Financial Results for the 3rd Financial Period ended Sep. 2016
November 17, 2016

Virtual Property Tour of Unicus Yoshikawa Contents

SectionSectionSectionAppendix

Appendix

Increasingpresence of SC
for daily needs

Financial results
for the fiscal
period ended
Sep.30, 2016

Implementationof growthstrategies

Key characteristics
of Kenedix Retail
REIT Corporation

Detailed financial
results andportfolio
information

01

02

03

01

02

01

Increasing presence of SC for daily needs

証券コード

3453
Security Code

Investments focusing on shopping center for daily needs
Our focus: Neighborhood, community andother shopping centers for daily needs

The majority of portfolio properties ofother listed retail-focused J-REITs"Daily / Neighborhood" type

"Weekend / Destination" type

Property types

Small

Trade area

Large

High

Frequency of customer visits

Low

Characteristics

Trade
area

NSC

Neighborhood
Shopping
Centers

Shopping centers with a supermarket
as an anchor or core tenant

3-5km

SM

Supermarkets

Stand-alone stores that primarily
provide groceries

3km

CSC

Community
Shopping
Centers

Larger Shopping centers than NSC,
with a supermarket as an anchor orcore tenant

5-10kmUrban Station-Front

Shopping centers in the immediate
vicinity of an urban public
transportation station

3-5km

Specialty Stores

Specialty stores such as drug stores,
convenience stores, health clubs orelectronic appliance stores

1-10kmSS

Large-scale suburban retail properties
RSC (Regional Shopping Center)
GMS (General Merchandise Store)
Stand-alone GMS is excluded from our investment criteria

Outlet malls

Urban retail properties featuring
High-end brand shops

4

Ample investment opportunities in shopping centers for daily needs

Ample investment
opportunities
in shopping centers for daily needs

Tenants with high demand
from consumers

Properties located in areas
with high population density

Ample investment
opportunities

77.2%

55.4%

92.3%

Share of frequently purchased items fordaily needs(Note 4) as a % of total household
expenditure on consumer products% of Japan's total population
living in suburban areas within the four major
metropolitan areas(Note 5)% of medium- or small-sized retailfacilities in "retail property opening
applications"

Note 1: The share of frequently purchased items for daily needs as a % of total household expenditure on consumer products according to a survey conducted by the Statistics Bureau of the Ministry of Internal Affairs and Communications in 2014.
Note 2: % of Japan's total population living in suburban areas within the four major metropolitan areas, according to a survey conducted by the Statistics Bureau of the Ministry of Internal Affairs and Communications in 2015 based on preliminary census data.
Note 3: % of applications submitted to develop new retail properties with a total floor area of 10,000 m2 or less from 2005 to 2014.
Note 4: "Frequently purchased items for daily needs" refers to items that can be selected quickly, such as convenience foods and household commodities.
Note 5: "Suburban areas within the four major metropolitan areas" refers to the four major metropolitan areas excluding Tokyo (Chiyoda ward, Chuo ward, Minato ward, Shinjuku ward and Shibuya ward), Osaka (Kita-ku, Chuo-ku, Fukushima-ku, Nishi-ku, Naniwa-ku and Tennoji-ku)
and Nagoya (Nishi-ku, Naka-ku and Nakamura-ku).

5

Trend in retail market and positioning of SC for daily needs
Increasing in market share

Limited exposure to e-commerce
Priority on quality of goods

Grocery
Specialty store
NSC

GMS
Department store

Operational stability
Easy access

Purchase goods at
specialty stores nearby

Frequent shopping

Purchase daily necessities atsupermarkets nearby

Abundant product lines

Shopping center for quick shopping

Needs for taking products in hand

+

+

VS

Increased demand for specialty stores

Shrinking retail trade area

Emergence of e-commerce players

Diversified consumer needs

Further aging of
population

Population concentration
in metropolitan areas

Penetration of the internet
Rise of mobile shopping6

Retail Market Trends: GMS vs. Specialty Store

Buying Goods at GMS
2007
Type of Store

Buying Goods at Specialty Stores
2016(JPY bn)

Sales

Type of Store(JPY bn)

Sales

Change1Super Market

12,961.0

1Super Market

15,517.4 +19.7%

2

GMS

8,602.1

2

Convenience Store

10,105.8 +36.6%

3Department Store

8,283.1

3

GMS

7,348.3

4

Convenience Store

7,413.9

4

Drug Store

7,271.5 +96.9%

5

Other Retailer

5,743.7

5

Other Retailer

7,143.6

24.4%

6

Consumer Electronics

5,719.1

6Department Store

6,223.4-24.9%

7

Drug Store

3,692.2

7

Consumer Electronics

5,438.0-4.9%

8

Clothing

3,177.7

8

Clothing

5,223.9 +64.4%

9Home and Garden

2,835.6

9Home and Garden

3,492.0 +23.1%

10 Consumers' Co-operative

2,487.0

10 Consumers' Co-operative

2,360.3-14.6%-5.1%

Source: Data regarding Japanese retailer earning results based on magazine “Diamond Chain Store (September 15, 2016)”

7

Limited e-commerce penetration in daily needs market
E-commerce market is still small compared to overall retail market

Tendency to purchase daily needs such as grocery in physical store

Market size comparison in types of stores (JPY trillion)

Consumers' preference: physical stores vs. online shopping

2007

Retailmarket

2014

+4.0

120.6

124.6

Grocery
食品
薬
Medicine
雑貨/日用品Lifestylegoods
Petペット用品
care goods
大型家具
Large
furniture
大型家電
Large home appliances
衣類
Clothing
小型家具
Smallfurniture
化粧品
Cosmetics
Train切符/チケット
tickets / tickets
携帯電話
Mobilephone
PC
Personal computer
小型家電
Small home appliances
本Books
CD / DVD CD/DVD/BD類/ BD and others
0%Supermarket
Specialty store

+1.4

GMS
Department
store

E-commerce(incl. goods)(excl. service)

-4.3
10.8

15.1

2.5

On
ネットが多いthe internet
10%

20%

30%

40%

50%

60%

70%

80%

90%

Source: White Paper Information and Communications in Japan by Ministry of Internal Affairs and Communications

33.8

32.4

Purchased more frequently…
実店舗が多いAt
physical stores

Low % of online shopping attributed to total expenditure on groceries

0.6%

+4.2
6.8

Source: Ministry of Economy, Trade, and Industry (“MITI”)“Retail market” is based on dynamic statistics on commerce. The figure is the sum of retailer’s sales excluding from car seller.
“Super market/ Specialty store refers to the sum of specialty super market, convenience store, and drug store based oncommerce census“GMS/ Department store refers to the sum of GMS and department store based on commerce census .
“E-commerce in 2007” is based on market size of B to C e-commerce of retailer on the report regarding to research about
national IT use in 2007
“E-commerce in 2014” is based on the market size of B to C e-commerce of goods seller on the report regarding to informationand service infrastructure for national economy and society in 2015.

Source: "National Survey of Family Income and Expenditure 2014" by Ministry of Internal Affairs and Communications Bureau of Statisti cs

8

Convenient shopping experience at shopping centers
Buying behavior of elderly residents in Tokyo (1)Buying behavior of elderly residents in Tokyo (2)Buying behavior of elderly residents in Tokyo (3)Frequent shoppers

Preference for supermarkets

Access by foot or bicycle

50.0%

69.4%

72.7%

Consumers who go shopping "almost
daily" or "3 to 4 times a week"

Consumers who identify supermarkets as"most frequently used type of retailproperty for purchasing groceries"

Consumers who travel to "most frequently
used retail properties" by foot or bicycle

Large ground parking lot

Low-rise facility

Easy access by foot or bicycle

Unicus Ina

Sunny Noma

Life Kameido

Source： Bureau of Industrial and Labor Affairs of the Tokyo Metropolitan Government "Reports on shopping trends of the elderly" (Dec. 2011)9

02

Financial results for the fiscal period
ended Sep.30, 2016

証券コード

3453
Security Code

Investment summary since the previous earnings announcement (May 19, 2016)
External GrowthInternal Growth

Financial Strategy

NEW!

Alliance agreement with ITOCHU Corporation
NEW!

Acquisition of K’s Denki Shin-Moriyama (Land)
Acquisition price: JPY 1,370 mn
Appraisal value: JPY 1,410 mn
Appraisal NOI yield (= after depreciation): 4.4%
Located in a high population growth area
Increasing population (5km radius +2.9%)

Property expansions on underutilized space
Work in progress at Unicus Ina

Market cap rose as shares outstanding increased
Included in FTSE EPRA/NAREIT Global Real
Estate Index Series
NEW!

Rent revisions for 3rd fiscal period
Unchanged or raised in 88.5% of all
Trend of tenants' revenue
Change from previous year: 100.2% in average

Diversification of source of funding
Issuance of investment corporation bonds
Total JPY 2,000 mn
5 years: JPY 1,000 mn, interest rate 0.20%
10 years: JPY 1,000 mn, interest rate 0.60%

NEW!

NEW!

Obtaining investment opportunities
Acquisition of silent partnership equity interest
Real estate in trust: Yumemachi Narashinodai Mall
Located in a high-population-growth area
Increasing population (5km radius +3.7%)

Environmental initiatives
Awarded a “Green Star” Rating in GRESB Real
Estate Assessment 2016
Received DBJ Green Building Certification for four
properties

Strengthen the financial position
Average interest rate: 0.99% (as of Oct. 31, 2016)
LTV: 42.9% (Forecast as of Mar. 31, 2017)
Acquisition capacity (up to LTV45%): JPY 6.6 bn

Distribution Per Unit (JPY)Stabilized DPU (JPY)

NAV per unit (JPY)実績
Actual7,414

予想
Forecast

当初予想
Initial forecast

Assuming that property-related taxes are expensed

6,846

5,555

5,974

6,040

6,542

5,738

244,905

5,843

5,843

237,472

238,401

2015/9
1st第1期period2016/3
第2期
2ndperiod

4,600
5,897

2015/9
1st第1期period

5,434

5,555

2016/3
2nd第2期period2016/93rd第3期period2017/3
4th第4期period2017/95th第5期period2015/2
IPO時点
Upon
IPO

2015/8
第1回PO時点
Upon 1st PO

2016/3
第2回PO時点
Upon 2nd PO

2016/11
As of the date of
本書の日付時点
this material

2016/9第3期
3rd
periodNote 1: “LTV” refers to "loan-to-value ratio", which is calculated as the ratio of the total amount of short-term debt, long-term debt, corporate bonds and tenant leasehold and security deposits (net amounts reserved for return of tenant leasehold and security deposits) divided bytotal assets as of the end of the previous fiscal period minus amounts reserved for return of tenant leasehold and security deposits. (same for below)
Note 2: NAV per unit at the end of each financial period = (NAV + appraisal gains/losses on the entire portfolio at the end of each financial period)/ (total number of investment units issued at the end of each financial period)
Note 3: Initial forecast represents the DPU estimate for each financial period stated in the material which we first announced earnings estimation after our listing11

Summary of Balance Sheets (JPY mn)
Mar. 2016
2nd period
Current assets
Property, plantand equipment
Intangible assets
Investments andother assets

Sep. 2016
3rd period

Change
JPY mn%Factors in change of current assets

14,96016,779+1,819+12.2%

133,488

160,918+27,430+20.5%

1. Increase in cash and deposits
Increase in cash and deposits in trust mainly due to increase in
2. tenant lease hold and deposits in trust
3. Others(JPY mn)+484+1,273+60

Factors in change of non-current assets
530

526

-4

-0.8%

753

822

+68

+9.1%

134,772

162,268+27,495+20.4%

1. Increase in PP&E mainly due to acquisition of assets (net)Increase in long-term prepaid expenses due to payment of
2. upfront fee related to debt financing (net)
3. Others+27,430+68-4

Factors in change of deferred assets
Total Non-current assets
Deferred assets
Total assets

276

312

+35

1. Increase in investment unit issuance costs related to 2nd PO (net)+40+13.0%

2. Other (amortization of organization costs)
Factors in change of current liabilities
Increase in short-term loans payable due to acquisition of
1. assets in connection with 2nd PO
2. Other+5,570

Factors in change of non-current liabilities
Increase in long-term loans payable due to acquisition of assets
1. in connection with 2nd PO
Increase in tenant lease hold and deposits in trust due to
2. acquisition of assets+6,230150,009179,360+29,350+19.6%

Current liabilities

8,283

13,781+5,497+66.4%

Non-current liabilities

61,69068,838+7,148+11.6%

Total liabilities

69,974

82,620+12,645+18.1%

Total net assets

80,03496,739+16,705+20.9%

Total liabilities and net assets

150,009179,360+29,350+19.6%

3. Other

-5

-72

+885
+32

Factors in change of net assets

LTV

42.7%

42.5%

---

---

1. Increase in unitholder’s capital due to 2nd PO+16,649

2. Allowance for temporary difference adjustment-4

3. Increase in unappropriated retained earnings+90

4. Deferred gains or losses on hedges

-31

12

Summary of Statements of Income and Retained Earnings (JPY mn)
Mar. 2016
2nd period
Actual (A)Rent revenue – real estate

4,656

Sep. 2016
3rd period
3rd period
Forecast (B) Actual (C)
5,406

5,405

Changes
C-A
+749

C-B
-0

Factors for changes from forecast
Operating revenues
Utility charge reimbursement
Due to decline in electricity charges

Other lease business revenue

884

986

968

+83

-17

Others-28+10Operating expenses
Operating revenues

5,541

6,392

6,374

+833

-18

Property related expenses(excl. depreciation)

1,669

NOI

3,871

4,192

4,228

+357

+36

565

711

714

+148

+2

3,305

3,480

3,513

+208

+33

Depreciation
NOI after depreciation

2,200

2,146

+476

-54

Repairs and maintenance (incl. restoring)+19

Utilities-69

Due to cost-cut ting and decline in electricity charges

Non-operating expenses
Interest expenses and financing-related expenses-11

Amortization of investment unit issuance costs-2

Factors for changes from 2nd period

Other operating expenses
Operating income

479

537

540

+61

+3

2,826

2,943

2,973

+147

+30

Non-operating income

1

1

0

-1

-0

Non-operating expenses

398

468

454

+55

-14

Ordinary income

2,428

2,475

2,519

+90

+44

Net income

2,427

2,472

2,518

+90

+46

DPU (JPY)

6,846

5,865

5,974

-872

+109

NOI
32 properties acquired in 2015-356

[ Property taxes (expense) of the 32 properties+482 ]

8 properties acquired in 2016

+713

Depreciation
32 properties acquired in 2015+15

8 properties acquired in 2016+132

Non-operating expenses
Interest expenses and financing-related expenses+37

Amortization of investment unit issuance costs

+17

13

Financial forecasts: 4th fiscal period (Mar. 2017) (JPY mn)
Key financial information
Operating revenues
Operating expenses

Sep. 2016
3rd period(Actual)Mar. 2017
4th period(Forecast)

Changes

6,374

6,398

+24

Factors for changes from previous period (from 3rd period)
Operating revenues
Rental revenue – real estate from properties acquired in Apr. 2016

+77

Rental revenue – real estate from properties acquired in Nov. 2016

+28

Utility charge reimbursement-70

Others

-10

3,400

3,390

-10

2,973

3,007

+34

454

460

+6

Utilities

-53

372

378

+5

Repairs and maintenance (incl. restoring)

-31

81

81

---

Sales and promotion+17

Ordinary income

2,519

2,547

+27

Asset management fee+47

Others+9

Net income

2,518

2,546

+27

DPU

5,974

6,040

+66

Sep. 2016
3rd period(Actual)Mar. 2017
4th period(Forecast)

Changes

4,228

4,315

+87

5.4%

5.4%

---

714

720

+5

3,513

3,595

+81

4.5%

4.5%

---

3,315

3,350

+35

264

549

+284

Operating income
Non-operating expenses
Interest expenses & financing-related
expenses
Amortization of investment unit
issuance costs & organization costs

Related key indicatorNOI
NOI yield (%)(Note1)
Depreciation
NOI after depreciation
NOI yield after depreciation (%)(Note1)
FFO(Note2)CAPEX
LTV (%)

42.5%

Operating expenses

Operating income+34

Breakdown of NOI (Net Operating Income)

42.9%

---

Rental and other operating revenues (A)Rent revenue – real estate

5,520

Utility charge reimbursement

469

Other revenues

406

Property-related expenses (B) (excl. depreciation)
PM fees / facility management fees

690

Utilities

469

Taxes

482

Repairs and maintenance (incl. restoring)

119

Sales and promotion

191

Others127

NOI (A-B)

4,315

Note1: Property taxes for the properties acquired in 2016 is not expected to be expensed in the 4th fiscal period.
Note2: FFO = Net income + Depreciation + Amortization - Gain on sale of property + Loss on sale of property

14

Financial forecasts: 5th fiscal period (Sep. 2017) (JPY mn)
Mar. 2017
4th period(Forecast)

Sep. 2017
5th period(Forecast)

Changes

Operating revenues

6,398

6,451

+52

Operating expenses

3,390

3,525

+135

3,007

2,925

-82

Key financial information

Operating income
Non-operating expenses

Factors for changes from previous period (from 4th period)
Operating revenues
Rent revenue – real estate-19

Parking space rental revenues+13

Utility charge reimbursement+73

Others-14

Operating expenses

460

461

+0

Utilities

+52

378

378

+0

Taxes

+81

81

81

---

Repairs and maintenance (incl. restoring)+17

Sales and promotion-17

Ordinary income

2,547

2,464

-82

Asset management fee-11

Net income

2,546

2,463

-82

Others

+12

DPU

6,040

5,843

-197

Mar. 2017
4th period(Forecast)

Sep. 2017
5th period(Forecast)

Changes

4,315

4,224

-90

Interest expenses & financing-related
expenses
Amortization of investment unit
issuance costs & organization costs

Related key indicatorNOI
NOI yield (%)(Note1)
Depreciation
NOI after depreciation
NOI yield after depreciation (%)(Note1)

Operating income

Breakdown of NOI (Net Operating Income)Rental and other operating revenues (A)

5.4%

5.3%

---

720

724

+4

3,595

3,500

-95

Rent revenue – real estate

5,500

Utility charge reimbursement

542

Other revenues

402

Property-related expenses (B) (excl. depreciation)
PM fees / facility management fees

690

Utilities

521
563
174

4.5%

4.4%

---

3,350

3,272

-78

Taxes
Repairs and maintenance (incl. restoring)

CAPEX

549

307

-241

Sales and promotion

LTV (%)

42.9%

42.9%

---

FFO

(Note2)-82

136

Others134

NOI (A-B)

4,224

Note1: Property taxes for the properties acquired by Nov.17, 2016 is expected to be expensed in the 5th fiscal period.
Note2: FFO = Net income + Depreciation + Amortization - Gain on sale of property + Loss on sale of property

15

Memo

16

03

Implementation of growth strategies (1 of 2)(External growth)

証券コード

3453
Security Code

ITOCHU Corporation joined Alliance Companies
Asset Management

Kenedix Retail REIT Corporation (“KRR”)

Property Management

Kenedix Real Estate Fund Management, Inc. (“KFM”)

NEW!
Pipeline support
Warehousing

Pipeline support（Note）

Pipeline support• Preferential access to potential acquisition
opportunities from Kenedix – ITOCHU fund• Information of potential acquisition
opportunities from ITOCHU group

Warehousing

Leasing

Leasing

Property Management

Property
Management

Leasing

Environmentally-friendly
technology/knowhow

Evaluation/advisoryon operations

Property Management

Personnel support

Personnel support

Right to use
trademarks

SponsorKenedix, Inc.

Alliance Companies

Sumitomo Mitsui
Finance and Leasing
Co., Ltd.

Nippon Commercial
Development Co., Ltd.

Alliance Companies

P&D Consulting
Co., Ltd.

ITOCHU Corporation

Note: Kenedix, Inc., the asset manager of the retail property development fund jointly created by ITOCHU Corporation (“Kenedix – ITOCHU Fund”), agrees to provide preferential access to potential acquisition opportunities regarding the fund, to KRR and KFM.

18

External growth

Summary of KRR’s portfolio
1

2

Number of properties
41

40

3

Total acquisition price (JPY bn)
158.7

33

160.1

19

Feb. 2015
At listing

Sep. 2015
1st period

4Sep. 2016
3rd period

Nov. 2016

Portfolio appraisal NOI yield (Note1)

Appraisal NOI yield

Feb. 2015
At listing

5

169.5

Sep. 2016
3rd period

Nov. 2016

95.7

82.3

80.8

Mar. 2016
2nd period

168.1

138.6

131.6

91.8

18

Total appraisal value (JPY bn)

Sep. 2015
1st period

Mar. 2016
2nd period

Sep. 2016
3rd period

Nov. 2016

6

Number of tenants (Note2)

NOI yield after depreciation
389

Feb. 2015
At listing

Sep. 2015
1st period

Mar. 2016
2nd period

Weighted average occupancy rate (Note2)

406

321
286
5.5%

5.4%

5.4%

5.4%

5.4%

99.6%

99.6%

99.7%

Sep. 2015
1st period

Mar. 2016
2nd period

Sep. 2016
3rd period

98.6%
4.3%

4.3%

4.4%

4.4%

4.4%

Feb. 2015
At listing

Sep. 2015
1st period

Mar. 2016
2nd period

Sep. 2016
3rd period

Nov. 2016

Feb. 2015
At listing

Sep. 2015
1st period

Mar. 2016
2nd period

Sep. 2016
3rd period

Feb. 2015
At listing

Note 1: “Appraisal NOI yield” refers to the annual net operating income assumed by the appraiser of the relevant property for the direct capitalization analysis in the latest appraisal reports at the acquisition date. “NOI yield after depreciation” based on the forecast for fi scal period
ending September 30, 2016.
Note 2: The figures at listing are as of September 30, 2014 and those for Sep. 2016 include K’s Denki Shin-Moriyama (Land)

19

External growthCharacteristics of KRR’s portfolio
Changes in property distribution (by acquisition price)
Feb. 2015(At listing)Types of retail property (by acquisition price)Nov. 2016
Shopping centers
for daily needs

Fululu Garden
Yachiyo
9.3%
Blumer HAT Kobe
6.9%

Fululu Garden
Yachiyo
18.4%

Roseo Mito
6.3%
Others
42.0%

Top 5
properties

Top 5
properties

Roseo Mito
12.0%

57.9%

32.7%

MONA
Shin-Urayasu
5.0%

Urban Station-Front SC
23.7%

Blumer Maitamon
10.4%
MONA
Shin-Urayasu
10.0%

Passaggio
Nishiarai
7.2%

Changes in share of top 10 tenants (by annual fixed rent)
Feb. 2015(At listing)

Ordinancedesignated cities,
core cities and other
areas
19.0%

a 6.0%
b 4.7%
c 4.6%

B 4.7%

d 4.3%

C 4.4%

Top 10tenants

Location (by acquisition price)Nov. 2016
A 11.2%Others
54.9%

NSC
46.1%

SS
13.8%

Blumer Maitamon
5.2%

Others
67.3%

100%

SM
7.1%
CSC
9.3%

D 4.2%

45.0%

E 4.0%
F 3.9%
G 3.9%
H 3.3%
I 2.8%
J 2.7%

Others62.7%

Top 10tenants

e 3.8%

37.3%

f 3.7%

Fukuokaarea
0.9%
Greater Nagoya
area
8.7%

g 3.7%

4 majormetropolitan
areas

Tokyo
Metropolitan
area
43.8%

81.0%

h 2.2%
i 2.1%
j 2.1%
Greater Osaka area
27.6%

Note: The figures are as of September 30, 2016 for the properties acquired by the date of this material.

20External growth

Growth roadmap
PurposeAchieve steady DPU growth

Enhance portfolio stability

Improve liquidity ofinvestment units
JPY 300 bn

JPY 200 bn

JPY 158.7 bn

JPY 160.1 bn

Sep. 2016
3rd period

Nov. 2016

JPY 131.6 bn

JPY 91.8 bn
JPY 80.8 bn

Feb. 2015
At listing

Sep. 2015
1st period

Mar. 2016
2nd period

Within 3 years
after listingMid-term

Abundant external growth opportunities

Promotion of external growth strategies

 Size of acquisition universe
 Increasing proportion of our investment target among domestic retailfacilities

 Increasing pipelines by development from sponsor and alliance companies Diverse acquisition channels and methods
 Selective investments by professionals

Note: “AUM” represents the total acquisition price of all properties in the portfolio.

21

External growth

Acquisition of K's Denki Shin-Moriyama (land)SS

Specialty Store

Location

K’s Denki Shin-Moriyama (Land)

A new store located along a major road in a retail trade area with high population growth

Trade area

Land on which an electronic retail store resides. Located in a high population growth area facing a trunk roadwith heavy car traffic with easy car access

175

High population growth potential

170
165
171

170

169

171

172

Easily accessible location

Access Located on the National Route 19, a major trunk roadwithin the subject retail trade area

Population of Moriyama Ward (1,000)
名古屋市守山区の人口

173

160

 Easily accessible by car with high visibility due to its
location on a corner lot facing an intersection
 Easy to enter / exit from the parking as the property isfacing roads on all four sides

155
0

2011

2012

2013

2014

2015

2016

Source: Nagoya City Government (as of August 1 of each year)

Facilities

Land convertible to other uses

LandscapeComparably new-built
Check! Limited competition within the same retailtrade area
全国平均Average
National

Historical residential land prices (2006 figures=100)
対象地周辺
The
Land nearby

名古屋圏Area
Nagoya110.0

Year opened (vs. Competitors)

105.0

Trade area

100.0
3km radius

95.0
90.0

5km radius

85.0
2006

Acquisition price

Access to major station

JPY1,370 mn

2009

2012

2015

Business

Home electronics, etc.

GFA-

Facilities

470 stores nationwide (as of May 2016)

Core tenant

Undisclosed

Employees

13,739 (as of Mar. 2016)

JR ChuoLine

Approx.
15 minutes



Revenue

4.4％(JPY mn)

13,265

17,493

15,03016,30517,500

2012

2013

2014

2015

2016*

0

JPY644.2 bn (consolidated , FY Mar. 2016)＊Earnings estimates

Highlights

10,000

Listing venue Tokyo Stock Exchange
Nagoya Station

■Trend of net profits
20,000

JPY60 mn

The land for K's Denki Shin-Moriyama opened in Nov. 2013,
facing National Route 19, an inter-regional trunk road
National Route 19, a six-lane road (3 lanes on each side), is
extremely busy with car traffic and lined with road-side grocery
supermarkets and restaurants
The store, surrounded by condominiums, retail stores and officebuildings along the inter-regional trunk road, is easily accessible
by car
The property is expected to generate stable cash flows over along term as the remaining period of the fixed-term land lease
contract is longer than 15 years

2012

Overview of K's Holdings Corporation

5,512.78m2



1998

Yamada Denki Tech Land
Nagoya Chikusa

K's Holdings, operating K's Denki stores across Japan

Land area

Appraisal NOI yield

Edion Shonai-dori Miyuki Mall

K’s Denki

Nagoya, Aichi

Appraisal NOI

opened2013
2002

Competitiveness

Location

Shin-Moriyama Station

Name of store
K's Denki Shin-Moriyama
Edion Mets Ozone Store

Retail trade area population


Population has been increasing in all
radii of the retail trade area
Population
Trade area
Change(1000)
1km

25

+0.9%

3km

239

+2.1%

5km

625

+2.9%

(Note) Based on 2005 and 2010 national census data

Reference: Benefits from investingin land-only properties
Building owned by tenant Generation of long-term stable rents due to a decrease of
vacancy risks because tenants will own buildings pursuant to
fixed-term land lease agreements
 Stabilization of rent revenue as tenants will pay maintenancecosts related to the buildings on such land

Building
Land rent Improvement of payout ratio as depreciation costs of buildings
are borne by tenants
 Limited downside risk related to their asset value caused byexternal factors, such as fires

LandLand owned by KRR(Note) The above represents the benefits that KRR expect to enjoy by investing in land-only
properties. KRR, however, neither guarantees nor promises that these benefits result
from its investments in lands

22External growth

Yumemachi Narashinodai Mall (bridge fund property)
NSC

Neighborhood
Shopping Center

LocationYumemachi Narashinodai Mall

Retail trade area

A relatively new NSC located in a high-population-growth area with a highly competitive grocery
supermarket as the core tenant (opened in April 2016)

High population growth potential

Trade area

High-income population■ Trend of population in Funabashi City (1,000)
115.0
609

610

611

614

2010

2011

2012

2013

112.5

622

619

109.2

110.0
2014

2015

(National average = 100)

104.2

105.0

Source: Funabashi City Government "Residential Population" (as of
October 1 of each year)

100.0■ Trend of population in Narashino City (1,000)

100.0
95.0

164

165

165

166

167

2010

2011

2012

2013

2014

169
90.0
2015

Source: Narashino City Government "Residential Population" (as of the end of
September of each year)

Trade area40%

Funabashi
船橋市
City

Shopping behavior

Narashino
習志野市
City

National
全国
average

Source: Survey on municipal taxation 2015 (MIC)

More younger households

National
日本全国
average

Funabashi Narashino
Chiba
船橋市
習志野市
千葉県
City
City
Prefecture

Strong local demand The proportion of consumers shopping groceries at
local stores in Funabashi City, where the property
resides, far exceeds the average of Chiba Prefecture30%

Appraisal value

JPY3,520 mn as of October 1, 2016

Access to major station

Location

Funabashi, Chiba

Otemachi Station

Land area

16,633.58m2

GFA(GU bldg.) 909.85 m2

Core tenant
Appraisal NOI

Lopia Co., Ltd.

Nishi-Funabashi Station



25歳～49歳
25 – 49 50歳～74歳
50 – 74

Chiba
Prefecture

93.2%

78.3%

75歳以上
over 74
Source: Chiba Prefecture, Business Support Division"Retail Trade Areas in Chiba Prefecture (Research Report on Consumer
Shopping Behavior 2012)"
Proportion of consumers shopping at local stores: Consumers shopping at
local stores devided by # of Respondents

Retail trade area population

TenantDiversified tenant mix with a highly competitive grocery supermarket as the core

Population has been increasing in all
radii of the subject retail trade area

Attractiveness to consumers

Tenant mix to satisfy diverse consumer needs

Trade area

Population(1000)

Percentagechange

1km

21

+7.7%

Located on the National Route 296 in the northeastern part of
Funabashi City where the population has been growing rapidly

3km

215

+4.2%



Consists of a 2-story main building and a GU building

5km

541

+3.7%



Provided with a flat parking for 343 cars



0%
24歳以下
Age below
24

Source: Statistics Bureau, Ministry of Internal Affairs and Communications (MIC)"National Population by Five-Year Age Group and by Sex"
Funabashi City "Population by Town and Age – by Each Age and Five-Year Age Group"
Narashino City "Population by Sex and Age Based on Resident Register"(as of end of Mar.2016 for Narashino City and as of Apr.1, 2016 for others)

Funabashi-Nichidaimae
Station

JPY176 mn

An NSC opened in April 2016 and housing Lopia, a grocery
supermarket which is competitive especially in meat products
and popular among consumers, as its core tenant. Other
tenants include retailers such as home electronics, clothing anddrug stores, and service outlets

Approx.
35 minutes

FunabashiCity

via through service

Tokyo Metro
Tozai Line

Highlights10%Toyo Rapid
Railway Line

(Main bldg.) 7,889.24m2

20%

A grocery supermarket with strength inmeat products and highly popular among
consumers

Retailers (home electronics, drug,
clothing and 100-yen stores)Service business store (a dental clinic
and a laundry)

Synergies among tenants

Grocerysupermarket
Local
residents

Other retailers home electronics,
clothing, drug and100-yen stores
Synergetic
effectFood and otherservices(Note) Based on 2005 and 2010 national census data

23

External growth

Pipelines (1 of 2): Pipeline expansion due to development
Example of properties under development by Kenedix

Development fund jointly created by Kenedix and ITOCHU(“Kenedix – ITOCHU Fund”)

Kawamachi Yahagi Mall
Location: Chiba, Chiba (Expected to open in Spring 2017)•••Land to be developed
Retailer network
Funding•••Land to be developed
Retailer network
Funding

Kenedix – ITOCHU Fund
NSC

Preferential negotiation rights

Supermarket
Location: Itabashi, Tokyo (Expected to open in Autumn 2017)
1st project
Location: Kanagawa Pref. (Expected to open in Autumn 2017)

SM

Note: As of Nov. 17, 2016, we have no plans to acquire these properties and there is no guarantee that we can acquire these properties in the future. The illustrations above are completion images based on design drawings and may differ from the actual buildings after completion.

24External growth

Pipelines (2 of 2): Alliance Company pipelines and real estate market
Alliance Company pipeline

Asset Manager's network

Totsuka-Fukaya Shopping Center (Land)
Location: Yokohama, Kanagawa

NSC

Round One
Location: Tokyo Metropolitan Area

MarketEnvironment

Cap rate has begun to compress in accordancewith higher evaluation to SC for daily needs in realestate market, while GMS is suffering fromcompetition with specialty stores in retail market.

Countermeasure

In order to seek growth opportunities avoiding too
much cap rate compression, Asset Manager’s
network is fully leveraged, and one-on-one
negotiation such as sale-and-lease back transaction
is expected to strengthen the network.

NSC

Round One
Location: Fukuoka Area

Investments in land
Strongdemand fromretailer

Unicus Urawamisono (Land)
Location: Saitama, Saitama (Expected to open in Spring 2017)

The majority of buildings on land-only properties
held by J-REITs are retail facilities
Potential for
conversion

NSC

NSC

These are the properties which are owned by Alliance Companies, and confirmed by both the Alliance Companies and Kenedix Retail
REIT as the properties that meet our investment criteria. As of Nov. 17, 2016, we have no plans to acquire these properties and there is
no guarantee that we can acquire these properties in the future. We may acquire only the underlying land of these properties. The
illustration of Unicus Urawamisono (Land) above is a completion image based on design drawings and may differ from the actual
building after completion.

Comparative analysis
on price per tsubo

Remaining lease term

25

Memo

26

03

Implementation of growth strategies (2 of 2)(Internal growth/Financial strategy/Others)

証券コード

3453
Security Code

Internal growth

Active management strategies
Value added “one-stop” asset management
and property management services
Asset management services
Build and manage a stable/consistent portfolio
Strengthened collaboration

Seek internal growth through property management

Building expansion
leveraging unused
portions of floor area

Sales-linked rent

Optimization of tenantcomposition

Effective utilization of
CAPEX

Property management services
Interact directly with tenants

Identify issues

Accumulate
know-howEnhance tenantsatisfaction

Monitor operational
status of tenants

Earnings stability

Execute solutions

Expected effects of active management strategies

Enhancement in
profitability

Increase in asset
value

28

Internal growth

Operating highlights - Roseo Mito•

Awarded the “DBJ Green
Building Certification”

Historical rental revenues and occupancy

Leasing of a large space in Roseo Mito

Occupancy
稼働率
rate

Rent
Revenue (JPY mn)
賃貸事業収入（百万円）

Departure of a sports good store occupying alarge space due to the Earthquake in 2011

345

340

350

106.0%
340

323

330

•

Leased the vacated space to a bowling operator

320

104.0%

309

102.0%

100.0%

310

100.0%

99.7%

100.0%

300
98.0%

290

96.0%

280

•

Bankruptcy of the bowling operator

94.6%

94.0%

270

92.0%
260

250

•
•

IPO of Kenedix Retail REIT Corporation
Divided the space into two sections and leased toa sports goods store and a discount store

90.0%

2014/9上場前（参考）2015/9
第1期（調整後）

2016/3
第2期

2016/9
第3期

Highlight of property

Property with excellent
environmental & Social
awareness

Enliven local communities An NSC with a supermarket and a home & garden store
as its core tenants

The Large
Space

Supermarket
Further strengthen our relationship with local community
by increasing the frequency of Roseo Festival to twice ayear Facing a main road with convenient car-accessibility
 Located in an area with increasing population wherefamilies concentrate
trade area

Population change(2005-2010)

1km

115.1%

3km

105.3%

5km

105.0%

Expansionsite Stronger tenant revenue according to our statistics:

Aerial photograph• FP ending Mar.2016: 128.0%

 Other information on Roseo MitoUpon
acquisition
GFA

45,654.67 m2

Plan view

Property expansion(Secondhand shop building)• FP ending Sep.2016: 109.6%

Home &
gardenstore

Historical appraisal value（JPY mn）

NOI yield (ROI)
As of Sep. 2016
48,296.15 m2

Acquisition
price

JPY 9,675 mn

JPY 10,046 mn

Appraisalvalue

JPY 9,780 mn

JPY 10,900 mn

Appraisal NOI

JPY 554 mn

JPY 596 mn

Appraisal NOI
Yield

5.7%

5.9%

10,700

11%

10,90010,3009,780

NOI yield (ROI) is calculated by NOI (deducting assumed
annual operating expenses (excluding depreciation) fromassumed annual operating revenue of the New building)
divided by construction cost

Total leasable area

2,641.48 m2

Acquisition price

JPY 371 mn

2014/10/1
取得時

2015/9/30
第1期末

2016/3/31
第2期末

2016/9/30
第3期末

Secondhand shop building

29

Internal growth

Property expansion (restaurant building) planned at Unicus Ina
Improve profitability(Note 1)

Enhance asset value(Note 1)

+240

12%

mn

NOI yield (return on investment)

Increase in Appraisal value

Calculated using the following formula:
Estimated increase in NOI (Estimated annual rent from the newrestaurant building - Estimated annual expenses excluding
depreciation) /Total project cost

Difference between the appraisal value of Unicus Ina (as ofMarch 31, 2016) and its appraisal value assuming thecompletion of the property expansion, both of which areprovided by Japan Real Estate Institute

July 2016:
Application for building approval

September 2016:
Begin building construction

Appraisal value

Estimated
increase in NOI

Total
construction cost

Appraisal value(As of Mar 31, 2016)(Assuming the completionof the property expansion)

12 mn

90 mn

4,420 mn

4,660 mn

Planned construction site

Schedule (Note 2)

Rendering (Note 3)

January 2017 (planned):
Completion & delivery of building

Rendering (Note 3)

Plannedconstruction
site

Note 1: These figures (except the total construction cost) are those at the time of the decision of property expansion, and may change, including total construction cost
Note 2: We cannot guarantee that the building extension will be completed as scheduled; the construction may be cancelled or delayed in the future
Note 3: This rendering may differ from the actual building to be completed30

Internal growth

Leasing overview
Rent type (fixed/sales-linked rent)

Rent revisions (based on number of revisions)

Based on actual rent (Apr. 2016‐Sep. 2016)
Sales-linked rent
Total Sales-linked
4.9%
rent
5.8%
Fixed rent with

Upward revision

Sales-linked rent
13.1%

No revision

Multi-tenant properties (based on acquisition prices)
Fululu Garden
Yachiyo
9.3%
Blumer HAT Kobe
6.9%

Downward revision

24.3%
48.3%
軸ラベル

Single-tenant
properties
44.4%

Remaining lease term (by annual fixed rent)

multi-tenant
properties

62.2%
34.5%

Fixed rent
81.9%

Roseo Mito
6.3%

53.9%

55.6%

34.6%

17.2%

13.5%

11.5%

Sep. 2015
1st period

Mar. 2016
2nd period
軸ラベル

Sep. 2016
3rd period

Other multi-tenant
properties
11.8%

Lease contract type (by annual fixed rent)

Blumer Maitamon
5.2%
MONA
Shin-Urayasu
5.0%
Carino Esaka
4.1%

Passaggio
Nishiarai
Daikanyama 3.7%
Address Dixsept
3.4%

Lease expiry (by annual fixed rent)# of tenants and % of lease expiry in each period (Note2)

20 years or more
6.1%
Less than 2 years
18.6%

15 to Less than
20 years
8.2%

10 to Less than
15 years
25.1%

Averageremaininglease term

9.5 yrs

Commercial
fixed-term land
lease
13.9%

Other
0.0%

27

14

97

37

13

15

tenants

tenants

tenants

tenants

tenants

tenants

6.8%
2 to Less than
5 years
13.8%

Regular building
lease
19.9%

Fixed-termbuilding lease
66.2%
5 to Less than
10 years
28.1%

2.6%

1.8%

2.2%

1.6%

1.1%

Mar. 2017 Sep. 2017 Mar. 2018 Sep. 2018 Mar. 2019 Sep. 2019
4th period 5th period 6th period 7th period 8th period 9th period

Note 1: The figures are as of September 30, 2016. The figures except rent type and rent revisions are based on the 41 properties acquired by the date of this material.
Note 2：Based on the contractual rent determined in the lease contract, including regular building leases.

31

Financial strategy

Financial key indicator and credit rating
LTV

Credit rating (JCR)

50.0%
45.0%

Credit rating agency

Japan Credit Rating Agency, Ltd.

Long-term issuer ratingA (Stable)

Seek to maintain LTV ratio between 40 – 45%

42.7%

40.0%

43.0%

42.5%

40.6%
35.0%

Summary of distributions in excess of retained earnings
Background and summary
As Japanese tax law changes, distributions in excess of retained earnings that are accounted
as allowance for temporary difference adjustment (“ATA”) enables cash distributions to betreated as profits distribution and deductible for tax purpose.

30.0%
25.0%
20.0%
Sep. 2015
1st period

Mar. 2016
2nd period

Sep. 2016
3rd period

Oct. 2016
After bond issuance

Average debt cost and average years to debt repayment dates
Average years to debt repayment dates (left axis)
8.0y

1.07%

6.0y

5.5y

1.05%

1.00%

Average debt cost (right axis)

0.99%

1.20%
1.00%

5.1y

4.6y

4.7y

4.0y

0.80%

A: Japanese GAAP vs. Japanese tax law
The items in association with certain transaction in relation to the property, Sunny Noma,
cause temporary difference between the treatment in Japanese GAAP and Japanese tax law.
As a result, taxable income before distribution was larger than net income.
B: Net income vs. income in accordance with Investment Trust Act
The item deducted from net asset in association with some of interest swap transaction
causes difference between net income and income defined by Investment Trust Act (“ITA”).
As a result, Net income was larger than income defined by ITA.
NOTE:This summary is translation of Japanese Original and describes Japanese tax
implications. Please ask your own tax adviser regarding taxation of your jurisdiction.

Chart: Distribution in excess of retained earnings (JPY mn)

0.60%

5

0.40%
0.20%
0.0y
Mar. 2016
2nd period

Sep. 2016
3rd period

Oct. 2016
After bondissuance

Note: "Average debt cost" is calculated as the weighted average interest of borrowings with upfront cost included and investment corporationbond, based on the amount outstanding. For floating interest debt hedged by interest swap, the debt cost is calculated using the interest
rate fixed. For floating interest debt without interest swap, the cost is based on TIBOR rate on the day at the end of period.

2,523

2,518

0.00%
Sep. 2015
1st period

36

31

2.0y
2,487
Net income

会計上の
利益

Income
投信法上のdefined
利益
by
ITA

(B)
純資産
控除項目

(A)
所得超過
税会不一致

(A) + (B)

ATAの利益超過分配

Total
分配金総額

Distribution

32

Financial strategy

Debt outstanding, bond issuance, and security/guaranteed deposits
Breakdown of debt outstanding by lender and investment corporation bonds
J. 1.3%I. 2.3%Issuance of investment corporation bonds(After prepayment on Oct. 31, 2016)
Balance
Name of lender(JPY mn)

K. 0.6%L. 2.8%H. 3.0%G. 3.0%A. 45.8%

Amount ofissuance

Term

Interest rate

A Sumitomo Mitsui Banking Corporation

32,410

B The Bank of Tokyo-Mitsubishi UFJ, Ltd.

9,210

C Development Bank of Japan Inc.

6,990

D Sumitomo Mitsui Trust Bank, Ltd.

4,870

E Mizuho Bank, Ltd.

4,870

F Resona Bank, Ltd.

3,100

G Mizuho Trust & Banking Co.,Ltd.

2,150

Total amount of security/guarantee deposits

H Aozora Bank, Ltd.

2,100

(As of Sep. 30, 2016)

JPY 11.5 bn

I Mitsubishi UFJ Trust and Banking Corporation

1,650(Amount kept as cash for deposit repayment)

JPY 7.9 bn(As of Nov. 1, 2016) (note)

JPY 11.5 bn(Amount kept as cash for deposit repayment)

JPY 7.9 bn

1st series

JPY 1,000 mn

5 years

0.20%

2nd series

JPY 1,000 mn

10 years

0.60%

F. 4.4%E. 6.9%Debt
outstanding

JPY

D. 6.9%70,700
millionC. 9.9%B. 13.0%

K The Musashino Bank, Ltd.

950

J The Gunma Bank, Ltd.

400

L Investment corporation bonds

2,000

Optimum use of security/guarantee deposits

Note: Security/guarantee deposits as of Nov. 1, 2016 is sum of security/guarantee deposits as of Oct. 31,
2016 and security/guarantee deposits of K’s Denki Shin-Moriyama (Land)

Staggered maturities of interest-bearing debts (After prepayment on Oct. 31, 2016)(JPY mn)

Fixed-interest and Long-term debt ratio: 83.8%

9,000

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

8,000
1,000
7,000
6,000

3,900

5,000
4,000
7,000
3,000
2,000

1,000

7,000

7,000

7,000

7,000

6,500

5,650

5,570
3,850

2,670

2,000

1,340

1,330

1,000

890

0
4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

PeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodPeriodperiod33

Other strategies

E-commerce resistance
Tenants with e-commerce resistant business (by annual fixed rent)

Businesses difficult to replace by ecommerce (Note 1)
Businesses where customers showb. preference for purchasing products
at physical stores (Note2)
Master lessees whose sub-lesseesc. primarily operate businesses fallingunder category a and b
Businesses that require physicalvisits to stores or handle productsd.
that consumers highly desire toevaluate in person (Note 3)
a.

90.6%

Trend to prioritize experiences/ services over goods
Seek to adapt trend to spend money on experiences or services rather than
goods, as the number or elderly people, who are relatively free to spend
time and/or money, are increasing.

17.4%
50.7%
12.8%

Household expenditure on sporting facilities
by age group and by year
支出金額（左軸）
Expenditure (left axis)

支出金額（左軸）
Expenditure (left axis)

消費支出に占める割合（右軸）% of total expenditure (right axis)(thousand yen)25
1.5%

(thousand yen)
25

20

20

消費支出に占める割合（右軸）% of total expenditure (right axis)
1.5%
1.3%

1.0%

15

1.1%
0.9%

15

0.7%

9.7%

10

0.5%

5

10

0.5%
0.3%

5

0.1%
0

0.0%
Age
29 30代
30s
30歳
or未満
less

40s
40代

50s
50代

60s
60代

0

70s
70代

-0.1%
2011

2012

2013

2014

2015

Source: Ministry of Internal Affairs and Communications “Family Income and Expenditure Survey”

Example of each type of business

Percentage of tenants’ category (based on rents)

ThingsK 13.1%
A 22.4%J 3.6%
I 3.8%
H 4.0%
G 6.0%
B 13.7%F 6.5%
E 7.0%

C 10.0%D 9.8%A Grocery
B Other retailer
C Service
D Home & garden
E Consumer electronics
F Clothing
G GMS
H Interior goods
I Restaurants
J Sports club
K Others-----------------------

22.4%
13.7%
10.0%
9.8%
7.0%
6.5%
6.0%
4.0%
3.8%
3.6%
13.1%

Daily

Example:• Grocery• Clothing• Medication/ Drug

Destination

Example:• High-end brands• Jewelry• Car/ Motorcycle

Services/
experiences
Example:• Sports club/ Yoga
• Cram school• Clinics• Restaurant/ Cafe
• Karaoke/ Bowling• Travel• Concert/ Live• Ceremonies

Note 1: "a" refers to businesses including medical services, hair salons, photography studios, for-profit schools and study centers, leisure facilities, restaurants and health clubs that cannot be replaced by e-commerce.
Note 2: “b” refers to businesses where 50% or more of the respondents to the survey conducted by the Ministry of Internal Affairs and Communications titled “Product types for online shopping or physical stores” indicated their preference for purchasing products at a physical store
and where 15% or fewer indicated their preference for purchasing such products on the internet.
Note 3: “d” refers to businesses that require physical visits to stores or handle products that consumers highly desire to evaluate in person (sporting goods, prescription eyewear, second-hand products, shoes, musical instruments and interior products).

34

Other strategies

Online advertising and social media marketing
Introducing mobile app “LINE@” to Bulmer Maitamon andFululu Garden Yachiyo

What’s in it for customers?
• Provide customers to good deals suchas bargain sales• Enable customers to communicate/message with favorite store (tenant)What’s in it for customers?
• Follow favorite stores and SCs• When you get close to the stores or
the SCs physically, it lets you know
good deals

Why introducing the App?
• Intend to increase the number of
repeat customers within radius of retailtrade area

Why introducing the App?
• Push marketing within the trade area
• Improve conversion rate to purchasegoods and services

LINE app is as popular app as Facebook in Japan

A large number of visits to Passaggio Nishiarai due to its location between
train station and residence area

LINE

Instagram

Twitter

Facebook
0.0%

Introducing mobile app “NEARLY” to Passaggio Nishiarai

37.5%

Number of visitor

4.6 million

6.0%

31.0%

# of people purchased
35.3%

5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

1.9 million

Source: Ministry of Internal Affairs and Communications “Research on ICT services and technology for solution to social issue (2015)”

35

Other strategies

CSR and environmental initiatives
DBJ Green Building Certification
Received DBJ Green Building Certification for Blumer HAT Kobe, Roseo Mito,
Ashiko Town Ashikaga, and Passaggio Nishiarai. Accordingly, the number ofaccumulated DBJ Green Building Certification became nine.

GRESB Real Estate Assessment 2016

Awarded a “Green Star” Rating at its firstparticipation in 2016
Received high evaluation on both
“implementation and measurement” and“management and policy”
Earned three star (out of five star)

Blumer HAT Kobe

Help enliven local communities
Properties with excellent
environmental and social
awareness

Roseo Mito

Ashiko Town Ashikaga

Seek to enhance the medium to long term asset value of our retail properties by attracting
tenants engaged in service businesses and holding local events at our properties to enliven
the local community.

Summer Festival at Uniscus Ina

Presentation day for lifelong education

CSR initiatives
We agreed to provide part of Unicus Yoshikawa as a temporary gathering area in casesof disaster such as floods.

Properties with highenvironmental and social
awareness

Passaggio Nishiarai
Unicus Yoshikawa (aerial photo)

Signing of agreement36Appendix 1

Key characteristics of Kenedix Retail REIT Corporation (KRR)Portfolio strategies
Investment criteria

Primary geographic target areas

Focus on the following four elements in making investment decisions:• Four major metropolitan areas,
which have relatively stable populations

Attractiveness

Location• Ability to serve particular day-to-day
needs of local area customers• Demographic composition, number ofhouseholds, competing facilities inlocal retail trade area

• Selective investments in ordinance-designated cities,
core cities and other areas for diversification

The Tokyo metropolitan area
The Greater Osaka area

Profitability

Tenant mix• Occupancy, leasing status, rent level
and lease term

• Optimal tenant mix for the property
considering tenant credit profiles andretail space usage

Target portfolio distribution (based on acquisition price)
Retail properties

100%
80%
or moreNeighborhood,community and othershopping centers fordaily needs

The Fukuoka area

Focus onthe four major
metropolitan
areas
The Greater Nagoya area

Investment in land -Seeking additional growth opportunitiesWe also seek investment opportunities in the underlying land of retail properties fordaily needs• Strong demand from retail tenants (the majority of buildings on land-only properties
held by J-REITs are retail facilities)• Maintain maximum value upon termination of lease term, as the land is expected tobe returned in its original state• Investment in lands would be limited to 20% of the portfolio (based on acquisition
price) as our general policy
Beneficial relationship for both Asset Manager and tenants
Advantages to Asset Manager

Advantages to tenants• Generation of long-term stable rents due to a decreaseof vacancy risks because tenants will own buildings
pursuant to fixed-term land lease agreements• Stabilization of rent revenue as tenants will pay
maintenance costs related to the buildings on such land
• Improvement of payout ratio as depreciation costs ofbuildings are borne by tenants• Limited downside risk related to their asset valuecaused by external factors, such as fires• Tenants that are both the lessee and property ownerbear a smaller financial burden when opening a store• Increased capital efficiency through treatment of land as
off balance sheet• Simplified procedures for interior renovation of buildings

40Retail property trends and macroeconomic conditions (1)Demographic shift in Japan

Shrinking retailtrade area
due to aging
population andconcentrated
population in thefour major
metropolitan areas

Population share in Japan by area（%）

Projections(million people)
140

45

120

40

100

35

80

30

60

25

40

20

20

15

0

10
1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

Retail market volume in Japan

50
40
30
20
1995

2000

2005

2010

2015

Four major metropolitan areas

under 30
1%40

Domestic

80

30

consumption led by

60

20

Fabrics, apparel and accessories (right axis)
Source: Ministry of Economy, Trade and Industry

2035

2040
Other areas

40s
12%

50s
19%

65%
60s
34%
Source: Ministry of Internal Affairs and Communications

Basic and selective consumption trends (YoY% change)
（%）
8
6
4
2
0
-2
-4
-6
-8
-10

2030

0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Total retail (left axis)
Groceries (right axis)

Stabledemand fordaily necessities

60 and
over

10

0

30s
4%

70 and over
31%

40
20

2025

Ownership of monetary assets by age group (as of 2014)100

the elderly

2020

Tokyo metropolitan area

Source: Ministry of Internal Affairs and Communications, National Institute of Population and Social
Security Research (as of 2013)(JPY trillion)
50

120

Projections

1990

65 and over (left axis)
15–64 (left axis)
14 and under (left axis)
Aging rate (right axis)
Source: Ministry of Internal Affairs and Communications, National Institute of Population and Social
Security Research (as of 2012)(JPY trillion)
140

（%）
60

Product types for physical stores or online shopping
Groceries
Medicines
Accessories/Daily commodities
Mobile phones
Pet products
Large furniture
Large electronics
Clothing
Small furniture
Cosmetics
Tickets
PCs
Small electronics
Books
CDs/DVDs/BDs

2006

2007

2008
2009
2010
Basic consumption

2011

Source: Ministry of Internal Affairs and Communications

2012

2013
2014
2015
Selective consumption

2016

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Purchase more frequently at physical stores

Purchase more frequently on the internet

Source: Ministry of Internal Affairs and Communications (2014)

Note: "Aging rate" refers to the percentage of the population aged 65 and older.

41

Retail property trends and macroeconomic conditions (2) Retail sales shares by store type20%

Increasein specialty
supermarket
market share

18.1

17.5

16.5

18.3

17.7

13.8

15%

12.0
9.9

10%
5%
0%
1991

1994

1997

1999

2002

Specialty suparmarkets
Department stores

2004

2007

2014

GMS
Convenience storesSource: Ministry of Economy, Trade and Industry

 Retail property opening applications by property size
(%)

100
95
90

Decrease in sizeof retail properties

1.9

3.8

2.7

2.5

12.6

11.4

10.4

9.6

18.6

85
80
75

13.4

15.3

13.8

0

72.1

69.5

73.0

69.0

FY2004

FY2005

FY2006

FY20075,000㎡ or less

0.8
4.4

21.4

1.2
3.8
15.6

1.0
2.6
13.4

0.7
4.3

1.1
4.3

1.3
3.1

1.2
2.5

1.3
3.5

14.6

15.3

14.5

14.5

11.8

80.4

79.3

81.0

81.8

83.3

FY2012FY2013

FY2014FY2015

18.8

70
65

1.2
3.5

76.7
FY200873.4
FY20095,000㎡-10,000㎡

79.5

FY201083.1

FY2011

10,000㎡-30,000㎡

Over 30,000㎡

FY2016(as of August)Source: Ministry of Economy, Trade and Industry"Compact City" policy promoted by the Japanese government through Urban Planning Guidelines
Due to factors such as an aging society, the Japanese government has promoted the "Compact City" policy that encourages the formation of highly compact
and convenient neighborhoods with high population concentrations

Government
promotion of"Compact City"
We believe that the importance of neighborhood, community and other shopping centersthat cater to the day-to-day needs will increase going forward

42

Overview of Alliance Companies
Sumitomo Mitsui Finance and Leasing Co., Ltd.
 Founded in Feb. 1963 (Leasing business since May 1968)
 Main lines of business: Leasing of a variety of equipment and machinery,loans and factoring, etc.
• Operating assets outstanding of JPY4.2 trillion. The top-class generalleasing company in Japan by lease transaction volume (with consolidated
operating assets of JPY540 bn for the real-estate sector (on a book value
basis)) (Note) The figures are as of end of Mar. 2016
• Sourcing transactions through the broad customer base of Sumitomo
Mitsui Banking Corporation
 Description of support• Sourcing of lease properties (pipeline support)• Provision of warehousing services, financing, other services to bridgefunds and personnel support
 Shareholders: Sumitomo Mitsui Financial Group, Inc. (60%), Sumitomo
Corporation (40%)

P&D Consulting Co., Ltd.
 Founded in Aug. 1998
 Main lines of business: Development and management of retail facilities,
retail consulting, etc.
• Development / management of its own brand "Unicus" (development: 11
locations / management: 10 locations) and development of other retailfacilities (8 locations) (as of Sep. 30, 2016)
 Description of support• Sourcing of properties developed on its own to Kenedix Retail REIT
(pipeline support)• PM services, tenant leasing and other services• Assessment of operating conditions and advisory on operations• Provision of knowhow the company has accumulated throughdevelopment / management of retail facilities

Nippon Commercial Development Co., Ltd.
 Founded in Apr. 2000
• Listed on the Tokyo Stock Exchange 1st Section and the Nagoya Stock
Exchange 1st Section
 Main lines of business: Real estate investment, sub-leasing / leasing / fund fee
businesses• "JINUSHI BUSINESS" to invest in land ownership interests
 Description of support• Sourcing of land acquisition opportunities (pipeline support)• PM services and tenant leasing services

 JINUSHI BUSINESS• Nippon Commercial Development's "JINUSHI BUSINESS" is a businessmodel whereby they invest in land ownership interests and lease the land totenants based on commercial fixed-term land lease agreements to generate
stable cash flow (rent) in the long term

ITOCHU Corporation
 Founded in Dec. 1949

• Listed on the Tokyo Stock Exchange 1st Section
 Main lines of business: Domestic trading, import/export, and overseas tradingof various products such as textile, machinery, metals, minerals, energy,
chemicals, food, general products, realty, information and communications
technology, and finance, as well as business investment in Japan andoverseas Description of support• Preferential access to potential acquisition opportunities from the retailproperty development fund, which will be jointly created by ITOCHU and
Kenedix, Inc. (pipeline support)• Providing information of potential acquisition opportunities to KRR and theAsset Manager, when ITOCHU or its affiliate tries to dispose a property• PM services and tenant leasing services

43

Overview of the Kenedix GroupThe Kenedix Group's strong commitment to J-REITs
Total AUM: JPY 1,682.1 bn (as of end of Sep. 2016) (Note)

J-REIT: JPY 1,186.8 bn

The Kenedix Group's total AUM
J-REITs(JPY bn)
1,800

Private funds / Private REIT

Proprietary investments

1,644
72

1,600

1,682
82

1,480
Kenedix Office Investment
Corporation

Kenedix Residential
Investment Corporation

Kenedix Retail REIT
Corporation

132

1,400

431

1,206

1,200
Japan Senior Living
Investment Corporation

Japan Logistics Fund Inc.

412

1,097 1,111

Premier Investment
Corporation

161

1,000

152

1,117

96

438

92

939

Private REIT / Private funds: JPY 412.9 bn

844

496

162

800
734
Private funds

172

542
548

162

Kenedix Private Investment
Corporation

600

531
1,140

432

1,186

349
Note: The Kenedix Group's total AUM includes proprietary investments of JPY 82.3 bn.

Breakdown of AUM as of end of Sep. 2016

400
Proprietaryinvestments
4.9 %

613

200
291

Private REIT /Private funds
24.5%

J-REIT
70.6%

909

281

322

344

387

427

482

0
0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

as of
as of
as of
as of
as of
as of
as of
as of
as of
as of
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Sep. 30,
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

44

Governance structure
Decision-making process for acquisition and sale of properties

Preparation of
proposal

Asset
Investment
Department of
Retail REIT
Division

Confirmation of
proposalCompliance
Officer

Relatedparty
transaction

Deliberation
andResolution

Deliberation
andResolution

Compliance
Committee

AssetManagement
Relatedparty
Committee oftransaction
Retail REIT
Division

Other transactions

Deliberation
andResolution

Relatedparty
transaction

Our board of
directors

ReportAsset
Manager's
board ofdirectors

Other transactions

Investment in Kenedix Retail REIT by the Kenedix GroupAs of Sep. 30, 2016, The Kenedix Group owns about 1.4% (5,750 units) of our total issued units.

Introduction of DPU-linked management fee structure
Fee linked with distribution
per unit

We believe the DPU-linked asset management fee structure will encourage the Asset Manager to place utmost
emphasis on the growth of income from portfolio properties.

The Kenedix Group's business model that benefits from our growth
Because of the importance of the J-REIT business to the Kenedix Group, we believe that our sound growth is in line with their interests.

45

Appendix 2

Detailed financial results and portfolio information

Earnings performance for the individual properties (1)Location

Tokyo metropolitan area

Property No.

T-1

T-2

T-3

T-4

T-5

T-6

T-7

T-8

Property
Name

Fululu Garden
Yachiyo

MONA
Shin-Urayasu

Passaggio
Nishiarai

Daikanyama
Address
Dixsept

Unicus Ina

Yorktown
Kita-Kaname

Unicus Yoshikawa

Sports Club
Renaissance
Fujimidai

Acquisition
Date

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

Acquisition price (In millions of yen)

Price
Information

8,063

5,850

5,390

4,379

4,000

3,600

T-10

Super Viva Home K’s Denki ShonanIwatsuki (Land) Fujisawa (Land)
Oct. 2, 2015

2,586

Oct. 2, 2015

4,815

3,169

Percentage of total portfolio

9.4%

5.1%

3.7%

3.4%

2.8%

2.5%

2.3%

1.6%

3.0%

2.0%

Net book value (In millions of yen)

14,984

8,373

5,915

5,431

4,394

3,998

3,637

2,576

4,890

3,210

Appraisal value (In millions of yen)

15,200

8,560

6,370

5,740

4,510

4,300

3,800

2,720

5,280

3,440

9.0%

5.1%

3.8%

3.4%

2.7%

2.6%

2.3%

1.6%

3.1%

2.0%

1

1（11）

1

1

1

3,120.87

67,325.95

15,578.58

Ratio

49

1（71）

1（41）

1（26）

1

Leasable floor area (m2)

77,057.56

9,568.31

10,546.25

5,056.39

13,044.37

Leased floor area (m2)

76,751.87

9,145.66

10,342.77

4,966.98

13,044.37(Note)

10,648.27
10,648.27

3,120.87

67,325.95

15,578.58

99.6%

95.6%

98.1%

98.2%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Operating periods

183 days

183 days

183 days

183 days

183 days

183 days

183 days

183 days

183 days

183 days(1) Rental and other operating
revenues (In thousands of yen)

736,676

497,497

326,652

268,784

131,843

130,482

Rental revenues

624,042

342,898

209,893

188,923

131,736

128,557

Other operating revenues

112,633

154,599

116,758

79,861

107

1,925(2) Property-related expenses(In thousands of yen)

357,639291,741

162,782

146,841

17,38240,339Property management fees

142,528

84,00746,92853,084

1,800

Taxes

70,95822,94735,18911,872

10,426(Note)(Note)(Note)

68,76457,76539,02435,379--20,98854,587

7,579

8,668

4,308

567

Number of tenants

Lease
Information

14,848

T-9

Occupancy ratio as of September
30, 2016

Income andUtilities
Retained
Earnings
Repairs and maintenance
Information(Note)

24,122
14,580Insurance

1,850

813

546

307

322

245

Trust fees and other expenses

52,547

71,62033,51437,528525

823

379,037

205,755

163,869

121,943

114,460

106,777

90,14364,009103,418

79,36883,35847,09531,915

15,21029,535

20,343

15,512

15,127--

295,678

158,659

131,953

106,732

84,92586,434

74,631

48,881

103,418

79,36840,683

138,817

13,357

5,418

7,222

252

10,920---338,353

66,938150,511

116,525

107,238

106,525

79,22264,009103,418

79,368(3) NOI (=(1)-(2))(In thousands of yen)
(4) Depreciation(In thousands of yen)(5) Rental operating income (=(3)-(4))(In thousands of yen)
(6) Capital expenditures(In thousands of yen)(7) NCF (=(3)-(6))(In thousands of yen)

Note: We have not obtained consent from the tenants of the relevant property to release the information.

47

Earnings performance for the individual properties (2)Location

Tokyo metropolitan area

Property No.

T-11

T-12

T-13

T-14

T-15

T-16

T-17

O-1

O-2

O-3

Gourmet City
Chiba-Chuo

Nakamachidai
Tokyu Store

Central Wellness
Club Nagatsuta
Minamidai

Life Kameido

Blumer Maitamon

Central Square
Takadono (Land)

Piago Kahma
Home Center
Omihachiman

Oct. 2, 2015

Apr. 21, 2016

Apr. 20, 2016

Apr. 21, 2016

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

Property
Name

Unicus Kamisato(Land)

Unicus Konosu(Land)

Inageya
Yokohama
Minamihonjuku(Land)

Acquisition
Date

Oct. 2, 2015

Oct. 2, 2015

Oct. 2, 2015

Price
Information

Acquisition price (In millions of yen)

3,000

1,700

1,442

760

3,360

1,724

1,450

8,389

2,685

2,140

Percentage of total portfolio

1.9%

1.1%

0.9%

0.5%

2.1%

1.1%

0.9%

5.3%

1.7%

1.3%

Net book value (In millions of yen)

3,043

1,726

1,462

779

3,493

1,802

1,473

8,465

2,727

2,157

Appraisal value (In millions of yen)

3,010

1,740

1,460

799

3,780

1,900

1,500

8,990

2,930

2,440

1.8%

1.0%

0.9%

0.5%

2.2%

1.1%

0.9%

5.3%

1.7%

1.5%

1

1

1

1

1

2

1

49

1

2

Leasable floor area (m )67,854.47

19,329.00

4,405.41

3,488.77

5,968.71

3,996.70

2,929.58

30,037.11

4,437.07

14,313.00

Leased floor area (m2)

67,854.47

19,329.00

4,405.41

3,488.77

5,968.71

3,996.70

2,929.58

29,757.73

4,437.07

14,313.00

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

99.1%

100.0%

100.0%

183 days

183 days

163 days

164 days

163 days

183 days

183 days

183 days(Note)(Note)

Ratio
Number of tenants
2

Lease
Information

Occupancy ratio as of September 30,
2016

183 days

183 days(1) Rental and other operating
revenues (In thousands of yen)

72,606

41,51653,440510,350

Rental revenues

72,606

41,50752,056

363,099

-

9

1,384

147,251(2) Property-related expenses(In thousands of yen)

6,243

4,595

3,929

232,584

Property management fees

1,200

1,200

Taxes

4,777

3,129

Utilities

-

-

294

91,763

Repairs and maintenance

-

-

302

15,025

Insurance

-

-

115

812

266

266

366

22,771

66,36236,92031,85919,18884,94149,511

32,739277,766

63,872

74,689

-

-

-

9,734

20,306

7,745

2,980

50,943-

10,534

66,36236,92031,8599,453

64,634

41,76529,759226,822

63,87264,155

-

-

-

1,184

-

-

-

21,663--66,36236,92031,85918,00484,94149,511

32,739256,10263,872

74,689Operating periods

Other operating revenues

Income andRetained
Earnings
Information

Greater Osaka area

Trust fees and other expenses(3) NOI (=(1)-(2))(In thousands of yen)
(4) Depreciation(In thousands of yen)(5) Rental operating income (=(3)-(4))(In thousands of yen)
(6) Capital expenditures(In thousands of yen)(7) NCF (=(3)-(6))(In thousands of yen)

(Note)(Note)(Note)

2,838
12(Note)

59,59542,616

Note: We have not obtained consent from the tenants of the relevant property to release the information.

48

Earnings performance for the individual properties (3)Location

Greater Osaka area

Property No.

O-4

O-5

O-6

O-7

Property
Name

Blumer
HAT Kobe

Carino Esaka

COMBOX
Komyoike

Hankyu Oasis
Hirakatadeguchi

Acquisition
Date

Apr. 16, 2015

Oct. 2, 2015

Oct. 2, 2015

Oct. 2, 2015

Acquisition price (In millions of yen)

Price
Information

6,555

6,450

O-8

O-9

O-10

WelciaLife
Kishiwadakamori
Nishi-Tengachaya(Land)
Oct. 2, 2015

Jan. 21, 2016

1,280

487

N-1

Million Town
Tsukaguchi(Land)

N-3

Kahma Home
Valor
Center Nakagawa
Ichinomiya-Nishi
Tomita (Land)

Apr. 21, 2016

1,505

N-2

Feb. 10, 2015

3,723

Feb. 10, 2015

2,311

K’s Denki
Nakagawa
Tomita (Land)
Feb. 10, 2015

2,174

889

Percentage of total portfolio

6.9%

4.1%

4.1%

0.8%

0.3%

0.9%

2.3%

1.5%

1.4%

0.6%

Net book value (In millions of yen)

11,538

6,587

6,469

1,327

497

1,572

3,772

2,351

2,170

907

Appraisal value (In millions of yen)

11,600

6,590

6,940

1,310

500

1,650

3,810

2,540

2,280

960

6.9%

3.9%

4.1%

0.8%

0.3%

1.0%

2.3%

1.5%

1.4%

0.6%

1

1

1

Ratio

1（41）

1（30）

1

1

1

1

1

Leasable floor area (m2)

24,185.02

7,540.58

25,530.44

2,960.38

3,033.45

2,679.52

8,264.46

Leased floor area (m2)

23,968.51

7,474.92

25,530.44

2,960.38

3,033.45

2,679.52

8,264.46(Note)

9,447.48
9,447.48(Note)

99.1%

99.1%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

100.0%

Operating periods

183 days

183 days

183 days

183 days

183 days

183 days

163 days

183 days

183 days

183 days(1) Rental and other operating
revenues (In thousands of yen)

491,969

295,046

226,261

44,870Rental revenues

367,890

200,297

226,261

44,870

Other operating revenues

124,079

94,749--(2) Property-related expenses(In thousands of yen)

221,096

115,51133,3782,264

Property management fees

66,11540,464

1,800

Taxes

47,30424,56630,473(Note)(Note)(Note)(Note)

81,85942,819

-

-

3,044

4,540

-

-

Number of tenants

Lease
Information

11,000Greater Nagoya area

Occupancy ratio as of September 30,
2016

Income andUtilities
Retained
Earnings
Repairs and maintenance
Information
Insurance
Trust fees and other expenses(3) NOI (=(1)-(2))(In thousands of yen)
(4) Depreciation(In thousands of yen)(5) Rental operating income (=(3)-(4))(In thousands of yen)
(6) Capital expenditures(In thousands of yen)(7) NCF (=(3)-(6))(In thousands of yen)

(Note)(Note)

1,800
-

935

721

690

55

21,837

2,398

414

408

270,872

179,535

192,883

36,20010,69742,606

78,69560,03664,355

22,95852,32827,80232,894

5,201

-

4,682

-

-

14,526-

218,544

151,732

159,988

30,99910,69737,92478,69560,03649,82822,958

5,292

2,966

-

-

-

-

-

-

-

-

265,580

176,569

192,883

36,20010,69742,606

78,69560,03664,355

22,958

Note: We have not obtained consent from the tenants of the relevant property to release the information.

49

Earnings performance for the individual properties (4)Property No.

Greater
Nagoya area
N-4

Property
Name

Homecenter
KohnanSunadabashi

Sunny Noma

Acquisition
Date

Apr. 21, 2016

Feb. 10, 2015

Location

Acquisition price (In millions of yen)

Price
Information

R-1

1,497

R-2

R-3

Roseo Mito

K’s Denki Aomori
HontenSuper Sports
Xebio
Aomori-Chuo

Feb. 10, 2015

Feb. 10, 2015

Feb. 10, 2015

10,046

R-4

1,469

898

R-5

R-6

R-7

R-8

Ashico Town
Ashikaga

Yorktown
Shinden-Higashi

KasumiTechnopark
SakuraSolala PlazaP-1 Plaza Tennno

Oct. 2, 2015

Oct. 2, 2015

Oct. 2, 2015

Apr. 21, 2016

Apr. 22, 2016

4,180

3,252

830

5,720

4,010

Percentage of total portfolio

4.5%

0.9%

6.3%

0.9%

0.6%

2.6%

2.0%

0.5%

3.6%

2.5%

7,206

1,499

10,079

1,486

903

4,370

3,342

856

5,761

4,193

Appraisal value (In millions of yen)

7,220

1,520

10,900

1,550

924

5,060

3,310

861

5,910

4,260

4.3%

0.9%

6.5%

0.9%

0.5%

3.0%

2.0%

0.5%

3.5%

2.5%

1

1

1(22)

1

1

1（26）

2

1

1

7

Leasable floor area (m )20,329.07

2,814.67

48,296.15

10,083.41

12,768.77

2,047.65

2,814.67

48,161.79

10,083.41

65,019.74

12,768.77

2,047.65(Note)

12,030.83

20,329.07(Note)

65,616.31

Leased floor area (m2)100.0%

100.0%

99.7%

100.0%

100.0%

99.1%

100.0%

100.0%

100.0%

100.0%

163 days

183 days

183 days

183 days

183 days

183 days

183 days

183 days

163 days

162 days

Number of tenants2

Occupancy ratio as of September 30,
2016
Operating periods

12,030.83(1) Rental and other operating
revenues (In thousands of yen)

378,055

278,190127,024

Rental revenues

345,076

200,955

119,806

Other operating revenues

32,97877,2347,217(2) Property-related expenses(In thousands of yen)

83,521

144,389

5,177

Property management fees

Income andRetained
Earnings
Information

F-1

Ordinance-designed cities, core cities and other areas

Net book value (In millions of yen)

Ratio

Lease
Information

7,140

Fukuoka area

Taxes

(Note)(Note)

19,02827,340(Note)(Note)

38,05925,377(Note)(Note)(Note)

2,642
14

Utilities

26,026

61,934200

Repairs and maintenance

6,366

9,633

1,047

697

675

766

4,062

8,709

506

Insurance
Trust fees and other expenses(3) NOI (=(1)-(2))(In thousands of yen)
(4) Depreciation(In thousands of yen)(5) Rental operating income (=(3)-(4))(In thousands of yen)
(6) Capital expenditures(In thousands of yen)(7) NCF (=(3)-(6))(In thousands of yen)

183,775

40,154

294,533

46,01528,380133,800

95,46722,736135,967

121,846

40,50014,25247,089

6,365

4,894

28,143

13,591

2,661

43,111

15,781

143,275

25,902

247,443

39,64923,486105,657

81,87520,07592,855106,065--

13,406

-

-

-

3,609

-

-

-

183,775

40,154

281,126

46,01528,380133,800

91,85722,736135,967

121,846

Note: We have not obtained consent from the tenants of the relevant property to release the information.

50

Balance sheets(in thousands of yen)

AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Consumption taxes receivable
Other
Total current assets
Non-current assets
Property, plant and equipment
Construction in progress
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment, net
Intangible assets
Leasehold right in trust
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Lease and guarantee deposits in trust
Long-term prepaid expenses
Long-term deposits
Total investments and other assets
Total non-current assets
Deferred assets
Organization costs
Investment unit issuance costs
Total deferred assets
Total assets

Second Fiscal Period Third Fiscal Period(As of Mar. 31, 2016) (As of Sep. 30, 2016)(in thousands of yen)

Second Fiscal Period(As of Mar. 31, 2016)

Third Fiscal Period(As of Sep. 30, 2016)

606,400
6,500,000
285,4706,520
932
748,176
136,468
8,283,968

453,515
12,070,000
267,670
7,108
1,081
859,300
122,669
13,781,345

51,000,000
10,633,432
23,04534,382
61,690,859
69,974,828

57,230,000
2,500
11,518,586
23,19064,677
68,838,953
82,620,298

77,606,649

94,256,390

77,606,649-4,263-4,263
94,252,127

2,427,985
2,427,985
80,034,634

2,518,802
2,518,802
96,770,929--31,166-31,166

Liabilities
3,882,955
10,341,252
192,030
33,750510,522
14,960,512

4,367,293
11,615,129
206,398
112,712477,707432
16,779,673

33,894,083-1,043,077
32,851,006
1,584,525-68,990
1,515,535
29,194-1,72027,47347,611-3,41344,19899,044,234
5,583
133,488,032

35,24342,409,745-1,707,093
40,702,651
1,808,630-106,872
1,701,758
203,295-6,582
196,71251,813-6,70045,112
118,225,350
12,015160,918,844

528,555
2,164
530,719524,576
1,883
526,460

10,00036,015583,023
124,960
753,998
134,772,750

10,00036,035651,956
124,960
822,951
162,268,256

35,435
240,764
276,199
150,009,463

30,369281,763
312,132
179,360,062

Current liabilities
Operating accounts payable
Short-term loans payable
Accounts payable-otherAccrued expenses
Income taxes payable
Advances received
Deposits received
Total current liabilities
Non-current liabilities
Long-term loans payable
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
Deduction from unitholders’ capital
Allowance for temporary difference adjustments
Total deduction from unitholders’ capital
Unitholders’ capital, net
Surplus
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

80,034,634

96,739,763

150,009,463

179,360,062

51

Statements of income and retained earnings(in thousands of yen)

Second Fiscal Period(From Oct. 1, 2015
to Mar. 31, 2016)

Third Fiscal Period(From Apr. 1, 2016
to Sep. 30, 2016)

Operating revenues
Rent revenue-real estate

5,405,789

884,665

968,378

Total operating revenues

5,541,057

6,374,168

Operating expenses
Asset management fees

Second Fiscal Period(From Oct. 1, 2015
to Mar. 31, 2016)

Third Fiscal Period(From Apr. 1, 2016
to Sep. 30, 2016)

A. Rental and other operating revenues
4,656,391

Other lease business revenue

Expenses related to rent business(in thousands of yen)

2,235,833

2,860,183

405,144438,769

Rent revenue-real estate
Rental revenues

3,761,328

4,393,233

Rental revenues from limited proprietary rights of land

598,355

680,862

Common area charges

296,707

331,693

4,656,391

5,405,789

Subtotal
Other lease business revenue

Asset custody fees

4,658

6,375

Parking space rental revenues

162,060

163,358

Administrative service fees

16,454

21,792

Utility charge reimbursement453,733

540,060

Directors’ compensation

4,500

4,500

Miscellaneous

268,871

264,959

Other operating expenses

48,444

69,052

Total operating expenses

2,715,035

3,400,673

2,826,021

2,973,494

937

51

Operating income
Non-operating income
Interest income
Interest on refund

Subtotal

884,665

968,378

5,541,057

6,374,168

Property management fees and facility management fees

637,809684,963

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

715

251

Utilities

495,520

523,159

1,652

303

Taxes

216

482,449

Repairs and maintenance

201,226

150,915Interest expenses

275,159306,343

Insurance

10,531

12,341

Financing-related expenses

59,21365,780Trust fees

14,49917,294

Total non-operating income

Non-operating expenses

Amortization of organization costs

5,066

5,066

Depreciation

565,861

714,171

Amortization of investment unit issuance costs

59,24476,922Others

310,168

274,888

2,235,833

2,860,183

3,305,224

3,513,984

Total non-operating expenses

398,683

454,113

Ordinary income

2,428,991

2,519,684

Income before income taxes

2,428,991

2,519,684

1,075

1,088

Total property-related expenses
C. Net operating income from real estate rental business(A-B)

Income taxes
Current
Total income taxes

1,075

1,088

2,427,915

2,518,595

Retained earnings brought forward

70

206

Unappropriated retained earnings

2,427,985

2,518,802

Net income

52Statements of cash flows(in thousands of yen)
Net cash provided by (used in) operating activities
Income before income taxes

Second Fiscal Period(From Oct. 1, 2015
to Mar. 31, 2016)

Third Fiscal Period(From Apr. 1, 2016
to Sep. 30, 2016)(in thousands of yen)

Second Fiscal Period(From Oct .1, 2015
To Mar. 31, 2016)

Third Fiscal Period(From Apr. 1, 2016
to Sep. 30, 2016)

2,428,991

2,519,684

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

7,700,000

566,142

714,452

Payments in short-term loans payable-3,200,000-800,000

Amortization of organization costs

5,066

5,066

Proceeds from long-term loans payable

14,650,000

6,230,000

Amortization of investment unit issuance costs

59,24476,922

Proceeds from issuance of investment units

19,611,147

16,531,819

-937

-51

-1,931,323-2,430,448

275,159306,343

Payments of dividends
Net cash provided by (used in) financing activities

36,829,824

25,901,371

Decrease (increase) in operating accounts receivable-28,262-14,367

Net increase (decrease) in cash and cash equivalents

3,105,407

1,973,891

Decrease (increase) in consumption taxes receivable

1,561,226

32,815

Cash and cash equivalents at the beginning of period

8,150,002

11,255,410

Decrease (increase) in prepaid expenses-16,987-78,961

Cash and cash equivalents at the end of period

11,255,410

13,229,301

Increase (decrease) in operating accounts payable

94,580-25,321

Depreciation and amortization

Interest income
Interest expenses

Increase (decrease) in accounts payable-other

25,738-19,393

Increase (decrease) in advances received

229,469

111,123

Increase (decrease) in deposits received-223,486-13,799

Decrease (increase) in long-term prepaid expenses
Other-164,503-68,932

36,767-4,103

Subtotal

4,848,210

3,541,476

Interest income received

Interest expenses paid
Income taxes paid

937

51

-272,051-305,756-6,464-940

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Purchase of property, plant and equipment

4,570,631

3,234,831--35,243

Purchase of property, plant and equipment in trust-40,463,688-28,233,179

Purchase of intangible assets in trust-361,455-

Payments for lease and guarantee deposits in trust-30,695-20

Proceeds of tenant leasehold and security deposits

-

2,500

Repayments of tenant leasehold and security deposits in trust-286,205-314,140

Proceeds from tenant leasehold and security deposits in trust

2,185,372

1,202,094

Proceeds from restricted bank deposits in trust

Net cash provided by (used in) investing activities

661,625

215,676-38,295,047-27,162,312

6,370,000

53

Appraisal value
Income capitalization approach value
No.

T-1
T-2
T-3
T-4
T-5
T-6
T-7
T-8
T-9
T-10
T-11
T-12
T-13
T-14
T-15
T-16
T-17
O-1
O-2
O-3
O-4
O-5
O-6
O-7
O-8
O-9
O-10
N-1
N-2
N-3
N-4
F-1
R-1
R-2
R-3
R-4
R-5
R-6
R-7
R-8
N-5

Property name

Fululu Garden Yachiyo
MONA Shin-Urayasu
Passaggio Nishiarai
Daikanyama Address Dixsept
Unicus Ina
Yorktown Kita-Kaname
Unicus Yoshikawa
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 MinamidaiLife Kameido
Blumer Maitamon
Central Square Takadono (Land)
Piago Kahma Home Center Omihachiman
Blumer HAT Kobe
Carino Esaka
COMBOX Komyoike
Hankyu Oasis Hirakatadeguchi
Welcia Kishiwadakamori (Land)
Life Nishi-Tengachaya
Million Town Tsukaguchi (Land)
Kahma Home Center Nakagawa Tomita (Land)
Valor Ichinomiya-Nishi
K’s Denki Nakagawa Tomita (Land)
Homecenter Kohnan Sunadabashi
Sunny Noma
Roseo Mito
K’s Denki Aomori Honten
Super Sports Xebio Aomori-Chuo
Ashico Town Ashikaga
Yorktown Shinden-Higashi
Kasumi Technopark Sakura
Solala PlazaP-1 Plaza Tennno
Total/Average
K’s Denki Shin-moriyama (Land)

Appraisal date

Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Sep. 30, 2016
Oct. 1, 2016

Appraisal value(JPY mn)

Direct capitalization method
Direct cap rate (%)

Previous

Latest15,200
8,500
6,280
5,620
4,420
4,300
3,770
2,720
5,260
3,390
3,010
1,740
1,460
799
3,780
1,880
1,500
8,780
2,870
2,410
11,600
6,590
6,920
1,310
500
1,620
3,730
2,500
2,230
945
7,220
1,520
10,700
1,570
909
5,060
3,310
861
5,740
4,230
166,754-

15,200
8,560
6,370
5,740
4,510
4,300
3,800
2,720
5,280
3,440
3,010
1,740
1,460
799
3,780
1,900
1,500
8,990
2,930
2,440
11,600
6,590
6,940
1,310
500
1,650
3,810
2,540
2,280
960
7,220
1,520
10,900
1,550
924
5,060
3,310
861
5,910
4,260
168,164
1,410

Changes

Previous

0
60
90
120
90
0
30
0
20
50
0
0
0
0
0
20
0
210
60
30
0
0
20
0
0
30
80
40
50
15
0
0
200
-20
15
0
0
0
170
30
1,410
-

4.7
5.3
4.4
3.8
5.2
5.0
4.8
4.7
5.2
4.7
5.1
4.3
5.5
6.4
4.9
4.8
5.2
5.6
4.9
5.3
4.9
5.1
5.5
5.8
5.8
5.4
5.6
5.2
5.0
5.3
-

Latest

4.7
5.2
4.4
3.8
5.2
5.0
4.8
4.7
5.2
4.7
5.1
4.3
5.4
6.3
4.9
4.8
5.2
5.6
4.8
5.2
4.9
5.1
5.4
5.7
5.7
5.4
5.6
5.2
4.9
5.3
-

DCF method
Discount rate (%)

Changes

Previous

0.0
-0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-0.1
-0.1
0.0
0.0
0.0
0.0
-0.1
-0.1
0.0
0.0
-0.1
-0.1
-0.1
0.0
0.0
0.0
-0.1
0.0
-

4.5
5.0
4.2
3.6
4.9
4.8
4.6
4.5
4.7
4.6
4.7
4.6
4.0
5.0
4.5
4.9
4.0
5.6
4.4
6.1
4.7
4.5
4.9
5.4
4.0
5.0
4.4
4.8
5.0
4.8
4.7
4.9
5.2
5.5
5.5
5.2
5.4
5.0
4.7
4.9
-

Latest

4.5
4.9
4.2
3.6
4.8
4.8
4.6
4.5
4.7
4.5
4.7
4.6
4.0
5.0
4.5
4.9
4.0
5.5
4.3
6.0
4.7
4.5
4.9
5.4
4.0
4.9
4.3
4.7
4.9
4.7
4.7
4.9
5.1
5.4
5.4
5.2
5.4
5.0
4.6
4.9
4.1

Terminal cap rate (%)

Changes

Previous

0.0
-0.1
0.0
0.0
-0.1
0.0
0.0
0.0
0.0
-0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-0.1
-0.1
-0.1
0.0
0.0
0.0
0.0
0.0
-0.1
-0.1
-0.1
-0.1
-0.1
0.0
0.0
-0.1
-0.1
-0.1
0.0
0.0
0.0
-0.1
0.0
-

4.9
5.5
4.6
4.0
5.4
5.2
5.0
4.9
4.6
5.4
4.9
5.3
4.5
5.7
6.6
5.1
5.0
5.4
5.8
4.6
5.1
5.5
5.1
5.5
5.7
6.0
6.0
5.6
5.8
5.4
5.2
5.4
-

Latest

4.9
5.4
4.6
4.0
5.3
5.2
5.0
4.9
4.6
5.4
4.9
5.3
4.5
5.6
6.5
5.1
5.0
5.4
5.8
4.6
5.0
5.4
5.1
5.5
5.6
5.9
5.9
5.6
5.8
5.4
5.1
5.4
4.3

Changes

0.0
-0.1
0.0
0.0
-0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
-0.1
-0.1
0.0
0.0
0.0
0.0
0.0
-0.1
-0.1
0.0
0.0
-0.1
-0.1
-0.1
0.0
0.0
0.0
-0.1
0.0
-

Note: “Previous” refers to appraisal value at the previous appraisal dated Mar. 31, 2016 for properties acquired in 1st or 2nd period and dated Feb. 1, 2016 for properties acquired in 3rd period (dated Nov.1, 2015 for Homecenter Kohnan Sunadabashi).
“Latest” refers to the latest appraisal date. Discount rate for DCF method shows the discount rate for the nearest period.

54

Unitholder information (as of September 30, 2016)
Ownership ratio by investor type
0.9%

Major unitholders

9.7%
Rank

38.3%

3.7%
Individuals andothers(41,051 units)

Financial
institutions

Other domestic
corporations

Foreigninvestors

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

80,44119.04%

2

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

34,820

8.24%

3

TRUST & CUSTODY SERVICE BANK, LTD.
(Securities Investment Trust Acct.)

29,456

6.97%

4

JP MORGAN CHASE BANK 385628

16,318

3.86%

5

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

16,036

3.79%

6

THE BANK OF NEW YORK MELLON SA/NV 10

12,501

2.95%

7

THE BANK OF NEW YORK, NON-TREATY JASDAC
ACCOUNT

12,1502.87%

8STATE STREET BANK AND TRUST COMPANY

7,029

1.66%

9

SIX SIS LTD.

6,453

1.52%

10

STATE STREET BANK AND TRUST COMPANY
505223

5,798

1.37%

Brokerage
firms(199,914 units) (15,604 units) (161,909 units) (3,972 units)

Number of unitholders by investor type
1.9%

2.5%

# of
(%)(Note)
units held1
422,450
units

47.3%

Name

0.2%

0.9%

10,618unitholders

94.6%

Individuals andothers(10,043)

Financial
institutions(92)

Other domestic
corporations(263)

Foreigninvestors

Brokerage
firms

(199)

(21)
Note: Figures are based on # of units and rounded down to the 2nd decimal place.

55

Portfolio map
Tokyo metropolitan area

Types of retail property(by acquisition price)

T-11
T-12

T-5

Shopping centers
for daily needs

T-9

100%

T-7
T-3
T-17

T-8
T-4

T-2

CSC
9.3%

T-1

SM
7.1%

R-2

T-14

T-16

NSC
46.1%

SS
13.8%

R-3

T-15
T-10
R-7
T-13

T-6

R-5

R-4

Urban
Station-Front
23.7%

R-1
R-6

Location(by acquisition price)

R-8
F-1

Ordinancedesignated cities,
core cities and other
areas
19.0%

Greater Nagoya area

Greater Osaka area

N-2

O-3

O-4

O-10

O-7

N-5
N-3
N-1

N-4

K’s Denki
Shin-Moriyama(Land)

Fukuoka area
0.9%
Greater
Nagoya area
8.7%

O-5

O-1

4 major
Metropolitan
areas

Tokyo
Metropolitan
area
43.8%

81.0%

O-2

O-9

O-6
O-8

Greater
Osaka area
27.6%

56

Portfolio overview
T-1

Fululu Garden Yachiyo

T-2

MONA Shin-Urayasu

T-3

T-8

Sports Club Renaissance
Fujimidai

T-9

Super Viva Home Iwatsuki(Land)

T-10 (Land)

T-11 Unicus Kamisato (Land)

T-12 Unicus Konosu (Land)

T-15 Tokyu Store

Nakamachidai

T-16 Nagatsuta Minamidai

Central Wellness Club

T-17 Life Kameido

O-1 Blumer Maitamon

O-2

O-5

Carino Esaka

O-6 COMBOX Komyoike

O-7 Hirakatadeguchi

N-2

Valor Ichinomiya-Nishi

N-3

R-4

Ashico Town
Ashikaga

R-5 Shinden-Higashi

Passaggio Nishiarai

K’s Denki Shonan-Fujisawa

T-4

Daikanyama Address Dixsept

T-5

Unicus Ina

Central Square Takadono(Land)

T-6

Yorktown Kita-Kaname

T-7

Inageya Yokohama

T-14 Chiba-Chuo

O-3 Omihachiman

Piago Kahma Home Center

O-4

Blumer HAT Kobe

Million Town

T-13 Minamihonjuku (Land)

Unicus Yoshikawa

Gourmet City

Hankyu Oasis

O-8 (Land)

Welcia Kishiwadakamori

O-9 Life Nishi-Tengachaya

O-10 Tsukaguchi (Land)

N-1

Kahma Home Center
Nakagawa Tomita (Land)

R-3

Super Sports Xebio
Aomori-Chuo

K's Denki
Nakagawa Tomita (Land)

N-4

Homecenter Kohnan
Sunadabashi

F-1

Sunny Noma

R-1

Roseo Mito

R-2

K’s Denki
Aomori-Chuo

Yorktown

R-6

Kasumi Technopark
SakuraR-7

Solala Plaza

R-8

P-1 Plaza Tenno

N-5

K's Denki
Shin-Moriyama (Land)

NEW

57

Portfolio overview
Acquisition priceNo

Name of property(note)

JPY

160,136mn

Total appraisal
value (note)
JPY

169,574mn

Average appraisal
NOI yield (note)

5.4%
Weighted averageoccupancy rate
(note)

99.7%
Number of tenants(note)

406

T-1 Fululu Garden Yachiyo
T-2 MONA Shin-Urayasu
T-3 Passaggio Nishiarai
T-4 Daikanyama Address Dixsept
T-5 Unicus Ina
T-6 Yorktown Kita-Kaname
T-7 Unicus Yoshikawa
T-8 Sports Club Renaissance Fujimidai
T-9 Super Viva Home Iwatsuki (Land)
T-10 K’s Denki Shonan-Fujisawa (Land)
T-11 Unicus Kamisato (Land)
T-12 Unicus Konosu (Land)
T-13 Inageya Yokohama Minamihonjuku (Land)
T-14 Gourmet City Chiba-Chuo
T-15 Nakamachidai Tokyu Store
T-16 Central Wellness Club Nagatsuta Minamidai
T-17 Life Kameido
O-1 Blumer Maitamon
O-2 Central Square Takadono (Land)
O-3 Piago Kahma Home Center OmihachimanO-4 Blumer HAT Kobe
O-5 Carino Esaka
O-6 COMBOX Komyoike
O-7 Hankyu Oasis Hirakatadeguchi
O-8 Welcia Kishiwadakamori (Land)
O-9 Life Nishi-Tengachaya
O-10 Million Town Tsukaguchi (Land)
N-1 Kahma Home Center Nakagawa Tomita (Land)
N-2 Valor Ichinomiya-Nishi
N-3 K's Denki Nakagawa Tomita (Land)
N-4 Homecenter Kohnan Sunadabashi
F-1 Sunny Noma
R-1 Roseo Mito
R-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 Sakura
R-7 Solala Plaza
R-8 P-1 Plaza Tennno
N-5 K’s Denki Shin-Moriyama (Land)

Acquisition
Appraisal value Appraisal NOI
price(JPY mn)yield (%)(JPY mn)
Existing Properties as of Sep. 30, 2016
Yachiyo, Chiba
14,84815,200
5.1
Urayasu, Chiba
8,063
8,560
6.1
Adachi ward, Tokyo
5,850
6,370
5.0
Shibuya ward, Tokyo
5,390
5,740
4.2
Kitaadachi-gun, Saitama
4,379
4,510
5.5
Hiratsuka, Kanagawa
4,000
4,300
5.4
Yoshikawa, Saitama
3,600
3,800
5.2
Nerima ward, Tokyo
2,586
2,720
5.0
Saitama, Saitama
4,815
5,280
4.3
Fujisawa, Kanagawa
3,169
3,440
5.0
Kodama-gun, Saitama
3,000
3,010
4.6
Konosu, Saitama
1,700
1,740
4.6
Yokohama, Kanagawa
1,442
1,460
4.5
Chiba, Chiba
760
799
5.8
Yokohama, Kanagawa
3,360
3,780
5.4
Yokohama, Kanagawa
1,724
1,900
5.7
Koto ward, Tokyo
1,450
1,500
4.5
Kobe, Hyogo
8,389
8,990
5.8
Osaka, Osaka
2,685
2,930
4.8
Omihachiman, Shiga
2,140
2,440
7.1
Kobe, Hyogo
11,00011,600
5.2
Suita, Osaka
6,555
6,590
5.2
Izumi, Osaka
6,450
6,940
6.0
Hirakata, Osaka
1,280
1,310
5.9
Kishiwada, Osaka
487
500
4.5
Osaka, Osaka
1,505
1,650
5.3
Amagasaki, Hyogo
3,723
3,810
4.6
Nagoya, Aichi
2,311
2,540
5.2
Ichinomiya, Aichi
2,174
2,280
5.9
Nagoya, Aichi
889
960
5.2
Nagoya, Aichi
7,140
7,220
5.2
Fukuoka, Fukuoka
1,497
1,520
5.4
Mito, Ibaraki
10,046
10,900
5.9
Aomori, Aomori
1,469
1,550
6.3
Aomori, Aomori
898
924
6.4
Ashikaga, Tochigi
4,180
5,060
6.5
Sendai, Miyagi
3,252
3,310
6.0
Tsukuba, Ibaraki
830
861
5.6
Sendai, Miyagi
5,720
5,910
5.0
Hamamatsu, Shizuoka
4,010
4,260
5.7
Property acquired in Nov. 2016
Nagoya, Aichi
1,370
1,410
4.4
Location(city/ward, prefecture)

Occupancy
rate (%)# oftenants

99.6
95.6
98.1
98.2
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.1
100.0
100.0
99.1
99.1
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.7
100.0
100.0
99.1
100.0
100.0
100.0
100.0

49
71
41
26
1
1
11
1
1
1
1
1
1
1
1
2
1
49
1
2
41
30
1
1
1
1
1
1
1
1
1
1
22
1
1
26
2
1
1
7

100.0

1

Note: The figures are as of Nov. 2016 (after acquisition of one property). The figures of “weighted average occupancy rate” and “number of tenants” are as of Sep. 30, 2016 (including K’s Denki Shin-Moriyama (Land)).

58

Operating highlights ~ Fululu Garden Yachiyo
CSC Community
Shopping Center

Fululu Garden Yachiyo

GMS vs. CSC

A CSC easily accessible by both cars and trains, located in an area withpopulation growthStand alone GMS fall outside
KRR's investment targets



CSC, consisted of specialty storesand GMS, is included as KRR's
investment targets

GMS

RSC larger than CSCs is also ourinvestment targets (up to 20% of
the entire portfolio)(excluded from our target)

Enlarged view
Yachiyo GC

CSC / RSC
Synergetic
effect

GMS



GMS

文

文

Yachiyo Wide-area Park文
文

Murakami Station

Yachiyo Chuo

Specialty
shopping mall

(Our investment target)

Toyo Rapid Railway
Yachiyo City Office

Keisei Main Line
Shizu
Katsutadai
Keisei Owada
Yukarigaoka
Takanodai CC

Tenants' credibility

Fululu Garden Yachiyo

Toyo Katsutadai Station

Yachiyodai

Katsutadai Station
文

Performance of core tenants (listed companies)(JPY mn)

Nearly 85% of the tenants are listedcompanies or members of listed corporategroups (on a rent income basis)

Company name

JPY14,848 mn

Xebio HD

210,672

2,084

Location

Yachiyo, Chiba

Fast Retailing

1,681,781

110,027

GFA(1) 50,960.84 m2(2) 65,698.32 m2

Aoki HD

183,805

10,185

Core tenant

Ito-Yokado Co., Ltd.

Honeys59,020

1,948

Appraisal NOI

JPY760 mn

Regal Corporation

36,030

1,336

Source: Compiled based on each company's disclosure materials
Note: Legal status suffixes, such as Co., Ltd., are omitted.

5.1%

Ito-Yokado

Local & retail trade area

Seven & i HD2Specialty store building

Access(JPY bn)
7,000

About 45 minutes to "Otemachi" stationfrom the nearest "Murakami" station

6,000



Facing National Route 16

Shuttle bus service available from
"Katsutadai" station

1
Ito-Yokado building

Population
Within a 5km radius: 335,000 people(up 1.5% from 2005 to 2010)



Within a 3km radius: 160,000 people(up 2.3% from 2005 to 2010)



Yachiyo City: 195,000 people(up 3.3% from 2010 to 2015)

Number of visitors
National Route 16

Source: Aerial photographs Geospatial Information Authority of Japan

Net income

Acquisition priceAppraisal NOI
yield

Murakami Station

Sales



5,000

5,631

6,038

6,045

Ranks in top 30% of all Ito-Yokado stores interms of annual sales

Sales have been growing since the store
manager was given more authority and the
product mix was optimized to better meet theneeds of local area customers



Low occupancy cost ratio: approx. 5%(Occupancy cost ratio: rents divided by sales)

300
250

4,991

200
175

4,000
3,000

Net income (JPY bn)
当期純利益

営業収益
EBIT

4,786

Operating performance of Ito-Yokado Yachiyo


129

172

160

138

150
100

2,000
1,000

50

0

0

2011

2012

2013

2014

2015

Online supermarket
Operating an online supermarket where products
ordered online are delivered to customers fromthe Ito-Yokado store in this property

Customers can also receive products theyordered online at any of the 10 Seven Elevenshops in the neighborhood

Ito-Yokado is reported to represent nearly half ofthe entire online supermarket market, which size
is approx. JPY100 bn

Seven & i HD group companies in the property


Ito-Yokado: Core tenantAkachan Honpo: Tenant in the specialty store
buildingMall SC Development: Sub-PM for the entire
property

Stable at 600,000 per month on average

Note: This section is taken from the 2nd period presentation material.

59

Operating highlights ~ MONA Shin-Urayasu
Urban Station-Front

Growth opportunities

MONA Shin-Urayasu

Retail trade area

文

文

Shin-Urayasu Station
文

MONA Shin-Urayasu

140

文
文

Location
Land area(Note)

130.4

文

文

100
60

Urayasu, Chiba

40

15,875.86 m2(Note)

GFA

76,767.24 m

Core tenant

Undisclosed

Appraisal NOI

JPY490 mn

Appraisal NOI yield

6.1%

2

120

80

JPY8,063 mn

110.1
110

20

浦安市
千葉市
Chiba-shi
Urayasu-shi
1990

1995

2000

2005

2010

2015

Source: 2015 National Census (preliminary report) (Ministry ofInternal Affairs and Communications)

Growth potential

MONA
Shin-Urayasu
NBF Shin-Urayasu
Tower

Source: Survey of Taxation for each City/Town/Village by
Ministry of Internal Affairs and Communications (2015)

Tenants include retailers offering convenience
goods, including a grocery supermarket and adrugstoreProvided with highly useful public spaces which canbe used for various events

Financial institution tenants (6 tenants), which help
attract heavy traffic into the property

Restaurant tenants can drive demand from office
workers on their way home as well as travelers
staying in hotels close to the train station

A 100-yen shop, a drugstore and sundries storesthat are highly popular among foreigners help attract
demand from inbound tourists



About 20 minutes to "Tokyo" station from thenearest "Shin-Urayasu" station



The property is connected directly to the station
via a pedestrian walkway

Shin-Urayasu station has a daily passenger trafficof over 58,000 people on averageTokyo Disney Report is located in Maihama, one
station west of Shin-Urayasu station

Within a 5km radius: 509,000 people(up 3.9% from 2005 to 2010)



Within a 3km radius: 205,000 people(up 5.3% from 2005 to 2010)

60.1%



Urayasu City: 164,000 people(down 0.5% from 2010 to 2015)

Proportion of the tenants whose
fixed-term lease contracts will
mature by the 6th financial
period (ending March 2018)



AEON Shin-Urayasu (Shoppers Plaza ShinUrayasu) is located on the south-east of “ShinUrayasu” station

Inboundtourists

Population

Competitive environment

Source: Aerial photographs Geospatial Information Authority of Japan

Tokyo
東京都
metropolis
Localresidents
Officeworkers

Pedestrian walkway

AEON
Shin-Urayasu

Tokyo
Chiba
千葉県
東京23区
23 wards
prefecture

Tenants meeting the needs of broad customer baseAccess

JR Shin-Urayasu Station

104.2

100

0

Location & retail trade area

Oriental HotelTokyo Bay

137.4

130

Note: Although the property is subject to sectional ownership, thetotal land area and GFA for the entire building are stated

Urayasu Brighton
Hotel Tokyo Bay

140.6
140

132

文

Meikai University

Acquisition price

120

115

123

Higher average income(National average=100)
150

160

文

Juntendo University
Urayasu Hospital

Retail trade area

 The average income in Urayasu City exceeds that in
23 wards of Tokyo

 Population in Urayasu City, where the property is
located, had grown until 2010 and has remained
stable level since then
180
164
164
155

文

文

Steadily growing population

文

Urayasu IC

Urayasu City OfficeLeasing maturity

We seek to achieve cost saving
and improved tenant satisfaction
through effective utilization of
CAPEX in a timely manner upon
the maturity of each lease
contract, and pursue rental upside
upon contract renewal or tenant
replacement by optimizing our
tenant mix to better meet theneeds in the retail trade area

60

Portfolio highlights (1)
Name

T-1

Fululu Garden
Yachiyo

T-2

MONA Shin-Urayasu

T-3

Passaggio Nishiarai

T-4

Daikanyama
Address Dixsept

T-5

Unicus Ina

Photo

Location
Acquisition price (JPY)

Highlights

Name

Yachiyo, Chiba

Urayasu, Chiba

Adachi ward, Tokyo

Shibuya ward, Tokyo

Kitaadachi-gun, Saitama

14,848 mn

8,063 mn

5,850 mn

5,390 mn

4,379 mn Located in front of Shin CSC in an area with
 The surrounding area has a  Occupies the retail section of  Highly competitive by
Urayasu Sta. (17 min from
population growth (40 min
significant inflow of families
a large complex facility inhousing supermarket Yaoko
Tokyo Sta. by train)
to Otemachi Sta. by train)
due to large developments
front of Daikanyama Sta.
among other tenants
 Approximately 50 stores in  Entrance to highly popular Houses a home appliance Houses sophisticated and The population in theresidential areas
the specialty store bldg.
store, an apparel store,
stylish retailers as well assurrounding area is Ito-Yokado provides online  Approx. 70 tenants, including restaurants, etc.
tenants that cater to day-toincreasing by continued
supermarkets and clothing
supermarket business
day needs of customers
residential developments
storesdelivered from this store
Yorktown
Super Viva HomeSports Club
K’s Denki
T-6
T-7 Unicus Yoshikawa
T-8 Renaissance Fujimidai
T-9
T-10 Shonan-Fujisawa (Land)
Kita-Kaname
Iwatsuki (Land)

Photo

Location
Acquisition price (JPY)

Highlights

NSC

SM

CSC

Hiratsuka, Kanagawa

Yoshikawa, Saitama

Nerima ward, Tokyo

Saitama, Saitama

Fujisawa, Kanagawa

4,000 mn

3,600 mn

2,586 mn

4,815 mn

3,169 mn

 Population increase with
 Conveniently located along a  A well-equipped Comprises a large home and  Faces major routes, which
residential developments
heavily traveled road in amembership-based healthgarden store, a supermarket gives the property a wide
 Plays an important role in the population increasing areaclub with a gym, two studios
and a food court
retail trade area
local community by housing  Houses a supermarket, Life,and a swimming pool
 A number of major routes
 More than ten years remaintenants including a
and a home and garden Large housing developments near the property potentiallyon a fixed-term land leasesupermarket, a drug store
store, Kohnan, as anchor
surrounding Fujimidai Sta.
enlarge trade areas including with K’s Holdings
and a restaurant
tenants(15min from Ikebukuro Sta.
adjacent cities
by train)
Urban Station-Front Shopping Centers

SS

61

Portfolio highlights (2)NameUnicus Konosu(Land)

T-13 Minamihonjuku (Land)

Kodama-gun, Saitama

Konosu, Saitama

Yokohama, Kanagawa

Chiba, Chiba

Yokohama, Kanagawa

3,000 mn

1,700 mn

1,442 mn

760 mn3,360 mn

T-11

Unicus Kamisato(Land)

T-12

Inageya Yokohama

T-14

Gourmet City
Chiba-Chuo

T-15

Nakamachidai
Tokyu Store

Photo

Location
Acquisition price (JPY)

Highlights

Name Underlying land of the largest  Underlying land of the largest  Underlying land of Inageya  Large daytime population
 A station-front NSC in an
NSC in Kamisato developed
NSC in Konosu developed
grocery supermarket opened due to the concentration ofarea with high population
by P&D
by P&Din March 2015
government offices in thegrowth and easy access to Competitive due to its
 Easy access and high Comprises a trade area thatarea
central Tokyo
concentration of highly
visibility by car given its
cater daily needs together
 Synergistically consisted of a  Houses a supermarket andrecognizable tenants
location facing the largest
with a restaurant and a drug grocery supermarket andother retailers that cater daily
including a supermarket andtrunk road within the relevant store nearby
clinicsneeds
a cinema complex
trade area
Central Wellness Club
Central Square
Piago Kahma Home
T-16 Nagatsuta Minamidai
T-17 Life Kameido
O-1 Blumer Maitamon
O-2
O-3
Takadono (Land)
Center Omihachiman

Photo

Location
Acquisition price (JPY)

Highlights

Yokohama, Kanagawa

Koto ward, Tokyo

Kobe, Hyogo

Osaka, Osaka

1,724 mn

1,450 mn

8,389 mn

2,685 mn Located in an area with high  A supermarket located in Located within a newly A new brand supermarket
population growth, housing a one of the most densely
developed residential area
which Life Corporation
health club as its core tenant populated retail trade areas  Consists of approx. 45
opened on the land in 2015
 Convenient car access duein Tokyotenants, including a Located in a densely
to its roadside location, with  "Kameido Residence", asupermarket, an electronic
populated area bordering
good visibility
large-scale condominium
appliance store and a major
central Osakaconsisting of approx. 700
clothing store as core
 Highly accessible by car as
residential units in thetenantswellneighborhood

Omihachiman, Shiga
2,140 mn
 NSC consisted of twobuildings, Piago(supermarket) and Kahma(home and garden store)
 The trade area surrounding
Omihachiman Sta. isresidential area with young
families

62

Portfolio highlights (3)
Name

O-4

Blumer HAT Kobe

O-5

Carino Esaka

O-6

COMBOX Komyoike

O-7

Hankyu Oasis
Hirakatadeguchi

O-8

WelciaKishiwadakamori (Land)

Photo

Location
Acquisition price (JPY)

Highlights

Name

Kobe, Hyogo

Suita, Osaka

Izumi, Osaka

Hirakata, Osaka

Kishiwada, Osaka

11,000 mn

6,555 mn

6,450 mn

1,280 mn

487 mn Landmark NSC in "HAT
 Attractively located near The largest retail property in  A supermarket located in a  Underlying land of a Welcia
Kobe District", a revival
Esaka Sta., only 10min fromthe central area of Komyoike highly populated area
store opened in 2015, which
symbol project from the Kobe Umeda Sta.
 Located in the area
 Approx. 100 car parking lots
also sells groceries
earthquake The retail trade area isaccessible to Namba Sta. inmake easy accessibility by  Surrounded by residential
 Houses a cinema complex, a popular among young
30 min by train
car in addition to consumers
districts, expecting
grocery store, clothing stores families
 A new condominium project
coming on footcustomers on bicycles as
and restaurants
 Core tenant is Tokyu Hands
nearby is planned
well as those by car
O-9Life NishiTengachaya

O-10

Million Town
Tsukaguchi (Land)

N-1

Kahma Home Center
Nakagawa Tomita (Land)

N-2

Valor IchinomiyaNishi

N-3

K's Denki
Nakagawa Tomita (Land)

Photo

Location

Osaka, Osaka

Amagasaki, Hyogo

Nagoya, Aichi

Ichinomiya, Aichi

Nagoya, Aichi

Acquisition price (JPY)

1,505 mn

3,723 mn

2,311 mn

2,174 mn

889 mnHighlights

 A supermarket located in a  A newly opened NSC located  Located near a number of Located in a commuter town  Located in an area 15mindensely populated retail area in an area as a part of the
major routes
for Nagoya (10 min fromfrom Nagoya Sta. by train The tenant, Life Corporation, large-scale redevelopment  Comprises an integrated
Nagoya Sta. by train) As Kahma Home Centerhas dominant strategy inproject in front of Tsukaguchi retail zone in the surrounding  NSC composed of Valor, aNakagawa Tomita,
Osaka and continues store
Sta.
area, together with asuccessful supermarket
comprises an integrated
opening Increasing in population insupermarket and a sporting
chain in the Chubu Region,
retail zone in the surrounding
the surrounding area isgoods store on the adjacent
as its core tenant, in addition area
expected, with the planned
lot
to an electronic appliancedevelopment
store and a health club63

Portfolio highlights (4)
Name

N-4

Homecenter Kohnan
Sunadabashi

F-1

Sunny Noma

R-1

Roseo Mito

R-2

K's Denki
Aomori Honten

R-3

Super Sports Xebio
Aomori-Chuo

Photo

Location
Acquisition price (JPY)

Highlights

Name

Nagoya, Aichi

Fukuoka, Fukuoka

Mito, Ibaraki

Aomori, Aomori

Aomori, Aomori

7,140 mn

1,497 mn

10,046 mn

1,469 mn

898 mn Houses a large home and Rebuilt in 2007 after enjoying  Located in a population
 Opened in 2005 in Hamada  Also in Hamada district ingarden store and a largestrong support from the local growing area with many
District in Aomori, which has
Aomori, some major routes
sporting goods store
community for 35 years
young families
the highest concentration ofbring customers from broad Located in a northern urban  The strongest performing Houses a supermarket and a retailers in Aomori
retail trade area
area of Nagoya
supermarket among other
home and garden store as The population is expected
Sunny supermarkets in thecore tenants Constructed a secondhand
to further increase in thesurrounding areasurrounding area
shop building in 2015
Ashico Town
Yorktown
Kasumi Technopark
R-4
R-5
R-6
R-7 Solala Plaza
R-8 P-1 Plaza Tennno
Ashikaga
Shinden-Higashi
SakuraPhoto

Location
Acquisition price (JPY)

Highlights

Ashikaga, Tochigi

Sendai, Miyagi

Tsukuba, Ibaraki

Sendai, Miyagi

4,180 mn

3,252 mn

830 mn5,720 mn

 A large-scale multi-tenant Located in eastern Sendai
 A 24-hour Kasumi
 A retail building directly
NSC with supermarket as aconveniently commutable tosupermarket
accessible by a pedestriancore tenant
Sendai Sta.
 The retail trade area includes walkway from Sendai Sta.
 Easily accessibility by car Houses a supermarket and a the college town of Tsukuba  Houses IDC Otsuka Kagu,
due to its location along ahome and garden store as
University
their only shop in Tohoku
major local route
core tenants
 Kasumi is headquartered in
Region Cinema reopened in March,
Tsukuba, and has a2016
dominant presence in the
area

Hamamatsu, Shizuoka
4,010 mn Located in a large scale retailarea in northeast
Hamamatsu where road-side
retail facilities concentrate Houses tenants including a
local supermarket, a drug
store and a relaxation spa

64

Disclaimer
The contents in this document are provided solely for informational purposes and not intended for the purpose ofsoliciting investment in, or as a recommendation to purchase or sell, any specific products.
This document contains charts/diagrams/tables/data and others Kenedix Real Estate Fund Management ("KFM")
created based on data, indices, etc. published by third parties, in addition to the information related to Kenedix Retail
REIT Corporation ("KRR"). This document also contains the current analyses/judgments/other opinions of KFM.
KFM is a financial instruments business operator under the Financial Instruments and Exchange Act.
The information provided herein is unaudited and hence no assurance or warranties are given with respect to theaccuracy or completeness thereof. Also, please be aware that the analyses/judgments/other opinions provided by KFM
may change or cease to exist without prior notice of any kind as they are based on current assumptions and beliefs of
KFM.
Neither KRR nor KFM shall be liable for any errors/inaccuracies of the data/indices/other information published by third
parties (including the data based on the appraisal report).
This document also contains forward-looking statements and anticipation of future results for KRR. However, noguarantees are given with respect to the accuracy of these statements/anticipation.
Revised editions of this document will be posted on our website (http://www.krr-reit.com/en) should there be majorcorrections going forward.
Unless otherwise explicitly stated, the figures such as percentage, ratio, and year(s) are rounded off to largest decimal
place shown in this document, the amount of money such as JPY, Japanese Yen, is truncated at the one tenth of thenumber shown in this document.
65