Semiannual
R e p o r t

26th

FiscalPeriodNovember 1, 2017- April 30, 2018

TSE 8972

AboutKDO

Kenedix Office Investment Corporation (KDO) is a dynamic and proven J-REIT focusing on investments in mid-sized officebuildings in the Tokyo metropolitan area. Since listing on the Tokyo Stock Exchange (8972), KDO has deployed tactfulproperty acquisition strategies in accordance with the real estate market environment. Through steady expansion, KDO’s
portfolio has grown from 31 properties with a total acquisition price of ¥69 billion to 97 properties with a total acquisition priceof ¥407 billion in April 2018.
As the No.1 J-REIT focusing on mid-sized office buildings, we will continue raising portfolio quality through asset reshuffle
and other initiatives, while advancing performance with internal growth, backed by sound financial management.

Unitholders' Information 48

Financial Section 24

Contents

Sustainability 22

Portfolio 20

Management Team 19

Financial Strategy 18

Internal Growth 14External Growth

Message from the Management

At a Glance

About KDO

2

2 Kenedix Office Investment Corporation

4

6

10

CHARACTERISTICS OF MID-SIZEDOFFICE BUILDING MARKET
Office market by total floor area
(proportion of number of buildings) (Note 1)
5,000 tsubo
or more10.2%

3,000-less than
5,000 tsubo

6.8%

1,000-less than
3,000 tsubo

Mid-sized
office buildings

83.0%

500-less than
1,000 tsubo

47.4%

Image of a typical mid-sized office building

35.6%

Source: Based on the survey CBRE conducted at the request of the AssetManagement Company.

Elevator
2 lifts

Note 1: The above data is the proportion of number of buildings based on size.
It covers rental office buildings located in Tokyo central 5 wards that weresurveyed by CBRE (as of the end of September 2016).

# of office building transactions bytransaction price¥10.0 billion
or more19.6%¥5.0-less than
10.0 billion

16.6%

Less than¥1.0 billion
Mid-sized
office buildings

19.4%(Note 2)61.0%

100~150
tsubo per floor
8~10 floors¥1.0-less than
5.0 billion

44.4%

Total floorarea of500~3,000
tsubo

Source: Compiled by the Asset Management Company based on "the number ofoffice building transactions by transaction size (FY2006-FY2017)" from
"Real Estate Transactions Study" by Urban Research InstituteCorporation, a think tank of Mizuho Trust & Banking Co., Ltd.
Note 2: The transaction prices of mid-sized office buildings are generally around¥1.0 billion to ¥10.0 billion.

Business office by the number of
employees (Tokyo)
100 people
or more30-99 people

5.6%

2.3%

10-29 people

17.0%

Mid/small-sizedcompanies

92.2%

1-9 people

75.2%

Source: Compiled by the Asset Management Company based on "2014
Economic Census for Business Frame Tokyo (revised results)(as of March 27, 2017)".
Kenedix Office Investment Corporation

3

At a Glance
Percent figures in brackets indicate period over period changes.

External growth
Effects of asset reshuffle through mutual transaction
Gain on sale of real estate

Increase in NOI after depreciation

Rejuvenation of average building age¥1,090 million+¥258 million

12.2 years

Internal growth
Increase in actual occupancy rate

Ratio of upward rent revision (by contract)

End of the 26th fiscal period (owned office buildings)

98.0%

25th fiscal period

26th fiscal period

16.9% 24.7%(+1.5%)

Increase by rent revision
Total monthly rent of the 26th fiscal period(increased portion)+¥6.8 million

Occupancy rate (contracted area based): 99.1%

Financial strategy
LTV (interest-bearing debt ratio)
End of the 26th fiscal
period (Apr. 2018)

Estimate after
the public offering

43.9% 42.3%
DPU history

Average interest rate oninterest-bearing debt

Average remaining period tomaturity on interest-bearing debt

End of the 26th fiscal period

End of the 26th fiscal period

1.07%

5.2 years(-0.03%)(+0.2 years)

Changes in NAV per unit

(Note 1)Raised dividend by approx. 10% year over year in the 26th
fiscal period (Apr. 2018).

+10.5% 12,960(yen)(Note 2)

+5.9%
(yen)

631,000

615,000
596,000

12,500577,000
557,000

11,733
11,365
10,70722nd
fiscal period(Apr. 2016)

23rd
24th
fiscal period fiscal period(Oct. 2016)(Apr. 2017)

25th
fiscal period(Oct. 2017)26th
fiscal period(Apr. 2018)

Note 1: Figures are calculated based on the number of investment units issued
and outstanding as of the end of each fiscal period.

4 Kenedix Office Investment Corporation

22nd
fiscal period(Apr. 2016)

23rd
24th
fiscal period fiscal period(Oct. 2016)(Apr. 2017)

25th
26th
fiscal period fiscal period(Oct. 2017)(Apr. 2018)

Note 2: NAV per unit is truncated to the nearest thousand yen after subtracting
the amount of DPU.

Portfolio growth (based on total acquisition price) and the number of properties (Note 1) (Note 2)# of properties (right axis)
Office (left axis)
Residential (left axis)
Central urban retail (left axis) PO Fiscal period with public offering (PO)
Others (left axis)(billion yen)(# of properties)

500

89

83 84 83 85

400

72

77

64

71
70
68 69 67
67
65

94
PO

74

97 97 97 99 97 98 97 96
407 415

PO

60
PO

100

0

80

PO

300

200

100

31

PO

PO

35

40

PO

20

69

0

1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th After
fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal fiscal the public
period period period period period period period period period period period period period period period period period period period period period period period period period period offering(Oct. 2005) (Apr. 2006) (Oct. 2006) (Apr. 2007) (Oct. 2007) (Apr. 2008) (Oct. 2008) (Apr. 2009) (Oct. 2009) (Apr. 2010) (Oct. 2010) (Apr. 2011) (Oct. 2011) (Apr. 2012) (Oct. 2012) (Apr. 2013) (Oct. 2013) (Apr. 2014) (Oct. 2014) (Apr. 2015) (Oct. 2015) (Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018) (Note 3)

Note 1: The amount and the number of properties are shown as of the end of each fiscal period. Figures are truncated to the nearest billion yen.
Note 2: Classification by use of owned properties has been changed from the 26th fiscal period (Apr. 2018) due to changes in the management guideline on
December 1, 2017. The same applies hereinafter.
Note 3: Calculated by adding the acquisition price of CROSS PLACE Hamamatsucho, the property acquired, and subtracting the acquisition price of KDX
Hamamatsucho Dai-2 Building and Frame Jinnan-zaka, the properties (to be) sold, to/from the total acquisition price at the end of the 26th fiscal period(Apr. 2018)

Portfolio diversification
Portfolio mainly consisted of mid-sized office buildings with advanced tenant diversification.
Plan to maintain approx. 80% investment ratio in Tokyo metropolitan area.
Breakdown by region (Note 2)

Breakdown by asset type (Note 1)
Central urban retail

Others(1 property)(1 property)

0.7%

2.4%

Other regional areas

18.9%

Office bldg.
(other)14.5%(7 properties)

End of 26th
fiscal period(Apr. 2018)# of properties:
97

Office bldg.
(mid-sized)

82.3%(88 properties)

Other Tokyo
metropolitan
areaTokyo central 5 wards

End of 26th
fiscal period(Apr. 2018)

51.8%

29.2%

Office bldg.

Tokyo metropolitan area

96.8%

81.0%

(95 properties)

Breakdown of the number of tenantsby leased floor area (Note 3)
300 tsubo or more
200-less than
300 tsubo

6.7%

5.1%

100-less than
200 tsubo

22.0%

End of 26th
fiscal period(Apr. 2018)# of tenants:
1,188

Less than 200 tsubo

88.2%

Less than 100
tsubo

66.2%

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

5

Message from the Management

We aim to realize sustainable growth bybuilding a robust and profitable portfolio.

Taisuke Miyajima
President & CEO

6 Kenedix Office Investment Corporation

Jiro Takeda
Director & COO, Head of Office REIT Department,
Kenedix Real Estate Fund Management, Inc.

Kenedix Office Investment Corporation

7

Message from the Management

We continued to deliver solid
results in the 26th fiscal period(Apr. 2018) as well as previous
fiscal period.

Kenedix Office Investment Corporation (KDO) continued to perform solidly in its 26th fiscal
period, the six months ended April 30, 2018, as well as previous fiscal period. Distributions
per unit (DPU) for the fiscal period were ¥12,960, being higher than the initially projected¥12,900. As in the previous term, distribution growth was roughly 10% year over year.
Due to an asset reshuffle during the fiscal period under review, we posted approximately¥550 million in gain on sale of real estate and put the entire amount into the reserve for
reduction entry. We plan to continue leveraging the reserve for reduction entry to maintainstable distributions and help realize sustainable growth.
During the fiscal period, we endeavored to drive external growth by continuing to invest
selectively and reshuffle assets, thereby enhancing our portfolio profitability and quality. We
dispersed and improved locations of assets by reshuffling assets in Shibuya and Yokohama and completed a sale of residential property that was a non-core asset. As a result of
this process, we expect to increase net operating income (NOI) by ¥520 million, improveappraisal profit/loss by ¥560 million, and secure ¥550 million in gain on sale.
On the internal growth, we continued to increase rent revenues by boosting actual occupancy rates that exclude free rent area and by raising unit rent. With lower rates of tenants
vacating properties and the gradual expiration of free rent period, the gap between officebuilding occupancy rates and actual occupancy rates shrank to 1.1 percentage points
at the end of the 26th fiscal period (April 30, 2018). Rent increases flowed over into theregional economy, with upward rent revisions continuing.
In addition, we maintained a stable financial position, and were able to cut interest ratecosts while prolonging remaining period to maturity.

In May 2018, we made our firstpublic offering in three and ahalf years*.

In May 2018, during the 27th fiscal period, the six months ending October 31, 2018, we
procured approx. ¥14.7 billion in our first domestic public offering in three and a half years.
We were thereby able to reshuffle assets through a mutual transaction with a general business corporation group in Japan.
We acquired CROSS PLACE Hamamatsucho through the mutual transaction. This recently constructed building in central Tokyo is less than five minutes walk from Daimon andOnarimon subway stations and is also close to JR Hamamatsucho Station. The seismically isolated building employs emergency generators that can run for 72 hours, making itvery comparable to the latest large buildings. The standard floor space of just over 1,000
square meters can be divided into three zones to enable floor plans that flexibly accommodate diverse tenant needs.
There are numerous small and medium-sized buildings in the Hamamatsucho andShibakoen areas. The proportion of office buildings supplied since the 2000s has beensmall. This property is comparatively larger among other mid-sized office buildings and is
one of the few relatively-new ones in the area, giving us great competitiveness.
As part of the mutual transaction, we sell Frame Jinnan-zaka, a central urban retail property, and KDX Hamamatsucho Dai-2 Building, a smaller, older office building. We thereby
expect to realize approx. ¥1.09 billion in gain on sales of these properties.
The mutual transaction is very significant because it increases the proportion of officebuildings in our investment portfolio and our NOI while lowering the average age of ourproperties.
The public offering reduced our loan-to-value (LTV) ratio to an estimated 42.3% from theend of the 26th fiscal period (April 30, 2018) of 43.9%. In the case of LTV 45% limit, we
would expect to secure a borrowing capacity to acquire properties of approx. ¥21.5 billion.

* May 2018 public offering, which included athird-party allocation in June 2018. The same
applies hereinafter.

8 Kenedix Office Investment Corporation

We will drive external growthby continuing to invest selectively and reshuffle assets whileleveraging borrowing capacity
to acquire properties. On theinternal growth, we aim to keepincreasing unit rent.

We will harness our strength
as an independent entity inongoing efforts to find newproperties while identifying
changing office needs toprovide new office environments.

As for the external growth, we expect transaction valuations in the office building market
to remain high, limiting opportunities to purchase properties at reasonable prices. We will
accordingly liaise with our sponsor Kenedix, Inc. and employ our own network to identify
the few attractive properties available. We will draw on borrowing capacity to acquire
properties obtained from the public offering to continue investing selectively and reshuffling
assets.
On the internal growth, we aim to deploy various measures to keep increasing unit rent.
Occupancy levels are near full, so the revenue impact of tenant turnover would be limited.
We nonetheless believe that continuous increases in market rents due to still low-levelvacancy rate of office buildings in major cities will offer scope for focusing on revising rents
upward.
As in the past, we will continue to boost tenant satisfaction by undertaking construction
work that enhances the value and competitiveness of our properties. At the same time, wewill properly explain the divergence between current and market rents to existing tenants
to ensure that steady rental increases are acceptable for them.
Our financial strategy is to maintain our conservative financial management approachand lower interest costs.
These efforts shall enhance unitholder value.
In the three and a half years through to the end of the 26th fiscal period, we acquired 20
properties for a total of ¥98.7 billion. We also sold 17 properties whose initial acquisition
prices totaled ¥61.4 billion.
We have been able to generate such solid results because of the independence of theKenedix Group and due to of the professionalism of our experts from diverse career backgrounds, particularly in finance and real estate. We are proud of all of them.
We will further harness our wide-ranging network and focus on uncovering new deals.
As well, we will continue to invest selectively and reshuffle assets to enhance the profitability and quality of our portfolio.
As circumstances surrounding us, work practice reforms, work–life balance, telework,thin clients, and shared and satellite offices are among the myriad developments that are
rapidly transforming operational and employment landscapes. We aim to properly identify
such changes and explore how office buildings can meet contemporary needs. In doing
so, we will apply our insights to building management and to providing new types of officebuildings.
Kenedix Office Investment Corporation

9

In Hamamatsucho, where CROSS PLACE Hamamatsucho is located, there are a number of offices of companies that develop business throughout Japanand Tokyo branch offices of those headquartered in regional areas, since the area has easy access to Tokyo Station and Shinagawa Station on the Tokaido
Shinkansen, and Haneda Airport, etc.

IkebukuroTokyo

P12 P13

Shinjuku

Hamamatsucho

Shibuya

ShinagawaExternal
GrowthCROSS PLACE
Hamamatsucho

A series of initiatives in the 26th fiscal period (Apr. 2018)

Planned asset reshuffle in and after the 27th fiscal period (Oct. 2018)
Summary of the May 2018 Public Offering

Yields are calculated as follows and rounded to the first decimal place.

• Estimated NOI yield: Calculated by dividing "NOI after excluding extraordinary factors for the year of the acquisition estimated by the Asset Management Company" by acquisition price• Estimated NOI yield after depreciation: Calculated by dividing estimated NOI after depreciation (estimated NOI – estimated depreciation expenses) by acquisition price• Appraisal NOI yield: Calculated by dividing "NOI calculated based on the direct capitalization method described in the relevant appraisal report as of the date of acquisition" by acquisition price• NOI yield after depreciation (actual): Calculated by dividing the sum of the rental operating income (NOI after depreciation (actual)) for the 24th (Apr. 2017) and 25th (Oct. 2017) fiscal
periods by acquisition price• Amount of enhancement of appraisal profit/loss is calculated by the sum of total appraisal profit of acquired properties and the total appraisal loss of sold properties

10 Kenedix Office Investment Corporation

A SERIES OF INITIATIVES IN THE 26TH FISCAL PERIOD (APR. 2018)
Continuously enhanced portfolio quality and profitability through tactful disposition and selective investment.
Increase in NOI after depreciation and enhancement of appraisal profit expected through a series of initiatives.

Acquisition

Disposition

Acquisition of mid-sized officebuilding through support from sponsor

Disposition throughasset reshuffle within the area

• Acquired a mid-sized office building with strong competitive
advantage as a part of portfolio restructuring in Yokohama
area.

• Disposition through asset reshuffle aimed for regional diversification and locational improvement, securing gain on sale from
2 properties.

JN Bldg.

KDX ShinYokohama 214 Bldg.

¥4,830 million¥9,860 million

Total book value¥4,574 million

4.1%

Total appraisal
value¥4,130 million

Average NOI yield
after depreciation(actual)3.4%¥9,500 million

Appraisal value

Estimated NOI yield(as of April 30, 2018)

KDX IkejiriOohashi Bldg.

Total disposition
price

Acquisition price

Estimated NOI yield
after depreciation

3.0%

Appraisal NOI yield

4.6%(as of October 31, 2017)

Joint acquisition with Kenedix group

Disposition of a non-core asset• Joint acquisition with Kenedix Private Investment Corporation
and Kenedix, Inc.’s private fund.

• Secured gain on sale through disposition of a non-core asset(residence) with low profitability.

Mitsubishijuko
Yokohama Bldg.
(quasi co-ownership interest)

Acquisition price¥14,720 million

Appraisal value¥14,900 million

Estimated NOI yield

4.0%(as of April 30, 2018)

Residence
Charmante Tsukishima(compartmentalized ownership)

Book value¥4,481 million

Appraisal value¥4,900 million

NOI yield after
depreciation(actual)2.2%(as of October 31, 2017)

Estimated NOI yield after
3.5%
depreciation
4.4%

Appraisal NOI yield

Disposition price ¥4,900 million

Total acquired

Total soldTotal acquisition price ¥24.2 billion

Total acquisition price ¥9.9 billion

Estimated NOI after depreciation ¥0.7 billion

NOI after depreciation (actual) ¥0.2 billion

Total appraisal profit ¥0.5 billion

Total appraisal loss ¥0.02 billion

Effects through a series of initiatives

Increase in NOI after depreciation

Enhancement of appraisal profit/loss

Gain on sale of real estate¥0.5 billion+¥0.5 billion¥0.5 billion

Kenedix Office Investment Corporation 11

PLANNED ASSET RESHUFFLE IN AND AFTER THE 27TH FISCAL PERIOD (OCT. 2018)

Overview of CROSS PLACE Hamamatsucho
Toei Subway
Mita Line

TokaidoShinkansen

ONARIMONSTATION

JR YamanoteLine
Toei Subway
Asakusa Line

Acquisition

CROSS PLACE
Hamamatsucho

Tokyo
Tower
Zojoji Temple

DAIMONSTATION

Shibakoen Park

Disposition

KDX Hamamatsucho
Dai-2 Building

SHIBAKOEN
STATION
Toei Subway
Oedo LineKDX
Hamamatsucho
Center Building

KDX
Shiba-Daimon
Building

HAMAMATSUCHOSTATION
Tokyo
Monorailto Haneda
AirportKDX
Hamamatsucho
Building

Inner Circular Route

Kyu-Shiba-rikyu
Gardens

JR Yokosuka
Line

Total 304
tsubo
118.39
tsubo

88.92
tsubo

96.67
tsubo

• Accessible by multiple train routes with traffic convenience in about 3 minutes from Daimon Station, about 4 minutes from Onarimon
Station and about 7 minutes from Hamamatsucho Station on foot.
• An office building with a 72-hour emergency power generator and a quake-absorbing structure that reduces shocks of an earthquake.
• Standard floor area of about 304 tsubo; flexible floor plan which can be divided into three, adjusting to various tenant needs.

Acquisition price¥20,700 million

Appraisal NOI yield

3.9%

Appraisal value,(as of March 31, 2018)¥22,400 million

Completion dateFebruary 2015

Estimated NOI yield

3.7%

Occupancy rate

100%

Estimated NOI yield after
depreciation

3.0%

12 Kenedix Office Investment Corporation——

PLANNED ASSET RESHUFFLE IN AND AFTER THE 27TH FISCAL PERIOD (OCT. 2018)
Asset reshuffle unique to KDO with an abundant track record of mutual transactions withmultiple developers, etc.
Asset reshuffle through mutual transactions• Dispose of a central urban retail property and a relatively old small-sized office building and acquire a relatively new property incentral Tokyo through mutual transaction with a domestic general business corporation group.

Asset
reshuffle

Property acquired

CROSS PLACE
Hamamatsucho

Properties (to be) sold

KDX Hamamatsucho
Dai-2 Building(Date of acquisition on July 2,
2018)

Frame Jinnan-zaka((Scheduled) date of saleon July 2, 2018 and Nov. 1,
2018)(Date of sale on July 2, 2018)

Gain on sale of real estate (Note 1)

Increase in NOI after depreciation (Note 2)

Rejuvenation of averagebuilding age (as of July 2, 2018)¥1,090 million+¥258 million

12.2 years

Note 1: The gain on sale is the estimate based on the estimated book value and expenses of the sale. With regards to Frame Jinnan-zaka, the sale of 49.0%
of quasi co-ownership interest was executed on July 2, 2018 and the remaining 51.0% is to be executed on November 1, 2018. The total of the 		gain on sale is stated while each figure to be recognized in the 27th fiscal period (Oct. 2018) and in the 28th fiscal period (Apr. 2019), respectively.
Note 2: The difference between estimated NOI after depreciation of the property acquired and the sum of the rental operating income of the 25th fiscal 		
period (Oct. 2017) and the 26th fiscal period (Apr. 2018) of the properties (to be) sold.

SUMMARY OF THE MAY 2018 PUBLIC OFFERING
Secured the acquisition funds through the public offering and achieved the above transaction that enhanced thequality of the portfolio.
Summary of the public offering
Offering structure

Domestic pubic offering

Paid-in value (issue amount)¥625,209

Number of investment units issued
and outstanding before the offering

404,885 units

Aggregate paid-in value(total issue amount)¥14,770 million(incl. third-party allotment)

Total number of new investment
units issued

23,625 units(incl. third-party allotment)

Launch date

May 14, 2018

Number of investment units issued
and outstanding after the offering

428,510 units(incl. third-party allotment)

Pricing date

May 21, 2018

Issue price¥646,425

Payment datePublic offering: May 28, 2018
Third-party allotment: June 15, 2018

Effects of the public offering• Acquisition of a prime property in central Tokyo through mutual transaction.
• Stable growth of DPU and increase of reserve for reduction entry by utilizing gain on sale.
• Generation of borrowing capacity to acquire properties due to a decrease in LTV level and securement of flexibility for selective investment.

DPU growth

25th Fiscal Period to27th Fiscal Period

Per unit+5.6%

Reserve for reduction entry

Total of 27th / 28th Fiscal Periods+¥0.6 billion

LTV after the public offering

Borrowing capacity toacquire properties(in the case of LTV45% limit)

42.3%(-1.6% against 26th fiscal period)

Approx.

¥21.5 billion
Kenedix Office Investment Corporation 13

98.0

%

as of the end of the 26th fiscal period

Actual Occupancy Rate

96.5

%

as of the end of the 25th fiscal period

Internal
Grow th
14 Kenedix Office Investment Corporation

Changes in occupancy and turnover ratio for office buildings
Rent trend upon tenant turnover for office buildings
Status of rent revisions with existing tenants
Construction expense (actual/budget)

CHANGES IN OCCUPANCY AND TURNOVER RATIO FOR OFFICE BUILDINGS
Actual occupancy rate further improved due to low turnover ratio and gradual expiration of free rent periods.
Occupancy rate performance of office buildings (Note 1)

Occupancy rate (contracted area based)

Average occupancy rateduring fiscal period

27th fiscal period(estimate)

Actual occupancy rate (excl. free rent area)

99.2%

(%)
100.0

97.8
96.8

1.1

2.5

98.0

96.8
3.2

95.0

99.1

99.0

96.5

Average actual occupancy rateduring fiscal period

27th fiscal period(estimate)

3.4

4.3

97.7%

94.6
93.4
92.5
Average occupancy rate during fiscal period for office buildings

23rd fiscal period

24th fiscal period

25th fiscal period

26th fiscal period

96.2%

97.1%

98.4%

99.2%

90.0
End of 22nd
fiscal period(Apr. 2016)

End of 23rd
fiscal period(Oct. 2016)

End of 24th
fiscal period(Apr. 2017)

End of 25th
fiscal period(Oct. 2017)

End of 26th
fiscal period(Apr. 2018)

Turnover ratio (annualized) of office buildings (Note 2) (Note 3)• No turnover of major tenants (cancelled ﬂoor of over 1,000 tsubo) is expected for both the actual and the estimate.

(%)

8.0
5.7

5.1
3.6

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

Seek opportunity
for unit rent
growth upontenant turnover inthe 27th ﬁscal
period (Oct. 2018)as turnover ratio
increases.

25thfiscal period(Oct. 2017)

3.2

26th
fiscal period(Apr. 2018)27th
fiscal period(Oct. 2018)
Estimate

Note 1: Occupancy rate (contracted area based) is calculated by dividing contract based leased area by leasable area, and actual occupancy rate (excl. freerent area) is calculated by subtracting free rent area from leased area then dividing that area by leasable area. The figures are rounded to the first decimal place. Average occupancy rate of office buildings during each fiscal period is a simple average of month-end occupancy rates of owned officebuildings during each period. The estimated average occupancy rate for the 27th fiscal period (Oct. 2018) is the figure that is used as part of theassumptions for the earnings forecasts.
Note 2: Annualized turnover ratio is calculated and annualized as follows: (Total leased area of the end-tenants who cancelled their lease agreements during
the six-month period from the beginning to the end of each period) / (Average leasable area of all office buildings owned by KDO as of each month-end
during the relevant period) x 2. Figures are rounded to the first decimal place.
Note 3: Estimate for the 27th fiscal period (Oct. 2018) is based on the cancellation notice, etc., received by May 31, 2018.
Kenedix Office Investment Corporation 15

RENT TREND UPON TENANT TURNOVER FOR OFFICE BUILDINGS
Increase rate in unit rent for new lease contracts in regional areas has been on the rise backed by a favorable
rental property market.
Increase rate in unit rent upon tenant turnover (Note)

Increase/decrease in monthly rent upon tenant turnover (Note)(%)(million yen)
Tokyo metropolitan area (incl. central 5 wards)
Regional areas

23.1

20.3

17.4

15.8

16.1

13.6

11.4

16.0

Total amount of increase in rent
Total amount of decrease in rent

5.8

12.9

11.9

22nd
fiscal period(Apr. 2016)

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

25th
fiscal period(Oct. 2017)26th
fiscal period(Apr. 2018)

54.4%

60.9%

52.3%

50.8%

70.0%

% of count of rent increase upon tenant turnover

-7.0
22nd
fiscal period(Apr. 2016)

5.0
-3.1

23rd
fiscal period(Oct. 2016)

5.3
-8.3
24th
fiscal period(Apr. 2017)

5.0

3.5

-1.5

-1.0

25th
fiscal period(Oct. 2017)26th
fiscal period(Apr. 2018)

Note : Total amount of increases/decreases in monthly rent before and after rent revision for each fiscal period is respectively aggregated for the spaces whererents paid by new tenants and by previous tenants can be compared. The increase rate in unit rent is calculated by comparing previous unit rents andnew unit rents paid by new tenants for the contracts of which the rent has increased.

STATUS OF RENT REVISIONS WITH EXISTING TENANTS
Increasing trend in the percentage of count of upward rent revisions due to the spread of existing tenants’ awareness of upward market rent trend.
Upward rent trend seen in areas other than the Tokyo central 5 wards, with upward rent revisions on a steadyincrease every period.
Changes in rent upon rent revisions(based on monthly rent) (Note 1)

Changes in count of rent increases and rent increase
rate (Note 2)• Steady rent increase as a result of proactive upward rent
negotiations.

• Count of rent increases prominently increased in areas otherthan the Tokyo central 5 wards.

(thousand yen)
Increase in rent
Decrease in rent

8,560Tokyo central 5 wards
Other areas

8,492
5,071

-636

7,034

-729 -1,065 -409

51

50

48

20

18

18

25

3,387

30

30

25

26

31

-472

22nd
fiscal period(Apr. 2016)

23rd
fiscal period(Oct. 2016)

24th
fiscal period(Apr. 2017)

25th
fiscal period(Oct. 2017)26th
fiscal period(Apr. 2018)

12.8%

6.5%

10.8%

7.8%

6.2%

6,826

-2,03272

Conﬁrmedas of
May 31,
2018

22nd
23rd
24th
25th
26th
27th
fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period(Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018) (Oct. 2018)
onwardconﬁrmed

43

41

Rent increase rate (incremental average)

Note 1: Total amount of increases/decreases in monthly rent before and after rent revisions for each fiscal period is respectively aggregated. Figures arerounded to the nearest thousand yen.
Note 2: Rent increase rate is calculated by dividing the sum of increase in monthly rent by the sum of monthly rent before revision. Figures are rounded to thefirst decimal place.

16 Kenedix Office Investment Corporation

CONSTRUCTION EXPENSE (ACTUAL/BUDGET)
Reinforce property competitiveness by flexibly implementing appropriate measures to improve property value.
Plan to continue to undergo repair/renovation by value-upgrading works for the 27th fiscal period (Oct. 2018).
Changes in depreciation and construction expense (actual/budget)(million yen)Repair/maintenanceCapex
Depreciation

451

582

1,120

1,165

22nd
fiscal period(Apr. 2016)
actual

2,293

2,288

2,274

2,230

23rd
fiscal period(Oct. 2016)
actual

2,372

2,295

498
436

451

767

1,018

953

886

24th
fiscal period(Apr. 2017)
actual

26th
fiscal period(Apr. 2018)
actual25th
fiscal period(Oct. 2017)
actual

1,447

27th
fiscal period(Oct. 2018)budgetRepair/renovation work budget for the 27th fiscal period (Oct. 2018) (Note)
Estimated amount(million yen)

Items

Value-upgrading works (including common areas)

Percentage of total expense
(%)

846

43.5

66
521

3.4
26.8

Eco-friendly works(Installation of LED lightings, etc.)

77

4.0

Outer wall repair

49

2.5

Maintenance / repair works

387

19.9

Replacement works

Air-conditioning facilities
Other major facilities

27th fiscal period(Oct. 2018) total

1,946

Percentage to depreciation
expense (%)

82.0

Note: Figures are approximate estimates as of the date in which repair plan was prepared.

Properties to undergo major repair/renovation for the 27th fiscal period (Oct. 2018)• Value-upgrading works (renovation of common areas, restrooms, etc.):
KDX Sakura-dori Building, KDX Nishi-Shinbashi Building, KDX Shinjuku Building, KDX Takadanobaba Building, Toshin 24 Building, 		KDX Shin-Yokohama Building, KDX Karasuma Building, KDX Takanawadai Building, Hiei Kudan-Kita Building• Replacement works of air-conditioning facilities:
KDX Ikebukuro West Building, Senri Life Science Center Building, KDX Yokohama Nishiguchi Building• Outer wall repair:
KDX Funabashi Building, KDX Shin-Osaka Building, KDX Hon-Atsugi Building, KDX Ebisu Building
Kenedix Office Investment Corporation 17

Financial Strategy

STATUS OF DEBT FINANCING
Keep reducing financial cost and extending average remaining period to maturity.
Refinance record for the 26th fiscal period (Apr. 2018)(Total amount of ¥12.0 billion) (Note 1)

Average remaining period to maturity andinterest rate (Note 2)• Reduced financial cost through refinancing and extended
remaining period to maturity
Conditions
before refinancing

3.9 years

Average borrowing
period(%)
1.80

Conditions
after refinancing

1.60

0.78 %

1.21%

Average interest rate

Weighted average remaining period to maturity (right axis)
Weighted average interest rate (incl. up-front fee) (left axis)

5.0

1.45

1.39

1.40

4.0

1.25

1.19

1.16

1.20

6.8 years

1.00
0.80

• Long-term borrowings account for ¥8.0 billion in the refinance(average interest rate 1.00%, average borrowing period 9.7 years)

4.1(years)
6.0

4.3

4.7

4.9

4.7

1.10

1.07

5.0

5.2

End of 20th End of 21st End of 22nd End of 23rd End of 24th End of 25th End of 26th
fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period fiscal period(Apr. 2015) (Oct. 2015) (Apr. 2016) (Oct. 2016) (Apr. 2017) (Oct. 2017) (Apr. 2018)

3.0
2.0
1.0
0.0

Note 1: The average interest rate and borrowing period are the weighted average of the interest rate of borrowings (incl. up-front fee) and borrowing period
based on the balance of borrowings, respectively (with the average interest rate rounded to the second decimal place and the average borrowing
period rounded to the first decimal place). Total borrowings that reached maturity in the 26th fiscal period (Apr. 2018) amount to ¥12.75 billion, of
which ¥0.75 billion was repaid by cash on hand.
Note 2: The average remaining period to maturity and interest rate are the weighted average based on the balance of debt outstanding as of the end of eachfiscal period (with the average remaining period to maturity rounded to the first decimal place and the average interest rate rounded to the second
decimal place).

MAJOR INDICES RELATED TO FINANCIAL STABILITY
Decreased LTV through the May 2018 Public Offering and generated borrowing capacity to acquire properties.
LTV (Interest-bearing debt ratio) (Note 1)
End of the 26th fiscal
period (Apr. 2018)

43.9%

Estimate after
the public offering

Borrowing capacity toacquire properties (Note 2)(in the case of LTV 45% limit)
Approx.

42.3% ¥21.5 billion

Credit rating status

Ratio of fixed interest rate (Note 3)

Japan Credit Rating
Agency, Ltd. (JCR)

Continue to hedge against apotential rise in interest rates

AA- (stable)

96.0%

Note 1: LTV (interest-bearing debt ratio) is calculated by dividing the balance of interest-bearing debt by the amount of total assets as of the end of the fiscal
period, rounded to the first decimal place.
Note 2: Estimated borrowing amount of debt which can be additionally procured from financial institutions or new issuance of investment corporation bonds forproperty acquisition by new debt financing, assuming that the LTV can be increased to a certain value.
Note 3: Include borrowings with floating interest rates fixed by interest rate swaps but exclude those hedged by interest rate caps (rounded to the first decimal place).

DIVERSIFICATION OF DEBT MATURITIESReduced refinancing risk through extension of remaining period to maturity and diversification of debt maturities.
Short-term borrowings
Balance of interest-bearing debt by maturity as of Apr. 30, 2018
¥6.0 billiion¥7.8 billiion
Corporate bonds(billion yen)
20.0
¥172.0 billiion
Long-term borrowings
Total interest-bearing debt ¥185.8 billiion
16.0

12.0

8.0

4.0

0.0

13.3
2.0 11.5
1.8
4.0

8.5

10.1 9.5

6.2
9.5

7.5

27th
fiscal period(Oct. 2018)

6.2

8.5

10.1 9.5

30thfiscal period(Apr. 2020)

18 Kenedix Office Investment Corporation

11.8
9.9
8.1
1.0
11.8

9.9

7.1

5.5
3.8
3.8

34th
fiscal period(Apr. 2022)

9.0 8.3
2.0
4.7

5.5 4.7

7.0

38th
fiscal period(Apr. 2024)

8.3

10.0

14.0
13.0 1.0
2.0

10.8 11.5

10.0 10.8

11.5 6.2 11.0 13.0
6.2

42nd
fiscal period(Apr. 2026)

46th
fiscal period(Apr. 2028)

Tetsushi Ichikawa

Hiroshi Sato

Hiroaki Momoi

Chisei Kaji

Jiro Takeda

Management TeamJiro Takeda

Hiroaki Momoi• Worked for Sumitomo Mitsui Trust Bank, Limited for approx. 7 years• Worked for Nippon Life Insurance Company, Real Estate Division for
approx. 9 years

Director & COO, Head of Office REIT Department• Joined Kenedix as Head of Fund Management Division 1 and served
for approx. 3 years after working for Sanko Estate Co., Ltd.,
GMAC Commercial Mortgage Japan, K.K. and Hudson Japan, K.K.
• Appointed Head of Planning Division, Office REIT Department,
Kenedix Real Estate Fund Management, Inc. on March 29, 2017

Planning Division, Office REIT Department• Joined Kenedix, Inc. in August 2014 after working for Secured Capital
Japan Co., Ltd.

• Appointed Director & COO, Head of Office REIT Department on
April 1, 2018

• Appointed Head of Planning Division, Office REIT Department,
Kenedix Real Estate Fund Management, Inc. on April 1, 2018 after
having worked in Planning Division, Office REIT Department and
Finance & Accounting Department for approx. 3 and a half years

Hiroshi Sato

Tetsushi Ichikawa

Asset Investment Division, Office REIT Department• Worked for Sumitomo Mitsui Trust Bank, Limited for approx. 12 years• Joined Kenedix, Inc. in February 2007
• Appointed Head of Private Fund Department and Head of Investment
Management Division, Private Fund Department, Kenedix Real Estate
Fund Management, Inc. in October 2013
• Appointed Head of Asset Investment Division, Office REIT Department
on March 1, 2018

Chisei KajiAsset Management Division, Office REIT Department• Worked for Mitsui Fudosan Building Management for approx. 9 years(Sales Division and others)

Finance & Accounting Department,
Business Administration Department• Worked for Sumitomo Mitsui Trust Bank, Limited for approx. 15 years(engaged in real estate finance, etc.)• Joined Kenedix, Inc. after having engaged in real estate investmentbanking and having served as director responsible for asset
management business at Touchstone Capital Securities Co., Ltd.
• Appointed Head of Finance & Accounting Department,
Kenedix Real Estate Fund Management, Inc. on October 1, 2013
after serving as Head of Finance Group for Kenedix Residential
Partners, Inc.
• Appointed Head of Business Administration Department on April 1,2015 (concurrent)• Joined Kenedix, Inc. after having engaged in asset management for
approx. 10 years at Tokyo Realty Investment Management, Inc.
• Appointed Head of Asset Management Division, Office REIT Department, Kenedix Real Estate Fund Management, Inc. on March 1, 2016
after having worked in Investment Management Division, Office REIT
Department for approx. 1 year
Kenedix Office Investment Corporation 19

Portfolio (As of April 30, 2018)
The properties acquired during the 26th fiscal period are marked with a red box.
The properties (to be) sold during the 27th/28th fiscal periods are marked with a yellow box.

No.

A-1
A-3
A-4
A-5
A-6
A-7
A-8
A-13
A-14
A-16
A-17
A-19
A-20
A-21
A-22
A-26
A-27
A-29
A-30
A-31
A-32
A-33
A-34
A-35
A-37
A-38
A-41
Office Buildings(Tokyo Metropolitan A-46
Area)
A-48
A-51
A-55
A-56
A-59
A-60
A-61
A-62
A-63
A-64
A-66
A-67
A-68
A-71
A-72
A-73
A-74
A-78
A-83
A-84
A-85
A-86
A-87
A-88
A-89
A-90
A-91

Property Name

Location

KDX Nihonbashi 313 Building
Higashi-Kayabacho Yuraku Building
KDX Hatchobori Building
KDX Nakano-Sakaue Building
Harajuku F.F. Building
KDX Minami Aoyama Building
Kanda Kihara Building
KDX Kojimachi Building
KDX Funabashi Building
Toshin 24 Building
KDX Ebisu Building
KDX Hamamatsucho Building
KDX Kayabacho Building
KDX Shinbashi Building
KDX Shin-Yokohama Building
KDX Kiba Building
KDX Kajicho Building
KDX Higashi-Shinjuku Building
KDX Nishi-Gotanda Building
KDX Monzen-Nakacho Building
KDX Shiba-Daimon Building
KDX Okachimachi Building
KDX Hon-Atsugi Building
KDX Hachioji Building
KDX Ochanomizu Building
KDX Nishi-Shinjuku Building
KDX Shinjuku 286 Building
Hiei Kudan-Kita Building
KDX Kawasaki-Ekimae Hon-cho Building
KDX Hamacho Nakanohashi Building
Shin-toshin Maruzen Building
KDX Jimbocho Building
KDX Iwamoto-cho Building
KDX Harumi Building
KDX Hamamatsucho Dai-2 Building
Koishikawa TG Building
KDX Gotanda Building
KDX Nihonbashi 216 Building
KDX Shinjuku Building
KDX Ginza 1chome Building
KDX Nihonbashi Honcho Building
KDX Iidabashi Building
KDX Higashi-Shinagawa Building
KDX Hakozaki Building
KDX Shin-Nihonbashi Building
KDX Tachikawa Ekimae Building
KDX Fuchu Building
KDX Kasuga Building
KDX Nakameguro Building
KDX Omiya Building
Itopia Nihonbashi SA Building
KDX Shinjuku 6-chome Building
KDX Takanawadai Building
KDX Ikebukuro Building
KDX Mita Building

Chuo-ku, Tokyo
Chuo-ku, Tokyo
Chuo-ku, Tokyo
Nakano-ku, Tokyo
Shibuya-ku, Tokyo
Minato-ku, Tokyo
Chiyoda-ku, Tokyo
Chiyoda-ku, Tokyo
Funabashi, Chiba
Yokohama, Kanagawa
Shibuya-ku, Tokyo
Minato-ku, Tokyo
Chuo-ku, Tokyo
Minato-ku, Tokyo
Yokohama, Kanagawa
Koto-ku, Tokyo
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Shinagawa-ku, Tokyo
Koto-ku, Tokyo
Minato-ku, Tokyo
Taito-ku, Tokyo
Atsugi, Kanagawa
Hachioji, Tokyo
Chiyoda-ku, Tokyo
Shinjuku-ku, Tokyo
Shinjuku-ku, Tokyo
Chiyoda-ku, Tokyo
Kawasaki, Kanagawa
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Chiyoda-ku, Tokyo
Chiyoda-ku, Tokyo
Chuo-ku, Tokyo
Minato-ku, Tokyo
Bunkyo-ku, Tokyo
Shinagawa-ku, Tokyo
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Chuo-ku, Tokyo
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Shinagawa-ku, Tokyo
Chuo-ku, Tokyo
Chuo-ku, Tokyo
Tachikawa, Tokyo
Fuchu, Tokyo
Bunkyo-ku, Tokyo
Meguro-ku, Tokyo
Saitama, Saitama
Chuo-ku, Tokyo
Shinjuku-ku, Tokyo
Minato-ku, Tokyo
Toshima-ku, Tokyo
Minato-ku, Tokyo

20 Kenedix Office Investment Corporation

Acquisition
Price (mn yen)
(Note 1)

5,940
4,450
3,680
2,533
2,450
2,270
1,950
5,950
2,252
5,300
4,640
3,460
2,780
3,728
2,520
1,580
2,350
2,950
4,200
1,400
6,090
2,000
1,305
1,155
6,400
1,500
2,300
7,600
3,760
2,310
2,110
2,760
1,864
10,250
2,200
3,080
2,620
2,010
6,800
4,300
4,000
4,670
4,590
2,710
2,300
1,267
6,120
2,800
1,880
2,020
2,200
1,900
5,250
3,900
3,180

Year Built(Note 2)

Occupancy
Rate(Note 3)Apr. 1974
Jan. 1987
Jun. 1993
Aug. 1992
Nov. 1985
Nov. 1988
May 1993
May 1994
Apr. 1989
Sep. 1984
Jan. 1992
Sep. 1999
Oct. 1987
Feb. 1992
Sep. 1990
Oct. 1992
Mar. 1990
Jan. 1990
Nov. 1992
Sep. 1986
Jul. 1986
Jun. 1988
May 1995
Dec. 1985
Aug. 1982
Oct. 1992
Aug. 1989
Mar. 1988
Feb. 1985
Sep. 1988
Jul. 1990
May 1994
Mar. 2008
Feb. 2008
Apr. 1992
Nov. 1989
Apr. 1988
Oct. 2006
May 1993
Nov. 1991
Jan. 1984
Mar. 1990
Jan. 1993
Nov. 1993
Nov. 2002
Feb. 1990
Mar. 1996
Jun. 1992
Oct. 1985
Apr. 1993
Jul. 1995
Mar. 1990
Oct. 1985
Mar. 2009
Mar. 1993

100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
90.4%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
84.5%
100.0%
100.0%
100.0%
100.0%
97.5%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
98.3%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
99.1%
100.0%
100.0%
100.0%
100.0%
100.0%
94.0%
100.0%
100.0%

No.

Property Name

Location

Acquisition
Price (mn yen)
(Note 1)

A-92 KDX Akihabara Building
Chiyoda-ku, Tokyo
2,600
A-93 KDX Iidabashi Square
Shinjuku-ku, Tokyo
4,350
A-94 KDX Musashi-Kosugi Building
Kawasaki, Kanagawa
12,000A-95 KDX Toyosu Grand Square
Koto-ku, Tokyo
8,666
A-96 KDX Takadanobaba Building
Toshima-ku, Tokyo
3,650
A-99 KDX Ikebukuro West Building
Toshima-ku, Tokyo
1,934
A-101 KDX Yokohama Building
Yokohama, Kanagawa
7,210
A-102 KDX Yokohama Nishiguchi Building
Yokohama, Kanagawa
2,750
A-107 KDX Ginza East Building
Chuo-ku, Tokyo
3,600
Office Buildings(Tokyo Metropolitan A-108 Pentel Building
Chuo-ku, Tokyo
3,350
Area)
A-109 KDX Hamamatsucho Center Building
Minato-ku, Tokyo
3,950
A-112 KDX Toranomon 1chome Building
Minato-ku, Tokyo
15,550A-113 KDX Shin-Nihonbashi Ekimae Building
Chuo-ku, Tokyo
3,829
A-114 KDX Nihonbashi Edo-dori Building
Chuo-ku, Tokyo
1,350
A-115 ARK Mori Building
Minato-ku, Tokyo
4,169
A-116 KDX Nishi-Shinbashi Building
Minato-ku, Tokyo
8,400
A-117 BR Gotanda
Shinagawa-ku, Tokyo
2,200
A-119 KDX Shibuya Nanpeidai Building
Shibuya-ku, Tokyo
3,500
A-120 KDX Yoyogi Building
Shibuya-ku, Tokyo
2,479
A-121 Ginza 4chome Tower
Chuo-ku, Tokyo
9,800
A-122 Mitsubishijuko Yokohama Building
Yokohama, Kanagawa 14,720
A-123 JN Building
Yokohama, Kanagawa
9,500
A-12 Portus Center Building
Sakai, Osaka
5,570
A-42 KDX Karasuma Building
Kyoto, Kyoto
5,400
A-44 KDX Sendai Building
Sendai, Miyagi
2,100
A-53 KDX Hakata-Minami Building
Fukuoka, Fukuoka
4,900
A-54 KDX Kitahama Building
Osaka, Osaka
2,220
A-58 KDX Nagoya Sakae Building
Nagoya, Aichi
7,550
A-69 KDX Kobayashi-Doshomachi Building
Osaka, Osaka
2,870
A-70 KDX Sapporo Building
Sapporo, Hokkaido
2,005
A-79 KDX Nagoya Ekimae Building
Nagoya, Aichi
7,327
Office Buildings(Other Regional
A-82 KDX Higashi Umeda Building
Osaka, Osaka
2,770
Areas)
A-97 KDX Utsunomiya Building
Utsunomiya, Tochigi
2,350
A-98 KDX Hiroshima Building
Hiroshima, Hiroshima
1,300
A-100 Senri Life Science Center Building
Toyonaka, Osaka
13,000A-104 KDX Minami-Honmachi Building
Osaka, Osaka
2,200
A-106 KDX Sakura-dori Building
Nagoya, Aichi
5,900
A-110 KDX Shin-Osaka Building
Osaka, Osaka
4,550
A-111 KDX Nagoya Nichigin-mae Building
Nagoya, Aichi
3,500
A-118 KDX Sapporo Kitaguchi Building
Sapporo, Hokkaido
1,800
Offce Buildings Subtotal (95 properties)
394,455
C-1
Frame Jinnan-zaka (Note 4)
Shibuya-ku, Tokyo
9,900
Central Urban
Retail Property
Central Urban Retail Property Subtotal (1 property)
9,900
D-2
Shinjuku 6chome Building (Land)
Shinjuku-ku, Tokyo
2,880
OthersOthers Subtotal (1 property)
2,880
Total (97 properties)
407,235
Investment Security

G.K. KRF 43 Silent Partnership Equity Interest Shinjuku-ku, Tokyo

1,107

Year Built(Note 2)

Occupancy
Rate(Note 3)

Dec. 1973
100.0%
Jan. 1994
100.0%
May 2013
100.0%
Apr. 2008
98.0%
Oct. 1988
100.0%
Jul. 1988
100.0%
Mar. 1994
100.0%
Oct. 1988
100.0%
Aug. 1991
100.0%
Nov. 1990
100.0%
Dec. 1985
100.0%
Oct. 2013100.0%
May 1992
100.0%
Mar. 1985
100.0%
Mar. 1986
100.0%
Aug. 1992
100.0%
Sep. 1991
100.0%
Dec. 2003
100.0%
Aug. 1991
100.0%
Nov. 2008
100.0%
Feb. 1994
100.0%
Sep. 2007
92.8%
Sep. 1993
100.0%
Oct. 1982
100.0%
Feb. 1984
100.0%
Jun. 1973
99.5%
Jul. 1994
89.2%
Apr. 2009100.0%
Jul. 2009100.0%
Oct. 1989
97.8%
Apr. 1986
100.0%
Jul. 2009100.0%
Feb. 1999
89.0%
Jan. 1990
100.0%
Jun. 1992
99.8%
Dec. 2009
98.8%
Aug. 1992
100.0%
May 1992
100.0%
Sep. 2006
96.2%
Sep. 1992
100.0%
Avg. 23.5 years 99.1%
Mar. 2005
95.2%
Avg. 13.0 years 95.2%—
100.0%—
100.0%
Avg. 23.2 years 99.0%
Dec. 1979

Note 1: Acquisition price is only the acquisition (investment) price of real estate or trust beneficiary interests in real estate (excl. any expenses, taxes, etc.)
acquired by KDO. Figures are truncated to the nearest million yen.
Note 2: Year built shows the completion date recorded in the real estate register. The average value shown in the subtotal or total section is a weighted
average number calculated based on acquisition price with a base date of April 30, 2018. Figures are truncated to the first decimal place.
Note 3: Occupancy rate is calculated by dividing leased area as of April 30, 2018 by leasable area and is rounded to the first decimal place. The subtotal andtotal lines show the figures calculated by dividing the subtotal (total) of the leased area for the property associated with each subtotal and total by thesubtotal (total) of the leasable area. For the Pentel Building, this includes the leasable area associated with the land (land interest) specified in the leaseagreement. For the Shinjuku 6chome Building (Land), the calculation is based on the leasable area of the land specified in the lease agreement.
Note 4: 49% of quasi co-ownership interest in Frame Jinnan-zaka was sold on July 2, 2018 and the remaining 51% is to be sold on November 1, 2018.

Kenedix Office Investment Corporation 21

Sustainability

Kenedix Real Estate Fund Management, Inc. (KFM), the asset management company for KDO,
contributes to society through investment management and creation of real estate value,
working on sustainability-conscious investment management and various ESG initiatives.

Environment and Society
Certifications
GRESB Real Estate Assessment (Note 1)• Acquired “Green Star” rating, the highest rating, for 6 consecutive years as a result of our efforts for
improving sustainability performance, and earned the highest-rated “5 Stars” (five-star scale).
• Participated from 2011 as the first J-REIT participant.

DBJ Green Building Certification (Note 2)• A total of 19 properties in our portfolio were awarded DBJ Green Building Certification, including
KDX Toranomon 1chome Bldg., which earned “Property with the best class environmental andsocial awareness” (five stars).

Certification for CASBEE for Real Estate (Note 3)• ARK Mori Bldg., KDX Toranomon 1chome Bldg. and KDX Kobayashi-Doshomachi Bldg. wereranked S, the highest rating, by CASBEE.

BELS Certification (Note 4)• In October 2014, KDX Musashi-Kosugi Bldg. was awarded a BELS Certification (three stars) for the
first time in history as a J-REIT owned property.
• In April 2016, KDX Iidabashi Square was awarded a BELS Certification (three stars).

Note 1: GRESB (Global Real Estate Sustainability Benchmark) is a benchmark to evaluate sustainability performance of private and listed real estate portfolios,etc., from environmental and social perspectives.
Note 2: The DBJ Green Building Certification System is a system certifying real estate with environmental and social considerations (Green Building) using a scoringmodel originally developed by Development Bank of Japan Inc. (DBJ) in order to select and certificate buildings that meet the demands of the time. The certifi­­cation has the following 5 ranks: "five stars", "four stars", "three stars", "two stars" and "one star".
Note 3: CASBEE is an evaluation system for rating the environmental performance of buildings, developed under the auspices of the Ministry of Land, Infrastructure,
Transport and Tourism. The system rates the overall environmental performance of buildings from two perspectives; the evaluation of the environmental quality
and performance of buildings themselves and the external environmental load of buildings.
Note 4: BELS (Building-Housing Energy-efficiency Labeling System) is the third-party certification system to rate houses and buildings in accordance with the obligation
to make effort to label energy saving performance as stipulated in the Act on Improving Energy Consumption Performance for Architectural Structures.

22 Kenedix Office Investment Corporation

Contribution to society
Cooperation to Campaign for United Nations Refugee Support• KDO supports Japan for UNHCR that is the official support contact point in Japan on behalf of
UNHCR, a refugee support organization of United Nations.
• KDO provides Japan for UNHCR with vacant space in its own properties for free for use in"Campaign for United Nations Refugee Support”.

Sustainability Committee
Establishment of sustainability committee• The initiatives for sustainability are promoted under the leadership of the Sustainability Committee established in KFM.
• The Committee holds meetings to discuss policies, targets, approaches on sustainability issues and monitors the progress,
in consideration of society and management status of KDO.
• What is discussed at the Sustainability Committee is reported to the Asset Management Committee at KFM, and the proposals are
executed upon approval of the management.

Governance
Rules concerning conflicts of interest in transactions
KFM provides asset management services to not only KDO but also Kenedix Residential Next Investment Corporation, Kenedix Private
Investment Corporation, Kenedix Retail REIT Corporation and other real estate funds, etc.
In addition to securing compliance with relevant laws and regulations among the departments in charge of respective REITs or private
funds, KFM has established specific terms and conditions for each type of transaction in its internal rules for certain transactions thatit or its related parties conduct with REITs or private funds. By doing so, we work to prevent ourselves from conducting transactions
that may be harmful to the interests of the REITs or private funds, or from conducting unnecessary transactions. Moreover, from theperspective of governance, those transactions are fully verified by our Compliance Committee, at which external members without
interests are present, in an effort to maintain transparency in our decision-making.

Each Department

Each Department

Proposal

All Departments

Compliance Officer

Preview

RelatedRelatedparty
party
Compliance Committee
transaction
transaction

Deliberation
and Resolution

All Departments

All Departments

Asset Management
Committee(Each Department)

Board of Directors

Deliberation
and Resolution

ReportOther transactions
Note: Transactions concerning each REIT, for which the Act on Investment Trusts and Investment Corporations (the Investment Trusts Act) or the internal rules
specify as requiring approval by the Board of Directors, must also be approved by the Board of Directors of the REIT (excluding transactions within thescope of insignificance criteria under the laws and regulations).

Rules concerning conflicts of interest among funds
Since KFM manages multiple REITs and private real estate funds, it has established a pipeline committee and adopted internal guidelines, in order to prevent the improper allocation of acquisition opportunities and thus, preventing conflicts of interest among funds.
Kenedix Office Investment Corporation 23

Independent Auditor’s Report 25
Balance Sheets 26

Financial Section

Statements of Income and Retained Earnings 28
Statements of Changes in Net Assets 28
Statements of Cash Flows 29
Notes to the Financial Statements 30

Financial Summary (Unaudited)
Historical Operating Trends
For the 22nd–26th Fiscal Periods

PeriodOperating revenues(Rental revenues)
Operating expenses(Property-related expenses)
Operating income
Ordinary income
Net income (a)Total assets (b)(Period-on-period change)
Interest-bearing debt (c)(Period-on-period change)
Unitholders’ equity (d)(Period-on-period change)
Unitholders’ capital(Period-on-period change)
Number of investment units issued and outstanding (e)Unitholders’ equity per unit (d)/(e)Total distribution (f)Distribution per unit (f)/(e)(Earnings distributed per unit)(Distribution in excess of earnings per unit)
Return on assets (annualized) (Notes 1 and 2)
Return on net assets (annualized) (Notes 2 and 3)
Net assets ratio at end of period (d)/(b)(Period-on-period change)
Interest-bearing debt ratio at end of period (c)/(b)(Period-on-period change)
Payout ratio (Note 4) (f)/(a)Other references
Number of properties
Total leasable floor area
Occupancy ratio at end of period
Depreciation expenses for the period
Capital expenditures for the period
Leasing NOI (Net Operating Income) (Note 5)
FFO (Funds From Operation) (Note 6)
FFO per unit (Note 7)

Unit

millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen
millions of yen%
millions of yen%
millions of yen%
millions of yen
%
unit
yen
millions of yen
yen
yen
yen
%
%
%
%
%

properties
m2%
millions of yen
millions of yen
millions of yen
millions of yen
yen

26th Period
25th Period
24th Period
23rd Period
22nd Period(as of(as of(as of(as of(as ofApr. 30, 2016) Oct. 31, 2016) Apr. 30, 2017) Oct. 31, 2017) Apr. 30, 2018)

14,362
12,812
8,260
6,533
6,102
4,816
4,815
408,813(+0.4)
175,100(+0.6)
212,555(+0.3)
206,199(0.0)
404,885
524,977
4,335
10,707
10,707—
1.2 (2.4)
2.3 (4.6)
52.0(-0.0)
42.8(+0.1)
90.0

13,491
13,429
7,703
6,754
5,788
4,603
4,601
413,031(+1.0)
178,100(+1.7)
212,825(+0.1)
206,199(0.0)
404,885525,6444,601
11,365
11,365—
1.1 (2.2)
2.2 (4.3)
51.5(-0.5)
43.1(+0.3)
99.9

15,03913,327
9,137
6,527
5,901
4,751
4,750
410,166(–0.7)
174,600(–2.0)
212,986(+0.1)
206,199(0.0)
404,885
526,041
4,750
11,733
11,733—
1.2 (2.3)
2.2 (4.5)
51.9(+0.4)
42.6(–0.6)
99.9

13,901
13,840
8,244
6,720
5,657
4,590
4,588
414,933(+1.2)
179,600(+2.9)
212,851(–0.1)
206,199(0.0)
404,885525,708
5,061
12,50012,500—1.1 (2.2)
2.2 (4.3)
51.3(–0.6)
43.3(+0.7)
110.2

14,823
14,222
7,974
6,977
6,848
5,829
5,828
422,993(+1.9)
185,850(+3.5)
213,642(+0.4)
206,199(0.0)
404,885
527,661
5,247
12,96012,960—1.4 (2.8)
2.7 (5.5)
50.5(–0.8)
43.9(+0.7)
90.0

97
457,774.90
96.9
2,230
1,120
8,509
6,302
15,565

99
462,533.92
96.9
2,274
1,165
8,949
6,877
16,985

97459,567.57
97.9
2,288
1,018
9,088
7,034
17,37398
456,932.16
99.1
2,293
953
9,413
7,451
18,404

97
466,031.33
99.0
2,295
886
9,539
7,574
18,708Notes: 1. Return on assets = Ordinary income/{(Total assets at beginning of period + Total assets at end of period)/2} × 100
2. Annualized values for the 22nd Fiscal Period are calculated based on a period of 182 days, 184 days for the 23rd Fiscal Period, 181 days for the 24th Fiscal
Period, 184 days for the 25th Fiscal Period and 181 days for the 26th Fiscal Period.
3. Return on net assets = Net income/{(Total net assets at beginning of period + Total net assets at end of period)/2} × 100
4. Payout ratio is rounded down to the first decimal place.
5. Leasing NOI = Rental revenues – Property-related expenses + Depreciation expenses for the period
6. FFO = Net income + Depreciation expenses for the period – Gain on sale of real estate property + Loss on sale of real estate property
7. FFO per unit = FFO/Number of investment units issued and outstanding (figures below ¥1 rounded down)

24 Kenedix Office Investment Corporation

Kenedix Office Investment Corporation 25

Balance Sheets
Kenedix Office Investment Corporation
As of April 30, 2018 and October 31, 2017

In thousands of yen

AssetsCurrent assets:
Cash and deposits (Notes 3 and 13)
Cash and deposits in trust (Notes 3 and 13)
Operating accounts receivable
Prepaid expenses
Consumption taxes receivable
Other (Note 8)
Total current assets
Non-current assets:
Property, plant and equipment (Notes 4 and 15)
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Machinery and equipment
Accumulated depreciation
Machinery and equipment, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Buildings in trust (Note 6)
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment, net
Intangible assets (Note 4)
Leasehold right (Note 15)
Leasehold right in trust (Note 15)
Other
Total intangible assets
Investments and other assets
Investment securities (Note 13)
Lease and guarantee deposits
Lease and guarantee deposits in trust
Long-term prepaid expenses
Other (Notes 13 and 14)
Total investments and other assets
Total non-current assets
Deferred assets
Investment corporation bond issuance costs
Total deferred assets
Total assets
See accompanying notes to the financial statements.

26 Kenedix Office Investment Corporation

As of April 30, 2018

As of October 31, 2017

¥ 13,033,326
10,444,809
308,21776,768
166,118
17,37924,046,619¥ 19,917,133
9,808,743
314,766
110,584
90,895
15,73930,257,862

17,943,798(5,111,557)
12,832,241
32,618(12,973)
19,645
411,649(223,927)
187,722
83,593(51,767)
31,82529,504,025
118,523,178(26,581,425)
91,941,753
345,717(162,368)
183,349
1,592,359(719,408)
872,951
466,546(278,421)
188,125
259,908,839
83395,670,563

17,814,001(4,812,998)
13,001,003
32,618(12,088)
20,529403,054(212,345)
190,709
83,593(48,941)
34,651
29,504,025
116,597,709(25,841,684)
90,756,024
373,778(175,568)
198,210
1,752,248(843,233)
909,014463,275(262,396)
200,878
246,626,638
1,142
381,442,828

285,257
352,298
3,501
641,057

285,257
353,072
4,114
642,444

1,090,336
10,000122,889
1,306,980
61,101
2,591,308
398,902,929

1,096,423
10,000122,889
1,273,614
39,0732,542,001
384,627,273

44,01944,019¥422,993,568

48,52648,526¥414,933,663

In thousands of yen

Liabilities
Current liabilities:
Operating accounts payable
Short-term loans payable (Notes 5,13 and 14)
Current portion of investment corporation bonds (Notes 5 and 13)
Current portion of long-term loans payable (Notes 5,13 and 14)
Accounts payable-otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Deposits received
Total current liabilities
Non-current liabilities:
Investment corporation bonds (Notes 5 and 13)
Long-term loans payable (Notes 5, 13 and 14)
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Total non-current liabilities
Total liabilities
Net Assets
Unitholders’ equity:
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 404,885 units
As of April 30, 2018, and October 31, 2017, respectively
Surplus:
Voluntary retained earnings
Reserve for reduction entry
Total voluntary retained earnings
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges (Notes 13 and 14)
Total valuation and translation adjustments
Total net assets (Note 9)
Total liabilities and net assets

As of April 30, 2018¥

1,453,036
6,000,000
1,800,000
17,050,000
291,560
79,639682
118,583
2,340,180
2,568
29,136,251

As of October 31, 2017¥

1,231,349
6,000,000
1,800,000
18,250,000
288,179
67,417760
153,268
2,240,535
31,64730,063,159

6,000,000
155,000,000
2,050,835
17,164,250
180,215,086
209,351,337

6,000,000
147,550,000
2,026,168
16,442,929
172,019,097
202,082,256

206,199,945

206,199,945

1,552,849
1,552,849
5,828,847
7,381,696
213,581,642

2,024,673
2,024,673
4,589,238
6,613,911
212,813,857

60,58760,587
213,642,230¥422,993,568

37,54937,549212,851,406¥414,933,663

Kenedix Office Investment Corporation 27

Statements of Income and Retained Earnings
Kenedix Office Investment Corporation
For the period from November 1, 2017 to April 30, 2018 and the period from May 1, 2017 to October 31, 2017

In thousands of yen

Operating revenues
Rent revenue - real estate (Note 11)
Other lease business revenue (Note 11)
Gain on sale of real estate property (Note 11)
Dividends income
Total operating revenues
Operating expenses
Expenses related to rent business (Note 11)
Loss on sale of real estate property (Note 11)
Asset management fees
Directors’ compensation
Asset custody fees
Administrative service fees
Audit fees
Other operating expenses
Total operating expenses
Operating income
Non-operating income
Interest income
Dividends and redemption-prescription
Interest on refund
Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bonds
Financing-related expenses
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Other non-operating expenses
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes (Note 8)
Current
Deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings

From November 1, 2017
to April 30, 2018

From May 1, 2017
to October 31, 2017¥12,351,730
1,870,367
550,142
50,882
14,823,123¥11,845,464
1,995,021—
61,007
13,901,494

6,977,998—
802,855
8,400
22,44855,69911,80095,5497,974,751
6,848,372

6,720,726
568,160
757,285
8,400
22,30455,16011,800100,257
8,244,096
5,657,398

38
481
232
752

35
462
14
513

818,187
32,780132,774
4,506—
30,9301,019,178
5,829,946
5,829,946

829,91340,495
152,051
5,072
19,277
20,973
1,067,785
4,590,125
4,590,125

1,101
(3)
1,098
5,828,847—¥ 5,828,847

1,126
5
1,131
4,588,993
244¥ 4,589,238

See accompanying notes to the financial statements.

Statements of Changes in Net Assets
Kenedix Office Investment Corporation
For the period from November 1, 2017 to April 30, 2018 and the period from May 1, 2017 to October 31, 2017

In thousands of yen

Valuationandtranslation
adjustments

Unitholders’ equity

Balance as of April 30, 2017
Changes during the fiscal period
Dividends of surplus
Net income
Net changes of items otherthan unitholders’ equity
Total changes during
the fiscal period
Balance as of October 31, 2017
Changes during the fiscal period
Reversal of reserve for reduction entry
Dividends of surplus
Net income
Net changes of items otherthan unitholder’s equity
Total changes during
the fiscal period
Balance as of April 30, 2018

Surplus
Voluntary
retainedearnings
UnappropriatedReserve forretained
Unitholders’reduction entry
earnings
capital¥206,199,945¥2,024,673¥ 4,750,760

Deferred
gains orlosses onhedges¥10,882

Total
net assets¥212,986,261

—
—

—
—

(4,750,515)
4,588,993(4,750,515)
4,588,993(4,750,515)
4,588,993——(4,750,515)
4,588,993

—

—

—

—

—

26,667

26,667—¥206,199,945—¥2,024,673(161,521)¥ 4,589,238(161,521)¥ 6,613,911(161,521)¥212,813,857

26,667¥37,549(134,854)¥212,851,406———(471,824)——

471,824(5,061,062)
5,828,847—(5,061,062)
5,828,847—(5,061,062)
5,828,847————(5,061,062)
5,828,847

—

—

—

—

—

23,03823,038—¥206,199,945(471,824)¥1,552,849

1,239,609¥ 5,828,847

767,785¥ 7,381,696

767,785¥213,581,642

23,038¥60,587

790,823¥213,642,230

See accompanying notes to the financial statements.

28 Kenedix Office Investment Corporation

Total
surplus¥ 6,775,433

Total
unitholders’equity¥212,975,379

Statements of Cash Flows
Kenedix Office Investment Corporation
For the period from November 1, 2017 to April 30, 2018 and the period from May 1, 2017 to October 31, 2017

In thousands of yen

Cash flows from operating activities:
Income before income taxes
Depreciation
Amortization of long-term prepaid expenses
Interest income
Interest expenses
Amortization of investment unit issuance costs
Amortization of investment corporation bond issuance costs
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable-other
Increase (decrease) in accrued consumption taxes
Increase (decrease) in advances received
Increase (decrease) in deposits received
Decrease in net property, plant and equipment held in trust due to sale
Decrease (increase) in long-term prepaid expenses
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Purchases of property, plant and equipment in trust
Repayments of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits
Repayments of tenant leasehold and security deposits in trust
Proceeds from tenant leasehold and security deposits in trust
Payments of restricted deposits in trust
Proceeds from restricted deposits in trust
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of period
Cash and cash equivalents at the end of period (Note 3)

From November 1, 2017
to April 30, 2018

From May 1, 2017
to October 31, 2017

¥ 5,829,946
2,295,920
132,517(38)
850,967
—
4,506
6,548
(75,223)
33,815
136,298
4,491(34,684)
99,644(29,078)
9,056,075(165,883)
3,823
18,149,649
38(837,734)(766)
17,311,186¥ 4,590,125
2,294,401
148,301(35)
870,409
19,277
5,072
14,663(90,895)(35,797)
243,171
26,455(444,631)
70,473(38,276)
5,389,413(193,833)(13,536)
12,863,759
35(877,086)(799)
11,985,908(101,142)(25,402,604)(14,666)
29,581(553,418)
1,295,016(686,767)
45,721(25,388,281)(102,119)(6,225,422)(112,140)
114,414(664,736)
669,818—
73,936(6,246,248)

4,000,000(4,000,000)
15,000,000(8,750,000)——(5,061,692)
1,188,307(6,888,787)
28,635,473¥ 21,746,685

2,000,000—
15,500,000(14,000,000)
2,977,416(1,500,000)(4,749,942)
227,473
5,967,133
22,668,339¥ 28,635,473

See accompanying notes to the financial statements.

Kenedix Office Investment Corporation 29

Notes to the Financial Statements
Kenedix Office Investment Corporation
For the period from November 1, 2017 to April 30, 2018 and the period from May 1, 2017 to October 31, 2017

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Kenedix Office Investment Corporation (“the Investment
Corporation”) is a real estate investment corporation whose units
are listed on the Tokyo Stock Exchange. The Investment
Corporation is engaged in the ownership and operation of selected
office buildings and retail properties in Japan, with a focus on­mid-sized office buildings in the Tokyo metropolitan area. The
Investment Corporation was incorporated on May 6, 2005 as aninvestment corporation under the Law Concerning Investment
Trusts and Investment Corporations of Japan, or the Investment
Trust Law. On July 21, 2005, the Investment Corporation was
listed on the Real Estate Investment Trust Market of the Tokyo
Stock Exchange with a total of 75,400 investment units issued andoutstanding (Securities Code: 8972). Subsequently, the Investment
Corporation raised funds through seven public offerings and othermeans including global offerings. Pursuant to the Investment Trust
Law, the Investment Corporation is externally managed by a registered asset management company, Kenedix Real Estate FundManagement, Inc. (“the Asset Management Company”), a sub­sidiary of Kenedix, Inc. (“Kenedix”). In concert with the AssetManagement Company, the Investment Corporation strives tomaximize cash distribution to investors by securing stable earnings
and sustainable investment growth. To this end, the Investment
Corporation adopts a dynamic and flexible investment stancethat accurately reflects its environment and market trends, and­endeavors to ensure a timely response to each and every
opportunity.
During the period ended October 31, 2017, the Investment
Corporation acquired two office buildings (KDX Sapporo Kitaguchi
Building (formerly named the Takeyama White Building): acquisition
price of ¥1,800 million, and KDX Shibuya Nanpeidai Building­(formerly named the Shibuya 1717 Building): acquisition price of¥3,500 ­million) and sold one office building (KDX Shin-Yokohama
381 Building: initial acquisition price of ¥5,800 million (with a­disposition price of ¥4,900 million)).
During the period ended April 30, 2018, the Investment
Corporation acquired two office buildings (Mitsubishijuko
Yokohama Building: acquisition price of ¥14,720 million, and JN
Building: acquisition price of ¥9,500 million) and sold one residential property (Residence Charmante Tsukishima: initial acquisition
price of ¥5,353 million) and two office buildings (KDX IkejiriOohashi Building: initial acquisition price of ¥2,400 million, andKDX Shin-Yokohama 214 Building: initial acquisition price of¥2,200 million) with a disposition price of ¥9,730 million.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Securities
Non-marketable securities classified as other securities are carriedat cost. Cost of securities sold is determined by the moving
average method. Concerning silent partnership (tokumei kumiai,

At the end of the twenty-fifth and twenty-sixth fiscal periods,
the Investment Corporation had total unitholders’ capital of¥206,199 million with 404,885 investment units outstanding,respectively. The Investment Corporation owned a portfolio of 98
properties (consisting of 93 office buildings, one residential property, three central urban retail properties and one other property)
and 97 properties (consisting of 95 office buildings, one central
urban retail property and one other property) with total acquisition
prices of ¥392,968 million and ¥407,235 million at the end of thetwenty-­fifth and twenty-sixth fiscal periods, respectively. (Note:
Due to the change in the Investment Corporation’s management
guidelines, the type of the two owned properties has beenchanged from ­central urban retail property to office building since
December 1, 2017.) The occupancy ratios were approximately
99.1% and 99.0% at the end of the twenty-fifth and twenty-sixth
fiscal ­periods, respectively.
Basis of Presentation
The accompanying financial statements have been prepared inaccordance with the provisions set forth in the Investment Trust
Act of Japan, the Financial Instruments and Exchange Law ofJapan and related regulations, and in conformity with accounting
principles and practices generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as to the application and disclosure requirements of the International Financial
Reporting Standards or accounting principles generally acceptedin the United States of America.
The accompanying financial statements are basically a translation of the audited financial statements that were prepared forJapanese domestic purposes from the accounts and records
maintained by the Investment Corporation and filed with the Kanto
Local Finance Bureau of the Ministry of Finance as required by the
Financial Instruments and Exchange Law. In preparing the accompanying financial statements, relevant notes have been added andcertain reclassifications have been made to the financial statements issued domestically in order to present them in a form thatis more familiar to readers outside Japan. The Investment
Corporation’s fiscal period is a six-month period that ends at theend of April and the end of October each year. The Investment
Corporation does not prepare consolidated financial statements
because it has no subsidiaries.
Certain amounts in the prior fiscal period’s financial statements
have been reclassified to conform to the current fiscal period’s
presentation.

“TK”) interests, the method of incorporating the amount of equity
equivalent to the portion that corresponds to the net gain or lossof the TK is adopted.

(B) Property, Plant and Equipment (including trust assets)
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated on a straight-line basis overthe estimated useful lives of the assets ranging as stated below:
Buildings
Structures
Machinery and equipment
Tools, furniture and fixtures

30 Kenedix Office Investment Corporation

From November 1, 2017 to April 30, 2018

2-49 years
2-45 years
3-17 years
3-20 years

From May 1, 2017 to October 31, 2017

2-49 years
2-45 years
3-17 years
3-20 years

(C) Intangible Assets (including trust assets)
Intangible assets are amortized by the straight-line method.
Leasehold right: Fixed-term land leasehold is amortized over acontractual period of 48 years and 9 months under the straightline method.
(D) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line
method.
(E) Investment Unit Issuance Costs
Investment unit issuance costs are amortized over a period of
three years under the straight-line method.
(F) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized over amaturity period under the straight-line method.
(G)	Accounting Treatment of Trust Beneficiary Interests inReal Estate
For trust beneficiary interests in real estate, which are commonly
utilized in the ownership of commercial properties in Japan, allassets and liabilities in trust are recorded in the relevant balance
sheets and statements of income and retained earnings.
(H) Revenue Recognition
Operating revenues consist of rental revenues including baserents, common area charges and other operating revenues,
which include utility charge reimbursements, parking space rental­revenues and other miscellaneous revenues. Rental revenues are
generally recognized on an accrual basis over the life of eachlease. Utility charge reimbursements are recognized when earned
and their amounts can be reasonably estimated. Reimbursementsfrom tenants including utility charge reimbursements are recorded
on a gross basis and such amounts are recorded both as­revenues and expenses during the fiscal period.
(I) Taxes on Property, Plant and Equipment
Property-related taxes including property taxes, city planning taxes
and depreciable property taxes are imposed on properties on acalendar year basis. These taxes are generally charged to operating expenses for the period, for the portion of such taxes corresponding to the said period. Under Japanese tax rules, the sellerof property at the time of disposal is liable for these taxes on theproperty from the date of disposal to the end of the calendar year
in which the property is disposed. The seller, however, is generally
reimbursed by the purchaser for these accrued property-related
tax liabilities.
When the Investment Corporation purchases properties, it­typically allocates the portion of the property-related taxes related
to the period following the purchase date of each property throughthe end of the calendar year. The amounts of those allocatedportions of the property-related taxes are capitalized as part of theacquisition costs of the related properties. Capitalized property-­
related taxes amounted to ¥53,876 thousand and ¥26,264 thousand as of April 30, 2018 and October 31, 2017, respectively. In
subsequent calendar years, such property-related taxes arecharged as operating expenses in the fiscal period to which the
installments of such taxes correspond.

(J) Income Taxes
Deferred tax assets and liabilities are computed based on the
difference between the financial statements and income tax basesof assets and liabilities using the statutory tax rates.
(K) Consumption Taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes. Non-deductible consumption taxes applicable to the acquisition of assets are includedin the cost of acquisition for each asset.
(L) Derivative Financial Instruments
The Investment Corporation utilizes interest-rate swap and­interest-rate cap contracts as derivative financial instruments only
for the purpose of hedging its exposure to changes in interest
rates. The Investment Corporation deferred recognition of gains
or losses resulting from changes in fair value of interest-rate swap
and interest-rate cap contracts because these contracts met thecriteria for deferral hedging accounting. However, the Investment
Corporation adopted special treatment for interest-swap andinterest-rate cap contracts if they met the criteria for hedging
accounting under this treatment, whereby the net amount to be
paid or received under the interest-rate swap and interest-rate cap
contract is added to or deducted from the interest on the assets or
liabilities for which the swap and cap contract was executed. The
hedge effectiveness for the interest-rate swap and interest-rate
cap contract is assessed each fiscal period except for those thatmeet the criteria of special treatment.
(M) Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, deposits
placed with banks and short-term investments which are highly
liquid, readily convertible to cash and with insignificant risk ofmarket value fluctuation, with maturities of three months or lessfrom the date of purchase.
(N) Presentation of Amounts
Amounts of less than one thousand yen have been truncated in
the Japanese financial statements prepared in accordance withJapanese GAAP and filed with regulatory authorities in Japan.
Unless otherwise noted, amounts of the twenty-sixth and­twenty-­fifth fiscal periods are rounded down, respectively, andratios are rounded off in the accompanying financial statements.
Totals shown in the accompanying financial statements do notnecessarily agree with the sums of the individual amounts.

Kenedix Office Investment Corporation 31

3. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following as of April 30, 2018 and October 31, 2017.
In thousands of yen

As of October 31, 2017

As of April 30, 2018

Cash and deposits
Cash and deposits in trust
Restricted deposits in trust (Note)
Cash and cash equivalents in trust¥19,917,133
9,808,743(1,090,403)¥28,635,473¥13,033,326
10,444,809(1,731,450)¥21,746,685

Note: Restricted deposits in trust are retained for the repayment of tenant leasehold and security deposits in trust.

4. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Property, plant and equipment and intangible assets consist of the following as of April 30, 2018.
In thousands of yen

Type of asset

Buildings
Structures
Machinery andequipment
Tools, furniture andfixtures¥ 17,814,001
32,618403,054
29,504,025

Subtotal
Buildings in trust
Structures in trust
Machinery andequipment in trust
Tools, furniture andfixtures in trust
Land in trust
Construction inprogress in trust

47,837,294

1,142

Intangible
assets

Other
Total intangible assets
Total

365,814,792¥

413,652,086
290,050

138,392

363,784
6,123

659,958¥414,312,045

2,965¥ 298,559 ¥ 12,832,241884
19,645

411,649

223,927

11,581

83,59351,767

2,826

—

—

—

5,400,225¥26,581,425

466,546

278,421

17,884——

83

380,836,725——

27,741,622

1,980,683

428,812,411——

363,784

11,486———
659,958¥10,419,079 ¥429,472,370

18,900¥33,160,748—¥25,579,404— ¥290,050
6,123¥

33,141,848
4,792

2,622

Note 1: The amount of increase during the period is primarily attributable to the acquisition of the two real estate properties.
Note 2: The amount of decrease during the period is primarily attributable to the sales of the three real estate properties.

32 Kenedix Office Investment Corporation

872,951

51,647

1,059¥

183,349

719,408

10,419,079—

10,607

1,592,359

10,419,079

31,82529,504,025

42,575,460

230,411

259,908,839

187,722

313,850

345,717

4,898

162,368

Remarks¥1,900,544 ¥ 91,941,753

31,026

6,077,802—
25,579,404

47,975,686

—

8,169

25,441,011

29,504,025¥ 4,073,882 ¥118,523,178

19,360,002¥¥ 5,111,557
12,973—70,522

463,275— ¥ 17,943,798—
32,618—1,752,248
246,626,638

Depreciation
for the period—¥ 5,999,351

373,778¥

Netbalance atthe endof period

Accumulated
depreciation—¥116,597,709

Subtotal
Total property, plant and equipment
Leasehold rightLeasehold rightin trust

129,797—
8,595

83,593Land
Property,plant andequipment¥

Depreciation

Balance atthe endof period

Decreaseduringthe period

Increaseduringthe period

Balance atthe beginningof period

188,125

259,908,839

83353,095,102

2,294,534

395,670,563

774

352,298

¥

— ¥

612

Notes 1 and 2

285,257
3,501

1,386
641,057¥2,295,920 ¥396,311,621

Notes 1 and 2

Property, plant and equipment and intangible assets consist of the following as of October 31, 2017.
In thousands of yen

Type of asset

Balance atthe beginningof period

Buildings
Structures
Machinery andequipment
Tools, furniture andfixtures¥ 17,752,301
32,618Land
Property,plant andequipment

Subtotal
Buildings in trust

Total

¥

61,699—Depreciation

Netbalance atthe endof period

Accumulated
depreciation

Depreciation
for the period— ¥ 17,814,001—
32,618¥ 4,812,998
12,088¥ 296,630 ¥ 13,001,003
884
20,529403,054

212,345

11,183

Remarks

391,289

11,76578,896

4,697—

83,593

48,941

2,700

34,651

29,504,025——

29,504,025——

29,504,025—

47,837,294

5,086,374

311,398

42,750,919¥3,101,479 ¥116,597,709¥25,841,684—

190,709

78,161¥1,649,573

373,565

1,945

1,732

373,778

175,568

11,143

198,210

1,687,226

67,3332,312

1,752,248

843,233

52,483909,014¥1,900,284 ¥ 90,756,024

456,418

11,176

4,320

463,275

262,396

17,704200,878245,227,423

4,564,561

3,165,346

246,626,638——

246,626,638

Subtotal
Total property, plant and equipment

Other
Total intangible assets¥

Balance atthe endof period

47,759,132

Land in trust
Construction inprogress in trust

Intangible
assetsDecreaseduringthe period¥118,049,614

Structures in trust
Machinery andequipment in trust
Tools, furniture andfixtures in trust

Leasehold rightLeasehold rightin trust

Increaseduringthe period

2,183

—

1,040

1,142

—

—

1,142

365,796,432

6,294,590

6,276,230

365,814,792

27,122,883

1,981,616

338,691,908

6,372,752

6,276,230

413,652,086

2,293,014

381,442,828¥¥

413,555,564¥

290,050—— ¥290,050

32,209,258
¥

4,792

¥

— ¥

285,257

363,784——

363,784

10,711

774

353,072

6,123

—

—

6,123

2,009

612

4,114

659,958¥414,215,523—¥6,372,752—
659,958¥6,276,230 ¥414,312,045

17,513¥32,226,772

Notes 1 and 2

Notes 1 and 2

1,386
642,444¥2,294,401 ¥382,085,272

Note 1: The amount of increase during the period is primarily attributable to the acquisition of the two real estate properties.
Note 2: The amount of decrease during the period is primarily attributable to the sales of the one real estate property.

5. SHORT-TERM LOANS PAYABLE, LONG-TERM LOANS PAYABLE AND INVESTMENT CORPORATION BONDS
The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as ofApril 30, 2018:
Classification

Short-term loans payable

Subtotal
Current portion of long-term loans payable

July 31, 2017
August 31, 2017
November 30, 2017
January 31, 2018
January 31, 2018
March 30, 2018

Last repayment dateJuly 31, 2018
August 31, 2018
November 30, 2018
January 31, 2019
January 31, 2019
March 29, 2019

Weighted-averageinterest rate

July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
October 31, 2012
October 31, 2013
October 31, 2016
November 12, 2013
November 29, 2013
March 28, 2012
March 28, 2012

July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018
October 31, 2018
October 31, 2018
October 31, 2018
November 12, 2018
November 30, 2018
March 28, 2019
March 28, 2019

0.57%
0.95%
0.95%
0.95%
0.95%
0.97%
1.08%
1.08%
1.08%
1.25%
0.89%
0.35%
0.82%
0.84%
1.77%
1.77%

Drawdown date

0.35%
0.30%
0.35%
0.31%
0.36%
0.36%

Balance(In thousands of yen)¥¥

1,000,000
1,000,000
2,000,000
500,000
500,000
1,000,000
6,000,000
500,000
1,000,000
1,000,000
500,000
500,000
500,000
700,000
500,000
300,000
2,500,000
500,000
1,000,000
1,000,000
200,000
1,400,000
1,000,000

Kenedix Office Investment Corporation 33

Classification

Current portion of long-term loans payable

SubtotalLong-term loans payable

34 Kenedix Office Investment Corporation

Weighted-averageinterest rate

Drawdown date

Last repayment date

March 12, 2014
March 31, 2014
March 30, 2016

March 31, 2019
March 31, 2019
March 31, 2019

0.78%
0.76%
0.17%

August 30, 2013
September 30, 2013
September 30, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014
July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015

August 31, 2020
September 30, 2019
September 30, 2019
November 12, 2020
November 12, 2020
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
October 31, 2020
July 10, 2019
July 10, 2021
July 10, 2021
July 31, 2019
July 31, 2019
July 31, 2020
October 31, 2020
July 31, 2022
July 31, 2019
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023
October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024

1.42%
1.06%
1.06%
1.07%
1.07%
1.12%
1.12%
1.21%
0.93%
1.13%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.95%
0.64%
0.90%
0.90%
0.68%
0.62%
0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%

Balance(In thousands of yen)¥

450,000
2,500,000
1,000,000
17,050,000¥ 1,500,000
1,800,000
900,000
2,000,000
500,000
1,000,000
900,000
1,300,000
3,700,000
2,300,000
1,800,000
1,800,000
3,000,000
4,000,000
3,000,000
2,000,000
2,900,000
500,000
2,000,000
500,000
1,000,000
1,000,000
2,700,000
300,000
2,200,000
1,000,000
800,000
500,000
1,000,000
950,000
2,700,000
1,000,000
3,000,000
2,000,000
1,500,000
1,000,000
2,000,000
1,000,000
1,500,000
1,500,000
1,250,000
350,000
1,700,000
1,250,000
2,100,000
1,000,000
2,500,000
2,300,000
500,000
500,000
500,000
500,000
500,000
500,000
2,000,000

Classification

Long-term loans payable

Subtotal
Current portion of investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016
December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017
June 30, 2017
August 10, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017
November 13, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 7, 2017
December 28, 2017
December 28, 2017
December 28, 2017
March 12, 2018
March 26, 2018
March 26, 2018

October 31, 2024
October 30, 2025
October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026
December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027
June 30, 2027
July 28, 2027
August 31, 2023
March 31, 2024
September 30, 2025
March 31, 2027
September 21, 2027
September 30, 2027
October 31, 2027
November 13, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
November 30, 2027
December 28, 2027
December 28, 2025
December 28, 2026
March 31, 2028
March 31, 2027
March 31, 2028

0.99%
1.11%
1.11%
1.11%
1.12%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.67%
0.88%
0.76%
0.73%
0.83%
0.98%
0.95%
0.86%
0.85%
0.85%
0.85%
0.80%
0.54%
0.56%
0.68%
0.73%
0.87%
0.85%
0.81%
0.93%
0.90%
0.82%
0.97%
0.93%
0.87%
0.90%
0.87%
0.86%
0.74%
0.88%
0.91%
0.80%
0.90%

September 12, 2013

September 12, 2018

1.00%

July 25, 2014
April 28, 2016
July 19, 2017
July 19, 2017

July 25, 2024
April 28, 2028
July 19, 2022
July 16, 2027

1.18%
0.90%
0.26%
0.64%

Balance(In thousands of yen)¥

1,000,000
1,500,000
2,000,000
2,500,000
2,500,000
1,000,000
2,500,000
500,000
2,000,000
1,800,000
1,000,000
500,000
1,000,000
2,000,000
2,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
1,000,000
4,000,000
1,500,000
500,000
1,500,000
500,000
700,000
500,000
1,500,000
3,500,000
1,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
2,500,000
3,000,000
1,400,000
1,200,000
1,000,000
1,000,000
1,000,000
800,000
600,000
500,000
500,000
500,000
1,500,000
1,000,000
1,000,000
155,000,000¥ 1,800,000
1,800,000¥ 2,000,000
1,000,000
1,000,000
2,000,000
6,000,000¥185,850,000

Kenedix Office Investment Corporation 35

The following summarizes short-term loans payable, long-term loans payable and investment corporation bonds outstanding as of
October 31, 2017:Classification

Short-term loans payable

Subtotal
Current portion of long-term loans payable

SubtotalLong-term loans payable

36 Kenedix Office Investment Corporation

November 30, 2016
December 28, 2016
January 31, 2017
March 31, 2017
July 31, 2017
August 31, 2017

Last repayment dateNovember 30, 2017
December 28, 2017
January 31, 2018
March 31, 2018
July 31, 2018
August 31, 2018

Weighted-averageinterest rate

November 12, 2010
December 1, 2010
December 28, 2012
December 28, 2012
January 16, 2017
March 12, 2014
March 26, 2013
March 26, 2013
July 31, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 19, 2013
August 30, 2013
August 30, 2013
August 30, 2013
October 31, 2012
October 31, 2013
October 31, 2016

November 12, 2017
November 12, 2017
December 28, 2017
December 29, 2017
January 31, 2018
March 12, 2018
March 26, 2018
March 26, 2018
July 31, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 19, 2018
August 31, 2018
August 31, 2018
August 31, 2018
October 31, 2018
October 31, 2018
October 31, 2018

2.02%
2.21%
1.09%
1.09%
0.28%
0.75%
1.04%
1.04%
0.56%
0.95%
0.95%
0.95%
0.95%
0.97%
1.08%
1.08%
1.08%
1.25%
0.89%
0.33%

March 28, 2012
March 28, 2012
August 30, 2013
September 30, 2013
September 30, 2013
November 12, 2013
November 12, 2013
November 12, 2013
November 29, 2013
November 29, 2013
November 29, 2013
January 10, 2014
January 31, 2014
January 31, 2014
March 12, 2014
March 12, 2014
March 12, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 20, 2014
March 31, 2014
April 22, 2014
July 10, 2014
July 10, 2014
July 10, 2014
July 14, 2014
July 31, 2014

March 28, 2019
March 28, 2019
August 31, 2020
September 30, 2019
September 30, 2019
November 12, 2018
November 12, 2020
November 12, 2020
November 30, 2018
November 30, 2020
November 30, 2020
January 31, 2021
January 31, 2020
January 31, 2021
March 31, 2019
March 12, 2020
March 12, 2023
March 12, 2020
September 20, 2021
March 20, 2022
March 12, 2023
March 31, 2019
October 31, 2020
July 10, 2019
July 10, 2021
July 10, 2021
July 31, 2019
July 31, 2019

1.77%
1.77%
1.42%
1.06%
1.06%
0.82%
1.07%
1.07%
0.84%
1.12%
1.12%
1.21%
0.93%
1.13%
0.78%
0.92%
1.36%
0.91%
1.01%
1.20%
1.35%
0.76%
0.95%
0.64%
0.90%
0.90%
0.68%
0.62%

Drawdown date

0.33%
0.33%
0.33%
0.33%
0.33%
0.28%

Balance(In thousands of yen)¥

2,000,000
500,000
500,000
1,000,000
1,000,000
1,000,000
6,000,000¥ 2,300,000
700,000
500,000
500,000
500,000
2,250,000
1,000,000
1,000,000
500,000
1,000,000
1,000,000
500,000
500,000
500,000
700,000
500,000
300,000
2,500,000
500,000
1,000,000
18,250,000¥ 1,400,000
1,000,000
1,500,000
1,800,000
900,000
1,000,000
2,000,000
500,000
200,000
1,000,000
900,000
1,300,000
3,700,000
2,300,000
450,000
1,800,000
1,800,000
3,000,000
4,000,000
3,000,000
2,000,000
2,500,000
2,900,000
500,000
2,000,000
500,000
1,000,000
1,000,000

Classification

Long-term loans payable

Drawdown date

Last repayment date

Weighted-averageinterest rate

July 31, 2014
July 31, 2014
July 31, 2014
August 29, 2014
September 1, 2014
September 1, 2014
September 3, 2014
September 3, 2014
September 22, 2014
September 30, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
October 31, 2014
January 30, 2015
January 30, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 18, 2015
February 27, 2015
March 12, 2015
March 31, 2015
April 30, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
August 31, 2015
September 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
October 30, 2015
November 12, 2015
January 29, 2016
January 29, 2016
January 29, 2016
January 29, 2016
February 18, 2016
February 18, 2016
March 30, 2016
March 31, 2016
April 28, 2016
April 28, 2016
April 28, 2016
July 29, 2016
August 2, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
October 31, 2016
December 12, 2016

July 31, 2020
October 31, 2020
July 31, 2022
July 31, 2019
August 31, 2021
August 31, 2021
August 31, 2022
August 31, 2022
September 30, 2020
September 30, 2021
October 31, 2021
October 31, 2023
October 31, 2023
October 31, 2023
October 31, 2024
October 31, 2024
January 31, 2021
January 31, 2025
February 28, 2022
February 28, 2022
February 29, 2024
February 28, 2025
February 28, 2025
February 28, 2025
March 31, 2025
April 30, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
August 31, 2022
September 30, 2024
October 31, 2024
October 30, 2025
October 30, 2025
October 30, 2025
October 30, 2025
November 30, 2025
January 31, 2022
January 31, 2022
January 29, 2026
January 29, 2026
February 18, 2026
February 18, 2026
March 31, 2019
March 31, 2026
April 30, 2024
April 30, 2026
April 30, 2026
July 31, 2026
July 31, 2026
October 31, 2024
October 31, 2026
October 31, 2026
October 31, 2026
October 31, 2026
November 30, 2026

0.74%
0.76%
1.01%
0.65%
0.89%
0.89%
0.98%
0.98%
0.80%
0.89%
0.80%
1.07%
1.13%
1.07%
1.26%
1.26%
0.71%
1.16%
0.91%
0.91%
1.16%
1.31%
1.15%
1.22%
1.27%
0.83%
0.87%
0.87%
0.87%
0.87%
0.87%
0.87%
1.07%
0.99%
1.11%
1.11%
1.11%
1.12%
1.17%
0.59%
0.64%
1.07%
1.02%
1.00%
1.00%
0.17%
0.90%
0.65%
0.84%
0.87%
0.61%
0.54%
0.67%
0.88%
0.76%
0.73%
0.83%
0.98%

Balance(In thousands of yen)¥

2,700,000
300,000
2,200,000
1,000,000
800,000
500,000
1,000,000
950,000
2,700,000
1,000,000
3,000,000
2,000,000
1,500,000
1,000,000
2,000,000
1,000,000
1,500,000
1,500,000
1,250,000
350,000
1,700,000
1,250,000
2,100,000
1,000,000
2,500,000
2,300,000
500,000
500,000
500,000
500,000
500,000
500,000
2,000,000
1,000,000
1,500,000
2,000,000
2,500,000
2,500,000
1,000,000
2,500,000
500,000
2,000,000
1,800,000
1,000,000
500,000
1,000,000
1,000,000
2,000,000
2,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
1,000,000
4,000,000
1,500,000
500,000

Kenedix Office Investment Corporation 37

Classification

Long-term loans payable

Subtotal
Current portion of investment corporation bonds
Subtotal
Investment corporation bonds

Subtotal
Total

Drawdown date

Last repayment date

Weighted-averageinterest rate

December 28, 2016
January 16, 2017
January 31, 2017
March 28, 2017
June 30, 2017
August 10, 2017
August 31, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
September 21, 2017
October 31, 2017

December 28, 2026
January 31, 2027
January 31, 2027
March 31, 2027
June 30, 2027
July 28, 2027
August 31, 2023
March 31, 2024
September 30, 2025
March 31, 2027
September 21, 2027
September 30, 2027
October 31, 2027

0.95%
0.86%
0.85%
0.85%
0.85%
0.80%
0.54%
0.56%
0.68%
0.73%
0.87%
0.85%
0.81%

September 12, 2013

September 12, 2018

1.00%

July 25, 2014
April 28, 2016
July19, 2017
July19, 2017

July 25, 2024
April 28, 2028
July 19, 2022
July 16, 2027

1.18%
0.90%
0.26%
0.64%

Balance(In thousands of yen)¥

1,500,000
500,000
700,000
500,000
1,500,000
3,500,000
1,000,000
1,000,000
1,500,000
1,000,000
1,000,000
2,500,000
2,500,000
147,550,000¥ 1,800,000
1,800,000¥ 2,000,000
1,000,000
1,000,000
2,000,000
6,000,000¥179,600,000

6. REDUCTION ENTRY
The amount of reduction entry of property, plant and equipment acquired by government subsidy is as follows:
In thousands of yen

Buildings in trust¥26,230¥26,230

7. PER UNIT INFORMATION

Net asset value per unit
Net income per unit
Weighted-average number of units (units)

As of October 31, 2017

As of April 30, 2018

Yen

From November 1, 2017
to April 30, 2018

¥527,661¥ 14,396
404,885

From May 1, 2017
to October 31, 2017

¥525,708¥ 11,334
404,885

The weighted-average number of units outstanding of 404,885 as of April 30, 2018 and October 31, 2017, respectively, was used for thecomputation of the amount of net income per unit. Net income per unit after adjusting for residual units is not included because there wereno residual investment units.

38 Kenedix Office Investment Corporation

8. INCOME TAXESThe Investment Corporation is subject to corporate income taxes
at a regular statutory rate of approximately 32%. However, theInvestment Corporation may deduct from its taxable income
amounts distributed to its unitholders, provided the requirements
are met under the Special Taxation Measures Law of Japan. Under
this law, the Investment Corporation must meet a number of tax
requirements, including a requirement that it currently distributein excess of 90% of its net income for the fiscal period in order tobe able to deduct such amounts. If the Investment Corporation
does not satisfy all of the requirements, the entire taxable incomeof the Investment Corporation will be subject to regular corporate

Statutory tax rate
Deductible cash distributions
Reversal of reserve for reduction entry
Provision of reserve for reduction entry
Others
Effective tax rateincome taxes. The Investment Corporation distributed in excessof 90% of its distributable income in the form of cash distributions
totaling ¥5,247 million and ¥5,061 million for the periods endedApril 30, 2018 and October 31, 2017, respectively. Therefore, such
distributions were treated as deductible distributions for purposesof corporate income taxes. The effective tax rate on the Investment
Corporation’s income was 0.02% for the fiscal periods ended April
30, 2018 and October 31, 2017, respectively. The following tablesummarizes the significant differences between the statutory tax
rate and the effective tax rate.

From November 1, 2017
to April 30, 201831.74%(28.57)—(3.17)
0.02
0.02%

From May 1, 2017
to October 31, 201731.74%(35.00)
3.26
—
0.02
0.02%

The significant components of deferred tax assets and liabilities as of April 30, 2018 and October 31, 2017 are as follows:
In thousands of yen

Deferred tax assets:
Enterprise tax payable
Amortization of leasehold right
Subtotal
Valuation allowance
Total deferred tax assets

As of April 30, 2018

As of October 31, 2017

¥

¥

29
3,628
3,657
(3,628)
¥
29

25
3,383
3,409
(3,383)¥25

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

10. RELATED-PARTY TRANSACTIONS(A) Parent Company, Major Corporate Unitholders and Other
Twenty-sixth fiscal period (November 1, 2017 to April 30, 2018) and Twenty-fifth fiscal period (May 1, 2017 to October 31, 2017):
Not applicable(B) Affiliated Companies and Other
Twenty-sixth fiscal period (November 1, 2017 to April 30, 2018) and Twenty-fifth fiscal period (May 1, 2017 to October 31, 2017):
Not applicable(C) Fellow Subsidiary Companies and Other
Twenty-sixth fiscal period (November 1, 2017 to April 30, 2018) and Twenty-fifth fiscal period (May 1, 2017 to October 31, 2017):
Not applicable(D) Directors, Major Individual Unitholders and Other
Twenty-sixth fiscal period (November 1, 2017 to April 30, 2018) and Twenty-fifth fiscal period (May 1, 2017 to October 31, 2017):
Not applicable

Kenedix Office Investment Corporation 39

11. BREAKDOWN OF RENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSSON SALE OF REAL ESTATE PROPERTY
Rent revenue - real estate, expenses related to rent business, and gain and loss on sale of real estate property for the periods from
November 1, 2017 to April 30, 2018 and from May 1, 2017 to October 31, 2017 consist of the following:
In thousands of yen

From November 1, 2017
to April 30, 2018

From May 1, 2017
to October 31, 2017¥10,509,225
1,842,504
12,351,730¥ 9,997,791
1,847,673
11,845,464

513,392
1,054,416
302,558
1,870,367¥14,222,098

520,035
1,176,012
298,973
1,995,021¥13,840,486¥ 1,355,289
2,295,308
1,102,668
1,148,754
19,318767,074
32,748
256,837¥ 6,977,998¥ 1,325,156
2,293,789
1,176,914
1,141,603
18,785451,239
33,580279,656¥ 6,720,726

Gain on sale of real estate property:
Revenue from sale of investment property
Cost of investment property
Other sales expenses
Gain on sale of real estate property¥ 9,730,000
9,056,075
123,782¥ 550,142————

Loss on sale of real estate property:
Revenue from sale of investment property
Cost of investment property
Other sales expenses
Loss on sale of real estate property

—
—
—
—

¥ 4,900,000
5,419,438
48,722¥ 568,160

Rental and other operating revenues:
Rent revenue - real estate:
Rental revenues
Common area charges
Subtotal
Others:Parking space rental revenues
Utility charge reimbursement
Miscellaneous
Subtotal
Total rent revenue - real estate
Property-related expenses:
Expenses related to rent business:
Property management fees and facility management fees
Depreciation
Utilities
Taxes
Insurance
Repairs and maintenance
Trust fees
OthersTotal expenses related to rent business

12. LEASESThe Investment Corporation, as lessor, has entered into leases whose fixed monthly rents are due in advance with lease terms of generally
two years for office buildings and residential properties and with lease terms ranging from two to ten years for retail properties. The future
minimum rental revenues under existing non-cancelable operating leases as of April 30, 2018 and October 31, 2017 are as follows:
In thousands of yen

Due within one year
Due after one year
Total

40 Kenedix Office Investment Corporation

As of April 30, 2018

¥1,446,246
5,943,183¥7,389,430

As of October 31, 2017

¥ 1,794,970
9,036,969¥10,831,939

13. FINANCIAL INSTRUMENTS
Twenty-sixth fiscal period (from November 1, 2017 to April 30, 2018)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges in interest rates and does not enter into derivatives for
speculative or trading purposes. Management of surplus funds isundertaken in a prudent manner that considers fully such factors
as safety, liquidity, interest rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.
Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition ofproperties and have a redemption date of a maximum of approximately 10 years following the accounting date. Although a certain
portion of said liabilities are subject to interest rate fluctuation risk,
the Investment Corporation utilizes derivatives (interest-rate swap
and interest-rate cap transactions) in order to reduce such risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy, and the assessmentof the effectiveness of hedging activities, please see Note 2 (L)“Derivative Financial Instruments.”(3) Risk management for financial instruments(a)	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and­interest-­rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.
(b)	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
Although loans and other liabilities are subject to liquidity risk,
the Investment Corporation reduces such risk by spreading out
payment due dates and by using diversified fund procurement
methods. Liquidity risk is also managed by such means as­regularly checking the balance of cash reserves.
(4)	Supplementary explanation of the estimated fair valueof financial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various
assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in a different fairvalue.

(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of April 30, 2018 and estimated fair value are shown in the following table.
The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and deposits(2) Cash and deposits in trust
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value

Estimated fair value¥ 13,033,326
10,444,809
23,478,136
6,000,000
1,800,000
17,050,000
6,000,000
155,000,000¥185,850,000
60,587¥ 13,033,326
10,444,809
23,478,136
6,000,000
1,804,644
17,088,337
6,057,000
155,280,513¥186,230,495
60,587

Difference

¥

—
—
—
—
4,644
38,33757,000280,513¥380,495—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing the net liability position.

Kenedix Office Investment Corporation 41

*1	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate, which is
subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS.”*2 Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,090,336

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3 Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and deposits
Cash and deposits in trust
Total¥13,033,326
10,444,809¥23,478,136*4 Redemption schedule for loans payable and investment corporation bonds
In thousands of yen

Short-term loans payable
Investment corporation bonds
Long-term loans payable
Total

Due within 1 year
or less¥ 6,000,000
1,800,000
17,050,000¥24,850,000

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

¥

¥

¥

¥

—
—
14,700,000¥14,700,000

Twenty-fifth fiscal period (from May 1, 2017 to October 31, 2017)(A) Overview(1) Policy for financial instruments
The Investment Corporation procures essential funds for acquiringproperties and undertaking the repayment of loans primarily
through bank loans and the issuance of investment corporation
bonds and new investment units. The Investment Corporation
uses derivatives for the purpose of hedging its exposure tochanges in interest rates and does not enter into derivatives for
speculative or trading purposes. Management of surplus funds isundertaken in a prudent manner that considers fully such factors
as safety, liquidity, interest rate conditions and cash flows.
(2) Types of financial instruments and related risk
Investment securities, which are Japanese silent partnership­(tokumei kumiai, “TK”) interests, are exposed to credit risk of theissuer and risk of fluctuation of value of its property.
42 Kenedix Office Investment Corporation——
19,600,000¥19,600,000——
21,700,000¥21,700,000—
1,000,000
10,950,000¥11,950,000

Due after
5 years¥—
5,000,000
88,050,000¥93,050,000

Loans payable and investment corporation bonds are usedprimarily for procuring funds necessary for the acquisition of properties and have a redemption date of a maximum of approximately
10 years and 6 months following the accounting date. Although acertain portion of said liabilities are subject to interest rate fluctuation risk, the Investment Corporation utilizes derivatives (interest-­
rate swap and interest-rate cap transactions) in order to reducesuch risk.
Interest-rate swap and interest-rate cap transactions are usedas derivative financial instruments. Utilizing interest-rate swap andinterest-rate cap transactions, the Investment Corporation fixes its
interest expense for long-term loans payable bearing interest at a
variable rate. With regard to hedge accounting methods, hedging
instruments and hedged items, hedge policy and the assessmentof the effectiveness of hedging activities, please see Note 2 (L)“Derivative Financial Instruments.”

(3) Risk management for financial instruments(a) 	Monitoring of market risk (the risks arising from­fluctuations in interest rates and others)
The Investment Corporation uses interest-rate swap and­interest-rate cap transactions in order to minimize risk arising fromfluctuations in interest rates on funds procured. The Investment
Corporation periodically reviews the value of the property andfinancial condition of the issuer with regard to investment­securities.

(4) 	Supplementary explanation of the estimated fair valueof financial instruments
The fair value of financial instruments is based on their quoted
market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various
assumptions and factors are reflected in estimating the fair value,
different assumptions and factors could result in a different fairvalue.

(b) 	Monitoring of liquidity risk (the risk that the Investment
Corporation may not be able to meet its obligations onscheduled due dates) associated with procurement offunds
Although loans and other liabilities are subject to liquidity risk,
the Investment Corporation reduces such risk by spreading out­payment due dates and by using diversified fund procurement
methods. Liquidity risk is also managed by such means as­regularly checking the balance of cash reserves.
(B) Estimated Fair Value of Financial Instruments
The carrying value of financial instruments on the balance sheet as of October 31, 2017 and estimated fair value are shown in the following
table. The following table does not include financial instruments for which it is extremely difficult to determine the fair value (Refer to *2 below).
In thousands of yen(1) Cash and deposits(2) Cash and deposits in trust
Subtotal(1) Short-term loans payable(2) Current portion of investment corporation bonds(3) Current portion of long-term loans payable(4) Investment corporation bonds(5) Long-term loans payable
Subtotal
Derivative transactions (*)

Carrying value¥ 19,917,133
9,808,743
29,725,877
6,000,000
1,800,000
18,250,000
6,000,000
147,550,000¥179,600,000
37,549Estimated fair value¥ 19,917,133
9,808,743
29,725,877
6,000,000
1,810,728
18,283,972
6,048,100
148,148,063¥180,290,864
37,549Difference

¥

—
—
—
—
10,72833,972
48,10059 8,063¥690,864—(*) The value of assets and liabilities arising from derivatives is shown at net value and with the amount in parentheses representing the net liability position.

*1 	Methods to determine the estimated fair value of financial instruments and other matters related to securities and­derivative transactions
Assets(1) Cash and deposits and (2) Cash and deposits in trust
Since these items are settled in a short period of time, their carrying value approximates fair value.
Liabilities(1) Short-term loans payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
(2) Current portion of investment corporation bonds and (4) Investment corporation bonds
The fair value of investment corporation bonds is based on quoted market prices.
(3) Current portion of long-term loans payable and (5) Long-term loans payable
The fair value of long-term loans payable is based on the present value of the total of principal and interest discounted by the interest rate
to be applied if similar new loans were entered into. The fair value of long-term loans payable bearing interest at a variable rate, which is
subject to fixed interest rates resulting from interest-rate swaps and special treatment applied to said swaps, is based on the present valueof the total of principal and interest, which is handled together with the applicable interest-rate swaps, discounted by the interest rate to be
applied if similar loans were entered into.
Derivative Transactions
Please refer to Note 14 “DERIVATIVE TRANSACTIONS.”

Kenedix Office Investment Corporation 43

*2 Financial instruments for which it is extremely difficult to determine the fair value
Classification

Carrying value (In thousands of yen)

Investment securities¥1,096,423

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above TK interests are not included in
the preceding table.
*3 Redemption schedule for receivables

Due within 1 year or less
(In thousands of yen)

Cash and deposits
Cash and deposits in trust
Total¥19,917,133
9,808,743¥29,725,877*4 Redemption schedule for loans payable and investment corporation bonds
In thousands of yen

Short-term loans payable
Investment corporation bonds
Long-term loans payable
Total

Due within 1 year
or less¥ 6,000,000
1,800,000
18,250,000¥26,050,000

Due after 1 year
through 2 years

Due after 2 years
through 3 years

Due after 3 years
through 4 years

Due after 4 years
through 5 years

¥

¥

¥

¥

—
—
13,750,000¥13,750,000——
18,600,000¥18,600,000——
21,300,000¥21,300,000—
1,000,000
17,050,000¥18,050,000

Due after
5 years¥—
5,000,000
76,850,000¥81,850,000

14. DERIVATIVE TRANSACTIONS
The following summarizes the contracted amount and the fair value of interest-rate swap and interest-rate cap contracts as ofApril 30, 2018:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)
Maturing after
1 yearFair value(In thousands of yen)Calculation method for
applicable fair value¥60,587

Based on theamount provided
by counterparty
financial institutions

Hedge accounting method

Type of derivative transactions

Hedged items

Principle method

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payableSpecial treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payable97,400,000

88,750,000*

Special treatment ofinterest-rate caps

Interest-rate caps
transaction

Long-term loans
payable500,000

—

*

Total

¥ 17,900,000 ¥ 17,900,000¥115,800,000 ¥106,650,000¥60,587(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.

44 Kenedix Office Investment Corporation

The following summarizes the contracted amount and the fair value of interest-rate swap and interest-rate cap contracts as of
October 31, 2017:(1) Hedge accounting not applied
Not applicable(2) Hedge accounting applied
Contracted amount (In thousands of yen)
Maturing after
1 yearFair value(In thousands of yen)Calculation method for
applicable fair value¥37,549

Based on theamount provided
by counterparty
financial institutions

Hedge accounting method

Type of derivative transactions

Hedged items

Principle method

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payableSpecial treatment ofinterest-rate swaps

Interest-rate swaps:
Receive/floating andpay/fixed

Long-term loans
payable99,650,000

93,900,000*

Special treatment ofinterest-rate caps

Interest-rate caps
transaction

Long-term loans
payable500,000

—

*

Total

¥ 12,200,000 ¥ 12,200,000¥112,350,000 ¥106,100,000¥37,549(*) Interest-rate swaps and interest-rate caps for which the special treatment is applied are accounted for together with the underlying hedged item. As a result, their fairvalue is included in the fair value of the hedged long-term loans payable.

15. INVESTMENT AND RENTAL PROPERTIES
Twenty-sixth fiscal period (from November 1, 2017 to April 30, 2018)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo metropolitan area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of October 31, 2017

¥382,081,158

Net change¥14,226,960

As of April 30, 2018

¥396,308,119

Fair value
As of April 30, 2018
(In thousands of yen)¥442,773,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers. Fair value at the end of the fiscal period under review of KDX­Hamamatsucho Dai-2 Building and Frame Jinnan-zaka (49.0% of quasi co-ownership interest) that were sold on July 2, 2018 and Frame Jinnan-zaka (51.0% of quasi
co-ownership interest) that is scheduled to be sold on November 1, 2018 are calculated based on the sale price (¥12,550,000 thousand) in the transaction agreement
on May 14, 2018.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of two properties totaling ¥24,692,691 thousand, the sales of three properties totaling ¥9,056,075 thousand and depreciation amounting to ¥2,295,308
thousand.

Income and loss in the fiscal period ended April 30, 2018 for real estate for rental purposes is listed in Note 11 “BREAKDOWN OF RENTALAND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY.”
Twenty-fifth fiscal period (from May 1, 2017 to October 31, 2017)
The Investment Corporation owns real estate for rental purposes mainly in the Tokyo metropolitan area for the purpose of generating rental
revenues.
The carrying value in the balance sheets and corresponding fair value of those properties are as follows:
Carrying value (In thousands of yen)
As of April 30, 2017

¥383,401,649

Net change¥(1,320,490)

As of October 31, 2017

¥382,081,158

Fair value
As of October 31, 2017
(In thousands of yen)

¥424,323,000*1: The carrying value represents the acquisition cost less accumulated depreciation.
*2: Fair value at the end of the fiscal period is the appraisal value determined by outside appraisers. Fair value at the end of the fiscal period under review of Residence
Charmante Tsukishima that was sold on December 1, 2017 is calculated based on the sale price (¥4,900,000 thousand) in the transaction agreement on October 30,
2017. Those of KDX Ikejiri-Oohashi Building and KDX Shin-Yokohama 214 Building that were sold on December 28, 2017 are calculated based on the anticipated saleprice (KDX Ikejiri-Oohashi Building: ¥2,400,000 thousand and KDX Shin-Yokohama 214 Building: ¥2,430,000 thousand) in the transaction agreements on December
14, 2017.
*3: Among changes in the amount of real estate for rental purposes that occurred during the fiscal period under review, principal increase/decrease factors were theacquisition of two properties totaling ¥5,405,572 thousand, the sales of one property totaling ¥5,419,438 thousand and depreciation amounting to ¥2,293,789
thousand.

Income and loss in the fiscal period ended October 31, 2017 for real estate for rental purposes is listed in Note 11 “BREAKDOWN OFRENTAL AND OTHER OPERATING REVENUES, PROPERTY-RELATED EXPENSES, AND GAIN AND LOSS ON SALE OF REAL ESTATEPROPERTY.”
Kenedix Office Investment Corporation 45

16. SEGMENT AND RELATED INFORMATION
Twenty-sixth fiscal period (from November 1, 2017 to April 30, 2018)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenues on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenues on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenues on the statementof income and retained earnings.
Twenty-fifth fiscal period (from May 1, 2017 to October 31, 2017)(A) Segment Information
Disclosure is omitted because the real estate leasing business is the Investment Corporation’s sole business and it has no r­eportablesegment subject to disclosure.
(B) Related Information(1) Information about each product and service
Disclosure is omitted because net sales to external customers for a single product/service category account for over 90% of the operating
revenues on the statement of income and retained earnings.
(2) Information about each geographic area(a) Net sales
Disclosure is omitted because net sales to external customers in Japan account for over 90% of the operating revenues on the statement ofincome and retained earnings.
(b) Property, plant and equipment
Disclosure is omitted because the amount of property, plant and equipment located in Japan accounts for over 90% of the amount ofproperty, plant and equipment on the balance sheet.
(3) Information about each major customer
Disclosure is omitted because net sales to a single external ­customer account for less than 10% of the operating revenues on the statementof income and retained earnings.

17. SIGNIFICANT SUBSEQUENT EVENTSISSUANCE OF NEW INVESTMENT UNITSOn May 14, 2018 and May 21, 2018, the Board of Directors of the Investment Corporation resolved to issue new investment units asdetailed below. Payments for the issuance of new investment units through public offering and through third-party allotment have been
completed on May 28, 2018 and June 15, 2018, respectively. As a result of the issuance of new investment units, the Investment
Corporation had total unitholders’ capital of ¥220,970,508,345 with 428,510 investment units outstanding as of June 15, 2018.
(Issuance of New Investment Units through Public Offering)Issuance of new investment units:
22,500 units
Issue price (Offer price):¥646,425 per unit
Aggregate issue price (Total offer price):¥14,544,562,500
Issue amount (Paid-in value):¥625,209 per unit
Total issue amount (Aggregate paid-in value):¥14,067,202,500
Payment date:
May 28, 201846 Kenedix Office Investment Corporation(Issuance of New Investment Units through Third-Party Allotment)
Issuance of new investment units:
1,125 units
Issue amount (Paid-in value):¥625,209 per unit
Total issue amount (Aggregate paid-in value):¥703,360,125
Payment date:June 15, 2018
Allottee:
Nomura Securities Co., Ltd.

(Use of Proceeds)
The proceeds from the public offering, amounting to ¥14,067,202,500, were allocated as a part of the funds for the acquisition of theproperty to be acquired, along with the proceeds from the third-party allotment resolved on the same date as the public offering, amounting
to ¥703,360,125.

18. DISTRIBUTIONS

I. Retained earnings at the end of period
II. Voluntary reserve (reversal)
Reversal of reserve for reduction entry
III. Total distributions
Distributions per unit
IV. Voluntary reserve (provision)
Provision of reserve for reduction entry
V. 	Retained earnings brought forward to
the next period
Method of calculating distribution amount

Yen

Twenty-sixth fiscal period(From November 1, 2017 to April 30, 2018)¥5,828,847,806

Twenty-fifth fiscal period(From May 1, 2017 to October 31, 2017)¥4,589,238,332—¥5,247,309,600¥
12,960¥ 471,824,168¥5,061,062,500¥
12,500¥ 581,538,206——
In accordance with the policy stipulated in
Article 35 (1) of its Articles of Incorporation,
the Investment Corporation determines thatthe amount of distribution shall exceed theamount equivalent to 90% of its distributableprofit as stipulated in Article 67-15 of the Act
on Special Measures Concerning Taxation,and shall be up to the amount of its profits
as the ceiling. Following this policy, theInvestment Corporation has decided that, of
the amount remaining after the provision ofreserve for reduction entry as stipulated in
Article 66-2 of the Act on Special Measures
Concerning Taxation is deducted from unappropriated retained earnings, it shall distribute the outstanding ¥5,247,309,600 as profit
distribution.
In addition, the Investment Corporation
decided not to distribute cash in excess of
distributable profit, stipulated in Article 35 (2)of its Articles of Incorporation.

—
In accordance with the policy stipulated in
Article 35 (1) of its Articles of Incorporation,
the Investment Corporation determines thatthe amount of distribution shall exceed theamount equivalent to 90% of its distributableprofit as stipulated in Article 67-15 of the Act
on Special Measures Concerning Taxation,and shall be up to the amount of its profits
as the ceiling. Following this policy, theInvestment Corporation decided to distribute¥5,061,062,500, the maximum integral multiple amounts of investment units issued andoutstanding of 404,885 units, based on theamount of the unappropriated retained earnings added the reversal of reserve for reduction entry.
In addition, the Investment Corporation
decided not to distribute cash in excess of
distributable profit, stipulated in Article 35 (2)of its Articles of Incorporation.

Kenedix Office Investment Corporation 47

Unitholders’ Information

Kenedix Office Investment Corporation
Fiscal Periods: Six months ending April 30 and October 31
Stock Listing: Real Estate Investment Trust Market of the Tokyo Stock Exchange (Securities Code: 8972)
Transfer Agent: Sumitomo Mitsui Trust Bank, Limited
Auditor:Ernst & Young ShinNihon LLC

IR Schedule (26th and 27th fiscal periods)

Apr.
2018

Jun.
2018

Jul.
2018

Oct.
2018

Dec.
2018

End of 26th
fiscal period

Performance for26th fiscal period
was announced

Distributions for
26th fiscal period
are paid

End of 27th
fiscal period

Performance for27th fiscal period
will be announced

Jan.
2019
Distributions for27th fiscal period
will be paid

General Breakdown of Unitholders (Note)
3.6% 1.1%
End of 25th
fiscal period(Oct. 31, 2017)

62.7%

32.7%

253,685 units

132,278 units

Total
404,885 units
14,593 units

4,329 units

3.4% 1.0%

End of 26th
fiscal period(Apr. 30, 2018)

63.0%
255,011 units
Financial institutions(including securities companies)

Total
404,885 units

32.7%
132,232 units 13,665 units

Foreign companies and individuals

Individuals and others

3,977 units

Other domestic companies

Note: Ratios are rounded to the first decimal place.

Top 10 Unitholders (As of Apr. 30, 2018)
Name

Percentage Share (Note)

Number of Units Held

The Master Trust Bank of Japan, Ltd. (Trust Acct.)

79,985

19.8%

Japan Trustee Services Bank, Ltd. (Trust Acct.)

76,151

18.8%

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Acct.)

26,729

6.6%

The Nomura Trust and Banking Co., Ltd. (Investment Trust Acct.)

23,187

5.7%

JP Morgan Chase Bank 385628

11,6102.9%State Street Bank and Trust Company 505012

7,942

2.0%

State Street Bank and Trust Company 505001

6,315

1.6%

Nomura Bank (Luxembourg) S.A.

5,285

1.3%

Barclays Capital Securities Limited

5,150

1.3%

State Street Bank West Client – Treaty 505234
Total

4,791

1.2%

247,14561.0%

Note: Ratios are rounded to the first decimal place.

Unit Price and Trading Volume(Units)
20,000(Yen)
1,000,000

8,000

800,000

6,000

600,000

4,000

400,000

2,000

200,000

0

2005

2006

2007

48 Kenedix Office Investment Corporation

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

Memo

Kenedix Office Investment Corporation 49

Memo

50 Kenedix Office Investment Corporation

Memo

Kenedix Office Investment Corporation 51

www.kdo-reit.com/en/

Disclaimer:This semiannual report includes translations of certain documents originally filed and made available inJapan in accordance with the Financial Instruments and Exchange Act of Japan.
The English language semiannual report was prepared solely for the convenience of readers outside
Japan and is not intended to constitute a prospectus. This semiannual report should not be construed as
an offer or solicitation to buy or sell any securities of Kenedix Office Investment Corporation (KDO). English
terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japanese terms. With respect to any and all terms herein, if there exist
any discrepancies in the meaning or interpretation thereof between the original Japanese documents andEnglish translation contained herein, the original Japanese documents will always govern the meaning andinterpretation.
None of KDO, Kenedix Real Estate Fund Management, Inc. (KFM), any of their respective directors, officers, employees, partners, unitholders, agents, affiliates nor their advisors shall be responsible or liable forthe completeness, appropriateness, or accuracy of English translations or the selection of the portion(s) of
any document(s) translated into English.
The financial statements of KDO have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP), which may materially differ in certain respects from generally
accepted accounting principles of other jurisdictions.
This semiannual report contains forward-looking statements. These statements appear in a number ofplaces in this semiannual report and include statements regarding the intent, belief, or current and future
expectations of KDO or KFM with respect to its business, financial condition and results of operations. In
some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,”“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or the negative of these terms orother similar terminology. These statements are not guarantees of future performance and are subject tovarious risks and uncertainties. Actual results, performance or achievements, or those of the industries inwhich we operate, may differ materially from any future results, performance or achievements expressedor implied by these forward-looking statements. In addition, these forward-looking statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise and involve
known and unknown risks and uncertainties. Accordingly, readers of this document should not interpret theforward-looking statements included herein as predictions or representations of future events or circumstances.
Potential risks and uncertainties also include those identified and discussed in this document. Given
these risks and uncertainties, readers of this document are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of information produced herein. We disclaim
any obligation to update or, except in the limited circumstances required by the Tokyo Stock Exchange,
announce publicly any revisions to any of the forward-looking statements contained in these documents.