Kenedix Office Investment Corporation
28th Fiscal Period Results (Ended April 2019)
June 13, 2019
(Ticker Symbol 8972)

Summary of Presentation0

Table of contents

Section 1

28th fiscal period (2019/4) management highlights and future initiatives

Section 2

28th fiscal period (2019/4) results,

P. 2

29th fiscal period (2019/10) earning forecasts and30th fiscal period (2020/4) earning forecasts

P. 6

Section 3

Portfolio overview

P. 10

Section 4External growthP. 14

Section 5

Internal growthP. 17

Section 6

Efforts for ESG

P. 26

Section 7

Financial strategy

P. 30

1

Section 1
28th fiscal period (2019/4) management highlights
and future initiatives

2

28th fiscal period (2019/4) management highlights
and future initiatives
Portfolio NOI yield
after depreciation

AUM

External
Growth415.8 bn yen⚫

Future initiatives⚫
⚫

Continue strategic asset
reshuffle and selective
investment

Unit rent increase rate
upon tenant turnover

The occupancy rate
remained high with thestrong tenant demands

99.2%
⚫

Future initiatives

⚫
⚫

1.04%

Reduce financial costthrough refinancing⚫

Future initiatives⚫
⚫

After property acquisition(estimate)

Approx.

23.0

Securement offlexibility for selective
bn yen investment

20.3%

Increased unit rent due
to move-out of large
tenant and strategicleasing activities

Increase in rent upon rent revision(Total monthly rent for 28th fiscal period)

9.0 mn yen

Accumulated rent
increase as a resultof proactive upward
rent negotiations

Continuous rise in unit rent by maintaining high occupancy rate and tenant turnoverDecrease in rent gap through proactive upward rent negotiations
Property management responding to changes in work styles and advanced information andtelecommunications technology

Interest-beaning debt
average interest rate

Financial
Strategy

3.8%

Improve the profitability
through the acquisitionof Chofu Center
Building in the 29th
fiscal period

Aim for further growth through selective investment by utilizing borrowing capacity for acquisition
Enhance the portfolio quality through continuous asset reshuffle
Continuous, close attention to changes in the demand for office locations due to changes in work styles

Occupancy rate

Internal
GrowthAfter property acquisition(estimate)

Borrowing capacity for acquisition(in the case of LTV 45% limit)

LTV

Correspondent
financial institutions

After property acquisition(estimate)

After property acquisition

42.1%

Issued KDO’s firstgreen bonds

15 institutions

New borrowings fromlife insurance company
and set up of acommitment line withthree megabanks

Reduce financial costs continuously through diversifying financing methods and borrowing periods
Raise funds through direct financing by using green bonds, etc.
Maintain stable financial management with a target LTV of 45%
3

Dividend and reserve for reduction entry
Raised dividend by approx. 5.9% year over year in the 28th fiscal period (2019/4), and further accumulated reserve for reduction entry
Normalized dividend steadily grew and achieved the target of 13,200 yen. Aim for further growth

Main factors for increase in forecasted DPU (Note 1)

DPU history (Note 1)
・Expect growth of 4% per annum or more based on dividend of 13,100 yen
for 28th fiscal period excluding one-time increase due to gain on sale of real estate

KDX Toranomon 1chome Building
Tenant turnover
Acquisition of
Chofu Center Building(29th fiscal period)

Gain on sale ofFrame Jinnan-zaka(Quasi co-ownershipinterest of 51%)

(yen)

13,45813,71913,650Gain onsale of 13,620
real state

614

446

12,960

-108

(yen)

+5.9%

13,370

619

+2.1%

+247
One-timerevenue
decline due
to free rents

13,650

Aim forfurther growth

Others13,370 +141
+99
Others13,100+2.1%

Terminationof free rents

+449
-277

The balance ofreserve for
reduction entry(Note 2)

12,96013,01226th
fiscal
第26期
第26期
period
（18/4期）（18/4(2018/4)
実績
Actual期）

27th
fiscal
第27期
第27期
period（18/10期）（18/10(2018/10)
実績
Actual
期）

実績
2,134

実績
2,475

mn yen13,00628th
fiscal
第28期
第28期
period（19/4期）（19/4(2019/4)
前回予想
実績
実績
forecast
Actual期）
当初予
想2,775 mn yen(6,476 yen per unit)

mn yenProvision of
340 mn yen

13,100

Provision of
299 mn yen

13,37013,65029th
fiscal
第29期
第29期
period（19/10期）（19/10(2019/10)
今回予想
Forecast期）

30th
fiscal
第30期
第30期
period（20/4期）（20/4(2020/4)予想
Forecast
期）

今回予
想

予想

第28期
調布
28th
fiscal KDX虎ノ門
第28期（19/4期）
一丁目ビル センタービル
period
実績
NOI減少
NOI増加
（19/4期）(2019/4)
実績
Actual

その他

第29期
調布
KDX虎ノ門
29th
fiscal第29期（19/10期）
センタービル 一丁目ビル
period
予想
NOI増加
NOI増加
（19/10期）(2019/10)
今回予想
Forecast

その他

第30期

30th
fiscal
第30期（20/4期）period予想（20/4期）(2020/4)予想
Forecast

Dividend excluding
one-time increase
due to gain onsale of real estate

Note 1：Figures per unit are calculated based on the number of investment units issued and outstanding as of the end of each fiscal period. The same applies hereinafter
Note 2：The balance of reserve for reduction entry is calculated by either adding provision of reserve for reduction entry or subtracting reversal of reserve for reduction entry stated on Basis for Calculating Cash Distribution for the
relevant fiscal period to/from the balance of reserve for reduction entry on the balance sheet as of the end of the relevant fiscal periods

4Portfolio appraisal profit and NAV per unit
Appraisal profit expanded to 71.0 billion yen due to an increase in appraisal value and continuous asset reshuffle
Raised NAV per unit by 8.9% year over year

Changes in portfolio appraisal profit amount and ratio (Note 1)

Changes in NAV per unit (Note 2)• Both appraisal profit amount and ratio reached a record highsince listing at the end of the 28th fiscal period (2019/4)
（億円）
(bn
yen)

(%)

17.6

800
80.0

含み益額（左軸）
Appraisal profit amount (left axis)
含み益率（右軸）
Appraisal profit ratio (right axis)

18.0

(yen)

+8.9%

700,000

687,000

654,000
15.0

13.9

650,000

600
60.0

631,000
11.9

615,000
12.0

10.9

600,000
400
40.0

8.6

596,000

9.0
550,000
6.0

200
20.0
500,000
3.0

0
0.0

331

415

472

570

710

24th
fiscal第24期
period
（17/4期）(2017/4)

25th
fiscal第25期
period（17/10期）(2017/10)

26th
fiscal第26期
period
（18/4期）(2018/4)

27th
fiscal第27期
period（18/10期）(2018/10)

28thfiscal第28期
period（19/4期）(2019/4)0.0

450,000

24th
fiscal第24期
period
（17/4期）(2017/4)

25th
fiscal第25期
period（17/10期）(2017/10)

26th
fiscal第26期
period
（18/4期）(2018/4)

27th
fiscal第27期
period（18/10期）(2018/10)

28thfiscal第28期
period（19/4期）(2019/4)

Note 1: Appraisal profit amount is calculated by subtracting book values from appraisal values for all properties owned as of the end of relevant fiscal periods
In addition, appraisal profit ratio is calculated by dividing appraisal profit amount by book value as of the end of relevant fiscal periods (rounded to the first decimal place)
Note 2: NAV per unit is truncated to the nearest thousand yen after subtracting the amount of DPU

5

Section 2
28th fiscal period (2019/4) results,
29th fiscal period (2019/10) earning forecasts and30th fiscal period (2020/4) earning forecasts

6

Outline of 28th fiscal period (2019/4) financial results
Further increased revenues from the existing properties, and also improved rental NOI
Booked gain on sale same as previous fiscal period, contributing to growth of dividends and further accumulated
reserve for reduction entry
28th fiscal period (2019/4) actual
27th fiscal
period(2018/10)
Actual(mn yen)

28th fiscal
period(2019/4)
Forecast

28th fiscal
period(2019/4)
Actual(announced on
Dec. 12, 2018)

28th (actual) 28th (actual)
vsvs27th (actual)
28th
Difference(forecast)Difference

A

B

C

C-A

C-B

Operating revenue

15,42015,246

15,212

1 -2081-34

Operating expense

8,271

8,099

8,039

2 -232

2-59

Operating income

7,148

7,147

7,172

+24

+25

Ordinary income

6,109

6,137

6,179

+70

+42

Net income

6,107

6,136

6,178

+70

+42

DPU (yen)

13,458

13,62013,719+261+99

Provision (+)/reversal (-) ofreserve for reduction entry

+340

+299

+299

-

-

Gain/loss on sale ofreal estate

532

Rental NOIInterest expense, etc.

Comparison against 27th fiscal period (2018/10) actual
1 Decrease in operating revenue
Increase in revenue from existing properties
Decrease in revenue from utility expense due toseasonal and other factors
Decrease in operating revenue of Senri LSC
Bldg. Hall
Decrease in dividend income

2 Decrease in operating expense

565

10,055

10,073

10,084

998

974

957

3

4

+32

+1

+29

+11

-40

-16

+65 mn yen-200 mn yen-39 mn yen-34 mn yen-232 mn yen

Decrease in repair/maintenance expense-165 mn yen

Decrease in utility expense due to seasonal andother factors-119 mn yen

Increase in brokerage fees

+42 mn yen

3 Booking and disappearance of gain onsale of real estate
4 Reduction in interest expense, etc.

+32 mn yen-40 mn yen

Comparison against 28th fiscal period (2019/4) forecasts
1 Decrease in operating revenue

563-208 mn yen

Increase in revenue from existing properties
Decrease in revenue from utility expense due toseasonal and other factors

2 Decrease in operating expense
Decrease in repair/maintenance expense
Decrease in utility expense due to seasonal andother factors-34 mn yen+35 mn yen-68 mn yen-59 mn yen-18 mn yen-41 mn yen

7Outline of 29th (2019/10) and 30th (2020/4) fiscal periods earnings forecasts
Expect rental NOI to steadily increase thanks to contribution of property acquisition while expect decline in revenue and income
due to disappearance of gain on sale
Boost up rental NOI through gradual resolution of temporary revenue decline from tenant turnover

29th (2019/10) and 30th (2020/4) fiscal periods forecasts (mn yen)

Operating revenue
Operating expense

28th fiscal
period(2019/4)
Actual29th fiscal
period(2019/10)
Forecast

A

B

C

15,212

15,04815,0998,039

30th fiscal 29th (forecast) 30th (forecast)periodvsvs(2020/4)
28th (actual) 29th (forecast)
Forecast
Difference
Difference

8,324

B-A

8,260

1
2

C-B

-164
+285

1
2

+50
-64

Operating income

7,172

6,723

6,839

-449

+115

Ordinary income

6,179

5,730

5,850

-449

+119

Net income

6,178

5,729

5,849

-449

+119

DPU (yen)

13,71913,37013,650

-349

+280

+299

-

-

-

-

Provision (+)/reversal (-) ofreserve for reduction entry
Gain/loss on sale of realestateRental NOIInterest expense, etc.

565

-

-

10,084

10,18810,362

957

978

973

3

-565

-

+104

+173

+20

-4

Comparison between 28th fiscal period (2019/4)
actual and 29th fiscal period (2019/10) forecasts
1 Decrease in operating revenue
Decrease in revenue from existing properties(due to free rent period for large tenants, etc.)
Revenue contribution of an acquired property
in 29th fiscal period
Increase in revenue from utility expense due toseasonal and other factors

2 Increase in operating expense
Increase in utility expense due to seasonal and otherfactors
Increase in taxes (the property acquired in 27th fiscal
period, etc.)-164 mn yen-48 mn yen+224 mn yen+218 mn yen+285 mn yen+223 mn yen+41 mn yen

3 Disappearance of gain on sale of real estate -565 mn yen

Comparison between 29th fiscal period (2019/10)
forecasts and 30th fiscal period (2020/4) forecasts
1 Increase in operating revenue
Revenue contribution of an acquired property in 29th
fiscal period
Increase in revenue from an existing property(revenue contribution of large tenants, etc.)
Decrease in revenue from utility expense due toseasonal and other factors

2 Decrease in operating expense
Decrease in utility expense due to seasonal and otherfactors+50 mn yen+70 mn yen+139 mn yen-139 mn yen-64 mn yen-98 mn yen

8

Memo

9

Section 3
Portfolio overview

10Portfolio growth and changes in the number of properties
Continue selective investment and asset reshuffle with improvement of the portfolio quality in mind
Aim for further growth by keeping an eye on real estate market trends while firmly maintaining investment criteria

Portfolio growth (based on total acquisition price) and the number of properties (Note 1) (Note 2)(bn yen)

600.0
6,000

Office(left axis)
オフィスビル（左軸）Residential (left axis)
住宅（左軸）

Centralurban retail (left axis)
都市型商業施設（左軸）その他（左軸）Other (left axis)

物件数（右軸）# of properties (right axis)

97

97

99

(# of properties)
97

98

97

97

94

96

84

83

90

85

77
74

72
68
64

400.0
4,000

69

67

65

80

PO

71

70
67

100

89

PO Fiscal period with public offering (PO)

83

5,000
500.0

97

407.2

420.8

415.8

PO

70

PO
PO

3,000
300.0

60
50

PO
PO

40

35

2,000
200.0

PO

31
PO

30
20

1,000
100.0
10
0

28th
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
21st
22nd
23rd
24th
25th
26th
27th
第1期
第2期
第3期
第4期
第5期
第6期
第7期
第8期
第9期
第10期
第11期
第12期
第13期
第14期
第15期
第16期
第17期
第18期
第19期
第20期
第21期
第22期
第23期
第24期
第25期
第26期
第27期
11月1日
fiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscal（05/10）（06/4）（06/10）（07/4）（08/4）（09/4）（10/4）（11/4）（12/4）（13/4）（14/4）（15/4）（16/4）（17/4）（18/4）
時点
periodperiodperiodperiodperiod （07/10）
periodperiod （08/10）
periodperiod （09/10）
periodperiod （10/10）
periodperiod （11/10）
periodperiod （12/10）
periodperiod （13/10）
periodperiod （14/10）
periodperiod （15/10）
periodperiod （16/10）
periodperiod （17/10）
periodperiod （18/10）
period0(2005/10) (2006/4) (2006/10) (2007/4) (2007/10) (2008/4) (2008/10) (2009/4) (2009/10) (2010/4) (2010/10) (2011/4) (2011/10) (2012/4) (2012/10) (2013/4) (2013/10) (2014/4) (2014/10) (2015/4) (2015/10) (2016/4) (2016/10) (2017/4) (2017/10) (2018/4) (2018/10) (2019/4)

Note 1: The amount and the number of properties are shown as of the end of each fiscal period. Figures are truncated to the nearest 0.1 billion yen. Figures in this material are truncated to the nearest unit unless otherwise stated
Note 2: Classification by use of owned properties has been changed from the 26th fiscal period (2018/4) due to changes in the management guideline on December 1, 2017. The same applies hereinafter

11

Portfolio diversification
Portfolio mainly consisted of mid-sized office buildings with advanced tenant diversification
Plan to maintain approx. 80% investment ratio in the Tokyo metropolitan area
Breakdown by region (Note 2)

Breakdown by asset type (Note 1)
Other
0.6%
(1 property)

Office Bldg.
(Other)14.2%(7 properties)

Other regional areas
18.5%
End of 28th
fiscal period(2019/4)
96 properties

Office Bldg.
(mid-sized)
85.0%(88 properties)

End of 28th
fiscal period(2019/4)
Other Tokyo
metropolitan area
28.5%

Office Bldg.

99.3% (95 properties)

Tokyo central
5 wards
52.8%

Tokyo metropolitan area

81.4%

Breakdown of the number of tenants by leased floor area (Note 3)
300 tsubo or
more
6.9%
200 - less than
300 tsubo
5.4%
100 - less than
200 tsubo
22.2%

End of 28th
fiscal period(2019/4)

Less than 100 tsubo
65.6 %# of tenants:
1,196
Less than 200 tsubo

87.8%
Note 1: Portfolio breakdown by asset type based on acquisition price (truncated to the first decimal place)
Note 2: Portfolio breakdown by region based on acquisition price (truncated to the first decimal place)
Note 3: Based on the number of tenants in each office building. Tenants leasing more than one property are counted as 1 tenant for each building without aggregating by name-base

12

Memo

13

Section 4External growth14

Acquired Property in the 29th fiscal period (2019/10)
Improve portfolio quality and profitability through negotiated transaction supported by the sponsor
Acquired the office building that can meet diverse tenant needs to increase the depth of the portfolio
Chofu Center Building (Acquired on June 14, 2019)

Reasons for acquisition• An office building located about nine minutes walk from “Chofu”
Station which has good access to major stations in Tokyo and islocated in a district where there are many commercial facilities, andadjacent to the residential area that meets the needs for close
placement of residence and workplace

Acquired Property
Chofu Center Building

Acquisition target (entire interest ofcompartmentalized ownership)
Acquisition target (co-ownership interest ofcompartmentalized ownership)
Office compartment

Retailcompartment
Parking compartment

Acquisition price8,700 mn yen

Appraisal value

9,920 mn yen

NOI yield (estimate) (Note 1)

4.8%• Located on the Musashino Plateau, which is relatively resistant toearthquake, and equipped with emergency power generators whichenables operation for 72 hours, having the possibility to meet thedemand of tenants for BCP• Highly convenient for tenants frequently using vehicles in the courseof business as located close to the Chuo Expressway “Chofu IC”
and equipped with parking space for 51 vehicles• Acquired at a lower price, approx. 12% lower than the appraisal
value, through information provision by Kenedix, the sponsor
Effects fromthe acquisition(As of April 1, 2019)

NOI yield after depreciation
4.3%(estimate) (Note 2)
Appraisal NOI yield (Note 3)

5.5%

Total floor area (Note 4)

31,536.86 m2

Completion date (Note 5)

January,1995

Occupancy rate

100%

Improvement ofPortfolio NOI yield after
depreciation (Note 8)(Note 6)

Appraisal profit
expansion

Mid term estimate

Appraisal upon acquisition

End of the 28th
fiscal period(2019/4)

After acquisition(estimate)+390 yen per period+1.2 bn yen

3.7%

3.8%

DPU growth(Note 7)

(As of May 31, 2019)

Note 1: Calculated by dividing estimated NOI after excluding extraordinary factors calculated by the Asset Management Company for the year of acquisition by acquisition price (The figure is rounded to the first decimal place. For yields, the same applies hereinafter).
Note 2: Calculated by dividing estimated NOI after depreciation (estimated NOI – estimated depreciation expenses) by acquisition priceNote 3: Calculated by dividing annualized net operating income (based on the direct capitalization method described in the appraisal report as of April 1, 2019) by acquisition priceNote 4: Total floor area for the whole building is shown. The Property is comprised of total of 3 compartments of office, parking and retail shop & pool, and KDO acquires 61.17% of co-ownership interest in the Property’s land, compartmentalized ownership of the entire
office compartment, and 20.37% of co-ownership interest in compartmentalized ownership of parking compartment. Total occupied area of the office compartment is 18,015.20m2
Note 5: Completion date of compartmentalized ownership building of office compartment is shown.
Note 6: Calculated by subtracting estimated financial cost for debt borrowed to acquire property (3.0 billion yen) from the estimated NOI after depreciation of acquired property, then dividing that by the total number of investment units issued as of the end of the 28th fiscal
period (2019/4) (truncated to the nearest ten yen)
Note 7: Difference between the appraisal value of the acquired property as of April 1, 2019 and the acquisition price is shown
Note 8: Calculated based on portfolio NOI yield after depreciation and acquisition price as of the end of the 28th fiscal period (2019/4) adding the Property’s estimated NOI after depreciation and acquisition price, respectively

15

Office buildings demand in major suburban cities
Focus on a corporate response and impact on office building market associated with changes in social environment
Pay close attention to changes in office building demand in major suburban cities as well as the future progress of polarized rental
market in the Tokyo metropolitan area
Demand changes of office buildings that the AssetManagement Company thinks of

Owned properties and their overview in major suburban cities (Note 1)

Changes in social environment: Properties owned: The nearest stationof each property owned

Decline in working population
due to falling birthrate

Emergence ofthe millennial generation
Penetration of
the work style reform

Advanced technologies

Labor force participation by
women and the elderly

Ensuring work-lifebalancePopularization of mobile
work and RPA (Note 2)

The demand for office buildings in major suburban cities (Note 1)
meeting the changes in social environment may rise

Ikebukuro Sta.

Fuchu Sta.

Good living
convenience andhighly bustling area

High traffic
convenience

5 KDX Funabashi Building

2 KDX Tachikawa Ekimae Building
Tachikawa Sta.

Workplacenear home

1 KDX Omiya Building

Omiya Sta.

Funabashi Sta.

Shinjuku Sta.
Tokyo Sta.

3 KDX Fuchu Building
Shibuya Sta.
Chofu Sta.

Shinagawa Sta.

Chofu Center Building

Features of office buildings in major suburban cities

Overview of Chofu City where the acquired property
is located (Note 3)
216
Population
trendsthousandpersons229

thousandpersons(+6.0%)

2005

2015

75

Changes in thousand
the number of persons
employees
2006(Tokyo (excluding central 5 wards): +8.1%)

Number of114
incoming andthousandoutgoing
persons
passengers at
the nearest station

2008

119

thousandpersons(+4.4%)

201779
thousand

Location
Nearest station

persons(+5.3%)

2014(5 regional urban cities (Note 4): +7.1%)

Number ofmajor officebuildings
suppliedMusashi-Kosugi Sta.

4 KDX Musashi-Kosugi Building

since 2004

1buildingPopulation of
the property’s location(ten thousand persons)
2005

2015

(Increaserate)

Number of incoming andoutgoing passengers at thenearest station(ten thousand persons)(Increase
2008
2017
rate)

Number ofmajor officebuildings
supplied(from 2004)

Properties owned
occupancy rate
End of End of End of
18th FP 23th FP 28th FP

1

Omiya-ku, Saitama
Omiya Station

10.6

11.3

(+6.9%) 47.8

68.7(+43.7%)

4

100% 100% 100%

2

Tachikawa
Tachikawa Station

17.2

17.6

(+2.2%) 30.5

33.1(+8.3%)

1

100% 100% 100%

3

Fuchu
Fuchu Station

24.5

26.0

(+6.0%)

8.6

8.8(+1.7%)

1

97.6% 85.2% 97.2%

4

Nakahara-ku, Kawasaki
Musashi-Kosugi Station

21.0

24.7

(+17.6%) 37.5

46.4(+23.7%)2

95.9% 100% 100%

5

Funabashi
Funabashi Station

56.9

62.2

(+9.3%) 27.1

27.6(+1.8%)

1

100% 100% 100%

Note 1: “Major suburban cities” in this material refer to municipalities in the vicinity of the 23 wards of Tokyo where the Investment Corporation owns properties in the Tokyo Metropolitan and 3 prefectures and a certain office area is formed
Note 2: RPA is an abbreviation for Robotic Process Automation and is a technology that automates business processes on computers on behalf of people
Note 3: The sources of each data are as follows. Population trends: Statistics Bureau, MIC “Population Census”; Changes in the number of employees: Statistics Bureau, MIC “Economic Census”; Number of incoming andoutgoing passengers at the nearest station: MLTI “City Planning Survey”; Number of major office buildings supplied: CBRE Report
Note 4: Sapporo City, Sendai City, Nagoya City, Osaka City, and Fukuoka City
16

Section 5Internal growth17Changes in occupancy and turnover ratio for office buildings
The occupancy rate remained high with the strong tenant demand
Despite increasing turnover ratio mainly due to move-out of the tenant occupying the whole property, achieved steadyprogress in filing vacancies

Occupancy rate performance of office buildings (Note 1)
Occupancy rateduring fiscal period(estimate)

Actual occupancy rate
(excl. free rent area)

Occupancy rate(contracted area based)

(%)
100.0

99.1

99.0

97.8

Ave. 99.2%

Ave. 98.8%• New tenants have been already determined for more than 80%
of move-out areas in 28th fiscal period (2019/4)■Major properties from which tenants moved-out

99.3

KDX Shibuya Nanpeidai Building: 0.9%
KDX Toranomon 1Chome Building: 0.7%

2.0%

1.9%

1.8%

2.5%

30th fiscal
period

99.2

99.1

1.1%

29th fiscal
periodTurnover ratio (annualized) ofoffice buildings (Note 2) (Note 3)

98.0
97.3

3.2%
95.0

6.7

97.3

97.3

96.5

KDX Toranomon
1Chome Building: 2.0%

6.4

5.7

94.6

4.4

Actual occupancy rateduring fiscal period(estimate)

90.0
25th fiscal
period averageoccupancy rate
98.4%

26th fiscal
period averageoccupancy rate
99.2%

27th fiscal
period averageoccupancy rate
99.1%

29th fiscal
period30th fiscal
periodAve. 96.6%

Ave. 97.3%

3.6
3.2

28th fiscal
period averageoccupancy rate
99.1%

85.0
第24期
End
of 24th（17/4期）末fiscal period

第25期
End
of 25th（17/10期）末fiscal period

第26期
End
of 26th（18/4期）末fiscal period

第27期
End
of 27th（18/10期）末fiscal period

第28期
End
of 28th（19/4期）末fiscal period

第29期
End
of 29th（19/10期）末fiscal period(2017/4)(2017/10)(2018/4)(2018/10)(2019/4)(2019/10)
想定
Estimate

第24期
24th
fiscalperiod
（17/4期）

第25期
25th
fiscalperiod（17/10期）(2017/4)(2017/10)

第26期
26th
fiscalperiod
（18/4期）(2018/4)

第27期
27th
fiscalperiod（18/10期）

第28期
28th
fiscalperiod（19/4期）(2018/10)(2019/4)

第29期
29th
fiscalperiod（19/10期）(2019/10)
想定
Estimate

Note 1: Occupancy rate (contracted area based) is calculated by dividing contract based leased area by leasable area, and actual occupancy rate (excl. free rent area) is calculated by subtracting free rent area from leased area thendividing that area by leasable area. The figures are rounded to the first decimal place. Average occupancy rate of office buildings during each fiscal period is a simple average of month-end occupancy rates of owned officebuildings during each period. The estimated average occupancy rate for the 29th fiscal period (2019/10) and the 30th fiscal period (2020/4) is the figure that is used as part of the assumptions for the earnings forecasts
Note 2: Turnover ratio is calculated and annualized as follows: (Total leased area of the end-tenants who cancelled their lease agreements during the six-months period from the beginning to the end of each period) / (Averageleasable area of all office buildings owned by KDO as of each month-end during the relevant period) x 2. Figures are rounded to the first decimal place
Note 3: Estimate for the 29th fiscal period (2019/10) is based on the cancellation notice, etc. received by May 31, 201918

Trends in move-ins/outs and rent changes upon tenant turnover for office buildings
Steady progress in filling vacancies backed by a favorable rental property market
Continue to raise rent revenue due to free rent period reduction and rise in unit rent
Changes in main indices of tenant move-ins/outs

Changes in monthly rent upon tenant turnover (Note 3)

Tenant move-in and move-out areas and the number of tenants (Note 1)(mn yen)( ) Number of move-in( ) Number of move-out

space leased (tsubo)
入居面積

space vacated (tsubo)
退去面積

(71)
5,123

(62)

Total rent
increase

(45)

4,487

(45)
(31)

3,962

Total rent
decrease

3,269

5.3

5.0

3.5

5.5

12.1

-8.3

-1.5

-1.0

-1.0

-1.0

25th
fiscal第25期
period（17/10期）(2017/10)

26th
fiscal第26期
period
（18/4期）(2018/4)

27th
fiscal第27期
period（18/10期）(2018/10)

28thfiscal第28期
period（19/4期）(2019/4)

50.8%

70.0%

69.8%

82.1%

2,208
24th
fiscal第24期
period
（17/4期）% of the number (2017/4)-3,783-2,428-2,184(35)(27)

of rent increase
contracts upontenant turnover-3,097(48)

Changes in unit rent upon tenant turnover (Note 4)-4,751

(49)

52.3%

(44)

18,213(yen/tsubo)

New unit rent
新規テナントの賃料単価
24th fiscal
第24期
period
（17/4期）(2017/4)

25th fiscal
第25期
period（17/10期）(2017/10)

26th fiscal
第26期
period
（18/4期）(2018/4)

27th fiscal
第27期
period（18/10期）(2018/10)

28th fiscal
第28期
period（19/4期）(2019/4)

FR period (# of month) (Note 2)
Tokyo
Central 5 wards
Tokyo
Metropolitan area
(excluding Tokyo

4.3

3.6

3.6

2.4

1.9

3.2

2.7

2.8

3.3

2.7

4.6

2.7

2.5

1.7

0.9

central 5 wards)

Other
regional areas

従前テナントの賃料単価
Previous unit rent
15,752
excluding the impact
of KDX Tranomon
1chome Building

14,245

14,713+20.3%

14,692
15,1401.2

14,353
13,58913,65013,61224th
fiscal第24期
period
（17/4期）(2017/4)

25th
fiscal第25期
period（17/10期）(2017/10)

26th
fiscal第26期
period
（18/4期）(2018/4)

27th
fiscal第27期
period（18/10期）(2018/10)

28thfiscal第28期
period（19/4期）(2019/4)

Note 1: The number of tenants and leased area are calculated based on floor. In case that an end-tenant move-out from/move-in to multiple floors, the number is counted by floor
Note 2: Rent-free period refers to a period from the start date of contract until the start date of contracted full rent. Above figures are monthly average and are expressed in terms of month by dividing by 30 days (truncated to the firstdecimal place). The analysis is based on office floors on the 2nd floor or above and excludes buildings that were newly acquired during the relevant fiscal periods
Note 3: Total amount of increases/decreases in monthly rent before and after rent revision for each fiscal period is respectively aggregated for the spaces where the rents paid by new tenants and by previous tenants can be compared
Note 4: New unit rent is an average unit rent calculated based on aggregated rents and areas for the spaces where rents paid by new tenants and by previous tenants can be compared for each fiscal period of “Tenant move-in andmove-out areas and the number of tenants”. Previous unit rent is an average unit price calculated based on aggregated previous rent units and areas for the spaces where new rent units are calculated

19

Leasing strategy to support internal growth
Aim to increase rent revenue by raising unit rent through tenant turnover
Respond to changes in work style of office workers and capture new needs for coworking space etc.
Tenant turnover at KDX Toranomon 1chome Building

Tenant turnover at KDX Shibuya Nanpeidai Building■Occupancy rate
(Based on leased area)■Tenant occupancy(as of the end of April 2019)11F

197.0810F

246.13

9F

246.138F

246.13(vacant from Aug. 31, 2019)7F

246.13

Occupied
Under negotiation withcandidate tenants

since Jul. 1, 2019
WeWorkUnder negotiation withcandidate tenants

6F

246.13

5F

246.13(vacant from Aug. 31, 2019)4F

246.13

3F

246.13since Apr. 26, 2019
WeWork

2F

246.13

Occupied

1F

61.82

Occupied

Before WeWork contract
After WeWork contract

100%

100%

under
negotiation

80.1%

60.2%

62.2%

Seek fornew tenants

3・4F/10・11F(Move-out on Mar. 31
and Jun. 30, 2019)

Move-in of WeWork
5・6F/8・9F(Move-out on Aug. 31, 2019)

Under negotiation
with candidate tenants

Increase rate due totenant turnover (Note)

Appraisal value
increase rate

22.4%
2019年
End of
3月末
Apr.
2019

End of
2019年
Jun.
2019
6月末
Estimate

End of
2019年
Aug.
2019
8月末
Estimate*Leasable area(tsubo)Received
cancellation
notice fromseveral tenants• The tenant occupying the whole building decided tomove to newly-built property• Contracted with new tenant to lease the wholebuilding without vacancy period and free rent period
given the rarity of vacancy in the Shibuya area
• New contracted unit rent is higher than theestimated unit rent at the time of acquisition of theProperty in August 2017 by approx. 10%• Continued to negotiate with several tenants whose rents were
below the market level, but not reached an agreement• Sequentially received cancellation notice from the above tenants
after September 2018, and expected occupancy rate to fall
22.4% as of the end of August 2019
• Began negotiations with WeWork to obtain a contract in theprocess of seeking for tenants with an eye on the needs fromcoworking space aimed at raising new unit rent

28th fiscal period (2019/4)+20.9%

Periodover period+2.4%

Note: Calculated by dividing a difference between new and previous rents by previous rent(rounded to the first decimal place)

Response to the demand for coworking space andsatellite office• Flexibly capture the demand for coworking space and satellite office which are
increasing the presence as influential tenant of office buildings in recent years,
and respond to changes in social environment such as workstyle reform andtelework development• Concluded a long-term fixed lease agreement with unit rent
38.5% higher than the previous tenant on the conditions to bearpart of move-in construction work expenses and provide a certain
free rent period• Currently continue negotiations to recover occupancy rate early
and raise unit rent
©WeWork (ref.：WeWork Marunouchi Kitaguchi)©XYMAX Corporation (ref.：ZXY Mitaka)

20

Status of rent revisions with existing tenants
Further acheived upward rent revision and had a certain prospect for increase in rent revenues in and after the
next fiscal period
Delivered steady results through negotiations on rent revisions based on detailed tenant analysis
Changes in rent upon rent revisions (based on monthly rent)(thousand yen)

Increase in rent

(Note 1)

Status of rent revisions (based on leased floor area)

Decrease in rent

27thfiscal period(2018/10)
282

9,051
8,492
7,034

6,826

6,622
5,977

Rent decrease
(2)
0.6%

No change(Higher thanmarket rent)
(72)
17.5%

Rent decrease
(1)
1.2%

No change(Higher thanmarket rent)
(60)
17.1%

Rent
increase
(62)
27.1%

Rent
increase
(83)
30.4%

28th
fiscal period(2019/4)305
No change
(148)
51.6%

No change
(159)
54.5%

Negotiation
target( ) Number of case

Changes in the number of rent increase contracts andrent increase rateTokyo
central 5 wards
都心5区-1,065-409-472

25th fiscal
第25期
period（17/10期）(2017/10)

26th fiscal
第26期
period
（18/4期）(2018/4)

-402

62
43

27th fiscal
第27期
period（18/10期）(2018/10)

28th fiscal
第28期
period（19/4期）(2019/4)

83

72-2,03224th fiscal
第24期
period
（17/4期）(2017/4)

Other
areas
都心5区以外29th fiscal
第29期
period（19/10期）(2019/10)
Onward以降確定分
confirmation
Confirmed as of
May 17, 2019

42

51
41

38

18

25

25

26

31

24

24th
fiscal第24期
period
（17/4期）(2017/4)

25th
fiscal第25期
period（17/10期）(2017/10)

26th
fiscal第26期
period
（18/4期）(2018/4)

27th
fiscal第27期
period（18/10期）(2018/10)

28thfiscal第28期
period（19/4期）(2019/4)

7.8%

6.2%

5.8%

5.7%

Rent increase rate
(incremental average) 10.8%

41(Note 2)

Note 1: Difference in monthly rent before and after rent revision in each fiscal period is calculated by aggregating the change amount per contract in each fiscal period (rounded to the nearest thousand yen)
Note 2: Rent increase rate is calculated by dividing the sum of increase in monthly rent by the sum of monthly rent before revision (rounded to the first decimal place)21

Rent gap of KDO office buildings
Market rent continued to rise and rent gap also remained at the high level
The negative balance of average rent gap is gradually reaching the largest level
Breakdown of rent gaps (based on monthly rent) (Note 1)

Breakdown of rent gaps by rent revision schedule(as of the end of the 28th fiscal period (2019/4), based on monthly rent) (Note 1) (Note 2)

Over+10%159 mn yen(mn yen)Between
0% and +10%

Higher thanmarket rent level

0%~+10%+10%以内

Over
+10%
+10%超

286 mn yen

37
64
39

Between-10% and 0%

121

26
21

47
19

683 mn yen

22
63

177

Lower thanmarket rent level

Lower thanmarket rent level-10%~0%-10%以内

Over
-10%
-10%超

162

74.3%

115
151

136

127

66.3%

87.2%

80.1%

Lower than
-10%

153

136

74.0%

100

158

129

609 mn yen
第28期
Endof 28th（19/4期）末fiscalperiod（注3）(2019/4)

28 / 47 properties (+3.2%)

第30期
30th
fiscal（20/4期）period到来分(2020/4)

第31期
31stfiscal（20/10期）
period到来分(2020/10)

第32期
32nd
fiscal（21/4期）period
到来分(2021/4)

End of 27th
fiscal period(2018/10)

第33期
33rd
fiscal（21/4期）period以降到来分(2021/10)
onwardHistorical average rent gaps (Note 3)(%)
End of 28th
fiscal period(2019/4)

30.0

23 / 48 properties (+3.1%)

Tokyo Metropolitan Area

11 / 29 properties (+4.6%)

15 / 29 properties (+4.3%)

Other Regional Area

11 / 18 properties (+5.0%)

9 / 18 properties (+5.6%)

19.5

21.0
14.4

20.0
10.0

Tokyo central 5 wards

第29期
29th
fiscal（19/10期）
period到来分(2019/10)(Note 3)■ Number of owned properties with increased market rent andperiod-over-period unit rent increase rate
End of 27th
fiscal period(2018/10)

61.0%

32

End of 28th
第28期
fiscal period（19/4期）末(2019/4)

End of 26th
fiscal period(2018/4)

25
59

10.3

4.7

7.1

4.2
-0.6

0.0
-10.0
-20.0

-2.2

-4.3

Largest negative balance since listing

-2.1

-4.2

-6.6

-7.3

-10.7
1st
fiscal 3rd
fiscal 5th
fiscal 7th
fiscal 9th
fiscal 11th
fiscal 13th
fiscal 15th
fiscal 17th
fiscal 19th
fiscal 21stfiscal 23rd
fiscal 25th
fiscal 27th
fiscal 28th
fiscal
第1期
第3期
第5期
第7期
第9期
第11期
第13期
第15期
第17期
第19期
第21期
第23期
第25期
第27期
第28期
period （06/10期）
period （07/10期）
period （08/10期）
period （09/10期）
period （10/10期）
period （11/10期）
period （12/10期）
period （13/10期）
period （14/10期）
period （15/10期）
period （16/10期）
period （17/10期）
period （18/10期）
period （19/4期）
period（05/10期）(2005/10) (2006/10) (2007/10) (2008/10) (2009/10) (2010/10) (2011/10) (2012/10) (2013/10) (2014/10) (2015/10) (2016/10) (2017/10) (2018/10) (2019/4)

Note 1: A new contracted rent (standard floor) for each property estimated by CBRE as of the end of each fiscal period is deemed the market rent; the gap between the contracted rent for each tenant as of the end of the
fiscal period and the market rent is recognized as a rent gap. No gap is classified into "Between 0% and +10%"
Note 2: Regarding the office buildings owned by KDO as of the end of the 28th fiscal period (2019/4), distribution of the rent gaps between the contracted rent for each tenant and the market rent estimated by CBRE as of theend of the 28th fiscal period (2019/4) by the timing of rent revisions for each tenant. The rents equal to market rents are classified into "Between 0% and +10%“
Note 3: Calculated as the weighted average, based on leasable floor area, of the gap rate between the average contracted rent of the standard floor for the office buildings owned by KDO as of the end of each fiscal period
and the market rent for each property estimated by CBRE at the time of appraisal

22Construction expense (actual/budget)
Strategically allocate funds to value-upgrading works currently in order to improve the property profitability
Aim for significant increase in rent revenue in the future by booking one-time tenant move-in construction work
budget in the 29th fiscal period (2019/10)
Repair/renovation work budget for 29th fiscal period(2019/10) (Note)

Changes in depreciation and construction expense(actual/budget)(mn yen)■Repair/maintenance■Capex■Depreciation

2,500
2,295

2,293

2,288

2,462

2,428

2,369

2,358

2,121
2,000
434
1,653
1,500

1,455

436

1,784

Items

Description of works

Value-upgrading works

tenant and common areas

Replacement works

Air-conditioning facilities

202

9.5%

Other major facilities
Eco-friendly works(Installation of LED lightings, etc.)
Outer wall repair

465

21.9%

117

5.5%

182

8.6%

Maintenance/repair works

403

19.0%

1,634

1,404

29th fiscal
period(2019/10)
total

422

1,494
403
767
451

Estimated
Percentage of total
amountexpense (%)(mn yen)754
35.6%

Note: Figures are approximate estimates as of the date inwhich repair plan was prepared

568

Percentage todepreciation
expense (%)

2,121

87.4%

1,000
1,686
1,231
500

1,018

953

886

1,362

Properties to undergo major repair/renovation in 29th
fiscal period (2019/10)• Value-upgrading works (renovation of tenant areas, common areas, restrooms, etc.):

925

KDX Toranomon 1chome Building, KDX Sakura-dori Building, KDX Sapporo Kitaguchi Building,
KDX Nakameguro Building• Replacement works of air-conditioning facilities:
Senri Life Science Center Building, Pentel Building
0
24th fiscal 25th fiscal
第24期
第25期
periodperiod
（17/4期）(2017/4) （17/10期）(2017/10)
実績
実績
actualactual26th fiscal 27th fiscal
第26期
第27期
periodperiod
（18/4期）(2018/4) （18/10期）(2018/10)
実績
実績
actualactual28th fiscal 29th fiscal
第28期
第29期
periodperiod（19/4期）(2019/4) （19/10期）(2019/10)
実績
予算
actualbudget30th fiscal
第30期
period（20/4期）(2020/4)
予算
budget• Outer wall repair
KDX Ebisu Building, KDX Sapporo Kitaguchi Building, Senri Life Science Center Building,
KDX Yoyogi Building, KDX Hakata-Minami Building, KDX Nakameguro Building

23

Initiatives for improving profitability
Aim for improving property competitiveness and tenant satisfaction through strategic value-upgrading works
Seek to raise properties profitability by continuously reducing cost as wellRenovation of common areas of KDX Shinjuku Building• 25 years have passed since the completion, and unrenovatedcommon areas became deteriorated and obsolete• Considered it possible to raise rent by renovation because of highpotential competitiveness• Renovated rest rooms, elevator hall, etc. to recover and improved the
profitability
BeforeAfter

Return on
investment (Note 1)

13.6%
Renovation of tenant area on the first basement floor of
KDX Utsunomiya Building• The restaurant on the first basement floor moved out at the end of
February 2019 due to decrease in sales• Despite expectations for long-term vacancy on the back of difficulty in
re-attraction of tenants for store use due to changes in the market
environment, attracted rental conference rooms through strategic usagechange• Realized improvement of current tenant convenience and revival of
profitaility
BeforeAfter

Return on
investment (Note 2)

15.7%

Response based on the CS survey
Renovation of air-conditioning facilities
at KDX Ikebukuro West Building

Renovation of elevators at
KDX Okachimachi Building• Renovated air-conditioning
facilities of the wholebuilding to resolve frequent
defects due to aging andimproved tenantsatisfaction• Together with renovation
for preventive
maintenance, renovatedelevator interior including
display board to improve
aesthetics

Replacement works of security systems at
KDX Nakano-Sakaue Building

Addition of smoking room at
KDX Ginza East Building• Partially renovated trasharea and added smoking
room to separatesmoking areas within thebuilding• Replaced the existing
securities system using
magnetic cards with one
using contact-free IC
cards to enhance
conveniences for tenantsContinuous efforts for reduction in electricity cost (Note 3)• Regularly made contract reviews of electricity cost that account for major ratio in property
management expense• Reduced the electricity charges by approx. 76 million yen per fiscal period in total through acontract reviews from the 26th (2018/4) to the 28th (2019/4) fiscal periods• Lowering electricity charges through competitive bidding involving multiple companies is
expected to further reduce electricity costs after switching power companies scheduled for
October 2019
Outlook for reductionof electricity cost
after the switchingin Oct. 2019

Properties
reviewed

42 properties

Reduced amount(estimate)
Approx.

51 mn yen/period

Note 1: Calculated the whole building’s rent increase per year based on the gap between unit rent of the office area as an appraisal value as of the end of the 27th fiscal period (2018/10) which is after the completion of
construction work and that as of the end of the 26th fiscal period (2018/4) which is before the start of construction work and divided by construction expense (rounded to the first decimal place)
Note 2: Calculated the whole building’s rent increase per year based on the gap between unit rent of the tenant moved in after construction work and that of the tenant moved out before constriction work and divided byconstruction expense (rounded to the first decimal place)
Note 3: The gap between actual electricity charges over the past year and the electricity charges where the contract terms after review are applied to the electricity usage over the same period24End-tenants of KDO office buildings
The largest tenant occupies 2.4% of total leased floor area and each of tenants other than the top 5 occupies less than 1.0%
A highly diversified tenant base with the top 10 tenants occupying around 10% of the total leased floor area

List of top end-tenants for office buildings

Average rent for office buildings by area (Note 2)(as of the end of the 28th fiscal period (2019/4))
Tenant nameLeasedarea(tsubo)% share ofleased floorarea (Note1)

1 Mitsubishi Heavy Industries, Ltd.

3,408.4

2.4% Mitsubishijuko Yokohama Bldg.

Tenant A(wholesale, retail and dining)

1,550.8

1.1%

2

24th fiscal period 26th fiscal period 28th fiscal period(2017/4)(2018/4)(2019/4)

Name of property

KDX Kawasaki-Emimae
Hon-cho Bldg.

Tenant B
3(service provider)

1,469.2

KDX Musashi-Kosugi Bldg.
1.0%
KDX Hiroshima Bldg.

4 ADK Creative One Inc.

1,427.8

1.0% KDX Toranomon 1 chome Bldg.

5 JASTEC Co., Ltd.

1,304.6

0.9% KDX Takanawadai Bldg.

6 Yokohama City

1,237.7

0.9%

15,100 yen

15,700 yenJapan

14,300 yen

14,800 yen(based on # of tenants) (Note 3)

Customer relation
telemarketing, CO,LTD

1,201.3

0.9% KDX Higashi Umeda Bldg.

8

Tenant C(service provider)

1,080.1

0.8% KDX Musashi-Kosugi Bldg.

Finance, Insurance
51, 4.5%

9 Medical Corporation DOYUKAI

1,022.4

0.7% Koishikawa TG Bldg.

Individual
57, 5.1%

Tenant D(wholesale, retail and dining)

912.2

0.6% Harajuku F.F. Bldg.

Manufacturing
150, 13.3%

Total

14,614.5

10.4%(+100 yenperiod over period)

Tenant diversification by type of business

7

10(+200 yenperiod over period)

15,300 yen

Transportation,
Communication
34, 3.0%
Real Estate49, 4.3%
Construction
50, 4.4%

Mitsubishijuko Yokohama Bldg.
KDX Yokohama Kannai Bldg.

16,300 yen

Tokyo
metropolitan area

Public sector (other)4, 0.4%Mining1, 0.1%
Infrastructure
1, 0.1%# of tenants
1,127

Service provider
472, 41.9%

Wholesale,
Retail, Dining
258, 22.9%

Note 1: Leased area of each end-tenant against total leased floor area of KDO portfolio as of the end of the 28th fiscal period (2019/4) (rounded to the first decimal place)
Note 2: Average rent is calculated by dividing total amount of contracted rents of office buildings for each area by the total leased floor area (rounded down to the nearest hundred yen)
Note 3: The chart shows the breakdown of tenants by type of business based on the total number of tenants in office portfolio (aggregated by name-base) as of the end of the 28th fiscal period (2019/4) (rounded to the first decimal place)25Section 6
Efforts for ESG

26

Efforts for ESG ①
Efforts for Environment
GRESB Real Estate Assessment

Issuance of green bonds• Acquired "Green Star" rating for 7 consecutive years as aresult of our efforts for improving sustainability performance• Issued KDO’s first green bonds in February 2019 with an aim for committed
efforts to improve sustainability and further contribution to development of
the domestic green bond market by offering opportunities to the universe ofinvestors who take active stance towards ESG investment• Earned the next highest-rated “4 Stars” in GRESB rating• Participated from 2011 as the first J-REIT participant

DBJ Green Building Certification• Acquired new certifications for four properties including
KDX Ochanomizu Building in the 28th fiscal period, andimproved from “two stars” to “three stars” for four
properties, including KDO Ikebukuro Building, mainly due torenovation of common areas• Obtained the third-party evaluation from Sustainalytics and “Green 1” fromJapan Credit Rating Agency, Ltd. (“JCR”), the highest evaluation in its “JCR
Green Bond Evaluation”

Use of proceeds of green bonds
DBJ Green
Building
Certification• A total of 24 properties in our portfolio were awarded DBJ
Green Building Certification, including KDX Toranomon
1chome Bldg. which earned the highest-rated “five stars”
EnergyCertification for
CASBEE forReal Estate

BELS
Certification
★★★★★
★★★★
★★★
★★
★

★★★★★
★★★★
★★★
★★
★

Water

Other environmentally
beneficial refurbishment

Top 3 certification ranks
Funds, repayment of the borrowings
and redemption of investment
corporation bonds to acquire properties
that meet the above condition

At least 10% reduction in
consumption
Expense of facilities refurbishment thatare expected to meet the above effectCertification for CASBEE for Real Estate• ARK Mori Bldg., KDX Toranomon 1chome Bldg. KDX
Karasuma Bldg., KDX Kobayashi-Doshomachi Bldg. and KDX
Shinjuku Bldg. were ranked S, the highest rating, by CASBEE

BELS Certification• In October 2014, KDX Musashi-Kosugi Bldg. was awarded a
BELS Certification (three stars) for the first time in history asa J-REIT owned property• In April 2016, KDX Iidabashi Square was awarded a BELS
Certification (three stars)

Outline of Tenth Series Unsecured Investment
Corporation Bonds (Green Bonds)
Issue dateFebruary 15, 2019

Total issue
amount2.0 billion yen

Maturity

5 years

Interest rate

0.390% per annum

Use ofproceeds

Repayment of the borrowings made to acquire KDX
Kobayashi-Doshomachi Building and KDX Toranomon
1chome Building, awarded “three stars” and “five stars,”
respectively, of DBJ Green Building Certification27

Efforts for ESG ②
Efforts for Social
Execution of green lease agreement• Green lease agreement has a structure where
KDO made LED lighting installation works for atenant office space at the expense of KDO anda certain ratio of a reduced amount of electricity
charges, etc. is paid back from tenant in return• Concluded with 28 tenants in 6 properties sinceJune 2015 as it allows both KDO and tenants toshare economic merit and reduce
environmental burden

Efforts for Governance

Structure of green lease (image)
Tenant’s
maintenance cost

Electricity
chargeCost
reductioneffectGreen Lease
Fee paid to
KDO

Asset management fee structure of the Asset Management Company• Changed the asset management fee structure of Asset Management Fees I
through III in the 27th fiscal period to further enhance the linkage between theasset management fees and unitholder profits
Asset Management Fee I

Total assets x 0.13%

Asset Management Fee II

Distribution per unit (Note 1) x 23,000

Asset Management Fee III
Electricity
chargeグリーンリース
BeforeAgreement
契約前

グリーンリース
After
Agreement
契約後

Distribution of emergency action manual handbook• Published a pocket-sized, portable emergency
action manual handbook and distributed totenants

Acquisition Commission
Sale Commission

Increase in distribution per unit (Note 2) x Number of outstanding
investment units x 10%
Acquisition price x 0.5%
(0.25% for acquisition from related parties)
Sale price x 0.5% at a maximum

Note 1: Calculated by dividing the pre-tax income before deducting Asset Management Fees II and III by the number ofoutstanding investment units as of the end of the relevant fiscal period. In case there is a loss carried forward, the loss isdeducted from the pre-tax income
Note 2: Obtained by subtracting simple average of DPU for the most recent 4 fiscal periods from DPU. If the amount subtracted
does not exceed zero, Asset Management Fee III shall be zero

Decision-making process with transparency andcheck-and-balance system• Contain various helpful information in an
emergency across 17 pages, such as response
to major earthquake, emergency relief activities,
and how to use AED• The Asset Management Company creates management guidelines of KDO, and sets
forth basic investment management guidelines, including investment policy, related
party transaction rules, distribution policy and disclosure policy, regarding the asset
management of KDO

Sponsor’s signing on to the Principles for Responsible
Investment (“PRI”) supported by the United Nations• Furthermore, as set forth in the management guidelines, the Asset Management
Company creates asset management plans, etc. (including medium-term businessplans and annual business plans as well as asset management plans) and makes
decision of property acquisition, according to investment policy set forth in the
management guidelines and related party transaction rules• Kenedix, Inc., the parent company of the AssetManagement Company, became a signatory to“the Principles for Responsible Investment (PRI)”
supported by the United Nations• The Investment Corporation and the AssetManagement Company share the Kenedix
Group’s philosophy, promote sustainability
initiatives and aim for compatibility between
sustainable growth and social responsibility under
the commitment to responsible investment• The decision-making flow for establishing and revising the management guidelines
and asset management plans, etc. and that pertaining to acquisition and sale ofassets are shown below
Proposal

Office REIT
Department

Deliberation
and Resolution

Review

Compliance
Officer

Relatedparty
transactions,etc.

Compliance
Committee

Deliberation
and Resolution

Deliberation
and Resolution

Investment
Office REIT
RelatedCorporation's
party
Department
transactions,Board of
Asset
etc.
Directors
Management
Committee

ReportBoardof Directors

28

Memo

29

Section 6
Financial strategy

30

Status of debt financing
Decrease financial cost at refinancing while paying attention to the trend of interest rate and balancing borrowing period
Seek to reduce refinancing risk through strategic diversification of debt maturities

Refinance record for the 28th fiscal period (2019/4)(Total amount of 10.0 bn yen) (Note 2)

Average interest rate and remaining period to maturity (Note 1)• Reduced financial cost through refinancing and extended
borrowing period

平均金利（融資実行手数料を含む）（左軸）
Weighted average interest rate (incl. up-front fee)
1.46%

1.45%

1.25%

第19期
End
of 19th（14/10期）末fiscal period(2014/10)
Averageremaining
period tomaturity (year)

Conditions before
refinancing

1.39%
1.19%

1.16%

1.10%

1.07%

1.06%

1.04%

第20期
End
of 20th（15/4期）末fiscal period(2015/4)

第21期
Endof 21st（15/10期）末fiscal period(2015/10)

第22期
Endof 22nd（16/4期）末fiscal period(2016/4)

第23期
Endof 23rd（16/10期）末fiscal period(2016/10)

第24期
Endof 24th（17/4期）末fiscalperiod(2017/4)

第25期
Endof 25th（17/10期）末fiscal period(2017/10)

第26期
Endof 26th（18/4期）末fiscalperiod(2018/4)

第27期
Endof 27th（18/10期）末fiscal period(2018/10)

第28期
End
of 28th（19/4期）末fiscalperiod(2019/4)

4.1

4.3

4.7

4.9

4.7

5.0

5.2

5.2

5.0

3.6

Average interest rate

0.98%

0.60%

Average borrowing
period3.9 years

4.9 years• Long-term borrowings account for 4.3 bn yen in the refinance(average interest rate of 0.94%, average borrowing period of
10.0 years)

Interest-bearing debt by maturity(excl. short-term borrowings)
29th
30th
31st
32nd
fiscal period fiscal period fiscal period fiscal period(2019/10)(2020/4)(2020/10)(2021/4)

Balance of interest-bearing debt by maturity
Short-term borrowings
Corporate bonds
Long-term borrowing
Total interest-bearing debt

(bn yen)
12.7
2.2

11.8

10.1

8.2

8.1

2.0

1.0
10.5

6.2

10.1

11.8
9.5

4.2 bn yen
8.0 bn yen
169.8 bn yen
182.0 bn yen

9.0
6.7

10.8

11.5

7.1
3.8

4.7

Averagefinancial cost

10.5 bn yen 10.1 bn yen

0.97%

0.94%

9.5 bn yen

1.06%

1.24%

6.2

2.0
5.5

2.0

6.2 bn yen

7.2

2.0
11.3
7.0

1.0

8.3

5.5
3.8

9.9

Balanceof debt maturing

14.0
13.0
11.3

9.9

9.5

Conditions afterrefinancing

10.8

13.0

11.5

4.3

11.0

8.3
6.2

Major indices related to financial stability

7.2
4.3

29th
30th
31st
32nd
33rd
34th
35th
36th
37th
38th
39th
40th
41st
42nd
43rd
44th
45th
46th
47th
48th
fiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalfiscalperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiod(2019/10) (2020/4) (2020/10) (2021/4) (2021/10) (2022/4) (2022/10) (2023/4) (2023/10) (2024/4) (2024/10) (2025/4) (2025/10) (2026/4) (2026/10) (2027/4) (2027/10) (2028/4) (2028/10) (2029/4)

Ratio offixed interest rate (Note 3)

Status of credit rating
(JCR)

96.6%

AA- (stable)

Note 1: Average interest rate and borrowing period are the weighted average based on the balance of debt outstanding as of the end of each fiscal period (with the average interest rate rounded to the second decimal place
and the average borrowing period rounded to the first decimal place)
Note 2: Average interest rate and borrowing period are the weighted average of the interest rate of borrowings (incl. up-front fee) and borrowing period based on the balance of borrowings, respectively (with the averageinterest rate rounded to the second decimal place and the average borrowing period rounded to the first decimal place). Total borrowings that reached maturity in the 28th fiscal period (2019/4) amount to 11.5 bn yen,of which 1.5 bn yen was repaid by cash on hand including the portion of proceeds of the 10th unsecured investment corporation bonds
Note 3: Includes the borrowings with floating interest rate fixed by interest rate swap (rounded to the first decimal place)31Historical changes in LTV and status of interest-bearing debt financing
Maintain stable financial base by keeping LTV at a conservative level with a target of 45%
Newly executed a commitment line agreement with three megabanks as flexible financing methods against future funding needs
Borrowing capacity for acquisition (Note 2)
as of the end of the 28th
fiscal period (2019/4)

Historical LTV (interest-bearing debt ratio) level (Note 1)
（%）
52.0

(in the case of LTV 45% limit)

44.0

45.8

45.3

48.0

47.5

46.2

47.2

48.4

Approx. 26.0 bn yen)
42.8

43.1

42.8

42.8

42.6

43.9

43.3

41.9

40.3

41.7

42.1

40.0
Appraisal-value 35.8
based LTV

36.0
32.0

End
of 13th
第13期
fiscal period（11/10期）末(2011/10)

Endof 14th
第14期
fiscal period（12/4期）末(2012/4)

Endof 15th
第15期
fiscal period（12/10期）末(2012/10)

Endof 16th
第16期
fiscal period（13/4期）末(2013/4)

Endof 17th
第17期
fiscal period（13/10期）末(2013/10)

Endof 18th
第18期
fiscal period（14/4期）末(2014/4)

Endof 19th
第19期
fiscal period（14/10期）末(2014/10)

Endof 20th
第20期
fiscal period（15/4期）末(2015/4)

Endof 21st
第21期
fiscal period（15/10期）末(2015/10)

Endof 22nd
第22期
fiscal period（16/4期）末(2016/4)

Endof 23rd
第23期
fiscal period（16/10期）末(2016/10)

Endof 24th
第24期
fiscal period（17/4期）末(2017/4)

Endof 25th
第25期
fiscal period（17/10期）末(2017/10)

Endof 26th
第26期
fiscal period（18/4期）末(2018/4)

Endof 27th
第27期
fiscal period（18/10期）末(2018/10)

Endof 28th 調布センタービル
After the acquisition
第28期
fiscal periodof Chofu Center（19/4期）末取得後(2019/4)
Building (Note 3)

Note 1: Interest-bearing debt ratio (LTV) is calculated by dividing the balance of interest-bearing debt by the amount of total assets as of the end of each fiscal period. Appraisal-value based LTV is calculated by dividing the balance of interest-bearing debt by thesum of the amount of total assets and appraisal profit/loss of owned properties as of the end of each fiscal period (rounded to the first decimal place)
Note 2: Estimated borrowing amount of debt which can be additionally procured from financial institutions or new issuance of investment corporation bonds for property acquisition by new debt financing, assuming that the LTV can be increased to a certain value
Note 3: LTV after the acquisition of Chofu Center Building on June 14, 2019 is calculated by dividing the sum of the balance of interest-bearing debt as of the end of the 28th fiscal period (2019/4) and the borrowing amount at the time of acquisition (3.0 billion yen)by total assets after the acquisition (estimates)

Investment corporation bonds issued as of the end of
the 28th fiscal period (2019/4) (total of 8.0 bn yen)
Corporate bonds
6th bonds
7th bonds

Issued period
2014/7
2016/4

IssuedamountInterest rate

2.0 bn yen

1.18%

1.0 bn yen

0.90%

10 years
12 years

2017/7

1.0 bn yen

0.26%

5 years

9th bonds

2017/7

2.0 bn yen

0.64%

10 years

10th bonds(green bonds)

2019/22.0 bn yen

0.39%

5 years

Outline of the commitment line agreement(executed on May 31, 2019)
Maximum amount

6.0 bn yen

Contract period

June 3, 2019 to April 30, 2020
Acquisition of assets,
Repayment of the existing borrowings and redemption of
investment corporation bonds
Syndication-type commitment line

Contract typeCounterparty

14 lending financial institutions

Term

8th bonds

Use of proceeds

Outstanding borrowings by financial institutions as of the end of
the 28th fiscal period (2019/4)

Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.,
Mizuho Bank, Ltd.

2.2%
6.2%

26.0%

6.5%

Total
borrowings
6.7%
from financial
institutions
11.1% 174.0 bn yen
20.0%
17.0%

Upon the acquisition of Chofu Center Building
Newly borrowed
1.0 bn yen from
Sumitomo Life
Insurance Company

Total borrowings(including 2.0 bn yen
from other banks)

Financial
institutions

177.0 bn yen

15

Sumitomo Mitsui Banking 45,200 mn yen

26.0%

MUFG Bank

34,800 mn yen

20.0%

Development Bank ofJapan
Sumitomo Mitsui TrustBank
Mizuho Bank

29,550 mn yen

17.0%

19,400 mn yen

11.1%

11,700 mn yen

6.7%

Aozora Bank

11,350 mn yen

6.5%

Resona Bank

10,750 mn yen

6.2%

Mizuho Trust & Banking

3,800 mn yen

2.2%

The Bank of Fukuoka
The Nishi-Nippon CityBank

2,500 mn yen

1.4%

1,700 mn yen

1.0%

The Hiroshima Bank

1,000 mn yen

0.6%

The 77 Bank

1,000 mn yen

0.6%

Higashi-Nippon Bank

800 mn yen

0.5%

The Mie Bank

500 mn yen

0.3%

32

Memo

33

Memo

34

Disclaimer

The contents of this document, including summary notes, quotes, data and other information, are provided solely for
informational purposes and not intended for the purpose of soliciting investment in, or as a recommendation to purchase or sell,
any specific products.
Please be aware that matters described herein may change or cease to exist without prior notice of any kind. This document
contains forward-looking statements and anticipations of future results, based on current assumptions and beliefs in light ofcurrently available information and resources. Risks and uncertainties, both known and unknown, including those relating to the
future performance of the real estate market in Japan, interest rate fluctuations, competitive scenarios, and changing
regulations or taxation, may cause Kenedix Office Investment Corporation (KDO)'s actual results, performance, achievements
and financial performance to be materially different from those explicitly or implicitly expressed in this document.
With respect to any and all terms herein, including without limitation, this document, the information provided is intended to bethorough. However, no assurance or warranties are given with respect to the accuracy or completeness thereof.
Neither KDO nor Kenedix Real Estate Fund Management, Inc. (KFM) shall be liable for any errors, inaccuracies, loss ordamage, or for any actions taken in reliance thereon, or undertake any obligation to publicly update the information contained inthis document after the date of this document.
Revised editions of this document will be posted on our website (https://www.kdo-reit.com/en/) if there should be majorcorrections going forward.

35