Investment
Invincible Corporation

Financial Summary
for the December 2016 Fiscal Period(from July 1, 2016 to December 31, 2016)
February 22, 2017

Name
Representative
Stock Listing
Securities CodeURL
Contact

:
:
:
:
:
:

Invincible Investment Corporation
Naoki Fukuda, Executive Director
Tokyo Stock Exchange8963
http://www.invincible‐inv.co.jp/eng/
Consonant Investment Management Co., Ltd.
(Asset Manager of Invincible Investment Corporation)
Jun Komo, General Manager of Planning Department
Tel. +81‐3‐5411‐2731

Start date fordividend distribution: March 28, 2017

This English language notice is a translation of the Japanese‐language notice released on February 22, 2017 and was prepared solely for theconvenience of, and reference by, non‐Japanese investors. It is not intended as an inducement or solicitation for investment. We caution
readers to undertake investment decisions based on their own investigation and responsibility. This translation of the original
Japanese‐language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy orcompleteness of this English translation. Readers are advised to read the original Japanese‐language notice. In the event of any discrepancy
between this translation and the Japanese original, the latter shall prevail in all respects.

1.

(values are rounded down to the nearest JPY million)
Financial Results for the Fiscal Period ended December 31, 2016 (from July 1, 2016 to December 31, 2016)(1)

Operating Results(Percentages indicate percentage change from the preceding period)
Operating Revenues

Operating Income

Ordinary Income

JPY million%

JPY million

Fiscal period ended
December 31, 2016

9,511

16.6

5,934

17.0

5,431

Fiscal period ended
June 30, 2016

8,158

18.9

5,073

16.1

4,364

Net Income per Unit%

Net Income/Unitholders’ Equity

JPY million

Net Income%

JPY million

%

24.5

5,431

24.5

47.8

4,363

47.8

Ordinary Income/
Total Assets

Ordinary Income/Operating Revenues

JPY

%

%

%

Fiscal period ended
December 31, 2016

1,477

4.2

1.9

57.1

Fiscal period ended
June 30, 2016

1,270

3.9

1.9

53.5

(Note)(2)“Net Income per Unit” is calculated based on the average number of investment units during the period and is rounded to thenearest yen. Net income per unit calculated based on the number of investment units issued and outstanding at the end of the
fiscal period ended June 30, 2016 (3,675,824units) and rounded down to yen is JPY 1,187.

Distributions
Distribution(Excluding excess profit )Per Unit

Total

Excess Profit
Per Unit

Distribution

Total

Per Unit

Dividend
Payout
Ratio

Total

Distribution/ Net
AssetsJPY

JPY million

JPY

JPY million

JPY

JPY million%%

Fiscal period ended
December 31, 2016

1,477

5,429

0

0

1,477

5,429

100.0

4.2

Fiscal period ended
June 30, 2016

1,125

4,135

61

224

1,186

4,359

94.8

3.5

(Note 1) The distribution per unit in excess of profit for the fiscal period ended June 30, 2016 is JPY 61, of which JPY 61 is the allowance fortemporary difference adjustments.
(Note 2) The “Dividend Payout Ratio” is calculated in accordance with the following formula:
Dividend Payout Ratio = Distribution Amount (Excluding excess profit distribution) ÷ Net Income × 100“Dividend Payout Ratio” is rounded to the nearest one decimal place.
(Note 3) “Distribution/ Net Assets” are calculated based on the figures excluding excess profit distribution.

(3)

Financial Position
Total Assets

Net Assets

JPY million

JPY million

Fiscal period ended
December 31, 2016

277,361

Fiscal period ended
June 30, 2016

284,106(Note)Net Assets / Total

Net Assets per Unit%

JPY

131,455

47.4

35,762130,00545.8

35,368“Net Assets per Unit” is calculated based on the number of investment units issued and outstanding at the end of each period, andis rounded to the nearest yen.

2

(4)

Cash Flows
Cash Flowsfrom
Operating
Activities

Cash Flowsfrom
Investment
Activities

Cash Flows
from
Financing
Activities

Closing Balance of Cashand Cash Equivalents

JPY million

JPY million

JPY million

JPY million

Fiscal period ended
December 31, 2016

9,818

(8,457)(3,910)14,214

Fiscal period ended
June 30, 2016

5,319

(86,000)

83,626

16,7642.

Forecasts for the Fiscal Periods ending June 30, 2017 (from January 1, 2017 to June 30, 2017) and December 31,
2017 (from July 1, 2017 to December 31, 2017)(Percentages indicate percentage change from the preceding period)

Operating
IncomeOperating
Revenues

Fiscal Period
ending June30, 2017
Fiscal Period
endingDecember31, 2017

Ordinary
IncomeNet Income

JPY
million%JPY
million%JPY
million%JPY
million

%

9,285

(2.4)

5,268

(11.2)

4,590(15.7)

4,589

10,498

13.1

6,245

18.5

5,652

23.1 5,651

Distribution
Distributionper
per
Excess Profit
Unit
Unit
Distribution (including(excludingexcess profit
per Unit
excess profit
distribution)
distribution)
JPY

JPY

JPY

(15.5)

1,185

55

1,240

23.1

1,460

21

1,481

(Reference) Estimated net income per unit for the fiscal period ending June 30, 2017 is JPY 1,185.
Estimated net income per unit for the fiscal period ending December 31, 2017 is JPY 1,460.

※

Others(1) Changes in Accounting Policies, Accounting Estimates or Restatements(a) Changes in Accounting Policies due to Revisions to
Accounting Standards and Other Regulations

None(b) Changes in Accounting Policies due to Other Reasons

None(c) Changes in Accounting Estimates

None(d) Restatements

None(2) Number of Investment Units Issued and Outstanding(a) Number of Units Issued and Outstanding as of the
End of the Fiscal Period (Including Treasury Units)

December 31, 2016 3,675,824(b) Number of Treasury Units as of the End of the Fiscal Period December 31, 2016

0June 30, 2016

3,675,824

June 30, 2016

0(Note) Please refer to “Note concerning Information per Unit” regarding the number of investment units which is the basis for the
calculation of net income per unit.

3ͤThe Implementation Status of Statutory Audit
At the time of this financial report, the audit procedures for the financial statements pursuant to the Financial
Instruments and Exchange Act are yet to be completed.
ͤExplanation on the Appropriate Use of the Forecast of Results and Other Matters of Special Consideration(Explanation on the Appropriate Use of the Forecast of Results)
The forward‐looking statements in this financial report are based on the information currently available to us andcertain assumptions which we believe are reasonable. Actual operating performance may differ significantly due
to factors we cannot predict as of this date, including gains or losses from the disposition of properties, repaymentof borrowings, decreases in rents and changes in operating conditions. Further, there is no guarantee of thepayment of the forecast distribution amount.
Please refer to “Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Periods
ending June 30, 2017 (from January 1, 2017 to June 30, 2017) and December 31, 2017 (from July 1, 2017 to December
31, 2017)”, on page 19 for assumptions used in the forecasts and precautions regarding the use of such forecasts.
Unless otherwise specified herein, amounts less than JPY 1 are rounded down, and ratios are rounded to the nearest
one decimal place.

41. Related Companies of the Investment Corporation
Disclosure is omitted because there have been no material changes in the “Structure of the Investment
Corporation” section of the latest securities report (filed on September 26, 2016).

2. Management Policy and Operating Conditions(1) Management Policy
Disclosure o f “Investment Policies,” “Investment Targets,” “Distribution Policies” and the “Investment
Restriction” is omitted because there have been no material changes from the relevant sections of the latest
securities report (filed on September 26, 2016)(2) Operating Conditionsa

Overview of the Fiscal Period Ended December 2016 (“Reporting Period”)(a)Main Trends of INV

INV was established in January 2002 in accordance with the Investment Trust and Investment Corporation Act(Act No. 198 of 1951, as amended; the “Investment Trust Act”). In May 2004, INV was listed on the Osaka
Securities Exchange (application for delisting was made in August 2007), and in August 2006 was listed on theReal Estate Investment and Trust Securities Section of the Tokyo Stock Exchange (Ticker Code: 8963).
After the merger with LCP Investment Corporation (“LCP”) was implemented on February 1, 2010, INV issued
new investment units through a third‐party allotment on July 29, 2011 and refinanced its debt. Calliope Godo
Kaisha (“Calliope”), an affiliate of the Fortress Investment Group LLC (“FIG” and together with Calliope andother affiliates of FIG, collectively the “Fortress Group”) was the main allottee, and the sponsor changed to theFortress Group.
Ever since the commencement of sponsorship from the Fortress Group, INV has been focusing its efforts on
improving the profitability of its portfolio and establishing a revenue base in order to implement stable
distributions, and has strengthened the lender formation through new borrowings and the refinancing ofexisting bank borrowings, thereby creating a financial base for external growth. With this platform as a base, inJune 2014, Consonant Investment Management Co., Ltd., the asset manager to which INV entrusts the
management of its assets (the “Asset Manager”) revised the Investment Guidelines for INV, and positioned
hotels as a core asset class alongside residential properties with a view towards expanding investments in the
hotel sector in which demand is forecasted to rise going forward. As a result of the external growth efforts,
INVʹs portfolio at the end of the previous period ended June 2016 composed of 124 properties (48 hotels, 68
residential properties and eight others) with a total acquisition value of JPY 266,619 million, and market
capitalization at such date of JPY 238,193 million. When compared to the period as of May 22, 2014, which is thetime immediately prior to INV’s initial investment in hotels, the total acquisition value and market
capitalization increased significantly by 3.7x and 8.0x, respectively.
In the Reporting Period, INV obtained an initial credit rating of “A” from Japan Credit Rating with a “Positive”
outlook on September 27, 2016.
INV expanded the pipeline for future growth by adding two residential properties to the properties subject to a
Memorandum of Understanding (the “MOUʺ) with affiliates of Fortress Group with respect to preferential
negotiating rights regarding the acquisitions of hotels and residential properties on December 22, 2016. As ofthe end of the Reporting Period, there are 22 hotels (6,116 rooms) and 11 residential properties (1,413 units) in
the MOU, which will continue to provide INV with considerable opportunities for external growth.

5

(b)

Operational Environment and Performance

For the December 2016 period, NOI increased by 41.2%or JPY 2,453 million compared to the same period in
the previous year (the December 2015 period), of which 35.7% came from the hotel portfolio and 5.7% fromthe residential portfolio.
As a result, INV maintained a high average occupancy rate (Note 1) of 98.2% across the entire portfolio, andthe NOI of entire portfolio increased by 17.9% from the previous period (the June 2016 period) to JPY 8,414
million. Below is commentary on each of these sectors and their performance in the second half of 2016.
In the hotel segment, improvements in travel infrastructure, the penetration of LCC’s into the Japanesemarket, and the Japanese government’s promotion of tourism initiatives at the national and local level,
coupled with macro structural changes such as a sharp increase in the number of cross‐border travelers dueto the global rise of the middle‐income bracket, have led to a continued increase in the number ofinternational visitors to Japan from China and Southeast Asian countries such as Thailand, Malaysia, thePhilippines, Indonesia and Vietnam. This robust combination helped Japan log a record high of 24.039
million inbound visitors in 2016, (a 21.8% increase compared to 19.737 million in the previous year).
However, for the Reporting Period, the hotel segment was impacted by poor weather such as typhoons, day
formation (reduced number of weekday holidays) of the Silver Week holiday in September 2016, an increasein hotel supply in Tokyo in the limited‐service‐hotel segment, an increase in the number of hotel rooms listed
on websites of online travel agents and increased cancellations.
Under the circumstances above, INV is working closely with the operators of the hotels, primarily MyStays
Hotel Management Co., Ltd. (“MyStays”), a hotel operator in the sponsor group, to proactively address theissues at hand. Specifically, MyStays continues to improve the web experience and the service function suchas its online chat function and strengthen its user content and engagement to drive more direct bookings
through the MyStays website as well as increase brand awareness. MyStays is increasing the over‐bookings
ratio to achieve higher occupancy rates and to offset vacancies caused by cancellations. As the result of theinitiatives, 39 of the hotels owned by INV (Note 2) recorded ADR (Note 3) of JPY 9,935, RevPAR (Note 4) of
JPY 9,049, and an occupancy rate (Note 5) of 91.1%. Among the 36 hotels (Note 6) in which a comparison canbe made for the same period in the previous year, ADR was JPY 9,877 (+0.0%), RevPAR was JPY 8,973 (‐0.8%),
with an occupancy rate of 90.8% (‐0.7 points). The ratio of overseas sales (Note 7) at the 36 hotels (Note 8)
increased to 27.9% (+2.0 points compared to the same period in the previous year).
With respect to the residential portfolio, market rent trends for small‐type city‐center properties maintainmoderate increase. Under the positive circumstances in the macro environment, INV implemented a rent
increase program for new leases and renewals as well as an initiative to reduce residential leasing costs basedon a market analysis of each unit and property. As a result, in the Reporting Period, INV realized a rent
increase for 54.2% of the new residential lease contracts for an average rent increase of 1.5% compared to theprevious rent across all new leases, and a rent increase for 33.6% of contract renewals for an average rent
increase of 1.0% compared to the previous rent across all renewal leases, while maintaining a high contract
renewal rate of 83.7%. The average occupancy rate achieved a stable 95.6% and the average occupancy rate
for 63 properties that can be compared to the same period in the previous year (Note 9) was 94.4% (adecrease of 0.9 points). The NOI (Note 10) for the 63 properties (Note 9) in which previous year comparisons
can be made increased 3.8% compared to the same period in the previous year. Furthermore, INV
determined on November 21, 2016 to change the master lessee (“ML”) and the property manager (“PM”) for
16 properties effective December 1, 2016 and for one property effective January 1, 2017 (Note 11) respectively
in order to further improve its operational efficiency as well as property performance by consolidating thenumber of ML/PM from 19 to 10 for its residential portfolio.
Due to the internal growth for the Reporting Period, and trends in the real estate investment and rental
market, the total appraisal value at the end of the Reporting Period was JPY 328,192 million, an increase of
JPY 4,901 million (+1.5%) over the previous period. The portfolio has an unrealized gain of JPY 68,253 million(Note 12) and an unrealized gain ratio of 26.3% (Note 12).

6

Key Performance Indicators of 36 Hotel Properties (Note 5)
Y2016
December fiscal
period
90.8%
9,877
8,973
5,373

June fiscal period
Occupancy Rate
ADR (JPY)
RevPAR (JPY)GOP (Note 13) (JPY million)

89.6%
9,008
8,068
4,516

Full‐Year
90.2%
9,448
8,523
9,889

Year‐on‐Year Changes
Y2016
December fiscal
period
‐0.7pt
‐0.0%
‐0.8%
‐2.3%

June fiscal period
Occupancy Rate
ADR (JPY)
RevPAR (JPY)GOP (Note 13) (JPY million)+0.1pt+8.4%+8.5%+12.3%

Full‐Year‐0.3pt
+3.7%
+3.3%
+3.8%

Key Performance Indicators of 63 Residential Properties (Note 8)
Y2016
December fiscal
periodJune fiscal period
Occupancy Rate
(Note 11)
Average Rent per Tsubo (JPY)(Note 14)
NOI (JPY million)

Full‐Year

95.5%

94.4%

95.0%

10,04010,123

10,082

1,540

1,553

3,093

Year‐on‐Year Changes
Y2016
December fiscal
periodJune fiscal period
Occupancy Rate
(Note 11)
Average Rent per Tsubo (JPY)(Note 14)
NOI (JPY million)

Full‐Year

+1.8pt‐0.9pt‐0.9pt

+1.3%

+1.7%

+1.5%

+5.1%

+3.8%

+4.4%

(Note 1) “Occupancy Rate” for the entire portfolio and for the residential properties is calculated by dividing
the sum of total leased area by the sum of total leasable area at the end of each month during therelevant period.
(Note 2) Of the 48 acquired hotels, the following nine hotels with fixed‐rent lease agreements are excluded:
Super Hotel Shinbashi‐Karasumoriguchi, Comfort Hotel Toyama, Super Hotel Tokyo JR Tachikawa
Kitaguchi, Super Hotel JR Ueno‐Iriyaguchi, Comfort Hotel Kurosaki, Comfort Hotel Maebashi,
Comfort Hotel Tsubame‐Sanjo, Comfort Hotel Kitami and Takamatsu Tokyu REI Hotel.
(Note 3) “ADR” means average daily rate, and is calculated by dividing total room sales (excluding service fees)
for a certain period by the total number of days per room for which each room was occupied during
the same period. Hereinafter the same shall apply.
(Note 4) “RevPAR” means revenue per available room per day, and is calculated by dividing total room sales
for a certain period by total number of rooms available (number of rooms x number of days) during thesame period, and is the same as the figure obtained by multiplying ADR by occupancy rates.
Hereinafter the same shall apply.

7

(Note 5) “Occupancy rates” for the hotel properties are calculated in accordance with the following formula:
Occupancy rates = total number of occupied rooms during a certain period ÷ total number of rooms
available during the same period (number of rooms x number of days)
Hereinafter the same shall apply.
(Note 6) Of the 48 acquired hotels, two hotels which were not operating for a certain period due to renovationin 2015, Hotel MyStays Shinsaibashi (renovation period: from January 25 2015 through March 31, 2015)
and Hotel MyStays Gotanda Station (renovation period: from March 1, 2015 through November 24,2015) and one hotel which was not fully operating for a certain period due to renovation in 2016,
Hotel MyStays Kanda (renovation period: from May 20, 2016 through August 22, 2016) are excluded,
in addition to the nine hotels with fixed‐rent lease agreements excluded per Note 2.
(Note 7) “Overseas sales ratio” is the ratio of sales amount through overseas web agents to revenues.
(Note 8) Of the 48 acquired hotels, 12 hotels, APA Hotel Yokohama‐Kannai, Super Hotel
Shinbashi‐Karasumoriguchi, Comfort Hotel Toyama, Super Hotel Tokyo JR Tachikawa Kitaguchi,
Super Hotel JR Ueno‐Iriyaguchi, Comfort Hotel Kurosaki, Comfort Hotel Maebashi, Comfort Hotel
Tsubame‐Sanjo, Comfort Hotel Kitami and Takamatsu Tokyu REI Hotel, the tenants of which do notdisclose the ratio of overseas sales; Hotel MyStays Gotanda Station, which was not operating for acertain period due to renovation in 2015 (renovation period: from March 1, 2015 through November 24,2015); and Hotel MyStays Kanda, which was not fully operating for a certain period due to renovationin 2016 (renovation period: from May 20, 2016 through August 22, 2016), are excluded.
(Note 9) Of the 68 acquired residential properties, five properties, City Court Kitaichijo, Lieto Court Mukojima,
Lieto Court Nishi‐Ojima, Royal Parks Momozaka and Royal Parks Shinden, which were not held by
INV in the same period in the beginning of the previous year, are excluded.
(Note 10) For the comparison of NOI of the 63 properties, insurance income and related repair expenses, which
are temporary items, are excluded.
(Note 11) 16 properties for which ML/PM were changed on December 1, 2016 are Royal Park Omachi,
Lexington Square Haginomachi, Lexington Square Daitabashi, Lexington Square Honjo Azumabashi,
Invoice Shin‐Kobe Residence, Cosmo Court Motomachi, Salvo Sala, Luna Court Edobori, Winntage
Kobe Motomachi, Corp Higashinotoin, Prime Life Sannomiya Isogami Koen, HERMITAGE NANBA
WEST, West Avenue, Prime Life Mikage, Lieto Court Mukojima and Lieto Court Nishi‐Ojima. One
property for which ML/PM were changed on January 1, 2017 is Acseeds Tower Kawaguchi‐Namiki.
(Note 12) The unrealized gain is calculated using the following formula: the appraisal value as of the end of theReporting Period ‐ book value as of the end of the Reporting Period.
The unrealized gain ratio is calculated using the following formula: the unrealized gain ÷ book value asof the end of the Reporting Period.
(Note 13) “GOP,” means the gross operating profit, and is the amount remaining after deducting costs of hotel
operations (the personnel, material, water, electricity and heating and advertising expenses and otherexpenses) and the management services fee to operators (if any) from the hotel’s revenues .
Hereinafter the same shall apply.
(Note 14) “Average rent per tsubo” is calculated by dividing the total rental revenue including common area
charges for each month by the sum of total leasable area at the end of each month during the relevant
period.

8

(c)Overview of Fund Raising
During the Reported period, INV obtained a credit rating of A from the Japan Credit Rating Agency
and also increased its bank group from 13 financial institutions to 19 including Japan Post Bank Co., Ltd.
Below are details of the initial credit rating which was obtained on September 27, 2016:
Credit Rating Agency
Japan Credit Rating Agency, Ltd.

Rating Object
Long‐term Issuer Rating

RatingA

OutlookPositive

As a result of the measures described below, INV’s interest‐bearing debt outstanding balance was JPY
142,419 million and the Interest‐Bearing Debt ratio (Note 1) and LTV (Note 2) were 51.3% and 43.4%
respectively, as of the end of the Reporting Period, with an average interest rate (Note 3) of 0.50%.
INV implemented the borrowing of Term Loan (E) (amount borrowed: JPY 4,000 million; interest rate:variable interest rate of 1‐month JPY TIBOR (Note 4) plus 0.4%, 0.5% and 0.6% for durations of three,four and five years) from The Tokyo Star Bank, Limited on July 20, 2016 for use as a portion of thefunds and related expenses for the two hotels acquired on June 15, 2016.
On November 30, 2016, INV repaid the portion of Term Loan (B), New Syndicate Loan (F), and Term
Loan (C) in the amount of JPY 3,498 million in total that corresponds to the borrowings equivalent to
the expected consumption tax refund (Note 5), using the consumption tax refunds from the five hotels
acquired on January 22, 2016, the four hotels acquired on March 31, 2016, and the two hotels acquiredon June 15, 2016.
In addition, a portion of INV’s existing loans from Mizuho was transferred to Japan Post Bank Co., Ltd.
in the amount of JPY 4,000 million on July 15, 2016, The Kagawa Bank, Ltd., The Shizuoka Bank, Ltd.,The Hyakugo Bank, Ltd., and The Bank of Fukuoka, Ltd. in the amount of JPY 1,000 million each on
July 29, 2016, The Daishi Bank, Ltd. and The Hiroshima Bank, Ltd. in the amount of JPY 1,000 each on
December 20, 2016.
(Note 1) Interest‐Bearing Debt ratio uses the calculation formula below:
Interest‐Bearing Debt ratio = total outstanding interest‐bearing debt/total assets x 100(Note 2) LTV uses the calculation formula below:
LTV = total outstanding interest‐bearing debt/total appraisal value x 100(Note 3) The average borrowing interest rate (annual rate) is calculated by the weighted average basedon the outstanding balance of borrowings and rounded to two decimal places.
(Note 4) With respect to only the first interest calculation period, the 2‐month JPY TIBOR.
(Note 5) Borrowings corresponding to the expected consumption tax refund mean the borrowings
which will be prepaid in the amount equivalent to the refund of consumption tax and local
tax, which were paid in relation to the acquisition of the trust beneficiary interests acquiredby the borrowings executed at the same time, in the case where the above‐mentioned
consumption tax refunds are received. The same shall apply hereinafter.

(d)

Overview of Results of Operations and Distributions

As a result of the operations mentioned above, operating revenues for the Reporting Period increased by
JPY 1,353 million from the previous period (+16.6%) to JPY 9,511 million, and net income increased by JPY
1,067 million from the previous period (+24.5%) to JPY 5,431 million. DPU for the Reporting Period was JPY
1,477, an increase of JPY 291 (+24.5%) compared to the previous period.
INV aims to include maximum profit distributions (excluding excess profit distribution) in deductible
expenses in accordance with Section 1 of Article 67‐15 of the Act on Special Taxation Measures Law (Act No.
15 of 1957; as amended), and decided to distribute all of the amount by deducting reversal of allowance fortemporary difference adjustment from profit as defined in Article 136, Paragraph 1 of the Investment Trust
Act, except for fractional distribution per unit less than JPY 1. As a result, the distribution per unit
(excluding excess profit distribution) for the Reporting Period is JPY 1,477. On the other hand, excess profit

9

distribution will not be made.
b

Outlook for the Fiscal Periods Ending June 30, 2017 and December 31, 2017

The DPU (including excess profit distribution) for the June 2017 period is forecast to be JPY 1,240 (+4.6%
YoY) and the DPU (including excess profit distribution) for the December 2017 period is forecast to be JPY
1,481 (+0.3% YoY); the full year DPU (including excess profit distribution) for calendar year 2017 is forecast
to be a modest growth of JPY 2,721 (+2.2% YoY).
Future operational policy and issues to be addressed
Since July 2011, INV has enhanced unitholder value by significantly increasing DPU with the FortressGroup as its sponsor. Going forward, INV will implement various strategies to maintain further growth,
including the following measures.
•••

Continuous acquisition of properties from sponsor and third parties
Further internal growth at hotel and residential properties
Diversification of financing measures including the issuance of invest corporation bonds andextension and diversification of maturities

Details of the future growth strategy are as follows.
(i)

External growth strategy
New Property Acquisitions
As its basic strategy, INV will move forward with the acquisition of new properties focusing on hotels,
where continued growth in portfolio revenues is anticipated, and residential properties especially whererental growth can be achieved. Rent revenue from residential assets and other assets as well as the
fixed rent portion from hotels will also contribute to more stable revenue, which was 67.4% of total
revenue for 2016. This acquisition strategy will enable INV to build a portfolio with a good balance
between growth and stability.
In regards to hotels, INV will take into consideration the trends in foreign travelers visiting Japan,
demands of business and leisure customers, the competitive hotel environment, and leasing contract
types when making investment decisions, with the aim of acquiring properties where growth andstability of GOP and rental revenue are forecasted to increase.
In regards to residential properties, INV will analyze occupancy rates, rental market trends, the presenceof competing properties among other factors, and consider acquiring mainly small‐type properties inlarge cities with strong competitiveness in which it believes it can achieve increases in rent. INV
decided today to acquire two high quality family‐type properties in Tokyo, taking into consideration of
the rent growth potential for Royal Parks Tower Minami‐Senju and the stability from the fixed‐termlease for Royal Parks Seasir Minami‐Senju, which will be beneficial to the diversification of theresidential portfolio, as announced in the release “Notice concerning Acquisition of Assets and Entering
into Leasing Contract” as of today.
These two residential properties are to be acquired from the pipeline of the sponsor, the Fortress Group,
which has helped INV to achieve steady external growth as follows.

10Properties Acquired from affiliates of the Fortress Group (as of the date of this document)
Date

Properties acquired

Total acquisition price

September 2012
May 2014
July 2014
February 2015

24 residential properties
Two hotels
18 hotels
Two hotels
11 hotels andthree residential properties
One hotel
Five hotels andone residential property
Four hotels andone residential property
Two hotels
74 properties(of which 45 are hotels and 29 areresidential properties)

JPY 14,043 million
JPY 5,435 million
JPY 39,938 million
JPY 4,911 million

July 2015
August 2015
January 2016
March 2016
June 2016
Total

JPY 35,258 million
JPY 5,069 million
JPY 10,207 million
JPY 66,697 million
JPY 15,900 million
JPY 197,458 million(of which hotels: JPY 170,382 million;
residential: JPY 27,076 million)

The Fortress Group manages four dedicated Japanese real estate funds, including the Fortress Japan
Opportunity Funds I, II, and III. The Fortress Group’s committed equity is over JPY 300 billion and thenumber of properties that the Fortress Group is invested in exceeds 1,400. In order to ensure future
growth options for the portfolio, INV entered into an updated MOU with affiliates of the Fortress Group
that provides preferential negotiation rights with respect to the acquisition of 22 hotels and nineresidential properties (excluding two residential properties anticipated to be acquired) (see the tablebelow) (Note 1). In addition, by utilizing the property transaction information available through theFortress Group and INV’s own network, INV will continuously consider and implement the acquisitionsof properties from third parties that will contribute to stability and growth in revenue and cash flow andan increase in DPU.
No.

Asset Name

Asset Type (Note 2)

Location

No. of Rooms

1

Hotel MyStays Premier Akasaka

Limited Service Hotel

Minato‐ku,Tokyo

327

2

Hotel MyStays Yokohama Kannai

Limited Service Hotel

Yokohama‐shi, Kanagawa

166

3

RIHGA Royal Hotel Kyoto

Full Service Hotel

Kyoto‐shi, Kyoto

489

4

Narita Excel Hotel Tokyu

Full Service Hotel

Narita‐shi, Chiba

706

5

Hotel MyStays Premier Sapporo
Park

Full Service Hotel

Sapporo‐shi, Hokkaido

418

6

Hotel MyStays Sapporo Station

Limited Service Hotel

Sapporo‐shi, Hokkaido

242

7

Hotel MyStays Oita

Limited Service Hotel

Oita‐shi, Oita

145

8

Art Hotel Hirosaki City

Full Service Hotel

Hirosaki‐shi, Aomori

134

9

Beppu Kamenoi Hotel

Resort Hotel

Beppu‐shi, Oita

322

10 Fusaki Resort Village

Resort Hotel

Ishigaki‐shi, Okinawa

195

Full Service Hotel

Urayasu‐shi, Chiba

1,016

Limited Service Hotel

Osaka‐shi, Osaka

397

Full Service Hotel

Asahikawa‐shi, Hokkaido

265

Limited Service Hotel

Kanazawa‐shi, Ishikawa

206

Full Service Hotel

Matsuyama‐shi, Ehime

161

11 Sheraton Grande Tokyo Bay Hotel
12

Hotel MyStays Shin Osaka
Conference Center

13 Art Hotel Asahikawa
14 Hotel MyStays Kanazawa Castle
15 Hotel JAL City Matsuyama

11

No.

Asset Name

16 Hotel MyStays Ueno East

Asset Type (Note 2)

Location

No. of Rooms

Limited Service Hotel

Taito‐ku, Tokyo

150

17

(tentative) Hotel MyStays
Honmachi 3‐chome (Note 3)

Limited Service Hotel

Osaka‐shi, Osaka

120

18

Hotel MyStays Sapporo Nakajima
Park

Limited Service Hotel

Sapporo‐shi, Hokkaido

86

Limited Service Hotel

Yokohama‐shi, Kanagawa

70

19 Flexstay Inn Sakuragicho
20

MyCUBE by MYSTAYS Asakusa
Kuramae

Limited Service Hotel

Taito‐ku, Tokyo

161

21

Hotel MyStays Premier
Hamamatsucho

Limited Service Hotel

Minato‐ku, Tokyo

120

22 Hotel MyStays Premier Omori

Limited Service Hotel

Shinagawa‐ku, Tokyo

220

Hotel Subtotal
23 Gran Charm Hiroo

Residential/Small Type

6,116
Shibuya‐ku, Tokyo

121

24 Plestay Win Kinshicho

Residential/Small Type

Sumida‐ku, Tokyo92

25 Gran Charm Kichijoji

Residential/Small TypeMusashino‐shi, Tokyo

28

26 Green Patio Noda

Residential/Small TypeNoda‐shi, Chiba

240

27 Dainichi F‐45

Residential/Small Type

Urayasu‐shi, Chiba

54

28 Gran Charm Urayasu

Residential/Small Type

Urayasu‐shi, Chiba

54

29 Gran Charm Urayasu 5

Residential/Small Type

Urayasu‐shi, Chiba

54

30 Gran Charm Minami Gyotoku I

Residential/Small Type

Ichikawa‐shi, Chiba

52

31 Gran Charm Minami Gyotoku II

Residential/Small Type

Ichikawa‐shi, Chiba

48

Residential Property Subtotal

743(Note 1)

The term of validity of the MOU is from December 22, 2016, the date of execution of the updated
MOU, to December 21, 2017. The above 31 properties does not include two residential properties
anticipated to be acquired upon the exercise of preferential negotiation rights under the MOU.
Regarding the 31 properties listed above, there is no guarantee that INV will be granted an
opportunity for considering acquisition of the properties or be able to acquire the properties.

(Note 2)Each “Asset Type” above is as follows:“Limited Service Hotel” refers to a hotel focusing on revenues from room stay and offer limited
service regarding foods and beverages, banquet, spa or gymnasium facilities.
“Full Service Hotel” refers to a hotel having segments of stay, foods and beverages, and banquet.
“Resort Hotel” refers to a hotel located at tourist destinations or recreational lots, having segmentsof stay, foods and beverages, and incidental facilities.
“Small Type” refers to a residential property in which the majority of dwelling units are less than
30 m2.

(Note 3)(tentative) Hotel MyStays Honmachi 3‐chome is scheduled to be completed in November 2017 andopen in December 2017.

12

Property Sales
While INV places priority on increasing unitholders’ value through external growth by taking into accountthe increased level of activity in the real estate trading market, it also plans to consider the possibility ofproperty sale and replacement upon consideration of the portfolio sector composition, geographic
distribution and competitiveness of each property, as appropriate.
(ii)

Strategy for internal growth(Hotels)
Of the 48 hotels owned by INV as at the end of the Reporting Period, 39 hotels use a variable rent
scheme. In the variable rent scheme, in principle, INV receives all of gross operating profit (GOP) after
deducting management fees for the hotel operator as rents, and INV can directly enjoy the hotel revenue
upside. In the case where GOP enters into a downward trend, INV could take advantage from the fixed
rent portion or downside floor to protect itself from further loss. For 33 hotels, MyStays has
implemented strict revenue management seeking to maximize revenue. INV will continue to accurately
ascertain and analyze operating conditions of its hotels, the conditions of nearby hotels, market trends
and other factors through operation meetings and other contact with hotel operators and will focus on
operations that maximize rent income.
(Residential properties and others)
INV will continue to strengthen its collaborative ties with Property Management (PM) companies andbrokers to further boost occupancy rates and earning capabilities of its properties. With respect to INV’s
residential properties, while keeping in mind the high‐season in the residential rental market that occurs
during the fiscal period ending June 2017, INV will focus on increasing the occupancy rate and rent for
both new lease contracts and lease renewals for each of its properties as well as formulating net leasing
cost reduction policies in order to continue maximizing profits.
Further, the implementation of appropriate maintenance and repair plans is of the utmost importance inmaintaining and enhancing the competitiveness and market value of the properties as well as ensuring
stable operations and high tenant satisfaction. Therefore, INV will continue to monitor current strategicplans with flexible implementation as it sees fit. Especially for hotels, INV will carefully execute theplans for renovations and replacement of fixtures and fittings in order to maintain and increase
revenues.

(iii) Financial strategy
INV has obtained its initial credit rating, strengthened its relationship with existing lenders andenhanced its lender formation via adding six new lenders including Japan Post Bank Co., Ltd. in order tofurther stabilize its financial base. Going forward, INV will work on diversifying financing measures
including issuing investment corporation bonds. Also, INV seeks to maximize unitholders’ value by way
of extension and diversification of its borrowing terms, further reduction of borrowing costs, solicitationof new financial institutions and further strengthening of its lender formation.
(iv) Compliance risk management
While the executive officer of INV concurrently serves as the representative director at the Asset Manager,
two supervisory directors (an attorney and a certified public account) oversee the execution of the executive
officer’s duties via the Board of Directors of INV. In addition, the compliance officer of the Asset Manager
attends each meeting of the Board of Directors in the capacity of an observer.
The Asset Manager has a compliance officer who is responsible for compliance with laws, regulations andother relevant matters as well as overall management of transactions with sponsor related parties.
Moreover, it has in place a compliance committee which, chaired by such compliance officer, is in charge ofdeliberating on compliance with laws, regulations and other relevant matters as well as transactions withsponsor related parties. Compliance committee meetings are attended by an outside expert (an attorney)
who, sitting in as a compliance committee member, conducts rigorous deliberations on the existence of13

conflicts of interest in transactions with sponsor related parties as well as strict examinations with respect to
INV’s compliance with laws and regulations.
INV intends to continually take steps to strengthen its compliance structure.
c

Significant Subsequent Events(a)Issuance of New Investment Units

INV has resolved at its Board of Directors Meeting to issue new investment units (“Public Offering”) andconduct secondary share offering per the below.
The details including issue price per unit will be determined at its Board of Directors Meeting to be held
hereafter.
(i)

(ii)

Issuance of new investment units through public offering
Number of Investment Units to be offered: 185,000 investment units

Use of proceeds: INV will use the proceeds from the public
offering for the acquisitions of “Royal Parks
Tower Minami‐Senju” and “Royal Parks Seasir
Minami‐Senju” as described in “(c) Property
Acquisition” below.

Issuance of new investment units through third‐party allotment (Note)
Number of Investment Units to be offered (maximum) : 9,250 investment units
Allottee: Mizuho Securities Co., Ltd.

Use of proceeds: INV will keep the proceeds as cash‐on‐hand anduse for future asset acquisition. The procured
funds will be deposited at banks until
disbursement.

(Note) There may be cases where there will be no subscription for whole or part of the investment units
to be issued through the third‐party allotment, resulting in a commensurate shortfall in theultimate number of investment units to be issued through the third‐party allotment, due toforfeiture, or there may be cases where such issuance itself will not take place at all.

14

(b)

Borrowing of Funds

INV has decided today to obtain new loans (“Borrowings”) in order to acquire properties described in “(c)Property Acquisition” below and related expenses. The details of loans are as follows:(i)

New Syndicate Loan (G)LenderMizuho Bank, Ltd.
Development Bank of Japan, Inc.
Resona Bank, Limited
The Bank of Fukuoka, Ltd.
The Shizuoka Bank, Ltd.
The Nomura Trust and Banking
Co., Ltd.
AEON Bank, Ltd.
The
Dai‐ichiLife
Insurance
Company, Limited
The Gunma Bank, Ltd.
The Towa Bank, Ltd.

Borrowing
Date

BorrowingAmount(JPY million)

Interest Rate(per annum)

Principal
Maturity
Date

Borrowing
MethodMarch 14,
2017

3,250

Variable interest rate
(Note 1)March 14,2020

Unsecured /non guarantee

March 14,
2017

3,250

Variable interest rate
(Note 2)

March 14,2021

Unsecured /non guarantee

March 14,
2017

4,750

Variable interest rate
(Note 3)

March 14,2022

Unsecured /non guarantee

Principal
Maturity
Date

Borrowing
MethodTotal(Note 1)
(Note 2)
(Note 3)(ii)

11,2501‐month JPY TIBOR (Base Rate) + spread (0.40%)
1‐month JPY TIBOR (Base Rate) + spread (0.50%)
1‐month JPY TIBOR (Base Rate) + spread (0.60%)

Term Loan (F)LenderSumitomo Mitsui Banking
Corporation.
Total(Note)

Borrowing
Date

BorrowingAmount(JPY million)

Mach 14,
2017

3,000

Interest Rate(per annum)

Variable interest rate September 14, Unsecured /(Note)
2020
non guarantee

3,000

1‐month JPY TIBOR (Base Rate) + spread (0.45%)

15

(c)

Property Acquisition

The Asset Manager has decided today to acquire the two residential properties (“Acquisition”) as follows:

Use

Acquisition
Price(JPY million)(Note 1)

Appraisal
Value(JPY million)(Note 2)

Property
Number

Property
Name

Location

A105

Royal Parks
Tower
Minami‐Senju

Arakawa‐ku,
Tokyo

21,879

Royal Parks
SeasirMinami‐Senju

Arakawa‐ku,
Tokyo

2,683

2,710

24,562

24,81022,100Residence
A106

Total

SellerCategory ofSpecified
AssetsSakuraTokutei
Mokuteki
KaishaMomo
Tokutei
Mokuteki
KaishaTrust
BeneficiaryInterest(Note 1) Acquisition price does not include property taxes, city planning taxes, national or local consumption
taxes; hereinafter the same.
(Note 2) The appraisal value is as of December 1, 2016 based on the appraisal reports by Japan Real Estate
Institute.
(Note 3) Figures are rounded down to the nearest million yen.

16

dOperational Outlook

The forecasts of financial results for the fiscal periods ending June 30, 2017 and December 31, 2017 are as
follows.
Fiscal Period ending June 30, 2017 (from January 1, 2017 to June 30, 2017)
Operating Revenues

JPY 9,285 million

Operating Income

JPY 5,268 million

Ordinary Income

JPY 4,590 million

Net Income

JPY 4,589 million

Total Distribution Amount (Including excess profit distribution)

JPY 4,798 million

Earnings per Unit

JPY 1,185

Distribution per Unit (Excluding excess profit distribution per unit)

JPY 1,185

Excess Profit Distribution per Unit

JPY 55Distribution per Unit (Including excess profit distribution per unit)

JPY 1,240

Fiscal Period ending December 31, 2017 (from July 1, 2017 to December 31, 2017)
Operating Revenues

JPY 10,498 million

Operating Income

JPY 6,245 million

Ordinary Income

JPY 5,652 million

Net Income

JPY 5,651 million

Total Distribution Amount (Including excess profit distribution)

JPY 5,731 million

Earnings per Unit

JPY 1,460

Distribution per Unit (Excluding excess profit distribution per unit)

JPY 1,460

Excess Profit Distribution per Unit

JPY 21

Distribution per Unit (Including excess profit distribution per unit)

JPY 1,481

For reference purposes, full‐year forecasts are provided below, since hotel revenues are influenced byseasonal effects.
(Reference) Full‐year 2017 (Aggregate of the fiscal periods ending in June 2017 and December 2017)
Operating Revenues

JPY 19,783 million

Operating Income

JPY 11,513 million

Ordinary Income

JPY 10,242 million

Net Income

JPY 10,241 million

Total Distribution Amount (Including excess profit distribution)

JPY 10,530 million

Earnings per Unit

JPY 2,645

Distribution per Unit (Excluding excess profit distribution per unit)

JPY 2,645

Excess Profit Distribution per Unit

JPY 76

Distribution per Unit (Including excess profit distribution per unit)

JPY 2,721

For the assumptions underlying the operational outlook for the fiscal periods ending June 30, 2017 andDecember 31, 2017, please see “Assumptions Underlying the Forecast of Financial Results andDistribution for the Fiscal Periods ending June 30, 2017 (from January 1, 2017 to June 30, 2017) and
December 31, 2017 (from July 1, 2017 to December 31, 2017.”

17

(Cautionary Note regarding Forward Looking Statements)
Forward looking statements such as the forecasts set forth herein are based on information currently
available and certain assumptions that are deemed reasonable. Actual operating performance may varysignificantly due to factors not foreseen at the time of this present notice, such as the occurrence of gains
and losses associated with the sale of properties, repayment of borrowings and a decrease in rent received.
Also, this forecast is not a guarantee of distribution amounts.

18

<Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Periods ending June 30,
2017 (from January 1, 2017 to June 30, 2017) and December 31, 2017 (from July 1, 2017 to December 31, 2017>
Item
Fiscal period

Assumptions
The 28th fiscal period: from January 1, 2017 to June 30, 2017 (181 days)
The 29th fiscal period: from July 1, 2017 to December 31, 2017 (184 days)
Properties held as of the end of the 28th fiscal period: 126 properties
Properties held as of the end of the 29th fiscal period: 126 properties

Assets undermanagement

INV assumes that INV will newly acquire 2 residential properties (Note) as of March 14,2017 in addition to existing 124 properties, and there will be no change through the endof the fiscal period ending December 2017.
(Note) Regarding the acquisition of properties as of March 14, 2017, please refer to “Noticeconcerning Acquisition and of Assets and Entering into Leasing Contract” dated as of today.

As of the end of the 28th fiscal period: 3,870,074 units
As of the end of the 29th fiscal period: 3,870,074 units

Units outstanding

INV assumes that a total of 194,250 new investment units will be issued through the
Public Offering (185,000 new investment units) and the Third Party Allotment (up to9,250 new investment units), that the expected number of investment units issued andoutstanding following the Offering will be 3,870,074 units, and that there will be no
additional issuance of units thereafter through the end of the fiscal period ending
December 2017.
Balance as of the end of the 28th fiscal period: JPY 156,669 mn
Balance as of the end of the 29th fiscal period: JPY 156,669 mn

Interest‐bearing liabilities

INV assumes that New Syndicate Loan (G) and Term Loan (F) are implemented as ofMarch 14, 2017, as mentioned in today’s release “Notice concerning Debt Financing”
and no other loan is implemented.
INV expects to record rental revenues for each fiscal period as follows:・Rental revenues(of these, hotel rents)(fixed hotel rents)(variable hotel rents)
Operating revenues

June 2017 Fiscal
PeriodJPY 9,285 mn(JPY 5,539 mn)(JPY 2,644 mn)(JPY 2,895 mn)

December 2017 Fiscal
PeriodJPY 10,498 mn(JPY 6,425 mn)(JPY 3,232 mn)(JPY 3,192 mn)

Rental revenues in the fiscal period ending June 2017 and the fiscal period ending
December 2017 are calculated based on estimates as of today from January 2017 to
December 2017. In addition, INV assumes there will be no delinquencies or
non‐payment of rent by tenants.
The majority of INV’s owned hotels uses a variable rent scheme linked to performanceof the relevant hotel. Hotel demand is affected by seasonal factors and the December
ending fiscal periods (from July to December) which include summer holiday andautumn outing seasons tend to record higher revenue than the June ending fiscal
periods (from January to June). Accordingly, rental revenue of INV tends to be higher
in the December ending fiscal periods than in the June ending fiscal periods

19

Item

Assumptions
INV expects to incur property related expenses for each fiscal period as follows:

Operating expenses

・Facility management fees(of these, repair costs)
・Taxes and other public charges
・Insurance expenses
・Depreciation expenses
・Other expenses
Total property related expenses

June 2017 Fiscal
PeriodJPY 504 mn(JPY 33 mn)
JPY 386 mn
JPY 9 mn
JPY 2,277 mn
JPY 403 mn
JPY 3,582 mn

December 2017
Fiscal Period
JPY 537 mn(JPY 36 mn)
JPY 470 mn
JPY 9 mn
JPY 2,407 mn
JPY 382 mn
JPY 3,807 mn

INV expects to incur other operating expenses than the property related expenses foreach fiscal period as follows:・Other operating expenses(of these, asset management
fees)

June 2017 Fiscal
PeriodJPY 434 mn

December 2017 Fiscal
PeriodJPY 445 mn(JPY 250 mn)(JPY 250 mn)

INV expects to record net operating income for each fiscal period as follows:

NOI

・NOI
(of these, hotel NOI)(of these, residential NOI)

June 2017 Fiscal
PeriodJPY 7,980 mn(JPY 5,259 mn)(JPY 2,347 mn)

December 2017 Fiscal
PeriodJPY 9,097 mn(JPY 6,083 mn)(JPY 2,630 mn)

NOI calculation method in the above table is as follows
・NOI＝ Rental Revenues ‐ Property Related Expenses + Depreciation Expenses
INV expects to incur non‐operating expenses for each fiscal period as follows:

Non‐operating expenses

・Interest expense
・Finance related costs
・Other non‐operating expenses(expenses relating to theissuance of new units for theOffering)
Total Non‐operating expenses

20

June 2017 Fiscal
PeriodJPY 378 mn
JPY 220 mn
JPY 80 mn(JPY 80 mn)

December 2017 Fiscal
PeriodJPY 400 mn
JPY 192 mn‐(‐)

JPY 678 mn

JPY 592 mn

Item

Assumptions
The distribution per unit is calculated in accordance with the cash distribution policy as
set forth in INV’s Articles of Incorporation.
With respect to the distribution for the fiscal period ending June 2017, INV expects todistribute an aggregate amount of JPY 4,798 million (distribution per unit: JPY 1,240)
based on the assumption that excess profit distribution will be paid (JPY 209 million), in
addition to net income for the fiscal period ending June 2017 (JPY 4,589 million) which
will be used as funds.

Distribution per unit

With respect to the distribution for the fiscal period ending December 2017, INV
expects to distribute an aggregate amount of JPY 5,731 million (distribution per unit:
JPY 1,481) based on the assumption that excess profit distribution will be paid (JPY 80
million), in addition to net income for the fiscal period ending December 2017 (JPY
5,651 million) which will be used as funds.
For the fiscal periods ending June 2017 and December 2017, INV expects to record
deferred gain on hedge of the interest rate swap as the valuation and conversion
adjustments, etc. of JPY 151 million, which is equal to the amount for the fiscal period
ended December 2016. The distribution per unit is calculated based on the assumptionthat fluctuation of the market value of the interest rate swap does not affect the
distribution per unit.
Distribution per unit may vary due to various factors, including changes of the assets
under management, fluctuation of rent income associated with reasons such as changeof tenants and occurrences of unexpected repairs.

21

Item

Assumptions
INV believes maintaining the stability of cash distributions over the medium term is
one of the most important factors in determining the amount of distribution for a given
fiscal period, and therefore, INV has adopted the policy to make distributions in excess
of profits in order to stabilize distributions, in cases where dilution of investment units
or significant expenses are to be recorded in connection with, among other things, theacquisition of assets or the raising of capital, leading to a temporary decrease in
distribution, taking into consideration the level of distribution per unit assuming suchacquisition of assets or capital raising had contributed for a full fiscal period.
INV may also consider making distributions in excess of profits for the purpose of
decreasing the impact from corporate tax increase arising from different rules in tax
and accounting practices, such as treatment on depreciation of fixed term land lease or
asset retirement obligation.

Excess profit distribution
per unit

With respect to the fiscal period ending June 2017, due to one‐off expenses inconnection with Public Offering, Acquisition and Borrowings, earnings per unit isexpected to decrease. Therefore, from the perspective of maintaining stable
distributions, INV intends to make distributions in excess of profits (JPY 43 per unit)
within the scope of the expected shortfall between actual earnings per unit and thesimulated earnings per unit after the transactions.
In addition, INV also intends to make distributions in excess of profits (JPY 12 per unit
for the fiscal period ending June 2017, JPY 21 per unit for the fiscal period ending
December 2017) in order to cope with the discrepancy between tax and accounting
treatment for the fiscal period ending June 2017 and the fiscal period ending December
2017.

Excess profit distribution per unit

Other

June 2017 Fiscal
PeriodJPY 55

December 2017
Fiscal Period
JPY 21

INV assumes there will be no amendments to applicable laws and regulations, thetaxation system, accounting standards and other regulations that would affect theforegoing forecasts.
In addition, INV assumes there will be no unforeseen material changes in general
economic trends, real estate market conditions and other trends and conditions.

22