17th

Fiscal Period

SEMIANNUAL REPORT

17th

May 1, 2013–October 31, 2013

Fiscal PeriodTokyo Metropolitan Area

SEMIANNUAL REPORT

Saitama

May 1, 2013–October 31, 2013

Tokyo

Chiba

Kanagawa

Focusing on

Mid-sized
Office Buildings in theTokyo Metropolitan Area

KENEDIX-REIT
TSE 8972

TSE 8972

Top Interview

Succeeding with our Strategy of Focusing on

Mid-sized Office Buildingsin the Tokyo Metropolitan Area
—Moving Ahead to Further Growth
The 17th Fiscal Period proved to be a turning
point for KENEDIX-REIT in moving ahead to afurther stage of growth.
During the fiscal period under review,
KENEDIX-REIT increased its capital by 19.1 billion
yen through a public offering and third-party
allotment.
With eight recent property acquisitions, the
KENEDIX-REIT portfolio grew to 89 properties—
the most of any J-REIT in the mid-sized officebuilding market. The total acquisition price also
surpassed 320 billion yen.
Looking to the future, KENEDIX-REIT has
set sights on expanding the portfolio to
400 billion yen in terms of acquisition price.

Naokatsu Uchida
Executive Director
Kenedix Realty Investment Corporation

Note:
As resolved at the Seventh General
Meeting of Unitholders on January 22,
2014, the Investment Corporation willchange its corporate name to Kenedix
Office Investment Corporation fromFebruary 3, 2014.

Kenedix Realty Investment Corporation Semiannual Report| 1

Question 1
Please review KENEDIX-REIT’s business performance during the 17th Fiscal Period.

Answer 1
Operating revenues in the period under review edged down 0.5% from the 16th Fiscal Period to 9.8 billion yen, operating
income fell 3.7% to 4.2 billion yen, and net income was down 5.7% to 2.8 billion yen. Although both revenues and profits decreased, I believe we have established a firm footing to ensure that this period marks the bottom as we move towardsustained recovery.
The portfolio as of the end of the period under review consisted of 85 properties, with a total acquisition price of
304.8 billion yen.
The portfolio is comprised of 89.9% office buildings, 7.2% central urban retail properties and 2.7% residential properties based on acquisition price. As of the end of the 17th Fiscal Period, the occupancy rate increased to 95.8%, with both
operations and management on a stable footing.
Property management for all properties held by the Investment Corporation is conducted by the asset managementcompany, which was recently renamed to Kenedix Real Estate Fund Management, Inc. Thanks to its expertise in property
management, the occupancy rate for our office buildings located within the Tokyo Metropolitan Area reached 96.2% at theend of the 17th Fiscal Period, while that for all our office buildings hit 95.6%, an increase of 2.1 percentage points from theend of the 16th Fiscal Period.
Turning to cash distributions per unit, these amounted to 9,302 yen. Distributions are paid in accordance with Article
67-15 of the Special Taxation Measures Law (STML). In the period under review, we also allocated a portion of unappropriatedretained earnings to retained earnings as a reserve for reduction entry, in accordance with the “Special Provisions for Taxationin the Event of Advance Acquisition of Land, etc. in 2009 and 2010” (STML Article 66-2). Specifically, we set aside 165 million
yen, an amount within the scope allowed by the application of STML Articles 66-2 and 67-15, from unappropriated retained
earnings as a reserve for reduction entry. Virtually all remaining unappropriated retained earnings were then distributed tounitholders, resulting in distributions per unit of 9,302 yen.

Question 2
Would you elaborate on business operations during the 17th Fiscal Period?

Answer 2
During the fiscal period under review, we successfully raised 19.1 billion yen in additional capital and proactively moved toacquire new properties.
We acquired Itopia Nihonbashi SA Building and Ginza 4chome Tower in August 2013, and Welship Higashi-Shinjuku thefollowing month. Then in the current period, we acquired SIA Takanawadai Building, Ikebukuro 261 Building, DNI Mita
Building and Akihabara SF Building in November and three additional floors of KDX Shinbashi Building, where we have hadpartial ownership, in December. Of the eight properties recently acquired, five were acquired directly from the market, using
our multiple acquisition pipelines: a continuing strength that ensures KENEDIX-REIT is well positioned for opportunities.
As a result, our portfolio size expanded to 89 properties with a total acquisition price exceeding 320 billion yen. The
number of end tenants also reached 1,000. We are steadily establishing our position as the No. 1 J-REIT in the mid-sized
office building market. We are now determined to expand the portfolio to 400 billion yen, as our next target.

Question 3
Please tell us about the recent capital increase. Was it intended to finance the recent property acquisitions?

Answer 3
That was the main purpose of the capital increase, but we are also thinking of future acquisitions. If an opportunity arises toacquire properties within our target range, we want to be able to move quickly to acquire them at favorable terms. For that,
we need to have a certain borrowing capacity. As we used a portion of the capital increase to repay some of our borrowings,
I believe we now have a borrowing capacity of up to 20 billion yen.

2 |Kenedix Realty Investment Corporation Semiannual Report

As a result, our interest-bearing debt ratio (LTV ratio) decreased to 44.4%. It had been as high as 47.5% at the end of
the 17th Fiscal Period. So I think we made a significant move in that regard. Investor response has been favorable overall.
Summary of 5th Public Offering
Offering structure

Global offering(Japanese offering + Reg. S + 144A)

Newly issued units

45,990 units (incl. OA options of 2,190 units)(16.0% of units outstanding)Launch date

October 24, 2013

Units outstanding afterissuance of new units

332,540 units

Pricing dateNovember 6, 2013

Offer price

430,950 yen

Payment datePublic offering: November 13, 2013
Over-allotment (“OA”): December 10, 2013

Issue price415,480 yen

Units outstanding

286,550 units (as of launch date)

Total issue price

19,107 million yen

Effects of Public Offering

Improving portfolio
profitability andstability (Note 1)

Strengthening financial
stability and securingacquisition capacity(Note 2)16th (2013/4) Period

Properties acquired after
17th (2013/10) Period

After public offering

Number of properties

82 properties

8 properties

89 properties

Total acquisition price290.9 billion yen

29.8 billion yen

320.7 billion yen

Average NOI yield

4.2%

5.1%

4.3%

Average NOI yield(after depreciation)

3.1%

4.3%

3.2%

Occupancy rate

93.8%

95.1%

94.1%

Number of tenants

991

63

1,050

LTV

NAV per unit (Note 3)

46.2%

44.4%

426,000 yen

435,000 yen

Notes:
1. Average NOI yield and average NOI yield after depreciation
are as of the end of fiscal period for the 16th (2013/4)
Period and, for the properties acquired after the 17th
Period, are based on appraisal NOI included in the relevant
appraisal report at the time of acquisition. Occupancy rate
and number of tenants are as of the end of fiscal period forthe 16th (2013/4) Period and are as of July 31, 2013 for theproperties acquired after the 17th Period. For the calculation of a number of properties after 5th public offering,
KDX Shinbashi is counted as one for both existing portion
and additional acquisition of compartmentalized portion.
2. Figures are estimates calculated based on relevant numbers
as of the end of fiscal period for the 16th (2013/4) Period
and as of December 10, 2013 for the properties acquired
after the 17th Period.
3. NAV per unit is calculated by subtracting the amount of
DPU and is truncated to the nearest thousand yen. For NAV
per unit after public offering, figures are estimates which
are calculated by subtracting the amount of DPU for the
17th Fiscal Period.

Question 4
How was your outlook on distribution when issuing new investment units, in light of the expected dilution?

Answer 4
The net asset value (NAV) per share increased, while LTV decreased. As wehave managed to fully lease the KDX Nihonbashi Kabutocho Building, we are
set to raise the distribution per unit (DPU) to the mid-9,000 yen range, ourinitial target, by the 19th Fiscal Period. Our distribution forecast for the 19th

Turning to DPU Growth StageDPU expected to increase due to the public offering andimprovement in occupancy of existing properties
Aim for early realization of
DPU 10,000 yen

Fiscal Period is currently 9,640 yen per unit. This is achievable without using
capital gains, and our plans are earning high marks from overseas investors.
The recently acquired properties boast nearly 100% occupancy rates andare expected to generate profit in the 18th or 19th Fiscal Period. The excep-

19th Period (Forecast)
9,640 yen

17th Period
9,302 yen

18th Period (Forecast)
9,360 yention is the three additional floors acquired of the KDX Shinbashi Building,where we are just starting leasing. Considering rent-free periods, we may

Increase in Unitholder Value through NAV Increaseneed to wait until the 20th Fiscal Period before these begin to support distri-

NAV accretive offering led to an increase in unitholder value(Pre-offering NAV per unit: 426,000 yen)bution growth.

Question 5
With the portfolio again expanding, do you see KENEDIX-REIT as being at a new growth stage?

Answer 5
With the number of end tenants exceeding 1,000, our profit base is sufficiently diversified and stable. The eight recently
acquired buildings boast a weighted-average NOI of 5.1%, and are expected to raise the average NOI of the existing portfolio which currently stands at 4.2%. I think we are now well positioned for a new phase of growth.

Kenedix Realty Investment Corporation Semiannual Report| 3

Question 6
Is there any concern about profitability and customer satisfaction as the portfolio grows in size?

Answer 6
Not really. I expect customer satisfaction to remain high. Looking at tenant move-ins and move-outs in particular, we seesome of our tenants moving to other Kenedix-managed buildings as they expand their office spaces. We have just obtained
the result of our 5th customer satisfaction survey, and it shows that more tenants wish to continue using our buildings thanin previous surveys. Moreover, customer satisfaction tends to be higher among tenants who have occupied our buildings
for a while versus newly acquired building tenants. This is something that we can be proud of.
With regard to profitability, we have the management expertise to raise the value of acquired buildings. For example,
with the KDX Omiya Building acquired in March 2013, we managed to raise the NOI by 21 million yen (16.4%) andappraisal value by 180 million yen (8.2%), by implementing value-up renovations and optimizing management costs. Thisis a major achievement that illustrates our strength in the mid-sized office building market, and will serve as a benchmark
case as we move ahead with our growth strategy.
We are formulating an action plan for further renovations that increase value based on the results of the survey. I want
to see high levels of customer satisfaction leading to an increase in occupancy and ultimately to an increase in unit rents.

Question 7
What about your financial strategy?

Answer 7
We are still tackling the legacy of the Lehman Crisis, which pushed up overall financial costs. The average interest rate ofour borrowings is still high, and I see a room for improvement. As the high-cost borrowings from the 2008-2009 period
gradually reach maturity, we expect to reduce our interest costs through refinancing.

Question 8
Lastly, can you tell us more about your future strategy in light of the results of the 17th Fiscal Period?

Answer 8
The 17th Fiscal Period marked the bottom in terms of business performance. We have made a turn for the better. The outlook is mostly bullish for the 18th Fiscal Period and even more so for the 19th Fiscal Period.
We will continue to have three active drivers of growth: external growth, internal growth and financial strategy. The primary growth driver is of course external growth, and this is backed and reinforced by sound internal growth and financial strategy.
Momentum is growing as Japan attracts increasing attention from overseas investors, thanks to recent developments
such as Abenomics and Tokyo’s selection to host the 2020 Summer Olympics.
The long-expected recovery of the Japanese real estate market is just taking-off. Although some investors remain skeptical about our ability to raise rents, these are certain to increase going forward. In fact, rents are just beginning to returnto levels common at the turn of the century. Rents are still working toward pre-Lehman levels, before the crisis led to amajor plunge in the real estate market. We are far from reaching the peak—I believe there is a much room for raising
rents and generating greater profit.
Although competition is intensifying among buyers as the economy improves, we have earned the trust of the market,
and this trust, steadily built over years, is another one of our major competitive advantages. Through timely property
acquisitions and effective portfolio reshuffling, we seek to raise the quality of our entire portfolio even further.
From the 18th Fiscal Period onward, based on solid business performance, we will advance with our growth strategy tofirmly establish KENEDIX-REIT as the No. 1 J-REIT in the mid-sized office building market.

January 2014
Naokatsu Uchida
Executive Director, Kenedix Realty Investment Corporation

4 |Kenedix Realty Investment Corporation Semiannual Report

Taking-off with the Momentum of a Capital
Increase to Become the No.1 J-REIT in the
Mid-sized Office Building Market
al
rn h
te wt
Ex GroGrowth Strategy

Portfolio expanded to89

properties

with a total acquisition price of320billion yen

During the fiscal period under review, KENEDIX-REIT announced adecision to issue new investment units, which was implemented
Distribution by Property Type (Based on acquisition price)from November to December 2013. The resulting capital increaseof 19 billion yen will be used to finance the property acquisitions ofResidential 2.6%

the 18th Fiscal Period as well as planned future acquisitions.

Central urban
retail properties
6.9%

With a sound financial outlook, KENEDIX-REIT acquired threeproperties during the 17th Fiscal Period, and concluded agreements

Office 90.4%

to acquire five more properties during the 18th Fiscal Period. These
Note: The percentage breakdown by property type based on theacquisition price after the public offering (As of December 10, 2013)(Figures are rounded down to the first decimal place).

acquisitions will raise the portfolio size to 89 properties with a totalacquisition price of 320 billion yen.
The three properties acquired during the 17th Fiscal Period(Itopia Nihonbashi SA Building, Ginza 4chome Tower and Welship

Distribution of Office Buildings by Region(Based on acquisition price)

Higashi-Shinjuku), as well as the five properties to be acquired

Other regional areas
18.0%

during the 18th Fiscal Period (SIA Takanawadai Building, Ikebukuro
261 Building, DNI Mita Building, Akihabara SF Building and KDX
Shinbashi Building*), are mostly located within the five central

Central
Tokyo
58.8%

Other Tokyo
metropolitan area
23.1%

wards of Tokyo: the area where KENEDIX-REIT has traditionallyfocused. By maintaining our focus, in terms of location and build-

Notes:
1. After the public offering (As of December 10, 2013)(Figures are rounded down to the first decimal place.)
2. Central Tokyo represents Chiyoda, Chuo, Minato, Shibuya andShinjuku wards.

ing type, we seek to maximize economies of scale and the qualityof our portfolio.
*Acquired three additional floors of KDX Shinbashi Building, where we have had partial ownershipsince May 1, 2006, to obtain a full ownership of the property.

Portfolio Growth (By acquisition price) Office buildings  Central urban retail properties

 Residential properties

Number of properties(Billion yen)

(Number of properties)

84
320

77

85

70

80
60
40

31

20

80

0

0
1st Period(2005/10)

5th Period(2007/10)

10th Period(2010/4)

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

15th Period(2012/10)

End of17th Period(2013/10)

89304.8 320.7

240
160

Number of properties by property type

100

400

17th Period After 5th(2013/10) offering

After the public
offering (As of
December 10, 2013)

Office79

83

Central urban retail3

3

Residential

3

3

Total

85

89

Kenedix Realty Investment Corporation Semiannual Report

Acquired
and

3

| 5

We have already outpaced our competitors in terms of the number

5

properties from the market

of portfolio properties, and KENEDIX-REIT is still on the look out forpromising new acquisitions. While competition is intensifying
among buyers, we benefit from a strong acquisition pipeline, as

properties through our support

well as a strong track record in the office building market. Buoyed
by a successful capital increase, KENEDIX-REIT is now poised tomake a real take-off, aiming to expand the portfolio to 400 billion

line and a silent partnershipyen in terms of acquisition price, as the No.1 J-REIT in the mid-sized
office building market.

Change in Asset Size(Million yen)Sale:
2 properties

Acquisition:
5 properties

Sale:
2 properties

Acquisition:
4 properties

Acquisition: 4 properties
Sale: 1 property(+9,100)

Acquisition:
9 properties

Acquisition: 3 properties Acquisition: 1 property Acquisition: 3 properties
Sale: 2 properties
Sale: 2 properties
Sale: 1 property(+6,300)(-500)(+12,000)

Acquisition:
5 properties

31,30015,60014,20013,10015,90013,90010,8002,000-2,3009th period(2009/10)-2,40010th period(2010/4)

11th period(2010/10)-4,500-5,10012th period(2011/4)

13th period(2011/10)

14th period(2012/4)

15th period(2012/10)-2,500-1,60016th period(2013/4)

17th period(2013/10)

After the 5th public offering(As of December 10, 2013)

Note: Change in asset size is calculated based on acquisition price and is truncated to the nearest 100 million yen.

Track Record of Property Acquisitions and Dispositions (Note 1)
13th Period (2011/10)

14th Period (2012/4)

15th Period (2012/10)

Acquisition: 4 properties
Total acquisition price:¥14,200 million

Acquisition: 9 properties
Total acquisition price:¥31,300 million

Acquisition: 3 properties
Total acquisition price:¥10,800 million

Sale: 1 property
Sale price: ¥5,800 million

No sale(Gain on sale: ¥500 million)

Change in asset size (Note 2)+¥9,100 million

Change in asset size+¥31,300 million

17th Period (2013/10)

After the 5th public offering

Acquisition: 1 property
Total acquisition price:¥2,000 million

Acquisition: 3 properties
Total acquisition price:¥13,900 million

Acquisition: 5 properties
Total acquisition price:¥15,900 million

Sale: 2 properties
Total sale price: ¥5,000 million

Sale: 2 properties
Total sale price: ¥3,100 million

Sale: 1 property
Sale price: ¥1,900 million(Gain on sale: ¥400 million)(Gain on sale: ¥400 million)(Gain on sale: ¥200 million)

Change in asset size+¥6,300 million

Change in asset size-¥500 million

Notes: 1. Figures are truncated to the nearest 100 million yen.

16th Period (2013/4)

Change in asset size+¥28,200 million

2. Change in asset size is calculated based on acquisition price.

Our Multiple Pipelines and Diversification of Acquisition Methods

Real Estate Market

Warehousing
function supported
by Kenedix

Brokerage

KDX principal
investment(incl. development projects)

KDX’s
private funds

Proprietary network of the Asset Management Company
Percentage share of properties acquired
through the proprietary network (Note)

Support-line
Multiple pipelines

48.5%

Equity investment

Percentage share of properties acquired
through the support line (Note)

51.5%

Direct acquisition

Co-investment with the sponsor

Note: Percentage share of properties is calculated based on acquisition prices of properties that are acquired between the 1st and 17th periods and after the public offering.

6 |Kenedix Realty Investment Corporation Semiannual Report

Improving Leasing Conditions throughEnhanced Property Management andCustomer Satisfaction
During the fiscal period under review, KENEDIX-REIT con-

al
rn h
te wt
In ro
G

ducted the fifth customer satisfaction survey through its

Growth Strategy

asset management company. The responses were favorable
overall, with an increased proportion of tenants wishing tocontinue using our buildings. In fact, we are seeing moretenants renting additional space within the same building
or moving to another building owned by KENEDIX-REIT.
Moreover, customer satisfaction tends to be higher among
tenants who have occupied our buildings for a while versus
newly acquired building tenants. With the average occu-

Average occupancy rate at
with

94.1

pancy rate at 94.1%, we are now prioritizing the improve-%

ment of leasing conditions over additional efforts toimprove the already high occupancy rate. We are confident

94.0

that high levels of customer satisfaction will lead to higher% of tenants highly tounit rents as well as shorter rent-free periods.
KDX Omiya Building is a case in point. Acquired during
the 16th Fiscal Period, customer satisfaction for this building

maintain continuous occupancy

was initially low, as is the case for many properties at thetime of acquisition. We promptly implemented value-up
renovations, modernizing the entrance and air-conditioning
system, and revised management costs. As a result, theoccupancy rate went up, which combined with reduced
management costs led to a higher NOI and appraisal value.
Ultimately, we managed to revise rents upward. This highlights how our property management expertise can be
Occupancy Rate Performance of Office Buildings (By region)
Tokyo metropolitan area
Total office building

(%)

100

95

Other regional areas

96.6

95.7

96.2

96.2

94.5

95.2

95.1

94.3

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

93.5

Improvement in occupancy
rate of KDX Nihonbashi
Kabutocho Bldg.
(Occupancy rate: 99.8%)

91.4

90.2

94.0

93.2

92.6

90

95.6

85

Office properties
Average month-end
occupancy rate
18th Period (forecast)
95.2%

Average occupancy rate for all office buildings
80

14th Period
92.5%

15th Period
94.3%

16th Period
93.1%

17th Period
94.1%

75
13th Period(2011/10)

14th Period(2012/4)

15th Period(2012/10)

16th Period(2013/4)

17th Period(2013/10)

Note: Occupancy rate is calculated by dividing leased area by leasable area and is rounded to the first decimal place. Average month-end occupancy rate of office properties is a
simple average of monthly-end occupancy rates for each period. The forecast occupancy rate for the 18th Fiscal Period (2014/4) is calculated based on the AssetManagement Company’s earnings forecast for the 18th Fiscal Period.

Kenedix Realty Investment Corporation Semiannual Report

employed to make the most of our external growth, which

the Japanese office building divi-

is essential for establishing a solid track record of growth.

sion. Although these efforts have| 7

yet to directly translate into

As the portfolio approaches 100 properties, we arebuilding an intensive service network, supported by an

improved NOI, rents and cash flow,

increasing number of select subcontractors. Our focus on

we believe they are integral to

mid-sized office buildings in central Tokyo is bringing

improving customer satisfaction and attracting investment

improved service quality thanks to the concentration ofin the future.
Within our niche, there is much more we can do. Mid-knowhow and significant economies of scale.
We are also aware of the substantial role we play insized office buildings comprise nearly 30% of the rentalsociety, as expectations for real-estate companies continue

office building market. Many of these buildings are old,

to increase. Forming an integral part of the social infra-

and benefit greatly from renovation work. Just by replacing

structure, office buildings are required to be disaster-

the air-conditioning system, we can significantly reduce

resilient as well as environment friendly. In terms of resil-

CO2 emissions and realize ongoing cost savings.

ience, KENEDIX-REIT maintains a probable maximum loss

Some 90% of business establishments in Tokyo employ(PML) rate below 5%. In terms of the environment, weless than 30 persons. By capturing this potentially large

have successfully obtained the Green Star rating of thedemand and by satisfying their needs at reasonable costs,

Global Real Estate Sustainability Benchmark (GRESB) for two

we seek to become the No.1 property owner in terms of bothconsecutive years, ranking top among eight competitors inscale and quality in the mid-sized office building market.

Motivation for Continuous Occupancy
Definitely want to stay
Want to stay
Do not want to stay
Unknown

Rather not to stay

Change in Rent Level at Time of Rent Revision(Based on monthly rent)
Increase in rent

(Thousand yen)

Decrease in rent

5,000
0.1%

2013 5th survey(667 tenants)

61.8%

32.2%

4.0%

94.0% of tenants shows high motivation for continuous occupancy.

2011 4th survey(566 tenants)

52.7%

2,464

41.2%

0.4%

0
-5,000

907

866

1,867

1,597

-6,231

2.5%-7,441-8,916-10,000
0.8%

2009 3rd survey(392 tenants)

46.4%

45.2%

5.4%

48.1%
0%

20%

43.7%
40%

60%

-15,733-19,368-20,000

0.5%

2007 2nd survey(391 tenants)-15,000

3.8%
80%

Note: Result on survey that interviewed persons in charge of general affairs

13th period(2011/10)

100%

14th period(2012/4)

15th period(2012/10)

16th period(2013/4)

17th period(2013/10)

Note: The above figures are the monthly rent level difference before and after the rent
revision and are calculated separately for each tenant. Numbers are rounded to
the nearest ¥1,000.

Effects of Value-upgrading Measures for KDX Omiya Bldg. (Acquired on March 26, 2013)
Rise in occupancy rate

Leasing activity andnegotiation with tenants

Occupancy rate at the endof the 17th Period (2013/10)

Projected NOI
after value-upgrading

Increase in NOI(ratio)95.1% (+6.8%)

136 million yen

157 million yen+21 million yen(+16.4%)

NOI yield at thetime of acquisition

Projected NOI yield

Increase in NOI yield

6.7%

7.4%

+0.7%

Increase in rent

Implementation ofrenewal works(Total expense 34 million yen)

Rent renewal foran existing tenant+7.8%

Review of
specification forbuilding maintenanceImprovement in NOI/NOI yield (Notes 2 and 3)
NOI at the timeof acquisition

Improvement in appraisal value and unrealized profit
Appraisal value at thetime of acquisition

Appraisal value at theend of 17th period

Increase in appraisal
value (ratio)

Reduction in maintenance costs

2,200 million yen

2,380 million yen+180 million yen(+8.2%)

Cost review

Acquisition priceBook value at theend of 17th period

Unrealized profit

2,020 million yen

2,130 million yen

250 million yen-13 million yen/year(-42.6%) (Note 1)

Notes:
1. Total amount of reduction in maintenance cost and of increase in rent are estimates that take into account changes in contract amount (annualized) based on contracts as ofNovember 30, 2013. No assurance is given with respect to future maintenance costs and rent. Of the 13 million yen reduction in administration cost, 8.5 million yen comesfrom the introduction of no-man operation.
2. NOI and NOI yield as of the acquisition date are calculated based on annualized operating income and operating expense as of March 26, 2013. NOI and NOI yield after valueupgrading are estimates calculated using annualized operating income and operating expense based on contracts as of November 30, 2013. No assurance is given with respect
to future NOI and NOI yield.
3. NOI is truncated to the nearest million. NOI yield is rounded down to the first decimal place.

8 |Kenedix Realty Investment Corporation Semiannual Report

Capital Increase Creates a Sound Financial
Basis for Future Property Acquisitions
During the fiscal period under review, KENEDIX-REIT moved

l
ia
nc gy
n a teFi traS

to increase its capital by 19.1 billion yen through the issu-

Growth Strategy

ance of new investment units. As a result, the interestbearing debt ratio (LTV ratio) decreased from 46.2% at theend of the 16th Fiscal Period to 44.4%, and is now below
the 45% level, which we believe is a prudent level over thelong term for conservative financial management.
A lower LTV ratio means a greater ability to procure
funds in a timely manner when the opportunity arises to

Capital increase of

acquire new properties. An increased borrowing capability

19.1
44.4

also means reduced dependence on capital markets andbillion yen

less financial uncertainty, which enables a proactive expansion strategy going forward.
Meanwhile, we are continuing our steady efforts to%

Reduces LTV ratio to

reduce debt costs. We have managed to reduce the average interest rate (including upfront fees) through the refinancing of high-interest loans borrowed right after the
Lehman Shock. And we still see room for further improvement, even in light of our ongoing efforts to increase therelative portion of fixed-rate debt, which currently stands
at 82.8%. We will also continue our efforts to extend theChanges in the LTV Ratio

average life of our borrowings and diversify debt maturities.

55.0 (%)

In line with our refinancing efforts, we have worked to

50.0
45.0

47.0

45.6

45.3 45.8
41.2 41.4 41.1 40.9 40.9

40.0
35.0 37.5

43.0
5th public
offering

40.3

38.9

38.7

46.2

maintain strong relationships with a number of quality

47.5

lenders. During the 17th Fiscal Period, we were able to44.4

expand this circle of lenders by four. At October 31, 2013,
KENEDIX-REIT was engaged in transactions with 14 lend-

35.3

ers. Supported by this sound financial foundation, we seek

30.0
5th Period(2007/10)

1st Period(2005/10)

9th Period(2009/10)

17th Period After the 5th(2013/10) public offering(forecast)

13th Period(2011/10)

to fully capitalize on opportunities for further growth in
the expanding market.

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

Diversification of Debt Maturities as of the End of the 17th Period (2013/10)
 Refinancing (17th Period) New borrowings (17th Period) Corporate bonds

Fixing Interest Rate (2013/10)

 Borrowings

Floating
interest rate
¥25.9 billion
17.2%(Billion yen)

30

3 year

5 year

6 year

7 year

25
20

4.9

3.0

18.7

20.6

15
10
5

Repayment
13.2

1.5
15.6

14.5

2.5
11.0

3.0

11.0
6.0

4.0

0
17th Period(2013/10)

19th Period(2014/10)

21st Period(2015/10)

Fixed interest rate
¥124.7 billion
82.8%

1.5

18.3

23rd Period(2016/10)

25th Period(2017/10)

3.5
1.8
2.5
27th Period(2018/10)

2.4

2.7

1.5

29th Period(2019/10)

31st Period(2020/10)

Note: The chart illustrates total debt amounts that reach maturity in each period, including repayment of a part ofprinciple based on contract (rounded to the first decimal place).

Note: Fixed rate includes borrowings that are fixed
through interest rate swap but excludes thosethat are hedged by interest rate cap (numbers
are rounded to the first decimal place).

Kenedix Realty Investment Corporation Semiannual Report| 9Management Team

 Naokatsu UchidaDirector and COO, Kenedix Real Estate Fund Management, Inc.
KRI General Manager of Fund 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
• Appointed Director and COO of Kenedix Real Estate Fund Management, Inc. and KRI
General Manager of Fund Division on October 1, 2013

 Fumihiko Shimodomae
General Manager of Property Management Department• 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• Appointed General Manager of Property Management Department, KRI Fund Division on
October 1, 2013

 Keisuke Sato
General Manager of Investment Management Department• 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• Appointed General Manager of Investment Management Department, KRI Fund Division on
October 1, 2013

 Hikaru Teramoto
General Manager of Planning Department• 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
• Appointed General Manager of Planning Department, KRI Fund Division on October 1,
2013

10 |

Kenedix Realty Investment Corporation Semiannual Report

KENEDIX-REIT Portfolio (As of October 31, 2013)
No.

Property Name

Location

Acquisition
Price (mn yen)
<Note 1>

Office(TokyoMetropolitan
Area)

Year Built<Note 2>

Occupancy
Ratio<Note 3>A01

KDX Nihonbashi 313 Building

Chuo-ku, Tokyo

5,940

Apr. 1974

100.0%

A03

Higashi-Kayabacho Yuraku Building

Chuo-ku, Tokyo

A04

KDX Hatchobori Building

Chuo-ku, Tokyo

4,450

Jan. 1987

100.0%

3,680

Jun. 1993

A05

KDX Nakano-Sakaue Building

Nakano-ku, Tokyo

100.0%

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

76.2%

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

88.7%

A16

Toshin 24 Building

Yokohama, Kanagawa

5,300

Sep. 1984

91.1%

A17

KDX Ebisu Building

Shibuya-ku, Tokyo

4,640

Jan. 1992

83.4%

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

92.9%

A33

KDX Okachimachi Building

Taito-ku, Tokyo

2,000

Jun. 1988

100.0%A34

KDX Hon-Atsugi Building

Atsugi, Kanagawa

1,305

May 1995

89.0%

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

63.1%

A46

Hiei Kudan-Kita Building

Chiyoda-ku, Tokyo

7,600

Mar. 1988

100.0%A47

KDX Shin-Yokohama 381 Building

Yokohama, Kanagawa

5,800

Mar. 1988

99.2%

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

81.7%

A50

KDX 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

73.7%

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

100.0%A59

KDX Iwamoto-cho Building

Chiyoda-ku, Tokyo

1,864

Mar. 2008

100.0%A60

KDX Harumi Building

Chuo-ku, Tokyo

10,250Feb. 2008

71.2%

A61

KDX Hamamatsucho Dai-2 Building

Minato-ku, Tokyo

2,200

Apr. 1992

87.5%

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%

Kenedix Realty Investment Corporation Semiannual Report

No.

Property Name

Location

Acquisition
Price (mn yen)
<Note 1>

Office(TokyoMetropolitan
Area)

A66

KDX Shinjuku Building

A67

KDX Ginza 1chome Building

A68

KDX Nihonbashi Honcho Building

A71

KDX Iidabashi Building

A72
A73

Shinjuku-ku, Tokyo

Year Built<Note 2>

| 11

Occupancy
Ratio<Note 3>

6,800

May 1993

88.3%

Chuo-ku, Tokyo

4,300

Nov. 1991

100.0%

Chuo-ku, Tokyo

4,000

Jan. 1984

100.0%

Shinjuku-ku, Tokyo

4,670

Mar. 1990

100.0%KDX Higashi-Shinagawa Building

Shinagawa-ku, Tokyo

4,590

Jan. 1993

100.0%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

Chuo-ku, Tokyo

11,270Nov. 1998

99.8%

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

KDX Kasuga Building

Bunkyo-ku, Tokyo

2,800

Jun. 1992

92.4%

A85

KDX Nakameguro Building

Meguro-ku, Tokyo

1,880

Oct. 1985

100.0%A86

KDX Omiya Building

Saitama, Saitama

2,020

Apr. 1993

95.1%

A87

Itopia Nihonbashi SA Building

Chuo-ku, Tokyo

2,200

Jul. 1995

100.0%

A88

Welship Higashi Shinjuku

Shinjuku-ku, Tokyo

1,900

Mar. 1990

100.0%

A12

Portus Center Building

Sakai, Osaka

5,570

Sep. 1993

95.8%

A24

KDX Minami Semba Dai-1 Building

Osaka, Osaka

1,610

Mar. 1993

90.4%

A25

KDX Minami Semba Dai-2 Building

Osaka, Osaka

1,560

Sep. 1993

82.2%

A36

KDX Niigata Building

Niigata, Niigata

1,305

Jul. 1983

63.7%

A42

Karasuma Building

Kyoto, Kyoto

5,400

Oct. 1982

94.3%

A44

KDX Sendai Building

Sendai, Miyagi

2,100

Feb. 1984

91.5%
93.9%

A53

KDX Hakata-Minami Building

Fukuoka, Fukuoka

4,900

Jun. 1973

OfficeA54

KDX Kitahama Building

Osaka, Osaka

2,220

Jul. 1994

92.8%(Other Regional
Areas)A58

KDX Nagoya Sakae Building

Nagoya, Aichi

7,550

Apr. 2009100.0%A69

KDX Kobayashi-Doshomachi Building

Osaka, Osaka

2,870

Jul. 2009100.0%

A70

Kitananajo SIA Building

Sapporo, Hokkaido

2,005

Oct. 1989

89.8%

A79

KDX Nagoya Ekimae Building

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

87.7%

A82

KDX Higashi Umeda Building

Osaka, Osaka

2,770

Jul. 2009100.0%

Office Subtotal (79 properties)

Residential

274,218

Avg. 23.2 years

95.6%

B03

Court Mejiro

Shinjuku-ku, Tokyo

1,250

Mar. 1997

100.0%

B19

Residence Charmante Tsukishima

Chuo-ku, Tokyo

5,353

Jan. 2004

100.0%

B18

Venus Hibarigaoka

Sapporo, Hokkaido

Residential Subtotal (3 properties)

Central Urban
Retail1,800

Mar. 1989

94.2%

8,403

Avg. 14.0 years

96.7%

C01

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%

C04

Ginza 4chome Tower

Chuo-ku, Tokyo

9,800

Nov. 2008

100.0%

22,179Avg. 8.4 years

100.0%

304,800

Avg. 21.8 years

95.8%

Central Urban Retail Subtotal (3 properties)
Total (85 properties)

Investment Security

Senri Property TMK Preferred Securities

Toyonaka, Osaka

891

Jun. 1992

Silent partnership equity interest of G.K. KRF 31(DNI Mita Building) <Note 4>

Minato-ku, Tokyo

200

Mar. 1993

Notes: 1. Acquisition price is the purchase price of the trust beneficiary interests etc. acquired by KRI.
2. Year built shows the completion date recorded in land register book. The average value shown in subtotal section is a weighted average number calculated based on
acquisition prices with a base date of October 31, 2013, and is rounded down to the first decimal place.
3. Occupancy ratio is calculated by dividing leased floor area by leasable floor area as of October 31, 2013 and is rounded to the first decimal place.
4. KRI acquired DNI Mita Building on November 18, 2013 and the silent partnership equity interest will be refunded during the 18th period.

12 |Kenedix Realty Investment Corporation Semiannual Report

Corporate Governance
Change of the Asset Management Company

fundamental philosophy including its investment policy, rules con-

On October 1, 2013, the asset management company of Kenedix

cerning transactions with related parties, distribution policy andRealty Investment Corporation (KRI) was transferred from Kenedix

its disclosure policy.

Office Partners, Inc. to Kenedix Real Estate Fund Management,

Kenedix Real Estate Fund Management may also propose

Inc. Four directors and three statutory auditors were appointed toproperty management plans in accordance with the Assetthe new asset management company.

Management Guidelines, identify properties for possible investment and decide whether to support particular acquisitions.

Investment and Management Decision-making
System of Kenedix Real Estate Fund Management

illustrates the creation and revision of individual AssetAs the asset management company of KRI, Kenedix Real EstateManagement Guidelines, as well as property management plans

Fund Management creates guidelines governing KRI’s asset man-for the acquisition and sale of properties.

The structure of the decision-making process outlined below

agement. These Asset Management Guidelines define KRI’s

Decision-making Process
Proposal

Each Department
of KRI’s
Fund Division

Preview

Deliberation and
Resolution

Compliance
Committee
Compliance Officer

1. KRI’s Decision-making Process for Asset Management
Investment Policy

Deliberation and
Resolution

Asset Management
Committee

ReportBoard of Directors(KRI’s Fund Division) Acquisition and Sale of Properties
The Investment Management Department of KRI’s Fund Division

The Investment Management Department of KRI’s Fund Division

selects properties for possible acquisition according to an agreed

proposes any revision of the Asset Management Guidelines to theupon process. The Investment Management Department first

Compliance Officer. After review by the Officer, the revisions areproposes property acquisitions to the Compliance Officer. Whenadvanced to the Compliance Committee where they are deliber-

the Officer concludes there are no conflicts or other issues, theated and resolved. Lastly, the Asset Management Committee of

Officer then forwards the proposal to KRI’s Asset Management

KRI deliberates and reaches resolution on the revisions.

Committee for review and ultimate resolution.

The Asset Management Guidelines may be revised to reflect

In the event that the Compliance Officer identifies such issues

changes in investment conditions and KRI’s investment policy, as

as related-party transactions, potential regulatory conflicts orwell as other reasons such as changes in the legal or regulatory

other cases the Officer deems require closer scrutiny, the proposal

environment. Whenever the Management Guidelines aremust be submitted for review and resolution by the Compliancechanged, the General Manager of KRI’s Fund Division is responsi-

Committee before proceeding to KRI’s Asset Management

ble for reporting each revision to the Board of Directors.

Committee for final review and resolution. The Compliance
Committee is free to solicit opinions from outside experts and for-

2. KRI’s Decision-making Process on Asset Management

ward these to KRI’s Asset Management Committee for reference Property Management Plans

in reaching a resolution.

Relevant departments of KRI’s Fund Division may propose property

The Investment Management Department of KRI’s Fund Division

management plans to the Compliance Officer. After review by thealso proposes property sales or disposals to the Compliance

Officer, the plans are deliberated and resolved in the Compliance

Officer. In a similar manner, the Officer reviews it and, when neces-

Committee. Following that, the Asset Management Committee ofsary, forwards the proposal to the Compliance Committee, which

KRI deliberates and reaches resolution on these plans.

can then advance the matter to KRI’s Asset Management

Each time a new property management plan is approved orCommittee. In the absence of conflicts or other issues, therevised, KRI’s General Manager of the Fund Division is charged

Compliance Officer may send the proposal directly to KRI’s Assetwith reporting this to the Board of Directors.

Management Committee for ultimate review and resolution.

| 13

Kenedix Realty Investment Corporation Semiannual Report

Financial Section
Contents
Independent Auditor’s ReportE

Balance Sheets

F

Statements of Income and Retained Earnings

G

Statements of Changes in Net Assets

G

Notes to Financial Statements

H

Statements of Cash Flows (Unaudited)R

Financial Summary (Unaudited)
Historical Operating Trends
For the 13th–17th Fiscal Periods
PeriodUnit

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)

17th Period(as of Oct. 31, 2013)

Operating revenues

mn yen

9,044

9,090

10,212

9,867

9,819

(Rental revenues)

mn yen

8,498

9,090

9,617

9,306

9,501

Operating expenses

mn yen

4,618

5,004

5,696

5,465

5,578

(Property-related expenses)

mn yen

3,961

4,284

4,822

4,740

4,845

Operating income

mn yen

4,425

4,086

4,516

4,401

4,240

Ordinary income

mn yen

3,040

2,551

3,011

3,003

2,832

Net income (a)mn yen

3,052

2,540

3,009

3,002

2,831

Total assets (b)mn yen274,973

303,284

306,734

308,172

316,753(+5.0)(+10.3)(+1.1)(+0.5)(+2.8)

110,914137,372

140,581

142,369

150,558(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)(-1.6)(+23.9)(+2.3)(+1.3)(+5.8)

150,272

150,063

150,389

150,653

150,781(+10.9)(-0.1)(+0.2)(+0.2)(+0.1)

147,153

147,153

147,153

147,153

147,153%(+10.5)

(0.0)

(0.0)

(0.0)

(0.0)

unit

286,550

286,550

286,550

286,550

286,550
526,195yen

524,419

523,688524,828

525,747mn yen

2,749

2,683

2,738

2,703

2,665

yen

9,596

9,364

9,557

9,434

9,302

(Earnings distributed per unit)

yen

9,596

9,364

9,557

9,434

9,302

(Distribution in excess of earnings per unit)

yen

—

—

—

—

—

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

1.1 (2.2)

0.9 (1.8)

1.0 (2.0)

1.0 (2.0)

0.9 (1.8)

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

2.1 (4.2)

1.7 (3.4)

2.0 (4.0)

2.0 (4.0)

1.9 (3.7)

54.6

49.5

49.0

48.9

47.6

(+2.9)(-5.2)(-0.5)(-0.1)(-1.3)

40.3

45.3

45.8

46.2

47.5

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)%%%(-2.7)(+5.0)(+0.5)(+0.4)(+1.3)

90.0

105.6

90.9

90.0

94.1

Other references
Number of properties

properties

Total leasable floor aream2

Occupancy ratio at end of period

74

83

84

83

85

300,016.89

340,589.96

351,153.72

347,853.97

358,517.31

%

94.7

95.4

95.5

93.9

95.8

Depreciation expenses for the period

mn yen

1,442

1,578

1,621

1,662

1,696

Capital expenditures for the period

mn yen

674

918

904

772

894

Leasing NOI (Net Operating Income) (Note 5)

mn yen

5,980

6,384

6,416

6,228

6,352

FFO (Funds From Operation) (Note 6)

mn yen

3,950

4,119

4,187

4,202

4,293

yen

13,786

14,374

14,612

14,664

14,984

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 13th Fiscal Period are calculated based on a period of 184 days, 182 days for the 14th Fiscal Period, 184 days for the 15th Fiscal Period,
181 days for the 16th Fiscal Period and 184 days for the 17th 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

9,819
10,212
9,044

9,090

13th Period

14th Period

15th Period

4,240

million yen
4,425

9,867

9,819

16th Period

17th Period(Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013)

Net Income

13th Period

4,516

4,401

4,240

15th Period

16th Period

17th Period

4,086

14th Period

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

Distribution per Unit

2,831
3,052

9,302

million yen

3,009

3,002

15th Period

16th Period

2,831

yen

9,596

9,364

9,557

9,434

9,302

13th Period

14th Period

15th Period

16th Period

17th Period

2,540

13th Period

14th Period

17th Period(Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013)

Total Assets(Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013)

Net Assets Ratio / Unitholders’ Equity

316,753
303,284

306,734

47.6

million yen

308,172

316,753

%

54.6%
49.5%

49.0%

48.9%

47.6%

150,272

150,063

150,389

150,653

150,781

million yen

million yen

million yen

million yen

million yen

13th Period

14th Period

15th Period

16th Period

17th Period

274,973

13th Period

14th Period

15th Period

16th Period

17th Period(Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013)

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

47.5

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

Occupancy Ratio

95.8

%

45.3%

45.8%

46.2%

47.5%

110,914137,372

140,581

142,369

150,558

million yen

million yen

million yen

million yen

million yen

13th Period

14th Period

15th Period

16th Period

17th Period

%

94.7%

95.4%

95.5%

93.9%

95.8%

13th Period

14th Period

15th Period

16th Period

17th Period

40.3%(Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013)(Ended Oct. 31, 2011) (Ended Apr. 30, 2012) (Ended Oct. 31, 2012) (Ended Apr. 30, 2013) (Ended Oct. 31, 2013)Kenedix Realty Investment Corporation Semiannual Report

| 15

16 |

Kenedix Realty Investment Corporation Semiannual Report

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

ASSETS
Current assets:
Cash and bank deposits (Note 12)
Rental receivables
Consumption tax refundable
Other current assets (Note 7)
Total current assets
Property and equipment, at cost: (Notes 3, 11 and 13)
Land
Buildings and structures (Note 5)
Machinery and equipment
Tools, furniture and fixtures
Construction in progressLess-accumulated depreciation
Net property and equipment
Other assets:
Ground leasehold (Notes 11 and 13)
Investment securities (Note 12)
Corporate bond issuance costs
Unit issuance costs
Other assets (Notes 11 and 13)
Total assets
LIABILITIES AND NET ASSETS
Liabilities
Current liabilities:
Trade and other payables
Current portion of corporate bonds (Notes 4 and 12)
Short-term debt and current portion of long-term debt (Notes 4 and 12)
Deposits received
Rents received in advance
Other current liabilities
Total current liabilities
Corporate bonds (Notes 4 and 12)Long-term debt (Notes 4 and 12)
Leasehold and security deposits received
Total liabilities
Net Assets
Unitholders’ equity
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 286,550 units
As of October 31, 2013 and April 30, 2013, respectively
Surplus
Voluntary retained earnings
Reserve for reduction entry
Retained earnings
Total surplus
Total unitholders’ equity
Total net assets (Note 8)
Total liabilities and net assets
See accompanying notes to the financial statements.

As of October 31, 2013

As of April 30, 2013

¥ 11,452,986
254,059
100,159
228,433
12,035,637¥ 14,813,927
185,047—
76,501
15,075,475

215,346,646
103,827,730
1,766,278
455,837
4,914(19,630,791)
301,770,614

205,702,745
100,488,908
1,557,795
446,748
6,699(17,966,695)
290,236,200

356,332
1,106,339
35,651
18,903
1,429,698¥316,753,174

357,106
896,655
26,04337,806
1,542,881¥308,172,166¥¥

810,169—
46,800,000
6,162
1,506,618
202,575
49,325,524
6,300,000
97,458,000
12,888,425
165,971,949

863,2311,500,000
30,000,000
16,967
1,686,455
366,030
34,432,683
4,500,000
106,369,500
12,216,921
157,519,104

147,153,820

147,153,820

795,928
2,831,477
3,627,405
150,781,225
150,781,225¥316,753,174

497,043
3,002,199
3,499,242
150,653,062
150,653,062¥308,172,166

Kenedix Realty Investment Corporation Semiannual Report| 17

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

Operating revenues:
Rental revenues (Notes 10 and 11)¥9,501,700¥9,306,087

Gain on sale of real estate property (Note 10)234,506

462,044

Dividends income

82,984

99,1689,819,190

9,867,299

Total operating revenues
Operating expenses:
Property-related expenses (Notes 10 and 11)

4,845,827

4,740,084

Asset management fees

549,899

553,018

Administrative service and custodian fees

69,22669,474

Other operating expenses

113,451

103,073

Total operating expenses
Operating income

5,578,403

5,465,649

4,240,787

4,401,650

Non-operating expenses:
Interest expense

1,050,678

1,046,727

Financing-related expenses

321,587

315,050

Amortization of unit issuance costs

18,90318,903

Amortization of corporate bond issuance costs

6,143

6,626

Others, net

10,495

10,9391,407,806

1,398,245

Ordinary income

Total non-operating expenses

2,832,981

3,003,405

Income before income taxes

2,832,981

3,003,405

Income taxes (Note 7)
Net income

1,504

1,329

2,831,477

3,002,076

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

123¥2,831,477¥3,002,199

See accompanying notes to the financial statements.

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

Retainedearnings

Total
surplusTotal
unitholders’equityTotal¥147,153,820¥225,796¥3,009,928¥3,235,724¥150,389,544¥150,389,544

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

Provision of reserve for reduction entry—

298,885(298,885)———

Payments of dividends——(2,703,314)(2,703,314)(2,703,314)(2,703,314)

Net income——

2,831,477

2,831,477

2,831,477

2,831,477—

298,885(170,722)

128,163

128,163

128,163¥147,153,820¥795,928¥2,831,477¥3,627,405¥150,781,225¥150,781,225

Balance as of October 31, 2012
Changes during the fiscal period

Total changes during the fiscal period
Balance as of April 30, 2013
Changes during the fiscal period

Total changes during the fiscal period
Balance as of October 31, 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 six months period from May 1, 2013 to October 31, 2013 and November 1, 2012 to April 30, 2013

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 October 31, 2013, the end of the seventeenth fiscal period, the number of investment units issued
and outstanding totaled 286,550 units.
The Investment Corporation is externally managed by Kenedix Real Estate Fund Management, Inc. (Note) (“the Asset Management
Company”) as its asset management company. The Investment Corporation entrust the Asset management Company and in collaboration
with the Asset Management Company, the Investment Corporation strives to maximize cash distribution to investors by securing stableearnings and sustainable investment growth. To this end, the Investment Corporation adopts the basic policy of conducting dynamic andflexible investment stance that seeks to respond to its environment and market trends, and endeavors to ensure a timely response toopportunities. (Note: On effective from October 1, 2013, the Asset Management Company for the Investment Corporation, Kenedix
Office Partners, Inc. was integrated with Kenedix Advisors, Inc. and with Kenedix Residential Partners, Inc. as the surviving corporation.
Kenedix Residential Partners, Inc. was renamed Kenedix Real Estate Fund Management, Inc. as part of the integration.)
During the period ended October 31, 2013, the Investment Corporation acquired two office buildings (Itopia Nihonbashi SA Building:acquisition price of ¥2,200 million, Welship Higashi-Shinjuku: acquisition price of ¥1,900 million) located in the Tokyo Metropolitan Area,
one central urban retail property (Ginza 4chome Tower: acquisition price of ¥9,800 million), an equity interest in a Japanese silent partnership (tokumei kumiai, “TK”) for a trust beneficiary interest in DNI Mita Building (acquisition price of ¥200 million) and sold Ikebukuro
Nikko Building (initial acquisition price of ¥1,653 million). As of October 31, 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 ¥150,558
million as of October 31, 2013, comprising ¥144,258 million in borrowings (¥135,158 million in long-term borrowings and ¥9,100 million in short-term borrowings) and ¥6,300 million in investment corporation bonds. The Investment Corporation owned a portfolio of 85
properties with a total acquisition price of ¥304,800 million containing a total leasable area of 358,517.31m2 and preferred two investment
securities with a total acquisition price of ¥1,091 million. The occupancy ratio was approximately 95.8%. A portfolio of 85 properties
consists of 79 office buildings, 3 residential properties, 3 central urban retail properties. 69 properties are 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 of International
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.

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. Concerning silent partnership (tokumei kumiai, “TK”) interests, the method of incorporating the amount of equity equivalent
to the portion that corresponds to the net gain or loss of TK is adopted.

Kenedix Realty Investment Corporation Semiannual Report| 19(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 May 1, 2013 to October 31, 2013

From November 1, 2012 to April 30, 2013

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 maturity 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) GROUND LEASEHOLD
Fixed term leasehold on a building and the special agreement on buildings sales, and the building are amortized over a contractual periodof 48 years and 9 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 ¥26,946 thousand and ¥10,265 thousand as of October 31, 2013 and April 30, 2013, 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 and interest-rate cap contracts as derivative financial instruments only for the
purpose of hedging its exposure to changes in interest rates. The Investment Corporation deferred recognition of gains or losses resulting
from changes in fair value of interest-rate swap and interest-rate cap contracts because these contracts met the criteria for deferral
hedging accounting. However, the Investment Corporation adopted the special treatment for interest-swap and interest-rate cap contracts if they met the criteria for hedging accounting under this treatment, whereby the net amount to be paid or received under theinterest-rate swap or interest-rate cap contract is added to or deducted from the interest on the assets or liabilities for which the swap orcap contract was executed. The hedge effectiveness for interest-rate swap and interest-rate cap contracts 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 AND EQUIPMENT
In millions of yen
As of October 31, 2013
Acquisition
costs

Accumulated
depreciation

Land¥215,346¥

Buildings and structures

103,828

Machinery and equipment

1,766

Tools, furniture and fixtures
Construction in progress
Total

4.

As of April 30, 2013
Book
value

Acquisition
costs

Accumulated
depreciation

Book
value

—

¥215,346¥205,703¥—¥205,703

18,63885,190100,489

17,042

83,447

732

1,034

1,558

683

875

456

260

196

447

242

205

5

—

5

6

—

6

¥321,401¥19,630¥301,771¥308,203¥17,967¥290,236

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

The following summarizes short-term debt, long-term debt and corporate bonds outstanding as of October 31, 2013:
Classification

Short-term debt

Drawdown date

Last
Repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

January 31, 2013

January 31, 2014

0.68%

August 19, 2013

November 29, 2013

0.55%

¥

1,000

August 19, 2013

November 29, 2013

0.60%

1,000

August 19, 2013

February 19, 2014

0.60%

1,000

September 13, 2013

March 13, 2014

0.57%

1,000

September 13, 2013

March 13, 2014

0.57%

900

October 31, 2013

October 31, 2014

0.55%

3,000

November 12, 2010

November 12, 2013

1.58%

November 12, 2010

November 12, 2013

1.58%

800

November 12, 2010

November 12, 2013

1.58%

400

December 1, 2010

November 12, 2013

1.32%

500

December 1, 2010

November 12, 2013

1.32%

200

December 1, 2010

November 12, 2013

1.32%

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

0.96%

2,250

March 12, 2012

March 12, 2014

0.96%

1,800

March 12, 2012

March 12, 2014

0.96%

1,800

March 12, 2012

March 12, 2014

0.96%

450

September 30, 2011

March 31, 2014

1.16%

2,500

July 13, 2011

July 14, 2014

1.54%

1,000

July 30, 2010

July 31, 2014

1.73%

3,700

July 29, 2011

July 31, 2014

1.03%

2,200

July 29, 2011

July 31, 2014

1.03%

1,000

Subtotal
Current portion of long-term debt

1,200

9,100
¥

1,500

Kenedix Realty Investment Corporation Semiannual Report

Classification

Current portion of long-term debt

Drawdown date

Last
Repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

July 29, 2011

July 31, 2014

1.40%

September 1, 2011

August 29, 2014

1.15%

¥

1,000

March 22, 2011

September 22, 2014

1.63%

2,700

September 30, 2011

September 30, 2014

1.27%

1,000

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

SubtotalLong-term debt

300

37,700
May 1, 2006

April 30, 2016

2.73%

January 29, 2010

January 30, 2015

2.17%

¥

5,000
1,008

February 18, 2010

February 18, 2015

2.19%

1,840

February 18, 2010

February 18, 2015

2.19%

1,360

February 18, 2010

February 18, 2015

2.19%

800

February 18, 2010

February 18, 2015

2.19%

400

April 2, 2010

April 2, 2015

2.22%

1,650

November 12, 2010

November 12, 2015

1.79%

1,200

November 12, 2010

November 12, 2015

1.79%

800

November 12, 2010

November 12, 2017

2.02%

2,300

December 1, 2010

November 12, 2015

1.46%

800

December 1, 2010

November 12, 2015

1.46%

200

December 1, 2010

November 12, 2017

2.21%

700

January 31, 2011

January 29, 2016

1.94%

800

February 28, 2011

August 31, 2015

1.91%

3,000

February 28, 2011

January 29, 2016

1.95%

500

March 31, 2011

January 29, 2016

1.91%

2,000

March 31, 2011

March 31, 2016

1.31%

1,000

April 28, 2011

October 31, 2015

1.86%

1,500

April 28, 2011

January 29, 2016

1.89%

1,000

August 31, 2011

February 27, 2015

0.99%

1,500

September 30, 2011

March 31, 2015

1.29%

2,500

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

January 15, 2013

January 15, 2017

0.97%

1,000

February 18, 2013

February 18, 2017

0.84%

1,500

March 26, 2013

March 26, 2018

1.04%

1,000

March 26, 2013

March 26, 2018

1.04%

1,000

| 21

22 |

Kenedix Realty Investment Corporation Semiannual Report

Classification

Drawdown dateLong-term debt

Last
Repayment date

Weighted-averageinterest rate

Balance(In millions of yen)

April 30, 2013

April 30, 2016

0.73%

July 31, 2013

July 29, 2016

0.63%

¥

1,000

July 31, 2013

July 31, 2018

0.73%

500

August 19, 2013

August 19, 2018

0.95%

1,000

August 19, 2013

August 19, 2018

0.95%

1,000

August 19, 2013

August 19, 2018

0.95%

500

August 19, 2013

August 19, 2018

0.95%

500

August 19, 2013

August 19, 2018

0.97%

500

August 30, 2013

August 31, 2018

1.08%

700

August 30, 2013

August 31, 2018

1.08%

500

August 30, 2013

August 31, 2018

1.08%

300

August 30, 2013

August 31, 2020

1.42%

1,500

September 30, 2013

September 30, 2019

1.06%

1,800

September 30, 2013

September 30, 2019

1.06%

900

October 31, 2013

October 31, 2018

0.89%

1,500

500

Subtotal

97,458

Corporate bonds

March 15, 2007

March 15, 2017

2.37%

March 8, 2012

September 8, 2017

2.00%

¥

1,500

September 12, 2013

September 12, 2018

1.00%

1,800

Subtotal

6,300

Total

5.

3,000

¥150,558

REDUCTION ENTRY

The amount of reduction entry of property and equipment acquired by government subsidy
In thousands of yen
As of October 31, 2013

As of April 30, 2013

¥26,230¥26,230

Buildings and structures

6.

PER UNIT INFORMATION
Yen
From May 1, 2013 to October 31, 2013

From November 1, 2012 to April 30, 2013

Net asset value per unit

¥526,195¥525,748

Net income per unit

¥

9,881

¥ 10,477

286,550

286,550Weighted average number of units (units)

The weighted average number of units outstanding of 286,550 as of October 31, 2013 and April 30, 2013 was used for the computationof the amount of net income per unit. Net income per unit after adjusting for residual units is not included because there were no residual
investment units.

7.

INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 37%. However, theInvestment Corporation may deduct from its taxable income amounts distributed to its unitholders, provided the requirements are met
under the Special Taxation Measures Law of Japan. Under this law, the Investment Corporation must meet a number of tax requirements,
including a requirement that it currently distribute in excess of 90% of our distributable profits as defined in the Special Taxation
Measures Law of Japan 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 profit in the form of cash distributions totaling ¥2,665 million(deducting ¥166 million as the provision of reserve for reduction entry) and ¥2,703 million (deducting ¥299 million as the provision ofreserve for reduction entry) for the periods ended October 31, 2013 and April 30, 2013. Such distributions were treated as deductible
distributions for purposes of corporate income taxes. The effective tax rate on the Investment Corporation’s income was 0.05% and0.04% for the periods ended October 31, 2013 and April 30, 2013.

Kenedix Realty Investment Corporation Semiannual Report| 23

The following summarizes the significant difference between the statutory tax rate and the effective tax rate:
As of October 31, 2013

As of April 30, 2013

Statutory tax rate

36.59%

36.59%

Deductible cash distributions(34.43)(32.93)

Provision of reserve for reduction entry(2.14)(3.64)

Others0.03

0.02

Effective tax rate

0.05%

0.04%

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

As of April 30, 2013

Deferred tax assets:
Enterprise tax payable
Amortization of leasehold rights

¥

47

¥

36

1,543

1,278

Subtotal deferred tax assets

1,590

1,314

Valuation allowance

1,543

Total deferred tax assets

8.

¥

1,278

47

¥

36

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 REAL ESTATE FUND MANAGEMENT, INC.
Kenedix Real Estate Fund Management, 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 Real Estate Fund Management, Inc.
property management fees in accordance with the terms of its Property Management Agreements. For these services, the Investment
Corporation paid ¥362 million to Kenedix Real Estate Fund Management, Inc.

10.

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

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

From November 1, 2012 to April 30, 2013

Rental revenues¥6,649,670¥6,628,333

Common area charges

1,587,331

1,589,549

8,237,001

8,217,882

Parking space rental revenues

299,884

292,402

Utility charge reimbursement

851,381681,272

Miscellaneous

113,434

114,531

Subtotal

1,264,699

1,088,205

9,501,700

9,306,087

Rental and other operating revenues:

Subtotal
Others:Total rental and other operating revenues
Property-related expenses:
Property management fees and facility management fees

951,025

951,905

1,696,849

1,662,016

Utilities

928,822753,048

Taxes

851,090820,158

Insurance

14,372

14,837

Repairs and maintenance

173,604

322,652

Trust fees

42,37742,926

Loss on retirement of fixed assets

10,114

5,193

Others177,574

167,349¥4,845,827¥4,740,084

Depreciation

Total property-related expenses

24 |Kenedix Realty Investment Corporation Semiannual Report

Gain on sale of real estate property:
Revenue from sale of investment property¥1,970,000¥3,180,000

Cost of investment property

1,672,153

2,641,181

Other sales expenses
Gain on sale of real estate property

11.

63,341

76,775¥ 234,506¥ 462,044

PROPERTY INFORMATIONType

Office Buildings

Central Urban
Retail Properties

Residential Properties

Tokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

64

15

2

1

3

¥221,923¥52,295¥6,603¥1,80072.81%

17.16%

2.17%

0.58%

7.28%

Net book value

221,450

50,919

5,994

1,745

22,019Appraisal value

205,818

44,417

5,573

1,560

21,87073.71%

15.91%

2.00%

0.55%

7.83%

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 May 1, 2013 to October 31, 2013
Rental and other operating revenues¥22,180(In thousands of yen)

¥6,601,873¥2,162,391¥188,186¥91,588¥457,662

Rental revenues

5,757,566

1,825,792

167,392

81,547404,704

Other revenues

844,307

336,599

20,794

10,041

52,9582,119,341

847,177

55,24832,414

94,798Property management fees

621,588

270,775

19,3508,255

31,057

Taxes

602,884

207,590

13,006

7,608

20,002

Utilities

647,058

238,328

2,696

2,174

38,566

Repairs and maintenance

104,826

52,181

7,176

7,643

1,778

8,484

4,963

357

311

257

134,501

73,34012,663

6,423

3,138

NOI (Net Operating Income)

4,482,532

1,315,214

132,938

59,174362,864

Depreciation expenses

1,117,815

414,689

57,561

21,437

85,347

Operating income from property leasing activities

3,364,717

900,525

75,37737,737

277,517

Property-related expenses

Insurance
Trust fees and other expenses

Capital expenditures

513,966

376,034

2,908

—

1,120

NCF (Net Cash Flow)¥3,968,566¥ 939,180¥130,030¥59,174¥361,744

A breakdown of property-type as of October 31, 2013 was as follows:
Class of assets

Property and equipment

Property type

Office Buildings

Area

Tokyo Metropolitan Area
Other Regional Areas

Subtotal
Residential Properties

69.9%

50,91916.1%

272,369

86.0%

5,994

1.9%

Other Regional Areas

1,745

0.6%

7,739

2.4%

Subtotal

Total

Percentage of total assets¥221,450

Tokyo Metropolitan Area

Central Urban Retail Properties Tokyo Metropolitan Area
Subtotal

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

22,0197.0%

22,0197.0%

302,127

95.4%

Investment securities

1,106

0.3%

Bank deposits and other assets

13,520

4.3%

Total assets

316,753

100.0%

Total liabilities

165,972

52.4%

Net assets¥150,781

47.6%

Kenedix Realty Investment Corporation Semiannual Report

12.

| 25

FINANCIAL INSTRUMENTS

Seventeenth Fiscal Period (May 1, 2013 to October 31, 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 issued by a special purpose entity (tokutei mokuteki kaisha, ”TMK”) as set forth by
the Act on Securitization of Assets and Japanese silent partnership (tokumei kumiai, ”TK”) interests 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 and interest-rate cap transactions) in order to reduce such risk.
Interest-rate swap and interest-rate cap transactions are used as derivative financial instruments. Utilizing interest-rate swap and interestrate cap transactions, 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 ofhedging 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 October 31, 2013 and estimated fair value are shown in thefollowing table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value(Refer to *2 below).
In thousands of yen

햲 Cash and bank deposits
Subtotal햲 Short-term debt
햳 Corporate bonds(including current portion of corporate bonds)
햴 Long-term debt(including current portion of long-term debt)
Subtotal
Derivative Transactions (*)

Carrying value

Estimated fair value

Difference¥ 11,452,986¥ 11,452,986¥

11,452,986

11,452,986—

9,100,000

9,100,000—

6,300,000

6,482,910

182,910135,158,000¥150,558,000

135,751,380¥151,334,290

593,380¥776,290

—

—

—

—

(*) 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*1: METHODS TO DETERMINE THE ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS AND OTHER MATTERS RELATED TO
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 rates, 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 TRANSACTIONS햲 Hedge accounting not applied
Not applicable햳 Hedge accounting applied
Contracted amount(In thousands of yen)

Hedge accounting
methodType of derivativetransactions

Special treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term debt

Interest-rate cap

Long-term debt

Special treatment ofinterest-rate cap
Total

Maturing after 1 year

Fair value(In thousands of yen)Calculation method for
applicable fair value¥26,700,000¥20,700,000*—

3,000,000

3,000,000*—¥29,700,000¥23,700,000

Hedged items—(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, theirfair value is included in the fair value of the hedged long-term debt.

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

Carrying value (In thousands of yen)

Investment securities¥1,106,339

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above preferred equity securities
of TMK and TK interests are not included in the preceding table.
*3: REDEMPTION SCHEDULE FOR RECEIVABLES
Due within 1 year or less
(In thousands of yen)

Cash and bank deposits¥11,452,986

Total¥11,452,986*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

¥ 9,100,000

¥

¥

¥

¥

Corporate bonds

—

—

—

4,500,000

1,800,000—

Long-term debt

¥37,700,000¥30,558,000¥30,800,000¥15,000,000¥14,500,000¥6,600,000

—

—

—

—

Due after
5 years¥—

Kenedix Realty Investment Corporation Semiannual Report

13.

| 27

INVESTMENT AND RENTAL PROPERTIES

Seventeenth Fiscal Period (May 1, 2013 to October 31, 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 April 30, 2013

Net change

As of October 31, 2013

Fair value as of October 31, 2013
(In thousands of yen)

¥290,593,741¥11,533,520¥302,127,261¥279,238,000

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.
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 3 properties totaling ¥14,020,279 thousand, the sale of 1 property totaling ¥1,672,153 thousand and depreciation amounting to¥1,696,849 thousand.

Income and loss in the fiscal period ended October 31, 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“.

14.

SUBSEQUENT EVENTSISSUANCE OF THE NEW INVESTMENT UNITS
On October 24, 2013 and November 6, 2013, the Board of Directors of the Investment Corporation resolved to issue new investment
units as detailed below. The payments were completed on November 13, 2013 through issuance of public offering, and the payments
were completed on December 10, 2013 through issuance of third-party allotment. As a result of the issuance of new investment units,
the Investment Corporation had total unitholders’ capital of ¥166,261,745,670 with 332,540 investment units outstanding as ofDecember 10, 2013.
(Issuance of New Investment Units through Public Offering)Issuance of New Investment Units: 43,800 units (Domestic Offering 21,900 units, International Offering 21,900 units)

Issue Price (Offer Price): ¥430,950 per unit

Aggregate Issue Price (Total Offer Price): ¥18,875,610,000

Issue Amount (Paid-in Value): ¥415,480 per unit

Total Issue Amount (Aggregate Paid-in Value): ¥18,198,024,000

Payment Date

: November 13, 2013

(Issuance of New Investment Units through Third-Party Allotment)
Issuance of New Investment Units: 2,190 units

Issue Amount (Paid-in Value): ¥415,480 per unit

Total Issue Amount (Aggregate Paid-in Value): ¥909,901,200

Payment Date

: December 10, 2013

Allottee: Nomura Securities Co., Ltd.

(Use of proceeds)
The funds from the Domestic Offering and International Offering, allocated as a portion of the funds for the acquired properties inEighteenth Fiscal Period and residual amounts allocated as a portion of the funds for the repayment of borrowings alongside theacquisition of assets acquired in the Seventeenth Fiscal Period. Furthermore, because cash on hand was allocated as a portion of thefunds for the acquisition of properties acquired in the Seventeenth Fiscal Period, the funds from the issuance of new Investment Unitsby third-party allotment are allocated to as proceed to compensate for the decrease of cash on hand resulting from the allocation.

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

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
Interest income
Interest expense
Loss on retirement of fixed assets
Changes in assets and liabilities:
Rental receivables
Consumption tax refundable
Accrued consumption tax
Trade and other payables
Rents received in advance
Property and equipment due to sale
Others, net
SubtotalInterest income received
Cash payments of interest expense
Cash payments of income taxes
Net cash provided by operating activities¥ 2,832,981¥ 3,003,405

2,023,561(565)
1,050,678
10,114

1,981,289(558)
1,046,727
5,193(69,012)(100,159)(155,406)
109,022(179,837)
1,672,153(212,763)
6,980,767
565(1,056,258)(890)
5,924,184

240,699—
68,323(102,818)
203,5932,641,181(129,157)
8,957,877
558(1,076,960)(1,092)7,880,383

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
Purchases of investment securities
Proceeds from leasehold and security deposits received
Payments of leasehold and security deposits received
Payments of restricted bank deposits
Proceeds from restricted bank deposits
Others, net
Net cash used in investing activities(15,090,275)(202,400)
1,161,189(623,098)(94,092)
32,279(292)(14,816,689)(2,860,168)—
639,486(1,409,380)—
569,851—(3,060,211)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt
Payments of short-term debt
Proceeds from long-term debt
Payments of long-term debt
Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Payment of dividends
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period

7,900,000(4,500,000)
11,700,000(7,211,500)
1,784,250(1,500,000)(2,702,999)
5,469,751(3,422,754)
14,371,603¥ 10,948,849

1,200,000(1,200,000)
9,000,000(7,211,500)——(2,738,824)(950,324)
3,869,848
10,501,755¥14,371,603

See related notes.

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 date of purchase.
CASH AND CASH EQUIVALENTS (UNAUDITED)Cash and cash equivalents consisted of the following as of October 31, 2013 and April 30, 2013:
In thousands of yen

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

As of October 31, 2013

As of April 30, 2013

¥11,452,986¥14,813,927(504,137)(442,324)¥10,948,849¥14,371,603

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

Kenedix Realty Investment Corporation Semiannual Report| 29

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
Ernst & Young ShinNihon LLC

IR Schedule (17th and 18th Fiscal Periods)
Oct.
2013

Dec.
2013

Jan.
2014

Apr.
2014

Jun.
2014

Jul.
2014

End ofthe 17th Period

Performance forthe 17th Period isannounced

Distributions forthe 17th Period arepaid

End ofthe 18th Period

Performance forthe 18th Period
will be announced

Distributions forthe 18th Period
will be paid

General Breakdown of Unitholders
Foreign corporations
and individuals
End of the 17th Period

Other domestic
corporations

Financial institutions(including securities companies)

Individuals
and others

48.5%

1.5%

41.8%

8.2%

138,897 units

4,342 units

119,684 units

23,627 units

End of the 16th Period

48.5%

1.7%

39.9%

9.9%

138,868 units

4,932 units

114,334 units

28,416 units

Note: Figures are rounded to the first decimal place.

Top Ten Unitholders (As of October 31, 2013)
Name

Share of Outstanding Units

Units Held

Japan Trustee Services Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
The Nomura Trust and Banking Co., Ltd. (Trust Account)
The Bank of New York, Treaty JASDEC AccountState Street Bank and Trust Company (Note 2)
JP Morgan Chase & Co. 385174
State Street Bank and Trust Company (Note 3)
Nomura Bank (Luxembourg) S.A.
State Street Bank and Trust Company 505223
Total<Note 1>45,42921,793
19,244
18,83010,828
6,948
6,820
6,424
6,176
5,501
147,99315.85%
7.60%
6.71%
6.57%
3.77%
2.42%
2.38%
2.24%
2.15%
1.91%
51.64%

Notes: 1. The percentage of shares are rounded down to the second decimal place.
2. The standing proxy is Settlement & Clearing Services Division, Mizuho Bank, Ltd.
3. The standing proxy is Custody department of The Hongkong and Shanghai Banking Corporation Limited, Tokyo Branch.

Unit Price and Trading Volume(Units)Closing Price

Trading Volume

11,000 s

Offer price of PO(¥873,180)
May 22, 2007
(payment date)

Offer price of IPO(¥580,000)
Jul 20, 2005
(payment date)

8,000 s7,000 s3,000 ss 900,000
s 800,000

Offer price of PO(¥274,510)
Jul 20, 2011
(payment date)

Offer price of PO(¥252,200)
Nov 16, 2009
(payment date)

Offer price of PO(¥593,096)
May 1, 2006
(payment date)

4,000 ss 1,000,000

s !VERAGE TRADING VOLUME DURING TH PERIOD     UNITS

6,000 s5,000 s(Yen)

s !S OF .OVEMBER  (IGHEST PRICE TRADING PRICE : c  -AY  ,OWEST PRICE TRADING PRICE : c  /CTOBER  20,000 s

Offer price of PO(¥430,950)
Nov 13, 2013
(payment date)s 700,000
s 600,000
s 500,000
s 400,000
s 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

Apr.

Oct.

2011

Apr.

Oct.

2012

Apr.

Oct.

2013

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

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 prospectus.
This semiannual report should not be construed as an offer or solicitation to buy or sell 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 equivalent Japaneseterms. 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 andinterpretation.
None of KENEDIX-REIT, KENEDIX Real Estate Fund Management, 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 Real Estate Fund Management, INC. with respect to its business, financial condition and results of operations. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,”“plan,” “anticipate,” “believe,” ”estimate,” “predict,” “potential,” or the negative of these terms or other similar terminology. These statements are not guarantees of future performance and are subject to various risks and uncertainties. Actual results, performance or achievements, or those of the industries in which we
operate, may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. In addition, theseforward-looking statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise and involve known and unknown
risks and uncertainties. Accordingly, readers of this document should not interpret the forward-looking statements included herein as predictions or representationsof future events or circumstances.
Potential risks and uncertainties also include those identified and discussed in this document. Given these risks and uncertainties, readers of this document are
cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of information produced herein. We disclaim any obligation
to update or, except in the limited circumstances required by the Tokyo Stock Exchange, announce publicly any revisions to any of the forward-looking statements
contained in these documents.