Fiscal Results Briefing
6th Fiscal Period Ended October 31, 20170Disclaimer
This document is provided for information purposes only and is not a solicitation for investment, nor a recommendation or invitation to enter into specifictransactions. We caution readers to undertake investment decisions of their own volition.
This document is not a disclosure document or report based upon the Financial Instruments and Exchange Act, the Act on Investment Trusts and Investment
Corporations, public listing regulations of the Tokyo Stock Exchange or other related laws or regulations in Japan.
This document includes charts, data and other information prepared by Sekisui House Investment Advisors, Ltd. (the “Asset Management Company”) based ondata, indices and other information disclosed by third parties, in addition to statements related to Sekisui House Reit, Inc. (the “Investment Corporation”).
Statements on analysis, judgments and other opinions concerning those charts, data and other information of the Investment Corporation or the AssetManagement Company as of the date of this document are also included.
This document is prepared based on accounting policies generally accepted in Japan, unless otherwise specified.
The contents of this document have not been audited and their accuracy and completeness are not guaranteed. Analysis, judgments and other opinions of theInvestment Corporation or the Asset Management Company only reflect the views of the Investment Corporation or the Asset Management Company as of thedate of the document. Therefore, other views and opinions may exist and the Investment Corporation or the Asset Management Company may change its views in
the future.
The figures under the same item of other disclosed materials may differ from figures presented in this document due to different rounding of fractions and the like.
This document includes forward-looking statements with respect to the future performance, plans, managerial goals and strategies of the Investment Corporation.
These statements are based on assumptions of future events or trends of the business environment and there is no assurance that these assumptions are correct.
The actual results may differ significantly due to various factors.
While the Investment Corporation takes reasonable care in the preparation of this document, it does not guarantee the accuracy and completeness of its content.
Readers are also cautioned that the contents of this document may be changed or deleted without prior notice.
The Investment Corporation or the Asset Management Company accepts no responsibility for the accuracy of data, indices and other information disclosed bythird parties.
For the convenience of preparing graphs, the dates indicated herein may differ from actual business dates.
Making a copy of, or appropriation of, the content contained herein without prior permission is prohibited.
This English language document was prepared solely for the convenience of, and reference by, overseas investors. The Investment Corporation gives nowarranties as to its accuracy or completeness.
The material containing the information required under Article 23 (1) and (2) of the AIFMD is available at http://sekisuihouse-reit.co.jp/en/ir/library.html.

Inquiries
Asset Management Company: Sekisui House Investment Advisors, Ltd.
Financial Instruments Business Operator: Director-General of the Kanto Finance Bureau (Kinsho) No. 2791
TEL +81-3-6447-4870（main）

1

Contents

Appendix

About Sekisui House Reit, Inc.
・Executive Summary

3・Balance Sheet

24

・Growth Strategies Utilizing Sekisui House’s Support

5・Statement of Income and Retained Earnings

25

・Management Performance since IPO

7・Entire Portfolio (as of October 31, 2017)26

・Financial Results and Forecast

8・Overview of Third follow-on Public Offering

27

・Portfolio Summary (as of December 14, 2017)9・Overview of Appraisal

28

・Outline of Portfolio

10・Types of Lease Agreement

29

・Portfolio Map and Growth Potential of the Area

12・Structure of SHR

30

・External Growth

13

・Governance System

31

・Internal Growth

14・Asset Management Company (as of December 14, 2017)32

・Financial Results

15

・Unitholders Composition

33

・Interest-Bearing Liabilities (as of December 14, 2017)16

・Change in Unit Price

34

・Strategy for Future Growth19

・Our Growth Strategies

20・CSR and Environmental Activities

21

・ESG initiatives of Sekisui House

22

2

Executive Summary
Characteristics of Sekisui House Reit, Inc. (“SHR”)
Characteristic 1

 SHR’s sponsor is Sekisui House, Ltd. (“Sekisui House”), one of

the leading homebuilders in Japan.

Current AUM(aggregate acquisition price)200.7 billion yen
Characteristic 2

 SHR is a diversified REIT focusing mainly on office buildings,

retail properties and hotels (“Commercial Properties”).

 Investing in Commercial Properties located in major

metropolitan areas; Greater Tokyo (55.3%), the Osaka area
(41.5%) and the Nagoya area (3.2%) (acquisition price basis).

Current Portfolio (asset type)

Office buildings 91.4%
Hotels 8.6%
Current Portfolio(area)

Tokyo, Osaka & Nagoya
100% Investing in Prime Properties featuring “strategic locations” andCurrent Portfolio(features)“high quality”.
 All 6 properties have been recently built and 5 properties have arating of 4 or 5 Stars under the DBJ Green Building Certification
system.
Characteristic 3

Prime Properties
100% Strong relationships with major domestic financial institutions.

Current LTV

40.7%(Note) Money amounts less than the indicated figures are rounded down and percentage figures are rounded to the nearest first decimal place otherwise indicated in this document. The same shall apply hereinafter.
(Note) The figures are as of December 14, 2017.

3

Executive Summary
Profile of Sekisui House Reit, Inc.
Corporate Profile
Trade name
Asset management company
Sponsor

JPY 59.6 bil JPY 51.5 bil JPY 23.1 bil JPY 55.8 bil JPY 4.4 bil JPY 6.35 bil/NAGOYA/OSAKA/OSAKA/TOKYO/TOKYO/OSAKA

Owned Assets
Aggregate acquisition price
Number of properties

JPY 200. 7bil
6 properties

Distributions
Fiscal period ends
Actual for 6th fiscal period
Forecast for 7th fiscal period
Forecast for 8th fiscal period

April and October of each year
JPY 2,710 per unit
JPY 2,700 per unit
JPY 2,680 per unit

Financial information
Total interest-bearing liabilities
Unitholders’ capital
Number of investment units
issued and outstanding
Long-term issuer rating

Sekisui House is also the mainsponsor of
Sekisui House Residential
Investment Corporation

Sekisui House Reit, Inc. (securities code: 3309)
Sekisui House Investment Advisors, Ltd.
Sekisui House, Ltd.

2,477

2,663

2,596

2,710

2,700

2,680

3rd FP DPU 4th FP DPU 5th FP DPU 6th FP DPU 7th FP DPU 8th FP DPU(actual)(actual)(actual)(actual)(forecast) (forecast)Highlight■Around a 1.8-fold expansion of asset size from the time of IPO■Achieved the target of 200 billion yen in asset size in around 2.5 years since IPO

JPY 84.4 bil
JPY 110.1 bil(billion yen)around200

969,000 units
AA- (stable) [JCR]

100

114.3
bil

2.5 years
200.7
bil

0
IPO

(Note) The figures are as of December 14, 2017.

4

after 3rd follow-on PO

Growth Strategies Utilizing Sekisui House’s Support
Strength and Track Record of Sekisui House’s Development Business Sekisui House’s Corporate Profile and Business Strategies
About Sekisui House

Priority strategies for each business modelSekisui House’s Corporate Profile (As of July 31, 2017)
Corporation Name : Sekisui House, Ltd.
Date of Establishment : August 1, 1960
Capital Stock : 202,591.20 million yen
Cumulative Number of Houses Built : 2,357,644 houses[Built-to-Order Business]
Promote stable growth and work to create quality housing stock by supplying high-valueadded houses.
[Supplied Housing Business]
Develop business for the purpose of increasing the asset value of quality housing stock
created by the Built-to-Order Business.

How Sekisui House became involved in the field of J-REIT
Since 2005, Sekisui House entered the J-REIT field by acquiring an[Development Business]
Promote the creation of quality towns through the environment creation-oriented
development and promote stable growth by increasing the asset turnover ratio.

equity stake in Japan Excellent Asset Management Co., Ltd., the asset
manager for Japan Excellent Inc.（The capital ties have dissolved already.）

In 2010, Sekisui House acquired 75% of Joint Capital Partners Co., Ltd.,the asset manager of Joint Reit Investment Corporation, now known as
Sekisui House Residential Investment Corporation.

[Overseas Business]
Provide Sekisuihouse Quality globally based on the environmental technologies cultivatedin Japan.

 Commitment of properties by Sekisui House Group to its
sponsored J-REITs (as of December 14, 2017)

 Sekisui House’s Consolidated Financial Statements FY2016(16/2-17/1)

Collaboration with our J-REIT platform within Sekisui House’s Development Businesshas become significantly more important.

Net Sales
2,026.9(billion yen)

OthersAsset Type

Number of Properties (Note)

Transaction Price

Total Assets

2,184.8 billion yen

Office8 properties

235.0 billion yen

Net Sales

2,026.9 billion yen

55 properties

103.6 billion yen

Operating Income

184.1 billion yen

63 properties

338.6 billion yen

Net Income

121.8 billion yen(2007-2017)

Residential(2010-2017)

Total(2007-2017)(Note) 2 office properties have been acquired by Japan Excellent, Inc. and 55 residential properties have beenacquired by Sekisui House Residential Investment Corporation.

5

520.7
Development Business
602.6(including overseas business)

Supplied Housing
Business
823.4

Built-to Order BusinessOutline of Asset Management Operation
6

Garden City Shinagawa Gotenyama

Management Performance since IPO
 Steady External Growth and Increase in Unitholder Value

additional additional
portionportionadditional
portion(billion yen)

3rd follow-on PO(2 properties)
21.2 billion yen

2nd follow-on PO
IPO

1st follow-on PO(3 properties)
114.3 billion yen(1 property)
38.6 billion yen(3 properties)
26.6 billion yen

179.5 bil

200

152.9
150

114.3

152.9

bil

6 properties
200.7 billion yen

179.5 bil

49.0%

bil

47.0%

bil

45.0%
43.0%

100

41.0%
50

42.5％

39.0%

41.0％

40.9％

40.8％

40.8％

40.7％

0

35.0%

End of 1st FP(as of Apr. 30, 2015)

End of 2nd FP(as of Oct. 31, 2015)

End of 3rd FP(as of Apr. 30, 2016)

End of 4ｔｈ FP(as of Oct. 31, 2016)

End of 5th FP(as of Apr. 30, 2017)

End of 6ｔｈ FP(as of Oct. 31, 2017)

Unrealized
Gain (Note1)

5.9 billion yen

11.9 billion yen

17.8 billion yen

24.1 billion yen

27.7 billion yen

35.0 billion yen

Total Market
Value（Note2）

89.6 billion yen

99.0 billion yen

100.2 billion yen

126.6 billion yen

127.2 billion yen

121.9 billion yen

1st FP (actual)

2nd FP (actual)

3rd FP (actual)

4th FP (actual)

5th FP (actual)

6th FP (actual)

1,603 yen

2,458 yen

2,477 yen

2,596 yen

2,663 yen

2,710 yen

Distribution
per unit

Growth of Distribution per unit
by follow-on POs

Initial Forecast
2,201 yen
Increase of 11.7 ％from initial forecast

Initial Forecast
2,410 yen
Increase of 7.7％ from initial forecast(Note1) The sum of differences between the book values and appraisal values at the end of each FP are calculated and indicated for the asset held as of the end of each FP.
(Note2) Total market value as of the end of each FP is calculated based on unit price as of the end of each FP respectively.

7

37.0%

7th FP(forecast)

8th FP(forecast)

2,700

2,680

yen

yen

Initial Forecast
2,590 yen
Increase of 4.6％ from initial forecast

Financial Results and Forecast Results and Forecast
Actual Results of
3rd FP（as of Apr. 30, 2016)

Actual Results of
4th FP（as of Oct. 31, 2016)

Actual Results of
5th FP（as of Apr. 30, 2017)

Actual Results of
6th FP（as of Oct. 31, 2017)

Forecast of
7th FP（as of Apr. 30, 2018)

Forecast of
8th FP（as of Oct. 31, 2018)

182 days

184 days

181 days

184 days

181 days

184 days

Operating
Revenue

3,467 million
yen4,059 million
yen

4,144 million
yen

4,580 million
yen4,646 million
yen4,655 million
yen

Operating Income

2,278 million
yen2,664 million
yen

2,704 million
yen2,987 million
yen2,992 million
yen

2,968 million
yen

Ordinary Income

1,967 millionyen2,321 million
yen

2,381 million
yen2,626 million
yen2,617 million
yen2,597 million
yen

Net Income

1,966 million
yen

2,320 million
yen

2,380 million
yen2,625 million
yen2,616 million
yen2,596 million
yen

Distribution Per
Unit (DPU)

2,477 yen

2,596 yen

2,663 yen

2,710 yen

2,700 yen

2,680 yen

Forecast of 7th FP（as of Apr. 30, 2018)

Forecast of 8th FP（as of Oct. 31, 2018)

Days of Operation

 Results of NOI Forecast of NOI yield
Actual Results of 6th FP（as of Oct. 31, 2017）
Actual Results

Yield (Note)

NOI4,132 million
yen

4.2 %

NOI
(after depreciation)

3,402 million
yen

3.4 %

(Note) Yield is calculated by dividing annualized NOI and NOI (after depreciation) by total acquisition price of the current portfolio.

8

NOI yield

4.1 %

4.1 %

NOI yield(after depreciation)

3.4 %

3.4 %

Portfolio Summary（as of December 14, 2017）
 Portfolio Highlight
Asset Size（aggregate acquisition price）（Note 2）233.0 billion yen

6 properties Occupancy Rate
91.4 ％
3 major metropolitan
Location
areas
Ratio
8.6 ％
(acquisition
price basis)
Greater Tokyo
6.9 years

100.0 ％

Acquisition
Price (JPY)

Appraisal
Value (JPY)

Investment
Ratio

Total Leasable
Area

Building
Age

55.6 bil－

27.7％

29,235.95 ㎡

4.0bil－2.0％

2,000.39 ㎡

59.6 bil

71.0 bil

29.7％

31,236.34 ㎡（Note 1）

Number of Properties
Asset Type Ratio

200.7 billion yen Total Appraisal Value

Office buildings

100.0 ％

（Note 2）

HotelsAverage Building Age（Note 2）

55.3 ％

 Portfolio Description
No.

Property Name
Acquired portion

Ｊ-1

Garden City
Shinagawa
Gotenyama

Additional acquisition
portionNEW
Subtotal

Occupancy
Rate

Area

100%

6.8 years

Tokyo

Ｊ-2

Gotenyama SH Building

51.5 bil

58.5 bil

25.7％

19,999.97 ㎡

100%

6.9 years

Tokyo

Ｊ-3

Hommachi Minami Garden City

23.1 bil

28.6bil

11.5％

16,699.46 ㎡

100%

6.8 years

Osaka

Office building portion

38.6 bil

44.6 bil

19.2％

17,006.94 ㎡

Hotel portion

17.2 bil

17.7 bil

8.6％

18,092.98 ㎡

100%

7.6 years

Osaka

Subtotal

55.8 bil

62.3 bil

27.8％

35,099.92 ㎡

Ｊ-5

HK Yodoyabashi Garden Avenue

4.4 bil

5.57 bil

2.2％

4,554.52 ㎡

100%

2.4 years

Osaka

Ｊ-6

Hirokoji Garden Avenue

6.35 bil

7.11 bil

3.2％

4,442.75 ㎡

100%

6.8 years

NagoyaＪ-4

Hommachi
Garden City

NEW

(Note 1) Total appraisal value is the sum of appraisal values stated in the appraisal reports as of the end of 6th FP.
(Note 2) Asset type ratio and location ratio are calculated by dividing the sum of acquisition prices of assets for each asset type or area by the total acquisition price, rounded to the nearest first decimal place. Average building age is calculated using theweighted average of building age according to the respective acquisition price.
(Note 3) As for Garden City Shinagawa Gotenyama, Hommachi Minami Garden City and HK Yodoyabashi Garden Avenue, SHR owns the sectional ownership right as well as accompanying right of site (in the site ownership ratio of approximately 81.0%,
56.3% and 40.6%, respectively).

9Outline of Portfolio
Property No.

J-1

J-2

J-3

Property name

Garden City Shinagawa Gotenyama

Gotenyama SH Building

Hommachi Minami Garden City

Photo of Properties

Map of Properties

7F
6F
5F
4F

Description of Rights

3F
2F
1F
B1F

Common Area
Common Area
Common Area

Portion acquired before the 3rd follow-on PO

7F
6F
5F
4F
3F
2F
1F

25F

B1F

B2F

24F

～

8F

13F
12F

～

9F

Portion acquired at the time of the 3rd follow-on PO

Portion held by Sekisui House

Types of Lease
Agreement

Fixed-Rent Type Master Lease

Direct Lease

Fixed-Rent Type Master Lease

Environmental
Considerations

DBJ Green Building Certification: 5 Stars-

DBJ Green Building Certification: 4 Stars

Total Floor Area
(entire building)

62,975.42㎡

19,812.85㎡

46,010.88㎡

Leasable Area(acquired portions)

31,236.34㎡

19,999.97㎡

16,699.46㎡

Occupancy Rate

100.0％

100.0％

100.0％

Completion Date

February 2011

February 2011

February 201110

Outline of Portfolio
Property No.

J-4

J-5

J-6

Property name

Hommachi Garden CityHK Yodoyabashi Garden Avenue

Hirokoji Garden Avenue

Photo of Properties

Map of Properties

27F
～

12Ｆ

12Ｆ

11Ｆ

11Ｆ

Hotel

14F

13Ｆ

10Ｆ

Portion held by Third Party

9F
13F

Description of Rights

6F

10F～

5F

Office

3F
2F
1F
B1F
B2F

Retail

7F

7F

11F

Common Area

Portion acquired before 3rd follow-on PO

9F
8F

8F

Common Area

12F

10Ｆ

6F
5F

4F

4F

3F

3F

2F

2F

1F

1F

Portion acquired at the time of the 3rd follow-on PO

Portion held by Sekisui House

Types of Lease
Agreement

Fixed-Rent Type Master Lease

Pass-Through Type Master Lease

Pass-Through Type Master Lease

Environmental
Considerations

DBJ Green Building Certification: 4 Stars(Office building portion)

DBJ Green Building Certification: 4 Stars
CASBEE OSAKA: Rank A

DBJ Green Building Certification: 4 Stars
CASBEE NAGOYA: Rank A

Total Floor Area
(entire building)

49,163.16㎡

16,953.28㎡

7,017.98㎡

Leasable Area(acquired portions)

Office building portion : 17,006.94㎡
Hotel portion: 18,092.98㎡

4,554.52㎡

4,442.75㎡

Occupancy Rate

100.0％

100.0％

100.0％

Completion Date

May 2010

July 2015

March 201111

Portfolio Map and Growth Potential of the Area
Shinagawa Gotenyama Area

■Shinagawa station, a station accessible from the two buildings below, is one of the largest stations in Tokyo and has a high growth rate in terms of passenger numbers.
■Shinagawa station offers easy access to the Shinkansen Line and to Tokyo International Airport.

Hommachi - Yodoyabashi Area
■These three buildings are located in an area known as the Hommachi - Yodoyabashi area, the central business district of Osaka.
■This area offers convenient access to public transportation and also to the Shinkansen Line and to Osaka International Airport.
Nagoya Meieki Area
■ Nagoya Station, the biggest terminal station in the Chubu Area, is located in the Nagoya Meieki Area, which a business and commercial district.
■ A large-scale redevelopment project around Nagoya is underway with an eye to the launch of the Linear Chuo Shinkansen in 2027.
Osaka International Airport (ITAMI)
Osaka Sta.

Narita International Airport

Umeda Sta.

Tokyo Terminal Sta.

Shibuya Sta.

Yodoyabashi Sta.
J-5

Midosuji Ave.
Hommachi Sta.

Tokyo

J-4

J-3

Shinagawa Sta.
J-2
J-1

Osaka
NagoyaNamba Sta.

Shinkansen Line

Tokyo International Airport(HANEDA)

Kansai International Airport
J-5

J-4

J-3

J-6

J-2

J-1

Nagoya Sta.

Shinkansen LineHK Yodoyabashi
Garden Avenue

Hommachi
Garden City

Hommachi Minami
Garden City
Chubu Centrair International Airport

J-6

12

Hirokoji
Garden Avenue

Gotenyama
SH Building

Garden City
Shinagawa Gotenyama

External Growth Investment policy••••

Promoting continuous external growth by focusing on property acquisitions from the sponsor
Applying strict investment selection criteria when considering acquisition from third parties
External growth centering on acquisition of office buildings
Shifting to an external growth strategy that focuses on domestic real estate for the time being

Achieved 200 billion yen in asset size by focusing on domestic real estate through utilization of Sponsor Pipeline andpromotion of continuous external growth.
【Preferential Negotiation Rights for Properties Co-owned with Sekisui House】

Area

Asset type

Ratio of unaquired floor area

Garden City Shinagawa Gotenyama

Tokyo

Office Building

19.0%

Hommachi Minami Garden City

Osaka

Office Building

43.6%

 Urban development undertaken by Sekisui House (Note 1)
1993

2006

2010

2011

2013

2015

Future project（tentative）
Akasaka 5chome PJ(Tokyo)（Note 3）Umeda
Sky Building（Osaka）

Akasaka
Garden City
(Tokyo)Hommachi
Garden City
（Osaka）（asset acquired）

Garden City
Shinagawa
Gotenyama(Tokyo)（asset acquired）(Note 2)

Gotenyama Hommachi Minami Hirokoji Garden
AvenueSH Building
Garden City
(Nagoya)（Osaka）(Tokyo)（asset acquired）（asset acquired）(Note 2)

（asset acquired）

Grand Front
Osaka（Osaka）

The Ritz-Carlton,
Kyoto（Kyoto）

HK Yodoyabashi
Garden Avenue（Osaka）（asset acquired）

OtemonTower
JX Building(Tokyo)（tentative）
ＭＭ21-44 PJ(Yokohama)（Note 3）(Note 1) The above projects include joint projects with other companies and properties that have been sold. SHR has no plan to acquire the above properties as of December 14, 2017.
(Note 2) Although SHR has acquired parts of the above buildings, it still has preferential negotiation rights by acquiring the remaining parts of these buildings. SHR does not have any plan to acquire the remaining parts of these buildings as of the date hereof.
(Note 3) These projects are currently under consideration by Sekisui House and may be changed or cancelled without prior notice.

13

Internal Growth Utilization of sponsor support••••

Provision of property management services for owned assets
Utilization of know-how and services possessed by Sekisui House that can enhance tenant satisfaction for operation management
Coordination in strategies such as renovation and value enhancement, etc. regarding old properties
Investigation and discussion regarding execution of master lease agreements that respond to property characteristics

 Status of lease agreements of portfolio properties (as of December 14, 2017)Management policy emphasizing stability until the portfolio is diversified
Selecting lease type depending on property characteristics
Property Name

HommachiMinami
Garden City

Garden City
Shinagawa Gotenyama

Hommachi
Garden City

Gotenyama
SH BuildingHK
Yodoyabashi
Garden Avenue

Direct Lease

Pass-Through Type Master Lease

Hirokoji
Garden Avenue

Photo of Properties
Lease Type

Fixed-Rent Type Master Lease(Note)

Ratio of Lease Type
(Note)

58.0%

16.1%

17.9%

8.0%

Asset Type

Office building

Hotel

Office building

Office building

Contract Period（Master Lease or
Direct Lease)① portion originallyacquired② portion
additionally acquired③ portion
additionally acquired

From Dec. 2014 From May 2016 From May 2017
to Dec. 2019
to Dec. 2019
to Dec. 2019

Office building
portionFrom Dec. 2014
to Dec. 2019

Hotel portion

From May 2015 From May 2017
to May 2020
to May 2020

Stable rent revenue

From Mar. 2011
to Feb. 2031

From May 2016
to May 2019

From May 2016
to May 2019

Long-term rent revenue

Rent for 92.0% of leased floor area (including direct lease) has been fixed substantively(Note) "Ratio of lease type" refers to the ratio of the leased floor area for each lease type under the relevant lease agreements, in respect of the properties, that are valid as of December 14, 2017 (or, if a master lease agreement that is valid as ofDecember 14, 2017 is concluded for the property, the master lease agreement), to the total sum of the leased floor areas indicated in such lease agreements, rounded to the nearest first decimal place.

14

Financial Results

 Status of interest-bearing liabilities （as of December 14, 2017）

 Financial Standing
End of 5th FP

Total interest-bearing liabilities
Fixed interest rate
debt ratio
Long-term debt ratio(as of end of Nov. 2017)77.3 billion yen

84.4 billion yen

76.6%

93.0%

100.0%

100.0%LTV (total asset basis)

40.8％

40.7％ (Note 1)

Acquisition capacity until
LTV reaches 50%(Approximate amount)35.0 billion yen

39.0 billion yen (Note 1)

Average financing interest rate

0.75%

0.73%

6.3 years

6.5 years(Note 2)Average financing term
(Note 3)

Total InterestBearing Liabilities

Percentage

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

19.10 billion yen

24.1 %

Sumitomo Mitsui Banking Corporation

17.03 billion yen

21.4 %

Mizuho Bank, Ltd.

10.15 billion yen

12.8 %

Sumitomo Mitsui Trust Bank, Limited

9.46 billion yen

11.9 %

Resona Bank, Limited

6.00 billion yen

7.6 %Mitsubishi UFJ Trust and Banking Corporation

5.00 billion yen

6.3 %Development Bank of Japan Inc.

4.24 billion yen

5.3 %The Norinchukin Bank

4.23 billion yen

5.3 %Mizuho Trust & Banking Co., Ltd.

4.19 billion yen

5.3 %

Total

79.4 billion yen

100.0%

Issue AmountDuration of
Bonds

After refinance(actual)(as of Apr. 30, 2017)

First Series Unsecured Investment Corporation Bonds

2.0 billion yen

10 years

Second Series Unsecured Investment Corporation Bonds

3.0 billion yen

5 years

 Diversification of Repayment Date（as of December 14, 2017）(billion yen)

Average remaining term ofinterest-bearing liabilities (Note 4)

4.2 years

Fixed

4.5 years

 Credit Rating Information

4.05

17.00 3.00

7.00

7.00

Floating

Investment Corporation Bonds

14.00

Credit Rating Company

Long-term Issuer Rating

JCR

AA-（Stable）

10.00
1.86

7.00
3.00

5.34

2.00
3.15

Apr. 30, Oct. 31, Apr. 30, Oct. 31, Apr. 30, Oct. 31, Apr. 30, Oct. 31, Apr. 30, Oct. 31, Apr. 30, Oct. 31, Apr. 30, Oct. 31, Apr. 30, Oct. 31, Apr. 30, Oct. 31,
2018
2018
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
2024
2024
2025
2025
2026
2026
（7th FP） （8th FP） （9th FP） （10th FP） （11th FP） （12th FP） （13th FP） （14th FP） （15th FP） （16th FP） （17th FP） （18th FP） （19th FP） （20th FP） （21th FP） （22th FP） （23th FP） （24th FP）(Note 1) As of the end of the 6th FP.
(Note 2) Average financing interest rate indicates a weighted average (annual) interest rate using the balance of interest-bearing liabilities as of the end of the 5th FP and the end of November 2017. In respect of the average interest rates of interest-bearing
liabilities for which an interest rate swap was conducted in order to hedge the risk of interest rate fluctuations, interest rates taking into account the effect of the interest rate swap are used. The figure is rounded to the nearest second decimal place.
(Note 3) Average financing term indicates the average term from the date of borrowing to maturity dates weighted by the balance of the respective interest-bearing liabilities.
(Note 4) Average remaining term of interest-bearing liabilities indicates the average remaining term from the end of the 5th FP and the end of November 2017 to maturity dates weighted by the balance of the respective interest-bearing liabilities.

15

Interest-Bearing Liabilities (1/3)（as of December 14, 2017) LoanTerm

LenderThe Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.

Long

Balance(million yen)Interest Rate

14,0000.65830% (Note)

17,0000.94060% (Note)

Drawdown Date Repayment Date

Remarks

Nov. 30, 2019Nov. 30, 2021
Dec. 3, 2014

10,0001.47450％ (Note)

Nov. 30, 2024

UnsecuredandUnguaranteed

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.

5,350

0.62760％ (Note)

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited

1,650

0.89470％ (Note)

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Mizuho Trust & Banking Co., Ltd.

2,350

1.01850％ (Note)

Nov. 30, 2020

Jul. 31, 2015

Nov. 30, 2022

Nov. 30, 2023

(Note) In order to hedge the risk of interest rate fluctuations, an interest rate swap transaction, which substantially secured interest rates, was conducted. Accordingly, the interest rates are calculated taking the effect of this interest rate swap into
consideration.

16

Interest-Bearing Liabilities (2/3) （as of December 14, 2017)
Term

LenderBalance(JPY mil)Development Bank of Japan Inc.

Interest Rate
650

0.88500%

1,650

0.61760%

Drawdown
Date

Repayment
Date

Remarks

Nov. 30, 2022
Nov. 30, 2020

Jul. 31, 2015
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

700

0.88470%750

1.00850%

4,050

Base Rate(JBA 1-month JPY TIBOR)+0.225％

Nov. 30, 2022

Nov. 30, 2023

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Development Bank of Japan Inc.
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.

Nov. 30, 2020

Sep. 9, 2016Long

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1,810

0.60500%
Sep. 8, 2026

Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation

1,340

0.67000%

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
The Norinchukin Bank

1,860

Base Rate(JBA 1-month JPY TIBOR)+0.20％The Bank of Tokyo-Mitsubishi UFJ, Ltd.

990

0.37000%

Aug. 31, 2021

Aug. 31, 2017
Nov. 30, 2023

Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.
Mizuho Trust & Banking Co., Ltd.

1,250

17

0.45254%

UnsecuredandUnguaranteed

Interest-Bearing Liabilities (3/3) （as of December 14, 2017)
Term

Long

LenderBalance(JPY mil)Interest Rate

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.

5,050

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

750

0.32000%

Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.

1,200

0.35341%

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.

5,050

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

750

0.34000%

1,200

0.42622%

79,400-Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.
Total Loans

Drawdown
Date

Repayment
Date

Remarks

0.34800% (Note)

Jul. 13, 2022

UnsecuredandUnguaranteed

Nov. 30, 2017

0.41800% (Note)
May 31, 2023

-

-

-

(Note) In order to hedge the risk of interest rate fluctuations, an interest rate swap transaction, which substantially secured interest rates, was conducted. Accordingly, the interest rates are calculated taking the effect of this interest rate swap into
consideration.

 Investment Corporation Bond
Name

Issue Amount(million yen)Interest Rate

Issue Date

Redemption Date

Remarks

First Series Unsecured Investment Corporation Bonds(with a clause that ranks them pari passu among specified investment corporation
bonds)

2,000

0.340%

Sep. 8, 2016

Sep. 8, 2026

UnsecuredandUnguaranteed

Second Series Unsecured Investment Corporation Bonds(with a clause that ranks them pari passu among specified investment corporation
bonds)

3,000

0.240%

Jul. 13, 2017

Jul. 13, 2022

UnsecuredandUnguaranteed

Total Investment Corporation Bonds

5,000

-

-

-

-

Total Interest-Bearing Liabilities

84,40018Strategy for Future Growth
Sekisui House REIT’s goals are to continue to focus on “Prime Properties”, andexpand and diversify its portfolio at a sustainable pace,by capitalizing on the strong support of Sekisui House.

Sekisui House REIT’s Operational Philosophy
・Provide high-quality social capital and maximize unitholder value
・Invest in commercial properties focused on strategic locations and high quality
・Portfolio development policy centering on office buildings
・Growth strategies that take full advantage of the versatile support of Sekisui House

Sekisui House’s Support for Sekisui House REIT
・External growth through Pipeline Support Agreement
・Fixed-rent type Master Lease with Sekisui House

19

Our Growth Strategies
Current Target

Expanding asset size to 300 billion yen

Strategy

Utilizing Sponsor
Pipeline effectively

Promote continuous external
growth for full-fledged
diversification of portfolio

300 billion yen
Accomplished our goal from IPO “200 bil” in 2.5 years from IPO.

152.9 bil

114.3 bil

After IPO

After 1st follow-on PO

200.7 bil

179.5 bil

After 2nd follow-on PO

After 3rd follow-on PO

 Management Strategies
Investment
Strategies

 Utilizing sponsor pipeline by Sekisui House Investment focusing on Prime Properties
 Continuous expansion of asset size Diversifying portfolio (number of properties / tenants)

Financial
Strategies

 Enhancing liquidity of investment
units by way of public offering Maintainning LTV (total asset basis) at a conservative
level between 40% and 50%
 Promoting extension of borrowing periods,
diversification of repayment dates and fixation of interest rates

20

The current
targetMaximize ourunitholder value
while maintaining stable
DPU growth

CSR and Environmental Activities
Award of “Green Star” in the Global Real Estate Sustainability Benchmark (“GRESB”) Survey

Contributing to Regions and Communities■ Events held in common areas■ In the GRESB Survey conducted in 2017, SHR
received a “Green Star” rating, which is awarded toparticipants highly evaluated in both dimensions of“Management & Policy” and “Implementation &Measurement” with regard to activities forenvironmental considerations and sustainability.
SHR also received “3 Stars” in the GRESB Rating.

Participation in Midosuji Illumination 2017

Christmas tree display＜Hommachi Garden City＞＜Hommachi Minami Garden City＞
Exhibit of modern art installation using pilotis＜Hommachi Garden City＞
Exhibit of dresses expressing Osaka’s night view
images in LED lights

An approximately 6m-high tree
designed by Five Star Christmas
Tree Co., for 5-star hotels aroundthe world■ SHR began participating in the Health & Wellbeing Module in 2017, an optional supplement to
the GRESB Real Estate Assessment launched in
2016.

The GRESB Survey, established primarily by major European pension fund groups, is an annual benchmark
survey for environmental, social and governance “ESG” considerations in the global real estate sector.

5 out of 6 Owned Properties Received DBJ Green Building Certifications High Rankings＜5 Stars＞

Other Activities＜Properties with the best class environmental & social awareness＞
Garden City Shinagawa Gotenyama■ Tenant satisfaction survey
With a view to maintaining/improving tenant satisfaction, SHR conducted a tenantsatisfaction survey to understand their dissatisfaction or requests as well as to reflect thesame in our asset management strategies.

■ Employee training
The Asset Management Company provided its employees with periodical training, such ascompliance training, to improve their skills as professional real estate managers.
＜Properties with exceptionally high environmental & social awareness＞＜4 Stars＞

Hommachi Minami
Garden City

Hommachi Garden City HK Yodoyabashi Garden Hirokoji Garden Avenue
Avenue(office building portion)

21■ Announcement of “policy concerning customer-oriented business conduct”
Having adopted “Principles for Customer-Oriented Business Conduct” announced in March2017 by the Financial Services Agency of Japan, the Asset Management Company
formulated a clear policy to achieve customer-oriented business conduct. This policy was
also announced on its website.

ESG initiatives of Sekisui House■ESG initiatives targeting sustainable growth（Established in 1989）(Established in 2006)■Development of Philosophy and Value Creation
In 2005, Sekisui House defined “a sustainable society” as the vision toaspire to and in this connection announced four values—environmental,
economic, social and homeowner—in order to attain and confirm this goal,
which is intended to achieve balanced management based on its
corporate philosophy.
■Main Actions of Sekisui House and Accolade from Third Parties
Environmental
Management

Environment●Global warming prevention●Ecosystem conservation●Resource recycling

Ｅ

Certified as an Eco-First Company by the Ministry of the Environment Japan in June 2008

Ｅ

Promotion of Net Zero Energy House “Green First Zero” received the 26th Grand Prize for the Global
Environment Award from the Minister of Economy, Trade and Industry / Organizer: Fuji Sankei GroupＥ

FY2017 Environment Minister's Award for Global Warming Prevention Activities (Advanced Introduction ofCountermeasure Technologies category) / Organizer: Ministry of the Environment

ＥFirst to joined RE100 in the construction industry in Japan, declaring use of 100% renewable energy

Ｓ

Selected by the Ministry of Economy, Trade and Industry for the New Diversity Management Selection 100
as a company that promotes diversity management

Ｓ

Selected by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange for the Nadeshikobrand 2017 as a company that promotes the active participation of women

Improvements in
Sociability

Social●Improve CS, ES and SS （note）●Human rights●Promotion of diversity●Workstyle innovation “Creating
thrilling and exciting workplaces”●Social contribution activities

Ｅ

Ｓ
Ｇ

Selected by S&P Dow Jones Indices in the U.S. and RobecoSAM in Swiss for the Dow Jones Sustainability
World Index (DJSI World)

Governance

Governance●Compliance risk management●Establishment of corporate ethics

Ｇ

Appointment of two outside directors to the Board of Directors and three outside audit and supervisory board
members to the Audit & Supervisory BoardＧ

Introduction of executive officer system

Ｇ

Established “Basic Policy on Corporate Governance” in 2016.

(note) CS（Customer Satisfaction), ES（Employee Satisfaction), SS（Shareholder Satisfaction）

22

Ⅲ. Appendix

Appendix

HK Yodoyabashi Garden Avenue

23

Balance Sheet（unit： thousand yen ）5th Fiscal Period
April 30, 2017

6th Fiscal Period
October 31, 2017

5th Fiscal Period
April 30, 2017

AssetsLiabilities
Current liabilities

Current assets
Cash and deposits

4,115,187

1,756,618

Operating accounts payable

Cash and deposits in trust

7,662,531

6,518,376

Current portion of long-term loans payable

Operating accounts receivable

16,70919,330Prepaid expenses

84,52376,198Deferred tax assets

16

7

-

372,744

11,350-11,890,319

8,743,275

Consumption taxes receivable
Other
Total current assets

53,345,801

59,604,170(2,678,821)(3,399,530)

Buildings in trust, net

50,666,979

56,204,639

672,428

683,807

Accumulated depreciation(43,390)(52,592)

Structures in trust , net

629,038

631,215Structures in trust

Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation

411

921

(23)

(58)

387

862

1,259

1,259

(297)

(447)

961

811

126,120,644

141,218,283

9,699

-

177,427,710

198,055,813

Other

3,882

3,147

Total intangible assets

3,882

3,147

Lease and guarantee deposits

20,181

20,181Long-term prepaid expenses

239,863

227,164

Total investments and other assets

260,044247,345

177,691,637

198,306,306

Investment corporation bond issuance costs

17,45335,045Investment unit issuance costs

28,02657,907

Total deferred assets

45,47992,952

189,627,436

207,142,534

Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment

Accounts payable - other376,804

402,587

Accrued expenses

79,17082,238938

743

Total current liabilities

284,571-

14,872,413

14,658,493

Non-current liabilities
Investment corporation bonds

2,000,000

5,000,000

Long-term loans payable

61,300,000

65,400,000

Tenant leasehold and security deposits in trust
Total non-current liabilities

9,033,710

9,268,730

72,333,710

79,668,730

87,206,123

94,327,223

100,040,294

110,189,294

Unappropriated retained earnings

2,381,018

2,626,016

Total surplus

2,381,018

2,626,016

102,421,312

112,815,310

102,421,312

112,815,310

189,627,436

207,142,534

Total liabilities

Net assets
Unitholders’ equity
Unitholders’ capital
SurplusIntangible assets

Total unitholders’ equity

Investments and other assets

Total non-current assets

172,924
14,000,000

Accrued consumption taxes

Property, plant and equipment
Accumulated depreciation

130,929
14,000,000

Income taxes payableNon-current assets
Buildings in trust

6th Fiscal Period
October 31, 2017

Total net assets

Deferred assets

Total assets

Total liabilities and net assets

24Statement of Income and Retained Earnings（unit： thousand yen ）5th Fiscal Period
From November 1, 2016 to April 30, 2017

6th Fiscal Period
From May 1, 2017 to October 31, 2017

Operating revenue
4,121,417

4,550,426

22,97030,081

4,144,387

4,580,508

1,053,022

1,178,033

332,503359,562

Asset custody fee

3,520

3,526

Administrative service fees

11,820

11,485

Directors’ compensations

3,600

3,600

Other operating expenses

35,86436,614

Total operating expenses

1,440,331

1,592,823

2,704,056

2,987,685

50

46Interest on refund

1,521

-

Subsidy income

10,935-

Total non-operating income

12,50746

283,125

293,464

Rent revenue - real estate
Other lease business revenue
Total operating revenue
Operating expenses
Expenses related to rent business
Asset management fee

Operating income
Non-operating income
Interest income

Non-operating expenses
Interest expenses
Interest expenses on investment corporation bond

3,383

5,568

Borrowing related expenses

39,81843,160

Amortization of investment unit issuance costs

7,006

14,384

Amortization of investment corporation bond issuance costs

934

2,258

Other

515

2,416

334,784

361,252

Ordinary income

2,381,779

2,626,479

Income before income taxes

2,381,779

2,626,479

Income taxes - current

945

750

Income taxes - deferred(5)9Total income taxes

940

759

2,380,839

2,625,719

Total non-operating expenses

Net Income
Retained earnings brought forward

179

296

Unappropriated retained earnings

2,381,018

2,626,016

25

Entire Portfolio（as of October 31, 2017）（unit： thousand yen ）Property No.

Ｊ-1

J-2

J-3

J-4

Property Name

Garden City
Shinagawa
Gotenyama

Gotenyama
SH Building

HommachiMinami Garden
City

From

May 1, 2017

May 1, 2017To

Oct. 31, 2017

Oct. 31, 2017

Hommachi
Garden City

J-5

J-6

Hirokoji
Garden Avenue

Total

Office building
PortionHotel PortionHK
Yodoyabashi
Garden Avenue

May 1, 2017

May 1, 2017

May 24, 2017

May 1, 2017

May 1, 2017

May 1, 2017

Oct. 31, 2017

Oct. 31, 2017

Oct. 31, 2017

Oct. 31, 2017

Oct. 31, 2017

Oct. 31, 2017

Days of operation
Property-related operating revenue
Rent revenue – real estate
1,307,694

1,088,998

586,791

903,801

352,728

139,221

171,190

4,550,426

-

-

92

-

-

11,914

18,07430,081

1,307,694

1,088,998

586,884

903,801

352,728

151,136

189,264

4,580,508

-

-

-

-

-

8,628

15,917

24,546

8,925

1,200

6,000

6,000

1,051

1,800

1,200

26,177

869

400

500

250

219

240

225

2,704

-

-

-

-

-

10,996

9,598

20,595

105,01049,94462,21188,007-

12,75916,173

334,107

Insurance expenses

1,702

962

984

1,139

626

554

322

6,291

Repair expenses

10,598

-

4,088

6,051

5,871

572

1,161

28,342

Depreciation

167,954

139,639

111,740

195,546

69,056

22,40723,750730,095

1,638

2,280

16

415

35

645

141

5,171

296,699

194,426

185,541

297,40976,86058,60568,4881,178,033③ Property-related operating income（=①-②）

1,010,994

894,571401,342606,391

275,867

92,530120,776

3,402,475

NOI（= ③ + Depreciation）

1,178,949

1,034,210

513,083

801,937

344,924

114,938

144,526

4,132,570

4.0％

4.0%

4.4%

4.2%

4.6%

5.2%

4.6%

4.2％

Rental income and others
Other lease business revenue
Utilities revenue and others① Property-related operating revenue
Property-related operating expenses
Expenses related to rent businessSubcontract expenses
Property management fees

Trust fees
Utilities expenses
Property and other taxes

Other expenses related to rent business② Property-related operating expenses

NOI yield (Note)(Note ) NOI yield is calculated by dividing annualized NOI by total acquisition price.

26

Overview of Third follow-on Public Offering Overview of Third follow-on Public Offering
Offering Type
Number of Investment Units
issued through the public offering

Domestic Offering
Total
Primary offering
The third party allotment

Issue price
Issue amountAmount of funds procured（including third-party allotment）

Portfolio

75,000 units
71,400 units
3,600 units

Total acquisition price

139,912 yen
135,320 yen
10.14 billion yen

Pricing Date

200.7 billion yen

Maximum Investment Ratio

31.0 ％

29.7 ％

Portfolio PML

1.9 ％

2.1 ％

6.3 years

6.4 years

27.7 billion yen

29.4 billion yen

Unrealized Gain

2017/5/24
2017/6/12

After 3rd follow-on PO

179.5 billion yen（Note 1）

2017/5/17
Primary offering
The third party allotment:

End of 5th FP

Average Building Age

2017/5/9

Issuance Resolution Date

Payment Date

 Changes in Key Factor

FinanceEnd of 5th FP

After 3rd follow-on PO Change in Unit Price（April 3, 2017 – June 12, 2017）
5/17
Pricing Date
Unit price（yen）

Volume（Unit）

5/9
Issuance
Resolution Date

150,000

Total interest-bearing debt

77.3 billion yen

84.4 billion yen

Period-end total assets LTV

40.8 ％

40.8 ％

25,000Acquisition Capacity（Note 2）
20,000145,000

15,000140,000
10,000135,000

5,000

130,000

Number of Investment Units
Issued and outstanding
Total Market Value（Note 3）

4/6 4/11 4/14 4/19 4/24 4/27 5/2 5/10 5/15 5/18 5/23 5/26 5/31 6/5
Volume （Right axis）

Price of SHR （Left axis）

6/8

TSE REIT Index（source）Tokyo Stock Exchange（Note) TSE REIT Index performance is indexed to SHR unit price (145,000 yen) as of end of May 9, 2017, which is pricing date of 3rd follow-on PO date of SHR

27

35.0 billion yen

894,000 units
127.2 billion yen

approximately

38.0 billion yen

969,000 units
136.3 billion yen(Note 1) Average building age after 3rd follow-on PO is calculated using the weighted average of building age.
(Note 2) Acquisition capacity refers to the maximum amount of funds to be procured, upon property acquisitions
by SHR, through new interest-bearing liabilities until LTV (total asset basis) reaches 50%. Please notethat this does not guarantee that such an amount can be actually procured.
(Note 3) Market capitalization is obtained by multiplying the closing price of investment unit at the end of period
for End of 5th FP and on June 12, 2017 for After 3rd follow-on PO by the total number of investment
units issued and outstanding on the respective date, rounded off to the specified unit.

0
4/3

approximately

Overview of Appraisal■Appraisal Value List
Capitalization
Property
No.

Property NameBook Valueor
Acquisition
price ②

Appraisal
Value ①(million yen)(million yen)

Unrealized
Gain/Loss①-②

Direct Return Method
Cap
Rate

Capitalization(million yen)

DCF Method(million yen)

Capitalization(million yen)(%)

Discount
Rate (%)

Terminal
Cap Rate(%)

Appraisal
NOI(millionyen)Appraisal
Institution

J-1

Garden City Shinagawa Gotenyama

71,00058,974

12,02573,0003.3

70,100

3.0

3.5

2,418

DAIWA REAL ESTATEAPPRAISAL CO.,LTD.

J-2

Gotenyama SH Building

58,50050,722

7,777

59,700

3.5

58,000

3.5

3.7

2,064

The Tanizawa Sōgō
Appraisal Co., Ltd.

J-3

Hommachi Minami Garden City

28,60022,481

6,118

29,6003.8

28,100

3.5

4.0

1,137

RichiAppraisal InstituteCo., Ltd.

J-4

Hommachi Garden City (Office building
portion)44,60037,8886,711

45,4003.5

43,700

3.3

3.7

1,591

Japan Real Estate Institute

Hommachi Garden City (Hotel portion)

17,70017,270429

17,9003.8

17,400

3.6

4.0

689

Japan Real Estate InstituteJ-5

HK Yodoyabashi Garden Avenue

5,570

4,391

1,178

5,810

4.0

5,470

4.0

4.1

235

The Tanizawa Sōgō
Appraisal Co., Ltd.

J-6

Hirokoji Garden Avenue

7,110

6,326

783

7,260

4.2

7,040

4.0

4.4

308

DAIWA REAL ESTATEAPPRAISAL CO.,LTD.

233,080

198,055

35,024

238,670-

229,810

-

-

8,445

Total

-

■Appraisal Value (as of end of 6th Fiscal Period, compared to as of end of 5th Fiscal Period)
Appraisal Value (million yen)
Property
No.

Property Name（note）

Garden City Shinagawa Gotenyama

J-1

End of 5th FP ①

（the first portion acquired and second portion acquired）

End of 6th FP ②

Direct Return Method Cap Rate (％)
Comparison②-①

End of 5th FP ①

64,500Comparison②-①

End of 6th FP ②

（note）

3.4
71,000+2,210△0.1
3.3

Garden City Shinagawa Gotenyama

4,290

J-2

Gotenyama SH Building

56,90058,500+1,600

3.6

3.5

△0.1

J-3

Hommachi Minami Garden City

27,90028,600

+700

3.9

3.8

△0.1

Hommachi Garden City (Office building portion)

43,50044,600+1,100

3.6

3.5

△0.1

Hommachi Garden City (Hotel portion)

17,60017,700

+100

3.8

3.8

-

J-5

HK Yodoyabashi Garden Avenue

5,380

5,570

+190

4.1

4.0

△0.1

J-6

Hirokoji Garden Avenue

6,940

7,110

+170

4.3

4.2

△0.1

227,010233,080+4,970---（the third portion acquired）

J-4（Note2）

合計

3.5

△0.2

（note1）Figures for Garden City Shinagawa Gotenyama(the third portion acquired) and Hommachi Garden City (Hotel portion), which was acquired during the 6th FP are based on the appraisal report as of March 31,2017.
（note2）Hommachi Garden City (Office building portion) has increased its value for holding the building entirely by acquiring Hommachi Garden City (Hotel portion) additionally in May 24, 2017 . Therefore, figures of appraisal value as of end of

the 5th period is market values that do not include the increased value, however, figures as of the 6th period is limited market values including the increased value.

28

Types of Lease Agreement
 Image of Lease Scheme

End-Tenant(Sub-lessee)

Tenant(Lessee)LessorFixed-Rent Type
Master Lease

Pass-Through Type
Master Lease

Direct Lease

End-Tenant

End-Tenant

End-Tenant

Rent

Rent

Sekisui House

Sekisui House

Fixed-Rent

Rent

SHR

SHR

Rent

SHR

 Characteristics of SHR’s Internal Growth•

Approximately 74% of the portfolio (ratio of lease types) adopts fixed-rent type master lease with Sekisui House.
Rent revenue is being fixed in order to reduce the impact of tenant vacation, etc. on earnings.

•

HK Yodoyabashi Garden Avenue and Hirokoji Garden Avenue adopt pass-through type master lease with Sekisui
House. Since SHR can receive rent of the same amount as the rent under the lease agreement concluded between
Sekisui House and end-tenants, SHR can benefit from rent revenue upside when the occupancy rate rises or the rent isrevised upward.

•

Gotenyama SH Building adopts direct lease in which the property is directly leased to the end-tenant. A 20-year leaseagreement has been concluded with the tenant, and thus the rent revenue is stable over the long-term.
29

Structure of SHR
 Structure Diagram

Asset Custodian

2

SEKISUI HOUSE REIT, INC.

5

Mitsubishi UFJ Trust and Banking Corporation

Administrative Agent for Operation of
Administrative Instruments
Mitsubishi UFJ Trust and Banking Corporation

General Meeting of Unitholders
Holding approximately 6.7% of investment units
Transfer Agent3(as of December 14, 2017)

Board of Directors
Executive Director: Junichi Inoue
Supervisory Director: Shigeru Nomura
Supervisory Director: Tatsushi Omiya

Mizuho Trust & Banking Co.,Ltd.

6

Parent Company of
the Asset Management Company / Sponsor
SEKISUI HOUSE, LTD.

Independent Auditor

Administrative Agent for
Investment Corporation Bonds

4

Ernst & Young ShinNihon LLC

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1

Asset Management Company

100% ownership

SEKISUI HOUSE INVESTMENT ADVISORS, LTD.

1

Asset Management Agreement

4

Fiscal Agency Agreement

52

Asset Custody Agreement

3

Administrative Agreement (Administration of Investment Units)General Administrative Agreement

6

Pipeline Support Agreement / Sponsor Support Agreement, etc.

30

Governance System
Adopts a Scheme that Emphasizes Unitholders’ Interests

Strong Alignment of Interests between Sekisui House
and Our Unitholders

 Decision-Making Process

Sekisui House has confirmed that it intends to continue holding
SHR’s investment units on a long-term basis
 Agreement on Consideration of Co-Ownership or Sectional
Ownership with Sekisui House
Sekisui House has confirmed that it will consider faithfully coownership (including beneficiary interests) or sectional ownershipwith us upon our request

Deliberation
and approval

Board of Directorsof Sekisui House Reit

Disapproved

Deliberation
and resolution

Deliberation
and resolution

Compliance Committee

Board of Directors

Rejected

Rejected

Deliberation
and resolution

Investigation
and approval

Compliance Officer

Proposal

Proposing Department

Investment Committee

Rejected

Remanded Same-Boat Investment from Sekisui House Measures to Prevent Transactions Involving Conflict of Interest

Attendance and assent byexternal members are required

Calculation Method

Type 1(Asset-based fee)

Total assets at prior FY-end × (up to) 0.5% (Note 1)

Type 2(DPU-based fee)

DPU (Note 2)× Operating Income (Note 3) × (up to) 0.004% (Note 1)

Type 3(Acquisition Fees)

Purchase price × (up to) 0.5% (Note 1)(up to 0.25%(Note 1) in case of a transaction with a related party)

Type 4(Disposition Fees)

Sale price × (up to) 0.5%
(zero in case of a transaction with a related party)

Acquisition price shall be equal to or less than the appraisal value.

Property Transfer

Transfer price shall be equal to or higher than the appraisal value.

Brokerage fee shall be within the scope of reward stipulated in the Building
Lots and Buildings Transaction Business Act, and shall be determined after
Payment of Brokerage Feetaking into account the levels of contract terms and conditions, difficulty inconducting brokerage and other factors.
a. Consignment shall be made under conditions that are deemed to beappropriate after comprehensively taking into account the market levelsof the outsourcing fees, the content of provided services, total work
volume and other factors.
b. Upon acquiring real estate and other assets, and if their management
and other services have been outsourced to interested parties and will
Outsourcing of Management
continue to be outsourced to the same parties, approval or disapproval of
and Other Services of Realthe acquisition as well as the acquisition price shall be determined by
Estate and Other Assets
paying full attention to the adequacy of the outsourcing terms andconditions.
c. With regard to the interested party’s status of implementing management
and other services, the party’s adequacy as consignee shall be verified
once a year as a rule via assessments and such conducted by an outside
independent appraiser that is not an interested party.
The agreements shall be executed under the terms and conditions that are
Execution of Lease
deemed to be adequate after investigating such factors as the market rent
Agreements for Real Estatelevel and price situation in neighboring markets and, as needed, referring to
and Other Assets
the opinions of third parties that are not interested parties.

 Performance-Based Asset Management FeesManagement Fee

Property Acquisition(Note 1) As of December 14, 2017,
Rate for Type 1 management fee is 0.15%,
Rate for Type 2 management fee is 0. 0023%,
Rate for Type 3 management fee is 0.3％ (or 0.15% in case of a transaction with a related party)(Note 2) DPU= distributable profit before deduction of Type 2 management fee / total number of investment units issued
and outstanding(Note 3) Operating Income before deduction of type 2 management fee

Placement of Orders forConstruction Work, Etc.
with Contract AmountSurpassing 30 million yen

31

Orders may be placed to interested parties only when such factors as theestimated price and the content of services to be provided are notdisadvantageous to SHR after comparing such factors with those of third
parties other than the interested parties.

Asset Management Company（as of December 14, 2017）
 Overview of Asset Management Company
Trade Name Directors and Corporate Auditors

Sekisui House Investment Advisors, Ltd.

（Financial Instruments Business Operator: Director-General of the Kanto
Finance Bureau (Kinsho) No. 2791）

Foundation

President &Junichi Inoue
Representative Director
Director

Atsuhiro Kida（General Manager of Management Division）

Director

Shoichi Maruyama

Director

Ichiro Maeoka（Compliance Officer）

Director

Kimiyoshi Otani

February 17, 2014

Paid-in capital

400 million yen

Shareholder

Sekisui House, Ltd.（100％）

Directors andemployees

25（General Manager of Real Estate Investment Management Division）（Chief Manager of Corporate Management Planning Office）

Hideyuki Kamijyo
Director（Part time）
Auditor（Part time）

 Organization Chart（Executive Officer, Chief Manager of Accounting & Finance
Department of Sekisui House）

Keizo Yoshimoto（Chief Manager of Legal Department of Sekisui House）

General Meeting of
Shareholders
AuditorBoard of Directors
Investment
Committee

Corporate Management
Planning OfficeCompliance
Committee
President &Representative Director

Real Estate Investment andManagement Division

Real Estate Investment
Department

Compliance
OfficerManagement Division

Real Estate Management
Department

IR and Finance
Department

32

General Affairs andAccounting Department

Unitholders Composition
 Number of Investment Units Issued and Outstanding by Unitholder Typethth

End of 5 FP

End of 6 FP

End of 5th FP

Comparison

Number ofinvestment
unit（unit）

ratio（％）

Number ofinvestment
unit（unit）

ratio（％）

Number ofinvestment
unit（unit）

ratio（pt）

Individuals, etc

88,1479.9

110,60911.4

22,462

1.6

Financial institution

607,38967.9

625,525

64.6

18,136△3.4City banks

-

-

-

-

-

-

Regional banks

66,6207.5

81,741

8.4

15,121

1.0

Trust banks

477,57853.4

474,308

48.9-3,270△4.5Life insurers

15,5271.7

15,521

1.6

-6

△0.1

Casualty insurers

1,601

0.2

1,601

0.2

0

△0.0

Shinkin banks

28,206

3.2

33,964

3.5

5,758

0.4

Others17,8572.0

18,3901.9

533

Nonfinancial corporations

88,4949.9

88,9009.2

406Unitholder Type

Non-Japanese corporations

End of 6th FP

Number ofunit holder（people）

ratio
（％）

Number ofunit holder（peopleratio（％）

Number ofunit holder（people)

ratio
（pt）

11,93495.9

13,878

95.8

1,944

△0.1

Financial institution

123

1.0

151

1.0

28

0.1

City banks

-

-

-

-

-

-

Regional banks

26

0.2

27

0.2

1

△0.0

Trust banks

9

0.1

9

0.1

0

△0.0

Life insurers

6

0.0

6

0.0

0

△0.0

Casualty insurers

2

0.0

2

0.0

0

△0.0

△0.1

Shinkin banks

44

0.4

59

0.4

15

0.1

△0.7

Others

36

0.3

48

0.3

12

0.0

1.9

268

1.8

34

△0.0

Unitholder Type

Individuals, etc

105,87811.8

129,422

13.4

23,544

1.5

Nonfinancial corporations

4,092

0.5

14,544

1.5

10,4521.0

Non-Japanese corporations

140

1.1

173

1.2

33

0.1

894,000

100.0

969,000

100.0

75,000-

Securities companies

18

0.1

20

0.1

2

△0.0

12,449100.0

14,490

100.0

2,041

-

Total

Financial Institutions
金融機関（証券会社含む）(Including Security Firms)

Other domestic
その他国内法人
companies

Foreign

外国法人等
Companies/Individuals

Individuals
個人・その他/Others

 Major Unitholders（Top 5）（as of October 31, 2017）
Name

2017年
As of
10月31日October 31,
現在
2017969,000口
969,000
units

88,900units(9.2%)

640,069 units(66.1%)

0%Comparison

234

Securities companies
Total Number of Unitholders by Unitholder Type

20%

40%

60%

129,422 110,609
units
units
(13.4%) (11.4 %)

80%

100%

(Note) Percentages are rounded to the nearest first decimal place.

33

Units

Percentage

Japan Trustee Services Bank, Ltd. (Trust Account)

245,286 units

25.3%

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

128,376 units

13.2%

Sekisui House, Ltd.

65,200 units

6.7%

Trust & Custody Services Bank, Ltd.
(Securities Investment Trust Account)

50,411 units

5.2%

The Nomura Trust and Banking Co., Ltd.
(Investment Trust Account)

35,728 units

3.7%

Change in Unit Price（December 3, 2014 – November 30, 2017）
Volume（Right axis）

TSE REIT Index

Price of SHR（Left axis）（JPY）（Units）

160,000

50,000186,236 units
as of Dec. 3 ,2014

155,000

45,000150,000
40,000145,000
35,000140,000

30,000135,000
130,000

25,000125,000

20,000120,000
15,000115,000
10,000110,000
5,000

105,000
100,0000
Dec JanYear
2014

Feb Mar Apr May Jun

Year
2015

Jul

Aug Sep Oct Nov Dec Jan

Feb Mar Apr May Jun

Year
2016

Jul

Aug Sep Oct Nov Dec Jan

Feb Mar Apr May Jun

Jul

Aug Sep Oct Nov

Year
2017

(Note) TSE REIT Index performance is indexed to SHR unit price (132,000 yen) as of December 3, 2014, which is our listing date. TSE REIT Index refers to the weighted average-type index of market capitalization of all REIT counters.

34

Memo

35

Memo

36

37