Activia Properties Inc.
FP17 Ended May 2020 Q&A Session (Telephone Conference)
Q&A Session Summary

Date: Thursday, July 16, 2020

Q1 ：Is COVID-19 impact in the closed facilities including but not limiting to thosewhich closed their entire facilities, or those which partially closed were also
incorporated into the forecast DPU for the FP18 ending November 2020?
Determined amount seems still not significant, please tell me the negotiation
status.

A1 ：Forecast DPU for the FP18 ending November 2020 incorporate a negative impact
from COVID-19 adding up to ￥1,195. The impact of the whole facility closureof some retail properties had already been factored in FP17, and for the FP18,
we included impact of respective request from other tenants such as rent relief
and else. As you can see the status of negotiation progress in slide 7, we havealready concluded roughly a half of 115 negotiations on temporary reduction.
Determined value for the agreed temporary reduction shown in dark grey color in
the graph at lower left of slide 9 is not significant, which indicates that wehave terminated a half of the negotiations with consuming only a small part of
the amount incorporated into the forecast DPU.
There are few relief requests that we have received for July and after, though
we have to look ahead to the second and third waves of COVID-19. Therefore, wewill continue to negotiate firmly on further requests from tenants to minimize
COVID-19 impact to us.

Q2 ：You mentioned that the increased amount of rent on offices for the FP17 ended
May 2020 was a record-high. Had it already been achieved before the spread of
COVID-19? Or in addition to the part achieved before crisis, is there someportion accomplished amid COVID-19 pandemic? I would like you to talk about itwith reference to current office’s performance in rental increase.

A2 ：As for the rental increase on offices achieved for the FP17 ended May 2020, wehad agreed on most of arrangements before March, and in addition, we could
conclude 11 cases with rent raise from March to May. With a tenant in Shinagawa
area, we have increased rent by 28.5% at contract renewal in May. We see thatrent uptrend has continued in the specific area and properties with strength

although vigor is restricted. There are also a few cases of rental increase attenant replacement in April and after such as an office in Osaka. So, we consider
that the market remains healthy in some parts of our portfolio.

Q3 ：Recently, a discussion on necessity of office space called into question fill
the headlines of some media, saying that office is not required in near future
mainly for IT companies located in Shibuya. Please tell us about actual officedemand with reference to your impression on demand in the greater Shibuya areaamid COVID-19.

A3 ：If I mention the overall trend including Shibuya area, office supply will behistorically low in 2021 and 2022, and we consider that the market will remain
solid with well-balanced demand and supply.
Due to the impact of COVID-19, work from home (WFH) has been verified
progressively, and we are recognizing the industries or businesses more adapted
to WFH than others as well as some underlying problems. We believe that theimportance of office space is also recognized anew, and office space will
coexist with telework maintaining its conventional role. That means office spacebecomes more important not only as a place to perform tasks individually but
also as a communication-oriented place where we share vision, collaborate,innovate and manage people. Therefore, we think properties having a goodaccessibility which facilitate gatherings and offering exciting and energetic
environment will be required. From that perspective, Shibuya area is suitable
for new workstyle, because the center of Shibuya where is attractive andstimulating is also close to living area and office supply is limited.
Temporarily, vacancy rate of Shibuya area has risen slightly, though the numberof tenants in Shibuya is relatively small as each tenant occupies a large officespace, and growing companies wishing to move Shibuya flow into the area. Throughour leasing activities and rental increase effort, we feel the area, Ebisu andGotanda especially has strongly demanded.

Q4 ：Concerning retail properties in the greater Shibuya area, you mentioned that
number of visitors become increasing and the trend so far accelerates. Do you
think visitors will return to the level of before COVID-19 as time advances?
Or will the after COVID-19 be different from situation so far? Please tell me
about your outlook with reference to how to coexist with e-commerce.

A4 ：Although there is no doubt that some sectors including restaurant and bar arefacing difficulty, we think requirements for retail properties especially in agood location will be changed. Location of properties will justify the purpose
to open a store on that place, and therefore the location of the property has
been important. And from now on, stores which have branding effect and admitted
valuable will have been strong. We consider that effectiveness which can add
value are very strong, and the value of opening stores in those location will
be unchanged in future despise progressing e-commerce. We will make leasing
effort emphasizing locational advantage of the properties as we believe thevalue of cities and places where people gather remain unchanged.

Q5 ：New lease contract with A-FLAG SAPPORO shown in slide 17 was concluded in March,and I recognize that the impact of COVID-19 was not yet serious. The newcontract seems advantageous for API, and Tokyu Hotels accepted rising fixed
costs. Under the COVID-19 pandemic, what do you think about this contract
continuity in future?

A5 ：This lease contract was concluded at end of march, so the impact of COVID-19
became already obvious. This time, part of sales-linked rent is transferred tofixed rent, so if Tokyu Hotels’ sale increases, they also have merit fromsales-linked rent. The reason why Tokyu Hotels concluded the contract is thatI think they are sure that sales and sales-linked rate will rebound withrecovering inbound visitors in future. API and Tokyu Hotels don’t think thisis negative contract.

Q6 ：NAV per unit for the period under review shows us that appraisal value of theproperties seems not affected from COVID-19. How do you expect the change ofcapitalization rate especially for retail properties in FP18?

A6 ：We are not sure about how the appraisal value affected from crisis as it isappraised by professional. There should be some factors affecting NAV such aswhether the impact of rent reduction on NOI will be constant and what are theactual terms and conditions implemented to transactions, etc. We cannot affirm
NAV will not fluctuate in future, however, good location and profitability ofthe property are important, and we believe those conditions are evaluated byappraiser.

Q7 ：Concerning retail properties, although you explained that there are somepotential demands of opening stores in prime location, my feeling does notcorrespond with that. Please tell me in more detail such as tenant attribution
and their demand as far as possible.

A7 ：We are implementing leasing effort for properties like Tokyu Plaza Omotesando
Harajuku, and there are some demands to good location in order to sustain
superiority of their brand and they actually request first refusal right. Thereis a trend like that in prime locations of Tokyo and Osaka. In particular, we
continue to communicate with a foreign-owned corporation to resume discussion
once interrupted, although their decision is depending on the headquarters.
Unfortunately, we cannot give their name now, however, we will be able toannounce when it makes a little bit more progress. There is still a demand froma brand of which everyone knows the name.

Q8 ：Concerning office situation, I was explained that there are some cancellations
occurred due to COVID-19. I understand these are due to business decline oftenant. Are there any example of cancellation because of moving into WFH?

A8 ：We think tenant’s earnings decline due to impact of COVID-19 is the main reason.
For example, some cancellations came from a temporary staffing company inrestaurant business or an apparel company. COVID-19 was the clincher for tenants
having had bad performance since before COVID-19 for both office and retailtenants. On the other hand, we cannot observe an impact from promoted WFH,
however, cancellation from the tenant who wanted once to expand their leasingarea might be an impact of COVID-19. There are some cases that quick decisionmaking companies such as venture company canceled expansion of leasing area by
COVID-19.

Q9 ：Did you consider repurchasing of own investment units? And why did you decide
not to do it?

A9 ： We have prepared the framework to implement repurchasing of own investment units.
Although we considered it as one of our options using cash like property
acquisition or debt repayment, we decided not to do it this time. When we deem
it will be the best in several options, we will continue to consider doing it.

Q10-1 ：It was quite a surprise that rental increase on offices is going well, and I
would like to know how you have made it happen. Have you started a discussion
with a high rent to see how the tenant response to the proposal or your tenants
accepted the proposalsmoothly?

A10-1 ：We have explained our tenants thoroughly the market situation. We start fromhaving them understand that their leased space worth the rent. After that,
discussion progress depends on a variety of factors such as how much they canaccept or what is their contract term. On the other hand, we emphasize also
replaceability of tenants, each discussion has been differently developed forexample judging tenant’s business scale and setting reviewed downtime. And
such effort to let them understand the market have made the recent outcome inrental increase.

Q10-2 ：Do you reference sources such as the CBRE market overview?
A10-2 ：You can see the rent gap situation on slide 14 in the presentation material,and it’s an extract from CBRE-sourced data for all of our properties. Thosekinds of data allow us to provide the tenant a detailed explanation.

Q11-1 ：Concerning the risk of fixed-rent reduction on hotels, what is the break-evenpoint for the operators in terms of RevPAR year-on-year percentage change inorder that they make profit after paying fixed rent? Or, what is the y-o-ypercentage decrease in RevPAR for you to decide fixed-rent reduction?
A11-1 ： The exact number for the breakeven point is not available right now, though I
assume that it would be around 50-60%, as I heard before. And I believe that,
as we have contracted a long-term lease, the operators will ask for different
things depending on how they identify this hotel in their facilities or how
they continue their operation. Operation in all of three of our hotels had
favorably progressed before the crisis, and we deem them three important assetsof API. Therefore, it would be possible that we will consider rent reduction
on hotels as one potential measure against COVID-19 if needed.

Q11-2 ：Do forecast DPU include buffer from potential reduction in hotel fixed rent?

A11-2 ：You can consider that buffer is to absorb all COVID-19 impact on our portfolio.
We formed a certain hypothesis on respective property in order to factor into
the estimated amount into forecast DPU.

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