Semi-annual Report for the 7th Period(From April 1, 2018
to September 30, 2018)

Focused Investment in
Shopping Centers for Daily Needs

https://www.krr-reit.com/en/

Highlights

For the 7th fiscal period ended September 30, 2018
contents

Distribution per unit

JPY 6,299
Forecast DPU for the 8th fiscal period

JPY 6,416

Total assets (by acquisition price)

JPY 212.8 b n

Number of properties

I. Overview of KRR
From the Executive Director
Top Interview
Key Characteristics
ESG Initiatives
Close-up KRR Vol.7
MONA Shin-Urayasu
Financial Highlights

II. Asset Management Report
Overview of Asset Management
Profile of KRR
Status on Investment Properties

53 properties
Number of tenants

520 tenants

Capital Expenditures
Expenses and Liabilities
Acquisition and Disposition
Accounting
OthersOccupancy rate at the end of period

99.4%

MONA Shin-Urayasu

From the Executive Director
Thanks to your support, Kenedix Retail REIT Corporation (“KRR”) has
reported its results of operations for the seventh fiscal period (from April
1, 2018 to September 30, 2018). We also held the Second General
Meeting of Unitholders on June 15, 2018.
We dedicate ourselves to the maximization of unitholder value bycontinuing implementation of our growth strategy extensively
supported from our Sponsor and the Alliance Companies. In addition,
we have decided to add distribution centers to our investment targets,to adapt to the retail environment where e-commerce has been
growing.
We respectfully look forward to your continued support.

Akihiro Asano

Executive Director, Kenedix Retail REIT Corporation
Director & COO, Head of Retail REIT Department,
Kenedix Real Estate Fund Management, Inc.

TOP INTERVIEW
Adapting to changing environment
for sustainable growth

What are the key characteristics of KRR?
We became the first J-REIT to focus primarily onneighborhood, community and other shopping
centers that cater to the day-to-day needs of local
area customers upon our listing in February 2015.
Japan is undergoing unprecedented demographic
changes that, we believe, are influencing the natureof local retail markets. In particular, the aging of theJapanese population and the increased
concentration of populations in urban areas haveresulted in shrinkage of retail trade areas for
shopping centers. We have also observed anincrease in market share of specialty stores asconsumer tastes change. Accordingly, we expect
continued high demand for such local shopping
centers for daily needs because of theirconvenience. We believe our selective investmentsin these shopping centers contribute further

increase in unitholder’s value.
Grocery anchored shopping centers account for
approximately 75% of our portfolio. People visit
grocery supermarkets very frequently, which gives
them a strong reason to come to our shopping
centers. This often results in purchases at othertenants as well. Emphasizing on groceries also has
the advantage of making our centers resilient toeconomic downturns and e-commerce penetration.
In fact, the sales of our tenants have remained
stable even as e-commerce has continued to grow.
Percentage of tenant category (based on rents)

Tenants lessaffected by ecommerce

50.3%■ Groceries & Costco
25.4%■ Service businesses
10.2%■ Health clubs
5.9%■ Amusement
5.0%■ Restaurants
3.9%■ Other retailers
15.4%■ Home & garden
8.3%■ Apparel
5.8%■ Consumer electronics 5.4%
■ GMS
4.6%
■ Others
10.2%1Top Inter view
What were the highlights of the seventh fiscal period
ended September 2018?
This fiscal period was the beginning of our fourth yearof operations. During the period from April to
September, we recorded our first property sale since
our initial public offering and purchased two
properties: Konami Sports Club Shibuya and Costco
Wholesale Sapporo Warehouse. Upon our listing, we
acquired 18 properties with an acquisition price of
80,843 million yen. At the end of the seventh fiscal
period, our portfolio had grown to 53 properties withan acquisition price of 212,897 million yen.
Konami Sports Club Shibuya is a membership healthclub in a high-end residential district of central Tokyo
with a high density of residents. Costco Wholesale
Sapporo Warehouse is the only Hokkaido store of
Costco, which operates members-only warehouse
stores. As the only location in Hokkaido, this store
draws a large number of people from the entire
Sapporo region. During this fiscal period, we sold K’s
Denki Nakagawa Tomita (Land) in the city of Nagoya,at a price that was far above this property’s bookvalue and appraised value.
The performance of our properties was supported bynumerous activities to improve profitability, including
the major renovation of MONA Shin-Urayasu in
Chiba prefecture. As a result, our performance wasstable throughout the latest fiscal period with theoccupancy rate for our entire portfolio remaining
above 99%.
In the seventh fiscal period, operating revenue
totaled 8,577 million yen, operating income was 3,816
million yen, ordinary income was 3,201 million yen
and net income was 3,197 million yen. The
distribution to unitholders was 6,299 yen per unit,
which is 44 yen higher than the distribution in thesixth fiscal period.
Following the end of the seventh fiscal period, weannounced the sale of Solala Plaza in the city of
Sendai. Selling this property mitigates our exposure
to potential risk factors that may emerge in the future
and provides funds to acquire other properties. We
believe asset reshuffling will improve the quality andprofitability of our portfolio.

Assets acquired in the 7th fiscal period
T - 2 4 Konami Sports Club Shibuya
SS

R - 1 1 Costco Wholesale Sapporo Warehouse
Shibuya ward,
Tokyo

Location
Acquisition
Price
Appraisal
Value
Appraisal NOI
yield

SS

JPY 3,400 mn
JPY 3,430 mn
4.0％

Asset disposed in the 7th FP

N - 3 K’s Denki Nakagawa Tomita (Land)SS

Location

Sapporo,Hokkaido

AppraisalValue

JPY 4,390 mn

AcquisitionPrice

JPY 4,210 mn

Appraisal
NOI yield

4.8％

Asset disposing in the 8th & 9th FP

R - 7 Solala Plaza
Location
Disposition
Price

Location

Nagoya, Aichi

DispositionPrice

JPY 1,128 mn

Appraisal
Value
Acquisition
Price

Sendai, Miyagi
JPY 5,980 mn

AppraisalValue

JPY 5,960 mn

AcquisitionPrice

JPY 5,720 mn

JPY 1,010 mn
JPY 889 mn

Note: KRR plans to dispose 49% quasi co-ownership interests in the 8th fiscal
period and 51% quasi co-ownership interests in the 9th fiscal period.

2

Why have you added distribution centers to yourinvestment targets even though your performancehas been consistently stable?
Purchasing food and other household necessities
has always been a vital part of people’s lives, andretail facilities are often the most convenient location
where people can buy these goods.
Backed by advances in information technology, ecommerce has grown to account for a certain shareof consumer spending. Merchandise purchased via
the Internet is delivered from distribution centers
directly to customers. KRR believes that shopping
centers for daily needs are highly resistant to ecommerce. One reason is the strong demand
among consumers to purchase groceries after
directly checking their freshness. These shopping
centers for daily needs have grocery stores as well as
tenants where consumers can receive services(experiences). In addition, these shopping centers
are in very convenient locations. However, thegrowth of e-commerce is adding distribution centersto retail facilities as channels and functions forproviding consumers with merchandise.
In this changing retail environment, delivery activities
are becoming more diverse as well. Merchandisethat people order using the Internet is shipped not
only from large distribution centers near major
highways but also from stores located nearresidential areas. Furthermore, there is diversification
in how people receive the goods they order. For
example, people sometimes use delivery boxes atrailway stations or retail facilities as well as stores topick up merchandise. Another trend is theacquisition of conventional retailers by Internet retailcompanies and the formation of alliances between

these companies. The growth of e-commerce iscreating an increasing need for e-commercedelivery functions at shopping centers that are close
to where people live.
These changes are making shopping anddistribution centers increasingly similar from thestandpoint of supplying merchandise to consumers.
KRR views distribution centers as an extension ofretail facilities as channels and functions forproviding consumers with merchandise, reflecting
shifts in consumer buying behavior. In addition, KRR
anticipates more growth in demand for shopping
centers for daily needs and for distribution centers,
providing goods involving diversifying merchandise
distribution channels and “the last-mile” delivery.
This is why we decided to enlarge our investment
targets to include distribution centers, which
perform a role similar to retail stores as analternative source of merchandise for consumers.
Having made this change, KRR is positioned as a
new type of retail REIT that can benefit from thegrowth of e-commerce as this category of the retailindustry continues to expand.
We respectfully look forward to your continued
support.

Steady AUM growth(JPY bn)
300

Aiming forsteady growthof AUM going
forwardAcquisition of Konami Sports Club Shibuya andCostco Wholesale Sapporo Warehouse
Disposition of K’s Denki Nakagawa Tomita (Land)

250

204.9

200

158.7
150

100

206.1

212.8

164.3

131.6
80.8

91.8

50

0
1st Period
IPO
2nd Period
3rd Period
4th Period
5th Period(Feb. 10, 2015) (Sep. 30, 2015) (Mar. 31, 2016) (Sep. 30, 2016) (Mar. 31, 2017) (Sep. 30, 2017)

6th Period(Mar. 31, 2018)

7th Period(Sep. 30, 2018)3

Key Characteristics

Focus on shopping centers for daily needs
1

Steady AUM growth

Retail properties located within residential districts or adjacent to major roads, which
provide daily goods and services
Well located for daily living

Retail trade area of an approximately 1 to 10 km radius (generally 3 to 5 km radius)
Customers predominantly from local areas surrounding the retail property

High volume of customer traffic

Accommodate certain daily local retail needs
Strong customer traffic on both weekdays and weekends

Specialty store tenant diversity

Various specialty stores to meet a range of day-to-day needs
Groceries, clothing and other daily goods and services

NSC

SM

Supermarkets

Neighborhood
Shopping Centers

Retail trade area
3 km radius

Retail trade area
3 – 5 km radiusStand-alone storesthat primarily
provide groceries

Shopping centerswith a supermarket
as an anchor or coretenantLife Kameido

Urban
Station-Front
Shopping Centers
Retail trade area
3 – 10 km radius

CSC

Shopping centers in
the immediate vicinityof an urban public
transportation station

Community
Shopping Centers

Retail trade area
5 – 10 km radius

Fululu Garden Yachiyo

Daikanyama Address Dixsept2

Larger shopping
centers than NSC, witha supermarket as ananchor or core tenant

Blumer Maitamon

SS

Specialty Stores

Retail trade area
1 – 10 km radiusSpecialty stores suchas drug stores,
convenience stores,
health clubs orelectronic appliancestoresHomecenter Kohnan Sunadabashi

Investment in major metropolitan areas with population concentrations

Primary geographic target areas
The four major metropolitan areas of Japan, which have relatively stable populations:•Tokyo metropolitan area•
Greater Osaka area•

Greater Nagoya area•

Fukuoka area

* KRR may also from time to time consider investing in ordinance-designated cities, core cities and other areas,
which would allow KRR to build a more diversified portfolio that provides flexibility and positive returns,
consistent with KRR’s investment goals, when attractive opportunities arise.

Location (by acquisition price)
Ordinance-designed
cities, core cities andother areas
23.2%
Fukuokaarea
3.8%
Greater
Nagoya area
9.8%

As of September 30, 2018
Tokyo metropolitan area
Greater Osaka area
4 major
Metropolitan
Areas
％

76.8

Greater Osaka area
20.8%

Tokyo
metropolitan
area
42.4%

Greater
Nagoya area
Fukuoka area4

Primary characteristics of shopping centers for daily needs
Location Located within residential areas ofa metropolitan commuter district

Residential district
Specialty stores(small retail spaces)■ Retail trade area population
・1km radius: 10,000 people
・3km radius: 62,000 people
・5km radius: 247,000 people

Tenants

Grocery supermarket(anchor tenant)Providing primarily daily
necessities■ Housing Yaoko (anchor tenant) anda group of specialty stores (nonanchor tenants)

Flat parking lot

Restaurant building
expansion site
Residential
district

An anchor tenant with strong ability to attract
customers

Facilities

Capacity to accommodate frequent customer visits and provide revenue
upside potential■ Flat parking lot to accommodate
approximately 480 vehicles■ Constructed a restaurant building onunderutilized space
Expansionbuilding
Acquisition
date3

Restaurant
building
Jan. 16, 2017

GFA

397.98 m2

Total
construction
cost

397.98m 2

JPY 91 mn
91百万円

A group of specialty stores selected to satisfy
the various needs of local residents
Expansion building

Additional investment in distribution centers

KRR is positioned as a new type of retail REIT that can benefit from the growth of e-commerce byadditionally investing in distribution centers■■KRR’s main target in logistics sector
Key features of retail distribution centers• Distribution centers for delivering goods to end
consumers■■Target portfolio distribution
Distribution centers
Other retail facilities

20% or less

• Distribution centers for delivering goods toconsumption areas such as stores• Relatively small-scale distribution centers• Companies supplying goods may be in the samebusiness sector as KRR’s retail tenants; thebusiness performance is stable• Relatively long-term leases

Shopping centers
for daily needs

80% or more

5

E S G I n i t iat i ves

1

Sustainability Policies

The Asset Manager has positioned initiatives on ESG (Environmental, Social and Governance) awareness as animportant business management issue. To promote initiatives on ESG, the Asset Manager has established thefollowing Sustainability Policies.
❶ Contribution to sustainable environment
We make positive contribution to sustainability by reducing the negative impact to the environment
through continuously reducing energy and water consumption, CO2 emission and waste; and byeliminating and managing of hazardous materials to carry out the social mission of improving theenvironmental performance of properties we manage.
❷ Commitment to diverse society
We contribute to realize the diverse society, considering the social impact of our properties. We endeavor
to deliver built environment where safety, health and wellbeing and diversity of tenants and local
community are secured.
❸ Stakeholder engagement
We manage our properties as a responsible real estate asset management company by stressing theimportance of engagement with our stakeholders such as investors, tenants, business partners, local
communities and property management companies.
❹ Attractive working environment
We aim to deliver attractive working environment by implementing measures to promote employees'
health & wellbeing and diversity & equal opportunities. We develop capabilities of employees to help themachieve the best performance by providing various educational opportunities such as trainings.
❺ Responsible organization
We ensure compliance and sound risk management in our entire business activities. We are committed toresponsible property investment by a responsible organization by aligning with global ESG initiatives andproactively disclosing ESG information.

2

Initiatives at Unicucs Ina■■Cooperation withlocal communities■■Greening of facilities■■Solar panel installation

Agreed with Ina Town toprovide part of facility as atemporary shelter in caseof a disasterAwarded Green Award of Saitama
Prefecture

Planned installation of solar
panels to decrease CO2
emissions■■Green lease agreements (Note)
KRR has entered into green
lease agreements with tenant,
P&D Consulting Co, Ltd.

Note: Green lease is an agreement specifying that property owners and tenants shall cooperate to reduce environmental burden.

6

3 Recognitions and certifications on environment■■GRESB Real Estate Assessment 2018GRESB is an annual benchmark assessment which measuresenvironmental, social, and governance (ESG) considerations in the realestate sector. KRR has been awarded a “Green Star” in the 2017GRESB Real Estate Assessment for the second consecutive
year, as it received high evaluation on both “implementationand measurement” and “management and policy”. KFM, theasset manager of KRR, has also joined the GRESB Company &Fund Members.

■■D B J G r e e n Building Certification
The DBJ Green Building Certification Program was launched by Development Bank of Japan Inc. (DBJ) in April 2011 tosupport real estate that meets environmental and social considerations. The program evaluates and certifies real estatewith environmental and social considerations, taking into account each property’s environmental features and measurestaken for various stakeholders, such as disaster and community-conscious measures.

■■Properties received DBJ Green Building Certification
Properties with outstanding environmental & social awareness (★★★★)
T - 2 MONA Shin-Urayasu

T - 1 Fululu Garden Yachiyo

Properties with excellent environmental & social
awareness (★★★)

Properties with high environmental & social awareness
(★★)

T-3

Passaggio Nishiarai

R-1

Roseo Mito

T-5

Unicus Ina

O-1 Blumer Maitamon

T-4

Daikanyama Address
Dixsept

R-4

Ashico Town Ashikaga

T-7

Unicus Yoshikawa

O-5 Carino Esaka

O-4 Blumer HAT Kobe

T-19 Yumemachi NarashinodaiMall
T-20 Kawamachi Yahagi Mall

R-10 Sun Street Hamakita

T-14 Gourmet City Chiba-Chuo N E W
N-6Resora Obu Shopping Terrace

NEW■■ Certified properties and floor area ratio

The number of certified properties: 16 (39.0%)
Certified floor area: 462,015.35m2 (65.3%)(as of September 30, 2018)
Note: The ratio is the percentage of certified floor area to the gross floor area of properties owned by KRR (707,294.75m2, calculated on a pro-rata basis ofownership ratio for compartmentalized ownership, excluding land-only properties). As of September 30, 2018, KRR owns 41 properties that are eligible forcertification, excluding 12 land-only properties.

7

Close-up KRR Vol. 7

T-2

Urban Station-Front SC

MONA Shin-Urayasu
MONA Shin-Urayasu opened in November 1990 in
front of Shin-Urayasu Station. Located in the city of
Urayasu in Chiba prefecture, the station is on the JR
Keiyo and Musashino lines, 17 minutes from Tokyo
Station by express train, and next to Maihama
Station, the gateway to Tokyo Disney Resort. MONA
Shin-Urayasu is directly accessible from the station
by a pedestrian walkway. In addition, a bus terminal
is on the south side of the station.
MONA Shin-Urayasu is surrounded by a masterplanned city centered on shopping and officebuildings. This is a highly popular residential areaand has been ranked by the Ministry of Land,
Infrastructure, Transport and Tourism as one ofJapan’s 100 most attractive cities. The city of
Urayasu has the highest average household income
in Chiba prefecture, due partly to the highpercentage of dual-income households. As a result,consumers in this area have very strong life stylepreferences. MONA Shin-Urayasu is a key elementof the community atmosphere that defines this
district. This shopping center also serves the people
working in nearby office buildings and guests whostay at hotels in this area.
The recently completed project was the first majorrenovation of MONA Shin-Urayasu since its opening
about 28 years ago. This renovation was made to
Asset overview
Acquisition price

JPY 8,063 mn

Location

Urayasu, Chiba

Land area

15,875.86 m2

Gross floor area

76,767.24 m2

Main tenant

G.U. Co., Ltd.

A shopping center in front of Shin-Urayasu
Station where extensive renovations werecompleted in September 2018
make the shopping center more competitive andincrease its value. Replacement of a first-floor
supermarket and entrance area renovations were thefirst phase of renovations completed in July 2017. The
second phase, which ended in September 2018,
involved 23 tenants (six new tenants, 14 relocations
within the shopping center and three store
expansions), improvements to the sales floor
environment, including a new look for floors, walls andceilings of common areas, installation of LED lights
and automatic doors, and changes to signboards. As
a result, MONA Shin-Urayasu has become a shopping
center that is even more appealing to people of allages with a supermarket, large fast-fashion apparelstore, household goods stores, cafés, restaurants andservice providers.
To function as a shopping center for daily needs in
Urayasu, MONA Shin-Urayasu is the site of various
community events. For example, the shopping center
provides spaces for events for Urayasu Festival of thecity of Urayasu and gives retail tours to elementary
school students to build strong ties with the public
and private sectors. LED lights and a building energy
management system make the shopping center
energy efficient. In recognition of these activities,
Mona Shin-Urayasu was awarded DBJ (Development
Bank of Japan) Green Building Certification (four-starrank) in September 2017 as a property withexceptionally high environmental and social awareness.
MONA Shin-Urayasu will continue to build on its
position as a community shopping center to reinforce
its reputation as a place that is closely linked to the life
styles of people living in this area.

8

Objective of the 2nd phase of the renewal projectIncrease attractiveness●Replacements andrelocations of tenants atlease expiry●Lease to fast fashion tenant,its first store in Urayasu

Strengthen image of the SC● Change the design offloors, walls and roofs

Improve access to shops●Renewal of signboards andfloor maps

●Install LED lightings●Install automatic doors●Enhance outdoor signboards

Schedule of the renewal

July 2017
Completion of the 1st phase of
the renewal

April 2018

September 2018

Completion of the renewalof the 2nd phase of▶
▶ Startand reopening
the renewal■Exterior
BeforeAfter■Entrance
BeforeAfter

9F i n anci al H i ghli ght s
KRR implements flexible financial strategies, aiming to produce stable profits in the medium - tolong-term and to steadily grow its portfolio.

1

Financial highlights (as of September 30, 2018)
LTV

Long-term debt ratio (Note)

Fixed interest debt ratio

Average remaining years
to maturity

Number of lenders

Average interest rate (Note)

44.5%

96.7%

92.7%

12

4.9 years

1.01%

Note: The borrowing Series 24-A on Sep. 28, 2018 is included in short-term borrowings.

2

Credit rating and commitment lines
Credit rating (JCR)

Commitment credit lines

A+ (Stable)
3JPY

2.0 b nDiversifying KRR’s lending sources◆ Issued investment corporation bonds◆ Invited a new lender

KRR issued investment corporation bonds on April
26, 2018, leveraging low interest rate environment.

KRR intends to diverse its lenders through its firstborrowing from Nippon Life Insurance Co. on Sep. 28,
2018.

Issue

Maturity

AmountLenderMaturity

Amount5th unsecured investment
corporation bonds

Annualinterest rate

10 years

JPY 2.0 bn

0.700%

Nippon Life Insurance Co.

6.5 years

JPY 700 mn

4 Debt maturity schedule (as of September 30, 2018)
KRR believes that diversified debt maturity schedule will contribute to a stable financing standing.

Debt outstanding JPY 106,100 mn (excluding interest-bearing tenant leasehold and security deposits)(JPY mn)

Borrowings

Investment corporation bonds

15,00012,000

9,000

6,000

3,000

0
8th
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 Period

10Por tfolio List as of September 30, 2018
Total
acquisition price

JPY212,897 mn
No.

Name of property

Weighted averageoccupancy rate

Number of
Tenants

99.4 %

Location(city / ward, prefecture)520

Acquisition price(JPY mn)Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

T-1 Fululu Garden Yachiyo

Yachiyo, Chiba

14,848

96.6

39

T-2 MONA Shin-Urayasu

Urayasu, Chiba

8,063

98.3

57

T-3 Passaggio Nishiarai

Adachi ward, Tokyo

5,850

98.6

41

T-4 Daikanyama Address Dixsept

Shibuya ward, Tokyo

5,390

97.9

27

T-5 Unicus Ina

Kitaadachi-gun, Saitama

4,470

100.0

1

T-6 Yorktown Kita-Kaname

Hiratsuka, Kanagawa

4,000

100.0

1

T-7 Unicus Yoshikawa

Yoshikawa, Saitama

3,600

100.0

11

T-8 Sports Club Renaissance Fujimidai

Nerima ward, Tokyo

2,586

100.0

1

T-9 Super Viva Home Iwatsuki (Land)

Saitama, Saitama

4,815

100.0

1

T-10 K’s Denki Shonan-Fujisawa (Land)

Fujisawa, Kanagawa

3,169

100.0

1

T-11 Unicus Kamisato (Land)

Kodama-gun, Saitama

3,000

100.0

1

T-12 Unicus Konosu (Land)

Konosu, Saitama

1,700

100.0

1

T-13 Inageya Yokohama Minamihonjuku (Land)

Yokohama, Kanagawa

1,442

100.0

1

T-14 Gourmet City Chiba-Chuo

Chiba, Chiba

760

100.0

1

T-15 Nakamachidai Tokyu Store

Yokohama, Kanagawa

3,360

100.0

1

T-16 Central Wellness Club Nagatsuta Minamidai

Yokohama, Kanagawa

1,724

81.0

1

T-17 Life Kameido

Koto ward, Tokyo

1,450

100.0

1

100.0

2

T-18 Totsuka-Fukaya Shopping Center (Land)

Yokohama, Kanagawa

4,170

T-19 Yumemachi Narashinodai Mall

Funabashi, Chiba

3,416

100.0

14

T-20 Kawamachi Yahagi Mall

Chiba, Chiba

3,097

100.0

12

T-21 Prime Square Jiyugaoka

Meguro ward, Tokyo

2,820

100.0

2

T-22 Round1 Ichikawa-Onitaka

Ichikawa, Chiba

1,880

100.0

1

T-23 Ozeki Tokiwadai

Itabashi ward, Tokyo

1,263

100.0

1

T-24 Konami Sports Club Shibuya

Shibuya ward, Tokyo

3,400

100.0

1

O-1 Blumer Maitamon

Kobe, Hyogo

8,389

99.7

52

O-2 Central Square Takadono (Land)

Osaka, Osaka

2,685

100.0

1

O-3 Piago Kahma Home Center Omihachiman

Omihachiman, Shiga

2,140

100.0

2

O-4 Blumer HAT Kobe

Kobe, Hyogo

11,00098.0

39

O-5 Carino Esaka

Suita, Osaka

6,555

99.5

30

O-6 COMBOX Komyoike

Izumi, Osaka

6,450

100.0

1

O-7 Hankyu Oasis Hirakatadeguchi

Hirakata, Osaka

1,280

100.0

1

O-8 Welcia Kishiwadakamori (Land)

Kishiwada, Osaka

487

100.0

1

O-9 Life Nishi-Tengachaya

Osaka, Osaka

1,505

100.0

1

O-10 Million Town Tsukaguchi (Land)
Kahma Home Center Nakagawa Tomita
N-1(Land)
N-2 Valor Ichinomiya-Nishi

Amagasaki, Hyogo

3,723

100.0

1

Nagoya, Aichi

2,311

100.0

1

Ichinomiya, Aichi

2,174

100.0

1

N-4 Homecenter Kohnan Sunadabashi

Nagoya, Aichi

7,140

100.0

1

N-5 K’s Denki Shin-Moriyama (Land)

Nagoya, Aichi

1,370

100.0

1

N-6 Resora Obu Shopping Terrace

Obu, Aichi

7,911

99.0

42

F-1 Sunny Noma

Fukuoka, Fukuoka

1,497

100.0

1

F-2 Round1 Stadium Hakata-Hanmichibashi

Fukuoka, Fukuoka

5,020

100.0

1

F-3 Kurume-Nishi Shopping Center

Kurume, Fukuoka

1,515

100.0

4

R-1 Roseo Mito

Mito, Ibaraki

10,046

99.7

22

R-2 K's Denki Aomori Honten

Aomori, Aomori

1,469

100.0

1

11

Por tfolio Map as of September 30, 2018
NSC

R-4
T-11

R-1

T-12

SM
CSC
Urban StationFront SC
SS

R-6

T-5
T-9
T-7
T-23
T-8
Konami Sports Club
Shibuya

T-24
T-4

T-21
T-15

T-16

T-6

T-3

R-2
R-3

T-20
T-14
R-7

T-13

T-10

R-11

R-9

T-22
T-19
T-17
T-1
T-2

Costco Wholesale Sapporo Warehouse

R-5

T-18

O-3

F-2

N-2

F-1
O-4

O-10

F-3

N-1

O-7

O-1

O-5
O-2

O-9

N-5
N-4
N-6
R-10
R-8

O-6
O-8

No.

Name of property

Location(city / ward, prefecture)

Acquisition price(JPY mn)Occupancy rate(%) (Note 1)

Number oftenants (Note 2)

R-3

Super Sports Xebio Aomori-Chuo

Aomori, Aomori

898

100.0

1

R-4

Ashico Town Ashikaga

Ashikaga, Tochigi

4,180

100.0

29

R-5

Yorktown Shinden-Higashi

Sendai, Miyagi

3,252

100.0

2

R-6

Kasumi Technopark Sakura

Tsukuba, Ibaraki

830

100.0

1

100.0

1

R-7

Solala Plaza

Sendai, Miyagi

5,720

R-8

P-1 Plaza Tenno

Hamamatsu, Shizuoka

4,010

100.0

7

R-9

Seiyu Rakuichi Moriya (Land)

Moriya, Ibaraki

4,111

100.0

1

R-10 Sun Street Hamakita

Hamamatsu, Shizuoka

10,746

99.3

53

R-11 Costco Wholesale Sapporo Warehouse

Sapporo, Hokkaido

4,210

100.0

1

212,897

99.4

520

Total of assets acquired by the end of the 7th period (Note 3)
Note 1: “Occupancy rate” is as of September 30, 2018.
Note 2: “Number of tenants” indicates the number of end-tenants as of September 30, 2018.

12

Over view of por tfolio (as of September 30, 2018)
T-1

T-2

Fululu Garden Yachiyo

MONA Shin-Urayasu

Passaggio Nishiarai

T-4

Daikanyama
Address Dixsept

T-6 Yorktown Kita-Kaname

T-7

Unicus Yoshikawa

T-8 R e n a iss a n ce F u j imi dai

T-9

Super Viva Home
Iwatsuki (Land)

K’s Denki

T-11

Unicus Kamisato (Land)

T-12

Unicus Konosu (Land)

T-13 Minamihonjuku (Land)

Inageya Yokohama

T-14

Gourmet City Chiba-Chuo

T-15 Tokyu Store

Nakamachidai

T-16 Nagatsuta Minamidai

Central Wellness Club

T-17

Life Kameido

T-18 Shopping Center (Land)

Totsuka-Fukaya

T-19

Yumemachi
Narashinodai Mall

Yahagi
T-20 Kawamachi
Mall

SquareT-21 Prime
Jiyugaoka

IchikawaT-22 Round1
Onitaka

O-2 Life Takadono (Land)

O-3 Center Omihachiman

T-5 Unicus Ina

T-10 Shonan-Fujisawa (Land)

Piago Kahma Home

O-7

S p or t s C l u b

T-3

O-1 Blumer Maitamon

Hankyu Oasis
Hirakatadeguchi

O-4 Blumer HAT Kobe

Note: Please refer p.2 for the properties acquired in the seventh fiscal period.

WelciaO-8 Kishiwadakamori (Land)

O-9 Life Nishi-Tengachaya

13

O-5 Carino Esaka

K’s Denki

N-5 Shin-Moriyama (Land)

O-6

COMBOX Komyoike

O-10

Milion Town
Tsukaguchi (Land)

N-4

Homecenter Kohnan Sunadabashi

N-1

Kahma Home Center
Nakagawa Tomita (Land)

N-6

Resora Obu Shopping Terrace

N-2 Valor Ichinomiya-Nishi

F-1

Sunny Noma

F-2

Round1 Stadium
Hakata-Hanmichibashi

F-3

Kurume-Nishi Shopping
CenterR-2

K’s Denki Aomori Honten

R-3

Super Sports Xebio
Aomori-Chuo

R-4

Ashico Town Ashikaga

R-5

Yorktown Shinden-Higashi

R-6

Kasumi Technopark
SakuraR-7

Solala Plaza

R-8

P-1 Plaza Tenno

R-9

Seiyu Rakuichi Moriya (Land)

R-1

Roseo Mito

R-10

Sun Street Hamakita

T-23 Ozeki Tokiwadai

14

Summar y of Investment Unit
Unit Price and trading volume(Unit)(Yen)

100,000

320,000

40,000
Unit price

Volume300,000

35,000280,000

30,000260,000

25,000240,000

20,000220,000

15,000200,000

10,000180,000

5,000

160,000

End
of
Sep.

Feb.End
10 of
Mar.

End
of
Mar.

2015

End
of
Sep.

2016

End
of
Mar.

End
of
Sep.

2017

0

End
of
Mar.

End
of
Oct.

2018

General breakdown of unitholders
As of September 30, 2018

Number of unitholders
by investor type

Ownership ratio
by investor type
Brokerage firms
3,082 units(0.6%)

Individuals
and others
54,832 units(10.8%)

Foreign investors
154,710 units(30.5%)

116(0.9%)

507,700

Foreign investors
222(1.8%)
Brokerage firms
18(0.1%)

12,261

units

Other domestic
corporations
16,377 units(3.2%)

Other domestic
corporations
261 Financial(2.1%) institutions

Financial
institutions
278,699 units(54.9%)

Individuals
and others
11,644(95.0%)

15

II. ASSET MANAGEMENT REPORT
Overview of Asset Management(1) Trends in Key Indicators
Third fiscal period

Fourth fiscal period(From October 1,2016
to March 31, 2017)(From April 1,2017
to September 30, 2017)(From October 1,2017
to March 31, 2018)

Sixth fiscal period

Seventh fiscal period

Millions of yen

6,374

6,430

7,803

8,126

8,577

Millions of yen

6,374

6,427

7,797

8,126

8,364

Millions of yen

3,400

3,409

4,137

4,358

4,760

Millions of yen

2,860

2,817

3,468

3,609

3,984

Operating income

Millions of yen

2,973

3,021

3,666

3,768

3,816

Ordinary income

Millions of yen

2,519

2,556

3,108

3,179

3,201

Net income

Millions of yen

2,518

2,552

3,104

3,175

3,197

Total assets

Millions of yen

238,490(From April 1, 2016
to September 30, 2016)

Fiscal period
Operating revenues
Of which, property-related revenues
Property-related expenses
Of which, property-related expenses[Period-on-period changes]
Total net assets[Period-on-period changes]

Fifth fiscal period(From April 1,2018
to September 30, 2018)

179,360

185,037

229,628

231,107%(+19.6)(+3.2)(+24.1)(+0.6)(+3.2)

Millions of yen

96,73996,823

116,516

116,585

116,729%(+20.9)(+0.1)(+20.3)(+0.1)(+0.1)

Unitholders’ capital
Number of investment units issued andoutstanding
Net assets per unit

Millions of yen

94,256

94,256113,399

113,399

113,399Units

422,450

422,450

507,700

507,700

507,700

Yen

228,996229,195

229,498

229,633

229,918

Distributions(Note 2)Millions of yen

2,523

2,553

3,104

3,175

3,198

Distributions per unit

Yen

5,974

6,044

6,115

6,255

6,299

Of which, distributions of earnings
Of which, distributions in excess ofretained earnings
Ordinary income to total assets (Note 3)

Yen

5,888

6,044

6,115

6,255

6,299

Yen

86

-

-

-

-

[Annualized] (Note 4)
Return on net assets (Note 5)

%

%

1.5

1.4

1.5

1.4

1.4

(3.1)

(2.8)

(3.0)

(2.8)

(2.7)

2.8

2.6

2.9

2.7

2.7
(5.5)

(5.7)

(5.3)

(5.8)

(5.5)

53.9

52.3

50.7

50.4

48.9

(+0.6)(-1.6)(-1.6)(-0.3)(-1.5)

Days

183

182

183

182

183

%

98.8

100.0

100.0

100.0

100.0

40

42

51

52

53

m2

674,491.03

719,906.77

865,226.20

866,425.22

890,152.09

405

409

542

522

520

%

99.7

99.6

99.6

99.5

99.4

Depreciation expense

Millions of yen

714

721

885

925

971

Capital expenditures

Millions of yen

264

276

367

263

806

Rental NOI (Net operating income) (Note 9)

Millions of yen

4,228

4,331

5,214

5,441

5,352

FFO (Funds from operation) (Note 10)

Millions of yen

3,315

3,358

4,093

4,194

4,028

FFO per unit
Yen
7,847
7,949
8,062
8,260
Note 1: Figures above are rounded down for monetary amounts and rounded to the nearest tenth for ratios.
Note 2: Distributions in excess of earnings for the allowance for temporary difference adjustments are not considered.
Note 3: Ordinary income to total assets = Ordinary income /{(Total assets at beginning of period + Total assets at end of period) / 2} × 100

7,935[Annualized](Note 4)

Net assets to total assets (Note 6)[Period-on-period changes]
Operating days
Payout ratio(Note 7)%

Number of properties
Leasable area
Number of tenants (Note 8)
Occupancy ratio(Note 11)

Note 4:Note 5:For the first fiscal period, annualized as if the operation began from February 10, 2015, when the actual operation began.
Return on net assets = Net income /{( Net assets at beginning of period + Net assets at end of period) / 2} × 100

Note 6:Note 7:

Net assets to total assets = Net assets at end of period / Total assets at end of period × 100
Payout ratio = Total distibutions (excluding excess of earnings) / Net income × 100
When calculated as follows, the payout ratio is 100.2% for the fiscal period ended March 31, 2016 and 100.2% for the fiscal period ended
September 30, 2016.
Payout ratio = Total distributions (including excess of earnings) / Net income × 100
Note 8: As for building tenants, if a tenant leases multiple spaces in a building, each space is counted as one tenant. In a pass-through type master lease,
the number of end-tenants is shown in parentheses. In a sublease type master lease, the number of master lessee is shown.
Note 9: Rental NOI = Property-related revenues - Property-related expenses + Depreciation expenses
Note 10: FFO = Net income + Depreciation + Amortization - Gain on sale of property + Loss on sale of property
Note 11: FFO per unit = FFO / Number of investment units issued and outstanding

16

(2) Status of Asset Management(Overview of the Fiscal Period ended March 31, 2018)i) Transition of KRR
KRR was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan(the “Investment Trust Act”). On October 30, 2014, KRR was registered with the Director-General of the Kanto Local
Finance Bureau (registration number: Director-General of the Kanto Local Finance Bureau No. 97). KRR was listed on
the Real Estate Investment Trust Securities (“J-REIT”) Market of Tokyo Stock Exchange, Inc. (the “Tokyo Stock
Exchange”) (Securities code: 3453) on February 10, 2015. Subsequently, KRR raised funds through public offerings,
including an international offering. As a result, the number of investment units issued at the end of the fiscal period
ended September 30, 2018 was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day
needs of local area customers and have stable demand from retailers and customers, in order to provide stable
investment returns over the long term. Sponsored by Kenedix, Inc., a leading, independent real estate asset
management company, KRR entrusts its asset management and investment operations to Kenedix Real Estate FundManagement, Inc. (“KFM”), with the following strategies.
Note: For KRR’s management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for dailyneeds as retail properties that generally have the following characteristics:
a. Retail trade area of approximately a one to ten kilometer radius (and generally, a three to five kilometer radius), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and servicesii) Investment Environment
There were signs of a moderate economic rebound in Japan with recoveries in corporate earnings.
Consumer spending seems to be stable due to recoveries in employment and income environment. Real GDP growth
was negative in the first quarter of 2018 but rebounded in the second quarter of 2018.
Looking at the financial environment, the financial market remained unstable due to global market events such as thepolicies of the U.S. administration and geopolitical risks. Interest rates in Japan rose slightly after the Bank of Japandecided to take more flexible stance on fluctuation of long-term interest rates at its Monetary Policy Meeting in July
2018. However, the Bank of Japan’s framework for continuous powerful monetary easing is keeping the interest rates
in Japan low.
Under these conditions, the real estate sales market remained strong with high investment demand to invest fromdomestic and overseas investors. The real estate leasing market is also kept strong, making the J-REIT market stable.

17iii) Management Performance(A) Acquisition of Assets
KRR acquired two assets (Konami Sports Club Shibuya with acquisition price of 3,400 million yen and Costco
Wholesale Sapporo Warehouse with acquisition price of 4,210 million yen), and disposed one asset (K’s Denki
Nakagawa Tomita (Land) with sale price of 1,128 million yen).
As a result, the portfolio at the end of the period under review (September 30, 2018) consists 53 properties with thetotal acquisition price of 212,897 million yen.
(B) Management and Operation of Assets
KFM provides property management services for all of the properties owned by KRR at the end of the period underreview (September 30, 2018). By using the same company for both asset management and property management
services, KRR aims to build stronger relationships with tenants and increase returns from its portfolio. Furthermore,by implementing retail property and distribution centers management that better reflects the needs of our tenants,
KRR strives to accumulate know-how and improve tenant satisfaction.
KRR invests primarily in neighborhood and community shopping centers that cater to the day-to-day needs ofcustomers. The portfolio is diversified in terms of properties, tenants and other characteristics with a goal to generateconsistent long-term cash flows. At the same time, a portion of the rent includes sales-linked rent to explore theupside potential (Note 1) for rental income. By using these measures, KRR aims to pursue a portfolio that achieves
both stability and growth.
As of the end of the period under review, portfolio as a whole performed well with an overall occupancy ratio of 99.4%.
Furthermore, the portfolio is diversified in terms of tenants as there are 520 end-tenants (Note 2) in KRR’s retailproperties.
Note 1:
Note 2:“Upside potential” represents feasibility of rental income or cash flow growth.
The number of end-tenants is the sum of the number of end-tenants in a pass-through type master lease and the number of masterleassees in a sublease type master lease.

(C) Financing
When financing to acquire properties, KRR seeks to achieve the proper balance between financial stability and the costof the funds with the objectives to achieve stable medium- to long-term returns and consistent growth of assets undermanagement.
(Debt Finance)
During the fiscal period under review, KRR borrowed 7,000 million yen for the acquisition of properties and 8,170
million yen for refinancing. KRR also issued investment corporation bonds to partially prepay borrowings of 2,000
million yen. Consequently, borrowings totaled 99,100 million yen and interest-bearing debt including investment
corporation bonds (excluding interest-bearing tenant leasehold and security deposits) totaled 106,100 million yen at
the end of the fiscal period under review (September 30, 2018).
When undertaking borrowings, KRR seeks to spread out repayment dates and lengthen borrowing periods. KRR may
use swaps to fix the interest payments to hedge against the risk of a rise in interest rates.
As a result, the average maturity of debt is 4.9 years, the weighted average interest rate is 1.01%, the long-term debt
ratio (Note 1) is 97.4% and the LTV ratio (Note 2) is 44.5%.
Note 1:
Note 2:Long-term debt ratio = (Long-term borrowings + Investment corporation bonds) / (Borrowings + Investment corporation bonds)
LTV ratio = (Loans payable + Investment corporation bonds) / Total assets(Credit Ratings)
The status of the credit ratings as of September 30, 2018 is as follows.
Credit rating agency
Japan Credit Rating Agency, Ltd. (JCR)

Details of the ratings
Long-term issuer rating

A+ (Outlook: Stable)

Rating on bonds

A+(Shelf Registration)
KRR filed a shelf registration statement for investment corporation bonds (excluding short-term investment
corporation bonds) on September 29, 2016. Details are as follows.
Planned issue amount
Planned issuance period

100,000,000,000 yen
October 7, 2016 to October 6, 2018

Use of funds

Acquisition funds for specified assets (as defined in Article 2, Paragraph 1 of the Investment Trust Law),
repayment funds for borrowings, repayment funds for investment corporation bonds (including short-term
investment corporation bonds), refund funds for lease and guarantee deposits, funds to pay for repairs andmaintenance, working capital, etc.

KRR issued the 1st Series Unsecured Investment Corporation Bonds (1,000 million yen) and the 2nd Series
Unsecured Investment Corporation Bonds (1,000 million yen) on October 31, 2016, the 3rd Series Unsecured
Investment Corporation Bonds (1,000 million yen) and the 4th Series Unsedcured Investment Corporation Bonds

18

(2,000 million yen) on August 31, 2017, and 5th Series Unsecured Investment Corporation Bonds (2,000 million yen)on April 26, 2018, based on this shelf registration statement.
iv) Results of Operations
For this period, revenue was 8,577 million yen, operating income was 3,816 million yen, ordinary income was 3,201
million yen and net income was 3,197 million yen.
Furthermore, in accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a
distribution of 3,198,002,300 yen which is almost equivalent to the earnings for the fiscal period. Cash distributions
are paid in accordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including
subsequent amendments).
Consequently, the distribution per unit was 6,299 yen.

19

(3) Changes in Investment Units Issued and Outstanding
Changes in the number of investment units issued and outstanding and unitholders’ capital since its corporation aresummarized in the following table.
Date

Total number of units issued andoutstanding (units)

Type of issue

Increase
October 3, 2014

Private placement forincorporation

February 9, 2015

Unitholders’ capital(in million yen)

Balance

Increase

Notes

Balance

750

750

150

150

(Note 1)

Public offering

254,250

255,000

56,43056,580(Note 2)

March 11, 2015

Capital increase throughthird-party allocation

5,750

260,750

1,276

57,857(Note 3)October 1, 2015

Public offering

88,750349,500

18,54776,404(Note 4)

October 21, 2015

Capital increase throughthird-party allocation

5,750

355,250

1,201

77,606(Note 5)

April 20, 2016

Public offering

64,000419,250

15,856

93,463(Note 6)

May 18, 2016

Capital increase throughthird-party allocation

3,200

422,450

792

94,256(Note 7)

April 18, 2017

Public offering

81,250503,700

18,244

112,500(Note 8)

Capital increase through
4,000
507,700
898
113,399
third-party allocation
Issued at issue price of 200,000 yen per unit for incorporation.
Issued at issue price of 230,000 yen per unit (issue amount of 221,950 yen per unit) for acquisition of new properties.
Issued at issue amount of 221,950 yen per unit for repayment of borrowings.
Issued at issue price of 216,543 yen per unit (issue amount of 208,991 yen per unit) for acquisition of new properties.
Issued at issue amount of 208,991 yen per unit for repayment of borrowings.
Issued at issue price of 256,717 yen per unit (issue amount of 247,764 yen per unit) for acquisition of new properties.
Issued at issue amount of 247,764 yen per unit for repayment of borrowings.
Issued at issue price of 232,537 yen per unit (issue amount of 224,547 yen per unit) for acquisition of new properties.
Issued at issue amount of 224,547 yen per unit for repayment of borrowings.

May 17, 2017
Note 1:
Note 2:
Note 3:Note 4:Note 5:Note 6:Note 7:Note 8:Note 9:(Note 9)(Changes in Unit Price at Tokyo Stock Exchange)
The highest and lowest closing prices of the investment units listed on J-REIT section of the Tokyo Stock Exchange
for each fiscal period are as follows.
Fiscal period
For the fiscal period
ended

Third fiscal period

Fourth fiscal period

Fifth fiscal period

Sixth fiscal period

Seventh fiscal period

September 30, 2016

March 31, 2017

September 30, 2017

March 31, 2018

September 30, 2018

Highest

JPY 296,100

JPY 275,000

JPY 251,100

JPY 251,700

JPY 249,200

LowestJPY 240,000

JPY 235,200

JPY 228,900

JPY 223,000

JPY 227,600

,

,

,

20

(4) Distributions
In accordance with the distribution policy in the KRR Articles of Incorporation, KRR made a distribution of
3,198,002,300 yen, which is almost equivalent to the earnings for the fiscal period. Cash distributions are paid inaccordance with Article 67-15 of the Special Taxation Measures Law (Law No. 26 of 1957, including subsequent
amendments).
Consequently, the distribution per unit for the fiscal period was 6,299 yen.
(in thousands of yen)
Fiscal period
For the fiscal period ended
Unappropriated retained
earnings
Retained earnings carriedforward
Total distributions[Distributions per unit]
Of which, distributions ofearnings[Distributions of earnings perunit]
Of which, distributions inexcess of retained earnings[Distributions in excess ofretained earnings per unit]
Total distributions in excessof earnings for the allowancefor temporary adjustment[Distributions per unit]

Third fiscal period
September 30, 2016

Fourth fiscal period
March 31, 2017

Fifth fiscal period
September 30, 2017

Sixth fiscal period
March 31, 2018

Seventh fiscal period
September 30, 2018

2,518,802

2,584,343

3,104,740

3,175,962

3,198,151

31,417

216

155

299

149

2,523,716

2,553,287

3,104,585

3,175,663

3,198,002[5,974 yen]

[6,044 yen]

[6,115 yen]

[6,255 yen]

[6,299 yen]

2,487,385

2,553,287

3,104,585

3,175,663

3,198,002[5,888 yen]

[6,044 yen]

[6,115 yen]

[6,255 yen]

[6,299 yen]

36,330－－－－[86 yen]

[－]

[－]

[－]

[－]

36,330－－－－[86 yen]

[－]

[－]

[－]

[－]

Total distributions in excessof earnings from theunitholders’ capital for tax
purposes

－

－

－

－

－

[Distributions per unit]

[－]

[－]

[－]

[－]

[－]

21

(5) Management Policy and Issues to be Addressed
Outlook for Asset Management
The Japanese economy is expected to continue to recover at a moderate pace. However, we should pay attention to
uncertainties about the overseas economy and politics regarding the direction of U.S. financial policies, the policies of
the U.S. administration, etc. We also need to pay attention to changes in domestic economic environment, such as
fluctuation of yen due to a rise in protectionism and the Bank of Japan’s interest rate policy.
As for Japan’s retail sector environment, supermarkets and drugstores are performing well, and we anticipate thistrend to continue. In addition, while e-commerce has grown to account for a certain share of consumer spending,backed by advances in information technology, we anticipate the integration of “brick and mortar” and the Internet
will advance as both retail companies and Internet companies try to adopt to such environment.
In the real estate trading market, we anticipate the high level of transaction volume to continue because of the lowinterest rate environment under the Bank of Japan’s monetary easing measures. However, investors should especiallykeep in mind the risk of changes in banks’ lending attitude towards real estate sector, as amount of banks’ outstandingloans towards real estate sector reached new highs.
From a medium to long-term perspective, to generate a steady stream of rental revenue, consistently increase our assets
and establish a suitable financial position, KRR will continue to manage assets based on the following policies.
(A) Investment Strategy for New Properties and Disposition Policy
KRR receives a variety of support from many sources in order to achieve steady growth of KRR’s assets and increase
the value of KRR’s assets. One source is the Kenedix Group, including Kenedix, Inc., the parent company of KFM (Note).
KRR also receives support from KRR’s Alliance Companies: Sumitomo Mitsui Finance and Leasing Co., Ltd., Nippon
Commercial Development Co., Ltd., P&D Consulting Co., Ltd., and ITOCHU Corporation. KRR is implementing a
growth strategy that takes full advantage of the external growth opportunities created by the large and diverse
acquisition pipeline made possible by the support of these companies.
When acquiring properties, KRR makes decisions based on all applicable factors with emphasis on four parameters: theretail property’s attractiveness, location, profitability and the tenant mix. By using this selection process, KRR invests
in retail properties that have competitive advantages, and prospects for stable cash flow and asset value growth. KRR
also invests in land ownership interests underlying retail properties. Regarding land-only properties, KRR makes theseinvestments after examining the terms of the land leasing agreement, the characteristics of the tenant, the asset value ofthe land, and the proportion of land-only properties in KRR’s portfolio. KRR may also consider making an equity
investment in a tokumei kumiai (silent partnership) for the acquisition of preferential negotiation rights andopportunities for additional revenues, provided that KRR is given an opportunity to acquire them in the future.
Regarding disposition of a portfolio property, KRR makes decisions based primarily on the significance of theseproperties in the context of the portfolio. This is assessed by comprehensive evaluation of the outlook for future
profitability and asset value determined based on its current profitability and market trends.
Note:

The Kenedix Group consists of Kenedix, Inc. and its subsidiaries and affiliates.

(B) Management Strategy for Existing Properties
KRR is committed to building a portfolio that can pursue both stability and growth. KRR believes that implementing
integrated asset and property management services makes it possible to properly manage retail properties anddistribution centers and pursue internal growth. Furthermore, this integrated management framework facilitates
activities to enliven local communities where KRR’s properties are located, enabling us to aim for medium tolong-term growth in asset value.
To accomplish these goals, KFM oversees properties owned by KRR while placing priority on the following themes.
・“One-stop” asset management and property management services
・Continuously implementing a retail property management cycle through our in-house property management
services
・Pursuit of internal growth through management of retail properties
・Directing investments and management policies to enliven local communities in the medium to long-term
・Implementing distribution center management“One-stop” asset management and property management services
KRR plans to use the integrated asset management and property management services of KFM for strengthening
relationships with tenants and making the portfolio more profitable.
Continuously implementing a retail property management cycle through KRR’s in-house property management
services
KFM provides property management services for all of KRR’s properties. KRR does this for the purposes of
performing retail property management that better reflects the needs of the tenants as well as accumulating know-how
and improving tenant satisfaction. Specifically, KRR uses direct contact with tenant companies at our properties inorder to strengthen tenant relationships and make properties more profitable. To this end, KRR maintains periodic
communication with tenants and perform questionnaire surveys to customers for monitoring of market conditions, sothat KRR can identify the needs of tenants and the customers visiting their sites. This process makes it possible to findissues that stand in the way of achieving greater satisfaction for tenants and their customers. Once KRR has discovered

22

points that require attention, KRR takes actions that take full advantage of the resources and knowledge regarding retailproperties within the Kenedix Group. Solutions include measures such as the effectively utilizing capital expenditures,
optimizing tenant mix, realizing growth in asset value by pursuing property expansions, and cutting costs, to improvetenant satisfaction and acquire more know-how.
Pursuit of internal growth through management of retail properties
KRR seeks to improve the profitability and value of its portfolio through proper management of retail properties.
i. Effectively utilize capital expenditure
KRR will use proper and well-timed capital expenditures to increase the satisfaction of tenants and make its
properties more competitive.
ii. Optimize tenant mix
KRR will constantly work on attracting new tenants that are highly appealing to shoppers and replace tenants withothers, optimizing tenant composition, in order to seek stable revenue and higher profitability by attracting morecustomers.
iii. Realize growth in asset value by pursuing property expansions
KRR will use the extensive knowledge involving retail properties of the Kenedix Group and KRR’s Alliance
Companies to utilize the underutilized space (Note) at properties and expand properties. These measures will take into
account the competitive position of each property, the effect on KRR’s financial position and other factors. By
increasing space that can be leased, KRR aims to increase revenue and asset value.
Note:

The underutilized space is defined as the area that is calculated by multiplying the floor space ratio, or the ratio of total area of thebuilding to the site area, which is prescribed in Article 52 of the Building Standards Act (Act No.201 of 1950, including subsequent
amendments.) and applied to each retail property in accordance with the Building Standards Act, City Planning Act (Act No.100 of 1968,
including subsequent amendments.) and other laws and regulations, by the land area that is allowed to be used as a retail property site, andsubtracting from this figure the actual gross floor area of the building.

Directing investments and management policies to enliven local communities in the medium to long-term
At KRR’s properties, KRR seeks tenants that provide services, holds community involved events and uses othermeasures to help enliven the local communities where KRR’s properties are located. KRR believes these activities willcontribute to the medium to long-term growth in the asset value of these properties.
Implementing distribution center management
Since tenants of distribution centers that KRR invests may belong to the same business sectors as the tenants occupying
KRR’s retail properties, KRR utilizes KRR’s relationship with KRR’s retail tenants in building up KRR’s relationshipwith tenants of distribution centers. KRR believes these tenant relationships will contribute to the long-term
management of these distribution centers.
(C) Financing
KRR will establish a suitable financial foundation by examining numerous financing methods and selecting the
optimum ones. These decisions will reflect interest rates and other elements of the financial environment. KRR’s goal
is to select financing methods that result in the optimum balance between financial stability and the financing cost.
(D) Disclosure of Information
KRR’s policy concerning disclosure activities is to use extensive investor relations activities to distribute a broad range
of information to investors and other related parties as well as to announce information as soon and as accurately as
possible. KRR also distribute information with awareness on ESG (Environmental, Social and Governance) for
sustainable growth of unitholder interest. KRR uses TDnet (Timely Disclosure network) and press releases to meet the
timely-disclosure requirements of the Tokyo Stock Exchange. In addition, KRR proactively posts information on its
website (http://www.krr-reit.com/en/).
(E) Conflicts of Interest
In addition to managing the assets of KRR, KFM provides asset management services to other REITs, which may incur
conflicts of interests in acquisition of assets. In order to prevent the improper allocation of acquisition opportunities,
KFM uses a “preferential right for acquisition opportunities” system for the property acquisition process. KFM has apipeline committee, which includes a compliance officer, and operates in accordance with rules. This system isstructured to prevent improper allocation of acquisition opportunities, and thus, managing conflicts of interest among
the REITs managed by KFM. Through these measures, KFM is taking suitable actions regarding conflicts of interest.

23

(6) Important Subsequent Events
Not applicable.
(Reference Material)i) Disposition of Assets
KRR has contracted a purchase and sale agreement (Note 1) on November 14, 2018 to dispose the following asset.
Property
numberR-7

Property type
(Note 2)
Urban Station-Front SC

Property name
Solala Plaza

Location
Sendai, Miyagi

Buyer
GK KRF74

Sale price(million yen) (Note 3)
5,980

Sale date
December 21, 2018 (49%)
and April 5, 2019 (51%)

Note 1: The purchase and sale agreement with the buyer on the sale of the asset falls under the category of forward commitment made by investment
corporations as stipulated in the “Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.” ruled by the
Financial Service Agency of Japan. In case the agreement is terminated, either of the parties responsible for the termination shall compensate forthe damage resulted from the termination by paying a penalty corresponding to 20% of the sale price (excluding consumption taxes and local
consumption taxes) to the other party.
Note 2: For the details of each type of retail properties, please refer “Section 5. Reference Information, (2) Overview of the Portfolio (Note 1).
Note 3: “Sale price” represents the amount specified in the purchase and sale agreement for the trust beneficiary interests, exclusive of the various
expenses (sale expenses, property tax, etc.) required in the sale of the asset.

24Profile of KRR(1) Status of Unitholders’ Capital
Third fiscal period
Fourth fiscal period
Fifth fiscal period
Sixth fiscal period
Seventh fiscal period(From April 1, 2016 to (From October 1, 2016 (From April 1, 2017 to (From October 1, 2017 (From April 1, 2018 toSeptember 30, 2016)
to March 31, 2017)
September 30, 2017)
to March 31, 2018)
September 30, 2018)

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

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

5,000,000 units

422,450 units

422,450 units

507,700 units

507,700 units

507,700 units

Unitholders’ capital

94,256 million yen

94,256 million yen

113,399 million yen

113,399 million yen

113,399 million yen

Number of unitholders

10,618

10,072

12,301

12,545

12,261(2) Matters Concerning Investment Units
The following is a list of major unitholders as of Seeptember 30, 2018.
Name

Location

Number of units
held(Units)Ratio (%)
(Note 1)

THE MASTER TRUST BANK OF JAPAN, LTD.
(Trust Acct.)

2-11-3, Hamamatsucho, Minato-ku, Tokyo

85,78916.89

JAPAN TRUSTEE SERVICES BANK, LTD.
(Trust Acct.)

1-8-11, Harumi, Chuo-ku, Tokyo

66,977

13.19

THE NOMURA TRUST AND BANKING CO.,LTD. (Investment Trust Acct.)

2-2-2, Otemachi, Chiyoda-ku, Tokyo

23,501

4.62

JP MORGAN CHASE BANK 385628

Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.

14,841

2.92

MIZUHO TRUST & BANKING CO., LTD.

1-2-1, Yaesu, Chuo-ku, Tokyo

10,519

2.07

8,841

1.74

8,746

1.72

8,579

1.68

7,338

1.44

6,744

1.32

241,875

47.64

MITSUBISHI UFJ TRUST AND BANKINGCORPORATION
THE BANK OF NEW YORK MELLON SA/NV 10

BNYM AS AGT/CLTS 10 PERCENTSTATE STREET BANK WEST
CLIENT-TREATY 505234
DFA INTERNATIONAL REAL ESTATESECURITIES PORTFOLIO

6-27-30 Shinjyuku, Shinjuku-ku, Tokyo
Standing proxy: Citibank, Ltd.
Total

Note 1:

2-11-3, Hamamatsucho, Minato-ku, Tokyo
Standing proxy: The Master Trust Bank ofJapan, Ltd.
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd.
2-7-1 Marunouchi, Chiyoda-ku, Tokyo
Standing proxy: The Bank of Tokyo Mitsubishi
UFJ, Ltd.
Shinagawa Intercity Tower A
2-15-1, Kohnan, Minato-ku, Tokyo
Standing proxy: Mizuho Bank, Ltd.

“Ratio” is the ratio to total number of units issued and outstanding, rounded down to the second decimal place.

25

(3) Matters Concerning Directors and Auditori) Executive Director, Supervisory Director, and Independent Auditor as of September 30, 2018
Position

Name

Executive Director Akihiro Asano

Director & COO, Head of Retail REIT Department, KFM

1,500

Yoshitoshi Yasu

Yoshitoshi Yasu Certified Public Accountant / Tax Accountant Office
Auditor of YOKU MOKU Holdings Co., Ltd.
Auditor of YOKU MOKU Co., Ltd.
Auditor of YOKU MOKU Crea Co., Ltd.
Auditor of Fujiricoh Trading Co., Ltd.
Auditor of CLOVER Inc.
Auditor of Kabou-isshin Co., Ltd.
Director & member of Audit comittee of Looop Inc.

1,500

Mai Ishiwatari

Partner, Shiroyama-Tower Law OfficeDirector, Cocone Corporation
Representative Director, Cocone Education Corporation

750

Akiko Yamakawa

Member of the Basic Sub-committee of Labour Policy Council, Ministryof Health, Labour and Welfare
Partner of Vanguard Lawyers Tokyo750－

13,000Supervisory
Director(Note)

Independent Auditor Ernst & Young ShinNihon LLC
Note:Total amount of fees
paid during the period(thousand yen)

Other concurrent title

Although supervisory directors are concurrently officers in corporations other than the ones stated above, there are no conflicts of interest
between KRR and any other corporations, including those stated above.

ii) Policy on Decisions to Terminate or not Reappoint the Accounting Auditor
The KRR Board of Directors will consider the termination of the Accounting Auditor pursuant to the provisions of theInvestment Trust Act of Japan. The directors will also consider not reappointing the Accounting Auditor after
examining the quality of audits, compensation for auditing and other applicable items.
(4) Asset Manager, the Custodian and Administrators
Asset manager, the custodian and administrators as of Sptember 30, 2018 are as follows.
Operational role

Name

Asset Manager

Kenedix Real Estate Fund Management, Inc.

Asset Custodian

Mizuho Trust & Banking Co., Ltd.

Unitholders’ Register Agent

Mizuho Trust & Banking Co., Ltd.

General Administrator

Mizuho Trust & Banking Co., Ltd.

Financial Agent for Investment Corporation Bonds

Sumitomo Mitsui Trust Bank, Ltd.
MUFG Bank, Ltd.

26

Status on Investment Properties(1) Component of Assets
Type ofspecified asset

Areas

Property type

(Note 1)

Sixth fiscal period
as of March 31, 2018
Total amount
held(Millions ofyen)

Seventh fiscal period
as of September 30, 2018
Total amount
held(Millions ofyen)

Ratio (%)
(Note 3)

Tokyo metropolitan
area

87,73438.0

91,497

38.4

Greater Osaka area

44,81819.4

44,735

18.8

Greater Nagoya area

22,085

9.6

21,142

8.9

Fukuoka area

8,092

3.5

8,052

3.4

Ordinance-designatedcities, core cities andother areas

45,64519.8

49,842

20.9

－

－

－

－

Total of trust beneficiary interests in real estate

208,37690.2

215,2270

90.3

Bank deposits and other assets

22,7309.8

23,219

9.7

Total assets

231,107100.0

238,490

100.0

Trust
beneficiaryinterest in realestateNeighborhood,community andother shopping
centers for daily
needs

Other retailproperties

Note 2:
Note 3:(Note 3)(Note 2)

(Note 2)

Note 1:

Ratio (%)－

“Areas” are categorized to the Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area
and Ordinance-designated cities, core cities and other areas. References to “Tokyo metropolitan area” are to the area thatconsists of Tokyo, Kanagawa, Saitama and Chiba prefectures. References to the “Greater Osaka area” are to the area thatconsists of Osaka, Kyoto, Hyogo, Nara and Shiga prefectures. References to the “Greater Nagoya area” are to the area thatconsists of Aichi, Gifu and Mie prefectures. References to the “Fukuoka area” are to the area that consists of Fukuoka
prefecture. “Ordinance-designated cities, core cities and other areas” refers to cities designated by government ordinance,
which have populations of 500,000 persons or more, core cities, which have populations of 200,000 persons or more, and toother areas with a population fewer than 200,000 persons, which KRR believes will have suitable customer traffic fromsurrounding areas.
“Total amount held” is the amount allocated in the balance sheets as of the end of fiscal period (figures are on a net bookvalue basis after deducting depreciation), and is rounded down to the nearest million.
“Ratio” is the ratio of the amount allocated in the balance sheets to the total assets rounded to the nearest tenth.

27

(2) Major Assets Owned
The following are major assets owned (the ten largest properties by book value) by KRR as of September 30, 2018.
Property
number

Property nameBook value(in millions)Leasable area(m2)
(Note 1)

Leased area(m2)
(Note 2)

Occupancy
rate(%)(Note 3)

Ratio tototal rental
revenue(%)

Primary use(Note 4)

T-1

Fululu Garden Yachiyo

14,82077,057.56

74,400.60

96.6

8.8

RetailO-4Blumer HAT Kobe

11,44923,775.88

23,308.29

98.0

6.3

RetailR-10

Sun Street Hamakita

10,71449,023.34

48,678.40(Note 5)

99.3

6.4

RetailR-1

Roseo Mito

9,895

48,296.15

48,161.79

99.7

4.6

Retail

T-2

MONA Shin-Urayasu

8,805

9,953.98

9,782.30

98.3

5.6

RetailO-1

Blumer Maitamon

8,318

30,290.55

30,187.39

99.7

6.0

Retail

N-6

Resora Obu Shopping Terrace

8,196

19,909.33

19,716.62

99.0

3.8

RetailN-4

Homecenter Kohnan Sunadabashi

7,045

20,329.07

20,329.07

100.0(Note 7)－RetailO-5Carino Esaka

6,634

7,540.58

7,504.90

99.5

3.7

RetailCOMBOX Komyoike

6,338

25,530.44(Note 6)25,530.44

100.0

2.7

RetailTotal

92,218311,706.88

307,599.80

98.7(Note 7)O-6

Note 1:
Note 2:

Note 3:Note 4:Note 5:Note 6:Note 7:(Note 5)－

“Leasable area” is equivalent to gross floor area of space that KRR considers to be available for lease in each property, rounded to the nearest
tenth. For land-only properties, leasable area is equivalent to land area as described in the property registry.
“Leased area” indicates the total leased area based on the lease agreements for each property as of September 30, 2018. As for leaseagreements of buildings, the leased area of warehouses and land are excluded. As for pass-through type master leases, the leased area basedon the lease agreements between the master lessee and the end-tenants as of September 30, 2018 is shown. As for sublease type master leases,
the leased area to the master lessee is shown.
“Occupancy rate” is calculated by dividing leased area by leasable area as of September 30, 2018, rounded to the nearest tenth.
“Ratio to total rental revenue” is calculated by rental revenue each property divided by total rental revenue.
The area that KRR owns exclusively as proportion to the co-ownership interest (co-ownership ratio: 90%).
The total area that KRR owns exclusively as a compartmentalized ownership interest (retail space).
KRR has not obtained consent from the tenant(s) to release this information.

28

(3) Overview of the Portfolio[Overview of Assets Owned]
The following summarizes the real estate or the real estate properties in trust owned by KRR as of September 30,
2018.
Area

(Note1)

Property
number

Property
type

T-1

CSC

T-2
T-3
T-4

Urban
Station-Front SC
Urban
Station-Front SC
Urban
Station-Front SC

Property nameLocation(City/ward,
prefecure)(Note 2)

Fululu Garden Yachiyo

Yachiyo, Chiba

MONA Shin-Urayasu

Urayasu, Chiba

Passaggio Nishiarai

Adachi ward, Tokyo

Daikanyama Address
Dixsept

Shibuya ward, Tokyo

T-5

NSC

Unicus Ina

Kitaadachi-gun, Saitama

T-6

NSC

Yorktown Kita-Kaname

Hiratsuka, Kanagawa

T-7

NSC

Unicus Yoshikawa

Yoshikawa, Saitama

T-8

SS

T-9

NSC

T-10

SS

T-11

NSC

Unicus Kamisato (Land)

Kodama-gun, Saitama

T-12

NSC

Unicus Konosu (Land)

Konosu, Saitama

T-13

SM

T-14

SM

T-15

NSC

T-16

SS

T-17

SM

T-18

NSC

T-19

NSC

T-20

NSC

Kawamachi Yahagi Mall

Chiba, Chiba

T-21

SS

Prime Square Jiyugaoka

Meguro-ku, Tokyo

T-22

SS

Round1
Ichikawa-Onitaka

Ichikawa, Chiba

T-23

SM

Ozeki Tokiwadai

Itabashi ward, Tokyo

T-24

SS

Konami Sports Club
ShibuyaShibuya ward, Tokyo

O-1

NSC

Blumer Maitamon

Kobe, Hyogo

O-2

SM

Life Takadono (Land)

Osaka, Osaka

O-3

NSC

Piago Kahma Home
Center Omihachiman

Omihachiman, Shiga

O-4

NSC

Blumer HAT Kobe

Kobe, Hyogo

T

O
O-5
O-6
O-7
O-8

Sports Club
Renaissance Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki
Shonan-Fujisawa (Land)

Inageya Yokohama
Minamihonjuku (Land)
Gourmet City
Chiba-Chuo
Nakamachidai
Tokyu Store
Central Wellness Club
Nagatsuta MinamidaiLife Kameido
Totsuka-Fukaya
Shopping Center (Land)
Yumemachi
Narashinodai Mall

Urban
Carino Esaka
Station-Front SC
Urban
COMBOX Komyoike
Station-Front SC
Hankyu Oasis
SM
Hirakatadeguchi
Welcia Kishiwadakamori
SS(Land)

Nerima ward, Tokyo
Saitama, Saitama
Fujisawa, Kanagawa

Yokohama, Kanagawa
Chiba, Chiba
Yokohama, Kanagawa
Yokohama, Kanagawa
Koto ward, Tokyo
Yokohama, Kanagawa
Funabashi, Chiba

Suita, Osaka
Izumi, Osaka
Hirakata, Osaka
Kishiwada, Osaka

Ownership
form
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estateBook value(in millions)

Evaluation value(in millions)(Note 3)

14,82015,200

8,805

9,410

5,792

6,710

5,400

6,370

4,384

5,050

3,961

4,350

3,576

3,840

2,516

2,760

4,890

5,510

3,210

3,510

3,043

3,050

1,726

1,770

1,462

1,430

741

792

3,412

3,810

1,771

1,890

1,494

1,520

4,228

4,310

3,431

3,510

3,113

3,210

2,990

2,830

1,886

1,970

1,282

1,350

3,551

3,420

8,318

9,370

2,727

3,150

2,130

2,470

11,44911,500

6,634

7,040

6,338

6,790

1,312

1,330

497

488

29

Area
(Note1)

Property
number

Propertytype

Property name

O-9

SM

Life Nishi-Tengachaya

O

N

F

R

O-10

NSC

N-1

SS

N-2

NSC

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

F-2

SS

F-3

NSC

R-1

NSC

R-2

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6
R-7
R-8

SM

(Note 2)

Note 2:
Note 3:

Osaka, Osaka

Million Town
Amagasaki, Hyogo
Tsukaguchi (Land)
Kahma Home Center
Nagoya, Aichi
Nakagawa Tomita (Land)
Valor Ichinomiya-Nishi
Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama (Land)
Resora Obu Shopping
Terrace
Sunny NomaIchinomiya, Aichi
Nagoya, Aichi
Nagoya, Aichi
Obu Aichi
Fukuoka, Fukuoka

Round1 Stadium
Hakata-Hanmichibashi
Kurume-Nishi Shopping
CenterRoseo Mito

Fukuoka, Fukuoka
Kurume, Fukuoka
Mito, Ibaraki

K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town Ashikaga
Yorktown
Shinden-Higashi
Kasumi Technopark
SakuraUrban
Solala Plaza
Station-Front SC

Aomori, Aomori
Aomori, Aomori
Ashikaga, Tochigi
Sendai, Miyagi
Tsukuba, Ibaraki
Sendai, Miyagi

NSC

P-1 Plaza Tenno

Hamamatsu, Shizuoka

R-9

NSC

Seiyu Rakuichi Moriya(Land)Moriya, Ibaraki

R-10

NSC

Sun Street Hamakita

Hamamatsu, Shizuoka

R-11

SS

Costco Wholesale
Sapporo Warehouse

Sapporo, Hokkaido

Total
Note 1:

Location(City/ward,
prefecure)

Ownership
form
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estate
Trust beneficiaryinterest in real estateBook value(in millions)

Evaluation value(in millions)(Note 3)

1,553

1,690

3,772

3,950

2,351

2,700

2,158

2,330

7,045

7,290

1,390

1,440

8,196

7,950

1,443

1,620

5,037

5,500

1,571

1,720

9,895

11,700

1,461

1,580

883

938

4,302

5,040

3,289

3,340

846

876

5,595

5,960

4,154

4,50

4,320

4,230

10,714

11,160

4,378

4,410

215,270

229,484“T”, “O”, “N”, “F” and “R” hereinafter refers to Tokyo metropolitan area, the Greater Osaka area, the Greater Nagoya area, the Fukuoka area andOrdinance-designated cities, core cities and other areas, respectively.
“Location” indicates the residential address. For those without a residential address, the building or land address on the registry is shown.
“Evaluation value” shows the appraisal value stated on the real estate appraisal report created by the real estate appraisers of Daiwa Real EstateAppraisal Co., Ltd., Japan Real Estate Institute and The Tanizawa Sōgō Appraisal Co., Ltd. in accordance with the methods and standards for asset
valuation as stipulated in the KRR Articles of Incorporation as well as the regulations as stipulated by The Investment Trusts Association, Japan.

30

[Earnings Performance for the Individual Properties]
Sixth fiscal period
as of March 31, 2018
Area

Property
number

Property
type

T-1

CSC

T-2
T-3
T-4
T-5

Urban
Station-Front SC
Urban
Station-Front SC
Urban
Station-Front SC

Fululu Garden
Yachiyo

755

9.3

39

96.6

736

8.8

MONA Shin-Urayasu

1(58)

87.8

489

6.0

1(57)

98.3

471

5.6

Passaggio Nishiarai

1(41)

98.6

310

3.8

1(41)

98.6

321

3.8

Daikanyama Address
Dixsept

1(27)

97.9

264

3.3

1(27)

97.9

279

3.3

1

100.0

139

1.7

1

100.0

139

1.7

－

－

T-6

NSC

Yorktown KitaKaname

T-7

NSC

Unicus Yoshikawa

SS

T-9

NSC

T-10

SS

T-11

NSC

T-12

NSC

T-13

SM

T-14

SM

T-15

NSC

T-16

SS

T-17

SM

T-18

NSC

T-19

NSC

T-20

NSC

T-21

SS

T-22

SS

RentalRatio toRentalRatio toNumberrevenue total rental
Occupancy revenue total rentalof tenants(millions) revenue
rate (%)(millions) revenue(Note 1)
(Note 2)
(Note 2)
(%)
(%)

98.8

Unicus Ina

T-8

Number
Occupancyof tenants
rate (%)(Note 1)
40

NSC

T

Sports Club
Renaissance
Fujimidai
Super Viva Home
Iwatsuki (Land)
K’s Denki
Shonan-Fujisawa(Land)
Unicus Kamisato(Land)
Unicus Konosu(Land)
Inageya Yokohama
Minamihonjuku(Land)
Gourmet City
Chiba-Chuo
Nakamachidai Tokyu
Store
Central Wellness
Club Nagatsuta
Minamidai
Life Kameido
Totsuka-Fukaya
Shopping Center(Land)
Yumemachi
Narashinodai Mall
Kawamachi Yahagi
Mall
Prime Square
Jiyugaoka
Round1
Ichikawa-Onitaka(Note 3)(Note 3)1100.0(Note 3)(Note 3)

1(11)

100.0

133

1.6

1(11)

100.0

134

1.6

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

72

0.9

1

1

100.0

41

0.5

1

100.0

1

100.0

1

100.0

2

100.0

1

100.0

－

－

(Note 3)(Note 3)－－(Note 3)(Note 3)

100.0

72

0.9

1

100.0

41

0.5

1

100.0

1

100.0

1

100.0

1

81.0

1

100.0
－

－

(Note 3)(Note 3)(Note 3)

1(14)

100.0

140

1(12)

100.0

118

2

100.0

2

100.0

1.7

1(14)

100.0

140

1.7

1.5

1(12)

100.0

119

1.4

2

100.0

1

100.0

－

－

(Note 3)(Note 3)

－

1

100.0

T-24

SS

－

－

－

－

1

100.0

O-1

NSC

Blumer Maitamon

51

98.4

481

5.9

52

99.7

O-2

SM

Life Takadono (Land)

1

100.0

1

100.0

2

100.0

Blumer HAT Kobe

O-5
O-6
O-7
O-8
O-9

Urban
Carino Esaka
Station-Front SC
Urban
COMBOX Komyoike
Station-Front SC
Hankyu Oasis
SM
Hirakatadeguchi
WelciaSS
Kishiwadakamori(Land)
Life
SM
Nishi-Tengachaya

0.7(Note 3)

－

NSC

59

－

100.0

O-4

－
(Note 3)－

1

Piago Kahma Home
Center Omihachiman－(Note 3)

0.7

100.0

100.0

－
(Note 3)

59

2

1

－
(Note 3)

Konami Sports Club
Shibuya

NSC

－

100.0

Ozeki Tokiwadai

O-3

－

1

SM

T-23

O

Property name

Sevenfth fiscal period
as of September 30, 2018－－

(Note 3)(Note 3)－－(Note 3)(Note 3)

502

6.0

－

－

(Note 3)(Note 3)

98.0

529

6.3

1(30)

99.5

311

3.7

1

100.0

226

2.7

1

100.0

2

100.0

1(39)

97.2

475

5.8

1(39)

1(31)

100.0

320

3.9

1

100.0

226

2.8

1

100.0
－

－

－

－

(Note 3)(Note 3)(Note 3)(Note 3)

44

0.6

44

0.5

1

100.0

1

100.0

1

100.0

1

100.0

31

Area

Property
number

Property
type

O

O-10

NSC

N-1

SS

N-2

NSC

N-3

SS

N-4

SS

N-5

SS

N-6

NSC

F-1

SM

N

F

F-2

SS

F-3

NSC

R-1

NSC

R-2

R

SS

R-3

SS

R-4

NSC

R-5

NSC

R-6

SM

R-7
R-8

Property nameMillion Town
Tsukaguchi (Land)
Kahma Home
Center Nakagawa
Tomita (Land)
Valor IchinomiyaNishi
K’s Denki
Nakagawa Tomita(Land)
Homecenter Kohnan
Sunadabashi
K’s Denki
Shin-Moriyama(Land)
Resora Obu
Shopping Terrace
Sunny Noma
Round1 Stadium
Hakata-Hanmichibashi
Kurume-Nishi
Shopping Center
Roseo Mito
K’s Denki Aomori
HontenSuper Sports Xebio
Aomori-Chuo
Ashico Town
Ashikaga
Yorktown
Shinden-Higashi
Kasumi Technopark
SakuraUrban
Solala Plaza
Station-Front SC

Sixth fiscal period
Sevenfth fiscal period
as of March 31, 2018as of September 30, 2018
RentalRatio toRentalRatio toNumberNumber
Occupancy revenue total rental
Occupancy revenue total rentalof tenantsof tenants
rate (%) (millions) revenue
rate (%)(millions) revenue(Note 1)
(Note 1)
(Note 2)
(Note 2)
(%)
(%)
－
－
－
－
1
100.0
1
100.0
(Note 3)(Note 3)(Note 3)(Note 3)
1

100.0

1

100.0

1

100.0

1

100.0

1

100.0

－

－

1

100.0

1

100.0

1

100.0

1

100.0

1(42)

99.2

1(42)

99.0

1

100.0

1

100.0

1

100.0

1

100.0

4

－

－

(Note 3)(Note 3)

320

3.9

－

－

(Note 3)(Note 3)

100.0

51

0.6

4

1(22)

99.7

378

4.7

1

100.0

1

100.0

1(29)

100.0

2

100.0

1

100.0

1

100.0

－

－

(Note 3)(Note 3)

317

3.8

－

－

(Note 3)(Note 3)

100.0

52

0.6

1(22)

99.7

383

4.6

1

100.0

1

100.0

1(29)

100.0

2

100.0

1

100.0

1

100.0

1.7

7

－

－

(Note 3)(Note 3)

280

3.5

－

－

(Note 3)(Note 3)－－(Note 3)(Note 3)

286

3.4

－

－

(Note 3)(Note 3)

100.0

136

1.6

NSC

P-1 Plaza Tenno

7

100.0

136

R-9

NSC

Seiyu Rakuichi
Moriya (Land)

1

100.0

(Note 3)(Note 3)

－

1

100.0

(Note 3)(Note 3)

R-10

NSC

Sun Street Hamakita

1(53)

99.2

518

6.4

1(53)

99.3

533

6.4

R-11

SS

Costco Wholesale
Sapporo Warehouse

－

－

－

－

1

100.0

(Note 3)(Note 3)

522

99.5

8,126

100.0

520

99.4

8,364

100.0

Total
Note 1:

Note 2:
Note 3:

－

－

－

－

－

Number of tenants is based upon the number of lease agreements with respect to the building(s) (or land in the case of land -only properties withleasehold interest) on each such property used mainly as stores and offices, as of March 31, 2018. Where one lessee leases more than one section of
the property, the lessee is counted as a tenant for each section leased within the property. Where pass-through type master lease agreements areentered into, the number of master lessees is with the number of end-tenants indicated in parentheses. Where sublease type master lease agreements
are entered into, the indicated, number of master lessee is shown. As for the “Total” of “Number of tenants”, the number of end-tenants is used forpass-through type master leases and the number of master lessee is used for sublease type master leases.
Rental revenue is based on total rental and other operating revenues of each property.
KRR has not obtained consent from the tenant(s) to release this information.

32

(4) Specified Transaction
As of September 30, 2018, the contract amount and fair value of the outstanding transaction under the specified
transaction account of KRR are as follows.
Contract amount (million yen)
(Note 1)Type

Due after one year

Fair value(million yen)
(Note 2) (Note 3)(Note 1)OTC

Interest rate swaps:
Receive floating / pay fixed

71,24064,260

142

Total

－

71,24064,260142

Note 1: The contract amount of interest rate swaps is based on its notional principal.
Note 2: For the financial reporting purpose, the transaction is not measured at fair value but accounted for under special treatment for interest
rate swaps based on “Accounting Standards for Financial Instruments” under Japanese GAAP.
Note 3: Based on the amount provided by counterparty financial institutions.

(5) Other Assets
Real estate or beneficiary rights of real estate in trust owned by KRR are disclosed in “(3) Overview of the Portfolio”.
KRR has no other specified assets.
(6) Asset in Geographic Area
KRR owns no asset in specified area other than Japan.

33

Capital Expenditures(1) Planned Capital Expenditures
The table below shows major capital expenditures (Note) for renovations, repairs and other projects that are planned forthe seventh fiscal period ending March 31, 2019. These expenditures are for real estate owned by KRR and real estatein trusts in which KRR owns trust beneficiary rights. These planned projects may include some expenditure that will berecorded as expenses rather than capital expenditures for accounting purposes.

Planned amount of capital expenditure(Millions of yen)
Payment for Total amountTotal
the period
already paid

Property
number

Property nameLocation

PurposeO-1

Blumer Maitamon

Kobe, Hyogo

Rooftop waterproof

From October 2018
to March 2019

147

－

－

T-1

Fululu Garden
YachiyoYachiyo, Chiba

Toilet and partial exterior wall
repairFrom September 2018
to December 2018

145

－

－

O-5

Carino Esaka

Suita, Osaka

Automatic fire alarm
replacement

From October 2018
to February 2019

69

－

－

T-5

Unicus Ina

Kobe, Hyogo

Solar panel installation

From October 2018
to March 2019

63

－

－

N-6

Resora Obu
Shopping Terrace

Obu, Aichi

LED installation to common
area

From October 2018
to March 2019

31

－

－

Schedule(2) Capital Expenditures during the Fiscal Period under Review
The table below shows major capital expenditures for renovations, repairs and other projects in the fiscal period underreview.
The amount of capital expenditures in the fiscal period under review was 806 million yen. There were also
expenditures of 399 million yen that were recorded as repair expenses. In total KRR spent 1,146 million yen on the
projects.
Property
number

Property nameLocation

PurposeSchedule

Capital expenditure(Millions of yen)

T-2

MONA
Shin-Urayasu

Urayasu, Chiba

Second phase of renewal

From April 2018
to September 2018

303

T-21

Prime Squre
Jiyugaoka

Meguro-ku, Tokyo

Interior repair

From March 2018
to April 2018

69

T-5

Unicus Ina

Kitaadachi-gun,
Saitama

Exterior wall repair

From May 2018
to August 2018

41

O-1

Blumer Maitamon

Kobe, Hyogo

LED installation to common area

From August 2018
to September 2018

40

O-4

Blumer HAT Kobe

Kobe, Hyogo

Changing of layout

From February 2018
to April 201837

Others

314

Total

806

(3) Reserved Amount for Long-Term Repairs, Maintenance and Renovation Plans
Not applicable34

Expenses and Liabilities(1) Expenses related to Asset Management
Sixth fiscal period(From October 1, 2017
to March 31, 2018)
Asset management fees (Note)(in thousands of yen)
Seventh fiscal period(From April 1, 2018
to September 30, 2018)

628,807638,549

Asset custody fees

9,411

9,463

Administrative service fees

29,71329,733

Directors' compensation

4,500

4,500

Other operating expenses

76,23393,385

748,665

775,631

Total

Note: The amount of asset management fees capitalized in addition to the amount above are 12,630 thousand yen for the sixth fiscal period and 76,100
thousand yen for the seventh fiscal period.

35

(2) Status of Borrowings
Borrowings on a financial institution basis as of September 30, 2018 are as follows.

36

37

(3) Status of Investment Corporation Bonds
Balance as ofApril 1, 2018
(million yen)

Balance as of
September 30,
2018(million yen)Interest rate
Redemption
Maturity date(%)
methodBonds

Issuance date

1st Series Unsecured Investment
Corporation Bonds

October 31,
2016

1,000

1,000

0.200

October 29,
2021

2nd Series Unsecured Investment
Corporation Bonds

October 31,
2016

1,000

1,000

0.600

October 30,
2026

3rd Series Unsecured Investment
Corporation Bonds

August 31,
2017

1,000

1,000

0.320

August 31,
2022

4th Series Unsecured Investment
Corporation Bonds

August 31,
2017

2,000

2,000

0.700

August 31,
2027

5th Series Unsecured Investment
Corporation Bonds

April 26,
2018

-

2,000

0.700

April 26,
2028

5,000

7,000

Total

Use

Remarks(Note 1)

Full onmaturity(Note 3)(Note 2)

Note 1: “Use” is acquisition funds for specified assets, repayment funds for borrowings, etc.
Note 2: “Use” is repayment funds for borrowings.
Note 3: Ranking pari passu among the specified investment corporation bonds(4) Status of Short-Term Investment Corporation Bonds
Not applicable(5) Status of Subscription Rights to New Investment Units
Not applicable38

Acquisition and Disposition(1) Acquisition and Disposition of Real Estate Properties & Asset-Backed Securities and Infrastructure &Infrastructure Related Assets
Acquisition
Ownership
form

Property
number

Property nameAcquisition date

Disposition

Acquisition price(in millions)(Note)

Disposition
Disposition
priceBook value Gain / loss
Date
(in millions) (in millions) (in millions)(Note)

Trust beneficiaryinterest in real estate

T-24

Konami Sports Club
Shibuya

April 27, 2018

3,400

－

－

－

－

Trust beneficiaryinterest in real estate

R-11

Costco Wholesale
Spporo Warehouse

May 31, 2018

4,210

－

－

－

－

K’s Denki
April 27,
Nakagawa-Tomita
－
1,128
907
212
－
2018
(Land)“Acquisition price” and “Disposition price” represent the purchase price of each trust beneficiary interest specified in purchase agreement in relation
to the acquisition of each property (excluding acquisition costs, adjustment in property tax and city-planning tax, and consumption tax; and rounded
down to the nearest one million yen).

Trust beneficiaryinterest in real estate
Note:

N-3

(2) Acquisition and Disposition of Other Assets
Other assets except real estate properties and asset-backed securities mentioned above mostly consist of cash anddeposits and cash and deposits in trust.

39

(3) Appraisal Values of Specific Assetsi) Real Estate
Acquisition/disposition

Ownership
form

Property
number

Property nameAcquisition/
disposition date

Acquisition/
disposition
price(in millions)Appraisalvalue(in millions)(Note 1)

Trust beneficiary
Acquisition interest in realestateDisposition

Trust beneficiaryinterest in realestateAppraiser

Evaluation date

(Note 2)

T-24

Konami Sports Club
April 27, 2018
Shibuya

3,400

3,430

The Tanizawa Sōgō
Appraisal Co., Ltd.

March 1, 2018

R-11

Costco Wholesale
Spporo Warehouse

May 31, 2018

4,210

4,390

Japan Real Estate
InstituteMarch 1, 2018

N-3

K’s Denki
Nakagawa-Tomita(Land)

April 27, 2018

1,128

995

The Tanizawa Sōgō
Appraisal Co., Ltd.

September 30,
2017

Note 1: “Acquisition price” represents the purchase amount (excluding acquisition costs and consumption taxes) of each property or beneficiary right ofreal estate in trust as stated in the Sales and Purchase Agreement.
Note 2: “Appraisal value” of specific assets above was calculated in accordance with the guideline of “Real Estate Appraisal Standards, Chapter 3,
Appraisal of Securitized Real Estate.”ii) Others(A) Investigator regarding values of certain assets

BDO Toyo & Co.
(B) Result and method of investigation
With regard to transactions and contracts entered by KRR whose values shall be investigated based on the Article
201 of the Act on Investment Trusts and Investment Corporations, BDO Toyo & Co. performs an investigation oftransactions. For the fiscal period from April 1, 2018 to September 30, 2018, the transactions subject to suchinvestigation were two interest rate swap transactions, for which KRR received reports from BDO Toyo & Co.
For this purpose, investigation was performed with respect to details of the interest swap contracts, such as thename of counter parties, contract amounts, or the period of transactions. This survey is not a part of the audit for
finalcial statements, and there is no guarantee of fairness of the price and internal management system.

40

(4) Related-Party Transactionsi) Transactions
Not applicableii) Amounts of Fees Paid
Total amount offee paid (A) (inmillion)Related-Party Transaction
Amount of fee
paid (B) (inmillion)Kenedix, Inc.
102

Ratio (B) / (A)(%)

Brokerage
228
44.7
fee A related party, etc. is defined as a related party, etc. of the asset manager having an asset management agreement with KRR as
Note
1:
Note
2:

prescribed in Article 123 of the Order for Enforcement of the Act on Investment Trusts and Investment Corporations of Japanand in Article 26-27 of the Regulations for Asset Investment Reports by Investment Trusts and Investment Corporations of theInvestment Trusts Association, Japan.
The fee paid for renovation placing orders to related party is as follows.
Kenedix Engineering, Inc. JPY 44 million(5) Transactions with Asset Manager in Connection with Concurrent Business Conducted by the Asset Manager
There is no transaction with the Asset Manager, KFM, regarding to the Type II Financial Instruments Business, andBuilding Lots and Buildings Transaction Business. Furthermore, KFM does not concurrently engage in any of Type I
Financial Instruments Business, Real Estate Specified Joint Business.

41

Accounting(1) Status on Assets, Liabilities, Principals, and Income and Losses
Please refer to the “Balance Sheets”, “Statements of Income and Retained Earnings”, “Statements of Changes in Net
Assets” and “Notes to Financial Statements” presented later in this report.
(2) Change in Calculation of Depreciation
Not applicable(3) Change in Valuation of Real Estate Properties and Infrastructure Assets
Not applicable(4) Disclosure of Beneficiary Certificates of Investment Trust Established by Selfi) Acquisition of Beneficiary Certificates of Investment Trust Established by Self
Not applicableii) Ownership of Beneficiary Certificates of Investment Trust Established by Self
Not applicable(5) Disclosure of Companies Owning Real Estate Overseas
Not applicable(6) Disclosure of Real Estate Owned by Companies Owning Real Estate Overseas
Not applicable

Others(1) Noticei) General Meeting of Unitholders
Not applicableii) Board of Directors
Not applicable(2) Others
In this report, any fraction is rounded down for monetary amounts and rounded off for ratios unless otherwise stated.

42Financial Statements(7th Fiscal Period: from April 1, 2018 to September 30, 2018)
Independent Auditor’s Report
Balance Sheet
Statement of Income and Retained Earnings
Statement of Changes in Net Assets
Statement of Cash Flows
Notes to Financial Statements

44

Kenedix Retail REIT Corporation

Balance Sheet
As of September 30, 2018
As of September 30, 2018

As of March 31, 2018

(in thousands of yen)
AssetsCurrent assets
Cash and deposits (Notes 9 and 11)¥7,582,764¥7,179,463

Cash and deposits in trust (Notes 9 and 11)

13,710,471

14,045,452

Operating accounts receivable

247,664

231,067

Prepaid expenses

151,397

51,788Consumption taxes receivable

175,068

-

4,618

4,255

21,871,984

21,512,027

Other
Total current assets
Non-current assets
Property, plant and equipment (Notes 17 and 20)
Buildings in trust

57,984,991

54,980,817

Accumulated depreciation(4,955,253)(4,053,797)

Buildings in trust, net (Note 3)

53,029,737

50,927,020

2,872,268

2,804,224

Accumulated depreciation(304,244)(249,855)

Structures in trust
Structures in trust, net (Note 3)

2,568,023

2,554,369

Machinery and equipment in trust

214,971

214,510

Accumulated depreciation(28,383)(22,623)

Machinery and equipment in trust, net

186,587

191,887

96,472

79,918

Accumulated depreciation(26,501)(20,383)

Tools, furniture and fixtures in trust, net (Note 3)

69,97159,534

155,092,322

150,317,484

Tools, furniture and fixtures in trust

Land in trust (Note 3)
Construction in progress in trust
Total property, plant and equipment, net

378

378

210,947,020

204,050,675

4,320,740

4,324,719

Intangible assets (Note 20)
Leasehold right in trust (Note 17)
Other

5,103

2,331

4,325,844

4,327,050

Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

60,25660,256Long-term prepaid expenses

840,462

780,184

Long-term deposits

157,110

157,110

Other

142,159

19,879Total intangible assets
Investments and other assets

1,209,988

1,027,429

216,482,854

209,405,155

Organization costs

10,16015,226

Investment corporation bond issuance costs

47,75935,396

Investment unit issuance costs

77,413

139,404

Total investments and other assets
Total non-current assets
Deferred assets

135,333

190,027¥238,490,172¥231,107,209

Total deferred assets
Total assets

See accompanying notes to financial statements.

45

As of September 30, 2018

As of March 31, 2018

(in thousands of yen)
Liabilities
Current liabilities
Operating accounts payable¥1,118,827¥646,507

Short-term loans payable (Notes 11 and 21)

2,750,000

12,920,000

Current portion of long-term loans payable (Notes 11 and 21)

12,000,000

5,650,000

Accounts payable-other

367,074

359,858

Accrued expenses

26,751

18,530

Income taxes payable

3,434

3,641

52,088312,160

1,163,601

1,121,432

Accrued consumption taxes
Advances received

77,211

117,043

17,558,988

21,149,173

Investment corporation bonds (Notes 11 and 22)

7,000,000

5,000,000

Long-term loans payable (Notes 11 and 21)

84,350,000

75,530,000

Tenant leasehold and security deposits in trust (Notes 3 and 11)

12,797,802

12,788,402

Asset retirement obligations (Note 15)

23,77823,629Other

30,02430,895

Deposits received
Total current liabilities
Non-current liabilities

Total non-current liabilities
Total liabilities

104,201,604

93,372,927

121,760,593

114,522,100

113,399,022

113,399,022(9,754)(9,754)

Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Allowance for temporary difference adjustments (Note 5)(9,754)(9,754)

113,389,267

113,389,267

3,198,151

3,175,962

Total deduction from unitholders' capital
Unitholders' capital, net
Surplus
Unappropriated retained earnings

3,198,151

3,175,962

116,587,418

116,565,229

Deferred gains or losses on hedges (Notes 11 and 12)

142,159

19,879Total valuation and translation adjustments

142,159

19,879Total surplus
Total unitholders' equity
Valuation and translation adjustments

Total net assets (Note 6)

116,729,578

116,585,108

Total liabilities and net assets¥238,490,172¥231,107,209

See accompanying notes to financial statements.

46

Kenedix Retail REIT Corporation

Statement of Income and Retained Earnings
For the period from April 1, 2018 to September 30, 2018
From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

(in thousands of yen)
Operating revenues
Rent revenue-real estate （Note 7)¥7,066,950¥6,991,591

Other lease business revenue (Note 7)

1,298,047

1,134,746

212,130-

8,577,129

8,126,338

3,984,558

3,609,580

638,549

628,807

Gain on sales of real estate property (Note 7)
Total operating revenues
Operating expenses
Expenses related to rent business (Note 7)
Asset management fees
Asset custody fees

9,463

9,411

Administrative service fees

29,73329,713

Directors' compensation

4,500

4,500

Other operating expenses

93,38576,233

Total operating expenses

4,760,189

4,358,245

3,816,939

3,768,092

Operating income
Non-operating income
Interest income

6163Interest on refund

-

1,472

Total non-operating income

61

1,535

Interest expenses

434,188398,485

Interest expenses on investment corporation bonds

18,54012,634

Financing-related expenses

92,203

86,123

Amortization of organization costs

5,066

5,038

Non-operating expenses

Amortization of investment corporation bond issuance costs

3,714

2,910

Amortization of investment unit issuance costs

61,99084,780615,704

589,972

Ordinary income

3,201,296

3,179,655

Income before income taxes

3,201,296

3,179,655

3,443

3,848

Total non-operating expenses

Income taxes
Current

3,443

3,848

3,197,852

3,175,807

Total income taxes
Net income
Retained earnings brought forward

299

155

Unappropriated retained earnings¥3,198,151¥3,175,962

See accompanying notes to financial statements.

47

Kenedix Retail REIT Corporation

Statement of Changes in Net Assets
For the period from April 1, 2018 to September 30, 2018
Unitholders' equity
Unitholders' capital

Surplus

Deduction fromunitholders' capital
Allowance

Total

for

deduction

temporaryfromdifference

unitholders'adjustments

capitalUnappropriated

Total
Total

unitholders'surplusequity¥3,104,740¥3,104,740¥116,494,008

surplus(3,104,585)(3,104,585)(3,104,585)

Net income

3,175,807

3,175,807

3,175,807

Unitholders'
capitalUnitholders'retained

capital, net

earnings(in thousands of yen)
Balance as of September
30, 2017¥113,399,022¥(9,754)¥(9,754)¥113,389,267

Changes of items during
the period
Dividends from

Net changes of items
other thanunitholders’ equity
Total changes of items
during the period

-

-

-

-

71,221

71,221

71,221¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,175,962¥3,175,962¥116,565,229

surplus(3,175,663)(3,175,663)(3,175,663)

Net income

3,197,852

3,197,852

3,197,852

Balance as of March 31,2018 (Note 8)
Changes of items during
the period
Dividends from

Net changes of items
other thanunitholders’ equity
Total changes of items
during the period

-

-

-

-

22,18822,18822,188¥113,399,022¥ (9,754)¥ (9,754)¥113,389,267¥3,198,151¥3,198,151¥116,587,418

Balance as of September
30, 2018 (Note 8)48

Valuation and translation
adjustments
Deferred gains

Total valuation

or losses on

and translation

hedgesTotal net assets

adjustments(in thousands of yen)

Balance as of September
30, 2017¥22,553¥22,553¥116,516,561

Changes of items during
the period
Dividends fromsurplus(3,104,585)

Net income

3,175,807

Net changes of items
other thanunitholders’ equity(2,674)(2,674)(2,674)(2,674)(2,674)68,547¥19,879¥19,879¥116,585,108

Total changes of items
during the period
Balance as of March 31,2018 (Note 8)
Changes of items during
the period
Dividends from
(3,175,663)

surplus3,197,852

Net income
Net changes of items
other thanunitholders’ equity

122,280

122,280

122,280

122,280

122,280

144,469¥142,159¥142,159¥116,729,578

Total changes of items
during the period
Balance as of September
30, 2018 (Note 8)

See accompanying notes to financial statements.

49

Kenedix Retail REIT Corporation

Statement of Cash Flows
For the period from April 1, 2018 to September 30, 2018
From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes¥3,201,296¥3,179,655

Depreciation and amortization

972,385925,524

5,066

5,038

Amortization of organization costs
Amortization of investment corporation bond issuance costs

3,714

2,910

Amortization of investment unit issuance costs

61,99084,780Interest income

(61)

(63)

Interest expenses

452,729

411,119

Decrease (increase) in operating accounts receivable(16,596)

18,765Decrease (increase) in consumption taxes receivable(175,068)

947,707

Decrease (increase) in prepaid expenses(99,609)84,586

Increase (decrease) in operating accounts payable

162,653(324)

Increase (decrease) in accounts payable-other
Increase (decrease) in accrued consumption taxes

7,007

18,937(260,071)

271,114

Increase (decrease) in advances received

42,16916,792

Increase (decrease) in deposits received(39,832)(25,736)

Decrease (increase) in long-term prepaid expenses(60,278)

28,740Decrease in net property, plant and equipment held in trust due to sale907,424-

Other(2,207)

14,532

Subtotal

5,162,711

5,984,080

Interest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

61

63(444,535)(410,726)(3,650)(2,910)4,714,587

5,570,507(8,461,827)(1,471,805)

Net cash provided by (used in) investing activities
Purchase of property, plant and equipment in trust(2,307)--966

Repayments of tenant leasehold and security deposits in trust(515,495)(299,385)

Proceeds from tenant leasehold and security deposits in trust

524,895

154,494

Purchase of intangible assets
Proceeds from investment securities

Proceeds from restricted bank deposits in trust
Net cash provided by (used in) investing activities

215,676

215,676(8,239,058)(1,400,052)

Net cash provided by (used in) financing activities
Increase in short-term loans payable-

6,150,000

Decrease in short-term loans payable(10,170,000)(5,900,000)

Proceeds from long-term loans payable

15,170,000

4,800,000

Repayments of long-term loans payable-(3,850,000)

Proceeds from issuance of investment corporation bonds

1,983,922-

Dividends paid

(3,175,454)(3,103,480)

Net cash provided by (used in) financing activities

3,808,468(1,903,480)

283,996

2,266,973

Cash and cash equivalents at the beginning of the period

19,118,825

16,851,851

Cash and cash equivalents at the end of the period (Note 9)¥ 19,402,822¥19,118,825

Net increase (decrease) in cash and cash equivalents

See accompanying notes to financial statements.

50

Kenedix Retail REIT Corporation

Notes to Financial Statements
For the period from April 1, 2018 to September 30, 2018

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Retail REIT Corporation (“KRR”) was established on October 3, 2014, under the Act on Investment Trusts and Investment Corporations of Japan(the “Investment Trust Act”). On February 10, 2015, KRR was listed on the Real Estate Investment Trust Securities (J-REIT) Market of Tokyo Stock
Exchange, Inc. (the Tokyo Stock Exchange) (Securities code: 3453). Subsequently, KRR raised funds through public offerings, including international
offerings. As a result, the number of investment units issued as of September 30, 2018 was 507,700 units.
KRR seeks to invest primarily in neighborhood, community and other shopping centers that cater to the day-to-day needs of local area customers andhave stable demand from retailers and customers, and also seeks to invest in distribution centers, which supplement shopping centers in providing goods toconsumers, in order to provide stable investment returns over the long term. Sponsored by Kenedix, Inc., KRR entrusts its asset management andinvestment operations to Kenedix Real Estate Fund Management, Inc. (“KFM”), with the following strategies.
(Note) For management purposes and ease of classification, KRR defines neighborhood, community and other shopping centers for daily needs asretail properties that generally have the following characteristics:
a. Retail trade area of an approximate radius of one to ten kilometers (and generally, a radius of three to five kilometers), with customers
predominantly from local areas surrounding the retail property
b. Operational capacity to accommodate certain daily local retail needs and strong customer traffic on both weekdays and weekends
c. Composed of various specialty stores to meet a range of day-to-day needs such as groceries, clothing and other daily goods and services
KRR acquired one property (Ozeki Tokiwadai with acquisition price of 1,263 million yen). For the period ended March 31, 2018, the portfolio of 52
properties (total acquisition prices of 206,176 million yen) as a whole performed well with an overall occupancy ratio of 99.5% as of March 31, 2018.
KRR acquired two properties (Konami Sports Club Shibuya with acquisition price of 3,400 million yen and Costco Wholesale Sapporo Warehouse withacquisition price of 4,210 million yen), and sold one property (K’s Denki Nakagawa Tomita (Land) with sale price of 1,128 million yen). For the period ended
September 30, 2018, the portfolio of 53 properties (total acquisition prices of 212,897 million yen) as a whole performed well with an overall occupancy ratioof 99.4% as of September 30, 2018.
Furthermore, the portfolio was diversified in terms of tenants as there were 522 and 520 end-tenants as of March 31, 2018 and September 30, 2018 in
KRR’s properties, respectively.
Basis of Presentation
KRR maintains its accounting records and prepares its financial statements in accordance with accounting principles generally accepted in Japan(Japanese GAAP), including provisions set forth in the Investment Trust Act, the Companies Act of Japan, the Financial Instruments and Exchange Act ofJapan and related regulations, which are different in certain respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are basically a translation of the financial statements of KRR, which were prepared in accordance with Japanese
GAAP and were presented in the Semiannual Securities Report of KRR filed with the Kanto Local Finance Bureau. In preparing the accompanying financial
statements, certain reclassifications and modifications have been made to the financial statements issued domestically in order to present them in a format
that is more familiar to readers outside Japan. In addition, the notes to financial statements include certain information that might not be required underJapanese GAAP but is presented herein as additional information.
KRR’s fiscal period is a six-month period which ends at the end of March or September. KRR does not prepare consolidated financial statements
because it has no subsidiaries.

51

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Other securities without market value are stated using the moving average cost method. Equity investments in a silent partnership are stated, theamount equivalent to the corresponding equity interests including net amount of gain or loss from the silent partnership.
(B) Property, Plant and Equipment (including trust assets)
Property, plant and equipment are stated at cost. Depreciation of property and equipment is calculated on a straight-line method over the estimateduseful lives of the assets ranging as stated below:

Buildings

From April 1, 2018
to September 30, 20182-70 years

From October 1, 2017
to March 31, 20182-70 years

Structures

8-59 years

8-59 years

Machinery and equipment

2-25 years

5-25 years

Tools, furniture and fixtures

3-15 years

3-15 years(C) Intangible Assets (including trust assets)
Intangible assets are amortized by the straight-line method.
(D) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line method.
(E) Organization Costs
Organization costs are amortized over a period of 5 years under the straight-line method.
(F) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of 3 years under the straight-line method.
(G) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over a maturity period under the straight-line method.
(H) Accounting Treatment of Trust Beneficiary Interests in Real Estate
For trust beneficiary interests in real estate, which are commonly utilized in the ownership of commercial properties in Japan, all relevant assets andliabilities in trust are recorded on the balance sheets and the statements of income and retained earnings.
(I)

Revenue Recognition
Operating revenues consist of rental revenues including base rents, common area charges and other operating revenues, which include utility charge
reimbursements, parking space rental revenues and other miscellaneous revenues. Rental revenues are generally recognized on an accrual basis
over the life of each lease. Utility charge reimbursements are recognized when earned and their amounts can be reasonably estimated.
Reimbursements from tenants including utility charge reimbursements are recorded on a gross basis and such amounts are recorded both asrevenues and expenses during the fiscal period.

(J) Taxes on Property and Equipment
Property-related taxes including property taxes, city planning taxes and depreciable property taxes are imposed on properties on a calendar year basis.
These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to said period. Under Japanese
tax regulations, the seller of the property is liable for these taxes on the property from the date of disposal to the end of the calendar year in which theproperty is disposed. The seller, however, is reimbursed by the purchaser for these accrued property-related tax liabilities.
When KRR purchases properties, it typically allocates the portion of the property-related taxes related to the period following the purchase date ofeach property through the end of the calendar year. The amounts of those allocated portions of the property-related taxes are capitalized as part of theacquisition costs of the related properties. There were no capitalized property-related taxes as of March 31, 2018. Capitalized property-related taxes
amounted to ¥39,223 thousand as of September 30, 2018.

52

(K) Income Taxes
Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets andliabilities using the statutory tax rates.
(L) Consumption Taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Non-deductible consumption taxes applicable tothe acquisition of assets are included in the cost of acquisition for each asset.
(M) Derivative Financial Instruments
KRR utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure to changes in interest rates.
KRR deferred recognition of gains or losses resulting from changes in fair value of interest-rate swap contracts because these contracts met thecriteria for deferral hedge accounting. However, KRR adopted the special treatment for interest-swap contracts if they met the criteria for hedge
accounting under this treatment. An assessment of the effectiveness of hedging is omitted for interest rate swaps because they fulfill the requirements
for the special treatment.
(N) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments which are highly liquid, readily convertible
to cash and with insignificant risk of market value fluctuation, with maturities of three months or less from the date of purchase.
(O) Presentation of Amounts
Amounts have been truncated in the Japanese financial statements prepared in accordance with Japanese GAAP and filed with regulatory authorities
in Japan. Unless otherwise noted, amounts are rounded down and ratios are rounded off in the accompanying financial statements. Totals shown in
the accompanying financial statements do not necessarily agree with the sums of the individual amounts.

53

3. COLLATERAL
Assets pledged as collateral and related secured liabilities are as follows:
Assets pledged as collateral

As of September 30, 2018

As of March 31, 2018
(in thousands of yen)

Buildings in trust¥2,688,066¥2,708,512

Structures in trust

47,58149,172Tools, furniture and fixtures in trust
Land in trust
Total
Secured liabilities

1,757

2,058

7,811,297

7,811,297

10,548,702

10,571,041

As of September 30, 2018

As of March 31, 2018

2,577,920

2,800,594¥2,577,920¥2,800,594

As of September 30, 2018

As of March 31, 2018

Tenant leasehold and security deposits in trust
Total

4. COMMITMENT LINE CONTRACTSKRR has commitment line contracts with the banks with which it does business.
(in thousands of yen)
Total amount of commitment line contracts¥2,000,000¥2,000,000

Balance of loans payable outstanding--

Remaining amount¥2,000,000¥2,000,000

5. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
The following summarizes allowance for temporary difference adjustments as of September 30, 2018
1. Reasons, related assets, initial amount, allowance and reversal
Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)

Balance atthe end of
the period

Reason forreversal

Related assets, etc.

Reason for allowance

Initial amount

Buildings in trust,
Leasehold right in trust

Amortization ofleasehold right in trust
and the amount inexcess of depreciation¥9,754¥9,754¥-¥-¥9,754-¥9,754¥9,754¥-¥-¥9,754-Total
2. Method of reversal

Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

The following summarizes allowance for temporary difference adjustments as of March 31, 2018
1. Reasons, related assets, initial amount, allowance and reversal
Balance atAllowance
Reversal
the beginningduring theduring theof the period
periodperiod(in thousands of yen)

Balance atthe end of
the period

Reason forreversal

Related assets, etc.

Reason for allowance

Initial amount

Buildings in trust,
Leasehold right in trust

Amortization ofleasehold right in trust
and the amount inexcess of depreciation¥9,754¥9,754¥-¥-¥9,754-¥9,754¥9,754¥-¥-¥9,754-Total
2. Method of reversal

Method of reversal
Buildings in trust,
Leasehold right in trust

Upon sale, the corresponding amount is scheduled to be reversed.

54

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

7. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATEDEXPENSES AND GAIN ON SALES OF REAL ESTATE PROPERTY
Rental and other operating revenues and property-related expenses for the periods from April 1, 2018 to September 30, 2018 and from October 1, 2017 toMarch 31, 2018 consist of the following:
From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

(in thousands of yen)
Rental and other operating revenues:
Rent revenue-real estate:
Rental revenues
Rental revenues from limited proprietary rights of landCommon area charges¥5,807,967¥5,697,578

929,815

953,536

329,167

340,476

7,066,950

6,991,591

Parking space rental revenues

204,954

201,155

Utility charge reimbursement

710,167

617,448

Subtotal
Other lease business revenue:

Miscellaneous

382,926

316,141

Subtotal

1,298,047

1,134,746

8,364,998

8,126,338

Property management fees and facility management fees

847,105

846,915

Utilities

682,433

597,633

Taxes

690,135

563,751

Repairs and maintenance339,258

259,834

Insurance

13,191

13,954

Trust fees

22,84622,153

Depreciation

971,850925,078

Others417,737

380,258

Total property-related expenses

3,984,558

3,609,580

Net operating income from real estate rental business¥4,380,440¥4,516,757

Total rental and other operating revenues
Property-related expenses:
Expenses related to rent business:

Gain on sales of real estate property:
From April 1, 2018 to September 30, 2018
(in thousands of yen)
K’s Denki Nakagawa Tomita (Land)
Revenue from sales of real estate property
Cost of real estate property
Other sales expenses
Gain on sales of real estate property¥1,128,000
907,4248,444¥212,130

From October 1, 2017 to March 31, 2018
Not applicable55

8. UNITHOLDERS’ EQUITY
Total number of authorized investment units and total number of investment units issued and outstanding are as follows:
From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

Total number of authorized investment units

5,000,000 units

5,000,000 units

Total number of investment units issued and outstanding

507,700 units

507,700 units

9. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of September 30, 2018 and March 31, 2018:
As of September 30, 2018

As of March 31, 2018

(in thousands of yen)
¥7,582,764¥7,179,463

Cash and deposits in trust

13,710,471

14,045,452

Restricted bank deposits in trust *(1,890,414)(2,106,090)

Cash and cash equivalents¥19,402,822¥19,118,825

Cash and deposits*Restricted bank deposits in trust are retained for repayment of tenant leasehold and security deposits in trust.

10. LEASES(As lessee)
Future minimum lease payments under non-cancelable operating leases as of September 30, 2018 and March 31, 2018 are as follows:
As of September 30, 2018

As of March 31, 2018

(in thousands of yen)
Due within 1 year

¥10,500¥10,500

Due after 1 year

183,298

188,548

Total¥193,798¥199,048(As lessor)
Future minimum lease income under the non-cancelable operating leases as of September 30, 2018 and March 31, 2018 are as follows:
As of September 30, 2018

As of March 31, 2018

(in thousands of yen)
Due within 1 year

¥9,188,950¥8,798,586

Due after 1 year

59,957,431

61,221,050

Total¥69,146,381¥70,019,637

56

11. FINANCIAL INSTRUMENTS(A). Overview(1) Policy for financial instruments
KRR procures funds for asset acquisitions, repairs, payment of distributions, repayment of loans, etc. through loans from financial institutions, issuance ofinvestment corporation bonds, issuance of investment units and other means. With regard to the procurement of interest-bearing debts, KRR ensures that it
can effectively combine stable long-term funds with flexible short-term funds. Management of surplus funds is undertaken through various bank deposits
focusing on safety, liquidity and effectiveness. KRR uses derivatives for the purpose of hedging its exposure to changes in interest rates and other risks anddoes not enter into derivative transactions for speculative or trading purposes.
(2) Types of financial instruments and related risk
Bank deposits are for managing KRR’s surplus funds and are exposed to credit risk such as the bankruptcy of financial institutions at which funds aredeposited.
Investment securities represent equity investments in a silent partnership and are exposed to credit risk of the issuer, property value fluctuation risk andinterest rate fluctuation risk.
Loans payable and investment corporation bonds, which are made or issued primarily for the purpose of procuring funds for the acquisition of real estate
and trust beneficiary interests in real estate and have a repayment date of a maximum of 10 years for loans payable and also have a redemption date of a
maximum of 9 years and 7 months for investment corporation bonds as of September 30, 2018, the end of the seventh fiscal period, are exposed to liquidity
risk where alternative funds may not be procured by the repayment date. Also, loans payable with floating interest rates are exposed to interest rate
fluctuation risk. Derivatives are used for the purpose of hedging interest rate fluctuation risk for a certain portion of the loans payable.
Tenant leasehold and security deposits are deposits received from tenants, which are exposed to liquidity risks when the tenants vacate the properties.
(3) Risk management for financial instruments
a. Credit risk
While bank deposits are exposed to credit risk such as the bankruptcy of financial institutions at which funds are deposited, such risk is monitored bydeposits in non-interest bearing ordinary savings accounts or with financial institutions with credit ratings above a certain level. Investment securities
represent equity investments in a silent partnership and are exposed to credit risk of the issuer. To manage this credit risk, the Investment Corporation
regularly evaluates the results of operations and the financial condition of the issuer, etc. In utilizing derivatives, KRR aims to mitigate counterparty risk suchas by transacting with financial institutions with favorable ratings.
b. Market risk
While loans payable with floating rates are exposed to interest rate fluctuation risk, such risk is monitored by adjusting the rate of the balance of loans
payable with floating rates against the total loans payable according to the financial environment, interest rate forecasts by continuous monitoring, etc. andby using derivatives, etc. While investment securities, which are equity investments in a silent partnership, are exposed to credit risk of the issuer andproperty value fluctuation risk, the Investment Corporation periodically reviews the value of the property and financial condition of the issuer with regard tothese investment securities. A risk management policy is established with regard to the execution and management of derivatives and such transactions
are conducted based on this policy.
c. Liquidity risk
Though loans payable are subject to liquidity risk, KRR reduces such risk by spreading out payment due dates and by diversifying financial institutions.
Liquidity risk is also managed by such means as regularly checking the balance of cash reserves.
Though tenant leasehold and security deposits are subject to liquidity risk, in principle, KRR reduces such risk by retaining funds that would enable KRR toreturn necessary amounts to tenants.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market price available, fair value isreasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in adifferent fair value.
(B). Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheets and estimated fair value are shown in the following table. Items whose fair values are
difficult to determine are not included in the following table (*2).

57

As of September 30, 2018
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥7,582,764¥7,582,764(2) Cash and deposits in trust

13,710,471

13,710,471

-

Total

¥

-

21,293,236

21,293,236-(1) Short-term loans payable

2,750,000

2,750,000-(2) Current portion of long-term loans payable

12,000,000

11,985,151(14,848)(3) Investment corporation bonds

7,000,000

6,951,700(48,300)(4) Long-term loans payable

84,350,000

84,172,853(177,146)(5) Tenant leasehold and security deposits in trust

2,383,685

2,376,485(7,199)108,483,685

108,236,191¥142,159¥142,159

Total
Derivative transactions(247,493)¥-

As of March 31, 2018
Carrying amount

Estimated fair value

Difference(in thousands of yen)
(1) Cash and deposits¥7,179,463¥7,179,463(2) Cash and deposits in trust

14,045,452

14,045,452

-

Total

¥

-

21,224,916

21,224,916-(1) Short-term loans payable

12,920,000

12,920,000-(2) Current portion of long-term loans payable

5,650,000

5,650,527

527(3) Investment corporation bonds

5,000,000

4,991,400(8,600)(4) Long-term loans payable

75,530,000

75,642,540

112,540(5) Tenant leasehold and security deposits in trust

2,635,158

2,630,225(4,933)

101,735,158

101,834,693¥19,879¥19,879

Total
Derivative transactions

99,534¥-*1: Methods to determine the estimated fair value of financial instruments and matters related to derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying amount approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time with floating interest rates, their carrying amount approximates fair value.
(2) Current portion of long-term loans payable and (4) Long-term loans payable
Among these items, the fair value of loans payable with fixed interest rates is calculated based on the present value, which is the total amount of principal
and interest discounted by the estimated interest rate to be applied in the event that KRR conducts new loans of the same type. As for the fair value of loans
payable with floating interest rates, it is based on the carrying amount since market interest rates are reflected in the short term and the fair value is believed
to approximate the carrying amount as the credit standing of KRR has not changed significantly since the loans were made. (However, the fair value of
long-term loans payable subject to the special treatment for interest-rate swaps is based on the present value of the total of principal and interest, accounted
for together with the applicable interest-rate swaps, discounted by the estimated interest rate to be applied in the event that KRR conducts new loans
payable of the same type.)(3) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.

58

(5) Tenant leasehold and security deposits in trust
The fair value is determined based on the present value of contractual cash flows discounted at the discount rate into which the period to the repayment
date and the credit risk are reflected.
Derivative transactions
Please refer to Note “12. DERIVATIVE TRANSACTIONS”.
*2: Financial instruments whose fair values are extremely difficult to determineClassification

As of September 30, 2018

As of March 31, 2018

(in thousands of yen)
Tenant leasehold and security deposits in trust (Note)¥10,414,116¥10,153,243

Total¥10,414,116¥10,153,243(Note) It is extremely difficult to determine their fair values based on estimated future cash flows because no quoted market price is available and therepayment dates of those deposits are not certain. Therefore, tenant leasehold and security deposits in trust are not included in the above
quantitative information.
*3: Redemption of monetary claims scheduled to be due after the balance sheet date
As of September 30, 2018
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Cash and deposits
Cash and deposits in trust
Total¥7,582,764¥-

13,710,471

¥

-

-

¥21,293,236

¥

¥

-

-

-

¥

¥

-

-

-

¥

¥

-

-

-

¥

-

-

¥

-

As of March 31, 2018
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Cash and deposits
Cash and deposits in trust
Total¥7,179,463¥-

14,045,452

¥

-

-

¥21,224,916

¥

¥

-

-

¥

-

¥

-

-

¥

-

¥

-

-

¥

-

-

¥

-

*4: Redemption of long-term loans payable and other interest-bearing debt scheduled to be due after the balance sheet date
As of September 30, 2018
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security
deposits in trust
Total¥2,750,000

¥

-

¥

-

¥

-

¥

-

¥

-

-

-

-

2,000,000-

5,000,000

12,000,000

7,000,000

13,300,000

9,050,000

7,500,000

47,500,000

435,430

435,430

435,430

435,430

13,99596,798¥15,185,430¥7,435,430¥13,735,430¥11,485,430¥7,513,995¥52,596,79859

As of March 31, 2018
Due in 1 year orDue after 1 year

Due after 2 years

Due after 3 years

Due after 4 years

lessthrough 2 years

through 3 years

through 4 years

through 5 years

Due after 5 years(in thousands of yen)
Short-term loans payable¥12,920,000

Investment corporation bonds
Long-term loans payable

-

¥

-

¥

-

¥

-

¥

-

-

-

-

1,000,000

1,000,000

3,000,000

5,650,000

9,380,000

7,000,000

13,300,000

9,050,000

36,800,000

435,430

435,430

435,430

435,430

224,712103,796¥19,005,430¥9,815,430¥7,435,430¥14,735,430¥10,274,712¥39,903,796

Tenant leasehold and security
deposits in trust
Total

¥

12. DERIVATIVE TRANSACTIONS
The contract amount and the fair value of interest-rate swap transactions as of September 30, 2018 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodType of derivativetransactions

Principle method Interest rate swap
transaction:
Receive/floating andpay/fixed
SpecialInterest rate swap
treatment oftransaction:interest-rate
Receive/floating andswaps
pay/fixed
Total

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥26,690,000¥25,360,000

44,550,000

38,900,000¥71,240,000¥64,260,000

Fair value(in thousands of yen)¥142,159*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions¥142,159*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fair value isincluded in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods to determine theestimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-term loans payable and (4)Long-term loans payable.）
The contract amount and the fair value of interest-rate swap transactions as of March 31, 2018 are shown in the following table.
(1)

Transactions not subject to hedge accounting
Not applicable(2)

Transactions subject to hedge accounting

Hedge
accounting
methodType of derivativetransactions

Principle method Interest rate swap
transaction:
Receive/floating andpay/fixed
SpecialInterest rate swap
treatment oftransaction:interest-rate
Receive/floating andswaps
pay/fixed
Total

Hedged items
Long-term loans
payableLong-term loans
payableContract amount(in thousands of yen)
Maturing after 1
year¥19,490,000¥19,490,000

41,050,000

35,400,000¥60,540,000¥54,890,000

Fair value(in thousands of yen)

¥19,879*

Calculation method for
applicable fair value
Based on the amountprovided by counterparty
financial institutions¥19,879*Interest rate swaps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fair value isincluded in the fair value of the hedged long-term loans payable.（Please refer to Note “11. FINANCIAL INSTRUMENTS” (*1) Methods to determine theestimated fair value of financial instruments and matters related to derivative transactions; Liabilities (2) Current portion of long-term loans payable and (4)Long-term loans payable.）60

13. RELATED PARTY TRANSACTIONS
1．Parent Company, major corporate unitholders and other
7th Fiscal Period (April 1, 2018 to September 30, 2018) and 6th Fiscal Period (October 1, 2017 to March 31, 2018): Not applicable
2．Affiliated companies and other
7th Fiscal Period (April 1, 2018 to September 30, 2018) and 6th Fiscal Period (October 1, 2017 to March 31, 2018): Not applicable
3．Fellow subsidiary companies and other
7th Fiscal Period (April 1, 2018 to September 30, 2018) and 6th Fiscal Period (October 1, 2017 to March 31, 2018): Not applicable
4．Directors, major individual unitholders and other
7th Fiscal Period (April 1, 2018 to September 30, 2018) and 6th Fiscal Period (October 1, 2017 to March 31, 2018): Not applicable

14. INCOME TAXESKRR is subject to corporate income taxes at a regular statutory rate of approximately 35%. However, KRR may deduct from its taxable income amounts
distributed to its unitholders, provided the requirements under the Special Taxation Measures Law of Japan are met, including a requirement that it currently
distributes in excess of 90% of its net income for the fiscal period in order to be able to deduct such amounts. If KRR does not satisfy all of the requirements,
the entire taxable income of KRR will be subject to regular corporate income taxes. Since KRR distributed in excess of 90% of its distributable income in theform of cash distributions totaling ¥3,198 million and ¥3,175 million for the periods ended September 30, 2018 and March 31, 2018, respectively, thedistributions were treated as deductible distributions for purposes of corporate income taxes. The effective tax rates on KRR’s income were 0.11% and0.12% for the periods ended September 30, 2018 and March 31, 2018, respectively. The following table summarizes the significant differences between thestatutory tax rate and the effective tax rate:
As of September 30, 2018

As of March 31, 2018

Statutory tax rate

34.59%

34.81%

Deductible cash distributions(34.55)(34.77)

Others0.07

0.08

Effective tax rate

0.11%

0.12%

The significant components of deferred tax assets and liabilities:
As of September 30, 2018

As of March 31, 2018

(in thousands of yen)
Deferred tax assets:
Enterprise tax payable

¥

210

¥

234

Amortization of leasehold right in trust

9,216

7,959

Depreciation

3,317

2,865

Asset retirement obligations

7,511

7,464

Subtotal deferred tax assets

20,256

18,524

Valuation allowance(20,256)(18,524)¥¥

Total deferred tax assets

-

-

61

15. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations reported on balance sheets
1. Summary of the asset retirement obligations
KRR has recognized the original state restoration obligations assumed under the fixed-term business-purpose land leasehold agreement as the asset
retirement obligations in connection with Sunny Noma acquired on February 10, 2015.
2. Method of calculating asset retirement obligations
Asset retirement obligations are calculated based on a discount rate of 1.256% after the useful life has been estimated to be 22 years and two months
based on the time period from the date of acquisition to the expiration of the agreement.
3. Changes in the amount of applicable asset retirement obligations consisted of the following:
From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

(in thousands of yen)
Balance at the beginning of the period
Accretion adjustment
Balance at the end of the period¥23,629¥23,482

148

147¥23,778¥23,629

16. SEGMENT INFORMATION
Segment information for the periods from April 1, 2018 to September 30, 2018 and October 1, 2017 to March 31, 2018 is as follows:(A) Segment information
Disclosure is omitted because the real estate leasing business is KRR’s sole business and it has no reportable segment information to disclose.
(B) Related information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating revenue on thestatements of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenue on the statements of income andretained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount of property, plant andequipment on the balance sheets.
(3) Information about each major customer
Disclosure is omitted because no net sales to a single external customer accounts for more than 10% of the operating revenue on the statements of income
and retained earnings.

6217. INVESTMENT AND RENTAL PROPERTIESKRR owns retail properties for rental purposes mainly in the four major metropolitan areas and other regional areas of Japan.
The book value and fair value concerning the above real estate for rental purposes are as follows.
From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

(in thousands of yen)Book value
Balance at the beginning of the period¥208,376,323

Changes during the period
Balance at the end of the period
Fair value at the end of the period¥207,771,218

6,894,504

605,105

215,270,828

208,376,323¥229,504,000¥220,765,000

Note 1: Book value is acquisition cost less accumulated depreciation.
Note 2: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period ended March 31, 2018, the principal increase
was due to the acquisitions of real estate trust beneficiary interests in 1 property totaling 1,280,257 thousand yen and the principal decrease wasdue to depreciation amounting to 924,931 thousand yen and during the fiscal period ended September 30, 2018, the principal increase was due tothe acquisitions of real estate trust beneficiary interests in 2 properties totaling 7,961,786 thousand yen and the principal decrease was the sales ofreal estate trust beneficiary interests in 1 property totaling 907,424 thousand yen and depreciation of 971,702 thousand yen.
Note 3: The fair value at the end of the period is the appraisal value determined by outside appraisers. In addition, the fair value of Solala Plaza as of
September 30, 2018, is based on the sales price (5,980,000 thousand yen) under the trust beneficiary interest sales contracts entered into on
November 14, 2018.
The profit or loss for the periods ended September 30, 2018 and March 31, 2018 concerning investment and rental properties is included in Note “7.
BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES AND GAIN ON SALES OF REAL ESTATEPROPERTY.”

18. PER UNIT INFORMATION
From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

Net asset value per unit
Net income per unit

¥229,918¥229,633¥6,298¥6,255

Net income per unit is calculated by dividing net income by the day-weighted average number of investment units outstanding during the fiscal period
ended September 30, 2018 (507,700 units) and during the fiscal period ended March 31, 2018 (507,700 units). Net income per unit after adjusting forresidual units is not included because there were no residual investment units.
The basis for calculating net income per unit is as follows:

Net income (in thousands of yen)
Net income not attributable to ordinary unitholders (in thousands of yen)
Net income attributable to ordinary unitholders (in thousands of yen)
Weighted average number of units during the period (units)

From April 1, 2018

From October 1, 2017

to September 30, 2018

to March 31, 2018

¥3,197,852¥3,175,807--¥3,197,852¥3,175,807

507,700

507,700

19. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

6320. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant and equipment and intangible assets consist of the following as of September 30, 2018:

Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks*(in thousands of yen)
Buildings in trust¥54,980,817¥3,004,173

Structures in trust

2,804,224

Machinery andequipment in trust
Property,plant andequipment-¥57,984,991¥4,955,253¥901,455¥53,029,737

68,043-2,872,268

304,244

54,3892,568,023

214,510460-

214,971

28,383

5,760

186,587

79,91816,554-96,472

26,501

6,118

69,971

150,317,484

5,682,262

907,424

155,092,322--

155,092,322

378

-

-

378

-

-

378

208,397,334

8,771,494

907,424

216,261,403

5,314,383

967,723

210,947,020

208,397,334

8,771,494

907,424

216,261,403

5,314,383

967,723

210,947,020

4,349,916--

4,349,916

29,1763,9784,320,740

4,455

3,307

-

7,763

2,659

534

5,103

-

¥ 4,357,679¥ 31,835¥ 4,513¥ 4,325,844

Tools, furnitureand fixtures intrust
Land in trust
Construction inprogress in trust
Subtotal

Total
Intangible
assets¥Leasehold rightin trust
Other

Total

¥ 4,354,372

¥

3,307

¥

*

*The amount of increase during the period is primarily attributable to the acquisition of the real estate properties and capital expenditures.
Property, plant and equipment and intangible assets consist of the following as of March 31, 2018:

Type of asset

Balance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of theperiodDepreciation
Accumulated
depreciation

Depreciation
for theperiodNetbalance atthe end of
the period

Remarks(in thousands of yen)
Buildings in trust¥54,528,155¥452,662-¥54,980,817¥4,053,797¥856,629¥50,927,020

Structures in trust

2,797,067

7,157

-

2,804,224

249,855

53,4582,554,369

214,510--214,510

22,623

5,645

191,887

71,172

8,746-

79,91820,383

5,218

59,534

149,241,987

1,075,497-

150,317,484--

150,317,484

14,291378

14,291

378

-

-

378

206,867,184

1,544,442

14,291

208,397,334

4,346,659

920,952

204,050,675

206,867,184

1,544,442

14,291

208,397,334

4,346,659

920,952

204,050,675

4,349,916--

4,349,916

25,1973,978

4,324,719

4,455

-

-

4,455

2,124

445

2,331

-

¥4,354,372¥27,322¥4,424¥4,327,050

Machinery andequipment in trust
Property,plant andequipment

Tools, furnitureand fixtures intrust
Land in trust
Construction inprogress in trust
Subtotal

Total
Intangible
assets
Total¥

Leasehold rightin trust
Other¥4,354,372

¥

-

¥

64

21. SHORT-TERM LOANS PAYABLE AND LONG-TERM LOANS PAYABLE
The following summarizes short-term loans payable and long-term loans payable outstanding as of September 30, 2018:
Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodAverageinterest rate
（Note 2）
（Note 3）

Balance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation

Short-termloanspayable¥900,000

300,000-

300,000-

2,600,000-

2,600,000-

MUFG Bank, Ltd.

1,070,000-

1,070,000-

Aozora Bank, Ltd.

640,000-

640,000-

Resona Bank, Limited

400,000-

400,000-

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui
Banking Corporation(Note 8)
Sumitomo Mitsui
Banking Corporation

360,000-

360,000-

300,000-

300,000-

200,000-

200,000-

3,400,000-

3,400,000

2,750,000

-

¥

-

0.455

April 19,
2018

0.455

April 21,
2018

-

0.455

September 30,
2018-

2,750,000

0.456

February 13,
2019

0.534

March 31,
2019

0.545

March 31,
2019

0.368

September
30, 2019

0.481

August 31,
2019

0.481

August 31,
2019

0.481

August 31,
2019

0.465

September
30, 2019

Subtotal

12,920,000-

10,170,000

2,750,000

MUFG Bank, Ltd.

750,000--

750,000

Aozora Bank, Ltd.

500,000--

500,000

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

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

1,850,000--

1,850,000

550,000--

550,000

500,000--

500,000

300,000--

300,000

250,000--

250,000

710,000--

710,000

Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

Current
portion of
long-term
loans
payable¥The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.
(Note 7)
Sumitomo Mitsui Trust
Bank, Ltd. (Note 7)
Mizuho Trust &Banking Co., Ltd.
(Note 7)
Aozora Bank, Ltd.
(Note 7)
Resona Bank, Limited(Note 7)
Sumitomo Mitsui Trust
Bank, Limited (Note 7)

620,000--

620,000

350,000--

350,000

250,000--

250,000

250,000--

250,000

200,000--

200,000

Mizuho Bank, Ltd.

-

300,000-

300,000

MUFG Bank, Ltd.

-

1,270,000-

1,270,000

Aozora Bank, Ltd.

-

640,000-

640,000

Resona Bank, Limited-

400,000-

400,000

Mizuho Bank, Ltd.

-

360,000-

360,000-

300,000-

300,000-

700,000-

700,000

8,030,000

3,970,000-

12,000,000

Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
Subtotal

Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(%)-

Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation¥900,000

Payment due
date（Note 4）65

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.

2,400,000--

2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

500,000--

500,000

Resona Bank, Limited

500,000--

500,000

The Gunma Bank, Ltd.

400,000--

400,000

400,000--

400,000

350,000--

350,000

300,000--

300,000

3,000,000--

3,000,000

MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

700,000--

700,000

500,000--

500,000

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

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

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

1,000,000--

1,000,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

450,000--

450,000

200,000--

200,000

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

1,150,000--

1,150,000

1,000,000--

1,000,000

700,000--

700,000

Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation

Mizuho Trust &Banking Co., Ltd.
Mizuho Bank, Ltd.
Resona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
MUFG Bank, Ltd.
Development Bank ofJapan Inc. (Note 6)
MUFG Bank, Ltd.
Resona Bank, Limited
The Musashino Bank,Ltd.
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
MUFG Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）0.751

February 10,
2020

0.865

February 10,
2021

0.978

February 10,2022

February 10,2021
February 10,
2022
April 16,
2025

0.975

March 31,
2023

0.994

March 31,
2023

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,2024

66

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.

Payment due
date（Note 4）--650,000

500,000--

500,000

1,500,000--

1,500,000

400,000--

400,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

500,000--

500,000

0.550

2,000,000--

2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

2,600,000--

2,600,000

500,000--

500,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

600,000--

600,000

0.400

500,000--

500,000

0.553

400,000--

400,000

0.553

200,000--

200,000

0.553

1,500,000--

1,500,000

400,000--

400,000

Aozora Bank, Ltd.

400,000--

400,000

Resona Bank, Limited
MUFG Bank, Ltd.
(Notes 6 )Mizuho Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
MUFG Bank, Ltd.
(Notes 6 )Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited

300,000--

300,000

600,000--

600,000

0.696

600,000--

600,000

0.815

500,000--

500,000

0.814

200,000--

200,000

0.814

500,000--

500,000

0.903

October 31,
2026

500,000--

500,000

500,000--

500,000

1.033

May 18,2027

400,000--

400,000

500,000--

500,000

1.050

500,000--

500,000

1.049

300,000--

300,000

1.050

MUFG Bank, Ltd.
The Gunma Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
Aozora Bank, Ltd.
MUFG Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
MUFG Bank, Ltd.
(Notes 6 )Development Bank ofJapan Inc.（Note 6）
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
（Note 6）
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited

Development Bank ofJapan Inc. (Note 6)
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

650,000

Sumitomo Mitsui Trust
Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation

Long-term
loans
payableAverageinterest rate
（Note 2）
（Note 3）

1.110

March 31,
2024

1.243

April 16,
2025

0.485

0.772

September 30,
2024
September 30,
2024
April 21,2026
October 31,
2025
September 30,
2021

January 31,
2027

April 27,
2021

April 27,
2021

October 31,
2024

October 31,
2024

May 18,2027

67

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
MUFG Bank, Ltd.
(Notes 6 )Sumitomo Mitsui Trust
Bank, Limited
MUFG Bank, Ltd.
(Notes 6 )Mizuho Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
(Notes 6 )MUFG Bank, Ltd.

Long-term
loans
payableMizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation--

500,000

0.670

1,500,000--

1,500,000

0.918

500,000--

500,000

0.930

1,500,000--

1,500,000

1.029

1,500,000--

1,500,000

1.100

500,000--

500,000

1.035

1,200,000--

1,200,000

1.000

1,250,000--

1,250,000

800,000--

800,000-

900,000-

900,000

0.988-

2,600,000-

2,600,000

0.985

-

2,000,000-

2,000,000

0.902

-

1,000,000-

1,000,000

1.090

-

1,000,000-

1,000,000

0.907

-

1,500,000-

1,500,000

0.999

-

500,000-

500,000

0.900-

500,000-

500,000

0.999-

500,000-

500,000

0.999-

700,000-

700,000

0.913

73,150,000

11,200,000-

84,350,000¥94,100,000¥15,170,000¥10,170,000¥99,100,000

The Bank of Fukuoka,
Ltd.
Sumitomo Mitsui
Banking Corporation
MUFG Bank, Ltd.
(Note 6)
Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Nippon Life Insurance
Company
Total

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

500,000

Mizuho Bank, Ltd.

Subtotal

Averageinterest rate
（Note 2）
（Note 3）0.603

September
29, 2023
September
30, 2026
September
29, 2027
September
29, 2028
October 3,
2027
February 10,2028
August 31,
2022
April 30,
2027
April 30,
2027
April 30,
2026
April 30,2028
May 31,
2026

May 31,2027

March 31,2025

Note 1: Annual repayments of long-term loans payable (except for current portion of long-term loans payable) scheduled after the balance sheet date are as follows:
Due after 1 year
through 2 years
Long-term loans
payable¥7,000,000

Due after 2 years
through 3 years

Due after 3 years
through 4 years（in thousands yen）

¥13,300,000¥9,050,000

Due after 4 years
through 5 years¥7,500,000

Due after 5 years¥47,500,000

Note 2: All debts except for the following Note 6 are loans payable at a floating rate.
Note 3: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to loans payable forwhich interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into consideration
the effects of the interest rate swaps are indicated.
Note 4: All the repayment methods of debt financing are lump-sum repayments on the due date.
Note 5: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) and repayment ofdebts.
Note 6: Loans payable at a fixed rate.
Note 7: Loans payable are listed in the current portion of long-term loans payable from the fiscal period under review, listed in long-term loans payable in the previous fiscal
period.
Note 8: Partial prepayment of 2,000,000 thousand yen was made on April 27, 2018.

68

The following summarizes short-term loans payable and long-term loans payable outstanding as of March 31, 2018:
Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodAverageinterest rate
（Note 2）
（Note 3）

Balance atthe end of
the period(in thousands of yen)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mizuho Bank, Ltd.

Short-termloanspayableCurrent
portion of
long-term
loans
payable

¥

-

0.485

October 3,
2017

0.443

February 10,
2018

0.447

April 19,2018

¥3,900,000

450,000-

450,000-

450,000-

450,000-

400,000-

400,000-

Resona Bank, Limited

250,000-

250,000-

Aozora Bank, Ltd.

250,000-

250,000-

200,000-

200,000-

900,000--

900,000

300,000--

300,000

2,600,000--

2,600,000

1,070,000--

1,070,000

Aozora Bank, Ltd.

640,000--

640,000

Resona Bank, Limited

400,000--

400,000

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui
Banking Corporation

360,000--

360,000

300,000--

300,000

200,000--

200,000-

3,400,000-

3,400,000

0.446

-

2,750,000-

2,750,000

0.455

Subtotal
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)

12,670,000

6,150,000

5,900,000

12,920,000

2,300,000-

2,300,000-

800,000-

800,000-

Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 7 and 8)
Aozora Bank, Ltd.
(Note 7）
Mizuho Bank, Ltd.
(Note 7)
Sumitomo Mitsui Trust
Bank, Limited (Note 7)
Resona Bank, Limited(Note 7)The Musashino Bank,
Ltd. (Note 7)
Sumitomo Mitsui
Banking Corporation(Note 7)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 7 and 8)
Sumitomo Mitsui Trust
Bank, Limited (Note 7)

400,000-

400,000-

350,000-

350,000-

750,000--

750,000

500,000--

500,000

400,000--

400,000

200,000--

200,000

200,000--

200,000

150,000--

150,000

1,850,000--

1,850,000

550,000--

550,000

500,000--

500,000

Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8）¥

Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(Note 5)

Unsecured/
Nonguaranteed(%)-

Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation¥3,900,000

Payment due
date（Note 4）0.447

April 21,2018

September 30,
2018
February 13,
2019

0.545

February 10,
2018

0.534

March 31,
2019

0.545

March 31,201969

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Current
portion of
long-term
loans
payableLong-term
loans
payableResona Bank, Limited(Note 7)The Musashino Bank,
Ltd. (Note 7)
Subtotal
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Sumitomo Mitsui Trust
Bank, Limited

300,000-

Averageinterest rate
（Note 2）
（Note 3）

Payment due
date（Note 4）Use

Remarks

0.545

March 31,2019

(Note 5)

Unsecured/
Nonguaranteed

0.751

February 10,
2020

0.865

February 10,2021(Note 5)

Unsecured/
Nonguaranteed(%)-

300,000

250,000--

250,000

9,500,000-

3,850,000

5,650,000

2,400,000--

2,400,000

800,000--

800,000

800,000--

800,000

550,000--

550,000

Aozora Bank, Ltd.

500,000--

500,000

Resona Bank, Limited

500,000--

500,000

The Gunma Bank, Ltd.
The Musashino Bank,
Ltd.
Mizuho Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

400,000--

400,000

400,000--

400,000

350,000--

350,000

300,000--

300,000

3,000,000--

3,000,000

700,000--

700,000

500,000--

500,000

450,000--

450,000

Resona Bank, Limited

450,000--

450,000

Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.
Mizuho Trust &Banking Co., Ltd.
Mizuho Bank, Ltd.

400,000--

400,000

2,600,000--

2,600,000

800,000--

800,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

1,500,000--

1,500,000

0.925

1,600,000--

1,600,000

1.033

4,600,000--

4,600,000

1.366

1,000,000--

1,000,000

600,000--

600,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

400,000--

400,000

1,500,000--

1,500,000

Resona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Sumitomo Mitsui Trust
Bank, Limited
Mizuho Bank, Ltd.
Resona Bank, Limited
Mizuho Trust &Banking Co., Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Development Bank ofJapan Inc. (Note 6)

0.978

February 10,2022

February 10,2021
February 10,
2022
April 16,
2025

0.975

March 31,
2023

0.994

March 31,2023

70

Classification
LenderBalance atthe beginningof the period

Increaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)Long-term
loans
payableResona Bank, Limited
The Musashino Bank,Ltd.
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
Mizuho Bank, Ltd.
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mizuho Trust &Banking Co., Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
The Gunma Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)
Resona Bank, Limited
Sumitomo Mitsui
Banking Corporation
Aozora Bank, Ltd.
Mitsubishi UFJ Trustand Banking
Corporation (Note 9)
Sumitomo Mitsui Trust
Bank, Limited
Resona Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Development Bank ofJapan Inc.（Note 6）
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
（Note 6）
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, LimitedAozora Bank, Ltd.

Averageinterest rate
（Note 2）
（Note 3）

Payment due
date（Note 4）Use

Remarks(Note 5)

Unsecured/
Nonguaranteed(%)

450,000--

450,000

200,000--

200,000

150,000--

150,000

1,500,000--

1,500,000

3,000,000--

3,000,000

1,150,000--

1,150,000

1,000,000--

1,000,000

700,000--

700,000

650,000--

650,000

500,000--

500,000

1,500,000--

1,500,000

0.987

March 31,
2023

1.013

March 31,
2023

1.110

March 31,
2024

1.243

April 16,
2025

0.368

September 30,
2019

400,000--

400,000

710,000--

710,000

620,000--

620,000

450,000--

450,000

0.803

890,000--

890,000

0.760

2,670,000--

2,670,000

0.932

890,000--

890,000

0.888

October 31,
2025

500,000--

500,000

0.550

September 30,
2021

2,000,000--

2,000,000

1.049

1,000,000--

1,000,000

1.049

500,000--

500,000

1.002

2,600,000--

2,600,000

500,000--

500,000

400,000--

400,000

300,000--

300,000

300,000--

300,000

600,000--

600,000

0.400

500,000--

500,000

0.553

400,000--

400,000

0.553

200,000--

200,000

0.553

1,500,000--

1,500,000

400,000--

400,000

400,000--

400,000

0.485

0.772

September 30,
2024
September 30,
2024
April 21,2026

January 31,
2027

April 27,
2021

April 27,
2021

October 31,
2024

71

Classification

Balance atthe beginningof the period

LenderIncreaseduring theperiodDecreaseduring theperiodBalance atthe end of
the period(in thousands of yen)
Resona Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Mizuho Bank, Ltd.
(Note 6)Development Bank ofJapan Inc. (Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited

Long-term
loans
payableResona Bank, Limited
Development Bank ofJapan Inc. (Note 6)
Mizuho Bank, Ltd.
(Note 6)
Mizuho Trust &Banking Co., Ltd.
(Note 6)The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Sumitomo Mitsui Trust
Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Mizuho Bank, Ltd.
(Note 6)
Sumitomo Mitsui Trust
Bank, Limited
Sumitomo Mitsui
Banking Corporation
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Notes 6 and 8)
Mizuho Trust &Banking Co., Ltd.

Averageinterest rate
（Note 2）
（Note 3）

Payment due
date（Note 4）(Note 5)

Unsecured/
Nonguaranteed

October 31,
2024

300,000--

300,000

0.772

600,000--

600,000

0.696

600,000--

600,000

0.815

500,000--

500,000

0.814

200,000--

200,000

0.814

500,000--

500,000

0.903

October 31,
2026

500,000--

500,000

500,000--

500,000

1.033

May 18,2027

400,000--

400,000

500,000--

500,000

1.050

500,000--

500,000

1.049

300,000--

300,000

1.050

October 31,
2024

May 18,2027

500,000--

500,000

0.670

1,500,000--

1,500,000

0.918

September
30, 2026

500,000--

500,000

0.930

1,500,000--

1,500,000

1.029

1,500,000--

1,500,000

1.100

-

500,000-

500,000

1.035-

1,200,000-

1,200,000

1.000

February 10,2028-

350,000-

350,000

Aozora Bank, Ltd.

-

250,000-

250,000

Resona Bank, Limited
Sumitomo Mitsui Trust
Bank, Limited
The Bank ofTokyo-Mitsubishi UFJ,
Ltd. (Note 8)
Mizuho Bank, Ltd.

-

250,000-

250,000

0.480

August 31,
2019-

200,000-

200,000-

1,250,000-

1,250,000

0.603

August 31,
2022-

800,000-

800,000

Subtotal

Remarks(%)

September
29, 2023

Total

Use

70,730,000

4,800,000-

75,530,000¥92,900,000¥10,950,000¥9,750,000¥94,100,000

September
29, 2027
September
29, 2028
October 3,
2027

Note 1: Annual repayments of long-term loans payable (except for current portion of long-term loans payable) scheduled after the balance sheet date are as follows:
Due after 1 year
through 2 years
Long-term loans
payable¥9,380,000

Due after 2 years
through 3 years¥7,000,000

Due after 3 years
through 4 years（in thousands yen）
¥13,300,000

Due after 4 years
through 5 years¥9,050,000

Due after 5 years¥36,800,000

Note 2: All debts except for the following Note 6 are loans payable at a floating rate.
Note 3: Average interest rates are the weighted average during the period and figures are rounded to the nearest third decimal place. Also, with regard to loans payable forwhich interest rate swap transactions were implemented in order to hedge the interest rate volatility risk, the weighted average interest rates taking into consideration
the effects of the interest rate swaps are indicated.

72Note 4: All the repayment methods of debt financing are lump-sum repayments on the due date.
Note 5: All debts were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate (additional expenses are included) and repayment ofdebts.
Note 6: Loans payable at a fixed rate.
Note 7: Loans payable are listed in the current portion of long-term loans payable from the fiscal period under review, listed in long-term loans payable in the previous fiscal
period.
Note 8: The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its corporate name to MUFG Bank, Ltd. on April 1, 2018.
Note 9: MUFG Bank, Ltd. succeeded to the status of lender from Mitsubishi UFJ Trust and Banking Corporation on April 16, 2018.

22. INVESTMENT CORPORATION BONDS
Outstanding investment corporation bonds as of September 30, 2018 are as follows.
SeriesDate of issue

Balance atthe beginningof period

Decreaseduring theperiodBalance at theend of period

Interest rate

(in thousands of yen)First series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)
Third series of unsecured
investment corporation bonds(Note 1)
Fourth series of unsecured
investment corporation bonds(Note 1)Fifth series of unsecured
investment corporation bonds(Note 1)Total

October 31,
2016¥1,000,000

October 31,
2016

¥

-

1,000,000-

Repayment date

¥1,000,000
1,000,000

0.200

October 29,
2021

0.600

October 30,
2026

1,000,000-

1,000,000

0.320

August 31,
2022

August 31,
2017

2,000,000-

2,000,000

0.700

August 31,
2027

April 26,
2018

-

-

2,000,000

0.700

April 26,2028-

¥7,000,000¥

Remarks(%)

August 31,
2017¥5,000,000

Use(Note2)
Unsecured(Note3)Note 1: Ranking pari passu among the specified investment corporation bonds.
Note 2: Investment corporation bonds were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate and repayment of debts.
Note 3: Investment corporation bonds were used as the funds for repayment of debts.
Note 4: Annual repayments of investment corporation bonds scheduled for the next five years after the balance sheet date are as follows.
Due in 1 year
or less
Investment
corporation bonds¥

Due after 1 year
through 2 years-¥

Due after 2 years
through 3 years(in thousands of yen)-¥

Due after 3 years
through 4 years-

Due after 4 years
through 5 years¥2,000,000¥-

Outstanding investment corporation bonds as of March 31, 2018 are as follows.
SeriesFirst series of unsecured
investment corporation bonds(Note 1)
Second series of unsecured
investment corporation bonds(Note 1)
Third series of unsecured
investment corporation bonds(Note 1)
Fourth series of unsecured
investment corporation bonds(Note 1)
Total

Date of issue

Balance atthe beginningof period

October 31,
2016¥1,000,000

October 31,
2016

Decrease
Balance at theduring theend of period
period(in thousands of yen)Interest rate

Repayment date

¥1,000,000

0.200

October 29,
2021

1,000,000-

1,000,000

0.600

October 30,
2026

August 31,
2017

1,000,000-

1,000,000

0.320

August 31,
2022

August 31,
2017

2,000,000-

2,000,000

0.700

August 31,
2027-¥5,000,000¥5,000,000¥

Remarks

(%)

-

¥

Use

(Note2)
Unsecured(Note3)Note 1: Ranking pari passu among the specified investment corporation bonds.
Note 2: Investment corporation bonds were used as the funds for acquiring real estate properties or trust beneficiary interest in real estate and repayment of debts.
Note 3: Investment corporation bonds were used as the funds for repayment of debts.
Note 4: Annual repayments of investment corporation bonds scheduled for the next five years after the balance sheet date are as follows.
Due in 1 year
or less
Investment
corporation bonds¥

Due after 1 year
through 2 years-¥

Due after 2 years
through 3 years(in thousands of yen)-¥

Due after 3 years
through 4 years-¥1,000,000

Due after 4 years
through 5 years¥1,000,000

73

23. DISTRIBUTIONS
From April 1, 2018
to September 30, 2018

From October 1, 2017
to March 31, 2018

I.. Retained earnings at the end of period¥3,198,151,440¥3,175,962,601

II. Total distributions¥3,198,002,300¥3,175,663,500¥6,299¥6,255¥149,140¥299,101

In accordance with the policy described in Article 39-1 of its
Articles of Incorporation, KRR determines that the amountof distribution shall exceed the amount equivalent to 90% of
its distributable profit as stipulated in Article 67-15 of theSpecial Taxation Measures Law and shall be up to its
profits as the maximum amount. Following this policy, KRR
has decided that it shall distribute ¥3,198,002,300 which isalmost the entire amount of retained earnings as the
distributions of earnings.
Procedures for the distribution of amounts exceeding
distributable income are outlined in Article 39-2 of KRR’s
Articles of Incorporation. In the seventh fiscal period, KRR
has decided not to distribute cash in excess of distributableprofit.

In accordance with the policy described in Article 39-1 of its
Articles of Incorporation, KRR determines that the amountof distribution shall exceed the amount equivalent to 90% of
its distributable profit as stipulated in Article 67-15 of theSpecial Taxation Measures Law and shall be up to its profits
as the maximum amount. Following this policy, KRR has
decided that it shall distribute ¥3,175,663,500 which isalmost the entire amount of retained earnings as the
distributions of earnings.
Procedures for the distribution of amounts exceeding
distributable income are outlined in Article 39-2 of KRR’s
Articles of Incorporation. In the sixth fiscal period, KRR has
decided not to distribute cash in excess of distributableprofit.

Distributions per unit
III.Retained earnings brought forward to thenext period

Method of calculating distribution amount74