Activia Properties Inc.
FP25 Ended May 2024 Financial Results
Q&A Session Summary
Date: Friday, July 19, 2024 (Telephone Conference)

Q1:

There was a comment that the LTV ratio has been rising and there are restrictions on thescale of unit buyback. We believe that a combination of asset disposition and repayment ofborrowings can be implemented without raising the LTV ratio, but what is your view? Howmuch of a constraint is the level of LTV?

A1:

Unit buyback combined with asset disposition has already been implemented in the previous
fiscal period, and we believe it will continue to be a potential approach. Meanwhile, with theperformance of properties improving, it is becoming more difficult to strike a balance between
asset disposition and unit buyback, and care must be taken with decisions on which properties tosell, and in this context, the timing of unit buyback is also a crucial point.
With regard to constraints on LTV, 47% is a historically high level, and we are cautious about
raising it any higher. This would make implementation in combination with repayment ofborrowings an option. In such cases, implementation should be determined based on whether unit
buybacks or asset replacement would be more effective. We intend to maintain the current LTVlevel of 47%, while considering unit buyback in the process.

Q2:

I would like to confirm whether progress has been made in improving utilities
income/expenses.

A2:

We have been asking tenants about raising prices and have received a certain degree ofunderstanding. However, it is our feeling that we have raised the price by a reasonable amount,and the current situation is that further price hikes may have a negative impact. If utilities
income/expenses deteriorate further, we will continue to consider asking for a certain level ofcontribution. We are unable to comment on any specific progress at this time.

1Q3:

Regarding replacement rents for office properties, is it safe to assume that the negative
impact of properties with vacancies will disappear and that they will have a positive impact
in the future?

A3:

Due to higher market rents, positive revisions and replacements are expected to increase in thefuture. The rate of rent increase is expected to be positive in the next fiscal period, and we also
believe it will be positive to some extent beyond that. Regarding the portfolio’s rent gap, existing
rents are below market rents, so, the rental income is becoming more likely to be positive.
Looking overall, although there are still some tenants whose rents are higher than market rents,
not every tenant requires to reduce them to the market rent. Furthermore, those “negative” gaps
might disappear if market rents continue to increase amid the recovery. As a result, we will havefewer concerns about future rent decreases than ever before. We expect those factors provide
positive effects for the portfolio and be a major driver of internal growth.

Q4:

You have set a DPU level of 8,700 yen this time and set a target to achieve the level by thefiscal period ending November 30, 2026 in terms of stabilized EPU. To what extent will you
be able to approach this level through internal growth of existing properties, or will you
combine asset acquisition, unit buyback, etc. to cover any shortfalls? What items and how
much of them do you think are necessary and feasible to achieve the level of 8,700 yen?

A4:

We recognize that the percentage of internal growth will be higher. We expect to see rent increases
and ancillary income increase to a certain degree in the future, and hope to bring the level close
to 8,700 yen through internal growth. However, there is a certain amount of risk that internal
growth alone will not reach that level, and we therefore believe it is possible to add something
extra by promoting external growth initiatives as well. Basically, we are aiming for 8,700 yen byfocusing on internal growth, with something extra to ensure we reach this level.

Q5:

Both retail properties and hotel properties are recovering steadily, but are retail properties
also benefiting from the recovery in inbound tourism? We would like to know if there are
any trends regarding the percentage of inbound sales.

A5:

Inbound tourism has also had a significant impact in retail properties. In particular, there has been
an increase in inbound sales in Tokyu Plaza Omotesando “Omokado”, which has contributed2significantly to sales. Before COVID-19, about mid-10% of Omokado’s sales were from inboundbusiness, but this has now increased to mid-20%, and the growth in sales in street-level stores isparticularly significant. Other properties have also seen an increase in the number of inboundvisitors, which has positively contributed to various revenues such as parking revenue as well assales.
Q6:

In the acquisition criteria on page 24 of the financial results presentation, there is a
discussion of future conversion to other uses, but is there anything you can tell us, such as
the specifics of what is currently envisioned?

A6:

In terms of what kind of properties we will acquire in the future, I mentioned that we would liketo acquire not only urban properties but also suburban retail properties, and properties such as
Mizonokuchi, Nakamozu, and Sagamihara have been generating very stable income, andMizonokuchi is performing well due to rent growth through tenant replacement.
Meanwhile, we recognize that suburban retail properties present risks, and in the past, when ecommerce developed, suburban retail properties were often converted to logistics properties orto other uses. Even under such circumstances, our sponsor is pursuing development in a wide
range of areas and believes that if suburban retail properties can be converted into better facilities
in the future, this will have a positive impact on the property value. For example, Mizonokuchi
and Sagamihara, which we own, could also be considered as suitable locations for logistics, so
various options could be considered in the future. We believe that the strength of our sponsor asa developer can be used to change the quality of properties in response to changes in the area’senvironment. If properties have the potential to be converted into more appealing facilities in thefuture, they may be included in our targets for acquisition, which is why they have beenmentioned in the presentation materials.

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Corporations of Japan, the rules governing companies listed on the Tokyo Stock Exchange or any otherapplicable rules.
This document includes data described by TLC REIT Management Inc. (hereinafter the “AssetManager”) and refers to data, index and other information provided by third parties in addition toinformation about Activia Properties Inc. (hereinafter the “Investment Corporation”). Also analyses,judgments and other points of view of the Asset Manager under the present situation are included.
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The Investment Corporation’s actual performance may be materially different from results anticipatedby forward-looking statements contained in this document.

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