External Growth
Investment Criteria
Investment Amount per Property
The minimum investment amount per property by type of use is as follows:
| Investment Amount | |
|---|---|
| Office Buildings | In principle, ¥2.0 billion or more |
| Retail Properties | In principle, ¥2.0 billion or more |
Type of Ownership
In connection with type of ownership, the decision as to whether LaSalle Japan acquires the title of real estate or the trust beneficial interest after establishing a trust for such real estate shall be made upon taking into consideration the acquisition costs at the time of investment and management costs after acquisition.
Location
Location shall be selected by taking into consideration the characteristics of profits arising from each type of real estate use. The criteria used in the selection process are as follows:
(1) Office Buildings
Locations for office buildings shall be selected by taking into consideration all the related factors in the area including: (i) the density of office buildings; (ii) the conditions of real estate leasing markets; and (iii) the distance from the nearest rail station and the number of lines serving that station.
(2) Retail Properties
Locations for retail properties shall be selected by taking into consideration all the related factors, after: (i) accurately recognizing the commercial area’s potential purchasing power and growth potential by analyzing the population, demographic changes, the number of households, average income, etc. in a properly recognized and determined commercial area; (ii) deciding whether the tenant and its type of business conform with the demands in the commercial area; and (iii) conducting research into wide-ranging aspects, including current competition, any plans our tenants’ competitors have for opening businesses in nearby areas, the scope for future development, etc.
Size
The size of properties shall at least meet the following criteria by type of use:
(1) Office Buildings
Total floor area shall be 2,500 m2 or larger and net floor area excluding common use space of a standard floor (see Note 1) shall be 250 m2 or larger.
(Note 1) “Standard floor” is defined as a typical floor other than the first floor of a building.
(2) Retail Properties
Total leasable floor area shall be 1,000 m2 or larger in the central Tokyo area* and total leasable floor area shall be 3,000 m2 or larger in other areas.
(Note 2) The “central Tokyo area” is comprised of Chuo, Chiyoda, Shinjuku, Minato and Shibuya Wards.
Notwithstanding the above, LaSalle Japan may acquire assets that do not meet the above criteria-taking into consideration such factors as location or area unique to each property-following a Portfolio Committee majority decision, to which the outside expert on the Portfolio Committee has to agree.
Building Facilities
In terms of building facilities, selection of investment asset shall be made based on the following criteria set by each type of use:
(1) Office Buildings
Selection shall be made on an individual basis taking into consideration standard specification in each geographic area in addition to the following basic standard specification.
| a. Floor configuration and segmentation | In principle, floors shall be reconfigurable and resegmentable |
|---|---|
| b. Ceiling height | In principle, at least 2,500 mm |
| c. Other | 24-hour access |
(2) Retail Properties
After accurately recognizing the specifications suitable for the type of use and business, selection shall be made on an individual basis taking into consideration all the related factors to each property, including special factors unique to each property’s location or area, versatility as a commercial property, potentiality of change of use and access to public transportation available to customers, etc.
Earthquake Resistance
For each type of use, investment assets shall meet the New Anti-Seismic Standards (see Note 1) or, if built under the Anti-Seismic Standards prior to the introduction of the New Anti-Seismic Standards, appropriate anti-seismic reinforcement shall be completed. Also, the PML ratio (see Note 2) for each property shall be less than 20%.
Even if anti-seismic reinforcement has not yet been completed at the time of acquisition, LaSalle Japan can acquire the property if such reinforcement can be completed after acquisition and the PML ratio for the entire portfolio does not exceed 10%, provided that the outside expert on the Portfolio Committee consents to such acquisition.
(Notes1) The New Anti-Seismic Standards refer to the standards relating to anti-seismic capability of buildings introduced by the amendments to the Enforcement Order of the Building Standard Law (Cabinet Order No.144 of 1981) enacted in 1981, which (1) introduced a new standard for percentage of binding iron reinforcing rod inside concrete pillars (0.2% or more), (2) shifted from a horizontal seismic coefficient to a layered shear force coefficient, and (3) introduced a new standard for secondary calculation of seismic impact, all of which contributed to significant improvements in anti-seismic capability of buildings.
(Notes2)
Ownership Other Than Full Title
In selecting a property with other than full title ownership, LaSalle Japan shall make a decision pursuant to the following criteria set by each type of ownership.
(1) Co-ownership
- To ensure discretionary management in leasing, improvements, etc., the basic policy is more than 50% of ownership, but the final decision shall be flexibly made by considering the relevant factors, including the characteristics and credit standing of co-owners.
- To ensure discretion in disposal, LaSalle Japan shall confirm the contents of restrictions on disposal, including preemptions, transfer restrictions, and special agreements among co-owners.
- To secure stable profits, LaSalle Japan shall confirm the characteristics and credit standing of other co-owners and design the best structural arrangements, including but not limited to special agreements concerning no partition of a co-ownership interest, perfection of registrations and arrangements relating to mutual use of underlying land.
(2) Compartmentalized Ownership
- To deal with possible major repairs due to age deterioration, LaSalle Japan shall review relevant factors, including the characteristics and credit standing of compartmentalized building unit title holders.
- To maintain an appropriate degree of discretion in the disposal of compartmentalized ownership interests, LaSalle Japan shall confirm the contents of disposal restrictions, including preemptions and transfer restrictions agreed by relevant compartmentalized building unit title holders, if any.
- To secure stable profits, LaSalle Japan shall confirm management carried out by the management partnership of the property (conditions of reserves, debt ratio, insurance, etc.) and make its own arrangements (including but not limited to increase and decrease of reserves accumulated by LaSalle Japan, insuring common area separately from insurance by the management partnership and perfection of rights to underlying land) as deemed necessary.
(3) Leasehold
- In principle, LaSalle Japan can invest in leasehold interest under the Land Lease Law (Law No. 49 of 1921, as amended), and the Land and House Lease Law (Law No. 90 of 1991, as amended).
- LaSalle Japan shall carefully consider the characteristics of owners of the underlying land as well as impact upon profitability of the property from change of leasehold rent, fees for renewal of lease agreement and consent fees for reconstruction or disposal, etc.
(4) Underlying Land
- In principle, LaSalle Japan can invest only in underlying land with fixed-term leaseholds under Article 22 and leaseholds for business under Article 24 of the Land and House Lease Law.
- LaSalle Japan shall carefully consider the characteristics of leaseholders and their credit standing to pay the rent as well as the outlook to secure stable profits after termination of the land lease agreement.
(5) Other
- In addition to items (1) through (4) above, LaSalle Japan shall not acquire properties to which third-party rights-including security interest, usufruct rights, etc. but excluding house leasehold rights-are attached, except where these interests or rights are deemed to have little impact on property profitability and are appropriate to maintain the value of the property, such as easement of access.
- In connection with a complex property (i.e., a group of buildings and underlying land effectively united and working as one property as a whole) to which the multiple rights or interests set forth (1) through (4) above are attached, LaSalle Japan shall make selection taking into consideration, in addition to items (1) through (4) above, the possibility of stable profitability from such complex property.
Holding Period
LaSalle Japan shall acquire investment assets based on comprehensive consideration of all factors related to real estate conditions, future profitability and risk, including location, maintenance and management status, countermeasures against degradation and obsolescence, earthquake resistance, ownership and other related rights, the contents of lease agreements with tenants, environmental and geological conditions, and so forth. LaSalle Japan shall acquire, in principle, such property that yields or is expected to yield stable rental revenue or similar income.
In principle, LaSalle Japan shall acquire investment assets on the premise that such assets will be held for more than three years.
Investment Targets
Types of Investments Considered as Targets
LaSalle Japan shall invest primarily in real estate and securities backed by real estate.
(1) Real Estate
- Real estate
- Real estate leasehold
- Surface rights
- Trust beneficiary interests in real estate, land leasehold or surface rights (including a package trust under which real estate is entrusted with moneys related to it)
- Trust beneficiary interests in money under which moneys are invested in real estate, land leasehold or surface rights
- Equity holdings related to an agreement under which (i) one party to the agreement makes contributions for the management by the other party of the assets set forth in (a.) through (e.) above, (ii) the other party manages such assets, and (iii) the profits arising from such management are distributed as a dividend (hereafter referred to as Equity Holdings in tokumei kumiai Relating to Real Estate).
(2) Securities Backed by Real Estate
(“Securities backed by real estate” refers to the following securities, aiming to invest in assets backed by more than half of underlying assets in real estate, etc.)
- Preferred contribution securities (as defined under Article 2, Paragraph 9 of the Asset Liquidation Law [Law No. 105 of 1998] as amended).
- Beneficiary securities (as defined under Article 2, Paragraph 7 of the Investment Trust and Investment Corporation Law)
- Investment securities (as defined under Article 2, Paragraph 15 of the Investment Trust and Investment Corporation Law)
- Specified purpose trust beneficiary securities (as defined under Article 2, Paragraph 15 of the Asset Liquidation law [excluding securities which fall under items (1) d. or e. above])
(3) Specified Assets
- Deposits
- Call loans
- The following securities:
- Government bonds
- Local government bonds
- Bonds issued under special laws (as defined under Article 2, Paragraph 1, Item 3 of the Financial Instruments and Exchange Law)
- Corporate bonds (excluding securities with stock acquisition rights)
- Bonds issued by a special purpose company (as defined under Article 2, Paragraph 1, Item 4 of the Financial Instruments and Exchange Law)
- Commercial paper (as defined under Article 2, Paragraph 1, Item 15 of the Financial Instruments and Exchange Law)
- Trustee certificates of loans (as defined under Article 2, Paragraph 1, Item 12 of the Financial Instruments and Exchange Law [excluding those defined in (2) b. above])
- Investment securities (as defined under Article 2, Paragraph 1, Item 11 of the Financial Instruments and Exchange Law [but excluding those defined in (2) c. above])
- Investment corporation bonds (as defined under Article 2, Paragraph 1, Item 7-2 of the Financial Instruments and Exchange Law)
- Securities and certificates representing options (as defined under Article 2, Paragraph 1, Item 19 of the Financial Instruments and Exchange Law)
- Depositary receipts (as defined under Article 2, Paragraph 1, Item 20 of the Financial Instruments and Exchange Law which are denominated in Japanese yen and have the nature of items (i) through (iv) above)
- Certificates of deposit
- Monetary receivables (as defined under Article 3, Paragraph 7 of the Enforcement Order of the Investment Trust and Corporation Law [hereinafter referred to as the “Enforcement Order”])
- Rights relating to trading in derivatives (as defined under Article 3, Item 2 of the Enforcement Order)
- Trust beneficiary interests in money for the purpose of investing in items a. through e. above
(4) When necessary, LaSalle Japan may invest in the following assets:
- Trademark rights as defined in Trademark Law (Law No. 127 of 1959, as amended) or rights of exclusive or normal use thereof, provided that these rights are incidental to investment in real estate
- Usage rights of sources of thermal spring and related facilities (as defined in Article 2, Paragraph 1 of Thermal Spring Law [Law No. 125 of 1948] as amended), provided that these rights are incidental to investment in real estate
- Other rights deemed appropriate to acquire incidentally investment in real estate