Kenedix Realty Investment Corporation (KRI)
3rd Period Results (ending Oct. 2006)
December 2006
Kenedix REIT Management, Inc.
http://www.kdx-reit.com/eng/index.html

12060X495 - 80c9760a

Disclaimer
The contents of this document, including summary notes, quotes, data and other information, areprovided solely for informational purposes and not intended for the purpose of soliciting investmentin, or as a recommendation to purchase or sell, any specific products.
Please be aware that matters described herein may change or cease to exist without prior notice ofany kind. This document contains forward-looking statements and anticipations of future results,
based on current assumptions and beliefs in light of currently available information and resources.
Risks and uncertainties, both known and unknown, including those relating to the future performanceof the real estate market in Japan, interest rate fluctuations, competitive scenarios, and changing
regulations or taxations, may cause Kenedix Realty Investment Corporation (KRI)'s actual results,
performance, achievements and financial performance to be materially different from those explicitly
or implicitly expressed in this document.
With respect to any and all terms herein, including without limitation, this document, the information
provided is intended to be thorough. However, no absolute assurance or warranties are given withrespect to the accuracy or completeness thereof.
Neither KRI nor Kenedix REIT Management (KDRM) shall be liable for any errors, inaccuracies, loss
or damage, or for any actions taken in reliance thereon, or undertake any obligation to publicly
update the information contained in this document after the date of this document.

1Section 1

Change of the Portfolio Strategy

12060X495 - 80c9760a

Change of the portfolio strategy to focus more on office
New investment policies:♦ Investment to focus on office buildings♦ No new investments in residential for the time being♦ Basic investment policies：♦ Investment in urban retail properties as an alternative
to investing in office buildings♦

Flexible and dynamic investment with accurate timing,based on grasp of market trends♦

Stress on three-point investment criteria（property type,area, and size)♦

Construct diversified asset portfolio

Change in portfolio construction policy
SectorUsage

After Change Before Change

OfficeResidential
RetailOffice buildings for rent
Rental housing
Urban-type retailproperties
Business hotels,
Educational facilities,
Nursing-care facilities

50〜100%
0〜30%
0〜20％

50% or more
20% or more

0% fortime being

30% or less

OthersOverview of current portfolio（ As of December 11, 2006）

Retail3

10.6%

Residential

32

29.5%

Anticipated portfolio when asset size
target (¥200bn) is achieved
Residential
Urban-type retailc. 25%
c. 8-10%

New investments in office
Office30c. 75%

59.9%
Officec. 65-67％♦ Has grown to become diversified
portfolio of assets, with 65
properties worth c. ¥150bn

3Section 2

3rd Period Financial Results (ending Oct. 2006)

12060X495 - 80c9760a

Highlights in the 3rd period
Future management
policies & targets

External
growthInternal
growthFinancialperformance♦ ¥81.4bn (35 properties) at the end of the 2nd period→¥150.9bn（65 properties)♦
at December 11, 2006
♦ Bulk purchases at time of PO using multi-pipeline approach（26 properties, c. ¥58bn）♦♦ Assets acquired using asset management company’s
proprietary network （5 properties, c. ¥9bn）♦ Increases in new rents (average of 16%) based on high move out rates(6.1% annualized in the 3rd period, 12.3% annualized in the 4th period) of
mid-sized office buildings♦ Construction work and leasing management based on results of CS survey(for office buildings)

Invest mainly in officebuildings
Asset size of ¥200bn by end2007♦ Focus on portfolio NOI yield♦ Increases in new andexisting rents♦ Credit ratings: A+ (JCR, Dec. 2006), A3 (Moody’s, Feb. 2006)♦ Corporate bond issues♦ Equity finance raised through global offering (May 1, 2006)♦ Diversified maturity dates♦ Diversified maturity dates（have taken on 7-year and 10-year fixed borrowings) ♦ Extend duration

3rd period
results♦ Results for the 3rd period– Distribution per unit: ¥13,529– FFO per unit:♦ Stable growth in distribution
per unit¥19,7595

12060X495 - 80c9760a

3rd period financial results—Performance highlights
Performance

Financial Ratios
2nd
period3rd
period2nd
period3rd
periodNotes

Interest-bearing debt ratio

45.6%

38.7% Decreased by approx. 6.9%

Equity ratio

49.3%

56.7% −

Leasing NOI¥2,256m

FFO¥1,752m

Net Income¥1,101m¥2,124m

Total assets¥92,053m¥160,314m

Net assets¥45,387m¥90,933m

Number of units
outstanding

79,370 units

157,000 units

Net assets per unit

¥571,840¥579,192

FFO pay-out ratio

Distribution per unit

¥13,884¥13,529

FFO per unit

Rental and other operating revenues ¥3,869m Property-related expenses +Depreciation for the period
Net Income + Depreciation for the period –¥3,102m
Gains on real estate disposals

62.9%

68.5% Distribution / FFO¥19,759 −¥22,076♦ Relationship between property revenue, leverage effects, and distribution （illustrated 3rd period results）
8%

1．Annual rate calculations based on 179-day average management
period of assets acquired, weighted by acquisition cost

6%

2．Ratios are percentages of total liabilities + market capitalization(excluding Leverage effects and Total)– Leasing NOI yield of c. 5.4% on acquisition price basis

4%2%

3．Leverage effects calculated based on rental business profit margin/(1-debt ratio）

0%

–

(2% )

Property-related
expenses (excl.
depreciation)

Operatingexpenses (AMfees etc.)

Non-operating
Total (source ofexpenses (interest
distribution)
paid etc.)

Rental revenues

Gains on realestate disposals

6.2%

0.2%

(1.5% )

(1.4% )

1.9%

(0.4% )

(0.5% )

4.4%

6.4%
2nd period(For reference)−(1.4%)(1.4%)

2.4%(0.6%)(0.5%)

4.8%

3rd period

Depreciation

Leverage effectof debt

Used monthly average debt ratio for current period of c. 36%

4．（Reference）Earnings yield level based on unit price as of the end of
the period––

Unit price as of the end of 3rd period (Oct. 31, 2006):¥628,000
Days under management: 179 days–

Distribution per unit ¥13,529 → c. 4.4%

6

12060X495 - 80c9760a

4th Period Earnings Forecasts
Operating forecasts for 4th period（to April 2007）
2nd period results(to April 2006)

3rd period results(to October 2006)

4th period forecasts(to April 2007)

Operating revenues

2,871

5,288

5,542

Operating expenses

1,527

2,723

2,973

¥157mn profit booked on sale of residential properties
in the 3rd period
Management fees up ¥101mn because of expansion in
asset size in the 3rd period

Property-related expenses(excl. depreciation)
Depreciation
Operating Income

615

1,261

1,309

650
1,343

1,135
2,565

1,199
2,568

Non-operating expenses

246

442

493

Interest expense
Ordinary Income
Net Income

164
1,103
1,101

375
2,125
2,124

431
2,075
2,074

Number of units outstanding
Distribution per unit (Yen)79,37013,884

157,000
13,529157,000
13,200

NOI

2,256

3,869

4,232

FFO

1,752

3,102

3,274

2nd period

3rd period

4th period

32 → 35 properties

59→64 properties

65 properties

Rental business revenues forecasts(for reference）

Notes

Both the 3rd period and the 4th period, ¥18mn
amortization of investment unit issue expenses
The 4th period borrowings ¥66.0bn-

Rental revenue – Property-related expenses +Depreciation
Net Income + Depreciation for the period –Gain on real estate disposals
Trends in the number of properties♦ Rental revenues based on
ARGUS, a general-use realestate software program♦ For office buildings, reflects
vacation notifications(generally 6 months inadvance) and leasing
situation

Major changes in 5th Period （to October 2007)♦ Expected fixed asset tax & urban planning tax
costs: ＋¥123mn compared with 4th period

Disclosure policies for profit forecasts♦ Disclose if DPU changes by 5% or more
♦ Disclose in principle if Operating revenues or
Net income change by 15% or more

7

12060X495 - 80c9760a

Turnover ratio for office building and newly-contracted rent levels
Past and estimate vacation rates
for office portfolio（annualized）
1st
period2nd
period3rd
period

12.2%

2.7%

6.1%

Special features of mid-sized office buildings
4th period(Estimate)
1

12.3%

♦ Most tenants are medium and small, and move-out
rates are high♦ When rents are rising, rent levels can be increased

Note:
1 Proportion of floor area to be newly vacated in 4th period
based on advance notifications of contract cancellations

Newly-contracted rent levels（Leased floor area basis）

Distribution of increases in newly-contracted rent levels（Leased floor area basis）

30% or more increase 0–5% increase
8.7%
25.4%

Rental decline21%

20–30%
increase
20.2%
Rental increase79%

10–20% increase
32.4%

5–10%
increase
13.3%

No. of tenants basis
Rentalincrease

Tokyo metropolitan area
Other regional areas
Total
1.
2.
3.

9
4
13

Rentaldecline145Largest increase：c. 39% (+¥9,000/tsubo)
Average increase（number of cases basis）：c.16%

3rd period results (new rental contracts signed in the 3rd Period)
Comparison with typical floor (offices above floors 1 and 2, excluding special usage) average rents(The one case of rental decline in the Tokyo metropolitan area was signed at the same level as the previous tenant)
Limited to office usage above floor 2

812060X495 - 80c9760a

Results of increase in office NOI levels
Office portfolio internal growth performance

Accomplishments

1.Increase in ongoingrent levels



Rental increases were successfully negotiatedfor c. 38% (Of buildings for which we asked forrental increases)

Succeeded in reductions on 15 of 23
properties under review （reductions totalaround ¥5m per month）

2.Reduction in BM costs

3.Increase in occupancy
rates

4.OtherNotes

Of office buildings in the Tokyo metropolitanarea, we chose to negotiate rental increases
unrelated to contract renewal date at the
beginning of 3rd period （20% of total officetenant rental floor area in the Tokyo metropolitan
area)



Of 25 properties owned at the beginning of the
3rd period, 23 properties are under review (2properties already reduced in the 2nd period)

Average reduction of c. 20%



Office occupancy rate
 New contracts during the 3rd period for spacevacant at the start of the period or when acquired
97.3% （15 properties）→97.7% （29 properties）① Reduced electricity charges：14 properties① Reduction resulting from change of plan
② Reduced fixed asset tax：2 properties（applies from the 4th period）③ Parking revenue, vending machine installations,② Utilized fixed asset tax reduction consultant
antenna installations etc.

（Reference）Office acquisition policy at time of the 2nd period results presentation♦ Emphasis on mid-sized office in the Tokyo
metropolitan area→aiming for rises in CF

9Section 3External Growth12060X495 - 80c9760a“KENEDIX Selection”—External Growth and Target Asset Size
Current target ¥200bn by the end of 2007

Initial target ¥200bn by the end of 2008

Anticipated portfolio when asset
size target (¥200bn）is achieved

1,400
1,200

RetailGrowth inasset size

Residential
Office

(¥bn)

1,000
800
600

65 properties¥150.9bn

64 properties¥146.7bn

1,600

29 properties¥61.0bn

31 properties¥69.1bn

10.9%

10.6%

30.2%

29.4%

58.7%

59.9%

3rd period results
announced(2006/12/11)

Residential
Urban-type retailc. 25%
c. 8–10%

New investments in office

35 properties¥81.4bn

15.2%

17.9%

25.5%

400

16.2%
31.0%

27.4%

200

52.7%

54.6%

Just after IPO(2005/8/1)

1st period(2005/10/31)

2nd period(2006/4/30)

3rd period(2006/10/31)

Just after IPO
29 properties
were acquired

2 properties
acquired during
1st period

4 properties
acquired during
2nd period

31 properties acquired,
2 properties sold during
3rd period

Officec. 65-67%

59.2%

0

Note: figures shown are rounded down to nearest ¥100m,
or 1 decimal place for ratios

No. of properties infos （compiled by asset manager）

Infos from asset
manager's proprietary
network
Infos from Kenedix
Group
Total

1 property
acquired

1st period（7/21/2005–10/2005）

2nd period（11/2005–4/2006）

3rd period（5/2006–10/2006）

179

409

318

30

76

111

209

485

428

11

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External growth strategy—properties acquired using multi-pipeline approach

Developers
Corporate sector

Pension funds
Private funds

Support line

Warehousing
Brokerage

Support line

Kenedix REITManagement, Inc.
(Asset manager)100%

Direct
Proprietary acquisition
network
Warehousing

11
46
1

0%

Kenedix
Realty Investment
Corporation(Investment Co.)At time of IPO/PO

During
4th periods
Duringthe
the1st1st–4th

Most acquisitions attime of IPO/PO were via
support line

Apart from one property,
all property purchases
during the each period
have been via the
proprietary network

1st period Just after IPO(2005/8/1)

1st period (excl. Just afterIPO) and 2nd periodPO(2006/5/1)

3rd and 4th periods(excl. PO）

TOTAL

-

4 (c.¥8.8bn)

1 (c.¥1.2bn)

6 (c.¥13.2bn)

11 (c.¥23.3bn)-

1 (c.¥6.0bn)

8 (c.¥16.3bn)-

9 (c.¥22.3bn)

1 (c.¥5.6bn)

17 (c.¥40.5bn)-

47 (c.¥107.1bn)

6 (c.¥20.4bn)

26 (c.¥58.0bn)

6 (c.¥13.2bn)

20
18

1

Support line

29 (c.¥61.0bn)

TOTAL

29 (c.¥61.0bn)
Notes:
1
2
3(No. of property)

9

Asset Management

Development
projects(No. of property)

Proprietary network

50%

Multi-pipeline

Financial
institutions

Strong record of acquisitions
through asset manager's proprietary network
Asset manager's
proprietary network

Real estatemarket1

3

1, 2

67 (c.¥152.7bn）

1

Includes 2 residential properties (c. ¥1.7bn) sold in May 2006
Breakdown of support line：Pension funds 29 properties, private funds 6 properties、Kenedix’s own real estate investments 12 properties
As of December 11, 2006

12

12060X495 - 80c9760a

Emphasis on mid-sized office buildings in the Tokyo metropolitan area
Office （as of December 11, 2006）
30 properties, total purchase costs of ¥90.4bn
Tokyo’s 23 wards
23 Properties ¥70.1bn

Acquisition price（Tokyo metropolitan area）
Acquisition price（Other regional areas）

Vacancy rate (% )Office building prices improving
Office building vacancy rates

8
4
0
1996

1998

2000

2002

Tokyo's 23 wards
Osaka city

Central Tokyo1
18 properties ¥57.6bn

Greater Osaka area
3 properties ¥8.7bn

12

2004

2006/9

Yokohama city

Source: Ikoma Data Service System, 2006
Other 18 wards
5 properties¥12.5bn(% )Fukuoka
1 property ¥1.4bn

TokyoKanagawa
2 properties ¥7.8bn
Chiba
1 property ¥2.2bn# ofAcquisition priceproperties(¥ bn)

Ratio(%)

Tokyo metropolitan area

26

80.2

88.7

Other regional areas

4

10.1

11.2

Total

30

90.4

100.0

Official land prices (commercial), YoY change
70
60
50
40
30
Tokyo area:＋1.0%
20
10
0
(10 )
(20 )
(30 )
1985 1988 1991 1994 1997 2000 2003 2006
Tokyo area
National averageHigh share for mid-sized offices

Other regional areas
11.2%
Other Tokyo
metropolitan area
24.9%

Number of employees per office （Tokyo）

30–99 100 or more
4.8%
1.5%
10–29
15.2%

Note:
1
Central Tokyo: Chiyoda, Chuo, Minato, Shibuya and Shinjuku wards

Central Tokyo
63.7%

1-29 employees
per office: 93.7%

1–9
78.5%

Source: Company compilation based on 2006 data for Tokyo commercial
offices/companies from the Statistics Division, Tokyo
Metropolitan Government Bureau of General Affairs

1312060X495 - 80c9760a

ResidentialーCurrent portfolio
Residential（as of 11 December 2006）
32 properties, total purchase costs of ¥44.4bn

Changes in top appraisal values （major cities）
Rate of change（2006）

City

Acquisition price（Tokyo metropolitan area）
Acquisition price（Other regional areas）

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Sapporo1 property ¥1.8bn

Greater Osaka area
2 properties ¥3.9bn

Tokyo’s 23 wards
21 properties ¥31.7bn

Fukuoka
2 properties ¥1.7bn

Nagoya
Tokyo
Osaka
Kyoto
Fukuoka
Yokohama
SapporoSaitama
Otsu
Kobe
SendaiShizuoka
Okayama
Hiroshima
Chiba

Rate of change

26.4%
23.8%
19.2%
16.8%
15.5%
11.5%
10.1%
6.0%
5.0%
4.5%
4.4%
3.3%
3.1%
2.5%
2.3%

9.3%
9.9%
2.0%
3.6%
5.9%
4.8%
(3.2% )
(4.8% )
(3.8% )
(6.2% )
(3.2% )
(2.0% )
(4.2% )
(2.9% )

M aximumappraisal value（2006）

4,600
18,720
4,960
2,020
3,960
3,870
1,850
1,950
210
1,870
1,430
940
1,010
1,650
1,350

Source: National Tax Agency
Note: Maximum appraisal values are ¥1,000 per m2

Population growth in major cities

Kanagawa/Saitama
3 properties ¥3.1bn

Trends for cities with populations over 1mn
City

Nagoya3 properties ¥2.1bn# ofAcquisition priceproperties(¥ bn)
Tokyo metropolitan area 24
34.8

Ratio
(%)
78.5

Other regional areas

8

9.5

21.4

Total

32

44.4

100.0

1
2
3
4
5
6
7
8
9
10
11
12

Tokyo (23 wards)
Yokohama
Osaka
NagoyaSapporoKobe
Kyoto
Fukuoka
Kawasaki
Saitama
Hiroshima
SendaiTokyo metropolitan area
Other regional areas
Nationw ide

2005 population（’000）

Population grow th
2000-2005

8,483
3,579
2,628
2,215
1,880
1,525
1,474
1,400
1,327
1,176
1,154
1,024
34,471
93,285
127,756

4.3%
4.4%
1.2%
2.0%
3.2%
2.1%
0.0%
4.4%
6.2%
3.8%
1.8%
1.7%
3.2%
(0.2% )
0.7%

Source: Company compilation based 2005 Population Census (preliminary figures),
Statistics Bureau of the Ministry of Internal Affairs and Communications
Note: Cities where the company has investment assets （as of October 31, 2006）arehighlighted in blue

14

Section 4Internal GrowthInternal growth achieved—
Maximize revenue through converting properties into office space

12060X495 - 80c9760a

KDX Hamacho Building（office）

Maximizing revenue through conversion into office space
10F
Restaurant

Rental contracts from
November 2006

Office space■ 10F: Converting restaurant
into office space supports

9F

Acquisition data

Leasable area:
Completion date:
Acquisition date:
Acquisition price:

Nihonbashi Hamacho,
Chuo Ward, Tokyo
3,048.54m2
September 1993
March 2006
¥2,300mn

Higher rent (+50%)

・

Increased exclusive-use
floor area (+20%)■ 9F: Converting residences
into office space

After dismantling

Location:・・Higher rent (+42%)

・

Increased exclusive-use
floor area (+10%)

Residence
Office space■■

Estimated pre-conversion rent
(restaurant, residences)
9F/10F aggregate: ¥17mn annually

Post-conversion rent
9F/10F aggregate: ¥28mn annually

Points♦Strong office demand♦

Kenedix group’s expertise managing mid-sizedbuildings♦

Fits with office-focused policy♦

Portfolio can support vacancy during conversion as
well as conversion cost■Annual revenue up: c. ¥11mn■Conversion cost: c. ¥68mn

Revenue growth aspercentage of conversion
cost: 16.2%

Occupancy trends
March (when acquired):

87.3%

End of September (one tenant vacate):

65.3%

November 1 (new contracts for 8/9/10F):

88.7%
16

12060X495 - 80c9760a

Internal Growth Strategy—Pursue of Customer Satisfaction
Improve profitability

Tenant customer satisfaction survey

Increase in rental
revenue and propertyvalue

CS survey

Ongoing internal growth♦

In conjunction with J. D. Power Asia Pacific, Inc.

♦

Survey brief: 20 properties (all 13 office buildings owned as ofDecember 2005, Yoyogi M Building, six office buildings acquired in the
3rd period)♦

No. of respondents: 904( Managers: 160, Staff: 744)♦

Five satisfaction levels for each category (possible maximum: 1,000)

CS increase

Work based on results of customer satisfaction survey
Totalsatisfactionlevel*
Mgrs
Staff

Identify theneeds of tenants

Improve competitivenessof properties

During 2nd period

During 3rd period
and 4th period
M aintenance andcapitalimprovement

CS-based work record, budgets(¥ bn)

3rd period

4th period (E)CS-based1

.17

.25

ER-based2

.16

.15

Lease3/value increase

.22

.47

Other work

.09

.06

Total

.64

.93

Depreciation

1.13

1.20

218 work requests from property managementcompany（Kenedix Advisors） during the 3rd period
Notes:
1 Work in accordance with tenant requirements based on customer
satisfaction survey, and with other individual tenant requirements
2 Based on engineering reports
3 Conversions, display rooms etc.

Description

Sogo Hirakawacho
Building
Higashi-Kayabacho
Yuraku Building○○

Install elevator lobby air-conditioning ducts, change
toilet ventilation fans, install electric toilet water heaters○○

Install remote security

Noir Hatchobori○○

K&Y Building(Southern Plaza)△△

Harajuku FF Building○○

Kanda Kihara Building○○

NNK Building○○

Koishikawa Yoshida
Building○○

Hakata Ekimae Dai-2
Building○○

Portus Center Building
KDX Omori Building

○
◎

○
○

Clean room air-conditioning & external coil fans
Work on ground-floor elevator lobby
1) Install four security cameras, digital recorders2) Elevators linked to remote security
3) Change to/install new non-contact car readers
4) Install intercom
5) Install hotel locks on common stairs
External stairway lighting/handrails, air-conditioning
1) Rust-proof internal/external steel, apply topcoat
2) Change batteries for electrical equipment
3) Clean air-conditioning fans4) install electric toilet water heaters, overhaul pumps
Repair external walls, roof
Install hot-air dryers in toilets
1) Change central post collection point
2) Replace trash-room/entrance mats3) Add more entrance-hall lighting4) Add more hallway night lamps
Automate tower parking
Add lighting in common corridors
Replace water-heating equipment
Replace tile flooring in common corridors
Add more entrance-hall lighting* Total satisfaction level◎
Mildly satisfied to satisfied○
Neutral to mildly satisfied△
Mildly unsatisfied to neutral

17

12060X495 - 80c9760a

Internal growth strategyーEnhance buildings’ competitiveness
Office-building name changes
New name

Old name

Change date

KDX Hamacho

Hamacho Hanacho

August 1, 2006

KDX Funabashi

Leland Center

October 1, 2006

KDX Hamamatsu-cho

Shuwa #2 Hamamatsu-cho

October 1, 2006

KDX Minami Semba Dai-1

Semba Mont Blanc

October 1, 2006

KDX Minami Semba Dai-2

Nashiki

October 1, 2006

KDX Nogizaka

PRISMA･N

October 1, 2006

♦ Show leasing companies, the rental
market that the building is managed
by the Kenedix (KDX) Group♦ Management quality and spec levels
typically differentiate office buildingsin the mid-sized market

BeforeAfter

Office: Other refurbishing♦ Enhance entrance-hall lighting♦ Security: Install surveillance cameras

Residential: Refurbishing, rents on new contracts♦ Covert traditional kitchens to open-plan(Ashiya Royal Homes)♦ Security: Change locks♦ Rent raised for 30 units, lowered for 16, unchanged for others(new contracts during the 3rd period)

Retail: Yoyogi M Building
Increase revenue by establishing clear vision, enhancetenant appeal by increasing property’s profile18

12060X495 - 80c9760a

Internal growth strategyーMaintain NOI yield and occupancy rates
Portfolio’s leasing NOI yield1 (annualized)
3rd period

OfficeResidential

Retail# of Properties

64

29

32

3

NOI yield

5.4%

5.8%

4.8%

4.7%

Post-tax2

5.2%

5.5%

4.7%

4.7%

Trend of occupancy rate by type
100

90

1: Leasing NOI yield: Real estate operating income (before depreciation) divided by purchase cost
2: NOI yield after property and metropolitan taxes recorded as expenses

OfficeCentralized Property Management

Retail

O
ct
-0
6

Au
g06

Ju
n06

6
Ap
r-0

Fe
b06

5
De
c0

Kenedix REITManagement, Inc.

O
ct
-0
5

Asset
Management

Residential

70
Au
g05

Kenedix Realty
Investment
Corporation (KRI)80

Decrease by acquisition ofresidential properties just after
completion(Asset Manager)

Trend of occupancy rate by area

Kenedix Advisors
Co., Ltd.
(Property Manager)80

Decrease by acquisition of regional
residential properties just after
completion

Tokyo metropolitan area

Other regional areas

O
ct
-0
6

Au
g06

Ju
n06

Ap
r-0

6

70
Fe
b06

① Staff with expertise in property
management② Broad network in leasing, management
and construction projects③ Department specialized in property
management (REIT Management Dept.)

90

5Monitoring Property
Management♦ Personnel meeting held
every week
♦ Report to the
management team
every month♦ Regular evaluation ofproperty management
activities

De
c0

♦

Efficient management plan
focusing on the whole portfolio
Property management fee:
incentive fee tied to theincome from real estate

O
ct
-0
5

♦

100

Au
g05

Centralized Property Management【Features】

19

Section 5

Financial Strategies / IR Strategies

Financial strategies（raising funds through debt）
Credit ratings
Rating agency

Type of rating

Rating Date

Japan Credit Rating Agency (JCR)Long-term preferential debt credit：A+
Moody’s Investors Service, Inc. Issuer credit：A3
Unsecured loans

Flexible Financing

December 11, 2006
February 28, 2006

Fixed interest rate

Fixed interest rate on longterm debt to avoid therisk of future increase
in interest rates

(¥bn)
60

62

40

Variable Interest Debt
¥15bn
22.7%

66

42

20

Fixed Interest Debt
¥51bn
77.2%

29

23

0
Just after IPO

1st period(2005/10)

2nd period(2006/4)

3rd period(2006/10)

3rd period
results announced(2006/12)

Note： Amounts of unsecured loans outstanding

Diversified repayment period

16.5

15

¥24bn in new
borrowings since 3rd
period is red portion

10
5

15
11

9.5
6

3

1
2

Diversified repayment period
to avoid refinancing risk

(¥bn)
20

Notes：

5

Prolonged debt average maturity(¥bn)
Long term debt
Short term debt
60
40
11.5
10
4
20
30.5
19
19
0
Just after IPO 1st period
2nd period(2005/8)(2005/10)(2006/4)

20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16

0

Note:

Amount of debt maturing in each year

Fixed-Interest Debt” includes loans that were converted to fixed from floating
through interest rate swap
Second decimal place omitted for ratios

Note:

Stable debt
financing strategy

13.5

15

48.5

51

3rd period(2006/10)

3rd period
resultsannounced(2006/12)

Fixed interest rates for all long-term loans through interest rate swaps

21

12060X495 - 80c9760a

Disclosure and IR Activities
Domestic investors

Regulardisclosure

Individual investors

Debt investors

International investors

Information disclosure based on TSE regulation：
disclosure through registration to TDnet and through Press release
Financial results (kessan tanshin)

Disclosure in the English website
Set up English mirror site
http://www.kdx-reit.com/eng/

Pro-active disclosure via website(http://www.kdx-reit.com)

WebsitedisclosureVideo feed of results briefing (website)

Resultsrelated
disclosure

Semi-annual report (English)
Asset management report(sent to existing investors)

Company
information
meetings

Analyst meeting

One-on-one
meetings

One-on-one meetings

Presentation toindividual investors

Number of investor meetings

Debt IR meetings

Presentation tointernational investors

One-on-one meetings (debt IR)

One-on-one meetings

Red text: IR activity initiated in 3rd period

Access to KRI website
141

Total traffic

33,574

Domestic regional financial institutions

52

International investors (Europe)

52

International investors (US)45

International investors (other)34

Press release
Portfolio
Dividends
KDRM site top
Disclosure material
Occupancy rate

11,919
8,100
4,569
4,684
3,279
2,862

Total

324

English webpages

1,541

Domestic institutions

Note: From June 21, 2005 to October 31, 2006 (including conference calls)

Note: Six-months from May 1, 2006 to Oct. 31, 200622

Section 6

Appendix

12060X495 - 80c9760a

KRI Unitholders (as of 3rd Period-end, October 31, 2006)
Investment Units by Unitholder

End of
1st period

End of
2nd period

End of
3rd period

Individuals
and Others

Financial Insto(incl. Securities companies)

22.7%

49.0%

Individuals
and Others

Financial Insto(incl. Securities companies)

15.6%

47.0%

Individuals
and Others

0%

48.0%
20%

Other Domestic Foreign corporation
Corporationand individuals
8.5%

Financial Insto(incl. Securities companies)

10.6%

Foreign
Other Domestic
corporation
andCorporationindividuals
12.4%
16.0%

40%

Individuals and Others
Financial Inst.
(incl. Securities companies)
Other Domestic
Corporation
Foreign corporation andIndividuals
Total

29.0%

Other Domestic Foreign corporation
Corporationand individuals
6.8%

34.6%

60%

80%

Type of Unitholder (as of October 31, 2006)
Type of
Unitholder

Expansion of investor base throughaggressive IR activities

100%

Top 10 Unitholders (as of October 31, 2006）# ofUnitholder(%)# of Inv.
units

(%)

6,881

95.1%

16,712

10.6%

115

1.6%

75,308

48.0%

Name

133

1.8%

10,721

6.8%

110

1.5%

54,259

34.6%

7,239

100.0%

157,000

100.0%

1
2
3
4

(%)

Japan Trustee Services Bank, Ltd. (Trust Acct.)
Nikko Citi Trust and Banking Co.(Investment Trust Acct.)

13,675
12,055

8.71
7.67

Goldman Sachs International

8,945

5.69

8,145

5.18

Trust & Custody Services Bank, Ltd. (Securities Investment Trust
Acct.)
5 Kenedix, Inc.
6 The Master Trust Bank of Japan, Ltd. (Trust Acct.)

7
8
9
10

# of units held
(unit)

7,850

5.00

7,029

4.47

State Street Bank & Trust Company

4,018

2.55

Resona Bank Ltd.

3,260

2.07

The Joyo Bank, Ltd.

3,183

2.02

Sumitomo Mitsui Banking Corporation

2,542

1.61

Total

70,70245.03

24

12060X495 - 80c9760a

KRI Unit Price Performance
Volume (units)
5,000

Price (yen)700,000
680,000

4,000

660,000
3,000

640,000

2,000

620,000
600,000

1,000
0
Jul 21, 2005

580,000
Sep 30, 2005

Dec 15, 2005

Feb 24, 2006
VolumeMay 10, 2006

Jul 18, 2006

Sep 25, 2006

560,000
Dec
Dec01,
22,2006
2006

Closing Price of KRITSE REIT Index and KRI unit price
125
120
115
110
105
100
95
90
Jul 22, 2005

Sep 30, 2005

Dec 09, 2005

Feb 20, 2006
May 02, 2006
Jul 14, 2006
Closing Price of KRITSE REIT Index

Sep 22, 2006

Dec
Dec01,
22,20062006

Note: TSE REIT Index as of July 20, 2005 = 100, whereas KRI Initial Offer Price = 100
25

12060X495 - 80c9760a

Market overview (yield Comparison between Japan and U.S.)
Yield spread in Japan

Yield spread in U.S.

(% )

7%
6%
5%
4%
3%
2%
1%
0%
Sep, 2001

Jun, 2003

JREIT dividend yield
Source:Mar, 2005

Dec, 2006

Spread over 10yr JGB

10yr JGB

10
8
6
4
2
0
(2)
(4)
Jan, 1992

Nov, 1996

USREIT dividend yield
Spread over 10yr treasury yield

UBS, Bloomberg

Source:Sep, 2001

Jul, 2006

10yr treasury yield

Datastream

Comparison with the yield of Japanese and US government securities (yield spread) show that levels
are sufficiently high → strong interest from international investors for JREITs
Trend of market cap. in USREIT

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
2001

Source:UBS

350
Market cap (US$bn)(¥bn)

Trend of market cap. in JREIT

300
250
200
150
100
50
0

2002

2003

2004

2005

2006

1971
Source:

1978

1985

1992

1999

2005

NAREIT26

12060X495 - 80c9760a

Statements of Income
3rd period
2nd period
from May 1, 2006
from November 1, 2005
to October 31, 2006
to April 30,2006
AmountOf
AmountOf(¥ thousand) Operating (¥ thousand) Operating
4,549,456
2,574,667
Rental and other operating revenues
Rental revenues
3,908,749
2,220,814
640,706
353,853
Common charges
Others582,043
297,122
175,387
86,129Parking space rental revenues
314,355
152,652
Utility charge reimbursements
Miscellaneous
92,30058,340Total rental and other operating revenues（A） 5,131,499
2,871,789
Disposal income
157,334
Operating revenues
5,288,833
100.0 2,871,789
100.0
Property management fees
529,334
322,415
Utilities
296,833
146,889
Tax
179,543
9,327
Repairs and maintenance costs
62,66655,117
Other expenses
193,265
81,608Depreciation
1,135,559
650,193
Total property-related expenses（B）
2,397,201
1,265,551
Rental business profit (A-B)
2,734,297
1,606,237
Net operating income（NOI)
3,869,856
2,256,430
Asset management fees
203,841
150,113
122,597
112,140
Other operating expenses
Operating expenses
2,723,641
51.5 1,527,805
53.2
Operating income
2,565,192
48.5 1,343,983
46.8
Non Operating income
2,389
0.1
5,198
0.2
Interest expense
375,765
164,606
Financing related expense
20,904
11,743
Amortization of unit issuance costs
17,784
55,118
Amortization of organization costs
5,089
5,089
Other non-operating expenses
22,956
9,610
Non-operating expenses
442,500
8.4
246,168
8.6
Non-operating expenses▲440,110▲8.3 ▲240,969▲8.4
2,125,081
40.2 1,103,014
38.4
Ordinary income
Income before income taxes
2,125,081
40.2 1,103,014
38.4
Current income taxes
1,009
0.0
1,017
0.0
Deferred income taxes
0▲2
2,124,071
40.2 1,101,999
38.4
Net income
Retained earnings at the beginning of period
40
14Retained earnings at the end of period
2,124,112
1,102,013♦

Net operating days in each period
3rd Period： 184 days （May 1, 2006–Oct. 31, 2006）
2nd Period： 181days （ Nov. 1, 2005–Apr. 30, 2006 ）To see Income statement by property, pleaserefer to the list in the Kessan Tanshin♦

Rental and other operating revenues:––♦

To the 35 properties as of the end of the
2nd period, we have added 31 new
properties and disposed 2 residential
properties during 3rd period
64 properties as of the end of the 3rd
periodDisposal income:–

Income from disposal of two residential
properties (May 10, 2006)♦

Property-related expenses:– Property tax and city planning tax were
included to expenses on tax payment date♦

Amortization of unit issuance costs:
Issuance costs were split into six times (inthree years) from the 3rd period (due to theregulation change in accounting policy)

Other expenses：

Insurance premium, trust fees, etc.

Other operating expenses：

Directors compensation, asset custody fees, general admin fees, auditors’ fees etc.
2712060X495 - 80c9760a

Balance Sheets
3rd period
as of October 31, 2006ASSETS
Current assets
Cash and bank deposits
Entrusted deposits
Other current assets
Fixed assets
Property and equipment at cost
Buildings
Land
Buildings in trust
Land in trust
Other assets
Leasehold and security deposits
Long-term prepaid expenses
Derivative assets
Deferred assets
Organization costs
Unit issuance costs
TOTAL ASSETSLIABILITIESCurrent liabilities
Trade payables
Short-term debt
Current maturities of long-term debt
Other account payables
Rents received in advance
Deposits received
Fixed liabilities
Long-term debt
Leasehold and security deposit received
Leasehold and security
deposits held in trust received
Deferred tax liability
Unrealized gain on derivatives
Equities
Total unitholders' capital
Retained earnings
Unrealized gain from deferred hedge transactions

TOTAL UNITHOLDERS' EQUITYTOTAL LIABILITIES AND
UNITHOLDERS' EQUITY

2nd period
as of April 30, 2006

Amount(¥ thousand)
10,243,869
4,709,666
4,779,041
755,162
149,945,921
149,719,621
1,370,913
2,148,301
56,634,477
89,565,928
226,300
18,20576,874
131,220
124,550
35,62788,923

Amount(%)(¥ thousand)
6.4
8,119,288
4,897,035
2,946,056
276,19693.5 83,893,031
93.4 83,434,736
1,048,237
1,345,661
30,056,832
50,984,005
0.1
458,295
17,48843,020397,786
0.1
40,71740,717-160,314,341

100.0

16,204,462
289,763
13,500,000
1,500,000
145,413
767,536
1,748
53,176,581
47,000,000
184,398
5,940,494
51,687
69,381,044
88,729,652
2,124,112
79,53290,933,297
160,314,341

10.1

33.2

92,053,037

12,239,887
106,410
11,500,000
99,119529,894
4,462
34,426,133
30,500,000
131,646
3,396,700♦

Cash and deposits, Cash and deposits in trust:– Out of the leasehold and security deposits received
from end-tenants, ¥2,745mn (as of end of 2nd period)and ¥4,814mn (as of end of 3rd period) were released♦

Property and equipment at cost
– 62 properties held at the end of the 3rd period areheld in the form of trust beneficiary interests. KDX
Funabashi Building and KDX Nogizaka Building wereacquired as properties– 34 properties held at the end of 2nd period are held in
the form of trust beneficiary interests, and KDX
Funabashi Building was acquired as a property

(%)
8.8

91.1
90.6

0.5

0.1

100.0

13.3

(¥mn)

Acquisition
value

43.3
55.4
1.2
0.1
56.7

397,786
46,666,021
44,285,002
1,102,013
45,387,015

50.7
48.1
1.2

100.0

92,053,037

100.0

Differences fromacquisition value(% )Differences frombook value(% )Office86,22487,424

92,157+5,932（+6.9% ）+4,732(+5.4% )Residential

44,45945,89845,536+1,077（+2.4% ）▲362（▲0.8% ）Retail

16,05916,396

17,620+1,560（+9.7% ）+1,223(+7.5% )Total

146,742

149,719

155,313+8,570（+5.8% ）+5,594 (+3.7% )End of 1st
periodEnd of 2nd
periodEnd of 3rd
period

(¥mn)

37.4

Book
value

Appraisalvalue at theend of 3rd
periodShort-term debt

10,00011,50013,500Long-term debt

19,00030,50048,500Interest-bearing debt total

29,00042,00062,000

Ratio of long-term

65.5%

72.6%

78.2%

Interest-bearing debt ratio

37.5%

45.6%

38.7%

♦

Measurement of interest swap at fair value recorded as apiece of total unitholders’ capital from the 3rd period

49.3
28

12060X495 - 80c9760a

Statements of Cash Flows／Retained Earnings
Statements of Cash Flows

1. Cash flows from operating activities
Income before income taxes
Depreciation
Amortization of long term prepaid expenses
Interest income
Interest expense
Amortization of organization costs
Amortization of unit issuance costs
Changes in rental receivables
Changes in comsumption tax refundable
Changes in prepaid expenses
Changes in trade payables
Changes in other payables
Changes in rent received in advance
Changes in deposit received
Changes in disposal of tangible assets in trust
Cash payments of long term prepaid expenses
Others, net
Sub totalInterest income receivables
Cash payments of interest expense
Cash payments of income tax
Net cash provided by operating activities
2. Cash flows from investing activities
Purchase of property and equipment
Purchase of property and equipment held in trust
Payments of security deposit receivable
Payments of leasehold and security deposits received
Proceeds from leasehold and security deposits
Payments of leasehold and security deposits held in trust
Proceeds from leasehold and security deposits held in trust
Payments of restricted bank deposits
Proceeds from restricted bank deposits
Net cash used in investing activities
3. Cash flows from financing activities
Increase from short-term debt borrowing
Decrease from short-term debt repayment
Increase from long-term debt
Proceeds from issuance of units
Payments of dividends
Net cash provided by financing activities
4. Net change in cash and cash equivalents
5. Cash and cash equivalents at beginning of period
6. Cash and cash equivalents at end of period

Statements of retained earnings
3rd period

2nd period

from May 1, 2006
to October 31, 2006
Amount (¥ thousand)from November 1,
2006
to April 30, 2006
Amount (¥ thousand)

2,125,081
1,135,559

1,103,014
650,193

10,894△461
375,765
5,089
17,784△35,670△461,163△23,280
183,353
31,270237,641△2，714
1,763,670△44,748△65,643
5,252,426
461△363,960△1,015
4,887,912

6,641
△11
164,606
5,089−
46,728771,867
6,956△86,583
12,872
149,650△66,679−△15,163△62,387
2,686,794
11△149,708△854
2,536,243△1,143,962△68,040,151△716△4,60057,351△251,697
2,795,490△750,424
225,669△67,113,039△2,398,504△10,774,905△7,488△11,503
143,150△208,757
629,077△82,013
181,003△12,529,940

13,000,000△11,000,000
18,000,000
44,444,649△1,098,660
63,345,989
1,120,861
7,057,143
8,178,004

1,500,000−
11,500,000−△239,969
12,760,030
2,766,333
4,290,810
7,057,143

Ⅰ Retained earnings
Ⅱ Distributions(Distributions per unit)
Ⅲ Retained earnings in next year

3rd period
2006/ 5/ 11–
2006/ 10/ 31(Unit: yen)
2nd period
2005/ 11/ 1〜
2006/ 4/ 30

2,124,112,014
2,124,053,000
13,52959,014

1,102,013,492
1,101,973,080
13,88440,412

Revision of the Financial performance forecast
for the 3rd period (ended Oct, 2006 )Original
Actualforecast Revised on(publishedOct. 18
results
on Jun.12)

Difference
from original
forecast

Operating Revenue¥5,027mn-¥5,288mn+5.2%

Net Income¥2,075mn-¥2,124mn+2.4%¥13,200¥13,500¥13,529+2.5%

Distribution per unit

29

12060X495 - 80c9760a

Portfolio Overview (as of Dec. 11, 2006)
Type

OfficeOccupancy rate（% ）²（End of Apr.06）

Occupancy rate（% ）（End of Jul.06）

Occupancy rate（% ）（End of Oct.06）

NOI³
yield
（% ）

Acquisition
Price
Completion(￥mn) Date

Occupancy rate（%）²
（End of Apr.06）

Occupancy rate（% ）（End of Jul.06）

Occupancy rate（% ）（End of Oct.06）

NOI³
yield
（% ）

# of
props. Area¹ Name

Location

3.7

B-19

T

Residence Charmante Tsukishima

Chuo ward, Tokyo

5,353

6.0

B-20

T

Regalo Ochanomizu I･II

Bunkyo ward, Tokyo

3,600

B-1

T

Storia Sirokane

Minato ward, Tokyo

3,150

B-2

T

Tre di Casa M inami Aoyama

Minato ward, Tokyo

B-21

T

Regalo Shiba-Kouen

Minato ward, Tokyo

6.2

B-3

T

Court M ejiro

Shinjuku ward, Tokyo

1,250

—

B-4

T

Apartments M otoazabu

Minato ward, Tokyo

97.1

97.6

94.6

100.0

5.5

B-5

T

Apartments Wakamatsu-Kaw ada

Shinjuku ward, Tokyo

1,180

Feb. 2004

97.8

90.5

96.3

5.0

100.0

5.8

B-22

T

Chigasaki Socie Ni-bankan

Chigasaki, Kanagawa

1,160

Jan. 1991

94.8

91.3

91.3

5.1

87.7

100.0

3.9

B-6

T

Court Nihonbashi-Hakozaki

Chuo ward, Tokyo

1,130

Feb. 2004

94.3

100.0

97.2

5.5

—

100.0

4.6

B-23

T

Court Nishi-Shinjuku

Shinjuku ward, Tokyo

1,130

Oct. 2005

100.0

100.0

93.0

5.2

Location

A-13

T

Belles M odes Building

Chiyoda ward, Tokyo

5,950

May. 1994

80.5

85.7

97.1

A-1

T

Nihonbashi 313 Building

Chuo ward, Tokyo

5,940

Apr. 1974

100.0

100.0

100.0

A-16

T

Toshin 24 Building

Yokohama, Kanagawa

5,300

Sep. 1984

100.0

100.0

100.0

5.8

A-2

T

Sogo Hirakaw acho Building

Chiyoda ward, Tokyo

5,180

Mar. 1988

100.0

100.0

100.0

5.2

A-17

T

Ebisu East 438 Building

Shibuya ward, Tokyo

4,640

Jan. 1992

100.0

100.0

100.0

4.6

A-3

T

Higashi-kayabacho Yuraku Building

Chuo ward, Tokyo

4,450

Jan. 1987

100.0

100.0

100.0

A-30

T

KDX Nishi-Gotanda Building

Shinagawa ward, Tokyo

4,200

Nov. 1992

—

—

—

A-4

T

Noir Hatchobori

Chuo ward, Tokyo

3,680

Jun. 1993

100.0

100.0

A-18

T

KDX Omori Building

Ohta ward, Tokyo

3,500

Oct. 1990

100.0

100.0

A-19

T

KDX Hamamatsucho Building

Minato ward, Tokyo

3,460

Sep. 1999

100.0

A-29

T

KDX Higashi-Shinjuku Building

Shinjuku ward, Tokyo

2,950

Jan. 1990

—

A-20

T

Type

Jan. 2004
Ⅰ：Jan. 2006
Ⅱ：Feb. 2006
Feb. 2003

100.0

100.0

100.0

41.4

70.1

93.8

2.7

92.5

89.3

92.9

5.2

2,460

Feb. 2004

100.0

100.0

100.0

5.1

2,260

Nov. 2005

50.6

96.7

100.0

3.0

Mar. 1997

85.1

100.0

100.0

4.4

1,210

Jan. 2004

5.3

5.4

Dai-ichi Kayabacho Building

Chuo ward, Tokyo

2,780

Oct. 1987

72.2

100.0

100.0

4.9

B-7

T

Side Denenchofu

Ohta ward, Tokyo

1,110

Feb. 1997

94.4

97.2

A-21

T

NTB・M Building

Minato ward, Tokyo

2,690

Feb. 1992

100.0

100.0

100.0

4.8

B-34

T

Gradito Kaw aguchi

Kawaguchi, Saitama

1,038

Feb. 2006

—

100.0

100.0

5.3

A-5

T

K&Y Building (Southern Plaza)

Nakano ward, Tokyo

2,533

Aug. 1992

98.8

98.8

97.0

5.8

B-8

T

S-court Yokohama-Kannai II

Yokohama, Kanagawa

945

Mar. 2003

100.0

100.0

100.0

6.0

A-22

T

KDX Shin-Yokohama Building

Yokohama, Kanagawa

2,520

Sep. 1990

100.0

100.0

99.6

6.5

B-24

T

Regalo Komazaw a-Kouen

Setagaya ward, Tokyo

912

Feb. 2006

84.8

100.0

100.0

5.0

A-6

T

Harajuku F.F. Building

Shibuya ward, Tokyo

2,450

Nov. 1985

100.0

100.0

100.0

6.8

B-9

T

Court M otoasakusa

Taito ward, Tokyo

880

Jan. 2005

82.3

95.0

100.0

5.3

A-27

T

KDX Kajicho Building

Chiyoda ward, Tokyo

2,350

Mar. 1990

—

90.9

100.0

4.4

B-25

T

Court Shin Okachimachi

Taito ward, Tokyo

878

Oct. 2005

100.0

97.0

100.0

5.5

A-15

T

KDX Hamacho Building

Chuo ward, Tokyo

2,300

Sep. 1993

87.3

87.3

65.3

4.8

B-11

T

Bloom Omotesando

Shibuya ward, Tokyo

875

Mar. 2003

100.0

100.0

100.0

5.5

A-7

T

FIK M inami Aoyama

Minato ward, Tokyo

2,270

Nov. 1988

100.0

100.0

100.0

6.7

B-13

T

Human Heim Okachimachi

Taito ward, Tokyo

830

Dec. 2004

85.2

100.0

100.0

6.0

A-14

T

KDX Funabashi Building

Funabashi, Chiba

2,252

Apr. 1989

91.9

91.9

97.9

5.6

B-26

T

Primo Regalo Kagurazaka

Shinjuku ward, Tokyo

762

Jan. 2006

56.8

96.0

96.0

4.8

A-23

T

KDX Yotsuya Building

Shinjuku ward, Tokyo

1,950

Oct. 1989

100.0

100.0

100.0

5.2

B-14

T

Court Shinbashi

Minato ward, Tokyo

748

Dec. 1997

100.0

100.0

100.0

5.6

A-8

T

Kanda Kihara Building

Chiyoda ward, Tokyo

1,950

May. 1993

100.0

100.0

100.0

7.1

B-27

T

Primo Regalo Youga

Setagaya ward, Tokyo

730

Dec. 2005

100.0

100.0

100.0

5.3

A-9

T

NNK Building

Shinjuku ward, Tokyo

1,610

Jun. 1992

100.0

100.0

100.0

6.7

B-15

T

Court Suitengu

Chuo ward, Tokyo

659

Jul. 2003

100.0

94.9

90.0

5.0

A-26

T

Kiba Ocean Building

Kohto ward, Tokyo

1,580

Oct. 1992

—

57.1

69.1

2.8

B-28

T

Court Shimouma

Setagaya ward, Tokyo

638

Oct. 2005

100.0

100.0

100.0

5.2

A-28

T

KDX Nogizaka Building

Minato ward, Tokyo

1,065

May. 1991

—

100.0

100.0

4.7

B-29

R

Ashiya Royal Homes

Ashiya, Hyogo

2,330

Jun. 1991

78.5

81.8

80.3

4.7

A-10

T

Koishikaw a Yoshida Building

Bunkyo ward, Tokyo

704

Oct. 1992

100.0

100.0

100.0

6.8

B-18

R

Venus Hibarigaoka

Sapporo, Hokkaido

1,800

Mar. 1989

82.7

81.7

84.6

5.0

A-12

R

Portus Center Building

Sakai, Osaka

5,570

Sep. 1993

96.7

100.0

100.0

6.7

B-30

R

Regalo Ibaraki I･II

Ibaraki, Osaka

1,600

29.4

40.9

67.1

1.3

A-24

R

KDX M inami Semba Dai-1 Building

Osaka, Osaka

1,610

Mar. 1993

91.2

100.0

100.0

5.1

①May. 1991
②Mar. 1993

B-31

R

Collection Higashi-Sakura

Nagoya, Aichi

1,264

Mar. 2006

4.5

58.3

94.0

0.8

A-25

R

KDX M inami Semba Dai-2 Building

Osaka, Osaka

B-32

R

Renaissance 21 Hirao Jousui-machi

Fukuoka, Fukuoka

900

Oct. 2005

34.2

69.5

91.9

4.9

A-11

R

Hakata-Ekimae Dai-2 Building

Fukuoka, Fukuoka

B-33

R

M ontore Nishikouen Bay Court

Fukuoka, Fukuoka

826

Feb. 2006

46.8

73.2

84.1

5.2

B-16

R

Abreast Hara

Nagoya, Aichi

444

Feb. 2000

95.2

100.0

100.0

6.9

B-17

R

Abreast Hirabari

Nagoya, Aichi

407

Mar. 2000

94.9

93.8

90.8

6.3

Office (Total 30 properties) Sub Total
RetailAcquisition
Price
Completion(￥mn) Date

# ofprops. Area¹ Name

1,560

Sep. 1993

86.0

77.3

90.0

4.7

1,430

Sep. 1984

100.0

99.2

99.2

7.6

Mar. 2005

100.0

100.0

100.0

4.7

Residential

90,424

C-1

T

Jinnan-zaka Frame

Shibuya ward, Tokyo

C-2

T

Yoyogi M Building

Shibuya ward, Tokyo

2,479

Aug. 1991

87.1

87.2

100.0

3.5

C-3

R

ZARA Tenjin Nishi-dori

Fukuoka, Fukuoka

3,680

Nov. 2005

100.0

100.0

100.0

5.2

Disposal
Price
(￥mn)

Occupancy rate（% ）（End of Dec.05）

Occupancy rate（% ）（End of Apr.06）

1,015

96.5

100.0

Retail (Total 3 properties) Sub Total

9,900

Residential (Total 32 properties) Sub Total
Total 65 properties

97.2

5.5

44,459150,942

16,059

Dispositions (2 properties)
Type
Residential# ofprops. Area¹ Name

Location

B-10

Setagaya-ward, Tokyo

B-12

T
T

Storia Todoroki
Clair Court Rokakouen

Residential （Total 2 properties）

Setagaya-ward, Tokyo

Acquisition
Price
(￥mn)
877
831

985

1,708

2,000

97.1

100.0

Notes:
1

T:Tokyo metropolitan area, R:Other regional areas2

Ocupancy rate of properties acquired on May 1, 2006 show the values for the term before acquisition by ourcompany (April 30, 2006) and serve for reference only

3

NOI yield after property and metropolitan taxes recorded as expenses

30

12060X495 - 80c9760a“KENEDIX Selection” −External Growth
Portfolio Overview
Just after IPO(As of August 1, 2005)(29 properties approx. ¥61 bn)(65 properties approx. ¥150.9 bn)
Retail (3 properties)
10.6%

Retail16.2%
Office52.7%

Type

Residential(32 properties)
29.4%

Residential
31.0%

Other regional areas
3.7%
Tokyo
metropolitan area
96.2%

Area

¥7.5–10.0 bn
1 property
16.2%

Size

¥5.0–7.5 bn
2 properties
18.2%¥2.5–5.0 bn
4 properties
22.6%

Less than ¥1.0bn
11 properties
13.4%¥1.0–2.5 bn
11 properties
29.5%

Diversification in Tenant Mix(as of the end of 3rd period)

As of December 11, 2006

¥5.0–7.5 bn 6 properties
Total ¥33.2 bn
22.0%¥2.5–5.0 bn 14 properties
Total ¥47.8 bn
31.7%

Office(30 properties)
59.9%

Official(Others)
2 tenants
0.6%

Individual
10 tenants
3.1%

Agriculture
1 tenant
0.3%

Wholesale,
Retail & Food
80 tenants
25.2%

Carriers & Telecoms
6 tenants
1.9%

Tokyo
metropolitan area
(52 properties)
84.7%

Less than ¥1.0 bn 16 properties
Total ¥12.1 bn
8.0%Realtors
15 tenants
4.7%

Financial & Insurance
25 tenants
7.9%

Number of end tenants(as of the end of 3rd period)
Office¥1.0–2.5 bn 28 properties
Total ¥47.7 bn
31.6%

Constructions
17 tenants
5.3%
Manufactures
54 tenants
17.0%

Service
108 tenants
34.0%

Other regional areas(13 properties)
15.3%¥7.5–10.0 bn 1 property
Total ¥99 bn
6.6%

Office: 29 properties, Number of tenants: 318

Residential

318
1,081

Retail

22

TOTAL

1,421

Note: Including type duplication

31

12060X495 - 80c9760a

Kenedix Group’s Support Line
Advantages of property acquisition by
Kenedix GroupAUM
AUM (¥bn)
600
500

385.6

400
240.3

300
200
19.0

100

High percentage of properties acquired throughnon-auction process

522.8

68.4

83.7

105.8

（ratio of properties acquired through non-auction process）♦

FY2004(A)

93.0%

♦

FY2005(A)

94.4%

0

Aggressive approach to development projects
Dec, 2000 Dec, 2001 Dec, 2002 Dec, 2003 Dec, 2004 Dec, 2005 Sep, 2006
Office Residential Retail Logistics Other

Source: Kenedix, As of September 30, 2006
Notes:
1 AUM trend of Kenedix, Inc and Kenedix Advisors Co., Ltd.
2 Include KRI and Japan Logistics Fund's properties♦

Superior results through proactive approach , know
how accumulation♦

Establishment of Development Department andreinforcement of human resources

Private Funds for pension investors arrangedby the sponsor
Fund
NumberType

1

Office, Residential

Nov. 2003

2

OfficeNov. 2003

3

Office, Residential

Apr. 2004

Fund established

4

Residential, Office

Sep. 2004

5

Residential, Office

Mar. 2005

6

Residential, Office

Jul. 2005

7

Residential, Office

Aug. 2005

8

Residential, Office

Aug. 2006

Acquisition of all properties held by fund No1 and No3 in Aug.
2005
Acquisition of all properties held by fund No2 in May. 2006

Fund size of the funds No4 to No8 is approximately ¥12.0–34.0bn
each, with total size amounting to c. ¥120.0 bn

Source: Kenedix, As of November 30, 2006
Note:
Established by Kenedix, Inc and Kenedix Advisors Co., Ltd.
32

12060X495 - 80c9760a

Kenedix Group’s Support Line
Secure the transparency and fairness of management in Kenedix group by manifesting information
flow between funds of different investors① Information of property dispositions: priority next to pension funds② Information of property dispositions from pension funds: 1st priority③ Information of property dispositions from Kenedix private funds: no later than third parties④ Property acquisition by utilizing Kenedix warehousing function
Outline of the “Memorandum on provision of property information”①
Exclusive offer /Exclusive offer to seｌl

Kenedix Advisors
Co., Ltd.
Properties ofPension Funds②
First priority for
offer③
Properties of Private
Funds

Information provided no later than third parties④
Warehousing

Kenedix REIT Management

Second priority for information/
Second priority for offer to sell

Asset management

Information of property
dispositions by third
parties / Properties for
proprietary investment

Kenedix Realty Investment Corporation

Kenedix Inc.

33

12060X495 - 80c9760a

Management Structure of the Asset Management Company
Decision Making Flow Chart
Discussion& Resolution

Resolution/Report

Preparation of inv. guidelines

Department
Concerned

Approval of transactions withrelated parties

Compliance
OfficerCompliance
Committee

Approval of transactions exempt
from inv. guidelines

Resolution

AssetManagement
Committee

Approval of transactions with non-related parties
under inv. guidelines

Policy on Transaction with Related Parties①Asset Acquisition: Must not acquire properties over appraised
price②Asset Disposal: Must not sell out properties under appraised price③Real Estate Leasing: Proper conditions must be determined inconjunction with research on market price and condition as well as
reference to the opinion of the third party④Real estate agency business such as trading and leasing properties:
commissions must be within the range specified in the Building Lots
and Buildings Transaction Business Law＜Reference＞# of meetings held by the various committees and Board of Directors of
the asset manager /Investment company
1st period 2nd period 3rd period Total
Compliance Committee
Asset Management Committee
Board of Directors

7
21
9

7
35
7

7
39
9

21
95
25

Board of Directors of Investment co* 11

7

7

25

Board of Directors

Discussion& Resolution

Screening

Report＜Reference＞
Transactions with interested parties（Disclosure of the summary of all transactions with interested parties ）Period

1st

2nd

3rd

Total

# of properties
acquired

31

4

31

66*

# of assets acquired

30

1

25

56

27

-

3

30

31

4

31

66

30

4

29

63

# of commissions ofproperty transaction
brokerage# of property
managementagreements concluded# of Property leasing（master lease contracts）

Note： 2 properties were already disposed （May 10,
2006)*Attendance of Directors at the Board Meeting of the Investment co：out of the 25 meetings,
attendance of all directors at 23 meetings （1 Executive Director, 2 Supervisory Directors）. 2
meetings were attended by 1 Executive Director and 1 Supervisory Director （1Supervisory
Director was absent). 1 meeting was held by conference call34