Mori Hills REIT Investment Corporation
Results of the 28th Fiscal Period ended July 31, 2020
Presentation Material
September 15, 2020

TSE Code： 3234
https://www.mori-hills-reit.co.jp/en/(Asset Manager) Mori Building Investment Management Co., Ltd.
https://www.morifund.co.jp/en/

Disclaimer

This document has been prepared by Mori Hills REIT Investment Corporation (“MHR”) for informational
purposes only and should not be construed as an offer of any transactions or the solicitation of an offer
of any transactions. MHR is a publicly-offered real estate investment corporation (J-REIT) investing inreal estate and related assets the prices of which may fluctuate. Unitholders of MHR may suffer loss
when unit prices decline due to fluctuation of real estate value and profitability, aggravation of financial
status of MHR and other reasons.
Please make investment decisions at your own discretion and responsibility, and contact securities
company when purchasing investment units of MHR.
This document’s content includes forward-looking statements about business performance; however,no guarantees are implied concerning future business performance. Although the data and opinions
contained in this document are derived from what we believe are reliable and accurate sources, we do
not guarantee their accuracy or completeness. The contents contained herein may change or cease toexist without prior notice. Regardless of the purpose, any reproduction and/or use of this document inany shape or form without the prior written consent from MHR is prohibited.
This document contains charts, data, etc. that were prepared by Mori Building Investment
Management Co., Ltd. (hereafter, the “Asset Manager”) based on charts, data, indicators, etc. releasedby third parties. Furthermore, this document includes statements based on analyses, judgments, andother observations concerning such matters by the asset manager as of the date of preparation.
Asset Management Company : Mori Building Investment Management Co., Ltd.
(Registered as a financial instruments business, Kanto Local Finance Bureau registration no. 408
Member of The Investment Trusts Association, Japan)

1

Contents

1. Executive summary
2. Investment highlights

3

4

Unit price performance5

Financial results

6

Offering highlights

7

Overview of new acquisitions(Acquired as of September 1, 2020)

8

Dividends per unit growth record

9Impact of COVID-19 on office demand overthe medium to long term

10

Increase in appraisal NAV per unit

11

Forecasts

12

Highest Property Portfolio among all J-REITs

13

External growth

22Internal growth25

Financial management

29

MHR’s representative property

31

3. Operation highlights

35

Factors that led to changes in dividends per unit
from the previous fiscal period

36

Change in assets under management

37

Change in unrealized capital gain/loss

38

Appraisal value

39

Change in the rent and occupancy rates

40

Tenant status by month and major tenants

41

Financial overview (as of July 31, 2020)

42

Debt status (as of July 31, 2020)

43

Unitholders breakdown (as of July 31, 2020)

44

4. Business environment recognition &MHR’s policy/strategy

45

Business environment recognition

46

MHR’s policy/strategy

47

Market-related information

49

5. Appendix

55

2

1. Executive summary
Financialsummary
28th period(Jul. 2020)

Operating revenue: 9,602 million yen, operating income: 6,028 million yen,
net income: 5,433 million yen Decreased revenue and increased income period-over-period
DPU: 2,898 yen (+0.5% from 27th period) Increasing for 20 consecutive fiscal periods
NAV per unit: 146,390 yen (+0.6% from 27th period) Increasing for 19 consecutive fiscal periods
COVID-19 has not impacted office rents, and while it did result in a temporary reduction of rents
at restaurants, this has had a negligible impact with the ratio of rent reduction to total revenue
being quite small

Public Offering
External
growthProcured 5.2 billion yen in public offering as of August 2020 and additionally acquired
Toranomon Hills Mori Tower for 12.2 billion yen as of September 1, 2020
DPU (forecast): 2,900 yen (29th period), 2,910 yen (30th period) Increasing forecast for 22
consecutive fiscal periods
We believe that the proliferation of telecommuting will not impact office demand for premium
properties in central Tokyo and that these properties will continue to be competitive
Possible to acquire premium properties in central Tokyo by utilizing our high-quality sponsor
pipeline

Internal
growthOccupancy ratio continued to be strong, office 99.7% and residential 96.1%. Steady internal
growth due to rent revision and replacement
Office rent gap ratio decreased from △6.2% in 27th period to △4.2% in 28th period

Financialmanagement

Maintained the target level by book value basis LTV 45.7%, appraisal value basis LTV 38.0%,
remaining duration of debt 4.7 years
Fixed interest rate ratio at the end of the period was 91.5%
3

2. Investment highlights

42-1 Unit price performance(yen)

200,000
PublicOffering inMar. 2013

190,000

PublicOffering in
Sep. 2013

PublicOffering in
Aug. 2014

PublicOffering inFeb. 2016

PublicOffering in
Aug. 2018180,000
170,000
160,000
150,000
140,000
130,000

Mori Hills REIT

120,000
110,000
100,000

TSE REIT Index

90,00080,00070,00060,00050,00040,00030,000Sep. 14,2010Market
value

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31, Jan. 31, Jul. 31,
2017
2019
2011
2016
2018
2019
2020
2012
2013
2013
2014
2014
2015
2016
2017
2020
2011
2012
2015
2018

41.9 bn yen(Sep. 14, 2010)

257.0 bn yen(Jul. 31, 2020)(Note 1) Unless otherwise stated in this document, all amounts are rounded down below the unit and all fractions and areas are rounded up below the decimal point.
(Note 2) TSE REIT Index is adjusted as of the 8th period result announcement (Sep. 14, 2010) and shows the relative performance vs. MHR’s unit price performance.

52-2 Financial results
27th period

28th period

28th period

Jan. 31, 2020

Jul. 31, 2020

Jul. 31, 2020

ActualActualDifference

Forecasted

△ 29

9,621

△ 31

3,606

Operating Highlights (million yen)
Operating revenue

9,631

9,602

Rent revenues

9,377

9,389

253

213

3,605

3,573

Other operating revenues

Operating expenses
Expenses related to properties

340

6,028

+2

6,015

1

1

+0

1

619

595

596

Ordinary income

5,407

5,434

+ 26

5,420

Net income

5,406

5,433

△ 23
+ 27

5,419

Total dividends

5,405

5,433

+ 28

5,418

1,874,960

1,874,960－

1,874,960

2,883

2,898

+ 15

2,890

Profit on real estate rental

6,407

6,350

6,356

Depreciation

1,034

1,041

NOI

7,441

7,391

△ 56

NOI yield

3.8%
390,690

Non-operating expenses

321

6,026

235

△ 59

Non-operating income

380

△ 40

3,265

Operating income

3,251

9,386

+ 27

SG&A

3,224

+ 11

DPU
Total units outstanding (units)
DPU (yen)

Increase/decrease factor (27th – 28th)・Operating revenue (△29 mn yen)
- Full period contribution of rent revision ofland (Laforet Harajuku)- Cancellation penalty- Office rent (Pass-Through)- Utilities and other revenue- Rent exemption for restaurants

・Operating expenses (△31 mn yen)
- Property management fee- Maintenance and repairs- Property taxes- Depreciation- Asset management fee- Utilities- Other operating expenses

+12
+12
+6
△49
△5

+18
+18
+16
+6
△41
△36
△17

・Non-operating expenses (△23 mn yen)
- Interest expenses, etc.

△23

Other Indices (million yen)

Acquisition price(weighted average based on the numberof operating days during the period) (Note)

+6

1,044
7,400

3.8%

△ 50

0.0PT

3.8%

390,690－

390,690

Increase/decrease factor for 28th period(Forecasted - Actual)・Operating income (+12 mn yen)
- Asset management fee- Office rent (Pass-Through)- Residential rent (Pass-Through)- Maintenance and repairs- Rent exemption for restaurants(Note) If properties are acquired during the period, the acquisition price is the weighted average based on the number of operating days.

+22
+3
+3
△9
△5

6

2-3 Offering highlights
Procured 5.2 billion yen in public offering
Total PO amount
paid-in 5.2 bn yen

Overview of public offering
28th period
ended Jul. 2020

Offering method Domestic offering
Issuance
resolution dateAugust 17, 2020

Pricing dateAugust 25, 2020

Payment datePrimary offering: August 31, 2020
Third-party allotment: September 25, 2020

Number of units
newly issued

41,370 units(of this, third-party allotment: 1,970 units)

Number of units
after offering

1,916,330 units

Offering price

131,435 yen per unit

Issued value

127,099 yen per unit

Total issued
value

5,258,085,630 yen(including third-party allotment)

390.6 bn yen

402.9 bn yen

NOI yield

3.8%

3.8%

45.7%

45.7%

38.0%

38.0%

Appraisal NAV
per unit

146,390 yen

147,545 yen

DPU2,898 yen/unit(Note 1)

LTV

(book value basis)(Note 2)LTV

(appraisal value basis)(Note 3)

From issuanceresolution date topricing date

From issuanceresolution date to
2 weeks after
pricing date

MHR

+3.28%+1.52%TSE REIT Index+3.34%+1.44%

Post offeringand acquisition

Total assets(acquisition price basis)

Trend of unit priceTotal acquisition of
12.2 bn yen(Note 4)(Note 4)(Note 4)

2,900

2,910

yen/unit

yen/unit(ending Jan. 2021)(ending Jul. 2021)(Note 1) Figures are average NOI yields of the entire portfolio.
(Note 2) LTV (book value basis) is calculated as [Total interest-bearing debt/Total assets](Note 3) LTV (appraisal value basis) is calculated as [Total interest-bearing debt/Appraisal value based total
assets (Total assets ＋Total appraised value - Total book value)](Note 4) The figures are calculated by taking into consideration the effects of the proceeds through theoffering, the scheduled asset acquisitions on September 1, 2020 and adding the newborrowings of 5.2 billion yen to the figures as of the end of the 28th period.

7

2-4 Overview of new acquisitions (Acquired as of September 1, 2020)
Toranomon Hills Mori Tower (Additional acquisition)
1. Super high rise tower - Tokyo’s new landmark
Quake-resistance structure with 52 floors and 247 meters above ground.
High-specification offices with a broad floor plate of approx. 1,000 tsubo,
international-standard conference facilities, Japan’s first Andaz hotel “theAndaz Tokyo”, retail facilities and residences.

2. Located in the center of the Toranomon area where further
development is expected
Directly connected to "Toranomon Hills Station" on the Hibiya subway line
and 6 transit stations and 11 lines are nearby. It is easily accessible fromHaneda Airport and ideal as a new hub for international business.
As a result of a number of redevelopment projects currently in progressaround the building, the Toranomon area has begun to rapidly evolve into aninternational urban center.

＜Acquisition portion＞
Hotel
Residential

Acquisition priceAppraisal value

NOI yield

12,220 mn yen

15,230 mn yen

3.4%

Property Number

O-9

Location(Residential indication)
C onstruction date

23-1, Toranomon 1-chome,
Minato-ku, Tokyo
May 2014

Total number of floors

52 floors above ground,
5 floors below ground

Gross floor area
Portions of acquisition

241,581.95 m2
17% quasi-co-ownershipinterest in trust beneficial
interests

Portion of
the red area
(note)

OfficeEarthquake PML

0.50%

Conference
facilities
Restaurant, etc.

Total acquired: 67% quasico-ownership interest
including past acquisition(Note) MHR acquired the trust beneficial interests in 87.95% co-ownership interest incompartmentalized ownership of the 28-35th floors

82-5 Dividends per unit growth record(yen/unit)

3,200

3,000

20 consecutive
fiscal period
increase

2,800

Longest among
all J-REITs

2,822

2,850

2,900 2,910
2,883 2,898 (forecast) (forecast)

2,753
2,659
2,567

2,600

2,606 2,610

2,502
2,367

2,400
2,303
2,200

2,151
2,019

2,000

1,910
1,833

1,800

1,724 1,740
1,670
1,589

1,600

1,400

1,200

1,315

8th
period
Jul.
2010

9th
period
Jan.
2011

10th
period
Jul.
2011

11th
period
Jan.
2012

12th
period
Jul.
2012

13th
period
Jan.
2013

14th
period
Jul.
2013

15th
period
Jan.
2014

16th
period
Jul.
2014

17th
period
Jan.
2015

18th
period
Jul.
2015

19th
period
Jan.
2016

20th
period
Jul.
2016

21st
period
Jan.
2017

22nd
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

25th
period
Jan.
2019

26th
period
Jul.
2019

27th
period
Jan.
2020

28th
period
Jul.
2020

29th
period
Jan.
2021

30th
periodJul.
2021※ Implemented a 5-for-1 investment unit split effective on February 1, 2014. Actual dividends per unit was divided by 5 for the periods before the split of investment units in the graph.

9Impact of COVID-19 on office demand over the
2-6 medium to long term
Considerations
on the state of
the office

While remote work continues to proliferate, the office is essential for companies in numerous ways, including
fostering corporate culture, brand identity, value creation through informal communication, operational
efficiency, training and recruiting, etc. In the future, it is expected that there will be greater value attached
to offices that are worth commuting to and possess charm.
As a rising number of companies are using hybrid systems that permit employees to both commute andwork remotely, it is likely that companies will try to reduce costs by transitioning to flexible spaces for
employees who commute infrequently, although the size of such space is expected to vary greatly from one
company to another.
From the perspective of physical distancing, each person will require a larger amount of space than before,
and from the perspective of fostering culture and encouraging collaboration increasing common areas will be
desired. These factors will increase the area needed by companies.

Considerations
for officedemandWe believe that there could be an increase in the “hub-and-spokes” approach that separates headquarter
functions from remote working, and this could decrease the number of employees who commute but may
have limited impact on contracted space.
However, even if total demand decreases, high-quality properties should capture demand as “hubs,” and as
offices that are worth commuting to and possess charm are further sought, demand is expected to rise formore symbolic, convenient, comfortable, and safe properties.
The elements that make up high-quality properties include prime locations (Tokyo’s Three or Five Central
Wards), a large space with a flexible layout, an advanced IT environment, a comfortable, open space withlush greenery, a full range of restaurants, shops, hotels, and cultural facilities, excellent earthquake
resistance and environmental performance, and professional building management.

Impact on MHR
and MHR’s
response

MHR’s portfolio is primarily composed of premium properties in central Tokyo, which integrate many of theabove elements to a high degree, and we believe that they will be competitive even under a new paradigm.
Apart from the medium- to long-term impacts mentioned above, there is the possibility that total officedemand could decline due to a downturn in business sentiment in the short term. In response to this, MHR is
maintaining stable distributions through its high-quality properties, superior property pipeline, stable revenues
provided through fixed-rent master leases, and relatively high financial ratings, etc.

102-7 Increase in appraisal NAV per unit
(yen/unit)
150,000

145,583

140,000

137,697

19 consecutive
fiscal period
increase

130,000

146,390

134,550

124,618
120,000

117,627
112,546 112,811

114,893

110,000
101,957

104,064

99,665100,000

90,00086,941

88,82681,99278,027 78,434

80,00072,73570,00062,73164,85660,00050,0009th
period
Jan.
2011

10th
period
Jul.
2011

11th
period
Jan.
2012

12th
period
Jul.
2012

13th
period
Jan.
2013

14th
period
Jul.
2013

15th
period
Jan.
2014

16th
period
Jul.
2014

17th
period
Jan.
2015

18th
period
Jul.
2015

19th
period
Jan.
2016

20th
period
Jul.
2016

21st
period
Jan.
2017

22nd
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

25th
period
Jan.
2019

26th
period
Jul.
2019

27th
period
Jan.
2020

28th
periodJul.
2020※ Implemented a 5-for-1 investment unit split effective on February 1, 2014. Actual dividends per unit was divided by 5 for the periods before the split of investment units in the graph.

112-8 Forecasts
28th period

29th period

30th period

Jul. 31, 2020

Jan. 31, 2021

Jul. 31, 2021

ActualForecast

Difference

Forecast

Operating Highlights (million yen)
Operating revenue

9,602

9,826

+ 223

9,874

Rent revenues

9,389

9,603

+ 214

9,662

213

222

+9

212

3,573

3,665

+ 92

3,704

3,251

3,354

+ 102

3,394

321

310

310

6,028

6,160

△ 10

+ 131

6,170

1

0

1

595

603

+7

593

Ordinary inc ome

5,434

5,558

△0

+ 123

5,577

Net income

5,433

5,557

+ 123

5,576

Total dividends

5,433

5,557

+ 123

5,576

1,874,960

1,916,330+ 41,370

1,916,330

2,898

2,900

+2

2,910

Profit on real estate rental

6,350

6,471

+ 121

6,480

Deprec iation

1,041

1,059

+ 18

1,077

NOI

7,391

7,531

+ 139

7,557

NOI yield

3.8%

3.7%

3.8%

390,690

400,851△ 0.1PT

Other operating revenues

Operating expenses
Expenses related to properties
SG&A

Operating income
Non-operating inc ome
Non-operating expenses

DPU
Total units outstanding (units)
DPU (yen)

Other Indices (million yen)

Ac quisition pric e(weighted average based on the numberof operating days during the period)+ 10,161

402,910

Increase/decrease factor (28th – 29th)・Operating revenue (+223 mn yen)
- Property acquisition in 29th period- Utilities and other revenue- Residential Rent (Pass-Through)- Cancellation penalty

・Operating expenses (+92 mn yen)
- Property acquisition in 29th period- Property management fee- Property taxes- Utilities- Depreciation

・Non-operating expenses (+7 mn yen)
- Interest expenses, etc.

+219
+21
△13
△9
+50
+26
+16
+14
△6

(New borrowings in 29th period)+12- Amortization of investment unit issuance cost +5- Interest expenses, etc.
△10

Increase/decrease factor (29th – 30th)・Operating revenue (+48 mn yen)
- Full period contribution of property
acquired in 29th period- Office Rent (Pass-Through)・Operating expenses (+39 mn yen)
- Property taxes- Depreciation- Full period contribution of property
acquired in 29th period- Property taxes for property
acquired in 29th period- Property management fee

・Non-operating expenses (△9 mn yen)
- Interest expenses, etc.

+43
+11
+17
+12
+10
+10
△15

△11

12

2-9 Highest quality property portfolio among all J-REITs
Investment strategy based on long-term perspective(1) Responding to demographics
Responding to the declining population andchange of working style(2) Responding to economic
trends and disasters
Responding to tenant demand during
economic downturns and to disasters(3) Addressing aging assets
Responding to asset value decline
due to aging

Investment in central Tokyo

Investing in high-quality assets
Property with excellent facilities, earthquake
resistance and environmental performance

Creating added value
Area management, peripheral development
and renovation

Location

Qualityof assetsValuecreation13

2-10 (1) Location
Highest property percentage in Central Tokyo among J-REITs

Tokyo’s Five
Central Wards
and their vicinity

Tokyo’s ThreeCentral Wards

87.8%

100%

(Note) The ratios represent proportion of acquisition price to total acquisition price.

Estimated population in central Tokyo
Area

Population in2015

Estimated
population in
2045

Change3 central wards
in Tokyo

442,000

594,000+34.3%

5 central wards
in Tokyo

1,000,000

1,175,000+17.5%

Tokyo

13,515,000

13,606,000

+0.7%

Osaka

8,839,000

7,335,000

Aic hi

7,483,000

6,899,000△ 17.0%127,094,000

106,421,000

Nationwide△ 7.8%△ 16.3%(Source) Prepared by the Asset Manager based on the “Regional Population Projections forJapan (estimated in 2018)” by the National Institute of Population and Social
Security Research.

14

2-11 (2) Quality of assets
High-grade properties with extensive facilities＜Overview and facilities of representative properties＞
Property nameGross floor
area

Access fromthe nearest
stationNumber ofshops &
restaurants

Roppongi Hills

Connected to758,203㎡- Roppongi
Station

228

Toranomon Hills(Afte r tota lproje ct com ple tion)

Connected to793,585㎡- Toranomon
Hills Station

Not fixed

Hotel
(spa)

Grand Hyatt Tokyo(NAGO MI SP A AND FITNESS)

Andaz Tokyo(approx .
(AO SPA AND CLUB)8,000 tsubo)

ARK Hills

2-minute walk
310,979㎡- from Roppongi
1-chome Station

55(THANN SANCTUAR Y
SP A AKASAKA)

Atago Green Hills

3-minute walk
151,106㎡- from Onarimon
Station18(Atago Gre en Hills SP A)

ANA InterContinental

Green
Residential coverage ofthe site

Cultural facility
Observatory

Conference

ShareofficeMori Art Museum
Tokyo City View
TOHO Cinemas

Academyhills
Ropponngi Hills
Club

〇

〇

30.1%

-

Toranomon Hills
Forum

〇

〇

30.4%

ARK Hills Club

〇

〇

43.3%

-

-

〇

51.9%

Suntory Hall-

(Source) Prepared by the Asset Manager based on disclosed materials as of August 31, 2020.
(Note 1) Describes the outline of the entire areas and facilities including properties owned by MHR.
(Note 2) “Connected” under the “Access from the nearest station” describes the possible direct connection by concourse etc..

152-12 (2) Quality of assets
Earthquake-resistant feature

Lowest portfolio
PML of all listed
J-REITs

0.91%

Environmental performance

Ratio of GB certified
properties in portfolio

Best among
all J-REITs

93.4%
In highest Ratings
71.5%※ PML refers to the probable maximum loss ratio expected to result from an earthquake.
A smaller figure indicates superiority in earthquake-resistance.

PML

Earthquakeresistant feature

Roppongi Hills Mori Tower

0.59%

Seismic damping

ARK Mori Building

0.78%

Seismic damping

0.73%

Seismic damping

1.56%

Seismic damping

Toranomon Hills Mori Tower

0.50%

Seismic damping

Holland Hills Mori Tower

0.85%

Seismic damping

Akasaka Tameike Tower

1.79%

Seismic damping

2.35%

Seismic damping

2.34%

Seismic damping

5.94%

－

2.20%

－

2.20%

－

Property nameKoraku Mori Building
ARK Hills South Tower

MORI Tower
Atago Green Hills

Forest Tower

Type

OfficeOffice(Partly
residential)

Plaza
Roppongi First Plaza
Roppongi View Tower

Highest quality
among all J-REITs

Residential※ In acquisition price base by excluding Laforet Harajuku (Land)

CASBEE for Existing Buildings: Rank S

Roppongi Hills
Mori Tower

ARK Mori
Building

Atago Green Hills Toranomon Hills(MORI Tower)
Mori Tower

CASBEE for
Existing Buildings: Rank A

Akasaka Tameike
Tower

Koraku Mori
Building

Holland Hills
Mori Tower

DBJ Green Building
Certification: Four stars

ARK Hills
South Tower16

2-13 (3) Value creation
Developments around MHR’s properties

Shintora-Dori CORE (Completed Sep. 2018)(Toranomon Hills area)
Toranomon Hills
Mori Tower

Toranomon Hills
Residential Tower

Opened Jun. 2014

Projected completion Jan. 2021

Toranomon Hills Station Tower

Toranomon Hills
Business Tower(Tentative name)
Projected completion Jul. 2023

Opened Jun. 2020

Total area: approx. 7.5ha
Total floor area: approx. 800,000m2

Toranomon Hills Station of
Hibiya subway line
Opened Jun. 2020

Office space: approx. 300,000m2
Residential units: approx. 720
Retail space: approx. 26,000m2
Green space: approx. 15,000m2

Mixed use Tower located at the center of future
grand boulevard in Tokyo
A 15-story mixed use tower with commercial facilities with a total
rental floor area of approximately 10,000m²
Cafe/dining and event space “THE CORE KITCHEN/SPACE” whichfaces the Shintora–Dori aims to be a creator's hub where creative
industry people gather, interact, and create ideas.
Incubation offices with shared lounges and meeting rooms arelocated on the 3rd floor and start-ups expanding into Japan fromoverseas and venture companies have moved in.

17

2-14 (3) Value creation
Toranomon Hills Business Tower (Completion Jan. 2020)
An international-standard, large-scale officebuilding with an innovation center
Business Tower is a 36-story office tower, featuring
international-standard, large-scale office space ofapproximately 96,000m², and retail facility area ofapproximately 7,600m².
The tower is directly connected to the new Toranomon Hills
station on the Hibiya subway line as well as the existing
Toranomon station on the Ginza subway. A bus terminal islocated on the first floor to function as a “Gateway toTokyo” via various bus lines including the BRT (Bus Rapid
Transit) connecting city center and waterfront areas, andvia airport limousine buses.
Offices occupy 32 floors from the 5th floor to the 36th floor
with the standard rentable floor area of 3,000 m2.
Refreshment corners are provided in the common area oneach floor aimed at promoting communication. In addition,
prepare for an emergency by arranging a disasterstockpiling warehouse on each floor.
An original energy plant that supplies electricity and heat is
installed in the Toranomon Hills area on the third basement
floor. It also provides the electricity and heat sufficient tocontinue urban functions even in the event of a disaster,
contributing to the safety and security of the Global
Business Center.

<Retail><Innovation center>

From the first basement floor
to the 3rd floor, commercial
spaces with a total of 60
restaurants and stores will
support global lifestyles.
The 3rd floor will house
Toranomon Yokocho, alandmark dining facility
featuring offerings from famous
stores from all over Tokyo.

On the 4th floor will be a large
membership-based incubation
center “ARCH,” which wasestablished especially to support
large enterprises' internal businessreforms and new business creation.
It boasts around 3,800 m2 of office
work space and aims to become abase for Japan's unique innovation
ecosystem.

18

2-15 (3) Value creation
Development around MHR’s properties (Toranomon-Azabudai Project: projected completion Mar. 2023)
The future version of “Hills” boasts anastonishing scale and impact
Large central square of approx. 6,000m² is set in the center ofthe city and various city functions such as offices, residences,hotel, an international school, retail facilities and cultural
facilities will be tightly integrated.
Total floor area will be 860,400m², with 213,900m² of officespace, approx. 1,400 residential units. Approx. 20,000 office
workers and 25-30 million people per year are expected to visit.
The main tower will soar 64 stories and 330m in height. Officesin the main tower, the West Tower and Podium Building willencourage free and creative work.

“Modern Urban Village”, a city-within-a-city full of greenery andconnects people
The core concept of the “Toranomon-Azabudai Project” is a “Modern Urban Village,”a unique neighborhood that will combine the sophistication of a megalopolis with theintimacy of a small village. It will be a completely new city like no other in the world.
It will cover an area of approx. 8.1 ha and will feature extensive greenery totaling
approx. 2.4 ha including a 6,000m² central square.

19

2-16 (3) Value creation
Creating community and innovation through the Area Management by sponsor

Toranomon Hills Area
Partnership withworld's largest
innovation center

Events“OUR PARKS”“Thursday Gathering” by

Various events such as “Our

Venture Café, a sister

Parks” are held in the openorganization of Cambridge

spaces, Oval Plaza and Atrium,

Innovation Center, promotes

where a vast lawn spreads out.

exchanges between

It creates a third place forparticipants to support thecommunity and activates thecreation of new innovations.

area of Toranomon.

ELLE Cinema Night(Toranomon Hills Mori Tower)

Thursday Gathering(Toranomon Hills Mori Tower)

Enjoy the charmof JapaneseMarketCollaboration with
Royal College of Art

DLX Design Academy(Shintora-Dori CORE)“DLX Design Academy" in

The dining facility “Touring

collaboration with the Royal

Stand” has been installed

College of Art, provides

along the road for the firsteducational programs to spurtime in Tokyo. It offers sales

creation of new values with anof gourmet cuisine using

environmental focus andseasonal ingredients fromworld-class learning andaround Japan and various

interacting opportunities.

Traveling stand(Shintora-Dori)workshops to experience
community activities.

20

2-17 (3) Value creation
Creating community and innovation through the Area Management by sponsor
ARK Hills Area
Workplace where
venture capitalgathers

KaleidWorks(ARK Mori Building)

Pioneer of urban
markets:
Hills Marche“KaleidWorks” consists of an

Hills Marche is the first

office area where independent

Marche Japon Project of theventure capitalists

Ministry of Agriculture,

representing Japan are located

Forestry and Fisheries. Basedand a lounge area. People whoon the concept that “the best

want to innovate in a wide

ingredients are in the city,"

range of fields can interact on

through fresh, local food wecommon grounds in sharedspaces.

Hills Marche(ARK Mori Building)reinforce the rich lifestyle of
ARK Hills.

Roppongi Hills Area
Co-creation
platform
HAB-YU platform

HAB-YU platform(ARK Hills South Tower)

Art Festival
representingTokyo

HAB-YU, operated jointly with

Tokyo-based art festival

the Fujitsu Group, is a platform“Roppongi Art Night”

for co-creation. It aims tointegrates the art and the city

create new value by bringing

to improve the cultural image

together the issues, ideas andof Roppongi and create atechnologies from people

pioneering model of urban"Human", region "Area", anddevelopment in Tokyo.

company "Business" (= HAB)
and forging ties (“YU”) among
them in a variety of ways.

(c) Roppongi Art Night Execution Committee
Roppongi Art Night(Roppongi Mori Tower)21

2-18 External growthBusiness environment
recognition

We believe that the structural changes to office demand will not
impact premium properties in central Tokyo

External growth policy

Proceed with external growth utilizing sponsors’ abundant property
pipeline(Note) Please refer to “Section 4. Businessenvironment recognition and MHR's
policy/strategy” for details.

Change in rent and vacancy rate of office buildings (Tokyo’s five central wards)
(%)

200

140

9.0

8.1%

180
160

10.0

8.9% 9.0% 8.7%
⇒ Estimate

7.3%
145

149

(Source)

5.5%

6.0 Prepared by the Asset Manager based on the
4.0%

3.6%

120
100

114
100
92

80

92

95

99

104

109

3.1%

120

125

128

128

128

2.8%
2.6% 2.6%

114

127

125

124

3.3% 3.3% 3.1%

1.9% 1.8%

(%)

4.9
4.6
4.2%

3.7

3.8%
3.5%

4.2%

3.8%
Cap rate of class A
office buildings(Marunouchi and Otemachi)

2.0 (Note)

The rent index targets large and medium

1.0 buildings (standard floor area of 100 tsubo ormore) in Tokyo’s five central wards. The rent

Change in return on real estate investment

4.3“Autumn 2019 Office Rent Forecast in Tokyo,
Osaka and Nagoya (2019-2025)” by the Office
4.0 Market Trends Research Committee(Japan Real Estate Institute and Miki Shoji Co.,
3.0 Ltd.).

5.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

4.0

Vacancy rate

7.0

4.7%

2.6%

Rent index

8.0

0.0 index is rebased to 100 as of 2010.

Mori Building’s extensive property
pipeline
Total assets:

Number of properties under(as of the end of March, 2020)(as of April, 2020)

2.2 trillion yen

management: 96 buildings

3.4%

3.4
3.1

3.0%

3.0%

2.8

MHR has “preferential negotiation rights”

06
08
10
12
14
16
18
20
(Source) Prepared by the Asset Manager based on “The Japanese Real Estate Investor
Survey” by the Japan Real Estate Institute.
(Note) Figures reflect the time of survey as of April each year.

22

2-19 External growth
Trend in assets under management (based on acquisition price)(billion yen)

450

402

Growth utilizing
sponsor’s pipeline

400
350
300

339

338

20th
Jul.
2016

22nd
Jul.
2017

390

390

26th
Jul.
2019

28th
Jul.
2020

billion yen

360

281
252

250
201

200
150
100

142

2nd
Jul.
2007

211

212

210

8th
Jul.
2010

10th
Jul.
2011

12th
Jul.
2012

230

159

4th
Jul.
2008

6th
Jul.
2009

14th
Jul.
2013

16th
Jul.
2014

18th
Jul.
2015

24th
Jul.
2018

After
acquisition

Acquired premium properties in central Tokyo lower than appraisal values(Acquired as of September 1, 2020)
Toranomon Hills Mori Tower
Toranomon Hills
Mori Tower

Recent officeacquisition bylisted REITs (Note 1)△ 19.8%△ 6.1%

Building age

6.3 years

16.8 years

PML

0.50%

3.86%

Discount ofacquisition price toappraisal value (Note 2)

Acquisition price 12,220 million yen
Appraisal value

15,230 million yen

Location

Minato-ku, Tokyo(Note 1) Average based on information of acquisitions (24 properties) disclosed from January to July 2020.
(Note 2) Discount of acquisition price to appraisal value = (Acquisition price – appraisal value) / appraisal value23

2-20 External growthMori Building Group’s involvement

MHR (Note 1)
In Operation(注4)

MB Group (Note 2)(注5)

Planning / Under Construction(Source) Prepared by the Asset Manager based on Mori Building’s “Mori Building Handy Map Mori Building Map/Home Route Support Map 2020.”(Note 1) Some of the properties have been partially acquired and held by MHR.
(Note 2) Properties are developed, owned, managed and planned for development by Mori Building Group, and there are no properties currently anticipated to be acquired by MHR.

24

2-21 Internal growthBusiness environment
recognition

While demand may decline to a certain extent due to a downturn inbusiness sentiment, rent trends will depend on vacancy rates

Internal growth policy

Maintain stability of cash flow through fixed rent master leases, while
striving for revenue growth with pass-through type leases

Trend in occupancy rates
(%)

99.5%

100

99.7%

99.9%

(Note) Please refer to “Section 4. Businessenvironment recognition and MHR's
policy/strategy” for details.

Trend in asking rent
100%

99.7%

98.4%

160

Roppongi・
Azabu

150

Toranomon・
Shimbashi

97.7%
96.3%

96.8%
97.9%

96.2%

96.1%

95

140

5 central
wards

130
90

120

110

Office (total)

85

Residential (total)
Office (Pass-Through)80
23rd
January 201824th
July 2018

25th
January 2019

26th
July 2019

27th
January 2020

28th
July 2020

100

90
2011

2012

2013

2014

2015

2016

2017

2018

2019

(Source) Prepared by the Asset Manager based on “Office Market Report” by Sanko
Estate Co., Ltd.
(Note) The average of asking rent (including common area revenue) that targets
a large scale building with a standard floor area of 200 tsubo or more is
rebased to 100 as of 2011.

25

2-22 Internal growth
Result of rent revision and tenant replacement (pass-through type)Net impact of rent revisions accumulated since 23rd period

Rent revision rate (Office)(Monthly rent basis)(%)(million yen)

+10

+26

+25.4 mn yen

+24

+8

+7.1%

+6.9%

+5.6%

+6

4.9
+16.7 mn yen+15.4 mn yen

+16

+12

+2

+1.5%

+2.5%

+10

※ Average of all contracts subject to revision
23rd
Jan. 2018+13.0 mn yen

+14

+2.1%

0

Office

+20
+18

+4

24th
Jul. 2018

25th
Jan. 201926th
Jul. 2019+11.9 mn yen

3.7

4.2

3.1

2.7

20.5
16.8

+8

27th
Jan. 2020

28th
Jul. 2020

+6
+4

5.2

+21.8 mn yen

Residential

+22

9.1

9.9

23rd
Jan. 201824th
Jul. 2018

11.7

12.5

25th
Jan. 201926th
Jul. 2019+2

Rent revision rate (Residential)

+0

(%)
+10

27th
Jan. 2020

28th
Jul. 2020

Net impact on increase/decrease of tenant replacement(Monthly rent basis)+8+6(million yen)

+5.5%

+5.4%

+5.3%

+5.9%

+20

+6.0%

(Residential)(Office)※ Average of
all contracts
with replacement
+7.5%

+15

+13.4%
+3.6%

+4
+10

+2

0

+2.7%
+5

※ Average of all contracts subject to revision
23rd
Jan. 201824th
Jul. 2018

25th
Jan. 201926th
Jul. 201927th
Jan. 2020

28th
Jul. 2020

Old tenant△5.2%

New tenant+0
27th
Jan. 2020

28th
Jul. 2020

27th
Jan. 2020

28th
Jul. 202026

2-23 Internal growth
Comparison with office market rent (pass-through type)
Rent gap (Total monthly rent)

Rent gap by revision (Total monthly rent)(million yen)(million yen)

400

160

Above market rent
(over +5%)300

Above market rent
(under +5%)

150

140
120
100
80

200

68

60

100

Below market rent

51
37

40

26

21
20
0

0
27th
Jan. 2020

28th
Jul. 2020

29th
Jan. 2021

30thJul. 2021

31stJan. 2022

32nd
Jul. 2022

33rd
Jan. 2023

34th
Jul. 2023
or afterRate of rent gap

△6.2%

△4.2%

This indicates that contracts have
not reached market rent levels
and have room for upside(Note 1) Market rent is based on the report by CBRE K.K.
(Note 2) Rent gap = Total tenants’ rent ÷ “Total market rent” – 1(Note 3) Figures reflect move outs of end tenants confirmed as of July 31, 2020

Occupancy rate remained at high level due tovigorous office demand
The rent gap has narrowed due to progress inrevisions to raise rents
Even after the outbreak of COVID-19, while taking
into consideration the circumstances, tenants
whose rent gap is large will be targeted forrevisions to raise rent27

2-24 Internal growth
Overview of fixed rent master lease
Ratio of fixed rent master lease (after new acquisition)● Structural changes to office demand will not
impact premium properties in central Tokyo

Seeking revisions toraise rents with
pass-through-type
properties

Fixedrent
65.7%● Display a defensive posture to the downturnin business sentiment in the short term

Realize stable cashflow
Monthly rent by contract expiration
Property nameRoppongi Hills Mori Tower(10 floors)

ARK Mori Building(8 floors + DHC)

Atago Green Hills(approx. 32.9% of entire
property)
Toranomon Hills Mori Tower(approx. 9.3% of entire
property)
Total

Total monthly% of portfolio
rent
total rent
(mn yen)

490.5

225.2

30.5%

14.0%

Breakdownof property

Leased floor
area
2
(m )

Payer ofmanagement
associated fee

Monthly rent by contract expiration (mn yen)
2021

2022

2023

2024 or after

Expiration of
the leaseagreement

23rd & 24th

8,993.45

114.6

－

－

－

Jul. 2021

19th & 22nd

8,609.47

－

－

95.0

－

Sep. 2023

20th

3,879.19

－

－

－

42.8

Jul. 2024

28th

4,460.13

－

－

－

49.2

Sep. 2025

MHR

25th

4,156.66

－

－

－

45.8

Jan. 2026

26th, 27th & 29th

12,942.64

－

－

－

142.9

Mar. 2026

13th/12th & 22nd

7,952.55

－

－

－

77.9

Jan. 2026

23rd & 25th

5,742.95

－

－

－

55.5

Jan. 2026

4th, 15th & 24th

7,680.52

－

－

－

73.8

Jan. 2026

DHC

3,212.41

Master lessee

－

－

17.9

－

Mar. 2023

MHR

168.7

10.5%

Office, residential& retail

29,667.58

Master lessee

－

168.7

－

－

Apr. 2022

173.2

10.8%

Part of 28th to
35th floors

16,360.16

MHR

－

173.2

－

－

Jul. 2022

1,057.7

65.7%

114.6

341.9

113.0

488.1

(10.8%)(32.3%)(10.7%)(46.2%)(Note) Figures reflect the acquisition as of September 1, 2020.

28

2-25 Financial management
Business environment
recognition

Interest rates are expected to remain low considering monetary
policies and assuming rise over the medium to long term

Financial management
policyMaintain mid 40% range LTV (book value basis) and 4 years or
longer average remaining duration of debt

Reduction in LTV(Note) Please refer to “Section 4. Businessenvironment recognition and MHR's
policy/strategy” for details.

Overview of debt financing

(%)

60.0

57.4%

LTV (book value basis)

53.7%

End of 27th
periodLTV (appraisal value basis)

55.0
Debt Balance

50.0
49.3%
45.0

46.4%

44.7%

44.5%

48.8%

45.7% 45.7%

45.7%

LTV (book value basis)(Note 1)
(Note 2)

LTV (appraisal value basis)
Avg. remaining duration

42.3%

40.0

42.1%

41.9%
39.4%

38.0% 38.0%

35.0
9th
10th
11th
period peri od period
Jan.
Jul.
Jan.
2011
2011
2012

・・・

After
20th
21st
22nd
23rd
24th
25th
26th
27th
28th
peri od period peri od period peri od period peri od period peri od acquisition
Jul.
Jan.
Jul.
Jul.
Jul.
Jan.
Jul.
Jan.
Jan.
2018
2019 2019
2020
2016
2017
2017
2018
2020

Jan. 31, 2020

End of 28th
periodJul. 31, 2020

179,222 mn yen

179,222 mn yen

45.7%

45.7%

38.2%

38.0%

4.6 years

4.7 years(Note 1) LTV (book value basis) is calculated as [Interest bearing debt
/Total assets].
(Note 2) LTV (appraisal value basis) is calculated as [Interest-bearing
debt/Appraisal value based total assets (Total assets + Total
appraisal value - Total book value)].

Reduction in average interest rate(including borrowing expenses)

Long-term debt ratio/
Fixed rate ratio

(%)
2.25

＜Long-term debt ratio＞

2.1%

2.0%

＜Fixed rate ratio＞

2.00
1.75
1.50

Long-term
100%

1.25
0.8%

1.00

0.76%

0.71%

0.75

0.69%

Fixed
91.5%

0.66%

0.50
0.25
9th
10th 11th
period period period
Jan.
2011

Jul.
2011

Jan.
2012

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

period period period period period period period period
・・・ period
Jan.
Jan.
Jan.
Jul.
Jul.
Jan.
Jul.
Jul.
2016

2017

2017

2018

2018

2019

Jul.
2019

2020

2020

(Note) Total interest-bearing debt cost is calculated as [(interest expenses + interest
expenses on investment corporation bonds + borrowing expenses + amortizationof investment corporation bond issuance costs) ×365 ÷operating days during
each period ÷average interest-bearing debt balance during each period].

29

2-26 Financial management
Extension in remaining duration of debt

Rating(years)

5.5
5.0

4.5

4.5

4.2
3.8

4.0

4.3

4.0

4.4

4.6

Japan Credit Rating (JCR)

4.7

Long-term issuer rating:

3.7

3.5

AA (Stable)

3.0
2.5
2.0
1.5

1.5

1.2

1.4

・・・

1.0
9th
10th
11th
period period period
Jan.
Jul.
Jan.
2011 2011
2012

・・・

20th
21st
22nd 23rd
24th
25th
26th
27th
28th
period period period period period period period period period
Jul.
Jan.
Jul.
Jul.
Jan.
Jul.
Jan.
Jul.
Jan.
2019 2020 2020
2016
2017
2017 2018 2018 2019

Overview of maturity (as of July 31, 2020)(billion yen)

20
Long-term loans

Investment corporation bonds

15

10
6
6.5

5
3.5
0

12.5
9.2

9.5

8.2

11.2

6.0

9.1

7.6

2

2

2

6.8
7.1

9.7

8.6
4

1.5

8.2

10.9

10.3
5.9

2

3.9

4.7

29th
30th
31st
32n d
33rd
34th
35th
36th
37th
38th
39th
40th
41st
42nd
43rd
44th
45th
46th
47th
48th
period period period period period period period period period period period period period period period period period period period period
Jul.
Jan.
Jan.
Jul.
Jan.
Jul.
Jul.
Jan.
Jul.
Jan.
Jan.
Jan.
Jul.
Jul.
Jan.
Jan.
Jul.
Jan.
Jul.
Jul.
2021
2022
2023
2024
2025
2025
2027
2028
2028
2029
2030
2021
2022
2023
2024
2026
2026
2027
2030
2029

Averageinterest 0.7%
rate

0.8%

0.9%

0.7%

0.5%

0.6% 0.7%

0.6%

30

2-27 MHR’s representative property (1) Roppongi Hills

Roppongi Hills Mori Tower
Since its opening in 2003 as Japan’s largest ever urban

Roppongi
Hills

redevelopment at about 11.6 hectares, more than 40 million

OfficeRoppongi Hills Mori Tower

people have visited Roppongi Hills each year from all over

Roppongi Hills Mori Tower is the main tower of Roppongi Hills and is 54 floors above

the world. As this community has matured, Roppongi Hills

ground and 238 meters high and has established itself as a landmark of Tokyo. Offices

has only multiplied its global magnetic attraction. Japan real

located from the 8th floor to the 48th floor boast floor plates of about 1,360 tsubo

estate development had been limited by an economic(about 4,500m²), among the largest floor areas of skyscrapers in Japan. It is a state-of-perspective until Mori Building revolutionized the concept by

the-art office building with an ultra high-speed network, outstanding earthquake

creating a community where humanity, culture, interaction

resistance performance and thorough security.

and vision toward the next era is born.

31

Residence

Roppongi Hills Residence

In Roppongi Hills where international cultural is fosteredand people come to interact, Mori Building designed
these residences with the comfort of the people as a toppriority, to provide the template for a “new life
overflowing with affluence and warmth”.

RetailShops and Restaurants

Retail facilities are comprised of more than 200 “onlyone” shops and restaurants divided into four areas withdifferent concepts. There are many shops on the lower
floors of the buildings and on the street so visitors canenjoy shopping, eating and drinking while walking
around the open spaces that are full of greenery.

Hotel

Grand Hyatt Tokyo

Grand Hyatt Tokyo offers a dynamic city space featuring
10 highly distinctive restaurants and bars, 387
guestrooms designed for the highest level of relaxation,
16 banquet facilities and much more. The wide range ofCinemaTOHO Cinemas Roppongi Hills

One of the top cinema complexes in Japan, TOHO offers ninemovie screens, a variety of daily show times and facilities

facilities inside the hotel and in Roppongi Hills enable
guests to enjoy leisurely time at the hotel to the fullest
extent.

with unprecedented comfort and functions. These theaters
ushered in a whole new culture of movie going in Roppongi.

Stable Supply of Power from the Independent Power Station
Roppongi Hills uses its own energy plant (a specially designated power

MuseumMori Art Museum“The world’s nearest art museum to the sky”, the museum
collaborates with a network of highly respected internationalart museums to create a space to appreciate the world’s top
modern art. It is open until 10 pm during exhibitions towelcome visitors after work or dinner.

supply business facility) to supply electrical power to the area. Because thisplant uses city gas (medium pressure gas) as the fuel, it is not affected bypower restrictions on the use of electricity and is able to provide an extremely
stable supply of electricity. The use of a power supply with triple redundantsafety allows the building to construct a power supply system with highreliability.

32

2-28 MHR’s representative property (2) Toranomon Hills

Toranomon Hills Mori Tower
Toranomon
Hills

Toranomon Hills is located in the “Special Zone for Asian
Headquarters” where Tokyo Metropolitan Government seeks toattract foreign companies. This building is Tokyo’s new landmark
and consists of Japan’s first Andaz hotel “Andaz Tokyo”, highspecification offices, a high class residential area with outstanding
views where hotel services are available, international-standard
conference facilities and commercial facilities to supports various
urban functions, along with an open space of about 6,000m².

OfficeToranomon Hills Mori Tower

Offices occupy the 6th to the 35th floors of “Toranomon Hills Mori Tower”, a super highrise tower with 52 floors rising 247 meters above ground with a gross floor area of
30,000 tsubo. Standard rent floors’ average size are about 1,000 tsubo (about 3,300m²)
with a ceiling height of 2.8 meters and they provide flexible and comfortable workspaces
without pillars. Six transit stations and 11 lines are nearby and provide access to Haneda
Airport which makes this building an optimal global business base.

33

Residence

Toranomon Hills Residence

Pleasing views of central Tokyo such as Tokyo Tower,
Rainbow Bridge, Tokyo Sky Tree and the open green
space of the Imperial Palace can be viewed fromresidences located on the 37th to 46th floors. Hotelservices in cooperation with Andaz Tokyo are available.

RetailShops and Restaurants

With the concept of "Communication Hub", restaurants
are designed to provide international cuisine that satisfy
customers from Japan and overseas. Various people suchas office workers, conference attendees and hotel guests
gather in this space uniquely designed to facilitatecommunication.

Hotel

Andaz Tokyo

Hyatt’s boutique lifestyle hotel "Andaz Tokyo" isJapan's first Andaz. Andaz means "personal style" in
Hindi. The hotel values the individuality of the area andincorporates the charm of the land into design and its’service.

Evolving as an International Urban Center and a Global
Business Hub
Upon completion of Toranomon Hills Business Tower, Toranomon Hills
Residential Tower and the currently planned Toranomon Hills Station Tower(Tentative name), the total area of the Toranomon Hills complex including
Toranomon Hills Mori Tower will reach about 7.5 hectares and about
800,000m2 of the total floor space. The area will evolve into a true
"international unban center and a global business hub" with integratedfunctions such as international standard offices, residences, hotels, retailfacilities and transportation infrastructure.

34

3. Operation highlights

35

3-1 Factors that led to changes in dividends per unit
from the previous fiscal period
27th period

29th period (Jan. 2021) Forecast

28th period (Jul. 2020)(yen/unit)

2,950

2,900

Dividends per unit

2,900
yen/unit

2,898
yen/unit

2,883
yen/unit＋5＋5(forecast)

＋32
△63

△30
＋13

＋79

2,850
△25

2,800

2,750

NOI
change ofexisting
properties

Financingcosts
decrease

Dilution
due to PO

OthersMajor factors behind change in NOI from existing properties:+ Full period contribution of rent revision of land (Laforet Harajuku)+ Increase in cancellation penalty－ Increase in property management fee－ Increase in maintenance and repairs－ Increase in property taxes－ Utilities and other revenue (net)－ Increase in depreciation

NOIchange ofexisting
properties

Properties
acquired(29th)

Financingcosts
decrease

OthersMajor factors behind change in NOI from existing properties:
+7
+7
△10
△10
△9
△7
△4

+ Utilities and other revenue (net)+ Decrease in depreciation－ Increase in property management fee－ Increase in property taxes－ Residential rent (Pass-Through)－ Decrease in cancellation penalty

+4
+4
△14
△8
△7
△5

(Note) Factors that led to change are arrived at by dividing the change from the previous fiscal period by 1,874,960 units for the 28th period (July 2020) and 1,916,330 units forthe 29th period (January 2021) indicated as an approximate figure in yen.

36

3-2 Change in assets under management(billion yen)

450
Existing properties

New property

402

billion yen

400

390

352

350

12

360

339

300

281

250

201

200

159
150

142

・・・

100

50

0
1st
period
Jan.
2007

2nd
period
Jul.
2007

3rd
period
Jan.
2008

4th
period
Jul.
2008

5th
period
Jan.
2009

・・・

18th
period
Jul.
2015

19th
period
Jan.
2016

20th
period
Jul.
2016

21st
period
Jan.
2017

22nd
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

25th
period
Jan.
2019

26th
period
Jul.
2019

27th
period
Jan.
2020

28th
period
Jul.
2020

After
acquisition37

3-3 Change in unrealized capital gain/loss(billion yen)

(%)

100

50
Unrealized capital gain/loss

Unrealized capital gain/loss ratio

90
81
78

80

bn yen

40

70

30

60

50
20.8% 21.0%

20.2%
40

20
28

30

20

8.2%

10

11
10

0

0

△10
△20

△14.9%△30△40

Unrealized capital gain/loss = Period end appraisal value – Period end book value
Unrealized capital gain/loss ratio = Unrealized capital gain/loss / Period end book value

△31

1st
period
Jan.
2007

2nd
period
Jul.
2007

3rd
period
Jan.
2008

4th
period
Jul.
2008

5th
period
Jan.
2009

6th
period
Jul.
2009

7th
period
Jan.
2010

8th
period
Jul.
2010

9th
period
Jan.
2011

10th
period
Jul.
2011

・・・

20th
period
Jul.
2016

21st
period
Jan.
2017

22nd
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

25th
period
Jan.
2019

26th
period
Jul.
2019

27th
period
Jan.
2020

28th
After
period acquisition
Jul.
2020

△10

△20

38

3-4 Appraisal value(million yen)
As of end of 27th period
Jan. 31, 2020
Principal
use

Property
name

PropertyNo.

Acquisition
price

Book
value

(A)
Appraisal
value(Note 1)

OfficeAs of end of 28th period
July 31, 2020

Yield (Direct
capitalization
method)(B)
Appraisal
value(Note 1)

Yield (Direct
capitalization
method)Discount
rate
(DCF)

Terminal
yield
(DCF)

Difference(B)－(A)

Difference(B)/(A)－1

Unrealized
capital gain(B)-book
value

Roppongi Hills
Mori Tower

O-0

115,380

111,663

148,100

2.9%

148,100

2.9%

2.6%

3.1%

0

0.0%

36,436

ARK Mori Building

O-1

62,48061,48863,7003.2%

63,700

3.2%

2.9%

3.4%

0

0.0%

2,211

Koraku Mori Building

O-4

27,20024,761

26,2003.4%

26,500

3.4%

3.0%

3.7%

300

1.1%

1,738

Akasaka Tameike Tower

O-6

43,93041,535

34,1003.2%

34,500

3.2%

2.9%

3.4%

400

1.2%

Atago Green Hills

O-7

42,09040,217

46,9003.4%

46,900

3.4%

2.9%

3.6%

0

0.0%

△ 7,035

ARK Hills South Tower

O-8

19,15018,704

25,1003.0%

25,200

3.0%

2.8%

3.2%

100

0.4%

6,495

Toranomon Hills
Mori Tower

O-9

36,21035,87244,8002.6%

44,800

2.6%

2.3%

2.8%

0

0.0%

8,927

Holland Hills Mori Tower

O-10

16,33016,27821,7003.2%

21,800

3.2%

2.8%

3.4%

100

0.5%

5,521

362,770

350,521410,600－

411,500

－

－

－

900

0.2%

60,978Sub total

6,682

Roppongi First Plaza

R-3

2,100

2,237

2,530

3.9%

2,530

3.9%

3.7%

4.1%

0

0.0%

292

ResidenRoppongi View Tower
tial

R-4

4,000

4,083

3,200

4.0%

3,260

4.0%

3.8%

4.2%

60

1.9%

6,100

6,321

5,730

－

5,790

－

－

－

60

1.0%

△ 823

21,82022,07440,4003.8%

40,600

－

3.8%

－

200

0.5%

18,525

21,82022,07440,400－40,600

－

－

－

200

0.5%

18,525

390,690378,917456,730－

457,890

－

－

－

1,160

0.3%

78,972Sub total
Laforet Harajuku (Land)
Retail (Note 2)andothers
Sub total
Total

S-1

△ 531

(Note 1) “Appraisal values” at the end of each fiscal period are based on the Ordinance Concerning Calculation of Investment Corporations, asset valuation methods and standards defined in the
Articles of Incorporation of the Company and rules defined by the Investment Trust Association. Figures in the property appraisal reports created by Japan Real Estate Institute areindicated for properties other than ARK Hills South Tower and figures in the property appraisal report created by Daiwa Real Estate Appraisal Co., Ltd. are indicated for ARK Hills South
Tower, respectively.
(Note 2) For Laforet Harajuku (Land), value in the “Yield (Direct capitalization method)” column for the 27th period shows the discount rate used in the DCF analysis.

393-5 Changes in the rent and occupancy rates(yen/tsubo)(%)

40,000100

35,00095

30,00090

25,00085

20,00080

15,00075

10,000

70

5,000

65

0

21st
periodJan. 2017(actual)

22nd
periodJul. 2017(actual)

23rd
periodJan. 2018(actual)24th
periodJul. 2018(actual)25th
periodJan. 2019(actual)

26th
periodJul. 2019(actual)27th
periodJan. 2020(actual)28th
periodJul. 2020(actual)29th
periodJan. 2021(forecast)

30th
periodJul. 2021(forecast)

Office rent (yen/tsubo)

31,281

31,06930,642

30,62930,84230,92431,02031,13931,32531,349Residential rent (yen/tsubo)

15,272

15,27814,85815,09515,302

15,49815,69815,766

15,721

15,650

Office occupancy

98.2%

95.7%

98.4%

99.5%

99.7%

99.9%

100%

99.7%

99.4%

99.6%

Residential occupancy

97.3%

96.7%

96.3%

97.9%

97.7%

96.8%

96.2%

96.1%

94.5%

95.4%

Retail occupancy

99.2%

99.7%

100%

100%

100%

99.2%

98.8%

98.5%

98.9%

98.9%

60

(Note) The above rents and occupancy rates indicate the average rent and the average occupancy rate during relevant fiscal periods.

40

3-6 Tenant status by month and major tenants
Office: Rent and occupancy rate

Residential: Rent and occupancy rate(yen/tsubo)
40,000(%)
100(yen/tsubo)
25,000(%)
100

20,00030,00090

90

15,00020,00080
10,000

80

5,000

0

70

Feb.
2020

Mar.

Apr.

May.

Jun.

Jul.

Rent (yen/tsubo)

31,021

31,084

31,10831,13031,152

31,339

Occupancy rate

99.9%

99.9%

99.9%

99.9%

99.9%

98.4%

Top 5 tenants
End tenantsMori Building Co., Ltd.

0

70

Feb.
2020

Mar.

Apr.

May.

Jun.

Jul.

Rent (yen/tsubo)

15,76915,66815,83015,771

15,82915,733

Occupancy rate

95.5%

96.6%

95.8%

95.8%

96.4%

96.2%

Tenant Contribution by Industry
Type-Office

Property nameLeased space(N ote 1 )Ratio

Roppongi Hills Mori Tower
ARK Mori Building
Koraku Mori Building
Atago Green Hills
ARK Hills South Tower
Toranomon Hills Mori Tower

109,845.73 m2

64.1%

Mylan Seiyaku Ltd.

Holland Hills Mori Tower

3,458.53 m2

2.0%

Mitsubishi UFJ Research andConsulting Co.,Ltd.

Holland Hills Mori Tower

3,436.90 m2

2.0%

Mori Building Ryutsu
System Co., Ltd.

Laforet Harajuku (Land)22,565.06 m

1.5%

ITOCHU Techno-Solutions
Corporation

Koraku Mori Building

2,116.88 m2

1.2%

121,423.10 m2

70.9%

Total of top 5 tenants

10,000(Note 1) Leased space is the lease area stated in the lease contract with the end tenant.
It is multiplied by the relevant percentage of ownership for each properties.
(Note 2) This indicates the figures as of July 31, 2020.

Others23.0%

Law firms,
etc.
11.6%

Information
andc ommunic ation
36.7%

Financ ial
institution/
Manufacturing
insuranc e
15.5%
13.3%

(Note 1) As for fixed rent master lease, ratios are based on monthly rents of tenants who are
actually using the floor areas as of July 31, 2020.
It is multiplied by the relevant percentage of ownership for each property.
(Note 2) Business types are classified by the Asset Manager.

41

3-7 Financial overview (as of July 31, 2020)
Long-term debt ratio/Fixed rate ratio＜Long-term debt ratio＞＜Fixed rate ratio＞

Long-termLong-term
100%
100%

Fixed
91.5%

Major financial indicator
End of 21st period
Jan. 31, 2017

Outstanding balances

End of 27th period
Jan. 31, 2020

End of 28th period
Jul. 31, 2020

Lenders

BalanceRatio

MUFG Bank, Ltd.

42,296 mn yen

26.1%

Mizuho Bank, Ltd.

28,498 mn yen

17.6%

Sumitomo Mitsui Banking Corporation

23,025 mn yen

14.2%

Sumitomo Mitsui Trust Bank, Limited

20,923 mn yen

12.9%

The Bank of Fukuoka

8,300 mn yen

5.1%

The Norinchukin Bank

7,000 mn yen

4.3%

Resona Bank, Limited.

6,430 mn yen

4.0%

Development Bank of Japan Inc.

5,950 mn yen

3.7%

Shinsei Bank, Limited

5,200 mn yen

3.2%

Mizuho Trust & Banking Co., Ltd.

4,800 mn yen

3.0%

The Nishi-Nippon City Bank, Ltd.

3,300 mn yen

2.0%

179,222 mn yen

179,222 mn yen

The Chugoku Bank, Limited.

1,500 mn yen

0.9%Long-term loan

157,222 mn yen

162,222 mn yen

Aozora Bank, Ltd.

1,000 mn yen

0.6%

Investment corporation bonds

22,000 mn yen

17,000 mn yen

The Hiroshima Bank, Ltd.

1,000 mn yen

0.6%

45.7%

45.7%

Oita Bank Co. Ltd.

1,000 mn yen

0.6%

38.2%

38.0%

Shinkin Central Bank

1,000 mn yen

0.6%

15.5x

16.0x

Nippon Life Insurance Company

1,000 mn yen

0.6%

4.6 years

4.7 years

0.49%

0.48%

Total borrowings

162,222 mn yen

100%

Investment c orporation bonds

17,000 mn yen

Total interest-bearing debt

179,222 mn yen

Debt balance

LTV (Book value basis)(Note 1)

LTV (Appraisal value basis)(Note 2)DSCR (Note 3)
Avg. remaining duration
Weighted avg. interest rate

(Note 1) LTV (Book value basis) is calculated as [Interest bearing debt/Total assets].
(Note 2) LTV (Appraisal value basis) is calculated as [Interest-bearing debt/Appraisal value
based total assets (Total assets ＋Total appraisal value－Total book value)].
(Note 3) DSCR is calculated as [Net income before interest expenses +Depreciation/
Interest expenses].

42

3-8 Debt status (as of July 31, 2020)
Debt
LenderSumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Development Bank of Japan Inc.
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd., MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
MUFG Bank, Ltd., Mizuho Bank, Ltd.,Sumitomo Mitsui
Trust Bank, Limited, Shinsei Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
The Norinchukin Bank, Resona Bank, Limited.
Shinsei Bank, Limited, Mizuho Trust & Banking Co., Ltd.
The Hiroshima Bank, Ltd.
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
The Bank of Fukuoka, Development Bank of Japan, Inc.
Aozora Bank, Ltd.
MUFG Bank, Ltd., Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Shinkin Central Bank
The Norinchukin Bank
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
The Bank of Fukuoka
Resona Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Oita Bank Co. Ltd.
The Norinchukin Bank
The Nishi-Nippon City Bank, Ltd.
The Bank of Fukuoka
Resona Bank, Limited.
Mizuho Trust & Banking Co., Ltd.
Shinsei Bank, Limited
The Nishi-Nippon City Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Development Bank of Japan Inc.
MUFG Bank, Ltd.
Mizuho Bank, Ltd.
Mizuho Bank, Ltd.
The Nishi-Nippon City Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
The Bank of Fukuoka
The Norinchukin Bank

Balance(mn yen)Rate ofinterest

Borrowingdate

Maturity
date

6,000

0.62%

2014/11/28

2020/11/30

6,500

0.75%

2014/11/28

2021/11/30

1,700

0.80%

2015/3/27

2023/3/27

6,500

0.57%

2015/5/29

2021/5/31

6,500

0.70%

2015/5/29

2022/5/31

6,000

0.49%

2015/8/31

2021/8/31

2,500

0.65%

2015/9/16

2023/8/31

3,200

0.50%

2015/11/30

2022/11/30

6,300

0.62%

2015/11/30

2023/11/30

7,500

0.33%

2016/3/31

2023/3/31

7,100

0.41%

2016/3/31

2024/3/31

7,200

0.50%

2016/3/31

2025/3/31

1,000
500
1,100
1,000
500
500
2,000
1,100
500
1,000
600
1,000
500
500
1,500
500
500
2,650
2,600
750
4,700
2,700
3,000
800
2,400
3,000
1,300
1,300

0.18%
0.37%
0.47%
0.52%
0.52%
0.61%
0.48%
0.58%
0.58%
0.23%
0.49%
0.49%
0.47%
0.47%
0.47%
0.54%
0.54%
0.55%
0.58%
0.64%
0.41%
0.60%
0.19%
0.26%
0.33%
0.43%
0.38%
0.43%

2016/3/31
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/11/30
2017/11/30
2017/11/30
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/5/23
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31

2022/9/30
2024/7/31
2025/7/31
2026/7/31
2026/7/31
2027/7/31
2028/7/31
2029/7/31
2029/7/31
2022/11/30
2024/11/30
2024/11/30
2025/8/31
2025/8/31
2025/8/31
2025/8/31
2025/8/31
2026/2/28
2027/2/28
2027/2/28
2027/8/31
2030/2/28
2022/5/23
2022/8/31
2023/8/31
2024/8/31
2024/8/31
2024/8/31

Lender
Shinsei Bank, Limited
Mizuho Trust & Banking Co., Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Development Bank of Japan Inc .
MUFG Bank, Ltd.
Resona Bank, Limited.
Mizuho Bank, Ltd.
The Bank of Fukuoka
The Norinchukin Bank
Sumitomo Mitsui Banking Corporation
MUFG Bank, Ltd.
Mizuho Bank, Ltd.
Mizuho Bank, Ltd.
The Chugoku Bank, Limited.
Resona Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited
The Norinchukin BankMUFG Bank, Ltd.
Mizuho Bank, Ltd.
Shinsei Bank, Limited
Sumitomo Mitsui Banking Corporation
The Bank of Fukuoka
Development Bank of Japan Inc .
The Chugoku Bank, Limited.
Shinsei Bank, Limited
Nippon Life Insuranc e Company
Mizuho Trust & Banking Co., Ltd.
The Bank of Fukuoka
The Nishi-Nippon City Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
MUFG Bank, Ltd.
Resona Bank, Limited.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Total

Balanc eRate of(mn yen) interest
1,300 0.52%
1,300 0.47%
3,600 0.56%
1,400 0.67%
500 0.67%
5,000 0.43%
1,300 0.48%
1,400 0.41%
2,000 0.17%
3,000 0.27%
1,144 0.40%
3,904 0.29%
1,952 0.41%
1,000 0.20%
1,000 0.22%
2,500 0.31%
1,000 0.14%
600 0.26%
2,200 0.19%
1,100 0.33%
900 0.36%
1,600 0.47%
2,000 0.26%
2,000 0.41%
500 0.32%
500 0.36%
1,000 0.48%
1,000 0.45%
1,000 0.29%
1,000 0.57%
834 0.27%
2,816 0.26%
830 0.30%
1,134 0.48%
1,408 0.40%

Borrowingdate
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2019/5/31
2019/5/31
2019/5/31
2019/5/31
2019/5/31
2019/8/30
2019/8/30
2019/8/30
2019/11/29
2019/11/29
2019/11/29
2019/11/29
2019/11/29
2019/11/29
2019/11/29
2019/11/29
2020/5/20
2020/5/20
2020/5/20
2020/5/20
2020/5/20
2020/5/20
2020/5/29
2020/5/29
2020/5/29
2020/5/29
2020/5/29

Maturitydate
2025/8/31
2025/8/31
2026/8/31
2027/8/31
2027/8/31
2028/2/29
2028/8/31
2029/8/31
2026/5/31
2026/5/31
2027/11/30
2028/11/30
2029/5/31
2025/8/31
2026/8/31
2029/8/31
2024/11/30
2026/5/31
2026/11/30
2027/5/31
2027/11/30
2028/5/31
2028/11/30
2028/11/30
2027/5/20
2028/5/20
2028/5/20
2029/5/20
2030/5/20
2030/5/20
2025/5/31
2027/5/31
2028/5/31
2028/11/30
2029/5/31

162,222(Note) The interest rates above are the interest rates actually fixed following the conclusion of an interest
swap agreement.

Investment corporation bonds
Bond
11th Series Unsecured Corporation Bond (7 years)
12th Series Unsecured Corporation Bond (10 years)
14th Series Unsecured Corporation Bond (10 years)
15th Series Unsecured Corporation Bond (5 years)
16th Series Unsecured Corporation Bond (10 years)
17th Series Unsecured Corporation Bond (10 years)
18th Series Unsecured Corporation Bond (10 years)
19th Series Unsecured Corporation Bond (10 years)
Total

AmountRate of(mn yen) Interest
2,000 0.69%
2,000 0.87%
2,000 0.82%
3,500 0.38%
1,500 0.89%
2,000 0.34%
2,000 0.49%
2,000 0.50%
17,000

Payment
date
2014/2/24
2014/11/27
2015/5/26
2015/11/26
2015/11/26
2016/8/30
2017/1/31
2017/6/30

Maturitydate
2021/2/24
2024/11/27
2025/5/26
2020/11/26
2025/11/26
2026/8/28
2027/1/29
2027/6/30

43

3-9 Unitholders breakdown (as of July 31, 2020)
Unitholders breakdown

End of 28th period＜Number of unitholders＞
Other domestic
Financialcorporations
institutions
1.7%
Foreign(Incl. securities
corporations
companies)
and individuals
1.4%
1.9%

＜Number of investment units＞

Foreigncorporations
and individuals
14.6%

Other domestic
Financialcorporations
institutions
1.6%
Foreign(Incl. securities
corporations
companies)
and individuals
1.5%
2.1%

Financial
institutions(Incl. securities
companies)
62.6%

Foreigncorporations
and individuals
17.7%

Individuals
94.8%

Number of units
held

1

Custody Bank of Japan, Ltd.
(Trust account)

437,247

23.3%

2

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

293,14215.6%

3

Mori Building Co., Ltd.

281,272

15.0%

4

The Nomura Trust & Banking Co., Ltd.
(Investment trust account)

85,241

4.5%

5

Custody Bank of Japan, Ltd.
(Securities investment trust account)

47,087

2.5%

6

STATE STREET BANK WEST CLIENT - TREATY
505234

21,749

1.2%

7

Custody Bank of Japan, Ltd.
(Money trust taxable account)

19,1591.0%

8JAPAN SECURITIES FINANCE CO., LTD.

17,3650.9%

9JP MORGAN CHASE BANK 385771

17,324

0.9%

10

The Gunma Bank,Ltd.

16,9860.9%

1,236,572

66.0%(Investment
trust 37.7%)

Individuals
5.8%

Other
domestic
corporations
17.1%

Financial
institutions(Incl. securities
companies)
59.4%

Name

Rank

Individuals
6.0%

Other
domestic
corporations
16.8%

Individuals
95.0%

End of 27th period

Top 10 unitholders

Total of top 10 unitholders

Ratio(Investment
trust 35.2%)

44

4. Business environment recognition & MHR’s policy/strategy

454-1 Business environment recognition
Real estate market / Lending attitude
Low vacancy rates bottomed out and turned upward, while therent increase trend moderated.
(Forecast of Office Market Trends Research Committee for Tokyo’s five
central wards)

Vacancy rate (forecast): 2.6% in 2020 → 2.6% in 2021
Rent index (forecast): 128 in 2020 → 128 in 2021
Cap rates have remained at historically low levels.
(Japan Real Estate Institute’s “The Japanese Real Estate Investor Survey”)

Class A buildings in Marunouchi
Cap rate: 3.0% in Oct. 2019 → 3.0% in Apr. 2020
Lending attitude toward the real estate industry continues tobe highly positive.

We believe that the proliferation of telecommuting will not
impact office demand for premium properties in central Tokyoand that these properties will continue to be competitive.
While office demand may decline to a certain extend due to adownturn in business sentiment in the future, rent trends will
depend on vacancy rates.

Interest rate trends / Macro environmentLong-term interest rates remain low due to the monetaryeasing policy and the core CPI rate of increase is at a low level.
10-year bond rates: 0.045% (August 31, 2020)
Core CPI: +0.0% (July 2020)
In the June 2020 preliminary business conditions composite
index, the leading index was at 84.4 (+6.1 PT increase from previous
month) and the coincident index was at 76.6 (+3.7 PT increase fromprevious month).
After the spread of COVID-19, both leading and coincidental
indices have deteriorated significantly. Statistical surveys showthat the issue of wage increase persists.
Investors across the world have become more interested in
ESG and the amount of funds directed to companies with high
ESG evaluation is on the rise.

Global business sentiment has deteriorated significantly due
to COVID-19.
The interest rate level is expected to remain low for a while,
but it is necessary to assume an interest rate rise in themedium to long term.
Inflow of funds to companies with high ESG ratings is
expected to increase further in the future.

Continues to “MHR’s policy/strategy” on the next page46

4-2 MHR’s policy/strategy

MHR’s Medium- to Long-Term Vision

The best portfolio
quality

The highest ESG
assessment

Dividend-driven
Management

By focusing primarily on
premium properties in central
Tokyo developed by thesponsor, MHR seeks tomaintain a highly competitive
portfolio quality while further
expanding the scale of theportfolio.

By making positive socialand environmental
contributions, MHR will
position itself to benefit tofrom the long-term trend offunds flowing into companies
with high ESG ratings andbuild competitiveness as aninvestment corporation.

By aiming for a continuous
improvement of dividends
and NAV per unit, anddeveloping the culture,policies and systems
necessary to realize thevision, MHR will continue tofoster the trust of unitholders.

Optimal REIT investment47

4-3 MHR’s policy/strategy
External
growth policy

Target premium properties in Central Tokyo and aim for annual external growth of approximately 30 billion
yen by best utilizing sponsors’ pipeline. (Set target yield at the mid 3% range or higher for NOI-based yield
and around 3.0% or higher for after-depreciation-based yield.)
We believe that the proliferation of telecommuting will not impact office demand for premium properties incentral Tokyo and that these properties will remain competitive.
Focus on portfolio size expansion in order to further enhance stability and liquidity as an investment
corporation while also considering disposition depending on conditions.

Internal
growth policy

Maintain stable revenue through fixed-rent master leases, and aim to continually maintain and improve rent
levels at pass-through-type properties.

Financialmanagement
policySet the current LTV level (book value basis: in the mid 40% range; appraisal value basis: in the upper 30%
range) as the target in order to secure property acquisition capacity while maintaining a durable position fortimes of economic slowdown.

Properly implement office property repairs as necessary and conduct value-enhancement renovation forresidential properties if such is judged to be cost-effective (there are no office properties that require largescale renewal in terms of building age or competitiveness).

Target average remaining duration of debt of 4 years or longer, and gradually increase the fixed rate ratio at
the appropriate timing.

ESG policy

Contribute to the improvement of various social and environmental issues by positioning ESG initiatives as anintegral part of management policy, and steadily implement them in actual management operations leading to
improved ESG ratings and stronger competitiveness.
Implement proactive information disclosure through publication of ESG reports organizing various policies andefforts.

48

4-4 Market-related information (1)Change in rent and vacancy rate of office buildings (Tokyo’s five central wards)
(%)

200

10.0
8.9% 9.0%

180

160

8.7%

9.0

⇒ Estimate

8.1%

8.0

7.3%

7.0

6.1%
145

5.5%

149

4.2%

140

6.0
4.0%

124

3.6%
3.1%

4.7%

120
2.9%
109

100

114

2.6%

101

100
92

80

92

95

99

104

109

120

125

114

128

128

2.6% 2.6%

128

5.0
127 125124

3.3% 3.3%
3.1%
2.8%

1.9% 1.8%

4.0
3.0
2.0
1.0

Rent index
Vacancy rate
(Source)
Prepared by the Asset Manager based on the“Autumn 2019 Office Rent Forecast in Tokyo,
Osaka and Nagoya (2019-2025)” by the OfficeMarket Trends Research Committee(Japan Real Estate Institute and Miki Shoji Co.,
Ltd.).
(Note)The rent index targets large and medium
buildings (standard floor area of 100 tsubo ormore) in Tokyo’s five central wards. The rent
index is rebased to 100 as of 2010.

0.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

New supply of office buildings (Tokyo’s five central wards)(thousand tsubo)

700⇒ Estimate

600
500

540

530
478

473

460

400

361

343
294

300
221

265

245

220

254

260

250

239

(Source)
Prepared by the Asset Manager based on the“Autumn 2019 Office Rent Forecast in Tokyo,
Osaka and Nagoya (2019-2025)” by
the Office Market Trends Research Committee(Japan Real Estate Institute and Miki Shoji
Co., Ltd.).

170

200
100
0
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

49

4-5 Market-related information (2)Change in rents and vacancy rates of luxury housing (Minato ward)(yen tsubo)(%)

24,00014.0

22,000

12.0

Minato ward’s averagevacancy rate over past
10 years: 7.4%

20,00010.0

18,0008.0

16,000

6.0

5.1%
4.1%

12,00010,000

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

18,7504.0
19,24014,000

19

20
1H

2.0
0.0

Avg. rents of Minato ward
Avg. vacancy rates of Minato ward
(Source)
Prepared by the Asset Manager based on Ken Real
Estate Investment Advisors’ “Ken Residential
Market Report” included in real estate appraisal
reports by Japan Real Estate Institute regarding
properties held by MHR.
(Note)
Data is based on rental housing with monthly rentof 300,000 yen or more or exclusive floor area of
30 tsubo or more.
“Avg. rents of Minato ward” is the contracted rent
excluding the management fee.
In the case of years, “Avg. vacancy rates of
Minato ward” is the average of the relevant year’s
January to March, April to June, July to September
and October to December figures, and “Avg. rentsof Minato ward” is the annual average.

Change in number of foreign residents in Minato ward
(people)24,000No. of foreigners registered under the
Ministry of Justice

Method for foreigner
registration was revised in2012 impacting head count

22,000The population of the Basic Resident Register(Source)
Prepared by the Asset Manager based on “Numberof registered foreign residents” prepared by
Statistics Division Bureau of General Affairs of Tokyo.

20,000(Note 1)
“Number of foreign residents” was the number offoreigners registered under the Ministry of Justiceuntil 2012. However, as the foreigner registration
system was abolished based on revision of the law,
the figure is the population of the Basic Resident
Register. Therefore, the data may not be consistent.

18,00019,98816,00014,000
03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20
01

20
04

(Note 2)
Number of foreign residents as of January 1 of eachyear is used for the year-based figures.

20
07

50

4-6 Market-related information (3)Change in return on real estate investment
(%)
6.5
6.0

6.0%

6.0%

6.0%

6.0%

5.7%

5.5

5.5%
5.2%

5.0%

5.1%
4.9%

4.9%

5.0
4.5%

4.5%

4.5%

4.5%

4.5%

4.2%

4.2% 4.2%

4.2%

4.5
4.0% 4.0%
4.0

Cap rate of class
A office buildings(Marunouchi and Otemachi)

5.8%

4.0%

3.8%

4.0%

3.8%

3.5

4.6%

4.5%

4.3%

4.0%

4.3%

4.8%

4.5%

Expected cap rate of high-end
multifamily residences (high-rise)

3.7%

3.6%

3.5% 3.5% 3.5%

3.8%
3.5%

3.5%

3.5%

3.0

3.4%
3.2%

3.0%

3.0%

3.0%

2.5
Apr.
2005

Expected cap rate of class
A office buildings(Marunouchi and Otemachi)

Apr.
2006

Apr.
2007

Apr.
2008

Apr.
2009

Apr.
2010

Apr.
2011

Apr.
2012

Apr.
2013

Apr.
2014

Apr.
2015

Change in real estate transaction amount

Apr.
2016

Apr.
2017

Apr.
2018

Apr.
2019

(Source)
Prepared by the Asset Manager based on“The Japanese Real Estate Investor Survey” by theJapan Real Estate Institute.

Apr.
2020

Lending attitude DI (Real estate industry)(billion yen)

6,000

+ 25
+ 20

5,000

+ 15
+ 10

4,000

+5

3,000

△5

+0
△ 10

2,000

△ 15
△ 20

1,000

△ 25

0
FY
04

FY
05

FY
06

FY
07

FY
08

FY
09

FY
10

FY
11

FY
12

FY
13

FY
14

FY
15

FY
16

FY
17

FY
18

FY
19

(Source) Prepared by the Asset Manager based on the “Real Estate Transaction Survey”(Estimated amount of domestic real estate transactions publicized by listedcompanies) by the Urban Research Institute.

△ 30
△ 35

Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20(Source) Prepared by the Asset Manager based on “National Short-Term Economic
Survey on Enterprises in Japan” by the Bank of Japan. Difference between
the proportion of firms feeling the lending attitude to be accommodative
less firms feeling the lending attitude to be restrictive.

51

4-7 Market-related information (4)Change in 10-year bond interest rates
(%)

1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
△ 0.1

(Source)
Prepared by the Asset Manager based on
Refinitiv.

△ 0.2
△ 0.3
△ 0.4

Jan.
2013

Jul.

Jan.
2014

Jan.
2015

Jul.

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

Jan.
2020

Jul.

Change in core CPI (Year-on-year comparison)
(%)

+ 2.0

Based on figures excluding thedirect effects of theconsumption tax rate increase

+ 1.5

+ 1.0

(Source)
Prepared by the Asset Manager based on“Consumer Price Index” by Statistic Bureau,
Ministry of Internal Affairs and Communicationsand “Economic Statistics Monthly” by the Bankof Japan.

+ 0.5

+ 0.0

(Note)
Figures from April 2014 to April 2015 arederived on “the basis of excluding the direct
impact of the consumption tax rate increase”(Bank of Japan’s “Economic Statistics Monthly”).

△ 0.5
△ 1.0

Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

Jan.
2020

Jul.

52

4-8 Market-related information (5)Business conditions composite index
110
105
100
95

Leading index

90

Coincident index

85(Source)
Prepared by the Asset Manager based on the“Business Conditions Composite Index” by
the Cabinet Office.

80
75(Note)The index is rebased to 100 as of 2015.

70
Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

Jan.
2020

Jul.

Money stock (M3: year-on-year comparison)
(%)
+6.6

+6.0
+5.4
+4.8
+4.2
+3.6
+3.0
(Source)
Prepared by the Asset Manager based on“Money Stock Statistics” by the Bank of Japan.

+2.4
+1.8
Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

Jan.
2020

Jul

53

4-9 Market-related information (6)Total cash earnings (Year-on-year comparison)
(%)

+ 4.0
+ 3.0
+ 2.0
+ 1.0
+ 0.0
Nominal

△ 1.0

Real

△ 2.0

(Source)
Prepared by the Asset Manager based on“Monthly Labour Survey (establishments with 5
or more employees)” by the Ministry of Health,Labour and Welfare.

△ 3.0
△ 4.0
△ 5.0

Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

Jan.
2020

Jul.

Consumer confidence survey
52
47
42
37

Employment

32

Consumer confidence index
27

Income growth22(Source)
Prepared by the Asset Manager based on“Consumer Confidence Survey” by the Cabinet
Office.

17
12
Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

Jan.
2020

Jul.

54

5. Appendix

55

5-1 Financial highlights
Indices

27th period
Period ended Jan. 31, 2020

28th period
Period ended Jul. 31, 2020

Net inc ome

5,406 mn yen

5,433 mn yen

Depreciation and amortization

1,034 mn yen

1,041 mn yen

CAPEX

149 mn yen

732 mn yen

Total assets

392,217 mn yen

392,258 mn yen

Total net assets

195,459 mn yen

195,503 mn yen

Calculation formula

Total net assets/unit (BPS)

104,247 yen

104,270 yen Total net assets/Total units outstanding

Unit price (as of end of each period)

181,700 yen

137,100 yen

1,874,960 units

1,874,960 units

5,405 mn yen

5,433 mn yen

Dividends/unit

2,883 yen

2,898 yen

Dividend yield

3.1%

Total units outstanding
Total dividends

FFO

6,440 mn yen

4.2% Dividends per unit (annualized)/Unit price as of end of period
6,474 mn yen Net income + Depreciation and amortization - Gain or loss on sales of real estate properties

FFO/unit

3,435 yen

3,453 yen FFO/Total units outstanding

Annualized

6,814 yen

6,925 yen Based on a period of 365 days

FFO multiple

26.7x

19.8x Unit price as of end of period/FFO per unit (annualized)

PER

31.8x

23.6x Unit price as of end of period/Net income per unit (average during the periods, annualized)

PBR

1.7x

1.3x Unit price as of end of period/Net assets per unit

ROA

1.4%

1.4% Ordinary income/Average of total assets during the period

2.7%

2.8% Based on a period of 365 days

2.8%

2.8% Net income/Average of total net assets during the period

5.5%

5.6% Based on a period of 365 days

Annualized
ROE
Annualized
NAV
NAV/unit
NAV multiple

272,963 mn yen
145,583 yen
1.2x

274,476 mn yen Total assets + Total appraisal value - Total book value - Total liabilities
146,390 yen
0.9x Unit price as of end of period/NAV per unit

Interest-bearing debt

179,222 mn yen

LTV (book value basis)

45.7%

45.7% Interest-bearing debt/Total assets

LTV (appraisal value basis)

38.2%

38.0% Interest-bearing debt/(Total assets + Total appraisal value - Total book value)

Operating days

184 days

179,222 mn yen

182 days56

5-2 Balance sheet(thousand yen)(thousand yen)

27th period

28th period

27th period

28th period

Period ended Jan. 31, 2020

Period ended Jul. 31, 2020

Period ended Jan. 31, 2020

Period ended Jul. 31, 2020

23,586,464

19,940,732

8,500,000

5,500,000

13,022,000

12,500,000

2,064,464

1,940,732

173,171,584

176,813,975

13,500,000

11,500,000

144,200,000

149,722,000

14,727,643

14,856,183

743,940

735,791

196,758,048

196,754,707

196,184,506

196,212,731

AssetsLiabilities

Current assets

11,875,571

12,270,828

C ash and deposits

5,646,194

6,575,310

C ash and deposits in trust

5,461,338

4,984,129

768,037

711,388

380,257,896

379,918,648

348,575,213

348,266,097

30,650,962

30,650,962

Other

Nonc urrent assets
Property, plant and equipment
Intangible assets
Investments and other assets

Deferred assets
Total assets

1,031,720

1,001,587

84,503

68,529392,217,971

392,258,006

Current liabilities
C urrent portion of investment
corporation bonds
C urrent portion of long-termloans payable
Other

Noncurrent liabilities
Investment corporation bonds
Long-term loans payable
Lease and guarantee depositedin trust
Other

Total liabilities
Net assets
Unitholders' equity
Unitholders' capital,net
Total surplus(Note)

189,991,366(Note)

190,051,613

6,193,140

6,161,117

291,944

291,9445,901,196

5,869,173△ 724,583

Total net assets△ 724,583△ 709,432

195,459,922

195,503,298

Total liabilities and net assets

392,217,971

392,258,006

Voluntary retained earnings
Unappropriated retained
earnings

Valuation and translation
adjustments

Deferred gains or losses onhedges△ 709,432(Note) Figure after deducting allowance for temporary difference adjustments.

57

5-3 Income statement(thousand yen)

27th period

28th period

Period ended Jan. 31, 2020

Period ended Jul. 31, 2020

Operating revenue

9,631,462

9,602,257

Rent revenues

9,377,544

9,389,038

253,917

213,218

3,605,057

3,573,365

3,224,074

3,251,861

Asset management fee

266,704

224,815

Directors' compensation

4,200

4,200

Asset custody fee

9,806

9,805

Administrative service fees

18,79918,528Other operating expenses

81,47364,155

6,026,404

6,028,891

1,079

1,428

44

48

1,035

1,379

619,654595,654

Interest expenses

377,420

370,700

Interest expenses on investment corporation bonds

67,75561,175Am ortiza tion of inve stm e nt corpora tion bonds issua nce cost

9,909

9,022

155,732

145,882

Amortization of investment unit issuance cost

6,952

6,952

Other

1,885

1,922

Ordinary inc ome

5,407,830

5,434,665

Income before income taxes

5,407,830

5,434,665

Net inc ome

5,406,483

5,433,733

Unappropriated retained earnings

5,901,196

5,869,173

Other operating revenues
Operating expenses
Expenses related to properties

Operating income
Non-operating income
Interest inc ome
Gain on forfeiture of unc laimed dividends
Non-operating expenses

Borrowing expenses

OfficeResidential
RetailLand
Other rent revenue

Parking revenue
Utilities and other revenue
Cancellation penalty
Key money

Property management fees
Property taxes
Utilities
Maintenance and repairs
Insurance premium
Custodian fees
Depreciation
Rent expenses
Other lease business expenses

7,858,977
782,985
73,390667,800
5,884

53,667145,224
13,797529

1,122,870
725,205
115,650
79,29817,3135,950
1,041,061
129,153
15,35858

5-4 Statement of cash flows / Retained earnings
Statement of cash flows

Net c ash provided by (used in) operating ac tivities(thousand yen)(thousand yen)

27th period

28th period

27th period

28th period

Period ended Jan. 31, 2020

Period ended Jul. 31, 2020

Period ended Jan. 31, 2020

Period ended Jul. 31, 2020

Net c ash provided by (used in) financing activities

6,240,351

6,452,555

Inc ome before inc ome taxes

5,407,830

5,434,665

Proc eeds from long-term loans payable

Depreciation and amortization

Repayments of long-term loans payable

1,034,455

1,041,061

Amortization of investment corporation bonds
issuance c ost

9,909

9,022

Amortization of investment unit issuanc e cost

6,952

6,952

Interest inc ome
Gain on forfeiture of unc laimed dividends

△ 44

△ 48

Interest expenses△ 1,035

445,175△ 1,379

Decrease (increase) in accounts rec eivable

40,50541,003

Inc rease (decrease) in acc rued expenses△ 237,457△ 65,325

Inc rease (decrease) in advances received

1,697△ 46,766

Decrease (increase) in prepaid expenses

7,564△ 10,545
53,595△ 40,881△ 7,666

Inc rease (decrease) in acc ounts payable

Other, net
SubtotalInterest inc ome rec eived
Interest expenses paid
Inc ome taxes paid

12,285

6,686,957

431,875

6,886,443

4448△ 445,198△ 432,597△ 1,452△ 1,339

Redemption of investment corporation bonds
Dividends paid
Net increase (decrease) in cash and c ash
equivalents
Cash and c ash equivalents at beginning of theperiodCash and c ash equivalents at the end of theperiodPurchase of property, plant and equipment in
trust
Repayments of lease and guarantee depositedin trust
Proceeds from lease and guarantee deposited intrust△ 10,461△ 595,774△ 26,233△ 117,924△ 205,905
221,677△ 693,420
215,570

15,900,000△ 5,404,873△ 15,900,000－△ 7,022,000△ 5,341,870
888,019△ 5,404,873

10,219,514

11,107,533

11,107,533

11,559,439

12,022,000△ 5,000,000
451,906

Retained earnings

Ⅰ Unappropriated retained earnings
Ⅱ Capitalization
Reversal of allowance for temporary
differenc e adjustments
Ⅲ Amount of Dividends
Amount of dividends per unit
Dividends of earnings
Dividends of earnings per unit

Net c ash provided by (used in) investing activities△ 5,341,870

Allowanc e for temporary differenc e adjustments(yen)
27th period

28th period

Period ended Jan. 31, 2020

Period ended Jul. 31, 2020

5,901,196,611

5,869,173,511

60,247,403

15,151,632

60,247,403

15,151,632

5,405,509,680

5,433,634,080

2,883

2,898

5,405,509,680

5,433,634,080

2,883

2,898

－

－

－

－

435,439,528

420,387,799

Dividends in exc ess of earnings per unit
(allowanc e for temporary difference
adjustments)
Ⅳ Retained earnings c arried forward59

5-5 Status of income and expenditures (1)(thousand yen)P rope rty num ber

O -0

O -1

O -4

O -6

P rope rty na m e

Roppongi Hills Mori Towe r

ARK Mori Building

Korak u Mori Building

Ak asa k a Tam eik e Towe r

Acquisition price

115,380,000
27th

28th

Ja n. 2020

Jul. 2020

O pe ra tion da ys

184 da ys

182 days

O ccupa ncy ra te

100%

100%

Avg. O ccupancy rate
(during pe riod)100%

Num ber of te na nts

1

P e riod

Re nt re ve nue s

62,480,000
27th

28th

Ja n. 2020

Jul. 2020△ 2 da ys

184 da ys

182 da ys

0.0P T

100%

100%

100%

0.0P T

100%

1

0

1

Differe nce

27,200,000
27th

28th

Jan. 2020

Jul. 2020△ 2 da ys

184 da ys

182 da ys

0.0P T

99.4%

86.1%

100%

0.0P T

99.4%

1

0

Differe nce

43,930,000
27th

28th

Jan. 2020

Jul. 2020△ 2 da ys

184 da ys

182 da ys

96.7%

95.7%

96.9%

△ 13.3P T

97.6%

96.4%

22

22

△ 2.5P T
0

138

135

△ 10,653

783,923

791,134

86,447

78,130870,370869,264△ 8,316
1,176

Differe nce

Differe nce△ 2 da ys△ 1.0PT△ 1.2PT△3

2,943,450

2,943,450－

1,351,486

1,351,486－

654,930

644,277

－

－

－

－

－

－

97,21773,7502,943,450

2,943,450－

1,351,486

1,351,486－

752,147

718,027△ 23,466

436,029447,868

11,838

165,834

164,853

61,67968,962

7,282

166,546

167,722△ 1,105

247,825

255,651

7,826

83,506

84,237△ 980△ 34,119730

30,71632,972

2,255

42,28243,804

1,522

－

－

－

－

－

－

74,14654,72030,92926,743

－

－

－

－

355

355

9,819

31,736△ 19,426

21,916

34,461

29,026△ 4,186

4,094

4,050

1,933

1,912

1,661

2,068

5,794

65,771

66,946

1,174

96,31897,657

△ 18

2,091

332,052

△ 21

1,679

326,258

△ 44

1,338

141,676

135,262

558

376

3,322

2,789

83,97120

10,853

10,624

1,039,999

25,232

320,368

321,094△ 532

83,951

1,014,766

△ 182

726

358,312371,681

13,368428,841

415,253

1,928,684

1,903,451

1,031,118

1,030,392

346,346

454,0112,235,503

1,096,890

1,097,338

448

490,153444,003583,205589,2746,068

Annua lize d NO I

4,473,119

4,483,290△ 19,438△ 47,488

441,5292,254,942△ 726

393,835

NO I (3) ((1)+(2))△ 25,232△ 13,588

10,171

2,175,896

2,200,706

24,810972,315

890,446

1,181,786

24,8833.9%

3.9%

0.0P T

3.5%

3.5%

0.0P T

3.6%

3.3%△ 81,869

1,156,902

Annua lize d NO I/
Acquisition price

2.6%

2.7%

0.1PT

－

272,162

272,162

36,27136,507236

13,642

149,962

136,320

22,512

42,051

19,5392,254,942

1,963,341△ 291,600

1,060,619

1,060,830

211

476,511

294,040△ 182,471

560,693547,222△ 13,470

O the r ope rating
reve nue s
Tota l property
ope rating re ve nue
P rope rty
m a na gem ent
P rope rty tax e s(Note 1)

Utilitie s
Maintena nce a nd
repairs
Insura nce
pre m ium
De pre cia tion (1)O the r e xpe nse s(Note 2)

Tota l property
ope rating ex penses
P roperty ope rating
incom e (2)CAP EX (4)NCF (3)-(4)△ 46,150△ 0.3P T

7,210△ 5,434△ 23△ 6,413△ 229

12,482(Note 1) For property tax, city planning tax and depreciable assets tax, MHR charges the amount of property taxes assessed and determined applicable to the fiscal period to expenses related to properties. Registeredowners of properties in Japan as of January 1 are responsible for paying property taxes for the calendar year based on assessments by local governments. Therefore, registered owners who sold properties to
MHR were liable for property taxes for the calendar year, including the period from the date of the acquisition by MHR until the end of the year. MHR reimbursed sellers of properties for the equivalent amount ofproperty taxes and included the amount in the acquisition cost of real estate.
(Note 2) “Other expenses” denotes the sum of custodian fees, rent expenses, and other lease business expenses (residential property management costs, and other property-related miscellaneous expenses) in aggregate.

605-6 Status of income and expenditures (2)(thousand yen)P rope rty num ber

O -7

O -8

O -9

O -10

P rope rty na m e

Ata go Gree n Hills

ARK Hills South Tower

Tora nom on Hills Mori Towe r

Holla nd Hills Mori Tower

Acquisition price

42,090,000
27th

28th

Ja n. 2020

Jul. 2020

O pe ra tion da ys

184 da ys

182 days

O ccupa ncy ra te

100%

100%

Avg. O ccupancy rate
(during pe riod)100%

Num ber of te na nts

1

P e riod

Re nt re ve nue s

19,150,000
27th

28th

Ja n. 2020

Jul. 2020△ 2 da ys

184 da ys

182 da ys

0.0P T

100%

100%

100%

0.0P T

100%

99.8%

1

0

43

44

Differe nce

36,210,000
27th

28th

Jan. 2020

Jul. 2020△ 2 da ys

184 da ys

182 da ys

0.0P T100%

100%△ 0.2P T

100%

116,330,000
27th

28th

Jan. 2020

Jul. 2020△ 2 da ys

184 da ys

182 da ys

0.0P T

100%

100%

100%

0.0P T

99.7%

99.4%

1

1

0

23

23

△ 4,162775,581775,581－

529,958

530,636

678

－

－

－

36,01334,819775,581775,581－565,972

565,456△ 1,194

89,28688,742

104,494

106,416

△ 515

1,922

Differe nce

Differe nce

Differe nce△ 2 da ys
0.0P T△ 0.3PT0

1,012,320

1,012,320－

487,104

482,942－－－

33,84926,5181,012,320

1,012,320－

520,953

509,460

2,664

2,664

－

49,82047,605△ 11,493

68,953

69,230277

34,79835,944

1,145

59,60060,874

△ 544
1,273

35,56935,604

35

－

－

－

35,934

26,486

－

－

－

9,203

5,380

－

－

－

4,419

2,346

△ 9,447

－

－

－

7,090

1,308

3,667

3,627

1,030

1,018

1,319

1,305

1,098

3,835

44,21944,245

25

101,038

101,038

△ 13

1,110

185,657△ 11△ 5,782

181,821△ 39△ 2,073△ 3,822－47,35649,4772,121

44,27445,765

1,491

1,494

2,235

741

71

71

0

209

210

1

301,380

306,945

5,564

171,717

159,882

251,315

252,031715

205,034

199,496

710,939705,374

349,236

349,578341

524,265

523,549

360,938

365,959

892,761

891,032

393,456

393,823367

625,303

624,588415,4377,142

1,770,967

1,786,961

15,994780,497789,8119,314

1,240,412

1,252,607△ 715

408,294

Annua lize d NO I

△ 1,728△ 715△ 5,537

NO I (3) ((1)+(2))△ 5,564△ 11,835

12,195809,931

833,156

23,225

Annua lize d NO I/
Acquisition price

4.2%

4.2%

0.0P T

4.1%

4.1%

0.1P T

3.4%

3.5%

0.0P T

5.0%

5.1%

0.1PT

CAP EX (4)31,468144,950

113,482

3,106

149

－

－

－

5,124

66,56461,439NCF (3)-(4)861,293746,081△ 115,211

390,349

393,674△ 2,957

625,303

624,588△ 715

403,169

348,872△ 54,296

O the r ope rating
reve nue s
Tota l property
ope rating re ve nue
P rope rty
m a na gem ent
P rope rty tax e s(Note 1)

Utilitie s
Maintena nce a nd
repairs
Insura nce
pre m ium
De pre cia tion (1)O the r e xpe nse s(Note 2)

Tota l property
ope rating ex penses
P roperty ope rating
incom e (2)△ 7,330△ 2,215

3,325

△ 12

5,021

61

5-7 Status of income and expenditures (3)(thousand yen)P rope rty num ber

R-3

R-4

S-1

P rope rty na m e

Roppongi First P la za

R oppongi View Tower

La foret Hara juk u (La nd)

Acquisition price4,000,000

2,100,000
27th

28th

Ja n. 2020

Jul. 2020

Jan. 2020

Jul. 2020

O pe ra tion da ys

184 da ys

182 days

O ccupa ncy ra te

82.0%

94.6%

△ 2 da ys

184 da ys

182 da ys

0.0P T

99.2%

98.1%

Avg. O ccupancy rate
(during pe riod)

100%

0.0P T

99.3%

99.0%

△ 1.1PT

87.0%

Num ber of te na nts

1

1

0

356

359

3

3,843

655,000

667,800

12,8009,377,544

9,389,038

11,493

△ 390

－

－

－

253,917

213,218

3,453

655,000

667,800

12,8009,631,462

9,602,257△ 40,698－－－

1,104,176

1,122,870

18,693

12,387△ 587△ 29,204341

82,22686,3394,113

705,466

725,205

19,738

1,050

1,087

36

－

－

－

152,625

115,650

8,625

1,218

2,208

990

－

－

－

60,70079,298△ 36,975

△2

344

340

－

－

－

17,503

17,313

17,82917,318－－－1,034,455

1,041,061

8

590

588

△ 511

△ 190

3,830

△ 759

△3

－

－

－

149,146

150,462

1,316

42,28951,051

8,761

47,821

48,086△1

264

82,22686,3394,113

3,224,074

3,251,861

27,78637,34930,36456,71759,905

3,188

572,774

581,461

8,687

6,407,387

6,350,396

NO I (3) ((1)+(2))

49,514

41,770△ 6,985

74,546

77,224

2,677

572,774

581,461

8,687

7,441,842

7,391,457△ 56,991

Annua lize d NO I

98,222

83,769147,878

154,873

6,994

1,136,209

1,166,116

29,907

14,762,351

14,823,527

61,175

Annua lize d NO I/
Acquisition price

4.7%

4.0%

△ 14,452△ 50,385

3.7%

3.9%

0.2P T

5.2%

5.3%

0.1P T

3.8%

3.8%

0.0PT

CAP EX (4)7,410

13,6896,278

29,783

6,629

－

－

－

149,319732,668

583,349

NCF (3)-(4)42,10328,080△ 14,023

44,76370,594△ 23,153

572,774

581,461

8,687

7,292,523

6,658,788△ 633,734

O the r ope rating
reve nue s
Tota l property
ope rating re ve nue
P rope rty
m a na gem ent
P rope rty tax e s(Note 1)

Utilitie s
Maintena nce a nd
repairs
Insura nce
pre m ium
De pre cia tion (1)O the r e xpe nse s(Note 2)

Tota l property
ope rating ex penses
P roperty ope rating
incom e (2)

27th

28th

Ja n. 2020

Jul. 2020

Jan. 2020

Jul. 2020△ 2 da ys

184 da ys

182 da ys

12.6P T

98.1%

98.1%

△ 2 da ys

184 da ys

182 da ys

0.0P T

100%

100%

90.7%

3.7P T

95.0%

97.0%

2.0P T

100%

35

40

5

90

90

0

79,63981,416

1,776

104,148

107,992

－

－

－

390

－

79,63981,416

1,776

104,538

107,992

13,08013,880800

14,741

14,153

7,941

8,159

217

12,046

1,360

1,231

3,690

12,316

△ 129

230

228

12,164

11,405

3,821

390,690,000
28th

Re nt re ve nue s

28th

21,820,000
27th

P e riod

27th

P ortfolio tota lDiffere nce△ 7,744△ 0.7P T

Differe nce

25,831

Differe nce

Differe nce△ 2 da ys△ 0.3PT

18,5976,606

62

5-8 Unit price performance since IPO
Relative price performance (Since IPO - July 31, 2020)
200

Performance since listing180(At listing vs. July 31, 2020)■ MHR:△8.6%■ TSE REIT Index: △9.4%

160
140
120
100
80
60
40
20
0

Jul. 31,
Nov. 30, Jul. 31,
Jul. 31,
Jul. 31,
Jul. 31,
2010
2006
2009
2008
2007
2011
(Source) Prepared by the Asset Manager based on Refinitiv.
(Note)
Rebased to 100 as per IPO priceJul. 31,
2012

Jul. 31,
2013

Jul. 31,
2014

Jul. 31,
2015

Jul. 31,
2016

Jul. 31,2017

Jul. 31,2018

Jul. 31,
2019

Jul. 31,2020

Unit price per period-end (Closing price)
Accounting period

Unit price

Accounting period

Unit price

Accounting period

Unit price

1st (January 2007)

1,100,000 yen

11th (January 2012)

252,200 yen

21st (January 2017)

153,500 yen

2nd (July 2007)

1,080,000 yen

12th (July 2012)

330,500 yen

22nd (July 2017)

138,900 yen

3rd (January 2008)

716,000 yen

13th (January 2013)

485,000 yen

23rd (January 2018)

137,100 yen

4th (July 2008)

465,000 yen

14th (July 2013)

548,000 yen

24th (July 2018)

138,100 yen

5th (January 2009)

265,000 yen

15th (January 2014)

135,900 yen

25th (January 2019)

144,500 yen

6th (July 2009)

352,000 yen

16th (July 2014)

151,100 yen

26th (July 2019)

160,300 yen

7th (January 2010)

264,900 yen

17th (January 2015)

166,600 yen

27th (January 2020)

181,700 yen

8th (July 2010)

177,300 yen

18th (July 2015)

145,300 yen

28th (July 2020)

137,100 yen

9th (January 2011)

281,000 yen

19th (January 2016)

152,100 yen

10th (July 2011)

258,100 yen

20th (July 2016)

160,500 yen(Reference)
IPO Price(November 30, 2006)(Split adjusted)High(May 8, 2007: in trade)

750,000 yen(150,000 yen)

1,460,000 yen(Split adjusted)(292,000 yen)(August 12, 2010: in trade)

168,200 yen(Split adjusted)(33,640 yen)

Low

(Note) Implemented a 5-for-1 investment unit split on February 1, 2014 (effective date).

63

5-9 Investment criteria
Investments focusing on Premium Properties for development of urban-type portfolio
Investments focusing on Premium Properties
Among properties that are located in Tokyo’s five central wards and in surrounding areas,
our investments mainly focus on “Premium Properties” that are able to maintain theircompetitiveness going forward based on their quality, size and specification.
Focus onPremium Properties

Premium properties

50% or more

Office building

Premium Properties
Type

Location

Scale

Gross floor area of 10,000㎡ ormore per buildingStandard leasable floor area of
1,000㎡ or more

Officebuildings

Tokyo's five central wards
and their vincity

Residential
properties

Tokyo's five central wards
Gross floor area of 2,000㎡ or
and their vincity
more per building(Primarily in the "three-A" area)〈Office buildings〉〈Residential properties〉〈Retail facilities〉

Office building foc us〈Department stores, downtown shopping centers,
large specialty stores & retail complexes, etc.〉

Flourishing areas of Tokyo's five Gross floor area of 10,000㎡ or
central wards and their vincity
more per-building
Retail facilities

50% or more

Tokyo' five central wards
foc usTokyo's five central
wards and their vincity

50% or more(Tokyo Metropolitan Area:
80% or more)〈Street front luxury brand shops, etc.〉

Exclusive, well-known
retail destinations such as
Ginza area, Aoyama area, andOmotesando area

Gross floor area of 1,000㎡ ormore per building(Note 1)

Tokyo’s five central wards： Minato, Chiyoda, Chuo, Shinjuku and Shibuya ward

(Note 2)Three-A area： Akasaka and Roppongi area, Aoyama and Harajuku area and Azabu and Hiroo area

(Note 3)

Ratios are based on the acquisition prices(Note 4)

Tokyo Metropolitan Area： Tokyo Metropolis, Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture

Earthquake-resistance foc us

Investment focused on
properties' earthquake
resistance, the safety of thearea, disastercountermeasures, etc.

645-10 Sustainability initiatives
Approach and System of Sustainability
Mori Hills REIT Investment Corporation (MHR) and Mori Building Investment Management Co., Ltd. (MIM) aim to contribute to
the creation and development of cities by providing investment opportunities in high-quality urban assets to investors, as statedin the Basic Policy of MHR and Company Mission of MIM.
MHR and MIM aim to contribute to the realization of a sustainable society and maximization of unitholder value in the medium tolong term by emphasizing ESG (Environment, Social and Governance) and investing in high-quality urban assets while striving
to improve various environmental and social performance levels.

Sustainability Promotion System
Operations connected to sustainability will be promoted primarily by the Sustainability Committee established by MIM.
The Chairperson of the Committee shall be the President & CEO while all directors and some administration staff shall comprisethe committeepersons. Various initiatives will be implemented based on the Sustainability Promotion Program which isestablished every fiscal year.
In principle, the Committee shall meet four times a year and shall formulate policies and the Sustainability Promotion Program,monitor progress of programs, deliberate various suggestions from departments, etc. in light of social conditions and theoperating status of MHR. The President & CEO approves the policies and promotion programs, constantly monitors the thoroughpromotion of sustainability, and establishes and maintains a sustainability promotion structure as a responsible party inpromoting sustainability.
Moreover, sustainability-related efforts shall be reported on periodically to the Board of Directors of both MHR and MIM. Each
Board oversees the status of initiatives for important issues related to ESG and the status of compliance and risk management.

Initiatives Throughout the Entire Supply Chain
Promotion of sustainability operations, whether environmental or social, requires initiatives that involve the whole supply chain.
We believe that joint initiatives with various stakeholders with aligned values are necessary.
By actively stimulating interactive communication with stakeholders such as tenants, local residents, property managementcompanies and our sponsor Mori Building that provides the property pipeline, and aligning our values, we aim to contribute to
the realization of a sustainable society.
655-11 Sustainability initiatives: Environment＜Green Building Certification and External
Assessment＞〇 Promotion of Energy-conservation〇 Green Building Certified Properties
Property Name

Type of Assessment

RatingRoppongi Hills Mori Tower

Rank S

ARK Mori Building

Rank SCASBEE for
Existing Buildings

Koraku Mori Building

Rank A

Atago Green Hills MORI Tower

Rank S
DBJ Green Building
Certification

Toranomon Hills Mori Tower
Holland Hills Mori Tower

CASBEE for
Existing Buildings

MHR promotes energy-conservation through initiatives such as
replacement of LED lighting in common areas and repair work of
air-conditioning. MHR also makes active efforts to reduce
environmental loads through proper separation and disposal ofwaste.

(Roppongi View Tower: Renovation of common area with LED lighting)

Rank A

Akasaka Tameike Tower

ARK Hills South Tower＜Reduction of Environmental Loads＞

4 stars
Rank S
Rank S(Certificates Coverage Ratio)
Certified Properties

Portfolio Data

Ratio

In acquisition price355.9 bn yen

381.0 bn yen

93.4%

In leasable floor area

147,736 ㎡

176,280 ㎡

83.8%

In number of properties

8 properties

10 properties

80.0%※ Excluding Laforet Harajuku (Land)○ GRESB Real Estate Rating
In the 2019 GRESB Survey, MHR received a“Green Star” rating for the eighthconsecutive year, and received “4 Stars” in
the GRESB Rating.

〇 Collaborating with Tenants

MHR holds an “environmental countermeasure council”
once or twice a year depending on the office building. The council
generates a report on the efforts to improve sustainability andraises awareness for power saving methods.
MHR also promotes environmental initiatives by communicatingwith tenants. MHR provides “WEB cloud services” as a tool tomake tenants’ energy usage visible, and offers helpful measures
for tenants’ energy conservation.
In addition to these efforts, MHR is further deepening
relationships with tenants by introducing “green leases” which
serve to align financial incentives and secure commitments fromboth parties. MHR is gradually expanding this approach since theintroduction of the first green lease in ARK Hills South Tower.

66

5-12 Sustainability initiatives: Social＜Initiatives with Employees＞＜Initiatives with Tenants and Local Communities＞〇 Talent Development〇 Tenant Satisfaction Surveys

MHR conducts “tenant satisfaction surveys” once every two
To cultivate human resources with flexible thinking and highyears in office buildings and once a year in most residential
ethical standards together with a high degree of expertise,properties.
mainly in real estate and finance, MHR introduces essential
The survey content starts with general matters such as location
knowledge and skills through on-the-job-training (OJT) andand image and extends to matters related to facilities and otherconventional training to improve staff effectiveness, to clarify
hard aspects as well as soft aspects such as managementcompany issues and to constantly improve management
systems. The thoughts of the tenants are used as a reference inmethods. MHR conducts a semi-annual staff assessment
our property management.
program - "Personnel Assessment and Feedback" as a corecomponent of our talent development strategy.
〇 Local Communities
MHR also subsidizes the expense for acquiring licenses and
MHR aims to foster a rich environment for the local community
qualifications by public and private organizations necessary
through various communication activities. In MHR’s properties
for work to improve employees' skills as professionals in thesuch as Roppongi Hills and ARK Hills, events and activities arereal estate fund business.
held like the “Hills Marche” and “Hills Machi-Iku Project” inwhich local people can participate.

(Qualifications held by employees as of the end of August 2020)
・ ARES Certified Master: 8
・ Real Estate Appraiser: 2
・ Real Estate Transaction Agent: 8
・ Certified Building Administrator: 2・ Certified Public Accountant: 3
・ Chartered Member of Securities Analysts Association of Japan: 1〇 Employee Stock Ownership Plan (ESOP)MHR established the "ESOP" by aligning interests of MHR’s
investors and MIM’s employees aiming to improve
unitholders' value over the medium to long term, and to
improve welfare benefits for MIM’s employees.

〇 Promoting Women’s Participation＜Initiatives with Investors＞

MHR is aiming for a workplace environment where each
employee can fully demonstrate their individuality andabilities and MHR is working on creating a pleasant working
environment for women. A child-care leave system andflexible working hours are provided and MHR promotes active
use of a short-time work system and paid holidays.

〇 All Japanese Listed Companies'
Website Ranking

Nikko Investor Relations Co., Ltd. announces
a valuation of websites of all listedcompanies by investigating the degree of
information disclosure based on objective
evaluation items from its unique perspective.
MHR’s website has received “Total Ranking:
The Best Site" for the fifth consecutive
year.

67

5-13 Sustainability initiatives: Governance＜Corporate Governance＞

MHR shall have at least one executive director and at least two
supervisory directors (or, at least one more than the number ofthe executive directors), and the board of directors shall becomprised of the executive directors and supervisory directors.
In addition to a general meeting of all unitholders, MHR’s
governance structure consists of one executive director, two
supervisory directors, the board of directors and an accounting
auditor, and entrusts its operation to the asset managementcompany.
MIM is required to perform its business operations in good faithand with due care of a prudent manager for MHR in line withthe purpose of the investment management business, andaccordingly performs conscientious asset investment andmanagement pertaining to real estate properties based on an
appropriate compliance structure and internal control structure
in order for MHR to gain high trust from the securities market
and investors.
(MIM’s organization)＜Compliance＞
The Compliance Department conducts inspections on legal

compliance and confirms consistency with internal rules. MIM
confirms whether there are any conflict of interest transactions withrelated parties. In this way, MIM is striving to ensurecomprehensive internal control, while also striving to enhance its
risk management structure as well as its effectiveness.
Furthermore, MIM has a set of internal rules (self-imposed
regulations) which stipulate rules such as its Related Parties
Transaction Guidelines. These Guidelines stipulate mattersconcerning transactions, etc. with related parties. Through MIM’scompliance with these Guidelines, MIM has established a structure
which ensures that the aforementioned transactions are managed
appropriately and that MIM sufficiently executes the duty of care ofa good manager and duty of loyalty to MHR.
(Process to counter transactions involving conflicts of interest)
Approved by MHR's Board of Directors

General Meeting of
Shareholders(In case of an acquisition fromany related party)

Corporate Auditor

President & CEO

Investment
Committee

Investment
Dept.

Asset
Management
Dept.

Complianc e
Committee

Financial
Dept.

Acc ounting
Dept.

Administration
Dept.

Compliance
Dept.

Reject or pass back the proposal

Board of Directors

Deliberation and resolution at MIM's Board of Direc tors (Note)

Deliberation and resolution at the Compliance Committee

Deliberation and resolution at the Investment Committee

Review by the Compliance Officer

Selection of investment grade properties and preparation of an
original proposal by the Investment Department(Note) A director who is classified as a related party officer is not able to participate in the resolution
when acquiring an asset from a related party.

685-14 Portfolio map (as of September 1, 2020)

MHR (Note 1)
In Operation(注4)

MB Group (Note 2)(注5)

Planning / Under Construction(Source) Prepared by the Asset Manager based on Mori Building’s “Mori Building Handy Map Mori Building Map/Home Route Support Map 2020.”(Note 1) Some of the properties have been partially acquired and held by MHR.
(Note 2) Properties are developed, owned, managed and planned for development by Mori Building Group, and there are no properties currently anticipated to be acquired by MHR.

69

5-15 Portfolio overview (as of September 1, 2020)
Type

Office building
Roppongi
Hills
Mori Tow er

ARKMori Building

O-0

O-1

O-4

Premium

Premium

Premium

Location

Roppongi,
Minato-ku,
TokyoAkasaka,Minato-ku,
TokyoCompletion

Apr. 2003

Building age

17 years
5 months

Total number offloorsGross floor area

Property name

Office building (Partly residential)
Atago Green Hills

RetailRoppongi
First
Plaza

Roppongi
View
Tow erLaforet
Harajuku(Land)

O-7

R-3

R-4

S-1

Premium

Premium-

Premium

Toranomon,
Minato-ku,
TokyoRoppongi,
Minato-ku, Tokyo

Jingumae,
Shibuya-ku,
Tokyo

Oct. 2001

Jul. 2001

Oct. 1993−

19 years
1 month

18 years
10 months

19 year1 month

26 years 10 months−

25 aboveground,2 below

42 aboveground,2 below

43 aboveground,4 below

2 aboveground,1 below

20 above ground,
1 below−

approx.
46,971㎡

approx.
85,266㎡

approx.
60,815㎡

approx.
2,083㎡

approx.
22,906㎡−

Toranomon
Hills Mori
Tower

Holland Hills
Mori Tow er

AkasakaTameikeTow er

O-8

O-9

O-10

O-6

Premium

Premium

Premium

Premium

Premium

Koraku,Bunkyo-ku,
TokyoRoppongi,
Minato-ku,
Tokyo

Toranomon,
Minato-ku,
Tokyo

Toranomon,
Minato-ku,
TokyoAkasaka,Minato-ku,
TokyoMar. 2000

Jul. 2013

May. 2014

Jan. 2005

Sep. 2000

Jul. 2001

34 years
5 months

20 years
5 months

7 years
1 month

6 years
3 months

15 years
7 months

19 years
11 months

54 aboveground,6 below

37 aboveground,4 below

19 aboveground,6 below

20 aboveground,4 below

52 aboveground,5 below

24 aboveground,2 below

approx.
442,150㎡

approx.
177,486㎡

approx.
46,154㎡

approx.
53,043㎡

approx.
241,581㎡

approx.
35,076㎡

Koraku Mori
ARK Hills
Building
South Tow er

Residential

MORI Tower Forest Tower

Plaza

Photo

Ownership(Note 1)Land

Building

PML (Note 2)
Earthquakeresistant feature(Note 3)Acquisition price(mn yen)Occupancy rate
(Note 4)Mar. 1986(Large-scalerenovation in 2005)

C o- owners hip
C o- owners hip(approx. 1 7 .7 % ) (approx.1 0 .9 % )L eas edCompartmentalizedCompartmentalizedCompartmentalized

ownershipownershipownership(approx. 1 3 .6 % ) (approx. 1 7 .9 % ) (approx. 5 7 .9 % )C o- owners hip(2 5 % )Atago,
Minato-ku, Tokyo

C o- owners hip
C o- owners hip
C o- owners hip(approx. 1 7 .0 % ) (approx. 6 2 .9 % ) (approx. 5 6 .4 % )C o- owners hip

C o- owners hip(2 5 % )(approx. 9 .3 % )CompartmentalizedCompartmentalized

ownershipownership

C o- owners hip

C o- owners hip

C o- owners hip(approx. 2 8 .8 % )(4 7 % )(4 6 % )CompartmentalizedCompartmentalized

ownershipownership

C o- owners hip(approx. 3 2 .9 % )(approx. 4 8 .5 % ) (approx. 6 5 .5 % )O wners hip−(approx. 4 6 .4 % ) (approx. 4 4 .7 % )

0.59%

0.78%

0.73%

1.56%

0.50%

0.85%

1.79%

2.35%

2.34%

5.94%

2.20%

2.20%

−

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

−

−

−

−

115,380

62,48027,20019,15048,43016,33043,93042,090

2,100

4,000

21,820

100%

100%

86.1%

100%

100%

100%

95.7%

100%

94.6%

98.1%

100%

Average building age
19.0 years (Note 5)

Portfolio PML
0.91% (Note 2)

Total acquisition price402,910 mn yen

705-15 Portfolio overview (Note)(Note 1) “Type of ownership” denotes the type of rights held by MHR or the Trustee. “Ownership” stands for ownership, “Co-ownership” stands for the ownership of beneficiary interests,“Compartmentalized ownership” denotes ownership and the rights for exclusive use in or over parts of a building, and “Leased land” denotes Leasehold land. The land site of Atago
Green Hills includes joint ownership in quasi-undivided interests of leasehold land and easement.
(Note 2) This indicates the figure described in the “Report on evaluation of seismic PML for portfolio” dated July 13, 2020 by Sompo Risk Management Inc.
(Note 3) ARK Mori Building adopts “slitwall” as an earthquake-resistant feature.
(Note 4) “Occupancy rate” indicates the figures as of July 31, 2020.
(Note 5) For calculation of the “Average building age” of Atago Green Hills, we have assumed that construction of the building was completed on July 30, 2001.

71