Contents 1. Overview of FRI Overview of FRI 3 Management strategy 4 Portfolio map 5 Portfolio asset categories 6 2. Financial results and forecasts Summary 9 Steady distribution growth 10 27th period results 11 28th period forecast 12 3. Management highlights Management highlights Large-scale shopping centers (regional SCs, outlet malls) Management highlights Community shopping centers (GMSs) Management highlights Medium-scale shopping centers (neighborhood SCs, supermarkets) Management highlights Urban retail facilities Management highlights Land interests and other properties 15 16 17 18 19 FRI and the retail market 20 Sound balance sheet 21 Internal growth financial 22 Sustainability initiatives 23 4. Portfolio overview Portfolio summary 27 FRI s portfolio in graphs 29 Rent revision and lease maturity schedules 30 5. Appendix Disclaimer All content in this document is provided solely for informational purposes and is not intended to serve as an inducement or solicitation to trade in any product offered by FRI. Investment decisions are made at the investors discretion and risk. FRI disclaims any responsibility or liability for the consequences of investing in FRI. Investment units issued by FRI are subject to price fluctuations due to various factors, including: (1) volatility in the J-REIT market, interest rates and the real estate market; (2) fluctuations in rental revenues from properties; and (3) the occurrence of unexpected losses due to natural disasters. Accordingly, investment in FRI entails the risk of incurring a loss. For more details, please also refer to a section titled Investment Risk presented in the Securities Registration Statement (Prospectus) and the Securities Report issued by FRI. Information provided in this document contains such forward-looking statements as business forecasts, which should not be construed as commitment to or guarantee of future performance. The information provided in this document was originally published in Japanese language form and has been translated for reference purposes only. FRI guarantees neither the completeness nor the accuracy of this English translation. Please be advised that all information provided herein may be subject to change without prior notice. Duplication or reproduction of any content presented herein without the prior consent of FRI or its authorized representative is strictly prohibited. Asset management company: Mitsui Fudosan Frontier REIT Management Inc. (Financial Instruments Business Registration No. 395; issued by Director-General of the Kanto Finance Bureau based on the Financial Instruments and Exchange Law) 1
1. Overview of FRI
Overview of FRI Corporate profile Name Frontier Real Estate Investment Corporation ("FRI") TSE Listing August 9, 2004 Securities code: 8964 Sponsor Mitsui Fudosan Co., Ltd. Changed from Japan Tobacco Inc. as of March 2008 Area 3 Kyushu/ Okinawa 9.2% Chugoku 11.1% Tokyo Metropolitan Area 52.0% Investment target Retail facilities Fiscal period ends June 30, December 31 Kansai 13.5% Investment units issued 496,000 Asset management company Portfolio Asset size (based on acquisition prices) Mitsui Fudosan Frontier REIT Management Inc. (Wholly owned subsidiary of Mitsui Fudosan Co., Ltd.) 293.4 billion; 33 properties Geographic distribution Urban areas: 52.0%; Other: 48.0% Occupancy rate 100% Total leasable floor space 1 1,433,781 m 2 Financial indicators LTV* 1 42.2% Interest-bearing 29.8% debt ratio* 2 Ratings JCR: AA Stable; R&I: AA- Stable; S&P: A+ Stable Chubu 14.1% Property type 3 Land interests and other properties 9.2% Key properties Urban retail facilities 18.1% Supermarkets 6.4% Neighborhood SCs 8.7% Regional SCs 39.5% Outlet malls 6.6% Community SCs 11.5% Distributions 27th period (Dec. 2017) 10,146 per unit 28th period (June 2018) forecast 10,080 per unit 1. Loan-to-value ratio = (Borrowings and bonds + Leasehold and security deposits - Unrestricted cash and deposits ) / (Balance of total assets - Unrestricted cash and deposits); same shall apply to all succeeding occurrences of LTV 2. Interest-bearing debt ratio = (Borrowings and bonds - Unrestricted cash and deposits) / (Balance of total assets - Unrestricted cash and deposits); same shall apply to all succeeding occurrences of interest-bearing debt ratio 3. Calculated based on the annualized fixed rent (excluding common area maintenance charges) of lease contracts valid as of December 31, 2017. Variable rent is not taken into account. Unrestricted cash and deposits = Cash and cash equivalents at the end of the period - distributions for the period Mitsui Shopping Park LaLaport SHIN-MISATO AEON MALL NAGOYADOME-Mae Mitsui Outlet Park IRUMA GINZA GLASSE 3
Management strategy Turning fluctuating real estate revenue into steady distribution growth over the long term External growth Fully utilize the sponsor s pipeline to continue acquiring excellent properties Selectively invest in non-sponsor properties utilizing the Asset Management Company s unique network, keeping a close eye on risk Carefully select properties for investment considering the certainty of cash flows and growth potential of the surrounding retail zone Make acquisitions with an eye to maintaining the whole portfolio s ratio of asset value to yield after depreciation Internal growth Secure a foundation for stable earnings based on long-term fixed rent Adjust to changes in the environments surrounding properties, maintaining and enhancing competitiveness through such measures as additional investment and tenant replacement Consider replacing properties that pose future uncertainties in order to further enhance portfolio quality Financial strategy Maintain sound financial standing through LTV control Execute capital procurement flexibly and strategically based on careful monitoring of the procurement environment Leveling out repayment periods and amounts to increase financial stability 4
Portfolio map 33 properties Asset size: 293.4 billion (as of February 15, 2018) Kyushu/ Okinawa area Chugoku area Large-scale SCs Community SCs Medium-scale SCs Urban retail facilities Land interests and other properties Regional SC Outlet mall Community SC Neighborhood SC Supermarket Urban retail facilities Land interests and other properties : A large-scale shopping center that houses multiple specialty stores : A large-scale shopping center in which multiple outlet stores are concentrated :A medium-scale shopping center where the main tenant typically stocks general merchandise and groceries (GMS) : A medium- or small-scale shopping center where the main tenant is typically a supermarket : A retail outlet that sells mainly food products : A store that faces onto a main street or a specialty store building in a prime urban location : Land interests in retail facilities, etc. 17 23 Don Quijote Fukuoka Tenjin VIORO 26 8 Mitsui Shopping Park ALPARK (East Building) Home Center Kohnan Hiroshima Minami-Machi (land interest) 3 Papillon Plaza 10 You Me Town Hiroshima Ohmiya 9 32 Frespo Tosu (land interest) KOJIMA x BIC CAMERA Naha Store Kansai area 29 Shinsaibashi Square Tachikawa JR Yamanote- Line 2 5 24 AEON MALL Ibaraki Belltown Tambaguchi Eki-Mae Store QANAT Rakuhoku Chubu area 6 18 AEON MALL NAGOYADOME- Mae Mitsui Shopping Park LaLaport IWATA Tokyo metropolitan area Tokyo Ito-Yokado Higashi- 15 Yamato AEON TOWN Tanashi- 16 Shibakubo Queen s Isetan Suginami- 11 Momoi 20 Shimura Shopping Center Summit Store Takinogawa 7 Momiji-Bashi 25 Ikebukuro Square 14 Desigual Harajuku 19 1 4 GINZA GLASSE AEON STYLE Shinagawa Seaside Kamiikedai Tokyu Store Yokohama 13 12 21 Kanagawa 31 Super Viva Home Zama and 33 Super Sanwa Zama Higashihara30 (land interest) 22 Summit Store Yokohama Okano (land interest) 28 27 Kohnan Kawasaki- Odasakae Mall (land interest) Saitama Costco Wholesale Warehouse Iruma (land interest) Mitsui Outlet Park IRUMA Mitsui Shopping Park LaLagarden KASUKABE Costco Wholesale Warehouse Shin-Misato (land interest) Mitsui Shopping Park LaLaport SHIN-MISATO Mitsui Shopping Park LaLaport SHIN-MISATO Annex 5
Portfolio asset categories Large-scale shopping centers (regional SCs, outlet malls) 8 properties Average acquisition price: 16.2 bn NOI yield: 5.9% NOI yield after depreciation: 4.1% Community shopping centers (GMS) 2 properties Average acquisition price: 15.8 bn NOI yield: 5.6% NOI yield after depreciation: 3.5% Regional SCs AEON MALL NAGOYADOME-Mae Community SCs 31.7 billion You Me Town Hiroshima Total acquisition price: 130.3 billion AEON MALL Ibaraki Mitsui Shopping Park LaLaport IWATA Mitsui Shopping Park Mitsui Shopping Park ALPARK (East Building) LaLaport SHIN-MISATO Outlet malls Mitsui Outlet Park IRUMA Medium-scale shopping centers (neighborhood SCs, supermarkets) 9 properties Average acquisition price: 4.6 bn NOI yield: 5.5% NOI yield after depreciation: 4.1% AEON STYLE Shinagawa Seaside 2 Neighborhood SCs Ito-Yokado Higashi-Yamato 41.4 billion Supermarkets Belltown Tambaguchi Eki-Mae Store Kamiikedai Tokyu Store Urban retail facilities 6 properties Average acquisition price: 9.9 bn NOI yield: 4.6% NOI yield after depreciation: 3.7% Land interests and other properties 8 properties Average acquisition price: 3.7 bn NOI yield: 5.3% NOI yield after depreciation: 5.3% Mitsui Shopping Park Papillon Plaza LaLagarden KASUKABE QANAT Rakuhoku Shimura Shopping Center Urban retail facilities Don Quijote Fukuoka Ikebukuro Square GINZA GLASSE VIORO Shinsaibashi Square Desigual Harajuku Tenjin 3 30.3 billion Land interests and other properties Kohnan Kawasaki-Odasakae Mall (land interest) Summit Store Yokohama Okano (land interest) 59.5 billion Costco Wholesale Warehouse Shin-Misato (land interest) Frespo Tosu (land interest) Queenʼs Isetan Suginami-Momoi Costco Wholesale Warehouse Iruma (land interest) Summit Store Takinogawa Momiji-Bashi Home Center Kohnan Hiroshima Minami-Machi (land interest) 4 AEON TOWN Tanashi-Shibakubo KOJIMA x BIC CAMERA Naha Store Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) 1. NOI yield is calculated by dividing the sum of NOI on rent (excluding extraordinary factors) and profit from property leasing by acquisition prices. Figures used in this calculation are as of December 31, 2017. 2. Renamed from AEON Shinagawa Seaside Shopping Center as of October 13, 2017. 3. Previously, (provisional name) Don Quijote Tenjin; officially renamed to the current property name as of November 17, 2017 following the tenant change executed on August 24, 2017. 4. Previously, (provisional name) Home Center Kohnan Hiroshima-Shi Minami-Machi (land interest); officially renamed to the current property name as of October 25, 2017. 6
2. Financial results and forecasts
Summary 1 Steady distribution growth Having accomplished a distribution per unit (DPU) of over 10,000 for the second consecutive period a first for us we now aim to extend this track record to the third consecutive period DPU 26th period 10,022 10,146 10,080 27th period 28th period (up 124 from the 26th period; 66 above forecast) (forecast) 23 Initiatives to strengthen the portfolio Acquired a new property from third parties Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) (July 2017) Acquisition price: 4,320 million Assumed NOI yield: 3.7% Floor space: 28,926.76 m2 New openings after tenant change Home Center Kohnan Hiroshima Minami-Machi (land interest) (October 2017) Don Quijote Fukuoka Tenjin (November 2017) Home Center Kohnan Hiroshima Minami-Machi Don Quijote Fukuoka Tenjin Renovations undertaken by master lessees AEON STYLE Shinagawa Seaside (October 2017) Ito-Yokado Higashi-Yamato (December 2017) 3 Conservative financial operations Maintained strong financial standing through conservative operations LTV 27th period end: 42.2% (including leasehold and security deposits) Interest-bearing debt ratio 27th period end: 29.8% (excluding leasehold and security deposits) Reduced debt cost 27th period end: 0.62% (-0.07 pt from the 26th period end) 9
Steady distribution growth Distribution per unit (yen) 10,000 9,500 9,000 8,500 8,000 8,000 6,000 4,000 2,000 5,622 DPU* 4,771.5 7,218.5 6,045 8,648 8,846.5 8,922.5 8,980 4,303 9,205.5 Operating revenue, net income and asset size July 2008 1st public offering March 2008 Third-party allotment 9,274 9,368.5 9,294 6,1686,233 6,364 5,658 9,097.5 9,239 9,299.5 9,991 9,191 March 2013 4th public offering 3,067 3,4703,587 3,667 3,5323,5843,608 3,8764,273 2,9502,9672,9972,974 2,5112,610 1,985 1,053 1,241 1,334 1,593 1,9091,9531,970 2,245 9,173.5 9,405 10,211 9,707 9,360 10,146 10,022 10,080 (Forecast) 9,695 9,903 9,694 (based on acquisition prices) 10,633 10,135 (billion yen) July 2012 10,390 Asset size 3rd public offering 9,676 9,960 9,853 10,03710,051 10,022 10,011 10,111 3,500 (right axis) 9,026 July 2010 8,472 3,000 300 2nd public offering 7,407 7,8018,023 Operating 営業収益 ( 左軸 ) 当期純利益 Net income ( 左軸 ) 資産規模 ( 右軸 ) 350 10,000 revenue (left axis) (left axis) 2,500 250 5,032 5,004 2,000 5,307 5,0074,642 4,550 4,664 4,808 4,911 4,970 200 4,467 1,500 150 1,000 100 500 50 0 第 1st 1 期 2nd 第 2 期第 3rd 3 期第 4th 4 期第 5th 5 期第 6th 6 期第 7th 7 期第 8th 8 期第 9th 9 期 10th 第期 11th 第期 12th 第期 13th 第期 14th 第期 15th 第期 16th 第期 17th 第期 18th 第期 19th 第期 20th 第期第 21st 期 22nd 第期 23rd 第期 24th 第期 25th 第期 26th 第期 27th 第期第 28th 期予想 04/12 月 05/6 月 05/12 月 06/6 月 06/12 月 07/6 月 07/12 月 08/6 月 08/12 月 09/6 月 09/12 月 10/6 月 10/12 月 11/6 月 Dec. 04 Jun. 05 Dec. 05 Jun. 06 Dec. 06 Jun. 07 Dec. 07 Jun. 08 Dec. 08 Jun. 09 Dec. 09 Jun. 10 Dec. 10 Jun. 11 Dec. 11 Jun. 12 Dec. 12 Jun. 13 Dec. 13 Jun. 14 Dec. 14 Jun. 15 Dec. 15 Jun. 16 Dec. 16 Jun. 17 Dec. 17 Jun. 18 * FRI implemented a two-for-one split of its investment units effective January 1, 2014. Distributions before the split have been divided by two. ** Distribution per unit (DPU), operating revenue and net income forecasts for the 28th period are given as the figures announced in Summary of Financial Results for the 27th Fiscal Period, published February 15, 2018. 11/12 月 12/6 月 12/12 月 13/6 月 13/12 月 14/6 月 14/12 月 15/6 月 15/12 月 16/6 月 16/12 月 17/6 月 17/12 月 18/6 月 0 0 10
27th period results 26th period (January 1, 2017 to June 30, 2017) 27th period (July 1, 2017 to December 31, 2017) Change Major factors in changes Operating revenue 10,011 10,135 +124 +1.2% Expenses related to rent business (excluding depreciation) 1,974 2,090 +116 NOI 8,037 8,044 +7 Depreciation 2,117 2,072-44 Property leasing operating income Selling, general and administrative expenses* 5,920 5,971 +51 619 640 +20 Operating income 5,300 5,331 +31 +0.6% Non-operating income 6 1-5 Non-operating expenses 334 299-35 Ordinary income 4,971 5,033 +61 +1.2% Net income 4,970 5,032 +61 +1.2% Distribution per unit (yen) 10,022 10,146 +124 +1.2% Note 1 Note 2 Note 2 Note 2 Note 1. Operating revenue Operation of 27th period acquisition (Super Viva +148 Home Zama and Super Sanwa Zama Higashihara (land interest)) and full-period operation of Home Center Kohnan Hiroshima Minami-Machi (land interest) Income from utility expenses +25 Decrease in rent due to tenant change at TSUTAYA -18 BOOK STORE TENJIN Decrease due to contract termination at VIORO during the 27th period -39 Note 2. Operating expenses Utility expenses +22 Repairs and maintenance +98 Depreciation -44 Selling, general and administrative expenses +20 Investment units issued and outstanding (units) 496,000 496,000 LTV at period-end 41.6% 42.2% -0.6 pt Interest-bearing debt ratio 28.8% 29.8% -1.1 pt Number of properties 32 33 +1 *Selling, general and administrative expenses = Asset custody fee + Administrative service fees + Directors compensations + Other operating expenses 11
28th period forecast 27th period results (July 1, 2017 to December 31, 2017) 28th period forecast* (January 1, 2018 to June 30, 2018) Change Operating revenue 10,135 10,111-23 -0.2% Operating income 5,331 5,288-42 -0.8% Ordinary income 5,033 5,005-27 -0.5% Net income 5,032 5,004-27 -0.6% Distribution per unit (yen) Preconditions for operating results forecasts 10,146 10,080-66 -0.7% Note 1 Note 2 Major factors in changes Note 1. Operating revenue Full-period operation of 27th period acquisition -3 (Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest)) and tenant change Sales-linked rent +10 Income from utility expenses -25 Note 2. Operating income (excluding difference in operating revenue) Outsourcing expenses -21 Utility expenses +23 Property tax, city planning tax, etc. -13 Repairs and maintenance -16 Depreciation +4 Selling, general and administrative expenses -4 27th period results 28th period forecast* Investment units issued and outstanding (units) 496,000 496,000 LTV at period-end 42.2% Approx. 42% Number of properties 33 33 Property tax, city planning tax, etc. 1,042 1,055 ( 単位 : 百万円 ) Repairs and maintenance 317 334 Depreciation 2,072 2,068 Non-operating expenses 299 284 Capital expenditures 171 158 *Forward-looking figures given here are as announced in Summary of Financial Results for the 27th Fiscal Period, published February 15, 2018. 12
3. Management highlights
Management highlights Large-scale shopping centers (regional SCs, outlet malls) AEON MALL Ibaraki (regional SC) Mitsui Outlet Park IRUMA (outlet mall) Introduced sales-linked rent after large-scale renovations in 2015. Continued to generate sales-linked rent in the 27th period Ritsumeikan University Osaka-Ibaraki Campus open since spring 2015 Major increase in daytime population JR line underpass to fully open in March 2018 (partially opened to pedestrians since November 2017) Will expand the retail zone on the east side of JR line Repairs of exterior walls planned (kickoff scheduled in the 28th period) AEON MALL Ibaraki Among the largest outlet malls in the Tokyo metropolitan area, attracting customers from a broad area, with synergies with the neighboring Costco Wholesale Warehouse Iruma Generates sales-linked rent every period Oume I.C. Ken-O Expressway Hachiohji Hachiohi I.C. JCT. Hachiohji 八王子 Around 500m from the Iruma IC Iruma I.C. Kawagoe Saitama I.C. Saitama Kan-etsu Expressway Tokorozawa Bijogi Tokorozawa 所沢 JCT. I.C. Ohizumi JCT. Tohoku Expressw ay Kawagu chijct. Kokubunji 国分寺 立川 Tachikawa Tokyo Chuo Expressway Shinjuku 新宿 Tokyo 東京 Hchiohji Shibuya 渋谷 Bypass Tomei Expressway Shinagawa 品川 7 min. on foot from Ibaraki Sta. Underpass Features of FRI s large-scale shopping centers 3km 500m 1km Part of underpass already opened to pedestrians Grid-square analysis 14,000 5,000 3,000 2,000 1,000 500 300 100 50 20 0 White indicates areas for which there is no valid data Sources: The Regional Economy and Society Analyzing System(RESAS)and Grid Square Statistics of Population Census undertaken by Statistics Japan, the Ministry of Internal Affairs and Communications Stable revenue base Portion under master leases 100% Percentage of total annual rent 46.1% Mitsui Shopping Park LaLaport IWATA Mitsui Outlet Park IRUMA Over 7: 27.7% Excellent locations near train stations Over 70% adjacent to a station Under 7: 72.3% Minutes on foot to nearest train station 1 1. Calculated based on the annualized fixed rent (excluding common area maintenance charges) of lease contracts valid as of December 31, 2017. Variable rent is not taken into account. 15
Management highlights Community shopping centers (GMSs) AEON STYLE Shinagawa Seaside (community SC) 27th period renovation AEON RETAIL renovated the property and renamed it AEON STYLE (Oct. 2017) Ito-Yokado Higashi-Yamato (community SC) 27th period renovation Ito-Yokado renovated the property s food and supermarket sections (Dec. 2017) Flagship central Tokyo AEON Group retail facility Capable of capturing office workers weekday consumption thanks to its positioning as a key shopping center for Shinagawa Seaside Forest, a multipurpose complex with a number of facilities Approximately 1,800 condominiums under construction within a 500 m radius Agreed not to revise rents after periodic discussions in October 2017 Higashiyamato City ranked first among Tokyo municipalities in 2015 birthrate survey while securing third place in 2017 National Ranking of Towns Comfortable for Working Parents 1 With neighboring retail facilities, forms the leading retail area in Higashiyamato City Nojima store newly opened on the second floor in June 2017 In discussions regarding rent revisions (Nov. 2012 and Nov. 2015) AEON STYLE Shinaga wa Condominiums (now on sale) Radius Population* 2011 2016 growth 1 km 40,000 +8.6% 3 km 272,000 +9.1% 5 km 806,000 +9.9% *Calculated using Basic Resident Register data as of April 1, 2016 Further growth expected YAOKO Ito-Yokado Higashi- Yamato Radius Population 2 2011 2016 growth 1 km 32,000 +7.5% 3 km 222,000 +2.8% 5 km 558,000 +1.4% 1. Based on municipality surveys undertaken by Nikkei DUAL and Nihon Keizai Shimbun 2. Calculated using Basic Resident Register data as of April 1, 2016 16
Management highlights Medium-scale shopping centers (neighborhood SCs, supermarkets) Papillon Plaza (neighborhood SC) QANAT Rakuhoku (neighborhood SC) Opened in 1993 to take advantage of a favorable location boasting direct access to main roads Contract to reach maturity in April 2019 Now looking into future internal growth opportunities Radius Population* 2011 2016 growth 1 km 33,000 +15.3% 3 km 214,000 +14.7% 5 km 522,000 +11.9% In August 2016, the master lessee (H 2 O Asset Management) acquired an adjacent lot In discussions regarding rent revisions (January 2015 and January 2018) Now looking into future internal growth opportunities Radius Population* 2011 2016 growth 1 km 36,000 +4.8% 3 km 184,000 +2.7% 5 km 414,000 +2.8% Yoshizuka Sta. 3 min. to Hakata station Papillon Plaza (Approx. 44,000m 2 ) QANAT Rakuhoku (approx. 13,000 m 2 ) Adjacent lot (Approx. 6,300 m2 ) Takano River Hakata Sta. *Calculated using Basic Resident Register data as of April 1, 2016 *Calculated using Basic Resident Register data as of April 1, 2016 17
Management highlights Urban retail facilities 27th period new opening Don Quijote Fukuoka Tenjin Features of FRI s urban retail facilities FRI owns stores with street level access and buildings that house specialty stores in prime urban locations with high liquidity FRI maintains a good balance of acquisitions from the sponsor (sponsordeveloped properties) and from third parties Growing inbound marketing demand is positively affecting store sales Acquired from the sponsor Ginza Ikebukuro Acquired from third parties Harajuku Tenjin Shinsaibashi Opened in November 2017 Achieved tenant change from TSUTAYA to Don Quijote with no downtime in August 2017 The lengthening of the Nanakuma subway line (to be completed in 2022) will improve access to Hakata Station Tenant Contract type Contract period Leased floor space Don Quijote Co., Ltd. Fixed-term building lease Aug. 2017 Mar. 2038 4,532.38 m2 ZARA DIESEL Muji VIORO Nishitetsu Fukuoka (Tenjin) Sta. H&M Don Quijote Apple Store Sony Store Brooks Brothers 20,000 15,000 10,000 5,000 0 GINZA GLASSE roadside land price (thousand yen/m 2 ) 25,000 1980 1985 1990 1995 2000 2005 2010 2015 (year) Source: National Tax Agency Percentage of total annual rent accounted for by urban retail facilities At 17th period-end 13.1% At 27th period-end 18.1% 18
Management highlights Land interests and other properties Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) 27th period acquisition Home Center Kohnan Hiroshima Minami-Machi (land interest) 27th period new opening Radius Population* 2007 2012 growth 1 km 25,000 +2.8% 3 km 247,000 +2.1% 5 km 573,000 +2.3% Acquired using the Asset Management Company s unique network in July 2017 Easy access via Yamato-Atsugi Bypass (National Route 246) Offers synergy with neighboring Costco Wholesale Zama Warehouse Opened in October 2017 A profit contributor throughout the 27th period and beyond Expected to generate synergies with neighboring You Me Town Hiroshima Location Acquisition price 1 Higashihara, Zama City, Kanagawa 4,320 million Acquisition date July 31, 2017 Contract period Leased floor space 28,926.76 m 2 Jul. 2014 Jul. 2044 (fixed-term business-use land lease contract) Location Period-end book value Contract period 2 Minami-machi, Minami-ku, Hiroshima City, Hiroshima 1,754 million Leased floor space 6,055.14 m 2 Aug. 2016 Jul. 2037 (fixed-term business-use land lease contract) *Calculated using Basic Resident Registers data as of April 1, 2016 19
FRI and the retail market Annual retail product sales by region Consumption by overseas tourists visiting Japan Hokkaido Tohoku Tokyo metropolitan area Chubu Kansai Chugoku Shikoku Kyushu/Okinawa 12.0% 3.1% 6.0% 17.9% 5.8% Annual retail product sales by region 4.8% 39.6% 11.1% 13.5% 9.2% Distribution of FRI properties* 52.0% (trillion yen) 6 5 4 3 2 Government target: 8 trillion 10.8% 14.1% * Calculated based on the annualized fixed rent (excluding common area maintenance charges) of lease contracts valid as of December 31, 2017. Variable rent is not taken into account. Source: Data on 2016 retail sales volumes by regional Bureau of Economy, Trade and Industry, Ministry of Economy, Trade and Industry Year-on-year comparison of monthly sales at FRI properties 30% 20% 1 0 2012 2013 2014 2015 2016 2017 2020 Source: Consumption Trend Survey for Foreigners Visiting Japan, Japan Tourism Agency BtoC E-commerce market size and e-commerce adoption rate (product sales) (trillion yen) 9 1.1 1.4 2.0 3.5 3.7 4.4 E-commerce market size E-commerce adoption rate EC 市場規模 ( 左目盛 ) EC (right 化率 ( axis) 右目盛 ) (left axis) 7% 6% 10% SC FRI 0% -10% -20% -30% 2017/01 2017/02 2017/03 2017/04 2017/05 2017/06 2017/07 2017/08 2017/09 2017/10 2017/11 2017/12 * Calculated based on sales at properties for which comparisons with the previous year are possible Source: SC sales statistics report, Japan Council of Shopping Centers 6 5.43% 4.75% 4.37% 3.85% 3 5.99 6.80 7.24 8.00 0 2013 2014 2015 2016 Source: Ministry of Economy, Trade and Industry FY2016 E-Commerce Market Survey 5% 4% 3% 2% 1% 0% 20
Sound balance sheet Key financial indicators Unrealized gain based on appraisal value and NAV Balance of borrowings and bonds Balance of leasehold and security deposits* LTV ratio 41.6% 42.2% Interest-bearing debt ratio 26th (June 30, 2017) 27th (December 31, 2017) 86,400 million 85,400 million 33,951 million 33,105 million Total balance of liabilities 120,351 million 118,505 million 28.8% 29.8% Long-term debt ratio 84.6% 86.3% 318.9 billion (Appraisal value) Total assets: 272.7 billion (as of December 31, 2017) Cash and deposits, etc. 11.4 billion Book value of assets under management 261.3 billion Borrowings and bonds 85.4 billion Leasehold and security deposits 33.1 billion Other liabilities 2.4 billion Net assets 151.8 billion 118.5 billion 209.4 billion (NAV) NAV per unit 422,315 *For an overview of leasehold and security deposits, please see p. 46 Unrealized gain 57.6 billion Unrealized gain based on appraisal value NAV (billion yen) 70 57.6 billion (billion yen) 250 NAV growth +16.2% over five years 60 50 40 200 150 30 100 20 10 0 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 50 0 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 21
Internal growth financial Refinancing to reduce debt cost (excluding short-term loans) Average remaining loan/bond period and debt cost (at each period end) (%) 2.00 1.40 0.80 0.20 12 8 4 0.91 3.9 0.51% 8.8 1.06 4.5 0.36% 5.9 Average interest rate of repayments in each period 各期返済分平均利率 1.07 5.0 1.98 0.27% 7.0 1.41 0.43% Average period of repayments in each period 11.6 9.8 0.35% Average interest rate of new loans/bonds in each period 各期借入分平均利率 1.23 0.21 8.0 6.0 5.6 5.2 6.1 0.98 1.04 Average period of new loans/bonds in each period 7.0 0.78 6.3 Years remaining (left axis) Debt cost (right axis) (years) (%) 8 Average including 1.20% leasehold and security deposits: 1.00% 7 1.08% 1.09% 1.07% 1.05% 0.47% 0.98% 0.72% 0.69% 0.92% 0.80% 6 0.62% 0.84% 5 4 3 3.58 3.70 3.64 3.70 3.93 4.04 4.32 4.84 4.83 4.63 Average including leasehold and security deposits: 5.83 0.60% 0.40% 0.20% 0.00% 0 (years) 22nd 第 22 期 23rd 第 23 期 24th 第 24 期 25th 第 25 期 26th 第 26 期 27th 第 27 期 28th 第 28 期 29th 第 29 期 30th 第 30 期 Distribution of maturity dates (billion yen) Commitment line 150 (as of February 15, 2018) 長期借入金 Long-term 保証金 Security borrowings deposits 投資法人債 Investment corporation bonds Long-term 第 27 期の長期借入分 borrowings in 27th Long-term borrowings in 28th 100 2 90,000 80,000 70,000 60,000 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 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 Balance of borrowings and bonds and interest paid Balance of borrowings Interest paid and 借入金等残高 bonds (left( axis) 左軸 ) 支払利息額 (right axis) ( 右軸 ) Impact on DPU: + 257-0.20% 500 450 400 350 5 50 50,000 40,000 400 385 376 381 369 358 339 303 307 300 250 0 0 第 28th 期第 29th 期第 30th 期第 31st 期第 32nd 期第 33rd 期第 34th 期第 35th 期第 36th 期第 37th 期第 38th 期第 39th 期第 40th 期第 41st 期第 42nd 期第 43rd 期第 44th 期第 45th 期第 46th 期第 47th 期第 48th 期第 49th 期第 50th 期 第 51 期 第 54 期第 55th 期 30,000 272 第 18th 18 期 第 19th 19 期 第 20th 20 期 第 21st 21 期 第 22nd 22 期 第 23rd 23 期 第 24th 24 期 第 25th 25 期 第 26th 26 期 第 27th 27 期 200 22
Sustainability initiatives Acquiring external recognitions GRESB Real Estate Assessment Received Green Star and 5-Star ratings under the GRESB program 27th period acquisition SMBC Environmental Assessment Rated AA in recognition of unique initiatives that no other J-REIT has undertaken 27th period acquisition East Asia / Retail / Listed 2nd (of 6 entities) Global 156th (of 823 entities) Rating (AAA is the highest) AA: Implementing excellent environmental consideration GRESB (Global Real Estate Sustainability Benchmark) GRESB is an assessment of the sustainability of real estate companies and operators. Said assessment is closely watched, as institutional investors use the GRESB benchmark assessment when they select investment targets. SMBC Environmental Assessment Financing Framework Sponsored by Sumitomo Mitsui Banking Corporation (SMBC), this assessment program rates corporations efforts to ensure eco-friendly operations based on unique criteria established by The Japan Research Institute, Limited. SMBC also sets financing conditions, including those for private placement bonds, taking the results of these assessments into account. Certified properties DBJ Green Building Certification Mitsui Shopping Park LaLaport SHIN-MISATO VIORO AEON MALL Ibaraki Mitsui Shopping Park Mitsui Outlet AEON MALL GINZA GLASSE Ikebukuro Square LaLaport IWATA Park IRUMA NAGOYADOME-Mae Mitsui Shopping Park LaLagarden KASUKABE 23
Sustainability initiatives ESG-related initiatives Examples of initiatives undertaken by the Asset Management Company Reducing environmental burden Conducted disaster drills Practiced such immediate responses as confirming the status of property damage and safety of employees following a disaster, assuming the occurrence of a major earthquake directly beneath the Tokyo Metropolitan Area. Participated in 18th &EARTH Clothing Support Project A disaster drill 3R (Reduce, Reuse and Recycle) initiatives Volume of garbage recycled at five properties (Apr. 2016 Mar. 2017) Garbage emissions 522 t/year Recycled volume 497 t/year Recycling rate* 95.2% Results of events at FRI properties (Oct. Nov. 2017) 1,423 participants Facility 6,319 kg of clothing collected 51,801 in additional donations Participants An event held at Mitsui Shopping Park LaLagarden KASUKABE Results Clothing collected Additional donations Mitsui Outlet Park IRUMA 97 437 kg 2,800 LaLagarden KASUKABE 263 1,307 kg 5,287 LaLaport IWATA 234 1,214 kg 9,781 LaLaport SHIN-MISATO 295 1,256 kg 6,251 ALPARK 534 2,105 kg 27,682 &EARTH Clothing Support Project Twice a year since 2008, the Mitsui Fudosan Group organizes and executes the project, inviting the public to donate unneeded clothing at retail facilities. The clothing is then distributed to people in need through the NPO Japan Relief Clothing Center. Mitsui Outlet Park IRUMA GINZA GLASSE LaLaport IWATA * Recycling rate =Recycled volume/ garbage emissions 100 LaLagarden KASUKABE LaLaport SHIN-MISATO 24
4. Portfolio overview
Portfolio summary Property name Acquisition date Seller 1 Acquisition price Book value Appraisal value Total leasable floor space 2 Occupancy rate 2 PML 4 Age 3 (years) 1 AEON STYLE Shinagawa Seaside Aug. 2004 JT 20,100 15,248 19,100 77,547 m2 100% 15.3 14% 2 AEON MALL Ibaraki 5 Aug. 2004 JT 18,100 14,306 23,800 151,092 m2 100% 17.1 13% 3 Papillon Plaza Aug. 2004 JT 4,810 4,504 5,440 17,095 m2 100% 24.1 1% 4 Kamiikedai Tokyu Store Aug. 2004 JT 1,490 1,240 1,860 6,640 m2 100% 15.8 11% 5 Belltown Tambaguchi Eki-Mae Store Aug. 2005 JT 2,130 1,872 2,870 11,176 m2 100% 12.4 9% 6 AEON MALL NAGOYADOME-Mae Mar. 2006 JT 24,800 20,820 25,200 154,766 m2 100% 11.8 13% 7 Summit Store Takinogawa Momiji-Bashi Sep. 2006 JT 3,100 2,848 3,700 6,455 m2 100% 11.3 12% 8 Home Center Kohnan Hiroshima Minami-Machi (land interest) 6 Apr. 2007 JT 1,940 1,754 2,540 6,055 m2 100% - - 9 Frespo Tosu (land interest) Nov. 2007 JT 3,178 3,256 3,110 79,447 m2 100% - - 10 You Me Town Hiroshima Feb. 2008 JT 23,200 20,000 21,200 122,169 m2 100% 9.9 10% 11 Queen s Isetan Suginami-Momoi Jul. 2008 MF, etc. 3,560 3,366 4,110 5,212 m2 100% 13.1 12% 12 Mitsui Outlet Park IRUMA Jul. 2008 MF, etc. 19,900 16,163 22,600 98,714 m2 100% 9.8 14% 13 Costco Wholesale Warehouse Iruma (land interest) Jul. 2008 MF, etc. 2,600 2,626 2,750 24,019 m2 100% - - 14 Desigual Harajuku 7 Oct. 2008 Non-sponsor 3,100 2,902 3,400 1,149 m2 100% 19.2 14% 15 Ito-Yokado Higashi-Yamato Jan. 2009 Non-sponsor 11,600 9,837 11,100 53,374 m2 100% 14.1 12% 16 AEON TOWN Tanashi-Shibakubo Feb. 2009 MF, etc. 3,100 2,831 3,300 8,785 m2 100% 12.8 11% 17 Don Quijote Fukuoka Tenjin Dec. 2009 Non-sponsor 3,700 3,337 4,290 4,532 m2 100% 10.5 2% 18 Mitsui Shopping Park LaLaport IWATA Jul. 2010 MF, etc. 15,200 11,533 15,300 136,136 m2 100% 8.6 16% 19 GINZA GLASSE Jul. 2010 MF, etc. 13,600 12,901 15,100 5,174 m2 100% 9.8 11% 20 Shimura Shopping Center Jan. 2011 Non-sponsor 4,430 4,209 5,800 17,126 m2 100% 17.1 14% 21 Mitsui Shopping Park LaLagarden KASUKABE Feb. 2011 MF, etc. 10,000 8,716 11,200 63,415 m2 100% 10.2 13% 22 Summit Store Yokohama Okano (land interest) Feb. 2012 Non-sponsor 5,700 5,945 6,800 14,394 m2 100% - - 23 VIORO Feb. 2012 Non-sponsor 10,100 9,675 11,900 5,834 m2 100% 11.3 1% 24 QANAT Rakuhoku Jul. 2012 MF, etc. 8,800 7,953 8,640 48,303 m2 100% 17.1 9% 25 Ikebukuro Square Feb. 2013 MF, etc. 20,400 19,361 24,700 8,863 m2 100% 5.1 14% 27
Portfolio summary Property name Acquisition date Seller 1 Acquisition price Book value Appraisal value Total leasable floor space *2 Occupancy rate 2 PML 4 Age 3 (years) 26 Mitsui Shopping Park ALPARK (East Building) Feb. 2013 MF, etc. 5,400 4,912 5,500 65,603 m2 100% 27.7 12% 27 Kohnan Kawasaki-Odasakae Mall (land interest) Jan. 2014 Non-sponsor 7,000 7,069 8,950 23,393 m2 100% - - Mitsui Shopping Park LaLaport 28 SHIN-MISATO Annex Mar. 2014 MF, etc. 3,930 3,717 3,980 6,714 m2 100% 5.7 12% 29 Shinsaibashi Square Mar. 2015 MF, etc. 8,620 8,658 9,500 1,750 m2 100% 3.3 7% 30 Mitsui Shopping Park LaLaport SHIN-MISATO 8 Apr. 2015 Aug. 2016 MF, etc. 19,840 19,507 20,200 142,315 m2 100% 8.4 11% Costco Wholesale Warehouse Shin-Misato 31 (land interest) Apr. 2015 MF, etc. 3,810 3,854 3,950 30,292 m2 100% - - 32 KOJIMA x BIC CAMERA Naha Store Jan. 2016 Non-sponsor 1,850 1,922 2,450 7,301 m2 100% 11.8 6% 33 Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) Jul. 2017 Non-sponsor 4,320 4,385 4,560 28,926 m2 100% - - Total (33 properties, as of December 31, 2017) 293,408 261,243 318,900 1,433,781 m2 100% 11.6 7.65% 1. MF, etc. represents Mitsui Fudosan and its consolidated subsidiaries as well as special purpose companies in which Mitsui Fudosan has invested. 2. For properties for which pass-through type master lease contracts are concluded, the figures are as at December 31, 2017, calculated on an end tenant basis. 3. With the exclusion of land interests, the determination of property age is calculated using the weighted average method based on acquisition price. 4. PML represents the probable maximum loss in earthquake risk analysis. The values stated for AEON MALL Ibaraki and Mitsui Outlet Park IRUMA are for the store buildings. The figure for Desigual Harajuku includes the portion of the building that was demolished as of October 29, 2012. The figure for Shinsaibashi Square is for the north tower. The value listed under Total represents the PML value at December 31, 2017 of the entire portfolio (properties from No. 1 to No. 33) as a whole, not the average value of the properties in the portfolio. 5. The acquisition price is as at the time of acquisition and includes the price of a part of land sold to Ibaraki City on October 12, 2010 (Space: 118.86 m 2 ; book value: 15 million; sales price: 19 million) 6. The acquisition price is as at the time of acquisition and includes the price of the building on the property at the time ( 208 million). Said building was demolished as announced on December 2, 2016. The value given for book value at end of 27th period is that after the building s demolition. 7. The acquisition price is as at the time of acquisition and includes a portion of the site sold on July 30, 2012 (cost of sales: 259 million). 8. FRI acquired a 16% co-ownership stake on April 1, 2015, and an additional 50% co-ownership stake on August 10, 2016, but the total leasable floor space presented here is that for the entire property. The acquisition price presented is the total after the additional acquisition. 28
FRI s portfolio in graphs Land interests and other properties 9.2% Urban retail facilities 18.1% Supermarkets 6.4% Property type Regional SCs Over 20 years 39.5% 3.9% Building age 2 5 years or less 3.3% Other 33.7% Tenants Mitsui Fudosan 3 25.3% Multi-tenant contracts 9.1% Pass-through master lease contracts 10.4% Contract type Neighborhood SCs 8.7% Outlet Malls 6.6% Community SCs 11.5% 10 to 20 years 49.1% Average building age: 11.6 years 5 to 10 years 43.8% Round One 4.0% Summit 4.2% Izumi 7.7% AEON Group 25.0% Single-tenant Contracts 12.1% Master lease contracts 68.4% 5 years or less 3.4% 5 to 10 years 8.7% Over 10 years 87.8% 5 years or less 24.2% 3 years or less 22.1% Sales-linked rent 1.2% Over 10 years 23.8% Contract term Remaining contract term Period remaining until rent revision 4 Ratio of fixed rent and saleslinked rent 5 to 10 years 22.7% Over 10 years 53.1% 3 to 5 years 16.8% 5 to 10 years 37.3% Fixed rent 98.8% Average contract term: 19.0 years Average remaining contract term: 10.9 years 1. All figures are calculated based on the annualized fixed rent (excluding common area maintenance charges) of lease contracts valid as of December 31, 2017. Variable rent is not taken into account. The ratio of fixed rent and sales-linked rent is that of the 27th fiscal period. 2. Based on acquisition price, excluding properties operated as land interests. 3. Excluding tenants under pass-through master lease contracts. 4. Balance of time remaining until the next rent revision date or contract maturity date, whichever is earlier. 29
Rent revision and lease maturity schedules Property name Main tenant 1 Contract type 2 Saleslinked rent Percentage of total annual rent 3 2017 2018 2019 2020 2021 26th 27th 28th 29th 30th 31st 32nd 33rd 34th 35th Revision 1 AEON STYLE Shinagawa Seaside AEON Retail ML T 7.6% Oct-22 2 AEON MALL Ibaraki AEON Retail ML F 7.8% Apr-35 3 Papillon Plaza Royal Home Center M/P *4 F/T 2.1% Apr-19 4 Kamiikedai Tokyu Store Tokyu Store ML F 0.5% Mar-22 5 Belltown Tambaguchi Eki-Mae Store Matsumoto ML F 0.9% Aug-25 6 AEON MALL NAGOYADOME-Mae AEON Retail ML F 8.0% Mar-26 7 Summit Store Takinogawa Momiji-Bashi Summit S F 1.0% Sep-26 Maturity Lease maturity 8 Home Center Kohnan Hiroshima Minami-Machi (land interest) Kohnan Shoji S F Undisclosed Jul-37 9 Frespo Tosu (land interest) Daiwa Lease S F 1.2% Nov-27 10 You Me Town Hiroshima Izumi ML F 7.7% Feb-28 11 Queen s Isetan Suginami-Momoi Isetan Mitsukoshi Food Service ML F 1.2% Dec-24 12 Mitsui Outlet Park IRUMA Mitsui Fudosan ML F 6.6% Jul-38 13 Costco Wholesale Warehouse Iruma (land interest) Costco S F 0.8% Apr-38 14 Desigual Harajuku INTS S F 0.7% Sep-22 15 Ito-Yokado Higashi-Yamato Ito-Yokado ML T 3.9% Nov-23 19 GINZA GLASSE 5 P F/T 3.6% - 20 Shimura Shopping Center Summit ML T 1.6% Nov-20 21 Mitsui Shopping Park LaLagarden KASUKABE Mitsui Fudosan ML T 3.8% Feb-31 22 Summit Store Yokohama Okano (land interest) Summit S F 1.6% Nov-31 23 VIORO 5 P F 4.0% - 24 QANAT Rakuhoku H2O Asset Management ML T 2.8% Nov-20 25 Ikebukuro Square Round One M F 6.6% Dec-32 26 Mitsui Shopping Park ALPARK (East Building) Mitsui Fudosan ML T 2.7% Feb-33 31 Costco Wholesale Warehouse Shin-Misato (land interest) Costco S F 32 KOJIMA x BIC CAMERA Naha Store Kojima S F 33 Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) Sumitomo Mitsui Finance and Leasing S F 16 AEON TOWN Tanashi-Shibakubo AEON Town ML T 1.2% Mar-25 Undisclosed 17 Don Quijote Fukuoka Tenjin Don Quijote S F Mar-38 New Contract 18 Mitsui Shopping Park LaLaport IWATA Mitsui Fudosan ML F 6.2% Jun-30 27 Kohnan Kawasaki-Odasakae Mall (land interest) Kohnan Shoji S F 2.1% Jan-36 28 Mitsui Shopping Park LaLaport SHIN-MISATO Annex FOREVER21 P F/T 1.2% Apr-22 Undisclosed 29 Shinsaibashi Square Burberry Japan M F Undisclosed 30 Mitsui Shopping Park LaLaport SHIN-MISATO Mitsui Fudosan ML T 6.0% Mar-35 Undisclosed Undisclosed Undisclosed Revision Recontracting Revision Revision Revision Maturity Maturity Revision Undisclosed May-27 Jul-44 1. For multi-tenant properties and properties for which pass-through type master lease contracts are concluded, the end tenant that leases the largest leased floor space is shown if they lease over 30% of the total. 2. ML: Master lease contract; P: Pass-through type master lease contract (in which the amount of rent that the master lessee pays FRI is the same as the amount of rent that end tenants are contracted to pay the master lessee); S: Contract with a single tenant; M: Contract with multiple tenants; F: Fixed-term lease; T: Traditional lease 3. Figures are calculated based on the annualized fixed rent (excluding common area maintenance charges) of lease contracts valid as of December 31, 2017. 4. FRI has a direct lease contract with Royal Home Center and pass-through type master lease contracts with the other end tenants. 5. The main tenant and the rent revision and lease maturity schedules are not disclosed as the status of contracts with end tenants varies significantly. 30
5. Appendix
Statement of income 26th period (January 1, 2017 to June 30, 2017) 27th period (July 1, 2017 to December 31, 2017) Change Amount % of total Amount % of total Amount % change Operating revenue 10,011 100.0% 10,135 100.0% 124 1.2% Rent revenue real estate 1 9,947 10,110 163 Rent revenue other 2 63 24-38 Operating expenses 4,711 47.1% 4,804 47.4% 92 2.0% Expenses related to rent business 4,091 4,163 72 Property management expenses 495 488-6 Property and other taxes 1,043 1,042-0 Casualty insurance 13 13 0 Repairs and maintenance 218 317 98 Depreciation 2,117 2,072-44 Other expenses 3 203 228 25 Selling, general and administrative expenses 619 640 20 Asset management fee 498 504 6 Asset custody fee 13 13 0 Administrative service fees 21 21 0 Directors' compensations 6 6 - Other 79 94 14 Operating income 5,300 52.9% 5,331 52.6% 31 0.6% Non-operating income 6 1-5 Non-operating expenses 334 299-35 Interest expenses 321 285-36 Other 12 13 0 Ordinary income 4,971 49.7% 5,033 49.7% 61 1.2% Income before income taxes 4,971 49.7% 5,033 49.7% 61 1.2% Income taxes (after net adjustment) 0 0 0 Net income 4,970 49.7% 5,032 49.7% 61 1.2% Unappropriated retained earnings 4,971 49.7% 5,032 49.7% 61 1.2% Major factors in changes 1 Operation of 27th period acquisition (Super Viva +148 Home Zama and Super Sanwa Zama Higashihara (land interest)) and full-period operation of Home Center Kohnan Hiroshima Minami-Machi (land interest) Income from utility expenses +25 Decrease in rent due to tenant change at TSUTAYA -18 BOOK STORE TENJIN 2 Decrease due to contract termination at VIORO during the 27th period -39 3 Utility expenses +22 33
Balance sheet (assets) 26th Period (as of June 30, 2017) 27th Period (as of Dec. 31, 2017) Change Major factors in changes Amount % of total Amount % of total Amount % change Current assets 15,998 5.8% 11,483 4.2% -4,514-28.2% Cash and deposits 1 11,800 7,623-4,177 Cash and deposits in trust 1 4,031 3,683-348 Other 165 176 10 Non-current assets (including deferred assets) 258,828 94.2% 261,308 95.8% 2,480 1.0% Property, plant and equipment 2 258,770 261,255 2,484 Buildings 37,995 36,987-1,007 Structures 393 358-35 Tools, furniture and fixtures 32 30-1 Land 72,924 72,924 - Buildings in trust 33,405 32,595-810 Structures in trust 383 359-24 Machinery and equipment in trust Tools, furniture and fixtures in trust 222 200-21 41 41 0 Land in trust 3 113,359 117,744 4,385 Construction in progress in trust 12 12 - Intangible assets 1 1 0 1. Cash and deposits matching depreciation +2,072 Property acquisition during 27th period (Super -4,385 Viva Home Zama and Super Sanwa Zama Higashihara (land interest)) Partial return of security deposits -763 Decrease in leasehold deposits due to property -82 acquisition and tenant change during 27th period Consumption taxes payable -244 Loan repayment -1,000 27th period capital expenditures -171 2. 27th period capital expenditures +171 Depreciation -2,072 3. Property acquisition during 27th period (Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest)) +4,385 4. Amortization of insurance payments -3 Investments and other assets 4 56 51-4 Total assets 274,826 100.0% 272,792 100.0% -2,034-0.7% 34
Balance sheet (liabilities and net assets) 26th Period (as of June 30, 2017) 27th Period (as of Dec. 31, 2017) Change Major factors in changes Amount % of total Amount % of total Amount % change Current liabilities 21,208 7.7% 18,662 6.8% -2,546-12.0% Short-term loans payable 1 18,500 16,200-2,300 Operating accounts payable 870 895 25 Accrued expenses 257 244-12 Advances received 1,098 1,073-25 Other 2 482 248-233 Non-current liabilities 101,867 37.1% 102,317 37.5% 450 0.4% Long-term loans payable 3 64,900 66,200 1,300 Investment corporation bonds 3,000 3,000 - Tenant leasehold and security deposits 4 17,672 17,491-180 Tenant leasehold and security deposits in trust 4 16,278 15,613-665 Other 15 12 2 1. Loan repayment -1,000 Extension of short-term loans -3,500 Current portion of long-term loans payable +2,200 2. Consumption taxes payable -244 3. Extension of short-term loans +3,500 Current portion of long-term loans payable -2,200 4. Partial return of security deposits -763 Decrease in leasehold deposits due to property -82 acquisition and tenant change during 27th period 5. Net assets per unit (yen): At the end of 26th period 305,948 At the end of 27th period 306,072 Total liabilities 123,075 44.8% 120,980 44.3% -2,095-1.7% Unitholders capital 146,590 53.3% 146,590 53.7% - Total surplus 5,159 1.9% 5,221 1.9% 61 Reserve for reduction entry 188 188 - Unappropriated retained earnings 4,971 5,032 61 Total net assets 5 151,750 55.2% 151,811 55.7% 61 0.0% Total liabilities and net assets 274,826 100.0% 272,792 100.0% -2,034-0.7% 35
Statement of cash flows Cash flows from operating activities Item 26th period (January 1, 2017 to June 30, 2017) 27th period (July 1, 2017 to December 31, 2017) Income before income taxes 4,971 5,033 Depreciation and amortization 2,117 2,072 Other 980-317 Net cash provided by (used in) operating activities 8,069 6,788 Cash flows from investing activities Purchase of property, plant and equipment -39-8 Purchase of property, plant and equipment in trust -103-4,497 Repayments of tenant leasehold and security deposits -278-255 Proceeds from tenant leasehold and security deposits 1 82 Repayments of tenant leasehold and security deposits in trust -43-728 Proceeds from tenant leasehold and security deposits in trust 239 63 Payments of restricted bank deposits in trust -216-50 Proceeds from reversal of restricted bank deposits in trust 14 216 Net cash provided by (used in) investment activities -424-5,179 Cash flows from financing activities Proceeds from short-term loans payable 25,000 31,500 Repayment of short-term loans payable -27,000-30,000 Proceeds from long-term loans payable 5,000 3,500 Repayment of long-term loans payable -3,000-6,000 Redemption of investment corporation bonds -0 - Payments for investment corporation bond issuance costs -4,911-4,968 Net cash provided by (used in) financing activities -4,911-5,968 Net increase (decrease) in cash and cash equivalents 2,732-4,359 Cash and cash equivalents at beginning of period 12,462 15,194 Cash and cash equivalents at end of period 15,194 10,834 36
Key indicators NOI yield * Yield after depreciation * 7.0% 6.2% 6.3% 6.2% 6.3% 6.2% 7.0% 6.0% 5.0% 4.0% 5.6% 5.7% 5.6% 5.6% 5.3% 5.2% 5.2% 5.2% 5.0% 5.5% 6.0% 5.0% 4.0% 4.5% 4.6% 4.5% 4.6% 4.6% 4.1% 4.2% 4.1% 4.1% 4.1% 3.0% 2.0% Book 帳簿価額ベース value Acquisition 取得価格ベース鑑定価額ベース Appraisal value basis price basis basis 3.0% 2.0% 3.8% 3.8% 3.8% 3.8% 3.7% 帳簿価額ベース Book value Acquisition 取得価格ベース鑑定価額ベース Appraisal value basis price basis basis 第 23rd 期 (15/12 (Dec. 15) 月 ) 第 24th 期 (16/6 (June 16) 月 ) 第 25th 期 (16/12 (Dec. 16) 月 ) 第 26th 期 (17/6 (June. 17) 月 ) 第 27th 期 (17/12 (Dec. 17) 月 ) 第 23rd 期 (15/12 (Dec. 15) 月 ) 第 24th 期 (16/6 (June 16) 月 ) 第 25th 期 (16/12 (Dec. 16) 月 ) 第 26th 期 (17/6 (June. 17) 月 ) 第 27th 期 (17/12 (Dec. 17) 月 ) LTV / Interest-bearing debt ratio NAV per unit / BPS per unit 50% 40% 30% 41.2% 27.2% 39.1% 25.5% 42.3% 41.6% 42.2% 29.6% 28.8% 29.8% (yen) 450,000 400,000 350,000 404,873 409,596 415,987 422,315 393,714 306,307 305,620 305,829 305,948 306,072 20% 300,000 10% 0% LTV 有利子負債比率 Interest-bearing debt ratio 250,000 200,000 一口当たり NAV per NAV unit 一口当たり BPS per BPS unit 第 23rd 期 (15/12 (Dec. 15) 月 ) 第 24th 期 (16/6 (June 16) 月 ) 第 25th 期 (16/12 (Dec. 16) 月 ) 第 26th 期 (17/6 (June. 17) 月 ) 第 27th 期 (17/12 (Dec. 17) 月 ) 第 23rd 期 (15/12 (Dec. 15) 月 ) 第 24th 期 (16/6 (June 16) 月 ) 第 25th 期 (16/12 (Dec. 16) 月 ) 第 26th 期 (17/6 (June. 17) 月 ) 第 27th 期 (17/12 (Dec. 17) 月 ) * The above figures are calculated excluding extraordinary factors. 37
Leasing income and expenses by property AEON STYLE Shinagawa Seaside AEON MALL Ibaraki Papillon Plaza Kamiikedai Tokyu Store Belltown Tambaguchi Eki-Mae Store AEON MALL NAGOYADOME-Mae Summit Store Takinogawa Momiji-Bashi Home Center Kohnan Hiroshima Minami-Machi (land interest) Frespo Tosu (land interest) You Me Town Hiroshima Queen s Isetan Suginami-Momoi Mitsui Outlet Park IRUMA Real estate rent revenue Expenses related to rent business Property leasing Rent Rent Property Property Casualty Repairs and Other Total revenue revenue Total and other management Depreciation operating real estate other taxes expenses insurance maintenance expenses income NOI 1 (to acquisition price) 2 NOI yield (to book value) 26th 742 737 4 359 87 46 1 4 214 4 383 598 6.0% 7.7% 27th 742 737 4 405 87 38 1 57 214 4 336 551 5.5% 7.2% 26th 774 768 5 296 96 16 0 17 162 1 478 640 7.1% 8.9% 27th 776 771 5 267 96 16 0 5 146 1 509 656 7.2% 9.2% 26th 222 222 0 90 32 37 0 0 18 1 132 150 6.3% 6.7% 27th 222 222 0 90 32 37 0 1 17 1 132 149 6.2% 6.6% 26th 53 53-17 5 1 0-10 0 35 46 6.2% 7.4% 27th 53 53-17 5 1 0-10 0 35 46 6.2% 7.5% 26th 84 84-21 9 1 0 0 10-63 73 6.9% 7.9% 27th 84 84-21 9 1 0-10 - 63 74 7.0% 7.9% 26th 773 773-254 91 15 0 0 146-519 665 5.4% 6.3% 27th 773 773-258 91 15 1 3 146-515 661 5.3% 6.4% 26th 99 99-20 6 1 0 0 12-78 90 5.8% 6.3% 27th 99 99-20 6 1 0-12 - 78 90 5.9% 6.4% 26th Not disclosed 2-5 - - 27th Not 2 disclosed 66 6.8% 7.6% 26th 118 118 0 16 16 - - - - 0 101 101 6.4% 6.2% 27th 118 118 0 16 16 - - - - 0 101 101 6.4% 6.2% 26th 745 745 0 247 89 14 0-142 - 497 640 5.5% 6.4% 27th 745 745 0 247 89 14 0-142 - 497 640 5.5% 6.4% 26th 112 112-23 8 2 0 0 11 0 89 100 5.7% 6.0% 27th 112 112-52 8 3 0 29 11 0 59 70 4.0% 4.2% 26th 714 714 0 319 47 16 1 42 211 0 395 606 6.1% 7.4% 27th 700 700 0 305 47 15 1 28 211 0 395 607 6.1% 7.5% 1. NOI = Property leasing operating income + Depreciation (same shall apply to all succeeding occurrences of NOI) 2. Only NOI is disclosed, as FRI has not obtained the permission of the lessee to disclose other information. 38
Leasing income and expenses by property Costco Wholesale Warehouse Iruma (land interest) Desigual Harajuku Ito-Yokado Higashi-Yamato AEON TOWN Tanashi-Shibakubo Don Quijote Fukuoka Tenjin Mitsui Shopping Park LaLaport IWATA GINZA GLASSE Shimura Shopping Center Mitsui Shopping Park LaLagarden KASUKABE Summit Store Yokohama Okano (land interest) VIORO Real estate rent revenue Expenses related to rent business Property leasing Rent Rent Property Property Casualty Repairs and Other Total revenue revenue Total and other management Depreciation operating real estate other taxes expenses insurance maintenance expenses income NOI (to acquisition price) NOI yield (to book value) 26th 78 78 0 4 4 - - - - - 73 73 5.7% 5.6% 27th 78 78 0 4 4 - - - - - 73 73 5.7% 5.6% 26th 66 66-12 7 1 0-3 0 53 57 3.7% 3.9% 27th 66 66-12 7 1 0-3 0 53 57 3.7% 3.9% 26th 380 380-168 41 8 0 2 115 0 211 327 5.6% 6.6% 27th 380 380-166 41 8 0 1 115 0 213 328 5.7% 6.7% 26th 114 114-31 11 2 0-17 0 83 100 6.5% 7.1% 27th 114 114-35 11 3 0 3 17 0 79 97 6.3% 6.9% 26th 147 147-54 8 4 0 2 32 5 92 125 6.8% 7.5% 27th Not 91 5.0% 5.5% disclosed* 26th 601 601 0 369 71 13 0 18 265 0 231 496 6.5% 8.4% 27th 600 600 0 370 71 13 0 19 265 0 229 495 6.5% 8.6% 26th 415 415-219 42 65 0 8 55 47 196 252 3.7% 3.9% 27th 420 420-238 42 67 0 16 56 55 182 238 3.5% 3.7% 26th 158 158 0 46 15 3 0 0 27 0 111 138 6.3% 6.6% 27th 158 158 0 46 15 3 0-27 0 111 139 6.3% 6.6% 26th 370 370-177 37 8 0 16 114 0 192 307 6.1% 7.0% 27th 370 370-207 37 9 0 45 114 0 163 277 5.6% 6.4% 26th 154 147 7 10 10 - - - - - 144 144 5.1% 4.9% 27th 154 147 7 10 10 - - - - - 144 144 5.1% 4.9% 26th 540 495 44 315 39 122 0 14 52 86 224 276 5.5% 5.7% 27th 532 526 5 327 39 116 0 20 52 97 204 257 5.1% 5.3% 26th 276 276-206 38 8 0 66 93 0 69 163 3.7% 4.1% QANAT Rakuhoku 27th 276 276-157 38 7 0 46 65 0 119 184 4.2% 4.6% * Only NOI is disclosed, as FRI has not obtained the permission of the lessee to disclose other information. 39
Leasing income and expenses by property Ikebukuro Square Mitsui Shopping Park ALPARK (East Building) Kohnan Kawasaki- Odasakae Mall (land interest) Mitsui Shopping Park LaLaport SHIN-MISATO Annex Shinsaibashi Square Mitsui Shopping Park LaLaport SHIN-MISATO Costco Wholesale Warehouse Shin-Misato (land interest) KOJIMA x BIC CAMERA Naha Store Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) Total Real estate rent revenue Expenses related to rent business Property leasing Rent Rent Property Property Casualty Repairs and Other Total revenue revenue Total and other management Depreciation operating real estate other taxes expenses insurance maintenance expenses income NOI (to acquisition price) 1 NOI yield (to book value) 26th 690 690 0 261 40 61 0 0 120 38 429 550 5.4% 5.6% 27th 697 697 0 269 39 63 0 0 120 44 427 548 5.4% 5.7% 26th 264 264-152 56 5 2 2 85-111 197 7.3% 7.9% 27th 264 264-152 56 5 2 1 85-111 197 7.3% 8.0% 26th 208 208 0 20 20 0 - - - 0 187 187 5.4% 5.3% 27th 208 208 0 20 20 0 - - - 0 187 187 5.4% 5.3% 26th 140 140 0 72 7 13 0 2 34 15 67 101 5.2% 5.4% 27th 145 145 0 74 7 14 0-34 18 70 104 5.3% 5.6% 26th Not 2 disclosed 174 4.0% 4.0% 27th Not 2 disclosed 174 4.0% 4.0% 26th 586 586-231 60 12 1 14 142 0 354 496 5.0% 5.1% 27th 586 586-232 60 12 1 15 142 0 353 496 5.0% 5.1% 26th Not 2 disclosed 86 4.5% 4.5% 27th Not 2 disclosed 86 4.5% 4.5% 26th Not 2 disclosed 68 7.4% 7.1% 27th Not 2 disclosed 70 7.6% 7.3% 26th - - - - - - - - - - - - - - 27th Not disclosed 2 76 - - 26th 10,011 9,947 63 4,091 1,043 495 13 218 2,117 203 5,920 8,037 5.6% 6.3% 27th 10,135 10,110 24 4,163 1,042 488 13 317 2,072 228 5,972 8,044 5.5% 6.2% 1. NOI yield is not shown for the property acquired in the 27th period. 2. Only NOI is disclosed, as FRI has not obtained the permission of the lessee to disclose other information. 40
Appraisal value Area Tokyo metropolitan area Property name Acquisition date Acquisition price 1. CR = Cap rate determined by the direct reduction approach 2. The cap rate for these properties is calculated using the residual land method. 3. The values shown are for FRI s 66% co-ownership stake. 4. Appraisal value at the end of the 26th period is based on appraisal value determined at the time of acquisition. Book value at end of 27th period 27th period (December 31, 2017) 26th period (June 30, 2017) Changes Appraisal Appraisal Appraisal value CR 1 value CR 1 value AEON STYLE Shinagawa Seaside Aug. 2004 20,100 15,248 19,100 5.7% 19,100 5.7% 0 0.0% Kamiikedai Tokyu Store Aug. 2004 1,490 1,240 1,860 4.7% 1,820 4.8% +40-0.1% Summit Store Takinogawa Momiji-Bashi Sep. 2006 3,100 2,848 3,700 4.9% 3,630 5.0% +70-0.1% Queen s Isetan Suginami-Momoi Jul. 2008 3,560 3,366 4,110 4.9% 4,110 4.9% 0 0.0% Mitsui Outlet Park IRUMA Jul. 2008 19,900 16,163 22,600 5.4% 22,600 5.4% 0 0.0% Costco Wholesale Warehouse Iruma (land interest) Jul. 2008 2,600 2,626 2,750 5.4% 2,750 5.4% 0 0.0% Desigual Harajuku Oct. 2008 3,100 2,902 3,400 3.2% 3,400 3.2% 0 0.0% Ito-Yokado Higashi-Yamato Jan. 2009 11,600 9,837 11,100 5.5% 11,100 5.5% 0 0.0% AEON TOWN Tanashi-Shibakubo Feb. 2009 3,100 2,831 3,300 5.6% 3,300 5.6% 0 0.0% GINZA GLASSE Jul. 2010 13,600 12,901 15,100 3.0% 15,100 3.0% 0 0.0% Shimura Shopping Center Jan. 2011 4,430 4,209 5,800 4.5% 5,690 4.6% +110-0.1% Mitsui Shopping Park LaLagarden KASUKABE Feb. 2011 10,000 8,716 11,200 5.3% 11,000 5.4% +200-0.1% Summit Store Yokohama Okano (land interest) 2 Feb. 2012 5,700 5,945 6,800 4.6% 6,630 4.7% +170-0.1% Ikebukuro Square Feb. 2013 20,400 19,361 24,700 4.3% 24,400 4.4% +300-0.1% Kohnan Kawasaki-Odasakae Mall (land interest) 2 Jan. 2014 7,000 7,069 8,950 4.5% 8,710 4.6% +240-0.1% Mitsui Shopping Park LaLaport SHIN-MISATO Annex Mar. 2014 3,930 3,717 3,980 5.2% 3,980 5.2% 0 0.0% Mitsui Shopping Park LaLaport SHIN-MISATO 3 Apr. 2015 Major factor in increase/ decrease CR 1 CR 1 Other 19,840 19,507 20,200 4.8% 20,300 4.8% -100 0.0% Aug. 2016 Costco Wholesale Warehouse Shin-Misato (land interest) Apr. 2015 3,810 3,854 3,950 4.4% 3,950 4.4% 0 0.0% Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) 4 Jul. 2017 4,320 4,385 4,560-4,550 - +10 - Chubu AEON MALL NAGOYADOME-Mae Mar. 2006 24,800 20,820 25,200 5.2% 25,200 5.2% 0 0.0% Mitsui Shopping Park LaLaport IWATA Jul. 2010 15,200 11,533 15,300 6.1% 15,400 6.1% -100 0.0% Kansai AEON MALL Ibaraki Aug. 2004 18,100 14,306 23,800 5.2% 23,800 5.2% 0 0.0% Belltown Tambaguchi Eki-Mae Store Aug. 2005 2,130 1,872 2,870 5.0% 2,820 5.1% +50-0.1% QANAT Rakuhoku Jul. 2012 8,800 7,953 8,640 4.8% 9,010 4.9% -370-0.1% Shinsaibashi Square Mar. 2015 8,620 8,658 9,500 3.5% 9,010 3.7% +490-0.2% Chugoku Home Center Kohnan Hiroshima Minami-Machi Kyushu/ Okinawa (land interest) Apr. 2007 1,940 1,754 2,540 5.2% 2,540 5.2% 0 0.0% You Me Town Hiroshima Feb.2008 23,200 20,000 21,200 6.3% 21,600 6.2% -400 +0.1% Mitsui Shopping Park ALPARK (East Building) Feb.2013 5,400 4,912 5,500 6.4% 5,520 6.4% -20 0.0% Papillon Plaza Aug. 2004 4,810 4,504 5,440 4.9% 5,330 5.0% +110-0.1% Frespo Tosu (land interest) Nov. 2007 3,178 3,256 3,110 6.5% 3,060 6.6% +50-0.1% Don Quijote Fukuoka Tenjin Dec. 2009 3,700 3,337 4,290 4.2% 4,180 4.3% +110-0.1% VIORO Feb. 2012 10,100 9,675 11,900 3.8% 11,900 3.9% 0-0.1% KOJIMA x BIC CAMERA Naha Store Jan. 2016 1,850 1,922 2,450 5.6% 2,410 5.7% +40-0.1% Total 293,408 261,243 318,900 317,900 +1,000 Unrealized gain: 57.6 billion (up 3.0 billion from 26th period) 41
Appraisal value (supplement) Area Tokyo metropolitan area Property name Appraisal value 27th period (December 31, 2017) 26th period (June 30, 2017) 1. CR = Cap rate determined by the direct reduction approach 2. DR = Discount rate determined by the discounted cash flow approach 3. TCR = Terminal cap rate determined by the discounted cash flow approach 4. The cap rate for these properties is calculated using the residual land method. 5. The appraisal values are for FRI s 66% co-ownership stake. 6. Appraisal value at the end of the 26th period is based on appraisal value determined at the time of acquisition. Direct reduction approach Discounted cash flow approach Appraisal value Direct reduction approach Discounted cash flow approach CR 1 DR 2 TCR 3 CR 1 DR 2 TCR 3 AEON STYLE Shinagawa Seaside 19,100 5.7% 5.6% 6.1% 19,100 5.7% 5.6% 6.1% Kamiikedai Tokyu Store 1,860 4.7% 4.4% 4.8% 1,820 4.8% 4.5% 4.9% Summit Store Takinogawa Momiji-Bashi 3,700 4.9% 4.5% 5.0% 3,630 5.0% 4.6% 5.1% Queen s Isetan Suginami-Momoi 4,110 4.9% 4.6% 5.0% 4,110 4.9% 4.6% 5.0% Mitsui Outlet Park IRUMA 22,600 5.4% 5.2% 5.6% 22,600 5.4% 5.2% 5.6% Costco Wholesale Warehouse Iruma (land interest) 2,750 5.4% 4.8% 5.7% 2,750 5.4% 4.8% 5.7% Desigual Harajuku 3,400 3.2% 3.0% 3.4% 3,400 3.2% 3.0% 3.4% Ito-Yokado Higashi-Yamato 11,100 5.5% 5.3% 5.7% 11,100 5.5% 5.3% 5.7% AEON TOWN Tanashi-Shibakubo 3,300 5.6% 5.3% 5.7% 3,300 5.6% 5.3% 5.7% GINZA GLASSE 15,100 3.0% 2.8% 3.2% 15,100 3.0% 2.8% 3.2% Shimura Shopping Center 5,800 4.5% 4.6% 4.7% 5,690 4.6% 4.7% 4.8% Mitsui Shopping Park LaLagarden KASUKABE 11,200 5.3% 5.1% 5.5% 11,000 5.4% 5.2% 5.6% Summit Store Yokohama Okano (land interest) 4 6,800 4.6% 4.4% 6,630 4.7% 4.5% Ikebukuro Square 24,700 4.3% 4.1% 4.5% 24,400 4.4% 4.2% 4.6% Kohnan Kawasaki-Odasakae Mall (land interest) 4 8,950 4.5% 4.3% 8,710 4.6% 4.4% Mitsui Shopping Park LaLaport SHIN-MISATO Annex 3,980 5.2% 5.0% 5.4% 3,980 5.2% 5.0% 5.4% Mitsui Shopping Park LaLaport SHIN-MISATO 5 20,200 4.8% 4.5% 4.9% 20,300 4.8% 4.5% 4.9% Costco Wholesale Warehouse Shin-Misato (land interest) 3,950 4.4% 4.5% 4.3% 3,950 4.4% 4.5% 4.3% Super Viva Home Zama and Super Sanwa Zama Higashihara (land interest) 6 4,560-4.0% - 4,550-4.0% - Chubu AEON MALL NAGOYADOME-Mae 25,200 5.2% 4.9% 5.3% 25,200 5.2% 4.9% 5.3% Mitsui Shopping Park LaLaport IWATA 15,300 6.1% 5.9% 6.3% 15,400 6.1% 5.9% 6.3% Kansai AEON MALL Ibaraki 23,800 5.2% 5.0% 5.4% 23,800 5.2% 5.0% 5.4% Belltown Tambaguchi Eki-Mae Store 2,870 5.0% 4.6% 5.0% 2,820 5.1% 4.7% 5.1% QANAT Rakuhoku 8,640 4.8% 4.5% 4.9% 9,010 4.9% 4.6% 5.0% Shinsaibashi Square 9,500 3.5% 3.3% 3.7% 9,010 3.7% 3.5% 3.9% Chugoku Home Center Kohnan Hiroshima Minami-Machi (land Kyushu/ Okinawa interest) 2,540 5.2% 4.8% - 2,540 5.2% 4.8% - You Me Town Hiroshima 21,200 6.3% 6.0% 6.4% 21,600 6.2% 5.9% 6.3% Mitsui Shopping Park ALPARK (East Building) 5,500 6.4% 6.2% 6.7% 5,520 6.4% 6.2% 6.7% Papillon Plaza 5,440 4.9% 4.6% 5.0% 5,330 5.0% 4.7% 5.1% Frespo Tosu (land interest) 3,110 6.5% 7.2% - 3,060 6.6% 7.3% - Don Quijote Fukuoka Tenjin 4,290 4.2% 4.0% 4.4% 4,180 4.3% 4.1% 4.5% VIORO 11,900 3.8% 3.9% 4.0% 11,900 3.9% 4.0% 4.1% KOJIMA x BIC CAMERA Naha Store 2,450 5.6% 5.4% 5.8% 2,410 5.7% 5.5% 5.9% 42
Borrowings and bonds Short-term borrowings Short-term borrowings Total Amount Drawdown Loan period amount Lender No. Interest rate Maturity date date (approximate) 4,500 Mizuho Bank, Ltd. 1 3,500 0.08545% 1/19/2018 2/19/2018 1 month 2 1,000 0.06077% 2/1/2018 2/19/2018 2 weeks 1,000 The 77 Bank, Ltd. 3 1,000 0.08545% 1/19/2018 2/19/2018 1 month Total short-term borrowings 5,500 (as of February 15, 2018) Remarks Unsecured/ Unguaranteed Long-term borrowings (as of February 15, 2018) Long-term borrowings Total amount Lender 15,500 Sumitomo Mitsui Banking Corporation No. Amount Interest rate Drawdown date Maturity date Loan period (approximate) 1 2,000 1.27750% 6/20/2011 6/20/2018 7.0 years 2 3,000 1.16875% 2/20/2012 2/20/2020 8.0 years 3 1,000 1.01125% 8/20/2012 8/20/2020 8.0 years 4 3,000 1.15625% 2/1/2013 2/1/2023 10.0 years 5 1,500 0.60848% 5/19/2014 11/19/2020 6.5 years 6 2,000 0.27500% 7/2/2015 7/2/2019 4.0 years 7 2,000 0.16830% 6/20/2017 6/21/2021 4.0 years 8 1,000 0.13830% 8/29/2017 8/30/2021 4.0 years 11,500 Mitsubishi UFJ Trust and Banking 9 2,000 1.27750% 6/20/2011 6/20/2018 7.0 years Corporation 10 2,500 0.82000% 2/1/2013 2/1/2021 8.0 years 11 2,000 0.68500% 2/19/2015 2/19/2025 10.0 years 12 1,500 0.54400% 3/2/2015 3/4/2024 9.0 years 13 1,500 0.62000% 3/2/2015 3/3/2025 10.0 years 14 1,000 Note 3 0.88600% 7/2/2015 7/2/2027 12.0 years 15 1,000 0.46130% 3/9/2016 3/9/2028 12.0 years 10,500 Development Bank of Japan Inc. 16 2,000 1.20875% 8/19/2013 8/21/2023 10.0 years 17 1,500 1.17000% 3/17/2014 5/19/2025 11.2 years 18 2,000 0.35880% 3/9/2016 3/9/2027 11.0 years 19 1,000 0.37190% 4/19/2016 7/20/2027 11.3 years 20 4,000 0.33415% 8/9/2016 2/9/2028 11.5 years 5,800 Mizuho Bank, Ltd. 21 1,500 1.30750% 5/19/2011 5/21/2018 7.0 years 22 1,500 0.90500% 3/15/2013 3/15/2022 9.0 years 23 1,300 Note 3 0.59750% 7/22/2014 7/19/2022 8.0 years 24 1,500 0.21076% 7/19/2017 1/19/2022 4.5 years Remarks Unsecured/ Unguaranteed 1. Repayment method is lump-sum repayment for all borrowings. 2. All interest rates on borrowings (except for those covered by note 3) are fixed rates. 3. These borrowings have been swapped into fixed rates to avoid the risk of interest rate fluctuations. The rates indicated are those at the time the rate swap contracts were formed. 43
Borrowings and bonds Long-term borrowings Total amount Lender No. Amount Interest rate Drawdown date Maturity date Loan period (approximate) 5,700 Sumitomo Mitsui Trust Bank, Limited 25 26 2,200 1,500 1.04125% 0.27500% 12/16/2011 7/2/2015 12/14/2018 7/2/2019 7.0 years 4.0 years 27 2,000 0.30874% 11/30/2015 11/30/2021 6.0 years 4,400 Mizuho Trust & Banking Co., Ltd. 28 2,500 0.69000% 2/1/2013 2/3/2020 7.0 years 29 1,900 0.15380% 3/9/2016 3/11/2024 8.0 years 4,000 The Norinchukin Bank 30 2,000 0.77250% 7/18/2013 7/18/2019 6.0 years 31 1,000 Note 3 0.33300% 1/7/2015 1/23/2023 8.0 years 32 1,000 0.21750% 1/23/2018 1/23/2023 5.0 years 4,000 THE BANK OF FUKUOKA, LTD. 33 1,000 0.33500% 11/21/2016 11/24/2026 10.0 years 34 2,000 0.42500% 2/24/2017 2/24/2027 10.0 years 35 1,000 0.35630% 2/1/2018 2/19/2026 8.1 years 2,500 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 36 1,000 1.28625% 8/19/2011 8/19/2019 8.0 years 37 1,500 0.99000% 2/24/2012 2/22/2019 7.0 years 2,000 The Daishi Bank, Ltd. 38 1,000 Note 3 0.04805% 2/10/2016 2/10/2023 7.0 years 39 1,000 0.29785% 8/1/2017 2/19/2025 7.6 years 2,000 The Iyo Bank, Ltd. 40 1,000 Note 3 0.61150% 4/1/2015 5/14/2025 10.1 years 41 1,000 0.09000% 11/21/2016 11/22/2021 5.0 years 2,000 The Yamaguchi Bank, Ltd. 42 1,000 0.81125% 8/18/2014 8/19/2024 10.0 years 43 1,000 0.56000% 6/19/2017 6/19/2029 12.0years 1,000 Resona Bank, Limited. 44 1,000 Note 3 0.46490% 3/2/2015 3/4/2024 9.0 years 1,000 The Hiroshima Bank, Ltd. 45 1,000 Note 3 0.40250% 11/25/2014 11/25/2021 7.0 years 1,000 The Gunma Bank, Ltd. 46 1,000 Note 3 0.27100% 12/16/2014 12/16/2020 6.0 years 1,000 THE HACHIJUNI BANK, LTD. 47 1,000 Note 3 0.25190% 11/19/2015 5/19/2022 6.5 years 1,000 The Musashino Bank, Ltd. 48 1,000 0.45333% 3/25/2014 5/27/2019 5.2 years 1,000 The 77 Bank, Ltd. 49 1,000 0.41130% 12/22/2016 12/22/2026 10.0 years Total long-term borrowings 75,900 (as of February 15, 2018) Remarks Unsecured/ Unguaranteed Investment corporation bonds Investment corporation bonds Total amount Issue No. Amount Interest rate Issue date Maturity date Period Remarks 3,000 2nd Investment corporation bonds 1 3,000 0.708% 11/25/2016 11/25/2031 15.0 years Total Investment corporation bonds 3,000 1. Repayment method is lump-sum repayment for all borrowings. 2. All interest rates on borrowings (except for those covered by note 3) are fixed rates. 3. These borrowings have been swapped into fixed rates to avoid the risk of interest rate fluctuations. The rates indicated are those at the time the rate swap contracts were formed. (as of February 15, 2018) Unsecured/ Unguaranteed 44
Ratings and indices Ratings Inclusion in global REIT indices FRI maintains top-level ratings among J-REITs, making its investment units eligible for purchase by the Bank of Japan. (as of December 31, 2017) Rating Firm Category Rating Outlook Indices JCR Long-term issuer AA Stable FTSE EPRA/NAREIT Global Real Estate Index R&I Issuer AA- Stable Dow Jones Global Select REIT Index Long-term A+ Stable S&P Global REIT Index/S&P Developed REIT Index S&P Short-term A-1 Stable GPR 250 Index/GPR 250 REIT Index (Logo presented above is based on the websites of the aforementioned agencies) 45
Leasehold and security deposits and depreciation Leasehold and security deposit features Since FRI contracts long-term leases, it can use leasehold and security deposits to procure significant long-term funding. Since FRI holds many security deposits at zero interest, these deposits provide a source of low-cost funding. Remaining period until full repayment (As of December 31, 2017) Average remaining years until full repayment of leasehold and security deposits: 8.9 years Schedule of security deposit repayment (billion yen) 202.0 億円 Within 5 years 36.2% Repayment starts at You Me Town Hiroshima Over 5 years, up to 10 years 24.4% Repayment ends at AEON STYLE Shinagawa Over 20 years Over 10 years, Over 15 years, up to 15 years up to 20 years 14.9% 20.6% Over 5 years: Approx. 60% Over 10 years: Approx. 40% 4.0% Utilizing depreciation Utilizing capital equivalent to each period s depreciation enables aggressive strategic investment in addition to the repayment of security deposits. ( 百万円 ) 2,000 1,500 1,000 500 0 1,636 96 Property acquisition, etc. 1,161 92 1,608 83 Large-scale renovations 712 411 32 879 657 114 Ordinary capital expenditure 1,072 122 487 508 1,011 516 1,003 516 1,003 1,637 763 276 763 460 33 1,306 87 Repayment of security deposits 1,715 125 1,138 171 1,450 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 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 158 28th (forecast) 101.0 億円 Repayment ends at NAGOYADOME-Mae Repayment ends at You Me Town Hiroshima 2013 2014 2015 2016 2017 2018 0 億円 0 2018 2018 年 2019 2020 2020 年 2021 2022 2022 年 2023 2024 2024年 2025 2026 2026 年 2027 2028 2028 年 46
Growth cycle and property acquisitions ース) 公Public offerings 募増資March 2008 Third-party allotment July 2008 July 2010 July 2012 March 2013 一口当たり分配金( 円) 資産規Distribution per unit (yen) LTV Asset size (acquisition price basis) 模( 取得価格ベ 9,000 4,771 50.0% 40.0% 9.3% 8.3% 5,622 6,045 Acquisitions スポンサー from からの取得 the sponsor 14.3% 資産規模 Asset size ( 億円 (billion ) yen) 8,648 7,218 8,846 8,922 8,980 9,205 9,274 9,368 9,294 9,097 9,239 9,299 9,991 9,191 9,173 9,405 10,211 9,707 9,360 9,695 9,694 9,903 10,022 10,146 10,080 Track record of stable distributions Sound, careful control of LTV Approx. 42% 34.0% 35.2% 35.9% 37.5% 41.0% 45.5% 46.2% 49.6% 45.7% 46.8% 41.0% 46.3% 42.3% 43.6% 42.5% 41.6% 41.0% 41.2% 39.2% 39.1% 42.2% 38.0%41.7% 37.6% Acquisitions スポンサー外 not からの取得 from the sponsor Property sales Seeking to grow FRI s asset size to maintain and improve the stability of the earnings base 648 648 669 917 948 967 999 1,231 1,596 1,743 1,780 1,780 2,068 2,212 2,212 2,370 2,458 2,716 2,592 2,678 2,659 2,831 2,831 2,739 2,890 2,890 2,934 2,934 第 1st 1 期 2nd 第 2 期 3rd 第 3 期 4th 第 4 期 5th 第 5 期 6th 第 6 期 7th 第 7 期 8th 第 8 期 9th 第 9 期 10th 第期 11th 第期 12th 第期 13th 第期 14th 第期 15th 第期 16th 第期 17th 第期 18th 第期 19th 第期 20th 第期 21st 第期 22nd 第期 23rd 第期 24th 第期 25th 第期 26th 第期 27th 第期第 28th 期 ( 予想 )** (04/12 Dec. 04 期 ) (05/6 Jun. 05 期 ) (05/12 Dec. 05 期 ) (06/6 Jun. 06 期 ) (06/12 Dec. 06 期 ) Jun. 07 (07/6 期 ) (07/12 Dec. 07 期 ) (08/6 Jun. 08 期 ) (08/12 Dec. 08 期 ) (09/6 Jun. 09 期 ) (09/12 Dec. 09 期 ) Jun. 10 (10/6 期 ) (10/12 Dec. 10 期 ) Jun. 11 (11/6 期 ) (11/12 Dec. 11 期 ) Jun. 12 (12/6 期 ) (12/12 Dec. 12 期 ) Jun. 13 (13/6 期 ) (13/12 Dec. 13 期 ) Jun. (14/6 期 14 ) (14/12 Dec. 14 期 ) Jun. 15 (15/6 期 ) (15/12 Dec. 15 期 ) Jun. 16 (16/6 期 ) Dec. (16/12 期 16 ) Jun. 17 (17/6 期 ) Dec. (17/12 17 期 ) Jun. 18 (18/6 期 ) Property sale Sponsor Japan Tobacco March 2008 onward: Mitsui Fudosan *FRI implemented a two-for-one split of its investment units effective January 1, 2014. Distributions before the split have been divided by two and truncated to the nearest yen. ** Distribution per unit (DPU), LTV and asset size forecasts for the 28th period are given as the figures announced in Summary of Financial Results for the 27th Fiscal Period, published February 15, 2018. 47
Assets acquired from the sponsor (Mitsui Fudosan) Steady track record of property acquisitions via the sponsor s robust pipeline Properties acquired from Mitsui Fudosan 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 Queen s Isetan Suginami-Momoi 3.5 billion Mitsui Outlet Park IRUMA 19.9 billion Costco Wholesale Warehouse Iruma (land interest) 2.6 billion AEON TOWN Tanashi-Shibakubo 3.1 billion 3,100 GINZA GLASSE 13.6 billion Mitsui Shopping Park LaLaport IWATA 15.2 billion 28,800 26,060 26,060 29,160 Mitsui Shopping Park LaLagarden KASUKABE 10.0 billion 10,000 57,960 QANAT Rakuhoku 8.8 billion Average annual acquisition price: 13,876 million 8,800 67,960 Ikebukuro Square 20.4 billion Mitsui Shopping Park ALPARK (East Building) 5.4 billion 25,800 76,760 Mitsui Shopping Park LaLaport SHIN-MISATO Annex 3.9 billion Cumulative assets acquired from Mitsui Fudosan, etc. 3,930 Shinsaibashi Square 8.6 billion Mitsui Shopping Park LaLaport SHIN-MISATO (16%) 4.7 billion Costco Wholesale Warehouse Shinmisato (land interest) 3.8 billion 17,170 102,560 106,490 Mitsui Shopping Park LaLaport SHIN-MISATO (50%) 15.1 billion Acquisition resources Non-sponsor Mitsui Fudosan, 17.7% etc. 47.3% 9 properties 51.8 bn Japan Tobacco 35.1% 2008 8th/9th 年 6/12 期 10th/11th 2009 年 6/12 期 2010 12th/13th 年 6/12 期 2011 14th/15th 年 6/12 期 2012 16th/17th 年 6/12 期 2013 18th/19th 年 6/12 期 2014 20th/21st 年 6/12 期 2015 22nd/23rd 年 6/12 期 2016 24th/25th 年 6/12 期 2017 26th/27th 年 6/12 期 15,100 123,660 Total acquisition price: 293.4 billion 10 properties 102.8 bn 138,760 14 properties 138.7 bn (As of Feb. 15, 2018 48
Mitsui Fudosan s retail facility development Breakdown of Mitsui Fudosan s inventory of property for sale to investors Main retail facility projects under development As of March 31, 2017 Opening year Project name Location Overseas rental assets in operation 8% Logistics facilities in operation 8% Rental housing in operation 6% Total: Approx. 873.5 billion Retail facilities in operation 14% 2014 LaLa terrace MUSASHIKOSUGI MITSUI OUTLET PARK SAPPORO KITA-HIROSHIMA (2nd stage) MITSUI OUTLET PARK KISARAZU (2nd stage) LaLaport KASHIWANOHA (North Building) Akarenga TERRACE IIDABASHI SAKURA TERRACE LaLaport IZUMI Shin-Kawasaki Square LaLaport FUJIMI MITSUI OUTLET PARK KLIA SEPANG (1st stage) Kawasaki City, Kanagawa Kitahiroshima City, Hokkaido Kisarazu City, Chiba Kashiwa City, Chiba Sapporo City, Hokkaido Chiyoda City, Tokyo Izumi City, Osaka Kawasaki City Kanagawa Fujimi City, Saitama Selangor, Malaysia MITSUI OUTLET PARK HOKURIKU OYABE Oyabe City, Toyama Office buildings in operation 20% Planned & under development 45% 2015 MITSUI OUTLET PARK MAKUHARI (3rd stage) LaLaport EBINA LaLaport EXPOCITY Chiba City, Chiba Ebina City, Kanagawa Suita City, Osaka Mitsui Outlet Park LINKOU New Taipei, Taiwan 2016 LaLaport SHONAN HIRATSUKA Hiratsuka City, Kanagawa Mitsui Fudosan s model for joint value creation with investors Property sales to various investors REIT sponsored by the Mitsui Fudosan Group, etc. 2017 2018 SAKAE GLOBE KICHIJOJI SQUARE MITSUI OUTLET PARK JAZZ DREAM NAGASHIMA (5th stage) MITSUI OUTLET PARK KLIA SEPANG (2nd stage) LaLaport NAGOYA KOMEI MITSUI OUTLET PARK KISARAZU (3rd stage) Shinsaibashi-suji 1-chome Project Nagoya City, Aichi Musashino City, Tokyo Kuwana City, Mie Selangor, Malaysia Nagoya City, Aichi Kisarazu City, Chiba Osaka City, Osaka Buyers commission property management Institutional investors, corporations, etc. Prepared from data in Mitsui Fudosan s Investor Presentation February 2018 MITSUI OUTLET PARK TAICHUNG PORT Taichung, Taiwan 2019 LaLaport NUMAZU Numazu City, Shizuoka 2021 TBD MITSUI OUTLET PARK KLIA SEPANG (3rd stage) Selangor, Malaysia LaLaport Kuala Lumpur Kuala Lumpur, Malaysia Retail Facility Development Project in Togocho, Aichi Aichi-gun, Aichi Miyashita Park Project Shibuya City, Tokyo Prepared from data in Mitsui Fudosan s Investor Presentation February 2018 49
Mitsui Fudosanʼs retail facility operation Mitsui Fudosanʼs retail facility operation Mitsui Fudosan owns and operates retail facilities across Japan, mainly in the Tokyo metropolitan and Kansai areas Regional SC Mitsui Outlet Park Urban retail facilities Other Hokkaido Tohoku LaLaport SHONAN HIRATSUKA MITSUI OUTLET PARK SAPPORO KITAHIROSHIMA LaLaport FUJIMI Chugoku Kansai Chubu Tokyo metropolitan area Kyushu Tokyo Midtown COREDO Muromachi 1 Rental revenue of Mitsui Fudosan s retail facilities (non-consolidated) Number of facilities 114 Total floor space Approx. 5,200,000 m 2 Leased floor space Approx. 2,900,000 m 2 Tenant stores Approx. 7,700 Tenant companies Approx. 2,300 Source: Mitsui Fudosan. As of October 1, 2017. Includes properties operated and managed on a consignment basis as well as three overseas properties. 250,000 200,000 150,000 100,000 50,000 0 157,716 169,894 148,025 129,235 123,114 118,823 87,393 103,191 62,091 45,947 51,716 34,657 36,935 37,601 Source: Fact books for the years ended March 31, 2002-2017, Mitsui Fudosan 215,221 201,371 2002 2002 年 2003 2003 年 2004 2004 年 2005 2005 年 2006 2006 年 2007 2007 年 2008 2008 年 2009 2009 年 2010 2010 年 2011 2011 年 2012 2012 年 2013 2013 年 2014 2014 年 2015 2015 年 2016 2016 年 2017 2017 年 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 3 月期 50