(REIT) Interim Financial Report for Fiscal Period Ending February 2017
REIT Securities Issuer:
Securities Code:
Representative:

Sakura Sogo REIT Investment Corporation
3473
Makoto Muranaka, Executive Director

Asset Management Company:
Representative:
Contact:

Sakura Real Estate Funds Management, Inc.
Makoto Muranaka, Representative Director and President
Mayumi Kobiki, Chief Financial Officer
TEL: 03-6272-6608

November 14, 2016

Stock Exchange Listing: Tokyo Stock Exchange
URL: http://sakurasogoreit.com/

Scheduled date of submission of semiannual securities report:

December 27, 2016

Preparation of supplementary interim financial results briefing materials:
Holding of interim financial results briefing session:

No
No(Amounts are rounded down to the nearest million yen)

1. StatusofManagement
andAssets(Interim period from April 1, 2016 to September 30, 2016)(1) Management Status
Operating revenue
Interim period
ended Sept. 2016

forOperating profit

FiscalPeriodEndingFebruary2017(% figures are the rate of period-on-period increase (decrease))
Ordinary profit (loss)
Profit (lossmillion yen%

million yen%

million yen%

million yen

%

292

-

138

-

(294)

-

(295)

-

Interim net profit(loss)
per unityenInterim period(6,629)ended Sept. 2016
(Note 1) The calculation period for the interim period ended September 2016 of the fiscal period ending February 2017 of Sakura Sogo
REIT Investment Corporation (the “Investment Corporation”) is a period of 183 days from April 1, 2016 to September 30, 2016,
but the actual asset management period was a period of 22 days from September 9, 2016.
(Note 2) Interim net profit (loss) per unit is calculated by dividing Interim net profit (loss) by the daily weighted average number ofinvestment units (44,542 units).
For the interim period ended September 2016, the Interim net profit (loss) per unit is calculated based on the daily weighted
average number of investment units (333,001 units) with the actual asset management period commencement date
(September 9, 2016) deemed as the beginning of the period, which amounts to an Interim net loss per unit of 886 yen.
(Note 3) Percentage figures for operating revenue, operating profit, ordinary profit and interim net profit are the rate of period-onperiod increase (decrease), but are not applicable for the interim period ended September 2016, because it is the first fiscal
period.
(2) Financial Position
Total assets
Interim period
ended Sept. 2016

Net assets

Equity ratio

Net assets per unit

million yen

million yen%

yen

63,851

28,95945.4

86,964(3) Cash Flow Status
Net cashprovided by (used in)operating activities
Interim period
ended Sept. 2016

Net cashprovided by (used in)investing activities

Net cashprovided by (used in)financing activities

Cash and cash equivalents
at end of period

million yen

million yen

million yen

million yen(1,009)(57,829)

60,0721,233-1-

2. Management Status and Distribution Forecast for Fiscal Period Ending February 2017 (from April 1, 2016 to February 28, 2017)
and Fiscal Period Ending August 2017 (from March 1, 2017 to August 31, 2017)(% figures are the rate of period-on-period increase (decrease))
Distribution
per unit
Distribution(excluding
in excess of
Net profit for the
Fiscal period
Operating revenue
Operating profit
Ordinary profit
distribution
earnings
termin excess of
per unit
earnings)
million yenyenyen% million yen% million yen% million yen%
Ending Feb. 2017

2,280

-

965

-

387

-

387

-

1,164

0

Ending Aug. 2017
2,419
6.1
1,090
13.0
953
146.3
953
146.3
2,863
0
(Reference)
Forecast net profit per unit [Forecast net profit ÷ Forecast average number of investment units during period]
Fiscal period ending February 2017: 2,216 yen
Fiscal period ending August 2017:
2,863 yen
(Note) Percentage figures for operating revenue, operating profit, ordinary profit and net profit are the rate of period-on-period
increase (decrease), but are not applicable for the fiscal period ending February 2017, because it is the first fiscal period.
* Other(1) Changes in Accounting Policies, Changes in Accounting Estimates, and Retrospective Restatement① Changes in accounting policies accompanying amendments to accounting standards, etc.: No② Changes in accounting policies other than ①:No③ Changes in accounting estimates:
No④ Retrospective restatement:No(2) Total Number of Investment Units Issued and Outstanding① Total number of investment units issued and outstanding (including treasury investment units) at end of period
Interim period ended September 2016: 333,001 units② Number of treasury investment units at end of period
Interim period ended September 2016:
0 units(Note) For the number of investment units serving as the basis for calculation of interim net profit (loss) per unit, please see“Notes on Per Unit Information” on page 19.
* Presentation of Status of Implementation of Interim Audit Procedures
At the time of disclosure of this interim financial report, audit procedures for interim financial statements pursuant to the Financial
Instruments and Exchange Act have not been completed.
* Explanation of Appropriate Use of Management Status Forecast, and Other Matters of Special Note
The management status outlook and other forward-looking statements contained in this document are based on information currently
available to and certain assumptions deemed reasonable by the Investment Corporation. Accordingly, the actual management status,
etc. may differ materially due to various factors. In addition, the forecast is not a guarantee of the amount of distribution.
The calculation period for the first fiscal period of the Investment Corporation is from April 1, 2016 to February 28, 2017. An interim
settlement of accounts has been conducted because the calculation period exceeds nine months. Please note that subsequent fiscal
periods of the Investment Corporation end on the last day of February and the last day of August.

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Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017

1. Related Parties of the Investment Corporation

Disclosure is omitted because there is no significant change from “Structure of the Investment Corporation” as set out in the securities
registration statement (submitted on August 5, 2016, as amended).

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Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017

2. Management Policy and Management Status(1) Management Policy
Disclosure is omitted because there is no significant change from “Investment Policy,” “Investment Targets” and “Distribution Policy”
as set out in the securities registration statement (submitted on August 5, 2016, as amended).

(2) Management Status
Overview of the Interim Period Under Review① Brief History of the Investment Corporation
The Investment Corporation was established under the Act on Investment Trusts and Investment Corporations (Act No. 198 of1951, as amended) (the “Investment Trusts Act”) with Sakura Real Estate Funds Management, Inc. (the “Asset Management
Company”) as the organizer and investments, with capital of 100.1 million yen (1,001 units) on April 1, 2016, and completed
the registration with the Kanto Local Finance Bureau under the Investment Trusts Act on April 26, 2016 (Director-General of
the Kanto Local Finance Bureau Registration No. 116). Later, the Investment Corporation implemented an issuance of new
investment units through a public offering in the amount of 29,154 million yen (332,000 units) on September 7, 2016, and listedon the Tokyo Stock Exchange, Inc. (“Tokyo Stock Exchange”) Real Estate Investment Trust Securities Market (Securities Code:3473) on September 8, 2016. These resulted in unitholders’ capital of 29,254 million yen and a total number of investment
units issued and outstanding of 333,001 units as of the end of the interim period under review.
The basic philosophy of the Investment Corporation is to leverage its core feature as a diversified REIT, to secure stable income
over the medium to long term and maximize unitholder value by building a portfolio that the Investment Corporation believes
to be optimal in light of the real estate investment environment and pursuing both cash-flow growth and stability.
② Investment Environment and Management Performance
Investment Environment
During the interim period the Japanese economy performed relatively well considering the Yen continued to strengthen. Private
consumption benefited from a decline in the unemployment rate, which is at around a two-decade low. Further gains inhousehold spending may be constrained by weak salary growth as a critical part of recent employment gains has been part-timejobs. Industrial activity has been positive in recent months, with manufacturing levels jumping to a nine-month high in October.
The Japanese real estate investment market continues to benefit from robust investor demand as real estate continues toprovide an attractive spread over Japanese government bonds and domestic lenders are still supportive of the sector.
Within this macro-economic backdrop, prices within the Tokyo Metropolitan area have continued to rise resulting in investors
now considering higher yielding properties in regional cities, particularly the Kinki region. This has resulted in property value
increases within regional markets. Vacancy rates continue to trend downward within the Tokyo office market and asking rents
continue to rise. Conversely, due to an increase in supply, rents for rental apartments overall have remained stable.
Management Performance
The Investment Corporation acquired the 18 properties it holds as of the last day of the interim period under review for 57,360
million yen in total on September 9, 2016. Accordingly, the actual asset management period during the interim period underreview was a period of 22 days.
As of the last day of the interim period under review, the total leasable area for the 18 properties held was 187,245.13m2 andthe average occupancy rate was 97.9%.

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Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
③ Overview of Fund Procurement
The Investment Corporation procures funds with agility and financial stability in mind under the basic financial policy of building
a stable and sound financial base aimed at maintaining and increasing income over the medium to long term.
Equity Financing
In the interim period under review, 29,154 million yen was procured in funds from implementing an issuance of investment
units in a capital increase through a public offering accompanying its new listing on the Tokyo Stock Exchange on September 8,
2016.
Debt Financing
In the interim period under review, a total amount of 30,900 million yen was borrowed from loan syndicates with Sumitomo
Mitsui Banking Corporation as the arranger on September 9, 2016. As a result, the balance of loans outstanding as of the endof the interim period under review was 30,900 million yen (of which, 22,000 million yen is long-term loans). The long-termloans were procured at fixed interest rates in order to mitigate the risk of interest rates rising.
④ Overview of Business Performance
Actual asset management during the interim period under review was for a period of 22 days from September 9, 2016 to
September 30, 2016. As a result of accounting for deferred organization expenses and investment unit issuance expenses
totaling 217 million yen in the interim period under review, business performance in the interim period under review wasoperating revenue of 292 million yen, operating profit of 138 million yen, ordinary loss of 294 million yen and loss of 295 million
yen.

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Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
Future Outlook① Investment Environment Going Forward
Japan's economic environment is showing signs of improvement with a number of positive indicators such as employment
trends, employee wage growth, steady increase of inbound tourism, active investment towards the Tokyo Olympic Games in
2020, advances in IoT (Internet of Things) and financial technology.
However, it remains uncertain whether the economy will demonstrate consistent growth particularly if the Yen continues tostrengthen making trading conditions more challenging for domestic corporates. Looking forward, exchange rate movements,
crude oil prices and factors associated with emerging economies may impact significantly on the Japanese economy.
Within this environment, it is expected that the domestic money supply from continued low interest rate policies and foreign
capital inflow subject to exchange rate trends will continue. As for the Japan real estate investment market, due to somepotential volatility within the capital markets, real estate offering stable yields contrast potential unpredictable factors,
adding further support to investment demand for real estate.
② Future Management Policy and Challenges to Address
The basic philosophy of the Investment Corporation is to leverage its core feature as a diversified REIT, to secure stable income
over the medium to long term and maximize unitholder value by building a portfolio that the Investment Corporation believes
to be optimal in light of the real estate investment environment and pursuing both cash-flow growth and stability.
(a) External Growth
As part of the building of a framework for stable incoming flow of property information, efforts will be made to source
property information by strengthening pipeline support agreements. The Asset Management Company is currently in theprocess of contracting with two parties that are scheduled to provide pipeline support services. In addition, co-sponsor
group, the Nippon Kanzai Group, has already secured pipeline support agreements for the Investment Corporation withfour parties. Continued efforts will be made to develop similar information networks not only in the Tokyo metropolitan
area but also regional major cities in line with the asset management guidelines. Such pipeline strengthening efforts are
believed to boost the sourcing capabilities of the Investment Corporation. The property information obtained will becarefully examined by leveraging the building management know-how of the Nippon Kanzai Group.
In addition, bridge funds and warehousing functions will be fully utilized in an aim to meet the most appropriate timing in
the acquisition of properties.
(b) Internal Growth
Upward rent revision negotiations will be pursued for properties where current rent falls below market rent. Furthermore,
efforts will be made to quickly re-tenant vacancies in order to shorten the assumed downtime period by conducting leasing
activities while sufficiently verifying the cost effectiveness of advertising expenses, etc.
In addition, along with striving to reduce costs by upgrading equipment and facilities as appropriate, such as switching to
LED lighting, efforts will be made to also promote measures to boost revenue, such as installing rooftop
telecommunications antennas at properties.
These and other measures will be underway in pursuit of potential for internal growth through enhancement of tenantsatisfaction by monitoring tenant needs via each property’s property management company and building managementcompany so as to be responsive to changes in the market.
③ Significant Subsequent Events
Not applicable.

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Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
④ Management Status Outlook
The following is the Investment Corporation’s management status projected for the fiscal period ending February 2017 and thefiscal period ending August 2017.

Fiscal period

Operating revenue

Operating profit

Ordinary profit

Net profit for thetermmillion yen

million yen

million yen

million yen

Distribution
per unit(excluding
distribution
in excess ofearnings)
yenDistribution
in excess ofearnings
per unityen

Ending Feb. 2017

2,280

965

387

387

1,164

0

Ending Aug. 2017

2,419

1,090

953

953

2,863

0

For the assumptions underlying this outlook, please refer to “Assumptions Underlying Management Status Forecast for Fiscal
Period Ending February 2017 and Fiscal Period Ending August 2017” below.
(Note)

The forecast figures above are the current forecast figures calculated under certain assumptions. Accordingly, theactual operating revenue, operating profit, ordinary profit, net profit, distribution per unit (excluding distribution inexcess of earnings) and distribution in excess of earnings per unit may vary due to various factors, such as futureacquisition or sale of real estate, etc., real estate market or other developments, interest rate fluctuations, or othercircumstances surrounding the Investment Corporation. In addition, the forecast is not a guarantee of the amountof distribution.

Assumptions Underlying Management Status Forecast for Fiscal Period Ending February 2017 and Fiscal Period Ending August 2017
Item

Assumptions

Calculation period● Fiscal period ending February 2017 (1st fiscal period) (from April 1, 2016 to February 28, 2017) (334 days)● Fiscal period ending August 2017 (2nd fiscal period) (from March 1, 2017 to August 31, 2017) (184 days)● The assumption is the real estate trust beneficiary rights that were newly acquired on September 9, 2016

Assets undermanagement

Operatingrevenue(total of 18 properties) (the “current portfolio assets”) without any change (acquisition of new properties,
disposition of portfolio properties, etc.) through to the end of the fiscal period ending August 2017.
● Change may arise in the event of acquisition of new properties other than the current portfolio assets or
disposition of portfolio properties, etc.
● Revenue from leasing of the current portfolio assets is calculated on the basis of such factors as the rent
stated in the lease agreements currently in effect.
● Operating revenue is based on the assumption that there will be no delinquent or unpaid rent by tenants.

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Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
Item

Assumptions● The main items of operating expenses are as follows (rounded down to the nearest specified unit; the same
shall apply hereinafter):
Fiscal period ending
February 2017
912 million yen

Fiscal period ending
August 2017
1,124 million yen

279 million yen

296 million yen

Of which: Maintenance and management fee

202 million yen

214 million yen

Of which: Property management fee

Expenses related to leasing business [Total]
Management fees

77 million yen

82 million yen

Repair expenses

17 million yen

16 million yen

Property taxes

0 million yen

202 million yen

Depreciation

240 million yen

243 million yen

403 million yen

204 million yen

108 million yen

128 million yen

Other than expenses related to leasing business [Total]
Asset management fee● Of expenses related to the leasing business of the current portfolio assets, which are the main operating
expenses, expenses other than depreciation are calculated on a historical data basis based on information
provided by the previous owner, etc. of each current portfolio asset and by reflecting variable factors.
● Repair expenses for buildings are projected to be 17 million yen for the fiscal period ending February 2017
and 16 million yen for the fiscal period ending August 2017 based on the repair plans formulated by the
Asset Management Company. However, such factors as emergency repair expenses possibly arising due tobuilding damage, etc. from unforeseeable causes, the variation in the amount depending on the fiscal year

Operatingexpenses

generally being large and not being an amount that arises periodically may result in each fiscal period’s
repair expenses differing materially from the forecast amount.
● Depreciation, which is calculated using the straight-line method, is projected to be 240 million yen for the
fiscal period ending February 2017 and 243 million yen for the fiscal period ending August 2017.
● At the Investment Corporation, the amount equivalent to fixed asset tax, city planning tax, depreciable asset
tax, etc. (“fixed asset tax, etc.”), which are settled upon acquisition of real estate, etc. by prorating for theperiod with the previous owner, is included in the cost of acquisition in the fiscal year of acquisition. In
addition, for fixed asset tax, etc. on real estate or trust beneficiary rights that have real estate as trust assets
held, the accounting is that, of the tax amount assessed and determined, the amount corresponding to theconcerned calculation period is expensed as expenses related to the leasing business.
● Of the fees payable to the Asset Management Company, an agreement has been reached for the NOI-linked
fee Asset Management Fee ②* that the fee rate shall be 0% until the fiscal period ending August 2017 on
the agreement that it is within the upper limit provided in the Articles of Incorporation of the Investment
Corporation. Accordingly, the asset management fee for the fiscal period ending February 2017 and thefiscal period ending August 2017 is lower than the asset management fee for the fiscal period ending
February 2018 and subsequent fiscal periods. The amount of the asset management fee for the fiscal period
ending February 2017 and the fiscal period ending August 2017 that would be payable if the asset
management fee were to be at the fee rate that would apply to the fiscal period ending February 2018 andsubsequent fiscal periods based on the other assumptions presented herein (estimate only) and the asset
management fee underlying the earnings forecast for each fiscal period would be a difference in amount ofapproximately 48 million yen for the fiscal period ending February 2017 and approximately 46 million yen
for the fiscal period ending August 2017.
* Asset Management Fee ② = The amount arrived at when NOI (the amount arrived at when the total of
expenses related to the leasing business (excluding depreciation and loss on retirement of non-current
assets) is subtracted from the total of leasing business revenue on the statement of income for the relevant
fiscal period of the Investment Corporation) is multiplied by the fee rate separately agreed upon between
the Investment Corporation and the Asset Management Company of no more than 3%.

Item

Assumptions-8-

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
● Deferred organization expenses of 51 million yen and expenses associated with issuance of new investment
units and listing of investment units of 193 million yen are projected as one-time expenses for the fiscal
Non-operating
expensesperiod ending February 2017. The deferred organization expenses and expenses associated with issuanceof new investment units and listing of investment units are scheduled to be amortized in a lump sum.
● Interest expenses and other borrowing related expenses are projected to be 333 million yen for the fiscal
period ending February 2017 and 136 million yen for the fiscal period ending August 2017.
● The balance of interest-bearing liabilities outstanding is assumed to be 30,900 million yen at the end of the
fiscal period ending February 2017 and 29,000 million yen at the end of the fiscal period ending August
2017.
● Regarding the expecting refund of consumption taxes associated with the acquisition of assets and payment

Debt financing

of various expenses in the fiscal period ending August 2017, the assumption is that the refund will be usedas the source of funds for loan repayment in the amount of 1,000 million yen during the fiscal period.
● LTV at end of the fiscal period ending February 2017 (1st fiscal period) is projected to be about 48.6% and
LTV at the end of the fiscal period ending August 2017 (2nd fiscal period) is projected to be 46.6%.
The following formula is used in the calculation of LTV.
LTV = Total interest-bearing liabilities ÷ Total assets × 100● The assumption is the investment units issued and outstanding as of today, which is 333,001 units, without

Investment units

any change in the number of investment units due to issuance of new investment units, etc. through to theend of the fiscal period ending August 2017.
● Distribution per unit (excluding distribution in excess of earnings) is calculated on the assumption that
distribution will be made in accordance with the cash distribution policy provided in the Articles ofDistribution
per unit

Incorporation of the Investment Corporation.
● Distribution per unit (excluding distribution in excess of earnings) may vary due to various factors, including
fluctuations in leasing revenue accompanying changes in assets under management, changes in tenants andother events, and incurrence of unexpected repairs, etc.

Distribution● The Articles of Incorporation of the Investment Corporation provide for distribution in excess of earnings,

in excess of earnings
per unit

but considering the ratio of capital expenditures to depreciation and in view of conservative financial
management, no distribution in excess of earnings is scheduled to be implemented for the time being.
● The assumption is that there will be no revision or amendment of laws and regulations, tax systems,
accounting standards, listing regulations, rules of The Investment Trusts Association, Japan, etc. that will

Other

impact the forecast figures above.
● The assumption is that there will be no unforeseen serious change in general economic trends and realestate market conditions, etc.

(3) Investment Risks
Disclosure is omitted because there is no significant change from “Investment Risks” as set out in the securities registration
statement (submitted on August 5, 2016, as amended).

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Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017

3. Interim Financial Statements(1) Interim Balance Sheet(Unit: thousand yen)Interim period(As of Sept. 30, 2016)
AssetsCurrent assets
Cash and deposits

731,102

Cash and deposits in trust

3,577,506

Operating accounts receivable

47,202

Prepaid expenses

97,172

Consumption taxes receivable

1,291,140

Other

0

Total current assets

5,744,124

Non-current assets
Property, plant and equipment
Buildings in trust

14,968,206

Accumulated depreciation(38,083)

Buildings in trust, net

14,930,123

Structures in trust

427,935

Accumulated depreciation(2,948)Structures in trust, net

424,987

Land in trust

41,774,028

Total property, plant and equipment

57,129,139

Intangible assets
Leasehold rights in trust

670,865

Other

19,300Total intangible assets

690,165

Investments and other assets
Long-term prepaid expenses

109,026

Long-term deposits

169,235

Other

10,000Total investments and other assets

288,261

Total non-current assets

58,107,566

Total assets

63,851,691- 10 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017

(Unit: thousand yen)Interim period(As of Sept. 30, 2016)
Liabilities
Current liabilities
Operating accounts payable

247,550

Short-term loans payable

8,900,000

Accounts payable – other155,446

Accrued expenses

9,857

Income taxes payable

605

Advances received

286,448

Other

217,707

Total current liabilities

9,817,615

Non-current liabilities
Long-term loans payable

22,000,000

Tenant leasehold and security deposits in trust

3,074,706

Total non-current liabilities

25,074,706

Total liabilities

34,892,322

Net assets
Unitholders’ equity
Unitholders’ capital

29,254,680

Surplus
Unappropriated retained earnings (undisposed loss)
Total surplus(295,310)(295,310)

Total unitholders’ equity

28,959,369

Total net assets*1 28,959,369

Total liabilities and net assets

63,851,691- 11 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017(2) Interim Statement of Income(Unit: thousand yen)Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
Operating revenue
Lease business revenue*1 255,529

Other lease business revenue*1 36,504

Total operating revenue

292,034

Operating expenses
Expenses related to rent business*1 116,360

Asset management fee

13,829Asset custody fee

1,479

Administrative service fees

2,938

Directors’ compensations

6,000

Other operating expenses

12,614

Total operating expenses

153,222

Operating profit

138,812

Non-operating income
Interest income

0

Total non-operating income0

Non-operating expenses
Interest expenses

11,003

Deferred organization expenses

51,056

Investment unit issuance expenses

166,659

Borrowing related expenses

204,797

Total non-operating expenses

433,518

Ordinary profit (loss)(294,705)Interim net profit (loss) before income taxes(294,705)

Income taxes – current

605

Income taxes – deferred-

Total income taxes

605

Interim net profit (loss)(295,310)

Unappropriated retained earnings (undisposed loss)(295,310)- 12 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017(3) Interim Statement of Unitholders’ Equity
Interim period (from April 1, 2016 to September 30, 2016)(Unit: thousand yen)
Unitholders’ equity
Surplus

Unitholders’capitalBalance at beginning of current period

Unappropriatedretained earnings(undisposed loss)

-

-

Total
net assets

Total
unitholders’equityTotal
surplus---29,254,680

29,254,680

Changes of items during period
Issuance of new investment units

29,254,680

Interim net profit (loss)(295,310)(295,310)(295,310)(295,310)

Total changes of items during period

29,254,680(295,310)(295,310)

28,959,369

28,959,369

Balance at end of current period

29,254,680(295,310)(295,310)

28,959,369

28,959,369- 13 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017(4) Interim Statement of Cash Flows(Unit: thousand yen)Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
Cash flows from operating activities
Interim net profit (loss) before income taxes(294,705)

Depreciation

41,531

Investment unit issuance expenses

166,659

Interest income

0Interest expenses

11,003

Decrease (increase) in operating accounts receivable(47,193)

Decrease (increase) in consumption taxes refund receivable(1,281,843)

Decrease (increase) in prepaid expenses(97,172)

Decrease (increase) in long-term prepaid expenses(109,026)

Decrease (increase) in long-term deposits paid

(169,235)

Decrease (increase) in other assets(10,000)

Increase (decrease) in operating accounts payable

247,550

Increase (decrease) in accounts payable – other

29,937

Increase (decrease) in advances received

286,448

Increase (decrease) in other liabilities

217,707

Subtotal(1,008,338)

Interest income received

0Interest expenses paid

(1,146)

Net cash provided by (used in) operating activities(1,009,484)

Cash flows from investing activities
Purchase of property, plant and equipment in trust(57,148,079)

Purchase of intangible assets(10,200)

Purchase of intangible assets in trust(670,865)

Proceeds from tenant leasehold and security deposits in trust

3,074,697

Payments into restricted deposits in trust(3,074,706)

Net cash provided by (used in) investing activities(57,829,153)

Cash flows from financing activities
Increase in short-term loans payable

8,900,000

Proceeds from long-term loans payable

22,000,000

Proceeds from issuance of investment units

29,172,541

Net cash provided by (used in) financing activities

60,072,541

Net increase (decrease) in cash and cash equivalents

1,233,903

Cash and cash equivalents at beginning of period-

Cash and cash equivalents at end of period*1 1,233,903- 14 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017(5) Notes on the Going Concern Assumption
Not applicable.
(6) Notes on Matters Concerning Significant Accounting Policies
1. Method of depreciation of
non-current assets(1) Property, plant and equipment (including trust assets)
The straight-line method is adopted.
The useful life of core property, plant and equipment is as follows:
Buildings
2-49 years
Structures

2. Accounting fordeferred assets

2-43 years(1) Deferred organization expenses
The entire amount is expensed as incurred.
(2) Investment unit issuance expenses
The entire amount is expensed as incurred.

3. Standards forrevenue and expense
recognition

Accounting for fixed asset tax, etc.
For fixed asset tax, city planning tax, depreciable asset tax, etc. on real estate or trust beneficiaryrights that have real estate as trust assets held, the accounting is that, of the tax amountassessed and determined, the amount corresponding to the concerned calculation period isexpensed as expenses related to rent business.
The amount equivalent to fixed asset tax, etc. in the initial fiscal year borne by the Investment
Corporation upon acquisition of real estate or trust beneficiary rights that have real estate astrust assets is not recognized as expenses but included in the cost of acquisition of theconcerned real estate, etc. In the interim period under review, the amount equivalent to fixed
asset tax, etc. included in the cost of acquisition of real estate, etc. was 125.927 million yen.

4. Scope of funds in the interim

The funds (cash and cash equivalents) in the interim statement of cash flows comprise cash onstatement of cash flows

hand and cash in trust, demand deposits and deposits in trust, and short-term investments witha maturity of three months or less from the date of acquisition that are readily convertible tocash and that are subject to an insignificant risk of changes in value.

5. Other significant matters(1) Accounting for trust beneficiary rights that have real estate, etc. as trust assets

serving as the basis for
preparation of the interim

For trust beneficiary rights that have real estate, etc. as trust assets held, all accounts ofassets and liabilities within trust assets and all accounts of revenue and expenses from thefinancial statements

trust assets are recognized in the relevant account item of the interim balance sheet andthe interim statement of income.
The following material items of the trust assets recognized in the relevant account item areseparately listed on the interim balance sheet.
① Cash and deposits in trust② Buildings in trust; Structures in trust; Land in trust③ Leasehold rights in trust④ Tenant leasehold and security deposits in trust(2) Accounting for consumption tax, etc.
The accounting for consumption tax and local consumption tax is that the taxes are excluded
from the transaction amounts.

- 15 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017(7) Notes to the Interim Financial Statements[Notes to the Interim Balance Sheet]*1. Minimum net assets as provided in Article 67, Paragraph 4 of the Act on Investment Trusts and Investment Corporations
Interim period(As of Sept. 30, 2016)
50,000 thousand yen[Notes to the Interim Statement of Income]*1. Breakdown of operating income (loss) from real estate leasing(Unit: thousand yen)Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
A. Operating revenue from real estate leasing
Lease business revenue
Rental revenue

219,185

Common area maintenance revenue

36,343

255,529

Other lease business revenue
Utilities reimbursement

24,869Parking revenue

9,372

Other revenue

2,262

Total operating revenue from real estate leasing

36,504
292,034

B. Operating expenses from real estate leasing
Expenses related to rent business
Management fees

40,007

Utilities expenses

27,577

Repair expenses

511

Insurance premium

662

Trust fees

1,569

Depreciation

41,031Other expenses

5,000

Total operating expenses from real estate leasing
C. Operating income (loss) from real estate leasing

116,360
175,674[A－B][Notes to the Interim Statement of Unitholders’ Equity]
Total number of investment units authorized, and total number of investment units issued and outstanding
Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
Total number of investment units authorized

10,000,000 units

Total number of investment units issued and outstanding

333,001 units- 16 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
[Notes to the Interim Statement of Cash Flows]*1. Reconciliation of cash and cash equivalents at end of period to the amount of interim balance sheet items
Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
Cash and deposits

731,102 thousand yen

Cash and deposits in trust

3,577,506 thousand yen

Restricted deposits in trust (Note)(3,074,706 thousand yen)

Cash and cash equivalents
1,233,903 thousand yen(Note) Deposits in trust retained for repayment of tenant leasehold and security deposits to tenants.
[Notes on Lease Transactions]Operating leases (as lessor)
Future minimum lease payments under non-cancellable operating leases
Interim period(As of Sept. 30, 2016)
Not later than 1 year

3,792,851 thousand yen

Later than 1 year

12,724,349 thousand yen

Total

16,517,200 thousand yen[Notes on Financial Instruments]
Matters concerning fair value, etc. of financial instruments
The carrying amount and fair value as of September 30, 2016, and the amount of difference between these, are as follows:
Carrying amount(thousand yen)
(1) Cash and deposits

Fair value(thousand yen)Amount of difference(thousand yen)731,102731,102-3,577,506

3,577,506-

4,308,609

4,308,609-(3) Short-term loans payable

8,900,000

8,900,000-(4) Long-term loans payable

22,000,000

22,016,176

16,176(2) Cash and deposits in trust
Assets total

Liabilities total
30,900,000
30,916,176
16,176(Note 1) Method of measurement of fair value of financial instruments(1) Cash and deposits; (2) Cash and deposits in trust
Because these are settled in a short period of time, the fair value is approximately the same as the book value and thus statedat that book value.
(3) Short-term loans payable
Because these are settled in a short period of time and have floating interest rates, the fair value is approximately the sameas the book value and thus stated at that book value.
(4) Long-term loans payable
Measurement is at the present value arrived at when the sum total amount of principal and interest is discounted by the rate
assumed to apply in the event of a new similar drawdown.
(Note 2) Financial instruments for which fair value is recognized to be extremely difficult to determine(Unit: thousand yen)Interim period(As of Sept. 30, 2016)

Category

Tenant leasehold and security deposits in trust
3,074,706
Tenant leasehold and security deposits in trust are not subject to fair value measurement, because fair value is recognized to be
extremely difficult to determine due to there being no market price and cash flows not being reasonably estimable.
[Notes on Securities]
Not applicable.
[Notes on Derivative Transactions]Not applicable.

- 17 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
[Notes on Share of Profit (Loss) of Entities Accounted for Using Equity Method, etc.]
Not applicable.
[Notes on Asset Retirement Obligations]Not applicable.
[Notes on Segment Information, etc.]
Segment Information
Segment information is omitted, because the Investment Corporation operates a single segment, which is the real estate leasing
business.
Related Information
Interim period (from April 1, 2016 to September 30, 2016)(1) Information about products and services
Information about products and services is omitted, because operating revenue from external customers for a single products andservices category is in excess of 90% of operating revenue on the interim statement of income.
(2) Information about geographic areas① Operating revenue
Information about geographic areas of operating revenue is omitted, because operating revenue from external customers inJapan is in excess of 90% of operating revenue on the interim statement of income.
② Property, plant and equipment
Information about geographic areas of property, plant and equipment is omitted, because the amount of property, plant andequipment located in Japan is in excess of 90% of the amount of property, plant and equipment on the interim balance sheet.
(3) Information about major customers
Information about major customers is omitted, because no single customer accounted for 10% or more of the total amount ofoperating revenue.

- 18 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
[Notes on Investment and Rental Properties]
The Investment Corporation owns office, retail, residential and other properties in mainly the Tokyo metropolitan area and regional
major cities for the purpose of earning revenue from leasing. The carrying amount, amount of increase (decrease) during period andfair value of these investment and rental properties are as follows:(Unit: thousand yen)Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
Carrying amount
Balance at beginning of period-

Amount of increase (decrease) during period

57,800,004

Balance at end of period

57,800,004

Fair value at end of period
58,258,000(Note 1) Carrying amount is the amount of the cost of acquisition, less accumulated depreciation.
(Note 2) Of the amount of increase (decrease) during period, the amount of increase is mainly attributable to acquisition of real estate
trust beneficiary rights of 18 properties (57,841,035 thousand yen), while the amount of decrease is mainly attributable todepreciation (41,031 thousand yen).
(Note 3) Fair value at end of period is the appraisal value by an outside real estate appraiser.
The income (loss) concerning investment and rental properties is presented in “Notes to the Interim Statement of Income.”[Notes on Per Unit Information]
Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
Net assets per unit

86,964 yen(6,629 yen)Interim net profit (loss) per unit[(886 yen)](Note 1) Interim net profit (loss) per unit is calculated by interim net profit (loss) by the average number of investment units during
the period (daily weighted average number of investment units: 44,542 units). In addition, interim net profit (loss) per unit
calculated based on the daily weighted average number of investment units with the actual asset management period
commencement date (September 9, 2016) deemed as the beginning of the period (333,001 units) is also shown, presented
in square brackets.
(Note 2) The basis for calculation of basic earnings (loss) per unit is as follows:
Interim period
From: Apr. 1, 2016
To: Sept. 30, 2016
Interim net profit (loss)(295,310 thousand yen)Amount not available to common unitholders- thousand yen

Interim net profit (loss) attributable to common investment units
Average number of investment units during period(295,310 thousand yen)
44,542 units[Notes on Significant Subsequent Events]
Not applicable.

- 19 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017(8) Changes in Total Number of Investment Units Issued and Outstanding
The following is the status of capital increase, etc. during the interim period under review.
Total number of investment units
Unitholders’ capitalissued and outstanding(thousand yen)(units)Date
Description
Increase(Decrease)

Balance

Increase(Decrease)

Notes

Balance

April 1, 2016

Establishment throughprivate placement

100,100

100,100

1,001

1,001

(Note 1)

September 7, 2016

Capital increase throughpublic offering

29,154,580

29,254,680

332,000

333,001(Note 2)

(Note 1) The Investment Corporation was established at an issue price of 100,000 yen per unit.
(Note 2) New investment units were issued through public offering at an issue price of 91,000 yen (paid-in amount of 87,815 yen) per
unit for the purpose of procuring funds for acquisition of new properties.

- 20 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017

4. Changes in Directors(1) Directors of the Investment Corporation
There were no changes in directors during the interim period under review.

(2) Directors of the Asset Management Company
There were no changes in directors during the interim period under review.

- 21 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017

5. Reference Information(1) Investment Status

Interim period(As of Sept. 30, 2016)
Asset type

Geographic area
(Note 1)

Asset use

Tokyo metropolitan area

As a percentage of
total amount of assets(%)(Note 3)

Total amount held(million yen)
(Note 2)
24,838

38.9

Regional major cities

-

-

Other

-

-

Tokyo metropolitan area--

Regional major cities

18,453

28.9

Other

4,177

6.5

Tokyo metropolitan area

2,204

3.5

Regional major cities

4,279

6.7

-

-

Tokyo metropolitan area

2,429

3.8

Regional major cities

1,415

2.2

Other

-

-

Subtotal

57,80090.5

Deposits and other assets

6,051

9.5

Total amount of assets

63,851100.0

OfficeRetailReal estate in trust
Residential

Other

Other

Interim period(As of Sept. 30, 2016)
Amount(million yen)

As a percentage of
total amount of assets(%)(Note 3)

Total amount of liabilities

34,892

54.6

Total amount of net assets

28,95945.4

Total amount of assets

63,851100.0(Note 1) “Tokyo metropolitan area” refers to Tokyo, Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture. The same shallapply hereinafter.
“Regional major cities” refers to cities designated by cabinet order and peripheral areas within commutable distance of thosecities, other than those in the Tokyo metropolitan area. The same shall apply hereinafter.
“Other” refers to areas other than those in the Tokyo metropolitan area and regional major cities. The same shall apply
hereinafter.
(Note 2) “Total amount held” is the amount on the interim balance sheet as of September 30, 2016 (in the case of real estate in trust,then the depreciated book value), rounded down to the nearest million yen.
(Note 3) “As a percentage of total amount of assets” is rounded to one decimal place.

- 22 -

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017(2) Investment Assets
The Investment Corporation has acquired trust beneficiary rights of 18 properties as of the date of this document.
The following are the assets (real estate or trust beneficiary rights that have real estate as trust assets; hereinafter, collectively
referred to as “portfolio assets”) held by the Investment Corporation as of September 30, 2016.

Property Real estate in trust(Property name)no.

Location

Acquisition priceConstruction(Note 2)completion
Price Share ofdate(million portfolio(Note 1)
yen)
(%)

Book
value
(millionyen)(Note 3)

Appraisal
Numbervalue
of(million
tenantsyen)(Note 5)(Note 4)

Annualrent(millionyen)(Note 6)

Total
leasablearea(m2)(Note 7)

Total
leasedarea(m2)(Note 8)

Occupancy
rate(%)(Note 9)OF-01

Seishin Building

Shinjuku-ku,
Tokyo

1989/03/31

7,880

13.7

7,935

7,960

22

413

5,616.89

5,616.89

100.0

OF-02

NK Building

Chiyoda-ku,
Tokyo

1991/10/28

3,730

6.5

3,758

3,780

4

218

3,394.35

3,394.35

100.0

OF-03

Tsukasacho Building

Chiyoda-ku,
Tokyo

1988/01/20

3,820

6.7

3,846

3,860

4

201

3,250.68

3,250.68

100.0

OF-04

Takadanobaba
Access

Shinjuku-ku,
Tokyo

1994/01/14

3,330

5.8

3,353

3,370

7

172

3,691.34

3,691.34

100.0

OF-05

Azabu Amerex
Building

Minato-ku,
Tokyo1988/06/30

2,020

3.5

2,039

2,050

7

122

2,240.02

2,240.02

100.0

OF-06

Hiei-Kudan Building

Chiyoda-ku,
Tokyo

1991/09/17

1,960

3.4

1,978

1,990

10

129

2,298.86

2,298.86

100.0

OF-07

Shin-Yokohama
Nara Building

Yokohama-shi,
Kanagawa

1992/03/17

1,910

3.3

1,927

1,930

16

127

4,049.99

3,646.62

90.0

24,65042.9

24,83824,94070

1,382

24,542.13

24,138.76

98.4

Office (7 properties) total
RT-01

La Park Kishiwada

Kishiwada-shi,
Osaka

1994/08/30

6,460

11.3

6,515

6,510

46

768

38,099.10

36,362.62

95.4

RT-02

Suroy Mall
Chikushino

Chikushino-shi,
Fukuoka

2007/06/22

7,670

13.4

7,727

7,810

24

589

32,159.64

32,159.64

100.0

RT-03

Seiyu Minakuchi

Koka-shi,Shiga

1999/05/31

4,150

7.2

4,177

4,240

1

Not
disclosed(Note 10)

23,814.88

23,814.88

100.0

RT-04

Suroy Mall
Nagamine

Kumamoto-shi,
Kumamoto

2007/08/23

4,180

7.3

4,210

4,320

21

297

12,600.68

12,368.58

98.2

106,674.30

104,705.72

98.2

Retail (4 properties) total

22,46039.2

22,631

22,88092

Notdisclosed(Note 10)

RS-01

Shiroi Logiman

Shiroi-shi,
Chiba

1995/05/09

2,180

3.8

2,204

2,190

284

260

21,896.86

20,805.03

95.0

RS-02

Matsuya Residence
SekimeOsaka-shi,
Osaka

1989/08/18

1,820

3.2

1,836

1,850

128

157

7,749.11

7,550.00

97.4

RS-03

Royal Hill Kobe
Sannomiya II

Kobe-shi,Hyogo

2004/09/17

1,480

2.6

1,492

1,500

111

109

3,217.93

3,128.74

97.2

RS-04

Urban Plaza
ImazatoOsaka-shi,
Osaka

1991/12/20

940

1.6

950

959

65

75

4,648.64

4,434.33

95.4

6,420

11.2

6,483

6,499

588

601

37,512.54

35,918.10

95.7

Not
disclosed(Note 10)Not
disclosed(Note 10)Not
disclosed(Note 10)Not
disclosed(Note 10)

Residential (4 properties) total

Not
disclosed(Note 10)Not
disclosed(Note 10)

OT-01

Funabashi Hidan

Funabashi-shi,
Chiba

2003/05/19

1,720

3.0

1,743

1,760

1

OT-02

Funabashi Hi-Tech(Note 11)

Funabashi-shi,
Chiba

2001/09/05

710

1.2

686

749

1

OT-03

Confomall Sapporo

Sapporo-shi,
Hokkaido

2003/03/10

1,400

2.4

1,415

1,430

47

123

5,941.26

5,899.23

99.3

Other (3 properties) total

3,830

6.7

3,845

3,939

49

Not
disclosed(Note 10)

18,516.16

18,474.13

99.8

Portfolio total/average

57,360100.057,80058,258799

4,189

187,245.13

183,236.71

97.9- 23 -

100.0

100.0

Sakura Sogo REIT Investment Corporation (3473)
Interim Financial Report for Fiscal Period Ending February 2017
(Note 1) “Construction completion date” is the date of new construction in the real estate registry for the main building.
(Note 2) “Acquisition price” is the sale and purchase price stated in the real estate trust beneficiary right sale and purchase agreement
for the portfolio asset. The sale and purchase price does not include consumption tax, local consumption tax and theexpenses required for the acquisition.
(Note 3) “Book value” is the depreciated book value of the asset as of September 30, 2016, rounded down to the nearest million yen.
(Note 4) “Appraisal value” has February 19, 2016 as the date of value. In the case of Suroy Mall Chikushino and Suroy Mall Nagamine,
because an appraisal report was obtained on May 20, 2016 prior to the 2016 Kumamoto Earthquake (the “Kumamoto
Earthquake”), another appraisal report was obtained on July 15, 2016 in light of the completion of restoration work on thedamaged portions conducted thereafter and the amount is based on the latter report.
(Note 5) “Number of tenants” is the sum total of the number of tenants (excluding warehouse, signboard, parking lot, etc. tenants)
under the lease contract for the real estate in trust as of September 30, 2016. In cases where multiple rental units arecontracted under a single name, the tenant is counted as 1 tenant. In cases where there is a pass-through-type master leaseagreement concluded or to be concluded for the asset, the total number of end-tenants (excluding warehouse, signboard,
parking lot, etc. end-tenants) is stated. In the case of La Park Kishiwada, Suroy Mall Chikushino and Suroy Mall Nagamine,
ATM tenants and those subleasing from tenants are not included.
(Note 6) “Annual rent” is the annual rent or the amount annualized by multiplying by 12 the monthly rent stated in the lease contract
for the real estate in trust as of September 30, 2016 (in the case of real estate in trust under multiple lease agreements, thenthe sum total amount of these) (including common area maintenance charges, but excluding warehouse, signboard, parking
lot, etc. usage fees, not factoring in for rent-free periods, and excluding consumption tax), rounded to the nearest million
yen. However, in cases where there is a pass-through-type master lease agreement concluded between the master lease
company and lessors, etc., it is the annual rent or the amount annualized by multiplying by 12 the monthly rent stated in thesublease contract with end-tenants for the real estate in trust as of September 30, 2016 (in the case of real estate in trust
under multiple sublease agreements, then the sum total amount of these) (including common area maintenance charges,
but excluding warehouse, signboard, parking lot, etc. usage fees, not factoring in for rent-free periods, and excluding
consumption tax), rounded to the nearest million yen. Accordingly, the figures for each property may not necessarily add up
to the total figures. In the case of La Park Kishiwada, Suroy Mall Chikushino and Suroy Mall Nagamine, rent from ATM tenants
and those subleasing from tenants are not included.
(Note 7) “Total leasable area” in the case of real estate in trust is the floor area regarded as being available for leasing based on thelease agreement or building drawing, etc. of the building for the asset as of September 30, 2016.
(Note 8) “Total leased area” is the sum total of the leased area stated in the lease contract for the real estate in trust as of September
30, 2016. However, in cases where there is a pass-through-type master lease agreement concluded between the master
lease company and lessors, etc., it is the sum total of the leased area of end-tenants stated in the sublease contract for thereal estate in trust as of September 30, 2016. There may be cases where total leased area exceeds total floor area, because
there are cases where portions that are not included in total floor area are included in leased area in the lease contract, etc.
In the case of La Park Kishiwada, Suroy Mall Chikushino and Suroy Mall Nagamine, the ATM area is not included.
(Note 9) “Occupancy rate” is the occupancy rate (total leased area expressed as a percentage of total leasable area) as of September
30, 2016, rounded to one decimal place.
(Note 10) Not disclosed, because it is information for which consent for disclosure has not been obtained from the tenant and, if
disclosed, could undermine the relationship of trust with the tenant and thereby create disadvantages, such as difficulty
maintaining the lease agreement over the long term, and ultimately undermine the interests of unitholders.
(Note 11) Fulfillment of the condition precedent provided in the building lease agreement dated March 30, 2016 with the tenant. (Thecondition precedent, which is that the tenant be confirmedby the City of Funabashi as a company that can set up operations
at the property, was fulfilled on October 11, 2016.)- 24 -