Investor Presentation for the Merger of Asset Managers. October 3, 2016

Transcription

1 Investor Presentation for the Merger of Asset Managers October 3, 2016

2 Summary of the Reorganization 1 Asset Management(AM) operations entrusted to the Three Asset Managers by the investment corporations will be integrated into one. (to be consolidated on April 1, 2017(planned)) Each investment corporation will continue to exist independently and there will be no changes in respective AM policies. We will continuously make maximum use of comprehensive support from Tokyu Fudosan Holdings Group.

3 Overview of the Three Asset Managers 2 Since the establishment of Tokyu Land Capital Management Inc., TLC Comforia Investment Management INC. and TLC Activia Investment Management Inc. in 2007, 2009 and 2010, respectively, each asset manager has accumulated the know-how and experience of AM operations. Overview of each asset manager Company TLC Activia Investment Management Inc. ( TAIM ) TLC Comforia Investment Management INC. ( TCI ) Tokyu Land Capital Management Inc. ( TLCM ) Representative President & CEO Michie Kawai President & CEO Hiroyuki Tohmata President & CEO Hitoshi Maehara Capital stock(*) 300 mn 200 mn 300 mn Investment corporation Activia Properties Inc. ( API ) Comforia Residential REIT, Inc ( CRR ) Broadia Private REIT, Inc. ( BPR ) Private fund Year 2007 February Incorporation of TLCM October Incorporation of TCI 2010 November Incorporation of TAIM June Listing of API 2013 February Listing of CRR 2014 March Start of AM for BPR (*)100% investment by Tokyu Land Corporation

4 Overview of API 3 API is a listed J-REIT investing in retail and office properties API was listed in June 2012 and the number of properties it holds is 34 with the AUM of bn as of the end of September API has grown more than twofolds in size for four years since the listing. Overview of API Name of investment corporation Activia Properties Inc. (Number of properties) Change of AUM of API ( 100 mn) Representative Executive officer Michie Kawai 40 3,529 4,000 Investment target Retail properties(*) and office buildings 30 2,826 2,929 3,267 3,000 Listing date June 13, ,310 2,417 Fiscal period May / November (The figures below are in fiscal period ended May 2016) 20 1,704 1,813 1,843 2,000 Operating revenue 10.2 bn Net income 5.2 bn 10 1,000 Net assets bn Total assets bn 0 Nov.2012May 2013Nov.2013May 2014Nov.2014May 2015Nov.2015May 2016Sep AUM (as of the end of Sep. 2016) bn 2nd period 3rd period 4th period 5th period 6th period 7th period 8th period 9th period Asset Manager TLC Activia Investment Management Inc. AUM (right axis) Number of properties (left axis) *Retail properties include accommodations (hotels), parking lots, etc.

5 Overview of CRR 4 CRR is a listed J-REIT investing in rental residences and serviced rental residences. CRR was listed in February 2013 and the number of properties it holds is 100 with the AUM of bn as of the end of September CRR has grown more than twofolds in size for three and half years since the listing. Overview of CRR Name of investment corporation Comforia Residential REIT, Inc (Number of properties) Change of AUM of CRR ( 100 mn) Representative Executive officer Hiroyuki Tohmata 100 2,000 Investment target Rental residences and serviced rental residences(*) Listing date February 6, ,465 1,467 1,644 1,671 1,600 Fiscal period January / July (The figures below are in fiscal period ended July 2016) 60 1,162 1,228 1,200 Operating revenue 6.5 bn Net income 2.3 bn Net assets 85.1 bn Total assets bn AUM (as of the end of Sep. 2016) bn 0 Jul Jan Jul Jan Jul Jan Jul Sep Asset Manager TLC Comforia Investment Management INC. 6th period 7th period 8th period 9th period 10th period 11th period 12th period AUM (right axis) Number of properties (left axis) *Serviced rental residences include houses for seniors, service apartments, flats for students (dormitories), etc.

6 Overview of BPR 5 BPR is a diversified-type private REIT (non-listed real estate investment corporation) investing in retail properties, office buildings, rental residences, etc. BPR started investment in March 2014 and the balance of AUM exceeds 100 bn as of the end of September Overview of BPR Name of investment corporation Broadia Private REIT, Inc. Change of AUM of BPR ( 100 mn) Structure of investment Investment target Private REIT (non-listed real estate investment corporation) Diversified (Retail properties, office buildings, rental residences, logistics facilities, etc.) 1,400 1,200 1,000 Representative Executive officer Hitoshi Maehara 800 Start of AM March 13, Fiscal period February / August 400 AUM (as of the end of Sep. 2016) More than 100 bn 200 Mar Sep Mar Sep Mar Sep Asset Manager Tokyu Land Capital Management Inc. AUM

7 Background of the Reorganization 6 Although each of the asset managers has grown steadily together with its respective investment corporation, we will conduct the Reorganization of the Three Asset Managers to increase further competitiveness under expanding market environments. Background External environments Internal environments 15 years have passed since the start of the J-REIT market and 56 J-REITs are listed with approximately 15 trillion in size. Competition for acquiring properties is getting overheated due to increasing competitors. The Three Asset Managers have grown steadily and accumulated know-how and experience of AM respectively. Conduct the Reorganization for further growth of each asset manager. 60 Changes in the number of J-REITs and AUM in the J-REIT market ( trillion) AUM (right axis) Number of J-REITs (left axis) Listing of API Listing of CRR Source: Association for Real Estate Securitization. The figure in the number of J-REITs in 2016 is as of the end of September, while the figure in the amount of AUM in 2016 is as of the end of August. 0.0

8 Goal of the Reorganization 7 We expect that the Reorganization will enable each investment corporation to grow further and enhance a value of unitholders by becoming more sophisticated real estate and financial professional groups. We will continuously leverage comprehensive support from Tokyu Fudosan Holdings Group. Growth of asset managers Growth of each investment corporation Growth of unitholders value Comprehensive support from Tokyu Fudosan Holdings Group as a sponsor

9 Overview of the Reorganization 8 We will integrate AM operations entrusted to the Three Asset Managers by the investment corporations into one. (to be consolidated on April 1, 2017) (The Reorganization is related to the Three Asset Manegers, and is not related to each investment corporation.) Current AM structure (Up to March 31, 2017) TLC Activia Investment Management Inc. Activia Properties Inc. (API) Absorption-type merger *1 AM structure after the Reorganization (On and after April 1, 2017) TLC REIT Management Inc. *3 Activia Properties Inc. (API) TLC Comforia Investment Management INC. Comforia Residential REIT, Inc (CRR) Tokyu Land Capital Management Inc. Broadia Private REIT, Inc. (BPR) Private fund Absorption-type split *2 Comforia Residential REIT, Inc (CRR) Broadia Private REIT, Inc. (BPR) Tokyu Land Capital Management Inc. Private fund ( * 1) Absorption-type merger - The merger will take place with TLC Comforia Investment Management INC. as a surviving company and TLC Activia Investment Management Inc. as an absorbed company. ( * 2) Absorption-type split - The split will take place with Tokyu Land Capital Management Inc. as an absorption-split company and TLC Comforia Investment Management INC. as an absorption-type split succeeding company (Operations to be split - Operations of the AM of Broadia Private REIT, Inc. and its HR & labor) ( * 3) Change of trade name - The trade name of TLC Comforia Investment Management INC. will be changed to TLC REIT Management Inc.

10 Organizational chart 9 Asset management departments are organized under the asset management division of each investment corporation to ensure the establishment of an efficient AM system and prevention of conflicts of interest. Property acquisition, financial & accounting functions and others will be integrated to the Corporate Planning & Administration, Finance & Accounting, and Asset Investment departments to accumulate know-how of HR and AM. Shareholders Meeting Board Statutory Auditor Investment Committee Compliance Committee President & CEO Acquisition Priority Review Meeting Internal Audit Dept. Compliance Dept. Activia Management Div. Comforia Management Div. Broadia Management Div. Corporate Planning & Administration Dept. Finance & Accounting Dept. Asset Investment Dept. Strategic Management Dept. Asset Management Dept. Strategic Management Dept. Asset Management Dept. Strategic Management Dept. Asset Management Dept.

11 Objectives of the Reorganization 10 Through the Reorganization, we aim to enhance a value of unitholders of each investment corporation by strengthening respective AM capabilities through (1) sophisticated AM operations, (2) expansion of chances of acquiring properties, and (3) further development in HRs. Objectives (1) Sophisticated AM operations (2) Expansion of chances of acquiring properties (3) Further development in HRs Enhance a value of unitholders by strengthening AM capabilities

12 Objectives and effects of the Reorganization (1) 11 The first purpose is to sophisticate AM operations by consolidating the know-how of AM. We expect synergy effects by i) leveraging the know-how of AM which has been accumulated such as property-management, financing, compliance, etc. in terms of management aspects, and ii) integrating several parts of functions in terms of organizational aspects. Objectives Sophisticated AM operations Sophisticate the AM operations by consolidating the know-how of AM for investment corporations in the Three Asset Managers. Effects Management Increase the asset value by leveraging the know-how of AM including accumulated knowledge and experience Conduct appropriate AM operations by expanded transaction opportunities resulting from the increased number of properties under management Consolidate property acquisition functions Organization Integrate financial and accounting functions Unify compliance and internal auditing functions and ensure the independence of the functions

13 Objectives and effects of the Reorganization (2) 12 The second purpose is to expand opportunities to acquire properties by enhancing our presence in the real estate market We aim to expand acquisition opportunities by increasing access to property information and leveraging diversified investment methods. Objectives Expansion of chances of acquiring properties Chances of obtaining property information will increase due to a higher presence in the market with our AUM exceeding 600 bn. We aim to expand opportunities to acquire properties by carrying out AM for a wide rage of asset types and utilizing various investment methods including joint bidding, etc. Effects Opportunities to acquire properties Increase opportunities to obtain property information provided by sellers, mediators, etc Expand opportunities to acquire properties by a strengthened negotiation power Investment methods Conduct joint bidding in a bulk sale of several properties with diversified use Conduct joint investment in a large-sized project which would be difficult for a single entity to invest in

14 Objectives and effects of the Reorganization (3) 13 The third purpose is to train human resources. We intend to advance expertise and strengthen organizational capability by consolidating training and education. Objectives Further development in HRs We aim to train HRs more effectively and enhance the expertise of employees by unifying trainings and education or developing a structure which enables employees to experience a wide range of operations. Through these activities, we intend to become further professional group. Effects Advancement of expertise Becoming a more skilled professional groups by solid training and education programs Accumulation of the experience of AM by managing a wide asset types of properties Strengthen Organizational capability Accumulating a wide range of experience in operations under a flexible organization and system Carrying out operations with multifaceted points of view based on extensive experience in operations

15 Investment target for each investment corporation 14 Investment targets of API are retail and office properties, CRR: rental residences and serviced rental residences, BPR: retail properties, office buildings, rental residences, logistics facilities, etc. The investment targets for API and BPR may overlap in retail and office properties, while those for CRR and BPR may overlap in rental residences and serviced rental residences, which may cause competition for acquiring properties. API CRR BPR (Diversified) Retail properties Retail properties ( *1 ) Office buildings Office properties Rental residences and serviced rental residences ( *2 ) Rental residences Hotels Logistics facilities Others * 1. Retail properties include accommodations (hotels) and parking lots. * 2. Serviced rental residences include houses for older people, service apartments, flats for students (dormitories), etc.

16 Structure to prevent conflicts of interest (Priority rule for property information 1) 15 The order of priority on information provided by the sponsor remains unchanged before and after the Reorganization. On the other hand, regarding information provided by a third party, we will newly set up certain rules on the consideration of property acquisition, since some target assets for each investment corporation may overlap and also the same asset manager will be engaged in AM for several investment corporations after the Reorganization. Current practice Information provided by the sponsor* In principle, listed investment corporations (API and CRR) have priority in the examination of property acquisition. *Property information owned by the sponsor (Tokyu Land Corporation) and property information owned by a third party which the sponsor has obtained No change Information provided by a third party The investment corporation entrusting its AM to the asset manager who has obtained information will examine property acquisition. Change Information flow with respect to obtained property information Information provided by the sponsor Information provided by a third party TAIM (API) TCI (CRR) TAIM (API) TCI (CRR) TLCM (BPR) The listed investment corporations (API and CRR) keep priority after the Reorganization. TLCM (BPR) Set up rules on the consideration of property acquisition, since the same asset manager will be engaged in AM for the investment corporations after the Reorganization and investment targets may overlap.

17 Structure to prevent conflicts of interest (Priority rule for property information 2) 16 After the Reorganization, the Order of Prioritized Consideration regarding property information provided by a third party is determined according to the rules shown in the table below in principle. The rules are based on objective criteria of Investment target and Gross floor area, both of which can exclude arbitrariness. Information provided by a third party (after the Reorganization) Investment target Gross floor area *1 Order of Prioritized Consideration Retail and office properties *2 Rental residences Serviced rental residences *3 3,000m 2 or more Less than 3,000m 2 1,500m 2 or more Less than 1,500m 2 1st Priority API 2nd Priority BPR 1st Priority BPR 2nd Priority API 1st Priority CRR 2nd Priority BPR 1st Priority BPR 2nd Priority CRR Logistics facilities BPR *1 Gross floor area is calculated based on floor areas shown on property register. *2 Retail properties include accommodations (hotels) and parking lots. *3 Serviced rental residences include houses for older people, service apartments, flats for students (dormitories), etc. (Exceptional rules) In case of a specific investment corporation holds first negotiation right to and / or sectional ownership on anticipated properties and for other cases, the relevant investment corporation should be granted 1st Priority. In case of an investment corporation is designated as acquirer by the seller and for other cases, a relevant investment corporation shall be granted to consider acquisition without holding and deliberation of Acquisition Priority Review Meeting.

18 Impact from priority rule for property information NSC: (*) が重複するため 下段の注記を Note に変更しております 17 Among the current portfolio of API and CRR, the impact from new priority rules on the Order of Prioritized Consideration is 1% and 3%, respectively. Thus we believe effects on their opportunities to acquire properties for API and CRR is minimal. API CRR Proportion of properties with gross floor areas of less than 3,000 m2 which were acquired through information provided by third parties in the overall portfolio: 1% (1 property / 3.0 bn) Proportion of properties with gross floor areas of less than 1,500 m2 which were acquired through information provided by third parties in the overall portfolio: 3% (*) (7 properties / 5.1 bn) (*) 1% after the listing (1 property / 0.9 bn) Total portfolio (acquisition price basis) 34 properties / bn Total portfolio (acquisition price basis) 100 properties / bn Note: The figures are as of the end of Sep Note: The figures are as of the end of Sep. 2016

19 System for preventing conflicts of interest (Flow of decision- making) 18 In case of competition for acquiring the same properties among investment corporations occurs, we will prevent conflicts of interest by checking the Order of Prioritized Consideration at the newly established Acquisition Priority Review Meeting composed of the Compliance Manager and others. Decision-making flow on acquisition of assets Report to the Board Prior approval by the investment corporation s executive committee Report to investment corporation In case of related-party transactions, etc Approval by each Management Division Manager Investment Committee s deliberation and resolution Compliance Committee s deliberation and resolution In case of related-party transactions, etc Approval by Compliance Manager Proposal by the Asset Investment Department and each Management Division Check by Acquisition Priority Review Meeting Obtainment of property information

20 Utilizing Tokyu Fudosan Holdings Group NSC: イーライフデザイン の英語ロゴがあれば お送りください 19 In addition to utilize asset managers unique know-how and network, we will continue to make maximum use of Tokyu Fudosan Holdings Group s value chain through the group s comprehensive support after the Reorganization. Tokyu Fudosan Holdings Group Provide comprehensive support TLC REIT Management Inc.

21 Expansion of AUM 20 The AUM is expected to exceed 600 bn and we will accelerate external growth by increasing our presence in the market. ( 100 mn) 10,000 9,000 8,000 API CRR BPR Further acceleration of external growth by increasing a presence of asset managers as well as leveraging the support by the sponsor 7,000 6,000 5,000 4,000 3,000 2,000 1, Growth process before the Reorganization Hereafter Growth phases after the Reorganization * The figures on acquisition price basis * The figures in 2013, 2014, and 2015 are those at the fiscal period of each REIT (The fiscal period ended Nov. for API, Jan. for CRR and Feb. for BPR, respectively.) * The figures in 2016 represent those at the end of Sep.

22 Major schedule 21 The Reorganization will come into effect on April 1, Schedule September 29, 2016 Resolution at the Board Conclusions of the agreements for the absorption-type merger and absorption-type split November 1, 2016 (planned) Resolution at the Shareholders Meeting (*) *The Shareholders Meeting will be held at TAIM only. (given simplified merger and simplified split for TCI, this does not need to be held by TCI) April 1, 2017 (planned) The agreement for the absorption-type merger and absorption-type split will come into effect.

23 Disclaimer This material is prepared solely for the purpose of the provision of information, not for the purpose of the offering, solicitation, marketing, etc. of a particular financial product. Activia Properties Inc., Comforia Residential REIT, Inc, Broadia Private REIT, Inc., TLC Activia Investment Management Inc., TLC Comforia Investment Management INC., and Tokyu Land Capital Management Inc. ( the group ) shall not be responsible for updating the said information as well as guarantee the accuracy and certainty of the information. The contents of the information provided in this material are subject to change or deletion without notice. The quotation, reproduction, and diversion of all or part of the contents in this material shall be prohibited without prior consent of the group.