Semiannual Report
27th Fiscal Period
May 1, 2018 – October 31, 2018

Characteristics of Kenedix Office Investment Corporation

We invest in and manage primarily mid-sized office buildings in the Tokyo metropolitan area to generate stableearnings and sustainably expand assets under management and thereby maximize unitholder profit.

Mid-sized office buildings

and(Note)
Mid-sized office building investment ratio (Note)

OthersCentral urban retail

0.6%

1.1%

Office bldgs.
(other)14.0%

Tokyo metropolitan area
(Note)
Tokyo metropolitan area investment ratio (Note)

Other regional areas

18.3%

Mid-sized office buildings

Tokyo metropolitan area

As of October 31, 2018

As of October 31, 2018

84.0%

81.6%

Tokyo
metropolitan
area(excluding ﬁve central wards)

28.2%

Tokyo
metropolitan
area(Tokyo ﬁve central wards)

53.3%

Note: Acquisition price ratios for each category with respect to total acquisition prices, rounded down to the first decimal place.

Image of a typical mid-sized office building

Around two elevator groups

Leased area per floor
100 to 150 tsubo

8~10 floors
Total floor area of
500~3,000 tsubo

We contribute to sustainable social growth by providing
comfortable office environments.
Please see the Sustainability section on page 14 fordetails on our contribution efforts.

2

Kenedix Office Investment Corporation

Features and attractions of mid-sized office buildings in the Tokyo metropolitan area

Numerous buildings
Mid-sized office buildings (between 500 and 3,000 tsubo) account for 83.0% of all office buildings in Tokyo central fivewards (Note) (Source 1), and offer more numerous attractive investment opportunities than large-sized ones. The investment
efficiency of mid-sized office buildings is greater than from small ones.

High liquidity
Properties valued at between 1 and 10 billion yen account for 61.0% of mid-sized office building sales (Source 2), andtransactions in properties in this price range are relatively brisk.

Solid tenant base
The prime tenants of mid-sized office buildings are firms with fewer than 30 employees. The figure for the Tokyo Metropolitan
is 92.2% (Source 3). This makes it relatively easy to secure new tenants when others leave and maintain high occupancy rates.

Positive rental demand climate
Small and mid-sized buildings constructed more than 20 years ago account for 82% of the total on a leased areabasis (Source 4) in Tokyo’s 23 wards. New supply is limited relative to that of large-sized office buildings, and we can makeproperties competitive by properly managing them, upgrading facilities on an ongoing basis, and undertaking construction
to enhance value.

Contents
Characteristics of Kenedix Office Investment Corporation 2

Sustainability

14

27th Fiscal Period (Oct. 2018) Results and Outlook

4

Financial Strategy

15

Message from the Management

6

Financial Section

16

External Growth

10Unitholders’ Information

40

Internal Growth

12

Portfolio

42

Note : Rental office buildings in Tokyo five central wards, representing the ratio of the number of buildings by structural scale covered in CBRE survey (at the end of
September 2016).
Source 1: Data from survey the Investment Corporation commissioned to CBRE.
Source 2: Compiled by the Asset Management Company based on “the Number of Office Building Transactions by Transaction Size (fiscal 2008 to 2017)”
obtained from “the Real Estate Transactions Study” by Urban Research Institute Corporation, a property thinktank in the Mizuho Financial Group.
Source 3: Compiled by the Asset Management Company based on “the Results of the Tokyo Metropolitan Government’s 2014 Economic Census for Business
Frame Tokyo (revised results) (published on March 27, 2017)”.
Source 4: Compiled by the Asset Management Company based on “Tokyo 23 Wards New Supply of Office Buildings & Office Pyramid 2018”, published by 		
Xymax Corporation on December 7, 2017.
Refer to the following definitions for the glossary in this report.
• Tokyo five central wards are Chiyoda, Chuo, Minato, Shinjuku, and Shibuya wards.
• The Tokyo metropolitan area encompasses Tokyo and Kanagwawa, Saitama, and Chiba prefectures.
• Regional areas are regional hub cities, including government-designated ones.
• In this document, Kenedix Office Investment Corporation is called “the Investment Corporation” or “KDO”, and Kenedix Real Estate Fund Management, Inc.
is called “the Asset Management Company”.
• The Investment Corporation defines mid-sized office buildings as rental office buildings whose main use under the Building Standards Act is office and whose
total floor area of the entire building stated in the certificate of all registered matters (“total floor area”) fulfills the following criteria (“mid-sized office building”)■ Tokyo 23 wards
Total floor area 13,000 m2 or less
■ Outside Tokyo 23 wards
Total floor area 20,000 m2 or less
Kenedix Office Investment Corporation3

27th Fiscal Period (Oct. 2018) Results and Outlook

Actual distributions per unit in the27th fiscal period (Oct. 2018)13,458 yen
Change from the previous fiscal period
Change from the initial forecast

+3.8%
+2.0%

27th fiscal period (Oct. 2018) results
Asset size

External
growthInternal
growthFinancialstrategy4Gain on sale of real estate in
the 27th/28th fiscal periods

Portfolio NOI yield
after depreciation

420.8 billion yen

1.09 billion yen

3.6 %Selective investment throughmutual transactions

Disposition of Frame Jinnan-zaka andKDX Hamamatsucho Dai-2 Bldg.

Enhanced profitability by continuous
asset reshuffle

Occupancy rate

Percentage of count of unit rent
growth upon tenant turnoverUpward rent revision(accumulated monthly rent over 5 periods)

99.1%

69.8 %

33.4 million yen

The occupancy rate remained highwith the strong tenant demands

Steady progress in filling vacancies
despite increasing turnover ratio

Steady rent increase as a result ofproactive upward rent negotiations

Interest-bearing debt
average interest rate

LTV (interest-bearing debt ratio)

Borrowing capacity for acquisition(in the case of LTV 45% limit)

1.06 %

41.9 %

25.0 billion yen

Reduced interest cost throughrefinancing

Decreased LTV level through public offering
for the first time in three and a half years

Securement of flexibility forselective investment

Kenedix Office Investment Corporation

Forecasted distributions per unit in
the 28th fiscal period (Apr. 2019) (Note)

13,620 yen
Change from 27th fiscal period (Oct. 2018)+1.2%  

Note : Forecasted as of December 12, 2018 based on certain assumptions.

Outlook■ Selectively invest by leveraging borrowing capacity for acquisitions■ Enhance portfolio quality by continuing to reshuffle assets■ Respond to office locations changes through work practice reforms and advances

in information and communications technologies■ Maintain high occupancy rates and continuously increase rents through tenant turnover■ Decrease rent gaps through proactive upward rent revisions■ Improve property profitability and reduce energy costs through value-upgrading works■ Refinance to continue reducing interest costs■ Explore diversifying financing channels■ Maintain stable financial management, with LTV (interest-bearing debt ratio) of 45% limit

Kenedix Office Investment Corporation

5

Message from the Management

We aim to materialize sustainablegrowth by building a robust andprofitable portfolio.

Jiro Takeda
Director & COO, Head of Office REIT Department,
Kenedix Real Estate Fund Management, Inc.

6

Kenedix Office Investment Corporation

We made our first domestic public offering in three and a half years andenhanced our portfolio by reshuffling assets through a mutual transaction.

In our 27th fiscal period, the six months ended October 31,

The transaction was significant to us because it enabled

2018, distributions per unit (DPU) were 13,458 yen, which was

us to lift our investment ratio in office buildings by divesting

2.0% higher than the 13,200 yen that was initially forecasted*.

a non-core asset as well as a relatively small and older asset

Distribution growth was around 7.7% year on year, with awhile securing a relatively new and outstanding property insteady progress in DPU in the 27th fiscal period.

central Tokyo.

During the period under review, we acquired CROSS

We have maintained high office building occupancy rates

PLACE Hamamatsucho through a mutual transaction with abecause of solid tenant demand, owing partly to expanding

general business corporation in Japan. The acquisition was

business space needs. Rises in occupied space have out-

priced at 20.7 billion yen, compared with an appraised

stripped increases in vacated space while vacated spaces

valuation of 22.4 billion yen. This building is in Minato Ward,turned upward.

Tokyo, and has excellent public transport access. As part ofUnit rent raises are now well entrenched, with revenues

the transaction, we sold the KDX Hamamatsucho Dai-2

increasing steadily from proactive negotiations to increase

Building and Frame Jinnan-zaka (quasi co-ownership

rents.

interest of 49%), realizing 532 million yen gain on sales of

The financial strategy has been to continue prudent

these properties. Of that amount, we allocated 192 million yen

financial management and maintain long borrowing terms

to dividends and the residual 340 million yen to the reserve forand lower interest costs. In addition, as a result of our public

reduction entry. As to date, this reserve is part of an effective

offering in May 2018, we reduced our loan-to-value (LTV)

policy of delivering stable dividends and sustainable growth.

ratio to 41.9%, and raised borrowing capacity for acquisition
toward selective investment .
* As of June 15, 2018

Kenedix Office Investment Corporation

7

Message from the Management

We aim to boost unitholder value by pursuing a growth strategy centeredon strong internal growth in a favorable investment climate.

On the external growth front, we will push ahead with acqui-

We will keep undertaking construction that effectively in-sitions in the current environment of property transactions

creases the competitiveness and profitability of our properties

at high prices while maintaining a balance between scale

while focusing even more on reducing energy consumption

expansion through selective investments and an improved

levels and costs from the standpoint of lowering our environ-

portfolio.

mental impact.

While acquiring properties is a challenge, the climate

On top of that, we expect that current work practice re-remains favorable for selling properties. Our policy is to keep

forms and the evolution of information and communications

pushing forward to reshuffle assets to improve appraisal

technologies (ICT) will drive considerable changes in required

profit/loss and profitability and thereby raise portfolio quality.

office building locations and in tenant demand. We believe

We will drive internal growth by maintaining high occupan-that it will be important to identify such changes and incor-cy rates while continuing to increase average unit rents byporate them in our acquisition strategies and operational

lifting asking rents upon tenant turnover.

management.

With occupancy rates high, the impact of raising revenues

Our financial strategy will encompass continuing to pursue

from tenant turnovers will be limited. Nonetheless, there is stillconservative financial management and lower interest costs

scope for focusing on upward rent revisions as market rents

while exploring ways to diversify our financing sources.

rise. We will refer to findings from regular customer satisfac-

It is with your support and encouragement that we enjoy ation surveys for tenants in endeavoring to boost such satis-

favorable portfolio management climate. We will endeavor tofaction in appropriately undertaking construction and opera-

further increase unitholder value by driving robust internal andtions for them while steadily and acceptably revising rents.

external growth and our financial strategy.

8

Kenedix Office Investment Corporation

We will undertake investment management that reflects changing officeneeds and look into ways that we can contribute to a sustainable society.

In the face of grave labor shortages, companies are increas-

We have stepped up our sustainability efforts by securing

ingly seeking to attract more talented people by creating of-certifications and assessments from external organizations.

fices that are more comfortable and convenient for workers.

As of November 1, 2018, 28 of our properties have been

We will constantly strive to cater to such corporate needs

certified or assessed. We were among the first J-REIT

through ongoing engagement with tenants and understand-players to take part in the real estate assessment program ofing changes in the office layouts and work styles of office

GRESB, a world-class benchmark for sustainability perfor-

workers while providing office spaces that meet corporate

mance evaluations. We have acquired the Green Star ratingneeds.

for seven consecutive years in recognition of our excellent

We support the activities of Japan for UNHCR, the official
support contact point in Japan on behalf of UNHCR. We

efforts on both “management and policy” and “implementation and measurement”.

provide vacant space at our properties to this organization

Environmental, social, and governance (ESG) efforts arefor the “UN Refugee Assistance Campaign” at no charge andtop management priorities. We accordingly explore ways tobroadcast refugee support videos for free through “digitalmaterialize a sustainable society by fulfilling our corporate

signage” as part of our social contribution.

social responsibilities (CSR), steadily undertaking specific

We will continue to assist efforts to reach the UN’s Sustain-

initiatives toward that end.

able Development Goals (SDGs) by supporting the initiativesof Japan for UNHCR.

Number of buildings awarded environmental
certifications (Note)
Increased approx.
DBJ Green Building
nine-fold
CASBEE

21

BELS(Number of properties)

2

13

13

5

5

5

6

6

7

7

2012

2013

2014

2015

11
6
3
3

2011

1

28
25
2

2
6

6

6

1

17

20

13

2016

2017

2018

Note: The properties held as of November 1, 2018 are counted, and the total number is stated.

Kenedix Office Investment Corporation

9External Growth

Asset reshuffle in the 27th fiscal period (Oct. 2018)
Booked gain on sale of property for the second consecutive fiscal periods as a result of transactions withdomestic general business groups, contributing to increases in distributions and reserve for reduction entry.
Acquisition

Disposition

CROSS PLACE Hamamatsucho

Acquisition priceAppraisal value

KDX
Frame
Total ofHamamatsucho Jinnan-zaka disposition price 12,500 mn yen
Dai-2 Building
Total ofappraisal value 13,300 mn yen (as of April 30, 2018)
NOI yield after
depreciation
3.0％(actual) (Note 1)

20,700 mn yen
22,400 mn yen(as of October 31,
2018)

NOI yield after
depreciation(actual) (Note 1)

3.4％

Completion dateFebruary, 2015

Acquisition dateJuly 2, 2018

KDX
Hamamatsucho Dai-2
Building

192 mn yen

DPU (Note 3)

13,458 yen

March, 2005
July 2, 2018

November 1, 2018

Frame Jinnan-zaka (quasi co-ownershipinterest: 51.0%)

28th fiscal period (Apr. 2019) forecast (Note 2)

532 mn yen

Provision of reserve
for reduction entry

KDX Hamamatsucho Dai-2 Building
Frame Jinnan-zaka (quasi co-ownershipinterest: 49.0%)

Disposition
date

Gain on sale of real estate

Frame Jinnan-zaka(quasi co-ownershipinterest: 49.0%)

Dividend
appropriation

KDX Hamamatsucho Dai-2 Building
Frame Jinnan-zaka

27th fiscal period (Oct. 2018) result
Gain on sale of real estate

April, 1992

Completiondate

340 mn yen

563 mn yen

Frame Jinnan-zaka(quasi co-ownership interest: 51.0%)

Provision of reserve
for reduction entry

299 mn yen

Dividend
appropriation

263 mn yen

DPU (Note 3)

13,620 yen

2,775
Total reserve for
reduction entry (Note 4)

2,475(mn yen)

2,134

+340

+299

Utilization policy forreserve for reduction
entry

Provision(forecast)• Response to one-timedecrease in revenue
and incurrence of costs• Response to one-time
decline in dividend
resulted from invest­­­­ment for future growth• Response to dilution ofdividend due to a public
offering during the fiscal
periodProvision

Reserve for
reduction entry
per unit (Note 3)

26th
fiscal period(Apr. 2018)
actual

27th
fiscal period(Oct. 2018)
actual28th
fiscal period(Apr. 2019)
forecast

5,271yen

5,776 yen

6,476 yen

Note 1: NOI yield after depreciation (actual): Calculated by dividing actual NOI after depreciation (actual NOI − depreciation expenses) by acquisition price.
Note 2: Forecasts for the 28th fiscal period (Apr. 2019) are estimated amounts as of December 12, 2018, based on certain conditions.
Note 3: Figures per unit are calculated based on the number of investment units issued and outstanding as of the end of each fiscal period.
Note 4: The balance of reserve for reduction entry is calculated by adding provision of reserve for reduction entry stated on Basis for Calculating CashDistribution for the relevant fiscal period to the balance of reserve for reduction entry on the balance sheet as of the end of the relevant fiscal periods.

10

Kenedix Office Investment Corporation

Asset reshuffles since the 21st fiscal period (Oct. 2015) and impacts
We have focused on strategically reshuffling assets since the 21st fiscal period through selective investments,
increasing appraisal profit in the portfolio and enhancing profitability.
Asset size (based on total acquisition price) since listing and number of properties owned
Office (left axis)
Residential (left axis)
Central urban retail (left axis)
Others (left axis)(bn yen)
600

72

450

Number of properties (right axis)
Fiscal periods in which public offerings (PO) madePO

83 84 83 85

77
68 69 67

64

70

65

71

67

89

(properties)

97 97 99 97 98 97 97 96
94 97
PO

74
PO

PO

415

420

100

75

PO

300

31

35

PO
PO

150

0

50

PO

PO

1st
fiscalperiod3rd
fiscalperiod(Oct. 2005)(Oct. 2006)

25

5thfiscalperiod(Oct. 2007)

7th
fiscalperiod9th
fiscalperiod(Oct. 2008)(Oct. 2009)11th
fiscalperiod(Oct. 2010)

13th
fiscalperiod(Oct. 2011)

Trackrecord of properties acquisition/disposition

15th
fiscalperiod(Oct. 2012)17th
fiscalperiod(Oct. 2013)

19th
fiscalperiod(Oct. 2014)

properties

2

properties

End of20th fiscal
period(Apr. 2015)

1

property

3

properties

2

properties

19.0

8.5

2

properties

5.1

2

14.7

5.2

2

properties

19.6

properties

1

property2

properties

20.7

5.3
5.8

14.2

24.2

9.9

(Oct. 2015)

23rd
fiscalperiod(Oct. 2016)

25th
fiscalperiod27th
fiscalperiod(Oct. 2017) (Oct. 2018)

As of
Nov.1,
20180

Effects of asset reshuffle from 21st to 27th fiscal periods

Total acquisition price (properties acquired) (bn yen)
Total acquisition price (properties sold) (bn yen)2

21stfiscalperiodNumber ofproperties,
AUM (Note 1)

21st fiscal period(Oct. 2015)~
27th fiscal period(Oct. 2018)
Acquisition

97 properties 14 properties
385.0 bn yen 97.7 bn yen

Disposition

End of27th fiscal
period(Oct. 2018)

Portfolio
growth14 properties 97 properties—
61.9 bn yen 420.8 bn yen +35.7 bn yen

7.0

1

3 property (Note 1)
properties

5

Portfolio
NOI yield (Note 3)

4.5%

4.0%

3.9%

4.8%

+0.3%

3.3%

3.3%

3.0%

3.6%

+0.3%

1.1 bn yen—+1.3 bn yen

2.4 bn yen+1.3 bn yen

properties

21st
fiscalperiod22nd
fiscalperiod23rd
fiscalperiod24th
fiscalperiod25th
fiscalperiod26th
fiscalperiod27th
fiscalperiod(Oct. 2015) (Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018) (Oct. 2018)

Enhancement of appraisal profit in portfolio (bn yen) (Note 2)

2.7
1.3
21st
fiscalperiod0.4
22nd
fiscalperiod23rd
fiscalperiod

1.3

1.5

24th
fiscalperiod25th
fiscalperiod

0.5

0.7

26th
fiscalperiod27th
fiscalperiodPortfolio
NOI yield
after
depreciation(Note 3)

Reserve for
reduction
entry (Note 4)(Oct. 2015) (Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018) (Oct. 2018)

Note 1: Frame Jinnan-zaka is not included in the number of properties sold in the 27th fiscal period as the Investment Corporation holds 51.0% of the quasi
co-ownership interest as of the end of the 27th fiscal period. Total acquisition price of properties sold in the 27th fiscal period (Oct. 2018) and totalacquisition price are calculated including the amount equivalent to quasi co-ownership interest of 49.0%.
Note 2: For the properties acquired, appraisal profit is the difference between the appraisal value as of the end of the 27th fiscal period (Oct. 2018) and theacquisition price. Enhancement of appraisal profit/loss in portfolio is calculated for each fiscal year in which acquisitions or dispositions are implemented
by, if the difference between the appraisal value at disposition and the book value at disposition is positive, subtracting the difference from the appraisal
profit, and if the difference is negative, the sum of the amount.
Note 3: Portfolio NOI yield and Portfolio NOI yield after depreciation as of the end of the 20th fiscal period (Apr. 2015) and the 27th fiscal period (Oct. 2018) arecalculated based on actual results for the relevant fiscal period. NOI yield and NOI yield after depreciation of the properties acquired from the 21st fiscal
period (Oct. 2015) through the 27th fiscal period (Oct. 2018) are calculated in accordance with the above calculation method based on actual resultsof the relevant property for the 27th fiscal period (Oct. 2018). Each yield of the properties sold is calculated by dividing the sum of actual NOI and NOI
after depreciation for two previous fiscal periods from the fiscal period including disposition date by the sum of acquisition price, including dispositionof 49.0% of quasi co-ownership interest in Frame Jinnan-zaka.
Note 4: The balance of reserve for reduction entry is calculated by either adding provision of reserve for reduction entry or subtracting reversal of reserve for
reduction entry stated on Basis for Calculating Cash Distribution for the relevant fiscal period to/from the balance of reserve for reduction entry on thebalance sheet as of the end of the relevant fiscal period.
Kenedix Office Investment Corporation 11

Internal Growth

Office building occupancy rates, leased and vacated space and numberof cases and turnover ratio
Occupancy rates have remained high against a backdrop of strong tenant demand. We consider this an
opportunity to raise the unit rent and solicit new tenants.
Leased and vacated space and number ofcases and turnover ratio (Note 2) (Note 3)

Occupancy rate performance of office buildings (Note 1)
Occupancy rate (contracted area based)
Actual occupancy rate (excluding free rent area)
(%)
100

97.8
3.2

99.1

1.1

2.5

96.8
95

99.1

99.0

1.8

98.0

Leased space (tsubo) （ ）Number of move-in
Vacated space (tsubo) （ ）Number of move-out
Turnover ratio(annualized based) (%)
（75）
（71）
5,966
5,123 （62）
（45）
4,487
（31）
3,269

2,208

97.3

96.5

3.4

94.6
93.4

3,783
5,337

Average occupancy rate during fiscal period
90

24thfiscal period

97.1%

End of 23rd
fiscal period(Oct. 2016)

25th
fiscal period

98.4%

End of 24th
fiscal period(Apr. 2017)26th
fiscal period

99.2%

（35）

2,184
（27）

3,097

3.2

4.4

（49）

（48）

（60）

27th
fiscal period

99.1%

End of 26th
fiscal period(Apr. 2018)

End of 25th
fiscal period(Oct. 2017)

2,428

End of 27th
fiscal period(Oct. 2018)

8.0

5.7

3.6

23rd fiscal 24th fiscal 25th fiscal 26th fiscal 27th fiscal
periodperiodperiodperiodperiod(Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018) (Oct. 2018)

Note 1: Occupancy rate (contracted area based) is calculated by dividing contract based leased area by leasable area, and actual occupancy rate (excluding
free rent area) is calculated by subtracting free rent area from leased area then dividing that area by leasable area. The figures are rounded to the firstdecimal place. Average occupancy rate of office buildings during each fiscal period is a simple average of month-end occupancy rates of owned officebuildings during each period.
Note 2: The number of move-in / out and leased area are calculated based on floor. In cases that an end-tenant move-out from/move-in to multiple floors, thenumber is counted by floor.
Note 3: Turnover ratio is calculated and annualized as follows: (Total leased area of the end-tenants who cancelled their lease agreements during the six-month
period from the beginning to the end of each period) / (Average leasable area of all office buildings owned by KDO as of each month-end during therelevant period) x 2. Figures are rounded to the first decimal place.

Rent trends upon tenant turnover (office buildings)
Unit rent conditions have surpassed previous levels in a robust rental market. Monthly rents continue to riseupon tenant turnover.
Increase/decrease in monthly rent upon tenant turnover (Note 2)

Change in unit rent upon tenant turnover (Note 1)
New unit rent (yen)Previous unit rent (yen)15,752
15,093
14,736

14,245

14,71360.9

13,58913,65013,61224th fiscal
period(Apr. 2017)

25th fiscal
period(Oct. 2017)

26th fiscal
period(Apr. 2018)

27th fiscal
period(Oct. 2018)

Percentage of the number of
new leases with increased rents
upon tenant turnover (%)

70.0

69.8

52.3

50.8

5.0

5.3

5.0

3.5

5.5

-3.1

-8.3

-1.5

-1.0

-1.0

14,692
14,35323rd fiscal
period(Oct. 2016)

Total rent increases(mn yen)Total rent decreases(mn yen)

23rd fiscal 24th fiscal 25th fiscal 26th fiscal 27th fiscal
periodperiodperiodperiodperiod(Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018) (Oct. 2018)

Note 1: New unit rent is an average unit rent calculated based on aggregated rents and areas for the spaces where rents paid by new tenants and by previous
tenants can be compared for each fiscal period of “Turnover by leased area and the number of tenants”. Previous unit rent is an average unit pricecalculated based on aggregated previous rent units and areas for the spaces where new rent units are calculated.
Note 2: Total amount of increases/decreases in monthly rent before and after rent revision for each fiscal period is respectively aggregated for the spaces
where the rents paid by new tenants and by previous tenants can be compared.

12

Kenedix Office Investment Corporation

Rent revisions with existing tenants
Upward rent trend has expanded beyond Tokyo five central wards to become well entrenched.
Proactive negotiations to boost rents have steadily borne fruit.
Rent revisions (leased floor area ratios)

Cumulative monthly rent increases and decreases
from rental revisions (Note 1)
Accumulated increase in rent
Accumulated decrease in rent

Increase in rent in the relevant fiscal period
Decrease in rent in the relevant fiscal period

27,423

13,563

5,977

6,826

20,597-729

Rent decrease（1 case）
1.2%

33,400(thousand yen)

5,071

(based on percentage of leased floor area)of

No change（219 cases）
71.6%

282 cases

7,034

Changes in count of rent increases and rent increase rates
Tokyo central 5 wards

8,492

Other areas(cases)72

80-1,065

Rent increase（62 cases）
27.1%

Based onleased area
27th fiscal period(Oct. 2018)
total contracts withrent negotiations-1,79448-409-2,203-2,032-4,23523rd fiscal 24th fiscal 25th fiscal
periodperiodperiod(Oct. 2016) (Apr. 2017) (Oct. 2017)

26th fiscal
period(Apr. 2018)

40

18

0

27th fiscal
period(Oct. 2018)

43
18

25

30

25

26

23rd fiscal
period(Oct. 2016)

24th fiscal
period(Apr. 2017)

25th fiscal
period(Oct. 2017)

10.8%

7.8%

-472

-4,70751

Rent
increase rate
(incremental average) (Note 2)

6.5%

62

41

38

31

24

26th fiscal 27th fiscal
periodperiod(Apr. 2018) (Oct. 2018)

6.2%

5.8%

Note 1: Difference in monthly rent before and after rent revision in each fiscal period is calculated by aggregating the change amount per contract in each fiscal
period. Figures are rounded to the nearest thousand yen.
Note 2: Rent increase rate is calculated by dividing the sum of increase in monthly rent by the sum of monthly rent before revision. Figures are rounded to thefirst decimal place.

Efforts on value-upgrading works
Strategic efforts on value-upgrading works have made properties more competitive and enhanced tenantsatisfaction, thereby increasing rents. Greater profitability has helped raise asset value, including appraisal
values.
KDX Nishi-Shinbashi Building
Recovering and strengthening property competitiveness by renovating common areas in large
for first time since the completion• The building’s competitiveness in the 26 years
since the completion exhibited a decline,
prompting us plan an upgrade to bolster value.
• We renovated toilets, elevator halls, and otherareas, enabling us to increase rents by anaverage of more than 10%.

KDX Omiya Building
Improving tenant services through gradualvalue-upgrading works• We fully renovated aging restrooms whilevalue-upgrading works have partially been
implemented.
• We negotiated rents with improved appearance
and comfort, boosting rents by an average ofmore than 6%.

Renovation example (elevator hall)Renovation example (restrooms)

Before renovation

Before renovation

After renovation

Average rent increase rate (Note)

Average rent increase rate (Note)+10.4 %

+6.9%

After renovation

Note: For the tenants whose rents were revised upward after renovation, calculated by dividing monthly rent after revision by monthly rent before revision(rounded to the first decimal place).
Kenedix Office Investment Corporation

13

Sustainability

Social initiatives
Support on Japan for UNHCR• KDO has been supporting Japan for UNHCR, which is the official support contact point in Japan onbehalf of UNHCR, a refugee support organization of United Nations, by providing a space for the“UN Refugee Assistance Campaign”, showing their advertising video on the “digital signage” of KDX
Toranomon 1chome Building both for free.
• In November 2018, the letter of appreciation was given by Japan for UNHCR to KDO.

Provision of relief goods to Mindanao Children's Library• Kenedix Group internally collects relief goods and sends them to Mindanao Children's Library on aregular basis. We receive warm greetings from the children in Mindanao.

Environmental certifications and assessments
GRESB Real Estate Assessment (Note 1)• We have received a Green Star rating for seven consecutive years in recognition of efforts to improve oursustainability performance.
• We have earned 4 Stars in the GRESB ratings, the second-highest level.
• In 2011, we became the first J-REIT to participate in this program.

DBJ Green Building Certification (Note 2)• CROSS PLACE Hamamatsucho Building (four stars) was one of two properties newly certified in the 27th
fiscal period.
• A total of 20 properties have received DBJ Green Building Certification. One of them is KDX Toranomon
1chome Building, which earned five stars as best in class for environmental and social awareness.

Certification for CASBEE for Real Estate (Note 3)• ARK Mori Bldg., KDX Toranomon 1chome Building, KDX Karasuma Building,
KDX Kobayashi-Doshomachi Building, and KDX Shinjuku Building received CASBEE’s top S rating.

BELS Certification (Note 4)• In October 2014, the KDX Musashi-Kosugi Building became the first J-REIT property to receive a BELS
Certification (three stars).
• In April 2016, KDX Iidabashi Square was awarded a BELS Certification (three stars).

Note 1: GRESB (Global Real Estate Sustainability Benchmark) is a benchmark to evaluate sustainability performance of private and listed real estate portfolio,etc., from environmental and social perspectives.
Note 2: The DBJ Green Building Certification System is a system certifying real estate with environmental and social considerations (Green Building) using ascoring model originally developed by Development Bank of Japan Inc. (DBJ) in order to select and certificate buildings that meet the demands of thetime. The certification has the following 5 ranks: “five stars”, “four stars”, “three stars”, “two stars” and “one star”.
Note 3: CASBEE is an evaluation system for rating the environmental performance of buildings, developed under the auspices of the Ministry of Land,
Infrastructure, Transport and Tourism. The system rates the overall environmental performance of buildings from two perspectives: the evaluation of
the environmental quality and performance of buildings themselves and the external environmental load of buildings.
Note 4: BELS (Building-Housing Energy-efficiency Labeling System) is the third-party certification system to rate houses and buildings in accordance with the
obligation to make effort to label energy saving performance as stipulated in the Act on Improving Energy Consumption Performance for Architectural
Structures.

14

Kenedix Office Investment Corporation

Financial Strategy

Status of debt financing
While closely monitoring interest rate trends, we endeavor to reduce interest costs upon refinance and extend
borrowing periods.
Borrowings from financial institutions as of the endof the 27th fiscal period (Oct. 2018)

Average interest rate and remaining period to maturity (Note)
Average remaining period to maturity (year)
Weighted average interest rate (including up-front fee) (%)

4.7

4.3

4.9

5.2

5.2

5.0

4.7

6.4%

26.1%

Total borrowings fromfinancial institutions

6.6%

1.19

1.16

177.0 bn yen

11.2%

1.10

1.07

4.2%

6.4%

1.39
1.25

2.1%

19.7%

1.06

17.3%

14 lending financial institutions (mn yen)
End of 21st End of 22nd End of 23rd End of 24th End of 25th End of 26th End of 27th
fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period(Oct. 2015) (Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018) (Oct. 2018)

Note: Average interest rate and borrowing period are the weighted
average based on the balance of debt outstanding as of the endof each fiscal period (with the average interest rate rounded to thesecond decimal place and the average borrowing period rounded to
the first decimal place).

Sumitomo Mitsui Banking
MUFG Bank
Development Bank of Japan
Sumitomo Mitsui Trust Bank
Mizuho Bank
Aozora Bank
Resona Bank
Mizuho Trust & Banking

46,20034,80030,55019,90011,70011,350
11,2503,800

The Bank of Fukuoka 2,500
The Nishi-Nippon City Bank 1,700
The Hiroshima Bank 1,000
The 77 Bank
1,000
Higashi-Nippon Bank
800
The Mie Bank
500

Major indices related to financial stability
Credit rating status

LTV (Interest-bearing debt ratio) (Note 1)

Ratio of fixed interest rate (Note 2)

Japan Credit Rating Agency, Ltd. (JCR)

Reduced LTV through public offering in May 2018,securing borrowing capacity for acquisition

Continue to hedge against
a potential rise in interest rates

AA-(stable)

41.9％

96.7％

Note 1: LTV (interest-bearing debt ratio) is calculated by dividing the balance of interest-bearing debt by the amount of total assets as of the end of the fiscal
period, rounded to the first decimal place.
Note 2: Include borrowings with floating interest rate fixed by interest rate swap, rounded to the first decimal place.

Maturities of interest-bearing debt
We endeavor to reduce refinancing risk by diversifying strategic repayment maturities.
Balance of interest-bearing debt by maturity (as of October 31, 2018)

6.0 bn yen
6.0 bn yen
Corporate bonds
Long-term borrowing 171.0 bn yen
Short-term borrowings

Total interest-bearing debt

183.0 bn yen(bn yen)

11.5
4.0
7.5

8.2 8.5

10.1 9.5

11.8

9.9

2.0

1.0

6.2

7.1

28th
fiscal period(Apr. 2019)32nd
fiscal period(Apr. 2021)

9.0 8.3

8.1
5.5 4.7
3.8

36th
fiscal period(Apr. 2023)

13.0 14.0
1.0

11.3 10.8 11.5

2.0
7.0

40th
fiscal period(Apr. 2025)

2.0

6.2

11.0

44th
fiscal period(Apr. 2027)

13.0

7.2

47th
fiscal period(Oct. 2028)

Kenedix Office Investment Corporation

15

Financial Section
Independent Auditor’s Report

17

Balance Sheet

18

Statement of Income and Retained Earnings

20

Statement of Changes in Net Assets

20

Statement of Cash Flows21

Notes to the Financial Statements

22

Financial Summary (Unaudited)
Historical Operating Trends
For the 23rd–27th Fiscal Periods

PeriodOperating revenues(Rental revenues)
Operating expenses(Property-related expenses)
Operating income
Ordinary income
Net income (a)Total assets (b)(Period-on-period change)
Interest-bearing debt (c)(Period-on-period change)
Unitholders’ equity (d)(Period-on-period change)
Unitholders’ capital(Period-on-period change)
Number of investment units issued and outstanding (e)Unitholders’ equity per unit (d)/(e)Total distribution (f)Distribution per unit (f)/(e)(Earnings distributed per unit)(Distribution in excess of earnings per unit)
Return on assets (annualized) (Notes 1 and 2)
Return on net assets (annualized) (Notes 2 and 3)
Net assets ratio at end of period (d)/(b)(Period-on-period change)
Interest-bearing debt ratio at end of period (c)/(b)(Period-on-period change)
Payout ratio (Note 4) (f)/(a)Other references
Number of properties
Total leasable floor area
Occupancy ratio at end of period
Depreciation expenses for the period
Capital expenditures for the period
Leasing NOI (Net Operating Income) (Note 5)
FFO (Funds From Operation) (Note 6)
FFO per unit (Note 7)

Unit

millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen%
millions of yen%
millions of yen%
millions of yen
%
unit
yen
millions of yen
yen
yen
yen
%
%
%
%
%

properties
m2%
millions of yen
millions of yen
millions of yen
millions of yen
yen

27th Period
26th Period
25th Period
24th Period
23rd Period(as of(as of(as of(as of(as ofOct. 31, 2016) Apr. 30, 2017) Oct. 31, 2017) Apr. 30, 2018) Oct. 31, 2018)13,491
13,429
7,703
6,754
5,788
4,603
4,601
413,031(+1.0)
178,100(+1.7)
212,825(+0.1)
206,199(0.0)
404,885525,6444,601
11,365
11,365—
1.1 (2.2)
2.2 (4.3)
51.5(–0.5)
43.1(+0.3)
99.9

15,03913,327
9,137
6,527
5,901
4,751
4,750
410,166(–0.7)
174,600(–2.0)
212,986(+0.1)
206,199(0.0)
404,885
526,041
4,750
11,733
11,733—
1.2 (2.3)
2.2 (4.5)
51.9(+0.4)
42.6(–0.6)
99.9

13,901
13,840
8,244
6,720
5,657
4,590
4,588
414,933(+1.2)
179,600(+2.9)
212,851(–0.1)
206,199(0.0)
404,885525,708
5,061
12,50012,500—1.1 (2.2)
2.2 (4.3)
51.3(–0.6)
43.3(+0.7)
110.2

14,823
14,222
7,974
6,977
6,848
5,829
5,828
422,993(+1.9)
185,850(+3.5)
213,642(+0.4)
206,199(0.0)
404,885
527,661
5,247
12,96012,960—1.4 (2.8)
2.7 (5.5)
50.5(–0.8)
43.9(+0.7)
90.0

15,42014,802
8,271
7,105
7,148
6,109
6,107
437,221(+3.4)
183,050(–1.5)
229,313(+7.3)
220,970(+7.2)
428,510535,141
5,766
13,45813,458—1.4 (2.8)
2.8 (5.5)
52.4(+1.9)
41.9(–2.1)
94.4

99
462,533.92
96.9
2,274
1,165
8,949
6,877
16,985

97459,567.57
97.9
2,288
1,018
9,088
7,034
17,37398
456,932.16
99.1
2,293
953
9,413
7,451
18,404

97
466,031.33
99.0
2,295
886
9,539
7,574
18,70897471,041.45
99.1
2,358
925
10,055
7,934
18,516

Notes: 1. Return on assets = Ordinary income / {(Total assets at beginning of period + Total assets at end of period) / 2} × 100
2. Annualized values for the 23rd Fiscal Period are calculated based on a period of 184 days, 181 days for the 24th Fiscal Period, 184 days for the 25th Fiscal
Period, 181 days for the 26th Fiscal Period and 184 days for the 27th Fiscal Period.
3. Return on net assets = Net income / {(Total net assets at beginning of period + Total net assets at end of period) / 2} × 100
4. Payout ratio is rounded down to the first decimal place.
5. Leasing NOI = Rental revenues – Property-related expenses + Depreciation expenses for the period
6. FFO = Net income + Depreciation expenses for the period – Gain on sale of real estate properties + Loss on sale of real estate properties
7. FFO per unit = FFO / Number of investment units issued and outstanding (figures below ¥1 rounded down)

16

Kenedix Office Investment Corporation

Kenedix Office Investment Corporation17

Balance Sheet
Kenedix Office Investment Corporation
As of October 31, 2018

In thousands of yen

AssetsCurrent assets:
Cash and deposits (Notes 3 and 14)
Cash and deposits in trust (Notes 3 and 14)
Operating accounts receivable
Prepaid expenses
Consumption taxes receivable
Other
Total current assets
Non-current assets:
Property, plant and equipment (Notes 4 and 16)
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust (Note 7)
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment, net
Intangible assets (Note 4)
Leasehold right (Note 16)
Leasehold right in trust (Note 16)
Other
Total intangible assets
Investments and other assets
Investment securities (Note 14)
Lease and guarantee deposits
Lease and guarantee deposits in trust
Long-term prepaid expenses
Other (Notes 9, 14, and 15)
Total investments and other assets
Total non-current assets
Deferred assets:
Investment corporation bond issuance costs
Investment unit issuance costs
Total deferred assets
Total assets
See accompanying notes to the financial statements.

18

Kenedix Office Investment Corporation

As of October 31, 2018

As of April 30, 2018

¥ 14,050,532
10,973,654
360,261
111,536—
14,60625,510,591¥ 13,033,326
10,444,809
308,21776,768
166,118
17,35024,046,590

17,693,312(5,316,656)
12,376,655
32,618(13,848)
18,770421,857(235,745)
186,11186,586(54,482)
32,10327,520,902
122,006,776(27,897,343)
94,109,432
353,520(159,867)
193,653
1,623,898(708,259)
915,639
476,862(293,197)
183,665
272,828,051
2,933
408,367,919

17,943,798(5,111,557)
12,832,241
32,618(12,973)
19,645
411,649(223,927)
187,722
83,593(51,767)
31,82529,504,025
118,523,178(26,581,425)
91,941,753
345,717(162,368)
183,349
1,592,359(719,408)
872,951
466,546(278,421)
188,125
259,908,839
83395,670,563

285,257
351,524
2,889
639,671285,257
352,298
3,501
641,057

1,114,806
10,000122,889
1,256,374
113,1112,617,181
411,624,771

1,090,336
10,000122,889
1,306,980
61,1302,591,336
398,902,957

39,86045,85585,715¥437,221,079

44,019—44,019¥422,993,568

In thousands of yen

Liabilities
Current liabilities:
Operating accounts payable
Short-term loans payable (Notes 6 and 14)
Current portion of investment corporation bonds (Notes 6 and 14)
Current portion of long-term loans payable (Notes 6, 14 and 15)
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Total current liabilities
Non-current liabilities:
Investment corporation bonds (Notes 6 and 14)
Long-term loans payable (Notes 6, 14 and 15)
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Other (Notes 14 and 15)
Total non-current liabilities
Total liabilities
Net Assets
Unitholders’ equity:
Unitholders’ capital
Surplus:
Voluntary retained earnings
Reserve for reduction entry
Total voluntary retained earnings
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments:
Deferred gains or losses on hedges (Notes 14 and 15)
Total valuation and translation adjustments
Total net assets (Note 10)
Total liabilities and net assets

As of October 31, 2018¥

1,341,577
6,000,000—
13,750,000
775,971
62,766795
193,775
2,364,110
2,311
24,491,309

As of April 30, 2018¥

1,453,036
6,000,000
1,800,000
17,050,000
291,560
79,639682
118,583
2,340,180
2,568
29,136,251

6,000,000
157,300,000
1,953,387
18,150,520
12,281
183,416,189
207,907,498

6,000,000
155,000,000
2,050,835
17,164,250—
180,215,086
209,351,337

220,970,508

206,199,945

2,134,387
2,134,387
6,107,886
8,242,273
229,212,781

1,552,849
1,552,849
5,828,847
7,381,696
213,581,642

100,798
100,798
229,313,580¥437,221,079

60,58760,587
213,642,230¥422,993,568

Kenedix Office Investment Corporation

19

Statement of Income and Retained Earnings
Kenedix Office Investment Corporation
For the period from May 1, 2018 to October 31, 2018

In thousands of yen

Operating revenues
Rent revenue - real estate (Note 12)
Other lease business revenue (Note 12)
Gain on sale of real estate properties (Note 12)
Dividends income
Total operating revenues
Operating expenses
Expenses related to rent business (Note 12)
Asset management fees
Directors’ compensation
Asset custody fees
Administrative service fees
Audit fees
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Dividends and redemption-prescription
Interest on refund
Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bonds
Financing-related expenses
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Other non-operating expenses
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes (Note 9)
Current
Deferred
Total income taxes
Net income
Unappropriated retained earnings

From May 1, 2018
to October 31, 2018

From November 1, 2017
to April 30, 2018¥12,730,773
2,071,972
532,490
85,21915,420,456¥12,351,730
1,870,367
550,142
50,882
14,823,123

7,105,951
978,238
8,400
22,68956,337
11,80088,304
8,271,721
7,148,734

6,977,998
802,855
8,400
22,44855,69911,80095,5497,974,751
6,848,372

66
788
330
1,185

38
481
232
752

833,92130,783
133,349
4,159
9,171
29,411
1,040,795
6,109,124
6,109,124

818,187
32,780132,774
4,506—
30,9301,019,178
5,829,946
5,829,946

1,240
(2)
1,238
6,107,886¥ 6,107,886

1,101
(3)
1,098
5,828,847¥ 5,828,847

See accompanying notes to the financial statements.

Statement of Changes in Net Assets
Kenedix Office Investment Corporation
For the period from May 1, 2018 to October 31, 2018

In thousands of yen

Valuationandtranslation
adjustments

Unitholders’ equity

Balance as of October 31, 2017
Changes during the fiscal period
Reversal of reserve for reduction entry
Dividends of surplus
Net income
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of April 30, 2018 (Note 5)
Changes during the fiscal period
Issuance of new investment units
Provision of reserve for reduction entry
Dividends of surplus
Net income
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of October 31, 2018 (Note 5)

Surplus
Voluntary
retainedearnings
UnappropriatedReserve forretained
Unitholders’reduction entry
earnings
capital¥206,199,945¥2,024,673¥ 4,589,238

Kenedix Office Investment Corporation

Deferred
gains orlosses onhedges¥ 37,549

Total
net assets¥212,851,406———(471,824)——

471,824(5,061,062)
5,828,847—(5,061,062)
5,828,847—(5,061,062)
5,828,847————(5,061,062)
5,828,847

—

—

—

—

—

23,03823,038—¥206,199,945(471,824)¥1,552,849

1,239,609¥ 5,828,847

767,785¥ 7,381,696

767,785¥213,581,642

23,038¥ 60,587

790,823¥213,642,230

14,770,562————
581,538———(581,538)(5,247,309)
6,107,886——(5,247,309)
6,107,886

14,770,562—(5,247,309)
6,107,886————

14,770,562—(5,247,309)
6,107,886

—

—

—

—

—

40,211

40,211

14,770,562¥220,970,508

581,538¥2,134,387

279,038¥ 6,107,886

860,576¥ 8,242,273

15,631,139¥229,212,781

40,211¥100,798

15,671,350¥229,313,580

See accompanying notes to the financial statements.

20

Total
surplus¥ 6,613,911

Totalunitholders’equity¥212,813,857

Statement of Cash Flows
Kenedix Office Investment Corporation
For the period from May 1, 2018 to October 31, 2018

In thousands of yen

Cash flows from operating activities:
Income before income taxes
Depreciation
Amortization of long-term prepaid expenses
Interest income
Interest expenses
Amortization of investment unit issuance costs
Amortization of investment corporation bond issuance costs
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable-other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease in property, plant and equipment due to sale
Decrease in property, plant and equipment in trust due to sale
Decrease (increase) in long-term prepaid expenses
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Purchases of property, plant and equipment in trust
Repayments of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits
Repayments of tenant leasehold and security deposits in trust
Proceeds from tenant leasehold and security deposits in trust
Payments of restricted deposits in trust
Proceeds from restricted deposits in trust
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of investment corporation bonds
Proceeds of investment unit issuance
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period (Note 3)

From May 1, 2018
to October 31, 2018

From November 1, 2017
to April 30, 2018

¥ 6,109,124
2,358,994
133,099(66)
864,704
9,171
4,159(52,044)
166,118(34,767)(34,206)
322,777
75,19223,930(257)
2,230,835
4,483,951(82,492)(61,519)
16,516,704
66(881,064)(692)
15,635,014¥ 5,829,946
2,295,920
132,517(38)
850,967
—
4,506
6,548
(75,223)
33,815
136,298
4,491(34,684)
99,644(29,078)—
9,056,075(165,883)
3,823
18,149,649
38(837,734)(766)
17,311,186(150,523)(21,870,082)(140,072)
55,327(213,521)
1,561,793(13,149)
2,829(20,767,399)(101,142)(25,402,604)(14,666)
29,581(553,418)
1,295,016(686,767)
45,721(25,388,281)

2,000,000(2,000,000)
8,500,000(9,500,000)(1,800,000)
14,715,536(5,247,420)
6,668,115
1,535,730
21,746,685¥ 23,282,416

4,000,000(4,000,000)
15,000,000(8,750,000)——(5,061,692)
1,188,307(6,888,787)
28,635,473¥ 21,746,685

See accompanying notes to the financial statements.

Kenedix Office Investment Corporation

21

Notes to the Financial Statements
Kenedix Office Investment Corporation
For the period from May 1, 2018 to October 31, 2018 and the period from November 1, 2017 to April 30, 2018

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Office Investment Corporation (“the Investment
Corporation”) is a real estate investment corporation whose units
are listed on the Tokyo Stock Exchange. The Investment
Corporation is engaged in the ownership and operation of selected
office buildings and retail properties in Japan, with a focus on­mid-sized office buildings in the Tokyo metropolitan area. The
Investment Corporation was incorporated on May 6, 2005 as aninvestment corporation under the Law Concerning Investment
Trusts and Investment Corporations of Japan, or the Investment
Trust Law. On July 21, 2005, the Investment Corporation was
listed on the Real Estate Investment Trust Market of the Tokyo
Stock Exchange with a total of 75,400 investment units issued andoutstanding (Securities Code: 8972). Subsequently, the Investment
Corporation raised funds through eight public offerings. Pursuant
to the Investment Trust Law, the Investment Corporation is externally managed by a registered asset management company,
Kenedix Real Estate Fund Management, Inc. (“the AssetManagement Company”), a subsidiary of Kenedix, Inc. (“Kenedix”).
In concert with the Asset Management Company, the Investment
Corporation strives to maximize cash distribution to investors bysecuring stable earnings and sustainable investment growth. To
this end, the Investment Corporation adopts a dynamic and flexible investment stance that accurately reflects its environment andmarket trends, and endeavors to ensure a timely response to eachand every opportunity.
During the period ended April 30, 2018, the Investment
Corporation acquired two office buildings (Mitsubishijuko
Yokohama Building: acquisition price of ¥14,720 million, and JN
Building: acquisition price of ¥9,500 million) and sold one residential property (Residence Charmante Tsukishima: initial acquisition
price of ¥5,353 million) and two office buildings (KDX IkejiriOohashi Building: initial acquisition price of ¥2,400 million, andKDX Shin-Yokohama 214 Building: initial acquisition price of¥2,200 million) with a disposition price of ¥9,730 million.
During the period ended October 31, 2018, the Investment
Corporation acquired one office building (CROSS PLACE
Hamamatsucho: acquisition price of ¥20,700 million) and sold one
office building (KDX Hamamatsucho Dai-2 Building: initial acquisition price of ¥2,200 million) and one central urban retail property(Frame Jinnan-zaka (49.0% of quasi co-ownership interest): initialacquisition price of ¥4,851 million (Note)) with a disposition price of¥7,297 million.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Non-marketable securities classified as other securities are carriedat cost. Cost of securities sold is determined by the moving
average method. Concerning silent partnership (tokumei kumiai,

At the end of the twenty-sixth fiscal period (fiscal period endedApril 30, 2018), the Investment Corporation had total unitholders’capital of ¥206,199 million with 404,885 investment units outstanding. At the end of the twenty-­seventh fiscal period (fiscal
period ended October 31, 2018), the Investment Corporation had
total unitholders’ capital of ¥220,970 million with 428,510 investment units outstanding. The Investment Corporation owned aportfolio of 97 properties (consisting of 95 office buildings, one
central urban retail property and one other property) and 97 properties (consisting of 95 office buildings, one central urban retailproperty and one other property) with total acquisition prices of¥407,235 million and ¥420,884 million at the end of the twenty-­
sixth and twenty-seventh fiscal periods, respectively. The occupancy ratios were approximately 99.0% and 99.1% at the end of
the twenty-­sixth and twenty-seventh fiscal periods, respectively.
(Note) The acquisition price is an amount equivalent to 49.0% of
quasi co-ownership interest in ¥9,900 million, which is the acquisition price of the entire building initially acquired.
Basis of Presentation
The accompanying financial statements have been prepared inaccordance with the provisions set forth in the Investment Trust
Act of Japan, the Financial Instruments and Exchange Law ofJapan 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 acceptedin the United States of America.
The accompanying financial statements are basically a 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 the accompanying financial statements, relevant notes have been added andcertain reclassifications have been made to the financial statements issued domestically in order to present them in a form thatis more familiar to readers outside Japan. The Investment
Corporation’s fiscal period is a six-month period that ends at theend of April and the end of October each year. The Investment
Corporation does not prepare consolidated financial statements
because it has no subsidiaries.

“TK”) interests, the method of incorporating the amount of equity
equivalent to the portion that corresponds to the net gain or lossof the TK is adopted.

(B) Property, Plant and Equipment (including trust assets)
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated on a straight-line basis overthe estimated useful lives of the assets ranging as stated below:
Buildings
Structures
Machinery and equipment
Tools, furniture and fixtures

22

Kenedix Office Investment Corporation

From May 1, 2018 to October 31, 2018

2– 49 years
2– 45 years
3– 17 years
3– 20 years

From November 1, 2017 to April 30, 2018

2– 49 years
2– 45 years
3– 17 years
3– 20 years

(C) Intangible Assets (including trust assets)
Intangible assets are amortized by the straight-line method.
Leasehold right: Fixed-term land leasehold is amortized over acontractual period of 48 years and 9 months under the straightline method.
(D) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line
method.
(E) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of
three years under the straight-line method.
(F) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over amaturity period under the straight-line method.
(G)	Accounting Treatment of Trust Beneficiary Interests inReal Estate
For trust beneficiary interests in real estate, which are commonly
utilized in the ownership of commercial properties in Japan, allassets and liabilities in trust are recorded in the relevant balance
sheets and statements of income and retained earnings.
(H) Revenue Recognition
Operating revenues consist of rental revenues including baserents, common area charges and other operating revenues,
which include utility charge reimbursement, parking space rental­revenues and other miscellaneous revenues. Rental revenues are
generally recognized on an accrual basis over the life of eachlease. Utility charge reimbursements are recognized when earned
and their amounts can be reasonably estimated. Reimbursementsfrom tenants including utility charge reimbursements are recorded
on a gross basis and such amounts are recorded both as­revenues and expenses during the fiscal period.
(I) Taxes on Property, Plant and Equipment
Property-related taxes including property taxes, city planning taxes
and depreciable property taxes are imposed on properties on acalendar year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to the said period. Under Japanese tax rules, the sellerof property at the time of disposal is liable for these taxes on theproperty from the date of disposal to the end of the calendar year
in which the property is disposed. The seller, however, is generally
reimbursed by the purchaser for these accrued property-related
tax liabilities.
When the Investment Corporation purchases properties, it­typically allocates the portion of the property-related taxes related
to the period following the purchase date of each property throughthe end of the calendar year. The amounts of those allocatedportions of the property-related taxes are capitalized as part of theacquisition costs of the related properties. Capitalized property-­
related taxes amounted to ¥28,631 thousand and ¥53,876 thousand as of October 31, 2018 and April 30, 2018, respectively. In
subsequent calendar years, such property-related taxes arecharged as operating expenses in the fiscal period to which the
installments of such taxes correspond.

(J) Income Taxes
Deferred tax assets and liabilities are computed based on the
difference between the financial statements and income tax basesof assets and liabilities using the statutory tax rates.
(K) Consumption Taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes. Non-deductible consumption taxes applicable to the acquisition of assets are includedin the cost of acquisition for each asset.
(L) Derivative Financial Instruments
The Investment Corporation utilizes interest-rate swap and­interest-rate cap contracts as derivative financial instruments only
for the purpose of hedging its exposure to changes in interest
rates. The Investment Corporation deferred recognition of gains
or losses resulting from changes in fair value of interest-rate swap
and interest-rate cap contracts because these contracts met thecriteria for deferral hedging accounting. However, the Investment
Corporation adopted special treatment for interest-swap andinterest-rate cap contracts if they met the criteria for hedging
accounting under this treatment. The hedge effectiveness forthe interest-rate swap and interest-rate cap contract is assessed
each fiscal period except for those that meet the criteria of­special treatment.
(M) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits
placed with banks and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk ofmarket value fluctuation, with maturities of three months or lessfrom the date of purchase.
(N) Presentation of Amounts
Amounts of less than one thousand yen have been truncated in
the Japanese financial statements prepared in accordance withJapanese GAAP and filed with regulatory authorities in Japan.
Unless otherwise noted, amounts of the twenty-seventh and­twenty-sixth fiscal periods are rounded down, respectively, andratios are rounded off in the accompanying financial statements.
Totals shown in the accompanying financial statements do notnecessarily agree with the sums of the individual amounts.
(O) Notes on Changes in Presentation or Classification
As the Investment Corporation started application of “Partial
Amendments to Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28, February 16, 2018) from the fiscal period
under review, changes are made to present deferred tax assets
under investments and other assets and deferred tax liabilities
under non-current liabilities.
As a result, ¥29 thousand of deferred tax assets which was
included in “other” under “current assets” in the balance sheets ofthe previous fiscal period is included in “other” under “investments
and other assets.”

Kenedix Office Investment Corporation23

3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of October 31, 2018 and April 30, 2018.
In thousands of yen

As of April 30, 2018

As of October 31, 2018

Cash and deposits
Cash and deposits in trust
Restricted deposits in trust (Note)
Cash and cash equivalents in trust¥13,033,326
10,444,809(1,731,450)¥21,746,685¥14,050,532
10,973,654(1,741,770)¥23,282,416

Note: Restricted deposits in trust are retained for the repayment of tenant leasehold and security deposits in trust.

4. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant and equipment and intangible assets consist of the following as of October 31, 2018.
In thousands of yen

Type of asset

Buildings
Structures
Machinery andequipment
Tools, furniture andfixtures¥ 17,943,798
32,618Land
Property,plant andequipment

Structures in trust
Machinery andequipment in trust
Tools, furniture andfixtures in trust
Land in trust
Construction inprogress in trust

Intangible
assets

Other
Total intangible assets
Total¥ 5,316,656
13,848¥ 299,675 ¥ 12,376,655
875
18,770421,857

235,745

11,81886,58654,482

2,987

—

—

5,620,733

315,356

3,532

540

—

1,983,122

105,275

2,325,684¥ 4,974,504

1,592,359

108,240

345,717466,546

259,908,839

83

380,836,725¥¥ 342,022 ¥ 17,693,312—
32,61883,593¥118,523,178

428,812,411
290,050

363,784
6,123

659,958¥429,472,370

23,362

15,822

16,539,695—

21,769,751¥

27,520,902

45,755,276¥1,490,907 ¥122,006,776
15,559353,520

76,701

1,623,898
476,8625,506

3,620,482¥27,897,343

159,867

272,828,051

—

2,850
21,664,475

5,209,158

2,933

397,292,042

18,235————29,058,667

2,042,251363,784

12,260—659,958¥7,534,843 ¥443,707,278

20,287¥34,699,687—¥21,769,751

34,679,400
4,792

3,234

Note 1: The amount of increase during the period is primarily attributable to the acquisition of the one real estate property.
Note 2: The amount of decrease during the period is primarily attributable to the sales of the two real estate properties.

24

Kenedix Office Investment Corporation

Notes 1 and 2

293,197—

6,123¥1,962,090 ¥ 94,109,432

915,639—¥

Note 240,134,543

51,309—290,050

32,103

708,259—— ¥Note 2

27,520,902

193,653443,047,319¥

Remarks

186,111

10,6157,534,843—

Netbalance atthe endof period

Depreciation
for the period

10,20747,975,686

Subtotal
Total property, plant and equipment
Leasehold rightLeasehold rightin trust

91,535—

Depreciation
Accumulated
depreciation

411,649
29,504,025

Subtotal
Buildings in trust¥

Balance atthe endof period

Decreaseduringthe period

Increaseduringthe period

Balance atthe beginningof period

183,665

272,828,051

2,933

368,233,375

2,357,607

408,367,919

774

351,524

¥

— ¥

612

285,257
2,889

1,386
639,671¥2,358,994 ¥409,007,590

Notes 1 and 2

Property, plant and equipment and intangible assets consist of the following as of April 30, 2018.
In thousands of yen

Type of asset

Buildings
Structures
Machinery andequipment
Tools, furniture andfixtures¥ 17,814,001
32,618403,054

Land
Property,plant andequipment

Subtotal
Buildings in trustTotal— ¥ 17,943,798—
32,6188,595—

Depreciation
for the period¥ 5,111,557
12,973¥ 298,559 ¥ 12,832,241884
19,645

411,649

223,927

11,581

Remarks

187,722

83,593——83,59351,7672,826

31,82529,504,025——

29,504,025——

29,504,025—

47,975,686

5,400,225

313,850

42,575,460¥ 4,073,882 ¥118,523,178¥26,581,425

138,392¥ 5,999,351

373,778

2,965

31,026

345,717

162,368

10,607

183,349

1,752,248

70,522

230,411

1,592,359

719,408

51,647872,951

Subtotal
Total property, plant and equipment

Other
Total intangible assets¥

Accumulated
depreciation

47,837,294

Land in trust
Construction inprogress in trust

Intangible
assets129,797—

Netbalance atthe endof period¥116,597,709

Structures in trust
Machinery andequipment in trust
Tools, furniture andfixtures in trust

Leasehold rightLeasehold rightin trust¥

Depreciation

Balance atthe endof period

Decreaseduringthe period

Increaseduringthe period

Balance atthe beginningof period

463,275

8,169

4,898

466,546

278,421

17,884

188,125

246,626,638

19,360,002

6,077,802

259,908,839——

259,908,839

1,142

—

1,059

83

—

—

83

365,814,792

25,441,011

10,419,079

380,836,725

27,741,622

1,980,683

353,095,102

25,579,404

10,419,079

428,812,411

2,294,534

395,670,563¥¥

413,652,086¥¥1,900,544 ¥ 91,941,753

290,050—— ¥290,050

33,141,848
¥

4,792

¥

— ¥

285,257

363,784——

363,784

11,486774

352,298

6,123

—

—

6,123

2,622

612

3,501

659,958¥414,312,045—¥25,579,404—
659,958¥10,419,079 ¥429,472,370

18,900¥33,160,748

Notes 1 and 2

Notes 1 and 2

1,386
641,057¥2,295,920 ¥396,311,621

Note 1: The amount of increase during the period is primarily attributable to the acquisition of the two real estate properties.
Note 2: The amount of decrease during the period is primarily attributable to the sales of the three real estate properties.

5. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From May 1, 2018
to October 31, 2018

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

2,000,000
428,510

From November 1, 2017
to April 30, 2018

2,000,000
404,885

6. SHORT-TERM LOANS PAYABLE, LONG-TERM LOANS PAYABLE AND INVESTMENT CORPORATION BONDS
The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as of
October 31, 2018:
Classification

Short-term loans payable

Subtotal
Current portion of long-term loans payable

November 30, 2017
January 31, 2018
January 31, 2018
March 30, 2018
July 31, 2018
August 31, 2018

Last repayment dateNovember 30, 2018
January 31, 2019
January 31, 2019
March 29, 2019
July 31, 2019
August 31, 2019

Weighted-averageinterest rate

November 12, 2013
November 29, 2013
March 28, 2012
March 28, 2012
March 12, 2014
March 31, 2014

November 12, 2018
November 30, 2018
March 28, 2019
March 28, 2019
March 31, 2019
March 31, 2019

0.82%
0.84%
1.77%
1.77%
0.78%
0.76%

Drawdown date

0.36%
0.31%
0.36%
0.36%
0.36%
0.32%

Balance(In thousands of yen)¥¥

2,000,000
500,000
500,000
1,000,000
1,000,000
1,000,000
6,000,000
1,000,000
200,000
1,400,000
1,000,000
450,000
2,500,000

Kenedix Office Investment Corporation25

Classification

Current portion of long-term loans payable

SubtotalLong-term loans payable26

Kenedix Office Investment Corporation

Drawdown date

Last repayment date

Weighted-averageinterest rate

March 30, 2016
July 10, 2014
July 14, 2014
July 31, 2014
August 29, 2014
September 30, 2013
September 30, 2013

March 31, 2019
July 10, 2019
July 31, 2019
July 31, 2019
July 31, 2019
September 30, 2019
September 30, 2019

0.17%
0.64%
0.68%
0.62%
0.65%
1.06%
1.06%

August 30, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 31, 2014
July 31, 2014
July 31, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015

August 31, 2020
November 12, 2020
November 12, 2020
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
October 31, 2020
July 10, 2021
July 10, 2021
July 31, 2020
October 31, 2020
July 31, 2022
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023
October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025

1.42%
1.07%
1.07%
1.12%
1.12%
1.21%
0.93%
1.13%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.95%
0.90%
0.90%
0.74%
0.76%
1.01%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%

Balance(In thousands of yen)¥

1,000,000
500,000
1,000,000
1,000,000
1,000,000
1,800,000
900,000
13,750,000¥ 1,500,000
2,000,000
500,000
1,000,000
900,000
1,300,000
3,700,000
2,300,000
1,800,000
1,800,000
3,000,000
4,000,000
3,000,000
2,000,000
2,900,000
2,000,000
500,000
2,700,000
300,000
2,200,000
800,000
500,000
1,000,000
950,000
2,700,000
1,000,000
3,000,000
2,000,000
1,500,000
1,000,000
2,000,000
1,000,000
1,500,000
1,500,000
1,250,000
350,000
1,700,000
1,250,000
2,100,000
1,000,000
2,500,000
2,300,000
500,000
500,000
500,000
500,000
500,000
500,000
2,000,000
1,000,000
1,500,000

Classification

Long-term loans payable

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017
June 30, 2017
August 10, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017
November 13, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 28, 2017
December 28, 2017
December 28, 2017
March 12, 2018
March 26, 2018
March 26, 2018
July 31, 2018
August 20, 2018
August 20, 2018
August 20, 2018
August 20, 2018
August 20, 2018
August 31, 2018
August 31, 2018
August 31, 2018
October 31, 2018

October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027
June 30, 2027
July 28, 2027
August 31, 2023
March 31, 2024
September 30, 2025
March 31, 2027
September 21, 2027
September 30, 2027
October 31, 2027
November 13, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
December 28, 2025
December 28, 2026
December 28, 2027
March 31, 2028
March 31, 2027
March 31, 2028
July 31, 2028
August 31, 2025
August 31, 2028
August 31, 2028
August 31, 2028
August 31, 2028
August 31, 2025
August 31, 2025
August 31, 2028
October 31, 2028

1.11%
1.11%
1.12%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.67%
0.88%
0.76%
0.73%
0.83%
0.98%
0.95%
0.86%
0.85%
0.85%
0.85%
0.80%
0.54%
0.56%
0.68%
0.73%
0.87%
0.85%
0.81%
0.93%
0.90%
0.82%
0.97%
0.94%
0.87%
0.90%
0.87%
0.74%
0.88%
0.86%
0.91%
0.81%
0.90%
0.99%
0.70%
1.00%
1.00%
1.00%
0.97%
0.70%
0.72%
1.01%
1.01%

Balance(In thousands of yen)¥

2,000,000
2,500,000
2,500,000
1,000,000
2,500,000
500,000
2,000,000
1,800,000
1,000,000
500,000
1,000,000
2,000,000
2,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
1,000,000
4,000,000
1,500,000
500,000
1,500,000
500,000
700,000
500,000
1,500,000
3,500,000
1,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
2,500,000
3,000,000
1,400,000
1,200,000
1,000,000
1,000,000
1,000,000
800,000
600,000
500,000
500,000
500,000
1,500,000
1,000,000
1,000,000
500,000
500,000
1,000,000
1,000,000
500,000
500,000
500,000
300,000
700,000
1,500,000

Kenedix Office Investment Corporation27

Classification

Long-term loans payable
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 31, 2018
October 31, 2018

October 31, 2028
October 31, 2028

0.91%
1.01%

July 25, 2014
April 28, 2016
July 19, 2017
July 19, 2017

July 25, 2024
April 28, 2028
July 19, 2022
July 16, 2027

1.18%
0.90%
0.26%
0.64%

Balance(In thousands of yen)¥

1,000,000
500,000
157,300,000¥ 2,000,000
1,000,000
1,000,000
2,000,000
6,000,000¥183,050,000

The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as ofApril 30, 2018:
Classification

Short-term loans payable

Subtotal
Current portion of long-term loans payable

SubtotalLong-term loans payable28

Kenedix Office Investment Corporation

July 31, 2017
August 31, 2017
November 30, 2017
January 31, 2018
January 31, 2018
March 30, 2018

Last repayment dateJuly 31, 2018
August 31, 2018
November 30, 2018
January 31, 2019
January 31, 2019
March 29, 2019

Weighted-averageinterest rate

July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
October 31, 2012
October 31, 2013
October 31, 2016
November 12, 2013
November 29, 2013
March 28, 2012
March 28, 2012
March 12, 2014
March 31, 2014
March 30, 2016

July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018
October 31, 2018
October 31, 2018
October 31, 2018
November 12, 2018
November 30, 2018
March 28, 2019
March 28, 2019
March 31, 2019
March 31, 2019
March 31, 2019

0.57%
0.95%
0.95%
0.95%
0.95%
0.97%
1.08%
1.08%
1.08%
1.25%
0.89%
0.35%
0.82%
0.84%
1.77%
1.77%
0.78%
0.76%
0.17%

August 30, 2013
September 30, 2013
September 30, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
April 22, 2014
July 10, 2014

August 31, 2020
September 30, 2019
September 30, 2019
November 12, 2020
November 12, 2020
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
October 31, 2020
July 10, 2019

1.42%
1.06%
1.06%
1.07%
1.07%
1.12%
1.12%
1.21%
0.93%
1.13%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.95%
0.64%

Drawdown date

0.35%
0.30%
0.35%
0.31%
0.36%
0.36%

Balance(In thousands of yen)¥

1,000,000
1,000,000
2,000,000
500,000
500,000
1,000,000
6,000,000¥
500,000
1,000,000
1,000,000
500,000
500,000
500,000
700,000
500,000
300,000
2,500,000
500,000
1,000,000
1,000,000
200,000
1,400,000
1,000,000
450,000
2,500,000
1,000,000
17,050,000¥ 1,500,000
1,800,000
900,000
2,000,000
500,000
1,000,000
900,000
1,300,000
3,700,000
2,300,000
1,800,000
1,800,000
3,000,000
4,000,000
3,000,000
2,000,000
2,900,000
500,000

Classification

Long-term loans payable

Drawdown date

Last repayment date

Weighted-averageinterest rate

July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016

July 10, 2021
July 10, 2021
July 31, 2019
July 31, 2019
July 31, 2020
October 31, 2020
July 31, 2022
July 31, 2019
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023
October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025
October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026

0.90%
0.90%
0.68%
0.62%
0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%
1.11%
1.11%
1.12%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.67%
0.88%
0.76%
0.73%

Balance(In thousands of yen)¥

2,000,000
500,000
1,000,000
1,000,000
2,700,000
300,000
2,200,000
1,000,000
800,000
500,000
1,000,000
950,000
2,700,000
1,000,000
3,000,000
2,000,000
1,500,000
1,000,000
2,000,000
1,000,000
1,500,000
1,500,000
1,250,000
350,000
1,700,000
1,250,000
2,100,000
1,000,000
2,500,000
2,300,000
500,000
500,000
500,000
500,000
500,000
500,000
2,000,000
1,000,000
1,500,000
2,000,000
2,500,000
2,500,000
1,000,000
2,500,000
500,000
2,000,000
1,800,000
1,000,000
500,000
1,000,000
2,000,000
2,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
1,000,000
4,000,000

Kenedix Office Investment Corporation

29

Classification

Long-term loans payable

Subtotal
Current portion of investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017
June 30, 2017
August 10, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017
November 13, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 28, 2017
December 28, 2017
December 28, 2017
March 12, 2018
March 26, 2018
March 26, 2018

October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027
June 30, 2027
July 28, 2027
August 31, 2023
March 31, 2024
September 30, 2025
March 31, 2027
September 21, 2027
September 30, 2027
October 31, 2027
November 13, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
December 28, 2027
December 28, 2025
December 28, 2026
March 31, 2028
March 31, 2027
March 31, 2028

0.83%
0.98%
0.95%
0.86%
0.85%
0.85%
0.85%
0.80%
0.54%
0.56%
0.68%
0.73%
0.87%
0.85%
0.81%
0.93%
0.90%
0.82%
0.97%
0.94%
0.87%
0.90%
0.87%
0.86%
0.74%
0.88%
0.91%
0.81%
0.90%

September 12, 2013

September 12, 2018

1.00%

July 25, 2014
April 28, 2016
July 19, 2017
July 19, 2017

July 25, 2024
April 28, 2028
July 19, 2022
July 16, 2027

1.18%
0.90%
0.26%
0.64%

Balance(In thousands of yen)¥

1,500,000
500,000
1,500,000
500,000
700,000
500,000
1,500,000
3,500,000
1,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
2,500,000
3,000,000
1,400,000
1,200,000
1,000,000
1,000,000
1,000,000
800,000
600,000
500,000
500,000
500,000
1,500,000
1,000,000
1,000,000
155,000,000¥ 1,800,000
1,800,000¥ 2,000,000
1,000,000
1,000,000
2,000,000
6,000,000¥185,850,000

7. REDUCTION ENTRY
The amount of reduction entry of property, plant and equipment acquired by government subsidy is as follows:
In thousands of yen

Buildings in trust¥26,230¥26,230

8. PER UNIT INFORMATION

Net asset value per unit
Net income per unit
Weighted-average number of units (units)

As of April 30, 2018

As of October 31, 2018

Yen

From May 1, 2018
to October 31, 2018

¥535,141¥ 14,373
424,933

From November 1, 2017
to April 30, 2018

¥527,661¥ 14,396
404,885

The weighted-average number of units outstanding of 424,933 and 404,885 as of October 31, 2018 and April 30, 2018, respectively, wasused for the computation of the amount of net income per unit. Net income per unit after adjusting for residual units is not included because
there were no residual investment units.

30

Kenedix Office Investment Corporation

9. INCOME TAXESThe Investment Corporation is subject to corporate income taxes
at a regular statutory rate of approximately 32%. However, theInvestment Corporation may deduct from its taxable income
amounts distributed to its unitholders, provided the requirements
are met under the Special Taxation Measures Law of Japan. Under
this law, the Investment Corporation must meet a number of tax
requirements, including a requirement that it currently distributein 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

Statutory tax rate
Deductible cash distributions
Provision of reserve for reduction entry
Others
Effective tax rateincome taxes. The Investment Corporation distributed in excessof 90% of its distributable income in the form of cash distributions
totaling ¥5,766 million and ¥5,247 million for the fiscal periods
ended October 31, 2018 and April 30, 2018, respectively. Therefore, such distributions were treated as deductible distributions forpurposes of corporate income taxes. The effective tax rate on theInvestment Corporation’s income was 0.02% for the fiscal periods
ended October 31, 2018 and April 30, 2018, respectively. The
following table summarizes the significant differences between thestatutory tax rate and the effective tax rate.

From May 1, 2018
to October 31, 201831.51%(29.74)(1.76)
0.01
0.02%

From November 1, 2017
to April 30, 201831.74%(28.57)(3.17)
0.02
0.02%

The significant components of deferred tax assets and liabilities as of October 31, 2018 and April 30, 2018 are as follows:
In thousands of yen

Deferred tax assets:
Enterprise tax payable
Amortization of leasehold right
Subtotal
Valuation allowance
Total deferred tax assets

As of October 31, 2018

As of April 30, 2018

¥

¥

30
3,873
3,904
(3,873)
¥
30

29
3,628
3,657
(3,628)¥29

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

11. RELATED-PARTY TRANSACTIONS(A) Parent Company, Major Corporate Unitholders and Other
Twenty-seventh fiscal period (From May 1, 2018 to October 31, 2018) and Twenty-sixth fiscal period (From November 1, 2017 toApril 30, 2018):
Not applicable(B) Affiliated Companies and Other
Twenty-seventh fiscal period (From May 1, 2018 to October 31, 2018) and Twenty-sixth fiscal period (From November 1, 2017 toApril 30, 2018):
Not applicable(C) Fellow Subsidiary Companies and Other
Twenty-seventh fiscal period (From May 1, 2018 to October 31, 2018) and Twenty-sixth fiscal period (From November 1, 2017 toApril 30, 2018):
Not applicable(D) Directors, Major Individual Unitholders and Other
Twenty-seventh fiscal period (From May 1, 2018 to October 31, 2018) and Twenty-sixth fiscal period (From November 1, 2017 toApril 30, 2018):
Not applicable

Kenedix Office Investment Corporation

31

12. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSSON SALE OF REAL ESTATE PROPERTY
Rent revenue - real estate, expenses related to rent business, and gain and loss on sale of real estate property for the fiscal periods fromMay 1, 2018 to October 31, 2018 and from November 1, 2017 to April 30, 2018 consist of the following:
In thousands of yen

Rental and other operating revenues:
Rent revenue - real estate:
Rental revenues
Common area charges
Subtotal
Others:Parking space rental revenues
Utility charge reimbursement
Miscellaneous
Subtotal
Total rent revenue - real estate
Property-related expenses:
Expenses related to rent business:
Property management fees and facility management fees
Depreciation
Utilities
Taxes
Insurance
Repairs and maintenance
Trust fees
OthersTotal expenses related to rent business
Gain on sale of real estate properties:
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Gain on sale of real estate properties

From May 1, 2018
to October 31, 2018

From November 1, 2017
to April 30, 2018¥10,893,102
1,837,671
12,730,773¥10,509,225
1,842,504
12,351,730

519,171
1,230,853
321,947
2,071,972¥14,802,746

513,392
1,054,416
302,558
1,870,367¥14,222,098¥ 1,378,278
2,358,382
1,241,455
1,225,685
19,886
568,517
32,791
280,955¥ 7,105,951¥ 1,355,289
2,295,308
1,102,668
1,148,754
19,318767,074
32,748
256,837¥ 6,977,998¥ 7,297,000
6,714,787
49,722¥ 532,490¥ 9,730,000
9,056,075
123,782¥ 550,142

13. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease terms of generally
two years for office buildings. The future minimum rental revenues under existing non-cancelable operating leases as of October 31, 2018
and April 30, 2018 are as follows:
In thousands of yen

Due within one year
Due after one year
Total

32

Kenedix Office Investment Corporation

As of October 31, 2018

¥1,621,774
5,956,433¥7,578,208

As of April 30, 2018

¥1,446,246
5,943,183¥7,389,430

14. FINANCIAL INSTRUMENTS
Twenty-seventh fiscal period (from May 1, 2018 to October 31, 2018)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges in interest rates and does not enter into derivatives for
speculative or trading purposes. Management of surplus funds isundertaken in a prudent manner that considers fully such factors
as safety, liquidity, interest rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.
Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition ofproperties and have a redemption date of a maximum of approximately 10 years following the accounting date. Although a certain
portion of said liabilities are subject to interest rate fluctuation risk,
the Investment Corporation utilizes derivatives (interest-rate swap
and interest-rate cap transactions) in order to reduce such risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy, and the assessmentof the effectiveness of hedging activities, please see Note 2 (L)“Derivative Financial Instruments.”(3) Risk management for financial instruments(a)	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and­interest-­rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.
(b)	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
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 as­regularly checking the balance of cash reserves.
(4)	Supplementary explanation of the estimated fair valueof 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 fairvalue.

(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of October 31, 2018 and estimated fair value are shown in the following
table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and deposits(2) Cash and deposits in trust
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value

Estimated fair value¥ 14,050,532
10,973,654
25,024,186
6,000,000—
13,750,000
6,000,000
157,300,000¥183,050,000
100,798¥ 14,050,532
10,973,654
25,024,186
6,000,000—
13,768,881
6,050,100
157,675,962¥183,494,943
100,798

Difference

¥

—
—
—
—
—
18,881
50,100375,962¥444,943—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing the net liability position.

Kenedix Office Investment Corporation33

*1	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a 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 valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 15 “DERIVATIVE TRANSACTIONS.”*2 Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,114,806

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3 Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and deposits
Cash and deposits in trust
Total¥14,050,532
10,973,654¥25,024,186*4 Redemption schedule for loans payable and investment corporation bonds
In thousands of yen

Short-term loans payable
Investment corporation bonds
Long-term loans payable
Total

Due within 1 year
or less¥ 6,000,000—
13,750,000¥19,750,000

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

¥

¥

¥

¥

—
—
18,600,000¥18,600,000——
21,300,000¥21,300,000—
1,000,000
17,050,000¥18,050,000——
9,300,000¥9,300,000

Due after
5 years¥—
5,000,000
91,050,000¥96,050,000

Twenty-sixth fiscal period (from November 1, 2017 to April 30, 2018)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges in interest rates and does not enter into derivatives for
speculative or trading purposes. Management of surplus funds isundertaken in a prudent manner that considers fully such factors
as safety, liquidity, interest rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.

34

Kenedix Office Investment Corporation

Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition ofproperties and have a redemption date of a maximum of approximately 10 years following the accounting date. Although a certain
portion of said liabilities are subject to interest rate fluctuation risk,
the Investment Corporation utilizes derivatives (interest-rate swap
and interest-rate cap transactions) in order to reduce such risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy, and the assessmentof the effectiveness of hedging activities, please see Note 2 (L)“Derivative Financial Instruments.”

(3) Risk management for financial instruments(a)	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and­interest-­rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.

(4)	Supplementary explanation of the estimated fair valueof 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 fairvalue.

(b)	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
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 as­regularly checking the balance of cash reserves.
(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of April 30, 2018 and estimated fair value are shown in the following table.
The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and deposits(2) Cash and deposits in trust
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value

Estimated fair value¥ 13,033,326
10,444,809
23,478,136
6,000,000
1,800,000
17,050,000
6,000,000
155,000,000¥185,850,000
60,587¥ 13,033,326
10,444,809
23,478,136
6,000,000
1,804,644
17,088,337
6,057,000
155,280,513¥186,230,495
60,587

Difference

¥

—
—
—
—
4,644
38,33757,000280,513¥380,495—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing the net liability position.

*1	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a 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 valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 15 “DERIVATIVE TRANSACTIONS.”

Kenedix Office Investment Corporation35

*2 Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,090,336

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3 Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and deposits
Cash and deposits in trust
Total¥13,033,326
10,444,809¥23,478,136*4 Redemption schedule for loans payable and investment corporation bonds
In thousands of yen

Short-term loans payable
Investment corporation bonds
Long-term loans payable
Total

Due within 1 year
or less¥ 6,000,000
1,800,000
17,050,000¥24,850,000

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

¥

¥

¥

¥

—
—
14,700,000¥14,700,000——
19,600,000¥19,600,000——
21,700,000¥21,700,000

Due after
5 years—
1,000,000
10,950,000¥11,950,000¥—
5,000,000
88,050,000¥93,050,000

15. DERIVATIVE TRANSACTIONS
The following summarizes the contracted amount and the fair value of interest-rate swap contracts as of October 31, 2018:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)

Hedge accounting method

Type of derivative transactions

Hedged items

Principle method

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payableSpecial treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payableTotal

Maturing after
1 year

¥ 23,900,000 ¥ 23,900,000

93,900,000

82,550,000¥117,800,000 ¥106,450,000

Fair value(In thousands of yen)Calculation method for
applicable fair value¥100,798

Based on theamount provided
by counterparty
financial institutions*¥100,798(*) Interest-rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fair value is included in thefair value of the hedged long-term loans payable.

36

Kenedix Office Investment Corporation

The following summarizes the contracted amount and the fair value of interest-rate swap and interest-rate cap contracts as ofApril 30, 2018:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)
Maturing after
1 yearFair value(In thousands of yen)Calculation method for
applicable fair value¥60,587

Based on theamount provided
by counterparty
financial institutions

Hedge accounting method

Type of derivative transactions

Hedged items

Principle method

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payableSpecial treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payable97,400,000

88,750,000*

Special treatment ofinterest-rate caps

Interest-rate caps
transaction

Long-term loans
payable500,000

—

*

Total

¥ 17,900,000 ¥ 17,900,000¥115,800,000 ¥106,650,000¥60,587(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.

16. INVESTMENT AND RENTAL PROPERTIES
Twenty-seventh fiscal period (from May 1, 2018 to October 31, 2018)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo metropolitan area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of April 30, 2018

¥396,308,119

Net change¥12,696,581

As of October 31, 2018

¥409,004,701

Fair value
As of October 31, 2018
(In thousands of yen)

¥465,637,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers. Fair value at the end of the fiscal period under review of Frame
Jinnan-zaka (51.0% of quasi co-ownership interest) that was sold on November 1, 2018 is calculated based on the sale price (¥5,253,000 thousand) in the transaction
agreement on May 14, 2018.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of one property totaling ¥20,841,117 thousand, the sales of two properties totaling ¥6,714,787 thousand and depreciation amounting to ¥2,358,382
thousand.

Income and loss in the fiscal period ended October 31, 2018 for real estate for rental purposes is listed in Note 12 “BREAKDOWN OFRENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY.”
Twenty-sixth fiscal period (from November 1, 2017 to April 30, 2018)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo metropolitan area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of October 31, 2017

¥382,081,158

Net change¥14,226,960

As of April 30, 2018

¥396,308,119

Fair value
As of April 30, 2018
(In thousands of yen)¥442,773,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers. Fair value at the end of the fiscal period under review of KDX­Hamamatsucho Dai-2 Building and Frame Jinnan-zaka (49.0% of quasi co-ownership interest) that were sold on July 2, 2018 and Frame Jinnan-zaka (51.0% of quasi
co-ownership interest) that is scheduled to be sold on November 1, 2018 are calculated based on the sale price (¥12,550,000 thousand) in the transaction agreement
on May 14, 2018.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of two properties totaling ¥24,692,691 thousand, the sales of three properties totaling ¥9,056,075 thousand and depreciation amounting to ¥2,295,308
thousand.

Income and loss in the fiscal period ended April 30, 2018 for real estate for rental purposes is listed in Note 12 “BREAKDOWN OF RENTALAND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY.”

Kenedix Office Investment Corporation

37

17. SEGMENT AND RELATED INFORMATION
Twenty-seventh fiscal period (from May 1, 2018 to October 31, 2018)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenues on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenues on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenues on the statementof income and retained earnings.
Twenty-sixth fiscal period (from November 1, 2017 to April 30, 2018)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenues on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenues on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenues on the statementof income and retained earnings.

18. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable38

Kenedix Office Investment Corporation

19. DISTRIBUTIONS

I. Retained earnings at the end of period
II. Total distributions
Distributions per unit
III. Voluntary reserve (provision)
Provision of reserve for reduction entry
IV. 	Retained earnings brought forward to
the next period
Method of calculating distribution amount

Yen

Twenty-seventh fiscal period(From May 1, 2018 to October 31, 2018)¥6,107,886,067¥5,766,887,580¥
13,458

Twenty-sixth fiscal period(From November 1, 2017 to April 30, 2018)¥5,828,847,806¥5,247,309,600¥
12,960¥ 340,998,487¥ 581,538,206—
In accordance with the policy stipulated in
Article 35 (1) of its Articles of Incorporation,
the Investment Corporation determines thatthe amount of distribution shall exceed theamount equivalent to 90% of its distributableprofit as stipulated in Article 67-15 of the Act
on Special Measures Concerning Taxation,and shall be up to the amount of its profits
as the ceiling. Following this policy, theInvestment Corporation has decided that, of
the amount remaining after the provision ofreserve for reduction entry as stipulated in
Article 66-2 of the Act on Special Measures
Concerning Taxation is deducted from unappropriated retained earnings, it shall distribute the outstanding ¥5,766,887,580 as profit
distribution.
In addition, the Investment Corporation
decided not to distribute cash in excess of
distributable profit, stipulated in Article 35 (2)of its Articles of Incorporation.

—
In accordance with the policy stipulated in
Article 35 (1) of its Articles of Incorporation,
the Investment Corporation determines thatthe amount of distribution shall exceed theamount equivalent to 90% of its distributableprofit as stipulated in Article 67-15 of the Act
on Special Measures Concerning Taxation,and shall be up to the amount of its profits
as the ceiling. Following this policy, theInvestment Corporation has decided that, of
the amount remaining after the provision ofreserve for reduction entry as stipulated in
Article 66-2 of the Act on Special Measures
Concerning Taxation is deducted from unappropriated retained earnings, it shall distribute the outstanding ¥5,247,309,600 as profit
distribution.
In addition, the Investment Corporation
decided not to distribute cash in excess of
distributable profit, stipulated in Article 35 (2)of its Articles of Incorporation.

Kenedix Office Investment Corporation

39

Unitholders’ Information

Outline of Kenedix Office Investment Corporation (as of November 1, 2018)● Structure of Investment Corporation

Property Support Line Company
Trademark Licenser

Investment Corporation

Kenedix, Inc.

❺

Asset Custodian/
Administrative Agent(Institutional administration)

Mizuho Trust & Banking Co., Ltd.

❷❹
Asset Management Company❶

Kenedix Real Estate
Fund Management, Inc.

General Meeting ofUnitholders

Administrative Agent(accounting business)❻

Mitsubishi UFJ Tr ust andBanking Corporation

Board of Directors❷

Executive Director

Jiro Takeda

Supervisory Director❼

Shiro Toba

Property Support Line Company

Supervisory Director

Kenedix Investment
Partners, Inc. (Note 1)

Administrator for Unitholder’s Register
Administrator for Special Accounts

Sumitomo Mitsui Trust Bank, Limited

Yoshihiro Morishima
Supervisory Director

Takahiro Seki

Property Management Company❸(Note 2)

Kenedix Property Management, Inc.

❶ Asset management agreement❷ Memorandum of Understanding on providing
real estate information❸ Property management agreement

Auditor❽Ernst & Young ShinNihon LLC

Administrative Agent for
Investment Corporation Bond

Sumitomo Mitsui Banking Corporation
MUFG Bank, Ltd.

❺ Asset custodian agreement / Administrative agency agreement(institutional administration)❻ Administrative agency agreement (accounting business)❼ Unitholder registry administrator agreement/ Special accounts administration agreement❹ Trademark licensing agreement❽ Financial agency agreement

Note 1: On November 1, 2018, Kenedix Investment Partners, Inc. was added to a party on a property information provision memorandum of understanding.
Note 2: Several properties are not under the property management of Kenedix Property Management, Inc.

Investment units● Unitholder structure (investment unit basis) (Note)
Other domestic companies

3,977units (0.98%)

End of 26th fiscal period(Apr. 30, 2018)
Total

404,885 units

End of 27th fiscal period(Oct. 31, 2018)
Total

Financial institutions (including securities companies)

Foreign companies and individuals

Financial institutions (including securities companies)

Foreign companies and individuals

255,011units (62.98%)

428,510 units

258,642 units (60.35%)

132,232 units (32.65%)

151,400 units (35.33%)

Other domestic companies

4,226 units (0.98%)

Note: Ratios rounded down to second decimal place.

40

Kenedix Office Investment Corporation

Individuals and others

13,665units (3.37%)

Individuals and others

14,242 units (3.32%)

● IR schedule

Disclosure on website as appropriate

Start of distribution payments

Apr.
Mar.

Feb.
Jan.
Dec.
Nov.

Start of distribution payments

Oct.

Fiscal period end

Asset management report publication

Financial results announcement

Sept.
Aug.

Fiscal period end

July
June
May

Asset management report publication

Financial results announcement● Unitholder memorandum

Fiscal period ends

April 30 and October 31

General Meeting of Unitholders

In principal, at least once every two years

Unitholder voting datePrescribed in Article 16 of the Articles of Incorporation

Distribution payment dates

Ends of April and October (within three months of payment confirmation date)Listing

Tokyo Stock Exchange (stock code: 8972)

Newspaper for publicannouncements

Nihon Keizai Shimbun

Unitholder registry and special
account administrator

Sumitomo Mitsui Trust Bank, Limited
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo

Postal address and telephoneinquiries

Stock Transfer Agency Division
Sumitomo Mitsui Trust Bank, Limited
8-4 Izumi 2-chome, Suginami-ku, Tokyo
Toll-free tel: 0120 782 031● Distribution payment

During receipt period

Take your distribution receipt to the head or branch offices of Japan Post Bank, Ltd. or post offices(bank agents).

After receipt period

Specify the receipt method on the back of the distribution receipt and mail it to the Stock Transfer
Agency Division of Sumitomo Mitsui Trust Bank, Limited, or receive the distribution at a branch of thebank.

Receiving future dividends

Distributions can be paid by remittances to bank or ordinary postal savings accounts. If transfer
designations or other procedures are preferred, you should, in principle, contact the brokerage withwhich you have an account. If you do not have a brokerage account and have a special account,contact Sumitomo Mitsui Trust Bank, Limited, the institution for managing special accounts.

Exclusions

Under the Articles of Incorporation of the Investment Corporation, you cannot receive distributions after
three years have passed since distribution payments start, so please receive them as soon as possible.

Kenedix Office Investment Corporation

41

Portfolio

Portfolio Map (as of November 1, 2018)
Tokyo metropolitan area (Tokyo central five wards)

JR Yamanote Line

Ueno

A-93
A-29

D-2

A-88

Suidobashi

A-71

Iidabashi

A-66

Shinjuku
A-41

A-55

Shinjuku Ward
JR Chuo Li

ne

A-120

A-8

Ichigaya

Chiyoda Ward

A-64

A-6
A-21
A-112

山手線

Shibuya Ward

Toranomon
A-115

A-7

ShibuyaMinato Ward

Ebisu

A-116

A-124
A-32

線
山手

A-119

A-91

A-17

A-89

Shinagawa42

Kenedix Office Investment Corporation

JR Sobu Line

A-68

A-20
A-4

A-121

A-107

Chuo Ward

Hamamatsucho
A-19

A-73
A-108

A-67

Shinbashi

A-51
A-74

Nihonbashi

A-1

A-109

A-114
A-87

Tokyo

A-13

Harajuku

A-113

Kanda

A-27

A-46

A-59

A-56

A-37

A-38

A-92

Ochanomizu

A-60

A-3

A-1

A-3

A-4

A-20

A-51

A-60

A-64

A-67

KDX Nihonbashi
313 Building

Higashi-Kayabacho
Yuraku Building

KDX Hatchobori
Building

KDX Kayabacho
Building

KDX Hamacho
Nakanohashi Building

KDX Harumi
Building

KDX Nihonbashi
216 Building

KDX Ginza
1chome Building

A-68

A-73

A-74

A-87

A-107

A-108

A-113

A-114

KDX Nihonbashi
Honcho Building

KDX Hakozaki
Building

KDX Shin-Nihonbashi Building

Itopia Nihonbashi
SA Building

KDX Ginza East
Building

Pentel Building

KDX Shin-Nihonbashi
Ekimae Building

KDX Nihonbashi
Edo-dori Building

A-121

A-7

A-19

A-21

A-32

A-89

A-91

A-109

Ginza 4chome
Tower

KDX Minami
Aoyama Building

KDX Hamamatsucho
Building

KDX Shinbashi
Building

KDX Shiba-Daimon
Building

KDX Takanawadai
Building

KDX Mita Building

KDX Hamamatsucho
Center Building

A-112

A-115

A-116

A-8

A-13

A-27

A-37

KDX Toranomon
1chome Building

ARK Mori Building

KDX Nishi-Shinbashi Building

CROSS PLACE
Hamamatsucho

Kanda Kihara
Building

KDX Kojimachi
Building

KDX Kajicho Building

KDX Ochanomizu
Building

A-46

A-56

A-59

A-92

A-29

A-38

A-41

A-55

Hiei Kudan-Kita
Building

KDX Jimbocho
Building

KDX Iwamoto-cho
Building

KDX Akihabara
Building

KDX HigashiShinjuku Building

KDX NishiShinjuku Building

KDX Shinjuku 286
Building

Shin-toshin
Maruzen Building

A-66

A-71

A-88

A-93

A-6

A-17

A-119

A-120

KDX Shinjuku
Building

KDX Iidabashi
Building

KDX Shinjuku
6-chome Building

KDX Iidabashi
SquareHarajuku F.F.
Building

KDX Ebisu Building

KDX Shibuya
Nanpeidai Building

KDX Yoyogi Building

AcquiredA-124 in the 27th

fiscal period

D-2

Shinjuku 6chome
Building (Land)

Kenedix Office Investment Corporation

43

Portfolio

Portfolio Map (as of November 1, 2018)
Tokyo metropolitan area (excluding central five wards)

A-86

Saitama Prefecture
A-62

A-99
A-90

A-84

A-33

A-96
A-78
A-35

A-31

A-5
Tokyo
Metropolitan
Tokyo central
A-83

A-85

A-26

5 wards

A-95
A-72

A-94
A-30
A-22

Kanagawa Prefecture

A-63

A-117

A-48

A-102

A-101

A-16

A-122

A-123

A-34

Chiba Prefecture

Other regional areas

A-118
A-70

A-53

A-12

A-82

A-42

A-100

A-54

A-104

A-69

A-110

Sendai
Utsunomiya

A-98

Kenedix Office Investment Corporation

A-44

A-97

NagoyaTokyo
metropolitan
area

Hiroshima Osaka
Hakata

44

A-14

A-58

A-106

A-79

A-111

A-5

A-14

A-16

A-22

A-26

A-30

A-31

A-33

KDX Nakano-Sakaue
Building

KDX Funabashi
Building

Toshin 24 Building

KDX Shin-Yokohama
Building

KDX Kiba Building

KDX Nishi-Gotanda
Building

KDX Monzen-Nakacho
Building

KDX Okachimachi
Building

A-34

A-35

A-48

A-62

A-63

A-72

A-78

A-83

KDX Hon-Atsugi
Building

KDX Hachioji
Building

KDX Kawasaki-Ekimae
Hon-cho Building

Koishikawa TG
Building

KDX Gotanda
Building

KDX HigashiShinagawa Building

KDX Tachikawa
Ekimae Building

KDX Fuchu Building

A-84

A-85

A-86

A-90

A-94

A-95

A-96

A-99

KDX Kasuga
Building

KDX Nakameguro
Building

KDX Omiya
Building

KDX Ikebukuro
Building

KDX MusashiKosugi Building

KDX Toyosu Grand
SquareKDX Takadanobaba
Building

KDX IkebukuroWest Building

A-101

A-102

A-117

A-122

A-123

KDX Yokohama
Building

KDX Yokohama
Nishiguchi Building

BR Gotanda

Mitsubishijuko
Yokohama Building

JN Building

A-12

A-42

A-44

A-53

A-54

A-58

A-69

A-70

Portus Center
Building

KDX Karasuma
Building

KDX Sendai Building

KDX Hakata-Minami
Building

KDX Kitahama
Building

KDX Nagoya
Sakae Building

KDX KobayashiDoshomachi Building

KDX Sapporo
Building

A-79

A-82

A-97

A-98

A-100

A-104

A-106

A-110

KDX Nagoya
Ekimae Building

KDX Higashi Umeda
Building

KDX Utsunomiya
Building

KDX Hiroshima
Building

Senri Life Science
Center Building

KDX Minami-Honmachi
Building

KDX Sakura-dori
Building

KDX Shin-Osaka
Building

A-111

A-118

KDX Nagoya
Nichigin-mae Building

KDX Sapporo
Kitaguchi Building

Kenedix Office Investment Corporation

45

Portfolio(as of October 31, 2018)
The properties acquired during the 27th fiscal period (Oct. 2018) are marked with a red box.
The properties sold during the 28th fiscal period (Apr. 2019) are marked with a yellow box.

Office Buildings (Tokyo Metropolitan Area (Tokyo central five wards))
No.

Property Name

Location

KDX Nihonbashi 313 Building
Chuo-ku, Tokyo
Higashi-Kayabacho Yuraku Building
Chuo-ku, Tokyo
KDX Hatchobori Building
A-4
Chuo-ku, Tokyo
A-20
KDX Kayabacho Building
Chuo-ku, Tokyo
A-51
KDX Hamacho Nakanohashi Building Chuo-ku, Tokyo
A-60
KDX Harumi Building
Chuo-ku, Tokyo
A-64
KDX Nihonbashi 216 Building
Chuo-ku, Tokyo
A-67
KDX Ginza 1chome Building
Chuo-ku, Tokyo
A-68
KDX Nihonbashi Honcho Building
Chuo-ku, Tokyo
A-73
KDX Hakozaki Building
Chuo-ku, Tokyo
A-74
KDX Shin-Nihonbashi Building
Chuo-ku, Tokyo
A-87
Itopia Nihonbashi SA Building
Chuo-ku, Tokyo
A-107 KDX Ginza East Building
Chuo-ku, Tokyo
A-108 Pentel Building
Chuo-ku, Tokyo
A-113 KDX Shin-Nihonbashi Ekimae Building Chuo-ku, Tokyo
A-114 KDX Nihonbashi Edo-dori Building
Chuo-ku, Tokyo
A-121 Ginza 4chome Tower
Chuo-ku, Tokyo
KDX Minami Aoyama Building
Minato-ku, Tokyo
A-7
A-19
KDX Hamamatsucho Building
Minato-ku, Tokyo
A-21
KDX Shinbashi Building
Minato-ku, Tokyo
A-32
KDX Shiba-Daimon Building
Minato-ku, Tokyo
A-89
KDX Takanawadai Building
Minato-ku, Tokyo
Tokyo
A-91
KDX Mita Building
Minato-ku, Tokyo
Metropolitan
OfficeArea (Tokyo A-109 KDX Hamamatsucho Center Building Minato-ku, Tokyo
Building
central five
A-112 KDX Toranomon 1chome Building
Minato-ku, Tokyo
wards)
A-115 ARK Mori Building
Minato-ku, Tokyo
A-116 KDX Nishi-Shinbashi Building
Minato-ku, Tokyo
A-124 CROSS PLACE Hamamatsucho
Minato-ku, Tokyo
A-8
Kanda Kihara Building
Chiyoda-ku, Tokyo
A-13
KDX Kojimachi Building
Chiyoda-ku, Tokyo
A-27
KDX Kajicho Building
Chiyoda-ku, Tokyo
A-37
KDX Ochanomizu Building
Chiyoda-ku, Tokyo
A-46
Hiei Kudan-Kita Building
Chiyoda-ku, TokyoA-56
KDX Jimbocho Building
Chiyoda-ku, Tokyo
A-59
KDX Iwamoto-cho Building
Chiyoda-ku, Tokyo
A-92
KDX Akihabara Building
Chiyoda-ku, Tokyo
A-29
Shinjuku-ku, Tokyo
KDX Higashi-Shinjuku Building
A-38
KDX Nishi-Shinjuku Building
Shinjuku-ku, Tokyo
A-41
KDX Shinjuku 286 Building
Shinjuku-ku, Tokyo
A-55
Shin-toshin Maruzen Building
Shinjuku-ku, Tokyo
A-66
KDX Shinjuku Building
Shinjuku-ku, Tokyo
A-71
KDX Iidabashi Building
Shinjuku-ku, Tokyo
A-88
KDX Shinjuku 6-chome Building
Shinjuku-ku, Tokyo
A-93
KDX Iidabashi Square
Shinjuku-ku, Tokyo
A-6
Harajuku F.F. Building
Shibuya-ku, Tokyo
A-17
KDX Ebisu Building
Shibuya-ku, Tokyo
A-119 KDX Shibuya Nanpeidai Building
Shibuya-ku, Tokyo
A-120 KDX Yoyogi Building
Shibuya-ku, Tokyo
Office Buildings (Tokyo Metropolitan Area (Tokyo central five wards)) Subtotal (48 properties)
A-1

A-3

AcquisitionPrice(mn yen) (Note 1)

5,940
4,450
3,680
2,780
2,310
10,250
2,010
4,300
4,000
2,710
2,300
2,200
3,600
3,350
3,829
1,350
9,800
2,270
3,460
3,728
6,090
5,250
3,180
3,950
15,5504,169
8,400
20,700
1,950
5,950
2,350
6,400
7,600
2,760
1,864
2,600
2,950
1,500
2,300
2,110
6,800
4,670
1,900
4,350
2,450
4,640
3,500
2,479
216,730

Year
Built (Note 2)

Occupancy
Rate (Note 3)

Apr. 1974
Jan. 1987
Jun. 1993
Oct. 1987
Sep. 1988
Feb. 2008
Oct. 2006
Nov. 1991
Jan. 1984
Nov. 1993
Nov. 2002
Jul. 1995
Aug. 1991
Nov. 1990
May 1992
Mar. 1985
Nov. 2008
Nov. 1988
Sep. 1999
Feb. 1992
Jul. 1986
Oct. 1985
Mar. 1993
Dec. 1985
Oct. 2013
Mar. 1986
Aug. 1992
Feb. 2015
May 1993
May 1994
Mar. 1990
Aug. 1982
Mar. 1988
May 1994
Mar. 2008
Dec. 1973
Jan. 1990
Oct. 1992
Aug. 1989
Jul. 1990
May 1993
Mar. 1990
Mar. 1990
Jan. 1994
Nov. 1985
Jan. 1992
Dec. 2003
Aug. 1991—

100.0%
100.0%
100.0%
100.0%
100.0%
90.7%
100.0%
100.0%
88.3%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
98.2%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99.8%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
98.3%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99.2%

Year
Built (Note 2)

Occupancy
Rate (Note 3)Aug. 1992
Apr. 1989
Sep. 1984
Sep. 1990
Oct. 1992
Nov. 1992
Sep. 1986
Jun. 1988
May 1995
Dec. 1985

98.2%
100.0%
94.1%
100.0%
100.0%
100.0%
100.0%
100.0%
84.5%
100.0%

Office Buildings (Tokyo Metropolitan Area (excluding central five wards))
No.

OfficeBuilding

46

Tokyo
Metropolitan
Area(excluding
central fivewards)

A-5
A-14
A-16
A-22
A-26
A-30
A-31
A-33
A-34
A-35

Kenedix Office Investment Corporation

Property NameKDX Nakano-Sakaue Building
KDX Funabashi Building
Toshin 24 Building
KDX Shin-Yokohama Building
KDX Kiba Building
KDX Nishi-Gotanda Building
KDX Monzen-Nakacho Building
KDX Okachimachi Building
KDX Hon-Atsugi Building
KDX Hachioji Building

Location

Nakano-ku, Tokyo
Funabashi, Chiba
Yokohama, Kanagawa
Yokohama, Kanagawa
Koto-ku, Tokyo
Shinagawa-ku, Tokyo
Koto-ku, Tokyo
Taito-ku, Tokyo
Atsugi, Kanagawa
Hachioji, Tokyo

AcquisitionPrice(mn yen) (Note 1)

2,533
2,252
5,300
2,520
1,580
4,200
1,400
2,000
1,305
1,155

No.

Property Name

AcquisitionPrice(mn yen) (Note 1)

Location

KDX Kawasaki-Ekimae Hon-cho Building Kawasaki, Kanagawa
Koishikawa TG Building
Bunkyo-ku, TokyoKDX Gotanda Building
Shinagawa-ku, Tokyo
KDX Higashi-Shinagawa Building
Shinagawa-ku, TokyoKDX Tachikawa Ekimae Building
Tachikawa, TokyoKDX Fuchu Building
Fuchu, TokyoKDX Kasuga Building
Bunkyo-ku, TokyoTokyo
KDX Nakameguro Building
Meguro-ku, Tokyo
Metropolitan
KDX Omiya Building
Saitama, Saitama
OfficeArea
KDX Ikebukuro Building
Toshima-ku, Tokyo
Building(excluding
KDX Musashi-Kosugi Building
Kawasaki, Kanagawa
five central
KDX Toyosu Grand Square
Koto-ku, Tokyo
wards)KDX Takadanobaba Building
Toshima-ku, Tokyo
KDX Ikebukuro West Building
Toshima-ku, TokyoKDX Yokohama Building
Yokohama, Kanagawa
KDX Yokohama Nishiguchi Building
Yokohama, Kanagawa
BR Gotanda
Shinagawa-ku, Tokyo
Mitsubishijuko Yokohama Building
Yokohama, Kanagawa
JN Building
Yokohama, Kanagawa
Office Buildings (Tokyo Metropolitan Area (excluding central five wards)) Subtotal (29 properties)
A-48
A-62
A-63
A-72
A-78
A-83
A-84
A-85
A-86
A-90
A-94
A-95
A-96
A-99
A-101
A-102
A-117
A-122
A-123

Year
Built (Note 2)

Occupancy
Rate (Note 3)

Feb. 1985
Nov. 1989
Apr. 1988
Jan. 1993
Feb. 1990
Mar. 1996
Jun. 1992
Oct. 1985
Apr. 1993
Mar. 2009
May 2013
Apr. 2008
Oct. 1988
Jul. 1988
Mar. 1994
Oct. 1988
Sep. 1991
Feb. 1994
Sep. 2007—

100.0%
100.0%
100.0%
100.0%
100.0%
98.2%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
97.5%
100.0%
100.0%
100.0%
100.0%
99.1%

Year
Built (Note 2)

Occupancy
Rate (Note 3)

5,570
5,400
2,100
4,900
2,220
7,550
2,870
2,005
7,327
2,770
2,350
1,300
13,000
2,200
5,900
4,550
3,500
1,800
77,312

Sep.1993
Oct. 1982
Feb. 1984
Jun. 1973
Jul. 1994
Apr. 2009
Jul. 2009
Oct. 1989
Apr. 1986
Jul. 2009
Feb.1999
Jan. 1990
Jun. 1992
Dec. 2009
Aug. 1992
May 1992
Sep. 2006
Sep. 1992—

100.0%
100.0%
100.0%
95.1%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
89.0%
100.0%
99.8%
96.4%
100.0%
100.0%
100.0%
100.0%
99.0%

412,955

Avg. 22.9 years

99.1%

3,760
3,080
2,620
4,590
1,267
6,120
2,800
1,880
2,020
3,900
12,000
8,666
3,650
1,934
7,210
2,750
2,200
14,7209,500
118,912

Office Buildings (Other Regional Areas)
No.

OfficeBuilding

Property Name

Location

Sakai, Osaka
Portus Center Building
KDX Karasuma Building
Kyoto, Kyoto
KDX Sendai Building
Sendai, Miyagi
KDX Hakata-Minami Building
Fukuoka, Fukuoka
KDX Kitahama Building
Osaka, Osaka
KDX Nagoya Sakae Building
Nagoya, Aichi
KDX Kobayashi-Doshomachi Building Osaka, Osaka
KDX Sapporo Building
Sapporo, Hokkaido
Other
KDX Nagoya Ekimae Building
Nagoya, Aichi
Regional
KDX Higashi Umeda Building
Osaka, Osaka
Areas
KDX Utsunomiya Building
Utsunomiya, Tochigi
KDX Hiroshima Building
Hiroshima, Hiroshima
Senri Life Science Center Building
Toyonaka, Osaka
KDX Minami-Honmachi Building
Osaka, Osaka
KDX Sakura-dori Building
Nagoya, Aichi
KDX Shin-Osaka Building
Osaka, Osaka
KDX Nagoya Nichigin-mae Building
Nagoya, Aichi
KDX Sapporo Kitaguchi Building
Sapporo, Hokkaido
Office Buildings (Other Regional Areas) Subtotal (18 properties)
A-12
A-42
A-44
A-53
A-54
A-58
A-69
A-70
A-79
A-82
A-97
A-98
A-100
A-104
A-106
A-110
A-111
A-118

Office Buildings Total (95 properties)

AcquisitionPrice(mn yen) (Note 1)

Central Urban Retail Property and Others
No.

Tokyo
Central Urban
Metropolitan
Retail Property
Area
OthersProperty Name

Frame Jinnan-zaka (Note 4)

Location

Investment
SecurityYear
Built (Note 2)

Occupancy
Rate (Note 3)

Shibuya-ku, Tokyo

5,049

Mar. 2005

100.0%

Central Urban Retail Property Subtotal (1 property)
Tokyo
D-2
Metropolitan
Shinjuku 6chome Building (Land)
Shinjuku-ku, Tokyo
Area
Others Subtotal (1 property)

5,049

Avg. 13.5 years

100.0%

2,880—

100.0%

2,880—

100.0%

Avg. 22.8 years

99.1%

C-1

Total (97 properties)
Category

AcquisitionPrice(mn yen) (Note 1)

Investment Security Name

G.K. KRF 43 Silent Partnership Equity Interest

Underlying Asset Name
(Note 5)

420,884
Underlying Asset
Location

Shinjuku Sanei Building Shinjuku-ku, Tokyo

Investment Security Total (one security)

Investment Security Price(mn yen) (Note 1)

Underlying Asset Year Built

1,107

Dec. 1979

1,107

Note 1: Acquisition price is only the acquisition (investment) price of real estate or trust beneficiary interests in real estate (excluding any expenses, taxes, etc.)
acquired by KDO. Figures are truncated to the nearest million yen.
Note 2: Year built shows the completion date recorded in the real estate register. The average value shown in the subtotal or total section is a weightedaverage number calculated based on acquisition price with a base date of October 31, 2018. Figures are truncated to the first decimal place.
Note 3: Occupancy rate is calculated by dividing leased area as of October 31, 2018 by leasable area and is rounded to the first decimal place. The subtotal
and total lines show the figures calculated by dividing the subtotal (total) of the leased area for the property associated with each subtotal and total
by the subtotal (total) of the leasable area. For the Pentel Building, this includes the leasable area associated with the land (land interest) specified in
the lease agreement. For the Shinjuku 6chome Building (Land), the calculation is based on the leasable area of the land specified in the lease agreement.
Note 4: Frame Jinnan-zaka was listed as quasi co-ownership of 51.0% as of the end of the 27th fiscal period (Oct. 2018) but was sold as of November 1, 2018.
Note 5: The said maps and photographs do not include investment securities owned by KDO.
Kenedix Office Investment Corporation47

www.kdo-reit.com/en/

Disclaimer
This semiannual report includes translations of certain documents originally filed and made available inJapan in accordance with the Financial Instruments and Exchange Act of Japan.
The English-language semiannual report was prepared solely for the convenience of readers outside
Japan and is not intended to constitute a prospectus. This semiannual report should not be construed as
an offer or solicitation to buy or sell any securities of Kenedix Office Investment Corporation (KDO). 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, if there exist
any discrepancies in the meaning or interpretation thereof between the original Japanese documents andEnglish translation contained herein, the original Japanese documents will always govern the meaning andinterpretation.
None of KDO, Kenedix Real Estate Fund Management, Inc. (KFM), any of their respective directors, officers, employees, partners, unitholders, agents, affiliates, nor their advisors shall be responsible or liable forthe completeness, appropriateness, or accuracy of English translations or the selection of the portion(s) of
any document(s) translated into English.
The financial statements of KDO 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 ofplaces in this semiannual report and include statements regarding the intent, belief, or current and future
expectations of KDO or KFM 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 orother similar terminology. These statements are not guarantees of future performance and are subject tovarious risks and uncertainties. Actual results, performance, or achievements, or those of the industries inwhich we operate, may differ materially from any future results, performance, or achievements expressedor 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
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Potential risks and uncertainties also include those identified and discussed in this document. Given
these risks and uncertainties, readers of this document are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of information produced herein. We disclaim
any obligation to update or, except in the limited circumstances required by the Tokyo Stock Exchange,
announce publicly any revisions to any of the forward-looking statements contained in this document.