japan prime realty investment corporation

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04 April 2014

Asia Pacific/Japan

Equity Research

REITs (REIT (Japan)) / OVERWEIGHT

Japan Prime Realty Investment Corporation (8955 / 8955 JP)

DOWNGRADE RATING

Valuation appeal waning; downgrade to NEUTRAL

■ Action: We revise our forecasts after contacting Japan Prime Realty (JPR)

and lower our target price from ¥390,000 to ¥360,000 (potential return 6.4%).

We also add forecasts for FT6/15. We now assume a higher risk premium

than previously in view of possible erosion in external growth expectations.

The lower TP erases JPR’s valuation appeal and mandates a downgrade

from Outperform to NEUTRAL.

■ Investment case: JPR has outperformed other large-cap J-REITs amid

expectations for the acquisition of high-quality properties. P/NAVPU is

currently 1.52x, well above the 1.37x simple average for other large caps.

■ In addition, property deals by JPR’s sponsor so far in 2014 have made it less

likely in our view that JPR will acquire the kind of S-class buildings this year

that the market anticipates. We believe this could erode the expectations for

external growth that have been a key driver of outperformance.

■ Risks: Upside risks include the acquisition of an S-class building in central

Tokyo at a good price. Downside risks include a failure to announce any new

acquisitions at end-June and the departure of major tenants.

■ Valuation: We base our ¥360,000 TP on the sum of our DPU forecasts for

FT12/14 and FT6/15 (¥12,128; previously the ¥11,825 total of our FT6/14

and FT12/14 forecasts) and a 3.36% (previously 3.04%) distribution yield

(risk-free rate 0.66%, risk premium 3.7%, expected CPI growth 1.0%).

Share price performance

80

100

120

140

200000

250000

300000

350000

400000

Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the

TOPIX which closed at 1216.77 on 03/04/14

On 03/04/14 the spot exchange rate was ¥103.91/US$1

Performance Over 1M 3M 12M Absolute (%) -1.2 0.4 -4.1 Relative (%) -1.5 7.0 -21.4

Financial and valuation metrics

Fiscal Term 12/13A 6/14E 12/14E 6/15E Operating revenue (¥ mn) 13,592 13,592 13,705 13,463 Operating profit (¥ mn) 6,368 6,349 6,337 6,226 Recurring profit (¥ mn) 4,900 4,983 4,964 5,044 Net income (¥ mn) 4,954 4,982 4,963 5,043 EPS (¥) 6,005 6,038 6,016 6,113 Change from previous EPS (%) n.a. 1.9 1.9 Consensus EPS (¥) n.a. 6,124.3 6,190.9 6,372.2 EPS growth (%) -0.4 0.6 -0.4 1.6 P/E (x) 28.1 28.0 28.1 27.7 Dividend per share (¥) 6,006 6,038 6,016 6,113 FFO per share (¥) 8,270 8,261 8,239 8,336 Dividend yield-(%) 3.6 3.6 3.6 3.6 FFO ratio (x) 20.4 20.5 20.5 20.3 ROE (%) 5.0 5.1 5.0 5.1 LTV (%) 32.7 32.3 32.3 32.3

Source : Company data, IFIS, Credit Suisse estimates Note : Dividend yield, FFO ratio, ROE and PER are annual basis.

Rating (from Outperform) NEUTRAL* Price (03 Apr 14, ¥) 338,500 Target price (¥) (from 390,000) 360,000¹ Chg to TP (%) 6.4 Market cap. (¥ bn) 279.3 (US$ 2.7) Enterprise value (¥ bn) 403.3 Number of shares (mn) 0.82 52-week price range 379,000 - 262,600

*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

Research Analysts

Atsuro Takemura

81 3 4550 7372

[email protected]

Masahiro Mochizuki

81 3 4550 7389

[email protected]

04 April 2014

Japan Prime Realty Investment Corporation (8955 / 8955 JP) 2

Downgrade to NEUTRAL We revise our forecasts after contacting JPR and lower our TP from ¥390,000 to ¥360,000.

We now assume a higher risk premium than previously in view of possible erosion in

external growth expectations. The lower TP erases JPR’s valuation appeal and mandates

a downgrade from Outperform to NEUTRAL.

Unit price performance has been stronger than other J-REITs

JPR has outperformed other large-cap J-REITs since August 2013. We attribute this to:

(1) the distribution yield having more scope for decline than other J-REITs, and

(2) expectations for property acquisitions to be as impressive to investors as the Otemachi

Tower land with leasehold interest purchase.

Figure 1: Share performance of large caps in J-REITs sector (end-Dec. 2012=100)

100

110

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Mar

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Japan Prime Realty Nippon Building Fund Japan Real Estate

Japan Retail Fund TOPIX Source: Thomson Reuters, Credit Suisse

Less scope for higher valuations than other J-REITs

We believe JPR’s firm unit price performance has been driven in part by prospects for a

decline in distribution yield based on historical trends. However, P/NAVPU now looks

excessive versus peers, and we accordingly see little possibility of further improvement in

valuations.

JPR’s management has emphasized keeping DPU stable. During the run-up in unit price

through 2007, DPU remained essentially flat while NAV rose (Figures 2–3). Because the

unit price rose along with NAV, JPR’s distribution yield declined to the same level as that

of Nippon Building Fund and other large-cap J-REITs (Figure 4).

Decrease TP to ¥360,000;

downgrade to NEUTRAL

JPR has outperformed other

J-REITs amid expectations

for valuations and external

growth

Distribution yield unlikely to

decline unless NAVPU rises

in earnest

04 April 2014


Figure 2: JPR’s NAVPU increased in last rally (2H

2002=100)

Figure 3: JPR’s DPU did not increase in last rally (2H

2002=100)

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Japan Prime Realty (refference) Nippon Building Fund

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Japan Prime Realty (refference) Nippon Building Fund

Source: Company data, Credit Suisse Source: Company data, Credit Suisse

Figure 4: Dividend yields (JPR's dividend yield declined to the same level as Nippon

Building Fund in last rally)

0.0%

1.0%

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5.0%

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Japan Prime Realty Nippon Building Fund

Source: Thomson Reuters, Credit Suisse

However, P/NAVPU has now become comparatively high amid expectations for property

acquisitions (Figure 5). JPR’s 1.52x is well above the 1.37x simple average for other large

caps (Nippon Building Fund, Japan Real Estate Investment, Japan Retail Fund, ORIX

JREIT). This makes a further decline in distribution yield unlikely in our view unless NAV

rises.

04 April 2014


Figure 5: P/NAVPU is relatively high

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Japan Prime Realty (for refference) Nippon Building Fund

(x)

Source: Company data, Thomson Reuters, Credit Suisse

External growth expectations could decline

We believe JPR’s unit-price performance has also been supported by expectations for

property acquisitions as impressive as in the past. However, we now see little possibility

that this year JPR will purchase S-class buildings that its sponsor is involved in. We

believe this could erode expectations for external growth.

The stock market welcomed JPR’s announcement in March 2013 of its acquisition of land

with leasehold interest for Otemachi Tower from sponsor Tokyo Tatemono. We suspect

this had investors looking for JPR to also acquire properties included in major projects in

which Tokyo Tatemono has a major share.

However, portions of Otemachi Tower on which JPR had priority negotiating rights were

sold to Mizuho Bank on 26 March 2014, with JPR taking a pass.

Nakano Central Park was sold by the SPC on 27 March to Tokyo Tatemono, Hulic, AXA

Life Insurance and to a private fund. We believe the property did not meet JPR’s criteria in

terms of NOI yield, as some tenants were still receiving free rent and existing tenant rents

were below market levels.

We also see little possibility of JPR acquiring Tokyo Square Garden this year, as the

building will not generate profits until 2015.

Unlikely to acquire S-class

buildings, at least this year

04 April 2014


Unit price performance

JPR has outperformed the TSE REIT Index amid expectations for the acquisition of

sponsor properties. While it underperformed TOPIX in 2H 2013 as long-term interest rates

rose, it has outperformed in 2014, with its status as a yield play supporting comparatively

firm performance amid a decline in the broader market as foreign investors sold.

We expect JPR to perform in line with the TSE REIT Index as expectations for external

growth erode. We look for slight outperformance versus TOPIX.

Figure 6: Share performance

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Japan Prime Realty Japan Prime Realty/TSE REIT Japan Prime Realty/TOPIX

(Jan 2009=100)

Source: Thomson Reuters, Credit Suisse

Unit price and valuation

We base our ¥360,000 TP on the sum of our DPU forecasts for FT12/14 and FT6/15

(¥12,128) and a 3.36% distribution yield (risk-free rate 0.66%, risk premium 3.7%,

expected CPI growth 1.0%).

We previously expected the risk premium to decline to 3.3% on expectations for higher

rents and external growth but now go with 3.7% as external growth expectations look set

to erode. Our 3.7% risk premium assumption is the bottom between 2011 and 2012, when

the BoJ was buying J-REITs but market expectations for inflation did not rise.

Figure 7: Implied yields Figure 8: Risk premiums

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Risk premium of dividend yield (distribution yield less the 10-year JGB yield)

Risk premium of NOI yield (distribution yield less the 10-year JGB yield)

Source: Thomson Reuters, Credit Suisse Source: Thomson Reuters, Credit Suisse

04 April 2014


Our forecasts

DPU for FT12/13 was ¥6,006. We forecast ¥6,038 (+0.5% ToT) for FT6/14, ¥6,016

(–0.4%) for FT12/14, and ¥6,113 (+1.6%) for FT6/15.

New acquisitions

We look for full-year contributions from Science Plaza-Yonbancho Plaza and Shibadaimon

Center Building, acquired in December 2013.

Occupancy

The overall office occupancy rate at end-FT12/13 was 94.8% (94.4% in Tokyo’s 23 wards,

95.4% elsewhere). We look for 94.2% (94.4%, 95.4%) in FT6/14, 95.3% (95.3%, 95.4%) in

FT12/14, and 93.7% (93.0%, 94.6%) in FT6/15.

Adjusting our figures to count rent-free tenants as vacancies, we forecast overall

occupancy of 94.2% (94.4%, 93.9%) in FT6/14, 94.8% (94.4%, 95.4%) in FT12/14, and

93.7% (93.0%, 94.6%) in FT6/15.

The occupancy rate of commercial facilities at end-FT12/13 was 99.7%, and we look for it

to remain at that level in FT6/14.

Average rents

The per-tsubo average monthly rent in Tokyo’s 23 wards was ¥24,705 in FT12/13. We

forecast ¥24,589 (–0.5% ToT) in FT6/14, ¥24,449 (–0.5%) in FT12/14, and ¥24,543

(–0.5%) in FT6/15. The per-tsubo average monthly rent in other areas was ¥15,233 in

FT12/13. We look for ¥15,199 (–0.5% ToT) in FT6/14, ¥15,085 (–0.5%) in FT12/14, and

¥15,032 (–0.5%) in FT6/15.

We expect per-tsubo rent for commercial facilities to remain flat at the FT12/13 level of

¥10,764.

Figure 9: Occupancy rates and average rents in the portfolio

84.0%

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)

Office avg. rent in Tokyo 23 wards (LHS) Office avg. rent in Tokyo 23 wards (LHS)Retail avg. rent in the other area (LHS) Office occ. rate in Tokyo 23 wards (RHS)Office occ. rate in Tokyo 23 wards (RHS) Retail occ. rate in other area (RHS)

(Yen/tsubo per month)

Source: Company data, Credit Suisse estimates

04 April 2014


Earnings forecasts and valuations Figure 10: Earnings forecasts

¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%)

Consolidated

Dec-13 A 13,592 2.4 6,368 -0.3 4,900 -1.5 4,954 -0.4 6,004.9 -0.4

Jun-14 CS E (new) 13,592 0.0 6,349 -0.3 4,983 1.7 4,982 0.6 6,038.3 0.6

(prev) 13,399 -1.4 6,285 -1.3 4,849 -1.0 4,848 -2.1 5,876.2 -2.1

CoE 13,630 0.3 6,348 -0.3 4,992 1.9 4,991 0.7 6,050.0 0.8

Dec-14 CS E (new) 13,705 0.8 6,337 -0.2 4,964 -0.4 4,963 -0.4 6,015.5 -0.4

(prev) 13,465 0.5 6,206 -1.3 4,909 1.2 4,908 1.2 5,949.0 1.2

Jun-15 CS E (new) 13,463 -1.8 6,226 -1.8 5,044 1.6 5,043 1.6 6,112.8 1.6

EPSOperating revenue Operating profit Recurring profit Net profit

Source: Company data, Credit Suisse estimates

Figure 11: Income statement

12/12 6/13 12/13 6/14 6/14 12/14 6/15

(¥mn) Co.E CS.E CS.E CS.E

Operating revenue 12,963 13,279 13,592 13,630 13,592 13,705 13,463

Real estate rental revenues 12,963 13,279 13,592 13,630 13,592 13,705 13,463

Rental revenues 12,160 12,510 12,694 12,879 12,841 12,828 12,712

Other operating revenue 803 769 898 751 751 877 751

Profit on sale of real estate 0 0 0 0 0 0 0

Dividends received 0 0 0 0 0 0 0

(Changes in rental revenue) 147 (14) (116)

Contribution from new properties or full-term contribution 244 0 0

Revised rents (43) (68) 16

Change in vacancy rate (54) 54 (132)

Decrease by sales of properties 0 0 0

Others 0 0 (0)

Operating expenses 6,198 6,894 7,223 7,282 7,243 7,367 7,237

Property-related expenses 5,519 6,208 6,535 6,562 6,555 6,678 6,549

Property and other taxes 1,025 1,822 1,879 1,992 1,992 1,986 1,986

Other expensed 2,663 2,502 2,787 2,729 2,729 2,858 2,729

Depreciation 1,831 1,885 1,869 1,837 1,834 1,834 1,834

Loss on sale of real estate 0 0 0 0 0 0 0

Asset management fees 465 469 473 473 474 473

Administrative service and custodian fees 77 79 81 81 81 81

Director's fee 7 7 7 7 7 7

Trust fees 40 37 35 35 35 35

Other operating expenses 89 94 92 92 92 92

Profit on real estate business (excluding capital gain/loss) 7,444 7,070 7,057 7,037 7,027 6,914

(Changes in profit in real estate business) 0 0 0 (20) (11) (113)

Contribution from new properties or full-term contribution 162 0 0

Revised rents (43) (68) 16

Change in vacancy rate (54) 54 (132)

Decrease by sales of properties 0 0 0

Others (85) 3 3

NOI (excluding profit on sale) 9,275 8,955 8,926 8,904 8,871 8,861 8,748

NOI growth (YoY) 392 (320) (29) 0 (55) (11) (113)

Operating profits 6,765 6,385 6,368 6,348 6,349 6,337 6,226

(% of revenues) 52.2% 48.1% 46.9% 46.6% 46.7% 46.2% 46.2%

Non-operating profit/loss (1,739) (1,410) (1,468) (1,366) (1,374) (1,182)

Non-operating profit 10 60 17 57 7 57

Non-operating loss 1,749 1,470 1,485 1,423 1,380 1,239

Recurring profits 5,026 4,975 4,900 4,992 4,983 4,964 5,044

(% of revenues) 38.8% 37.5% 36.1% 36.6% 36.7% 36.2% 37.5%

Extraordinary loss 0 0 55 0 0 0

Net income before tax 5,026 4,975 4,955 4,983 4,964 5,044

Net income 5,025 4,975 4,954 4,991 4,982 4,963 5,043 Source: Company data, Credit Suisse estimates

04 April 2014


Figure 12: Balance sheet

12/12 6/13 12/13 6/14 12/14 6/15

(¥mn) CS.E CS.E CS.E

Total current assets 20,696 22,896 22,139 20,904 21,623 22,440

Cash and bank deposits 8,402 10,852 9,781 8,546 9,264 10,082

Trust cash and trust deposits 11,596 11,569 11,857 11,857 11,857 11,857

Rental receivables 229 321 271 271 271 271

Prepaid expenses 203 145 189 189 189 189

Deferred tax assets 0 0 0 0 0 0

Consumption 259 0 0 0 0 0

Other current assets 5 8 41 41 41 41

Fixed assets 381,111 386,614 391,657 390,947 390,237 389,527

Tangible fixed assets 375,722 381,291 386,429 385,719 385,009 384,299

Intangible fixed assets 4,799 4,799 4,798 4,798 4,798 4,798

Other investment assets 589 525 429 429 429 429

Deferred assets 176 206 178 151 124 96

Issuance costs of bond 176 206 178 151 124 96

Total assets 401,984 409,716 413,974 412,002 411,983 412,063

Current liabilities 35,659 40,903 35,460 37,225 39,625 33,625

Trade accounts payable 1,722 1,825 1,699 1,699 1,699 1,699

Short-term loans 0 0 2,000 2,000 2,000 2,000

Current portion of long-term loans 30,618 30,468 12,235 6,000 19,400 26,400

Current portion of bond 0 5,000 16,000 24,000 13,000 0

Accrued payable 581 695 691 691 691 691

Accrued expenses 211 208 215 215 215 215

Accrued corporate taxes 1 1 1 1 1 1

Accrued consumption taxes 64 192 174 174 174 174

Rent received in advance 2,461 2,515 2,446 2,446 2,446 2,446

Deposits 0 0 0 0 0 0

Others 1 0 0 0 0 (0)

Fixed liabilities 169,156 171,696 181,419 177,654 175,254 181,254

Bond 49,500 51,500 40,500 32,500 43,500 56,500

Long-term loans 100,439 100,190 121,024 125,259 111,859 104,859

Tenant leasehold and security 7,871 7,959 7,553 7,553 7,553 7,553

Trust tenant leasehold and security 11,345 12,047 12,342 12,342 12,342 12,342

Total unit holders' equity 197,168 197,117 197,095 197,123 197,104 197,184

Total liabilities and unit holders' equity 401,984 409,716 413,974 412,002 411,983 412,063 Source: Company data, Credit Suisse estimates

04 April 2014


Figure 13: Cash flow statement

12/12 6/13 12/13 6/14 12/14 6/15


Cash flow from operating activities 6,612 7,785 6,722 6,843 6,824 6,904

Income before income taxes 5,025 4,975 4,954 4,982 4,963 5,043

Depreciation and amortization 1,831 1,884 1,869 1,834 1,834 1,834

Others 0 0 0 0 0 0

Cash flow from investing activities (12,709) (6,886) (7,132) (1,124) (1,124) (1,124)

Fixed assets (11,867) (343) (359) (1,124) (1,124) (1,124)

Entrusted property and equipment (1,122) (7,446) (6,712) 0 0 0

Tenant leasehold and security deposits 342 251 0 0 0 0

Entrusted tenant leasehold and security deposits (61) 652 0 0 0 0

Others (1) (0) (61) 0 0 0

Cash flow from financing activities 1,435 1,523 (372) (6,954) (4,982) (4,963)

Short-term debt (20,600) 0 2,000 0 0 0

Long-term debt 8,076 (399) 2,601 (2,000) 0 0

Bond (2,051) 6,948 0 0 0 0

Payment of Bond issuance cost 0 0 0 0 0 0

Proceeds from issuance of units 20,606 0 0 0 0 0

Dividends to unit holders (4,596) (5,025) (4,973) (4,954) (4,982) (4,963)

Others 0 (0) 0 0 0 0

Net increase(decrease) in cash (4,662) 2,422 (783) (1,235) 719 818 Source: Company data, Credit Suisse estimates

04 April 2014


Figure 14: Valuation sheet

12/12 6/13 12/13 6/14 12/14 6/15


Total assets 401,984 409,716 413,974 412,002 411,983 412,063

Net assets 197,168 197,117 197,095 197,123 197,104 197,184

Total dividends 5,025 4,975 4,954 4,982 4,963 5,043

NOI (excluding capital gain/loss) 9,275 8,955 8,926 8,871 8,861 8,748

FFO 6,856 6,859 6,823 6,816 6,797 6,877

FFO payout ratio 73.3% 72.5% 72.6% 73.1% 73.0% 73.3%

Dividend (annualized) 10,051 9,950 9,908 9,963 9,926 10,086

NOI (annualized) (excluding capital gain/loss) 18,550 17,910 17,852 17,742 17,721 17,496

FFO (annualized) 13,713 13,718 13,646 13,631 13,594 13,754

EBITDA (annualized) 17,192 16,538 16,475 16,366 16,343 16,120

NOI yield (NOI/acquisition price) 4.9% 4.6% 4.6% 4.5% 4.5% 4.5%

Number of shares outstanding (share) 825,000 825,000 825,000 825,000 825,000 825,000

Net income per share (¥) 6,093 6,030 6,005 6,038 6,016 6,113

growth rate (%) -5.2% -1.0% -0.4% 0.6% -0.4% 1.6%

Dividend per share (¥) 6,093 6,030 6,005 6,038 6,016 6,113

NOI per share (¥) (excluding capital gain/loss) 11,242 10,855 10,819 10,753 10,740 10,604

FFO per share (¥) 8,311 8,314 8,270 8,261 8,239 8,336

shareholders' equity per share (¥) 238,992 238,929 238,903 238,937 238,914 239,011

Dividend per share (¥) (annualized) 12,183 12,060 12,010 12,077 12,031 12,226

NOI per share (¥) (excluding capital gain/loss)(annualized) 22,485 21,709 21,638 21,506 21,480 21,207

FFO per share (¥) (annualized) 16,622 16,628 16,541 16,523 16,477 16,672

Share price (¥) 249,200 303,500 337,000 338,500 338,500 338,500

Market capitalization at end of fiscal term 205,590 250,388 278,025 279,263 279,263 279,263

Dividend yield 4.9% 4.0% 3.6% 3.6% 3.6% 3.6%

PER 20.5 25.2 28.1 28.0 28.1 27.7

FFO ratio 15.0 18.3 20.4 20.5 20.5 20.3

Share price/NAV (book value) 1.0 1.3 1.4 1.4 1.4 1.4

Share price/NAV (appraisal value) 1.2 1.4 1.5 1.5 1.5 1.5

Implied NOI yield 4.7% 4.0% 3.7% 3.7% 3.7% 3.7%

EV/EBITDA 22.0 25.8 27.9 28.1 28.1 28.5

Interest-bearing debt 180,557 187,158 191,759 189,759 189,759 189,759

Tenant leasehold and security deposits 19,216 20,006 19,895 19,895 19,895 19,895

LTV (interest-bearing debt / total assets) 44.9% 45.7% 46.3% 46.1% 46.1% 46.1%

LTV (interest-bearing debt +deposit/total assets) 49.7% 50.6% 51.1% 50.9% 50.9% 50.9%

ROA 2.5% 2.4% 2.4% 2.4% 2.4% 2.4%

ROE 5.1% 5.0% 5.0% 5.1% 5.0% 5.1%

DSCR 6.0 6.3 6.1 6.3 6.3 7.0

D/E 0.9 0.9 1.0 1.0 1.0 1.0

FFO=Net profit＋depreciation±capital gain/loss

DSCR=(Net profits+depreciation+interest payment)/(interest payment)

Annualized data except dividends are calculated by doubling data of each fiscal term.

Annualized dividend=(dividend±capital gain/loss)×2±capital gain/loss. Source: Company data, Credit Suisse estimates

04 April 2014


Companies Mentioned (Price as of 03-Apr-2014)

AXA (AXAF.PA, €19.48) Hulic (3003.T, ¥1,410) Japan Prime Realty Investment Corporation (8955.T, ¥338,500, NEUTRAL, TP ¥360,000) Japan Real Estate Investment Corporation (8952.T, ¥522,000) Japan Retail Fund (8953.T, ¥203,700) Mizuho Financial Group (8411.T, ¥210) Nippon Building Fund (8951.T, ¥565,000) Orix Jreit (8954.T, ¥129,200) Tokyo Tatemono (8804.T, ¥891)

Disclosure Appendix

Important Global Disclosures

Atsuro Takemura and Masahiro Mochizuki, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for Japan Prime Realty Investment Corporation (8955.T)

8955.T Closing Price Target Price

Date (¥) (¥) Rating

29-Sep-11 196,500 280,000 O

09-Oct-12 235,100 267,000

25-Mar-13 360,500 430,000

08-Jul-13 296,000 *

01-Nov-13 330,500 390,000 O

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the le ss attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well a s European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non -Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

04 April 2014


Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 43% (53% banking clients)

Neutral/Hold* 40% (50% banking clients)

Underperform/Sell* 14% (45% banking clients)

Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative ba sis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives , current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for Japan Prime Realty Investment Corporation (8955.T)

Method: We base our ¥360,000 TP on the sum of our DPU forecasts for FT12/14 and FT6/15 (¥12,128) and a 3.36% distribution yield (risk-free rate 0.66%, risk premium 3.7%, expected CPI growth 1.0%). Our 3.7% risk premium assumption is the bottom between 2011 and 2012, when the BoJ was buying J-REITs but market expectations for inflation did not rise.

Risk: Risks that may impede achievement of our ¥360,000 TP for Japan Prime Realty Investment Corporation (JPR) are the the acquisition of an S-class building in central Tokyo at a good price, a failure to announce any new acquisitions at end-June and the departure of major tenants.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (8951.T, AXAF.PA, 8411.T) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (AXAF.PA, 8411.T) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (AXAF.PA, 8411.T) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (8411.T) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (AXAF.PA, 8411.T) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (8951.T, AXAF.PA, 8411.T, 3003.T) within the next 3 months.

Credit Suisse has received compensation for products and services other than investment banking services from the subject company (AXAF.PA, 8411.T) within the past 12 months

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (8955.T, 8951.T, 8952.T, 8953.T, 8804.T, AXAF.PA, 8411.T, 3003.T) within the past 12 months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

04 April 2014


Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

The following disclosed European company/ies have estimates that comply with IFRS: (AXAF.PA).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (8411.T) within the past 3 years.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (Japan) Limited .................................................................................................... Atsuro Takemura ; Masahiro Mochizuki

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

04 April 2014


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