25th

Fiscal Period Business Report(Statement of Financial Performance)

December 1, 2017 – May 31, 2018

Stock
Code

8976

6-2-1 Ginza, Chuo Ward, Tokyo http://www.daiwa-office.co.jp/en/

I. Overview of Daiwa Office Investment Corporation
To Our Investors
We would like to express our deep gratitude to all our unitholders for your support of Daiwa Office Investment Corporation (DOI).
In the 25th Fiscal Period, DOI posted operating revenues of 13,440 million yen and operating income of 6,678 million yen. Our
distribution per unit for the 25th Fiscal Period is 11,150 yen, an increase of 193 yen from the 24th Fiscal Period.
See page 4 for financial and management highlights
Average contract rent at the end of the 25th Fiscal Period was 19,295 yen. Rent revisions contributed to an 8 million yen increasein monthly contracted rents from the end of the previous fiscal period, which was a 4.2% rate of increase for average monthlyrent. Furthermore, the rate of increase for average monthly rent stood at 14.9% due to replacement of tenants, and the occupancy
rate was 99.0%.We will realize sustainable internal growth through the thorough implementation of the hands-on approach that
continuously applies “Bonji-Tettei” as the code of conduct.
See page 8 for details of internal growth
During the 25th Fiscal Period, DOI acquired two properties (total acquisition price: 42,300 million yen), CONCURRED Yokohama (75%of quasi co-ownership) and Daiwa Kanda East (former name Nippon Manpower Building), and sold two properties (total sale price:
70,800 million yen), Shinjuku Maynds Tower (3/7 of co-ownership interest) and Daiwa Meieki Building.
During the 26th Fiscal Period, DOI acquired Prime Kanda Building (acquisition price: 1,800 million
yen) and plans to acquire Kita-Shinagawa Gotenyama Building (acquisition price: 2,500 millionyen). DOI will continue to selectively acquire office properties centering on the five central
wards of Tokyo in an effort to further improve the value of its portfolio.
See page 12 for details of external growthIn financial matters, DOI promoted diversification of repayment dates by taking out long-termborrowings. DOI will continue striving to further strengthen its financial structure while working
to reduce future refinancing risks. See page 15 for details of financial conditions
DOI will continue to increase the competitiveness of its properties and aim toachieve its medium- to long-term goal of continuous growth through the utilizationof investment capacity from capital increase, etc., while increasing long-term
EPS (net income after deducting gain on sales of properties). We wish for thecontinued success of our unitholders and ask for your continued support of DOI.

Yoshimi Murakami Executive Director of Daiwa Office Investment Corporation
Table of Contents

I. Overview of Daiwa Office Investment Corporation
To Our Investors……………………………………………… 2

II. Asset Management Report…………………………… 17
III. Balance Sheets… ……………………………………… 22

Characteristics and Strategies of
Daiwa Office Investment Corporation ………………………… 3
Financial and Management Highlights………………………… 4

IV. Statements of Income and Retained Earnings…… 24
V. Statements of Changes in Net Assets……………… 25

Overview of Portfolio (Portfolio list)…………………………… 5
Overview of Portfolio (Portfolio distribution)…………………… 6
Internal Growth Measures… ………………………………… 8External Growth Measures…………………………………… 12
Financial Conditions… ……………………………………… 15
Description of Asset Manager………………………………… 16

2

VI. Statements of Cash Flows… ………………………… 26
VII. Notes to Financial Statements……………………… 27
VIII. Independent Auditor’s Report… …………………… 41
IX. Investor Information… ………………………………… 42

Characteristics and Strategies of Daiwa Office Investment Corporation

Characteristics of Daiwa Office Investment Corporation

Office Specialized
REIT

REIT Focused on the Five
Central Wards of Tokyo

Effective application of operational knowhow specialized in officebuildings

Places priority on owning office buildings in favorable locations forwhich there is high demand

Office buildings 100.0%

Major Regional Cities 2.1%
Greater Tokyo

Five Central
Wards of Tokyo

80.4%

17.5%

Based on acquisition price(Note) Please note that the percentages in the above graphs are as of June 30, 2018.

Growth Strategies
Activities for solid growth・Continue acquiringproperties

Achievement of a 500 billion yen asset size

・Leverage borrowing
capacity

Keep the medium- to long-term, upper-limit
LTV target range within 40%~50%

500.0(billion yen)
500

445.7 458.3

467.7 469.3 469.3

439.4 441.2

400

300

Establishment of stable revenue base・Property management
activities

Continuation of “Bonji-Tettei”
Thorough implementation of hands-on
approach
Further strengthen relations with tenants

・Maintain andimprove property
value

Capture tenant needs by reinforcing ties withproperty managers
Strategic renewals and lease-up activities

・Financial activities

Reduce refinancing risk by extending
borrowing periods and diversifying
repayment dates

Distribution per Unit

200

100

0
Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period Fiscal period
ended
ended
ended
ended
ended
ended
November 2015 May 2016 November 2016 May 2017 November 2017 May 2018

Fiscal period ended May 2018
(25th Fiscal Period)

Fiscal period ending November 2018
(Note) The forecasts on distribution are calculated based(26th Fiscal Period)on certain assumptions and may vary due tochanges in the status and other factors. Moreover,the forecasts set forth herein should not be
construed as a guarantee of distribution amounts.

Fiscal period ending May 2019(27th Fiscal Period)

As ofMedium-term
June
goal
30, 2018

11,150 yen
11,850 yen
12,000 yen(Actual)(Forecast)(Forecast)

I. Overview of Daiwa Office Investment Corporation

3

Financial and Management Highlights
Steady increase of distributions due to progress in internal growth■ Operating Revenues■ Operating Income■ Net Income(Million yen)
14,000(Million yen)
7,000(Million yen)
6,000

12,363

11,00012,853

13,44012,735

12,547

6,108

6,143

6,177

6,133

6,678

5,250

5,000

4,000

3,000

2,000

5,324

5,359

5,455

5,887

8,000

5,000

0

0
21st Period 22nd Period 23rd Period 24th Period 25th Period0
21st Period 22nd Period 23rd Period 24th Period 25th Period

21st Period 22nd Period 23rd Period 24th Period 25th Period■ Changes in Rental Revenues

External growth (acquisition/full contribution from properties sold) (Note 1)
External growth (acquisition/during-theperiod contribution from properties sold) (Note 2)
115
267
Internal growth (increase/decrease
27839
of rents of existing properties)
154(Million yen)
12,00011,00010,000
9,000
8,000
7,000

29
278
-70

261
6
-55

77
347
190

176
148
215

349
511
64

227
229
117

12
14
-42

8
0
54

0
18
337

-324
58
327

26
0
13

282

6,000
5,000
15th Period 16th Period 17th Period 18th Period 19th Period 20th Period 21st Period 22nd Period 23rd Period 24th Period 25th Period 26th Period 27th Period(Forecast) (Forecast)■ Distribution per Unit
(Yen)
12,00010,000
8,000

7,300
7,540
7,621

Forecast from one year earlier
Actual dividends

7,570
7,820
8,256

8,328
8,700
9,142

Forecast from six months earlier

9,000
9,350
9,688

(Note 1) Amount obtained by subtracting rents
and common area fees income in theprevious fiscal period of properties soldin the previous fiscal period from theamount of rents and common area
fees income increased compared tothe previous period due to full year
contribution from properties acquiredin the previous fiscal period.
(Note 2) Amount obtained by subtracting rents
and common area fees income
decreased in the current fiscal period
due to sales of properties in thecurrent fiscal period from the amountof rents and common area fees
income increased in the current fiscal
period due to acquisition of properties
in the current fiscal period.

12,0009,750
9,850
10,5089,900
10,55010,695

10,56010,70010,764

10,71010,77010,957

10,80011,000
11,15011,14011,85021st Period

22nd Period

23rd Period

24th Period

25th Period

26th Period 27th Period(Forecast) (Forecast)

6,000
4,000
2,000
0
17th Period

18th Period

Operating revenues (Million yen)
Operating income (Million yen)
Ordinary income (Million yen)
Net income (Million yen)
Total number of units issued (Units)
Net assets per unit (Yen)Distribution per unit (Yen)
Total assets (Million yen)
Loan-to-value (LTV) (Based on total asset value) (%)
Number of investment properties
Asset size (Billion yen)
Total rentable area (m2)Occupancy rate (%)

19th Period

20th Period

25th Period

24th Period

23rd Period

22nd Period

21st Period(May 2018)(November 2017)(May 2017)(November 2016)(May 2016)

13,440
6,678
5,888
5,887
491,877
515,730
11,150467,040
40.5
55
4,394
340,144.07
99.0

12,735
6,177
5,456
5,455
497,869
515,790
10,957483,173
42.3
54
4,693
338,377.31
98.2

12,547
6,133
5,360
5,359
497,869
515,317
10,764
483,730
42.2
54
4,693
338,436.22
97.7

12,853
6,143
5,325
5,324
497,869
515,230
10,695
483,450
42.3
53
4,677
336,722.04
97.7

12,363
6,108
5,326
5,250
484,000
511,818
10,508476,690
43.3
50
4,583
328,027.44
98.7(Note 1) Distribution per unit for the 21st fiscal period is calculated by dividing the amount obtained by subtracting provision for reserve for reduction entry (164 million yen) from unappropriated retained earnings by
the total number of investment units issued.
(Note 2) Distribution per unit for the 25th fiscal period is calculated by dividing the amount obtained by subtracting provision for reserve for reduction entry (403 million yen) from unappropriated retained earnings by
the total number of investment units issued.

4Overview of Portfolio (Portfolio list)(As of June 7, 2018)
Property Name

Address

Appraisal
Execution Acquisition
Rentable Structure andPrice
Value at End
Area (m2) No. of Floors Completion of Major
of Period
Share(Note 2)
(Note 3)
Repairs mm yen (%) (mm yen) (Note 4)

Five Central Wards of Tokyo (Note 1)
Ginza, Chuo-ku, Tokyo
8,114.85 SRC B3/12F July 1963
Ginza, Chuo-ku, Tokyo
2,032.11 SRC B3/8F Aug. 1972
Shibaura, Minato-ku, Tokyo
9,619.67 SRC B1/12F Oct. 1987
Minami Aoyama, Minato-ku, Tokyo
2,715.54 S SRC B2/5F Sept. 1990
Kanda Sarugakucho, Chiyoda-ku, Tokyo
3,657.43
SRC 8F
June 1985
Hamamatsucho, Minato-ku, Tokyo
3,663.38 SRC B2/10F July 1993
Jingumae, Shibuya-ku, Tokyo
2,198.61 RC B1/4F
Dec. 1997
Shibadaimon, Minato-ku, Tokyo
2,386.48 SRC RC B1/7F Nov. 1996
Kanda Misakicho, Chiyoda-ku, Tokyo
2,137.53
S 8F
July 1996
Shinbashi, Minato-ku, Tokyo
2,595.76 SRC B1/8F
Apr. 1974
Tsukiji, Chuo-ku, Tokyo
2,659.59
SRC 10F
Jan. 1996
Tsukiji, Chuo-ku, Tokyo
1,487.44 SRC B1/7F Jan. 1990
Tsukishima, Chuo-ku, Tokyo
8,425.69
S 5F
July 1996
Nihombashi-Horidomecho, Chuo-ku, Tokyo
2,850.81 SRC B2/7F
Apr. 1993
Azabudai, Minato-ku, Tokyo
1,697.88 SRC B2/9F
Apr. 1984
Hatchobori, Chuo-ku, Tokyo
3,265.83 SRC B1/8F Oct. 1974
Kojimachi, Chiyoda-ku, Tokyo
2,695.31 SRC B2/9F Oct. 1987
Shinbashi, Minato-ku, Tokyo
11,614.92
SRC 9F
Apr. 1973
Yoyogi, Shibuya-ku, Tokyo
22,771.98 S SRC B3/34F Sept. 1995
Udagawacho, Shibuya-ku, Tokyo
2,480.65 RC B1/9F
Aug. 2006
Nihombashi-Odenmacho, Chuo-ku, Tokyo
2,379.31
SRC 8F
Mar. 1985
Kanda-Jimbocho, Chiyoda-ku, Tokyo
3,164.26
S B1/8F
Mar. 1997
Nishi-Shimbashi, Minato-ku, Tokyo
4,815.84 SRC B1/10F July 1993
Nihombashi-Kayabacho, Chuo-ku, Tokyo
5,899.11 S SRC B1/8F Apr. 2010
Kanda-Jimbocho, Chiyoda-ku, Tokyo
2,889.34
S 9F
Feb. 2010
Maruyamacho, Shibuya-ku, Tokyo
13,960.87 S SRC B1/15F Oct. 2002
Nihombashi Hongokucho, Chuo-ku, Tokyo
2,143.08
S 8F
May 2010
Shinjuku, Shinjuku-ku, Tokyo
6,751.31 S RC B2/11F Jan. 2012
Akasaka, Minato-ku, Tokyo
8,746.48 SRC B2/7F Sept. 1990
Shibuya, Shibuya-ku, Tokyo
6,329.00 S B1/12F
Dec. 1988
Minami Azabu, Minato-ku, Tokyo
13,234.39 S RC B1/6F Sept. 2009
Ebisu, Shibuya-ku, Tokyo
2,951.70 SRC B1/9F Dec. 1997
Okubo, Shinjuku-ku, Tokyo
7,498.33
S10F
Aug. 2010
Jingumae, Shibuya-ku, Tokyo
4,426.10 S RC B1/7F Nov. 2001
Shinsen-cho, Shibuya-ku, Tokyo
2,811.35 RC B1/9F
Sept. 2001
Nanpeidaicho, Shibuya-ku, Tokyo
8,566.73 S SRC B1/11F Feb. 2004
Nihonbashi Hakozakicho, Chuo-ku, Tokyo
32,055.85 S SRC RC B2/20F Feb. 1994
Hatchobori, Chuo-ku, Tokyo
2,622.42 S SRC B1/10F Feb. 2006
Hatchobori, Chuo-ku, Tokyo
1,723.15 SRC B1/9F Feb. 1996
Nishishinjuku, Shinjuku-ku, Tokyo
6,967.61 SRC RC S B2/11F Aug. 1991
Nihonbashi Koami-cho, Chuo-ku, Tokyo
5,630.17 S SRC 7F
Feb. 1999
Higashi Nihonbashi, Chuo-ku, Tokyo
5,015.88
S 7F
Mar. 2008
Daikanyamacho, Shibuya-ku, Tokyo
1,588.35
S 6F
Mar. 2001
Nishishinjuku, Shinjuku-ku, Tokyo
1,120.58
RC 4F
Mar. 1989
Kanda Mikura-cho, Chiyoda-ku, Tokyo
1,719.51 SRC S B1/7F Jan. 1991
Kanda Higashi Matsushitacho, Chiyoda-ku, Tokyo 3,918.02
S 9F
Feb. 2005
Kanda Suda-cho, Chiyoda-ku, Tokyo
1,680.07 S RC B1/10F Aug. 1990
Subtotal
259,680.27
Greater Tokyo Area (Note 1)
Higashi-Ikebukuro, Toshima-ku, Tokyo
4,461.47 SRC S B1/9F June 1993
48 Daiwa Higashi-Ikebukuro
Kita-Shinagawa, Shinagawa-ku, Tokyo
6,548.17 SRC B1/11F July 1991
49 Daiwa Shinagawa North
Osaki, Shinagawa-ku, Tokyo
1,786.06 S RC B1/6F Sept. 2007
50 Daiwa Osaki 3-chome
Kamiooka Nishi, Konan-ku, Yokohama City, Kanagawa 2,630.30 S SRC B3/7F May 201151 Daiwa Kamiooka
Kamiogi, Suginami-ku, Tokyo
17,778.14 S SRC B2/18F June 1993
52 Integral Tower
Meguro, Meguro-ku, Tokyo
3,519.50 S SRC B2/14F July 200953 Daiwa Meguro Square
Ogikubo, Suginami-ku, Tokyo
3,849.63 SRC B1/7F Nov. 1990
54 Daiwa Ogikubo
55 CONCURRED Yokohama (Note 6) Kinko-cho, Kanagawa-ku, Yokohama City, Kanagawa 28,052.98 S SRC B1/20F Feb. 2008
Subtotal
68,626.25
Major Regional Cities (Note 1)
Awaji-cho, Chuo-ku, Osaka City, Osaka
13,517.62 S SRC B1/16F Feb. 200856 Daiwa Kitahama
Subtotal
13,517.62
Total
341,824.14

1 Daiwa Ginza
2 Daiwa Ginza Annex
3 Daiwa Shibaura
4 Daiwa Minami-Aoyama
5 Daiwa Sarugakucho
6 Daiwa A Hamamatsucho
7 Daiwa Jingumae
8 Daiwa Shibadaimon
9 Daiwa Misakicho
10 Daiwa Shimbashi 510
11 Daiwa Tsukijiekimae
12 Daiwa Tsukiji
13 Daiwa Tsukishima
14 Daiwa Nihonbashi Horidomecho
15 Daiwa Azabudai
16 Daiwa Kyobashi
17 Daiwa Kojimachi 4-chome
18 Daiwa Onarimon
19 Shinjuku Maynds Tower (Note 5)
20 Daiwa SHIBUYA EDGE
21 Daiwa Kodenmacho
22 Daiwa Jimbocho
23 Daiwa Nishi-Shimbashi
24 Daiwa Kayabacho Building
25 Daiwa Jinbocho 3-chome
26 E SPACE TOWER
27 Daiwa Nihonbashi Hongokucho
28 shinyon curumu
29 Daiwa Akasaka
30 Daiwa Shibuya Miyamasuzaka
31 Daiwa Azabu Terrace
32 Daiwa Ebisu 4-chome
33 LAQUAS Higashi Shinjuku
34 Daiwa Aoyama
35 Shinsen Place
36 Glass City Shibuya
37 Daiwa River Gate
38 Daiwa Hatchobori ekimae
39 Daiwa Hatchobori ekimae West
40 Daiwa Nishi-Shinjuku
41 Kirin Nihonbashi Building
42 Daiwa Higashi-nihonbashi
43 Square Daikanyama Building
44 Shinjuku West Building
45 Daiwa Kanda Mikuracho Building
46 Daiwa Kanda East(Note 7)
47 Prime Kanda Building

Ownership TypeLand

Building

PML (%)

simple and17,400 Feeleasehold
Fee simple
3,840 Fee simple
Fee simple
7,870 Fee simple
Fee simple
4,640 Fee simple
Fee simple
3,840 Fee simple
Fee simple
3,610 Fee simple Compartmentalized
ownership
2,460 Fee simple
Fee simple
3,110 Fee simple
Fee simple
2,860 Fee simple
Fee simple
2,530 Fee simple
Fee simple
2,000 Fee simple
Fee simple
1,610 Fee simple
Fee simple
10,500 Fee simple
Fee simple
2,660 Fee simple
Fee simple
1,930 Fee simple
Fee simple
3,450 Fee simple Compartmentalized
ownership (100%)Compartmentalized
2,810 Fee simple ownership (100%)
13,700 Fee simple Compartmentalized
ownership (100%)
62,600 Co-ownership Co-ownership
5,190 Fee simple
Fee simple
simple and2,260 Feeleasehold
Fee simple
3,620 Fee simple
Fee simple
6,570 Fee simple
Fee simple
8,170 Fee simple
Fee simple
5,060 Fee simple
Fee simple
33,500 Fee simple
Fee simple
2,560 Fee simple
Fee simple
15,600 Right of site Compartmentalized
ownership (100%)
14,000 Fee simple
Fee simple
9,350 Fee simple
Fee simple
16,600 Fee simple
Fee simple
6,040 Fee simple
Fee simple
10,800 Fee simple
Fee simple
12,400 Fee simple
Fee simple
6,720 Fee simple
Fee simple
18,300 Fee simple
Fee simple
30,900 Fee simple
Fee simple
3,320 Fee simple
Fee simple
1,850 Fee simple
Fee simple
15,800 Fee simple
Fee simple
8,290 Fee simple
Fee simple
6,780 Fee simple
Fee simple
2,620 Fee simple
Fee simple
1,230 Fee simple
Fee simple
1,710 Fee simple
Fee simple
5,120 Fee simple
Fee simple
1,940 Right of site Compartmentalized
ownership
409,720

4.53
3.97
3.82
9.19
7.14
3.79
13.33
3.72
4.24
5.51
4.23
4.98
4.87
4.68
6.64
4.51
6.19
3.89
2.03
1.56
4.19
5.05
3.76
4.50
5.33
3.11
3.80
4.44
7.14
5.64
2.67
2.44
4.46
4.42
6.21
1.61
1.76
5.89
7.03
4.32
5.76
4.37
6.21
8.28
6.01
3.86
5.12

2,958 0.77,710 1.7
1,650 0.42,000 0.5
15,220 3.4
5,600 1.3
3,800 0.9
38,100 8.6
77,038 17.5

4,050
6,170
2,340
2,750
20,5006,810
4,540
39,40086,560Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Quasi
co-ownership

Compartmentalized
ownership (100%)
Quasi
co-ownership

3.55
7.19
6.14
6.29
1.18
1.68
6.41
0.92

9,481
9,481
441,241

11,70011,700507,980

Fee simple

Fee simple

3.48

2003
2003

14,100 3.2
3,050 0.7
8,265 1.9
4,550 1.0
3,190 0.7
2,865 0.62,800 0.6
2,578 0.6
2,346 0.5
2006
2,080 0.5
1,560 0.4
1,240 0.3
7,840 1.8
2,520 0.6
1,600 0.4
2005
3,460 0.8
2,910 0.7
2003 13,860 3.1
66,900 15.2
5,900 1.3
2,460 0.6
4,150 0.95,000 1.1
5,600 1.3
3,550 0.8
24,000 5.4
1,721 0.4
9,650 2.2
9,200 2.1
7,000 1.6
14,000 3.2
4,135 0.98,450 1.99,800 2.2
4,800 1.1
16,000 3.6
28,000 6.3
2,871 0.7
1,647 0.4
13,710 3.1
8,180 1.9
6,370 1.4
2,280 0.5
942 0.2
1,592 0.4
4,200 1.0
1,800 0.4
354,722 80.4

2.1
2.1
100

Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple(Note 1) The Five Central Wards of Tokyo are Chiyoda, Chuo, Minato, Shinjuku and Shibuya Wards (or ku). The Greater Tokyo Area is Tokyo (excluding the Five Central Wards), and Kanagawa, Chiba and Saitama prefectures.
Major Regional Cities are the Osaka area (Osaka, Kyoto and Hyogo prefectures), Nagoya area (Aichi, Mie and Gifu prefectures) and ordinance designated cities and core cities set forth in the Local Autonomy Act.
(Note 2) The Rentable Area is indicated as of May 31, 2018 (end of 25th Fiscal Period).
(Note 3) Structure acronyms are S for steel, RC for reinforced concrete and SRC for steel-reinforced concrete.
(Note 4) The values entered in the Appraisal Value at End of Period column are the appraisal values in the real estate appraisal reports with a pricing point of May 31, 2018 (end of 25th Fiscal Period) for Prime Kanda
Building.
(Note 5) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding Shinjuku Maynds Tower is a co-ownership interest equal to 3/7 of the entire property. The figures shown for theAcquisition Price and the Appraisal Value at End of Period respectively indicates a figure equivalent to 3/7 of the property and a referential figure estimated by using 3/7 of the co-ownership interest instead of 6/7 ofthe co-ownership interest, which was so as of May 31, 2018. The figure shown for the Rentable Area is the figure equivalent to 3/7 of the total rentable area of the entire building.
(Note 6) The entrusted real estate corresponding to trust beneficiary interests that DOI owns regarding CONCURRED Yokohama is a quasi co-ownership interest equal to 75/100 of the entire property. The figure shown for
the Rentable Area is the figure equivalent to 75/100 of the total rentable area of the entire building.
(Note 7) Concerning the names of properties, DOI changed Nippon Manpower Building to Daiwa Kanda East on July 1, 2018.

I. Overview of Daiwa Office Investment Corporation

5Overview of Portfolio (Portfolio distribution)
DOI concentrates its investment in the Five Central Wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya)
Shibuya-ku

7 Daiwa Jingumae

20 Daiwa SHIBUYA EDGE

30 Daiwa Shibuya Miyamasuzaka

32 Daiwa Ebisu 4-chome

48 Daiwa Higashi-Ikebukuro

Ikebukuro Sta.
48

19 Shinjuku Maynds Tower

26 E SPACE TOWER

52

34 Daiwa Aoyama

Suginami-ku

35 Shinsen Place

36 Glass City Shibuya

43 Square Daikanyama Building

Nakano Sta.

54 Ogikubo Sta.
51 Integral Tower

Toshimaku

33
HigashiShinjuku Sta.

Shinjuku-ku

Shinjuku-ku
44
40

Shinjuku Sta.
28

19

Yotsuya Sta.

Honancho Sta.
54 Daiwa Ogikubo

Tokyo Metro
Ginza Line
Marunouchi Line
Hibiya Line
Tozai Line
Chiyoda Line
Yurakucho Line
Hanzomon Line
Namboku Line
Fukutoshin Line

Toei Subway

28 shinyon curumu

33 LAQUAS Higashi Shinjuku

40 Daiwa Nishi-Shinjuku

44 Shinjuku West Building

Shibuya-ku

Minato-ku

34

20
26
3 Daiwa Shibaura

4 Daiwa Minami-Aoyama

35

6 Daiwa A Hamamatsucho

36

ine
hi L
Tos
n
e
Den
yu
Tok

Lin
e
To
kyu
To
yok
o

JR

8 Daiwa Shibadaimon

10 Daiwa Shimbashi 510

30
Shibuya Sta.
43

Naka-meguro Sta.

6

32
Ebisu Sta.

15 Daiwa Azabudai

53

Main investment area:
Five Central Wards ofTokyo
Focused investmentarea: Greater Tokyo
Major Regional Cities

Gaienmae Sta.

4

Omotesando Sta.

Oedo Line
Asakusa Line
Mita Line
Shinjuku Line
Yamanote Line
Saikyo Line
Chuo Line
Sobu Line
Keiyo Line
Yokosuka Lineand
Sobu Rapid Line

Aoyamaitchome Sta.

7

18 Daiwa Onarimon

23 Daiwa Nishi-Shimbashi

29 Daiwa Akasaka

31 Daiwa Azabu Terrace

53 Daiwa Meguro Square

Meguro Sta.

Osaki Sta.
50

(As of June 7, 2018)

Chuo-ku

1 Daiwa Ginza

37 Daiwa River Gate

2 Daiwa Ginza Annex

11 Daiwa Tsukijiekimae

12 Daiwa Tsukiji

13 Daiwa Tsukishima

14 Daiwa Nihonbashi Horidomecho

16 Daiwa Kyobashi

21 Daiwa Kodenmacho

24 Daiwa Kayabacho Building

Asakusa Sta.
Oshiage Sta.

Suidobashi Sta.

9

Akihabara Sta.

5

25 22

Kudanshita Sta.

47
46
45

27

21

14
Ningyocho Sta.

Chiyoda-ku

Nihombashi Sta.

Tokyo Sta.
Akasakamitsuke Sta.

Hibiya Sta.

Akasaka Sta.

12

Toranomon Sta.

29

Shibakoen Sta.

24 Suitengumae37

Chuo-ku

41

16

39 38

Ginza Sta.

Shimbashi Sta.
23
10
18

12

41 Kirin Nihonbashi Building 42 Daiwa Higashi-nihonbashi

Sta.

Chiyoda-ku

Hatchobori
Sta.

11
Tsukishima Sta.

13

6

15

39 Daiwa Hatchobori ekimae West

42

Otemachi Sta.

17

27 Daiwa Nihonbashi Hongokucho 38 Daiwa Hatchobori ekimae

Kinshicho Sta.

5 Daiwa Sarugakucho

9 Daiwa Misakicho

17 Daiwa Kojimachi 4-chome

22 Daiwa Jimbocho

25 Daiwa Jinbocho 3-chome

45 Daiwa Kanda Mikuracho Building

46 Daiwa Kanda East

47 Prime Kanda Building

8

Minato-ku
31

3

51 Daiwa Kamiooka

55 CONCURRED Yokohama

56 Daiwa Kitahama

ShinagawaSta.

49

Shinagawaku

49 Daiwa Shinagawa North

50 Daiwa Osaki 3-chome

56

51 55

I. Overview of Daiwa Office Investment Corporation

7

Internal Growth Measures
Realizing rent increases upon contract renewal and tenant replacement while working to heighten tenant satisfaction

Office Market Trends
Further improvements in vacancy rate are observed and rent levels are continuously increasing.

■ Office Building Rental Market of Tokyo■ Office Market Medium-term Forecast(Yen/tsubo)
24,000(%)
10.0

Average rents of existing buildings (left axis)
Vacancy rate of existing buildings (right axis)

22,000(Tsubo)500,000

8.0

20,00019,8776.0

18,0004.0

16,0002.55 2.0

14,000New supplies (Grade-A, etc.)
Floor area of new demands

New supplies (others)
Vacancy rate

(%)
10.0

New supplies (overall)

400,000

8.0

300,000

6.0

200,000

4.0

100,0002.0
0.00Predicted figures*-100,000

0.02001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20182001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(Source) Miki Shoji(Source) CBRE “Mid-term Office Market Outlook 2018~2022”*Predicted figures as of July 2018

■ Occupancy Rate

■ Rate of New Leases and Cancellations*

(%)
100.0

(%)
20.0

95.9
95.0

96.4

95.4

95.0

96.3 96.4

97.2 97.3

98.3 98.7

97.7 97.7

98.2

99.0

98.0
97.6
98.0 97.6

13.4
10.0

9.8

7.4
3.2

94.3

8.2

3.3

5.7

4.4

6.1 6.2
2.0

4.3

1.8

2.9 3.8 4.4 4.0

0.0
92.4
-3.4
-3.9

90.0

Occupancy rate (actual)
Occupancy rate (forecast)Occupancy rate (forecast)(as of disclosure in January 2018)

85.7

85.0

-2.0

-10.0

-20.0

-5.9

-7.3

-6.3 -5.3-2.4 -1.7 -1.6

-2.8
-6.1 -5.7-3.8 -3.6 -3.9 -3.3 -2.5

Rate of new leases
Rate of cancellations-14.7

1.6 1.7-2.1

Expected rate of new leases
Expected rate of cancellations

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period* Transition of rate of new leases and cancellation areas to the total rentable area.

Rental Business Status■ Average Contract Rent and Market Rent

■ Attribution Analysis/Monthly Contract Rent*(Yen/tsubo)
30,000(Million yen)100

27,000

90

2,250
2,200

82.30
83.52 80

24,00081.41

Decrease due totenants’cancellations

2,150
2,100
2,050

21,00070

18,00019,437 19,295
19,57460

15,000

Average contract rent (left axis)*
Unit rent index(Period-on-period comparison, right axis)**12,000

50

1,950
1,900

1,959

+12

Increasedue torent revisions

+99

-3

Increase due to
new leases

-213

–68
Increase due to
new acquisition

1,958

1,850
40

End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period* Average contract rent is average monthly contracted rent with tenants at the end of each fiscal period.
** Unit rent index is the earning rate of unit rent of individual properties indexed with the 7th Fiscal Period
as100.

8

2,000

Decreasedue torent revisions+171

Decrease due
to sales

1,800
End of 24th FP
monthly contract rent

End of 25th FP
monthly contract rent

* Monthly contract rent is the total of final rent from tenants contracting at the end of the Fiscal Period.
Monthly contract rent for Shinjuku Maynds Tower was adjusted to 6/7 of the total in 24th Fiscal Period,
while monthly contract rents for Shinjuku Maynds Tower and CONCURRED Yokohama were respectively
adjusted to 3/7 and 75/100 of the total in 25th Fiscal Period.

Status of Contract Renewal/New Lease■ Area of which Contract Ended/Will End In and Afterthe Fiscal Period Ended May 2018 (25th fiscal period)(Based on rentable area)■ Changes in Ratios of Areas with Rent Increase/Decrease/
Unchanged and Cancellation upon Contract Renewal
25th Period 3.2

(%)
30.0

Scheduled
25.0

24.0

23.7

20.0

19.3

15.6

51.7

40.4

7.8

48.8

44.4

6.6

53.4

3.9

42.6

0.2

49.0

5.0

19th Period

26.5

18th Period 4.8

8.6

17th Period

8.5

16th Period

10.0 4.6

25th Period

26th Period

27th Period

28th Period

29th Period(Note) The ratio of areas of which lease contracts are scheduled to be renewed in each fiscal period to thetotal rentable area (336,760.45m2) as of the end of May 2018 is indicated.

■ Changes in Rent Increase/Decrease Rate of Contract
Renewal Tenants (Sections)

5.0

0.0

0.0

4.5

2.5

-5.2 -6.5

-5.0

-7.0
-10.0

5.0
1.0

-7.0

9.8
4.3

-4.9

5.2
5.2
0.0

9.0
9.0

0.0

7.3
7.2

-5.1

6.1
6.1

8.1
8.1

7.8

0.0

0.0

0.0

7.8

70.8

20.0

6.6
80,000-15.0
Increase rate

-25.0

12.1

40.0

8.2

60.0
Unchanged

Increase

80.0
Cancellation

100.0
（%）

(Note 1) Of the increase in the 17th FP, 14.1% is due to some tenants switching from sublease agreements tomaster lease agreements and 7.9% is due to negotiations with tenants.
(Note 2) Decrease in the 25h FP is due to some tenants switching from sublease agreements to master leaseagreements.

-21.2

14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th
Period Period Period Period Period Period Period Period Period Period Period Period(Note 1) “Increase rate” and “Decrease rate” indicate the simple average of rent increase/decrease against
contract rents before renewals for lease contracts whose contract renewal periods have arrived in
the above periods and whose rent renewals have been agreed, rounded to the first decimal place.
(Note 2) Figures for “Rent increase/decrease rate” are obtained by dividing the total of contract rents after
renewal for lease contracts whose contract renewals have been agreed by the total of contract rents
before renewal, rounded to the fist decimal place.

96,294

New tenant (left axis)
Previous tenant (left axis)
Increase/decrease rate (right axis)

91,394
83,962
83,77275,943
14.9
69,262

59,04255,05460,000Rent increase/decrease rate

57.4
77.1

(Thousand yen)
100,000

4.2

Decrease rate

19.9

14.1*

Decrease

40,000

-22.7
-22.7

2.7

66.7

-10.2

-20.0

1.4

■ Increase/Decrease in Monthly Rent due to New Lease andIncrease/Decrease Rate (Compared to the previous tenant
for the same section)

(%)
15.0
10.0

0.7

61.1

7.9*

0.0

0.0

50.1

37.5

20th Period

10.0

2.9

24th Period

21st Period

15.0

49.9

23rd Period
22nd Period

21.0

43.8

29,97029,203

（%）
20.0

16.0

12.0

9.6

8.9

8.0

7.2

20,000

4.0

2.6
0

0.0

21st Period

22nd Period

23rd Period

24th Period

25th Period(Note) “New tenant” refers to the tenant who concluded a new lease contract in the respective fiscal period,and “Previous tenant” refers to the tenant, for the same section for which the new tenant concluded alease contract, which had been under a lease contract immediately before the new tenant.

Improvement in Financial Standing■ Monthly Rent Increase Due to Contract Renewal/New Lease(Financial Standing)(Thousand yen/month)
30,00025,00025,528Contract Renewal

6,680 21,804 21,309
7,432 12,521 17,004
14,246
18,847
14,376 766
5,855
12,747
14,371
6,438 13,479
3,988
9,020
11,1493,157 7,938
8,787
8,759
5,862
New Lease

20,00015,00010,000
5,000
0

19th
Period20th
Period21stPeriod22nd
Period23rd
Period24th
Period■ Increase in Dividend Resource Due to Improved Financial Standing
Simple19th 20th 21st 22nd 23rd 24th
25th averageof seven
Period Period Period Period Period Period Period fiscal
periods

Percentage of 6-month 0.7% 1.0% 0.8% 0.7% 1.4% 1.2% 1.2% 1.0%
Total Rent
conversion
Revenue(rents and
12-monthcommon area conversion 1.3% 2.0% 1.7% 1.5% 2.8% 2.4% 2.3% 2.0%
fees) (Note 1)
Growth rate of 6-month 1.5% 2.1% 1.8% 1.5% 2.9% 2.4% 2.3% 2.1%
conversion
dividend
resource
12-month 3.0% 4.3% 3.6% 2.9% 5.8%
4.9% 4.7% 4.2%
(Note 2)conversion

25th
SimplePeriod average ofseven fiscal periods(Note 1) The figures are calculated by dividing the amount obtained by multiplying the total of net increase in monthly rents due to contract renewal and new lease by 6, by rents and common area fees income in the immediately
prior fiscal period, rounded to the first decimal place.
(Note 2) The figures are calculated by dividing the amount obtained by multiplying the total of net increase in monthly rents due to contract renewal and new lease by 6, by net income in the immediately prior fiscal period, rounded
to the first decimal place.

I. Overview of Daiwa Office Investment Corporation

9

Internal Growth Measures“Bonji-Tettei”
Continuous internal growth and maximization of asset value through “Bonji-Tettei”“Bonji-Tettei”
Accurate grasp of present
situations◦Accurate understanding of the leasing market◦Grasping of needs and trends of occupying tenants through regular visits◦In-depth understanding of property features

Activities for internal growth◦Information gathering from brokers◦Implementing tenant satisfaction surveys and proposing improvement measures◦Periodical property examination

Realization of internal growth◦Maintenance of a stable occupancy rate by promptly filling vacancies◦Realization of stable management through solid relationship with tenants◦Securement of revenue based on well-planned medium- to long-term management

Aims to maximize asset value
Office Management Team
(7 members)

Aims at maximizing asset value
through efforts of the specialist
group by assigning personnel incharge to each property in DOI's
portfolio.

Hiroshi Udagawa Takafumi Ushiku Kotaro Ishii

Jun Arai

Chie Kamimura

Yuuki Kobatake

Jun Iwasaki

Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
Asset management
work history:
work history:
work history:
work history:
work history:
work history:
work history:
11 years 10 months
13 years 8 months
12 years 1 month
12 years 1 month
11 years 11 months
5 years 7 month
1 year 7 month

Construction Management
Team (5 members)
Investment Planning Team

Engineering: Formulation and implementation of construction planning of the assets
Middle office work: Budget and performance management for the portfolio(3 members)(Note) The numbers of members are the figures as of end of May 2018. “Asset Management work history” is the number of years engaged in the relevant work (as of end of May 2018) and does not indicate the number of years
employed at the asset management company.

Occupancy Status of Properties Subject to Leasing Improvement in the Fiscal Period Ended May 2018 (25th FP)■ Daiwa Kyobashi (Acquisition price: 3,460 million yen)

■ Daiwa Jinbocho 3-chome (Acquisition price: 3,550 million yen)

100.0(%)

99.5

90.0

100.0

100.0(%) 100.0
90.0

87.9

80.0

100.0

80.0

88.1

70.0

70.0

60.0

60.0
’17/5

’17/8

’17/11’18/2• Succeeded in capturing the needs for expansion of an IT-related company as a result oftargeting the needs for relocation as well as for nearby sub-offices as the property isnear Tokyo Station and has great accessibility with multiple routes available for use.
• 100.0% occupancy rate as of the end of May
100
90

’17/5

’18/5

’17/8

’17/11

’18/2

’18/5

• Succeeded in receiving tenancy application from an IT-related company in December byappealing the property’s great accessibility of being near Otemachi and having multiple
routes available for use, superior building age and its grade (100% occupancy rate).
Although a tenant will vacate in April, the occupancy rate will be maintained at 100%
100
without downtime.
• 100.0% occupancy rate as of the end of May
90

Leasing Highlight and Properties Subject to Leasing Improvement in the Fiscal Period ending November 2018 (26th FP)
80

80

70

70

Properties Subject to Leasing Improvement

10

60

60

■ Daiwa Minami-Aoyama (Acquisition price: 4,550 million yen)

■ CONCURRED Yokohama (Acquisition price: 38,100 million yen)

■ Square Daikanyama Building (Acquisition price: 2,280 million yen)

• The property’s advantage is its
refined design suited to Aoyama
and its massive appearance.
Grasped need for floor expansionof its existing tenant throughdaily communication andsucceeded in capturing the needsmoothly.
• Concluded contract withdowntime of just around two
weeks.

• Needs for offices open to
customers and business bases are
anticipated due to its locational
characteristics of being very close
Yokohama Station where multiple
routes are available, as well as theneed for relocation to integrate
offices as the property offers large
floor area.
• Aim for early leasing while
maintaining unit price by utilizing
free rent when needed.

• Needs for leasing the entire building fromcompanies that value area image, trendsensitiveness, etc. such as apparel,
advertisement or design companies, as well asfrom foreign companies or companies inbusinesses that tend to concentrate in the
Shibuya area such as telecommunications, andfrom educational corporations are anticipated.
• Aim to capture needs by appealing the point that leasing
the entire building is possible in addition to the scarcity ofvacant floors as much as approximately 500 tsubos amidst
lowering vacancy rates in Shibuya and surrounding areas.

Aim of Large-Scale Repair Work and Cases in 25th Fiscal Period■ Aim of Large-Scale Repair Work
Establish medium- to long-term plans in an aim to maintain or recover properties’ functions, consider work by carefully examining the following factors and implement

1. Cost large-scale
reduction
appropriate
repair work in a timely manner.
2. Value enhancement
3. Response to tenant needs
4. Response to environmental quality improvement
5. Response to social changes

Work leading to reduction of costs borne by owners such as reduction of utility charges through replacement of
air-conditioning equipment, utilization of water reuse equipment, etc.
Work aiming to improve future profitability through enhancing properties’ competitiveness through such as
replacement of air-conditioning equipment
Work for customer satisfaction to improve environment for tenants such as renovation of air-conditioning
equipment and restrooms
Work leading to improving environmental performance such as introduction of green lease (installation of LED
lighting in areas exclusively occupied by tenants)
Work in response to social changes such as installation of IT-related equipment and barrier-free floor plans■ Cases in 25th Fiscal Period

Value enhancement through replacement of air-conditioning equipment
Integral Tower• Replaced central air conditioners with individual air conditioners.
• Realized rent rise by satisfying tenant needs through improving tenant’s convenience in using air conditioners. This will also lead to reduction of utility charges forthe owner.
• Realized higher appraisal value due to improved profitability.
Impact on unit rent
Realized rent
increase greaterthan the increase inmarket rent unit
price (for large-scalebuildings in 23
Wards of Tokyo)
through replacementof air conditioning

Impact on appraisal value
1.15
1.1
1.05

Integral Tower
Large-scale buildings in
23 Wards of Tokyo
Announcement of
replacement work(from around June 2016)

1
0.95(Note) Figure at the end of 21st FP is stated as 1.
21st FP 22nd FP 23rd FP

24th FP

25th FPAppraisal value as of theend of 25th Fiscal Period
increased by 4.1% fromthe end of the previous
fiscal period (no change
in cap rate). Contributed
to improving property
value through enhancing
profitability.

(Billion yen)
Increasing
23.0
Lowering cap rate rental revenues
0.8
21.0
0.5
19.0
20.5
19.2 2.6% 19.7 4.1%
17.0
15.0
13.0
11.0
9.0
7.0
5.0
23rd FP
24th FP
25th FP

Value enhancement through changing the usage
Daiwa Kanda East
• As the 9th floor was used as residences at the time of acquisition (January 2018), the 9th floor was calculated as vacant rooms in the medium-term expected NOI yield (4.5%).
• Implemented construction work to change the 9th floor to a rental office floor in June and July 2018. The 9th floor is expected to start operation as office during the26th Fiscal Period.
• By implementing this value enhancement work, the medium-term expected NOI yield is expected to increase to 4.9% (assumed occupancy rate of 98.1%) from the initial
4.5% (assumed occupancy rate of 90.4%).

Change inusage

Residence

OfficeCost recovery period

about 3.3 years
Floor plan of 9th floor

Reduction of cost (utility charges) by utilizing unused water
Shinjuku Maynds Tower

Daiwa River Gate

Reduce the amount of tap water usage by utilizing
rainwater, etc. for flushing toilets and water
Cost comparison(Million yen)
300
250

150
100
50
1st year

2nd year(Thousand yen)
35,000

The result is
reduction of
approximately
140 million yen ofcosts in 5 years(expected toreduce costs by
28 million yen
annually)

Prior
Forecast

200

0Reduced the amount of tap water usage by utilizing surplus
water emitted from the compressor unit on the rooftop due
to humidity and improving water usage efficiency.

3rd year

4th year

5th year

30,00025,000

Cost comparison
The result is areduction of
approximately
21.5 million yen
of costs in 5
years (expected
to reduce costs
by 5.1 million yen
annually)

Prior
Forecast

20,00015,00010,0005,000

Installed unused water
filtering equipment0

1st year

2nd year

3rd year

4th year

5th yearI. Overview of Daiwa Office Investment Corporation

11

External Growth Measures
Investment in selectively-chosen, high-quality competitive properties even in a harsher acquisition environment

Trading Performance in 25th Fiscal Period■ Asset Replacement

Acquired two properties for 42,300 million yen in total
CONCURRED
Yokohama

Shinjuku Maynds
Tower(Note 1)

Daiwa Kanda East

75/100 of quasi
co-ownership interest

Acquisition Date
Acquisition PriceAppraisal Value (Note 2)

Transferred two properties for 70,800 million yen in total

January 11, 2018
38,100 million yen
39,300 million yen

3/7 of co-ownershipinterest

January 12, 2018
4,200 million yen
5,000 million yen
Kanda Higashi
KanagawaLocation/Distance to Kinko-cho,
Matsushitacho,ku,Yokohama-shi,
StationTokyo/2.0
Kanagawa/5.0 minutes Chiyoda-ku,
minutes
Construction Date/
February 29,
February 16,
Building Age (Note 3)
2008/10.2 years
2005/13.2 years
NOI Yield (Note 4)
4.0%
4.4%

42,300 million yen
44,300 million yen

4.1%

Transfer Date
Sale PriceAppraisal Value (Note 5)

February 28, 2018
62,500 million yen
62,500 million yen

Location/Distance toStationYoyogi, Shibuya-ku,
Tokyo /1.0 minuteConstruction Date/
Building Age (Note 3)
NOI Yield (Note 6)

September 23,
1995/22.7 years
3.0%

Daiwa Meieki
Building

December 20, 2017
8,300 million yen
7,990 million yen
Meieki-Minami,
Nakamura-ku, Nagoya
City, Aichi/7.0 minutes
December 20,
2007/10.4 years
4.5%

70,800 million yen
70,490 million yen

3.1%(Note 1) DOI changed the name of Nippon Manpower Building to Daiwa Kanda East on July 1, 2018.
(Note 2) As of December 1, 2017.
(Note 3) As of May 31, 2018.
(Note 4) Indicates figure calculated by dividing the annual income assumed by using the occupancy rate at the time of acquisition by acquisition price, based on leasing agreement for the property at the time ofacquisition and in consideration of the taxes and other costs that may be incurred.
(Note 5) As of November 30, 2017. Appraisal Value of Shinjuku Maynds Tower is calculated as 3/7 of co-ownership interest by using the figures for 6/7 of co-ownership interest.
(Note 6) Indicates figure calculated by dividing NOI of 24th Fiscal Period by the sale price.

Trading Performance in 26th Fiscal Period■ Newly Acquired Properties

Prime Kanda Building [Acquired on June 7, 2018]

to be acquired
Kita-Shinagawa Gotenyama Building [Scheduledon September 13, 2018]
Daiichi Keihin

Akihabara Station

Iwamotocho Station

Daiwa Kanda
Mikuracho Building

Kanda Suda-cho,
Chiyoda-ku, Tokyo
Site Area (Note)
302.42m2
Structure/Floor
S/RC/B1/10F
Total Floor Area (Note) 2,435.80m2
Acquisition Price
1,800 million yen
Location

million yen
Appraisal Value 1,940(as of May 1, 2018)
Construction Date August 1990
Occupancy Rate 100.0%(as of acquisition)

Number of Tenants 6 (as of acquisition)• Located a 1-minute walk from Iwamotocho Station on the Toei Subway
Shinjuku Line, a 7-minute walk from Akihabara Station on the JR Yamanote
Line and Keihin Tohoku Line, a 4-minute walk from Akihabara Station on
the Tokyo Metro Hibiya Line, an 8-minute walk from Kanda Station on the
JR Yamanote Line, Keihin Tohoku Line and Chuo Line as well as a 6-minute
walk from Kanda Station on the Tokyo Metro Ginza Line.
• A leasable area of approximately 70 tsubos per floor is secured and isequipped with OA floors, individual air conditioning and other facilities.
• Since the office space is without pillars, flexible layouts and efficient use ispossible.
(Note) Indicates the figure for the entire building.

12

e/JR Tokaido M
Tokaidoain Line
Shinkansenanote LinJR YamTokyo Metro Marunouchi Line

Tokyo Marriott Hotel
Kanda Station

Kita-Shinagawa,Shinagawa-ku, Tokyo
Site Area
602.41m2
Structure/Floor S/SRC/8F
Total Floor Area 2,897.64m2
Acquisition Price 2,500 million yen
Locationue

Nippon Manpower Buildingin LinePrime Kanda
Building

Line
HibiyaMetro
Tokyo

JR Chuo Line

Awajicho
Station

Kyu-Kaigan Aven

Toei Shinjuku Line
Ogawamachi
StationShinagawa
StationMa
KeikyuJR Ya
Keihin manote Line/
TohokuLine

Akihabara Station

Daiwa
Shinagawa North

Kita-Shinagawa
StationKita-Shinagawa
Gotenyama Building

Appraisal 2,620 million yen(as of June 1, 2018)
Value
Construction July 1992
Date
Occupancy 86.2%(as of the scheduled acquisition date)
Rate
Number of 4
(as of the scheduled acquisition date)
Tenants• Located a 10-minute walk from Shinagawa Station on the JR Yamanote
Line, JR Keihin Tohoku Line and JR Tokaido Line and a 1-minute walk from
Kita-Shinagawa Station on the Keikyu Line.
• A leasable area of approximately 100 tsubos per floor is secured with 2,550mm typical floor celling height, 50 mm OA floors and facilities including
individual air conditioners.
• It has rectangle-shaped (roughly regular-shaped) rental spaces with sidecore design, thus offering excellent layout flexibility and usability.

Current Portfolio and Acquisition Policy
DOI will invest in competitive properties based on in-depth data analysis upon careful selection from among the vast information on properties obtained
through diverse sourcing.
■ Distribution Chart of Portfolio Properties■ Acquisition Policy* Distance to station is indicated by calculating 80m as
one minute

Building age (Years)
60• Place priority on the Five Central Wards of Tokyo and equivalent areas.
• Thoroughly select properties in view of actual demand toward location (distance tostation, station power, crowd attraction, surrounding environment), building specs, etc.

55

• Target properties to improve stability and profitability of our existing portfolio.

50

Properties acquired in the 25th FP
Properties (schedule to be) acquired in the 26th FP
Properties sold in in the 25th FP
Properties acquired after sponsor change
Properties acquired before sponsor change• Invest in buildings with an age of less than 25 years.
45■ Sale Policy

40• Consider replacement of properties if necessary through sale in light of properties’
future competitiveness, profitability, etc.

35

■ Number of Properties Reviewed for Acquisition(cases)
500

416

400
300

296

264

0

17

26

15

100

288

18

12

Daiwa Kanda East

60

16th Fiscal 17th Fiscal 18th Fiscal 19th Fiscal 20th Fiscal 21st Fiscal 22nd Fiscal 23rd Fiscal 24th Fiscal 25th Fiscal
PeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodCONCURRED Yokohama

10

40

29

20

19

15

320

276

31

23

20

80

344

289

200
100

393

356

Kita-Shinagawa
Gotenyama Building

25* Number of gross proposals (cases)

Number of properties reviewed (left axis)
Number of properties reviewed in detail (right axis)

Prime Kanda Building

30

20

5

0

0

0

1

2

3

4

5

Daiwa Meieki

6

11
8
9
10
Distance to station (minutes)

7

Changes in Asset Size and Trading Performance
Aim to achieve medium-term goal of an asset size of 500 billion yen
80.0 (%)(Billion yen) 550
Total Acquisition Price

LTV (based on total assets) (right axis)

500.0

500

445.7

450

350

311.3

300

269.1

278.1

100

313.2

34.2

34.0
25.5

28.1

314.9

332.0

287.3

250

150

469.3

34.4

37.5

28.9

Acquisition property

Acquisition property

Acquisition property• Daiwa Nishi-Shimbashi• Daiwa Kudan• E SPACE
TOWER• Daiwa Osaki
3-chome

352.7

364.0

439.4
60.0

50.0

43.0

40.6

70.0

387.5

44.3
40.2

43.3

41.7

Acquisition property

Acquisition property

Acquisition property• Daiwa Shibuya
Dougenzaka• Daiwa Akasaka• Daiwa Shibuya
Miyamasuzaka• Daiwa Azabu
Terrace• Daiwa Kitahama• Daiwa River Gate
• Daiwa Hatchobori
ekimae• Daiwa Hatchobori
ekimae West

Acquisition property

Acquisition property

Acquisition property

Acquisition property

Acquisition property

Acquisition property•50
Daiwa Jimbocho• Daiwa Kayabacho• Daiwa Jinbocho3-chome• Daiwa
Nihonbashi
Hongokucho• shinyon curumu• Daiwa Meieki• Daiwa Kamiooka• Integral Tower

0

469.3

413.2

400

200

458.3

467.7

• Daiwa Ebisu
4-chome• LAQUAS Higashi
Shinjuku• Daiwa Aoyama• Shinsen Place• Glass City Shibuya• Daiwa Meguro
Square

42.3

42.2

42.3

40.5

40.0

Acquisition property• Daiwa
Higashinihonbashi• SquareDaikanyama
Building• Shinjuku West
Building• Daiwa Ogikubo

Acquisition property

Acquisition property• Daiwa
Nishi-Shinjuku• Kirin Nihonbashi
Building• Daiwa Kanda
Mikuracho
Building

Acquisition property• CONCURRED
Yokohama• Daiwa Kanda East

9th
10th
11th
12th
13th
14th
15th
16th
17th
18th
19th
20th
21st
22nd
23rd
24th
25th
Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period Fiscal Period

30.0

20.0

10.0

0.0
Mediumterm goal

I. Overview of Daiwa Office Investment Corporation

13

Effective Use of Asset Replacement and 30 Billion Yen of Surplus Funds
Implemented large-scale asset replacement totaling 117.4 billion yen in acquisitions and divestments conducted in 25th Fiscal Period and 26th Fiscal Period■ Changes in Major Indices of Portfolio
Various major indices of portfolio increased over one and a half years from 24th Fiscal Period by asset replacement, internal growth and effective use of 30
billion yen of surplus funds.
Major IndicesEnd of 24th FP ended
November 2017

Properties (scheduled to be) acquired
during 25th FP ended May 2018 and26th FP ending November 2018

Properties sold during 25th
FP ended May 2018

After Asset Replacement
Forecast for 27th FP ending
May 2019

Number of property (Note 1)

54 properties

4 properties

2 properties

57 properties

Total Assets

469,341 million yen

46,600 million yen

72,200 million yen

443,741 million yen

NOI Yield (Note 2)

4.0%

4.2%

3.2%

4.4%

Ratio of Investment inShinjuku Maynds Tower (Note 3)

28.5%

15.1%

640,587 yen

654,225 yen

42.3%

40.3%

Investment Units Issued
and Outstanding

497,869 units

491,877 units

Distribution per unit

10,957 yen

12,000 yen(total acquisition price basis)

NAV per unit (Note 4)
LTV (Note 5)(Note 1) Among the properties sold during the 25th FP, Shinjuku Maynds Tower was sold partially and thus counted the remaining ownership as one property in the number of properties at the end of the 27th FP.
Only the properties which transaction contracts are concluded and presently announced are reflected in the number of properties at the end of the 27th FP.
(Note 2) NOI Yields are calculated as follows. Numerator: Annualized NOI does not include costs related to DOI. Figure for the end of the 24th FP is the annualized actual NOI, figure for the NOI of properties acquired
during the 25th FP and the 26th FP is the expected NOI for the 27th FP annualized, figure for the NOI of assets sold during the 25th FP is the actual NOI of the 24th FP annualized, and figure as of the end of
the 27th FP is the forecast NOI for the fiscal period annualized. Denominator: Book value as of the end of the 24th FP is the book as of the end of the fiscal period, and book value as of the end of the 27th FP
is calculated by adding properties acquired during the 26th FP ((scheduled) acquisition price) to the book value as of the end of the 25th FP.
(Note 3) The ratio of investment in Shinjuku Maynds Tower is the ratio of Shinjuku Maynds Tower’s acquisition price to the total acquisition price.
(Note 4) NAV per unit = (Unitholders’ capital + Total appraisal value at the end of fiscal period − Total property book value at the end of fiscal period) / Number of investment units issued and outstanding. NAV per unit
as of the end of 27th FP is calculated based on NAV per unit as of the end of the 25th FP.
(Note 5) LTV as of the end of the 27th FP is calculated by using total assets as of the end of the 25th FP as basis and by using 187,950 million yen of total interest-bearing liabilities in the 28th FP as a premise.

■ Use of 30 Billion Yen of Surplus Funds• 30 billion yen of surplus funds generated with the asset replacement in the 25th FP.
• As a result of using approximately 23.32 billion yen in total, the contribution to the distribution per unit is 383 yen in total.
Use of Funds

Allot to1. acquisition of
new properties
Allot to
2. repayment of
loans
3.

Allot to sharebuybacks
Total[Prime Kanda Building: Kanda Suda-cho, Chiyoda-ku (1-minute walk from Iwamotocho Station on the Toei Subway Shinjuku Line)]
Acquisition price (Note 1): 1.8 billion yen, NOI yield: 3.8% (at the time of acquisition (Note 2)) → 4.2% (medium-term projection (Note 3))
Structure/Floor: S/RC/B1/10F[Kita-Shinagawa Gotenyama Building: Kita-Shinagawa, Shinagawa-ku (1-minute walk from Kita-Shinagawa Station on the Keikyu Line)]
Acquisition price (Note 1): 2.5 billion yen, NOI yield: 4.1% (at the time of acquisition (Note 4)) → 4.1% (medium-term projection (Note 5))
Structure/Floor: SRC/S/8F

Calculation: Contribution
to distribution per unit
27th FP ending May 2019+146 yen[Repayment/early repayment of 15.35 billion yen in total to 8 lenders]• Repayment of 1.85 billion yen in total to 3 lenders (implemented on February 28, 2018)• Early repayment of 2.00 billion yen to 1 lender (implemented on March 30, 2018)• Early repayment of 11.50 billion yen in total to 5 lenders (implemented on April 27, 2018)+103 yen• Acquisition period: from March 1, 2018 to May 18, 2018
• Number of investment units acquired: 5,992 units• Total acquisition price: 3,675,523,000 yen+134 yen

Approx. 23.32 billion yen+383 yen(Note 1) Excluding acquisition costs, consumption tax, etc.
(Note 2) Indicates figure calculated by dividing the annual income assumed by using the assumed occupancy rate (100.0%), based on leasing agreement for the property at the time of acquisition and in considerationof the taxes and other costs that may be incurred, and does not represent forecast figures for the current period or the next period onward.
(Note 3) Indicates figure arrived by dividing estimate figure for normal operation period (with assumed occupancy rate of 96.0%) after acquisition, which is obtained by deducting rent business-related expenses fromthe rent revenue assumed under rents over a medium term, by acquisition price and does not represent forecast figure for the current period or the next period onward.
(Note 4) Indicates figure calculated by dividing the annual income assumed by using the assumed occupancy rate (96.0%), based on leasing agreement for the property at the time of acquisition and in considerationof the taxes and other costs that may be incurred, and does not represent forecast figures for the current period or the next period onward.
(Note 5) Indicates figure arrived by dividing estimate figure for normal operation period (with assumed occupancy rate of 96.0%) after acquisition, which is obtained by deducting rent business-related expenses fromthe rent revenue assumed under rents over a medium term, by acquisition price and does not represent forecast figure for the current period or the next period onward.

14

Financial Conditions
Reduce refinancing risk by extending borrowing periods and diversifying repayment dates

Status of Interest-Bearing Liabilities (As of May 31, 2018)
During the 25th Fiscal Period, DOI took out short-term borrowings of 39 billion yen in total to raise funds for the acquisition of new
properties, and also conducted early repayment of 52.5 billion yen in total of 13.5 billion yen of existing loans and the aforementioned
short-term loans.
In addition, DOI refinanced 5.0 billion yen for 6.85 billion yen of matured existing loans, successfully diversifying repayment dates. DOI
will continue to focus on stable financial management.
■ Interest-Bearing Liabilities■ Change in Remaining Years at Time of
Procurement of Interest-Bearing Liabilities(Billion yen) 280

70.0 (%) (Years) 10.0
Interest-bearing liabilities (left axis)

240

60.0

LTV (based on acquisition price) (Note) (right axis)

200

Medium-to-long term, upper-limit LTV target range

160

9.0
8.0

50.0

7.0

40.5 40.0

6.0

120
80

5.0 (Years)

Average years remaining at the period end (right axis)
Average remaining years at the time of procurement
during the 25th Fiscal Period (left axis)
Average remaining years at thetime of procurement during the25th Fiscal Period(excluding short-termborrowings)(left axis)

4.5

4.2
4.0
7.9
3.5
3.0

5.0

2.5

30.0

4.0

2.0

20.0

3.0

1.5

2.0

1.0

40

10.0

0

0.0
End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of End of
8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period

1.0

1.4

0.0

0.5
0.0

13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th
Period Period Period Period Period Period Period Period Period Period Period Period Period(Note) LTV (based on acquisition price): Total interest-bearing liabilities / Total acquisition price of properties(Note) Dotted line indicates average remaining years at the time of procurement during
the 25th Fiscal Period excluding short-term borrowings.

■ Diversification of Repayment Dates■ Balance of Borrowings by Financial Institution(Million yen)
20,000Investment corporation bond

16,00012,000

8,000

4,000

0
26th 27th 28th 29th 30th 31st 32nd 33rd 34th 35th 36th 37th 38th 39th 40th 41st 42nd
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period Period■ Ratio of Fixed- to
Floating-Rate Borrowings■ Ratio of Long- to
Short-Term Liabilities

End of 25th
Fiscal Period

End of 25th
Fiscal Period

23.8%

76.2%

8.2
%

91.8%

Fixed interest rates

Long-term borrowings

Floating interest rates

Short-term borrowings andcurrent portion of long-termborrowings■ Status of Rating
Rating agency

Rating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)

Target rating

LenderSumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank
Development Bank of Japan
MUFG Bank, Ltd.
Mizuho Bank
Shinsei Bank
Resona Bank
The Bank of Fukuoka
Mizuho Trust and Banking
Kansai Urban Banking Corporation
Aozora Bank
Nishi-Nippon City BankThe Gunma Bank
The 77 Bank
The Musashino Bank
Tokio Marine & Nichido Fire Insurance
The Yamaguchi BankORIX Bank Corporation
Nippon Life Insurance Company
The Kagawa Bank
The Higashi-Nippon Bank
Taiyo Life Insurance Company
Fukoku Mutual Life Insurance
Investment Corporation Bonds
Total

RatingBalance (mm yen)

36,40022,50021,75020,50018,40014,00012,500
5,500
5,500
5,000
3,000
3,000
2,500
2,000
2,000
2,000
2,000
1,500
1,300
1,000
1,000
300
200
5,100
183,850

Share

19.8%
12.2%
11.8%
11.2%
10.0%
7.6%
6.8%
3.0%
3.0%
2.7%
1.6%
1.6%
1.4%
1.1%
1.1%
1.1%
1.1%
0.8%
0.7%
0.5%
0.5%
0.2%
0.1%
100.0%

Rating outlook

Issuer rating

A+

StableLong-term issuer rating

AA−

Positive

I. Overview of Daiwa Office Investment Corporation

15

Description of Asset Manager

Organization of Asset Manager (As of July 1, 2018)■ Description■ Directors and Auditors

Company Name
Address
Established
Paid-in Capital
President
Board of Directors
No. of Employees
Registration of Financial
Instruments Business Operator
Building Lots and Buildings
Transaction Business License
Discretionary Agent for Real
Estate Transaction Approval
Association MembershipDaiwa Real Estate Asset Management Co., Ltd.
6-2-1 Ginza, Chuo-ku, Tokyo
October 21, 2004
200 million yen
Akira Yamanouchi
10
Executive directors: 5; Executive auditor: 1
Non-executive directors: 2; Non-executive auditors: 2
71 (excluding dispatched employees)
Registration No. 355 (Financial Instruments), Director-General,
Kanto Local Finance Bureau (Kinsho)
License No. (3)-83920, Governor of Tokyo
License No. 34, Minister of Land, Infrastructure, Transport andTourism
Member of The Investment Trusts Association, Japan
Member of Japan Investment Advisers Association
Member of Type II Financial Instruments Firms Association

President and Representative Director
Vice President and Representative
Director
Vice President and Representative
Director
Executive Managing Director
Director
Director (non-executive)
Director (non-executive)
Auditor
Auditor (non-executive)
Auditor (non-executive)■ Organizational
Chart

Akira Yamanouchi
Yuji Shinotsuka
Yoshiki Nishigaki
Toshio Fukushima
Hajime Imbe
Mikita Komatsu
Naoya Otani
Tamaki Shibayama
Morimasa Matsuda
Shinji Kiso

Shareholders’ Meeting
Corporate Auditors
Board of Directors

Compliance Committee

Compliance Officer

Investment Committee（*）
President andRepresentative Director
Acquisition and Asset Management Division
Acquisition
Department
OfficeInvestment Team
Residential
Investment Team
Healthcare
Investment Team
Hotel
Investment team

Origination
Department

Private Fund Division

Asset Management
Department
OfficeManagement Team
Residential
Management Team
Healthcare
Management Team
Hotel
Management team
Investment
Planning Team
Construction
Management Team

Private FundManagement Department

Internal Control Office

Corporate Division
Customer Relations
Department

Administration
Department

Finance
Department

Corporate Planning
Department

Finance Team
Accounting TeamManagement Team

* Set up separately for each
investment corporation

Structure
Asset Manager
General Administrator
related to the operation of theadministrative instruments
Daiwa Real Estate AssetManagement Co., Ltd④①

Investment Corporation②

General Administrator
Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

General Meeting of Unitholders
Officers
Executive Director: Yoshimi Murakami
Supervisory Director: Takayuki Hiraishi
Supervisory Director: Hiroshi Sakuma

Supporting Company

Accounting Auditor

Daiwa Securities Group Inc.

KPMG AZSA LLC① Asset management contract/General administration affairs contract related to operationof administrative instruments② General administrative affairs contract/Asset custodian contract③ Unitholder register, etc. management contract/Special account management contract③⑤

Manager of Unitholder
Registry, etc.
Special Account Management
Institution
Sumitomo Mitsui Trust Bank, Limited

General Administrator(Investment Corporation Bonds)
Sumitomo Mitsui Banking Corporation
Resona Bank, Ltd.

④ Sponsor support agreement⑤ Fiscal agency agreement(Note) The specified affiliated juridical person (meaning a specified affiliated juridical person as provided in Article 12, Paragraph 3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Specified
Securities (Ordinance of the Ministry of Finance No. 22 of 1993; including amendments thereto)) of DOI is Daiwa Securities Group Inc. Daiwa Securities Group Inc. is the Asset Management Company’s parent
company (meaning a parent company as stipulated in Article 8, Paragraph 3 of the Ordinance on Terminology, Forms and Preparation Methods of Financial Statements, etc. (Ordinance of the Ministry of Finance
No. 59 of 1963; including amendments thereto))16II. Asset Management Report
1. Management Status and Other Performance Highlights Data
Fiscal Period

25th Period 24th Period 23rd Period 22nd Period 21st Period

Dec. 1, 2017 From June 1, 2017 From Dec. 1, 2016 From June 1, 2016 From Dec. 1, 2015
( FromTo May 31, 2018 )( To Nov. 30, 2017 )( To May 31, 2017 )( To Nov. 30, 2016 )( To May 31, 2016 )(1) Operating Performance(Millions of yen, except per unit data or where otherwise indicated)
Operating revenues
13,441
12,735
12,547
12,85312,363
Rental revenues
12,86912,71812,513
12,687
11,948Operating expenses
6,762
6,558
6,414
6,710
6,255
Property-related expenses
5,410
5,279
5,151
5,433
5,014
Operating income
6,679
6,177
6,133
6,143
6,108
Ordinary income
5,888
5,456
5,360
5,325
5,327
Net income
5,887
5,455
5,359
5,325
5,250
(2) Properties, etc. (as of end of period)
Total assets
467,040
483,173483,731483,451476,690[period-on-period percentage changes][−3.3%][−0.1%][+0.1%][+1.4%][+3.5%]
Interest-bearing liabilities
188,950
204,300
204,300
204,300
206,300
Net assets
253,676
256,796
256,561
256,517
247,720[period-on-period percentage changes][−1.2%][+0.1%][+0.0%][+3.6%][+0.0%]
Note 2
247,876
251,552
251,552
251,552
243,404
Unitholders’ capital, net(3) Distributions
Total distribution amount
5,484
5,455
5,359
5,325
5,086
Dividend payout
93.2%
100.0%
100.0%
100.0%
96.9%(4) Per Unit Information
Total number of units issued (units)491,877
497,869
497,869
497,869
484,000
Net assets per unit (yen)515,731515,790
515,318
515,231511,819
Distribution per unit (yen)11,15010,957
10,764
10,695
10,508Distribution amount from earnings per unit (yen)11,15010,957
10,764
10,695
10,508Distribution amount in excess of earnings per unit (yen)
–
–
–
–
–
(5) Financial Indicators
1.2%
1.1%
1.1%
1.1%
1.1%
ROA
Notes 3and4[annual rate][2.5%][2.3%][2.2%][2.2%][2.3%]
2.3%
2.1%
2.1%
2.1%
2.1%
ROE
Notes 4and 5[annual rate][4.6%][4.2%][4.2%][4.2%][4.2%]
Capital ratio
54.3%
53.1%
53.0%
53.1%
52.0%
[period-on-period percentage changes][+1.2%][+0.1%][−0.0%][+1.1%][−1.8%]LTV (loan to value)
40.5%
42.3%
42.2%
42.3%
43.3%
Note 6
Property leasing cash flows (NOI)
9,231
9,208
9,133
9,004
8,660
(6) Other Referential Information
Number of investment properties
55
54
54
53
50
Note 7
606
580
577
558
543
Number of tenants
340,144.07 338,377.31 338,436.22 336,722.04 328,027.44
Total rentable area (m2)
Note
8
99.0%
98.2%
97.7%
97.7%
98.7%
Occupancy rate
Depreciation
1,772
1,769
1,771
1,750
1,726
Capital expenditures
1,564
536
824
993
517
(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)Operating revenues, etc. do not include consumption taxes, etc.
Unitholders’ capital, net: Unitholders’ capital − Deduction from unitholders' capital
ROA: Ordinary income ÷ [(Total assets at beginning of period + Total assets at end of period) ÷ 2] × 100
Figures for the 21st Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 22nd Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 23rd Fiscal Period are the annualized figures calculated based on 182 days of management.
Figures for the 24th Fiscal Period are the annualized figures calculated based on 183 days of management.
Figures for the 25th Fiscal Period are the annualized figures calculated based on 182 days of management.
ROE: Net income ÷ [(Net assets at beginning of period + Net assets at end of period) ÷ 2] × 100
Property leasing cash flows (NOI): Rental revenues − Property-related expenses + Depreciation
Number of tenants is the number of end tenants. When there is a tenant occupying multiple buildings, the concerned tenant iscounted and stated for each individual building.
Occupancy rate: Total leased area ÷ Total rentable area

II. Asset Management Report17

2. Developments in Asset Management in the Fiscal Period under Review(1) Brief History of the Investment Corporation
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred
to as “DOI”) was established on July 11, 2005 in accordance with the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951; including amendments thereto) with Daiwa Real Estate AssetManagement Co., Ltd. (former name K.K. daVinci Select) (the “Asset Manager”) as the organizer. After its
establishment, DOI implemented an additional issuance of investment units through a public offering (99,600
units) on October 18, 2005 and then listed on the Tokyo Stock Exchange, Inc. (TSE) Real Estate Investment
Trust Section (stock code: 8976) on the following day.
Though initial assets under management were 79,573 million yen (sum total of acquisition price),
subsequent activities, such as additional acquisition of properties and replacement of portfolio properties,
resulted in the assets under management amounting to 439,442 million yen as of the last day of May 2018.
DOI strives to secure stable revenue and sustained growth of the investment assets based on a clear
portfolio development policy of specializing in investment in office buildings, with a particular focus on
investment in a total floor area of more than about 2,000m2 situated in downtown Tokyo, as well as throughdedicated efforts to heighten tenant satisfaction levels.
(2) Investment Environment and Management Performance(A) Investment Environment
The Japanese economy during the fiscal period under review saw real GDP growth rate (Second
Preliminary Estimates) for January to March 2018 at an annual rate of -0.6%, indicating a temporary
standstill in the recovery trend that had continued for eight consecutive quarters under the ongoing
quantitative/qualitative monetary easing policy by the Bank of Japan.
In the office building leasing market in central Tokyo, with new supply having settled down, the vacancy
rate for existing large buildings, the overall vacancy rate that includes small- to medium-sized buildings
also continues to be on an improving trend. The drop in the vacancy rate has led to an increase in officerent in some areas, and the market as a whole continues to see increase in rent, albeit slight.
For the office building transaction market, a strong appetite for property acquisitions continued among
real estate companies, funds (including J-REITs) and oversea investors with the continuing proactive
lending attitude by financial institutions.
(B) Management Performance
In view of increasing the ordinary EPS (EPS (net income per unit) after deducting gain on sales fromproperties) over the medium to long term, DOI continued to work on “external growth,” which aims toboost revenue through acquisition of properties, and “internal growth,” which aims to maximize income
generating from owned properties.
Concerning external growth, DOI acquired “CONCURRED Yokohama” (acquisition price: 38,100 million
yen) and “Daiwa Kanda East Building” (Note) (acquisition price: 4,200 million yen) in January 2018.
Furthermore, DOI divested “Daiwa Meieki Building” in December 2017, and three-sevenths out of sixsevenths of co-ownership interests in “Shinjuku Maynds Tower” in February 2018. As a result, DOI’s
assets under management as of the end of the 25th Fiscal Period (May 31, 2018) totaled 55 properties,
the sum total of acquisition prices of which amounted to 439,442 million yen.
Concerning internal growth, while the office leasing market remained strong, DOI conducted proactive
leasing, such as capturing needs for floor expansion within the same property through strengthening
relationships with existing tenants and reinforcing collaboration with leasing brokers and property
managers. Consequently, the occupancy rate as of the end of the 25th Fiscal Period (May 31, 2018) was
99.0%.
(Note) The name of Nippon Manpower Building was changed to Daiwa Kanda East Building on July 1, 2018.

18

(3) Overview of Capital Procurement(A) Procurement of Capital for New Property Acquisitions and Repayment of Borrowings
In the 25th Fiscal Period, DOI made the following borrowings to fund the acquisition of new properties
and the repayment of borrowings.
・DOI took out loans of 39,000 million yen in total from Sumitomo Mitsui Banking Corporation, Sumitomo
Mitsui Trust Bank, Ltd., Mizuho Bank, Ltd. and MUFG Bank, Ltd. on January 11, 2018 to fund theacquisition of a new property (CONCURRED Yokohama) acquired on the same day.
・DOI took out loans of 5,000 million yen in total from Sumitomo Mitsui Trust Bank, Ltd. on February 28,
2018 to fund the repayment of loans of 6,850 million yen borrowed from Sumitomo Mitsui Trust Bank,
Ltd., ORIX Bank Corporation and The Higashi-Nippon Bank, Limited which were due for repayment on
the same day; and used cash on hand to repay the remaining amount.
・DOI took out loans of 1,000 million yen in total from The Musashino Bank, Ltd. and The Gunma Bank,
Ltd. on May 31, 2018 to fund the repayment of loans of 1,000 million yen in total borrowed from thesame banks which were due for repayment on the same day.
DOI executed early repayment of loans of 41,000 million yen in total borrowed from Sumitomo Mitsui
Banking Corporation, Sumitomo Mitsui Trust Bank, Ltd., Mizuho Bank, Ltd. and MUFG Bank, Ltd. on
March 30, 2018.
In addition, DOI executed early repayment of loans of 11,500 million yen in total borrowed from
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd., Mizuho Bank, Ltd., Sumitomo Mitsui Trust
Bank, Ltd. and Mizuho Trust & Banking Co., Ltd. on April 27, 2018.
(B) Status of Interest-Bearing Liabilities at End of the Fiscal Period under Review
As a result of the above, the balance of interest-bearing liabilities outstanding as of the end of the 25th
Fiscal Period (May 31, 2018) stood at 188,950 million yen in total (long-term debt: 183,850 million yen;investment corporation bonds: 5,100 million yen). The balance of the current portion of long-term debt
stood at 15,500 million yen.
The average remaining period of interest-bearing liabilities as of the end of the 25th Fiscal Period stands
at 4.2 years.
(4) Capital Expenditures during the 25th Fiscal Period
The following summarizes the primary construction work that constitutes capital expenditures implemented
during the 25th Fiscal Period. Capital expenditures for the 25th Fiscal Period amounted to 1,564 million yen
and, when combined with the 506 million yen in repair expenses charged to the 25th Fiscal Period expenses,
totals 2,070 million yen in construction work were implemented.
Name of real estate
properties(Location)
Integral Tower(Suginami-ku, Tokyo)
Integral Tower(Suginami-ku, Tokyo)
E SPACE TOWER(Shibuya-ku, Tokyo)
Other

PurposeUpgrading of air-conditioning system
Construction of power receiving andtransforming facility
Upgrading of air-conditioning system

PeriodFrom: Mar. 2017
To: Apr. 2018
From: Mar. 2017
To: Dec. 2017
From: Mar. 2018
To: May 2018

Construction
amount paid
(million yen)
914
178
92
380

Total

1,564

II. Asset Management Report19(5) Overview of Financial Performance and Distributions
As a result of the management described above, DOI posted financial performance for the 25th Fiscal Periodof 13,441 million yen in operating revenue, 6,679 million yen in operating income, 5,888 million yen in ordinary
income and 5,887 million yen in net income.
Concerning distributions, it is planned that the amount equivalent to distributions from earnings would be
included in the amount of tax-deductible expenses based on application of special provisions for taxation of
corporation tax (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957;
including amendments thereto) (the “Special Taxation Measures Act”)). On that basis, DOI decided to distributealmost the entire amount (excluding fractions of the distribution amount per unit that are less than 1 yen )remaining after reserving part of unappropriated retained earnings as reduction entry and deducting provision ofreserve for reduction entry from unappropriated retained earnings, through application of “Special Provisions on
Taxation in the case of advance acquisition of land and such in 2009 and 2010” (Article 66-2 of the Special
Taxation Measures Act). Accordingly, DOI declared a distribution amount per unit of 11,150 yen.
In the fiscal period under review, DOI acquired treasury investment units through market purchase at theTokyo Stock Exchange based on a discretionary transaction agreement with a securities company and thencancelled all of the units. Such was executed for the enhancement of capital efficiency and return of profits tounitholders, after comprehensively taking into consideration the level of investment unit price, status of cash on
hand, financial condition, market environment, etc. The total number of investment units acquired/cancelledduring the fiscal period under review was 5,992 (1.2% of the total number of investment units issued andoutstanding before the acquisition/cancellation), and the total acquisition price was 3,675,523,000 yen. As aresult of the acquisition/cancellation of treasury investment units, a distribution amount per unit increased by
134 yen.

3. Outlook for the Next Fiscal Period(1) Investment Environment
The Japanese economy going forward was expected to continue to expand backed by solid trends inpersonal spending against the backdrop of a favorable employment environment and the improved income
environment while the monetary easing policy implemented by Bank of Japan continued. However, the paceof growth is expected to stall temporarily due to factors which will slow exports, such as the ending of
inventory accumulation in Japan and the U.S. and ECB’s announcement of plans to scale down quantitativeeasing. In addition, factors such as policies set out by the U.S. President Donald Trump, the downward swingof the Chinese economy, deterioration of the European economy, rise of crude oil price, stricter overtime work
regulations and consumption tax hike scheduled for October 2019 pose potential risks of disrupting theJapanese real economy and financial environment, and are thus thought to require attention.
In the Tokyo office building leasing market, factors such as improvement in employment are stimulating
demand, resulting in the vacancy rate dropping. Improvement in corporate performance is forecasted toincrease demand for office floor space and rent is expected to continue rising moderately as a consequence.
In the office building transaction market, backed by the favorable financing environment, among otherfactors, the property acquisition appetite among investors overseas, real estate companies and funds(including J-REITs) is thought to remain strong.
(2) Future Management Policy and Tasks(A) Strategy for Managing Existing Properties
While office leasing market conditions remain strong, large-scale relocations to new buildings forconsolidation, etc. have become noticeable. Therefore, DOI intends to improve its skill in building
management by constantly attempting to grasp the latest tenant needs and market conditions, regularly
reviewing management systems and such in order to be able to promptly respond when secondary or
tertiary vacancies, etc. arise. Consequently, DOI will carry out operational management under the following
policies with an aim to enhance the competitiveness of existing properties and thereby increase the longterm EPS over the medium to long term.
(a)Maintain and raise occupancy rates
Concerning existing tenants, strive to reduce cancellation risks by improving the quality of buildings,
equipment and management system. In addition, concerning new tenants, strive to maintain and raiseoccupancy rates through the provision of highly satisfactory services from gaining deeper
understanding of tenant needs through proactive participation in the market.

20

(b)Maintain and raise profitability
Aim to secure stable revenue over the medium to long term through further strengthening good
relationships with existing tenants, as well as proactively tapping the needs of new tenants bydiscerning the market environment.
(c)Lower operational management costs
Strive to lower operational management costs based on maintaining office environments of hightenant satisfaction levels by implementing efficient operational management and reviewing systematicconstruction work by optimally leveraging the economies of scale achieved from proactively realizing
external growth.
(B) Strategy for New Property Investments
DOI will invest in office buildings that have a total floor area of about 2,000m2 or more based on various
external growth strategies, while maintaining a balance with the asset acquisition environment andfinancing situation. In principle, considerations will focus on Tokyo as the investment target area, but DOI
will also consider investing in competitive properties in cities other than Tokyo from a viewpoint ofterritorially-distributed investments.
As pipeline support, in addition to expanding its own information-sourcing channels, DOI will continue tosearch for properties that meet its investment criteria by proactively gathering real estate transaction
market information through greater collaboration with the Asset Manager and Sponsor Group and utilizing
the Group’s extensive network of clients, partners, etc.
Furthermore, in the 25th Fiscal Period, DOI acquired “CONCURRED Yokohama” located in Yokohama
City, Kanagawa Prefecture and “Daiwa Kanda East Building” located in Tokyo. DOI believes that
acquisition of these properties will contribute to further stabilization and enhancement of the portfolio. DOI
will continue to strive to acquire properties in line with the investment strategy described above.
(C) Financial Strategy
DOI will conduct disciplined financial management of the following basic content.
(a) Control leverage by keeping the ratio of interest-bearing liabilities to total assets (LTV) within the rangeof 40% to 50% at maximum, taking into consideration also LTV based on the appraisal value, etc., as aprinciple.
(b) Diversify repayment deadlines, targeting 30.0 billion yen as the maximum amount of interest-bearing
liabilities that shall become due during any single fiscal period as a principle.
(c) Aim to have long-term loans account for at least 70% of balance of loans as a principle.
(d) Achieve diversification of lenders, which shall mainly be Japanese financial institutions.
(e) Pursuant to its fund management rules, maintain stability in its financial standing by managing
necessary funds, such as the amount equivalent to distributions paid, separately from working capital.
(D) Schedule of Capital Expenditures
The following are the principal capital expenditures arising from renovation construction work, etc.
currently planned for existing portfolio properties. Please note that the expected construction amountincludes portions that are expensed as a separate account item of accounting costs.

Name of real estate
properties(Location)
Daiwa Akasaka Building(Minato-ku, Tokyo)
Integral Tower(Suginami-ku, Tokyo)
Daiwa Shibuya Miyamasuzaka
Building(Shibuya-ku, Tokyo)
Daiwa Onarimon Building(Minato-ku, Tokyo)
Kirin Nihonbashi Building(Chuo-ku, Tokyo)

PurposeScheduled
implementation
periodExpected construction amount(million yen)TotalamountAmount paid
duringcurrent
periodTotalamountalreadypaid

Upgrading of airconditioning system
Upgrading of airconditioning system(West side)

From: Nov. 2016
To: Nov. 2018

1,084

–

654

From: Jun. 2018
To: Nov. 2019

986

–

–

Repair of exterior walls

From: Mar. 2018
To: Dec. 2018

256

15

4

Upgrading of airconditioning system
Changing lighting in
exclusive areas to LED(green leasing)From: Jun. 2018
To: Nov. 2018

235

–

–

From: Jun. 2018
To: Nov. 2018

181

–

–

II. Asset Management Report21III. Balance Sheets
As of May 31, 2018 and November 30, 2017

(Thousands of yen)

As of
May 31, 2018

As ofNovember 30, 2017

AssetsCurrent Assets:
Cash and cash equivalents (Notes 3 and 4)

32,070,912

15,958,480

Tenant receivables

180,947

222,262

Income taxes refundable

16,268–Prepaid expenses

338,534

344,392

Deferred tax assets (Note 13)

5,349

4,896

Other current assets

36,81884,122

Total Current Assets

32,648,828

16,614,152

Land

12,302,227

12,302,227

Buildings and structures

3,274,666

3,268,095

Tools, furniture and fixtures

19,917

23,976

Construction in progress

3,687

3,619

Land in trust accounts

335,174,786

360,772,888

Buildings and structures in trust accounts

101,335,964

106,097,844

Machinery and equipment in trust accounts

765,971998,775

Tools, furniture and fixtures in trust accounts

228,475

257,138

Construction in progress in trust accounts

821,311

1,519,315(23,429,603)(26,673,085)

2,398,276

2,398,276

306,884

306,884433,202,561

461,275,952–

3,951,142

379

433

Lease and guarantee deposits in trust accounts

113,685

113,685

Long-term prepaid expenses

903,807

1,002,821

Deferred tax assets (Note 13)

35,14592,583

Derivative assets (Note 4)

83,26963,861

Deferred investment corporation bond issuance costs

17,651

20,589Others34,69938,2191,188,635

5,283,333

467,040,024

483,173,437

Investment Properties, at cost (Notes 5 and 6):

Less: accumulated depreciation
Leasehold rights
Leasehold rights in trust accounts
Total Investment Properties, net
Investments and Other Assets:
Investment securities (Note 4)
TrademarkTotal Investments and Other Assets
Total Assets
The accompanying notes are an integral part of these financial statements.

22

(Thousands of yen)

As of
May 31, 2018

As ofNovember 30, 2017

Liabilities
Current Liabilities:
Accounts payable

872,092

814,020–

2,000,000

15,500,000

17,350,000

534,702425,557

655

870

Accrued consumption taxes

296,361

256,958

Rent received in advance2,073,800

2,046,248

Other current liabilities

524,628

304,746

Total Current Liabilities

19,802,238

23,198,399

5,100,000

5,100,000

Long-term debt (Notes 4 and 9)

168,350,000

179,850,000

Tenant security deposits including trust accounts (Note 4)

19,502,509

17,632,043

Derivative liabilities (Note 4)

434,527

596,907

Other long-term liabilities

174,578–

Total Long-Term Liabilities

193,561,614

203,178,950

213,363,852

226,377,349

251,551,759

251,551,759(3,675,523)–

247,876,236

251,551,759

164,163

164,1635,887,688

5,455,378

253,928,087

257,171,300

Deferred gains or losses on hedges(251,915)(375,212)

Total valuation and translation adjustments(251,915)(375,212)

Total Net Assets

253,676,172

256,796,088

Total Liabilities and Net Assets

467,040,024

483,173,437

Short-term debt (Notes 4 and 9)
Long-term debt due within one year (Notes 4 and 9)
Accounts payable – other
Income taxes payable

Long-Term Liabilities:
Investment corporation bonds (Notes 4 and 9)

Total Liabilities

Net Assets (Notes 8 and 14)
Unitholders’ Equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 491,877 units as of May 31,
2018 and 497,869 units as of November 30, 2017
Deduction from unitholders’ capital
Unitholders’ capital, net
Reserve for reduction entry
Retained earnings
Total Unitholders’ Equity
Valuation and translation adjustments

The accompanying notes are an integral part of these financial statements.
III. Balance Sheets

23

IV. Statements of Income and Retained Earnings
For the fiscal periods ended May 31, 2018 and November 30, 2017

(Thousands of yen)

For the fiscal periods
ended May 31, 2018
Operating Revenues:
Rental revenues (Note 7)
Other revenues related to property leasing (Note 7)

For the fiscal periods
ended November 30, 201712,868,665
41,40912,718,363
16,864Gain on sale of investment properties (Note 11)
Dividend income
Total Operating Revenues

481,734
48,821––

13,440,629

12,735,227

Operating Expenses:
Property-related expenses (Note 7)
Asset management fees
Asset custody fees

5,410,175
1,064,808
24,796

5,279,235
1,048,416
24,12476,501
19,73875,117
18,595

7,200
158,669

7,200
105,292

6,761,887
6,678,742

6,557,979
6,177,248

9
698
137,419
898

92
480
–
1,589

139,024

2,161

542,083
16,892
144,081
125,589
100,880548,020
16,708
153,931–4,708

929,525
5,888,241
5,888,241

723,367
5,456,042
5,456,042

775
5

883
4

780

887

5,887,461
227
5,887,688

5,455,155
223
5,455,378

Administrative service fees
Trust fees
Directors’ compensation
Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues:
Interest income
Reversal of distribution payable
Insurance income
Other non-operating revenues
Total Non-Operating Revenues
Non-Operating Expenses:
Interest expense
Interest expense on investment corporation bonds
Borrowing expenses
Loss on fire
Other non-operating expenses
Total Non-Operating Expenses
Ordinary Income
Income Before Income Taxes
Income taxes – current
Income taxes – deferred
Total Income Taxes (Note 13)
Net Income
Retained Earnings Brought Forward
Retained Earnings at End of Period

The accompanying notes are an integral part of these financial statements.

24

IV. Statements of Income and Retained Earnings

V. Statements of Changes in Net Assets
For the fiscal periods ended May 31, 2018 and November 30, 2017
Number of
Units
Unitholders’(Units)CapitalBalance as of
May 31, 2017
Cashdistributions
declared
Net income
Net changesof items otherthanunitholders’equityBalance as ofNovember30, 2017
Cashdistributions
declared
Net income

497,869 251,551,759

Deduction
fromUnitholders'Capital(Thousands of yen)

Unitholders’ Equity

Deferred
Gains orReserve for Retained Treasury
Unitholders’ Reduction
Investment Losses on
Earnings
capital, net
Hedges
Entry
Units－ 251,551,759

164,1635,359,285－

Total Net
Assets(514,582) 256,560,625

－

－

－

－

－

(5,359,062)－－(5,359,062)

－

－

－

－

－

5,455,155－－

5,455,155

－

－

－

－

－

－

－

139,370

139,370－ 251,551,759

164,1635,455,378－(375,212) 256,796,088

497,869 251,551,759

－

－

－

－

－

(5,455,151)－－(5,455,151)

－

－

－

－

－

5,887,461－－

5,887,461(3,675,523)－(3,675,523)

3,675,523－－－

123,297

123,297－(251,915) 253,676,172

Acquisition oftreasury(5,992)－－－－－
investment
units
Retirement oftreasury(3,675,523) (3,675,523)－－－－
investment
units (Note 8)
Net changesof items other
－
－
－
－
－
－
than
unitholders’equityBalance as of491,877 251,551,759(3,675,523) 247,876,236
164,1635,887,688
May 31, 2018
The accompanying notes are an integral part of these financial statements.

V. Statements of Changes in Net Assets

25VI. Statements of Cash Flows
For the fiscal periods ended May 31, 2018 and November 30, 2017

(Thousands of yen)

For the fiscal periods
ended
May 31, 2018

For the fiscal periods
ended
November 30, 2017

Income before income taxes

5,888,241

5,456,042

Depreciation and amortization

1,775,614

1,772,415

2,938

2,954

Interest expense

558,975

564,728

Decrease (increase) in tenant receivables

41,314(77,108)

Decrease in accounts payable(19,484)(287,045)

Increase in rent received in advance

27,552

5,632(558,883)(564,820)

39,404(79,493)

69,827,449–

378,798(221,280)

77,961,918

6,572,025(43,364,997)(1,610,953)

Payments for purchases of intangible assets–(31,259)

Payments for purchases of investment securities–(3,951,142)

Proceeds from redemption of investment securities

3,951,142–

Proceeds from tenant security deposits including trust
accounts

4,398,247

970,585

Refunds of tenant security deposits including trust
accounts(2,353,203)(610,851)(37,368,811)(5,233,620)

Proceeds from short-term debt

39,000,000

1,000,000

Repayments of short-term debt

(41,000,000)–

Proceeds from long-term debt

6,000,000

10,550,000

Repayments of long-term debt

(19,350,000)(11,550,000)

Payment for acquisition of treasury investment units(3,675,523)–

Distributions paid

(5,455,152)(5,358,341)

Net Cash Used in Financing Activities(24,480,675)(5,358,341)

Net Change in Cash and Cash Equivalents

16,112,432(4,019,936)

Cash and Cash Equivalents at Beginning of Period

15,958,480

19,978,416

Cash and Cash Equivalents at End of Period (Note 3)

32,070,912

15,958,480

Cash Flows from Operating Activities:

Amortization of bond issuance costs

Interest payments
Increase (decrease) in accrued consumption taxes
Decrease due to sale of investment properties in trust
accounts
Other, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
including trust accounts

Net Cash Used in Investing Activities
Cash Flows from Financing Activities:

The accompanying notes are an integral part of these financial statements.

26

VI. Statements of Cash Flows

VII. Notes to Financial Statements
For the fiscal periods ended May 31, 2018 and November 30, 2017

Note 1 – Organization and Basis of Presentation
Organization
Daiwa Office Investment Corporation (the former DA Office Investment Corporation; hereinafter referred to as“DOI”) was established on July 11, 2005 as an investment corporation under the Act on Investment Trusts andInvestment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the“Investment Trust Act”) by the founder (the former daVinci Select; now, Daiwa Real Estate Asset Management(hereinafter referred to as the “Asset Manager”)).
DOI is an externally managed real estate fund, established as an investment corporation. The Asset Manager,
as DOI’s asset management company, is engaged in acquiring, managing, leasing, and renovating officeproperties. Daiwa Securities Group Inc. currently owns 100% of the shares of the Asset Manager.
On October 18, 2005, DOI had raised approximately 49,498,710 thousand yen through an initial public offeringof units. Those units were listed on the J-REIT section of the Tokyo Stock Exchange.
As of May 31, 2018, DOI had ownership or trust beneficiary interests in 55 office properties with approximately
340,144m2 of rentable office space and had leased office space to 606 tenants engaged in a variety ofbusinesses. The occupancy rate for the office properties was approximately 99.0 %.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Act, the Financial Instruments and Exchange Act and their related accounting regulations, andin conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards or
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of DOI prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing theaccompanying financial statements, relevant notes have been expanded and certain reclassifications have been
made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory
Japanese GAAP financial statements, but not required for fair presentation, is not presented in theaccompanying financial statements.
DOI maintains its accounting records in Japanese yen.
DOI’s fiscal period is a six-month period ending at the end of May and November of each year.

VII. Notes to Financial Statements

27

Note 2 – Summary of Significant Accounting Policies(a) Cash and Cash Equivalents
Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of threemonths or less from the date of acquisition.
(b) Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the trust beneficiary interests in trust. Investment property
balances are depreciated using the straight-line method over the estimated useful lives as follows:
As of May 31, 2018
As of November 30, 2017
Buildings and structures
2-64 years
2-64 years
Machinery and equipment
7-23 years
7-23 years
Tools, furniture and fixtures
5-15 years
5-15 years
Cost related to the renovation, construction improvement of properties is capitalized. Expenditures for repairs andmaintenance which do not add to the value or prolong the useful life of property, are expensed as incurred.
(c) Investment securities
Investment securities classified as available-for-sale securities without fair value are stated at cost determined by
the moving-average method. Equity interest in a silent partnership is accounted for using the equity method of
accounting.
(d) Deferred Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized on a straight-line basis over the respective
terms of the bonds.
(e) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements andincome tax bases of assets and liabilities using the statutory rate.
(f) Real Estate Taxes
Investment properties are subject to various taxes, such as property taxes and city planning taxes. Owners of theproperties are registered by records maintained in each jurisdiction by the local government. The taxes are imposedon the registered record owner as of January 1 of each year, based on an assessment made by the local government.
When a property is purchased within the calendar year, the taxes for the corresponding calendar year are imposedon the seller. DOI pays the seller the corresponding amount of the taxes for the period from property acquisition dateto December 31 of the calendar year and capitalizes these amounts as acquisition costs of the property, rather than
expensing them. In subsequent calendar years, such taxes on investment properties are charged as operating
expenses in each fiscal period.
The following is a summary of capitalized real estate taxes.

(Thousands of yen)

Capitalized real estate taxes

For the fiscal periods ended
May 31, 2018
126,301

For the fiscal periods ended
November 30, 2017–(g) Consumption Taxes
Consumption taxes are excluded from transaction amounts. Generally, consumption taxes paid are offset against thebalance of consumption taxes withheld. As such, the excess of payments over amounts withheld is included in thecurrent assets while the excess of amounts withheld over payments is included in the current liabilities. Non-deductible
consumption taxes relating to investment properties are amortized equally over five years.
(h) Hedge Accounting
DOI enters into derivative transactions for the purpose of hedging risks in the Articles of Incorporation of DOI in
accordance with its general risk management policy. DOI uses interest-rate swaps as hedging instruments in order tohedge the risk of interest rate fluctuations related to borrowings. Pursuant to Japanese GAAP, DOI applies the special
accounting treatment to interest-rate swaps which qualify for hedge accounting and meet specific criteria. Under the
special accounting treatment, the related differentials paid or received under such swap contracts can be recognized
and included in interest expense or income of the hedged assets or liabilities, and the interest-rate swaps are notrequired to be measured at fair value separately. The assessment of hedge effectiveness has been made each fiscal
period except for interest-rate swaps which meet the special criteria.

28

(i) Revenue Recognition
Operating revenues consist of rental revenues including base rents and common area charges, and other operating
revenues such as utility charge reimbursements, parking space rental revenues and other income. Rental revenues
are generally recognized on an accrual basis over the life of each lease. Utility charge reimbursements are recognizedwhen earned and their amounts can be reasonably estimated.
(j) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, all assets and liabilities with respect to assets in trust, as well as all
income generated and expenses incurred with respect to assets in trust, are recorded in the relevant balance sheet
and income statement accounts of the accompanying financial statements.

Note 3 – Cash and Cash Equivalents
Cash and cash equivalents stated on the accompanying balance sheets and statements of cash flows as of
May 31, 2018 and November 30, 2017 consisted of the following:(Thousands of yen)

Cash and deposits
Cash and deposits in trust accounts
Cash and cash equivalents

As of May 31, 2018
28,687,859
3,383,053
32,070,9120

As of November 30, 2017
14,289,857
1,668,623
15,958,480

Note 4 – Financial Instruments(a) Qualitative Information for Financial Instruments
Policy for Financial Instrument Transactions
DOI raises funds through borrowings, issuance of investment corporation bonds and issuance of investment units
for acquisition and renovation of investment properties, cash distributions of dividends and repayment of bankborrowings. In financing through interest-bearing debt, DOI raises funds with longer term, fixed-rate and welldiversified maturities to secure stable financing capacity and avoid potential risk of rising interest rates.
Surplus funds are managed considering risk and liquidity, by investing in highly liquid monetary assets and securities(in principle, deposits).
DOI enters into derivative transactions only for the purpose of hedging interest rate risks arising from liabilities.
Nature and Extent of Risks arising from Financial Instruments and Risk Management
Proceeds from borrowings and investment corporation bonds are used mainly to acquire investment properties andrepay or redeem outstanding borrowings and bonds. These borrowings and bonds are exposed to liquidity risk. Suchrisk is managed in ways such as maintaining the LTV ratio at low levels, diversifying maturities, keeping the ratio of
long-term debt to total debt at high levels, and diversifying lenders. For the floating-rate borrowings exposed to therisk of future interest rate fluctuations, DOI uses derivative transactions (interest-rate swap) as hedging instruments, inorder to avoid interest rate fluctuations and to fix the amount of interest payments for floating-rate borrowings.
DOI evaluates the effectiveness of hedges by the correlation between the change in aggregated amount of cash
flow of the hedging instruments and the change in aggregated amount of cash flow of the hedged items. The
assessment of hedge effectiveness is omitted for the interest-rate swaps which meet the specific criteria under the
special accounting treatment.
Derivative transactions are executed and monitored in compliance with the rules and procedures set forth in the risk
management policy of DOI.
Tenant security deposits including trust accounts are exposed to liquidity risk arising from refunding deposits in theevent of vacating of properties by tenants. Such risk is managed by reserving some parts of the funds.
Bank deposits are used for investing DOI’s surplus funds. These bank deposits are exposed to credit risks such as
bankruptcy of the depository financial institutions. DOI manages credit risk by investing only in short-term deposit andsetting a minimum credit rating requirement for the depository financial institutions (excluding deposits for settlement
purposes).
Investment securities are investments in silent partnerships and exposed to credit risk of the issuer, fluctuation riskof real estate value, etc. and interest rate fluctuation risk. DOI manages such risks by reviewing the financial status of
the issuers and the real estate values, etc. on a regular basis.
Supplemental Explanation regarding Fair Value of Financial Instruments
The fair value of financial instruments is based on their quoted market price. When there is no quoted market priceavailable, fair value is reasonably estimated. Since certain assumptions and factors are reflected in estimating the fairvalue, different assumptions and factors could result in a different value. Also, the contractual amounts of derivativetransactions do not represent the market risk involved in these derivative transactions.
VII. Notes to Financial Statements

29

(b) Estimated Fair Value of Financial Instruments
Book value, fair value and difference between the two as of May 31, 2018 and November 30, 2017 were as follows:(Thousands of yen)

As of May 31, 2018

As of November 30, 2017

AssetsBook value

Fair value

DifferenceBook value

Fair value

Difference

Cash and cash
equivalents
Total

32,070,912

32,070,912–

15,958,480

15,958,480–

32,070,912

32,070,912–

15,958,480

15,958,480

–

–

–

–

2,000,000

2,000,000–

15,500,000

15,510,392

10,392

17,350,000

17,364,932

14,9325,100,000

5,168,640

68,6405,100,000

5,175,450

75,450Long-term debt

168,350,000

168,312,077(37,923)

179,850,000

179,753,467(96,533)

Total

188,950,000

188,991,109

41,109204,300,000

204,293,849(6,151)(368,208)(368,208)–(548,484)(548,484)–

Liabilities
Short-term debt
Long-term debt
due within one
year
Investment
corporation bonds

Derivativetransactions (*)(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parenthesis indicating the net liability
position.

The financial instruments whose fair value is deemed extremely difficult to determine are excluded from theabove table (See Note 2 below).
Notes:
1. Methods to estimate fair value of financial instruments and derivative transactions
Assets:(1) Cash and cash equivalents
Due to the short maturities, the book value of these assets is deemed a reasonable approximation of the fairvalue.
Liabilities:(1) Short-term debt, long-term debt due within one year and long-term debt
For short-term debt and long-term debt with floating interest rates, their fair value and book value are nearly
identical and there are no significant changes in DOI’s credit risk after borrowing. Therefore, for these items, theirbook value is assumed as their fair value. For short-term debt and long-term debt with fixed interest rates, theirfair value is calculated based on the present value of principle and interest cash flows discounted at the current
interest rate which is estimated to be applied if similar new debt is entered into. However, the fair value of certain
floating-rate long-term debt that qualifies for the special treatment of interest-rate swaps is calculated based on
the present value of principle and interest cash flows which are processed as a single unit with the interest-rate
swap.
(2) Investment corporation bonds
The fair value of investment corporation bonds is based on their quoted market price.

30

Derivative Transactions:
The Company applies the hedge accounting for all derivative transactions. Contractual amount and fair value
were as follows:(Thousands of yen)Hedge
accounting
methodType ofderivativetransaction

Hedged item

As of May 31, 2018
Contracted amount
Fair value (*1)
Due after one year
Total

Deferral hedge
accounting
methodInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

105,100,000

96,100,000(368,208)

Special treatment
for interest-rate
swapsInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

4,500,000

2,000,000– (*2)

109,600,000

98,100,000(368,208)(Thousands of yen)Hedge
accounting
methodType ofderivativetransaction

Hedged item

As of November 30, 2017
Contracted amount
Fair value (*1)
Due after one year
Total

Deferral hedge
accounting
methodInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

112,600,000

105,100,000(548,484)

Special treatment
for interest-rate
swapsInterest-rate swap
Receive floating/
Pay fixed

Long-term debt

14,350,000

7,000,000– (*2)

126,950,000

112,100,000(548,484)(*1) The fair value is provided by financial institutions.
(*2) Fair values of interest-rate swaps with the special treatment are included in fair values of related long-term debt as the interest-rate swaps areprocessed as a single unit with the hedged long-term debt.

2. Financial instruments whose fair value is deemed extremely difficult to determine
Investment securities (with a book value of nil as of May 31, 2018 and 3,951,142 thousand yen as of November
30, 2017) were excluded from the scope of fair value disclosure because they are not marketable, which in turnmakes it difficult to reasonably determine the fair value.
Tenant security deposits including trust accounts (with a book value of 19,502,509 thousand yen as of May 31,
2018 and 17,632,043 thousand yen as of November 30, 2017) that have been deposited by tenants were
excluded from the scope of fair value disclosure because they are not marketable, and the actual deposit period
is not estimable, which in turn makes it difficult to reasonably estimate the future cash flows.

VII. Notes to Financial Statements

31

3. Redemption schedule for monetary claims(Thousands of yen)

As of May 31, 2018

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
32,070,912––––
32,070,912––––
Due within
one year

Due after
five years––(Thousands of yen)

As of November 30, 2017

Cash and cash equivalents
Total

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years
15,958,480––––
15,958,480––––
Due within
one year

Due after
five years––

4. Redemption schedule for short-term debt, investment corporation bonds and long-term debt
(Thousands of yen)

As of May 31, 2018

Investment corporation bonds
Long-term debt
Total

Due within
one year

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due after
five years– 3,000,000––– 2,100,000
15,500,000 19,500,000 33,300,000 21,500,000 30,600,000 63,450,000
15,500,000 22,500,000 33,300,000 21,500,000 30,600,000 65,550,000(Thousands of yen)

As of November 30, 2017

Short-term debt
Investment corporation bonds
Long-term debt
Total

32

Due within
one year

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due after
five years

2,000,000–––––– 3,000,000––– 2,100,000
17,350,000 22,000,000 31,600,000 24,200,000 31,600,000 70,450,000
19,350,000 25,000,000 31,600,000 24,200,000 31,600,000 72,550,000Note 5 – Tangible Fixed Assets of Investment Properties
Investment properties as of May 31, 2018 and November 30, 2017 and consisted of the following:(Thousands of yen)

As of May 31, 2018

As of November 30, 2017

Acquisition
cost

Accumulated
depreciation

Book value

Acquisition
cost

Accumulated
depreciation

Book valueLand

12,302,227–

12,302,227

12,302,227–

12,302,227

Buildings andstructures

3,274,666(2,153,748)

1,120,918

3,268,095(2,069,721)

1,198,374

Tools, furnitureand fixtures

19,917(8,805)

11,112

23,976(11,727)

12,249Construction inprogress

3,687

–

3,687

3,619

–

3,619

Land in trust
accounts

335,174,786–

335,174,786

360,772,888–

360,772,888

Buildings andstructuresin trust accounts

101,335,964(20,770,634)

80,565,330

106,097,844(23,990,228)

82,107,616

Machinery andequipmentin trust accounts

765,971(378,846)

387,125

998,775(475,578)

523,197

Tools, furnitureand fixturesin trust accounts

228,475(117,570)

110,905

257,138(125,831)

131,307

Construction inprogressin trust accounts

821,311–

821,311

1,519,315–

1,519,315

453,927,004(23,429,603)

430,497,401

485,243,877(26,673,085)

458,570,792

Total

VII. Notes to Financial Statements

33

Note 6 – Fair Value of Investment and Rental Properties
The book value, net changes in the book value and the fair value of the investment and rental properties wereas follows:(Thousands of yen)

For the fiscal periods ended
May 31, 2018

For the fiscal periods ended
November 30, 2017

Balance at beginning of period

459,753,017

460,986,037

Change during the period (Note 2)(27,375,454)(1,233,020)

Balance at end of period

432,377,563

459,753,017

Fair value (Note 3)

506,040,000

527,130,000

Book value: (Note 1)(Notes)1. The book value represents the acquisition cost less accumulated depreciation.
2. Significant changes
For the fiscal period ended May 31, 2018, the major reason for the increase is acquisition of “CONCURRED Yokohama” and “Daiwa Kanda East”(42,300,000 thousand yen). The major reason for the decrease is sale of “Daiwa Meieki Building” and “Shinjuku Maynds Tower (3/7 out of 6/7 ofco-ownership interest)” (69,827,449 thousand yen) and depreciation (1,772,039 thousand yen).
For the fiscal period ended November 30, 2017, the major reason for the decrease is depreciation (1,768,827 thousand yen).
3. The fair values as of May 31, 2018 and November 30, 2017 were determined by the sum of appraisal values provided by external real estateappraisers.

Note 7 – Rental Revenues and Expenses
Rental revenues and expenses for the fiscal periods ended May 31, 2018 and November 30, 2017 were as
follows:(Thousands of yen)

For the fiscal periods ended
May 31, 2018

For the fiscal periods ended
November 30, 201712,868,665

12,718,363

41,40916,864

12,910,074

12,735,227

Consignment expenses

962,222

969,050

Utilities expenses

998,452

1,095,648

Taxes and dues

1,108,573

1,110,288

Insurance expenses

14,24914,771

Repair expenses

505,705

267,966

1,772,039

1,768,827

48,93552,685

Total rental expenses

5,410,175

5,279,235

Income from property leasing

7,499,899

7,455,992

Revenues from property leasing:
Rental revenues
Other revenues related to property leasing
Total revenues from property leasing
Rental expenses:

Depreciation
Other

34

Note 8 – Net Assets
DOI issues non-par value units in accordance with the Investment Trust Act and all of the amounts issued aredesignated as stated capital. DOI maintains a minimum of 50 million yen of net assets as required by theInvestment Trust Act.
Retirement of treasury investment units during the fiscal periods ended May 31, 2018 and November 30, 2017
was as follows.

(Thousands of yen)

Total number of units retired (units)
Total amount of retired units

For the fiscal periods ended
May 31, 2018

For the fiscal periods ended
November 30, 2017

5,992

–

3,675,523–

Note 9 – Short-Term Debt, Long-Term Debt Due Within One Year, Long-Term Debt andInvestment Corporation Bonds
Short-term debt, long-term debt due within one year, long-term debt and investment corporation bonds as of
May 31, 2018 and November 30, 2017 consisted of the following:(Thousands of yen)

As of May 31, 2018
Unsecured loans due 2018 to 2026, principallyfrom banks and insurance companies with interest
rates mainly ranging from 0.2% to 1.0%

As of November 30, 2017

183,850,000

199,200,000

0.4% unsecured bond due 2019

3,000,000

3,000,000

1.0% unsecured bond due 2024

2,100,000

2,100,000

188,950,000

204,300,000

Total(Note) The interest rates presented are daily weighted average interest rates. As for long-term debts which were hedged by interest-rate swaps for the
purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to calculate daily weighted average interest rates.

The annual maturities of long-term debt and investment corporation bonds as of May 31, 2018 were as follows:(Thousands of yen)

Due within
one yearLong-term debt and investment
corporation bonds

Due after
Due after
Due after
Due after
one to two two to three three to four four to five
years
years
years
years

Due after
five years

15,500,000 22,500,000 33,300,000 21,500,000 30,600,000 65,550,000

Note 10 – Leases
As Lessor
The future minimum rental revenues under existing non-cancelable operating leases as of May 31, 2018 andNovember 30, 2017 were as follows:(Thousands of yen)

As of May 31, 2018

As of November 30, 2017

Due within one year

10,074,022

9,330,888

Due after one year

17,842,811

15,844,194

Total

27,916,833

25,175,082

VII. Notes to Financial Statements

35

Note 11 – Gain and Loss on Sale of Investment Properties
Gain and loss on sale of investment properties for the fiscal period ended May 31, 2018 was as follows:(Thousands of yen)

For the fiscal period
ended May 31, 2018
Daiwa Meieki Building:
Proceeds from sale of investment property

8,301,326

Cost of selling investment property(5,217,314)

Other expenses related to sale(124,549)

Gain on sale of investment property

2,959,463

Shinjuku Maynds Tower (3/7 out of 6/7 of co-ownership interests):
Proceeds from sale of investment property

62,500,000

Cost of selling investment property(64,610,135)

Other expenses related to sale

(367,594)

Loss on sale of investment property(2,477,729)

Net gain on sale of investment properties

481,734

No investment properties were sold during the fiscal period ended November 30, 2017.

Note 12 – Reduction of Investment Properties Purchased with Government Subsidies
Government subsidies of 32,898 thousand yen were deducted from the acquisition cost of the buildings intrust as of May 31, 2018 and November 30, 2017.

Note 13 – Income Taxes
DOI is subject to Japanese corporate income taxes on all of its taxable income. However, DOI may deduct theamount distributed to its unitholders from its taxable income when certain requirements, including a requirement
to distribute in excess of 90% of distributable profit for the fiscal period, are met under the Special Taxation
Measure Act of Japan. If DOI does not satisfy all of the requirements as specified in the Act, the entire taxable
income of DOI will be subject to regular corporate income taxes in Japan.
DOI has made distribution in excess of 90% of its distributable profit for each fiscal period in order to be able
to deduct such amount from taxable income.
The following table summarizes the significant difference between the statutory tax rate and DOI’s effective tax
rate for financial statement purposes.

(%)

36

For the fiscal periods ended
May 31, 2018

For the fiscal periods ended
November 30, 2017

Statutory tax rate

31.74

31.74

Deductible cash distributions(29.56)(31.73)

Provision of reserve for reduction entry(2.17)–

Others0.00

0.01

Effective tax rate

0.01

0.02

The significant components of deferred tax assets and liabilities as of May 31, 2018 and November 30, 2017
were as follows:(Thousands of yen)

As of May 31, 2018

As of November 30, 2017

Deferred tax assets:
Accrued enterprise tax

8

13

142,600

193,446

142,608

193,459

Reserve for reduction entry

75,80675,806

Deferred gains on hedges

26,30820,174

Total deferred tax liabilities

102,114

95,980Net deferred tax assets

40,494

97,479Deferred losses on hedges
Total deferred tax assets
Deferred tax liabilities:

Note 14 – Per Unit Information
Information about earnings per unit for the fiscal periods ended May 31, 2018 and November 30, 2017, net
assets per unit as of May 31, 2018 and November 30, 2017 were as follows:(Yen)

For the fiscal periods ended
May 31, 2018

For the fiscal periods ended
November 30, 2017

Net income per unit

11,882

10,957Weighted average number of units outstanding (units)495,505

497,869

Earnings per Unit:(Yen)

As of May 31, 2018
Net Assets per Unit

515,731

As of November 30, 2017515,790

The computation of earnings per unit is based on the weighted average number of units outstanding during theperiod. The computation of net assets per unit is based on the number of units outstanding at each period end
as stated on the balance sheets.
The diluted net income per unit is not stated as there are no diluted investment units.
There is no amount that is not available to ordinary unitholders.

VII. Notes to Financial Statements

37

Note 15 – Distribution Information
DOI’s Articles of Incorporation stipulate that DOI is required to make cash distribution in excess of 90% of
distributable profit as defined in the Special Taxation Measure Act of Japan for each fiscal period. Therefore, thetotal amount of dividends that DOI has determined to pay out is 5,484,428,550 yen for the fiscal period ended
May 31, 2018 and 5,455,150,633 yen for the fiscal period ended November 30, 2017 that are the largest integral
multiple of 491,877 and 497,869, the number of units outstanding as of May 31, 2018 and November 30, 2017,
respectively, after deducting provision of reserve for reduction entry as stipulated in Article 66-2 of the Special
Taxation Measure Act of Japan. Furthermore, DOI does not pay out dividends that exceed accounting profits asoutlined in Article 32-2 of DOI’s Articles of Incorporation.
(Yen)

For the fiscal periods ended
May 31, 2018

For the fiscal periods ended
November 30, 2017

I Unappropriated retained earnings

5,887,688,126

5,455,377,793

II Cash distributions declared

5,484,428,550

5,455,150,633

403,259,576––

227,160

III Voluntary reserves provision of reserve for
reduction entry
IV Retained earnings brought forward

Cash distributions are declared by the board of directors after the end of each period. Such distributions arepayable to unitholders of record at the end of each period. Information of cash distributions per unit and theboard of directors meeting dates when the distributions were proposed and approved were as follows:(Yen)

Cash distributions per unit
Board of directors meeting dates

38

For the fiscal periods ended
May 31, 2018

For the fiscal periods ended
November 30, 201711,15010,957

July 18, 2018

January 18, 2018

Note 16 – Related-Party Transactions
Related-party transactions for the fiscal periods ended May 31, 2018 and November 30, 2017 were as follows:
For the fiscal period ended May 31, 2018
Classification
Name
Location
Capital stock (Thousands of yen)
Ratio of voting rights
Acquisition date
Relation to the related party
Nature of transaction
Amount of transaction (Thousands of yen)Account
Balance at the end of period(Thousands of yen)

Subsidiary of other related party
Godo Kaisha Yokohama Office Management
Chuo-ku, Tokyo
400
Real estate management–
Acquisition of trust beneficial interest in real estate
Acquisition of trust beneficial interest in real estate (Notes 1, 2 and 3)
38,100,000––

The above amount of transaction does not include consumption tax, etc.
(Notes)
1. Terms of transactions were determined based on market price.
2. Terms of transactions with interested parties were determined based on the Assets Manager’s internal regulation which was established to prevent
conflict of interest.
3. DOI holds real estate in trust associated with trust beneficial interest that is equivalent to 75% of quasi co-ownership interest in the entire
CONCURRED Yokohama.

For the fiscal period ended November 30, 2017
No related-party transaction was entered into for the fiscal period ended November 30, 2017.

Note 17 – Segment Information
For the fiscal periods ended May 31, 2018 and November 30, 2017
Segment Information
Segment information has been omitted as DOI has only one segment, which is property leasing business.
Related Information
Information about Products and Services
Disclosure of this information has been omitted as operating revenues to external customers for a single
product/service category account for more than 90% of the operating revenues on the statements of income
and retained earnings.
Information about Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as domestic operating revenues account for more than 90% of
total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as domestic investment properties account for more than 90%of the book value of the total investment properties.
Information about Major Tenants
Disclosure of this information has been omitted as there is no tenant that accounts for 10% or more of theoperating revenues recorded in the statements of income and retained earnings.

VII. Notes to Financial Statements

39

Note 18 – Significant Subsequent Events(a) Acquisitions of Assets(1) DOI acquired the trust beneficial interest in real estate on June 7, 2018 as described below.
Overview of the asset
Asset type
Property nameLocation
Acquisition priceAgreement date
Acquisition dateSellerTrust beneficial interest in domestic real estate (Note 1)
Prime Kanda Building
2-8-2 Kanda Suda-cho, Chiyoda-ku, Tokyo
1,800,000 thousand yen (excluding acquisition costs, consumption tax, etc.)
May 23, 2018
June 7, 2018
Non-disclosed (Note 2)(Note 1) The asset is a trust beneficial interest with compartmentalized ownership of the B1 floor, part of the first floor and floors 4 to 10 as primary
asset in trust.
(Note 2) The seller is a domestic special purpose company. Its information is not disclosed since consent for disclosure has not been obtained fromthe seller.

(2) DOI determined to acquire the trust beneficial interest in real estate on June 18, 2018 as described below.
Overview of the asset
Asset type
Property nameLocation
Acquisition priceAgreement date
Acquisition date(scheduled)
Seller40

Trust beneficial interest in domestic real estate
Kita-Shinagawa Gotenyama Building
3-3-5 Kita-Shinagawa, Shinagawa-ku, Tokyo
2,500,000 thousand yen (excluding acquisition costs, consumption tax, etc.)
June 18, 2018
September 13, 2018
Danke Holdings Co., Ltd.

VIII. Independent Auditor’s Report

VIII. Independent Auditor’s Report41

IX. Investor Information
History of Investment Unit Price(Yen) 900,000

18,000 (Units)
Investment unit price (left axis)

Trading volume (right axis)

800,000

16,000700,000

14,000600,000

12,000500,000

10,000400,000

8,000

300,000

6,000

200,000

4,000

100,000

2,000

0

0

2016
June July

Aug. Sept. Oct.

Nov.

2017
Dec. Jan.

Feb.

Mar.

Apr.

May

June

July

Aug. Sept. Oct.

Nov.

2018
Dec. Jan.

Feb.

Mar.

Apr.

May

Overview of Investment Units and Unitholders (As of May 31, 2018)■ No. of Investment Units by Investor Type
25th
Fiscal Period

Individuals/others
17,144 units (3.5%)

Financial institutions
171,532 units (34.9%)■ No. of Unitholders
by Investor Type
Foreigners 106,453 units (21.6%)

Total: 491,877 units
Other domestic corporations 190,961 units (38.8%)

24th
Fiscal Period

Individuals/others
20,718 units (4.2%)

Financial institutions
182,502 units (36.7%)

Securities firms 5,787 units (1.2%)

Foreigners 97,119 units (19.5%)

Total: 497,869 units
Other domestic corporations 191,803 units (38.5%)

Number ofPercentage
Units Owned
Share(Units)

128,905

26.21

2. The Master Trust Bank of Japan, Ltd. (Trust Account)

65,125

13.24

3. Daiwa Securities Group Inc.

59,321

12.06

4. Japan Trustee Services Bank, Ltd. (Trust Account)

39,506

8.03

Trust & Custody Services Bank, Ltd.
5.
(Securities Investment Trust Account)

26,045

5.30

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

12,606

2.56

7. THE BANK OF NEW YORK, NON-TREATY JASDEC ACCOUNT

8,699

1.77

8. STATE STREET BANK AND TRUST COMPANY 505012

8,006

1.63

9. STICHTING PENSIOENFONDS METAAL EN TECHNIEK

5,641

1.15

STATE STREET BANK - WEST PENSION
10.
FUND CLIENTS - EXEMPT 505233

5,147

1.05

(Note) The percentage share figures are rounded to the second decimal place.

42

Financial institutions

98(1.3%)

Other domestic
corporations

127(1.7%)

Foreigners

223(2.9%)

Securities firms

16(0.2%)

Total

7,565

IR Calendar

1. Daiwa Investment Management Inc.

6.

7,101
(93.9%)

Securities firms 5,727 units (1.2%)

Top Ten Unitholders (As of May 31, 2018)
Name of Investor

Individuals/others

July 18, 2018 : Announcement of financial results
25th Fiscal Period
August 9, 2018 : Sending of Japanese version Business
Report for 25th Fiscal Period(Statement of Financial Performance)
August 10, 2018 : Start paying distributions for25th Fiscal PeriodMay
End offiscal period

Feb.
Jan.

July
End offiscal period

Aug.

Nov.

January 2019 : Announcement of financial results for
26th Fiscal Period
February 2019 : Sending of Japanese version Business
Report for 26th Fiscal Period(Statement of Financial Performance)
February 2019 : Start paying distributions for
26th Fiscal Period

Investor Memo
End of fiscal period

May 31 and November 30 of each year

General Meeting of Unitholders

Held at least once every two years

Date for finalizing Unitholders with voting rights
for the General Meeting of Unitholders

Date publicly announced beforehand

Reference date for finalizing payment of
distributions

May 31 and November 30 of each year
(distributions are paid within three months of this reference date)

Listed financial instruments exchangeTokyo Stock Exchange (securities code: 8976)

Newspaper in which notice is posted

Nikkei Inc.

Manager of Unitholder Registry, etc.

Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo 100-8233

Office handling administrative affairs

Transfer Agency Department of Sumitomo Mitsui Trust Bank, Limited, 1-4-1 Marunouchi, Chiyoda-ku, Tokyo
100-8233 Phone 0120-782-031 (toll-free in Japan)

Service counter

Head Office and All branches of the Sumitomo Mitsui Trust Bank nationwide

Provision of Information via Website
Daiwa Office Investment Corporation conducts information distribution via its website as an important tool for IR activities. DOI also provides an
e-mail delivery service, “IR mail Delivery Service,” which informs the subscribers of updates in website content such as press releaseannouncements via e-mail free of charge. The website will be continually enhanced and enriched so that the current situation and future
strategies of DOI are clearly communicatedDaiwa Office Investment Corporation

http://www.daiwa-office.co.jp/en/

Important information is
distributed via e-mail. Please
access and follow the simple
steps if you wish to receive
our IR mail Delivery Service.

IX. Investor Information

43

The Daiwa Office Investment Corporation logo symbolizes hospitality with an open door and the desire to be a brightand open investment corporation. We will continue to aim to be a highly-transparent investment corporation that isfurther cherished and trusted by our investors and tenants.