Semiannual
R e p o r t

25th

FiscalPeriodM ay 1 , 2 0 1 7 - O c t o b e r 3 1 , 2 0 1 7

TSE 8972

AboutKDO

Kenedix Office Investment Corporation (KDO) is a dynamic and proven J-REIT focusing on investments in midsized office buildings in the Tokyo Metropolitan Area. Since listing on the Tokyo Stock Exchange (8972), KDO has
deployed tactful property acquisition strategies in accordance with the real estate market environment. Throughsteady expansion, KDO’s portfolio has grown from 31 properties with a total acquisition price of ¥69.1 billion to 98
properties with a total acquisition price of ¥392.9 billion in October 2017.
As the No.1 J-REIT focusing on mid-sized office buildings, we will continue raising portfolio quality throughasset reshuffle and other initiatives, while advancing performance with internal growth, backed by sound financial
management.

Contents2
About KDO
4
At a Glance
6
Message from the Management
10
External Growth
14Internal Growth18
Financial Strategy
19Management Team
20
Portfolio
22
Sustainability
24
Financial Section
44
Unitholders' Information

Characteristics of mid-sized office building market# of office building transactions bytransaction price

Office market by total floor area
(proportion of number of buildings) (Note 1)
5,000 tsubo
or more10.2%¥10.0 billion
or more17.2%

3,000-less than
5,000 tsubo

6.8%

1,000-less than
3,000 tsubo

Mid-sized
office buildings

83.0%

500-less than
1,000 tsubo

47.4%¥5.0-less than
10.0 billion

16.0%

Less than¥1.0 billion

Mid-sized
office buildings (Note 2)

62.7%

35.6%

20.1%
¥1.0-less than
5.0 billion

46.7%

Source: Based on the survey CBRE conducted at the request of the AssetManagement Company.

Source: Compiled by the Asset Management Company based on "the number ofoffice building transactions by transaction size (FY2006-FY2016)" from
"Real Estate Transactions Study" by Urban Research InstituteCorporation, a think tank of Mizuho Trust & Banking Co., Ltd.

Note 1: The above data is the proportion of number of buildings based on size.
It covers rental office buildings located in Tokyo central 5 wards that weresurveyed by CBRE (as of the end of September 2016).

Note 2: The transaction prices of mid-sized office buildings are generally around¥1.0 billion to ¥10.0 billion.

Elevator
2 lifts

Business office by the number of
employees (Tokyo)
100 people
or more30-99 people

5.6%

10-29 people

17.0%

2.3%

Mid/small-sizedcompanies

92.2%

1-9 people

75.2%

Source: Compiled by the Asset Management Company based on "2014
Economic Census for Business Frame Tokyo (revised results)(as of March 27, 2017)".

100~150
tsubo per floor
8~10 floors
Total floorarea of500~3,000
tsubo

Kenedix Office Investment Corporation

3

At a Glance
Percent figures in brackets indicate period over period changes.

External growth
Portfolio NOI yield

Portfolio appraisal profit/loss

The 25th fiscal period (Oct. 2017)

End of the 25th fiscal period (Oct. 2017)4.7% (+0.1%)¥41.5 billion (+¥8.4 billion)

Internal growth
Increase in actual occupancy rate

Increase by rent revision

End of the 25th fiscal period (owned office buildings)

Total monthly rent of the 25th fiscal period(all properties)

End of the 24th
fiscal period

End of the 25th
fiscal period¥6.6 million

-2.8%

-4.2%

96.5%
(+1.9%)

Rent gap against the market

Occupancy rate (contracted area based): 99.0%

Financial strategy
Average interest rate oninterest-bearing debt

Average remaining period tomaturity on interest-bearing debt

LTV

End of the 25th fiscal period

End of the 25th fiscal period

1.10%

5.0 years

Conservative financial managementwith a target LTV of 45%
End of the 25th fiscal period(-0.06%)43.3%(+0.3 year)

DPU history(+0.7% pt)

Changes in NAV per unit

Raised dividend by 10% year by year in the 25th fiscal
period (Oct. 2017).
(yen)+10.0%

12,500(Note)

+6.6%

(yen)

615,000

596,000
577,000

11,733557,000

11,365
10,70722nd
fiscal period(Apr. 2016)

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

25th
fiscal period(Oct. 2017)

22nd
fiscal period(Apr. 2016)

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

25th
fiscal period(Oct. 2017)

Note: NAV per unit is truncated to the nearest thousand yen after subtracting
the amount of DPU.

4 Kenedix Office Investment Corporation

Portfolio growth (based on total acquisition price) and the number of properties (Note)# of properties (right axis)
Office (left axis)
Residential (left axis)
Central urban retail (left axis) PO Fiscal period with public offering (PO)
Others (left axis)(billion yen)(# of properties)

500

83 84 83 85
400

72

77
68 69 67

64

65

70

67

71

94

89

74

PO

97 97 97 99 97 98 500

393 392

PO

60
PO

100

0

80

PO

300

200

100

31

PO

PO

35

40

PO

20

69

0

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th Mid-longfiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal term goal
period period period period period period period period period period period period period period period period period period period period period period period period period(Oct. 2005) (Apr. 2006) (Oct. 2006) (Apr. 2007) (Oct. 2007) (Apr. 2008) (Oct. 2008) (Apr. 2009)(Oct. 2009) (Apr. 2010) (Oct. 2010) (Apr. 2011) (Oct. 2011) (Apr. 2012)(Oct. 2012) (Apr. 2013) (Oct. 2013) (Apr. 2014) (Oct. 2014) (Apr. 2015) (Oct. 2015) (Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017)

Note: The amount and the number of properties are shown as of the end of each fiscal period. Figures are truncated to the nearest billion yen.

Portfolio diversification
Portfolio mainly consisted of mid-sized office buildings with advanced tenant diversification.
Plan to maintain approx. 80% investment ratio in Tokyo metropolitan area.

Breakdown by region (Note 2)

Breakdown by asset type (Note 1)
Residential
Central urban retail

5.6%

Others0.7%

Office bldg.
(other)(5 properties)

19.6%(1 property)(3 properties)

8.8%

Other regional areas

1.3%(1 property)

End of 25th
fiscal period(Oct. 2017)# of properties:
98

Office bldg.
(mid-sized)

83.4%(88 properties)

Other Tokyo
metropolitan
areasTokyo central 5 wards

End of 25th
fiscal period(Oct. 2017)

55.0%

25.2%

Office bldg.

Tokyo metropolitan area

92.2%
(93 properties)

80.3%

Breakdown of the number of tenantsby leased floor area (Note 3)
300 tsubo or more
200-less than
300 tsubo

5.0%100-less than
200 tsubo
Note 1: Portfolio breakdown by asset type based on acquisition price(truncated to the first decimal place).
Note 2: Portfolio breakdown by region based on acquisition price(truncated to the first decimal place).
Note 3: Based on the number of tenants in each office building. Tenantsleasing more than one property are counted as 1 tenant for eachbuilding without aggregating by name-base.

22.6%

6.3%

End of 25th
fiscal period(Oct. 2017)# of tenants:
1,171

Less than 100
tsubo

66.0%

Less than 200 tsubo

88.6%

Kenedix Office Investment Corporation

5

Message from the Management

Build a Portfolio with Robust Profitability
to Realize Sustained Growth

Performance Overview of the 25th Fiscal Period (Oct. 2017)
Kenedix Office Investment Corporation (KDO) continued to progress well in its 25th fiscal period, the six months ended October 31, 2017, delivering solid results. We boosted
cash distributions 10% from a year earlier, positioning ourselves for even further growth
down the track.
During the fiscal period, we endeavored to drive external growth by continuing toinvest selectively and reshuffle assets. We reshuffled assets in Shibuya and Yokohama,invested selectively in Sapporo, and divested a non-core residential property. These
efforts, extending through the 26th fiscal period (Apr. 2018), aim to enhance portfolio
profitability, and have enabled us to expand distributions and bolster appraisal profit.
Regarding internal growth, revenues for existing properties have predictably continued to trend upward as the prime near-term driver for distribution expansion.
The contracted-area-based occupancy rate at the end of October 31, 2017, was
99.0%, the highest level since our listing. As in the previous fiscal period, rents rosesteadily upon revisions with existing tenants.
In view of market rent levels, there is still scope for contracted rents to keep rising.
We thus look to revise rents upward over the foreseeable future, with revenues continuing to increase.
For financial strategy, we issued our first investment corporation bonds since ourcredit rating was raised to AA-. We also refinanced to cut interest costs and lengthen
borrowings to take advantage of low interest rates. In addition, we maintained our interest-bearing debt ratio at a conservative 43.3% at the end of the fiscal period.
Distributions per unit for the fiscal period under review were ¥12,500, or 2.5% higher
than initial forecast of ¥12,200, reflecting the use of a portion of the reserve for reduction
entry with respect to the loss on sale of real estate. We have a policy to use the reserve
for reduction entry for stable and sustained growth of distributions.

6 Kenedix Office Investment Corporation

NAOKATSU UCHIDA
Director & COO, Head of Office REIT Department
Kenedix Real Estate Fund Management, Inc.

Kenedix Office Investment Corporation

7

Message from the Management

Initiatives for Next Fiscal Periods
To propel external growth, we continue to invest selectively and reshuffle assets.
Our stance on the office building transaction market basically remains the same as
half a year ago, and we recognize that transaction prices are still high. We are accordingly focusing on finding and buying properties that match our criteria. While acquisition
opportunities are infrequent, we continue employing diverse purchasing approaches
and invest selectively. We also continue reshuffling assets to further enhance portfolio
assets and profitability.
For internal growth, we will boost revenue from existing properties. Office demandremains strong among our tenant base of small and medium-sized enterprises (SMEs)
and sole proprietorships while supply is limited, so we believe that supply and demandin the mid-sized office rental market should remain favorable over the foreseeable future.
As specific efforts, we will renovate and construct facilities to maintain and improvethe competitiveness of our properties.
We will harness capital expenditures effectively and expand our growth scope tomaterialize the profit potential of our properties. As well, we will strive to improve tenantsatisfaction while endeavoring to continue increasing unit rents.
Our financial strategy is to maintain a conservative financial management approachand cut interest costs. Some of our interest-bearing debt carries relatively high interest
rates, so for the time being we should be able to contribute to distributions throughrefinancing and others to lower interest expenses.
As for interest-bearing debt, we seek to retain conservative levels while capitalizingon opportunities to acquire properties.
We will continue investing selectively in new acquisition of properties and reshuffling assets while further increasing revenues from existing properties and, interest rate
trends permitting, lowering interest expenses.
All of these efforts should drive distribution growth. Still, in view of the prevailing business climate we will continue to focus on boosting internal growth, thereafter drawing
on external growth and interest expense cuts to contribute to distributions.
Looking Ahead
We have amassed a wealth of asset management expertise in investing heavily in midsized office buildings. In addition, we have improved the quality of our portfolio as wellas our profitability by constantly enhancing our operations while strategically reshuffling
assets. We are proud that our numbers reflect such achievements.

8 Kenedix Office Investment Corporation

Message from the Management

We would also like to note that in addition to engaging in environmentally friendly operations weaccord priority to the health and welfare of office workers. In recent times, workplaces have diversified
in response to workstyle reforms.
We have seen the emergence of shared and satellite office spaces as part of what seems to be atrend away from large, centralized sites toward small or mid-sized ones or offices in dispersed locations.
As such, we will apply findings from tenant satisfaction surveys while identifying the disparateneeds of SMEs and sole proprietorships to further improve comfort and productivity. We will also endeavor to become an owner of mid-sized office buildings that can offer entirely new office concepts
in the years ahead.

Kenedix Office Investment Corporation

9

Sapporo
P11

Shinjuku

ShibuyaTokyo

P11 P12

Shinagawa

Yokohama
P11 P13External Growth
A series of initiatives in and after the 25th fiscal period (Oct. 2017)
Strategic asset reshuffle in the Shibuya area
Strategic asset reshuffle in the Yokohama area

10 Kenedix Office Investment Corporation

A series of initiatives in and after the 25th fiscal period (Oct. 2017)
Continued to improve portfolio quality and profitability by selective investment and asset reshuffle.
Increased dividend and enhanced appraisal profit/loss.
Asset reshuffle
in the Shibuya and Yokohama areas• Portfolio enhancement through flexible and timely
disposition and selective investment in highly
competitive properties.

Acquisition

25th fiscal period
Shibuya 1717
Bldg.

26th fiscal period
Mitsubishijuko
Yokohama Bldg.
(23% quasi co-ownership interests)

Disposition

Asset
reshuffle

Selective investment in other regional areas• Conveniently located three minutes on foot from thenorth exit of Sapporo Station.
• The second mid-sized office building in the solid
leasing market in Sapporo.
25th fiscal period

JN Bldg.

Takeyama
White Bldg.

Assetreshuffle

Estimated NOI yield

5.0%

Estimated NOI yield after
depreciation

4.2%

Appraisal NOI yield

5.7%

Sale of non-core asset

26th fiscal period

25th fiscal period

26th fiscal period

26th fiscal period

KDX
Ikejiri-Oohashi
Bldg.

KDX
Shin-Yokohama
381 Bldg.

KDX
Shin-Yokohama
214 Bldg.

Residence
Charmante Tsukishima• Sold the only residential property
owned and achieved capitalgains.

(Compartmentalized-ownership:
approx. 57%)

NOI yield (actual)

4.0%

NOI yield after
depreciation (actual)

2.2%

Disposition priceNOI yield

4.3%

Under the tight market conditions where transaction prices are still high, we have succeeded in enhancing portfolio quality and profitability by selective investment and flexible asset reshuffle.
Total acquired

Total sold

Acquisition price ¥29.5 billion

Acquisition price ¥15.7 billion

Estimated NOI yield after depreciation 3.3%

Actual NOI yield after depreciation 2.6%

Total appraisal profit ¥0.8 billion

Total appraisal loss ¥1.1 billion(Note 1)

(Note 1)

Effects of a series of initiatives
Growth of DPU (Mid-long term estimate) +¥580/period(Note 2)

Enhancement of appraisal profit/loss +¥1.9 billion(Note 1)

Note 1: Appraisal profit/loss is the difference between the appraisal value as of the date of acquisition and the acquisition price for properties acquired,
and the difference between the appraisal value as of the date of disposition and the estimated book value (the book value for KDX Shin-Yokohama
381 building) for properties sold. Amount of enhancement of appraisal profit/loss is calculated by the sum of total appraisal profit of properties
acquired and the total appraisal loss of properties sold.
Note 2: The amount of DPU growth is calculated by subtracting the actual NOI yield after depreciation of properties sold and the financial cost for debt
borrowed to acquire properties (¥10.5 billion) from the estimated NOI yield after depreciation of properties acquired, then dividing that by the total
number of investment units issued as of the end of the 25th fiscal period (Oct. 2017) (truncated to the nearest ten yen).
Kenedix Office Investment Corporation 11

Strategic asset reshuffle in the Shibuya area
Acquired Shibuya 1717 Bldg., located within walking distance from Shibuya Station and is in strong demand fromapparel and IT-related companies. This asset reshuffle enhanced both profitability and appraisal profit/loss by
replacing with a better-located property in the area.

Effect ofasset reshuffle

Property acquired
Shibuya 1717 Bldg.
(Acquired on August 10, 2017)

Location

Shibuya-ku, Tokyo

Acquisition price¥3,500 million

Appraisal value

Increase in NOI yield after depreciation
Property sold(actual)¥3,710 million(as of July 1, 2017)

Property acquired(estimated)

2.8%

3.2%

Enhancement of appraisal profit/loss
Property soldKDX Ikejiri-Oohashi Bldg.

Rejuvenation of building age (Note)(Sold on December 28, 2017)

Location

Meguro-ku, Tokyo

Disposition price¥2,400 million

Appraisal value¥1,740 million(as of October 31, 2017)+¥0.8 billion

Appraisal profit/loss

Propertysold

29.3 years

Propertyacquired 14.0 years

Note: Building age is calculated based on the sale date of KDX Ikejiri-Oohashi Bldg.,
which is December 28, 2017 (rounded to the first decimal place).

Tokyo Metro
Marunouchi LineSHINJUKUSTATION

Tokyo Metropolitan Government
Buildings

Imperial
PalaceTOKYOSTATION

Keio Line
Meiji Jingu
ShrineOdakyu Line

Tokyo Metro
Fukutoshin Line

Yoyogi Park
Tsukiji Market

SHIBUYASTATION
Acquisition

Den-en-toshi
Line

Shibuya 1717
Bldg.
Disposition

KDX
Ikejiri-Oohashi
Bldg.

Yamanote Line

Yamanote Line
Tokyu Toyoko
Line
SHINAGAWA
STATION

12 Kenedix Office Investment Corporation

Strategic asset reshuffle in the Yokohama area
Selectively invested in Mitsubishijuko Yokohama Bldg., which is expected to generate stable earnings over thelong term and JN Bldg., a highly competitive property in the Kannai area.
Sold two properties in the Shin-Yokohama area at a price approx. 9.4% higher than appraisal value.

Effect ofasset reshuffle

Properties acquired
Mitsubishijuko Yokohama Bldg.
(Acquired on December 7, 2017)

Location

Yokohama, Kanagawa

Acquisition price¥14,720 million

Increase in NOI yield after depreciation
Properties sold(actual)Properties acquired(estimate)

2.7%

3.3%

Appraisal value¥14,900 million(as of October 31, 2017)

Enhancement of appraisal profit/loss

JN Bldg.
(Acquired on January 31, 2018)

Location

Yokohama, Kanagawa

Plannedacquisition price¥9,500 million

Appraisal value(as of December 1, 2017)+¥1.4 billion

Appraisal profit/loss

Rejuvenation of building age (Note)¥9,860 million
Properties
29.4 years
sold

Properties
acquired 18.6 years

Properties soldNote: Building age is calculated from the acquisition date of JN Bldg., which is
January 31, 2018 (rounded to the first decimal place).

KDX Shin-Yokohama 381 Bldg.
(Sold on October 31, 2017)

Location

Yokohama, Kanagawa

Disposition price¥4,900 million

Appraisal value¥4,310 million(as of April 30, 2017)

Yamanote LineSHINAGAWA
STATION

KDX Shin-Yokohama 214 Bldg.
(Sold on December 28, 2017)

Location

Yokohama, Kanagawa

Disposition price¥2,430 million

Appraisal value¥2,390 million(as of October 31, 2017)

Disposition

KDX Shin-Yokohama
381 Bldg.

Tokaido Main Line

Disposition

KDX Shin-Yokohama
214 Bldg.

TokaidoShinkansen

SHIN-YOKOHAMASTATION

YOKOHAMASTATION

Acquisition

Mitsubishijuko
Yokohama Bldg.

Yokohama Coastal Waters

Acquisition

JN Bldg.
Negishi Line

Kenedix Office Investment Corporation 13

97.8%
99.0%
97.8%
99.0%
Internal Growth
Changes in occupancy and turnover ratio for office buildings
Overview of the 7th CS survey results (Aug. 2017)
Rent trend upon tenant turnover for office buildings
Status of rent revisions with existing tenants
Construction expense (actual/budget)

14 Kenedix Office Investment Corporation

Changes in occupancy and turnover ratio for office buildings
Period-end occupancy rate has improved by 1.2% pt from the previous fiscal periods, backed by steady progressin filling vacancies.
Actual occupancy rate is expected to improve further with expiration of free rent periods and decreasing turnover ratio.
Occupancy rate performance of office buildings (Note 1)

Turnover ratio (annualized) of officebuildings (Note 2) (Note 3)

(%)

100

96.8

97.8

96.8

3.2
95

3.4

4.3

(%)

99.0

Occupancy rate (contracted area based)
Actual occupancy rate (excl. free rent area)

Major tenants (cancellation floor area over 1,000 tsubo)
Other tenants (cancellation floor area 1,000 tsubo or less)

2.5

7.9

96.5

2.4

8.0
5.7

94.6
93.4

92.5

3.6

Average occupancy rate during fiscal period
90

23rd fiscal period

24th fiscal period

96.2%

End of 22nd
fiscal period(Apr. 2016)97.1%

End of 23rd
fiscal period(Oct. 2016)

5.6

25th fiscal period

98.4%

End of 24th
fiscal period(Apr. 2017)

End of 25th
fiscal period(Oct. 2017)

8.0

5.7

3.6

2.9
2.9

25th
24th
22nd
23rd
26th
fiscal period fiscal period fiscal period fiscal period fiscal period(Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018)
Estimate

Note 1: Occupancy rate (contracted area based) is calculated by dividing contract-based leased area by leasable area and actual occupancy rate (excl.
free rent area) is calculated by dividing leased area subtracting free rent area by leasable area. The figures are rounded to the first decimal place.
Average occupancy rate during each fiscal period is a simple average of month-end occupancy rates of owned buildings during each period.
Note 2: Annualized turnover ratio is calculated and annualized as follows: (Total leased area of the end-tenants who cancelled the lease agreements during
the six-month period from the beginning to the end of each period) / (Average leased area of all office buildings owned by KDO as of each month-end
during the relevant fiscal period) x 2. Figures are rounded to the first decimal place.
Note 3: The estimate for the 26th fiscal period (Apr. 2018) is based on the cancellation notice, etc., received by November 30, 2017.

Overview of the 7th CS survey results (Aug. 2017)High intention for continuous occupancy.
Competitiveness dependent on timely equipment upgrade and renovation.
CS survey overview• Together with J.D. Power Asia Pacific, we implement a
CS survey on hardware (e.g., facility and equipment)
and software (e.g., response to tenants) for existing
tenants in office buildings (people in charge of generalaffairs and employees) on a biennial basis.

6th survey August 2015
(21st fiscal period)

7th survey August 2017
(25th fiscal period)# of properties

85 properties

89 properties# of distributions

Persons in charge: 884
Employees: 4,736

Persons in charge: 973
Employees: 5,052

Collection rate

Persons in charge: 82%
Employees: 78%

Persons in charge: 81%
Employees: 81%

TimingIntention for continuous occupancy (Note)• The ratio of tenants with intention for continuous
occupancy increased by 5% from the previous survey.

Definitely want to stay
Rather would stay
Rather not stay
Do not want to stay
N/A
2015 survey
(6th)
723

55%

36%

2017 survey
(7th)
790

61%

35%

96% of tenants showed intention
for continuous occupancy

2%
6%
1%
4%

Note: Result on survey that interviewed people in charge of general affairs
Kenedix Office Investment Corporation 15

Rent trend upon tenant turnover for office buildings
More than half of the new tenants have agreed to rents higher than previous rents upon tenant turnover, continued
for five consecutive fiscal periods.
Increase/decrease in monthly rent upon tenant turnover (Note)(%)(million yen)
Total amount of increase in rent
Total amount of decrease in rent

Proportion of the number of new leases withincreased rents upon tenant turnover

60.9
51.6

54.4

52.3

50.8

5.8

4.5
-3.0

-7.0

5.0

5.3

5.0

-3.1

-4.4

-1.5

Retail tenant
turnoverin Senri LSC

-3.9
-8.3

21st
fiscal period(Oct. 2015)

22nd
fiscal period(Apr. 2016)

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

25th
fiscal period(Oct. 2017)

21stfiscal period(Oct. 2015)

22nd
fiscal period(Apr. 2016)

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

25th
fiscal period(Oct. 2017)

Note : Total amount of increases/decreases in monthly rent before and after rent revision for each fiscal period is respectively aggregated for the spaces where
the rents paid by new/previous tenants can be compared.

Status of rent revisions with existing tenants
Upward rent trend has continued, with more than 50 upward rent revisions.
This trend has also been observed in areas other than Tokyo central 5 wards.
Changes in number of rent increase and % ofrent increase (Note 1)

Changes in rent upon rent revisions(based on monthly rent) (Note 2)• Number of rent increase was prominent in areas other thanTokyo central 5 wards.

• Steady rent increase as a result of proactive upward rent
negotiations.

(%)(thousand yen)
Increase in rent (Office building)
Increase in rent (Central urban retail)
Decrease in rentTokyo central 5 wards
Other areas

48

20

18

30

30

25

26

21st
fiscal period(Oct. 2015)

22nd
fiscal period(Apr. 2016)

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

25th
fiscal period(Oct. 2017)

9.1%

12.8%

6.5%

10.8%

7.8%

29
10
19

43
18

% of rent increase (incremental average)

8,560
790

51

50

25

4,254
752 7,770
3,502-2,395For Ginza
4chome Tower

8,492
5,071
5,071

3,365
5,127

7,034
142

25

3,412

6,892

-636 -729 -1,065 -409

-32
Conﬁrmed
as ofNovember 30,
2017

21st
22nd
23rd
24th
25th
26th
fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period(Oct. 2015)(Apr. 2016)(Oct. 2016) (Apr. 2017) (Oct. 2017)(Apr. 2018)

Note 1: Calculated by aggregating the actual rent increase of the office buildings and central urban retail properties in our portfolio. Rent increase rate is
calculated by dividing the sum of increase in monthly rent by the sum of monthly rent before revision. Figures are rounded to the first decimal place.
Note 2: Total amount of increases/decreases in monthly rent before and after rent revisions for each fiscal period is aggregated, respectively. Figures arerounded to the nearest thousand yen.

16 Kenedix Office Investment Corporation

Construction expense (actual/budget)
Reinforce property competitiveness by flexibly implementing appropriate measures to improve property value.
Increase construction budget for the 26th fiscal period (Apr. 2018), and proactively conduct value-upgrading works.
Changes in depreciation and construction expense (actual/budget)• Increase both repair expenses and capital expenditure budgets as KDO plans to proactively conduct value-upgrading works in the
26th fiscal period (Apr. 2018).
(million yen)Repair/maintenanceCapex
Depreciation

497

451

582

1,120

1,165

655
436

451

1,018

953

469
21st
fiscal period(Oct. 2015)
actual22nd
fiscal period(Apr. 2016)
actual23rd
fiscal period(Oct. 2016)
actual

2,307

2,293

2,288

2,274

2,230

2,218

25th
fiscal period(Oct. 2017)
actual24th
fiscal period(Apr. 2017)
actual

1,261
26th
fiscal period(Apr. 2018)budgetRepair/renovation work budget for the 26th fiscal period (Apr. 2018) (Note)
Estimated amount(million yen)

Items

Value-upgrading works (including common areas)

Percentage of total expense
(%)

581

30.3

Air-conditioning facilities

276

14.4

Other major facilities

453

23.7

Installation of LED lightings, etc.

110

5.8

Outer wall repair

84

4.4

Maintenance / repair works

410

21.4

26th fiscal period(Apr. 2018) total

Percentage to depreciation
expense (%)

1,917

83.1

Improvement / replacement works

Note: Figures are approximate estimates as of the date in which repair plan was prepared.

Properties to undergo major repair/renovation for the 26th fiscal period (Apr. 2018)• Value-upgrading works (renovation of common areas, restrooms, etc.):
KDX Omiya Building, KDX Funabashi Building,
KDX Shinjuku 286 Building, KDX Shinjuku Building,
KDX Hachioji Building, Shin-toshin Maruzen Building,
KDX Nishi-Shinbashi Building, KDX Ginza East Building,Toshin 24 Building, Pentel Building,
KDX Sakura-dori Building, KDX Takadanobaba Building

Kenedix Office Investment Corporation 17

Financial Strategy

Status of debt financing
Issued the first investment corporation bonds post credit rating upgrade, and continued to reduce financial cost
while extending remaining period to maturity through refinancing, etc.
Refinance record for the 25th fiscal period (Oct. 2017)(Total amount of ¥14.0 billion) (Note 1)
Conditions
before refinancing

Conditions
after refinancing

1.30%

0.82%

Average interest rate

Average remaining period to maturity andinterest rate (Note 2)
Weighted average remaining period to maturity (right axis)
Weighted average interest rate (incl. up-front fee) (left axis)

(%)

1.46

1.45

1.4

1.39

1.2

4.2 years

Average borrowing
period7.9 years

5

1.25

1.0

3.6

0.8

4.1

(years)
6

4.3

4.7

1.19

4

1.16

3

1.10
4.7
5.0

4.9

End of 19th End of 20th End of 21nd End of 22th End of 23th End of 24th End of 25th
fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period(Oct. 2014) (Apr. 2015) (Oct. 2015) (Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017)2
1
0Note 1: The average interest rate and borrowing period are the weighted averages of the interest rate (incl. up-front fees) and borrowing period based on thebalance of borrowings, respectively (with the average interest rate rounded to the second decimal place and the average borrowing period rounded to
the first decimal place).
Note 2: The average remaining period to maturity and interest rate are the weighted averages based on the balance of borrowings, respectively (with theaverage remaining period to maturity rounded to the first decimal place and the average interest rate rounded to the second decimal place).

Major indices of financial stability as of the end of the 25th fiscal period (Oct. 2017)
Credit rating status
Japan Credit Rating Agency, Ltd. (JCR)

LTV (Interest-bearing debt ratio) (Note 1)

Ratio of fixed interest rate (Note 2)

Conservative financial managementwith a target LTV of 45%

Continue to hedge against a potential risein interest rates

AA- (stable)

95.5%

43.3%

Note 1: LTV is calculated by dividing the balance of interest-bearing debt by the amount of total assets as of the end of the fiscal period, rounded to the firstdecimal place.
Note 2: Includes borrowings with floating interest rates fixed by interest rate swaps but excludes those hedged by interest rate caps, rounded to the first decimal place.

Diversification of debt maturities
Reduced refinancing risk through extension of remaining period to maturity and diversification of debt maturities.
Balance of interest-bearing debt by maturity as of October 31, 2017¥6.0 billiion
Corporate bonds¥7.8 billiion
Long-term borrowings¥165.8 billiion
Total interest-bearing debt ¥179.6 billiion
Short-term borrowings(billion yen)
20.0

16.0

12.0

12.7 13.3
2.0
4.0 1.8
7.5

8.0

4.0

0.0

8.7 9.5

26th
fiscal period(Apr. 2018)

7.5

8.5

10.1 9.5

6.2
6.2

10.1 9.5
8.5

30th
fiscal period(Apr. 2020)

18 Kenedix Office Investment Corporation

11.8
9.9
8.1
1.0
11.8

9.9

7.1

5.5
3.8
3.8

34th
fiscal period(Apr. 2022)

9.0
8.3
2.0
4.7

5.5 4.7

7.0

8.3

10.0 10.3

10.0 10.3

13.0

11.5

11.5

2.0

4.7 11.0
4.7

1.0
1.0

38nd
fiscal period(Apr. 2024)

42nd
fiscal period(Apr. 2026)

46th
fiscal period(Apr. 2028)

Chisei Kaji

Akimitsu Uezu

Naokatsu Uchida

Tetsushi Ichikawa

Jiro Takeda

Management Team(As of October 31, 2017)

Naokatsu Uchida

Chisei Kaji

• Worked for Mitsubishi UFJ Trust and Banking Corporation for approx.
17 years (Real Estate Division, Real Estate Project Origination Division)• Worked for Mitsui Fudosan Building Management for approx. 9 years(Sales Division and others)• After working as CEO for Joint Asset Management Co., Ltd., joined
Kenedix Office Partners, Inc. and was a member of the Financial
Planning Department for approx. 2 years• Joined Kenedix Real Estate Fund Management, Inc. after having
engaged in asset management for approx. 10 years at Tokyo Realty
Investment Management Inc.

• Appointed Executive Officer of Kenedix Office Investment Corporation(to the present) after serving as President & CEO of Kenedix OfficePartners, Inc.

• Appointed Head of Asset Management Division, Office REIT Department on March 1,2016 after having worked in Investment Manage
ment Division, Office REIT Department for approx. 1 year

Director & COO, Head of Office REIT Department• Appointed Director & COO, Head of Office REIT Department on

October 1, 2013

Head of Asset Management Division, Office REIT Department

Jiro Takeda

Head of Planning Division, Office REIT Department

Akimitsu Uezu

Head of Asset Investment Division, Office REIT Department• Joined Investment Management Division, Kenedix REIT Management, Inc. in July 2006 and worked for 2 years after having engaged
in real estate transactions at judicial scrivener’s office and real estatecompany• Appointed Head of Asset Investment Division, Office REIT Department
on March 1, 2016 after having worked as Head of Asset Investment
Division, Kenedix Residential Partners, Inc. and Director of Space
Design, Inc.

• Worked for Sumitomo Mitsui Trust Bank, Limited for approx. 7 years• After working for Sanko Estate Co., Ltd., GMAC Commercial Mortgage
Japan K.K., and Hudson Japan K.K., joined Kenedix and served as
Head of Fund Management Division I for approx. 3 years• Appointed Head of Planning Division, Office REIT Department on
March 29, 2017

Tetsushi Ichikawa

Head of Finance & Accounting Department,
Business Administration Department• Worked for Sumitomo Mitsui Trust Bank, Limited for approx. 15 years(engaged in real estate finance, etc.)• Joined Kenedix after having engaged in real estate investment banking
and having served as director responsible for asset managementbusiness at Touchstone Capital Securities Co., Ltd.
• Appointed Head of Finance & Accounting Department, on October 1,
2013 after serving as Head of Finance Group for Kenedix Residential
Partners, Inc.
• Appointed Head of Business Administration Department on April 1,2015 (concurrent)
Kenedix Office Investment Corporation 19

Portfolio (As of October 31, 2017)
The properties acquired during the 25th fiscal period are marked with a red box.
The properties sold during the 26th fiscal period are marked with a yellow box.

No.

A-1
A-3
A-4
A-5
A-6
A-7
A-8
A-13
A-14
A-16
A-17
A-19
A-20
A-21
A-22
A-26
A-27
A-29
A-30
A-31
A-32
A-33
A-34
A-35
A-37
A-38
A-41
Office Building
A-46(Tokyo Metropolitan
A-48
Area)
A-50
A-51
A-55
A-56
A-59
A-60
A-61
A-62
A-63
A-64
A-66
A-67
A-68
A-71
A-72
A-73
A-74
A-78
A-83
A-84
A-85
A-86
A-87
A-88
A-89
A-90
A-91

Property Name

Location

KDX Nihonbashi 313 Building
Higashi-Kayabacho Yuraku Building
KDX Hatchobori Building
KDX Nakano-Sakaue Building
Harajuku F.F. Building
KDX Minami Aoyama Building
Kanda Kihara Building
KDX Kojimachi Building
KDX Funabashi Building
Toshin 24 Building
KDX Ebisu Building
KDX Hamamatsucho Building
KDX Kayabacho Building
KDX Shinbashi Building
KDX Shin-Yokohama Building
KDX Kiba Building
KDX Kajicho Building
KDX Higashi-Shinjuku Building
KDX Nishi-Gotanda Building
KDX Monzen-Nakacho Building
KDX Shiba-Daimon Building
KDX Okachimachi Building
KDX Hon-Atsugi Building
KDX Hachioji Building
KDX Ochanomizu Building
KDX Nishi-Shinjuku Building
KDX Shinjuku 286 Building
Hiei Kudan-Kita Building
KDX Kawasaki-Ekimae Hon-cho Building
KDX Ikejiri-Oohashi Building
KDX Hamacho Nakanohashi Building
Shin-toshin Maruzen Building
KDX Jimbocho Building
KDX Iwamoto-cho Building
KDX Harumi Building
KDX Hamamatsucho Dai-2 Building
Koishikawa TG Building
KDX Gotanda Building
KDX Nihonbashi 216 Building
KDX Shinjuku Building
KDX Ginza 1chome Building
KDX Nihonbashi Honcho Building
KDX Iidabashi Building
KDX Higashi-Shinagawa Building
KDX Hakozaki Building
KDX Shin-Nihonbashi Building
KDX Tachikawa Ekimae Building
KDX Fuchu Building
KDX Kasuga Building
KDX Nakameguro Building
KDX Omiya Building
Itopia Nihonbashi SA Building
KDX Shinjuku 6-chome Building
KDX Takanawadai Building
KDX Ikebukuro Building
KDX Mita Building

Chuo-ku, Tokyo
Chuo-ku, Tokyo
Chuo-ku, Tokyo
Nakano-ku, Tokyo
Shibuya-ku, Tokyo
Minato-ku, Tokyo
Chiyoda-ku, Tokyo
Chiyoda-ku, Tokyo
Funabashi, Chiba
Yokohama, Kanagawa
Shibuya-ku, Tokyo
Minato-ku, Tokyo
Chuo-ku, Tokyo
Minato-ku, Tokyo
Yokohama, Kanagawa
Koto-ku, Tokyo
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Shinagawa-ku, Tokyo
Koto-ku, Tokyo
Minato-ku, Tokyo
Taito-ku, Tokyo
Atsugi, Kanagawa
Hachioji, Tokyo
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Shinjuku-ku, Tokyo
Chiyoda-ku, Tokyo
Kawasaki, Kanagawa
Meguro-ku, Tokyo
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Chiyoda-ku, Tokyo
Chiyoda-ku, Tokyo
Chuo-ku, Tokyo
Minato-ku, Tokyo
Bunkyo-ku, Tokyo
Shinagawa-ku, Tokyo
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Chuo-ku, Tokyo
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Shinagawa-ku, Tokyo
Chuo-ku, Tokyo
Chuo-ku, Tokyo
Tachikawa, Tokyo
Fuchu, Tokyo
Bunkyo-ku, Tokyo
Meguro-ku, Tokyo
Saitama, Saitama
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Minato-ku, Tokyo
Toshima-ku, Tokyo
Minato-ku, Tokyo

20 Kenedix Office Investment Corporation

Acquisition
Price (mn yen)
(Note 1)

5,940
4,450
3,680
2,533
2,450
2,270
1,950
5,950
2,252
5,300
4,640
3,460
2,780
3,728
2,520
1,580
2,350
2,950
4,200
1,400
6,090
2,000
1,305
1,155
6,400
1,500
2,300
7,600
3,760
2,400
2,310
2,110
2,760
1,864
10,250
2,200
3,080
2,620
2,010
6,800
4,300
4,000
4,670
4,590
2,710
2,300
1,267
6,120
2,800
1,880
2,020
2,200
1,900
5,250
3,900
3,180

Year Built(Note 2)

Occupancy
Rate(Note 3)Apr. 1974
Jan. 1987
Jun. 1993
Aug. 1992
Nov. 1985
Nov. 1988
May 1993
May 1994
Apr. 1989
Sep. 1984
Jan. 1992
Sep. 1999
Oct. 1987
Feb. 1992
Sep. 1990
Oct. 1992
Mar. 1990
Jan. 1990
Nov. 1992
Sep. 1986
Jul. 1986
Jun. 1988
May 1995
Dec. 1985
Aug. 1982
Oct. 1992
Aug. 1989
Mar. 1988
Feb. 1985
Sep. 1988
Sep. 1988
Jul. 1990
May 1994
Mar. 2008
Feb. 2008
Apr. 1992
Nov. 1989
Apr. 1988
Oct. 2006
May 1993
Nov. 1991
Jan. 1984
Mar. 1990
Jan. 1993
Nov. 1993
Nov. 2002
Feb. 1990
Mar. 1996
Jun. 1992
Oct. 1985
Apr. 1993
Jul. 1995
Mar. 1990
Oct. 1985
Mar. 2009
Mar. 1993

100.0%
100.0%
100.0%
96.5%
100.0%
100.0%
100.0%
100.0%
91.1%
94.1%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
77.9%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
83.1%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
96.4%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99.1%
100.0%
100.0%
100.0%
100.0%
100.0%
94.0%
100.0%
100.0%

No.

Property Name

Location

Acquisition
Price (mn yen)
(Note 1)

A-92 KDX Akihabara Building
Chiyoda-ku, Tokyo
2,600
A-93 KDX Iidabashi Square
Shinjuku-ku, Tokyo
4,350
A-94 KDX Musashi-Kosugi Building
Kawasaki, Kanagawa
12,000A-95 KDX Toyosu Grand Square
Koto-ku, Tokyo
8,666
A-96 KDX Takadanobaba Building
Toshima-ku, Tokyo
3,650
A-99 KDX Ikebukuro West Building
Toshima-ku, Tokyo
1,934
A-101 KDX Yokohama Building
Yokohama, Kanagawa
7,210
A-102 KDX Yokohama Nishiguchi Building
Yokohama, Kanagawa
2,750
A-103 KDX Shin-Yokohama 214 Building
Yokohama, Kanagawa
2,200
Office Building(Tokyo Metropolitan A-107 KDX Ginza East Building
Chuo-ku, Tokyo
3,600
Area)
A-108 Pentel Building
Chuo-ku, Tokyo
3,350
A-109 KDX Hamamatsucho Center Building
Minato-ku, Tokyo
3,950
A-112 KDX Toranomon 1chome Building
Minato-ku, Tokyo
15,550A-113 KDX Shin-Nihonbashi Ekimae Building
Chuo-ku, Tokyo
3,829
A-114 KDX Nihonbashi Edo-dori Building
Chuo-ku, Tokyo
1,350
A-115 ARK Mori Building
Minato-ku, Tokyo
4,169
A-116 KDX Nishi-Shinbashi Building
Minato-ku, Tokyo
8,400
A-117 BR Gotanda
Shinagawa-ku, Tokyo
2,200
A-119 Shibuya 1717 Building
Shibuya-ku, Tokyo
3,500
A-12 Portus Center Building
Sakai, Osaka
5,570
A-42 KDX Karasuma Building
Kyoto, Kyoto
5,400
A-44 KDX Sendai Building
Sendai, Miyagi
2,100
A-53 KDX Hakata-Minami Building
Fukuoka, Fukuoka
4,900
A-54 KDX Kitahama Building
Osaka, Osaka
2,220
A-58 KDX Nagoya Sakae Building
Nagoya, Aichi
7,550
A-69 KDX Kobayashi-Doshomachi Building
Osaka, Osaka
2,870
A-70 KDX Sapporo Building
Sapporo, Hokkaido
2,005
A-79
KDX
NagoyaEkimaeBuilding
Nagoya,Aichi
7,327
Office Building(Other Regional
A-82 KDX Higashi Umeda Building
Osaka, Osaka
2,770
Areas)
A-97 KDX Utsunomiya Building
Utsunomiya, Tochigi
2,350
A-98 KDX Hiroshima Building
Hiroshima, Hiroshima
1,300
A-100 Senri Life Science Center Building
Toyonaka, Osaka
13,000A-104 KDX Minami-Honmachi Building
Osaka, Osaka
2,200
A-106 KDX Sakura-dori Building
Nagoya, Aichi
5,900
A-110 KDX Shin-Osaka Building
Osaka, Osaka
4,550
A-111 KDX Nagoya Nichigin-mae White Building
Nagoya, Aichi
3,500
A-118 Takeyama White Building
Sapporo, Hokkaido
1,800
Offce Building Subtotal (93 properties)
362,555
C-1
Frame Jinnan-zaka
Shibuya-ku, Tokyo
9,900
C-2
KDX Yoyogi Building
Shibuya-ku, Tokyo
2,479
Central Urban
Retail Properties
C-4
Ginza 4chome Tower
Chuo-ku, Tokyo
9,800
Central Urban Retail Properties Subtotal (3 properties)
22,179B-19 Residence Charmante Tsukishima
Chuo-ku, Tokyo
5,353
Residential
Property
Residential Property Subtotal (1 property)
5,353
D-2
Shinjuku 6chome Building (Land)
Shinjuku-ku, Tokyo
2,880
OthersOthers Subtotal (1 property)
2,880
Total (98 properties)
392,968
Investment Security

G.K. KRF 43 Silent Partnership Equity Interest Shinjuku-ku, Tokyo

1,107

Year Built(Note 2)

Occupancy
Rate(Note 3)

Dec. 1973
100.0%
Jan. 1994
100.0%
May 2013
100.0%
Apr. 2008
98.0%
Oct. 1988
92.0%
Jul. 1988
100.0%
Mar. 1994
100.0%
Oct. 1988
100.0%
Nov. 1989
100.0%
Aug. 1991
100.0%
Nov. 1990
100.0%
Dec. 1985
100.0%
Oct. 2013100.0%
May 1992
100.0%
Mar. 1985
100.0%
Mar. 1986
100.0%
Aug. 1992
100.0%
Sep. 1991
100.0%
Dec. 2003
100.0%
Sep. 1993
100.0%
Oct. 1982
96.7%
Feb. 1984
100.0%
Jun. 1973
99.5%
Jul. 1994
89.2%
Apr. 2009100.0%
Jul. 2009100.0%
Oct. 1989
100.0%
Apr. 1986
100.0%
Jul. 2009
95.5%
Feb. 1999
100.0%
Jan. 1990
100.0%
Jun. 1992
99.8%
Dec. 2009100.0%
Aug. 1992
100.0%
May 1992
100.0%
Sep. 2006
100.0%
Sep. 1992
100.0%
Avg. 23.7 years 99.0%
Mar. 2005
96.5%
Aug. 1991
100.0%
Nov. 2008
100.0%
Avg. 12.4 years 98.6%
Jan. 2004
100.0%
Avg. 13.8 years 100.0%—
100.0%—
100.0%
Avg. 22.9 years 99.1%
Dec. 1979

Note 1: Acquisition price is only the acquisition (investment) price of the trust beneficiary interests, etc. (excl. any expenses, taxes, etc.) acquired by KDO.
Figures are truncated to the nearest million yen.
Note 2: Year built shows the completion date recorded in the real estate register. The average value shown in the subtotal or total section is a weighted
average number calculated based on acquisition price with a base date of October 31, 2017. Figures are truncated to the first decimal place.
Note 3: Occupancy rate is calculated by dividing leased area as of October 31, 2017 by leasable area and is rounded to the first decimal place. The subtotal
and total lines show the figures calculated by dividing the subtotal (total) of the leased area for the property associated with each subtotal and total by
the subtotal (total) of the leasable area. For the Pentel Building, this includes the leasable area associated with the land (land interest) specified in thelease agreement. For the Shinjuku 6chome building (Land), the calculation is based on the leasable area of the land specified in the lease agreement.

Kenedix Office Investment Corporation 21

Sustainability

Kenedix Real Estate Fund Management, Inc. (KFM), the asset management company for KDO,
contributes to society through investment management and creation of real estate value, working on sustainability-conscious investment management and various ESG initiatives.

Environment and Society
Certifications
Rating from GRESB (Note 1)• Acquired “Green Star” rating, the highest rating, for 6 consecutive years as a result of our efforts for
improving sustainability performance, and earned the highest-rated “5 Stars” (five-star scale).
• Participated from 2011 as the first J-REIT participant.

DBJ Green Building Certification (Note 2)• A total of 17 properties in our portfolio were awarded DBJ Green Building Certification, including
KDX Toranomon 1chome Bldg., which earned the certification for a property with the best classenvironmental and social awareness (five stars).

Certification for CASBEE for Real Estate (Note 3)• ARK Mori Bldg., KDX Toranomon 1chome Bldg. and KDX Kobayashi-Doshomachi Bldg. wereranked S, the highest rating, by CASBEE.

BELS Certification (Note 4)• In October 2014, KDX Musashi-Kosugi Bldg. was awarded a BELS Certification for the first time inhistory as a J-REIT owned property.

Note 1: GRESB (Global Real Estate Sustainability Benchmark) is a benchmark to evaluate the sustainability performance of private and listed real estate portfolio,
etc. from environmental and social perspectives.
Note 2: The DBJ Green Building Certification System is a system certifying real estate with environmental and social considerations (Green Building) using a scoringmodel originally developed by Development Bank of Japan Inc. (DBJ) in order to select and certificate buildings that meet the demands of the time.
The certification has the following 5 ranks: “five stars”, “four stars”, “three stars”, “two stars” and “one star”.
Note 3: CASBEE is an evaluation system for rating the environmental performance of buildings, developed under the auspices of the Ministry of Land, Infrastructure,
Transport and Tourism. The system rates the overall environmental performance of buildings from two perspectives; the evaluation of the environmental quality
and performance of buildings themselves, and the external environmental load of buildings.
Note 4: BELS (Building-Housing Energy-efficiency Labeling System) is the third-party certification system to rate houses and buildings in accordance with the obligation
to make effort to label energy-saving performance as stipulated in the Act on Improving Energy Consumption Performance for Architectural Structures.

22 Kenedix Office Investment Corporation

Specific Efforts
Converting emergency guide lights and lighting to LEDs
We are encouraging the reduction of electricity consumption at each of our owned properties from the perspective of environmental
consideration and cost reduction. Our efforts include converting emergency guide lights, lighting in common-use areas/leased areas,
etc. to LEDs for actively promoting reduction of light bulb replacement costs and electricity expenses.

Disaster prevention-related renovations as responsibility towards our stakeholders• Placed a box storing emergency kit in each elevator since the 24th fiscal period (Apr. 2017) as a result of anincrease of tenants’ anti-disaster consciousness.
• Of 98 properties owned by KDO, placed total 152 kits in 75 properties as of the end of the 25th fiscal period(Oct. 2017).

Cooperating with communities in bicycle sharing for social contribution
We have offered portions of five property sites to serve as bicycle parking for bicycle sharing. Suchcooperation enhances convenience for tenants and local residents as well as serves the public interest.

GovernanceApproval Process with Proper Corporate Governance
Where deemed appropriate or in the case of a related-party transaction, the compliance officer submits proposals to the compliancecommittee for its review and approval to meet proper corporate governance.
Each Department

Each Department

Proposal

All Departments

Compliance Officer

Preview

RelatedRelatedparty
party
Compliance Committee
transaction
transaction

Deliberation
and Resolution

All Departments

All Departments

Asset Management
Committee(Each Department)

Board of Directors

Deliberation
and Resolution

ReportOther transactions
Note: Transactions concerning each REIT, for which the Act on Investment Trusts and Investment Corporations (the Investment Trusts Act) or the internal rules
specify as requiring approval by the Board of Directors, must also be approved by the Board of Directors of the REIT (excluding transactions within thescope of insignificance criteria under the laws and regulations).

Rules Concerning Conflicts of Interest
Since KFM manages multiple REITs and private real estate investment funds, it has established a pipeline committee and adopted
internal guidelines, in order to prevent the improper allocation of acquisition opportunities or the violation of the fiduciary duties it owes
to the funds.

Kenedix Office Investment Corporation 23

Financial Section

25
Independent Auditor’s Report
26
Balance Sheets
27
Statements of Income and Retained Earnings
27
Statements of Changes in Net Assets
28
Statements of Cash Flows
29
Notes to Financial Statements

Financial Summary (Unaudited)
Historical Operating Trends
For the 21st–25th Fiscal Periods

PeriodOperating revenues(Rental revenues)
Operating expenses(Property-related expenses)
Operating income
Ordinary income
Net income (a)Total assets (b)(Period-on-period change)
Interest-bearing debt (c)(Period-on-period change)
Unitholders’ equity (d)(Period-on-period change)
Unitholders’ capital(Period-on-period change)
Number of investment units issued and outstanding (e)Unitholders’ equity per unit (d)/(e)Total distribution (f)Distribution per unit (f)/(e)(Earnings distributed per unit)(Distribution in excess of earnings per unit)
Return on assets (annualized) (Notes 1 and 2)
Return on net assets (annualized) (Notes 2 and 3)
Net assets ratio at end of period (d)/(b)(Period-on-period change)
Interest-bearing debt ratio at end of period (c)/(b)(Period-on-period change)
Payout ratio (Note 4) (f)/(a)Other references
Number of properties
Total leasable floor area
Occupancy ratio at end of period
Depreciation expenses for the period
Capital expenditures for the period
Leasing NOI (Net Operating Income) (Note 5)
FFO (Funds From Operation) (Note 6)
FFO per unit (Note 7)

Unit

millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen%
millions of yen%
millions of yen%
millions of yen
%
unit
yen
millions of yen
yen
yen
yen
%
%
%
%
%

properties
m2%
millions of yen
millions of yen
millions of yen
millions of yen
yen

25th Period
24th Period
23rd Period
22nd Period
21st Period(as of(as of(as of(as of(as ofOct. 31, 2015) Apr. 30, 2016) Oct. 31, 2016) Apr. 30, 2017) Oct. 31, 2017)

13,74013,226
7,800
6,668
5,940
4,565
4,564
407,217(–0.1)
174,100(–0.3)
211,914(–0.0)
206,199(0.0)
404,885
523,394
4,170
10,30010,30014,362
12,812
8,260
6,533
6,102
4,816
4,815
408,813(+0.4)
175,100(+0.6)
212,555(+0.3)
206,199(0.0)
404,885
524,977
4,335
10,707
10,707

13,491
13,429
7,703
6,754
5,788
4,603
4,601
413,031(+1.0)
178,100(+1.7)
212,825(+0.1)
206,199(0.0)
404,885525,6444,601
11,365
11,36515,03913,327
9,137
6,527
5,901
4,751
4,750
410,166(–0.7)
174,600(–2.0)
212,986(+0.1)
206,199(0.0)
404,885
526,041
4,750
11,733
11,733

13,901
13,840
8,244
6,720
5,657
4,590
4,588
414,933(+1.2)
179,600(+2.9)
212,851(–0.1)
206,199(0.0)
404,885525,708
5,061
12,50012,5001.1 (2.2)
2.2 (4.3)
52.0(+0.1)
42.8(–0.1)
91.3

1.2 (2.4)
2.3 (4.6)
52.0(-0.0)
42.8(+0.1)
90.0

1.1 (2.2)
2.2 (4.3)
51.5(-0.5)
43.1(+0.3)
99.9

1.2 (2.3)
2.2 (4.5)
51.9(+0.4)
42.6(–0.6)
99.9

1.1 (2.2)
2.2 (4.3)
51.3(–0.6)
43.3(+0.7)
110.2

97453,681.06
94.9
2,218
469
8,775
6,487
16,023

97457,774.90
96.9
2,230
1,120
8,509
6,302
15,565

99
462,533.92
96.9
2,274
1,165
8,949
6,877
16,985

97459,567.57
97.9
2,288
1,018
9,088
7,034
17,37398
456,932.16
99.1
2,293
953
9,413
7,451
18,404

Notes: 1. Return on assets = Ordinary income/{(Total assets at beginning of period + Total assets at end of period)/2} × 100
2. Annualized values for the 21st Fiscal Period are calculated based on a period of 184 days, 182 days for the 22nd Fiscal Period, 184 days for the 23rd Fiscal
Period, 181 days for the 24th Fiscal Period, 184 days for the 25th Fiscal Period.
3. Return on net assets = Net income/{(Total net assets at beginning of period + Total net assets at end of period)/2} × 100
4. Payout ratio is rounded down to the first decimal place.
5. Leasing NOI = Rental revenues – Property-related expenses + Depreciation expenses for the period
6. FFO = Net income + Depreciation expenses for the period – Gain on sale of real estate property + Loss on sale of real estate property
7. FFO per unit = FFO/Number of investment units issued and outstanding (figures below ¥1 rounded down)

24 Kenedix Office Investment Corporation

Kenedix Office Investment Corporation 25

Balance Sheets
Kenedix Office Investment Corporation
As of October 31, 2017 and April 30, 2017

In thousands of yen

AssetsCurrent assets:
Cash and bank deposits (Notes 3 and 13)
Operating accounts receivable
Consumption taxes receivable
Other current assets (Note 8)
Total current assets
Property, plant and equipment, at cost (Notes 4 and 15):
Buildings and structures (Note 6)
Machinery and equipment
Tools, furniture and fixtures
Accumulated depreciation
Land
Construction in progress
Net property, plant and equipment
Investments and other assets:
Leasehold right (Note 15)
Investment securities (Note 13)
Investment corporation bond issuance costs
Investment unit issuance costs
Other assets
Total investments and other assets
Total assets
Liabilities and Net Assets
Liabilities
Current liabilities:
Operating accounts and other payables
Short-term loans payable and current portion of long-term loans payable(Notes 5, 13 and 14)
Current portion of investment corporation bonds (Notes 5 and 13)
Deposits received
Advances received
Other current liabilities
Total current liabilities
Non-current liabilities:
Investment corporation bonds (Notes 5 and 13)
Long-term loans payable (Notes 5, 13 and 14)
Tenant leasehold and security deposits
Total non-current liabilities
Total liabilities
Net Assets
Unitholders’ equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 404,885 units
As of October 31, 2017, and April 30, 2017, respectively
Surplus:
Voluntary retained earnings
Reserve for reduction entry
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges (Note 14)
Total valuation and translation adjustments
Total net assets (Note 9)
Total liabilities and net assets
See accompanying notes to the financial statements.

26 Kenedix Office Investment Corporation

As of October 31, 2017

As of April 30, 2017

¥ 29,725,877
314,766
90,895
126,323
30,257,862¥ 23,832,680
329,429—
85,51324,247,623

134,818,107
2,155,302
546,868(32,209,258)
276,130,664
1,142
381,442,828

136,208,100
2,078,516
535,315(30,793,020)
274,731,449
2,183
382,762,544

638,330
1,096,423
48,526—
1,449,691
3,232,972¥414,933,663

639,104
1,087,688
31,016
19,277
1,379,132
3,156,218¥410,166,386¥¥

1,519,529

1,414,407

24,250,000
1,800,000
31,6472,240,535
221,446
30,063,159

26,750,000
1,500,000
69,9242,170,062
673,815
32,578,209

6,000,000
147,550,000
18,469,097
172,019,097
202,082,256

4,800,000
141,550,000
18,251,916
164,601,916
197,180,125

206,199,945

206,199,945

2,024,673
4,589,238
6,613,911
212,813,857

2,024,673
4,750,760
6,775,433
212,975,379

37,54937,549212,851,406¥414,933,663

10,882
10,882212,986,261¥410,166,386

Statements of Income and Retained Earnings
Kenedix Office Investment Corporation
For the period from May 1, 2017 to October 31, 2017 and the period from November 1, 2016 to April 30, 2017

In thousands of yen

Operating revenues:
Rent revenue - real estate (Note 11)
Gain on sale of real estate property (Note 11)
Dividends income
Total operating revenues
Operating expenses:
Expenses related to rent business (Note 11)
Loss on sale of real estate property (Note 11)
Asset management fees
Administrative service and custodian fees
Other operating expenses
Total operating expenses
Operating income
Non-operating expenses:
Interest expenses
Financing-related expenses
Amortization of investment unit issuance costs
Amortization of investment corporation bond issuance costs
Others, net
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes (Note 8)
Net income
Retained earnings brought forward
Unappropriated retained earnings

From May 1, 2017
to October 31, 2017

From November 1, 2016
to April 30, 2017¥13,840,486—
61,007
13,901,494¥13,327,605
1,662,787
48,643
15,039,036

6,720,726
568,160
757,285
77,465
120,457
8,244,096
5,657,398

6,527,688
1,657,160
766,673
78,232
107,363
9,137,118
5,901,917

870,409
152,051
19,277
5,072
20,4601,067,272
4,590,125
4,590,125
1,131
4,588,993
244¥ 4,589,238

885,690
153,773
34,882
5,481
70,3191,150,147
4,751,770
4,751,770
1,248
4,750,521
238¥ 4,750,760

See accompanying notes to the financial statements.

Statements of Changes in Net Assets
Kenedix Office Investment Corporation
For the period from May 1, 2017 to October 31, 2017 and the period from November 1, 2016 to April 30, 2017

In thousands of yen

Valuationandtranslation
adjustments

Unitholders’ equity

Balance as of October 31, 2016
Changes during the fiscal period
Dividends of surplus
Net income
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of April 30, 2017
Changes during the fiscal period
Dividends of surplus
Net income
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of October 31, 2017

Unitholders’capitalSurplus
Voluntary
retainedearnings
UnappropriatedReserve forretained
reduction entry
earnings

Total
surplusTotal
unitholders’equityDeferred
gains orlosses onhedges¥206,199,945 ¥2,024,673¥4,601,756¥6,626,429 ¥212,826,375

—
—

—
—

(4,601,518)
4,750,521(4,601,518)
4,750,521(4,601,518)
4,750,521——(4,601,518)
4,750,521

—

—

—

—

—

11,85911,859——¥206,199,945 ¥2,024,673

149,003¥4,750,760

149,003
149,003¥6,775,433 ¥212,975,379

11,859¥10,882

160,863¥212,986,261

—
—

—
—

(4,750,515)
4,588,993(4,750,515)
4,588,993(4,750,515)
4,588,993——(4,750,515)
4,588,993

—

—

—

—

—

26,667

26,667(161,521)(161,521)(161,521)
26,667¥4,589,238 ¥6,613,911 ¥212,813,857 ¥37,549(134,854)¥212,851,406——¥206,199,945 ¥2,024,673

¥

Total
net assets(977) ¥212,825,397

See accompanying notes to the financial statements.
Kenedix Office Investment Corporation 27

Statements of Cash Flows
Kenedix Office Investment Corporation
For the period from May 1, 2017 to October 31, 2017 and the period from November 1, 2016 to April 30, 2017

In thousands of yen

Cash Flows from Operating Activities:
Income before income taxes
Adjustments to reconcile income before income taxes
to net cash provided by (used in) operating activities:
Depreciation and amortization
Interest income
Interest expenses
Changes in assets and liabilities:
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Increase (decrease) in accrued consumption taxes
Increase (decrease) in operating accounts and other payables
Increase (decrease) in advances received
Decrease in property and equipment due to sale
Others, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Purchases of property, plant and equipment
Purchases of intangible assets
Proceeds from tenant leasehold and security deposits
Payments of tenant leasehold and security deposits
Payments of restricted bank deposits in trust
Proceeds from restricted bank deposits in trust
Net cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period (Note 3)
See accompanying notes to the financial statements.

28 Kenedix Office Investment Corporation

From May 1, 2017
to October 31, 2017

From November 1, 2016
to April 30, 2017

¥ 4,590,125¥ 4,751,770

2,467,053(35)
870,4092,479,628(35)
885,690

14,663(90,895)(444,631)
269,626
70,473
5,398,413(281,444)
12,863,759
35(877,086)(799)
11,985,908

1,346—
254,234(278,398)
24,264
19,474,995
75,62027,669,115
35(885,563)(843)
26,782,743(6,327,541)—
784,232(776,876)—
73,936(6,246,248)(15,667,977)(293,196)
1,350,759(949,034)(289,809)—(15,849,258)

2,000,000—
15,500,000(14,000,000)
2,977,416(1,500,000)(4,749,942)
227,473
5,967,133
22,668,339¥ 28,635,473

4,000,000(1,500,000)
6,200,000(9,200,000)—(3,000,000)(4,601,179)(8,101,179)
2,832,305
19,836,034¥ 22,668,339

Notes to Financial Statements
Kenedix Office Investment Corporation
For the period from May 1, 2017 to October 31, 2017 and the period from November 1, 2016 to April 30, 2017

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Office Investment Corporation (“the Investment­Corporation”) is a real estate investment corporation whose units
are listed on the Tokyo Stock Exchange. The Investment­Corporation is engaged in ownership and operation of selected
office buildings, residential and retail properties in Japan, with afocus on mid-sized office buildings in the Tokyo Metropolitan Area.
The Investment Corporation was incorporated on May 6, 2005 as
an investment corporation under the Law Concerning Investment
Trusts and Investment Corporations of Japan, or the Investment
Trust Law. On July 21, 2005, the Investment Corporation was
listed on the Real Estate Investment Trust Market of the Tokyo
Stock Exchange with a total of 75,400 investment units issued andoutstanding (Securities Code: 8972). Subsequently, the Investment
Corporation raised funds through seven public offerings and othermeans including global offerings. Pursuant to the Investment Trust
Law, the Investment Corporation is externally managed by a registered asset management company, Kenedix Real Estate FundManagement, Inc. (“the Asset Management Company”), a sub­sidiary of Kenedix, Inc. (“Kenedix”). In concert with the Asset­Management Company, the Investment Corporation strives tomaximize cash distribution to investors by securing stable earnings
and sustainable investment growth. To this end, the Investment
Corporation adopts a dynamic and flexible investment stance that
accurately reflects its environment and market trends, and­endeavors to ensure a timely response to each and every
opportunity.
During the period ended April 30, 2017, the Investment­Corporation acquired three office buildings (ARK Mori Building:acquisition price of ¥4,169 million, Nishi-Shinbashi TS Building:acquisition price of ¥8,400 million, and BR Gotanda: acquisition
price of ¥2,200 million) and sold five office buildings (BUREX­Toranomon: initial acquisition price of ¥1,750 million, KDX­Nihonbashi Kabutocho Building: initial acquisition price of ¥11,270
million, KDX Roppongi 228 Building: initial acquisition price of¥3,300 million, KDX Kanda Misaki-cho Building: initial acquisition
price of ¥1,380 million, and KDX Gobancho Building: initial acquisition price of ¥1,951 million (with a total disposition price of¥19,910 million)).
During the period ended October 31, 2017, the Investment
Corporation acquired two office buildings (Takeyama White­Building: acquisition price of ¥1,800 million, and Shibuya 1717

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Non-marketable securities classified as other securities are carriedat cost. Cost of securities sold is determined by the moving
average method. Concerning silent partnership (tokumei kumiai,­ uilding: acquisition price of ¥3,500 million) and sold one officeBbuilding (KDX Shin-Yokohama 381 Building: initial acquisition priceof ¥5,800 million(with a disposition price of ¥4,900 million)). At theend of the twenty-fourth and twenty-fifth fiscal periods, theInvestment Corporation had total unitholders’ capital of ¥206,199
million with 404,885 investment units outstanding, respectively.
The Investment Corporation owned a portfolio of 97 properties(consisting of 92 office buildings, one residential property, three
central urban retail properties and one other property), and 98
properties (consisting of 93 office buildings, one residential property, three central urban retail properties and one other property)
with total acquisition prices of ¥393,468 million and ¥392,968­million at the end of the twenty-fourth and twenty-fifth fiscal periods, respectively. The occupancy ratios were approximately 97.9%
and 99.1% at the end of the twenty-fourth and twenty-fifth fiscal
periods, respectively.
Basis of Presentation
The accompanying financial statements have been prepared inaccordance with the provisions set forth in the Investment Trust
Act of Japan, the Financial Instruments and Exchange Law ofJapan and related regulations, and in conformity with accounting
principles and practices generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to the application and disclosure requirements of the International Financial
Reporting Standards or accounting principles generally acceptedin the United States of America.
The accompanying financial statements are basically a translation of the audited financial statements that were prepared for­Japanese domestic purposes from the accounts and records
maintained by the Investment Corporation and filed with the Kanto
Local Finance Bureau of the Ministry of Finance as required by the
Financial Instruments and Exchange Law. In preparing the accompanying financial statements, relevant notes have been added andcertain reclassifications have been made to the financial statements issued domestically in order to present them in a form thatis more familiar to readers outside Japan. The Investment
Corporation’s fiscal period is a six-month period that ends at theend of April and the end of October each year. The Investment
Corporation does not prepare consolidated financial statements
because it has no subsidiaries.

“TK”) interests, the method of incorporating the amount of equity
equivalent to the portion that corresponds to the net gain or lossof the TK is adopted.

(B) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated on a straight-line basis overthe estimated useful lives of the assets ranging as stated below:
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures

From May 1, 2017 to October 31, 2017

2-49 years
3-17 years
3-20 years

From November 1, 2016 to April 30, 2017

2-49 years
3-17 years
3-20 years

Kenedix Office Investment Corporation 29

(C) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of
three years under the straight-line method.
(D) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over amaturity period under the straight-line method.
(E)	Accounting Treatment of Trust Beneficiary Interests inReal Estate
For trust beneficiary interests in real estate, which are commonly
utilized in the ownership of commercial properties in Japan, allassets and liabilities in trust are recorded in the relevant balance
sheets and statements of income and retained earnings.
(F) Leasehold Right
Fixed-term leaseholds on the building and special agreements onbuilding sales are amortized over a contractual period of 48 years
and 9 months under the straight-line method.
(G) Revenue Recognition
Operating revenues consist of rental revenues including baserents, common area charges, and other operating revenues, which
include utility charge reimbursements, parking space rental­revenues and other miscellaneous revenues. Rental revenues are
generally recognized on an accrual basis over the life of eachlease. Utility charge reimbursements are recognized when earned
and their amounts can be reasonably estimated. Reimbursementsfrom tenants including utility charge reimbursements are recorded
on a gross basis and such amounts are recorded both as­revenues and expenses during the fiscal period.
(H) Taxes on Property, Plant and Equipment
Property-related taxes including property taxes, city planning taxes
and depreciable property taxes are imposed on properties on acalendar year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to the said period. Under Japanese tax rules, the sellerof property at the time of disposal is liable for these taxes on theproperty from the date of disposal to the end of the calendar year
in which the property is disposed. The seller, however, is generally
reimbursed by the purchaser for these accrued property-related
tax liabilities.
When the Investment Corporation purchases properties, it­typically allocates the portion of the property-related taxes related
to the period following the purchase date of each property throughthe end of the calendar year. The amounts of those allocatedportions of the property-related taxes are capitalized as part of theacquisition costs of the related properties. Capitalized property-­
related taxes amounted to ¥26,264 thousand and ¥32,698 thousand as of October 31, 2017 and April 30, 2017, respectively. In
subsequent calendar years, such property-related taxes arecharged as operating expenses in the fiscal period to which the
installments of such taxes correspond.

30 Kenedix Office Investment Corporation(I) Income Taxes
Deferred tax assets and liabilities are computed based on the
difference between the financial statements and income tax basesof assets and liabilities using the statutory tax rates.
(J) Consumption Taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes. Non-deductible consumption taxes applicable to the acquisition of assets are includedin the cost of acquisition for each asset.
(K) Derivative Financial Instruments
The Investment Corporation utilizes interest-rate swap and­interest-rate cap contracts as derivative financial instruments only
for the purpose of hedging its exposure to changes in interest
rates. The Investment Corporation deferred recognition of gains orlosses resulting from changes in fair value of interest-rate swap
and interest-rate cap contracts because these contracts met thecriteria for deferral hedging accounting. However, the Investment
Corporation adopted special treatment for interest-swap andinterest-rate cap contracts if they met the criteria for hedging
accounting under this treatment, whereby the net amount to be
paid or received under the interest-rate swap and interest-rate cap
contract is added to or deducted from the interest on the assets or
liabilities for which the swap and cap contract was executed. The
hedge effectiveness for the interest-rate swap and interest-rate
cap contract is assessed each fiscal period except for those thatmeet the criteria of special treatment.
(L) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits
placed with banks and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk ofmarket value fluctuation, with maturities of three months or lessfrom the date of purchase.
(M) Rounding of Amounts Presented
Amounts of less than one thousand yen have been truncated in
the Japanese financial statements prepared in accordance withJapanese GAAP and filed with regulatory authorities in Japan.
Unless otherwise noted, amounts of the twenty-fifth fiscal andtwenty- fourth fiscal period are rounded down, respectively, andratios are rounded off in the accompanying financial statements.
Totals shown in the accompanying financial statements do notnecessarily agree with the sums of the individual amounts.

3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consisted of the following as of October 31, 2017 and April 30, 2017.
In thousands of yen

As of April 30, 2017

As of October 31, 2017

Cash and bank deposits
Restricted bank deposits in trust (Note)
Cash and cash equivalents in trust¥23,832,680(1,164,340)¥22,668,339¥29,725,877(1,090,403)¥28,635,473

Note: Restricted bank deposits in trust are retained for repayment of tenant leasehold and security deposits in trust.

4. SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

In millions of yen

As of April 30, 2017

As of October 31, 2017

Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Land
Construction in progress
Total

Acquisition costs

Accumulated
depreciation

Book value¥134,818
2,155
546
276,1301¥413,652¥30,842
1,055
311
—
—
¥32,209¥103,975
1,099
235
276,1301¥381,442

Acquisition costs¥136,208
2,078
535
274,7312¥413,555

Accumulated
depreciation¥29,506
992
293——¥30,793

Book value¥106,701
1,085
242
274,7312¥382,762

5. SHORT-TERM LOANS PAYABLE, LONG-TERM LOANS PAYABLE AND INVESTMENT CORPORATION BONDS
The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as of
October 31, 2017:Classification

Short-term loans payable

Current portion of long-term loans payable

SubtotalLong-term loans payable

November 30, 2016
December 28, 2016
January 31, 2017
March 31, 2017
July 31, 2017
August 31, 2017
November 12, 2010
December 1, 2010
December 28, 2012
December 28, 2012
January 16, 2017
March 12, 2014
March 26, 2013
March 26, 2013
July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
October 31, 2012
October 31, 2013
October 31, 2016

Last repayment dateNovember 30, 2017
December 28, 2017
January 31, 2018
March 31, 2018
July 31, 2018
August 31, 2018
November 12, 2017
November 12, 2017
December 28, 2017
December 29, 2017
January 31, 2018
March 12, 2018
March 26, 2018
March 26, 2018
July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018
October 31, 2018
October 31, 2018
October 31, 2018

Weighted-averageinterest rate

March 28, 2012
March 28, 2012
August 30, 2013
September 30, 2013
September 30, 2013

March 28, 2019
March 28, 2019
August 31, 2020
September 30, 2019
September 30, 2019

1.77%
1.77%
1.42%
1.06%
1.06%

Drawdown date

0.33%
0.33%
0.33%
0.33%
0.33%
0.28%
2.02%
2.21%
1.09%
1.09%
0.28%
0.75%
1.04%
1.04%
0.56%
0.95%
0.95%
0.95%
0.95%
0.97%
1.08%
1.08%
1.08%
1.25%
0.89%
0.33%

Balance(In millions of yen)

¥

2,000
500
500
1,000
1,000
1,000
2,300
700
500
500
500
2,250
1,000
1,000
500
1,000
1,000
500
500
500
700
500
300
2,500
500
1,000
24,250¥ 1,400
1,000
1,500
1,800
900

Kenedix Office Investment Corporation 31

Classification

Long-term loans payable

32 Kenedix Office Investment Corporation

Drawdown date

Last repayment date

Weighted-averageinterest rate

November 12, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 31, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015

November 12, 2018
November 12, 2020
November 12, 2020
November 30, 2018
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 31, 2019
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
March 31, 2019
October 31, 2020
July 10, 2019
July 10, 2021
July 10, 2021
July 31, 2019
July 31, 2019
July 31, 2020
October 31, 2020
July 31, 2022
July 31, 2019
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023
October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025
October 30, 2025
October 30, 2025

0.82%
1.07%
1.07%
0.84%
1.12%
1.12%
1.21%
0.93%
1.13%
0.78%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.76%
0.95%
0.64%
0.90%
0.90%
0.68%
0.62%
0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%
1.11%
1.11%

Balance(In millions of yen)

¥

1,000
2,000
500
200
1,000
900
1,300
3,700
2,300
450
1,800
1,800
3,000
4,000
3,000
2,000
2,500
2,900
500
2,000
500
1,000
1,000
2,700
300
2,200
1,000
800
500
1,000
950
2,700
1,000
3,000
2,000
1,500
1,000
2,000
1,000
1,500
1,500
1,250
350
1,700
1,250
2,100
1,000
2,500
2,300
500
500
500
500
500
500
2,000
1,000
1,500
2,000
2,500

Classification

Long-term loans payable

Subtotal
Current portion of Investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 30, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017
June 30, 2017
August 10, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017

October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2019
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027
June 30, 2027
July 28, 2027
August 31, 2023
March 31, 2024
September 30, 2025
March 31, 2027
September 21, 2027
September 30, 2027
October 31, 2027

1.12%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.17%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.67%
0.88%
0.76%
0.73%
0.83%
0.98%
0.95%
0.86%
0.85%
0.85%
0.85%
0.80%
0.54%
0.56%
0.68%
0.73%
0.87%
0.85%
0.81%

September 12, 2013

September 12, 2018

1.00%

July 25, 2014
April 28, 2016
July 19, 2017
July 19, 2017

July 25, 2024
April 28, 2028
July 19, 2022
July 16, 2027

1.18%
0.90%
0.26%
0.64%

Balance(In millions of yen)

¥

2,500
1,000
2,500
500
2,000
1,800
1,000
500
1,000
1,000
2,000
2,000
1,000
1,500
1,000
1,000
2,500
1,000
4,000
1,500
500
1,500
500
700
500
1,500
3,500
1,000
1,000
1,500
1,000
1,000
2,500
2,500
147,550¥ 1,800
1,800¥ 2,000
1,000
1,000
2,000
6,000
¥179,600

The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as ofApril 30, 2017:Classification

Short-term loans payable

Current portion of long-term loans payable

Drawdown dateNovember 30, 2016
December 28, 2016
January 31, 2017
March 31, 2017
June 29, 2012
July 29, 2016
August 2, 2016
August 2, 2016
September 21, 2012
September 21, 2012
September 21, 2012
October 31, 2012

Last repayment dateNovember 30, 2017
December 28, 2017
January 31, 2018
March 31, 2018
June 30, 2017
July 31, 2017
August 31, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017

Weighted-averageinterest rate

0.33%
0.33%
0.33%
0.33%
1.29%
0.38%
0.38%
0.23%
1.16%
1.16%
1.16%
1.10%

Balance(In millions of yen)

¥

2,000
500
500
1,000
1,500
1,000
1,000
1,000
5,000
1,000
1,000
2,500

Kenedix Office Investment Corporation 33

Classification

Current portion of long-term loans payable

SubtotalLong-term loans payable

34 Kenedix Office Investment Corporation

Drawdown date

Last repayment date

Weighted-averageinterest rate

November 12, 2010
December 1, 2010
December 28, 2012
December 28, 2012
January 16, 2017
March 12, 2014
March 26, 2013
March 26, 2013

November 12, 2017
November 12, 2017
December 28, 2017
December 29, 2017
January 31, 2018
March 12, 2018
March 26, 2018
March 26, 2018

2.02%
2.21%
1.09%
1.09%
0.28%
0.75%
1.04%
1.04%

March 28, 2012
March 28, 2012
October 31, 2012
July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
August 30, 2013
September 30, 2013
September 30, 2013
October 31, 2013
November 12, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 31, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014

March 28, 2019
March 28, 2019
October 31, 2018
July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018
August 31, 2020
September 30, 2019
September 30, 2019
October 31, 2018
November 12, 2018
November 12, 2020
November 12, 2020
November 30, 2018
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 31, 2019
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
March 31, 2019
October 31, 2020
July 10, 2019
July 10, 2021
July 10, 2021
July 31, 2019
July 31, 2019
July 31, 2020
October 31, 2020
July 31, 2022
July 31, 2019
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023

1.77%
1.77%
1.25%
0.56%
0.95%
0.95%
0.95%
0.97%
0.95%
1.08%
1.08%
1.08%
1.42%
1.06%
1.06%
0.89%
0.82%
1.07%
1.07%
0.84%
1.12%
1.12%
1.21%
0.93%
1.13%
0.78%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.76%
0.95%
0.64%
0.90%
0.90%
0.68%
0.62%
0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%

Balance(In millions of yen)

¥

2,300
700
500
500
500
2,250
1,000
1,000
26,750¥ 1,400
1,000
2,500
500
1,000
1,000
500
500
500
700
500
300
1,500
1,800
900
500
1,000
2,000
500
200
1,000
900
1,300
3,700
2,300
450
1,800
1,800
3,000
4,000
3,000
2,000
2,500
2,900
500
2,000
500
1,000
1,000
2,700
300
2,200
1,000
800
500
1,000
950
2,700
1,000
3,000
2,000

Classification

Long-term loans payable

Subtotal
Current portion of Investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 30, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017

October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025
October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2019
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2018
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027

1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%
1.12%
1.11%
1.11%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.17%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.33%
0.67%
0.73%
0.88%
0.83%
0.76%
0.98%
0.95%
0.86%
0.85%
0.85%

March 8, 2012

September 8, 2017

2.00%

September 12, 2013
July 25, 2014
April 28, 2016

September 12, 2018
July 25, 2024
April 28, 2028

1.00%
1.18%
0.90%

Balance(In millions of yen)

¥

1,500
1,000
2,000
1,000
1,500
1,500
1,250
350
1,700
1,250
2,100
1,000
2,500
2,300
500
500
500
500
500
500
2,000
1,000
2,500
2,500
2,000
1,500
1,000
2,500
500
2,000
1,800
1,000
500
1,000
1,000
2,000
2,000
1,000
1,500
1,000
1,000
1,000
4,000
2,500
1,500
1,000
500
1,500
500
700
500
141,550¥ 1,500
1,500¥ 1,800
2,000
1,000
4,800
¥174,600

Kenedix Office Investment Corporation 35

6. REDUCTION ENTRY
The amount of reduction entry of property, plant and equipment acquired by government subsidy is as follows:
In thousands of yen

Buildings and structures¥26,230¥26,230

7. PER UNIT INFORMATION

Net asset value per unit
Net income per unit
Weighted-average number of units (units)

As of April 30, 2017

As of October 31, 2017

Yen

From May 1, 2017
to October 31, 2017

¥525,708¥ 11,334
404,885

From November 1, 2016
to April 30, 2017

¥526,041¥ 11,733
404,885

The weighted-average number of units outstanding of 404,885 as of October 31, 2017 and April 30, 2017, respectively, was used for thecomputation of the amount of net income per unit. Net income per unit after adjusting for residual units is not included because there wereno residual investment units.

8. INCOME TAXESThe Investment Corporation is subject to corporate income taxes
at a regular statutory rate of approximately 32%. However, theInvestment Corporation may deduct from its taxable income
amounts distributed to its unitholders, provided the requirements
are met under the Special Taxation Measures Law of Japan. Under
this law, the Investment Corporation must meet a number of tax
requirements, including a requirement that it currently distributein excess of 90% of its net income for the fiscal period in order tobe able to deduct such amounts. If the Investment Corporation
does not satisfy all of the requirements, the entire taxable incomeof the Investment Corporation will be subject to regular corporate

Statutory tax rate
Deductible cash distributions
Reversal of reserve for reduction entry
Others
Effective tax rateincome taxes. The Investment Corporation distributed in excessof 90% of its distributable income in the form of cash distributions
totaling ¥5,061 million and ¥4,750 million for the periods ended
October 31, 2017 and April 30, 2017, respectively. Therefore, such
distributions were treated as deductible distributions for purposesof corporate income taxes. The effective tax rate on the Investment
Corporation’s income was 0.02% and 0.03% for the fiscal periods
ended October 31, 2017 and April 30, 2017, respectively. The
following table summarizes the significant differences between thestatutory tax rate and the effective tax rate.

From May 1, 2017
to October 31, 201731.74%(35.00)
3.26
0.02
0.02%

From November 1, 2016
to April 30, 201731.74%(31.73)
—
0.02
0.03%

The significant components of deferred tax assets and liabilities as of October 31, 2017 and April 30, 2017 are as follows:
In thousands of yen

Deferred tax assets:
Enterprise tax payable
Amortization of leasehold rights
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets

As of October 31, 2017

As of April 30, 2017

¥

¥

25
3,383
3,409
(3,383)
¥
25

30
3,154
3,185
(3,154)¥30

9. NET ASSETSThe Investment Corporation issues only non-par value units in accordance with the Investment Trust Act. The entire amount of the issue
price of new units is designated as stated capital. The Investment Corporation is required to maintain net assets of at least ¥50 million as
required by the Investment Trust Act.

36 Kenedix Office Investment Corporation

10. RELATED-PARTY TRANSACTIONS(A) Parent Company, Major Corporate Unitholders’ and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable(B) Affiliated Companies and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable(C) Fellow Subsidiary Companies and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable(D) Directors, Major Individual Unitholders’ and Other
Twenty-fifth Fiscal Period (May 1, 2017 to October 31, 2017) and Twenty-fourth Fiscal Period (November 1, 2016 to April 30, 2017):
Not applicable

11. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSSON SALE OF REAL ESTATE PROPERTY
Rent revenue - real estate, expenses related to rent business, and gain and loss on sale of real estate property for the periods from May 1,2017 to October 31, 2017 and from November 1, 2016 to April 30, 2017 consist of the following:
In thousands of yen

From May 1, 2017
to October 31, 2017

From November 1, 2016
to April 30, 2017

¥ 9,997,791
1,847,673
11,845,464¥ 9,701,842
1,870,827
11,572,669

520,035
1,176,012
298,973
1,995,021¥13,840,486

499,611
978,129
277,195
1,754,936¥13,327,605¥ 1,325,156
2,293,789
1,176,914
1,141,603
18,785451,239
33,580279,656¥ 6,720,726¥ 1,315,879
2,288,632
1,006,582
1,122,460
18,202436,606
32,832306,493¥ 6,527,688

Gain on sale of real estate property:
Revenue from sale of investment property
Cost of investment property
Other sales expenses
Gain on sale of real estate property

—
—
—
—

¥14,840,000
12,839,023
338,188¥ 1,662,787

Loss on sale of real estate property:
Revenue from sale of investment property
Cost of investment property
Other sales expenses
Loss on sale of real estate property¥ 4,900,000
5,419,438
48,722¥ 568,160¥ 5,070,000
6,635,971
91,189¥ 1,657,160

Rental and other operating revenues:
Rent revenue - real estate:
Rental revenues
Common area charges
Subtotal
Others:Parking space rental revenues
Utility charge reimbursement
Miscellaneous
Subtotal
Total rent revenue - real estate
Property-related expenses:
Expenses related to rent business:
Property management fees and facility management fees
Depreciation
Utilities
Taxes
Insurance
Repairs and maintenance
Trust fees
OthersTotal expenses related to rent business

Kenedix Office Investment Corporation 37

12. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease terms of generally
two years for office buildings and residential properties and with lease terms ranging from two to ten years for retail properties. The future
minimum rental revenues under existing non-cancelable operating leases as of October 31, 2017 and April 30, 2017 are as follows:
In thousands of yen

As of October 31, 2017

Due within one year
Due after one year
Total

¥ 1,794,970
9,036,969¥10,831,939

As of April 30, 2017

¥ 1,679,760
9,345,602¥11,025,363

13. FINANCIAL INSTRUMENTS
Twenty-fifth Fiscal Period (from May 1, 2017 to October 31, 2017)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges in interest rates and does not enter into derivatives for
speculative or trading purposes. Management of surplus funds isundertaken in a prudent manner that considers fully such factors
as safety, liquidity, interest rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.
Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition ofproperties and have a redemption date of a maximum of approximately 10 years and 6 months following the accounting date.
Although a certain portion of said liabilities are subject to interest
rate fluctuation risk, the Investment Corporation utilizes derivatives(interest-rate swap and interest-rate cap transactions) in order toreduce such risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy, and the assessmentof the effectiveness of hedging activities, please see Note 2 (K)“Derivative Financial Instruments.”(3) Risk management for financial instruments(a)	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and interest-rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.
(b)	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
Although loans and other liabilities are subject to liquidity risk, theInvestment Corporation reduces such risk by spreading out
payment due dates and by using diversified fund procurement
methods. Liquidity risk is also managed by such means as­regularly checking the balance of cash reserves.
(4)	Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various
assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in a different fairvalue.

(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of October 31, 2017 and estimated fair value are shown in the following
table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and bank deposits
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value

Estimated fair value¥ 29,725,877
29,725,877
6,000,000
1,800,000
18,250,000
6,000,000
147,550,000¥179,600,000
37,549¥ 29,725,877
29,725,877
6,000,000
1,810,728
18,283,972
6,048,100
148,148,063¥180,290,864
37,549Difference

¥

—
—
—
10,72833,972
48,100598,063¥690,864—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing net liability position.

38 Kenedix Office Investment Corporation

*1:	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate, which is
subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS.”*2: Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,096,423

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3: Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and bank deposits
Total¥29,725,877¥29,725,877*4: Redemption schedule for loans payable and investment corporation bonds

Short-term loans payable
Investment corporation bonds
Long-term loans payable
Total

Due within 1 year
or less¥ 6,000,000
1,800,000
18,250,000¥26,050,000

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

¥

¥

¥

¥

—
—
13,750,000¥13,750,000

Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges in interest rates and does not enter into derivatives for
speculative or trading purposes. Management of surplus funds isundertaken in a prudent manner that considers fully such factors
as safety, liquidity, interest rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership­(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.

——
18,600,000¥18,600,000——
21,300,000¥21,300,000—
1,000,000
17,050,000¥18,050,000

Due after
5 years¥—
5,000,000
76,850,000¥81,850,000

Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition of properties and have a redemption date of a maximum of approximately
11 years following the accounting date. Although a certain portionof said liabilities are subject to interest rate fluctuation risk, theInvestment Corporation utilizes derivatives (interest-rate swap andinterest-rate cap transactions) in order to reduce such risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy, and the assessmentof the effectiveness of hedging activities, please see Note 2 (K)“Derivative Financial Instruments.”

Kenedix Office Investment Corporation 39

(3) Risk management for financial instruments(a) 	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and­interest-rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.

(4) 	Supplementary explanation of the estimated fair value offinancial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various
assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in a different fairvalue.

(b) 	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
Although loans and other liabilities are subject to liquidity risk, theInvestment Corporation reduces such risk by spreading out­payment due dates and by using diversified fund procurement
methods. Liquidity risk is also managed by such means as­regularly checking the balance of cash reserves.
(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of April 30, 2017 and estimated fair value are shown in the following table.
The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and bank deposits
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value¥ 23,832,680
23,832,680
4,000,000
1,500,000
22,750,000
4,800,000
141,550,000¥174,600,000
10,882Estimated fair value¥ 23,832,680
23,832,680
4,000,000
1,508,940
22,791,356
4,874,082
142,700,464¥175,874,843
10,882Difference

¥

—
—
—
8,940
41,35674,082
1,150,464¥1,274,843—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing net liability position.

*1: 	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate, which is
subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS.”

40 Kenedix Office Investment Corporation

*2: Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,087,688

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3: Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and bank deposits
Total¥23,832,680¥23,832,680*4: Redemption schedule for loans payable and investment corporation bonds

Short-term loans payable
Investment corporation bonds
Long-term loans payable
Total

Due within 1 year
or less¥ 4,000,000
1,500,000
22,750,000¥28,250,000

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

¥

¥

¥

¥

—
1,800,000
17,050,000¥18,850,000——
14,700,000¥14,700,000——
19,600,000¥19,600,000——
21,700,000¥21,700,000

Due after
5 years¥—
3,000,000
68,500,000¥71,500,000

14. DERIVATIVE TRANSACTIONS
The following summarizes the contracted amount and the fair value of interest-rate swap and the interest-rate cap contracts as of
October 31, 2017:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)
Maturing after
1 yearFair value(In thousands of yen)Calculation method for
applicable fair value¥37,549

Based on theamount provided
by counterparty
financial institutions

Hedge accounting method

Type of derivative transactions

Hedged items

Principle method

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payableSpecial treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payable99,650,000

93,900,000*

Special treatment ofinterest-rate caps

Interest-rate caps
transaction

Long-term loans
payable500,000

—

*

Total

¥ 12,200,000 ¥ 12,200,000¥112,350,000 ¥106,100,000¥37,549(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.

Kenedix Office Investment Corporation 41

The following summarizes the contracted amount and the fair value of interest-rate swap and the interest-rate cap contracts as ofApril 30, 2017:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)
Maturing after
1 yearInterest-rate caps
transaction

Long-term loans
payable*Special treatment ofinterest-rate caps

500,000

Long-term loans
payable500,000

Interest-rate swaps:
Receive/floating andpay/fixed*

Special treatment ofinterest-rate swaps

97,400,000¥

102,150,000

Long-term loans
payableBased on theamount provided
by counterparty
financial institutions

Interest-rate swaps:
Receive/floating andpay/fixed¥10,882

Principle method

3,700,000

Hedged items

Calculation method for
applicable fair value

Type of derivative transactions

Fair value(In thousands of yen)

Hedge accounting method

Total

3,700,000 ¥¥106,350,000 ¥101,600,000¥10,882(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.

15. INVESTMENT AND RENTAL PROPERTIES
Twenty-fifth Fiscal Period (from May 1, 2017 to October 31, 2017)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying Value (In thousands of yen)
As of April 30, 2017

¥383,401,649

Net change¥(1,320,490)

As of October 31, 2017

¥382,081,158

Fair value
As of October 31, 2017
(In thousands of yen)

¥424,323,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers. Fair value at the end of the fiscal period under review of Residence
Charmante Tsukishima that was sold on December 1, 2017 is calculated based on the sale price (¥4,900 million) in the transaction agreement on October 30, 2017.
Those of KDX Ikejiri-Oohashi Building and KDX Shin-Yokohama 214 Building that were sold on December 28, 2017 are calculated based on the anticipated sale price(KDX Ikejiri-Oohashi Building: ¥2,400 million; and KDX Shin-Yokohama 214 Building: ¥2,430 million) in the transaction agreements on December 14, 2017.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of 2 properties totaling ¥5,405,572 thousand, the sales of 1 property totaling ¥5,419,438 thousand and depreciation amounting to ¥2,293,789 thousand.

Income and loss in the fiscal period ended October 31, 2017 for real estate for rental purposes is listed in Note 11 “BREAKDOWN OFRENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY”.
Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying Value (In thousands of yen)
As of October 31, 2016

¥389,197,020

Net change¥(5,795,370)

As of April 30, 2017

¥383,401,649

Fair value
As of April 30, 2017
(In thousands of yen)

¥416,550,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: The fair value is the appraisal value or the survey value determined by outside appraisers.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of 3 properties totaling ¥14,942,506 thousand, the sales of 5 properties totaling ¥19,474,995 thousand and depreciation amounting to ¥2,288,632
thousand.

Income and loss in the fiscal period ended April 30, 2017 for real estate for rental purposes is listed in Note 11 “BREAKDOWN OF RENTALAND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY.”

42 Kenedix Office Investment Corporation

16. SEGMENT AND RELATED INFORMATION
Twenty-fifth Fiscal Period (from May 1, 2017 to October 31, 2017)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenue on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenue on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenue on the statementof income and retained earnings.
Twenty-fourth Fiscal Period (from November 1, 2016 to April 30, 2017)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenue on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenue on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenue on the statementof income and retained earnings.

17. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable

Kenedix Office Investment Corporation 43

Unitholders’ Information

Kenedix Office Investment Corporation
Fiscal Periods: Six months ending April 30 and October 31
Stock Listing: Real Estate Investment Trust Market of the Tokyo Stock Exchange (Securities Code: 8972)
Transfer Agent: Sumitomo Mitsui Trust Bank, Limited
Auditor:Ernst & Young ShinNihon LLC

IR Schedule (25th and 26th fiscal periods)

Oct.
2017

Dec.
2017

Jan.
2018

Apr.
2018

Jun.
2018

End of 25th
fiscal period

Performance for25th fiscal period
is announced

Distributions for25th fiscal period
are paid

End of 26th
fiscal period

Performance for26th fiscal period
will be announced

General Breakdown of Unitholders (Note)
3.7%
End of 24th
fiscal period(Apr. 30, 2017)

Distributions for
26th fiscal period
will be paid

1.1%

59.2%
14,952 units

Jul.
2018

Total
404,885 units

36.0%

239,748 units

4,275 units

3.6%

145,910 units

1.1%

End of 25th
fiscal period(Oct. 31, 2017)62.7%
14,593 units

253,685 units

Individuals and others

Total
404,885 units

32.7%
4,329 units

Financial institutions(including securities companies)

132,278 units

Other domestic corporations

Foreign corporations and individuals

Note: Ratios are rounded to the first decimal place.

Top Ten Unitholders (As of October 31, 2017)# of Units Held (Unit)

Percentage Share (Note)

Japan Trustee Services Bank, Ltd. (Trust Acct.)

84,715

20.9%

The Master Trust Bank of Japan, Ltd. (Trust Acct.)

72,81318.0%

Trust and Custody Services Bank, Ltd. (Securities Investment Trust Acct.)

34,297

8.5%

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

21,1795.2%

State Street Bank and Trust Company 505012

11,742

2.9%

State Street Bank and Trust Company 505223

8,240

2.0%

State Street Bank and Trust Company

6,455

1.6%

DFA International Real Estate Securities Portfolio

6,064

1.5%

The Bank of New York Mellon SA/NV 10

5,752

1.4%

Name

State Street Bank and Trust Company 505001
Total

5,491

1.4%

256,748

63.4%

Note: Ratios are rounded to the first decimal place.

Unit Price and Trading Volume(Units)
20,000(Yen)
1,000,000

8,000

800,000

6,000

600,000

4,000

400,000

2,000

200,000

0

2005

2006

2007

44 Kenedix Office Investment Corporation

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

0

www.kdo-reit.com/en/

Disclaimer:This semiannual report includes translations of certain documents originally filed and made available inJapan in accordance with the Financial Instruments and Exchange Act of Japan.
The English language semiannual report was prepared solely for the convenience of readers outside
Japan and is not intended to constitute a prospectus. This semiannual report should not be construed as
an offer or solicitation to buy or sell any securities of Kenedix Office Investment Corporation (KDO). English
terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japanese terms. With respect to any and all terms herein, if there exist
any discrepancies in the meaning or interpretation thereof between the original Japanese documents andEnglish translation contained herein, the original Japanese documents will always govern the meaning andinterpretation.
None of KDO, Kenedix Real Estate Fund Management, Inc., any of their respective directors, officers,
employees, partners, unitholders, agents, affiliates nor their advisors shall be responsible or liable for thecompleteness, appropriateness, or accuracy of English translations or the selection of the portion(s) of any
document(s) translated into English.
The financial statements of KDO have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP), which may materially differ in certain respects from generally
accepted accounting principles of other jurisdictions.
This semiannual report contains forward-looking statements. These statements appear in a number ofplaces in this semiannual report and include statements regarding the intent, belief, or current and future
expectations of KDO or Kenedix Real Estate Fund Management, Inc. with respect to its business, financial
condition and results of operations. In some cases, you can identify forward-looking statements by terms
such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or the negative of these terms or other similar terminology. These statements are not guarantees
of future performance and are subject to various risks and uncertainties. Actual results, performance or
achievements, or those of the industries in which we operate, may differ materially from any future results,
performance or achievements expressed or implied by these forward-looking statements. In addition, theseforward-looking statements are necessarily dependent upon assumptions, estimates and data that may beincorrect or imprecise and involve known and unknown risks and uncertainties. Accordingly, readers of thisdocument should not interpret the forward-looking statements included herein as predictions or representations of future events or circumstances.
Potential risks and uncertainties also include those identified and discussed in this document. Given
these risks and uncertainties, readers of this document are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of information produced herein. We disclaim
any obligation to update or, except in the limited circumstances required by the Tokyo Stock Exchange,
announce publicly any revisions to any of the forward-looking statements contained in these documents.