Kenedix Office Investment Corporation
29th Fiscal Period Results(Ended October 2019)
December 16, 2019
Ticker Symbol : 8972
Summary of Presentation0

Table of contents

Section 1 29th fiscal period (2019/10) management highlights and future initiatives P. 2
Section 2 29th fiscal period (2019/10) results,
30th fiscal period (2020/4) earning forecasts and31st fiscal period (2020/10) earning forecasts

P. 6

Section 3 Portfolio overview

P. 10

Section 4 External growthP. 14

Section 5 Internal growthP. 17

Section 6 Efforts for ESG

P. 26

Section 7 Financial strategy

P. 30

1

Section 1

29th fiscal period (2019/10) management highlights
and future initiatives

2

29th fiscal period (2019/10) management highlights
and future initiatives

AUM

424.5

bn
yen

Acquired Chofu Center Building throughnegotiated transaction supported by the sponsor

Occupancy
rate

99.5%

Portfolio
NOI yield

4.8%

The green certified properties exceeded the
majority of the portfolio through active andcontinuous efforts (based on total floor area)

Increase inmonthly rent
upon tenant
turnoverIncrease inmonthly rent
upon rent revision

21.5

mn
yen

Ratio of the number of rent increase contracts
upon tenant turnover rose to 85.1%

Interest-bearing
debt averageinterest rate

LTV

Reduced financial cost through refinancing⚫

Future initiatives

⚫
⚫
⚫

51.3%

Focus on continuous asset reshuffle andinternal growth

Occupancy rate remained high with the strong
tenant demands

1.02%

Percentage of total
floor area of green
certified properties

42.1%

Maintained stable financial base by keeping
LTV at a conservative levelyen
9.8 mnNo downward rent revisions in 29th fiscal period,
and ratio of rent increase contracts increased to36.6%, more than the result of previous fiscal
periodCorrespondent
financial
institutions

tutions
16 insti-

Further diversified and increased lending
financial institutions following borrowings
from two new institutions

Continue selective investment through diversified acquisition methods such as joint investment utilizing
the Kenedix group capabilities and asset reshuffle by mutual transactions
Focus on further raising unit rent by conducting value-upgrading works based on CS survey results
Work on financial cost reduction through diversifying borrowing periods while maintaining stable financial base
Aim for compatibility between sustainable growth and social responsibility through continuous initiatives for
improving sustainability
3

Dividend and reserve for reduction entry
Dividend excluding gain on sale increased by 4.1% from 28th fiscal period, exceeding the previous forecast
Normalized dividend is expected to exceed 14,000 yen by steadily implementing each growth strategy
Changes in DPU excluding gain on sale

DPU and reserve for reduction entry per unit history (Note 1)

28th fiscal
periodCurrent
Forecast

DPU

As of Dec. 13, 2019

One-time increase in dividend
due to gain on sale of real estate
One-time increase in dividend
due to reversal of reverse for reduction entry

Reserve for reduction entry per unit

Previous
forecast
As of Jun. 12, 2019

(yen)

Increase of 32.4%(from 21st fiscal period (2015/10))

12,50011,365
10,30010,707

11,733
13

12,90013,45813,719446

619

13,63913,370

Actual13,100
Actual13,10029th fiscal
period30th fiscal
periodActualForecast

13,639 (+4.1%) 13,910 (+2.0%)
Forecast

Forecast

13,370 (+2.1%) 13,650 (+2.1%)+3.0%
13,91014,050

Aim forfurther growth13,6501,165

652
13,100

6,476

3,814

第21期
21st
fiscalperiod（15/10(2015/10)期）
Actual
実績

第22期
22nd
fiscalperiod（16/4(2016/4)期）
Actual
実績

第23期
23rd
fiscalperiod（16/10(2016/10)期）
Actual
実績

第24期
24th
fiscalperiod（17/4(2017/4)期）
Actual
実績

第25期
25th
fiscalperiod（17/10(2017/10)期）
Actual
実績

第26期
26th
fiscalperiod（18/4(2018/4)期）
Actual
実績

第27期
27th
fiscalperiod（18/10(2018/10)期）
Actual
実績

第28期
28th
fiscalperiod（19/4(2019/4)期）
Actual実績

第29期
29th fiscal
period（19/10(2019/10)
実績期） Actual
Forecast
当初予
想 of Reserve
The balance
for reduction entry (Note 2)

2,775 mn yen

第30期
第31期
30th
fiscal
31st
fiscal第30期
periodperiod（20/4（20/10（20/4期）(2020/4)(2020/10)
期） 今回予期）
Previous
Current
Forecast
forecast forecast
想
当初予
予想
想for reduction entry will be used to respond to one-time decrease
Reservein revenue due to large tenants move-out and expense accrued, etc., anddilution of dividend due to a public offering during the fiscal period

Note 1：Figures per unit are calculated based on the number of investment units issued and outstanding as of the end of each fiscal period. The same applies hereinafter
Note 2：Reserve for reduction entry is calculated by either adding provision of reserve for reduction entry or subtracting reversal of reserve for reduction entry stated on Basis for Calculating Cash Distribution for the relevant fiscal
periods to/from the balance of reserve for reduction entry on the balance sheet as of the end of the relevant fiscal periods

4Portfolio appraisal profit and NAV per unit
Appraisal profit expanded to 85.0 billion yen due to continuous asset reshuffle and an increase in appraisal value
Raised NAV per unit by 9.9% year over year

Changes in portfolio appraisal profit amount and ratio (Note 1)

Changes in NAV per unit (Note 2)• Both appraisal profit amount and ratio reached a record highsince listing at the end of 29th fiscal period (2019/10)(bn yen)

20.7

1000
100.0

含み益額（左軸）
Appraisal profit amount (left axis)
含み益率（右軸）
Appraisal profit ratio (right axis) 17.6

(%)

(yen)

21.0

750,000+9.9%
719,000

18.0

800
80.0
13.9

687,000

700,000
654,000

15.0
650,000

600
60.0

11.9
12.0

10.9

631,000
615,000

600,000
9.0

400
40.0

550,000
6.0
200
20.0
3.0

0
0.0

41.5

47.2

57.0

71.0

85.0

25th
fiscal第25期
period（17/10期）(2017/10)

26th
fiscal第26期
period
（18/4期）(2018/4)

27th
fiscal第27期
period（18/10期）(2018/10)

28thfiscal第28期
period（19/4期）(2019/4)

29th
fiscal第29期
period（19/10期）(2019/10)

0.0

500,000

450,000

25th
fiscal第25期
period（17/10期）(2017/10)

26th
fiscal第26期
period
（18/4期）(2018/4)

27th
fiscal第27期
period（18/10期）(2018/10)

28thfiscal第28期
period（19/4期）(2019/4)

29th
fiscal第29期
period（19/10期）(2019/10)

Note 1: Appraisal profit amount is calculated by subtracting book values from appraisal values for all properties owned as of the end of relevant fiscal periods
In addition, appraisal profit ratio is calculated by dividing appraisal profit amount by book value as of the end of relevant fiscal periods (rounded to the first decimal place)
Note 2: NAV per unit is truncated to the nearest thousand yen after subtracting the amount of DPU

5

Section 2

29th fiscal period (2019/10) results,
30th fiscal period (2020/4) earning forecasts and31st fiscal period (2020/10) earning forecasts

6

Outline of 29th fiscal period (2019/10) financial results
Declined revenue and income mainly due to disappearance of gain on sale
Despite the impact of decline in revenue caused by large tenant turnover, boosted up rental NOI thanks torevenue contribution of property acquisition, etc.
29th fiscal period (2019/10) actual
28th fiscal
period(2019/4)
Actual(mn yen)

29th fiscal
period(2019/10)
Forecast

29th fiscal
period(2019/10)
Actual29th (actual) 29th (actual)vsvs28th (actual) 29th (forecast)Difference
Difference(announced on
Jun. 12, 2019)

A

B

C

C-A

C-B

Operating revenue

15,212

15,04815,0271-184

1

Operating expense

8,039

8,324

8,199

2 +1602

Operating income

7,172

6,723

6,828

-344

-20

-125
+104

Ordinary income

6,179

5,730

5,845

-334

+115

Net income

6,178

5,729

5,844

-334

+115

DPU (yen)

13,71913,37013,639

-80

+269

+299

-

-

-

-

Provision (+)/reversal (-) ofreserve for reduction entry
Gain/loss on sale ofreal estate
Rental NOI

Comparison against 28th fiscal period (2019/4) actual
1 Decrease in operating revenue
Disappearance of gain on sale of real estate-565 mn yen

Revenue contribution of an acquired property
in 29th fiscal period+224 mn yen

Decrease in revenue from existing properties(due to free rent period for large tenants, etc.)
Increase in revenue from utility expense due toseasonal and other factors
Increase in dividend income

2 Increase in operating expense
Increase in utility expense due to seasonaland other factors
Increase in taxes (a property acquired in 27th fiscal
period, etc.)
Increase in depreciation

3 Disappearance of gain on sale of real estate--

10,084

10,188

957

978

3

-565

-

10,287

+202

+98

966

+8

-11

Decrease in revenue from utility expense due toseasonal and other factors
Increase in premium income

2 Decrease in operating expense
Interest expense, etc.

-42 mn yen+159 mn yen+17 mn yen+160 mn yen+81 mn yen+55 mn yen+50 mn yen-565 mn yen

Comparison against 29th fiscal period (2019/10) forecast
1 Decrease in operating revenue

565-184 mn yen

Decrease in utility expense due to seasonal andother factors-20 mn yen-58 mn yen+17 mn yen-125 mn yen-142 mn yen

730th (2020/4) and 31st (2020/10) fiscal periods earnings forecasts
Expect to increase operating revenue and net income in 30th fiscal period owing to gradual expiration of free rent
periods of large tenants and full-period revenue contribution of an acquired property
Expect rental NOI to increase in 31st fiscal period as well due to increase in revenue from existing properties, etc.
30th (2020/4) and 31st (2020/10) fiscal periods forecasts
29th fiscal
period(2019/10)
Actual(mn yen)

30th fiscal 31st fiscal
30th
31st
periodperiod(forecast) (forecast)(2020/4)(2020/10)
vsvs
Forecast
Forecast 29th (actual)
30th
Difference (forecast)Difference

A

B

C

B-A

C-B

Operating revenue

15,027

15,191

15,506

1 +163

1 +314

Operating expense

8,199

8,262

8,503

2

+62

2 +241

Operating income

6,828

6,929

7,003

+101

+73

Ordinary income

5,845

5,961

6,021

+116

+60

Net income

5,844

5,960

6,020

+116

+60

Comparison between 29th fiscal period (2019/10) actualand 30th fiscal period (2020/4) forecasts
1 Increase in operating revenue
Revenue contribution of an acquired property
in 29th fiscal period
Increase in revenue from existing properties (revenue
contribution of large tenants, etc.)
Decrease in revenue from utility expense due toseasonal and other factors

2 Increase in operating expense

13,63913,91014,050+271+140Provision (+)/reversal (-) ofreserve for reduction entry

-

-

-

-

-

Gain/loss on sale ofreal estate

-

-

-

-

-

Rental NOIInterest expense, etc.

+70 mn yen+286 mn yen-142 mn yen+62 mn yen

Decrease in utility expense due to seasonal and otherfactors-106 mn yen

Increase in repair/maintenance expense+104 mn yen

Increase in depreciation+40 mn yen

Comparison between 30th fiscal period (2020/4) forecasts
and 31st fiscal period (2020/10) forecasts
1 Increase in operating revenue

DPU (yen)+163 mn yen

Increase in revenue from existing properties (revenue
contribution of large tenants, etc.)
Increase in revenue from utility expense due toseasonal and other factors

2 Increase in operating expense
Increase in utility expense due to seasonal and otherfactors+314 mn yen+79 mn yen+217 mn yen+241 mn yen+203 mn yen

10,287

10,463

10,562+176+99

Decrease in repair/maintenance expense-61 mn yen

966

952

966

-14

+13

Increase in taxes (an acquired property in 29th fiscal
period, etc.)+32 mn yen

Increase in depreciation+41 mn yen

8

Memo

9

Section 3

Portfolio overview

10Portfolio growth and changes in the number of properties
Continue selective investment and asset reshuffle with improvement of the portfolio quality in mind
Aim for further growth by keeping an eye on real estate market trends while firmly maintaining investment criteria

Portfolio growth (based on total acquisition price) and the number of properties (Note 1) (Note 2)(bn yen)(# of properties)

オフィスビル（左軸）Office(left axis)
600.0
6,000

都市型商業施設（左軸）Centralurban retail (left axis)# of properties (right axis)
物件数（右軸）Residential (left axis)
住宅（左軸）
その他（左軸）Other (left axis)

96

97

100

PO Fiscal period with public offering (PO)

90
5,000
500.0
80

424.5

PO

415.8

70

PO

4,000
400.0

PO

60

PO

3,000
300.0

50
PO
PO

40
2,000
200.0

PO

31

30

PO

20
1,000
100.0

69.1

10
0

1st

第1期
fiscalperiod（05/10）(2005/10)

3rd

第3期
fiscalperiod（06/10）(2006/10)

5th

第5期
fiscalperiod（07/10）(2007/10)

7th

第7期
fiscalperiod（08/10）(2008/10)

9th

第9期
fiscalperiod（09/10）(2009/10)

11th

第11期
fiscalperiod（10/10）(2010/10)

13th

第13期
fiscalperiod（11/10）(2011/10)

15th

第15期
fiscalperiod（12/10）(2012/10)

17th

第17期
fiscalperiod（13/10）(2013/10)

19th

第19期
fiscalperiod（14/10）(2014/10)

21st

第21期
fiscalperiod（15/10）(2015/10)

23rd

第23期
fiscalperiod（16/10）(2016/10)

25th

第25期
fiscalperiod（17/10）(2017/10)

27th

28th

29th

0

第27期
fiscal 第29期
fiscalfiscal 第28期
period （19/10）
periodperiod （19/4）（18/10）(2018/10) (2019/4) (2019/10)

Note 1: The amount and the number of properties are shown as of the end of each fiscal period. Figures are truncated to the nearest 0.1 billion yen. Figures in this material are truncated to the nearest unit unless otherwise stated
Note 2: Classification by use of owned properties has been changed from 26th fiscal period (2018/4) due to changes in the management guideline on December 1, 2017. The same applies hereinafter

11

Portfolio diversification
Portfolio mainly consisted of mid-sized office buildings with advanced tenant diversification
Plan to maintain approx. 80% investment ratio in the Tokyo metropolitan area
Breakdown by asset type (Note 1)
Office Bldg.
(Other)16.0%(8 properties)

Breakdown by region (Note 2)
Other
0.6%
(1 property)

End of 29th
fiscal period(2019/10)
97 properties

Other regional areas
18.2%

Office Bldg.
(mid-sized)
83.3%(88 properties)

End of 29th
fiscal period(2019/10)

Office Bldg.

Other Tokyo
metropolitan area
30.0%

99.3%
(96 properties)

Tokyo central
5 wards
51.7%

Tokyo metropolitan area

81.7%

Breakdown of the number of tenants by leased floor area (Note 3)
300 tsubo or
more
7.3%
200 - less than
300 tsubo
5.8%

100 - less than
200 tsubo
22.0%

End of 29th
fiscal period(2019/10)

Less than 100 tsubo
64.9%# of tenants:
1,192
Less than 200 tsubo

86.9%
Note 1: Portfolio breakdown by asset type based on acquisition price (truncated to the first decimal place)
Note 2: Portfolio breakdown by region based on acquisition price (truncated to the first decimal place)
Note 3: Based on the number of tenants in each office building. Tenants leasing more than one property are counted as 1 tenant for each building without aggregating by name-base

12

Memo

13

Section 4External growth14

Acquired Property in 29th fiscal period (2019/10)
Acquired the Property with relatively high profitability through negotiated transaction supported by the sponsor
The first joint acquisition with Kenedix Retail REIT Corporation that further diversified the acquisition methods
Joint acquisition with Kenedix Retail REIT Corporation
Chofu Center Building (Retail wing)(Acquired on October 24, 2019)

Chofu Center Building(Acquired on June 14, 2019)
KDO

Kenedix Retail REIT Corporation (KRR)

TBU
Office compartment
Retailcompartment
Parking compartment

Acquisition priceAppraisal value

8,700 mn yen
9,920 mn yen• Focused on changes in office buildings demand and acquired Chofu Center Building in
the Chofu area, where the new supply is limited, at a reasonable price through negotiatedtransaction(As of April 1, 2019)

NOI yield (estimate) (Note 1)

4.8%

NOI yield after depreciation(estimate) (Note 2)

4.3%

Appraisal NOI yield (Note 3)

5.5%• Kenedix Retail REIT Corporation acquired the other compartment (retail wing) supported
by Kenedix, Inc., our sponsor• The first joint acquisition of complex asset by the Kenedix Group’s listed investment
corporations that further expands the external growth strategy of KDO characterized bydiversified acquisition methods

Note 1: Calculated by dividing estimated NOI after excluding extraordinary factors calculated by the Asset Management Company for the year of acquisition by acquisition price (The figure is rounded to the first decimal place.
For yields, the same applies hereinafter)
Note 2: Calculated by dividing estimated NOI after depreciation (estimated NOI – estimated depreciation expenses) by acquisition priceNote 3: Calculated by dividing annualized net operating income (based on the direct capitalization method described in the appraisal report as of April 1, 2019) by acquisition price15

Track record of asset reshuffle in and after 21st fiscal period (2015/10)
Conduct strategic asset reshuffle after comprehensively evaluating building age, profitability, appraisal profit/loss, etc.
Improved the portfolio quality
21st Fiscal
Period(2015/10)

22nd Fiscal
Period(2016/4)

23rd Fiscal
Period(2016/10)

24th Fiscal Period(2017/4)

KDX Hamamatsucho
Center Bldg.

KDX Nagoya
Nichigin-mae Bldg.

KDX Shin-Nihonbashi
Ekimae Bldg.

(Compartmentalized ownership ･Partial land leasehold)

BR Gotanda

25th Fiscal
Period(2017/10)
KDX Sapporo
Kitaguchi Bldg.

26th Fiscal Period(2018/4)
Mitsubishijuko
Yokohama Bldg.
(Quasi-co-ownership interest)

27th Fiscal
Period(2018/10)

28th Fiscal
Period(2019/4)

29th Fiscal
Period(2019/10)

Total
acquisition
price

Chofu Center Bldg.

KDX Hamamatsucho
Place(Compartmentalized
ownership)15
properties
Acquisition

KDX Shin-Osaka Bldg.

KDX Toranomon
1chome Bldg.

KDX Nihonbashi
Edo-dori Bldg.

ARK Mori Bldg.
(Compartmentalized
ownership)

KDX NishiShinbashi Bldg.

KDX Shibuya
Nanpeidai Bldg.

KDX Yokohama
Kannai Bldg.

106.4
bn yenNagoya Nikko
Shoken Bldg.

Mutualtransaction

Mutualtransaction

Mutualtransaction

KDX Toranomon
Bldg.

BUREX
Toranomon

KDX Nihonbashi
Kabutocho Bldg.

Mutualtransaction

KDX Shin-Yokohama 381 Bldg.

KDX IkejiriOohashi Bldg.

KDX ShinYokohama
214 Bldg.

Frame Jinnan-zaka

Frame Jinnan-zaka(Quasi-co-ownershipinterest: 49%)

(Quasi-co-ownershipinterest: 51%)

RetailRetail15
properties

Disposition
KDX Nogizaka Bldg.

Toranomon
Toyo Bldg.

KDX Roppongi KDX Gobancho KDX Kanda
228 Bldg.
Bldg.
Misaki-cho Bldg.

Residence Charmante
Tsukishima

KDX Hamamatsucho
Dai-2 Building

66.9
bn yenResidential

Average age(Note 2)

NOI yield

Controlled an increase in average portfolio building age after four years and a half below two years through asset reshuffle focused on relatively old buildings

23.9 years

Net
increase in
asset size

4.5%

NOI yield rose by 0.3% mainly due to disposal of low-profit properties and raising property profitability after acquisition, etc.

4.8%

92.1%

Further raised the investment ratio in office buildings through disposal of non-core assets (residence and urban retail property)

99.3%

Appraisal profit
amount (Note 5)

39.4

1.9 bn yen

In addition to real estate price increase, enhancement of appraisal profit/loss amounted to 8.9 bn yen owing to asset reshuffle,
contributing to portfolio quality improvement

85.0 bn yen

bn yenCredit rating

A+(Note 3)

Portfolio Ratio of officeindicators building (Note 4)(Note 1)

22.1 years

Upgraded to AA- in January 2017 for structuring the high-quality portfolio, sound financial management, and proven asset management

AA-

Note 1: The portfolio indicators for 21st fiscal period (2015/10) are as of the end of 20th fiscal period (2015/4)
Note 2: Average age is calculated by weighted average of office buildings’ age based on acquisition price as of the end of each fiscal period (truncated to the first decimal place)
Note 3: NOI yield calculation for the properties without taxation on property and city planning taxes in the year of acquisition are assumed as if they are imposed. Acquisition price for newly acquired / sold properties is calculated by multiplying the ratio of actual operatingdays to the relevant fiscal period's operating days
Note 4: Portfolio breakdown of office buildings based on acquisition price (truncated to the first decimal place)
Note 5: Appraisal profit amount is the sum of differences between appraisal value and book value for the properties owned as of the end of relevant fiscal periods.

16Section 5Internal growth17Changes in occupancy and turnover ratio for office buildings
The occupancy rate remained highDespite temporary decline mainly due to large tenant turnover, the actual occupancy rate is expected to recoverwith gradual expiration of free rent periods in 30th fiscal period

Occupancy rate performance of office buildings (Note 1)
(%)
100.0
99.0

稼働率（契約面積ベース）
Occupancy rate(contracted area based)
99.1

Actual occupancy rate
実質稼働率（FR面積控除後）(excl. free rent area)
99.1

99.2

Occupancy rateduring fiscal period (estimate)
30th
fiscal31st fiscal
期中平均稼働率（想定）periodperiodTurnover ratio (annualized) ofoffice buildings (Note 2) (Note 3)

Ave. 99.3% Ave. 98.8%
99.5

99.2

2.0% were affected by large tenant
turnover in KDX Toranomon
1Chome Building

0.8%

1.1%

1.9%

1.8%

2.5%

2.8%

98.4

(%)

6.7

98.0

6.3
97.3

97.3
96.7

96.5
95.0

Actual occupancy rateduring fiscal period (estimate)
30th 期中平均稼働定）
fiscal31st fiscal
periodperiodAve. 98.0%

26th fiscal period
averageoccupancy rate
99.2%

27th fiscal period
averageoccupancy rate
99.1%

28th fiscal period
averageoccupancy rate
99.1%

Ave. 97.4%

4.4
3.6

3.3

3.2

29th fiscal period
averageoccupancy rate
99.1%

90.0
第25期
End
of 25th（17/10期）末fiscal period

第26期
End
of 26th（18/4期）末fiscal period

第27期
End
of 27th（18/10期）末fiscal period

第28期
End
of 28th（19/4期）末fiscal period

第29期
End
of 29th（19/10期）末fiscal period(2017/10)(2018/4)(2018/10)(2019/4)(2019/10)

第30期
End
of 30th（20/4期）末fiscal period(2020/4)
想定
Estimate

第25期
25th
fiscalperiod（17/10期）(2017/10)

第26期
26th
fiscalperiod
（18/4期）(2018/4)

第27期
27th
fiscalperiod（18/10期）(2018/10)

第28期
28th
fiscalperiod（19/4期）(2019/4)

第29期
29th
fiscalperiod（19/10期）(2019/10)

第30期
30th
fiscalperiod（20/4期）(2020/4)
想定
Estimate

Note 1: Occupancy rate (contracted area based) is calculated by dividing contract based leased area by leasable area, and actual occupancy rate (excl. free rent area) is calculated by subtracting free rent area from leased area thendividing that area by leasable area. The figures are rounded to the first decimal place. Average occupancy rate of office buildings during each fiscal period is a simple average of month-end occupancy rates of owned officebuildings during each period. The estimated average (actual) occupancy rate for 30th fiscal period (2020/4) and 31st fiscal period (2020/10) is the figure that is used as part of the assumptions for the earnings forecasts
Note 2: Turnover ratio is calculated and annualized as follows: (Total leased area of the end-tenants who cancelled their lease agreements during the six-months period from the beginning to the end of each period) / (Averageleasable area of all office buildings owned by KDO as of each month-end during the relevant period) x 2. Figures are rounded to the first decimal place
Note 3: Estimate for 30th fiscal period (2020/4) is based on the cancellation notice, etc. received by November 30, 201918

Trends in move-ins/outs and rent changes upon tenant turnover for office buildings
The ratio of the number of rent increase contracts upon tenant turnover further rose with strong tenant demands
The monthly rent upon tenant turnover significantly increased in 29th fiscal period owing to large tenant turnover
Changes in monthly rent upon tenant turnover (Note 3)

Changes in main indicators of tenant move-ins/outs
Tenant move-in and move-out areas and the number of tenants (Note 1)( ) Number of move-in/out

space leased (tsubo)
入居面積

space vacated (tsubo)
退去面積(mn yen)

(49)
(62)
(45)

4,487
(31)

3,269

(45)

5,795

Total rent
increase

3,962

5.0

2,208
-2,428-2,184(35)(27)

Total rent
decrease-3,097(48)-4,751-4,555(44)(47)% of the numberof rent increase
contracts upontenant turnover

3.5

5.5

12.1

21.5

-1.5

-1.0

-1.0

-1.0

-0.4

第25期
25th fiscal（17/10期）
period

第26期
26th fiscal（18/4期）period

第27期
27th fiscal（18/10期）
period

第28期
28th fiscal（19/4期）period

第29期
29th fiscal（19/10期）
period(2017/10)(2018/4)(2018/10)(2019/4)(2019/10)

50.8%

70.0%

69.8%

82.1%

85.1%

Changes in unit rent upon tenant turnover (Note 4)
25th fiscal
第25期
period（17/10期）(2017/10)

26th fiscal
第26期
period
（18/4期）(2018/4)

27th fiscal
第27期
period（18/10期）(2018/10)

28th fiscal
第28期
period（19/4期）(2019/4)

29th fiscal
第29期
period（19/10期）(2019/10)

Free rent period (# of month) (Note 2)
Tokyo
Central 5 wards
Tokyo
Metropolitan area
(excluding Tokyo
central 5 wards)

Other
regional areas

3.6

3.6

2.4

1.9

2.9

2.7

2.8

3.3

2.7

2.2

2.7

2.5

1.7

0.9

1.7

(yen/tsubo)
excluding the impact
of KDX Tranomon
1chome Building

0.6

新規テナントの賃料単価
New unit rent
従前テナントの賃料単価
Previous unit rent

21,453
18,213

14,713

14,692

13,65013,61225th
fiscal第25期
period（17/10期）

26th
fiscal第26期
period
（18/4期）(2017/10)(2018/4)+20.7%

15,751
17,77814,35327th
fiscal第27期
period（18/10期）(2018/10)

15,14028th
fiscal第28期
period（19/4期）(2019/4)

29th
fiscal第29期
period（19/10期）(2019/10)

Note 1: The number of tenants and leased area are calculated based on floor. In case that an end-tenant move-out from/move-in to multiple floors, the number is counted by floor
Note 2: Free rent period refers to a period from the start date of contract until the start date of contracted full rent. Figures are expressed as a simple average in terms of month by dividing by 30 days (rounded to the firstdecimal place). The analysis is based on office floors on the 2nd floor or above and excludes buildings that were newly acquired during the relevant fiscal periods
Note 3: Total amount of increases/decreases in monthly rent before and after tenant turnover for each fiscal period is respectively aggregated for the spaces where the rents paid by new tenants and by previous tenants can be compared
Note 4: New unit rent is an average unit rent calculated based on aggregated unit rents and areas for the spaces where rents paid by new tenants and by previous tenants can be compared for each fiscal period of “Tenant move-in andmove-out areas and the number of tenants”. Previous unit rent is an average unit rent calculated based on aggregated previous unit rents and areas for the spaces where new unit rents are calculated

19

Status of rent revisions with existing tenants
The amount of rent increase upon rent revisions in 29th fiscal period exceeded the high level in the previous
fiscal period, and the trend for upward rent revisions is expected to continue in the next fiscal period as wellCareful building management boosted the ratio of rent increase upon rent revisions
Changes in rent upon rent revisions (based on monthly rent) (Note 1)(thousand yen)

Increase in rent
増賃額

Status of rent revisions (based on leased floor area) (Note 2)
Exception for negotiation(Higher thanmarket rent)
(72)
17.5%

Decrease in rent
減賃額

9,885
9,051

7,034

Exception for negotiation(Higher thanmarket rent)
(71)
16.9%

7,266
No change
(148)
51.6%

Rent
increase
(94)
36.6%

29th
fiscal period(2019/10)329

28thfiscal period(2019/4)
305

6,826
5,977

Rent decrease(2)
0.6%
Rent increase
(83)
30.4%

No change
(164)
46.5%

Negotiation
targetNegotiation
targetNote: The number of case is noted in bracket

Changes in the number of rent increase contracts andrent increase rateTokyo
central 5 wards
都心5区

Other
areas
都心5区以外

94
83

-409

-472

72

-402

62
51

-2,032
26th fiscal
period
第26期(2018/4)（18/4期）

27th fiscal
period
第27期(2018/10)（18/10期）

28th fiscal
period
第28期(2019/4)（19/4期）

29th fiscal
period
第29期(2019/10)（19/10期）

30th fiscal
period
第30期(2020/4)（20/4期）
Onward以降確定分
confirmation

Confirmed as ofNovember 15, 2019

Rent increase rate
(incremental average)

64

38

25
25th fiscal
period
第25期(2017/10)（17/10期）

42

41

41

26

31

24

25th fiscal
第25期
period（17/10期）(2017/10)

26th fiscal
第26期
period
（18/4期）(2018/4)

27th fiscal
第27期
period（18/10期）(2018/10)

28th fiscal
第28期
period（19/4期）(2019/4)

29th fiscal
第29期
period（19/10期）(2019/10)

7.8%

6.2%

5.8%

5.7%

6.7%

30

(Note 3)Note 1: Difference in monthly rent before and after rent revision in each fiscal period is calculated by aggregating the change amount per contract in each fiscal period (rounded to the nearest thousand yen)
Note 2: “Market rent” in this graph is a new contracted rent (standard floor) for each property estimated by CBRE as of the end of each fiscal period
Note 3: Rent increase rate is calculated by dividing the sum of increase in monthly rent by the sum of monthly rent before revision (rounded to the first decimal place)20

Rent gap of KDO office buildings
The number of owned properties with increased market rent increased again driven by strategic
value-upgrading works
The ratio of contracted rents lower than market rent level expanded to 77.6%
Breakdown of rent gaps by rent revision schedule

Breakdown of rent gaps (based on monthly rent) (Note 1)(as of the end of 29th fiscal period (2019/10), based on monthly rent) (Note 1) (Note 2)

Over10%128 mn yen

159 mn yen

Between
0% and 10%

286 mn yen

Between-10% and 0%641mn yen
Lower thanmarket rent level

74.3%

609 mn yen

Endof 28th
第28期
fiscal period（19/4期）末(2019/4)

第29期
29th
fiscalperiod（19/10期）(2019/10)（注3）
Endof 29th
第29期
fiscal period（19/10期）末(2019/10)(excl. Tokyo central 5 wards)

Other Regional Areas

End of 28th
fiscal period(2019/4)

23 / 48 properties (+3.1%)

End of 28th
fiscal period(2019/4)

82.6%

201

136

第30期
30th
fiscalperiod（20/4期）(2020/4)
到来分

14

158

124
89.9%

750mn yen

164

127

77.6%

■Number of owned properties with increased market rent andperiod-over-period unit rent increase rate

Tokyo Metropolitan Area

Over
+10%
+10%超

40
35

18
41

136

Lower than-10%

End of 27th
fiscal period(2018/10)

0%~+10%+10%以内

81

23
13

47
19

683 mn yen

Lower thanmarket rent level-10%~0%-10%以内31

Higher thanmarket rent level

Tokyo central 5 wards

Over
-10%
-10%超

(mn yen)273mn yen

75.8%

159

189

第31期
31st
fiscalperiod（20/10期）(2020/10)
到来分

第32期
32nd
fiscalperiod（21/4期）(2021/4)
到来分

80.0%

102

145

67
55

第33期
33rd
fiscalperiod（21/10期）(2021/10)
到来分

第34期
34th
fiscalperiod
（22/4期）(2022/4)
以降到来分
onward51.4%

Historical average rent gaps (Note 3)
(%)
30.0

End of 29th
fiscal period(2019/10)

43 / 48 properties (+2.8%)

19.5

20.0
10.0
0.0

10.3
4.7
-2.2

-4.3
-10.7

21.0
14.4
7.1

4.2

-0.6

-2.1

-4.2

-6.6

-7.3

-8.9

-10.0

15 / 29 properties (+4.3%)

21 / 29 properties (+3.8%)

9 / 18 properties (+5.6%)

15 / 18 properties (+5.1%)

-20.0

End
of
End
of
End
of
End
of
End
of
End
of
End
of
End
of
End
of
End
of
End of
End of 第27期
End of 第28期
End of
End of
End
of
第1期
第3期
第5期
第7期
第9期
第11期
第13期
第15期
第17期
第19期
第21期
第23期
第25期
第29期
1st fiscal （06/10期）
3rd fiscal （07/10期）
fiscal 9th
fiscal 11th
fiscal 13th
fiscal 15th
fiscal 17th
fiscal 19th
fiscal （15/10期）
21st fiscal （16/10期）
23rd fiscal （17/10期）
25th fiscal （18/10期）
27th fiscal （19/4期）
28th fiscal （19/10期）
29th fiscal
5th fiscal 7th（05/10期）（08/10期）（09/10期）（10/10期）（11/10期）（12/10期）（13/10期）（14/10期）
periodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiod(2005/10) (2006/10) (2007/10) (2008/10) (2009/10) (2010/10) (2011/10) (2012/10) (2013/10) (2014/10) (2015/10) (2016/10) (2017/10) (2018/10) (2019/4) (2019/10)

Note 1: A new contracted rent (standard floor) for each property estimated by CBRE as of the end of each fiscal period is deemed the market rent; the gap between the contracted rent for each tenant as of the end of the fiscal
period and the market rent is recognized as a rent gap. No gap is classified into “Between 0% and +10%”
Note 2: Regarding the office buildings owned by KDO as of the end of 29th fiscal period (2019/10), distribution of the rent gaps between the contracted rent for each tenant and the market rent estimated by CBRE as of the endof 29th fiscal period (2019/10) by the timing of rent revisions for each tenant. The rents equal to market rents are classified into “Between 0% and +10%”
Note 3: Calculated as the weighted average, based on leasable floor area, of the gap rate between the average contracted rent of the standard floor for the office buildings owned by KDO as of the end of each fiscal period andthe market rent for each property estimated by CBRE at the time of appraisal

21

Overview of 8th CS survey results (August 2019)
Affirmed tenants’ high “overall satisfaction” and “intention for continuous occupancy” owing toappropriate replacement works, value-upgrading works, etc.
CS survey results: reasons for satisfaction (note)

CS survey overview• Together with J.D. Power Asia Pacific, we continuously implement CS survey on
hardware (e.g. facility and equipment) and software (e.g. response to tenants) for
existing tenants in office buildings (persons in charge of general affairs andemployees) on a biennial basis
Timing89 properties

工事
Renovation
11%
Security, disaster
セキュリティ・防災体制
prevention
scheme13%

Person in charge: 973
Employee: 5,052

Person in charge: 977
Employee: 5,465

Collection rate

Person in charge: 81%
Employee: 81%

Person in charge: 78%
Employee: 72%

外観・エントランス
Exterior,
entrance
8%
Restroom
トイレ
10%

その他共用部
Other
Common areas
10%
Building maintenancemanager
ビルメンテナンス担当者
12%

Elevator
エレベーター
6%

Intention for continuous occupancy (note)

Changes in overall satisfaction (note)■Satisfied■Somewhat satisfied■Neutral■Somewhat dissatisfied■Dissatisfied

■N/A

28%

オフィス（広さ・窓/採光・空調等）

Hardware49%
Software51%

92 properties# ofdistributions

2015年調査2015 survey
（第6回）
(6th)
723
（723件）

清掃・清掃員

7th survey
8th survey
Aug. 2017 (25th fiscal period) Aug. 2019 (29th fiscal period)# of properties

Office(Space, window /daylighting, airconditioning, etc.)
15%

Cleaning staff
7%
Property
manager
プロパティ・マネジャー
8%

50%■Definitely want to stay

16%

4%
1%

2017年調査2017 survey
（第7回）
(7th)
（790件）
790

33%

50%

14%

2019年調査2019 survey
（第8回）
(8th)
（758件）
758

34%

48%

14%

82% of tenants showed “Satisfied”
or “Somewhat satisfied”

1%

2015年調査2015 survey
（第6回）
(6th)
（723件）
723■Rather would stay55%

■Rather not stay

■Do not want to stay

36%

■N/A

6% 2%
1%

3%

2017年調査2017 survey
（第7回）
(7th)
（790件）
790

61%

35%

4%

4%

2019年調査2019 survey
（第8回）
(8th)
（758件）
758

62%

33%

4% 1%

95% of tenants showed intention
for continuous occupancy

Note: Result on survey that interviewed persons in charge of general affairs

22Strategic value-upgrading works contributing to internal growth
Draw up an efficient value-upgrading work plan based on the CS survey results
Reinforce property competitiveness and improve tenant satisfaction aimed at further enhancing the portfolio profitability
Overview of value-upgrading works

KDX Sakura-dori Building• Periodic CS surveys found that appropriate replacement and valueupgrading works of restrooms, etc. improve the tenant satisfaction• Out of relatively-old owned properties that have become deteriorated
and obsolete, select those that are considered possible to raise rents
because of highly competitive potential and value-upgrading works• Establish a track record of unit rent increase upon tenant turnoverand upward rent revision, and restore and enhance the profitability

KDX Nakameguro Building (a portion of floors)
BeforeAfter

Return on
investment(estimate) (Note 1)

Unit rent increase
rate uponrent revision (Note 2)

8.9%

11.1%

BeforeAfter

Return on
investment(estimate) (Note 1)

Ratio of unit rent
increase upontenant turnover (Note 3)

19.3%

39.5%

Elevator hall

Restrooms

EffectKDX Karasuma Building
After

Elevator hall

Elevator hall

Restrooms

Restrooms

Effect

BeforeReturn on
investment(estimate) (Note 1)

Ratio of unit rent
increase upontenant turnover (Note 3)

6.5%

44.8%

EffectNote 1: Calculated potential revenue increase amount based on unit rent increase through value-upgrading works estimated by CBRE, and then divided by construction expense (rounded to the first decimal place)
Note 2: For the tenants for which KDO succeeded in upward rent revision in 29th fiscal period (2019/10), calculated the difference in the rents paid by each of these tenants before and after the rent revision, and thencalculated the increase rate as the weighted average based on the subject floor area (rounded to the first decimal place)
Note 3: Compared the rents in the same space paid by new tenants that moved in 29th fiscal period (2019/10) and by previous tenants (rounded to the first decimal place)23

Construction expense (actual/budget)
Strategically allocate funds for value-upgrading works to improve property profitability at the moment
Temporarily budget works for tenant move-in in 30th fiscal period as well, expecting a substantial increase inrent revenue in the future
Changes in depreciation and construction expense(actual/budget)
Depreciation

Repair/maintenanceRepair/renovation work budget for 30th fiscal period(2020/4) (Note)
Items

Capex

(mn yen)
2,500

2,295

2,293

2,460

2,419

2,369

2,358

Value-upgrading works
Replacement works

2,502
2,241

2,000

548

1,947

Estimatedamount(mn yen)
481
268
627

Description of works
tenant and common areas
Air-conditioning facilities
Other major facilities

Eco-friendly works(Installation of LED lightings, etc.)
Outer wall repair
Maintenance/repair works

Percentage of total
expense (%)
21.4
12.0
28.0

110

4.9

280
476

12.5
21.2

1,835
1,653
1,500

1,634

409

1,494
1,404

Note: Figures are approximate estimates as of the date inwhich repair plan was prepared

403
767

451

568

1,426

1,463

91.1

KDX Toranomon 1chome Building, KDX Sakura-dori Building, KDX Higashi-Shinagawa Building• Replacement works of air-conditioning facilities:

1,231
886

2,241

• Value-upgrading works (renovation of tenant areas, common areas, restrooms, etc.):

1,692

953

Percentage todepreciation
expense (%)

Properties to undergo major repair/renovation in 30th
fiscal period (2020/4)

1,000

500

30th fiscal
period (2020/4)
total

483

Senri Life Science Center Building, Koishikawa TG Building

925• Replacement works of Elevator:
KDX Iidabashi Square, KDX Higashi-Shinagawa Building, KDX Shiba-Daimon Building,
KDX Mita Building, KDX Nishi-Gotanda Building, KDX Sapporo Kitaguchi Building,
KDX Nishi-Shinjuku Building, Itopia Nihonbashi SA Building

0
25th
fiscal第25期
period（17/10期）(2017/10)
actual実績

26th
fiscal 27th
fiscal
第26期
第27期
periodperiod
（18/4期）（18/10期）(2018/4)(2018/10)
actualactual実績
実績

28th
fiscal 29th
fiscal 30th
fiscal
第28期
第29期
第30期
periodperiodperiod（19/4期）（19/10期）（20/4期）(2019/4)(2019/10)(2020/4)
予算
actualactualbudget
実績
実績
予算

31st
fiscal第31期
period（20/10期）(2020/10)
予算
budget予算• Outer wall repair:
KDX Ginza East Building、KDX Takanawadai Building, KDX Shin-Nihonbashi Ekimae Building,Senri Life Science Center Building, KDX Sakura-dori Building24End-tenants of KDO office buildings
The largest tenant occupies 2.4% of total leased floor area and each of tenants other than the top 4 occupies
less than 1.0%
A highly diversified tenant base with the top 10 tenants occupying around 10% of the total leased floor area
List of top end-tenants for office buildings

Average rent for office buildings by area (Note 2)(as of the end of 29th fiscal period (2019/10))
Tenant nameLeasedarea(tsubo)share ofleased floorarea (%) (Note1)

1 Mitsubishi Heavy Industries, Ltd. 3,408.4

2.4

Mitsubishijuko Yokohama Bldg.

2 WeWork Japan G.K.

1.3

KDX Toranomon 1chome Bldg.

1,920.0

25th fiscal period 27th fiscal period 29th fiscal period(2017/10)(2018/10)(2019/10)

Name of property

Tenant A
3(wholesale, retail and dining)

1,550.8

1.1

KDX Kawasaki-Emimae
Hon-cho Bldg.

4 Japan Pension Service

1,424.9

1.0

Chofu Center Bldg.

5 JASTEC Co., Ltd.

1,304.6

0.9

KDX Takanawadai Bldg.

6 Yokohama City

1,237.7

0.9

Mitsubishijuko Yokohama Bldg.
KDX Yokohama Kannai Bldg.

15,400 yen

16,100 yenJapan

14,500 yen

15,200 yen(based on # of tenants) (Note 3)
Transportation,
Communication
36, 3.2%
Real Estate
48, 4.3%

0.8

KDX Higashi Umeda Bldg.

8

Tenant B(Manufacturing)

1,168.0

0.8

KDX Kobayashi-Doshomachi Bldg.

Individual
55, 4.9%
Manufacturing
147, 13.1%

0.8

Tenant D(service provider)

1,080.1

0.7

KDX Musashi-Kosugi Bldg.

Total

15,404.9

10

10.7

Finance, Insurance
50, 4.4%

Public sector (other)4, 0.4%Mining1, 0.1%
Infrastructure
1, 0.1%

Construction
49, 4.4%

1,201.3

1,109.1(+200 yenperiod over period)

Tenant diversification by type of business

Customer relation
telemarketing, CO,LTD

KDX Musashi-Kosugi Bldg.
KDX Hiroshima Bldg.

(+200 yenperiod over period)

15,500 yen

7

Tenant C
9(service provider)

16,500 yen

Tokyo
metropolitan area

# of tenants
1,125

Wholesale,
Retail, Dining
258, 22.9%

Service provider
476, 42.3%

IT-related
service providers
115, 10.2%(Note 4)Note 1: Leased area of each end-tenant against total leased floor area of KDO portfolio as of the end of 29th fiscal period (2019/10) (rounded to the first decimal place)
Note 2: Average rent is calculated by dividing total amount of contracted rents of office buildings for each area as of the end of each fiscal period by the total leased floor area (rounded down to the nearest hundred yen)
Note 3: The chart shows the breakdown of tenants by type of business based on the total number of tenants in office portfolio (aggregated by name-base) as of the end of 29th fiscal period (2019/10) (rounded to the first decimal place)
Note 4: Classified the companies as “IT-related service provider” that are categorized as software business company, information processing service provider, information provider and other information service providers according to thesmall classification defined in “TBD Industry Classification” of Teikoku Databank, Ltd.
25

Section 6

Efforts for ESG

26

Efforts for ESG ①
Efforts for Environment
GRESB Real Estate Assessment• Acquired "Green Star" rating for 8 consecutive years as aresult of our efforts for improving sustainability performance• Earned the 2nd-highest-rated “4 Stars” in GRESB Rating• Acquired the highest “A” Level for Public Disclosure on ESG

DBJ Green Building Certification• Acquired “two stars” for Chofu Center Building in 29th
fiscal period (2019/10)• A total of 25 properties in our portfolio were awarded theCertification, including KDX Toranomon 1chome Bldg.,
which earned the highest-rated “five stars”

Certification for CASBEE for Real Estate• 3 properties were newly ranked “S,” the highest rating, andother 3 properties “A” by CASBEE. A total of 12 properties inour portfolio were awarded the Certification“S”: KDX Kawasaki-Ekimae Hon-cho Bldg., KDX Utsunomiya Bldg.,
KDX Hiroshima Bldg.
“A”: KDX Funabashi Bldg., KDX Shin-Yokohama Bldg., KDX Shin-Osaka Bldg.

BELS Certification• In October 2014, KDX Musashi-Kosugi Bldg. wasawarded a BELS Certification (three stars) for the firsttime in history as a J-REIT owned property• In April 2016, KDX Iidabashi Square was awarded theCertification (three stars). 2 properties in our portfolio
were awarded the Certification

Acquisition of environmental certification• As KDO has been actively and continuously
promoting green buildings, the properties
that acquired DBJ Green Building
Certification, Certification for CASBEE forReal Estate and BELS Certification exceeda majority of the portfolio in terms of ratio offloor area to total floor area

End of 29th fiscal period (19/10)
Acquisition of environmental
certification (Note)
Properties

33

Total floor area ratio

・

51.3%

Note: The number of properties is counted without duplication in case a property has multiple
certification and evaluation
Total floor area ratio is calculated without duplication by dividing certified floor area by total
floor area of the portfolio

LED lighting installation in rental spaces• Installation of LED lightings in common
area is roughly completed, installing LED
lightings in rental spaces in a planned way• Already installed in 5 properties in 28th
fiscal period (2019/4) and 3 properties in
29th fiscal period (2019/10), and will be
gradually introduced in the future

Activities for energy conservation• Post posters promoting the activities for energy
conservation in summer (July to September)and winter (December to February) in theproperties• Eco-friendly paper including limestonematerials are used for the posters

27

Efforts for ESG ②
Efforts for Social
Support on Japan for UNHCR by installing monitors• Newly installed monitors in elevator halls andelevators, and showed their advertising video on
Japan for UNHCR’s activities for free
• Installed the monitors in 24 properties as ofDecember 1, 2019 to ease the stress of tenants’
employees and visitors while waiting
for an elevator

Efforts for Governance
Asset management fee structure of the Asset Management Company• Changed the asset management fee structure of Asset Management Fees I
through III in 27th fiscal period to further enhance the linkage between the asset
management fees and unitholder profits
Asset Management Fee I

Total assets x 0.13%

Asset Management Fee II

Distribution per unit (Note 1) x 23,000

Asset Management Fee III
Acquisition Commission
Sale Commission

Signing on to the Principles for Financial Action
for the 21st Century by the Asset Management Company• Kenedix Real Estate Fund Management, Inc., the asset
management company for KDO, became a signatory to
the Principles for Financial Action towards a Sustainable
Society (Principles for Financial Action for the 21stCentury (“the PFA21”))• Further promote initiatives for sustainability, being awareof responsibility and role needed toward a sustainable
society

Publication of “ESG Disclosure”• Made a report to stakeholders about basic
policies of sustainability, promotion system
and major ESG efforts, etc. of KDO and theAsset Management Company, and disclose
them on the website

Increase in distribution per unit (Note 2) x Number of outstanding
investment units x 10%
Acquisition price x 0.5%
(0.25% for acquisition from related parties)
Sale price x 0.5% at a maximum

Note 1: When there is a loss carried forward, obtained by dividing the amount calculated by subtracting loss carried forward fromincome before income taxes before Asset Management Fees II and III by the number of outstanding investment units as ofthe end of the relevant fiscal period
Note 2: Obtained by subtracting simple average of DPU for the most recent 4 fiscal periods from DPU. If the amount subtracted
does not exceed zero, Asset Management Fee III shall be zero

Decision-making process with transparency & check-and-balance system• The Asset Management Company creates management guidelines of KDO, and sets
forth basic investment management guidelines, including investment policy, related
party transaction rules, distribution policy and disclosure policy, regarding the asset
management of KDO• Furthermore, as set forth in the management guidelines, the Asset Management
Company creates asset management plans, etc. (including medium-term businessplans and annual business plans as well as asset management plans) and makes
decision of property acquisition, according to investment policy set forth in the
management guidelines and related party transaction rules• The decision-making flow for establishing and revising the management guidelines
and asset management plans, etc. and that pertaining to acquisition and sale ofassets are established in principle as follows
Proposal

Office REIT
Department

Deliberation
and Resolution

Review

Compliance
Officer

Relatedparty
transactions,etc.

Compliance
Committee

Deliberation
and Resolution

Deliberation
and Resolution

Investment
Office REIT
RelatedCorporation's
party
Department
transactions,Board of
Asset
etc.
Directors
Management
Committee

ReportBoardof Directors

28

Memo

29

Section 7

Financial strategy

30

Status of debt financing
Decrease financial cost at refinancing while paying attention to the trend of interest rate and balancing borrowing period
Seek to reduce refinancing risk through strategic diversification of debt maturities
Refinance record for 29th fiscal period (2019/10)

Average interest rate and remaining period to maturity (Note 1)(Total amount of 8.2 bn yen) (Note 2)
1.45%• Reduced financial cost through refinancing and extended
borrowing period

Weighted average interest rate (incl. up-front fee)
平均金利（融資実行手数料を含む）
1.39%

Conditions before
refinancing

Conditions afterrefinancing

Average interest rate

0.82%

0.50%

Average borrowing
period4.3 years

5.5 years

1.25%
1.19%

Averageremaining
period tomaturity (year)

1.16%

1.10%

1.07%

1.06%

1.04%

1.02%

End
of 20th
第20期
fiscal period（15/4期）末End
of 21st
第21期
fiscal period（15/10期）末End
of 22nd
第22期
fiscal period（16/4期）末End
of 23rd
第23期
fiscal period（16/10期）末End
of 24th
第24期
fiscal period（17/4期）末End
of 25th
第25期
fiscal period（17/10期）末End
of 26th
第26期
fiscal period（18/4期）末End
of 27th
第27期
fiscal period（18/10期）末End
of 28th
第28期
fiscal period（19/4期）末End
of 29th
第29期
fiscal period（19/10期）末(2015/4)(2015/10)(2016/4)(2016/10)(2017/4)(2017/10)(2018/4)(2018/10)(2019/4)(2019/10)

4.1

4.3

4.7

4.9

4.7

5.0

5.2

5.2

5.0

4.8

Interest-bearing debt by maturity(excl. short-term borrowings)
30th
31st
32nd
33rd
fiscal period fiscal period fiscal period fiscal period(2020/4)(2020/10)(2021/4)(2021/10)

Balance of interest-bearing debt by maturity
Corporate bonds 8.0 bn yen(bn yen)

Borrowings 177.0 bn yen
14.0

12.7

11.8

11.1
9.5

13.0

12.5
11.3
9.9

9.1

9.0

10.8

1.0
11.4
2.0

6.7

10.5
bn yen11.1
bn yen9.5
bn yen11.8
bn yenAveragefinancial cost

0.94%

0.99%

1.24%

1.07%

8.3

7.5

1.0

Balanceof debt maturing

7.2

2.0

5.3
2.0

Major indicators related to financial stability

3.8

30th
fiscalperiod(2020/4)

32nd
fiscalperiod(2021/4)

34th
fiscalperiod(2022/4)

36th
fiscalperiod(2023/4)

38th
fiscalperiod(2024/4)

40th
fiscalperiod(2025/4)

42nd
fiscalperiod(2026/4)

44th
fiscalperiod(2027/4)

46th
fiscalperiod(2028/4)

48th
fiscalperiod(2029/4)

Ratio offixed interest rate (Note 3)

Status of credit rating
(JCR)

97.7%

AA- (Stable)

Note 1: Average interest rate and borrowing period are the weighted average based on the balance of debt outstanding as of the end of each fiscal period (with the average interest rate rounded to the second decimal place
and the average borrowing period rounded to the first decimal place)
Note 2: Average interest rate and borrowing period are the weighted average of the interest rate of borrowings (incl. up-front fee) and borrowing period based on the balance of borrowings, respectively (with the averageinterest rate rounded to the second decimal place and the average borrowing period rounded to the first decimal place).
Note 3: Includes the borrowings with floating interest rate fixed by interest rate swap (rounded to the first decimal place)31Historical changes in LTV and status of interest-bearing debt financing
Maintain stable financial base by keeping LTV at a conservative level with a target of 45%
Started to obtain loans from two new financial institutions and further diversified our sources of funding
Borrowing capacity for acquisition (Note 2)
as of the end of 29th
fiscal period (2019/10)

Historical LTV (interest-bearing debt ratio) level (Note 1)
(%)
45.8

45.3

46.2

47.2

47.5

(in the case of LTV 45% limit)

48.4

Approx. 23.0 bn yen
42.8

43.1

42.8

42.8

42.6

43.3

43.9
41.9

40.3

41.7

42.1

Appraisal-value 35.2
based LTVEndof 13th
第13期
fiscal period（11/10期）末(2011/10)

Endof 14th
第14期
fiscalperiod（12/4期）末(2012/4)

Endof 15th
第15期
fiscal period（12/10期）末(2012/10)

Endof 16th
第16期
fiscalperiod（13/4期）末(2013/4)

Endof 17th
第17期
fiscal period（13/10期）末(2013/10)

Endof 18th
第18期
fiscalperiod
（14/4期）末(2014/4)

Endof 19th
第19期
fiscal period（14/10期）末(2014/10)

Endof 20th
第20期
fiscalperiod（15/4期）末(2015/4)

Endof 21st
第21期
fiscal period（15/10期）末(2015/10)

Endof 22nd
第22期
fiscalperiod
（16/4期）末(2016/4)

Endof 23rd
第23期
fiscal period（16/10期）末(2016/10)

Endof 24th
第24期
fiscalperiod
（17/4期）末(2017/4)

Endof 25th
第25期
fiscal period（17/10期）末(2017/10)

Endof 26th
第26期
fiscalperiod
（18/4期）末(2018/4)

Endof 27th
第27期
fiscal period（18/10期）末(2018/10)

Endof 28th
第28期
fiscalperiod（19/4期）末(2019/4)

Endof 29th
第29期
fiscal period（19/10期）末(2019/10)

Note 1: LTV is calculated by dividing the balance of interest-bearing debt by the amount of total assets as of the end of each fiscal period. Appraisal-value based LTV is calculated by dividing the balance of interest-bearing debt by the sum of the amount of total
assets and appraisal profit/loss of owned properties as of the end of each fiscal period (rounded to the first decimal place)
Note 2: Estimated borrowing amount of debt which can be additionally procured from financial institutions or new issuance of investment corporation bonds for property acquisition by new debt financing, assuming that the LTV can be increased to a certain value

Issue status of investment corporation bonds as of the endof 29th fiscal period (2019/10) (total of 8.0 bn yen)
Corporate bonds

Issued period

6th bonds
7th bonds
8th bonds
9th bonds
10th bonds(green bonds)

2014/7
2016/42017/72017/7

Issuedamount2.0 bn yen
1.0 bn yen
1.0 bn yen
2.0 bn yen

2019/22.0 bn yen

Interest rate

Term

1.18%
0.90%
0.26%
0.64%

10 years
12 years
5 years
10 years

0.39%

5 years

Maximum amount

6.0 bn yen

Contract period

June 3, 2019 to April 30, 2020
Acquisition of assets,
Repayment of the existing borrowings and redemption of
investment corporation bonds
Syndication-type commitment line

Contract typeCounterparty

16 lending financial institutions

2.1%
6.0%
6.4%
6.6%

Outline of the commitment line agreement(executed on May 31, 2019)

Use of proceeds

Outstanding borrowings by financial institutions as of the end of
29th fiscal period (2019/10)

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

11.2%

26.1%

Total
borrowings
from financial
institutions
177.0 bn yen

19.7%
16.7%
The number of lending financial institutions
increased from 14 to 16 following two new
borrowings: Sumitomo Life Insurance
Company and The Norinchukin Bank

Sumitomo Mitsui Banking
三井住友銀行

46,200 mn yen 26.1%

三菱ＵＦＪ銀行
MUFG Bank

34,800 mn yen 19.7%

Development Bank of
日本政策投資銀行
Japan

29,550 mn yen 16.7%

Sumitomo Mitsui Trust
三井住友信託銀行
Bank

19,900 mn yen 11.2%

Mizuho Bank
みずほ銀行

11,700 mn yen

6.6%

ResonaBank
りそな銀行

11,250 mn yen

6.4%

AozoraBank
あおぞら銀行

10,550 mn yen

6.0%

MizuhoTrust & Banking
みずほ信託銀行
The Bank of Fukuoka
The Nishi-Nippon CityBank

3,800 mn yen
2,500 mn yen

2.1%
1.4%

1,700 mn yen

1.0%

The Hiroshima Bank

1,000 mn yen

0.6%

The 77 Bank
Sumitomo Life Insurance
Company

1,000 mn yen

0.6%

1,000 mn yen

0.6%

Higashi-Nippon Bank

800 mn yen

0.5%

The Norinchukin Bank

800 mn yen

0.5%

The Mie Bank

500 mn yen

0.3%

32

Memo

33

Memo

34

Disclaimer

The contents of this document, including summary notes, quotes, data and other information, are provided solely for
informational purposes and not intended for the purpose of soliciting investment in, or as a recommendation to purchase or sell,
any specific products.
Please be aware that matters described herein may change or cease to exist without prior notice of any kind. This document
contains forward-looking statements and anticipations of future results, based on current assumptions and beliefs in light ofcurrently available information and resources. Risks and uncertainties, both known and unknown, including those relating to the
future performance of the real estate market in Japan, interest rate fluctuations, competitive scenarios, and changing
regulations or taxation, may cause Kenedix Office Investment Corporation (KDO)'s actual results, performance, achievements
and financial performance to be materially different from those explicitly or implicitly expressed in this document.

With respect to any and all terms herein, including without limitation, this document, the information provided is intended to bethorough. However, no assurance or warranties are given with respect to the accuracy or completeness thereof.
Neither KDO nor Kenedix Real Estate Fund Management, Inc. (KFM) shall be liable for any errors, inaccuracies, loss ordamage, or for any actions taken in reliance thereon, or undertake any obligation to publicly update the information contained inthis document after the date of this document.
Revised editions of this document will be posted on our website (https://www.kdo-reit.com/en/) if there should be majorcorrections going forward.

35