiwa Office Investment Corporation 3 Financial and Management Highlights Steady increase of distributions even in a severe office market environment ■ Operating Revenues ■ Operating Income (million yen) (million yen) 10,000 5,000 10,387 9,763 4,770 4,000 4,438 7,500 8,432 8,587 7,615 3,760 3,000 3,677 3,308 5,000 2,000 2,500 1,000 0 0 15th Period 16th Period 17th Period 18th Period 19th Period 15th Period 16th Period 17th Period 18th Period 19th Period ■ Net Income ■ Asset Size (million yen) (billion yen) 4,000 400 413.2 4,031 3,641 387.5 3,000 350 364.0 2,959 3,016 352.7 2,589 332.0 2,000 300 1,000 250 0 200 15th Period 16th Period 17th Period 18th Period 19th Period 15th Period 16th Period 17th Period 18th Period 19th Period ■ Distribution Per Unit 8,328 (yen) 7,570 8,700 9,000 10,000 Forecast from one year earlier Forecast from six months earlier Actual dividends 7,300 9,750 6,550 7,820 9,142 9,350 5,500 7,200 7,540 5,350 8,256 8,000 6,250 7,478 7,621 4,850 5,500 3,600 4,850 6,542 6,000 3,180 5,986 4,100 5,107 3,280 4,464 4,000 3,671 2,000 0 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period 17th Period 18th Period 19th Period 20th Period 21st Period 19th Period 18th Period 17th Period 16th Period 15th Period (May 2015) (November 2014) (May 2014) (November 2013) (May 2013) Operating revenues (million yen) 10,387 9,763 8,587 8,432 7,615 Operating income (million yen) 4,770 4,438 3,760 3,677 3,308 Ordinary income (million yen) 4,032 3,642 3,005 2,955 2,590 Net income (million yen) 4,031 3,641 3,016 2,959 2,589 Total number of units issued (units) 441,000 441,000 395,798 395,798 395,798 Net assets per unit (yen) 505,566 504,746 509,490 509,560 508,707 Distribution per unit (yen) 9,142 8,256 7,621 7,478 6,542 Total assets (million yen) 432,232 399,555 380,723 363,653 342,572 Loan-to-value (LTV) (based on total asset value) (%) 44.3 40.2 43.0 40.6 37.5 Number of investment properties 47 46 44 44 41 Asset size (billion yen) 4,132 3,875 3,640 3,527 3,320 Total rentable area (m2) 288,833.07 286,088.89 259,381.62 244,877.17 225,651.87 Occupancy rate (%) 97.3 97.2 96.4 96.3 95.0 4 Overview of Portfolio (portfolio list) (as of June 2, 2015) Acquisition Appraisal Rentable Structure and Execution Ownership Type Price Value at End PML (%) Property Name Address Area (m2) No. of Floors Completion of Major of Period Share (Note 5) (Note 2) (Note 3) Repairs mm yen (mm yen) Land Building (%) (Note 4) Five Central Wards of Tokyo (Note 1) Fee simple and 1 Daiwa Ginza Ginza, Chuo-ku, Tokyo 8,175.26 SRC B3/12F July 1963 2003 14,100 3.2 15,500 leasehold Fee simple 4.53 2 Daiwa Ginza Annex Ginza, Chuo-ku, Tokyo 2,032.11 SRC B3/8F Aug. 1972 2003 3,050 0.7 3,170 Fee simple Fee simple 3.97 3 Daiwa Shibaura Shibaura, Minato-ku, Tokyo 9,619.67 SRC B1/12F Oct. 1987 8,265 1.9 7,240 Fee simple Fee simple 3.82 4 Daiwa Minami-Aoyama Minami Aoyama, Minato-ku, Tokyo 2,715.53 S SRC B2/5F Sept.