24 May 2019
To All Concerned Parties

REIT Securities Issuer
Sakura Sogo REIT Investment Corporation
3-8-11 Kudan Minami, Chiyoda-ku, Tokyo
Makoto Muranaka
Executive Director(Securities Code 3473)
Asset Management Company
Sakura Real Estate Funds Management, Inc.
Contact: Makoto Muranaka.
Representative Director and President
Tel: +81-3-6272-6608

Notice Concerning Asset Acquisition of Domestic Real Estate Trust Beneficiary Rights
Sakura Sogo REIT Investment Corporation (hereinafter the “Investment Corporation” or “SKR”)
announces that Sakura Real Estate Funds Management, Inc. (hereinafter “SREFM”) has passed a
resolution to acquire one asset (hereinafter referred to as the “Anticipated Acquisition”) as outlined
below:
1. Overview of the Anticipated Acquisition
Property name
The Portal Akihabara
Asset type
OfficeLocation
Chiyoda-ward, Tokyo
Year of construction
May 2002
Anticipated acquisition price1¥1,500,000,000
Appraisal value2¥1,520,000,000
Anticipated acquisition: Trust beneficiary rights
Conclusion of purchase and sale agreement: 24 May 2019
Anticipated settlement date: 3 June 2019
Seller: Please refer to 4. Profile of the Seller of the asset to be acquired
Acquisition funds: Anticipated acquisition will be acquired with debt financing and cash on hand
(Please refer to the "Notice Concerning Borrowing" also announced today)
・ Settlement method: Payment in full on settlement
・
・
・
・
・

2. Reasons for the Transaction
SREFM, a licensed asset management company manages SKR’s assets. SREFM is focused on
implementing initiatives that enhance both SKR portfolio characteristics and unitholder value. This
includes exploring opportunities to acquire assets, that increases SKR’s geographical weighting to theGreater Tokyo Area3 and the office portfolio particularly given the current strength of that sub-market.
SREFM believes that real estate investments, particularly office assets located in the Greater Tokyo
Area will benefit in the medium to long term by a more stable workforce population base relative to
Regional locations in Japan. SREFM believes the Anticipated Acquisition outlined herein will further
strengthen existing portfolio characteristics and the prospects for future earnings and distribution per

1“Anticipated acquisition price” indicates the anticipated purchase price for the trust beneficiary rights described in the purchaseand sale agreement. It is exclusive of acquisition related expenses and consumption tax.
2

”Appraisal value” is as at 1 May 20193

Greater Tokyo Area consists of Tokyo, Kanagawa, Chiba and Saitama

1

unit. The forecast increase to Leasing Net Operating Income for the 6th Fiscal Period (ending 30 June2019) and 7th Fiscal Period (ending 31 December 2019) is approximately ¥3 million and ¥29 million
respectively. The forecast post acquisition loan to value ratio (hereinafter “LTV”) as at the end of the
6th Fiscal Period is 46.2% (vs. 44.8% as at the end of the 5th Fiscal Period ending 31 December 2018).
Furthermore, in deciding to complete the Anticipated Acquisition, SREFM has considered several key
factors including the following:
1) An increase in portfolio weighting to the Greater Tokyo Area
Based on the investment guidelines, SKR targets maintaining a portfolio weighting of at least 50%
to the Greater Tokyo Area (by acquisition price). Post the Anticipated Acquisition, SKR’s weighting
to the Greater Tokyo Area will increase to 56.2% (from 55.0% as at the end of April 2019). SKR’s
weighting to Central Tokyo4 will increase to 44.9% (from 43.4%). This compares favorably with
SKR’s Diversified and Small Cap REIT5 peers which are 34.4% and 16.5% respectively as at 31
March 2019.
2) An increase in portfolio weighting to office
The Central Tokyo office market is performing strongly and is expected to remain firm in the foreseeable
future. This is because there is limited new supply and office space demand continues to be robust.
The Anticipated Acquisition will result in an increased weighting to SKR’s Central Tokyo office portfolio
from 40.5% to 42.1% by acquisition price.
3) A reduction in the weighted average property age
Where possible, SKR also focuses on reducing the weighted average6 age of the portfolio. The
Anticipated Acquisition will result in a reduction in the weighted average age of the office portfolio to28.2 years from 28.9 years (as at 30 Apr 2019). The weighted average age of the overall portfolio
will decrease to 22.5 years from 22.6 years.

3. Features of the Anticipated Acquisition
The Anticipated Acquistion is a recently refurbished multi-tenant office building conveniently
located within the Higashi-Kanda area. It is approximately a 4-minute walk from Bakurocho
Station (JR Sobu Main Line), a 5-minute walk from Asakusabashi Station (JR Sobu and Toei
Asakusa lines), and about an 8-minute walk from Akihabara Station (JR Yamate, Keihin Tohoku
and Tokyo Metro Hibiya lines).
According to Sanko Estate Co., Ltd.’s office market report (March 2019), the vacancy rate inCentral Tokyo where the Anticipated Acquistion is located was only 0.6% as at February 2019
and the average asking rent per tsubo as at February 2019 was ¥29,637 per tsubo per month,
an increase of 5.9% over the past 12 months.
Renovation works were completed in March 2019 and included the following: 1. Extensive
interior renovation and remodeling works (including installation of a kitchen and wood deck on
8F), 2. Upgrade to exterior walls, 3. Waterproofing works on the rooftop and all floors, 4. Officefitout works on all floors and 5. HVAC and ventilation systems renewal works. In addition, ceilingheights of approximately 3.4 meters were achieved by removing the suspended ceiling system
and leaving structural beams exposed. Furthermore, by installing office and conference room
4

Central Tokyo refers to the five central wards Chiyoda, Chuo, Minato, Shibuya and Shinjuku

5A “Diversified” REIT is a REIT investing in more than one type of asset class. A “Small Cap” REIT is defined as a REIT with lessthan ¥100 billion market cap. Source: J-REIT DB - Weighted average calculated using AUM of each J-REIT
6
Weighted by acquisition value

2

furniture in line with tenant needs, the overall leasing appeal of the Anticipated Acquistion was
significantly enhanced and the building now provides a modern, efficient work environment thathas proven very attractive for start-up companies from multiple industries.
Having regard to all the above mentioned features and characteristics of the property, SREFM
has determined that the acquisition of this property will enhance earnings and profit stability ofthe portfolio.

OF-08 The Portal Akihabara
ZoningAsset typeType of specified asset
Trustee
Trust term
Location
AccessCommercial district
Office / partial residential
Trust beneficiary interest
SMBC Trust Bank Ltd.
10 years from 3 June 2019 to 30 June 2029
2-10-9 Higashi Kanda, Chiyoda-ward, Tokyo
Bakurocho station (4 minute walk) JR Sobu main line
Asakusabashi station (5-minutes) JR Sobu line
Akihabara station (8-minutes) JR Yamanote, Keihin Tohoku,
Hibiya, Tsukuba Express lines
Completion date
May 2002
Structure / Number of stories
Steel-frame reinforced concrete, steel-framed flat roof alloy
plated steel plate / 8F
Building coverage ratio
80% (designated building coverage ratio)
Floor area ratio
500% (designated floor area ratio)
Site area
184.76 square meters (registered area)
Gross building area
1,010.67 square meters (registered area)
Total leasable area
941.69 square meters
Total leased area
941.69 square meters
Property management company
Sun Frontier Fudosan Co., Ltd.
Seismic risk (PML)1
8.2%
Anticipated acquisition price2
1,500 million yen
Appraisal value3
1,520 million yen
Appraisal NOI4
60.1 million yen
Appraisal firm
JLL Morii Valuation & Advisory K.K.
Tenant related (as at the date of this announcement)
Total number of tenants
8
Total monthly all-in rent revenue
5.9 million yen
Occupancy
100.0%
Tenant security deposits
37.4 million yen
Special commentsn/a“PML” is extracted from the Earthquake Risk Valuation Report provided by Tokio Marine & Nichido Risk Consulting
Co., Ltd. in April 20192
“Anticipated acquisition price” as agreed to for the transaction and indicated in the Purchase and Sale Agreement(exclusive of acquisition related expenses and consumption tax)
3
Effective date of the appraisal value is 1 May 20194
“Appraised NOI” is defined as Net Operating Income, which is the operating income stated in the appraisal reportminus operating expenses and is the income prior to deducting depreciation expenses. This is not the same as NCF(Net Cash Flow), which adds the revenue from the security deposit to the NOI and deducts Capex. The appraisal
report NOI is based on the direct capitalization method and is rounded to the nearest thousand yen. Date of theappraisal report is 1 May 20191

Summary of the Appraisal Report
Property Name
Appraisal Value
Appraiser
Appraisal Report Date
Item
Indicated value by income approach(unit: yen)
The Portal Akihabara
1,520,000,000
JLL Morii Valuation & Advisory K.K.
1 May 2019
Details
Description
1,520,000,000 Assessed utilizing a combination of the direct
capitalization method and the DCF method. The
direct capitalization method is an indicator that the
profitability of the subject real estate is a clear

3

Indicated value by direct capitalization
method1,540,000,000(i) Operating revenue ((a)-(b))(a) Gross potential income

69,013,331
71,884,720(b) Vacancy loss etc.

2,871,389(ii) Operating expenses
Maintenance and managementfee

8,869,591
2,040,000

Utilities expense

170,916

Repair expenses

885,500

Property management fee

1,725,333

Tenant leasing costs, etc.

717,847

Property taxes

Insurance premiums

2,945,395

84,600

Other expenses(iii) Net operating income(NOI = (i)-(ii)(iv) Financial interests on deposits(v) Capital expenditures

300,000
60,143,740(vi) Net cash flow
(NCF = (iii)+(iv)-(v))(vii) Capitalization rate

58,422,140

Indicated value of DCF method

Discount rate
Terminal capitalization rate
Indicated value by cost approach

Ratio of land
Ratio of building
Other matters of consideration

344,567
2,066,167

method for net income and return yield, and the
DCF method is effective by properly reflecting theforecast of net income. The appraisal value wascalculated by taking the values derived from thedirect capitalization method and the DCF method
together into considerations.
Assessed by applying the direct capitalization rate
to the appropriate net income of the subject realestate.
Assessed by applying the medium to long term
stabilized rent to the rentable area.
Assessed by taking into consideration the current
and past occupancy of the subject real estate,market vacancy rates and future trends, tenant
recruitment conditions, as well as the level ofcompetitiveness of the subject real estate.
Adopted terms of estimates received from service
provider which are judged consistent in comparison
with the maintenance and management costs ofsimilar real estate.
Confirmed based on actual rates and comparing
rates for similar properties.
Renewal work costs described in the engineering
report were deemed appropriate, and 30% of theamount was recorded as repair expenses.
Taking into considering the estimates received forproperty management services and the property
management fees of similar real estate, we
assessed property management fees at 2.5% of therevenue.
Assessed from the projected churn. In addition,
special advertising expenses were not included
taking into consideration the competitiveness of thesubject real estate.
Based on the actual values obtained, theassessment was made in consideration of the rateof change that can be predicted by future
reclassification of property tax.
Assessed from the ratio to the replacement costbased on the actuals of similar real estate.
Based on actuals of similar real estate.
Assessed long term investment return as 1.0%.
Renewal costs described in the engineering reportwere recognized as appropriate, and 70% of thatamount was classified as capital expenditure.
-

3.8%

Assessed taking into consideration forecast
fluctuation of net income and level ofcompetitiveness based on analyzing similar realestate transactions, potential supply and demand,building specifications, market rent, lease terms,
tenant types, etc.
1,500,000,000 Assessed by assuming current lease agreement
terms and conditions and tenant characteristics,
appropriately reflecting the change in future cash
flows and terminal value.
3.6% Assessed from the discount rate for transactions ofsimilar real estate and comparison with yields forother financial products.
3.9% Assessed taking into consideration the marketabilityof the subject real estate at the end of the analysis
period.
776,000,000 Assessed by applying depreciation price correction
to the replacement cost as well as taking themarketability of the land and building as a single
piece of real estate into consideration.
80.0% 20.0% Since the subject real estate is an office building with a residential
component, and the buyer is one who undertakes transactions with anemphasis on profitability, it is judged that the value is based on income
reflecting actual market conditions. On the other hand, the indicated4value by cost approach focuses on cost and is judged as being difficult
to fully reflect market conditions and profitability of the subject property
when calculating the value. Based on the above, the appraisal valueof the subject real estate was determined with an emphasis on theincome approach and the indicated value by cost approach method
was noted for reference purposes.

4. Profile of the Seller of the asset to be acquired
There are no capital, personal and business relationships between SKR, SREFM and the Seller. In
addition, the Seller is not a “related party” of SKR or SREFM.
Company Name
Head Office
Representative Director
Principal Business
CapitalEstablished
Net Assets (consolidated)1
Total Assets (consolidated)1
Major unitholders and unitholder ratio2
Relationships with SKR and/or SREFM
CapitalPersonal
Business
Related Party Status

Sun Frontier Fudosan Co., Ltd.
1-2-2 Yurakucho, Chiyoda-ku, Tokyo
Tomoaki Horiguchi
Real estate brokerage, property management, etc.
¥11,965 million (as of January 2018)
8 April 1999
¥55,860 million (as at March 2019)¥110,898 million (as at March 2019)
Houonsha Co., Ltd. 36.83% (as at March 2019)
There is no capital relationship to report
There is no personal relationship to report
There is no business relationship to report
The Seller does not fall under the definition of a related partyof SKR or SREFM

1

Figures are rounded down to the nearest ¥1 million.

2

The ratio of the number of shares held to the total number of issued shares is the unitholder ratio, and unitholders witha unitholding ratio of over 10% are listed as major unitholders.

5. Overview of Brokerage
There are no capital, personal and business relationships between SKR, SREFM and the broker. In
addition, the broker is not a “related party” of SKR or SREFM.
Company Name
Head Office
Managing Director
Principal Business
CapitalEstablished
Relationships with SKR and/or SREFM
CapitalPersonal
Business
Related Party Status
Notes

Sanko Office Management
4-6-1 Ginza, Chuo-ward, Tokyo
Hajime Miyo
Brokerage, asset management,
consulting
100 million yen
13 December 2011

leasingmanagement,

There is no capital relationship to report
There is no personal relationship to report
There is no business relationship to report
The broker does not fall under the definition of a related partyof SKR or SREFM
The broker did not allow disclosure of broker fee

6. Future Outlook
The forecast increase to Leasing Net Operating Income for the 6th Fiscal Period (ending 30 June2019) and 7th Fiscal Period (ending 31 December 2019) is approximately ¥3 million and ¥29 million
respectively. Currently, SKR is not revising its earnings forecast announced on 14 February 2019,
but will promptly disclose the details in the event a revised earnings forecast is deemed necessary.

5Reference Materials
・ Reference Material 1 Portfolio List after the Anticipated Acquisition
・ Reference Material 2 Summary of Engineering Report and Earthquake Risk Analysis
・ Reference Material 3 Photographs and Location Map of Anticipated Acquisition

The original Japanese version of this press release is distributed to the press club of the Tokyo Stock
Exchange (Kabuto Club), the press club of the Ministry of Land, Infrastructure, Transport and Tourism,
and the press club for construction trade publications of the Ministry of Land, Infrastructure, Transport
and Tourism.
Sakura Sogo REIT Investment Corporation website address: http://sakurasogoreit.com/en/

6

Reference Material 1. Portfolio List after the Anticipated Acquisition
Property
No.

Property nameLocation

Acquisition
Real estate
Investment
priceappraisalratio (%)3(¥m)1value (¥m)2
OF-01 Seishin Building
Shinjuku, Tokyo
7,880
8,900
13.7
OF-02 NK Building
Chiyoda, Tokyo
3,730
4,010
6.5
OF-03 Tsukasamachi Building
Chiyoda, Tokyo
3,820
4,060
6.6
OF-04 Takadanobaba AccessShinjuku, Tokyo
3,330
3,550
5.8
OF-05 Azabu Amerex Building
Minato, Tokyo
2,020
2,310
3.5
OF-06 Hiei Kudan Building
Chiyoda, Tokyo
1,960
2,120
3.4
OF-07 Shin Yokohama Nara Building
Yokohama, Kanagawa
1,910
2,030
3.3
OF-08 The Portal Akihabara
Chiyoda, Tokyo
1,500
1,520
2.6
Office sub-total
26,15028,50045.4
RT-01
La Park Kishiwada
Kishiwada, Osaka
6,460
6,650
11.2
RT-02
Suroy Mall Chikushino
Chikushino, Fukuoka
7,670
7,790
13.3
RT-03
Seiyu Minakuchi
Koka, Shiga
4,150
4,140
7.2
RT-04
Suroy Mall Nagamine
Kumamoto, Kumamoto
4,180
4,470
7.3
Retail sub-total
22,46023,05039.0
RS-01 Shiroi Logiman
Shiroi, Chiba
2,180
2,170
3.8
RS-02 Matsuya Residence Sekime
Osaka, Osaka
1,820
1,970
3.2
RS-04 Urban Plaza Imazato
Osaka, Osaka
940
949
1.6
RS-05 Abode Yoyogi Parkside
Shibuya,Tokyo
1,600
1,680
2.8
Residential sub-total
6,540
6,769
11.4
OT-01
Funabashi Hi Tech Park I
Funabashi, Chiba
1,720
1,800
3.0
OT-02
Funabashi HiTech Park II
Funabashi, Chiba
710
782
1.2
Other sub-total
2,430
2,582
4.2
Total Portfolio
57,58060,901100.0
1”Acquisition Price” as agreed to for the transaction and indicated in the Purchase and Sale Agreement (exclusive of acquisition
related expenses and consumption tax)
2
Appraisal reports provided by Daiwa Real Estate Appraisal Co., Ltd. with effective date 31 December 2018 for existing properties.
Appraisal report for anticipated acquisition provided by JLL Morii Valuation & Advisory K.K. has effective date 1 May 2019.
3“Investment ratio” is the ratio of acquisition prices for each existing asset / anticipated acquisition asset to the total of acquisition
prices, rounded down to the first decimal place.

7

Reference Material 2. Summary of Engineering Report and Earthquake Risk Analysis
Property
No.

Property name

Engineering
Firm

Engineering
ReportInvestigation Date

Short term
repairexpenses1(thousandyen)

Medium tolong term
repairexpenses(thousand
yen)2

PML
(%)3

OF-01
OF-02
OF-03
OF-04
OF-05
OF-06
OF-07
OF-08

Seishin Building
NK Building
Tsukasamachi Building
Takadanobaba Access
Azabu Amerex Building
Hiei Kudan Building
Shin Yokohama Nara Building
The Portal Akihabara

TRC4
TRC4
TRC4
TRC4
TRC4
TRC4
TRC4
RRI5

5 October 20158 October 20158 October 2015
5 October 2015
5 October 20158 October 201516 October 201518 March 2019

0
0
0
0
0
0
0
0

18,603
16,031
12,823
16,108
5,682
17,234
13,798
2,952

5.5
8.4
9.4
3.5
9.3
3.5
4.4
8.2

RT-01
RT-02
RT-03
RT-04

La Park Kishiwada
Suroy Mall Chikushino
Seiyu Minakuchi
Suroy Mall Nagamine

TRC4
TRC4
TRC4
TRC4

5,6 October 2015
21,22 June 20169 October 2015
26 June 2016

0
0
0
0

71,68430,314
14,05814,857

14.8
1.7
4.2
8.1

RS-01
RS-02
RS-04
RS-05

Shiroi LogimanMatsuya Residence Sekime
Urban Plaza Imazato
Abode Yoyogi Parkside

TRC4
TRC4
TRC4
JCIA6

13 October 20157 October 2015
6 October 2015
11 July 2017

0
0
0
0

48,37422,752
7,993
642

3.6
11.6
12.0
7.3

OT-01
OT-02

Funabashi Hi Tech Park I
Funabashi Hi Tech Park II

TRC4
TRC4

16 October 201516 October 2015

0
0

1,901
3,123

4.6
4.6

Total Portfolio
0318,929
3.9”Short term repair expenses” are the expenses stated in the Engineering Report as expenses in need and repair required withinroughly one year, rounded to the nearest thousand yen.
2
”Medium to long-term repair expenses” is the average amount per year of the repair and renewal expenses projected for the next
12 years stated in the Engineering Report, rounded to the nearest thousand yen.
3
“PML” (“Probable Maximum Loss”) for the planned acquisition and overall PML is extracted from the Earthquake Risk Valuation
Report provided by Tokio Marine & Nichido Risk Consulting Co., Ltd. in April 2019. PML for the residual assets is extracted fromthe Earthquake Risk Valuation Reports provided by Tokyo Marine & Nichido Risk Consulting Co., Ltd. in May 2018.
4
Tokio Marine & Nichido Risk Consulting Co., Ltd.
5
Rubicon Realty Inc.
6
JCIA Japan Constructive Inspect Association
1

8

Reference Material 3. Photographs and Location Map of Anticipated Acquisition
1. OF-08 The Portal Akihabara

910