Fiscal Period Business Report Th (Statement of Financial Performance) 14 June 1, 2012 ~ November 30, 2012
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Fiscal Period Business Report th (Statement of Financial Performance) 14 June 1, 2012 ~ November 30, 2012 The Daiwa Office Investment Corporation logo has been created. The 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-ofce.co.jp/en/ I. Overview of Daiwa Office Investment Corporation Toward a New Stage of Growth Daiwa Office Investment Corporation (DOI) has focused on recovering the occupancy rates of existing properties during the 14th Fiscal Period, and as a result the occupancy rates have been steadily recovering. Due to this, we believe that the environment of DOI is becoming such that we can begin taking on new challenges. Therefore, we will challenge to grow our portfolio by daringly acquiring low-occupancy properties and suburban properties and then improving their performance. Honshu Meieki Building shinyon curumu Kamiooka Eye Mark Building Contents I. Overview of Daiwa Office Investment Corporation II. Asset Management Report………………………… 17 Characteristics and Strategies of Daiwa Office Investment Corporation ………………………… 3 III. Balance Sheets… …………………………………… 22 To Our Investors……………………………………………… 4 IV. Statements of Income……………………………… 24 Financial and Management Highlights………………………… 5 V. Statements of Changes in Unitholders’ Equity …… 25 Overview of Portfolio (portfolio distribution)…………………… 6 Internal Growth Measures… ………………………………… 8 VI. Notes to Financial Statements…………………… 26 External Growth Measures………………………………… 10 VII. Independent Auditors’ Report…………………… 36 Overview of Portfolio (portfolio list)………………………… 14 VIII. Statements of Cash Flows [Information Only]…… 37 Financial Conditions… …………………………………… 15 Description of Asset Manager……………………………… 16 IX. Investor Information… ……………………………… 38 2 Characteristics and Strategies of Daiwa Office Investment Corporation 3 Characteristics of Daiwa Office Investment Corporation Office Specialized REIT focused on the Five Portfolio comprised of REIT Central Wards of Tokyo A Class and B Class buildings Effective application of operational know- Places priority on owning office buildings Operates Shinjuku Maynds Tower at the how specialized in office buildings in favorable locations for which there is core and blue-chip medium-sized office high demand buildings Office buildings 100.0% Major Regional Cities 1.5% Five Central A Class buildings Greater Tokyo Wards of Tokyo (Shinjuku Maynds Tower) 6.6% 91.8% 42.5% B Class buildings Based on acquisition price 57.5% Based on acquisition price (Note) Please note that the percentages in the above graphs are as of November 30, 2012. Growth Strategies 350.0 Activities for solid growth (billion yen) Proactive investment in 350 ・Continue acquiring Achievement of a 350 billion yen asset size selectively chosen properties competitive properties ・Leverage borrowing Keep the medium-to-long term, upper-limit 313.2 314.9 capacity LTV target range within 40%~50% 311.3 300 287.3 278.1 Establishment of stable revenue base ・Property management Continuation of “Bonji-Tettei” activities Improve occupancy rate and increase rent revenue 250 Further strengthen relations with tenants ・Maintain and Capture tenant needs by reinforcing ties with improve property property managers value Strategic renewals and lease-up activities ・Financial activities Reduce risk of rising interests by extending borrowing periods and increase the ratio of 200 Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period Acquisition borrowings with fixed interest rates ended ended ended ended ended target November 2010 May 2011 November 2011 May 2012 November 2012 Distribution per Unit 14th Fiscal Period yen (actual) (fiscal period ended November 2012) 5,986 (Note) The forecasts on distribution are 3500 calculated based on certain assumptions and may vary due to 15th Fiscal Period yen (forecast) changes in the status and other (fiscal period ending May 2013) 6,250 factors. Moreover, the forecasts set forth herein should not be construed as a guarantee of 16th Fiscal Period yen (forecast) 6,5503000 distribution amounts. (fiscal period ending November 2013) I. Overview of Daiwa Office Investment Corporation 3 2500 2000 To Our Investors Toward Further Growth We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI). I am Nobuaki Omura, the Executive Director elected at the 7th General Meeting of Unitholders held on August 20, 2012. I humbly ask for your support as we make efforts in furthering the growth of DOI. In the 14th Fiscal Period, DOI posted operating revenues of 7,566 million yen and operating income of 3,146 million yen. Our distribution per unit for the 14th Fiscal Period is 5,986 yen, an increase by 879 yen from the 13th Fiscal Period. The office building leasing market had been experiencing a continually severe environment due to the large supply in central Tokyo during 2012. However, trends of improvements in the vacancy rates and rents could be seen starting with highly competitive properties in the second half of 2012. In terms of DOI’s existing properties, there have been an increasing number of inquiries regarding new moving-in and space expansion at Shinjuku Maynds Tower and E SPACE TOWER. We have also worked to improve the occupancy rates of other existing properties at an early stage to avoid secondary vacancies, and the occupancy rate as of the end of the 14th Fiscal Period significantly exceeded initial forecasts at 96.4%. During the 14th Fiscal Period we acquired West Park Osaki in September 2012 for 1,650 million yen. Though relatively small, we believe the property is excellent due to a lack of competitive properties nearby and partner and group companies, etc. of major companies with headquarters in the Osaki area have strong needs for offices there. Also, three properties are scheduled for acquisition in the 15th Fiscal Period with a total acquisition price of 16,950 million yen. These properties are shinyon curumu (9,650 million yen), Honshu Meieki Building (5,300 million yen) and Kamiooka Eye Mark Building (2,000 million yen). Unlike our previous property acquisitions, these include properties with low occupancy and properties outside Tokyo. However, all properties are relatively new and close to train stations. In addition to the fact that office needs are strong, we believe that we were able to acquire properties in areas where growth can be expected through large-scale developments and such. Following these acquisitions, we will work to improve the performance of these properties, thereby leading to improvement of the entire portfolio. In financial matters, we will aim to reduce the risk of rising interest rates by increasing the ratio of borrowings with fixed interest rates and reducing financial costs while also extending our borrowings. As we were able to bring the occupancy rate up to over 96% during the 14th Fiscal Period, our leasing capabilities have become very solid. As such, we will be able to rise to the next stage of growth as we take on the challenge of acquiring low- occupancy properties and improving their performance. 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 4 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 4,000 7,500 3,000 3,317 7,606 7,566 3,090 3,147 7,431 2,824 6,424 6,759 5,000 2,000 2,482 2,500 1,000 0 0 10th Period 11th Period 12th Period 13th Period 14th Period 10th Period 11th Period 12th Period 13th Period 14th Period ■ Net Income ■ Distribution Per Unit (million yen) (yen) 2,500 6,000 5,986 2,369 2,000 5,107 2,021 4,000 4,464 1,500 1,767 1,453 3,671 3,240 1,000 1,282 2,000 500 0 0 10th Period 11th Period 12th Period 13th Period 14th Period 10th Period 11th Period 12th Period 13th Period 14th Period ■ Asset Size ■ Period End Occupancy Rate (billion yen) (%) 350 100 95.9 96.4 95.4 94.3 92.4 300 311.3 313.2 314.9 90 287.3 278.1 250 80 200 70 10th Period 11th Period 12th Period 13th Period 14th Period 10th Period 11th Period 12th Period 13th Period 14th Period 14th Period 13th Period 12th Period 11th Period 10th Period (November 2012) (May 2012) (November 2011) (May 2011) (November 2010) Operating revenues (million yen) 7,566 7,431 7,606 6,759 6,424 Operating income (million yen) 3,147 3,090 3,317 2,824 2,482 Ordinary income (million yen) 2,365 2,022 1,767 1,587 1,273 Net income (million yen) 2,369 2,021 1,767 1,453 1,282 10000 Total number of units issued (units) 395,798 395,798 395,798 4000 395,798 395,798 Net assets per unit (yen) 508,132 507,331 506,693 505,900 505,469 Distribution per unit (yen) 5,986 5,107 4,464 3,671 3,240 Total assets (million yen) 325,665 325,315 323,217 298,626 294,562 Loan-to-value (LTV) 34.4 34.2 34.0 28.9 28.1 (based on total asset value) (%) Number of investment properties 38 37 36 35 33 Asset size (billion yen) 314.9 313.2 311.3 287.3 278.1 Total rentable area (m2) 208,733.38 207,277.34 205,318.62 191,346.43 182,548.82 Occupancy rate (%) 96.4 94.3 92.4 95.4 95.9 I. Overview of Daiwa Office Investment Corporation 5 Overview of Portfolio (portfolio distribution) DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards) 34 Daiwa Higashi-Ikebukuro 2 Daiwa Ginza Annex 11 BPS SQUARE 12 Daiwa Tsukiji 13 Daiwa Tsukiji 616 14 Daiwa Tsukishima 34 Ikebukuro Sta.