Tokyo can’t sustain an attractive ROI!

No, Tokyo has the largest urban economy
by GMP and is projected to remain theleader through 2025!
Tokyo’s population is shrinking!

No, Tokyo’s population is growing andprojected to grow well into the future!

Tokyo is a has-been!

No, Tokyo is home to the global
headquarters of twice as many Global
500 firms as the next metropolis!

KENEDIXREIT

A DYNAMIC, MARKET LEADING JREIT
Kenedix Realty Investment Corporation (KENEDIX-REIT; Securities Code: 8972) is a proactively
managed Japanese real estate investment trust ( J-REIT) that principally invests in mid-sized office buildings
and is managed by Kenedix REIT Management (KRM). KENEDIX-REIT is known to lead the market,
rather than follow, and to be proactively managed to prevent itself from ever being caught unawares.
KENEDIX-REIT recently ended its Tenth Fiscal Period with a portfolio of 70 assets and an acquisitionbased value of 235.7 billion yen.

HISTORY OF PRUDENT PORTFOLIO GROWTH
A CONSTANTLY EVOLVING STRATEGY ATTUNED TO THE MARKETGENERAL BREAKDOWN OF UNITHOLDERS
116,532 units: 49.9%

Foreign corporations and individuals

KENEDIX-REIT follows stability
focused periods withannouncement of its re-growthphase and reinforces its portfoliowith 5 new acquisitions

90,772 units: 45.4%

95,004 units: 47.5%

Other domestic corporations

2,670 units: 1.3%

2,461 units: 1.2%

Financial institutions(including securities companies)

84,966 units: 42.5%

86,234 units: 43.1%

4.865 units: 2.1%
4,865

89,040 units: 38.1%

Individuals and others
21,592 units: 10.8%

16,301 units: 8.2%

23,113 units: 9.9%

End of 8th Period(200,000 units)

End of 9th Period(200,000 units)

End of 10th Period(233,550 units)

Name

Units Held

Share of Outstanding Units

Note: Figures are rounded to the first decimal place.

Occupancy Ratio

(%)
100

95.3%
KENEDIX-REIT lists in July 2005
with 29 properties and a valueof ¥69 billion(billion yen)
250

95.9%

175.0
146.7

150

43.0

44.4

50

18.9

81.4

197.0

95.7%

94.7%

94.4%

95

212.8
12.7

222.0 218.9 220.1
12.7

12.7

12.3

12.3

10.3
12.3

235.7

90

10.3
12.3

16.0

Residential
CentralUrban Retail

43.0

184.0

115.9

196.9

213.0
193.9

197.4

17,950

8.73%
7.68%

Trust and Custody Services Bank, Ltd. (Securities Investment Trust Acct.)

16,030

6.86%

The Nomura Trust and Banking Co., Ltd. (Investment Trust Acct.)

12,564

5.37%

The Master Trust Bank of Japan, Ltd. (Trust Acct.)

11,937

5.11%

The Bank of NY Treaty JASDEC Account

9,250

3.96%

State Street Bank and Trust Company 505025

8,314

3.55%

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/HENDERSON HHF SICAV

7,800

3.33%

State Street Bank and Trust Company

6,808

2.91%

State Street Bank and Trust Company 505223

4,675

2.00%

Total

115,72949.55%

OfficeIR SCHEDULE 10TH AND 11TH PERIODS

137.9

April

86.2

June

July

October

Distributions for10th Period are paid

End of 11th Period

DecemberJanuary

48.2

End of 10th Period0
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
1st Period 2nd Period 3rd Period 4th Period 5th Period 6th Period 7th Period 8th Period 9th Period 10th Period
2005/10
2006/4
2006/10
2007/4
2007/10
2008/4
2008/10
2009/4
2009/102010/4

Distribution
per unit (yen)20,401

Note: The respective shares are rounded down to the second decimal place.

16.0

20.7

Japan Trustee Services Bank, Ltd. (Trust Acct.)
NCT Trust and Banking Corporation (Investment Trust Acct.)

16.0

16.0

12.3

12.3
37.7

95.6%

KENEDIX-REIT sells 23 residential
assets and acquires 9 oﬃce assets.

200

69.1

95.9%

94.9%

KENEDIX-REIT nearly
doubles in size with theacquisition of 30 properties
from multiple pipelines

100

TOP TEN UNITHOLDERS AS OF APRIL 30, 2010

96.9%

96.6%

3,052 13,884 13,529 13,682 13,960 16,711 15,618 12,172 10,511 10,993
KENEDIX-REIT has consistently paid a robust
distribution to its shareholders as it stays ahalf-step ahead of the market

KENEDIX-REIT remains in pursuit of its ideal – aprimarily mid-sized oﬃce building portfolio of 100
oﬃce buildings and a value of ¥400 billion

Note: The amounts are rounded down to the nearest 100 million yen.

TABLE OF CONTENTS
KENEDIX-REIT: A Dynamic, Market Leading J-REIT .....................................................................1
Tokyo Report: Even a Fair Fight? .................................................................................................2Japan Report: The Comeback of Strategic Pragmatism..............................................................3
Achieving a Sound Balance of Growth .......................................................................................5
Cross-Organizational Cooperation Enables Optimal Results ......................................................8
Parlaying Strategy into Action....................................................................................................91 │ Kenedix Realty Investment Corporation

Taking Advantage of a Rare Opportunity to Raise Portfolio Performance ...............................10
Hands-on Management ...........................................................................................................11
Clear Milestones Set Tone for Strong Future.............................................................................12
Promoting Investment in Japan by Assisting the Foreign Investor ..........................................13
KENEDIX-REIT: A Strong, Diversified Portfolio ..........................................................................14
KENEDIX-REIT Portfolio Table ...................................................................................................15
Portfolio Map............................................................................................................................16
Financial Summary ..................................................................................................................17

Performance for10th Period is announced

Performance for11th Period is announced

Distributions for11th Period are paid

Information is regularly disclosed throughout the year via press releases and the website at 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 document for an oﬀer to sell, or seeking an oﬀer to buy, any securities of KENEDIX Realty Investment Corporation(KENEDIX-REIT).
English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japanese terms. With respect to any and all terms herein, including
without limitation, ﬁnancial statements, if there exist any discrepancies in the meaning or interpretation thereof between the original Japanese documents and English translation contained herein, the original
Japanese documents will always govern the meaning and interpretation.
None of KENEDIX-REIT, Kenedix REIT Management, Inc. nor any of their respective directors, officers, employees, partners, unitholders, agents, affiliates nor their advisors shall be responsible or liable for thecompleteness, 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 REIT 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, performanceor achievements expressed or implied by these forward-looking statements. In addition, these forward-looking statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or
imprecise and involve known and unknown risks and uncertainties. Accordingly, readers of this document should not interpret the forward-looking statements included herein as predictions or representations of
future events or circumstances.
Potential risks and uncertainties also include those identiﬁed and discussed in this document. Given these risks and uncertainties, readers of this document are cautioned not to place undue reliance on forwardlooking 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.

Kenedix Realty Investment Corporation │ 34

Have you wondered if Tokyo's days are over? Like thepress your eyes are not on Japan. Why? Many seem tobelieve that Tokyo is aging. Well the demographics andbottom lines appear to be different. Let's take a look.

ESTIMATED GMP GROSS METROPOLITANPRODUCT IN 2008
Paris

EVEN A FAIR FIGHT?

PROJECTED REAL GMP GROWTHTokyo

POPULATION SIZE IN 2008
LondonLondonPariss

1,479

LondonTOKYO REPORT
Paris

Tokyo

Tokyo

1.7

New YorkN

New Yorkk

A

Is Tokyo's economy large
enough to sustain an
attractive ROI?

Aren't Tokyo's prospects for
economic growth dim?

Q
A

Yes, Tokyo remains thelargest urban economy by
GMP. In fact, Tokyo is
projected to retain its top
position through 2025. (Note 2)

Source: UK Economic Outlook November 2009,
PricewaterhouseCoopers
Notes: 1. Figures are calculated byPricewaterhouseCoopers at purchasing power
parity (PPP) to correct for diﬀerences in prices
among economies, based on data from the UN,
World Bank, OECD and national data sources.
2. According to data published in UK Economic
Outlook November 2009.

A

No, unlike the rest of Japan, Tokyo's population is actually
growing, and is projected to continue growing well into the
future.

Source: World Urbanization Prospects: The 2001 Revision, United Nations

NUMBER OF 2009 FORTUNE 500 COMPANY GLOBALHEADQUARTERS
New YorkA

An emphatic yes. Tokyo overwhelms other mega
cities in this regard, with industry leaders from a
broad range of industries calling Tokyo home.

Source: Fortune Global 500, 2009, Fortune Magazine

Yes, greater Tokyo is thelargest metropolitan area inthe world, eclipsing the next
largest metropolitan area by
several million people.

Source: UK Economic Outlook November 2009,
PricewaterhouseCoopers

1.2

0.5
0.2
Tokyo
1975 2000
2000 2015

0.32

0.2

0.16

New York
1975 2000
2000 2015

Paris
1975 2000
2000 2015

0-0.27
London1975 2000
2000 2015

New York

Tokyo 51

Is Tokyo strongly represented by industry
leaders?

(%)
1.2
1.0
0.8
0.6
0.4
0.2
0.0
-0.2

Is Tokyo's population large
enough to sustain an
attractive ROI?

OFFICE MARKET BY DEAL VOLUME
LondonParis

Tokyo 13.7

Paris
Q

A

Source: UK Economic Outlook November 2009,
PricewaterhouseCoopers

Isn't Tokyo's population shrinking?

LondonQ

No, despite its current size,
Tokyo's growth in real GMP
is projected to becompetitive in the long run
with the world's leading
urban areas.

POPULATION GROWTH
Q(million
illioon people)
peoplepeo
plele)(avg. % pper(avg
er annum for 2008 – 2025)(billion US
US$
S$ at
at PPP
PPP (N(Note 1))

Q

35.83

New York

Q
A(billion(billi(bi
billlli
l ion US$US$)$)Is Tokyo's office market dead?
On the contrary, Tokyo's office market was thesecond most active over the past 12 months,
behind only London.

Source: Real Capital Analytics for May 26, 2009 through May 25, 2010.

Kenedix Realty Investment Corporation │ 2

JAPAN REPORTTHE COMEBACK OF STRATEGICPRAGMATISM

In the summer of 2010, there are plenty of reasons to be optimistic about Japan’s economic future. For the first timein almost a decade, all the major forces that determine economic fortunes point towards a sustainable up-cycle.
Against super-low expectations, the possibility of major upside surprises is high and, in my personal opinion, thecurrent cycle has the potential to surprise not just in terms of headline growth but, more importantly, in duration.
Why the optimism? Let’s start with the cyclical position, which, for an economist, means a look at inventories.
Here the evidence is overwhelmingly positive: almost no industry sub-sector shows any sign of excessive
stockpiling. Quite the contrary - whether cars, construction machinery, steel, electronic components or digital
cameras and cement, wherever you look you find very low inventory levels. In the aftermath of the unprecedented
global financial crisis, corporate leaders are primed to err on the side of caution. This, in turn, actually raises thepotential for up-side surprises as any incremental demand growth will feed right through to increased production.
Also, the record-low inventory levels limit the risk of deflation. If anything, inflation risks are rising at the current
cyclical juncture.
But why should demand grow? Simple answer - focus on the basics and don’t fight the cycle. Since the summer of2009, Japan has gone through a very strong export-led recovery cycle. In fact, in most industries, Japan has gained,
not lost, global market share. More importantly, the spill-over from exports to domestic demand is beginningto take hold. Clearspeak - wages and incomes are beginning to rise for the first positive growth in over three
years: base pay is rising at a rate of almost 2%, summer bonus pay is up almost five percent. Net net, householdincomes are rising at almost 3% in nominal terms as the spoils from the export-led recovery are being distributed
throughout the system. Add to this the fact that former Prime Minister Hatoyama’s child-benefit policy boosts
aggregate disposable income by another one percent, and you realize that household incomes are now rising at
a rate of just about four percent. By any account, this is a powerful underpinning for consumer-led growth on
the home front. Watch for housing and real estate to show further signs of recovery between now and the end of
2010, and keep a careful eye on consumption of white-goods and other higher-priced items. When rising incomes
combine with ‘austerity fatigue’ after years of frugal living, domestic demand is poised to surprise on the up-side.
Interestingly, economic policy is also much more supportive and constructive than commonly perceived. Indeed,
for the first time since the Koizumi administration, the Bank of Japan is going out of its way to be supportive, tosignal loud and clear that they are in no rush to “exit” or tighten. Aux contraire, since December 2009, three newquantitative easing initiatives have been announced, the last of which came in early June. Even more important is
the fact that the Bank of Japan is not acting alone. Both the new government of Prime Minister Naoto Kan as wellas the bureaucracy have published fairly comprehensive and detailed economic growth strategies. Japan has not had
this degree of policy coordination in almost a decade: the industries and sectors the Bank of Japan seeks to support
with its special lending facilities match line-by-line the government’s newfound growth strategy. It is clear in mymind that a decade of policy complacency has come to an end. A new Japanese strategic pragmatism is on the rise.

3 │ Kenedix Realty Investment Corporation

Under Prime Minister Hatoyama, Japan was preoccupied
with social policy issues. Now economic and financial policy
is back at the center. Specifically, Prime Minister Kan haspresented a clear-cut growth target: between now and 2020,
nominal growth of three percent and real growth of two
percent is the goal. How to achieve it? First and foremost,Kan is not afraid to be pro-business - despite his strong
dependence on the labor unions for his political machine. A
cut in corporate taxes is now a virtual certainty. And this is
the right thing to do - Japan simply cannot compete against
Asian competitors who pay barely one-third or even onefourth of the tax burden.
Of course, lower corporate taxes in Japan alone won’t turnJapan into an economic powerhouse. But the long overdue corporate tax cut will, at the margin, make Japan a more
attractive destination for capital spending and future investment. If followed up by structural policy initiatives
to boost entrepreneurship, Japan Inc. has a fair shot of re-inventing herself as a new center of excellence andinnovation.
To be sure, not all is good. First of all, Japan remains a huge *free rider* on global economic fortunes. When theworld sneezes, Japan catches a cold. Remember that a one percentage point change in global growth lifts or cuts
corporate profits by almost 20 percent, while a similar change in domestic demand boosts or cuts profits by only
about five percent. With global fortunes about four times as important as domestic ones, Japan remains essentiallya ‘slingshot on global growth’.
The other big negative Japan faces is that its tax system is very inefficient. A rise in national income by 1% only lifts
total tax revenues by barely half a percentage point. In other words, it is impossible for Japan to grow her way outof the current fiscal deficit woes. The tax system simply is too inefficient and the tax base is not broad enough. So
no matter who is in charge of Japanese policy making, sooner or later, the tax burden on the Japanese will have togo up. Whether this comes through a higher consumption tax, higher incomes taxes, or a combination of both,
remains to be seen. Also, the introduction of a true and unified tax-number identification system is poised to comebefore long. Indeed, in my personal view, the positive up-cycle outlined above - last year's export recovery feeding
this year`s income growth - could very well come to an end as soon as the government is forced to raise the tax
burden on households. The trick will have to be to raise taxes while a new export up-cycle is on its way. Will thegovernment be lucky enough to get that one right?
From a global perspective, Japan remains an attractive investment story. Ample technology, a diligent workforce,
highly educated, as well as a public infrastructure second to none in the world. If I am halfway right, and the
combination of private sector initiatives coupled with a newfound strategic pragmatism from policy makers
combines, Japan may well become a big positive surprise for global investors. Expectations are low, ultra low, andit will take quite a lot to convince global money that Japan has what it takes to deliver sustainable high returns. All
too often the swift, sharp up-cycles were followed by long, drawn-out periods of underperformance. However,conditions are falling into place for a major trend reversal. Japan has got what it takes.

Jesper Koll
Head of Japan Equity Research
J.P. Morgan

Kenedix Realty Investment Corporation │ 4

S p e a k i n g

t o

Y o u

Achieving a Sound Balance of Growth

Dear Investor,
Although the global economy is grappling with the European fallout, it appears to have found the path out of the financial
crisis of the past few years recession, unique in that it was the first recession since real estate securitization swept the world.
The various corrections in the marketplace caused by this recession and the ensuing attempts out of it have created a strong
opportunity to buy real estate. Unfortunately, our investment unit price still bears an implied cap rate over 7%, resulting
in the market’s reluctance to accept our public offering in November 2009 to acquire properties with around a 6% yield.
Nevertheless, it is irrefutably the right time to buy property.
On the industry level, the reorganization of the REIT industry in Japan is still
incomplete. Most industry pundits point to 200 - 300 billion yen in funds as being
sufficient to secure autonomy and independence, but those REITs far smaller than thisare proving difficult to sustain and so a few more mergers between REITs are likely tooccur.

NOVEMBER 2009 PUBLIC OFFERING

This fiscal period we conducted a public offering to acquire four properties andalso acquired Pacific Marks Nishi-Shinjuku, thereby realizing our initial plans
for the period. The public offering lowered our LTV and further strengthened
our relationships with our supporting banks. Pacific Marks Nishi-Shinjuku itself
was a result of our team carefully analyzing a property and taking advantage of an
opportunity to acquire a property below appraisal value due to the unique situationof the owner, another J-REIT. We are still looking to buy properties, but the rush of
potential opportunities present at the end of March due to the close of the corporate
fiscal year has passed and we are now in a quiet market period searching for the next
opportunity.

Outstanding units
233,550 units
after oﬀering
Pricing date November 9, 20095 │ Kenedix Realty Investment Corporation

Units oﬀered
Designated buyerof units

Delivery dateDomestic publicoﬀering:
33,550 units
Kenedix REITManagement:
1,200 units

November 17, 2009

Discount rate

3.0%

Issue price¥252,200

Oﬀering size

¥8.4 bn

Bookrunner

Nomura Securities Co.,Ltd.

CHANGE IN LTV(%)
In hindsight, the public offering was viewed both favorably
50
47.0
KENEDIX-REIT is committed
and unfavorably by the market. On the positive side, it
45.6
to a conservative leverage
45
served as a clear announcement that KENEDIX-REIT had
41.2 41.4 41.1
moved from restructuring to acquisitions and that we had
40
40.9%
overcome any financial risk that may have been perceived.
38.7
38.9
37.5
35
Our ability to lower leverage and acquire properties has
35.3
also enabled us to combat the declining trend in rents and30
provide our investors with a 10,000 yen plus distribution perunit – a distribution level they desire and we are resolute to25
provide. The public offering also contributed to improving
20
the risk standing of KENEDIX-REIT among financial
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Period Period Period Period Period Period Period Period Period Period
institutions. Since peaking early last year, overall the spread
Note: LTV = Total debt ÷ Total assets
on borrowings has dropped between 30 and 50 bps. The
public offering and these resulting improvements, alongwith strong bank relations, are the reasons why we were able EXTERNAL GROWTH AS A GENERATOR OF STABLE
DISTRIBUTIONS
to fund our acquisition of Pacific Marks Nishi-Shinjuku withfull debt of 7 billion yen.

Newproperties

Revenues from
portfolio additions
cover drops inrevenues from theexisting portfolio

Confidence andtrust cultivatedthrough strong
communication
helps us deliver
results and deliveron promises

We will also overcome the slight dip in rents through proactive restructuringof our portfolio where we sell small and buy big. We aim to conduct about
10 - 20 billion yen in acquisitions as a portfolio strengthening measure. We
are also considering teaming with Kenedix, Inc. and ITOCHU Corporation
to form a bridge fund of slightly higher risk but providing strong
distributions to help form a future pipeline for KENEDIX-REIT properties.
This fiscal period we were able to diversify the shareholders of our asset
management company with the addition of MAX-REALTY, Inc. to existing
shareholders ITOCHU Corporation and Kenedix, Inc. MAX-REALTY
is owned by leading property manager XYMAX Corporation and theSumitomo Mitsui Banking Corporation, which of course provides access tostrong property management know-how and strengthens our position with
one of the leading mega bank groups.
Naturally, we will also maintain our stance of emphasizing tenant relations.
We have conducted several tenant satisfaction surveys and are careful toalways prudently act on our findings, as is shown later in this report. This

Kenedix Realty Investment Corporation │ 6

Y o uAnother beneficial factor is that the economy, which drove many restructurings and bankruptcies and thus growing tenant
departures, has corrected itself and is generating new tenants. In this state,
it is reasonable to assume that the bottoming out of rents is not too distant,
if they haven’t already done so.

t o

We have now demonstrated that we can achieve external
growth with strong properties and finance them at enviable
Dropping revenues
rates, both with equity and debt. These, along with ourfrom the existing
portfolio
diversified portfolio and staff diligence, have helped
us temporarily overcome the market reality of falling
occupancies and rents and pay out a robust distribution. KENEDIX-REIT hit a low point in July 2009 when occupancy fell
to 92.4%, but it has since risen above the 94% level and is being controlled there. This level, achievable through our active
property management and strong tenant relations, is very competitive, even with those REITs specializing in Class S andClass A properties.

S p e a k i n g

On the negative side, the next time we consider equity
financing, we should pay a little more heed to concerns overvalue dilution and attempt to make the financing and relatedacquisitions more accretive for our investors.

emphasis means we do not have to entirely mark our rents to the market. We are not able to, and do not want to, hikerents exorbitantly during good periods as some REITs are prone to do, and conversely we do not need to lower rents
drastically in most cases during bad times. Our close relations also provide us with the knowledge to negotiate with strong
comprehension of our tenants’ present standing - a distinct advantage.
Another market development that we believe will be to our advantage in the long term is the emergence of the various
Green requirements for real estate in Tokyo. Presently most of the requirements are focused on large buildings with annual
CO2 output equivalent to 1,500 kiloliters or more of crude oil. The sum total of our entire portfolio is that large, so wehave a reporting requirement but the requirements don’t extend beyond this. However, the Energy Conservation Law andother legislation will eventually require owners to provide Green Buildings and both tenants and owners alike to lower CO2
output. We are planning to invest capital in modernizing air conditioning systems and implementing other measures thatsave energy and lower costs, and our position as a financially strong owner of 70 buildings means we can implement suchmeasures at a far more advantageous cost than owners of only a few properties, thereby raising our competitiveness. As thebuildings are modernized, the ability to maintain and possibly raise rents at these buildings also grows, particularly withnew tenants.

S p e a k i n g

t o

Y o u

The Benefits of Strong Internal Communication
As we discuss later in this report, our strengths in both external and internal growth are driven by Kenedix REITManagement’s emphasis on strong internal communication. Our weekly Asset Management Committee meetings feature
wide-ranging reports by management on market opportunities, occupancies, rent trends and such, and the respective “C”
class executives additionally meet regularly and when necessary to discuss actions and opportunities. This communication
enables us to move fast to meet tenant demands and also to achieve interdivisional cooperation. Confidence and trust in each other cultivated bythis communication enables our team to take advantage of opportunities todeliver results and deliver on promises made to KENEDIX-REIT investors.

We will seek asound balancein our strategy,
always mindfulof the interestsof KENEDIXREIT investors.

Delivering Again in the Eleventh Fiscal Period
Our sound and balanced emphasis on both external growth and portfolio
management (internal growth) has enabled us to once again deliver solid
results, with operating income of 3,738 million yen and a distribution perunit of 10,993 yen. We are committed to delivering a distribution of 10,000
yen in the Eleventh Fiscal Period (ending October 2010) as well. While
we have achieved a strong financial standing, cash flow is steady and we canalso buy properties, the implied rates for properties on the market generally
don’t make investment sense and the European situation, though more thanovercome by the strength of Asia, is worrisome. One thing is certain – ouropportunities and the means available for achieving results are not limited.
We may seek an aggressive strategy of acquiring another REIT, we may once
again acquire all the properties of a distressed fund at a favorable discount or
we may just hold steady. The important thing to note is that we will seek asound balance in our strategy, always mindful of the interests of KENEDIXREIT investors, and will continue to work to deliver steady distributions.
Thank you again for your continued support.

Taisuke Miyajima
CEO and President
Kenedix REIT Management, Inc.

7 │ Kenedix Realty Investment Corporation

The J-REIT investment vehicle was constructed toprovide nearly complete transparency to investors in thesometimes difficult to comprehend world of real estate
investment. Two integral pieces of the decision-making
process that bestow legal compliance and organizationwide support and implementation for the decision are
the Compliance Officer and the Asset Management
Committee (AMC).

CROSSORGANIZATIONAL
COOPERATION ENABLES
OPTIMAL RESULTS

DECISIONMAKING AT KENEDIX REIT MANAGEMENTThe Compliance Oﬃcer previews major potential decisions of the REIT to ensure no transactions are detrimental to the interests ofinvestors, the rules for deals with interested parties are obeyed and the deals are implemented in accordance with establishedguidelines. The Compliance Oﬃcer also works to ensure that service providers are in compliance with the rules and regulations thatgovern J-REITs.

Preview

Deliberation and Resolution

Deliberation and Resolution Resolution or Reporting

Creation of management
guidelines
Approval for transactions withinterested parties

Corresponding
Division

Compliance
Oﬃcer

Asset
Management
Approval for transactions outside
Committee of management guidelines(AMC)

Compliance
Committee(1 outside member(lawyer) )Approval for transactions that
follow management guidelines
excluding those with interested parties

Resolution
Boardof
Directors
Reporting

AMC is the crux of cross-organizational management and communication. Attendees of the regular weekly meetings consist of theleadership and managers, and meetings aﬃliated with property or other material decisions are attended by the leadership including the
CEO and President of Kenedix REIT Management, the General Manager of the Financial Planning Division (CFO), General Manager of theInvestment Management Division (CIO), General Manager of the Property Management Division and Compliance Oﬃcer.

AMC members receive weekly reports
THE AMC MEETS FREQUENTLY
on tenant movements and intents,
1st
2nd
3rd
4th
5th
6th
7th
8th
9th
10th
Period Period Period Period Period Period Period Period Period Period
discuss countermeasures to negate
Asset Management
21
35
39
39
38
38
52
44
36
39
negative movements, receive proposals
Committee meetings
on renovations and other improvements
as well as discuss and approve property acquisition and disposition measures. Although implementation rests in
the hands of each individual responsible division, the discussion and approval process vets issues and ensures alogical, powerful flow of communication in the decision-making process.

PACIFIC MARKS NISHISHINJUKU ILLUSTRATES AMC’S POWER
The power and effectiveness of this process is illustrated in the decision to acquire Pacific Marks Nishi-Shinjuku.
The CIO brought it up for discussion in late 2009 as a potential acquisition that he was convinced would be
beneficial for KENEDIX-REIT. The potential price was far below the appraised value and the strength of thebuilding and its potential positive contribution to cash flow were all viewed favorably by the AMC. The CFO,
realizing KENEDIX-REIT lacked the cash, visited relationship banks to discuss financing and eventually raised
new debt to cover the entire acquisition.
The head of asset management wanted the property's positive cash flow to positively impact the distribution
price. Thus the CIO negotiated a closing in mid-February rather than the end of the month favored by theseller.
KENEDIX-REIT was successful in the negotiations and thus theoretically transferred two weeks of additional
rental revenues to its own accounts, which helped raise last fiscal period's distribution. Thus the reporting,discussing and cooperating of AMC members enabled an advantageous acquisition by KENEDIX-REIT.

Kenedix Realty Investment Corporation │ 8

PARLAYING STRATEGY
INTO ACTION

Following nearly 15 months of market silence, KENEDIXREIT put its words into action and became the second
J-REIT to conduct a public offering in November 2009.
Always, a half-step ahead of the market, KENEDIX-REIT
applied the 8.1 billion yen plus in capital that it raised toacquire four buildings: three on November 18 and one
on December 1. The public offering served to notify themarket that KENEDIX-REIT was growing again and led
to many new investment opportunities being presented to
the J-REIT.

FIVE BUILDINGS ACQUIRED IN TENTH PERIODTOTAL ACQUISITION PRICE 8.8 BN YEN: ACQUIRED VIA PUBLIC OFFERINGNOVEMBER 18, 2009 ACQUISITIONSDECEMBER 1, 2009 ACQUISITION

KOISHIKAWA TG BUILDINGGOTANDA TG BUILDINGKDX SHINYOKOHAMA 381
BUILDING ANNEX TOWER

KDX NIHONBASHI 216
BUILDING

Location

Location

Location

Location

Bunkyo Ward,Tokyo

Acquisition price 3.08 bn yen

Shinagawa Ward,Tokyo

Yokohama,
Kanagawa

Acquisition price 2.62 bn yen

Acquisition price 1.1 bn yen

ACQUISITION PRICE 6.8 BN YEN: ACQUIRED WITH NEW BORROWINGSFEBRUARY 18, 2010 ACQUISITION

Acquisition price 2.01 bn yen

DELIVERING GROWTH(bn yen)250

7.9%

growth ofoffice building
portfolio

PACIFIC MARKS NISHISHINJUKU
Location

Chuo Ward,Tokyo

Shinjuku Ward, Tokyo

Acquisition price 6.8 bn yen

213.0 bn yen
200

197.4 bn yen

150

100

PortfolioP
f li
9th Period(2009/10)

Portfolio
P f li10th Period(2010/4)

Note: The figures are based on acquisition price.

9 │ Kenedix Realty Investment Corporation

TAKING ADVANTAGE OF A
The acquisitions made by KENEDIX-REIT during the
RARE OPPORTUNITY TO RAISE
Tenth Fiscal Period took advantage of the rare opportunity
presented by market confusion to raise the performance ofPORTFOLIO PERFORMANCE
the portfolio. This has been key in ensuring the delivery ofa robust dividend.

RAISING PORTFOLIO PERFORMANCE THROUGH ACQUISITIONS OFFICE
Portfolio as of 9th Period
Acquisition price

Properties Acquired in 10th Period¥197.4 bn¥15.6 bn58

5

Number of properties

Tokyo Metropolitan Area: 83.7%
Other Regional Areas: 16.3%

Geographic distribution
Average property age

Tokyo Metropolitan Area: 100.0%

20.8 years

15.6 years

Unrealized gain or loss (%) (Note 1)

-9.8%

+7.1%

NOI yield (10th Period)

5.1%

6.0% (Note 2)

Notes: 1. Unrealized gain or loss is calculated based on the appraisal value as of the End of the Tenth Fiscal Period and the book value as of the End of the Tenth Fiscal Period.
2. The NOI yield for properties acquired during the Tenth Fiscal Period is calculated based on the premise that real property and city planning taxes are treated as expenses (rounded
to the first decimal place).

RAISING RETURNS THROUGH NEW INVESTMENT MODELSKENEDIX-REIT is actively considering
new investment models as a means toheighten overall returns. One methodthat is being considered actively is theuse of silent partnership investment,
preferred equity investment and otherinvestment structures with the sponsor
of KRM as a means to secure theprojects in the future.

Debt
Real estate
EquityInvestment

Sponsor, etc.

Delivering Results

The CIO

Koju Komatsu
General Manager of
the Investment
Management
Division (CIO)
Kenedix REITManagement, Inc.

KENEDIX-REIT is striving to build a portfolio of 400 billion yen in assets centered on midsized office buildings in Tokyo Metropolitan Area. We began a renewed pursuit of this target
last fiscal period as we aim to build an even more robust portfolio.
Building a robust portfolio requires emphasis on not just cash flow but a balance between
location, size, grade and other factors. Of course the perceived balance shifts depending onmarket characteristics such as now when we are particularly focusing on property returns dueto the sizeable gap between current rents and market rents.
The acquisition of Pacific Marks Nishi-Shinjuku is a good example of first buying a property
because of its excellent location, grade and size. The building possesses these qualities tothe extent it can become a core portfolio asset but we were also able to acquire it at a pricethat generates a favorable return for KENEDIX-REIT, reflecting the emphasis we place on
properties in today’s market. It is a key acquisition as we pursue further growth and one more
piece of evidence that we deliver results.

Kenedix Realty Investment Corporation │ 10

HANDSON
MANAGEMENTTENANT SATISFACTION DRIVES SUCCESSFUL PROPERTY MANAGEMENTKENEDIX-REIT is privy to one of the worst kept secrets
in real estate, namely, that real estate is people. The
difference is that we apply this principle as the central
tenet of our approach to property management. Naturally,cleanliness, working fixtures and other factors are vital to
the success of property management, but the true crux iswhether the tenants, or customers, are truly satisfied.

KENEDIX-REIT conducted the third customer satisfaction (CS) survey in cooperation with industry leading
market research specialists J.D. Power Asia Pacific in the Ninth Fiscal Period with a sample of 58 properties. A
team was assembled in the Tenth Fiscal Period to study how to implement the findings as well as report thefindings to the various properties. Implementation of the suggested work is to take place in the Eleventh andTwelfth Fiscal Periods. Rather than revel in its “accomplishments,” KRM has proactively compiled responses andcountermeasures to opinions voiced in the CS survey. As a result, KENEDIX-REIT is installing hand driers in thebathrooms of over ten of its buildings during the Eleventh Fiscal Period.
OVERALL CUSTOMER TENANT SATISFACTION

Satisﬁed

Slightly satisﬁed

Dissatisﬁed
Slightly dissatisﬁed
Neither satisﬁed nor dissatisﬁed

19.4%

48.9%

21.8%

2009 Survey(2,841 samples)

Unknown

6.4%

4.6%

increase in “Satisfied” sample
2007 Survey(2,285 samples)

15.6%

48.1%

0

20

24.7%

40

60

9.4%

100 (%)

80

KRM has also revamped its centralized property management operations. This has materialized in the form of
eleven on-site open houses at ten properties during the period and reinforced collaboration with leasing agents,
which in turn has led to 130 new tenant contracts for a total of 26,461m2 over the year from May 2009 to April
2010. The sum of these efforts has resulted in a +6 figure for new tenants versus departing tenants.
Hands-on management has allowed KRM to gain greater comprehension of tenant attributes and needs, lower
costs, improve value and achieve a positive tenant entry/departure ratio.

RAISING COMPETITIVENESS: DEPRECIATION AND ACTUAL OR
BUDGETED WORK APRIL 30, 2010
Depreciation

80

Work

60

1,400

40

1,200

20

0

1,000

7th Period

8th Period

9th Period 10th Period

Number of new tenants

-1

5

4

8

6

-20

-60
-80

2007/11

2008/05

2008/11

2009/05

2009/11

2008/04

2008/10

2009/04

2009/102010/04〜

400

Diﬀerence
Number of departing tenants

200
8th
hP
Periodi dActual(2009/4)

99thhP
Periodi dActual(2009/10)

10th
h PeriodP i dActual(2010/4)

11 │ Kenedix Realty Investment Corporation

11 h Pi d
11th
PeriodBudget(2010/10)

12th Pi dPeriodBudget(2011/4)

〜

600

〜

-40

〜

800

0

6th Period〜(mn yen)
1,600

NEW TENANTS AND DEPARTING TENANTS

Note: These numbers are based on floors. Thus if one tenant departs from two floors
or contracts for two floors, it is counted as two.

CLEAR MILESTONESSET TONE FOR STRONG
FUTUREKENEDIX-REIT demonstrated its financial strength in
three ways during the Tenth Fiscal Period:1) Milestone equity financing on November 16, raisedroughly 8.1 billion yen and acquired four office buildings,
lowered its LTV and strengthened its already strong
relationships with financial institutions.

BREAKDOWN OF LENDERS AS OF APRIL 30, 2010
Mitsui Sumitomo Insurance
1.0 bn yen

2) Successful refinancing of 8.5 billion yen in maturing
debt during the Tenth Fiscal Period with one- to five-year
loans.

Sumitomo Mitsui
Banking Corporation
21.59 bn yen

Norinchukin Bank
4.0 bn yen

Resona Bank

4.3 bn yen

Chuo Mitsui Trustand Banking
15.48 bn yen

Mitsubishi UFJ
Trust and Banking
7.2 bn yen

3) Successful arrangement of 7.0 billion yen in new
borrowings from Sumitomo Mitsui Banking Corporation,
Development Bank of Japan, Chuo Mitsui Trust andBanking and Aozora Bank to acquire a property.

Bank ofTokyo Mitsubishi UFJ
9.8 bn yen

Aozora Bank 13.99 bn yen
Development Bank of Japan
13.62 bn yen

DIVERSIFICATION OF DEBT MATURITIES AS OF APRIL 30, 2010
(bn yen)25

Short-term borrowing
Long-term borrowing
20

Investment
corporation bond
9.00

15

10

10.30

18.55

15.80
Tenth Fiscal Periodborrowings
10.74

5

5.00
0

3.80

6.27

6.64

5.79

2.65

0.21

0.21

5.00

3.00

11th
Period12th
Period13th
Period14th
Period15th
Period16th
Period17th
Period18th
Period19th
Period20th
Period21stPeriod22nd
Period23rd
Period24th
Period2010/10

2011/4

2011/10

2012/4

2012/102013/42013/10

2014/4

2014/10

2015/4

2015/10

2016/4

2016/102017/4

Notes: 1. The debt amounts that mature in each period are shown.
2. Borrowings taken out in the Tenth Fiscal Period are encircled(KENEDIX-REIT has excluded portions of principal that are to be repaid in early installments based on the loan
agreements).
3. All figures on this page have been rounded to the decimal place indicated.

Delivering Results

The CFO

Masahiko Tajima
Director and General
Manager
Financial Planning
Division (CFO)
Kenedix REITManagement, Inc.

My duty as the CFO of Kenedix REIT Management is to support the sound growth of ourportfolio by enabling the steady, yet dynamic raising of capital. This requires constantly
grasping the situations in the equity and debt markets, and constantly playing out risk
scenarios.
KENEDIX-REIT is emerging from these tough times in a favorable position in part becauseof strong banking relations. The three most vital elements in maintaining banking relations
are: 1) Maintain deep communications with banks and notifying them of any policy orother changes in advance (don’t surprise them), 2) Prevent yourself from being unilaterally
dependent on banks by maintaining a plethora of financing and capital-raising options, and 3)
Maintain a balanced exposure to banks.
It is also important not to limit the options available to us as a J-REIT. We are striving tobuild a ideal portfolio of 400 billion yen and as CFO, I must analyze and consider a variety ofcapital-raising options, including equity, borrowings, bonds and asset-backed financing. Thisis essential for delivering results.

Kenedix Realty Investment Corporation │ 12

PROMOTING INVESTMENT
Japan ever had an Achilles’ heel, it would be the general
IN JAPAN BY ASSISTING Ifinabilityor lack of good English communication andinformation
English – the proverbial information gap.
THE FOREIGN INVESTOR The situation,inhowever,is not as dire as many are led tobelieve. There are now a number of research services
and other service providers that can and do provide accurate and significant market research. KENEDIX-REIT
would like to introduce the following excellent sources of information to help foreign investors ascertain market
conditions. These include a national government source, industry body, foreign company and Japanese firm. These
are not the only sources but are sources that many in the local real estate industry depend upon. Our hope is that
their introduction here can help bridge the information gap.

THE MINISTRY OF LAND, INFRASTRUCTURE,
TRANSPORT AND TOURISM MLITTOCHI.MLIT.GO.JP/ENGLISH

THE ASSOCIATION FOR REAL ESTATESECURITIZATION ARES
WWW.ARES.OR.JP/EN/INDEX_EN.HTMLThe Ministry of Land, Infrastructure, Transport andTourism (MLIT) is probably one of the strongest
advocates of publishing land prices and other land
information in English. The information it provides
covers pricing, trends and policies while also including
general market data.

The Association for Real Estate
Securitization (ARES) is a leadingindustry body for real estate
securitization in Japan and enjoys
broad support among real estate,securities and service firms. The
organization was founded in
September 1990 as the Council
for Real Estate Syndication(CRES) and changed its name to ARES in 2002.
The organization has a database on J-REIT deals, amonthly report, a market overview and also publishes ahandbook on securitization in Japan.

CBRE JAPANMIKI SHOJI

GLOBAL PLAYER WITH LOCAL PRESENCEA STANDOUT PROVIDER OF JAPANESE REAL ESTATE MARKET RESEARCH

WWW.CBRE.CO.JP/EN
CB Richard Ellis (CBRE)
is one of the most globally
recognized real estate service
firms. The company has
enjoyed and built a strong
market research division in
Japan led by Andy Hurfurt.
The company provides market
reports, tailor-made property
reviews, client briefingsand expert opinions to its
clientele, enjoying robust support among both foreignand domestic clients.

13 │ Kenedix Realty Investment Corporation

WWW.EMIKI.COM/ENG
Miki Shoji wasfounded in 1965
and is led by
Kiyoshi Iijima. The
company issues aquarterly reporton the Tokyo
office market
in English that is widely read by English speaking
market professionals in Japan. The company provides
comprehensive assistance and research on the Japanesereal estate market with particular strengths in the office
and warehouse markets.

KENEDIXREIT
A STRONG,
DIVERSIFIED PORTFOLIO

The following statistics are robust evidence that
KENEDIX-REIT has constructed a powerful portfolio.

Total acquisition priceTot

OFFICE BUILDING PORTFOLIO:
63 PROPERTIES AND TOTAL ACQUISITIONS
OF 213.0 BILLION YEN
AS OF APRIL 30, 2010

36 properties:¥132.7 bn

TTokyo Metropolitan Area: Central Tokyo

TTokyo Metropolitan Area: Non Central Tokyo

KENEDIX-REIT has constructed a diversiﬁed
portfolio of 70 properties (63 oﬃces) centeredon a good selection of 36 oﬃce buildings inCentral Tokyo.
9 properties:
es:

OOther Regional Areas

¥32.2
2.2
2 bn
b

Notes: 1. Central Tokyo is comprised of Chiyoda, Chuo, Minato,
Shibuya and Shinjuku wards.
2. The amounts are rounded down to the nearest 100
million yen.

18 propertiess:1¥48.1 bn¥

MARKET VACANCIES: KENEDIXREIT VERSUS THE MARKETCHANGES IN OCCUPANCY RATIO FOR OFFICE PORTFOLIOKENEDIX-REIT’s strong tenant relations helps it outperform themarket.

Placing importance on the relationship with tenants, occupancy
has held stable due to considering maintaining occupancy above
negotiating for increased rents.

(%)
10

(%)
100

Tokyo Metropolitan Area

8.8%

Data provided by Miki Shoji

95.7%
94.0%

(Note)

95

8

KENEDIX-REIT(Central Tokyo)

6

Total Oﬃce Portfolio

88.2%

90

Other Regional Areas
4

4.0%

2
Apr
2008

Jul
2008

Oct
2008

Jan
2009

Apr
2009

Jul
2009

Oct
2009

Jan
2010

Apr
2010

85

Acquisition of
KDX Nagoya Sakae Building
80 May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar Apr
2007

2008

2009

2010

Note: The vacancies provided by Miki Shoji are the averages for the business district ofTokyo (central 5 wards) and cover both new and existing buildings. This chart was
prepared by KENEDIX-REIT using Miki Shoji data.

Reference: Occupancy at end of 10th Period (Apr. 30, 2010)
Total portfolio (70 properties) 94.4% (+2.0% compared to Jul. 31, 2009)RENTAL NOI RETURNS ANNUALIZEDSUMMARY OF APPRAISED VALUES AS OF APRIL 30, 2010

KENEDIX-REIT recorded falling returns for both oﬃce and retailproperties but the overall portfolio performed a strong 5.1%.

The appraised values of the portfolio have dropped but as awhole the portfolio continues to perform strongly with appraisal
versus acquisition values falling less than 10% for the portfolio
despite the recent economic crisis.

(mn yen)CentralResidential
Urban Retail

5th
Period6th
Period7th
Period8th
Period9th
Period10th Period

Oﬃce

5.5%

5.6%

5.3%

5.5%

5.2%

5.1%

① Acquisition price

213,071

12,37910,319235,769

Central Urban
Retail

5.1%

4.3%

4.8%

4.7%

4.6%

4.5%

② Book value

214,579

12,506

10,117237,204

Residential

5.3%

5.3%

5.3%

5.2%

5.0%

5.2%

③ Appraisal value

194,765

11,6708,465

214,900

Total

5.4%

5.5%

5.3%

5.4%

5.2%

5.1%

Diﬀerence from

Note: Each of the ﬁgures represent the values after adjustment of property and city taxes④ acquisition price(③-①)-18,306-709-1,854-20,869

Percentage ④ / ①

-8.6%

-5.7%

-18.0%-8.9%

Diﬀerence from book⑤
value ( ③ - ② )-19,814-836-1,652-22,304

Percentage ⑤ / ②

-9.2%

-6.7%

-16.3%

-9.4%

Oﬃce

Total

Kenedix Realty Investment Corporation │ 14

KENEDIXREIT
PORTFOLIO TABLEEND OF 10TH PERIOD APRIL 30, 2010

A
Oﬃce

Property Name

Location

Acquisition Price(mn yen)Year Built

Occupancy
Ratio

KDX Nihonbashi 313 Building
KDX Hirakawacho Building
Higashi-Kayabacho Yuraku Building
KDX Hatchobori Building
KDX Nakano-Sakaue Building
Harajuku F.F. Building
FIK Minami Aoyama
Kanda Kihara Building
KDX Shinjuku-Gyoen Building
Portus Center Building
KDX Kojimachi Building
KDX Funabashi Building
KDX Hamacho Building
Toshin 24 Building
Ebisu East 438 Building
KDX Omori Building
KDX Hamamatsucho Building
KDX Kayabacho Building
KDX Shinbashi Building
KDX Shin-Yokohama Building
KDX Yotsuya Building
KDX Minami Semba Dai-1 Building
KDX Minami Semba Dai-2 Building
KDX Kiba Building
KDX Kajicho Building
KDX Nogizaka Building
KDX Higashi-Shinjuku Building
KDX Nishi-Gotanda Building
KDX Monzen-Nakacho Building
KDX Shiba-Daimon Building
KDX Okachimachi Building
KDX Hon-Atsugi Building
KDX Hachioji Building
KDX Niigata Building
KDX Ochanomizu Building
KDX Nishi-Shinjuku Building
KDX Toranomon Building
Toranomon Toyo Building
KDX Shinjuku 286 Building
Karasuma Building
KDX Sendai Building
KDX Roppongi 228 Building
Hiei Kudan-Kita Building
KDX Shin-Yokohama 381 Building (Note 1)
KDX Shin-Yokohama 381 Building Annex Tower (Note 1)
KDX Kawasaki-Ekimae Hon-cho Building
Nissou Dai-17 Building
Ikejiri-Oohashi Building
KDX Hamacho Nakanohashi Building
KDX Kanda Misaki-cho Building
KDX Hakata-Minami Building
KDX Kitahama Building
Shin-toshin Maruzen Building
KDX Jimbocho Building
KDX Gobancho Building
KDX Nagoya Sakae Building
KDX Iwamoto-cho Building
KDX Harumi Building
KDX Hamamatsucho Dai-2 Building
Koishikawa TG Building
Gotanda TG Building
KDX Nihonbashi 216 Building
Paciﬁc Marks Nishi-Shinjuku
Oﬃce Subtotal (63 Properties)

Chuo Ward, Tokyo
Chiyoda Ward, Tokyo
Chuo Ward, Tokyo
Chuo Ward, Tokyo
Nakano Ward, Tokyo
Shibuya Ward, Tokyo
Minato Ward, Tokyo
Chiyoda Ward, Tokyo
Shinjuku Ward, Tokyo
Sakai, Osaka
Chiyoda Ward, Tokyo
Funabashi, Chiba
Chuo Ward, Tokyo
Yokohama, Kanagawa
Shibuya Ward, Tokyo
Ota Ward, Tokyo
Minato Ward, Tokyo
Chuo Ward, Tokyo
Minato Ward, Tokyo
Yokohama, Kanagawa
Shinjuku Ward, Tokyo
Osaka, Osaka
Osaka, Osaka
Koto Ward, Tokyo
Chiyoda Ward, Tokyo
Minato Ward, Tokyo
Shinjuku Ward, Tokyo
Shinagawa Ward, Tokyo
Koto Ward, Tokyo
Minato Ward, Tokyo
Taito Ward, Tokyo
Atsugi, Kanagawa
Hachioji, Tokyo
Niigata, Niigata
Chiyoda Ward, Tokyo
Shinjuku Ward, Tokyo
Minato Ward, Tokyo
Minato Ward, Tokyo
Shinjuku Ward, Tokyo
Kyoto, Kyoto
Sendai, Miyagi
Minato Ward, Tokyo
Chiyoda Ward, Tokyo
Yokohama, Kanagawa
Yokohama, Kanagawa
Kawasaki, Kanagawa
Yokohama, Kanagawa
Meguro Ward, Tokyo
Chuo Ward, Tokyo
Chiyoda Ward, Tokyo
Fukuoka, Fukuoka
Osaka, Osaka
Shinjuku Ward, Tokyo
Chiyoda Ward, Tokyo
Chiyoda Ward, Tokyo
Nagoya, Aichi
Chiyoda Ward, Tokyo
Chuo Ward, Tokyo
Minato Ward, Tokyo
Bunkyo Ward, Tokyo
Shinagawa Ward, Tokyo
Chuo Ward, Tokyo
Shinjuku Ward, Tokyo

5,940
5,180
4,450
3,680
2,533
2,450
2,270
1,950
1,610
5,570
5,950
2,252
2,300
5,300
4,640
3,500
3,460
2,780
2,690
2,520
1,950
1,610
1,560
1,580
2,350
1,065
2,950
4,200
1,400
6,090
2,000
1,305
1,155
1,305
6,400
1,500
4,400
9,850
2,300
5,400
2,100
3,300
7,600
4,700
1,100
3,760
2,710
2,400
2,310
1,380
4,900
2,220
2,110
2,760
1,951
7,550
1,864
10,250
2,200
3,080
2,620
2,010
6,800

Apr. 1974
Mar. 1988
Jan. 1987
Jun. 1993
Aug. 1992
Nov. 1985
Nov. 1988
May 1993
Jun. 1992
Sep. 1993
May 1994
Apr. 1989
Sep. 1993
Sep. 1984
Jan. 1992
Oct. 1990
Sep. 1999
Oct. 1987
Feb. 1992
Sep. 1990
Oct. 1989
Mar. 1993
Sep. 1993
Oct. 1992
Mar. 1990
May 1991
Jan. 1990
Nov. 1992
Sep. 1986
Jul. 1986
Jun. 1988
May 1995
Dec. 1985
Jul. 1983
Aug. 1982
Oct. 1992
Apr. 1988
Aug. 1962
Aug. 1989
Oct. 1982
Feb. 1984
Apr. 1989
Mar. 1988
Mar. 1988
Apr. 2009
Feb. 1985
Jul. 1991
Sep. 1988
Sep. 1988
Oct. 1992
Jun. 1973
Jul. 1994
Jul. 1990
May 1994
Aug. 2000
Apr. 2009
Mar. 2008
Feb. 2008
Apr. 1992
Nov. 1989
Apr. 1988
Oct. 2006
May 1993

100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
77.1%
100.0%
100.0%
88.5%
97.1%
100.0%
100.0%
84.1%
100.0%
100.0%
100.0%
100.0%
100.0%
86.3%
100.0%
83.1%
94.1%
100.0%
75.1%
78.1%
100.0%
100.0%
100.0%
97.3%
100.0%
100.0%
100.0%
64.3%
100.0%
100.0%
100.0%
93.9%
100.0%
93.9%
92.8%
65.1%
91.9%
100.0%
100.0%
100.0%
94.9%
100.0%
100.0%
100.0%
86.2%
96.4%
100.0%
85.0%
85.7%
90.3%
100.0%
98.2%
87.5%
100.0%
57.8%
87.5%
93.8%

213,071

20.5 yrs

94.0%

Collateralized
Assets

No.
A-1
A-2
A-3
A-4
A-5
A-6
A-7
A-8
A-9
A-12
A-13
A-14
A-15
A-16
A-17
A-18
A-19
A-20
A-21
A-22
A-23
A-24
A-25
A-26
A-27
A-28
A-29
A-30
A-31
A-32
A-33
A-34
A-35
A-36
A-37
A-38
A-39
A-40
A-41
A-42
A-44
A-45
A-46
A-47
A-65
A-48
A-49
A-50
A-51
A-52
A-53
A-54
A-55
A-56
A-57
A-58
A-59
A-60
A-61
A-62
A-63
A-64
A-66

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15 │ Kenedix Realty Investment Corporation

A-66
Paciﬁc Marks Nishi-Shinjuku

PORTFOLIO MAP
THIS PAGE ONLY REPRESENTS PROPERTIES IN CENTRAL TOKYO.
A-13
KDX Kojimachi Building

YAMANOTE LINEIKEBUKURO

B-03

Tokyo
Metropolitan
Government

A-38

A-55

A-37
KDX Ochanomizu Building

UENO

A-29

SHINNJUKKUSHINJUKU

A-52

A-41

A-66

A-59

A
A-46

A-23

A-37
A-56
A-08

A-57

A-09

A-27

AA-13
-

C-02

A-02
A-06

The Imperial Palace
A-51

TOKYO

A-07

C-01

AA-15

A-03

AA-20
AA-45

SHIBUYA

A 64
A-64
A-21
A-2
A-399

A-28
A-17

Tokyo
Tower

A-01

A-40

A-04

A-61
61
A-19

B-19

A-32

A-60

SHINAGAWA

A-32
KDX Shiba-Daimon Building
A-40
Toranomon Toyo Building

Collateralized
AssetsNo.

B
Residential

C
Central Urban
Retail

B-3
B-18
B-19
B-25
B-34
C-1
C-2

■
■

■

Tokyo International Airport

Property Name

Location

Court Mejiro
Shinjuku Ward, Tokyo
Venus Hibarigaoka
Sapporo, Hokkaido
Residence Charmante Tsukishima
Chuo Ward, Tokyo
Court Shin-Okachimachi
Taito Ward, Tokyo
Gradito Kawaguchi
Kawaguchi, Saitama
Residential Subtotal (5 properties)
Frame Jinnan-zaka
Shibuya Ward, TokyoKDX Yoyogi Building
Shibuya Ward, Tokyo
Central Urban Retail Subtotal (2 properties)

TOTAL 70 properties

Acquisition Price(mn yen)Year Built

Occupancy
Ratio

Mar. 1997
Mar. 1989
Jan. 2004
Oct. 2005
Feb. 2006

95.2%
96.3%
100.0%
93.0%
100.0%

10,3199.3 yrs

97.4%

9,900
2,479

Mar. 2005
Aug. 1991

100.0%
87.2%

12,3797.8 yrs

97.4%

235,769

19.3 yrs

94.4%

1,250
1,800
5,353
878
1,038

Notes: 1. A-65 KDX Shin-Yokohama 381 Building Annex Tower is an annex tower of the A-47 KDX Shin-Yokohama 381 Building and the Investment Corporation owns the entire compartmentalized
ownership building.
2. The completion date is the date of construction completion recorded in the land register. The average age subtotal and total data are calculated using the weighted-average based on
acquisition prices as of April 30, 2010, and are rounded down to the ﬁrst decimal place.
3. Amounts indicated have been rounded down.

Kenedix Realty Investment Corporation │ 16

FINANCIAL SUMMARYHISTORICAL OPERATING TRENDSFOR THE SIXTH  TENTH FISCAL PERIODS

Periodunit

6th Period(as of Apr. 30, 2008)

7th Period(as of Oct. 31, 2008)

8th Period(as of Apr. 30, 2009)

9th Period(as of Oct. 31, 2009)

10th Period(as of Apr. 30, 2010)

Operating revenues

mn yen

8,582

8,456

8,204

7,921

8,067

(Rental revenues)

mn yen

7,630

8,156

8,204

7,921

8,067

Operating expenses

mn yen

4,517

4,311

4,740

4,708

4,329

(Property-related expenses)

mn yen

3,447

3,678

3,603

3,652

3,714

Operating income

mn yen

4,065

4,144

3,463

3,213

3,738

Ordinary income

mn yen

3,343

3,124

2,435

2,103

2,568

Net income (a)mn yen

3,342

3,123

2,434

2,102

2,567

Total assets (b)mn yen230,520

239,648

238,745

236,320

251,566(Period-on-period change)

Interest-bearing debt (c)%(+7.8)(+4.0)(-0.4)(-1.0)(+6.5)

mn yen89,75098,75098,75097,220102,968(Period-on-period change)%(+18.9)(+10.0)(0.0)(-1.5)(+5.9)

Unitholders’ equity (d)mn yen128,314

128,087

127,398

127,067

135,689(Period-on-period change)%(+0.4)(-0.2)(-0.5)(-0.3)(+6.8)

Unitholders’ capitalmn yen124,973

124,973

124,973

124,973

133,129(Period-on-period change)

%

(0.0)

(0.0)

(0.0)

(0.0)

(+6.5)

unit

200,000

200,000

200,000

200,000

233,550yen

641,570

640,437

636,990

635,335

580,987

Number of investment units
issued and outstanding (e)Unitholders’ equity per unit(d)/(e)Total distribution (f)mn yen

3,342

3,123

2,434

2,102

2,567

Distribution per unit (f)/(e)yen

16,711

15,618

12,172

10,511

10,993(Earnings distributed per
unit)

yen

16,711

15,618

12,172

10,511

10,993(Distribution in excess ofearnings per unit)

yen

-

-

-

-

-

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

1.5 (3.0)

1.3 (2.6)

1.0 (2.1)

0.9 (1.8)

1.1 (2.1)

Return on unitholders’ equity(annualized) (Notes 2 and 3)%

2.6 (5.2)

2.4 (4.8)

1.9 (3.8)

1.7 (3.3)

2.0 (3.9)

Unitholders’ equity ratio at
end of period (d)/(b)

%

55.7

53.4

53.4

53.8

53.9

(-4.1)(-2.2)(-0.1)(+0.4)(+0.2)

38.9

41.2

41.4

41.1

40.9

(Period-on-period change)

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

Payout ratio (Note 4) (f)/(a)(+3.6)(+2.3)(+0.2)(-0.2)(-0.2)

%

99.9

99.9

100.0

100.0

99.9

properties

Other reference
Number of properties

68

69

67

65

70

Total leasable ﬂoor aream2

248,625.52

256,214.30

250,364.42

254,225.04

271,260.81

Occupancy at end of period

%

95.9

95.6

95.7

94.7

94,4

Depreciation expenses forthe period
Capital expenditures for theperiodLeasing NOI (net operating
income) (Note 5)

mn yen

1,430

1,445

1,429

1,451

1,477

mn yen

1,152

1,105

891

400

330

mn yen

5,612

5,923

6,030

5,721

5,830

FFO (funds from operation)

mn yen

4,259

4,269

4,356

3,994

4,044

yen

21,297

21,34521,78019,973

17,318(Note 6)

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 x 100
2. Annualized values for the Sixth Fiscal Period are calculated based on a period of 182 days, 184 days for the Seventh Fiscal Period, 181 days for the Eighth Fiscal Period, 184 days for
the Ninth Fiscal Period and 181days for the Tenth Fiscal Period.
3. Return on unitholders’ equity = Net income/(Total unitholders’ equity at beginning of period + Total unitholders’ equity at end of period)/2 x 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 – Proﬁt on sale of trust beneﬁciary interests in real estate or real estate + Loss on sale of trust beneﬁciary interests in realestate or real estate
7. FFO per unit = FFO/Number of investment units issued and outstanding (ﬁgures below ¥1 rounded down)

17 │ Kenedix Realty Investment Corporation

19 │ Kenedix Realty Investment Corporation

BALANCE SHEETSAS OF APRIL 30, 2010 AND OCTOBER 31, 2009

In thousands of yen
As of April 30, 2010

As of October 31, 2009ASSETS
Current assets:
Cash and bank deposits¥

13,297,791¥

12,870,430

Rental receivables

151,363

184,068

Consumption tax refundable

48,308136,065

Other current assets

83,141

99,296

13,580,603

13,289,859

Land

164,462,798

152,327,017

Buildings and structures

80,958,715

76,930,254

Machinery and equipment

1,264,468

1,228,084

Tools, furniture and ﬁxtures

340,770

327,711

Total current assets
Property and equipment, at cost:Less-accumulated depreciation(10,108,997)(8,650,220)

236,917,754

222,162,846

Ground leasehold

285,350

285,350

Organization costs

-

5,090

Corporate bond issuance costs

33,86539,647

Net property and equipment
Other assets:

Unit issuance costs

41,893

23,684

Other assets

707,019

513,945

Total assets¥

251,566,484¥

549,294¥

236,320,421

LIABILITIES AND UNITHOLDERS' EQUITY
Liabilities
Current liabilities:
Trade and other payables¥

Short-term debt

469,905

37,050,000

24,500,000

17,054

15,105

Rents received in advance

1,245,403

1,133,738

Other current liabilities

179,264

171,408

39,041,015

26,290,156

Corporate bonds

12,000,000

12,000,000

Long-term debt

53,918,500

60,720,000

Leasehold and security deposits received

10,917,330

10,228,542

Deposits received

Total current liabilities

Other liabilities
Total liabilities-

14,554¥

115,876,845¥

109,253,252¥

133,129,755¥

124,973,750

Unitholders' equity
Unitholders' capital
Units authorized: 2,000,000 units
Units issued and outstanding: 233,550 units
As of April 30, 2010 and October 31, 2009, respectively
Retained earnings
Unrealized gain from deferred hedge transactions

2,567,480(7,596)

Total unitholders' equity
Total liabilities and unitholders' equity

2,102,249(8,830)135,689,639¥

251,566,484

127,067,169¥

236,320,421

See accompanying notes to the ﬁnancial statements.

Kenedix Realty Investment Corporation │ 20

STATEMENTS OF INCOME AND RETAINED EARNINGSFOR THE PERIOD FROM MAY 1, 2009 TO OCTOBER 31, 2009 AND THE PERIOD FROM NOVEMBER 1, 2009 TO APRIL 30, 2010

In thousands of yen
From November 1, 2009
to April 30, 2010

From May 1, 2009
to October 31, 2009

Operating revenues:
Rental revenues¥

Total operating revenues

8,067,448¥

7,921,862

8,067,448

7,921,862

Property-related expenses

3,714,418

3,652,105

Loss on sale of real estate-

440,771

Asset management fees

433,915423,183

Administrative service and custodian fees

77,22976,727

Other operating expenses

103,530

115,723

4,329,092

4,708,509

Operating expenses:

Total operating expenses
Operating income¥

3,738,356¥

3,213,353¥

932,081¥

907,825

Non-operating expenses:
Interest expense
Financing-related expenses

210,091

147,899

Amortization of organization costs

5,090

5,090

Amortization of unit issuance costs

32,063

23,684

Amortization of corporate bond issuance costs

5,782

5,878

(15,122)

19,7292,568,371

2,103,248

940

1,057

2,567,431

2,102,191

49

58

Others, net
Income before income taxes
Income taxes
Net income
Retained earnings at the beginning of period
Retained earnings at the end of period
See accompanying notes to the ﬁnancial statements.

21 │ Kenedix Realty Investment Corporation¥

2,567,480¥

2,102,249

STATEMENTS OF CHANGES IN UNITHOLDERS’ EQUITY
FOR THE PERIOD FROM MAY 1, 2009 TO OCTOBER 31, 2009 AND THE PERIOD FROM NOVEMBER 1, 2009 TO APRIL 30, 2010

In thousands of yen
Unitholders' Equity
Unitholders'
capitalBalance as of April 30, 2009¥

124,973,750

Retainedearnings¥

2,434,458

Unrealized gainfrom deferred hedgetransactions¥(10,110)

Total¥

127,398,098

Changes during the ﬁscal period
New unit issuance

-

-

-

-

Payment of dividends-(2,434,400)-(2,434,400)

Net income-

2,102,191-

2,102,191

Interest-rate swap

-

-

1,280

1,280

-

(332,209)

1,280(330,929)

Total changes
during the ﬁscal period
Balance as of October 31, 2009¥

124,973,750¥

2,102,249¥(8,830)¥127,067,169

Changes during the ﬁscal period
New unit issuance

8,156,005

Payment of dividends--

8,156,005-(2,102,200)-(2,102,200)

Net income-

2,567,431-

2,567,431

Interest-rate swap

-

-

1,234

1,234

8,156,005

465,2311,234

8,622,470

Total changes
during the ﬁscal period
Balance as of April 30, 2010¥

133,129,755¥

2,567,480¥(7,596)¥135,689,639

See accompanying notes to the ﬁnancial statements.

Kenedix Realty Investment Corporation │ 22

NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 1, 2009 TO OCTOBER 31, 2009 AND THE PERIOD FROM NOVEMBER 1, 2009 TO APRIL 30, 2010

1. ORGANIZATION AND BASIS OF PRESENTATIONORGANIZATION
Kenedix Realty Investment Corporation (“the Investment Corporation”) was established on May 6, 2005 under the Law
concerning Investment Trusts and Investment Corporations of Japan (“the Investment Trust Law”). On July 21, 2005, theInvestment 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 public offerings including two global offerings. The Investment Corporation also undertook an additional issue of 33,550
investment units through a public offering in Japan on November 16, 2009. Consequently, as of April 30, 2010, the end of the tenthfiscal period, the number of investment units issued and outstanding totaled 233,550 units.
The Investment Corporation is externally managed by Kenedix REIT Management, Inc. (“the Asset Management Company”)
as its asset management company. In concert with the Asset Management Company, the Investment Corporation strives tomaximize cash distribution to investors by securing stable earnings and sustainable investment growth. To this end, the Investment
Corporation adopts a dynamic and flexible investment stance that accurately reflects its environment and market trends, andendeavors to ensure a timely response to each and every opportunity. The Investment Corporation endeavors to develop adiversified investment portfolio named “KENEDIX Selection,” adopting a three-point investment criteria based on property type,area and size.
During the period ended April 30, 2010, the Investment Corporation also undertook an additional issue of 33,550 investment
units through a public offering in Japan on November 16, 2009, and undertook long-term borrowings of ¥7,000 million. The
Investment Corporation acquired five office buildings (total acquisition price of ¥15,610 million) in the Tokyo Metropolitan Area.
As of April 30, 2010, the Investment Corporation had total unitholders’ capital of ¥133,130 million with 233,550 investment units
outstanding. The Investment Corporation owned a portfolio of 70 properties with a total acquisition price of ¥235,769 million
containing a total leasable area of 271,260.81m2. The occupancy ratio was 94.4%. The portfolio of 70 properties consists of 63
office buildings, 5 residential properties and 2 central urban retail properties. 60 properties are located in the Tokyo Metropolitan
Area and 10 properties are located in Other Regional Areas.

BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust
Law of Japan, the Japanese Corporation Law, the Financial Instruments and Exchange Law of Japan and related regulations, and in
conformity with accounting principles and practices generally accepted in Japan (“Japanese GAAP”), which are different in certain
respects as to the application and disclosure requirements of the International Financial Reporting Standards or accounting
principles generally accepted in the United States of America.
The accompanying financial statements are a basically translation of the audited financial statements that were prepared forJapanese domestic purposes from the accounts and records maintained by the Investment Corporation and filed with the Kanto
Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. In preparing theaccompanying financial statements, relevant notes have been added and certain reclassifications have been made from the financial
statements issued domestically in order to present them in a form that is more familiar to readers outside Japan. The Investment
Corporation’s fiscal period is a six-month period which ends at the end of April and October of each year, respectively. The
Investment Corporation does not prepare consolidated financial statements because it has no subsidiaries.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESA PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line basis over theestimated useful lives of the assets ranging as stated below:
From November 1, 2009 to April 30, 2010

From May 1, 2009 to October 31, 2009

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

B ORGANIZATION COSTS
Organization costs are amortized over a period of five years, comprised of ten fiscal periods, with an equal amount amortized ineach fiscal period.

23 │ Kenedix Realty Investment Corporation

C UNIT ISSUANCE COSTS
Unit issuance costs are amortized over a period of three years under the straight-line method.
Underwriters’ commissions in connection with the issuance of unitholders’ equity are offset against proceeds raised since the“Spread Method” was used for the unit issuance. Under the Spread Method, securities underwriters underwrite the units at theissue price and offer them to investors at the offer price, which is different from the issue price. The difference between the offer
price and the issue price represents the underwriting commission received by the securities underwriters, eliminating the need forthe issuer to pay underwriting commissions. If securities underwriters had underwritten the units at the issue price and offered theunits to investors at an offer price equal to the issue price (known as the “Conventional Method”), a commission would have been
incurred and it would have been expensed as new unit issuance costs. Therefore, the Spread Method understated unit issuance costsby ¥254,421 thousand on the balance sheet and decreased amortization of unit issuance costs by ¥50,884 thousand and increased
income before income taxes on the income statement by the same amount compared to the Conventional Method for the period
from November 1, 2009 through April 30, 2010.

D CORPORATE BOND ISSUANCE COSTS
Corporate bond issuance costs are amortized over a loan period under the straight-line method.

E ACCOUNTING TREATMENT OF TRUST BENEFICIARY INTERESTS IN REAL ESTATE
For trust beneficiary interests in real estate, which are commonly utilized in the ownership of commercial properties in Japan, allassets and liabilities within trust are recorded in the relevant balance sheet and income statement accounts.

F 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 recognized on an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned andtheir amounts can be reasonably estimated. Reimbursements from tenants including utility charge reimbursements are recorded
on a gross basis and such amounts are recorded both as revenue and an expense during the fiscal period, respectively.

G 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. Under the Japanese tax rule, the seller of the property at the time of disposal is liable for these taxes on
the property from the date of disposal to the end of the calendar year in which the property is disposed. The seller, however, isreimbursed 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 allocatedportions of the property-related taxes are capitalized as part of the acquisition costs of the related properties. In subsequentcalendar years, such property-related taxes are charged as operating expenses in the fiscal period in which the installments of suchtaxes are paid to the relevant tax authorities.

H INCOME TAXES
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases ofassets and liabilities using the statutory tax rates.

I DERIVATIVE FINANCIAL INSTRUMENTS
The Investment Corporation utilizes interest-rate swap agreements as derivative financial instruments only for the purpose ofhedging its exposure to changes in interest rates. The Investment Corporation deferred recognition of gains or losses resulting fromchanges in fair value of interest-rate swap agreements because its interest-rate swap agreements met the criteria for deferral hedging
accounting. However, the Investment Corporation adopted special treatment for interest-swap agreements if its interest-rate swap
agreement met the criteria for hedging accounting under this treatment whereby the net amount to be paid or received under theinterest-rate swap agreement is added to or deducted from the interest on the assets or liabilities for which the swap contract was
executed.

J ROUNDING OF AMOUNTS PRESENTED
Amounts have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP and filed withregulatory authorities in Japan, whereas amounts have been rounded to the nearest million in the accompanying financial
statements. Totals shown in the accompanying financial statements do not necessarily agree with the sums of the individual
amounts.

Kenedix Realty Investment Corporation │ 24

NOTES TO FINANCIAL STATEMENTS

3. SCHEDULE OF PROPERTYLand
Buildings and structures
Machinery and equipment
Tools, furniture and ﬁxtures
Total

Acquisitioncosts¥ 164,463
80,9591,264
341¥ 247,027

In millions of yen
As of April 30, 2010
As of October 31, 2009
Accumulated
Acquisition
AccumulatedBook value
Book value
depreciation
costs
depreciation¥ 164,463¥
152,327¥ 152,327¥ 9,573
71,38676,930 ¥
8,191
68,739
399
865
1,228
341
887
137
204
328
118
210
¥ 10,109¥ 236,918¥ 230,813 ¥
8,650 ¥ 222,163

4. SHORT-TERM AND LONG-TERM DEBT
The following summarizes short-term and long-term debt outstanding as of April 30, 2010:
Classiﬁcation

Short-term debt

Current portion of long-term debt

October 26, 2009
October 30, 2009
January 29, 2010
February 26, 2010
April 30, 2010
August 1, 2005
October 31, 2008
July 31, 2008
February 29, 2008
June 30, 2008
September 22, 2008
July 15, 2008
September 30, 2008
April 17, 2007
May 1, 2006
April 30, 2009
April 30, 2009

October 26, 2010
October 29, 2010
January 31, 2011
February 28, 2011
April 28, 2011
July 30 ,2010
October 29, 2010
January 31, 2011
February 28, 2011
February 28, 2011
March 22, 2011
March 31, 2011
March 31, 2011
April 18, 2011
April 28, 2011
April 28, 2011
April 28, 2011

Weighted-averageinterest rate
1.79%
1.80%
1.36%
1.65%
1.40%
1.29%
1.57%
1.87%
1.37%
1.99%
1.71%
1.87%
1.82%
1.65%
2.20%
2.23%
2.23%

May 1, 2006
July 14, 2006
September 1, 2006
December 1, 2006
April 2, 2007
January 10, 2008
February 29, 2008
March 31, 2008
March 31, 2008
May 1, 2008
June 30, 2008
June 30, 2008
July 31, 2008
September 1, 2008
February 27, 2009
February 27, 2009
April 30, 2009
April 30, 2009
October 26, 2009
October 30, 2009
December 8, 2009
January 13, 2010
January 29, 2010
February 18, 2010
February 18, 2010
April 2, 2010

April 28, 2016
July 13, 2011
August 30, 2013
November 30, 2011
April 2, 2012
January 10, 2012
August 31, 2011
September 30, 2011
September 30, 2011
November 1, 2011
June 29, 2012
December 28, 2012
July 29, 2011
September 1, 2011
February 29, 2012
August 31, 2012
October 31, 2011
April 27, 2012
October 28, 2013
October 30, 2013
December 10, 2012
January 15, 2013
January 30, 2015
February 18, 2013
February 18, 2015
April 2, 2015

2.73%
2.15%
2.12%
1.96%
1.88%
1.50%
1.43%
1.61%
1.56%
1.91%
2.15%
2.26%
1.99%
1.78%
2.07%
2.04%
2.40%
2.40%
2.42%
2.45%
1.67%
1.90%
2.17%
1.90%
2.19%
2.22%

March 15, 2007
March 15, 2007

March 15, 2012
March 15, 2017

1.74%
2.37%

Drawdown date

Repayment date

SubtotalLong-term debt

Subtotal
Corporate bonds
Subtotal
Total

25 │ Kenedix Realty Investment Corporation

Balance(In millions of yen)
¥
1,500
3,500
1,300
500
2,000
9,500
500
3,500
2,000
1,000
1,250
2,000
2,000
1,500
2,500
1,500
1,000
¥
37,050¥ 5,000
1,000
3,000
2,500
2,000
2,500
1,500
3,000
2,000
1,000
1,500
3,000
3,500
1,000
480
960
3,500
2,000
980
1,960
500
1,000
1,176
1,500
5,363
2,000
¥
53,919
9,000
3,000
¥
12,000¥ 102,969

5. LINE OF CREDIT
The Investment Corporation has established a credit commitment line with a lender. The borrowing under the commitment line
agreement is ¥2 billion. The Investment Corporation had an outstanding balance of ¥2 billion as of April 30, 2010.
The commitment period of the commitment line agreement concluded with The Bank of Tokyo-Mitsubishi UFJ, Ltd. has already
expired. Furthermore, the expiration date of the commitment line agreement is March 31, 2011, set in the memorandum of
understanding executed on September 26, 2008. However, since the commitment period has already expired, the Investment
Corporation cannot undertake new borrowings.

6. ASSETS PLEDGED AS COLLATERAL AND SECURED LOANS PAYABLE(As of April 30, 2010)

Assets pledged as collateral
Cash and bank deposits
Land
Buildings and structures
Machinery and equipment
Tools, furniture and ﬁxtures
Other assets
Total
Secured loans payable:
Short-term loans debt
Long-term loans debt
Total

In thousands of yen¥

5,213,604
117,509,969
51,514,053
544,088
121,981
1,146¥ 174,904,841¥

37,050,000
53,918,500¥ 90,968,500

7. PER UNIT INFORMATIONThe net asset value per unit as of April 30, 2010 and October 31, 2009 was ¥580,987 and ¥635,335. Net income per unit as of April
30, 2010 and October 31, 2009 was ¥11,125 and ¥10,510.
The weighted average number of units outstanding of 230,770 and 200,000 were used for the computation of the amount of net
income per unit as of April 30, 2010 and October 31, 2009.

8. INCOME TAXESThe Investment Corporation is subject to corporate income taxes at a regular statutory rate of approximately 40%. However, theInvestment Corporation may deduct from its taxable income amounts distributed to its unitholders, provided the requirements
are met under the Special Taxation Measure Law of Japan. Under this law, the Investment Corporation must meet a number of tax
requirements, including a requirement that it currently distribute in excess of 90% of its net income for the fiscal period in order tobe able to deduct such amounts. If the Investment Corporation does not satisfy all of the requirements, the entire taxable incomeof the Investment Corporation will be subject to regular corporate income taxes. Since the Investment Corporation distributed
approximately 100% of its distributable income in the form of cash distributions totaling ¥2,567 million and ¥2,102 million forthe periods ended April 30, 2010 and October 31, 2009, such distributions were treated as deductible distributions for purposes ofcorporate income taxes. The effective tax rate on the Investment Corporation’s income was 0.04% and 0.05% for the periods endedApril 30, 2010 and October 31, 2009. The following summarizes the significant difference between the statutory tax rate and theeffective tax rate:

Statutory tax rate ..............................................................................
Deductible cash distributions ......................................................
Other .......................................................................................................
Eﬀective tax rate ................................................................................

From November 1, 2009
to April 30, 2010

From May 1, 2009
to October 31, 200939.33%(39.32)0.03
0.04%

39.33%(39.31)
0.03
0.05%

9. UNITHOLDERS’ EQUITYThe Investment Corporation issues only non-par value units in accordance with the Investment Trust Law. 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 Law.

Kenedix Realty Investment Corporation │ 26

NOTES TO FINANCIAL STATEMENTS

10. RELATED-PARTY TRANSACTIONSTRANSACTIONS WITH KENEDIX REIT MANAGEMENT, INC.
Kenedix REIT 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 REIT Management,
Inc. property management fees in accordance with the terms of its Property Management Agreements. For these services, theInvestment Corporation paid ¥305 million to Kenedix REIT Management, Inc.

11. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATEDEXPENSES
Rental and other operating revenues and property-related expenses for the periods from November 1, 2009 to April 30, 2010 andfrom May 1, 2009 to October 31, 2009 consist of the following:
In thousands of yen
From November 1, 2009
to April 30, 2010
Rental and other operating revenues:
Rental revenues
Common area charges
Subtotal
Others:Parking space rental revenues
Utility charge reimbursement
Miscellaneous
Subtotal
Total rental and other operating revenues
Property management fees and facility management fees
Depreciation
Utilities
Taxes
Insurance
Repairs and maintenance
Trust fees
Loss on retirement of ﬁxed assets
OthersTotal property-related expenses¥

5,882,594
1,267,521
7,150,115¥

243,319560,259
113,755
917,333
8,067,448¥¥¥

801,877
1,477,410
508,338
648,231
16,759110,725
41,57912,537
96,962
3,714,418¥

Loss on sale of real estate
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Loss on sale of real estate

From May 1, 2009
to October 31, 2009

¥

¥

-

¥

¥

5,711,053
1,195,072
6,906,125
231,982
617,328
166,427
1,015,737
7,921,862
764,052
1,451,833
529,106
536,723
16,098171,075
38,192
23,394
121,632
3,652,105

1,982,000
2,348,605
74,166440,771

12. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease terms ofgenerally two years for office buildings and residential properties and with lease terms ranging from two to ten years for retailproperties. The future minimum rental revenues under existing non-cancelable operating leases as of April 30, 2010 and October
31, 2009 are as follows:
In thousands of yen
As of April 30, 2010
Due within one year
Due after one year
Total

27 │ Kenedix Realty Investment Corporation¥¥

1,285,413
7,940,847
9,226,260

As of October 31, 2009¥¥

1,059,032
7,538,786
8,597,818

13. DERIVATIVES AND HEDGE ACCOUNTINGThe Investment Corporation has entered into interest-rate swap agreements with several Japanese financial institutions to hedge its
variable rate long-term debt obligations. The Investment Corporation utilizes interest-rate swap agreements, which are derivative
financial instruments, only for the purpose of mitigating future risks of fluctuations of interest rates, but does not enter into suchtransactions for speculative or trading purposes. The Investment Corporation entered into such derivative transactions to hedge
risk in accordance with its Articles of Incorporation and the established risk management policies of the Asset Management
Company.
The following summarizes the notional principal amounts and the estimated unrealized loss from interest-rate swap agreements
as of April 30, 2010: The estimated unrealized loss does not include the interest-rate swap agreements that met the criteria for the
special treatment.
(As of April 30, 2010)
Type
Interest-rate swap:
Fixed rate payable and ﬂoating rate receivable

Notional amount

Unrealized loss

¥25,000 million¥(13 million)

14. PROPERTY INFORMATION
Details of the property portfolio as of April, 2010 were as follows:TypeOﬃce Buildings

Location

Residential Properties

Central Urban Retail
Properties

Tokyo
Metropolitan Area

Other Regional
Areas

Tokyo
Metropolitan Area

Other Regional
Areas

Tokyo Metropolitan
Area

54

9

4

1

2

Number of properties

Property information (In millions of yen)
Acquisition price
Percentage of total acquisition costs
Net book value
Appraisal value at year end
Percentage of total appraisal value¥

180,856
76.71%
182,795
170,14179.17%¥

32,21513.66%
31,785
24,624
11.46%

¥

8,519
3.61%
8,242
7,095
3.30%

¥

1,800
0.76%
1,876
1,370
0.64%

¥

12,3805.25%
12,506
11,6705.43%

94,10684,036
10,07034,943
8,302
8,409
2,117
7,043
469
8,603
59,16322,781¥

353,231324,285
28,94676,24023,904
19,521
19,634
5,917
328
6,936
276,991
65,803Financial results for the period ended April 30, 2010 (In thousands of yen)
Rental and other operating revenues
Rental revenues
Other revenues
Property-related expenses
Property management fees
Taxes
Utilities
Repairs and maintenanceInsurance
Trust fees and other expenses
NOI (Net Operating Income)Depreciation expenses
Operating income from property leasing
activities
Capital expenditures
NCF (Net Cash Flow)¥

6,255,280
5,584,307
670,973
1,606,555
573,530
469,995
387,172
72,59810,50692,754
4,648,725
968,514¥

1,099,609
918,872
180,737
460,603
171,176
137,117
96,685
15,796
4,783
35,046
639,006
344,043¥

265,222238,616
26,606
58,667
24,965
13,188
2,730
9,371
673
7,740
206,555
76,269¥3,680,211

294,963130,286

36,382

211,188

214,377
4,434,348

100,716
538,290288
206,267

59,163

15,074
261,917

Kenedix Realty Investment Corporation │ 28

NOTES TO FINANCIAL STATEMENTS

A breakdown of property types as of April 30, 2010 was as follows:
Class of assets

Property typeOﬃce Buildings

Area
Tokyo Metropolitan Area
Other Regional Areas

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

182,795
31,785
214,580
8,242
1,876
10,118

72.7%
12.6%
85.3%
3.3%
0.7%
4.0%

12,506

5.0%

237,204
14,362
251,566
115,877
135,689

94.3%
5.7%
100.0%
46.1%
53.9%

Subtotal
Property andequipment

Residential Properties

Subtotal
Central Urban Retail
Properties
Total
Bank deposits and other assets
Total assets
Total liabilities
Net assets

Tokyo Metropolitan Area
Other Regional Areas

Tokyo Metropolitan Area¥¥¥

Percentage of
total assets

15. FINANCIAL INSTRUMENTS
Tenth Fiscal Period (November 1, 2009 to April 30, 2010)
Effective the fiscal year ended April 30, 2010, a new accounting standard for financial instruments and related implementation
guidance have been adopted.

1. OVERVIEW
1 POLICY FOR FINANCIAL INSTRUMENTS
The Investment Corporation procures essential funds for acquiring properties and undertaking the repayment of loans primarily
through bank loans and the issuance of corporate bonds and new investment units. The Investment Corporation uses derivatives
for the purpose of hedging 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
Debt and corporate bonds are used primarily for procuring funds necessary for the acquisition of properties and have a redemption
date of a maximum of seven years following the accounting date. Although a certain portion of said liabilities are subject to interest
rate fluctuation risk, the Investment Corporation utilizes derivatives (interest-rate swap transactions) in order to reduce such risk.
Interest-rate swap transactions are used as derivative financial instruments. Utilizing interest-rate swap 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 of hedging activities, pleasesee 2. (I) 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 in order to minimize risk arising from fluctuations in interest rates
on funds procured.
(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 the balance 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 priceavailable, 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.

29 │ Kenedix Realty Investment Corporation

2. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments on the balance sheets as of April 30, 2010 and estimated fair value are shown in thefollowing table.

(1) Cash and bank deposits
Total assets(1) Short-term debt
(2) Corporate bonds(3) Long-term debt(including current portion of long-term debt)
Total liabilities

Carrying value¥
13,297,791¥ 13,297,791
8,800,000
12,000,000

In thousands of yen
Estimated fair value¥
13,297,791¥ 13,297,791
8,800,000
11,415,600

82,168,500

81,417,950(750,550)¥ 102,968,500¥ 101,633,550¥ (1,334,950)

Diﬀerence(584,400)

Note 1: Methods to determine the estimated fair value of ﬁnancial instruments and other matters related to securities and derivative transactions.

ASSETS
1 CASH AND BANK DEPOSITS
Since these items are settled in a short period of time, their carrying value approximates fair value.

LIABILITIES
1 SHORTTERM DEBT
Since these items are settled in a short period of time, their carrying value approximates fair value.

2 CORPORATE BONDS
The fair value of corporate bonds is based on quoted market prices.

3 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 tobe applied if similar new loans were entered into. The fair value of long-term debt bearing interest at variable rate, which is subject
to fixed interest rates resulting from interest rate swaps and special treatment applied to said swaps, is based on the present value ofthe total of principal and interest, which is handled together with applicable interest-rate swaps, discounted by the interest rate tobe applied if similar loans were entered into.

DERIVATIVE TRANSACTIONS① Items that are not applied to hedge accounting
Not applicable② Items that are applied to hedge accounting

Hedge
accounting
methodType of derivativetransaction

Hedgeditems

Accounting
method, inprinciple

Interest-rate
swaps: Receive/
ﬂoating and pay/ﬁxedLong-term
debt

Specialtreatment ofinterest-rate
swapsInterest-rate
swaps: Receive/
ﬂoating and pay/
ﬁxed
Total

Long-term
debt

Contracted amount(in thousands of yen)

Fair value
Maturing within (in thousands of yen)
1 year

¥-1,500,000

23,500,000¥ 25,000,000¥

9,000,000¥ 9,000,000¥

Calculation method for
applicable fair value

Based on theamount provided(12,520) by counterparty
ﬁnancial
institutions*¥ (12,520)*Special treatment of interest-rate swaps is reported at the fair value of applicable long-term debt. This is because such swaps are handled together with hedged long-term debt.
Note 2: Redemption schedule for receivables.

Cash and bank deposits
Total

Due in 1 year or less
(In thousands of yen)
¥ 13,297,791¥ 13,297,791

Note 3: Redemption schedule for debt and corporate bonds.

Kenedix Realty Investment Corporation │ 30

NOTES TO FINANCIAL STATEMENTS

In thousands of yen

Short-term debt
Corporate bonds
Long-term debt

Due in 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

Due after 5 years¥ 8,800,000
28,250,000

9,000,000
25,980,000

8,460,000

5,940,000

8,538,500

3,000,000
5,000,000

16. INVESTMENT AND RENTAL PROPERTIES
Tenth Fiscal Period (November 1, 2009 to April 30, 2010)
Effective the fiscal year ended April 30, 2010, a new accounting standard for disclosures regarding the fair value of investment andrental real estate properties and related implementation guidance have been adopted.
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo Metropolitan Area for the purpose ofgenerating rental revenues.
The carrying value in the balance sheet and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of October 31, 2009

Net change¥ 222,449,460¥ 14,754,790

As of April 30, 2010
¥ 237,204,250

Fair value
As of April 30, 2010
(In thousands of yen)
¥ 214,900,000

Note 1: The carrying value represents the acquisition cost less accumulated depreciation.
Note 2: The fair value is the appraisal value or the survey value determined by outside appraisers.
Note 3: Among net changes during the ﬁscal period, principal increases were caused by the acquisition of 5 oﬃce buildings totaling ¥15,893,389 thousand, and principal decreases were theretirement of ﬁxed assets at two properties amounting to ¥12,537 thousand.

Income and loss in the fiscal period ended April 30, 2010 for real estate for rental purposes is listed in the note “11. BREAKDOWNOF RENTAL AND OTHER OPERATING REVENUES AND PROPERTY-RELATED EXPENSES.”

31 │ Kenedix Realty Investment Corporation

STATEMENTS OF CASH FLOWS UNAUDITEDFOR THE PERIOD FROM MAY 1, 2009 TO OCTOBER 31, 2009 AND THE PERIOD FROM NOVEMBER 1, 2009 TO APRIL 30, 2010

In thousands of yen
From November 1, 2009
to April 30, 2010

From May 1, 2009
to October 31, 2009

CASH FLOWS FROM OPERATING ACTIVITIESIncome before income taxes¥

2,568,371¥

2,103,248

Adjustments to reconcile income before income taxes
to net cash provided by operating activities:
Depreciation and amortization

1,672,685

1,613,633

Interest expense

932,081

907,825

Loss on retirement of ﬁxed assets

12,53723,394

Changes in assets and liabilities:
Rental receivables

32,70576,500Consumption tax refundable

87,756(136,065)

Accrued consumption tax(30,679)(240,048)

Trade and other payables(4,781)(136,412)

Rents received in advance

111,665(39,880)

Property and equipment due to sale-

2,348,605

Others, net(331,498)(192,155)

Subtotal

5,050,842

6,328,645(905,953)(912,655)

Cash payments of interest expense
Cash payments of income taxes

(752)

(649)

4,144,137

5,415,341(16,241,402)(4,110,567)

1,436,443

613,790

Payments of leasehold and security deposits received(664,470)(692,215)

Proceeds from withdrawal of time deposits

1,000,000-

Payments of restricted bank deposits(165,814)(16,919)

Proceeds from restricted bank deposits

66,354

1,034

330

-

(14,568,559)(4,204,877)

Proceeds from short-term debt

3,800,000

5,000,000

Net cash provided by operating activities

CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property and equipment
Proceeds from leasehold and security deposits received

Others, net
Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIESPayment of short-term debt

(5,000,000)(5,000,000)

Proceeds from long-term debt

11,700,000

3,000,000

Payment of long-term debt

(4,751,500)(4,530,000)

Proceeds from issuance of investment units

8,105,733-

Payment of dividends(2,101,910)(2,434,003)

11,752,323(3,964,003)

1,327,901(2,753,539)

Net cash (used in) provided by 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

10,957,956¥

12,285,857

13,711,495¥

10,957,956

See related notes.

Kenedix Realty Investment Corporation │ 32

STATEMENTS OF CASH FLOWS UNAUDITED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 thedate of purchase.

CASH AND CASH EQUIVALENTS (Unaudited)
Cash and cash equivalents consisted of the following as of April 30, 2010 and October 31, 2009:
In thousands of yen
As of April 30, 2010

As of October 31, 2009

Cash and bank deposits ..............................................................................................

¥ 13,297,791........................................................

(621,934)(522,474)

More than 3-month ﬁxed deposits (Note 2) ...............................................................

(390,000)(1,390,000)

Cash and cash equivalents ........................................................................................

¥ 12,285,857¥ 10,957,956

Restricted bank deposits held in trust(Note 1)

Notes: 1. Restricted bank deposits held in trust are retained for repayment of tenant leasehold and security deposits.
2. More than 3-month ﬁxed deposits are ﬁxed deposits which have deposit terms of more than 3 months.

33 │ Kenedix Realty Investment Corporation¥ 12,870,430

KENEDIXREIT

A DYNAMIC, MARKET LEADING JREIT
Kenedix Realty Investment Corporation (KENEDIX-REIT; Securities Code: 8972) is a proactively
managed Japanese real estate investment trust ( J-REIT) that principally invests in mid-sized office buildings
and is managed by Kenedix REIT Management (KRM). KENEDIX-REIT is known to lead the market,
rather than follow, and to be proactively managed to prevent itself from ever being caught unawares.
KENEDIX-REIT recently ended its Tenth Fiscal Period with a portfolio of 70 assets and an acquisitionbased value of 235.7 billion yen.

HISTORY OF PRUDENT PORTFOLIO GROWTH
A CONSTANTLY EVOLVING STRATEGY ATTUNED TO THE MARKETGENERAL BREAKDOWN OF UNITHOLDERS
116,532 units: 49.9%

Foreign corporations and individuals

KENEDIX-REIT follows stability
focused periods withannouncement of its re-growthphase and reinforces its portfoliowith 5 new acquisitions

90,772 units: 45.4%

95,004 units: 47.5%

Other domestic corporations

2,670 units: 1.3%

2,461 units: 1.2%

Financial institutions(including securities companies)

84,966 units: 42.5%

86,234 units: 43.1%

4.865 units: 2.1%
4,865

89,040 units: 38.1%

Individuals and others
21,592 units: 10.8%

16,301 units: 8.2%

23,113 units: 9.9%

End of 8th Period(200,000 units)

End of 9th Period(200,000 units)

End of 10th Period(233,550 units)

Name

Units Held

Share of Outstanding Units

Note: Figures are rounded to the first decimal place.

Occupancy Ratio

(%)
100

95.3%
KENEDIX-REIT lists in July 2005
with 29 properties and a valueof ¥69 billion(billion yen)
250

95.9%

175.0
146.7

150

43.0

44.4

50

18.9

81.4

197.0

95.7%

94.7%

94.4%

95

212.8
12.7

222.0 218.9 220.1
12.7

12.7

12.3

12.3

10.3
12.3

235.7

90

10.3
12.3

16.0

Residential
CentralUrban Retail

43.0

184.0

115.9

196.9

213.0
193.9

197.4

17,950

8.73%
7.68%

Trust and Custody Services Bank, Ltd. (Securities Investment Trust Acct.)

16,030

6.86%

The Nomura Trust and Banking Co., Ltd. (Investment Trust Acct.)

12,564

5.37%

The Master Trust Bank of Japan, Ltd. (Trust Acct.)

11,937

5.11%

The Bank of NY Treaty JASDEC Account

9,250

3.96%

State Street Bank and Trust Company 505025

8,314

3.55%

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/HENDERSON HHF SICAV

7,800

3.33%

State Street Bank and Trust Company

6,808

2.91%

State Street Bank and Trust Company 505223

4,675

2.00%

Total

115,72949.55%

OfficeIR SCHEDULE 10TH AND 11TH PERIODS

137.9

April

86.2

June

July

October

Distributions for10th Period are paid

End of 11th Period

DecemberJanuary

48.2

End of 10th Period0
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
1st Period 2nd Period 3rd Period 4th Period 5th Period 6th Period 7th Period 8th Period 9th Period 10th Period
2005/10
2006/4
2006/10
2007/4
2007/10
2008/4
2008/10
2009/4
2009/102010/4

Distribution
per unit (yen)20,401

Note: The respective shares are rounded down to the second decimal place.

16.0

20.7

Japan Trustee Services Bank, Ltd. (Trust Acct.)
NCT Trust and Banking Corporation (Investment Trust Acct.)

16.0

16.0

12.3

12.3
37.7

95.6%

KENEDIX-REIT sells 23 residential
assets and acquires 9 oﬃce assets.

200

69.1

95.9%

94.9%

KENEDIX-REIT nearly
doubles in size with theacquisition of 30 properties
from multiple pipelines

100

TOP TEN UNITHOLDERS AS OF APRIL 30, 2010

96.9%

96.6%

3,052 13,884 13,529 13,682 13,960 16,711 15,618 12,172 10,511 10,993
KENEDIX-REIT has consistently paid a robust
distribution to its shareholders as it stays ahalf-step ahead of the market

KENEDIX-REIT remains in pursuit of its ideal – aprimarily mid-sized oﬃce building portfolio of 100
oﬃce buildings and a value of ¥400 billion

Note: The amounts are rounded down to the nearest 100 million yen.

TABLE OF CONTENTS
KENEDIX-REIT: A Dynamic, Market Leading J-REIT .....................................................................1
Tokyo Report: Even a Fair Fight? .................................................................................................2Japan Report: The Comeback of Strategic Pragmatism..............................................................3
Achieving a Sound Balance of Growth .......................................................................................5
Cross-Organizational Cooperation Enables Optimal Results ......................................................8
Parlaying Strategy into Action....................................................................................................91 │ Kenedix Realty Investment Corporation

Taking Advantage of a Rare Opportunity to Raise Portfolio Performance ...............................10
Hands-on Management ...........................................................................................................11
Clear Milestones Set Tone for Strong Future.............................................................................12
Promoting Investment in Japan by Assisting the Foreign Investor ..........................................13
KENEDIX-REIT: A Strong, Diversified Portfolio ..........................................................................14
KENEDIX-REIT Portfolio Table ...................................................................................................15
Portfolio Map............................................................................................................................16
Financial Summary ..................................................................................................................17

Performance for10th Period is announced

Performance for11th Period is announced

Distributions for11th Period are paid

Information is regularly disclosed throughout the year via press releases and the website at 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 document for an oﬀer to sell, or seeking an oﬀer to buy, any securities of KENEDIX Realty Investment Corporation(KENEDIX-REIT).
English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japanese terms. With respect to any and all terms herein, including
without limitation, ﬁnancial statements, if there exist any discrepancies in the meaning or interpretation thereof between the original Japanese documents and English translation contained herein, the original
Japanese documents will always govern the meaning and interpretation.
None of KENEDIX-REIT, Kenedix REIT Management, Inc. nor any of their respective directors, officers, employees, partners, unitholders, agents, affiliates nor their advisors shall be responsible or liable for thecompleteness, 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 REIT 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, performanceor achievements expressed or implied by these forward-looking statements. In addition, these forward-looking statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or
imprecise and involve known and unknown risks and uncertainties. Accordingly, readers of this document should not interpret the forward-looking statements included herein as predictions or representations of
future events or circumstances.
Potential risks and uncertainties also include those identiﬁed and discussed in this document. Given these risks and uncertainties, readers of this document are cautioned not to place undue reliance on forwardlooking 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.

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