Questions and Answers
at the Fiscal Period July 2018 Earnings Presentation
Advance Residence Investment Corporation
Date: From 15:30 to 16:30, Tuesday, September 11, 2018
Presenter:Kenji Kousaka,President and Representative Director,
AD Investment Management Co., Ltd.
- The questions grouped according to topic.
- Advance Residence Investment Corporation is abbreviated as “ADR”.

Internal Growth Related Questions
Q1. The rise in rent was higher than prior periods, were there any significant changes in the market
during the six months?
A1. There has not been any significant change in the market. The rental market continues to berobust with strong demand and limited supply especially in the 23 wards of Tokyo, whichenabled us to set rents higher. We were also able to set higher rents on units that haveundergone value enhancement works which we have been putting a lot of effort into inrecent periods.
Q2. What is the rate of increase in rent when excluding effects of rent rise due to value enhancement
works?
A2. The amount of increase in aggregated monthly rent was 4.5 million yen, and the rate ofincrease was 1.8%.
Q3. Are you thinking of shifting towards pursuing higher rents even if it will mean longer downtime(lower occupancy) in the long-term.
A3. To justify a longer downtime, significant increase in rent will be required to compensate
for the loss in revenue. In the current strong market, there might be cases where that canbe achieved. Whether it will be achievable will depend on the property, therefore we willconsider pursuing significantly higher rents on property by property bases.
Q4. What are the factors behind the differences between the rent trends in Tokyo, Osaka and Nagoya
even though the cities equally have population inflows continuing?
A4. The difference in rent trends is due to the fact that, in Tokyo, the supply of apartments are
significantly lower than the population inflow. On the other hand, in Osaka and Nagoya,supply and demand seems to be more or less in balance.

External Growth Related Questions
Q5. You have told us that rents in Kansai and Nagoya area continue to be soft. Are you going tokeep the properties in those area? Or will you be looking to dispose them if you can sell themat a high price and buy properties in Tokyo area where rent trends are strong?
A5. Since the profitability of those properties is not low, we are not actively planning to sell.
The average NOI yield to the book value of the properties in Osaka is 6.3%, and the yield
after depreciation is 4.9%. In Nagoya, the average NOI yield is 6.6%, and the yield after
depreciation is 5.0%.
Q6. The appraisal cap rates keep compressing, are you going to maintain your acquisition hurdle
rate?
A6. We would like maintain our hurdle rate at about 4.0% yield after depreciation which wehope to achieve with the cooperation from our sponsors.
Q7. Recent string of acquisitions have been regional properties. Is it because acquiring properties in
the Tokyo 23 wards including properties of sponsors are becoming difficult? Will you beconsidering to increase holdings in regional cities above the current limit of 20% to gain yields?
A7. Although the acquisition market continues to be very competitive, we expect that we will
be able to acquire properties from sponsors at an acceptable yield. The basic policy ofADR's portfolio is to allocate 70% or more in the Tokyo 23 wards. Currently the ratio is71%. We would like to continue external growth in this area where we see strong rents
rise, but as the prices of property is high, we would proceed deliberately.

Questions on Other Topics
Q8. Has there been any changes in rental apartment market and in the attitudes of lenders due to therecent series of apartment loan scandal?
A8. We have not seen any impact in our lender’s attitudes to us. I think lenders put lending toREITs and apartment loans in to different category. I think there will be very little impact
on REITs in general, there are not many cases where buyers of REIT properties to beindividuals. On the other hand, there might be opportunities to acquire properties fromfailed transactions in which the buyer is an individual and could not secure a loan fromtheir lenders.

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