In September 2001 NBF became the first Japanese real estate investment corporation to be listed on the J-REIT section of the Tokyo Stock Exchange, and has since then its assets, revenues and profits have experienced steady growth.
It is our pleasure to announce NBF’s results during the 20th period (January 1 – June 30, 2011) consisting of operating revenues of ¥28,081 million, operating income of ¥11,919, net income of ¥8,757 million and a cash distribution per share of ¥15,138, thanks to heartfelt support from our shareholders.
Moreover, as of the end of said period NBF’s portfolio included a base of 64 properties owned representing an investment of ¥837.1 billion (based on acquisition price), total rentable area of 828,491 m2 (250,618 tsubo) with an occupancy rate of 97.1% and the total number of tenants standing at 1,011 as of the end of said period.
While Japan’s economy during the current period showed a slight recovery in business revenues and capital expenditures due to an increase of exports backed by recovery of the international economy, due to the impact of The Great East Japan Earthquake in March 2011, downward trends mainly in production activities intensified because of destroyed production facilities and supply chains, as well as restrictions on power supplies.
In the office building rental market, the vacancy rate in the Tokyo CBDs as of the end of the current period decreased by 0.1 point compared with the end of the previous period resulting in a vacancy rate of 8.81% (survey report by Miki Shoji Co., Ltd.), but still remained at a high level. On the other hand, occupancy rates in large-scale, excellent properties, especially quakeproof, newly-built properties in central Tokyo, gradually improved due to the progress of downward adjustments in rent levels as well as an increase in demand for larger spaces as the result of office consolidation, expansion and relocation etc. Nevertheless, the average offered rent decreased by ¥293 compared with the end of the previous period to ¥17,292 per tsubo (survey report by Miki Shoji Co., Ltd.), continuing to struggle.
Under these circumstances, NBF, based on competitive advantages in its portfolio, promoted leasing activities to fill vacant capacity as well as devoted itself to maintaining and improving occupancy rates by developing measures to enhance satisfaction of existing tenants, and setting appropriate rent levels in accordance with movements in the market. As the result of such efforts, NBF’s vacancy rate as of the end of this period improved by 0.5 points compared with the end of the previous period resulting in a 2.9% rate, which continued to be far lower than market average.
NBF expects that this trend of improvement in occupancy rates in large-scale, excellent properties with high-spec functions, including, in particular, quakeproof functions, will continue, but speculates that rent levels will begin to bottom out next year.
In the real property trading market, although a sense of temporary recession existed due to the impact of The Great East Japan Earthquake, certain transactions were observed mainly in central Tokyo due to the stabilized financing environment and advanced price adjustments of traded properties.
Considering the situation, NBF acquired six (6) new properties (including an additional partial acquisition) such as the NBF Ueno Bldg. acquired in January 2011, and decided in February 2011 to acquire the Mitsubishi Heavy Industries Head Office Building. Furthermore, as a substitution of assets, NBF decided in July 2011 to sell the NBF Sudacho Verde Bldg.
Although the supply of large-scale, excellent properties in the market targeted by NBF is still limited, NBF’s policy is to continue to undertake selective investments in excellent properties which will contribute to its mid- and long-term portfolio growth taking into account the soundness of its financial situation.
The direct impact on NBF’s portfolio of The Great East Japan Earthquake which occurred in March 2011 was limited to minor damage to certain properties which will not materially affect the management thereof, and NBF only reported ¥238 million (0.03% of the total acquisition amount of managed assets) as expenses for measures against earthquake disasters.
As for indirect impact, there are no apparent issues at present, and NBF expects no material impact in the future either; provided, it will be necessary to keep a close eye on the impact on the real property market of the problem of power supply shortages originally caused by the incident at the Fukushima No. 1 Nuclear Power Plant.
As seen above, although there are signs of market recovery, considering the ongoing uncertainty in the business environment, NBF projects a cash distribution per share of ¥15,100 during the 21st period (July – Dec. 2011), and ¥15,100 during the 22nd period (Jan – June. 2012).
In March 2011 NBF celebrated the 10th anniversary of its founding, and the 10th anniversary of its listing as a J-REIT will occur in September 2011. For the next decade, through maximum exploitation of its brand as the first and largest J-REIT in Japan as well as the know-how of its sponsor Mitsui Fudosan Co., Ltd., NBF aims to further shareholder value more than ever based on its consistent financial strategies by realizing balanced growth, both externally and internally, and promoting stable profit distributions on a mid-term and long-term basis.
We are grateful to our shareholders for continuing to guide and support us.
