Investment Principles Presentation Material N O M U R A M A S T E R F U N D

Transcription

1 Investment Principles Presentation Material N O M U R A M A S T E R F U N D November 9, 2015

2 目次 1. Overview of the Merger APPENDIX The Merger of 3 REITs 2 Concepts of the Merger 3 Forecasts 4 2. Investment Principles of "New REIT" Basic Principles 6 Mid-to Long-term Management Strategy 1 - Quality & Growth - 7 Mid-to Long-term Management Strategy 2 8 Introduction of 4 Brands that bear the Core of Leasing Value Chain Ⅰ 22 Introduction of 4 Brands that bear the Core of Leasing Value Chain Ⅱ 23 Property overview of New Aquisitions Ⅰ 24 Property overview of New Aquisitions Ⅱ 25 Property overview of New Aquisitions Ⅲ 26 Property overview of New Aquisitions Ⅳ 27 Market Review - Leasing Market - 28 Market Review - Sales Market Specific Management Policy External Growth Strategy - Co-work with Sponsor - 10 Main Property Development Status of the Sponsor - Office & Residential - 11 Main Property Development Status of the Sponsor - Logistics & Retail - 12 SPR(Strategic Property Replacement ) Ⅰ 13 SPR(Strategic Property Replacement) Ⅱ 14 Internal Growth Strategy 1 - Management Pipelines - 15 Internal Growth Strategy 2 16 Financing Strategy 17 Design Management Strategy that Utilize Research Function 18 Summary of Asset Management Company 19 Financial Results and IR Calendar 20 November 9, 2015

3 Overview of the Merger 1

4 The Merger of 3 REITs October 1, 2015 Diversified type REIT Incorporation of Nomura Real Estate Master Fund thorough consolidation merger Number of properties 257 (First place out of all J-REITs)( 1) Total Assets Ticker Code ,988 mil( 2) Specialized in Office Nomura Real Estate Office Fund Specialized in Logistics & Retail Nomura Real Estate Master Fund Office Number of Properties Total assets ,868 mln. Specialized in Residence Nomura Real Estate Residential Fund Residence : Number of Properties Total assets : : : 146 ( 2) 162,547 mln. ( 2) Logistics Number of Properties Total assets Retail Number of Properties : : Total assets : : ,810 mln. 37 ( 2) 132,763 mln. ( 2) *1: The ranking is as of October 1, Scheduled acquisitions aren t included in the calculation. *2: Acquisition price indicates the acquisition price for the former Nomura Real Estate Master Fund, Inc. (the Former NMF ), and the valuation as at the end of the most recent fiscal period for Nomura Real Estate Office Fund, Inc. ( NOF ) and Nomura Real Estate Residential Fund, Inc. ( NRF ). Scheduled acquisitions aren t included in the calculation. 2

5 Concepts of the Merger Diversified type strategy (Transformation of investment strategy) Realize sustainable growth by transformation from Specialized type REIT into Diversified REIT Larger scale strategy (One of the largest Diversified type REITs in Japan) Strengthen stability and enhance growth strategy through expansion of asset size Sponsor support ( Leasing business Value Chain ) Accelerate mutual growth with Nomura Real Estate Group by establishment of Leasing business Value Chain Background of the merger Intensified acquisition competition in real estate market Polarization in size of REIT (Top 10 REITs asset size accounts aound 40% out of 53 REITs) ( ) Tax reform in 2015 enables the inclusion in expenses of the distribution in excess of net income equivalent to the amortization costs of goodwill Based on the numbers disclosed by each REIT as of September 30,

6 Forcast First Fiscal Period (October 1,2015 to February 29, 2016) Second Fiscal Period (March 1, 2016 to August 31,2016) Operating Revenues \ 24,288 mln. \ 29,723 mln. Operating Income Ordinary Income \ 6,273 mln. \ 10,801 mln. \ 3,636 mln. \ 8,178 mln. Net Income \ 3,635 mln. \ 8,177 mln. Net Income per unit \ 976 \ 2,197 Distribution in Excess of Net Income Per Unit Cash Distribution Per Unit (Including Distribution in Excess of Net Income) \ 1,124 \ 513 \ 2,100 \ 2,710 Total Assets \ 929,031 mln. \ 944,342 mln. Liabilities \ 403,664 mln. \ 418,271 mln. Goodwill \ 74,792 mln. \ 72,882 mln. LTV 43.5 % 44.3 % Proposed Acquisition Price \ 794,018 mln. \ 808,098 mln. 1 5 months for the First Fiscal Period 2 Based on Notice Concerning Revision to Forecasts of Financial Results for the Fiscal Period Ending February 29, 2016 and the Fiscal Period Ending August 31, 2016 dated October 2,2015 4

7 Investment principles of New REIT 5

8 6 Basic Principles Mid-to Long-term Stable Management Asset size Fund Brand Aware of risk tolerance and market capitalization Share detailed strategies and the implementations Leasing business value chain Property Acquisition Pipeline Management Pipeline

9 Overview of Mid-to Long-term Management Strategy I - Quality & Growth years 10 years after Quality Growth Master SPR (Strategic Property Replacement)* Enhancement of portfolio quality Internal growth Rent increase centering on investment sectors with upside potential Implement first public offering Improvement of the evaluation from unitholders External growth Focused investment in sponsor developed properties Internal growth Strengthen property brands through maximization of management pipeline Finance Public offering in line with the equity market Sustainability Asset size A high and stable level of various management indices including asset size Fund brand High evaluation based on its Quality and Growth Establishment of a strong fund brand Growth that maintains high Quality Become a representative J-REIT brand * SPR means Strategic Property Replacement. Details are described in pages 13 to 14. 7

10 Overview of Mid-to Long-term Management Strategy II Asset size bln bln (*1) Focused investment in sponsor developed properties Selective investment in properties outside of the group 1 tln 43.5% LTV 44.3% 43.5% LTV 運用水準 : 40%~50% Operational LTV level: 40-50% FP 1 (Forecasts) FP2 (Forecasts) Promote SPR (Strategic Property Replacement) (*2) Continue SPR (*2) Cash distribution 2,710 Aim to increase cash distribution through internal growth, external growth and other measures 3 5 years Quality Growth *1: Assumed acquisition price including 7 properties such as NRE Kichijoji Building. *2: SPR means Strategic Property Replacement. Details are described in pages 13 to 14. 8

11 Specific Management Policy 9

12 Overview of External Growth Strategy Collaboration with Sponsor - Focused investment in sponsor developed properties Selective investment in properties outside of the group External growth channel Sponsor developed properties Sponsor developed properties PMO,Landport, PROUD FLAT,GEMS, etc. Business companies, private funds, etc Assumed acquisition size of sponsor developed properties bln/year bln/year Selective investment in properties outside of the group 3 5 years Quality Growth 10

13 Main Property Development Status of the Sponsor - Office, Residence - Office Residence PMO Shiba Daimon PMO Hirakawacho PJ. Proud Flat SangenjyayaⅡ Proud Flat Omori Ⅲ Name Location Completion (plan) period PMO Shibadaimon Minato-ku, Tokyo Operating PMO Hirakawacho PJ. Chiyoda-ku, Tokyo Jan.2016 PMO Nihonbashi Mitsukoshimae PJ. Chuo-ku,Tokyo May.2016 PMO Nihonbashi Edo-dori PJ. (*1) Chuo-ku,Tokyo Jun.2016 PMO Nihonbashi Kabutocho PJ. Chuo-ku,Tokyo Oct.2016 PMO Shin-Nihonbashi PJ. Chuo-ku,Tokyo Nov.2016 PMO Iwamotocho Ⅱ PJ. Chiyoda-ku, Tokyo Dec.2016 PMO Nishi-Shinbashi PJ. Minato-ku, Tokyo Feb.2017 PMO Shibuya Itchome PJ. Shibuya-ku, Tokyo May.2017 PMO Tamachi ⅡPJ. Minato-ku, Tokyo Jan.2018 PMO Uchi-kanda PJ. Chiyoda-ku, Tokyo Feb.2018 PMO Higashi-Shinbashi Nichome PJ. Minato-ku, Tokyo Jun.2018 PMO Kita-Otemachi PJ. Chiyoda-ku, Tokyo Jul.2018 PMO Ochyanomizu PJ. Chiyoda-ku, Tokyo Jun.2019 Name Location Completion (plan) period Proud Flat SangenjyayaⅡ Setagaya-ku, Tokyo Operating Proud Flat OmoriⅢ Shinagawa-ku, Tokyo Operating Proud Flat Kinshicho Sumida-ku, Tokyo Operating Proud Flat Higashi-Nakano Nakano-ku, Tokyo Operating Proud Flat KagurazakaⅢ Shinjyuku-ku, Tokyo Operating Proud Flat Higashi-Kanda Chiyoda-ku, Tokyo Operating Proud Flat Gakugei DaigakuⅡ Meguro-ku, Tokyo Operating Proud Flat Mitsukoshi-mae Chuo-ku,Tokyo Operating Proud Flat SugamoⅢ Toshima-ku, Tokyo Nov.2015 Proud Flat Yoyogi Hachiman Shibuya-ku, Tokyo Jan.2016 Proud Flat Ochyanomizu Chiyoda-ku, Tokyo May 2016 Proud Flat Noborito Kawasaki-shi, Kanagawa May 2016 Proud Flat Nakaochiai Shinjyuku-ku, Tokyo Dec.2016 Proud Flat Asakusabashi Taito-ku, Tokyo Feb.2017 *1:Join Venture PJ. *2:NMF is not scheduled to acquire the properties stated above as of today 11

14 Main Property Development Status of the Sponsor - Logistics, Retail - Logistics Retail Landport Iwatsuki PJ. Landport HachiojiⅡ PJ. GEMS Daimon PJ. GEMS Kanda PJ. Name Location Completion (plan) period Landport Kashiwa ShyonanⅠ PJ. Kashiwa-shi, Chiba Jan.2016 Landport Kashiwa ShyonanⅡ PJ. Kashiwa-shi, Chiba Apr.2016 Landport Iwatsuki PJ. Saitama-shi, Saitama May 2016 Landport HachiojiⅡPJ. Hachioji-shi, Tokyo Sep.2016 Landport Komaki PJ.(*1) Komaki-shi, Aichi Jan.2017 Landport Takatsuki PJ. Takatsuki-shi, Osaka Jun.2017 Landport Shinonome PJ. Koto-ku, Tokyo Aug.2018 Name Location Completion (plan) period NRE Kichijoji Building Musashino-shi, Tokyo Operating GEMS Daimon PJ. Minato-ku, Tokyo Feb.2016 GEMS Kanda PJ. Chiyoda-ku, Tokyo Jun.2016 GEMS Ebisu PJ. Shibuya-ku, Tokyo Aug.2017 GEMS Jingu-mae PJ. Shibuya-ku, Tokyo Planning GEMS Tamachi PJ. Minato-ku, Tokyo Planning GEMS Nishi-Shinjyuku PJ. Shinjyuku-ku, Tokyo Planning *:Join Venture PJ. *2:NMF is not scheduled to acquire the properties stated above as of today 12

15 Outside of the group Sponsor 13 SPR (Strategic Property Replacement) I Points of SPR Crossover deals Optimization of sector timing Utilization of the sponsor pipeline Management of cash distribution (disposition profit & loss and periodic profit) Improvement of portfolio quality Sales QUALITY : 3~5 年 Acquisition Sales target Building aged 20 years or more Small sized Acquisition target Building aged about years Internal growth capacity Sales target Sponsor developed properties Building aged 20 years or more Rebuilding enabled Quality: Growth: Replacement goal Around 50 bln in total Around 10 bln per year Rebuilding Redevelopment

16 SPR (Strategic Property Replacement) II Image of the portfolio s average building age Currently 19years old Effect of reducing average building age Strengthen competitiveness in the market Effective utilization of depreciation Decrease repair expenses Target 15years old 3 5 years Quality Growth 14

17 15 Internal Growth Strategy I Management Pipeline - Initiative examples at respective brands P M O Realize PMO quality Brand Strategy Meeting Value Chain Committee EVENT PMO futsal Holding events to expand relationships among tenant companies and providing CSR support programs PMO seminar CSR support program Improvement of asset value SAFETY SERVICE LINK G E M S Establishment of N-FORT, a BCP integrated response center Holding PMO seminars targeting tenants that receive training classes, etc., providing interview venues and other services PMO Workers Website: Offering information on various discounts and introducing PROUD FLAT Tie-up with a buzz marketing website Established a special page GEMS Retty in collaboration with Retty, a top buzz marketing service on gourmet under real name policy, in order to improve the brand recognition A high and stable level of occupancy rate Realize upside compared to market rents Example of branding going well More tenant companies are relocating into buildings under the same brand PMO Iwamotocho PMO Nihonbashi Nichome PMO Iwamotocho PMO Nihonbashi Odenmacho PMO Hatchobori PMO Nihonbashi Kayabacho, etc. Example of the special page PROUD FLAT Provision of tenant-only Chintai Confort Support Provide various supports limited to the tenants Relocation for expansion Rush-over service Special benefit service Disaster prevention support Visiting support Relocations between buildings under the same brand and such are on an increasing trend in GEMS and PROUD FLAT as well

18 ( million /month) Internal Growth Strategy Ⅱ Office sector:contract Renewals (Monthly Rent Before and After) Rent Change(left) % Rate Rent Change(right) -1.8% -2.9% -0.2% Improvement of Rate Rent Change 1.0% 0.0% -1.0% -2.0% -3.0% ( 13.01=100) Retail sector:override Rent (Universal CityWalk Osaka TM ) Acquisition date of former NMF Steady Increase in Override Rent TM The Wizarding World of Harry Potter was opened in July /04 14/10 15/04 (*1) 15/09 *1: Improvement of 0.1% with removal of Japan Airlines Co., Ltd. at Nomura Real Estate Tennozu building. -4.0% 50 '13.01 '13.04 '13.07 '13.10 '14.01 '14.04 '14.07 '14.10 '15.01 '15.04 '15.07 TM & Warner Bros. Entertainment Inc. Harry Potter Publishing Rights J.K. Rowling. (s15) TM & Universal Studios. All rights reserved. CR Points of growth measures Office Retail (near stations) Retail (in residential areas) Logistics Residential Upside sector Stable income sector Increase new asking rent and reduce free rent periods Aggressive negotiation for renewal with rent increase Increase rental units Aggressive negotiation for renewal with rent increase and increase override rent ratio Review merchandising and strengthen sales promotion activities Aggressive negotiation for renewal with rent increase Earn incidental revenues Set key money in line with tenant attribution and demand/ supply 16

19 Finance Interest bearing liabilities Total Interestbearing liabilities (*1) LTV (loan-to-value) ( 2) \404 billion 43.3%(47.1%) ( 1) Diversification of repayment dates Liabilities Bond ( bln) Average remaining duration Average interest rate 3.9 years 1.14% Credit ratings Rating agency LT issuer rating Outlook Remark Japan Credit Rating Agency Long-term Issuer Rating AA Stable Upgrade Rating and Investment Information, Inc. Issuer Rating A+ Stable Maintain (*3) (*4) Eligible for BOJ purchase program Standard & Poor's Ratings Services Long-term corporate credit ratings A Stable Maintain (*5) Inclusion to the index after the Merger Index Name Type Remarks MSCI Global Standard Indexes Stock Indices Newly incorporated after the market closed on September 25 Only 7 J-REITs are incorporated including NMF FTSE EPRA/NAREIT Global Real Estate Index Real Estate/REIT Indices Weight changed after the market closed on October 13 *1: Figures are assumptions as of today. *2: The figure in brackets is an assumption after deducting positive goodwill. *3: Comparison with the rating granted to former Nomura Real Master Fund, Inc. *4: Comparison with the rating granted to former Nomura Real Estate Office Fund, Inc. *5: Comparison with the rating granted to former Nomura Real Estate Residential Fund, Inc. 17

20 Risk analysis Future forecasts Design Management Strategy that Utilize Research Function Design management strategy based on market analysis Design mid-to long-term management strategy based on detailed market analysis by an independent research team Market outlook Japanese real estate market is currently on a path to solid recovery cycle backed by maintained capital investment intention of corporations and improved employment environment Solid implementation Management cycle based on strategy Market analysis Continuous monitoring by the research team Review management strategy Management by management planning team Global economy Japanese economy Japanese real estate market Research team Management planning team Restructure management strategy based on scenario analysis Prepare sub-scenario taking risks in mind 18

21 Investment Committee Compliance Committee Risk Management Committee NPR Valuation Committee Project Screening Committee Chief Strategy Officer NMF Investment Management Group General Meeting of Shareholders Board of Directors President & CEO Board of Statutory Auditors Statutory Auditors Summary of Asset Management Company Organization Corporate Planning Leagal & Compliance Internal Audit Accounting Official Home Page Renewed to a top page with a time lapse video Discretionary Investment M anagement Section Finance Client Relations & Marketing Investment Management Product Management Research & Analysis section Acquisitions Investment Management Planning Fund Management Fund Management Management Planning Asset Management I Asset Management II IR manager NPR Investment Management (Fund Management / IR Manager:(from left) Mr.Kitayama, Mr.Endo, Mr.Iwata and Ms.Kurosaki) (Photo) J-REIT Fair daited October 4,

22 Financial Results and IR Calendar IR Calendar End of February Fiscal period end Around December Property tour Individual investors meeting on financial results Overseas IR 12 月 December January 1 月 2 月 February 3 月 March April 4 月 5 月 May Mid-April Announcement of financial results Analyst meeting on financial results Mid-May Commencement of payment of distributions Dispatch of Asset Management Report Mid-November Commencement of payment of distributions Dispatch of Asset Management Report 11 月 November October 10 月 July 7 月 6 月 June Around June Property tour Individual investors meeting on financial results Overseas IR Mid-October Announcement of financial results Analyst meeting on financial results 9 月 September 8 月 August End of August Fiscal period end 20

23 APPENDIX 21

24 22 Introduction of 4 Brands that bear the Core of Leasing Value Chain Ⅰ - Bring power of office to growth capacity - PMO (Premium Midsize Office) are a new category of office buildings that accommodate businesses styles that are diversifying with time, as well as featuring the same functions and design standards as large-scale buildings despite being medium-scaled. - More pleasant and safe residence with PROUD quality - PROUD FLAT are rental apartments that stand on location selected utilizing the information network/know-how of the development and sales business of Nomura Real Estate Group to suit urban rental apartments, and are controlled excellently and operated/managed appropriately through Nomura Real Estate s unique design standard for housing complexes (rental apartments), outline for quality control inspection, etc. Maintain high occupancy rate through accumulated know-how on advertisement for leasing Organize a team dedicated to marketing PMO and implement direct marketing Accumulate tenant needs by implementing marketing throughout the PMO series Strengthen tenant relations by Nomura Real Estate Group s management and operation Fine-tuned maintenance to maintain beauty Implement events to expand relationships among tenants and provide privilege to tenants after move-in High crime-prevention effect by equipping security cameras at elevators and common areas within the building as a standard Building specifications that follow the philosophy of PROUD, a for-sale condominium series Support system for tenants only Disaster prevention support Housing quality Total support maintenance and management Special benefit service Visiting support Rush over service

25 Introduction of 4 Brands that bear the Core of Leasing Value Chain Ⅱ - To become precious gems for people involved with the facilities - GEMS are commercial facilities developed centering on urban areas. They are mainly comprised of various restaurants with original tastes that brighten and enrich the lives of office workers and residents in the area as well as presenting them with ideas for new lifestyles. - Logistics revolution that aim further improvement in company revenue is here - Landport are logistic facilities with advanced high functions realized through designs for optimization and efficiency, responding to recent changes in the logistics environment and various tenant needs. Restaurants that feature originality in every aspect of taste, atmosphere and service Facilities which adults can utilize casually on a daily basis Facilities where people can enjoy high-quality food, time and space in a relaxed mood Facilities developed by exercising Nomura Real Estate Group s know-how Developments that utilized Nomura Real Estate s know-how and focused on major stations in Tokyo and areas where office workers are concentrated Implement branding in collaboration with a property management company Geo-Akamatsu Develop at locations appropriate for logistics in rapidly changing logistics environment Select locations with excellent access to mass consumption areas, export and import hub and manufacturing Ability to respond to readjustment projects and urbanization control areas Logistic facilities with functionality to respond to various tenant needs Respond to various freight needs with drive for heavy vehicles to upper floors and flexible separation plans of the floor area Arrange comfortable office environment, security functions and enriched amenity space 23

26 24 Property overview of New Aquisitions Ⅰ NRE Kichijyoji building GEMS Ichigaya Acquisition Price \ 5,310 mln. Acquisition Price \ 2,080 mln. Appraisal Value \ 5,330 mln.(as of May 1, 2015) Appraisal Value \ 2,090 mln.(as of May 1, 2015) Address Kichijoji Honcho, Musashino City, Tokyo Address 4-3 Rokubancho, Chiyoda Ward, Tokyo Gross Floor area 2, m2 Gross Floor area 1, m2 Structure S/RC B2/7F Structure S/SRC B1/9F Completion date Jul 10, 2014 Completion date Oct 31, 2014 Note) The New REIT and Nomura Real Estate Development Co., Ltd. holds quasi-co-ownership of the beneficial interest in the ratio of 51.0% and 49.0%, respectively. The land area and gross floor area are shown for the entire building.

27 25 Property overview of New AquisitionsⅡ Proud Flat Hatchobori Proud Flat Itabashi Honcho Acquisition Price \ 920 mln. Acquisition Price \ 720 mln. Appraisal Value \ 923 mln.(as of May 1, 2015) Appraisal Value \ 723 mln.(as of May 1, 2015) Address Hatchobori, Chuo Ward, Tokyo Address 32-9 Honcho, Itabashi Ward, Tokyo Gross Floor area m2 Gross Floor area 1, m2 Structure RC 12F Structure RC 10F Completion date May 27, 2014 Completion date Jul 08, 2014

28 26 Property overview of New Acquisitions Ⅲ PMO Tamachi PMO Ginza Hatchome Acquisition Price (scheduled) \6,210 mln. Appraisal Value \6,400 mln.(as of May 1, 2015) Acquisition Price (scheduled) \ 3,970 mln. Appraisal Value \4,130 mln.(as of May 1, 2015) Address Shiba, Minato Ward, Tokyo Address Ginza, Chuo Ward, Tokyo Gross Floor area 4, m2 Gross Floor area 2, m2 Structure S/SRC B1/12F Structure S 10F Completion date Feb 07, 2014 Completion date Apr 25, 2014

29 27 Property overview of New Acquisitions Ⅳ PMO Shibakoen Acquisition Price (scheduled) \ 3,900 mln. Appraisal Value \3,950 mln.(as of May 1, 2015) Address Gross Floor area Structure Shibakoen, Minato Ward, Tokyo 2, m2 S 8F Completion date Jul 31, 2014

30 28 Market Review Leasing Market - Office Retail Residential Rent( /tsubo) 23,000 22,000 21,000 20,000 19,000 18,000 '01.Q Rent Vacancy Rate Matrix (Tokyo Central Five wards) Previous Peak 08.Q '05.Q ,000 16,000 ' '14.Q Vacancy Rate(%) 15, Source: Prepared by NREAM based on data from Miki Shoji Co., Ltd. Retail Sales (based on comparable store sales) (%) ショッヒ ンク センター名古屋市 Nagoya city Shopping center 食品スーハ ー (%) 大阪市 Osaka city Supermarket 福岡市 Fukuoka city 12 チェーンストア Chain store(including (GMS 含む GMS) ) 14 東京特別区 Special Wards of Tokyo 10 大型スーハ ー平均 Large supermarket average 全国平均 National Average 8 大型スーハ ー 飲食料品部門 Large supermarket (food & beverage) Supermarkets are performing strongly even Strength of large cities stood out -12 after the consumption tax hike -14 '14.04 '14.09 '15.02 '15.07 '14.04 '14.09 '15.02 '15.07 Source: Prepared by NREAM based on various retail sales statistics Leasing demand is expected to be solid over medium-term with contribution from increase in inflow of populations to central cities, increase in single households, etc. Rents for high quality rental apartments will remain stable due to the tightened supply-demand balance. (10,000tsubo) Nominal new supply of office buildings in Tokyo s 23 wards M M: : 1,000-2,999 坪以上 tsubo L L: :3,000 3,000-8,999 坪以上 tsubo LL LL:9,000-17,999 : 坪以上 tsubo XL XL: :18,000 坪以上 tsubo ( 右軸 ) 棟数 Forecast '01 '03 '05 '07 '09 '11 '13 '15 '17 Source: Prepared by NREAM (number of buildings) Logistics (tsubo) 400, , , , , , ,000 50,000 0 新規供給新規需要空室率 ( 全体 ) 空室率 ( 竣工 1 年以上 ) New supply New demand Vacancy rate (overall) Vacancy rate (a year or more after completion) Forecast Source: Prepared by NREAM based on data from CBRE 20% 16% 12% 8% 4% 0%

31 Market Review Sales Market Expected Yield Transaction Volume Land Price/Construction Cost Expected yield(%) 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% Investor s Expected Yield by sector オフィス Office (class ( 東京 丸の内 A building in Marunouchi, Aクラスビル Tokyo) ) 賃貸マンション Residential (Studio( type, 東京 城南 Jonan area ワンルームマンション (Meguro and Setagaya ) wards), Tokyo) 商業施設 Retail (Urban( central 東京 銀座 store, Ginza 都心型店舗 area, Tokyo) ) 2.5% 物流施設 Logistics (Multi-tenant ( 東京 江東区 type, Koto マルチテナント型 ward, Tokyo) ) 2.0% '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Source: Prepared by NREAM based on data from Miki Shoji Co., Ltd. Expected yield(%) st half of nd half of nd half of st half of Contract rent (10 thousand yen/tsubo) Source: Contract rent and expected yield are prepared by NREAM ( 100 mln.) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Number of land sales transactions (average of metropolitan Tokyo and the surrounding three prefectures, which are Kanagawa-ken, Saitama-ken and Chiba-ken) (year-on-year) Real Estate sales amount and BOJ s Tankan/banks lending attitude DI 0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 (year) 15% 10% 5% 0% -5% -10% -15% (4) Downturn phase 09/9 その他 Other オフィス Office (right axis) BOJ s Tankan/banks lending attitude DI (targeting large enterprises ( and 右目盛 real ) estate 日銀短観 銀行貸出態度 industry DI( 大企業 不動産業向け ) 売買額 Transaction (12 amount ヶ月移動平均 (12 months moving ) average) Source: Prepared by NREAM based on various materials announced Real estate transaction/pricing cycle 11/3 09/3 (3) Depression phase 10/3 05/9 10/3 12/9 12/3 11/9 08/9 06/3 13/3 13/9 14/3 06/9 15/3 (1)Recovery phase -20% -10% -5% 0% 5% 10% Urban land price index (total average, metropolitan Tokyo and the surrounding three prefectures, which are Kanagawa-ken, Saitama-ken and Chiba-ken) (year-on-year) 08/3 07/3 07/9 (2)Soaring phase Source: Prepared by NREAM based on various materials announced Change in increase/decrease ratio in greater Tokyo area 0% 20% 40% 60% 80% 100% 07.4Q 08.1Q 08.2Q 08.3Q 08.4Q 09.1Q 09.2Q 09.3Q 09.4Q 10.1Q 10.2Q 10.3Q 10.4Q 11.1Q 11.2Q 11.3Q 11.4Q 12.1Q 12.2Q 12.3Q 12.4Q 13.1Q 13.2Q 13.3Q 13.4Q 14.1Q 14.2Q 14.3Q 14.4Q 15.1Q 15.2Q Increase Flat Decrease Source: Prepared by NREAM based on data from Ministry of Land, Infrastructure, Transport and Tourism Change in construction cost level by sector Average of 2015 = Condominium:RC マンション 5,000m 2 m2 6/0 90 Office:SRC オフィス :SRC 7,000m7,000 2 m2 9/1-2 Store:RC 店舗 :RC 1,500m 2 m2 4/0 85 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Source: Prepared by NREAM based on data from Construction Research Institute 29

32 This document has been prepared for the purpose of provision of information only, and should not be construed as an offer, solicitation or commercial conduct of any nature associated with any specific products. Investors wishing to purchase the investment units of Nomura Real Estate Master Fund, Inc. should contact their own securities brokers or dealers. A fee may be charged by your financial instruments business operator in relation to the sale or purchase of investment units. For management fees that the Fund pays to Nomura Real Estate Asset Management Co., Ltd., please refer to the terms and conditions of the Fund, etc. The forward-looking statements with respect to the future financial results contained in this document are based on the current facts about the investment policy of the Fund, applicable laws and regulations, the market environment, business practice, etc., as of the preparation date of this document and do not reflect or consider any changes in the circumstances after the preparation date. These forward-looking statements inherently reflect uncertainty about known risks as well as unknown risks and other factors and may deviate from the actual operating and management results, financial conditions, etc., of the Fund. Investment in real estate investment securities may result in a loss due to a decline in the transaction price caused by, for example, changes in the price or the revenue-generating capability of the underlying properties or deterioration of the financial conditions of the issuer. Although the information contained in this document is intended to be complete and thorough, there is no assurance of precision and safety of the same. Please note that the contents of this document is subject to change or cancellation without prior notice. It is prohibited to make duplication, reproduction, distribution or use of any part or whole of the information contained in this document without express prior written consent.