(TSE Code: 8982) Top REIT, Inc. Presentation on Business Results for the Third Fiscal Period. (May 1, 2007 October 31, 2007)

Transcription

1 (TSE Code: 8982) Top REIT, Inc. Presentation on Business Results for the Third Fiscal Period (May 1, 27 October 31, 27) December 18, 27

2 Index Overview Since IPO (Highlights of the First, Second and Third Period Activities) I. Third Fiscal Period Results (Ended October 31, 27) I1 Results of the Third Fiscal Period (Summary) I2 Results of the Past Periods and Forecasts I3 Unitholders I4 Unit Price Performance & Volume (March 1, 26 November 3, 27) I5 Portfolio Overview Portfolio Summary II. External Growth Strategies II1 External Growth: Past Achievements II2 External Growth: Fully Applying Sponsors Strengths II3 External Growth: Strategies III.Internal Growth Strategies III1 Internal Growth: Maintaining High Occupancy Rate III2 Internal Growth: Results from Office Rents Revision / Room for Internal Growth by Revising Rents Upward III3 Internal Growth: Results from Residential Rents Revision / Room for Internal Growth by Revising Retail Rents Upward IV. Financial Strategies IV1 Credit Rating and Debt Composition as of October 31, 27 IV2 Financial Strategies: Preparation for the Risk of Fluctuating Interest Rates and Spreading Out Repayment Dates IV3 Financial Strategies: Sound Financial Policy V. Third Fiscal Period Results (Ended October 31, 27) V1 Income Statement (Summary) / Dividend Statement V2 Balance Sheets (Summary) V3 Major Financial Indicators V4 Forecast for Fourth and Fifth Fiscal Periods VI. Portfolio Overview VI1 Portfolio Map VI2 Portfolio Overview VI3 Appraisal Values as of End of Third Fiscal Period VI4 Appraisal Caps VII. Appendix (1) Portfolio Details VII1 Performance on Property Basis VII2 Property Details VII3 Withdrawal of Early Termination Notice and Agreement on the Rent Revision with ItoYokado VIII. Appendix (2) Structure of Asset Manager VIII1 Decision Making Process for Acquisition and Disposition of Properties VIII2 Overview of Asset Manager IX. Appendix (3) Other Reference IX1 Summary of Real Estate Market Indicators IX2 Characteristics of Top REIT IX3 Investment Principles IX4 Internal Growth Principles 1

3 Overview Since IPO Topics External Growth Y25 Y26 Y27 Nov. Dec. Jan. Feb. Mar. Apr May Jun. Jul. Aug. Sep Oct. Nov. Dec. Jan. Feb. Mar. Apr May Jun, Established (Nov 2, 25) First Fiscal Period : Nov 2, 25 Oct 31, Days Actual Asset management Period: Mar 1, 26 Oct 31, Days Listed (Mar 1, 26) 7 Properties 14,386mn Obtained New Property Rating A2 Acquired (Jun 3, 26) (Oct 3, 26) 8 Properties 113,286mn Second Fiscal Period Nov 1, 26 Apr 3, 27 New Property Acquired (Dec 8, 26) 9 Properties 123,921mn New Properties Acquired (Mar 19,2, 27) 11 Properties 13,846mn Mar 1 Harumi Triton Square Office Tower Y 33,mn, Akasaka Oji Building 9,66mn, Kanda Park Plaza 5,156mn, Faret East Building 1,52mn and Nittetsu Honmachi Building 1,1mn Mar 3 NEC Head Office Building 41,95mn Mar 1 Sagamihara Shopping Center 12,mn Jun 3 ItoYokado HigashiNarashino 8,9mn Dec 8 FukasawaHouse tower H & I 1,635mn Jul, Aug Sep Oct Third Fiscal Period May 1, 27 October 31, 27 Mar 19 Musashiurawa Shopping Square 4,335mn Mar 2 OAK PLAZA 2,59 mn 33,4mn 37,4mn 35,9mn 47,1mn 54,3mn 54,4mn Financial Strategy (Debt) (Mar 2Fixed by IRS 11,mn) (May 31 Interest rate Fixed by Interest Rate Swap Total: 23,mn) (3.2 固定化 11, 百万円 ) Mar 3 LongTerm Debt 33,4mn Jun 3 4,mnAug 31 2,5mn Dec 8 13,7mn Mar 19, 2 ShortTerm Debt 2,9mn June 29 Refinance 7Yr Fixed Debt 2bn Aug 6 Fixed by LT Debt IRS Total 54.4bn 42bn Financial Strategy (Equity) Net Assets 1mn Initial Public Offering 82,26mn Offering at 55, per unit Termend Unit Price (closing) 689, Termend Unit Price (closing) 843, Floater 1.4bn Termend Unit Price (closing) 524, 2

4 I. Third Fiscal Period Results (Ended October31, 27) 3

5 I1. Results of the Third Fiscal Period (Summary) (in millions yen, except as otherwise noted) Items Third Fiscal Period Results May 1, 27 Oct 31, 27 Third Fiscal Period Forecast (Announced on June 18, 27) Net Change (Results vs. Forecast) Second Fiscal Period Results Nov 1, 26 Apr 3, 27 Net Change (Third Fiscal Period Results vs. Second Fiscal Period Results) Period of Asset Management (Days) Operating Revenue Ordinary Income Net Income Number of Units Issued (Unit) Dividend per Unit (Yen) Number of Properties Assumed 4,715 1,848 1, , 11, ,698 1,644 1, , 1, , % +12.4% +12.4% +12.4% 4,526 2,324 2, , 14, , % 2.5% 2.5% 2.5% Appraisal Value Total 155, ,468 3, % Difference Between Forecast and Actual Results Operating Revenue: 17mn Operating income exceeded the forecast mainly due to incremental rental revenue such as contract renewal fee income from Fukasawa House. Ordinary Income: 24mn Actual maintenance cost was less than the previous forecast due to reviewing efficiency of maintenance work and achieving maintenance cost reduction through diligent negotiations. Nonoperating expenses (mostly interest paid ) was less than the previous forecast and nonoperating income (mostly interest received ) was more than the previous forecast. General administrative expenses such as cost of general unit holder meeting could be minimized due to reviewing efficiency of expenses and negotiations. Other References Items Third Fiscal Period Second Fiscal Period Number of Tenants 4 39 Total Rentable Area 261, m2 Occupancy Rate 99.7% 99.5% Current Depreciation Current Capital Expenditures 927mn 49mn TermEnd Unit Price 524, 843, TermEnd Market Capitalization 81,22mn 261, m2 873mn 8mn 13,665mn 4

6 I2. Results of the Past Periods and Forecasts 5,5 5, 4,5 Operating Revenue (in millions Yen) 4,526 4,715 4,661 4,712 4,37 5, 4, (in millions Yen) Operating Expenses City Planning Tax and Fixed Assets Tax imposed 5, 4, (in million Yen) Net Income City Planning Tax and Fixed Assets Tax imposed 4, 3,5 3, 3, 2, 1,61 1,878 2,465 2,45 2,5 (49) (454) (56) 3, 2, 2,33 2,323 1,847 (49) 1,72 1,75 (454) (56) 2,5 1, 1, 2, 第 1 期実績 st FP 第 2 nd 期実績 FP 第 3 rd 3 期実績 FP 第 4 th 期予想 FP 第 5 期予想 5 th FP 1第 st FP 1 期実績 2 nd 第 FP 2 期実績 3 rd FP 第 3 期実績 4 th 第 FP 4 期予想 5第 th 5 FP 期予想 1第 st 1 期実績 FP 2第 nd 2 FP 期実績 3 rd 第 FP 3 期実績 4 th 第 4 FP 期予想第 5 th 期予想 FP (Forecast) (Forecast) (Forecast) (Forecast) (Forecast) (Forecast) 18, 16, 14, 12, 1, 8, 6, (Yen) 13,116 Dividend per Unit 14,992 City Planning Tax and Fixed Assets Tax imposed 11,921 11,1 11, Items 1st Fiscal Period* (Reference only) 2 nd Fiscal Period Days of Fiscal Period Operating Revenue Operating Expenses Tax & Public Due Depreciation 4,37mn 1,61mn 73mn 4,526mn 1,878mn 873mn 3 rd Fiscal Period 4,715mn 2,465mn 49mn 927mn 4 th Fiscal Period (Forecasts) 4,661mn 2,45mn 454mn 931mn 5 th Fiscal Period (Forecasts) ,712mn 2,5mn 56mn 931mn 4, 2, Net Income 2,33mn 2,323mn 1,847mn 1,72mn 1,75mn 第 1期実績 st FP 第 22 nd 期実績 FP 3第 rd 3 FP 期実績 4第 th 4 FP 期予想第 5 th 5 期予想 FP (Forecast) (Forecast) Dividend per Unit 13,116 14,992 11,921 FFO per Unit 17,827 2,625 17,93 11,1 17,1 11, 17, *1. Actual days of the 1 st fiscal period was 245 Days. The above numbers are calculated by a following calculation method ( (First Fiscal Period Results) / 245 Days x 365 Days / 2) 5

7 I3.Unitholders Ownership Share by Investor Criteria as of October 31, 27 Rank Investor Criteria Number of Units Held Number of Unitholders Retail Investors/Others 15,491 1.% 5, % Financial Institutions (Incl. Security Firms) NonFinancial Institutions (Corporate) Name Number of Units held Share (%) 1 Japan Trustee Service Bank, trust account 11, NikkoCiti Trust and Banking Corporation, trust account 11, % % 11,34 7.3% % Overseas Investors 26, % % Total 155, 1.% 5,789 1.% Top 15 Unitholders as of October 31, 27 11, The Bank of Ikeda 6, The Master Trust Bank of Japan, trust account 6, Trust and Custody Services Bank, trust account 6, North Pacific Bank 4, American Life Insurance Company GAL 3, Nomura Trust and Banking, trust account 3, Goldman Sachs International 3, The Sumitomo Trust & Banking 3, Nippon Steel City Produce 3, Oji Real Estate 3, The Hiroshima Bank 3, The Fuji Fire and Marine Insurance 2, Sumitomo Mitsui Banking Corporation 2, Total 75, Number of Unitholders 1 st Fiscal Period End Total Number of Investors: nd Fiscal Period End Total Number of Investors: rd Fiscal Period End Total Number of Investors: 5,789 1st Fiscal Period End Total number of Units Outstanding 155, 2 nd Fiscal Period End Total number of Units Outstandin g 155, 3 rd Fiscal Period End Total number of Units Outstanding 155, Financial Institutions : 171 (2.8%) NonFinancial Institutions (Corporate):146 (2.4%) Overseas Investors: 45 (.7%) Retail Investors/Others 5,769 (94.1%) Financial Institutions: 165 (3.%) NonFinancial Institutions (Corporate): 127 (2.3%) Overseas Investors: 8 (1.4%) Retail Investors/Others 5,149(93.3%) Financial Institutions: 156 (2.7%) NonFinancial Institutions (Corporate): 123 (2.1%) Overseas Investors: 85 (1.5%) Retail Investors/Others 5,425(93.7%) % 2% 4% 6% 8% 1% Number of Units Held Retail Investors/Others 16,47 (1.6%) Financial Institutions (Incl. Security Firms) : 11,45 (71.%) Retail Investors NonFinancial Institutions /Others 13,32 (8.6%) (Corporate) 12,393 (8.%) Financial Institutions (Incl. Security Firms) : 11,763 (65.7%) Retail Investors /Others 15,491 (1.%) NonFinancial Institutions (Corporate) 11,34 (7.3%) Financial Institutions (Incl. Security Firms) : 11,512 (65.5%) NonFinancial Institutions (Corporate) 13,15 (8.5%) Overseas Investors 15,38 (9.9%) Overseas Investors 27,524 (17.8%) Overseas Investors 26,693 (17.2%) % 2% 4% 6% 8% 1% 6

8 I4. Unit Price Performance & Volume (March 1, 26 November 3,, 27) (JPY) 95, 85, TOP 出来高 TOP Trading Volume TOP 東証 REIT 指数 ( 指数化後 ) TOPIX( 指数化後 ) TSE REIT Index 31,893Units (March 1) TOP TOPIX Historical Closing High: 998, (Feb 16, 27) 3 rd Fiscal 1 st Fiscal 2 第 1 期第 nd Fiscal 2 期第 Period 3 期第 4 期 Period Period (Unit) 1, 8, 75, 6, 65, 55, 45, Historical Closing Low 397, (Nov 22, 27) 4, 2, 35, ar 26 Apr H18.3 May H18.4 June H18.5 July H18.6 Aug H18.7SepH18.8Oct H18.9 Nov H18.1 H18.11 Dec Jan H H19.1 Feb H19.2 Mar H19.3 AprH19.4May H19.5June H19.6 July H19.7 H19.8 Aug H19.9 Sep H19.1 Oct H19.11 Nov H19.12 Dec 3 rd Fiscal Period End Unit Price (Closing) JPY 524, (October 31, 27) IPO Price JPY 55, Mar 1, 26 Historical High since IPO (Closing Price) Historical low since IPO (Closing Price) JPY 998, Feb 16, 27 JPY 397, Nov 22, 27 7

9 I5. Portfolio Overview Portfolio Summary Total Acquisition Price: billion Rentable Area: 261, m2 Number of Properties: 11 Asset Class (property type) PML: 2.2% Scale (on a total floor area basis) 1% 8% 6% 4% 2% % 11.5% 18.4% 2.% 8.1% 19.3% 88.5% 81.6% 7.6% (4.2%) (37.%) (32.1%) 上場時 IPO End of 第 1 期末第 2,3 期末 1 st FP End of 2 nd and 3 rd FP その他 Others 住宅 Residential 商業施設 Retail オフィスビル Office ( ): ): 日本電気本社 Share of NEC ビルの比率 Head Office Building 1% 8% 6% 4% 2% % 6.% 5.5% 6.8% 1.7% 17.7% 11.5% 1.6% 26.8% 9.2% 71.8% 66.2% 57.3% IPO End of of End of of 2 2 上場時第 1 期末第 2,32 期末 1 st period FP and 3 rd Period FP Less than 11,m 万m2未満 2 1,m 2 149,999m 万m2以上 2 5 万m2未満 5,m 2 599,999m 万m2以上 2 1 万m2未満 1,m 2 1 or 万m2以上 more 1% 8% 6% 4% 2% % Area 1.1% 1.%.8% 13.% 19.8% 28.6% 86.% 79.2% 7.6% 上場時 IPO End of End of 2 第 1 st 期末 FP 第 2,3 2 期末 and 3 rd FP 関西圏 Kansai 東京周辺都市部 Metropolitan Tokyo 東京都心部 Central Tokyo 1% 8% 6% 4% 2% % Age of Buildings 4.9% 4.6% 5.9% 49.4% 46.5% 4.3% 14.% 19.8% 17.1% 25.2% 31.6% 29.1% 11.4% 上場時 IPO End of End of 2 1第 1 期末第 2,3 2 期末 1 st period FP and and 3 rd 3 rd Period FP Numbers on above graphs are calculated based on Acquisition Price 2 2 年以上 years or more 15 years 年以上 years 2 年未満 1 years 1 14 年以上 years15 年未満 5 years 59 年以上 years1 年未満 Less than 5 年未満 years Average: Years Weighted Average based on Acquisition Price 8

10 II. External Growth Strategies 9

11 II1. External Growth: : Past Achievements Asset Class 7 Properties 14,386 IPO History of Asset Growth ItoYokado HigashiNarashino 8,9 OAK PLAZA 2,59 Musashiurawa Shopping Square 4,335 Fukasawa House Tower H&I 1,635 8 Properties 113,286 End of 1 st Period 11Properties 13,846 End of 2 nd Period Number of Property Information 1 st Fiscal Period (last 6 months) May 1, 26 Oct. 31, 26 From Sponsors Office 24 Retail 12 Residence 24 Other 8 Total From Non Sponsors 2 nd Fiscal Period Nov. 1, 26 Apr. 3, 27 From Sponsors From Non Sponsors 11 Properties 13,846 End of 3 rd Period 3rd Fiscal Period May 1, 27 October 31, From Sponsors ( in millions yen ) From Non Sponsors 3 % of Property Information are from sponsors. To focus on collecting office property information leads 3 9 Appreciation of Asset Values Accomplishment of Pursuing both Steady Growth and Quality Portfolio overall (in millions of yen) 18, 16, 14, 12, 1, 8, 6, 4, 2, 取得価格 Acquisition Price 期末算定価格 Appraisal Value 含み益 Appraisal Gain 127, ,286 14, ,468 13,846 13, ,923 21,622 25,77 As of End 第 of 1 期実績 1 st Fiscal Period As of 第 End 2 of 期実績 2 nd Fiscal Period As 第 of End 3 期実績 of 3 rd Fiscal Period Appraisal Gain of Three Major Properties in Central Tokyo 取得価格 Acquisition Price 期末算定価格 Appraisal Price Acquisition 取得価格 Price (in millions of yen) 6, Harumi Island Akasaka Oji 55, NEC Head Office Triton Square Building 5, Office Tower Y 9,55 1,55 45, 5,1 4, 35, 3, 25, 2, 15, 1, 5, 41,95 41,95 41,95 41,95 6,1 8,3 1,8 33, 33, 33, 33, 2,4 4,54 4,64 9,66 9,66 9,66 9,66 取得価格 1 第 2期実績取得価格第 2 期実績取得価格第 2 期実績 st nd 3 nd Acquisition 1 st 2 nd 3 nd Acquisition 1 st 2 nd Acquisition Price FP FP FP Price FP FP FP Price FP FP 3 nd FP 1

12 II2. External Growth: Fully Applying Sponsors Strengths Top REIT, Inc. Top REIT Asset. Management Utilizing Sponsors Strengths Sponsors Strengths have been applied to all acquisitions of Properties Properties previously owned or developed by sponsor group companies Number of group companies Sumitomo Trust Group 42 Nippon Steel Group 326 Oji Paper Group 35 Faret East Building Nittetsu Honmachi Building Akasaka Oji Building Structuring Providing Equity As of March 31, 27 Properties brokered by sponsors Musashiurawa Shopping Square OAK PLAZA Sagamihara Shopping Center Kanda Park Plaza NEC Head Office Harumi Island Triton Square Office Tower Y The Sumitomo Trust & Banking Fukasawa House Tower H&I Nippon Steel City Produce ItoYokado Higashi Narashino Pipeline (Agreement on Provision of Information & Brokerage Information) Oji Real Estate Warehousing Agreement on Warehousing 11

13 II3. External Growth: Strategies (in billions of yen) Medium Term External Growth Target To reduce investment share to 2% in NEC Head Office Building Additional acquisition: about 8 billion yen % Future Acquisitions Others Harumi Island Triton Square Office Tower Y NEC Head Office 31.6% 25.2% 15.7% 4.2% IPO % 32.1% End of 3rd Fiscal Period 約 65 億円 % 2.% Image after achieving target Image of Portfolio Breakdown by Asset Class After Achieving Medium Term External Growth Target 21 Billion Office:75%, Aggregation of Retail, Residential, Others: 25% NonOffice: 25% Others Residintial Retail NonOffice: 38 Billion Approx 15Billion Approx 65 Billion NEC Head Office: 2.% Office: 92 Billion Harumi Island Triton Square Office Tower Y: 15.7% Future Acquisitions Current Portfolio Striving to achieve the growth target by April 21 Current Investment Strategies by Asset Class Office: 75% Asset Class Office Retail Residential Policy Focusing on offices located in central Tokyo Focusing on urban retail facilities Focusing on location of each property (Considering mainly on sponsor development properties) Target LTV range 45% Aiming to achieve dividend growth target :12,13, yen/unit 12

14 III.Internal Internal Growth Strategies 13

15 III1. Internal Growth: Maintaining High Occupancy Rate Tenants First = Maintaining and Improving Tenant Satisfaction Reflecting demand from tenants in facility management plan, thus improving assets quality and value Building up good relationship with major tenants will support longterm stable cash flows Five Major Tenants Name of Tenants ItoYokado Co., Ltd. NEC Sumitomo Metal Industries Nippon Steel City Produce R.A. Asset Management 3, 28, 26, 24, 22, 2, 18, 16, 14, 12, 1, 99.8% 99.9% 178,14.46 Type of Industry Wholesale/ Retail Occupancy rate (Transitions) As of October 31, 27 (3 rd Fiscal Period End) 229,231.7 Name of Properties Sagamihara Shopping Center/ ItoYokado HigashiNarashino 99.5% 99.5% 99.4% 99.5% 99.6% 99.6% 99.7% 261, Rented Area ( m2 ) 112,89.54 Gross Rentable Area ( m2 ) 261, Share (%) 43. Manufacturing NEC Head Office Building 72, Manufacturing Harumi Island Triton Square Office Tower Y 11, Real Estate Faret East / OAK PLAZA 1, Real Estate FukasawaHouse Tower H&I , Occupancy Rate 261, , , , March 26(IPO) Oct6 Apr7 May7 Jun7 Jul7 Aug7 Sep7 Oct7 End of 1 st FP End of 2 nd FP End of 3 rd FP Third Fiscal Period Leasing Agreement with Major Tenants Leasing agreement with ItoYokado Longterm leasing agreement for Sagamihara is valid until Aug 1, 213, and for HigashiNarashino is valid until Nov 3, 214. Leasing agreement with NEC 2years fixed term leasing agreement that runs until Dec 225 has been signed. A rent will be revised in Dec 213, Dec 217 and Dec 221. (Cancellation option by NEC thereafter under certain conditions) Maintaining Stable and High Occupancy 1.% 98.% 96.% 94.% 92.% 9.% 88.% 86.% 84.% 82.% 8.% 14

16 III2. Internal Growth: Results from Office Rents Revision / Room for Internal Growth by Revising Rents Upward Office: Rent Renewal Results/Schedule of Future Rent Renewal Office: Room for upward rent revision 1 st FP 第 1 期 Equivalent to Market Rents or no change マーケット並み賃料達成済 / 据置改定改定余地有 Revised Up or Room to / revised 増額改定済 upward 1 st st FP: revised up:4.6% growth (Avg.) 2 nd FP 3 rd FP 第 2 期 第 3 期 4 th FP 5 th FP 第 4 期 第 5 期 6 th FP 第 6 期 7 th FP 第 7 期 3 rd rd FP: revised up:9.1% growth (Avg.) Past Result Future Schedule 2 nd nd FP: revised up: 3.8% growth (Avg.) Room to grow 14M/FP (Excluding Rent Revision from NEC) Prospective Growth (Approx. 6M/FP) 第 8 期 8 th FP 16 th FP 第 16 期 NEC Head Office Building 対象面積 Area to be ( m2 ) renewed: m2 5, 1, 15, 2, 25, Ratio of Potential Upward Revision of Rents (by area) 5% or higher than marketrate rents: 1% Equivalent to marketrate rents 1% NEC Head Office 61% Expected more than 1% growh: 12% Expected more than 5% growth: 15% Expected more than 2% growth: 3% 現状賃料 Current Rents 5% or higher than marketrate rents: 2% Equivalent to marketrate rents 19% NEC Head Office 42% マーケット賃料 Market Rents Ratio of Potential Upward Revision of Rents (by rents amount) Expected more than 2% growth : 3% Expected more than 1% growth :11% Expected more than 5% growth: 23% 35% of total office floor area may be revised upward Area is considered office rentable area only (excluding space such as storage attached to offices) 15

17 III3. Internal Growth: Results from Residential Rents Revision / Room for Internal Growth by Revising Retail Rents Upward Residential: Renewal Rents and Newly Contracted Rents Newly contracted Rents 第 2 nd 2 FP 期 第 3 rd 3 FP 期 Achieved 3.1% growth (Avg.) 前賃料と同額 Nochange Increased 増額 Decreased 減額 Achieved 1.2% growth (Avg.) ( m2面積 ) ( m2 ) 12, 1, % 1, 8, Residential: Maintaining High Occupancy 1, , % 9.6% 1, % 3 rd FP 1, ,6.64 9, , % Rented 賃貸面積 Area ( m2 ) 88.3% 87.4% Occupancy Rate 稼働率 88.5% 1, , , % 91.7% 93.6% 1.% 95.% 9.% Number of Units , 85.% Revised Rents 第 2 期 2 nd FP 第 3 rd 3 FP 期 Nochange Increased Decreased 据置改定増額改定減額改定 4, 2, 8.% 75.% Number of Units 平成 18 年 Dec 12 月末 ( 取得時 26 ) 平成 19 年 1 月末 Jan 平成 19 Feb 年 2 月末 平成 19 年 Mar 3 月末 平成 19 年 Apr 4 月末 27 ( 第 At 2 期末 end ) of 2 nd FP 平成 19 年 May 5 月末 平成 19 年 6 June 月末 平成 19 年 July 7 月末 平成 19 年 8 Aug 月末 平成 19 Sep 年 9 月末 平成 Oct 19 年 1 月末 At ( 第 3 期末 end ) of 3 rd FP 7.% 第 4 th 4 FP 期 第 5 th 5 FP 期 第 6 th 6 FP 期 第 7 th 7 FP 期 Retail :Schedule of Future Rent Revisions Sagamihara Shopping Center 第 8 th 8 FP 期第 9 th 9 FP 期 1 第 th FP Musashiurawa Shopping Square 1 期 Area subject to rent revisions: m2 1, 2, 3, 4, 5, 6, IY HigashiNarashino (SalesBased Rent) Residential Retail Newly Contracted Rents: Continuing to achieve increased rents mainly from new tenants Sagamihara Shopping Center: Commencing negotiation to pursue higher rent based on rising local land value 16

18 IV. Financial Strategies 17

19 IV1. Credit Rating and Debt Composition as of October 31, 27 A2 (Stable) Issuer Rating Assigned by Moody s Investors Services Long Term Debt Term Loan 1 Term Loan 2 Term Loan 3 Term Loan 4 Term Loan 5 Lender Sumitomo Trust Mizuho CB SMBC Bank of Tokyo Mitsubishi UFJ Chuo Mitsui Trust Termend Balance (in million Yen) Interest Rate 5,2 1.19%(Floater) 5,5 6, Mitsubishi UFJ Trust Sub Total 16,7 Ditto 1.39%(Fixed) 5,2 1.29% (Floater) 5,5 6, Sub Total 16,7 1.92%(Fixed) Ditto 8,5 1.6%(Fixed) Sub Total 8,5 Ditto 8,5 1.95%(Fixed) Sub Total 8,5 Sumitomo Trust 2, 2.27%(Fixed) Development Bank of Japan 1, 2.4%(Fixed) DaiIchi Life 1, 2.4%(Fixed) Date of Borrowings March 3, 26 March 3, 26 June 29, 27 June 29, 27 June 29, 27 Date of Maturity June 3, 21 June 29, 212 June 3, 214 Remaining Period (Duration) 1year & 4 Months 3 Years & 4 Months 2 Years & 8 Months 4 Years & 8 Months 6 Years & 8 Months Repayment Method Sub Total 4, Total 54,4 1.66%(Avg.) 3 Years & 1 Months (Avg.) Note: Interest rates are rounded to the second decimal point, and the remaining periods are rounded to a whole number. The averages for interest rates and remaining periods are weighted average figures using monthend balance. Mar 3, 29 Mar 3, 211 Bullet Bullet Bullet Bullet Bullet Note Unsecured Unsecured Unsecured Unsecured Unsecured 18

20 IV2. Financial Strategies: Preparation for the Risk of Fluctuating Interest Rates and Spreading Out Maturity Dates Total borrowings: 54.4 billion yen Loan to value (LTV): 37.3% Ratio of longterm borrowings: 1% Ratio of fixed interest borrowings: 8.9% 1% 8% 6% 4% 2% % Ratio of LongTerm Debt 7.% 1.% 93.% 38.5% 61.5% 1.% IPO End of 1st FP End of 2nd FP End of 3rd FP Short Term Long Term 1% 8% 6% 4% 2% % 1.% Ratio of Fixed Debt 35.9% 64.1% 57.6% 42.4% 19.1% 8.9% IPO End of 1st FP End of 2nd FP End of 3rd FP Floater Fixed Actions to Spread Out Debt Maturity Schedule (in billion yen) 5 Before Refinancing All shortterm debt has been refinanced to longterm debt on July 29, 27 (in billion yen) After Refinancing Period ending 1/7 Periods ending 4/8 and 1/8 Periods ending 4/9 and 1/9 Periods ending 4/1 and 1/1 Periods ending 4/11 and 1/11 3/3/9 3/3/11 Periods ending 4/12 and 1/12 Periods ending 4/13 and 1/13 Periods ending 4/14 and 1/14 Period ending 1/7 Periods ending 4/8 and 1/8 Periods ending 4/9 and 1/9 Periods ending 4/1 and 1/1 Periods ending 4/11 and 1/11 Periods ending 4/12 and 1/12 Periods ending 4/13 and 1/13 Periods ending 4/14 and 1/14 3/3/9 6/3/1 3/3/11 6/29/12 6/3/

21 IV3. Financial Strategies: Sound Financial Policy Sound Financial Policy Conservative Financial Policy Spreading Out Debt Maturities Preparing for Future Interest Rate Fluctuation Maintaining Multiple Financing Channels Maintaining Good Relationships with Prominent Lenders to Secure Stable Debt and Additional Borrowing Capability Maintaining a Conservative Leverage Ratio Consistently maintain LTV at a conservative 45% to ensure financing capabilities for forthcoming acquisitions Capacity of Additional Borrowings and Acquisitions Approx. 37 bn Capacity for additional borrowings (Unit: Billion Yen) 3 年 5 年 Capacity for Additional Acquisitions Approx. 37. Current Assets 13. Fixed Assets Capacity for Additional Borrowings Approx. 37. Borrowings 54.4 Security Deposit (with interest)1.2 Other 6.2 Net assets 84. Ceiling LTV = 1 Operational goal 5% (Scope for operations: 45%)21Ratio of interestbearing debt Periodend LTV = 2 PeriodEnd 37.3% to total assets 38.1% Diversification of borrowing period and repayment dates The refinancing was executed on June 29, 27 extending the borrowing periods and spreading out repayment dates. This policy will continue to be followed as a means to improve the stability of financial operations. Hedging against the risk of rising interest rates The current ratio of fixed interest borrowings is 8.9%. Top REIT will closely monitor conditions of shortterm and longterm interest rate market and take appropriate action if necessary. Building of a stable bank formation Maintaining financial flexibility & capability All borrowings have been obtained unsecured and an issuer rating has been obtained. Top REIT continues to maintain stable transactions with six banks. Top REIT has been dealt with since time of the IPO. Development Bank of Japan and DaiIchi Mutual Life Insurance has joined as new lenders of a 7years term loan since June 27. 2

22 V. Third Fiscal Period Results (Ended October 31, 27) 21

23 V1. Income Statement (Summary) / Dividend Statement Income Statement Accounting Item I. Operating Revenue and Expenses 1. Operating Revenue 2. Operating Expenses Rental expenses Asset management fees Other operating expenses Operating Income II NonOperating Income and Expenses 1. NonOperating Income Interest received Other nonoperating income 2. NonOperating Expenses Interest paid Amortization of funding costs New investment unit issue costs Other nonoperating expenses Ordinary Income Net income before income taxes 3 rd FP May 1, 27 October 31, 27 (184days) Value (in millions yen) (%) 4, ,465 1, , ー 24 1,848 1, nd FP Nov 1, 26 April 3, 27 (181days) Value (In million yen) 4,526 1,878 1, , ー 19 2,324 2,324 (%) Dividend Statement Accounting Item Retained earnings at end of period Total Dividend Amount (Dividend per Unit) (yen) Retained earnings carried forward 3 rd FP May 1, 27 October 31, 27 (184days) Value (in millions yen) 1,847 1,847 (11,921) 2 nd FP Nov 1, 26 April 3, 27 (181days) Value (in millions yen) (14,992) Contribution of properties acquired in 2 nd FP Fukasawa House H&I, Musashiurawa Shopping Square and OAK PLAZA for full period Reduced rents of ItoYokado HigashiNarashino Store since August 1, 27 Rental expenses Depreciation: 927mn Management expenses: 35mn Utility Cost: 166mn and others 2,323 2,323 Corporate residents and business taxes 1 1 Corporate tax adjustment Net Income 1, , Retained Earnings at the End of Period 1,847 2,323 22

24 V2. Balance Sheets (Summary) Accounting Item 3 rd FP Ended October 31, 27 Value (in millions yen) 2 nd FP Ended April 3, 27 Value (%) ( in millions yen) (%) Accounting Item 3 rd FP Ended October 31, 27 Value (in millions yen) (%) 2 nd FP Ended April 3, 27 Value (in millions yen) (%) Assets Liabilities I Total Current Assets Cash and deposits Cash and deposits held in trust account Tenants receivables Consumption tax refund receivable Other current assets II Total Fixed Assets 1. Total Investment Properties, net Buildings, etc. in trust Land in trust 2. Total Intangible Assets Other intangible assets 3. Total Investment and Other Assets Leasehold and security deposits Longterm prepaid expenses Deferred tax assets Other investments III Total Deferred Assets Organization expenses (initial expense) Total Assets 13, ,745 8, , ,698 43,524 89, , , ,84 3 2, , , ,42 89, , I Total Current Liabilities Net Assets Accounts payable Shortterm debt Other account payable Expenses payable Consumption tax payable Rents received in advance Other current liabilities II Total Fixed Liabilities Longterm debt Tenant Lease and security deposits in trust Derivative debt Total Liabilities I Total Unitholders Equity 1. Unitholders equity 2. Reserves Retained earnings at period end Total reserves II Adjustments for valuation, conversion, etc. Deferred hedge losses Total Net Assets Total Liabilities and Net Assets 1, ,627 54,4 6, ,952 84,17 82,26 1,847 1, ,19 145,972.9 Refinancing , , ,71 33,4 6, ,85 84,583 82,26 2,323 2, , , Tenant leasehold and security deposits, etc Total debts: : 54,4mn (1) Of which, interestbearing debt: 1,275mn (2) (1) + (2) Total interestbearing debt: 55,675mn 23

25 V3. Major Financial Indicators 3 rd FP Nov 1, 26 April 3, 27 2 nd FP Nov 1, 26 April 3, 27 Normalized 1 st FP Nov 2, 25 Oct 31, 26 Remarks Days of Fiscal Period 184 days 181 days days Indicators of First Fiscal Period have been calculated as follows (First Fiscal Period Results) / 245 Days x 365 Days / 2 Ratio of interestbearing debt to total assets at period end 38.1% 38.% 29.1% Interestbearing debt at period end / total assets at period end Ratio of debt to total assets at period end ( LTV ) 37.3% 37.1% 28.% Total debt at period end / total assets at period end Rental NOI (Net Operating Income) 3,671mn 4,1mn 3,551mn Rental revenue rental expenses + depreciation for the period Rental NOI yield 5.6% 6.1% 6.3% Rental NOI (semiannualized) x 2 / total acquisition price of portfolio at period end Funds from Operation (FFO) 2,775mn 3,197mn 2,763mn Net income + depreciation for the period FFO per unit 17,93 2,625 17,827 FFO/number of outstanding units issued at period end Return on Assets (ROA) 1.3% 1.7% 1.9% Ordinary income / (total assets at beginning period (for first fiscal period, total assets as of March 1, 26) + average total assets at period end) / 2 Annualized 2.5% 3.4% 3.9% Return on Equity (ROE) 2.2% 2.7% 2.5% Annualized Unitholders Equity to Total Asset Ratio at period end 4.3% 57.6% 5.5% 57.8% 5.% 66.2% Net income/(net assets at beginning period (for first fiscal period, net assets as of March 1, 26) + average net assets at period end) / 2 Unitholders equity at period end/total assets at period end 24

26 V4. Forecast for Fourth and Fifth Fiscal Periods Items 4 th FP Nov 1, 27 April 3, 28 (Forecast) 5 th FP May 1, 28 October 31, 28 (Forecast) 3 rd FP May 1, 27 Oct 31, 27 Days of Fiscal Period 182 days 184 days 184 days Operating Revenue Operating Expenses 2,45mn 2,5mn Property expenses 1,16mn (Tax & Public Due : 454mn) 1,64mn (Tax & Public Due: 56mn) Depreciation 931mn 931mn Operating Income Ordinary Income 4,661mn 2,211mn 1,721mn 4,712mn 2,211mn 1,76mn Net Income 1,72mn 1,75mn 4,715mn 2,465mn 1,43mn (Tax & Public Due: 49mn) 927mn 2,25mn 1,848mn 1,847mn Number of Units Issued 155, Units 155, Units Dividend per Unit 11,1 11, 155, Units 11,921 NOI (Rental) 3,645mn 3,648mn FFO 2,651mn 2,636mn 3,671mn 2,775mn Assumptions Number of Properties: 11, Number of Units Issued: 155, Units Total Debts: 54.4Billion NonOperating Expenses 4 th Fiscal Period 54mn (of which interest to be paid 473mn) 5 th Fiscal Period 52mn (of which interest to be paid 491mn) Number of Properties:11 25

27 VI. Portfolio Overview 26

28 VI1. Portfolio Map Tokyo metropolitan area Osaka metropolitan area in Kansai Musashiurawa Shopping Square Amagasaki ShinOsaka Faret East Building ItoYokado HigashiNarashino Osaka Kyobashi 深沢ハウス FukasawaHouse HI 棟 tower H & I FukasawaHouse tower H & I Sagamihara Shopping Center 日鉄本町ビル Nittetsu Honmachi Building Tennoji 晴海アイランドトリトンスクエア Harumi Island Triton Square オフィスタワー Office Tower YY Central Tokyo Shinjuku Yotsuya Iidabashi OAK PLAZA Kanda Chiyoda Ward Tokyo Akihabara Kanda Park Plaza Shibuya Ward Shibuya Akasaka Oji Building Minato Ward Shinbashi NEC Head Office Building Chuo Ward Harumi Island Triton Square Office Tower Y 武蔵浦和ショッピングスクエア Musashiurawa Shopping Square Shinagawa Ward Shinagawa NEC 日本電気本社ビル Head Office Building 27

29 VI2. Portfolio Overview as of End of Third Fiscal Period Asset Class Area Property Address Acquisition Date Floor Area (m 2 ) Rentable Area (m 2 ) Completion Date Acquisition Price Share (%) Occupancy (%) No. of Tenants PML (%) Office Central Tokyo NEC Head Office Building Harumi Island Triton Square Office Tower Y Akasaka Oji Building Kanda Park Plaza Minato Ward, Tokyo Chuo Ward, Tokyo Minato Ward, Tokyo Chiyoda Ward, Tokyo March 3, 26 March 1, 26 March 1, 26 March 1, , , ,63.5 5, , , , , Jan 199 Oct 21 Apr 1989 Nov ,95mn 33,mn 9,66mn 5,156mn Tokyo Metropolitan Faret East Building Tachikawa, Tokyo March 1, 26 16, , Dec ,52mn Kansai Nittetsu Honmachi Building Osaka City, Osaka March 1, 26 6, ,49.52 Jun ,1mn SubTotal (6 Properties) 116, ,386mn Retail Tokyo Metropolitan Sagamihara Shopping Center ItoYokado Higashi Narashino Musashiurawa Shopping Square Sagamihara, Kanagawa March 1, 26 Narashino, Chiba June 3, 26 45, ,98.42 Oct ,9mn Saitama City, Saitama March 19, 27 56, , , ,96.69 Aug 1993 Oct 25 12,mn 4,335mn SubTotal (3 Properties) 127, ,235mn Residential Tokyo Metropolitan FukasawaHouse tower H & I SubTotal (1 Property) Setagaya Ward, Tokyo December 8, 26 12, , June 24 1,635mn , ,635mn Others Central Tokyo OAK PLAZA SubTotal (1 Property) Chiyoda Ward, Tokyo March , ,121,85 April ,59mn ,121,85 2,59mn Total (11 Properties) 261, ,846mn

30 VI3. Appraisal Values as of End of Third Fiscal Period (In millions yen) Asset Class Area Property Book Value Acquisition Price Appraisal Price as of Oct 31,26 Appraisal Price (B) (B)(A) Appraisal Price as of Apr 3, 27 Appraisal Price (C) (C)(A) Appraisal Price as of October 31, 27 Appraisal Price (D) (D)(A) NEC Head Office Building 43,4 41,95 47,5 5,1 51,5 9,55 52,5 1,55 Central Tokyo Harumi Island Triton Square Office Tower Y Akasaka Oji Building 33,139 9,916 33, 9,66 39,1 11,7 6,1 2,4 41,3 14,2 8,3 4,54 43,8 14,3 1,8 4,64 Office Kanda Park Plaza 5,178 5,156 5, , , Tokyo Metropolitan Faret East Building 1,452 1,52 2, , ,55 1,3 Kansai Nittetsu Honmachi Building 1,125 1,1 1,14 4 1, ,67 57 SubTotal (6 Properties) 93,853 92,386 16,332 13, ,4 23,654 12,333 27,947 Sagamihara Shopping Center 11,939 12, 12,1 1 12,1 1 12,1 1 Retail Tokyo Metropolitan ItoYokado Higashi Narashino Musashiurawa Shopping Square 8,927 8,9 4,449 4,335 9,1 11 6,888 4,35 2, ,873 4,35 3,27 15 SubTotal (2 Properties) 25,315 25,235 21, ,338 1,897 22,323 2,912 Residential Tokyo Metropolitan FukasawaHouse tower H&I 1,92 1,635 1, ,5 135 Subtotal (1 property) 1,92 1,635 1, ,5 135 Others Central Tokyo OAK PLAZA Subtotal (1 property) 2,627 2,59 2,627 2,59 2,59 2,59 2,767 2, Total(11Properties) 132,698 13, ,442 14, ,468 21, ,923 25,77 29

31 VI4. Appraisal Cap IPO First Fiscal Period Second Fiscal Period Third Fiscal Period Properties Direct Capitalization Method: Cap Rate Discounted Cash Flow Method Discount Rate Terminal Capitalization Rate Direct Capitalization Method: Cap Rate Discounted Cash Flow Method Discount Rate Terminal Capitalization Rate Direct Capitalization Method: Cap Rate Discounted Cash Flow Method Discount Rate Terminal Capitalization Rate Direct Capitalization Method: Cap Rate Discounted Cash Flow Method Discount Rate Terminal Capitalization Rate 4.2%(Next 7yrs) 3.8%(Next 7yrs) NEC Head Office Building 4.5% 4.8% 4.1% 4.4% 4.1% 4.2% 4.% 4.7% (afterwards) 4.3% (afterwards) 3.7% (Next 6yrs) 4.2% (afterwards) 3.5% (next 6yrs) 4.2% (afterwards) 4.2% Harumi Island Triton Square Office Tower Y 5.3% 5.% 5.6% 4.6% 4.3% 4.8% 4.4% 4.1% 4.6% 4.3% 4.% 4.5% Akasaka Oji Building Kanda Park Plaza Faret East Building Nittetsu Honmachi Building 4.8% 5.2% 6.3% 6.5% 5.% 4.8% 6.4% 6.5% 5.1% 5.8% 6.6% 6.8% 4.4% 5.2% 5.9% 6.3% 4.6% 4.8% 6.% 6.3% 4.7% 5.8% 6.2% 6.6% 4.2% 5.2% 5.7% 6.2% 4.4% 4.8% 5.8% 6.2% 4.5% 5.8% 6.% 6.5% 4.2% 5.1% 5.5% 6.% 4.3% 4.7% 5.6% 6.2% 4.5% 5.7% 5.8% 6.3% Sagamihara Shopping Center 5.3% 5.2% 5.5% 5.3% 5.2% 5.5% 5.3% 5.2% 5.5% 5.3% 5.1% 5.5% ItoYokado Higashi Narashino 6.3% 5.4% 6.8% 6.1% 5.8% 6.6% 6.1% 5.2% 6.6% Musashiurawa Shopping Square 5.1% 5.% 5.3% 5.1% 4.8% 5.3% FukasawaHouse tower H&I 4.3% 4.% 4.5% 4.3% 4.% 4.5% OAK PLAZA 4.8% 4.3% 5.4% 4.7% 4.2% 5.3% Appraisers in Charge Tanizawa Sogo Appraisal Co., Ltd. Japan Real Estate Institute Chuo Real Estate Appraisal Co., Ltd DAIWA REAL ESTATE APPRAISAL Corporation. Properties NEC Head Office Building, Akasaka Oji Building, Faret East Building, Nittetsu Honmachi Building Harumi Island Triton Square Office Tower Y, FukasawaHouse tower H&I Kanda Park Plaza, ItoYokado HigashiNarashino, OAK PLAZA Sagamihara Shopping Center, Musashiurawa Shopping Square 3

32 VII. Appendix (1) Portfolio Details 31

33 VII1. Operating Income by Property Basis (in millions yen) NEC Head Office Building Harumi Island Triton Square Office Tower Y Akasaka Oji Building Kanda Park Plaza Faret East Building Nittetsu Honmachi Building Sagamihara Shopping Center ItoYokado Higashi Narashino Musashiurawa Shopping Square Fukasawa House Tower H&I OAK PLAZA Days of Fiscal Period 184 Days 184 Days 184 Days 184 Days 184 Days 184 Days 184 Days 184 Days 184 Days 184 Days 184 Days Total Revenue 1,37 1, Rental Revenue 1,37 1, Property Related Expenses Total Property Management Fee Taxes and Public Charges Utility Costs Insurance Fees Repair Expenses Others NOI 1, Depreciation & Amortization Operating Income Capital Expenditures Property Tax are charged from 3rd Fiscal Period except Musashiurawa and OAK Plaza. Property Tax for these properties will be charged from 5th fiscal period. Replacing airconditioning equipments and others Replacing airconditioning equipments and others Replacing disaster prevention equipment 32

34 VII21. NEC Head Office Building Address 571 Shiba, Minatoku, Tokyo Acquisition Price billion yen Site Area 21, m 2 Floor Space 144, m 2 Floors 3 Basement Floors 39 Floors Above Ground Completion January 199 Title Land, Building: CoOwnership (5%) The building enjoys great transportation convenience with four railway lines usable (JR Yamanote Line, KeihinTohoku Line, Toei Subway Mita Line and Toei Asakusa Line) providing good access to Haneda Airport and various places in central Tokyo. This property is widely referred to as the NEC Super Tower and is a landmark in Tokyo. NEC Corporation has its head office in this building. The area forms a conglomeration of the NEC group affiliates. 33

35 VII Harumi Island Triton Square Office Tower Y Address 1811 Harumi, Chuoku, Tokyo Acquisition Price 33 billion yen Site Area 39, m 2 Floor Space 267, m 2 Floors 4 Basement Floors, 4 Floors Above Ground Completion October 21 Title Land: Coownership (16,884,921/1,,) Building: Compartmentalized ownership (3 rd 15 th Floor ) Harumi Island Triton Square is a large multiuse complex completed in 21 through coordinated redevelopment of the Harumi district of Tokyo, a bayside area. The Square has three skyscraper office buildings as its landmark, retail facilities and a highrise condominium. The property is a 4story skyscraper that is an intelligent office building built in 21 and equipped with stateoftheart specifications/facilities. The Tokyo head office of Sumitomo Metal Industries and the head office of Japan Trustee Services Bank are the main tenants. 34

36 VII23. Akasaka Oji Building Address Acquisition Price Site Area and Floor Space Floors Completion Title 8122 Akasaka, Minatoku, Tokyo 9.66 billion yen 2, m 2 /1,63. 5 m 2 1 Basement floor, 9 Floors Above Ground April 1989 Ownership This building is in an area extending from the Akasaka district of Tokyo, an area home to many hotels and embassies that is also popular among foreign firms, to the Aoyama district, home to fashion, culture and music with many luxury brand shops. The building faces Aoyama Dori (avenue) and enjoys great transit convenience as the closest station (Aoyamaitchome Station) has tracks for the Tokyo Metro Subway Ginza and Hanzomon Lines, and for the Toei Subway Oedo Line. Although located in the center of Tokyo, the area is rich in greenery with the Akasaka Imperial Grounds extending along the opposing side of Aoyama Dori. The anchor tenant is Sony Computer Entertainment. 35

37 VII24. Office Properties Faret East Building Nittetsu Honmachi Building Kanda Park Plaza Address Acquisition Price Site Area and Floor Space Floors Completion Title Address Acquisition Price Site Area and Floor Space Floors Completion Title Address Acquisition Price Site Area and Floor Space Floors Completion Title 222 Kajimachi, Chiyodaku, Tokyo billion yen m 2 /5, m 2 1 Basement floor, 9 Floors Above Ground November 1959 Ownership 2347 Akebonocho, Tachikawa, Tokyo 1.52 billion yen 2, m 2 /16, m 2 1 Basement Floor, 12 Floors Above Ground December 1994 Land: Coownership (44,544,/1,,) Building: Compartmentalized Ownership (2 rd 5t h and a part of 6 th Floor ) 1124 Utsubohonmachi, Nishiku, Osaka 1.1 billion yen m 2 /6, m 2 2 Basement Floor, 12 Floors Above Ground June 1991 Ownership 36

38 VII25. Sagamihara Shopping Center Address Acquisition Price Site Area and Floor Space Kobuchi, Sagamihara, Kanagawa 12 billion yen 3, m 2 /56, m 2 Floors Completion August Basement Floor, 4 Floors Above Ground Title Ownership Located along national highway 16, a lengthy central thoroughfare in the Tokyo metropolitan area, the large shopping center is also near Kobuchi Station on the JR Yokohama Line, enjoying excellent access by road or rail. This commercial area has a population of some 62, within a 5km radius and about 1.86 million within a 1km radius. Many shopping centers, home centers and specialty stores are found along national highway 16, including the neighboring Jusco Sagamihara Shopping Center. This property has approximately 19,m 2 in sales space comprised of the directly operated ItoYokado and specialty shops, and provides parking for over 1,3 vehicles. The site also features a family restaurant and gardening specialty store. 37

39 VII26. Retail Properties Musashiurawa Shopping Square Address Acquisition Price Area of Land/Floor Space Structure/Floors Completion Type of Title 731, Bessho, Minamiward, Saitamacity, Saitama 4.3 billion yen 8, m2 /28, m2 Steel structure with flat roof / 1 basement floor, 4 floors above ground October 25 Coownership ("kyoyu") of trust beneficiary interests in real estate (Ratio of ownership is 5%) ItoYokado HigashiNarashino Store Address Acquisition Price Site Area and Floor Space Floors Completion 731 Higashi Narashino, Narashino, Chiba 8.9 billion yen 29, m 2 / 45, m 2 1 Basement Floor, 4 Floors Above Ground October 1994 Title Ownership 38

40 VII27. FukasawaHouse tower H & I Address Acquisition Price Site Area and Floor Space 212 Fukasawa, Setagaya Ward, Tokyo 1.6 billion yen 39,84. 9 m 2 /12, m 2 Floors Completion June Floors Above Ground Title Land: Coownership (1,584,269/1,,) Building: Compartmentalized ownership The surrounding area has a luxurious and spacious streetscape and is one of the most prestigious housing areas in Tokyo. The property is adjacent to Komazawa Park and the site itself has rich greenery providing an excellent residential environment. FukasawaHouse is a large housing project that consists of 13 residential tower with 772 units and a retail building within an expansive site. All residences house underground parking. The subject property is the rental housing buildings in the project and has 124 units ranging in size from 24 bedroom units with areas of some 75m2 to 12m 2. It comes with excellent antidisaster facilities including an antiearthquake structure and potable water generation system for emergencies. 39

41 VII28. OAK PLAZA Address Acquisition Price Area of Land/Floor Space 216 Kanda Awajicho, Chiyodaward, Tokyo 2.59billion yen 1, m2 /6, m2 Structure/Floors SRC structure with a flat rooffloors / 1 basement floor, 1 floors above ground Completion CompletionApril 1985 (Completion Date of the conversion March 27) Type of Title Ownership This property is highly accessible as it is only a 3 to 6 minute walk from six stations including the JR Ochanomizu Station, JR Akihabara Station, Tokyo Metro Marunouchi Line Awajicho Station. It boasts a sound location near the prime office areas of Marunouchi and Otemachi around Tokyo Station and the Akihabara area and its IT base. etc. Since its completion in 1985, this property was used as a hotel named as Hotel New Kanda and now has been converted to a multiuse building that has, in addition to hotels, offices (service offices and meeting rooms for rent), restaurant and retail shop. 4

42 41 VII3. Contents of Memorandum of Understanding Withdrawal of Early Termination Notice from ItoYokado ItoYokado withdraws the notice of early termination dated February 22, 27. Top REIT agrees to such withdrawal. Agreement on the Rent Revision Rent = Fixed Rent (minimum rent) + SalesBased Rent Adopt Salesbased Rent Scheme (Change in method of rent calculation) Confirm minimum rent until the maturity of the lease agreement Before Revision Agree on Reduction in the fixed rent (Revised on August 1, 27) Share the plan and information to maximize property value (Business plan for the site, the annual results of sales and the number of customers who visited the site) After Revision Fixed Annual Rent JPY725mn JPY471mn (revised on August 31, 27) SalesBased Rent Leased Area N/A The salesbased rent is the amount obtained from multiplying the excess over a specific amount of annual sales generated during a period from March to February of the following year from the lots directly operated by ItoYokado by a specific rate. The salesbased rent will not accrue before February 28 and can accrue from March ,98.42 m2 Deposit and Guarantee Deposit:JPY1,135mn, Guarantee: JPY1,275mn (as of Oct 31, 27) Maturity of the Lease November 3, 214 Rent Renewal 3year regular review Terms and conditions of the rent system including method of calculation of the fixed rent and the salesbased rent shall not change until November 3, 214, the maturity of the lease agreement. Prohibition of Early Termination Other Issues a. Termination is prohibited for the first thirteen years (until November 3, 27) regardless of reasons therefore b. Even after the period set forth in a., early termination is prohibited unless continuation of the agreement is impracticable for unavoidable reasons. ItoYokado should bear utilities costs and routine management expenses. N/A Top REIT is entitled to request ItoYokado to give a reasonable explanation of its business plan for the site rented by it. ItoYokado shall submit to Top REIT the annual results of the sales and the number of customers.

43 VIII. Appendix (2) Structure of Asset Manager 42

44 VIII1. Decision Making Process for Acquisition and Disposition of Properties 少数意見の報告 Report of minority opinions 立案部 Department in charge of preparing a Proposals コンフ ライアンス Compliance 室 Office ( 注 1) ( 注 2) (Note 1) (Note 2) 投資運用委員会 and Investment Management Committee 取締役会 Board of Directors 決定 Final Decision 審査 Examination リスク コンフ ライアンス Risk and 委員会 Compliance Committee 審議 決議 Examination 審議 決議 Examination 審議 決議 Examination and and and ( 否決 ) decision ( 否決 中止 decision ( 注 3)) ( 否決 ) decision 差戻し (Rejection) (Rejection and/or (Rejection) ( 注 1) 以下いずれかに該当する場合にはリスク コンプライアンス委員会に付議します Return Suspension) (Note 3) 利益相反取引規程に定める利害関係者との重要な取引 ( この場合 全会一致の議決が必要 ) (Note 1) Proposals コンプライアンス室長がリスク コンプライアンス委員会での審議を必要と認める場合 will be passed to the Risk and Compliance Committee if they fall on either of the followings: ( 注 2) 以下いずれかに該当する場合には取締役会に付議します Material transactions with interested parties defined in the rules on transactions with interested parties (unanimous vote is required in this case) 取得又は売却予定額が The head of the Compliance 1 億円超かつ本投資法人の総資産額の Office recognizes the discussion of the issues 1% in を超える場合 the Risk and Compliance Committee to be necessary. (Note 2) Proposals 資金調達計画 will be passed ( 資金調達に関する最終意思決定は本投資法人の役員会にて行われます to the Board of Directors if they fall under any of the followings: ) 利益相反取引規程に定める利害関係者との重要な取引 The price of proposed acquisition or sale is over 1 billion yen and over 1% of Top REIT s total assets. ( 注 3) コンプライアンス室長は 投資運用委員会における審議 決議の過程で法令等に照らして問題点がある Capital raising plans (Final decisions on raising capital shall be made by the Board of Directors of Top REIT.) Material transactions with interested parties defined in the rules on transactions with interested parties (Note と判断する場合には 審議及び決議を中止し 立案部に差し戻すことができます 3) The head of the Compliance Office can suspend discussions and decisions and return the item to the Department in charge of if he or she judges that the item has legal problems in the process of discussions or decision making at the Investment and Management Committee. 43

45 VIII II2. Overview of Asset Manager Name Top REIT Asset Management Co., Ltd. 名 称 トップリート アセットマネジメント株式会社 Address (Top REIT Asset Management Co., Ltd.) Nittetsu Nihonbashi Building 所 在 地 1131 東京都中央区日本橋一丁目 Nihonbashi, Chuo Ward, Tokyo 13 番 1 号日鐵日本橋ビル Established Oct 22, 24 Paidin 設 Capital 立 3mn 平成 16 年 1 月 22 日 株主総会 Shareholders The Sumitomo Trust & Banking Co., Ltd. 38% 監査役資本金と株主構成 3 億円 Nippon Steel City Produce, Inc. 31% 取締役会 Oji Real 住友信託銀行株式会社 Estate Co., Ltd. 31% 38% 株式会社新日鉄都市開発 31% 投資運用委員会リスク コンフ ライアンス委員会 Business Investment 王子不動産株式会社 trust manager and 31% Description asset manager of JREIT 代表取締役社長 事 業 内 Registered Financial Instruments Firm (Asset Management), 容 No. 365 投資法人資産運用業 (Kinsho), issued by the Director, Kanto Local Finance Bureau Directors 代表者 President 代表取締役社長 and : 土田 Nobuhito 京一 ENDO Representative 平成 19 年 7 月 Director 1 日より 投資運用部 財務部 企画 管理部 コンフ ライアンス室 Milestone 代表取締役社長 Oct 22, 24 遠藤晋民 : Top REIT Asset Management ( TRAM ) established Dec 1, 24 : TRAM obtained a license for real estate agent (The Governor s of Tokyo No. (1) 8394) 沿革平成 16 年 12 月 1 日宅地建物取引業の免許取得東京都知事 (1) 第 8394 号 May 1, 25 : TRAM obtained an approval for discretionary agent license for real estate transaction 平成 17 年 5 月 1 日宅地建物取引業法上の取引一任代理等の認可取得 (The Minister of Land, Infrastructure and Transport No. 35) Jun 28, 25 : 国土交通大臣認可第 TRAM obtained an approval 35 号 for asset manager for investment corporation 平成 17 年 6 月 28 日 Nov 2, 平成 年 11 月 2 日 全て平成 19 年 6 月 2 日現在 Sep 3, 27 投資信託委託業者の認可取得 (The Prime Minister No. 47) 内閣総理大臣第 47 号 : トップリート投資法人と資産運用委託契約の締結 TRAM entered into the Asset Management Agreement with Top REIT, Inc. : Deemed Registered Financial Instruments Firm (Asset Management), No. 365 (Kinsho), issued by the Director, Kanto Local Finance Bureau. Nov 27, 27 : Formally submitted applications to register as Financial Instruments Firm 44

46 IX. Appendix (3) Other Reference 45

47 IX1. Summary of Real Estate Market Indicators Real Estate Sales Market (%) Cap Rate: Office in Central Tokyo Source: The Japanese Real Estate Investor Survey by Japan Real Estate Institute Risk Premium: Cap Rate (Marunouchi )1 Year JGB Risk Premium Marunomuchi Nihonbashi Kanda Toranomon Shiodome Akasaka Roppongi Kohnan Nishi Shinjuku Shibuya Ikebukuro Ueno Ohsaki Real Estate Leasing Market Yen/Tsubo 16, 15, 14, 13, 12, 11, 1, 9, Source: CBRE Office Market Report Office Leasing Market in Central 5 wards in Tokyo ,52 14,72 14,48 14,46 14,52 14,33 14,22 14,19 14,9 13,96 13,86 13,83 13,67 13,67 13,49 13,35 13,22 13,18 13,11 13,4 13,12 13,23 13,32 13,53 13,96 Sep1 Dec1 Mar Rents per Tsubo Average Vacancy Rate Jun2 Sep2 Dec2 Mar3 Jun3 Sep3 Dec3 Mar4 Jun4 Sep4 Dec4 Mar5 Jun5 Sep5 Dec5 Mar6 Jun6 Sep6 Dec6 Mar7 Jun7 Sep7 (%) (%) Cap Rate (Residintial Property in Tokyo) in thousand yen/tsubo Residential (Condominium) Market in Tokyo (Historical rents per Tsubo) Y 23 Y 24 Y 25 Y 26 Y Studio ("Jyonan Area" South West) Family Type (South West Area) Low Rise Condo for Expats Studio ("Jyoto Area" (East)) Family Type ("Jyoto Area" (East)) High Rise Condo for Expats 9.8 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: The Japanese Real Estate Investor Survey by Japan Real Estate Institute (%) Cap Rate Retail Property in Tokyo 25.4 Urban Retail Property in Ginza area Suburban SC Source: The Japanese Real Estate Investor Survey by Japan Real Estate Institute Urban Retail Property in OmoteSando area 27.1 Source: Rental residential property information FORRENT Monthly Report by Recruit Retail Property Market Shopping Center Sales (yearonyear comparison) Y21 1Q Y21 2Q Y21 3Q Y21 4Q Y22 1Q Y22 2Q Y22 3Q Y22 4Q Y23 1Q Y23 2Q Y23 3Q Y23 4Q Y24 1Q Y24 2Q Y24 3Q Y24 4Q Y25 1Q Y25 2Q Y25 3Q Y25 4Q Y26 1Q Y26 2Q Y26 3Q Y27 1Q Y26 1Q Y26 2Q Y26 3Q Total Tenants Ancor Tenants Source: Annual Sales Statistics of Shopping Centers by the Japan Council of Shopping Centers 46

48 IX2. Characteristics of Top REIT Top REIT Asset Management ( TRAM ) Development Brokerage Property Management Asset Management DNA Capital + Personnel Sponsors Asset Management Office Retail Residence Top REIT Diversified Portfolio Three Major Asset Classes Other Asset Classes i.e., hotels and warehouses 1. Skilled Management of a Diversified Portfolio Pursuing both steady growth and quality through a bluechip portfolio of excellent properties and prudent management measures firmly founded in real estate expertise Strategic application of commissioned reports from a think tank 2. Optimal Application of Sponsor Strengths Ensuring steady growth through the pipeline and warehousing functions of sponsors The Sumitomo Trust & Banking 38% Applying unique sponsor strengths to secure growth in asset value Nippon Steel City Produce A whollyowned subsidiary of Nippon Steel Oji Real Estate A whollyowned subsidiary of Oji Paper 31% 31% Support Sponsor Strengths Ensuring Steady Income Maximizing Investor Value Steady Growth of Portfolio Inheriting Sponsors DNA Top REIT Asset Management ( TRAM ) was established in collaboration with three firms The Sumitomo Trust & Banking, Nippon Steel City Produce and Oji Real Estate. Excellent personnel have been dispatched to TRAM from the three sponsors to ensure real estate investment expertise as well as inheritance of their corporate groups assets, that is, a longterm strategic view and diversified knowhow acquired through each of the sponsor s businesses. Utilizing Sponsor Strengths Sponsor skills shall be utilized to achieve steady growth by applying their real estate development abilities, brokerage networks and management skills, including leasing activities that utilize the leasing demand of our sponsor groups. Number of group companies Sumitomo Trust Group 42 Nippon Steel Group 326 Oji Paper Group 35 47

49 IX3. Investment Policy Diversified Portfolio Asset Class Investment Focus Allocation Office Retail Residence Others Mainly in Central Tokyo Three major metropolitan areas and core regional cities Three major metropolitan areas and core regional cities Mainly in Tokyo Metropolitan Area Plus three major metropolitan areas and core regional cities Investment focus will be determined based on characteristics of each asset Effectively Apply the Characteristics of Each Asset Class Less Than 8% Less Than 5% Less Than 5% Less Than 1% Estimated Candidate Real Estate Market Nationally: Approx. JPY 54.5 Trillion (Aggregation of three types of properties) Residence 2% 28% Retail Enable Selective Investment Office 52% Source: STB Research Institute Estimated Investment Market Size by Property Type dated Oct 31, 25 Pursuing steady external growth through a bluechip portfolio of diverse asset types Avoid a Bias with Certain Asset Classes Highly Competitive Target An array of Choices from Three Asset Class Enable to Screen Competitive Properties Pursuing External Growth Focusing on BlueChip Properties Office buildings Retail properties Residential properties Pursuing Both Steady Growth and Quality Lowly Competitive 48