Fifteenth Period (ended December 2013) Presentation Materials

Transcription

1 Fifteenth (ended December 2013) Presentation Materials February 18, 2014 (TSE:8987) 0

2 Table of Contents Ⅰ. Financial Highlights 1. Topics 3 2. Financial Results of the 15th (Ended December 2013) 4 Ⅱ. Results and Management Policies Going Forward 1. Management Discussion of Market Environment 6 2. External Growth (1) Highlight of Public Offering 7 (2) History of External Growth 8 (3) Utilization of Sponsor Support 9 [Reference] Major Developments and Owned Properties of Core Sponsors 10 (4) Newly acquired properties Internal Growth (1) Occupancy rates 13 (2) Rent levels and rental revenue Financial Strategy Performance Forecasts 17 Reference Materials Revenue and Expenses by Property 19 Portfolio Appraisal Value 20 Statement of Income and Retained Earnings 21 Balance Sheet 22 Financial Status 23 Statements of Cash Flow and Profit Distributions 24 Financial Indicators 25 Unitholders 26 Portfolio Map 27 Portfolio Overview 28 What Makes Japan Excellent Inc. Unique 30 Growth Strategy Utilizing Sponsor Companies 32 Unit price / Overview of Japan Excellent Asset Management Co., Ltd. 33 1

3 I. Financial Highlights AKASAKA INTERCITY 2

4 1. Topics 1. Held third public offering in 3 years and continued external growth with 18.5 billion of property acquisition Held a 10 billion public offering and acquired 3 properties for 18.5 billion centering on HAMARIKYU INTERCITY, a relatively new and large-scale property in central Tokyo acquired from the sponsor. The asset size grew by 45.9% in approx. three years with the continuous acquisition of 17 properties (Note 1) of 90 billion. Diversification of tenants and properties was advanced, the investment ratio of central Tokyo was increased and a portfolio with growth potential was constructed. 2. Stable portfolio profitability In addition to the decrease of the tenant departure rate, progress was made in leasing, and the occupancy rate improved further from 97.1% at the end of the previous period to a high level of 98.7% at the end of the 15th period. The rent gap decreased further and rental revenue is heading toward a stable upward trend. 3. Continued stable financial management A total of 8.0 billion was refinanced including 5.0 billion from issuing of investment corporation bonds. Promoted conversion to fixed-interest rate in preparation for the risk of rising longterm interest rates while holding down borrowing costs, and the ratio of fixed-rate loans is now 90.8%. Total acquisition price increased 46% in approx. 3 years Total acquisition price End of 8th bn End of 8th After PO (Note 2) bn Net increase ratio 45.9% Increase of ratio of investment in the 6 central wards of Tokyo After the transactions (Note 2) Ratio of investment in 6 central wards of Tokyo 51.6% 56.0% 100% 96% 92% 88% 84% 80% Occupancy rate is high and rent gap continues to narrow 94.0% 11.1% 8.8% Promoted conversion to fixed-interest rate while holding down borrowing costs End of 13th End of 14th 7.4% End of 13th 第 13 期末第 14 期末第 15 期末 97.1% Occupancy rate at the end of the period (left axis) End of 14th 98.7% End of 15th Rent gap (right axis) End of 15th Ratio of fixed interest rate 76.2% 84.4% 90.8% Average interest rate 1.32% 1.28% 1.26% 30.0% 20.0% 10.0% 0.0% Implemented split (5-for1) of investment units on January 1, 2014 Established an environment that makes investment easy for investors ahead of the introduction of NISA The split was deemed to contribute to the further widening the spectrum of investors and increase liquidity Outstanding investment units before the split of investment units Outstanding investment units after the split of investment units Number of investment units after issuance of new investment units (Note 3) Notes: 1. The number of acquired properties includes the additional acquisition of ownership interest (the same applies hereafter). 2. After the transactions refers to the point at which the acquisitions of HAMARIKYU INTERCITY (additional acquisition of compartmentalized ownership), Aoba-dori Plaza and Daiwa Minami- morimachi were completed (the same applies hereafter) Assumes that all of the new investment units of the third-party allotment were issued. 224,950 units 1,124,750 units 1,212,750 units

5 2. Financial Results of the 15th (Ended December 2013) Revenue from operations 8,409 8, Rental revenue 7,519 7, Rev enue f or utilities expenses Other rental revenue Expenses from operations 4,350 4, Property management expenses 1,136 1, Utilities expenses 804 1, Taxes Repairs and maintenance Other expenses for rentaloperations Depreciation 1,433 1, Profits from operations Sales and administrativ e expenses Distributions from anonymous association 4,059 4, Operating income 3,546 3, Other income Other expenses Ordinary income 14th (Jun. 2013) ,589 2, Net income 2,598 2, Provision of reserve for reduction entry Total distributions Distributions per unit ,744 2, (2,440 yen) 12,200 yen 15th (Dec. 2013) (Unit: million yen) (2,466 yen) 12,334 yen Difference (26 yen) 134 yen Factors of Change, etc. Increase of revenue and profit due to full-period contribution of properties acquired in the 14th period, and distributions per unit was 12,334, an increase of 134 yen from the previous period 1 Properties acquired in the 14th period: million yen Existing properties: - 57 million ➁ Properties acquired in the 14th period: + 31 million Existing properties: - 57 million (reactionary decrease due to increase in previous period s leasing management fee, etc.) 3 Properties acquired in the 14th period: + 53 million Existing properties: + 17 million 4 Absence of expenses related to public offering-related expenses in the previous period: - 45 million Other: + 24 million Comparison with Initial Forecasts Net income was as initially forecast Distribution per unit exceeded the initial forecast by 34 at 12,334 (Unit: million yen) Initial forecast Results Deffirences Revenue from operations 8,802 8, Expenses from operations 4,560 4, Net income 2,766 2,774 8 Distribution per unit (2,460 yen) 12,300 yen (2,466 yen) 12,334 yen (6 yen) 34 yen Note: A 5-for-1 split of investment units was implemented on January 1, In consideration of this split, the amount that is a fifth of the figures is indicated in parenthesis for distributions per unit. Also, amounts are rounded down to the nearest whole number. 4

6 II. Results and Management Policies Going Forward Omori Bellport D 5

7 1. Management Discussion of Market Environment Office Leasing Market Balance of the supply and demand of offices is improving in central Tokyo and the recovery trend of the vacancy rate is ongoing. Rents are bottoming out or even partially turning upwards as an increase of prices of excellent buildings in central Tokyo is starting to be anticipated. Real Estate Investment Market The appetite for investment by market participants continues to be strong, but the supply of properties is limited and the real estate transaction price is increasing. Investors expected cap rates in the Tokyo metropolitan area (particularly in central Tokyo) and some major regional cities are on a downward trend. Financial Markets Short-term interest rates will remain low and stable for the time being due to ongoing monetary easing measures. Long-term interest rates are expected to remain flat or increase gradually, and concerns for increase such as from affairs overseas must be watched. 6

8 2. External Growth (1) Highlight of Public Offering: Continual Growth Accompanied by Enhanced Portfolio Quality Acquired Properties Balanced acquisition of a relatively new and large-scale property in central Tokyo with potential for growth and carefully selected competitive and highly profitable properties 3 properties: 18.5 billion Average NOI yield: 5.4% Overview of Public Offering (Note2) Total number of units issued Offer price / Issue price Total issue price 88,000 units (including 8,000 units for over-allotment) 118,072 yen / 114,196 yen 10,049 million (including 913 million for over-allotment) Distribution per Unit (Note1) Forecast distributions for the 16th period increased 10 from the initial forecast of 2,440 ( 12,200) 16th period (initial forecast) 2,440 yen (12,200 yen) Growth potential Profitable Profitable HAMARIKYU INTERCITY Aoba-dori Plaza Daiwa Minami-morimachi 16th period (forecast) 2,450 yen (12,250 yen) 17th period (forecast) 2,450 yen (12,250 yen) Offer Price Date issuance was approved January 8, 2014 Pricing date January 20, 2014 Payment date January 27, 2014 Offer price is more than 1.2 times of NAV per unit NAV per unit (as of end of 15th period) Offer price Magnification 96,955 yen 118,072 yen 1.22 times Effects of Latest Public Offering Increase of the asset size Enhancement of portfolio quality Strengthening of the financial base Increase of unitholder value Number of properties 28 properties + End of 15th period (Dec. 2013) The acquisition After the transactions 3 properties (including one additional acquisition of compartmentalized ownership) 30 properties Total acquisition price billion billion billion NOI yield (Note3) 4.6% + 5.4% 4.7% Average building (Note4) 18.8 years years 18.2 years LTV (Note5) 48.6% 48.3% NAV per unit (Note5,6) 96,955 yen 98,660 yen Notes: 1.A 5-for-1 split of investment units was implemented on January 1, In consideration of this split, the amount that is a fifth of the figures is indicated in parenthesis for the 15th period prior to the split, and the amount that is five times the forecast figures is indicated in parenthesis for the 16th period onward following the split. Also, amounts are rounded down to the nearest whole number. 2. Figures are indicated based on the assumption that the number of new units issued through third-party allotment, implemented along with secondary offering under over-allotment (OA), will be 8,000 units, the maximum. 3. The figure for NOI yield in the column After the transactions is calculated by adding the annual estimated NOI of the 3 acquired properties for the fiscal year in which they were acquired, excluding special factors that may arise during the fiscal year, to the actual figure at the end of the 15th period. 4. Average building age is as of December 31, LTV and NAV per unit in the column After the transactions are estimated figures assuming all of the new investment units of the OA were issued. 6. The difference between the acquisition price and appraisal value of the newly acquired properties are considered as unrealized profit/loss for the calculation 7 of NAV per unit in the After the transactions column. NAV per unit is the figure after the 5-for-1 split of investment units.

9 2. External Growth (2) History of external growth Ongoing growth Increase of the portfolio s growth potential Increase of the portfolio s stability The asset size grew by 45.9% with the three public offerings in three years accompanied by ongoing property acquisitions (17 properties: 90 billion). Constructing a strong portfolio with growth potential and stability. Acquired 17 properties for 90 billion (including three acquisitions of additional compartmentalized ownership) in approx. 3 years utilizing the sponsor s support [Ratio of investment in the 6 central wards of Tokyo] (Note 1, 4) 60.0% 50.0% 51.6% 56.0% Daiba Garden City HAMARIKYU INTERCITY JEI Hiroshima Hacchobori AKASAKA INTERCITY (additional acquisition) Osaka Kogin (Land with Leasehold Interest) Major properties acquired after the 9th period Kowa Nishi- Shimbashi HAMARIKYU INTERCITY (additional acquisition) Aoba-dori Plaza Daiwa Minamimorimachi Properties acquired in the 16th period 40.0% Asset size (Note1) (Unit: 100 million yen) 3,000 2,500 2,000 1,810 Public offering 2,154 1,881 1,951 2,170 2,170 Public offering 2,455 2,455 Public offering 2,640 (Note6) Growth rate of asset size +45.9% 30.0% 30.0% 20.0% 10.0% End of 8th (Jun.2010) Ratio of top 5 tenants 28.9% After new transactions (Note 5) 20.3% 1,500 1, % End of 8th After the transactions (Jun.2010) [Ratio of top 5 properties] (Note 1) 500 Average market capitalization 67 billion(note2) (Note3) billion 70.0% 60.0% 60.5% 0 No. of properties 8th (Jun. 2010) 18 properties 9th (Dec. 2010) 19 properties 10th (Jun.2011) 19 properties 11th (Dec. 2011) 23 properties 12th (Jun. 2012) 24 properties 13th (Dec. 2012) 24 properties 14th (Jun. 2013) 28 properties 15th (Dec. 2013) 28 properties 8 After new transaction 30 properties Notes: 1. Figures above are based on the acquisition price. 2. average. 3. Average from July 1, 2013 to January 31, The 6 central wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya wards. 5. Ratio of Top 5 Tenants is the ratio of the total space leased to end tenants who are top five in terms of total leased floor space to entire leased space of the portfolio. The figure for after the transactions is based on the figure at the end of the 15th period and takes into account the newly acquired properties. 6. The figure is the growth rate from the end of the 8th period to after the transactions. 50.0% 40.0% End of 8th (Jun.2010) 47.4% After the transactions

10 2. External Growth (3) Utilization of Sponsor Support Continued acquisition of properties from the sponsor, not being swayed by the severe property acquisition environment Of the 90 billion total acquisition price in the last approx. 3 years, 40 billion was used for acquisition of relatively new, high-spec large-scale buildings in central Tokyo (Note 1) Content of properties acquired since the 9th period (after the transactions) Seller Area Class Third party 9.6% Brokerage by sponsor, etc. 19.0% Acquired from sponsors 71.4% 7.1% Other 6 central wards of Tokyo 92.9% 32.4% Other 67.6% Relatively new, highspec large-scale buildings in central Tokyo Ongoing supply of properties from the sponsor Approx. 90% of properties acquired from the sponsor are located in the 6 central wards of Tokyo Approx. 70% of properties in the 6 central wards of Tokyo are relatively new, highspec large-scale buildings JEI Hiroshima Hacchobori Osaka Kogin (Land with Leasehold Interest) No. 32 Kowa Kowa Shirokanedai No. 35 Kowa Kowa Nishi- Shimbashi Acquired with 2011 public offering Daiba Garden City Acquired (additional) with 2013 public offering AKASAKA INTERCITY Acquired (additional) with latest public offering HAMARIKYU INTERCITY Notes: 1. Large-scale buildings are properties with a total floor area of at least 10,000 tsubos and a standard floor area of at least 300 tsubos Rates are calculated based on acquisition price.

11 [Reference] Major Developments and Owned Properties of Core Sponsors 1 NIPPON STEEL KOWA REAL ESTATE INTERCITY Series of NIPPON STEEL KOWA REAL ESTATE Owned 2 3 Owned Shinanomachi Yotsuya Ichigaya Nagatacho Otemachi Kanda Nihonbashi SHINAGAWA INTERCITY 4 Owned 27% interest Kowa Nishi- Shimbashi AKASAKA INTERCITY Shibaura RENA SITE Tower The Dai-ichi Life Insurance 5 49% interest HAMARIKYU INTERCITY 6 Akasaka 1-chome District Category 1 Urban Redevelopment Project Area where the project is to be implemented Approx. 2.5ha Total floor area Approx. 175,300m² Site area Approx. 16,000m² NAGOYA INTERCITY Sekisui House completion (planned) April 2017 Tokyo Yurakucho Akasaka-mitsuke 8 7 Aoyama-itchome Tameike-sanno 6 Kasumigaseki Ginza 2 Omote-sando 4 Shimbashi Roppongi Hamamatsucho 3 Azabu-juban Mita 7 8 Owned 9 Tamachi Shirokane-takanawa 5 Tokyo Square Garden Owned Akasaka Garden City 10 Owned Daiba Garden City Garden City Shinagawa Gotenyama Meguro Gotanda 9 Shinagawa 1 Odaiba-kaihinkoen Daiba 10 Osaki Tennozu-Isle Omori Bell Port Honmachi Garden City Honmachi Minami Garden City Notes: 1. There are no plans to acquire the above properties as of the date of this document The properties indicated Owned include those in which JEI has partial ownership interest.

12 2. External Growth (4) Newly Acquired Properties 1 100% interest Office lobby Residence Mixed-use development property comprised of offices and residences, developed by Nippon Steel Kowa Real Estate and completed in March 2011 Located a 5-minute walk from Hamamatsucho Station on JR and the Tokyo Monorail Line; With Daimon and Takeshiba stations also available, 3 stations and 6 routes are available for use The location provides easy access to Shinkansen and Haneda Airport and transportation is convenient Adopts state-of-the-art facilities including a hybrid vibration control structure and photovoltaic power generation, providing resilient in emergency situations and consideration for the environment Specifications are highly competitive with pillar-free office floors having over 300 tsubos of floor space and 2,900 mm ceiling height, and the residential floors having excellent facilities including a reception area, lounge and athletic gym for the exclusive use of the residents The property has a track record of high occupancy and currently the offices have 100% occupancy and the residential section is almost full as well HAMARIKYU INTERCITY (additional acquisition of compartmentalized ownership) Acquisition date February 4, 2014 (Note 1) Seller NIPPON STEEL KOWA REAL ESTATE CO., LTD. Acquisition price 12,000 million Appraisal value 12,000 million NOI yield (Note 2) 4.9% Acquired from sponsors Daimon Sta. HAMARIKYU INTERCITY Total floor area 35,555.87m 2 Structure / No. of floors S/SRC B2/25F Built March 7, 2011 Location and , Kaigan, Minato-ku, Tokyo Notes: 1. JEI acquired the co-ownership interest for all site area and the whole building ownership (ownership ratio of 60/100). Since JEI already had the co-ownership interest for all site area and the whole building with 40/100 ratio, acquisition this time completed the entire acquisition of the property. 2. NOI yield is calculated based on the estimated annual NOI excluding the effect of special circumstances that may arise during the year of acquisition. 11 Hamamatucho Sta. Takeshiba Sta.

13 2. External Growth (4) Newly Acquired Properties 2 Aoba-dori Sta. Aoba-dori Plaza Sendai Sta. Sendai Sta. Minami-morimachi Sta. Daiwa Minamimorimachi Osakatemmangu Sta. Aoba-dori Plaza Daiwa Minami-morimachi Acquisition date February 4, 2014 Seller Bois Vert LLC Acquisition price 2,120 million Acquired from a bridge fund formed by sponsors Acquisition date February 4, 2014 Seller Bois Vert LLC Acquisition price 4,410 million Acquired from a bridge fund formed by sponsors Appraisal value 2,560 million Appraisal value 4,520 million NOI yield (Note) 6.6% Total floor area 22,737.38m 2 NOI yield (Note) 6.1% Total floor area 12,759.65m 2 Structure / No. of floors S/SRC B1/15F Structure / No. of floors SRC B1/9F Built July 26, 1996 Built January 8, 1990 Location Chuo, Aoba-ku, Sendai-shi, Miyagi Location 2-6, 2-chome Kita, Tenjinbashi, Kita-ku, Osaka-shi, Osaka Located a 1-minute walk from the subway Sendai Station and a 5-minute walk from the JR Sendai Station, near the exit of Sendai Station s underground passage Located in Sandai s competitive office area and has a high level of visibility along the main street of Aoba-dori While the standard floor space is 353 tsubos, it can be divided into 11 smaller spaces to meet various needs of tenants The property has high specs with ceiling height of 2,700mm, OA floor of 100mm, individually controlled air conditioning, an automated security system that allows 24-hour access, etc. as well as a high level of earthquake-proof safety with vibration damping devices. Note: NOI yield is calculated based on the estimated annual NOI excluding the effect of special circumstances that may arise during the year of acquisition. Directly connected to subway Minami-Morimachi Station, which is a 2-minute ride from the next station in the Umeda area, a central area in Osaka, and transportation is convenient with 3 train routes available for use The area has a court, legal affairs bureau, tax office and such nearby, and stable demand from offices of lawyers and patent attorneys are expected The main tenant is an FM broadcasting station renting the space ever since the completion of the building, and stable occupancy of the property can be expected as the average occupancy rate in the past 5 years has been high at 99.1% and it has advantageous location and scale 12

14 3. Internal Growth (1)Occupancy rates 15th period: Occupancy rate increased to Historical 98.7% with and further Forecasted leasing Occupancy Rates 15 th period: Occupancy rate increased to 98.7% due to progress of leasing up of properties The overall portfolio occupancy rate increased to 98.7% by the end of the 15th period with the contribution of leasing up of Ebina Prime Tower and Akasaka Garden City (Ebina Prime Tower: 82.5% at end of 14th period 94.8% at end of 15th period; Akasaka Garden City: 82.3% at end of 14th period 100% at end of 15th period) 16th period: Occupancy rate maintained a high level Through a departure of a major tenant is scheduled, early lease up of the property is anticipated. The overall portfolio occupancy rate is scheduled to remain high. (%) [Occupancy Rates Market and JEI Historical and Forecasted] Forecast (tsubo) 7,000 5,000 3,000 [Historical and Forecast Tenant Departure Rates (Note) and Spaces Leased Up and Vacated (Excluding Residences and Same- Relocations)] (lhs) (rhs) 入居面積 Space leased up 退去面積 Space vacated テナント退去率 Tenant departure date Ebina PT Kawasaki Nisshincho Ebina PT JEI Hamamatuscho (Departure rate) 12% Forecast 10% 8% 6% 4% End of Dec End of Jun End of Dec End of Jun Source: Prepared based on materials provided by Miki Shoji End of Dec th Average (Forecast) 98.5% (7,000) End of Jun ,000 (1,000) (3,000) (5,000) 2.1% Major Tenants in Kawasaki Nisshincho 12th (Jun. 2012) 1.5% 4.2% 13th (Dec. 2012) Note 2 2.2% 14th (Jun. 2013) 0.3% Major Tenants in JEI Hamamatuscho 15th (Dec. 2013) 1.9% 16th (Jun. 2014) 2% Note 3 0% 0% 0.6% Notes:1. Tenant departure rate is calculated for the entire JEI portfolio as space vacated by tenants over the period as a percentage of total leased space as of the end of the previous period. In the case of additional acquisition during the period, tenant departure rate is calculated as space vacated by tenants over the period as a percentage of the sum of total leased space as of the end of the previous period and leased space of the newly acquired property. In the case of a sale of a property during the period, leased space of the sold property is not subtracted from the total leased space as of the end of the previous period, and thus, the original formula (space vacated by tenants over the period as a percentage of total leased space as of the end of the previous period) applies. 2.The tenant departure rate minus the departure at Kawasaki Nisshincho. 3. The tenant departure rate minus the departure at JEI Hamamatsucho. -2% 2% -4% -6% -8% 8% -10% 10% -12%

15 3. Internal Growth (2) Rent levels and rental revenue (yen/ tsubo) Historical and Forecast Rent Revisions and Average Rent Average rent revision is expected to improve significantly Downward pressure on rents is being eased The rent gap is narrowing further The rent adjustment cycle is almost through Historical and Forecast Rent Revisions Rent hikes Amount of upward revision Rent Unchanged Rent cuts amount of upward revision Historical and Forecast Average Rent Average revision (Note 1) 11th 14,628 tsubo ( 18% ) 0% 68% 31% - 4.9% 12th 20,575 tsubo ( 27% ) 27% 41% 32% - 4.4% 13th 11,759 tsubo ( 15% ) 0% 55% 45% - 4.5% 14th 28,170 tsubo ( 31% ) 0% 35% 65% - 4.0% 15th 14,385 tsubo ( 16% ) 6% 45% 49% - 4.4% 16th (Forecast) Space up for revision(note)percentage of leasable space in parentheses 23,877 tsubo ( 24% ) 5% 61% 34% - 1.9% (Note 2) 15th period Revenues of existing properties (properties owned as of the end of the 13th period) decreased (- 57 million) with the delay of leasing up of some properties, but increased overall due to the fullperiod contribution of properties acquired in the 14th period. 16th period Revenues will increase due to the rent revenue of properties acquired in the 16th period. Revenues of existing properties will increase from the previous period such as due to the fullperiod contribution of properties leased up in the 15th period. Revenues of existing properties will make an upturn with the 15th period as the bottom. 17th period Historical and Forecast of Total Rent Revenue Revenues will increase with the full-period contribution of properties acquired in the 16th period Rent revenue will be on a stable upward trend (million (million yen) yen) Historical and Forecast of Total Rent Revenue Rent gap Forecast Average rent Market rent End of 12th ( Jun. 2012) End of 13th (Dec. 2012) End of 14th (Jun. 2013) End of 15th (Dec. 2013) End of 16th (Jun. 2014) Notes: 1. Average percentage change including rent kept at previous levels. 2. Based on leased office space only. 14

16 4. Financial Strategy (1) The LTV dropped to 48.3% with the 10 billion public offering. Financial Stability Increased financial stability through procurement at low costs with the issuance of investment corporation bonds and the conversion to fixed-interest rates. Overview of investment corporation bonds: 5.0 billion, 5 year period, interest rate of 0.46% 60.0% 55.0% 50.0% 45.0% 40.0% 35.0% 30.0% 33.7% End of 1st 49.7% End of 2nd 51.3% End of 3rd [Historical Interest-bearing Debt and -end LTV (total assets)] 51.2% End of 4th 48.7% 48.9% 49.0% 49.0% End of 5th End of 6th End of 7th [Historical and Forecast Fixed-Rate Percentage] End of 8th 50.4% 45.7% End of 9th End of 10th 49.6% 49.7% 49.7% 48.7% 48.6% 48.3% End of 11th 期末有利子負債残高 End of 12th End of 13th 期末総資産 LTV End of 14th End of 15th After the (Unit: 100 million yen) 1,400 1,200 1,000 [Historical -End Average Rate and Average Remaining of Interest-Bearing Debt] (year) (%) 15

17 4. Financial Strategy (2) (Unit: 100 million yen) Stable Fund Raising Maintain stability for fund procurement through 返済期別有利子負債残高 the diversification of maturity date, continuation of commitment line of credit [ Status of Maturity Date Diversification (After the Transactions) ] Secured liquidity by establishing a commitment line 14 billion framework 第 16 期第 17 期第 18 期第 19 期第 20 期第 21 期第 22 期第 23 期第 24 期第 25 期第 26 期第 27 期第 28 期第 29 期第 30 期 長期借入金 Long-term ( Loans 固定金利 (fixed) rate) 長期借入金 Long-term ( Loans 変動金利 (floating ) rate) 投資法人債 Investment corporation bond 86 短期借入金 Short-term Loans 16th 17th 18th 19th 20th 21th 22th 23th 24th 25th 26th 27th 28th 29th 30th 20 Rating agency Japan Credit Rating Agency (JCR) [ Rating ] Rating (outlook) Long-term issuer rating: AA- (stable) [ Interest Bearing Debt ] (Unit: 100 million yen) 14th (End of Jun. 2013) 15th (End of Dec. 2013) After the transactions Interest-bearing debt 1,254 1,254 1,344 Rating and Investment Information (R&I) Issuer rating: A+ (stable) Short-term loans (Note) 0 (0.0%) 0 (0.0%) 90 (8.5%) Long-term loans (Note) 1,014 (100.0%) 964 (100.0%) 964 (91.5%) Moody s Japan Issuer rating: A3 (stable) Investment corporation bonds (Note) As a percentage of total borrowings in parentheses

18 5. Performance Forecasts 15th (Dec. 2013) 8,848 9, , Rental revenue 7,753 8, ,501 ➄ 176 Revenue from operations Revenue from utility expenses Other revenue Expenses from operations 4,605 4, , Property management expenses 1,110 1, , Utilites expenses 1, , Taxes Repair and maintenance (NOI) 5,747 6, , Depreciation 1,504 1, , Profits from operations Sales and administrativ e expenses Operating income Other expenses Ordinary income Net income Total distributions Distribution per unit Note: (2,466 yen) 12,334 yen 16th (Jun. 2014) Result Forecast Vs. Prev ious Forecast (Unit: million yen) 17th (Dec. 2014) Vs. Prev ious 4,243 4, , ,709 3, , ,775 2, , ,774 2, , ,774 2, , ,450 yen -16 yen 2,450 yen (12,250 yen) (-84 yen) (12,250 yen) 0 yen A 5-for-1 split of investment units was implemented on January 1, In consideration of this split, the amount that is a fifth of the figures is indicated in parenthesis for the 15th period and earlier periods prior to the split, and the amount that is five times the forecast figures is indicated in parenthesis for the 16th period onward following the split. Also, amounts are rounded down to the nearest whole number. 2,480 (12,400) 2,460 (12,300) 2,440 (12,200) 2,420 (12,100) (yen) (2,440) 12,200 12th (Jun. 2012) Factors for Increase/Decrease Revenues will increase in the 16th and 17th periods with the stable revenues of existing properties and contribution of properties acquired in the 16th period Distributions per unit are expected to exceed the current level at 2,450 with the absorption of the expensing of fixed property and city planning tax for properties acquired in the 14th period [16th period ] 1 Properties acquired in the 16th period: 2 Expensing of fixed property and city planning tax for properties acquired in the 14th period: 3 Expenses related to the public offering: [ Historical and Forecast Distributions per Unit ] (2,448) 12,242 (2,440) 12,200 13th (Dec. 2012) 14th (Jun. 2013) (2,466) 12,334 15th (Dec. 2013) million + 63 million + 40 million 4 Increased to 2,450 from the initial forecast (announced Aug. 2013) of 2,440 [ 17th period ] 5 Properties acquired in the 16th period: million Other properties : + 38 million 6 Expensing of fixed property and city planning tax for properties acquired in the 14th period: + 60 million 7 Absence of expenses related to the public offering: - 40 million 2,450 (12,250) 16th (Jun. 2014) 2,450 (12,250) 17th (Dec. 2014) Level of distributions per unit to be raised from the 16th period ( 2,440 2,450) Aim for further increase of distributions through utilization of capacity to acquire properties, increase of rent, etc. 17

19 Reference Materials Akasaka Garden City 18

20 Revenue and Expenses by Property Revenue from operations Expenses from operations Utilities Profits from operations NOI Rental revenue Other revenue Property management Taxes Insurance Repair and maintenance Other expenses Depreciation Number of operating days Acquisition price Area I Area II Area III (Unit: million yen) Ⅰ-1 Ⅰ-2 Ⅰ-3 Ⅰ-4 Ⅰ-7 Ⅰ-8 Ⅰ-9 Ⅰ-10 Ⅰ-11 Ⅰ-12 Ⅰ-13 Ⅰ-14 Ⅱ-1 Ⅱ-2 Ⅱ-3 Ⅲ-1 Ⅲ-2 Ⅲ-3 Ⅲ-5 Ⅲ-6 Ⅲ-7 Ⅲ-8 Ⅲ-9 Ⅲ-10 Ⅲ-11 Ⅳ-2 Ⅳ-3 Ⅳ-4 Osaka Daiba Akasaka Kowa Kowa Kogin Kawasaki Kawasaki Kawasak Hiroshima Total Shiba 2- Hamam 32 AKASAKA Garden 35 HAMARIKYU Shintomicho Nagoya honmachi Kosugi Kowa Ryogoku Ebina Core City NHK Nishi- Musashi- 44 Omori Garden Shiroka Nishi- Higashi- Hongo Nisshincho Guchi bori chome atsucho Kowa INTERCITY City Kowa INTERCITY i Nishi- Sengoku Tachikawa Kyobashi SE Haccho- Sankyo City nedai Shinbashi (Land with Guchi Bldg. Leasehold , , , , , , , , ,552 9,450 8,350 7,430 23,300 28,146 4,705 11,000 8,280 7,080 1,750 3,931 4,300 6,673 1,770 13,890 10,976 5,400 4,725 1,150 2,550 6,470 32,000 1,620 6,500 3,308 2,760 5, ,567 Area IV Compared with previous period 15th period NOI yield (annualized) 14th period NOI yield (annualized) Difference 5.0% 6.0% 4.3% 4.6% 1.9% 2.9% 5.2% 5.3% 4.6% 5.1% 5.8% 5.5% 7.6% 3.9% 9.4% 7.3% 4.8% 4.3% 5.2% 10.5% 5.1% 3.2% 3.6% 5.5% 6.7% 8.2% 6.5% 9.2% 4.6% 5.0% 6.1% 4.4% 4.6% 2.3% 3.1% 3.7% 5.5% 4.4% 5.1% 6.3% 5.6% 8.0% 4.1% 9.5% 7.3% 5.1% 4.3% 4.6% 10.8% 4.8% 2.3% 3.7% 4.5% 6.6% 8.2% 7.3% 9.2% 4.7% 0.0% -0.1% -0.1% 0.0% -0.4% -0.2% 1.5% -0.2% 0.2% 0.0% -0.5% -0.1% -0.4% -0.2% -0.1% 0.0% -0.3% 0.0% 0.6% -0.3% 0.3% 0.9% -0.1% 1.0% 0.1% 0.0% -0.8% 0.0% -0.1% Notes: 1. Figures are rounded down to the nearest million. Acquisition price are rounded off less than one million yen. 2. Ratios are rounded to the first decimal place. 3. NOI yield for each property shown is annualized. (NOI yield = Annualized NOI / acquisition price) 4. Details concerning revenue and expenses for 35 Kowa, Kowa Nishishimbashi, Kawasaki Higashiguchi and JEI Hongo are not disclosed because we have not received consent from tenants. 5. Details concerning rental revenue for NHK Nagoya are not disclosed because we have not received consent from the business partner. 19 [Breakdown by Area] (Unit: million yen) Area I Total Area II Total Area III Total Area IV Total NOI 2, , Acquisition price 135,974 12,743 85,281 11,568 15th period NOI yield (annualized) 4.1% 5.9% 4.9% 8.3% 14th period NOI yield (annualized) 4.2% 6.1% 4.8% 8.3% Difference -0.1% -0.2% 0.1% 0.0%

21 DAIWA REAL ESTATE APPRAISAL Corporation DAIWA REAL ESTATE APPRAISAL Corporation Portfolio Appraisal Value Property Number Area Name Evaluation Acquisition Prive Appraisal Value difference(2-1) Book Value Difference(2-3) at end of % FP15 3 % End of FP14 1 End of FP15 2 Direct reduction reduced yield Difference(5-4) End of FP14 4 End of FP15 5 I-1 I Omori Bellport D 22,552 23,150 23, % 21,571 1, % 4.8% 4.8% 0.0% % Appraisal Organization Chuo Real Estate Appraisal Co., Ltd. (Unit: million yen) I-2 Shiba 2-Chome 9,450 11,000 11, % 9,100 2, % Office 4.8% Office 4.7% Residence 5.5% Residence 5.3% Office -0.1% Residence -0.2% Japan Real Estate Institute I-3 JEI Hamamatsucho 8,350 7,470 7, % 8,353-1, % 4.5% 4.4% -0.1% I-4 No. 32 Kowa 7,430 6,679 6, % 7, % 5.4% 5.3% -0.1% I-7 Akasaka Garden City 23,300 17,700 16,600-1, % 22,656-6, % 4.1% 4.0% -0.1% I-8 AKASAKA INTERCITY 28,146 24,500 25, % 27,624-2, % 3.9% 3.8% -0.1% I-9 Kowa Shirokanedai 4,705 4,970 5, % 4, % 4.9% 4.8% -0.1% I-10 Daiba Garden City 11,000 12,080 12, % 10,630 1, % 5.0% 5.0% 0.0% I-11 No. 35 Kowa 8,280 9,150 9, % 8, % 4.2% 4.2% 0.0% I-12 HAMARIKYU INTERCITY 7,080 7,830 7, % 6,882 1, % 4.5% 4.4% -0.1% I-13 Shintomicho 1,750 1,820 1, % 1, % 5.0% 5.0% 0.0% I-14 Kowa Nishishinbashi 3,931 4,050 4, % 3, % 4.3% 4.2% -0.1% II-1 II NHK Nagoya Housou-Center 4,300 4,190 4, % 4, % 5.8% 5.7% -0.1% II-2 JEI Nishi-honmachi 6,673 4,200 4, % 7,391-3, % 5.4% 5.4% 0.0% II-3 Osaka Kogin (land with leasehold interest) 1,770 1,770 1, % 1, % 4.5% 4.5% 0.0% III-1 III Musashikosugi Tower Place 13,890 16,100 16, % 12,751 3, % 5.4% 5.2% -0.2% III-2 Kowa Kawasaki Higashiguchi 10,976 8,350 8, % 9,983-1, % 5.0% 5.4% 0.4% III-3 JEI Hongo 5,400 4,560 4, % 5, % 4.5% 4.7% 0.2% III-5 Kawasaki Nisshincho 4,725 3,560 3, % 4, % 5.7% 5.5% -0.2% III-6 No. 44 Kowa 1,150 1,530 1, % % 5.8% 5.7% -0.1% III-7 JEI Ryogoku 2,550 2,138 2, % 2, % 5.4% 5.4% 0.0% III-8 Ebina Prime Tower 6,470 3,690 3, % 5,936-2, % 6.3% 6.2% -0.1% III-9 Kowa Kawasaki Nishiguchi 32,000 24,500 24, % 30,135-5, % 5.0% 5.2% 0.2% III-10 Pacific Square Sengoku 1,620 1,589 1, % 1, % 5.0% 5.0% 0.0% III-11 Core City Tachikawa 6,500 6,870 6, % 6, % 5.5% 5.4% -0.1% Ⅳ-2 Ⅳ JEI Kyobashi 3,308 3,520 3, % 3, % 6.0% 5.9% -0.1% Ⅳ-3 JEI Hiroshima Hacchobori 2,760 2,720 2, % 2, % 5.8% 5.8% 0.0% Japan Real Estate Institute Chuo Real Estate Appraisal Co., Ltd. Japan Real Estate Institute Japan Real Estate Institute Japan Real Estate Institute Chuo Real Estate Appraisal Co., Ltd. Japan Real Estate Institute Japan Real Estate Institute Chuo Real Estate Appraisal Co., Ltd. Japan Real Estate Institute Japan Real Estate Institute Japan Real Estate Institute Japan Real Estate Institute Japan Valuers Co., Ltd. Japan Valuers Co., Ltd. Japan Valuers Co., Ltd. Japan Real Estate Institute Chuo Real Estate Appraisal Co., Ltd. Japan Real Estate Institute Japan Valuers Co., Ltd. Chuo Real Estate Appraisal Co., Ltd. Japan Real Estate Institute Japan Real Estate Institute Ⅳ-4 SE Sankyo 5,500 5,996 6, % 5, % 6.0% 6.0% 0.0% Total 245, , , % 238,103-11, % 4.9% 4.8% -0.1% - Chuo Real Estate Appraisal Co., Ltd. Area I Total Area II Toral Area III Total Area IV Total Grand Total Notes: 1. Total yield by area was calculated using weighted averages and rounding to the nearest decimal point. 135, , , % 132,970-2, % 4.5% 4.4% -0.1% - 12,743 10,160 10, % 13,766-3, % 5.4% 5.4% 0.0% - 85,281 72,887 73, % 79,925-6, % 5.2% 5.3% 0.1% - 11,568 12,236 12, % 11,440 1, % 6.0% 5.9% -0.1% - 245, , , % 238,103-11, % 4.9% 4.8% -0.1% 2. Appraisal value" includes the appraisal value described in the real estate appraisal report made by a real estate appraiser belonging to Japan Real Estate Institute, Chuo Real Estate Appraisal, Japan Valuers and Daiwa Real Estate Appraisal Corporation as of end of 14th and 15th period based on Japan Excellent s rules and the regulations stipulated by the Investment Trusts Association, Japan. When there is a joint ownership property in the current portfolio, its value is obtained after multiplying the total value of the shared real estate by the percentage of the interest owned by Japan Excellent or the trustee. 20

22 Statement of Income and Retained Earnings 14th (Jun. 2013) Note: Figures under one million yen are rounded down. Ratios are rounded to the nearest first decimal point. 21 % 15th (Dec. 2013) % Difference (Unit: million yen) Difference by % 1. Revenue 8, , Rental revenue 7,716 7, Other rental revenue Distributions from anonymous association Operating expenses 4, , Property management expenses 1,136 1, Utilities expenses 804 1, Taxes Insurance Repairs and maintenance Other expenses for rental operation Depreciation 1,433 1, Total operating expenses 4,350 4, Profits from operations 4,059 4, Asset management fees Other Operating income 3, , Other income Interest income Other Other expenses Interest expense Loan relating fees Interest expense on investment corporation bonds Amortization of investment corporation bond issuance costs Other Ordinary income 2, , Extraordinary income Gain from donation of fixed asset Net income before taxes 2, , Income taxes current Income taxes deferred Net income 2, , Retained earnings brought forward Unappropriated retained earnings at the end of period 2,598 2,

23 Balance Sheet Difference Assets % % Liabilities % % Note: Figures under one million yen are rounded down. Ratios are rounded to the nearest second decimal point. 22 (Unit: million yen) Difference Ⅰ.Current assets 17, , Ⅰ.Current liabilities 21, , ,812 Cash and deposits 3,600 4,707 1,107 Operating accounts payable Cash and deposits in trust 13,031 13, Short-term debt due within a year 8,000 15,500 7,500 Investment corporation bonds maturing within a Operating accounts receivable ,000 12,000 - year Other Other accounts payable Ⅱ.Fixed assets 239, , Accrued consumption taxes Property and equipment 230, , Other Real Estate 7,193 7, Ⅱ.Long-term liabilities 115, , ,554 Real Estate in trust 223, , Investment corporation bonds 12,000 17,000 5,000 Construction in progress Long-term loans 93,400 80,900-12,500 2.Intangible assets 8, , Security deposits from tenants Leasehold rights 1,185 1,185 - Security deposits from tenants in trust 9,466 9, Leasehold rights in trust 7,380 7,380 - Total liabilities 136, , Other Investments and other assets Unitholders' equity Unitholders' equityinvestment securities Ⅰ.Unitholders' capital 120, , Leasehold and security deposits Unitholders' capital 117, , Long-term prepaid expenses Retained earnings 2,781 2, Other Voluntary retained earnings (Reserve for reduction entry) Ⅲ.Deferred assets Unappropriated retained earnings 2, , Deferred investment corporation bond issuance costs Total unitholders' equity 120, , Total assets Assts 14th (Jun. 2013) 15th (Dec. 2013) Liabilities and Unitholders' Equity 14th (Jun. 2013) 15th (Dec. 2013) 257, , Total liabilities and unitholders' equity 257, ,

24 Financial Status Balance of Interest Bearing Debt (as of the end of December 2013) Borrowings (long-term borrowings; borrowed on December 27, 2013) Lenders Interest-Bearing Debts (million yen) As a percentage of all borrowings As a percentage of all interestbearing debt Mizuho Bank, Ltd. 21, % 17.0% The Norinchukin Bank 1,162 (Unit: million yen) Lenders Amount Interest rate Mitsubishi UFJ Trust and Banking Corporation 16, % 13.2% Mizuho Bank, Ltd. 675 Development Bank of Japan Inc. 14, % 11.2% Mitsubishi UFJ Trust and Banking Corporation 675 Sumitomo Mitsui Banking Corporation 11, % 8.9% Mizuho Trust & Banking Co., Ltd years 1.000% (Note) The Dai-ichi Life Insurance Company, Limited 9, % 7.2% Total 3,000 Mizuho Trust & Banking Co., Ltd. 6, % 5.3% The Norinchukin Bank 4, % 3.3% Aozora Bank, Ltd. 2, % 2.4% Note: This interest rate is the substantial interest rate for payment converted to a fixed rate through an interest rate swap agreement dated December 20, 2013 Investment Corporation Bonds (issued November 25, 2013) Resona Bank, Ltd. 2, % 2.3% Sompo Japan Insurance Inc. 2, % 2.0% Investment Corporation Bond Issue price (million yen) Interest rate Sumitomo Mitsui Trust Bank, Limited 1, % 1.3% 5th Series Unsecured Investment Corporation Bond 5,000 5 years 0.460% Tokio Marine & Nichido Fire Insurance Co., Ltd. 1, % 1.2% Total 5,000 The Bank of Fukuoka, Ltd. 1, % 0.8% Shinkin Central Bank 1, % 0.8% Loan Total 96, % 76.9% Establishment of Commitment Line (Established January 31, 2014) 1st Series Unsecured Investment Corporation Bond 12, % 2nd Series Unsecured Investment Corporation Bond 5, % 3rd Series Unsecured Investment Corporation Bond 5, % Mizuho Bank, Ltd. 4th Series Unsecured Investment Corporation Bond 2, % Mitsubishi UFJ Trust and Banking Corporation 5th Series Unsecured Investment Corporation Bond 5, % Sumitomo Mitsui Banking Corporation Investment Corporation Bond Total 29, % Interest-Bearing Debt Total 125, % Lenders : Sponsor companies of the asset management company. Note : Note: Amounts are rounded down to the nearest million yen. Rates are rounded to the nearest first decimal place. 23 Credit limit (million yen) 14,000 (Note) Term From Jan. 31, 2014 to Jan. 29, 2015 Use of funds Repayment of existing borrowings (including investment corporation bonds) Note: There are no borrowings based on the above as of the date of this document.

25 Statements of Cash Flow and Profit Distributions Cash Flow Statement Profit Distribution (Unit: yen) (Unit: million yen) 15th (Dec. 2013) Clasification Note: Figures less than one million yen are rounded down. Amount Ⅰ.Cash flow from operating activities 4,949 Net income before taxes 2,775 Depreciation 1,504 Interest expense -788 Other 1,457 II. Cash flow from investing activities -892 Proceeds from sale of investment securities -113 Purchase of property and equipment -727 Net payments for security deposits -54 Other 2 Ⅲ.Cash flow from financing activities -2,774 Proceeds from long-term loans 3,000 Repayment of long-term loans -8,000 Proceeds from issuance of investment corporation bonds 5,000 Distributions to unitholders -2,746 Other -27 IV. Net decrease in cash and cash equivalents 1,282 V. Cash and cash equivalents at beginning of period 16,632 VI. Cash and cash equivalents at end of period 17,914 15th (Dec. 2013) Clasification Unappropriated retained earnings at the end of period Amount 2,774,683,020 Distributions 2,774,533,300 (Note 1) (Distributions per investment unit) (2,466) 12,334 Earnings carried over to next perio 149,720 Outstanding investment units at the end of period (Note 2) (1,124,750 units) 224,950 units Notes : 1. A 5-for-1 split of investment units was implemented on January 1, In consideration of this split, the amount that is a fifth of the figure is indicated in parenthesis for distributions per unit. Also, amounts are rounded down to the nearest whole number. 2. A 5-for-1 split of investment units was implemented on January 1, In consideration of this split, the figure for after the split are indicated in parenthesis for outstanding investment units at the end of period. 24

26 Financial Indicators Financial indicators Calculation method Unit (Note 1) (Notes 1) (Note 1) (Notes 2) (Note 2) (Notes 2) (Note 2) EPS (Earnings per share) Net income / average number of investment units during the period yen 11,884 (2,376) 12,334 (2,466) EBIT (Earnings before interest and tax) Income before income taxes + (Interest expense + Interest expense on investment corporation bonds) MN yen 3,359 3,586 EBITDA (Earnings before interest, tax and Income before income taxes + (Interest expense + Interest expense on depreciation and amortization)) investment corporation bonds) + Depreciation and amortization MN yen 4,793 5,090 NOI (Net operating income) Rental revenue - rental expenses + Depreciation and amortization MN yen 5,493 5,747 NCF (Net cash flow) NOI - Capital expenditures MN yen 4,921 4,972 FFO (Funds from operation) FFO per unit NAV (Net asset value) Net income + Depreciation and amortization - Net profit from sale of real estate (Net income + Depreciation and amortization - Net profit from sale of real estate) / Number of outstanding investment units end total assets - end total liabilities - end real estate book value + end real estate appraisal value MN yen 4,032 4,279 yen 17,924 (3,584) 19,022 (3,804) MN yen 107, ,050 NAV per unit NAV / Number of outstanding investment units yen 477,897 (95,579) 484,775 (96,955) DSCR (Debt service coverage ratio) (1) DSCR (Debt service coverage ratio) (2) ROA ROE Cash flow before interest and taxes / (Interest expense + Interest expense on investment corporation bonds) (Note) Cash flow before interest and taxes = Net income before interest and taxes + Depreciation and amortization Net income before interest and taxes / (Interest expense + Interest expense on Investment Corporation Bonds) Ordinary income / [( beginning total assets + period end total assets) / 2] x 100 multiple multiple % (Reference) Annualized w ith follow ing formula Above x 365 days / Number of operating days % Net income / [( beginning net assets + period end net assets) / 2] x th (Jun. 2013) 15th (Dec. 2013) % (Reference) Annualized w ith follow ing formula Above x 365 days / Number of operating days % ( 1) Equity to Total Assets ( end net assets / end total assets) x 100 % LTV (based on period-end total assets) ( end interest-bearing debt / end total assets) x 100 % LTV (based on period-end valuation gain/loss) (-end interest-bearing debt (-end total assets+real estate valuation gain/loss)) 100 Distribution payout ratio Total cash distribution amount / Net income x 100 % Notes: 1. Figures less than the unit are rounded down. Distribution payout ratio is rounded down to the nearest decimal place. Other ratios are rounded to the nearest decimal place. 2. A 5-for-1 split of investment units was implemented on January 1, In consideration of this split, the amount that is a fifth of the figure is indicated in parenthesis for per-unit indicators. 25 % BPS (Book value per unit) end net assets / Number of outstanding investment units yen 536,488 (107,297) 536,622 (107,324)

27 Unitholders Owner Classification Financial Institutions and Securities Companies Number of units 14th period (Jun. 2013) Investment Units 15th period (Dec. 2013) Compositi on change (%) 14th period (Jun. 2013) Unitholders 15th period (Dec. 2013) Composition Number of Composition Number of Composition Number of Composition (%) units (%) unitholders (%) unitholders (%) Composition change (%) 143, , Other Domestic Companies 25, , Foreign Companies, etc. 35, , Individuals 21, , , , Total 224, , , , Ratio of investment units held by the 3 sponsor companies: 9.1% Rank Name Units Composition ratio(%) 1 Japan Trustee Services Bank, Ltd. (Trust Account) 59, The Master Trust Bank of Japan, Ltd. (Trust Account) 16, NIPPON STEEL KOWA REAL ESTATE CO., LTD. 14, Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) 13, The Nomura Trust and Banking Co., Ltd. (Investment Trust Account) 12, NOMURA BANK (LUXEMBOURG) S.A. 5, The Dai-ichi Life Insurance Company, Limited 4, STATE STREET BANK AND TRUST COMPANY , The Fuji Fire and Marine Insurance 2, RBC ISB A/C DUB NON RESIDENT - TREATY RATE 2, Total 133, :Sponsor companies of the asset management company. Note: Ratios are rounded to the nearest first decimal place. 26

28 Portfolio Map Iii-7 JEI Ryogoku Ⅳ-4 SE Sankyo Sapporo City I-14 Kowa Nishishinbashi Sendai City Ⅳ-5 Aoba-dori Plaza Ⅳ-6 Daiwa Minami-morimachi Ⅱ-3 Osaka Kogin (Land with Leasehold Interest) Hiroshima City Nagoya City Osaka City Ⅱ-1 NHK Nagoya Housou-Center Ⅱ-2 JEI Nishi-honmachi Ⅳ-3 JEI Hiroshima Hacchobori Ⅳ-2 JEI Kyobashi 27

29 Portfolio Overview (1) Property Number I-1 I-2 I-3 I-4 I-7 I-8 I-9 I-10 I-11 I-12 I-13 I-14 II-1 II-2 II-3 Type Office Office Office Office Office Office Office Office Office Other Office Office Office Office Office Name Omori Bellport D Shiba 2-Chome JEI Hamamatsuch o No. 32 Kowa Akasaka Garden City AKASAKA INTERCITY Kowa Shirokaneda i Daiba Garden City No. 35 Kowa HAMARIKYU INTERCITY Shintomicho Kowa Nishishinbas hi NHK Nagoya Housing- Center JEI Nishi- Honmachi Osaka Kogin (land with leasehold interest) Location Minami-Oi, Shinagawa Ward, Tokyo Shiba, Minato Ward, Tokyo Hamamatsucho, Minato Ward, Tokyo Minami- Azabu, Minato Ward, Tokyo Akasaka, Minato Ward, Tokyo Akasaka, Minato Ward, Tokyo Shirokanedai, Minato Ward, Tokyo Daiba, Minato Ward, Tokyo Akasaka, Kaigan, Minato Irifune, Chuo Minato Ward, Ward, Tokyo Ward, Tokyo Tokyo Nishishinbashi, Minato Ward, Tokyo Higashi Ward, Nagoya City, Aichi Nishi Ward, Osaka City Osaka Chuo Ward, Osaka City Osaka Total Floor Area (m 2 ) 155, , , , , , , , , , , , , , , (site area for land) Completion date September 1996 March 1994 December 1991 March 1979 January 2006 January 2005 March 1978 December 2007 January 1980 March 2011 November 1990 July 1996 July 1991 February Acquisition Price (MN yen) Investment ratio (%) 22,552 9,450 8,350 7,430 23,300 28,146 4,705 11,000 8,280 19,080 1,750 3,931 4,300 6,673 1, PML (%) Notes: 1. Completion Date is as of the time of initial construction described in the register. 2. Acquisition Price is the price recorded in sales agreements (excluding consumption tax). Amounts of less than one million yen are rounded. 3. Investment Ratio shows a ratio of the acquisition price for each property, and is rounded to the nearest decimal place. 28

30 Portfolio Overview (2) Property Number III-1 III-2 III-3 III-5 III-6 III-7 III-8 III-9 III-10 III-11 Ⅳ-2 Ⅳ-3 Ⅳ-4 Ⅳ-5 Ⅳ-6 Type Office Office Office Office Office Office Office Office Office Office Office Office Office Office Office Name Musashikosug i Tower Place Kowa Kawasaki Higashiguchi JEI Hongo Kawasaki Nisshincho No. 44 Kowa JEI Ryogoku Ebina Prime Tower Kowa Kawasaki Nishiguchi Pacific Square Sengoku Core City Tachikawa JEI Kyobashi JEI Hiroshima Hacchobori SE Sankyo Aobadori Plaza Daiwa Minamimori Bldg. Location Total Floor Area ( m2 ) Completion date Acquisition Price (MN yen) Investment ratio (%) PML (%) Nakahara Ward, Kawasaki City, Kanagawa Kawasaki Ward, Kawasaki City, Kanagawa Hongo, Bunkyo Ward, Tokyo Kawasaki Ward, Kawasaki City, Kanagawa Higashiyama, Meguro Ward, Tokyo Ryogoku, Sumida Ward, Tokyo Chuo, Ebina City, Kanagawa Saiwai Ward, Kawasaki City, Kanagawa Honkomagom e, Bunkyo Ward, Tokyo Akebonocho, Tachikawa City, Tokyo Miyakojima Ward, Osaka City, Osaka Naka Ward, Hiroshima City, Hiroshima Kita Ward, Sapporo City, Hokkaido Aoba Ward, Sendai City, Miyagi Kita Ward, Osaka City, Osaka 53, , , , , , , , , , , , , , , July 1995 April 1988 February 1991 April 1992 July 1984 August 1996 May 1995 February 1988 November 1992 December 1994 April 1987 February 1999 March 1989 July ,890 10,976 5,400 4,725 1,150 2,550 6,470 32,000 1,620 6,500 3,308 2,760 5,500 2,120 4, January 1990 Notes: 1. Completion Date is as of the time of initial construction described in the register. 2. Acquisition Price is the price recorded in sales agreements (excluding consumption tax). Amounts of less than one million yen are rounded. 3. Investment Ratio shows a ratio of the acquisition price for each property, and is rounded to the nearest decimal place. 29

31 What Makes Japan Excellent Inc. Unique (1) Access to the comprehensive capabilities of sponsor companies having strengths in both real estate and finance. NIPPON STEEL KOWA REAL ESTATE CO., LTD. Established through the integration of Nippon Steel City Produce and Kowa Real Estate, a real estate company with balanced operation of its office building business centering on central Tokyo and its residential business. Property Brokerage Personnel Management The Dai-ichi Life Insurance Company, Limited One of Japan s top class life insurance companies. As of March 31, 2013, manages 273 office buildings and other investment properties nationwide. Property Loans Personnel Sekisui House, Ltd. One of Japan s top-class homebuilders boasting a track record in large-scale urban development projects; Akasaka Garden City and オフィスについては集積度の高いコアエリアが Honmachi Garden City are among its 80% 以上となるよう representative またコアエリアの内訳についてもきめ細かに投資比率を設定 development projects. Property Personnel Management Management Management Loans Loans Brokerage The Dai-Ichi Co., Ltd. Sohgo Housing Co., Ltd. Mizuho Bank, Ltd. Personnel Mizuho Trust & Banking Co., Ltd. Brokerage Personnel Brokerage for third-party Achievements : Property Supply of properties Loans Loans Brokerage Supply of Personnel properties personnel Management Management of JEI s properties 30

32 What Makes Japan Excellent Inc. Unique (2) JEI invests mainly in office buildings in metropolitan areas and operates its portfolio balancing revenue stability and expansion. Usage Investment Policy Usage (Note 1) Investment ratio in portfolio (Note 2) Office buildings Other (commercial facilities, residential, etc.) 90% or more 10% or less Investment Ratio by Usage (Note 3) Other 7.2% Office buildings 92.8% Ratio of investment in office buildings 92.8% Target investment areas Investment Policy Investment Ratio by Area (Note 3) Area I Area II Target investment areas (Note 2) Core areas 6 central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku, Shinagawa and Shibuya) Central Osaka (Umeda, Dojima, Nakanoshima, Yodoyabashi, Honmachi, etc.) Central Nagoya (Meieki, Fushimi, Sakae, etc.) Central Fukuoka (Tenjin, Hakata-ekimae, etc.) Investment ratio in portfolio (Note ( 2) 3) 80% or more 50% or more of the core areas 50% or less of the core areas 32.3% 4.8% 6.9% 56.0% Ratio of investment in the Tokyo metropolitan area 88.3% (Note4) Area III Tokyo other than Area I, and its vicinity (Kanagawa, Saitama, and Chiba) 50% or less of the core areas Area Area I Area II Area III Area IV Area IV Areas in Osaka, Nagoya and Fukuoka other than Area II and other government designated cities 20% or less Acquisition price 147,974 million yen 12,743 million yen 85,281 million yen 18,098 million yen Number of properties 12 properties 3 properties 10 properties 5 properties Notes: 1.Usage is determined based on the majority share of leasable space for each asset related to real estate. The total acquisition cost of the concerned asset related to real estate is incorporated in the acquisition price by said usage. 2.This refers to the ratio of total acquisition cost of the asset related to real estate for each usage or area against the total acquisition cost of the overall portfolio. 3.This indicates the post-acquisitions investment ratio and is rounded to the nearest first decimal place. 4. Tokyo metropolitan area indicates Tokyo and its surrounding areas (Kanagawa, Saitama and Chiba prefectures) (Area I and Area III). 31

33 Growth Strategy Utilizing Sponsor Companies Comprehensive Strengths Property acquisitions leveraging sponsors pipeline Enhance portfolio through property replacements with sponsor companies Of the properties acquired since the 9th period when property acquisitions were resumed, 90.4% (based on acquisition price) was acquired through the support of our sponsors. By aggressively leveraging the sponsors pipeline, avoid excessive competition in property acquisitions and acquire prime assets difficult to acquire in real estate transaction market. Acquired from the sponsor or a bridge fund supported by the sponsor Properties Acquired in 16th Replacements aimed at improvement of competitiveness Replace limited growth potential properties with high growth potential newly constructed properties. Replacement aimed at achieving a higher proportion of larger and newer properties in the portfolio to secure long-term competitiveness. HAMARIKYU INTERCITY No. 28 Kowa Property replacements aimed at profitability improvement and stabilization Replace buildings with a single tenant who is to relocate with multi-tenant buildings. Realize profitability improvement and stabilization of the portfolio. Kowa Shirokanedai No. 36 Kowa Acquisition Transfer Acquisition Transfer HAMARIKYU INTERCITY (additional acquisition of compartmentalized ownership) Aobadori Plaza Daiwa Minamimorimachi Bldg. Revenue stabilization by introducing fixed rent master lease arrangements Acquired in 10th Acquired in 12th Acquired in 14th Daiba Garden City Shintomicho Along with the acquisition, concluded a fixed rent 10 year master lease agreement with Sekisui House, Ltd. Along with the acquisition, concluded a partially fixed rent master lease agreement with NIPPON STEEL KOWA REAL ESTATE CO., LTD. for vacant space. Daiba Garden City JEI Hiroshima Hacchobori Kowa Nishishinbashi 32

34 Unit price / Overview of Japan Excellent Asset Management Co., Ltd. Unit price and Tokyo Stock Exchange REIT index Overview of Japan Excellent Asset Management (thousand yen) TSE J-REIT Index (point) Corporate Name Headquarters Japan Excellent Asset Management Co., Ltd Minamiaoyama, Minato Ward, Tokyo Established April 14, 2005 Capital 450 million yen NIPPON STEEL KOWA REAL ESTATE CO., LTD. 45.0% The Dai-ichi Life Insurance Company, Limited 20.0% Sekisui House, Ltd. 15.0% Shareholders The Dai-ichi Co., Ltd. 5.0% Sohgo Housing Co., Ltd. 5.0% Mizuho Bank, Ltd. 5.0% Mizuho Trust & Banking Co., Ltd. 5.0% End. Jun End. Dec Business Operations Financial Instrument Dealer 2014 Note : Closing prices for December 25, 2013 and earlier are divided by 5. Organization Note: Percentages in the above table are percentages of total outstanding shares. Outline and Organization of JEAM (1) Asset management agreement (2) A. Pipeline support agreement with NIPPON STEEL KOWA REAL ESTATE B. Pipeline support agreement with Sekisui House C. Pipeline support agreement with Mizuho Trust & Banking (3) Agreement with Mizuho Research Institute for provision of market and other information (4) Agreement to entrust administrative duties and asset custody (5) Agreement to entrust administrative of unitholders' register 33