5th Fiscal Period
Semi-Annual Report
October 1, 2017 to February 28, 2018
Securities Code: 3462

We will strive to enhance the fundperformance to live up to the expectations
and trust of our unitholders.

https://www.nre-mf.co.jp/en/

8-5-1 Nishi-Shinjuku, Shinjuku Ward, Tokyo

Value Chain of the Nomura Real Estate Group

Message from the Management

DRIVING THE MARKET AS ONE OF JAPAN’S LARGEST REITS
Under its Medium-to Long-term Management Strategy, NMF

target of ¥50 billion. From October 2017, NFM moved on to

designated the first three to five years after its establish-

the next Growth phase, in which NMF will promote a growthment as its Quality phase, and it has advanced strategic

strategy centering on external growth, internal growth andproperty replacements (SPRs). It has completed the phasepublic offerings, by exerting the collective strengths of thein just two years, earlier than the initial plan. During the

Nomura Real Estate Group, the sponsor, and will realize a

Quality phase, NMF successfully sold properties worth

further increase in cash distributions.

TO OUR UNITHOLDERS

NMF will strive to increase
unitholder value by securing
stable income over the
medium to long term andensuring the steady growth ofassets under management.

around ¥105 billion, more than double the initial replacement

Property Acquisition Pipeline

01

Leasing Value Chain of
the Nomura Real Estate Group06

Maximize
Value

Obtain Trading
Information

OfficeRetailLogistics

01
06

Increasing
Brand Value

Site
Selection

02
Revenue
Improvement
Measures

Residential

02

Shuhei Yoshida

Measures to
Improve
Property Value

05

03

Investment
Analysis

Property
Acquisition

04
Price
Examination /Negotiation

Executive Director

Nomura Real Estate Master Fund, Inc.

In the 5th fiscal period, as key initiatives of the Growth phase, NMF steadily advanced external growth byleveraging the Nomura Real Estate Group’s property development capabilities and internal growth bymaking maximum use of the property management pipeline with a focus on strengthening its property
brands. As a result, at the end of the 5th fiscal period, NMF’s portfolio was comprised of 271 properties witha total acquisition price of ¥922.5 billion. Thanks to internal growth in upside sectors, including office andretail, operating revenues totaled ¥34,218 million, operating profit reached ¥13,212 million, and net income

05

03

Product Design/ Development

Sales

04
Leasing

came to ¥10,714 million. As a result, the per-unit distribution for the 5th fiscal period came to ¥3,047.
Since the close of the 5th fiscal period, NMF has carried out its first public offering since its founding,acquired nine excellent properties developed by the sponsor, and invested in its first ever hotel. Furthermore,
to express our strong ambition toward growth aimed at becoming the brand most trusted by unitholders, werolled out a new brand strategy and adopted a new logo, featuring a deer motif, timed to align with the

REAL ESTATEManagement Pipeline

public offering.
In the spirit of the ideals expressed in the new logo, we remain strongly committed to enhancing performance and will manage the fund’s assets with the aim of living up to the expectations and trust of ourunitholders.
As we move forward, we ask for your continued support and encouragement.

12

Highlights

New Fund LogoPERFORMANCE HIGHLIGHTS
4th Fiscal Period
Cash Distribution per Unit¥

(including distribution in excess of net income)6th Fiscal Period

5th Fiscal Period

3,037

¥

(forecast)*

3,047

¥

3,081

Operating Revenues¥

38,139 million¥

34,218 million¥

34,605 million

Operating Profit¥

15,735 million¥

13,212 million¥

13,253 million

Ordinary Income¥

13,190 million¥

10,715 million¥

10,698 million

Net Income¥

13,190 million¥

10,714 million¥

10,697 million

Total Assets Acquired¥

Total Assets¥

Interest-bearing Liabilities

927,318 million¥

1,095,828 million¥¥

488,741 million

922,568 million

1,089,820 million¥

486,198 million

44.6 %

LTV¥¥

955,984 million

The Characteristics of THE DEER
Regeneration of Strong Deer Antlers
Symbolizing our resolve for a constant advancement and thenumber one brand that we seek

497,155 million

Keen Sense of Smell and Agility

44.4 %

Symbolizing our ability to meet the changes in the market
environment and to react swiftly¥

44.6 %

Powerful Leap
Symbolizing our growth potential based on a strong support
By Nomura Real Estate GroupNet Income(Millions of yen)
40,000(Millions of yen)
15,00038,13934,71434,21813,19034,60530,97630,000We unveiled a new fund logo featuring THE DEER
associating its characteristics with NMF.

1,118,585 million* The above forecast distribution is calculated based on certain assumptions as disclosed in “SUMMARY OF FINANCIAL RESULTS (REIT) For the 5th Fiscal
Period Ended February 28, 2018”, published April 13, 2018. As such, the actual distribution may differ from this forecast due to future property acquisitions
or sales, changes in the real estate market, tenant changes or other changes in the circumstances surrounding NMF. The distribution forecast is not aguarantee of distributions

Operating Revenue

We have launched a new branding strategy with NMF’s
first public offering in our Growth Phase to express ourdecision to become the leading brand of the J-RElTs.

10,71410,00024,313

9,355

10,697

8,670

20,0005,000
10,000

The Logo Design of THE DEER
4,048

Looking Far Ahead
Our strategies with perceptions and long-term perspectives00

1st FP

2nd FP

3rd FP

4th FP

5th FP

6th FP

1st FP

2nd FP

3rd FP

4th FP

5th FP(Forecast)

Net Assets per Unit

Cash Distribution per Unit

(Yen)
150,000

(Yen)
4,000

128,318

128,777

132,939

133,069

6th FP(Forecast)

See page 55
3,000

100,000

3,036
Gain on sales 299

3,028

3,037

140

3,081

3,047

2,737

and trust of our unitholders.

50,0001,000

02nd FP

3rd FP

4th FP

5th FP

1st FP

2nd FP

3rd FP

4th FP

5th FP

6th FP(Forecast)3

We will strive to enhance the fundperformance to live up to the expectations

2,219
2,000

1st FP

Our clear intention to build a solid performance

Internal reserve of ¥140
equivalent to gain on sales

132,6970Strong Front Leg Pawing the GroundA special page of the new brand has been opened on the website.
Along with the introduction of the new brand, a video of the brand can be viewed.
4

Director and Managing Executive Officer’s Review

TRANSITIONING FROM THE QUALITY PHASE TO
THE GROWTH PHASE
the sponsor and Watermark Hotel Sapporo, which is NMF’s

Ken Okada

Director and Managing Executive Officer,
Head of NMF Investment Management
Group, Nomura Real Estate AssetManagement Co., Ltd.

first public offering has achieved a successful outcome.

first hotel asset, through the public offering this time. The

Furthermore, NMF rolled out a new brand strategy and

AUM will expand to over ¥950 billion after the acquisition of

adopted a new logo, featuring a deer motif, timed to align withthese properties. The nine properties from the sponsor are

the public offering. Starting as a REIT specializing in logistics“PMO,” “Landport” and “PROUD FLAT,” the profitable

and retail properties (former NMF), NMF transformed into aleasing asset brands developed by Nomura Real Estate

diversified REIT through a merger of three Nomura Real

Development Co., Ltd. All of them are relatively new proper-

Estate-affiliated REITs and grew dramatically through aties with high added value and enjoy strong competitivenessmerger with the former TOP REIT; and has evolved into

in the respective areas. As to Watermark Hotel Sapporo, it isJapan’s largest REIT. In addition, our appearance as well as our

located near the Susukino area, Sapporo City’s busiest

content have totally changed after having realized quality

entertainment district, while also being very close to theimprovement through SPR. Now in light of our advancement

Odori area, which serves as the city’s business hub. The

into the new stage, the Growth phase, we decided to create aproperty is thus well-positioned to welcome businesspeople

new logo to express our strong ambition toward growthin need of accommodation while also attracting tourists fromaimed at becoming the brand most trusted by unitholders.

Japan and abroad. Going forward, we anticipate an upside in(For details of the new logo, please refer to page 4.)
As we remain strongly committed to enhancing perfor-

rent revenue through rebranding. (For details of the main

mance and to manage the fund’s assets with the aim of

newly acquired properties, please refer to page 13.)
Although the timing was not the best for public offeringwith the J-REIT market remaining weak due to concerns

living up to the expectations and trust of our unitholders, weappreciate your continued interest in our business.

over a rise in the U.S. interest rates, NMF’s growth story
accompanying specific actions, such as accomplishment of

Overview of Public Offering (PO)the Quality phase which we have steadily promoted sinceForm of offering

the merger of the three REITs, transition to the Growthphase, and increase in distribution through acquisition ofquality properties centering on those developed by the

Q1. Can you give us a review of the 5th fiscal period?

sponsor as well as steady internal growth, was highly recognized, resulting in strong demand as large as around 6.6
times the planned amount of issuance while the investment

We made a transition to a new stage, the Growth phase, inresult of higher portfolio competitiveness realized by SPR.

unit price also remaining higher than the trends of all REITs

October 2017 as we had largely completed the sale of

We have worked to maximize rent revenues through upward(Tokyo Stock Exchange REIT Index). We believe that NMF’s

properties subject to strategic property replacements (SPRs)

rent revisions, etc., leveraging the portfolio’s robust stability

with the sale of Morisia Tsudanuma in the 5th fiscal periodwith a high occupancy rate of 98.6% as well as proactive

and successfully enhanced the portfolio’s quality. Including

negotiations with tenants based on this high occupancy rate.

the sale of Funabashi Logistics Center that followed, we

In particular, the office leasing market was strong and wewere able to achieve sales of ¥105 billion, more than double

successfully increased the average rent per tsubo by 1.1%

the property replacement target of ¥50 billion initially set forfrom the previous fiscal period, partially helped by thethe Quality phase. As we focus on “external growth,” “inter-

upward rent revisions of large tenants.

nal growth” and “conducting public offering” in the Growth

As a result of pressing ahead with such internal growth,

phase, we have acquired Summit Store Mukodaicho from an

we have decided to distribute ¥3,047 for the 5th fiscal

external party in addition to acquiring four properties (PMO

period, an increase of ¥27 (+0.8%) from the previous fore-

and GEMS) from the sponsor, Nomura Real Estate

cast. We believe that internal growth centering on office

Development Co., Ltd. during the 5th fiscal period, promot-

properties will continue for the time being. In addition, sinceing investment in a wide range of real estate with finest

properties developed by the sponsor are scheduled to belocation and specifications.

completed in a stream going forward, we will seek further

Internal growth, which is one of the growth engines, isalso considered extremely favorable, with no properties

growth of distribution driven by both internal and external
growth.

5¥137,474

Issue value¥133,125

Resolution date of issuance

February 1, 2018

Determination date of conditions

February 13, 2018

Payment date(third-party allotment)

March 1, 2018
(March 20, 2018)

Acquisition

Sales¥18.46 billion

After PO
(end of April 2018)PO¥927.3 billion¥16.5 billion¥23.4 billion¥33.4 billion¥955.9 billion

268 properties

5 properties

2 properties

10 properties

281 properties

Average NOI yield
Average age
Ratio of properties in Tokyo area

5.1%

4.2%

5.1%

4.4%

5.0%

19.0 years

3.5 years

36.0 years

2.6 years

18.4 years

82.0%

100%

100%

89.2%

DPU

Initial forecast forFeb. 2018 period¥3,020

LTV

44.6%

82.1%
Forecast for Aug. 2018 period¥3,081 (+2.0%)
Forecast for Feb. 2019 period¥3,102 (+2.7%)
44.4%* The average age of the properties in the PO are the figures indicated in the prospectus

Changes in Investment Unit Price(from the resolution date of issuance to the determination date of conditions)
TSE REIT Index
100

NNF

Feb. 1 Resolution date of issuance¥149,100

Feb. 13 Determination date of conditions¥143,300(Comparison with index +0.63 pt)

96

uphold “conducting public offerings” as another importantaround, we carried out the first public offering since founding.

94

Changes In Investment Unit Price(after the determination date of conditions)
TSE REIT Index

As of Apr. 10(Comparison with index +2.70 pt)

NNF

106
104
102

98

arrangements for acquiring excellent properties this time
We acquired a total of ten properties, nine properties from

4,321,800 units

Issue price

Number of properties

Along with “external growth” and “internal growth,” wemeasure in the Growth phase. As we completed

Number of investment units issued

Asset size

having major issues in current management status as a

Q2. Can you explain to us about the public offering, which was the first since founding?

138,670 units

Total issue value(including third-party allotment)

Change in Indicators
End of previous period(end of August 2017)

Domestic offering

Number of investment units offered(including third-party allotment)

100

Feb. 6 Nikkei Stock
Average -¥1,071(Concern over the increase
in interest rate in the U.S.)
Feb. 1Feb. 2Feb. 5

Feb. 6

98

Mar. 1
Payment date96
Feb. 7

Feb. 8Feb. 9Feb. 13

Feb. 13

Feb. 20

Feb. 27

Mar. 6

Mar. 13Mar. 20 Mar. 27

Apr. 3Apr. 106

Management Strategy

OVERVIEW AND PROGRESS OF MEDIUM-TO LONG-TERM
MANAGEMENT STRATEGYNMF adopts the basic principle of conducting stable management over the medium to long term and is formulating a medium-to

NMF formulates and implements medium-to long-term management
strategy with an aim to become a representative J-REIT brand.

long-term management strategy eyeing the 10 years from inception in order to realize this principle.
NMF designated the first 2-3 years from inception as the “Quality” phase which focuses on the establishment of a strong fundbrand, the following period as the “Growth” phase which maintains high quality and the 10 years from inception as the “Master”
phase when NMF evolves into a representative J-REIT brand, and will implement strategies in accordance with each phase.

Overview of Medium- to Long-term Management Strategy
2-3 years from fund inception

10 years from fund inception

Quality Phase
SPR(Strategic property
replacement)

Enhancement of
portfolio quality

Growth5th FP ~External
GrowthInternal
GrowthAsset size
¥1 trillion

Rent increase
mainly in theupside sectors

External GrowthInternal

Focused investments in high-quality
sponsor-developed properties andinvestments in new sector

Establishment of a strong fund brandPursuing further
mainly in

Growth maintaining

Phase

Master Phase

GrowthPublic Offering

revenue growth
office sector

Enhancement of unitholder value

high quality

Sustainability
Asset SizeFund Brand

Various management indicators including asset size
remain stable at a high level

Establish NMF brand in
J-REIT market

Become a representative J-REIT brandGrowth Trajectory since Inception
Realizing the expansion of asset size while promoting the enhancement of portfolio quality through asset replacement

Quality Phase

Growth Phase

Major Properties Acquired

Merger of TOP REIT

1st PO

Changes in asset size (¥100 mln)
Total sales amount (¥100 mln)
Total acquisition amount (¥100 mln)

NRE Kichijoji
Building

GEMS Ichigaya

PMO Tamachi

PMO Ginza
Hatchome

PROUD FLAT
Hatchobori

PROUD FLAT
Itabashi Honcho

PMO Shibakoen

PRIME URBAN
Meguro Mita

NEC Head Office
Building

Harumi Island
Triton Square
Office Tower Y

Nakaza Cui-daore Building

PMO
Shinnihonbashi

GEMS Daimon

PMO Nihonbashi
Mitsukoshi-mae

PROUD FLAT Sangen Jaya II

Watermark Hotel
SapporoLandport Hachioji II

Average age (year)* Excluding the merger of TOP REIT
Landport Kashiwa Shonan II

nORBESA

Summit Store Mukodaicho

1 property ¥10.8 billion

7,836

7,926

7,846

Inception (Oct. 2015)

End of 1st FP (Feb. 2016)

End of 2nd FP (Aug. 2016)

19.3

19.5

90

18.7
336

-341

9,328

9,273

9,225

9,559

End of 3rd FP (Feb. 2017)

End of 4th FP (Aug. 2017)

End of 5th FP (Feb. 2018)

1st PO (Apr. 2018)21.9 years (unexecuted SPR)

19.5

444

18.4
19.0

18.8

834

999

-341
-815

Major Properties Sold
7

1,334

17 properties ¥34.1 billion

11 properties ¥47.4 billion

NOF Nihonbashi Honcho Building
NOF Tameike Building
NOF Minami-Shinjuku Building
NOF Shinagawa Konan Building
JCB Sapporo Higashi Building, etc.

Ito-Yokado Higashi-Narashino Store
Mitsubishi Motors (Land with leasehold right) 2 propertiesNOF Technoport Kamata Center Building
Tennozu Park Side Building
Logistics Facilities in Gunma Prefecture (4 properties), etc.

-1,050-1,050

2 properties ¥23.4 billion
Morisia Tsudanuma
Funabashi Logistics Center

8

Investment in New Sector

INVESTMENT IN NEW SECTOR “HOTELS”
Background to Entry
A sector where both stable income and upside can1

be expected by combining fixed rent and variable

OfficeRetailResidential

Logistics

Hotel

Healthcare

1.0%

6.9%

Market expansion against the backdrop of stable

14.4%

Total
acquisition pricein hotel sector
approx.

demand for domestic accommodations and theincrease in the number of foreign visitors¥

Further enhancement of leasing value chain of the

3

0.7%

Other

rent

2

First Hotel Acquisition

Listed J-REIT’s Sector Diversification(as of March 31, 2018)

1.18

¥

15.4%

trillion

42.8%

Total
acquisition price oflisted J-REIT's portfolios
approx.

16.5
trillion

Nomura Real Estate Group

18.8%

Clarification of Investment Policy in Hotels
through Partial Revision to Asset Management Guidelines
Standards for determining a property’s use
Upon acquisition, the leasable floor space, rent revenue and other factors attributable to each use of the acquired real estateshall be assessed to determine its main use; properties’ whose main use is thus found to be as hotels shall be consideredhotels. Note that hotels include any attached restaurants, meeting rooms, banquet halls, spas or similar facilities.
Standards for determining the contract type
In principle, hotels to be acquired shall be managed as leased facilities (including variable-rent leases), and Nomura Real Estate
Master Fund, Inc. shall not directly commission their operation.
Property selection policy
When investing in hotels, in addition to the provisions of property selection standards applied regardless of property use, theWatermark Hotel Sapporo

Asset Management Company’s property selection policy shall be to invest with balanced consideration of profitability andstability. In particular, hotels shall be selected with regard to their location in light of such factors as the strength of the local

Acquisition price: ¥3,600 million

economy, trends in visitors from overseas and the potential impact on the surrounding area of natural disasters. Furthermore, as

Location: S apporo City,
Hokkaido

the profitability of hotels is greatly impacted by such factors as the ability of the operator and brand strength, particular weight
shall be given to the conditions of the property’s lease contract and the operator’s creditworthiness and substitutability.

Appraisal NOI yield: 5.1%

Consideration shall also be given to the division between the Asset Management Company and the operator of assets, including furniture, fixtures and equipment*, as well as the division of the burden for repairs and renovations.

Land area: 553.20 m2*Indicates assets necessary for operation of hotels such as furniture, fixtures, equipment, ornaments and kitchen equipment.

Leasable floor space: 4,425.36 m2

Environment Surrounding Hotels in Japan

Expansion of Hotel Business of the Sponsor

Total Number of Overnight Guests in Domestic Hotels

Number of Inbound Travelers

Stable demand for domestic accommodation and increase in thenumber of foreign overnight guests

Target of government: 40 million people in 2020
60 million people in 2030

Overview of New Company

Property to be Developed*
Business expansion under the brand of “NOHGA HOTEL”

Total number of Japanese overnight guests (left axis)(Millions of people)
500
400

398

Total number of foreign overnight guests (right axis)
100

413

432

427

65

300

423

18

26

33

0
2011

2012

2013

2014

2015

2016

Source: Prepared by the Asset Management Company based on “Overnight
Travel Statistics Survey” of Japan Tourism Agency in the Ministry ofLand, Infrastructure, Transport and Tourism

980

Total number of tourists

Tourists

24,03919,73720,000

70

44

200
100

438

(Thousands of people)
25,00021,04960

15,00040

10,000

20

5,000

0

0

13,413

6,218
4,057
2011

8,358
6,041
2012

16,96910,363

Name

Nomura Real Estate Hotels Co., Ltd.

Head office

1-26-2 Nishi-Shinjuku, Shinjuku, Tokyo

Capital¥100 million

Principal shareholder(shareholding ratio)

Nomura Real Estate Holdings, Inc.
(100%)

Principal business

Planning, operation and managementof hotels

Established

October 17, 2017

10,880
7,962

2013

2014

2015

2016

Source: Prepared by the Asset Management Company based on “Visitor Arrivals,
Japanese Overseas Travelers” and “Visitor Arrivals by Nationality/
Purpose of Visit” of Japan National Tourism Organization (JNTO)First property
Location: Taito Ward, Tokyo
Number of guestrooms: 1
 30
Opening: Autumn 2018 (scheduled)
Operator: Nomura Real Estate
Hotels Co., Ltd.

* NMF has not decided the acquisition of the property to be developed as of the date of this document and there is no guarantee that the property will be acquired in
the future. Moreover, the illustration above is a rendering based on design drawing, etc. and may differ from the building that will be actually completed.

10External Growth

OVERVIEW OF PROPERTIES ACQUIRED IN THE FISCALPERIOD ENDED FEBRUARY 2018 (5TH FISCAL PERIOD)

OfficeSponsorOfficeSponsorPMO Hirakawacho

RetailPMO Shinnihonbashi

SponsorRetailGEMS Kanda

SponsorGEMS Daimon

Acquisition price: ¥3,410 million

Acquisition price: ¥4,440 million

Acquisition price: ¥1,500 million

Acquisition price: ¥2,060 million

Acquisition date: September 29, 2017

Acquisition date: September 29, 2017

Acquisition date: September 29, 2017

Acquisition date: September 29, 2017

Location: Chiyoda Ward, Tokyo

Location: Chuo Ward, Tokyo

Location: Chiyoda Ward, Tokyo

Location: Minato Ward, Tokyo

Completion: January 2016

Completion: November 2016

Completion: June 2016

Completion: February 2016

Land area: 307.79 m2

Land area: 552.11 m2(Owned area: 473.11 m2 / Leased area: 79.00 m2)

Land area: 198.73 m2

Land area: 241.43 m2

Leasable floor space: 1,023.60 m2

Leasable floor space: 1,175.42 m2

Leasable floor space: 1,871.08 m2

Leasable floor space: 2,971.76 m2

RetailMorisia Tsudanuma

Investment
Acquisition

Transfer price: ¥18,000 million

Transfer date: September 29, 2017

Transfer price: ¥5,480 million
Book value: ¥4,537 million

Summit Store Mukodaicho
Acquisition date: November 30, 2017

SPR

Buyer: N omura Real Estate
Development Co., Ltd.

Funabashi Logistics Center

External party

Acquisition price: ¥5,100 million

Book value: ¥17,896 million

Logistics

RetailLocation: Nishi-Tokyo City, Tokyo
Completion: March 2009

Transferred
in 5th fiscal
periodManagement
Sale

Land area: 6,166.41 m2
Leasable floor space: 6,996.40 m2

Transfer date: January 19, 2018
Buyer: E xternal party

11

Increase in portfolio quality
with SPR

12

External Growth

OVERVIEW OF PROPERTIES ACQUIRED ALONG WITH
THE PUBLIC OFFERING
Property name
PMO Nihonbashi
Mitsukoshi-mae

Use

Location

OfficeChuo, Tokyo

Acquisition Appraisal
price
value
(Millions ofyen)(Millions of
yen)

4,310

4,520

Appraisal
NOI yield

Total floor
area
(m2)

Completion

Acquisition
date

3.5%

2,968.75

May 2016

Residential

Sponsor

PROUD FLAT Soto kanda

April 2, 2018

Acquisition price: ¥1,216 million

Acquisition price: ¥2,280 million

April 2, 2018

Location: Chiyoda Ward, TokyoPMO Shibadaimon

OfficeMinato, Tokyo

2,130

2,180

3.9%

1,755.21 September 2014

Logistics

Hachioji, Tokyo

9,230

9,310

4.4%

33,028.63 September 2016 March 1, 2018

Location: Kawasaki City,
Kanagawa

Landport Iwatsuki

Logistics

Saitama, Saitama

6,090

6,110

4.5%

24,177.15

May 2016

March 1, 2018

Appraisal NOI yield: 5.1%

PROUD FLAT Yoyogi
HachimanResidential

Shibuya, Tokyo

966

1,000

4.4%

1,081.03

January 2016

April 2, 2018Land area: 518.80 m2

PROUD FLAT Sangen Jaya II

Residential

Setagaya, Tokyo

2,750

2,800

4.4%

3,522.92

January 2014

April 2, 2018

Leasable floor space: 1,771.77 m2

PROUD FLAT Soto kanda

Residential

Chiyoda, Tokyo

2,280

2,370

4.4%

2,882.48

April 2016

April 2, 2018

PROUD FLAT Nakaochiai

Residential

Shinjuku, Tokyo

844

873

4.6%

1,333.42

December 2016

April 2, 2018

PROUD FLAT Noborito

Residential Kawasaki, Kanagawa
Hotel

Sapporo, Hokkaido

Total

OfficeSponsor

1,216

1,260

5.1%

2,000.91

April 2016

April 2, 2018

3,600

3,850

5.1%

4,348.23

March 2008

March 5, 201833,41634,273

4.4%

77,098.73

OfficeSponsorPMO Nihonbashi
Mitsukoshi-mae
Acquisition price: ¥4,310 million
Location: Chuo Ward, Tokyo
Appraisal NOI yield: 3.5%
Land area: 365.95 m (ownership)
70.52 m2 (joint
ownership)
2

Sponsor

PROUD FLAT Noborito

Landport Hachioji II

Watermark Hotel Sapporo

Residential

Residential

SponsorPMO Shibadaimon

PROUD FLAT Nakaochiai

Acquisition price: ¥2,130 million

Acquisition price: ¥844 million

Location: Minato Ward, Tokyo

Location: Shinjuku Ward, Tokyo

Appraisal NOI yield: 3.9%

Appraisal NOI yield: 4.6%

Land area: 289.59 m2

Land area: 423.28 m2

Leasable floor space: 1,463.36 m2

Leasable floor space: 1,103.88 m2

Appraisal NOI yield: 4.4%
Land area: 407.54 m2
Leasable floor space: 2,344.93 m2

Residential

Sponsor

PROUD FLAT
Yoyogi Hachiman
Acquisition price: ¥966 million
Location: Shibuya Ward, Tokyo
Appraisal NOI yield: 4.4%
Land area: 335.87 m2
Leasable floor space: 972.13 m2

Leasable floor space: 2,267.46 m2

Logistics

Sponsor

Logistics

SponsorResidential

Sponsor

Hotel

External party

Watermark Hotel Sapporo
Acquisition price: ¥3,600 million
Location: S apporo City,
Hokkaido
Appraisal NOI yield: 5.1%
Land area: 553.20 m2
Leasable floor space: 4,425.36 m2

Landport Hachioji II

13

Landport Iwatsuki

PROUD FLAT Sangen Jaya II

Acquisition price: ¥9,230 million

Acquisition price: ¥6,090 million

Acquisition price: ¥2,750 million

Appraisal NOI yield: 4.4%

Appraisal NOI yield: 4.5%

Location: Setagaya Ward, Tokyo

Location: Hachioji City, Tokyo

Location: Saitama City, Saitama

Appraisal NOI yield: 4.4%

Land area: 16,466.84 m2

Land area: 11,926.85 m2

Land area: 1,534.91 m2

Leasable floor space: 33,421.80 m2

Leasable floor space: 24,089.82 m2

Leasable floor space: 2,931.42 m2

14

External Growth

STRONG SPONSOR PIPELINES FOR EXTERNAL GROWTH
The sponsor has launched new brands for income-generating real estate by use of residential, logistics, office and retail, and has
promoted its development and operations, starting with PROUD FLAT in 2005, Landport in 2007, PMO in 2008 and GEMS in 2012.

Nomura Real Estate’s Core Logistics Facility Brand
Name

Nomura Real Estate’s Core Office Brand
Completion(plan) period

StatusMinato, Tokyo

Completed 2014

NMF Acquired

Chuo, Tokyo

Completed 2016

OperatingChuo, Tokyo

Completed 2016

NMF Acquired

PMO Uchi-Kanda PJ.

Chiyoda, Tokyo

Completed 2017

Operating

PMO Shibuya PJ.

Shibuya, Tokyo

Completed 2017

Operating

PMO Hanzomon PJ.
(entrusted development)

Chiyoda, Tokyo

Completed 2017

Working

PMO Shinjuku-gyoen PJ(entrusted development)

Shinjuku, Tokyo

Sep. 2018

Under construction

meet the needs of the changing logistics environment

PMO Tamachi II PJ.

Minato, Tokyo

Feb. 2018

Under construction

and diverse tenants.

PMO Higashi-Shinbashi PJ.

Minato, Tokyo

Apr. 2018

Under construction

Designed for optimized, efficient logistics to enhance

PMO Kyobashi-Higashi PJ.

Chuo, Tokyo

Apr. 2018

Under construction

tenant satisfaction.

PMO Ochanomizu PJ.

Chiyoda, Tokyo

Jul. 2018

Under construction

Name✔ PMO Shibadaimon
PMO Nihonbashi Edo-dori*
PMO Nihonbashi✔
Mitsukoshi-mae

PMO Nihonbashi Edo-dori

PMO Kyobashi-Higashi Project

PMO is a new category of office building that is mid-sized
yet offers the functionality and grade of a large-sizedbuilding to meet the needs of increasingly diverse
businesses.
Office buildings where people will be proud toStrategy 1
work, strengthening hiring and retention
Strategy 2

Offices that enhance corporate image andreputation, helping to attract customers

Strategy 3

Buildings with one tenant per floor to ensure
efficiency, independence and safety

Strategy 4

Places that stimulate employee motivation andcommunication, fostering enhanced productivity

LocationPMO Hamamatsucho PJ.

Minato, Tokyo

Nov. 2018

Under construction

PMO Kandasudacho PJ.

Chiyoda, Tokyo

Jan. 2020

Planning

PMO Hatchobori Shinkawa
PJ.*

Chuo, Tokyo

Apr. 2018

Under construction

PMO Akihabara-Kita PJ.

Taito, Tokyo

Dec. 2018

Under construction

PMO Nishi-Shinjuku PJ.

Shinjuku, Tokyo

Jun. 2019

Planning

PMO Shibuya II PJ.

Shibuya, Tokyo

Aug. 2020

Planning

PMO Gotanda PJ.

Shinagawa, Tokyo

Jul. 2019

Planning

Minato-ku PJ.

Minato, Tokyo

Jul. 2020

Planning

GEMS Sangenjaya PJ.

GEMS retail facilities are located mainly in urban areasand comprised primarily of a rich variety of selectNMF Acquired

Completed 2016

NMF Acquired

Landport Komaki*

Komaki, Aichi

Completed 2017

Operating

Landport Shinonome PJ.

Koto, Tokyo

Aug. 2018

Planning

Landport Narashino PJ.

Narashino, Chiba

Dec. 2019

Under construction

Landport Kawaguchi PJ.

Kawaguchi, Saitama

Jan. 2020

Planning

Landport Higashi-Narashino
PJ.

Narashino, Chiba

Aug.2019

Planning

Landport Ome I PJ.

Ome, Tokyo

Nov. 2018

Under construction

Landport Ome II PJ.

Ome, Tokyo

Jun. 2020

Planning

Landport Ome III PJ.

Ome, Tokyo

Jun. 2020

Planning

Landport Koshigaya PJ.

Koshigaya, Saitama

Jun. 2020

Planning

Landport Kasukabe II PJ.

Kasukabe, Saitama

May 2021

Planning

Landport Atsugi Aikawamachi
PJ.*

Atsugi, Kanagawa

Mar. 2020

Planning

Landport logistics facilities offer advanced functionality to* Joint Venture PJ.

Nomura Real Estate’s Core Residential Facility Brand✔

Tomigaya 2-chome PJ. (former
Mitsubishi Motors Shibuya Store)

Proud Flat Miyazakidai

Name

Location

Total
units

Completion(plan) period

StatusProud Flat
Sangenjaya II

Setagaya, Tokyo

70

Completed 2014

NMF Acquired

Proud Flat
Higashi-Kanda

Chiyoda, Tokyo

38

Completed 2015

Operating

Proud Flat
Mitsukoshi-mae

Chuo, Tokyo

40

Completed 2015

Operating

Proud Flat Yoyogi
HachimanShibuya, Tokyo

30

Completed 2016

NMF Acquired✔ Proud Flat Soto Kanda

Chiyoda, Tokyo

75

Completed 2016

NMF Acquired✔ Proud Flat Noborito

Kawasaki, Kanagawa

79

Completed 2016

NMF Acquired✔ Proud Flat Nakaochiai

Shinjuku, Tokyo

37

Completed 2016

NMF Acquired

Proud Flat
Monzen Nakacho V

Koto, Tokyo

99

Oct. 2017

Under construction

Proud Flat
Miyazakidai

Kawasaki, Kanagawa

82

Feb. 2018

Under construction

Proud Flat Togoshi

Shinagawa, Tokyo99

Dec. 2018

Under construction

Taito, Tokyo

87

Mar. 2019

Under construction

Name

Location

Completion(plan) period

StatusGEMS Jingu-mae PJ.

Shibuya, Tokyo

Apr. 2018

Under construction

PROUD FLAT properties are developed on locations

GEMS Kayabacho PJ.

Chuo, Tokyo

Feb. 2018

Under construction

optimally suited for urban rental housing selected by

Proud Flat
Asakusabashi II

GEMS Namba PJ.

Osaka, Osaka

Nov. 2018

Under construction

leveraging the Nomura Real Estate Group’s information

GEMS Tamachi PJ.

Minato, Tokyo

Feb. 2019

Under construction

Proud Flat
Higashi-Nihonbashi

Chuo, Tokyo

43

Oct. 2018

Under construction

network and know-how related to housing development
and sales.

Proud Flat
Asakusabashi III

Taito, Tokyo

41

Aug. 2018

Under construction

Quality control and proper operations and management

Proud Flat Asakusa
Kaminarimon

Taito, Tokyo

49

Jan. 2019

Under construction

Proud Flat Ryogoku

Sumida, Tokyo

90

Aug. 2019

Planning

Tomigaya 2-chome PJ.

Shibuya, Tokyo109

Feb. 2019

Planning

Kiba 5-chome PJ.

Koto, Tokyo

136

Feb. 2020

Planning

Minami-Shinagawa
2-chome PJ.

Shinagawa, Tokyo

127

Apr. 2019

Planning

Kinshicho II PJ.

Sumida, Tokyo

62

Jan. 2020

Planning

Sumida-ku PJ.

Sumida, Tokyo

35

Nov. 2019

Planning

Kameido 6-chome PJ.

Koto, Tokyo98

Dec. 2022

Planning

GEMS Nishi-Shinjuku PJ.

Shinjuku, Tokyo

Not fixed

Planning

GEMS Sangenjaya PJ.

Setagaya, Tokyo

May 2018

Under construction

GEMS Shin-Yokohama PJ.

Yokohama, Kanagawa

Jul. 2018

Under construction

GEMS Shinbashi PJ.

Minato, Tokyo

Sep. 2018

Under construction

GEMS Sakae PJ.

Nagoya, Aichi

Aug. 2019

Planning

housing complex design standards and quality control

Yokohama, Kanagawa

Sep. 2019

Planning

inspection guidelines.

are ensured using Nomura Real Estate’s proprietary rental

Jinbo-cho PJ.

Chiyoda, Tokyo

Jan. 2019

Planning

Suginami PJ.

Suginami, Tokyo

Sep. 2018

Planning

Hiroo PJ.

Shibuya, Tokyo

May 2019

Planning

Katase Kaigan PJ.

Fujisawa, Kanagawa

Feb. 2019

Planning

Chayamachi PJ.

Osaka, Osaka

Jul. 2020

Planning

restaurants.

✔ Properties acquired by NMF (as of April 2, 2018)

Facilities offer new lifestyle ideas to brighten and enrich*1 Sourced from Presentation Materials for the Consolidated Financial Results for the 3rd Quarter, FY2018*2 NMF is not scheduled to acquire the properties stated above as of today (excluding the properties stated NMF has acquired).

the everyday lives of nearby office workers and residents.

15

Completed 2016

Hachioji, Tokyo

Landport
HigashiNarashino PJ.
(former ItoYokado Higashi
Narashino)

Other Retail facilities
GEMS Kayabacho PJ.

Saitama, Saitama✔ Landport Hachioji II✔

GEMS Yokohama PJ.

GEMS Jingu-mae PJ.

Status✔ Landport Iwatsuki* Joint Venture PJ.

Nomura Real Estate’s Core Retail Facility Brand

Completion(plan) period

Location

Properties developed by using SPRs

16

Internal Growth

INTERNAL GROWTH — MANAGEMENT STATUS —OfficeRetailAverage rent for properties held at the end of the 4th fiscal period remained on an upward trend (¥17,795/tsubo ➤ ¥17,987/

Seeking internal growth primarily based on stable fixed rent as well as that based on sales-linked rent

tsubo, 1.1% increase from the previous fiscal period)

Fiscal Period Ended February 2018 Management Topics

Fiscal Period Ended February 2018 Management Topics

Renovated and opened “Takoyaki Museum” as

New contracts“TAKOPA” (Universal CityWalk Osaka)

Approximately 40% of contracts closed was for floor expansion in the same building

SHIMOKITA and Ichibancho stear

Results of rent revision

Average increase rate:

Rents of 12 properties out of 16 properties in PMO series were revised upwards

Average Rent

5.2%

Average unit rent of properties held as of the end of the previous fiscal period

Monthly rent increase

Amount affected by sales and purchases

Monthly rent increase rate

Retail (overall): Rent revenue breakdown(Millions of yen)
50

73

17,50040

17,000(%)
5.0

Average rate of increase oftenants with increased
rent renewals:
%

5.6

3.7

16,50017,021

17,41917,987

17,7953.0

20

15,0003Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Feb. 2016(5 months)

23

1.9

2.0

13

0.9

0
Feb. 2016(5 months)

2.0

1.7

10

15,500

4.0

1.0

7

5

Feb. 2017

Ratio of sales-linked rent
Morisia Tsudanuma, etc. Amount affected by sales
Approximately - ¥1.0 billion(Millions of yen)
8,000

4.4%
4.0%

3.7%

6,000

Aug. 2017

Feb. 2018

4.2%

BeforeAfter

Located in Front of Station: Increase/decrease ofmonthly rents of tenants subject to rent revisions(rate of increase/decrease)

Near stations, fixed rent

Residential areas, fixed rent

4.3%

(%)
4.8
4.2

Increase/Decrease of rent

3.0

4,000

2.4

Stable
fixed
rent

2,000

Rate of increase/decrease(Millions of yen)
800

3.6

Upside

5,000

3,000
0.0

Aug. 2016

Sales-linked rent

7,000

30

16,628* Year-on-year comparison of the actual results from March 2, 2018 when
“TAKOPA” opened to April 10, 2018. Amount of increased rent (monthly) isthe amount calculated by converting the increased rent during the targeted
40-day period into the amount for 30 days.

Rent Renewals(¥/tsubo)
18,000Sales
16.1% increase
Rent revenue
17.1% increase(increase of ¥2,040
thousand/month)*

New leasing was completed for vacant areas at Recipe(Average free rent 2.8 months ➤ 2.2 months）

16,000

TAKOPA was renovated (Universal CityWalk Osaka)

(%)
2.0

1.5%

600

1.5%

1.5

498

1.1%

400

1.2

1,000

1.0

0.8%

1.8

263
200

317

180

176

0.5

0.6

0

0.0
Feb. 2016

Aug. 2016

Feb. 2017

Aug. 20170.3%

0Feb. 2018

Feb. 2016

0.0

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Logistics
Residential

Completed leasing of Landport Atsugi. Occupancy rate of the entire portfolio is expected to be 100% from June 2018.
Fiscal Period Ended February 2018 Management Topics

Steadily achieved internal growth while receiving stable rent income

Lease up of Landport Atsugi

Fiscal Period Ended February 2018 Management Topics

Of 14,518 tsubo in total, concluded lease contract for Zone C (3,730 tsubo). (Leasing started in June 2018)
Lease contract renewed for Landport Urayasu

Promoted upward rent revision upon tenant move-ins & move-outs/

Of 21,188 tsubo in total lease contracts maturing in fiscal period ending August 2019, renewed contract to extend lease

contract renewal

maturity to fiscal period ending August 2026 for 10,619 tsubo

Implemented removal of exclusive area in line with property characteristics

PRIME URBAN Ebisu

Realized upward revision of rent upon tenant replacement even at expensive

Diversification of Tenant Contract Maturities (rent basis)

properties.

(%)
20(Example) PRIME URBAN Ebisu: 1LDK 51.0 m2 ¥225,000 (+¥14,000)
15.6%

15

In negotiations

10

11.4%
5.9%

In negotiations

0.2%
Aug. 2018

Feb. 2019

Rent Change at Move-ins & Move-outs
Down

In negotiations
Aug. 2019

4.9%
0.6%
Feb. 2020

Aug. 2020

0.0%
Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

17

Rate of monthly rent
increase/decrease:

55.9

55.4

56.9

1.7%

BeforeRent Change at Rent Renewal
Down

Flat

Up

(%)
100

Rate of monthly rent
increase/decrease:

0.2%

Seeking rent increase upon renewal

50

19.3

0

After

9.6

6.5

9.5

6.9

9.0

89.8

93.1

90.2

92.9

91.0

60.2

50

Feb. 2023

Continuously negotiated with tenants whose lease contracts will reach maturity during the fiscal periods ending
February 2019 and August 2019 and promoted further diversification of contract maturities

Up

Ratio of rent increase is increasing
46.5

3.3%

2.8%

Flat

(%)
100

9.2%

8.7%

5

0

Landport Urayasu
Maturity of contract was changed to the fiscal period
ending August 2026 with the renewal of contract

22.3

20.0

19.6

21.0

34.2

21.7

24.6

23.5

18.8

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

0

0.7

0.4
Feb. 2016

0.3
Aug. 2016

0.2
Feb. 2017

0.0
Aug. 2017

Feb. 2018

18

ESG

ESG INITIATIVES (EXTERNAL CERTIFICATION)

INITIATIVES FOR “E,” “S” AND “G”

NMF works with its asset management company to enhance unitholder value over the medium to long term by carrying out
asset management with consideration for the environment, and society and governance (ESG).

Initiatives for “E (Environment)”
Making various capital investments in owned properties to reduce the environmental burden (*Example cases in

Signatory on PRI and UNEP FI

and after 2017)

The asset management company became a signatory to both PRI and UNEP FI in December 2017 as the first real estate company-affiliated asset management company in Japan.

Principles for Responsible Investment (PRI)

United Nations Environment Programme FinanceInitiative (UNEP FI)

An international network of investors established in 2006
working to realize the Six Principles for the financial industry under the leadership of Kofi Annan who was then the
UN Secretary General. As of April 2018, about 2,000
institutions have signed on to PRI.

Energy efficiency through promotionof LED lighting

Energy efficiency through upgradingof air-conditioning equipment, etc.

Water use efficiency through installation of smart irrigation facilities

Shinjuku Nomura Building, NRE Osaka
Building, EQUINIA Shinjuku, NMF
Sendai Aoba-dori Building, Ichibancho
stear, PRIME URBAN Kagurazaka, etc.

NMF Shiba-Koen Building, NMF
Shinjuku Minamiguchi Building,
Sagamihara Shopping Center, Izumiya
Obayashi, NRE Tennozu Building,
Universal CityWalk Osaka, etc.

Unmanned watering using rainwater toreduce the environmental burden
through water-saving. The stored
rainwater can also be used in times ofdisaster.

Conclusion of an agreement
between Megalos Kanagawa and the
Kanagawa Fire Department

Holding of a summer festival at
Shinjuku Nomura Building

Safety measures for unforeseen
circumstances

An agreement has been concluded with
the Kanagawa Fire Department regarding the use of pool water for firefighting, etc. in case of disasters such as amajor earthquake

We held a summer festival as an
initiative to raise tenant satisfaction andcontribute to the community.

PMO Nihonbashi Muromachi will be
used as a disaster management hub incase of emergency. It stores food,blankets, etc. for 2,000 people in thetenant companies.

Established in 1992. A partnership between UNEP andfinancial institutions to promote the adoption of financial
systems that integrate economic development and ESG
issues. UNEP FI established PRI cooperating with UN
Global Compact.

Initiatives for “S (Society)”GRESB
NMF has now obtained a 5-star ranking, the highest on the five-grade scale that compares overall scores on the GRESB Real
Estate Assessment, a sustainability benchmark for real estate companies and property management entities. Furthermore, inrecognition of excellent disclosure of environment-and sustainability-related initiatives, the NMF received an “A” rating, thehighest on a five-grade scale, under the GRESB Public Disclosure Level evaluation scheme launched in 2017.

NMF GRESB Rating in 2017Management & Policy
Implementation & Measurement

Public Disclosure“Green Star”, “5-Star”“A”
Initiatives for “G (Governance)”

DBJ Green Building
Certification

BELS

Environment Load Reduction
Working with the Sponsor

43 properties in total, of which

18 properties were certified as

Our Sponsor, Nomura Real Estate Development Co.,

11 properties were certified

at the end of February 2018

Ltd., will standardize the acquisition of the environ-

during February 2018 period.

period.

ment-related certifications such as DBJ Green

Certified Rate*:

54.1

%

Certified Rate*:

17.6

%

Building and BELS with their development property
brands.
Environment load reduction realestate offerings

NMF’s Board of Directors

Corporate governance/compliancestructure

Training programs provided by
NREAM

In order to ensure neutrality in conducting operations of NMF, all three of the
Executive Director and Supervisory
Directors are chosen from among
independent professionals.

NREAM thoroughly prevents conflictsof interest, manages risks and complies
with laws and regulations by establishing a governance system that gives toppriority to compliance.

Compliance training: 12 times a year

Members

Compliance Committee

1 (one) Executive Director: Lawyer
2 (two) Supervisory Directors: Certified public accountant: Real estate appraiser

Deliberates approval of significant transactions with related parties, etc. and confirms
legal compliance.

Frequency of meetings

Deliberates basic policies, etc. on asset
management and investment advisory
activities and makes decisions as NREAM.

Regular session: Once a month (extraordinary sessions also held)
Term of office* Total floor space basis

19

Feedbacks on the environmental
measures

Investment Committee

BCP training: Once a year in principle
Encouraging employees to obtain
ARES (The Association for Real
Estate Securitization) Certified Master
Qualification
Number of qualification holders as of
May 2017: 106 (No. 1 among real estate
investment managementcompanies)
Business-related training: As needed(ex.: Real estate registration training,
ER training, appraisal training)

Two years for both Executive Director/
Supervisory Directors, in principle

20

Financial Strategy

FINANCIAL HIGHLIGHTSBALANCE SHEET HIGHLIGHTS

Continued to promote the lowering of average interest rate and extension of borrowing periods through refinancing utilizing the

February 2018 Fiscal Period DPU: ¥3,047 (¥27 higher than forecast)

low-interest rate environment. Conducted the first issuance of investment corporation bonds since incorporation.



Status of Interest-bearing Debt (as of end of fiscal period)
Feb. 2016 (1st FP)

Aug. 2016 (2nd FP)

Feb. 2017 (3rd FP)

Aug. 2017 (4th FP)

Feb. 2018 (5th FP)¥ 403,164 million¥ 409,771 million¥ 498,784 million¥ 488,741 million¥ 486,198 million

3.96 years

4.36 years

4.31 years

4.54 years

4.52 years
0.91%
88.0%
95.4%
44.6%

Total Interest-bearing debt
Average remaining duration
Average interest rate

1.09 %

1.03 %

0.95 %

0.92 %

Ratio of Long-term Debt

84.1 %

85.9 %

83.2 %

88.0 %

Ratio of Fixed-rate Debt

91.4 %

95.8 %

92.2 %

94.9 %

43.4 %

LTV

43.8 %

45.1 %

Diversification of Repayment Dates(Millions of yen)
60,000Borrowings

Investment corporation bonds

1.37%

1.33%

50,0000.89%
40,000

1.04%
0.72%

1.23%

0.60%

Commitment line ¥50 billion + uncommitted line of credit ¥30 billion( )Average interest rate

2.90%

1.92%
1.13%

1.06%
0.74%

0.72%

44.6 %

1.00% 0.95%
0.56%

0.71% 0.67% 0.74% 0.69% 0.73% 0.77% 0.78%

30,00020,00010,000Distributions of earnings aDistributions in excess of profit b
Total distributions a + b

10,286
2,346
12,633

10,976
1,769
12,745

690
-577
112

Internal reserves
Total internal reserves

3
3,111

587
3,694

583
583

DPU
Distributions of earnings
Distributions in excess of retained earnings per unit
[allowance for adjustment of temporary differences]
Distributions in excess of retained earnings per unit
[other distributions in excess of net earnings]

3,020
2,459

3,047
2,624

27
165

295

284

-11

(Yen)

0
6th
FP
Aug.
2018

7th
FP
Feb.
2019

8th
FP
Aug.
2019

9th
FP
Feb.
2020

10th
FP
Aug.
2020

11th
FP
Feb.
2021

12th
FP
Aug.
2021

13th
FP
Feb.
2022

14th
FP
Aug.
2022

15th
FP
Feb.
2023

17th
FP
Feb.
2024

16th
FP
Aug.
2023

18th
FP
Aug.
2024

19th
FP
Feb.
2025

Financing in February 2018 Fiscal Period
Repayment Overview
Total

¥

Average remaining
duration

0.99 %
5.1 years

Total

¥

26,320 million

Average interest
rate

0.65 %

Average remaining
duration

8.5 years* Not included a scheduled repayment of ¥42.8 million. Average interest rate is calculated
based on the interest rate upon repayment.

Credit Ratings
Credit rating agency
Japan Credit Rating
Agency, Ltd.
(JCR)
Rating & Investment
Information, Inc.
(R&I)
S&P Global Ratings
Japan Inc.
(S&P)

21st
FP
Feb.
2026

22nd
FP
Aug.
2026

23rd
FP
Feb.
2027

24th
FP
Aug.
2027

New Funding Overview

28,820 million

Average interest
rate

20th
FP
Aug.
2025

25th
FP
Feb.
2028

26th
FP
Aug.
2028

27th
FP
Feb.
2029

28th
FP
Aug.
2029

29th
FP
Feb.
2030

30th
FP
Aug.
2030

31st
FP
Feb.
2031

Overview of Issuance ofInvestment Corporation Bonds

Refinancing

21(Millions of yen)Ended Feb. 28, 2018 (5th FP) Differences
Item
Forecasts (A) Result (B)(B) - (A)Operating revenue
33,36534,218853
Rental revenues
30,55130,724172
Other rental revenues
2,810
2,907
97
Gain on sales of real estate
3
587
583
Operating expense
20,86021,006
145
Rental business expenses
14,652
14,785133
Repair expenses
1,548
1,758
209
Tax and public dues
2,700
2,699
-1
Depreciation and amortization
4,752
4,737
-15
Others
5,651
5,590
-60
Asset management fees
2,960
3,007
46
Amortization of goodwill
2,622
2,622
–
Other operating expenses
625
591
-34
Operating profit
12,504
13,212708
Non-operating revenues–
1212
Non-operating expenses
2,487
2,509
21
Interest expenses and other financial costs
2,479
2,457
-22
Investment unit issuance expenses–
42
42
Other non-operating expenses
890
Ordinary income
10,016
10,715698
Net income
10,015
10,714699
Net income (excluding gains on sales)
10,011
10,127
115

Nomura Real Estate Master Fund, Inc.
Second Series of Unsecured
Investment Corporation Bonds(with pari passu clause among specified
investment corporation bonds)

Name

Date of issuance

November 16, 2017

Issued amount¥2.0 billionTerm

10 yearsInterest rate

0.59%

Long-term
Issuer Rating:Issuer Rating:

Note

AA

Rating outlook:A+

Rating outlook:

Long-term
Corporate Rating:A

Short-term
Corporate Rating:

A-1

StableStableOutlook:

StableLoan Limit(commitment period)

Participating
Financial Institutions

Net income (excluding gain on sales)

+115■ Real estate rental profits

+136

1. Real estate rental profits of existing properties(1) Rental revenues

(+246)

Increase in revenue of existing
properties+181
Incurrence of settlement fee,cancellation fee, etc.

+ 65(2) Real estate rental business expenses
Increase in repair and maintenance

(-135)- 213

Increase in restoration work, etc. - 69E
 mergency preventive
maintenance work

- 37

Renewal work ➤ Repair work- 50

Decrease in PM fee (revision fee, etc.)

+29

2. R
 eal estate rental revenues and expenses due toproperties acquired or sold
Increase in rental revenues

+24

Decrease in real estate rental expenses

+2■ Operating expenses excluding real estate rental
expenses-12
Increase in asset management fee

- 46

Decrease in other expenses

+34■ Non-operating profit or loss

-9

-127

Decrease in interest expenses andother financial costs

+22(Millions of yen)

Investment unit issuance expenses

- 42

139
1,089,820
922,568
486,19844.6%
612,410
23,583
17,489

4,523
440
3,500
0.1%
121
100

(+26)

■ Gain on sales of real estate (internal reserve)
Gain on sales of Funabashi LC, etc.

+583* Impact on net income is indicated with +/-Factors in Change of DPU (¥/unit)
February 2018 period (5th)Commitment Line 1

Commitment Line 2¥40.0 billion¥10.0 billion(one year)

1,085,296
922,128
482,698
44.5%
23,461
17,388

Total assets
Acquisition priceInterest-bearing debt
LTV
Market capitalization
NOI
FFO

Commitment Lines*
Rating description

266

Main factors accounting for differences
between Feb. 2018 period forecasts andresults
(Millions of yen)

3,200

3,100

(three years)

MUFG Bank, Ltd.
Sumitomo Mitsui Banking
MUFG Bank, Ltd.
Corporation
Sumitomo Mitsui
Mizuho Bank, Ltd.
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited* In addition to the above commitment lines, NMF has established a 1-year,¥30.0 billion uncommitted line of credit.

3,000

Increase in rent and common service fee +32
Office+31
Retail-1
Logistics-3
Residential+6
Other revenues
+26
Settlement fee, cancellation fee, etc. +15
Amount affected by sales and purchases +5(Acquired Summit Store Mukodaicho)(Disposed Funabashi Logistics Center)

63

Feb. 2018 period
DPU (Forecast)Rental revenues

Factors for decrease in revenue
DPU

140

-5
Increase in repair expenses
Decrease in PM fee
Decrease in other expenses

3,020

Factors for increase in revenue

139

- 31
Internal reserve ofgain on sales 0*

Internal reserves

Decrease in interest expenses, etc.
+5Investment unit issuance expenses -10
Increase in asset management fees -11
Decrease in other expenses, etc.
+11Real estate rental
expenses

-50
+6
+13

3,047
(+27)
OthersGain on sales

Feb. 2018 period
DPU (Result)* It is assumed that ¥3 million of gain on sales of Morisia Tsudanuma (¥0 per unit) will be allotted to internal reserves in the forecasts for the fiscal period ended
February 2018.

22

Portfolio

PORTFOLIO LIST (AS OF THE END OF THE 5TH FISCAL PERIOD)
Settlement
number

Property nameLocation

Office Buildings
Of-T-001 Shinjuku Nomura Building
Shinjuku Ward, TokyoOf-T-002 NRE Tennozu Building
Shinagawa Ward, TokyoOf-T-003 Kojimachi Millennium Garden
Chiyoda Ward, TokyoOf-T-006 NMF Shinjuku Minamiguchi Building
Shibuya Ward, TokyoOf-T-007 NMF Shibuya Koen-dori Building
Shibuya Ward, TokyoOf-T-008 Secom Medical Building
Chiyoda Ward, TokyoOf-T-009 NMF Shiba Building
Minato Ward, TokyoOf-T-010 Nishi Shinjuku Showa Building
Shinjuku Ward, TokyoOf-T-011 NRE Shibuya Dogenzaka Building
Shibuya Ward, TokyoOf-T-013 Iwamoto-cho Toyo Building
Chiyoda Ward, TokyoOf-T-015 NMF Surugadai Building
Chiyoda Ward, TokyoOf-T-016 PMO Nihonbashi Honcho
Chuo Ward, TokyoOf-T-017 PMO Nihonbashi Kayabacho
Chuo Ward, TokyoOf-T-018 NMF Gotanda Ekimae Building
Shinagawa Ward, TokyoOf-T-019 NRE Higashi-nihonbashi Building
Chuo Ward, TokyoOf-T-020 PMO Akihabara
Chiyoda Ward, TokyoOf-T-021 Hatchobori NF Building
Chuo Ward, TokyoOf-T-022 NMF Kanda Iwamoto-cho Building
Chiyoda Ward, TokyoOf-T-023 NMF Takanawa Building
Shinagawa Ward, TokyoOf-T-024 PMO Hatchobori
Chuo Ward, TokyoOf-T-026 PMO Nihonbashi Odenmacho
Chuo Ward, TokyoOf-T-028 PMO Higashi-nihonbashi
Chuo Ward, TokyoOf-T-029 NRE Ueno Building
Taito Ward, TokyoOf-T-031 NF Hongo Building
Bunkyo Ward, TokyoOf-T-034 Crystal Park Building
Musashino City, TokyoOf-T-035 NMF Kichijoji Honcho Building
Musashino City, TokyoOf-T-036 Faret Tachikawa Center Square
Tachikawa City, TokyoOf-T-037 NMF Kawasaki Higashiguchi Building
Kawasaki City, Kanagawa
Of-T-038 NMF Yokohama Nishiguchi Building
Yokohama City, Kanagawa
Of-T-039 NMF Shin-Yokohama Building
Yokohama City, Kanagawa
Of-T-041 PMO Tamachi
Minato Ward, TokyoOf-T-042 PMO Ginza Hatchome
Chuo Ward, TokyoOf-T-043 PMO Shibakoen
Minato Ward, TokyoOf-T-044 NEC Head Office Building
Minato Ward, TokyoOf-T-045 Harumi Island Triton Square Office Tower Y Chuo Ward, TokyoOf-T-046 NMF Aoyama 1-chome Building
Minato Ward, TokyoOf-T-047 NMF Takebashi Building
Chiyoda Ward, TokyoOf-T-048 Harumi Island Triton Square Office Tower Z Chuo Ward, TokyoOf-T-049 NMF Kayabacho Building
Chuo Ward, TokyoOf-T-050 NMF Shinjuku EAST Building
Shinjuku Ward, TokyoOf-T-051 NMF Shiba-Koen Building
Minato Ward, TokyoOf-T-052 NMF Ginza 4-chome Building
Chuo Ward, TokyoOf-T-053 Faret East Building
Tachikawa City, TokyoOf-T-054 PMO Shinnihonbashi
Chuo Ward, TokyoOf-T-055 PMO Hirakawacho
Chiyoda Ward, TokyoOf-S-001 Sapporo North Plaza
Sapporo City, Hokkaido
Of-S-002 NRE Sapporo Building
Sapporo City, Hokkaido
Of-S-004 NMF Sendai Aoba-dori Building
Sendai City, Sendai
Of-S-005 NMF Utsunomiya Building
Utsunomiya City, Tochigi
Of-S-006 NMF Nagoya Fushimi Building
Nagoya City, Aichi
Of-S-007 NMF Nagoya Yanagibashi Building
Nagoya City, Aichi
Of-S-008 Omron Kyoto Center Building
Kyoto City, Kyoto
Of-S-009 SORA Shin-Osaka 21
Osaka City, Osaka
Of-S-010 NRE Osaka Building
Osaka City, Osaka
Of-S-011 NRE Nishi-Umeda Building
Osaka City, Osaka
Of-S-012 NRE Yotsubashi Building
Osaka City, Osaka
Of-S-013 NRE Hiroshima Building
Hiroshima City, Hiroshima
Of-S-014 NMF Hakata Ekimae Building
Fukuoka City, Fukuoka
Of-S-015 NMF Tenjin-Minami Building
Fukuoka City, Fukuoka
Subtotal (59 properties)
Retail Facilities
Rt-T-002 Yokosuka More’s City
Rt-T-003 Recipe SHIMOKITA
Rt-T-004 Kawasaki More’s
Rt-T-005 EQUINIA Shinjuku
Rt-T-006 EQUINA Ikebukuro
Rt-T-007 covirna machida
Rt-T-008 Nitori Makuhari
Rt-T-009 Konami Sports Club Fuchu
Rt-T-010 FESTA SQUARE

23

Yokosuka City, Kanagawa
Setagaya Ward, Tokyo
Kawasaki City, Kanagawa
Shinjuku Ward, Tokyo
Toshima Ward, Tokyo
Machida City, Tokyo
Chiba City, Chiba
Fuchu City, Tokyo
Saitama City, Saitama

Acquisition
price(Millions ofyen)

43,90020,50026,70010,00010,400
11,100
7,040
8,140
5,310
4,050
4,690
4,320
5,010
4,430
3,570
4,240
2,480
4,160
2,830
2,880
2,210
1,690
6,470
4,890
3,390
1,780
3,850
7,830
5,460
2,620
6,210
3,970
3,900
44,10018,20010,400
8,330
8,180
6,070
5,710
3,620
1,850
1,850
4,440
3,410
6,250
4,140
2,030
2,320
2,240
2,280
18,30012,100
6,100
3,450
4,000
2,280
4,210
2,230
428,110

13,64010,407
6,080
4,260
3,990
3,440
3,080
2,730
2,600

Settlement
number

Property nameRt-T-011 GEMS Shibuya
Rt-T-012 Sundai Azamino
Rt-T-013 EQUINIA Aobadai
Rt-T-014 Megalos Kanagawa
Rt-T-015 Mitsubishi Motors Meguro
Rt-T-016 Mitsubishi Motors Chofu
Rt-T-018 Mitsubishi Motors Nerima
Rt-T-019 Mitsubishi Motors Kawasaki
Rt-T-020 Mitsubishi Motors Takaido
Rt-T-021 Mitsubishi Motors Katsushika
Rt-T-022 Mitsubishi Motors Higashikurume
Rt-T-023 Mitsubishi Motors Setagaya
Rt-T-025 Mitsubishi Motors Sekimachi
Rt-T-026 Mitsubishi Motors Higashiyamato
Rt-T-027 Mitsubishi Motors Motosumiyoshi
Rt-T-028 Mitsubishi Motors Kawagoe
Rt-T-029 Mitsubishi Motors Edogawa
Rt-T-030 Mitsubishi Motors Sayama
Rt-T-031 NRE Kichijoji Building
Rt-T-032 GEMS Ichigaya
Rt-T-033 Sagamihara Shopping Center
Rt-T-034 Musashiurawa Shopping Square
Rt-T-036 Summit Store Naritahigashi (Land)
Rt-T-037 GEMS Daimon
Rt-T-038 GEMS Kanda
Rt-T-039 Summit Store Mukodaicho
Rt-S-001 Universal CityWalk Osaka
Rt-S-002 Izumiya Senrioka
Rt-S-004 Izumiya Yao
Rt-S-005 Izumiya Obayashi
Rt-S-006 Ichibancho stear
Rt-S-007 EQUINIA Aobadori
Rt-S-008 MEL Building
Rt-S-009 nORBESA
Rt-S-010 Nakaza Cui-daore Building
Subtotal (44 properties)
Logistics Facilities
Lg-T-001 Landport Urayasu
Lg-T-002 Landport Itabashi
Lg-T-003 Landport Kawagoe
Lg-T-004 Landport Atsugi
Lg-T-005 Sagamihara Tana Logistics Center
Lg-T-006 Sagamihara Onodai Logistics Center
Lg-T-007 Landport Hachioji
Lg-T-008 Landport Kasukabe
Lg-T-010 Atsugi Minami Logistics Center B Tower
Lg-T-011 Hanyu Logistics Center
Lg-T-012 Kawaguchi Logistics Center B Tower
Lg-T-013 Kawaguchi Logistics Center A Tower
Lg-T-014 Atsugi Minami Logistics Center A Tower
Lg-T-015 Kawaguchi Ryoke Logistics Center
Lg-T-016 Landport Kashiwa Shonan II
Lg-T-017 Landport Kashiwa Shonan I
Lg-S-005 Hirakata Kuzuha Logistics Center
Subtotal (17 properties)
Residential Facilities
Rs-T-001 PROUD FLAT Shirokane Takanawa
Rs-T-002 PROUD FLAT Yoyogi Uehara
Rs-T-003 PROUD FLAT Hatsudai
Rs-T-004 PROUD FLAT Shibuya Sakuragaoka
Rs-T-005 PROUD FLAT Gakugei Daigaku
Rs-T-006 PROUD FLAT Meguro Gyoninzaka
Rs-T-007 PROUD FLAT Sumida Riverside
Rs-T-008 PROUD FLAT Kagurazaka
Rs-T-009 PROUD FLAT Waseda
Rs-T-010 PROUD FLAT Shinjuku Kawadacho
Rs-T-011 PROUD FLAT Sangen Jaya
Rs-T-012 PROUD FLAT Kamata
Rs-T-013 PROUD FLAT Kamata II
Rs-T-014 PROUD FLAT Shinotsuka

Location

Acquisition
price(Millions ofyen)

Shibuya Ward, Tokyo
Yokohama City, Kanagawa
Yokohama City, Kanagawa
Yokohama City, Kanagawa
Meguro Ward, Tokyo
Chofu City, Tokyo
Nerima Ward, Tokyo
Kawasaki City, Kanagawa
Suginami Ward, Tokyo
Katsushika Ward, Tokyo
Higashikurume City, Tokyo
Setagaya Ward, Tokyo
Nerima Ward, Tokyo
Higashiyamato City, Tokyo
Kawasaki City, Kanagawa
Kawagoe City, Saitama
Edogawa Ward, Tokyo
Sayama City, Saitama
Musashino City, Tokyo
Chiyoda Ward, Tokyo
Sagamihara City, Kanagawa
Saitama City, Saitama
Suginami Ward, Tokyo
Minato Ward, Tokyo
Chiyoda Ward, Tokyo
Nishi-Tokyo City, Tokyo
Osaka City, Osaka
Suita City, Osaka
Yao City, Osaka
Takarazuka City, Hyogo
Sendai City, Miyagi
Sendai City, Miyagi
Sendai City, Miyagi
Sapporo City, Hokkaido
Osaka City, Osaka

2,490
1,700
1,560
1,000
2,740
1,760
1,240
950
850
800
800
770
600
450
370
350
200
160
10,410
2,080
6,840
2,720
700
2,060
1,500
5,100
15,500
8,930
4,406
3,020
4,700
1,640
1,060
8,500
11,600159,783

Urayasu City, Chiba
Itabashi Ward, Tokyo
Kawagoe City, Saitama
Atsugi City, Kanagawa
Sagamihara City, Kanagawa
Sagamihara City, Kanagawa
Hachioji City, Tokyo
Kasukabe City, Saitama
Atsugi City, Kanagawa
Hanyu City, Saitama
Kawaguchi City, Saitama
Kawaguchi City, Saitama
Atsugi City, Kanagawa
Kawaguchi City, Saitama
Kashiwa City, Chiba
Kashiwa City, Chiba
Hirakata City, Osaka

17,40015,71013,70011,41010,600
8,700
8,250
7,340
4,590
3,810
3,750
2,830
2,690
10,79010,8009,900
3,460
145,730

Minato Ward, Tokyo
Shibuya Ward, Tokyo
Shibuya Ward, Tokyo
Shibuya Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Chuo Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Setagaya Ward, Tokyo
Ota Ward, Tokyo
Ota Ward, Tokyo
Toshima Ward, Tokyo

3,400
989
713
750
746
939
2,280
1,590
1,110
947
1,190
1,160
3,320
623

Settlement
number

Property nameLocation

Rs-T-015
Rs-T-016
Rs-T-017
Rs-T-018
Rs-T-019
Rs-T-020
Rs-T-021
Rs-T-022
Rs-T-023
Rs-T-024
Rs-T-025
Rs-T-026
Rs-T-028
Rs-T-029
Rs-T-030
Rs-T-031
Rs-T-032
Rs-T-033
Rs-T-034
Rs-T-035
Rs-T-036
Rs-T-037
Rs-T-038
Rs-T-039
Rs-T-040
Rs-T-041
Rs-T-042
Rs-T-043
Rs-T-044
Rs-T-045
Rs-T-046
Rs-T-047
Rs-T-048
Rs-T-050
Rs-T-051
Rs-T-052
Rs-T-053
Rs-T-054
Rs-T-055
Rs-T-056
Rs-T-057
Rs-T-058
Rs-T-060
Rs-T-061
Rs-T-062
Rs-T-063
Rs-T-065
Rs-T-066
Rs-T-067
Rs-T-068
Rs-T-069
Rs-T-070
Rs-T-071
Rs-T-072
Rs-T-073
Rs-T-075
Rs-T-076
Rs-T-077
Rs-T-078
Rs-T-079
Rs-T-080
Rs-T-081
Rs-T-082
Rs-T-083
Rs-T-084
Rs-T-085
Rs-T-086
Rs-T-087
Rs-T-088
Rs-T-089
Rs-T-090
Rs-T-091

PROUD FLAT Kiyosumi Shirakawa
PROUD FLAT Monzen Nakacho II
PROUD FLAT Monzen Nakacho I
PROUD FLAT Fujimidai
PROUD FLAT Asakusa Komagata
PROUD FLAT Yokohama
PROUD FLAT Kamioooka
PROUD FLAT Tsurumi II
PRIME URBAN Azabu Juban
PRIME URBAN Akasaka
PRIME URBAN Tamachi
PRIME URBAN Shibaura LOFTPRIME URBAN Yoyogi
PRIME URBAN Ebisu II
PRIME URBAN Bancho
PRIME URBAN Chiyoda Fujimi
PRIME URBAN Iidabashi
PRIME URBAN Ebisu
PRIME URBAN Naka Meguro
PRIME URBAN Gakugei Daigaku
PRIME URBAN Senzoku
PRIME URBAN Meguro Riverside
PRIME URBAN Meguro Ohashi Hills
PRIME URBAN Meguro Aobadai
PRIME URBAN Gakugei Daigaku II
PRIME URBAN Naka Meguro II
PRIME URBAN Kachidoki
PRIME URBAN Shinkawa
PRIME URBAN Nihonbashi Yokoyamacho
PRIME URBAN Nihonbashi Hamacho
PRIME URBAN Hongo Ikizaka
PRIME URBAN Hakusan
PRIME URBAN Yotsuya Gaien Higashi
PRIME URBAN Nishi Shinjuku I
PRIME URBAN Nishi Shinjuku II
PRIME URBAN Shinjuku Naitomachi
PRIME URBAN Nishi Waseda
PRIME URBAN Shinjuku Ochiai
PRIME URBAN Mejiro
PRIME URBAN Kagurazaka
PRIME URBAN Sangen Jaya III
PRIME URBAN Chitose Karasuyama
PRIME URBAN Sangen Jaya
PRIME URBAN Minami Karasuyama
PRIME URBAN Karasuyama Galleria
PRIME URBAN Karasuyama Court
PRIME URBAN Chitose Funabashi
PRIME URBAN Yoga
PRIME URBAN Shinagawa Nishi
PRIME URBAN Osaki
PRIME URBAN Oimachi II
PRIME URBAN Yukigaya
PRIME URBAN Omori
PRIME URBAN Denenchofu Minami
PRIME URBAN Nagahara Kamiikedai
PRIME URBAN Nakano Kamitakada
PRIME URBAN Takaido
PRIME URBAN Nishi Ogikubo
PRIME URBAN Nishi Ogikubo II
PRIME URBAN Otsuka
PRIME URBAN Komagome
PRIME URBAN Ikebukuro
PRIME URBAN Monzen Nakacho
PRIME URBAN Kameido
PRIME URBAN Sumiyoshi
PRIME URBAN Mukojima
PRIME URBAN Kinshi Koen
PRIME URBAN Kinshicho
PRIME URBAN Hirai
PRIME URBAN Kasai
PRIME URBAN Kasai II
PRIME URBAN Kasai East

Koto Ward, Tokyo
Koto Ward, Tokyo
Koto Ward, Tokyo
Nerima Ward, Tokyo
Taito Ward, Tokyo
Yokohama City, Kanagawa
Yokohama City, Kanagawa
Yokohama City, Kanagawa
Minato Ward, Tokyo
Minato Ward, Tokyo
Minato Ward, Tokyo
Minato Ward, Tokyo
Shibuya Ward, Tokyo
Shibuya Ward, Tokyo
Chiyoda Ward, Tokyo
Chiyoda Ward, Tokyo
Chiyoda Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Meguro Ward, Tokyo
Chuo Ward, Tokyo
Chuo Ward, Tokyo
Chuo Ward, Tokyo
Chuo Ward, Tokyo
Bunkyo Ward, Tokyo
Bunkyo Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Shinjuku Ward, Tokyo
Setagaya Ward, Tokyo
Setagaya Ward, Tokyo
Setagaya Ward, Tokyo
Setagaya Ward, Tokyo
Setagaya Ward, Tokyo
Setagaya Ward, Tokyo
Setagaya Ward, Tokyo
Setagaya Ward, Tokyo
Shinagawa Ward, Tokyo
Shinagawa Ward, Tokyo
Shinagawa Ward, Tokyo
Ota Ward, Tokyo
Ota Ward, Tokyo
Ota Ward, Tokyo
Ota Ward, Tokyo
Nakano Ward, Tokyo
Suginami Ward, Tokyo
Suginami Ward, Tokyo
Suginami Ward, Tokyo
Toshima Ward, Tokyo
Toshima Ward, Tokyo
Toshima Ward, Tokyo
Koto Ward, Tokyo
Koto Ward, Tokyo
Koto Ward, Tokyo
Sumida Ward, Tokyo
Sumida Ward, Tokyo
Sumida Ward, Tokyo
Edogawa Ward, Tokyo
Edogawa Ward, Tokyo
Edogawa Ward, Tokyo
Edogawa Ward, Tokyo

Acquisition
price(Millions of
yen)

928
652
1,030
1,470
1,920
2,090
2,710
1,650
1,100
938
972
1,830
359
1,140
1,090
679
2,040
1,260
1,410
775
474
414
2,970
1,310
1,080
2,850
2,570
2,100
4,220
1,550
557
866
1,490
1,090
885
430
421
594
1,430
2,900
718
717
724
667
549
338
746
1,390
494
1,860
1,040
951
905
774
1,720
498
1,060
414
1,790
730
437
3,800
2,420
779
632
528
1,290
758
722
640
981
1,140

Settlement
number

Property nameRs-T-093 PRIME URBAN Itabashi Kuyakushomae
Rs-T-094 PRIME URBAN Asakusa
Rs-T-095 PRIME URBAN Machiya South Court
Rs-T-096 PRIME URBAN Musashi Koganei
Rs-T-097 PRIME URBAN Musashino Hills
Rs-T-098 PRIME URBAN Koganei Honcho
Rs-T-099 PRIME URBAN Kumegawa
Rs-T-100 PRIME URBAN Musashi Kosugi comodo
Rs-T-101 PRIME URBAN Kawasaki
Rs-T-102 PRIME URBAN Shinyurigaoka
Rs-T-103 PRIME URBAN Tsurumi Teraya
Rs-T-105 PRIME URBAN Urayasu
Rs-T-106 PRIME URBAN Gyotoku I
Rs-T-107 PRIME URBAN Gyotoku II
Rs-T-108 PRIME URBAN Gyotoku Ekimae
Rs-T-109 PRIME URBAN Gyotoku Ekimae II
Rs-T-110 PRIME URBAN Gyotoku III
Rs-T-111 PRIME URBAN Nishi Funabashi
Rs-T-112 PRIME URBAN Kawaguchi
Rs-T-113 PROUD FLAT Hatchobori
Rs-T-114 PROUD FLAT Itabashi Honcho
Rs-T-115 PRIME URBAN Meguro Mita
Rs-T-116 Fukasawa House Towers H&I
Rs-T-117 PRIME URBAN Toyosu
Rs-T-118 PRIME URBAN Nihonbashi KayabachoRs-T-119 PRIME URBAN Yoga II
Rs-T-120 PRIME URBAN Musashi-Koganei II
Rs-T-121 PRIME URBAN Gakugei Daigaku Parkfront
Rs-T-122 PROUD FLAT Omori III
Rs-T-123 PROUD FLAT Kinshicho
Rs-S-001 PROUD FLAT Itsutsubashi
Rs-S-002 PROUD FLAT Kawaramachi
Rs-S-003 PROUD FLAT Shin OsakaRs-S-005 PRIME URBAN Kita Juyo Jo
Rs-S-006 PRIME URBAN Odori Koen I
Rs-S-007 PRIME URBAN Odori Koen II
Rs-S-008 PRIME URBAN Kita Juichi Jo
Rs-S-009 PRIME URBAN Miyanosawa
Rs-S-010 PRIME URBAN Odori Higashi
Rs-S-011 PRIME URBAN Chiji Kokan
Rs-S-012 PRIME URBAN Maruyama
Rs-S-013 PRIME URBAN Kita Nijuyo Jo
Rs-S-014 PRIME URBAN Sapporo Idaimae
Rs-S-015 PRIME URBAN Sapporo Riverfront
Rs-S-016 PRIME URBAN Kita Sanjo DoriRs-S-017 PRIME URBAN Nagamachi Icchome
Rs-S-018 PRIME URBAN Yaotome Chuo
Rs-S-019 PRIME URBAN Tsutsumidori Amamiya
Rs-S-020 PRIME URBAN Aoi
Rs-S-021 PRIME URBAN Kanayama
Rs-S-022 PRIME URBAN Tsurumai
Rs-S-023 PRIME URBAN Kamimaezu
Rs-S-024 PRIME URBAN Izumi
Rs-S-025 PRIME URBAN Esaka I
Rs-S-026 PRIME URBAN Esaka II
Rs-S-027 PRIME URBAN Esaka III
Rs-S-028 PRIME URBAN Tamatsukuri
Rs-S-029 PRIME URBAN Sakaisuji Honmachi
Rs-S-030 PRIME URBAN Hakata
Rs-S-031 PRIME URBAN Yakuin Minami
Rs-S-032 PRIME URBAN Kashii
Rs-S-033 PRIME URBAN Hakata Higashi
Rs-S-034 PRIME URBAN Chihaya
Rs-S-035 PRIME URBAN Chikusa
Subtotal (150 properties)

Location
Itabashi Ward, Tokyo
Taito Ward, Tokyo
Arakawa Ward, Tokyo
Koganei City, Tokyo
Koganei City, Tokyo
Koganei City, Tokyo
Higashimurayama City, Tokyo
Kawasaki City, Kanagawa
Kawasaki City, Kanagawa
Kawasaki City, Kanagawa
Yokohama City, Kanagawa
Urayasu City, Chiba
Ichikawa City, Chiba
Ichikawa City, Chiba
Ichikawa City, Chiba
Ichikawa City, Chiba
Ichikawa City, Chiba
Funabashi City, Chiba
Kawaguchi City, Saitama
Chuo Ward, Tokyo
Itabashi Ward, Tokyo
Meguro Ward, Tokyo
Setagaya Ward, Tokyo
Koto Ward, Tokyo
Chuo Ward, Tokyo
Setagaya Ward, Tokyo
Koganei City, Tokyo
Meguro Ward, Tokyo
Shinagawa Ward, Tokyo
Sumida Ward, Tokyo
Sendai City, Miyagi
Sendai City, Miyagi
Osaka City, Osaka
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sapporo City, Hokkaido
Sendai City, Miyagi
Sendai City, Miyagi
Sendai City, Miyagi
Nagoya City, Aichi
Nagoya City, Aichi
Nagoya City, Aichi
Nagoya City, Aichi
Nagoya City, Aichi
Suita City, Osaka
Suita City, Osaka
Suita City, Osaka
Osaka City, Osaka
Osaka City, Osaka
Fukuoka City, Fukuoka
Fukuoka City, Fukuoka
Fukuoka City, Fukuoka
Fukuoka City, Fukuoka
Fukuoka City, Fukuoka
Nagoya City, Aichi

Other Facilities
Ryotokuji University Shin-Urayasu Campus
Ot-T-001
Urayasu City, Chiba(Land)
Subtotal (1 properties)
Total (271 properties)

Acquisition
price(Millions of
yen)

1,080
384
1,910
1,910
1,280
791
1,520
1,940
962
1,020
493
804
633
730
488
469
747
761
1,580
920
720
1,058
7,140
5,290
2,850
1,320
1,310
1,300
1,110
785
652
735
1,620
274
502
334
547
475
394
249
229
437
616
4,480
1,730
1,140
466
949
712
553
1,020
1,590
3,770
652
794
1,190
1,020
1,810
588
265
398
622
604
1,110
184,045

4,900
4,900
922,568

24

Portfolio

PORTFOLIO GALLERY (AS OF THE END OF THE 5TH FISCAL PERIOD)
Total Office Portfolio

NMF Office Portfolio

59 properties

Total Acquisition Value for Portfolio¥

428,110 million

TOP 3 properties (acquisition price)

NEC Head Office Building

34 properties

Total Acquisition Value for Portfolio¥

159,783 million

TOP 3 properties (acquisition price)

Shinjuku Nomura Building

Kojimachi Millennium Garden

Universal CityWalk Osaka

Yokosuka More’s City

Nakaza Cui-daore Building

Acquisition price: ¥44,100 million

Acquisition price: ¥43,900 million

Acquisition price: ¥26,700 million

Acquisition price: ¥15,500 million

Acquisition price: ¥13,640 million

Acquisition price: ¥11,600 million

Location: Minato Ward, Tokyo

Location: Shinjuku Ward, Tokyo

Location: Chiyoda Ward, Tokyo

Location: Osaka City, Osaka

Location: Yokosuka City, Kanagawa

Location: Osaka City, Osaka

Completion: January 1990

Completion: May 1978

Completion: May 2000

Completion: June 2001

Completion: July 1997

Completion: February 2004

NRE Shibuya Dogenzaka Building

NMF Shinjuku Minamiguchi Building

Faret Tachikawa Center Square

NRE Kichijoji Building

Recipe SHIMOKITA

Izumiya Senrioka

Acquisition price: ¥5,310 million

Acquisition price: ¥10,000 million

Acquisition price: ¥3,850 million

Acquisition price: ¥10,410 million

Acquisition price: ¥10,407 million

Acquisition price: ¥8,930 million

Location: Shibuya Ward, Tokyo

Location: Shibuya Ward, Tokyo

Location: Tachikawa City, Tokyo

Location: Musashino City, Tokyo

Location: Setagaya Ward, Tokyo

Location: Suita City, Osaka

Completion: March 1999

Completion: April 1974

Completion: December 1994

Completion: July 2014

Completion: July 2011

Completion: June 2000

NRE Sapporo Building

25

Total Office Portfolio

NMF Retail Portfolio

NMF Nagoya Yanagibashi Building

NMF Tenjin-Minami Building

FESTA SQUAREEQUINIA Aobadai

Sagamihara Shopping Center

Acquisition price: ¥4,140 million

Acquisition price: ¥2,280 million

Acquisition price: ¥2,230 million

Acquisition price: ¥2,600 million

Acquisition price: ¥1,560 million

Acquisition price: ¥6,840 million

Location: Sapporo City, Hokkaido

Location: Nagoya City, Aichi

Location: Fukuoka City, Fukuoka

Location: Saitama City, Saitama

Location: Sendai City, Miyagi

Location: Sagamihara City, Kanagawa

Completion: July 2008

Completion: March 1991

Completion: February 2008

Completion: September 2008

Completion: November 1982

Completion: August 1993 etc.

26

Portfolio

PORTFOLIO GALLERY (AS OF THE END OF THE 5TH FISCAL PERIOD)
Total Office Portfolio

NMF Logistics Portfolio

17 properties

Total Acquisition Value for Portfolio¥

145,730 million

TOP 3 properties (acquisition price)

Landport Urayasu

150 properties

Total Acquisition Value for Portfolio¥

184,045 million

TOP 3 properties (acquisition price)

Landport Itabashi

Landport Kawagoe

Fukasawa House Towers H&I

PRIME URBAN Toyosu

PRIME URBAN Sapporo Riverfront

Acquisition price: ¥17,400 million

Acquisition price: ¥15,710 million

Acquisition price: ¥13,700 million

Acquisition price: ¥7,140 million

Acquisition price: ¥5,290 million

Acquisition price: ¥4,480 million

Location: Urayasu City, Chiba

Location: Itabashi Ward, Tokyo

Location: Kawagoe City, Saitama

Location: Setagaya Ward, Tokyo

Location: Koto Ward, Tokyo

Location: Sapporo City, Hokkaido

Completion: May 2008

Completion: January 2008

Completion: May 2009

Completion: June 2004

Completion: January 2005

Completion: January 2008

Landport Atsugi

Sagamihara Tana Logistics Center

Hanyu Logistics Center

PRIME URBAN Meguro Mita

PROUD FLAT Shibuya Sakuragaoka

PRIME URBAN Shibaura LOFT

Acquisition price: ¥11,410 million

Acquisition price: ¥10,600 million

Acquisition price: ¥3,810 million

Acquisition price: ¥1,058 million

Acquisition price: ¥750 million

Acquisition price: ¥1,830 million

Location: Atsugi City, Kanagawa

Location: Sagamihara City, Kanagawa

Location: Hanyu City, Saitama

Location: Meguro Ward, Tokyo

Location: Shibuya Ward, Tokyo

Location: Minato Ward, Tokyo

Completion: March 2007

Completion: October 2007

Completion: February 2006

Completion: July, 2008

Completion: January 2008

Completion: July 2006

Kawaguchi Logistics Center A Tower

27

Total Office Portfolio

NMF Residential Portfolio

Hirakata Kuzuha Logistics Center

Landport Hachioji

PRIME URBAN Kagurazaka

PRIME URBAN Musashi Kosugi comodo

PROUD FLAT Shin Osaka

Acquisition price: ¥3,750 million

Acquisition price: ¥3,460 million

Acquisition price: ¥8,250 million

Acquisition price: ¥2,900 million

Acquisition price: ¥1,940 million

Acquisition price: ¥1,620 million

Location: Kawaguchi City, Saitama

Location: Hirakata City, Osaka

Location: Hachioji City, Tokyo

Location: Shinjuku Ward, Tokyo

Location: Kawasaki City, Kanagawa

Location: Osaka City, Osaka

Completion: April 1996

Completion: April 2003

Completion: November 2008

Completion: March 2008

Completion: February 1987

Completion: September 200928

Portfolio

Structure and Organization

PORTFOLIO SUMMARY
Structure of NMF
Properties

Acquisition priceAppraisal value

Building age

Specified Related Party

Floor area

Investment Corporation

Custodian

Parent Company of the Asset Management Company

271 ¥ 922,568 million ¥ 1,001,250 million 18.8 years

Total

OfficeRetail(Near stations)

Retail(Residential areas)

59 ¥ 428,110 million¥

19 ¥ 106,617 million

¥

25

¥

53,166 million

17 ¥ 145,730 million

Logistics

Residential

150 ¥ 184,045 million
1

Other

¥

¥

4,900 million

2455,390 million 24.9 years

785,359.33 m

119,430 million 16.7 years

235,465.16 m

61,304 million 17.9 years

205,499.69 m¥¥

2,244,174.79 m

2

2

660,643.59 m

2

189,546 million 13.0 years
5,150 million

Nomura Real Estate Holdings, Inc.

Asset Custody Agreement

General Administrator(Institutional Administration /Accounting)Transfer Agent andSpecial Account Administrator

2

170,430 million 10.4 years¥

Sumitomo Mitsui Trust Bank, Ltd.

Nomura Real Estate Development Co., Ltd.

357,207.02 m

2

—

—

Asset Management Company
Nomura Real Estate
Asset Management Co., Ltd.

Asset
Management
Agreement

Information Provision
Agreement

Leasing Value Chain
Nomura Real Estate
Development Co., Ltd.
Nomura Real Estate Partners Co., Ltd.
GEO AKAMATSU CO., LTD.
Basic Agreement with respect toLeasing Value Chain

Information Provider
Nomura Real Estate Development Co., Ltd.

Diversification by Area

Diversification by Use

Properties are also spread among various geographical areas

The portfolio is also allocated by use to provide further

with 80% or more of the properties in the Tokyo area andstability.

Mitsubishi UFJ Trust and Banking Corporation
Transfer Agency Agreement, General Administration Agreement
Agreement on Special Account Management

Unitholders' Meeting

General Administrator (Financial Agent)

Board of Directors

MUFG Bank, Ltd.

Executive Director

Sumitomo Mitsui Banking Corporation

Shuhei Yoshida

Nomura Securities Co., Ltd.

Supervisory Directors

Mizuho Securities Co., Ltd.

Mineo Uchiyama
Koichi Owada

Information Provider
Ernst & Young Shin Nihon LLC

Financial Agent Agreement (related to Former NMF's 1st series bonds,
NOF's 7th series bonds, NOF's 10th series bonds and NMF's 2nd series bonds) /Principal Payment Entrustment Agreement (NOF's 2nd series bonds) /Registration Entrustment Agreement (NOF's 2nd series bonds) / Investment
Corporation Bond Management Agreement (related to NOF's 2nd series bonds)

General administrator of investment
corporation bonds
General Administrator (Short-Term
Investment Corporation Bonds)

Investment Corporation BondManagement Agreement(related to NOF's 2nd series bonds)
Agreement on Entrustment of Issuance, Redemption and Settlement of
Short-Term Investment Corporation Bonds / Private Placement Handling Agreement

about 20% in three major metropolitan areas and government designated cities.

MUFG Bank, Ltd.

Other Facilities

0.5%

Other Area

Stability Model

18.1%

42.0%

Growth Model

19.9%

Logistics
Facilities

15.8%

Tokyo Area

81.9%

58.0%

Residential
Facilities

General Meeting of Shareholders

OfficeBuildings

Investment Committee

46.4%

Retail Facilities(Residential areas)

5.8%

Diversification by Property

Diversification by Tenant

Top Ten Properties as a Percentage of Portfolio

Top Ten Tenants as a Percentage of Portfolio

25.7%

Organization of NREAM

Statutory Auditors

Retail Facilities(Near stations)Board of Directors

Compliance Committee

President & CEO

Risk Management Committee
NPR Valuation Committee

11.6%

Project Screening Committee
Corporate Planning

37.4%

Chief Strategy Officer

International Business Planning

Product Development

Legal & Compliance

Research & Analysis

Internal Audit

Acquisitions

Finance & Accounting

Investment Management Planning

Client Relations & Marketing
Investment Management

NMF Investment Management Group
Fund Management
Asset Management I
Asset Management II
NPR Investment Management

29

30

Financial Section

BALANCE SHEETThousands of Yen

As of February 28, 2018

As of February 28, 2018

As of August 31, 2017

ASSETSLIABILITIESCurrent Assets:
Cash and bank deposits
Rental receivables
Income taxes receivable
Other current assets
Total current assets

Current Liabilities:
Trade accounts payable
Current portion of investment corporation bonds
Current portion of long-term debt
Lease obligations
Other accounts payable
Accrued expenses
Accrued income taxes
Accrued consumption taxes
Rent received in advance
Unearned revenue
Derivatives liabilities
Other current liabilities
Total current liabilities

Property and Equipment:
Land
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Leased assets
Construction in progress		Subtotal
Less accumulated depreciation
Net property and equipment
Investments and Other Assets:
Goodwill
Leasehold rights
Intangible assets
Long-term prepaid expenses
Long-term deposits
Security deposits
Derivatives Assets
Deferred investment corporation bond issuance costs
Total investments and other assets
Total Assets
The accompanying notes to financial statements are an integral part of these statements.

¥

76,536,939
556,64855
973,715
78,067,357¥

71,227,676
787,20356
1,289,537
73,304,472

629,702,460
301,548,314
904,607569,890
23,901
99,000932,848,172(26,882,795)
905,965,377

629,968,513
306,496,171
828,600
609,927
23,901
5,229
937,932,341(23,357,245)
914,575,096

93,453,709
8,960,080
49,157
1,725,576
537,247
945,964
74,63940,964
105,787,336¥1,089,820,070

96,075,952
8,580,708
33,0601,692,617
566,019945,754
35,372
19,667
107,949,149¥1,095,828,717

Thousands of Yen¥

2,223,179—
58,315,600
3,798
2,437,546
291,069605
223,118
4,896,719
263,51349,32546,66868,751,140

As of August 31, 2017¥

3,078,365
4,000,000
54,760,600
6,630
1,536,891
333,667605
1,227,566
4,942,250
300,134
50,649299,281
70,536,638

Long-term Liabilities:
Investment corporation bonds
Long-term debt
Lease obligations
Long-term advanced received
Security deposits from tenants
Derivatives liabilities
Total long-term liabilities

20,500,000
407,382,800
1,592
449,678
36,525,325
1,118,775
465,978,170

18,500,000
411,480,600
2,956
574,828
36,575,246
1,509,405
468,643,035

Total Liabilities

534,729,310

539,179,673

162,791,125

162,592,574

394,012,959(7,169,176)(6,000,468)(13,169,644)
380,843,315
12,549,780
393,393,095
556,184,220

394,012,959(7,367,727)(5,801,917)(13,169,644)
380,843,315
14,737,837
395,581,152
558,173,726(1,093,460)(1,093,460)(1,524,682)(1,524,682)

555,090,760

556,649,044¥1,089,820,070¥1,095,828,717

NET ASSETS
Unitholders’ Equity:
Unitholders’ capital
Surplus		Capital surplus
		 Allowance for temporary difference adjustment
		 Other deductions from capital surplus
		 Total deductions from capital surplus
		 Net capital surplus
		Retained earnings
		Total surplus
Total unitholders’ equity
Valuation and Translation Adjustments:
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these statements.

31

32

Financial Section

STATEMENT OF INCOME AND RETAINED EARNINGSSTATEMENT OF CHANGES IN NET ASSETS
Thousands of Yen

For the period
from September 1, 2017
to February 28, 2018

For the period from September 1, 2017 to February 28, 2018
Thousands of Yen

For the period
from March 1, 2017
to August 31, 2017

Unitholders’ Equity

OPERATING REVENUES AND EXPENSES
Operating Revenues:
Real estate rental revenues
Gain on sales of real estate
Operating Expenses:
Real estate rental expenses
Asset management fees
Asset custody fees
Administrative service fees
Amortization of goodwill
Other operating expenses
Operating Income¥33,631,626
587,250
34,218,876¥35,032,000
3,107,662
38,139,662

14,785,472
3,007,250
56,139154,620
2,622,243
380,816
21,006,540
13,212,336

15,962,926
3,063,129
56,591
174,470
2,622,243
524,491
22,403,850
15,735,812

NON-OPERATING REVENUES AND EXPENSES
Non-Operating Revenues:
Interest income
Reversal of dividends payable
Interest on refund
Other non-operating revenues

636
11,437—19
12,092366
23,673853
48
24,9401,873,773
187,1142,147
396,804
42,462
6,863
2,509,163

1,950,878
206,638
1,372
405,750—
5,311
2,569,949

		Ordinary Income

10,715,265

13,190,803

		 Income before Income Taxes

10,715,265

13,190,803

		Net Income

605
605
10,714,660

605
605
13,190,198

		 Retained earnings brought forward

1,835,120

1,547,639

Non-Operating Expenses:
Interest expense
Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuance costs
Loan arrangement fees
Investment unit issuance expenses
Other non-operating expenses

Income Taxes:
		Current		 Retained Earnings at End of Period
The accompanying notes to financial statements are an integral part of these statements.

¥12,549,780¥14,737,837

Balance as of September 1, 2017
Distributions of retained earnings
Reversal of allowance for temporary difference
adjustments
Distributions in excess of net earnings fromallowance for temporary difference
adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders’equityBalance as of February 28, 2018

SurplusCapital surplus
Deductions from capital surplus
Allowance fortemporary
Other
Total deduction
difference
deductions from from capitaladjustment
capital surplus
surplus(¥7,367,727)(¥5,801,917)(¥13,169,644)
—
—
—

Units
4,183,130—

Unitholders’capital¥162,592,574—

Capitalsurplus¥394,012,959——

198,551—

198,551(198,551)

—

—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—
4,183,130—¥162,791,125—¥394,012,959—(¥7,169,176)—(¥6,000,468)—(¥13,169,644)—¥380,843,315

Thousands of Yen

Unitholders’ Equity
Surplus
Balance as of September 1, 2017
Distributions of retained earnings
Reversal of allowance for temporary difference
adjustments
Distributions in excess of net earnings fromallowance for temporary difference
adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders’equityBalance as of February 28, 2018

Net capitalsurplus¥380,843,315—

Valuation and Translation Adjustments
Total valuation andDeferred gains ortranslation
losses on hedges
adjustments(¥1,524,682)(¥1,524,682)——

Retained earnings¥14,737,837(12,704,166)

Total surplus¥395,581,152(12,704,166)

Total
unitholders’equity¥558,173,726(12,704,166)(198,551)(198,551)

—

—

—

—

—
—
10,714,660——
10,714,660——
10,714,660

—
—
—

—
—
—

—
—
10,714,660—¥12,549,780—¥393,393,095—¥556,184,220

431,222(¥1,093,460)

431,222(¥1,093,460)

431,222¥555,090,760

Total net assets¥556,649,044(12,704,166)

The accompanying notes to financial statements are an integral part of these statements.

For the period from March 1, 2017 to August 31, 2017
Thousands of Yen

Unitholders’ Equity

Balance as of March 1, 2017
Distributions of retained earnings
Reversal of allowance for temporary difference
adjustments
Distributions in excess of net earnings fromallowance for temporary difference
adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders'equityBalance as of August 31, 2017

SurplusCapital surplus
Deductions from capital surplus
Allowance fortemporary
Other
Total deduction
difference
deductions from from capitaladjustment
capital surplus
surplus(¥5,374,246)(¥3,800,508)(¥9,174,754)
—
—
—

Units
4,183,130—

Unitholders’capital¥161,883,753—

Capitalsurplus¥394,012,959——

708,821—708,821(708,821)

—

—

—
—
—

—
—
—

—
—
—

(2,702,302)———(1,292,588)—(2,702,302)(1,292,588)—(2,702,302)(1,292,588)——
4,183,130—¥162,592,574—¥394,012,959—(¥7,367,727)—(¥5,801,917)—(¥13,169,644)—¥380,843,315

Thousands of Yen

Unitholders’ Equity
Surplus
Balance as of March 1, 2017
Distributions of retained earnings
Reversal of allowance for temporary difference
adjustments
Distributions in excess of net earnings fromallowance for temporary difference
adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders'equityBalance as of August 31, 2017

Net capitalsurplus¥384,838,205—

Valuation and Translation Adjustments
Total valuation andDeferred gains ortranslation
losses on hedges
adjustments(¥1,545,634)(¥1,545,634)——

Retained earnings¥10,928,088(8,671,628)

Total surplus¥395,766,293(8,671,628)

Total
unitholders’equity¥557,650,046(8,671,628)(708,821)(708,821)

—

—

—

—

—
—
13,190,198(2,702,302)(1,292,588)
13,190,198(2,702,302)(1,292,588)
13,190,198

—
—
—

—
—
—

(2,702,302)(1,292,588)
13,190,198—¥14,737,837—¥395,581,152—¥558,173,726

20,952(¥1,524,682)

20,952(¥1,524,682)

20,952¥556,649,044

Total net assets¥556,104,412(8,671,628)

The accompanying notes to financial statements are an integral part of these statements.

33

34

Financial Section

STATEMENT OF CASH FLOWSNOTES TO FINANCIAL STATEMENTS

Thousands of Yen

For the period
from September 1, 2017
to February 28, 2018

For the period
from March 1, 2017
to August 31, 2017

CASH FLOWSCash Flows from Operating Activities
Income before income taxes
Depreciation
Amortization of goodwill
Investment unit issuance expenses
Amortization of investment corporation bond issuance costs
Interest income
Interest expense
Loss on disposal of property and equipment
Decrease (Increase) in rental receivables
Decrease (Increase) in long-term prepaid expenses
Decrease (Increase) in long-term deposits
Increase (Decrease) in trade accounts payable
Increase (Decrease) in other accounts payable
Decrease (Increase) in consumption taxes receivables
Increase (Decrease) in accrued consumption taxes
Increase (Decrease) in accrued expenses
Increase (Decrease) in rent received in advance
Decrease in property and equipment in trust due to sales
Decrease in intangible assets in trust due to sales
Other		Subtotal
Interest received
Interest paid
Income taxes paid
		 Net cash provided by (used in) operating activities¥10,715,265
4,738,060
2,622,243
42,462
2,147(636)
2,060,887
6,257
226,257(32,959)
28,772(855,186)
318—(1,004,448)
839,836(45,531)
22,433,392
1,829
59,38841,838,353
636(2,264,761)(604)
39,573,624¥13,190,803
4,862,891
2,622,243
—
1,372
(366)
2,157,516
4,998(324,497)(92,370)(32,777)
667,990(59,416)
147,670
1,227,566
9,344(141,432)
43,502,593—(54,162)
67,689,966
366(2,389,746)(1,606)
65,298,980

Cash Flows from Investing Activities
Payments for purchases of property and equipment
Payments for purchases of leasehold rights and intangible assets
Reimbursement of security deposits to tenants
Proceeds from security deposits from tenants
Payments of security deposits
Proceeds from security deposits
		 Net cash provided by (used in) investing activities(18,540,241)(397,311)(1,599,528)
1,553,906(210)—(18,983,384)(43,360,739)(470)(2,881,873)
1,565,683—
11,000(44,666,399)——
24,320,000(24,862,800)
2,000,000(4,000,000)(23,445)(12,712,708)

31,700,000(36,700,000)
45,070,000(45,112,800)—(5,000,000)—(8,699,524)(1,109)(915)(15,280,977)(2,701,640)(1,291,980)(22,735,944)

5,309,263
71,227,676¥76,536,939(2,103,363)
73,331,039¥71,227,676

Cash Flows from Financing Activities
Proceeds from short-term debt
Repayments of short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Payments of investment corporation bond issuance costs
Distributions to unitholders
Distributions in excess of net earnings from allowance fortemporary difference adjustments
Other distributions in excess of net earnings
		Net cash provided by (used in) financing activities
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period

1. ORGANIZATION
Nomura Real Estate Master Fund, Inc. (NMF) is a real estate investment corporation formed to own and invest primarily in
logistics facilities, retail facilities, offices and residential facilities. NMF is externally managed by a licensed asset managementcompany, Nomura Real Estate Asset Management Co., Ltd. (“NREAM”). NREAM is a wholly-owned subsidiary of Nomura Real
Estate Holdings, Inc. NMF was established on October 1, 2015 through the consolidation type merger involving the former
Nomura Real Estate Master Fund, Inc. (hereinafter the “former NMF”), Nomura Real Estate Office Fund, Inc. (hereinafter“NOF”) and Nomura Real Estate Residential Fund, Inc. (hereinafter “NRF”), and listed its investment securities (TSE code:3462) on the Real Estate Investment Trust Section of the Tokyo Stock Exchange on October 2 of the same year.
NMF adopts the basic policy of investing primarily in real estate and other assets to secure stable income and steady growth ofassets under management over the medium to long term. In order to realize this basic policy, NMF adopts an investment
strategy that centers on the Greater Tokyo area (Tokyo, Kanagawa, Chiba and Saitama prefectures), which has strong tenant
demand, while also considering regional diversification through the three major metropolitan areas and cabinet-order designated cities, etc. By combining the “diversified type strategy” in which investments are made in facilities of a variety of sectors
such as logistics facilities, retail facilities, offices and residential facilities with the “large-scale REIT strategy,” which pursues theeffects of diversifying properties and tenants, to make the portfolio more stable as well as with the utilization of the “leasing
value chain” with the Nomura Real Estate Group, the sponsor, NMF will aim to increase unitholder value by securing stable
income and steady growth of assets under management over the medium to long term.

2. BASIS OF PRESENTATION
NMF maintains its accounting records and prepares its financial statements in accordance with accounting principles generally
accepted in Japan (“Japanese GAAP”), including provisions set forth in the Investment Trust Act of Japan, the Companies Act ofJapan, the Financial Instruments and Exchange Act of Japan and related regulations, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements are a translation of the audited financial statements of NMF, which were prepared inaccordance with Japanese GAAP and were presented in NMF’s Securities Report filed with the Kanto Local Finance Bureau. In
preparing the accompanying financial statements, certain reclassifications and modifications have been made to the financial
statements issued domestically in order to present them in a format that is more familiar to readers outside Japan. In addition,
the notes to financial statements include certain information that might not be required under Japanese GAAP but is presented
herein as additional information. Amounts have been rounded to the nearest thousand yen in the accompanying financial statements and the notes thereto, whereas amounts were truncated in the Japanese financial statements prepared in accordancewith Japanese GAAP.
NMF’s fiscal period is a six-month period which ends at the end of February or August. NMF does not prepare consolidated
financial statements because it has no subsidiaries.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESCash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments that are highly
liquid, readily convertible to cash, with an insignificant risk of market value fluctuation, and with a maturity of three months orless when purchased.
Property and equipment
Property and equipment are stated at cost, which includes the purchase price and related costs for acquisition, less accumulated depreciation.
Depreciation is calculated by the straight-line method over the estimated useful lives of the fixed assets outlined below:
Buildings 		
Structures
Machinery and equipment
Tools, furniture and fixtures

3 - 70 years
2 - 45 years
2 - 15 years
2 - 20 years

Intangible assets
Intangible assets are amortized by the straight-line method.
Goodwill is amortized using the straight-line method over 20 years.

The accompanying notes to financial statements are an integral part of these statements.

35

36

Financial Section

NOTES TO FINANCIAL STATEMENTS
Long-term prepaid expenses
Long-term prepaid expenses are amortized by the straight-line method.

4. CASH AND CASH EQUIVALENTS

Impairment of fixed assets
NMF reviews fixed assets for impairment whenever events or changes in circumstances indicate that the carrying value of its
fixed assets may not be recoverable. An impairment loss is recognized if the carrying value of an asset exceeds the aggregate
estimated future cash flows. If a fixed asset is determined to be impaired, it is written down to its recoverable amount and thewrite-down is recorded as an impairment loss during the period in which it occurs.

Deferred investment corporation bond issuance costs
Deferred investment corporation bond issuance costs are amortized by the straight-line method over the respective terms of
the bonds.
Investment unit issuance expenses
The entire amount is expensed as incurred.
Allowance for doubtful accounts
For allowance for doubtful accounts against possible losses arising from default on receivables, the uncollectable amount isestimated and recorded by investigating collectability based on historical loan loss ratios for general receivables and on a caseby-case examination for doubtful and other specific receivables.
Accounting treatment of beneficial interests in real estate
All assets and liabilities held in trust, for which the real estate in possession of NMF was entrusted, and all related earnings andexpenses incurred are reflected in the accompanying balance sheet and statement of income and retained earnings,
respectively.
Revenue recognition
Operating revenues consist of rental revenues including base rents and common area charges, and other operating revenues
including utility charge reimbursements, parking space rental revenues and other income. Rental revenues are generally recognized on an accrual basis over the life of each lease. Utility charge reimbursements are recognized when earned and theiramounts are reasonably estimated.
Property related taxes
Property in Japan is subject to property taxes, urban planning taxes and depreciable property taxes on a calendar year basis. The
taxes related to property are generally imposed based on the value of the relevant property and incurred for the fiscal period.
The seller of a property is liable for property related taxes for the period from the purchase date through the end of that calendar year because taxes are imposed on the owner registered in the record as of January 1 for the entire year based on theassessment made by the local government. The amount applicable to the buyer of a property is usually settled between eachparty and capitalized as part of the acquisition cost of the property. The capitalized property related taxes amounted to ¥135,274
thousand for the fiscal period ended August 31, 2017, and ¥12,466 thousand for the fiscal period ended February 28, 2018.
Income taxes
Deferred tax assets and liabilities are computed based on the differences between the financial statements and income tax
bases of assets and liabilities using the applicable statutory tax rates.
Consumption taxes
Consumption taxes received and paid are not included in the accompanying statement of income and retained earnings.
Derivative financial instruments
NMF utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure tochanges in interest rates. NMF defers recognition of gains or losses resulting from changes in the fair value of interest rate
swap contracts which meet the criteria for deferral hedge accounting.
Although deferral hedge accounting is generally applied, NMF applies the special treatment to those interest-rate swap contracts that meet the criteria for such special treatment. Under the special treatment, interest-rate swaps are not remeasured atfair value; instead, the net amount paid or received under the interest rate swap contract is recognized and included in interest
expense or income.

37

Cash and cash equivalents as of February 28, 2018 and August 31, 2017 consist of the following:Thousands of Yen

As of February 28, 2018

As of August 31, 2017¥76,536,939¥76,536,939¥71,227,676¥71,227,676

Cash and bank deposits
Cash and cash equivalents
Important contents of the non-cash transactions:Not applicable.

5. ASSETS PLEDGED AS COLLATERAL AND SECURED LIABILITIESThe assets pledged as collateral are as follows:

Thousands of Yen

As of February 28, 2018

As of August 31, 2017

¥3,327,532
6,096,368
206¥9,424,107¥3,319,061
6,096,368—¥9,415,429

Buildings in trust
Land in trust
Tools, furniture and fixtures in trust
Total
The secured liabilities are as follows:

Thousands of Yen

As of February 28, 2018

As of August 31, 2017

¥726,648¥726,648¥726,648¥726,648

Tenant leasehold and security deposits in trust
Total

6. SCHEDULE OF PROPERTY AND EQUIPMENT
Property and equipment as of February 28, 2018 and August 31, 2017 consist of the following:

Thousands of Yen

As of February 28, 2018Land
Buildings and structures
Accumulated depreciation
Machinery and equipment
Accumulated depreciation
Tools, furniture and fixtures
Accumulated depreciation
Land in trust
Buildings and structures in trust
Accumulated depreciation
Machinery and equipment in trust
Accumulated depreciation
Tools, furniture and fixtures in trust
Accumulated depreciation
Lease assets in trust
Accumulated depreciation
Construction in progress
Total

Acquisition costs¥223,024,637
121,861,494(8,494,264)
620,043(298,651)
190,500(37,880)
406,677,823
179,686,820(17,892,399)
284,564(36,334)
379,390(104,417)
23,901(18,850)
99,000¥905,965,377

Book value¥223,024,637
113,367,230
321,392
152,620
406,677,823
161,794,421
248,230
274,973
5,051
99,000¥905,965,377

As of August 31, 2017
Acquisition costs¥214,805,613
118,505,725(6,669,922)
597,359(235,885)
143,823(23,985)
415,162,900
187,990,446(16,282,808)
231,241(24,553)
466,104(105,142)
23,901(14,950)
5,229¥914,575,096

Book value¥214,805,613
111,835,803
361,474
119,838
415,162,900
171,707,638
206,688
360,9628,951
5,229¥914,575,096

38

Financial Section

NOTES TO FINANCIAL STATEMENTS
7. SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT

8. LONG-TERM DEBT

Short-term debt and current portion of long-term debt as of February 28, 2018 and August 31, 2017 consist of the following:

Long-term debts as of February 28, 2018 and August 31, 2017 consist of the following:

As of February 28, 2018
Amount(Thousands of yen)Unsecured loans from banks due on September 26, 2017
Unsecured loans from banks due on December 26, 2017
Unsecured loans from a bank due on February 26, 2018
Unsecured loans from banks due on February 26, 2018
Unsecured loans from banks due on February 27, 2018
Unsecured loans from a bank due on March 27, 2018
Unsecured loans from banks due on March 27, 2018
Unsecured loans from banks due on April 27, 2018
Unsecured loans from banks due on May 28, 2018
Unsecured loans from a bank due on June 26, 2018
Unsecured loans from a bank due on August 27, 2018
Unsecured loans from banks due on August 27, 2018
Unsecured loans from banks due on November 26, 2018
Unsecured loans from banks due on November 26, 2018
Unsecured loans from banks due on November 26, 2018
Unsecured loans from a bank due on November 26, 2018
Unsecured loans from banks due on November 26, 2018
Unsecured loans from banks due on December 26, 2018
Unsecured loans from banks due on February 26, 2019
Unsecured loans from a bank due on February 26, 2019
Unsecured loans from banks due on February 26, 2019
Unsecured loans from a bank due on May 26, 2025 (Note 2)
Unsecured loans from a bank due on May 26, 2025 (Note 2)
Total

—
—
—
—
—
¥ 2,355,000
4,670,000
1,230,000
12,200,000
2,000,000
2,000,000
5,400,000
2,000,000
4,000,000
3,000,000
1,000,000
1,700,000
6,375,000
3,000,000
2,000,000
5,300,000
42,80042,800¥58,315,600

Weighted-averageinterest rate (Note 1)
—
—
—
—
—
1.08448%0.65545%0.65545%0.86250%
1.09000%
1.03500%
0.99000%
0.93600%
0.72500%
0.77650%
0.48250%
0.50250%
0.16545%1.44450%0.90759%0.87695%
2.17000%
2.21812%

As of August 31, 2017
Amount(Thousands of yen)

¥ 4,000,000
12,900,000
1,000,000
1,500,000
5,420,000
2,355,000
4,670,000
1,230,000
12,200,000
2,000,000
2,000,000
5,400,000
—
—
—
—
—
—
—
—
—
42,80042,800¥54,760,600

Weighted-averageinterest rate (Note 1)
0.15000%
1.03775%
1.84650%0.43727%
1.12013%1.08448%0.63000%
0.63000%
0.86250%
1.09000%
1.03500%
0.99000%
—
—
—
—
—
—
—
—
—
2.17000%
2.21812%Note 1: The weighted-average interest rate is weighted by the balance of each borrowing at the end of the period and rounded to the nearest fifth decimal place. As forthe borrowings, which were hedged by interest-rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
Note 2: R epay ¥10.7 million of principal at each repayment date during the period between August 26, 2013, and February 26, 2025, and repay ¥497.1 million on May
26, 2025, the last repayment date(1) NMF entered into ¥10,000 million credit facilities in the form of commitment lines with two financial institutions for the fiscal
period ended February 28, 2018. The total unused amount of such credit facilities was ¥10,000 million as of February 28,2018.
(2) NMF entered into ¥40,000 million credit facilities in the form of commitment lines with five financial institutions for the fiscal
period ended February 28, 2018. The total unused amount of such credit facilities was ¥35,000 million as of February 28,2018.
(3) NMF entered into ¥10,000 million credit facilities in the form of commitment lines with two financial institutions for the fiscal
period ended August 31, 2017. The total unused amount of such credit facilities was ¥10,000 million as of August 31, 2017.
(4) NMF entered into ¥40,000 million credit facilities in the form of commitment lines with five financial institutions for the fiscal
period ended August 31, 2017. The total unused amount of such credit facilities was ¥40,000 million as of August 31, 2017.

39

As of February 28, 2018

Unsecured loans from banks due on November 26, 2018
Unsecured loans from banks due on November 26, 2018
Unsecured loans from banks due on November 26, 2018
Unsecured loans from a bank due on November 26, 2018
Unsecured loans from banks due on November 26, 2018
Unsecured loans from banks due on December 26, 2018
Unsecured loans from banks due on February 26, 2019
Unsecured loans from a bank due on February 26, 2019
Unsecured loans from banks due on February 26, 2019
Unsecured loans from banks due on March 29, 2019
Unsecured loans from banks due on March 29, 2019
Unsecured loans from banks due on May 27, 2019
Unsecured loans from a bank due on May 27, 2019
Unsecured loans from a bank due on May 27, 2019
Unsecured loans from a bank due on August 26, 2019
Unsecured loans from banks due on August 26, 2019
Unsecured loans from banks due on August 26, 2019
Unsecured loans from banks due on August 26, 2019
Unsecured loans from banks due on October 28, 2019
Unsecured loans from banks due on October 28, 2019
Unsecured loans from banks due on November 26, 2019
Unsecured loans from banks due on November 26, 2019
Unsecured loans from banks due on November 26, 2019
Unsecured loans from banks due on November 26, 2019
Unsecured loans from banks due on February 26, 2020
Unsecured loans from banks due on February 26, 2020
Unsecured loans from banks due on May 26, 2020
Unsecured loans from a bank due on May 26, 2020
Unsecured loans from a bank due on May 27, 2020
Unsecured loans from banks due on May 29, 2020
Unsecured loans from a bank due on August 26, 2020
Unsecured loans from a bank due on August 26, 2020
Unsecured loans from banks due on August 26, 2020
Unsecured loans from a bank due on August 26, 2020
Unsecured loans from banks due on August 26, 2020
Unsecured loans from a bank due on August 26, 2020
Unsecured loans from banks due on September 28, 2020
Unsecured loans from banks due on November 26, 2020
Unsecured loans from banks due on November 26, 2020
Unsecured loans from a bank due on November 26, 2020
Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from banks due on February 26, 2021
Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021

Weighted-averageAmount(Thousands of yen)interest rate (Note 1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
¥ 4,500,000
0.81625%
4,000,000
0.89635%
9,000,000
1.11750%
1,000,000
1.04875%
1,100,000
0.69894%
2,200,000
1.22000%
5,700,000
1.25200%
2,500,000
1.27625%4,700,000
0.81080%
3,000,000
0.22545%
4,000,000
0.19545%
1,600,000
1.16500%
4,000,000
0.72650%
5,600,000
0.54065%
3,450,000
0.37420%
5,750,000
1.01150%
2,500,000
0.64685%
10,000,000
1.33750%
800,000
1.25875%
1,000,000
1.48625%
4,000,000
0.43000%
1,100,000
1.53674%
800,000
1.28277%
4,700,000
1.18000%
500,000
1.15566%
4,500,000
1.08100%
1,000,000
0.72000%
3,000,000
0.22545%
3,500,000
0.46075%
2,350,000
0.46190%
500,000
0.47375%
5,000,000
1.35250%
2,000,000
1.17750%
2,000,000
1.19211%2,000,000
0.80832%
3,000,000
0.86350%
2,120,000
0.85050%
500,000
0.46725%2,000,000
0.22560%

As of August 31, 2017
Weighted-averageinterest rate (Note 1)¥ 2,000,000
0.93600%
4,000,000
0.72500%
3,000,000
0.77650%
1,000,000
0.48250%
1,700,000
0.50250%
6,375,000
0.14000%
3,000,000
1.44450%
2,000,000
0.90759%
5,300,000
0.87695%
4,500,000
0.81625%
4,000,000
0.89635%
9,000,000
1.11750%
1,000,000
1.04875%
1,100,000
0.69894%
2,200,000
1.22000%
5,700,000
1.25200%
2,500,000
1.27625%4,700,000
0.81080%
3,000,000
0.20000%
4,000,000
0.17000%
1,600,000
1.16500%
4,000,000
0.72650%
5,600,000
0.54065%
3,450,000
0.37420%
5,750,000
1.01150%
2,500,000
0.64685%
10,000,000
1.33750%
800,000
1.25875%
1,000,000
1.48625%
4,000,000
0.43000%
1,100,000
1.53674%
800,000
1.28277%
4,700,000
1.18000%
500,000
1.15566%
4,500,000
1.08100%
1,000,000
0.72000%——
3,500,000
0.46075%
2,350,000
0.46190%
500,000
0.47375%
5,000,000
1.35250%
2,000,000
1.17750%
2,000,000
1.19211%2,000,000
0.80832%
3,000,000
0.86350%
2,120,000
0.85050%
500,000
0.46725%2,000,000
0.22560%
Amount(Thousands of yen)40

Financial Section

NOTES TO FINANCIAL STATEMENTS
As of February 28, 2018
Weighted-averageinterest rate (Note 1)
2,800,000
0.14700%
400,000
0.21810%8,000,000
1.56250%
1,000,000
1.46375%
1,000,000
1.68200%
3,500,000
1.62500%
4,180,000
1.23920%2,700,000
1.24100%
3,600,000
0.81585%
2,000,000
1.30289%2,000,000
1.11662%
4,900,000
0.97410%3,500,000
1.48300%
4,500,000
1.31850%
2,750,000
1.29600%
4,000,000
1.16000%
5,500,000
1.25900%
4,500,000
0.82500%
2,980,000
1.19700%
3,000,000
1.09133%
4,000,000
1.08034%
1,000,000
0.32886%
4,000,000
0.76250%
2,100,000
0.92280%
1,800,000
1.05000%
4,550,000
1.11000%
1,500,000
0.98624%
1,000,000
0.71221%1,500,000
0.69250%
1,300,000
1.13250%2,800,000
0.40740%
10,000,000
0.48700%
2,000,000
1.86500%
2,000,000
1.89500%
1,000,000
1.83875%
1,000,000
0.41250%
2,500,000
0.43408%
1,000,000
1.14850%
1,000,000
1.15850%
1,000,000
1.18032%
4,000,000
1.20772%
6,100,000
1.08510%1,000,000
0.43466%
1,000,000
0.41000%
6,700,000
0.55700%
2,000,000
1.75900%
2,600,000
0.82800%
4,000,000
0.49380%
1,500,000
0.47483%
2,750,000
1.59400%
1,300,000
0.53630%

Amount(Thousands of yen)Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from banks due on May 26, 2021
Unsecured loans from a bank due on May 26, 2021
Unsecured loans from a bank due on May 27, 2021
Unsecured loans from a bank due on May 27, 2021
Unsecured loans from banks due on July 26, 2021
Unsecured loans from a bank due on August 26, 2021
Unsecured loans from banks due on August 26, 2021
Unsecured loans from a bank due on November 26, 2021
Unsecured loans from banks due on November 26, 2021
Unsecured loans from banks due on November 26, 2021
Unsecured loans from a bank due on January 26, 2022
Unsecured loans from banks due on February 28, 2022
Unsecured loans from a bank due on February 28, 2022
Unsecured loans from banks due on February 28, 2022
Unsecured loans from banks due on May 26, 2022
Unsecured loans from banks due on May 31, 2022
Unsecured loans from banks due on August 26, 2022
Unsecured loans from a bank due on August 26, 2022
Unsecured loans from banks due on August 26, 2022
Unsecured loans from a bank due on August 26, 2022
Unsecured loans from banks due on September 30, 2022
Unsecured loans from banks due on November 28, 2022
Unsecured loans from a bank due on November 28, 2022
Unsecured loans from banks due on November 28, 2022
Unsecured loans from banks due on November 28, 2022
Unsecured loans from a bank due on November 28, 2022
Unsecured loans from banks due on November 28, 2022
Unsecured loans from a bank due on February 27, 2023
Unsecured loans from banks due on February 27, 2023
Unsecured loans from banks due on February 28, 2023
Unsecured loans from a bank due on May 26, 2023
Unsecured loans from a bank due on May 26, 2023
Unsecured loans from a bank due on May 26, 2023
Unsecured loans from a bank due on May 26, 2023
Unsecured loans from a bank due on May 26, 2023
Unsecured loans from a bank due on August 28, 2023
Unsecured loans from a bank due on August 28, 2023
Unsecured loans from a bank due on August 28, 2023
Unsecured loans from a bank due on August 28, 2023
Unsecured loans from banks due on August 28, 2023
Unsecured loans from a bank due on August 28, 2023
Unsecured loans from a bank due on August 28, 2023
Unsecured loans from banks due on August 31, 2023
Unsecured loans from banks due on November 27, 2023
Unsecured loans from banks due on November 27, 2023
Unsecured loans from banks due on November 27, 2023
Unsecured loans from banks due on November 27, 2023
Unsecured loans from a bank due on February 26, 2024
Unsecured loans from banks due on February 26, 2024

41

As of August 31, 2017
Weighted-averageinterest rate (Note 1)
2,800,000
0.14700%
400,000
0.21810%8,000,000
1.56250%
1,000,000
1.46375%
1,000,000
1.68200%
3,500,000
1.62500%
4,180,000
1.23920%2,700,000
1.24100%
3,600,000
0.81585%
2,000,000
1.30289%2,000,000
1.11662%
4,900,000
0.97410%3,500,000
1.48300%
4,500,000
1.31850%
2,750,000
1.29600%
4,000,000
1.16000%
5,500,000
1.25900%
4,500,000
0.82500%
2,980,000
1.19700%
3,000,000
1.09133%
4,000,000
1.08034%
1,000,000
0.32886%
4,000,000
0.76250%
2,100,000
0.92280%
1,800,000
1.05000%
4,550,000
1.11000%
1,500,000
0.98624%
1,000,000
0.71221%1,500,000
0.69250%
1,300,000
1.13250%2,800,000
0.40740%
10,000,000
0.48700%
2,000,000
1.86500%
2,000,000
1.89500%
1,000,000
1.83875%
1,000,000
0.41250%
2,500,000
0.43408%
1,000,000
1.14850%
1,000,000
1.15850%
1,000,000
1.18032%
4,000,000
1.20772%
6,100,000
1.08510%1,000,000
0.43466%
1,000,000
0.41000%
6,700,000
0.55700%
2,000,000
1.75900%
2,600,000
0.82800%
4,000,000
0.49380%
1,500,000
0.47483%
2,750,000
1.59400%
1,300,000
0.53630%

As of February 28, 2018
Weighted-averageinterest rate (Note 1)
1,100,000
0.51000%
2,700,000
0.46376%
2,000,000
0.53676%
2,700,000
0.85925%2,700,000
0.49533%
3,000,000
0.58175%
2,430,000
0.49971%5,670,000
0.49485%
2,250,000
0.50825%
3,000,000
0.58000%
1,800,000
0.55979%
500,000
0.52384%
4,200,000
0.62675%
1,000,000
0.52140%
3,000,000
0.53936%
1,500,000
0.53880%
2,000,000
0.60286%2,000,000
0.60286%
2,800,000
0.60286%
1,000,000
0.61434%
3,000,000
0.56380%
4,050,000
0.58727%
1,850,000
0.67915%2,600,000
0.60489%
3,000,000
0.58380%
1,100,000
1.09830%
1,100,000
1.06250%
2,000,000
1.03955%
2,000,000
0.59639%2,000,000
0.60448%
4,200,000
0.64616%
900,000
0.65123%1,300,000
0.64278%
1,000,000
0.59499%
4,000,000
0.74080%
2,500,000
0.63995%
1,100,000
0.65267%2,700,000
0.67591%2,700,000
0.67591%
3,000,000
0.77669%
1,000,000
0.70414%3,000,000
0.67483%2,000,000
0.76000%
2,000,000
0.74229%
4,165,000
0.73506%
4,000,000
0.69956%
2,320,000
0.71500%
3,060,000
0.78177%
2,300,000
0.74736%4,000,000
0.76843%2,600,000
0.76290%

AmountAmount(Thousands of yen)(Thousands of yen)Unsecured loans from banks due on May 27, 2024
Unsecured loans from a bank due on May 27, 2024
Unsecured loans from a bank due on May 27, 2024
Unsecured loans from a bank due on June 26, 2024
Unsecured loans from a bank due on June 26, 2024
Unsecured loans from a bank due on August 26, 2024
Unsecured loans from a bank due on August 26, 2024
Unsecured loans from banks due on August 26, 2024
Unsecured loans from a bank due on November 26, 2024
Unsecured loans from banks due on November 26, 2024
Unsecured loans from a bank due on November 26, 2024
Unsecured loans from a bank due on November 26, 2024
Unsecured loans from banks due on February 26, 2025
Unsecured loans from a bank due on February 26, 2025
Unsecured loans from banks due on February 26, 2025
Unsecured loans from banks due on February 26, 2025
Unsecured loans from a bank due on May 26, 2025
Unsecured loans from a bank due on May 26, 2025
Unsecured loans from banks due on May 26, 2025
Unsecured loans from a bank due on May 26, 2025
Unsecured loans from banks due on August 26, 2025
Unsecured loans from banks due on August 26, 2025
Unsecured loans from banks due on August 26, 2025
Unsecured loans from banks due on August 26, 2025
Unsecured loans from banks due on August 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from banks due on November 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from a bank due on November 26, 2025
Unsecured loans from banks due on February 26, 2026
Unsecured loans from a bank due on May 26, 2026
Unsecured loans from a bank due on May 26, 2026
Unsecured loans from a bank due on August 26, 2026
Unsecured loans from a bank due on August 26, 2026
Unsecured loans from banks due on August 26, 2026
Unsecured loans from a bank due on August 26, 2026
Unsecured loans from banks due on August 26, 2026
Unsecured loans from a bank due on November 26, 2026
Unsecured loans from a bank due on November 26, 2026
Unsecured loans from banks due on November 26, 2026
Unsecured loans from banks due on November 26, 2026
Unsecured loans from banks due on February 26, 2027
Unsecured loans from banks due on May 26, 2027
Unsecured loans from banks due on May 26, 2027
Unsecured loans from banks due on August 26, 2027
Unsecured loans from banks due on August 26, 2027

As of August 31, 2017
Weighted-averageinterest rate (Note 1)
1,100,000
0.51000%
2,700,000
0.46376%
2,000,000
0.53676%
2,700,000
0.85925%2,700,000
0.49533%
3,000,000
0.58175%
2,430,000
0.49971%5,670,000
0.49485%
2,250,000
0.50825%
3,000,000
0.58000%
1,800,000
0.55979%——
4,200,000
0.62675%
1,000,000
0.52140%
3,000,000
0.53936%——2,000,000
0.60286%2,000,000
0.60286%
2,800,000
0.60286%
1,000,000
0.61434%
3,000,000
0.56380%
4,050,000
0.58727%
1,850,000
0.67915%2,600,000
0.60489%
3,000,000
0.58380%
1,100,000
1.09830%
1,100,000
1.06250%
2,000,000
1.03955%
2,000,000
0.59639%2,000,000
0.60448%
4,200,000
0.64616%
900,000
0.65123%1,300,000
0.64278%——4,000,000
0.74080%
2,500,000
0.63995%——
2,700,000
0.67591%2,700,000
0.67591%
3,000,000
0.77669%
1,000,000
0.70414%3,000,000
0.67483%2,000,000
0.76000%
2,000,000
0.74229%
4,165,000
0.73506%————
3,060,000
0.78177%——
4,000,000
0.76843%——

Amount(Thousands of yen)42

Financial Section

NOTES TO FINANCIAL STATEMENTS
As of February 28, 2018
Amount(Thousands of yen)Unsecured loans from a bank due on November 26, 2027
Unsecured loans from banks due on November 26, 2027
Unsecured loans from a bank due on February 28, 2028
Unsecured loans from a bank due on November 26, 2029
Unsecured loans from a bank due on November 26, 2029
Unsecured loans from a bank due on October 28, 2030
Unsecured loans from a bank due on October 28, 2030
Unsecured loans from a bank due on May 26, 2025 (Note 2)
Unsecured loans from a bank due on May 26, 2025 (Note 2)
Total

2,000,000
5,000,000
1,000,000
2,000,000
2,000,000
1,100,000
1,100,000
753,900
753,900¥407,382,800

forth in the Investment Trust Act.

As of August 31, 2017

Weighted-averageinterest rate (Note 1)
0.89209%
0.79571%
0.82130%
1.12506%
1.12506%
1.92250%
1.91700%
2.17000%
2.21812%Amount(Thousands of yen)

2,000,000——
2,000,000
2,000,000
1,100,000
1,100,000
775,300
775,300¥411,480,600

Weighted-averageinterest rate (Note 1)
0.89209%——1.12506%
1.12506%
1.92250%
1.91700%
2.17000%
2.21812%Note 1: The weighted-average interest rate is weighted by the balance of each borrowing at the end of the period and rounded to the nearest fifth decimal place. As forthe borrowings, which were hedged by interest-rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
Note 2: Installments of ¥10.7 million will be made on the 26th day of every third month starting on August 26, 2013, with the remaining payment of ¥497.1 million to be
repaid on May 26, 2025.

The scheduled repayment amounts of long-term debt for each of the five years after the balance sheet date (excluding thecurrent portion of long-term debt) are as follows.


Thousands of Yen

As of August 31, 2017
As of February 28, 2018

1-2 years¥63,160,600¥64,685,600

2-3 years¥58,385,600¥59,655,600

3-4 years¥52,235,600¥47,715,600

4-5 years¥44,715,600¥51,615,600

As of February 28, 2018

NOF’s 2nd series of unsecured investment corporation
bonds due on March 16, 2020
NOF’s 7th series of unsecured investment corporation
bonds due on March 17, 2028
NOF’s 9th series of unsecured investment corporation
bonds due on November 24, 2017
Former NMF’s 1st series of unsecured investment
corporation bonds due on October 30, 2024
NOF’s 10th series of unsecured investment corporation
bonds due on November 25, 2024
NMF’s 2nd series of unsecured investment corporation
bonds due on November 16, 2027
Total

Interest rate

Thousands of Yen

Related assets, etc.
Goodwill

Balance at the Allowance set
Balance at theReversal during
Initial amount end of previous aside during
end of current
periodperiodperiodperiodAmortization of goodwill¥4,244,641¥4,244,641——¥4,244,641
ReasonReason for reversal—
Sale and depreciation ofproperties for which
1,399,853
merger expenses wererecordedLand, buildings,
etc.

Merger expenses

4,029,136

1,491,074—(¥ 91,221)

Deferred gains orlosses on hedges

Loss on interest-rate
swaps recognized at theend of the fiscal period

2,867,595

1,545,633—(20,951)

1,524,682

Land, buildings,
etc.

Impairment loss

269,797

86,379—(86,379)———

7,367,727¥7,367,727——(198,551)(¥198,551)

7,169,176¥7,169,176

2.47%¥ 5,000,000

2.47%

4,500,000

2.90%

4,500,000

2.9%

—

—

4,000,000

1.52%

3,000,000

0.87%

3,000,000

0.87%

6,000,000

1.02%

6,000,000

1.02%

2,000,000

0.59%

—

—

¥20,500,000

Item
Buildings, etc.
Land
Buildings in trust, etc.
Land in trust
Leasehold rights
Leasehold rights in trust(Note 1)

¥ 5,000,000

Changes in fair value ofderivative transactions
Sale of properties forwhich impairment loss
were recorded——

Method of reversal
Upon depreciation and sale, etc., the corresponding amount is scheduled to be reversed.
Upon sale, etc., the corresponding amount is scheduled to be reversed.
Upon depreciation or sale, etc., the corresponding amount is scheduled to be reversed.
Upon sale, etc., the corresponding amount is scheduled to be reversed.

(3) Impairment loss
Upon the sale of the relevant properties, the corresponding amount is scheduled to be reversed.
(4) Deferred gains or losses on hedges.
Based on changes in the fair value of derivatives used as hedging instruments, the corresponding amount is scheduled to bereversed.
For the period from March 1, 2017 to August 31, 2017¥22,500,000

1. Reason, related assets and amountsThousands of Yen

1-2 years——

2-3 years¥5,000,000¥5,000,000

3-4 years——

4-5 years——

10. UNITHOLDERS’ EQUITY
NMF issues only non-par value investment units in accordance with the Investment Trust Act. The entire amount of the issue
price of new units is designated as stated capital. NMF is required to maintain net assets of at least ¥50,000 thousand as set

43Interest rate

Amount(Thousands of yen)

(Note 1)The scheduled redemption amounts of investment corporation bonds for each of the five years after the balance sheet date areas follows.
Within a year
¥4,000,000—

1. Reason, related assets and amounts(2) Merger expenses

As of August 31, 2017

Note 1: The interest rate is rounded to the nearest second decimal place.

As of August 31, 2017
As of February 28, 2018

For the period from September 1, 2017 to February, 2018

2. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.

Details of investment corporation bonds outstanding are summarized as follows.

Amount

The movement in the allowance for temporary difference adjustments on the Balance Sheet was as follows:

Increase - subtotal
Total

9. INVESTMENT CORPORATION BONDS(Thousands of yen)

11. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS

Thousands of Yen

Balance at the Allowance set
Balance at theReversal during
Initial amount end of previous aside during
end of current
Reason for reversal
periodperiodperiodperiodGoodwill
Amortization of goodwill¥4,244,641¥1,622,398¥2,622,243—¥4,244,641—
Land, buildings, etc. Merger expenses
4,029,136
1,497,394(6,320)—1,491,074—
Loss on interest-rate
Deferred gains or
Changes in fair value ofswaps recognized at the
2,867,595
2,254,454—(¥708,821)
1,545,633
losses on hedges
derivative transactions
end of the fiscal period
Land, buildings, etc. Impairment loss
269,797—
86,379—86,379—
Shortfall of reserve forLong-term deposits
15,186—————
repairRelated assets, etc.

Reason44

Financial Section

NOTES TO FINANCIAL STATEMENTS

Related assets, etc.
Increase - subtotal
Buildings, building
improvements, etc.
Unearned revenue,
etc.
Other
Decrease - subtotal
Total

Balance at the Allowance set
Balance at theReversal during
Initial amount end of previous aside during
end of current
periodperiodperiodperiod—5,374,246
2,702,302(708,821)
7,367,727

ReasonDepreciation deficiency
equivalent
Write-down of loss oninterest rate swap due
to merger—

Reason for reversal—(1,302,167)

—

—

—

—

—

(216,262)

—

—

—

—

—

(¥ 76,769)————¥5,374,246——¥2,702,302——(¥708,821)——¥7,367,727———

2. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
(2) Merger expenses
Item
Buildings, etc.
Land
Buildings in trust, etc.
Land in trust
Leasehold rights
Leasehold rights in trust

Method of reversal
Upon depreciation and sale, etc., the corresponding amount is scheduled to be reversed.
Upon sale, etc., the corresponding amount is scheduled to be reversed.
Upon depreciation or sale, etc., the corresponding amount is scheduled to be reversed.

Subsidiaries and affiliates
Not applicable
Fellow subsidiary companies
Not applicable
Directors and major individual unitholders
Not applicable

14. INCOME TAXESNMF, as an investment corporation, is subject to corporate income taxes at a statutory tax rate of approximately 31.74% for the
fiscal period ended February 28, 2018. However, NMF may deduct dividend distributions paid to its unitholders from its taxable
income amounts, provided such distributions meet the requirements under the Act on Special Measures Concerning Taxation ofJapan. Under this act, an investment corporation must meet a number of tax requirements, including a requirement to distribute in excess of 90% of its distributable income for the fiscal period, in order to deduct such amounts. If the investment corporation does not satisfy all of the requirements, the entire taxable income of the investment corporation will be subject to regular
corporate income taxes.
Since NMF distributed in excess of 90% of its distributable income in the form of cash distributions totaling ¥12,745,997 thousand for the fiscal period ended February 28, 2018, such distributions were treated as deductible distributions for purposes ofcorporate income taxes.
The following summarizes breakdown of deferred tax assets and liabilities:

For the period
from September 1, 2017
to February 28, 2018

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

(3) Impairment loss
Upon the sale of the relevant properties, the corresponding amount is scheduled to be reversed.
(4) Deferred gains or losses on hedges.
Based on changes in the fair value of derivatives used as hedging instruments, the corresponding amount is scheduled to bereversed.

12. PER UNIT INFORMATIONThe net asset values per unit and the net income per unit as of February 28, 2018 and August 31, 2017 were as follows:
For the period
from September 1, 2017
to February 28, 2018
Net assets per unit
Net income per unit

For the period
from March 1, 2017
to August 31, 2017

¥132,697¥ 2,561¥133,069¥ 3,153

Deferred tax asset:
Valuation difference on other assets acquired by merger
Deferred gains or losses on hedges
Unearned revenue
Write-offs for long-term prepaid expenses
Depreciation costs of trust leasehold rights
		Subtotal		Valuation allowance
		 Total non-current deferred tax assets
Total deferred tax assets
Net deferred tax assets

Net income (Thousands of yen)Amount not available to ordinary unitholders (Thousands of yen)
Net income available to ordinary unitholders (Thousands of yen)
Average number of units during the period (Units)

For the period
from March 1, 2017
to August 31, 2017¥10,714,661—¥10,714,661
4,183,130

13. RELATED PARTY TRANSACTIONS
For the periods from September 1, 2017 to February 28, 2018 and from March 1, 2017 to August 31, 2017
Parent Company and major corporate unitholders
Not applicable45¥13,190,198—¥13,190,198
4,183,130

For the period
from March 1, 2017
to August 31, 2017

¥21,567,576
345,465
224,444
22,194
97822,160,657(¥22,160,657)———¥21,965,966
481,704
275,398
25,634855
22,749,557(¥22,749,557)———

The following summarizes the significant differences between the statutory tax rate and the effective tax rate.
For the period
from September 1, 2017
to February 28, 2018

Note 1: The net income per unit is calculated by dividing net income by the weighted-average number of units outstanding.
Note 2: The basis for calculating net income per unit is as follows.

For the period
from September 1, 2017
to February 28, 2018

Thousands of Yen

Statutory tax rate
Deductible cash distributions
Valuation of allowance
Amortization of goodwill
Other
Effective tax rate

31.74%(35.26%)(4.24%)
7.77%
0.01%
0.01%

For the period
from March 1, 2017
to August 31, 201731.74%(16.57%)(21.48%)
6.31%
0.00%
0.00%

15. FINANCIAL INSTRUMENTS
Overview(1) Policy for Financial Instruments
Upon acquisition of property-related assets, NMF may raise funds through certain financing methods including borrowings,
issuance of investment corporation bonds and issuance of investment units. In financing through interest - bearing debt, tosecure stable financing capability and reduce future risks of rising interest rates, NMF’s investment policy is to secure46

Financial Section

NOTES TO FINANCIAL STATEMENTS
longer-term, fixed-rate borrowings with well-diversified maturities.
NMF enters into derivative transactions only for the purpose of reducing risk of future interest rate fluctuations and does notengage in speculative transactions.
(2) Type and Risk of Financial Instruments and Related Risk Management
Debts and investment corporation bonds are primarily used to fund the acquisition of property-related assets as well as therepayment of debts and redemption of investment corporation bonds. NMF is exposed to liquidity risk of being unable tomeet its obligations on scheduled due dates. NMF controls and limits such risk by diversifying not only the financial institutions, but also the type of financing to include the effective use of surplus funds and direct financing from the capital markets such as issuance of investment units. In addition, NMF is exposed to the market risk arising from fluctuations in interest
rates on its floating-rate debts. However, the effect of such risk on the operation of NMF is limited by maintaining the LTV
ratio at low levels and the ratio of long-term fixed-rate debts to total debt at high levels. Furthermore, NMF may utilize
derivative transactions (interest-rate swap transactions) as a hedging instrument to reduce the market risk under floating-rate
debts by swapping such floating-rate interest payments for fixed-rate interest payments.
Bank deposits are held as a means of investing surplus funds, and NMF is exposed to the credit risk that financial institutions
may default. However, the effect of such risk is limited by diversifying the financial institutions with which surplus funds aredeposited.
(3) Supplementary Explanation on Estimated Fair Value of Financial Instruments
The fair value of financial instruments is based on the quoted market price, if applicable. When there is no quoted market
price available, fair value is reasonably estimated. Certain assumptions are used for the estimation of fair value. Accordingly,
the result of such estimation may change if different assumptions are used. Furthermore, the contractual amounts of derivative transactions stated in “22. Derivatives and Hedge Accounting” below do not represent the market risk involved in thesederivative transactions.

cash flows from the interest-rate swap at a rate reasonably estimated to be applicable to similar fixed-rate debt.) The fair value of fixed-rate long-term debt isdetermined by discounting the sum of its principal and interest payments at a rate reasonably estimated to be applicable to similar fixed-rate debt.
(vi) Derivative transactions
See “21. Derivatives and Hedge Accounting.”
Note 3: Redemption schedule for cash and bank deposits as of February 28, 2018



Cash and bank deposits
Total(i) Cash and bank deposits(ii) Current portion of investment corporation bonds(iii) Current portion of long-term debt(iv) Investment corporation bonds(v) Long-term debt(vi) Derivative transactions

Fair value¥ 76,536,939—(58,423,277)(21,791,171)(412,310,168)(¥ 1,097,928)

Difference——¥ 107,677
1,291,171¥4,927,368—

For the period from March 1, 2017 to August 31, 2017
The following table summarizes the carrying value and the estimated fair values of financial instruments as of August 31, 2017.
(i) Cash and bank deposits(ii) Current portion of investment corporation bonds(iii) Current portion of long-term debt(iv) Investment corporation bonds(v) Long-term debt(vi) Derivative transactions

Thousands of Yen

Carrying value (Note 1)¥ 71,227,676(4,000,000)(54,760,600)(18,500,000)(411,480,600)(¥ 1,539,851)

Fair value (Note 2)¥ 71,227,676(4,011,828)(54,912,627)(19,932,756)(417,122,162)(¥ 1,539,851)

Difference—¥ 11,828
152,027
1,432,756¥5,641,562—

Note 1: The numbers in parenthesis indicate liabilities.
Note 2: Method for determining the fair value of financial instruments and derivative transactions(i) Cash and bank deposits
As these items are settled within a short-term period, their fair value is nearly equal to the carrying value. Therefore, for these items, the carrying value isreported as the fair value.
(ii) Current portion of investment corporation bonds and (iv) Investment corporation bonds
The fair value of investment corporation bonds issued by NMF is determined based on their market prices.
(iii) Current portion of long-term debt and (v) Long-term debt
For floating-rate long-term debt, the carrying value is reported as it is considered to be approximately equal to the fair value because such debt reflects themarket interest rates within a short-term period. (However, the fair value of certain floating-rate long-term debt that qualifies for the special treatment ofinterest-rate swaps (see “21. Derivatives and Hedge Accounting”) is determined by discounting the sum of its principal and interest payments net of any

47

—
—

Due within
one year¥71,227,676¥71,227,676

After one year, After two years, After three years, After four years,
within two years within three years within four years within five years
—
—
—
—
—
—
—
—

After five years——

Note 4: Redemption schedule for debt as of February 28, 2018

Thousands of Yen

Due within
one yearInvestment corporation bonds—
Long-term debt
¥58,315,600
Total¥58,315,600

After one year, After two years, After three years, After four years,
After five years
within two years within three years within four years within five years— ¥ 5,000,000—— ¥ 15,500,000¥64,685,600 ¥59,655,600 ¥47,715,600 ¥51,615,600 ¥183,710,400¥64,685,600 ¥64,655,600 ¥47,715,600 ¥51,615,600 ¥199,210,400

Redemption schedule for debt as of August 31, 2017

Thousands of Yen

Due within
one yearInvestment corporation bonds ¥4,000,000
Long-term debt
¥54,760,600
Total¥58,760,600

Thousands of Yen

Carrying value¥ 76,536,939—(58,315,600)(20,500,000)(407,382,800)(¥ 1,097,928)

After five years

Thousands of Yen

Cash and bank deposits
Total

The following table summarizes the carrying value and the estimated fair values of financial instruments as of February 28, 2018.
(Note 2)After one year, After two years, After three years, After four years,
within two years within three years within four years within five years
—
—
—
—
—
—
—
—

Redemption schedule for cash and bank deposits as of August 31, 2017

For the period from September 1, 2017 to February 28, 2018

(Note 1)

Due within
one year¥76,536,939¥76,536,939



Fair Value of Financial Instruments

Thousands of Yen

After one year, After two years, After three years, After four years,
After five years
within two years within three years within four years within five years—¥5,000,000—— ¥13,500,000¥63,160,600 ¥58,385,600 ¥52,235,600 ¥44,715,600 ¥192,983,200¥63,160,600 ¥63,385,600 ¥52,235,600 ¥44,715,600 ¥206,483,200

16. INVESTMENT AND RENTAL PROPERTIESNMF owns leasable office, leasable retail facilities, leasable logistics facilities, leasable residential (including land) in Greater
Tokyo area and other areas for the purpose of earning revenue from leasing. The following table summarizes the carrying value
and the estimated fair value of these properties.


Thousands of Yen

For the period
from September 1, 2017
to February 28, 2018
Carrying value
Balance at beginning of the period
Amount of increase (decrease) during the period
Balance at end of the period
Fair value at end of the period¥ 923,155,804(8,321,623)
914,834,180¥1,001,250,000

For the period
from March 1, 2017
to August 31, 2017
¥ 928,836,719(5,680,915)
923,155,804¥1,002,630,000

Note 1: The carrying value represents the acquisition cost less accumulated depreciation.
Note 2: O f the change in investment and rental properties, the increase during the previous period is mainly attributable to the acquisition of nORBESA (¥8,638,004
thousand),NRE Kichijoji Building (¥5,141,844 thousand), Nakaza Cui-daore Building (¥12,165,807 thousand),Landport Kashiwa Shonan I (¥10,040,496 thousand),PRIME URBAN Gakugei Daigaku Parkfront (¥1,402,842 thousand), Proud Flat Omori III (¥1,165,489 thousand), Proud Flat Kinshicho (¥831,191 thousand),Summit Store Narita-Higashi(Land) (¥744,810 thousand). The decrease during the previous period is mainly attributable to the sale of NOF Technoport Kamata
Center Building (¥4,725,469 thousand), NOF Nihonbashi Honcho Building (¥10,889,175 thousand), Tennozu Park Side Building (¥12,467,899 thousand),Mitsubishi Motors Shibuya (Land) (¥1,586,458 thousand), Mitsubishi Motors Suginami (Land) (¥748,922 thousand), Ito-Yokado Higashi-Narashino Store(¥641,752 thousand), Merad Owada (¥6,510,260 thousand), Ota Nitta Logistics Center (¥3,081,630 thousand), Ota Higashishinmachi Logistics Center(¥1,958,017 thousand), Ota Kiyohara Logistics Center (¥578,054 thousand) and Chiyodamachi Logistics Center (¥314,953 thousand) as well as depreciation(¥4,858,613 thousand). The increase during the current period is mainly attributable to the acquisition of PMO Shinnihonbashi (¥4,496,617 thousand), PMO
Hirakawacho (¥3,460,311 thousand), GEMS Daimon (¥2,087,357 thousand), GEMS Kanda (¥1,520,710 thousand) and Summit Store Mukodaicho (¥5,159,847
thousand). The decrease during the current period is mainly attributable to the sale of Morisia Tsudanuma (¥17,897,287 thousand) and Funabashi Logistics
Center (¥4,537,933 thousand) as well as depreciation (¥4,733,427 thousand).
Note 3: F air value at the end of the period is the appraisal value or survey price determined by an outside real estate appraiser. However, the scheduled transfer price isused as the fair value for Morisia Tsudanuma in the previous period.

The real estate rental revenues and expenses for the fiscal period ended February 28, 2018 are presented in “18. Breakdown ofReal Estate Rental Revenues and Expenses”.

48

Financial Section

NOTES TO FINANCIAL STATEMENTS
17. SEGMENT INFORMATION

19. BREAKDOWN OF GAIN AND LOSS ON SALES OF REAL ESTATE

For the periods from September 1, 2017 to February 28, 2018 and from March 1, 2017 to August 31, 2017

Thousands of Yen

Since NMF has been engaged in the real estate leasing business as a single segment, segment information has been omitted.
Related Information
1. Information about products and services
Since revenues from external customers of products and services within a single segment are more than 90 percent of total
operating revenues, information about products and services has been omitted.
2. Information about geographical areas(1) Revenues
Since more than 90 percent of the total operating revenues were generated from external customers in Japan, geographicalbreakdown of revenues has been omitted.
(2) Property and equipment
Since more than 90 percent of the total property and equipment on the balance sheet are located in Japan, geographicalbreakdown of property and equipment has been omitted.

For the period from September 1, 2017 to February 28, 2018

¥23,480,000
22,435,221
457,529¥ 587,250¥47,414,250
43,502,593
803,995¥ 3,107,662

—
—
—
—

—
—
—
—

20. LEASESRevenues (Thousands of yen)
¥4,773,517

Related segment nameRental real estate business

Revenues (Thousands of yen)
¥4,708,156

Related segment nameRental real estate business

For the period from March 1, 2017 to August 31, 2017
Customer name
Nomura Real Estate Partners Co., Ltd.

Gain on sale of real estate
Proceeds from sale of real estate
Cost of real estate
Other related sales expense
Gain on sale of real estate
Loss on sale of real estate
Proceeds from sale of real estate
Cost of real estate
Other related sales expense
Loss on sale of real estate

The future minimum rental revenues from tenants under non-cancelable operating lease of properties as of February 28, 2018
and August 31, 2017 are summarized as follows:

3. Information about major clients

Customer name
Nomura Real Estate Partners Co., Ltd.

For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2017
to February 28, 2018

Segment Information

Thousands of Yen

As of February 28, 2018

As of August 31, 2017

¥ 29,455,791
76,898,092¥106,353,883¥ 32,493,388
82,875,214¥115,368,602

Due within one year
Due after one year
Total

21. DERIVATIVES AND HEDGE ACCOUNTING
Derivative transactions as of February 28, 201818. BREAKDOWN OF REAL ESTATE RENTAL REVENUES AND EXPENSES(1) There were no derivative financial instruments not subject to hedge accounting.

Real estate rental revenues and expenses for the fiscal period ended February 28, 2018 and August 31, 2017 consist of thefollowing:(2) Derivative financial instruments subject to hedge accounting were as follows:

Thousands of Yen

For the period from
September 1, 2017
to February 28, 2018
Real estate rental revenues
Rental revenues
		Rental revenues
		 Common area charges
Other rental revenues
		Parking revenues
		Incidental income
		 Other miscellaneous revenues
Real estate rental expenses
		 Property management costs
		 Property management fees
		 Property and other taxes
		Utility expenses
		Casualty insurance		 Repairs and maintenance		Land rents
		Depreciation
		 Other rental expenses
Real estate rental profits49¥33,631,626
30,724,009
28,294,469
2,429,540
2,907,617
584,742
2,198,013
124,862
14,785,472
1,592,436
888,376
2,699,056
1,784,615
43,247
1,758,409
210,440
4,737,224
1,071,669¥18,846,154

For the period
from March 1, 2017
to August 31, 2017
¥35,032,000
31,656,774
29,096,278
2,560,496
3,375,226
661,984
2,507,620
205,622
15,962,926
1,697,881
955,304
2,883,602
2,013,032
46,032
2,083,226
208,035
4,862,343
1,213,471¥19,069,074

Thousands of Yen

Hedge accounting
methodPrincipal treatment
methodSpecial treatment ofinterest-rate swaps
Total

Type of derivative
instruments
Interest-rate swaps:
Received/floating andpaid/fixedInterest-rate swaps:
Received/floating andpaid/fixed

Main hedged
item

Notional amountDue after one year

(Note 1)Long-term debt

¥134,780,000

Long-term debt

101,696,700¥236,476,700

Fair value (Note 2)¥116,080,000 (¥1,097,928) (Note 3)

83,753,900(1,043,451) (Note 4)¥199,833,900 (¥2,141,379)

Note 1: Contract amount is based on notional amount.
Note 2: Fair value is measured by swap counterparty, based on the actual market interest rate, etc.
Note 3: Out of the fair value, (¥4,467 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥1,043,451 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest-rate swaps.

50

Financial Section

NOTES TO FINANCIAL STATEMENTS
Derivative transactions as of August 31, 201723. INFORMATION ON ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS(1) There were no derivative financial instruments not subject to hedge accounting.

For the period from September 1, 2017 to February 28, 2018

(2) Derivative financial instruments subject to hedge accounting were as follows:

1. Reason of provision related assets and amountsThousands of Yen

Hedge accounting
methodPrincipal treatment
methodSpecial treatment ofinterest-rate swaps

Type of derivative
instruments
Interest-rate swaps:
Received/floating andpaid/fixedInterest-rate swaps:
Received/floating andpaid/fixed

Main hedged
item

Notional amount(Note 1)
Due after one year

Long-term debt

¥154,100,000

Long-term debt

101,718,100

Total¥255,818,100(1,402,532) (Note 4)¥218,855,300 (¥2,942,383)

Note 1: Contract amount is based on notional amount.
Note 2: Fair value is measured by swap counterparty, based on the actual market interest rate, etc.
Note 3: Out of the fair value, (¥15,169 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥1,402,532 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest-rate swaps.

Goodwill
Long-term deposits
Increase-subtotal
Buildings, facilities, etc.
Unearned revenue
OthersDecrease-subtotal
Total

Reason of provision
Amortization of goodwill
Shortfall of reserve for repairs
Depreciation deficiency equivalent
Write-down of loss on interest rate swap due to merger—

Provision of allowance fortemporary difference
adjustments¥2,622,243
7,570
2,629,813(1,234,823)(161,277)(45,704)(1,441,804)¥1,188,009

2. Reason for reversal, related assets and amounts


22. CASH DISTRIBUTIONS
For the period
from September 1, 2017
to February 28, 2018

For the period
from March 1, 2017
to August 31, 2017

1. Retained earnings at end of period¥12,549,780,041¥14,737,836,769

2. Distributions in excess of retained earnings
		 Of which, allowance for temporary difference adjustment
		 Of which, other distributions in excess of net income¥1,769,463,990¥1,188,008,920¥581,455,070———

3. Incorporation into unitholders’ capital		 Of which, reversal of allowance for temporary difference adjustments¥478,516,800¥478,516,800¥198,551,954¥198,551,954

4. Distributions
		 [Distributions (per unit)]		 Of which, distributions of earnings
		 [Of which, distributions of earnings (per unit)]		 Of which, allowance for temporary difference adjustments		 [Of which, allowance for temporary difference adjustments (per unit)]		 Of which, other distributions in excess of net income
		 [Of which, other distributions in excess of net income (per unit)]¥12,745,997,110(¥3,047)¥10,976,533,120(¥2,624)¥1,188,008,920(¥284)¥581,455,070(¥139)¥12,704,165,810(¥3,037)¥12,704,165,810(¥3,037)————

4. Retained earnings carried forward¥1,094,730,121¥1,835,119,005

Calculation method of distribution amount
NMF calculates distributions in accordance with the cash distribution policies as specified in Article 36, Paragraphs 1 and 2 of
NMF’s Articles of Incorporation. For the fiscal period ended February 28, 2018, NMF decided to pay ¥12,745,997,110 in distributions, for a distribution per unit of ¥3,047. This figure was calculated as ¥10,714,661,036 in net income plus ¥2,622,242,820 inamortization of goodwill minus ¥587,249,509 in gains on sale of real estate, for a subtotal of ¥12,745,997,110, from which theportion for which per-unit distributions comprising the types of dividends laid out below would be less than ¥1 was excluded.
Total distributions comprise distributions of earnings and distributions in excess of net income. Distributions of earnings cameto ¥10,976,533,120 (¥2,624 per unit), calculated as income as stipulated in Article 136 Paragraph 1 of the Act on Investment
Trusts and Investment Corporations, less reversal of allowance for temporary difference adjustments (hereinafter ATA).
Distributions in excess of net income comprise a ¥1,188,008,920 (¥284 per unit) distribution of ATA and ¥581,455,070 (¥139 perunit) in other distributions in excess of net income.

51

Thousands of Yen

Related assets, etc.

Fair value (Note 2)¥129,380,000 (¥1,539,851) (Note 3)

89,475,300

Thousands of Yen

Related assets, etc.

Reason for reversal

Provision of allowance fortemporary difference
adjustments

Sale and depreciation of properties for which merger
expenses were recorded
Deferred gains or losses on hedges Changes in fair value of derivatives
Total

Land, Buildings, etc.

(¥ 47,295)(431,221)(¥478,516)

3. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
(2) Merger expenses
Item
Buildings, etc.
Land
Buildings in trust, etc.
Land in trust, etc.
Leasehold
Leasehold in trust

Method of reversal
Upon depreciation or sale, the corresponding amount is scheduled to be reversed.
Upon sale, the corresponding amount is scheduled to be reversed.
Upon depreciation or sale, the corresponding amount is scheduled to be reversed.
Upon sale, the corresponding amount is scheduled to be reversed.

(3) Long-term deposits
In principle, long-term deposits are not reserved.
(4) Deferred gains or losses on hedges
The amount corresponding to changes in the fair value of derivatives used as hedging instruments is scheduled to bereversed.
For the period from March 1, 2017 to August 31, 2017
1. Reason for reversal, related assets and amountsThousands of Yen

Related assets, etc.

Reason for reversal

Sale and depreciation of properties for which merger
expenses were recorded
Land, buildings, etc.
Sale of property on which impairment was recognizedDeferred gains or losses on hedges Changes in fair value of derivatives
Total

Land, buildings, etc.

Provision of allowance fortemporary difference
adjustments(¥ 91,222)(86,379)(20,951)(¥198,552)

52

Financial Section

NOTES TO FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT

2. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
(2) Merger expenses
Item
Buildings, etc.
Land
Buildings in trust, etc.
Land in trust, etc.
Leasehold
Leasehold in trust

Method of reversal
Upon depreciation or sale, the corresponding amount is scheduled to be reversed.
Upon sale, the corresponding amount is scheduled to be reversed.
Upon depreciation or sale, the corresponding amount is scheduled to be reversed.
Upon sale, the corresponding amount is scheduled to be reversed.

(3) Impairment loss
Upon the sale of the relevant properties, the corresponding amount is scheduled to be reversed.
(4) Deferred gains or losses on hedges
The amount corresponding to changes in the fair value of derivatives used as hedging instruments is scheduled to bereversed.

24. SIGNIFICANT SUBSEQUENT EVENTSIssuance of new investment units
At the Board of Directors’ meetings held on February 1, 2018 and February 13, 2018, NMF resolved to issue new investment
units, as shown below. Payments for new investment units issued via a public offering concluded on March 1, 2018, and payments for new investment units issued via a third-party allocation concluded on March 20, 2018. As a result, unitholders’ capitalwas ¥181,251,569 thousand, and the total number of investment units issued and outstanding was 4,321,800 as of March 20,
2018.
1. Issuance of New Investment Units through Public Offering (Primary Offering)Number of units offered:
132,000 units
Issue price (offer price):¥137,474 per unit
Total issue price (total offer price):¥18,146,568,000
Amount to be paid (issue value):¥133,125 per unit
Total amount to be paid (total issue value): ¥17,572,500,000
Payment date:
March 1, 2018
2. Issuance of New Investment Units through Third-Party Allotment (Third-Party Allotment)
Number of units offered:
6,670 units
Amount to be paid (issue value):¥133,125 per unit
Total amount to be paid (total issue value): ¥887,943,750
Payment date:
March 20, 2018
Allottee:
Nomura Securities Co., Ltd.
Use of proceeds
The proceeds obtained from the Primary Offering and the Third-party Allotment were used for a part of the acquisition of thenine properties acquired on March 1, 2018 and April 2, 2018.

53

54

Financial Strategy

Investor Information

RETENTION OF AMOUNT EQUIVALENT TO GAIN ON SALES
IR Calendar
Basic Distribution Policy

Distribution Policy for Periods with Gainon SalesDistribute net income+ amortization of goodwill

Announcement of financial results(Mid-April)

Announcement of financial results(Mid-October)To ensure stable distributions over the medium and long term, by
January

adjusting distributions in excess of earnings, a cash amountFebruary

March

April

May

June

July

AugustSeptember

OctoberNovember

Decemberequivalent to gain on sales may be designated as retained
earnings.
Gain onsales

RetainGoodwill
amortization

Distributions
in excess of
net earnings

Gain onsales

10

Goodwill
amortization

10

20

Gain onsales

Retention of amountequivalent to gain on
sales

10

Distributions inexcess of earnings

10

10
Gain on sales is
distributed, anddistributions inexcess of earnings
are adjusted
accordinglyNet
incomeProfitExcl. gainon salesDistributionsof netearnings

Net
income80

ProfitExcl. gainon sales80

ProfitExcl. gainon salesFiscal period end(End of February)

Commencement of payment of distributions
Release of Asset Management Report(Mid-May)

Distribution of Investment Units
Individuals and others

Other domestic corporations

357,791 units (8.6%)

325,961 units (7.8%)

Fiscal period end(End of August)Commencement of payment of distributions
Release of Asset Management Report(Mid-November)

Top 10 Unitholders
Unitholder

Units held

Share

1

Japan Trustee Services Bank, Ltd.

920,651

22,0%

2

The Master Trust Bank of Japan, Ltd.

564,057

13.5%

3

Nomura Real Estate Development Co., Ltd.

210,671

5.0%

4The Nomura Trust and Banking Co., Ltd.

176.394

4.2%

5

Trust & Custody Services Bank, Ltd.

159,538

3.8%

6

STATE STREET BANK WEST CLIENT- TREATY 505234

124,399

3.0%

7

NOMURA BANK (LUXEMBOURG) S.A.

95,872

2.3%

8

STATE STREET BANK - WEST PENSIONFUND CLIENTS - EXEMPT 505233

82,976

2.0%

9STATE STREET BANK AND TRUSTCOMPANY 505223

54,826

1.3%

10

STATE STREET BANK AND TRUSTCOMPANY 505012

47,1331.1%

2,436,517

58.2%

Financial institutions

80

2,257,417 units (54.0%)
Foreign corporations

1,241,961 units (29.7%)
Net income(as on statementof income)

Total
distributions

Net income(as on statementof income)

Total
distributions

Distribution
breakdown

Retention of Amount Equivalent to Gain on Sales
in 5th Fiscal Period
Retention of amountequivalent to gain on sales(¥587 mln)*1

Retain* Numbers shown
above are forillustrative purposes
only.

Retained earnings
brought forward, etc.
(internal reserve ofgain on sales in theprevious period)*2

Gain onsales

ProfitExcl.
gain on
sales

587

587

262
(587)

Other domestic corporations 516 (1.5%)

Distributions ofallowance for temporary
difference adjustment

Amountequivalent
to goodwill
amortization
expenses

10,127

10,127

Net income
Distribution(as on statement
policyof income)

Other distributions inexcess of earnings

10,127

10,714

Total
distribution¥12,745 mln(Distributionsof profit¥10,976 mln)
(Distributions
in excess ofearnings¥1,769 mln)

Total distributions(incl. distributions inexcess of earnings)

Distributionof retained
earnings
brought
forward, etc.

Lack of depreciation
attributable to the difference between accounting
and tax treatment

Foreign corporations 489 (1.4%)

Internal reserveof gain on sales

Total

587

Web Site262

https://www.nre-mf.co.jp/en/
Distributions
in excess ofearnings¥1,769 mln

Distributeas profits

NMF strives to ensure accurate, timely disclosure through its website.
For convenience, the website also offers a variety of other information,
including the following.
■ Overview of NMF and its features; information about the AssetManagement Company-1,434

581

2,622
1,188
Goodwill
amortization

1,188

Allowance Distributions
for temporary in excess
differenceof profit
adjustment (Breakdown)*1 When there is a gain on sales, NMF’s policy is, in principle, to set aside an amount equivalent to the gain that is not more than the amount of goodwill amortization
expenses as reserves within the scope that will not be subject to income tax. For the 5th fiscal period, NMF does not expect the reserves equivalent to the period’s
gain on sales to be taxed because it is within the amount of distributions in excess of earnings (distribution reducing unitholders’ capital for tax purposes).
*2 The amount calculated by deducting the reversal of allowance for temporary difference adjustment for the 5th fiscal period (¥47 million. Excluding those attributableto deferred gains or losses on hedges) from ¥310 million as reserves of profits out of gain on sales in the previous period.

55

187 (0.6%)

32.539 (96.5%)

Distributions in excessof earnings

1,769

Financial institutions

Individuals and others

587
2,622

Number of Unitholders■ Portfolio summary; property overviews (with photos, maps, etc.);

occupancy rate data■ Press releases, disclosure materials, and information on distributions

and financial results
We will continue to enhance the website’s contents and use it toprovide timely information.

56