Sony sells Tokyo office building for $1.2 billion

Sony announced its second sale of major offices in as many months today, the company offloading its Tokyo-based Sony City Osaki building for ¥111 billion (around $1.2 billion). Following last month's sale of its US headquarters for $1.1 billion, Sony entered the Osaki building and its premises into a trust, then sold the trust's beneficiary rights to Nippon Building Fund inc. and an unnamed "Japanese institutional investor" in a 60/40 split.

Sony stated the sale was part of the company's reorganization of assets to "strengthen its corporate structure." Then again, the ¥41 billion (around $4.4 billion) raised in operating income by the sale and how it'll help Sony turn an operating profit this fiscal year helps too. The company wants to bring an end to four successive years of losses, including last fiscal year's loss of around $820 million, not to mention the humiliation of Fitch Ratings cutting the company's credit rating to junk status.

While the sale represents another major shift for the company in a year of nothing but, Sony and other Sony Group businesses are to remain in the City Osaki building for five further years under a separate lease agreement.

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Sony Corporation Announces Sale of "Sony City Osaki" Office Building and Premises

Sony Corporation ("Sony") today announced that it has sold its Sony City Osaki office building and premises to Nippon Building Fund Inc. and a Japanese institutional investor. The sale was structured such that Sony placed the office building and premises in a trust and then sold the trust beneficiary rights. Sony and other Sony Group businesses will remain in the building for a period of five years after the sale under a lease agreement entered into separately.

The sale price is 111.1 billion yen. After deducting expenses related to transaction costs, Sony received net cash proceeds today of 110 billion yen. As a result of the sale, Sony expects to realize a gain on the sale of approximately 41 billion yen, to be recorded as operating income, in the fourth quarter of the fiscal year ending March 31, 2013.

As stated on February 7, 2013 in the announcement of Sony's forecast for consolidated financial results for the fiscal year ending March 31, 2013, Sony has identified certain assets for possible sale as part of an initiative to transform its business portfolio and reorganize its assets. This sale was conducted as a part of that initiative. While this sale was aniticipated and the potential gain on the sale was taken into account at the time of the forecast, Sony is currently reevaluating the aggregate impact of this sale and other factors on the forecast.
1. Reasons for this sale
Sony is transforming its business portfolio and reorganizing its assets in an effort to strengthen its corporate structure. This sale was conducted as a part of this reorganization.
2. Summary of assets to be sold
Assets / Location Selling Price Book Value Expected Gain on Sale Current Status
Sony City Osaki
(Shinagawa-ku, Tokyo, Japan） 111.1 billion yen Approximately
44 billion yen Approximately
41 billion yen In use as an office building of Sony
3. Summary of Buyers
(1) Buyers
Nippon Building Fund Inc. and one Japanese institutional investor*
(The trust beneficiary rights will be co-owned by Nippon Building Fund Inc. and the Japanese institutional investor, 60% and 40% respectively.）
*The name of the Japanese institutional investor is not being disclosed as per its request. There is no capital, personnel or transaction relationship to be disclosed herein between (1) such Japanese institutional investor and Sony or (2) affiliates of such Japanese institutional investor and affiliates of Sony. In addition, neither such Japanese institutional investor nor its affiliates are deemed to be a related party of Sony.

(2) Summary of Nippon Building Fund Inc.
(1) Trade name Nippon Building Fund Inc.
(2) Address of head office 9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, Japan
(3) Name and title of representative Tsutomu Nishiwaka, Executive Director
(4) Business Asset management pursuant to the Act on Investment Trusts and Investment Corporations of Japan
(5) Paid in capital 504,368 million yen (as of February 14, 2013)
(6) Date of establishment March 16, 2001
(7) Net assets 446,005 million yen (as of December 31, 2012)
(8) Total assets 899,123 million yen (as of December 31, 2012)
(9) Major investors and their respective investment ratio
(As of December 31, 2012) Trade name Investment Ratio
Japan Trustee Services Bank, Ltd. 16.9%
Trust & Custody Services Bank, Ltd. 7.7%
The Nomura Trust and Banking Co., Ltd. 5.6%
(10) Relationship with Sony Corporation Capital relationship Sony is not an investor in the Buyer. There is no capital relationship between the Buyer and Sony required to be disclosed to herein. There is no capital relationship between affiliates of the Buyer and Sony required to be disclosed to herein.
Personnel relationship There is no personnel relationship between the Buyer and Sony required to be disclosed to herein. There is no personnel relationship between affiliates of the Buyer and Sony required to be disclosed to herein.
Transaction relationship There is no transaction relationship between the Buyer and Sony required to be disclosed to herein. There is no transaction relationship between affiliates of the Buyer and Sony required to be disclosed to herein.
Status as a related party Neither the Buyer nor its affiliates are deemed to be a related party of Sony.
4. Schedule
(1) Approval of the contract of sale (by the CEO of Sony) February 28, 2013
(2) Execution of the contract of sale February 28, 2013
(3) Closing date of the sale February 28, 2013
5. Outlook
The impact of the sale on Sony's forecast for consolidated financial results for the fiscal year ending March 31, 2013 is stated above.

(For reference) Sony's consolidate financial forecast for the ficasl year ending March 31, 2013, which was announced on February 7, 2013, and its consolidated financial results for the fiscal year ended March 31, 2012
(Yen in billions)
Sales and operating revenue Operating income (loss) Income (loss) before income taxes Net income (loss) attributable to Sony Corporation's stockholders
Consolidated financial forecast for the fiscal year ending March 31, 2013 6,600 130 150 20
Consolidated financial results for the fiscal year ended March 31, 2012 6,493.2 (67.3) (83.2) (456.7)