Securities Code : 8977

Table of Contents

1. Executive Summary ・・・・・・・・・・・・・・・・・・・ 2
2. Overview of 4th Public Offering and New Properties ・・・・・10
3. External Growth Strategies ・・・・・・・・・・・・・・・・19
4. Internal Growth Strategies ・・・・・・・・・・・・・・・・26
5. Financial Strategies ・・・・・・・・・・・・・・・・・・・ 36
6. Development Status in Osaka and initiatives of Hankyu REIT ・・ 40
7. Overview of Financial Results for 26th Fiscal Period ・・・・・ 45
8. APPENDIX・・・・・・・・・・・・・・・・・・・・・・・ 51
This material includes forward-looking statements based on present assumptions and future outlook.
Actual results may differ from the forward-looking statement values due to various factors.
Since investment securities of Hankyu REIT are closed-end type which do not make redemption of units demanded by unitholders, the only means forunitholders to convert the investment securities is to sell to third parties. Market value of the investment securities is affected by supply/demand at theexchange and also fluctuates affected by interest rate environment, economic situations, real estate market trends and various other factors
surrounding the market. Therefore, the unitholders may not be able to sell the investment securities at the price of acquisition incurring loss.
This material is not intended as a solicitation to acquire investment securities of Hankyu REIT nor is it intended as a solicitation to sign contracts
relating to transactions of other financial instruments. When undertaking any investment, please do so based on your own judgment and responsibility
as an investor.
Before purchasing investment securities of Hankyu REIT, please consult with a securities company that is a “Type I Financial Instruments Business
Operator.”
This material is an English translation of the original, which was issued in the Japanese language.
There are sections that display property names in abbreviated form.
"(Site)" is added after the name of properties for which Hankyu REIT owns only its land.

11. Executive Summary2

1-1. Medium-term Objectives and Results for 26th Fiscal Period (1)Aim for sustainable growth and improvement of portfolio quality,
while aiming to increase distributions
Medium-term Objectives

Results for 26th Fiscal Period• Asset scale at the end of the 26th FP was JPY 153.9 billion

1

Aim to achieve asset scale of JPY 200 billion within 2020
(place emphasis on medium-to-long-term fair value)• Acquired a total of 4 properties (JPY 12.29 billion) which are 3
community-based retail facilities and a hotel by utilizing theasset management company’s own property information
sourcing channels and the comprehensive strength of thesponsor group.

• Distribution per unit for the 26th FP was 2,952 yen(+75 yen from the 25th FP)• Improve profitability through the acquisition of 4 properties
with fair value

2

Aim to achieve distribution level of JPY 3,000
on an ongoing basis• Increase in occupancy rate of Sphere Tower Tennozu(93.0% ⇒ 94.8%)• Increase in occupancy rate of Ueroku F Building(93.8% ⇒ 100%)• Maintain a high occupancy rate of the entire portfolio.
(99.8%)

3

1-1. Medium-term Objectives and Results for 26th Fiscal Period (2)Aim forsustainablegrowth and improvementof26thportfolio
Medium-term
Objectives
Results for
Fiscalquality,
Periodwhile aiming to increase distributions• Systematically implemented capital investment especially3

Systematically implement repairs and CAPEX to maintainand improve property value

4

Consider and implement asset replacement to improve
portfolio quality• Continuously discussed measures to improve portfolio
quality.

Eliminate future risk factors→ Changed to the response to future risk factors• Current risks were eliminated with the completion ofleasing of Sphere Tower Tennozu and the reachedsettlement on Hotel Gracery Tamachi• Continuously considering minimization and exclusion of
future risk factors (response to the progress in ecommerce and properties with unrealized losses)

5

in properties which are 20 years old or older from theperspective of preventive maintenance (Kitano, LAXA,
Yamada, etc.).

• LTV remains at the same level on an ongoing basis with
the implementation of public offering and new borrowings,
and increase in appraisal value

6

Implement fund procurement in light of interest rate trends (inprinciple, procurement mainly on a long-term and fixed basis)

41.4% (end of the 25th FP) ⇒ 41.1% (end of the 26th FP)• For refinancing borrowings, adopted both long-term debt
with fixed interest rate and short-term debt with variableinterest rate while taking into account the balance between
stability of fund procurement and maintaining andimproving distribution level.

41-2. Overview of 26th Fiscal Period Financial Results(Unit: millions of yen)

Item

Forecast for 26th Fiscal Period (A) Results for 26th Fiscal Period (B)(as of January 25, 2018)(Dec. 1, 2017 to May 31, 2018)

Change(B)-(A)(Main factors for increase/decrease in profits)

Operation period (days)

182

182

―

Operating revenues

5,176

5,203

27

Operating income

2,269

2,284

14

(1)
Increase in income from lease(Nigawa, Higashiosaka, etc.)

JPY +21 mn

(1)
(2)
(3)

Ordinary income

1,885

1,886

1

Net income

1,883

1,884

1

638,500

638,500―

Distribution per unit (JPY)

2,950

2,952

2

FFO per unit (JPY)

4,328

4,335

7

Total number of outstanding
investment units at end of fiscal(2)
Increase in depreciation and
JPY -11 mn
non-deductible consumption tax, etc.

(3)
Increase in non-operating expenses JPY -14 mn(Increase in investment unit issuance expenses,
etc.)

period (units)

Net assets per unit
Net assets per unit
after reflecting unrealized
gain/loss

JPY 123,135
JPY 158,694

Results for 26th fiscal period (ended May 2018)
Distribution per unit

JPY 2,952

5

1-3. Overview of 27th and 28th Fiscal Period Financial Forecasts(Unit: millions of yen)
Change(B)-(A)

Forecast for 27th Fiscal Period (B)(Dec. 1, 2017 to May 31, 2018)(Jun. 1, 2018 to Nov. 30, 2018)

Operation period(days)

182

183

1

182

-1

Operating revenues

5,203

5,503

300

5,479

-24

Operating income

2,284

2,269

-15

2,305

36

Ordinary income

1,886

1,917

31

1,949

32

Net income

1,884

1,915

30

1,948

32

Total number of outstanding
investment units at end of
fiscal period (units)638,500

638,500―

638,500―

Distribution per unit (JPY)

2,952

3,000

48

3,050

50

FFO per unit (JPY)

4,335

4,433

98

4,520

86

Item

Forecast for 28th Fiscal Period (C)Change(C)-(B)

Results for 26th Fiscal Period (A)(Dec.1, 2018 to May 31, 2019)[Forecasts for 27th Fiscal Period] Main factors for increase/decrease from 26th fiscal period results[Forecast for 28th Fiscal Period] Main factors for increase/decrease from 27th fiscal period forecasts• Increase in lease operating income from acquisition of new properties
JPY +127 mn (OZONE +39, Nigawa +30, Higashiosaka +27, Hakata +30)

• Increase in lease operating income from the new properties
JPY +17 mn (OZONE +8, Nigawa +11)

• Increase in repair expenses *JPY -79 mn (response to earthquake -60, etc.)• Increase in depreciation (NISHINOMIYA, etc.)*
JPY -9 mn• Increase in management fee
JPY -15 mn• Increase in interest expenses
JPY -10 mn• Decrease in Investment unit issuance expenses
JPY +55 mn*Calculation includes existing properties only
Forecast for 27th Fiscal Period (ending November 2018)
Distribution per unit
JPY 3,000[Main preconditions]• Increase in income from lease due to completion of leasing of existing properties *JPY +18 mn (Kitano +12, HEP +6)• Decrease in repair expenses*
JPY +13 mn (response to earthquake +60, Yamada +43, Kitano -76, etc.)• Increase in depreciation*
JPY -23 mn (NISHINOMIYA, etc.)*Calculation includes existing properties only
Forecast for 28th Fiscal Period (ending May 2019)
Distribution per unit

JPY 3,050• There will be no change in portfolio properties from the 27 properties presently owned.
• There will be no additional issuance of investment units to the 638,500 units issued and outstanding at present through to the end of the 28th fiscal period.

6

1-4. Trends of Asset Scale

Place emphasis on medium-to-long-term fair value andaim to achieve asset scale of JPY 200 billion within 2020

Improved financialbase throughasset replacement

Returned to growth paththrough
resuming external growth

Continued growththrough PO in 2
consecutive years

Implementation ofsustainable growth andenhancement of stability
in portfolio quality
through acquiring newproperties

Enhanced portfolio quality
through asset replacements

Aim to achieve
asset scale of JPY
200 bn within 202027 properties
JPY 153.9 bn

19 properties
JPY 127.8 bn
15 properties
JPY 121.3 bn

23 properties
JPY 139.3 bn

23 properties
JPY 139.3 bn

End of 19th period(End of Nov. 2014)

End of 21st period(End of Nov. 2015)19 properties
JPY 127.8 bn

23 properties
JPY 141.6 bn

23 properties
JPY 141.6 bn

21 properties
JPY 132.8 bn

End of 15th period(End of Nov. 2012)

Acquired assets

Transferred assets

16 properties
JPY 116.1 bn

End of 16th period(End of May 2013)

End of 17th period End of 18th period(End of Nov. 2013) (End of May 2014)

End of 22nd period(End of May 2016)

End of 23rd period(End of Nov. 2016)

End of 25th period(End of Nov. 2017)

End of 26th period(End of May 2018)

Within 20207

1-5. Trends of Distribution per Unit

Distribution has stepped up
Aim to achieve distribution level of JPY 3,000 on an ongoing basis█ Distribution per unit (results)█ Distribution per unit (forecast)
（JPY）

3,200

Approximately 40 mn yen oftax and public dues on an
ongoing basis for new
properties
were not recorded

Approximately 26 mn yen outof tax and public dues on an
ongoing basis for new
properties
were not recorded

Aim to achieve
JPY 3,000 on
an ongoing
basis

3,050
3,000

3,000

2,952
2,877

2,800
2,717

2,600

2,400

2,200
第24期
24th
periodMay
20172017年5月期

第25期
25th
periodNov.
20172017年11月期

第26期
26th
periodMay
20182018年5月期

第27期
27th
periodNov.
20182018年11月期

第28期
28th
periodMay
20192019年5月期

8

1-6. Profitability and Financial Status● Profitability of Portfolio
Average NOI yield (Note)
Average NOI yield
after depreciation (Note)
Unrealized income/loss(Note)End of 23rd period(End of Nov. 2016)

End of 24th period(End of May 2017)

End of 25th period(End of Nov. 2017)

End of 26th period(End of May 2018)

4.8%

4.8%

4.9%

5.0%

3.7%

3.6%

3.7%

3.8%

JPY 14.6 bn

JPY 17.6 bn

JPY 20.4 bn

JPY 22.7 bn● Stability of Financial Foundation
End of 23rd period(End of Nov. 2016)

End of 24th period(End of May 2017)

End of 25th period(End of Nov. 2017)

End of 26th period(End of May 2018)

LTV (Note)

43.0%

42.2%

41.4%

41.1%

Interest-bearing debt ratio

44.5%

44.6%

44.5%

43.6%

Average debt financing costs(including investment corporation bonds)

0.92%

0.94%

0.88%

0.88%

Average remaining years on
long-term borrowings payable
and investment corporation bonds

4.4 years

4.4 years

4.4 years

4.7 years(Note) Details of the calculation method for “Average NOI yield,” “Average NOI yield after depreciation,” “Unrealized income/loss” and “LTV” are presented on page 65.

92. Overview of 4th Public Offering and New Properties102-1. Overview of 4th Public Offering
Overview of Public Offering
Number of units issued and outstanding
Number of investment units to be newly issued

597,500 units(638,500 units after public offering)
41,000 units(Of this, third-party allotment: 2,000 units)

Issue price

JPY 128,115

Paid-in amountJPY 123,844

Total paid-in amount

JPY 5,077 mn(Including third-party allotment)

Date of resolution of issuance

January 25, 2018

Price determination dateFebruary 5, 2018

Payment dateFebruary 13, 2018 (primary offering)
March 13, 2018 (third-party allotment)112-2. Overview of New Properties
Overview of New Properties
Property name

METS OZONE

Vessel Inn Hakata Nakasu(Tentative name)
MANDAI Nigawa Store (site)

LAMU Higashiosaka Branch (site)

Property typeCommunity-based
Retail Facility

HotelCommunity-based
Retail Facility

Community-based
Retail Facility

Higashi-ku, Nagoya City,
Aichi Pref.

Hakata-ku, Fukuoka City

Takarazuka City / Nishinomiya City,
Hyogo Pref.

Higashiosaka City, Osaka

Acquisition price

JPY 5,400 mn

JPY 2,760 mn

JPY 2,280 mn

JPY 1,850 mn

Appraisal value

JPY 5,600 mn

JPY 2,780 mn

JPY 2,300 mn

JPY 1,870 mn

NOI yield (Note)

5.4%

4.3%

4.2%

4.2%

NOI yield after depreciation

4.2%

2.7%

4.2%

4.2%

The asset managementcompany’s own sourcing
channels

The asset managementcompany’s own sourcing
channels

The asset managementcompany’s own sourcing
channels

February 15, 2018

March 29, 2018

March 27, 2018

March 27, 2018

Direct lease

Direct lease

Direct lease

Direct lease

September 30, 2014

January 1, 2018

April 4, 2016

25 years

21 years

30 years

Location(Note)

Acquisition method

The asset managementcompany’s own sourcing
channels
Utilization of the sponsor
solutions

Acquisition date
Lease contract type
Lease contract start date

Differ by tenants
Lease contract period

Total of New Properties
Acquisition priceAppraisal value

Average NOI yield (Note)

Average NOI yield
after depreciation (Note)

JPY 12,290 mn

JPY 12,550 mn

4.8%

3.9%

Total / Average(Note) Details of the calculation method for “NOI yield” and “NOI yield after depreciation” are presented on page 65.

122-3. Significance of Acquiring New Properties (1)Acquisition of properties located near major stations of the Tokaido and Sanyo Shinkansen First acquisitions in Nagoya and Fukuoka areas Acquisitions in major investment area (Kansai Region)

Major
investment area
(Kansai Region)
Tokyo(Tokyo Metropolitan area)

Vessel Inn Hakata Nakasu

Hotel

Kyoto

METS OZONE

Community-based
Retail Facility

NagoyaHiroshima
Fukuoka

Kobe Osaka

Community-based
Retail Facility(Tentative name)
MANDAI Nigawa Store (site)

LAMU Higashiosaka Branch (site)

Tokaido and Sanyo Shinkansen
Areas where major stations are located132-3. Significance of Acquiring New Properties (2)Enhance revenue stability through the progress of the diversification of area and use
Other areas
1.5%

Umeda area
17.2%

Other
Kansai region
7.9%

Areas along
Hankyu andHanshin lines
49.1%

Other use
0.8%

Urban
retail facilities
14.4%
Office
26.1%

Hotel
7.7%

Kansairegion74.3%

Community-based
retail facilities
50.9%

Retail-use
zone
73.0%

End of 26th FP

End of 25th FP

Tokyo
24.2%

Umeda area
15.9%

Other areas
6.7%

Other
Kansai region
8.5%

Tokyo
22.3%
Areas along
Hankyu andHanshin lines
46.7%

Other use
0.4%

<METS OZONE>

Urban
retail facilities
12.7%
Office
25.0%

Hotel
9.0%

Kansairegion71.0%

Community-based
retail facilities
53.0%

Retail-use
zone
74.6%

<Vessel Inn Hakata Nakasu>

Utilization of sponsor solutionsFirst acquisition of hotel asset since increasing the
maximum investment ratio for hotels
Acquired in 26th FP

Transferred in 22nd FP

The asset managementcompany’s own property
information sourcing channels

Assetreplacement

Sponsor solutions(Hankyu Sekkei Consultant)Acquisition ofproperty throughnegotiatedtransactions

METS OZONE

Richmond Hotel Hamamatsu

Vessel Inn Hakata Nakasu

NOI yield after depreciation 1.6%

NOI yield after depreciation 2.7%

14

2-4. Overview of New Property METS OZONE

Property Overview

Property Features

Acquisition price

JPY 5,400 mn

 The Property offers excellent access by car as it faces “Inner Ring Route” which isa wide-area arterial road.

NOI yield

5.4%

NOI yield after depreciation

4.2%

 Ozone Station, which is located within an approximately 5-minute walk from theProperty, is a transport hub accessible by three lines namely JR, Subway Line andMeitetsu Line.

Location

Higashi-ku, Nagoya City, Aichi Pref.

Site area/Leased area

17,422.32 m2 / 15,681.37 m2

Occupancy rate

100%

Opening period

April 2002

Property manager

TOKYU COMMUNITY CORP

Acquisition dateFebruary 15, 2018

 The Property targets a trade area which is a densely populated area in Nagoya
City and where the population is increasing. According to the national census in
2015, its population by trade area is approximately 29,000 within 1 km,
approximately 281,000 within 3 km and approximately 691,000 within 5 km,
making the location densely populated as a residential area in the urban area.
 The Property is occupied mainly by tenants that meet every day needs such as“NITORI,” “EDION,” “Yamanaka (food supermarket)” and “UNIQLO” as its main
tenants who are expected to take in consumption demand from trade areas.

15

2-5. Overview of New Property Vessel Inn Hakata Nakasu

approximately 1-minute walkfrom Nakasu-Kawabata Station

Property Overview
Acquisition price

JPY 2,760 mn

NOI yield

4.3%

NOI yield after depreciation

2.7%

LocationHakata-ku, Fukuoka City

Site area/Leased area

405.98 m2 / 2,776.49 m2

Number of guest rooms
Opening period

166 rooms in total(of which, 153 single rooms)

February 2010(rebranded in October 2014)

Operator

Vessel Hotel Development Co., Ltd.

Acquisition date

March 29, 2018

Property Features
 The Property is a hotel mainly for accommodation with a total of 166 rooms, mainly
singles, and opened after rebranding as Vessel Inn Hakata Nakasu in October
2014.
 The Property stands in an excellent location being an approximately 1-minute walkfrom Nakasu-Kawabata Station on the Fukuoka City Subway Line and offers
excellent access as it takes only around 9 minutes to Fukuoka Airport Station,around 3 minutes to JR Hakata Station, and around 1 minute to Tenjin Station via
a direct subway line from the station.
 Nakasu area where the Property is situated is a major bustling area in Kyushu andalso close to office zones such as the Hakata and Tenjin areas, and thus stronger
demand for both leisure and business can be expected.

16

2-6. Overview of New Property (Tentative name) MANDAI Nigawa Store (site)<As of June 18, 2018>(Note) The building is being constructed by the tenant as of July 2018 and isscheduled to open in autumn 2018.
Acquisition price

JPY 2,280 mn

NOI yield

4.2% (Note)

NOI yield after depreciation

4.2% (Note)

Location

Nigawakita, Takarazuka City,
Hyogo Pref./Tajikano-cho,Nishinomiya City, Hyogo Pref.

Site area/Leased area

9,194.01 m2 / 9,194.01 m2

Opening period

Autumn 2018 (scheduled)

Acquisition date

March 27, 2018

Facility typeCommunity-based retail facility
consisting of a food supermarket
and drug store

Property Features
 The area near Nigawa Station on the Hankyu Imazu Line where the Property is
located is a dominant area of the Hankyu Hanshin Holdings Group. It is popular as
a commuter town for Osaka and Kobe as both cities can be accessed in about 30
minutes.
 The area surrounding Nigawa Station is an educational district with schools suchas Kwansei Gakuin University and other schools, and the population is expected toincrease with the current residential development.
 MANDAI Co., Ltd., the tenant, is capable of extending the three perishable
foodstuffs as well as having price appeal and has 147 supermarkets in the Kansai
region (as of the end of February 2018). It is distinguished by the development ofcommunity-based attentive stores, and it actively implements a dominant strategy
through the concentration of stores within a given area.

(Note) The figure for (Tentative name) MANDAI Nigawa Store (site) is calculated based on the operating revenues and operating costs in the 2nd year with an assumption of
100% rent collection, using the DCF method described in the appraised report.
As of July 2018, the building is being constructed and 51.1% of the rent up to the day prior to either the building’s completion date or September 1, 2018 (whichevercomes first) will be received.

172-7. Overview of New Property LAMU Higashiosaka Branch (site)

Property Features

Acquisition price

JPY 1,850 mn

NOI yield

4.2% (Note)

NOI yield after depreciation

4.2% (Note)

Location

Kominowa, Higashiosaka City,
Osaka Pref.
2

2

Site area/Leased area

8,942.54 m / 8,942.54 m

Opening period

January 2017

Acquisition date

March 27, 2018

Facility type24-hour discount store handling
mainly food(Note) The figure is calculated based on the appraised report.

 The area near the Property is a residential area with numerous families. The
population in the area is trending upwards due to those commuting to Osaka Cityand such, as the price of residences is relatively inexpensive and access to central
Osaka is excellent.
 The store on the Property is a 24-hour discount store handling mainly food. It
captures the day-to-day needs of neighborhood customers while on the weekends
is bustling with families arriving by automobile from more distant locations for bulk
purchase.
 Daikokuten Bussan Company, the tenant, is a retail distributor and comprehensive
food wholesaler (listed on the First Section of the Tokyo Stock Exchange) whichhandles the processing of vegetables, fruits, meats, everyday dishes, etc., as wellas breads, noodles and daily foods of private brands. The store on the property not
only provides reasonable prices but also puts effort into making the store
enjoyable through the sale by weight of everyday dishes, etc.

18

3. External Growth Strategies193-1. Acquisition Strategy and Investment Targets
Investment Targets

Investment Target Areas

Target real estate with retail-use and office-use zones
Especially focus investment on retail-use zones

Target real estate across Japan
Investment target areas are Tokyo metropolitan area,
nationwide government ordinance-designated cities
and other comparable major cities
Of these, investment is focused on Kansai Region

Retail-use
facilities

Retail-use
zones
50%
or moreOffice-use
facilities

Mixed-use(complex)facilities

Utilize information sourcing capabilities
and network of the Hankyu Hanshin
Holdings Group that has deeply rooted
connections in the community

Office-use
zones
Retail-use
zones

Zones forother uses

Office-use
zones

Zones forother uses

Retail-use
zones

KansaiRegion50%
or moreZones forother uses

* In principle, the maximum investment ratio for hotel-use portion (part of retail-use
zones) is 20% of all assets under management
Kansai Region:
Osaka, Kyoto, Hyogo, Nara, Shiga,
and Wakayama Prefectures

Portfolio Status (End of 26th FP)
Urban
retail facilities
12.7%

Other use
0.4%
Total acquisition price:

Office25.0%

JPY 153.91 bn
Total number of properties：
27 properties
Hotel
9.0%

Community-based
retail facilities
53.0%

Other
regions
6.7%

Retail-use
zone
74.6%
Other
Kansai region
8.5%

Umeda area
15.9%

Tokyo
22.3%
Areas along
Hankyu andHanshin lines
46.7%

Kansairegion71.0%

20

3-2. Securing Opportunities to Acquire Properties
Status of Property Acquisition Activities
Promoting consideration of property acquisitions that can contribute to improvement of portfolio profitability and stability amidst heatedcompetition for property acquisition. Will continue to obtain quality property information utilizing the comprehensive strengths of the sponsor
group through joint efforts with the sponsor group.
In addition, will continue to aim for further expansion of the asset management company’s own property information sourcing channels while
making CRE proposals utilizing sponsor solutions, etc., and lead to property acquisitions at appropriate prices through negotiatedtransactions and limited tendering.

Diverse Property Acquisition Methods
Acquisition method
Sponsor group’s
propertyHEP Five
Kitano Hankyu Building
Dew Hankyu Yamada
Nitori Ibaraki-Kita Store(site)
LaLaport KOSHIEN (site)
LAXA Osaka
HANKYU NISHINOMIYAGARDENSkotocross Hankyu
Kawaramachi

Propertydevelopedby sponsor group

On-balance bridge

Shiodome East Side MANDAI Toyonaka Honan
Store (site)
Building
Hotel Gracery
Tamachi
KOHYO Onohara
Store

DAILY QANAT Izumiya
Horikawa Marutamachi
Store (site)
MANDAI Gojo Nishikoji
Store (site)
LIFE Shimoyamate Store(site)

SPC bridge
Hankyu Corporation Head
Office Building
Ueroku F Building
AEON MALL
SAKAIKITAHANADA (site)

Direct acquisition
from outside
Takatsuki-Josai Shopping Center
Kohnan Hiroshima NakanoHigashi Store (site)
Sphere Tower Tennozu
Kita-Aoyama San cho-me
Building
OASIS Town Itami Konoike (site)
METS OZONE(Tentative name)
MANDAI Nigawa Store (site)
LAMU Higashiosaka Branch(site)
Vessel Inn Hakata Nakasu
Properties Acquired in the 26th FP21

3-3. Population Dynamics of Kansai Region/Chukyo Region and Acquisition Policy (1) Areas in Kansai/Chukyo regions with concentration of population(Resident population per 1 km²: 2,500 or more)• Community-based retail facilities of Hankyu REIT are located in areas with concentration of population(Most are in areas with notable concentration)

Owned community-based retail facilities<Resident population per 1 km²>
15,000 or more
10,000 or more but less than 15,000
5,000 or more but less than 10,000
2,500 or more but less than 5,000

Source: Prepared by processing “National Census 2015” by Statistics Bureau, Ministry of Internal Affairs and Communications22

3-3. Population Dynamics of Kansai Region/Chukyo Region and Acquisition Policy (2) Increase/decrease in areas in Kansai/Chukyo regions with concentration of population(Increase/decrease in resident population per 1 km²)
• Polarization of population increase/decrease is progressing based on convenience and living environment

Upon acquisition of community-based retail facilities, discuss mainly areas with high retail potential, such as
those expecting population growth (including individual factors such as location and form of facilities)

Owned community-based retail facilities<Resident population increase/decrease rate per 1 km²>
Large increase (+5% or more)
Small increase (+2% to < +5%))
About the same (±2%)
Small decrease (-5% to ≦ -2%)
Large decrease (-5% or more)

Source: Prepared by processing “National Census 2015” and “National Census 2005” by Statistics Bureau, Ministry of Internal Affairs and Communications23

3-4. Investment in Community-Based Retail Facilities
Investment in excellent trade areas with abundant trade area population, such as areas along
Hankyu and Hanshin lines where strong consumer demand can be expected over the medium-tolong-term.
Trade area population within
1 km radius(Thousands of people)

Trade area population within
3 km radius(Thousands of people)

Trade area population within
5 km radius(Thousands of people)

1,000
100 万人

40 万人
400

50
5 万人
40
4 万人

800
80 万人

30 万人
300

600
60 万人

30
3 万人

20 万人
200
400
40 万人

20
2 万人

10 万人
100

LAMU Higashiosaka Branch(site)METS OZONE(Tentative name)
MANDAI Nigawa Store (site)

Izumiya Horikawa

Takatsuki

MANDAI Gojo

OnoharaNitori Ibaraki

KITAHANADA

Hankyu Yamada

KOSHIEN

MANDAI Toyonaka

Itami Konoike

NISHINOMIYA GARDENS

LIFE Shimoyamate

LAMU Higashiosaka Branch(site)METS OZONE(Tentative name)
MANDAI Nigawa Store (site)

Izumiya Horikawa

Takatsuki

MANDAI Gojo

OnoharaNitori Ibaraki

KITAHANADA

Hankyu Yamada

KOSHIEN

MANDAI Toyonaka

Itami Konoike

NISHINOMIYA GARDENSLAMU Higashiosaka Branch(site)METS OZONE(Tentative name)
MANDAI Nigawa Store (site)

Izumiya Horikawa

Takatsuki

MANDAI Gojo

OnoharaNitori Ibaraki

KITAHANADA

Hankyu Yamada

KOSHIEN

MANDAI Toyonaka

Itami Konoike

NISHINOMIYA GARDENS

LIFE Shimoyamate

仮(称 万)代仁川

ラ・ムー東大阪

メッツ大曽根万代五条

イズミヤ堀川

ニトリ茨木

高槻

阪急山田

小野原

北花田

甲子園

万代豊中

西宮ガーデンズライフ下山手

0
0 万人

伊丹鴻池

ラ・ムー東大阪仮(称 万)代仁川

メッツ大曽根万代五条

イズミヤ堀川

ニトリ茨木

高槻

阪急山田

小野原

北花田

甲子園

万代豊中

(Source) “National Census 2015” by Statistics Bureau, Ministry ofInternal Affairs and Communications

西宮ガーデンズライフ下山手

0 万人
0

伊丹鴻池

ラ・ムー東大阪仮(称 万)代仁川

メッツ大曽根万代五条

イズミヤ堀川

ニトリ茨木

高槻

阪急山田

小野原

北花田

甲子園

万代豊中

西宮ガーデンズライフ下山手

伊丹鴻池

0 万人0

200
20 万人

LIFE Shimoyamate

10
1 万人

Purchase Trends of Online Shopping and Shopping at Brick-and-Mortar Stores in Japan (by product)
20
-40
-20
0
20
40
60
80
100
40

Tenant composition and provision of
products/services that match the trade area
• Tenant composition mainly featuring diversified
business categories indispensable for everyday life
as well as tenants selling daily necessities that arelikely to be purchased at brick-and-mortar stores.

Food
食品
携帯電話
Drug/cosmetics
薬・化粧品
Large household
appliances
大型家電
Sundries/daily
commodities
雑貨/日用品Large furniture
大型家具
Clothing
衣類
Small furniture
小型家具
Small household
appliances
小型家電
PCs
PC
Books
本
Tickets
切符/チケット
CD/DVD/BD, etc.
CD/DVD/BD類
Pet Products
ペット用品(10.7)(10.1)

Mobile phones(13.9)(12.3)(17.0)(12.5)(20.7)(15.7)(17.8)(16.4)
Purchase only at brick-and-mortar stores(21.8)

Purchase often at brick-and-mortar stores(18.0)

Purchase only online(17.0)

Purchase often online(10.2)(Source)“Study Report on an International Analysis of User Perceptions of New Forms of ICT in the IoT Era” by Information Communications Economic
Office, Information Communications Global Strategy Bureau, Ministry of Internal Affairs and Communications(Note)

Figures in the parenthesis are the percentages of respondents who answered “Purchase almost equally online and at brick-and-mortar stores.”24

3-5. Target Asset Class for Investment and Owned Assets

Discussion focused on investment in urban retail facilities,
community-based retail facilities and hotels
City center
Offices

Urban vicinity

Shiodome East Side
Building

Hankyu Corporation
Head Office Building

Sphere Tower
Tennozu

Ueroku F Building

Retail facilities

Urban retail facilities

Community-based retail facilities

RSC
Urban
SC

Urban
SC

HEP Five

Kitano Hankyu
Building

HANKYU NISHINOMIYAGARDENSRSC

AEON MALL
SAKAIKITAHANADA(site)RSC

NSC

LaLaport KOSHIEN(site)

Takatsuki-Josai
Shopping Center

GMS / SM

GMS / SMDAILY QANAT
Izumiya Horikawa
Marutamachi Store(site)KOHYO Onohara
Store

NSC

NSC

OASIS Town Itami
Konoike(site)Dew Hankyu Yamada

NSC
NSC
Urban
SC

Kita-Aoyama
San cho-me Building

Hotelskotocross Hankyu
Kawaramachi

Urban
SC

Asset Acquired in the
26th FPLAXA Osaka

Hotel Gracery
Tamachi

Vessel Inn Hakata
NakasuKohnan Hiroshima
Nakano-Higashi Store(site)

Asset Acquired in the
26th FPMETS OZONEGMS / SM
GMS / SM

LIFE Shimoyamate
Store(site)

Asset Acquired in the
26th FP(Tentative name)
MANDAI Nigawa
Store (site)

LAMU Higashiosaka
Branch (site)

Regional shopping center: A large shopping center serving a wide area

NSC

Neighborhood shopping center: A small-trade-area shopping center havingneighborhood areas as main trade areas

NSC

MANDAI Toyonaka
Honan Store(site)

GMS / SM

Asset Acquired in
the 26th FP

RSC

GMS / SMNSC

MANDAI Gojo
Nishikoji Store(site)

Specialty shop

Nitori Ibaraki-Kita
Store (site)

General merchandise Store (GMS): A general supermarket
Supermarket (SM): A large supermarket mainly selling food items25

4. Internal Growth Strategies264-1. Occupancy Rate for Individual Properties (Occupancy by End-Tenants)
Stable occupancy rates maintained since 1st fiscal period(%)
100
99.5 100.0 99.3 98.5 99.3 98.8
99.4 98.5 99.0 99.5 98.6 98.6 98.7 98.7 98.8 98.8 99.1 99.6 99.8 99.8
98.1 98.5 98.7 98.4 98.7 99.0

95
90
85
80

FP 1 FP 2 FP 3 FP 4 FP 5 FP 6 FP 7 FP 8 FP 9 FP 10 FP 11 FP 12 FP 13 FP 14 FP 15 FP 16 FP 17 FP 18 FP 19 FP 20 FP 21 FP 22 FP 23 FP 24 FP 25 FP 26

Total portfolio occupancy rate at 99.8% (as of May 31, 2018)(%)
100

Total portfolio

90

HEP

80

Kitano Hankyu
Hankyu Yamada

70

Ueroku F Bldg.

60

Tennozu

50

Shiodome

4030•

Kita-Aoyama
End of End of End of End of End of End of End of End of End of End of End of End of End of
May '17 Jun. '17 Jul. '17 Aug. '17 Sep. '17 Oct. '17 Nov. '17 Dec. '17 Jan. '18 Feb. '18 Mar. '18 Apr. '18 May '18

METS OZONEThe graph excludes the 19 properties (Takatsuki-Josai, Nitori Ibaraki, Kohnan Hiroshima, Tamachi, LaLaport KOSHIEN, LAXA Osaka, NISHINOMIYAGARDENS, Hankyu Corporation Head Office, AEON MALL SAKAIKITAHANADA, MANDAI Toyonaka Honan, Izumiya Horikawa Marutamachi, kotocross,
LIFE Shimoyamate, MANDAI Gojo Nishikoji, KOHYO Onohara and OASIS Town Itami Konoike, MANDAI Nigawa Store, LAMU Higashiosaka Branch andVessel Inn Hakata Nakasu ) leased to single tenants (occupancy rates of 100%).

27

4-2. Topics on Properties Owned (1)<HANKYU NISHINOMIYA GARDENS> Turned the temporary parking lot on the south side
into a multistory one
Turned the existing temporary parking lot on south side intoa multistory one as a measure to ease chronic traffic
congestion that occurs on weekends(Scheduled to start operation around autumn 2018)

1st floor is also scheduled to be occupied by a retail store
Implemented upward rent revision of master lease rent inaccordance with investment burden.
As of the end of June 2018
(Photographed from north side)<AEON MALL SAKAIKITAHANADA (site)> Reopened after renovation
The store including the site vacated by Sakai Kitahanada Hankyu
was reopened in March 2018 after undergoing renovation andfreshness and competitiveness as a retail facility improved.

(Photos on the website of each store are used)“MUJI” underwent floor expansion and operates the first retailspace handling “food.” The area of the retail space is more than
4,300 m2, which is the largest “MUJI” in the world.
Two major casual brands “UNIQLO” and “GU”
also opened.
Inside the Store <MUJI>

Inside the Store <GU>28

4-2. Topics on Properties Owned (2)Status of Response to Properties Damaged by the North Osaka Earthquake (Note)
Striving to restore the properties that were damaged by the North Osaka Earthquake (Note), which
occurred on June 18, 2018, at an early stage.
<Situation of Damage and Status of Operation of Properties near the Seismic Center)> Dew Hankyu Yamada
Escalator and parking facility were damaged, and operation was temporarily suspended.
Operation of the entire facility was resumed 2 days after the earthquake on June 20.
 Takatsuki-Josai Shopping Center
Escalator and exterior wall of parking lot were damaged, but the home center and supermarket on the
1st floor opened on the day.
Tenants on the 2nd floor resumed operation the next day on June 19.
 KOHYO Onohara Store
Sprinkler facility, escalator and exterior wall were damaged, and operation was temporarilysuspended.
Supermarket resumed operation on June 26, and the entire facility was resumed operation on July 6.

Approximately JPY 60 mn, which is the expected amount required forrestoration and construction work, has already been factored into thefinancial results forecast for the 27th FP as repair expenses.
(Note) Tentative name as of July 10, 201829

4-3. Rent Systems and Present Condition of 27 Portfolio Properties (1)(End of 26th Fiscal Period)<Properties Mainly Using the Fixed-rent System>
Property nameMain rent system

Present conditions

HEP Five
Specialty shop building(urban SC)

Overage(fixed + variable)

The store will mark its 20th anniversary in 2018. Sales was 99.5% compared with the previous year
and seems that it has bottomed out most recently. It has replaced and attracted tenants by being
conscious of younger millennials and inbound torists, which are its target. It is scheduled to beoccupied by “VR ZONE OSAKA” in autumn 2018 and sales of Ferris wheel also remain strong.

<Properties Using the Fixed-rent System>
Property nameMain rent system

Present conditions

HANKYU NISHINOMIYAGARDENS
RSC (Note 1)

Long-term, fixed

Rent income is stable based on a fixed-type master lease method (Note 2) with Hankyu Corporation.
At JPY 81.5 billion in fiscal 2017, sales increased for the ninth consecutive year since opening.
Scheduled to turn the temporary parking lot on south side into a multistory oneand start operating it inautumn 2018 as a measure to ease traffic congestion on weekends.

Dew Hankyu Yamada
NSC (Note 1)

Long-term, fixed(partly overage)

Occupancy rate at the end of the 26th FP remained at 100% following the end of the previous period.
Although there are competitions with EXPOCITY, etc., it intends to establish relations with tenants toenable long-term daily use by nearby residents as a community-based retail facility.

Kitano Hankyu Building
Specialty shop building(urban SC)

Fixed(partly overage)

Occupancy rate at the end of the 26th FP was 96.3%. Although a tenant moved out at the end of
December 2017, it is making efforts to find tenants at an early stage by conducting leasing activities
for tenants that will attract purpose-driven customers and create synergy with existing tenants.

Takatsuki-Josai
Shopping Center
NSC (Note 1)

Long-term, fixed

Rent income is stable based on a fixed-type master lease method (Note 2) with Kohnan Shoji Co.,
Ltd. As a community-based store, it houses shops that fulfill the needs of nearby residents, such as ahome center, grocery store, home electronics retailer and sporting goods shop.

Fixed

Occupancy rate continues to be 100%. THREE AOYAMA, the flagship store of THREE, a naturalcosmetics brand operated by an affiliate of Pola Orbis Holdings Inc. is housed as the core tenant.

Kita-Aoyama San cho-me
Building
Urban retail facility(Note 1) RSC: Regional Shopping Center; NSC: Neighborhood Shopping Center(Note 2) Fixed-type master lease method: Hankyu REIT receives a certain amount of rent from the master lessee (sublessor), regardless of fluctuations in endtenant rent.

30

4-3. Rent Systems and Present Condition of 27 Portfolio Properties (2)(End of 26th Fiscal Period)<Properties Using the Fixed-rent System>
Property nameMain rent system

Present conditions

Fixed

A new property acquired in February 2018 (26th FP). Long-term contracts are mainly concluded withtenants and main tenants have not been replaced since opening. Sales also remain strong. It willcontinue to implement store operation supported by local residents as a community-based retailfacility.

kotocross Hankyu
Kawaramachi
Specialty shop building(urban SC)

Long-term, fixed

Rent income is stable based on the fixed-type master lease method (Note 2) with Hankyu
Corporation. As a retail facility that features the characteristics of a landmark facing the ShijoKawaramachi crossing, the building houses merchandise shops, restaurants and service shops. An
end tenant moved out at the end of February 2018 and earnest leasing activities have been
conducted to source the next tenant.

KOHYO Onohara StoreSM (Note 1)

Long-term, fixed

Rent income is stable based on the fixed-type master lease method (Note 2) with KOHYO Co., Ltd.
Opened in May 2016, this community-based retail facility houses not only a grocery store, but also
other shops closely related to daily life, such as a 100-yen shop.
Being two years since the opening, it has gained wider recognition among local customers.

Ueroku F Building
OfficeFixed

Occupancy rate at the end of the 26th FP increased to 100% from 93.8% at the end of the previous
period due to floor expansion. It will continue to strive to improve the level of satisfaction bystrengthening relations with tenants.

Sphere Tower Tennozu
OfficeFixed

Occupancy rate increased to 94.8% with the occupancy of new tenant in February 2018. For theremaining sections, it will focus on leasing activities including floor expansion within the property.

Shiodome East Side Building
OfficeFixed

Occupancy rate continues to be 100%. Will continue to strive to improve level of satisfaction by
pursuing relations with existing tenants.

Long-term, fixed

Rent income is stable based on the fixed-type master lease method (Note 2) with Hankyu
Corporation. The building serves as the main base of Hankyu Hanshin Holdings Group, and Hankyu
Hanshin Holdings and Hankyu Corporation use it as their head office building.

METS OZONENSC (Note 1)

Hankyu Corporation
Head Office Building
Office(Note 1) NSC: Neighborhood Shopping Center; SM: Supermarket(Note 2) Fixed-type master lease method: Hankyu REIT receives a certain amount of rent from the master lessee (sublessor), regardless of fluctuations in endtenant rent.

31

4-3. Rent Systems and Present Condition of 27 Portfolio Properties (3)(End of 26th Fiscal Period)<Properties Using the Fixed-rent System>
Property nameMain rent
systemPresent conditions

Hotel Gracery Tamachi
HotelLong-term, fixedLong-term and fixed lease contract with Fujita Kanko Inc. Although rent has slightly decreased with theimpact of hotel developments in the neighborhood, both guest room occupancy rate and guest room unit
price remain at high levels. As for the rent reduction action, a settlement was reached in September 2017.

LAXA Osaka
Hotel

Long-term, fixed

Rent income is stable based on the fixed-type master lease method (Note 2) with Hankyu Corporation.
Renovation work of all guestrooms of the hotel started in January 2018 and is scheduled to be completed
in July 2018.

Vessel Inn Hakata
NakasuHotelLong-term, fixed

A new property acquired in March 2018 (26th FP).
Rent income is stable based on a long-term fixed-term building lease agreement with Vessel Hotel
Development Co., Ltd.

Nitori Ibaraki-Kita Store(site)
Specialty shop

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with Nitori
Holdings Co., Ltd. The tenant is also maintaining strong performance.

Kohnan Hiroshima
Nakano-Higashi Store(site)NSC (Note 1)

Long-term, fixedContract for a fixed-term land lease for business purposes with Kohnan Shoji Co., Ltd.
It is a retail facility occupied by a home center and a grocery store and offering high transportation
convenience facing a major national road.

LaLaport KOSHIEN(site)RSC (Note 1)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with Mitsui
Fudosan Co., Ltd.
Sales remain strong with the continuous effect of the renewal in spring 2017. Retail facilities have openedin the neighborhood and will focus on the sales trend, etc.

AEON MALL
SAKAIKITAHANADA(site)RSC (Note 1)

Long-term, fixed

Hankyu REIT owns the site only, and there is a contract for a long-term, fixed-term land lease with thebuilding owner Sumitomo Mitsui Trust Bank, Limited for the shopping center land with land leasehold
right, which occupies most of the site. The renovation that was implemented in three periods since spring2017 was completed in March 2018 and a total of 69 stores including 30 new stores reopened after
renovation. Sales remain strong.

(Note 1) NSC: Neighborhood Shopping Center; RSC: Regional Shopping Center;(Note 2) Fixed-type master lease method: Hankyu REIT receives a certain amount of rent from the master lessee (sublessor), regardless of fluctuations in endtenant rent.

32

4-3. Rent Systems and Present Condition of 27 Portfolio Properties (4)(End of 26th Fiscal Period)<Properties Using the Fixed-rent System>
Property nameMain rent system

Present conditions

MANDAI Toyonaka Honan
Store (site)
NSC (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
MANDAI Co., Ltd.
Sales have been strong since the property’s opening in October 2013. As a community-based store,
it houses shops closely related to daily life, such as a grocery store, drugstore and 100-yen shop.

DAILY QANAT Izumiya
Horikawa Marutamachi Store(site)SM (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
Izumiya Co., Ltd. The store is becoming more well-known and the business continues to be strong.
With more foreign tourists visiting Japan coming to the store, tax-free shopping has been madeavailable.

MANDAI Gojo Nishikoji Store(site)NSC (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
MANDAI Co., Ltd.
The store is bustling mainly with local customers who come on bicycle.

LIFE Shimoyamate
Store (site)
SM (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with Life
Corporation.

OASIS Town Itami Konoike(site)NSC (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
HANKYU OASIS Co., Ltd. The facility houses shops closely related to daily life, such as a grocery
store, apparel store and drugstore(Tentative name)
MANDAI Nigawa Store (site)
NSC (Note)

Long-term, fixed

A new property acquired in March 2018 (26th FP). Rent income is stable based on a contract for a
fixed-term land lease for business purposes with MANDAI Co., Ltd. The building is currently being
constructed by MANDAI Co., Ltd. and is scheduled to open in September 2018. 51.1% of rent will bereceived until the day before the completion date or September 1, 2018, whichever is earlier.

LAMU Higashiosaka Branch(site)NSC (Note)

Long-term, fixed

A new property acquired in March 2018 (26th FP). Rent income is stable based on a contract for a
fixed-term land lease for business purposes with Daikokuten Bussan Company. Sales remain strong
since opening in January 2017.

(Note) NSC: Neighborhood Shopping Center; SM: Supermarket

33

4-4. Appraisal Value

Appraisal value increased by 1.3%, generating unrealized income of JPY 22.7 bn
Cap rate decreased for 15 properties
Change in Unrealized income/Loss and Cap Rate
・Asset acquisition
Acquired 3 properties

・Asset acquisition
Acquired 4 properties

・Asset transfer
Transferred 2 properties

・Asset acquisition
Acquired 2 properties

・Asset acquisition
Acquired 4 properties

JPY 22,704 mn(JPY mn)

30,000

5.2%

20,000

4.9%

10,000

4.6%

0

4.3%

4.0%

-10,000
第17期
17thperiod2013.11
Nov.
2013

第18期
18th
period2014.5
May
2014

第19期
19th
period2014.11
Nov.
2014

第20期
20th
period2015.5
May
2015

第21期
21st
period2015.11
Nov.
2015

含み損益

第22期
22nd
period2016.5
May
2016

第23期
23rd
period2016.11
Nov.
2016

第24期
24th
period2017.5
May
2017

第25期
25th
period2017.11
Nov.
2017

第26期
26th
period2018.5May
2018

CAPレート（加重平均）(右軸）Unrealized income/loss
Weighted average cap rate (right axis) (Note)(Note) Cap rates are the weighted average based on appraisal values

34

4-5. List of Appraisal Values(Unit: millions of yen)

Acquisition
price① End of previous period(25th fiscal period)
Appraisalvalue② End of current period(26th fiscal period)

Cap rate(Note)

Appraisal value

Cap rate(Note)③Valuerecorded on the
Change(②-①)/① balance sheet at(Note)
end of current
periodChange(②-①)(Note)

Unrealized
income/loss②-③

Value to book
ratio
②/③

3,433

161.7%HEP Five (14% of the quasi co-ownership of thetrust beneficiary interests)

6,468

8,890

3.5%

9,002

3.5%

112

1.3%

5,568

Kitano Hankyu Building

7,740

7,350

4.5%

7,540

4.4%

190

2.6%

7,809

-269

96.5%

Dew Hankyu Yamada

6,930

8,690

4.4%

8,780

4.3%

90

1.0%

5,495

3,284

159.8%

Takatsuki-Josai Shopping Center

8,600

8,480

4.9%

8,480

4.9%

0

0.0%

6,935

1,544

122.3%

Nitori Ibaraki-Kita Store (Site)

1,318

1,720

4.7%

1,730

4.6%

10

0.6%

1,340

389

129.1%

Kohnan Hiroshima Nakano-Higashi Store (Site)

2,175

1,890

5.5%

1,890

5.5%

0

0.0%

2,280

-390

82.9%

Hotel Gracery Tamachi

4,160

4,120

4.3%

4,210

4.2%

90

2.2%

3,624

585

116.1%

LaLaport KOSHIEN (site)

7,350

7,770

4.2%

7,960

4.1%

190

2.4%

7,752

207

102.7%

HANKYU NISHINOMIYAGARDENS (28% of the quasi co-ownership of
the trust beneficiary interests)

18,30024,976

4.2%

25,116

4.2%

140

0.6%

17,291

7,824

145.2%AEON MALL SAKAIKITAHANADA (site)

8,100

9,980

4.2%

10,230

4.1%

250

2.5%

8,189

2,040

124.9%

MANDAI Toyonaka Honan store (site)

1,870

2,310

4.3%

2,310

4.3%

0

0.0%

1,889

420

122.3%DAILY QANAT Izumiya Horikawa Marutamachi
Store (site)

3,100

3,680

4.2%

3,810

4.1%

130

3.5%

3,127

682

121.8%

kotocross Hankyu Kawaramachi

2,770

3,330

4.3%

3,400

4.2%

70

2.1%

2,648

751

128.4%

LIFE Shimoyamate Store (site)

1,421

1,640

4.2%

1,670

4.1%

30

1.8%

1,434

235

116.5%

MANDAI GOJO Nishikoji Store (site)

4,182

4,750

4.3%

4,760

4.3%

10

0.2%

4,213

546

113.0%KOHYO Onohara Store

1,631

1,750

4.9%

1,780

4.8%

30

1.7%

1,640

139

108.5%OASIS Town Itami Konoike (site)

7,100

7,440

4.1%

7,440

4.1%

0

0.0%

7,391

48

100.7%METS OZONE

5,400

-

-

5,620

4.5%

-

-

5,693

-73

98.7%

(Tentative name) MANDAI Nigawa Store (site)

2,280

-

-

2,330

4.2%

-

-

2,307

22

101.0%LAMU Higashiosaka Branch (site)

1,850

-

-

1,880

4.4%

-

-

1,873

6

100.3%

Vessel Inn Hakata Nakasu

2,760

-

-

2,770

4.2%

-

-

2,819

-49

98.2%

Shiodome East Side Bldg.

19,025

14,7003.9%

14,700

3.9%

0

0.0%

17,095-2,395

86.0%

Hankyu Corporation Head Office Building

10,20012,2004.0%

12,500

3.9%

300

2.5%

9,465

3,034

132.1%

Ueroku F Building

2,980

2,790

5.1%

2,870

5.0%

80

2.9%

2,571

298

111.6%

Sphere Tower Tennozu (33% of the quasi coownership of the trust beneficiary interests)

9,405

6,864

3.9%

6,897

3.8%

33

0.5%

8,495

-1,59881.2%

LAXA Osaka

5,122

5,720

4.7%

5,870

4.6%

150

2.6%

4,220

1,649

139.1%

Kita-Aoyama San cho-me Buiding

1,680

2,030

3.4%

2,060

3.3%

30

1.5%

1,722

337

119.6%

153,918

153,070

4.2%

167,605

4.2%

1,935

1.3%

144,900

22,704115.7%

Total(Note) Cap rates are cap rates and discount rates based on the direct capitalization method used for appraisal value calculations (Nitori Ibaraki-Kita Store (site), Kohnan
Hiroshima Nakano-Higashi Store (site), LaLaport KOSHIEN (site), AEON MALL SAKAIKITAHANADA (site), LIFE Shimoyamate Store (site) and LAMU
Higashiosaka Branch (site) are allocated a discount rate using the DCF method) and the total is the weighted average cap rate based on appraisal values.

35

5. Financial Strategies365-1. Initiatives toward Strengthening Financial Foundation
Continued stable financial operations by striking a balance between reduction of debt financing costs, andextension of borrowing periods and diversification of debt repayment dates
Overview of Refinancing and New Borrowing

Trends of Debt Financing Costs and Average Remaining Years
6.0 years

1.50%
1.40%
1.30%

4.8 years

4.7 years
4.4 years 4.4 years 4.4 years 4.4 years

Amount ofdebt financing

Borrowing
periodFixed/variable

5.0 years(1)

February 28, 2018

JPY 1.0 bn

10 years

Fixed

4.0 years(2)

February 28, 2018

JPY 1.0 bn

1 yearVariable

JPY 2.0 bn

1 yearVariable(Prepayment)

JPY 2.5 bn

10 years

Fixed

(5)

May 28, 2018

JPY 2.2 bn

10 years

Fixed

(6)

May 28, 2018

JPY 1.0 bn

1 yearVariable(7)

May 31, 2018

JPY 1.5 bn

1 yearVariable

1.23%
3.4 years

1.20%

1.07%

1.10%
1.00%

Execution date

5.1 years

1.06%

1.04%

3.0 years

(3)

1.08%
2.7 years

0.94%
0.92%

0.88%

0.90%

0.88%

2.0 years

0.80%

(4)

March 30, 2018
(New borrowing)

May 24, 2018

1.0 years
End of
FP 18

End of
FP 19

End of
FP 20

End of
FP 21

End of
FP 22

End of
FP 23

End of
FP 24

End of
FP 25

End of
FP 26

Ave. debt financing cost (including investment corporation bonds)
Ave. remaining years on loans payable and investment corporation bonds

Diversification of Debt Repayment Dates (As of May 31, 2018)(JPY bn)
12.0
10.0
8.0

1.0

(2)

2.0

(3)

1.0

(6)

1.5

(7)

6.0

Investment
corporation bonds
JPY 2.0 bn

Investment
corporation bonds
JPY 2.0 bn

1.0 (1)

4.0

(4)
6.0

2.0
0.0

2.5

7.0
5.5

5.0

4.0
2.0

1.0

FP 27

FP 28

FP 29

FP 30

FP 31

FP 32

5.2

5.0

FP 33

FP 34

2.0

FP 35

FP 36

FP 37

2.8

3.0

FP 44

FP 45

1.2

FP 38

2.5

(4)

2.2

(5)

5.0

FP 39

FP 40

FP 41

FP 42

FP 43

FP 46

FP 47

2.0

FP 48

FP 49

FP 50

FP 51

FP 52

FP 53

37

5-2. Basic Financial Policy / Debt Outstanding
Basic Financial Policy

Debt Outstanding by Lender (JPY mn)● Maintain sound financial position● Maintain favorable trading relationship with financial institutions● Realize lower fund procurement costs(effective use of security deposits/guarantees)● Reduce financing risks (diversification of debt repayment dates)● Reduce interest rate fluctuation risks (focus on long-term, fixed-rateborrowings)
As of end of
FP 25

As of end of
FP 26

JPY 65.9 bn

JPY 67.9 bn

Avg. funding cost (interest-bearing debt +utilized amount of security deposits andguarantees)

0.86%

0.84%

Avg. debt financing cost (including
investment corporation bonds)

0.88%

0.88%

Interest-bearing debt

Avg. remaining years on long-term loans
payable and investment corporation bonds

4.4 years

4.7 years

Long-term debt ratio

89.1%

91.9%

Fixed debt ratio

85.7%

88.7%

LTV (Note)

41.4%

41.1%

Interest-bearing debt ratio

44.5%

43.6%

Investment corporation bonds

JPY 4.0 bn

JPY 4.0 bn

Investor rating (R&I)

A+(stable)A+(stable)Investor rating (JCR)

AA(stable)AA(stable)(Note) Details of the calculation method for “LTV” are presented on p.65.

As of May 31, 2018

1,500
2.2%

4,000
5.9%

3,400
5.0%

19,100
28.1%

6,900
10.2%

8,800
13.0%
12,20018.0%
12,00017.7%

MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Development Bank of Japan Inc.
Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
The Senshu Ikeda Bank, Ltd.
Mizuho Trust and Banking Co., Ltd.
Investment corporation bonds

Total JPY 67.9 bn
Registration for Issuance ofInvestment Corporation Bonds
Planned value of issuance (upper limit): JPY 100,000 mn
Planned issuance period: Dec. 19, 2017 to Dec. 18, 201938

5-3. Asset Scale and LTV (Loan to Value)

Total acquisition priceTotal appraisal value at the end of period

LTV at end of period (based on management guidelines)

Interest-bearing debt ratio at the end of period

Capital increaseby 2nd public offering

Capital increaseby 1st public offering(JPY bn)
300

57.9

55.2

55.6

56.1

55.9

56.0

55.9

55.8

46.1

48.6

46.0

45.6

49.4

210
180

31.0

28.8

30.0 30.7

46.9

46.2

45.4

45.5

45.2

45.5

45.5

46.7
43.2

40.8 40.3

47.3 45.4

43.4 42.9

44.4

43.2 43.0

42.9

43.0

44.5

44.6

41.9 43.0

42.2

44.5

43.6

50.0
40.0

41.4 41.1

39.1

150

(%)
60.0

53.5

270
240

Capital increaseby 4th public offering

Capital increaseby 3rd public offering

30.0

120
90
60

18.0

20.0

21.3

18.2 18.9

10.0

30
0

FP 1
FP 2 FP 3 FP 4 FP 5 FP 6 FP 7 FP 8 FP 9 FP 10 FP 11 FP 12 FP 13 FP 14 FP 15 FP 16 FP 17 FP 18 FP 19 FP 20 FP 21 FP 22 FP 23 FP 24 FP 25 FP 26
Nov'05 May'06 Nov'06 May'07 Nov'07 May'08 Nov'08 May'09 Nov'09 May'10 Nov10 May'11 Nov11 May'12 Nov'12 May'13 Nov13 May'14 Nov'14 May'15 Nov'15 May'16 Nov'16 May'17 Nov'17 May'18

Number ofproperties

5

6

7

8

9

11

11

16

15

15

15

15

15

15

15

16

19

19

23

23

23

21

23

23

23

0.0

27

39

6. Development Status in Osaka and Initiatives of Hankyu REIT40

6-1. Redevelopment Projects/Infrastructure Constructions in Kansai Region
 Full-fledged infrastructure construction and redevelopment in 2020 onward Measures including development of Umekita 2nd phase, construction of
Nakanoshima Regenerative Medicine Center, attraction of the World Expo 2025
to Yumeshima Island and the integrated resorts (IR) scheme are underway orplanned Enhancement of convenience with shorter travel time to Kansai International
Airport from Umeda area after the opening of the Naniwasuji Line

Umekita 2nd phase

Osaka International Airport(Itami Airport)

Kyoto

Naniwasuji Line/Naniwasuji Renraku Line*
Naniwasuji Line
Naniwasuji Renraku Line

Development project for
Nakanoshima Regenerative Medicine Center*To continue with research and discussion
Juso

Kobe-sannomiya

Kawaramachi

Shin-Osaka

Umeda area
Hankyu Railway

USJ

Hanshin Electric Railway

Kobe Airport Terminal

Properties owned by Hankyu REIT

Namba Shinsaibashi area

Yumeshima Island Osaka World Expo(currently working to win the bid)
Integrated resorts (IR) scheme
Terminal exclusively for LCC
international flights(Operations started in Jan. 2017)(Note)
Prepared by Hankyu REIT AssetManagement, Inc. based on
publicly announced materials(including projections based onassumptions and outlook for the
future as of July 2018).

Currently
approx.

60 minTo be shortened by around 20 to
25 minutes with the opening of the
Naniwasuji Line

<Plans and Events in Kansai Region (including plans and targets)>
2018

Completion of 1st phase building of Osaka Umeda Twin Towers South2019

Rugby World Cup

2021

World Masters Games 2021 Kansai

2021

Opening of Nakanoshima Regenerative Medicine Center

2022

Completion of the entire Umeda 1-Chome 1-Banchi Project(Osaka Umeda Twin Towers South)

2025
Fiscal 2026
Spring 2031

Kansai International Airport

2037 (the earliest)

Osaka World Expo (if the bid is won)
Umekita 2nd phase (completion of infrastructure development)(Town opening in sequence from around spring 2023)
Opening of the Naniwasuji Line
Launch of the Maglev bullet train service between Shin-Osaka and Nagoya

41

6-2. Redevelopment Projects in Umeda Area (1) (Umeda 1-Chome 1-Banchi Project)

Umekita 2nd phase(Town opening in sequence from around spring 2023;
Infrastructure development scheduled to be completed
in fiscal 2026)

Perspective drawing of the completed“Umeda 1-Chome 1-Banchi Project (Osaka Umeda Twin Towers South)”(Looking from Umeda Hankyu Building (Hankyu Umeda Main Store))
Location
Site area
Floor area ratio

New JR station(Tentative name: Kita-umeda Station)(Scheduled to open in spring 2023)

Umeda 1-Chome
1-Banchi Project

Total floor area
Number offloors

1-1 Umeda, Kita-ku,
Osaka-shi, and otherApprox. 12,200 m2

B2F to 9F
Department store
zone

2,000%
Approx. 260,000 m2

Total floor area:
Approx. 100,000 m2
11F to 38F

Office zone

38 floors above groundand 3 floors below

Total floor area:
Approx. 143,000 m2
11F

Conference zone
HeightMain use

Total floor area:
Approx. 4,000 m2

Approx. 190 m
Department store,
office, hall, etc.

Other(parking space, etc.)

Total floor area:
Approx. 13,000 m2

Overview of “Construction Plan”(Note 1) Includes properties jointly owned with the Hankyu Hanshin Holdings Group.
(Note 2) Includes properties jointly owned with other companies.

●1st phase work
July 2015: 1st phase new construction work has commenced
April 2018: Completion of 1st phase buildings(Shin-Hankyu Building, east section of Daihanshin Building)* Partial opening of new department store (June 2018)●2nd phase work
June 2018: Start demolition of west side of Daihanshin Building
Spring 2019: 2nd phase new construction work will commence
Fall 2021: Completion of 2nd phase building(New department store section)* Full opening of new department store
Spring 2022: Full completion* Opening of office-use zone

42Redevelopment Projects in Umeda Area (2 )6-2. (Policy and Overview of Umekita 2nd phase (Reference))(Source) Urban Renaissance Agency

43

6-3. Policy and Initiatives of Hankyu REIT
Investment in urban retail facilities
Number of foreign tourists visiting Osaka has increased significantly since around 2015
Attractiveness and customer appeal have improved in Osaka/Umeda
Sponsor group also promotes the revitalization of Umeda Area through value enhancement

Proactively investing in urban retail facilities over the medium term

Revitalization and increase in revenue of HEP Five
Attracting large tenants that can bring in younger millennials, which is the main target,
and foreign tourists visiting Japan who come for riding the Ferris wheel

VR ZONE OSAKA Scheduled to open in autumn 2018
(First branch in Kansai Region)
Experience-based VR activity facility operated by
BANDAI NAMCO Amusement447. Overview of Financial Results for 26th Fiscal Period457-1. Income Statement / Cash Distribution Statement
Income Statement
Item
1. Operating revenues
Lease operating revenues
2. Operating expenses
Lease-related expenses
Asset management fees
Directors' compensation
Asset custody fees
Adminstrative service fees
Independent auditors' fees
Other operating expenses
Operating income
3. Non-operating revenues
Interest income
Other non-operating revenues
4. Non-operating expenses
Interest expense
Borrowing related expenses
Interest expense on investment
corporation bonds
Amortization of deferred investment
corporation bond issuance costs

Cash Distribution Statement(Unit: millions of yen)
25th Fiscal Period
26th Fiscal Period(Operation period:183 days) (Operation period:182 days)
ChangeJun. 1, 2017 to Nov. 30, 2017 Dec. 1, 2017 to May 31, 2018
AmountPercentage
AmountPercentage
4,902
100.0
5,203
100.0
301
(1)
4,902
5,203
(2)
2,752
56.1
2,918
56.1
166
2,269
2,429
349
358
3
3
18
18
36
38
10
10
63
60
2,150
43.9
2,284
43.9
134
-0
1
0.0
0
0.0
0
0
1
0
357
7.3
399
7.7
41
289
275
55
54
11

11

1

1

Investment unit issue costs
Other non-operating expenses
Ordinary income
Extraordinary Losses

―
0
1,793
73

Income before income taxes
for current period

1,720

1,886

Income taxes- current
Income taxes- deferred
Net income for current period

1
0
1,718

1
-0
1,884

Retained earnings brought forwardfrom the previous period
Retained earnings at the end ofcurrent period

36.6

35.1

55
0
1,886
―

0

0

1,719

1,885

36.3
―

92
-73

(Unit: thousands of yen)Item

25th Fiscal Period 26th Fiscal Period

ChangeAmountAmountAmountRetained earnings at the end ofcurrent period

1,719,286

1,885,158

165,871

Distributions

1,719,007(2,877)279

1,884,852(2,952)306

165,844(75)
27(Distribution per unit (JPY))
Retained earnings carried forward(Main factors for increase/decrease)(1) Operating revenues
Increase in income from lease through acquisition of new properties(OZONE, Nigawa, Higashiosaka and Hakata):
JPY +192 mn
Increase in income from lease(Tennozu, Itami, etc.):

JPY +112 mn(2) Operating expenses
Increase in building management expenses(OZONE, etc.):

JPY +39 mn

Increase in repair expense(Yamada, Takatsuki, HEP, etc.):

JPY +81 mn

Increase in depreciation(OZONE, Hakata, etc.) :JPY +41 mn(3)(3) Extraordinary loss
Decrease in expenses due to absence of
payment of settlement money (Tamachi) :36.2

JPY -73 mn

166

Lease operating revenues/expenses
Breakdown: See pages 48 and 49

46

7-2. Balance Sheet(Unit: millions of yen)Item

25th Fiscal Period

26th Fiscal Period(as of Nov. 30, 2017)(as of May 31, 2018)

AmountAmountRatio (%)

Ratio (%)

(Unit: millions of yen)

ChangeItem

AmountAssets25th Fiscal Period

26th Fiscal Period(as of Nov. 30, 2017)(as of May 31, 2018)

AmountAmountRatio (%)

Ratio (%)

ChangeAmountLiabilities

I Current assets total

14,830Cash and deposits

6,973

3,917

Operating accounts payable

Cash and deposits in trust

7,616

5,320

1

14

Deposits paid

83

100

Lease obligations in trust―3

Consumption taxes receivable―

214

Distribution payable

6

7

152

225

Accrued expenses

161

159

2

5

1

1

Operational income receivables

Prepaid expenses
OthersII Fixed assets total

133,100

10.0

90.0

9,799

145,772

6.3-5,031I Current liabilities total

93.7

12,672

2,085

3,580

Structures

203

196

Short-term debt

7,200

5,500

Long-term debt due within one year

3,000

7,000

Accrued consumption taxes

Deposits received
Security deposits due within one year

0

0

Land

18,143

26,452

Investment corporation bonds

Buildings in trust

24,951

25,823Long-term debt

Structures in trust

516

502

Lease obligations in trust

Machinery and equipment in trust

148

144

Tools, furniture and fixtures in trust

76

90

85,46687,050Tools, furniture and fixtures

Land in trust
Lease assets in trust―

46

Construction in progress in trust

94

453

Tangible fixed assets total

131,68689.0

144,342

II Long-term liabiliteies total

OthersIntangible fixed assets total

957

957

59

55

1,016

0.7

1,012

63

―

731

782

0

8

238

241

62,63042.3

62,7299.2

2,297

Interest-bearing
debt
JPY 67,900 mn

40.3

99

4,000

4,000

Total
security deposits

51,70051,400JPY 7,528 mn―

43Security deposits

1,297

1,668

Security deposits in trust

5,633

5,618

JPY 3,762 mn

74,57450.4

76,97049.5

I Unitholders' capital

71,65948.4

76,736

49.3

II Surplus total

1,719

1.2

1,885

1.2

73,37849.6

78,62150.5

0147,953

100.0

155,592

100.0

7,639

Liabilities total

2,396

Net assets

92.8

12,655Retained earnings at the end ofcurrent period

2. Intangible fixed assets
Leasehold rights

14,241
537

Advances received

Buildings

8.1

540

Income taxes payable

1. Tangible fixed assets

11,944

Net assets total

0.7

-4

1,719

was allocated forpropertyacquisitions

1,885

3. Investments, other assets
Long-term prepaid expenses

387

Lease and guarantee deposits

10

Investment, other assets total

397

0.3

418

0.3

20

22

0.0

21

0.0

-1

III Total deferred assets
Deferred investment corporationbond issuance costs

Assets total

386
31

22
147,953

21
100.0

155,592

100.0

7,639 Liabilities and net assets total

47

7-3. Income and Expenditure by Property (1)(Unit: millions of yen)
HEP Five

Item(14% of the quasi
Kitano Hankyu
co-ownership of theBldg.
trust beneficiaryinterests)

Dew Hankyu
YamadaKohnanNitori IbarakiHotel Gracery
Hiroshima
Kita Store (site)
TamachiNakano-Higashi(Note)Store (site)

TakatsukiJosai SC

Number of operating daysof 26th fiscal period

182

182

182

182

Lease operating revenues
total

305

551

371

Income from lease

235

369

Utilities expense income

13

Other incomes

182

LaLaport
KOSHIEN(site)NISHINOMIYAGARDENS(28% of thequasi coownership of
the trust
beneficiaryinterests)

AEON MALL
SAKAI
KITAHANADA(site) (Note)

MandaiToyonaka
Honan Store(site) (Note)

DAILY QANAT
IzumiyaHorikawa
MarutamachiStore(site) (Note)

182

182

182

LIFE
Shimoyamate
Store(site) (Note)

kotocross
HankyuKawaramachi

182

182

182

182

182

284

68

112

257

623

102

261

283

68

108

257

622

102

110

43

―

―

―

―

―

―

55

71

66

0

0

4

0

1

―

196

403

264

162

6

50

108

202

46

Property/Facility
management fees

46

113

78

13

0

1

1

0

1

Utilities expense

20

119

43

0

―

―

―

―

―

Lease operating costs total

3

0

1

22

―

―

0

6

12

Advertising and promotion
expenses

31

3

5

―

―

―

―

―

―

Repair expense

21

20

40

31

―

0

2

0

―

Nonlife insurance
premium

0

1

0

0

―

0

0

1

0

Tax and public dues

24

49

26

25

6

14

102

59

10

7

1

3

0

―

0

1

0

0

―

32

0

132

21

Rent paid

Other expenses

182

40

92

64

67

NOI
(Lease operating income +Depreciation)

148

240

171

190

60

62

95

148

553

211

53

87

76

34

Lease operating income

108

147

107

122

60

62

62

148

421

211

53

87

55

34

50

200

30

―

―

―

4

4

41

―

―

―

1

―

Depreciation

Capital expenditure(Note) The Asset Management Company decided rent information is not disclosed as consent was not obtained from the tenants, and there is a possibility
disclosure may affect the competitiveness of Hankyu REIT and eventually damage the interests of unitholders.

487-3. Income and Expenditure by Property (2)(Unit: millions of yen)
MANDAI Gojo
Nishikoji
Store (site)(Note)

Item

Number of operating daysof 26th fiscal period

182

KOHYO
OnoharaStore(Note)182

OASIS Town
Itami Konoike(site)(Note)METS OZONE(Tentativename) MANDAI
Nigawa Store(site)(Note)

LAMU
Higashiosaka
Branch (site)(Note)

Vessel Inn
Hakata Nakasu(Note)

182

106

66

66

64

HankyuCorporation
Head Office
Bldg.

Ueroku F Bldg.

Sphere Tower
Tennozu
33% of thequasi coownership of
the trust
beneficiaryinterests)

182

182

182

182

182

Shiodome
East
Side Bldg.

LAXA Osaka

Kita-Aoyama
San cho-me Bldg.
(Note)

182

Total
(27
properties)―

Lease operating revenues
total

173

399

359

136

268

254

5,203

Income from lease

150

376

359

117

217

254

4,717

Utilities expense income

12

19

―

9

16

―

227

Other incomes

10

3

―

8

34

―

257

Lease operating costs
total
Property/Facility
management fees

92

186

163

90

197

137

2,429

38

19

1

22

29

1

381

Utilities expense

13

23

―

10

50

―

283

Rent paid

12

1

―

―

0

17

79

Advertising and promotion
expenses

1

―

―

―

0

―

42

Repair expense

0

11

―

4

18

4

156

Nonlife insurance premium

0

0

1

0

0

2

13

Tax and public dues

―

21

47

12

28

47

559

0

4

0

1

5

1

29

23

105

112

39

64

62

883

Other expenses
Depreciation
NOI(Lease operating income +Depreciation)

109

43

153

105

9

15

21

318

308

84

135

179

36

3,657

Lease operating income

109

35

153

81

9

15

10

213

196

45

71

116

32

2,774

―

0

―

1

―

―

―

17

8

2

33

50

―

448

Capital expenditure(Main repair expense)(Main capital expenditure)

Dew Hankyu Yamada

HEP Five
Waterproofing repair work on 7th floor parking

Takatsuki-Josai Shopping Center
Painting of steel poles and frames in parking lot

JPY 39 mn
JPY 28 mn(Note) The Asset Management Company decided rent information is notdisclosed as consent was not obtained from the tenants, and there is apossibility disclosure may affect the competitiveness of Hankyu REIT andeventually damage the interests of unitholders.

Renovation of restrooms

Kitano Hankyu Building
Heat source equipment renewal
Drainage renewal
Escalator renewal
Establishment of 2nd floor smoking room

JPY 17 mn
JPY 107 mn
JPY 33 mn
JPY 27 mn
JPY 15 mn

Dew Hankyu Yamada
Renovation of refractory coating in 5th fl. parking JPY 23 mn
LAXA Osaka

Fan coil renewal

JPY 39 mn

49

7-4. Financial Indicators

Item

25th Fiscal Period

26th Fiscal Period

183 days

182 days

1.2%

1.2%

Ordinary income / {(Total assets at beginning of period+ Total assets at end of period) /2 }

2.4%

2.5%

Calculated from duration of operation

2.3%

2.5%

Net income / {(Net assets at beginning of period + Net assets at
end of period) /2 }

4.7%

5.0%

Calculated from days of operation

49.6%

50.5%

Net assets / Total assets

41.4%

41.1%

(47.3%)(47.2%)(Amount of interest-bearing debt + Security deposits - Matched money tosecurity deposits)/(Total assets(*) - Matched money to security deposits)*Appraisal-value basis (Ratios in brackets are based on book value)

44.5%

43.6%

Interest-bearing debt / Total assets

9.5 times

10.6 times

Net Operating Income (NOI)

JPY3,474 mn

JPY3,657 mn

Net lease operating income + Depreciation

Funds From Operation (FFO)

JPY2,560 mn

JPY2,768 mn

Net income for current fiscal period +Depreciation - Income/loss
on sale of real estate

Operation period

Return On Assets (ROA)(per annum)
Return On Equity (ROE)(per annum)
Ratio of net assets at end of period
Loan To Value ratio at end of period (LTV)
Ratio of interest-bearing debts to total assets
at end of period
Debt Service Coverage Ratio (DSCR)

Remarks
25th fiscal period: Jun. 1, 2017 to Nov. 30, 2017
26th fiscal period: Dec. 1, 2017 to May. 31, 2018

Pre-interest and pre-depreciation Net income for current fiscal
period / Interest expenses50

8. APPENDIX

51

8-1. Portfolio List (1)As of May 31, 2018
ClassifiCode
cation (Note 1)

HEP Five

Location

Kita-ku,
Osaka City

Nov. 1998

19.6

Kitano Hankyu Bldg.

Kita-ku,
Osaka City

Jun. 1985

33.0

R3(K)

Dew Hankyu Yamada

Suita City,
Osaka Prefecture

Oct. 2003

R4(K)

Takatsuki-Josai
Shopping Center

Takatsuki City,
Osaka Prefecture

R5(K)Nitori Ibaraki-Kita Store(site)

Ibaraki City,
Osaka Prefecture

R6

Kohnan Hiroshima NakanoHigashi Store (site)

Aki-ku,Hiroshima City

R8

Hotel Gracery Tamachi

R9(K)LaLaport KOSHIEN(site)

R1(K)(14% of the quasi co-ownership of
the trust beneficiary interests)

R2(K)

R11(K)

Retail-use facilites

Name

Building
age
Completion date(Years)(Note 2)

HANKYU NISHINOMIYAGARDERNS(28% of the quasi co-ownership of
the trust beneficiary interests)

Total leasable
2
area (m )(Note 3)

Occupancy Total number
PML
rate
of tenants(Note 4)(Note 3)(Note 3)

6,337.37

100.0%

1(2,958.94)(99.3%)

(125)

Date
of acquisition

Acqusition
price (JPY mn )Investment
ratio

Appraisal value(JPY mn)

Cap rate(Note 5)5.0%

Feb. 1, 2005

6,468

4.2%

9,002

3.5%

10.7%

Feb. 1, 2005

7,740

5.0%

7,540

4.4%

28,194.15

100.0%

2(18,477.35)(96.3%)

(24)

14.7

13,027.28

100.0%

27

4.7%

Feb. 1, 2005

6,930

4.5%

8,780

4.3%

Apr. 2003

15.2

31,451.81

100.0%

1

5.9%

Nov. 15, 2005

8,600

5.6%

8,480

4.9%

―

―

6,541.31

100.0%

1―

Mar. 29, 2006

1,318

0.9%

1,730

4.6%

―

―

25,469.59
60.14

100.0%

1―

Oct. 2, 2006
Apr. 9, 2007

2,170
5

1.4%

1,890

5.5%

Minato-ku,
Tokyo

Sep. 2008

9.7

4,943.66

100.0%

1

10.3%

Dec. 25, 2008

4,160

2.7%

4,210

4.2%

Nishinomiya City,
Hyogo Prefecture――

126,052.16

100.0%

1

6.4%

Jan. 22, 2009

7,350

4.8%

7,960

4.1%

Nishinomiya City,
Hyogo Prefecture

Oct. 2008

9.7

65,372.41

100.0%

1

9.2%

Apr.16, 2013

18,30011.9%

25,116

4.2%

R12(K)AEON MALL
SAKAIKITAHANADA(site)

Kita-ku,
Sakai City
Osaka Prefecture――

64,104.27

100.0%

2―

Jun. 27, 2013

8,100

5.3%

10,230

4.1%

R13(K)

MANDAI Toyonaka Honanstore (site)

Toyonaka city
Osaka Prefecture――

8,159.41

100.0%

1―Jun. 27, 2013

1,870

1.2%

2,310

4.3%

Kamigyo-ku,
Kyoto city――

3,776.15

100.0%

1―Jun. 4, 2014

3,100

2.0%

3,810

4.1%

DAILY QANAT Izumiya
R14(K) Horikawa Marutamachi Store(site)
R15(K)

kotocross Hankyu
Kawaramachi

Shimogyo-ku,
Kyoto city

Oct. 2007

10.7

4,400.13

100.0%

1

2.6%

Jun. 4, 2014

2,770

1.8%

3,400

4.2%

R16(K)

LIFE Shimoyamate Store(site)

Chuo-ku,
Kobe city――

2,397.83

100.0%

1―Jun. 4, 2014

1,421

0.9%

1,670

4.1%

R17(K)

MANDAI Gojo
Nishikoji Store (site)

Ukyo-ku
Kyoto city――

9,182.80

100.0%

1―Jun. 24, 2014

4,182

2.7%

4,760

4.3%

KOHYO Onohara Store

Minoh City,
Osaka Prefecture

May 2016

2.1

3,310.31

100.0%

1

5.3%

Jul. 1, 2016

1,631

1.1%

1,780

4.8%

―

―

17,997.10

100.0%

1―

Nov. 25, 2016

7,100

4.6%

7,440

4.1%

R18(K)
R19(K)OASIS Town Itami Konoike
Itami City,
Hyogo Prefecture(site)

R20

METS OZONE

Higashi-ku,
Nagoya City,
Aichi Prefecture

Apr. 2002

16.2

15,681.37

100.0%

13

5.6%

Feb.15, 2018

5,400

3.5%

5,620

4.5%

R21(K)(Tentative name) MANDAI
Nigawa Store (site)

Takarazuka City,
Nishinomiya City,
Hyogo Prefecture――

9,194.01

100.0%

1―

Mar.27, 2018

2,280

1.5%

2,330

4.2%

R22(K)LAMU Higashiosaka
Branch (site)

Higashiosaka
City, Osaka
Prefecture――

8,942.54

100.0%

1―

Mar.27, 2018

1,850

1.2%

1,880

4.4%

R23

Vessel Inn Hakata Nakasu

Hakata-ku,
Fukuoka City

Jul. 2009

8.9

2,776.49

100.0%

1

0.2%

Mar. 29, 2018

2,760

1.8%

2,770

4.2%

52

8-1. Portfolio List (2)As of May 31, 2018
Name

Location

Completion date

Buildingage(Years)(Note 2)

O1

Shiodome East Side Bldg.

Chuo-ku,Tokyo

Aug. 2007

10.8

9,286.58

100.0%6

O2(K)Hankyu Corporation Head
Office Building

Kita-ku,
Osaka City

Sep. 1992

25.7

27,369.37

100.0%

M1(K)Ueroku F Bldg.

Chuo-ku,
Osaka City

Sep. 1993

24.7

4,611.82

M2(33% of the quasi co-ownership of
the trust beneficiary interests)

Shinagawa-ku,
Tokyo

Apr. 1993(Note 6)

25.2

M3(K)

LAXA Osaka

Fukushima-ku,
Osaka City

Feb. 1999

M5

Kita-Aoyama San cho-me
Building

Minato-ku,
Tokyo

Sep. 2013

Mixed-use (complex)
facilities

Office-use
facilities

Classifi- Codecation (Note 1)

Sphere Tower Tennozu

Portfolio total

Total leasable
2
area (m )(Note 3)

Occupancy Total number
PML
rate
of tenants(Note 4)(Note 3)(Note 3)Dateof acquisition

Acqusition
price (JPY mn )Investment
ratio

Appraisal value(JPY mn)

Cap rate(Note 5)

4.6%

Feb. 29, 2008

19,025

12.4%

14,700

3.9%

1

3.7%

Apr.10, 2013

10,2006.6%

12,5003.9%

100.0%

11

3.2%

Nov. 1, 2005

2,980

1.9%

2,870

5.0%

8,818.09

94.8%

25

2.7%

Oct. 2, 2007

9,405

6.1%

6,897

3.8%

19.3

30,339.91

100.0%

1

3.7%

Jan. 22, 2009

5,122

3.3%

5,870

4.6%

4.7

619.76100.0%

3

7.4%

Nov. 12, 2013

1,680

1.1%

2,060

3.3%

16.5

538,417.84(525,322.61)

99.9%(99.8%)

108
(254)

3.4%

―

153,918

167,605

4.2%

100.0%(Note 1) The properties owned by Hankyu REIT are assigned codes classified by facility (type of use) and region.
The letters on the left represent the facility (type of use):“R” is for retail-use facility, “O” is for office-use facility and “M” is for mixed-use (complex) facility.
The numerals are the numbers assigned to each facility in the chronological order of the acquisition.
The letter “K” in parentheses to the right of the numerals indicates that the property is located in Kansai Region.
(Note 2) The portfolio total is the weighted average building age by acquisition price. It is based on the acquisition date for newly acquired properties.
(Note 3) Figures in parenthesis indicate the total leasable area for end-tenants, the occupancy rate based on the said area, and the number of end-tenants, respectively.
For HEP Five, 14% quasi co-ownership of the trust beneficiary interests is indicated as the leasable area.
For Sphere Tower Tennozu, 33% quasi co-ownership of the trust beneficiary interests is indicated as the leasable area.
For HANKYU NISHINOMIYA GARDENS, 28% quasi co-ownership of the trust beneficiary interests is indicated as the leasable area.
(Note 4) PML of LaLaport KOSHIEN (site) is calculated for the parking garage space administration building (394.88 m2).
(Note 5) Cap rates and discount rates are based on the direct capitalization method used for appraisal value calculations (Nitori Ibaraki-Kita Store (site), Kohnan Hiroshima
Nakano-Higashi Store (site), LaLaport KOSHIEN (site), AEON MALL SAKAIKITAHANADA (site), LIFE Shimoyamate Store (site) and LAMU Higashiosaka Branch(site) are allocated a discount rate using the DCF method) and the portfolio total is the weighted average cap rate based on appraisal values.
(Note 6) The completion date for the office and store portions is indicated.

53

8-2. Trends of Distribution per Unit

Distribution per unit forecast( JPY )

4,000

3,792
3,473

3,500
3,000

2,998

2,991
2,715 2,744

2,714

2,860

2,500

JPY 2,952

Distribution per unit

2,500 2,560

2,820
2,560

2,000

3,068
3,300

2,862

2,538

3,000
2,820
2,600

2,322

2,483

2,537

2,464

2,420 2,400 2,460
2,400

2,597
2,445 2,361
2,540

2,567 2,620
2,492 2,537

2,775

2,626

2,717

2,600 2,620 2,630
2,530 2,550
2,460 2,480

2,877

2,800

2,952

3,050
2,950 3,000

2,400
2,300

1,500
1,000
500
0

FP 1
FP 2
FP 3
FP 4
FP 5
FP 6
FP 7
FP 8
FP 9 FP 10 FP 11 FP 12 FP 13 FP 14 FP 15 FP 16 FP 17 FP 18 FP 19 FP 20 FP 21 FP 22 FP 23 FP 24 FP 25 FP 26 FP 27 FP 28
Nov'05 May'06 Nov'06 May'07 Nov'07 May'08 Nov'08 May'09 Nov'09 May'10 Nov10 May'11 Nov11 May'12 Nov'12 May'13 Nov13 May'14 Nov'14 May'15 Nov'15 May'16 Nov'16 May'17 Nov'17 May'18 Nov'18 May'19

Irregular period (303 days)54

8-3. Income Ratio by Rent Category and Sales-Based Overage Rent System Mechanism
Income Ratio by Rent Category

26th period
Income Ratio
1.1%
Overage-rent
tenants

Fixed-rent
tenants

6.5%

92.5%

<Variable-rent portion>
Rent income varies
in accordance with thesales of part of shops in
HEP Five, Dew Hankyu
Yamada, Kitano Hankyu
Building and others.
<Fixed-rent portion>
Rent income varies inaccordance with theoccupancy rates andrent levels of HEP
Five, Kitano Hankyu
Building and others.

Rent income varies
in accordance withthe occupancy rates
and rent levels of
remaining properties

Concept Diagram ofGeneral Sales-Based Overage Rent System

Rent income

Variable-rent
portionFixed-rent
portionPoint from where
sales-based overagerent is generated

Tenant sales

Total rent income(excluding warehouse income)55

8-4. Change in Population in Areas along Hankyu/Hanshin Lines
The population in Kansai Region is either remaining flat or trending downwards due to theaging population along with a decreasing birthrate, but areas along Hankyu/Hanshin lines are
relatively popular and the population in these areas has been increasing consistently after
bottoming out in 1996

106
106

Along Hankyu and Hanshin lines
阪急阪神沿線
Kansai region
関西圏
Osaka
大阪府
Great Hanshin-Awaji Earthquake
Hyogo
兵庫県
Kyoto
京都府

105
105
104
104
103
103
102
102
101
101
100
100
99
99

Population along Hankyu/Hanshin lines
has been increasing consistently
since the earthquake

98
98
97
97
96
96
95
95

'91

'92

'93

'94

'95

'96

'97

'98

'99

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12

'13

'14

'15

'16

'17

(Source) Japan Geographic Data Center “Population Summary of the Basic Resident Registers”(Note) The graph indicates the change in populations where the populations in 1991 are set at 100.

56

8-5. Hankyu/Hanshin Lines and Properties Owned

57

8-6. Status of Offices in Osaka
Decreasing Trend of Office Vacancy Rate Continuing in Osaka
Advancement of relocation of offices from Yodoyabashi and Hommachi areas, etc., into Umeda area, especially into high-specbuildings ⇒ Drop in vacancy rate in Umeda area
Most recently, more proactive relocation for expansion is seen due to higher overall demand backed by the improved employment
situation ⇒ Drop in overall vacancy rate
New office supply in the future is limited
New contract rent for Umeda area has risen due to the ongoing decline of the vacancy rate
Vacancy Rate as of May 2018

Change in Vacancy Rate of
Osaka’s Major Business Areas

Umeda area

12.0%

Change in New Contract Rent in Umeda Area
(Relative value based on figures in March 2014 set as 100)

Yodoyabashi
Shinsaibashi Shin-Osaka areaand Hommachi andNamba area
area

2.16%

3.43%

3.42%

125

3.45%

10.0%

120

8.0%

115

6.0%

110

4.0%

Umeda area

2.0%

Shinsaibashi andNamba area

0.0%
May
2013

Sep.
2013

Jan.
2014

May
2014

Sep.
2014

105

Yodoyabashi and
Hommachi area
Shin-Osaka area
Jan.
2015

May
2015

Sep.
2015

Jan.
2016

May
2016

Sep.
2016

Jan.
2017

May
2017

Sep.
2017

Jan.
2018

May
2018

95

(Source) Miki Shoji Co., Ltd. “Office Data”

Approx. 800,000 m2 newly supplied (2010 - 2017)20
200

今後の新規供給は限定的
New supply in the future is limited

Nakanoshima Festival
Tower West
Approx. 70,000 m²

15
150
100
10

Mar. 2014 Mar. 2015 Mar. 2016 Mar. 2017 Mar. 2018
(Source) Prepared by Hankyu Hanshin REIT Asset Management, Inc.
based on materials from real estate research companies

Change in Floor Area of Major New Office Supply in Osaka(thousand m2)

Grade A buildings
Grade B buildings

100

Namba SkyO
Approx. 34,000 m²

Umeda 1-Chome
1-Banchi Project
Approx. 143,000 m²

Obic Midosuji Building
Approx. 20,000 m²

505
00

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

(year)(Source) Calculated by Hankyu Hanshin REIT Asset Management, Inc. based on materials from office brokerage companies (include some estimates) (February 2018)58

8-7. Status of Retail Facilities in Osaka
Department Store Sales are on an Upward Trend while Supermarket Sales Remain Strong
Sales of department stores for January to May 2018 increased due to greater purchases by foreign tourists visiting Japanfrequently and Japan’s high-net-worth individuals.
→ Duty-free sales of department stores in Kansai Region increased by 60.1% year on year
(April 2018 renewed a record for duty-free sales for a single month) (Note 1)
Sales of supermarkets in central areas continued to be on an upward trend due to return of the population to the city center despite
the increase of rate in the most recent period being gradual (Note 2)
Population increase/decrease is becoming clearer in certain areas, leading to a state of progress in polarization
Sales of Supermarkets by District

Sales of Department Stores by District(change over the same month of the previous year)(change over the previous year)

8.0%

7.4%

6.0%

20.0%

Rebound of last-minute demand dueto the consumption tax rate hike

15.0%

4.0%

10.0%

2.0%
0.7%

0.0%

-0.6%

-2.0%

Renovation of two stores(Note 3) being a main factor

-4.0%

5.0%
2.4%
1.1%
-0.8%

0.0%
-5.0%
-10.0%

-6.0%
2012

2013

2014
Osaka

2015
Tokyo

2016

2017

2018 (year)

Nationwide

May
2015

Nov.
2015

May
2016

Osaka
Source: Japan Department Stores Association*Figures for 2018 are compared with the cumulative total for January to May 2018

Nov.
2016

May
2017

Tokyo (Special Wards)

Nov.
2017

May
2018

Nationwide

Source: Ministry of Economy, Trade and Industry “Current Survey of Commerce”(Note 1) Source: Bank of Japan Osaka Branch “Department Store Duty-Free Sales (Kansai Region)”(Note 2) Source: Ministry of Economy, Trade and Industry “Current Survey of Commerce”(Note 3) Hanshin Department Store Umeda Main Store (from February 2015) and Daimaru Shinsaibashi Store (from January 2016)59

8-8. Status of Inbound Tourists in Kansai Region
Foreign Tourists Visiting Osaka Continue to Increase
Number of foreign tourists visiting Osaka: Reached 11.11
million in 2017, marking a new record and exceeding 10
million for the first time
Visitation rate by prefecture of foreign tourists visiting Japan:
Most recent visitation rate for Osaka Prefecture wascomparable to Tokyo and about 40% of all tourists visited
Osaka
Visitation Rate by Prefecture of Foreign Tourists Visiting Japan
Year

2013

2014

2015

2016

2017 (Note 2)

Osaka Prefecture

30.2%

34.1%

41.9%

44.7%

44.1%

Tokyo

43.2%

48.5%

48.2%

44.5%

41.1%

Change in Number of Foreign Tourists Visiting Osaka(million people)

12.00
1,200
1,000
10.00

7.16

6.00
600
3.76

4.00
400
200
2.00

1.70

2.35
1.58

2.03

2.63

0
0.00
2009

(Note 2) Source: Prepared by the Asset Management Company based on“Consumption Trend Survey for Foreigners Visiting Japan”(Japan Tourism Agency)

International flight passengers at Kansai International Airport
for fiscal 2017 reached 14.31 million, marking a new record(Note)
Number of foreigners from nearby Asian countries (China,
South Korea, Taiwan and Hong Kong) using LCCs is on therise due to a shift from group tours to independent travel

9.40

8.00
800

(Note 1) Source: Osaka Convention & Tourism Bureau

Number of Foreign Passengers
Using Kansai International Airport Hits Record-High

11.11

2010

2011

2012

2013

2014

2015

2016

2017 (year)

Source: Osaka Convention & Tourism Bureau(million people)

Status of International Flight Passengers at
Kansai International Airport

1,600
16.00
1,400
14.00
1,200
12.00

Foreign passengers

14.31 mn

Japanese passengers

1,000
10.00
800
8.00

6.61 mn

600
6.00
400
4.00

(Note) Source: Kansai Airports Co., Ltd.

200
2.00
0
0.00

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 (year)
Source: Kansai Airports Co., Ltd.

60

8-9. Changes and Current Status of Central Osaka
Renewal in central Osaka is advancing

１

Nakatsu Sta.

In Umeda area, construction of large and high-spec buildings including Umeda Hankyu Building
and GRAND FRONT OSAKA have completed one after another
Change in Leased Office Area of Umeda Area and Yodoyabashi and Hommachi Area
(thousand m2)
260
2,600

Hankyu Umeda Sta.

Umeda subway Sta.

１

JR Osaka Sta.

Higashi-Umeda Sta.

Hanshin Umeda Sta.
Nishi-Umeda
Fukushima Sta. Sta.

For leased office area,
Umeda area surpassed
Yodoyabashi and
Hommachi area

Umeda area surpasses with the
opening of GRAND FRONT OSAKA

240
2,400
2,200
220
2,000
200

— Umeda area
— Yodoyabashi and Hommachi area

1,800
180
Yodoyabashi Sta.
Higobashi Sta.

2003
Kitahama Sta.

2
3
Hommachi Sta.

2007

2009

2011

2013

2017 (year)

2015

3

2

Relocations of tenants from Yodoyabashi and Hommachi area (central business area of Osaka
for more than 50 years) to Umeda area is advancing as aging of office buildings is progressing

Chuo-Odori
Boulevard

3

Old buildings in the surrounding areas which tenants moved out from tend to be converted into
tower condominiums and hotels

Change in Population of Chuo-ku and Kita-ku of Osaka City

Shinsaibashi Sta.

(relative value based on 2007 (100))

140

Population significantly increased in
Chuo-ku (around Yodoyabashi and
Hommachi) and Kita-ku (around Umeda)

130

Population of central
Osaka has increased

Namba Sta.
(Hanshin, Kintetsu and subway)

JR Namba Sta.

2005

Source: Miki Shoji Co., Ltd. “Office Data”

Uehommachi Sta.
Nankai Namba Sta.

134

120

121

110

— Kita-ku, Osaka City
— Chuo-ku, Osaka City

100
90
2007

2009

2011

2013

2015

2017 (year)

Source: Japan Geographic Data Center “Population Summary of the Basic Resident Registers”

Openings of supermarkets in central Osaka has accelerated

61

8-10. Main Investment Area of Hankyu REIT “Umeda”

Aerial photograph takenfrom southeast side facing northwest(shot in December 2015)
Hotel New
Hankyu Osaka

LAXA Osaka

HERBISOSAKAGRAND FRONTOSAKA

Kita-Hankyu
Bldg.

HERBIS ENTNU chayamachi
NU chayamachi Plus

HankyuCorporation
Head Office
Bldg.

HANKYUTERMINAL Bldg.
Osaka Umeda Twin Towers
South(Hanshin Department Store)(Completion of 1st phase building)

Chayamachi
Applause

Kitano Hankyu
Bldg.

Hankyu GrandBldg.

JR Osaka Sta.

Hankyu Umeda Sta.
Hankyu-Sanbangai

HEP Navio

Umeda OSBldg.

Osaka Nikko
Bldg.

■Property owned by Hankyu REIT

Umeda Hankyu
Bldg.
(Hankyu
Department
Store)OS Bldg.

HEP Five

Higashi Hankyu
Bldg.

Umeda Center
Bldg.

■Major property developed and owned by Hankyu Hanshin Holdings Group

62

8-11. Real Estate Business Reorganization of the Sponsor Group
Since April 2018, the sponsor group launched its new organization possessing resources and know-how of the group’s realestate businesses and consolidated with an aim to accelerate achievement of “strengthening and expanding the real estateleasing business in Umeda, along Hankyu/Hanshin lines, metropolitan areas and overseas” and “thoroughly differentiating
the real estate sales businesses and other businesses,” as part of its long-term vision.
Aim to strengthen cooperation between the sponsor group and Hankyu REIT through the asset management company“Hankyu Hanshin REIT Asset Management, Inc.” (the company was changed from Hankyu REIT Asset Management, Inc.)
being a subsidiary of “Hankyu Hanshin Properties Corp.” (the company name was changed from Hankyu Realty Co., Ltd.),
which launched as a business supervising company directly under Hankyu Hanshin Holdings.

[Former Organization]
Hankyu Hanshin Holdings

HankyuCorporation

Hanshin Electric
Railway

Hankyu Realty

Hankyu REIT AssetManagement

Hankyu Travel
International

Hankyu Hanshin
Express

Hankyu Hanshin
Hotels[New Organization] Since April 1, 2018
Hankyu Hanshin Holdings

HankyuCorporation
Real estatebusinesses

Hankyu Hanshin
Properties

Hankyu Hanshin REIT
Asset Management

Hanshin Electric
Railway
Real estatebusinesses

Hankyu Travel
International

Hankyu Hanshin
Express

Hankyu Hanshin
Hotels(1) Hankyu Realty became a subsidiary of Hankyu Hanshin Holdings.
(2) Real estate businesses of Hankyu Corporation and Hanshin Electric Railway weretransferred to Hankyu Realty, and Hankyu Realty changed its trading name toHankyu Hanshin Properties.
(3) Hankyu REIT Asset Management changed its trading name to Hankyu Hanshin
REIT Asset Management.

638-12. HANKYU NISHINOMIYA GARDENS and Properties in the Vicinity

Hankyu Imazu LineACTA NISHINOMIYAWest Bldg.

ACTA NISHINOMIYA
East Bldg.

Hankyu Kobe Line

HANKYU NISHINOMIYAGARDENS

Nishinomiya
Kitaguchi Sta.

Hyogo Performing
Arts Center

Konan University

Aerial photograph takenfrom south side facing north648-13. Details of Value Calculation Methods
Average NOI yield =[Total real estate lease operation income* - Real estate lease operation expenses* + Total depreciation*] concerning owned real estate or new
assets (to be) acquired as of each period ÷Total acquisition price
Average yield after depreciation =[Total real estate lease operation income* - Real estate lease operation expenses*] concerning owned real estate or new assets (to be)acquired as of each period ÷Total acquisition priceUnrealized income/loss =Total appraisal value of owned real estate or new assets (to be) acquired as of each period - Total book value** Figures are based on results. However, for METS OZONE, (Tentative name) MANDAI Nigawa Store (site), LAMU Higashiosaka Branch (site) and Vessel Inn
Hakata Nakasu, the net operating revenues and operating expenses in the first year (in the second year for OASIS Town Itami Konoike (site)) based on the
discounted cash flow (DCF) method recorded in the appraisal report are used for figures other than depreciation, and amounts calculated following Hankyu
REIT’s accounting policy are used for depreciation. For public charges and taxes, they are posted in expenses from the first fiscal year and yields on an ongoing basis are calculated.

LTV=






Amount of outstanding debts + Security deposits or guarantees - Matched money
Total amount of assets - Matched money
When corporate bonds have been issued, the amount of outstanding debts shall include the amount of outstanding bonds.
Matched money refers to cash or deposits reserved in the trust account to guarantee the deposit and security money for the assets
owned by Hankyu REIT as the object of the trust beneficiary interests.
The total amount of assets refers to the amount in the assets section of the most recent balance sheet for each period. However, withrespect to tangible fixed assets, the difference between appraisal value and book value at the end of the fiscal period shall be added toor subtracted from the book value of the tangible fixed assets at the end of the fiscal period.

65

8-14. Portfolio PML and Anti-Seismic Measures
As of May 31, 2018
Classification

Retail-use
facilities

Office-use
facilities

Mixed-use(complex)facilities

Code

Name

PML

R1(K)

HEP Five(14% of the quasi co-ownership of the trust beneficiary interests)

5.0%

R2(K)

Kitano Hankyu Bldg.

10.7%

R3(K)

Dew Hankyu Yamada

4.7%

R4(K)

Takatsuki-Josai
Shopping Center

5.9%

R5(K)

Nitori Ibaraki-Kita Store(site)―

R6

Kohnan Hiroshima Nakano-Higashi Store (site)―

R8

Hotel Gracery Tamachi

10.3%

R9(K)

LaLaport KOSHIEN(site)

6.4%

R11(K)

HANKYU NISHINOMIYA GARDERNS(28% of the quasi co-ownership of the trust beneficiary interests)

9.2%

R12(K)AEON MALL SAKAIKITAHANADA(site)―

R13(K)

MANDAI Toyonaka Honanstore (site)―

R14(K)DAILY QANAT Izumiya
Horikawa Marutamachi Store(site)―

R15(K)

kotocross Hankyu Kawaramachi

2.6%

R16(K)

LIFE Shimoyamate Store(site)―

R17(K)

MANDAI Gojo
Nishikoji Store (site)―

R18(K)KOHYO Onohara Store

5.3%

R19(K)OASIS Town Itami Konoike (site)―

R20

METS OZONE

5.6%

R21(K)(Tentative name) MANDAI Nigawa Store (site)―

R22(K)LAMU Higashiosaka Branch (site)―

R23

Vessel Inn Hakata Nakasu

0.2%(Note)

O1

Shiodome East Side Bldg.

4.6%

O2(K)

Hankyu Corporation Head Office Building

3.7%

M1(K)

Ueroku F Bldg.

3.2%

M2

Sphere Tower Tennozu(33% of the quasi co-ownership of the trust beneficiary interests)

2.7%

M3(K)

LAXA Osaka

3.7%

M5

Kita-Aoyama San cho-me Building

7.4%

Portfolio total

3.4%●What is PML?
PML (Probable Maximum Loss) refers to the estimatedamount of the maximum loss from earthquake damage
expressed as a percentage, and indicates the ratio of
projected maximum physical loss amount of a building
from a probable earthquake of maximum magnitude(assumed to happen once every 475 years, or a 10%
probability of occurring during any 50 year span) during its
use (a 90% non-exceedance probability) against the priceto reacquire it.
●Portfolio PML
The total PML value for multiple buildings scattering inwide areas is always smaller than the weighted average
PML value of each building. This is called the portfolio
effect. Hankyu REIT calculates the portfolio PML by taking
into account the geographical diversity of buildings acrossa wide range of areas.
As shown in the table to the left, the portfolio PML ofHankyu REIT is 3.4% (including new properties (to be)acquired).
●Policy on earthquake insurance coverage
Hankyu REIT will decide to cover earthquake insurance inaccordance with the following standard set forth in its
management guidelines:“Hankyu REIT will investigate earthquake insurance
coverage when the PML of an individual property exceeds
15%.”(Note) PML of LaLaport KOSHIEN (site) is calculated for the parking
garage space administration building (394.88m2).

66

8-15. Investment Unit Price
Relative Price

Relative value based on 100 of the closing price basis on
January 4, 2017 / closing price basis

Per Unit Trading Trends*(Oct. 26, 2005 — June 29, 2018)

130.00High (closing price basis)120.00

JPY 276,000(Jun. 2007)

110.00Low (closing price basis)

JPY 65,000(Dec. 2011)

100.00January 4, 2017 — June 29, 2018

90.00
80.00
Jan '17 Mar '17 May '17 Jul '17 Sep '17 Nov '17 Jan '18 Mar '18 May '18

High (closing price basis)(Feb. 24, 2017)

Low (closing price basis)

Hankyu REIT

TSE REIT Index

JPY 156,500
JPY 127,500(Feb. 15, 2018)

Nikkei Stock Average

Price on June 29, 2018 (closing price basis)

Source: QUICKJPY 137,300

Unit Price (closing price basis)(Unit: JPY thousand)
280(Units)
7,000

240

6,000

200

5,000

160

4,000

120

3,000

10/26/2005

80

2,000

40

1,000

0

0

May'05 Nov'05 May'06 Nov'06 May'07 Nov'07 May'08 Nov'08 May'09 Nov'09 May'10 Nov'10 May'11 Nov'11 May'12 Nov'12 May'13 Nov'13 May'14 Nov'14 May'15 Nov'15 May'16 Nov'16 May'17 Nov'17 May'18

Source: QUICK

VolumeUnit Price

Since Hankyu REIT implemented a five-for-one split of its investment units with December 1, 2014 as the effective date, the figures that retrospectively reflect theimplementation of the five-for-one split are indicated.

67

8-16. Analysis of Unitholder Attributes at End of 26th Fiscal Period
Unitholder Composition
Ownership by category

Number ofunitholders(persons)

Ratio toownership

Number ofinvestment
units held
(units)Ratio tonumber ofinvestment
units

116

0.79%

130,427

9

0.06%

14,13596.63%

Financial institutions(excluding trust banks)
Trust banks
Individuals, etc.

Top 10 Unitholders
Number of units
Ownership
held (units)

Unitholder name
Japan Trustee Services Bank, Ltd.
(Trust account)

146,443

22.94%

20.43%The Master Trust Bank of Japan, Ltd.
(Trust account)

76,94612.05%

266,479

41.74%The Nomura Trust and Banking Co., Ltd.
(Investment accounts)

23,3993.66%

150,280

23.54%

Hankyu Hanshin Properties Corp.

22,4003.51%

14,636

2.29%

Other organizations

248

1.70%

56,086

8.78%

Foreign organizations,etc.

Trust & Custody Services Bank, Ltd.
(Securities investment trust account)

120

0.82%

35,228

5.52%

The Hachijuni Bank, Ltd.

13,6202.13%

14,628100.00%638,500

100.00%THE CHUKYO BANK, Ltd.

11,385

1.78%

Aozora Bank, Ltd.

8,642

1.35%

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

7,431

1.16%

The Senshu Ikeda Bank, Ltd.

7,177

1.12%

Total investment

332,07952.01%

Number of outstanding units

638,500

100.00%Total

Ratio of Units by Unitholder Category

47.27%

33.83%

34.34%

16.09%

17.44%

19.56%

20.43%

43.42%

43.86%

41.38%

41.74%

23.59%

21.73%

24.67%

23.54%

9.03%

9.24%
7.65%

9.16%
7.80%

9.17%
5.22%

8.78%
5.52%

End of FP 15

End of FP 20

End of FP 24

End of FP 25

End of FP 26

19.02%
23.91%

13.39%

33.96%

22.27%

13.46%

9.29%
7.78%

8.62%
10.14%End of FP 1

End of FP 5

26.31%
34.41%
23.20%
11.31%
4.83%
End of FP 10

Foreign organizations, etc.

13.63%

Other organizations

Individuals, etc.

Trust banks

Financial institutions(excluding trust banks)688-17. Organization of Hankyu Hanshin REIT Asset Management, Inc.
(As of May 31, 2018)
Corporate Data

General Meeting of
Shareholders
Auditors
Board of Directors

Trade nameHankyu Hanshin REIT Asset Management, Inc.

Headquarters

19-19, Chayamachi, Kita-ku, Osaka 530-0013,
Japan

EstablishedMarch 15, 2004

Paid-in capital

JPY 300 mn

Shareholder

Hankyu Hanshin Properties Corp. (100%)

Number of
officers and employees

President &Representative Director

Internal Audit Department
Compliance Committee

Executive officers

Investment Management
Committee
Compliance Department

34 (full-time workers only)
President & Representative
Director

Yoshiaki Shiraki

Managing Director

Toshinori Shoji

Director

Hideo Natsuaki

Director

Hiroshi Aoyama

Director

Futoshi Kinoshita

Director (part-time)

Noriyuki Yagi

Director (part-time)

Toyoyuki Komori

Corporate Auditor (part-time)

Koji Yoshida

Corporate Auditor (part-time)

Yasuki Fukui

Financial instruments trading business(investment management business)

Principal businesses
Investment
Planning
Department

Investment
Management
Department 1

Investment
Management
Department 2

IR and Public
Relations
Department

Corporate
Administrationand Supervision
Department

Financial product trader:
Director-General of the Kinki Finance Bureau
Ministry of Finance (Kinsho) No. 44
Real estate transaction license:
The Governor of Osaka Prefecture (3) No. 50641
Approval of discretionary dealing trustee, etc.:
No. 23 by Minister of Land, Infrastructure,
Transport and Tourism

69

8-18. Compliance and Internal Audit Systems of Hankyu Hanshin REIT Asset Management, Inc.

Build robust compliance and internal audit systems by systematically ensuring multiple check functions
based on the basic policy for building internal control systems
Compliance system

Constituent member
Directors, Corporate Auditors

Implementation(Note)

Board of Directors

President &Representative Director•

A majority of directors in attendance, and approvalof a majority of the attending directors are required.

Develop a compliance system as the most importantmanagement issue based on the basic policy concerningcompliance•

Achieve comprehensive compliance by establishing aCompliance Officer and a Compliance Department

Constituent member•

The Compliance Committee, including outside experts,
deliberates on Conflicts of Interests Transaction (note)•

The Compliance Officer attends the Investment
Committee meeting and checks for compliance issues•

Appointed a person to be in charge of efforts to prevent
improper requests and exclude anti-social forces

Decision criteria

Chairman: Compliance officer
Committee members: President & Representative
Director, full-time Directors and outside experts
Observers: Corporate Auditors (do not participate inresolutions) and other persons recommended by
the Chairman and approved by the Committee
Decision criteria

Compliance Committee

Investment Management
Committee

Proposals by
Department/Office

Approval of all of the attending committee members
is required under the condition where 3/4 or more
have attended including a compliance officer andtwo outside experts.

Internal audit system•

Establish PDCA cycle for improving operations in eachdepartment/office by systematically implementing theinternal audit every fiscal year based on the annualinternal audit plan.

•

Utilize external consulting entity to secure independence
of internal audit and obtain an extremely effective internal
audit.

Constituent member
Chairman: President & Representative Director
Vice chairman: full-time director designated bychairmanCommittee members: full-time director (excluding
compliance officer), office managers of respective
department (other than full-time director orcompliance officer)(Note) Interested party transactions that meet a certain criteria must
gain approval of Hankyu REIT’s Board of Directors’ Meeting.

Decision criteria
Approval of all of the attending committee members
is required under the condition where 3/4 or more
including the chairman and vice chairman haveattended together with the compliance officer.

708-19. Company Structure of Hankyu REIT
(As of May 31, 2018)(Note) In preparation for the event that the number of Executive and Supervisory Directors is less than that stipulated in laws and regulations, Toshinori Shoji
was elected as alternate Executive Director and Hiroumi Shioji was elected as alternate Supervisory Director at the General Unitholders’ Meeting held on
August 25, 2016.

71