Growth

Growth potential shall be secured through the achievement of both enhancement of asset values from a medium- to long-term perspective and growth of net income per investment unit from an internal and external growth perspective.
Internal growth mentioned here is growth based primarily on the following internal factors.

  • Increase rental revenues
  • Increase the occupancy rate
  • Reduce property management costs, etc.

On the other hand, external growth is growth based primarily on the following external factors which are triggered by the acquisition of additional properties or additional capital investment.

  • Reduce expenses as asset scale expands
  • Acquire properties for which the return is expected to exceed capital cost
  • Maintain and improve tenant enticements through renovation
  • Improve profitability by replacements in property portfolio

(1) Internal growth factors

Optimization of asset management

In order to achieve internal growth, TOKYU REIT shall outsource management which aims to optimize portfolio value from a medium- to long-term perspective to an asset management company.
The asset management company shall select a property management (hereafter "PM") company suitable for each property and shall instruct and supervise the said PM company. Furthermore, based primarily on the following objectives, it shall strive to maximize the cash flow of each property.

  • By establishing trust relationships with tenants and through tenant marketing, it shall strive to enhance tenant satisfaction and make it its goal to maintain and improve rents and occupancy rates
  • Through efficient management and operations, it shall strive to reduce property management costs, etc.

Growth based on the area where the investment target is located and its type of use

The investment targets of TOKYU REIT are primarily office properties, retail properties, and complexes that include office or retail properties located in the Tokyo central 5 wards and areas along the Tokyu rail lines ("Tokyu Areas"). However, we shall not invest in areas other than the Tokyo Metropolitan Area(Investment target area).
TOKYU REIT shall make it its goal to realize internal growth based on the following characteristics of the abovementioned areas and uses.

  • Relative superiority of the growth ability of the area itself
  • Relative superiority of the economic sphere of the Tokyo Metropolitan Area centering the Tokyo central 5 wards area.
  • Economic strength and brand ability of Tokyu Areas themselves
  • Originality based on expectations of cooperation with Tokyu Corporation and its subsidiaries
  • Expectations for strategic investment and business activities being operated by Tokyu Corporation and its subsidiaries primarily in Tokyu Areas.
  • Superiority of Tokyu Corporation and its subsidiaries
  • Tenant sales performance backed by an information network on tenants and local contacts
  • By making Tokyu Corporation and its subsidiaries our PM companies in principle, their expertise in real estate management towards management properties outsourced from third parties other than from TOKYU REIT as well as their ability to reduce management and operations costs taking advantage of their economies of scale brought about through their conducting property management operations.

(2) External growth factors

Proactive property acquisition and maintenance and improvement of portfolio quality

TOKYU REIT shall proactively acquire office properties, retail properties, and complexes that include office or retail properties located in the Tokyo central 5 wards area and Tokyu Areas, which are primary investment targets of TOKYU REIT, at reasonable prices, based on the original information collection ability and property assessment ability of the asset management company. When acquiring property, individual real estate shall be selected based on property assessments and on the assumption they will be held long-term. By replacing portfolio properties as needed, and through other acts, we shall strive to maintain and improve portfolio quality and shall make it our goals to enhance asset value and achieve growth of net income per investment unit.
Moreover, portfolio properties shall be replaced in accordance with investment management strategies formulated as needed by the asset management company in line with the basic principles, such as TOKYU REIT's strategy called the Long-term Investment Management Strategy (Surf Plan) formulated in September 2009 by the asset management company based on the basic principles in the desire to construct a strong balance sheet even in times of a recession and to develop a portfolio with permanent competitiveness.

Property acquisition from Tokyu Corporation and its subsidiaries

TOKYU REIT shall secure acquisition opportunities for stable and continuous properties out of properties owned by Tokyu Corporation and its subsidiaries. To this end, a memorandum relating to the purchase and sale of real estate was concluded between Tokyu Corporation, TOKYU REIT and the asset management company.

(3) Synergies Produced with Tokyu Corporation and its Subsidiaries (Growth achieved by adding value to the Tokyu Areas)

Through synergies produced with Tokyu Corporation and its subsidiaries, TOKYU REIT shall strive to achieve growth by adding value to the Tokyu Areas.

Tokyu Group Management Policy

In the Tokyu Group Management Policy announced by Tokyu Corporation, which is the central company of Tokyu Corporation and its subsidiaries, on April 18, 2000, the company decided to focus its management resources in the revitalization of Shibuya and Tokyu Line areas, and positions its real estate investment trust business as one of its growth strategies. Furthermore, in the management plan announced by the company later on, it continues to place expectations on the role of the real estate investment trust business of the Group.

Growth achieved through business activities of Tokyu Corporation and its subsidiaries in Tokyu Areas (capital re-investment model)

In the event properties owned by or new properties developed by Tokyu Corporation and its subsidiaries are sold to third parties, including TOKYU REIT, Tokyu Corporation and its subsidiaries may invest the collected investment capital in real estate development investment in Tokyu Areas or other businesses (e.g. construction to improve the transportation capacity, effective use of spaces inside stations, development of station buildings, development of infrastructure such as cable TVs, etc. conducted by Tokyu Corporation). Through such strategic investments, the quality of living environment is expected to rise and the population in the Tokyu Areas and ability to attract customers are expected to increase. As a result, economic activities of Tokyu Areas are expected to be revitalized and in turn are expected to contribute to the external and internal growth in the following points.

  • Increase of acquisition opportunities for development properties
  • Revenue increase of retail facilities through an increase in consumption, and accumulation of business functions based on Shibuya

Growth achieved through business activities of companies other than Tokyu Corporation and its subsidiaries in Tokyu Areas

The addition of value to Tokyu Areas brought about by the above business activities carried out by Tokyu Corporation and its subsidiaries are expected to attract business activities of companies other than Tokyu Corporation and its subsidiaries and to further raise the economic strength and brand ability of the areas in the Tokyu Area itself. As a result, they are expected to contribute to the external and internal growth in the following points.

  • Increase of property acquisition opportunities based on expansion of real estate development investment
  • Increase of opportunities to obtain superior tenants based on an increase of opportunities for tenants to open a store.

Please refer to this page, about growth of Tokyu Areas.

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