A2 External Influences International Competitiveness and economic growth.
Investor Presentation for the Merger...2020/08/28 · • Mixed-use • Retail External Growth Aim...
Transcript of Investor Presentation for the Merger...2020/08/28 · • Mixed-use • Retail External Growth Aim...
I n v e s t o r P r e s e n t a t i o n f o r t h e M e r g e r
August 28, 2020
1. Overview of the Merger
2. Significance of the Merger
3. Growth Strategy
4. Financial Strategy
5. Post-Merger Financial Forecast
Appendix
Contents
P. 2
P. 10
P. 18
P. 23
P. 26
P. 28
Figures of less than one unit are truncated and percentage figures are calculated by rounding to the nearest whole number. (Note)
1. Overview of the Merger
Basic Principle of the New Investment Corporation
Support metropolitan life (live, work and consume) in Japan from the perspective of real estate
The largest(1) diversified J-REIT(2) investing in real estate that provide metropolitan life foundations
Japan Metropolitan Fund Investment Corporation
(MMI) (JRF)
3 *Please refer to page 41 for the notes to this page.
Significance of the Merger
Fit to Environment Changes
Promote flexible operation of facilities beyond the framework of asset classes, amid changes in operational environment
Strengthen capabilities to operate mixed-use properties by area or by asset level, under the structure of diversified REIT
Enhance unitholder values of both JRF and MMI through transition into diversified REIT
Expand Investment Universe Able to acquire mixed-use properties(1) and residential properties etc.
Able to enter into large scale transactions, such as bulk sale of multiple type assets
Allow greater flexibility in acquisition strategies to cope with expected changes in the
social structure
Create the Largest J-REIT Increase market presence significantly
Improve stability by more-diversified portfolio Enhance liquidity by increasing market capitalization
Enhance Stability
Further diversify portfolio
Build resilience to deterioration in business environment
Increase liquidity of the investment units and exposures in major indices
Accelerate Growth Further promote asset replacement and
external growth
Make the best use of properties beyond the framework of asset class
Accelerate investment for growth on the back of higher risk tolerance
1.
2.
3.
4 The term “Mixed-use properties” means properties occupied by more than two types of tenants such as retail, office, residential, hotel or other uses.
(1)
As of listing(1) (End of) latest period(2)
Number of properties 4 100
Asset size(3) 40.9bn yen 877.2bn yen
DPU(4) 3,313 yen 4,500 yen
NAV per unit(4)(5) 111,900 yen 223,600 yen
Before MC-UBS Group participation(6)
(End of) latest period(2)
Number of properties(7) 12 25
Asset size(3)(7) 157.6bn yen 282.7bn yen
DPU(8) 1,191 yen 2,049 yen
NAV per unit(5)(8) 63,500 yen 98,500 yen
Urban retail properties located in “where people gather” Main investment target Office buildings located in the three major metropolitan areas (Tokyo area, Osaka area and Nagoya area)
• Track record of 18 years • The largest J-REIT focusing on retail properties in terms of
asset size • Promotion of asset replacement from suburban-type to urban-
type
Operating results
• Proactive acquisition of properties since the MC-UBS Group participation as sponsor in 2015
• Almost doubled asset size in the past five years • Shifted the focus of the portfolio from Osaka area to Tokyo
area
Key properties
Characteristics of JRF and MMI
GYRE KAWASAKI Le FRONT mozo wonder city Twin 21 Yokohama i-land Tower Cube Kawasaki
5 *Please refer to page 41 for the notes to this page.
Japan Retail Fund Investment Corporation
(as of August 31, 2020)(5)
MCUBS MidCity Investment Corporation
(as of June 30, 2020)(6)
New Investment Corporation (Japan Metropolitan Fund)
(as of March 1, 2021) (Pro forma)(7)
Portfolio
Asset size (based on (anticipated) acquisition price) 888,884 million yen 282,710 million yen 1,191,594 million yen
Number of properties 102 properties 25 properties 127 properties
NOI yield (based on (anticipated) acquisition price)(1) 4.9% 4.5% 4.7%
NOI yield after depreciation (based on (anticipated) acquisition price) (2) 3.6% 3.6% 3.6%
Unrealized gain or loss 160,917 million yen 23,241 million yen 160,917 million yen
Financials
LTV 45.5% 42.1% 43.9%
Interest-bearing debt 411,725 million yen 126,975 million yen 538,700 million yen
Credit rating AA-(R&I) AA-(JCR) Aim to maintain/improve
Unitholder Value
NAV per unit(3) 223,800 yen 98,500 yen 108,200 yen
Book value per unit(4) 166,400 yen 87,500 yen 87,500 yen
Merged Investment Corporation at a Glance
Feb. 2021 Period (38th) (Forecast)
Jun. 2020 Period (28th) (Actual)
Aug. 2021 Period (39th) (Forecast)
DPU
DPU (forecast) 4,500 yen 2,049 yen 2,286 yen
DPU (forecast) (after accounting for merger ratio and unit split) 2,250 yen 2,049 yen Japan Retail Fund
Investment Corporation
MCUBS MidCity Investment Corporation
+1.6% +11.6%
% Change(8)
6 *Please refer to page 41 for the notes to this page.
Post-merger Portfolio
Diversification by Use(2) Diversification by Property Size(4) Diversification by Area(1)
Urban retail 51.2%
Office 15.6%
Mixed-use
11.6%
Others (3) 1.3%
Suburban retail
20.2%
Share of Top 10 Properties
31.5%
Walking Minutes from Nearest Station(6) Others Tenant Diversification(5)
Within 10 minutes
Within 1 minute 21.3%
More than 1 minute and less than or equal to 5 minutes 46.5%
More than 10 minutes
15.0%
Share of Top 10 Tenants
37.9%
Rent Type (based on annual rent)
Fixed 98.1%
Revenue-based 1.9%
Lease Type (based on annual rent)
Ordinary building (land) lease contract 42.3%
Fixed-term building (land) lease contract 57.7%
Lease Period(7) Average lease period 10.3years
85.0% Share of top 10 tenants before merger
JRF 45.3%
MMI 57.3%
Share of top 10 properties before merger
JRF 35.4%
MMI 72.0%
Asset Size
1,191.5bn yen
More than 5 minutes and less than or equal to 10 minutes 17.3%
Others 11.8%
Tokyo Area 54.0%
Osaka Area
28.5%
Nagoya Area 5.7%
Share of Three Metropolitan Areas
88.2%
7 *Please refer to page 42 for the notes to this page.
Growth Strategy
Basic Principle of the New Investment Corporation
Support metropolitan life (live, work and consume) in Japan from the perspective of real estate
Enha
nce
Unith
olde
r Val
ue
Short- to Mid-term
Mid- to
Long-term
Future Vision
Create virtuous cycle where area value and asset value improve together
• Further shift into urban properties and diversify asset type • Aim to increase DPU level
Build base for growth and improve profitability
• Revenue increase backed by external growth • Implementing reconstruction and conversion, etc. • Other investment measures for growth such as M&As
Execute various growth investments
8
Outline of Merger and Planned Schedule
Outline of Merger
Name of the new investment corporation
Japan Metropolitan Fund Investment Corporation Abbreviation : JMF
Method of the Merger
Absorption-type merger Surviving corporation :Japan Retail Fund Investment
Corporation (JRF) Dissolving corporation :MCUBS MidCity Investment
Corporation (MMI)
Merger ratio
JRF : MMI=1 : 1 (Allot 1 JRF investment unit per one MMI investment unit※) ※ A two for one unit split of JRF is scheduled in order to
allot one or more JRF investment units to MMI unitholders and the merger ratio will be based on the number of JRF units after the unit split
※ For reference, the merger ratio based on the number of JRF units before the unit split is JRF : MMI=1 : 0.5
Conditions for the Merger
The Merger is subject to that a proposal for approval of the Merger Agreement (a special resolution(1)) will be approved at the meetings of unitholders of both JRF and MMI
Planned Schedule
Execution of the Merger Agreement August 28, 2020
Record date for meeting of unitholders
August 31, 2020
Record date for meeting of unitholders
September 13, 2020
Meeting of unitholders October 23, 2020
Meeting of unitholders October 22, 2020
Delisting February 25, 2021
End of the final fiscal period before the Merger(2)
February 28, 2021
End of the fiscal period (immediately before the Merger)
February 28, 2021
Effective date of the Merger March 1, 2021
Payment of distribution Middle of May, 2021
Payment of merger consideration(3)
May, 2021
End of the first fiscal period after the Merger August 31, 2021
Japan Retail Fund Investment Corporation
(JRF) MCUBS MidCity Investment Corporation
(MMI)
9
Such resolution shall be passed with at least a two-thirds majority of the votes of the attending unitholders with the unitholders in attendance holding over half of the units outstanding. MMI will submit a proposal for a revision of the Articles of Incorporation to change the 29th business period, from the period from July 1, 2020 to December 31, 2020 to that from July 1, 2020 to February 28, 2021, to its general meeting of unitholders to be held on October 22, 2020, subject to approvals of the Merger Agreement at the respective general meetings of unitholders of JRF and MMI. The same shall apply hereinafter. An amount equivalent to the cash distribution for the business period of MMI from July 1, 2020 to February 28, 2021 will be paid as the merger consideration.
(1) (2) (3)
2. Significance of the Merger
Environment Changes
Urban
Mixed use means higher added value Various types of use head for coexistence and co-prosperity
Place to offer experience that cannot be gained via e-commerce Further distinction between online and real
Commuter-town Suburban
Office
Retail Residence
Changes in needs for office floors
No change in advantage of Urban
A role of offices is changing from a place for work to a place for interaction
Convenient offices remain highly valued as a place for interaction
Decline in needs for floor to sell product
Properties in favorable locations will increasingly become mixed-use
Rise in e-commerce
Conversion into a showrooming space or other use accelerates
Continued concentration of population to urban areas
Growing needs for residence in Urban
Population inflow into urban areas because of their strengths in social infrastructure
Needs for areas where one can work and consume increase
Accelerating contraction of rural area economies The decline and outflow of population
Increase in vacant facilities Reduction in number of tenants
✔ Widespread e-commerce and remote working
✔ Trend of mixed-use by area and by property
Growing needs for living near office Increase in number of elderly people and women who work, and more needs for nursing
Growing needs for consumption near home Increase in daytime population due to the spread of work from home
COVID-19 is accelerating environment changes
Office (Headquarters)
Office (Branches) Satellite Office
Showrooming / hands-on services
Facilities that can be used for other purposes, including
shops, other services, restaurants, offices and hotels
Supermarkets and other facilities deeply
engaged in daily living
Residential area (Urban)
Residential area (Commuter-town)
Added value
Needs for consumption in living areas
Needs for consumption in office districts
More people prefer to live in urban areas
Decline in retail properties located in
suburban areas
Decline in demand for office properties located in suburban
areas
Investment Target of the New Investment Corporation Accelerating trend of m
ixed-use by area or by property
Added value
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Increase in Mixed-use Properties
Office District Principal commercial districts Major stations/Residential stations
Examples of mixed-use
by area
Examples of mixed-use
by property
Urban Commuter-town
Akasaka / Shibuya Through active redevelopment, a number of mixed-use properties which are occupied by retailers and hotels emerged
Omotesando / Aoyama Mixed-use properties containing offices, residence and retail shops increase as the commercial district has expanded
Tachikawa A number of mixed-use properties are completed upon redevelopment mainly in the north side of Tachikawa Station
Retail × Satellite Office KAWASAKI Le FRONT
Retail × Distribution hub Machinoma Omori
Fulfills a function as a hub of broad area distribution of online supermarkets
Retail × Office Office × Retail G-Bldg. Daikanyama 02 Osaka YM Bldg.
Office × Retail Twin 21 and Nagoya Lucent Tower are occupied by tenants, including cafes and restaurants and other services for office workers and tenants that prefer spaces with a scenic view in upper floors
12
Strengths and Challenges of JRF and MMI
The Merger is the best way to enhance unitholder values of both JRF and MMI
Fit to Environment Changes Expand Investment Universe Create the Largest J-REIT
Operational capabilities Strength Track record of managing operational assets Strength Capability to operate offices with deep understanding of market trends
Capabilities of acquisitions Strength Strong presence as one of the largest holders of retail properties in Japan Strength Track record of achieving unique external growth
Investment targets Challenge Sector-specialized REIT subject to greater limitations Challenge Sector-focused REIT subject to greater limitations
Current environment Challenge Negative impacts on the retail sector in proportion to the popularization of e-commerce Challenge
Office leasing market uncertainties in association with spreading remote working
Breakthrough by the Merger
13
MC-UBS Asset Management Capability
Both JRF and MMI have built up a variety of experiences in multiple asset types
Internal and external growth supported by the network of approximately 1,400 tenants
G-Square Shibuya Dogenzaka
Acquisition with a low occupancy rate of 70%. Achievement of revenue increase by raising the occupancy rate and average unit rent
Tenant Relationships
Trends of leasing market and rents are analyzed through regular information exchange with research firms
Research of Leasing Market
A number of large-scale renewal works with designing space
Renewal
Reconstruction, floor expansion by building an annex building, tenant replacement premised on conversion, etc. have been implemented
Reconstruction/Floor Expansion /Conversion
Property acquisition focuses on specific areas to which competitive tenants are attracted, with an aim to enhance leasing potential in the relevant area
Area Focused Acquisition
The flow of people is analyzed based on locational information via smartphones, which is extended to analyses of people’s movements in the area and utilized for leasing
Analysis of Flow of People
The asset manager embarked on ESG efforts from an early stage and signed up to a number of initiatives, as the first of J-REITs or its asset manager
Front-runner among J-REITs
Both of the two investment corporations received the highest ESG ratings in the J-REIT sector from external ESG rating parties
Highest-awarded J-REIT
Value Enhancement Leasing Area Management ESG
GYRE
Re-acquisition of the former Esquisse Omotesando as GYRE, after reconstruction of the property. Renovation works in the restaurant floor has been completed recently
Omotesando /Harajuku / Aoyama
Achievement of upside rent revisions through tenant replacement at 18 properties held in the area
MSCI ESG Indices (1)
Both are rated as AA, the highest rating in the J-REIT sector, as of August 28, 2020, and selected for MSCI Japan ESG Select Leaders Index, for which only 8 J-REITs are selected
14
MMI JRF JRF JRF MMI
Inclusion of both of the investment corporations in the MSCI Index and their use of MSCI's logo, trademarks, service marks and indices in this document are not intended to constitute sponsorship, advertisement or sales promotion by MSCI or its affiliates for the two investment corporations. MSCI has the exclusive right to use the MSCI Index, and MSCI and the MSCI Index and its logo are trademarks and service marks of MSCI and its affiliates.
(1)
Fit Ourselves to Environment Changes
Examine options of reconstruction and conversion, for optimal use of properties free from their traditional uses
Consistently positive attitude for tenant replacement and renewal
Implement internal growth measures beyond asset type by leveraging our capabilities
Area management in view of synergy effects among tenants of different uses in urban areas in which further increase of mixed-use properties is expected
• Increase in value of the adjacent land as an office site by increasing the value of a retail property
GMS near stations in residential areas
Supermarket at lower floors and rental
housing at upper floors
Retail property near stations in residential
areas
Distribution center and supermarket
Urban amusement facility
Retail stores at lower floors and offices at
upper floors
Property adjacent to the portfolio properties
Large-scale mixed-use property
Area Management
Plan
Enhance tenant relationships
Keep up with changes in needs for offices
Seek the best use of properties 1 2
3
4
Plan
Utilize relationships with existing tenants beyond the borders of uses
• Attraction of retail tenants to office properties • Attraction of office tenants to retail properties for showrooming use Plan
Change in the role of offices from a place for work to a place for interaction Differentiate with an ability to attract people, cultivated in retail property
management
• Introduction of retailer tenants that can raise value of office buildings • Renewal of common areas for easier gathering and interaction Plan
A food court is set up, aiming to improve convenience of office workers in the surrounding area
KAWASAKI Le FRONT×Cube Kawasaki
15
Expand Investment Universe
Enables sustainable external growth in accordance with environment changes
Offices
Retail Properties
Mixed-use Properties
Others
Offices in urban areas
Before merger Post-merger
Urban Offices
Prime area
Major stations
Residential Station
Hotels in urban areas
Commuter-town Offices
Facing high street
Urban retail properties
Residential Station
Office x Retail
Office x Residence
Residence x Retail
Complex for three or more uses
Rental houses in urban areas
Hotels in urban areas
New categories
Located on main streets in major retail areas
Those that can be turned into mixed-use properties
With supermarkets being the main tenants
Promote acquisition of offices in favorable location and high building specifications
Examine satellite offices as a new target. However, the target will be limited to those that can also be used as retail space for a while
Located within 30-minute from key business areas and within 10-minute walk from the nearest station Limited to those with fixed rent, in favorable location and highly versatile
16
1,191.5 1,132.7
1,053.2 1,031.0
877.2
745.6 696.1 678.9
282.7
NewInvestmentCorporation
NipponBuilding
Fund
Japan RealEstate
NomuraReal Estate
Master Fund
Japan RetailFund
DaiwaHouse REIT
NipponPrologis REIT
ORIX JREIT MCUBSMidCity
Create the Largest J-REIT
Benefitting from advantages of larger asset size
Asset Size of J-REITs (based on (anticipated) acquisition price)(1)
(bn yen)
Enhance stability through diversification of properties, tenants and property uses
Portfolio diversification ✔
Higher presence in capital market ✔
Increase liquidity of the investment units and exposures in major indices
More flexibility in investment management ✔
Enhance growth opportunities through increasing investment management options
Advantages of larger asset size
17 *Please refer to page 42 for the notes to this page.
3. Growth Strategy
The growth strategy is a plan as of the date of this document and it is not guaranteed that such plan will be achieved. (Note)
Short-to-Mid Term : Build Base for Growth and Improve Profitability
Aim to raise the level of DPU by implementing growth strategies
成長施策
Improve NOI yield after depreciation 1 Asset replacement
Utilize cash on hand of approx. 30bn yen Remaining borrowing capacity of approx. 25bn yen to reach LTV of
45%(3) 2 Acquisition with cash on hand and borrowings
Monetize unrealized gains Unrealized gains on suburban retail properties(2) : 25.8bn yen 3 Distribution of
disposition gains
Scheduled refinancing amount for the five fiscal periods after the Merger: 120.5bn yen/ Average debt cost(1): 1.1%
Latest debt financing of the surviving corporation (JRF) : Borrowing term of 10 years debt cost of 0.4%
4 Reduction in debt cost
Aim to further raise the level of
DPU
19 *Please refer to page 42 for the notes to this page.
Asset Replacement
Assets to be Acquired Asset Replacement
Further shift into urban properties and diversify asset type
Assets to be Sold
• Office x Retail • Office x Residence • Residence x Retail • 3 or more purposes
Offices
Retail Properties
Mixed-use Properties
Residence
• Urban offices • Commuter-town offices
• Rental houses in urban areas
• Facing high street • Urban retail properties • Residential Station
Suburban Retail Properties • Properties with inferior location/profitability that fall
under the categories of sub assets and secondary core assets of JRF
Urban Retail Properties with Low Profitability • Properties with low profitability that are unlikely to
improve in the future • Properties that may be offered in exchange for other
properties which requires replacement property to be proposed
Urban Retail 51%
Office 16%
Mixed-use 12%
Others(2)
1% Suburban Retail 20%
Post-merger Portfolio(1)
Others • Hotels in urban areas • New categories
20
It is based on (anticipated) acquisition price of the New Investment Corporation. Hotel assets are classified into this category. In addition, residential and other new types of assets are classified into this category although that none of them are owned at present.
(1) (2)
• Office • Mixed-use • Retail
External Growth
Aim to achieve sustainable external growth utilizing own network and sponsor support
69.9bn yen/year
74%
39.1bn yen/year 30.8bn yen/year
JRF MMI
Past Track Record
74% 26%
Based on own network Sponsor support
Approx. 30bn yen
Approx. 340bn yen
Approx. 20bn yen Approx. 9bn yen
• Mixed-use • Retail
Approx. 200bn yen Approx. 50bn yen Approx. 90bn yen
Greater potential for external growth by expanding investment universe and opportunities to utilize sponsor support
• Bulk sale of multiple type assets • Mixed-use and residential properties
• Use of Mitsubishi Corporation Group’s capabilities of complex urban development(4)
Redevelopment of east side of
Shinagawa Station
Redevelopment of Tennozu District
Development capabilities of Mitsubishi Corporation Urban Development
• UBS Asset Management has extensive experience and track record in residential and mixed-use assets globally including Japan, with 75,000 residential units valued at ca. USD 25 billion(5)
Consideration of development of large-scale mixed-use property
Consideration of development of a new asset category such as Retail×Arena
(acquisition price basis)
Average annual acquisition amount in the past 5 years(1)
Acquisition based on own network
in the past 5 years
Current Pipeline External Growth Opportunities Going Forward(3)
Preferential negotiation right(2)
Deals in consideration(2)
New opportunities from expanded investment universe
Further use of sponsor support
Examples of past complex development of Mitsubishi Corp.
21 *Please refer to page 42 for the notes to this page.
Mid-to-Long Term : Execute Various Growth Investments
Aim to further enhance unitholder value on the basis of stable profitability
Growing asset size/revenues through acquisitions
Acquisition with a plan of reconstruction/conversion etc.
Participation in development opportunities
Exploring new asset categories
Improvement of profitability through renewal and conversion
Reconstruction/redevelopment with assets kept on balance sheet
Differentiation by space-designing capabilities
Initiatives within 5% of portfolio (Consideration of equity investment or mezzanine loan investment)
Utilization of IT
Seeking for M&A opportunities
Future Vision: Create virtuous cycle where area value and asset value improve together
External Growth Internal Growth Other Growth
22
4. Financial Strategy
Financial Strategy
Post-merger Financial Indicators
Aug. 2021 Period (39th)
Feb. 2022 Period (40th)
Aug. 2022 Period (41st)
Feb. 2023 Period (42nd)
Aug. 2023 Period (43rd)
Total/Average
Total Amount 30,250mn yen 21,000mn yen 27,900mn yen 14,500mn yen 26,900mn yen 120,550mn yen
Avg. term 7.2 years 7.9 years 7.6 years 8.4 years 7.4 years 7.6 years
Avg. debt cost(6) 0.99% 1.11% 1.04% 1.06% 0.90% 1.01%
Latest Debt Financing of the Surviving Corporation, JRF (Jul. 2020)
Amount 4.3bn yen
Borrowing term 10 years
Debt cost (7) 0.38%
Credit ratings
Aim to maintain/improve
JRF:AA-(R&I) MMI:AA-(JCR)
LTV(1)
Book value:43.9%
Appraisal value:38.8%
Average debt cost(2)
0.80%
Average loan term remaining (3)
4.6 years
Long-term borrowing ratio(4)
98.7%
Fixed-interest ratio
91.6%
Commitment Line
Borrowing to be Refinanced for the Post-merger Five Fiscal Periods (Long-term Fixed and Investment Corporation Bond Only)
Maximum amount Contract period Longest borrowing period Lender
① 50bn yen 3 years 5 years MUFG Bank, Ltd., Sumitomo Mitsui Trust Bank, Ltd., Mizuho Bank, Ltd.
② 10bn yen 2 years 3 years Sumitomo Mitsui Banking Corporation
③ 15bn yen 3 years 3 years MUFG Bank, Ltd., Sumitomo Mitsui Trust Bank, Ltd., Mizuho Bank, Ltd.
Total:75bn yen Largest amount in the J-REITs(5)
Aim to reduce debt cost by maintaining the strong balance sheet
(As of end of July 2020)
JRF・MMI
24 *Please refer to page 42 for the notes to this page.
Return to Unitholders
Negative goodwill as of August 26 (pro forma)(1) 45,107mn yen
Reserves will be used for maintaining stable DPU
Post-merger Reserve Post-merger Asset Management Fee Structure
The asset management fee structure of the surviving corporation (JRF) will be used
Post-merger reserve (pro forma)
Retained earnings for temporary difference
adjustment (pro forma)
43,750mn yen
Reserves of JRF, surviving
corporation
5,902mn yen
Post-merger reserve (pro forma)
49,653mn yen
49,653mn yen
<Breakdown>
To be used for stabilization of the DPU level Regular reversal of retained earnings for temporary difference adjustment
(50 years, 100 fiscal periods) Makeup for temporary revenue decrease due to changes in external
circumstances Makeup for temporary revenue decrease due to an exit of large-lot tenant Makeup for temporary revenue decrease due to asset replacement in which
asset sale precedes acquisition Makeup for revenue decrease along with reconstruction, conversion and
renewal
Policy to utilize the reserve
Asset Management Fee I Gross Asset Value× 0.45% (per annum)
Asset Management Fee II Total Distribution × 5.65%
Acquisition Fee Acquisition Value × 0.8%
Disposal Fee Disposition value × 0.6% *No Disposition Fee shall be paid in the case of a capital loss from disposition
Fee Structure of the Surviving Corporation (JRF)
Merger Fee Appraisal value of assets received at merger × up to 2.0%
25 This is an estimate based on the investment unit price of JRF as of August 26, 2020 and the appraisal value of the properties in MMI’s portfolio as of June 30, 2020 (the end of 28th Period) (market value as of the same date with regard to silent partnership interest). (1)
5. Post-Merger Financial Forecast
Forecast of Post-merger Operating Results
Aug. 2021 Period (39th)
(Forecast) Memo
Operating revenue 39,689 mn yen Takes into account the delay in leasing activities caused by COVID-19 Operating expenses 23,025 mn yen Decrease in depreciation and SG&A of MMI due to the Merger Temporary expenses related to merger(1) 1,357 mn yen Merger fee of 1,000 million yen, Merger cost of 357 million yen
(NOI: excluding gain on sales of property) 28,027 mn yen
Operating income 16,663 mn yen
Non-operating revenues - mn yen
Non-operating expenses 2,073 mn yen Decrease in cost related to financing, etc. of MMI due to the Merger Ordinary income 14,590 mn yen
Extraordinary income 45,107 mn yen Gain on negative goodwill in association with the Merger Net income 59,697 mn yen
Allocation to reserve 43,750 mn yen Addition to reserve of gain on negative goodwill excluding temporary cost in association with the Merger
Reversal of reserve 31 mn yen Amortization of existing reserve for temporary difference adjustments of JRF on a straight-line basis
Total distribution 15,977 mn yen
Units outstanding 6,989,091 units
Distribution per unit 2,286 yen
Capital expenditure 4,269 mn yen
Repair cost 946 mn yen
Total 5,216 mn yen
Depreciation 6,502 mn yen
27 This is the total of merger fees payable to the Asset Manager and expenses related to the Merger including financial advisory fee and other advisory fees payable to professional advisors; the same shall apply hereinafter. (1)
Appendix
Asset Manager
Mitsubishi Corp.-UBS Realty Inc.
Board Members Track Record
President & CEO & Representative Director Katsuji Okamoto
Deputy President & Representative Director Naoki Suzuki
Director (full-time) Tadatsugu Matsutani
Director (part-time) Naoshi Ogikubo
Director (part-time) Katsuhisa Sakai
Director (part-time) Joe Azelby
Director (part-time) Keiichi Miki
Director (part-time) Graham Mackie
Mission
Vision
“Always create new values, for people, the community and the world” Through real estate investment management, we create new demands in our society and new values that exceed people’s expectations
We strive to be the leading group of professionals, trusted by people, the community and the world
Mission and Vision Post-merger Structure
18 years of experience in operating J-REITs ✔
Operating 3 REITs ✔
Largest J-REIT AUM of 1.4tn yen(1) ✔
One of the largest buyers of commercial real estate in Japan ✔
Sponsor
スポンサー
New Division Asset Manager
Investment Corporation
Industrial Division
Japan Metropolitan Fund Investment Corporation
Support metropolitan life in Japan
Support Japanese industries
29 This is the sum of the acquisition prices of the three investment corporations managed by the asset manager as of the end of July 2020. (1)
Forecast of Operating Results Before Merger (JRF)
Aug. 2020 Period (37th) (Forecast)(1)
Feb. 2021 Period (38th) (Forecast) Period-on-period change
Operating revenue 30,617 mn yen 29,823 mn yen -793 mn yen
Gain on sales of property 1,787 mn yen - mn yen -1,787 mn yen
Operating expenses 17,154 mn yen 17,475 mn yen +321 mn yen
Of which temporary expenses related to merger 198 mn yen 73 mn yen -125 mn yen
(NOI: excluding gain on sales of property) 20,443 mn yen 20,928 mn yen +485 mn yen
Operating income 13,462 mn yen 12,348 mn yen -1,114 mn yen
Non-operating revenues - mn yen - mn yen - mn yen
Non-operating expenses 1,716 mn yen 1,648 mn yen -67 mn yen
Ordinary income 11,746 mn yen 10,699 mn yen -1,047 mn yen
Extraordinary income - mn yen - mn yen - mn yen
Net income 11,746 mn yen 10,698 mn yen -1,047 mn yen
Allocation to reserve 66 mn yen - mn yen -66 mn yen
Reversal of reserve 31 mn yen 1,012 mn yen +981 mn yen
Total distribution 11,711 mn yen 11,711 mn yen - mn yen
Units outstanding 2,602,483 units 2,602,483 units - units
Distribution per unit 4,500 yen 4,500 yen - yen
Capital expenditure 2,853 mn yen 2,363 mn yen -489 mn yen
Repair expenses 500 mn yen 585 mn yen +84 mn yen
Total 3,354 mn yen 2,949 mn yen -405 mn yen
Depreciation 5,455 mn yen 5,439 mn yen -15 mn yen
Calculated by adding temporary expense related to the Merger to the forecast announced on August 7, 2020. (1)
30
Results and Forecast of Operating Results Before Merger (MMI)
Jun. 2020 Period (28th) (Actual)
Feb. 2021 Period (29th) (Forecast)(1)
Operating revenue 9,061 mn yen 12,233 mn yen
Operating expenses 4,785 mn yen 6,910 mn yen
(NOI: excluding gain on sales of property) 6,318 mn yen 8,162 mn yen
Operating income 4,276 mn yen 5,322 mn yen
Non-operating revenues 3 mn yen - mn yen
Non-operating expenses 619 mn yen 941 mn yen
Of which temporary expenses related to merger - mn yen 142 mn yen
Ordinary income 3,660 mn yen 4,380 mn yen
Extraordinary income 10 mn yen - mn yen
Extraordinary loss 10 mn yen - mn yen
Net income 3,657 mn yen 4,379 mn yen
Allocation to reserve - mn yen - mn yen
Reversal of reserve - mn yen 998 mn yen
Total distribution 3,657 mn yen 5,377 mn yen
Units outstanding 1,784,125 units 1,784,125 units Distribution per unit (29th: Merger consideration per unit) 2,049 yen 3,014 yen
Capital expenditure 1,002 mn yen 1,433 mn yen
Repair expenses 300 mn yen 571 mn yen
Total 1,303 mn yen 2,004 mn yen
Depreciation 1,267 mn yen 1,760 mn yen
Based on the assumption of 8-month business period from July 1, 2020 to February 28, 2021. (1)
31
Specified Affiliated Company
(Parent Company of the Asset Manager)
MUFG Bank, Ltd. Mizuho Bank, Ltd.
PwC Tax Japan
Mitsubishi UFJ Trust and Banking Corporation
Structure of the Merged Investment Corporation
(a) Asset Management Agreement / Trademark License Agreement (b) Asset Custodian Contract / General Administrative Services Agreement / Account Administrative Service Agreement / Special Accounts Administration Agreement (c) Fiscal Agency Agreement / Administrative Services Agreement Related to Principal and Interest Payment (d) Tax Service Agreement
Name of contracts
Investment Corporation
Japan Metropolitan Fund Investment Corporation
General Meeting of Unitholders
Mitsubishi Corp.-UBS Realty Inc.
Asset Manager
Mitsubishi Corporation
Board of Directors
Executive Director: Shuichi Namba
Supervisory Director: Masahiko Nishida
Supervisory Director: Masaharu Usuki
PricewaterhouseCoopers Arata LLC
Independent Auditor
Asset Custodian/ General Administrator/
Special Accounts Administrator
General Operations Agent of Investment Corporation
Bond
Tax Administrator
(a)
(51% Owned) (b)
(c)
(d)
32
Japan Retail Fund Investment Corporation (JRF) MCUBS MidCity Investment Corporation (MMI)
Representative (Executive director) Shuichi Namba Katsuhiro Tsuchiya
Supervisory director Masahiko Nishida Masaharu Usuki
Haruo Kitamura Osamu Ito
Kyoko Nagata
TSE code 8953 3227
Date of fund listing March 12, 2002 August 29, 2006
Fiscal period Six months ending in February and August Six months ending in June and December
Units outstanding(1) 2,618,017 units 1,784,125 units
Total equity(1) 411,878 mn yen 151,540 mn yen
Asset Manager Mitsubishi Corp.-UBS Realty Inc. Mitsubishi Corp.-UBS Realty Inc.
Asset custodian Mitsubishi UFJ Trust and Banking Corporation Sumitomo Mitsui Trust Bank, Ltd.
Unitholder registry administrator Mitsubishi UFJ Trust and Banking Corporation Mitsubishi UFJ Trust and Banking Corporation
General administrator of accounting, etc. Mitsubishi UFJ Trust and Banking Corporation Sumitomo Mitsui Trust Bank, Ltd.
General operations agent of Investment Corporation bond MUFG Bank, Ltd. Mizuho Bank, Ltd.
Overview of the Two Investment Corporations
33 The figures are as of the end of the most recent fiscal period. (1)
0
200
400
600
800
1,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Progress and Growth of the Two Investment Corporations (JRF)
0
1,000
2,000
3,000
4,000
5,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
877.2 bn yen
Feb. 2020 Period (36th)
4,500 yen
Feb. 2020 Period (36th)
Asset size
Distribution per unit(1)
(bn yen)
(yen)
Expand asset size, with a focus on suburban-type ML properties
Strengthen the balance sheet
Merger
Resume external growth
Shifting focus on urban properties Acquisition of urban properties
and disposition of suburban properties
(based on acquisition price)
34 JRF implemented a four-for-one unit split on March 1, 2010, the figures from the Aug. 2002 (1st) Period to the Feb. 2010 (16th) Period are calculated by dividing the actual amount of distribution by four respectively. (1)
Progress and Growth of the Two Investment Corporations (MMI)
Asset size(1)
Distribution per unit(2)
(bn yen)
(yen)
Before participation of MC-UBS Group as a sponsor
External growth via focused investment in three metropolitan areas and four public offerings Improvement of portfolio profitability through internal growth, strengthening financial soundness
and strategic asset replacement
0
100
200
300
2006 2014 2015 2016 2017 2018 2019 2020
0
1,000
2,000
3,000
2006 2014 2015 2016 2017 2018 2019 2020
Gain on sales of property etc.
Participation of MC-UBS Group
as a sponsor
282.7 bn yen
Jun. 2020 Period (28th)
2,049 yen
Jun. 2020 Period (28th)
(based on acquisition price)
Participation of MC-UBS Group
as a sponsor
35
Excluding the equity interest in a silent partnership (tokumei kumiai), the underlying asset of which is Nagoya Lucent Tower. As MMI implemented a five-for-one unit split on January 1, 2018, the figures from the Aug. 2002 (1st) Period to the Dec. 2017 (23rd) Period are calculated by dividing the actual amount of distribution by five respectively.
(1) (2)
Area Property Name Location
(Anticipated)Acquisition
Price(million yen)
InvestmentRatio
(pro forma)
Leasable
Space (m²)(1)
Occupancy
Rate(1)
No. of
Tenants(1)
CoreMachinoma Omori Ota-ku, Tokyo 9,100 0.8% 8,963.39 95.9% 36G-Bldg. Daikanyama 02 Shibuya-ku, Tokyo 3,600 0.3% 2,166.69 79.4% 8Abiko Shopping Plaza Abiko-shi, Chiba 10,322 0.9% 41,293.90 100.0% 58Ito-Yokado Yabashira Matsudo-shi, Chiba 1,616 0.1% 21,308.78 100.0% 1Ito-Yokado Tsunashima Yokohama-shi, Kanagawa 5,000 0.4% 16,549.50 100.0% 1AEON Itabashi Shopping Center Itabashi-ku, Tokyo 12,411 1.0% 72,748.34 100.0% 1SEIYU Hibarigaoka Nishi Tokyo-shi, Tokyo 6,100 0.5% 19,070.88 100.0% 1Round1 Machida Machida-shi, Tokyo 2,450 0.2% 6,801.89 100.0% 1Round1 Stadium Itabashi Itabashi-ku, Tokyo 2,400 0.2% 14,828.74 100.0% 1Summit Store Nakano Minamidai Nakano-ku, Tokyo 3,100 0.3% 3,536.50 100.0% 1Colline Bajikouen Setagaya-ku, Tokyo 3,100 0.3% 5,368.02 100.0% 10Kawaramachi OPA Kyoto-shi, Kyoto 18,500 1.6% 18,848.20 100.0% 1G-Bldg. Shinsaibashi 01 Osaka-shi, Osaka 1,582 0.1% 886.46 100.0% 2Round1 Stadium Sennichimae(Land with leasehold interest)
Osaka-shi, Osaka 8,000 0.7% 1,711.63 100.0% 1
G-Bldg. Shinsaibashi 02 Osaka-shi, Osaka 4,380 0.4% 948.72 100.0% 1Round1 Kyoto Kawaramachi Kyoto-shi, Kyoto 2,800 0.2% 8,821.66 100.0% 1G-Bldg. Shinsaibashi 03 Osaka-shi, Osaka 30,500 2.6% 5,319.29 100.0% 4EDION Kyobashi(Land with leasehold interest)
Osaka-shi, Osaka 5,640 0.5% 4,307.16 100.0% 1
G-Bldg. Abeno 01 Osaka-shi, Osaka 4,285 0.4% 4,757.35 100.0% 10G-Bldg. Umeda 01 Osaka-shi, Osaka 9,483 0.8% 3,529.51 100.0% 12G-Bldg. Shinsaibashi 04 Osaka-shi, Osaka 3,170 0.3% 1,610.63 100.0% 5G-Bldg. Kyoto Kawaramachi 01 Kyoto-shi, Kyoto 2,180 0.2% 2,398.34 100.0% 4G-Bldg. Midosuji 01 Osaka-shi, Osaka 9,975 0.8% 2,446.00 100.0% 2Round1 Sannomiya Station Kobe-shi, Hyogo 3,200 0.3% 10,054.52 100.0% 1G-Bldg. Kobe Sannomiya 01 Kobe-shi, Hyogo 3,000 0.3% 3,750.38 100.0% 5G-Bldg. Midosuji 02 Osaka-shi, Osaka 15,000 1.3% 1,428.28 100.0% 1Kyoto Family Kyoto-shi, Kyoto 5,340 0.4% 19,639.09 100.0% 63AEON MALL Tsurumi Ryokuchi Osaka-shi, Osaka 29,902 2.5% 138,538.63 100.0% 1AEON MALL Itami Itami-shi, Hyogo 21,488 1.8% 157,904.26 100.0% 1Life Shimodera(Land with leasehold interest)
Osaka-shi, Osaka 1,683 0.1% 4,344.18 100.0% 1
Life Taiheiji(Land with leasehold interest)
Higashi Osaka-shi, Osaka 1,282 0.1% 3,898.01 100.0% 1
KAMISHIN PLAZA Osaka-shi, Osaka 3,900 0.3% 12,008.81 89.0% 38m-city Toyonaka Toyonaka-shi, Osaka 5,570 0.5% 33,301.93 100.0% 1G-Bldg. Nagoya Sakae 01 Nagoya-shi, Aichi 1,900 0.2% 794.02 24.8% 1AEON Yagoto Nagoya-shi, Aichi 3,698 0.3% 63,702.48 100.0% 1mozo wonder city Nagoya-shi, Aichi 55,480 4.7% 86,526.78 100.0% 219Valor Kachigawa(Land with leasehold interest)
Kasugai-shi, Aichi 6,350 0.5% 20,509.10 100.0% 1
Tokyoarea
Nagoyaarea
Osakaarea
Portfolio List
Japan Retail Fund Investment Corporation
36
Area Property Name Location
(Anticipated)Acquisition
Price(million yen)
InvestmentRatio
(pro forma)
Leasable
Space (m²)(1)
Occupancy
Rate(1)
No. of
Tenants(1)
CoreG-Bldg. Minami Aoyama 02 Minato-ku, Tokyo 5,350 0.4% 1,529.15 100.0% 4G-Bldg. Daikanyama 01 Shibuya-ku, Tokyo 1,235 0.1% 599.79 100.0% 1GYRE Shibuya-ku, Tokyo 22,712 1.9% 4,828.12 100.0% 15Bic Camera Tachikawa Tachikawa-shi, Tokyo 11,920 1.0% 20,983.43 100.0% 2G-Bldg. Kita Aoyama 01 Minato-ku, Tokyo 989 0.1% 492.69 100.0% 2G-Bldg. Jiyugaoka 01 Meguro-ku, Tokyo 3,093 0.3% 2,274.60 59.7% 2Cheers Ginza Chuo-ku, Tokyo 4,200 0.4% 1,686.58 100.0% 10G-Bldg. Jingumae 06 Shibuya-ku, Tokyo 2,360 0.2% 670.42 100.0% 4G-Bldg. Jingumae 01 Shibuya-ku, Tokyo 3,400 0.3% 555.75 100.0% 2G-Bldg. Jingumae 02 Shibuya-ku, Tokyo 2,233 0.2% 426.29 100.0% 3G-Bldg. Minami Aoyama 01 Minato-ku, Tokyo 10,085 0.8% 1,592.90 100.0% 3La Porte Aoyama Shibuya-ku, Tokyo 9,400 0.8% 4,158.53 96.9% 23G-Bldg. Shinjuku 01 Shinjyuku-ku, Tokyo 6,600 0.6% 1,093.67 100.0% 1G-Bldg. Jingumae 03 Shibuya-ku, Tokyo 5,520 0.5% 1,676.87 100.0% 8G-Bldg. Minami Ikebukuro 01 Toshima-ku, Tokyo 5,800 0.5% 5,066.06 100.0% 8Urban Terrace Jingumae Shibuya-ku, Tokyo 2,797 0.2% 1,719.19 100.0% 2Arkangel Daikanyama(Land with leasehold interest)
Meguro-ku(Shibuya-ku), Tokyo
1,000 0.1% 904.04 100.0% 1
G-Bldg. Omotesando 01 Shibuya-ku, Tokyo 5,850 0.5% 1,508.03 100.0% 1Round1 Yokohama Station West Yokohama-shi, Kanagawa 3,930 0.3% 6,560.09 100.0% 1G-Bldg. Sangenjaya 01 Setagaya-ku, Tokyo 3,725 0.3% 3,471.52 100.0% 3G-Bldg. Ginza 01 Chuo-ku, Tokyo 5,500 0.5% 1,610.54 100.0% 6KAWASAKI Le FRONT Kawasaki-shi, Kanagawa 30,000 2.5% 49,222.44 100.0% 67G-Bldg. Shibuya 01 Shibuya-ku, Tokyo 3,230 0.3% 1,630.03 100.0% 2G-Bldg. Omotesando 02 Shibuya-ku, Tokyo 17,705 1.5% 5,555.65 100.0% 6G-Bldg. Kichijoji 01 Musashino-shi, Tokyo 3,460 0.3% 1,718.21 100.0% 1CUTE CUBE HARAJUKU Shibuya-ku, Tokyo 8,520 0.7% 1,428.55 100.0% 10G-Bldg. Ueno 01 Taito-ku, Tokyo 3,320 0.3% 1,471.80 100.0% 1G-Bldg.Takadanobaba 01 Shinjyuku-ku, Tokyo 5,945 0.5% 3,569.20 100.0% 13G-Bldg. Akihabara 01 Chiyoda-ku, Tokyo 4,980 0.4% 2,701.99 100.0% 1G-Bldg. Akihabara 02 Chiyoda-ku, Tokyo 2,500 0.2% 1,037.33 100.0% 1G-Bldg. Kichijoji 02 Musashino-shi, Tokyo 15,300 1.3% 8,838.79 100.0% 1G-Bldg. Ginza Chuo-Dori 01 Chuo-ku, Tokyo 13,000 1.1% 3,141.07 100.0% 9MARINE & WALK YOKOHAMA Yokohama-shi, Kanagawa 11,300 0.9% 8,347.69 98.5% 25G-Bldg. Jingumae 07 Shibuya-ku, Tokyo 1,950 0.2% 373.12 100.0% 1G-Bldg. Minami Aoyama 03 Minato-ku, Tokyo 12,200 1.0% 1,373.46 74.7% 5G-Bldg. Jingumae 08 Shibuya-ku, Tokyo 2,490 0.2% 802.40 100.0% 3Round1 Stadium Kawasaki Daishi Kawasaki-shi, Kanagawa 2,370 0.2% 13,559.17 100.0% 1G-Bldg. Jingumae 09 Shibuya-ku, Tokyo 7,000 0.6% 1,127.06 85.3% 5
Tokyoarea
(2)
For “Leasable Space”, “Occupancy Rate” and “No. of Tenants”, the figures are as of the end of June, 2020. For “GYRE”, its acquisition price includes the initially-held land with leasehold and the property additionally acquired.
(1) (2)
Area Property Name Location
(Anticipated)Acquisition
Price(million yen)
InvestmentRatio
(pro forma)
Leasable
Space (m²)(1)
Occupancy
Rate(1)
No. of
Tenants(1)
CoreRound1 Hiroshima Hiroshima-shi, Hiroshima 2,970 0.2% 9,890.63 100.0% 1DFS T GALLERIA OKINAWA Naha-shi, Okinawa 15,600 1.3% 42,088.14 100.0% 1G-Bldg. Sendai Ichibancho 01 Sendai-shi, Miyagi 4,320 0.4% 2,387.17 100.0% 1G-Bldg. Naha-shintoshin 01 Naha-shi, Okinawa 5,650 0.5% Not disclosed 100.0% 2G-Bldg. Tenjin Nishi-dori 01 Fukuoka-shi, Fukuoka 4,850 0.4% 2,667.42 88.8% 7G-Bldg. Tenjin Nishi-dori 02 Fukuoka-shi, Fukuoka 5,000 0.4% 1,496.56 100.0% 1AEON Naha Shopping Center Naha-shi, Okinawa 10,830 0.9% 79,090.48 100.0% 1AEON MALL Sapporo Hassamu Sapporo-shi, Hokkaido 18,818 1.6% 102,162.16 100.0% 1
Secondary coreAEON MALL Musashi Murayama Musashimurayama-shi, Tokyo 30,600 2.6% 137,466.97 100.0% 1m-city Kashiwa Kashiwa-shi, Chiba 5,520 0.5% 20,437.36 100.0% 1Ario Otori Sakai-shi, Osaka 19,040 1.6% 95,135.36 100.0% 1AEON MALL Kobe Kita Kobe-shi, Hyogo 10,920 0.9% 128,050.62 100.0% 1Nara Family Nara-shi, Nara 34,875 2.9% 82,927.89 99.2% 113Oyama Yuen Harvest Walk Oyama-shi, Tochigi 10,709 0.9% 59,535.10 98.5% 65Tecc Land Fukuoka Shime Honten Kasuya-gun, Fukuoka 4,150 0.3% Not disclosed 100.0% 1
SubAEON MALL Yamato Yamato-shi, Kanagawa 16,823 1.4% 85,226.68 100.0% 1Higashi-Totsuka Aurora City Yokohama-shi, Kanagawa 50,500 4.2% 109,355.90 100.0% 5Ito-Yokado Yotsukaido Yotsukaido-shi, Chiba 13,744 1.2% 59,762.30 100.0% 2Makuhari Plaza Chiba-shi, Chiba 5,700 0.5% 24,505.37 100.0% 5AEON Takatsuki Takatsuki-shi, Osaka 11,700 1.0% 77,267.23 100.0% 1Life Kishibe(Land with leasehold interest)
Suita-shi, Osaka 1,910 0.2% 5,516.61 100.0% 1
Izumisano Shofudai(Land with leasehold interest)
Izumisano-shi, Osaka 2,625 0.2% 44,009.52 100.0% 2
Round1 Stadium Sakai Chuo Kanjyo Sakai-shi, Osaka 1,750 0.1% 17,521.46 100.0% 1pivo Izumi Chuo Izumi-shi, Osaka 6,000 0.5% 21,182.94 100.0% 17Round1 Stadium Takatsuki Takatsuki-shi, Osaka 2,080 0.2% 19,767.64 100.0% 1AEON MALL Sapporo Naebo Sapporo-shi, Hokkaido 9,260 0.8% 74,625.52 100.0% 1MrMax Nagasaki Nagasaki-shi, Nagasaki 2,475 0.2% 12,115.09 100.0% 2
JRF Total/Average 102 Properties 888,884 2,308,120.39 99.7% 989
Others
Others
Tokyoarea
Osakaarea
Others
Tokyoarea
Osakaarea
Portfolio List
Japan Retail Fund Investment Corporation MCUBS MidCity Investment Corporation
37
(2)
(2)
(3)
Area Property Name LocationAppraisal
Value(million yen)
InvestmentRatio
(pro forma)
Leasable
Space (m²)(1)
Occupancy
Rate(1)
No. of
Tenants(1)
Sumitomo Fudosan Ueno Bldg. No.6 Taito-ku, Tokyo 8,690 0.7% 6,858.16 100.0% 2
G-Square Shibuya Dogenzaka Shibuya-ku, Tokyo 17,000 1.4% 5,051.06 100.0% 9
Shibuya Sakuragaoka Square Shibuya-ku, Tokyo 19,700 1.7% 6,379.66 100.0% 4
Yokohama Creation Square Kanagawa-ku, Yokohama 8,250 0.7% 12,704.18 99.2% 43
Cube Kawasaki Kawasaki-ku, Kawasaki 23,600 2.0% 24,494.06 100.0% 10
Higashi-Nihombashi Green Bldg. Chuo-ku, Tokyo 3,200 0.3% 3,254.77 100.0% 7
Sasazuka Center Bldg. Shibuya-ku, Tokyo 9,310 0.8% 8,240.30 100.0% 9
USC Bldg. Koto-ku, Tokyo 11,500 1.0% 12,487.73 93.9% 9
Yoshiyasu Kanda Bldg. Chiyoda-ku, Tokyo 4,250 0.4% 3,149.39 100.0% 7
TOYOTA MOBILITY SERVICE Bldg. Chuo-ku, Tokyo 10,400 0.9% 6,123.81 100.0% 1
M-City Akasaka 1-chome Bldg. Minato-ku, Tokyo 4,470 0.4% 2,550.44 100.0% 12
Yokohama i-land Tower Naka-ku, Yokohama 23,900 2.0% 25,460.50 100.0% 7
M-City Edogawabashi Bldg. Bunkyo-ku, Tokyo 4,240 0.4% 3,472.70 100.0% 2
East Square Tokyo Koto-ku, Tokyo 9,760 0.8% 12,208.42 77.5% 12
AEON MALL Tsudanuma Narashino-shi, Chiba 29,000 2.4% 101,210.44 100.0% 1
Hotel Vista Premio Tokyo Minato-ku, Tokyo 11,000 0.9% 4,236.46 100.0% 2
Twin 21 Chuo-ku, Osaka 60,300 5.1% 82,304.82 98.0% 103
MID Imabashi Bldg. Chuo-ku, Osaka 2,670 0.2% 4,277.63 100.0% 21
Kitahama MID Bldg. Chuo-ku, Osaka 11,500 1.0% 10,189.49 100.0% 10
MID Nishihommachi Bldg. Nishi-ku, Osaka 2,600 0.2% 3,881.74 100.0% 18
Higobashi MID Bldg. Nishi-ku, Osaka 4,400 0.4% 4,655.57 100.0% 12
Osaka YM Bldg. Fukushima-ku, Osaka 8,180 0.7% 9,952.88 100.0% 28
Konami Sports Club Kyobashi Miyakojima-ku, Osaka 3,430 0.3% 9,586.26 100.0% 1
Sendai Capital Tower Aoba-ku, Sendai 6,800 0.6% 12,999.80 95.2% 75
Dormy Inn Hakata Gion Hakata-ku, Fukuoka 4,560 0.4% 5,554.91 100.0% 2
MMI Total/Average 25 Properties 302,710 381,285.18 98.5% 407
Area Property Name LocationAcquisition
Price(million yen)
Silent partnership interest related to office building
Nagoyaarea
Nagoya Lucent Tower Nishi-ku, Nagoya 4,919
Osakaarea
Others
Tokyoarea
For “Leasable Space”, “Occupancy Rate”, “No. of Tenants” and “Appraisal Value”, the figures are as of the end of June, 2020. Not disclosed because consent from tenants has not been obtained. To be acquired on August 31, 2020.
(1) (2) (3)
(1)
7,000
30,575 38,250
28,500 24,400
19,800 18,900
12,900 30,800
21,350
31,975 25,700
22,850 21,000
25,850 25,700
28,800 17,050
16,250 14,400
24,150
1,500
6,000
7,500
7,000 9,500 4,000 2,000 8,000
7,000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug.
2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Short-term borrowingLong-term borrowingInvestment corporation bondGreen bond
Post-merger Financial Data
Commitment line: 75.0bn yen
Overview of Borrowings Balance(1)
(mn yen)
Average borrowing
term(2)
Average remaining period (2)
Average debt cost(2)
Short-term 7,000 0.5 years 0.1 years 0.19%
Long-term 479,200 8.3 years 4.7 years 0.77%
Investment Corporation Bond 52,500 8.2 years 4.1 years 0.72%
Total 538,700 8.2 years 4.6 years 0.76%
Status of Lenders(3)
Lender Balance (mn yen) Proportion
MUFG Bank, Ltd. 149,217 27.7% Sumitomo Mitsui Banking Corporation 68,500 12.7% Sumitomo Mitsui Trust Bank, Limited 59,509 11.0%
Development Bank of Japan, Inc. 57,475 10.7%
Mizuho Bank, Ltd. 40,400 7.5%
Shinsei Bank, Limited 14,500 2.7%
Resona Bank, Limited 13,700 2.5%
The Bank of Fukuoka, Ltd. 11,550 2.1%
Shinkin Central Bank 10,200 1.9%
Others 51,200 9.5%
Investment corporation bond 52,500 9.7%
Total 538,700 100%
(as of Aug. 28, 2020)
(as of Aug. 28, 2020)
Credit Ratings JRF MMI
Credit rating agency Issuer rating Issuer rating
Rating and Investment Information, Inc.(R&I) AA- (Stable)
A+ (Stable)
Japan Credit Rating Agency, Ltd. (JCR) AA-(4)
(Stable)
S&P Global Rating (S&P) A(5)
(Stable)
Moody's Investors Service, Inc. (Moody’s) A3 (Negative)
(as of Aug. 28, 2020)
Maturity Ladder (as of Aug. 28, 2020)
(mn yen)
38
The figures are calculated by aggregating the amount of interest-bearing debt of JRF and MMI as of the date of this document. The figures are calculated as weighted average based on the amount of interest-bearing debt of JRF and MMI as of the date of this document. The figures are calculated based on the amount of interest-bearing debt of JRF and MMI as of the date of this document.
(1) (2) (3)
(4) It is a long-term issuer rating. (5) It is a long-term issuer rating. Further, JRF is also rated A-1 for a short-term issuer rating.
ESG Efforts and Evaluations
Award from External Parties GRESB
• Both JRF and MMI have achieved the highest ranking of Green Star
• JRF was selected as Asia Retail Sector Leader in 2018
JRF MMI
Real Estate Assessment
Green Star (5 consecutive years)
Green Star (4 consecutive years)
Rating ★★★★ ★★★★★
Public Disclosure
A (3 consecutive years)
A
CDP Climate Change Initiative
• JRF is the first participant among J-REITs since 2016 • JRF received a score “B”, two ranks better than the previous
year 2016 2017 2018 2019
Score C C C B
MSCI ESG Rating(1)
• Both JRF and MMI are rated as AA, the highest among J-REITs
JRF MMI
Rating AA AA
Inclusion into MSCI Japan ESG Select Leaders Index
• Both JRF and MMI are selected • 8 J-REITs are selected • GPIF engages in passive investment tracking this index
Efforts by the Asset Manager Introduced a sustainability committee and Chief Sustainability Officer
Conducted a joint ESG conference with the three REITs
Published ESG Report
To reinforce a system for promotion of sustainability, newly organized a “Sustainability Committee”
Introduced Chief Sustainability Officer (CSO), and appointed Deputy President & Representative Director of MCUBS to the role
Conducted an ESG conference with cooperation of the three REITs that are managed by the Asset Manager
Many institutional investors and sell-side analysts attended the event
In order to share MCUBS Group’s basic idea and activities of ESG with the stakeholders, published ESG Report, which concisely covers ESG activities of the whole group
39
Inclusion of both of the investment corporations in the MSCI Index and their use of MSCI's logo, trademarks, service marks and indices in this document are not intended to constitute sponsorship, advertisement or sales promotion by MSCI or its affiliates for the two investment corporations. MSCI has the exclusive right to use the MSCI Index, and MSCI and the MSCI Index and its logo are trademarks and service marks of MSCI and its affiliates.
(1)
JRF MMI
★★★★★ 1 property
★★★★ 7 properties 3 properties
★★★ 7 properties
★★ 6 properties
★ 2 properties
Total 23 properties 3 properties
JRF MMI
★★★★ 1 property
★★★ 1 property
★★ 4 properties
Total 1 property 5 properties
JRF MMI
S 16 properties
A 2 properties 2 properties
B+ 3 properties
For Real Estate Total
18 properties 5 properties
For Wellness Office 1 property
ESG Approvals and Initiatives
Environmental Approvals Initiatives Supported by Asset Manager
Principles for Responsible Investment (PRI) Montreal Carbon Pledge
Signatory since August 2013
United Nations Environment Programme Finance Initiative (UNEP FI)
United Nations Global Compact (UNGC)(1)
Principles for Financial Action toward a Sustainable Society (Principles for Financial Action for the 21st Century)
Task Force on Climate-related Financial Disclosures (TCFD)
First as J-REIT asset manager
Signatory since September, 2015 First as J-REIT asset manager
Signatory since October 2016 First as J-REIT asset manager
Signatory since October 2016 First J-REIT as asset manager
Signatory since June 2013 Endorsement since August 2019
DBJ Green Building Certification
CASBEE For Real Estate
For Wellness Office
BELS Certification
(As of August 28, 2020)
Japan Climate Initiative
Joined since May 2020
40 Mitsubishi Corp.-UBS Realty Inc. has supported the Corporate Responsibility Initiative of the United Nations Global Compact and its principles in the areas of human rights, labor, environment, and anti-corruption since 2016. (1)
41
P.3
It is based on the comparison between the total acquisition price stated in the financial information of respective investment corporations as of July 31, 2020 (as of the end of the most recent fiscal period) and the estimated value which are the sum of total acquisition price of Japan Retail Fund Investment Corporation (“JRF”) as of July 31, 2020, anticipated acquisition price of the asset anticipated to be acquired which was announced in “Notice Concerning Acquisition of Trust Beneficiary Right in Real Estate in Japan (G-Bldg. Tenjin Nishi-dori 02)” dated August 26, 2020, and the appraisal values of MCUBS MidCity Investment Corporation (“MMI”) as of June 30, 2020. Such value may be different from the actual asset size (based on acquisition price) of the New Investment Corporation as of the effective date of the Merger, and it is not guaranteed that the asset size of the New Investment Corporation will be the largest among J-REITs as of the effective date of the Merger. The total of appraisal values of MMI is adopted to calculate the asset size of the New Investment Corporation after the Merger, as JRF will succeed the MMI assets at market value, based on the purchase accounting method for accounting purposes. The New Investment Corporation will not acquire any new industrial real estate properties which are investment target of Industrial & Infrastructure Fund Investment Corporation. The same applies hereinafter.
(1) (2)
P.6
The figure is calculated by dividing the total actual or estimated annual NOI by the asset size (based on (anticipated) acquisition price). The figure is calculated by subtracting actual or estimated annual depreciation from the total actual or estimated annual NOI and dividing it by the asset size (based on (anticipated) acquisition price). (Net Asset + Unrealized Gain or Loss - Total Distribution (to be) Paid) / Units Outstanding Net Asset / Units Outstanding Estimate As of the End of August 2020 of Japan Retail Fund Investment Corporation • Asset size (based on (anticipated) acquisition price): The figure is the total of acquisition price of the properties in the portfolio as of the end of Feb. 2020 (36th) Period, reflecting the acquisitions and dispositions of properties from March 1, 2020 to the date of this document, and
adding the anticipated acquisition price of G-Bldg. Tenjin Nishi-dori 02, which is to be acquired as of August 31, 2020. The same shall apply hereinafter. • Number of properties: The figure is the number of properties in the portfolio as of the end of Feb. 2020 (36th) Period, reflecting the acquisitions and dispositions of properties from March 1, 2020 to the date of this document, and adding G-Bldg. Tenjin Nishi-dori 02, which is to be
acquired as of August 31, 2020. • NOI yield: The figure is calculated by dividing the total of annualized actual NOI for the Feb. 2020 (36th) Period of the properties held in the portfolio from the end of Feb. 2020 (36th) Period to the date of this document (for KAWASAKI Le Front, estimated NOI after the renewal) and
estimated annual NOI of the properties acquired or to be acquired from March 1, 2020 to August 31, 2020 as of each acquisition, by the asset size (based on (anticipated) acquisition price). • NOI yield after depreciation: The figure is calculated by dividing the total of annualized figures calculated by deducting depreciation expenses for the Feb. 2020 (36th) Period from actual NOI of the properties held in the portfolio from the end of Feb. 2020 (36th) Period to the date of
this document (for KAWASAKI Le Front, an estimate after the renewal) and figures calculated by deducting estimated annual depreciation expenses from estimated annual NOI of the properties acquired or to be acquired from March 1, 2020 to August 31, 2020 as of each acquisition, by the asset size (based on (anticipated) acquisition price).
• Unrealized gain or loss: The figure is calculated by deducting the unrealized gain or loss of the property disposed of on March 2, 2020 and then adding the figures calculated by deducting (anticipated) acquisition price from appraisal value from respective properties acquired or to be acquired from March 1, 2020 to August 31, 2020 to the unrealized gain or loss as of the end of the Feb. 2020 (36th) Period (calculated by deducting book value from appraisal value; the same shall apply hereinafter).
• LTV: The figure is calculated by dividing the total of interest-bearing debt as of the date of this document by the estimated total assets as of the end of the Aug. 2020 (37th) Period. • Interest-bearing debt: The figure is the total of interest-bearing debt as of the date of this document. Any new borrowing or issuance of investment corporation bonds is not scheduled by August 31, 2020. • Rating: indicating (long-term) issuer ratings as of the date of this document. • NAV per unit: The figure is calculated by dividing the figure calculated by adding the unrealized gain or loss to the net assets as of the end of the Feb. 2020 (36th) Period, from which the total acquisition value of own investment units cancelled as of August 19, 2020 and estimated
total distribution for the Aug. 2020 (37th) Period were deducted, by the total units outstanding as of the date of this document. • Book value per: The figure is calculated by dividing the figure calculated by deducting the total acquisition value of own investment units cancelled as of August 19, 2020 from the net assets as of the end of the Feb. 2020 (36th) Period, by the total units outstanding as of the date of
this document. Estimate As of the End of June 2020 of MCUBS MidCity Investment Corporation • The portfolio does not include the silent partnership interest in Nagoya Lucent Tower and the other indicators are calculated by the methods similar to those applied to JRF. Assumption of New Investment Corporation (Japan Metropolitan Fund Investment Corporation) as of March 1, 2021: • Asset size (based on (anticipated) acquisition price): the asset size of the portfolio of the New Investment Corporation is represented by the sum of the total of (anticipated) acquisition price of the properties in JRF’s portfolio as of August 31, 2020 and the total of appraisal value of
the properties in MMI’s portfolio as of June 30, 2020, as JRF, an acquiring investment corporation, will succeed assets of MMI, an investment corporation being acquired, at market value, subject to the purchase accounting method. • NOI yield: The figure is calculated by dividing the total of actual or estimated annual NOI by the asset size (based on (anticipated) acquisition price); the acquisition price of MMI’s assets used for calculation of NOI yield of the portfolio of the New Investment Corporation are based on
their appraisal value as of June 30, 2020. • NOI yield after depreciation: The figure is calculated by dividing the figure calculated by deducting actual or estimated annual depreciation expenses from the total of actual or estimated annual NOI, by the asset size (based on (anticipated) acquisition price); the acquisition price of
MMI’s assets used for calculation of NOI yield of the portfolio of the New Investment Corporation are based on their appraisal value as of June 30, 2020. • Unrealized gain or loss: unrealized gain or loss of the portfolio of the New Investment Corporation is represented by that of JRF as JRF will succeed the MMI’s assets at market value. • Book value per unit: For the units outstanding of the New Investment Corporation, please refer to Page 27; the net assets of the New Investment Corporation is calculated based on the appraisal value of MMI’s assets as of June 30, 2020; the same shall apply hereinafter. • NAV per unit: calculated according to the following formula: (Net assets + Unrealized gain or loss – Total distribution (to be) paid) / Units outstanding. NAV per unit of the New Investment Corporation is calculated according to the following formula: (Net assets calculated under
certain conditions based on the merger ratio and JRF’s investment unit price as of August 26, 2020 + Unrealized gain or loss of JRF – Estimated total distribution (to be) paid) / Units outstanding. It indicates a rate of an increase or a decrease in DPU of the New Investment Corporation from (estimated) DPU of the respective investment corporations before the Merger in consideration of the merger ratio and unit split.
(1) (2) (3) (4) (5) (6) (7) (8)
P.5
It means “as of March 12, 2002” for the number of properties and asset size, “as of the Aug. 2002 (1st) Period” for DPU, or “as of the end of the Aug. 2002 (1st) Period” for NAV per unit. It means (The end of) the Feb. 2020 (36th) Period for JRF and (The end of) the Jun. 2020 (28th) Period for MMI. It means the total of acquisition price. As JRF implemented a four-for-one unit split on March 1, 2010, the figure as of listing (the Aug. 2002 (1st) Period), is calculated by dividing the actual figure of DPU and NAV per unit by four as the split had not taken place by that time. (Net assets + Unrealized gain or loss – Total distribution (to be) paid) / Units outstanding (rounded down the figure less than 100 yen) It means “as of April 22, 2015” for the number of properties and asset size, “as of the Dec. 2014 (17th) Period” for DPU or “as of the end of the Dec. 2014 (17th) Period” for NAV per unit, which are before Mitsubishi Corp.-UBS Realty Inc. acquired 65% shares in MID REIT Management Co., Ltd. It means the total of acquisition price, excluding the equity interest in a silent partnership (tokumei kumiai), the underlying asset of which is Nagoya Lucent Tower. As MMI implemented a five-for-one unit split on January 1, 2018, the figure before MC-UBS Group participation (the Dec. 2014 (17th) Period) is calculated by dividing the actual figure of DPU and NAV per unit by five as the split had not taken place by that time.
(1) (2) (3) (4) (5) (6) (7) (8)
Note
Note
42
P.7
Diversification by Area: It is based on (anticipated) acquisition price of the New Investment Corporation. • Tokyo Area: Tokyo, Kanagawa, Saitama and Chiba Prefecture • Osaka Area: Osaka, Kyoto and Hyogo Prefecture • Nagoya Area: Aichi Prefecture It is based on (anticipated) acquisition price of the New Investment Corporation. Hotel assets are classified into this category. In addition, residential and other new types of assets are classified into this category although none of them are owned at present. It is based on (anticipated) acquisition price of the New Investment Corporation. It is based on annual rent. It is based on the number of properties in the portfolio of the New Investment Corporation. It is based on the weighted average of rent.
(1) (2) (3) (4) (5) (6) (7)
P.17
It is based on the total acquisition price (as of the end of the most recent fiscal period) stated in the financial information of respective investment corporations as of July 31, 2020. The asset size of the New Investment Corporation is the sum of (anticipated) total acquisition price of JRF as of July 31, 2020, anticipated acquisition price of the asset anticipated to be acquired which was announced in “Notice Concerning Acquisition of Trust Beneficiary Right in Real Estate in Japan (G-Bldg. Tenjin Nishi-dori 02)” dated August 26, 2020, and the appraisal values of MMI as of June 30, 2020 as estimated assumed value. Such value may be different from the actual asset size (based on acquisition price) of the New Investment Corporation as of the effective date of the Merger, and it is not guaranteed that the asset size of the New Investment Corporation will be the largest among J-REITs as of the effective date of the Merger. The asset size of MMI excludes the equity interest in a silent partnership (tokumei kumiai) of Nagoya Lucent Tower.
(1)
P.19
It is calculated by dividing the total of interest for debt and investment corporation bonds, loan-related expenses, expenses for issuance and redemption of investment corporation bonds and custodial fees of investment corporation bonds paid on interest-bearing debt and investment corporation bonds of JRF and MMI that will be due or redeemed by the end of the fifth fiscal period after the Merger, by the total interest-bearing debt of JRF and MMI that will be due by the end of the fifth fiscal period after the Merger. It is the unrealized gain on the sub assets and secondary core assets of JRF as of the end of the Feb. 2020 (36th) Period. Sub-assets are GMS, roadside facilities and other assets that are not profitable to invest in. Secondary core assets are suburban malls (large shopping malls located in suburban areas) and value-add (assets with high yields and high upside potential). It is an estimated amount to be borrowed if the level of book value-based LTV 43.9%, the figure calculated by dividing the total of interest-bearing debt of JRF and MMI as of the date of this document by the estimated total assets of the New Investment Corporation as of the end of the Aug. 2021 (39th) Period, is assumed to be raised to 45%.
(1) (2) (3)
P.21
The figure is the sum of annual averages of the total acquisition price from August 1, 2015 to July 31, 2020. It is based on the status as of the date of this document. It is not guaranteed that the acquisitions will be realized. They are plans at present. It is not guaranteed that they will be realized. It describes the past track record and future plans of its development projects, over which the New Investment Corporation has not secured preferential negotiation right and it is not guaranteed that the acquisitions will be realized. The New Investment Corporation has not secured any preferential negotiation right over them and no future acquisition of these properties are guaranteed.
(1) (2) (3) (4) (5)
P.24
Book value-based LTV is calculated by dividing the total interest-bearing debt of JRF and MMI as of the date of this document by the estimated total assets of the New Investment Corporation as of the end of the Aug. 2021 (39th) Period calculated based on the appraisal value of MMI’s assets as of June 30, 2020. Market value-based LTV is calculated by dividing the total interest-bearing debt of JRF and MMI as of the date of this document by the sum of the unrealized gain or loss of the New Investment Corporation stated in Page 6 and the estimated total assets of the New Investment Corporation as of the end of Aug. 2021 (39th) Period calculated based on the appraisal value of MMI’s assets as of June 30, 2020. It is calculated by dividing the annual total of interest for debt and investment corporation bonds, loan-related expenses, expenses for issuance and redemption of investment corporation bonds and custodial fees of investment corporation bonds as of the date of this document, by the total interest-bearing debt of JRF and MMI as of the date of this document. The same shall apply hereinafter. The figure is a weighted average of remaining loan terms based on the amount of interest-bearing debt of JRF and MMI as of the date of this document; the same shall apply hereinafter. Long-term loans and investment corporation bonds that become due within one year are included in the long-term borrowing. Based on the publicly-available information of other investment corporations as of July 31, 2020. The figure is a weighted average of debt cost based on the amount of interest-bearing debt that will be due within the respective fiscal periods, including loan-related fees, etc. This includes loan-related fees, etc.
(1) (2) (3) (4) (5) (6) (7)
Disclaimer This document is intended to provide information relating to the absorption-type merger with Japan Retail Fund Investment Corporation (“JRF”) as the surviving corporation and MCUBS
MidCity Investment Corporation (“MMI”; JRF and MMI are referred to collectively as the “Investment Corporations”) as the dissolving corporation and is not intended to solicit or recommend investment in or encourage the purchase of any particular product. You may incur losses related to fluctuations in the prices of the Investment Corporations’ investment units as a result of any fluctuations in the trading market, interest rates, real estate market, and other factors, or a decrease in rental income relating to the real property underlying the investment units. When making any investment decision with respect of the Investment Corporations’ investment units, investors must make their investment decisions based on their own determinations and assume full responsibility for their own investment decisions.
This document is not a disclosure statement or operational report pursuant to the Financial Instruments and Exchange Act, the Act on Investment Trusts and Investment Corporations, or the securities Listing Regulations of the Tokyo Stock Exchange.
The information provided in this document is based on information available to the Investment Corporations as of the date hereof. The Investment Corporations do not guarantee the accuracy, completeness, certainty, validity or fairness of such information. Moreover, the information contained in this document is subject to revision without prior notice.
This document contains statements relating to future results, plans, management targets, strategies and other forward-looking information that are based on current assumptions derived from information available as of the date hereof. Such statements will no longer be accurate or applicable if the assumptions underlying such statements change. As such, these statements are not a guarantee of any future results, outcomes or financial conditions.
The information contained herein may not be reproduced, circulated, quoted or otherwise used without the prior consent of the Investment Corporations.
This English language document was prepared solely for the convenience of, and reference by, non-Japanese persons. The Investment Corporations give no warranties as to its accuracy or completeness.
Asset Management Company:Mitsubishi Corp.-UBS Realty Inc.
(Financial Instruments Dealer, Director of Kanto Local Financial Bureau (Financial Instruments Dealer)
Number 403, Member of The Investment Trusts Association, Japan)