Focused Investment in
Shopping Centers for Daily Needs
Semi-annual Report for the 6th Period(From October 1, 2017 to March 31, 2018)

http://www.krr-reit.com/en/

Highlights

For the 6th fiscal period ended March 31, 2018
contents

Distribution per unit

JPY 6,255
Forecast DPU for the 7th fiscal period

JPY 6,245

I. Overview of KRR
From the Executive Director
Key Characteristics
Pipeline Expansion
External GrowthInternal Growth
Financial Highlights

Total assets (by acquisition price) /ESG Initiatives

Number of properties

Portfolio Map

JPY 206.1 bn
52 properties

Number of tenants

Overview of Portfolio
Close-up KRR Vol.5
Ashico Town Ashikaga
Summary of Investment Unit
II. Asset Management Report
Overview of Asset Management
Profile of KRR

5 2 2 tenants
Occupancy rate at the end of period

99.5 %

Yumemachi Narashinodai Mall

Portfolio List

Status on Investment Properties
Capital Expenditures
Expenses and Liabilities
Acquisition and Disposition
Accounting
OthersFrom the Executive Director
Thanks to your support, Kenedix Retail REIT Corporation (“KRR”) has
reported its results of operations for the sixth fiscal period (fromOctober 1, 2017 to March 31, 2018).
We became the first J-REIT to focus primarily on neighborhood,community and other shopping centers that cater to the day-to-day
needs of local area customers upon our listing in February 2015. Japanis undergoing unprecedented demographic changes that, we believe,
are influencing the nature of local retail markets. In particular, the agingof the Japanese population and the increased concentration of
populations in urban areas have resulted in shrinkage of retail tradeareas for shopping centers. We have also observed an increase in market share of specialty stores asconsumer tastes change. Accordingly, we expect continued high demand for such local shopping centers fordaily needs because of their convenience. We believe our selective investments in these shopping centers
contribute further increase in unitholder’s value.
Moreover, we have positioned initiatives on ESG (Environment, Social and Governance) awareness as animportant business management issue since our listing. We aim to help achieve a sustainable society bypromoting such initiatives, enlivening local communities and enhancing social infrastructure, while working tocontribute to society through our investment in shopping centers for daily needs.
For the sixth fiscal period, operating revenue totaled 8,126 million yen, operating income was 3,768 million
yen, ordinary income was 3,179 million yen and net income was 3,175 million yen. The distribution tounitholders was 6,255 yen per unit.
We acquired 18 shopping centers with acquisition price of 80,843 million yen upon our listing. During thesixth fiscal period, we acquired a new supermarket located in Tokyo metropolitan area. At the end of thesixth fiscal period, our portfolio consisted of 52 properties for 206,176 million yen in acquisition price. We
believe that AUM growth contributes to diversification of our portfolio and stability of our earnings base.
Due to the enhanced diversification through AUM expansion and the track record since our listing, KRR’s
credit rating was upgraded to A+ by Japan Credit Rating Agency, Ltd. in December 2017.
Going into the seventh fiscal period, we disposed a property for the first time, and acquired two properties
located in Tokyo and Sapporo. Through these disposition and acquisitions, our portfolio consists 53
properties for 212,897 million yen in acquisition price.
We dedicate ourselves to the maximization of unitholder value by continuing implementation of our
growth strategy extensively supported from our Sponsor and the Alliance Companies.
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.

1

Key Characteristics

Focus on shopping centers for daily needs
1

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

Retail properties located within residential districts or adjacent to major roads, which
provide daily goods and services
Well located for daily living

Retail trade area of an approximately 1 to 10 km radius (generally 3 to 5 km radius)
Customers predominantly from local areas surrounding the retail property

High volume of customer traffic

Accommodate certain daily local retail needs
Strong customer traffic on both weekdays and weekends

Specialty store tenant diversity

Various specialty stores to meet a range of day-to-day needs
Groceries, clothing and other daily goods and services

NSC

SM

Supermarkets

Neighborhood
Shopping Centers

Retail trade area
3 km radius

Retail trade area
3 – 5 km radiusStand-alone storesthat primarily
provide groceries

Shopping centerswith a supermarket
as an anchor or coretenantLife Kameido

Urban
Station-Front
Shopping Centers

CSC

Shopping centers in
the immediate vicinityof an urban public
transportation station

Retail trade area
3 – 10 km radius

Community
Shopping Centers

Retail trade area
5 – 10 km radius

Fululu Garden Yachiyo

Daikanyama Address Dixsept2

Larger shopping
centers than NSC, witha supermarket as ananchor or core tenant

Blumer Maitamon

SS

Specialty Stores

Retail trade area
1 – 10 km radiusSpecialty stores suchas drug stores,
convenience stores,
health clubs orelectronic appliancestoresHomecenter Kohnan Sunadabashi

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
22.0%
Fukuoka area
3.9%
Greater Nagoya
area
10.6%

As of March 31, 2018

4 major
Metropolitan
Areas
％

78.0

Greater Osaka area
21.4%

Tokyo metropolitan area
Greater Osaka areaTokyo
metropolitan
area
42.1%

Greater
Nagoya area
Fukuoka area2

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

Residential district
Specialty stores(small retail spaces)■ Retail trade area population
・1km radius: 9,600 people
・3km radius: 60,000 people
・5km radius: 244,000 people

Tenants

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

Flat parking lot

Restaurant building
expansion site
Residential
district

An anchor tenant with strong ability to attract
customers

Facilities

Capacity to accommodate frequent customer visits and provide revenue
upside potential■ Flat parking lot to accommodate
approximately 480 vehicles■ Constructed a restaurant building onunderutilized space
Expansionbuilding

Restaurant
building

Acquisition
date

Jan. 16, 2017

3

GFA

397.98 m2

Total
construction
cost

397.98m 2

JPY 91 mn
91百万円

A group of specialty stores selected to satisfy
the various needs of local residents
Expansion building

Pipeline expansion through collaboration with KRR’s Sponsor and Alliance Companies

KRR aims steady external growth through pipelines from its Sponsor and Alliance Companies andpipeline expansion utilizing sourcing capability of the Asset Manager.
■ Strong support from the Kenedix Group and Alliance Companies
KRR has strong support from its Sponsor, Kenedix, Inc., as well as four Alliance Companies
for both internal and external growth.
Asset management
Property management

SponsorSponsorAlliance Companies

3External Growth

1

Steady AUM growth

KRR made steady AUM growth through three follow-on offerings since its IPO. Its AUM expandedfrom 80.8 billion yen at the time of listing to 212.8 billion yen. In the 7th fiscal period, KRR sold aproperty for the first time.
(AUM)(JPY bn )3,000

Acquisition of Konami Sports Club Shibuya
and Costco Wholesale Sapporo Warehouse
Disposition of K’s Denki Nakagawa Tomita(Land)

2,500

204.9

2,000

158.7
1,500

206.1

212.8

Aiming forsteady growthof asset value
going forward

164.3

131.6

1,000

91.8

80.8

500

0

2

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

Assets acquired in the 6th fiscal period

T - 2 3 Ozeki Tokiwadai
A grocery supermarket, which opened in September 2017, located in one of the most densely
populated retail trade areas in Tokyo, with 64 thousand residents within a one-kilometer radiusSM

Acquisition
Price
Location

JPY 1,263 mn
Itabashi ward,
Tokyo

AppraisalValue

JPY 1,340 mn

Appraisal NOI

JPY 57 mn

Land area

804.68 m2

Appraisal NOI
yield

4.6％

Gross floor area

1,217.02 m2

Core tenant

Ozeki Co., Ltd.

4

3

Assets acquired in the 7th fiscal period

T - 2 4 Konami Sports Club Shibuya

R - 1 1 Costco Wholesale Sapporo Warehouse

A large sports club with a wide range of facilities in adensely populated area of central Tokyo

The only Costco warehouse in Hokkaido, covering
Sapporo metropolitan area as its trade area

SS

SS

AcquisitionPrice

JPY 3,400 mn

Location

Shibuya ward,Tokyo

Acquisition
Price

4

Sapporo,Hokkaido

JPY 3,400 mn Location

Asset disposed in the 7th fiscal period

N - 3 K’s Denki Nakagawa Tomita (Land)SS

Location
DispositionPrice
Acquisition
Price
Appraisal
Value

5

Nagoya, Aichi
JPY 1,128 mn
JPY 889 mn
JPY 1,010 mn

Land area
Dispositiondate
Acquisitiondate

5,560.23 m2
April 27, 2018
February 10, 2015

Appraisal NOI JPY 46 mn

Preferential access to potential acquisition opportunities

KRR seeks to achieve external growth by selectively acquiring properties managed or developed by
the Kenedix Group and taking advantage of preferential negotiation rights for properties owned byAlliance Companies.
Examples of pipelines
Apita Terrace Yokohama Tsunashima
Location: Yokohama, Kanagawa

Unicus Urawamisono (Land)
Location: Saitama, Saitama

Across Plaza Urayasu Higashino (Land)(Location: Urayasu, Chiba
Opened in

Development Project in Nagoya (Land) (Note)
Planned to
Location: Nagoya, Aichi

Opened inMar. 2018

Dec. 2017

Opened inMar. 2017

open inJan. 2019

Note: The illustrations above are completion images based on design drawings and may differ from the actual buildings after completion.

5

E S G I n i t iat i ves

1

Environmental Initiatives■ Installation of LED lighting

T-2 1 Prime Square Jiyugaoka

T-1 Fululu Garden Yachiyo
T-2 MONA Shin-Urayasu
T-3 Passaggio Nishiarai
T-5 Unicus Ina
O-4 Blumer HAT Kobe
O-5 Carino Esaka
R-4 Ashico Town Ashikaga

KRR promotes installation of LED lighting to reduce
replacement costs and to conserve energy. This effort
also contributes to mitigate environmental burden by
reducing CO2 and waste emissions■Greening of facilities

Greening of facilities creates energy-saving effects
such as mitigation of outdoor temperature, as well
as relaxing effects for visitors by providing refreshing
Blumer Maitamon (Entrance)
spaces.
■ Performance

The actual performance of reduction in unit energy
consumption is as follows.

MONA Shin-Urayasu (Rooftop )
2015

2016

Energy intensity (kl)

0.05174

0.04863

Energy intensity (MJ)

1,981

1,862

YonY performance (%)

96.5

94.0

Note: Energy intensity is calculated by dividing total energy use equivalent to crude oil (kl/year) by total occupancy floor area (m2/year)
and also converted into MJ per m2/year.

2

Social Initiatives■ Local events at our properties

KRR is making efforts to enliven local communities byholding community-participating events at its properties.
Summer Festival(Unicus Ina)

Kamisato Farmer’s Market(Unicus Kamisato)■ Collaboration with local communities

KRR agreed with Yoshikawa City to provide part ofUnicus Yoshikawa as a temporary shelter in case of adisaster as floods. KRR also agreed with Yachiyo
Police Station to provide coupons to the elderly who
voluntarily returned their driver’s license
Signing of agreement(Unicus Yoshikawa)

Signing of agreement(Fululu Garden Yachiyo)■ Initiatives with tenant

KRR has entered into green lease agreements with some of its tenants. Green lease is an agreement specifyingthat property owners and tenants shall cooperate to reduce environmental burden. KRR has also conductedtenant satisfaction surveys in some of its properties.
■ Social contribution activities

Installation of AEDs and emergency supplies in some ofits properties. KRR supports the activity of Japan
Association for UNHCR (United Nations High@Japan Association for UNHCR
Commissioner for Refugees) by providing common areas
AEDs and emergency supplies UNHCR fund-raising campaign
of its properties for their fund-raising campaign.
(MONA Shin-Urayasu)

6

3

Recognitions and certifications on environment■ GRESB Real Estate Assessment 2017GRESB is an annual benchmark assessment which measuresenvironmental, social, and governance (ESG) considerations in
the real estate sector. KRR has been awarded a “GreenStar” in the 2017 GRESB Real Estate Assessment for thesecond consecutive year, as it received high evaluation
on both “implementation and measurement” and“management and policy”. KFM, the asset manager of
KRR, has also joined the GRESB Company & Fund
Members.
■ DBJ 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 program evaluates andcertifies real estate with environmental and social considerations, taking into account each property’s
environmental features and measures taken for various stakeholders, such as disaster and communityconscious measures.
■ Properties received DBJ Green Building Certification

Properties with outstanding environmental & social awareness (★★★★)
T - 2 MONA Shin-Urayasu

T-4
O-4

T - 1 Fululu Garden Yachiyo

Properties with excellent environmental & social
awareness (★★★)

Properties with high environmental & social awareness(★★)

Daikanyama Address
Dixsept
Blumer HAT Kobe

R-1

Roseo Mito

T-5

R-4

Ashico Town Ashikaga

T-19 Yumemachi NarashinodaiMall
T-20 Kawamachi Yahagi Mall
O-5

Unicus Ina

Carino Esaka

R-10 Sun Street Hamakita
T-3

Passaggio Nishiarai

T-7

Unicus Yoshikawa

O-1 Blumer Maitamon■ Certified properties and floor area ratio

The number of certified properties: 14 (35.9%)
Certified floor area: 432,817.34m2 (63.8%)(as of March 31, 2018)
Note: The ratio is the percentage of certified floor area to the gross floor area of properties owned by KRR (670,134.15m2, calculated ona pro-rata basis of ownership ratio for compartmentalized ownership, excluding land-only properties). As of March 31, 2018, KRR
owns 39 properties that are eligible for certification, excluding 13 land-only properties.

7

Close-up KRR
Interview

Takao
Mizoguchi

Vol. 6

KRR has acquired four shopping centers that wedeveloped, namely Unicus Ina, Unicus Yoshikawa, Unicus
Kamisato and Unicus Konosu (land only for Unicus
Kamisato and Unicus Konosu)..

President of
What characteristics make UNICUS unique?
P&D Consulting Co., Ltd. Our objective is to create shopping centers that makeTakao Mizoguchi is President of P&D Consulting Co.,
Ltd., which is one of KRR’s Alliance Companies. Mr.
Mizoguchi discusses P&D Consulting’s corporate
philosophy and the concepts that define the UNICUS
brand used for the company’s shopping centers.
First, please explain briefly about your company.
Our primary business is the development and operation of
shopping centers, using the UNICUS brand. We operate 11
UNICUS shopping centers located mainly in Saitama
prefecture. Our corporate philosophy is “building mutually
beneficial relationships with stakeholders and playing a rolein the creation and advancement of vibrant communities.”
Stakeholders include the customers who use our shopping
centers as well as our business partners, employees and allothers involved in our operations.
Since its IPO, KRR has been dedicated to helping enliven
local communities and enhance social infrastructures andalso providing stable returns over the long-term by making
investments primarily in shopping centers for daily needs.
We decided to support KRR as its Alliance Company
because we are in agreement with KRR’s philosophy.

What is the concept behind the UNICUS brand?
UNICUS is derived from the word “unique” and the Latin for“only one.” By using this brand for our shopping centers, weare targeting shopping centers that are operating slightly
upscale life style centers for everyday needs and creating
places with deep roots in their host communities and apleasant environment for visitors.

people want to visit casually. By visiting a UNICUS
shopping center, visitors can take the time to look aroundat other stores before doing their grocery shopping.
UNICUS attracts tenants that are slightly upscale. To
accomplish this goal, we aim to operate shopping centerswith many tenants in order to produce a highly
entertaining guest experience.
Playing a role in the creation and advancement of vibrantcommunities is another central theme. This is why
UNICUS shopping centers have places for performancesby groups from schools and other local organizations.
There are also many other initiatives for enabling our
shopping centers to help enliven the communities they
serve.

What are your plans for the future?
We want to contribute to the quality of life in the areas
where we operate. To do this, we will continue to explore
ways to provide even more added value, at or
surrounding our shopping centers. One example is added
value involving Japan’s aging population. The
government is promoting the Compact City policy thatencourages the formation of highly compact andconvenient neighborhoods with residential, medical,
welfare, retail and transportation services. We want tocontribute to such communities by creating compact
facilities in metropolitan districts.
In collaboration with KRR, we concluded “green leases,”
which include provisions that encourage the building
owner and tenants to work together to reduce theenvironmental impact. Furthermore, we look forward toworking with KRR in other ways to enliven communities
where we operate shopping centers.

Unicus Kamisato (Land)8

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

1

Financial highlights (as of March 31, 2018)
LTV

Long-term debt ratio /Fixed interest debt ratio

Average remaining years
to maturity

Number of lenders

Average interest rate (Note)

44.5%

96.1%

92.0%

11

5.2 years

1.00%

Note: The average interest rate is as of Apr. 30, 2018.

2

Upgrade of Japan Credit Rating Agency (JCR)

Japan Credit Rating Agency, Ltd. (“JCR”)
announced that the credit rating of KRR’s
Long-Term Issuer Rating was upgraded.

3

December, 2017
Credit rating
AgencyJCR

Before the Change

After the Change

A (positive)

A+ (stable)

Diversifying KRR’s lending sources◆Issued investment corporation bonds◆Invited a new lender

KRR issued investment corporation bonds on April
26, 2018, leveraging low interest rate environment.

KRR intends to diverse its lenders through its firstborrowing from The Bank of Fukuoka, Ltd. on May 31,
2018.

Issue

Maturity

AmountLenderMaturity

Amount5th unsecured investment
corporation bonds

Annualinterest rate

10 years

JPY 2.0 bn

0.700%The Bank of Fukuoka, Ltd.

8 years

JPY 1.0 bn

4Debt maturity schedule (as of May 31, 2018)

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)
Borrowings
15,000Investment corporation bonds

Issued investment
corporation bonds

12,000

9,000

6,000

3,000

0

7th
8th
9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
21st
22nd 23rd
24th
25th
26th
27th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period9Por tfolio List as of May 31, 2018
Total
acquisition price

JPY212,897 mn
No.

Weighted averageoccupancy rate

Name of property

Number of
Tenants

99.5 %

Location(city / ward, prefecture)523

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

Number oftenants (Note 2)

T-1 Fululu Garden Yachiyo

Yachiyo, Chiba

14,84898.8

40

T-2 MONA Shin-Urayasu

Urayasu, Chiba

8,063

87.8

58

T-3 Passaggio Nishiarai

Adachi ward, Tokyo

5,850

98.6

41

T-4 Daikanyama Address Dixsept

Shibuya ward, Tokyo

5,390

97.9

27

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

100.0

11

T-8 Sports Club Renaissance Fujimidai

Nerima ward, Tokyo

2,586

100.0

1

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-14 Gourmet City Chiba-Chuo

Chiba, Chiba

760

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

100.0

2

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 Prime Square Jiyugaoka

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

O-1 Blumer Maitamon

Kobe, Hyogo

8,389

98.4

51

O-2 Central Square Takadono (Land)

Osaka, Osaka

2,685

100.0

1

O-3 Piago Kahma Home Center Omihachiman

Omihachiman, Shiga

2,140

100.0

2

O-4 Blumer HAT Kobe

Kobe, Hyogo

11,00097.2

39

O-5 Carino Esaka

Suita, Osaka

6,555

100.0

31

O-6 COMBOX Komyoike

Izumi, Osaka

6,450

100.0

1

O-7 Hankyu Oasis Hirakatadeguchi

Hirakata, Osaka

1,280

100.0

1

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 Kahma Home Center 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

99.2

42

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

99.7

22

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

T-9

F-1

Super Viva Home Iwatsuki (Land)

Sunny Noma

10

Por tfolio Map as of May 31, 2018
NSC

R-4
T-11

R-1

T-12

SM
CSC
Urban StationFront SC
SS

R-6

T-5
T-9

Ozeki Tokiwadai T-23

T-8
Konami Sports Club
Shibuya T-24
T-4

T-3

T-21

T-7

R-9

T-22
T-17

T-19

T-2

R-2

T-1
T-20

T-14
R-7

T-13
T-10

T-6

R-11

R-3

T-15

T-16

Costco Wholesale Sapporo Warehouse

R-5

T-18

O-3

F-2

N-2

F-1
O-4

O-10

O-7
O-5
O-2

O-1

F-3

N-1

O-9

N-5
N-4
N-6
R-10
R-8

O-6
O-8

No.

Name of property

Location(city / ward, prefecture)

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

Number oftenants (Note 2)

R-4 Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

100.0

29

R-5 Yorktown Shinden-Higashi

Sendai, Miyagi

3,252

100.0

2

R-6 Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

100.0

1

R-7 Solala Plaza

Sendai, Miyagi

5,720

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

10,74699.2

53

Total of assets acquired by the end of the 6th period (Note 3)
T-24 Konami Sports Club Shibuya

Costco Wholesale Sapporo
R-11 Warehouse
Total of assets acquired during the 7th period

Total

205,287

99.5

521

Shibuya ward, Tokyo

3,400

100.0

1

Sapporo, Hokkaido

4,210

100.0

1

7,610

100.0

2

212,897

99.5

523

Note 1: “Occupancy rate” is as of March 31, 2018.
Note 2: “Number of tenants” indicates the number of end-tenants as of March 31, 2018.
Note 3: “Portfolio List” and “Total” do not contain K’s Denki Nakagawa Tomita disposed on April 27, 2018.

11

Over view of por tfolio (as of May 31 , 2018)
T-1

T-2

Fululu Garden Yachiyo

MONA Shin-Urayasu

T-3

Passaggio Nishiarai

T-4

Daikanyama
Address Dixsept

T-5

Unicus Ina

T-6

Yorktown Kita-Kaname

T-7

Unicus Yoshikawa

T-8

S p or t s C l u b
R e n a iss a n ce F u j imi dai

T-9

Super Viva Home
Iwatsuki (Land)

T-10

K’s Denki
Shonan-Fujisawa (Land)

T-11

Unicus Kamisato (Land)

T-12

Unicus Konosu (Land)

T-13

Inageya Yokohama
Minamihonjuku (Land)

T-14

Gourmet City Chiba-Chuo

T-15

Nakamachidai
Tokyu Store

T-16

Central Wellness Club
Nagatsuta Minamidai

T-17

Life Kameido

T-18

Totsuka-Fukaya
Shopping Center (Land)

T-19

Yumemachi
Narashinodai Mall

T-20

Kawamachi YahagiMallT-21 Jiyugaoka

T-22

Round1 IchikawaOnitaka

O-1 Blumer Maitamon

O-2

Life Takadono (Land)

O-3 Center Omihachiman

O-7

Hankyu Oasis
Hirakatadeguchi

O-4

Blumer HAT Kobe

O-9

Life Nishi-Tengachaya

Prime Square

Piago Kahma Home

(Note) Please refer p.4 and p.5 for the properties acquired in the sixth and seventh fiscal period.

WelciaO-8 Kishiwadakamori (Land)

12

O-5

Carino Esaka

N-5

K’s Denki
Shin-Moriyama (Land)

F-1

Sunny Noma

F-2

O-6

COMBOX Komyoike

O-10

Milion Town
Tsukaguchi (Land)

N-1

Kahma Home Center
Nakagawa Tomita (Land)

N-6

Resora Obu Shopping Terrace

N-2

Valor Ichinomiya-Nishi

N-4

Homecenter Kohnan Sunadabashi

Round1 Stadium
Hakata-Hanmichibashi

F-3

Kurume-Nishi Shopping
CenterR-2

K’s Denki Aomori Honten

R-3

Super Sports Xebio
Aomori-Chuo

R-4

Ashico Town Ashikaga

R-5

Yorktown Shinden-Higashi

R-6

Kasumi Technopark
SakuraR-7

Solala Plaza

R-8

P-1 Plaza Tenno

R-9

Seiyu Rakuichi Moriya (Land)

R-1

Roseo Mito

R-10

Sun Street Hamakita

13Summar y of Investment Unit
Unit Price and trading volume(Unit)
100,000(Yen )
320,000

40,000
Unit price

Volume300,000

35,000280,000

30,0002018年4月27日終値
231,600円

260,000

25,000240,000

20,000220,000

15,000200,000

10,000180,000

5,000

160,000

0
Feb.
10,

End End End End End End End End End End End End

End End End End End End End End End End End End

End End End End End End End End End End End End

End End End

of

of

of

of

of

of

of

of

of

Feb. Mar. Apr. May Jun. Jul.

of

of

of

of

of

Of

Aug. Sep. Oct. Nov. Dec. Jan.

of

of

of

of

of

Feb. Mar. Apr. May Jun. Jul.

2015

of

of

of

of

of

Of

Aug. Sep. Oct. Nov. Dec. Jan.

of

of

of

of

of

Feb. Mar. Apr. May Jun. Jul.

2016

of

of

of

of

of

Of

Aug. Sep. Oct. Nov. Dec. Jan.

2017

of

of

Feb. Mar. Apr.

2018

General breakdown of unitholders
As of March 31, 2018

Ownership ratio
by investor type
Brokerage firms
3,471 units(0.7%)

Foreign investors
176,987 units(34.9%)

Number of unitholders
by investor type

Individuals
and others
54,975 units(10.8%)

507,700

Foreign investors
227(1.8%)
Brokerage firms
23(0.2%)

12,545units

Other domestic
corporations
16,169 units(3.2%)

Other domestic
corporations
264(2.1%)
Financial
institutions
115(0.9%)

Financial
institutions
256,098 units(50.4%)

Individuals
and others
11,916(95.0%)

14

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

Third fiscal period

Fourth fiscal period

Fifth fiscal period

Sixth fiscal period(From October 1, 2015
to March 31, 2016)(From April 1, 2016
to September 30, 2016)(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

5,541

6,374

6,430

7,803

8,126

Millions of yen

5,541

6,374

6,427

7,797

8,126

Millions of yen

2,715

3,400

3,409

4,137

4,358

Millions of yen

2,235

2,860

2,817

3,468

3,609

Operating income

Millions of yen

2,826

2,973

3,021

3,666

3,768

Ordinary income

Millions of yen

2,428

2,519

2,556

3,108

3,179

Net income

Millions of yen

2,427

2,518

2,552

3,104

3,175

Total assets

Millions of yen

231,107

Fiscal period
Operating revenues
Of which, property-related revenues
Property-related expenses
Of which, property-related expenses[Period-on-period changes]
Total net assets[Period-on-period changes]
Unitholders’ capital
Number of investment units issued andoutstanding
Net assets per unit
(Note 2)150,009179,360

185,037

229,628%(+38.4)(+19.6)(+3.2)(+24.1)(+0.6)

Millions of yen

80,03496,73996,823

116,516

116,585%(+33.9)(+20.9)(+0.1)(+20.3)(+0.1)

Millions of yen

77,606

94,256

94,256113,399

113,399Units

355,250

422,450

422,450

507,700

507,700

Yen

225,291

228,996229,195

229,498

229,633

Millions of yen

2,432

2,523

2,553

3,104

3,175

Distributions per unit

Yen

6,846

5,974

6,044

6,115

6,255

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

Yen

6,834

5,888

6,044

6,115

6,255

Yen

12

86

-

-

-

Distributions[Annualized] (Note 4)%

Return on net assets (Note 5)

1.9

1.5

1.4

1.5

1.4

(3.7)

(3.1)

(2.8)

(3.0)

(2.8)

3.5

2.8

2.6

2.9

2.7

(6.9)

(5.7)

(5.3)

(5.8)

(5.5)

53.4

53.9

52.3

50.7

50.4

(-1.8)(+0.6)(-1.6)(-1.6)(-0.3)

Days

183

183

182

183

182

%

100.0

98.8

100.0

100.0

100.0

33

40

42

51

52

m2

609,026.59

674,491.03

719,906.77

865,226.20

866,425.22

389

405

409

542

522

%

99.6

99.7

99.6

99.6

99.5

Depreciation expense

Millions of yen

565

714

721

885

925

Capital expenditures

Millions of yen

530

264

276

367

263

Rental NOI (Net operating income) (Note 9)

Millions of yen

3,871

4,228

4,331

5,214

5,441

FFO (Funds from operation) (Note 10)

Millions of yen

3,058

3,315

3,358

4,093

4,194

FFO per unit
Yen
8,609
7,847
7,949
8,062
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

8,260[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(Note 11)

Note 4:Note 5:For the first fiscal period, annualized as if the operation began from February 10, 2015, when the actual operation began.
Return on net assets = Net income /{( Net assets at beginning of period + Net assets at end of period) / 2} × 100

Note 6:Note 7:

Net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Payout ratio = Total distibutions (excluding excess of earnings) / Net income × 100
When calculated as follows, the payout ratio is 100.2% for the fiscal period ended March 31, 2016 and 100.2% for the fiscal period ended
September 30, 2016.
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 outstanding15

(2) Status of Asset Management(Overview of the Fiscal Period ended March 31, 2018)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, 2018 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 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 FundManagement, Inc. (“KFM”), with the following strategies.
Note: For KRR’s management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for dailyneeds 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
There were signs of a moderate economic rebound in Japan with recoveries in corporate earnings. Real GDP growth(second preliminary estimate) in the fourth quarter of 2017 was positive 1.6% on an annualized basis, indicating
positive figures for eight consecutive quarters.
As for Japan’s retail market, consumer spending seems to be stable due to recoveries in employment and income
environment, looking at the breakdown of GDP figures.
Looking at the financial environment, the financial market remained unstable due to global market events such as thepolicies of the U.S. administration and geopolitical risks. In terms of interest rates, there are concerns that interest rates
in Japan may rise due to the Federal Reserve rate hike in the U.S., while “Quantitative and Qualitative Monetary
Easing with Yield Curve Control” including the negative interest rate policy by the Bank of Japan and thereappointment of Haruhiko Kuroda as Bank of Japan Governor is keeping the interest rates in Japan low. Under these
conditions, the J-REIT market remained unstable with many equity finances by J-REITs in the first quarter of 2018. On
the other hand, the figures released by the Tokyo Stock Exchange show that foreign investors have been strongly
buying J-REITs during the period.

16iii) Management Performance(A) Acquisition of Assets
KRR acquired and started the operations of the following trust beneficiary interests in real estate (one property
acquired on February 13, 2018 with acquisition price of 1,263 million yen). As a result, the portfolio at the end of the
fiscal period under review (March 31, 2018) consists 52 properties with the total acquisition price of 206,176 million
yen.
Property
number
T-23

Propertytype

Property name(Note 1)SM

Ozeki Tokiwadai

Location(City/ward,
prefecture)
Itabashi-ku, Tokyo

Acquisition
price(million yen)

Acquisition date

(Note 2)

1,263

February 13, 2018

Note 1: Properties are categorized into the following five types of shopping centers for daily needs: NSC (Neighborhood Shopping Centers), SM(Supermarkets), CSC (Community Shopping Centers), Urban Station-Front SC (Urban Station-Front Shopping Centers) and SS (Specialty
Stores). Features of the categories are described below.
Types of shopping centers for daily needs

Features

Trade area

NSC (Neighborhood Shopping Centers)

Shopping centers with a supermarket as an anchor or core tenant andseveral specialty store tenants

Three to fivekilometer

SM (Supermarkets)

Stand-alone stores that primarily provide groceries, with a retail trade area

Three kilometer

CSC (Community Shopping Centers)

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

Five to ten
kilometer

Urban Station-Front Shopping Centers

Shopping centers that are located in the immediate vicinity of an urban
public transportation station, which take advantage of stable foot traffic

Three to ten
kilometer

SS (Specialty Stores)

Single- or multiple-tenant shopping centers that specialize in a single typeof merchandise or service, such as drug stores, convenience stores, healthclubs or electronic appliance stores

One to ten
kilometer

Note 2: “Acquisition price” represents the purchase price of each trust beneficiary interest specified in purchase agreement in relation to theacquisition of each property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; androunded down to the nearest one million yen).

(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, 2018). 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 management that better reflects the needs of KRR’s tenants, KRR strives to accumulate
know-how and improve tenant satisfaction. KRR invests primarily in neighborhood and community shopping centersthat cater to the day-to-day needs of customers. The portfolio is diversified in terms of properties, tenants and othercharacteristics with a goal to generate consistent long-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 and growth.
As of the end of the fiscal period under review, the portfolio as a whole performed well with an overall occupancy ratioof 99.5%. Furthermore, the portfolio is diversified in terms of tenants as there are 522 end-tenants (Note 2) in KRR’s retailproperies.
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 masterleassees 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 to achieve stable medium to long-term returns and consistent growth of assets under management.
(Debt Finance)
During the fiscal period under review, KRR borrowed 1,200 million yen for the acquisition of properties and 9,750
million yen for refinancing. Consequently, borrowings totaled 94,100 million yen and interest-bearing debt including
investment corporation bonds (excluding interest-bearing tenant leasehold and security deposits) totaled 99,100 million
yen at the end of the fiscal period under review (March 31, 2018).
When undertaking borrowings, KRR seeks to spread out repayment dates and lengthen borrowing periods. On the other
hand, KRR partially borrowed short-term loans from the point of flexibility under the financing strategy, also
controlling financing cost. 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 remaining years to maturity is 4.6 years, the weighted average interest rate is 0.96%, the17

long-term debt ratio (Note 1) is 87.0% and the LTV ratio (Note 2) is 42.9%.
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, 2018 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 September 29, 2016. Details are as follows.
Planned issue amount
Planned issuance period

100,000,000,000 yen
October 7, 2016 to October 6, 2018

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.

KRR issued the 1st Series Unsecured Investment Corporation Bonds (1,000 million yen) and the 2nd Series
Unsecured Investment Corporation Bonds (1,000 million yen) on October 31, 2016, and the 3rd Series Unsecured
Investment Corporation Bonds (1,000 million yen) and the 4th Series Unsedcured Investment Corporation Bonds(2,000 million yen) on August 31, 2017, based on this shelf registration statement.
iv) Results of Operations
For this period, revenue was 8,126 million yen, operating income was 3,768 million yen, ordinary income was 3,179
million yen and net income was 3,175 million yen.
Furthermore, in accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distributionof 3,175,663,500 yen which is almost equivalent to the earnings for the fiscal period. Cash distributions are paid inaccordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent
amendments). Consequently, the distribution per unit was 6,255 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 corporation aresummarized in the following table.
Date

Type of issue

Notes
Increase

October 3, 2014

Private placement forincorporation

February 9, 2015

Unitholders’ capital(in million yen)

Total number of units issued andoutstanding (units)
Balance

Increase

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
for each fiscal period are as follows.
Fiscal period
For the fiscal period
ended

Second fiscal period

Third fiscal period

Fourth fiscal period

Fifth fiscal period

Sixth fiscal period

March 31, 2016

September 30, 2016

March 31, 2017

September 30, 2017

March 31, 2018

Highest

JPY 282,700

JPY 296,100

JPY 275,000

JPY 251,100

JPY 251,700

LowestJPY 226,800

JPY 240,000

JPY 235,200

JPY 228,900

JPY 223,000

,

,

,

19

(4) Distributions
In accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distribution of
3,175,663,500 yen, which is almost equivalent to the earnings for the fiscal period. Cash distributions are paid inaccordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent
amendments).
Consequently, the distribution per unit for the fiscal period was 6,255 yen.
(in thousands of yen)
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[Distributions per unit]

Second fiscal period
March 31, 2016

Third fiscal period
September 30, 2016

Fourth fiscal period
March 31, 2017

Fifth fiscal period
September 30, 2017

Sixth fiscal period
March 31, 2018

2,427,985

2,518,802

2,584,343

3,104,740

3,175,962

206

31,417

216

155

299

2,432,041

2,523,716

2,553,287

3,104,585

3,175,663[6,846 yen]

[5,974 yen]

[6,044 yen]

[6,115 yen]

[6,255 yen]

2,427,778

2,487,385

2,553,287

3,104,585

3,175,663[6,834 yen]

[5,888 yen]

[6,044 yen]

[6,115 yen]

[6,255 yen]

4,263

36,330－－－[12 yen][86 yen]

[－]

[－]

[－]

4,263

36,330－－－[12 yen][86 yen]

[－]

[－]

[－]

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

－

－

－

－

－

[Distributions per unit]

[－]

[－]

[－]

[－]

[－]

20

(5) Management Policy and Issues to be Addressed
Outlook for Asset Management
The Japanese economy is expected to continue to recover at a moderate pace. However, we should pay attention to
uncertainties about the overseas economy and politics regarding the direction of U.S. financial policies, the policies of
the U.S. administration, etc. We also need to pay attention to changes in domestic economic environment, such as
fluctuation of yen due to a rise in protectionism, effects of “Quantitative and Qualitative Monetary Easing with Yield
Curve Control” including the negative interest rate policy and concerns over geopolitical risks.
As for Japan’s retail sector environment, supermarkets and drugstores are performing well, and KRR anticipates thistrend to continue. In addition, while e-commerce has grown to account for a certain share of consumer spending,backed by advances in information technology, KRR anticipates the integration of “brick and mortar” and the Internet
will advance as both retail companies and Internet companies try to adapt to such environment.
In the real estate trading market, KRR anticipates the high level of transaction volume to continue because of the lowinterest rate environment under the Bank of Japan’s monetary easing measures. However, investors should 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.
From a medium to long-term perspective, to generate a steady stream of rental revenue, consistently increase KRR’s
assets and establish a suitable financial position, KRR will continue to manage assets based on the following policies.
(A) Investment Strategy for New Properties and Disposition Policy
KRR receives a variety of support from many sources in order to achieve steady growth of KRR’s assets and increase
the value of KRR’s assets. One source is the Kenedix Group, including Kenedix, Inc., the parent company of KFM (Note).
KRR also receives support from KRR’s Alliance Companies: Sumitomo Mitsui Finance and Leasing Co., Ltd., Nippon
Commercial Development Co., Ltd., P&D Consulting Co., Ltd., and ITOCHU Corporation. KRR is 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, KRR makes 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, KRR invests
in retail properties that have competitive advantages, and prospects for stable cash flow and asset value growth. KRR
also invests in land ownership interests underlying retail properties. Regarding land-only properties, KRR makes theseinvestments after examining the terms of the land leasing agreement, the characteristics of the tenant, the asset value ofthe land, and the proportion of land-only properties in KRR’s portfolio. KRR may also consider making an equity
investment in a tokumei kumiai (silent partnership) for the acquisition of preferential negotiation rights andopportunities for additional revenues, provided that KRR is given an opportunity to acquire them in the future.
Regarding disposition of a portfolio property, KRR makes decisions based primarily on the significance of theseproperties in the context of the portfolio. This is assessed by comprehensive evaluation of the outlook for future
profitability and asset value determined based on its current profitability and market trends.
Note:

The Kenedix Group consists of Kenedix, Inc. and its subsidiaries and affiliates.

(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 pursue
internal growth. Furthermore, this integrated management framework facilitates activities to enliven local communities
where KRR’s properties are located, enabling KRR 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 KRR’s 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“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
KFM provides property management services for all of KRR’s properties for the purposes of performing retail property
management that better reflects the needs of the tenants as well as accumulating know-how and improving tenantsatisfaction. Specifically, KRR uses direct contact with tenant companies at KRR’s 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

21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 the competitive position of each property, the effect on KRR’s financial position and other factors. By
increasing space that 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 thebuilding 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,
including subsequent amendments.) and other laws and regulations, by the land area that is allowed to be used as a retail property site, andsubtracting from 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 retail properties, KRR seeks tenants that provide services, holds community involved events and uses othermeasures to help enliven the local communities where KRR’s properties are located. KRR believes these activities willcontribute to the medium to long-term growth in the asset value of these properties.
(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 select financing 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 wide range
of information to investors and other related parties and to announce information as soon and as accurately as possible.
KRR uses TDnet (Timely Disclosure network) and press releases to meet the timely-disclosure requirements of theTokyo Stock Exchange. In addition, KRR proactively posts information on its website (http://www.krr-reit.com/en/).
(E) Conflicts of Interest
In addition to managing the assets of KRR, KFM provides asset management services to other investment corporations
and real estate funds. KFM uses a “preferential right for acquisition opportunities” system for the property acquisition
process. KFM has a pipeline committee, which includes a compliance officer, and operates in accordance with rules.
This system is structured to prevent improper allocation of acquisition opportunities as well as conflicts of interest
among the REITs and funds 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 one asset.
Property Property
number
type
T-24

SS

Property nameSellerShibuya-ku, Tokyo

Undisclosed (Note 2)

Konami Sports Club
ShibuyaAcquisition price Appraisal value(million yen)
Acquisition date(million yen)
(Note 1)

Location

3,400

3,430

April 27,2018

Note 1: “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.
Note 2: Undisclosed as KRR has not obtained consent from the seller.

KRR has contracted a purchase and sale agreement (note 1) on March 30, 2018 to acquire the following asset.
Property Property
number
type
R-11

SS

Property nameSeller

Sapporo, Hokkaido

Undisclosed (Note 4)

Costco Wholesale Sapporo
Warehouse

AnticipatedAppraisal value
Scheduled dateacquisition price(million yen)(million yen)of acquisition(Note
3)(Note 2)

Location

4,210

4,390

May 31, 2018

Note 1: The purchase and sale agreement with the Seller on the acquisition of the asset falls under the category of forward commitment made byinvestment 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 thetermination shall compensate for the damage resulted from the termination by paying a penalty corresponding to 20% of the acquisition
price (excluding consumption taxes and local consumption taxes) to the other party.
Note 2: “Anticipated 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 acquisitionof the asset.
Note 3: “Appraisal value” represents as of March 1, 2018.
Note 4: Undisclosed as KRR has not obtained consent from the seller.

ii) Disposition of Assets
KRR disposed one asset.
Property Property
number
type
N-3
Note:

Property nameLocation

Buyer

Sale price(million yen) (Note 2)

Sale date

Nippon Commercial
Development Co.,
1,128
April 27, 2018
Ltd.
“Sale price” represents the amount specified in the sale and purchase agreement for the trust beneficiary interests, exclusive of thevarious expenses (sale expenses, property tax, etc.) required in the sale of the asset.
SS

K’s Denki Nakagawa
Tomita(Land)

Nagoya, Aichi

iii) Financing
KRR borrowed fund for the acquisition on April 27, 2018 (3,000 million yen for Series 21) and made decision toborrow fund for the acquisition on May 31, 2018 (4,000 million yen for Series 20). Furthermore, KRR borrowed forthe repayment of the borrowings on April 19, 2018 (1,200 million yen for Series 22) and on April 23, 2018 (5,570
million yen for Series 23). KRR also partially prepaid 2,000 million yen of 3,400 million yen short-term borrowings(Series 17-A) by issuing investment corporation bonds on April 27, 2018.
KRR also entered into agreements on commitment lines on March 31, 2018 to secure flexibility and stability infinancing method, for potential needs of funds as follows.
Counterparty
Sumitomo Mitsui Banking
Corporation

Limit of maximum amount(million yen)
1,000

Contract period
April 1, 2018 to March 31, 2019

Remarks
Unsecured, unguaranteed

Besides this commitment line, KRR has already established a 1,000 million yen commitment line with Mizuho Bank,
Ltd. The total limit of the commitment lines will remain at 2,000 million yen upon the execution of the newcommitment line agreement.
iv) Investment Corporation Bonds
KRR decided to issue investment corporation bonds adopted at the board of directors’ meeting held on April 20, 2018
and the payment was completed on April 26, 2018. The details are provided as follows.
Name of investment
corporation bonds

Kenedix Retail REIT Corporation 5th Series Unsecured Investment Corporation Bonds (Ranking paripassu among the specified investment corporation bonds) (The aforementioned investment corporation23

bonds shall hereafter be referred to as the “5th Series Bonds.”)
Total amount of the bonds

2.0 billion yen

Interest rate

0.700% per annum

Payment date

April 26, 2018
No collateral or guarantee is applicable, and no assets are specifically reserved as collateral for the

Collateral / Guarantee
Investment Corporation Bonds.
Wednesday, April 26, 2028
Investment Corporation Bonds may be purchased and cancelled at any time after the payment date, except
Redemption method and maturity

for the case of service regulations and other rules that the statutory or depository otherwise stipulates.
If the maturity date of the Investment Corporation Bonds falls on the bank holiday, the payment will be
brought forward to the previous bank business day.

Ratings

A+ (Japan Credit Rating Agency, Ltd.)Fiscal agent, issuing agent andpaying agent
Use of funds

MUFG Bank, Ltd.
Total amount raised (approximate net balance) was 1,983 million yen. It was used for partial prepaymentof borrowings, which was borrowed on October 3, 2017.

24

Profile of KRR(1) Status of Unitholders’ Capital
Second fiscal period
Third fiscal period
Fourth fiscal period
Fifth fiscal period
Sixth fiscal period(From October 1, 2015 (From April 1, 2016 to (From October 1, 2016 (From April 1, 2017 to (From October 1, 2017
September 30, 2016)
to March 31, 2017)
September 30, 2017)
to March 31, 2016)
to March 31, 2018)

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

355,250 units

422,450 units

422,450 units

507,700 units

507,700 units

Unitholders’ capital

77,606 million yen

94,256 million yen

94,256 million yen

113,399 million yen

113,399 million yen

Number of unitholders

10,876

10,618

10,072

12,301

12,545(2) Matters Concerning Investment Units
The following is a list of major unitholders as of March 31, 2018.
Name

Location

Number of units
held(Units)Ratio (%)
(Note 1)

THE MASTER TRUST BANK OF JAPAN, LTD.
(Trust Acct.)

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

86,483

17.03

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

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

66,036

13.00

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

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

20,7044.07

JP MORGAN CHASE BANK 385628

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

16,318

3.21

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

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

16,058

3.16

11,6482.29

11,405

2.24

8,841

1.74

7,242

1.42

6,307

1.24

251,042

49.44

THE BANK OF NEW YORK,NON-TREATY JASDEC ACCOUNT
THE BANK OF NEW YORK MELLON SA/NV 10
MITSUBISHI UFJ TRUST AND BANKINGCORPORATION

2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd. (Note 2)
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd. (Note 2)
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd. (Note 2)

STATE STREET BANK AND TRUSTCOMPANY 505223
SIX SIS LTD.
Total
Note 1:“Ratio” is the ratio to total number of units issued and outstanding, rounded down to the second decimal place.

Note 2:“The Bank of Tokyo Mitsubishi UFJ, Ltd.” changed its name to “MUFG Bank, Ltd.” as of April 1, 2018.

25

(3) Matters Concerning Directors and Auditori) Executive Director, Supervisory Director, and Independent Auditor as of September 30, 2017
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

Mai Ishiwatari

Partner, Shiroyama-Tower Law OfficeDirector, Cocone Corporation
Representative Director, Cocone Education Corporation

1,500

Supervisory
Director(Note)

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

Other concurrent title－

10,800Although 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, 2018 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.

26

Status on Investment Properties(1) Component of Assets
Sixth fiscal period
as of March 31, 2018

Fifth fiscal period
as of September 30, 2017
Type ofspecified asset

Areas

Property type

(Note 1)

Total amount held
(Millions of yen)

Total amount held
(Millions of yen)

Ratio (%)
(Note 3)(Note 2)86,65537.7

87,73438.0

Greater Osaka area

44,945

19.6

44,818

19.4

Greater Nagoya area

22,162

9.7

22,085

9.6

Fukuoka area

8,133

3.5

8,092

3.5

Ordinance-designatedcities, core cities andother areas

45,87420.0

45,645

19.8

－

－

－

－

－

Total of trust beneficiary interests in real estate

207,771

90.5

208,376

90.2

2

0.0

－

－

Bank deposits and other assets

21,854

9.5

22,7309.8

Total assets

229,628100.0

231,107

100.0

Neighborhood,community andother shopping
centers for daily
needs

Other retailproperties

Investment securities

Note 2:
Note 3:Note 4:(Note 3)

Tokyo metropolitan
area

Trust beneficiaryinterest in realestateNote 1:

Ratio (%)

(Note 2)

(Note 4)

“Areas” are categorized to the Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area andOrdinance-designated 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, Naraand Shiga 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 to cities
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 fromsurrounding 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.
“Investment securities” is the silent partnership equity interest of JRP8 GK.

27

(2) Major Assets Owned
The following are major assets owned (the ten largest properties by book value) by KRR as of March 31, 2018.
Property
number

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

Leased area(m2)

(Note 1)

(Note 2)

Occupancy
rate(%)(Note 3)

Ratio tototal rental
revenue(%)

Primary use(Note 4)

T-1

Fululu Garden Yachiyo

14,86377,057.56

76,148.98

98.8

9.3

RetailO-4Blumer HAT Kobe

11,45523,775.88

23,118.86

97.2

5.8

RetailR-10

Sun Street Hamakita

10,76849,023.34

48,619.71(Note 5)

99.2

6.4

RetailR-1

Roseo Mito

9,937

48,296.15

48,161.79

99.7

4.7

Retail

T-2

MONA Shin-Urayasu

8,513

9,592.65

8,421.16

87.8

6.0

RetailO-1

Blumer Maitamon

8,316

30,290.55

29,797.70

98.4

5.9

Retail

N-6

Resora Obu Shopping Terrace

8,195

19,990.40

19,820.82

99.2

3.9

RetailN-4

Homecenter Kohnan Sunadabashi

7,086

20,329.07

20,329.07

100.0(Note 7)RetailO-5Carino Esaka

6,664

7,540.58

7,540.58

100.0

3.9

RetailCOMBOX Komyoike

6,370

25,530.44(Note 6)25,530.44

100.0

2.8

RetailTotal

92,172

311,426.62

307,489.11

98.7(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, 2018. As for lease agreementsof buildings, 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, 2018 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, 2018, 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.

28

(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, 2018.
Area(Note1)

Property
number

Propertytype

Property nameLocation(City/ward,
prefecure)

Ownership
formBook value(in millions)(Note 2)

T-1
T-2
T-3
T-4

T

O

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

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-14

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
Ichikawa-Onitaka

Ichikawa, Chiba

T-23

SM

Ozeki Tokiwadai

Itabashi ward, Tokyo

O-1

NSC

Blumer Maitamon

Kobe, Hyogo

O-2

SM

Life Takadono (Land)

Osaka, Osaka

O-3

NSC

Piago Kahma Home
Center Omihachiman

Omihachiman, Shiga

O-4

NSC

Blumer HAT Kobe

Kobe, Hyogo

O-5
O-6
O-7
O-8
O-9

Sports Club
Renaissance Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki
Shonan-Fujisawa (Land)

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

Urban
Carino Esaka
Station-Front SC
Urban
COMBOX Komyoike
Station-Front SC
Hankyu Oasis
SM
Hirakatadeguchi
Welcia Kishiwadakamori
SS(Land)SM

Life Nishi-Tengachaya

Nerima ward, Tokyo
Saitama, Saitama
Fujisawa, Kanagawa

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

Suita, Osaka
Izumi, Osaka
Hirakata, Osaka
Kishiwada, Osaka
Osaka, Osaka

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 estate
Trust beneficiaryinterest in real estate

Evaluation value(in millions)(Note 3)

14,863

15,200

8,513

8,890

5,824

6,440

5,405

6,130

4,370

4,940

3,982

4,340

3,591

3,830

2,531

2,750

4,890

5,420

3,210

3,510

3,043

3,050

1,726

1,780

1,462

1,430

751

799

3,433

3,810

1,779

1,900

1,464

1,510

4,228

4,310

3,443

3,520

3,121

3,210

2,916

2,830

1,897

1,960

1,279

1,340

8,316

9,350

2,727

3,090

2,141

2,430

11,455

11,500

6,664

6,910

6,370

6,810

1,314

1,330

497

488

1,558

1,650

29

Area
(Note1)

Property
number

Propertytype

Property nameLocation(City/ward,
prefecure)

Ownership
form(Note 2)

O

O-10

NSC

N-1

SS

N-2

NSC

N-3

SS

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

N

F

F-2

SS

F-3

NSC

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R

R-7

Million Town
Amagasaki, Hyogo
Tsukaguchi (Land)
Kahma Home Center
Nagoya, Aichi
Nakagawa Tomita (Land)
Valor Ichinomiya-Nishi
K’s Denki
Nakagawa Tomita (Land)
Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama (Land)
Resora Obu Shopping
Terrace
Sunny Noma

Note 2:
Note 3:

Nagoya, 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
Shinden-Higashi
Kasumi Technopark
SakuraUrban
Solala Plaza
Station-Front SC

Aomori, Aomori
Aomori, Aomori
Ashikaga, Tochigi
Sendai, Miyagi
Tsukuba, Ibaraki
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

Total
Note 1:

Ichinomiya, Aichi

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)

3,772

3,870

2,351

2,680

2,154

2,320

907

1,010

7,086

7,310

1,390

1,440

8,195

7,950

1,457

1,590

5,057

5,390

1,577

1,690

9,937

11,500

1,467

1,570

888

936

4,322

5,060

3,301

3,330

848

874

5,632

5,950

4,155

4,340

4,320

4,220

10,768

11,160208,376

220,647“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.

30

[Earnings Performance for the Individual Properties]
Fifth fiscal period
as of September 30, 2017
Area

Property
number

Property
type

T-1

CSC

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

T

Fululu Garden
Yachiyo

733

9.4

40

98.8

755

9.3

MONA Shin-Urayasu

1(70)

95.9

483

6.2

1(58)

87.8

489

6.0

Passaggio Nishiarai

1(42)

99.8

305

3.9

1(41)

98.6

310

3.8

Daikanyama Address
Dixsept

1(2)

97.9

268

3.4

1(27)

97.9

264

3.3

1

100.0

139

1.8

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

T-23

SM

O-1
O-2

O-4
O-5
O-6
O-7
O-8
O-9
O-10

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

99.4

Unicus Ina

T-8

Number
Occupancyof tenants
rate (%)(Note 1)
48

NSC

O-3

O

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

Property name

Sixfth fiscal period
as of March 31, 2018

Sports Club
Renaissance
Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki
Shonan-Fujisawa(Land)
Unicus Kamisato(Land)
Unicus Konosu(Land)
Inageya Yokohama
Minamihonjuku(Land)
Gourmet City
Chiba-Chuo
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
Ichikawa-Onitaka

－

1

100.0

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

1(11)

100.0

132

1.7

1(11)

100.0

133

1.6

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

72

0.9

1

1

100.0

41

0.5

1

100.0

1

100.0

1

100.0

2

100.0

1

100.0

－

－

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

100.0

72

0.9

1

100.0

41

0.5

1

100.0

1

100.0

1

100.0

2

100.0

1

100.0
－

－

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

100.0

128

1(12)

100.0

88

2

100.0

2

100.0

1.6

1(14)

100.0

140

1.7

1.1

1(12)

100.0

118

1.5

－

－

2

100.0

(Note 3)(Note 3)

1

100.0

100.0

Ozeki Tokiwadai

－

－

－

－

1

100.0

NSC

Blumer Maitamon

50

98.2

509

6.5

51

98.4

SM

Life Takadono (Land)

1

100.0

－

－

1

100.0

(Note 3)(Note 3)

NSC

Piago Kahma Home
Center Omihachiman

2

100.0

NSC

Blumer HAT Kobe

97.2

475

5.8

1(31)

100.0

320

3.9

1

100.0

226

2.8

1

100.0

1

100.0

1

100.0

489

6.3

1(39)

1(30)

97.8

305

3.9

1

100.0

226

2.9

1

100.0
－

－

(Note 3)(Note 3)

1

100.0

－

(Note 3)(Note 3)

5.9
－

98.7

0.6

481

(Note 3)

1(42)

－

－
(Note 3)

－

100.0

44

－
(Note 3)(Note 3)

2

100.0

0.7

－

1(14)

1

59

－
100.0

100.0

－
(Note 3)

0.8

2

1

－
(Note 3)

59

1

Urban
Carino Esaka
Station-Front SC
Urban
COMBOX Komyoike
Station-Front SC
Hankyu Oasis
SM
Hirakatadeguchi
WelciaSS
Kishiwadakamori(Land)
Life
SM
Nishi-Tengachaya
Million Town
NSC
Tsukaguchi (Land)

－

1

100.0

－

－

(Note 3)(Note 3)

44

0.6

－

－

(Note 3)(Note 3)

31

Area

Property
number

Property
type

N-1

SS

N-2

NSC

N-3

SS

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

N

F

F-2

SS

F-3

NSC

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

R-5

NSC

R
R-6
R-7

SM

Property nameKahma Home
Center Nakagawa
Tomita (Land)
Valor IchinomiyaNishi
K’s Denki
Nakagawa Tomita(Land)
Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama(Land)
Resora Obu
Shopping Terrace
Sunny Noma
Round1 Stadium
Hakata-Hanmichibashi
Kurume-Nishi
Shopping Center
Roseo Mito
K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town
Ashikaga
Yorktown
Shinden-Higashi
Kasumi Technopark
SakuraUrban
Solala Plaza
Station-Front SC

Fifth fiscal period
Sixfth fiscal period
as of September 30, 2017as of March 31, 2018
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

1(43)

99.4

1(42)

99.2

1

100.0

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

113

1.4

－

－

(Note 3)(Note 3)

－

100.0

51

0.6

1(22)

99.7

378

4.7

1

100.0

1

100.0

1(29)

100.0

2

100.0

1

100.0

1

100.0

7

100.0

46

0.6

4

1(22)

99.7

379

4.9

1

100.0

－

－

(Note 3)(Note 3)

100.0

2

100.0

1

100.0

1

100.0

288

3.7

－

－

(Note 3)(Note 3)

3.9

(Note 3)

4

1(29)

320
－

100.0

100.0

－
(Note 3)(Note 3)1

1－(Note 3)－－(Note 3)(Note 3)

280

3.5

－

－

(Note 3)(Note 3)

100.0

136

1.7

R-8

NSC

P-1 Plaza Tenno

7

100.0

136

R-9

NSC

Seiyu Rakuichi
Moriya (Land)

1

100.0

(Note 3)(Note 3)

1

100.0

－

－

(Note 3)(Note 3)

R-10

NSC

Sun Street Hamakita

1(51)

98.0

458

5.9

1(53)

99.2

518

6.4

542

99.6

7,797

100.0

522

99.5

8,126

100.0

Total
Note 1:

Note 2:
Note 3:－

1.7－

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 areentered into, the number of master lessees is with the number of end-tenants indicated in parentheses. Where sublease type master lease agreements
are entered into, the indicated, number of master lessee is shown. As for the “Total” of “Number of tenants”, the number of end-tenants is used forpass-through type 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.

32

(4) Specified Transaction
As of March 31, 2018, 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

60,54054,890

19

Total

－

60,54054,89019Note 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 forthe seventh fiscal period ending September 30, 2018. These expenditures are for real estate owned by KRR and realestate in trusts in which KRR owns trust beneficiary rights. These planned projects may include some expenditure thatwill be recorded as expenses rather than capital expenditures for accounting purposes.
Property
number

Property nameLocation

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

Schedule

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

Second phase of renewal

From April 2018
to October 2018

349

－

－

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

Air conditioner-related
renewalFrom April 2018
to September 2018

260

－

－

T-21

Prime Square
Jiyugaoka

Meguro-ku,
TokyoInterior repair

From December 2017
to April 2018

73

－

－

T-5

Unicus Ina

Kobe, Hyogo

Exterior wall repair

From April 2018
to September 2018

47

－

－

O-1

Blumer Maitamon

Kobe, Hyogo

LED installation to common
area

From April 2018
to September 2018

46

－

－

(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 263 million yen. There were also
expenditures of 259 million yen that were recorded as repair expenses. In total KRR spent 523 million yen on the
projects.
Property
number

Property nameLocation

PurposeSchedule

Capital expenditure(Millions of yen)

T-1

Fululu Garden
YachiyoYachiyo, Chiba

Power generator renewal

From January 2018
to March 2018

45

T-6

Yorktown Kita
KanameHiratsuka,
Kanagawa

Rooftop parking waterproof

From July 2017
to December 2017

41

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

Air conditioner renewal

From February 2018
to March 2018

27

N-2

Valor
Ichinomiya-Nishi

Ichinomiya, Aichi

Exterior wall repair

From September 2017
to November 2017

25

O-5

Carino Esaka

Suita, Osaka

Escalator renewal

From February 2018
to March 201822

Others

101

Total

263

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

Expenses and Liabilities(1) Expenses related to Asset Management
Fifth fiscal period(From April 1, 2017
to September 30, 2017)
Asset management fees (Note)(in thousands of yen)
Sixth fiscal period(From October 1, 2017
to March 31, 2018)549,721628,807

Asset custody fees

7,776

9,411

Administrative service fees

25,791

29,713

Directors' compensation

4,500

4,500

Other operating expenses

81,132

76,233668,921748,665

Total

Note: The amount of asset management fees capitalized in addition to the amount above are 405,750 thousand yen for the fifth fiscal period and 12,630
thousand yen for the sixth fiscal period.

35

(2) Status of Borrowings
Borrowings on a financial institution basis as of March 31, 2018 are as follows.
Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)

Sumitomo M itsui Banking Corporation

3,900,000-

3,900,000-

Sumitomo M itsui Banking Corporation

450,000-

450,000-

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

450,000-

450,000-

M izuho Bank, Ltd.

400,000-

400,000-

Resona Bank, Ltd.

250,000-

250,000-

Aozora Bank, Ltd.

250,000-

250,000-

Sumitomo M itsui Trust Bank, Ltd.

200,000-

200,000-

Sumitomo M itsui Banking Corporation

900,000--

900,000

M izuho Bank, Ltd.

300,000--

300,000

Sumitomo M itsui Banking Corporation

2,600,000--

2,600,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

Classification

Balance at the
beginning of
period(Thousands ofyen)

LenderAverageinterest rate
(Note 1)
(Note 2)(％)

Payment due date
（Note 3）

Short-Term Loans Payable

0.485

October 3, 2017

0.443

February 10, 2018

0.447

April 19, 2018

Current Portion of Long-Term
Loans Payable

1,070,000--

1,070,000

Aozora Bank, Ltd.

640,000--

640,000

Resona Bank, Ltd.

400,000--

400,000

M izuho Bank, Ltd.

360,000--

360,000

M izuho Trust & Banking Co., Ltd.

300,000--

300,000

M itsubishi UFJ Trust and Banking Corporation （Note 8）

200,000--

200,000

Sumitomo M itsui Banking Corporation-

3,400,000-

3,400,000

0.446 September 30, 2018

Sumitomo M itsui Banking Corporation-

2,750,000-

2,750,000

0.455

February 13, 2019

Sub Total

12,670,000

6,150,000

5,900,000

12,920,000

Sumitomo M itsui Banking Corporation

0.545

February 10, 2018

0.534

M arch 31, 2019

2,300,000-

2,300,000-

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

800,000-

800,000-

M izuho Bank, Ltd.

400,000-

400,000-

M izuho Trust & Banking Co., Ltd.

350,000-

350,000-

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 6 and 7）

750,000--

750,000

Aozora Bank, Ltd. （Note 6）

500,000--

500,000

M izuho Bank, Ltd. （Note 6）

400,000--

400,000

Sumitomo M itsui Trust Bank, Ltd. （Note 6）

200,000--

200,000

Resona Bank, Ltd. （Note 6）

200,000--

200,000

The M usashino Bank, Ltd. （Note 6）

150,000--

150,000

1,850,000--

1,850,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 6 and 7）

550,000--

550,000

Sumitomo M itsui Trust Bank, Ltd. （Note 6）

500,000--

500,000

Resona Bank, Ltd. （Note 6）

300,000--

300,000

The M usashino Bank, Ltd. （Note 6）

250,000--

250,000

Sub Total

9,500,000-

3,850,000

5,650,000

Sumitomo M itsui Banking Corporation

Sumitomo M itsui Banking Corporation （Note 6）Long-Term Loans Payable

2,400,000--

2,400,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

800,000--

800,000

M itsubishi UFJ Trust and Banking Corporation （Note 8）

800,000--

800,000

Sumitomo M itsui Trust Bank, Ltd.

550,000--

550,000

Aozora Bank, Ltd.

500,000--

500,000

Resona Bank, Ltd.

500,000--

500,000

The Gunma Bank, Ltd.

400,000--

400,000

The M usashino Bank, Ltd.

400,000--

400,000

M izuho Bank, Ltd.

350,000--

350,000

M izuho Trust & Banking Co., Ltd.

300,000--

300,000

3,000,000--

3,000,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

700,000--

700,000

Sumitomo M itsui Trust Bank, Ltd.

500,000--

500,000

Aozora Bank, Ltd.

450,000--

450,000

Resona Bank, Ltd.

450,000--

450,000

Sumitomo M itsui Banking Corporation

0.447

Remarks(Note 4)

Unsecured/Non-guaranteed(Note 4)

Unsecured/Non-guaranteed(Note 4)

Unsecured/Non-guaranteed

April 21, 2018

0.545

M arch 31, 2019

0.751

February 10, 2020

0.865

Use

February 10, 2021

36

Classification

LenderM izuho Bank, Ltd.

Balance at the
beginning of
period(Thousands ofyen)

Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)

400,000--

400,000

2,600,000--

2,600,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

800,000--

800,000

Sumitomo M itsui Trust Bank, Ltd.

600,000--

600,000

Aozora Bank, Ltd.

400,000--

400,000

M izuho Trust & Banking Co., Ltd.

400,000--

400,000

M izuho Bank, Ltd.

300,000--

300,000

Resona Bank, Ltd.

300,000--

300,000

Development Bank of Japan Inc.（Note 5）

1,500,000--

Development Bank of Japan Inc.（Note 5）

1,600,000-

Sumitomo M itsui Banking Corporation

4,600,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

Sumitomo M itsui Banking Corporation

Averageinterest rate
(Note 1)
(Note 2)(％)
0.865

Payment due date
（Note 3）February 10, 2022

1,500,000

0.925

February 10, 2021-

1,600,000

1.033

February 10, 2022--

4,600,000

1.366

April 16, 2025

1,000,000--

1,000,000

Sumitomo M itsui Trust Bank, Ltd.

600,000--

600,000

M izuho Bank, Ltd.

400,000--

400,000
0.975

M arch 31, 2023

Resona Bank, Ltd.

400,000--

400,000

M izuho Trust & Banking Co., Ltd.

400,000--

400,000

M itsubishi UFJ Trust and Banking Corporation （Note 8）

400,000--

400,000

1,500,000--

1,500,000

0.994

M arch 31, 2023

M itsubishi UFJ Trust and Banking Corporation （Note 8）

450,000--

450,000

Resona Bank, Ltd.

200,000--

200,000

0.987

M arch 31, 2023

The M usashino Bank, Ltd.

150,000--

150,000

Development Bank of Japan Inc.（Note 5）

1,500,000--

1,500,000

1.013

M arch 31, 2023

Sumitomo M itsui Banking Corporation

3,000,000--

3,000,000

M izuho Bank, Ltd.

1,150,000--

1,150,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

1,000,000--

1,000,000
1.110

M arch 31, 2024

M izuho Trust & Banking Co., Ltd.

700,000--

700,000

Sumitomo M itsui Trust Bank, Ltd.

650,000--

650,000

Long-Term Loans Payable

Resona Bank, Ltd.

500,000--

500,000

1,500,000--

1,500,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）

400,000--

400,000

M izuho Bank, Ltd.

710,000--

710,000

Sumitomo M itsui Trust Bank, Ltd.

620,000--

620,000

Sumitomo M itsui 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 M itsui 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 M itsui Banking Corporation

1.243

Remarks(Note 4)

Unsecured/Non-guaranteed

February 10, 2021

0.978

Development Bank of Japan Inc.（Note 5）

Use

April 16, 2025

0.368 September 30, 2019

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）
The Gunma Bank, Ltd.（Note 5）

500,000--

500,000

Development Bank of Japan Inc.（Note 5）

2,000,000--

2,000,000

1.049

M izuho Trust & Banking Co., Ltd.（Note 5）

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

Resona Bank, Ltd.
Sumitomo M itsui Banking Corporation

2,600,000--

2,600,000

Aozora Bank, Ltd.

500,000--

500,000

M itsubishi UFJ Trust and Banking Corporation （Note 8）

400,000--

400,000

Sumitomo M itsui Trust Bank, Ltd.

300,000--

300,000

Resona Bank, Ltd.

300,000--

300,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 5 and 7）

600,000--

600,000

0.400

Development Bank of Japan Inc.（Note 5）

500,000--

500,000

0.553

M izuho Bank, Ltd. (Note 5)

400,000--

400,000

0.553
0.553

0.485

January 31, 2027

January 31, 2027

April 27, 2021
M izuho Trust & Banking Co., Ltd.（Note 5）

200,000--

200,000

1,500,000--

1,500,000

Sumitomo M itsui Trust Bank, Ltd.

400,000--

400,000

Aozora Bank, Ltd.

400,000--

400,000

Sumitomo M itsui Banking Corporation

0.772

October 31, 2024

37

Increase during
the period(Thousands ofyen)

Decrease during
the period(Thousands ofyen)

Balance at theend of period(Thousands ofyen)

Resona Bank, Ltd.

300,000--

300,000

0.772

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 5 and 7）

600,000--

600,000

0.696

M izuho Bank, Ltd. (Note 5)

600,000--

600,000

0.815

Development Bank of Japan Inc.（Note 5）

500,000--

500,000

0.814

M izuho Trust & Banking Co., Ltd.（Note 5）

200,000--

200,000

0.814

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 5 and 7）

500,000--

500,000

0.903

October 31, 2026

Sumitomo M itsui Banking Corporation

500,000--

500,000

Sumitomo M itsui Trust Bank, Ltd.

500,000--

500,000

1.033

M ay 18, 2027

Resona Bank, Ltd.

400,000--

400,000

Development Bank of Japan Inc.（Note 5）

500,000--

500,000

1.050

M izuho Bank, Ltd. (Note 5)

500,000--

500,000

1.049

M izuho Trust & Banking Co., Ltd.（Note 5）

300,000--

300,000

1.050

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 5 and 7）

500,000--

500,000

0.670 September 29, 2023

1,500,000--

1,500,000

0.918 September 30, 2026

500,000--

500,000

0.930

M izuho Bank, Ltd. (Note 5)

1,500,000--

1,500,000

1.029

Sumitomo M itsui Trust Bank, Ltd.

1.100 September 29, 2028

Classification

Balance at the
beginning of
period(Thousands ofyen)

LenderAverageinterest rate
(Note 1)
(Note 2)(％)

Payment due date
（Note 3）Use

Remarks(Note 4)

Unsecured/Non-guaranteed

October 31, 2024

October 31, 2024

Long-Term Loans Payable

Sumitomo M itsui Trust Bank, Ltd.
The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 5 and 7）

M ay 18, 2027

September 29, 2027
1,500,000--

1,500,000

Sumitomo M itsui Banking Corporation-

500,000-

500,000

1.035

October 3, 2027

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Notes 5 and 7）-

1,200,000-

1,200,000

1.000

February 10, 2028

M izuho Trust & Banking Co., Ltd.

-

350,000-

350,000

Aozora Bank, Ltd.

-

250,000-

250,000
0.480

August 31, 2019

Resona Bank, Ltd.

-

250,000-

250,000

Sumitomo M itsui Trust Bank, Ltd.

-

200,000-

200,000

The Bank of Tokyo-M itsubishi UFJ, Ltd. （Note 7）-

1,250,000-

1,250,000
0.603

August 31, 2022

M izuho Bank, Ltd.

-

800,000-

800,000

Sub Total
Total

70,730,000

4,800,000-

75,530,000

92,900,000

10,950,000

9,750,000

94,100,000

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 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 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 ofdebts.
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.
Note 7: The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its corporate name to MUFG Bank, Ltd. on April 1, 2018.
Note 8: MUFG Bank, Ltd. succeeded to the status of lender from Mitsubishi UFJ Trust and Banking Corporation on April 16, 2018.

(3) Status of Investment Corporation Bonds
Balance as of
Balance as ofInterest rate
Redemption
Issuance date October 1, 2017 March 31, 2018
Maturity date(%)
method(million yen)(million yen)
1st Series Unsecured Investment October 31,
October 29,
1,000
1,000
0.200
Corporation Bonds
2016
2021
Bonds

2nd Series Unsecured Investment
Corporation Bonds

October 31,
2016

3rd Series Unsecured Investment
Corporation Bonds

August 31,
2017

1,000

4th Series Unsecured Investment
Corporation Bonds

August 31,
2017

Total

0.600

October 30,
2026

1,000

0.320

August 31,
2022

2,000

2,000

0.700

August 31,
2027

5,000

5,000

1,000

1,000

Use

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

38

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

Acquisition price(in millions)(Note)

Disposition
Disposition
priceBook value Gain / loss
Date
(in millions) (in millions) (in millions)(Note)

Trust beneficiaryinterest in real estate
Note:

T-23

Ozeki Tokiwadai

February 13, 2018

1,263

－

－

－

－

“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 anddeposits and cash and deposits in trust.

40

(3) Appraisal Values of Specific Assetsi) Real Estate
Acquisition/disposition

Ownership
form

Property
number

Property nameAcquisition date

Acquisition
price(in millions)Appraisalvalue(in millions)(Note 1)

(Note 2)

Appraiser

Evaluation date

Trust beneficiary
Daiwa Real Estate
Ozeki Tokiwadai
interest in real
T-23
February 13, 2018
1,340
1,263
Dec. 1, 2017(Land)
Appraisal Co., Ltd.
estateNote 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,
Appraisal of Securitized Real Estate.”
Acquisitionii) 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, 2017 to March 31, 2018, 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 thename of counter 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.

41

(4) Related-Party Transactionsi) Transactions
Transaction price (in millions)Purchase
Total amount

Sale

1,263

-

Transaction with related-party
JRP7 GK

1,263(100.0%)

-

(-%)

Total

1,263

(100.0%)-(-%)ii) Amounts of Fees Paid
The amount of fee paid for renovation placing orders to a related party is as follows.
Kenedix Engineering, Inc. JPY 52 million
Note:

A related party, etc. is defined as a related party, etc. of the asset manager having an asset management agreement with KRR as prescribed in
Article 123 of the Order for Enforcement of the Act on Investment Trusts and Investment Corporations of Japan and in Article 26-27 of theRegulations 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.

42

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.

43Financial Statements(5th Fiscal Period: from April 1, 2017 to September 30, 2017)(6th Fiscal Period: from October 1, 2017 to March 31, 2018)
Independent Auditor’s Report
Balance Sheets
Statements of Income and Retained Earnings
Statements of Changes in Net Assets
Statements of Cash Flows
Notes to Financial Statements

45

Kenedix Retail REIT Corporation

Balance Sheets
As of March 31, 2018 and September 30, 2017
As of March 31, 2018

As of September 30, 2017

(in thousands of yen)
AssetsCurrent assets
Cash and deposits (Notes 9 and 11)¥7,179,463¥5,265,120

Cash and deposits in trust (Notes 9 and 11)

14,045,452

13,908,498

Operating accounts receivable

231,067

249,833

Prepaid expenses

51,788136,375

Consumption taxes receivable
Other
Total current assets-

947,707

4,255

3,571

21,512,027

20,511,105

Non-current assets
Property, plant and equipment (Notes 17 and 20)
Buildings in trust

54,980,817

54,528,155

Accumulated depreciation(4,053,797)(3,197,167)

Buildings in trust, net (Note 3)

50,927,020

51,330,987

2,804,224

2,797,067

Accumulated depreciation(249,855)(196,396)
2,600,670

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

2,554,369

Machinery and equipment in trust

214,510214,510

Accumulated depreciation(22,623)(16,977)

Machinery and equipment in trust, net

191,887

197,533

79,91871,172

Accumulated depreciation(20,383)(15,164)

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

59,53456,007150,317,484

149,241,987

Tools, furniture and fixtures in trust

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

378

14,291

204,050,675

203,441,477

4,324,719

4,328,697

2,331

2,776

4,327,050

4,331,474

Intangible assets (Note 20)
Leasehold right in trust (Note 17)
Other
Total intangible assets
Investments and other assets
Investment securities
Lease and guarantee deposits

-

2,790

10,00010,000

Lease and guarantee deposits in trust

60,25660,256Long-term prepaid expenses

780,184

808,924

Long-term deposits

157,110

157,110Other

19,87922,553

1,027,429

1,061,634

209,405,155

208,834,586

Organization costs

15,226

20,264

Investment corporation bond issuance costs

35,39638,307

Investment unit issuance costs

139,404

224,185

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

Total deferred assets
Total assets

190,027

282,757¥231,107,209¥229,628,449

See accompanying notes to financial statements.

46

As of March 31, 2018

As of September 30, 2017

(in thousands of yen)
Liabilities
Current liabilities
Operating accounts payable¥646,507¥574,194

Short-term loans payable (Notes 11 and 21)

12,920,000

12,670,000

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

5,650,000

3,850,000

Accounts payable-other359,858

339,816

Accrued expenses

18,53018,164

Income taxes payable

3,641

2,703

Accrued consumption taxes
Advances received
Deposits received

312,160

41,046

1,121,432

1,104,639

117,043

142,780

21,149,173

18,743,344

Investment corporation bonds (Notes 11 and 22)

5,000,000

5,000,000

Long-term loans payable (Notes 11 and 21)

75,530,000

76,380,000

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

12,788,402

12,933,293

Asset retirement obligations (Note 15)

23,62923,482

Other

30,89531,767

Total current liabilities
Non-current liabilities

Total non-current liabilities
Total liabilities

93,372,927

94,368,543

114,522,100

113,111,887

113,399,022

113,399,022(9,754)(9,754)

Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Allowance for temporary difference adjustments (Note 5)
Total deduction from unitholders' capital
Unitholders' capital, net(9,754)(9,754)

113,389,267

113,389,267

3,175,962

3,104,740

Surplus
Unappropriated retained earnings
Total surplus

3,175,962

3,104,740

116,565,229

116,494,008

Deferred gains or losses on hedges (Notes 11 and 12)

19,87922,553

Total valuation and translation adjustments

19,87922,553

Total unitholders' equity
Valuation and translation adjustments

Total net assets (Note 6)

116,585,108

116,516,561

Total liabilities and net assets¥231,107,209¥229,628,449

See accompanying notes to financial statements.

47

Kenedix Retail REIT Corporation

Statements of Income and Retained Earnings
For the period from October 1, 2017 to March 31, 2018 and the period from April 1, 2017 to September 30, 2017
From October 1, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017

(in thousands of yen)
Operating revenues
Rent revenue-real estate (Note 7)¥6,991,591¥6,637,179

Other lease business revenue (Note 7)

1,134,746

1,160,494

-

5,844

8,126,338

7,803,517

3,609,580

3,468,519

628,807549,721

Dividend income
Total operating revenues
Operating expenses
Expenses related to rent business (Note 7)
Asset management fees
Asset custody fees

9,411

7,776

Administrative service fees

29,71325,791

Directors' compensation

4,500

4,500

Other operating expenses

76,233

81,132

Total operating expenses

4,358,245

4,137,441

3,768,092

3,666,076

Interest income

6359Interest on refund

1,472

-

Total non-operating income

1,535

59

Interest expenses

398,485

369,045

Interest expenses on investment corporation bonds

12,634

5,414

Financing-related expenses

86,12380,322

Amortization of organization costs

5,038

5,066

Operating income
Non-operating income

Non-operating expenses

Amortization of investment corporation bond issuance costs

2,910

1,906

Amortization of investment unit issuance costs

84,78096,175589,972

557,930

Ordinary income

Total non-operating expenses

3,179,655

3,108,205

Income before income taxes

3,179,655

3,108,205

3,848

3,681

Income taxes
Current
Total income taxes
Net income

3,848

3,681

3,175,807

3,104,524

Retained earnings brought forward

155

216

Unappropriated retained earnings¥3,175,962¥3,104,740

See accompanying notes to financial statements.

48

Kenedix Retail REIT Corporation

Statements of Changes in Net Assets
For the period from October 1, 2017 to March 31, 2018 and the period from April 1, 2017 to September 30, 2017
Unitholders' equity
Unitholders' capital

Surplus

Deduction from unitholders'
capitalUnitholders'

Allowance for

Total

Unitholders'

capitaltemporary

deduction from

capital, netdifference

unitholders'adjustments

capitalUnappropriatedretainedearnings

Total
Total

unitholders'surplusequity¥2,584,343¥96,800,139(in thousands of yen)
Balance as of March 31,
2017¥94,256,390¥(40,593)¥(40,593)¥94,215,796¥2,584,343

Changes of items during
the period
Issuance of new
investment units

19,142,631

19,142,631

19,142,631

Dividends fromsurplus(2,553,287)(2,553,287)(2,553,287)

Reversal of
allowance fortemporary difference
adjustments

30,83830,83830,838Net income(30,838)(30,838)-

3,104,524

3,104,524

3,104,524

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

19,142,631

30,83830,83819,173,470

520,397

520,397

19,693,868¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,104,740¥3,104,740¥116,494,008

surplus(3,104,585)(3,104,585)(3,104,585)

Net income

3,175,807

3,175,807

3,175,807

Balance as of September
30, 2017 (Note 8)
Changes of items during
the period
Dividends from

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

-

-

-

-

71,221

71,221

71,221¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,175,962¥3,175,962¥116,565,229

Balance as of March 31,2018 (Note 8)49

Valuation and translation
adjustments
Deferred gains

Total valuation

or losses on

and translation

hedgesTotal net assets

adjustments(in thousands of yen)

Balance as of March 31,
2017¥23,395¥23,395¥96,823,535

Changes of items during
the period
Issuance of new
investment units

19,142,631

Dividends fromsurplus(2,553,287)

Reversal of
allowance fortemporary difference
adjustments-

Net income

3,104,524

Net changes of items
other thanunitholders’ equity

(842)

(842)

(842)

(842)

(842)

19,693,026¥22,553¥22,553¥116,516,561

Total changes of items
during the period
Balance as of September
30, 2017 (Note 8)
Changes of items during
the period
Dividends from
(3,104,585)

surplus
Net income

3,175,807

Net changes of items
other thanunitholders’ equity(2,674)(2,674)(2,674)(2,674)(2,674)68,547¥19,879¥19,879¥116,585,108

Total changes of items
during the period
Balance as of March 31,2018 (Note 8)

See accompanying notes to financial statements.

50

Kenedix Retail REIT Corporation

Statements of Cash Flows
For the period from October 1, 2017 to March 31, 2018 and the period from April 1, 2017 to September 30, 2017
From October 1, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017

(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes¥3,179,655¥3,108,205

Depreciation and amortization

925,524885,529

5,038

5,066

Amortization of organization costs
Amortization of investment corporation bond issuance costs

2,910

1,906

Amortization of investment unit issuance costs

84,78096,175Interest income

(63)

(59)

Interest expenses

411,119

374,459

Decrease (increase) in operating accounts receivable

18,765(66,839)

Decrease (increase) in consumption taxes receivable

947,707(947,707)

Decrease (increase) in prepaid expenses

84,586(95,354)

Increase (decrease) in operating accounts payable(324)

119,319

Increase (decrease) in accounts payable-other

18,93759,447

Increase (decrease) in accrued consumption taxes

271,114(204,795)

Increase (decrease) in advances received

16,792

226,397

Increase (decrease) in deposits received(25,736)

18,539Decrease (increase) in long-term prepaid expenses

28,740(160,857)-(32,150)

Other

14,532(7,011)

Subtotal

5,984,080

3,380,270

Decrease (increase) in long-term deposits

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

63

59(410,726)(370,062)(2,910)(4,253)5,570,507

3,006,014(1,471,805)(38,122,784)

Net cash provided by (used in) investing activities
Purchase of property, plant and equipment in trust
Purchase of intangible assets-(1,141)

Purchase of intangible assets in trust-(3,812,078)

Proceeds from investment securities

966

104,744-(24,220)

Payments for lease and guarantee deposits in trust
Repayments of tenant leasehold and security deposits in trust(299,385)(603,958)

Proceeds from tenant leasehold and security deposits in trust

154,494

2,141,079

Proceeds from restricted bank deposits in trust

215,676

215,676(1,400,052)(40,102,682)

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

6,150,000

16,270,000

Decrease in short-term loans payable(5,900,000)(15,070,000)

Proceeds from long-term loans payable

4,800,000

19,000,000

Repayments of long-term loans payable(3,850,000)-

Proceeds from issuance of investment corporation bonds-

2,977,457

Proceeds from issuance of investment units-

19,027,111

Dividends paid

(3,103,480)(2,552,953)

Net cash provided by (used in) financing activities(1,903,480)

39,651,615

Net increase (decrease) in cash and cash equivalents

2,266,973

2,554,947

Cash and cash equivalents at the beginning of the period

16,851,851

14,296,903

Cash and cash equivalents at the end of the period (Note 9)¥19,118,825¥16,851,851

See accompanying notes to financial statements.

51

Kenedix Retail REIT Corporation

Notes to Financial Statements
For the period from October 1, 2017 to March 31, 2018 and the period from April 1, 2017 to September 30, 2017

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 Corporationsof 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 international offerings. As a result, the number of investment units issued as of March 31, 2018 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 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 management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for dailyneeds as retail 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), withcustomers 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 andservices
KRR acquired trust beneficiary interests in real estate (six properties acquired on April 19, 2017 with an acquisition price of 18,821 million yen, aproperty acquired on April 27, 2017 with an acquisition price of 10,746 million yen, a property acquired on May 18, 2017 with an acquisition price of
3,097 million yen and a property acquired on August 1, 2017 with an acquisition price of 7,911 million yen). For the period ended September 30,
2017, the portfolio of 51 properties as a whole performed well with an overall occupancy ratio of 99.6% as of September 30, 2017.
KRR acquired a trust beneficiary interest in real estate (a property acquired on February 13, 2018 with an acquisition price of 1,263 million yen).
For the period ended March 31, 2018, the portfolio of 52 properties as a whole performed well with an overall occupancy ratio of 99.5% as ofMarch 31, 2018.
Furthermore, the portfolio was diversified in terms of tenants as there were 542 and 522 end-tenants as of September 30, 2017 and March 31,2018 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 inJapan (Japanese GAAP), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments andExchange Act of Japan and related regulations, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
The accompanying financial statements are basically a translation of the financial statements of KRR, which were prepared in accordance withJapanese GAAP and were presented in the Semiannual Securities Report of KRR filed with the Kanto Local Finance Bureau. In preparing theaccompanying financial statements, certain reclassifications and modifications have been made to the financial statements issued domestically inorder 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 under Japanese 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.

52

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Other securities without market value are stated using the moving average cost method. Equity investments in a silent partnershipare stated, the amount equivalent to the corresponding equity interests including net amount of gain or loss from the silent partnership.
(B) 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 theestimated useful lives of the assets ranging as stated below:

Buildings

From October 1, 2017
to March 31, 20182-70 years

From April 1, 2017
to September 30, 20172-70 years

Structures

8-59 years

8-59 years

Machinery and equipment

5-25 years

5-25 years

Tools, furniture and fixtures

3-15 years

3-15 years(C) Intangible Assets (including trust assets)
Intangible assets are amortized by the straight-line method.
(D) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line method.
(E) Organization Costs
Organization costs are amortized over a period of 5 years under the straight-line method.
(F) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of 3 years under the straight-line method.
(G) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over a maturity period under the straight-line method.
(H) 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 and liabilities in trust are recorded on the balance sheets and the statements of income and retained earnings.
(I)

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 recognizedon an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can bereasonably estimated. Reimbursements from tenants including utility charge reimbursements are recorded on a gross basis and suchamounts are recorded both as revenues and expenses during the fiscal period.

53

(J) 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 thecalendar year in which the property 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 purchasedate of each property through the end of the calendar year. The amounts of those allocated portions of the property-related taxes arecapitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted to ¥137,530 thousand as of
September 30, 2017. There were no capitalized property-related taxes as of March 31, 2018.
(K) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets
and liabilities using the statutory tax rates.
(L) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes
applicable to the acquisition of assets are included in the cost of acquisition for each asset.
(M) Derivative Financial Instruments
KRR utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure to changes ininterest rates. KRR deferred recognition of gains or losses resulting from changes in fair value of interest-rate swap contracts because thesecontracts met the criteria 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.
(N) 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.
(O) 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.

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

As of March 31, 2018

As of September 30, 2017
(in thousands of yen)

Buildings in trust¥2,708,512¥2,707,274

Structures in trust

49,17250,764Tools, furniture and fixtures in trust

2,058

2,359

7,811,297

7,811,297

10,571,041

10,571,696

Land in trust
Total

54

Secured liabilities

As of March 31, 2018

As of September 30, 2017

2,800,594

3,023,268¥2,800,594¥3,023,268

As of March 31, 2018

As of September 30, 2017

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, 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.

The following summarizes allowance for temporary difference adjustments as of September 30, 2017
1. Reasons, related assets, initial amount, allowance and reversal
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

Deferred gains or losses
on hedges

Loss on interest-rate
swaps recognized at theend of the fiscal period

Total

Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)
¥9,75430,83830,838¥40,593¥40,593

¥

¥

-

¥

Balance atthe end of
the period-

Reason forreversal¥9,754--(30,838)-

Changes infair value ofderivativetransactions-¥(30,838)¥9,754-

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 derivative transactions used as hedging instruments, the corresponding
amount is scheduled to be reversed.

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 designatedas stated capital. KRR is required to maintain net assets of at least ¥50 million as required by the Investment Trust Act.

55

7. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUESAND PROPERTY-RELATED EXPENSES
Rental and other operating revenues and property-related expenses for the periods from October 1, 2017 to March 31, 2018 and from April 1,2017 to September 30, 2017 consist of the following:
From October 1, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017
(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¥5,697,578¥5,361,334

953,536

938,809

340,476

337,034

6,991,591

6,637,179

Parking space rental revenues

201,155

195,782

Utility charge reimbursement617,448

661,928

Subtotal
Other lease business revenue:

Miscellaneous

316,141

302,783

Subtotal

1,134,746

1,160,494

8,126,338

7,797,673

Property management fees and facility management fees

846,915

808,367

Utilities

597,633

650,115

Taxes

563,751

563,716

Repairs and maintenance259,834

189,071

Insurance

13,954

13,507

Trust fees

22,153

21,137

Depreciation

925,078885,100

Others380,258

337,504

Total property-related expenses

3,609,580

3,468,519

Net operating income from real estate rental business¥4,516,757¥4,329,153

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

8. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From October 1, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017

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 units56

9. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of March 31, 2018 and September 30, 2017:
As of March 31, 2018

As of September 30, 2017

(in thousands of yen)
Cash and deposits¥7,179,463¥5,265,120

Cash and deposits in trust

14,045,452

13,908,498

Restricted bank deposits in trust *(2,106,090)(2,321,767)

Cash and cash equivalents¥19,118,825¥16,851,851*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, 2018 and September 30, 2017 are as follows:
As of March 31, 2018

As of September 30, 2017

(in thousands of yen)
Due within 1 year

¥10,500¥10,500

Due after 1 year

188,548

193,798

Total¥199,048¥204,298(As lessor)
Future minimum lease income under the non-cancelable operating leases as of March 31, 2018 and September 30, 2017 are as follows:
As of March 31, 2018

As of September 30, 2017

(in thousands of yen)
Due within 1 year

¥8,798,586¥8,424,336

Due after 1 year

61,221,050

63,081,778

Total¥70,019,637¥71,506,114

57

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 of investment 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 tochanges in interest rates and other risks and does 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
are deposited.
Investment securities represent equity investments in a silent partnership and are exposed to credit risk of the issuer, property value fluctuation risk
and interest rate fluctuation risk.
Loans payable and investment corporation bonds, which are made or issued primarily for the purpose of procuring funds for the acquisition of realestate and trust beneficiary interests in real estate and have a repayment date of a maximum of 10 years 6 months for loans payable and also
have a redemption date of a maximum of 9 years and 5 months for investment corporation bonds as of March 31, 2018, the end of the sixth fiscal
period, are exposed to liquidity risk where alternative funds may not be procured by the repayment date. Also, loans payable with floating interest
rates are exposed to interest rate fluctuation risk. Derivatives are used for the purpose of hedging interest rate fluctuation risk for a certain portionof the loans payable.
Tenant leasehold and security deposits are deposits received from tenants, which are exposed to liquidity risks when the tenants vacate theproperties.
(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
by deposits in non-interest bearing ordinary savings accounts or with financial institutions with credit ratings above a certain level. Investment
securities represent equity investments in a silent partnership and are exposed to credit risk of the issuer. To manage this credit risk, theInvestment Corporation regularly evaluates the results of operations and the financial condition of the issuer, etc. 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 ofloans payable with floating rates against the total loans payable according to the financial environment, interest rate forecasts by continuous
monitoring, etc. and by using derivatives, etc. While investment securities, which are equity investments in a silent partnership, are exposed tocredit risk of the issuer and property value fluctuation risk, the Investment Corporation periodically reviews the value of the property and financial
condition of the issuer with regard to these investment securities. A risk management policy is established with regard to the execution andmanagement 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 to return 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
is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could
result in a different 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 fairvalues are difficult to determine are not included in the following table (*2).

58As of March 31, 2018
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥7,179,463¥7,179,463(2) Cash and deposits in trust

14,045,452

14,045,452

-

Total

¥

-

21,224,916

21,224,916-(1) Short-term loans payable

12,920,000

12,920,000-(2) Current portion of long-term loans payable

5,650,000

5,650,527

527(3) Investment corporation bonds

5,000,000

4,991,400(8,600)(4) Long-term loans payable

75,530,000

75,642,540

112,540(5) Tenant leasehold and security deposits in trust

2,635,158

2,630,225(4,933)

101,735,158

101,834,693¥19,879¥19,879

Total
Derivative transactions

99,534¥-As of September 30, 2017
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥5,265,120¥5,265,120(2) Cash and deposits in trust

13,908,498

13,908,498

-

Total

¥

-

19,173,618

19,173,618-(1) Short-term loans payable

12,670,000

12,670,000-(2) Current portion of long-term loans payable

3,850,000

3,837,976(12,023)(3) Investment corporation bonds

5,000,000

4,976,700(23,300)(4) Long-term loans payable

76,380,000

76,284,508(95,491)(5) Tenant leasehold and security deposits in trust

2,887,549

2,886,747(802)

100,787,549

100,655,932¥22,553¥22,553

Total
Derivative transactions(131,617)¥-*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 ofprincipal 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 thefair 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 ofthe 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.)(3) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.

59

(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 therepayment 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, 2018

As of September 30, 2017

(in thousands of yen)
Investment securities (Note1)¥-¥2,790Tenant leasehold and security deposits in trust (Note2)

10,153,243

10,045,743

Total¥10,153,243¥10,048,533(Note1) Fair values of investment securities are not subject to disclosure of fair value as they have no market price and their fair values arerecognized to be extremely difficult to grasp.
(Note2) It is extremely difficult to determine their fair values based on estimated future cash flows because no quoted market price is available
and the repayment dates of those deposits are not certain. Therefore, tenant leasehold and security deposits in trust are not includedin the above quantitative information.
*3: Redemption of monetary claims scheduled to be due after the balance sheet date
As of March 31, 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¥7,179,463

Cash and deposits in trust

14,045,452

Total

¥

-

¥

-

¥21,224,916

¥

-

-

¥

-

¥

¥

-

-

-

¥

-

¥

-

¥

-

¥

-

As of September 30, 2017
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¥5,265,120

Cash and deposits in trust

13,908,498

Total

¥

-

¥

-

¥19,173,618

¥

-

-

¥

-

¥

-

¥

-

¥

-

¥

-

¥

-

¥

-

*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, 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
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security
deposits in trust
Total¥12,920,000

-

¥

-

¥

-

¥

-

1,000,000-

1,000,000¥-

3,000,000¥-

5,650,000

9,380,000

7,000,000

13,300,000

9,050,000

36,800,000

435,430

435,430

435,430

435,430

224,712103,796¥19,005,430¥9,815,430¥7,435,430¥14,735,430¥10,274,712¥39,903,79660

As of September 30, 2017
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¥12,670,000

Investment corporation bonds
Long-term loans payable

-

¥

-

¥

-

¥

-

¥

-

-

-

-

-

2,000,000

3,000,000

3,850,000

6,980,000

7,000,000

13,300,000

7,000,000

42,100,000

435,430

435,430

435,430

435,430

435,430

110,793¥16,955,430¥7,415,430¥7,435,430¥13,735,430¥9,435,430¥45,210,793

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, 2018 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodPrinciple
methodSpecialtreatment ofinterest-rate
swaps
Total

Type of derivativetransactions
Interest rate swap
transaction:
Receive/floating andpay/fixed
Interest rate swap
transaction:
Receive/floating andpay/fixed

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥19,490,000¥19,490,000

41,050,000

35,400,000¥60,540,000¥54,890,000

Fair value(in thousands of yen)

¥19,879

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions*¥19,879*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-termloans payable and (4) Long-term loans payable.）
The contract amount and the fair value of interest-rate swap transactions as of September 30, 2017 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodPrinciple
methodSpecialtreatment ofinterest-rate
swaps
Total

Type of derivativetransactions
Interest rate swap
transaction:
Receive/floating andpay/fixed
Interest rate swap
transaction:
Receive/floating andpay/fixed

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥16,940,000¥16,940,000

44,900,000

41,050,000¥61,840,000¥57,990,000

Fair value(in thousands of yen)

¥22,553*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions¥22,553*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods todetermine the estimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-termloans payable and (4) Long-term loans payable.）61

13. RELATED PARTY TRANSACTIONS
1．Parent Company, major corporate unitholders and other
6th Fiscal Period (October 1, 2017 to March 31, 2018) and 5th Fiscal Period (April 1, 2017 to September 30, 2017): Not applicable
2．Affiliated companies and other
6th Fiscal Period (October 1, 2017 to March 31, 2018) and 5th Fiscal Period (April 1, 2017 to September 30, 2017): Not applicable
3．Fellow subsidiary companies and other
6th Fiscal Period (October 1, 2017 to March 31, 2018) and 5th Fiscal Period (April 1, 2017 to September 30, 2017): Not applicable
4．Directors, major individual unitholders and other
6th Fiscal Period (October 1, 2017 to March 31, 2018) and 5th Fiscal Period (April 1, 2017 to September 30, 2017): Not applicable

14. INCOME TAXESKRR is subject to corporate income taxes at a regular statutory rate of approximately 35%. 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 arequirement 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 the form of cash distributions totaling ¥3,175 million and ¥3,104 million for the periods ended March
31, 2018 and September 30, 2017, respectively, the distributions were treated as deductible distributions for purposes of corporate income taxes.
The effective tax rate on KRR’s income was 0.12% for the periods ended March 31, 2018 and September 30, 2017. The following tablesummarizes the significant differences between the statutory tax rate and the effective tax rate:
As of March 31, 2018

As of September 30, 2017

Statutory tax rate

34.81%

34.81%

Deductible cash distributions(34.77)(34.77)

Others0.08

0.08

Effective tax rate

0.12%

0.12%

The significant components of deferred tax assets and liabilities:
As of March 31, 2018

As of September 30, 2017

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

¥

234

¥

222

Amortization of leasehold right in trust

7,959

6,703

Depreciation

2,865

2,412

7,464

7,418

Subtotal deferred tax assets

Asset retirement obligations

18,524

16,756

Valuation allowance(18,524)(16,756)¥¥

Total deferred tax assets

-

-

62

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 theasset 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 twomonths 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, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017

(in thousands of yen)
Balance at the beginning of the period
Accretion adjustment
Balance at the end of the period¥23,482¥23,335

147

146¥23,629¥23,482

16. SEGMENT INFORMATION
Segment information for the periods from October 1, 2017 to March 31, 2018 and April 1, 2017 to September 30, 2017 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 the statements 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 ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount of property,
plant and equipment 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.

6317. INVESTMENT AND RENTAL PROPERTIESKRR owns retail properties 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, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017
(in thousands of yen)Book value
Balance at the beginning of the period¥207,771,218

Changes during the period
Balance at the end of the period
Fair value at the end of the period¥166,782,022

605,105

40,989,196

208,376,323

207,771,218¥220,765,000¥218,766,000

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 September 30, 2017, theprincipal increase was due to the acquisitions of real estate trust beneficiary interests in 9 properties totaling 41,517,461 thousand yen andthe principal decrease was due to depreciation amounting to 884,953 thousand yen and during the fiscal period ended March 31, 2018, theprincipal increase was due to the acquisitions of real estate trust beneficiary interests in 1 property totaling 1,280,257 thousand yen and theprincipal decrease was due to depreciation amounting to 924,931 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 K’s Denki
Nakagawa Tomita (Land) as of March 31, 2018, which was sold on April 27, 2018, is based on the sales price (1,128,000 thousand yen)under the trust beneficiary interest sales contracts entered into on November 14, 2017.
The profit or loss for the periods ended March 31, 2018 and September 30, 2017 concerning investment and rental properties is included in Note
“7. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES.”

18. PER UNIT INFORMATION

Net asset value per unit

From October 1, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017

¥229,633¥229,498¥6,255¥6,219Net income per unit

Net 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, 2018 (507,700 units) and during the fiscal period ended September 30, 2017 (499,147 units). Net income per unit after
adjusting for residual 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, 2017

From April 1, 2017

to March 31, 2018

to September 30, 2017

¥3,175,807¥3,104,524--¥3,175,807¥3,104,524

507,700

499,147

19. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

6420. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant and equipment and intangible assets consist of the following as of March 31, 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¥54,528,155¥452,662

Structures in trust

2,797,067

Machinery andequipment in trust
Property,plant andequipment-¥54,980,817¥4,053,797¥856,629¥50,927,020

7,157

-

2,804,224

249,855

53,4582,554,369

214,510--214,510

22,623

5,645

191,887

71,172

8,746-

79,91820,383

5,218

59,534

149,241,987

1,075,497-

150,317,484--

150,317,484

14,291378

14,291

378

-

-

378

206,867,184

1,544,442

14,291

208,397,334

4,346,659

920,952

204,050,675

206,867,184

1,544,442

14,291

208,397,334

4,346,659

920,952

204,050,675

4,349,916--

4,349,916

25,1973,978

4,324,719

4,455

-

-

4,455

2,124

445

2,331

-

¥4,354,372¥27,322¥4,424¥4,327,050

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

Total
Intangible
assets¥Leasehold rightin trust
Other

Total

¥4,354,372

¥

-

¥

Property, plant and equipment and intangible assets consist of the following as of September 30, 2017:

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¥42,757,457¥11,770,697

Structures in trust

1,822,887

Machinery andequipment in trust
Property,plant andequipment

and fixtures in¥54,528,155¥3,197,167¥819,702¥51,330,987

974,180-

2,797,067

196,396

51,2142,600,670

203,295

11,215-

214,510

16,977

5,532

197,533

60,635

10,536-

71,172

15,164

4,525

56,007

123,937,095

25,304,891-

149,241,987--

149,241,987

24,784

3,275

13,76814,291--

14,291

168,806,155

38,074,797

13,768206,867,184

3,425,706

880,975

203,441,477

168,806,155

38,074,797

13,768206,867,184

3,425,706

880,975

203,441,477

537,838

3,812,078-

4,349,916

21,2193,9784,328,697

3,314

1,141

-

4,455

1,679

429

2,776

¥541,153¥3,813,219-¥4,354,372¥22,898¥4,408¥4,331,474

trust
Construction inprogress in trust
Subtotal

Total

Total

-

Tools, furniture

Land in trust

Intangible
assets¥Leasehold rightin trust
Other

¥

*

*

*The amount of increase during the period is primarily attributable to the acquisition of the real estate properties and capital expenditures.

65

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, 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
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)

Short-termloanspayableCurrent
portion of
long-term
loans
payable¥Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed

(%)
¥

-

0.485

October 3,
2017

0.443

February 10,
2018

0.447

April 19,2018-

¥3,900,000

450,000-

450,000-

450,000-

450,000-

Mizuho Bank, Ltd.

400,000-

400,000-

Resona Bank, Limited

250,000-

250,000-

Aozora Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8）

250,000-

250,000-

200,000-

200,000-

900,000--

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.
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
Subtotal
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)

360,000--

360,000

300,000--

300,000

200,000--

200,000-

3,400,000-

3,400,000

0.446

-

2,750,000-

2,750,000

0.455

12,670,000

6,150,000

5,900,000

12,920,000

2,300,000-

2,300,000-

800,000-

800,000-

400,000-

400,000-

350,000-

350,000-

750,000--

750,000

500,000--

500,000

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 7 and 8)
Aozora Bank, Ltd.
(Note 7）
Mizuho Bank, Ltd.
(Note 7)
Sumitomo Mitsui Trust
Bank, Limited (Note 7)
Resona Bank, Limited(Note 7)The Musashino Bank,
Ltd. (Note 7)¥3,900,000

Payment due
date（Note 4）

0.447

0.545

0.534

April 21,2018

September 30,
2018
February 13,
2019

February 10,
2018

March 31,201966

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)

Current
portion of
long-term
loans
payableSumitomo Mitsui
Banking Corporation(Note 7)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 7 and 8)
Sumitomo Mitsui Trust
Bank, Limited (Note 7)
Resona Bank, Limited(Note 7)The Musashino Bank,
Ltd. (Note 7)
Subtotal
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

Long-term
loans
payable1,850,000--

1,850,000

550,000--

550,000--

500,000

300,000--

300,000

250,000--

250,000

9,500,000-

3,850,000

5,650,000

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

700,000--

700,000

Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

Payment due
date（Note 4）Use

Remarks

0.545

March 31,2019

(Note 5)

Unsecured/
Nonguaranteed

0.751

February 10,
2020

0.865

February 10,2021(Note 5)

Unsecured/
Nonguaranteed

0.978

February 10,
2022

(%)

500,000

The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.

Averageinterest rate
（Note 2）
（Note 3）500,000--

500,000

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

Mizuho Bank, Ltd.

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

400,000--

400,000

Mizuho Trust &Banking Co., Ltd.

400,000--

400,000

Mizuho Bank, Ltd.

300,000--

300,000

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

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

Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

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

67

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Sumitomo Mitsui Trust
Bank, Limited

Long-term
loans
payable--1,000,000

600,000--

600,000

Mizuho Bank, Ltd.

400,000--

400,000

Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Development Bank ofJapan Inc. (Note 6)
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Resona Bank, Limited

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

Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
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.
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

1,000,000

The Musashino Bank,Ltd.
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)

Averageinterest rate
（Note 2）
（Note 3）700,000--

700,000

650,000--

650,000

500,000--

500,000

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

1,500,000--

1,500,000

400,000--

400,000

710,000--

710,000

620,000--

620,000

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

October 31,
2025

500,000--

500,000

0.550

September 30,
2021

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

1.243

April 16,
2025

0.368

September 30,
2019

0.485

September 30,
2024
September 30,
2024
April 21,2026

January 31,
2027

April 27,
2021

68

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
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
payable-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

Resona Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Mizuho Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
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

Resona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Sumitomo Mitsui Trust
Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Mizuho Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Mizuho Trust &Banking Co., Ltd.
Aozora Bank, Ltd.

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

September
29, 2023

1,500,000--

1,500,000

0.918

September
30, 2026

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

February 10,2028-

350,000-

350,000-

250,000-

250,000-

250,000-

250,000

0.480

August 31,
2019-

200,000-

200,000-

1,250,000-

1,250,000

0.603

August 31,
2022-

800,000-

800,000

Sumitomo Mitsui Trust
Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mizuho Bank, Ltd.

Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(%)-

Subtotal
Total

Payment due
date（Note 4）600,000

Resona Bank, Limited

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）70,730,000

4,800,000-

75,530,000¥92,900,000¥10,950,000¥9,750,000¥94,100,000

0.772

April 27,
2021

October 31,
2024

October 31,
2024

May 18,2027

September
29, 2027
September
29, 2028
October 3,
2027

69

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¥9,380,000

Due after 2 years
through 3 years¥7,000,000

Due after 3 years
through 4 years（in thousands yen）
¥13,300,000

Due after 4 years
through 5 years¥9,050,000

Due after 5 years¥36,800,000

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 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 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) andrepayment of debts.
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 theprevious fiscal period.
Note 8: The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its corporate name to MUFG Bank, Ltd. on April 1, 2018.
Note 9: MUFG Bank, Ltd. succeeded to the status of lender from Mitsubishi UFJ Trust and Banking Corporation on April 16, 2018.

70

The following summarizes short-term loans payable and long-term loans payable outstanding as of September 30, 2017: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.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)

Short-termloanspayableCurrent
portion of
long-term
loans
payable¥4,140,000¥

Payment due
date（Note 4）-

¥4,140,000¥-

360,000-

360,000-

1,070,000-

1,070,000

3,900,000-

450,000

April 21,
2017

-

0.480

April 21,2017-

3,900,000

0.480

October 3,
2017

-

-

450,000

450,000--

450,000

Mizuho Bank, Ltd.

400,000

0.430

February 10,
2018

250,000

Aozora Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)

250,000-

400,000

Resona Bank, Limited-

200,000--

200,000-

900,000-

900,000

0.430-

300,000-

300,000

April 19,2018-

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

0.430

April 21,2018

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 10)
Sumitomo Mitsui
Banking Corporation（Note 7）
Sumitomo Mitsui Trust
Bank, Limited (Note 8)
Subtotal-

360,000-

360,000-

300,000-

300,000-

200,000-

200,000-

1,000,000

1,000,000

-

0.430

April 27,2018-

8,500,000

8,500,000

-

0.430

July 31,2018

11,470,000

16,270,000

15,070,000

12,670,000

2,300,000--

2,300,000

800,000--

800,000

0.545

February 10,
2018

400,000--

400,000

350,000--

350,000

3,850,000--

3,850,000

Mizuho Trust &Banking Co., Ltd.
Subtotal

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed

(%)
0.480

Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Mizuho Bank, Ltd.

Use

250,000
250,00071

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Mitsubishi UFJ Trustand Banking
Corporation (Note 10)
Sumitomo Mitsui Trust
Bank, Limited

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）--2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

Aozora Bank, Ltd.

500,000--

500,000

Resona Bank, Limited

500,000--

500,000

The Gunma Bank, Ltd.
The Musashino Bank,
Ltd.

400,000--

400,000

400,000--

400,000

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

350,000--

350,000

300,000--

300,000

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

0.751

February 10,
2020

0.865

February 10,2021

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mizuho 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

750,000--

750,000

500,000--

500,000

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

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

Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

2,400,000

Resona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Aozora Bank, Ltd.

Payment due
date（Note 4）

0.978

0.534

February 10,2022

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

March 31,201972

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Sumitomo Mitsui Trust
Bank, Limited

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

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

1,000,000--

1,000,000

600,000--

600,000

Mizuho Bank, Ltd.

400,000--

400,000

Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 10)
Development Bank ofJapan Inc.(Note 6)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Sumitomo Mitsui Trust
Bank, Limited

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

1,850,000--

1,850,000

550,000--

550,000

500,000--

500,000

Resona Bank, Limited
The Musashino Bank,Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 10)300,000--

300,000

250,000--

250,000

450,000--

450,000

Resona Bank, Limited
The Musashino Bank,Ltd.
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 9)
The Gunma Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
Resona Bank, Limited

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

0.975

March 31,
2023

0.994

March 31,
2023

0.545

March 31,
2019

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.243

April 16,
2025

0.368

September 30,
2019

400,000--

400,000

710,000--

710,000

620,000--

620,000

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

October 31,
2025

500,000--

500,000

0.550

September 30,
2021

2,000,000--

2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

September 30,
2024
September 30,
2024
April 21,2026

January 31,
2027

73

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
Aozora Bank, Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 10)
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 9)
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
payableTotal

Averageinterest rate
（Note 2）
（Note 3）

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)-

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

Resona Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 9)
Mizuho Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 9)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited-

300,000-

300,000-

600,000-

600,000

0.696-

600,000-

600,000

0.815

Resona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 9)
Sumitomo Mitsui Trust
Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 9)
Mizuho Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
Subtotal

0.485

0.772

April 27,
2021

April 27,
2021

October 31,
2024

October 31,
2024-

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

September
29, 2023-

1,500,000-

1,500,000

0.918

September
30, 2026-

500,000-

500,000

0.930-

1,500,000-

1,500,000

1.029

-

1,500,000-

1,500,000

1.100

57,380,000

19,000,000-

76,380,000¥72,700,000¥35,270,000¥15,070,000¥92,900,000

May 18,2027

September
29, 2027
September
29, 202874

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
payableDue after 2 years
through 3 years¥6,980,000

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

¥7,000,000

Due after 4 years
through 5 years¥13,300,000

Due after 5 years¥7,000,000¥42,100,000

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 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 4: All the repayment methods of debt financing except for the following Note 7 and Note 8 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) andrepayment of debts.
Note 6: Loans payable at a fixed rate.
Note 7: Prepayment was made on May 31, 2017.
Note 8: Prepayment of 3,000,000 thousand yen and 5,500,000 thousand yen was made on August 31, 2017 and September 29, 2017, respectively.
Note 9: The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its corporate name to MUFG Bank, Ltd. on April 1, 2018.
Note 10: MUFG Bank, Ltd. succeeded to the status of lender from Mitsubishi UFJ Trust and Banking Corporation on April 16, 2018.

22. INVESTMENT CORPORATION BONDS
Outstanding Investment corporation bonds as of March 31, 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)Total

October 31,
2016¥1,000,000

October 31,
2016

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-¥5,000,000¥5,000,000¥

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

75Outstanding Investment corporation bonds as of September 30, 2017 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)Total

October 31,
2016¥1,000,000

October 31,
2016

1,000,000

August 31,
2017

¥

-

August 31,
2017¥2,000,000¥

Use

Remarks(%)-¥1,000,000

0.200

October 29,
2021-

1,000,000

0.600

October 30,
2026

0.320

August 31,
2022

0.700

August 31,
2027

-

-

Repayment date

1,000,000-

2,000,000-¥5,000,000(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-¥

Due after 4 years
through 5 years-¥2,000,000

23. DISTRIBUTIONS
From October 1, 2017
to March 31, 2018

From April 1, 2017
to September 30, 2017

I.. Retained earnings at the end of period¥3,175,962,601¥3,104,740,879

II. Total distributions¥3,175,663,500¥3,104,585,500¥6,255¥6,115

III.Retained earnings brought forward to
the next period¥299,101¥155,379

Method of calculating distribution amountIn accordance with the policy described in Article 39-1 of
its Articles of Incorporation, KRR determines that theamount of distribution shall exceed the amountequivalent to 90% of its distributable profit as stipulated
in Article 67-15 of the Special Taxation Measures Law
and shall be up to its profits as the maximum amount.
Following this policy, KRR has decided that it shall
distribute ¥3,175,663,500 which is almost the entire
amount of retained earnings as the distributions ofearnings.
Procedures for the distribution of amounts exceeding
distributable income are outlined in Article 39-2 of KRR’s
Articles of Incorporation. In the sixth fiscal period, KRR
has decided not to distribute cash in excess of
distributable profit.

In accordance with the policy described in Article 39-1 of
its Articles of Incorporation, KRR determines that theamount of distribution shall exceed the amountequivalent to 90% of its distributable profit as stipulated
in Article 67-15 of the Special Taxation Measures Law
and shall be up to its profits as the maximum amount.
Following this policy, KRR has decided that it shall
distribute ¥3,104,585,500 which is almost the entire
amount of retained earnings as the distributions ofearnings.
Procedures for the distribution of amounts exceeding
distributable income are outlined in Article 39-2 of KRR’s
Articles of Incorporation. In the fifth fiscal period, KRR
has decided not to distribute cash in excess of
distributable profit.

Distributions per unit

76