AEON REIT Investment Corporation Asset Manager: AEON Reit Management Co., Ltd. Securities Code: 3292 https://www.aeon-jreit.co.jp/en/index.html Presentation Material for Investor Meeting For the 12th Fiscal Period Ended January 31, 2019 March 19, 2019 AEON MALL Kofu Showa
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AEON REIT Investment Corporation · Store areas in the 10 km trading area Rent of the existing building (before renewal) Rent of the extended building + Rent after renewal of the
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AEON REIT Investment Corporation
Asset Manager:
AEON Reit Management Co., Ltd.
Securities Code: 3292
https://www.aeon-jreit.co.jp/en/index.html
Presentation Material for Investor Meeting For the 12th Fiscal Period Ended January 31, 2019
March 19, 2019
AEON MALL Kofu Showa
Table of Contents
2
I. Overview of Financial Results for the 12th Fiscal Period
Ended January 31, 2019
1.Financial Highlights of the 12th Fiscal Period Ended January 31,
2019--- P. 4
2. Topics for 12th Fiscal Period—External Growth/Internal Growth— --- P. 53. Topics for 12th Fiscal Period—Financing Matters— --- P. 6
4.Overview of Financial Results for the 12th Fiscal Period Ended
January 31, 2019--- P. 7
5. Portfolio Indicators at the End of 12th Fiscal Period --- P. 8
II. AEON REIT’s Strengths and Growth Strategy
1. Trends in Results for Five-Year Period After Listing --- P. 102. AEON REIT’s Advantages --- P. 113. External Growth—Pipeline Support— --- P. 12
4.External Growth—AEON Group’s business domains and
pipelines—--- P. 13
5. External Growth—Advantages of investment targets— --- P. 14
6.External Growth—Stance on property acquisitions and future
initiatives—--- P. 15
7. Internal Growth—Investment for Expansion and Renewal— --- P. 16
8.Internal Growth—Robust Matter Lease Agreement with the AEON
Group—--- P. 17
9. Internal Growth—Lease Structure— --- P. 18
10. Introduction of Individual Property (AEON Mall Kurashiki) --- P. 19
11.Financing policy—Diversification of Lenders and Financing
Methods (1)—--- P. 20
12.Financing policy—Diversification of Lenders and Financing
Methods (2)—--- P. 21
13. Risk Management --- P. 22
14. Strategic cash management—Cash Generation Skills— --- P. 23
15.Strategic cash management Utilization for the growth of
distribution--- P. 24
III. Forecasts of Performances and Future Objectives
1. Financial Forecasts(13th&14th) --- P. 26
2. Activities to Achieve Sustainability—AEON Group and AEON
REIT—--- P. 27
3. Future Growth Objectives --- P. 28
4. Messages from the Management Team --- P. 29
Appendix 1 Characteristics of AEON REIT --- P. 31-48
Appendix 2 Supplement --- P. 50-69
I. Overview of Financial Results for the 12th Fiscal Period Ended January 31, 2019
Financial Highlights of the 12th Fiscal Period Ended January 31, 2019
Improved quality of the portfolio through sustained and stable growth.
4
Distributions
External Growth
FinancialStrategy
InternalGrowth
12th Fiscal Period Ended January 31, 2019
Distributions per unit 3,066 yen
Up 56 yen (+1.9%) from 3,010 yen, the initial forecast
Investing in revitalization of property to boost revenue and competitiveness
Kurashiki (accessibility improvement work)
Increase in rent: up 3.10 million yen/year
Kagoshima and Yamagata Minami (disaster prevention work)Increase in rent: up 3.32 million yen/year
Acquired the extended building at Kofu Showa
Unrealized gain up 0.8 billion yen
Increase in rent (annualized) up 0.53 billion yen
Refinancing 27.0 billion yen (including 15.0 billion yen through issuance of retail bonds)
Average residual period 3.7 years → 4.6 years
Average financing cost 0.80% → 0.78%Overall situation of
interest-bearing debt
Topics for 12th Fiscal Period - External Growth/Internal Growth -
5
(Note) Unrealized gain: (Appraisal value at the end of the 11th fiscal period – Book value at the end of the 11th fiscal period) + Appraisal value at the time of acquisition of the extended building at Kofu Showa (existing and
extended buildings) – (Book value of the existing building + Acquisition value of the extended building + Expenses for investment in the revitalization of the existing building)
Strengthened profitability by utilizing sufficient cash on hand without depending on borrowings.
External
Growth
Improved accessibility by installing a new exit and entrance and implemented disaster prevention measures, preferentially.
Internal
Growth
増築棟取得前 増築棟取得後
1 2 Increase in annual rentIncrease of 0.8 billion yen in
unrealized gain (note)3 Evolution to an overwhelmingly top-
rated local community mall
806
million yen
0.5
billion
yen
010,00020,00030,00040,00050,00060,00070,00080,000
(㎡)Store areas in the 10 km trading area
Rent of the
existing building
(before renewal)
Rent of the extended building
+ Rent after renewal of the
existing building
Existing building
(Acquired)
After acquisition of
extended building
(Existing and
extended buildings)
Location Nakakoma-gun, Yamanashi Pref.
Acquisition
price8.3 bilion yen 15.4 billion yen
Appraisal
price8.6 billion yen 17.3 billion yen
Site area 119,064.22㎡
Total floor
area66,417.84 ㎡ 99,680.71㎡
Overview of AEON MALL Kofu Showa
Effects of the acquisition of the extended building at Kofu Showa and renewal of the existing building
Rent
of the
existing building
Increased
of rent
Acquisition of an extended building of the existing AEON MALL building at Kofu Showa.
1.3
billion
yen
+0.8
billion
yen
AEON Group’s strength
in development capability
1,346
million yen
Property Detail Effect InvestmentIncrease in rent
(annualized)
AEON MALL KurashikiInstallation of a new exit and entrance on
the north side of the mall
Improvement in
accessibility44 million yen +3.1 million yen
AEON MALL KagoshimaAnti-smoke hanging walls made of
inflammable films
Disaster prevention
measures
72 million yen +2.1 million yen
AEON MALL Yamagata Minami 38 million yen +1.1 million yen
Before acquisition
of the extended
building
After acquisition
of the extended
building
Rent
of the
existing building
Before refinancing After refinancing
Total amount of refinancing 27 billion yen 27 billion yen
Initial procurement period 4.9 years 7.8 years
Average financing cost 0.78% 0.71%
Topics for 12th Fiscal Period -Financing Matters-
6
Implemented the refinancing of 27 billion yen, funds borrowed when an IPO
was made.
Retail bonds with
JREIT’s largest
issuance amount
and longest term
Issuance AEON REIT’s first retail bonds
Refinancing
Poster
announcing the
issuanceConditions of investment
corporation bonds
Effects of investment
corporation bonds
Overview of
refinancing
1
Allotted funds procured through the issuance of retail bonds to funds for the
refinancing.2
Raised new loans from The Yamaguchi Bank and The Gunma Bank, Ltd. in
efforts to diversify procurement sources.3
Results of refinancing
1
2
Extended the term and reduced procurement cost.
Increased the number of financial institutions
that provide loans to 23 (21 at the end of the
11th fiscal period).
Issuance amount
15 billion yen
Term 10 years
Interest rate 0.783%
Gift for purchasers
AEON gift certificate
Before refinancing After refinancing
Interest-bearing debts 150 billion yen 150 billion yen
Average residual period 3.7 years 4.6 years
Average financing cost 0.80% 0.78%
Comparison of procuring conditions (27 billion yen) Comparison of interest-bearing debts (150billion yen)
Successfully diversified our means of financing, extending our procurement period and reducing our
procurement cost.
Diversification of financing means
Enhancement of the investment
corporation’s popularity
(Acquisition of potential investors)
Overview of Financial Results for the 12th Fiscal Period Ended January 31, 2019Removed the impact of disasters and achieved distribution of 3,066 yen, a significantly larger amount than the initial announcement.
7
11th Fiscal Period Ended July 2018
12th Fiscal Period Ended January 2019
Result Result vs. Previous Period Initial Forecast vs. Forecast(A) (B) (B-A) (C) (B-C)
Operating Revenues (Millions of yen) 16,201 16,329 ① +127 16,283 ⑦ +45
Operating Expenses (Millions of yen) 10,019 9,993 ② ▲25 10,014 ⑧ ▲20
Operating Income (Millions of yen) 6,182 6,335 +153 6,269 +66
Ordinary Income (Millions of yen) 5,297 5,448 ③ +151 5,362 ⑨ +86
Extraordinary income (Millions of yen) - 152 ④ +152 - ⑩ +152
Extraordinary Loss (Millions of yen) 37 274 ⑤ +237 - ⑪ +274
Net Income (Millions of yen) 5,254 5,325 +71 5,357 ▲31 Reversal of dividend reserves
(Millions of yen) - 122 ⑥ +122 - ⑫ +122
Distributions per Unit (yen) 2,956 3,066 +110 3,010 +56
NOI (Millions of yen) 11,299 11,553 +254 11,529 +23 (Note) The number of investment units issued for each period is 1,777,347.
【Major factors of changes from the previous period】 【Major factors of changes from the forecast】
No. Main items Amount (million yen) No. Main items Amount (million yen)
Newly acquired properties/
rent income from extended properties+586 Income from dividends paid by overseas SPCs +9
Rent income from properties sold
in the previous period▲407 Insurance income +27
Absence of gains from sale of properties
as posted in the previous fiscal period▲35 Expenses for the leasing business +5
Rent expenses for properties sold
in the previous fiscal period▲224 Fund costs ▲25
Depreciation for newly-acquired properties
and extended properties+211 Loan related costs ▲58
Loan related costs ▲37 Investment corporation bond related costs +39
Investment corporation bond related costs +39 ⑩ Insurance income +152
④ Insurance income +152 ⑪ Disaster related losses +274
⑤ Disaster related losses +237 ⑫ Reversal of dividend reserves(⑪-⑩) +122
⑥ Reversal of dividend reserves +122
①
⑦
⑧
②
⑨
③
Portfolio Indicators at the End of 12th Fiscal Period
Portfolio that features stable revenues, and sufficient borrowing capacities and unrealized gains.
Note 1: The total purchase price not including expenses (brokerage fees, taxes and dues, etc.) incurred for the purchase of the real estate, etc.
Note 2: The unrealized gain and loss as of the end of the 12th fiscal period (difference between appraisal value and book value at the end of each fiscal period)
Note 3: The difference from the distribution forecast of 3,010 yen for the 12th fiscal period announced on September 12, 2018
Note 4: The amount of interest-bearing debts that can be acquired until LTV (including leasehold deposits) reaches 50%
3,066 yen(up 1.9% from initial forecast)
(Note 3)
133,464 yen(up 2,507 yen from
the end of the 11th period)
(incl. leasehold deposits)
II. AEON REIT’s Strengths and Growth Strategy
第3期 第12期
資産規模の推移とアセットクラスの多様化
RSC 82.0%
SRSC 17.6%
SRSC 7.7%
RSC 78.1%
CSC 4.0%
Logistics 8.5%
Overseas 0.4% Overseas 1.6%
第3期 第12期
Net asset value (NAV) per unit
10
Trends in Results for Five-Year Period After Listing
Achieved expansion of asset size, diversification of investment targets, distribution growth and an increase in NAV
158.9 billion yen
362.4 billion yen
第3期 第12期
Distributions per unit
Increase of 124.6%
2,461 yen3,066yen
112,635 yen
133,464 yen
Increase of 118.5%
3rd Fiscal Period Ended July 2014
7th Fiscal Period Ended July 2016
8th Fiscal Period Ended January 2017
10th Fiscal Period Ended January 2018
11th Fiscal Period Ended July 2018
12th Fiscal Period Ended January 2019
Asset size by 2.2 times
AEON Taman Universiti SC Daiei Kawasaki Process CenterAEON MALL Seremban 2
AEON Style Kemigawahama
AEON MALL Kyoto Gojo AEON MALL Kofu Showa
J-REIT’s first acquisition
of overseas properties
Scheme for the
acquisition of extended
buildings
Strategic property
replacement
Kumamoto⇔Kyoto Gojo
Acquisition of new
properties through the
Group’s collaborative
initiatives
Acquisition of properties
by utilizing the overseas
SPC scheme
Acquisition of logistics
properties to support
commercial distribution
systems
Initiatives leveraging AEON REIT’s strengths
12th Fiscal Period
12th Fiscal Period
12th Fiscal Period
3rd Fiscal Period
3rd Fiscal Period
3rd Fiscal Period
Change in the asset size and diversification of the asset class
AEON REIT’s Advantages
AEON REIT’s unique growth strategy built on AEON Group’s strengths.
11
External Growth
Promote the diversification of asset types including urban-based properties.
Investment in community
infrastructure2
(→ pages 14 & 15)
Take advantage of many pipelines in
acquiring properties through
negotiated transactions.
Strength due to many pipelines1
(→ pages 12 & 13)
Internal Growth
Achieve stable rent income through the conclusion of long-term and fixed master leasing agreements.
Robust master leasing scheme4
( → pages 17 & 18)
Increase property value by taking measures in line with changes in the business environment and local characteristics.
Effective building extensions and revitalization3
(→ page 16)
Strategic Cash Management
Generate free cash flow of approximately 7.0 billion yen per year.
Generation of free cash flow7
(→ page 23)
Create diverse and flexible choices in response
to a variety of settings.
Flexible utilization of cash on hand8
(→ page 24)
Financing Policy
Implement stable financing operations such as the issuance of retail bonds and increase in the number of loan providers.
Implementation of stable fund-raising5
(→ pages 20 & 21)
Enhance consistency through the coverage of earthquake insurance and effective utilization of reserves.
Consistent payment of
distributions6
(→ page 22)
Risk Management
External Growth Strategy -Pipeline Support-
Aim to increase the asset size by utilizing AEON Group’s many pipelines.
12
(Note 1) Some of these stores are operating as tenants at SCs managed by AEON Mall or AEON TOWN.
(Note 2) Excerpts from the supplements to the financial results of AEON CO., LTD for the fiscal period ended February 28, 2018 (excluding AEON Mall Co., Ltd. and AEON TOWN Co., Ltd.) and websites of respective companies.
(Note 3) Excerpts from the data (for the fiscal period ended February 28, 2018) provided by AEON GLOBAL SCM CO. LTD.
(Note 4) GMS, SM, DS, HC and SuC stand for General Merchandise Store, Supermarket, Discount Store, Home Center and Supercenter, respectively.
A free cash flow of approximately 7.0 billion yen per year to be used as funds for the implementation of a range of strategies.
23
Free cash flow for the respective fiscal periods (Note)
Main track records on the utilization of cashExternal
Growth
写真
Allocated partially to the acquisition of overseas properties
3,052 million yen
(Note) Free cash flow = Depreciation - Capital Expenditures
Jan 2019 Period
Measures taken in
relation to disasters
Acquisition of the extended building at Kofu Showa
7,155 million yen
Internal
Growth
Renewal in Ota
199 million yen
(Millions of yen)
Renewal in Suzuka
296 million yen
Distributions in excess of earnings for the fiscal period ended July 31, 2016
1,898 million yen
Jul 2018 PeriodJan 2018 Period Jul 2019 Period Jan 2020 Period
DepreciationCapital
ExpendituresFree cash flow
Financial Strategy- Implementation of Measures That Contribute to Growth in Distributions -
Seek to maximize unit-holder value by considering the efficient utilization of funds.
24
Acquisition of
properties
Investment for
revitalization
LTV control
Investment in newly acquired
properties
Boosting of revenues and
competitiveness of existing properties
owned
Contribution to the enhancement of
unit-holder value through continuous
value increasing efforts
Improvement
of
profitability
Stabilization
of financial
position
Capital
policy
Response to
unpredictable
events
Unit buy-backs
Distributions in
excess of
earnings
Reduction in the cost of debt
Enhancement in available capacity
Response to natural disasters and
unexpected events caused by
natural disasters and payment of
temporary expenses
Increased capital efficiency
Will consider implementation if
the P/NAV continues to be at a
level significantly below one and
sufficient excess funds are
available
Management of distributions
(i) If utilized for acquiring properties,(assuming the acquisition of a property whose NOI yield is 3.9%
after depreciation)
(ii) If interest-bearing debt is utilized for repayment,
(assuming the repayment of borrowings whose average interest
is 0.8% per year.)
(iii) If utilized for unit buy-backs and depreciation(assuming the implementation of unit buy-backs for the
investment unit price of 106,771 yen (Note) and cancellation)
(Note) An investment unit level that stands at 0.8 times per
133,464 yen, or NAV per unit at the end of the 12th fiscal period.
Increase of approx. 54 yen
per unit LTV remains
unchanged.
Increase of approx. 11 yen
per unit LTV decreases 0.77%
Increase of approx. 82 yen
per unit LTV increases 0.63%.
A simulation on the result of fund utilization based on
the assumption of using free cash of 5.0 billion yen
III. Forecasts of Performances and Future Objectives
【13th term: Major factors of changes from the previous period】 【13th term: Major factors of changes from the forecast】 【14th term: Major factors of changes from the previous period】
No. Main items Amount (million yen) No. Main items Amount (million yen) No. Main items Amount (million yen)
Rent income from extended properties
(Full-period contribution)+47
Rent increase due to investment
for revitalization+5 Repairs and maintenance expenses ▲14
Income from dividends of overseas SPC
(Exchange rate factors)▲12
Income from dividends of overseas SPC
(Exchange rate factors)▲2 Depreciation ▲23
Insurance revenue ▲27 Repairs and maintenance expenses +28 Fund costs +3
Taxes and dues for properties acquired +89 Depreciation ▲12
Repairs and maintenance expenses +59 Fund costs +15
Depreciation +17 Loan related costs ▲106
Fund costs +27 Investment corporation bond related costs +63
Loan related costs ▲65
Investment corporation bond related costs +23
Depreciation of investment unit issuance expenses ▲31
④ Difference from income revenue posted in the pervious period ▲152
⑤ Difference from disaster factors reflected in the previous period +274
⑥ Reversal of reserves posted in the previous period ▲122
⑤⑧
⑥
②
⑦
③
①
Financial Forecasts
Achieved the medium-term objective of distributing an ordinary dividend of approximately 3,000 yen.
26
12th Fiscal Period Ended July 2019
13th Fiscal Period Ended January 2019 14th Fiscal Period Ended July 2020
ResultForecast
Announced on Jan. 14, 2019vs. Previous Period
ForecastAnnounced on Sep. 12, 2018 vs. Forecast
ForecastAnnounced on Jan. 14, 2019
vs. Previous Period
(A) (B) (B-A) (C) (B-C) (D) (D-B)
Operating Revenues (Millions of yen) 16,329 16,334 ① +5 16,331 ⑤ +3 16,335 -
Operating Expenses (Millions of yen) 9,993 10,186 ② +192 10,149 ⑥ +36 10,154 ⑧ ▲31
Operating Income (Millions of yen) 6,335 6,148 ▲187 6,181 ▲33 6,180 +32
Ordinary Income (Millions of yen) 5,448 5,333 ③ ▲115 5,318 ⑦ +14 5,333 -
Extraordinary income (Millions of yen) 152 - ④ ▲152 - - - -
Extraordinary Loss (Millions of yen) 274 - ⑤ ▲274 - - - -
Net Income (Millions of yen) 5,325 5,332 +6 5,313 +19 5,332 -Reversal of dividend reserves
(Millions of yen) 122 - ⑥ ▲122 - - - -
Distributions per Unit (yen) 3,066 3,000 ▲66 2,985 +15 3,000 -
NOI (Millions of yen) 11,553 11,423 ▲130 11,451 ▲28 11,435 +12
(Note) The number of investment units issued for each period is 1,777,347.
Activities to Achieve Sustainability - AEON Group and AEON REIT -
Will seek to take proactive actions in collaboration with the AEON Group
27
AEON GROUP
Environment
Planted 11.66 million tress(Cumulative number of trees planted at the end of February 2018)
AEON Carbon-free Vision 2050Will reduce CO2 emissions 35% by 2030 from the level in 2010
and achieve zero emissions by 2050.
Reduction in food disposalsWill collaborate with stakeholders including customers and
create a resource-recycling society.
Society
AEON 1% Club FoundationPromote initiatives aimed to develop the next generation, promote friendships with foreign countries and sustain the development of local communities (succession of cultural heritage)
AEON Environmental Foundation Promote efforts to plant trees, preserve biodiversity and develop human resourcesin the environmental field.
Disaster prevention
Agreements on disaster preventionConcluded agreements with more than 850 localgovernments and private companies nationwide.
Collaboration with external partiesCollaboration with the Self Defense Force and Japan Airlines in case of an emergency.
AEON REIT
GRESB in 2018
Obtained the Green Star for the third straight year
Received DBJ’s certification for six properties
AEON Mall Itami Koya
AEON Mall Mito Uchihara
AEON Mall KYOTO
AEON Mall Kurashiki
AEON Mall Nogata
AEON Mall Morioka
Received CASBEE certification for two properties
AEON Mall Yamatokoriyama
AEON Mall Kagoshima
MSCI Japan ESG Select Leaders IndexIncluded from 2017
Indicator selected as an ESG indicator index for
GPIF’s passive investments
Corporate Governance CodeEstablished the code of an asset management company ahead of other companies in March 2016
As of the end of
the12th fiscal period 3,300 yen
3,000 yen
Future Growth Objectives
Will steadily implement growth strategies by leveraging strong,
free cash flows and aiming to achieve an ordinary dividend of 3,300 yen.
28
Summary of growth strategies
External Growth
Implement selected investments from many pipelines in the AEON Group via negotiated transactions
Acquire top-class stores in each area that are resistant to changes in the business environment
Internal Growth
Maintain and enhance the competitiveness of facilities through the Group’s collaborative implementation of effective investments
Achieve not only stable rents through matter lease agreements but rent increases through revitalization
Financing policy
Facilitate the diversification of financing methods to respond to changes in the business environment in the future
Further stabilize financial management through efforts to extend and fix the term of interest-bearing debt
Growth objectives
As of the end of
the12th fiscalperiod 500.0billion yen362.4 billion yen
(Note) The Asset Management Company does not guarantee the amounts presented as ordinary distributions and asset size, which are management targets set by the Company.
Asset sizeOrdinary distributions
Seek to expand the asset size steadily by making
selected investments in response to market
conditions.
Aim to meet the medium-term objective through a
range of measures by leveraging strong cash flows.
Messages from the Management Team
29
In charge of Investment
Management Department.
and Asset Management
Department.
In charge of Business
Administration Department.,
Accounting Department.
and Financial and Planning
Department.
Career in brief
Mr. Shiozaki joined Jusco Co., Ltd. (currently, AEON
Co., Ltd.) in 1977. He engaged in real estate-related
operations for approximately 25 years while
developing his career at AEON Kosan Co., Ltd.
(currently, AEON Mall Co., Ltd.) and Rock
Development Co., Ltd. (currently, AEON TOWN Co.,
Ltd.). He has extensive experience in sales and
brokerage services, in addition to his current
assignment that he has been engaged in since the
dawn of the securitization of domestic real estate at
the beginning of 2000. Mr. Shiozaki was appointed
President and Representative Director of the
Company in May 2016, after engaging in asset
management-related assignments as Director of the
Company, a position that he took on August in 2012.
Career in briefMr. Seki joined Juso Co., Ltd. (currently, AEON Co. Ltd.) in
1988. He was seconded to JAYA JUSCO STORES (currently,
AEON Malaysia) in 1995. Since 2000, Mr. Seki engaged in the
management of the Group’s overseas companies and
assignments related to Asian businesses and developer
business strategies. He became deeply involved in the
establishment of AEON Reit as an Auditor and a Director of the
Company in 2012 and 2013, respectively. After gaining his
career as an Executive Officer of AEON Retail Co., Ltd. while
concurrently serving as the General Manager of Developer
Department and General Manager of President’s Office, he was
appointed Director of the Company in 2018.
Career in briefMr. Arisaka joined The Dai-Ichi Kangyo Bank, Ltd. (currently,
Mizuho Bank, Ltd.) in 1983. He engaged in a range of
assignments including corporate financing, fund and exchange
transactions, foreign bond transactions, market planning and
asset management. After developing his career through services
at the bank’s Hong Kong and New York branches and as the
assistant general manager of the International currency
exchange division, general manager of the North America office
of Global Alternative Investment Management division, and
general manager of the risk control operation division, Mr.
Arisaka took on the position of Compliance Officer and the
general manager of Compliance Department at the Company in
2012. He was appointed Director of the Company in 2015.
Compliance Officer
General Manager of
Compliance Department.
Career in briefMr. Ogusu joined The Fuji Bank Limited (currently, Mizuho Bank,
Ltd.) in 1984. He engaged in a variety of assignments such as
financing for U.S. and domestic real estate properties, corporate
sales for large real estate companies and auditing of operations.
He took on the position of the manager of IR and planning
group of Finance and Planning Department at the Company in
2012. He played a leading role in the establishment of IR
operations even before the Company was listed. He assumed
the position of Compliance Officer and general manager of
Compliance Department, and became Director of the Company
in 2016.
Yasuo Shiozaki
President and Representative DirectorMessage from Representative Director.
Director
Nobuaki Seki
Director
Tetsuya Arisaka
Director
Yasushi Ogusu
Five years have passed since AEON REIT was listed in November 2013.
Thanks to your support, we recorded successful results for the 12th fiscal
period.
Despite many natural disasters such as earthquakes and typhoons during the
period, we achieved distribution of 3,066 yen per unit, which was 56 yen
higher than the 3,010 yen expected at the end of the previous period.
AEON REIT has been implementing various measures including earthquake
insurance to prepare for the risk of natural disasters. In addition, it succeeded
in enhancing revenues through the acquisition of the extended building at
Kofu Showa and reducing financing costs through the refinancing and
issuance of retail bonds. Going forward, the Company will continue to
manage its assets to achieve stable distributions on a medium- to long-term
basis.
Your continued support is greatly appreciated.
Appendix 1 Characteristics of AEON REIT
AEON Group Profile
31
●General Financing
Business 4.5%
Operating Revenue
8.39 trillion yen
●GMS Business 34.4%
●SM Business 36.1%
●Drugstore/Pharmacy
Business7.8%
●Shopping Center
Development Business 3.7%
●Service/Specialty Store Business
8.6%
●International Business 4.7%
AEON’s Top salesbusiness
domains
● Sales from general merchandising stores: 3.1 trillion yen
● Sales from grocery supermarkets: 3.2 trillion yen
● Operating revenue from domestic shopping centers: 288.0 billion yen
Seven businesses promoted by the AEON Group to
support people’s daily lives (Note 1)
Continuous growth of the AEON
Group
AEON expanding into 14 countries globally (Note 2)
Aim to achieve 10 trillion yen and 340 billion yen in operating revenue and
●Tasmania Ranch operated directly by AEON 1 facility
Total 21,742 stores/facilities
●GMS Business
●Shopping Center
Development Business
● General Financing Business
●Health & Wellness
Business
●SM Business
●Service/Specialty Store
Business● International
Business
(Note 1) Business compositions, sales and operating revenues are quoted from the AEON Report 2018.
(Note 2) The number of stores, operating revenues in the medium-term management plan and operating income targets are
quoted from the AEON Report 2018.
(Note 1)
Myanmar
Laos
Indonesia
Philippines
Korea
JapanAEON Group across
Asia and the world
Record high revenue for
8 consecutive fiscal periods8.39 trillion yen
8.70 trillion yen
10 trillion yen
Fiscal period
Medium-term management plan
(Note 2)
Australia
Singapore
India
Malaysia
Thailand
Vietnam
China
Cambodia
Company name Headquarters Sales
1 Walmart Stores USA 495,761
2 CVS Health USA 184,765
3 Amazon.com USA 177,866
4 Costco USA 126,171
5 Kroger USA 122,662
6 Walgreens Boots Alliance USA 118,214
7 Schwarz Gruppe Germany 116,312
8 The Home Depot USA 100,904
9 ALDI Germany 99,870
10 Carrefour France 94,714
11 Tesco UK 77,690
12 AEON Japan 77,458
13 Ahold Delaize The Netherlands 75,478
14 Target USA 71,879
15 Lowe’s USA 68,619
Company name Total operating earnings
1 AEON 8,390,012
2 Seven & i Holdings 6,037,815
3 Fast Retailing 1,861,917
4 Yamada Denki 1,573,873
5 Family Mart UNY Holdings 1,275,300
6 Isetan Mitsukoshi Holdings 1,268,865
7 Takashimaya 949,572
8 H20 Retailing 921,871
9 Don Quijote Holdings 828,798
10 Bic Camera 790,639
AEON Group’s Rankings
32
Retailer rankings by total domestic operating revenue in 2017 Top 15 retailers by global sales in 2017
(Note) Prepared by the Asset Management Company based on an article in the January
2019 issue of the Hanbai Kakushin, an industry magazine. Earnings are indicated
in millions of yen. Figures for Fast Retailing and Don Quijote Holdings show
earnings in FY2017/8 and FY2017/6, respectively. Figures for the other companies
show earnings in either FY2018/12 or FY2018/3.
(Note) Prepared by the Asset Management Company based on an article in the January 2019
issue of the Hanbai Kakushin, an industry magazine. Sales are indicated in millions of
dollars.
Realization of Growth Strategies through Collaboration with AEON Group
33
(Source) Prepared by the Asset Manager based on the information provided by AEON CO., LTD. and AEON Mall Co., Ltd. (as of Jan. 2019).Note: AEON REIT neither owns nor plans to acquire any of these properties as of now.
● Major Shopping Centers currently under development by AEON Group
⚫ Grant of preferential negotiation rights on the retail properties operated by AEON Group
⚫ Provision of information on potential sales of properties owned by third parties
AEON GLOBAL SCM CO.,LTD.
The Daiei, Inc.
AEON REIT positions retail properties as the infrastructure assets of local communities and invests in those properties to support
the rich life of people living there.
AEON REIT aims to create a rich life for people and contribute to local communities through investment activities and implements
stable asset management on a medium- to long-term basis.
Basic Philosophy and Basic Policy
36
(Note) Refers to retail properties, logistics facilities and related facilities. Retail properties refer to facilities containing retail businesses and other merchandising businesses, entertainment and amusement
facilities and other facilities that attract customers (including parking lots and equipment and systems for logistics). Logistics facilities refer to warehouses and other storage facilities for the distribution and
transport of merchandise and other goods.
AEON REIT carries out a growth strategy based on the policy of maintaining a mutually beneficial relationship with the AEON
Group (Note), thereby aiming to maximize value for unitholders.
Basic Philosophy
Basic Policy
(Note) Refers to the group comprised of the holding company AEON CO., LTD. and its 291 consolidated subsidiaries and 31 equity-method associates (as of February 28, 2018).
(i) Acquire retail properties
from the AEON Group
(ii) Expand the asset size, make asset management
more stable and improve financing capabilities
(iii) Increase distribution and improve
unitholder value
(ii) Make growth investments by
leveraging funds obtained from
property sales
(iii) Increase revenues and
enhance corporate value
(i) Sell retail
properties to the REIT
Portfolio Policy
37
TypeInvestment ratio (Note 1)
Domestic85% or more
OverseasNo more than 15%
Large-scale retail
property
(i) Super regional shopping center (SRSC): More than one anchor tenant with over 200 specialty stores
80% or more(ii) Regional shopping center (RSC)
: A large GMS with over 50 specialty stores
(iii) Community shopping center (CSC): A GMS, discount store and large grocery store with 20 to 50 specialty stores
Other retail property(Small- and medium-scale)
Neighborhood shopping center (NSC): A grocery store with 10 – 30 specialty stores
No more than 20%Supermarket (SM): A grocery supermarket with a focus on the selling of high purchase frequency
commodities, such as food and household good
Logistics facility No more than 10%
(Note 1) Calculated based on acquisition prices.
(Note 2) Indicates Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia.
Anchor tenant
Anchor tenant
Mall area
(Specialty store area)
Overseas investment areas Overseas investment targets
Countries and regions with strong economic growth
prospects in the medium to long term, such as Malaysia in
the ASEAN region(Note 2)
and China
Retail properties leased to and managed and operated by
the AEON Group comprehensively, in principle, under
master lease contracts
AEON MALL Mitouchihara
(Super regional shopping center)
: Logistics facilities that support a supply chain, an integral part of the retail business
The AEON Group’s stable management of properties supports the stable payment of distributions.
38
Fixed and variable rents
Anchor tenants Other specialty stores
Fixed rent (Note)
Rental and operational expenses, etc.
End tenants: Sales
Master lessee: Rent income
AEON REIT: Operating revenue
Distributions
Lease Structure (Conceptual Image of Capital Flows)
(Note) The amount equivalent to the fixed asset tax
and city planning tax will be paid as additional
variable rent.
Strategic Cash Management and a Stable Financial Position
39
In the large-scale retail properties that we target for investment, the depreciation expense accounts for a large percentage of the property value.
The percentage of depreciation expenses in a real estate price tends to be higher than office buildings and distribution facilities due to a shorter period of depreciation in accounting.
By deploying internal reserves in an amount equal to the depreciation expense, we plan to increase capital efficiency and stabilize cash flow.
Measures aimed at stabilizing financial position
Investment contributing to an increase in income
Appropriation of funds to acquire new properties
Response to natural disasters and unexpected events caused by natural disasters, payment of temporary expenses, etc.
Capital strategies that protect unitholder interests
Investing in revitalization of property to boost revenues
and competitiveness
Reduction in the cost of our debt by repayment of
interest-bearing debt
Distributions in excess of earnings
Increased capital efficiency through unit buy-backs
Response to other unpredictable events
Growth
driven by
efficient
use of
capital
Trends in Results for Five-Year Period After Listing
Asset size has been growing steadily and distributions have been paid stably since the REIT was listed.
Acquired properties from AEON Malaysia, which has been operating locally for more than 30 years.Rents are CPI-linked, reflecting Malaysia’s growth potential.
41
Fixed rent agreement
(10-year lease term)
CPI-linked rent revision
(every 3 years)
Net lease
* Only AOEN MALL Seremban 2
Changes in CPI in Malaysia and Japan
Total net sales of AEON Co. (M) BHD
Population 32,020,000
Area
Approx. 330,000 km2 (approx. 90% of the area of
Japan)
GDP per capita (nominal) $9,755
The GDP per capita increased approximately 2.3 times compared to the level in 2000 and is expected to continue growing sharply going forward.
The median age is 28.6 years. The young generation and working-age people account for more than 90% of the population.
Overview of Malaysia✓ Has been operating business in
Malaysia for more than 30 years,
has established a solid position as a
retailer, and has knowledge of laws,
taxation, accounting, etc. related to
real estate.
✓ Is therefore able to purchase
properties after verifying adequate
track records.
(Millions of RM)
Properties held by AEON REIT in Malaysia
Outline of Master Lease Agreement
Age composition
Source:SPEEDA
Source:Department of Statistics MalaysiaSource:IMF - World Economic Outlook Databases
Invested in logistics facilities, an integral part of commercial distribution. Currently owns three properties.Seeks to incorporate growth potential and profitability in the Group’s overall supply chain.
42
type merchandise function Kanto Region Kansai Region
Process Center Fresh food
Fresh food processing centerProduction and processing of fresh food that can not be processed in each store and supply raw materials for cooking at each store
Regional Distribution Center
High rotation products
Inventory storage baseMainly as a room temperature facility, responsible for temporary storage and supply of goods frequently replenished at each store
Customers
community
infrastructure assets
Stores Logistics facility
Daiei-Kawasaki Process Center
Daiei-IbarakiProcess Center
AEON Minami-Osaka RDC
Initiatives leveraging AEON REIT’s strengths③- property replacement and acquisition of the extended building -
Acquired the extended building at Kofu Showa Acquisition of AEON MALL Kyoto Gojo
Improved portfolio quality with the replacement of properties and acquisition of the extended building of a property owned by the REIT.
⚫ Acquisition of complete ownership of land in Kyoto,
where land is scarce
⚫ Located in a populated housing area in Kyoto City whose population of trading area is approx. 340,000 in the 3-kilometer area with a high market density
AEON MALL Kumamoto AEON MALL Kyoto Gojo
⚫ Converted the property into the area’s overwhelmingly Number One mall in terms of both floor area and the number of tenants.
⚫ Sales rose 1.6 times at specialty stores after the acquisition of the extended building.
22,582
32,044
46,222
0 25,000 50,000 75,000
商業施設B
商業施設A
甲府昭和
Before expansion
22,582
32,044
69,583
0 25,000 50,000 75,000
商業施設B
商業施設A
甲府昭和
After expansion
Extended building
43
Store areas in the 10 km trading areaNeighborhood-based Commercial Facilities
Parking lots for approx.2,000 bicyclesFor the large local population
Food sales area, Kyo-Deli, selling fresh foodProvided by local companies
Asset
replacement
Kofu showa
Commercialfacility A
Commercialfacility B
Kofu showa
Commercialfacility A
Commercialfacility B
(Source) Prepared by the Asset Manager based on the market report prepared by
BAC Urban Projects Co.,Ltd..
北海道・東北
関東
東海・北陸・中部
近畿
中国・四国
九州・沖縄
マレーシア
Portfolio Highlights (as of January 31, 2019)
44
Number of properties 40
Total acquisition price ¥362.4bn
Portfolio appraisal NOI yield before depreciation 6.4%
Portfolio appraisal NOI yield after depreciation 3.9%
39 Overseas AEON Taman Universiti(Note8) Johor, Malaysia June, 2014 22,870.00658
(20millions of RM)645
(19millions of RM)567
(21mililions of RM)△77
(1miliions of RM)0.8%
40 Overseas AEON MALL SEREMBAN 2 Negeri Sembilan, Malaysia September, 2016 81,135.005,252
(215millions of RM)-
6,211(233millions of RM)
- 4.0%
Grand total (as of January 31, 2019 with 40 properties)
3,430,189.60 362,478 - 387,882 45,039 1.5%
(Note 1) The valuation date of the Appraisal value is January 31, 2019. (Note 2) Unrealized profit (loss) = Appraisal value − Book value at end of period(Note 3) Each property undergoes a seismic risk analysis to forecast the loss rate related to damage from the recurrence of an earthquake during a 475 year period. The number for Domestic Subtotal is not an average, but rather the PML value for the whole
domestic portfolio. (Note 4) Acquisition price, Book value at end of period, Appraisal value and Unrealized profit (loss) include a real estate portion (adjacent land portion that was additionally acquired on April 28, 2015).(Note 5) Acquisition price, Book value at end of period, Appraisal value and Unrealized profit (loss) describe AEON REIT’s pro-rata portion of the quasi-co-ownership interest (jun kyōyū-mochibun) in the trust beneficiary rights (40% for each property).(Note 6) Acquisition price, Book value at end of period, Appraisal value and Unrealized profit (loss) include a real estate portion (The Extended Building that was additionally acquired on September 3, 2018).
PML of the existing building and the extended building of AEON MALL Kofu Showa is 2.5%, 3.1%, respectively.(Note 7) Acquisition price of AEON MALL Nogata has decreased because of transfer of land.(Note 8) Acquisition price, Book value at end of period, Appraisal value and Unrealized profit (loss) describe AEON REIT’s portion of the amount equivalent to the rights (18.18%) similar to the co-ownership interest (kyōyū-mochibun) of the trust property for
which the rights were transferred from AEON CO. (M) BHD., which holds the whole property.
Appraisal Value for the 40 Properties held in 12th fiscal period
54
Propertynumber
Property name Appraisal agencyAcquisition price(Millions of yen)
Appraisal value (Millions of yen)Capitalization Rate based on direct capitalization
method (%)11th Period
(July 31, 2018)12th Period
(Jun 31, 2019)Difference
11th Period(July 31, 2018)
12th Period(Jun 31, 2019)
Difference
SRSC-1 AEON LakeTown mori (Note1) The Tanizawa Sōgō Appraisal Co., Ltd. 21,190 23,800 23,800 0 4.8 4.8 0.0
CSC-1 AEON Chigasaki-Chuo Shopping Center Japan Real Estate Institute 6,410 6,570 6,590 20 5.0 5.0 0.0
CSC-2 AEON STYLE Kemigawahama Japan Real Estate Institute 3,748 3,860 3,860 0 6.2 6.2 0.0
CSC-3 AEON KireuriwariShopping Center The Tanizawa Sōgō Appraisal Co., Ltd. 4,394 4,640 4,640 0 5.2 5.2 0.0
L-1 Daiei-Kawasaki Process Center Japan Real Estate Institute 14,280 15,000 15,100 100 4.9 4.9 0.0
L-2 AEON Minami-Osaka RDC Japan Real Estate Institute 9,870 10,300 10,600 300 4.9 4.8 ▲ 0.1
L-3 Daiei-Ibaraki Process Center Japan Real Estate Institute 6,810 7,140 7,290 150 5.1 5.0 ▲ 0.1
M-1 AEON Taman Universiti Shopping Centre (Note2) Japan Real Estate Institute658
(20百万RM)588
(21.5百万RM)567
(21.3百万RM)- - - -
M-2 AEON MALL Seremban2 (Note3) Japan Real Estate Institute5,252
(215百万RM)6,374
(233百万RM)6,211
(233百万RM)- - - -
TOTAL 362,478 388,166 387,882 - - - -
(Note 1) For AEON LakeTown mori and AEON LakeTown kaze, their appraisal values, price based on direct capitalization method, price based on DCF method, and NOI describe the Investment Corporation’s pro-rata portion of the quasi-co-ownership interest (jun kyōyū-mochibun) in the beneficiary rights of real estate in trust (40% for each property).
(Note 2) The appraisal value of AEON MALL Kofu Showa at the end of 11th period is based on the total appraisal value of the existing building and the extended building of AEON MALL Kofu as of August 1, 2018.(Note 3) Pursuant to the local appraisal methodology, we entrusted the evaluation of the appraisal value of the property to Japan Real Estate Institute. Appraisal value represents the amount equivalent to the Investment Corporation’s pro-rata portion of the
rights (18.18%) similar to the co-ownership right (kyōyū-mochibun) of the trust property pertaining to the trust of the beneficiary rights of real estate in trust. In addition, the amount in Malaysian Ringgit was converted to Japanese yen based on the exchange rate as of the end of the fiscal period (July 31, 2018; 1 RM = ¥27.36, January 31, 2019; 1RM = ¥26.66; rounded down to the nearest 100th).
(Note 4) The amount in Malaysian Ringgit was converted to Japanese yen based on the exchange rate as of the end of the fiscal period (July 31, 2018; 1 RM = ¥27.36,January 31, 2019; 1RM = ¥26.66 ; rounded down to the nearest 100th).
4.00
4.50
5.00
5.50
6.00
6.50
7.00
3rd Fiscal Period
(July 2014)
4th Fiscal Period
(January 2015)
5th Fiscal Period
(July 2015)
6th Fiscal Period
(January 2016)
7th Fiscal Period
(July 2016)
8th Fiscal Period
(January 2017)
9th Fiscal Period
(July 2017)
10th Fiscal Period
(January 2018)
11th Fiscal Period
(July 2018)
12th Fiscal Period
(Junuary 2019)
500 thousand or more less than 500 thousand
55
Average cap rate of portfolio(Note)
(%)
(%)
Average cap rate of portfolio of in area-wise(Note)
(%)
Average cap rate of portfolio for Trade-Area Population within 10km(Note)
Average cap rate of Portfolio
(Note) ・Average cap rate is calculated excluding Malaysian properties whose return yield by direct capitalization method is not calculated.・“The three largest cities” indicates the Metropolitan, Chubu and Kinki areas, i.e. Metropolitan area covers Tokyo, Kanagawa, Saitama and Chiba pref., Chubu area covers Aichi, Gifu and Mie pref. and Kinki covers Osaka, Kyoto, Hyogo, Nara and Shiga pref. in each.・“Trade-Area Population within 10km” is calculated excluding Daiei-Kawasaki PC , AEON Minami-Osaka RDC and Daiei-Ibaraki PC.
4.00
4.50
5.00
5.50
6.00
6.50
7.00
3rd Fiscal Period
(July 2014)
4th Fiscal
Period(January
2015)
5th Fiscal Period
(July 2015)
6th Fiscal
Period(January
2016)
7th Fiscal Period
(July 2016)
8th Fiscal Period
(January 2017)
9th Fiscal Period
(July 2017)
10th Fiscal Period
(January 2018)
11th Fiscal Period
(July 2018)
12th Fiscal Period
(January 2019)
three largest cities others
5.5
5.6
5.7
5.8
5.9
6.0
6.1
6.2
6.3
3rd Fiscal Period
(July 2014)
4th Fiscal Period
(January 2015)
5th Fiscal Period
(July 2015)
6th Fiscal Period
(January 2016)
7th Fiscal Period
(July 2016)
8th Fiscal Period
(January 2017)
9th Fiscal Period
(July 2017)
10th Fiscal Period
(January 2018)
11th Fiscal Period
(July 2018)
12th Fiscal Period
(January 2019)
KYOTO
レイクタウンmori
倉敷
伊丹昆陽
水戸内原
甲府昭和
大和郡山
川崎PC
鹿児島
京都五条
その他
Portfolio PML and Earthquake Insurance
56
⚫ Promote portfolio diversification (size per property and property locations)
⚫ Consider purchasing earthquake insurance for individual properties whose PML(Note) exceeds 15%. Manage the portfolio to prevent its PML from exceeding 10%.
⚫ Ensure available financing capacity and funds in hand for contingencies through conservative LTV management and cash flow generated by depreciation expenses.
*1. Earthquake risk assessment report (Tokio Marine & Nichido Risk Consulting Co., Ltd.)*2. The expected maximum amount of loss calculated by multiplying the sum total of replacement costs of the properties (the amount required for constructing new equivalent buildings) by the portfolio PML
(Note)The probable maximum loss (PML) indicates a loss from a very rare, massive earthquake that strikes once in 475 years as a percentage of a building’s price.
⚫ AEON examines the effect on distributions and cost effectiveness of the insurance premiums based on the maximum loss estimated from the domestic portfolio PML and acquires earthquake insurance coverage.
Diversification of property locations (23 prefectures in Japan)
Investment ratio (top 10 properties) 5.9%
5.8%
4.9%
4.7%
4.6%
4.3%
4.0%
3.9%
3.7%
3.7%
54.5%
10.5%
9.6%
8.5%
7.7%
6.6%
5.8%
4.9%
4.4%
4.3%
4.2%
33.3%
Conventional policy against earthquake risk
Status of earthquake risk in the current portfolio
Use of earthquake insurance茨城県
京都府
神奈川県
埼玉県
兵庫県
大阪府
岡山県
千葉県
北海道
山梨県
その他
Properties insured Properties held in Japan
38 properties
Maximum payment (deductible: ¥100 million)
¥3.0 billion
Premiums (annual) ¥150 million
KYOTO
Lake Town mori
Kurashiki
Itamikoya
Mitouchihara
Kofu Showa
Yamatokoriyama
Kawasaki PC
Kagoshima
Kyoto Gojo
Other
Ibaraki
Kyoto
Kanagawa
Saitama
Hyogo
Osaka
Okayama
Chiba
Hokkaido
Yamanashi
Other
13 15 47 50
110 113 149
196 217
291 298
3rd Period 4th Period 5th Period 6th Period 7th Period 8th Period 9th Period 10th Period 11th Period 12th Period 13th Period
(Forecast)
Result of Internal Growth
Achieved increases in medium- and long-term rents by making investments for revitalization.
57
(Millions of yen)
(Note 3)The scope is limited to the properties which Aeon Reit owned at the end of July 2018.
Major cases of Investments in Revitalization with increase in rent after Feb. 2018
Cumulative amount of annualized rent increase as a result of investments in revitalization projects (note3)
PropertyRent increase (scheduled)
monthRevitalization project
Project cost (millions of yen)
(Note 1)
Effect of revitalization(per annum)
Rent increase(millions of yen)
Rent increase as a percentage of project cost (%)
AEON MALL Nogata(Note2) February 2018 Conversion of lighting to LEDs 69 6.9 10.0
AEON MALL Hiezu July 2018 Large scale renewal 73 6.1 8.4
AEON MALL Nogata(Note2) August 2018 Conversion of lighting to LEDs 71 7.1 10.0
AEON MALL Kurashiki August 2018 Renewal of food sales area 82 6.1 7.5
AEON MALL Kofu showa September 2018 the revitalization of the existing building 781 50.7 6.5
AEON MALL Kurashiki December 2018Installation of a new exit and entrance
on the north side of the mall44 3.1 7.0
AEON MALL Suzuka March 2019 Connection to public sewerage 88 6.4 7.3
(Note1) “Projected cost of investments in revitalization” indicates construction cost in order to improve the value of the properties operated.
(Note2) Rent has been increased for 10 years.
20.1 19.6 19.621.0 20.1 19.8 19.5
21.320.3 20.1 19.7
0.0
5.0
10.0
15.0
20.0
25.0
Mar–May
2016
Jun–Aug
2016
Sep–Nov
2016
Dec 2016–
Feb 2017
Mar–May
2017
Jun–Aug
2017
Sep–Nov
2017
Dec 2017–
Feb 2018
Mar–May
2018
Jun–Aug
2018
Sep–Nov
2018
Performance of Properties in Portfolio
58
Sales Trends of individual Properties for June 2018 - November 2018
Rent Revenues at Master Lease Companies of 34 Retail Domestic Properties in Portfolio
Mar. 2016–Feb. 2017
(12-month period) ¥80.4billion
Mar. 2017–Feb. 2018
(12-month period) ¥80.7billion
0 0
22
92 1
YoY sales index Less than 90%90%
~95%95%
~100%100%
~105%105%
~110%More than 110%
% of total 0% 0% 64.7% 26.5% 5.9% 2.9%
Notes)1. Sales of each property for June 2018 – November 2018 are expressed as a percentage of sales for the same period a year earlier (June 2017 – November 2017 ).2. The year-on-year sales index above presents data based on interviews of master lease companies. AEON STYLE Kemigawahama ,AEON REIT acquired on November 30, 2017 , does not include.3. The figures in the year-on-year sales index above have been rounded to the nearest hundredh of a percent. As a result, the total amount may not always total 100.0%.
(Note 1)Revenue such as rent income and income incidental thereto received by the master lease company from end tenant. And, AEON STYLE Kemigawahama ,AEON REIT acquired on November 30, 2017 , does not include.(Note 2)The rent revenue figures above are data based on interviews of master lease companies.
(Billions of yen)
7th period 8th period 9th period 10th period 11th period 12th period
Total debt ¥111,069million ¥134,904million ¥162,683million ¥164,621million ¥164,805million ¥164,276million
LTV (including leasehold deposits)
42.8% 46.4% 46.7% 44.9% 44.7% 44.9%
LTV (excluding leasehold deposits)
38.9% 42.7% 43.0% 41.4% 41.4% 41.4%
Long-term debt ratio 100.0% 98.7% 99.0% 100.0% 100.0% 100.0%
Fixed interest rate ratio 88.4% 96.5% 92.9% 95.7% 95.7% 95.7%
Average remaining borrowed period
4.1 year 4.7 year 4.4 year 4.2 year 3.7 year 4.6 year
Average interest rate on borrowings
0.85% 0.84% 0.79% 0.80% 0.80% 0.78%
Financial Management
59
Debt Snapshot
60
(Note 1) Refers to the Japanese yen TIBOR released by the Japanese Bankers Association; provided, however, that if there is no corresponding time period, it refers to the interest rate reasonably set by the agent by the straight-line method.(Note 2) While funds are borrowed at floating rates, the interest rates are fixed in effect by entering into interest rate swap agreements to hedge interest rate fluctuation risk. The figures are the interest rates calculated after taking into consideration the effect of interest rate swaps.
2. Investment Corporation BondsDate of
Determining Conditions
Serial Number
Interest Rate Amount Issued Maturity Date Term DescriptionRating
Pricing Standard Lead ManagerJCR
October 6, 2015 1 0.961 % ¥2.0 billion October 10, 2025 10 years Without collateral or guarantee AA- Spread from JGBDaiwa Securities Co., Ltd.SMBC Nikko Securities Inc.
October 13, 2016 2 0.470 % ¥1.0 billion October 20, 2026 10 years Without collateral or guarantee AA- Interest rate
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
November 28, 2017 4 0.680 % ¥2.0 billion December 8, 2027 10 years Without collateral or guarantee AA- Interest rateSMBC Nikko Securities Inc.Mizuho Securities Co., Ltd.Daiwa Securities Co., Ltd.
November 16, 2018 5 0.783% ¥15.0 billion December 7, 2028 10 years Without collateral or guarantee AA- Spread from JGBSMBC Nikko Securities Inc.Mizuho Securities Co., Ltd.Daiwa Securities Co., Ltd.
1. Borrowings
Borrowing Date TermBorrowing Amount
MaturityFloating rate/
Fixed rate Interest rate
Breakup
Existing Borrowings
November 25, 2013 Long-term ¥27.0bn¥22.0bn October 20, 2020 Effective fixed rate (Note 2) 1.17250%
¥5.0bn October 20, 2023 Effective fixed rate (Note 2) 1.76375%
February 27, 2015 Long-term ¥9.7bn
¥1.2bn October 21, 2019 Effective fixed rate (Note 2) 0.61910%
¥4.0bn October 20, 2021 Effective fixed rate (Note 2) 0.88915%
¥4.5bn October 21, 2024 Effective fixed rate (Note 2) 1.40390%
February 29, 2016
Long-term ¥23.5bn
¥4.1bn October 21, 2019 Effective fixed rate (Note 2) 0.14750%
March 29, 2016¥6.0bn October 20, 2021 Effective fixed rate (Note 2) 0.35125%
¥5.8bn October 20, 2022 Effective fixed rate (Note 2) 0.54100%
May 31, 2016 ¥6.6bn October 20, 2025 Effective fixed rate (Note 2) 0.99100%
February 29, 2016 ¥1.0bn October 20, 2027 Effective fixed rate (Note 2) 1.40730%
October 20, 2016 Long-term ¥23.4bn
¥3.9bn October 21, 2019 Effective fixed rate (Note 2) 0.23700%
¥4.8bn October 20, 2022 Effective fixed rate (Note 2) 0.48750%
¥1.2bn October 20, 2022 Fixed rate 0.55000%
¥6.7bn October 20, 2023 Effective fixed rate (Note 2) 0.61375%
¥2.7bn October 20, 2025 Effective fixed rate (Note 2) 0.87250%
¥4.1bn October 20, 2026 Effective fixed rate (Note 2) 1.00300%
March 28, 2017 Long-term ¥29.7bn
¥6.4bn October 21, 2019 Floating base rate(Note 1) +0.22%
¥6.1bn October 20, 2021 Effective fixed rate (Note 2) 0.43200%
¥5.2bn October 20, 2022 Effective fixed rate (Note 2) 0.52800%
¥0.2bn October 20, 2022 Fixed rate 0.63000%
¥6.8bn October 21, 2024 Effective fixed rate (Note 2) 0.83800%
¥5.0bn October 20, 2026 Effective fixed rate (Note 2) 1.09710%
December 27, 2017 Long-term ¥3.7bn¥3.4bn October 20, 2023 Effective fixed rate (Note 2) 0.52270%
¥0.3bn October 20, 2023 Fixed rate 0.60000%
NewBorrowings
November 22, 2018 Long-term ¥12.0bn
¥3.0bn October 20, 2021 Effective fixed rate (Note 2) 0.37850%
¥4.6bn October 20, 2023 Effective fixed rate (Note 2) 0.59700%
¥0.4bn October 20, 2023 Fixed rate 0.64000%
¥4.0bn October 20, 2025 Effective fixed rate (Note 2) 0.85100%
Many Choices of Financing Methods According to Investment Unit Prices
Financing efforts in a way that contributes to an increase in distribution per unit and total market value.
Follow-on
offerings
Policy for financing means
With the goal of achieving continuous growth in distributions and market value, AEON REIT will adopt optimal financing means at each point in time, factoring in assets to be acquired and market conditions.
Hybrid financing
Loan-based
financing
Investment
corporation bonds
Investment unit price levels
Profitability of properties to be acquired in future
DPU growth
Consider implementation as a new financing method
Utilize cash generating skills
Balance between LTV and DPU
Points to be factored inMethod
Interest conditions
LTV levels
Balance between long-term fixed loans and financing cost
Utilize derivatives (interest swaps)
Investment corporation bonds for the wholesale market
Investment corporation bonds for individual investors
Follow-on
offerings
Hybrid(Subordinated
bonds/loans)
Debt
financing
Consider implementation by leveraging borrowings and funds on hand with priority given to the improvement of profitability through property acquisition.
Consider implementing unit buy-backs if sufficient capital surpluses are available and the measure is considered very effective.
Consider financing by combining follow-on offerings and borrowings while at the same time taking the dilution of distributions per unit into consideration, from the perspective of the profitability of properties to be acquired.
Consider financing mainly through public offerings whose possibility of a successful premium capital increase is strong.
A level at which urban-type and recently built properties, among other properties, whose cap rates are relatively low, can be considered as acquisition targets.
61
0
5
10
15
20
25
30
35
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
E
20
19
E
20
20
E
20
21
E
20
22
E
20
23
E
Summary of Malaysian Economy
62
(Millions of people)
Changes in GDP growth rate in Japan & Malaysia
Population growth in Malaysia (estimated figures for FY2018 onwards) Monthly trends of RM / Yen
Relationship between the Fiscal Year of the Overseas SPC and the Settlement of Accounts of the Investment Corporation (Conceptual Diagram)
64
Overseas real estate acquired by an overseas SPC starts contributing to the full-year revenues of AEON REIT in the settlement for the following fiscal period (X+ 1 period). Although the overseas SPC has full-year accounting terms under the local laws, it is expected to pay interim dividends.
X-1 Period X Period X + 1 Period
Income from beginning of
X+1th
Period to end of X+1th period.
X + 2 Period
AEON REIT Investment Corporation
Overseas SPC
Income from the
acquisition of
property to end of
Xth period
Acquisition of shares in the overseas SPC
Conclusion of the sales
agreement
Establishment of the overseas
SPC
Acquisition of property
Fiscal year-end (SPC)
Announcement of results for
the X-1th fiscal period
Completedacquisition of shares in the overseas SPC
Announcement of results for the Xth fiscal
period
Receipt of interim dividends of the overseas SPC
Marking-to-market of properties
owned by the overseas SPC on
end of Xthperiod
Implementation of interim audit on
SPC
Payment of interim
dividends after the numbers
are fixed by audit
Announcement of results for
the X+1th fiscal period
Receipt of dividends of the overseas
SPC
Marking-to-market of properties owned
by the overseas SPC on
end of X+1th period
Implementation of audit on SPC
Payment of dividends after the numbers
are fixed by audit
Fiscal year-end (SPC)
Currency Hedging Policy for Investment Capital(Overseas SPC Shares) and Dividends
65
Overseas SPC
Overseas SPC
Day A Day B
Currency hedging period
Currency hedging policy for investment capital(when acquiring the Overseas SPC shares)
⚫ Plan to hedge the investment capital (the Overseas SPC shares) by concluding an exchange contract upon acquiring the shares.✓ Conduct currency hedging for acquiring the shares at the exchange rate of
the date when the acquisition is announced, so that there will be no difference between the yen-denominated acquisition price announced upon acquisition and the actual yen-denominated acquisition price
✓ When the acquisition is conducted in the fiscal period following the fiscal period in which the announcement is made, currency hedging shall be arranged by the end of the fiscal period in which the announcement is made, not extended into the following fiscal period, as a rule.
⚫ For the investment capital (the Overseas SPC shares), fix the acquisition price at the exchange rate of the day when the agreement is concluded
End of Xth fiscal period
Acquisition of shares issued by overseas real
estate holding corporation
Receipt of rental income for the Xth fiscal period as
dividends denominated in yen
Conduct audits of the Overseas SPC
for the Xthfiscal period
Currency hedging policy for dividends received from the Overseas SPC
⚫ For dividends received from the Overseas SPC, plan to conduct hedging by concluding an exchange contract as of the end of the fiscal period in order to fix the dividend amount denominated in yen
✓ For share dividends paid by the Overseas SPC, conduct hedging by concluding an exchange contract for the period from the finalization of the dividend amount denominated in ringgit by the Overseas SPC to the receipt of the dividends by AEON REIT
Fixing of dividends for the Xth fiscal
period
Payment of dividends for
the Xthfiscal period
Currency hedging period
Assume conservative exchange rates at the time of drawing up budgets in consideration of exchange rate trends. The exchange rate assumed for forecasts for the 13th period (ending July 31, 2019) and the 14th period (ending January 31, 2020) is ¥24.0(on January 31,
2019: ¥26.66).
Exchange rate assumed for budgeting
Conclusion of purchase agreement on shares
issued by overseas real estate holding corporation
Comparisons between Retail Environments in Japan and the US
66
Japan US
Population(Note 1)
Approx.120 million
Approx.320 million
2.5 times (compared
to Japan)
Number ofLarge Malls
(Note 2)
Approx.3,000
Approx.46,000
2.5 times (compared
to Japan)
Population per one Large Mall
Approx.39,000
Approx.6,000
5.6 times (compared
to US)
Oversupply of retail facilities in the United States compared with the level in Japan The ratio of online stores in Japan is lower than in the United States,
hovering at a 5% level in recent years.
Comparison of the number of retail facilities Comparison of the EC ratio
(Note) Japan’s EC ratio: Graph prepared by the Asset Management Company based on the FY2017 Survey of Infrastructure
Development Status for Data-driven Society in Japan (E-Commerce Market Survey) by the Ministry of Economy, Trade and Industry.
The United States’ EC ratio: Graph prepared by the Asset Management Company based on data issued by the United States Census Bureau.
commercial facilities owned by AEON REIT
US
Core TenantsGMS(food items sales 60%)Large specialty stores / Movie
theater
Department stores/Large specialty stores / Movie
theater
TenantsComposition
Product sales: Approx. 65%、Drinking and eating & services: Approx. 35%
Product sales: Approx. 80%
Location and
means for store
visits
A range of means for store visits
due to shopping areas located
nearby
Store visits mainly by car due to
facilities located in the suburbs
Comparison of retail facility characteristics
(Note)Prepared by the Asset Manager based on Supplementary of 92th Financial Results for FY2017 of AEON Co., Ltd..(Note)Prepared by the Asset Manager based on data of the properties owned by AEON REIT.(Note)Source: ICSC、Office J.K
Image figure
(i) Food product area used by
visitors repeatedly.
(ii) Tenant composition including
time-consuming type facilities such
as a cinema and large food court.
Retail facilities whose frequency of use by local people is high because all of the retail facilities owned sell food products
(iii) Store visits by a range of means such as by public
transportation, car, bicycle or on foot.
(Note1)Population in Japan is as of Septenber 1, 2018(Homepage of Ministry of Internal Affairs and Communications). Population in the US is as of May 2018.(Homepage of US Federal Bureau)
(Note2)Number of Large Malls in Japanis based on Japan Shopping Center Association SC White Paper 2017.Number of Large Malls in the US is based on CoStar, ICSC, Office J.K.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2010 2011 2012 2013 2014 2015 2016 2017
Comparison of the EC ratio between Japan and the United States
US Japan
8.9%
5.8%
AEON REIT received GRESB Real Estate Assessment
• AEON REIT achieved the “Green Star” in three consecutive years AEON MALL ItamikoyaAEONMALL KYOTO AEON MALL Mitouchihara
Total 1,777,347 100.0% 1,777,347 100.0% 24,390 100.0% 22,819 100.0%
8th Prriod(Jan.2017)
9th Prriod(Jul.2017)
10th Prriod(Jan.2018)
11th Prriod(Jul.2018)
12th Prriod(Jan.2019)
Individuals and Others
Financial institutions
Other domestics Corporations
Foreign Corporations
Disclaimer
Disclaimer
― These materials contain forward-looking statements with respect to the future business results, plans, and management targets and strategies of AEON REIT
Investment Corporation (AEON REIT). These forward-looking statements are based on assumptions made at the present time about future events and the operating
environment. There is no guarantee that these assumptions are correct. Various factors could cause actual future results to differ materially from those expressed or
implied by the forward-looking statements contained herein.
― While all reasonable measures have been taken to ensure that the information presented herein is correct, AEON REIT makes no assurance or guarantee as to the
accuracy or completeness of that information. The contents of the information may be changed or eliminated without notice.
― These materials include analyses, judgments and other views based on information currently available to AEON REIT and AEON Reit Management Co., Ltd. As such,
actual operating results may differ from these views. Furthermore, there are other views that differ from these, and AEON REIT and AEON Reit Management Co., Ltd.
may change these views in the future.
― These materials are provided for the sole purpose of presenting general information and explaining the management strategies of AEON REIT, and are not intended
as a solicitation to purchase AEON REIT’s investment units, nor to enter into any other financial instruments transaction agreement. When making investments,
investors are advised to use their own judgment and discretion.
Disclaimer for Dutch Investors
― The units of AEON REIT Investment Corporation (“AEON REIT”) are being marketed in the Netherlands under Section 1:13b of the Dutch Financial Supervision Act
(Wet op het financieel toezicht, or the “Wft”). In accordance with this provision, AEON Reit Management Co., Ltd. (the “AIFM”) has notified the Dutch Authority for the
Financial Markets of its intention to offer these units in the Netherlands. The units of AEON REIT will not, directly or indirectly, be offered, sold, transferred or delivered
in the Netherlands, except to or by individuals or entities that are qualified investors (gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft, and as a
consequence neither the AIFM nor AEON REIT is subject to the license requirement pursuant to the Wft. Consequently, neither the AIFM nor AEON REIT is subject
to supervision of the Dutch Central Bank (De Nederlandsche Bank) or the Netherlands Authority for Financial Markets (Autoriteit Financiële Markten). The AIFM is
therefore solely subject to limited ongoing regulatory requirements as referred to in Article 42 of the European Alternative Investment Fund Managers Directive
(European Directive 2011/61/EU) (the “AIFMD”).
Please visit AEON REIT’s home page (www.aeon-jreit.co.jp/en) to access its latest annual report referred to in Article 22(1) of the AIFMD or information provided
under Article 23 of the AIFMD.
Asset Manager: AEON Reit Management Co., Ltd.
(Registration of financial instruments business: Kanto Local Finance Bureau, Director-General (Financial Instruments), No. 2668)