Fiscal Period Ended April 2024 19th Financial Results Briefing Script and Q&A Summary
Date and Time: Monday, June 17, 2024 5:00pm-6:00pm

Event Summary[Speakers]
Toru Abe
Atsuhiro Kida
Nobuyoshi Sato
Kimiyoshi Otani
Sadaaki Takeuchi
Toshimitsu Fujiwara

President and Representative Director
Director, in charge of Accounting
Department and General Affairs Department
Director, in charge of Investor Relations
Department and Finance Department
Director, in charge of ESG Promotion
Department
Director and General Manager of Investment
Operations Division
Director, in charge of Corporate Strategy andDevelopment Department

1Abe: Hello, everyone. I am Abe from Sekisui House Asset Management.
Thank you very much for attending today's briefing on the financial results for the 19th fiscal period of SHR. I
will now explain the details of the financial results.
Please see page three of the presentation material. Here are the operational highlights and future initiatives.
First, the distribution per unit or DPU for the 19th fiscal period ended April 2024 was 2,095 JPY, an increaseof 119 JPY over the previous period. This was 260 JPY higher than the forecast announced at the time of thefinancial results for the 18th fiscal period.
The DPU forecast for the 20th fiscal period ending October 2024 and the 21st fiscal period ending April 2025
are 1,749 JPY and 2,252 JPY, respectively. Factors that cause fluctuations in distributions, etc., will be
explained later.
The long-term EPU, which is reported as earnings per unit after deducting gains/losses on dispositions,
impairment losses, and asset management fees related to gains on dispositions from net income, and adding
ATA, or allowance for temporary difference adjustment, is expected to decrease due to the disposition of two
office buildings and one hotel property, which will result in a decline in earnings in the future.
However, we intend to gradually recover through external growth by continuing to acquire properties andinternal growth, mainly in residential properties.
In terms of external growth, we have decided to dispose of Garden City Shinagawa Gotenyama, which had
been a pending issue, in two installments in the 19th and 20th fiscal periods. In addition, we have decided to2dispose of the hotel portion of Hommachi Garden City in the 19th fiscal period, and the office building portionin two installments: 65% in the 20th fiscal period and 35% in the 21st fiscal period.
Our future policy is to increase the ratio of residential properties to more than 70% and achieve internal
growth. At the same time, we will incorporate the recently announced US residences and work for stable
growth in Japan and proactive growth in the US, which the sponsor is also pursuing.
Next, in terms of internal growth, in residential properties, the occupancy rate at the end of the period wasmaintained at 97%, and change in rent rate at the time of new contract rose to a positive 4.8%. The change inrent rate at the time of renewed contract increased to 0.6%. In office buildings, the occupancy rate was 96.6%
at the end of the period, despite the disposition of some properties. Akasaka Garden City rose to 95.3%, while
Hommachi Minami Garden City experienced a vacancy and is currently at 98.7%.
I will explain the financial part later.
In terms of ESG, we received “A-” in the CDP Climate Change Assessment and were selected as a
“Sustainability Yearbook Member” for the first time.
Now, let me begin to explain the specifics.

See page four. This is about future growth strategies and policies.
We will continue to target 1,800 JPY and 1,500 JPY for DPU and long-term EPU, as in the past, and aim for 600
billion JPY in asset size.

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We will shift the portfolio development policy to a residential focus and increase the ratio to more than 70%.
Of which up to 30% will incorporate US residences with steadily increasing rents, and together with theinternal growth of domestic residences, we will seek to increase the distribution yield in the portfolio.

Please proceed to page six. I will explain the factors that caused changes from the previous period for the
19th fiscal period ended April 2024, on a per unit basis.
On the left is real estate property-related operating income.
Office building was negative 94 JPY, mainly due to lower property-related operating income from thedisposition of Garden City Shinagawa Gotenyama and interest in Gotenyama SH Building, and lower propertyrelated operating income from other buildings, excluding Shinjuku Hirose Building. In residential, thefavorable market environment resulted in a positive 15 JPY. Hotel posted a negative 2 JPY. These totaled
negative 81 JPY.
The loss on the disposition of Garden City Shinagawa Gotenyama, which represented the first disposition in
installments in the 19th fiscal period, was offset by gains on the disposition of the hotel portion of Hommachi
Garden City and Gotenyama SH Building, resulting in a positive gain on disposition of 350 JPY compared to theprevious fiscal period.
There is a negative 915 JPY due to the accounting impairment loss of Garden City Shinagawa Gotenyama,
which will be disposed of for the second time in the 20th fiscal period, a positive 86 JPY for SG&A expenses,
mainly due to a decrease in asset management fees, and 964 JPY from the recording of ATA due to tax
discrepancy and other factors in the impairment loss of Garden City Shinagawa Gotenyama mentioned earlier.
As a result, the DPU for the 19th fiscal period was 2,095 JPY, an increase of 119 JPY from the previous period.

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On the next page, we have listed the P/P change, the change from the published forecast, and the factors
behind the change for each asset type, which we hope you will review later.

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Please continue to page eight. This is the forecast for the 20th fiscal period ending October 2024, and the 21stfiscal period ending April 2025.
In the 20th fiscal period, in the real estate property-related operating income, for residential, we expect a
positive 108 JPY for the properties acquired in the 19th and 20th fiscal periods, but due to the impact of repair
work expenses and an increase in property tax for the existing properties, we expect a total of positive 67 JPY.
In office buildings, we expect a negative 249 JPY, mainly due to a decrease in revenue from the installment
disposition of Garden City Shinagawa Gotenyama and the disposition of interests in Hommachi Garden Cityand Gotenyama SH Building. In hotels, the disposition of Hommachi Garden City resulted in a negative 57 JPY.
In real estate property-related operating income, we forecast a total of negative 239 JPY.
Overseas SPCs dividends will contribute to the total for one month, adding 32 JPY. In SG&A expenses, we
expect an increase in asset management fees and interest expenses, which are set at negative 396 JPY.
Although there are positive gains from the disposition of Garden City Shinagawa Gotenyama, Hommachi
Garden City, and Gotenyama SH Building, there is a reversal of ATA of 881 JPY due to the resolution of tax
discrepancy in impairment losses. Therefore, the distribution for the 20th fiscal period is expected to be 1,749
JPY, a decrease of 346 JPY from the 19th fiscal period.
In the 21st fiscal period, in office buildings, we expect a negative 55 JPY, mainly due to a decrease in rental
revenues from Hommachi Garden City and a decrease in rental revenues from the disposition of interest in
the Gotenyama SH Building.

6For residential, we expect an increase of 11 JPY due to properties acquired after the 19th fiscal period andrent increases at existing properties, etc. We expect real estate property-related operating income to be
negative 44 JPY.
Gain on disposition will be negative 589 JPY compared to the 20th fiscal period, but overseas SPCs dividends
are expected to increase by three months, adding 96 JPY. SG&A expenses are expected to be positive 120 JPY
due to a decrease in asset management fees, etc. The DPU is expected to be 2,252 JPY, an increase of 503 JPY
compared to the forecast for the 20th fiscal period.
From the 22nd fiscal period onward, overseas SPCs dividends will contribute for the entire period of properties
held and increase. Furthermore, with future external and internal growth, we will increase the ratio of highly
stable residential properties to improve the long-term EPU and DPU.

Now, please proceed to page 11. This is about external growth.
First, I would like to discuss the change in portfolio development policy.
As announced on May 28 of this year, we have increased the percentage of residential properties to at least
70%, of which up to 30% may be invested in US residences.
In Japan, internal growth of residential properties has become more active, and we intend to increase theratio of residential properties to increase our profitability. In addition, Sekisui House, our sponsor, has
accumulated a great deal of experience and achievements in the urban rental housing (multi-family) businessin the US. By focusing on US residences, which have growth potential and currently offer higher yields thanthose in Japan, we will strive to maximize unitholder value through stable growth in Japan and proactive
growth in the US by adding new US residences to our core assets of domestic residences.

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Then, page 12. This is a summary of the asset replacement announced to date.
Dispositions from the 19th to the 21st fiscal periods totaled 147,850 million JPY for four properties, including
the Gotenyama SH Building, which continues to be disposed of in installments, with a total gain/loss on
disposition of 11,701 million JPY for the three fiscal periods.
Meanwhile, acquisitions totaled 92,079 million JPY, consisting of 11 domestic residential properties, one officebuilding, and one US residential property.
With regard to the use of the disposition proceeds, while giving priority to the acquisition of assets, we will
also consider partial repayment of debt or acquisition of our own investment units, depending on the situation.
By positioning residential properties, which are the sponsor group's strongest area of expertise, as the main
axis asset, we hope to further strengthen the stability of our earnings.

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Then, page 13. This page discusses Garden City Shinagawa Gotenyama and Hommachi Garden City, whichwere decided to be disposed of in March of this year.
In Garden City Shinagawa Gotenyama, the occupancy rate is expected to fall below 50% due to the departureof a major tenant at the end of July of this year, and we have been conducting sales activities with theunderstanding that a considerable amount of time will be required to backfill the rent further, as the rent is
expected to fall substantially against the rent paid to date. With the appraisal value also falling significantly,
the property was disposed of at a loss of approximately 8.2 billion JPY.
With respect to Hommachi Garden City, although the hotel portion of the property was facing rising
expectations of rent increases due to a recovery in inbound demand, the NOI had not risen significantly, andthe yield could not be expected to increase even if the lease was changed from a fixed-rent master lease to apass-through master lease. Furthermore, the time for equipment renewal was approaching, and we were
expecting to contribute to repair costs, including CapEx, in the future.
For the office building portion, the rent level of the large tenant who occupies slightly less than 70% of thetotal rentable area was higher than the rent level of the surrounding area, and there were concerns about thepossibility of profitability deterioration in the future. The hotel and office building portions of Hommachi
Garden City were disposed of for a total gain of approximately 13.6 billion JPY.

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See next page. This is a list of properties acquired in Japan. Please check back later for the contents.

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We will move on to page 15. This is the status of the portfolio. The graph on the right shows the status as oftoday.
Residences accounted for 68.5% of the total, with the recently acquired US residence accounting for 9.9% of
the total portfolio. The ratio of residences will be further increased as 35% of the office building portion of
Hommachi Garden City and the remaining 80% of the Gotenyama SH Building will be disposed of one after
another in the future.

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The next page and beyond is about the US asset.
This page contains indicators for the US as a whole. The top left graph shows the change in nominal GDP and
the top right graph shows household income, with median growth and multi-family rent trends.
As you are aware, the US economy continues to grow steadily. Nominal GDP has maintained a high growthrate compared to Japan. Median household income has also continued to increase, and housing rents haveincreased by a greater margin since 2020.
On the other hand, cap rates for real estate transactions have been adjusting since March 2022, triggered by
the monetary tightening policy, and as shown in the graph at the bottom, in residential properties, multifamily cap rates have also been increasing.
Although we would not have been able to acquire the property at the price level based on the previous cap
rate, we have decided that at the current price level, we can consider acquiring the property at a price levelthat meets our investment criteria, and that we will also be able to capture the internal growth of the property
in the future.

12See next page. This is the data for Seattle, the location of The Ivey on Boren, which we recently acquired.
The upper left graph shows the population. Seattle's population, currently around 4.1 million, has grown
12.7% over the past decade, far exceeding the 5.5% population growth rate of the US as a whole over thesame period. Increased immigration is also thought to be boosting rental demand in Seattle.
The upper right graph shows household income. The median household income in Seattle is over 115,000 USD,
which we believe indicates that the area has the economic strength to support high rents.
The lower graph shows the trend of multi-family rents. The rate of increase over the past 10 years has been
44.2%, and we expect rents to continue to increase in the future due to the growing population and highhousehold incomes.

13Now, see page 18. This is the location of The Ivey on Boren, which was recently acquired.
It is located in the heart of Seattle, Washington. The property is conveniently located in the heart of downtown,
surrounded by high-rise office buildings, condominiums, cafes and restaurants, and the Space Needle,
Seattle's famous tower, is also within sight.
Amazon and Microsoft are two of the leading companies headquartered in the region, both of which conduct
the majority of their research and product development in the region.

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Please proceed to the next page. This is an overview of The Ivey on Boren.
The property is a 44-story tower condominium with seven basement floors, completed in October 2022.
There are 406 units in total, consisting of 20 studio type units, 270 one-bedroom units, 84 two-bedroom units,
and 32 three-bedroom units. The occupancy rate as of the end of April was 92.4%. Common facilities include
365 self-parking spaces, a gym and swimming pool, multiple barbecue spaces, and a lounge and rooftop
terrace on the top floor overlooking the city.
It was awarded “High-Rise Residential Development of the Year” in 2023 and LEED Gold for green building
certification. In addition, the property has excellent environmental performance, including Fitwel certificationin the area of wellbeing.

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Please take a look at the photos of common areas and inside the units on the next page.

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Now, please proceed to page 21. Here you will find our investment and management structure.
SHR made a 100% investment in the SPC that owns the property, but in order to receive distributions every
six months, two SPCs were established, each with a six-month staggered fiscal period, and each owns 50% of
the property.
Property management is outsourced to Holland Residential, a local Sekisui House partner company that
handles everything from development to current operational management.
In addition, we have signed an outsourcing agreement with a local Sekisui House to receive operational
support.
In addition, the contract is guaranteed minimum rent for the first two years to avoid the risk of income
fluctuation in the initial period.

17See page 22. Here is a diagram of the flow of making distributions each fiscal period at SHR, with the two SPCs
staggering their fiscal periods by six months.
SPCs close their books at the end of January and the end of July, with dividends from SPCs closing at the endof January allocated to the fiscal period ending April each year, and dividends from SPCs closing at the end of
July allocated to the fiscal period ending October each year for distribution to SHR.
With respect to foreign exchange, we plan to hedge the future one fiscal period by using foreign exchange
forward contracts. Please see the chart below right for the fluctuation risk in earnings due to the impact offoreign exchange rates. The chart shows the expected dividend yield at each exchange rate level.

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Please proceed to the next page. Next is the sponsor pipeline.
The total amount is approximately 240 billion JPY, of which 90 billion JPY is for residential and 150 billion JPY
is for office buildings, etc. Although the list of developments shows only residential properties, we expect toacquire many ZEH properties in the future.

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Then see page 24. This is the change in appraisal value.
As a result of the recent asset replacement, the total appraisal value has decreased to 604.5 billion JPY, andunrealized capital gains have also decreased by 1.3 billion JPY from the previous period to 95.2 billion JPY, but
the unrealized capital gains rate has increased to 18.7%. There was no change in the cap rate for thetransaction this fiscal period from the previous period.

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Please proceed to the next page.
The NAV per unit was 85,713 JPY, a decrease of 1,270 JPY from the previous period due to the impact of asset
replacement and a decrease in unrealized capital gains.

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Next, I will explain internal growth.
Please go to page 27. First, I will talk about residential.
As for occupancy rates, the average occupancy rate for the 19th fiscal period was 97.1%, and was still 97.0%
at the end of April, remaining steady at the 97% level.
The occupancy rate for single type in Tokyo 23 wards averaged 96.5% during the fiscal period, and was 96.3%
at the end of April. Tokyo 23 wards continue to experience a strong population inflow trend, and from a
supply-demand balance, we intend to focus on improving occupancy rates and increasing rents.

22Here are the figures on the rent status, and new and renewal contracts.
The change in rent rate for new contracts in the upper left-hand corner shows an overall increase of 4.8%, anincrease of 0.6 percentage points compared to the previous period.
Renewal contracts on the right also increased by 0.6%, a 0.3 percentage point increase over the previous
period.
The non-refundable deposit received also increased 0.9 percentage points from the previous period to over56%.
The rate of renewal is 88%. As you can see in the graph on the upper right, the ratio of rent increase at thetime of renewal was 20.6% in the current period. We would like to focus on raising this ratio in order to further
increase revenues.

23This page shows the change in rent rate in new contracts by area.
The major cities nationwide show a 2.7% increase, while the greater Tokyo area shows a 5.2% increase. The
breakdown of the greater Tokyo area in the lower left shows a 5.2% increase in the Tokyo 23 wards and an
8.2% increase outside of the Tokyo 23 wards.
Among the major cities, Nagoya-shi showed a slight decrease, while other cities showed an increase.
Since increasing rents in the greater Tokyo area, especially in the 23 wards where property profitability is high,will lead to future growth, we will continue our efforts to increase rents and raise revenues.

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Here you can see our operation status for the current fiscal period.
The three newly built properties acquired on March 1, 2024, have not yet been occupied, and we started
accepting applications after acquisition. Leasing is progressing smoothly for each property, and Esty Maison
Omori already has an occupancy rate of 100%.
Also, on the right side, there are cases where renovations have resulted in significant rent increases. In therenovation of family-type properties over 15 years old, we achieved an average rent increase of 44% forproperties with an average age of 24.1 years.
In addition, although various costs have been rising since last year, we are working to review management
fees and reduce costs in high-cost construction projects.

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On the next page, you will find examples of value-up work we have performed in the current 19th fiscal period.

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The next page is an example of a large-scale repair project.
In order to increase rents, a certain amount of value-up work is necessary in conjunction with large-scale
repair work, etc. We will continue to implement such work in a planned manner to increase rents in the future.

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See the next page. Please refer to the data here, which shows the population inflow to the Tokyo 23 wards
and the jobs-to-applicants ratio.
Last year, 2023, was a year of significant recovery in the number of over-migrants in the Tokyo 23 wards, with
53,899, and this year, 2024, the number of over-migrants is nearly 50,000 as of April, and we expect further
increases.

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Next, office buildings. Regarding the overall operation status of the office buildings, the results as of the endof the 19th fiscal period are shown in the red box.
The overall occupancy rate was 96.6%, with backfilling progressing at Akasaka Garden City and some vacancies
at Hommachi Minami Garden City.
The bottom row shows renewal result and trends in leases. The rate of rent change in the 19th fiscal period
was negative 5.4%, an even larger decrease.

29This page describes Akasaka Garden City and Hommachi Minami Garden City, which have vacancies.
In Akasaka Garden City, one lot has been backfilled and the occupancy rate is 95.3%. The remaining parcels
have a great view and we have been working on them while aiming to secure rents, but they have been vacant
for a long time. We would like to proceed with a policy of prioritizing operation, including renewal, while also
checking the surrounding conditions.
In Hommachi Minami Garden City, there was a move-out in a small section, resulting in an occupancy rate of
98.7%. The property has had a few tenants move out in the past, but the downtime has been short and wehave been able to return the property to full occupancy.
The section that became vacant this time is also a small section, so we will secure the rent level and aim toclose the contract as soon as possible. We will also negotiate with tenants who have a rent gap to increase
the rent for renewal or re-signing.

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Next page describes the status of rent revisions and rent gaps.
In the 19th fiscal period, 63.3% of all rent revisions were unchanged and only 1.8% increased while 34.9%
decreased, resulting in a rate of rent change of negative 5.4%.
The rent gap in the greater Tokyo area was resolved to 8% with the disposition of Garden City Shinagawa
Gotenyama.
In the Osaka area, there is no significant change in the rent gap at negative 12.8%, and we intend to focus on
increasing rents as much as possible while emphasizing occupancy.

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Please proceed to the next page. This graph shows average rents and vacancy rates in Tokyo’s business
districts and Osaka’s business districts.
In Tokyo’s business districts, vacancy rates are declining. Average rents also began to increase, albeit slightly.
In Osaka’s business districts, vacancy rates have declined slightly and rents have remained flat.

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Now, please continue to page 39 for the financials. The financial indicators are as shown in the table in thelist.
The average interest rate was 0.63%, 2 basis points higher than at the end of the previous period.
The right side of the graph shows the most recent financing results. While the financing is basically green
finance, we have also taken out some loans with floating interest rates to reduce the borrowing rate, albeit
slightly. Although further increases in interest rates are expected, we will continue to strive to keep costs as
low as possible while maintaining a balance by incorporating short-term and floating interest rates.
The LTV on total assets at the end of the current period was 45.5%.
There is no change in the rating status. We have received confirmation from both rating agencies that there
will be no impact on the change in the investment guideline and the inclusion of overseas real estate.
We have also received confirmation from our lending institutions that they will continue to support us in thesame manner as before.

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Next page. The LTV control policy was reviewed in the previous fiscal period, and we will continue to operatewith a target cruising level of 45% to 50%. This is based on the assumption that future asset replacement will
result in a larger proportion of more stable residences.
Below left, if we were to raise the LTV to 50%, the remaining acquisition capacity would be approximately 51
billion JPY.

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Now, finally, let's talk about ESG. See page 42.
We have continued to actively address ESG issues, and in the 19th fiscal period, we received a high evaluationfrom an external evaluation organization.
For the CDP Climate Change Assessment, this is the first time we have participated in the program, and we
received an “A-” rating, the highest leadership level.
In addition to being selected for the first time as a constituent of the Dow Jones Sustainability Asia/PacificIndex, SHR was also selected as a Sustainability Yearbook Member as a company with excellent sustainability
performance.

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Also, as shown on the next page, we will continue to promote ESG initiatives through participation in a numberof initiatives and obtaining external evaluations.

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Last page. Here are the details of the new initiative, as SHR has acquired its first ZEH property from the sponsor.
Prime Maison Asakusa EAST, acquired on April 1, is a ZEH property.
As I mentioned earlier, the pipeline of ZEH properties being developed by our sponsor, Sekisui House, willbuild up in the future. By actively acquiring these properties, we will aim to build a competitive portfolio.
That is all I have to say.
As I mentioned, we disposed of Garden City Shinagawa Gotenyama, which had been pending, and at the sametime, we disposed of Hommachi Garden City, which we recognized as a future risk.
On the other hand, the residences recovery has been very strong. In our asset replacement, we decided tofocus on residential properties, and for a portion of this, we also incorporated rental housing in the US.
Although there is the risk of exchange rate fluctuations, the yield level is high compared to the domestic
trading cap rate, and we believe that we can achieve internal growth that will contribute to the recovery andimprovement of the profitability of the entire portfolio.
Based on the new policy, in order to achieve results, we will continue to work with our sponsor group to
maximize unitholder value.
We look forward to your continued support.
Thank you very much.

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Question & Answer[Q]: Regarding investment in rental housing in the US, could you please explain the scale of the pipeline thatyou can see now, and the future acquisition yields, whether they will be the same as this time or whether they
are likely to go up or down? And, although the exchange rate is changing, would you make a decision on
acquisition based on the yield at the current exchange rate?
Also, as a supplementary question, it seems that you are not leveraging this time, but would you ever leverage
at SPC if interest rates or the borrowing environment changes?
Abe [A]: We have not signed an agreement with the sponsor to disclose the US pipeline, so there are no
details to be shown in this document, but as you are probably aware, a considerable number of years andamounts of money have been accumulated in the US multi-family development, and I believe that it isprobably a reasonable amount.
Among the many properties available, we decided that The Ivey on Boren, located in Seattle, Washington,
was very attractive due to the economic growth potential of the area, its future growth and stability, and theproperty's growth potential. In addition, the property's sense of yield matched our perspective, and we wereable to negotiate and acquire the property.
Regarding the foreign exchange rate, we expect to receive various comments from investors about the factthat the acquisition was made while the yen is weakening, but we believe that the acquisition would not havebeen possible without the cap rate at the current level. Therefore, we will have to assess whether the yen will
depreciate further or appreciate again in the future based on the exchange rate at which the acquisition was
made.
Regarding the sense of yield, our overall portfolio has a yield of about 3.1% after amortization. In order torecover and increase the DPU, and before that, the long-term EPU, we need to increase the yield after
amortization. So we believe that the focus should be on those that can firmly raise the level of our domestic
portfolio.
As for leverage, we basically do not anticipate any leverage at the local SPC. If we leverage our investments
locally at the current interest rate level, the interest paid will have a very large impact, and it will be difficult
to generate positive returns. Our current thinking is that we will keep it within the scope of our full equity
investment from Japan.

[Q]: You explained that LTV will be raised in the future as the number of houses with high stability increases,
but I would like to confirm again whether it is correct to assume that the LTV will gradually increase toward50%.
Abe [A]: We have received confirmation from the two rating agencies that there will be no impact on therating up to the 50% level, so including that, we have set the control level at 50%. However, although it isstated that our remaining acquisition capacity is about 51 billion JPY, we do not intend to raise the current
rate from the mid-45% range all at once, and we think it would be best if the rate were kept in the 47% range
or so, while checking future market interest rates and borrowing rates. Therefore, we do not have a policy of
rapidly raising the LTV to 50% at this time.

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[Q]: First, in terms of building a portfolio for the future, I think the trend is to increase the number ofresidences, but is it your intention to acquire overseas and domestic residences while using the current
surplus funds, or do you intend to sell off more of the office buildings you currently own in order to focus
more on the residential portfolio? In other words, do you intend to sell off more of your current officebuildings in order to increase the number of overseas residences?
Second, I would like to reconfirm the structure of the housing overseas this time. I have carefully read thepress release and other information on the acquisition, but just in case it is misleading. This time, the dividend
yield is 3.7%, but what is the process leading up to this point? Specifically, how much is the NOI, how muchtax is paid in the US, what about depreciation, etc., which are a little different from those in Japan. I would
like to reconfirm what the taxes and depreciation are, and how the 3.7% figure was arrived at as a result.
Abe [A]: Regarding your first question, we are planning to increase the ratio of residential properties in our
portfolio, and our sponsor has confirmed with us that their strongest point is residential properties, and wehave established such a policy.
At this point, as I mentioned earlier, as we dispose of Garden City Shinagawa Gotenyama, the office building
portion of Hommachi Garden City, and the hotel portion, and continue to dispose of 10% of the SH Building
each fiscal period, a certain amount of surplus funds will be generated. We must first make good use of them,and we will do what we can within the scope of the surplus funds.
As for our current NAV multiple per unit, it continues to be below 1x intermittently, so within the scope of
possible replacements, we need to firmly raise the long-term EPU every period, and also show an
improvement in distributions through dividends from overseas SPCs. We believe that we must first work torecover the NAV multiple. We think we can slightly increase the size of assets by using some LTV, so we willproceed with that plan for now.
As for whether or not we will sell more office buildings, we have managed to dispose of the properties that
had been pending. Regarding the performance of the remaining office buildings, our thinking is that we may
consider separating the offices again, depending on the situation, judging the level at which the NOI yield
after depreciation and the yield on distributions are performing for us, and what the future risks may or may
not be.
However, at this time, the remaining 35% of Hommachi Garden City will be disposed of, and the Gotenyama
SH Building will be disposed of eight more times, or at 10% each, and we would like to allocate as much of
Fujiwara [A]: Regarding your second question. In this case, LLCs were established in the US and an indirect
investment was made, and as for the accounting and tax structure at the LLC level, accounting is based on the
IFRS fair value model, which basically means that depreciation is not recorded and the property is valued atfair value.
On the other hand, for tax purposes, depreciation is recorded, resulting in a tax discrepancy, for which taxeffect accounting is applied.
As a result, there will be a leakage of approximately 100 to 110 basis points between NOI and distributable
income. Of that amount, roughly 30 basis points is current income taxes, which is the actual outflow of cash.
The remaining 70 basis points are deferred tax liabilities, which are recorded as income taxes for accounting
purposes, but are actually retained locally as cash on hand. That is all.
Abe [A]: As just explained, due to the tax discrepancy, the portion corresponding to the deferred tax liabilities
will be retained locally, and our current estimate is about 1.9 million USD per year in local currency, which isabout 300 million JPY at the current exchange rate. This will be retained over the next 10 years, and although39

it will not be depreciated, we will also use these retained earnings for CapEx and other so-called repair
expenses.

[Q]: Regarding the multi-family cap rates, you say that you can't afford it unless it's at the current level, but
are you buying with the expectation that it will peak out in the future? Or is it being purchased based on the
expectation that it will continue to rise in terms of fair value, as you mentioned IFRS fair value, although thepeak-out is not yet known, because it will still rise in terms of cash flow? Let me confirm this.
Second, the NAV per unit has been declining a little. I would like to confirm that external growth will be themain factor in raising the NAV per unit in the future. For example, is there any idea of increasing NAV per unit
by increasing capital efficiency? As the president mentioned earlier, there will be cash inflows of about JPY7
billion each fiscal period, which will cause your assets to decline a little, but is it correct to think that while
beating it back, you will increase NAV by increasing external growth?
Abe [A]: First, regarding multi-family, we believe that under the current US interest rate situation, thetransaction cap rates have widened, making it possible for us to invest in this area. Currently, we haveconfirmed, including at the site, that there is no atmosphere of further widening in that area. It is still unclear
as to whether we can say that it has peaked. However, interest rate cuts are expected to start in the US, andmany cities in the US are showing very strong demand for residential properties in particular, so we see astrong possibility that the cap rates will go down again if investment money starts to be reinvested in suchproperties.
Regarding cash flow, our assumption now is that the rent level will increase by 3% per year and the cost level
will also increase by 3% per year. The local appraisal company's evaluation that we obtained is similar to theassumption. Therefore, although we are using the fair value model, the cash flow will continue to increase,
and while the movement between caps will naturally be important, we believe that the appraisals for eachfiscal period will also increase. If interest rates fall and investment activity picks up again, we think that thecap rates will tighten.
As for the NAV per unit, you mentioned the use of capital efficiency, but as you pointed out, the Gotenyama
SH Building has 8 times remaining, with a cash inflow of 5 billion JPY, excluding the gain on disposition. In
order to utilize these and other factors, first of all, how can we raise the overall portfolio, including internal
growth, while holding one target of 3.1%?
In addition, we believe that an environment in which it is difficult to acquire new properties will continue tooccur in the future, and we will make future decisions after carefully examining the situation and the level atwhich we should purchase our own investment units to ensure that this will have a positive effect that willplease our shareholders.
[END]______________

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Disclaimer
・ The purpose of this document is to provide information and is not intended to solicit investments inor recommend trading in marketable securities or products.
・ Unless stated otherwise, the information provided in this document does not constitute a disclosure
document or asset management report under the Financial Instruments and Exchange Act, the Act on
Investment Trusts and Investment Corporations, public listing regulations of the Tokyo Stock
Exchange or other related laws and regulations.
・ While SHR and SHAM have taken due care in the preparation of this document, there is no guarantee
as to the accuracy, adequacy, or completeness of the information, regardless of whether that
information was prepared by SHR or SHAM or received from a third party. The content of thisdocument is subject to change or eliminated without advance notice.
・ Among the information contained in this material, forward-looking statements, whether explicit ornot, involve uncertainties of known risks, unknown risks, and other factors, and SHR ’s actual
performance, management results, financial conditions, etc., may differ significantly from these.

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