17th

Fiscal Period Business Report(Statement of Financial Performance)

December 1, 2013 – May 31, 2014

6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-office.co.jp/en/

I. Overview of Daiwa Office Investment Corporation
To Our Investors
We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).
In the 17th Fiscal Period, DOI posted operating revenues of 8,587 million yen and operating income of 3,760 million yen. Our
distribution per unit for the 17th Fiscal Period is 7,621 yen, an increase by 143 yen from the 16th Fiscal Period.
See page 4 for financial and management highlights
DOI conducted portfolio property replacement in the 17th Fiscal Period acquiring “Integral Tower” on May 29, 2014 for 15,220
million yen and selling “Daiwa Shibuya SS Building” on May 30, 2014 for 3,800 million yen. We will consider portfolio replacement
through the sale of properties going forward by analyzing long-term profitability and costs for each property.
See page 8 for details of external growth
The overall portfolio occupancy rate increased to 96.4% in the 17th Fiscal Period with the recovery of the occupancy rates of shinyon
curumu, Daiwa Meieki and other properties subject to leasing improvement. Furthermore, Shinjuku Maynds Tower was awarded “Arank” in CASBEE for Market Promotion certification system.
See page 12 for details of internal growthIn financial matters, improvement of debt costs, lengthening of maturities, changing
interest rate from floating to fixed rate and strengthening formation of lenders, in addition
to steady expansion of asset size and maintenance of high occupancy rate are recognizedresulting in the new acquisition of a long-term issuer rating of AA- (stable) from Japan
Credit Rating Agency, Ltd. (JCR). DOI will continue striving to further strengthen
financial structure while working to reduce future refinancing risks.
See page 14 for details of financial condition
DOI will continue to focus on establishing its portfolio with a particularemphasis on office buildings in favorable locations centering on Tokyo, andaim to achieve an asset size of 500 billion yen while striving to increase thecompetitiveness of existing properties.
We wish for the continued success of our unitholders and ask for yourcontinued support of DOI.

Nobuaki Omura Executive Director of Daiwa Office Investment Corporation
Contents

I. Overview of Daiwa Office Investment Corporation
To Our Investors……………………………………………… 2
Characteristics and Strategies of
Daiwa Office Investment Corporation ………………………… 3
Financial and Management Highlights………………………… 4
Overview of Portfolio (portfolio list)…………………………… 5

II. Asset Management Report…………………………… 16
III. Balance Sheets… ……………………………………… 22
IV. Statements of Income………………………………… 24
V. Statements of Changes in Unitholders’ Equity ……… 25

Overview of Portfolio (portfolio distribution)…………………… 6

VI. Notes to Financial Statements……………………… 26

External Growth Measures…………………………………… 8VII. Independent Auditors’ Report……………………… 36

Internal Growth Measures… ………………………………… 12
Financial Conditions… ……………………………………… 14
Description of Asset Manager………………………………… 15

2

VIII. Statements of Cash Flows [Information Only]… …… 37
IX. Investor Information… ………………………………… 38

Characteristics and Strategies of Daiwa Office Investment Corporation

Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT Focused on the Five
Central Wards of Tokyo

Effective application of operational knowhow specialized in officebuildings

Places priority on owning office buildings in favorable locations forwhich there is high demand
Major Regional Cities 2.8%
Greater Tokyo

Office buildings 100.0%

Five Central
Wards of Tokyo

86.7%

10.5%

Based on acquisition price(Note) Please note that the percentages in the above graphs are as of May 31, 2014.

Growth Strategies
Activities for solid growth・Continue acquiringproperties

Achievement of a 500 billion yen asset size

・Leverage borrowing
capacity

Keep the medium-to-long term, upper-limit
LTV target range within 40%~50%

500.0

Proactive investment inselectively chosencompetitive properties(billion yen)
500

400

313.2

314.9

332.0

352.7

364.0

387.5

300

Establishment of stable revenue base・Property management
activities

Continuation of “Bonji-Tettei”
Thorough implementation of hands-on
approach
Further strengthen relations with tenants

・Maintain andimprove property
value

Capture tenant needs by reinforcing ties withproperty managers
Strategic renewals and lease-up activities

・Financial activities

Reduce refinancing risk by extending
borrowing periods and diversifying
repayment dates

Distribution per Unit

200

100

0
Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period
ended
ended
ended
ended
ended
May 2012 November 2012 May 2013 November 2013 May 2014

Fiscal period ended May 2014
(17th Fiscal Period)(Note) The forecasts on distribution arecalculated based on certain
assumptions and may vary due to

Fiscal period ending November 2014changes in the status and other(18th Fiscal Period)

factors. Moreover, the forecasts
set forth herein should not be
construed as a guarantee of
distribution amounts.

Fiscal period ending May 2015
(19th Fiscal Period)

As ofAugust 1,
2014

7,621 yen
7,820 yen
8,328 yen

Medium-term
goal(actual)(forecast)(forecast)

I. Overview of Daiwa Office Investment Corporation

3

Financial and Management Highlights
Steady increase of distributions even in a severe office market environment■ Operating Revenues■ Operating Income(million yen)
10,000(million yen)
4,000

7,431

7,615

7,566

8,587

8,432

7,500

3,000

5,000

2,000

2,500

1,000

3,677

3,760

16th Period

17th Period

3,308

3,090

3,146

13th Period

14th Period0013th Period

14th Period

15th Period

16th Period

17th Period■ Net Income■ Asset Size(million yen)
3,000

(billion yen)
350

332.0

2,589

2,369

364.0

352.7

3,016

2,959
2,000

15th Period

300

2,021
1,000

313.2

314.9

13th Period

14th Period

250

0

200
13th Period

14th Period

15th Period

16th Period

17th Period

15th Period

16th Period

17th Period■ Distribution Per Unit(yen)
10,000
Forecast from one year earlier
8,000
6,000

4,154
3,903
5,246

2,843
3,176
3,240

4,000

Forecast from six months earlier

3,180
3,280
3,671

Actual dividends

4,850
4,850
5,107

3,600
4,100
4,464

5,350
5,500
5,986

5,500
6,250
6,542

6,550
7,200
7,478

7,300
7,540
7,621

16th Period

17th Period

7,570
7,820

8,328

2,000
0
9th Period

10th Period

11th Period

13th Period

14th Period

15th Period

18th Period 19th Period

17th Period

16th Period

15th Period

14th Period

13th Period(May 2014)(November 2013)(May 2013)(November 2012)(May 2012)

Operating revenues (million yen)

8,587

8,432

7,615

7,566

7,431

Operating income (million yen)

3,760

3,677

3,308

3,146

3,090

Ordinary income (million yen)

3,005

2,955

2,590

2,364

2,022

Net income (million yen)

3,016

2,959

2,589

2,369

2,021

Total number of units issued (units)395,798

395,798

395,798

395,798

395,798507,330

Net assets per unit (yen)509,490

509,560

508,707508,132

Distribution per unit (yen)

7,621

7,478

6,542

5,986

5,107

Total assets (million yen)

380,723

363,653

342,572

325,665

325,315

43.0

40.6

37.5

34.4

34.2

44

44

41

38

37

364.0

352.7

332.0

314.9

313.2

259,381.62

244,877.17

225,651.87

208,733.38

207,277.34

96.4

96.3

95.0

96.4

94.3

Loan-to-value (LTV) (based on total asset value) (%)
Number of investment properties
Asset size (billion yen)
Total rentable area (m2)Occupancy rate (%)

4

12th Period

Overview of Portfolio (portfolio list) including Properties Acquired in the 18th Fiscal Period
DOI has a portfolio comprised of one A Class building and 45 B Class buildings(As of August 1, 2014)
Property Name

Address

Acquisition
Appraisal
Execution
Rentable Structure andPrice
Value at End
Area (m2) No. of Floors Completion of Major
of Period(Note 2)
(Note 3)
Repairs mm Share (mm yen)
yen(%)
(Note 4)

Ownership TypeLand

Building

PML (%)(Note 5)

Five Central Wards of Tokyo (Note 1)

1 Daiwa Ginza
2 Daiwa Ginza Annex
3 Daiwa Shibaura
4 Daiwa Minami-Aoyama
5 Daiwa Sarugakucho
6 Daiwa A Hamamatsucho
7 Daiwa Jingumae
8 Daiwa Shibadaimon
9 Daiwa Misakicho
10 Daiwa Shimbashi 510
11 Daiwa Tsukijiekimae
12 Daiwa Tsukiji
13 Daiwa Tsukiji 616
14 Daiwa Tsukishima
15 Daiwa Nihonbashi Horidomecho
16 Daiwa Azabudai
17 Daiwa Nihombashi Honcho
18 Daiwa Ginza 1-chome
19 Daiwa Kyobashi
20 Daiwa Kojimachi 4-chome
21 Daiwa Onarimon
22 Shinjuku Maynds Tower (Note 6)
23 SHIBUYA EDGE
24 Daiwa Kodenmacho
25 Daiwa Jimbocho
26 Daiwa Nishi-Shimbashi
27 Daiwa Kudan
28 Daiwa Kayabacho Building
29 Daiwa Jimbocho 3-chome
30 E SPACE TOWER
31 Daiwa Nihonbashi Hongokucho
32 shinyon curumu
33 Daiwa Shibuya Dougenzaka
34 Daiwa Akasaka (Note 7)
35 Daiwa Shibuya Miyamasuzaka
36 Azabu Green Terrace

Ginza, Chuo-ku, Tokyo

8,175.26 SRC B3/12F

July 1963

2003

14,1003.6

15,400Fee simple andleaseholdFee simple

9.17

Ginza, Chuo-ku, Tokyo

2,032.99

SRC B3/8F

Aug. 1972

2003

3,050

0.8

3,150 Fee simple

Fee simple

7.46

Shibaura, Minato-ku, Tokyo

9,619.63 SRC B1/12F

Oct. 1987

8,265

2.1

7,180 Fee simple

Fee simple

5.09

Minami Aoyama, Minato-ku, Tokyo

2,715.53 S SRC B2/5F Sept. 1990

4,550

1.2

4,100 Fee simple

Fee simple

12.79

Sarugakucho, Chiyoda-ku, Tokyo

3,657.43

June 1985

3,190

0.8

3,160 Fee simple

Fee simple

9.79

Hamamatsucho, Minato-ku, Tokyo

3,663.38 SRC B2/10F

July 1993

2,865

0.7

2,860 Fee simple

Compartmentalized
ownership

6.03

Jingumae, Shibuya-ku, Tokyo

2,198.61

Dec. 1997

2,800

0.7

2,100 Fee simple

Fee simple

12.01

Shibadaimon, Minato-ku, Tokyo

2,386.02 SRC RC B1/7F Nov. 1996

2,578

0.7

2,640 Fee simple

Fee simple

2.99

Misakicho, Chiyoda-ku, Tokyo

2,137.53

S 8F

2,346

0.6

2,500 Fee simple

Fee simple

6.68

Shimbashi, Minato-ku, Tokyo

2,676.14

SRC B1/8F

Apr. 1974

2,080

0.5

2,380 Fee simple

Fee simple

8.13

Tsukiji, Chuo-ku, Tokyo

2,659.59

SRC 10F

Jan. 1996

1,560

0.4

1,470 Fee simple

Fee simple

7.67

Tsukiji, Chuo-ku, Tokyo

1,487.82

SRC B1/7F

Jan. 1990

1,240

0.3

1,440 Fee simple

Fee simple

9.70

Tsukiji, Chuo-ku, Tokyo

2,931.93

SRC B1/9F

Mar. 1994

2,440

0.6

2,480 Fee simple

Fee simple

7.69

Tsukishima, Chuo-ku, Tokyo

8,426.85

S 5F

July 1996

7,840

2.0

8,140 Fee simple

Fee simple

10.89

Nihombashi-Horidomecho, Chuo-ku, Tokyo

2,850.81

SRC B2/7F

Apr. 1993

2,520

0.7

2,490 Fee simple

Fee simple

7.84

Azabudai, Minato-ku, Tokyo

1,697.38

SRC B2/9F

Apr. 1984

1,600

0.4

1,700 Fee simple

Fee simple

9.57

Nihombashi-Honcho, Chuo-ku, Tokyo

7,418.61 SRC B1/10F

Jan. 1964

2006

7,420

1.9

7,100 Fee simple

Fee simple

8.49

Ginza, Chuo-ku, Tokyo

3,758.43 SRC B2/11F

Jan. 1962

2005

4,620

1.2

4,500 Fee simple

Fee simple

10.16

Hachobori, Chuo-ku, Tokyo

3,265.83

SRC B1/8F

Oct. 1974

2005

3,460

0.9

3,110 Fee simple

2,690.90

SRC B2/9F

Oct. 1987

2,910

0.8

2,660 Fee simple

Shimbashi, Minato-ku, Tokyo

11,615.37

SRC 9F

Apr. 1973

13,860

3.6

13,000 Fee simple

Compartmentalized
ownership (100%)Compartmentalized
ownership (100%)Compartmentalized
ownership (100%)

10.04

Kojimachi, Chiyoda-ku, Tokyo
Yoyogi, Shibuya-ku, Tokyo

45,543.98 S SRC B3/34F Sept. 1995

113,000 Co-ownership Co-ownership6.42

Udagawacho, Shibuya-ku, Tokyo

2,480.65

RC B1/9F

Aug. 2006

5,900

1.5

4,300 Fee simple

Fee simple

3.14

Nihombashi-Odenmacho, Chuo-ku, Tokyo

2,379.31

SRC 8F

Mar. 1985

2,460

0.6

1,980

Fee simple andleaseholdFee simple

7.71

Kanda-Jimbocho, Chiyoda-ku, Tokyo

3,164.26

S B1/8F

Mar. 1997

4,150

1.1

2,900 Fee simple

Fee simple

5.58

Nishi-Shimbashi, Minato-ku, Tokyo

4,815.84 SRC B1/10F

July 1993

5,000

1.3

4,800 Fee simple

Fee simple

6.76

Kudan Minami, Chiyoda-ku, Tokyo

2,882.61

Mar. 1987

4,000

1.0

2,960 Fee simple

Compartmentalized
ownership (100%)

7.96

Nihombashi-Kayabacho, Chuo-ku, Tokyo

5,899.11 S SRC B1/8F

Apr. 2010

5,600

1.4

6,610 Fee simple

Fee simple

5.58

Kanda-Jimbocho, Chiyoda-ku, Tokyo

2,889.34

Feb. 2010

3,550

0.9

3,860 Fee simple

Fee simple

6.13

SRC 8FRC B1/4F

SRC 9F
S 9F

July 1996
2006

2003

133,800 34.5

8.62
5.45

Maruyamacho, Shibuya-ku, Tokyo

13,960.87 S SRC B1/15F

Oct. 2002

24,0006.2

28,100 Fee simple

Fee simple

5.78

Nihombashi Hongokucho, Chuo-ku, Tokyo

2,143.08

May 2010

1,721

0.4

1,890 Fee simple

Fee simple

6.93

Shinjuku, Shinjuku-ku, Tokyo

6,751.31 S RC B2/11F

Jan. 2012

9,650

2.5

10,400 Right of site Compartmentalized
ownership (100%)

6.50

Maruyamacho, Shibuya-ku, Tokyo

4,144.90 SRC B1/11F

Mar. 1988

4,500

1.2

4,750 Fee simple

Fee simple

5.89

Akasaka, Minato-ku, Tokyo

8,794.51

SRC B2/7F

Sept. 1990

9,200

2.4

10,700 Fee simple

Fee simple

9.81

Shibuya, Shibuya-ku, Tokyo

6,327.95

S B1/12F

Dec. 1988

7,000

1.8

7,450 Fee simple

Fee simple

6.60

Minami Azabu, Minato-ku, Tokyo

13,234.39

S RC B1/6F

Sept. 2009

14,0003.6

15,000 Fee simple

Fee simple

2.74

Subtotal

S 8F

213,478.15

329,825 85.1

312,260

Greater Tokyo Area (Note 1)

37 Daiwa Kinshicho
38 Daiwa Higashi-Ikebukuro
39 Benex S-3
40 Daiwa Shinagawa North
41 Daiwa Osaki 3-chome
42 Daiwa Kamiooka
43 Integral Tower

Kameido, Koto-ku, Tokyo

5,347.27

Jan. 1992

3,653

0.9

3,570 Fee simple

Fee simple

7.42

Higashi-Ikebukuro, Toshima-ku, Tokyo

4,461.48 SRC S B1/9F June 1993

2,958

0.8

3,240 Fee simple

Fee simple

5.56

Shin-Yokohama, Kohoku-ku, Yokohama City, Kanagawa

7,470.18 S SRC B1/12F Feb. 1994

4,950

1.3

3,240 Fee simple

Fee simple

5.66

Kita-Shinagawa, Shinagawa-ku, Tokyo

6,549.98 SRC B1/11F

July 1991

7,710

2.0

5,890 Fee simple

Fee simple

5.56

Osaki, Shinagawa-ku, Tokyo

1,786.58

S RC B1/6F

Sept. 2007

1,650

0.4

2,030 Fee simple

Fee simple

10.93

Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa

2,630.30 S SRC B3/7F

May 2011

2,000

0.5

2,120 Fee simple

Fee simple

12.30

Kamiogi, Suginami-ku, Tokyo

17,710.63 S SRC B2/18F June 1993

15,2203.9

15,700 Fee simple

Fee simple

3.56

45,956.42

38,1419.8

35,790Subtotal

S B1/5F

Major Regional Cities (Note 1)

44 Daiwa Minami-Senba
45 Daiwa Meieki
46 Kitahama Grand Building

Minami-Senba, Chuo-ku, Osaka City, Osaka

5,719.54

SRC B1/8F

Sept. 1986

4,810

1.2

2,770 Fee simple

Fee simple

11.56

Meieki-Minami, Nakamura-ku, Nagoya City, Aichi

7,461.90

S 12F

Dec. 2007

5,300

1.4

6,410 Fee simple

Fee simple

12.11

Awaji-cho, Chuo-ku, Osaka City, Osaka

Fee simple

4.98

13,517.62 S SRC B1/16F Feb. 2008

9,481

2.4

10,000 Fee simple

Subtotal

26,699.06

19,591

5.1

19,180

Total

286,133.63

387,557 100.0

367,230(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku).
The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama Prefectures.
Major Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo prefectures), Nagoya area (Aichi, Mie and Gifu prefectures) and ordinance designated cities and core cities set forth in the Local Autonomy Act.
(Note 2) The Rentable Area are indicated as of May 31, 2014 (end of 17th Fiscal Period). The Rentable Area of Azabu Green Terrace and Kitahama Grand Building are indicated as of April 30, 2014.
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of May 31, 2014 (end of 17th Fiscal Period). The values
entered in the Appraisal Value at End of Period column of Azabu Green Terrace and Kitahama Grand Building are indicated as of May 15, 2014.
(Note 5) The figures entered for PML are the figures in the Portfolio Earthquake PML Assessment Report (June 2014) prepared by Sompo Japan Nipponkoa Risk Management Inc. The figures entered for PML of Azabu
Green Terrace and Kitahama Grand Building are as of May 2014.
(Note 6) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 6/7 of the entire property. DOI acquired 3/7 of theco-ownership interest on July 13, 2007 for 65.1 billion yen and 3/7 of the co-ownership interest on November 26, 2007 for 68.7 billion yen. The figure shown for the Rentable Area is figure equivalent to 6/7
of the total rentable area of the entire building.
(Note 7) The property name was changed from “Akasaka Business Place” to “Daiwa Akasaka” as of August 1, 2014.

I. Overview of Daiwa Office Investment Corporation

5Overview of Portfolio (portfolio distribution) including Properties Acquired in the 18th Fiscal Period
DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya)
Shibuya-ku

7 Daiwa Jingumae

23 SHIBUYA EDGE

38 Daiwa Higashi-Ikebukuro

Ikebukuro Sta.

38

Toshima-ku

22 Shinjuku Maynds Tower

30 E SPACE TOWER

43
Ogikubo Sta.

Suginami-ku

33 Daiwa Shibuya Dougenzaka

35 Daiwa Shibuya Miyamasuzaka

Nakano Sta.

Shinjuku-ku

Shinjuku-ku
Shinjuku Sta.
32

22
32 shinyon curumu

Yotsuya Sta.

Honancho Sta.

Shibuya-ku

Minato-ku

Aoyamaitchome Sta.

7

4
43 Integral Tower

23

Saikyo Line

Hibiya Line

Chuo Line

Tozai Line

Sobu Line

Chiyoda Line

JR Yokosuka Lineand
Sobu Rapid Line

Yurakucho Line
Hanzomon Line

3 Daiwa Shibaura

4 Daiwa Minami-Aoyama

6 Daiwa A Hamamatsucho

Fukutoshin Line
Oedo Line35
Shibuya Sta.

yu
Tok

Namboku Line

Toei Subway

Line

De

Marunouchi Line

30
33

Lin
e

Yamanote Line

ne n
-Tosh
i

JR

Ginza Line

To
kyu
To
yok
o

Tokyo Metro

Omotesando Sta.

8 Daiwa Shibadaimon

10 Daiwa Shimbashi 510

Naka-meguro Sta.

16 Daiwa Azabudai

Asakusa Line

Meguro Sta.

Mita Line
Shinjuku Line

Main investment area:
Five Central Wards of Tokyo
Focused investment area:
Greater Tokyo
Major Regional Cities

6

21 Daiwa Onarimon

26 Daiwa Nishi-Shimbashi

34 Daiwa Akasaka

36 Azabu Green Terrace

Osaki Sta.
41

(As of August 1, 2014)

Chuo-ku

1 Daiwa Ginza

2 Daiwa Ginza Annex

11 Daiwa Tsukijiekimae

12 Daiwa Tsukiji

13 Daiwa Tsukiji 616

14 Daiwa Tsukishima

15 Daiwa Nihonbashi Horidomecho

17 Daiwa Nihombashi Honcho

18 Daiwa Ginza 1-chome

19 Daiwa Kyobashi

24 Daiwa Kodenmacho

28 Daiwa Kayabacho Building

31 Daiwa Nihonbashi Hongokucho

Chiyoda-ku

Asakusa Sta.
Oshiage Sta.

Suidobashi Sta.

Kudanshita Sta.

9

Akihabara Sta.

5

37
31

24

Chiyoda-ku
Hibiya Sta.

Akasaka Sta.

12

Toranomon Sta.

34

18
Ginza Sta.

Shimbashi Sta.
26
10
21

6

16
Shibakoen Sta.

9 Daiwa Misakicho

20 Daiwa Kojimachi 4-chome

25 Daiwa Jimbocho

27 Daiwa Kudan

29 Daiwa Jimbocho 3-chome

39 Benex S-3

42 Daiwa Kamiooka

44 Daiwa Minami-Senba

45 Daiwa Meieki

Ningyocho Sta.

Nihombashi Sta.

Tokyo Sta.
Akasakamitsuke Sta.

5 Daiwa Sarugakucho

15

17

Otemachi Sta.

20

Kinshicho Sta.

29 25
27

12

28

19

37 Daiwa Kinshicho

Chuo-ku
11
13

Tsukishima Sta.

14

8Minato-ku
363

39
46 Kitahama Grand Building

44
ShinagawaSta.

40

Shinagawaku

40 Daiwa Shinagawa North

41 Daiwa Osaki 3-chome

46 45

42

I. Overview of Daiwa Office Investment Corporation

7

External Growth Measures
Proactive investment in selectively chosen competitive properties

Newly Acquired Properties
Integral Tower (acquisition on May 29, 2014)

17th Fiscal Period• 4-minute walk from Ogikubo Station on JR Chuo, Sobu and Tokyo Metro Marunouchi lines.
• Good access to major office districts such as Shinjuku, Akasaka, Ginza, Marunouchi and Otemachi.
• The Ogikubo area can be expected to be used as a sales/service base for the western Tokyo area or as a back-up office base with consideration
given to BCP.
Acquisition price

15,220 million yen

Expected NOI yield

4.8%

Address

1-2-1 Kamiogi, Suginami-ku, Tokyo

Site area

3,170.21m2

Structure and floors

S SRC B2/18F

Total floor area

25,744.27m2

Appraisal price

15,700 million yen

Completion

June 1993

Occupancy rate

96.7% (as of May 2014)

Seiyu
Integral Tower

LUMINE

JR Chuo Line/Sobu Line

Ogikubo Sta.

Tokyo Metro Marunouchi Line

Kitahama Grand Building (acquisition on August 1, 2014)

18th Fiscal Period• Located about 300 meters south of or a 4 minute-walk from Kitahama Station on the Osaka Municipal Subway Sakaisuji Line.
• Stands in the area which is regarded as Sakaisuji-Honmachi business zone with office buildings around the junctions of Sakaisuji & HonmachiDori and Chuo-Odori.
• The area is next to the Kitahama area which has historically developed as the center for securities brokers and pharmaceuticals and is still home
to many financial institutions and pharmaceutical companies.
i
Watanabebash Oebashi Station
Station

9,481 million yen

Expected NOI yield

5.0%

Address

2-2-14 Awaji-cho, Chuo-ku,
Osaka City, Osaka

Site area

2,078.62m2

Structure and floors

S SRC B1/16F

Total floor area

18,762.97m2

Appraisal price

10,000 million yen

Completion

February 2008

Occupancy rate

100.0% (as of August 2014 (acquisition date))

Osaka City Hall

Na
Statiniwab
on ashi

Subway Yotsubashi Line

Subway Midosuji Line

Kitahama Station

Yodoyabashi Stationion

Higobashi Stat

Honmachi
StationKitahama Grand
Building

Subway Chuo Line

Osaka
Exchange

KeihanNakanoshima Line
Keihan Main Line

Subway Sakaisuji Line

Acquisition priceSakaisujiHonmachi
StationChuo
Ward OfficeAcquisition of Properties after Sponsor Change Total acquisition price: 126,022 million yen
Acquisition
timing9th Period

10th Period

11th Period

12th Period

13th Period

14th Period

Daiwa Jimbocho

Daiwa NishiShimbashi

Daiwa Kudan

Daiwa Kayabacho
Building

Daiwa Jimbocho3-chomeE SPACE TOWER

Daiwa Nihonbashi
Hongokucho

Daiwa Osaki
3-chome

Property
name

8

Area

Chiyoda-ku, Tokyo

Minato-ku, Tokyo

Chiyoda-ku, Tokyo

Chuo-ku, Tokyo

Chiyoda-ku, Tokyo

Shibuya-ku, Tokyo

Chuo-ku, Tokyo

Shinagawa-ku, Tokyo

Acquisition
price

4,150 million yen

5,000 million yen

4,000 million yen

5,600 million yen

3,550 million yen

24,000 million yen

1,721 million yen

1,650 million yen

Seller

ORIX JREIT Inc.

Japan
Core Asset 2 YK

Shining Nova
No. 5 B (SPC)

Daiwa
Property Co, Ltd.

Tokyu Land
Corporation

Endeavor Realty
Fund YK

Tosei Corporation

MCR Six GK

Acquisition
dateMar. 10, 2010

Aug. 13, 2010

Sept. 2, 2010

Mar. 25, 2011

Mar. 29, 2011

Jul. 8, 2011

May 11, 2012

Sept. 18, 2012

Azabu Green Terrace (acquisition on July 4, 2014)

18th Fiscal Period• Located in Minami-Azabu area, which is surrounded by theMoto-Azabu/Hiroo international area where a number of embassies
and high-end residences for foreigners are situated and the
Shirokane-takanawa area that is very popular as a residential areawith a high class cultural environment.
• Tokyo Metro Subway Nanboku-Line and Tokyo Municipal Subway
Mita-Line are available from Shirokane-takanawa Station, thenearest station, offering convenient access to major business
districts such as Meguro, Roppongi, Nagatacho and Otemachi.
• Standing in an area that is relatively disaster-free, stable andsecure land, it is a highly evaluated office property even in terms of
its BCP qualifications.
• Has also been recognized for its stylish design, receiving the Good
Design Award in 2011, etc.

Acquisition price 14,000 million yen
Expected NOI yield 4.6%
Address

3-20-1 Minami Azabu, Minato-ku, Tokyo

Site area

3,655.20m2

Embassy of Embassy of Qatar
Switzerland
Embassy ofArgentina Embassy ofSouth Korea
Embassy of
NorwayArisugawanomiya
Memorial Park
Embassy of Finland
Embassy ofGermanEmbassy of
Pakistan

Structure and floors S RC B1/6F

Embassy of France

Total floor area

17,127.05m

Appraisal price

15,000 million yen

Completion

September 2009

Occupancy rate

100.0% (as of July 2014 (acquisition date))

Toei
Oedo Line

Embassy ofAustralia

Azabu Green Terrace

2

15th Period

ita

iM

16th Period

17th Period

shinyon curumu

Daiwa Meieki

Daiwa Akasaka

Daiwa Shibuya
Miyamasuzaka

Shinjuku-ku, Tokyo

Nagoya-shi, Aichi Yokohama-shi, Kanagawa Shibuya-ku, Tokyo

9,650 million yen

5,300 million yen

Two domestic
industrial
companies

e

Lin

Sh
tak irokan
Stat anawa eion

Toe

Daiwa Shibuya
Dougenzaka

Dec. 3, 2012
Apr. 12, 2013

Embassy of China

Azabu
Jub
Statioann
Embassy ofAustria

Azabu Juban
StationTo
Hibiykyo Me
a Lin troe

Embassy of
Lithuania

Hiroo Station• Initiatives for creating large-scale greenery, such as improving theenvironment by reducing the heat-island phenomenon and giving consideration tobiodiversity taken at the property are highly evaluated, leading to the property
receiving several environmental awards including from the urban development
section of the “Top 100 Biodiversity Focused Properties,” organized by Organization
for Landscape and Urban Green Infrastructure.

18th Period

Integral Tower

Azabu Green
Terrace

Kitahama Grand
Building

Minato-ku, Tokyo

Shibuya-ku, Tokyo Suginami-ku, Tokyo

Minato-ku, Tokyo

Osaka-shi, Osaka

4,500 million yen

9,200 million yen

7,000 million yen

15,220 million yen 14,000 million yen

9,481 million yen

Domestic special
Domestic special
Shimizu Corporation
purpose company
purpose company

HakubaCapital 1 TMK

E Buildings Limited
Ogikubo Building YK
Liability Company

Azabu Green
Terrace GK

GK North Beach

Aug. 9, 2013

Sept. 27, 2013

Jul. 4, 2014

Aug. 1, 2014

Feb. 1, 2013

Daiwa Kamiooka

2,000 million yen

Mar. 1, 2013

Jul. 3, 2013

May 29, 2014

(Note) The sum total of acquisition prices of the total acquisition price from sponsor changes until August 1, 2014 and acquisition prices of additional acquisition of existing properties and acquisition of leasehold rights
during the period is 126,442 million yen.

I. Overview of Daiwa Office Investment Corporation

9External Growth Measures

Changes in Asset Size and Trading Performance
Aim to achieve medium-term goal of asset size of 500 billion yen by utilizing acquisition capability earned through capital increase(billion yen) 550

80.0 (%)
Acquisition capability

Total Acquisition Price

LTV (Total Asset)

Acquisition
capability

500

Active investment for competitive
properties after thorough selection

450

32.0

billion yen

400
350
300
250

287.3

278.1

269.1

265.0

100
50

Acquisition property

Acquisition property• Daiwa Nishi-Shimbashi• Daiwa Kudan• E SPACE TOWER• Daiwa Osaki
3-chomeAcquisition property

Acquisition property

Acquisition property• Daiwa Jimbocho• Daiwa Kayabacho• Daiwa Jimbocho 3-chome• Daiwa Nihonbashi
Hongokucho

0

45.0

40.6

40.0

30.0
Acquisition property

150

50.0

28.9

28.1

25.5

25.3

60.0

50.0

43.0

40.6

37.5

34.4

34.2

34.0

200

314.9

313.2

311.3

70.0

387.5

364.0

352.7

332.0

500.0

Acquisition 75.1
capability billion yen

Acquisition property

Acquisition property• Daiwa Shibuya Dogenzaka• Daiwa Akasaka• Daiwa Shibuya Miyamasuzaka• Azabu Green Terrace• Kitahama
Grand Building

Acquisition property

Acquisition property• shinyon curumu• Daiwa Meieki• Daiwa Kamiooka• Integral Tower

20.0

10.0

0

8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
As of
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period August 1, 2014

LTV
= 45%

LTV
= 50%

Mediumterm goal

Current Portfolio and Acquisition Policy
DOI will invest in competitive properties based on in-depth data analysis upon careful selection from among the vast information on properties obtained
through diverse sourcing.
■ Acquisition Policy■ Distribution Chart of Portfolio Properties* indicate properties acquired after sponsor changes, indicate properties
acquired in 17th and 18th Fiscal Periods. Distance to station is measured by the
distance to the nearest station.

Building age (year)
60• Invest heavily in the five central wards of Tokyo and equivalent area.
• Thoroughly select properties in view of actual demand toward location (distance tostation, station power, crowd attraction, surrounding environment), building specs, etc.

55

• Target properties to improve stability and profitability of our existing portfolio.

50• Invest in buildings less than 25 years of building age.
45
40

■ Sale Policy• Consider replacement of properties if necessary by sales in light of properties’ futurecompetitiveness, profitability, etc.

400

Number of properties reviewed (left axis)
Number of properties reviewed in detail (right axis)

335

300
200
100
0

10

35

44

300

268

221
30

25

296

264
28

Daiwa Kudan
Daiwa Shibuya Dogenzaka
Daiwa Shibuya Miyamasuzaka
Daiwa Akasaka* Number of gross proposals. (cases)

427

30
25

■ Number of Properties Reviewed for Acquisition(cases)
500

35

100
80
60

Integral Tower

20

Daiwa
Nishi-Shimbashi
Daiwa Jimbocho

15

E SPACE TOWER

10

40

17

15

11th
12th
13th
14th
15th
16th
17th
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period

20
0

Daiwa
Kamiooka

5
0

Daiwa
Jimbocho
3-chome

Daiwa
Osaki 3-chome
Kitahama
Grand Building

Daiwa Kayabachoshinyon curumu Building

0

1

2

3

4

Daiwa Meieki
Azabu Green Terrace

Daiwa Nihonbashi Hongokucho

5

6

7

8
9
10
11
Distance to station (minutes)

Summary of Capital Increase through Public Offering and its Significance■ Summary of Capital Increase throughPublic Offering
Issuance type

■ Ratio of Major Properties in DOI’s Portfolio

Public offering (Domestic offering)

45,202 units
No. of new investment
units issued(Offering 41,902 units + OA 4,110 units)
Issue priceTotal procured amount

4.0

Beforethe public offering
44 properties,
352,786 million yen

37.9

6.8

2.7 2.3

3.9 2.6

(%)

39.7

After
the public offering
46 properties,
387,557 million yen

466,537 yen
20.3 billion yen

Shinjuku Maynds Tower 34.5

(including OA)(%)

Others 35.1

E SPACE TOWER 6.2
Integral Tower 3.9

Daiwa Shibaura 2.1
Daiwa Akasaka 2.4

Daiwa Ginza 3.6
Azabu Green Terrace 3.6

Kitahama Grand Building 2.4

Daiwa Onarimon 3.6
shinyon curumu 2.5(Note) The names and investment ratios of the top 10 properties on acquisition price basis after the public offering are indicated.

■ Changes in Major Indices after Capital Increase through Public Offering
Major IndicesEnd of 16th Period

Properties Acquired Upon Capital
Increase through Public Offering

After the public offering (Note)

No. of properties

44 properties

3 properties

46 properties

Asset size (Total acquisition price)352.7 billion yen

38.7 billion yen

387.5 billion yen

NOI yield (Annualized)

3.4%

4.8%

3.5%

NAV per unit

459,893 yen-

469,660 yen

Average building age

21.6 years

11.5 years

21.0 years

No. of tenants

442 companies

26 companies

474 companies

Occupancy rate

96.3%

98.7%

96.7%

LTV

40.6%

-

40.6%

68.2 billion yen-

75.1 billion yen

3.4 years-

4.5 years

Acquisition capability
Average Debt Remaining Period(Note) Major indices of “After Public Offering” exclude “Daiwa Shibuya SS” (sold on May 30, 2014).

■ Portfolio Replacement■ Changes in Acquisition Capability and LTVWill consider portfolio replacement through sales of properties going(billion yen)120

forward by analyzing long-term profitability and costs for each property

Overview of asset sold in the 17th Fiscal Period
Daiwa Shibuya SS Building
Address
Shibuya, Shibuya-ku, Tokyo
Transfer Date
May 30, 2014
Book Value (Note 1)
Sale Price
3,783 million yen
3,800 million yen
Appraisal Value (Note 1)
3,840 million yen
Differences between Sale Price and17 million yen (+0.4%)
Appraisal Value (Note 2)Completion
July 8, 1977
(Note 1) The price is as of November 30, 2013.
(Note 2) The difference between Sale Price and Book Value differs from gain/loss on sale.

Acquisition capability

(%)
44

LTV

43.0

100
80
60

42

40.6

40.6
75.1

68.2

40
38

40

36

20

34

0
End of FP ended Nov. 2013(end of 16th Period)0
End of FP ended May 2014(end of 17th Period)

After public offering(forecast)

I. Overview of Daiwa Office Investment Corporation

11

Internal Growth Measures
Committed to heightening tenant satisfaction and proactive leasing activities

Office Market Trends
Further improvements in vacancy rate are observed and rent levels are showing signs of recovery.

■ Office Building Rental Market of Tokyo■ Transition of the Supply and Demand Balance in 23 Wards of Tokyo(yen/tsubo)
25,000(yen/tsubo)
25,000

(%)
10.0
(%)
10.0

23,00023,0008.0
8.0

21,00021,0006.0
6.0

200,000
100,000

6.0
4.5

19,00019,0004.0
4.0

100,000
0

4.5
3.0

2.0
2.0
Average rents of
Vacancy rate ofexisting buildings
existing buildings
0.0
15,000
Averagerents of (left axis)
Vacancyrate of (right axis)
existing buildings (left axis)
existing buildings (right axis)
0.0
15,0002001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(Source) Miki Shoji

0-100,000

3.0
Predicted figures
1.5
Floor area of new supplies
Predicted figures
1.5
Floor
Vacancy rate
0.0
Floor area
area ofof new
new demands
supplies
Floor 2003
area ofnew2005
demands
rate2011 2012 2013 2014 2015 2016 2017 2018 0.0
2001 2002
2004
2006 2007 2008Vacancy
2009 2010
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

17,00017,000(tsubo)400,000(tsubo)400,000
300,000

(%)
9.0
(%)
9.0
7.5

Supply anddemandand
gap
Supply300,000
200,000

7.5
6.0

demand gap-100,000-200,000-200,000(Source) CBRE “Mid-term Office Market Outlook 2014 Tokyo 23 Wards”

Rental Business Status
We strived to improve the occupancy rate as well as diversifying tenants in leased areas.

■ Occupancy Rate
(%)
100.0
(%)
100.0
97.7
97.7

■ Average Contract Rents and Market Rents (monthly)(yen/tsubo)
25,000(yen/tsubo)
25,000
95.9
95.9

95.0
95.0
92.8
92.8

90.0
90.0

96.4
96.4

95.4
95.4

94.3
94.3

96.3
96.3

95.0
95.0

96.4
96.4
94.8
94.8

95.2
95.2
95.3

95.8
95.8

95.3

120
120

22,50022,50020,00020,00092.4
92.4
Occupancy rate (actual)

Occupancy rate (actual)(forecast)Occupancy rate (forecast)
85.7(As of disclosure in January 2014)
85.0
Occupancy rate (forecast)
85.7
of disclosure
January2014)
85.0
End of End of End of
End of End of End of End of End of End of(AsEnd
of End ofinEnd
of Endof
7th
8th
9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19thEndof Endof Endof Endof Endof Endof Endof Endof Endof Endof Endof Endof EndofPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriod7th
8th
9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th
Period Period Period Period Period Period Period Period Period Period Period Period Period909075.0 75.1
75.0 75.1
Unit rent index(Period-on-period
Unit rent index
comparison, right axis)**(Period-on-period
comparison,rightrents*axis)**
Averagecontract

17,50017,50060
60

18,215
18,468 18,215 30
18,468 16,284 30

Average contract
rents*
office rents
16,284(according to Miki Shoji for five central wards of Tokyo)
16,03515,000
Average office rents
to Miki Shoji for five central wards of Tokyo)
16,03515,000 End of End(accordingof End of End of End of End of End of End of End of End of End of End of End of End of
4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17thEndof Endof Endof Endof Endof Endof Endof Endof Endof Endof Endof Endof Endof EndofPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriod
4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th
Periodcontracted
Period Period
PeriodPeriodPeriodPeriodPeriodPeriod Period Period Period* Average monthly
rents
withPeriod
tenants
at theendPeriodof eachfiscalperiod.

00** Unit rent index is the comparison of existing properties’ rents with the existing properties’ rents in thepreceding period for consecutive periods, indexed with the figure at the end of the 7th FP as 100.

■
(No.Tenantof cases) Diversification in Leased Area
(No. of700
cases)
700
600
600

25.5
25.5

500
500

200
200
100
100
0
0

28.6
28.6

28.4
28.4
24.9
24.9 23.4
23.4

3,000m2 or more (left axis)
1,000m22 oror moremore,(leftlessaxis)
than 3,000m2 (left axis)
3,000m
2 2
2 2300m
1,000mor
ormore,more,lesslessthanthan1,000m
3,000m(left(leftaxis)
axis)
2
Less
300m2less(leftthanaxis)1,000m2 (left axis)
or more,300mthan22
Ratio thanof tenants
3,000m or more (%) (right axis)
Less
300mleasing(left axis)
11 axis)Ratio of tenants leasing 3,000m2 or more (%) (right

400
400
300
300

22.8
22.8

25.2
25.2

27.5
27.5

(%)
30
(%)
30

11
11
30
30

8
24
8
24
115
115

8
8
34
34

9
34
9
34

10
10
32
32

127
127

127
127

133
133

145
145

97
97

105
105

107
107

103
103

110
110

11
27
27

159
159
119
119

30
20
20
10
20
20

10
10
31
31
174
174

139
139

12
12
40
40

187
187

194
194

147
147

149
149

End of
End of
End of
End of
End of
End of
End of
End of
End of
9th Period 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period 17th Period
End of
End of
End of
End of
End of
End of
End of
End of
End of
9th Period 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period 17th Period(Note) Office and retail are the target tenants (excluding residence and warehouse)

12

50
40
40
30

24.4
24.4

10
10
34
34

■ Changes and Reasons for Tenants Moving In/Out (Note)(No. of cases)(No. of60
cases)
60
50

100
-100
-10
-20
-20
-30
-30
-40

10
10

-40
-50
-50
-60
-60

33
33

-20
-20

30
30

31
31
17

6
6

17

-24
-24

-14
-14

16
16
4
4
-12
-12

18
18
-2
-2
-20
-20

24
24
9
9

25
25
12
12

-15
-15

-13
-13

18
18

13
13

-25
-25

-26
-26

42
42
18
18

-24
-24

-53
-53

End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
8th Period 9th Period 10th Period 11th Period 12th Period 13th Period 14th Period 15th Period 16th Period 17th Period
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
8th Period Number
9th Period
10th Period
Periodof13th
PeriodPeriod 16th Period 17th Periodof Move
Ins 11th Period 12th
NumberMove
Outs14th Period 15th
Difference
Number of Move Ins

0
0

44
44

38
38

Number of Move Outs

Difference

Breakdown of 17th
Cost
Space
BetterConsolidation Downsizing
PeriodReduction Expansion
LocationMoving inMoving out

2
1

22
4

3
7

0
5

8
1

Other

Total

7
6

42
24

(Note) Figures above exclude new moving in/out for residential and warehouse properties

Occupancy Rate of the Properties Subject to Leasing Improvement in the 17th Fiscal Period■ shinyon curumu (acquisition price: 9,650 million yen)

■ Daiwa Meieki (acquisition price: 5,300 million yen)
100.0(%)

100.0(%)

50.0

51.9

55.9

67.5

78.4

96.3

■ Daiwa Higashi-Ikebukuro (acquisition price: 2,958 million yen)

85.4 81.3

100.0(%)
100.0

98.4

100.0

69.3

50.0

50.0

92.2*

100.0

100

0.0

0.0

0.0
Time of 15th
Acquisition Period(Dec. 2012)

16th
Period17th
Period• Highly convenient property located a 4-minute walkfrom JR Shinjuku Station’s new south exit and directly
connected to the passageway of Shinjuku 3-chomesubway station.
• Local development can be expected with developmentof station building scheduled to open in the spring of2016 as well as with infrastructure development.

Time of 15th
Acquisition Period(Feb. 2013)

16th
Period• Located a 6-minute walk from Nagoya Station on the
JR and Nagoya Municipal Subway lines and a 2-minute
walk from the underground doorway which leads to the100
underground shopping arcade.
• A large-scale redevelopment is planned in the futureand business accumulation is growing year by year.
50

0Property subject toleasing improvement• Property with hightransportation
convenience being
located within a 3
minute-walk from
Shinsaibashi Station on
the Osaka City Subway
Midosuji Line, NagahoriTsurumi Line and a 4
minute-walk from Yotsubashi Station on the
Yotsubashi Line.
• The property houses renowned brand shops on
the lower floors and stands in one of the mostcommercialized areas of the Osaka office area.

15th
Period16th
Period17th
Period• Middle-scale property located a 10-minute walk from
Higashi-Ikebukuro Station on the Tokyo Metro
Yurakucho Line and a 12-minute walk from JR
100
Ikebukuro Station.
• The property is close to Sunshine City and it has acharacteristic solid exterior.
50

50

0
100

50

* Monthly occupancy rates are indicated for the 17th Fiscal Period.

Value-up Properties in the 18th Fiscal Period■ Daiwa Minami-Senba (acquisition price: 4,810 million yen)

14th
Period17th
Period00■ Shinjuku Maynds Tower (acquisition price: 133,800 million yen)
Strategic value-up property• Shinjuku Maynds Tower, completed in 1995, is approachingits first major challenge with the physical, economic andsocial degradation of various facilities.
• Upon updating what is inevitably required due to aging
degradation, we will not seek simple replacement but
promote strategic value-up plans that will lead to adding
value to the property in various aspects including measuresfor energy-saving, CS improvement and BCP.

Obtained “A rank” in CASBEE for
Market Promotion certification
system in June 2014

Energy-saving

CS Improvement

BCP measures• Introduction of individual heat sources• Introduction of LED lighting to common areas• Visualization of energy (introduction of BEMS
through the renewal of the central monitor)
Scheduled to be completed in 2015

• Computerizing VAV control (air/temperature
control) Scheduled to be completed in 2015
• Renewal construction of underground
shopping floors• Renewal construction of common areas on
office floors• Long-term earthquake
countermeasure construction
on elevators• Installment of emergency
disaster kit cabinets inelevators

Measures to Increase Portfolio Value■ Strategic Renewal Works■ BCP Measures (security reinforcement)■ Strategic Tenant Attraction

Air conditioning equipment renewal work

Surveillance cameras are added to 6 properties in the portfolio

Kagami Crystal

Daiwa A Hamamatsucho

Daiwa Kyobashi (wind shelter)

Daiwa Misakicho

Daiwa Minami-Aoyama (service entrance)
Daiwa Ginza

Upgrading common area at E SPACE TOWER■ Energy–Saving Measures
Ceiling renovation at Daiwa A Hamamatsucho■ Coexistence with Local Societies
Free coffee offered by UCC Holdings Co.,
Ltd. at the Tokyo Marathon

BeforeAfter

BeforeAfter

Daiwa Onarimon

I. Overview of Daiwa Office Investment Corporation

13

10

Financial Conditions
Reduce refinancing risk by extending borrowing periods and diversifying repayment dates

Status of Interest-Bearing Liabilities (as of May 31, 2014)
During the 17th Fiscal Period, DOI conducted refinancing of 14.9 billion yen due to arrival of repayment dates and new debt financing of 16
billion yen for property acquisitions, in order to extend borrowing periods and diversify repayment dates. DOI will continue to focus on stablefinancial management and support further growth.
■ Interest-Bearing Liabilities■ Changes in Remaining Years at the Time of70.0(%) (year) 8.0 Procurement of Interest-Bearing Liabilities(billion yen) 280
Interest-bearing liabilities (left axis)

240

60.0

LTV (based on acquisition price) (Note) (right axis)

200

50.0

Medium-to-long term, upper-limit LTV target range

160

7.0

Average year remaining at the period end (right axis)

6.0

Average remaining years at the time ofprocurement during the 17th Fiscal Period (left axis)

3.5

6.2

3.0

5.0

2.5

4.0

2.0

3.0

1.5

2.0

1.0
0.5

30.0

80

20.0

40

10.0

1.0

0.0

0.0

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

4.0 (year)

40.0

120

0

3.8

0.0
8th
9th 10th 11th 12th 13th 14th 15th 16th 17th
Period Period Period Period Period Period Period Period Period Period(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties■ Diversification of Repayment Dates■ Balance of Borrowings by Financial Institution(million yen)
30,000Financial institution

Balance (mm yen)

Long-term borrowings, etc.

Fixed interest rates

Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank
Development Bank of Japan
Mizuho Bank
The Bank of Tokyo-Mitsubishi UFJ
Shinsei Bank
Resona Bank
Aozora Bank
Kansai Urban Banking Corporation
Mitsubishi UFJ Trust and Banking
Mizuho Trust and Banking
The Bank of Fukuoka
ORIX Bank Corporation
The Gunma BankThe Shizuoka Bank
The Musashino Bank
Tokio Marine & Nichido Fire Insurance
The Higashi-Nippon Bank
The Hiroshima Bank
The Kagawa Bank
The 77 Bank
The Bank of Yokohama
The Yamaguchi Bank
Taiyo Life Insurance Company
Nippon Life Insurance Company
Fukoku Mutual Life Insurance
Subordinated investment corporation bonds
Total

Short-term borrowings, etc.

Floating interest rates(Note) Balances less than a million yen have been rounded down.

20,00010,00014,9000
17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Long- to
Short-Term Liabilities■ Ratio of Fixed- to
Floating-Rate Borrowings

End of 17th
23.5%
FiscalPeriodEnd of 17th
19.7%
FiscalPeriod

76.5%

80.3%

33,40020,35018,75013,90011,50011,000
9,000
6,000
5,000
5,000
5,000
4,000
2,500
2,500
2,000
2,000
2,000
1,500
1,000
1,000
1,000
500
500
300
300
200
3,500
163,700

Share

20.4%
12.4%
11.5%
8.5%
7.0%
6.7%
5.5%
3.7%
3.1%
3.1%
3.1%
2.4%
1.5%
1.5%
1.2%
1.2%
1.2%
0.9%
0.6%
0.6%
0.6%
0.3%
0.3%
0.2%
0.2%
0.1%
2.1%
100.0%■ Status of Rating
DOI newly acquired a rating from Japan Credit Rating Agency, Ltd. (JCR) in February 2014 for its conservative leverage, the significant improvement in debt costs, etc.
Rating agency

Japan Credit Rating Agency, Ltd. (JCR)
Rating and Investment Information, Inc. (R&I)

14

Target rating

RatingRating outlook

Long-term issuer rating
Issuer rating

AAA+

StableStableDescription of Asset Manager

Organization of Asset Manager (as of July 14, 2014)■ Description■ Directors and Auditor

Name

Daiwa Real Estate Asset Management Co., Ltd.

Address

6-2-1 Ginza, Chuo-ku, Tokyo

Established

October 21, 2004

Paid-in Capital

200 million yen

Employees
Registration of Financial Instruments
Business Operator
Building Lots and Buildings Transaction
Business License
Discretionary Agent for Real EstateTransaction Approval

57
No. 355 (Kinsho), Director-General, Kanto Local
Finance Bureau

Association Membership

President and Representative
Akira Yamanouchi
DirectorNo. (2)-83920, Governor of Tokyo
No. 34, Minister of Land, Infrastructure, Transport andTourism
Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association■ Organizational Chart

Vice President andRepresentative Director

Yuji Shinotsuka (Head of Corporate Planning Dept.)

Vice President andRepresentative Director

Yoshiki Nishigaki (Head of Private Fund Management Dept.)

Director

Naoyuki Owa (Head of Administration Dept.)

Director (non-executive)

Toshihiro Matsui

Director (non-executive)

Mikita Komatsu

Auditor (non-executive)

Masaru Shirataki

Auditor (non-executive)

Shinji Kiso

Shareholders’ Meeting
Auditors
Board of Directors

Compliance Committee
Investment Committee

President andRepresentative Director

Acquisition
Department
Office Investment
Team
Residential Investment
Team
Healthcare Investment
Team

Asset Management
Department
Office Management
Team
Residential
Management Team
Healthcare
Investment Team
Investment
Planning Team
Construction
Management Team

Customer Relations
Department

Finance Department

Compliance Officer
Internal Control Office
Administration
Department

Corporate Planning
Department

Private FundManagement Department

Finance Team

Advisory Team

Accounting Team

Operational TeamManagement Team

Structure
Asset Manager
General Administrator
related to the operation of theadministrative instruments
Daiwa Real Estate AssetManagement Co., Ltd④①

Investment Corporation②

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

General Meeting of Unitholders
Officers
Executive Director: Nobuaki Omura
Supervisory Director: Takayuki Hiraishi
Supervisory Director: Hiroshi Sakuma

Supporting Company

Accounting Auditor

Daiwa Securities Group Inc.

KPMG AZSA LLC① Asset management contract / General administration affairs contract related to operationof administrative instruments② General administrative affairs contract / Asset custodian contract③ Unitholder register, etc. management contract / Special account management contract③⑤

Manager of Unitholder
Registry, etc.
Special Account Management
Institution
Sumitomo Mitsui Trust Bank, Limited

General Administrator(Investment Corporation Bonds)
Sumitomo Mitsui Banking Corporation④ Sponsor support agreement⑤ Fiscal agency agreement(Note) The specified affiliated juridical person (meaning a specified affiliated juridical person as provided in Article 12, Paragraph 3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Specified
Securities (Ordinance of the Ministry of Finance No. 22 of 1993; including amendments thereto)) of DOI is Daiwa Securities Group Inc.
Daiwa Securities Group Inc. is the Asset Management Company’s parent company (meaning a parent company as stipulated in Article 8, Paragraph 3 of the Ordinance on Terminology, Forms and Preparation
Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance No. 59 of 1963; including amendments thereto)).

I. Overview of Daiwa Office Investment Corporation15

II. Asset Management Report
1. Management Status and Other Performance Highlights Data
Fiscal Period

17th Period 16th Period 15th Period 14th Period 13th Period

Dec. 1, 2013 From June 1, 2013 From Dec. 1, 2012 From June 1, 2012 From Dec. 1, 2011
( FromTo May 31, 2014 )( To Nov. 30, 2013 )( To May 31, 2013 )( To Nov. 30, 2012 )( To May 31, 2012 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
8,588
8,432
7,615
7,566
7,431
Rental revenues
8,491
8,367
7,520
7,384
7,338
Operating expenses
4,827
4,755
4,306
4,419
4,341
Property-related expenses
3,931
3,870
3,499
3,602
3,533
Operating income
3,761
3,677
3,309
3,147
3,090
Ordinary income
3,006
2,956
2,590
2,365
2,022
Net income
3,016
2,960
2,589
2,369
2,021
(2) Properties, etc. (as of end of period)
Total assets
380,723
363,654
342,573
325,666
325,316[period-on-period percentage changes][+4.7%][+6.2%][+5.2%][+0.1%][+0.6%]
Interest-bearing liabilities
163,700
147,700
128,300
112,081111,391
Net assets
201,655
201,683
201,345
201,118
200,800[period-on-period percentage changes][+0.0%][+0.2%][+0.1%][+0.2%][+0.1%]
Unitholders’ capital
198,781
198,781
198,781
198,781
198,781(3) Distributions
Total distribution amount
3,016
2,960
2,589
2,369
2,021
Dividend payout
100.0%
100.0%
100.0%
100.0%
100.0%(4) Per Unit Information
Total number of units issued (units)395,798
395,798
395,798
395,798
395,798
Net assets per unit (yen)509,490
509,561
508,707508,132
507,331
Distribution per unit (yen)
7,621
7,478
6,542
5,986
5,107
Distribution amount from earnings per unit (yen)
7,621
7,478
6,542
5,986
5,107
Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
ROA
0.8%
0.8%
0.8%
0.7%
0.6%
Notes 2and3[annual rate][1.6%][1.7%][1.6%][1.5%][1.2%]
ROE
1.5%
1.5%
1.3%
1.2%
1.0%
Notes 3and 4[annual rate][3.0%][2.9%][2.6%][2.4%][2.0%]
Capital ratio
53.0%
55.5%
58.8%
61.8%
61.7%
[period-on-period percentage changes][−2.5%][−3.3%][−3.0%][0.0%][−0.3%]LTV (loan to value)
43.0%
40.6%
37.5%
34.4%
34.2%
Property leasing cash flows (NOI)
Note 5
5,916
5,826
5,300
5,088
5,172
(6) Other Referential Information
Number of investment properties
44
44
41
38
37
Number of tenants
Note 6
458
442
410
376
355
259,381.62 244,877.17 225,651.87 208,733.38 207,277.34
Total rentable area (m2)Occupancy rate
Note 7
96.4%
96.3%
95.0%
96.4%
94.3%
Depreciation
1,356
1,329
1,280
1,306
1,367
Capital expenditures
454
294
278
357
641
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

16

Operating revenues, etc. do not include consumption taxes, etc.
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 13th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 14th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 15th Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 16th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 17th Fiscal Period are the annualized figures calculated based on 182 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (former DA Office Investment Corporation; hereinafter “DOI”) was establishedon July 11, 2005 in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951;
including amendments thereto) with Daiwa Real Estate Asset Management Co., Ltd. (hereinafter “DREAM”; former, K.K.
daVinci Select) as the organizer. After its establishment, DOI implemented an additional issuance of investment units
through a public offering (99,600 units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (“TSE”)
Real Estate Investment Trust Section (securities code: 8976) the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition prices), subsequent
activities, such as the additional acquisition of properties and replacement of portfolio properties, resulted in theassets under management amounting to 364,076 million yen (sum total of acquisition prices) as of the last day of May
2014.
DOI strives to secure stable revenues and achieve sustainable growth of investment assets based on a clear
portfolio development policy of specializing in investment in office buildings, with a particular focus on investment inbuildings with a total floor area of 2,000m2 or more situated in downtown Tokyo, as well as through dedicated efforts
to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment (from Dec 1, 2013 to May 31, 2014)
During the 17th Fiscal Period, a recovery trend was seen in the Japanese economy owing to
improvement in business sentiment and corporate performance primarily by export-related companies
associated with the depreciation of the yen and rise in stock prices against the backdrop of financefocused economic policies, centering on the financial policies promoted by the Abe administration, as
well as the large-scale monetary easing policy implemented by Bank of Japan, high level of public
investment and other factors. While there were concerns of consumption decreasing on the rebound of
the last-minute surge in demand associated with the consumption tax hike, improvement in employment
and other factors are expected to lead to steady economic recovery going forward.
In the office rental market in central Tokyo, vacancy rates took a turn after peaking in June 2013 anddeclined to 6.52% at the end of May 2014 due to the settling down in new supply. Led by the
improvement in vacancy rates of large buildings, overall vacancy rates including that of small andmedium-sized buildings were also on an improving trend. While the drop in vacancy rates is leading to astronger sense that office rents are bottoming out, there was a rise in office rents of large buildings insome areas but only a slight increase in the overall market.
In the office transaction market, property prices were anticipated to rise due to expectations of theeconomy recovering and property acquisitions by real estate companies and funds (including REITs)
remained high amid the ongoing favorable equity financing environment and proactive lending attitudes offinancial institutions.
(B) Management Performance
To increase the long-term EPS (EPS (net income per unit) after deducting gain on sales of properties)
over the medium to long term, DOI has sustained the strategy for “external growth” which aims toincrease revenue through property acquisitions, and “internal growth” which aims to maximize income
generated from existing properties.
For external growth, DOI proactively engaged in property acquisition activities and purchased “Integral
Tower” (acquisition price: 15,220 million yen) in May 2014. Meanwhile, DOI divested “Daiwa Shibuya SS
Building” (sale price: 3,800 million yen) in May 2014. As a result, DOI’s assets under management at theend of the 17th Fiscal Period (as of May 31, 2014) totaled 44 properties, the sum total of acquisition
prices amounted to 364,076 million yen.
For internal growth, in spite of the severe office rental market, DOI tried to meet the demands of tenants
to expand rental space through developing good relations with existing tenants and strengthening
cooperation with leasing brokers and property managers. As a result of proactive leasing activities, theoccupancy rate at the end of the 17th Fiscal Period (as of May 31, 2014) was maintained at 96.4%.

II. Asset Management Report17

(3) Overview of Capital Procurement(A) Procurement of Funds for Acquisitions
DOI implemented the following financing activities during the 17th Fiscal Period to acquire “Integral Tower.”(a) On May 29, 2014, DOI borrowed 16,000 million yen in total from Sumitomo Mitsui Banking Corporation,
The Bank of Tokyo-Mitsubishi UFJ, Ltd., Sumitomo Mitsui Trust Bank, Limited, Mizuho Bank, Ltd.,
Development Bank of Japan Inc., Mizuho Trust & Banking Co., Ltd., and The Musashino Bank, Limited
to acquire the new property (“Integral Tower” delivered on May 29, 2014).
(B) Procurement of Funds for Repayment of Borrowings (Refinancing)
DOI implemented the following financing activities during the 17th Fiscal Period for repayment of borrowings.
(a) On March 18, 2014, DOI borrowed 4,000 million yen from Resona Bank, Ltd. for repayment of 4,000
million yen due on March 18, 2014.
(b) On March 25, 2014, DOI borrowed 2,000 million yen from Sumitomo Mitsui Banking Corporation for
repayment of 2,000 million yen due on March 25, 2014.
(c) On March 31, 2014, DOI borrowed 8,900 million yen in total from Mizuho Bank, Ltd., The Bank ofTokyo-Mitsubishi UFJ, Ltd. and Gunma Bank, Ltd. for repayment of 8,900 million yen due on March 31,
2014.
(C) Status of Interest-Bearing Liabilities
As a result of the above, the balance of interest-bearing liabilities outstanding at the end of the 17th Fiscal
Period (as of May 31, 2014) stood at 163,700 million yen (short-term debt: 5,500 million yen; long-term debt:
154,700 million yen; investment corporation bonds: 3,500 million yen). The balance of long-term debt due
within one year stood at 29,500 million yen.
During the 17th Fiscal Period, the average remaining repayment period has been extended from 3.43 years(16th Fiscal Period) to 3.82 years (17th Fiscal Period) because DOI conducted borrowings mainly with periodsof between 5 years and 8 years and as long as 8.5 years. Furthermore, borrowing costs were reduced throughthe reduction of credit spread interest. Meanwhile, DOI concluded interest-rate swap agreements in the 17th
Fiscal Period to fix future interest payments for borrowings of 19,600 million yen in total in order to offset therisks of the possible increase of interest rates.

18

(4) Capital Expenditures During the 17th Fiscal Period
The following summarizes the major construction work that constitutes capital expenditures during the 17th
Fiscal Period. Capital expenditures amounted to 454 million yen, and combined with the 272 million yen in
repair expenses, total of 726 million yen in construction work was implemented.
Name of Property(location)

PurposeExpenditure(millions of yen)

PeriodShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renewal of thestore on B1F

From: Jan. 2014
To: May 201498

Daiwa Misakicho(Chiyoda-ku, Tokyo)

Renewal work for air conditioning

From: Apr. 2014
To: May 201447

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation work for common area

From: Jan. 2014
To: Feb. 201428

From: Dec. 2013
To: May 2014

281

Other Buildings
Total

454

(5) Overview of Financial Performance and Distributions
As a result of the management described above, for the 17th Fiscal Period, DOI recorded 8,587 million yen in
operating revenue, 3,761 million yen in operating income, 3,006 million yen in ordinary income and 3,016 million
yen in net income.
Concerning distributions, to ensure that the cash dividend would be deducted from taxable income (Article
67-15 of the Special Measures Concerning Taxation (Act No. 26 of 1957; including amendments, hereinafter“Special Taxation Measures Act”)), DOI decided to distribute the entire retained earnings at the 17th Fiscal
Period end, excluding fractions of the distribution amount per unit that are less than 1 yen. Accordingly, DOI
declared a distribution of 7,621 yen per unit.

II. Asset Management Report193. Future Management Policy and Tasks(1) Investment Environment
The Japanese economy is expected to recover gradually with the improvement of corporate performance
mainly focusing on export-related companies and public investment as well as a recovery in personal
spending due to the effects of various finance focused economic stimulus measures, centering on the public
works projects and financial policies promoted by the Abe administration, and the large-scale monetaryeasing policy implemented by the Bank of Japan as well as the recovery in overseas economies centering on
advanced countries. However, there still is a need to pay attention to the turmoil in overseas economies andfinancial markets with the emergence of geopolitical risks because they pose potential risks of disrupting theJapanese real economy and financial environment.
In the office rental market, vacancy rates declined with the boost in demand from the decrease in the
supply of new office buildings and improvement of the employment situation. In addition, rents are anticipatedto improve as an increase in demand for office floor is expected along with the improvement of corporate
performance.
In the office transaction market, the appetite for acquisitions by real estate companies and funds (including
REITs) is expected to be even stronger against the backdrop of the favorable financing environment andexpectations for rents to rise, among other factors.
(2) Management Policy and Tasks(A) Strategy for Managing Existing Properties
Under the above office leasing market conditions, tenants are also expected to be more selective withproperties. Consequently, DOI will carry out operational management under the following policy in an aim
to enhance the competitiveness of existing properties and thereby increase the long-term EPS over the
medium to long term.
(a) Maintain and raise occupancy rates
For existing tenants, strive to reduce vacancy risks through improving the quality of buildings,
equipment and management systems. For new tenants, strive to maintain and raise occupancy rates
through the provision of more comfortable services than competitors by aggressively participating in
the market.
(b) Maintain and raise profitability
Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c) Lower operational management costs
Strive to lower operational management costs based on maintaining the high level of tenantsatisfaction with office environments. To achieve this, DOI will implement efficient operational
management by leveraging the economies of scale obtained from external growth and reviewing
planned construction work.
(B) Investment Strategy for New Properties
Based on various external growth strategies, DOI will concentrate its investment in buildings with a total
floor area of 2,000m2 or more considering a balance between the financing and purchasing market
situation. In principal, DOI will invest in properties around Tokyo, but will also look into investment incompetitive properties in areas other than Tokyo to diversify investments.
As pipelines, in addition to expanding its own information-sourcing channels, DOI will search forproperties that meet its investment criteria by proactively gathering real estate transaction market
information through expanding partnerships with DREAM and the Sponsor Group, and utilizing theGroup’s extensive network of clients.
During the 17th Fiscal Period, DOI additionally acquired “Integral Tower” which is situated in Tokyo. DOI
will continue to strive to acquire properties that are in line with the investment strategy described above.

20

(C) Financial Strategy
DOI will conduct disciplined financial management based on the following content.
(a) In principle, control leverage by keeping the ratio of interest-bearing liabilities to total assets (LTV)(based on total asset value) within the range of 40% to 50% at maximum in consideration of thesubstantial LTV (ratio) and other factors.
(b) In principle, diversify the payment date, targeting 30 billion yen as the maximum amount of interestbearing liabilities that shall become due during any single Fiscal Period.
(c) In principle, aim to have long-term loans be at least 70% of total loans.
(d) Diversify lenders, which shall mainly be domestic financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by separatingnecessary funds, such as the amount of distributions paid, from working funds.
(D) Schedule of Capital Expenditures
The following table lists major capital expenditures in conjunction with the refurbishment or renewal
work planned for the future on the properties held as of May 31, 2014. Please note that the amounts
below include costs that will be recognized as expenses.
Estimated Cost
(millions of yen)
Name of Property(location)

PurposeShinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for renewal of
CVCF and renovation work fordisaster-prevention equipment

From: Oct. 2013
To: Mar. 2015

406

254

7

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Renovation work for central
supervisory system

From: Oct. 2013
To: Sep. 2015

297

54

5

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

Construction work for upgradingof main central supervisorysystem VAV and controller

From: Oct. 2013
To: Sep. 2015

110

15

2

Daiwa Tsukishima (Chuo- Renewal work for air
ku, Tokyo)
conditioning

From: Jul. 2014
To: Nov. 2014

101

–

–

Shinjuku Maynds Tower(Shibuya-ku, Tokyo)

From: Jun. 2014
To: Jul. 2014

56

–

–

Estimated Period
Total

Exchange work for power supply
separate type storage battery

Payment
Cumulative
for theamountcurrent
paid
periodII. Asset Management Report21III. Balance Sheets
As of May 31, 2014 and November 30, 2013
(Thousands of yen)

As of
May 31, 2014

As ofNovember 30, 2013

AssetsCurrent Assets:
Cash and cash equivalents [Note 11]

22,537,727

16,924,972

Tenant receivables

292,388299,238

Consumption tax refundable

135,052–

Prepaid expenses

307,951

289,695

Deferred tax assets [Note 9]

3,729

7,426

Other current assets

80,831

108,601

Total Current Assets

23,357,678

17,629,932

Land including trust accounts

286,292,278

279,089,504

Buildings and structures including trust accounts [Note 4]

84,489,584

79,791,214

Machinery and equipment in trust accounts

781,250

861,302

Tools, furniture and fixtures including trust accounts

117,789

102,157

Construction in progress including trust accounts

436,937

42,001Other tangible fixed assets including trust accounts

5,909

6,017

(18,616,452)(17,517,216)

2,713,986

2,713,986

356,221,281

345,088,965

1,260

1,448

Lease and guarantee deposits in trust

113,684

113,684

Long-term prepaid expenses

942,444778,748

Deferred tax assets [Note 9]

70,13423,706

Deferred investment corporation bond issuance costs

1,718

4,585

Others14,945

12,8391,144,185

935,010

380,723,144

363,653,907

Investment Properties, at cost: [Notes 3 and 12]

Less: accumulated depreciation
Leasehold rights including trust accounts
Total Investment Properties, net
Other Assets:
Right of trademark

Total Other Assets
Total Assets
The accompanying notes are an integral part of these financial statements.

22

(Thousands of yen)

As of
May 31, 2014

As ofNovember 30, 2013

Liabilities
Current Liabilities:
Operating accounts payable

904,316

772,417

Short-term debt [Notes 6 and 11]

5,500,000

3,000,000

Long-term debt due within one year [Notes 6 and 11]

29,500,000

33,900,000

461,153

286,983844

811

Accrued consumption taxes

16,05196,309Rent received in advance

971,477

977,470

Other current liabilities

365,069

164,119

Total Current Liabilities

37,718,910

39,198,109

3,500,000

3,500,000

Long-term debt [Notes 6 and 11]

125,200,000

107,300,000

Tenant security deposits including trust accounts [Note 11]12,443,797

11,904,030

205,310

68,576

141,349,107

122,772,606

179,068,017

161,970,715

198,780,951

198,780,951

3,016,511

2,959,948

201,797,462

201,740,899(142,335)(57,707)(142,335)(57,707)

Total Net Assets

201,655,127

201,683,192

Total Liabilities and Net Assets

380,723,144

363,653,907

Accounts payable – other
Income taxes payable

Long-Term Liabilities:
Investment corporation bond [Notes 6 and 11]

Derivative liabilities [Note 11]
Total Long-Term Liabilities
Total Liabilities

Net Assets [Note 5 and 10]
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 395,798 units
Retained earnings
Total Unitholders’ Equity
Valuation and translation adjustments
Deferred gains or losses on hedges
Total Valuation and translation adjustments

The accompanying notes are an integral part of these financial statements.

III. Balance Sheets

23

IV. Statements of Income
For the six months ended May 31, 2014 and November 30, 2013
(Thousands of yen)

Operating Revenues and Expenses
Operating Revenues:
Rental revenues [Note 7]

For the six months ended
May 31, 2014

For the six months ended
November 30, 2013

8,491,130

8,367,068

Other revenues related to property leasing [Note 7]
Gain on sale of investment property [Note 8]
Total Operating Revenues

92,7583,611

65,002–

8,587,499

8,432,070

Operating Expenses:
Property-related expenses [Note 7]
Asset management fees
Asset custody fees

3,931,000
710,204
18,1633,870,374
696,225
17,657

62,68622,026

63,107
21,7185,400
77,2855,400
80,5604,826,764
3,760,735

4,755,041
3,677,029

932
630
4,068

1,424
1,101
2,465

5,630

4,990

554,143
47,449151,0457,939

522,251
53,610144,285
5,935

760,576
3,005,789

726,0812,955,938

11,485

4,884

Total Extraordinary Income

11,485

4,884

Income Before Income Taxes

3,017,274

2,960,822

Income taxes – current
Income taxes – deferred
Total Income Taxes [Note 9]

930
4

992
(6)

Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing expenses
Other non-operating expenses
Total Non-Operating Expenses
Ordinary Income
Extraordinary Income:Gain on donation of tangible fixed asset

Net Income
Retained Earnings Brought Forward
Retained Earnings at End of Period

934

986

3,016,340
171
3,016,511

2,959,836
112
2,959,948

The accompanying notes are an integral part of these financial statements.

24

IV. Statements of Income

V. Statements of Changes in Unitholders' Equity
For the six months ended May 31, 2014
(Thousands of yen)

Deferred Gains
or Losses
on Hedges

Number of
Units

Unitholders’CapitalRetained
Earnings

395,798

198,780,951

2,959,948(57,707)

201,683,192

Cash dividends declared––(2,959,777)–(2,959,777)

Net income––

3,016,340–

3,016,340

Net changes of items other thanunitholders’ equity

–

–

–

(84,628)(84,628)

395,798

198,780,951

3,016,511(142,335)

201,655,127

Balance as of November 30, 2013

Balance as of May 31, 2014Total

For the six months ended November 30, 2013
		

(Thousands of yen)

Deferred Gains
or Losses
on Hedges

Number of
Units

Unitholders’CapitalRetained
Earnings

395,798

198,780,951

2,589,422(25,003)

201,345,370

Cash dividends declared––(2,589,310)–(2,589,310)

Net income––

2,959,836–

2,959,836

Net changes of items other thanunitholders’ equity

–

–

–

(32,704)(32,704)

395,798

198,780,951

2,959,948(57,707)

201,683,192

Balance as of May 31, 2013

Balance as of November 30, 2013

Total

The accompanying notes are an integral part of these financial statements.

V. Statements of Changes in Unitholders' Equity

25

VI. Notes to Financial Statements
For the six months ended May 31, 2014 and November 30, 2013

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (former DA Office Investment Corporation: hereinafter, “DOI”) wasestablished on July 11, 2005 as an investment corporation under the Law Concerning Investment Trusts andInvestment Corporations of Japan (hereinafter, the “Investment Trust Law of Japan”) by the founder (the former
daVinci Select; presently, Daiwa Real Estate Asset Management (hereinafter, “DREAM”)).
DOI is an externally managed real estate fund, established as an investment corporation. DREAM, as DOI’s
asset management company, is engaged in acquiring, managing, leasing, and renovating office properties.
Daiwa Securities Group Inc. currently owns 100% of DREAM.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units are listed on the J-REIT section of the Tokyo Stock Exchange.
As of May 31, 2014, DOI had ownership or beneficiary interests in 44 office properties with approximately
259,382 square meters of rentable office space and had leased office space to 458 tenants engaged in a varietyof businesses. The occupancy rate for the office properties was approximately 96.4%.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Law of Japan and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (hereinafter, “Japanese GAAP”), which are different in certain respects as
to application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP. Some supplementary information included in
the statutory Japanese language financial statements, but not required for fair presentation, is not presented in
the accompanying financial statements. DOI does not prepare consolidated financial statements, as DOI has no
subsidiaries.

Note 2 – Summary of Significant Accounting Policies
Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the beneficiary interests of properties in trust. Property andequipment balances are depreciated using the straight-line method over the estimated useful lives. The
estimated useful lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

As of May 31, 2014
2-64 years
3-23 years
5-18 years

As of November 30, 2013
2-64 years
2-23 years
5-18 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs
and maintenance which do not add to the value of a property or prolong its useful life are expensed as incurred.
Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized using the straight-line method over therespective terms of the bonds.
Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of temporary
differences between the amounts of assets and liabilities for financial statements and for income tax purposes isrecognized as deferred taxes.
Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of
newly purchased properties, DOI capitalizes a portion of the real estate taxes that relate to a period from the purchasedate of each property until the end of the calendar year as part of the acquisition cost of the relevant property.
Capitalized real estate taxes amounted to 54,857 thousand yen for the six months ended May 31, 2014 and 71,391
thousand yen for the six months ended November 30, 2013.

26

Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and otheroperating revenues such as utility charge reimbursements, parking space rental revenues and other income.
Rental revenues are generally recognized on an accrual basis over the life of each lease. Utility charge
reimbursements are recognized when earned and their amounts are reasonably estimated.
Hedge Accounting
DOI conducts derivative transactions in order to hedge against risks defined in its Articles of Incorporation
based on its risk management policy. DOI utilizes derivative financial instruments such as interest-rate swap
agreements only for the purpose of hedging its exposure to changes in interest rates. DOI deferred recognitionof gains or losses resulting from changes in fair value of interest-rate swap agreements because its interest-rateagreements met the criteria for deferral hedging accounting.
However, DOI applies special treatment to the interest-rate swap agreements that meet the criteria for suchspecial treatment. Under the special treatment, interest-rate swaps are not remeasured at fair value: instead, thenet amount paid or received under the interest-rate swap agreements is recognized and included in interest
expense. The hedge effectiveness for interest-rate swap agreements is assessed each fiscal period except for
those that meet the criteria of special treatment.
Accounting Treatment of Beneficiary Interests in Trust Assets Including Real Estate
For trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well
as all income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheet
and income statement accounts.
Consumption Taxes
Consumption taxes are excluded from transaction amount. Non-deductible consumption taxes are recognized
as expenses.

Note 3 – Schedule of Tangible Fixed Assets of Investment Properties(Thousands of yen)
Investment properties as of May 31, 2014 and November 30, 2013 consisted of the following:
As of May 31, 2014
As of November 30, 2013
Acquisition
Accumulated
Acquisition
AccumulatedBook value
Book value
costs
depreciation
costs
depreciation
Land286,292,278– 286,292,278 279,089,504– 279,089,504
including trust accounts

Buildings andstructures

84,489,584(18,145,866)

66,343,718

79,791,214(17,055,415)

62,735,799

Machinery andequipment

781,250(401,380)

379,870

861,302(399,706)

461,596

Tools, furniture andfixtures117,789(63,297)

54,492102,157(56,078)

46,079Construction inprogress

436,937–

436,937

42,001–42,001Other tangible
fixed assets

5,909(5,909)–6,017(6,017)–372,123,747(18,616,452)

353,507,295

359,892,195(17,517,216)

342,374,979

including trust accounts

in trust accounts

including trust accounts

including trust accounts

including trust accounts

Total

Note 4 – Advanced Depreciation for Tangible Fixed Assets Acquired by Government
Subsidies, Etc.
Government subsidies of 32,898 thousand yen are deducted from the acquisition cost of the buildings in trust
as of May 31, 2014 and November 30, 2013.

Note 5 – Net Assets
DOI issues only non-par value units in accordance with the Investment Trust Law of Japan and all of the issue
prices of new units are designated as stated capital. DOI maintains at least 50,000 thousand yen as the minimum
amount of net assets, as required by the Investment Trust Law of Japan.
VI. Notes to Financial Statements

27

Note 6 – Short-term debt, Long-Term Debt and Investment Corporation Bonds
Short-term debt, Long-term debt and investment corporation bonds as of May 31, 2014 and November 30,(Thousands of yen)2013 consisted of the following:
As of
As of
May 31,
November 30,
2014
2013
Unsecured loans due 2014 to 2022, principally from banks and insurance
160,200,000
144,200,000
companies with interest rates mainly ranging from 0.4% to 1.1%
2.7% unsecured bond due 20193,500,000
3,500,000
Total
163,700,000
147,700,000[Note] The interest rate presented is the spot rate as of May 31, 2014. As for long-term debts which were hedged by interest-rate swaps for the
purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used.

The annual maturities of short-term debt, long-term debt and investment corporation bonds as of May 31, 2014
(Thousands of yen)were as follows:
Due within one year
35,000,000
Due after one to two years
8,300,000
Due after two to three years
18,200,000
Due after three to four years
19,400,000
Due after four to five years
21,500,000
Due after five years
61,300,000

Note 7 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended May 31, 2014 and November 30, 2013 were as follows:(Thousands of yen)		For the six months ended
For the six months ended
May 31, 2014
November 30, 2013
A. Revenues from property leasing
Rental revenues
8,491,130
8,367,068
Other revenues related to property leasing
92,75865,002
Total revenues from property leasing
8,583,888
8,432,070
B. Property-related expenses
Consignment expenses
692,132
654,832
Utilities expenses
842,933
877,332
Taxes and dues
705,981692,431
Non-life insurance expenses
12,785
12,928
Repair expenses
272,159
251,074
Depreciation
1,355,744
1,328,913
Other property-related expenses
49,26652,864
Total property-related expenses
3,931,000
3,870,374
C. Operating income from property leasing [A – B]
4,652,888
4,561,696

Note 8 – Gain and Loss on Sale of Investment Properties
Gain and loss on sale of investment properties for the period ended May 31, 2014 were as follows. No
investment properties were sold during the period ended November 30, 2013.
For the six months ended May 31, 2014
Daiwa Shibuya SS Building
Proceeds from sale of investment property
Cost of sale of investment property
Other related sale expenses
Gain on sale of investment property

28(Thousands of yen)

3,800,000
3,776,563
19,8263,611

Note 9 – Income Taxes
DOI is subject to income taxes in Japan. The effective tax rate on DOI’s income based on applicable Japanese
tax law was estimated as 0.03% for the six months ended May 31, 2014 and 0.03% for the six months ended
November 30, 2013. The following table summarizes the significant differences between the statutory tax rates
and DOI’s effective tax rates for financial statement purposes.

Statutory tax rate
Deductible dividends
Others
Effective tax rate

For the six months ended
May 31, 201436.59%(36.58)0.02
0.03%

For the six months ended
November 30, 201336.59%(36.58)0.02
0.03%

DOI was established as an investment corporation under the Investment Trust Law of Japan, and as long as aninvestment corporation distributes to its unitholders at least 90% of earnings available for dividends for a period andother requirements prescribed in the Special Taxation Measures Law of Japan are met, the investment corporation isallowed to deduct the total amount of dividends in calculating its taxable income under Japanese tax regulations.
The significant components of deferred tax assets and liabilities as of May 31, 2014 and November 30, 2013 were(Thousands of yen)
as follows:
As of May 31, 2014
As of November 30, 2013
Deferred tax assets:
Accrued enterprise tax
15
19
Deferred losses on hedges
73,84831,367
Total deferred tax assets
73,86331,386
Deferred tax liabilities:
Deferred gains on hedges–
254
Total deferred tax liabilities–
254
Net deferred tax assets
73,86331,132On March 31, 2014, the “Act to Partially Revise the Income Tax Act and Others” (Act No.10 of 2014) was
promulgated. As a result, the Special Reconstruction Corporation Tax will be repealed from the fiscal period
beginning April 1, 2014. In response to the revision, the effective statutory tax rate used to calculate the deferredincome tax assets and liabilities concerning the temporary differences, etc. expected to be reversed in theaccounting periods starting on and after June 1, 2014 has been changed to 34.16%.
The effect of this change is immaterial.

Note 10 – Per Unit Information
Information about net assets per unit and net income per unit as of May 31, 2014 and November 30, 2013 andfor the periods then ended were as follows. The computation of net income per unit is based on the weighted
average number of units outstanding during the period. The computation of net assets per unit is based on thenumber of units outstanding at each period end.
For the six months ended
For the six months ended
May 31, 2014
November 30, 2013
Net assets at period end per unit
509,490 yen
509,561 yen
Net income per unit
7,620.91 yen
7,478.15 yen
Net income per unit is calculated by dividing the net income by the daily weighted average number of investment
units issued and outstanding. The diluted net income per unit is not stated as there are no diluted investment units.
(Note) The basis for calculating the net income per unit is as follows.

Net income (thousands of yen)Amount not available to ordinary unitholders(thousands of yen)
Net income available to ordinary unitholders(thousands of yen)
Average number of units during the period (units)

For the six months ended
May 31, 2014
3,016,340

For the six months ended
November 30, 2013
2,959,836––

3,016,340

2,959,836

395,798

395,798

VI. Notes to Financial Statements

29

Note 11 – Financial Instruments(For the six months ended May 31, 2014 and November 30, 2013)(1) Status of Financial Instruments(A) Policy for financial instruments
DOI procures funds through various financing methods (such as borrowings, issuance of investment
corporation bonds, issuance of investment units) for acquisition and renovation of investment properties,
payments of dividends and reimbursement of bank borrowings.
In financing through interest-bearing debt, to secure stable financing capacity and reduce future risk ofrising interests, DOI secures long-term fixed-rate borrowings with well-diversified maturities.
DOI manages surplus funds with safe and highly liquid money claims and securities (in principle, deposits).
Derivative transactions are conducted only for the purpose of reducing risk of future interest rate
fluctuations.
(B) Types and risks of financial instruments and related risk management system
Proceeds from the financing of debts and investment corporation bonds are used mainly to acquisitionof investment properties and reimbursement of current debts and bonds. While these debts and bonds
are exposed to liquidity risk, DOI manages the risk by maintaining the LTV ratio at low levels, diversifying
maturities, keeping the ratio of long-term debt to total debt at high levels, and diversifying lenders withparticular focus on domestic financial institutions. Bank borrowings with floating interest rates are
exposed to the risk of future interest rate fluctuations and DOI manages that by using derivativetransactions such as interest-rate swap agreements.
DOI evaluates the effectiveness of hedges by comparing the accumulated cash-flow changes ofhedged items and that of hedging items, and then verifies the ratio of both amounts of changes.
Furthermore, DOI omits assessment of hedge effectiveness for the interest-rate swap agreements whichmeet the criteria of special treatment.
Execution and management of derivative transactions have been carried out based on the regulations
defined in the basic policy of risk management.
Security deposits represent funds deposited by tenants, and DOI is exposed to the risk of refunding
deposits in the event that a tenant terminates the contract. However, such risk is limited by reserving
some parts of the funds.
Deposits are used for investing DOI’s surplus funds. These deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. DOI manages credit risk by restricting the tenor of thedeposit relatively short and setting a minimum credit rating requirement for the depository financial
institutions.
(C) Supplementary explanation for fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if applicable. When there isno quoted market price available, fair value is reasonably estimated. As certain assumptions are used forthe estimation of fair value, the result of such estimation may differ if different assumptions are used. Also,
the contractual amounts of derivative transactions do not represent the market risk involved in thesederivative transactions.
(2) Estimated Fair Value of Financial Instruments
The book value, fair value and difference between the two as of May 31, 2014 and November 30, 2013 are
as follows. The financial instruments whose fair value is extremely difficult to estimate are excluded from thefollowing table.
(As of May 31, 2014)(Thousands of yen)Book Value
Fair Value
Difference
Cash and cash equivalents
22,537,727
22,537,727–
Total
22,537,727
22,537,727–
Short-term debt
5,500,000
5,500,000–
Long-term debt due within one year
29,500,000
29,506,082
6,082
Investment corporation bond
3,500,000
3,500,000–
Long-term debt
125,200,000
125,287,010
87,010Total
163,700,000
163,793,092
93,092Derivative transactions(*)(216,183)(216,183)–(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount inparenthesis indicating the net liability position.

30

(As of November 30, 2013)(Thousands of yen)Book Value
Fair Value
Difference
Cash and cash equivalents
16,924,972
16,924,972–
Total
16,924,972
16,924,972–
Short-term debt
3,000,000
3,000,000–
Long-term debt due within one year
33,900,000
33,902,830
2,830
Investment corporation bond
3,500,000
3,500,000–
Long-term debt
107,300,000
107,324,155
24,155
Total
147,700,000
147,726,985
26,985Derivative transactions(*)(88,820)(88,820)–(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount inparenthesis indicating the net liability position.
Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions
Assets(1) Cash and cash equivalents
As these instruments are settled in short period of time, their fair value and book value are nearly identical.
Therefore, for these items, the book value is assumed as the fair value.
Liabilities(1) Short-term debt, long-term debt due within one year and long-term debt
For short-term debt and long-term debt with floating interest rates, their fair value and book value are nearly
identical and there are no significant changes in DOI’s credit risk after borrowing. Therefore, for these items,
their book value is assumed as their fair value. For short-term debt and long-term debt with fixed interest
rates, their fair value is based on the present value of principle and interest cash flows discounted at thecurrent interest rate estimated to be applied if similar new debt is entered into. However, the fair value ofcertain floating-rate long term debt that qualifies for the special treatment of interest-rate swaps is determinedby discounting the sum of its principal and interest payments net of any cash flows from the interest-rate
swaps.
(2) Investment corporation bond due within one year and investment corporation bond
The fair value of investment corporation bond is based on their quoted market price, if available. When
there is no quoted market price available, their book value is assumed as their fair value, as their fair value
and book value are nearly identical because of floating interest rates and no significant changes in DOI’s
credit risk after issuing the bonds.
Derivative Transactions(1) Derivatives to which hedge accounting is not applied
Not applicable.
(2) Derivatives to which hedge accounting is applied(As of May 31, 2014)
Method of Hedge
Accounting(Thousands of yen)Type of Derivative Transactions

Hedged Items Contract Amount(due after one year)

Fair
Value(*)

Interest rate swap transactions
Receive floating and pay fixedLong-term debt

70,100,000(46,100,000)(216,183)

Special treatment
rate swap transactions
for interest rate swap Interest
Receivefloating and pay fixedtransactions

Long-term debt

35,350,000(32,850,000)–(**)

105,450,000(78,950,000)(216,183)

Deferral hedge
accounting method

Total

VI. Notes to Financial Statements

31

(As of November 30, 2013)
Method of Hedge
Type of Derivative Transactions
Accounting

Contract Amount
Hedged Items (dueafter one year)

Fair
Value(*)

Deferral hedge
accounting method

Interest rate swap transactions
Receive floating and pay fixedLong-term debt

65,400,000(34,500,000)(88,820)

Special treatment
rate swap transactions
for interest rate swap Interest
Receive floating and pay fixedtransactions

Long-term debt

32,350,000(32,350,000)–(**)

97,750,000(66,850,000)(88,820)(Thousands of yen)

Total

*The fair value is provided by the financial institution.
**The values of derivatives qualifying for special treatment of interest rate swap transactions are included in that of related long-term debt. Thisis because such swaps are handled together with hedged long-term debt.

2. Financial instruments whose fair value is extremely difficult to estimate.
Tenant security deposits including trust accounts (with a book value of 12,443,797 thousand yen as of May
31, 2014 and 11,904,030 thousand yen as of November 30, 2013) that have been deposited from tenants are
not marketable and the actual deposit period cannot be reliably determined, thus making it impossible toreasonably estimate their future cash flows, and therefore, it is considered to be extremely difficult to estimate
their fair value.
3. Redemption schedule for money claims(As of May 31, 2014)

Cash and cash equivalents
Total(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
22,537,727––––
22,537,727––––(As of November 30, 2013)

Cash and cash equivalents
Total

Due after
5 years––(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
16,924,972––––
16,924,972––––

Due after
5 years––

4. Redemption schedule for short-term debt, investment corporation bond and long-term debt
(As of May 31, 2014)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Short-term debt
5,500,000––––
Long-term debt due within one year 29,500,000––––
Investment corporation bondLong-term debt
Total

–
–
35,000,000

–
–

–
–
–
– 3,500,000
8,300,000 18,200,000 19,400,000 21,500,000 57,800,000
8,300,000 18,200,000 19,400,000 21,500,000 61,300,000(As of November 30, 2013)(Thousands of yen)

Due within Due after
Due after
Due after
Due after
1 year1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
Investment corporation bond due
3,000,000–
within one year
Long-term debt due within one year 33,900,000–
Investment corporation bond––Long-term debt
– 16,600,000
Total
36,900,000 16,600,00032

Due after
5 years–––

Due after
5 years
–

–
–
–
–
–
–
– 3,500,000
3,700,000 28,250,000 17,350,000 41,400,000
3,700,000 28,250,000 17,350,000 44,900,000Note 12 – Investment and Rental Properties

DOI owns office buildings (including land) for rent in Tokyo and other areas.
The book value, net changes in the book value and the fair value of the investment and rental properties are as
follows.
(Thousands of yen)(For the six months ended May 31, 2014)
Book Value
Fair value as of
As of
ChangeAs of
May 31, 2014
November 30, 2013
during the period(*1)
May 31, 2014
345,046,153
10,737,607
355,783,760
342,230,000(For the six months ended November 30, 2013)
Book Value
As of
ChangeMay 31, 2013
during the period(*2)
324,976,353
20,069,800(Thousands of yen)

As ofNovember 30, 2013
345,046,153

Fair value as ofNovember 30, 2013
328,290,000(Note 1)		 The book value represents the acquisition cost less accumulated depreciation.
(Note 2)		 Significant changes(*1) For the six months ended May 31, 2014, the major reason of increase is acquisition of “Integral Tower” (15,220,000 thousandyen). The major reasons of decrease are divestment of “Daiwa Shibuya SS Building” (3,776,563 thousand yen) and depreciation(1,355,744 thousand yen).
(*2) For the six months ended November 30, 2013, the major reasons of increase are acquisitions of “Tousen Dogenzaka Daini
Building” (4,500,000 thousand yen), “Akasaka Business Place” (9,200,000 thousand yen) and “Nisseki Shibuya Building”(7,000,000 thousand yen). The major reason of decrease is depreciation (1,328,913 thousand yen).
(Note 3)		 The fair values as of May 31, 2014 and November 30, 2013 represent the sum of appraisal values estimated by external real estateappraisers.

Income and loss from investment and rental properties for the six months ended May 31, 2014 and November
30, 2013 are disclosed in Note 7.

VI. Notes to Financial Statements

33

Note 13 – Transactions with Related Parties(For the six months ended May 31, 2014)
Classification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting
rights, etc. held byrelated party(held in DOI)
Relationship withrelated party
Nature of transaction

Parent company, interested party
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3 billion yen
Holding company
14.99%
directly held in DOI
32.57%
indirectly held in DOI

Asset custodian
Sumitomo Mitsui Trust Bank, Limited
Chiyoda-ku, Tokyo342 billion yen
BankProvision of capital

Provision of capital–

Payment of interest expense on
investment corporation bonds Borrowing of capital(Notes 1 and 2)

Amount of transaction
47,449(thousands of yen)
Investment
Account
corporation
bonds
Balance at end of
period3,500,000(thousands of yen)

Payment ofinterest expense(Note 3)2,000,000

85,022Other
current
liabilities

Short-term debt Long-term debt

Othercurrent liabilities

19,4571,000,000

349

19,350,000(For the six months ended November 30, 2013)
Classification
Name of company, etc.
Location
Capital stockBusiness description
Percentage of voting
rights, etc. held byrelated party(held in DOI)
Relationship withrelated party
Nature of transaction

Parent company, interested party
Daiwa Securities Group Inc.
Chiyoda-ku, Tokyo
247.3 billion yen
Holding company
14.99%
directly held in DOI
32.57%
indirectly held in DOI

Asset custodian
Sumitomo Mitsui Trust Bank, Limited
Chiyoda-ku, Tokyo342 billion yen
BankProvision of capital

Provision of capital–

Payment of interest expense on Borrowing ofinvestment corporation bonds capital(Notes 1 and 2)

Amount of transaction
48,102(thousands of yen)
Investment
Account
corporation
bonds
Balance at end of
3,500,000
period(thousands of yen)

7,000,000

Repayment of
capitalPayment of interest
expense(Note 3)5,000,000

70,725Other
current
liabilities

Short-term debt Long-term debt –19,3591,000,000

17,350,000–

Consumption taxes are not included in transaction amounts.
(Note 1) Issuance conditions for the investment corporation bonds were decided by analyzing the spread of similar bonds, the difference of
spread between senior bonds and subordinated bonds, and the past track record of similar bonds.
(Note 2) Terms of transactions with interested parties were determined based on the assets manager’s office regulation which was establishedto prevent the conflict of interest.
(Note 3) Terms of transaction were determined based on market trends.

34

Note14 – Significant Subsequent Events(1) Issuance of New Investment Units
DOI resolved the issuance of new investment units at DOI’s Board of Directors Meetings held on June 17, 2014
and June 25, 2014. The proceeds of the publicly offered new investment units were received on July 2, 2014.
Conversely, the proceeds of the new investment units issued by third party allotment were received on July 30,
2014.
(A) Issuance of New Investment Units through Public Offering (Primary Offering)(a) Number of investment units offered:

41,092 units(b) Amount contributed in (issued value):450,746 yen per unit(c) Total amount contributed in (issued value): 18,522,054,632 yen(d) Contribution date:July 2, 2014(e) Use of procured proceeds

The proceeds will be used to fund the acquisition of
specified assets described in below “(2) Acquisition ofAssets” and acquisition costs.

(b) Issuance of New Investment Units through Third-Party Allotment(a) Number of investment units offered:

4,110 units(b) Amount contributed in (issued value):450,746 yen per unit(c) Total amount contributed in (issued value): 1,852,566,060 yen(d) Allottee and number of investment units
allotted

Daiwa Securities Co. Ltd.
4,110 units(e) Contribution date:July 30, 2014(f) Use of procured proceeds

The proceeds will be used to fund the acquisition of
specified assets described in below “(2) Acquisition ofAssets” and acquisition costs.

(2) Acquisition of Assets(A) DOI acquired the trust beneficial interest in real estate on July 4, 2014.
Overview of the Asset(a) Type of asset acquired

Trust beneficial interest in real estate(b) Property name

Azabu Green Terrace(c) Location

3-20-1 Minami Azabu Minato-ku, Tokyo(d) Acquisition price

14,000,000 thousand yen(excluding acquisition costs and consumption tax, etc.)(e) Date of agreement

June 17, 2014(f) Date of delivery

July 4, 2014(g) Seller

Azabu Green Terrace Goudou Kaisha(B) DOI acquired the trust beneficial interest in real estate on August 1, 2014
Overview of the Asset(a) Type of asset acquired

Trust beneficial interest in real estate(b) Property nameKitahama Grand Building(c) Location

2-2-14 Awajicho, Chuou-ku, Osaka(d) Acquisition price

9,481,500 thousand yen(excluding acquisition costs and consumption tax, etc.)(e) Date of agreement

June 17, 2014(f) Date of delivery

August 1, 2014(g) Seller

Goudou Kaisha North Beach

VI. Notes to Financial Statements35

VII. Independent Auditors’ Report36

VII. Independent Auditors’ ReportVIII. Statements of Cash Flows [Information Only]
For the six months ended May 31, 2014 and November 30, 2013
(Thousands of yen)

For the six months
ended
May 31, 2014

For the six months
ended
November 30, 2013

Income before income taxes

3,017,274

2,960,822

Depreciation and amortization

1,357,077

1,330,094

2,868

3,631

601,592

575,861(Increase) Decrease in tenant receivables

6,850(69,087)

Increase (Decrease) in accounts payable(13,793)

230,681

Increase (Decrease) in rent received in advance(5,994)

102,540

Decrease in investment property due to sale

3,776,563–

Cash payments of interest expense(601,109)(615,391)(Increase) Decrease in consumption taxes refundable(135,052)

248,782

Other, net(36,885)(186,076)

7,969,391

4,581,857(15,933,578)(21,395,958)(3,024)–

Proceeds from tenant security deposits

1,371,048

1,208,132

Payments for tenant security deposits(831,280)(338,351)(15,396,834)(20,526,177)

Proceeds from short-term debt

2,500,000

8,000,000

Repayment of short-term debt–

(5,000,000)

Proceeds from long-term debt

28,400,000

38,900,000

Repayments of long-term debt

(14,900,000)(17,500,000)–(5,000,000)(2,959,802)(2,588,481)

Net Cash Provided by Financing Activities

13,040,198

16,811,519

Net Change in Cash and Cash Equivalents

5,612,755

867,199

Cash and Cash Equivalents at Beginning of Period

16,924,972

16,057,773

Cash and Cash Equivalents at End of Period

22,537,727

16,924,972

Cash Flows from Operating Activities:

Amortization of bond issuance costs
Interest expense

Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Payments for purchases of intangible assets

Net Cash Used in Investing Activities
Cash Flows from Financing Activities:

Redemption of investment corporation bonds
Payment of dividends

The statements of cash flows are not audited by any independent auditor.
Summary of Significant Accounting Policies [Information Only]
Cash and Cash Equivalents
DOI considers all highly liquid investments with original maturity of three months or less to be cash and cash
equivalents.

VIII. Statements of Cash Flows [Information Only]37

IX. Investor Information
History of Investment Unit Price
6,000 (units)(yen) 600,000
Investment unit price (left axis)

Trading volume (right axis)

500,000

5,000

400,000

4,000

300,000

3,000

200,000

2,000

100,000

1,000

0

0

2012
June July

Aug. Sept. Oct.

Nov.

2013
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

2013
Dec. Jan. Feb.

Mar.

Apr.

May

Overview of Investment Units and Unitholders (as of May 31, 2014)
146×57■ No. of investment units by investor type
17th
Fiscal Period

Individuals/others
23,461 units (5.9%)■ No. of unitholders
by investor type

Financial institutions
161,137 units (40.7%)

Foreigners 19,237 units (4.9%)

Total: 395,798 units
Securities firms 1,060 units (0.3%)

Other domestic corporations 190,903 units (48.2%)

16th
Fiscal Period

Individuals/others
28,742 units (7.3%)

Financial institutions
151,918 units (38.4%)

Foreigners 23,041 units (5.8%)

Total: 395,798 units

Top Ten Unitholders (as of May 31, 2014)

Financial institutions

25(0.3%)

Other domestic
corporations

149(1.6%)

Foreigners

136(1.5%)

Securities firms

16(0.2%)

Total

9,196

IR Calendar
Number ofUnits Owned

Percentage
Share

July 17, 2014 ・Announcement of financial results for17th Fiscal Period
August 4, 2014 ・Sending of Japanese version Business
Report for 17th Fiscal Period(Statement of Financial Performance)

1.

Daiwa Investment Management Inc.

128,905 units

32.6%

2.

Japan Trustee Services Bank, Ltd. (Trust Account)

74,008 units

18.7%

August 5, 2014 ・Start paying distributions for17th Fiscal Period

3.

Daiwa Securities Group Inc.

59,321 units

15.0%

August 19, 2014・8th General Meeting of Unitholders

4.

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

32,778 units

8.3%

5.

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

20

40

28,970 units

May

60

80

6.

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

19,164 units

4.8%

7.

Nomura Bank (Luxembourg) S.A.

3,128 units

0.8%

8.

The Fuji Fire and Marine Insurance Co., Ltd.

2,086 units

0.5%

9.

State Street Bank and Trust Company 505012

964 units

0.2%

10.

BBH for Pyramis GR TR for Employee Bene PL
Pyramis Sel Int SM Cap Comm951 units

0.2%

End offiscal period

Feb.

7.3%

(Note) The percentage share figures are rounded to the first decimal place.

38

8,870
(96.5%)

Securities firms 1,117 units (0.3%)

Other domestic corporations 190,980 units (48.3%)

Name of Investor

Individuals/others

Jan.
100

July
End offiscal period

Aug.

Nov.
January 2015

・Announcement of financial results for
18th Fiscal Period

February 2015 ・Sending of Japanese version Business
Report for 18th Fiscal Period(Statement of Financial Performance)
February 2015 ・Start paying distributions for
18th Fiscal Period

Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Unitholders

Held at least once every two years

Date for finalizing Unitholders with voting rights
for the General Meeting of Unitholders

Date publicly announced beforehand

Reference date for finalizing payment of
distributions

May 31 and November 30 of each year
(distributions are paid within three months of this reference date)

Listed financial instruments exchangeTokyo Stock Exchange (securities code: 8976)

Newspaper in which notice is posted

Nihon Keizai Shimbun

Manager of Unitholder Registry, etc.

Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 2-8-4 Izumi, Suginamiku, Tokyo 168-0063 Phone 0120-782-031 (toll-free in Japan)

Service counter

Head Office and All branches of the Sumitomo Mitsui Trust Bank nationwide

Provision of Information via Website
Daiwa Office Investment Corporation conducts information distribution via its website as an important tool for IR activities. DOI also provides an
e-mail delivery service, “IR mail Delivery Service,” which informs the subscribers of updates in website content such as press releaseannouncements via e-mail free of charge. The website will be continually enhanced and enriched so that the current situation and future
strategies of DOI are clearly communicated.

Daiwa Office Investment Corporation

http://www.daiwa-office.co.jp/en/

Important information is
distributed via e-mail. Please
access and follow the simple
steps if you wish to receive
our IR mail Delivery Service.

IX. Investor Information

39

The Daiwa Office Investment Corporation logo symbolizes hospitality with an open door and the desire to be a brightand open investment corporation. We will continue to aim to be a highly-transparent investment corporation that isfurther cherished and trusted by our investors and tenants.