16th
Fiscal Period

KENEDIX-REIT
Semiannual Report

Naokatsu Uchida
CEO and President
Kenedix Office Partners, Inc.

CEO’s
Os
LetterImproving Portfolio Quality
through Proactive Reshuffling

D

uring

the 16th Fiscal Period, we managed to steadily reshuffle our portfolio in line with
KENEDIX-REIT’s management policy. As bipolarization becomes more prominent in
the mid-sized office building market in terms of quality, we seek to further improve

the quality of our portfolio. We are determined to occupy the high-end position in this segment, firmly
establishing our presence in the market as the No.1 J-REIT in mid-sized office buildings.

Kenedix
1 | Kenedix
Realty Investment
Realty Investment
Corporation
Corporation
Semiannual
Semiannual
ReportReport| 1CEO Interview

Review of

16th Fiscal Period
Outlook and Strategies for17th Fiscal Period
1. Review of 16th Fiscal Period
Question 1

Answer 1

Can you please begin with anDoverview of the 16th Fiscal Perioduring(ended April 2013)?

this half-year period, we improved the quality of the portfolio,
our property management and our financial position.
KENEDIX-REIT acquired the Nomura Fudosan Omiya Kyodo

Building, an office building in Omiya Ward, Saitama City. Omiya is located within
the Tokyo Metropolitan Area, where stable demand for office spaces is expected. The highly competitive building is within minutes from JR Omiya Station, amajor transfer station in the northern Tokyo Metropolitan Area. This marked our
first office property acquisition in Saitama Prefecture, bringing regional diversity
to our portfolio.
Meanwhile, in November 2012, we sold the Kanazawa Nikko Building. We
acquired this non-office building as part of an attractive multi-property deal, andfollowing acquisition sought to dispose of it on favorable terms. We also soldthe KDX Yotsuya Building, an office building which was expected to see a
decline in NOI, in April 2013. With the accelerating pace of transactions in thereal estate market, we are working to improve the quality of our portfolio
through proactive asset reshuffling.
As for the management of the existing properties, we achieved a rapid lease
up of the KDX Nihonbashi Kabutocho Building, which saw the move-out of amajor tenant at the end of November 2012.
On the financial front, our focus remains firmly on stable financial management, which is achieved by maintaining a conservative interest-bearing debt
ratio (LTV ratio), increasing the proportion of fixed-rate and long-term borrowings, and diversifying debt maturities. We will continue our policy of maintaininga high proportion of fixed-rate debt and reducing financing costs. Lastly, I shouldadd, that our credit rating from Japan Credit Rating Agency, Ltd. improved one
notch from A to A+ in March 2013, thanks to our history of sound portfolio andfinancial management.

2 |Kenedix Realty Investment Corporation Semiannual Report2. Outlook and Strategies for 17th Fiscal Period
Question 2

Answer 2

How is leasing progressing and,also, how does KENEDIX-REIT standout from other J-REITs?

I

see some positive signs for the 17th Fiscal Period. We successfully leased the
KDX Nihonbashi Kabutocho Building, where the single tenant terminatedthe lease for the entire building on November 31, 2012. We renovated thebuilding to accommodate multiple tenants and, within six months of lease termination, we had contracted leases for 100.0% (as of July 31, 2013) of the space.
Portfolio-wide, the average occupancy rate currently stands at 93.1% for our officebuildings, but with the full leasing of the KDX Nihonbashi Kabutocho Building, I
expect the rate will improve to around 96% during the 17th Fiscal Period.
Trends in both rental revenue and cash-flow are positive. I see signs of bottoming out. I also expect the turnover rate will improve with the declining number of lease terminations.
Moving forward, we will redouble our efforts to improve leasing rates andterms. The Asset Management Company has its own internal property management division, ensuring prompt understanding and the accurate reflection oftenant needs. We upgrade buildings in line with tenant expectations and conduct regular customer satisfaction (CS) surveys of our tenants to ensure thatwhat they value is what we value. Our heightened responsiveness shows, providing tenants with strong motivation to renew their leases. Through these andother efforts, we continuously seek to raise tenant satisfaction. Ultimately, thiswill be reflected in better profitability and the distribution to our unitholders.

Question 3

Answer 3

What is the outlook for the officeleasing market, especially withregard to occupancy and rents?

supply and demand balance has been improving in the office leas-Ting market since early 2013, bringing a welcome end to marked

heover-supply, widely known as the “2012 problem.” Among prom-ising signs on the demand side, we are receiving more inquiries about move-ins
for both space expansion and contraction. Simultaneously, polarization is
becoming more prominent between competitive and non-competitive properties. While high-quality properties located in competitive areas are very popularwith rising occupancy rates from new tenants, the situation remains difficult for
non-competitive properties.
The outlook for office demand depends very much on corporate earnings.
We need to keep a close eye on the impact of Abenomics on boosting the economy and corporate performance. The widening quality gulf is expected to be
especially pronounced in the market for mid-sized office buildings, where we
specialize. As such, enhancing the competitiveness of our properties gains evenmore importance.

Question 4
Can you tell us more about yourfinancial strategy?

Answer 4Ourpolicy of diversifying debt maturities, extending the average lifeof debt, and heavily favoring fixed-rate interest over floating
remains unchanged. During the 16th Fiscal Period, we continued

to maintain the high level of fixed-rate debt at approximately 86%, amid risingconcern over interest rate risk, and managed to steadily reduce financing costs
while maintaining a conservative LTV ratio.
In terms of lenders, we maintain strong relationships with 10 lenders. We

Kenedix Realty Investment Corporation Semiannual Report| 3consider opportunities to broaden and balance our lender base, either by initiating transactions with new lenders or increasing borrowings from existing lenders
with whom we have a relatively small balance. We intend to build long-term
relationships with our lenders based on deep understanding of the REIT market.

Question 5

Answer 5

Lastly, please tell us about theTunitholder distribution.

hedistribution per unit for the period under review was 9,434 yen,up 554 yen from the initial forecast of 8,800 yen announced in
December 2012, thanks to capital gains from sales of properties,

proactive leasing of existing properties, and reduction of financing costs.
Nevertheless, the figure remained 123 yen short of the distribution for the 15th
Fiscal Period (ended October 2012). Positive factors, such as the capital gains
from the property sales and the full period operation of the three properties
acquired during the 15th Fiscal Period, were more than offset by the move-out
of a major tenant at the end of November 2012. Meanwhile, a portion of theaforementioned capital gains has been retained as a provision for reserve for
reduction entry in order to maintain stable distribution levels in the future.
The distribution per unit for the 17th Fiscal Period is expected to be 8,830
yen, incorporating a part of the capital gain from the sale of the Ikebukuro
Nikko Building, which was sold in May 2013.
We also managed to fully lease the KDX Nihonbashi Kabutocho Building
around the end of July 2013. We will enhance the quality of our portfolio management with an eye on increasing the distribution to the mid-9,000 yen range.

Question 6

Answer 6

Please tell us your outlook forTboth the J-REIT market andhe

KENEDIX-REIT.

real estate market is expected to rise going forward, supported by
the bold monetary easing implemented since December 2012 with
the inauguration of the Abe Cabinet, which has vowed to end

deflation and set the target inflation rate at 2%. The anticipated price increase is

expected to push up both rental revenue and asset values. The revision of theInvestment Trust Act is also expected to buoy the J-REIT market, along with theintroduction of a tax-exempt investment program and other similar measures.
KENEDIX-REIT has established a unique presence in the J-REIT market with its
extensive portfolio of mid-sized office buildings in the Tokyo Metropolitan Area.
Capitalizing on our expertise in the management of the mid-sized office buildings, as well as our broad network and economies of scale, we seek to offer
greater satisfaction to a diverse range of tenants through our real-estates services. Aiming to become the No. 1 J-REIT in the mid-sized office building market,
we will continue our effort to be the best in the market, maximizing unitholder
value and fulfilling our social mission as a J-REIT.
July 2013

Naokatsu Uchida
CEO and President
Kenedix Office Partners, Inc.

4 |Kenedix Realty Investment Corporation Semiannual ReportSpecial Feature

External Growth

Special Feature

External GrowthandSuccessful Property Replacement
Diversification of Investment Method
the current fiscal period for a sales price of 1,970 million

Property Replacement
the fiscal period under review, KENEDIX-D

yen on May 10, 2013.
As a result, the number of properties owned as of May

REIT successfully increased its portfolio

uringweighting in mid-sized office buildings in

31, 2013 (excluding the preferred equity securities)

the Tokyo Metropolitan Area. KENEDIX-REIT acquired one

amounts to 82, with a total acquisition price of 290,900

office building, the Nomura Fudosan Omiya Kyodo

million yen. Since KENEDIX-REIT’s listing in 2005, the total

Building, on March 26, 2013 for an acquisition price ofacquisition price of its properties has more than quadru-

2,020 million yen, and sold two buildings, the Kanazawa

pled. Looking at the portfolio as a whole, 92.8% was

Nikko Building and the KDX Yotsuya Building, on

comprised of office buildings, 4.2% of central urban retailNovember 1, 2012 and April 24, 2013, respectively.

properties, and 2.8% of residential properties on an acqui-

After reaching an agreement on March 21, 2013,

sition price basis as of May 31, 2013.

KENEDIX-REIT sold the Ikebukuro Nikko Building during
Distribution by property type (based on acquisition price)

Distribution of office buildings by region (based on acquisition price)

Residential 2.8%

Other regional areas
19.3%

Central Urban
Note:
The percentage breakdown by property type based on the acquisition
price as of the end of May, 2013
(Figures are rounded down to thefirst decimal place).

Retail Properties
4.2%

Office 92.8%

Portfolio Growth (by acquisition price)(Billion yen)
 Office Buildings

Central
Tokyo
57.2%

Other Tokyo
metropolitan area
23.4%

Note:
As of May 31, 2013 (Figures arerounded down to the first decimal place.)

Number of properties
by property type

Number of properties Central Urban Retail Properties
 Residential Properties

OfficeCentral urban retailResidential
Total

77
2
3
82

(¥billion)(Number of properties)

300

290.9

240

100
80

82
180

60

120

40

60

20

0

0
End of 1st(2005/10)

End of 4th(2007/4)

End of 8th(2009/4)

Notes: 1. Figures are rounded down to the nearest ¥100 million.

End of 12th
(2011/4)

2. Central Tokyo represents Chiyoda, Chuo, Minato, Shibuya and Shinjuku wards.

Kenedix Realty Investment Corporation Semiannual Report

| 5

As of
End of 16th
(2013/4) May 31, 2013

Diversifying Investment Methods
enhancing the focus on high-quality

Both of these routes proved fruitful during the period

mid-sized office buildings, KENEDIX-REIT

under review. The Asset Management Company led to thehas been working to diversify investment

acquisition of the Nomura Fudosan Omiya Kyodo Building,methods. Specifically, we are utilizing both the robust net-

whereas Kenedix Inc. and Kenedix Advisors Co., Ltd. were

work of the Asset Management Company, as well as theintegral to acquiring the silent partnership equity interest

support provided by our sponsor, Kenedix Inc.

in the DNI Mita Building from a third party with a sponsor.

W

hile

Acquired During the 16th Fiscal Period• Utilizing the original network of
the Asset Management Company• Utilizing the support-line from the Sponsor, Kenedix, Inc.
DNI Mita Building

Overview of Equity Interest in Silent Partnership

Nomura Fudosan Omiya Kyodo Building

GK KRF31(Asset)Trust beneficiary interest etc.:¥4.69 billion
Other assets: ¥0.34 billion(Liabilities)
Non-recourse loan : ¥2.87 billion
Other liabilities: ¥0.21 billion(Equity）
Silent partnership equity interest etc.:¥1.95 billion
Joint investment

Preferential
negotiation right

Gross floor area: 5,055.50m2
Year built: April 1993
Occupancy rate (As of Apr. 30, 2013): 88.3%

Gross floor area: 5,007.98m2

Acquisition price: ¥ 2.02 billion
Appraisal value at the time of acquisition: 2.20 billion yen

Year built: March 1993

Difference between acquisition price and appraisal value:-1.8 billion yen (-8.2%)

Occupancy rate (As of Apr. 30, 2013):
72.5%

Appraisal value: ¥3.43 billion

KRI

Kenedix(approx 48.2%)(approx 51.8%)• Acquired silent partnership equity interest of G.K. KRF 31 with
Kenedix, whose asset consists of a trust beneficiary interest in
DNI Mita Building• Secured preferential negotiation right of DNI Mita Building attime of acquisition of the silent partnership equity interest. By
submitting a notice of interest of purchasing the asset for above¥3,180 million before November 23, 2014, the preferential
negotiation right will be granted• Assumed dividend yield of the silent partnership is 13.8%

Portfolio Reshuffle

Sold During 16th Fiscal Period and After
Kanazawa Nikko Building

KDX Yotsuya Building

Ikebukuro Nikko Building (Note)

Sales price: ¥0.78 billion

Sales price: ¥2.40 billion

Sales price: ¥1.97 billion

Settlement date: November 1, 2012

Settlement date: April 24, 2013

Settlement date: May 10, 2013

Reasons for sales• Acquired as a part of a portfolio transaction (eight properties) although the property by itself did not meet ourinvestment criteria as it is classified as “Other” property
type and the acquisition price falls below minimum
investment value of ¥1 billion  Have been seeking sales
opportunity right after the time of acquisition• Sales price that exceeds book value by ¥0.10 billion(+15.2%)

Reasons for sales• Current contracted rent is higher than the market average uture cash flow growth potential is limited• Received a notice of lease cancellation from a tenant on
the first floor  Risk of a drop in rental revenue at thetime of lease cancellation in the near future• Sales price that exceeds book value by ¥0.43 billion(+22.2%) and appraisal value by ¥20 million (+0.8%)

Reasons for sales• Risk of falling profitability assessed based on current
building specifications and replacement expenses ofbuilding facilities• Sales price that exceeds assumed book value by ¥0.29
billion (+17.8%) and appraisal value by ¥0.27 billion(+15.9%)6 |Note: The purchase and sales agreement for Ikebukuro
Nikko Building was concluded on March 21, 2013
during the 16th period and was sold on
May 10, 2013.

Kenedix Realty Investment Corporation Semiannual ReportSpecial Feature

Internal Growth

Special Feature

Internal Growth

Improving Occupancy and Leasing Conditions

throughEnhanced Property Management
and Building Maintenance
Successful Leasing of

Leasing Status (Note 1-2)

KDX Nihonbashi Kabutocho Building

A

Actualthe end of July 2013, we managed to

As of the end of 16th
period (2013/4)

lease-up the KDX Nihonbashi
round

Kabutocho Building, achieving a con-tract rate of 100.0% within six months from the termination of the entire building lease on November 30, 2012.
We renovated the building to accommodate multiple tenants and made other building upgrades such as moderniz-

Occupancy rate

As of 2013/5/31

13.4(%) (Note 2)

Forecast
As of the end of 17th
period (2013/10)

16.8

100.0

Notes:
1. Figures are based on the lease contracts concluded as of May 31, 2013 material
with an assumption that no tenant would move out up until the end of 17th period.
All data are subject to change depending on actual performance.
2. Occupancy rate for the contract that has started is calculated by dividing leased
floor area by leasable floor area and is rounded to the first decimal place.

ing common spaces. Thanks to these efforts, we managed
to diversify tenants, which now consist of manufacturers,

Achieved Introduction of Multi-tenants

trading companies and service providers. This should trans-

A wide range of tenants including service, manufacturer, whole-late into an improved portfolio occupancy rate from thesale, retail and restaurant, etc. concluded lease contracts.

17th Fiscal Period.
Value-up works for
KDX Nihonbashi Kabutocho Building

SMBC Nikko Se
Securities
100.0%

Changed the building specification to accommodate amulti-tenants switching from a single-tenant property.
Concurrently, improved functionality and interior of the building.

As of the end of 15th
period (2012/10)

Common corridor

Tenant E
2.6%
Tenant D 3.3%
Tenant C
10.3%
Tenant B
19.1%

Tenant F
0.8%

Kenedix
36.1%
Tenant A
27.6%

As of the end of 17th period(2013/10) (forecast)

Kenedix Realty Investment Corporation Semiannual Report| 7

Vacant floor
0.2%

optimizing the portfolio, KENEDIX-REIT

KENEDIX-REIT has established a unique position in thelooks for ways to advance the quality of

mid-sized office building market as an owner of over 80

operations in terms of occupancy andproperties. This is the foundation of our expertise in theleasing terms. These advances are achieved by proactive

maintenance and servicing of buildings, which is handledleasing activities and bolstering customer satisfaction.

by our in-house property managers. We can also leverage

W

hile

The average occupancy ratio for office buildings was

economies of scale to receive discounts when implement-

93.5% at the end of the 16th Fiscal Period, down froming renovations such as the installation of LED lighting.
We will capitalize on our unique advantage in order to95.2% at the end of the 15th Fiscal Period, mainly due tothe move-out of the single tenant of the KDX Nihonbashi

offer greater satisfaction to our tenants.

Kabutocho Building, which accounts for 2.5% of thePercentage Changes in Rent Per Unit and Rental Revenue

entire portfolio. Positive signs are, however, emerging for

Percentage changes in rent per unit
Percentage changes in rent income(%)

the 17th Fiscal Period including successful leasing activities2

and the bottoming out of rental revenue.

1

-0.2%

0

Improving Trends in Rental Revenue

W

e

-0.4%

-1

are carrying on our efforts to maintainrental terms. In fact, we are already seeing-3

signs of a bottoming out with regard to

-4

-0.6%

-2.7%

-2

-1.5%
-3.1%

-5

rental revenue from existing properties.

End of 15th
(2012/10)

Meanwhile, polarization is widening between competitive and non-competitive properties. In addition to location,

End of 16th
(2013/4)

End of 17th
(2013/10) (forecast)Diversifying Our Tenant Base

maintenance and services are becoming key factors fornumber of end-tenants for our office build-T

attracting tenants, as well as compliance with the latest
earthquake resistance standards.

ings was 878 as of the end of the fiscal period

he

Key Steps to Rent Income Recovery

under review, 89.7% of whom rent less than

200 tsubo.* Furthermore, we have managed to attract tenants from various sectors. By diversifying the tenant base,Rise in occupancy rate

we can make sure that the impact of a move-out of a major

Upward trend in occupancy rate: 92.8% 14th period  94.5% (15th period) 95.1% (16th period)  95.5% (17th period, forecast)tenant or sluggish performance in certain sectors wouldhave a relatively limited effect on our portfolio performance.

Rise in rent-based occupancy rate

*100 tsubo is approximately 330 m2.

Rent-based occupancy rate increased to 93.5% (16th period) and is expected tofurther improve to 94.4% for the 17th period due to a drop in remaining periodsof free rent

Through steady efforts to improve the quality of ourRise in rent per unit

portfolio management, we seek to enhance the visibilityof our profit outlook and maximize the distribution to

Percentage change in rent per unit has been contracting from -3.1% (15th period)to -1.5% (16th period). Expected to contract further for the 17th period

our unitholders.



Rise in rent income

Distribution by Type of Tenant(based on number of tenant)

Percentage change in rent income expected to slightly decline in the 17th period.
Expecting rent income to bottom out after the next period.

Personal use
43 5.1%

Public sector
1 0.1%
Minings
1 0.1%

Occupancy rate performance of office buildings (by region)(%)

Tokyo metropolitan area

100
95
90

Other regional areas

95.5

95.7

94.2

94.3

90.4

Move-out of a major
tenant in KDX Nihonbashi
Kabutocho Bldg.
(Occupancy rate: 0%)

Total office building

96.6

96.2

95.1

95.2

94.5

91.4

90.2

93.5
93.2

92.6

85

Average occupancy rate for all office buildings
80

Average for 13th period
93.9%

Average for 14th period
92.5%

Average for 15th period
94.3%

Average for 16th period
93.1%

End of 13th
(2011/10)

End of 14th
(2012/4)

8 |End of 15th
(2012/10)

Average for 17th period(Forecast) 94.3%

End of 16th
(2013/4)

Wholesale, retail,restaurant
207 24.6%

94.2

Improvement in occupancy
rate of KDX Nihonbashi
Kabutocho Bldg.
(Occupancy rate: 100.0%)75
End of 12th
(2011/4)

Service provider
324 38.4%

96.7
96.0

End of 17th
(2013/10)

Transportation/
Communication
32 3.8%Financial Insurance
49 5.8%
Real estate
29 3.4%

Note: The above chart shows the breakdown of tenantsby the type of business they are in, based on the
total number of tenants in office portfolio (aggregated by name-base)

Kenedix Realty Investment Corporation Semiannual ReportFinancial Strategy

Special FeatureSpecial Feature

Financial Strategy

Maintaining a Stable Financial Basethrough
Sound Management

and Risk Control

K

REIT’s focus in terms of financial management remains firmly on maintainENEDIX- ing a conservative interest-bearing
debt ratio (LTV ratio), diversifying debt maturities, and prioritizing fixed interest rates. As a result, KENEDIX-REIT has
managed to substantially reduce financing costs.
Our LTV ratio stood at 46.2% at the end of the 16th
Fiscal Period, slightly higher than 45.8% at the end of the
15th Fiscal Period. We managed to reduce the averageinterest rate (including upfront fees) from 1.96% to 1.88%.
We will continue our efforts to increase the portion of ourborrowings with fixed-rate interest, in order to hedge therisk of rising interest rates. Fixed-rate debt, which stands at
121.9 billion yen, now accounts for 85.6% of our total
debt, against floating-rate debt of 20.5 billion yen. We will
also continue our efforts to extend the average life of ourborrowings and diversify debt maturities.

Changes in borrowings for relevant periods
Average interest rate (excl. base rate) (left axis)
Average borrowing term (right axis)

1.60 (%)
1.20

0.96%

1.42%

0.80

1.18%

(Year) 6.0

0.85%

1.07%

3.0

0.40
0.00

4.5

1.5

3.4

2.4

3.2

4.0

3.7

End of 12th
(2011/4)

End of 13th
(2011/10)

End of 14th
(2012/4)

End of 15th
(2012/10)

End of 16th
(2013/4)¥20.0 billion¥47.4 billion¥24.5 billion¥10.2 billion

0.0

Amount of borrowings¥32.5 billion

Notes: 1. Average borrowing term is a weighted average based on amount of borrowings (rounded to the first decimal place).
2. Average interest rateis weighted by amount of new borrowings and by adding annualized upfront fee to the
spread cost for total debt costs (rounded to the second decimal place).
3. Borrowings that are repaid within the same period are not included for the calculation.

High Credit Standing Allows Greater Flexibility
On March 8, 2013, Japan Credit Rating Agency, Ltd. (JCR)
upgraded our credit ratings (long-term issuer rating andshelf registration ratings) by one notch from A to A+, basedon our conservative financial management as well as
improved portfolio quality.

Changes in Average Interest Rate and Average Life of Debt
Average interest rate (including up front fees) (left axis)
Average life of debt (right axis)
2.2 (%)
2.1
2.21%
2.0
2.17%
1.9
2.02%
1.8
1.7
2.2
2.3
2.5
1.6
End of 12th
(2011/4)

End of 13th
(2011/10)(Year) 9.0

1.96%
1.88%

End of 14th
(2012/4)

2.7

2.4

End of 15th
(2012/10)

End of 16th
(2013/4)

7.5
6.0
4.5
3.0
1.5
0.0

Rebalancing Our Borrowings
We maintain good relationships with 10 lenders. We are
receptive to broadening our lender base in order to accommodate future growth. We will examine opportunities toincrease the volume of transactions with lenders withwhom we have a relatively small balance of borrowings,
or we may commence transactions with new lenders.

Note: Average interest rate and average life of debt are weighted averages based on outstanding debts at the end ofeach fiscal period. Average interest rate (including up front fees) and average life of debt are rounded to thesecond and first decimal places respectively.

Changes in the LTV Ratio

Breakdown of Lenders

55 (%)
50
47.0

45.6

45

45.3
41.2

41.4

41.1

40
35

46.2

43.0
40.9

40.9
40.3

38.9

38.7

45.8

37.5
35.3

30
End of 1st(2005/10)

End of 4th(2007/4)

End of 7th(2008/10)

End of 10th(2010/4)

End of 13th
(2011/10)

End of 16th
(2013/4)

Mizuho Bank
1.5%
Resona Bank
6.1%
Mitsubishi UFJ
Trust and Banking
6.7%Bank of Tokyo
Mitsubishi UFJ
12.0%

Mizuho Trust & Banking
1.1%

Sumitomo Mitsui
Trust Bank
13.0%

Aozora Bank
14.4%

Note: LTV = Interest-bearing debt at end of period / Total assets

Kenedix Realty Investment Corporation Semiannual Report| 9Bank of Fukuoka 0.7%
Sumitomo Mitsui
Banking Corporation
25.7%
Development Bankof Japan
18.8%

KENEDIX-REIT Portfolio (As of April 30, 2013)

A13 KDX Kojimachi Building

No.

Office(TokyoMetropolitan
Area)

A15 KDX Hamacho Building

A30 KDX Nishi-Gotanda
Building

Property Name

A33 KDX Okachimachi
Building
Location

A40 Toranomon Toyo Building

Acquisition PriceYear Built(mn yen)(Note 1)

Occupancy
Ratio

A01

KDX Nihonbashi 313 Building

Chuo-ku, Tokyo

5,940

Apr. 1974

A03

Higashi-Kayabacho Yuraku Building

Chuo-ku, Tokyo

4,450

Jan. 1987

99.7%
89.1%

A04

KDX Hatchobori Building

Chuo-ku, Tokyo

3,680

Jun. 1993

100.0%A05

KDX Nakano-Sakaue Building

Nakano-ku, Tokyo

2,533

Aug. 1992

100.0%

A06

Harajuku F.F. Building

Shibuya-ku, Tokyo

2,450

Nov. 1985

100.0%A07

FIK Minami Aoyama

Minato-ku, Tokyo

2,270

Nov. 1988

100.0%

A08

Kanda Kihara Building

Chiyoda-ku, Tokyo

1,950

May 1993

86.5%

A13

KDX Kojimachi Building

Chiyoda-ku, Tokyo

5,950

May 1994

100.0%A14

KDX Funabashi Building

Funabashi, Chiba

2,252

Apr. 1989

100.0%A15

KDX Hamacho Building

Chuo-ku, Tokyo

2,300

Sep. 1993

100.0%

A16

Toshin 24 Building

Yokohama, Kanagawa

5,300

Sep. 1984

100.0%A17

KDX Ebisu Building

Shibuya-ku, Tokyo

4,640

Jan. 1992

100.0%A19

KDX Hamamatsucho Building

Minato-ku, Tokyo

3,460

Sep. 1999

100.0%A20

KDX Kayabacho Building

Chuo-ku, Tokyo

2,780

Oct. 1987

100.0%A21

KDX Shinbashi Building

Minato-ku, Tokyo

2,690

Feb. 1992

100.0%A22

KDX Shin-Yokohama Building

Yokohama, Kanagawa

2,520

Sep. 1990

92.9%

A26

KDX Kiba Building

Koto-ku, Tokyo

1,580

Oct. 1992

100.0%A27

KDX Kajicho Building

Chiyoda-ku, Tokyo

2,350

Mar. 1990

100.0%A28

KDX Nogizaka Building

Minato-ku, Tokyo

1,065

May 1991

100.0%A29

KDX Higashi-Shinjuku Building

Shinjuku-ku, Tokyo

2,950

Jan. 1990

100.0%A30

KDX Nishi-Gotanda Building

Shinagawa-ku, Tokyo

4,200

Nov. 1992

100.0%A31

KDX Monzen-Nakacho Building

Koto-ku, Tokyo

1,400

Sep. 1986

100.0%A32

KDX Shiba-Daimon Building

Minato-ku, Tokyo

6,090

Jul. 1986

79.1%

A33

KDX Okachimachi Building

Taito-ku, Tokyo

2,000

Jun. 1988

100.0%A34

KDX Hon-Atsugi Building

Atsugi, Kanagawa

1,305

May 1995

95.7%

A35

KDX Hachioji Building

Hachioji, Tokyo

1,155

Dec. 1985

100.0%A37

KDX Ochanomizu Building

Chiyoda-ku, Tokyo

6,400

Aug. 1982

100.0%A38

KDX Nishi-Shinjuku Building

Shinjuku-ku, Tokyo

1,500

Oct. 1992

100.0%A39

KDX Toranomon Building

Minato-ku, Tokyo

4,400

Apr. 1988

100.0%

A40

Toranomon Toyo Building

Minato-ku, Tokyo

9,850

Aug. 1962

96.9%

A41

KDX Shinjuku 286 Building

Shinjuku-ku, Tokyo

2,300

Aug. 1989

100.0%A45

KDX Roppongi 228 Building

Minato-ku, Tokyo

3,300

Apr. 1989

54.4%

A46

Hiei Kudan-Kita Building

Chiyoda-ku, Tokyo

7,600

Mar. 1988

100.0%A47

KDX Shin-Yokohama 381 Building (Note 2)

Yokohama, Kanagawa

5,800

Mar. 1988

100.0%A48

KDX Kawasaki-Ekimae Hon-cho Building

Kawasaki, Kanagawa

3,760

Feb. 1985

100.0%

A49

Nissou Dai-17 Building

Yokohama, Kanagawa

2,710

Jul. 1991

46.7%

A50

Ikejiri-Oohashi Building

Meguro-ku, Tokyo

2,400

Sep. 1988

91.3%

A51

KDX Hamacho Nakanohashi Building

Chuo-ku, Tokyo

2,310

Sep. 1988

100.0%A52

KDX Kanda Misaki-cho Building

Chiyoda-ku, Tokyo

1,380

Oct. 1992

100.0%

A55

Shin-toshin Maruzen Building

Shinjuku-ku, Tokyo

2,110

Jul. 1990

100.0%A56

KDX Jimbocho Building

Chiyoda-ku, Tokyo

2,760

May 1994

100.0%A57

KDX Gobancho Building

Chiyoda-ku, Tokyo

1,951

Aug. 2000

85.7%

A59

KDX Iwamoto-cho Building

Chiyoda-ku, Tokyo

1,864

Mar. 2008

100.0%A60

KDX Harumi Building

Chuo-ku, Tokyo

10,250Feb. 2008

72.2%

A61

KDX Hamamatsucho Dai-2 Building

Minato-ku, Tokyo

2,200

Apr. 1992

100.0%

A62

Koishikawa TG Building

Bunkyo-ku, Tokyo

3,080

Nov. 1989

100.0%

A63

Gotanda TG Building

Shinagawa-ku, Tokyo

2,620

Apr. 1988

100.0%A64

KDX Nihonbashi 216 Building

Chuo-ku, Tokyo

2,010

Oct. 2006

100.0%A66

KDX Shinjuku Building

Shinjuku-ku, Tokyo

6,800

May 1993

96.5%

10 |

Kenedix Realty Investment Corporation Semiannual ReportA46 Hiei Kudan-Kita Building

A59 KDX Iwamoto-cho
Building

A67 KDX Ginza 1chome
Building

Property NameNo.

A75 KDX Nihonbashi
Kabutocho Building
Location

A42 Karasuma Building

Acquisition PriceYear Built(mn yen)(Note 1)

Occupancy
Ratio

A67

KDX Ginza 1chome Building

Chuo-ku, Tokyo

4,300

Nov. 1991

100.0%A68

KDX Nihonbashi Honcho Building

Chuo-ku, Tokyo

4,000

Jan. 1984

100.0%A71

KDX Iidabashi Building

Shinjuku-ku, Tokyo

4,670

Mar. 1990

100.0%A72

KDX Higashi-Shinagawa Building

Shinagawa-ku, Tokyo

4,590

Jan. 1993

100.0%A73

KDX Hakozaki Building

Chuo-ku, Tokyo

2,710

Nov. 1993

100.0%A74

KDX Shin-Nihonbashi Building

Chuo-ku, Tokyo

2,300

Nov. 2002

100.0%A75

KDX Nihonbashi Kabutocho Building (Note 3)

Chuo-ku, Tokyo

11,270Nov. 1998

13.4%

A76

Ikebukuro Nikko Building (Note 3)

Toshima-ku, Tokyo

1,653

Mar. 1986

100.0%

A77

Kabutocho Nikko Building II

Chuo-ku, Tokyo

1,280

Oct. 2001

100.0%

A78

Tachikawa Ekimae Building

Tachikawa, Tokyo

1,267

Feb. 1990

100.0%

A83

Fuchu South Building

Fuchu, Tokyo

6,120

Mar. 1996

97.2%

A84

Kasuga Business Center Building

Bunkyo-ku, Tokyo

2,800

Jun. 1992

92.4%

A85

Nakameguro Business Center Building

Meguro-ku, Tokyo

1,880

Oct. 1985

100.0%

A86

Nomura Fudosan Omiya Kyodo Building

Saitama, Saitama

2,020

Apr. 1993

95.1%

Office

A12

Portus Center Building

Sakai, Osaka

5,570

Sep. 1993

98.6%(Other Regional
Areas)A24

KDX Minami Semba Dai-1 Building

Osaka, Osaka

1,610

Mar. 1993

82.9%

A25

KDX Minami Semba Dai-2 Building

Osaka, Osaka

1,560

Sep. 1993

94.1%

A36

KDX Niigata Building

Niigata, Niigata

1,305

Jul. 1983

61.9%

A42

Karasuma Building

Kyoto, Kyoto

5,400

Oct. 1982

98.3%

A44

KDX Sendai Building

Sendai, Miyagi

2,100

Feb. 1984

96.8%

A53

KDX Hakata-Minami Building

Fukuoka, Fukuoka

4,900

Jun. 1973

94.9%

A54

KDX Kitahama Building

Osaka, Osaka

2,220

Jul. 1994

92.8%

A58

KDX Nagoya Sakae Building

Nagoya, Aichi

7,550

Apr. 2009100.0%A69

KDX Kobayashi-Doshomachi Building

Osaka, Osaka

2,870

Jul. 2009

93.5%

A70

Kitananajo SIA Building

Sapporo, Hokkaido

2,005

Oct. 1989

94.4%

A79

KDX Nagoya Ekimae Building (Note 5)

Nagoya, Aichi

7,327

Apr. 1986

100.0%

A80

Nagoya Nikko Shoken Building

Nagoya, Aichi

4,158

Aug. 1974

98.0%

A81

Sendai Nikko Building

Sendai, Miyagi

950

Mar. 1989

75.4%

A82

KDX Higashi Umeda Building

Osaka, Osaka

2,770

Jul. 2009100.0%

Office Subtotal (78 properties)

Residential

271,771

Avg. 22.7 years

93.5%

B03

Court Mejiro

Shinjuku-ku, Tokyo

1,250

Mar. 1997

90.1%

B19

Residence Charmante Tsukishima

Chuo-ku, Tokyo

5,353

Jan. 2004

100.0%

B18

Venus Hibarigaoka

Sapporo, Hokkaido

1,800

Mar. 1989

96.3%

8,403

Avg. 13.5 years

97.0%

Residential Subtotal (3 properties)

Central Urban
RetailC01

Frame Jinnan-zaka

Shibuya-ku, Tokyo

9,900

Mar. 2005

100.0%C02

KDX Yoyogi Building

Shibuya-ku, Tokyo

2,479

Aug. 1991

100.0%

12,379Avg. 10.8 years

100.0%

292,553

Avg. 22.0 years

93.9%

Toyonaka, Osaka

891

Jun. 1992

Silent partnership equity interest of G.K. KRF 31 Minato-ku, Tokyo(DNI Mita Building) (Note 4)200

Mar. 1993

Central Urban Retail Subtotal (2 properties)
Total (83 properties)
Senri Property TMK Preferred Securities

Investment Security

Notes: 1. The year built refers to the date of construction completion recorded in the land register. The average age subtotal and total data are calculated using theweighted-average based on acquisition prices as of April 30, 2012, and are rounded down to the first decimal place.
2. KDX Shin-Yokohama 381 Building and KDX Shin-Yokohama 381 Building Annex Tower are indicated collectively as one property. Year of construction of existing tower isshown. Upon calculating the weighted-average portfolio age, the completion date (April 2009) for the KDX Shin-Yokohama 381 Building Annex Tower is not considered.
3. Purchase and sales agreement of Ikebukuro Nikko Building was concluded on March 21, 2013 during the 16th period and the property was sold on May 10, 2013.
4. Acquired silent partnership equity interests during the 17th period (May 23, 2013).
5. Nagoya Ekimae Sakura-dori Building and View Flex Umeda Building were renamed KDX Nagoya Ekimae Building and KDX Higashi Umeda Building, respectively,
on April 1, 2013.
6. Amounts indicated have been rounded down.

Kenedix Realty Investment Corporation Semiannual Report| 11Management Team

 Naokatsu Uchida

 Keisuke Sato

Representative Director

Director & General Manager of Investment Management Division• Worked for Mitsubishi UFJ Trust and Banking Corporation for approximately 17 years (Real
Estate Division, Real Estate Project Origination Division)• After working for Joint Asset Management Co., Ltd. as its Representative Director, he joined
Kenedix Office Partners, Inc. where he was a member of the Financial Planning Division for
approximately two years• Appointed Representative Director of Kenedix Office Partners, Inc. on February 2, 2012

• Worked for Tokyu Land Corporation for approximately nine years• Joined Kenedix, Inc. after having worked for JPMorgan Securities Japan Co., Ltd. andPrudential Real Estate Investors (Japan) K.K.
• Real estate appraiser• Appointed Director and General Manager of Investment Management Division on August 1,
2012

 Fumihiko Shimodomae

 Hikaru Teramoto

Director & General Manager of Property Management Division• Worked for Mitsui Fudosan Building Management for 12 years• Joined Kenedix Office Partners, Inc. in January 2011 after serving for Pacific Management
and as a director for the asset management companies of Nippon Commercial Investment
Corporation• Appointed Director and General Manager of Property Management Division on July 1, 2012
after working as PM Manager of Property Management Division

12 |Director & General Manager of Financial Planning Division• After working for Sakura Bank for six years, he moved to Sakura Securities, Daiwa Securities
SMBC, and Goldman Sachs where he engaged in investment banking for ten years• Joined Kenedix Office Partners, Inc. after having worked for Goldman Sachs Realty Japan•Appointed Director and General Manager of Financial Planning Division on August 1, 2012

Kenedix Realty Investment Corporation Semiannual ReportCorporate Governance

KENEDIX-REIT endeavors to build a corporate gover-

Corporate Governance System of Kenedix OfficePartners

nance system that fosters highly transparent asset

Kenedix Office Partners endeavors to control the various risks

management operations and fair transactions.

related to investment management by preparing management

With the aim of becoming an “autonomous J-REIT,”

guidelines and adhering to fundamental investment management
Ensuring management independence and transparency isconcepts, including investment policies, transaction rules withextremely important in undertaking fair transactions and indis-

interested parties, and policies of distribution and disclosure.

pensable for promoting sound management practices. In order toFurthermore, based on a review conducted by the Compliancecomply with each legal regulation and realize asset management

Officer, important items that include transactions with interested

operations that are fair and highly transparent, Kenedix Officeparties are subject to strict protocols that involve deliberations andPartners, the asset management company of KENEDIX-REIT, is

resolutions undertaken by the Asset Management Committee

mindful of the following items, shown in the chart below. In par-(AMC) and the Compliance Committee (whose members include

ticular, the Compliance Officer and the Compliance Committee

one outside lawyer). Final decisions regarding such transactions

function as two integral aspects of the corporate governance sys-

are made by the Board of Directors.

tem, ensuring compliance with rules and regulations that govern

AMC’s Role in Advancing Decision Making

J-REITs, organization-wide support and implementation.

On a weekly basis, AMC members receive reports on tenant

Corporate Governance System of KENEDIX-REIT

movements and plans, discuss measures to deal with negative

KENEDIX-REIT has established a Board of Directors—a meeting of

movements, receive proposals on renovations and other improve-

which is held on a regular basis—that is fully capable of undertak-ments, and deliberate and approve property acquisitions and dis-ing operating decisions and functioning as a body that supervises

positions. While each division takes action to fulfill its respective

the executive officer. Through the functions of the Board ofareas of responsibility, the process of discussion and approval vets

Directors, KENEDIX-REIT grasps and oversees the status ofissues and ensures a flow of communication that is logical and

Kenedix Office Partners’ business operations.

meaningful to the decision-making process.

Decision Making at Kenedix Office Partners

 The Compliance Officer previews the REIT’s major pending decisions to ensure that no transactions are detrimental to the interests of investors, that the rules for deals with interested
parties are obeyed and that the deals are implemented in accordance with established guidelines. The Compliance Officer also works to ensure that service providers are in compliancewith the rules and regulations that govern J-REITs.
Preview

Deliberation and Resolution

Deliberation and Resolution

Resolution or Reporting

Creation of management guidelines

Corresponding
Division ComplianceOfficer

Asset Management
Committee(AMC)

Compliance
Committee(including 1 outside lawyer)

Approval for transactions withinterested parties
Approval for transactions outsideof management guidelines

Resolution
Boardof
DirectorsReportingApproval for transactions that follow management guidelines,
excluding those with interested parties

 AMC is the crux of cross-organizational management and communication. Attendees of the
AMC meetings comprise leaders and managers, and meetings related to property or othermaterial decisions are attended by the CEO and President of Kenedix Office Partners, theGeneral Manager of the Financial Planning Division (CFO), the General Manager of theInvestment Management Division (CIO), the General Manager of the Property Management
Division and the Compliance Officer.

Meetings of Committees in Each Fiscal Period
1st

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

Compliance Committee(Period)

7

7

7

8

6

8

9

8

8

10

7

7

8

6

7

7

Asset Management Committee

21

35

39

39

38

38

52

44

36

39

32

37

44

40

40

41

Kenedix Office Partners Board of Directors

9

7

9

8

9

7

10

8

10

12

11

9

11

9

12

9

KENEDIX-REIT Board of Directors

11

7

7

9

7

7

7

8

8

8

8

7

9

9

8

8

Kenedix Realty Investment Corporation Semiannual Report

| 13

16th

Financial Section
Contents
Independent Auditor’s ReportF

Balance Sheets

G

Statements of Income and Retained Earnings

H

Statements of Changes in Net Assets

H

Notes to Financial Statements

I

Statements of Cash Flows (Unaudited)S

Financial Summary (Unaudited)
Historical Operating Trends
For the 12th–16th Fiscal Periods
PeriodUnit

12th Period(as of Apr. 30, 2011)

13th Period(as of Oct. 31, 2011)

14th Period(as of Apr. 30, 2012)

15th Period(as of Oct. 31, 2012)

16th Period(as of Apr. 30, 2013)

Operating revenues

mn yen

8,136

9,044

9,090

10,212

9,867(Rental revenues)

mn yen

8,136

8,498

9,090

9,617

9,306

Operating expenses

mn yen

4,427

4,618

5,004

5,696

5,465

(Property-related expenses)

mn yen

3,767

3,961

4,284

4,822

4,740

Operating income

mn yen

3,709

4,425

4,086

4,516

4,401

Ordinary income

mn yen

2,346

3,040

2,551

3,011

3,003

Net income (a)mn yen

2,309

3,052

2,540

3,009

3,002

Total assets (b)mn yen261,928

274,973

303,284

306,734

308,172(Period-on-period change)

Interest-bearing debt (c)%mn yen(Period-on-period change)%

Unitholders’ equity (d)mn yen(Period-on-period change)%

Unitholders’ capitalmn yen(Period-on-period change)

Number of investment units issued andoutstanding (e)Unitholders’ equity per unit (d)/(e)(+4.3)(+5.0)(+10.3)(+1.1)(+0.5)

112,715

110,914137,372

140,581

142,369(+9.9)(-1.6)(+23.9)(+2.3)(+1.3)

135,505150,272

150,063

150,389

150,653(-0.2)(+10.9)(-0.1)(+0.2)(+0.2)

133,129

147,153

147,153

147,153

147,153%(0.0)(+10.5)

(0.0)

(0.0)

(0.0)

unit

233,550

286,550

286,550

286,550

286,550
525,747yen

580,199

524,419

523,688524,828mn yen

2,310

2,749

2,683

2,738

2,703

yen

9,891

9,596

9,364

9,557

9,434

(Earnings distributed per unit)

yen

9,891

9,596

9,364

9,557

9,434

(Distribution in excess of earnings per unit)

yen

—

—

—

—

—

Return on assets (annualized) (Notes 1 and 2)%

0.9 (1.8)

1.1 (2.2)

0.9 (1.8)

1.0 (2.0)

1.0 (2.0)

Return on net assets (annualized) (Notes 2 and 3)%

1.7 (3.4)

2.1 (4.2)

1.7 (3.4)

2.0 (4.0)

2.0 (4.0)

51.7

54.6

49.5

49.0

48.9

(-2.3)(+2.9)(-5.2)(-0.5)(-0.1)

43.0

40.3

45.3

45.8

46.2

Total distribution (f)Distribution per unit (f)/(e)Net assets ratio at end of period (d)/(b)(Period-on-period change)

Interest-bearing debt ratio at end of period (c)/(b)(Period-on-period change)

Payout ratio (Note 4) (f)/(a)%%%(+2.2)(-2.7)(+5.0)(+0.5)(+0.4)

100.0

90.0

105.6

90.9

90.0

Other references
Number of properties

properties

Total leasable floor aream2

Occupancy at end of period

71

74

83

84

83

286,237.93

300,016.89

340,589.96

351,153.72

347,853.97

%

94.6

94.7

95.4

95.5

93.9

Depreciation expenses for the period

mn yen

1,406

1,442

1,578

1,621

1,662

Capital expenditures for the period

mn yen

574

674

918

904

772

Leasing NOI (Net Operating Income) (Note 5)

mn yen

5,776

5,980

6,384

6,416

6,228

FFO (Funds From Operation) (Note 6)

mn yen

3,716

3,950

4,119

4,187

4,202

yen

15,914

13,786

14,374

14,612

14,664

FFO per unit (Note 7)

Notes: 1. Return on assets = Ordinary income/{(Total assets at beginning of period + Total assets at end of period)/2} × 100
2. Annualized values for the 12th Fiscal Period are calculated based on a period of 181 days, 184 days for the 13th Fiscal Period, 182 days for the 14th Fiscal Period, 184
days for the 15th Fiscal Period and 181 days for the 16th Fiscal Period.
3. Return on net assets = Net income/{(Total net assets at beginning of period + Total net assets at end of period)/2} × 100
4. Payout ratio is rounded down to the first decimal place.
5. Leasing NOI = Rental revenues – Rental expenses + Depreciation expenses for the period
6. FFO = Net income + Depreciation expenses for the period – Gain on sale of real estate property + Loss on sale of real estate property
7. FFO per unit = FFO/Number of investment units issued and outstanding (figures below ¥1 rounded down)
8. Where applicable, figures are rounded down to the nearest million.

14 |Kenedix Realty Investment Corporation Semiannual ReportOperating Revenues

Operating Income

4,401

9,867

million yen

million yen

10,212

9,044

9,090

13th Period

14th Period

4,425

9,867

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Net Income

3,052

3,009

3,002

13th Period

14th Period

15th Period

16th Period

Total Assets

15th Period

16th Period

yen

9,891

9,596

9,364

9,557

9,434

12th Period

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Net Assets Ratio / Unitholders’ Equity

308,172
303,284

million yen

306,734

308,172

274,973

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Interest-Bearing Debt Ratio (LTV Ratio) / Interest-Bearing Debt

46.2
43.0%

14th Period

9,434

million yen(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

12th Period

13th Period

2,540

2,309

261,928

12th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Distribution per Unit

3,002
12th Period

4,401

3,709

8,136

12th Period

4,516

4,086

%

51.7%

54.6%

45.8%

46.2%

49.5%

49.0%

48.9%

135,505150,272

150,063

150,389

150,653

million yen

million yen

million yen

million yen

million yen

12th Period

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Occupancy Ratio

93.9

%

45.3%

48.9

%

94.6%

94.7%

95.4%

95.5%

93.9%

12th Period

13th Period

14th Period

15th Period

16th Period

40.3%

112,715

110,914137,372

140,581

142,369

million yen

million yen

million yen

million yen

million yen

12th Period

13th Period

14th Period

15th Period

16th Period(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)(Ended Apr. 30, 2011) (Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013)

Kenedix Realty Investment Corporation Semiannual Report

| 15

16 |

Kenedix Realty Investment Corporation Semiannual ReportBalance Sheets
Kenedix Realty Investment Corporation
As of April 30, 2013 and October 31, 2012
In thousands of yen
As of April 30, 2013

As of October 31, 2012ASSETS
Current assets:
Cash and bank deposits (Note 12)¥ 14,813,927¥ 11,513,930

Rental receivables

185,047

425,746

Other current assets (Note 7)

76,501

79,424

15,075,475

12,019,100

Total current assets
Property and equipment, at cost: (Notes 3, 11 and 13)
Land205,702,745

205,933,483

Buildings and structures (Note 5)

100,488,908

100,188,719

Machinery and equipment

1,557,795

1,548,922

Tools, furniture and fixtures

446,748

433,305

Construction in progress

6,699

6,699

(17,966,695)(16,448,292)

290,236,200

291,662,836

Ground leasehold (Notes 11 and 13)

357,106

357,881

Investment securities (Note 12)896,655

896,655

Corporate bond issuance costs

26,04332,669Unit issuance costs

37,80656,709Less-accumulated depreciation
Net property and equipment
Other assets:

Other assets (Notes 11 and 13)
Total assets

1,542,881

1,708,798¥308,172,166¥306,734,648¥¥

LIABILITIES AND NET ASSETS
Liabilities
Current liabilities:
Trade and other payables

863,231

894,162

Current portion of corporate bonds (Notes 4 and 12)

1,500,000

1,500,000

Short-term debt and current portion of long-term debt (Notes 4 and 12)

30,000,000

19,700,000

Deposits received
Rents received in advance

16,967

18,964

1,686,455

1,482,863

Other current liabilities

366,030

328,146

34,432,683

23,924,135

Corporate bonds (Notes 4 and 12)

4,500,000

4,500,000

Long-term debt (Notes 4 and 12)

106,369,500

114,881,000

Leasehold and security deposits received

12,216,921

13,039,969

157,519,104

156,345,104

147,153,820

147,153,820

Total current liabilities

Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 286,550 units
As of April 30, 2013 and October 31, 2012, respectively
Surplus
Voluntary retained earnings
Reserve for reduction entry
Retained earnings
Total surplus
Total unitholders’ equity

497,043

225,7963,002,199

3,009,928

3,499,242

3,235,724

150,653,062

150,389,544

Total net assets (Note 8)

150,653,062

150,389,544

Total liabilities and net assets¥308,172,166¥306,734,648

See accompanying notes to the financial statements.

Kenedix Realty Investment Corporation Semiannual Report| 17

Statements of Income and Retained Earnings
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012
In thousands of yen
From November 1, 2012 to April 30, 2013 From May 1, 2012 to October 31, 2012

Operating revenues:
Rental revenues (Notes 10 and 11)¥9,306,087¥ 9,617,355

Gain on sale of real estate property (Note 10)462,044595,516

Dividends income

99,168—9,867,299

10,212,871

Property-related expenses (Notes 10 and 11)

4,740,084

4,822,166

Loss on sale of real estate property (Note 10)—

151,823

Asset management fees

553,018

548,085

Administrative service and custodian fees

69,47468,539Other operating expenses

103,073

105,575

5,465,649

5,696,188

4,401,650

4,516,683

Total operating revenues
Operating expenses:

Total operating expenses
Operating income
Non-operating expenses:
Interest expense

1,046,727

1,093,771

Financing-related expenses

315,050

366,756

Amortization of unit issuance costs

18,90327,282

Amortization of corporate bond issuance costs

6,626

6,736

Others, net

10,93910,904

1,398,245

1,505,449

Ordinary income

Total non-operating expenses

3,003,405

3,011,234

Income before income taxes

3,003,405

3,011,234

Income taxes (Note 7)
Net income

1,329

1,439

3,002,076

3,009,795

Retained earnings at the beginning of period
Retained earnings at the end of period

123

133

¥3,002,199¥ 3,009,928

See accompanying notes to the financial statements.

Statements of Changes in Net Assets
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012
In thousands of yen
Unitholders’ Equity
Surplus
Voluntary retained
earnings

Balance as of April 30, 2012

Unitholders’capitalReserve for
reduction entry

Retainedearnings

Total
surplusTotal
unitholders’equityTotal¥147,153,820¥ 368,796¥ 2,540,387¥ 2,909,183¥150,063,003¥150,063,003

Changes during the fiscal period
Reversal of reserve for reduction entry—(143,000)

143,000———

Payments of dividends——(2,683,254)(2,683,254)(2,683,254)(2,683,254)

Net income——

3,009,795

3,009,795

3,009,795

3,009,795—(143,000)

469,541

326,541

326,541

326,541¥147,153,820¥ 225,796¥ 3,009,928¥ 3,235,724¥150,389,544¥150,389,544

Total changes during the fiscal period
Balance as of October 31, 2012
Changes during the fiscal period
Provision of reserve for reduction entry—

271,247(271,247)———

Payments of dividends——(2,738,558)(2,738,558)(2,738,558)(2,738,558)

Net income——

3,002,076

3,002,076

3,002,076

3,002,076—

271,247(7,729)263,518

263,518

263,518¥147,153,820¥ 497,043¥ 3,002,199¥ 3,499,242¥150,653,062¥150,653,062

Total changes during the fiscal period
Balance as of April 30, 2013
See accompanying notes to the financial statements.

18 |Kenedix Realty Investment Corporation Semiannual ReportNotes to Financial Statements
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012

1.

ORGANIZATION AND BASIS OF PRESENTATIONORGANIZATION
Kenedix Realty Investment Corporation (”the Investment Corporation”) was established on May 6, 2005 under the Act on Investment
Trusts and Investment Corporations of Japan (“the Investment Trust Act”). On July 21, 2005, the Investment Corporation was listed on
the Real Estate Investment Trust Market of the Tokyo Stock Exchange with a total of 75,400 investment units issued and outstanding(Securities Code: 8972). Subsequently, the Investment Corporation raised funds through four public offerings and other means including
global offerings. As a result, as of April 30, 2013, the end of the sixteenth fiscal period, the number of investment units issued andoutstanding totaled 286,550 units.
The Investment Corporation is externally managed by Kenedix Office Partners, Inc. (Note) (“the Asset Management Company”) as its
asset management company. In concert with the Asset Management Company, the Investment Corporation strives to maximize cash
distribution to investors by securing stable earnings and sustainable investment growth. To this end, the Investment Corporation adopts
a dynamic and flexible investment stance that accurately reflects its environment and market trends, and endeavors to ensure a timely
response to each and every opportunity. The Investment Corporation has partially changed the management guidelines contained in thecompany regulations of the Asset Management Company as of September 1, 2012, and raised the lower limit of the investment ratio of
office buildings along with changing the upper limits, etc. of the investment ratio of other types of properties.
During the period ended April 30, 2013, the Investment Corporation acquired one office building (Nomura Fudosan Omiya Kyodo
Building: acquisition price of ¥2,020 million) located in the Tokyo Metropolitan Area and sold KDX Yotsuya Building (initial acquisition
price of ¥1,950 million) and Kanazawa Nikko Building (initial acquisition price of ¥645 million). As of April 30, 2013, the Investment
Corporation had total unitholders’ capital of ¥147,154 million with 286,550 investment units outstanding. The balance of interest-bearing
debt amounted to ¥142,369 million as of April 30, 2013, comprising ¥136,369 million in borrowings (¥130,669 million in long-termborrowings and ¥5,700 million in short-term borrowings) and ¥6,000 million in investment corporation bonds. The Investment
Corporation owned a portfolio of 83 properties with a total acquisition price of ¥292,553 million containing a total leasable area of
347,853.97m2 and preferred equity securities with a total acquisition price of ¥891 million. The occupancy ratio was approximately
93.9%. A portfolio of 83 properties consists of 78 office buildings, 3 residential properties, 2 central urban retail properties. 67 propertiesare located in the Tokyo Metropolitan Area and 16 properties are located in Other Regional Areas.
BASIS OF PRESENTATIONThe Investment Corporation maintains its accounting records and prepares its financial statements in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards. The financial statements are prepared in accordance with the Investment Trust Act.
The financial statements are basically a translation of the Japanese audited financial statements of the Investment Corporation. In preparing the accompanying financial statements, certain reclassifications have been made to the financial statements issued domestically inorder to present them in a format which is familiar to readers outside Japan. Certain information in the business report and supplementaryschedule has been omitted. Additional information has been added to the Japanese audited financial statements for the convenience ofreaders outside Japan and this includes disclosing the prior year’s comparatives as supplemental information in the English translated
financial statements although the Japanese audited financial statements only need to disclose the current year’s information.

Kenedix Realty Investment Corporation Semiannual Report

| 19

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) SECURITIESNon-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the moving averagemethod.
(B) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line basis over the estimateduseful lives of the assets ranging as stated below:
From November 1, 2012 to April 30, 2013

From May 1, 2012 to October 31, 2012

Buildings and structures

2-49 years

2-49 years

Machinery and equipment

3-17 years

3-17 years

Tools, furniture and fixtures

3-20 years

3-20 years(C) UNIT ISSUANCE COSTS
Unit issuance costs are amortized over a period of 3 years under the straight-line method.
(D) CORPORATE BOND ISSUANCE COSTS
Corporate bond issuance costs are amortized over a loan period under the straight-line method.
(E) 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 assets
and liabilities within trust are recorded in the relevant balance sheets and statements of income and retained earnings.
(F) LEASEHOLD RIGHTS
Fixed term leasehold with special agreement on buildings sales, and the building are amortized over a contractual period of 48 years and9 months under the straight-line method.
(G) REVENUE RECOGNITION
Operating revenues consist of rental revenues including base rents and common area charges, and other operating revenues including
utility charge reimbursements, parking space rental revenues and other miscellaneous revenues. Rental revenues are generally recognizedon an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can bereasonably estimated. Reimbursements from tenants including utility charge reimbursements are recorded on a gross basis and suchamounts are recorded both as revenues and expenses during the fiscal period, respectively.
(H) 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 tosaid period. Under the Japanese tax rule, the seller of the property at the time of disposal is liable for these taxes on the property fromthe date of disposal to the end of the calendar year in which the property is disposed. The seller, however, is reimbursed by the purchaser
for these accrued property-related tax liabilities.
When the Investment Corporation purchases properties, it typically allocates the portion of the property-related taxes related to the period
following the purchase date of each property through the end of the calendar year. The amounts of those allocated portions of theproperty-related taxes are capitalized as part of the acquisition costs of the related properties. Capitalized property-related taxes amounted
to ¥10,265 thousand and ¥23,009 thousand as of April 30, 2013 and October 31, 2012, respectively. In subsequent calendar years, suchproperty-related taxes are charged as operating expenses in the fiscal period to which the installments of such taxes correspond.
(I) INCOME TAXES
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets
and liabilities using the statutory tax rates.
(J) CONSUMPTION TAXES
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes
applicable to the acquisition of assets are included in the cost of acquisition for each asset.

20 |Kenedix Realty Investment Corporation Semiannual Report(K) DERIVATIVE FINANCIAL INSTRUMENTS
The Investment Corporation utilizes interest-rate swap agreements and interest-rate cap agreements as derivative financial instruments
only for the purpose of hedging its exposure to changes in interest rates. The Investment Corporation deferred recognition of gains orlosses resulting from changes in fair value of interest-rate swap agreements and interest-rate cap agreements because its interest-rate
swap agreements and interest-rate cap agreements met the criteria for deferral hedging accounting. However, the Investment Corporation
adopted special treatment for interest-swap agreements and interest-rate cap agreements if its interest-rate swap agreements andinterest-rate cap agreements met the criteria for hedging accounting under this treatment, whereby the net amount to be paid or
received under the interest-rate swap contract and interest-rate cap contract is added to or deducted from the interest on the assets or
liabilities for which the swap and cap contract was executed. The hedge effectiveness for interest-rate swap contracts and interest-rate
cap contract is assessed each fiscal period except for those that meet the criteria of special treatment.
(L) ROUNDING OF AMOUNTS PRESENTED
Amounts have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP and filed with regulatory
authorities in Japan, whereas amounts have been rounded to the nearest million in the accompanying financial statements. Totals shownin the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

3.

SCHEDULE OF PROPERTY
In millions of yen
As of April 30, 2013
Acquisition
costs

Accumulated
depreciation

Land¥205,703¥

Buildings and structures

100,489

Machinery and equipment

1,558

Tools, furniture and fixtures
Construction in progress
Total

4.

As of October 31, 2012
Book
value

Acquisition
costs

Accumulated
depreciation

Book
value

—

¥205,703¥205,933¥—¥205,933

17,042

83,447100,189

15,58484,605

683

875

1,549

638

911

447

242

205

433

226

207

6

—

6

7

—

7

¥308,203¥17,967¥290,236¥308,111¥16,448¥291,663

SHORT-TERM DEBT, LONG-TERM DEBT AND CORPORATE BONDS

The following summarizes short-term debt, long-term debt and corporate bonds outstanding as of April 30, 2013:
Classification

Short-term debt

Drawdown date

Last
repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

July 31, 2012

July 31, 2013

0.81%

October 31, 2012

October 31, 2013

0.76%

¥

3,000

January 31, 2013

January 31, 2014

0.74%

1,200

July 30, 2010

July 31, 2013

1.49%

September 1, 2006

August 31, 2013

2.12%

3,000

March 31, 2011

September 30, 2013

1.53%

2,000

September 30, 2011

September 30, 2013

1.15%

1,000

October 29, 2010

October 31, 2013

1.46%

500

November 12, 2010

November 12, 2013

1.58%

1,500

November 12, 2010

November 12, 2013

1.58%

800

November 12, 2010

November 12, 2013

1.58%

400

December 1, 2010

November 12, 2013

1.41%

500

December 1, 2010

November 12, 2013

1.41%

200

December 1, 2010

November 12, 2013

1.41%

100

July 30, 2010

January 31, 2014

1.66%

3,700

January 31, 2011

January 31, 2014

1.57%

1,300

March 12, 2012

March 12, 2014

1.02%

2,250

March 12, 2012

March 12, 2014

1.02%

1,800

March 12, 2012

March 12, 2014

1.02%

1,800

March 12, 2012

March 12, 2014

1.02%

450

September 30, 2011

March 31, 2014

1.16%

2,500

Subtotal
Current portion of long-term debt

1,500

5,700

Subtotal¥

500

24,300Kenedix Realty Investment Corporation Semiannual Report| 21

Classification

Long-term debt

Drawdown date

Last
repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

¥5,000

May 1, 2006

April 30, 2016

2.73%

January 29, 2010

January 30, 2015

2.17%

1,032

February 18, 2010

February 18, 2015

2.19%

1,898
1,403

February 18, 2010

February 18, 2015

2.19%

February 18, 2010

February 18, 2015

2.19%

825

February 18, 2010

February 18, 2015

2.19%

413

April 2, 2010

April 2, 2015

2.22%

1,700

July 30, 2010

July 31, 2014

1.73%

3,700
1,200

November 12, 2010

November 12, 2015

1.79%

November 12, 2010

November 12, 2015

1.79%

800

November 12, 2010

November 13, 2017

2.02%

2,300

December 1, 2010

November 12, 2015

1.51%

800

December 1, 2010

November 12, 2015

1.51%

200

December 1, 2010

November 12, 2017

2.21%

700

January 31, 2011

January 29, 2016

1.94%

800
3,000

February 28, 2011

August 31, 2015

1.91%

February 28, 2011

January 29, 2016

1.95%

500

March 22, 2011

September 22, 2014

1.63%

2,700

March 31, 2011

January 29, 2016

1.91%

2,000

March 31, 2011

March 31, 2016

1.37%

1,000

April 28, 2011

October 31, 2015

1.86%

1,500

April 28, 2011

January 29, 2016

1.89%

1,000

July 13, 2011

July 14, 2014

1.54%

1,000

July 29, 2011

July 31, 2014

1.11%

2,200
1,000

July 29, 2011

July 31, 2014

1.11%

July 29, 2011

July 31, 2014

1.40%

300

August 31, 2011

February 27, 2015

1.05%

1,500

September 1, 2011

August 29, 2014

1.15%

1,000

September 30, 2011

September 30, 2014

1.27%

1,000

September 30, 2011

March 31, 2015

1.29%

2,500

December 26, 2011

October 31, 2014

1.24%

2,500

December 26, 2011

October 31, 2014

1.26%

2,000

December 26, 2011

October 31, 2014

1.26%

2,000

December 26, 2011

October 31, 2014

1.26%

1,000

December 26, 2011

October 31, 2015

1.34%

2,500

December 26, 2011

October 31, 2015

1.32%

2,500

December 26, 2011

October 31, 2015

1.34%

2,000

December 26, 2011

October 31, 2016

1.44%

2,500

December 26, 2011

October 31, 2016

1.42%

2,500

December 26, 2011

October 31, 2016

1.44%

2,000

January 10, 2012

January 29, 2016

1.27%

2,500

January 31, 2012

January 30, 2015

1.19%

1,500

March 12, 2012

March 12, 2015

1.08%

1,000

March 28, 2012

March 28, 2017

1.36%

500

March 28, 2012

March 28, 2019

1.77%

1,400

March 28, 2012

March 28, 2019

1.77%

1,000

March 30, 2012

September 30, 2015

1.21%

2,000

April 27, 2012

October 30, 2015

1.27%

1,000

June 29, 2012

June 30, 2017

1.29%

1,500

September 21, 2012

September 21, 2017

1.16%

5,000

September 21, 2012

September 21, 2017

1.16%

1,000

September 21, 2012

September 21, 2017

1.16%

1,000

October 31, 2012

April 30, 2015

1.01%

2,500

October 31, 2012

October 31, 2016

1.06%

2,500

October 31, 2012

October 31, 2016

1.05%

1,500

October 31, 2012

October 31, 2017

1.10%

2,500

October 31, 2012

October 31, 2018

1.25%

2,500

December 10, 2012

December 12, 2016

0.98%

500

December 28, 2012

December 28, 2016

1.01%

2,000

December 28, 2012

December 28, 2017

1.09%

500

December 28, 2012

December 29, 2017

1.09%

500

22 |

Kenedix Realty Investment Corporation Semiannual Report

Classification

Drawdown date

Last
repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

January 15, 2013

January 16, 2017

0.97%

1,000

February 18, 2013

February 18, 2016

0.84%

1,500

March 26, 2013

March 26, 2018

1.04%

1,000

March 26, 2013

March 26, 2018

1.04%

1,000

April 30, 2013

April 28, 2016

0.73%

1,000

Subtotal
Corporate bonds

106,370
March 15, 2007

March 15, 2017

2.37%

September 15, 2011

September 13, 2013

1.59%

¥

1,500

March 8, 2012

September 8, 2017

2.00%

1,500

Subtotal

6,000

Total

5.

3,000

¥136,670

REDUCTION ENTRY

The amount of reduction entry of property and equipment acquired by government subsidy
In thousands of yen

Buildings and structures

6.

As of April 30, 2013

As of October 31, 2012

¥26,230¥26,230PER UNIT INFORMATION
Yen
From November 1, 2012 to April 30, 2013

From May 1, 2012 to October 31, 2012

Net asset value per unit

¥525,748¥524,828

Net income per unit

¥ 10,477¥ 10,504

Weighted average number of units (units)286,550

286,550

The weighted average number of units outstanding of 286,550 was used for the computation of the amount of net income per unit asof April 30, 2013 and October 31, 2012. Net income per unit after adjusting for residual units is not included because there were noresidual investment units.

7.

INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 40%. However, theInvestment Corporation may deduct from its taxable income amounts distributed to its unitholders, provided the requirements are met
under the Special Taxation Measure Law of Japan. Under this law, the Investment Corporation must meet a number of tax requirements,
including a requirement that it currently distribute in excess of 90% of its net income for the fiscal period in order to be able to deduct
such amounts. If the Investment Corporation does not satisfy all of the requirements, the entire taxable income of the Investment
Corporation will be subject to regular corporate income taxes. Since the Investment Corporation distributed in excess of 90% of its distributable income in the form of cash distributions totaling ¥2,703 million (deducting ¥299 million as the provision of reserve for reduction
entry) and ¥2,739 million (deducting ¥271 million as the provision of reserve for reduction entry) for the periods ended April 30, 2013
and October 31, 2012. Such distributions were treated as deductible distributions for purposes of corporate income taxes. The effective
tax rate on the Investment Corporation’s income was 0.04% and 0.05% for the periods ended April 30, 2013 and October 31, 2012.
The following summarizes the significant difference between the statutory tax rate and the effective tax rate:
As of April 30, 2013

As of October 31, 2012

Statutory tax rate

36.59%

36.59%

Deductible cash distributions(32.93)(33.28)Provision of reserve for reduction entry(3.64)(3.30)

Others0.03

0.04

Effective tax rate

0.04%

0.05%

Kenedix Realty Investment Corporation Semiannual Report| 23

The significant components of deferred tax assets and liabilities as of April 30, 2013 and October 31, 2012 were as follows:
In thousands of yen
As of April 30, 2013

As of October 31, 2012

Deferred tax assets:
Enterprise tax payable¥

Amortization of leasehold rights

1,278

1,014

Subtotal deferred tax assets

1,314

1,041

Valuation allowance

1,278

Total deferred tax assets

8.

¥

36

¥

27

1,014

36

¥

27

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

9.

RELATED-PARTY TRANSACTIONSTRANSACTIONS WITH KENEDIX OFFICE PARTNERS, INC.
Kenedix Office Partners, Inc., a consolidated subsidiary of Kenedix, Inc., provides the Investment Corporation with property management
services and related services. For these services, the Investment Corporation pays Kenedix Office Partners, Inc. property management feesin accordance with the terms of its Property Management Agreements. For these services, the Investment Corporation paid ¥350 million
to Kenedix Office Partners, Inc.

10.

BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES,GAIN ON SALE OF REAL ESTATE PROPERTY AND LOSS ON SALE OF REAL ESTATE PROPERTY

Rental and other operating revenues, property-related expenses, gain on sale of real estate property and loss on sale of real estate property for the periods from November 1, 2012 to April 30, 2013 and May 1, 2012 to October 31, 2012 consist of the following:
In thousands of yen
From November 1, 2012 to April 30, 2013

From May 1, 2012 to October 31, 2012

Rental revenues¥6,628,333¥6,664,510

Common area charges

1,589,549

1,559,549

8,217,882

8,224,059

Parking space rental revenues

292,402286,632

Utility charge reimbursement

681,272

769,331

Miscellaneous

114,531

337,333

Subtotal

1,088,205

1,393,296

Total rental and other operating revenues¥9,306,087¥9,617,355

Property management fees and facility management fees

¥ 951,905¥ 937,543

Depreciation

1,662,016

1,621,151

Utilities

753,048

790,093

Taxes

820,158

823,223

Insurance

14,837

14,673

Repairs and maintenance322,652

400,960

Trust fees

42,926

42,682

Loss on retirement of fixed assets

5,193

17,689Rental and other operating revenues:

Subtotal
Others:OthersTotal property-related expenses

24 |167,349

174,152¥4,740,084¥4,822,166

Kenedix Realty Investment Corporation Semiannual ReportGain on sale of real estate property:
Revenue from sale of investment property¥3,180,000¥4,200,000

Cost of investment property

2,641,181

3,355,390

Other sales expenses
Gain on sale of real estate property

76,775

249,094¥ 462,044¥ 595,516¥

Loss on sale of real estate property:
Revenue from sale of investment property—¥ 860,000

Cost of investment property—

992,112

Other sales expenses—

19,711—¥ 151,823

Loss on sale of real estate property

11.

¥

PROPERTY INFORMATIONType

Office Buildings

Residential Properties

Central Urban
Retail Properties

OthersTokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other
Regional Areas

63

15

2

1

2

—

¥219,476¥52,295¥6,603¥1,800¥12,380¥—75.02%

17.88%

2.26%

0.61%

4.23%

—

Net book value

219,586

50,961

6,049

1,767

12,231—

Appraisal value

201,898

44,510

5,573

1,560

11,150—76.28%

16.82%

2.10%

0.59%

4.21%

—

Location

Number of properties

Property information(In millions of yen)

Acquisition price
Percentage of total acquisition price

Percentage of total appraisal value

Financial results for the period from November 1, 2012 to April 30, 2013
Rental and other operating revenues(In thousands of yen)

¥6,579,818¥2,111,248¥187,011¥92,433¥335,577

Rental revenues

5,842,021

1,820,672

167,125

82,393

305,671

Other revenues

737,797

290,576

19,886

10,04029,906—

2,054,384

860,216

52,56937,293

72,688918

Property-related expenses¥——

Property management fees

630,404

271,094

19,5508,148

22,716(7)

Taxes

577,776

200,730

12,938

7,617

20,276

821

Utilities

531,610

192,914

2,524

2,351

23,549100

Repairs and maintenance

185,501

118,176

6,261

9,556

3,158

—

8,828

5,109

374

325

200

1

120,265

72,193

10,922

9,296

2,789

3

4,525,434

1,251,032

134,442

55,140262,889(918)

Insurance
Trust fees and other expenses
NOI (Net Operating Income)Depreciation expenses

1,106,779

406,519

57,417

22,111

67,987

1,203

Operating income from property leasing activities

3,418,655

844,51377,02533,029194,902(2,121)

Capital expenditures

479,908

289,152

1,116

546

1,755

—

NCF (Net Cash Flow)¥4,045,526¥ 961,880¥133,326¥54,594¥261,134¥ (918)A breakdown of property-type as of April 30, 2013 was as follows:
Class of assets

Property type

Area

Property and equipment

Office Buildings

Tokyo Metropolitan Area

Balance at the end of period(In millions of yen)

Percentage of total assets¥219,586

71.3%

Other Regional Areas

50,961

16.5%

270,547

87.8%

Tokyo Metropolitan Area

6,048

2.0%

Other Regional Areas

1,767

0.5%

7,816

2.5%

12,231

4.0%

Subtotal
Residential Properties
Subtotal
Central Urban Retail Properties

Tokyo Metropolitan Area

Subtotal
Total
Investment securities

12,231

4.0%

290,594

94.3%

897

0.3%

Bank deposits and other assets

16,681

5.4%

Total assets

308,172

100.0%

Total liabilities

157,519

51.1%

Net assets¥150,653

48.9%

Kenedix Realty Investment Corporation Semiannual Report

| 25

12.

FINANCIAL INSTRUMENTS

Sixteenth Fiscal Period (November 1, 2012 to April 30, 2013)(A) OVERVIEW(1) POLICY FOR FINANCIAL INSTRUMENTS
The Investment Corporation procures essential funds for acquiring properties and undertaking the repayment of loans primarily throughbank loans and the issuance of corporate bonds and new investment units. The Investment Corporation uses derivatives for the purpose ofhedging its exposure to changes in interest rates and does not enter into derivatives for speculative or trading purposes. Management of
surplus funds is undertaken in a prudent manner that considers fully such factors as safety, liquidity, interest rate conditions and cash flows.
(2) TYPES OF FINANCIAL INSTRUMENTS AND RELATED RISK
Investment securities are preferred equity securities of TMK as set forth by the Act on Securitization of Assets and are exposed to credit
risk of the issuer and risk of fluctuation of value of its property.
Debt and corporate bonds are used primarily for procuring funds necessary for the acquisition of properties and have a redemption dateof a maximum of seven years following the accounting date. Although a certain portion of said liabilities are subject to interest rate fluctuation risk, the Investment Corporation utilizes derivatives (interest-rate swap transactions and interest-rate cap transaction) in order toreduce such risk.
Interest-rate swap transactions and interest-rate cap transaction are used as derivative financial instruments. Utilizing interest-rate swap
transactions and interest-rate cap transaction, the Investment Corporation fixes its interest expense for long-term debt bearing interest at
a variable rate. With regard to hedge accounting methods, hedging instruments and hedged items, hedge policy, and the assessment of
the effectiveness of hedging activities, please see 2. (K) Derivative Financial Instruments.
(3) RISK MANAGEMENT FOR FINANCIAL INSTRUMENTS(a) Monitoring of market risk (the risks arising from fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap transactions and interest-rate cap transaction in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment Corporation periodically reviews the value of the property and financial
condition of the issuer with regard to investment securities.
(b) Monitoring of liquidity risk (the risk that the Investment Corporation may not be able to meet its obligations on scheduled
due dates) associated with funds procurement
Although loans and other liabilities are subject to liquidity risk, the Investment Corporation reduces such risk by spreading out payment
due dates and by using diversified fund procurement methods. Liquidity risk is also managed by such means as regularly checking thebalance of cash reserves.
(4) SUPPLEMENTARY EXPLANATION OF THE ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available,
fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions
and factors could result in a different fair value.
(B) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments on the balance sheet as of April 30, 2013 and estimated fair value are shown in the following
table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer tonote 2 below).
In thousands of yen
Carrying value

Estimated fair value

Difference¥ 14,813,927¥ 14,813,927¥

Subtotal

14,813,927

14,813,927—

햲 Short-term debt

5,700,000

5,700,000—

햳 Corporate bonds(including current portion of corporate bonds)

6,000,000

5,974,800(25,200)

햲 Cash and bank deposits—

햴 Long-term debt(including current portion of long-term debt)

130,669,500

130,858,276

188,776

Subtotal¥142,369,500¥142,553,076¥163,576———

Derivative Transactions** The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing net liability position.

26 |Kenedix Realty Investment Corporation Semiannual Reportnote 1: METHODS TO DETERMINE THE ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS AND OTHER MATTERS RELATEDTO SECURITIES AND DERIVATIVE TRANSACTIONSASSETS햲 Cash and bank deposits
Since these items are settled in a short period of time, their carrying value approximates fair value.
LIABILITIES햲 Short-term debt
Since these items are settled in a short period of time, their carrying value approximates fair value.
햳 Corporate bonds
The fair value of corporate bonds is based on quoted market prices.
햴 Long-term debt
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be
applied if similar new loans were entered into. The fair value of long-term debt bearing interest at variable rate, which is subject to fixedinterest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present value of the total ofprincipal and interest, which is handled together with applicable interest-rate swaps, discounted by the interest rate to be applied if similarloans were entered into.
DERIVATIVE TRANSACTIONS(1) ITEMS THAT ARE NOT APPLIED TO HEDGE ACCOUNTING
Not applicable(2) ITEMS THAT ARE APPLIED TO HEDGE ACCOUNTING

Hedge accounting
methodContracted amount(In thousands of yen)Type of derivativetransactions

Hedged items

Maturing after 1 year

Fair value(In thousands of yen)Interest-rate swaps:
Special treatment ofReceive/floating andinterest-rate swaps
pay/fixed

Long-term debt

¥20,500,000¥20,500,000*

Special treatment ofInterest-rate capinterest-rate cap

Long-term debt

1,000,000

1,000,000*¥21,500,000¥21,500,000

Total

Calculation method for
applicable fair value* Special treatment of interest-rate swaps and interest-rate cap is reported at the fair value of applicable long-term debt. This is because such swaps and cap are
handled together with hedged long-term debt.

note 2: FINANCIAL INSTRUMENTS FOR WHICH IT IS EXTREMELY DIFFICULT TO DETERMINE THE FAIR VALUEClassification

Carrying value (In thousands of yen)Preferred equity securities¥896,655

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in the above table.

note 3: REDEMPTION SCHEDULE FOR RECEIVABLES
Due within 1 year or less
(In thousands of yen)

Cash and bank deposits¥14,813,927

Total¥14,813,927

note 4: REDEMPTION SCHEDULE FOR DEBT AND CORPORATE BONDS
In thousands of yen
Due within 1 year
or less

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

Short-term debt

¥ 5,700,000

¥

¥

¥

¥

Corporate bonds

1,500,000——

3,000,000

1,500,000—

Long-term debt

¥24,300,000¥36,669,500¥32,800,000¥15,000,000¥17,000,000¥4,900,000

—

—

—

Kenedix Realty Investment Corporation Semiannual Report

| 27

—

Due after
5 years

¥

—

13.

INVESTMENT AND RENTAL PROPERTIES

Sixteenth Fiscal Period (November 1, 2012 to April 30, 2013)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose of generating
rental revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of October 31, 2012

Net change

As of April 30, 2013

Fair value as of April 30, 2013
(In thousands of yen)

¥292,021,269¥(1,427,529)¥290,593,741¥264,961,000

notes: 1. The carrying value represents the acquisition cost less accumulated depreciation.
2. The fair value is the appraisal value or the survey value determined by outside appraisers.
The fair value of Ikebukuro Nikko Building is based on the sales price of ¥1,970,000 thousand under the sales and purchase agreement dated May 10, 2013.
3. Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increases and decreases were
the acquisition of 1 properties totaling ¥2,108,384 thousand, the sale of 2 properties totaling ¥2,641,181 thousand and depreciation amounting to¥1,662,016 thousand.

Income and loss in the fiscal period ended April 30, 2013 for real estate for rental purposes is listed in the Note “10.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, GAIN ON SALE OF REAL ESTATEPROPERTY AND LOSS ON SALE OF REAL ESTATE PROPERTY”.

28 |Kenedix Realty Investment Corporation Semiannual ReportStatements of Cash Flows (Unaudited)
Kenedix Realty Investment Corporation
For the period from November 1, 2012 to April 30, 2013 and the period from May 1, 2012 to October 31, 2012
In thousands of yen
From November 1, 2012
to April 30, 2013

From May 1, 2012
to October 31, 2012

¥ 3,003,405¥ 3,011,234

CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes
Adjustments to reconcile income before income taxes to
net cash provided by operating activities:
Depreciation and amortization

1,981,289

1,965,534

Interest income

(558)

(857)

Interest expense

1,046,727

1,093,771

5,193

17,689240,699(249,271)

Loss on retirement of fixed assets
Changes in assets and liabilities:
Rental receivables—

220,729

Accrued consumption tax

Consumption tax refundable

68,323

122,971

Trade and other payables(102,818)

98,211

Rents received in advance

203,593(405,105)

2,641,181

4,349,377

Property and equipment due to sale
Others, net(129,157)(374,870)

Subtotal

8,957,877

9,849,413

Interest income received
Cash payments of interest expense

558

857

(1,076,960)(1,108,485)

Cash payments of income taxes
Net cash provided by operating activities(1,092)(1,829)7,880,383

8,739,956(2,860,168)(11,909,217)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Purchase of investment securities—(5,655)

Proceeds from leasehold and security deposits received

639,486

1,155,231

Payments of leasehold and security deposits received(1,409,380)(1,012,861)—(597,875)

Payments of restricted bank deposits
Proceeds from restricted bank deposits
Net cash provided by investing activities

569,851

86,628(3,060,211)(12,283,749)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt

1,200,000

4,500,000

Payments of short-term debt

(1,200,000)(13,500,000)

Proceeds from long-term debt

9,000,000

20,000,000

Payments of long-term debt

(7,211,500)(7,791,500)

Payment of dividends(2,738,824)(2,681,963)

Net cash provided by financing activities(950,324)

526,537

Net change in cash and cash equivalents

3,869,848(3,017,256)

Cash and cash equivalents at the beginning of period

10,501,755

13,519,011

Cash and cash equivalents at the end of period¥14,371,603¥ 10,501,755

See related notes.

Kenedix Realty Investment Corporation Semiannual Report| 29

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (UNAUDITED)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 dateof purchase.
CASH AND CASH EQUIVALENTS (UNAUDITED)Cash and cash equivalents consisted of the following as of April 30, 2013 and October 31, 2012:
In thousands of yen

Cash and bank deposits
Restricted bank deposits (note)
Cash and cash equivalents

As of April 30, 2013

As of October 31, 2012

¥14,813,927¥11,513,930(442,324)(1,012,175)¥14,371,603¥10,501,755

note: Restricted bank deposits are retained for repayment of tenant leasehold and security deposits.

30 |Kenedix Realty Investment Corporation Semiannual ReportUnitholders’ Information
Kenedix Realty Investment Corporation
Fiscal Periods:
Stock Listing:Transfer Agent:
Auditor:Six months ending April 30 and October 31
Real Estate Investment Trust Market of the Tokyo Stock Exchange (Security Code: 8972)
Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo Japan
Ernst & Young ShinNihon LLC

IR Schedule (16th and 17th Fiscal Periods)
Apr.
2013

Jun.
2013

Jul.
2013

Oct.
2013

Dec.
2013

Jan.
2014

End ofthe 16th Period

Performance forthe 16th Period isannounced

Distributions forthe 16th Period arepaid

End ofthe 17th Period

Performance forthe 17th Period isannounced

Distributions forthe 17th Period are
paid

General Breakdown of Unitholders
Foreign corporations
and individuals

Other domestic
corporations

Financial institutions(including securities companies)

Individuals
and others

48.5%

1.7%

39.9%

9.9%

138,868 units

4,932 units

114,334 units

28,416 units

End of the 16th Period
End of the 15th Period

48.9%

1.6%

36.7%

12.7%

140,129 units

4,672 units

105,245 units

36,504 units

Note: Figures are rounded to the first decimal place.

Top Ten Unitholders (As of April 30, 2013)
Name

Japan Trustee Services Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
The Master Trust Bank of Japan, Ltd. (Ttrust Account)
The Nomura Trust and Banking Co., Ltd. (Trust Account)
JP Morgan Chase Bank 385174
The Bank of New York, Treaty JASDEC AccountState Street Bank and Trust Company (Note 2)
State Street Bank and Trust Company (Note 3)
Nomura Bank (Luxembourg) S.A.
MSIP CLIENT SECURITIES
Total

Units Held

Share of Outstanding Units

41,175
20,273
18,374
17,953
8,540
8,494
7,418
7,164
6,660
4,864
140,915

14.36%
7.07%
6.41%
6.26%
2.98%
2.96%
2.58%
2.50%
2.32%
1.69%
49.17%

Notes: 1. The respective shares are rounded down to the second decimal place.
2. The standing proxy is Custody department of The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch.
3. The standing proxy is Settlement & Clearing Services Division, Mizuho Corporate Bank, Ltd., which became the surviving company in an absorption-type merger with Mizuho Bank, Ltd.
on July 1, 2013 when it simultaneously changed its name to Mizuho Bank, Ltd.

Unit Price Performance(Yen)(Units)
20,000 s
11,000 s

Trading Volumes 1,000,000

Closing Prices 900,000

8,000 ss 800,000

7,000 ss 700,000

6,000 ss 600,000

5,000 ss 500,000

4,000 ss 400,000

3,000 ss 300,000

2,000 ss 200,000

1,000 ss 100,000

0s

s0
July

Oct.

2005

Apr.

Oct.

2006

Apr.

Oct.

2007

Apr.

Oct.

2008

Apr.

Oct.

2009

Apr.

Oct.

2010

Kenedix Realty Investment Corporation Semiannual Report

Oct.

Apr.

2011

| 31

Oct.

Apr.

2012

Apr.

2013

http://www.kdx-reit.com/eng/

Disclaimer: Disclaimer: This semiannual report includes translations of certain documents originally filed and made available in Japan in accordance with the Securities
and Exchange Law of Japan. The English language semiannual report was prepared solely for the convenience of readers outside Japan and is not intended
to constitute a document for an offer to sell, or seeking an offer to buy, any securities of KENEDIX Realty Investment Corporation (KENEDIX-REIT).
English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalentJapanese terms. With respect to any and all terms herein, including without limitation, financial statements, if there exist any discrepancies in the meaning
or interpretation thereof between the original Japanese documents and English translation contained herein, the original Japanese documents will always
govern the meaning and interpretation.
None of KENEDIX-REIT, Kenedix Office Partners, Inc. nor any of their respective directors, officers, employees, partners, unitholders, agents, affiliates nor
their advisors shall be responsible or liable for the completeness, appropriateness, or accuracy of English translations or the selection of the portion(s) of
any document(s) translated into English.
The financial statements of KENEDIX-REIT have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP),
which may materially differ in certain respects from generally accepted accounting principles of other jurisdictions.
This semiannual report contains forward-looking statements. These statements appear in a number of places in this semiannual report and include
statements regarding the intent, belief, or current and future expectations of KENEDIX-REIT or Kenedix Office Partners, Inc. with respect to its business,financial condition and results of operations. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,”“would,” “expect,” “plan,” “anticipate,” “believe,” ”estimate,” “predict,” “potential,” or the negative of these terms or other similar terminology.
These statements are not guarantees of future performance and are subject to various risks and uncertainties. Actual results, performance or achievements,or those of the industries in which we operate, may differ materially from any future results, performance or achievements expressed or implied by theseforward-looking statements. In addition, these forward-looking statements are necessarily dependent upon assumptions, estimates and data that may
be incorrect or imprecise and involve known and unknown risks and uncertainties. Accordingly, readers of this document should not interpret theforward-looking statements included herein as predictions or representations of future events or circumstances.
Potential risks and uncertainties also include those identified and discussed in this document. Given these risks and uncertainties, readers of thisdocument are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of information produced herein. We
disclaim any obligation to update or, except in the limited circumstances required by the Tokyo Stock Exchange, announce publicly any revisions to any of
the forward-looking statements contained in these documents.