Implementation of Asset Replacement

March 29, 2013
Hankyu REIT, Inc.
Hankyu REIT AssetManagement, Inc.

1. Portfolio Improvement in Collaboration with Sponsor Group
2. Effects of Asset Replacement
3. Overview of Acquisition Property (HANKYU NISHINOMIYA GARDENS)
4. Overview of Acquisition Property (Hankyu Corporation Head Office Building)Portfolio Improvement in Collaboration with Sponsor Group
Future Growth Strategies and Management Policies (reproduction of financial results briefing materials for the 15th fiscal period)
Distribution Policies

Implementation of management that emphasizes on stability of distributions
distributions in medium to long term

Collaborate with sponsor group in an aim to realize measures to improve portfolio earning power
External Growth
Strategies

Improvement and growth of portfolio by utilizing comprehensive strengths
strengths of Hankyu Hanshin Group

Improve existing portfolio by considering measures, such as replacing properties with declining earning power, in an aim to return to a growth path.
Internal Growth
Strategies

Deepening of operational management

Aim to bottom out and turn around revenues through detailed response tailored to each facility, such as proactively replacing retail tenants withstagnant sales, while maintaining high occupancy by establishing good relationships with tenants
FinancialStrategies

Implementation of stable financial operations and LTV controls

Realize steady refinancing, diversification of debt repayment dates and reduction of debt financing costsby reinforcing cooperation with financial institutions in an aim to stabilize the financial foundation
With clearer signs of income decreasing due to exit of large tenants and increase in repair expenses, the asset
replacement will be implemented in an aim to secure distributions of JPY 12,000 or more on an ongoing basis andrealize early return to a growth path.

Hankyu REIT, Inc.

Sponsor GroupIn light of such factors as intensifying competition
with surrounding facilities, retail facilities in theUmeda area (HEP Five and NU chayamachi) will
be sold to the sponsor group.

HEP Five and NU chayamachi will beacquired to lead the value enhancement ofboth facilities and thereby promote further
revitalization of the Umeda area.

A community-based retail facility (HANKYUNISHINOMIYA GARDENS) and a sponsor grouphead office building will be acquired in an aim toenhance the NOI yield while maintaining thequality of the portfolio.

In collaboration with Hankyu REIT, Inc., further
growth of the real estate business of thesponsor group on the whole will be aimed.

1

Effects of Asset Replacement■ HANKYU NISHINOMIYA GARDENS (28% quasi co-ownership of trust beneficiary interests)■HEP Five (partial transfer; 31% quasi co-ownership of trust beneficiary interests)

Property Overview

Property Overview● Transfer price: JPY 16,523 mn● Acquisition price: JPY 18,300 mn● Book value: JPY 13,002 mn● Appraised value: JPY 20,300 mn● NOI yield: 4.5% (Note 2)● NOI yield: 6.0% (Note 1)● Yield after depreciation: 3.1% (Note 2)● Yield after depreciation: 4.4% (Note 1)■ Hankyu Corporation Head Office Building
Property Overview

Hankyu REIT’s interest in quasi co-ownership changes to 14% after thetransfer■NU chayamachi
Property Overview● Acquisition price: JPY 10,200 mn● Transfer price: JPY 14,100 mn● Appraised value: JPY 10,200 mn● Book value: JPY 17,543 mn● NOI yield: 5.9% (Note 1)● NOI yield: 3.7% (Note 2)● Yield after depreciation: 3.4% (Note 1)● Yield after depreciation: 1.3% (Note 2)

Total acquisition price: JPY 28,500 mn
Effects ofAsset
Replacement*

Total transfer price: JPY 30,623 mn

B e f o re

A f te r

R e p la c e m e n t

R e p la c e m e n t
5 .2 %N O I y i e ld

4 . 5 % (N o t e 3 )U nr e aliz e d g a in(l o s s )(J P Y 8 . 3 b n )LTV

5 5 . 8 % ( N ote 5)(N o t e 4 )(J P Y 6 . 5 b n )5 4 .2 %E ff e c ts
+ 0 .6 p
I m p ro v e s
JP Y 1 .8 b n
D e t e rio r a te s
1 .6 b n

Impact on lease operating income: Approx. JPY 230 mn increase (on an ongoing and full-period basis)
Aim to secure distributions of JPY 12,000 or more on an ongoing basis and realize early return to a growth path
(Note 1) Calculated based on the existing lease agreement as the NOI after recording taxes and public dues as expenses or the income after depreciation, divided by the acquisition price.
(Note 2) Calculated as the sum total figure of 15th fiscal period results and 16th fiscal period forecasts (the figures assumed in the forecasts for the 16th fiscal period announced in the report of financial
results for the 15th fiscal period; the same hereafter), divided by the transfer price.
(Note 3) Calculated as the figure of 15th fiscal period results and 16th fiscal period forecasts, divided by the total acquisition price of portfolio properties.
(Note 4) The figure at the end of the 15th fiscal period. LTV = (Interest-bearing debt + Security deposits – Matched money to security deposits) ÷ (Total assets (appraisal adjustment basis) – Matchedmoney to security deposits). Unrealized gain (loss) is the difference between the appraised value and the book value.
(Note 5) Calculated as there being no change in revenues/expenses, appraised value, etc. from before the asset replacement for the properties other than the asset replacement properties.

2

Overview of Acquisition Property (HANKYU NISHINOMIYA GARDENS)
Favorable trade area with active purchasing power,
centering on Nishinomiya/Ashiya area

Overview of HANKYU NISHINOMIYA GARDENSThe property, which opened in 2008 as a redevelopment of the former site ofHankyu Nishinomiya Stadium, is one of the largest shopping centers in westernJapan.



Directly connected by a deck to Nishinomiya-kitaguchi Station, which ranks third
behind Umeda Station and Sannomiya Station in the number of passengers out ofall Hankyu Railway lines.

 The area where the property is located is midway between
Osaka and Kobe, and is an area that enjoys an abundant andfavorable trade area able to secure many customers in the highincome bracket.
Trade area population
Within 10km

HANKYU NISHINOMIYAGARDENS won the Fifth JapanSC Award and Gold Award(awarded March 19, 2013).

Within 3km

Takarazuka City
Within 5km

340,000

Location
Number of stores

Takamatsu-cho, Nishinomiya-shi,
Hyogo
268 stores

Total floor area

(as of end of February2013)
Hankyu Department Store,
Izumiya and Toho Cinemas
JPY 71.3 bn(fiscal 2011 results)
Approx. 247,000㎡

Opening dateNovember 2008

Parking capacity

Approx. 3,000 vehicles

Anchor storesOverall sales(Note)(Note) The amount including consumption tax, etc.

Itami CityAshiya City
Within 3km

Within 5km

780,000

Nishinomiya
Gardens

Within 10km

Amagasaki City

Nishinomiya City
1,750,000

Per capita income

Per capita income

taxable for municipal taxes

taxable for municipal taxes

Kansai region ranking

Top 5 in Japan ranking (Note)(Japan ranking) (Note)

Ashiya City
1st

Minato Ward, Tokyo

2nd

Chiyoda Ward, Tokyo

3rd

Shibuya Ward, Tokyo

4th

Ashiya City, Hyogo

5th

Chuo Ward, Tokyo

1st (4th)
Nishinomiya City

2nd (23rd)
Takarazuka City

5th (33rd)(Note) Ranking of the income taxable for municipal taxes, divided by the number oftaxpayers of the per income levy, based on the data of Ministry of Internal Affairs
and Communications’ “Fiscal 2011 Municipal Taxation Status, etc. Survey.” Kansai
region herein refers to Shiga Prefecture, Kyoto Prefecture, Osaka Prefecture, Hyogo
Prefecture, Nara Prefecture and Wakayama Prefecture.

3

Overview of Acquisition Property (Hankyu Corporation Head Office Building)
Overview of Hankyu Corporation Head Office Building The property is occupied by Hankyu Corporation, Hankyu Hanshin Holdings,Inc., etc., making it a core base of the Hankyu Hanshin Holdings Group.
 The property was sold in November 2009 in the post-Lehman-Shock realestate prices falling phase in order to lower the LTV.
(Priority negotiation rights granted to Hankyu REIT upon the transfer.)
 A fixed type master lease agreement is concluded with Hankyu Corporation,
making it a property with high rent stability.

Location

Shibata, Kita-ku, Osaka-shi

Lot area

3,396.82㎡(Note)

Total floor area

27,369.37㎡(Note)

Floors2 underground levels, 19 floors(Note)

Month/Year built

September 1992

(Note) As specified in the registry4This material includes forward-looking statements based on present assumptions andfuture outlook.
Actual results may differ from the forward-looking statement values due to various factors.
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 otherfinancial 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.