Semi-annual Report for the 9th Period(From April 1, 2019 to September 30, 2019)

Focused Investment in
Shopping Centers for Daily Needs

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

H i ghli ght s

For the 9th fiscal period ended September 30, 2019
Distribution per unit

JPY 6,486

Forecast DPU for the 10th fiscal period

JPY 6,501

JPY 200.9 b n

Number of tenants

55
480

Occupancy rate at the end of period

98.9%

Kawamachi Yahagi Malll

I. Overview of KRR
Fro m the E xecutive Directo r
To p Interview
Key Characteristics
ESG Initiatives
Close-up KRR Vol.9
Resora Obu Shopping Terrace

Total assets (by acquisition price)

Number of properties

Contents

Financial Highlights
Portfolio List
Portfolio Map
Overview of Portfolio
Summery of Investment Unit
II. Asset Management Report
Overview of Asset Management
Profile of KRR
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 ofoperations for the ninth fiscal period (from April 1, 2019 to September 30, 2019).
We are in the fifth year since 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. In addition, in order to adapt to changing retail
environment with the recent penetration of e-commerce where the functions of retail and logistics
facilities are getting similar, we have added distribution centers to our investment targets, andacquired the first distribution center in March 2019.
For the ninth fiscal period, operating revenue totaled 8,609 million yen, operating income was3,879 million yen, ordinary income was 3,288 million yen and net income was 3,287 million yen.
The distribution to unitholders was 6,486 yen per unit.
During the ninth fiscal period, we acquired three additional distribution centers. We also
continued to review the portfolio and reshuffled assets. Specifically, we decided to dispose of

Fululu Garden Yachiyo, which was the largest asset in our portfolio in terms of acquisition priceand which was the only asset with a general merchandise store (GMS) in our portfolio. On theother hand, we decided to acquire two shopping centers for daily needs and one retail
distribution center. As a result, our portfolio, which started with 18 assets with a total acquisition
price of 80,843 million yen at the time of listing, has grown to 55 properties for 200,938 million
yen in acquisition price at the end of the ninth period.
Going into the tenth fiscal period, we acquired five additional properties in connection with thefourth public offering. Through these disposition and acquisitions, our portfolio consists 61
properties for 225,000 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

Focused investment in shopping centers for daily needs,
and expansion in the scope of investment to include
retail distribution centers
Focusing our investment in shopping centers for daily needs, comprised of competitive specialty stores
Shopping centers for daily needs enjoy a high frequency of customer visits due to their convenience and satisfy
the daily needs of customers. By focusing on investment in shopping centers for daily needs, KRR seeks to gain astable source of income.
Target investment ratio byasset type

1. Shopping centers for daily needs (80% or more)

Shopping
centers fordaily needs
80% or more

Logistics facilities
and other retailfacilities 20%
or less

Retail properties located within residential districts or adjacent tomajor roads, which provide daily goods and services
Well located for dailylivingRetail trade area of an approximately 1-10km radius (generally around 3-5km)
Customers predominantly from local areas surrounding the retail property

High volume ofcustomer 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

Primary characteristics of shopping centers for daily needs - Unicus Ina as an example
Location Located within residential areas ofa metropolitan commuter district

Residential
district

Specialty stores(small retail spaces)
Grocerysupermarket(anchor tenant)Flat parking lot

Tenants Providing primarily daily
necessities

Restaurant building
expansion site
Residenti
al district■ Retail trade area population
・1km radius: 10,000 people
・3km radius: 62,000 people
・5km radius: 247,000 people

ウニクス伊奈（NSC）■ Housing Yaoko, a grocery
supermarket (anchor tenant), anda group of specialty stores (nonanchor tenants)

UnicusIna (NSC)
ウニクス伊奈（NSC）

Facilities Capacity to accommodate frequent customer visits and provide revenue upside potential■ Flat parking lot to accommodate approx. 480 vehicles■ Constructed a restaurant building on underutilized space2

Expanding the scope of investment to include retail distribution centers, adapting to the trend ofchanging retail environment
KRR expanded its investment target to include logistics facilities, to adapt to changing environment with ecommerce penetration. In logistics sector, KRR targets retail distribution centers near areas of consumption toadapt to the changing flow of goods.

2. Logistics facilities (20% or less, combined with other retail facilities)
Major KRR investments and their positioning in the supply chain
Shopping
centers fordaily needs

KRR investments

Visit
Manufacturing
Stores

Large logistics
facilities

Delivery
Delivery

ImportDelivery
Retail distribution centers

Background of investment in logistics facilities
Changes in retail facilities with the rise of e-commerce
Partnerships between online and brick-and-mortar
retailers■ Delivery of products from retail facilities■ Pickup of products at retail facilities■ Integration of logistics and retail facilities■

Challenges faced by the logistics sector with the rise of
e-commerce
Frequent small deliveries
Shorter lead time
■ Managing to last mile issues■ Needs for distribution centers close to consumption
areas
■
■

Similar functions of retail and logistics facilities in providing customers with merchandise
Delivery of products from retail facilities

Pickup of products at retail facilities

Integration of logistics and retail facilities

Kyorindo Net Super delivery vehicles (P-1 Plaza Tenno)

PUDO station (Apita Terrace Yokohama Tsunashima)

Conceptual property expansion with a restaurant building(Yokohama Kamigo Distribution Center) (Note)

Note: The picture above is an image of completion, and may differ from the actual building after completion. We have not made any specific decision regarding
the expansion of the restaurant building, and it may be changed, postponed or cancelled in the future.

3

Growth strategies

1

Steady AUM growth
Since IPO in 2015, KRR achieved steady growth in AUM through four public offerings. AUM
size that was 80.8 billion yen at IPO has expanded 2.8 times to 225 billion yen.

（JPY bn）
300

Aiming forsteady growthof AUM going
forward

250
204.9

200
158.7

150
100

206.1

212.8

213.2

225.0
200.9

164.3

131.6
91.8
80.8

50

2 Assets disposed of in the 9th & 10th fiscal period2

T-1 Fululu Garden Yachiyo

R-7 Solala Plaza (Note)

O-8 Welcia Kishiwada Kamori (Land)

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

3 Assets acquired in the 9th fiscal period
O-11

Habikigaoka Shopping Center

L-1

An NSC located in a new town undergoing land readjustment in thesoutheast part of Osaka Prefecture

NSC

L-2

Location

Habikino, Osaka

L

Location

Zama, Kanagawa

Acquisition
JPY2,000 mn
price

Acquisition
JPY1,400 mn
priceAppraisalvalue

JPY2,020 mn

Appraisalvalue

JPY1,640 mn

Appraisal
NOI yield

5.3%

Appraisal
NOI yield

6.0%

Oppama Distribution Center

L-4 Yokohama Kamigo Distribution Center

A core distribution center for a major convenience store chain, containing
facilities for distribution and a processing center for such convenience store
chain

L

Zama Distribution Center

A distribution center for a major convenience store chain, located in an areawith a concentration of logistics facilities

Location

Yokosuka,
Kanagawa

Acquisition
JPY1,300 mn
price

A distribution center for a home delivery company with a valuable location ina densely populated area

LocationL

Zama, Kanagawa

Acquisition
JPY790 mn
priceAppraisalvalue

JPY1,570 mn

Appraisalvalue

JPY840 mn

Appraisal
NOI yield

6.5%

Appraisal
NOI yield

5.0%Note 1: “Appraisal value” is as of September 30, 2019.
Note 2: “Appraisal NOI” includes operating revenue related to the restaurant building, and the “Appraisal NOI yield” is calculated taking into
account the estimated construction cost of this building.

44Assets acquired in the 10th fiscal period

T-25 Apita Terrace Yokohama Tsunashima (51% quasi-co-ownership interest)
An NSC that meets diverse customer needs and constitutes a next -generation urban smart city in an area with a dense and growing population

NSC

T-26 Kalsa Hiratsuka

T-27 Monenosato Mall

An NSC with the retail trade area covering Hiratsuka and Chigasaki,
the core of the Shonan area

An NSC with YorkMart as its core tenant, located in the developing
Monenosato New Town residential area

NSC

NSC

T-28 Chofu Center Building (Retail wing)

T-29 Across Plaza Urayasu Higashino (Land)

An NSC that serves the needs of its neighborhood, located in a commercial
and residential district within walking distance of Chofu Station, and agrocery supermarket as its core tenant

The underlying land for a relatively new NSC opened in December 2017
along a major road in a residential area in Urayasu, an area with
continued population growth

NSC

N-7

NSC

Valor Nakashidami (Land)

The underlying land for a relatively new grocery supermarket in
Moriyama-ku, Nagoya, an area undergoing continued development,with a land readjustment project underwaySM

L-5 Gyoda Distribution Center
A versatile storage and distribution center suitable for local distributionin Tokyo metropolitan commuter districts and semi -long-distance
distribution

L

5

ESG Initiatives

1

Environmental initiatives

Recognitions and certifications on environment
Awarded GRESB Green Stars for the fourth consecutive years
Awarded a “Green Star” Rating in response to high evaluations for the
fourth consecutive years since its first participation in the GRESB Real
Estate Assessment in 2016.
Won the first place in the “Eastern Asia - Retail - Listed” category andalso earned four star (out of five star) GRESB Rating in 2019, improved
from three star in the previous year.

DBJ Green Building Certification
The following 14 properties have been awarded the DBJ Green Building Certification for theirenvironmental initiatives as of September 2019.
Properties with outstanding environmental & social awareness (★★★★)
T-2 MONA Shin-Urayasu

T-4

Daikanyama Address Dixept

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

Properties with high environmental & social awareness
(★★)

T-3
Passaggio Nishiarai

O-5
Carino Esaka

T-5
Unicus Ina

T-7
Unicus Yoshikawa

R-1
Roseo Mito

T-20
Kawamachi Yahagi Mall

R-4
Ashico Town Ashikaga

T-19
Yumemachi
Narashinodai Mall

O -4

R-10
Sun Street Hamakita

Blumer HAT Kobe

O-1 Blumer Maitamon

N-6
Resora Obu
Shopping Terrace

Certified properties and floor area ratio
The number of certified properties: 14 (32.6%)
Certified floor area: 340,251.61m2 (54.5%)(as of September 30, 2019)

Note: The ratio is the percentage of certified floor area to the gross floor area of properties owned by KRR (623,999.98m 2, calculated on a pro-rata basisof ownership ratio for compartmentalized ownership, excluding land-only properties). As of September 30, 2019, KRR owns 43 properties that are
eligible for certification, excluding 12 land-only properties.

Environmental Considerations Rating from Sumitomo Mitsui Banking Corporation
Awarded an “A” grade from Sumitomo Mitsui Banking Corporation in recognition of its commitment toenvironmental initiatives in asset management, based on SMBC Environmental Considerations Lending
Program.

MUFG ESG Rating Certificate for J-REIT supported by JCR
Awarded the highest rank of “S” in “MUFG ESG Rating Certificate for J-REIT supported by JCR” by Mitsubishi
UFJ Research and Consulting Co., Ltd.

6

2

Initiatives at Unicus Ina

Solar panel installation

Cooperation with local
communities

Improve profitability, energy saving effect,
BCP effect, and CO2 emission reduction
effectAgreed with Ina Town to provide
part of facility as a temporary
shelter in case of a disasterGreening of facilities

Community-participating eventsAwarded Green Award of
Saitama Prefecture

Making efforts to enliven local
communities

3 Governance structure
Decision-making process for acquisition of properties from a related party
When one of the parties involved in the purchase of a property or other transaction is a related-party, thefollowing independent decision-making procedures are applied.
Preparation of
proposal
Asset
Investment
Divisionof Retail REIT
Department

Confirmation of
proposalCompliance
Officer

Deliberation andresolution

Relatedpartytransaction

Compliance
Committee

Deliberation andresolution

Relatedpartytransaction

AssetManagement
Committee ofRetail REIT
Division

Deliberation andresolution
KRR Boardof Directors

Relatedpartytransaction(Note)

Other transactions

ReportAsset
Manager's
Board ofDirectors

Other transactions

Note: Transactions within the scope of insignificance criteria are excluded from the decision-making process above.

Kenedix Group's business model benefiting from our growth
The Kenedix Group’s J-REIT assets constitute the majority of their AUM. Because of the importance of the J-REIT
business to the Kenedix Group, we believe that our sound growth is in line with their interests.
We also implemented the following measures to align the Kenedix Group’s performance to unitholder value.
Alignment with
Kenedix Group (Note)

Kenedix increased its holdings to
10,050 units(Approx. 1.9% of total
outstanding units)

Introduction of fee aim to provide incentives toenhance unitholder value (since October 1, 2018)
Asset management fee I

Asset management fee II

Total assets at the end of
the previous period x
0.3%(annual rate)

Net income X DPU X 0.0012%

Total assets at the end of
the previous period X
0.27% (annual rate)

Net income X DPU X 0.0013%

Investment unit performancefee (newly adopted)

KRR’s excess returns over T SE
REIT Total Return Index X
market cap X 0.1%

Acquisition fee

Disposition fee

Acqu isit io n pr ice X 1 .0 %(In clu din g a cqu isit i on ofbu ildin g s t h r ou gh
expa n sion orr econ st r u ct ion )D isposit io n pr ice X 0 .5 %Merger fee (newly adopted)

Appraisal value of the assets tobe succeeded X 1.0%
(maximum)Note: The figures are as of the end of November 2019.

7

Close-up KRR

N-6

Vol.9

NSC

Resora Obu Shopping Terrace
One of the largest shopping centers for daily needs in the city of Obu, Aichi
Resora Obu Shopping Terrace is a neighborhood
shopping center (NSC) adjacent to 130 condominiums andmedical facilities that opened in April 2008 . It is locatedapproximately 15 minute walk from Obu Station (twostations to Nagoya Station on the rapid train) on the JR
Tokaido Line and the Taketoyo Line in Obu, Aichi
Prefecture. For customers visiting by car, the parking lot
has been secured for more than 1,000 vehicles.
The city of Obu is an industrial city centered on theautomobile industry with the neighboring cities of Nagoya
and Kariya, where major companies of the Toyota Groupare concentrated. Its population is on an increasing trend.
The tenant structure of this property is composed oftenants that are easily accessible to child-rearing families.
Its core tenant is Yamanaka, a grocery supermarket, which
operates dominantly mainly in Aichi Prefecture. In addition
to stores such as a drugstore, a bookstore, apparel stores,
and a 100-yen shop, it also houses service oriented
tenants such as a bouldering gym, a health club, an urban
childcare center, a toddler class, and an English
conversation class.
Since KRR acquired the property in August 2017, part ofthe bookstore on the first floor was replaced by achildren’s apparel store in June 2018, and the amusement
tenant on the second floor was replaced by a creditworthy
tenant, Namco, in July 2019.
Acquisition price

JPY7,911mn

LocationObu, Aichi

Land area

29,359.74m 2

Gross floor area

24,093.43m 2Core tenant

Premium Support K.K.

In particular, since the opening of Namco Asobi Park as anamusement tenant, the number of families with children
visiting the shopping center has increased significantly,
and sales at stores handling children's products andrestaurants have increased. This has had a positive impact
on sales at other stores as well. At the same time, KRR is
working to maintain and improve the competitiveness andthe value of the shopping center by creating a playroom
and resting space in a part of the common area andinstalling a tatami seating space in the food court.
In terms of managing the shopping center, we are actively
working to build stronger ties with local governments andcommunities by co-hosting disaster prevention events withfire departments using spaces in the shopping center.
Examples include cooperating in blood donation activities
by the Aichi Red Cross Blood Center, and promoting local
products and mascot of Obu in cooperation with local
magazines. In terms of energy conservation, we use LEDs
for in-house lighting and parking lots. These efforts werehighly evaluated, and we received DBJ Green Building
Certification as a “property with high environmental andsocial awareness.”
We will continue to pursue management that is integrated
with the local community and work to revitalize the facility
as a shopping center for daily needs.

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

1

Financial highlights (as of September 30, 2019)
LTV

44.9%

Long-term debt ratio (Note)

Fixed interest debt ratio

Number of lenders

Average interest rate

96.2%

Average remaining years
to maturity

1.03%

12

4.6 years

2

94.2%

Credit rating and commitment lines (as of September 30, 2019)
Credit rating (JCR)

Commitment credit lines

A+ (Stable)

3JPY

3.0 b nDebt maturity schedule (as of November 1, 2019)

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

Debt outstanding JPY 110,900 mn(excluding interest-bearing tenant leasehold and security deposits)
Borrowings(JPY mn)
15,000Investment corporation bonds

12,000
9,000
6,000
3,000
0

10th
period11th
period12th
period13th
period14th
period15th
period16th
period17th
period18th
period19th
period20th
period21st
period22nd
period23rd
period24th
period25th
period26th
period27th
period28th
period29th
period30th
period4 Inclusion in major indices
KRR believes that the expansion of market capitalization and inclusion in the global index will lead to expansion of
the investor base and improvement of liquidity, and is incorporated into the following major indices.
FTSE EPRA／NAREIT Global Real Estate Index

S&P Developed REIT Index

Dow Jones Global Select REIT Index

Bloomberg Asia REIT Index

GPR 250 Index

MSCI Japan Small Cap Index

9

Portfolio List as of Nov. 1, 2019
Total acquisition price

Weighted average occupancy rate

JPY225,000 mn
No.

第Name of property

99.0 %

Location(city / ward, prefecture)

Number of Tenants494
Acquisition price(JPY mn)Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

T-2

MONA Shin-Urayasu

Urayasu, Chiba

8,063

100.0

58

T-3

Passaggio Nishiarai

Adachi ward, Tokyo

5,850

100.0

42

T-4

Daikanyama Address Dixsept

Shibuya ward, Tokyo

5,390

99.1

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

99.6

10

T-8

Sports Club Renaissance Fujimidai

Nerima ward, Tokyo

2,586

100.0

1

T-9

Super Viva Home Iwatsuki (Land)

Saitama, Saitama

4,815

100.0

1

T-10

K’s Denki Shonan-Fujisawa (Land)

Fujisawa, Kanagawa

3,169

100.0

1

T-11

Unicus Kamisato (Land)

Kodama-gun, Saitama

3,000

100.0

1

T-12

Unicus Konosu (Land)

Konosu, Saitama

1,700

100.0

1

T-13

Inageya Yokohama Minamihonjuku (Land)

Yokohama, Kanagawa

1,442

100.0

1

T-15

Nakamachidai Tokyu Store

Yokohama, Kanagawa

3,360

100.0

1

T-16

Central Wellness Club Nagatsuta Minamidai

Yokohama, Kanagawa

1,724

81.0

1

T-17

Life Kameido

Koto ward, Tokyo

1,450

100.0

1

T-18 Totsuka-Fukaya Shopping Center (Land)

Yokohama, Kanagawa

4,170

100.0

2

T-19 Yumemachi Narashinodai Mall

Funabashi, Chiba

3,416

100.0

14

T-20 Kawamachi Yahagi Mall

Chiba, Chiba

3,097

100.0

12

T-21 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

T-24 Konami Sports Club Shibuya

Shibuya ward, Tokyo

3,400

100.0

1

99.7

50

O-1

Blumer Maitamon

Kobe, Hyogo

8,389

O-2

Central Square Takadono (Land)

Osaka, Osaka

2,685

100.0

1

保

O-3

DCM Kahma MEGA Don Quijote UNY Omihachiman

Omihachiman, Shiga

2,140

100.0

2

有

O-4

Blumer HAT Kobe

Kobe, Hyogo

11,000

84.4

41

資

O-5

Carino Esaka

Suita, Osaka

6,555

100.0

30

産

O-6

COMBOX Komyoike

Izumi, Osaka

6,450

100.0

1

O-7

Hankyu Oasis Hirakatadeguchi

Hirakata, Osaka

1,280

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

O-11 Habikigaoka Shopping Center

Habikino, Osaka

2,000

100.0

2

期
末

N-1

DCM Kahma Nakagawa Tomita (Land)

Nagoya, Aichi

2,311

100.0

1

N-2

Valor Ichinomiya-Nishi

Ichinomiya, Aichi

2,174

100.0

1

N-4

Homecenter Kohnan Sunadabashi

Nagoya, Aichi

7,140

100.0

1

N-5

K’s Denki Shin-Moriyama (Land)

Nagoya, Aichi

1,370

100.0

1

Obu, Aichi

7,911

95.5

39

N-6 Resora Obu Shopping Terrace
F-1

Sunny Noma

Fukuoka, Fukuoka

1,497

100.0

1

F-2

Round1 Stadium Hakata-Hanmichibashi

Fukuoka, Fukuoka

5,020

100.0

1

F-3

Kurume-Nishi Shopping Center

Kurume, Fukuoka

1,515

100.0

4

R-1

Roseo Mito

Mito, Ibaraki

10,046

100.0

23

R-2

1

K's Denki Aomori Honten

Aomori, Aomori

1,469

100.0

R-3 Super Sports Xebio Aomori-Chuo

Aomori, Aomori

898

100.0

1

R-4 Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

95.0

28

R-5 Yorktown Shinden-Higashi

Sendai, Miyagi

3,252

100.0

2

R-6 Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

100.0

1

R-8 P-1 Plaza Tenno

Hamamatsu, Shizuoka

4,010

100.0

7

R-9 Seiyu Rakuichi Moriya (Land)

Moriya, Ibaraki

4,111

100.0

1

R-10 Sun Street Hamakita

Hamamatsu, Shizuoka

10,746

99.4

50

10

Portfolio Map as of Nov. 1, 2019
NSC

R-4
T-11

R-1

Urban Station-Front SC

L-5 GyodaDistributionCenter

T-12

SM

R-6

SS

T-5
T-9

L-3

ChofuCenterBuilding T-8(Retailwing) T-28

T-23

T-3

R-11

Logistics

T-7

R-9

T-22
T-17

T-19

R-2
R-3

T-27 MonenosatoMall

T-2
T-20
T-24
T-4
T-21
T-29 AcrossPlazaUrayasu
Zama Distribution Center
T-16
Higashino (Land)
L-1
T-25
T-15 ApitaTerraceYokohamaTsunashima
T-18
T-13
T-6
L-4 Yokohama KamigoDistribution Center
T-10
L-2 Oppama Distribution Center
T-26 KalsaHiratsuka

R-5

L-4

O-3

F-2

N-2

F-1

N-5
O-4

O-10

O-1

F-3

O-9
O-6

No.

第
期
末
保
有
資
産

第
期
取
得
資
産

Name of property

O-7

N-4

N-1

O-5
O-2
O-11
Habikigaoka
Shopping Center
Location(city / ward, prefecture)

Valor Nakashidami (Land)
N- 7

N-6
R-10
R-8
Acquisition price(JPY mn)Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

R-11

Costco Wholesale Sapporo Warehouse

Sapporo, Hokkaido

4,210

100.0

L-1

Zama Distribution Center

Zama, Kanagawa

1,400

100.0

1

L-2

Oppama Distribution Center

Yokosuka, Kanagawa

1,300

100.0

1

L-3

Musashi Ranzan Distribution Center

Hiki-gun, Saitama

3,879

100.0

1

L-4

Yokohama Kamigo Distribution Center

Yokohama, Kanagawa

Total of assets acquired by the end of the 9th period

1

790

100.0

1

200,45198.9

479

T-25 Apita Terrace Yokohama Tsunashima

Yokohama, Kanagawa

5,899

100.0

1

T-26 Kalsa Hiratsuka

Hiratsuka, Kanagawa

5,980

100.0

3

T-27 Monenosato Mall

Yotsukaido, Chiba

2,410

98.7

5

T-28 Chofu Center Building (Retail wing)

Chofu, Tokyo

2,300

100.0

3

T-29 Across Plaza Urayasu Higashino (Land)

Urayasu, Chiba

2,248

100.0

1

N-7 Valor Nakashidami (Land)

Nagoya, Aichi

2,551

100.0

1

L-5

Gyoda, Saitama

3,160

100.0

1

24,54899.9

15225,000

99.0

494

Gyoda Distribution Center

Total of assets acquired during the 10th period
Total

Note 1: “Occupancy rate” is as of September 30, 2019.
Note 2: “Number of tenants” indicates the number of end -tenants as of September 30, 2019.
Note 3: “Portfolio List” and “Total” do not contain Welcia Kishiwadakamori (Land) disposed of on October 31, 2019.

11

Overview of portfolio (as of Nov. 1, 2019)
T-2

MONA Shin-Urayasu

T-3

Passaggio Nishiarai

T-4

Daikanyama
Address Dixsept

T-6

Yorktown KitaKaname

T-7

Unicus Yoshikawa

T-15

Nakamachidai
Tokyu Store

T-8

Sports Club
Renaissance Fujimidai

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-17

Life Kameido

T-18

Totsuka-Fukaya
Shopping Center (Land)

T-19

Yumemachi Narashinodai Mall

T-21

Prime Square
Jiyugaoka

T-22

Round1
IchikawaOnitaka

T-23

Ozeki Tokiwadai

T-24

Konami Sports
Club Shibuya

O-2

Life Takadono (Land)

O-3

DCM KahmaMEGA
Don Quijote UNY
Omihachiman

O-4

Blumer HAT Kobe

O-1

Blumer Maitamon

O-7

Hankyu Oasis
Hirakatadeguchi

T-5

Unicus Ina

T-16

Central Wellness Club
NagatsutaMinamidai

T-20

Kawamachi Yahagi Mall

O-9

Life Nishi-Tengachaya

Note: Please refer p.4-5 for the properties acquired in the ninth and tenth fiscal period.

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

Million Town
Tsukaguchi (Land)

N-4

Homecenter Kohnan Sunadabashi

Round1 Stadium
Hakata-Hanmichibashi

F-3

Kurume-Nishi Shopping
CenterR-2

R-5

Yorktown
ShindenHigashi

R-6

Kasumi Technopark
SakuraR-8

R-1

Roseo Mito

R-10

Sun Street Hamakita

DCM Kahma

N-1 Nakagawa Tomita (Land) N-2

Valor Ichinomiya-Nishi

N-6

Resora Obu Shopping Terrace

K’s Denki Aomori
HontenR-3

Super Sports Xebio
Aomori-Chuo

R-4 Ashico Town Ashikaga

P-1 Plaza Tenno

R-9

Seiyu Rakuichi Moriya(Land)

R-11

L-3

Musashi Ranzan Distribution Center

Costco Wholesale
Sapporo Warehouse13Summary of Investment Unit
Unit Price and trading volume（Unit）
1 00,000（ Yen ）
320,000

Feb 10, 2015
JPY 266,100

40,000
Unit Price

Volume300,000

35,000280,000

30,000260,000

25,000240,000

20,000
Sep 30, 2019
JPY 270,800

220,000

1 5,000

200,000

1 0,000

1 80,000

5,000

1 60,000

Mar
Feb.1
30
10

Sep
30

Mar
30

2015

Mar
30

Sep
30

2016

Sep
30

Mar
30

2017

Sep
30

2018

Mar
30

Sep
30

0

2019

General breakdown of unitholders
As of September 30, 2019

Ownership ratio
by investor type
Brokerage firms
23,085 units(4.5%)

Number of unitholders byinvestor type

Other domestic
corporations
232

Individuals
and others
50,643 units（2.1%）

Financial
Institutions
104(10.0%)

Foreign investors
151,933 units(29.9%)(3.0%)（0.3%）（1.0%）

507,700

10,907units

Other domestic
corporation
15,370 units

Foreign investors
235
Brokerage firms（2.2%）
28

Financial
Institutions
266,669 units(52.5%)

Individuals
and others
10,308（94.5%）

14

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

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

Millions of yen

7,803

Millions of yen

7,797

Millions of yen
Millions of yen

Operating income
Ordinary income

Seventh fiscal period Eighth fiscal period

Ninth fiscal period(From April 1,2018
to September 30, 2018)(From October 1, 2018
to March 31, 2019)(From April 1, 2019
to September 30, 2019)

8,126

8,577

8,415

8,609

8,126

8,364

8,197

8,367

4,137

4,358

4,760

4,530

4,729

3,468

3,609

3,984

3,733

3,891

Millions of yen

3,666

3,768

3,816

3,884

3,879

Millions of yen

3,108

3,179

3,201

3,284

3,288

Net income

Millions of yen

3,104

3,175

3,197

3,283

3,287

Total assets

Millions of yen

229,628

231,107

238,490

237,845236,253%(+24.1)(+0.6)(+3.2)(-0.3)(-0.7)

Millions of yen

116,516

116,585

116,729

116,505

116,386%(+20.3)(+0.1)(+0.1)(-0.2)(-0.1)

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

Millions of yen

113,399

113,399

113,399

113,399

113,399Units

507,700

507,700

507,700

507,700

507,700

Yen

229,498

229,633

229,918

229,477

229,242

Distributions(Note 2)Millions of yen

3,104

3,175

3,198

3,288

3,292

Distributions per unit

Yen

6,115

6,255

6,299

6,477

6,486

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

Yen

6,115

6,255

6,299

6,138

6,242

Yen

-

-

-

339

244

1.5

1.4

1.4

1.4

1.4

(3.0)

(2.8)

(2.7)

(2.8)

(2.8)

2.9

2.7

2.7

2.8

2.8

(5.8)

(5.5)

(5.5)

(5.6)

(5.6)

50.7

50.4

48.9

49.0

49.3

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

Days

183

182

183

182

183

%

100.0

100.0

100.0

94.9

96.4

51

52

53

53

55

m2

865,226.20

866,425.22

890,152.09

913,759.61

850,456.06

542

522

520

511

480

%

99.6

99.5

99.4

99.2

98.9

Depreciation expense

Millions of yen

885

925

971

990

1,019

Capital expenditures

Millions of yen

367

263

806

500

791

Rental NOI (Net operating income) (Note 9)

Millions of yen

5,214

5,441

5,352

5,454

5,494

FFO (Funds from operation) (Note 10)

Millions of yen

4,093

4,194

4,028

4,105

4,093

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

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

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

FFO per unit
Yen
8,062
8,260
7,935
8,085
8,063
Note 1: Figures above are rounded down for monetary amounts and rounded to the nearest tenth for ratios.
Note 2: Distributions in excess of earnings for the allowance for temporary difference adjustments are not considered.
Note 3: Ordinary income to total assets = Ordinary income /{(Total assets at beginning of period + Total assets at end of period) / 2} × 100
Note 4: For the first fiscal period, annualized as if the operation began from February 10, 2015, when the actual operation began.
Note 5: Return on net assets = Net income /{( Net assets at beginning of period + Net assets at end of period) / 2} × 100
Note 6: Net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Note 7: Payout ratio = Total distibutions (excluding excess of earnings) / Net income × 100
When calculated as follows, the payout ratio is 100.1% for the fiscal period ended March 31, 2019 and 100.2% for the fiscal period ended
September 30, 2019
Payout ratio = Total distributions (including excess of earnings) / Net income × 100
Note 8: As for building tenants, if a tenant leases multiple spaces in a building, each space is counted as one tenant. In a pass-through type master lease,
the number of end-tenants is shown in parentheses. In a sublease type master lease, the number of master lessee is shown.
Note 9: Rental NOI = Property-related revenues - Property-related expenses + Depreciation expenses
Note 10: FFO = Net income + Depreciation + Amortization - Gain on sale of property + Loss on sale of property
Note 11: FFO per unit = FFO / Number of investment units issued and outstanding(Note 11)15

(2) Status of Asset Management(Overview of the Fiscal Period ended September 30, 2019)i) Transition of KRR
KRR was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan (the“Investment Trust Act”). On October 30, 2014, KRR was registered with the Director-General of the Kanto Local
Finance Bureau (registration number: Director-General of the Kanto Local Finance Bureau No. 97). KRR was listed on
the Real Estate Investment Trust Securities (“J-REIT”) Market of Tokyo Stock Exchange, Inc. (the “Tokyo Stock
Exchange”) (Securities code: 3453) on February 10, 2015. Subsequently, KRR raised funds through public offerings,
including an international offering. As a result, the number of investment units issued at the end of the fiscal period ended
September 30, 2019 was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needsof local area customers and have stable demand from retailers and customers, in order to provide stable investment
returns over the long term. Sponsored by Kenedix, Inc., a leading, independent real estate asset management company,
KRR entrusts its asset management and investment operations to Kenedix Real Estate Fund Management, Inc. (“KFM”),
with the following strategies.
Note: For KRR’s management purposes and ease of classification, KRR defines shopping centers for daily needs as retail properties that generally
have the following characteristics:
a. Retail trade area of approximately a one to ten kilometer radius (and generally, a three to five kilometer radius), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and servicesii) Investment Environment
During the fiscal year under review, the Japanese economy continued to recover moderately with the continued
improvement in corporate earnings and an increase in capital investment, as well as a recovery in consumer spending
backed by continued improvements in the employment and income environment, although exports and some production
activities were weak due to the overseas economic trends such as slowdown in the Chinese economy.
Financial conditions have remained unstable due to events in the global market, such as trade frictions between the
United States and China and developments within the European Union. Interest rates in Japan remained low and stableagainst the backdrop of continued monetary easing by the Bank of Japan, monetary easing policy by the U.S. monetary
authorities, and unstable global markets.
Under these conditions, the real estate sales market continued to show an upward trend due to active investment demandby domestic and overseas investors. The real estate leasing market also remained robust, making the J-REIT market
bullish, with the TSE REIT Index reaching its 12-year high, as the J-REIT defensiveness was evaluated amid unstable
equity markets.

16iii) Management Performance(A) Acquisition of Assets
KRR acquired four assets (Zama Distribution Center with acquisition price (Note 1) of 1,400 million yen, Oppama
Distribution Center with acquisition price of 1,300 million yen, Yokohama Kamigo Distribution Center with acquisition
price of 790 million yen and Habikigaoka Shopping Center with acquisition price of 2,000 million yen), and disposed
two assets (Solala Plaza (51% quasi co-ownership interests) with sale price (Note 2) of 3,049 million yen (acquisition
price (Note 3) was 2,917 million yen) and Fululu Garden Yachiyo with sale price of 15,200 million yen (acquisition
price was 14,848 million yen)).
As a result, the portfolio at the end of the period under review (September 30, 2019) consists 55 properties with the totalacquisition price of 200,938 million yen.
Note 1:
Note 2:
Note 3:“Acquisition price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of thevarious expenses (acquisition expenses, property tax, city planning tax, consumption tax, etc.) required in the acquisition of the asset.
“Sale price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various
expenses (sale expenses, property tax, etc.) required in the sale of the asset.
The acquisition price of Solala Plaza as a whole was 5,720 million yen, and 3,049 million yen represents 51% quasi co-ownershipinterests.

(B) Management and Operation of Assets
KFM provides property management services for all of the properties owned by KRR at the end of the period underreview (September 30, 2019). By using the same company for both asset management and property management services,
KRR aims to build stronger relationships with tenants and increase returns from its portfolio. Furthermore, byimplementing retail property and distribution centers management that better reflects the needs of our tenants, KRR
strives to accumulate know-how and improve tenant satisfaction.
KRR invests primarily in neighborhood and community shopping centers that cater to the day-to-day needs of customers.
The portfolio is diversified in terms of properties, tenants and other characteristics with a goal to generate consistentlong-term cash flows. At the same time, a portion of the rent includes sales-linked rent to explore the upside potential(Note 1) for rental income. By using these measures, KRR aims to pursue a portfolio that achieves both stability andgrowth.
As of the end of the period under review, portfolio as a whole performed well with an overall occupancy ratio of 98.9%.
Furthermore, the portfolio is diversified in terms of tenants as there are 480 end-tenants (Note 2) in KRR’s retailproperties and distribution centers.
Note 1:
Note 2:“Upside potential” represents feasibility of rental income or cash flow growth.
The number of end-tenants is the sum of the number of end-tenants in a pass-through type master lease and the number of master lessees
in a sublease type master lease.

(C) Financing
When financing to acquire properties, KRR seeks to achieve the proper balance between financial stability and the costof the funds with the objectives to achieve stable medium- to long-term returns and consistent growth of assets undermanagement.
(Debt Finance)
During the fiscal period under review, KRR borrowed 7,010 million yen for refinancing. Consequently, borrowings
totaled 99,100 million yen and interest-bearing debt including investment corporation bonds (excluding interest-bearing
tenant leasehold and security deposits) totaled 106,100 million yen at the end of the fiscal period under review(September 30, 2019).
When undertaking borrowings, KRR seeks to spread out repayment dates and lengthen borrowing periods. KRR may
use swaps to fix the interest payments to hedge against the risk of a rise in interest rates.
As a result, the average maturity of debt is 4.6 years, the weighted average interest rate is 1.03%, the long-term debt ratio(Note 1) is 96.2% and the LTV ratio (Note 2) is 44.9%.
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 September 30, 2019 is as follows.
Credit rating agency
Japan Credit Rating Agency, Ltd. (JCR)

Details of the ratings
Long-term issuer rating

A+ (Outlook: Stable)

Rating on bonds

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

100,000,000,000 yen
October 9, 2018 to October 8, 202017

Use of funds

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

iv) Results of Operations
For this period, revenue was 8,609 million yen, operating income was 3,879 million yen, ordinary income was 3,288
million yen and net income was 3,287 million yen.
Furthermore, in accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distribution(excluding excess of earnings) of 3,169,063,400 yen which is almost equivalent to the earnings for the fiscal period. The
distribution per unit (excluding excess of earnings) was 6,242 yen, Cash distributions are paid in accordance with Article
67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent amendments).
Furthermore, in accordance with the policy for “Distribution of Money in Excess of Profits” as stated in the KRR Articles
of Incorporation, KRR made a distribution in excess of earnings for the 123,878,800 yen allowance for temporary
adjustment (as defined in Article 2-2-30 of the Ordinance on Accountings of Investment Corporations (Cabinet Office
Ordinance No.47 of 2006, including subsequent amendments.)) for the purpose of reflecting the effect on distributionsof the difference in earnings calculated under Japanese GAAP and Japanese tax laws in association with the amortizationof fixed-term land lease rights (as defined in Article 2-2-30 (a) of the Ordinance on Accountings of Investment
Corporations) and the item deduced from net asset (as defined in Article 2-2-30 (b) of the Ordinance on Accountings ofInvestment Corporations) in association with deferred losses on hedges. This resulted in a distribution in excess ofearnings per unit of 244 yen.
Consequently, the distribution per unit was 6,486 yen (of which the distribution in excess of earnings per unit was 244
yen).

18

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

Total number of units issued andoutstanding (units)

Type of issue

Increase
October 3, 2014

Private placement forincorporation

February 9, 2015

BalanceUnitholders’ capital(in million yen)
Increase

Notes

Balance

750

750

150

150

(Note 1)

Public offering

254,250

255,000

56,43056,580(Note 2)

March 11, 2015

Capital increase throughthird-party allocation

5,750

260,750

1,276

57,857(Note 3)October 1, 2015

Public offering

88,750349,500

18,54776,404(Note 4)

October 21, 2015

Capital increase throughthird-party allocation

5,750

355,250

1,201

77,606(Note 5)

April 20, 2016

Public offering

64,000419,250

15,856

93,463(Note 6)

May 18, 2016

Capital increase throughthird-party allocation

3,200

422,450

792

94,256(Note 7)

April 18, 2017

Public offering

81,250503,700

18,244

112,500(Note 8)

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

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

Fifth fiscal period

Sixth fiscal period

Seventh fiscal period

Eighth fiscal period

Ninth fiscal period

September 30, 2017

March 31, 2018

September 30, 2018

March 31, 2019

September 30, 2019

Highest

JPY 251,100

JPY 251,700

JPY 249,200

JPY 279,600

JPY 291,800

LowestJPY 228,900

JPY 223,000

JPY 227,600

JPY 237,200

JPY 256,300,

19

(4) Distributions
The distribution of earnings for the third period is 6,138 yen per unit. In order to maintain KRR’s favorable tax treatment,
which is available to J-REITs under Article 67-15 of the Special Taxation Measures Act, KRR intends to distribute mostof KRR’s retained earnings.
Furthermore, KRR made a distribution in excess of earnings for the allowance for temporary adjustment for the purposeof reflecting the effect on distributions of the difference in earnings calculated under Japanese GAAP and Japanese tax
laws in association with the amortization of fixed-term land lease rights and the item deducted from net asset inassociation with deferred losses on hedges. This resulted in a distribution in excess of earnings per unit of 339 yen.
Consequently, the distribution per unit for the fiscal period, including the excess distribution, was 6,477 yen (of which
the distribution in excess of earnings per unit was 339 yen).
(in thousands of yen)Fifth fiscal period
September 30, 2017

Sixth fiscal period
March 31, 2018

Seventh fiscal period
September 30, 2018

Eighth fiscal period
March 31, 2019

Ninth fiscal period
September 30, 2019

3,104,740

3,175,962

3,198,151

3,283,881

3,455,496

155

299

149

167,619

286,433

3,104,585

3,175,663

3,198,002

3,288,372

3,292,942[6,115 yen]

[6,255 yen]

[6,299 yen]

[6,477 yen]

[6,486 yen]

3,104,585

3,175,663

3,198,002

3,116,262

3,169,063[6,115 yen]

[6,255 yen]

[6,299 yen]

[6,138 yen]

[6,242 yen]

－

－

－

172,110

123,878

[－]

[－]

[－]

[339 yen][244 yen]－－－

172,110

123,878[Distributions per unit]

[－]

[－]

[－]

[339 yen][244 yen]

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

－

－

－

－

－

[Distributions per unit]

[－]

[－]

[－]

[－]

[－]

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

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

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

21

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

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

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

22

(6) Important Subsequent Events
KRR passed resolutions at the Board of Directors Meeting held on October 8, 2019 and October 16, 2019, to issue newinvestment units to fund the acquisition of specified assets. Payments for the issuance of new investment units throughpublic offering and through third-party allotment have been completed on October 23, 2019 and November 14, 2019,respectively. KRR plans to use the net proceeds through third-party allotment to fund part of the acquisition of specified
assets or repayment of borrowings in the future.
As a result, unitholders’ capital totaled 121,183,494,770 yen and total number of investment units issued and outstanding
increased to 536,177 as of November 14, 2019.
Issuance of new investment units through public offerings
Total number of units issued:
27,300 units
Issue price (offer price):
282,847 yen per unit
Total amount of issue price (total offer price): 7,721,723,100 yen
Paid-in amount (issue amount):
273,360 yen per unit
Total paid-in amount (total issue amount):
7,462,728,000 yen
Payment date:
October 23, 2019
Issuance of new investment units through third-party allotment
Total number of units issued:
1,177 units
Paid-in amount (issue amount):
273,360 yen per unit
Total paid-in amount (total issue amount):
321,744,720 yen
Payment date:November 14, 2019
Allottee:
SMBC Nikko Securities Inc.
(Reference Material)i) Acquisition of Assets
KRR acquired following assets.
Property
number

Property
type(Note 1)

Property nameLocation

Seller

T-25

NSC

Apita Terrace Yokohama
Tsunashima (51% quasi coownership interests)

Yokohama, Kanagawa

T-26

NSC

Kalsa Hiratsuka

T-27

NSC

Monenosato Mall

T-28

NSC

T-29

NSC

N-7

SM

Valor Nakashidami (Land)

L-5

L

Gyoda Distribution Center

Chofu Center Building(Retail wing)
Across Plaza Urayasu
Higashino (Land)

Acquisition price(million yen)
(Note 3)

Appraisal value(million yen)
(Note 4)

GK IK Investment Four
(Note 5)

5,899

6,220

Hiratsuka, Kanagawa

SMFL MIRAI Partners
Co., Ltd.

5,980

6,010

Yotsukaido, Chiba

Undisclosed (Note 2)

2,410

2,510

Chofu, Tokyo

Undisclosed (Note 2)

2,300

2,440

2,248

2,300

2,551

2,560

3,160

3,350

SMFL MIRAI Partners
Co., Ltd.
Moriyama-ku, Nagoya, SMFL MIRAI Partners
AichiCo., Ltd.
Urayasu, Chiba

Gyoda, Saitama

GK KRF 77

Acquisition dateNovember 1,
2019
November 1,
2019
October 24,
2019
October 24,
2019
October 24,
2019
November 1,
2019
October 1, 2019

Note 1: Properties are categorized into the following six types of properties: NSC (Neighborhood Shopping Center), SM (Supermarket), CSC (Community
Shopping Center), Urban Station-Front SC (Urban Station-Front Shopping Center), SS (Specialty Store) and L (Logistics facility).
Note 2: Undisclosed as KRR has not obtained consent from the seller.
Note 3: “Acquisition price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various
expenses (acquisition expenses, property tax, city planning tax, consumption tax, etc.) required in the acquisition of the asset.
Note 4: Appraisal values are as of September 1, 2019.
Note 5: Seller holds 49% of quasi co-ownership interests of trust beneficiary right in the property.

ii) Disposition of Assets
KRR disposed of the following asset.
Property
numberO-8
Note:

Property type

Property nameLocation

Buyer

Sale price(million yen) (Note)

Sale date

Welcia Kishiwadakamori
Nippon Commercial
560 October 31, 2019
Kishiwada, Osaka Development Co., Ltd.
(Land)“Sale price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various expenses(sale expenses, property tax, city planning tax, consumption tax, etc.) required in the sale of the asset.
SS23iii) Financing
KRR borrowed 2,740 million yen (Series 29) on October 31, 2019 for the repayment of the borrowings. Furthermore,
KRR borrowed 4,800 million yen (Series 30) on November 1, 2019 for the acquisition of assets.

24

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

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

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

507,700 units

507,700 units

507,700 units

507,700 units

507,700 units

Unitholders’ capital

113,399 million yen

113,399 million yen

113,399 million yen

113,399 million yen

113,399 million yen

Number of unitholders

12,301

12,545

12,261

10,931

10,907(2) Matters Concerning Investment Units
The following is a list of major unitholders as of September 30, 2019.
Name

Location

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

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

74,41014.65

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

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

51,984

10.23

JP MORGAN BANK LUXEMBURG S.A.384500

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

24,1404.75

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

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

21,649

4.26

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

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

16,462

3.24

MIZUHO TRUST & BANKING CO., LTD.

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

13,621

2.68

AOZORA BANK, LTD.

6-1-1 Kojimachi, Chiyoda-ku, Tokyo

11,4392.25

BNYM AS AGT/CLTS 10 PERCENT

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

10,985

2.16

MITSUBISHI UFJ TRUST AND BANKINGCORPORATION

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

8,841

1.74

STATE STREET BANK WEST CLIENTTREATY 505234

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

7,507

1.47

241,038

47,47

Total
Note:

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

25

(3) Matters Concerning Directors and Auditori) Executive Director, Supervisory Director, and Independent Auditor as of September 30, 2019
Position

Name

Executive Director Akihiro Asano

Director & COO, Head of Retail REIT Department, KFM

1,500

Yoshitoshi Yasu

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

1,500

Akiko Yamakawa

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

1,500

－

13,000Supervisory
Director(Note)

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

Other concurrent title

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

ii) Policy on Decisions to Terminate or not Reappoint the Accounting Auditor
The KRR Board of Directors will consider the termination of the Accounting Auditor pursuant to the provisions of theInvestment Trust Act of Japan. The directors will also consider not reappointing the Accounting Auditor after examining
the quality of audits, compensation for auditing and other applicable items.
(4) Asset Manager, the Custodian and Administrators
Asset manager, the custodian and administrators as of September 30, 2019 are as follows.
Operational role

Name

Asset Manager

Kenedix Real Estate Fund Management, Inc.

Asset Custodian

Mizuho Trust & Banking Co., Ltd.

Unitholders’ Register Agent

Mizuho Trust & Banking Co., Ltd.

General Administrator

Mizuho Trust & Banking Co., Ltd.

Financial Agent for Investment Corporation Bonds

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

26

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

Areas

Property type

(Note 1)

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

Note 3:(Note 2)

Ratio (%)
(Note 3)38.1

75,60432.0

Greater Osaka area

44,662

18.8

46,91419.9

Shopping
centers for daily Greater Nagoya area
needs

21,0688.9

21,005

8.9

Fukuoka area

8,011

3.4

7,972

3.4

Ordinance-designatedcities, core cities andother areas

46,89019.7

44,101

18.7

Other retailproperties

－

－

－

－

－

Distribution
centers

Tokyo metropolitan
area

3,945

1.7

4,740

2.0

215,255

90.5

200,338

84.8

－

－

2,830

1.2

－

－

2,830

1.2

Bank deposits and other assets

22,5899.5

33,08414.0

Total assets

237,845100.0

236,253

100.0

Distribution
centers

Tokyo metropolitan
area

Total of real estate

Note 2:(Note 3)90,678

Total of trust beneficiary interests in real estate

Note 1:

Total amount held
(Millions of yen)

Ratio (%)

Tokyo metropolitan
area

Trust beneficiaryinterest in realestateReal estate

Ninth fiscal period
as of September 30, 2019

Eighth fiscal period
as of March 31, 2019

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

27

(2) Major Assets Owned
The following are major assets owned (the ten largest properties by book value) by KRR as of September 30, 2019.
Property
numberO-4

Property nameBlumer HAT Kobe

Book value(in millions)
11,394

Leasable area(m2)
(Note 1)

Leased area(m2)
(Note 2)

23,775.88

23,613.51

49,023.34

48,678.40

Occupancy
rate(%)(Note 3)

Ratio tototal rental
revenue(%)

Primary use(Note 4)

99.3

5.6

Retail(Note 5)

99.3

6.4

RetailR-10

Sun Street Hamakita

10,648R-1

Roseo Mito

9,848

48,296.15

48,062.15

99.5

4.7

Retail

T-2

MONA Shin-Urayasu

8,782

9,953.98

9,832.41

98.8

6.3

RetailO-1

Blumer Maitamon

8,305

30,290.55

30,187.39

99.7

5.8

Retail

N-6

Resora Obu Shopping Terrace

8,173

19,909.33

17,189.91

86.3

3.9

Retail－(Note 5)N-4

Homecenter Kohnan Sunadabashi

7,009

20,329.07

20,329.07

100.0(Note 7)RetailO-5Carino Esaka

6,676

7,540.58

7,540.58

100.0

3.7

RetailO-6

COMBOX Komyoike

6,305(Note 6)25,530.44

100.0

2.8

Retail

T-3

Passaggio Nishiarai

5,745

10,528.25

10,528.25

100.0

3.8

Retail

83,047

244,851.81

239,833.78

98.0(Note 7)

Total

25,530.44－

Note 1: “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.
Note 2: “Leased area” indicates the total leased area based on the lease agreements for each property as of September 30, 2019. 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 September 30, 2019 is shown. As for sublease type master leases, the leased
area to the master lessee is shown.
Note 3: “Occupancy rate” is calculated by dividing leased area by leasable area as of September 30, 2019, rounded to the nearest tenth.
Note 4: “Ratio to total rental revenue” is calculated by rental revenue each property divided by total rental revenue.
Note 5: The area that KRR owns exclusively as proportion to the co-ownership interest (co-ownership ratio: 90%).
Note 6: The total area that KRR owns exclusively as a compartmentalized ownership interest (retail space).
Note 7: 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 September 30, 2019.
Area(Note1)

Property
number
T-2
T-3
T-4

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

Location(City/ward,
prefecure)(Note 2)MONA Shin-Urayasu

Urayasu, Chiba

Passaggio Nishiarai

Adachi ward, Tokyo

Daikanyama Address
Dixsept

Shibuya ward, Tokyo

T-5

NSC

Unicus Ina

Kitaadachi-gun, Saitama

T-6

NSC

Yorktown Kita-Kaname

Hiratsuka, Kanagawa

T-7

NSC

Unicus Yoshikawa

Yoshikawa, Saitama

T-8

SS

T-9

NSC

T-10

SS

T-11

NSC

Unicus Kamisato (Land)

Kodama-gun, Saitama

T-12

NSC

Unicus Konosu (Land)

Konosu, Saitama

T-13

SM

T-15

NSC

T-16

SS

T-17

SM

T

O

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

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

Nerima ward, Tokyo
Saitama, Saitama
Fujisawa, Kanagawa

Yokohama, Kanagawa
Yokohama, Kanagawa
Yokohama, Kanagawa
Koto ward, Tokyo

T-18

NSC

T-19

NSC

T-20

NSC

Kawamachi Yahagi Mall

Chiba, Chiba

T-21

SS

Prime Square Jiyugaoka

Meguro-ku, Tokyo

T-22

SS

Round1 IchikawaOnitaka

Ichikawa, Chiba

T-23

SM

Ozeki Tokiwadai

Itabashi ward, Tokyo

T-24

SS

Konami Sports Club
ShibuyaShibuya ward, Tokyo

O-1

NSC

Blumer Maitamon

Kobe, Hyogo

O-2

SM

Life Takadono (Land)

Osaka, Osaka

O-3

NSC

DCM Kahma MEGADon Quijote UNY
Omihachiman

Omihachiman, Shiga

O-4

NSC

Blumer HAT Kobe

Kobe, Hyogo

Carino Esaka

Suita, Osaka

COMBOX Komyoike

Izumi, Osaka

O-5
O-6

Urban StationFront SC
Urban StationFront SC

O-7

SM

O-8

SS

Hankyu Oasis
Hirakatadeguchi
Welcia Kishiwadakamori(Land)

Yokohama, Kanagawa
Funabashi, Chiba

Hirakata, Osaka
Kishiwada, Osaka

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

Evaluation value(in millions)(Note 3)

8,742

9,820

5,745

6,840

5,377

6,140

4,406

5,120

3,921

4,350

3,548

3,850

2,486

2,750

4,890

5,580

3,210

3,490

3,043

3,050

1,726

1,780

1,462

1,410

3,372

3,810

1,756

1,820

1,487

1,520

4,228

4,320

3,403

3,510

3,103

3,220

2,997

2,830

1,865

1,970

1,277

1,350

3.549

3,410

8,414

9,660

2,727

3,150

2,113

2,550

11,357

11,500

6,825

7,190

6,272

6,580

1,304

1,330

497

488

29

Area
(Note1)O

N

F

Property
number

Propertytype

Property name

O-9

SM

Life Nishi-Tengachaya

O-10

NSC

O-11

NSC

N-1

SS

N-2

NSC

Location(City/ward,
prefecure)(Note 2)

Osaka, Osaka

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

Ichinomiya, Aichi

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

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-8

NSC

P-1 Plaza Tenno

Hamamatsu, Shizuoka

R-9

NSC

Seiyu Rakuichi Moriya(Land)Moriya, Ibaraki

R

R-10

Sunny Noma

Nagoya, Aichi
Nagoya, Aichi
Obu Aichi
Fukuoka, Fukuoka

Round1 Stadium
Hakata-Hanmichibashi
Kurume-Nishi Shopping
CenterRoseo Mito

Fukuoka, Fukuoka
Kurume, Fukuoka
Mito, Ibaraki

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

NSC

Sun Street Hamakita

Hamamatsu, Shizuoka

R-11

SS

Costco Wholesale
Sapporo Warehouse

Sapporo, Hokkaido

L-1

L

Zama Distribution Center Zama, Kanagawa

L-22

L

T
L-3

L

L-4

L

Oppama Distribution
CenterMusashi Ranzan
Distribution Center
Yokohama Kamigo
Distribution Center
Total

Yokosuka, Kanagawa
Hiki-gun, Saitama
Yokohama, Kanagawa

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

Evaluation value(in millions)(Note 3)

1,544

1,690

3,772

3,980

2,084

2,020

2,351

2,700

2,127

2,360

6,968

7,300

1,390

1,440

8,165

7,060

1,418

1,630

4,993

5,720

1,560

1,800

9,801

11,800

1,448

1,580

874

939

4,324

5,030

3,264

3,340

841

877

4,146

4,350

4,320

4,240

10,752

11,160

4,326

4,410

Real estate

1,467

1,640

Real estate

1,362

1,570

Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate

3,907

4,000

832

840

203,168

217,864(Note 4)(Note 4)(Note 4)(Note 4)Note 1: Properties are categorized into the following six types of properties: NSC (Neighborhood Shopping Center), SM (Supermarket), CSC (Community
Shopping Center), Urban Station-Front SC (Urban Station-Front Shopping Center), SS (Specialty Store) and L (Logistics facility).
We categorize shopping centers for daily needs as follows.
Type of shopping centers for daily
Features
Trade area
needs
three toNSC (Neighborhood Shopping
Shopping centers with a supermarket as an anchor or core tenant and several
fivespecialty
store
tenants
Centers)
kilometerthree
SM (Supermarkets)
Stand-alone stores that primarily provide groceries, with a retail trade area
kilometer
CSC (Community Shopping Centers)

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

five to ten
kilometer

Shopping centers that are located in the immediate vicinity of an urban public
three to tentransportation station, which take advantage of stable foot traffic
kilometer
Single- or multiple-tenant shopping centers that specialize in a single type of
one to ten
SS (Specialty Stores)
merchandise or service, such as drug stores, convenience stores, health clubs or
kilometer
electronic appliance stores“T”, “O”, “N”, “F” and “R” hereinafter refers to Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area andOrdinance-designated cities, core cities and other areas, respectively.
Note 2: “Location” indicates the residential address. For those without a residential address, the building or land address on the registry is shown.
Note 3: “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.
Urban Station-Front Shopping Centers

30

Note 4: The amount and proportion of quasi co-ownership interests that KRR owns are shown.

31

[Earnings Performance for the Individual Properties]
Eighth fiscal period
As of March 31, 2019
Area

Property
number

Property
type

T-1

CSC

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

96.6

699

8.5

－

－

678

8.1

MONA Shin-Urayasu

1(57)

98.8

514

6.3

1(58)

100.0

526

6.3

Passaggio Nishiarai

1(41)

98.6

301

3.7

1(42)

100.0

318

3.8

Daikanyama Address
Dixsept

1(25)

97.2

267

3.3

1(27)

99.1

270

3.2

1

100.0

139

1.7

1

100.0

140

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-17

SS
SM

T-18

NSC

T-19

NSC

T-20

NSC

T-21

SS

T-22

SS

RentalRatio toRentalRatio toNumberNumber
Occupancy revenue total rental
Occupancy revenue total rentalof tenantsof tenants
rate (%)(millions) revenue
rate (%) (millions) revenue(Note 1)
(Note 1)
(Note 2)
(Note 2)
(%)
(%)
38

Unicus Ina

T-16

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

1(10)

99.6

132

1.6

1(10)

99.6

132

1.6

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

100.0

75

0.9

1

100.0

43

0.5

100.0

1

100.0

－

－

(Note 3)(Note 3)

－

－

－

－

－

－

1

100.0

1

100.0

1

81.0

1

100.0

1

100.0

1

100.0

75

0.9

1

1

100.0

43

0.5

1

1

81.0

1

100.0

2

100.0

2

100.0

1(14)

100.0

142

1.7

1(14)

100.0

145

1.7

1(12)

100.0

116

1.4

1(12)

100.0

117

1.4

2

100.0

2

100.0

1

100.0

1

100.0

T-24

SS

1

100.0

O-1

NSC

Blumer Maitamon

50

99.7

O-2

SM

Life Takadono (Land)

1

100.0

O-3

NSC

DCM Kahma MEGADon Quijote UNY
Omihachiman

O-4

NSC

SM

O-8

SS

O-9

SM

－
(Note 3)

100.0

100.0

O-7

－
(Note 3)

1

1

O-6

－
(Note 3)

Konami Sports Club
ShibuyaUrban StationFront SC
Urban StationFront SC

－

100.0

Ozeki Tokiwadai

O-5

－

1

SM

T-23

O

Fululu Garden
Yachiyo

NSC

T-8

T

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

Property nameNinth fiscal period
as of September 30, 2019－－

(Note 3)(Note 3)

50

99.7

1

100.0

494

5.9

－

－

－

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

1(41)

99.3

455

Carino Esaka

1(30)

100.0

COMBOX Komyoike

1

100.0

Hankyu Oasis
Hirakatadeguchi
WelciaKishiwadakamori(Land)
Life
Nishi-Tengachaya

1

100.0

100.0

100.0

－

Blumer HAT Kobe

1

1
5.8

100.0

100.0

100.0

－
(Note 3)

475

2

1

1

－
(Note 3)

2

100.0

5.6

1(41)

84.4

469

5.6

302

3.7

1(30)

100.0

312

3.7

232

2.8

1

100.0

226

2.7

1

100.0

－

－

－

－

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

44

0.5

44

0.5

1

100.0

1

100.0

32

Area

Property
number

Property
type

O-10

NSC

O-11

NSC

N-1

SS

O

N-2
N

F

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

F-2

SS

F-3

NSC

R-1

NSC

R-2

R

NSC

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R-7

Urban StationFront SC

R-8

Property nameMillion Town
Tsukaguchi (Land)
Habikigaoka
Shopping Center
DCM Kahma
Nakagawa Tomita(Land)
Valor IchinomiyaNishi
Homecenter Kohnan
Sunadabashi
K’s Denki ShinMoriyama (Land)
Resora Obu
Shopping Terrace
Sunny Noma
Round1 Stadium
HakataHanmichibashi
Kurume-Nishi
Shopping Center
Roseo Mito
K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town
Ashikaga
Yorktown ShindenHigashi
Kasumi Technopark
SakuraSevenfth fiscal period
Eighth fiscal period
as of September 30, 2018
As of March 31, 2019
RentalRatio toRentalRatio toNumberNumber
Occupancy revenue total rental
Occupancy revenue total rentalof tenantsof tenants
rate (%)(millions) revenue
rate (%) (millions) revenue(Note 1)
(Note 1)
(Note 2)
(Note 2)
(%)
(%)
－
－
1
100.0
1
100.0
(Note 3)(Note 3)
－

－

1

100.0

1

100.0

－

－

－

－

(Note 3)(Note 3)

2

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1(38)

86.3

1(39)

95.5

1

100.0

1

100.0

1

100.0

318

3.9

－

－

(Note 3)(Note 3)

－

100.0

52

0.6

1(23)

100.0

384

4.6

1

100.0

100.0

52

0.6

4

1(21)

99.5

381

4.7

1

100.0

－

276

3.4

1

100.0

1(29)

100.0

2

100.0

1

100.0

Solala Plaza (Note 5)

1

100.0

NSC

P-1 Plaza Tenno

1(7)

100.0

138

1.7

R-9

NSC

Seiyu Rakuichi
Moriya (Land)

1

100.0

－

(Note 3)－(Note 3)

1

R-10

NSC

Sun Street Hamakita

1(53)

99.3

526

6.4

1(50)

1

100.0

－

(Note 3)－(Note 3)

1

100.0

－

－

－

－

1

100.0

－

－

－

－

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

1

100.0

－

－

－

－

1

100.0

520

99.4

8,364

100.0

480

98.9

R-11

SS

L-1

L

L-2

L

T
L-3

L

L-4

L
Total

Costco Wholesale
Sapporo Warehouse
Zama Distribution
Center
Oppama Distribution
CenterMusashi Ranzan
Distribution Center
Yokohama Kamigo
Distribution Center－－(Note 3)(Note 3)

3.3

(Note 3)

4(Note 3)

272
－

100.0

－

－
(Note 3)(Note 3)

1(Note 3)－(Note 3)

1

100.0

1(28)

95.0

2

100.0

1

100.0

－

－

1(7)

100.0

－

－

(Note 3)(Note 3)

332

4.0

－

－

(Note 3)(Note 3)

138

1.7

100.0

－

－

(Note 3)(Note 3)

99.4

547

6.5

－

－

(Note 3)(Note 3)－－(Note 3)(Note 3)

8,367

100.0

Note 1: 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 September 30, 2019. Where one lessee leases more than one sectionof 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.
Note 2: Rental revenue is based on total rental and other operating revenues of each property.
Note 3: KRR has not obtained consent from the tenant(s) to release this information.
Note 4: Fululu Garden Yachiyo was disposed of on September 27, 2019, Gourmet City Chiba Chuo was disposed on March 5, 2019 and Solala Plaza wasdisposed on December 21, 2018 (49% quasi co-ownership interests) and April 5, 2019 (51% quasi co-ownership interests)..
Note 5: The retal revenue of Solala Plaza is shown as the sum of rental revenue for 100% ownership until December 20, 2018 and rental revenue for 51%
ownership from December 21, 2018. Number of tenants of Solala Plaza is shown for the whole building.

33

(4) Specified Transaction
As of September 30, 2019, the contract amount and fair value of the outstanding transaction under the specified
transaction account of KRR are as follows.
Contract amount (million yen)
(Note 1)Type

Due after one year

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

Interest rate swaps:
Receive floating / pay fixed

72,82065,820

-286

Total

－

72,82065,820-286

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

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

34

Capital Expenditures(1) Planned Capital Expenditures
The table below shows major capital expenditures (Note) for renovations, repairs and other projects that are planned for theNinth fiscal period ending March 31, 2020. These expenditures are for real estate owned by KRR and real estate in trusts
in which KRR owns trust beneficiary rights. These planned projects may include some expenditure that will be recorded
as expenses rather than capital expenditures for accounting purposes.
Property
number

Property nameLocation

PurposeSchedule

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

R-4

Ashico Town
Ashikaga

Ashikaga,
Tochigi

Rooftop parking waterproof(OM building)

From October 2019
to March 2020

102

－

－

R-4

Ashico Town
Ashikaga

Ashikaga,
Tochigi

Rooftop parking waterproof(YB building)

From November 2019
to March 2020

81

－

－

T-5

Unicus Ina

Kitaadachi-gun,
Saitama

Rooftop waterproof

From October, 2019
to March 2020

72

－

－

T-20

Kawamachi Yahagi
MallChiba, Chiba

Solar panel installation

From October 2019
to March 2020

41

－

－

T-24

Konami Sports Club Shibuya-ku,
ShibuyaTokyo

Water heater replacement

From October 2019
to March 2020

37

－

－

N-2

Valor
Ichinomiyanishi

Ichinomiya,
Aichi

GHP replacement

31

－

－

T-21

Prime Square
Jiyugaoka

Meguro-ku,
Tokyo

Exterior wall repair

31

－

－

O-3

DCM Kahma
Omihachiman,
MEGA Don Quijote
Shiga
UNY Omihachiman

27

－

－

From October 2019
to December 2019
From October 20119
to March 2020
From September 2019

Exterior wall repair

to November 2019(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 791 million yen. There were also expendituresof 296 million yen that were recorded as repair expenses. In total KRR spent 1,088 million yen on the projects.
Property
number

Property name

R-10

Sun Street Hamakita

Hamamatsu,
Shizuoka

Environmental renewal

From June 2019
to September 2019

O-5

Carino Esaka

Suita, Osaka

Exterior wall repair

From November 2018
to September 2019

146

O-1

Blumer Maitamon

Kobe, Hyogo

Rooftop waterproof

From February 2019
to June 2019

134

R-4

Ashico Town
Ashikaga

Ashikaga, Tochigi

Rooftop parking waterproof (OM building)

From May 2019
to Septem 2019

77

O-5

Carino Esaka

Suita, Osaka

Toilet renewal

From April 2019
to July 2019

37

Note:

Location

PurposeSchedule

Capital expenditure(Millions of yen)
162
(Note)

Others

233

Total

791

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

(3) Reserved Amount for Long-Term Repairs, Maintenance and Renovation Plans
Not applicable35

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

661,991

674,397

Asset custody fees

9,722

9,699

Administrative service fees

30,60130,904

Directors' compensation

4,500

4,500

Other operating expenses

89,835

118,687

Total

796,650

838,188

Note: The amount of asset management fees capitalized in addition to the amount above are 38,793 thousand yen for the eighth fiscal period and 54,900
thousand yen for the ninth fiscal period related the acquisition of properties that entered the book value of real estates and 18,651 thousand yen for
the eighth fiscal period and 91,249 thousand yen for the ninth fiscal period related the disposition of properties.

36

(2) Status of Borrowings
Borrowings on a financial institution basis as of September 30, 2019 are as follows.

37

38

39

(3) Status of Investment Corporation Bonds
Bonds

Issuance date

Balance as ofApril 1, 2018
(million yen)

Balance as of
September 30,
2018(million yen)

1st Series Unsecured Investment
Corporation Bonds

October 31,
2016

1,000

1,000

0.200

October 29,
2021

2nd Series Unsecured Investment
Corporation Bonds

October 31,
2016

1,000

1,000

0.600

October 30,
2026

3rd Series Unsecured Investment
Corporation Bonds

August 31,
2017

1,000

1,000

0.320

August 31,
2022

4th Series Unsecured Investment
Corporation Bonds

August 31,
2017

2,000

2,000

0.700

August 31,
2027

5th Series Unsecured Investment
Corporation Bonds

April 26,
2018

-

2,000

0.700

April 26,
2028

5,000

7,000

Total

Interest rate
Redemption
Maturity date(%)
methodUse

Remarks(Note 1)

Full onmaturity(Note 3)(Note 2)

Note 1: “Use” is acquisition funds for specified assets, repayment funds for borrowings, etc.
Note 2: “Use” is repayment funds for borrowings.
Note 3: Ranking pari passu among the specified investment corporation bonds(4) Status of Short-Term Investment Corporation Bonds
Not applicable(5) Status of Subscription Rights to New Investment Units
Not applicable40

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

Property
number

Property nameAcquisition date

Disposition

Disposition
Acquisition price
DispositionDa
price(in millions)te(in millions)(Note 1)
(Note 1)

Book value(in millions)

Gain / loss
(in millions)

Real estate

L-1

Zama Distribution
CenterApril 5, 209

1,400

－

－

－

－

Real estate

L-2

Oppama Distribution
CenterApril 5, 2019

1,300

－

－

－

－

Trust beneficiaryinterest in real estate

L-4

Yokohama Kamigo
Distribution Center

April 11, 2019

790

－

－

－

－

Trust beneficiaryinterest in real estate

O-11

Habikigaoka Shopping
Center

September 27,
2019

2,000

－

－

－

－

Trust beneficiaryinterest in real estate

R-7

Solala Plaza (51% quasi
co-ownership interests)－－

April 5, 2019

3,049

2,827
(Note 2)

201

Trust beneficiaryinterest in real estate

T-1

Fululu Garden Yachiyo－－

September 27,
201915,20014,79640

Note 1: “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).
Note 2: Represents the amount corresponding to the trust beneficiary co-ownership interest (a trust beneficiary co-ownership interest of 51%).

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

Ownership
form

Property
number

Property nameAcquisition/
disposition
Acquisition/
pricedisposition date(in millions)(Note 1)

Appraisalvalue(in millions)Appraiser

Evaluation date

(Note 2)

L-1

Zama Distribution
CenterApril 5, 2019

1,400

1,640

The Tanizawa Sōgō
Appraisal Co., Ltd.

January 1,
2019

L-2

OppamaDistribution Center

April 5, 2019

1,300

1,580

The Tanizawa Sōgō
Appraisal Co., Ltd.

January 1,
2019

L-4

Yokohama Kamigo
Distribution Center

April 11, 2019

790

840

The Tanizawa Sōgō
Appraisal Co., Ltd.

February 1,
2019

O-11

Habikigaoka
Shopping Center

September 27,
2019

2,000

2,020

The Tanizawa Sōgō
Appraisal Co., Ltd.

September 1,
2019

R-7

Solala Plaza

April 5, 2019

2,930

(Note 3)

Japan Real Estate
Institute

September 30,
2018

T-1

Fululu Garden
YachiyoSeptember 27,
2019

800

15,000Daiwa Real EstateAppraisal Co., Ltd.

March 31,2019

Real estate

Acquisition

Trust beneficiaryinterest in realestateTrust beneficiary
Disposition interest in realestate3,039

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

41

Acquisition/disposition

Ownership
form

Property
number

Property nameAcquisition/
disposition
Acquisition/
pricedisposition date(in millions)(Note 1)

Appraisalvalue(in millions)Appraiser

Evaluation date

(Note 2)

Note 3: Represents the amount corresponding to the trust beneficiary co-ownership interest (a trust beneficiary co-ownership interest of 51%).

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

BDO Toyo & Co.
(B) Result and method of investigation
With regard to transactions and contracts entered by KRR whose values shall be investigated based on the Article
201 of the Act on Investment Trusts and Investment Corporations, BDO Toyo & Co. performs an investigation oftransactions. For the fiscal period from April 1, 2019 to September 30, 2019, the transactions subject to suchinvestigation were three interest rate swap transactions, for which KRR received reports from BDO Toyo & Co. For
this purpose, investigation was performed with respect to details of the interest swap contracts, such as the name ofcounter parties, contract amounts, or the period of transactions. This survey is not a part of the audit for finalcial
statements, and there is no guarantee of fairness of the price and internal management system.

42

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

Total amount

Purchase

Sale

5,490

18,249Transaction with related-party
GK KRF80

-

(-%)

3,049

(16.7%)

Total

-

(-%)

3,049

(16.7%)ii) Amounts of Fees Paid
Not applicable.
Note: A related party, etc. is defined as a related party, etc. of the asset manager having an asset management agreement with KRR as prescribedin Article 123 of the Order for Enforcement of the Act on Investment Trusts and Investment Corporations of Japan and in Article 26-27 of
the Regulations for Asset Investment Reports by Investment Trusts and Investment Corporations of the Investment Trusts Association,
Japan.

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

43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.

44

45

Financial Statements(9th Fiscal Period: from April 1, 2019 to September 30, 2019)
Independent Auditor’s Report
Balance Sheet
Statement of Income and Retained Earnings
Statement of Changes in Net Assets
Statement of Cash Flows
Notes to Financial Statements

46

Kenedix Retail REIT Corporation

Balance Sheet
As of September 30, 2019
As of September 30, 2019

As of March 31, 2019(in thousands of yen)
AssetsCurrent assets
Cash and deposits (Notes 9 and 11)¥18,599,690¥7,475,785

Cash and deposits in trust (Notes 9 and 11)

12,974,943

13,647,110

Operating accounts receivable

230,017

213,214

Prepaid expenses

137,034

31,307

Other

25,002

9,788

31,966,688

21,377,208

Total current assets
Non-current assets
Property, plant and equipment (Notes 17 and 20)

692,529-

Accumulated depreciation(14,554)-

Buildings, net

677,974-

37,947

-

(969)

-

36,978-

Buildings

Structures
Accumulated depreciation
Structures, net
Land2,115,355-

Buildings in trust

53,995,091

59,140,856

Accumulated depreciation(5,698,859)(5,692,853)

Buildings in trust, net (Note 3)

48,296,231

53,448,003

3,055,215

2,999,320

Structures in trust
Accumulated depreciation(410,820)(359,296)

Structures in trust, net (Note 3)

2,644,394

2,640,023

Machinery and equipment in trust

220,898

250,568

Accumulated depreciation(33,189)(30,701)

Machinery and equipment in trust, net

187,709219,866

Tools, furniture and fixtures in trust
Accumulated depreciation

127,382

93,286(29,146)(31,649)

98,23561,636

Land in trust (Note 3)

144,794,027

154,566,718

Total property, plant and equipment, net

198,850,906

210,936,249

4,312,783

4,316,761

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

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

7,811

6,282

4,320,594

4,323,044

Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

60,25660,256Long-term prepaid expenses

825,953

891,506

Long-term deposits

157,110

157,110

2,352

2,194

Total intangible assets
Investments and other assets

Other
Total investments and other assets
Total non-current assets

1,055,672

1,121,066

204,227,173

216,380,360

Deferred assets
55

5,121

Investment corporation bond issuance costs

40,32944,044

Investment unit issuance costs

19,25338,506

Organization costs

59,63887,672¥236,253,500¥237,845,241

Total deferred assets
Total assets

See accompanying notes to financial statements.

47

As of September 30, 2019

As of March 31, 2019(in thousands of yen)
Liabilities
Current liabilities
Operating accounts payable¥951,647¥715,187

Short-term loans payable (Notes 11 and 21)

4,070,000

2,750,000

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

9,120,000

13,350,000

Accounts payable-other541,163

476,092

Accrued expenses

24,01927,020

Income taxes payable

1,108

1,018

556,438

183,075

Advances received

1,193,590

1,154,552

Deposits received

71,40482,992

16,529,373

18,739,939

Accrued consumption taxes

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

7,000,000

7,000,000

Long-term loans payable (Notes 11 and 21)

85,910,000

83,000,000

128,623-

9,958,139

12,376,878

Tenant leasehold and security deposits (Note 11)
Tenant leasehold and security deposits in trust (Notes 3 and 11)
Asset retirement obligations (Note 15)

24,07723,927

Other316,840

198,926

103,337,680

102,599,732

119,867,054

121,339,671

113,399,022

113,399,022(181,865)(9,754)

Total non-current liabilities
Total liabilities
Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Allowance for temporary difference adjustments (Note 5)(181,865)(9,754)113,217,156

113,389,267

Unappropriated retained earnings

3,455,496

3,283,881

Total surplus

3,455,496

3,283,881

116,672,653

116,673,148

Deferred gains or losses on hedges (Notes 11 and 12)(286,206)(167,579)

Total valuation and translation adjustments(286,206)(167,579)

Total net assets (Note 6)

116,386,446

116,505,569

Total liabilities and net assets¥236,253,500¥237,845,241

Total deduction from unitholders' capital
Unitholders' capital, net
Surplus

Total unitholders' equity
Valuation and translation adjustments

See accompanying notes to financial statements.

48

Kenedix Retail REIT Corporation

Statement of Income and Retained Earnings
For the period from April 1, 2019 to September 30, 2019
From April 1, 2019

From October 1, 2018

to September 30, 2019

to March 31, 2019(in thousands of yen)
Operating revenues
Rent revenue-real estate （Note 7)¥7,129,860¥7,068,551

Other lease business revenue (Note 7)

1,237,149

1,128,554

Gain on sales of real estate property (Note 7)
Total operating revenues

242,514

218,0618,609,524

8,415,167

3,891,696

3,733,705

Operating expenses
Expenses related to rent business (Note 7)

674,397

661,991

Asset custody fees

9,699

9,722

Administrative service fees

30,90430,601

Directors' compensation

4,500

4,500

Asset management fees

Other operating expenses

118,687

89,835

Total operating expenses

4,729,884

4,530,355

3,879,639

3,884,811

Interest income

58

61

Dividends and redemption-prescription

722

1,160

-

567

780

1,789

Interest expenses

449,454441,044

Interest expenses on investment corporation bonds

19,53819,653Financing-related expenses

94,397

93,482

Amortization of organization costs

5,066

5,038

Operating income
Non-operating income

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

Amortization of investment corporation bond issuance costs

3,714

3,714

Amortization of investment unit issuance costs

19,25338,906

591,425

601,840

Ordinary income

3,288,995

3,284,760

Income before income taxes

3,288,995

3,284,760

1,117

1,027

Total non-operating expenses

Income taxes
Current

1,117

1,027

3,287,877

3,283,732

Total income taxes
Net income
Retained earnings brought forward

167,619

149

Unappropriated retained earnings¥3,455,496¥3,283,881

See accompanying notes to financial statements.

49

Kenedix Retail REIT Corporation

Statement of Changes in Net Assets
For the period from April 1, 2019 to September 30, 2019
Unitholders' equity
Unitholders' capital

Surplus

Deduction from unitholders'
capitalUnitholders'
capitalAllowance fortemporarydifference
adjustments

Total
deduction
fromunitholders'
capitalUnitholders'
capital, net

Unappropri
ated
retainedearnings

Total
surplusTotal
unitholders'equity¥3,198,151¥3,198,151¥116,587,418(3,198,002)(3,198,002)(3,198,002)

3,283,732

3,283,732

3,283,732(in thousands of yen)
Balance as of September 30, 2018

¥ (9,754)¥113,399,022¥ (9,754)¥113,389,267

Changes of items during the period
Dividends from surplus
Net income
Net changes of items other thanunitholders’ equity
Total changes of items during the period

-

-

-

-

85,73085,73085,730

Balance as of March 31, 2019 (Note 8)¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,283,881¥3,283,881¥116,673,148(3,116,262)(3,116,262)(3,116,262)

Changes of items during the period
Dividends from surplus
Distributions in excess of earnings
from allowance for temporary
difference adjustments(172,110)(172,110)(172,110)

Net income
Net changes of items other thanunitholders’ equity
Total changes of items during the period
Balance as of September 30, 2019 (Note 8)

3,287,877

3,287,877

3,287,877-(172,110)(172,110)(172,110)

171,614

171,614(495)¥113,399,022¥ (181,865)¥ (181,865)¥113,217,156¥3,455,496¥3,455,496¥116,672,653

Valuation and translation adjustments

Balance as of September 30, 2018

(172,110)

Deferred gains orlosses on hedges

Total valuation andtranslation adjustments(in thousands of yen)¥142,159¥142,159

Changes of items during the period
Dividends from surplus

Total net assets¥116,729,578(3,198,002)
3,283,732

Net income
Net changes of items other thanunitholders’ equity(309,739)(309,739)(309,739)

Total changes of items during the period(309,739)(309,739)(224,009)

Balance as of March 31, 2019 (Note 8)
Changes of items during the period¥(167,579)¥(167,579)¥116,505,569

Dividends from surplus
Distributions in excess of earnings fromallowance for temporary difference
adjustments(3,116,262)

Net income
Net changes of items other thanunitholders’ equity

3,287,877(172,110)(118,627)(118,627)(118,627)

Total changes of items during the period(118,627)(118,627)(119,122)

Balance as of September 30, 2019 (Note 8)¥(286,206)¥(286,206)¥116,386,446

See accompanying notes to financial statements.

50

Kenedix Retail REIT Corporation

Statement of Cash Flows
For the period from April 1, 2019 to September 30, 2019
From April 1, 2019

From October 1, 2018

to September 30, 2019

to March 31, 2019(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes¥3,288,995¥3,284,760

Depreciation and amortization

1,020,517

991,733

5,066

5,038

Amortization of organization costs
Amortization of investment corporation bond issuance costs

3,714

3,714

Amortization of investment unit issuance costs

19,25338,906

Interest income

(58)

(61)

Interest expenses

468,993

460,697

Decrease (increase) in operating accounts receivable(16,802)34,449Decrease (increase) in consumption taxes receivable-

175,068

Decrease (increase) in prepaid expenses
Increase (decrease) in operating accounts payable(105,726)

120,089

9,399(193,175)

Increase (decrease) in accounts payable-other

85,88067,472

Increase (decrease) in accrued consumption taxes

373,363

130,986

Increase (decrease) in advances received

39,037(9,048)

Increase (decrease) in deposits received(11,587)

5,781

Decrease (increase) in long-term prepaid expenses
Decrease in net property, plant and equipment held in trust due to sale
Other
Subtotal

65,552(51,043)

17,624,357

3,462,719

5,485(55,494)

22,875,441

8,472,596

58

61(472,583)(460,401)(1,027)(3,443)22,401,889

8,008,812

Purchase of property, plant and equipment(2,845,831)-

Purchase of property, plant and equipment in trust

Interest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities(3,501,983)(4,619,028)

Purchase of intangible assets(2,500)(2,039)Proceeds from tenant leasehold and security deposits

128,623-(2,824,940)(582,124)

384,497

222,061

Repayments of tenant leasehold and security deposits in trust
Proceeds from tenant leasehold and security deposits in trust
Proceeds from restricted bank deposits in trust

1,419,737

215,676

Net cash provided by (used in) investing activities(7,242,397)(4,765,454)

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

1,320,000

2,750,000

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

Proceeds from long-term loans payable

5,690,000

5,650,000

Repayments of long-term loans payable(7,010,000)(5,650,000)

Dividends paid

(3,288,016)(3,198,020)

Net cash provided by (used in) financing activities(3,288,016)(3,198,020)

Net increase (decrease) in cash and cash equivalents

11,871,475

45,336

Cash and cash equivalents at the beginning of the period

19,448,158

19,402,822

Cash and cash equivalents at the end of the period (Note 9)¥31,319,634¥19,448,158

See accompanying notes to financial statements.

51

Kenedix Retail REIT Corporation

Notes to Financial Statements
For the period from April 1, 2019 to September 30, 2019

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Retail REIT Corporation (“KRR”) was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan(the “Investment Trust Act”). On February 10, 2015, KRR was listed on the Real Estate Investment Trust Securities (J-REIT) Market of Tokyo Stock
Exchange, Inc. (the Tokyo Stock Exchange) (Securities code: 3453). Subsequently, KRR raised funds through public offerings, including international
offerings. As a result, the number of investment units issued as of September 30, 2019 was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needs of local area customers andhave stable demand from retailers and customers, and also seeks to invest in distribution centers, which supplement shopping centers in providing goods toconsumers, in order to provide stable investment returns over the long term. Sponsored by Kenedix, Inc., KRR entrusts its asset management andinvestment operations to Kenedix Real Estate Fund Management, Inc. (“KFM”), with the following strategies.
(Note) For management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for daily needs asretail properties that generally have the following characteristics:
a. Retail trade area of an approximate radius of one to ten kilometers (and generally, a radius of three to five kilometers), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and services
KRR acquired one property (Musashi Ranzan Distribution Center (90% quasi co-ownership interest) with acquisition price of 3,879 million yen, and soldtwo properties (Solala Plaza (49% quasi co-ownership interest) with sale price of 2,930 million yen (initial acquisition price of 2,802 million yen) and Gourmet
City Chiba-Chuo with sale price of 800 million yen (initial acquisition price of 760 million yen). For the period ended March 31, 2019, the portfolio of 53
properties (total acquisition price of 213,214 million yen) as a whole performed well with an overall occupancy ratio of 99.2% as of March 31, 2019.
KRR acquired four properties (Zama Distribution Center with acquisition price of 1,400 million yen, Oppama Distribution Center with acquisition price of
1,300 million yen, Yokohama Kamigo Distribution Center with acquisition price of 790 million yen and Habikigaoka Shopping Center with acquisition price of
2,000 million yen), and sold two properties (Solala Plaza (51% quasi co-ownership interest) with sale price of 3,049 million yen (initial acquisition price of
2,917 million yen) and Fululu Garden Yachiyo with sale price of 15,200 million yen (initial acquisition price of 14,848 million yen)). For the period ended
September 30, 2019, the portfolio of 55 properties (total acquisition price of 200,938 million yen) as a whole performed well with an overall occupancy ratioof 98.9% as of September 30, 2019.
Furthermore, the portfolio was diversified in terms of tenants as there were 511 and 480 end-tenants as of March 31, 2019 and September 30, 2019 in
KRR’s properties, respectively.
Basis of Presentation
KRR maintains its accounting records and prepares its financial statements in accordance with accounting principles generally accepted in Japan(Japanese GAAP), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments and Exchange Act ofJapan and related regulations, which are different in certain respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are basically a translation of the financial statements of KRR, which were prepared in accordance with Japanese
GAAP and were presented in the Semiannual Securities Report of KRR filed with the Kanto Local Finance Bureau. In preparing the accompanying financial
statements, certain reclassifications and modifications have been made to the financial statements issued domestically in order to present them in a format
that is more familiar to readers outside Japan. In addition, the notes to financial statements include certain information that might not be required underJapanese GAAP but is presented herein as additional information.
KRR’s fiscal period is a six-month period which ends at the end of March or September. KRR does not prepare consolidated financial statements
because it has no subsidiaries.

52

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

Buildings

From April 1, 2019
to September 30, 20192-70 years

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

Structures

8-59 years

8-59 years

Machinery and equipment

2-25 years

2-25 years

Tools, furniture and fixtures

3-15 years

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

Taxes on Property and Equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on a calendar year basis.
These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to said period. Under Japanese
tax regulations, the seller of the property is liable for these taxes on the property from the date of disposal to the end of the calendar year in which theproperty is disposed. The seller, however, is reimbursed by the purchaser for these accrued property-related tax liabilities.
When KRR purchases properties, it typically allocates the portion of the property-related taxes related to the period following the purchase date ofeach property through the end of the calendar year. The amounts of those allocated portions of the property-related taxes are capitalized as part of theacquisition costs of the related properties. Capitalized property-related taxes amounted to ¥18,448 thousand and ¥20,564 thousand as of March 31,
2019 and September 30, 2019, respectively.

53

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

54

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

As of September 30, 2019

As of March 31, 2019(in thousands of yen)

Buildings in trust¥652,282¥2,715,656

Structures in trust

25,19345,989Tools, furniture and fixtures in trust
Land in trust
Total
Secured liabilities

-

2,970

2,709,001

7,811,297

3,386,476

10,575,913

As of September 30, 2019

Tenant leasehold and security deposits in trust
Total

As of March 31, 2019482,562

2,355,246¥482,562¥2,355,246

4. COMMITMENT LINE CONTRACTSKRR has commitment line contracts with the banks with which it does business.
As of September 30, 2019

As of March 31, 2019(in thousands of yen)

Total amount of commitment line contracts¥3,000,000¥2,000,000

Balance of loans payable outstanding--

Remaining amount¥3,000,000¥2,000,000

5. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
The following summarizes allowance for temporary difference adjustments as of September 30, 2019
1. Reasons, related assets, initial amount, allowance and reversal
Related assets, etc.

Reason for allowance

Buildings in trust,
Leasehold right in trust
Deferred gains or losses
on hedges

Amortization ofleasehold right in trust
and the amount inexcess of depreciation
Loss on interest-rate
swaps recognized at theend of the fiscal period

Total

Initial amount

Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)

¥14,324¥9,754¥4,569167,541-

167,541¥181,865¥9,754¥172,110¥¥

Balance atthe end of
the period

Reason forreversal-¥14,324--

167,541--¥181,865-

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

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

Deferred gains or losses on hedges

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

55

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

Balance atthe end of
the period

Reason forreversal

Related assets, etc.

Reason for allowance

Initial amount

Buildings in trust,
Leasehold right in trust

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

Method of reversal
Buildings in trust,
Leasehold right in trust

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

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

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

From October 1, 2018

to September 30, 2019

to March 31, 2019(in thousands of yen)
Rental and other operating revenues:
Rent revenue-real estate:
Rental revenues¥5,906,675¥5,813,708

Rental revenues from limited proprietary rights of land

929,686

929,592

Common area charges

293,498

325,250

7,129,860

7,068,551

Parking space rental revenues

196,389

197,311

Utility charge reimbursement

686,217597,255

Miscellaneous

354,542333,986

Subtotal

1,237,149

1,128,554

8,367,009

8,197,106

Property management fees and facility management fees

812,506

833,594

Utilities

651,605

598,956

Taxes

736,890

690,559

Repairs and maintenance296,687

200,684

Insurance

12,88013,078Subtotal
Other lease business revenue:

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

Trust fees

23,02622,900Depreciation

1,019,546

990,872

Others338,551

383,060

Total property-related expenses

3,891,696

3,733,705

Net operating income from real estate rental business¥4,475,313¥4,463,400

56

Gain on sales of real estate property:
From April 1, 2019 to September 30, 2019(in thousands of yen)
Solala Plaza (51% quasi co-ownership interests)
Revenue from sales of real estate property¥3,049,800

Cost of real estate property

2,827,727

Other sales expenses
Gain on sales of real estate property

20,455¥201,616(in thousands of yen)

Fululu Garden Yachiyo
Revenue from sales of real estate property¥15,200,000

Cost of real estate property

14,796,629

Other sales expenses
Gain on sales of real estate property

362,472¥40,898

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

Cost of real estate property

2,730,981

Other sales expenses
Gain on sales of real estate property

19,690¥179,528(in thousands of yen)

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

731,737

Other sales expenses
Gain on sales of real estate property

29,729¥38,532

8. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From April 1, 2019

From October 1, 2018

to September 30, 2019

to March 31, 2019

Total number of authorized investment units

5,000,000 units

5,000,000 units

Total number of investment units issued and outstanding

507,700 units

507,700 units

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

As of March 31, 2019(in thousands of yen)
Cash and deposits¥18,599,690¥7,475,785

Cash and deposits in trust

12,974,943

13,647,110

Restricted bank deposits in trust *(255,000)(1,674,737)¥31,319,634¥19,448,158

Cash and cash equivalents*Restricted bank deposits in trust are retained for repayment of tenant leasehold and security deposits in trust.

57

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

As of March 31, 2019(in thousands of yen)
Due within 1 year

¥10,500¥10,500

Due after 1 year

172,798

178,048

Total¥183,298¥188,548(As lessor)
Future minimum lease income under the non-cancelable operating leases as of September 30, 2019 and March 31, 2019 are as follows:
As of September 30, 2019

As of March 31, 2019(in thousands of yen)
Due within 1 year

¥8,850,474¥8,902,131

Due after 1 year

53,231,922

55,971,359

Total¥62,082,397¥64,873,490

58

11. FINANCIAL INSTRUMENTS(A). Overview(1) Policy for financial instruments
KRR procures funds for asset acquisitions, repairs, payment of distributions, repayment of loans, etc. through loans from financial institutions, issuance ofinvestment corporation bonds, issuance of investment units and other means. With regard to the procurement of interest-bearing debts, KRR ensures that it
can effectively combine stable long-term funds with flexible short-term funds. Management of surplus funds is undertaken through various bank deposits
focusing on safety, liquidity and effectiveness. KRR uses derivatives for the purpose of hedging its exposure to changes in interest rates and other risks anddoes not enter into derivative transactions for speculative or trading purposes.
(2) Types of financial instruments and related risk
Bank deposits are for managing KRR’s surplus funds and are exposed to credit risk such as the bankruptcy of financial institutions at which funds aredeposited.
Loans payable and investment corporation bonds, which are made or issued primarily for the purpose of procuring funds for the acquisition of real estate
and trust beneficiary interests in real estate and have a repayment date of a maximum of 9 years for loans payable and also have a redemption date of a
maximum of 8 years and 7 months for investment corporation bonds as of September 30, 2019, the end of the ninth 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 portion of the loans payable.
Tenant leasehold and security deposits are deposits received from tenants, which are exposed to liquidity risks when the tenants vacate the properties.
(3) Risk management for financial instruments
a. Credit risk
While bank deposits are exposed to credit risk such as the bankruptcy of financial institutions at which funds are deposited, such risk is monitored bydeposits in non-interest bearing ordinary savings accounts or with financial institutions with credit ratings above a certain level. In utilizing derivatives, KRR
aims to mitigate counterparty risk such as by transacting with financial institutions with favorable ratings.
b. Market risk
While loans payable with floating rates are exposed to interest rate fluctuation risk, such risk is monitored by adjusting the rate of the balance of loans
payable with floating rates against the total loans payable according to the financial environment, interest rate forecasts by continuous monitoring, etc. andby using derivatives, etc. A risk management policy is established with regard to the execution and management of derivatives and such transactions are
conducted based on this policy.
c. Liquidity risk
Though loans payable are subject to liquidity risk, KRR reduces such risk by spreading out payment due dates and by diversifying financial institutions.
Liquidity risk is also managed by such means as regularly checking the balance of cash reserves.
Though tenant leasehold and security deposits are subject to liquidity risk, in principle, KRR reduces such risk by retaining funds that would enable KRR toreturn necessary amounts to tenants.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value isreasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in adifferent fair value.
(B). Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheets and estimated fair value are shown in the following table. Items whose fair values are
difficult to determine are not included in the following table (*2).

59As of September 30, 2019
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥18,599,690¥18,599,690(2) Cash and deposits in trust

12,974,943

12,974,943

-

Total

¥

-

31,574,634

31,574,634-(1) Short-term loans payable

4,070,000

4,070,000-(2) Current portion of long-term loans payable

9,120,000

9,115,112(4,887)(3) Investment corporation bonds

7,000,000

7,084,100

84,100(4) Long-term loans payable

85,910,000

86,818,747

908,747

777,358

758,152(19,206)

106,877,358

107,846,112¥(286,206)¥(286,206)(5) Tenant leasehold and security deposits in trust
Total
Derivative transactions

968,753¥-(Note) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing the net liability
position.
As of March 31, 2019
Carrying amount

Estimated fair value

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

13,647,110

13,647,110

-

Total

¥

-

21,122,896

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

2,750,000

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

13,350,000

13,361,605

11,605(3) Investment corporation bonds

7,000,000

7,023,800

23,800(4) Long-term loans payable

83,000,000

83,539,962

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

2,132,211

2,131,966(245)

108,232,211

108,807,334¥(167,579)¥(167,579)

Total
Derivative transactions

575,122¥-(Note) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing the net liability
position.
*1: Methods to determine the estimated fair value of financial instruments and matters related to derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying amount approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time with floating interest rates, their carrying amount approximates fair value.
(2) Current portion of long-term loans payable and (4) Long-term loans payable
Among these items, the fair value of loans payable with fixed interest rates is calculated based on the present value, which is the total amount of principal
and interest discounted by the estimated interest rate to be applied in the event that KRR conducts new loans of the same type. As for the fair value of loans
payable with floating interest rates, it is based on the carrying amount since market interest rates are reflected in the short term and the fair value is believed
to approximate the carrying amount as the credit standing of KRR has not changed significantly since the loans were made. (However, the fair value of
long-term loans payable subject to the special treatment for interest-rate swaps is based on the present value of the total of principal and interest, accounted
for together with the applicable interest-rate swaps, discounted by the estimated interest rate to be applied in the event that KRR conducts new loans
payable of the same type.)60

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

As of September 30, 2019

As of March 31, 2019(in thousands of yen)
Tenant leasehold and security deposits (Note)¥128,623¥-

Tenant leasehold and security deposits in trust (Note)¥9,180,780¥10,244,667

Total¥9,309,403¥10,244,667(Note) It is extremely difficult to determine their fair values based on estimated future cash flows because no quoted market price is available and therepayment dates of those deposits are not certain. Therefore, tenant leasehold and security deposits and tenant leasehold and security
deposits in trust are not included in the above quantitative information.
*3: Redemption of monetary claims scheduled to be due after the balance sheet date
As of September 30, 2019
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Cash and deposits
Cash and deposits in trust
Total¥18,599,690¥-

12,974,943

¥

-

-

¥31,574,634

¥

¥

-

-

-

¥

¥

-

-

-

¥

¥

-

-

-

¥

-

-

¥

-

As of March 31, 2019
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

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

13,647,110

¥

-

-

¥21,122,896

¥

¥

-

-

¥

-

¥

-

-

¥

-

¥

-

-

¥

-

-

¥

-

*4: Redemption of long-term loans payable and other interest-bearing debt scheduled to be due after the balance sheet date
As of September 30, 2019
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security
deposits in trust
Total¥4,070,000

¥

-

¥

-

¥

-

¥

-

¥

-

-

-

2,000,000--

5,000,000

9,120,000

13,300,000

9,050,000

7,500,000

8,990,000

47,070,000

13,995

13,995

13,995

13,995

13,99582,803¥13,203,995¥13,313,995¥11,063,995¥7,513,995¥9,003,995¥52,152,803

As of March 31, 201961

Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

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

-

¥

-

¥

-

-

1,000,000

1,000,000-

5,000,000

13,350,000

7,000,000

13,300,000

9,050,000

7,500,000

46,150,000

435,430

435,430

435,430

224,712

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

Investment corporation bonds
Long-term loans payable
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 September 30, 2019 are shown in the following table.
(1) Transactions not subject to hedge accounting
Not applicable(2) Transactions subject to hedge accounting
Hedge
accounting
methodType of derivativetransactions

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

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥33,920,000¥33,920,000

38,900,000

31,900,000¥72,820,000¥65,820,000

Fair value(in thousands of yen)¥(286,206)*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions-¥(286,206)*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fair value isincluded in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods to determine theestimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-term loans payable and (4)Long-term loans payable.）
The contract amount and the fair value of interest-rate swap transactions as of March 31, 2019 are shown in the following table.
(1) Transactions not subject to hedge accounting
Not applicable(2) Transactions subject to hedge accounting
Hedge
accounting
methodType of derivativetransactions

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

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

38,900,000

31,900,000¥71,240,000¥62,910,000

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

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions-¥(167,579)*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fair value isincluded in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods to determine theestimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-term loans payable and (4)Long-term loans payable.）62

13. RELATED PARTY TRANSACTIONS
1．Parent Company, major corporate unitholders and other
9th Fiscal Period (April 1, 2019 to September 30, 2019) and 8th Fiscal Period (October 1, 2018 to March 31, 2019): Not applicable
2．Affiliated companies and other
9th Fiscal Period (April 1, 2019 to September 30, 2019) and 8th Fiscal Period (October 1, 2018 to March 31, 2019): Not applicable
3．Fellow subsidiary companies and other
9th Fiscal Period (April 1, 2019 to September 30, 2019) and 8th Fiscal Period (October 1, 2018 to March 31, 2019): Not applicable
4．Directors, major individual unitholders and other
9th Fiscal Period (April 1, 2019 to September 30, 2019) and 8th Fiscal Period (October 1, 2018 to March 31, 2019): Not applicable

14. INCOME TAXESKRR is subject to corporate income taxes at a regular statutory rate of approximately 32%. However, KRR may deduct from its taxable income amounts
distributed to its unitholders, provided the requirements under the Special Taxation Measures Law of Japan are met, including a requirement that it currently
distributes in excess of 90% of its net income for the fiscal period in order to be able to deduct such amounts. If KRR does not satisfy all of the requirements,
the entire taxable income of KRR will be subject to regular corporate income taxes. Since KRR distributed in excess of 90% of its distributable income in theform of cash distributions totaling ¥3,292 million and ¥3,288 million for the periods ended September 30, 2019 and March 31, 2019, respectively, thedistributions were treated as deductible distributions for purposes of corporate income taxes. The effective tax rate on KRR’s income was 0.03% for theperiods ended September 30, 2019 and March 31, 2019. The following table summarizes the significant differences between the statutory tax rate and theeffective tax rate:
As of September 30, 2019

As of March 31, 2019

Statutory tax rate

31.51%

31.51%

Deductible cash distributions(31.55)(31.54)

Others0.07

0.06

Effective tax rate

0.03%

0.03%

The significant components of deferred tax assets and liabilities:
As of September 30, 2019

As of March 31, 2019(in thousands of yen)
Deferred tax assets:
Enterprise tax payable¥

Amortization of leasehold right in trust

11,682

10,473

Depreciation

4,205

3,770

Asset retirement obligations

7,574

7,558

Deferred gains or losses on hedges

24

¥

20

90,04052,938Subtotal deferred tax assets

113,527

74,761

Valuation allowance(113,527)(74,761)¥¥

Total deferred tax assets

-

-

63

15. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations reported on balance sheets
1. Summary of the asset retirement obligations
KRR has recognized the original state restoration obligations assumed under the fixed-term business-purpose land leasehold agreement as the asset
retirement obligations in connection with Sunny Noma acquired on February 10, 2015.
2. Method of calculating asset retirement obligations
Asset retirement obligations are calculated based on a discount rate of 1.256% after the useful life has been estimated to be 22 years and two months
based on the time period from the date of acquisition to the expiration of the agreement.
3. Changes in the amount of applicable asset retirement obligations consisted of the following:
From April 1, 2019

From October 1, 2018

to September 30, 2019

to March 31, 2019(in thousands of yen)
Balance at the beginning of the period
Accretion adjustment
Balance at the end of the period¥23,927¥23,778

150

149¥24,077¥23,927

16. SEGMENT INFORMATION
Segment information for the periods from April 1, 2019 to September 30, 2019 and October 1, 2018 to March 31, 2019 is as follows:(A) Segment information
Disclosure is omitted because the real estate leasing business is KRR’s sole business and it has no reportable segment information to disclose.
(B) Related information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating revenue on thestatements of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenue on the statements of income andretained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount of property, plant andequipment on the balance sheets.
(3) Information about each major customer
Disclosure is omitted because no net sales to a single external customer accounts for more than 10% of the operating revenue on the statements of income
and retained earnings.

6417. INVESTMENT AND RENTAL PROPERTIESKRR owns retail properties and logistics facility for rental purposes mainly in the four major metropolitan areas and other regional areas of Japan.
The book value and fair value concerning the above real estate for rental purposes are as follows.
From April 1, 2019

From October 1, 2018

to September 30, 2019

to March 31, 2019(in thousands of yen)Book value
Balance at the beginning of the period¥215,255,734

Changes during the period(12,087,205)(15,093)

Balance at the end of the period

203,168,529

215,255,734¥217,936,000¥229,995,800

Fair value at the end of the period¥215,270,828

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, 2019, the principal
increase was due to the acquisitions of real estate and real estate trust beneficiary interests in 4 properties totaling 5,765,573 thousand yen and theprincipal decrease was due to the sales of real estate trust beneficiary interests in 2 properties totaling 17,624,357 thousand yen and depreciation
amounting to 1,019,396 thousand yen and during the fiscal period ended March 31, 2019, the principal increase was due to the acquisitions of realestate trust beneficiary interests in 1 property totaling 3,951,173 thousand yen and the principal decrease was due to the sales of real estate trust
beneficiary interests in 2 properties totaling 3,462,719 thousand yen and depreciation amounting to 990,722 thousand yen.
Note 3: The fair value at the end of the period is the appraisal value determined by outside appraisers. The fair value of Welcia Kishiwadakamori (Land) asof September 30, 2019, is based on the sales price (560,000 thousand yen) under the trust beneficiary interest sales contracts entered into on May
16, 2019. In addition, the fair value of Solala Plaza (51.0% quasi co-ownership interest) and Welcia Kishiwadakamori (Land) as of March 31, 2019 isbased on the sales price (3,049,800 thousand yen and 560,000 thousand yen, respectively) under the trust beneficiary interest sales contracts
entered into on November 14, 2018 and May 16, 2019, respectively.
The profit or loss for the periods ended September 30, 2019 and March 31, 2019 concerning investment and rental properties is included in Note “7.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES AND GAIN ON SALES OF REAL ESTATEPROPERTY.”

18. PER UNIT INFORMATION
From April 1, 2019

From October 1, 2018

to September 30, 2019

to March 31, 2019

Net asset value per unit
Net income per unit

¥229,242¥229,477¥6,476¥6,467

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 September 30, 2019 (507,700 units) and during the fiscal period ended March 31, 2019 (507,700 units). Net income per unit after adjusting forresidual units is not included because there were no residual investment units.
The basis for calculating net income per unit is as follows:

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

From April 1, 2019

From October 1, 2018

to September 30, 2019

to March 31, 2019

¥3,287,877¥3,283,732--¥3,287,877¥3,283,732

507,700

507,70065

19. SIGNIFICANT SUBSEQUENT EVENTSIssuance of new investment units
KRR passed resolutions at the Board of Directors Meetings held on October 8, 2019 and October 16, 2019, to issue new investment units to fund part of theacquisition of specified assets.
Payments for the issuance of new investment units through public offering and through third-party allotment have been completed on October 23, 2019 andNovember 14, 2019, respectively. The proceeds from the third-party allotment of new investment units will be retained and used to fund part of theacquisition of specified assets or repayment of borrowings in the future.
As a result, unitholders' capital totaled ¥121,183,494,770 and the total number of investment units issued and outstanding increased to 536,177 as ofNovember 14, 2019.
(Issuance of new investment units through public offering)
Total number of units issued: 27,300 units

Issue price (offer price): ¥282,847 per unit

Total amount of issue price (total offer price): ¥7,721,723,100

Paid-in amount (issue amount): ¥273,360 per unit

Total paid-in amount (total issue amount): ¥7,462,728,000

Payment date

: October 23, 2019

(Issuance of new investment units through third-party allotment)
Total number of units issued: 1,177 units

Paid-in amount (issue amount): ¥273,360 per unit

Total paid-in amount (total issue amount): ¥321,744,720

Payment date

: November 14, 2019

Allottee: SMBC Nikko Securities Inc.

66

20. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant and equipment and intangible assets consist of the following as of September 30, 2019:

Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks(in thousands of yen)
Buildings-¥692,529-¥692,529¥14,554¥14,554¥677,974

Structures-

37,947-37,947969

969

36,978Land-

2,115,355-

2,115,355--

2,115,355-

2,845,831-

2,845,831

15,523

15,5232,830,308

Buildings in trust

59,140,856

1,240,754

6,386,519

53,995,091

5,698,859

926,698

48,296,231

Structures in trust

2,999,320

99,63143,737

3,055,215

410,820

58,1212,644,394

Machinery andequipment in trust

250,568-

29,669220,898

33,1896,512

187,709

Tools, furnitureand fixtures intrust

93,286

61,25827,162

127,382

29,146

8,561

98,235Land in trust

154,566,718

2,306,956

12,079,647

144,794,027--

144,794,027

Subtotal

217,050,750

3,708,600

18,566,736

202,192,614

6,172,016

999,893

196,020,598

217,050,750

6,554,432

18,566,736

205,038,446

6,187,539

1,015,417

198,850,906

4,349,916--

4,349,916

37,133

3,978

4,312,783

9,803

2,500

-

12,303

4,491

971

7,811

-

¥ 4,362,219¥ 41,625¥ 4,949¥ 4,320,594

Subtotal
Property,plant andequipment

Total
Intangible
assetsLeasehold rightin trust
Other

Total

¥

¥ 4,359,719

¥

2,500

¥

¥

*

*

*The amount of decrease during the period is primarily attributable to the sales of the real estate properties.
Property, plant and equipment and intangible assets consist of the following as of March 31, 2019:

Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks*(in thousands of yen)

Property,plant andequipment

Buildings in trust¥57,984,991¥3,052,716¥1,896,850¥59,140,856¥5,692,853¥918,486¥53,448,003

Structures in trust

2,872,268

131,913

4,861

2,999,320

359,296

55,4752,640,023

Machinery andequipment in trust

214,971

64,10328,506

250,568

30,701

5,767

219,866

Tools, furnitureand fixtures intrust

96,472

4,543

7,729

93,286

31,6497,015

61,636

155,092,322

1,198,390

1,723,994

154,566,718--

154,566,718

378

-

378

-

-

-

-

216,261,403

4,451,666

3,662,320

217,050,750

6,114,501

986,744

210,936,249

216,261,403

4,451,666

3,662,320

217,050,750

6,114,501

986,744

210,936,249

4,349,916--

4,349,916

33,1543,978

4,316,761

7,763

2,039

-

9,803

3,520

861

6,282

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

Land in trust
Construction inprogress in trust
Subtotal
Total
Intangible
assets
Total

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.

67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 September 30, 2019:
Classification
LenderBalance atthe beginningof the period

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

Balance atthe end of
the period(in thousands of yen)

Short-termloanspayableCurrent
portion of
long-term
loans
payableSumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Subtotal-¥-¥2,750,000

0.466

700,000-

700,000-

620,000-

620,000

2,750,000

1,320,000-

4,070,000

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

710,000-

710,000-

620,000-

620,000-

350,000-

350,000-

250,000-

250,000-

Resona Bank, Limited.

250,000-

250,000-

Sumitomo Mitsui Trust
Bank, Limited

200,000-

200,000-

Mizuho Bank, Ltd.

300,000-

300,000-

MUFG Bank, Ltd.

1,270,000-

1,270,000-

Aozora Bank, Ltd.

640,000-

640,000-

Resona Bank, Limited

400,000-

400,000-

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

360,000-

360,000-

300,000-

300,000-

700,000-

700,000-

2,400,000--

2,400,000

800,000--

800,000

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

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-

1,270,000-

1,270,000

0.476

-

660,000

660,000

-

0.475

-

650,000-

650,000

Mizuho Trust &Banking Co., Ltd.

Long-term¥

Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/(%)-

The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.

Long-term
loans
payable¥ 2,750,000

Payment due
date（Note 4）January 31,
2020

0.477

September 30,
2020

0.368

September
30, 2019

0.488

August 31,
2019

0.488

August 31,
2019

0.488

August 31,
2019

0.466

September
30, 2019

0.751

MUFG Bank, Ltd.
Mizuho Bank, Ltd.
(Note 7)
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Subtotal
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

-

200,000-

200,000

13,350,000

2,780,000

7,010,000

9,120,000

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

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

400,000--

400,000

2,600,000--

2,600,000

0.978

800,000--

800,000

0.978

February 10,
2020

August 31,
2020

0.476

0.865

February 10,2021

February 10,2022
February 10,68Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)loans
payableSumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mizuho Bank, Ltd.

-

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

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

1,000,000--

1,000,000

600,000--

600,000

400,000--

400,000

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

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

Resona Bank, Limited

March 31,
2023

0.994

March 31,
2023

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.110

March 31,
2024

1.243

April 16,2025

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

Mizuho Bank, Ltd.

1,150,000--

1,150,000

MUFG Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.

1,000,000--

1,000,000

700,000--

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000

400,000--

400,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

500,000--

500,000

0.550

2,000,000--

2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

2,600,000--

2,600,000

500,000--

500,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

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

Remarks

Nonguaranteed

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

0.975

The Musashino Bank,Ltd.
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation

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

Use

2022

-

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

Payment due
date（Note 4）(%)

600,000

Resona Bank, Limited

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）September 30,
2024
September 30,
2024
April 21,2026
October 31,
2025
September 30,
2021

January 31,
2027

0.485

April 27,
2021

0.485

April 27,2021

(Note 5)

Unsecured/
Nonguaranteed69Classification
LenderBalance atthe beginningof the period

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

Long-term
loans
payableThe Bank of Fukuoka,
Ltd.
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.

Averageinterest rate
（Note 2）
（Note 3）

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

600,000--

600,000

0.400

500,000--

500,000

0.553

400,000--

400,000

0.553

200,000--

200,000

0.553

1,500,000--

1,500,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

600,000--

600,000

0.696

600,000--

600,000

0.815

500,000--

500,000

0.814

200,000--

200,000

0.814

500,000--

500,000

0.903

October 31,
2026

500,000--

500,000

500,000--

500,000

1.033

May 18,2027

400,000--

400,000

500,000--

500,000

1.050

500,000--

500,000

1.049

300,000--

300,000

1.050

500,000--

500,000

0.670

1,500,000--

1,500,000

0.918

500,000--

500,000

0.930

1,500,000--

1,500,000

1.029

1,500,000--

1,500,000

1.100

500,000--

500,000

1.035

1,200,000--

1,200,000

1.000

1,250,000--

1,250,000

800,000--

800,000

900,000--

900,000

0.988

2,600,000--

2,600,000

0.985

2,000,000--

2,000,000

0.902

1,000,000--

1,000,000

1.090

1,000,000--

1,000,000

0.907

1,500,000--

1,500,000

0.999

500,000--

500,000

0.900

500,000--

500,000

0.999

500,000--

500,000

0.999

0.772

0.603

April 27,
2021

October 31,
2024

October 31,
2024

May 18,2027

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

70

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Nippon Life Insurance
Company
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

Averageinterest rate
（Note 2）
（Note 3）

Payment due
date（Note 4）

March 31,
2025

-

-

700,000

0.913

700,000--

700,000

0.726

500,000--

500,000

0.676

Aozora Bank, Ltd.

500,000--

500,000

0.726

Mizuho Bank, Ltd.

400,000--

400,000

0.726

400,000--

400,000

0.676

1,850,000--

1,850,000

0.910

March 31,1,300,000--

1,300,000

0.860

2028

Resona Bank, Limited.

-

650,000-

650,000

0.460

Aozora Bank, Ltd.

-

890,000-

890,000

0.585

Mizuho Bank, Ltd.

-1,370,000-

1,370,000

0.718

83,000,000

2,910,000-

85,910,000¥99,100,000¥7,010,000¥7,010,000¥99,100,000

MUFG Bank, Ltd.

Subtotal
Total

Remarks(%)

700,000

The Musashino Bank,
Ltd.
Sumitomo Mitsui
Banking Corporation

Use

March 31,2026

August 31,
2024
August 31,
2026
March 31,2028

Note 1: Annual repayments of long-term loans payable (except for current portion of long-term loans payable) scheduled after the balance sheet date are as follows:
Due after 1 year
through 2 years
Long-term loans
payable¥ 13,300,000

Due after 2 years
through 3 years¥ 9,050,000

Due after 3 years
through 4 years（in thousands yen）
¥ 7,500,000

Due after 4 years
through 5 years¥ 8,990,000

Due after 5 years¥ 47,070,000

Note 2: All debts except for the following Note 6 are loans payable at a floating rate.
Note 3: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to loans payable forwhich interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into consideration
the effects of the interest rate swaps are indicated.
Note 4: All the repayment methods of debt financing are lump-sum repayments on the due date.
Note 5: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) and repayment ofdebts.
Note 6: Loans payable at a fixed rate.
Note 7: Prepayment was made on September 30, 2019.

71

The following summarizes short-term loans payable and long-term loans payable outstanding as of March 31, 2019:
Classification
LenderBalance atthe beginningof the period

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

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

¥

-

-

2,750,000-

2,750,000

Subtotal

2,750,000

2,750,000

2,750,000

2,750,000

750,000-

750,000-

Aozora Bank, Ltd.

500,000-

500,000-

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

400,000-

400,000-

200,000-

200,000-

200,000-

200,000-

150,000-

150,000-

1,850,000-

1,850,000-

550,000-

550,000-

500,000-

500,000-

300,000-

300,000-

250,000-

250,000-

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

710,000--

710,000

620,000--

620,000

350,000--

350,000

250,000--

250,000

Resona Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited

250,000--

250,000

200,000--

200,000

Mizuho Bank, Ltd.

300,000--

300,000

MUFG Bank, Ltd.

1,270,000--

1,270,000

Aozora Bank, Ltd.

640,000--

640,000

Resona Bank, Limited

400,000--

400,000

Mizuho Bank, Ltd.

360,000--

360,000

300,000--

300,000

700,000--

700,000

2,400,000--

2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

500,000--

500,000

500,000--

500,000

400,000--

400,000

400,000--

400,000

350,000--

350,000

300,000--

300,000

The Musashino Bank,
Ltd.

Current
portion of
long-term¥

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

Remarks

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

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(%)

MUFG Bank, Ltd.

Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

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

Payment due
date（Note 4）

0.463
0.461

0.534

March 31,
2019

0.545

March 31,
2019

0.368

September
30, 2019

0.488

August 31,
2019

0.488

August 31,
2019

0.488

August 31,
2019

0.463

September
30, 2019

0.751

February 10,
2020

0.751

February 10,
2020

72

Classification
LenderBalance atthe beginningof the period

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

Long-term
loans
payable19,000,000-

5,650,000

13,350,000

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

0.865

February 10,
2021

0.978

February 10,2022

450,000--

450,000

450,000--

450,000

Mizuho Bank, Ltd.

400,000--

400,000

Sumitomo Mitsui
Banking Corporation

2,600,000--

2,600,000

MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited

800,000--

800,000

600,000--

600,000

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

400,000--

400,000

400,000--

400,000

300,000--

300,000

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

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

1,000,000--

1,000,000

Sumitomo Mitsui Trust
Bank, Limited

600,000--

600,000

Mizuho Bank, Ltd.

400,000--

400,000

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

400,000--

400,000

400,000--

400,000

MUFG Bank, Ltd.
Development Bank ofJapan Inc. (Note 6)
MUFG Bank, Ltd.

400,000--

400,000

1,500,000--

1,500,000

450,000--

450,000

200,000--

200,000

March 31,
2023

0.994

March 31,
2023

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.243

April 16,2025

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

1,150,000--

1,150,000

MUFG Bank, Ltd.

1,000,000--

1,000,000

700,000--

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000

400,000--

400,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

MUFG Bank, Ltd.
The Gunma Bank, Ltd.
(Note 6)500,000-

Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed-

500,000

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

0.975

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

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

Payment due
date（Note 4）(%)

Resona Bank, Limited

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

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）0.550

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

73

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)

Payment due
date（Note 4）--2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

2,600,000--

2,600,000

500,000--

500,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

600,000--

600,000

0.400

500,000--

500,000

0.553

400,000--

400,000

0.553

200,000--

200,000

0.553

1,500,000--

1,500,000

400,000--

400,000

Aozora Bank, Ltd.

400,000--

400,000

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

300,000--

300,000

600,000--

600,000

0.696

600,000--

600,000

0.815

500,000--

500,000

0.814

200,000--

200,000

0.814

500,000--

500,000

0.903

October 31,
2026

500,000--

500,000

500,000--

500,000

1.033

May 18,2027

400,000--

400,000

500,000--

500,000

1.050

500,000--

500,000

1.049

300,000--

300,000

1.050

500,000--

500,000

0.670

1,500,000--

1,500,000

0.918

500,000--

500,000

0.930

1,500,000--

1,500,000

1.029

1,500,000--

1,500,000

1.100

500,000--

500,000

1.035

1,200,000--

1,200,000

1.000

1,250,000--

1,250,000

Mizuho Bank, Ltd.

800,000--

800,000

Sumitomo Mitsui
Banking Corporation

900,000--

900,000

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

Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

2,000,000

Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
Aozora Bank, Ltd.

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

0.485

0.772

0.603
0.988

January 31,
2027

April 27,
2021

April 27,
2021

October 31,
2024

October 31,
2024

May 18,2027

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

74

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation

Averageinterest rate
（Note 2）
（Note 3）--2,600,000

0.985

2,000,000--

2,000,000

0.902

1,000,000--

1,000,000

1.090

1,000,000--

1,000,000

0.907

1,500,000--

1,500,000

0.999

500,000--

500,000

0.900

500,000--

500,000

0.999

500,000--

500,000

0.999

700,000--

700,000

0.913-

700,000-

700,000

0.726-

500,000-

500,000

0.676

Aozora Bank, Ltd.

-

500,000-

500,000

0.726

Mizuho Bank, Ltd.

-

400,000-

400,000

0.726-

400,000-

400,000

0.676-

1,850,000-

1,850,000

0.910

-

1,300,000-

1,300,000

0.860

77,350,000

56,500,000-

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

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

The Musashino Bank,
Ltd.
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
Subtotal
Total

Use

Remarks(%)

2,600,000

Mizuho Bank, Ltd.

Payment due
date（Note 4）

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

May 31,2027

March 31,2025

March 31,2026

March 31,2028

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

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

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

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

Due after 5 years¥46,150,000

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

75

22. INVESTMENT CORPORATION BONDS
Outstanding investment corporation bonds as of September 30, 2019 are as follows.
SeriesFirst series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)
Third series of unsecured
investment corporation bonds(Note 1)
Fourth series of unsecured
investment corporation bonds(Note 1)Fifth series of unsecured
investment corporation bonds(Note 1)
Total

Date of issue

Balance atthe beginningof period

October 31,
2016¥1,000,000

October 31,
2016

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

Repayment date

¥1,000,000

0.200

October 29,
2021

1,000,000-

1,000,000

0.600

October 30,
2026

August 31,
2017

1,000,000-

1,000,000

0.320

August 31,
2022

August 31,
2017

2,000,000-

2,000,000

0.700

August 31,
2027

April 26,2018

2,000,000-

2,000,000

0.700

April 26,2028-

¥7,000,000¥7,000,000¥

Remarks

(%)

-

¥

Use

(Note2)

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

Due after 1 year
through 2 years-¥

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

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

Due after 4 years
through 5 years-¥-

Outstanding investment corporation bonds as of March 31, 2019 are as follows.
SeriesDate of issue

Balance atthe beginningof period

Decreaseduring theperiodBalance at theend of period(in thousands of yen)First series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)
Third series of unsecured
investment corporation bonds(Note 1)
Fourth series of unsecured
investment corporation bonds(Note 1)Fifth series of unsecured
investment corporation bonds(Note 1)Total

October 31,
2016¥1,000,000¥-

Interest rate

Repayment date

¥1,000,000

0.200

October 29,
2021

1,000,000-

1,000,000

0.600

October 30,
2026

August 31,
2017

1,000,000-

1,000,000

0.320

August 31,
2022

August 31,
2017

2,000,000-

2,000,000

0.700

August 31,
2027

April 26,2018

2,000,000-

2,000,000

0.700

April 26,2028-

¥7,000,000¥

Remarks(%)

October 31,
2016¥7,000,000

Use(Note2)

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

Due after 1 year
through 2 years-¥

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

¥1,000,000

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

Due after 4 years
through 5 years
¥

-

76

23. DISTRIBUTIONS
From April 1, 2019
to September 30, 2019

From October 1, 2018
to March 31, 2019

I.. Retained earnings at the end of period¥3,455,496,659¥3,283,881,662

II. Distributions in excess of earnings¥123,878,800¥172,110,300

Of which, allowance for temporary
difference adjustments¥123,878,800¥172,110,300¥3,292,942,200¥3,288,372,900¥6,486¥6,477¥3,169,063,400¥3,116,262,600¥6,242¥6,138¥123,878,800¥172,110,300

¥244

¥339

¥286,433,259¥167,619,062

In accordance with the policy described in Article 39-1 of its
Articles of Incorporation, KRR determines that the amountof distribution shall exceed the amount equivalent to 90% of
its distributable profit as stipulated in Article 67-15 of theSpecial Taxation Measures Law and shall be up to its
profits as the maximum amount. Following this policy, KRR
has decided that it shall distribute ¥3,169,063,400 which isalmost the entire amount of income as defined in Article
136-1 of the Investment Trust Act.
Furthermore, in accordance with the policy for “Distributionof Money in Excess of Profits” as stated in Article 39-2 of
KRR’s Articles of Incorporation, KRR made a distribution inexcess of earnings of ¥123,878,800 for allowance fortemporary difference adjustments (as defined in Article
2-2-30 of the Ordinance on Accountings of Investment
Corporations) for the purpose of reflecting the effect on
distributions of the difference in earnings calculated underJapanese GAAP and Japanese tax laws (as defined in
Article 2-2-30 (a) of the Ordinance on Accountings ofInvestment Corporations) in association with theamortization of fixed-term land leasehold rights and of theitem deducted from net asset (as defined in Article 2-2-30(b) of the Ordinance on Accountings of Investment
Corporations) in association with deferred losses onhedges.

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

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

Method of calculating distribution amount9th Fiscal Period (From April 1, 2019 to September 30, 2019)
1. Reasons, related assets and allowance(in thousands of yen)
Related assets, etc.

Allowance for temporary
difference adjustments

ReasonBuildings in trust,
Leasehold right in trust

Amortization of leasehold right in trust and the amount in excess ofdepreciation¥5,251

Deferred gains or losses on hedges

Loss on interest-rate swaps recognized at the end of the fiscal period¥118,627

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

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

Deferred gains or losses on hedges

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

77

8th Fiscal Period (From October 1, 2018 to March 31, 2019)
1. Reasons, related assets and allowance(in thousands of yen)
Related assets, etc.

Allowance for temporary
difference adjustments

ReasonBuildings in trust,
Leasehold right in trust

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

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

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

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

Deferred gains or losses on hedges

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

78