Investment
Invincible Corporation

Financial Summary
for the June 2019 Fiscal Period(from January 1, 2019 to June 30, 2019)
August 22, 2019

Name
Representative
Stock Listing
Securities CodeURL
Contact

:
:
:
:
:
:

Invincible Investment Corporation
Naoki Fukuda, Executive Director
Tokyo Stock Exchange8963
https://www.invincible-inv.co.jp/en/
Consonant Investment Management Co., Ltd.
(Asset Manager of Invincible Investment Corporation)
Jun Komo, General Manager of Planning Department
Tel. +81-3-5411-2731

Start date fordividend distribution: September 20, 2019

This English language notice is a translation of the Japanese-language notice released on August 22, 2019 and was prepared solely for the convenience of, andreference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution readers to undertake investment
decisions based on their own investigation and responsibility. This translation of the original Japanese-language notice is provided for informational purposes
only, and no warranties or assurances are given regarding the accuracy or completeness of this English translation. Readers are advised to read the original
Japanese-language notice. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail in all respects.

1.

(Figures are rounded down to the nearest JPY million)
Financial Results for the Fiscal Period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)(1)

Operating Results(Percentages indicate percentage change from the preceding period)
Operating Revenues

Operating Income

Ordinary Income

Net Income

JPY million%

JPY million%

JPY million%

JPY million%

Fiscal period ended
June 30, 201927,33989.2

22,185133.2

21,240153.3

21,239153.3

Fiscal period ended
December 31, 2018

14,451

10.3

9,514

12.8

8,384

8.6

8,384

8.6

Net Income per Unit

Net Income /Unitholders’ Equity

Ordinary Income /Total Assets

Ordinary Income /Operating Revenues

JPY

%

%

%

Fiscal period ended
June 30, 2019

3,748

9.3

4.6

77.7

Fiscal period ended
December 31, 2018

1,504

4.2

2.0

58.0

(Note)(2)“Net Income per Unit” in the table above is calculated based on the average number of investment units during the relevant period and isrounded to the nearest yen. Net income per unit for the fiscal period ended December 31, 2018 is JPY 1,479, if calculated based on thenumber of investment units issued and outstanding at the end of fiscal period ended December 31, 2018 (5,666,840 units) and rounded
down to the nearest yen.

Distributions
Distribution(Excluding excess profit
distribution)

Per Unit

Total

Distribution

Excess Profit
Distribution
Per Unit(Including excess profit
distribution)

Per Unit

Total

Total

Dividend
Distribution /PayoutNet Assets
Ratio

JPY

JPY million

JPY

JPY million

JPY

JPY million%%

Fiscal period ended
June 30, 2019

1,656

9,384

0

0

1,656

9,384

44.2

4.1

Fiscal period ended
December 31, 2018

1,632

9,248

51

289

1,683

9,537

110.3

4.2

(Note 1)

(Note 2)

(Note 3)(Note 4)(Note 5)

(3)

Distribution (excluding excess profit distribution) differs from net income for the fiscal period ended June 30, 2019, since INV reserved
JPY 11,855 million of net income as internal reserve for the purpose of stabilizing the distribution level for the next and subsequent
periods.
Distribution (excluding excess profit distribution) differs from net income for the fiscal period ended December 31, 2018, since INV
distributes almost all of the profit as defined in Article 136, Paragraph 1 of the Investment Trust and Investment Corporation Act, which
includes deferred gain on hedge.
The distribution in excess of profit for the fiscal period ended December 31, 2018 is JPY 289 million (JPY 51 per unit), of which JPY 85
million (JPY 15 per unit) is the allowance for temporary differences adjustment arising from different rules and practices in tax andaccounting and JPY 204 million (JPY 36 per unit) is the refund of investment for the purpose of stabilizing distributions.
Dividend Payout Ratio is calculated in accordance with the following formula:
Dividend Payout Ratio = Distribution Amount (Excluding excess profit distribution) ÷ Net Income × 100
Dividend Payout Ratio is rounded to the nearest one decimal place.
Dividend payout ratio for the fiscal period ended June 30, 2019 is 44.2% since INV reserved a portion of net income as internal reserve,and distribution (excluding excess profit distribution) differs from net income for the fiscal period as mentioned in (Note 1) above,.
Distribution/ Net Assets is calculated based on the figures excluding excess profit distribution.

Financial Position
Total Assets

Net Assets

Net Assets / Total Assets

Net Assets per Unit

JPY million

JPY million%

JPY

Fiscal period ended
June 30, 2019467,931

233,04649.8

41,125

Fiscal period ended
December 31, 2018455,362

221,36448.6

39,063(Note)Net Assets per Unit is calculated based on the number of investment units issued and outstanding at the end of each fiscal period, and isrounded to the nearest yen.

2

(4)

Cash Flows
Cash Flows fromOperating
Activities

Cash Flows from
Investment
Activities

Cash Flows from
Financing
Activities

Closing Balance ofCash and
Cash Equivalents

JPY million

JPY million

JPY million

JPY million

Fiscal period ended
June 30, 201955,810(726)(10,548)

55,599Fiscal period ended
December 31, 2018

10,654(85,738)

71,075

11,0642.

Forecasts for the Fiscal Period ending December 31, 2019 (from July 1, 2019 to December 31, 2019)

Operating
Revenues

Operating
Income(Percentages indicate percentage change from the preceding period)
Distribution
Distribution
per Unit
per Unit
Excess Profit
Ordinary(including(excluding Distribution
Net Income
excess profit
Incomeexcess profit
per Unit
distribution)
distribution)

JPY million % JPY million % JPY million % JPY million %Fiscal Period
endingDecember 31,
2019(Reference)

18,043(34.0)

12,107(45.4)

10,701(49.6)

10,700(49.6)

JPY

JPY

JPY

1,725

0

1,725

Estimated net income per unit for the fiscal periods ending December 31, 2019 is JPY 1,755.
Distribution per unit (excluding excess profit distribution) for the fiscal period ending December 31, 2019 will differ from estimatednet income per unit for the fiscal period ending December 31, 2019, since INV plans to reserve JPY 183 million of net income asinternal reserve.

* Others(1) Changes in Accounting Policies, Accounting Estimates or Restatements(a) Changes in Accounting Policies due to Revisions to
Accounting Standards and Other Regulations(b) Changes in Accounting Policies due to Other Reasons(c) Changes in Accounting Estimates(d) Restatements(2) Number of Investment Units Issued and Outstanding(a) Number of Units Issued and Outstanding
as of the End of the Fiscal Period (Including Treasury Units)

None
None
None
None

June 30,
2019

5,666,840 December 31,
2018

5,666,840(b) Number of Treasury Units as of the End of the Fiscal Period June 30,
2019

0 December 31,
2018

0(Note)

Please refer to “Notes Related to Per Unit Information” regarding the number of investment units which is the basis for the calculation of
net income per unit.

3

･ Financial Summary report is not subject to audit procedure by certified public accountants or audit corporations.
･ Special Consideration(Other Matters of Special Consideration)
The forward-looking statements contained in this financial summary report are based on the information currently
available to us and certain assumptions which we believe are reasonable. Actual operating performance may differ
significantly due to factors we cannot predict as of this date, including gains or losses from the disposition of properties,
repayment of borrowings, decreases in rents and changes in operating conditions. Further, there is no guarantee of thepayment of the forecast distribution amount.
Please refer to “Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Period ending
December 2019” on page 21 for assumptions used in the forecasts and precautions regarding the use of such forecasts.
Unless otherwise specified herein, amounts less than JPY 1 are rounded down, and ratios are rounded to the nearest one
decimal place.

41. Operating Conditions(1) Operating Conditionsa

Overview of the Fiscal Period Ended June 30, 2019(a)Main Trends of INV

INV was established in January 2002 in accordance with the Investment Trust and Investment Corporation Act (Act No.
198 of 1951, as amended; the “Investment Trust Act”). In May 2004, INV was listed on the Osaka Securities Exchange(application for delisting was made in August 2007), and in August 2006 was listed on the Real Estate Investment andTrust Securities Section of the Tokyo Stock Exchange (Ticker Code: 8963).
After the absorption-type merger with LCP Investment Corporation (“LCP”) was implemented on February 1, 2010 INV
issued new investment units through a third-party allotment on July 29, 2011 and refinanced its debt. Calliope Godo
Kaisha (“Calliope”), an affiliate of the Fortress Investment Group LLC (“FIG” and together with Calliope and otheraffiliates of FIG, collectively the “Fortress Group”) was the main allottee, and the sponsor changed to the Fortress Group.
FIG became a subsidiary of Softbank Group Corp. (“SoftBank Group”), after SoftBank Group acquired FIG effective on
December 27, 2017 (Note 1). Calliope, an affiliate of FIG, who owned 100% of the issued shares of Consonant
Investment Management Co., Ltd., the asset manager to which INV entrusts the management of its assets (the “AssetManager”), transferred 80.0% of issued shares of the Asset Manager to Fortress CIM Holdings L.P., a subsidiary of
SoftBank Group, and 20.0% to SoftBank Group on March 29, 2018, pursuant to the basic agreement which was enteredinto as of September 7, 2017. Although FIG is no longer an indirect parent company of the Asset Manager, FIG continues
to support INV as the sponsor.
Ever since the commencement of sponsorship from the Fortress Group (Note 2), INV has been focusing its efforts on
improving the profitability of its portfolio and establishing a revenue base in order to secure stable distributions, and has
strengthened the lender formation through new borrowings and the refinancing of existing bank borrowings, thereby
creating a financial base for external growth. With this platform as a base, in June 2014, the Asset Manager revised theInvestment Guidelines for INV, and positioned hotels as a core asset class alongside residential properties with a view
towards expanding investments in the hotel sector in which demand is forecasted to rise going forward. As a result ofsuch external growth efforts, INV's portfolio as at the end of the previous fiscal period ended December 2018 comprised of
132 properties (66 hotels (Note 3) (Note 4), 64 residential properties and two others) with a total acquisition price of JPY
448,362 million (Note 5). The total acquisition price of the portfolio has significantly grown by 6.2 times, compared to
May 22, 2014, which is the date immediately prior to INV’s initial investment in hotels.
Moreover, the Asset Manager revised the Investment Guidelines as of July 17, 2018. Such revision was intended toestablish an investment policy and asset management structure regarding investments in overseas assets, and also tochange the investment policy regarding domestic hotels to focus on (i) Limited service hotels, which feature relatively
higher profit margins and potential for revenue growth backed by increasing demand for accommodations, and (ii)Full-service and Resort hotels, which have a variety of revenue sources, including lodging and dining and goods sale,that are expected to achieve stable growth in overall hotel revenues. Based on such change in investment policy, in
July 2018, INV decided on acquisition of TK (Japanese anonymous association (tokumei kumiai)) interest in two
overseas hotels, “Westin Grand Cayman Seven Mile Beach Resort & SPA” and “Sunshine Suites Resort” (collectively,
the “Cayman Hotels”) as underlying assets for the first time ever in J-REIT history. In September 2018, INV
implemented the investment in the Cayman Hotels via a global offering of new investment units and borrowing of funds.
INV intends to improve both the profitability and stability of the portfolio through such investments, including
investment in the Cayman Hotels, which is expected to even out the effects of seasonality in INV’s portfolio.
In the Fiscal Period ended June 30, 2019 (“Reporting Period”), INV implemented an investment structure change
regarding the overseas hotels on May 9, 2019 (the “Structure Change”), in response to the amendment of the Act on Special
Measures Concerning Taxation of Japan enacted on April 1, 2019. Please refer to “Overview of Investment Structure
Change regarding Overseas Assets” for details of the investment structure change. In addition, INV sold two residential
properties on June 7 and June 19, 2019. As a result, INV's portfolio at the end of Reporting Period comprised of 130
properties (66 hotels (Note 3) (Note 4), 62 residential properties and two others) with a total acquisition price of JPY
418,593 million (Note 6).

5(Note 1)

US Eastern Standard Time

(Note 2)As of July 2011, Calliope owned 97.35% of issued shares of the Asset Manager and the investment ratio reached100% in October 2013. Calliope transferred 80.0% of issued shares to Fortress CIM Holdings L.P., asubsidiary of SoftBank Group and 20.0% to SoftBank Group on March 29, 2018. As of the date of thisdocument, SoftBank Group owns 100% of issued shares of the Asset Manager directly and indirectly.

(Note 3)The preferred equity interest is counted as a hotel property, based on the use of Sheraton Grande Tokyo Bay
Hotel, the underlying asset of the preferred equity interest. Such preferred equity interest issued by a special
purpose company (tokutei mokuteki kaisha) refers to 178,458 units of preferred equity interest issued by
Kingdom Special Purpose Company (the “TMK”) (equivalent to 49.0% of the total issued and outstanding
preferred equity interest), which owns the trust beneficiary interest of the Sheraton Grande Tokyo Bay Hotelas an underlying asset. Moreover, INV’s investment amount of the preferred equity interest is used as theacquisition price of the preferred equity interest, unless otherwise stated. The “underlying asset” refers to
the real estate or the real estate related assets owned by a TK operator of TK interest or a TMK relating to thepreferred equity interest which INV owns, thus the real estate or the real estate related assets which will be therevenue source of INV. Hereinafter the same shall apply.

(Note 4)

From September 28, 2018 (Cayman Island local time; September 29, 2018 in Japan local time), INV owned
100% of the TK interest in Seven Mile Resort Holdings Ltd. (the “Cayman SPC”), a Cayman Islands special
purpose company that holds leasehold interests in the Cayman Hotels as underlying assets. However, as
described in "(d) Overview of Investment Structure Change regarding Overseas Assets" below, since May 9,
2019 (Cayman Island local time; May 10, 2019 in Japan local time), INV has directly held the leaseholdinterests of the Cayman Hotels. Both of the TK interest and the Cayman Hotels are counted as two
properties before and after the Structure Change. Hereinafter the same shall apply.

(Note 5)In investing in the Cayman SPC, INV initially funded USD 339,836 thousand (JPY 37,534 million), which
was an amount which was reasonably estimated to enable the Cayman SPC to acquire the underlying assets.
However, based on the closing settlement, the Cayman SPC did not need as much capital as anticipated.
Therefore, INV received a refund of the TK investment in the amount of USD 6.8 million on December 10,
2018 (Cayman Island local time) from the Cayman SPC. INV’s investment amount to the TK interest is
calculated based on the amount reflecting such partial refund (i.e., USD 333,036 thousand). USD isconverted into JPY amount via exchange rate of USD 1=JPY 110.45 based on the foreign exchange forward
contract executed on July 26, 2018 and implemented on September 26, 2018. Figures are rounded down to
the nearest yen. Hereinafter the same shall apply to the investment amount in the TK interest and theacquisition price of the Cayman Hotels (Note 6) upon the distribution in kind in connection with thetermination of TK agreement.

(Note 6)

Due to the Structure Change, the book value of the leasehold interests of the Cayman Hotels recorded by the
Cayman SPC as of May 9, 2019 (Cayman Island local time; May 10, 2019 in Japan local time), when INV
succeeded the leasehold interests of the Cayman Hotels from the Cayman SPC via distribution in kind inconnection with the termination of TK agreement, is deemed as the acquisition price of the Cayman Hotels.
The book value is converted into JPY amount.

(b)

Operational Environment and Performance

For the June 2019 period, the portfolio NOI (Note 1) increased by 40.5% or JPY 4,243 million to JPY 14,734 million
compared to the same period in the previous year (the June 2018 period). The hotel portfolio NOI increased by JPY
4,358 million, which is equivalent to the increase by 41.5% of the portfolio NOI, due to a combination of internal andexternal growth. While the residential portfolio is also benefitting from strong rental growth, NOI for the residential
portfolio declined by JPY 75 million, which is equivalent to the decrease by 0.7% of the portfolio NOI, due to asset
sales as part of INV’s asset recycling program. Other portfolio assets also experienced a decline in NOI of JPY 38
million, which is equivalent to the decrease by 0.4% of the portfolio NOI, due to the sale of assets during the June 2018
period. The portfolio continued to maintain a high average occupancy rate (Note 2) of 98.8% for the period.

6Commentary on hotel and residential performance in the Reporting Period is described below.
The NOI (Note 1) for the Reporting Period of the 55 domestic hotels (Note 3) owned by INV increased by 1.0%
compared to the same period in the previous year (figures exclude nine domestic hotels with fixed-rent lease agreementsof the 64 domestic hotels owned by INV at the beginning of the June 2019 Fiscal Period, including Sheraton GrandeTokyo Bay Hotel, the underlying asset of the preferred equity interest of TMK owned by INV). The 55 domestic
hotels recorded an occupancy rate (Note 4) of 88.5% (+0.4 points YoY), ADR (Note 5) of JPY 10,388 (+2.0% YoY),
and RevPAR (Note 6) of JPY 9,190 (+2.5% YoY). Fixed rent revenues accounted for 49.2% (JPY 4,168 million) of
total hotel revenue and variable rent revenues accounted for 50.8% (JPY 4,304 million) of total hotel revenue (figures
based on the 63 domestic owned hotels as of the end of the June 2019 Fiscal Period, and excludes Sheraton GrandeTokyo Bay Hotel, the underlying asset of the preferred equity interest of TMK owned by INV).
Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine Suites Resort, recorded an average occupancy
rate of 89.3% (-0.1 points YoY), ADR of USD 416 (+16.9% YoY), and RevPAR of USD 371 (+16.7% YoY). As aresult of the Structure Change, INV recognized the following revenues in the Reporting Period; (i) the originallyscheduled TK distribution of the Cayman Hotels for the period, from September 28, 2018 (acquisition date in Cayman
local time) through March 31, 2019, (ii) TK distribution of the Cayman Hotels for the period from April 1, 2019
through May 9, 2019 (the effective date of TK agreement termination) and (iii) the Cayman Hotels’ earnings andexpenses from May 10, 2019 (the following day of the effective date of TK agreement termination) through June 30,
2019 as under direct ownership income.
In Japan, inbound visitors reached a record high of 16.63 million (+4.6% YoY) for January through June 2019, while
government targets continued growth of 40 million inbound visitors in 2020 and 60 million inbound visitors in 2030.
Japan will host the Rugby World Cup in September through October 2019 and Tokyo Olympics Games in 2020, andthese world-class events are anticipated to further increase attention to Japan and more inbound tourists to Japan. In
Cayman Islands, the expansion of the Owen Roberts International Airport was completed on March 29, 2019. The
airport expansion has massively expanded its capacity and can now accommodate 2.7 million passengers annually, up
from the old and overstretched capacity of 0.5 million passengers and is anticipated to bring more guests to the Cayman
Hotels.
The average occupancy rate of 64 residential properties (Note 7) achieved 96.1%, an increase of 0.6 points compared tothe same period in the previous year. The NOI (Note 8) of the 64 residential properties for the Reporting Period
decreased by 1.3% compared to the same period in the previous year, due to the sale of Royal Parks Tower
Minami-Senju and Spacia Ebisu. However, the NOI increased by 1.0% for the 62 residential properties excluding such
two sold properties. Trends for rent at city-center residential properties with small-type rooms maintained a moderateincrease. Due to the positive circumstances in the macro environment, INV continues to focus on its rent increaseprogram for new leases and renewals as well as initiatives to reduce residential leasing costs based on a detailed market
analysis of each property and unit.
In the Reporting Period, INV realized a rent increase for 50.1% (based on the number of contracts) of the newresidential lease contracts for an average rent increase of 2.0% compared to the previous rent across all new leases (Note9).
INV achieved a rent increase for 39.7% (based on the number of contracts) of contract renewals for an average rent
increase of 1.8% compared to the previous rent across all renewal leases (Note 9), while maintaining a high contract
renewal rate (Note 10) of 76.2%. Combined, new leases and renewal leases were signed at 1.9% higher than theprevious leases (Note 9).
The total appraisal value of 129 properties was JPY 472,263 million (1 out of the 130 properties owned by INV at theend of the Reporting Period is excluded from the appraisal calculation: Sheraton Grande Tokyo Bay Hotel (preferred
equity) for which appraisal values of such securities is not applicable). The portfolio has an unrealized gain of JPY
83,960 million (Note 11) and an unrealized gain ratio of 21.6% (Note 11). The total appraisal value of 127 properties
which were owned throughout the Reporting Period (the Cayman Hotels are excluded due to the Structure Change)
increased by 1.0% from JPY 431,200 million at the end of December 2018 period to JPY 435,593 million at the end of
the Reporting Period.

7

Key Performance Indicators of 55 Domestic Hotel Properties (Note 3)
June 2019 fiscal period

Year-on-year change

Occupancy Rate (Note 4)

88.5%+0.4ptADR (JPY) (Note 5)

10,388+2.0%

RevPAR (JPY) (Note 6)

9,190

+2.5%

GOP (JPY million) (Note 12)

9,091

+0.9%

Key Performance Indicators of Cayman Hotels
June 2019 fiscal period

Year-on-year change

Occupancy Rate (Note 4)89,3%-0.1ptADR (USD) (Note 5)416+16.9%

RevPAR (USD) (Note 6)371+16.7%GOP (USD) (Note 12)26,681,479+8.9%

Key Performance Indicators of 64 Residential Properties (Note 7)
June 2019
Occupancy Rate (Note 1)
Average Rent per Tsubo per Month(JPY) (Note 13)
NOI (JPY million) (Note 8)

fiscal period

Year-on-year change

96.1%+0.6pt

9,890

+1.6%

2,498

-1.3%

(Note 1)

“NOI” for the hotel properties is calculated in accordance with the following formula:
NOI＝ Rental Revenues ‐ Property Related Expenses + Depreciation Expenses + Dividend on the preferred
equity interest (TMK dividend) + TK distribution of the Cayman Hotels + (Management Contract Revenue of
the Cayman Hotels‐Management Contract Expense)(Note 2)

“Average Occupancy Rate” for the entire portfolio and “Occupancy Rate” for the residential properties iscalculated by dividing the sum of total leased area by the sum of total leasable area at the end of each month
during the relevant period.

(Note 3)Of the 64 hotels held as of the beginning of the June 2019 Fiscal Period (including the Sheraton GrandeTokyo Bay Hotel, the underlying asset of the preferred equity interest of TMK owned by INV), the following
nine hotels with fixed-rent lease agreements are excluded: Super Hotel Shinbashi/Karasumoriguchi, Comfort
Hotel Toyama, Super Hotel Tokyo-JR Tachikawa Kitaguchi, Super Hotel JR Ueno-iriyaguchi, Comfort Hotel
Kurosaki, Comfort Hotel Maebashi, Comfort Hotel Tsubame-Sanjo, Comfort Hotel Kitami and Takamatsu
Tokyu REI Hotel. The figures assume that all properties acquired after January 2018 by INV had been
owned since January 1, 2018. The actual results before acquisition by INV are based on the data provided
by the sellers.

(Note 4) “Occupancy rate” for the hotel properties is calculated in accordance with the following formula:
Occupancy rate = total number of occupied rooms during a certain period ÷ total number of rooms available
during the same period (number of rooms x number of days)
Hereinafter the same shall apply.
(Note 5)“ADR” means average daily rate, and is calculated by dividing total room sales (excluding service fees) for acertain period by the total number of days per room for which each room was occupied during the same
period. Hereinafter the same shall apply.

(Note 6)

“RevPAR” means revenues per available room per day, and is calculated by dividing total room sales for acertain period by total number of rooms available (number of rooms x number of days) during the same
period, and is the same as the figure obtained by multiplying ADR by occupancy rates. Hereinafter the same
shall apply.

8

(Note 7)

Based on the 64 residential properties owned as of the beginning of June 2019 Fiscal Period. In addition, thefigures for the properties acquired after January 2018 are calculated on the assumption INV had acquired
those properties on January 1, 2018, using the actual figures provided by the sellers of such properties for theperiod before the acquisition, for the purpose of comparison with previous year.

(Note 8)For the comparison of NOI, insurance income and related repair expenses, which are temporary items, as well
as expenses required to detach trust beneficiary interest from an integrated trust account are excluded.

(Note 9)

Increase or decrease in the sum of monthly rents on new or renewal contracts, or the total of both, comparedwith the sum of previous rents.

(Note 10) Renewal rate is calculated by the number of renewed contracts during the relevant period divided by the
number of contracts due up for renewal during the relevant period(Note 11) The unrealized gain is calculated using the following formula: the appraisal value as of the end of theReporting Period - book value as of the end of the Reporting Period.
The unrealized gain ratio is calculated using the following formula: the unrealized gain ÷ book value as of theend of the Reporting Period.
(Note 12) “GOP,” means the gross operating profit, and is the amount remaining after deducting costs of hotel
operations (the personnel, utility and advertising expenses and other expenses) and the management services
fee to operators (if any) from the hotel’s revenues. Hereinafter the same shall apply. Moreover, GOP for
the Sheraton Grande Tokyo Bay Hotel has been multiplied by 49%, or INV’s ownership ratio of the preferred
equity interest. Hereinafter the same shall apply.
(Note 13) “Average Rent per Tsubo per Month” is calculated by dividing the total rental revenue (including common
area charges) for each month by the sum of total leased area (tsubo) at the end of each month during therelevant period.
(c)Overview of Fund Raising
As a result of the measures described below, INV’s interest-bearing debt outstanding balance was JPY 228,774
million and the Interest-Bearing Debt ratio (Note 1) and LTV (appraisal value basis) (Note 2) were 48.9% and46.6% respectively, as of the end of the Reporting Period, with an average interest rate (Note 3) of 0.53%.
(Note 1) Interest-Bearing Debt ratio uses the calculation formula below:
Interest-Bearing Debt ratio = total outstanding interest (excluding short-term consumption tax loan)-bearing debt/total assets x 100(Note 2) LTV (appraisal value basis) uses the calculation formula below:
LTV = total outstanding interest (excluding short-term consumption tax loan) -bearing debt/total
appraisal value (*) x 100(*) Since appraisal value for Sheraton Grande Tokyo Bay Hotel (preferred equity interest) is notavailable, the acquisition price of the preferred equity interest (JPY 17,845 million) is deemed asappraisal value of Sheraton Grande Tokyo Bay Hotel (preferred equity interest).
(Note 3)

The average interest rate (annual rate) is calculated by the weighted average based on the outstandingbalance of borrowings and rounded to two decimal places.

(i) Borrowing of Funds
INV borrowed Term Loan (I) on January 22, 2019 (total amount borrowed: JPY 4,250 million; interest rate: variableinterest rate of 1-month JPY TIBOR plus 0.30000% (by the interest swap agreement, it is fixed, in effect, at 0.37250%)
for durations of three years), which was arranged by MUFG Bank, Ltd. and Sumitomo Mitsui Trust Bank, Limited inorder to repay Term Loan (B) in the amount of JPY 4,250 million due on January 22, 2019.
On March 29, 2019, INV borrowed New Syndicate Loan (K) (total amount borrowed: JPY 11,434 million; interest rate:variable interest rate of 1-month JPY TIBOR plus 0.80000%, 1-month JPY TIBOR plus 0.50000% (by the interest swap
agreement, it is fixed, in effect, at 0.59400%), and 1-month JPY TIBOR plus 0.30000% (by the interest swap agreement,
it is fixed, in effect, at 0.36100%) for durations of ten, five and three years), which was arranged by Mizuho Bank, Ltd. inorder to repay New Syndicate Loan (F) in the amount of JPY 11,434 million due on March 30, 2019.
9

In New Syndicate Loan (K), INV further strengthened its lender formation by introducing five new banks, Aozora Bank,
Ltd, The Senshu Ikeda Bank, Ltd, Kiraboshi Bank, Ltd., The Tochigi Bank, Ltd. and The Nishi-Nippon City Bank, Ltd.
In addition, INV raised its first 10-year loan, lengthening the average maturity of its debt and diversifying the repayment
dates.
Furthermore, INV borrowed Term Loan (J) on June 17, 2019 (total amount borrowed: JPY 1,000 million; interest rate:variable interest rate of 1-month JPY TIBOR plus 0.30000% (by the interest swap agreement, it is fixed, in effect, at
0.34000%) for duration of three years), which was arranged by Citibank, N.A. Tokyo Branch in order to repay Term
Loan (C) in the amount of JPY 1,000 million due on June 15, 2019.
Additionally, INV borrowed Term Loan (K) on June 28, 2019 (total amount borrowed: JPY 1,000 million; interest rate:variable interest rate of 1-month JPY TIBOR plus 0.30000% (by the interest swap agreement, it is fixed, in effect, at
0.33433%) for duration of three years), which was arranged by Development Bank of Japan, Inc. in order to repay Term
Loan (D) in the amount of JPY 1,000 million due on June 30, 2019.
(ii) Prepayment of Loan
INV’s short-term consumption tax loan (Note 1) in the New Syndicate Loan (J) (in the amount of JPY 1,099 million) was
prepaid on May 31, 2019 from the consumption tax refund concerning asset acquisitions on August 2, 2018 and cash on
hand.
(Note 1) Short-term consumption tax loan is a loan which is to be repaid before the maturity date from a refund of
consumption taxes and regional consumption taxes on an acquisition of a property.

(d)Overview of Investment Structure Change regarding Overseas Assets
Since September 2018, INV owned a TK interest (100% interest) in a Cayman Islands special purpose company thatheld Leasehold Interests (Note 1) in Cayman Hotels as underlying assets (the “Cayman Hotel TK Interest”).
However, on April 1, 2019, an amended Act on Special Measures Concerning Taxation was enacted in Japan thatamends the requirement that “a J-REIT must not hold 50% or more of the shares or investment in another corporation”(Note 2) by expanding the regulation to include investments in TK. As INV owned 100% of TK Interests with
Leasehold in the Cayman Hotels as underlying assets, there was a possibility that INV would fail to satisfy this new
requirement if INV continued to hold the TK interest, applicable from the fiscal period ending December 2019, whichis the first fiscal period of INV immediately after the effective date (April 1, 2019) of tax law amendment.
In response to such tax law amendment, INV implemented an investment structure change regarding the Cayman
Hotels on May 9, 2019 (Cayman Island local time), and acquired the Leasehold of the Cayman Hotels by way of a
distribution in kind after the termination of the TK agreement, and INV currently has direct ownership of Leaseholdof the Cayman Hotels and continues to operate the Cayman Hotels. INV assumed the agreements concluded
between the Cayman SPC and the hotel management SPC.

(Note 1) Rights equivalent to long-term real estate leasehold rights in Japan (the “Leasehold”). INV also acquired some
movables including FF&E pertaining to hotel operations. “FF&E” is an abbreviation for furniture, fixturesand equipment, which are the assets necessary for hotel operation, such as furniture, fixtures, equipment andkitchen equipment (hereinafter the same).
(Note 2) Investment corporations under the J-REIT system can deduct the amount of cash distributions in calculating
its taxable income as long as they satisfy certain conditions (conduit requirements), in order to prevent double
taxation between J-REIT and unitholders.
(e) Overview of Sale of Assets
The Asset Manager decided to sell two residential properties, Spacia Ebisu on May 17, 2019 and Royal Parks
Tower Minami-Senju on May 28, 2019 for the purpose of improving the profitability of the portfolio by replacing
the assets and stabilizing future distributions by reserving profits from sales as internal reserve, and the sales werecompleted on June 19, 2019 and June 7, 2019 respectively. The sold assets are as follows. The proceeds fromthe sales were used to fund the acquisition and a portion of the related expenses described in “c Significant
Subsequent Events (c) Acquisition of assets”.

10Property
Number

Property Name

AcquisitionPrice(million yen)

Book
Value
(millionyen)(Note 1)

Sale Price(millionyen)(Note 2)Gain onSale(millionyen)(Note 3)

Transferee

A75

Spacia Ebisu

7,010

6,422

12,200

5,633

Undisclosed(Note 4)

A105

Royal Parks Tower
Minami-Senju

21,87921,92327,700

5,484

Undisclosed(Note 5)

Total

28,88928,34539,90011,117-(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(f)CategoryofSpecified
Assets

Trust
Beneficial
Interest-

As of the date of sale.
Sale price does not include adjustments for fixed asset taxes or city planning taxes, or national or local
consumption taxes; hereinafter the same.
Gain on sale is calculated by deducting the transfer related cost.
The name of the transferee (an affiliate of a foreign real estate fund) is not disclosed, as the transferee’s consent has
not been obtained for disclosure.
The name of the transferee (a Japanese TMK (Tokutei Mokuteki Kaisha)) is not disclosed, as the transferee’s
consent has not been obtained for disclosure.
Amounts are rounded down to the nearest million yen.
Overview of Results of Operations and Distributions

As a result of the operations mentioned above, operating revenues for the Reporting Period increased by JPY 12,888
million from the previous period (+89.2%) to JPY 27,339 million, net income increased by JPY 12,855 million(+153.3%) to JPY 21,239 million and unappropriated retained earnings including the retained deficit carried forwardfrom the preceding fiscal period (JPY 107 million) reached JPY 21,131 million.
INV believes that maintaining the stability of cash distributions over the medium term is one of the most importantfactors in determining the amount of distribution for a given fiscal period. With respect to the Reporting Period, INV
reserved a portion of net income increased due to the Structure Change and the sales of Spacia Ebisu and Royal Parks
Tower Minami-Senju, and aims to maintain stable distributions in the future. INV reserved JPY 11,825 million of net
income as internal reserve and decided that distribution per unit (excluding excess profit distribution) is JPY 1,656 anddoes not make distributions in excess of profits. Moreover, due to the internal reserve, the distribution payout ratio
will not be large enough to fulfill one of the tax conduit requirement (Note 1) of paying out at least 90% of net
distributable income as dividends. However, INV has tax-loss carry forwards in the amount of JPY 22.6 billion(mainly arising out of disposition of the assets in December 2010 fiscal period) which is more than enough to fully
offset the taxable income. As a result, INV does not expect to be required to pay any income taxes for the Reporting
Period.
(Note 1) Investment corporations under the J-REIT system can deduct the amount of cash distributions in calculating
its taxable income as long as they satisfy certain conditions (conduit requirements), in order to prevent double
taxation between J-REIT and unitholders.

bOutlook for the Fiscal Periods Ending December 31, 2019

The DPU for the December 2019 fiscal period is forecast to be JPY 1,725 (+2.5% YoY).
calendar year 2019 is forecast to be JPY 3,381 (+8.6% YoY), providing steady growth.

11

The full year DPU forFuture operational policy and issues to be addressed
Since July 2011, INV has enhanced unitholder value by significantly increasing DPU and financial stability with theFortress Group as its sponsor. Since Fortress Group joined under the umbrella of SoftBank Group in December 2017
and SoftBank Group owns 100% of issued shares of the Asset Manager directly and indirectly as of March 29, 2018,
in addition to continued access to Fortress’s global real estate expertise, INV will seek to leverage the resources thatare expected to become available through SoftBank Group. SoftBank Group has market-leading expertise intechnology fields such as digital marketing for both mobile and desktop, online payment systems, search engine
optimization, AI and robotics. INV believes that deployment of technology into INV’s real estate assets, especially
its hotels, will enhance the ongoing initiatives to improve its digital marketing, minimize labor costs and increasecustomer engagement. For example, INV plans to pursue opportunities to better manage the increased number offoreign visitors and their related online research, bookings and payments, improve the process in setting hotel rates
and manage overbooking through the use of sophisticated AI algorithms, and reduce labor costs while enhancing
customer service through the use of robotics.
In addition to pursuing synergies with SoftBank Group, going forward, INV will continue to implement various
strategies to maintain further growth and financial stability, including the following measures.
Further external growth utilizing sponsor supportProperty acquisition from third parties with the aim of expanding the AUM

Asset recycling and property acquisitions using the proceeds from sales



Further internal growth at hotel and residential properties

Diversification of funding sources and lengthening the average maturity period of its debt throughborrowings and the issuance of investment corporation bonds

Details of the future growth strategy are as follows.
(i)

External growth strategy
New Property Acquisitions
As its basic strategy, INV will move forward with the acquisition of new properties focusing on hotels, wherecontinued growth in portfolio revenues is anticipated and residential properties especially where rental growth canbe achieved. Rent revenue from residential assets and other assets as well as the fixed rent portion from hotels
will also contribute to more stable revenue, which was 60.4% of total revenue (Note 1). This acquisition strategy
will enable INV to build a portfolio with a good balance between growth and stability.
In regards to hotels, INV will take into consideration the trends in foreign travelers visiting Japan, demands ofbusiness and leisure customers in nearby areas, and leasing contract types when making investment decisions, withthe aim of acquiring properties where growth and stability of GOP and rental revenue are forecasted to increase.
In regards to residential properties, INV will analyze occupancy rates, rental market trends, the presence ofcompeting properties among other factors, and consider acquiring properties that have mainly small-type rooms
with strong competitiveness in large cities, in which it believes it can achieve increases in rent.
INV has achieved steady external growth via the sponsor pipeline from the Fortress Group, as follows.

12

Properties Acquired from affiliates of the Fortress Group (as of the date of this document)
Date

Properties acquired

Total acquisition price

September 2012
May 2014

24 residential properties (Note 2)
Two hotels

JPY 14,043 million (Note 2)
JPY 5,435 million

July 2014
February 201518 hotels
Two hotels

JPY 39,938 million
JPY 4,911 million

July 2015

11 hotels andthree residential properties

JPY 35,258 million

August 2015

One hotel
Five hotels andone residential property

January 2016

JPY 5,069 million
JPY 10,207 million

March 2016

Four hotels andone residential property

JPY 66,697 million

June 2016
March 2017

Two hotels
Two residential properties

JPY 15,900 million
JPY 24,562 million

May 2017
October 2017

One hotel
Five hotels (Note 3)

JPY 8,000 million
JPY 57,444 million (Note 3)

February 2018
June 2018

Four hotels
Two hotels

JPY 12,425 million
JPY 7,325 million

August 2018
September 2018

Four hotels
Two hotels (Note 4)

JPY 47,747 million
JPY 36,783 million (Note 4)

July 201918 hotels
112 properties(of which 81 are hotels and 31 areresidential properties)

JPY 82,646 million
JPY 474,391 million(of which hotels: JPY 422,753 million;
residential: JPY 51,638 million)

Total

The Fortress Group manages five dedicated Japanese real estate funds, including the Fortress Japan Opportunity
Funds I, II, III and IV. The Fortress Group’s committed equity is over JPY 450 billion and the number ofproperties that the Fortress Group is invested in exceeds 3,500. In order to ensure future growth options for the
portfolio, INV entered into an updated MOU with affiliates of the Fortress Group that provides preferential
negotiation rights with respect to the acquisition of three hotels and eight residential properties (see the tablebelow) (Note 5). In addition, by utilizing the property transaction information available through the FortressGroup and INV’s own network, INV will continuously consider and implement the acquisitions of properties fromthird parties that will contribute to stability and growth in revenue and cash flow and an increase in DPU.
No.

Asset nameLocation

Asset type (Note 6)

No. of rooms

1

Rihga Royal Hotel Kyoto

Kyoto, Kyoto

Full Service Hotel

489

2

Hotel MyStays Premier Narita

Narita, Chiba

Full Service Hotel

711

3

Fusaki Beach Resort Hotel & Villas

Ishigaki, Okinawa

Resort Hotel

188

4

Gran Charm Hiroo

Shibuya-ku, Tokyo

Residential/Small Type

121

5

Gran Charm Kichijoji

Musashino, Tokyo

Residential/Small Type28

6

Green Patio Noda

Noda, Chiba

Residential/Small Type240

7

Dainichi F‐45

Urayasu, Chiba

Residential/Small Type54

8

Gran Charm Urayasu

Urayasu, Chiba

Residential/Small Type54

9Gran Charm Urayasu 5

Urayasu, Chiba

Residential/Small Type54

10Gran Charm Minami Gyotoku I

Ichikawa, Chiba

Residential/Small Type52

11

Gran Charm Minami Gyotoku II

Ichikawa, Chiba

Residential/Small Type48

(Note 1)
(Note 2)The percentage indicates composition of rent revenue based on the actual results for the fiscal period ended
June 2019. Sheraton Grande Tokyo Bay Hotel (preferred equity interest) is excluded.
Of the properties acquired from affiliates of the Fortress Group, two residential properties (Sun Terrace
Minami-Ikebukuro and Royal Parks Tower Minami-Senju) have been sold.
13

(Note 3)(Note 4)(Note 5)(Note 6)

Sheraton Grande Tokyo Bay Hotel acquired by a special purpose company, of which INV owns the preferred
equity interest, is counted as one property and the INV’s investment amount to the preferred equity interest iscounted as the acquisition price of the preferred equity interest.
The Cayman Hotels acquired by the Cayman SPC, of which INV owned the TK interest, are counted as two
properties and the INV’s investment amount to the TK interest is used as the acquisition price of the TK
interest. After the Structure Change, INV currently has direct ownership of the Leasehold of the Cayman
Hotels.
The term of validity of the MOU is from July 1, 2019, the date of execution of the updated MOU, to June 30,
2020. However, regarding the 11 properties listed above, there is no guarantee that INV will be granted an
opportunity for considering acquisition of the properties or be able to acquire the properties. INV has nopreferential negotiation rights with respect to overseas assets.
Each “Asset Type” above is as follows:“Full Service Hotel” refers to a hotel generally having both restaurant facilities providing breakfast, lunch anddinner (including meals provided by reservation) and meeting facilities that can be used for banquet
services. .
“Limited Service Hotel” refers to a hotel that does not qualify as Full-Service Hotel.
“Resort Hotel” refers to a hotel located in areas where a substantial number of guests stay for sightseeing or
recreational purposes and includes both full service hotels and limited service hotels.
With respect to a hotel that falls within the definition of both a full service hotel and a resort hotel, wecategorize the hotel as a full service hotel if it has substantial demand for meeting room, banquet service,wedding service or food and beverage service (including demand from non-staying guests) and as a resort
hotel in all other cases. With respect to a hotel that falls within the definition of both a limited service hotel
and a resort hotel, we categorize the hotel as a resort hotel.
“Small Type” refers to a residential property in which the majority of dwelling units are less than 30 m2.

Property Sales
While INV places priority on increasing unitholders’ value through external growth by taking into account the increased
level of activity in the real estate trading market, it also considers the possibility of portfolio optimization upon
consideration of the portfolio sector composition, geographic distribution and competitiveness of each property, as
appropriate and previously detailed in the Asset Recycling Program.
(ii) Strategy for internal growth(Hotels)
Of the 64 domestic hotels (Note 1) owned by INV as of the end of the Reporting Period, 55 hotels use a variable
rent scheme. In the variable rent scheme, in principle, INV receives all of gross operating profit (GOP) after
deducting payment of management fees for the hotel operator as rents. For 53 hotels of the 55 hotels, MHM andsubsidiaries of MHM have implemented sophisticated revenue management initiatives seeking to maximize
revenue through effectively taking in the accommodation demand. As a result, INV can directly enjoy the hotelrevenue upside through this variable rent scheme.
For hotels, renovation of rooms and replacement of fixtures and fittings are indispensable to maintain and increase
revenues and operate stably in a planned manner.
(Residential properties and others)
INV will continue to strengthen its collaborative ties with PM and brokers to further boost occupancy rates andearning capabilities of its properties. With respect to INV’s residential properties, while keeping in mind thelow-season in the residential rental market that occurs during the December 2019 period, INV will focus on
increasing the occupancy rates and rents for both new lease contracts and lease renewals for all of its properties aswell as formulating net leasing cost reduction policies in order to continue maximizing profits.
Further, the implementation of appropriate maintenance and repair plans is of the utmost importance in maintaining
and enhancing the competitiveness and market value of the properties as well as ensuring high tenant satisfaction.
Therefore, INV will continue to monitor current strategic plans with flexible implementation as it sees fit.
(Note 1)

Including Sheraton Grande Tokyo Bay Hotel (the preferred equity interest).
14

(iii) Financial strategy
In the Reporting Period, INV has started new transactions with 5 banks and further strengthened the bank formationof INV, as well as conducting borrowings for a duration of 10 years in order to diversify fund procurement sources,
lengthen the maturity of its debt and diversify the repayment dates, as described in “a Overview of the Fiscal Period
Ended June 2019 (c) Overview of Fund Raising (i) Borrowing of Funds”. Going forward, INV seeks to maximize
unitholders’ value by way of further reduction of borrowing costs, diversification of loan maturity dates andfinancing measures, and improvement of its credit rating.

(iv) Compliance risk management
While the executive officer of INV concurrently serves as the representative director at the Asset Manager, two
supervisory directors (an attorney and a certified public account) oversee the execution of the executive officer’s duties
via the Board of Directors of INV. In addition, the compliance officer of the Asset Manager attends each meeting of
the Board of Directors in the capacity of an observer.
The Asset Manager has a compliance officer who is responsible for compliance with laws, regulations and otherrelevant matters as well as overall management of transactions with sponsor related parties. Moreover, it has in place acompliance committee which, chaired by such compliance officer, is in charge of deliberating on compliance with laws,
regulations and other relevant matters as well as transactions with sponsor related parties. Compliance committee
meetings are attended by an outside expert (an attorney) who, sitting in as a compliance committee member, conducts
rigorous deliberations on the existence of conflicts of interest in transactions with sponsor related parties as well as strict
examinations with respect to INV’s compliance with laws and regulations.
INV intends to continually take steps to strengthen its compliance structure.
c

Significant Subsequent Events(a) Issuance of New Investment Units
On July 1, 2019, INV launched its sixth Global Share Offering, and seventh share offering in total since Fortress became
its Sponsor. The offering size and funds raised are described below. The funds from the issuance of new units wereused to procure a portion of acquisition price for 18 domestic hotels stated in “(c) Acquisition of Assets”. Payment for
the issuance of new investment units and for the third-party allotment in connection with overallotment were completed
on July 18, 2019 and August 15, 2019 respectively. As a result, total equity for INV is JPY 235,576 million, and total
number of issued investment units is 6,096,840 units.
(i) Issuance of new investment units through Public Offering
Number of investment units to be offered:

Amount to be paid (issue value)
Total amount to be paid (total issue value)
Issue price (offer price)
Total issue price (total offer price)
Payment date

:
:
:
:

409,524 investment units
Domestic public offering: 194,524 investment units
Overseas offering: 215,000 investment units
JPY 56,939 per unit
JPY 23,317,887,036
JPY 58,898 per unit
JPY 24,120,144,552
July 18, 2019(ii) Secondary offering of investment units (overallotment secondary offering)Number of Investment Units to be offered in thesecondary offering
Offer priceTotal offer price
Delivery date:

20,476 investment units:::

JPY 58,898 per unit
JPY 1,205,995,448
July 19, 201915

(iii) Issuance of new investment units through third-party allotment
Number of investment units to be offered
Amount to be paid (issue value)
Total amount to be paid (total issue value)
Payment date
Allottee
(b)

:
:
:
:
:

20,476 investment units
JPY 56,939 per unit
JPY 1,165,882,964
August 15, 2019
Mizuho Securities Co., Ltd.

Debt Financing

Along with equity finance described in “(a) Issuance of New Investment Units”, INV has decided to execute newborrowings (New Syndicate Loan (L)) on July 1, 2019 in order to fund a portion of the acquisition price of 18 domestic
hotel properties later described in “(c) Acquisition of Assets”.
New Syndicate Loan (L)LenderMizuho Bank, Ltd.,
Sumitomo Mitsui Banking Corporation,
MUFG Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited,
Citibank, N.A., Tokyo Branch,
Development Bank of Japan Inc.,
AEON Bank, Ltd.,The Nomura Trust and Banking Co., Ltd.
Mizuho Bank, Ltd.,
Sumitomo Mitsui Banking Corporation,
MUFG Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited,
Citibank, N.A., Tokyo Branch,
Development Bank of Japan Inc.,
AEON Bank, Ltd.,
Aozora Bank, Ltd.,The Nomura Trust and Banking Co., Ltd.
Mizuho Bank, Ltd.,
Sumitomo Mitsui Banking Corporation,
MUFG Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited,
Development Bank of Japan Inc.,
AEON Bank, Ltd.,
Aozora Bank, Ltd.,The Nomura Trust and Banking Co., Ltd.
Mizuho Bank, Ltd.,
Sumitomo Mitsui Banking Corporation,
MUFG Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited,
Development Bank of Japan Inc.,
AEON Bank, Ltd.,
Aozora Bank, Ltd.,The Nomura Trust and Banking Co., Ltd.
Mizuho Bank, Ltd.,
Sumitomo Mitsui Banking Corporation,
MUFG Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited
Total Debt

Borrowing
Date

Outstanding
Balance(JPY million)

Interest Rate(annual rate)

Maturity
Date

4,943

0.41326%(Note 1)January 16,
2023

4,943

0.52473%(Note 1)January 16,
2024

Borrowing
MethodUnsecured/ nonguarantee
4,943

0.57984%(Note 1)

July 16, 2024

4,943

Variableinterest rate
(Note 2)January 16,
2025

4,942

Variableinterest rate
(Note 3)

July 16, 2025

2,686

Variableinterest rate
(Note 4)

July 18, 2020

July 19,2019

27,400(Note 1) These are borrowings with floating interest rates, but the interest rates are fixed through interest rate swap
agreements.
(Note 2) 1-month JPY TIBOR (Base Rate) + spread (0.55000%)(Note 3) 1-month JPY TIBOR (Base Rate) + spread (0.70000%)(Note 4) 1-month JPY TIBOR (Base Rate) + spread (0.20000%)

16

(c)

Acquisition of Assets
The Asset Manager decided to acquire 18 hotels as follows on July 1, 2019, and acquisition of assets has been
completed on July 19, 2019.

Property
Number

Property Name

Acquisition Price(million yen)Appraisal Value(million yen)
(Note 1)

SellerD64

Hotel MyStays Sapporo Aspen

15,54315,700Touyako Godo Kaisha

D65

Art Hotel Ishigakijima

9,731

9,830

Yaeyama Resort Hotel Tokutei
Mokuteki Kaisha

D66

Hotel MyStays Fuji Onsen Resort

9,405

9,500

Saturnia Tokutei Mokuteki Kaisha

D67

Hotel Sonia Otaru

5,930

5,990

Shirahama Tokutei Mokuteki Kaisha

D68

Hotel MyStays Kanazawa Castle

5,682

5,740

Calvis Tokutei Mokuteki Kaisha

D69

Art Hotel Niigata Station

5,524

5,580

HL Investments 2 Tokutei Mokuteki
KaishaD70

Hotel MyStays Nagoya Nishiki

5,197

5,250

Shirahama Tokutei Mokuteki Kaisha

D71

Hotel Nord Otaru

4,296

4,340

Shirahama Tokutei Mokuteki Kaisha

D72

Hotel MyStays Kagoshima Tenmonkan

3,445

3,480

Kawaguchiko Tokutei Mokuteki
KaishaD73

Art Hotel Asahikawa

3,197

3,230

Shirahama Tokutei Mokuteki Kaisha

D74

Hotel MyStays Matsuyama

3,098

3,130

Calvis Tokutei Mokuteki Kaisha

D75

Hotel MyStays Sapporo Susukino

3,059

3,090

Kawaguchiko Tokutei Mokuteki
KaishaD76

Hotel MyStays Sapporo Nakajima Park

2,118

2,140

Shirahama Tokutei Mokuteki Kaisha

D77

Hotel MyStays Sapporo Nakajima Park
Annex

1,584

1,600

Shirahama Tokutei Mokuteki Kaisha

D78

Flexstay Inn Sakuragicho

1,425

1,440

Calvis Tokutei Mokuteki Kaisha

D79

MyCUBE by MYSTAYS Asakusa
Kuramae

1,287

1,300

Calvis Tokutei Mokuteki Kaisha

D80

Hotel MyStays Kagoshima Tenmonkan
Annex

1,168

1,180

Kawaguchiko Tokutei Mokuteki
KaishaD81

Hotel MyStays Nayoro

957

967

Kawaguchiko Tokutei Mokuteki
Kaisha82,646

83,487

Total(Note 1)

Appraisal Value is based on appraisal value stated in the appraisal report by the Japan Real Estate Institute., JLL Morii Valuation& Advisory K.K., The Tanizawa Sōgō Appraisal Co., Ltd. or Daiwa Real Estate Appraisal Co., Ltd. on the valuation date ofApril 1, 2019.

17

(Reference Information)(a)Debt Financing
INV has decided to implement new borrowings (New Syndicate Loan (M)) on July 11, 2019, in order to repay a portion of
New Syndicate Loan (E) in the amount of JPY 28,979 million which was due on July 16, 2019.
INV has also decided to implement new borrowings (Term Loan (L)) on July 18, 2019, in order to repay a portion of Term
Loan (E) in the amount of JPY 700 million which was due on July 20, 2019.
(i) New Syndicate Loan (M)Borrowing
LenderDate

Outstanding
Balance(JPY million)

Interest Rate

Maturity

Borrowing(annual rate)

Date

Method0.40000%

January 16,(Note 1)2023

0.49859%

January 16,(Note 1)2024

0.56310%

July 16,

Unsecured/ non(Note 1)

2024

guarantee

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

5,796

Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Resona Bank, Limited.
Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited

5,796

Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Resona Bank, Limited.
Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation

July 16,

Sumitomo Mitsui Trust Bank, Limited

2019

5,796

Shinsei Bank, Limited
Citibank, N.A., Tokyo Branch
Mizuho Bank, Ltd.
MUFG Bank, Ltd.

Variable

Sumitomo Mitsui Banking Corporation

5,796

Sumitomo Mitsui Trust Bank, Limited

interest rate
(Note 2)January 16,
2025

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

Variable

Shinsei Bank, Limited

5,795

Citibank, N.A.,Tokyo Branchinterest rate
(Note 3)

Sumitomo Mitsui Trust Bank,
LimitedResona Bank, Limited.
Total Debt

28,97918

July 16,2025

(Note 1) These are borrowings with floating interest rates, but the interest rates are fixed through interest rate swap
agreements.
(Note 2) 1-month JPY TIBOR (Base Rate) + spread (0.55000%)(Note 3) 1-month JPY TIBOR (Base Rate) + spread (0.70000%)(ii)

Term Loan (L)LenderBorrowing

Tokyo Star Bank, Limited

Date

Outstanding
Amount(JPY million)

Interest Rate

Maturity

Borrowing(annual rate)

Date

MethodJuly 16,

Unsecured/ non

2025

guarantee

Variable

July 22,

700

2019

interest rate
(Note 1)

(Note 1) 1-month JPY TIBOR (Base Rate) + spread (0.70000%)d

Operational Outlook

The forecasts of financial results for the fiscal period ending December 31, 2019 (from July 1, 2019 to December 31,2019) are as follows. For reference purposes, full-year forecasts (aggregate of the fiscal periods ending June 30, 2019and December 31, 2019) are provided as well, since hotel revenues are influenced by seasonal effects.
December 2019
Fiscal Period(Anticipated)(Reference)
June 2019
Fiscal Period(Reference)
Full-year 2019

Operating Revenues

JPY 18,043 million

JPY 27,339 million

JPY 45,382 million

Operating Income

JPY 12,107 million

JPY 22,185 million

JPY 34,292 million

Ordinary Income

JPY 10,701 million

JPY 21,240 million

JPY 31,941 million

Net Income

JPY 10,700 million

JPY 21.239 million

JPY 31,940 million

Total Distribution Amount(Including excess profit distribution)

JPY 10,517 million

JPY 9,384 million

JPY 19,901 million

Net Income per Unit

JPY 1,755

JPY 3,748

JPY 5,503

Distribution per Unit
(Excluding excess profit distribution)

JPY 1,725

JPY 1,656

JPY 3,381---

JPY 1,725

JPY 1,656

JPY 3,381

Excess Profit Distribution per Unit
Distribution per Unit
(Including excess profit distribution)

For the assumptions underlying the operational outlook for the fiscal period ending December 31, 2019, please see“Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Period ending December
2019.”(Cautionary Note regarding Forward Looking Statements)
Forward looking statements such as the forecasts set forth herein are based on information currently available andcertain assumptions that are deemed reasonable. Actual operating performance may vary significantly due tofactors not foreseen at the time of this present notice, such as the occurrence of gains and losses associated with thesale of properties, repayment of borrowings and a decrease in rent received. Also, this forecast is not a guarantee of
distribution amounts.

19

<Assumptions Underlying the Forecast of Financial Results and Distribution for the Fiscal Period ending December 2019 >Item

Assumptions

Fiscal period

The December 2019 fiscal period: from July 1, 2019 to December 31, 2019 (184 days)

Assets under management

Based on the properties held as of the date of this document (147 properties and a preferred
equity interest in one TMK), and INV assumes that there will be no changes through the end of
the fiscal period ending December 31, 2019.
As of the end of the December 2019 fiscal period: 6,096,840 units

Units outstanding

INV assumes that there will be no change to the current 6,096,840 units issued and outstanding
through the end of the fiscal period ending December 31, 2019.
Balance as of the end of the fiscal period ending December 31, 2019: JPY 256,174 million(borrowing: JPY 252,174 million, investment corporation bonds: JPY 4,000 million)

Interest-bearing liabilities

Regarding other loans maturing during the December 2019 fiscal period, INV intends torefinance at a similar condition. INV assumes no other new loan or prepayment of loan
through the end of the December 2019 fiscal period.
INV expects to record rental revenues as follows:
December 2019
Fiscal Period
JPY 15,944 million(JPY 13,201 million)(JPY 6,466 million)(JPY 6,734 million)
JPY 1,393 million

・Rental revenues(of these, hotel rents)(fixed hotel rents)(variable hotel rents)
・Management contract
revenue
・TMK Dividend amountOperating revenues

JPY 705 million

We estimate the amount of dividends on the preferred equity interests (TMK dividend) based on
the performance of the underlying asset and the assumed amount of expenses incurred by the
TMK.
The forecasts of management contract revenue are based on estimated performance of theunderlying assets and the assumed amount of expenses incurred by the hotel managementcompany. Management contract revenue have been calculated based on the exchange rate of
USD 1 = JPY 110.00, as the exchange rate is fixed based on the currency put/call options
covering approximately 85% of expected cash flow.
Rental revenues are calculated based on estimates as of the date of this document. In addition,
INV assumes there will be no delinquencies or non-payment of rent by tenants.
INV expects to incur property related expenses and management contract expenses out of
operating expenses as follows:

Operating expenses

・Facility management fees(of these, repair costs)
・Taxes and other public charges(Note)
・Insurance expenses
・Depreciation expenses
・Other expenses
Total property related expenses andmanagement contract expenses

December 2019
Fiscal Period
JPY 519 million(JPY 21 million)
JPY 621 million
JPY 145 million
JPY 3,882 million
JPY 147 million
JPY 5,317 million(Note) Property taxes and city planning taxes on the assets acquired in 2019 are calculated on a
pro-rata basis with the previous owners and settled at the time of acquisition, and are notrecorded for the fiscal period ending December 31, 2019 and will be recorded from thefiscal period ending June 30, 2020 as the amount equivalent to such settlement isincluded in the acquisition cost.
20

Item

Assumptions
INV expects to incur other operating expenses than the property related expenses andmanagement contract expenses as follows:
December 2019
Fiscal Period
JPY 618 million

Operating expenses
・Other operating expenses(of these, asset management fees)(JPY 300 million)

INV expects to record net operating income as follows:
December 2019
Fiscal Period
JPY 16,609 million

・NOI
NOI

(of these, domestic hotel)(JPY 13,350 million)(of these, overseas hotel)(JPY 1,263 million)(of these, residential)(JPY 1,810 million)

NOI calculation method in the above table is as follows
・NOI＝ Rental Revenues ‐ Property Related Expenses + Depreciation Expenses + Dividend on
the preferred equity interest (TMK dividend) + (Management Contract Revenue of the
Cayman Hotels‐Management Contract Expense)
INV expects to incur non-operating expenses as follows:

Non-operating expenses

Distribution per unit

・Interest expense
・Finance related costs・Interest for investment corporation
bonds
・Depreciation of investment
corporation bonds issuance expenses
・Other non-operating expenses(expenses relating to the issuance of
new units for the public offering)
Total Non-operating expenses

December 2019
Fiscal Period
JPY 692 million
JPY 498 million
JPY 11 million
JPY 3 million
JPY 200 million
JPY 1,406 million

The distribution per unit is calculated in accordance with the cash distribution policy as set forthin INV’s Articles of Incorporation.
With respect to the distribution for the fiscal period ending December 31, 2019, INV expects todistribute an aggregate amount of JPY 10,517 million (distribution per unit: JPY 1,725) which is
the remaining amount after reserving JPY 183 million for internal reserve from the net income
for the fiscal period ending December 31, 2019 (JPY 10,700 million).
For the fiscal period ending December 31, 2019, INV expects to record deferred gain on hedgeof the interest rate swap and the currency option as the valuation and conversion adjustments,
etc. of JPY 87 million, which is equal to the amount for the fiscal period ended June 30, 2019.
The distribution per unit is calculated based on the assumption that fluctuation of the market
value of the interest rate swap does not affect the distribution per unit.
Distribution per unit may vary due to various factors, including changes of the assets undermanagement, fluctuation of rent income associated with reasons such as change of tenants andoccurrences of unexpected repairs.

21

Item

Excess profit distribution
per unit

Assumptions
INV believes maintaining the stability of cash distributions over the medium term is one of themost important factors in determining the amount of distribution for a given fiscal period, andtherefore, INV has adopted the policy to make distributions in excess of profits in order tostabilize distributions, in cases where dilution of investment units or significant expenses are to
be recorded in connection with, among other things, the acquisition of assets or the raising of
capital, leading to a temporary decrease in distribution per unit, taking into consideration thelevel of distribution per unit assuming such acquisition of assets or capital raising had
contributed for a full fiscal period.
INV may also consider making distributions in excess of profits for the purpose of decreasing
the impact from corporate tax increase arising from different rules in tax and accounting
practices, such as treatment on depreciation of fixed term land lease or asset retirement
obligation.
With respect to the fiscal period ending December 2019, INV will not make distributions inexcess of profits as the impact to distribution per unit due to one off expenses in connection withthe public offering, acquisition of assets and the borrowing of funds is limited with the increase
in revenue from the acquisition of assets. In addition, INV will not make distributions inexcess of profits in order to cope with the discrepancy between tax and accounting treatment.
December 2019
Fiscal Period
・Excess profit distribution per unit

Other

-

INV assumes there will be no amendments to applicable laws and regulations, the taxation
system, accounting standards and other regulations, including the proposed amendments to the
Income Tax Act stated below, that would affect the foregoing forecasts.
In addition, INV assumes there will be no unforeseen material changes in general economic
trends, real estate market conditions and other trends and conditions.

(3) Investment Risk
Disclosure is omitted because there have been no material changes in the “Investment Risk” section of the latest
securities registration statement (filed on July 1, 2019). The acquisition of anticipated properties described in suchsecurities registration statement has been completed as scheduled.

22

2. Financial Statements(1)

Balance Sheet
Fiscal period ended
December 31, 2018(as of December 31, 2018)

AssetsCurrent assets:
Cash and bank deposits
Cash and bank deposits in trust
Accounts receivable
Rental receivables
Prepaid expenses
Income taxes receivable
Consumption taxes receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets:
Property and equipment
Buildings
Accumulated depreciation
Buildings, net
Buildings and accompanying facilities
Accumulated depreciation
Buildings and accompanying facilities, net
Tools, furniture and fixtures, at cost
Accumulated depreciation
Tools, furniture and fixtures, net
Construction in progress
Buildings in trust, at cost
Accumulated depreciation
Buildings in trust, net
Buildings and accompanying facilities in trust,at costAccumulated depreciation
Buildings and accompanying facilities intrust, net
Structures in trust, at cost
Accumulated depreciation
Structures in trust, net
Tools, furniture and fixtures in trust, at cost
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property and equipment, net
Intangible assets
Leasehold rights
Leasehold rights in trust
Total intangible assets
Investments and other assets
Investment securities
Guarantee deposits
Long-term prepaid expenses
Derivatives assets
Other
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets

23(Unit: JPY thousand)Fiscal period ended
June 30, 2019(as of June 30, 2019)

3,985,335
7,079,268
583,0122,591,368
539,442
172,912434,3260(86)
15,385,582

48,833,358
6,766,348
647,2102,758,865
371,720
483,656
168,970(148)
60,029,983

3,192
(669)
2,522
144,380,745(12,260,835)
132,119,910

19,142,244(62,908)
19,079,335
5,111,168(42,886)
5,068,281
1,069,418(14,924)
1,054,494
9,817
130,105,036(13,178,580)
116,926,456

32,567,092*4 29,757,547(7,258,920)(7,460,526)

25,308,172

22,297,021

228,964(92,586)
136,377
1,690,363(504,581)
1,185,781
203,881,464
362,634,229

227,665(94,980)
132,685
1,816,296(611,887)
1,204,408
199,037,787
14,364364,824,652

20,015,700
20,015,700

10,637,811
12,864,608
23,502,420

54,640,213
1,700,670
708,191
216,555
22,66757,288,298
439,938,228

17,856,387
803,721
601,259
255,404
22,667
19,539,440
407,866,513

38,98538,985455,362,796

35,47835,478467,931,975

Fiscal period ended
December 31, 2018(as of December 31, 2018)(Unit: JPY thousand)Fiscal period ended
June 30, 2019(as of June 30, 2019)

Liabilities
Current liabilities:
Accounts payable
Short-term loans payable

431,891
1,099,000

511,902-

Current portion of long-term loans payable
Accounts payable-other54,745,000
651,992

51,744,000
136,155

Accrued expenses
Income taxes payable

200,203605

362,920605

Consumption taxes payable
Advances received

571,668

2,764,397
454,614134,085

26,15957,834,445

56,000,754

4,000,000
170,029,000

4,000,000
173,030,000

2,009,816
92,525

1,746,941
75,543

Asset retirement obligations

32,10732,321

Total non-current liabilities

176,163,449

178,884,805

233,997,895

234,885,560

211,092,540

211,092,540

6,264,432

6,264,432*2 (46,329)*2 (131,332)*3 (5,194,798)(5,398,804)(5,241,128)(5,530,137)

1,023,303

734,294

Retained earnings

9,140,372

21,131,966

Total surplus

10,163,675

21,866,261

221,256,215

232,958,801

Deferred gains or losses on hedges

108,684

87,612

Total valuation and translation adjustments

108,684

87,612*1 221,364,900*1 233,046,414

455,362,796

467,931,975

Deposits received
Total current liabilities
Non-current liabilities:
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security deposits in trust
Derivatives liabilities

Total liabilities
Net assets
Unitholders’ equity:
Unitholders’ capital
Surplus:Capital surplus
Deduction of capital surplus
Allowance for temporary differences
adjustment
Other deduction of capital surplus
Total deduction of capital surplus
Capital surplus (net)Total unitholders’ equity
Valuation and translation adjustments:

Total net assets
Total liabilities and net assets

24

(2)

Statement of Income and Retained Earnings(Unit: JPY thousand)Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)

Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
Operating revenue
Rental revenue―real estate*1 13,604,224-

Management contract revenue
Gain on sale of real estate properties

846,780

Dividend income
TK Dividend amount
Total operating revenue*1 12,153,399*2 580,588*3 11,117,983-

827,477
2,660,220

14,451,005

27,339,670*1 4,450,676*1 4,490,658*2 164,376

Operating expenses
Property related expenses
Management contract expenses

275,000

Asset management fees
Directors’ compensation

5,200
18,645

Asset custody fees
Administrative service fees

52,607
86

Provision of allowance for doubtful accounts
Other
Total operating expenses
Operating income

300,000
4,800
22,23347,312

134,032148
125,069

4,936,248

5,154,599

9,514,756

22,185,070

82

811

34,468
72

1,005

906

800

35,5282,617

555,811-588,555
33,648

8,490

11,405

2,625

3,506

407,683
186,997

310,089-

Non-operating income
Interest income
Foreign exchange gains
Interest on tax refund
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuancecosts
Loan-related costs
Investment unit issuance costs
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Subsidy income
Total extraordinary income
Extraordinary losses
Loss on reduction entry of non-current assets

3,999

0

1,165,608

947,206

8,384,676

21,240,482-

115,319-

115,319-

115,319

Total extraordinary losses-

115,319

Income before income taxes

8,384,676

21,240,482

Income taxes

605

605

Total income taxes

605

605

8,384,071

21,239,877

756,300(107,910)

9,140,372

21,131,966

Net income
Retained earnings (deficit) brought forward
Unappropriated retained earnings
25

(3)

Statement of Changes in Net Assets

Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)(Unit: JPY thousand)Unitholders’ equity
SurplusCapital surplus
Unitholders’capitalDeduction of capital surplus
Capital surplus

Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Distributions fromsurplusAcquisition of own
investment units
Retirement of own
investment units

168,798,455

Allowance fortemporarydifferences
adjustment

6,264,432(46,329)

Other
deduction ofcapital surplus

Total
deduction ofcapital surplus

Capital surplus(net)(1,194,818)(1,241,148)

5,023,283(3,999,980)(3,999,980)(3,999,980)

42,294,085

Net income
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod42,294,085－－(3,999,980)(3,999,980)(3,999,980)

211,092,540

6,264,432(46,329)(5,194,798)(5,241,128)

1,023,303

Unitholders’ equity
SurplusRetainedearnings
Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units
Distributions fromsurplus7,610,548

Total
surplusOwn investment
units

12,633,832－(6,854,248)

Retirement of own
investment units
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod181,432,288

42,294,085(6,854,248)(6,854,248)

Acquisition of own
investment units

Net income

Total
unitholders’equity(3,999,980)(3,999,980)(3,999,980)

3,999,980－

8,384,071

8,384,071

8,384,071

1,529,823(2,470,157)－

39,823,927

9,140,372

10,163,675－

221,256,215

26

Valuation and translation adjustments

Balance at the beginningof the period
Changes during theperiodIssuance of new
investment units

Deferred
gains or losses
on hedges

Totalvaluation andtranslation
adjustments

90,97590,975Total
net assets

181,523,263

42,294,085

Distributions fromsurplus(6,854,248)

Acquisition of own
investment units(3,999,980)

Retirement of own
investment units－

Net income
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod8,384,071
17,70917,70917,70917,70917,70939,841,636

108,684

108,684

221,364,900

27

Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)(Unit: JPY thousand)Unitholders’ equity
SurplusCapital surplus
Unitholders’capitalDeduction of capital surplus
Capital surplus

Balance at the beginningof the period
Changes during theperiodDistributions fromsurplus
Reversal of allowancefor temporary
differences adjustment
Other excess profit
distribution

211,092,540

Allowance fortemporarydifferences
adjustment

6,264,432(46,329)

Other
deduction ofcapital surplus(5,194,798)

Total
deduction ofcapital surplus

Capital surplus(net)(5,241,128)

1,023,303(85,002)(85,002)(204,006)(204,006)(204,006)(85,002)

Net income
Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiod－－(85,002)(204,006)(289,008)(289,008)

211,092,540

6,264,432(131,332)(5,398,804)(5,530,137)

734,294

Unitholders’ equity
SurplusRetainedearnings
Balance at the beginningof the period
Changes during theperiodDistributions fromsurplus

Changes other thanunitholders’ equity(net)
Total changes during theperiodBalance at the end of theperiodTotalunitholders’equityDeferred
gains or losses
on hedges

Totalvaluation andtranslation
adjustments

108,684

108,684

Total
net assets

9,140,372

10,163,675

221,256,215(9,248,282)(9,248,282)(9,248,282)(9,248,282)(85,002)(85,002)(85,002)(204,006)(204,006)(204,006)

21,239,877

21,239,877

21,239,877

Reversal of allowancefor temporary
differences adjustment
Other excess profit
distribution
Net income

Total
surplus

Valuation and translation adjustments

21,239,877

221,364,900(21,072)(21,072)(21,072)

11,991,594

11,702,585

11,702,585(21,072)(21,072)

11,681,513

21,131,966

21,866,261

232,958,801

87,612

87,612233,046,414

28

(4) Statement of Cash Distribution(Unit: JPY)
Fiscal period ended December 31, 2018(from July 1, 2018 to December 31, 2018)

Fiscal period ended June 30, 2019(from January 1, 2019 to June 30, 2019)

9,140,372,069

21,131,966,492-

125,201,855

Allowance for temporary
differences adjustment

85,002,600-

Other deduction of capital surplus

204,006,240-

9,537,291,720

9,384,287,040(1,683)(1,656)

Of which, distributions ofearnings(Distributions of earnings perunit)
Of which, allowance fortemporary differences adjustment(Excess profit distribution perunit (Allowance for temporary
differences adjustment))
Of which, other excess profit
distribution(Excess profit distribution perunit (Other excess profit
distribution))

9,248,282,880

9,384,287,040(1,632)(1,656)85,002,600

-

(15)

-

204,006,240

-

(36)

-

Retained earnings (deficit) carriedforward(107,910,811)

11,622,477,597

I

Unappropriated retained earnings

II

Incorporation into unitholders'
capitalOf which, reversal of allowance fortemporary differences adjustment

III

Excess profit distribution

IV Distributions(Distribution per unit)V29

Calculation method of distribution
amountAs shown above, the distribution perunit for the Reporting Period is JPY
1,683.
With respect to profit distributions (notincluding Excess Profit Distribution),
INV decided to distribute almost all of
its profit as defined in Article 136,
Paragraph 1 of the Investment Trust Act,
other than fractional amount per unit lessthan JPY 1, aiming to include themaximum amount of profit distributions
in deductible expenses in accordancewith Article 67-15, Paragraph 1 of the
Act on Special Taxation Measures (ActNo. 26, 1957).
As a result, thedistribution of earnings per unit (notincluding Excess Profit Distribution perunit) is JPY 1,632.
In addition, in accordance with the
distribution policy as set forth in the
Articles of Incorporation, INV makes
distributions in excess of earnings of theamount that it determines (the “Excess
Profit Distribution”).
For theReporting Period, INV decided to make
Excess Profit Distribution of JPY 85
million in order to cope with thediscrepancy between tax and accounting
treatment, making Excess Profit
Distribution from the allowance fortemporary differences adjustment of JPY
15 per unit. INV decided to also make
Excess Profit Distribution of JPY 204
million as refund of investment in orderto stabilize distributions, making other
Excess Profit Distribution of JPY 36 per
unit.
Under the Reporting Period, deferredgain on hedge of the interest rate swapof JPY 108 million has arisen.
Deferred gain on hedge of the interest
rate swap is included in profit as definedin Article 136, Paragraph 1 of theInvestment Trust and Investment
Corporation Act, and INV has decided to
distribute almost all of the profit as
defined in Article 136, Paragraph 1 ofthe Investment Trust and Investment
Corporation Act. As a result, retained
deficit carried forward of JPY 107
million is recorded.

30

In accordance with the distribution
policy set forth in Article 17, Paragraph
1 of the Articles of Incorporation of
INV, the distribution amount shall be theamount which does not exceed theamount of profits but exceeds 90% of
the distributable profit as defined in
Article 67-15 of the Special Taxation
Measures Act. However, in the eventthat any tax losses arise, or if no profits
have been recorded for tax purposes due
to tax losses carried forward, thedistribution amount may be as
reasonably
determinedby
INV.
Pursuant to this policy, INV determinedthe distribution amount to be JPY
9,384,287,040 out of net income of JPY
21,239,877,303. Moreover, INV does
not make excess profit distribution set
forth in Article 17, Paragraph 4 of the
Articles of Incorporation.

(5)Statement of Cash Flows(Unit: JPY thousand)Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)

Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Loss on reduction entry of non-current assets
Investment unit issuance costs
Amortization of investment corporation bond issuance costs
Loan-related costs
Interest income
Interest expenses
Foreign exchange losses (gains)
Increase (decrease) in allowance for doubtful accounts
Decrease (increase) in rental receivable
Decrease (Increase) in deposits paid
Decrease (increase) in refundable income taxes
Decrease (increase) in consumption taxes receivable
Increase (decrease) in accounts payable
Increase (decrease) in consumption taxes payable
Increase (decrease) in accounts payable-other
Increase (decrease) in accrued expenses
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease from sales of property and equipment in trust
Decrease from sales of intangible assets in trust
Others, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchases of property and equipment in trust
Purchases of leasehold rights in trust
Repayments of tenant leasehold and security deposits in trust
Proceeds from tenant leasehold and security deposits in trust
Payments of tenant leasehold and security deposits
Collection of tenant leasehold and security deposits
Payments of TK investment
Proceeds from withdrawal of TK investment
Other, net
Net cash used in investing activities
Cash flows from financing activities
Increase in short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment corporation bonds
Borrowing related expenses
Payments for acquisition of own investment units
Payment of distributions of earnings
Payments of distributions in excess of retained earnings fromallowance for temporary differences adjustment
Payment of other distributions in excess of retained earnings
Proceeds from issuance of investment units
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

31

8,384,676
3,039,033
186,997
2,625
407,683(82)
564,302(7,261)(3)(764,772)(23,292)(434,326)(32,970)(14,902)(49,755)(2,611)
20,161(75,818)
9,283
11,208,966
82(553,985)(605)
10,654,458

21,240,482
3,168,320
115,319
3,506
310,089(811)
599,960(23,481)62
285,339
96,4703,830
434,326
22,952
2,764,397
40,334
118,454(117,053)(347,981)
21,268,952
7,047,749(617,969)
56,413,251
811(603,432)(605)
55,810,025(45,485,560)(3,421,194)(64,862)
49,032(19,105)(37,534,886)
751,060(12,784)(85,738,300)(1,302,310)(323,779)
61,654
896,949(58,789)(726,275)

1,099,000(2,000,000)
68,338,000(28,979,000)
1,980,352(804,736)(3,999,980)(6,664,830)(1,099,000)
17,684,000(17,684,000)(167,123)(8,993,502)-(85,002)42,107,087
71,075,892(4,007,949)
15,072,553*1 11,064,604(204,006)(10,548,635)(12)
44,535,102
11,064,604*1 55,599,707

(6)Notes to Concerning Going Concerns Assumption
Not applicable(7)

Notes to Concerning Significant Accounting Policies
1. Evaluation standards and evaluation method of assets
Other securitiesThose with no fair value
Cost method through moving-average method is used.
2. Method of depreciation of non-current assets(a) Property and equipment (including assets in trust)The straight-line method is used.
The useful lives of major property and equipment are as follows.
Buildings
16-50 years
Buildings and accompanying facilities
5-29 years
Tools, furniture and fixtures
4-10 years
Buildings in trust
5-67 years
Buildings and accompanying facilities in trust
2-33 years
Structures in trust
3-55 years
Tools, furniture and fixtures in trust
2-19 years(b) Intangible assets
For fixed-term land lease for business purposes in Japan, the straight-line method based on the lease period is used.
(c) Long-term prepaid expenses
The straight-line method is used.
3. Accounting treatment of deferred assets(a) Investment unit issuance costs
The full amount is recorded as expense at the time of expenditure.
(b) Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized using the straight-line method over a period up to
redemption of the investment corporation bonds.
4. Method of calculating allowances
Allowance for doubtful accounts
To reserve for losses on doubtful accounts, allowances are provided for normal receivables using a rate determinedbased on past bad debt experiences, and specific allowances are provided for accounts with a possibility of default
based on the estimated amounts considered to be uncollectible by considering the collectability of accounts on an
individual basis.
5. Conversion of assets and liabilities in foreign currency into Japanese yen
Receivables and payables denominated in foreign currencies are translated into yen at the spot exchange rate at the endof the fiscal period date, and differences arising from the translation are treated as a profit or loss.

32

6. Revenue and expense recognition
Accounting treatment of property taxes and other taxes
With respect to property taxes, city planning taxes and depreciable asset taxes, of the tax amount assessed anddetermined, the amount corresponding to the relevant fiscal period is accounted for as property related expenses.
Of the amounts paid to the seller for acquisitions of real estate, the amount equivalent to property taxes is capitalized
as part of the acquisition cost of the real estate instead of being charged as expense. The amount equivalent toproperty taxes that was included as part of the acquisition of real estate during the fiscal period ended June 30, 2019 iszero.
7. Method of hedge accounting(a) Method of hedge accounting
Deferred hedge accounting is used.
(b) Hedging instrument and hedged item
(Borrowings)
Hedging instrument: interest rate swap
Hedged item: interest on borrowings(Scheduled foreign currency-denominated transactions)
Hedging instrument: Foreign exchange option
Hedged item: Scheduled foreign currency-denominated transaction(c) Hedge policy
INV enters into derivative transactions for the purpose of hedging against the risks set forth in INV’s Articles ofIncorporation in accordance with its risk management policy.
(d) Method of evaluating hedge effectivenessHedge effectiveness is evaluated by comparing the cumulative amount of changes in cash flows of the hedging
instrument and the cumulative amount of changes in cash flows of the hedged item and verifying the difference inthe amounts of change of both the hedged item and the hedging instrument.
8. Cash and cash equivalents as stated in Statement of Cash Flows
Cash and cash equivalents as stated in the Statement of Cash Flows consist of cash on hand and cash in trust, floating
deposits, deposits in trust and short-term investments that are very liquid and realizable with a maturity of threemonths or less when purchased and that are not subject to significant risks of changes in value.
9. Other significant matters which constitute the basis for preparation of financial statements(i) Accounting treatment of trust beneficiary interests in real estate
As to trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust, as well as all
income generated and expenses incurred from assets in trust, are recorded in the relevant balance sheets and income
statement accounts. Of such items, the following significant trust assets and liabilities are shown separately on thebalance sheet.
(a) Cash and bank deposits in trust(b) Buildings in trust
Buildings and accompanying facilities in trust
Structures in trust
Tools, furniture and fixtures in trust
Land in trust
Construction in progress in trust(c) Leasehold rights in trust(d) Tenant leasehold and security deposits in trust
33

(ii) Accounting treatment of consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(Additional Information)(Notes Related to Provision and Reversal of Allowance for Temporary Differences Adjustment)
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
The following provision was made in the statement of cash distribution:
1. Reasons, related assets and amounts

Related assets, etc.

(Unit: JPY thousand)Allowance fortemporary differences
adjustment

ReasonLeasehold rights in trust

Depreciation of leasehold rights

85,002

2. Method of reversal
Related assets, etc.

Method of reversal

Leasehold rights in trust

The corresponding amount is scheduled to be reversed upon sale, etc.

Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)
The following reversal was made in the statement of cash distribution:
1. Reasons, related assets and amounts

Related assets, etc.

(Unit: JPY thousand)Allowance fortemporary differences
adjustment

ReasonSale of properties with leasehold
rights in trust

Leasehold rights in trust(125,201)

2. Method of reversal
Related assets, etc.

Method of reversal

Leasehold rights in trust(8)

The corresponding amount is scheduled to be reversed upon sale, etc.

Notes to the Financial Statements(Notes to the Balance Sheet)*1. Minimum net assets as required by Article 67, Paragraph 4 of the Act on Investment Trusts and Investment Corporations(Unit: JPY thousand)Fiscal period ended
Fiscal period ended
December 31, 2018
June 30, 2019(as of December 31, 2018)(as of June 30, 2019)50,00050,000*2. Allowance for temporary differences adjustment
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
1. Reasons, related assets and amounts

Relatedassets, etc.

ReasonLeaseholdrights in trust

Depreciationof leasehold
rights

Total

InitialamountBalance atthe end of
previous
period(Unit: JPY thousand)
Balance atReversalthe end of
duringcurrent
periodperiodAllowance
set aside
duringperiod(46,329)(46,329)--(46,329)(46,329)(46,329)--(46,329)34

2. Method of reversal(1) Leasehold rights in trust
The corresponding amount is scheduled to be reversed upon sale, etc. of the relevant property.
Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)
1. Reasons, related assets and amounts
Balance atthe end of
previous
periodAllowance
set aside
duringperiod(131,332)(46,329)(85,002)-(131,332)(131,332)(46,329)(85,002)-(131,332)

Relatedassets, etc.

ReasonInitialamountLeaseholdrights in trust

Depreciationof leasehold
rights

Total(Unit: JPY thousand)
Balance atReversalthe end of
duringcurrent
periodperiod

2. Method of reversal(1) Leasehold rights in trust
The corresponding amount is scheduled to be reversed upon sale, etc. of the relevant property.
*3. Status of retirement of own investment units
Fiscal period ended

Fiscal period ended

Total number of units retired

December 31, 2018(as of December 31, 2018)
81,341 units

Total amount of retirement

JPY 3,999,980 thousand

June 30, 2019(as of June 30, 2019)-*4. Reduction entry amount of property and equipment acquired with governmental subsidies, etc.
(Unit: JPY thousand)Fiscal period ended

Fiscal period ended

December 31, 2018(as of December 31, 2018)

June 30, 2019(as of June 30, 2019)

Building and accompanying
facilities in trust-

35

115,319

(Notes to Statement of Income and Retained Earnings)*1. Real estate rental revenues and expenses(Unit: JPY thousand)Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)

Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
A.

Real estate rental revenues

Rental revenue-real estate
Rent/common area charges (Note)

13,258,939

11,795,812

345,284

357,587

13,604,224

12,153,399

Maintenance costs

667,393

662,160

Taxes and public dues

547,232

565,715

Other revenues
Total

B.

Real estate rental expenses

Property related expenses

Non-life insurance expenses
Depreciation expenses
Other expenses

13,817

13,7233,039,033

3,048,495

183,199

200,561

Total

4,450,676

4,490,658

C.

9,153,548

7,662,741

4,953,767

4,304,181

Real estate rental income (A-B)(Note) Of which, revenue from variable hotel rents*2. Management contract income(Unit: JPY thousand)Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)

Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
A.

Hotel operating revenue-

1,406,749

B.

Hotel operating expenses-

826,160

C.

Management contract revenue (A-B)-

580,588

D.

Management contract expenses
Management fee

-

3,490

Non-life insurance expenses-

36,279Depreciation expenses-

119,824

Other expenses

-

4,782

Total

-

164,376E.

-

416,211

Management contract income (C-D)

36

*3. Gain on sales of properties
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Not applicable
Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)(Unit: JPY thousand)Spacia Ebisu

Royal Parks Tower Minami-Senju

Proceeds from sales of properties

12,209,814

27,745,250

Cost of sales of properties

6,422,775

21,923,169

153,225

337,910

5,633,813

5,484,169

Other expenses on sales of properties
Gain on sales of properties(Notes to Statement of Changes in Net Assets)
Number of issuable investment units authorized and number of investment units issued and outstanding
Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)

Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)

Number of issuable investment units

10,000,000 units

10,000,000 units

Number of investment units issued and outstanding

5,666,840 units

5,666,840 units(Notes to Statement of Cash Flows)*1. Relationship between cash and cash equivalents in statement of cash flows and amounts in accompanying balance sheet
is as follows:
Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
3,985,335(Unit: JPY thousand)Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)48,833,358

Cash and bank deposits in trust

7,079,268

6,766,348

Cash and cash equivalents

11,064,604

55,599,707

Fiscal period ended
December 31, 2018(as of December 31, 2018)
312,959(Unit: JPY thousand)Fiscal period ended
June 30, 2019(as of June 30, 2019)
268,487

Due after one year

9,934,076

7,824,534

Total

10,247,035

8,093,022

Cash and bank deposits(Notes Related to Lease Transactions)Operating lease transactions (as lessee)
Unexpired lease fees

Due within one year37

Operating lease transactions (as lessor)
Unexpired lease fees
Fiscal period ended
December 31, 2018(as of December 31, 2018)
9,754,753(Unit: JPY thousand)Fiscal period ended
June 30, 2019(as of June 30, 2019)9,754,753

Due after one year

63,134,893

58,695,396

Total

72,889,647

68,450,150

Due within one year

(Notes Related to Financial Instruments)
1.

Status of financial instruments(1) Policy for financial instruments
INV principally conducts its operations through investments in real estate and other specified assets to seek to ensurestable income in the medium to long term.
The policy for raising funds is principally through issuing new investment units, investment corporation bonds, etc. orborrowing loans.
Derivative transactions are to be entered into for the purpose of hedging against the risks of future interest rate
fluctuations, exchange rate fluctuations, etc. and not for speculation.
Surplus funds are managed after carefully taking into account safety, liquidity, the interest rate environment andfinancing.
(2) Nature and extent of risks arising from financial instruments and risk management
The funds raised through borrowings and issuing investment corporation bonds are mainly used to acquire realestate properties or trust beneficiary interest in real estate (including related acquisition costs) and for therefinancing of existing loans. Liquidity risks relating to loans are managed by the finance department of the AssetManager by preparing and updating plans for funds, and monitoring the financial covenants set forth in loan
agreements.
(3) Supplemental information regarding market value, etc. for financial instruments
The fair value of financial instruments is based on quoted market prices if available. When quoted market prices are
not available, fair value is determined through a reasonable estimate. Since certain assumptions, etc. are used inestimating the fair value, different assumptions, etc. may result in the variance of such value.

38

2.

Estimated fair value of financial instruments

Fiscal period ended December 31, 2018 (as of December 31, 2018)
Book value, fair value and the difference between values as of December 31, 2018, are as follows.
(Unit: JPY thousand)Book Value

Fair Value

Difference(1) Cash and bank deposits

3,985,335

3,985,335-(2) Cash and bank deposits in trust

7,079,268

7,079,268-

Total assets

11,064,604

11,064,604-(3) Short-term loans payable(1,099,000)(1,099,000)-(4) Current portion of long-term loans payable(54,745,000)(54,745,000)-(5) Investment corporation bonds(4,000,000)(3,996,500)

3,500(170,029,000)(170,029,000)-(229,873,000)(229,869,500)

3,500

124,029

124,029-(6) Long-term loans payable
Total liabilities(7) Derivatives

Fiscal period ended June 30, 2019 (as of June 30, 2019)
Book value, fair value and the difference between values as of June 30, 2019, are as follows.
(Unit: JPY thousand)Book Value

Fair Value

Difference(1) Cash and bank deposits

48,833,358

48,833,358-(2) Cash and bank deposits in trust

6,766,348

6,766,348-

Total assets

55,599,707

55,599,707-(3) Short-term loans payable

-

-

-

(4) Current portion of long-term loans payable(51,744,000)(51,744,000)-(5) Investment corporation bonds(4,000,000)(4,005,300)(5,300)(173,030,000)(173,030,000)-(228,774,000)(228,779,300)(5,300)179,861

179,861-(6) Long-term loans payable
Total liabilities(7) Derivatives(Note 1) Items recorded in the Liabilities Section are shown in parenthesis.
(Note 2) Receivables and payables arising from derivative transactions are recorded in net amounts, and if the total net
amount is a negative amount, such amount is shown in parenthesis.

39

(Note 1) Methods to calculate fair values of financial instruments(1) Cash and bank deposits(2) Cash and bank deposits in trust(3) Short-term loans payable
Due to the short maturities, the book value of these instruments is deemed a reasonable approximation of the fairvalue, and therefore, the book value is used as the fair value.
(4) Current portion of long-term loans payable (6) Long-term loans payable
Long-term loan with floating interest rates reflecting changes in market rates within a short-term period arestated at their book value as their book value approximate their fair value.
(5) Investment corporation bonds
Fair value is calculated using a method based on market price.
(7) Derivatives
Please refer to the “Notes Related to Derivative Transactions” below.

(Note 2) Financial instruments for which fair value is extremely difficult to value

Tenant leasehold and security deposits in trust

Fiscal period ended
December 31, 2018(as of December 31, 2018)
2,009,816(Unit: JPY thousand)Fiscal period ended
June 30, 2019(as of June 30, 2019)
1,746,941

54,640,213

17,856,387

Investment securities

Tenant leasehold and security deposits in trust have no observable market price, and it is impracticable to reasonably
estimate their future cash flows because the repayment dates of those deposits and the timing of the lessee’s exit fromthe property are not certain. Thus, their fair value is not disclosed.
Investment securities (preferred equity interest and TK interest) have no observable market price, and it isimpracticable to assess its fair value. Thus, its fair value is not disclosed.
(Note 3) Remaining schedule of monetary claims after the closing date of the fiscal period
Fiscal period ended December 31, 2018 (as of December 31, 2018)

Cash and bank deposits(Unit: JPY thousand)Due within Due after one Due after two Due after three Due after four
Due after
one yearto two years to three years to four years to five years
five years
3,985,335-

Cash and bank deposits in trust

7,079,268

-

-

-

-

-

Total

11,064,604

-

-

-

-

-

Fiscal period ended June 30, 2019 (as of June 30, 2019)

Cash and bank deposits(Unit: JPY thousand)Due within Due after one Due after two Due after three Due after four
Due after
one yearto two years to three years to four years to five years
five years
48,833,358-

Cash and bank deposits in trust

6,766,348

-

-

-

-

-

Total

55,599,707

-

-

-

-

-

40

(Note 4) Repayment schedule of investment corporation bonds, long-term loans payable and other interest-bearing debts
after the closing date of the fiscal period
Fiscal period ended December 31, 2018 (as of December 31, 2018)

Short-term loans payable(Unit: JPY thousand)Due within Due after one Due after two Due after three Due after four
Due after
one yearto two years to three years to four years to five years
five years
1,099,000-

Current portion of long-termloans payable

54,745,000

-

-

-

-

-

Investment corporation bonds

-

-

-

-

3,000,000

1,000,000

Long-term loans payable-

50,130,000

55,601,000

32,895,000

27,843,000

3,560,000

55,844,000

50,130,000

55,601,000

32,895,000

30,843,000

4,560,000

Total

Fiscal period ended June 30, 2019 (as of June 30, 2019)
Due within
one year
Short-term loans payable(Unit: JPY thousand)Due after one Due after two Due after three Due after four
Due after
to two years to three years to four years to five years
five years-

Current portion of long-termloans payable

51,744,000

-

-

-

-

-

Investment corporation bonds

-

-

-

1,000,000

2,000,000

1,000,000-

57,380,000

52,602,000

29,645,000

28,843,000

4,560,000

51,744,000

57,380,000

52,602,000

30,645,000

30,843,000

5,560,000

Long-term loans payable
Total(Notes Related to Investment Securities)
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Other securities
Preferred equity interest (JPY 17,856,387 thousand in the balance sheet) and TK interest (JPY 36,783,826 thousand in thebalance sheet) have no observable market price, and it is impracticable to assess its fair value.

Thus, their fair values are

not disclosed.
Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)
Other securities
Preferred equity interest (JPY 17,856,387 thousand in the balance sheet) has no observable market price, and it isimpracticable to assess its fair value.

Thus, its fair value is not disclosed.

(Notes Related to Derivative Transactions)1.

Derivative transactions to which hedge accounting is not applied
Fiscal period ended December 31, 2018 (as of December 31, 2018)
Not applicable
Fiscal period ended June 30, 2019 (as of June 30, 2019)
Not applicable

41

2.

Derivative transactions to which hedge accounting is applied
Fiscal period ended December 31, 2018 (as of December 31, 2018)
The contract amount as of the closing date under each hedge-accounting method and the amount equivalent to thenotional principal prescribed in the contracts are as shown below.
(Unit: JPY thousand)
Method of hedge
accounting

Principle
accounting
methodDerivativetransaction type, etc.

Primary hedged
itemInterest rate swap
Receive floating
rate/pay fixed rate

Borrowings

Currency option
transaction
USD/Call(Option fees)
Currency option
transaction
USD/Put

Scheduledforeigncurrencydenominatedtransactions(Option fees)

Contract amount, etc. (*1)
Amount due
after one year

Fair value (*2)

71,640,000

34,729,000

48,781

4,444,000

1,903,000(124,943)(53,157)

4,444,000

1,903,000(140,288)(88,792)(87,318)(162,566)(Note 1) The contract amount, etc. for interest rate swap are stated based on a notional principal.
(Note 2) Estimation method for fair value
Interest rate swap
Estimated based on the price, etc. presented by the correspondent financial institutions.
Currency option
Indicates fair values of option fees, etc. presented by the correspondent financial
institutions.
Fiscal period ended June 30, 2019 (as of June 30, 2019)
The contract amount as of the closing date under each hedge-accounting method and the amount equivalent to thenotional principal prescribed in the contracts are as shown below.
(Unit: JPY thousand)
Method of hedge
accounting

Principle
accounting
methodDerivativetransaction type, etc.

Primary hedged
itemInterest rate swap
Receive floating
rate/pay fixed rate

Borrowings

Currency option
transaction
USD/Call(Option fees)
Currency option
transaction
USD/Put

Scheduledforeigncurrencydenominatedtransactions(Option fees)

Contract amount, etc. (*1)
Amount due
after one year

Fair value (*2)

84,074,000

51,413,000(19,845)

5,134,140

1,933,140(133,171)(42,806)

5,134,140

1,933,140(225,420)(102,873)(33,916)(233,622)(Note 1) The contract amount, etc. for interest rate swap are stated based on a notional principal.
(Note 2) Estimation method for fair value
Interest rate swap
Estimated based on the price, etc. presented by the correspondent financial institutions.
Currency option
Indicates fair values of option fees, etc. presented by the correspondent financial
institutions.
(Notes Related to Retirements Payments)
Not applicable42

(Notes Related to Asset Retirement Obligations)1.

Summary of the asset retirement obligations for the period
INV has recorded asset retirement obligations in regard to its obligation to restore the land to its original condition
related to the fixed-term land lease agreement of Comfort Hotel Maebashi held by INV.

2.

Calculation method for asset retirement obligations for the period
The amount of the asset retirement obligations has been calculated by estimating the period of use at 43 years, basedon the remaining period until the expiration of the fixed-term land lease agreement, and by using a discount rate of
1.342%.

3.

Increase/decrease in the total amount of asset retirement obligations

Balance at the beginning of the period
Increase due to the acquisition of property and equipment
Accretion expense
Balance at the end of the period

Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
31,891
215
32,107(Unit: JPY thousand)Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)32,107213
32,321(Notes Related to Segment and Related Information)
I. Segment Information
Disclosure is omitted because the real estate investment business is INV’s sole business and it has no reportable segments.
II. Related Information
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
1. Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category accounted forover 90% of the operating revenue on the statement of income.
2. Information about each geographic area
(1) Net sales
Disclosure is omitted because net sales to external customers in Japan accounted for over 90% of the operating
revenue on the statement of income.
(2) Property and equipment
Disclosure is omitted because the amount of property and equipment located in Japan accounted for over 90% of
the amount of property and equipment on the balance sheet.
3. Information about each major customer(Unit: JPY thousand)Name of customer

Operating revenues
7,297,799

MyStays Hotel Management Co., Ltd.

Related segment
Real Estate Investment

Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)
1. Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category accounted forover 90% of the operating revenue on the statement of income.

43

2. Information about each geographic area
(1) Net sales(Unit: JPY thousand)Japan

The Cayman Islands
24,098,860(Note)

Total

3,240,809

27,339,670

Net sales are based on the location of the customer and categorized by country or territory.

(2) Property and equipment
Disclosure is omitted because the amount of property and equipment located in Japan accounted for over 90% of
the amount of property and equipment on the balance sheet.
3. Information about each major customer(Unit: JPY thousand)Name of customer

Operating revenues

Related segment

MyStays Hotel Management Co., Ltd.

6,581,126

Real Estate Investment

Undisclosed (Note 1)

5,633,813

Real Estate Investment

Undisclosed (Note 2)

5,484,169

Real Estate Investment(Note 1)

The customer is an affiliate of a foreign real estate fund. However, the name is not disclosed sinceconsent for the disclosure has not been obtained. The customer is not a group company of INV/theAsset Manager.

(Note 2)The customer is a domestic special purpose company. However, the name is not disclosed sinceconsent for the disclosure has not been obtained. The customer is not a group company of INV/theAsset Manager.

44

(Notes Related to Rental Properties)
INV owns residential properties and hotels as core assets principally in the Tokyo area and major regional cities with an aim
to establish a portfolio focusing on both stability and growth potential. The book value changed during the period andbalance at the end of the period are as follows.
Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)

Book value
Residences

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

Book value
Commercial facilities

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

Book value
HotelsBalance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period

Book value
Total

Balance at the
beginning of the period
Change during theperiodBalance at the end of
the period

Fair value at the end of the period(Unit: JPY thousand)Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)86,569,109

85,908,280(660,828)(28,986,463)

85,908,280

56,921,817

102,044,000

72,197,000

4,912,468

4,866,739(45,728)(41,503)4,866,739

4,825,236

6,170,000

6,140,000

245,453,345

291,874,909

46,421,563

34,680,926

291,874,909

326,555,836

354,366,000

393,926,158

336,934,923

382,649,930

45,715,006

5,652,960

382,649,930

388,302,890

462,580,000

472,263,158(Note 1) Book value is the figure calculated by subtracting accumulated depreciation from acquisition price (including
acquisition-related costs).
(Note 2) The major factors of increase for the fiscal period ended December 31, 2018, were acquisition of hotels andconstruction work related to capital expenditures, and the major factor of the decrease was depreciation. The
major factors of increase for the Reporting Period were a change in the investment structure concerning overseas
assets and construction work related to capital expenditures, and the major factors of decrease were sale ofresidential properties and depreciation.
(Note 3) The fair value as of the end of the reporting period is determined based on the appraisal value or survey value
provided by Asset Research and Development Inc., Japan Real Estate Institute, JLL Morii Valuation & Advisory
K.K., Tanizawa Sogo Appraisal Co., Ltd., Daiwa Real Estate Appraisal Co., Ltd. and CBRE, Inc.
For information related to profits and losses from rental properties, please refer to “Notes to Statement of Income andRetained Earnings.”

45

(Notes Related to Tax Accounting)
1. Significant components of deferred tax assets and liabilities(Unit: JPY thousand)Fiscal period ended
December 31, 2018

Fiscal period ended
June 30, 2019

(Deferred tax assets)
Enterprise tax payable

1,294

Allowance for doubtful accounts

1,294

27

46

549,474

428,965

Land (merger)

1,367,722

786,792

Loss carried forward (Note 1)

7,153,149

747,198

Asset retirement obligations

10,142

10,168Depreciation of fixed-term leasehold rights
Adjustment of acquisition prices (overseas
properties)

153,295

76,182-477,2139,235,105

2,527,862(7,153,149)(747,198)(2,037,871)(1,743,389)(9,191,020)(2,490,588)

44,08437,274

Buildings and other (merger)

Subtotal
Valuation allowance for tax loss carried forward
Valuation allowance for the total of deductible
temporary differences, etc.
Subtotal (Note 2)
Total(Deferred tax liabilities)
Removal expenses included in asset retirement
obligations

9,751

Deferred gains or losses on hedges

34,333

Total

9,711
27,56237,27444,084(Deferred tax assets, net)--

(Note 1) The amounts of tax loss carried forward and the deferred tax assets by carry-forward period are as follows.
Fiscal period ended December 31, 2018 (as of December 31, 2018)
Due within Due after one Due after two Due after three Due after four
one yearto two years to three years to four years to five years
Tax loss carried forward(a)Valuation allowance(Unit: JPY thousand)Due after
Total
five years

5,164,678

1,317,493-

349,185

321,791- 7,153,149(5,164,678)(1,317,493)-(349,185)(321,791)- (7,153,149)

-

-

-

Deferred tax assets(a) Tax loss carried forward is multiplied by statutory tax rate.

--

Fiscal period ended June 30, 2019 (as of June 30, 2019)
Due within Due after one Due after two Due after three Due after four
one yearto two years to three years to four years to five years
Tax loss carried forward(a)Valuation allowance(Unit: JPY thousand)Due after
Total
five years-

78,982-

668,215--

747,198-(78,982)-(668,215)--(747,198)

-

-

-

-

-

Deferred tax assets(a) Tax loss carried forward is multiplied by statutory tax rate.
46

(Note 2) Valuation allowance decreased by JPY 6,700,432,000. The main factor for the decrease is use of tax loss carriedforward.
2. Significant difference between statutory tax rate and the effective tax rate
(Unit: %)Fiscal period ended
December 31, 2018

Fiscal period ended
June 30, 2019

Statutory tax rate

31.51

31.51

Deductible cash distributions(31.84)-

Changes in valuation allowance(0.35)(31.58)-(0.05)

Others0.69

0.12

Effective tax rate

0.01

0.00

Effect of tax rate change(Notes Related to Equity-Method Income)Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Amount of investment in affiliates
JPY 54,640,213,000
Amount of investment when accounted for by the equity method
JPY 54,640,213,000
Amount of investment profit when accounted for by the equity method JPY 846,780,000
Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)
Amount of investment in affiliates
JPY 17,856,387,000
Amount of investment when accounted for by the equity method
JPY 17,856,387,000
Amount of investment profit when accounted for by the equity method JPY 3,487,698,000

47

(Notes Related to Transactions with Related Parties)
1. Transactions with Parent Company and Major Unitholders
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)
Classification

Name

Address

Aki Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

Raetia Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

HL Investments
Minato-ku,
2 Tokutei
Tokyo
Interested Mokuteki Kaisha
party of the(Note 3)
Asset
ManagerStatedcapital(JPY
million)Type oftransaction

Transaction
amount(JPY
thousand)(Note 1)

Account

Balance atthe end of
the period(JPY
thousand)(Note 1)-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

20,691,000

-

-

-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

16,731,000

-

-

-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

5,286,000

-

-

-

-

Purchase of
Seller of
trust
trust
beneficiary
beneficiary interests ininterests in real estate
real estate(Note 2)
(Note 4)

5,039,000--

141,119

Percentage
Relationshipof votingBusiness orrightsCommon Businessoccupation
owned
board
relation(%)
membership

Investment
0.1 managementbusiness

Investment
0.1 managementbusiness

Investment
0.1 managementbusiness---

Dogo Tokutei
Minato-ku,
Mokuteki Kaisha
Tokyo(Note 3)

Investment
0.1 managementbusiness

Naqua Hotel &Resorts
Management
Co., Ltd.
(Note 3)

Minato-ku,
Tokyo

10

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

1,112,683

Accounts
receivable

MyStays HotelManagement
Co., Ltd.
(Note 3)

Minato-ku,
Tokyo

100

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

7,297,799

Accounts
2,264,664
receivable(Note 1)
(Note 2)
(Note 3)(Note 4)

Consumption taxes, etc., are not included in transaction amounts, but are included in the balance at the end of the period.
The terms and conditions have been determined based on the Asset Manager’s internal rules and manual regarding transactions withsponsor related parties.
Aki Tokutei Mokuteki Kaisha, Raetia Tokutei Mokuteki Kaisha, HL Investments 2 Tokutei Mokuteki Kaisha, Dogo Tokutei Mokuteki
Kaisha and Naqua Hotel & Resorts Management Co., Ltd. and MyStays Hotel Management Co., Ltd. have no capital relationship to bedisclosed with the Asset Manager. However, these Tokutei Mokuteki Kaisha or the tenant and operator have received an anonymous
partnership investment or investment through funds that are managed by affiliates of FIG (a subsidiary of SoftBank Group Corp., which
is a parent company of the Asset Manager directly/indirectly owning 100% of its issued shares). Accordingly, INV treats Aki Tokutei
Mokuteki Kaisha, Raetia Tokutei Mokuteki Kaisha, HL Investments 2 Tokutei Mokuteki Kaisha, Dogo Tokutei Mokuteki Kaisha andNaqua Hotel & Resorts Management Co., Ltd. and MyStays Hotel Management Co., Ltd. as the equivalent to interested parties.
The purchase of trust beneficiary interests pertains to the following properties. The transaction amount is the purchase price stated in
the trust beneficiary purchase agreement, to which other expenses for acquisition, property taxes, city planning taxes and consumption
taxes are not included.

Purchase Price(JPY thousand)

Property Number

Name of Property

Counterparty

D60

Hotel MyStays Premier Akasaka

Aki Tokutei Mokuteki Kaisha

20,691,000

D61

Hotel MyStays Premier Sapporo Park

Raetia Tokutei Mokuteki Kaisha

16,731,000

D62

Hotel MyStays Ueno East

HL Investments 2 Tokutei Mokuteki
Kaisha5,286,000

D63

Hotel MyStays Midosuji Honmachi

Dogo Tokutei Mokuteki Kaisha

5,039,000

Total

47,747,000

48

Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)
Account

Balance atthe end of
the period(JPY
thousand)(Note 1)

Accounts
receivable

197,253

Address

Naqua Hotel &Resorts
Management
Co., Ltd.
(Note 2)

Minato-ku,
Tokyo

10

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

590,306

MyStays HotelManagement
Co., Ltd.
(Note 2)

Minato-ku,
Tokyo

100

Hotel
business--

Lessee andoperator of
hotelsRentalrevenues

6,581,126(Note 1)
(Note 2)

2.

Transaction
amount(JPY
thousand)(Note 1)Name

Classification

Interested
party of theAsset Manager

Percentage
Relationshipof votingBusiness orType ofrightsCommonoccupation
Business transaction
owned
board
relationship(%)
memberStatedcapital(JPY
million)Accounts
1,834,677
receivable

Consumption taxes, etc., are not included in transaction amounts, but are included in the balance at the end of the period.
Naqua Hotel & Resorts Management Co., Ltd. and MyStays Hotel Management Co., Ltd. have no capital relationship to be disclosedwith the Asset Manager. However, this tenant and operator have received an anonymous partnership investment or investment throughfunds that are managed by affiliates of FIG (a subsidiary of SoftBank Group Corp., a parent company of the Asset Manager
directly/indirectly owning 100% of its issued shares). Accordingly, INV treats Naqua Hotel & Resorts Management Co., Ltd. and
MyStays Hotel Management Co., Ltd. as the equivalent to interested parties.

Transactions with Affiliates
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)

Classification

Affiliate

Name

Address

Seven Mile
ResortGrand Cayman,
Holdings Cayman Islands
Ltd.

Investment
amount (JPY
Investment Relationship
Business orType ofmillion)ratio with related
occupationtransaction(Note 1)(%)
parties(Note 2)

Transaction
amount(JPY
million)(Note 1)
(Note 2)

Investment
in TK(Note 2)
(Note 3)36,783

Investment (Investment
TK
36,783 management
ratio)
investment
business
100.0

Balance atthe end of
Account the period(JPYmillion)--(Note 1) Investment amount in USD is converted to yen using the exchange rate fixed by foreign exchange forward (USD
1=JPY 110.45 (rounded down to two decimal places)).
(Note 2) INV initially funded USD 339,836 thousand (JPY 37,534 million). However, based on the closing settlement, theCayman SPC did not need as much capital as anticipated. Therefore, INV received a refund of the TK investmentin the amount of USD 6.8 million on December 10, 2018 (Cayman Island local time) from the Cayman SPC. Thus,
the amounts indicated are those after the partial refund.
(Note 3) Investment was made based on a TK agreement.
(Note 4) The TK is a TK with Seven Mile Resort Holdings Ltd. as an operator.

49

Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)

Classification

Affiliate

Name

Address

Investment
amount (JPY
Investment Relationship
Business or
million)ratio
with related
occupation(Note 1)(%)
parties(Note 2)Seven Mile
ResortGrand Cayman,
Holdings Cayman Islands
Ltd.

Type oftransaction

Transaction
amount(JPY
million)Refund of TK
investment(Note 3)
Investment (Investment
TK
36,783 management
ratio)
Acquisition of
investment
business
100.0
non-current
assets(Note 3)

Balance atthe end of
Account the period(JPYmillion)36,783--35,903--(Note 1) Investment amount in USD is converted to yen using the exchange rate fixed by foreign exchange forward (USD
1=JPY 110.45 (rounded down to two decimal places)).
(Note 2) INV initially funded USD 339,836 thousand (JPY 37,534 million). However, based on the closing settlement, theCayman SPC did not need as much capital as anticipated. Therefore, INV received a refund of the TK investmentin the amount of USD 6.8 million on December 10, 2018 (Cayman Island local time) from the Cayman SPC. Thus,
the amounts indicated are those after the partial refund.
(Note 3) The TK is a TK with Seven Mile Resort Holdings Ltd. as an operator and had made investments based on a TK
agreement. Following the agreed termination of the agreement on May 9, 2019, however, the TK has received
dividend in kind of non-current assets it owns. Since the acquisition price of non-current assets acquired in thismanner is the book value as of the date of the agreed termination of the agreement, there is a difference from theamount of the refund of the TK investment.
3.

Transactions with Companies under Common Control
None for both the fiscal period ended December 31, 2018 and the fiscal period ended June 30, 2019.

4.

Transactions with Directors and Major Unitholders
Fiscal period ended December 31, 2018 (from July 1, 2018 to December 31, 2018)

Classification

Directors
and close
relatives

Same asabove(Note 1)Name

Business or occupation

Naoki
FukudaExecutive Director of
INV and President &CEO of Consonant
Investment
Management Co., Ltd.

Same asabove

Same as above

Details of transaction

Transaction
amount(JPY
thousand)(Note 3)

Account

Balance atthe end of
the period(JPY
thousand)(Note 3)-

Payment of asset
management fees toConsonant Investment
Management Co., Ltd.
(Note 1)

279,774

Accruedexpenses

148,500-

Payment ofadministrative agency
fees for organizational
management toConsonant Investment
Management Co., Ltd.
(Note 2)

1,100

Accruedexpenses864

Ratio ofvotingrights(%)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the Articles of Incorporation of
INV.

(Note 2)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in “Administrative Agency
Agreement for Organizational Management,” entered into by and between INV and the Asset Manager.

(Note 3)

Consumption taxes, etc. are not included in the transaction amounts, but are included in the balance at the end of the period.

50

Fiscal period ended June 30, 2019 (from January 1, 2019 to June 30, 2019)

Classification

Directors
and close
relatives

Same as
above

Name

Business or occupation

Naoki
FukudaExecutive Director of
INV and President &CEO of Consonant
Investment
Management Co., Ltd.

Same asabove(Note 1)Same as above

Details of transaction

Transaction
amount(JPY
thousand)(Note 3)

Account

Balance atthe end of
the period(JPY
thousand)(Note 3)-

Payment of asset
management fees toConsonant Investment
Management Co., Ltd.
(Note 1)

419,700

Accruedexpenses291,276-

Payment ofadministrative agency
fees for organizational
management toConsonant Investment
Management Co., Ltd.
(Note 2)600

Accruedexpenses324

Ratio ofvotingrights(%)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in the Articles of Incorporation of
INV.

(Note 2)

Naoki Fukuda served as a representative of the third party (the Asset Manager), and the fee is as set forth in “Administrative Agency
Agreement for Organizational Management,” entered into by and between INV and the Asset Manager.

(Note 3)

Consumption taxes, etc. are not included in the transaction amounts, but are included in the balance at the end of the period.

(Notes Related to Parent Company or Any Material Affiliated Company)
1. Information of parent company
Not applicable
2. Summarized financial information of material affiliated company
Kingdom Special Purpose Company was the material affiliated company during the Reporting Period, and thesummary of financial statements are as below:(Unit: JPY thousand)
Kingdom Special Purpose Company
Fiscal period ended
December 31, 2018

Fiscal period ended
June 30, 2019

Total specified assets
Total other assets

100,856,568
3,784,525

100,524,164
3,972,036

Total current liabilities
Total non-current liabilities

212,208
66,280,661

106,709
66,280,661

Total net assets

38,148,224

38,108,830

Operating revenue
Income before income taxes
Net income

2,350,784
1,729,001
1,728,124

2,333,624
1,689,613
1,688,730

51

(Notes Related to Per Unit Information)
Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)

Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)

Net assets per unit

JPY 39,063

JPY 41,125

Net income per unit

JPY 1,504

JPY 3,748

Net income per unit is calculated by dividing net income for the period by the average number of investment units during
the period. Diluted net income per unit is not stated as there are no diluted units.
(Note)The basis for calculating net income per unit is as follows.

Net income (JPY thousand)Fiscal period ended
December 31, 2018(from July 1, 2018 to
December 31, 2018)
8,384,071

Fiscal period ended
June 30, 2019(from January 1, 2019 toJune 30, 2019)21,239,877--

8,384,071

21,239,877

5,575,457

5,666,840

Amounts not attributable to common unitholders(JPY thousand)Net income attributable to common units(JPY thousand)Average number of investment units during the period(units)(Notes Related to Significant Subsequent Events)
1. Issuance of new investment units
INV resolved at its meetings of the Board of Directors held on July 1, 2019 and July 25, 2019 respectively to conduct
the issuance of new investment units and secondary offering of investment units. Payment for the new investment
units issued through the public offering was completed on July 18, 2019, in accordance with the following terms andconditions. In addition, with respect to the issuance of new investment units through the third-party allotment inconnection with the overallotment secondary offering, the payment was completed on August 15, 2019. As a result,the unitholders’ capital of INV is JPY 235,576 million and the number of investment units issued and outstanding of
INV increased to 6,096,840.
(1) Issuance of new investment units through public offering
Number of investment units to beofferedOf whichdomestic public offering
overseas offering
Issue price(offer price)
Total issue price(total offer price)Amount to be paid (issue value)
Total amount to be paid
(total issue value)
Payment date:

409,524 investment units:::

194,524 investment units
215,000 investment units
JPY 58,898 per unit
JPY 24,120,144,552::

JPY 56,939 per unit
JPY 23,317,887,036:

July 18, 201952

(2) Secondary offering of investment units (overallotment secondary offering)(3)

Number of Investment Units to beoffered in the secondary offering
Offer priceTotal offer value
Delivery date:

20,476 investment units:::

JPY 58,898 per unit
JPY 1,205,995,448
July 19, 2019(3) Issuance of new investment units through third-party allotment
Number of investment units to beofferedAmount to be paid
(issue value)
Total amount to be paid
(total issue value)
Payment date
Allottee:

20,476 investment units:

JPY 56,939 per unit:

JPY 1,165,882,964::

August 15, 2019
Mizuho Securities Co., Ltd.

2. Debt Financing
In order to fund a portion of the acquisition price for 18 hotel properties (domestic real estate trust beneficiaryinterests) acquired on July 19, 2019, INV resolved the following debt financing at a meeting of the Board of
Directors held on July 1, 2019, and entered into a loan agreement on the same day.
New Syndicate Loan (J)LenderOutstanding balance
Interest rate, etc.

:::

Interest payment date:Principal repayment method
Borrowing method
Borrowing date
Maturity date

:
:
:
:

Syndicate of lenders arranged by Mizuho Bank, Ltd.
JPY 27,400 million
Base Rate (1-month JPY TIBOR) + 0.700%, 0.550%,0.500%, 0.450%, 0.350%, 0.200%
The last Japanese business day of each month before theprincipal maturity date with July 31, 2019 as the firstpayment date, and the principal maturity dateLump-sum repayment
Unsecured/ non-guarantee
July 19, 2019
July 16, 2025, January 16, 2025, July 16, 2024, January 16,
2024, January 16, 2023, July 18, 2020

3. Acquisition of assets (properties)
INV resolved acquisition of the following 18 hotel properties (total acquisition price: JPY 82,646 million) on July 1,
2019 and completed the acquisition on July 19, 2019.

53

Property Number: D64

Hotel MyStays Sapporo Aspen

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 15,543 million

Location

Sapporo-shi, Hokkaido

Completion Date

December 1995

Legal Form of Asset

Trust beneficiary interest

SellerTouyako Godo Kaisha

Total Floor Area

15,313.17 m2

Leasable Area

15,313.17 m2

Property Number: D65

Art Hotel Ishigakijima

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 9,731 million

LocationIshigaki-shi, Okinawa

Completion Date

January 1984

Legal Form of Asset

Trust beneficiary interest

SellerYaeyama Resort Hotel Tokutei Mokuteki Kaisha

Total Floor Area

17,247.54 m2

Leasable Area

17,247.54 m2

Property Number: D66

Hotel MyStays Fuji Onsen Resort

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 9,405 million

Location

Fujiyoshida-shi, Yamanashi

Completion Date

November 2016

Legal Form of Asset

Trust beneficiary interest

SellerSaturnia Tokutei Mokuteki Kaisha

Total Floor Area

5,498.49 m2

Leasable Area

5,498.49 m2

Property Number: D67

Hotel Sonia Otaru

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 5,930 million

Location

Otaru-shi, Hokkaido

Completion Date

April 1992
March 1998
November 2018

Legal Form of Asset

Trust beneficiary interest

SellerShirahama Tokutei Mokuteki Kaisha

Total Floor Area

6,509.41 m2

Leasable Area

6,509.41 m2

Property Number: D68

Hotel MyStays Kanazawa Castle54Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 5,682 million

Location

Kanazawa-shi, Ishikawa

Completion Date

June 1982
February 1991
January 1997

Legal Form of Asset

Trust beneficiary interest

SellerCalvis Tokutei Mokuteki
KaishaTotal Floor Area

5,931.84 m2

Leasable Area

5,931.84 m2

Property Number: D69

Art Hotel Niigata Station

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 5,524 million

Location

Niigata-shi, Niigata

Completion Date

April 1985

Legal Form of Asset

Trust beneficiary interest

Seller

HL Investments 2 Tokutei Mokuteki Kaisha

Total Floor Area

10,403.01 m2

Leasable Area

10,403.01 m2

Property Number: D70

Hotel MyStays Nagoya Nishiki

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 5,197 million

Location

Nagoya-shi, Aichi

Completion Date

March 1974

Legal Form of Asset

Trust beneficiary interest

SellerShirahama Tokutei Mokuteki Kaisha

Total Floor Area

6,077.99 m2

Leasable Area

6,077.99 m2

Property Number: D71

Hotel Nord Otaru

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 4,296 million

Location

Otaru-shi, Hokkaido

Completion Date

March 1996

Legal Form of Asset

Trust beneficiary interest

SellerShirahama Tokutei Mokuteki Kaisha

Total Floor Area

6,047.43 m2

Leasable Area

6,047.43 m2

Property Number: D72

Hotel MyStays Kagoshima Tenmonkan
55

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 3,445 million

Location

Kagoshima-shi, Kagoshima

Completion Date

September 1990

Legal Form of Asset

Trust beneficiary interest

SellerKawaguchiko Tokutei Mokuteki Kaisha

Total Floor Area

7,659.55 m2

Leasable Area

7,659.55 m2

Property Number: D73

Art Hotel Asahikawa

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 3,197 million

Location

Asahikawa-shi, Hokkaido

Completion Date

October 1987

Legal Form of Asset

Trust beneficiary interest

SellerShirahama Tokutei Mokuteki Kaisha

Total Floor Area

25,131.84 m2

Leasable Area

25,131.84 m2

Property Number: D74

Hotel MyStays Matsuyama

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 3,098 million

Location

Matsuyama-shi, Ehime

Completion Date

July 2000

Legal Form of Asset

Trust beneficiary interest

SellerCalvis Tokutei Mokuteki Kaisha

Total Floor Area

8,274.37 m2

Leasable Area

8,274.37 m2

Property Number: D75

Hotel MyStays Sapporo Susukino

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 3,059 million

Location

Sapporo-shi, Hokkaido

Completion Date

May 1981

Legal Form of Asset

Trust beneficiary interest

SellerKawaguchiko Tokutei Mokuteki Kaisha

Total Floor Area

2,853.26 m2

Leasable Area

2,853.26 m2

56

Property Number: D76

Hotel MyStays Sapporo Nakajima Park

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 2,118 million

Location

Sapporo-shi, Hokkaido

Completion Date

February 1991

Legal Form of Asset

Trust beneficiary interest

SellerShirahama Tokutei Mokuteki Kaisha

Total Floor Area

5,473.41 m2

Leasable Area

5,473.41 m2

Property Number: D77

Hotel MyStays Sapporo Nakajima Park Annex

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 1,584 million

Location

Sapporo-shi, Hokkaido

Completion Date

September 1991

Legal Form of Asset

Trust beneficiary interest

SellerShirahama Tokutei Mokuteki Kaisha

Total Floor Area

1,775.21 m2

Leasable Area

1,775.21 m2

Property Number: D78

Flexstay Inn Sakuragicho

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 1,425 million

Location

Yokohama-shi, Kanagawa

Completion Date

November 1991

Legal Form of Asset

Trust beneficiary interest

SellerCalvis Tokutei Mokuteki Kaisha

Total Floor Area

1,308.61 m2

Leasable Area

1,308.61 m2

Property Number: D79

MyCUBE by MYSTAYS Asakusa Kuramae

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 1,287 million

Location

Taito-ku, Tokyo

Completion Date

September 1991

Legal Form of Asset

Trust beneficiary interest

SellerCalvis Tokutei Mokuteki Kaisha

Total Floor Area

2,156.70 m2

Leasable Area

2,156.70 m2

57

Property Number: D80

Hotel MyStays Kagoshima Tenmonkan Annex

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 1,168 million

Location

Kagoshima-shi, Kagoshima

Completion Date

February 1985

Legal Form of Asset

Trust beneficiary interest

SellerKawaguchiko Tokutei Mokuteki Kaisha

Total Floor Area

2,047.70 m2

Leasable Area

2,047.70 m2

Property Number: D81

Hotel MyStays Nayoro

Acquisition Date

July 19, 2019

Acquisition Price (Note 1)

JPY 957 million

Location

Nayoro-shi, Hokkaido

Completion Date

November 2014

Legal Form of Asset

Trust beneficiary interest

SellerKawaguchiko Tokutei Mokuteki Kaisha

Total Floor Area

1,985.27 m2

Leasable Area

1,985.27 m2(Note 1)

Acquisition price is based on the purchase price indicated in the relevant purchase agreement and does notinclude acquisition-related expenses, property taxes, city planning taxes or consumption taxes.

58

(9)

Changes in Total Number of Investment Units Issued and Outstanding
Changes in the number of investment units issued and outstanding and unitholders’ capital for the past 10 years up to
the end of the Reporting Period are as follows.

Date

Type of Issue

Total Number of Investment
Units Issued and Outstanding(units)Increase
Total

Unitholders’ Capital (JPY)
Increase

Reference

Total

February 1, 2010

Unit split

215,596

269,495-

19,134,417,100(Note 1)February 1, 2010

Merger367,200

636,695-

19,134,417,100(Note 2)

711,597

1,348,292

6,999,979,689

26,134,396,789(Note 3)

224,887

1,573,179

2,999,992,580

29,134,389,369(Note 4)

July 29, 2011
December 20, 2013

Third-party
allotment
Third-party
allotment

July 16, 2014

Public offering

1,040,000

2,613,179

22,747,920,000

51,882,309,369(Note 5)

August 13, 2014

Third-party
allotment

55,5072,668,686

1,214,104,611

53,096,413,980(Note 6)

July 15, 2015

Public offering

500,000

3,168,686

27,970,500,000

81,066,913,980(Note 7)

August 12, 2015

Third-party
allotment

25,0003,193,686

1,398,525,000

82,465,438,980(Note 8)March 30, 2016

Public offering

459,5123,653,198

36,123,157,344

118,588,596,324(Note 9)22,626

3,675,824

1,778,675,112

120,367,271,436(Note 10)-

3,675,824

224,225,264

120,591,496,700(Note 11)

April 27, 2016

February 22, 2017

Third-party
allotment
Reversal of
allowance fortemporarydifferences
adjustment

March 13, 2017

Public offering

185,000

3,860,824

8,393,450,000

128,984,946,700(Note 12)October 12, 2017

Public offering

887,959

4,748,783

37,917,625,218

166,902,571,918(Note 13)

November 1, 2017

Third-party
allotment

44,3984,793,181

1,895,883,396

168,798,455,314(Note 14)

August 1, 2018

Public offering

909,524

5,702,705

40,280,089,388

209,078,544,702(Note 15)

August 21, 2018

Third-party
allotment

45,476

5,748,181

2,013,995,612

211,092,540,314(Note 16)

December 28, 2018

Retirement(81,341)

5,666,840-

211,092,540,314(Note 17)

(Note 1)
(Note 2)

An investment unit split of 5 units per 1 unit was conducted.
A merger by absorption pursuant to Article 147 of the Act on Investment Trusts and Investment Corporations was conducted with
LCP, with INV as the surviving entity. As a result of the merger by absorption, 4 investment units of INV (after the investment
unit split) were allotted for each LCP investment unit. The number of LCP investment units issued as of the time of the merger
by absorption was 91,800 units.
(Note 3) New investment units were issued through third-party allotment at a price of JPY 9,837 per unit to make repayment of existing
loan, etc.
(Note 4)
New investment units were issued through third-party allotment at a price of JPY 13,340 per unit to make repayment of existing
loan, etc.
(Note 5) New investment units were issued through public offering at a price of JPY 22,688 per unit (JPY 21,873 after deducting theunderwriters’ discount) to raise funds for the acquisition of new properties.
(Note 6) New investment units were issued through third-party allotment at a price of JPY 21,873 per unit for the purpose of cash reserve
to appropriate to repayment in future borrowings.
(Note 7) New investment units were issued through public offering at a price of JPY 57,817 per unit (JPY 55,941 after deducting theunderwriters’ discount) to raise a part of the funds for the acquisition of new properties.
(Note 8) New investment units were issued through third-party allotment at a price of JPY 55,941 per unit for the purpose of allocation to
cash reserves to be used as part of the funds for future acquisition of properties.
(Note 9) New investment units were issued through public offering at a price of JPY 81,217 per unit (JPY 78,612 after deducting theunderwriters’ discount) to raise a part of the funds for the acquisition of new properties.
(Note 10) New investment units were issued through third-party allotment at a price of JPY 78,612 per unit for the purpose of allocation to
cash reserves to be used as a part of the funds for future acquisition of properties.
(Note 11) Reversal of allowance for temporary differences adjustment was decided at the meeting of the Board of Directors of INV held
on February 22, 2017 and the amount was incorporated into unitholders’ capital.

59

(Note 12) New investment units were issued through public offering at a price of JPY 46,897 per unit (JPY 45,370 after deducting theunderwriters’ discount) to raise a part of the funds for the acquisition of new properties.
(Note 13) New investment units were issued through public offering at a price of JPY 44,118 per unit (JPY 42,702 after deducting theunderwriters’ discount) to raise a part of the funds for the acquisition of new properties.
(Note 14) New investment units were issued through third-party allotment at a price of JPY 42,702 per unit for the purpose of allocation
to cash reserves to be used as part of the funds for future acquisition of specified assets.
(Note 15) New investment units were issued through public offering at a price of JPY 45,776 per unit (JPY 44,287 after deducting theunderwriters’ discount) to raise a part of the funds for the acquisition of new properties.
(Note 16) New investment units were issued through third-party allotment at a price of JPY 44,287 per unit for the purpose of raising apart of the funds for the acquisition of new properties.
(Note 17) INV acquired own investment units from December 13, 2018 to December 18, 2018 (on a trade date basis) through themarket purchase at Tokyo Stock Exchange based on a discretionary transaction contract with a security company.
INV resolved the retirement of all the acquired own investment units at the Board of Directors' Meeting held on December 25,
2018 and the acquired own investment units were retired on December 28, 2018.
The acquisition of own investment units was conducted using capital surplus, and thus there is no change to unitholders’capital.

60

3. Reference Information(1)

Composition of INV’s Assets
Fiscal period ended December 31, 2018(as of December 31, 2018)

Type of
Purpose

Geographic area

asset

(Note 1)

Percentage of
total assets(%)

Amount held
(JPY million)

2

0.0

2

0.0

-

-

-

-

-

-

35,837

7.7

2
2

0.0
0.0

35,83935,8397.7
7.7

70,386

15.5

41,575

8.9

15,521

3.4

15,346

3.3

85,90818.9

56,921

12.2

-

-

-

-

4,866

1.1

4,825

1.0

4,866

1.1

4,825

1.0

159,13634.9

158,74533.9

132,735

29.1

131,970

28.2

Amount held
(JPY million)(Note 2)Real
estateHotelsFiscal period ended June 30, 2019(as of June 30, 2019)

Greater Tokyo
area (Note 3)
Major regional
citiesOverseas (Note 4)

Subtotal
Total real estate
Greater Tokyo
area
Major regional
Residences
citiesSubtotal
Greater Tokyo
area
Real
Offices/Commercial Major regional
estate in
Facilities
citiestrust
Subtotal
Greater Tokyo
area
Major regional
HotelscitiesSubtotal

Percentage of
total assets(%)(Note 2)291,87264.1

290,715

62.1

Total real estate in trust

382,64784.0

352,462

75.3

Preferred equity interest (Note 5)

17,856

3.9

17,856

3.8

TK interest (Note 6)

36,783

8.1--

Deposits and other assets

18,072

4.0

61,77213.2

455,362100.0

467,931100.0(382,649)(84.0)(388,302)(83.0)

Total assets (Note 7)(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)

“Greater Tokyo area” refers to Tokyo, Kanagawa, Chiba and Saitama.
“Amount held” is from the balance sheet as of the end of the reporting period (book value after depreciation for real estate, leasehold andreal estate in trust). The amounts held for hotels are calculated by including book value of accompanying FF&E, in principle.
While Hotel MyStays Haneda is held as trust beneficiary interests, part of accompanying FF&E is held in kind, which falls under thiscategory.
The Leasehold of the Cayman Hotels falls under the category of “Real estate” for “Overseas.” The leasehold interests are the rights
equivalent to long-term real estate leasehold rights for buildings and land under the laws of the Cayman Islands (Term: 99 years; annual
lease payment: USD 1 or KYD 1). INV implemented an investment structure change regarding “Westin Grand Cayman Seven Mile
Beach Resort & Spa” and “Sunshine Suites Resort” on May 9, 2019 (Cayman Island local time), a change from making investments basedon the TK agreement to directly owning the Leasehold of the Cayman Hotels, which are the undying assets of the TK.
Preferred equity interest issued by Kingdom Special Purpose Company, with the Sheraton Grande Tokyo Bay Hotel as an underlying asset(asset in trust of trust beneficiary interest acquired by Kingdom Special Purpose Company, which is the real estate that serves as the main
source of revenue for Kingdom Special Purpose Company).
TK interests of INV in the SPC in Cayman Islands which holds The Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine
Suites Resort as underlying assets.
The figures indicated in parenthesis under “Total assets” show the amounts related to owned real estate (excluding the amount of preferred
equity interest and TK interest owned).

61

Total Liabilities

Fiscal period ended December 31, 2018(as of December 31, 2018)
Percentage ofAmount (JPY million)
total assets (%)
233,997
51.4

Total Net Assets
Total Liabilities
and Net Assets(2)

Fiscal period ended June 30, 2019(as of June 30, 2019)
Percentage ofAmount (JPY million)
total assets (%)
234,88550.2

221,36448.6

233,04649.8

455,362100.0

467,931100.0

Real Estate Properties, Etc.
The following summarizes the real estate assets (real estate or trust beneficiary interest comprised mainly of realestate) as well as preferred equity interest held by INV as of June 30, 2019.

aProperty
number(Note 1)

A26

A27

A28

A29

A30

A32

A33

A34

A35

A37

A38

A39

A40

Price and investment percentage

Name of property

Location(Note 2)Trust
beneficiary
1-31-2 Izumi, Suginami-ku, Tokyo
interests(Note 8)
Trust
Nisshin Palacestage
beneficiary
5-4-1 Nagasaki, Toshima-ku, Tokyo
Higashi-Nagasaki
interests(Note 8)Trust
2-26-6 Nishi-Gotanda,
beneficiary
Growth Maison Gotanda
Shinagawa-ku, Tokyo
interests(Note 8)Trust
beneficiary
Growth Maison Kameido
6-58-16 Kameido, Koto-ku, Tokyo
interests(Note 8)Trust
beneficiary
Emerald House
3-27-18 Itabashi, Itabashi-ku, Tokyo
interests(Note 8)Trust
3-15-35 Takanodai, Nerima-ku,
beneficiary
Suncrest Shakujii-Koen
Tokyo
interests(Note 8)Trust
Growth Maison
3-16-2 Shin-Yokohama, Kohoku-ku, beneficiaryShin-Yokohama
Yokohama-shi, Kanagawa
interests(Note 8)
Trust
Belle Face
1-27-5 Higashi-Ueno, Taito-ku,
beneficiary
Ueno-Okachimachi
Tokyointerests(Note 8)Trust
beneficiaryGrand Rire Kameido
3-39-12 Kameido, Koto-ku, Tokyo
interests(Note 8)Trust
1-15-15 Okamoto, Setagaya-ku,
beneficiary
Growth Maison Yoga
Tokyo
interests(Note 8)Trust
3-7-6 Nishikicho, Tachikawa-shi,
beneficiary
Route Tachikawa
Tokyointerests(Note 8)Trust
beneficiary
Shibuya-Honmachi Mansion 2-35-2 Honmachi, Shibuya-ku, Tokyo
interests(Note 8)Trust
beneficiaryCity Heights Kinuta
4-13-15 Kinuta, Setagaya-ku, Tokyo
interests(Note 8)Nisshin Palacestage
Daitabashi

62

Appraisalvalue at theend of the
Appraiser
period(Note 7)
(JPY
million)(Note 5)

Balancesheet
carryingvalue(JPY
million)Investment
percentage(%)(Note 4)

1,251

1,097

0.3

1,230

A

1,229

1,058

0.3

1,330

A

888

842

0.2

1,030

A

1,070

957

0.3

1,150

A

1,505

1,337

0.4

1,430

A

1,088

1,057

0.3

1,100

A

1,059

942

0.3

1,180

A

1,023

931

0.2

1,090

A

906

803

0.2

1,010

A

795

732

0.2

771

A

676

639

0.2

669

A

651

701

0.2

664

A

646

650

0.2

531

A

Acquisition
Legal form
price
of asset(JPY million)(Note 3)

Property
number(Note 1)Name of property

Acquisition
Legal form
price
of asset(JPY million)(Note 3)

Location(Note 2)

A41

Acseeds Tower
Kawaguchi-Namiki

2-5-13 Namiki, Kawaguchi-shi,
Saitama

A43

College Square Machida

3-4-4 Nakamachi, Machida-shi,
Tokyo

A44

Belair Meguro

1-2-15 Meguro, Meguro-ku, Tokyo

A45

Wacore Tsunashima I

2-7-47 Tarumachi, Kohoku-ku,
Yokohama-shi, Kanagawa

A46

Foros Nakamurabashi

1-6-6 Kouyama, Nerima-ku, Tokyo

A47

Growth Maison Kaijin

5-29-51 Kaijin, Funabashi-shi,
Chiba

A48

College Square Machiya

7-3-1 Arakawa, Arakawa-ku, Tokyo

A51

City House Tokyo Shinbashi 6-19-1 Shinbashi, Minato-ku, Tokyo

A52

Winbell Kagurazaka

6-15 Shin-Ogawacho, Shinjuku-ku,
Tokyo

A53

Nishiwaseda Cresent
Mansion3-18-9 Nishi-Waseda, Shinjuku-ku,
Tokyo

A54

Lexington Square
Akebonobashi

3-8 Yochomachi, Shinjuku-ku, Tokyo

A59

Towa City Coop Shinotsuka 5-49-7 Higashi-Ikebukuro,
IIToshima-ku, Tokyo

A61

Bichsel Musashiseki

1-22-7 Sekimachi-Kita, Nerima-ku,
Tokyo

A63

Towa City Coop Sengencho

4-338-2 Sengencho, Nishi-ku,
Yokohama-shi, Kanagawa

A64Royal Park Omachi

2-11-10 Omachi, Aoba-ku,
Sendai-shi, Miyagi

A65

Lexington Square
Haginomachi

1-15-16 Haginomachi,
Miyagino-ku, Sendai-shi, Miyagi

A66

Visconti Kakuozan

2-44 Otanacho, Chikusa-ku,
Nagoya-shi, Aichi

A71

Lexington Square
Daitabashi

1-33-18 Izumi, Suginami-ku, Tokyo

A72

Lexington Square Honjo
Azumabashi

4-20-6 Higashikomagata,
Sumida-ku, TokyoA73

AMS TOWER Minami 6-Jo

2-5-15 Minami 6-Jo Nishi,
Chuo-ku, Sapporo-shi, Hokkaido

A76

Neo Prominence

3-21-5 Shimo, Kita-ku, Tokyo

A77

Invoice Shin-Kobe
Residence

3-3-8 Ikutacho Chuo-ku, Kobe-shi,
Hyogo

63

Trust
beneficiaryinterests(Note 8)Trust
beneficiaryinterests(Note 8)Trust
beneficiaryinterests(Note 8)Trust
beneficiaryinterests(Note 8)Trust
beneficiaryinterests(Note 8)Trust
beneficiaryinterests(Note 8)Trust
beneficiaryinterests(Note 8)Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Balancesheet
carryingvalue(JPY
million)Appraisalvalue at theInvestment
end of thepercentage
Appraiser
period(%)(Note 7)(JPY
(Note 4)
million)(Note 5)

620

526

0.1

755

A

589

555

0.1

540

A

589

551

0.1

624

A

572

517

0.1

519

A

566

506

0.1

581

A

557

512

0.1

514

A

510

443

0.1

556

A

2,520

2,281

0.6

3,540

B

3,260

3,003

0.8

4,420

C

1,880

1,891

0.4

2,720

C

1,450

1,301

0.3

1,970

D

866

809

0.2

1,210

B

577

548

0.1

809

C

1,110

1,007

0.3

1,410

B

415

381

0.1

657

B

330

274

0.1

420

B

255

228

0.1

283

D

977

831

0.2

1,250

D

511

428

0.1

651

D

1,180

923

0.3

1,270

D

1,660

1,601

0.4

2,160

B

1,260

1,144

0.3

1,440

B

Acquisition
Legal form
price
of asset(JPY million)(Note 3)

Property
number(Note 1)Name of property

A78

Cosmo Court Motomachi

3-12-20 Motomachidori Chuo-ku,
Kobe-shi, Hyogo

A79

Revest Honjin

2-13 Toriidori Nakamura-ku,
Nagoya-shi, Aichi

A80

Revest Matsubara

3-13-12 Matsubara Naka-ku,
Nagoya-shi, Aichi

A82

Alba Noritake Shinmachi

3-6-8 Noritake Shinmachi, Nishi-ku,
Nagoya-shi, Aichi

A83

Revest Meieki Minami

2-13-33 Meieki-Minami,
Nakamura-ku, Nagoya-shi, Aichi

A84

Revest Heian

2-13-17 Heian, Kita-ku,
Nagoya-shi, Aichi

A85

Vendir Hamaotsu Ekimae

1-2-15 Hamaotsu, Otsu-shi, Shiga

A86

Salvo Sala

2-6-21 Shimanouchi Chuo-ku,
Osaka-shi, Osaka

A87

Excellente Kagurazaka

128-1 Yamabukicho Shinjuku-ku,
Tokyo, and one other parcel

A88

Luna Court Edobori

3-4-11 Edobori, Nishi-ku,
Osaka-shi, Osaka

A89

Winntage Kobe Motomachi

7-2-2 Motomachidori, Chuo-ku,
Kobe-shi, Hyogo

A90

Queen's Court Fukuzumi

1-3-10 Fukuzumi, Koto-ku, Tokyo

A91

Corp Higashinotoin

380-1 Kawaranomachi,
Higashinotoindori Nijo Kudaru,
Nakagyo-ku, Kyoto-shi, Kyoto, andtwo other parcels

A92

Belair Oimachi

5-14-17 Higashi-Oi, Shinagawa-ku,
Tokyo

A93

Siete Minami-Tsukaguchi

3-18 Minami-Tsukaguchimachi,
Amagasaki-shi, Hyogo

A94

Prime Life Sannomiya
Isogami Koen

4-3-23 Isogamidori, Chuo-ku,
Kobe-shi, Hyogo

A95

HERMITAGE NANBA
WEST

4-10-3 Sakuragawa, Naniwa-ku,
Osaka-shi, Osaka

A96

Century Park Shinkawa
1-bankan

4-1-2 Shinkawacho, Minato-ku,
Nagoya-shi, Aichi

A97

West Avenue

1-5-17 Nishi, Kunitachi-shi, Tokyo

A98

Little River Honmachibashi

1-34 Honmachibashi, Chuo-ku,
Osaka-shi, Osaka

A99

Prime Life Mikage

2-25-11 Mikage Tsukamachi,
Higashinada-ku, Kobe-shi, Hyogo

Location(Note 2)

A100 City Court Kitaichijo

1-6-3 Kita 1-jo Higashi, Chuo-ku,
Sapporo-shi, Hokkaido

A101 Lieto Court Mukojima

5-45-10 Mukojima, Sumida-ku,
Tokyo

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

64

Balancesheet
carryingvalue(JPY
million)Appraisalvalue at theInvestment
end of thepercentage
Appraiser
period(%)(Note 7)(JPY
(Note 4)
million)(Note 5)

973

872

0.2

1,120

B

674

599

0.2

837

B

657

590

0.2

824

B

608

540

0.1

768

B

597

530

0.1

786

B

595

531

0.1

741

B

581

510

0.1

759

B

544

490

0.1

664

B

543

502

0.1

667

B

525

473

0.1

597

B

512

456

0.1

632

B

456

428

0.1

666

B

446

407

0.1

551

B

412

385

0.1

556

B

374

345

0.1

455

B

373

338

0.1

466

B

355

322

0.1

456

B

335

314

0.1

460

B

331

310

0.1

331

B

310

285

0.1

400

B

297

268

0.1

337

B

1,782

1,729

0.4

2,080

B

1,683

1,668

0.4

1,910

B

Property
number(Note 1)

A102 Lieto Court Nishi-Ojima

2-41-14 Ojima, Koto-ku, Tokyo

A103 Royal Parks Momozaka

5-38 Fudegasakicho, Tennouji-ku,
Osaka-shi, Osaka

A104 Royal Parks Shinden

3-35-20 Shinden, Adachi-ku, Tokyo

A106

Acquisition
Legal form
price
of asset(JPY million)(Note 3)

Location(Note 2)Name of property

Royal Parks Seasir
Minami-Senju

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

3-41-7 Minami-Senju, Arakawa-ku,
Tokyo
Subtotal (62 properties)

B17

Lexington Plaza Hachiman

3-1-50 Hachiman, Aoba-ku,
Sendai-shi, Miyagi

B18

AEON TOWN Sukagawa

105 Furukawa, Sukagawa-shi,
Fukushima

Trust
beneficiaryinterests
Trustbeneficiaryinterests

Subtotal (2 properties)

D01

D02

D03

D04

D05

D06

D07

D08

D09

D10

D11

D12

D13

D14

D15

D16

Trust
beneficiaryinterests
Trust
Hotel MyStays Asakusa
1-21-11 Honjo, Sumida-ku, Tokyo
beneficiaryinterests
52, Kasabokocho, Higashiiru,
Trust
Hotel MyStays Kyoto-Shijo Aburanokoji, Shijyodori,beneficiary
Shimogyo-ku, Kyoto-shi, Kyoto
interests
Trust
MyStays Shin-Urayasu
2-1-4 Akemi, Urayasu-shi, Chiba
beneficiary
Conference Centerinterests
Trust
Hotel MyStays Maihama
3-5-1 Tekkodori, Urayasu-shi, Chiba beneficiaryinterests
Trust
Hotel MyStays Premier
2-4-1 Sonezakishinchi, Kita-ku,
beneficiary
DojimaOsaka-shi, Osakainterests
Trust
Hotel MyStays
2-23-22 Higashi-Sakura, Naka-ku,
beneficiary
Nagoya-Sakae
Nagoya-shi, Aichi
interests
Trust
Hotel MyStays
1-4-8 Awaji-machi, Chuo-ku,
beneficiary
Sakaisuji-Honmachi
Osaka-shi, Osakainterests
Trust
4-81 Sueyoshicho, Naka-ku,
Hotel MyStays Yokohama
beneficiary
Yokohama-shi, Kanagawa
interests
Trust
5-43-7 Higashi-Nippori,
Hotel MyStays Nippori
beneficiaryArakawa-ku, Tokyo
interests
Trust
Hotel MyStays
3-14-20 Haruyoshi, Chuo-ku,
beneficiary
Fukuoka-Tenjin-Minami
Fukuoka-shi, Fukuoka
interests
Trust
3-26 Shin-Ogawamachi,
Flexstay Inn Iidabashi
beneficiary
Shinjuku-ku, Tokyo
interests
Trust
Hotel MyStays Ueno
1-5-7 Matsugaya, Taito-ku, Tokyo
beneficiary
Inarichointerests
Trust
1-22-19 Kita-Shinagawa,Flexstay Inn Shinagawa
beneficiary
Shinagawa-ku, Tokyo
interests
Trust
Flexstay Inn Tokiwadai
1-52-5 Tokiwadai, Itabashi-ku, Tokyo beneficiaryinterests
Trust
Flexstay Inn Sugamo
3-6-16 Sugamo, Toshima-ku, Tokyo
beneficiaryinterests
Hotel MyStays Kanda

1-2-2 Iwamotocho, Chiyoda-ku,
Tokyo

65

Balancesheet
carryingvalue(JPY
million)Appraisalvalue at theInvestment
end of thepercentage
Appraiser
period(%)(Note 7)(JPY
(Note 4)
million)(Note 5)

1,634

1,612

0.4

1,860

B

2,910

2,785

0.7

3,160

C

5,024

4,900

1.2

5,790

C

2,683

2,694

0.6

2,840

B

61,26556,921

14.6

72,197

-

3,280

3,028

0.8

3,690

C

2,320

1,796

0.6

2,450

C

5,600

4,825

1.3

6,140

-

2,851

2,962

0.7

5,140

B

2,584

2,530

0.6

4,580

B

6,024

5,874

1.4

11,500

B

4,930

4,666

1.2

7,490

B

4,870

4,781

1.2

7,010

B

3,845

3,773

0.9

7,200

B

2,958

2,666

0.7

6,370

B

2,514

2,377

0.6

5,590

B

2,119

2,204

0.5

3,680

B

1,898

1,807

0.5

2,740

B

1,570

1,482

0.4

5,930

B

1,381

1,357

0.3

2,160

B

1,331

1,249

0.3

2,110

B

1,242

1,203

0.3

2,040

B

1,242

1,210

0.3

2,340

B

1,192

1,124

0.3

2,360

B

Property
number(Note 1)Name of property

Acquisition
Legal form
price
of asset(JPY million)(Note 3)

Location(Note 2)

D17

Hotel MyStays Otemae

1-3-2 Tokuicho, Chuo-ku,
Osaka-shi, Osaka

D18

Flexstay Inn Kiyosumi
Shirakawa(Note 9)1-12-16 Tokiwa, Koto-ku, Tokyo

D19

Flexstay Inn Nakanobu P1

4-27-12 Futaba, Shinagawa-ku,
Tokyo

D20

Flexstay Inn Nakanobu P2

4-27-8 Futaba, Shinagawa-ku, TokyoD21

APA Hotel
Yokohama-Kannai

3-37-2 Sumiyoshicho, Naka-ku,
Yokohama-shi, Kanagawa

D22

Hotel MyStays
Hakodate-Goryokaku

26-17 Honcho, Hakodate-shi,
Hokkaido

D23

Flexstay Inn Shirogane

5-10-15 Shirokane, Minato-ku,
Tokyo

D24

Hotel MyStays Haneda

5-1-13 Haneda, Ota-ku, Tokyo

D25

Hotel MyStays Kameido P1 6-32-1 Kameido, Koto-ku, Tokyo

D26

Hotel MyStays Ueno
Iriyaguchi

D27

Hotel MyStays Kameido P2 6-7-8 Kameido, Koto-ku, Tokyo

D28

Hotel MyStays Shimizu(Note 9)1-23 Masagocho, Shimizu-ku,
Shizuoka-shi, Shizuoka

D29

Super Hotel Shinbashi/
Karasumoriguchi

5-16-4 Shinbashi, Minato-ku, Tokyo

D30

Flexstay Inn Higashi-Jujo

2-10-2 Nakajujo, Kita-ku, Tokyo

D31

Hotel MyStays Utsunomiya

2-4-1 Higashi-Shukugo,
Utsunomiya-shi, Tochigi

D32

Flexstay Inn
Kawasaki-Kaizuka

1-13-2 Kaizuka, Kawasaki-ku,
Kawasaki-shi, Kanagawa

D33

Comfort Hotel Toyama

1-3-2 Takara-machi, Toyama-shi,ToyamaD34

Flexstay Inn
Kawasaki-Ogawacho

15-9 Ogawacho, Kawasaki-ku,
Kawasaki-shi, Kanagawa

D35

Flexstay Inn Ekoda

8-6 Sakaecho, Nerima-ku, Tokyo

D36

Super Hotel Tokyo-JR
Tachikawa Kitaguchi

2-21-9 Akebonocho, Tachikawa-shi,
Tokyo

D37

Super Hotel JR
Ueno-iriyaguchi

7-9-14 Ueno, Taito-ku, Tokyo

D38

Hotel MyStays Shinsaibashi

1-9-30 Nishi-Shinsaibashi,
Chuo-ku, Osaka-shi, Osaka

D39

Comfort Hotel Kurosaki

3-13-13 Kurosaki, Yahatanishi-ku,
Kitakyusyu-shi, Fukuoka

D40

Comfort Hotel Maebashi

2-18-14 Omotecho, Maebashi-shi,
Gunma

5-5-13 Higashi-Ueno, Taito-ku,
Tokyo

66

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Balancesheet
carryingvalue(JPY
million)Appraisalvalue at theInvestment
end of thepercentage
Appraiser
period(%)(Note 7)(JPY
(Note 4)
million)(Note 5)

1,192

1,143

0.3

3,450

B

749

718

0.2

1,380

B

589

568

0.1

864

B

283

287

0.1

416

B

8,350

7,752

2.0

9,950

B

2,792

2,797

0.7

3,780

B

2,119

2,095

0.5

2,480

B

7,801

7,355

1.9

8,820

B

5,594

5,397

1.3

7,850

B

3,821

3,702

0.9

3,860

B

3,742

3,603

0.9

5,120

B

2,198

2,161

0.5

2,420

B

1,624

1,594

0.4

1,890

B

1,277

1,269

0.3

1,340

B

1,237

1,230

0.3

1,910

B

980

919

0.2

1,190

B

979

927

0.2

1,140

B

906

885

0.2

930

B

5,069

4,886

1.2

4,640

B

1,170

1,114

0.3

1,230

E

1,130

1,089

0.3

1,220

E

3,160

3,059

0.8

3,060

B

1,148

1,074

0.3

1,220

E

1,128

1,051

0.3

1,150

E

Property
number(Note 1)Name of property

Acquisition
Legal form
price
of asset(JPY million)(Note 3)

Location(Note 2)

D41

Comfort Hotel
Tsubame-Sanjo

2-115 Sugoro, Sanjo-shi, Niigata

D42

Comfort Hotel Kitami

3-4 Ohdori-Nishi, Kitami-shi,
Hokkaido

D43

Hotel MyStays Gotanda
Station (Note 10)

2-6-8 Nishi-Gotanda,
Shinagawa-ku, Tokyo

D44

Hotel Epinard Nasu

1-10 Kaidoue, Oaza-Takakuhei,
Nasu-machi, Nasu-gun, Tochigi (and59 other parcels)

D45

Hotel MyStays Fukuoka
Tenjin3-5-7 Tenjin, Chuo-ku, Fukuoka-shi,
Fukuoka

D46

Hotel MyStays
Hamamatsucho

1-18-14 Hamamatsucho, Minato-ku,
Tokyo

D47

Hotel MyStays PremierKanazawa

2-13-1 Hirooka, Kanazawa-shi,Ishikawa

D48

Takamatsu Tokyu REI Hotel

9-9 Hyogomachi, Takamatsu-shi,
KagawaD49

Hotel MyStays Premier
Hamamatsucho

1-8-5 Hamamatsucho, Minato-ku,
Tokyo

D50

Hotel MyStays Shin Osaka
Conference Center

6-2-19 Nishinakashima,
Yodogawa-ku, Osaka-shi, Osaka

D51

Hotel MyStays PremierOmori

6-19-3 Minami Oi, Shinagawa-ku,
Tokyo

D52

Beppu Kamenoi Hotel

5-17 Chuo cho, Beppu-shi, Oita

D53

Hotel MyStays Sapporo
Station4-15 Kita Hachijyo Nishi, Kita-ku,
Sapporo-shi, Hokkaido

D545-65, Onoe-cho, Naka-ku,
Hotel MyStays Yokohama
Yokohama-shi, Kanagawa andKannai3 other lots

D55

Art Hotel Joetsu

5-1-11, Hon-cho Joetsu-shi, Niigata

D56

Art Hotel Hirosaki City

1-1-2, 1-1-6, 1-1-7, 1-2-1, Omachi,
Hirosaki-shi, Aomori

D57

Hotel MyStays Oita

1-32, Niagemachi Oita-shi, Oita

D58

Hotel MyStays Gotanda

2-5-4, Higashigotanda
Shinagawa-ku, Tokyo

D59

Hotel MyStays Tachikawa

1-8-14, Nishiki-cho Tachikawa-shi,
Tokyo

D60

Hotel MyStays Premier
Akasaka

2-17-54, Akasaka Minato-ku, Tokyo

D61

Hotel MyStays Premier
Sapporo Park

2-2-10, Minamikujo Chuo-ku,
Sapporo-shi, Hokkaido

D62

Hotel MyStays Ueno East

5-5-6, Higashi Ueno Taito-ku, Tokyo

D63

Hotel MyStays Midosuji
Honmachi

3-2-10, Honmachi, Chuo-ku,
Osaka-shi, Osaka

67

Trust
beneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests
Trustbeneficiaryinterests

Balancesheet
carryingvalue(JPY
million)Appraisalvalue at theInvestment
end of thepercentage
Appraiser
period(%)(Note 7)(JPY
(Note 4)
million)(Note 5)

1,010

955

0.2

1,070

E

851

795

0.2

906

E

26,523

26,4106.3

26,600C

20,981

19,863

5.0

23,100

C

8,059

7,833

1.9

8,750

C

7,959

7,819

1.9

7,050

C

13,761

13,1303.3

14,500

C

2,139

2,130

0.5

2,220

E

8,000

8,017

1.9

10,700B

13,068

12,9793.1

13,500

D

9,781

9,722

2.3

10,200

D

8,870

8,415

2.1

9,170

D

7,880

7,713

1.9

8,320

D

5,326

5,262

1.3

5,500

D

2,772

2,737

0.7

2,810

D

2,723

2,658

0.7

2,760

D

1,604

1,563

0.4

1,640

D

4,068

4,067

1.0

4,140

D

3,257

3,246

0.8

3,290

E

20,691

20,603

4.9

23,900B

16,731

16,575

4.0

17,100

D

5,286

5,255

1.3

5,390

D

5,039

4,994

1.2

5,090

B

Property
number(Note 1)Name of property

Location(Note 2)Acquisition
Legal form
price
of asset(JPY million)(Note 3)

D200

Westin Grand Cayman
Seven Mile Beach Resort& SPA

30620 Seven Mile Beach Road,
Grand Cayman, Cayman Islands

30,061The(USD
Leasehold272,171,000(Note 11))

D201

Sunshine Suites Resort

1465 Esterley Tibbetts Highway,
Grand Cayman, Cayman Islands

The
Leasehold(Note 11)

5,842
(USD
52,898,000)

Appraisalvalue at theInvestment
end of thepercentage
Appraiser
period(%)(Note 7)(JPY
(Note 4)
million)(Note 5)30,720(USD
30,011
7.2 285,000,000
F)(Note 12)
5,950
(USD
F
5,826
1.4 55,200,00
0)(Note 12)

Balancesheet
carryingvalue(JPY
million)Subtotal (65 properties)

333,881326,55579.8

393,926-

Total (129 properties)

400,747

388,30295.7

472,263-

17,845

17,856

4.3- (Note 5)

Subtotal of preferred equity interest issued by special purpose company (1 property)

17,845

17,856

4.3--

Total (130 properties)

418,593

406,159

100.0

-

-

－

Sheraton GrandeTokyo Bay Hotel(preferred equity
interest)－

Preferredequity interest
issued by
specialpurposecompany(Note 13)

(Note 1)

“Property number” indicates the use categorization of properties owned by INV, with “A” standing for residence, “B” standing for office andcommercial facility, “C” standing for parking lots and “D” standing for hotel, and the number assigned for each property. The number
following “A”, “B”, “C” and “D” is assigned based on how early the acquisition was made, except for acquisitions made at the same time alower number is assigned to the property with a greater acquisition price.

(Note 2)

“Location” is, in principle, based on the indicated address (jyukyohyoji), except that if the jyukyohyoji system has not been implemented forsuch property, the location is based on the land number (chiban).

(Note 3)Acquisition price” is the purchase price indicated in the real estate or trust beneficiary purchase agreement except for Sheraton Grande Tokyo
Bay Hotel (preferred equity interest), Westin Grand Cayman Seven Mile Beach Resort & SPA and Sunshine Suites Resort. For Sheraton
Grande Tokyo Bay Hotel (preferred equity interest), “Acquisition price” indicates the amount invested by INV for the preferred equity
interest, excluding investment in the specified equity interests in the Kingdom Tokutei Mokuteki Kaisha and the acquisition price ofthe equity interest held by the employees in a G.K., which is a master lease company. For Westin Grand Cayman Seven Mile Beach Resort& SPA and Sunshine Suites Resort, the book value of the Leasehold of each of the Cayman Hotels stated by the Cayman SPC as of May 9,
2019 (Cayman Island local time; May 10, 2019 in Japan local time), which is the date when INV succeeded the Leasehold from the Cayman
SPC as dividend in kind in line with the agreed termination of the TK agreement. The amounts in USD are converted into JPY as shown.
Such price excludes consumption tax and other taxes, and has been rounded down to the nearest million yen.

(Note 4)

“Investment percentage” is the ratio of the acquisition price to the aggregate acquisition price of INV’s portfolio, and has been rounded to thefirst decimal place.

(Note 5)

“Appraisal value at the end of the period” is the value appraised or determined based on research by the real estate appraiser as of the end of
the fiscal period in accordance with the Articles of Incorporation of INV and the regulations of The Investment Trust Association, Japan. As
to appraisal of Westin Grand Cayman Seven Mile Beach Resort & SPA and Sunshine Suites Resort, the local appraiser verification method(Note 6) is adopted. The appraisal value for Sunshine Suites Resort includes the unused land adjacent to the hotel. Appraisal is entrusted tothose described in (Note 7) below. For Sheraton Grande Tokyo Bay Hotel (preferred equity interest), there is no Appraisal value at the endof the period due to it being preferred equity interest. Appraisal values for the underlying assets as of the closing date of the fiscal period are
as follows.
Name of property

Appraisal value

Sheraton Grande Tokyo Bay Hotel(Note 6)

JPY 101,000 million

Appraiser(Note 6)C

Under the “local appraiser verification method,” a real estate appraiser licensed in Japan determines appraisal value based on theunderstanding and analyses of basic data and information necessary for real estate appraisal, including appraisal methods employed by
local appraisers, and transaction examples and trends in local markets that are used for real estate appraisal, and by verifying the validity ofdecisions made in appraisal reports and appropriateness of appraisal value prepared by local appraisers. INV appoints CBRE, Inc., aprofessional appraiser licensed and certified in the Cayman Islands, as a local appraiser to engage in appraisal of the Underlying Asset andprepare a local appraisal report. INV then engages CBRE K.K., a company appointed as a real estate appraiser in Japan, to verify the
local appraisal report and then obtains a report on verification of appraisal performed by local appraiser.

68

(Note 7)“Appraiser” is shown in code in the table above.

The code used to represent the appraisers is as follows:

Appraiser
A: Assets Research and Development Inc.
B: Japan Real Estate Institute
C: JLL Morii Valuation & Advisory K.K.
D: The Tanizawa Sogo Appraisal Co., Ltd.
E: Daiwa Real Estate Appraisal Co., Ltd.
F: CBRE K.K.
As to appraisal of Westin Grand Cayman Seven Mile Beach Resort & SPA and Sunshine Suites Resort, the local appraiser verification
method is adopted and CBRE K.K. has entrusted such verification to CBRE, Inc.

The appraisal value for Sunshine Suites Resort includes

the acquisition price of the unused land adjacent to the hotel.
(Note 8) These trust beneficiary interests were integrated into three groups with other trust beneficiary interests when INV procured funds throughdebt financing backed by trust assets in July 2011. The grouping of trust beneficiary interests at the end of the Reporting Period is asfollows:
Group 1
Nisshin Palacestage Daitabashi, Nisshin Palacestage Higashi-Nagasaki, Growth Maison Shin-Yokohama, Belle Face Ueno-Okachimachi,
Growth Maison Yoga, Shibuya-Honmachi Mansion, and Foros Nakamurabashi
Group 2
College Square Machida, Belair Meguro, and Wacore Tsunashima I
Group 3
Suncrest Shakujii-Koen, Grand Rire Kameido, Acseeds Tower Kawaguchi-Namiki, Growth Maison Kaijin, and College Square Machiya(Note 9) The property name was changed to Hotel MyStays Shimizu on April 1, 2019 along with the change of the hotel operator.
(Note 10) Appraisal value at the end of the period indicates appraisal value calculated deeming the owned portion and the floor expansion portion asone.
(Note 11) The leasehold interests are the rights equivalent to long-term real estate leasehold rights for buildings and land under the laws of the Cayman
Islands (Term: 99 years; annual lease payment: USD 1 or KYD 1). INV implemented an investment structure change regarding “Westin
Grand Cayman Seven Mile Beach Resort & Spa” and “Sunshine Suites Resort” on May 9, 2019 (Cayman Island local time), a change frommaking investments based on the TK agreement to directly owning the movable assets such as leasehold and FF&E of the Cayman Hotels(the Leasehold), which are the undying assets of the TK.
(Note 12) Appraisal value at the end of the period are converted into JPY using the exchange rate of USD 1 = JPY 107.79, which is the exchange rateon the closing date of the fiscal period (June 30, 2019).
(Note 13) Preferred equity interest issued by special purpose company refers to 178,458 units of preferred equity interest issued by Kingdom Special
Purpose Company (equivalent to 49.0% of preferred equity interest issued and outstanding after the issuance of the said preferred equity
interest), with the Sheraton Grande Tokyo Bay Hotel as an underlying asset, and is recorded as one property.

69b

Capital expenditures for assets under management(a) Schedule for capital expenditures
The schedule for the principal capital expenditures for property maintenance construction, etc., as of the end of the
fiscal period ended June 30, 2019 for the real estate assets is as follows.
Estimated Cost (JPY thousand)Name of Property

Location

PurposeScheduled Time of
Implementation

Total

Payment for
the Fiscal Advance
Period ended Payments
June 2019

Flexstay Inn
Kiyosumi Shirakawa

Koto-ku,Tokyo

Conversion of
guestrooms

From July 2019
To December 2019

201,400--

D44 Hotel Epinard Nasu

Nasu-gun,Tochigi

Work related tosubsidized projects

From July 2019
To December 2019

190,000

-

-

D18

D09

Hotel MyStays
Yokohama

Yokohama-shi,
Kanagawa

Renovation work

From July 2019
To December 2019

170,000--

D53

Hotel MyStays
Sapporo Station

Sapporo-shi,
Hokkaido

Conversion of
guestrooms

From July 2019
To December 2019

150,000--

D51

Hotel MyStays
Premier Omori

Shinagawa-ku,
Tokyo

Hot-and-chilledwater generator
replacement

From July 2019
To December 2019

108,000--(b) Capital expenditures for the fiscal period ended June 30, 2019
The principal construction work constituting capital expenditures for the real estate assets for the fiscal period ended
June 30, 2019 is as follows. Capital expenditures for the fiscal period totaled JPY 1,186,225 thousand, andtogether with JPY 23,655 thousand in repair costs included in this fiscal period’s expenses, construction work
totaling JPY 1,209,880 thousand was implemented.
Name of property

PurposeTime ofimplementation

Payment(JPY thousand)Yokohama-shi,
Renovation work
Kanagawa

From January 2019
To June 2019

239,400

D44 Hotel Epinard Nasu

Nasu-gun,Tochigi

Introduction of energy-saving
equipment

From January 2019
To June 2019

214,332

D28

Hotel MyStays
Shimizu

Shizuoka-shi,
Shizuoka

Renovation work

From January 2019
To June 2019

119,422

D48

Takamatsu Tokyu
REI Hotel

Takamatsu-shi, Disaster prevention switchboard
replacement
KagawaFrom January 2019
To June 201920,276

Joetsu-shi,
Niigata

From January 2019
To June 201913,300

D09

Hotel MyStays
Yokohama

Location

D55 Art Hotel Joetsu

Upgrading of air-conditioning
systemOther construction

579,493
Total(3)

1,186,225

Tenant Summary

a Summary of lease conditions by property
Disclosure is omitted because the information is described in the presentation material for the 32nd Fiscal Period
Ended June 2019 separately announced today.
b Occupancy trend
Disclosure is omitted because the information is described in the presentation material for the 32nd Fiscal Period
Ended June 2019 separately announced today.
70