Earnings Announcement for the 10th Fiscal Period (Fiscal Period Ended November 2010)

Transcription

1 January 14, 2011 Earnings Announcement for the 10th Fiscal (Fiscal Ended November 2010)

2 This document is provided for informational purposes and should not be construed as an offer or solicitation of an offer to buy or sell any specific product, including investment units. We advise you to inquire with each securities company with regards to the purchase of Daiwa Office Investment Corporation s investment units. This document is not intended to provide information meeting the requirements of Japan s new Financial Instruments and Exchange Law or Investment Trust and Investment Corporation Law, or by the associated cabinet orders, cabinet office ordinances, or rules, or by the rules governing companies listed on the Tokyo Stock Exchange, or any other applicable rules, nor is it a disclosure document or statement of financial performance prepared in accordance with the provisions of any of the foregoing. This document contains forward-looking statements. However, these forward-looking statements are based on certain assumptions and judgments made using currently available information, and there are a number of known and unknown risks and uncertainties. These forward-looking statements are not a guarantee of future performance or management results, and actual results may differ materially from any explicit or implicit forecasts contained herein. Although the information contained in this document is the best available at the time of publication, no assurances can be given regarding the accuracy and certainty of this information. The content of this document can be modified or withdrawn without prior notice. 1

3 Contents Section 1 Performance Highlights and Forecasts Section 4 Financial Strategy 10th Fiscal Topics Financial Highlights of the 10th Fiscal Highlights of Forecasts for the 11th and 12th Fiscal s Issue and Activities of the Investment Corporation Medium-term Target of Total Acquisition Price Status of Interest-bearing Liabilities Collateral Situation Unitholders Competitive Edges Upside Potential Section 2 Internal Growth Section 5 Appendix Portfolio Map Analyses of Leasing Income Status of Shinjuku Maynds Tower Properties Subject to Leasing Improvement Case Example of Leasing Activities Section 3 External Growth Summary of Results for the 10th Fiscal Forecasts (11th and 12th Fiscal s) Major Financial Data Appraisal Values at End of Fiscal Portfolio Performance Summary Exploitation of New Pipeline Organization of the Asset Management Company Positioning of Asset Manager within Daiwa Securities Group The Real Estate Market and Property Acquisitions 19 Current Portfolio and Acquisition Policy 20 Sourcing Strategies 21 Progress on Property Acquisitions 22 2

4 Section 1 Performance Highlights and Forecasts

5 10 th Fiscal Topics 10 th Fiscal Topics During the 10th Fiscal, the occupancy rate, which had fallen to 85.7% as of the end of the 9th Fiscal, recovered to 95.9% In August 2010, the Kyodo Building (Nishishimbashi) was acquired for 5.0 billion yen and in September 2010, Kyodo Building (Kudan Ichigo-kan) was acquired for 4.0 billion yen In June 2010, 5.0 billion yen in unsecured investment corporation bonds were issued through a public offering. In September 2010, new unsecured borrowings of 5.5 billion yen were procured. In August 2010, a major unitholder, Columbus, sold 70,000 shares, of which 60,000 shares were acquired by Daiwa PI Partners Status of Shinjuku Maynds Tower The occupancy rate, which had dropped to 78.1% at the end of the 9th Fiscal, recovered to 99.9% as a result of leasing activities that draw on the Property s characteristics Improved the quality of the property by switching some lighting of outside facilities and by upgrading the surveillance camera system Brand Value Enhancement Activities In September 2010, the names of 25 buildings were changed, centering on those that were still crowned with the name of the former sponsor, to Daiwa Building. In September 2010, the name of the Investment Corporation was changed to Daiwa Office Investment Corporation 4

6 Fiscal Highlights of the 10 th Fiscal Results of the 10 th Fiscal Status of the 10 th Fiscal Operating Revenue Operating Cost Operating Income Ordinary Income Net Income Number of Investment Unit 9 th Fiscal (ended May 31, 2010) (31 properties) 6,985 million 4,026 million 2,959 million 1,773 million 2,076 million 395,798 unit 10 th Fiscal (ended Nov. 30, 2010) (33 properties) 6,424 million 3,942 million 2,481 million 1,273 million 1,282 million 395,798 unit Change 561million 83million 477million 500million 794million - Operating Revenue Operating revenue for the 10th Fiscal decreased despite the acquisition of 2 properties which added to the revenue due to the leasing income of major tenants who moved out during the 9th Fiscal not entirely recover during the 10th Fiscal Furthermore, although the occupancy rate recovered during the 10th Fiscal, rent revenue did not increase since free rent clauses were attached to contracts with new tenants and operating revenue dropped 561 million yen to end at 6,424 million yen Dividend per Unit Occupancy Rate NOI Yield (Reference) Operating Revenue 5, % 3.7% Forecast *of 10 th Fiscal (32 properties) 6,317million 3, % 3.2% 10 th Fiscal (ended Nov.30, 2010) (33 properties) 6,424 million 2,006 Change 107 million Operating Cost Although utility charges rose due to the rise in temperature during the summer, and depreciation expenses rose, there was a decrease in expenses for restoration and repair upon tenants moving out as well as a decrease in management costs for most properties, resulting in operating expenses decreasing 83 million yen compared to the 9th Fiscal to 3,942 million yen Net Income 1,257 million 1,282 million 25million Dividend per Unit 3,176 3, Occupancy Rate 91.7% 95.9% NOI Yield 3.3% 3.2% * Announced on June 13,

7 Highlights of Forecasts for the 11 th and 12 th Fiscal Forecasts (as of January 13, 2011) The 11 th Fiscal Forecast Operating Revenue Operating Cost 10 th Fiscal (ended Nov. 30, 2010) (33 properties) 6,424 million 2,481 million 11 th Fiscal Forecast (ended May 30, 2011) (33properties) 6,650 million 2,546 million 12 th Fiscal Forecast (ended Nov ) (33properties) 6,757 million 2,655 million Of tenants who moved in during the 9th Fiscal or 10th Fiscal, rents will be received from tenants whose free rent period, etc. will end. Operating revenue for the 11th Fiscal is forecast to increase 226 million yen compared to the 10th Fiscal A switch will be made from a strategy of prioritizing raising the occupancy rate to a strategy of improving terms and conditions of contracts with tenants and the occupancy rate is forecast to drop from 95.9% to 93.4% Operating Income 1,273 million 1,300 million 1,427 million Net income is forecast to increase by 15 million yen and dividend per unit will be 3,280 yen Ordinary Income Number of Investment Unit Dividend per Unit Expected Occupancy Rate 1,282 million 395,798 unit 3, % 1,298 million 395,798 unit 3, % 1,425 million 395,798 unit 3, % The 12 th Fiscal Forecast Of tenants who moved in during the 10th Fiscal, rents from tenants whose free rent period, etc. will end are expected to increase, but forecasts are conservative in view of rent decreases, cancellation risk, etc. Operating revenue for the 12th Fiscal is forecast to increase 106 million yen compared to the 11th Fiscal. Expected NOI Yield 3.2% 3.3% 3.4% The occupancy rate of the 12th Fiscal is forecast to improve from 93.4% to 94.2% Due to decreases of operating expenses, non-operating expenses, etc., net income is forecast to increase by 126 million yen and dividend per unit will be 3,600 yen 6

8 Issues and Activities of the Investment Corporation Balance Sheet of the 10 th th Fiscal (November 30, 2010) Asset Issue and Activities Activities of Shinjuku Maynds Tower Strengthen relationships with tenants and strive to maintain occupancy rate Continue implementing renewal constructions and strive to enhance the value of the property Rebuilding the Leasing Strategy While doing the utmost to raise the occupancy rate of Daiwa Nihombashi Honcho, etc., aim to improve contract terms and conditions from a strategy of prioritizing the occupancy rate Promote property purchases Acquisition of Kyodo Building (Nishishimbashi) and Kyodo Building (Kudan Ichigo-kan) Raise the pace of acquiring properties Internal Growth Status of Shinjuku Maynds Tower P15 Internal Growth Leasing Activities P16~17 External Growth Growth through asset acquisitions P19~24 (Unit:million yen) Liabilities 94,498 Assets 294,562 Net Assets 200,063 Forecast EPS for the 11 th Fiscal 3,280 yen Financial Strategy Status of interestbearing liabilities P26~28 Financial Strategy Status of unitholders P29 Liabilities Issue and Activities Diversify financing means Raise procurement ability by diversifying lenders and issuing investment corporation bonds Increase in the ratio of unsecured borrowings Continue acquiring properties by procuring unsecured borrowings Strive to raise the ratio of unsecured borrowings by various methods Net Assets Issues and Activities Stabilize unitholder composition By carrying out activities to stabilize unitholder composition or to raise liquidity, do utmost to develop a new field of unitholders Forecast EPS for the 12 th Fiscal 3,600 yen 7

9 Medium-term Target of Total Acquisition Price Total Acquisition Price Medium-term Target to achieve a total acquisition price of 350 billion yen at early stage by taking advantage of the low LTV (Billion yen) Total Acquisiton Price LTV (based on acquisiton price) Expected LTV 70.00% 60.00% % % % 20.00% % % Listed 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 8

10 Section 2 Internal Growth

11 Portfolio Map ~ decrease or increase in occupancy rate compared with previous Fiscal ~ Shibuya Ward SHIBUYA EDGE 5 Central Wards of Tokyo Shinjuku Maynds Tower Shinjuku Ward Shibuya Station Daiwa Jingumae Daiwa Misakicho Daiwa Jimbocho Daiwa Sarugakucho Sunline Bldg. No.7 Chiyoda Ward Tokyo Station Daiwa Ginza Annex Daiwa Minami Aoyama Daiwa Ginza Kyodo Bldg. (Nishishimbashi) Daiwa Shibashi510 Daiwa Azabudai Daiwa Ginza 1-chome Daiwa Onarimon Daiwa A Hamamatsucho Daiwa Shibuya SS Kyodo Bldg. (Kudan Ichigo-kan) Daiwa Shibadaimon Daiwa Kodenmacho Nihonbashi MS Bld. Chuo Daiwa Nihonbashi Honcho Ward Daiwa Kyobashi BPS Square Daiwa Tsukiji Daiwa Tsukiji616 Daiwa Tsukishima Regional Cities Daiwa Minami-Senba Tokyo Metropolitan Area As of November 30, 2010 Occupancy rate compared with previous Fiscal Increase : 12 buildings Decrease : 3 buildings Unchanged : 16 buildings Daiwa Higashi-Ikebukuro Tokyo Minato Ward Daiwa Shibaura Benex S-3 Daiwa Kinshicho Daiwa Shinagawa North 10

12 Analyses of Leasing Income (1) Occupancy Rate and NOI Yield NOI Compared to Previous Fiscal Occupancy Rate(%) (1) The 10 th Fiscal 456 million yen 100% 95% 97.0% 97.4% 99.0% 95.9% 98.2% 98.3% 97.6% 97.7% 93.4% 94.2% The occupancy rate for the 10 th Fiscal rose for 12 properties, including Shinjuku Maynds Tower, and recovered to 95.9% Due to the impact of a drop in existing rents, free rents, etc., the NOI yield ended at 3.2% 90% 85% (Million y en) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Occupancy Rate 3,143 3,282 1st 2nd NOI yield (% ) : NOI / average acquisition price 6,895 6,373 6,334 3,974 3rd 5,133 4th 5th 6th 7th 92.8% 5,915 8th 4,922 9th 85.7% NOI (Million yen): Rent revenue + Other lease business revenue - Expenses related to rent business + Depreciation ,465 4,623 4,743 10th 11th (Yield (%)) 9.0% 12th 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (2) The 11 th Fiscal +158 million yen The occupancy rate for the 11 th Fiscal is estimated to be 93.4% based on expectations on the possibility of the occupancy rate of some properties dropping temporarily, excluding Shinjuku Maynds Tower Although an increase can be expected in the 11 th Fiscal in leasing income which will be received from tenants whose free rent period will end, NOI yield is estimated to remain roughly the same at 3.3%, based on projections of an impact from a drop in existing rents, etc. (3)The 12 th Fiscal +119 million yen The occupancy rate that is projected to decline during the 11 th Fiscal is estimated to recover by the 12 th Fiscal and the occupancy rate is forecast to be 94.2% in the 12 th Fiscal Although rents are projected to increase due to the end of the free rent period from tenants who move in during the 10 th Fiscal, a slow recovery is forecast based on a projection of losses from vacant areas, declining rents, and other factors, and NOI yield is forecast to be 3.4% 11

13 Analyses of Leasing Income (2) Contract Rent* Increase and Reduction Ratio of Contract Rent Revisions* (Million ( 百万円 yen) ) 1,200 Increase from new leases Increase by new acquisition 10th 55.2% 39.6% 5.2% 1,100 Increase from rent revisions Decrease from tenants Decrease from cancellations rent revisions 9th 28.6% 68.5% 2.8% 1,000 8th 37.5% 44.5% 18.1% 7th 10.9% 51.6% 37.5% 900 May 2010 Monthly Contract Rent Nov Monthly Contract Rent * Monthly Contact Rent means a total final ret from tenants who contracted by the end of the Fiscal. 0% 20% 40% 60% 80% 100% *Based on leased space U nchanged Decrease Increase 12

14 Analyses of Leasing Income (3) (Case) New Leases and Cancellations * (yen/tsubo) 28,000 24,000 Average Contract Rent and Market Rent , , ,000 4th 5th 6th 7th 8th 9th 10th Av rage Contract Rent * Miki Shoji Tokyo 5 Central Wards Office Rent CBRE Asking rent in Tokyo 5 Central Wards (excluding common area charge) * Average of rent that tenants contracted by the end of each Fiscal pay -40 Reason for New Leases and Cancellations th 8th 9th 10th New Leases C ancellations Difference between New Leases and Cancellations (Case) New Leases Cancellations Cost Reduction 8 4 Space Expansion 10 Consolidation 4 6 Reduction 1 Better location 4 Other 5 3 Total *Excluding residence 13

15 Analyses of Leasing Income (4) Major Tenants Top 10 List Pie Chart of Industries of Top 30 Tenant Tenant Name Property Leased Space (m 2 ) % of Total Leased Space Not disclosed * Trend Micro Incorporated EMC Japan Daiwa Tsukishima Shinjuku Maynds Tower Shinjuku Maynds Tower 6, , , Wholesale Trade 3.3% Other Products 4.6% Other 12.9% Services 29.2% UCC Holdings Co., Ltd. Daiwa Onarimon 4, Precision Instruments 5.2% Sekisui House, Ltd. Shinjuku Maynds Tower 4, Not disclosed * Not disclosed * SUN WAVE CORPORATION Not disclosed * Shinjuku Maynds Tower Shinjuku Maynds Tower Daiwa Sarugakucho Daiwa Jimbocho 4, , , , Construction 5.7% Foods 6.2% Electric Appliances 6.3% Banks 8.0% Information & Communication 18.7% JR EAST DESIGN CORPORATION Shinjuku Maynds Tower 2, Total - 45, * The leased space of top 30 tenant covers 45.4% of total leased space as of the end of the 10 th Fiscal ** Industries are categorized according to TSE s 33 industry group. * Not disclosed due to tenant's request 14

16 Status of Shinjuku Maynds Tower Present State of the Property The occupancy rate, which had significantly declined during the previous fiscal period, largely improved due to a focus on leasing activities and has now reached full occupancy Implementing switching some lighting of outside facilities, upgrading the surveillance camera system and renewal constructions are planned to continue in an aim to raise the added value of Shinjuku Maynds Tower Strengthening of relationships with tenants Implementing some investments to raise tenant satisfaction Occupancy Rate of Shinjuku Maynds Tower 100.0% 95.0% 90.0% 85.0% (4) (5) Activities for Improvement of Property Value Value of properties will be enhanced through activities such as the renewal of stores on basement floors and common-use areas on the 1F Implementing of renewal constructions on the standard floors will continue in an aim to raise the value of properties While collaborating with property management companies, the management company will hold direct communication with tenants so that tenant needs will be assessed and contribute to raising tenant satisfaction Energy data will be analyzed in efforts to conserve energy and reduce costs 80.0% 75.0% 70.0% No. (1) (2) (3) (4) (5) Average for Nishi-Shinjuku area office buildings* Shinjuku Manynds Tower * Source: CBRE Announce Date February 1, 2010 June 25, 2010 July 20, 2010 August 31, 2010 October 8, 2010 Reason Better Location Space Expansion Better Location Consolidation Space Expansion (1) Number of Floor (2) (3) Occupancy Rate 78.8% 81.4% 84.5% 91.0% 99.4% 15

17 Properties Subject Leasing Improvement Daiwa Nihombashi Honcho Daiwa Kyobashi (%) (%) Occupancy Rate Expected Occupacy Rate Occupancy Rate Ex pected Occupacy Rate Location Constructed Total floor area Acquisition Price Nihombashi-Honcho Chuo-ku January , m2 7,420million yen Activities and Future Strategy th 7th 8th 9th 10th 11th 12th 4-minute walk from Mitsukoshimae Station on the Tokyo Metro Hanzomon Line and Ginza Line Recognized to be a property with highlyconvenient access and high competitiveness The Property s large tenant vacated the property during the 9th Fiscal at the end of April. Although the occupancy rate fell to 38.2% at the end of May, the rate recovered to 65.2% at the end of the 10th Fiscal as a result of carrying out activities for the property as a property subject to improvement that was higher than the 48.2% that was forecast As a property subject to leasing improvement in continuation from before, collaboration with leasing brokers and property managers will be conducted in striving to recover the occupancy rate by the 12th Fiscal Constructed Hacho-bori Chuo-ku October minute walk from Takaracho Station on Toei Asakusa Line, 4-minute walk from Hachobori Station on Tokyo Metro Hibiya Line, 5minute walk from Kyobashi Station on Tokyo Metro Ginza Line. Transportation convenience is well and easy to walk to Ginza. Since the main tenant vacated the property, the occupancy rate during the 11th Fiscal is projected to drop to 54.0% Aim to recover the occupancy rate by the 12th Fiscal while scrutinizing the creditworthiness of tenants, contract terms and conditions, etc. and focus on finding new stable tenants The creditworthiness of tenants, contract terms and conditions, etc. will be scrutinized and a focus placed on finding new stable tenants Location Total floor area Acquisition Price 4, m2 3,460million yen 30.0 Activities and Future Strategy 6th 7th 8th 9th 10th 11th 12th 16

18 Case Examples of Leasing Activities Daiwa Ginza 1-chome Daiwa Jingumae (%) (%) Occupancy Rate Ex pected Occupancy Rate Location Construction Total floor area Acquisition Price Ginza 1-chome Chuo-ku January , m2 4,620million yen 70.0 Activities and Future Strategy Occupancy Rate Expected Occupacy Rate 6th 7th 8th 9th 10th 11th 12th 2-minute walk from Ginza 1-chome Station on the Tokyo Metro Yurakucho Line, and 4-minute walk from Kyobashi Station on the Tokyo Metro Ginza Line Close to central Ginza and highly competitive also as office/residential location The occupancy rate of this property had continued to be low, but the common-use areas and bathroom areas were renewed. As a result of planning a leasing campaign, etc., a recovery from the 76.6% occupancy rate forecast for the end of the 10th Fiscal to 97.4% was attained. Responded to demands for increasing floor areas from existing tenants Location Construction Total floor area Acquisition Price Jingumae Shibuya-ku December , m2 2,800million yen 0.0 Activities and Future Strategy 6th 7th 8th 0 9th 10th 11th 7-minute walk from Gaienmae Station on the Tokyo Metro Ginza Line Office building boasting high visibility from facing Gaien-nishi Street Common-use areas were renewed after the tenant who had been renting the entire building vacated the property Occupancy rate, which had been 0% in the 9th Fiscal, recovered to 78.5% as of the end of the 10th Fiscal as a result of implementing campaigns, etc. Creditworthiness of tenants, contract terms and conditions, etc. will be scrutinized in striving to obtain new stable tenants for the remaining floors 12th 17

19 Section 3 External Growth

20 The Real Estate Market and Property Acquisitions The Real Estate Market and Trading Performance (Number) Number of Transactions (Case) Source: Compiled by the Investment Corporation based on data from the Real Estate Transaction Survey of the Urban Research Institute (Mizuho Trust and Banking s think tank) and information from the Bank of Japan s website Number of Transactions Lending Attitude DI (Real Estate) Lending Attitude DI (All Industries) nd Half st Half nd Half st Half nd Half st Half nd Half st Half nd Half st Half nd Half st Half nd Half DI=Diffusion Index (Above is easy (accommodating), whereas below is severe) 0 0 (Billion yen) Boom Subprime Loan Problem Adjustment Expanding Total Acquisition Price Aggressive investment for future growth 0 Listed 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 19

21 Current Portfolio and Acquisition Policy Medium-term target to achieve a total acquisition price of 350 billion yen at an early stage (Total Floor Area ( m2 ) 120,000 Distribution Chart of Portfolio Properties Portfolio Properties Current Portfolio 100,000 80,000 60,000 40,000 20,000 Shinjuku Maynds Tower Investment Target A Class Buildings (1) Kyodo Bldg. (Kudan Ichigo-kan) B Class Buildings Investment Ratio Area Ratio 5 Central Wards 91.3% Tokyo Metropolitan 6.9% Regional Cities 1.7% Classification Ratio A Class 48.1% B Class 51.9% Investment is concentrated in the five central wards of Tokyo. A class buildings* (Shinjuku Maynds Tower ) and B class buildings**. Portion of B class buildings are older buildings ((2)). Acquisition Policy Continue investing heavily in the five central wards of Tokyo. For the time being, invest heavily in younger A class buildings and younger B class buildings (1) within 20 years of building age. Aim to improve stability and profitability of our portfolio by achieving new buildings Consider property replacement, such as selling Zone (2) properties and purchasing Zone (1) properties. Kyodo Bldg. (Nishishimbashi) (2) (Building Age) *A class buildings: Total floor area is over 30,000m2 ** B class buildings: Total floor area over 2,000m2 but less than 30,000m2 20

22 Sourcing Strategy Property Selling Needs General Business Company Selling properties being discharged to improve balance sheets, properties being discharged for such reasons as financial restructuring, etc. Developer Selling properties with good progress in securing tenants and recognized to be income-generating properties after development, etc General Constructor Selling properties that were temporarily held for such reasons as the bankruptcy of property owners but are now able to be sold due to recovery in earnings, etc Strengths of the Investment Corporation in Property Acquisition Gain advantage in the purchase competition by constantly maintaining abundant cash reserves and utilize the support capacity of our sponsor, etc. to lead to negotiation at more advantageous terms than competitors Not belonging to a group comprised of real estate companies, etc., allows for collecting various types of property information Strengthen alliance with the Daiwa Securities Group and exert the Group s strengths in the areas of property information collection and joint projects, etc. to proactively take advantage of the marketing ability of the Daiwa Securities Group Lender CMBS, etc. Fund Selling properties for which the collection of funds would like to be promoted due to there being no prospects for loans receivable being repaid, etc. Selling properties from repayment of loans becoming due and business plans reaching the end of term, etc. 21

23 Recent Property Acquisition (1) Kyodo Building (Nishishimbashi) (This building name will be changed to Daiwa Nishishimbashi in the future) Acquisition Price Expected NOI* 5.00 Billion yen 276 Million yen Convenient Location in Tokyo The property is located within a 8-minute walk to Toranomon Station on Tokyo Metro Ginza Line, about a 9-minute walk to Kamiyacho on Hibiya Line and Mita Station on Tokyo Municipal Toei. Also, taking into account that the demand for office space in the area, we are of the opinion that the Property is expected to be stably operated. Redevelopment Project In the surrounding areas of the property, a redevelopment project is underway for Loop Highway 2, which runs from Toranomon to Shimbashi (commonly known as McArthur Road ), as well as for the surrounding areas. As such, revitalization of the areas surrounding the property can be expected in the future. * Expected NOI in the press release announced on August 10, 2010 Location Site Area Structure Floor Total Floor Area Leasable Floor Area Construction Acquisition Price Occupancy Rate Date of Delivery Nishi-shimbashi 3-chome Minato-ku 1, m2 85.5% (as of Nov.30, 2010) SRC B1/10F 6, m2 4, m2 July 31, Billion yen August 13,

24 Recent Property Acquisition (2) Kyodo-Building ( Kudan Ichigo-kan) (This building name will be changed to Daiwa Kudan in the future) Acquisition Price Expected NOI* 4.00 Billion yen 213 Million yen Convenient location in Tokyo The property is conveniently located in terms of public transportation, which is within a 1- minute walk to Kudanshita Station on Tokyo Municipal Shinjuku Line, the Tokyo Metro Tozai and Hanzomon Lines. Acquisition of property after renewal *Remodeling in the elevator hall Location Kudan Minami 1-chome Chiyoda-ku Renewal of the property was completed by the seller at the time of its acquisition. Therefore, competitive leasing activities can be carried out from the time of its acquisition despite its building age not being all that new. Site Area m2 *Reinforcement on the rooftop Structure Floor Total Floor Area Leasable Floor Area SRC 9F 3,679.70m2 3,135.95m2 *Expected NOI in the press release announced on June 14, 2010 Construction March 31, 1987 Acquisition Price 4.00 Billion yen Occupancy Rate 90.7% (as of Nov ) Settlement Date September 2,

25 Section 4 Financial Strategy

26 Status of Interest-bearing Liabilities (1) Loan to Value Trend Ratio of Long-to Short-Term Borrowings (Billion yen) Interest-bearing Liabilities LTV (based on acquisiton price) Expected LTV 70% 65% 60% 9 th Fiscal 10 th Fiscal 4.8% 3.1% 10.3% 17.2% % Upper limit range LTV in the medium-term target LTV Target for the near future 50% 45% 40% 35% 92.1% 72.5% Current position of long-term borrowings Long-term borrowings Investment corporation bonds % Ratio of Fixed to Floating Borrowings % 20% 9 th Fiscal 10 th Fiscal 60 15% 40 10% 20 5% 47.6% 42.6% 48.3% 43.1% 0 0% 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 9.8% 8.6% * LTV( based on acquisition price) =Total interest-bearing liabilities / Total acquisition price of properties held at the end the Fiscal Fixed interest Floating interest (capped) Floating interest 25

27 Status of Interest-bearing Liabilities (2) Continuous decline in debt cost by refunding from high-cost borrowings and decreasing in financial related expenses is estimated Repayment Dates Debt Cost Rate* (annualized) (Million yen) 25,000 Aozora Bank (Secured) Amount: 19,600 million yen Interest Rate:T+219bps (%) ,000 Shinsei Bank (Secured) Amount: 7,100 million yen Interest Rate:L+180bps ORIX Trust Bank (Unsecured) Amount: 1,500million yen Interest Rate: T+85bps Fukuoka Bank (Unsecured) Amount: 2,000million yen Interest Rate: T+85bps ,000 19,600 4,000 2,000 Shinsei Bank (Unsecured) Amount:2,000million yen Interest Rate:T+90bps 0.0 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 1,500 * Debt Cost Rate (annualized): (Interest Expense + Financial Related Expenses)/ Interest-bearing Liabilities) 10,000 5, th Nov. 10 2, th May 11 3,500 3,000 5, th Nov. 11 7, th May 12 13,900 5, th 15 th Nov. 12 May 13 2,000 5,000 5, th Nov nd Series of Unsecured Investment Corporation Bond Amount: 5,000million yen Interest Rate:1.87% 3, th Nov Debt Cost Simulation * Assigning a total amount of interest expense and financial related expenses at 10 th Fiscal the value of 100. Assume that debt cost equal current debt cost to refund liabilities. (excluded new financing) 10th 11th 12th 13th 14th 15th 16th 26

28 Status of Interest-bearing Liabilities (3) List of Interest-bearing Liabilities Investment Corporation Bonds (As of November 30, 2010) Term Lender Balance Interest Rate Date of Type (million y en) (%) adv ance Due date Sumitomo Mitsui Banking Corporation (*) Fixed 1.81% 09/9/18 12/9/18 The Sumitomo Trust and Banking Co., Ltd. (*) Fix ed 1.81% 09/9/18 12/9/18 Dev elopment Bank of Japan, Inc. (*) Fix ed 1.54% 09/9/18 12/9/18 The 77 Bank Ltd. (*) Fix ed 1.81% 09/9/18 12/9/18 The Chuo Mitsui Trust and Banking Co., Ltd. (*) Fix ed 1.79% 09/11/30 12/11/30 Taiyo Life Insurance Company (*) Fixed 1.79% 09/11/30 12/11/30 The Gunma Bank, Ltd. (*) Float T+100bps 09/11/30 12/11/30 Tha Kagaw a Bank Ltd.(*) Float T+100bps 10/2/26 13/2/28 Resona Bank, Ltd. 2, Fix ed 1.59% 08/3/21 11/3/18 Kansai Urban Banking Corporation 5, Fix ed 2.00% 08/6/30 11/6/30 Resona Bank, Ltd. 3, Fix ed 1.90% 08/8/29 11/8/31 Mizuho Bank, Ltd. 3, Float T+100bps 08/9/30 11/9/30 Total current maturities of long term borrow ings 14, Shinsei Bank, Ltd. 7, Float L+180bps 09/2/20 12/2/20 Aozora Bank, Ltd. 19, Float T+219bps 09/5/21 12/5/21 Sumitomo Mitsui Banking Corporation (*) 4, Fixed 1.81% 09/9/18 12/9/18 The Sumitomo Trust and Banking Co., Ltd. (*) 3, Fix ed 1.81% 09/9/18 12/9/18 Dev elopment Bank of Japan, Inc. (*) 2, Fix ed 1.54% 09/9/18 12/9/18 Mizuho Bank, Ltd. 1, Float T+125bps 09/9/18 12/9/18 The 77 Bank Ltd. (*) Fix ed 1.81% 09/9/18 12/9/18 The Chuo Mitsui Trust and Banking Co., Ltd. (*) 1, Fix ed 1.79% 09/11/30 12/11/30 Taiyo Life Insurance Company (*) Fixed 1.79% 09/11/30 12/11/30 The Gunma Bank, Ltd (*) Float T+100bps 09/11/30 12/11/30 Aozora Bank, Ltd. 3, Float T+100bps 10/2/26 13/2/28 The Shizuoka Bank, Ltd. 1, Float T+100bps 10/2/26 13/2/28 Tha Kagaw a Bank Ltd.(*) Float T+100bps 10/2/26 13/2/28 Shinsei Bank, Ltd. 2, Float T+90bps 10/9/2 13/7/31 American Life Insurance Company 5, Fixed 2.29% 08/9/2 13/8/30 Fukuoka Bank 2, Float T+85bps 10/9/28 13/9/30 Orix Trust Bank 1, Float T+85bps 10/9/28 13/9/30 Total long-term borrow ings Total borrowings 60, , Current maturities of long term borrowin Long term borrowings (*)Portions of long-term installment loans that are due within 1 year have been categorized as current maturities of long term borrowings. Term Lender Balance Interest Rate Date of Type (million yen) (%) adv ance Due date Long-term No. 1 Unsecured and Subordinated 3,500 Float T+240bps 09/9/17 19/9/17 Long-term No. 2 Unsecured Investment Corporation 5,000 Fixed 1.87% 10/6/24 6/24/13 Total investment corporate bonds 8,500 Balance by interest-bearing liabilities (Including Investment Corporation Bonds) Name of Financial Institution Balance (million yen) Share (% ) Aozora Bank 23, Shinsei Bank 9, Kansai Urban Banking Corporation 5, Resona Bank 5, American Life Insurance Company 5, Sumitomo Mitsui Banking Corporation 4, Mizuho Bank 4, Sumitomo Trust and Banking 3, Dev elopment Bank of Japan 2, Fukuoka Bank 2, Chuo Mitsui Trust and Banking 1, Orix Trust Bank 1, Shizuoka Bank 1, Kagawa Bankl Gunma Bank Taiyo Life Insurance Bank Inv estment corporation bonds 8, Total 82,

29 Collateral Situation No. Properties Borrowing date Repayment date Pledger No. Properties Borrowing date Repayment date Pledger 1 Daiwa Onarimon 08/9/2 13/8/30 American Life Insurance Company Daiwa A Hamamatsucho Daiwa Shibadaimon Daiwa Tsukiji616 Sunline 7 Bldg. Daiwa Minami Aoyama SHIBUYA EDGE Daiwa Shinagawa North Daiwa Shibaura Shinjuku Maynds Tower (1/7) Daiwa Ginza Daiwa Ginza Annex Daiwa Jingumae Daiwa Higashi Ikebukuro Daiwa Tsukiji Daiwa Tsukisihima Daiwa Kyobashi Daiwa Minami-Senba Shinjuku Maynds Tower(1/7) BPS Square Bennex S-3 08/3/21 08/6/30 08/8/29 08/9/30 09/2/20 09/5/21 09/9/18 11/3/18 11/6/30 11/8/31 11/9/30 12/2/20 12/5/21 12/9/18 Risona Bank Kansai Urban Bank Risona Bank Mizuho Bank Shinsei Bank Aozora Bank Mizuho Bank Daiwa Misakicho Daiwa Shinbashi510 Daiwa Kinshicho Nihonbashi MS Bldg. Daiwa Azabudai Daiwa Shibuya SS Daiwa Nihonbashi Honcho Daiwa Ginza 1chome Shinjuku Maynds Tower (1/7) Shinjuku Maynds Tower (1/7) Shinjuku Maynds Tower (1/7) Daiwa Sarugakucho Shinjuku Maynds Tower (1/7) Daiwa Jimbocho Kyodo Building (Nishishimbashi) Kyodo Building (Kudan Ichigo-kan) 09/9/18 09/11/30 10/2/26 12/9/18 12/11/30 13/2/28 SMBC Sumitomo Trust Development Bank of Japan 77 Bank Chuo-Mitsui Trust Bank Taiyo Life Gunma Bank Aozora Bank Shizuoka Bank Kagawa Bank Daiwa Kodenmacho 28

30 Unitholders Current State of Unitholders List of Top 10 Investors Columbus sold 70 thousand investment units last. Daiwa PI Partners which is a consolidated subsidiary of Daiwa Securities Group Inc. purchased 60 thousand investment units sold by Columbus. No. 1 K.K. Columbus Investor Name 10 th Fiscal Number of Unit 68,905 9 th Fiscal Number of Unit 138,905 Change of Unit -70,000 Rate 17.41% 2 Daiwa PI Partners Co. Ltd. 60, , % Unitholders Share by Investor Type Investor Type 10 th Fiscal Number of Unit 9 th Fiscal Number of Unit Change of Unit Rate Daiwa Securities Group Inc. Japan Trustee Services Bank, Ltd. (Trust Account) The Nomura Trust and Banking Co,. Ltd. (Investment Trust Account) 51,893 48,078 35,542 51,893 29,593 13, , , % 12.15% 8.98% Individuals Bank 39,658 1,611 42,527 1,611-2, % 0.4% 6 Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) 23,450 20,905 +2, % Trust Bank Life Insurance 116, , , % 0.1% 7 Goldman Sachs International 7,803 9,774-1, % Non-life Insurance Other Financial Institutions 5,599 1,964 5,599 2, % 0.5% 8 The Master Trust Bank of Japan, Ltd. (Investment Trust Account) 7,695 12,376-4, % Other Domestic Corporation Foreigner 133,033 43, ,182 39,589-10,149 +4, % 11.1% 9 The Fuji Fire and Marine Insurance Co., Ltd. 5,599 5, % Securities Total 53, ,798 53, , % 100.0% 10 Deutsche Bank AG London-PB Non- Treaty Clients 613 5, , % 29

31 Competitive Edge Establish highly-transparent business structure Strictly control conflicts of interest with sponsor Introduce financial institutions rigorous compliance framework Ensure high transparency and establish disciplined investment process Introduce external consultants for more sophisticated risk management Collaborate with the Daiwa Securities Group and raise the information management system level Expand net work of collaboration with the Daiwa Securities Group Remarkably expand financing capacity Reinforce sourcing activities Increase sense of security from tenants/investors by improving creditworthiness Issuance of unsecured investment corporation bonds Contribute to tenants staying at the property and to leasing activities Strengthen relationships with investors by enhancing IR in Japan and abroad Secure well-experienced, highly-professional human resources Develop team of outstanding professional staff by capitalizing on the human resources of the Daiwa Securities Group Employ excellent human resources from outside by drawing on the Daiwa Securities Group s brand power Increase number of employees with a high level of motivation to challenge new business stages Increase young staff with a high level of motivation from the Daiwa Securities Group Obtain excellent human resources from outside Establish a medium-term business plan and clarify goals 30

32 Upside Potential Internal Growth Increase of leasing income due to the ending of free rent periods, etc. Due to the ending of free rent periods, etc. of new tenants who moved in during the 9th Fiscal or 10th Fiscal, leasing income will increase in phases from the 11th Fiscal and is expected to cause an increase in income until the 14th Fiscal Enhancement of relationships with tenants and a lot of efforts to avoid rent decreased, losses from vacant areas, etc. will achieve a stable profit. (In the 11th Fiscal and 12th Fiscal leasing income is forecast to increase due to an increase in tenants whose free rent period, etc. will end, but the disclosure includes rent decreases and forecasts of losses from vacant areas as well as forecasts of tenants moving in for these fiscal periods) External Growth Total acquisition price of 350 billion yen on the medium-term By taking advantage of the low LTV, acquisitions of properties will be conducted by procuring debts Medium-term goal to achieve a total acquisition price of 350 billion yen at an early stage with LTV at 44%, which is within the LTV target range on a medium- to long-term perspective Acquisition price 22.5 billion 50.0 billion Total acquisition price 300.7billion billion LTV* 35% 40% Share of Shinjuku Maynds Tower 44.5% 40.8% Share of Shinjuku Maynds Tower will be reduced through the acquisition of prime 71.8 billion billion 44% 38.2% properties to improve earnings structure billion billion 50% 34.2% Financial Strategy Reduction of debt costs *Based on total acquisition price Debt costs would significantly be reduced if high cost borrowings that are due during the 13th Fiscal are procured at current fund procurement costs Reduction of debt costs are expected to have a positive impact beginning from the dividends of the 14th Fiscal 31

33 Section 5 Appendix

34 Summary of Results for the 10 th Fiscal (1) ~Balance Sheet~ Comparison with Results of the 9 th Fiscal Assets 9th Fiscal As of May 31, th Fiscal As of Nov.30, th Fiscal As of May 31, th Fiscal As of Nov.30, 2010 Million Yen (%) Million Yen (%) Million Yen (%) Million Yen (%) Current Assets 17, % 19, % Current Liabilities 3, % 16, % Cash and Deposits 11, % 13,191 Trade Payables % 593 Cash and Deposits in Trust 4, % 5,312 Current Maturities of Long-term Borrowings 2, % 14,258 Consumption Taxes Receivable % 119 Other Payables % 237 Other Current Assets 1, % 1,168 Rents Received in Advance % 807 Fixed Assets 266, % 274, % Other Current Liabilities % 206 Intangible Fixed Assets 260, % 269, % Fixed Liabilities 79, % 78, % Buildings Held in Trust 48, % 50,518 Investment Corporation Bonds Issued 3, % 8,500 Land Held in Trust 212, % 218,730 Long-term Debt 66, % 60,016 Other Tangible Fixed Assets % 24 Leasehold and Security Deposits Received 4, % 5,375 Intangible Fixed Assets 4, % 4, % Leasehold and Security Deposits Received in Trust 4, % 4,496 Leasehold Rights in Trust 4, % 4,970 Other Fixed Liabilities 8 0.0% 6 Other Intangible Fixed Assets 2 0.0% 8 Total Liabilities 83, % 94, % Investments and Other Assets % % Paid-in Capital 198, % 198,780 Leasehold and Security Deposits Paid in Trust % 113 Retained Earnings 2, % 1,282 Long-term Prepaid Expenses % 334 Total Capital 200, % 200, % Other Investments and Other Assets % 18 Total Liabilities and Capital 283, % 294, % Deferred Assets % % Investment Corporation Bond Issuance Costs % 51 Total Assets 283, % 294, % Liability Capital 33

35 Summary of Results for the 10 th Fiscal (2) ~ Profit-and-Loss Statement~ Comparison with Results of the 9 th Fiscal Comparison with Forecasts Operating Revenues (A) Number of Properties (at period-end) Effective Number of Days of Investment 9th (May 31, 2010) 10th (Nov. 30, 2010) Change 10th Forecast (July 13, 2010) 10th (Nov. 30, 2010) Number of Properties (at period-end) Effective Number of Days of Investment ,985 6,424? 561 Operating Revenues (A) 6,317 6, Change Gain on Sale Gain on Sale Operating Expenses (B) 4,026 3,942? 83 Operating Expenses (B) 3,851 3, Rental Business Expenses (excluding depreciation) 2,063 1,958? 104 Rental Business Expenses (excluding depreciation) 1,854 1, Depreciation 1,184 1, Depreciation 1,232 1, Gain and Loss from Rental Operations Gain and Loss from Rental Operations 3,737 3,229? 507 3,229 3, (excluding gain on sale) (excluding gain on sale) Operating Income (A-B) Non-operating Expenses 2,959 2,481? 477 Operating Income (A-B) 2,465 2, ,192 1, Non-operating Expenses 1,206 1, Interest Expense (including cap amortization) Interest Expense (including cap amortization) Financing Related Expenses ? 29 Financing Related Expenses Ordinary Income 1,273? 500 Ordinary Income 1,259 1, Extraordinary Income 303 9? 294 Extraordinary Income Net Income 2,076 1,282? 794 Net Income 1,257 1, Investment Units Issued and Outstanding 395,798unit 395,798unit Investment Units Issued and Outstanding 395,798uit 395,798uit Dividend per Unit (Unit: Yen) 5,246 3,240? 2,006 Dividend per Unit (Unit: Yen) 3,176 3,

36 Forecasts (11 th and 12 th Fiscal ) ~ Profit-and-Loss Statement~ Forecast for the 11 th and 12 th Fiscal Unit: Million Yen (excluding the number of investment units and cash dividends) 10th (Nov. 30, 2010) 11th Forecast (May 31, 2011) 12th Forecast (Nov. 30, 2011) Number of Properties (at period-end) Effective Number of Days of Investment Operating Revenues (A) 6,424 6,650 6,757 Gain on Sale Operating Expenses (B) 3,942 4,104 4,102 Rental Business Expenses (excluding depreciation) 1,958 2,027 2,014 Depreciation 1,235 1,279 1,285 Gain and Loss from Rental Operations (excluding gain on sale) Operating Income (A-B) Non-operating Expenses 3,229 3,343 3,457 2,481 2,546 2,655 1,212 1,245 1,228 Interest Expense (including cap amortization) Financing Related Expenses Ordinary Income 1,273 1,300 1,427 Extraordinary Income 9 Net Income 1,282 1,298 1,425 Investment Units Issued and Outstanding Dividend per Unit (Unit: Yen) 395,798unit 395,798unit 395,798unit 3,240 3,280 3,600 * Although we assume that rents will remain at the current level, actual rents may differ from the assumption depending on the status of assets under management. 35

37 Major Financial Data Item Unit 6th 7th 8th 9th 10th Number of days of investment Day Number of properties at end of period Property Occupancy rate at end of period % Average acquisition price Million y en 272, , , , ,167 NOI (after deduction of gain on sale) Million y en 6,373 6,334 5,915 4,922 4,465 Funds from operation (FFO) Million y en 3,592 4,338 3,890 3,261 2,518 Return on asset (ROA) % Return on equity (ROE) % Capital adequacy ratio at end of period % NOI Rent revenue + Other lease business revenue Expenses related to rent business + Depreciation FFO Net Income + Depreciation Gain on Sale ROA Annualized Net Income / Total Assets ROE Annualized Net Income / Total Investments Loan-to-Value (LTV) at end of Fiscal Interest-bearing liabilities at end of Fiscal / Total assets at end of Fiscal * Figures are rounded to the first decimal place. Loan-to-Value (LTV) at end of period %

38 Appraisal Value at End of Fiscal (1) Property Name Appraisal Value at End of 10th Appraisal Value at End of 9th Compared to End of 9th Major Reason : (1) Decrease in market rent (2) Increase in cap-rate (3) Increase in cancellation notices Compared to Acquisition Price (Unit: Million yen) Major Acquisition Cap Rate Reason Price (Nov.30, 2010) (May 31, 2010) Difference Change Difference Change 10th 9th Daiwa Ginza 14,000 14, % 14, % 4.6% 4.6% Daiwa Ginza Annex 2,920 3, % 3, % 4.5% 4.5% Daiwa Shibaura 7,087 7, % 8,265-1, % 5.2% 5.2% Daiwa Minami Aoyama 4,000 4, % (2) 4, % 4.9% 4.8% Daiwa Sarugakucho 3,350 3, % 3, % 5.7% 5.7% Daiwa A Hamamatsucho 2,854 2, % 2, % 5.1% 5.1% Daiwa Jingumae 2,010 1, % 2, % 4.7% 4.7% Daiwa Shibadaimon 2,789 2, % 2, % 5.1% 5.1% Daiwa Misakicho 2,398 2, % 2, % 5.3% 5.3% Daiwa Shimbashi 510 2,540 2, % 2, % 5.2% 5.2% BPS Square 1,660 1, % 1, % 5.3% 5.3% Daiwa Tsukiji 1,370 1, % 1, % 5.2% 5.2% Daiwa Tsukiji 616 2,410 2, % (1) 2, % 5.1% 5.1% Daiwa Tsukishima Bldg. 7,720 7, % 7, % 5.3% 5.3% Nihonbashi MS Bldg. 2,430 2, % 2, % 5.0% 5.0% Daiwa Azabudai 1,830 1, % 1, % 5.0% 5.0% Daiwa Shibuya SS 3,950 3, % 3, % 5.0% 5.0% 37

39 Appraisal Value at End of Fiscal (2) Property Name Appraisal Value at End of 10th Appraisal Value at End of 9th Compared to End of 9th Compared to Acquisition Price (Unit: Million yen) Major Acquisition Cap Rate Reason Price (Nov.30, 2010) (May 31, 2010) Difference Change Difference Change 10th 9th Daiwa Nihonbashi Honcho 7,360 8, % (1) 7, % 5.1% 5.1% Daiwa Ginza 1-chome 4,310 4, % (1) 4, % 4.8% 4.8% Daiwa Kyobashi 3,350 3, % (3) 3, % 5.0% 5.0% Sunline Building No. 7 2,360 2, % 2, % 5.0% 5.0% Daiwa Onarimon 14,600 15, % 13, % 4.9% 4.9% Shinjyuku Maynds Tower 106, , % 133,800-27, % 4.0% 4.0% SHIBUYA EDGE 4,130 4, % 5,900-1, % 4.6% 4.6% Daiwa Kodemmacho 1,920 1, % 2, % 5.3% 5.3% Daiwa Jimbocho 4,340 4, % 4, % 5.2% 5.2% Kyodo Building (Kudan Ichigo-kan)** 4,240 4, % 4, % 5.0% 5.0% Kyodo Building (Nishishimbashi)** 5,720 5, % 5, % 5.0% 5.0% Daiwa Kinshicho 3,587 3, % 3, % 5.6% 5.6% Daiwa Higashi-Ikebukuro 3,414 3, % 2, % 5.4% 5.4% Benex S-3 3,410 3, % 4,950-1, % 5.8% 5.8% Daiwa Shinagawa North 5,770 5, % 7,710-1, % 5.2% 5.2% Daiwa Minami-Senba 3,030 3, % (1) 4,810-1, % 5.5% 5.5% Total 242, ,573-3, % 278,195-35, % - - * Major Reason : (1) Decrease in market rent (2) Increase in cap-rate (3) Increase in cancellation notices **Substitute appraisal value at the time of acquisition for appraisal value at the end of 9 th Fiscal 38

40 Portfolio Performance Summary (1) (9 th -10 th Fiscal Results by Property) Daiwa Ginza Daiwa Ginza Annex Daiwa Shibaura Daiwa Minami Aoyama Daiwa Sarugakucho Daiwa A Hamamatsucho Daiwa Jingumae Property Name Profits from property-related activities (*1) Acquisition Price (million yen) Book Value (million yen) Appraisal Value (million yen) Occupancy Rate (%) PML (%) (*6) Property Management Company 14,100 3,050 8,265 4,550 3,000 2,865 2,800 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 13,749 13,688 2,965 2,952 8,164 8,154 4,513 4,514 2,987 2,976 2,839 2,831 2,763 2,766 14,600 14,000 3,030 2,920 7,430 7,087 4,350 4,000 3,350 3,350 2,860 2,854 1,940 2, UNHEX UNHEX Xymax Axis UNHEX UNHEX UNHEX UNHEX Number of operating days (1) Property-related Revenues 370, ,434 92,132 98, , , , , , , , ,676 72,898 13,142 Rent (incl. common service fees) 370, ,062 92,132 88, , , , , , , , ,676 72,898 13,142 Other Revenues (*2) 0 10, ,870 1,265 1, (2) Property-related Expenses 86,316 96,853 23,816 20,473 76,600 70,193 24,662 27,056 26,786 30,487 62,611 60,955 49,002 21,053 Administrative Expenses 13,605 13,288 5,949 3,902 14,171 12,167 3,509 3,684 5,412 5,394 8,867 8,743 3,846 8,057 Utility Charges 25,471 29,610 4,863 5,453 19,003 22,465 6,733 8,586 7,497 8,712 8,430 10,102 5,509 3,493 Property Management Fees 8,309 6,489 1,600 1,636 4,993 4,860 2,125 2,474 1,918 1,934 4,588 2,425 1,288 2,290 Property-related Taxes (*3) 23,610 24,916 7,662 8,207 19,511 20,293 10,975 11,388 3,064 3,087 9,059 9,068 6,268 6,488 Non-life Insurance Costs Repair Expenses 2,519 9,765 3,594 1,132 18,134 9,631 1, ,388 2, , Other Expenses 12,183 12, ,467 8,784 29,400 29, (3) NOI (=(1)-(2)) 284, ,580 68,316 77, , , , , ,090 98,506 83,120 75,720 23,896-7,911 Annualized NOI 570, , , , , , , , , , , ,028 47,922-15,779 NOI Yield (*4) 4.0% 4.1% 4.5% 5.1% 5.1% 5.4% 5.0% 4.9% 6.8% 6.5% 5.8% 5.3% 1.7% -0.6% Depreciation and Amortization 67,066 67,257 17,441 17,531 23,168 23,406 10,557 10,801 11,777 11,801 16,234 16,450 9,427 9,777 Proceeds for Restoration and Repair Work 0 0 2, ,000 0 Proceeds from Amortization of Leashold and Security Deposits (Reference) (*1) For profits from property-related activities, actual results (excluding Other Revenues and Property-related Taxes) are used and displayed by rounding down to the nearest thousand yen. (*2) Other Revenues does not include Proceeds for Restoration and Repair Work or Proceeds from Amortization of Leasehold and Security Deposits. (*3) Fixed property taxes, city planning taxes and depreciable asset taxes recorded in Property-related Taxes are calculated by converting the actual amount to the number of operating days. (*4) NOI Yield is calculated by dividing annualized NOI in (3) on the table by the acquisition price. (*5) NOI in this table is calculated by accounting for Property-related Taxes for NOI (after deduction of gain on sale) found on p.36 and so does not equal that figure. (*6) NKSJ Risk Management, Inc. has prepared for the PML since 10 th Fiscal. The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (January 2011) and rounded to the first decimal place. 39

41 Portfolio Performance Summary (2) (9 th -10 th Fiscal Results by Property) Daiwa Shibadaimon Daiwa Misakicho Daiwa Shimbashi 510 BPS Square Daiwa Tsukiji Daiwa Tsukiji 616 Daiwa Tsukishima Bldg. Property Name Profits from property-related activities (*1) Acquisition Price (million yen) Book Value (million yen) Appraisal Value (million yen) Occupancy Rate (%) PML (%) (*6) Property Management Company 2,578 2,346 2,080 1,560 1,240 2,440 7,840 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 2,492 2,480 2,274 2,261 2,138 2,151 1,435 1,418 1,236 1,230 2,389 2,365 7,470 7,404 2,812 2,789 2,392 2,398 2,560 2,540 1,650 1,660 1,390 1,370 2,600 2,410 7,690 7, UNHEX UNHEX Property Partners UNHEX Xymax Axis Property Partners Property Partners Number of operating days (1) Property-related Revenues 104, ,676 84,896 87,043 86,376 86,632 55,320 55,320 50,762 48,376 99,188 93, , ,889 Rent (incl. common service fees) 104, ,676 84,896 87,043 85,688 86,632 55,320 55,320 50,762 48,376 99,188 93, , ,889 Other Revenues (*2) (2) Property-related Expenses 32,325 21,668 17,965 17,917 22,238 17,833 6,528 7,979 11,218 12,265 22,428 23,874 52,266 53,885 Administrative Expenses 5,516 5,591 2,879 2,872 5,125 3, ,593 2,442 5,195 6,223 9,172 8,454 Utility Charges 6,375 7,791 5,417 6,928 4,106 5, ,913 3,336 6,413 7,784 20,933 26,218 Property Management Fees 1,561 1,890 1,271 1,306 1,331 1, ,223 1,399 1,960 1,885 4,687 4,333 Property-related Taxes (*3) 5,730 5,994 5,590 5,673 5,722 5,967 5,414 5,481 3,994 4,182 7,451 7,453 12,968 13,378 Non-life Insurance Costs Repair Expenses 12, ,683 1,015 5, , , ,092 1,094 Other Expenses (3) NOI (=(1)-(2)) 72,394 79,007 66,931 69,125 64,138 68,799 48,792 47,340 39,544 36,110 76,760 69, , ,004 Annualized NOI 145, , , , , ,222 97,852 94,422 79,305 72, , , , ,724 NOI Yield (*4) 5.6% 6.1% 5.7% 5.9% 6.2% 6.6% 6.3% 6.1% 6.4% 5.8% 6.3% 5.7% 5.9% 6.0% Depreciation and Amortization 14,269 14,312 14,083 14,091 5,825 6,306 17,338 17,340 7,276 7,014 28,501 28,558 67,138 67,458 Proceeds for Restoration and Repair Work Proceeds from Amortization of Leashold and Security Deposits (Reference) (*1) For profits from property-related activities, actual results (excluding Other Revenues and Property-related Taxes) are used and displayed by rounding down to the nearest thousand yen. (*2) Other Revenues does not include Proceeds for Restoration and Repair Work or Proceeds from Amortization of Leasehold and Security Deposits. (*3) Fixed property taxes, city planning taxes and depreciable asset taxes recorded in Property-related Taxes are calculated by converting the actual amount to the number of operating days. (*4) NOI Yield is calculated by dividing annualized NOI in (3) on the table by the acquisition price. (*5) NOI in this table is calculated by accounting for Property-related Taxes for NOI (after deduction of gain on sale) found on p.36 and so does not equal that figure. (*6) NKSJ Risk Management, Inc. has prepared for the PML since 10 th Fiscal. The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (January 2011) and rounded to the first decimal place. 40

42 Portfolio Performance Summary (3) (9 th -10 th Fiscal Results by Property) Nihonbashi MS Bldg. Daiwa Azabudai Daiwa Shibuya SS Daiwa Nihonbashi Honcho Daiwa Ginza 1-chome Daiwa Kyobashi Sunline Building No. 7 Property Name Profits from property-related activities (*1) Acquisition Price (million yen) Book Value (million yen) Appraisal Value (million yen) Occupancy Rate (%) PML (%) (*6) Property Management Company 2,520 1,600 3,930 7,420 4,620 3,460 2,680 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 2,520 2,509 1,576 1,576 3,865 3,854 7,264 7,246 4,536 4,562 3,424 3,409 2,663 2,656 2,490 2,430 1,830 1,830 3,950 3,950 8,070 7,360 4,550 4,310 3,550 3,350 2,450 2, UNHEX UNHEX UNHEX Xymax Axis Xymax Axis UNHEX UNHEX Number of operating days (1) Property-related Revenues 78,655 74,929 60,480 65, , , ,343 95, ,489 92, , ,407 54,776 75,440 Rent (incl. common service fees) 77,107 74,929 59,099 65, , , ,343 95, ,366 91, , ,407 54,763 74,540 Other Revenues (*2) 1, , , , (2) Property-related Expenses 25,002 20,832 16,827 27,370 55,683 28,262 39,224 44,205 28,446 30,709 20,432 22,756 24,719 26,498 Administrative Expenses 4,882 5,233 3,064 2,467 4,679 4,294 9,171 14,148 6,555 9,052 4,700 5,994 4,462 4,401 Utility Charges 4,551 5,404 2,573 3,242 7,946 9,889 12,372 10,423 6,224 7,738 6,352 7,547 4,387 5,809 Property Management Fees 1,725 1,933 1,530 1,200 5,683 1,823 3,759 3,796 2,070 2,945 1,864 1,828 1,288 1,236 Property-related Taxes (*3) 7,027 7,189 5,063 5,282 10,297 11,013 12,224 12,739 7,281 7,839 6,653 6,994 13,632 14,643 Non-life Insurance Costs Repair Expenses 6, ,481 15,066 26,885 1,054 1,283 2,694 6,040 2, Other Expenses (3) NOI (=(1)-(2)) 53,653 54,096 43,653 37,808 54, , ,119 51, ,043 61,770 94,951 80,651 30,057 48,941 Annualized NOI 107, ,898 87,544 75, , , , , , , , ,861 60,278 97,616 NOI Yield (*4) 4.3% 4.3% 5.5% 4.7% 2.8% 5.1% 5.2% 1.4% 5.1% 2.7% 5.5% 4.6% 2.2% 3.6% Depreciation and Amortization 17,107 12,598 6,939 7,116 15,105 15,328 28,055 28,237 19,256 18,619 16,191 16,797 9,170 9,266 Proceeds for Restoration and Repair Work 6, , , Proceeds from Amortization of Leashold and Security Deposits (Reference) (*1) For profits from property-related activities, actual results (excluding Other Revenues and Property-related Taxes) are used and displayed by rounding down to the nearest thousand yen. (*2) Other Revenues does not include Proceeds for Restoration and Repair Work or Proceeds from Amortization of Leasehold and Security Deposits. (*3) Fixed property taxes, city planning taxes and depreciable asset taxes recorded in Property-related Taxes are calculated by converting the actual amount to the number of operating days. (*4) NOI Yield is calculated by dividing annualized NOI in (3) on the table by the acquisition price. (*5) NOI in this table is calculated by accounting for Property-related Taxes for NOI (after deduction of gain on sale) found on p.36 and so does not equal that figure. (*6) NKSJ Risk Management, Inc. has prepared for the PML since 10 th Fiscal. The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (January 2011) and rounded to the first decimal place. 41

43 Portfolio Performance Summary (4) (9 th -10 th Fiscal Results by Property) Daiwa Onarimon Shinjyuku Maynds Tower SHIBUYA EDGE Daiwa Kodemmacho Daiwa Jimbocho Kyodo Building (Kudan Kyodo Building Property Name Profits from property-related activities (*1) Acquisition Price (million yen) Book Value (million yen) Appraisal Value (million yen) Occupancy Rate (%) PML (%) (*6) Property Management Company 13, ,800 5,900 2,460 4,150 5,000 4,000 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 13,761 13, , ,294 5,885 5,868 2,440 2,461 4,205 4,184 5,151 4,038 15,100 14, , ,000 4,220 4,130 1,950 1,920 4,290 4,340 5,720 4, Xymax Axis Xymax Axis Xymax Axis Property Partners Mitsui Fudosan Building Management Xymax Axis Mitsui Fudosan Buildi ng Management Number of operating days (1) Property-related Revenues 421, ,897 2,452,626 2,155, , ,032 47,388 52,547 69, , ,011 56,159 Rent (incl. common service fees) 421, ,897 2,450,303 2,153, , ,032 47,388 52,547 69, , ,011 56,159 Other Revenues (*2) 0 0 2,323 2, (2) Property-related Expenses 80, , , ,823 23,158 21,731 15,753 15,362 6,425 20,753 18,536 5,698 Administrative Expenses 13,248 12, , ,628 4,355 4,284 4,680 3,742 2,670 6,017 9,571 2,215 Utility Charges 17,789 22, , ,905 6,198 7,992 3,422 4,924 2,486 12,392 5,934 2,181 Property Management Fees 12,195 4,795 17,390 27,369 5,035 2,068 1,509 1, ,647 2,219 1,136 Property-related Taxes (*3) 34,079 36, , ,491 6,962 7,210 3,801 3, Non-life Insurance Costs ,178 5, Repair Expenses 2,476 32, ,418 26, , Other Expenses 0 0 2,524 7, (3) NOI (=(1)-(2)) 341, ,962 1,486,498 1,349, , ,301 31,635 37,185 63, ,108 87,474 50,461 Annualized NOI 684, ,197 2,981,163 2,691, , ,032 63,441 74, , , , ,648 NOI Yield (*4) 4.9% 4.5% 2.2% 2.0% 3.9% 3.5% 2.6% 3.0% 6.7% 6.9% 5.8% 5.1% Depreciation and Amortization 29,226 29, , ,704 16,597 16,642 7,938 8,135 11,440 22,917 31,025 11,962 Proceeds for Restoration and Repair Work ,228 7, Proceeds from Amortization of Leashold and Security Deposits (Reference) (*1) For profits from property-related activities, actual results (excluding Other Revenues and Property-related Taxes) are used and displayed by rounding down to the nearest thousand yen. (*2) Other Revenues does not include Proceeds for Restoration and Repair Work or Proceeds from Amortization of Leasehold and Security Deposits. (*3) Fixed property taxes, city planning taxes and depreciable asset taxes recorded in Property-related Taxes are calculated by converting the actual amount to the number of operating days. (*4) NOI Yield is calculated by dividing annualized NOI in (3) on the table by the acquisition price. (*5) NOI in this table is calculated by accounting for Property-related Taxes for NOI (after deduction of gain on sale) found on p.36 and so does not equal that figure. (*6) NKSJ Risk Management, Inc. has prepared for the PML since 10 th Fiscal. The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (January 2011) and rounded to the first decimal place. 42

44 Portfolio Performance Summary (5) (9 th -10 th Fiscal Results by Property) Daiwa Kinshicho Daiwa Higashi-Ikebukuro Benex S-3 Daiwa Shinagawa North Daiwa Minami-Senba Property Name 33properties Total Profits from property-related activities (*1) Acquisition Price (million yen) Book Value (million yen) Appraisal Value (million yen) Occupancy Rate (%) PML (%) (*6) Property Management Company 3,653 2,958 4,950 7,710 4, ,195 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 9th 10th 3,548 3,523 2,914 2,885 4,583 4,552 7,605 7,570 4,963 4, , ,219 3,542 3,587 3,417 3,414 3,380 3,410 5,710 5,770 3,500 3, , , UNHEX UNHEX Xymax Axis UNHEX Mitsui Fudosan Building Management Number of operating days (1) Property-related Revenues 153, , , , , , , , , ,283 6,649,152 6,403,869 Rent (incl. common service fees) 153, , , , , , , , , ,283 6,610,024 6,374,684 Other Revenues (*2) , ,982 2, ,128 29,184 (2) Property-related Expenses 41,615 44,987 38,981 43,856 56,765 87,545 58,026 62,927 36,941 49,477 2,049,295 1,969,769 Administrative Expenses 13,722 13,952 10,188 12,547 19,203 17,271 16,956 12,964 13,889 21, , ,064 Utility Charges 10,532 13,124 14,111 15,657 15,023 18,096 13,379 15,591 8,672 10, , ,108 Property Management Fees 2,504 2,311 2,316 2,557 2,998 4,135 4,134 4,996 1,548 2, , ,376 Property-related Taxes (*3) 12,757 13,038 9,588 9,687 16,288 16,377 18,893 19,368 11,586 11, , ,683 Non-life Insurance Costs ,945 13,106 Repair Expenses 1,758 2,224 2,458 3,091 2,738 31,159 4,162 9, , , ,878 Other Expenses ,407 59,552 (3) NOI (=(1)-(2)) 112, , ,742 97,279 65,648 56, , ,500 66,094 62,805 4,599,857 4,434,100 Annualized NOI 224, , , , , , , , , ,268 9,376,838 9,063,757 NOI Yield (*4) 6.2% 6.0% 7.8% 6.6% 2.7% 2.3% 3.4% 2.8% 2.8% 2.6% 3.5% 3.3% Depreciation and Amortization 29,027 29,130 29,633 29,753 55,455 55,930 48,517 36,923 35,228 34,191 1,184,842 1,235,682 Proceeds for Restoration and Repair Work , ,600 9, ,710 20,619 Proceeds from Amortization of Leashold and Security Deposits , ,098 0 (Reference) (*1) For profits from property-related activities, actual results (excluding Other Revenues and Property-related Taxes) are used and displayed by rounding down to the nearest thousand yen. (*2) Other Revenues does not include Proceeds for Restoration and Repair Work or Proceeds from Amortization of Leasehold and Security Deposits. (*3) Fixed property taxes, city planning taxes and depreciable asset taxes recorded in Property-related Taxes are calculated by converting the actual amount to the number of operating days. (*4) NOI Yield is calculated by dividing annualized NOI in (3) on the table by the acquisition price. (*5) NOI in this table is calculated by accounting for Property-related Taxes for NOI (after deduction of gain on sale) found on p.36 and so does not equal that figure. (*6) NKSJ Risk Management, Inc. has prepared for the PML since 10 th Fiscal. The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (January 2011) and rounded to the first decimal place. 43