Focused Investment in
Shopping Centers for Daily Needs
Semi-annual Report for the 8th Period(From October 1, 2018 to March 31, 2019)https://www.krr-reit.com/en/

H i ghli ght s

For the 8th fiscal period ended March 31, 2019
Distribution per unit

JPY 6,477

Forecast DPU for the 9th fiscal period

JPY 6,480

Total assets (by acquisition price)

JPY 213.2 b n

Number of properties

Number of tenants

53

Contents
I. Overview of KRR
Fro m the E xecutive Directo r
To p Interview
Key Characteristics
ESG Initiatives
Close-up KRR Vol.8
Passaggio Nishiarai
Financial Highlights
Portfolio List
Portfolio Map
Overview of Portfolio
Summery of Investment Unit
II. Asset Management Report

511

Occupancy rate at the end of period

99.2%

Overview of Asset Management
Profile of KRR
Status on Investment Properties
Capital Expenditures
Expenses and Liabilities
Acquisition and Disposition
Accounting
Others

Ashico Town Ashikaga

From the Executive Director
Thanks to your support, Kenedix Retail REIT Corporation (“KRR”) has
reported its results of operations for the eighth fiscal period (from October 1,
2018 to March 31, 2019).
We dedicate ourselves to the maximization of unitholder value bycontinuing implementing growth strategies that take full advantage ofexternal growth opportunities through diverse pipelines and operational
expertise in retail facilities, extensively supported from our Sponsor and theAlliance Companies. In addition, in order to adapt to the recent penetrationof e-commerce, we have added distribution centers to our investment
targets, and acquired the first distribution center in March 2019.
We respectfully look forward to your continued support.

Akihiro Asano

Executive Director, Kenedix Retail REIT Corporation
Director & COO, Head of Retail REIT Department,
Kenedix Real Estate Fund Management, Inc.

TOPINTERVIEW
Adapting to changing environment
for sustainable growth

What is the overview of the eighth fiscal period?
Four years have passed since KRR was listed in
February 2015. During the eighth period from
October 2018 to March 2019, we reviewed ourportfolio and reshuffled our assets. Specifically, we
decided to sell Solala Plaza (Sendai, Miyagi) and
Gourmet City Chiba Chuo (Chiba, Chiba), whichhave relatively low post-depreciation yields within
our portfolio. On the other hand, we decided toacquire four distribution centers that KRR has beenable to acquire since last year.
As a result, our portfolio, which totaled 18 properties
with acquisition price of 80,843 million yen at thetime of listing, expanded to 53 properties withacquisition price of 213,214 million yen at the end of
the eighth fiscal period, and to 55 properties withacquisition price of 213,786 million yen after thecompletion of all of the above transactions. We also
improved the profitability of our overall portfolio by
acquiring properties with higher yields than theproperties disposed. We also recorded a gain on thesale of the property as a result of the property
disposition.

On the operational front, we worked to improve
profitability by actively replacing the anchor tenant
in Passaggio Nishiarai (Adachi-ward, Tokyo).
Occupancy rates have remained at the 99% level
throughout the period, and we have continued tomaintain stable management of the portfolio.
As a result of the above, we recorded operating
revenue of 8,415 million yen, operating income of
3,884 million yen, ordinary income of 3,284 million
yen, and net income of 3,283 million yen for theeighth fiscal period. Distribution per unit was 6,477
yen, which was 178 yen higher than the distribution
for the seventh fiscal period.

Asset acquired in the 8th fiscal period
L-3 Musashi Ranzan Distribution Center
Distribution center in an area with a concentration oflogistics facilities, near a Kan-Etsu Expressway
interchange
Location
Acquisition
priceHiki-gun,
Saitama

JPY 3,879 mn

Appraisal value JPT 4,000 mn
Appraisal NOI
yield

5.7%

1

Top Inter view
This is the first time that KRR has acquired
distribution centers. Could you tell us the
background to the expansion of the investment
criteria to distribution centers?
We have been managing our portfolio focusing on
shopping centers for daily needs for four years since
our IPO. In shopping centers for daily needs, there is ahigh percentage of grocery supermarkets andservice-oriented tenants. We believe that they arehighly resilient to e-commerce, which is expanding
along with the advances in information technology.
One reason is the strong demand among consumers
to purchase groceries after directly checking theirfreshness. In addition, these shopping centers are invery convenient locations. However, with the increasein e-commerce, logistics functions are playing a role incomplementing consumers’ purchasing behavior
along with retail facilities in terms of channels andfunctions for providing consumers with merchandise.
Amid this changing retail environment, delivery
activities are becoming increasingly diverse as well.
Merchandise ordered via the Internet is shipped not
only from distribution centers but also from stores
located near residential areas. Furthermore, there isdiversification in how people receive the goods
ordered via the Internet. For example, people
sometimes use delivery boxes at retail facilities as well
as stores to pick up merchandise. Another trend is
the acquisition of conventional retailers by Internet
retail companies and the formation of alliances
between these companies. The growth of ecommerce is creating an increasing need for delivery
functions at shopping centers that are close to where
people live. These changes are making shopping anddistribution centers increasingly similar from thestandpoint of supplying merchandise to consumers.

Assets acquired in the 9th fiscal period
L-1

Zama Distribution Center
Distribution center for a major convenience store
chain that delivers to its stores

Location

Zama,
Kanagawa

Acquisition
JPY 1,400 mn
price

L-2 Oppama Distribution CenterCore distribution center of a major convenience store
chain that delivers to its stores and features a process
center function

Yokosuka,
Kanagawa

Appraisal value JPY 1,640 mn

Location

Appraisal NOI
yield

Acquisition
JPY 1,300 mn
price

6.0%

Appraisal value JPY 1,570 mn
Appraisal NOI
yield

6.5%

L-4 Yokohama Kamigo Distribution Center
Distribution center of a home delivery service firm
within a residential district

Restaurant building planned for construction

Location

Yokohama,
Kanagawa

Acquisition
JPY 790 mn
priceAppraisal value JPY 840 mn
Appraisal NOI
yield

5.0% (Note)

Note: “Appraisal NOI” includes operating revenue related to the restaurant building, and the “Appraisal NOI yield” is calculated taking into account the estimatedconstruction cost of this building.

2Under these circumstances, we view distribution
centers as an extension of retail facilities as channels
and functions for providing consumers withmerchandise. We also anticipate more growth indemand for shopping centers for daily needs andfor distribution centers that are providing goods
involving diversifying merchandise distribution
channels and “the last mile” delivery. This is why wehave expanded our investments to distribution
centers that supplement retail facilities in supplying
merchandise to consumers.
We announced the acquisition of four distribution
centers: Zama Distribution Center (Zama,
Kanagawa), Oppama Distribution Center (Yokosuka,
Kanagawa), Musashi Ranzan Distribution Center(Hiki-gun, Saitama), and Yokohama Kamigo
Distribution Center (Yokohama, Kanagawa).

Zama Distribution Center and Oppama Distribution
Center are distribution centers for a major
convenience store chain. Oppama Distribution
Center also includes a food processing center forthe convenience store chain. Musashi Ranzan
Distribution Center is used as a distribution center
for a manufacturer which operates a nearby factory,
and is highly convenient for storing the
manufacturer’s products for retail stores. Yokohama
Kamigo Distribution Center is a delivery center of ahome delivery service firm within a residential district.
We are planning to build a new restaurant buildingon the premises of this property.
We aim to become a new retail REIT that also
captures the growth of e-commerce in response to
the changing retail environment.
We respectfully look forward to your continued
support.

Assets disposed in the 8th & 9th fiscal period
R-7 Solala Plaza (Note)

T-14 Gourmet City Chiba-Chuo
Location
Disposition
price
Acquisition
price

Chiba, Chiba

Location
Disposition
price
Acquisition
price

JPY 800 mn
JPY 760 mn

Sendai, Miyagi
JPY 5,980 mn
JPY 5,720 mn

Note: KRR disposed 49% quasi co-ownership interests in the 8th fiscal period
and 51% quasi co-ownership interests in the 9th fiscal period.

Steady AUM growth(JPY bn)
300

Acquisition of Musashi Ranzan
Distribution Center
Disposition of Gourmet City Chiba-Chuo
and Solala Plaza (49% quasi coownership interests)

250

204.9

200

158.7
150

100

206.1

212.8

Aiming forsteady growthof AUM going
forward

213.2

164.3

131.6
80.8

91.8

50

0
IPO
1st Period
2nd Period
3rd Period
4th Period
5th Period
6th Period
7th Period
8th Period(Feb. 10, 2015) (Sep. 30, 2015) (Mar. 31, 2016) (Sep. 30, 2016) (Mar. 31, 2017) (Sep. 30, 2017) (Mar. 31, 2018) (Sep. 30, 2018) (Mar. 31, 2019)3

Key Characteristics

Focus on shopping centers for daily needs
1

The first J-REIT to focus on shopping centers for daily needs

KRR is the first listed J-REIT to focus on neighborhood, community and other shopping centers fordaily needs. KRR seeks to generate both long-term stable cash flow and profitability growth.
■■ Retail properties located within residential districts or adjacent to major roads, which

provide daily goods and services

High volume ofcustomer traffic

Well located for dailylivingAccommodate certain daily
local retail needs
Strong customer traffic on both
weekdays and weekends

Retail trade area of an
approximately 1 to 10 km radius(generally 3 to 5 km radius)
Customers predominantly fromlocal areas surrounding theretail property

Specialty store tenant
diversity

Various specialty stores tomeet a range of day-to-day
needs
Groceries, clothing and otherdaily goods and services

Primary characteristics of shopping centers for daily needs
Location Located within residential areas ofa metropolitan commuter district

Residential district
Specialty stores(small retail spaces)
Grocery supermarket(anchor tenant)■ Retail trade area population
・1km radius: 10,000 people
・3km radius: 62,000 people
・5km radius: 247,000 people

Tenants

Flat parking lot

Providing primarily daily
necessities■ Housing Yaoko (anchor tenant) anda group of specialty stores (nonanchor tenants)

Restaurant building
expansion site
Residential
district
ウニクス伊奈（NSC
Unicus Ina (NSC)）

Facilities

Capacity to accommodate frequent customer visits and provide revenue
upside potential

An anchor tenant with strong ability to attract
customers■ Flat parking lot to accommodate
approximately 480 vehicles■ Constructed a restaurant building onunderutilized space
Expansionbuilding

Restaurant
building

Acquisition
date

Jan. 16, 2017

GFA

397.98 m2

Total
construction
cost

JPY 91 mn

Expansion building

A group of specialty stores selected to satisfy
the various needs of local residents42

Investment in major metropolitan areas with population concentrations■■ Primary geographic target areas
The four major metropolitan areas of Japan, which have relatively stable populations:• Tokyo metropolitan area
• Greater Osaka area
• Greater Nagoya area
• Fukuoka area
* KRR may also from time to time consider investing in ordinance-designated cities, core cities and other areas,
which would allow KRR to build a more diversified portfolio that provides flexibility and positive returns,
consistent with KRR’s investment goals, when attractive opportunities arise.

Location (by acquisition price)
Ordinance-designed
cities, core cities andother areas
20.5%
Fukuokaarea
3.8%

4 major
Metropolitan
Areas

Greater
Nagoya area
9.8%

79.5%

Greater Osaka area
20.7%

Tokyo
metropolitan
area
45.3%

Tokyo metropolitan area
Greater Osaka area

Greater
Nagoya area

As of May 31, 2019
Fukuoka area

3

Additional investment in distribution centers

KRR is positioned as a new type of retail REIT that can benefit from the growth of e-commerce byadditionally investing in distribution centers.
■■ KRR’s main target in logistics sector

Key features of retail distribution centers• Distribution centers for delivering goods to end
consumers■■ Target portfolio distribution
Distribution centers
Other retail facilities

20% or less

• Distribution centers for delivering goods toconsumption areas such as stores• Relatively small-scale distribution centers• Companies supplying goods may be in the samebusiness sector as KRR’s retail tenants; thebusiness performance is stable• Relatively long-term leases

Shopping centers
for daily needs

80% or more

5

E S G I n i t iat i ves

1

Recognitions and certifications on environment■■ GRESB Real Estate Assessment 2018GRESB is an annual benchmark assessment which measuresenvironmental, social, and governance (ESG) considerationsin the real estate sector. KRR has been awarded a“Green Star” in the 2018 GRESB Real Estate
Assessment for the third consecutive year.

■■ D B J G r e e n Building Certification
The DBJ Green Building Certification Program was launched by Development Bank of Japan Inc. (DBJ) in April
2011 to support real estate that meets environmental and social considerations. The following properties havereceived DBJ Green Building Certifications.
Properties with outstanding environmental & social awareness (★★★★)
T-1

Fululu Garden Yachiyo

T-2

MONA Shin-Urayasu

Properties with excellent environmental & social
awareness (★★★)
T-7 Unicus Yoshikawa
T-3 Passaggio Nishiarai

O-4 Blumer HAT Kobe
R-1 Roseo Mito

T-4 Daikanyama Address
DixeptR-4 Ashico Town Ashikaga

O-1 Blumer Maitamon

Properties with high environmental & social awareness(★★)
T-5 Unicus Ina
T-19 Yumemachi NarashinodaiMall
T-20 Kawamachi Yahagi Mall

O-5 Carino Esaka
R-10 Sun Street Hamakita
N-6 Resora Obu
Shopping Terrace■■ Certified properties and floor area ratio
The number of certified properties: 15 (36.6%)
Certified floor area: 456,910.77m2 (62.8%)(as of March 31, 2019)
Note: The ratio is the percentage of certified floor area to the gross floor area of properties owned by KRR (727,870.92m 2, calculated
on a pro-rata basis of ownership ratio for compartmentalized ownership, excluding land-only properties). As of March 31, 2019,
KRR owns 41 properties that are eligible for certification, excluding 12 land-only properties.

■■ Environmental Considerations Rating from Sumitomo Mitsui Banking Corporation
Awarded an “A” grade from Sumitomo Mitsui Banking Corporation in recognition of its commitment toenvironmental initiatives in asset management, based on SMBC Environmental Considerations Lending
Program.
■■ MUFG ESG Rating Certificate for J-REIT supported by JCR
Awarded the highest rank of “S” in “MUFG ESG Rating Certificate for J-REIT supported by JCR” by Mitsubishi
UFJ Research and Consulting Co., Ltd.
6

2

Initiatives at Unicus Ina■■ Greening of facilities■■ Cooperation with local

communities

Agreed with Ina Town toprovide part of facility as atemporary shelter in case of adisasterAwarded Green Award of
Saitama Prefecture

Signing of agreement

Award ceremony■■ Community-participating

eventsMaking efforts to enliven local
communities

Summer Festival■■ Solar panel installation
KRR Installed solar panels to decrease CO2 emissions. KRR has entered into green lease agreementswith the tenant, P&D Consulting Co., Ltd.

Structure
Owner of solar panels

Lease

Rent
Extra rent (Note)based on green
leasePower supplierPower supply

Electricity
charges

Power user
(Tenant)
Note: Green lease is an agreement specifying that property owners and tenants shall cooperate to reduce environmental burden.

3

Singing of PRI by Kenedix, Inc.

Kenedix, Inc. became a signatory to the United Nations
Principles for Responsible Investment (“PRI”) in April 2019.
KRR and the Asset Manager promote sustainability
initiatives through the practice of PRI as members of theKenedix Group.

7

Close-up KRR Vol.8

T-3

Urban Station-Front SC

Passaggio Nishiarai
Passaggio Nishiarai is an urban station-front
shopping center that opened in April 2010 in front ofNishiarai Station on the Tobu Isesaki Line and Daishi
Line in Adachi-ku, Tokyo. Trains from Nishiarai
Station have direct operations with the Tokyo Metro
Hibiya Line and the Hanzomon Line, providing 30
minutes direct access to Otemachi Station.
The area, including this property, was redevelopedon a large scale by fifteen hectares as an “Urban
Development Project (Nishiarai Nouvell)” in the area
near the west exit of Nishiarai Station. The property is
located between approximately 2,000 condominiums
developed in the area and Nishiarai Station, closest
to the station. The Passage (Passaggio) with an
atrium from the first floor, is part of the pedestrianpassageway that passes through the redevelopment
area and contributes to the formation of a unity inthe community.
The stores of the shopping center include leading
tenants in various fields, such as apparel stores,
outdoor goods stores, musical instruments stores,
and 100-yen shops. In addition, service-oriented
stores, such as pharmacies, clinics, tutorial schools,
and English conversation classrooms, are occupied,making the tenant structure easy for child-rearing
families, which have resided into large numbers after
the redevelopment.
Asset overview
Acquisition price

JPY 5,850 mn

Location

Adachi-ward, Tokyo

Land area

5,079.68 m2

Gross floor area

21,996.90 m2

Main tenant

Shimamura Co., Ltd.

Station-front shopping center for dailyneeds within a large-scale redevelopment
project
On the basement floor of this property, a major
home appliance retailer was operating as the anchor
tenant since 2011. However, the lease agreement was
terminated in 2018, and a new large-scale fast
fashion store which fits the customer base in thecatchment area was opened. The number of visitors
to the shopping center after the opening of the fast
fashion store has increased by more than 10% year
on year. The reshuffling of the anchor tenant has had
a positive impact on sales at other stores including
restaurants.
On the operational front, we are actively working tobuild stronger ties with the local government andcommunities. For example, we use space within ourfacilities to co-host traffic safety events with police
stations and disaster prevention events with fire
departments. We also regularly hold flea markets andexperiential events with local residents’ participation,and cooperate with local cable TV stations to telecast
fireworks in Adachi City on the screen. In recognitionof these efforts, Passaggio Nishiarai was awarded DBJ
Green Building Certification (three-star rank) as aproperty with
Tobu Daishi Lineexcellentenvironmental andRing Road No.7
social awareness inNishiarai
June 2018.
StationWe will continue towork to revitalize
facilities as a lifestylePassaggio Nishiarai
oriented retail facility
for the local
community.
文

文

文

8

F i n anci al H i ghli ght s
KRR implements flexible financial strategies, aiming to produce stable profits in the medium - to long-term
and to steadily grow its portfolio.

1

Financial highlights (as of March 31, 2019)
LTV

Long-term debt ratio (Note)

Fixed interest debt ratio

Average remaining years
to maturity

Number of lenders

Average interest rate

44.6%

96.7%

92.7%

12

4.9 years

1.02%

Note: The borrowing Series 24-A on Sep. 28, 2018 is included in short-term borrowings.

2

Credit rating and commitment lines (as of April 1, 2019)
Credit rating (JCR)

Commitment credit lines

A+ (Stable)

JPY

3.0 b nNote: Increased from JPY 2.0 bn.

3Debt maturity schedule (as of March 31, 2019)

KRR believes that diversified debt maturity schedule will contribute to a stable financing standing.

Debt outstanding JPY 106,100 mn(excluding interest-bearing tenant leasehold and security deposits)(JPY mn)

Borrowings

15,000Investment corporation bonds

12,000

9,000

6,000

3,000

0

9th
Period10th
Period11th
Period12th
Period13th
Period14th
Period15th
Period16th
Period17th
Period18th
Period19th
Period20th
Period21stPeriod22nd
Period23rd
Period24th
Period25th
Period26th
Period27th
Period9Por tfolio List as of May 31, 2019
Total
acquisition price

JPY213,786 mn
No.

Weighted averageoccupancy rate

Name of property

99.2 %

Location(city / ward, prefecture)

Number of
Tenants

513

Acquisition price(JPY mn)Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

T-1

Fululu Garden Yachiyo

Yachiyo, Chiba

14,848

96.6

38

T-2

MONA Shin-Urayasu

Urayasu, Chiba

8,063

98.8

57

T-3

Passaggio Nishiarai

Adachi ward, Tokyo

5,850

98.6

41

T-4

Daikanyama Address Dixsept

Shibuya ward, Tokyo

5,390

97.2

25

T-5

Unicus Ina

Kitaadachi-gun, Saitama

4,470

100.0

1

T-6

Yorktown Kita-Kaname

Hiratsuka, Kanagawa

4,000

100.0

1

T-7

Unicus Yoshikawa

Yoshikawa, Saitama

3,600

99.6

10

T-8

Sports Club Renaissance Fujimidai

Nerima ward, Tokyo

2,586

100.0

1

T-9

Super Viva Home Iwatsuki (Land)

Saitama, Saitama

4,815

100.0

1

T-10

K’s Denki Shonan-Fujisawa (Land)

Fujisawa, Kanagawa

3,169

100.0

1

T-11

Unicus Kamisato (Land)

Kodama-gun, Saitama

3,000

100.0

1

T-12

Unicus Konosu (Land)

Konosu, Saitama

1,700

100.0

1

T-13

Inageya Yokohama Minamihonjuku (Land)

Yokohama, Kanagawa

1,442

100.0

1

T-15

Nakamachidai Tokyu Store

Yokohama, Kanagawa

3,360

100.0

1

T-16

Central Wellness Club Nagatsuta Minamidai

Yokohama, Kanagawa

1,724

81.0

1

T-17

Life Kameido

Koto ward, Tokyo

1,450

100.0

1

T-18 Totsuka-Fukaya Shopping Center (Land)

Yokohama, Kanagawa

4,170

100.0

2

T-19 Yumemachi Narashinodai Mall

Funabashi, Chiba

3,416

100.0

14

T-20 Kawamachi Yahagi Mall

Chiba, Chiba

3,097

100.0

12

T-21

Meguro ward, Tokyo

2,820

100.0

2

T-22 Round1 Ichikawa-Onitaka

Ichikawa, Chiba

1,880

100.0

1

T-23 Ozeki Tokiwadai

Itabashi ward, Tokyo

1,263

100.0

1

T-24 Konami Sports Club Shibuya

Shibuya ward, Tokyo

3,400

100.0

1

O-1

Blumer Maitamon

Kobe, Hyogo

8,389

99.7

50

O-2

Osaka, Osaka

2,685

100.0

1

Omihachiman, Shiga

2,140

100.0

2

O-4

Central Square Takadono (Land)DCM Kahma MEEGA Don Quijote UNY
Omihachiman
Blumer HAT Kobe

Kobe, Hyogo

11,000

99.3

41

O-5

Carino Esaka

Suita, Osaka

6,555

100.0

30

O-6

COMBOX Komyoike

Izumi, Osaka

6,450

100.0

1

1,280

100.0

1

O-3

Prime Square Jiyugaoka

O-7

Hankyu Oasis Hirakatadeguchi

Hirakata, Osaka

O-8

Welcia Kishiwadakamori (Land)

Kishiwada, Osaka

487

100.0

1

O-9

Life Nishi-Tengachaya

Osaka, Osaka

1,505

100.0

1

O-10 Million Town Tsukaguchi (Land)

Amagasaki, Hyogo

3,723

100.0

1

N-1

DCM Kahma Nakagawa Tomita (Land)

Nagoya, Aichi

2,311

100.0

1

N-2

Valor Ichinomiya-Nishi

Ichinomiya, Aichi

2,174

100.0

1

N-4

Homecenter Kohnan Sunadabashi

Nagoya, Aichi

7,140

100.0

1

N-5

K’s Denki Shin-Moriyama (Land)

Nagoya, Aichi

1,370

100.0

1

N-6

Resora Obu Shopping Terrace

Obu, Aichi

7,911

86.3

38

F-1

Sunny Noma

Fukuoka, Fukuoka

1,497

100.0

1

F-2

Round1 Stadium Hakata-Hanmichibashi

Fukuoka, Fukuoka

5,020

100.0

1

F-3

Kurume-Nishi Shopping Center

Kurume, Fukuoka

1,515

100.0

4

R-1

Roseo Mito

Mito, Ibaraki

10,046

99.5

21

R-2

K's Denki Aomori Honten

Aomori, Aomori

1,469

100.0

1

R-3

Super Sports Xebio Aomori-Chuo

Aomori, Aomori

898

100.0

1

R-4

Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

100.0

29

10

Por tfolio Map as of May 31, 2019
R-4
T-11

T-12
L-3
Musashi Ranzan
Distribution Center

SM
CSC
Urban StationFront SC
SS
Logistics

R-6

T-5
T-9
T-7

T-23 T-3
T-8
T-24
T-4 T-21
ZamaDistributionCenter
T-16
L-1
T-15

R-9

T-10

T-22
T-19
T-17
T-1
T-20
T-2

R-2
R-3

R-5

L-2 OppamaDistributionCenter

O-3

F-2

F-1

R-11

T-13
L-4 YokohamaKamigoDistributionCenter

T-18
T-6

NSC

R-1

O-4
O-1

F-3

O-10
O-9
O-8

No.

Name of property

O-7
O-5
O-2

N-2
N-5
N-4

N-1

N-6
R-10
R-8

O-6

Location(city / ward, prefecture)

Acquisition price(JPY mn)Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

3,252

100.0

2

R-5

Yorktown Shinden-Higashi

Sendai, Miyagi

R-6

Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

100.0

1

R-8

P-1 Plaza Tenno

Hamamatsu, Shizuoka

4,010

100.0

7

R-9

Seiyu Rakuichi Moriya (Land)

Moriya, Ibaraki

4,111

100.0

1

R-10 Sun Street Hamakita

Hamamatsu, Shizuoka

10,746

99.3

53

R-11 Costco Wholesale Sapporo Warehouse

Sapporo, Hokkaido

4,210

100.0

1

Musashi Ranzan Distribution Center

Hiki-gun, Saitama

L-3

Total of assets acquired by the end of the 8th period (Note 3)

3,879

100.0

1

210,296

99.2

510

L-1

Zama Distribution Center

Zama, Kanagawa

1,400

100.0

1

L-2

Oppama Distribution Center

Yokosuka, Kanagawa

1,300

100.0

1

L-4

Yokohama Kamigo Distribution Center

Yokohama, Kanagawa

790

100.0

1

3,490

100.0

3

213,786

99.2

513

Total of assets acquired during the 9th period
Total

Note 1: “Occupancy rate” is as of March 31, 2019.
Note 2: “Number of tenants” indicates the number of end-tenants as of March 31, 2019.
Note 3: “Portfolio List” and “Total” do not contain Solala Plaza (51% quasi co-ownership interests) disposed on April 5, 2019.

11

Over view of por tfolio (as of May 31, 2019)
T-1

T-2

Fululu Garden Yachiyo

MONA Shin-Urayasu

Sports Club
Renaissance Fujimidai

T-5 Unicus Ina

T-6 Yorktown Kita-

T-10 K’s Denki

T-11 Unicus Kamisato (Land) T-12 Unicus Konosu (Land) T-13 Inageya Yokohama

T-16 Central Wellness Club

T-17 Life Kameido

T-18 Totsuka-Fukaya

T-19 Yumemachi

T-21 Prime Square

T-22 Round1 Ichikawa-T-23 Ozeki Tokiwadai

O-1

T-24 Konami Sports

O-2

O-3 Don Quijote UNY

Shonan-Fujisawa (Land)

Nagatsuta Minamidai

Jiyugaoka

Club Shibuya

O-4

KanameT-7

Unicus Yoshikawa

T-8

Minamihonjuku (Land)

Onitaka

Life Takadono (Land)

Shopping Center (Land)

Narashinodai Mall

T-3

Passaggio Nishiarai

T-4

Daikanyama
Address Dixsept

T-9Super Viva Home
Iwatsuki (Land)

T-15 Nakamachidai
Tokyu Store

T-20 Kawamachi Yahagi Mall

Blumer Maitamon

DCM Kahma MEGA
Omihachiman

Blumer HAT Kobe

Note: Please refer p.1-2 for the properties acquired in the eighth and ninth fiscal period.

O-7 Hankyu Oasis

Hirakatadeguchi

O-8 Welcia

Kishiwadakamori (Land)12

O-5 Carino Esaka

O-6 COMBOX Komyoike

O-9 Life Nishi-Tengachaya O-10 Million Town

Tsukaguchi (Land)

N-2 Valor Ichinomiya-Nishi

N-1

DCM Kahma
Nakagawa Tomita (Land)

N-4 Homecenter Kohnan Sunadabashi

N-6 Resora Obu Shopping Terrace

F-2 Round1 Stadium

F-3 Kurume-Nishi Shopping R-2 K’s Denki Aomori

R-3 Super Sports Xebio

R-4 Ashico Town Ashikaga

R-5 Yorktown Shinden-

R-6 Kasumi Technopark

R-9 Seiyu Rakuichi Moriya

R-11 Costco Wholesale

N-5 K’s Denki

Shin-Moriyama (Land)

Hakata-Hanmichibashi

HigashiF-1

Sunny Noma

Center

SakuraHontenR-8 P-1 Plaza Tenno

R-1

Aomori-Chuo(Land)

Sapporo Warehouse

Roseo Mito

R-10 Sun Street Hamakita

13Summar y of Investment Unit
Unit Price and trading volume(Unit)(Yen)

100,000

320,000

40,000
Unit price

Volume300,000

35,000280,000

30,000260,000

25,000240,000

20,000220,000

15,000200,000

10,000180,000

5,000

160,000

Feb. End
10 of
Mar.

End
of
Sep.

End
of
Mar.

2015

End
of
Sep.

2016

End
of
Sep.

End
of
Mar.

End
of
Mar.

2017

0

End
of
Sep.

2018

End
of
Mar.

2019

General breakdown of unitholders
As of March 31, 2019

Number of unitholders
by investor type

Ownership ratio
by investor type
Individuals
and others
45,770 units(9.0%)

Brokerage firms
9,497 units(1.9%)

Other domestic
corporations
239 Financial(2.2%) institutions
102(0.9%)

Foreign investors
169,041 units(33.3%)

507,700

10,931

units

Other domestic
corporations
15,257 units(3.0%)

Foreign investors
216(2.0%)
Brokerage firms
15(0.1%)

Financial
institutions
268,135 units(52.8%)

Individuals
and others
10,359(94.8%)

14

II. ASSET MANAGEMENT REPORT
Overview of Asset Management(1) Trends in Key Indicators
Fourth fiscal period

Fifth fiscal period

Sixth fiscal period(From October 1,2016
to March 31, 2017)(From April 1,2017
to September 30, 2017)(From October 1,2017
to March 31, 2018)

Millions of yen

6,430

7,803

Millions of yen

6,427

7,797

Millions of yen

3,409

Millions of yen

2,817

Operating income

Millions of yen

Ordinary income

Millions of yen

Net income
Total assets

Operating revenues
Of which, property-related revenues
Property-related expenses
Of which, property-related expenses[Period-on-period changes]
Total net assets(From October 1, 2018
to March 31, 2019)

8,126

8,577

8,415

8,126

8,364

8,197

4,137

4,358

4,760

4,530

3,468

3,609

3,984

3,733

3,021

3,666

3,768

3,816

3,884

2,556

3,108

3,179

3,201

3,284

Millions of yen

2,552

3,104

3,175

3,197

3,283

Millions of yen

185,037

229,628

231,107

238,490

237,845(+3.2)(+24.1)(+0.6)(+3.2)(-0.3)

96,823

116,516

116,585

116,729

116,505(+0.1)(+20.3)(+0.1)(+0.1)(-0.2)%
Millions of yen[Period-on-period changes]

Seventh fiscal period Eighth fiscal period(From April 1,2018
to September 30, 2018)

Fiscal period%

Unitholders’ capital
Number of investment units issued andoutstanding
Net assets per unit

Millions of yen

94,256113,399

113,399

113,399

113,399Units

422,450

507,700

507,700

507,700

507,700

Yen

229,195

229,498

229,633

229,918

229,477

Distributions(Note 2)Millions of yen

2,553

3,104

3,175

3,198

3,288

Distributions per unit

Yen

6,044

6,115

6,255

6,299

6,477

Of which, distributions of earnings
Of which, distributions in excess ofretained earnings
Ordinary income to total assets (Note 3)

Yen

6,044

6,115

6,255

6,299

6,138

Yen

-

-

-

-

339

[Annualized] (Note 4)
Return on net assets (Note 5)

%

%

1.4

1.5

1.4

1.4

1.4

(2.8)

(3.0)

(2.8)

(2.7)

(2.8)

2.6

2.9

2.7

2.7

2.8
(5.6)

(5.3)

(5.8)

(5.5)

(5.5)

52.3

50.7

50.4

48.9

49.0

(-1.6)(-1.6)(-0.3)(-1.5)(+0.0)

Days

182

183

182

183

182

%

100.0

100.0

100.0

100.0

94.9

42

51

52

53

53

m2

719,906.77

865,226.20

866,425.22

890,152.09

913,759.61

409

542

522

520

511

%

99.6

99.6

99.5

99.4

99.2

Depreciation expense

Millions of yen

721

885

925

971

990

Capital expenditures

Millions of yen

276

367

263

806

500

Rental NOI (Net operating income) (Note 9)

Millions of yen

4,331

5,214

5,441

5,352

5,454

FFO (Funds from operation) (Note 10)

Millions of yen

3,358

4,093

4,194

4,028

4,105

[Annualized](Note 4)

Net assets to total assets (Note 6)[Period-on-period changes]
Operating days
Payout ratio(Note 7)%

Number of properties
Leasable area
Number of tenants (Note 8)
Occupancy ratio

FFO per unit
Yen
7,949
8,062
8,260
7,935
8,085
Note 1: Figures above are rounded down for monetary amounts and rounded to the nearest tenth for ratios.
Note 2: Distributions in excess of earnings for the allowance for temporary difference adjustments are not considered.
Note 3: Ordinary income to total assets = Ordinary income /{(Total assets at beginning of period + Total assets at end of period) / 2} × 100
Note 4: For the first fiscal period, annualized as if the operation began from February 10, 2015, when the actual operation began.
Note 5: Return on net assets = Net income /{( Net assets at beginning of period + Net assets at end of period) / 2} × 100
Note 6: Net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Note 7: Payout ratio = Total distibutions (excluding excess of earnings) / Net income × 100
When calculated as follows, the payout ratio is 100.1% for the fiscal period ended March 31, 2019
Payout ratio = Total distributions (including excess of earnings) / Net income × 100
Note 8: As for building tenants, if a tenant leases multiple spaces in a building, each space is counted as one tenant. In a pass-through type master lease,
the number of end-tenants is shown in parentheses. In a sublease type master lease, the number of master lessee is shown.
Note 9: Rental NOI = Property-related revenues - Property-related expenses + Depreciation expenses
Note 10: FFO = Net income + Depreciation + Amortization - Gain on sale of property + Loss on sale of property
Note 11: FFO per unit = FFO / Number of investment units issued and outstanding(Note 11)15

(2) Status of Asset Management(Overview of the Fiscal Period ended March 31, 2019)i) Transition of KRR
KRR was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan (the“Investment Trust Act”). On October 30, 2014, KRR was registered with the Director-General of the Kanto Local
Finance Bureau (registration number: Director-General of the Kanto Local Finance Bureau No. 97). KRR was listed on
the Real Estate Investment Trust Securities (“J-REIT”) Market of Tokyo Stock Exchange, Inc. (the “Tokyo Stock
Exchange”) (Securities code: 3453) on February 10, 2015. Subsequently, KRR raised funds through public offerings,
including an international offering. As a result, the number of investment units issued at the end of the fiscal period ended
March 31, 2019 was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needsof local area customers and have stable demand from retailers and customers, in order to provide stable investment
returns over the long term. Sponsored by Kenedix, Inc., a leading, independent real estate asset management company,
KRR entrusts its asset management and investment operations to Kenedix Real Estate Fund Management, Inc. (“KFM”),
with the following strategies.
Note: For KRR’s management purposes and ease of classification, KRR defines shopping centers for daily needs as retail properties that generally
have the following characteristics:
a. Retail trade area of approximately a one to ten kilometer radius (and generally, a three to five kilometer radius), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and servicesii) Investment Environment
During the fiscal year under review, the Japanese economy continued to recover moderately with the continued
improvement in corporate earnings and an increase in capital investment, as well as a recovery in consumer spending
backed by continued improvements in the employment and income environment after its decline caused by the natural
disaster in the summer of 2018. Real GDP growth was negative in the third quarter of 2018, but rebounded in the fourth
quarter of 2018.
Financial conditions have remained unstable due to events in the global market, such as trade frictions between the
United States and China and developments within the European Union. Interest rates in Japan remained low and stableagainst the backdrop of continued monetary easing by the Bank of Japan, policy changes by the U.S. monetary authorities,
which had been concerned about an interest rate hike, and unstable global markets.
Under these conditions, the real estate sales market continued to show an upward trend due to active investment demandby domestic and overseas investors. The real estate leasing market also remained strong, making the J-REIT market firm
as the J-REIT defensiveness was evaluated amid unstable equity markets.

16iii) Management Performance(A) Acquisition of Assets
KRR acquired one asset (Musashi Ranzan Distribution Center (90% quasi co-ownership interests) with acquisition priceof 3,879 million yen (Note 1)), and disposed two assets (Solala Plaza (49% quasi co-ownership interests) with sale price(Note 2) of 2,930 million yen (acquisition price (Note 3) was 2,802 million yen) and Gourmet City Chiba-Chuo withsale price of 800 million yen (acquisition price was 760 million yen)).
As a result, the portfolio at the end of the period under review (March 31, 2019) consists 53 properties with the totalacquisition price of 213,214 million yen.
Note 1:
Note 2:
Note 3:“Acquisition price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of thevarious expenses (acquisition expenses, property tax, city planning tax, consumption tax, etc.) required in the acquisition of the asset.
“Sale price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various
expenses (sale expenses, property tax, etc.) required in the sale of the asset.
The acquisition price of Solala Plaza as a whole was 5,720 million yen, and 2,930 million yen represents 49% quasi co-ownershipinterests.

(B) Management and Operation of Assets
KFM provides property management services for all of the properties owned by KRR at the end of the period underreview (March 31, 2019). By using the same company for both asset management and property management services,
KRR aims to build stronger relationships with tenants and increase returns from its portfolio. Furthermore, byimplementing retail property and distribution centers management that better reflects the needs of our tenants, KRR
strives to accumulate know-how and improve tenant satisfaction.
KRR invests primarily in neighborhood and community shopping centers that cater to the day-to-day needs of customers.
The portfolio is diversified in terms of properties, tenants and other characteristics with a goal to generate consistentlong-term cash flows. At the same time, a portion of the rent includes sales-linked rent to explore the upside potential(Note 1) for rental income. By using these measures, KRR aims to pursue a portfolio that achieves both stability andgrowth.
As of the end of the period under review, portfolio as a whole performed well with an overall occupancy ratio of 99.2%.
Furthermore, the portfolio is diversified in terms of tenants as there are 511 end-tenants (Note 2) in KRR’s retailproperties and distribution centers.
Note 1:
Note 2:“Upside potential” represents feasibility of rental income or cash flow growth.
The number of end-tenants is the sum of the number of end-tenants in a pass-through type master lease and the number of master lessees
in a sublease type master lease.

(C) Financing
When financing to acquire properties, KRR seeks to achieve the proper balance between financial stability and the costof the funds with the objectives to achieve stable medium- to long-term returns and consistent growth of assets undermanagement.
(Debt Finance)
During the fiscal period under review, KRR borrowed 8,400 million yen for refinancing. Consequently, borrowings
totaled 99,100 million yen and interest-bearing debt including investment corporation bonds (excluding interest-bearing
tenant leasehold and security deposits) totaled 106,100 million yen at the end of the fiscal period under review (March
31, 2019). In addition, the existing commitment line agreements with a total maximum borrowing amount of 2,000
million yen was renewed on March 27, 2019, to commence on April 1, 2019, after expiring on March 31, 2019.
Additionally, a commitment line agreement with a maximum borrowing amount of 1,000 million yen commencing on
April 1, 2019 was newly established on March 27, 2019.
When undertaking borrowings, KRR seeks to spread out repayment dates and lengthen borrowing periods. KRR may
use swaps to fix the interest payments to hedge against the risk of a rise in interest rates.
As a result, the average maturity of debt is 4.9 years, the weighted average interest rate is 1.02%, the long-term debt ratio(Note 1) is 97.4% and the LTV ratio (Note 2) is 44.6%.
Note 1:
Note 2:Long-term debt ratio = (Long-term borrowings + Investment corporation bonds) / (Borrowings + Investment corporation bonds)
LTV ratio = (Loans payable + Investment corporation bonds) / Total assets(Credit Ratings)
The status of the credit ratings as of March 31, 2019 is as follows.
Credit rating agency
Japan Credit Rating Agency, Ltd. (JCR)

Details of the ratings
Long-term issuer rating

A+ (Outlook: Stable)

Rating on bonds

A+(Shelf Registration)
KRR filed a shelf registration statement for investment corporation bonds (excluding short-term investment corporation
bonds) on October 1, 2018. Details are as follows.
17Planned issue amount
Planned issuance period

100,000,000,000 yen
October 9, 2018 to October 8, 2020

Use of funds

Acquisition funds for specified assets (as defined in Article 2, Paragraph 1 of the Investment Trust Law),
repayment funds for borrowings, repayment funds for investment corporation bonds (including short-term
investment corporation bonds), refund funds for lease and guarantee deposits, funds to pay for repairs andmaintenance, working capital, etc.

iv) Results of Operations
For this period, revenue was 8,415 million yen, operating income was 3,884 million yen, ordinary income was 3,284
million yen and net income was 3,283 million yen.
Furthermore, in accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distribution(excluding excess of earnings) of 3,116,262,600 yen which is almost equivalent to the earnings for the fiscal period.
Cash distributions are paid in accordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957,
including subsequent amendments).
Furthermore, in accordance with the policy for “Distribution of Money in Excess of Profits” as stated in the KRR Articles
of Incorporation, KRR made a distribution in excess of earnings for the 172,110,300 yen allowance for temporary
adjustment (as defined in Article 2-2-30 of the Ordinance on Accountings of Investment Corporations (Cabinet Office
Ordinance No.47 of 2006, including subsequent amendments.)) for the purpose of reflecting the effect on distributionsof the difference in earnings calculated under Japanese GAAP and Japanese tax laws in association with the amortizationof fixed-term land lease rights (as defined in Article 2-2-30 (a) of the Ordinance on Accountings of Investment
Corporations) and the item deduced from net asset (as defined in Article 2-2-30 (b) of the Ordinance on Accountings ofInvestment Corporations) in association with deferred losses on hedges. This resulted in a distribution in excess ofearnings per unit of 339 yen.
Consequently, the distribution per unit was 6,477 yen (of which the distribution in excess of earnings per unit was 339
yen).

18

(3) Changes in Investment Units Issued and Outstanding
Changes in the number of investment units issued and outstanding and unitholders’ capital since its incorporation aresummarized in the following table.
Date

Type of issue

Total number of units issued andoutstanding (units)
Increase

October 3, 2014

Private placement forincorporation

February 9, 2015

BalanceUnitholders’ capital(in million yen)
Increase

Notes

Balance

750

750

150

150

(Note 1)

Public offering

254,250

255,000

56,43056,580(Note 2)

March 11, 2015

Capital increase throughthird-party allocation

5,750

260,750

1,276

57,857(Note 3)October 1, 2015

Public offering

88,750349,500

18,54776,404(Note 4)

October 21, 2015

Capital increase throughthird-party allocation

5,750

355,250

1,201

77,606(Note 5)

April 20, 2016

Public offering

64,000419,250

15,856

93,463(Note 6)

May 18, 2016

Capital increase throughthird-party allocation

3,200

422,450

792

94,256(Note 7)

April 18, 2017

Public offering

81,250503,700

18,244

112,500(Note 8)

Capital increase through
4,000
507,700
898
113,399
third-party allocation
Issued at issue price of 200,000 yen per unit for incorporation.
Issued at issue price of 230,000 yen per unit (issue amount of 221,950 yen per unit) for acquisition of new properties.
Issued at issue amount of 221,950 yen per unit for repayment of borrowings.
Issued at issue price of 216,543 yen per unit (issue amount of 208,991 yen per unit) for acquisition of new properties.
Issued at issue amount of 208,991 yen per unit for repayment of borrowings.
Issued at issue price of 256,717 yen per unit (issue amount of 247,764 yen per unit) for acquisition of new properties.
Issued at issue amount of 247,764 yen per unit for repayment of borrowings.
Issued at issue price of 232,537 yen per unit (issue amount of 224,547 yen per unit) for acquisition of new properties.
Issued at issue amount of 224,547 yen per unit for repayment of borrowings.

May 17, 2017
Note 1:
Note 2:
Note 3:Note 4:Note 5:Note 6:Note 7:Note 8:Note 9:(Note 9)(Changes in Unit Price at Tokyo Stock Exchange)
The highest and lowest closing prices of the investment units listed on J-REIT section of the Tokyo Stock Exchange foreach fiscal period are as follows.
Fiscal period
For the fiscal period
ended

Fourth fiscal period

Fifth fiscal period

Sixth fiscal period

Seventh fiscal period

Eighth fiscal period

March 31, 2017

September 30, 2017

March 31, 2018

September 30, 2018

March 31, 2019

Highest

JPY 275,000

JPY 251,100

JPY 251,700

JPY 249,200

JPY 279,600

LowestJPY 235,200

JPY 228,900

JPY 223,000

JPY 227,600

JPY 237,200

,

,

19

(4) Distributions
The distribution of earnings for the third period is 6,138 yen per unit. In order to maintain KRR’s favorable tax treatment,
which is available to J-REITs under Article 67-15 of the Special Taxation Measures Act, KRR intends to distribute mostof KRR’s retained earnings.
Furthermore, KRR made a distribution in excess of earnings for the allowance for temporary adjustment for the purposeof reflecting the effect on distributions of the difference in earnings calculated under Japanese GAAP and Japanese tax
laws in association with the amortization of fixed-term land lease rights and the item deducted from net asset inassociation with deferred losses on hedges. This resulted in a distribution in excess of earnings per unit of 339 yen.
Consequently, the distribution per unit for the fiscal period, including the excess distribution, was 6,477 yen (of which
the distribution in excess of earnings per unit was 339 yen).
(in thousands of yen)
Fourth fiscal period
March 31, 2017

Fifth fiscal period
September 30, 2017

Sixth fiscal period
March 31, 2018

Seventh fiscal period
September 30, 2018

Eighth fiscal period
March 31, 2019

2,584,343

3,104,740

3,175,962

3,198,151

3,283,881

216

155

299

149

167,6192,553,287

3,104,585

3,175,663

3,198,002

3,288,372[6,044 yen]

[6,115 yen]

[6,255 yen]

[6,299 yen]

[6,477 yen]

2,553,287

3,104,585

3,175,663

3,198,002

3,116,262[6,044 yen]

[6,115 yen]

[6,255 yen]

[6,299 yen]

[6,138 yen]

－

－

－

－

172,110

[－]

[－]

[－]

[－]

[339 yen]

－

－

－

－

172,110[Distributions per unit]

[－]

[－]

[－]

[－]

[339 yen]

Total distributions in excessof earnings from theunitholders’ capital for tax
purposes

－

－

－

－

－

[Distributions per unit]

[－]

[－]

[－]

[－]

[－]

Fiscal period
For the fiscal period ended
Unappropriated retained
earnings
Retained earnings carriedforward
Total distributions[Distributions per unit]
Of which, distributions ofearnings[Distributions of earnings perunit]
Of which, distributions inexcess of retained earnings[Distributions in excess ofretained earnings per unit]
Total distributions in excessof earnings for the allowancefor temporary adjustment

20(5) Management Policy and Issues to be Addressed
Outlook for Asset Management
The Japanese economy is expected to continue its moderate recovery, but it is considered necessary to pay attention to
the uncertainties surrounding overseas economies and politics, such as the U.S. administration's policy management andthe trend of trade frictions between the United States and China. In Japan, attention should also be paid to various factors,
including the impact of the U.S.-China trade friction on the domestic economy and the Bank of Japan’s stance onmonetary easing.
As for Japan’s retail environment, specialty stores such as supermarkets and drugstores that meet the diversified tastesof consumers are expected to perform well. In addition, while e-commerce has grown to account for a certain share of
consumer spending, backed by advances in information technology, we anticipate the integration of “brick and mortar”
and the Internet will advance as both retail companies and Internet companies try to adopt to such environment. On theother hand, attention should be paid to the impacts of the scheduled consumption tax hike.
In the real estate market, active real estate transactions are expected to continue against the backdrop of the favorable
funding environment due to the Bank of Japan’s monetary easing policy. However, investors should especially keep inmind the risk of changes in banks’ lending attitude towards real estate sector, as amount of banks’ outstanding loans
towards real estate sector reached new highs.
Under these circumstances, based on the following management policies, KRR will implement appropriate managementwith the aim of securing stable rental income, steadily growing assets, and building an appropriate financial base from a
medium-to long-term perspective.
(A) Investment Strategy for New Properties and Disposition Policy
We receive a variety of support from many sources in order to achieve the steady growth of our assets and increase thevalue of our assets. One source is the Kenedix Group (Note 1), including Kenedix, Inc., the parent company of KFM.
We also receive support from our Alliance Companies: Sumitomo Mitsui Finance and Leasing Co., Ltd., SMFL MIRAI
Partners Co., Ltd. (Note 2), Nippon Commercial Development Co., Ltd., P&D Consulting Co., Ltd., and ITOCHU
Corporation. We are implementing a growth strategy that takes full advantage of the external growth opportunities
created by the large and diverse acquisition pipeline made possible by the support of these companies.
When acquiring properties, we make decisions based on all applicable factors with emphasis on four parameters: theretail property’s attractiveness, location, profitability and the tenant mix. By using this selection process, we invest inretail properties with a competitive edge, and good prospects for consistent rental revenue and growth in asset value. We
also invest in carefully selected distribution centers, which supplement retail facilities in providing goods to consumers.
In addition, we invest in land ownership interests underlying retail properties. Regarding land-only properties, we makethese investments after examining the terms of the land leasing agreement, the characteristics of the tenant, the asset
value of the land, and the proportion of land-only properties in our portfolio. We may also consider making an equity
investment in a tokumei kumiai (silent partnership) for the acquisition of preferential negotiation rights and opportunities
for additional revenues, provided that we are given an opportunity to acquire them in the future.
Regarding disposition of a portfolio property, we make decisions based primarily on the significance of these properties
in the context of the portfolio. This is assessed by comprehensive evaluation of the outlook for future profitability andasset value determined based on its current profitability and market trends.
Note 1: The Kenedix Group consists of Kenedix, Inc. and its subsidiaries and affiliates.
Note 2: Sumitomo Mitsui Finance and Leasing Co., Ltd. (“SMFL”) succeeded a part of its real estate leasing business to SMFL MIRAI Partners
Co., Ltd. (“SMFL MIRAI Partners”) through an absorption-type company split. With this succession, KRR and KFM entered into anagreement with SMFL and SMFL MIRAI Partners to partially succeed the alliance agreement signed on November 17, 2014 from SMFL
to SMFL MIRAI Partners. It has been agreed that specifically, services other than providing bridge finance to warehousing SPC’s andsecuring personnel be succeeded to SMFL MIRAI Partners.

(B) Management Strategy for Existing Properties
KRR is committed to building a portfolio that can pursue both stability and growth. KRR believes that implementing
integrated asset and property management services makes it possible to properly manage retail properties and distribution
centers and pursue internal growth. Furthermore, this integrated management framework facilitates activities to enliven
local communities where KRR’s properties are located, enabling us to aim for medium to long-term growth in asset
value.
To accomplish these goals, KFM oversees properties owned by KRR while placing priority on the following themes.
・“One-stop” asset management and property management services
・Continuously implementing a retail property management cycle through our in-house property management
services
・Pursuit of internal growth through management of retail properties
・Directing investments and management policies to enliven local communities in the medium to long-term
・Implementing distribution center management“One-stop” asset management and property management services
KRR plans to use the integrated asset management and property management services of KFM for strengthening
relationships with tenants and making the portfolio more profitable.
Continuously implementing a retail property management cycle through KRR’s in-house property management services
21

KFM provides property management services for all of KRR’s properties. KRR does this for the purposes of performing
retail property management that better reflects the needs of the tenants as well as accumulating know-how and improving
tenant satisfaction. Specifically, KRR uses direct contact with tenant companies at our properties in order to strengthen
tenant relationships and make properties more profitable. To this end, KRR maintains periodic communication withtenants and perform questionnaire surveys to customers for monitoring of market conditions, so that KRR can identify
the needs of tenants and the customers visiting their sites. This process makes it possible to find issues that stand in theway of achieving greater satisfaction for tenants and their customers. Once KRR has discovered points that require
attention, KRR takes actions that take full advantage of the resources and knowledge regarding retail properties within
the Kenedix Group. Solutions include measures such as the effectively utilizing capital expenditures, optimizing tenantmix, realizing growth in asset value by pursuing property expansions, and cutting costs, to improve tenant satisfaction
and acquire more know-how.
Pursuit of internal growth through management of retail properties
KRR seeks to improve the profitability and value of its portfolio through proper management of retail properties.
i. Effectively utilize capital expenditure
KRR will use proper and well-timed capital expenditures to increase the satisfaction of tenants and make its properties
more competitive.
ii. Optimize tenant mix
KRR will constantly work on attracting new tenants that are highly appealing to shoppers and replace tenants withothers, optimizing tenant composition, in order to seek stable revenue and higher profitability by attracting morecustomers.
iii. Realize growth in asset value by pursuing property expansions
KRR will use the extensive knowledge involving retail properties of the Kenedix Group and KRR’s Alliance Companies
to utilize the underutilized space (Note) at properties and expand properties. These measures will take into account thecompetitive position of each property, the effect on KRR’s financial position and other factors. By increasing spacethat can be leased, KRR aims to increase revenue and asset value.
Note:

The underutilized space is defined as the area that is calculated by multiplying the floor space ratio, or the ratio of total area of the building
to the site area, which is prescribed in Article 52 of the Building Standards Act (Act No.201 of 1950, including subsequent amendments.)
and applied to each retail property in accordance with the Building Standards Act, City Planning Act (Act No.100 of 1968, inc luding
subsequent amendments.) and other laws and regulations, by the land area that is allowed to be used as a retail property site, and subtractingfrom this figure the actual gross floor area of the building.

Directing investments and management policies to enliven local communities in the medium to long-term
At KRR’s properties, KRR seeks tenants that provide services, holds community involved events and uses other measures
to help enliven the local communities where KRR’s properties are located. KRR believes these activities will contributeto the medium to long-term growth in the asset value of these properties.
Implementing distribution center management
Since tenants of distribution centers that KRR invests may belong to the same business sectors as the tenants occupying
KRR’s retail properties, KRR utilizes KRR’s relationship with KRR’s retail tenants in building up KRR’s relationshipwith tenants of distribution centers. KRR believes these tenant relationships will contribute to the long-term managementof these distribution centers.
(C) Financing
KRR will establish a suitable financial foundation by examining numerous financing methods and selecting the optimum
ones. These decisions will reflect interest rates and other elements of the financial environment. KRR’s goal is to selectfinancing methods that result in the optimum balance between financial stability and the financing cost.
(D) Disclosure of Information
KRR’s policy concerning disclosure activities is to use extensive investor relations activities to distribute a broad range
of information to investors and other related parties as well as to announce information as soon and as accurately as
possible. KRR also distribute information with awareness on ESG (Environmental, Social and Governance) for
sustainable growth of unitholder interest. KRR uses TDnet (Timely Disclosure network) and press releases to meet the
timely-disclosure requirements of the Tokyo Stock Exchange. In addition, KRR proactively posts information on its
website (https://www.krr-reit.com/en/).
(E) Conflicts of Interest
In addition to managing the assets of KRR, KFM provides asset management services to other REITs, which may incur
conflicts of interests in acquisition of assets. In order to prevent the improper allocation of acquisition opportunities,
KFM uses a “preferential right for acquisition opportunities” system for the property acquisition process. KFM has apipeline committee, which includes a compliance officer, and operates in accordance with rules. This system is structured
to prevent improper allocation of acquisition opportunities, and thus, managing conflicts of interest among the REITs
managed by KFM. Through these measures, KFM is taking suitable actions regarding conflicts of interest.

22

(6) Important Subsequent Events
Not applicable.
(Reference Material)i) Acquisition of Assets
KRR acquired following three assets.
Property Property
type
number (Note
1)
L-1

L

Property name

LAppraisal value(million yen)
(Note 5)

Undisclosed (Note 2)

1,400

1,640

April 5, 2019

Undisclosed (Note 2)

1,300

1,570

April 5, 2019

Yokohama, Kanagawa Undisclosed (Note 2)

790

840

April 11, 2019

SellerZama, Kanagawa

Yokosuka, Kanagawa

Zama Distribution Center(Note 4)

L-2

Acquisition price(million yen)
(Note 3)

Location

Oppama Distribution Center

Acquisition date

(Note 4)L-4

L

Yokohama Kamigo
Distribution Center

Note 1: Properties are categorized into the following six types of properties: NSC (Neighborhood Shopping Center), SM (Supermarket), CSC (Community
Shopping Center), Urban Station-Front SC (Urban Station-Front Shopping Center), SS (Specialty Store) and L (Logistics facility).
Note 2: Undisclosed as KRR has not obtained consent from the seller.
Note 3: “Acquisition price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various
expenses (acquisition expenses, property tax, city planning tax, consumption tax, etc.) required in the acquisition of the asset.
Note 4: The acquisition of the properties L-1 and L-2 fall under the category of forward commitment by investment corporations, as stipulated in theComprehensive Guidelines for Supervision of Financial Instruments Business Operators provided by the Financial Services Agency.
Note 5: Appraisal values of L-1 and L-2 are as of March 31, 2019 and that of L-4 is as of February 1, 2019.

ii) Disposition of Assets
KRR disposed the following asset.
Property
number

Property typeR-7

Urban Station-Front SC

Note:

Property nameLocation

Buyer

Sale price(million yen) (Note)

Sale date

Solala Plaza (51% quasi coGK KRF80
3,049 April 5, 2019
Sendai, Miyagi
ownership interests)“Sale price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various expenses(sale expenses, property tax, etc.) required in the sale of the asset.

KRR has contracted a purchase and sale agreement on May 16, 2019 to dispose the following asset.
Property
number

Property type

Property nameLocation

Buyer

Sale price(million yen) (Note 2)

Sale date

Welcia Kishiwadakamori
Nippon Commercial
560 October 31, 2019
Kishiwada, Osaka Development Co., Ltd.
(Land) (Note 1)
Note 1: The purchase and sale agreement with the buyer on the sale of the asset falls under the category of forward commitment made by investment
corporations as stipulated in the “Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.” ruled by the
Financial Service Agency of Japan. In case the agreement is terminated, either of the parties responsible for the termination shall compensate forthe damage resulted from the termination by paying a penalty corresponding to 20% of the sale price (excluding consumption taxes and local
consumption taxes) to the other party. However, since KRR is the seller in this transaction and there is no concern such as financing in executing
the sale, KRR believes that the risk of KRR paying the penalty and making an important impact on its financial condition is small.
Note 2: “Sale price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various expenses(sale expenses, property tax, city planning tax, consumption tax, etc.) required in the sale of the asset.
O-8

SS

23

Profile of KRR(1) Status of Unitholders’ Capital
Fourth fiscal period
Fifth fiscal period
Sixth fiscal period
Seventh fiscal period
Eighth fiscal period(From October 1, 2016 (From April 1, 2017 to (From October 1, 2017 (From April 1, 2018 to (From October 1, 2018
to March 31, 2017)
September 30, 2017)
to March 31, 2018)
September 30, 2018)
to March 31, 2019)

Fiscal period
Total number of authorized
investment units
Total number of investment
units issued and outstanding

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

422,450 units

507,700 units

507,700 units

507,700 units

507,700 units

Unitholders’ capital

94,256 million yen

113,399 million yen

113,399 million yen

113,399 million yen

113,399 million yen

Number of unitholders

10,072

12,301

12,545

12,261

10,931(2) Matters Concerning Investment Units
The following is a list of major unitholders as of March 31, 2019.
Name

Location

Number of units
held(Units)Ratio (%)
(Note)THE MASTER TRUST BANK OF JAPAN, LTD.
(Trust Acct.)

2-11-3, Hamamatsucho, Minato-ku, Tokyo

85,756

16.89

JAPAN TRUSTEE SERVICES BANK, LTD.
(Trust Acct.)

1-8-11, Harumi, Chuo-ku, Tokyo

62,622

12.33

JP MORGAN BANK LUXEMBURG S.A.384500

Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.

24,1404.75

THE NOMURA TRUST AND BANKING CO.,LTD. (Investment Trust Acct.)

2-2-2, Otemachi, Chiyoda-ku, Tokyo

22,313

4.39

TRUST & CUSTODY SERVICE BANK, LTD.
(Securities Investment Trust Acct.)

Office Tower Z, Harumi Island Triton Square,
1-8-12 Harumi, Chuo-ku, Tokyo

15,0602.96

BNYM AS AGT/CLTS 10 PERCENT

2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd.

15,015

2.95

MIZUHO TRUST & BANKING CO., LTD.

1-2-1, Yaesu, Chuo-ku, Tokyo

11,202

2.20

MITSUBISHI UFJ TRUST AND BANKINGCORPORATION

1-4-5, Marunouchi, Chiyoda-ku, Tokyo

8,841

1.74

STATE STREET BANK WEST CLIENTTREATY 505234

Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.

8,178

1.61

DFA INTERNATIONAL REAL ESTATESECURITIES PORTFOLIO

6-27-30 Shinjyuku, Shinjuku-ku, Tokyo
Standing proxy: Citibank, Ltd.

6,643

1.30

259,770

51.16

Total
Note:

“Ratio” is the ratio to total number of units issued and outstanding, rounded down to the second decimal place.

24

(3) Matters Concerning Directors and Auditori) Executive Director, Supervisory Director, and Independent Auditor as of March 31, 2019
Position

Name

Executive Director Akihiro Asano

Director & COO, Head of Retail REIT Department, KFM

1,500

Yoshitoshi Yasu

Yoshitoshi Yasu Certified Public Accountant / Tax Accountant Office
Auditor of YOKU MOKU Holdings Co., Ltd.
Auditor of YOKU MOKU Co., Ltd.
Auditor of YOKU MOKU Crea Co., Ltd.
Auditor of Fujiricoh Trading Co., Ltd.
Auditor of CLOVER Inc.
Auditor of Kabou-isshin Co., Ltd.
Director & member of Audit comittee of Looop Inc.

1,500

Akiko Yamakawa

Member of the Basic Sub-committee of Labour Policy Council, Ministryof Health, Labour and Welfare
Partner of Vanguard Lawyers Tokyo

1,500

－

13,000Supervisory
Director(Note)

Independent Auditor Ernst & Young ShinNihon LLC
Note:Total amount of fees
paid during the period(thousand yen)

Other concurrent title

Although supervisory directors are concurrently officers in corporations other than the ones stated above, there are no conflicts of interest
between KRR and any other corporations, including those stated above.

ii) Policy on Decisions to Terminate or not Reappoint the Accounting Auditor
The KRR Board of Directors will consider the termination of the Accounting Auditor pursuant to the provisions of theInvestment Trust Act of Japan. The directors will also consider not reappointing the Accounting Auditor after examining
the quality of audits, compensation for auditing and other applicable items.
(4) Asset Manager, the Custodian and Administrators
Asset manager, the custodian and administrators as of March 31, 2019 are as follows.
Operational role

Name

Asset Manager

Kenedix Real Estate Fund Management, Inc.

Asset Custodian

Mizuho Trust & Banking Co., Ltd.

Unitholders’ Register Agent

Mizuho Trust & Banking Co., Ltd.

General Administrator

Mizuho Trust & Banking Co., Ltd.

Financial Agent for Investment Corporation Bonds

Sumitomo Mitsui Trust Bank, Ltd.
MUFG Bank, Ltd.

25

Status on Investment Properties(1) Component of Assets
Type ofspecified asset

Areas

Property type

(Note 1)

Total amount held
(Millions of yen)
(Note 2)

Note 2:
Note 3:

Total amount held
(Millions of yen)

Ratio (%)
(Note 3)(Note 2)

Ratio (%)
(Note 3)

Tokyo metropolitan
area

91,49738.4

90,67838.1

Greater Osaka area

44,73518.8

44,66218.8

Shopping
centers for daily Greater Nagoya area
needs

21,142

8.9

21,068

8.9

Fukuoka area

8,052

3.4

8,011

3.4

Ordinance-designatedcities, core cities andother areas

49,842

20.9

46,89019.7

Trust beneficiaryinterest in realestateNote 1:

Eighth fiscal period
as of March 31, 2019

Seventh fiscal period
as of September 30, 2018

Other retailproperties

－

－

－

－

－

Distribution
Centers

Tokyo metropolitan
area

－

－

3,945

1.7

Total of trust beneficiary interests in real estate

215,2270

90.3

21,255

90.5

Bank deposits and other assets

23,2199.7

22,589

9.5

Total assets

238,490

100.0

237,845

100.0“Areas” are categorized to the Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area and Ordinancedesignated cities, core cities and other areas. References to “Tokyo metropolitan area” are to the area that consists of Tokyo, Kanagawa,
Saitama and Chiba prefectures. References to the “Greater Osaka area” are to the area that consists of Osaka, Kyoto, Hyogo, Nara andShiga prefectures. References to the “Greater Nagoya area” are to the area that consists of Aichi, Gifu and Mie prefectures. References tothe “Fukuoka area” are to the area that consists of Fukuoka prefecture. “Ordinance-designated cities, core cities and other areas” refers tocities designated by government ordinance, which have populations of 500,000 persons or more, core cities, which have populations of
200,000 persons or more, and to other areas with a population fewer than 200,000 persons, which KRR believes will have suitable customer
traffic from surrounding areas.
“Total amount held” is the amount allocated in the balance sheets as of the end of fiscal period (figures are on a net book value basis after
deducting depreciation), and is rounded down to the nearest million.
“Ratio” is the ratio of the amount allocated in the balance sheets to the total assets rounded to the nearest tenth.

26

(2) Major Assets Owned
The following are major assets owned (the ten largest properties by book value) by KRR as of September 30, 2018.
Property
number

Property nameBook value(in millions)Leasable area(m2)
(Note 1)

Leased area(m2)
(Note 2)

Occupancy
rate(%)(Note 3)

Ratio tototal rental
revenue(%)

Primary use(Note 4)

T-1

Fululu Garden Yachiyo

14,866

77,057.56

74,400.60

96.6

8.5

RetailO-4Blumer HAT Kobe

11,394

23,775.88

23,613.51

99.3

5.6

RetailR-10

Sun Street Hamakita

10,64849,023.34

48,678.40(Note 5)

99.3

6.4

RetailR-1

Roseo Mito

9,848

48,296.15

48,062.15

99.5

4.7

Retail

T-2

MONA Shin-Urayasu

8,782

9,953.98

9,832.41

98.8

6.3

RetailO-1

Blumer Maitamon

8,305

30,290.55

30,187.39

99.7

5.8

Retail

N-6

Resora Obu Shopping Terrace

8,173

19,909.33

17,189.91

86.3

3.9

RetailN-4

Homecenter Kohnan Sunadabashi

7,009

20,329.07

20,329.07

100.0(Note 7)－RetailO-5Carino Esaka

6,676

7,540.58

7,540.58

100.0

3.7

RetailCOMBOX Komyoike

6,305

25,530.44(Note 6)25,530.44

100.0

2.8

RetailTotal

92,010311,706.88

305,364.46

98.0(Note 7)O-6

Note 1:
Note 2:

Note 3:Note 4:Note 5:Note 6:Note 7:(Note 5)－

“Leasable area” is equivalent to gross floor area of space that KRR considers to be available for lease in each property, rounded to the nearest
tenth. For land-only properties, leasable area is equivalent to land area as described in the property registry.
“Leased area” indicates the total leased area based on the lease agreements for each property as of March 31, 2019. As for lease agreements ofbuildings, the leased area of warehouses and land are excluded. As for pass-through type master leases, the leased area based on the leaseagreements between the master lessee and the end-tenants as of March 31, 2019 is shown. As for sublease type master leases, the leased area
to the master lessee is shown.
“Occupancy rate” is calculated by dividing leased area by leasable area as of March 31, 2019, rounded to the nearest tenth.
“Ratio to total rental revenue” is calculated by rental revenue each property divided by total rental revenue.
The area that KRR owns exclusively as proportion to the co-ownership interest (co-ownership ratio: 90%).
The total area that KRR owns exclusively as a compartmentalized ownership interest (retail space).
KRR has not obtained consent from the tenant(s) to release this information.

27

(3) Overview of the Portfolio[Overview of Assets Owned]
The following summarizes the real estate or the real estate properties in trust owned by KRR as of March 31, 2019.
Area(Note1)

Property
number

Property
type

T-1

CSC

T-2
T-3
T-4

T

O

Urban
Station-Front SC
Urban
Station-Front SC
Urban
Station-Front SC

Property nameLocation(City/ward,
prefecure)(Note 2)

Fululu Garden Yachiyo

Yachiyo, Chiba

MONA Shin-Urayasu

Urayasu, Chiba

Passaggio Nishiarai

Adachi ward, Tokyo

Daikanyama Address
Dixsept

Shibuya ward, Tokyo

T-5

NSC

Unicus Ina

Kitaadachi-gun, Saitama

T-6

NSC

Yorktown Kita-Kaname

Hiratsuka, Kanagawa

T-7

NSC

Unicus Yoshikawa

Yoshikawa, Saitama

T-8

SS

T-9

NSC

T-10

SS

T-11

NSC

Unicus Kamisato (Land)

Kodama-gun, Saitama

T-12

NSC

Unicus Konosu (Land)

Konosu, Saitama

T-13

SM

T-15

NSC

T-16

SS

T-17

SM

T-18

NSC

T-19

NSC

T-20

NSC

Kawamachi Yahagi Mall

Chiba, Chiba

T-21

SS

Prime Square Jiyugaoka

Meguro-ku, Tokyo

T-22

SS

Round1 IchikawaOnitaka

Ichikawa, Chiba

T-23

SM

Ozeki Tokiwadai

Itabashi ward, Tokyo

T-24

SS

Konami Sports Club
ShibuyaShibuya ward, Tokyo

O-1

NSC

Blumer Maitamon

Kobe, Hyogo

O-2

SM

Life Takadono (Land)

Osaka, Osaka

O-3

NSC

DCM Kahma MEGADon Quijote UNY
Omihachiman (Note 6)

Omihachiman, Shiga

O-4

NSC

Blumer HAT Kobe

Kobe, Hyogo

Carino Esaka

Suita, Osaka

COMBOX Komyoike

Izumi, Osaka

O-5
O-6

Urban StationFront SC
Urban StationFront SC

O-7

SM

O-8

SS

Sports Club
Renaissance Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki ShonanFujisawa (Land)

Inageya Yokohama
Minamihonjuku (Land)
Nakamachidai
Tokyu Store
Central Wellness Club
Nagatsuta MinamidaiLife Kameido
Totsuka-Fukaya
Shopping Center (Land)
Yumemachi
Narashinodai Mall

Hankyu Oasis
Hirakatadeguchi
Welcia Kishiwadakamori(Land)

Nerima ward, Tokyo
Saitama, Saitama
Fujisawa, Kanagawa

Yokohama, Kanagawa
Yokohama, Kanagawa
Yokohama, Kanagawa
Koto ward, Tokyo
Yokohama, Kanagawa
Funabashi, Chiba

Hirakata, Osaka
Kishiwada, Osaka

Ownership
form
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estateBook value(in millions)

Evaluation value(in millions)(Note 3)

14,86615,000

8,782

9,760

5,776

6,810

5,394

6,440

4,429

5,230

3,941

4,350

3,561

3,840

2,501

2,750

4,890

5,540

3,210

3,500

3,043

3,050

1,726

1,780

1,462

1,410

3,392

3,810

1,764

1,890

1,491

1,520

4,228

4,320

3,417

3,510

3,110

3,210

2,982

2,830

1,875

1,970

1,280

1,350

3,548

3,410

8,305

9,380

2,727

3,150

2,123

2,510

11,394

11,500

6,676

7,180

6,305

6,630

1,309

1,330

497

488

28

Area
(Note1)

Propertytype

Property name

O-9

SM

Life Nishi-Tengachaya

O-10

NSC

N-1

SS

Million Town
Amagasaki, Hyogo
Tsukaguchi (Land)DCM Kahma
Nakagawa Tomita (Land) Nagoya, Aichi

N-2

NSC

Valor Ichinomiya-Nishi

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

O

N

F

R

T

F-2

SS

F-3

NSC

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

(Note 2)

Osaka, Osaka(Note 6)

Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama (Land)
Resora Obu Shopping
Terrace
Sunny NomaIchinomiya, Aichi
Nagoya, Aichi
Nagoya, Aichi
Obu Aichi
Fukuoka, Fukuoka

Round1 Stadium
Hakata-Hanmichibashi
Kurume-Nishi Shopping
CenterRoseo Mito

Fukuoka, Fukuoka
Kurume, Fukuoka
Mito, Ibaraki

K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town Ashikaga
Yorktown ShindenHigashi
Kasumi Technopark
SakuraAomori, Aomori
Aomori, Aomori
Ashikaga, Tochigi

R-5

NSC

R-6

SM

R-7

Urban StationFront SC

Solala Plaza (Note 4)

Sendai, Miyagi

R-8

NSC

P-1 Plaza Tenno

Hamamatsu, Shizuoka

R-9

NSC

Seiyu Rakuichi Moriya(Land)Moriya, Ibaraki

R-10

NSC

Sun Street Hamakita

Hamamatsu, Shizuoka

R-11

SS

L-3

L

Costco Wholesale
Sapporo Warehouse
Musashi Ranzan
Distribution Center
Total

Note 1:

Location(City/ward,
prefecure)

Property
numberSendai, Miyagi
Tsukuba, Ibaraki

Sapporo, Hokkaido
Hiki-gun, Saitama

Ownership
form
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estateBook value(in millions)

Evaluation value(in millions)(Note 3)

1,549

1,690

3,772

3,950

2,351

2,700

2,143

2,360

7,009

7,290

1,390

1,440

8,173

7,440

1,429

1,660

5,015

5,610

1,566

1,760

9,848

11,600

1,455

1,580

879

939

4,276

5,030

3,277

3,340

843

877

2,831

2,820

4,162

4,350

4,320

4,240

10,648

11,160

4,345

4,410

3,945

4,000

215,255

229,694(Note 5)(Note 5)(Note 5)(Note 5)(Note 5)(Note 5)

Properties are categorized into the following six types of properties: NSC (Neighborhood Shopping Center), SM (Supermarket), CSC (Community
Shopping Center), Urban Station-Front SC (Urban Station-Front Shopping Center), SS (Specialty Store) and L (Logistics facility).
We categorize shopping centers for daily needs as follows.
Type of shopping centers for daily
Features
Trade area
needs
three toNSC (Neighborhood Shopping
Shopping centers with a supermarket as an anchor or core tenant and several
fivespecialty store tenantsCenters)
kilometerthree
SM (Supermarkets)
Stand-alone stores that primarily provide groceries, with a retail trade area
kilometer
CSC (Community Shopping Centers)

Larger shopping centers than NSC, which have a supermarket as an anchor or coretenant in addition to specialty store tenants

five to ten
kilometer

Shopping centers that are located in the immediate vicinity of an urban public
three to tentransportation station, which take advantage of stable foot traffic
kilometer
Single- or multiple-tenant shopping centers that specialize in a single type of
one to ten
SS (Specialty Stores)
merchandise or service, such as drug stores, convenience stores, health clubs or
kilometer
electronic appliance stores“T”, “O”, “N”, “F” and “R” hereinafter refers to Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area andOrdinance-designated cities, core cities and other areas, respectively.
“Location” indicates the residential address. For those without a residential address, the building or land address on the registry is shown.
“Evaluation value” shows the appraisal value stated on the real estate appraisal report created by the real estate appraisers of Daiwa Real EstateAppraisal Co., Ltd., Japan Real Estate Institute and The Tanizawa Sōgō Appraisal Co., Ltd. in accordance with the methods and standards for asset
valuation as stipulated in the KRR Articles of Incorporation as well as the regulations as stipulated by The Investment Trusts Association, Japan.
KRR disposed trust beneficiary interest in real estate of Solala Plaza (49% on December 21, 2018 and 51% on April 11, 2019).
The amount and proportion of quasi co-ownership interests that KRR owns are shown.
KRR changed property names as follows.
Property number
New name
Previous name
Effective date
Urban Station-Front Shopping Centers

Note 2:
Note 3:Note 4:Note 5:Note 6:

29

O-3
N-1

DCM Kahma MEGA Don
Quijote UNY Omihachiman
DCM Kahma Nakagawa Tomita(Land)

Piago Kahma Home Center
Omihachiman
Kahma Home Center Nakagawa
Tomita (Land)

February 28, 2019
February 28, 201930

[Earnings Performance for the Individual Properties]
Sevenfth fiscal period
as of September 30, 2018
Area

Property
number

Property
type

T-1

CSC

T-2
T-3
T-4
T-5

96.6

736

8.8

38

96.6

699

8.5

MONA Shin-Urayasu

1(57)

98.3

471

5.6

1(57)

98.8

514

6.3

Passaggio Nishiarai

1(41)

98.6

321

3.8

1(41)

98.6

301

3.7

Daikanyama Address
Dixsept

1(27)

97.9

279

3.3

1(25)

97.2

267

3.3

1

100.0

139

1.7

1

100.0

139

1.7

－

－

T-6

NSC

Yorktown KitaKaname

T-7

NSC

Unicus Yoshikawa

SS

T-9

NSC

T-10

SS

T-11

NSC

T-12

NSC

T-13

SM

T-14

SM

T-15

NSC

T-16

SS

T-17

SM

T-18

NSC

T-19

NSC

T-20

NSC

T-21

SS

T-22

SS

RentalRatio toRentalRatio toNumberNumber
Occupancy revenue total rental
Occupancy revenue total rentalof tenantsof tenants
rate (%)(millions) revenue
rate (%) (millions) revenue(Note 1)
(Note 1)
(Note 2)
(Note 2)
(%)
(%)
39

Unicus Ina

Sports Club
Renaissance
Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki ShonanFujisawa (Land)
Unicus Kamisato(Land)
Unicus Konosu(Land)
Inageya Yokohama
Minamihonjuku(Land)
Gourmet City ChibaChuo (Note 4)
Nakamachidai Tokyu
Store
Central Wellness
Club Nagatsuta
Minamidai
Life Kameido
Totsuka-Fukaya
Shopping Center(Land)
Yumemachi
Narashinodai Mall
Kawamachi Yahagi
Mall
Prime Square
Jiyugaoka
Round1 IchikawaOnitaka(Note 3)(Note 3)1100.0(Note 3)(Note 3)

1(11)

100.0

134

1.6

1(10)

99.6

132

1.6

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

1

100.0

1

100.0

43

0.5

1

100.0

－

－

1

100.0

1

81.0

1

100.0

2

100.0

0.9

1

1

100.0

41

0.5

1

100.0

1

100.0

1

100.0

1

81.0

1

100.0

－

－

(Note 3)(Note 3)

59

0.7

－

－

(Note 3)(Note 3)－－(Note 3)(Note 3)

2

100.0

1(14)

100.0

140

1.7

1(14)

100.0

142

1.7

1(12)

100.0

119

1.4

1(12)

100.0

116

1.4

2

100.0

2

100.0

1

100.0

1

100.0

O-1

NSC

Blumer Maitamon

52

99.7

O-2

SM

Life Takadono (Land)

1

100.0

O-3

NSC

DCM Kahma MEGADon Quijote UNY
Omihachiman

O-4

NSC

SM

100.0

72

100.0

O-9

1

100.0

1

SS

0.9

1

SS

O-8

75

100.0

T-24

SM

100.0

1

100.0

O-7

－
(Note 3)

100.0

1

O-6

－
(Note 3)

1

Konami Sports Club
ShibuyaUrban StationFront SC
Urban StationFront SC

－

100.0

Ozeki Tokiwadai

O-5

－

1

SM

T-23

O

Fululu Garden
Yachiyo

NSC

T-8

T

Urban
Station-Front SC
Urban
Station-Front SC
Urban
Station-Front SC

Property nameEighth fiscal period
As of March 31, 2019－－

(Note 3)(Note 3)

50

99.7

1

100.0

475

5.8

－

－

－

(Note 3)(Note 3)(Note 3)(Note 3)

1(39)

98.0

529

Carino Esaka

1(30)

99.5

COMBOX Komyoike

1

100.0

Hankyu Oasis
Hirakatadeguchi
WelciaKishiwadakamori(Land)
Life
Nishi-Tengachaya

1

100.0

100.0

100.0

－

Blumer HAT Kobe

1

1
6.0

100.0

100.0

100.0

－
(Note 3)

502

2

1

1

－
(Note 3)

2

100.0

6.3

1(41)

99.3

455

5.6

311

3.7

1(30)

100.0

302

3.7

226

2.7

1

100.0

232

2.8

1

100.0

－

－

－

－

(Note 3)(Note 3)(Note 3)(Note 3)

44

0.5

44

0.5

1

100.0

1

100.0

31

Area

Property
number

Property
type

O

O-10

NSC

N-1

SS

N-2

NSC

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

F-2

SS

F-3

NSC

R-1

NSC

N

F

R-2

R

L

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R-7

Urban StationFront SC

R-8

Property nameMillion Town
Tsukaguchi (Land)DCM Kahma
Nakagawa Tomita(Land)
Valor IchinomiyaNishi
Homecenter Kohnan
Sunadabashi
K’s Denki ShinMoriyama (Land)
Resora Obu
Shopping Terrace
Sunny Noma
Round1 Stadium
HakataHanmichibashi
Kurume-Nishi
Shopping Center
Roseo Mito
K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town
Ashikaga
Yorktown ShindenHigashi
Kasumi Technopark
SakuraSevenfth fiscal period
Eighth fiscal period
as of September 30, 2018
As of March 31, 2019
RentalRatio toRentalRatio toNumberNumber
Occupancy revenue total rental
Occupancy revenue total rentalof tenantsof tenants
rate (%)(millions) revenue
rate (%) (millions) revenue(Note 1)
(Note 1)
(Note 2)
(Note 2)
(%)
(%)
1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

1(42)

99.0

1

100.0

317

3.8

－

－

1

100.0

(Note 3)

4

100.0

1(22)

99.7

1

100.0

－

－

(Note 3)1100.0(Note 3)(Note 3)

52

0.6

4

100.0

52

0.6

383

4.6

1(21)

99.5

381

4.7

1

100.0

－

－

(Note 3)(Note 3)

286

3.4

100.0

2

100.0

1

100.0

Solala Plaza (Note 5)

1

100.0

NSC

P-1 Plaza Tenno

7

100.0

136

1.6

R-9

NSC

Seiyu Rakuichi
Moriya (Land)

1

100.0

－

(Note 3)－(Note 3)

1

R-10

NSC

Sun Street Hamakita

1(53)

99.3

533

6.4

1(53)

1

100.0

－

(Note 3)－(Note 3)

1

－

－

－

－

520

99.4

8,364

100.0

L-3

L
Total

Note 1:

Note 2:
Note 3:Note 4:Note 5:

3.9

100.0

1(29)

SS

318

86.3

1

100.0

R-11

－
(Note 3)1(38)1Costco Wholesale
Sapporo Warehouse
Musashi Ranzan
Distribution Center－(Note 3)－－(Note 3)(Note 3)

1

100.0

1(29)

100.0

2

100.0

1

100.0

1

100.0

7

100.0

－

－

(Note 3)(Note 3)

276

3.4

－

－

(Note 3)(Note 3)

138

1.7

100.0

－

－

(Note 3)(Note 3)

99.3

526

6.4

100.0

－

－

(Note 3)(Note 3)

1

100.0

－

－

(Note 3)(Note 3)

511

99.2

8,197

100.0

Number of tenants is based upon the number of lease agreements with respect to the building(s) (or land in the case of land -only properties withleasehold interest) on each such property used mainly as stores and offices, as of March 31, 2018. Where one lessee leases more than one section of
the property, the lessee is counted as a tenant for each section leased within the property. Where pass-through type master lease agreements are enteredinto, the number of master lessees is with the number of end-tenants indicated in parentheses. Where sublease type master lease agreements are enteredinto, the indicated, number of master lessee is shown. As for the “Total” of “Number of tenants”, the number of end-tenants is used for pass-throughtype master leases and the number of master lessee is used for sublease type master leases.
Rental revenue is based on total rental and other operating revenues of each property.
KRR has not obtained consent from the tenant(s) to release this information.
Gourmet City Chiba Chuo was disposed on March 5, 2019.
The retal revenue of Solala Plaza is shown as the sum of rental revenue for 100% ownership until December 20, 2018 and rental revenue for 51%
ownership from December 21, 2018. Number of tenants of Solala Plaza is shown for the whole building.

32

(4) Specified Transaction
As of March 31, 2019, the contract amount and fair value of the outstanding transaction under the specified transaction
account of KRR are as follows.
Contract amount (million yen)
(Note 1)Type

Due after one year

Fair value(million yen)
(Note 2) (Note 3)(Note 1)OTC

Interest rate swaps:
Receive floating / pay fixed

71,24062,910

-167

Total

－

71,24062,910-167

Note 1: The contract amount of interest rate swaps is based on its notional principal.
Note 2: For the financial reporting purpose, the transaction is not measured at fair value but accounted for under special treatment for interest
rate swaps based on “Accounting Standards for Financial Instruments” under Japanese GAAP.
Note 3: Based on the amount provided by counterparty financial institutions.

(5) Other Assets
Real estate or beneficiary rights of real estate in trust owned by KRR are disclosed in “(3) Overview of the Portfolio”.
KRR has no other specified assets.
(6) Asset in Geographic Area
KRR owns no asset in specified area other than Japan.

33

Capital Expenditures(1) Planned Capital Expenditures
The table below shows major capital expenditures (Note) for renovations, repairs and other projects that are planned for theNinth fiscal period ending September 30, 2019. These expenditures are for real estate owned by KRR and real estate intrusts in which KRR owns trust beneficiary rights. These planned projects may include some expenditure that will berecorded as expenses rather than capital expenditures for accounting purposes.

Planned amount of capital expenditure(Millions of yen)
Payment for Total amountTotal
the period
already paid

Property
number

Property name

R-10

Sun Street Hamakita

Hamamatsu,
Shizuoka

Environmental renewal

From April 2019
to September 2019

O-1

Blumer Maitamon

Kobe, Hyogo

Rooftop waterproof

From February 2019
to June 2019

O-5

Carino Esaka

Suita, Osaka

Exterior wall repair

R-4

Ahico Town
Ashikaga

Ashikaga,
Tochigi

R-4

Ashico Town
Ashikaga

Ashikaga,
Tochigi

Note:

Location

PurposeSchedule

200

－

－

147

－

－

From November 2018
to September 2019

144

－

－

Rooftop parking waterproof(OM building)

From May 2019
to September 2019

83

－

－

Rooftop parking waterproof(YB building)

From November 2018
to March 2020

81

－

－

(Note)

The amount as proportion to the quasi co-ownership interests that KRR owns are shown.

(2) Capital Expenditures during the Fiscal Period under Review
The table below shows major capital expenditures for renovations, repairs and other projects in the fiscal period underreview.
The amount of capital expenditures in the fiscal period under review was 500 million yen. There were also expendituresof 200 million yen that were recorded as repair expenses. In total KRR spent 700 million yen on the projects.
Property
number

Property nameLocation

PurposeSchedule

Capital expenditure(Millions of yen)

T-1

Fululu Garden
YachiyoYachiyo, Chiba

Toilet and partial exterior wall repair

From September 2018
to January 2019

138

O-5

Carino Esaka

Suita, Osaka

Automatic fire alarm replacement

From December 2018
to March 2019

69

T-5

Unicus Ina

Kitaadachi-gun,
Saitama

Solar panel installation

From January 2019
to March 2019

64

N-6

Resora Obu
Shopping Terrace

Obu, Aichi

LED installation to common area

From February 2019
to March 2019

26

T-2

MONA ShinUrayasu

Urayasu, Chiba

Sprinkler installation

From February 2019
to March 201925

Others

175

Total

500

(3) Reserved Amount for Long-Term Repairs, Maintenance and Renovation Plans
Not applicable34

Expenses and Liabilities(1) Expenses related to Asset Management
Seventh fiscal period(From April 1, 2018
to September 30, 2018)
Asset management fees (Note)(in thousands of yen)
Eighth fiscal period(From October 1, 2018
to March 31, 2019)638,549

661,991

Asset custody fees

9,463

9,722

Administrative service fees

29,73330,601

Directors' compensation

4,500

4,500

Other operating expenses

93,38589,835

Total

775,631796,650

Note: The amount of asset management fees capitalized in addition to the amount above are 76,100 thousand yen for the seventh fiscal period and 38,793
thousand yen for the eighth fiscal period.

35

(2) Status of Borrowings
Borrowings on a financial institution basis as of March 31, 2019 are as follows.
Classification

LenderShort-Term
Loans
PayableSumitomo Mitsui Banking Corporation
Sumitomo Mitsui Banking Corporation

Balance at theDecrease
Increase during
beginning ofduring thethe period
periodperiod(Thousands of(Thousands of(Thousands of
yen)
yen)
yen)
2,750,000
2,750,000

Average
Balance at theinterest rate
end of period(Note 1)(Thousands of(Note 2)
yen)
(％)
0.463

-

2,750,000-

2,750,000

2,750,000

2,750,000

2,750,000

2,750,000

MUFG Bank, Ltd.

750,000-

750,000-

Aozora Bank, Ltd.

500,000-

500,000-

Mizuho Bank, Ltd.

400,000-

400,000-

Sumitomo Mitsui Trust Bank, Ltd.

200,000-

200,000-

Resona Bank, Ltd.

200,000-

200,000-

The Musashino Bank, Ltd.

150,000-

150,000-

1,850,000-

1,850,000-

MUFG Bank, Ltd.

550,000-

550,000-

Sumitomo Mitsui Trust Bank, Ltd.

500,000-

500,000-

Resona Bank, Ltd.

300,000-

300,000-

The Musashino Bank, Ltd.

250,000-

250,000-

Mizuho Bank, Ltd.

710,000--

710,000

Sumitomo Mitsui Trust Bank, Ltd.

620,000--

620,000

Mizuho Trust & Banking Co., Ltd.

350,000--

350,000

Aozora Bank, Ltd.

250,000--

250,000

Resona Bank, Ltd.

250,000--

250,000

Sumitomo Mitsui Trust Bank, Ltd.

200,000--

200,000

Mizuho Bank, Ltd.

300,000--

300,000

MUFG Bank, Ltd.

1,270,000--

1,270,000

Aozora Bank, Ltd.

640,000--

640,000

Resona Bank, Ltd.

400,000--

400,000

Mizuho Bank, Ltd.

360,000--

360,000

Mizuho Trust & Banking Co., Ltd.

300,000--

300,000

Sumitomo Mitsui Banking Corporation

700,000--

700,000

2,400,000--

2,400,000

MUFG Bank, Ltd.(Note 6)

800,000--

800,000

MUFG Bank, Ltd.(Note 6)

800,000--

800,000

Sumitomo Mitsui Trust Bank, Ltd.(Note 6)

550,000--

550,000

Aozora Bank, Ltd.(Note 6)

500,000--

500,000

Resona Bank, Ltd.(Note 6)

500,000--

500,000

The Gunma Bank, Ltd.(Note 6)

400,000--

400,000

The Musashino Bank, Ltd.(Note 6)

400,000--

400,000

Mizuho Bank, Ltd.(Note 6)

350,000--

350,000

Mizuho Trust & Banking Co., Ltd.(Note 6)

300,000--

300,000

19,000,000-

5,650,000

13,350,000

Sub Total

Sumitomo Mitsui Banking Corporation

Current Portion of Long-Term Loans Payable

Sumitomo Mitsui Banking Corporation (Note 6)

Sub Total

Payment due date
（Note 3）February 13, 2019

0.461

January 31, 2020

0.534

March 31, 2019

0.545

March 31, 2019

0.488

August 31, 2019

0.488

August 31, 2019

0.488

August 31, 2019

Long-Term Loans Payable

0.751

February 10, 2020

0.865

February 10, 2021

0.978

February 10, 2022--

3,000,000

700,000--

700,000

Sumitomo Mitsui Trust Bank, Ltd.

500,000--

500,000

Aozora Bank, Ltd.

450,000--

450,000

Resona Bank, Ltd.

450,000--

450,000

Mizuho Bank, Ltd.

400,000--

400,000

2,600,000--

2,600,000

MUFG Bank, Ltd.

800,000--

800,000

Sumitomo Mitsui Trust Bank, Ltd.

600,000--

600,000

Aozora Bank, Ltd.

400,000--

400,000

Mizuho Trust & Banking Co., Ltd.

400,000--

400,000

Mizuho Bank, Ltd.

300,000--

300,000

Resona Bank, Ltd.

300,000--

300,000

Development Bank of Japan Inc. (Note 5)

1,500,000--

1,500,000

0.925

February 10, 2021

Development Bank of Japan Inc. (Note 5)

1,600,000--

1,600,000

1.033

February 10, 2022

Sumitomo Mitsui Banking Corporation

4,600,000--

4,600,000

1.366

April 16, 2025

MUFG Bank, Ltd.

1,000,000--

1,000,000

Sumitomo Mitsui Trust Bank, Ltd.

600,000--

600,000

Mizuho Bank, Ltd.

400,000--

400,000

0.975

March 31, 2023

Resona Bank, Ltd.

400,000--

400,000

Mizuho Trust & Banking Co., Ltd.

400,000--

400,000

MUFG Bank, Ltd.

400,000--

400,000

1,500,000--

1,500,000

0.994

March 31, 2023

Development Bank of Japan Inc. (Note 5)(Note 4)

Unsecured/
Unguaranteed(Note 4)

Unsecured/
Unguaranteed(Note 4)

Unsecured/
Unguaranteed

0.463 September 30, 2019

3,000,000

Sumitomo Mitsui Banking Corporation

Remarks

0.368 September 30, 2019

MUFG Bank, Ltd.

Sumitomo Mitsui Banking Corporation

Use

36

Classification

Lender

MUFG Bank, Ltd.

Balance at theDecrease
Increase during
beginning ofduring thethe period
periodperiod(Thousands of(Thousands of(Thousands of
yen)
yen)
yen)
450,000-

Average
Balance at theinterest rate
end of period(Note 1)(Thousands of(Note 2)yen)(％)
450,000

Payment due date
（Note 3）0.987

March 31, 2023

1.013

March 31, 2023

1.110

March 31, 2024

1.243

April 16, 2025

Resona Bank, Ltd.

200,000--

200,000

The Musashino Bank, Ltd.

150,000--

150,000

Development Bank of Japan Inc. (Note 5)

1,500,000--

1,500,000

Sumitomo Mitsui Banking Corporation

3,000,000--

3,000,000

Mizuho Bank, Ltd.

1,150,000--

1,150,000

MUFG Bank, Ltd.

1,000,000--

1,000,000

Mizuho Trust & Banking Co., Ltd.

700,000--

700,000

Sumitomo Mitsui Trust Bank, Ltd.

650,000--

650,000

Resona Bank, Ltd.

500,000--

500,000

1,500,000--

1,500,000

MUFG Bank, Ltd.

400,000--

400,000

Sumitomo Mitsui Trust Bank, Ltd.

450,000--

450,000

0.803 September 30, 2024

Development Bank of Japan Inc. (Note 5)

890,000--

890,000

0.760 September 30, 2024

Sumitomo Mitsui Banking Corporation

2,670,000--

2,670,000

0.932

April 21, 2026

890,000--

890,000

0.888

October 31, 2025

0.550 September 30, 2021

Sumitomo Mitsui Banking Corporation

MUFG Bank, Ltd.

500,000--

500,000

Development Bank of Japan Inc. (Note 5)

2,000,000--

2,000,000

1.049

Mizuho Trust & Banking Co., Ltd. (Note 5)

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

The Gunma Bank, Ltd. (Note 5)

Resona Bank, Ltd.

2,600,000--

2,600,000

Aozora Bank, Ltd.

500,000--

500,000

MUFG Bank, Ltd.

400,000--

400,000

Sumitomo Mitsui Trust Bank, Ltd.

300,000--

300,000

Resona Bank, Ltd.

300,000--

300,000

MUFG Bank, Ltd. (Note 5)

600,000--

600,000

0.400

Development Bank of Japan Inc. (Note 5)

500,000--

500,000

0.553

Mizuho Bank, Ltd. (Note 5)

400,000--

400,000

0.553
0.553

Sumitomo Mitsui Banking Corporation

0.485

Long-Term Loans Payable-

200,000--

1,500,000

Sumitomo Mitsui Trust Bank, Ltd.

400,000--

400,000

Aozora Bank, Ltd.

400,000--

400,000

Resona Bank, Ltd.

300,000--

300,000

MUFG Bank, Ltd. (Note 5)

600,000--

600,000

0.696

Mizuho Bank, Ltd. (Note 5)

600,000--

600,000

0.815

Development Bank of Japan Inc. (Note 5)

500,000--

500,000

0.814

Mizuho Trust & Banking Co., Ltd. (Note 5)

200,000--

200,000

0.814

MUFG Bank, Ltd. (Note 5)

500,000--

500,000

0.903

October 31, 2026

Sumitomo Mitsui Banking Corporation

500,000--

500,000

Sumitomo Mitsui Trust Bank, Ltd.

500,000--

500,000

1.033

May 18, 2027

Resona Bank, Ltd.

400,000--

400,000

Development Bank of Japan Inc. (Note 5)

500,000--

500,000

1.050

Mizuho Bank, Ltd. (Note 5)

500,000--

500,000

1.049

Mizuho Trust & Banking Co., Ltd. (Note 5)

300,000--

300,000

1.050

October 31, 2024

October 31, 2024

May 18, 2027

500,000--

500,000

0.670 September 29, 2023

1,500,000--

1,500,000

0.918 September 30, 2026

MUFG Bank, Ltd. (Note 5)

500,000--

500,000

0.930

Mizuho Bank, Ltd. (Note 5)

1,500,000--

1,500,000

1.029

Sumitomo Mitsui Trust Bank, Ltd.

1,500,000--

1,500,000

1.100 September 29, 2028

500,000--

500,000

1.035

October 3, 2027

MUFG Bank, Ltd. (Note 5)

1,200,000--

1,200,000

1.000

February 10, 2028

MUFG Bank, Ltd.

1,250,000--

1,250,000

0.603

August 31, 2022

Mizuho Bank, Ltd.

800,000--

800,000

Sumitomo Mitsui Banking Corporation

900,000--

900,000

0.988

April 30, 2027

Sumitomo Mitsui Banking Corporation

2,600,000--

2,600,000

0.985

April 30, 2027

Sumitomo Mitsui Banking Corporation

2,000,000--

2,000,000

0.902

April 30, 2026

Mizuho Bank, Ltd.

1,000,000--

1,000,000

1.090

April 30, 2028

The Bank of Fukuoka, Ltd.

1,000,000--

1,000,000

0.907

May 31, 2026

Sumitomo Mitsui Banking Corporation

1,500,000--

1,500,000

0.999

MUFG Bank, Ltd. (Note 5)

500,000--

500,000

0.900

Mizuho Bank, Ltd.

500,000--

500,000

0.999

Mizuho Trust & Banking Co., Ltd.

500,000--

500,000

0.999

Nippon Life Insurance Company

700,000--

700,000

0.913

MUFG Bank, Ltd. (Note 5)
Sumitomo Mitsui Trust Bank, Ltd.

Sumitomo Mitsui Banking Corporation

Unsecured/
Unguaranteed

April 27, 2021

-

0.772

(Note 4)

April 27, 2021

200,000

Sumitomo Mitsui Banking Corporation

Remarks

January 31, 2027

1,500,000

Mizuho Trust & Banking Co., Ltd. (Note 5)

Use

September 29, 2027

May 31, 2027

March 31, 2025

37

Classification

LenderSumitomo Mitsui Trust Bank, Ltd.

Balance at theDecrease
Increase during
beginning ofduring thethe period
periodperiod(Thousands of(Thousands of(Thousands of
yen)
yen)
yen)
700,000-

Average
Balance at theinterest rate
end of period(Note 1)(Thousands of(Note 2)yen)(％)
700,000
0.726

Long-Term Loans Payable

Resona Bank, Ltd.

-

500,000-

500,000

0.676

Aozora Bank, Ltd.

-

500,000-

500,000

0.726

Mizuho Bank, Ltd.

-

400,000-

400,000

0.726

The Musashino Bank, Ltd.

-

400,000-

400,000

0.676

Sumitomo Mitsui Banking Corporation-

1,850,000-

1,850,000

0.910

MUFG Bank, Ltd.

-1,300,000-

1,300,000

0.860

77,350,000

5,650,000-

83,000,000

99,100,000

8,400,000

8,400,000

99,100,000

Sub Total
Total

Payment due date
（Note 3）Use

Remarks(Note 4)

Unsecured/
Unguaranteed

March 31, 2026

March 31, 2028

Note 1: All debts except for the following Note 5 are borrowings at a floating rate.
Note 2: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to borrowings for which interest rate swap
transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into consideration the effects of the interest rate swaps are indicated.
Note 3: All the repayment methods of debt financing are lump-sum repayments on the due date.
Note 4: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) and repayment of debts.
Note 5: Borrowings at a fixed rate.
Note 6: Borrowings are listed in the current portion of long-term loans payable from the fiscal period under review, listed in long-term loans payable in the previous fiscal period.

38

(3) Status of Investment Corporation Bonds
Balance as ofApril 1, 2018
(million yen)

Balance as of
September 30,
2018(million yen)

October 31,
2016

1,000

1,000

0.200

October 29,
2021

2nd Series Unsecured Investment
Corporation Bonds

October 31,
2016

1,000

1,000

0.600

October 30,
2026

3rd Series Unsecured Investment
Corporation Bonds

August 31,
2017

1,000

1,000

0.320

August 31,
2022

4th Series Unsecured Investment
Corporation Bonds

August 31,
2017

2,000

2,000

0.700

August 31,
2027

5th Series Unsecured Investment
Corporation Bonds

April 26,
2018

-

2,000

0.700

April 26,
2028

5,000

7,000

Bonds

Issuance date

1st Series Unsecured Investment
Corporation Bonds

Total

Interest rate
Redemption
Maturity date(%)
methodUse

Remarks(Note 1)

Full onmaturity(Note 3)(Note 2)

Note 1: “Use” is acquisition funds for specified assets, repayment funds for borrowings, etc.
Note 2: “Use” is repayment funds for borrowings.
Note 3: Ranking pari passu among the specified investment corporation bonds(4) Status of Short-Term Investment Corporation Bonds
Not applicable(5) Status of Subscription Rights to New Investment Units
Not applicable39

Acquisition and Disposition(1) Acquisition and Disposition of Real Estate Properties & Asset-Backed Securities and Infrastructure &Infrastructure Related Assets
Acquisition
Ownership
form

Property
number

Property nameAcquisition date

Disposition

Disposition
Acquisition price
DispositionDa
price(in millions)te(in millions)(Note)(Note)

Trust beneficiaryinterest in real estate

L-3

Musashi Ranzan
Distribution Center

Trust beneficiaryinterest in real estate

R-7

Trust beneficiaryinterest in real estate

T-14

Note:

Book value(in millions)

Gain / loss
(in millions)

March 26, 2019

3,879

－

－

－

－

Solala Plaza－－

December 21,
2018

2,930

2,730

179

Gourmet City Chiba
Chuo

－

－

March 5,
2019

800

731

38

“Acquisition price” and “Disposition price” represent the purchase price of each trust beneficiary interest specified in purchase agreement in relation
to the acquisition of each property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; and rounded
down to the nearest one million yen).

(2) Acquisition and Disposition of Other Assets
Other assets except real estate properties and asset-backed securities mentioned above mostly consist of cash and deposits
and cash and deposits in trust.
(3) Appraisal Values of Specific Assetsi) Real Estate
Acquisition/disposition

Ownership
form

Property
number

Property nameAcquisition/
disposition date

Acquisition/
disposition
price(in millions)(Note 1)

Acquisition

Trust beneficiaryinterest in realestateTrust beneficiary
Disposition interest in realestateL-3

Musashi Ranzan
March 26, 2019
Distribution Center

3,879

R-7

Solala Plaza

December 21,
2018

2,930

T-14

Gourmet City Chiba
March 5, 2019
Chuo

800

Appraisalvalue(in millions)Appraiser

Evaluation date

The Tanizawa Sōgō
Appraisal Co., Ltd.

February 1,
2019(Note 4)

Japan Real Estate
Institute

September 30,
2018

792

Daiwa Real EstateAppraisal Co., Ltd.

September 30,
2018(Note 2)4,000
(Note 3)2,920

Note 1: “Acquisition price” represents the purchase amount (excluding acquisition costs and consumption taxes) of each property or beneficiary right ofreal estate in trust as stated in the Sales and Purchase Agreement.
Note 2: “Appraisal value” of specific assets above was calculated in accordance with the guideline of “Real Estate Appraisal Standards, Chapter 3, Appraisalof Securitized Real Estate.”
Note 3: Represents the amount corresponding to the trust beneficiary co-ownership interest (a trust beneficiary co-ownership interest of 90%).
Note 4: Represents the amount corresponding to the trust beneficiary co-ownership interest (a trust beneficiary co-ownership interest of 51%).

ii) Others(A) Investigator regarding values of certain assets

BDO Toyo & Co.
(B) Result and method of investigation
With regard to transactions and contracts entered by KRR whose values shall be investigated based on the Article
201 of the Act on Investment Trusts and Investment Corporations, BDO Toyo & Co. performs an investigation oftransactions. For the fiscal period from October 1, 2018 to March 31, 2019, the transactions subject to suchinvestigation were two interest rate swap transactions, for which KRR received reports from BDO Toyo & Co. For
this purpose, investigation was performed with respect to details of the interest swap contracts, such as the name ofcounter parties, contract amounts, or the period of transactions. This survey is not a part of the audit for finalcial
statements, and there is no guarantee of fairness of the price and internal management system.

40

(4) Related-Party Transactionsi) Transactions
Transaction price (in million)

Total amount

Purchase

Sale

3,879

3,730

Transaction with related-party
GK KRF80

-

(-%)

2,930

(78.6%)

Total

-

(-%)

2,930

(78.6%)ii) Amounts of Fees Paid
Not applicable.
Note: A related party, etc. is defined as a related party, etc. of the asset manager having an asset management agreement with KRR as prescribedin Article 123 of the Order for Enforcement of the Act on Investment Trusts and Investment Corporations of Japan and in Article 26-27 of
the Regulations for Asset Investment Reports by Investment Trusts and Investment Corporations of the Investment Trusts Association,
Japan.

(5) Transactions with Asset Manager in Connection with Concurrent Business Conducted by the Asset Manager
There is no transaction with the Asset Manager, KFM, regarding to the Type II Financial Instruments Business, andBuilding Lots and Buildings Transaction Business. Furthermore, KFM does not concurrently engage in any of Type I
Financial Instruments Business, Real Estate Specified Joint Business.

41

Accounting(1) Status on Assets, Liabilities, Principals, and Income and Losses
Please refer to the “Balance Sheets”, “Statements of Income and Retained Earnings”, “Statements of Changes in Net
Assets” and “Notes to Financial Statements” presented later in this report.
(2) Change in Calculation of Depreciation
Not applicable(3) Change in Valuation of Real Estate Properties and Infrastructure Assets
Not applicable(4) Disclosure of Beneficiary Certificates of Investment Trust Established by Selfi) Acquisition of Beneficiary Certificates of Investment Trust Established by Self
Not applicableii) Ownership of Beneficiary Certificates of Investment Trust Established by Self
Not applicable(5) Disclosure of Companies Owning Real Estate Overseas
Not applicable(6) Disclosure of Real Estate Owned by Companies Owning Real Estate Overseas
Not applicable

Others(1) Noticei) General Meeting of Unitholders
Not applicableii) Board of Directors
Not applicable(2) Others
In this report, any fraction is rounded down for monetary amounts and rounded off for ratios unless otherwise stated.

42Financial Statements(8th Fiscal Period: from October 1, 2018 to March 31, 2019)
Independent Auditor’s Report
Balance Sheet
Statement of Income and Retained Earnings
Statement of Changes in Net Assets
Statement of Cash Flows
Notes to Financial Statements

44

Kenedix Retail REIT Corporation

Balance Sheet
As of March 31, 2019
As of March 31, 2019

As of September 30, 2018

(in thousands of yen)
AssetsCurrent assets
Cash and deposits (Notes 9 and 11)¥7,475,785¥7,582,764

Cash and deposits in trust (Notes 9 and 11)

13,647,110

13,710,471

Operating accounts receivable

213,214247,664

Prepaid expenses

31,307

151,397-

175,068

9,788

4,618

21,377,208

21,871,984

Consumption taxes receivable
Other
Total current assets
Non-current assets
Property, plant and equipment (Notes 17 and 20)
Buildings in trust

59,140,856

57,984,991

Accumulated depreciation(5,692,853)(4,955,253)

Buildings in trust, net (Note 3)

53,448,003

53,029,737

2,999,320

2,872,268

Accumulated depreciation(359,296)(304,244)

Structures in trust
Structures in trust, net (Note 3)

2,640,023

2,568,023

Machinery and equipment in trust

250,568

214,971

Accumulated depreciation(30,701)(28,383)

Machinery and equipment in trust, net

219,866

186,587

93,28696,472

Accumulated depreciation(31,649)(26,501)

Tools, furniture and fixtures in trust, net (Note 3)

61,636

69,971

154,566,718

155,092,322

Tools, furniture and fixtures in trust

Land in trust (Note 3)
Construction in progress in trust
Total property, plant and equipment, net-

378

210,936,249

210,947,020

4,316,761

4,320,740

Intangible assets (Note 20)
Leasehold right in trust (Note 17)
Other

6,282

5,103

4,323,044

4,325,844

Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

60,25660,256Long-term prepaid expenses

891,506

840,462

Long-term deposits

157,110

157,1102,194

142,159

Total intangible assets
Investments and other assets

Other

1,121,066

1,209,988

216,380,360

216,482,854

Organization costs

5,121

10,160Investment corporation bond issuance costs

44,04447,759Investment unit issuance costs

38,506

77,413

Total investments and other assets
Total non-current assets
Deferred assets

87,672

135,333¥237,845,241¥238,490,172

Total deferred assets
Total assets

See accompanying notes to financial statements.

45

As of March 31, 2019

As of September 30, 2018

(in thousands of yen)
Liabilities
Current liabilities¥715,187

Operating accounts payable¥1,118,827

Short-term loans payable (Notes 11 and 21)

2,750,000

2,750,000

Current portion of long-term loans payable (Notes 11 and 21)

13,350,000

12,000,000

Accounts payable-other

476,092

367,074

Accrued expenses

27,02026,751

1,018

3,434

183,075

52,088Advances received

1,154,552

1,163,601

Deposits received

82,992

77,211

18,739,939

17,558,988

Income taxes payable
Accrued consumption taxes

Total current liabilities
Non-current liabilities
Investment corporation bonds (Notes 11 and 22)

7,000,000

7,000,000

Long-term loans payable (Notes 11 and 21)

83,000,000

84,350,000

Tenant leasehold and security deposits in trust (Notes 3 and 11)

12,376,878

12,797,802

23,927

23,778Asset retirement obligations (Note 15)

198,926

30,024

102,599,732

104,201,604

121,339,671

121,760,593

113,399,022

113,399,022

Allowance for temporary difference adjustments (Note 5)(9,754)(9,754)

Total deduction from unitholders' capital(9,754)(9,754)

113,389,267

113,389,267

Unappropriated retained earnings

3,283,881

3,198,151

Total surplus

3,283,881

3,198,151

116,673,148

116,587,418(167,579)

142,159

Other
Total non-current liabilities
Total liabilities
Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital

Unitholders' capital, net
Surplus

Total unitholders' equity
Valuation and translation adjustments
Deferred gains or losses on hedges (Notes 11 and 12)(167,579)

142,159

Total net assets (Note 6)

Total valuation and translation adjustments

116,505,569

116,729,578

Total liabilities and net assets¥237,845,241¥238,490,172

See accompanying notes to financial statements.

46

Kenedix Retail REIT Corporation

Statement of Income and Retained Earnings
For the period from October 1, 2018 to March 31, 2019
From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018

(in thousands of yen)
Operating revenues
Rent revenue-real estate （Note 7)¥7,068,551¥7,066,950

Other lease business revenue (Note 7)

1,128,554

1,298,047

218,061

212,130

8,415,167

8,577,129

3,733,705

3,984,558

661,991

638,549

Gain on sales of real estate property (Note 7)
Total operating revenues
Operating expenses
Expenses related to rent business (Note 7)
Asset management fees
Asset custody fees

9,722

9,463

Administrative service fees

30,60129,733

Directors' compensation

4,500

4,500

Other operating expenses

89,83593,385

Total operating expenses

4,530,355

4,760,189

3,884,811

3,816,939

61

61

1,160

-

Operating income
Non-operating income
Interest income
Dividends and redemption-prescription

567

-

1,789

61

Interest expenses

441,044434,188

Interest expenses on investment corporation bonds

19,653

18,540Financing-related expenses

93,482

92,203

Amortization of organization costs

5,038

5,066

Amortization of investment corporation bond issuance costs

3,714

3,714

Interest on refund
Total non-operating income
Non-operating expenses

Amortization of investment unit issuance costs

38,906

61,990Total non-operating expenses

601,840

615,704

Ordinary income

3,284,760

3,201,296

Income before income taxes

3,284,760

3,201,296

1,027

3,443

1,027

3,443

Income taxes
Current
Total income taxes

3,283,732

3,197,852

Retained earnings brought forward

149

299

Unappropriated retained earnings¥3,283,881¥3,198,151

Net income

See accompanying notes to financial statements.

47

Kenedix Retail REIT Corporation

Statement of Changes in Net Assets
For the period from October 1, 2018 to March 31, 2019
Unitholders' equity
Unitholders' capital

Surplus

Deduction fromunitholders' capital
Allowance

Total

for

deduction

temporaryfromdifference

unitholders'adjustments

capitalUnappropriated

Total
Total

unitholders'surplusequity¥3,175,962¥3,175,962¥116,565,229

surplus(3,175,663)(3,175,663)(3,175,663)

Net income

3,197,852

3,197,852

3,197,852

Unitholders'
capitalUnitholders'retained

capital, net

earnings(in thousands of yen)
Balance as of March 31,
2018¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267

Changes of items during
the period
Dividends from

Net changes of items
other thanunitholders’ equity
Total changes of items
during the period

-

-

-

-

22,18822,18822,188¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,198,151¥3,198,151¥116,587,418(3,198,002)(3,198,002)(3,198,002)

3,283,732

3,283,732

3,283,732

Balance as of September
30, 2018 (Note 8)
Changes of items during
the period
Dividends fromsurplus
Net income
Net changes of items
other thanunitholders’ equity
Total changes of items
during the period

-

-

-

-

85,73085,73085,730¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,283,881¥3,283,881¥116,673,148

Balance as of March 31,
2019 (Note 8)48

Valuation and translation adjustments
Deferred gains orlosses on hedges

Total valuation

Total net assets

and translation
adjustments(in thousands of yen)

Balance as of March 31,
2018¥19,879¥19,879¥116,585,108

Changes of items
during the period
Dividends from
(3,175,663)

surplus3,197,852

Net income
Net changes of
items other thanunitholders’ equity

122,280

122,280

122,280

122,280

122,280

144,469¥142,159¥142,159¥116,729,578

Total changes of items
during the period
Balance as of September
30, 2018 (Note 8)
Changes of items
during the period
Dividends from
(3,198,002)

surplus3,283,732

Net income
Net changes of
items other thanunitholders’ equity(309,739)(309,739)(309,739)(309,739)(309,739)(224,009)¥(167,579)¥(167,579)¥116,505,569

Total changes of items
during the period
Balance as of March
31, 2019 (Note 8)

See accompanying notes to financial statements.

49

Kenedix Retail REIT Corporation

Statement of Cash Flows
For the period from October 1, 2018 to March 31, 2019
From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018

(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes¥3,284,760¥3,201,296

Depreciation and amortization

991,733

972,385

5,038

5,066

Amortization of organization costs
Amortization of investment corporation bond issuance costs

3,714

3,714

Amortization of investment unit issuance costs

38,906

61,990Interest income

(61)

(61)

Interest expenses

460,697452,729

Decrease (increase) in operating accounts receivable

34,449(16,596)

Decrease (increase) in consumption taxes receivable

175,068(175,068)

Decrease (increase) in prepaid expenses

120,089(99,609)

Increase (decrease) in operating accounts payable(193,175)

162,653

Increase (decrease) in accounts payable-other67,472

7,007

Increase (decrease) in accrued consumption taxes

130,986(260,071)

Increase (decrease) in advances received(9,048)42,169

Increase (decrease) in deposits received

5,781(39,832)

Decrease (increase) in long-term prepaid expenses(51,043)(60,278)

Decrease in net property, plant and equipment held in trust due to sale

3,462,719

907,424

Other(55,494)(2,207)

Subtotal

8,472,596

5,162,711

Interest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

61

61(460,401)(444,535)(3,443)(3,650)8,008,812

4,714,587(4,619,028)(8,461,827)

Net cash provided by (used in) investing activities
Purchase of property, plant and equipment in trust(2,039)(2,307)

Repayments of tenant leasehold and security deposits in trust(582,124)(515,495)

Proceeds from tenant leasehold and security deposits in trust

222,061

524,895

Proceeds from restricted bank deposits in trust

215,676

215,676(4,765,454)(8,239,058)

Purchase of intangible assets

Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Increase in short-term loans payable

2,750,000-

Decrease in short-term loans payable(2,750,000)(10,170,000)

Proceeds from long-term loans payable

5,650,000

15,170,000

Repayments of long-term loans payable(5,650,000)--

1,983,922

Dividends paid

(3,198,020)(3,175,454)

Net cash provided by (used in) financing activities(3,198,020)

3,808,468

Net increase (decrease) in cash and cash equivalents

45,336283,996

Proceeds from issuance of investment corporation bonds

Cash and cash equivalents at the beginning of the period

19,402,822

19,118,825

Cash and cash equivalents at the end of the period (Note 9)¥19,448,158¥19,402,822

See accompanying notes to financial statements.

50

Kenedix Retail REIT Corporation

Notes to Financial Statements
For the period from October 1, 2018 to March 31, 2019

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Retail REIT Corporation (“KRR”) was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan(the “Investment Trust Act”). On February 10, 2015, KRR was listed on the Real Estate Investment Trust Securities (J-REIT) Market of Tokyo Stock
Exchange, Inc. (the Tokyo Stock Exchange) (Securities code: 3453). Subsequently, KRR raised funds through public offerings, including international
offerings. As a result, the number of investment units issued as of March 31, 2019 was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needs of local area customers andhave stable demand from retailers and customers, and also seeks to invest in distribution centers, which supplement shopping centers in providing goods toconsumers, in order to provide stable investment returns over the long term. Sponsored by Kenedix, Inc., KRR entrusts its asset management andinvestment operations to Kenedix Real Estate Fund Management, Inc. (“KFM”), with the following strategies.
(Note) For management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for daily needs asretail properties that generally have the following characteristics:
a. Retail trade area of an approximate radius of one to ten kilometers (and generally, a radius of three to five kilometers), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and services
KRR acquired two properties (Konami Sports Club Shibuya with acquisition price of 3,400 million yen and Costco Wholesale Sapporo Warehouse withacquisition price of 4,210 million yen), and sold one property (K’s Denki Nakagawa Tomita (Land) with sale price of 1,128 million yen). For the period ended
September 30, 2018, the portfolio of 53 properties (total acquisition prices of 212,897 million yen) as a whole performed well with an overall occupancy ratioof 99.4% as of September 30, 2018.
KRR acquired one property (Musashi Ranzan Distribution Center (90% quasi co-ownership interest) with acquisition price of 3,879 million yen, and soldtwo properties (Solala Plaza (49% quasi co-ownership interest) with sale price of 2,930 million yen (initial acquisition price of 2,802 million yen) and Gourmet
City Chiba-Chuo with sale price of 800 million yen (initial acquisition price of 760 million yen). For the period ended March 31, 2019, the portfolio of 53
properties (total acquisition prices of 213,214 million yen) as a whole performed well with an overall occupancy ratio of 99.2% as of March 31, 2019.
Furthermore, the portfolio was diversified in terms of tenants as there were 520 and 511 end-tenants as of September 30, 2018 and March 31, 2019 in
KRR’s properties, respectively.
Basis of Presentation
KRR maintains its accounting records and prepares its financial statements in accordance with accounting principles generally accepted in Japan(Japanese GAAP), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments and Exchange Act ofJapan and related regulations, which are different in certain respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are basically a translation of the financial statements of KRR, which were prepared in accordance with Japanese
GAAP and were presented in the Semiannual Securities Report of KRR filed with the Kanto Local Finance Bureau. In preparing the accompanying financial
statements, certain reclassifications and modifications have been made to the financial statements issued domestically in order to present them in a format
that is more familiar to readers outside Japan. In addition, the notes to financial statements include certain information that might not be required underJapanese GAAP but is presented herein as additional information.
KRR’s fiscal period is a six-month period which ends at the end of March or September. KRR does not prepare consolidated financial statements
because it has no subsidiaries.

51

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Property, Plant and Equipment (including trust assets)
Property, plant and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line method over the estimateduseful lives of the assets ranging as stated below:

Buildings

From October 1, 2018
to March 31, 20192-70 years

From April 1, 2018
to September 30, 20182-70 years

Structures

8-59 years

8-59 years

Machinery and equipment

2-25 years

2-25 years

Tools, furniture and fixtures

3-15 years

3-15 years(B) Intangible Assets (including trust assets)
Intangible assets are amortized by the straight-line method.
(C) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line method.
(D) Organization Costs
Organization costs are amortized over a period of 5 years under the straight-line method.
(E) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of 3 years under the straight-line method.
(F) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over a maturity period under the straight-line method.
(G) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, which are commonly utilized in the ownership of commercial properties in Japan, all relevant assets andliabilities in trust are recorded on the balance sheets and the statements of income and retained earnings.
(H) Revenue Recognition
Operating revenues consist of rental revenues including base rents, common area charges and other operating revenues, which include utility charge
reimbursements, parking space rental revenues and other miscellaneous revenues. Rental revenues are generally recognized on an accrual basis
over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can be reasonably estimated.
Reimbursements from tenants including utility charge reimbursements are recorded on a gross basis and such amounts are recorded both asrevenues and expenses during the fiscal period.
(I)

Taxes on Property and Equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on a calendar year basis.
These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to said period. Under Japanese
tax regulations, the seller of the property is liable for these taxes on the property from the date of disposal to the end of the calendar year in which theproperty is disposed. The seller, however, is reimbursed by the purchaser for these accrued property-related tax liabilities.
When KRR purchases properties, it typically allocates the portion of the property-related taxes related to the period following the purchase date ofeach property through the end of the calendar year. The amounts of those allocated portions of the property-related taxes are capitalized as part of theacquisition costs of the related properties. Capitalized property-related taxes amounted to ¥39,223 thousand and ¥18,448 thousand as of September
30, 2018 and March 31, 2019, respectively.

52

(J) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets andliabilities using the statutory tax rates.
(K) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes applicable tothe acquisition of assets are included in the cost of acquisition for each asset.
(L) Derivative Financial Instruments
KRR utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure to changes in interest rates.
KRR deferred recognition of gains or losses resulting from changes in fair value of interest-rate swap contracts because these contracts met thecriteria for deferral hedge accounting. However, KRR adopted the special treatment for interest-swap contracts if they met the criteria for hedge
accounting under this treatment. An assessment of the effectiveness of hedging is omitted for interest rate swaps because they fulfill the requirements
for the special treatment.
(M) 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 of market value fluctuation, with maturities of three months or less from the date of purchase.
(N) Presentation of Amounts
Amounts have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP and filed with regulatory authorities
in Japan. Unless otherwise noted, amounts are rounded down and ratios are rounded off in the accompanying financial statements. Totals shown in
the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

53

3. COLLATERAL
Assets pledged as collateral and related secured liabilities are as follows:
Assets pledged as collateral

As of March 31, 2019

As of September 30, 2018
(in thousands of yen)

Buildings in trust¥2,715,656¥2,688,066

Structures in trust

45,98947,581Tools, furniture and fixtures in trust
Land in trust
Total
Secured liabilities

2,970

1,757

7,811,297

7,811,297

10,575,913

10,548,702

As of March 31, 2019

As of September 30, 2018

2,355,246

2,577,920¥2,355,246¥2,577,920

As of March 31, 2019

As of September 30, 2018

Tenant leasehold and security deposits in trust
Total

4. COMMITMENT LINE CONTRACTSKRR has commitment line contracts with the banks with which it does business.
(in thousands of yen)
Total amount of commitment line contracts¥2,000,000¥2,000,000

Balance of loans payable outstanding--

Remaining amount¥2,000,000¥2,000,000

5. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
The following summarizes allowance for temporary difference adjustments as of March 31, 2019
1. Reasons, related assets, initial amount, allowance and reversal
Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)

Balance atthe end of
the period

Reason forreversal

Related assets, etc.

Reason for allowance

Initial amount

Buildings in trust,
Leasehold right in trust

Amortization ofleasehold right in trust
and the amount inexcess of depreciation¥9,754¥9,754¥-¥-¥9,754-¥9,754¥9,754¥-¥-¥9,754-Total
2. Method of reversal

Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

The following summarizes allowance for temporary difference adjustments as of September 30, 2018
1. Reasons, related assets, initial amount, allowance and reversal
Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)

Balance atthe end of
the period

Reason forreversal

Related assets, etc.

Reason for allowance

Initial amount

Buildings in trust,
Leasehold right in trust

Amortization ofleasehold right in trust
and the amount inexcess of depreciation¥9,754¥9,754¥-¥-¥9,754-¥9,754¥9,754¥-¥-¥9,754-Total
2. Method of reversal

Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

54

6. NET ASSETSKRR 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 statedcapital. KRR is required to maintain net assets of at least ¥50 million as required by the Investment Trust Act.

7. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATEDEXPENSES AND GAIN ON SALES OF REAL ESTATE PROPERTY
Rental and other operating revenues and property-related expenses for the periods from October 1, 2018 to March 31, 2019 and from April 1, 2018 toSeptember 30, 2018 consist of the following:
From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018
(in thousands of yen)

Rental and other operating revenues:
Rent revenue-real estate:
Rental revenues
Rental revenues from limited proprietary rights of landCommon area charges¥5,813,708¥5,807,967

929,592

929,815

325,250

329,167

7,068,551

7,066,950

Parking space rental revenues

197,311

204,954

Utility charge reimbursement597,255

710,167

Subtotal
Other lease business revenue:

Miscellaneous

333,986

382,926

Subtotal

1,128,554

1,298,047

8,197,106

8,364,998

Property management fees and facility management fees

833,594

847,105

Utilities

598,956

682,433

Taxes

690,559

690,135

Repairs and maintenance

200,684

339,258

Insurance

13,07813,191

Trust fees

22,90022,846

Depreciation

990,872

971,850

Others383,060

417,737

Total property-related expenses

3,733,705

3,984,558

Net operating income from real estate rental business¥4,463,400¥4,380,440

Total rental and other operating revenues
Property-related expenses:
Expenses related to rent business:

Gain on sales of real estate property:
From October 1, 2018 to March 31, 2019(in thousands of yen)
Solala Plaza (49% quasi co-ownership interest)
Revenue from sales of real estate property¥2,930,200

Cost of real estate property

2,730,981

Other sales expenses
Gain on sales of real estate property

19,690¥179,528(in thousands of yen)

Gourmet City Chiba-Chuo
Revenue from sales of real estate property¥800,000Cost of real estate property

731,737

Other sales expenses

29,729Gain on sales of real estate property¥38,532

55

From April 1, 2018 to September 30, 2018
(in thousands of yen)
K’s Denki Nakagawa Tomita (Land)
Revenue from sales of real estate property
Cost of real estate property
Other sales expenses
Gain on sales of real estate property¥1,128,000
907,4248,444¥212,130

8. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018

Total number of authorized investment units

5,000,000 units

5,000,000 units

Total number of investment units issued and outstanding

507,700 units

507,700 units

9. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of March 31, 2019 and September 30, 2018:
As of March 31, 2019

As of September 30, 2018

(in thousands of yen)
Cash and deposits¥7,475,785¥7,582,764

Cash and deposits in trust

13,647,110

13,710,471

Restricted bank deposits in trust *(1,674,737)(1,890,414)

Cash and cash equivalents¥19,448,158¥19,402,822*Restricted bank deposits in trust are retained for repayment of tenant leasehold and security deposits in trust.

10. LEASES(As lessee)
Future minimum lease payments under non-cancelable operating leases as of March 31, 2019 and September 30, 2018 are as follows:
As of March 31, 2019

As of September 30, 2018

(in thousands of yen)
Due within 1 year

¥10,500¥10,500

Due after 1 year

178,048

183,298

Total¥188,548¥193,798(As lessor)
Future minimum lease income under the non-cancelable operating leases as of March 31, 2019 and September 30, 2018 are as follows:
As of March 31, 2019

As of September 30, 2018

(in thousands of yen)
Due within 1 year

¥8,902,131¥9,188,950

Due after 1 year

55,971,359

59,957,431

Total¥64,873,490¥69,146,381

56

11. FINANCIAL INSTRUMENTS(A). Overview(1) Policy for financial instruments
KRR procures funds for asset acquisitions, repairs, payment of distributions, repayment of loans, etc. through loans from financial institutions, issuance ofinvestment corporation bonds, issuance of investment units and other means. With regard to the procurement of interest-bearing debts, KRR ensures that it
can effectively combine stable long-term funds with flexible short-term funds. Management of surplus funds is undertaken through various bank deposits
focusing on safety, liquidity and effectiveness. KRR uses derivatives for the purpose of hedging its exposure to changes in interest rates and other risks anddoes not enter into derivative transactions for speculative or trading purposes.
(2) Types of financial instruments and related risk
Bank deposits are for managing KRR’s surplus funds and are exposed to credit risk such as the bankruptcy of financial institutions at which funds aredeposited.
Loans payable and investment corporation bonds, which are made or issued primarily for the purpose of procuring funds for the acquisition of real estate
and trust beneficiary interests in real estate and have a repayment date of a maximum of 9 years and 6 months for loans payable and also have aredemption date of a maximum of 9 years and 1 month for investment corporation bonds as of March 31, 2019, the end of the eighth fiscal period, areexposed to liquidity risk where alternative funds may not be procured by the repayment date. Also, loans payable with floating interest rates are exposed tointerest rate fluctuation risk. Derivatives are used for the purpose of hedging interest rate fluctuation risk for a certain portion of the loans payable.
Tenant leasehold and security deposits are deposits received from tenants, which are exposed to liquidity risks when the tenants vacate the properties.
(3) Risk management for financial instruments
a. Credit risk
While bank deposits are exposed to credit risk such as the bankruptcy of financial institutions at which funds are deposited, such risk is monitored bydeposits in non-interest bearing ordinary savings accounts or with financial institutions with credit ratings above a certain level. In utilizing derivatives, KRR
aims to mitigate counterparty risk such as by transacting with financial institutions with favorable ratings.
b. Market risk
While loans payable with floating rates are exposed to interest rate fluctuation risk, such risk is monitored by adjusting the rate of the balance of loans
payable with floating rates against the total loans payable according to the financial environment, interest rate forecasts by continuous monitoring, etc. andby using derivatives, etc. A risk management policy is established with regard to the execution and management of derivatives and such transactions are
conducted based on this policy.
c. Liquidity risk
Though loans payable are subject to liquidity risk, KRR reduces such risk by spreading out payment due dates and by diversifying financial institutions.
Liquidity risk is also managed by such means as regularly checking the balance of cash reserves.
Though tenant leasehold and security deposits are subject to liquidity risk, in principle, KRR reduces such risk by retaining funds that would enable KRR toreturn necessary amounts to tenants.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value isreasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in adifferent fair value.
(B). Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheets and estimated fair value are shown in the following table. Items whose fair values are
difficult to determine are not included in the following table (*2).

57

As of March 31, 2019
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥7,475,785¥7,475,785(2) Cash and deposits in trust

13,647,110

13,647,110

-

Total

¥

-

21,122,896

21,122,896-(1) Short-term loans payable

2,750,000

2,750,000-(2) Current portion of long-term loans payable

13,350,000

13,361,605

11,605(3) Investment corporation bonds

7,000,000

7,023,800

23,800(4) Long-term loans payable

83,000,000

83,539,962

539,962(5) Tenant leasehold and security deposits in trust

2,132,211

2,131,966(245)

108,232,211

108,807,334¥(167,579)¥(167,579)

Total
Derivative transactions

575,122¥-(Note) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing the net liability
position.
As of September 30, 2018
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥7,582,764¥7,582,764(2) Cash and deposits in trust

13,710,471

13,710,471

-

Total

¥

-

21,293,236

21,293,236-(1) Short-term loans payable

2,750,000

2,750,000-(2) Current portion of long-term loans payable

12,000,000

11,985,151(14,848)(3) Investment corporation bonds

7,000,000

6,951,700(48,300)(4) Long-term loans payable

84,350,000

84,172,853(177,146)(5) Tenant leasehold and security deposits in trust

2,383,685

2,376,485(7,199)108,483,685

108,236,191¥142,159¥142,159

Total
Derivative transactions(247,493)¥-*1: Methods to determine the estimated fair value of financial instruments and matters related to derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying amount approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time with floating interest rates, their carrying amount approximates fair value.
(2) Current portion of long-term loans payable and (4) Long-term loans payable
Among these items, the fair value of loans payable with fixed interest rates is calculated based on the present value, which is the total amount of principal
and interest discounted by the estimated interest rate to be applied in the event that KRR conducts new loans of the same type. As for the fair value of loans
payable with floating interest rates, it is based on the carrying amount since market interest rates are reflected in the short term and the fair value is believed
to approximate the carrying amount as the credit standing of KRR has not changed significantly since the loans were made. (However, the fair value of
long-term loans payable subject to the special treatment for interest-rate swaps is based on the present value of the total of principal and interest, accounted
for together with the applicable interest-rate swaps, discounted by the estimated interest rate to be applied in the event that KRR conducts new loans
payable of the same type.)58

(3) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(5) Tenant leasehold and security deposits in trust
The fair value is determined based on the present value of contractual cash flows discounted at the discount rate into which the period to the repayment
date and the credit risk are reflected.
Derivative transactions
Please refer to Note “12. DERIVATIVE TRANSACTIONS”.
*2: Financial instruments whose fair values are extremely difficult to determineClassification

As of March 31, 2019

As of September 30, 2018

(in thousands of yen)
Tenant leasehold and security deposits in trust (Note)¥10,244,667¥10,414,116

Total¥10,244,667¥10,414,116(Note) It is extremely difficult to determine their fair values based on estimated future cash flows because no quoted market price is available and therepayment dates of those deposits are not certain. Therefore, tenant leasehold and security deposits in trust are not included in the above
quantitative information.
*3: Redemption of monetary claims scheduled to be due after the balance sheet date
As of March 31, 2019
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Cash and deposits¥7,475,785

Cash and deposits in trust

13,647,110

Total

¥

-

¥

-

-

¥21,122,896

¥

¥

-

-

-

¥

¥

-

-

-

¥

¥

-

-

-

¥

-

-

¥

-

As of September 30, 2018
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Cash and deposits¥7,582,764

Cash and deposits in trust

13,710,471

Total

¥

-

¥

-

-

¥21,293,236

¥

¥

-

-

¥

-

¥

-

-

¥

-

¥

-

-

¥

-

-

¥

-

*4: Redemption of long-term loans payable and other interest-bearing debt scheduled to be due after the balance sheet date
As of March 31, 2019
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security
deposits in trust
Total¥2,750,000

-

¥

-

¥

-

¥

-

1,000,000-

1,000,000

¥

-

¥

-

5,000,000-

13,350,000

7,000,000

13,300,000

9,050,000

7,500,000

46,150,000

435,430

435,430

435,430

224,712

13,99589,801¥16,535,430¥7,435,430¥14,735,430¥10,274,712¥7,513,995¥51,239,80159

As of September 30, 2018
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable¥2,750,000

Investment corporation bonds
Long-term loans payable

-

¥

-

¥

-

¥

-

¥

-

-

-

-

2,000,000-

5,000,000

12,000,000

7,000,000

13,300,000

9,050,000

7,500,000

47,500,000

435,430

435,430

435,430

435,430

13,99596,798¥15,185,430¥7,435,430¥13,735,430¥11,485,430¥7,513,995¥52,596,798

Tenant leasehold and security
deposits in trust
Total

¥

12. DERIVATIVE TRANSACTIONS
The contract amount and the fair value of interest-rate swap transactions as of March 31, 2019 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodType of derivativetransactions

Principle method Interest rate swap
transaction:
Receive/floating andpay/fixed
SpecialInterest rate swap
treatment oftransaction:interest-rate
Receive/floating andswaps
pay/fixed
Total

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥32,340,000¥31,010,000

38,900,000

31,900,000¥71,240,000¥62,910,000

Fair value(in thousands of yen)¥(167,579)*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions¥(167,579)*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fair value isincluded in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods to determine theestimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-term loans payable and (4)Long-term loans payable.）
The contract amount and the fair value of interest-rate swap transactions as of September 30, 2018 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodType of derivativetransactions

Principle method Interest rate swap
transaction:
Receive/floating andpay/fixed
SpecialInterest rate swap
treatment oftransaction:interest-rate
Receive/floating andswaps
pay/fixed
Total

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥26,690,000¥25,360,000

44,550,000

38,900,000¥71,240,000¥64,260,000

Fair value(in thousands of yen)¥142,159*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions¥142,159*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fair value isincluded in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods to determine theestimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-term loans payable and (4)Long-term loans payable.）60

13. RELATED PARTY TRANSACTIONS
1．Parent Company, major corporate unitholders and other
8th Fiscal Period (October 1, 2018 to March 31, 2019) and 7th Fiscal Period (April 1, 2018 to September 30, 2018): Not applicable
2．Affiliated companies and other
8th Fiscal Period (October 1, 2018 to March 31, 2019) and 7th Fiscal Period (April 1, 2018 to September 30, 2018): Not applicable
3．Fellow subsidiary companies and other
8th Fiscal Period (October 1, 2018 to March 31, 2019) and 7th Fiscal Period (April 1, 2018 to September 30, 2018): Not applicable
4．Directors, major individual unitholders and other
8th Fiscal Period (October 1, 2018 to March 31, 2019) and 7th Fiscal Period (April 1, 2018 to September 30, 2018): Not applicable

14. INCOME TAXESKRR is subject to corporate income taxes at a regular statutory rate of approximately 32%. However, KRR may deduct from its taxable income amounts
distributed to its unitholders, provided the requirements under the Special Taxation Measures Law of Japan are met, including a requirement that it currently
distributes in excess of 90% of its net income for the fiscal period in order to be able to deduct such amounts. If KRR does not satisfy all of the requirements,
the entire taxable income of KRR will be subject to regular corporate income taxes. Since KRR distributed in excess of 90% of its distributable income in theform of cash distributions totaling ¥3,288 million and ¥3,198 million for the periods ended March 31, 2019 and September 30, 2018, respectively, thedistributions were treated as deductible distributions for purposes of corporate income taxes. The effective tax rates on KRR’s income were 0.03% and0.11% for the periods ended March 31, 2019 and September 30, 2018, respectively. The following table summarizes the significant differences between thestatutory tax rate and the effective tax rate:
As of March 31, 2019

As of September 30, 2018

Statutory tax rate

31.51%

34.59%

Deductible cash distributions(31.54)(34.55)

Others0.06

0.07

Effective tax rate

0.03%

0.11%

The significant components of deferred tax assets and liabilities:
As of March 31, 2019

As of September 30, 2018

(in thousands of yen)
Deferred tax assets:
Enterprise tax payable¥

Amortization of leasehold right in trust

10,47320

9,216

Depreciation

3,770

3,317

Asset retirement obligations

7,558

7,511

Deferred gains or losses on hedges¥

210

52,938-Subtotal deferred tax assets

74,761

20,256

Valuation allowance(74,761)(20,256)¥¥

Total deferred tax assets

-

-

61

15. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations reported on balance sheets
1. Summary of the asset retirement obligations
KRR has recognized the original state restoration obligations assumed under the fixed-term business-purpose land leasehold agreement as the asset
retirement obligations in connection with Sunny Noma acquired on February 10, 2015.
2. Method of calculating asset retirement obligations
Asset retirement obligations are calculated based on a discount rate of 1.256% after the useful life has been estimated to be 22 years and two months
based on the time period from the date of acquisition to the expiration of the agreement.
3. Changes in the amount of applicable asset retirement obligations consisted of the following:
From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018

(in thousands of yen)
Balance at the beginning of the period
Accretion adjustment
Balance at the end of the period¥23,778¥23,629

149

148¥23,927¥23,778

16. SEGMENT INFORMATION
Segment information for the periods from October 1, 2018 to March 31, 2019 and April 1, 2018 to September 30, 2018 is as follows:(A) Segment information
Disclosure is omitted because the real estate leasing business is KRR’s sole business and it has no reportable segment information to disclose.
(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 thestatements 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 statements of income andretained 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 of property, plant andequipment on the balance sheets.
(3) Information about each major customer
Disclosure is omitted because no net sales to a single external customer accounts for more than 10% of the operating revenue on the statements of income
and retained earnings.

6217. INVESTMENT AND RENTAL PROPERTIESKRR owns retail properties and logistics facility for rental purposes mainly in the four major metropolitan areas and other regional areas of Japan.
The book value and fair value concerning the above real estate for rental purposes are as follows.
From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018
(in thousands of yen)Book value
Balance at the beginning of the period¥215,270,828

Changes during the period
Balance at the end of the period
Fair value at the end of the period¥208,376,323(15,093)6,894,504

215,255,734

215,270,828¥229,995,800¥229,504,000

Note 1: Book value is acquisition cost less accumulated depreciation.
Note 2: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period ended March 31, 2019, the principal increase
was due to the acquisitions of real estate trust beneficiary interests in 1 property totaling 3,951,173 thousand yen and the principal decrease wasdue to the sales of real estate trust beneficiary interests in 2 properties totaling 3,462,719 thousand yen and depreciation amounting to 990,722
thousand yen and during the fiscal period ended September 30, 2018, the principal increase was due to the acquisitions of real estate trust
beneficiary interests in 2 properties totaling 7,961,786 thousand yen and the principal decrease was due to the sales of real estate trust beneficiaryinterests in 1 property totaling 907,424 thousand yen and depreciation amounting to 971,702 thousand yen.
Note 3: The fair value at the end of the period is the appraisal value determined by outside appraisers. In addition, the fair value of Solala Plaza (51.0%
quasi co-ownership interest) and Welcia Kishiwadakamori (Land) as of March 31, 2019 is based on the sales price (3,049,800 thousand yen and
560,000 thousand yen, respectively) under the trust beneficiary interest sales contracts entered into on November 14, 2018 and May 16, 2019,respectively. The fair value of Solala Plaza as of September 30, 2018, is based on the sales price (5,980,000 thousand yen) under the trust
beneficiary interest sales contracts entered into on November 14, 2018.
The profit or loss for the periods ended March 31, 2019 and September 30, 2018 concerning investment and rental properties is included in Note “7.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES AND GAIN ON SALES OF REAL ESTATEPROPERTY.”

18. PER UNIT INFORMATION
From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018

Net asset value per unit
Net income per unit

¥229,477¥229,918¥6,467¥6,298Net income per unit is calculated by dividing net income by the day-weighted average number of investment units outstanding during the fiscal period
ended March 31, 2019 (507,700 units) and during the fiscal period ended September 30, 2018 (507,700 units). Net income per unit after adjusting forresidual units is not included because there were no residual investment units.
The basis for calculating net income per unit is as follows:

Net income (in thousands of yen)
Net income not attributable to ordinary unitholders (in thousands of yen)
Net income attributable to ordinary unitholders (in thousands of yen)
Weighted average number of units during the period (units)

From October 1, 2018

From April 1, 2018

to March 31, 2019

to September 30, 2018

¥3,283,732¥3,197,852--¥3,283,732¥3,197,852

507,700

507,700

19. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

6320. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant and equipment and intangible assets consist of the following as of March 31, 2019:

Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks*(in thousands of yen)
Buildings in trust¥57,984,991¥3,052,716¥1,896,850¥59,140,856¥5,692,853¥918,486¥53,448,003

Structures in trust

2,872,268

131,913

4,861

2,999,320

359,296

55,4752,640,023

214,971

64,10328,506

250,568

30,701

5,767

219,866

96,472

4,543

7,729

93,286

31,6497,015

61,636

155,092,322

1,198,390

1,723,994

154,566,718--

154,566,718

378

-

378

-

-

-

-

216,261,403

4,451,666

3,662,320

217,050,750

6,114,501

986,744

210,936,249

216,261,403

4,451,666

3,662,320

217,050,750

6,114,501

986,744

210,936,249

4,349,916--

4,349,916

33,1543,978

4,316,761

7,763

2,039

-

9,803

3,520

861

6,282

¥4,357,679¥2,039-¥4,359,719¥36,675¥4,840¥4,323,044

Machinery andequipment in trust
Property,plant andequipment

Tools, furnitureand fixtures intrust
Land in trust
Construction inprogress in trust
Subtotal

Total
Intangible
assetsLeasehold rightin trust
Other

Total

¥

*The amount of increase during the period is primarily attributable to the acquisition of the real estate properties and capital expenditures.
Property, plant and equipment and intangible assets consist of the following as of September 30, 2018:

Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks*(in thousands of yen)
Buildings in trust¥54,980,817¥3,004,173

Structures in trust

2,804,224

Machinery andequipment in trust
Property,plant andequipment

and fixtures in¥57,984,991¥4,955,253¥901,455¥53,029,737

68,043-2,872,268

304,244

54,3892,568,023

214,510460-

214,971

28,383

5,760

186,587

79,91816,554-96,472

26,501

6,118

69,971

150,317,484

5,682,262

907,424

155,092,322--

155,092,322

378

-

-

378

-

-

378

208,397,334

8,771,494

907,424

216,261,403

5,314,383

967,723

210,947,020

208,397,334

8,771,494

907,424

216,261,403

5,314,383

967,723

210,947,020

4,349,916--

4,349,916

29,1763,9784,320,740

trust
Construction inprogress in trust
Subtotal

Total

Total

-

Tools, furniture

Land in trust

Intangible
assets¥Leasehold rightin trust
Other

4,455
¥ 4,354,372

3,307
¥

3,307

¥

-

7,763

2,659

534

5,103

-

¥ 4,357,679¥ 31,835¥ 4,513¥ 4,325,844**The amount of increase during the period is primarily attributable to the acquisition of the real estate properties and capital expenditures.

6421. SHORT-TERM LOANS PAYABLE AND LONG-TERM LOANS PAYABLE
The following summarizes short-term loans payable and long-term loans payable outstanding as of March 31, 2019:
Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodAverageinterest rate
（Note 2）
（Note 3）

Balance atthe end of
the period(in thousands of yen)
Short-termloanspayableSumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation¥-¥2,750,000

¥

-

-

2,750,000-

2,750,000

Subtotal

2,750,000

2,750,000

2,750,000

2,750,000

750,000-

750,000-

Aozora Bank, Ltd.

500,000-

500,000-

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
The Musashino Bank,
Ltd.
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.

400,000-

400,000-

200,000-

200,000-

200,000-

200,000-

150,000-

150,000-

1,850,000-

1,850,000-

550,000-

550,000-

500,000-

500,000-

300,000-

300,000-

250,000-

250,000-

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Aozora Bank, Ltd.

710,000--

710,000

620,000--

620,000

350,000--

350,000

250,000--

250,000

Resona Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited

250,000--

250,000

200,000--

200,000

Mizuho Bank, Ltd.

300,000--

300,000

MUFG Bank, Ltd.

1,270,000--

1,270,000

Aozora Bank, Ltd.

640,000--

640,000

Resona Bank, Limited

400,000--

400,000

Mizuho Bank, Ltd.

360,000--

360,000

300,000--

300,000

700,000--

700,000

2,400,000--

2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

500,000--

500,000

500,000--

500,000

400,000--

400,000

400,000--

400,000

350,000--

350,000

The Musashino Bank,
Ltd.

Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation(Note 7)
MUFG Bank, Ltd.
(Note 7)
MUFG Bank, Ltd.
(Note 7)
Sumitomo Mitsui Trust
Bank, Limited (Note 7)
Aozora Bank, Ltd.
(Note 7)
Resona Bank, Limited(Note 7)
The Gunma Bank,
Ltd.(Note 7)
The Musashino Bank,
Ltd. (Note7)
Mizuho Bank, Ltd.
(Note7)Use

Remarks

February 13,
2019
January 31,
2020(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(%)

MUFG Bank, Ltd.

Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

Current
portion of
long-term
loans
payable¥2,750,000

Payment due
date（Note 4）

0.463
0.461

0.534

March 31,
2019

0.545

March 31,
2019

0.368

September
30, 2019

0.488

August 31,
2019

0.488

August 31,
2019

0.488

August 31,
2019

0.463

September
30, 2019

0.751

February 10,
2020

65

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Current
portion of
long-term
loans
payablePayment due
date（Note 4）Use

Remarks

0.751

February 10,2020(Note 5)

Unsecured/
Nonguaranteed

0.865

February 10,
2021

0.978

February 10,2022(Note 5)

Unsecured/
Nonguaranteed(%)

Mizuho Trust &Banking Co., Ltd.
(Note7)300,000--

300,000

Subtotal

19,000,000-

5,650,000

13,350,000

Sumitomo Mitsui
Banking Corporation

3,000,000--

3,000,000

MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

700,000--

700,000

500,000--

500,000

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

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

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

1,000,000--

1,000,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

450,000--

450,000

200,000--

200,000

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

1,150,000--

1,150,000

1,000,000--

1,000,000

700,000--

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000

400,000--

400,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

Mizuho Trust &Banking Co., Ltd.
Mizuho Bank, Ltd.
Resona Bank, Limited

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）Development Bank ofJapan Inc. (Note 6)
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
MUFG Bank, Ltd.
Development Bank ofJapan Inc. (Note 6)
MUFG Bank, Ltd.
Resona Bank, Limited
The Musashino Bank,Ltd.
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation

February 10,2021
February 10,
2022
April 16,
2025

0.975

March 31,
2023

0.994

March 31,
2023

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.243

April 16,2025
September 30,
2024
September 30,
2024
April 21,2026

66

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
MUFG Bank, Ltd.
The Gunma Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
Aozora Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
MUFG Bank, Ltd.
(Note 6)Development Bank ofJapan Inc.（Note 6）
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
（Note 6）
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
Long-term
loans
payableResona Bank, Limited
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
MUFG Bank, Ltd.
(Note 6)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
MUFG Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
(Note 6)

Averageinterest rate
（Note 2）
（Note 3）

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)
October 31,
2025
September 30,
2021

890,000--

890,000

0.888

500,000--

500,000

0.550

2,000,000--

2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

2,600,000--

2,600,000

500,000--

500,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

600,000--

600,000

0.400

500,000--

500,000

0.553

400,000--

400,000

0.553

200,000--

200,000

0.553

1,500,000--

1,500,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

600,000--

600,000

0.696

600,000--

600,000

0.815

500,000--

500,000

0.814

200,000--

200,000

0.814

500,000--

500,000

0.903

October 31,
2026

500,000--

500,000

500,000--

500,000

1.033

May 18,2027

400,000--

400,000

500,000--

500,000

1.050

500,000--

500,000

1.049

300,000--

300,000

1.050

500,000--

500,000

0.670

1,500,000--

1,500,000

0.918

500,000--

500,000

0.930

1,500,000--

1,500,000

1.029

1,500,000--

1,500,000

1.100

500,000--

500,000

1.035

1,200,000--

1,200,000

1.000

0.485

0.772

January 31,
2027

April 27,
2021

April 27,
2021

October 31,
2024

October 31,
2024

May 18,2027

September
29, 2023
September
30, 2026
September
29, 2027
September
29, 2028
October 3,
2027
February 10,
2028

67

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
1,250,000--

1,250,000

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

800,000--

800,000

900,000--

900,000

0.988

2,600,000--

2,600,000

0.985

2,000,000--

2,000,000

0.902

1,000,000--

1,000,000

1.090

1,000,000--

1,000,000

0.907

1,500,000--

1,500,000

0.999

500,000--

500,000

0.900

500,000--

500,000

0.999

500,000--

500,000

0.999

700,000--

700,000

0.913-

700,000-

700,000

0.726

Resona Bank, Limited-

500,000-

500,000

0.676

Aozora Bank, Ltd.

-

500,000-

500,000

0.726

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

-

400,000-

400,000

0.726-

400,000-

400,000

0.676-

1,850,000-

1,850,000

0.910

-

1,300,000-

1,300,000

0.860

77,350,000

56,500,000-

83,000,000¥99,100,000¥8,400,000¥8,400,000¥99,100,000

The Bank of Fukuoka,
Ltd.
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Nippon Life Insurance
Company
Sumitomo Mitsui Trust
Bank, Limited

Subtotal
Total

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

MUFG Bank, Ltd.

Mizuho Bank, Ltd.

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）0.603

August 31,
2022
April 30,
2027
April 30,
2027
April 30,
2026
April 30,2028
May 31,
2026

May 31,2027

March 31,2025

March 31,2026

March 31,2028

Note 1: Annual repayments of long-term loans payable (except for current portion of long-term loans payable) scheduled after the balance sheet date are as follows:
Due after 1 year
through 2 years
Long-term loans
payable¥7,000,000

Due after 2 years
through 3 years¥13,300,000

Due after 3 years
through 4 years（in thousands yen）
¥9,050,000

Due after 4 years
through 5 years¥7,500,000

Due after 5 years¥46,150,000

Note 2: All debts except for the following Note 6 are loans payable at a floating rate.
Note 3: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to loans payable forwhich interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into consideration
the effects of the interest rate swaps are indicated.
Note 4: All the repayment methods of debt financing are lump-sum repayments on the due date.
Note 5: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) and repayment ofdebts.
Note 6: Loans payable at a fixed rate.
Note 7: Loans payable are listed in the current portion of long-term loans payable from the fiscal period under review, listed in long-term loans payable in the previous fiscal
period.

68

The following summarizes short-term loans payable and long-term loans payable outstanding as of September 30, 2018:
Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodAverageinterest rate
（Note 2）
（Note 3）

Balance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.

Short-termloanspayable¥Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(%)-¥900,000

300,000-

300,000-

2,600,000-

2,600,000-

1,070,000-

1,070,000-

Aozora Bank, Ltd.

640,000-

640,000-

Resona Bank, Limited

400,000-

400,000-

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
MUFG Bank, Ltd.

360,000-

360,000-

300,000-

300,000-¥-

200,000-

200,000-

3,400,000-

3,400,000

0.455

April 19,
2018

0.455

April 21,
2018

-

0.455

September 30,
2018

0.456

February 13,
2019

0.534

March 31,
2019

0.545

March 31,
2019

0.368

September
30, 2019

0.481

August 31,
2019

0.481

August 31,
2019

0.481

August 31,
2019

0.465

September
30, 2019

Sumitomo Mitsui
Banking Corporation(Note 8)
Sumitomo Mitsui
Banking Corporation
Subtotal

2,750,000--

2,750,000

12,920,000-

10,170,000

2,750,000

MUFG Bank, Ltd.

750,000--

750,000

Aozora Bank, Ltd.

500,000--

500,000

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

1,850,000--

1,850,000

MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited

550,000--

550,000

500,000--

500,000

Resona Bank, Limited
The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.
(Note 7)
Sumitomo Mitsui Trust
Bank, Ltd. (Note 7)
Mizuho Trust &Banking Co., Ltd.
(Note 7)
Aozora Bank, Ltd.
(Note 7)
Resona Bank, Limited(Note 7)
Sumitomo Mitsui Trust
Bank, Limited (Note 7)

300,000--

300,000

250,000--

250,000

710,000--

710,000

The Musashino Bank,
Ltd.
Sumitomo Mitsui
Banking Corporation

Current
portion of
long-term
loans
payable¥900,000

Payment due
date（Note 4）620,000--

620,000

350,000--

350,000

250,000--

250,000

250,000--

250,000

200,000--

200,000

Mizuho Bank, Ltd.

-

300,000-

300,000

MUFG Bank, Ltd.

-

1,270,000-

1,270,000

Aozora Bank, Ltd.

-

640,000-

640,000

Resona Bank, Limited-

400,000-

400,000

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
Subtotal-

360,000-

360,000-

300,000-

300,000-

700,000-

700,000

8,030,000

3,970,000-

12,000,000

69Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.

2,400,000--

2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

500,000--

500,000

Resona Bank, Limited

500,000--

500,000

The Gunma Bank, Ltd.

400,000--

400,000

400,000--

400,000

350,000--

350,000

300,000--

300,000

3,000,000--

3,000,000

MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

700,000--

700,000

500,000--

500,000

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

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

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

1,000,000--

1,000,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

450,000--

450,000

200,000--

200,000

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

1,150,000--

1,150,000

1,000,000--

1,000,000

700,000--

700,000

Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation

Mizuho Trust &Banking Co., Ltd.
Mizuho Bank, Ltd.
Resona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
MUFG Bank, Ltd.
Development Bank ofJapan Inc. (Note 6)
MUFG Bank, Ltd.
Resona Bank, Limited
The Musashino Bank,Ltd.
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）0.751

February 10,
2020

0.865

February 10,
2021

0.978

February 10,2022

February 10,2021
February 10,
2022
April 16,
2025

0.975

March 31,
2023

0.994

March 31,
2023

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,2024

70

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.

Payment due
date（Note 4）--650,000

500,000--

500,000

1,500,000--

1,500,000

400,000--

400,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

500,000--

500,000

0.550

2,000,000--

2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

2,600,000--

2,600,000

500,000--

500,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

600,000--

600,000

0.400

500,000--

500,000

0.553

400,000--

400,000

0.553

200,000--

200,000

0.553

1,500,000--

1,500,000

400,000--

400,000

Aozora Bank, Ltd.

400,000--

400,000

Resona Bank, Limited
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
MUFG Bank, Ltd.
(Note 6)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

300,000--

300,000

600,000--

600,000

0.696

600,000--

600,000

0.815

500,000--

500,000

0.814

200,000--

200,000

0.814

500,000--

500,000

0.903

October 31,
2026

500,000--

500,000

500,000--

500,000

1.033

May 18,2027

400,000--

400,000

500,000--

500,000

1.050

500,000--

500,000

1.049

300,000--

300,000

1.050

MUFG Bank, Ltd.
The Gunma Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
Aozora Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
MUFG Bank, Ltd.
(Note 6)Development Bank ofJapan Inc.（Note 6）
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
（Note 6）
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited

Development Bank ofJapan Inc. (Note 6)
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

650,000

Sumitomo Mitsui Trust
Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）

1.110

March 31,
2024

1.243

April 16,
2025

0.485

0.772

September 30,
2024
September 30,
2024
April 21,2026
October 31,
2025
September 30,
2021

January 31,
2027

April 27,
2021

April 27,
2021

October 31,
2024

October 31,
2024

May 18,2027

71

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
MUFG Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
(Note 6)
MUFG Bank, Ltd.

Long-term
loans
payableMizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation--

500,000

0.670

1,500,000--

1,500,000

0.918

500,000--

500,000

0.930

1,500,000--

1,500,000

1.029

1,500,000--

1,500,000

1.100

500,000--

500,000

1.035

1,200,000--

1,200,000

1.000

1,250,000--

1,250,000

800,000--

800,000-

900,000-

900,000

0.988-

2,600,000-

2,600,000

0.985

-

2,000,000-

2,000,000

0.902

-

1,000,000-

1,000,000

1.090

-

1,000,000-

1,000,000

0.907

-

1,500,000-

1,500,000

0.999

-

500,000-

500,000

0.900-

500,000-

500,000

0.999-

500,000-

500,000

0.999-

700,000-

700,000

0.913

73,150,000

11,200,000-

84,350,000¥94,100,000¥15,170,000¥10,170,000¥99,100,000

The Bank of Fukuoka,
Ltd.
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Nippon Life Insurance
Company
Total

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

500,000

Mizuho Bank, Ltd.

Subtotal

Averageinterest rate
（Note 2）
（Note 3）0.603

September
29, 2023
September
30, 2026
September
29, 2027
September
29, 2028
October 3,
2027
February 10,2028
August 31,
2022
April 30,
2027
April 30,
2027
April 30,
2026
April 30,2028
May 31,
2026

May 31,2027

March 31,2025

Note 1: Annual repayments of long-term loans payable (except for current portion of long-term loans payable) scheduled after the balance sheet date are as follows:
Due after 1 year
through 2 years
Long-term loans
payable¥7,000,000

Due after 2 years
through 3 years

Due after 3 years
through 4 years（in thousands yen）

¥13,300,000¥9,050,000

Due after 4 years
through 5 years¥7,500,000

Due after 5 years¥47,500,000

Note 2: All debts except for the following Note 6 are loans payable at a floating rate.
Note 3: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to loans payable forwhich interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into consideration
the effects of the interest rate swaps are indicated.
Note 4: All the repayment methods of debt financing are lump-sum repayments on the due date.
Note 5: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) and repayment ofdebts.
Note 6: Loans payable at a fixed rate.
Note 7: Loans payable are listed in the current portion of long-term loans payable from the fiscal period under review, listed in long-term loans payable in the previous fiscal
period.
Note 8: Partial prepayment of 2,000,000 thousand yen was made on April 27, 2018.

72

22. INVESTMENT CORPORATION BONDS
Outstanding investment corporation bonds as of March 31, 2019 are as follows.
SeriesFirst series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)
Third series of unsecured
investment corporation bonds(Note 1)
Fourth series of unsecured
investment corporation bonds(Note 1)Fifth series of unsecured
investment corporation bonds(Note 1)
Total

Date of issue

Balance atthe beginningof period

October 31,
2016¥1,000,000

October 31,
2016

Decrease
Balance at theduring theend of period
period(in thousands of yen)Interest rate

Repayment date

¥1,000,000

0.200

October 29,
2021

1,000,000-

1,000,000

0.600

October 30,
2026

August 31,
2017

1,000,000-

1,000,000

0.320

August 31,
2022

August 31,
2017

2,000,000-

2,000,000

0.700

August 31,
2027

April 26,2018

2,000,000-

2,000,000

0.700

April 26,2028-

¥7,000,000¥7,000,000¥

Remarks

(%)

-

¥

Use

(Note2)

Unsecured(Note3)Note 1: Ranking pari passu among the specified investment corporation bonds.
Note 2: Investment corporation bonds were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate and repayment of debts.
Note 3: Investment corporation bonds were used as the funds for repayment of debts.
Note 4: Annual repayments of investment corporation bonds scheduled for the next five years after the balance sheet date are as follows.
Due in 1 year
or less
Investment
corporation bonds¥

Due after 1 year
through 2 years-¥

Due after 2 years
through 3 years(in thousands of yen)-

Due after 3 years
through 4 years¥1,000,000

Due after 4 years
through 5 years¥1,000,000¥-

Outstanding investment corporation bonds as of September 30, 2018 are as follows.
SeriesDate of issue

Balance atthe beginningof period

Decreaseduring theperiodBalance at theend of period

Interest rate

(in thousands of yen)First series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)
Third series of unsecured
investment corporation bonds(Note 1)
Fourth series of unsecured
investment corporation bonds(Note 1)Fifth series of unsecured
investment corporation bonds(Note 1)Total

October 31,
2016¥1,000,000

October 31,
2016

¥

-

1,000,000-

Repayment date

¥1,000,000
1,000,000

0.200

October 29,
2021

0.600

October 30,
2026

1,000,000-

1,000,000

0.320

August 31,
2022

August 31,
2017

2,000,000-

2,000,000

0.700

August 31,
2027

April 26,
2018

-

-

2,000,000

0.700

April 26,2028-

¥7,000,000¥

Remarks(%)

August 31,
2017¥5,000,000

Use(Note2)
Unsecured(Note3)Note 1: Ranking pari passu among the specified investment corporation bonds.
Note 2: Investment corporation bonds were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate and repayment of debts.
Note 3: Investment corporation bonds were used as the funds for repayment of debts.
Note 4: Annual repayments of investment corporation bonds scheduled for the next five years after the balance sheet date are as follows.
Due in 1 year
or less
Investment
corporation bonds¥

Due after 1 year
through 2 years-¥

Due after 2 years
through 3 years(in thousands of yen)-¥

Due after 3 years
through 4 years-¥2,000,000

Due after 4 years
through 5 years
¥

-

73

23. DISTRIBUTIONS
From October 1, 2018
to March 31, 2019

From April 1, 2018
to September 30, 2018

I.. Retained earnings at the end of period¥3,283,881,662¥3,198,151,440

II. Distributions in excess of earnings¥172,110,300¥-

Of which, allowance for temporary
difference adjustments¥172,110,300¥-¥3,288,372,900¥3,198,002,300¥6,477¥6,299¥3,116,262,600¥3,198,002,300¥6,138¥6,299¥172,110,300

¥-

¥339

¥-

¥167,619,062¥149,140

In accordance with the policy described in Article 39-1 of its
Articles of Incorporation, KRR determines that the amountof distribution shall exceed the amount equivalent to 90% of
its distributable profit as stipulated in Article 67-15 of theSpecial Taxation Measures Law and shall be up to its
profits as the maximum amount. Following this policy, KRR
has decided that it shall distribute ¥3,116,262,600 which isalmost the entire amount of income as defined in Article
136-1 of the Investment Trust Act.
Furthermore, in accordance with the policy for “Distributionof Money in Excess of Profits” as stated in Article 39-2 of
KRR’s Articles of Incorporation, KRR made a distribution inexcess of earnings of ¥172,110,300 for allowance fortemporary difference adjustments (as defined in Article
2-2-30 of the Ordinance on Accountings of Investment
Corporations) for the purpose of reflecting the effect on
distributions of the difference in earnings calculated underJapanese GAAP and Japanese tax laws (as defined in
Article 2-2-30 (a) of the Ordinance on Accountings ofInvestment Corporations) in association with theamortization of fixed-term land leasehold rights and of theitem deducted from net asset (as defined in Article 2-2-30(b) of the Ordinance on Accountings of Investment
Corporations) in association with deferred losses onhedges.

In accordance with the policy described in Article 39-1 of its
Articles of Incorporation, KRR determines that the amountof distribution shall exceed the amount equivalent to 90% of
its distributable profit as stipulated in Article 67-15 of theSpecial Taxation Measures Law and shall be up to its profits
as the maximum amount. Following this policy, KRR has
decided that it shall distribute ¥3,198,002,300 which isalmost the entire amount of retained earnings as the
distributions of earnings.
Procedures for the distribution of amounts exceeding
distributable income are outlined in Article 39-2 of KRR’s
Articles of Incorporation. In the seventh fiscal period, KRR
has decided not to distribute cash in excess of distributableprofit.

III. Total distributions
Distributions per unit
Of which, distributions of earnings
Of which, distributions of earnings per unit
Of which, allowance for temporary
difference adjustments
Of which, distributions in excess ofearnings per unit (allowance for temporary
difference adjustments)
IV.Retained earnings brought forward to thenext period

Method of calculating distribution amount8th Fiscal Period (From October 1, 2018 to March 31, 2019)
1. Reasons, related assets and allowance(in thousands of yen)
Related assets, etc.

Allowance for temporary
difference adjustments

ReasonBuildings in trust,
Leasehold right in trust

Amortization of leasehold right in trust and the amount in excess ofdepreciation¥4,569Deferred gains or losses on hedges

Loss on interest-rate swaps recognized at the end of the fiscal period¥167,541

2. Method of reversal
Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

Deferred gains or losses on hedges

Based on changes in the fair value of the hedging instruments, the corresponding amount is scheduled to be reversed.

7th Fiscal Period (From April 1, 2018 to September 30, 2018)
Not applicable74