Activia Properties Inc.
FP20 Ended November 2021
Q&A Session Summary
Date: Tuesday, January 18, 2022 (Telephone Conference)

Q1 ： I would like to ask about the asset disposition you factored into the forecast for the period
ending November 2022. Is the objective of the asset disposition to maintain the portfolio
profitability which is a little suffering, or do you have already some properties in yourmind that you prefer to dispose of?
And as for the internal reserve you conducted for the period under review, please let us
know your plan about when to use it or if you are going to accumulate the reserve.
A1 ： As you pointed out, generally there are two effects that we can expect from asset disposition.
And our principle objective is to replace with new assets one or more properties that are
actually suffering deteriorated profitability and/or are hard for us to anticipate growth, toimprove the overall portfolio profitability for the mid- to long-term, which we consider
important.
This time we committed to pay out at a minimum ¥9,200 in DPU for the coming fiscal periods.
We assume a certain amount of capital gain on the sale of property for the fiscal period ending
November 2022, though, as I said earlier, our priority is to improve the profitability of ouroverall portfolio through asset replacement. Then, if we will earn some capital gain, that will
be used to support DPU.
As for the internal reserve, we do not plan to use it for the fiscal period ending November
2022. We had kept from that method till now due to tax burden, though, this time we decided
to adopt it as other J-REITs having conducted cash reserve had received good feedback fortheir financial stability. We will therefore keep a certain amount of reserve to secure a stablelevel of DPU rather than use it. As we emphasize the future stability above all, we will
gradually accumulate the reserve with considering tax impact, for example when there is asignificant fluctuation in the amount of revenue with a capital gain on the sale of property.

Q2 ： In your presentation, you showed the rent growth that you’ve achieved for the period
under review. Haven’t you had the rent reduction during the period?

A2 ： We had a small number of rent reduction cases at tenant replacement. Even though overall
rent level is increasing, we predict that more cases of rent reduction will be identified in thefuture due to downside pressure of rent. Asset replacement is therefore a effective method totake.

Q3 ： Have you received a good response in the leasing activities for the Shimbashi andShiodome area? Please let me know also about the timeline to backfill the spaces.
A3 ： Shiodome Building is highly appreciated for its specification and we receive well feedback.
Discussions with some prospective tenants are proceeding, even though they tend to take time
before reaching a decision as there are other leasing spaces in some competitor buildings in
the surrounding area. We haven’t assumed revenue from that spaces for the forecast for thefiscal period ending November 2022, though if the spaces will have been backfilled, that is
an upside. We will therefore work diligently to early resolve the issue.
For the Shimbashi area also, we are receiving queries for the spaces. Though, in addition tothat there are several competitors in the area, the area itself is one of a wide array of choicesin the areas surroundings for prospects, they take time for decision making, not as for theEbisu area. That said, things are progressing.

Q4 ： As for the office market in Minato ward, do you think that the occupancy rate on
contract basis will improve if you ease the leasing conditions, for example by offering
free-rent period? Also, please tell me how to understand the office supply scheduled in
2023. Even though those brand-new buildings will not compete directly with yourproperties in terms of specifications, will there be any impact in the mid- to long-term?
A4 ： In Minato ward, we are struggling in leasing as there are a large number of competitors andprospective tenants don’t need to make a prompt decision. That said, we started to identify
that some of them became more active. Our competitors should also gradually shift tocondition easing, and we think that there will be more leasing outcome in the months ahead.
As for the new supply in 2023, we don’t think that those buildings will directly compete withours since the rent level is quite different. Though, we will pay a close attention to the market
trend. We can say that the important factor is whether the specification of the space meetsrequirement of each tenant or not.

Q5 ： BOJ raised fiscal 2022 consumer price outlook today. You mentioned in the presentationthat you secured a stable revenue from retail properties, though is the consumer priceincrease taken into consideration in the lease contracts? Especially for the land of Tokyu
Plaza Ginza, is the rent linked to the CPI?
A5 ： Lease term for retail tenants is generally longer than office tenants. And lease contracts varydepending on how much risks each of tenant and owner can afford to take for that long period.
We think that there can be two types of retail properties; one which can enjoy a stable revenue
under any kind of market environment, and the other which can flexibly adapt to upside linked
to tenant sales and the price increase. Actually, the proportion of sales-linked rent is verysmall in overall rent revenue, though it is a future upside. Our hotel performance is showing
a sign of recovery, and sales-linked rent will possibly be generated in coming months. We
will therefore decide to choose either stability or upside potential depending on thecharacteristics of each property upon negotiation with tenants. As for Tokyu Plaza Ginza, therent is fixed and not linked to CPI.

Q6 ： Regarding your commitment to a minimum DPU of ¥9,200, how long is it for? Do you
plan to review the commitment at a certain timing?
A6 ： We will not drop the commitment before the end of 2023 as the impact of the vacation inShiodome Building can possibly remain until the fiscal period ending November 2023.
Though we are determined to work to achieve above ¥9,200 at an early timing by conducting
asset replacement and paying continued effort in leasing activities. The market could befurther weakened due to the massive supply of offices in 2023, although we think that we canmaintain the DPU level of ¥9,200. Therefore, the commitment will be maintained until theend of the fiscal period ending November 2023.

Q7 ： What was the occupancy rate on cash basis for the period under review? Please let us
know also for the forecasted periods.
A7 ： The occupancy rate on cash basis at the end of November 2021 was 95.1%. For the forecastedperiods, we expect 93.2% for the period ending May 2022 and 93.3% for the period ending
November 2022. It will remain at a lower 90% partially due to the impact of Shiodome

Building.

Q8 ： In connection with the tenant sales in Tokyu Plaza Omotesando Harajuku and DECKSTokyo Beach that you explained in your presentation, is there further vacation risk inview of the tenant capacity to bear the rent? If the sales remain at 50% of the preCOVID level, tenants can still afford the rent, or is there possibility that they leave?
A8 ： For Tokyu Plaza Omotesando Harajuku, the three street-level store tenants comprise 80% ofsales. Their sales are not recovered, though they play a key role in their brands in themarketing perspective. Also, we have contracted for a long term with the tenants, so theirsales performance will not significantly affect our management. On the other hand, the tenantsin the middle floors are suffering due to the impact of COVID. We are therefore looking into
tenant replacement. As for DECKS Tokyo Beach, a large portion of sales was originallycoming from inbound tourists. The tenants having depended heavily on sales from foreign
tourists are now suffering. We are planning to replace them and some discussions withprospective tenants are already started. We will continue to work for further stability byinviting tenants capturing domestic demand.

Q9 ： The unit’s discount to NAV continues for the time being. What will be the trigger for
you to conduct a unit buyback?
A9 ： Unit buyback is one of the ways to use efficiently the cash in hand. Generally, cash in hand
are used for asset acquisition and unit buyback comes next to it. Though, given the current
market price, unit buyback is an option that we can take. We are not yet at the stage toannounce when and how to proceed it, though it remains an option, so does external growth.
< End >

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