Table of Contents

1. Executive Summary ・・・・・・・・・・・・・・・・・・・ 2
2. Overview of 4th Public Offering ・・・・・・・・・・・ ・ ・ 11
3. Summary of Kansai Area・・・・・・・・・・・・・・・・・ 21
4. External Growth Strategies・・・・・・・・・・・・・・・・ 27
5. Internal Growth Strategies・・・・・・・・・・・・・・・・ 35
6. Financial Strategies・・・・・・・・・・・・・・・・・・・ 46
7. Overview of Financial Results for 25th Fiscal Period・・・・・ 50
8. APPENDIX・・・・・・・・・・・・・・・・・・・・・・・ 56
This material includes forward-looking statements based on present assumptions and future outlook.
Actual results may differ from the forward-looking statement values due to various factors.
Since investment securities of Hankyu REIT are closed-end type which do not make redemption of units demanded by unitholders, the only means forunitholders to convert the investment securities is to sell to third parties. Market value of the investment securities is affected by supply/demand at theexchange and also fluctuates affected by interest rate environment, economic situations, real estate market trends and various other factors
surrounding the market. Therefore, the unitholders may not be able to sell the investment securities at the price of acquisition incurring loss.
This material is not intended as a solicitation to acquire investment securities of Hankyu REIT nor is it intended as a solicitation to sign contracts
relating to transactions of other financial instruments. When undertaking any investment, please do so based on your own judgment and responsibility
as an investor.
Before purchasing investment securities of Hankyu REIT, please consult with a securities company that is a “Type I Financial Instruments Business
Operator.”
This material is an English translation of the original, which was issued in the Japanese language.
There are sections that display property names in abbreviated form.
"(Site)" is added after the name of properties for which Hankyu REIT owns only its land.

11. Executive Summary2

1-1. Medium-term Objectives and Results for 25th Fiscal Period (1)Aim for sustainable growth and improvement of portfolio quality,
while aiming to increase distributions
Medium-term Objectives

1

Aim to achieve asset scale of JPY 200 billion within 2020
(place emphasis on medium-to-long-term fair value)

Results for 25th Fiscal Period• Acquired 2 properties (JPY 8.16 billion) which are acommunity-based retail facility (acquired in February 2018)
and a hotel (scheduled to be acquired in March 2018) by
utilizing the asset management company’s own property
information sourcing channels and the comprehensive
strength of the sponsor group (26th FP).
• Despite the occurrence of payment of settlement money forthe rent reduction action concerning Hotel Gracery Tamachi
in the 25th FP, secured distribution exceeding the forecast.
• Distribution per unit forecast for the 26th FP and the 27th FP
are expected to achieve the level of medium-term objectives
at JPY 2,950 and JPY 3,000, respectively.
• At Sphere Tower Tennozu, rent collection from a large tenantcommenced and occupancy rate increased as 2 new tenants
have moved in (88.1%⇒ 94.8% (February 2018 (26th FP)).

Upward revision

2

Aim to achieve a distribution level of JPY 2,900 on an
ongoing basis in the 26th fiscal period (ending May 2018)
and subsequent fiscal periods

Realized improvement of distribution level and expansion of acquisition
capacity through implementing acquisition of properties at appropriate
prices, internal growth and public offering.

Aim to achieve distribution level of JPY 3,000 on an
2 ongoing basis
31-1. Medium-term Objectives and Results for 25th Fiscal Period (2)Aim Medium-term
for sustainablegrowth and improvement
portfolio
quality,Objectives
Results forof25th
Fiscal Period
while aiming to increase distributions• Systematically implemented capital investment especially in
3

Systematically implement repairs and CAPEX to maintainand improve property value

properties which are 20 years old or older from theperspective of preventive maintenance (Kitano, LAXA,
Hankyu Corporation Head Office Building, etc.).

4

Consider and implement asset replacement to improve
portfolio quality• Continuously discussed measures to improve portfolio
quality.

5

Eliminate future risk factors• As for the rent reduction action concerning Hotel Gracery
Tamachi, a settlement was reached at a level which enables
maintaining the same level of distribution as the forecasts.

6

Implement fund procurement in light of interest rate trends(in principle, procurement mainly on a long-term and fixedbasis)• LTV is expected to decrease due to increase of appraisal
value and implementation of public offering.
42.2% (end of the 24th FP) ⇒41.4% (end of the 25thFP) ⇒40.2% (after public offering and acquisition of
new properties (planned))• For refinancing borrowings, refinanced JPY 3.0 billion by
long-term debt of 10 years with fixed interest rate and JPY
4.0 billion by short-term debt with variable interest rate, while
taking into account the balance between stability of fundprocurement and maintaining and improving distribution level.

*Medium-term objectives were announced in the financial results briefing materials for the 23rd fiscal period.

4

1-2. Overview of 25th Fiscal Period Financial Results● Comparison with 24th fiscal period results(Unit: millions of yen)
Item

Results for 24th FP (A)Results for 25th FP (B)(Dec. 1, 2016 - May 31, 2017) (Jun. 1, 2017 - Nov. 30, 2017)182

Operation period (days)

183

4,740

Operating revenues(Main factors for increase/decrease)

Change(B) - (A)(1)
Increase in income from lease (Itami):

1

4,902

162

(1)
(2)

Operating income

1,979

2,150

170

Ordinary income

1,625

1,793

168

Net income

1,623

1,718

95

Total number of investment
units issued and outstandingat the end of fiscal period

597,500

597,500―

Distribution per unit (JPY)

2,717

2,877

160

FFO per unit (JPY)

4,133

4,285

152

(3)

● Comparison with 25th fiscal period forecasts
Forecasts for 25th FP (A)(as of July 14, 2017)

Results for 25th FP (B)(Jun. 1, 2017 - Nov. 30, 2017)

183

183

―

Operating revenues

4,873

4,902

29

Operating income

2,052

2,150

97

Ordinary income

1,674

1,793

118

Net income

1,673

1,718

45

Total number of investment
units issued and outstandingat the end of fiscal period

597,500

597,500―

Distribution per unit (JPY)

2,800

2,877

77

FFO per unit (JPY)

4,212

4,285

72

JPY 122,809

Net assets per unit
after reflecting unrealized gain/loss

JPY 157,053

Increase in utilities expense income:

JPY +47 mn(2)
Decrease in repair expenses:
Increase in utilities expenses:

JPY +60 mn
JPY -54 mn(3)Payment of settlement money (Tamachi) :JPY -73 mn(1)
Increase in income from lease:
Increase in air-conditioning usage fee income (Tennozu):

Change(B) - (A)Operation period (days)

Net assets per unit

Increase in air-conditioning usage fee income (Tennozu): JPY +13 mn(Main factors for increase/decrease)(Unit: millions of yen)Item

JPY +100 mn(100% rent collection from July 3, 2017 (2 months earlier than initial assumption))

(1)
(2)

(2)
Decrease in repair expenses (Yamada, etc.):

JPY +5 mn
JPY +9 mn

JPY +54 mn(Partial change in repair plans to make up for the payment of settlement money (Tamachi))(3)

Decrease in utilities expenses:

JPY +16 mn(3)
Decrease in interest expenses:

JPY +6 mn(4)Payment of settlement money (Tamachi):

JPY -73 mn(4)Results for 25th fiscal period (ended November 2017)
JPY 2,877
Distribution per unit5

1-3. Overview of 26th and 27th Fiscal Period Financial Forecasts(Unit: millions of yen)

Results for 25th FP (1)(Jun. 1, 2017 - Nov. 30, 2017)

Item

Forecasts for 26th FP (2)(Dec. 1, 2017 - May 31, 2018)

Change(2) - (1)Forecasts for 27th FP (3)(Jun. 1, 2018 - Nov. 30, 2018)

Change(3) - (2)Operation period (days)

183

182

-1

183

1

Operating revenues

4,902

5,176

274

5,402

226

Operating income

2,150

2,269

119

2,269

-0

Ordinary income

1,793

1,885

91

1,917

31

Net income

1,718

1,883

164

1,915

31

597,500

638,500

41,000638,500―

Distribution per unit (JPY)

2,877

2,950

73

3,000

50

FFO per unit (JPY)

4,285

4,328

42

4,439

110

Total number of investment units
issued and outstanding at the endof fiscal period[Forecasts for 26th Fiscal Period] Main factors for increase/decrease from 25th fiscal period results
・Increase in lease operating income from acquisition of new properties
JPY +87 mn (OZONE +76, Hakata +10)

・Increase in lease*
JPY +110 mn(Tennozu +98, Itami +21 (lease income: Full-period 100% rent collection), etc.)
・Increase in repair expenses*
JPY -72 mn ( Yamada -66, HEP -21, etc.)(Partial change in repair plans for 25th FP to make up for the payment of settlementmoney (Tamachi))・Occurrence of expenses related to issuance of investment units
JPY -43 mn
・ Decrease in expenses due to absence of payment of settlement money (Tamachi)*Calculation includes existing properties only
JPY +73 mn

Forecast for 26th Fiscal Period (ending May 2018)
Distribution per unit

[Main preconditions]

JPY 2,950[Forecast for 27th Fiscal Period] Main factors for increase/decrease from 26th fiscal period forecasts• Increase in lease operating income from acquisition of new properties
JPY +90 mn (OZONE +59, Hakata +30)
• Difference between income and expenditure of utilities expenses*
JPY -20 mn• Increase in repair expenses*
JPY -39 mn (Takatsuki -28, etc.)• Increase in depreciation*
JPY -16 mn (NISHINOMIYA, etc.)• Increase in asset management remuneration
JPY -11 mn• Increase in interest expenses
JPY -11 mn• Decrease in expenses due to absence of payment of expenses related to issuanceof investment units*Calculation includes existing properties only
JPY +43 mn

Forecast for 27th Fiscal Period (ending November 2018)
Distribution per unit
JPY 3,000• There will be no change in portfolio properties from the 25 properties presently held or planned to be acquired.
• There will be no additional issuance of investment units to the 638,500 units (the sum of the total number of investment units issued and outstanding at present and the
41,000 units (max.) of new investment units to be issued as resolved on January 25, 2018) in total number of investment units issued and outstanding through to the end of
the 27th fiscal period.

6

1-4. Trends of Asset Scale

Place emphasis on medium-to-long-term fair value andaim to achieve asset scale of JPY 200 billion within 2020

Improved financialbase throughasset replacement

Returned to growth paththrough
resuming external growth

Continued growththrough PO for 2nd
consecutive year

Enhanced portfolio quality
through asset replacement

Implementation ofsustainable growth andenhancement of stability
in portfolio quality
through acquiring newproperties

Aim to achieve
asset scale of JPY
200 billion within
2020

25 properties
JPY 149.7 bn

15 properties
JPY 121.3 bn

19 properties
JPY 127.8 bn

End of 17th
period(End ofNov. 2013)

End of 18th
period(End ofMay 2014)

23 properties
JPY 139.3 bn

End of 19th
period(End ofNov. 2014)

End of 21st
period(End ofNov. 2015)

23 properties
JPY 141.6 bn

End of 23rd
period(End ofNov. 2016)

End of 25th
period(End ofNov. 2017)21 properties
JPY 132.8 bn

Acquired assets

16 properties
JPY 116.1 bn
Transferred assets

End of 15th
period(End ofNov. 2012)19 properties
JPY 127.8 bn

23 properties
JPY 139.3 bn

23 properties
JPY 141.6 bn

End of 16th
period(End ofMay 2013)

End of 22nd
period(End ofMay 2016)

After public offeringand acquisition of
new properties

Within 20207

1-5. Trends of Distribution per Unit

Distribution has stepped up
Aim to achieve distribution level of JPY 3,000 on an ongoing basis█ Distribution per unit (results)(JPY)█ Distribution per unit (forecast)

3,200

4.3%
increase

2.5%
increase

5.9%
increase

Aim to achieve JPY
3,000 on an
ongoing basis(from the 25th FP)(from the 25th FP)

3,000(from the 24th FP)

2,950

3,000

2,877
Includes tax andpublic dues on an
ongoing basis for
new properties:

2,800

2,717
2,626

Approx.
JPY 30 mn/period

2,600

2,400

2,200

第23期

第24期

第25期

第26期

第27期

2016年11月期
23rd
periodNov. 20162017年5月期
24th
periodMay 2017

2017年11月期
25thperiodNov. 20172018年5月期
26th
periodMay 2018

2018年11月期
27th
periodNov. 20188

1-6. Profitability and Financial Status● Profitability of Portfolio
Average NOI yield (Note 1)

Average NOI yield
after depreciation (Note 1)
Unrealized income/loss(Note 1)

End of 22nd period(End of May 2016)

End of 23rd period(End of Nov. 2016)

End of 24th period(End of May 2017)

End of 25th period(End of Nov. 2017)

After public offeringand acquisition of
new properties

4.8%

4.8%

4.8%

4.9%

4.9%

3.5%

3.7%

3.6%

3.7%

3.7%

JPY 12.6 bn

JPY 14.6 bn

JPY 17.6 bn

JPY 20.4 bn

JPY 20.6 bn● Stability of Financial Foundation
End of 22nd period(End of May 2016)

End of 23rd period(End of Nov. 2016)

End of 24th period(End of May 2017)

End of 25th period(End of Nov. 2017)(Note 2)After public offeringand acquisition of
new properties

LTV (Note 1)

41.9%

43.0%

42.2%

41.4%

40.2%

Interest-bearing debt ratio

43.0%

44.5%

44.6%

44.5%

43.0%

Average debt financing costs(including investment corporation bonds)

1.04%

0.92%

0.94%

0.88%

Average remaining years on
long-term borrowings payable
and investment corporation bonds

4.4 years

4.4 years

4.4 years

4.4 years(Note 2)

(Note 2)

(Note 1) Details of the calculation method for “Average NOI yield,” “Average NOI yield after depreciation,” “Unrealized income/loss” and “LTV” are presented on page 66.
(Note 2) The figure includes the expected amount and may differ from actual results.

9

1-7. Real Estate Business Reorganization of the Sponsor Groupu From April 2018, the sponsor group plans to launch its new organization possessing resources and know-how of the group’s
real estate businesses and consolidated with an aim to accelerate achievement of “strengthening and expanding the realestate leasing business in all areas” and “thoroughly differentiating the real estate sales businesses and other businesses,”
as part of its long-term vision.
u Aim to strengthen cooperation between the sponsor group and Hankyu REIT through the asset management company“Hankyu Hanshin REIT Asset Management, Inc.” (the company name is scheduled to be changed from Hankyu REIT AssetManagement, Inc.) being a subsidiary of “Hankyu Hanshin Properties Corp.” (the company name is scheduled to bechanged from Hankyu Realty Co., Ltd.), which will be launched as a business supervising company directly under Hankyu
Hanshin Holdings.

[Current Organization]
Hankyu Hanshin Holdings

HankyuCorporation

Hanshin Electric
Railway

Hankyu Realty

Hankyu REIT AssetManagement

Hankyu Travel
International

Hankyu Hanshin
Express

Hankyu Hanshin
Hotels[New Organization] From April 1, 2018 (planned)
Hankyu Hanshin Holdings

HankyuCorporation
Real estatebusinesses

Hankyu Hanshin
Properties
Hankyu Hanshin REIT
Asset Management

Hanshin Electric
Railway
Real estatebusinesses

Hankyu Travel
International

Hankyu Hanshin
Express

Hankyu Hanshin
Hotels(1) Hankyu Realty will become a subsidiary of Hankyu Hanshin Holdings.
(2) Real estate businesses of Hankyu Corporation and Hanshin Electric Railway willbe transferred to Hankyu Realty and Hankyu Realty will change its trading nameto Hankyu Hanshin Properties.
(3) Hankyu REIT Asset Management will change its trading name to Hankyu Hanshin
REIT Asset Management.

10

2. Overview of 4th Public Offering112-1. Overview of 4th Public Offering and New Properties
Overview of Public Offering
Number of units
issued andoutstanding
Number ofinvestment units tobe newly issued

597,500 units(638,500 units after public offering (max.))

41,000 units (max.)

Property name

METS OZONE

Vessel Inn Hakata Nakasu

Property typeCommunity-based
Retail Facilities

Hotel

Higashi-ku, Nagoya City

Hakata-ku, Fukuoka City

Acquisition price(planned)

JPY 5,400 mn

JPY 2,760 mn

Appraisal value

JPY 5,600 mn

JPY 2,780 mn

NOI yield (Note)

5.4%

4.3%

NOI yield after
depreciation (Note)

4.2%

2.7%

(Of this, third-party allotment: 2,000 units (max.))

LocationIssue price

JPY 128,115

Paid-in amountJPY 123,844

Total
paid-in amount

Overview of New Properties

JPY 5,077 mn (max.)(Including third-party allotment)

Acquisition method
Date of resolutionof issuance

January 25, 2018

Price
determination dateFebruary 5, 2018

Payment dateFebruary 13, 2018 (primary offering)
March 13, 2018 (third-party allotment) (planned)

Acquisition date
Lease contract
type
Lease contract
start date
Lease contract
periodThe asset management company’s own
sourcing channels
Utilization of the sponsor solutions

The asset management company’s own
sourcing channels

February 15, 2018

March 29, 2018 (planned)

Direct lease

Direct lease
September 30, 2014

Differ by tenants
25 years

Total of New Properties
Acquisition price (planned)

Appraisal value

Average NOI yield

Average NOI yield
after depreciation

JPY 8,160 mn

JPY 8,380 mn

5.0%

3.7%

Total / Average(Note) Details of the calculation method for “NOI yield” and “NOI yield after depreciation” are presented on page 66.

12

2-2. Significance of Acquiring New Properties (1)Acquisition of properties located near major stations of
the Tokaido and Sanyo Shinkansen― First property acquisitions in Nagoya and Fukuoka areas ―Major
investment area
(Kansai Region)

Property scheduled to be acquiredin the 26th FP

Tokyo(Tokyo Metropolitan area)

Vessel Inn Hakata Nakasu

Hotel

Kyoto

NagoyaMETS OZONE

Community-based
Retail Facility

Hiroshima
Fukuoka

Tokaido and Sanyo Shinkansen
Areas where major stations are locatedProperty acquiredin the 26th FP

Kobe Osaka

Property acquiredin the 23rd FP

Property acquiredin the 23rd FP

KOHYO Onohara StoreOASIS Town Itami Konoike (site)

Community-based
Retail Facility

Community-based
Retail Facility132-2. Significance of Acquiring New Properties (2)Enhance revenue stability through the progress of the diversification of area and use
Other areas
1.5%

Other
Kansai region
7.9%

Areas along
Hankyu andHanshin lines
49.1%

Other use
0.8%

Urban
retail facilities
14.4%
Office
26.1%

Hotel
7.7%

Kansairegion74.3%

Community-based
retail facilities
50.9%

Retail-use
zone
73.0%

Utilization of sponsor solutions
Realized property acquisition through negotiated transactions by utilizing
solutions gained through operational management by the sponsor group, in
addition to the asset management company’s own property information
sourcing channels

The asset managementcompany’s own property
information sourcing channels

After acquisition of new properties

Tokyo
24.2%

End of 25th FP

Other areas
6.9%

Umeda area
17.2%

Umeda area
16.3%
Tokyo
22.9%
Areas along
Hankyu andHanshin lines
46.4%

Other
Kansai region
7.5%
Other use
0.8%

Urban
retail facilities
13.6%
Office24.7%
Community-based
retail facilities
51.7%

Hotel
9.2%

Kansairegion70.2%

Retail-use
zone
74.5%

First acquisition of hotel asset since increasing the
maximum investment ratio for hotels
Made partial change in management guidelines in January 2015 and increased the
maximum investment ratio for te hotel-use portion from 10% to 20%⇒ Acquired through limited tendering by utilizing the asset management company’s
own property information sourcing channels(scheduled to be acquired in March 2018)(Transferred Richmond Hotel Hamamatsu in April 2016)
Transferred in 22nd FP

Acquired in 26th FP (planned)

Assetreplacement

Sponsor solutions(Hankyu Sekkei Consultant)Acquisition ofproperty throughnegotiatedtransactions

METS OZONE

Richmond Hotel Hamamatsu
NOI yield after depreciation 1.6%

Vessel Inn Hakata Nakasu
NOI yield after depreciation 2.7%

14

2-3. Overview of New Property METS OZONE

Property Overview
Acquisition price

JPY 5,400 mn

NOI yield

5.4%

NOI yield after depreciation

4.2%

Location

Higashi-ku, Nagoya City, Aichi Pref.

Site area/Leased area

17,422.32 m2 / 15,681.37 m2

Occupancy rate

100%

Opening period

April 2002

Property manager

TOKYU COMMUNITY CORP

Acquisition dateFebruary 15, 2018

Property Featuresl The Property offers excellent access by car as it faces “Inner Ring Route” which isa wide-area arterial road. Furthermore, it has a multi-story parking lot that canaccommodate 558 vehicles as well as a ground parking lot that can accommodate
124 vehicles on the west side of the store.
l Ozone Station, which is located within an approximately 5-minute walk from theProperty, is a transport hub accessible by three lines namely JR Chuo Main Line,
Nagoya Municipal Subway Meijo Line and Meitetsu Seto Line.
l The Property targets a trade area which is a densely populated area in Nagoya
City and where the population is increasing. According to the national census in
2015, its population by trade area is approximately 29,000 within 1 km,
approximately 281,000 within 3 km and approximately 691,000 within 5 km,
making the location densely populated as a residential area in the urban area.
l The Property is occupied mainly by tenants that meet everyday needs such as“NITORI,” “EDION,” “Yamanaka (food supermarket)” and “UNIQLO” as its main
tenants who are expected to take in consumption demand from trade areas.

15

2-4. METS OZONE and Properties in the Vicinity

Subway Meijo Line
YutoritoLine

Nagoya DomeJR Chuo Line
Meitetsu Seto LineAEON MALL
Nagoya Dome Mae

METS OZONE

Ozone Station on the
Subway Meijo Line

Inner Ring Route

Ozone Station
on Yutorito Line

JR Chuo Main Line
Subway Meijo Line
Inner Ring RouteMeitetsu Seto Line

Aerial photograph taken from southwest side facing northeast16

2-5. Overview of New Property Vessel Inn Hakata Nakasu (1)approximately 1-minute walkfrom Nakasu-Kawabata Station

Property Overview
Proposed acquisition price

JPY 2,760 mn

NOI yield

4.3%

NOI yield after depreciation

2.7%

LocationHakata-ku, Fukuoka City

Site area/Leased area

405.98 m2 / 2,776.49 m2

Lease contract period

25 years

Number of guest rooms
Opening period

166 rooms in total(of which, 153 single rooms)

February 2010(rebranded in October 2014)

Operator

Vessel Hotel Development Co., Ltd.

Proposed acquisition date

March 29, 2018

Property Featuresl The Property is a hotel mainly for accommodation with a total of 166 rooms, mainly
singles, and opened after rebranding as Vessel Inn Hakata Nakasu in October
2014.
l The Property stands in an excellent location being an approximately 1-minute walkfrom Nakasu-Kawabata Station on the Fukuoka City Subway Line and offers
excellent access as it takes only around 9 minutes to Fukuoka Airport Station,around 3 minutes to JR Hakata Station, and around 1 minute to Tenjin Station via
a direct subway line from the station.
l Nakasu area where the Property is situated is one of the greatest bustling areas in
Kyushu and also close to office zones such as the Hakata and Tenjin areas, andthus stronger demand for both leisure and business can be expected.

17

2-5. Overview of New Property Vessel Inn Hakata Nakasu (2)List of hotels operated by Vessel Hotel Development Co., Ltd.

Operation Policy Prioritizing Customer Satisfaction

u Vessel Inn is one of the hotel group brands which
the operator Vessel Hotel Development Co., Ltd.
operates at 18 locations nationwide.
u Under the concept of “a relaxing clean space at areasonable price,” introduced equipment such as
Simmons beds, air purifiers with humidifier functionsand Wi-Fi in all rooms for the purpose of providing
rooms that realize both cleanliness and functionality.

Gained high reputation among viral websites
on hotels, etc.
u Vessel hotels provide attractive services atreasonable prices, and ranked 1st in “Jalan Chain
Hotel Ranking 2016” (Note 1) as well as 1st in 2016
and 3rd in 2017 in satisfaction surveys conductedby a hotel survey institution (Note 2).

(Note 1) Among a “category of chain hotels which was nice to stay in,” those priced“less than 15,000 yen per stay for a couple/wedded couple.”(Note 2) In a category of 9,000 yen – less than 15,000 yen per stay.

18

2-6. Retail Market of Nagoya City

Favorable Retail Market Supported by Strong Purchasing Power
Trends of Population in Trade Area of METS OZONE

Located in Area with High Retail Potential

120

Chikusa-ku
Naka-kuu Nagoya City has a population of approximately 2.3 million, thefourth largest nationwide following Tokyo (23 wards), Yokohama
City and Osaka City, and the population is on an increasing trend.
u Population in Higashi-ku, Nagoya City where METS OZONE
stands is increasing significantly, relative to Nagoya City itself, andfuture increase in population can be expected.

Moriyama-ku
Kita-ku110

u When looking at annual sales of retail trade by city (2014),
Nagoya City is at the level of fourth largest nationwide
following Tokyo (23 wards), Osaka City and Yokohama City.

105.9
105.5

100

98.6
95

Tokyo (23 words) (Note)
Osaka City
Nagoya City
Sapporo City
Fukuoka City
Kobe City
Kyoto City

12.4
3.9
3.4
2.9
2.0
1.7
1.6

Hiroshima City

1.6
1.2

Sendai City

1.2

2009

2010

2011

2012

2013

2014

2015

2016

2017 (year)(Source)“Long-term trend of population by ward” by Nagoya City

(Note)

Population of each ward as of November 2008 was indexed as100, and figures for November of each year are indicated.

u Taxable income per person is ranked third among
prefectural capitals
Taxable Income per Person in Tokyo (23 ward) and Prefectural Capitals(Municipal tax) (2016)

Annual Sales of Retail Trade by City (2014)

Yokohama City

109.7

105

2008

Consumers with High Income Level and Strong Purchasing Power

116.7

Higashi-ku

115

1st

Tokyo (23 wards) (Note)

2nd

Kanagawa Prefecture Yokohama City

3rd

Aichi Prefecture

Nagoya City

4th

Saitama Prefecture

Saitama City

5th

Chiba Prefecture

Chiba City

(Source) “Commercial statistics for 2014: Volume 3 Industry edition (table of city,ward, town and village)” by Nagoya City

(Source) Prepared by the Asset Management Company based on“Survey on taxation status, etc. concerning municipal tax forfiscal 2016; survey concerning income levy amount, etc. forfiscal 2016 by the stage of standard taxable value (total)” by
Ministry of Internal Affairs and Communications(Note)(Note)

0

5.0

Total of 23 wards of Tokyo is indicated.

10.0

1 5 . 0 (trillion yen)

Average of the 23 wards of Tokyo is the subject

19

2-7. Hotel Market in Fukuoka City
Trends of Number of Tourists (Fukuoka City) and Number of Foreign Entrants
to Japan (Fukuoka Airport/Hakata Port)

Market where Stronger Demand for Both
2,000
20.0
Tourism and Business Fields can be Expected(million people)(million people)
Number of tourists (Fukuoka City)
観光客数（福岡市）(left axis)

300
3.0

外国人入国者数
Number of foreign entrants to Japan（福岡空港・博多(Fukuoka Airport/Hakata Port)港）(right axis)

1,800
18.0

2.0
200
1.0
100

1,600
16.0

Guest Room Occupancy Rate Remains Highu Number of Fukuoka Airport users and number of visitors to
Fukuoka Prefecture among foreign tourists visiting Japan arecontinuously increasingu Guest room occupancy rate of accommodation facilities inFukuoka City stably exceeds 80% since 2016 and remains high

1,400
14.0
2011

2012

2013

2014

2015

00.0
2016 (Year)(Source) “2015 Fukuoka City tourism statistics” by Tourism Industry Section,
Economy, Tourism & Culture Bureau, Fukuoka City and “Airport Management
Status Survey Report by Calendar Year and Fiscal Year” by Civil Aviation
Bureau, Ministry of Land, Infrastructure, Transport and Tourism

Trends of Guest Room Occupancy Rate of Accommodation Facilities(Fukuoka City)

100%
Single month
12 months average

90%

80%

70%
Jan. 2013年
Jul. 2014年
Jan. 2014年
Jul. 2015年
Jan. 2015年
Jul. 2016年
Jan. 2016年
Jul. 2017年
Jan. 2017年
Jul.
2013年
2013
2013
2014
2014
2015
2015
2016
2016
2017
2017
1月
7月
1月
7月
1月
7月
1月
7月
1月
7月
(Source) “Accommodation Survey” by Japan Tourism Agency

Enjoy Demands from Both Tourism and Business Fields

u Fukuoka City keeps the 2nd rank nationwide only following
Tokyo 23 wards for 7 consecutive years in the number ofinternational conventions held.

Number of International Conventions Held Nationwide
Rank
1st
2nd

u Accommodation demand can be expected not only for the
purpose of tourism but also for businesses, academics, etc.

3rd
4th
5th

2009

2010

2011

2012

2013

2014

2015

Tokyo

Tokyo

Tokyo

Tokyo

Tokyo

Tokyo

Tokyo

(23 wards)(23 wards)(23 wards)(23 wards)(23 wards)(23 wards)(23 wards)

（497）

（491）

（470）

（500）

（531）

（543）

（557）

Fukuoka City
Fukuoka City
Fukuoka City
Fukuoka City
Fukuoka City
Fukuoka City
Fukuoka City
（206）
（216）
（221）
（252）
（253）
（336）
（363）
Yokohama City Yokohama City Yokohama City
Yokohama City
Kyoto City
Kyoto City
Sendai City
（179）
（174）
（169）
（196）
（226）
（202）
（221）
Kyoto City
Kyoto City
Kyoto City
Yokohama City
Kyoto City
Yokohama City
Kyoto City
（164）
（155）
（137）
（191）
（176）
（200）
（218）
Nagoya City
Nagoya City
Nagoya City
Osaka City
Osaka City
Nagoya City Yokohama City
（124）
（122）
（112）
（140）
（172）
（163）
（190）

(Source) “International meetings statistics” by Japan National Tourism
Organization (JNTO)

20

3. Summary of Kansai Area21

3-1. Status of Offices in Osaka
Decreasing Trend of Office Vacancy Rate Continuing in Osaka• Renewal in the Osaka office market and concentration of city functions are advancing• Outlook is that the decreasing trend for vacancy rate will continue(Vacancy rate of Umeda area is at a level below the most recent lowest figure for Tokyo’s business areas (3.02% in October 2017))• New contract rent for Umeda area has risen due to the ongoing decline of the vacancy rate

• Advancement of relocation of offices from Yodoyabashi and Hommachi area, etc., into Umeda area, especially into high-spec buildings⇒ Drop in vacancy rate in Umeda area
• Most recently, more proactive relocation for expansion is seen due to higher overall demand backed by the improved employment situation⇒ Drop in overall vacancy rate
• New office supply in the future is limited

Change in Vacancy Rate of
Osaka’s Major Business Areas

Change in New Contract Rent in Umeda Area

Vacancy Rate as of January 2018
Umeda area

12.0%

(Relative value based on figures in March 2014 set as 100)
120

Yodoyabashi
Shinsaibashi Shin-Osaka areaand Hommachi andNamba area
area

2.13%

3.86%

3.29%

3.92%

115

10.0%

110

8.0%
6.0%

105

4.0%

梅田地区
Umeda area
淀屋橋・本町地区
Yodoyabashi and Hommachi area
心斎橋・難波地区
Shinsaibashi and Namba area
新大阪地区
Shin-Osaka area

Vacancy rate increased dueto the impact from openingof GRAND FRONT OSAKA

2.0%

100
95

0.0%
Jan.

May

Sep.

Jan.

May

Sep.

Jan.

May

Sep.

Jan.

Aグレードビル
Grade A buildings
Bグレードビル
Grade B buildings

May

Sep.

Jan.

May

Sep.

Jan.

2013.1
2013.52013.92014.1
2014.52014.92015.1
2015.52015.92016.1
2016.52016.92017.12017.52017.92018.1
2013
2013
2013
2014
2014
2014
2015
2015
2015
2016
2016
2016
2017
2017
2017
2018
(Source) Miki Shoji Co., Ltd. “Office Data”

2014.3Mar.

2015.3Mar.

2016.3Mar.

2017.3
Mar.

2014

2015

2016

2017

(Source) Prepared by Hankyu REIT Asset Management, Inc.
based on materials from real estate research companies

Change in Floor Area of Major New Office Supply in Osaka(thousand m2)

今後の新規供給は限定的
New supply in the future is limited

Approx. 800,000 m2 newly supplied (2010 - 2017)

20
200

Nakanoshima Festival
Tower West
Approx. 70,000 m²

15
150

Namba SkyO
Approx. 34,000 m²

100
10

Umeda 1-Chome
1-Banchi Project
Approx. 143,000 m²

Obic Midosuji Building
Approx. 20,000 m²

505
00
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

(Source) Calculated by Hankyu REIT Asset Management, Inc. based on materials from office brokerage companies (include some estimates) (February 2018)2022(year)

22

3-2. Status of Retail Facilities in Osaka
Department Store Sales Turned Upward while Supermarket Sales Remained Strong• Sales of department stores in 2017 showed an increasing trend due to greater purchases by foreign tourists visiting Japan who benefitted from the depreciationof the yen and high stock prices and Japan’s high-net-worth individuals• Sales of supermarkets in central areas are on an increasing trend due to return of the population to the city center, and the outlook is that this trend will continue
into the future• Population increase/decrease is becoming clearer in certain areas, leading to a state of progress in polarization• Sales of department stores in Osaka (2017) increased by 6.6% year on year
• Duty-free sales of department stores in Kansai Region in 2017 increased by 75.4% year on year
• (October 2017 renewed a record for duty-free sales for a single month) (Note 1)• Sales of supermarkets in Osaka City continued to remain strong (Note 2)⇒ Due to supermarkets yet being opened one after another in central areas

Sales of Department Stores by District

Sales of Supermarkets by District(change over the previous year)(change over the same month of the previous year)

8.0%

25.0%
6.6%

6.0%

Rebound of last-minute demand
due to the consumption tax rate
hike

20.0%

4.0%

15.0%

2.0%

10.0%
0.5%

0.0%

-0.4%

-2.0%

6.2%
5.6%
2.1%

5.0%
0.0%

Renovation of two stores (Note 3)
being a main factor

-4.0%

-5.0%
-10.0%

-6.0%
2011

2012

2013

大阪
Osaka

Source: Japan Department Stores Association

2014
東京
Tokyo

2015

2016
全国
Nationwide

2017(year)

Oct. 2015年
Apr.
2014年
2014
2015
10月
4月
Osaka
大阪市

Oct.
2015年
2015
10月

Apr.
2016年
2016
4月

Oct.
2016年
2016
10月

Tokyo (special wards)
東京（特別区）

Apr.
2017年
2017
4月

Nationwide
全国

Oct.
2017年
2017

10月

Source: Ministry of Economy, Trade and Industry “Current Survey of Commerce”(Note 1) Source: Bank of Japan Osaka Branch “Department Store Duty-Free Sales (Kansai Region)”(Note 2) Source: Ministry of Economy, Trade and Industry “Current Survey of Commerce”(Note 3) Hanshin Department Store Umeda Main Building (from February 2015) and Daimaru Shinsaibashi Store (from January 2016)23

3-3. Status of Inbound Tourists in Kansai Region
Foreign Tourists Visiting Osaka Continue to Increaseu Number of foreign tourists visiting Osaka: Reached 11.11
million in 2017, marking a new record and exceeding 10
million for the first timeu Visitation rate by prefecture of foreign tourists visiting Japan:
Most recent visitation rate for Osaka Prefecture wascomparable to Tokyo and about 40% of all tourists visited
Osaka
Visitation Rate by Prefecture of Foreign Tourists Visiting Japan
Year

2013

2014

2015

2016

2017 (Note 2)

Osaka Prefecture

30.2%

34.1%

41.9%

44.7%

44.1%

Tokyo

43.2%

48.5%

48.2%

44.5%

41.1%

Change in Number of Foreign Tourists Visiting Osaka(million people)

12.00
1,200
1,000
10.00

u Number of foreigners from nearby Asian countries (China,
South Korea, Taiwan and Hong Kong) using LCCs is on therise due to a shift from group tours to independent travels(Note) Source: Kansai Airports Co., Ltd.

7.16

600
6.00
3.76

400
4.00
2.63

2.35
200
2.00

1.70

1.58

2.03

0
0.00
2009

(Note 2) Source: Prepared by the Asset Management Company based on“Consumption Trend Survey for Foreigners Visiting Japan”(Japan Tourism Agency)

u International flight passengers at Kansai International Airport
for fiscal 2017 were 14.31 million, marking a new record (Note)

9.40

800
8.00

(Note 1) Source: Osaka Convention & Tourism Bureau

Number of Foreign Passengers
Using Kansai International Airport Hits Record-High

11.11

2010

2011

2012

2013

2014

2015

2016

2017 (year)

Source: Osaka Convention & Tourism Bureau

Status of International Flight Passengers at
Kansai International Airport(million people)

1,600
16.00
1,400
14.00

Foreign passengers

14.31 mn

Japanese passengers
1,200
12.00
1,000
10.00
800
8.00

6.61 mn

600
6.00
400
4.00
200
2.00
0
0.00
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 (year)
Source: Kansai Airports Co., Ltd.

24

3-4. Changes and Current Status of Central Osaka
Renewal in central Osaka is advancing

１

Nakatsu Sta.

In Umeda area, construction of large and high-spec buildings including Umeda Hankyu Building
and GRAND FRONT OSAKA have completed one after another
Change in Leased Office Area of Umeda Area and Yodoyabashi and Hommachi Area
(thousand m2)
260
2,600

Hankyu Umeda Sta.
Umeda subway Sta.

１

JR Osaka Sta.

Higashi-Umeda Sta.

Hanshin Umeda Sta.

For leased office area,
Umeda area surpassed
Yodoyabashi and
Hommachi area

Nishi-Umeda
Fukushima Sta. Sta.

Umeda area surpasses with the
opening of GRAND FRONT OSAKA

240
2,400
2,200
220
2,000
200

— Umeda area
— Yodoyabashi and Hommachi area

1,800
180
Yodoyabashi Sta.

2003
Kitahama Sta.

Higobashi Sta.

2
3

2005

2007

2009

2011

2013

2015

2017 (year)

Source: Miki Shoji Co., Ltd. “Office Data”

3

2

Relocations of tenants from Yodoyabashi and Hommachi area (central business area of Osaka
for more than 50 years) to Umeda area is advancing as aging of office buildings is progressing

Chuo-Odori
Boulevard

3

Old buildings in the surrounding areas which tenants moved out from tend to be converted into
tower condominiums and hotels

Hommachi Sta.

Change in Population of Chuo-ku and Kita-ku of Osaka City
(relative value based on 2006 (100))

Shinsaibashi Sta.

140
130

Population of central
Osaka has increased

Namba Sta.
(Hanshin, Kintetsu and subway)

JR Namba Sta.

Uehommachi Sta.
Nankai Namba Sta.

Population significantly increased in
Chuo-ku (around Yodoyabashi and
Hommachi) and Kita-ku (around Umeda)

134
120

120
110
100

— Kita-ku, Osaka City
— Chuo-ku, Osaka City

90
2006

2008

2010

2012

2014

(year)
2016

Source: Japan Geographic Data Center “Population Summary of the Basic Resident Registers”

Openings of supermarkets in central Osaka has accelerated

25

3-5. Main Investment Area of Hankyu REIT “Umeda”

Aerial photograph takenfrom southeast side facing northwest(shot in December 2015)
Hotel New
Hankyu Osaka

LAXA Osaka

HERBISOSAKAGRAND FRONTOSAKA

Kita-Hankyu
Bldg.

HERBIS ENT
Dai Hanshin Bldg.
(Hanshin Department Store)(under construction)

NU chayamachi
NU chayamachi Plus

Chayamachi
Applause

Kitano Hankyu
Bldg.

HankyuCorporation
Head Office
Bldg.

HANKYUTERMINAL Bldg.

Hankyu GrandBldg.

ＪＲ Osaka Sta.

Hankyu Umeda Sta.
Hankyu-Sanbangai

HEP Navio

Umeda OSBldg.

Osaka Nikko
Bldg.

Shin Hankyu
Bldg.
(underconstruction)■Property owned by Hankyu REIT

Umeda Hankyu
Bldg.
(Hankyu
Department
Store)OS Bldg.

HEP Five

Higashi Hankyu
Bldg.

Umeda Center
Bldg.

■Major property developed and owned by Hankyu Hanshin Holdings Group

26

4. External Growth Strategies27

4-1. Acquisition Strategy and Investment Targets
Investment Targets

Investment Target Areas

Target real estate with retail-use and office-use zones
Especially focus investment on retail-use zones

Target real estate across Japan
Investment target areas are Tokyo metropolitan area,
nationwide government ordinance-designated cities
and other comparable major cities
Of these, investment is focused on Kansai Region

Retail-use
facilities

Retail-use
zones
50%
or moreOffice-use
facilities

Mixed-use(complex)facilities

Utilize information sourcing capabilities
and network of the Hankyu Hanshin
Holdings Group that has deeply rooted
connections in the community

Office-use
zones
Retail-use
zones

Zones forother uses

Office-use
zones

Retail-use
zones

Zones forother uses

KansaiRegion50%
or moreZones forother uses

* In principle, the maximum investment ratio for hotel-use portion (part of retail-use
zones) is 20% of all assets under management
Kansai Region:
Osaka, Kyoto, Hyogo, Nara, Shiga and Wakayama

Portfolio Status (After acquisition of new properties)
Urban
retail facilities
13.6%

Other use
0.8%
Total acquisition price:

Office24.7%

JPY 149.78 bn
Total number of properties：
25 properties
Hotel
9.2%

Community-based
retail facilities
51.7%

Other
regions
6.9%

Retail-use
zone
74.5%
Other
Kansai region
7.5%

Umeda area
16.3%

Tokyo
22.9%
Areas along
Hankyu andHanshin lines
46.4%

Kansairegion70.2%

28

4-2. Securing Opportunities to Acquire Properties
Status of Property Acquisition Activities
Promoting consideration of property acquisitions that can contribute to improvement of portfolio profitability and stability amidst heated competition forproperty acquisition. Will continue to obtain quality property information utilizing the comprehensive strengths of the sponsor group through joint efforts withthe sponsor group.
In addition, will continue to aim for further expansion of the asset management company’s own property information sourcing channels while making CRE
proposals utilizing sponsor solutions, etc., and lead to property acquisitions at appropriate prices through negotiated transactions and limited tendering.

Trends of Information Leads(leads)Information leads checked

1,000

Information leads considered

800
600
400
200
0
1st
FP

2nd
FP

3rd
FP

4th
FP

5th
FP

6th
FP

7th
FP

8th
FP

9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th
FP FP FP FP FP FP FP FP FP FP FP FP FP FP FP FP FP

Diverse Property Acquisition Methods
Acquisition method
Property developedby sponsor group

On-balance bridge

HEP Five

Shiodome East Side Building

MANDAI Toyonaka Honan Store (site)

Hankyu Corporation Head Office Building Takatsuki-Josai Shopping Center

Kitano Hankyu Building

Hotel Gracery Tamachi

Kohnan Hiroshima Nakano-Higashi Store (site)

KOHYO Onohara StoreDAILY QANAT Izumiya Horikawa
Marutamachi Store (site)

Ueroku F Building

Dew Hankyu Yamada

AEON MALL SAKAIKITAHANADA (site)

Sphere Tower Tennozu

Sponsor group’s property

Nitori Ibaraki-Kita Store (site)
LaLaport KOSHIEN (site)
LAXA Osaka

MANDAI Gojo Nishikoji Store (site)
LIFE Shimoyamate Store (site)

SPC bridge

Direct acquisition
from outside

Kita-Aoyama San cho-me Building
OASIS Town Itami Konoike (site)
METS OZONEHANKYU NISHINOMIYA GARDENS
kotocross Hankyu Kawaramachi

Vessel Inn Hakata Nakasu(To be) Acquired in 26th FP29

4-3. Information Leads and Leads Considered (25th Fiscal Period)* Outer circle: Information leads

Use

Area

City center

Office36

Mixed(Complex)

1

RetailHotel

Inner circle: Leads actually considered

11

Suburban

37

47

159

4

1

11

5

39

6

4

10

1

0

1

1

33

14

16

2

2

6

2

1

6

4

8

1

0

0

3

26

26

30

3

6

7

3

178
1

3
2

14

2

17

2

Other*

Urban vicinity

12

4

29

1

2

7

29

2

1

* Properties anticipating property development by the sponsor group such as at old buildings and former sites of factories, etc.

Kansai Region

Tokyo metropolitan area

(Osaka, Kyoto, Hyogo, Nara, Shiga, Wakayama)(Tokyo, Kanagawa, Saitama, Chiba)

Other areas

Leads considered were primarily in Kansai Region, Tokyo metropolitan area andregional major cities, such as Nagoya, Fukuoka and Hiroshima, etc.

30

4-4. Population Dynamics of Kansai Region/Chukyo Region and Acquisition Policy (1)l Areas in Kansai/Chukyo regions with concentration of population(Resident population per 1 km²: 2,500 or more)• Retail facilities of Hankyu REIT are located in areas with concentration of population(Most are in areas with notable concentration)

Owned community-based retail facilities<Resident population per 1 km²>
15,000 or more
10,000 or more but less than 15,000
5,000 or more but less than 10,000
2,500 or more but less than 5,000

Source: Prepared by processing “National Census 2015” by Statistics Bureau, Ministry of Internal Affairs and Communications31

4-4. Population Dynamics of Kansai Region/Chukyo Region and Acquisition Policy (2)l Increase/decrease in areas in Kansai/Chukyo regions with concentration of population(Increase/decrease in resident population per 1 km²)
• Polarization of population increase/decrease is progressing based on convenience and living environment

Upon acquisition of retail facilities, discuss mainly areas with high retail potential, such as those
expecting population growth (including individual factors such as location and form of facilities)

Owned community-based retail facilities<Resident population increase/decrease rate per 1 km²>
Large increase (+5% or more)
Small increase (+2% to < +5%))
About the same (±2%)
Small decrease (-5% to ≦ -2%)
Large decrease (-5% or more)

Source: Prepared by processing “National Census 2015” and “National Census 2005” by Statistics Bureau, Ministry of Internal Affairs and Communications32

4-5. Investment in Community-Based Retail Facilities
Investment in excellent trade areas with abundant trade area population, such as areas along
Hankyu and Hanshin lines where strong consumer demand can be expected over the medium-tolong-term.
Trade area population within
1 km radius

Trade area population within
3 km radius(Thousands of people)

Trade area population within
5 km radius(Thousands of people)(Thousands of people)

5 万人
50

1001,000
万人

40 万人
400

4 万人
40

80 万人
800

30 万人
300

60 万人
600

3 万人
30
20 万人
200

40 万人
400

2 万人
20
10 万人
100

METS OZONEMANDAI Gojo

Horikawa Marutamachi

Takatsuki

Nitori Ibaraki

OnoharaHankyu Yamada

KITAHANADAMANDAI Toyonaka

KOSHIENNISHINOMIYA GARDENS

Itami Konoike

LIFE Shimoyamate

METS OZONEMANDAI Gojo

Horikawa Marutamachi

Takatsuki

Nitori Ibaraki

OnoharaHankyu Yamada

KITAHANADAMANDAI Toyonaka

KOSHIENNISHINOMIYA GARDENS

Itami Konoike

METS OZONEMANDAI Gojo

Horikawa Marutamachi

Takatsuki

Nitori Ibaraki

OnoharaHankyu Yamada

KITAHANADAMANDAI Toyonaka

KOSHIENNISHINOMIYA GARDENS

Itami Konoike

LIFE Shimoyamate

メッツ大曽根

堀川丸太町

万代五条

高槻

ニトリ茨木

小野原

阪急山田

北花田

万代豊中

甲子園

西宮ガーデンズ

伊丹鴻池

0 万人
0

ライフ下山手メッツ大曽根

堀川丸太町

万代五条

ニトリ茨木

高槻

阪急山田

小野原

万代豊中

北花田

西宮ガーデンズ甲子園

ライフ下山手

0 万人
0

伊丹鴻池

メッツ大曽根

堀川丸太町

万代五条

高槻

ニトリ茨木

阪急山田

小野原

万代豊中

北花田

西宮ガーデンズ甲子園

ライフ下山手

伊丹鴻池

0 万人0

20 万人
200

LIFE Shimoyamate

1 万人
10

Purchase Trends of Online Shopping and Shopping at Brick-and-Mortar Stores in Japan (by product)
20
-40
-20
0
20
40
60
80
100
40

(Source) “National Census 2015” by Statistics Bureau, Ministry ofInternal Affairs and Communications

Tenant composition and provision of
products/services that match the trade area
• Tenant composition mainly featuring diversified
business categories indispensable for daily life aswell as tenants selling daily necessities that arelikely to be purchased at brick-and-mortar stores.

食品FoodMobile phones
携帯電話
Drug/cosmetics
薬・化粧品
Large household
appliances
大型家電
Sundries/daily
commodities
雑貨/日用品Large furniture
大型家具
Clothing
衣類
Small furniture
小型家具
Small household
appliances
小型家電
PCPCs
Books
本
Tickets
切符/チケット
CD/DVD/BD, etc.
CD/DVD/BD類
Pet Products
ペット用品(10.7)(10.1)(13.9)(12.3)(17.0)(12.5)(20.7)(15.7)(17.8)(16.4)
Purchase only at brick-and-mortar stores(21.8)

Purchase often at brick-and-mortar stores(18.0)

Purchase only online(17.0)

Purchase often online(10.2)(Source)“Study Report on an International Analysis of User Perceptions of New Forms of ICT in the IoT Era” by Inf ormation Communications Economic
Of fice, Inf ormation Communications Global Strategy Bureau, Ministry of Internal Af f airs and Communications(Note)

Figures in the parenthesis are the percentages of respondents who answered “Purchase almost equally online and at brick-and-mortar stores.”33

4-6. Target Asset Class for Investment and Owned Assets (Including Assets to be Acquired)

Discussion focused on investment in urban retail facilities,
community-based retail facilities and hotels
Urban vicinity

Offices

City center

Shiodome East Side
Building

Hankyu Corporation
Head Office Building

Sphere Tower
Tennozu

Ueroku F Building

Retail facilities

Urban retail facilities

Community-based retail facilities

RSC
Urban
SC

Urban
SC

HEP Five

Kitano Hankyu
Building

RSC

HANKYU NISHINOMIYAGARDENSAEON MALL
SAKAIKITAHANADA(site)RSC

LaLaport KOSHIEN(site)NSC

Takatsuki-Josai
Shopping Center

NSC

NSC

OASIS Town Itami
Konoike(site)Dew Hankyu Yamada

NSC

MANDAI Gojo NishikojiStore(site)

NSC
NSC
Urban
SC

Kita-Aoyama
San cho-me Building

Hotelskotocross Hankyu
Kawaramachi

Urban
SC

MANDAI Toyonaka
Honan Store(site)

NSC

Kohnan Hiroshima
Nakano-Higashi Store(site)

Hotel Gracery
Tamachi

Vessel Inn Hakata
NakasuMETS OZONEGMS・SM

DAILY QANAT
Izumiya Horikawa
Marutamachi Store(site)

GMS・SM

KOHYO Onohara
Store

GMS・SM

LIFE Shimoyamate
Store(site)

RSC

Regional shopping center: A large shopping center serving a wide area

NSC

Neighborhood shopping center: A small-trade-area shopping center havingneighborhood areas as main trade areas

Asset to be acquired
LAXA Osaka

Acquired asset

GMS・SM

専門店

Nitori Ibaraki-Kita
Store

General merchandise Store (GMS): A general supermarket
Supermarket (SM): A large supermarket mainly selling food items

34

5. Internal Growth Strategies35

5-1. Operational Management

Achieving a WIN-WIN-WIN-WIN relationship in operations

Consumers

Unitholders
Boosting stakeholder satisfaction
Maintaining and improving rent income
Improving attractiveness to consumers
and sojourn time
Attraction of competitive “in vogue” tenants

Tenants

Hankyu REIT36

5-2. Occupancy Rate for Individual Properties (Occupancy by End-Tenants)
Stable occupancy rates maintained since 1st fiscal period
(%)
100
95

99.5 100.0 99.3

99.5 98.6 98.6 98.7 98.7 98.8 98.8 99.1 99.6 99.8
98.5 99.3 98.8 98.1 98.5 98.7 98.4 98.7 99.0 99.4 98.5 99.0

90
85
80
10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th
9th
8th
7th
6th
5th
4th
3rd
2nd
1st
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
'05/11 '06/05 '06/11 '07/05 '07/11 '08/05 '08/11 '09/05 '09/11 '10/05 '10/11 '11/05 '11/11 '12/5 '12/11 '13/05 '13/11 '14/05 '14/11 '15/05 '15/11 '16/05 '16/11 '17/5 '17/11

Total portfolio occupancy rate at 99.8% (as of the end of 25th period)(%)
100
Total portfolio

90

Tennozu
88.1%

80(December 2016)

70
60
50

HEP
Kitano Hankyu
Hankyu Yamada
Ueroku F Bldg.

Tennozu
88.1%(December 2016)

Tennozu
Shiodome
Kita-Aoyama

40
30
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End ofNov. 2016 Dec. 2016 Jan. 2017 Feb. 2017 Mar. 2017 Apr. 2017 May 2017 Jun. 2017 Jul. 2017 Aug. 2017 Sep. 2017 Oct. 2017 Nov. 2017

・ The graph excludes the 16 properties (Takatsuki-Josai, Nitori Ibaraki, Kohnan Hiroshima, Tamachi, LaLaport KOSHIEN, LAXA Osaka, NISHINOMIYAGARDENS, Hankyu Corporation Head Office, AEON MALL SAKAIKITAHANADA, MANDAI Toyonaka Honan, Izumiya Horikawa Marutamachi, kotocross,
LIFE Shimoyamate, MANDAI Gojo Nishikoji, KOHYO Onohara and OASIS Town Itami Konoike) leased to single tenants (occupancy rates of 100%).

37

5-3. Topics on Properties Owned (1)Sphere Tower Tennozu
Occupancy rate increased to 94.8% (26th FP)
In 2016, achieved seven leasing contracts, including a large
tenant, boosting occupancy rate to 88.1% in December 2016

Change in Occupancy Rate of Sphere Tower Tennozu
93.0% 94.8%

100.0%
88.1%
80.0%
52.5%

60.0%

Concluded a lease agreement with two new tenants, raising
occupancy rate to 93.0% at the end of 25th FP and to
94.8% in February 2018 (26th FP)(Full occupancy for office floors)
Vacancies: Retail floor Approx. 1,400 m²

Hotel Gracery Tamachi
Eliminated future risk factors at a level capable ofmaintaining forecast distribution• Reached settlement at a point closer to Hankyu REIT’s claim
than the midpoint of both sides’ claims• Despite the payment of settlement money, the result for the
25th FP showed an increase in revenue and profit compared to
the result for the 24th FP while also surpassing the forecast forthe 25th FP as a result of a decrease in repair expense frompartially changing repair plans, etc.

39.0% 39.0% 40.9%
40.0%
20.0%
0.0%
May 2015年
Nov. 2016年
May 2016年
Nov. 2017年
May 2017年
Nov. 2018年
Feb.
2015年
2015
2015
2016
2016
2017
2017
2018
5月
11月
5月
11月
5月
11月
2月

Settlement point
Approx. 7.4% rent reduction
Hankyu REIT’s claim
Approx. 7.3% rent increase

Fujita Kanko’s claim
Approx. 23.5% rent reduction

Middle point of both sides’ claims
Approx. 8.1% rent reduction

Settlement reached at a point closer toHankyu REIT’s claim

38

5-3. Topics on Properties Owned (2)Case Examples of Repair/Updating in the 25th FP<Kitano Hankyu Building>Efforts on maintaining/improving
asset value

Selected as a body eligible for receiving subsidy of ASSET
Project by the Ministry of Environment•

Promoted repair/renovation systematically fromthe perspective of preventive maintenance inorder to secure stable revenues over the
medium-to-long-term

ASSET Project (Note) is a project that aims to significantly and efficiently reduce
CO2 emissions by introducing advanced facilities that are promoted by the Ministryof Environment and by accelerating operational improvement.

•

As part of the project, Hankyu REIT participated in CO2 reduction project with
upgrading of a freezer, and was selected as a body eligible for receiving subsidy.

<LAXA Osaka><Ueroku F Building>Completed repair work on exterior wall

Completed upgrading of emergency power generator(Note) Advanced technologies promotion Subsidy Scheme with Emission reduction
Targets

Repair work on exterior wall that had been underway over four
fiscal periods was completed in the 25th FP.

<After completion of upgrading><Removal of old power generator>

39

5-4. Rent Systems and Present Condition of 23 Portfolio Properties (1)(End of 25th Fiscal Period)
Properties Mainly Using the Fixed-rent System
Property nameMain rent system

Present conditions

HANKYU NISHINOMIYAGARDENS
RSC (Note 1)

Long-term, fixed

Rent income is stable based on a fixed-type master lease method (Note 2) with Hankyu Corporation.
At JPY 79.6 billion in fiscal 2016, sales increased for the eighth consecutive year since opening in
2008. The fully renovated food court on 1F reopened in April 2017 and sales are going strong.

Dew Hankyu Yamada
NSC (Note 1)

Long-term, fixed(partly overage)

As a result of the last remaining section finding a tenant during the period, occupancy rate at the endof the 25th FP reached 100%. Out of existing tenants which were up for rent revision in November
2017, six tenants agreed to increase rent. After two years of EXPOCITY’s opening, monthly sales ofthe entire facility have been over 100% year-on-year throughout the period.

Kitano Hankyu Building
Specialty shop building(urban SC)

Fixed(partly overage)

Occupancy rate at the end of the 25th FP increased by 1.2 percentage points from the previous
period to 98.8%. For the remaining sections, we will make efforts to find tenants at an early stage byconducting leasing activities for tenants that will attract purpose-driven customers and create synergy
with existing tenants.

Takatsuki-Josai
Shopping Center
NSC (Note 1)

Long-term, fixed

Rent income is stable based on a fixed-type master lease method (Note 2) with Kohnan Shoji Co.,
Ltd. As a community-based store, it houses shops that fulfill the needs of nearby residents, such as ahome center, grocery store, home electronics retailer and sporting goods shop.

Picture book event
at HANKYU NISHINOMIYA GARDENS

Christmas fairat Dew Hankyu Yamada(Note 1) RSC: Regional Shopping Center; NSC: Neighborhood Shopping Center(Note 2) Fixed-type master lease method: Hankyu REIT receives a certain amount of rent from the master lessee (sublessor), regardless of fluctuations in endtenant rent.

40

5-4. Rent Systems and Present Condition of 23 Portfolio Properties (2)(End of 25th Fiscal Period)
Properties Mainly Using the Fixed-rent System
Property nameMain rent system

Present conditions

HEP Five
Specialty shop building(urban SC)

Overage(fixed + variable)

Occupancy rate at the end of the 25th FP was 99.7% and sales was 102.7% compared with theprevious year. Out of the tenants with fixed-term leasing agreements expiring in January 2018, 16
are scheduled to be replaced (including relocation within the facility) to keep the facility fresh andtrendy.

Properties Using the Fixed-rent System
Property nameMain rent system

Present conditions

Kita-Aoyama San cho-me
Building
Urban retail facility

Fixed

Occupancy rate continues to be 100%. THREE AOYAMA, the flagship store of THREE, a naturalcosmetics brand operated by an affiliate of Pola Orbis Holdings Inc. is housed as the core tenant.

kotocross Hankyu
Kawaramachi
Specialty shop building(urban SC)

Long-term, fixed

Rent income is stable based on the fixed-type master lease method (Note 2) with Hankyu
Corporation. As a retail facility that features the characteristics of a landmark facing the ShijoKawaramachi crossing, the building houses merchandise shops, restaurants and service shops. One
tenant moved out at the end of November 2017 and earnest leasing activities have been conductedto source the next tenant.

KOHYO Onohara StoreSM (Note 1)

Long-term, fixed

Rent income is stable based on the fixed-type master lease method (Note 2) with KOHYO Co., Ltd.
Opened in May 2016, this community-based retail facility houses not only a grocery store, but also
other shops closely related to daily life, such as a 100-yen shop.
Being two years since the opening, it has gained wider recognition among local customers.

OASIS Town Itami Konoike(site)NSC (Note 1)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
HANKYU OASIS Co., Ltd.
In line with the store opening , the rent collectable became 100% from July 3, 2017 (25th FP). The
facility houses shops closely related to daily life, such as a grocery store, apparel store and drugstore.

(Note 1) RSC: Regional Shopping Center; NSC: Neighborhood Shopping Center(Note 2) Fixed-type master lease method: Hankyu REIT receives a certain amount of rent from the master lessee (sublessor), regardless of fluctuations in endtenant rent.

41

5-4. Rent Systems and Present Condition of 23 Portfolio Properties (3)(End of 25th Fiscal Period)
Properties Mainly Using the Fixed-rent System
Property nameMain rent system

Present conditions

Ueroku F Building
OfficeFixed

Occupancy rate for the 25th FP was unchanged from the previous period at 93.8%. For vacantsections, will conduct leasing activities mainly by seeking needs for floor expansion within the same
property.

Sphere Tower Tennozu
OfficeFixed

Achieving a leasing contract with one tenant in the 25th FP, the office portion became fully occupied.
In addition, a new tenant was added in February 2018 (26th FP), raising the occupancy rate to 94.8%.

Shiodome East Side Building
OfficeFixed

Occupancy rate continues to be 100%. Will continue to strive to improve level of satisfaction by
pursuing relations with existing tenants.

Hankyu Corporation
Head Office Building
OfficeLong-term, fixed

Rent income is stable based on the fixed-type master lease method (Note) with Hankyu Corporation.
The building serves as the main base of Hankyu Hanshin Holdings Group, and Hankyu Corporation
uses it as its head office building.

Hotel Gracery Tamachi
HotelLong-term, fixedLong-term and fixed lease contract with Fujita Kanko Inc. Both guest room occupancy rate and guest
room unit price remain at high levels. Fujita Kanko Inc., the lessee, filed an action for reduction in theamount of rent against Hankyu REIT in October 2014, but settlement was reached in September
2017 at a level capable of maintaining forecast distribution. This eliminated future risk factors.

LAXA Osaka
Hotel

Long-term, fixed

Rent income is stable based on the fixed-type master lease method (Note) with Hanshin Electric
Railway Co., Ltd. Guest room occupancy rate of Hotel Hanshin, which is under a sublease contract,
remains at a high level.

Nitori Ibaraki-Kita Store (site)
Specialty shop

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes withNitori Holdings Co., Ltd. Development of residential land is underway nearby and the trade area
population is increasing. The tenant is also maintaining strong performance.

Kohnan Hiroshima NakanoHigashi Store (site)
NSC (Note 1)

Long-term, fixedContract for a fixed-term land lease for business purposes with Kohnan Shoji Co., Ltd.
This retail facility offers high transportation convenience, and has a home center and a grocery store
as tenants. Joint efforts will continue to be made for effective utilization of the facility, etc. in order toimprove the management balance sheets of tenants.

(Note) Fixed-type master lease method: Hankyu REIT receives a certain amount of rent from the master lessee (sublessor), regardless of fluctuations in endtenant rent.

42

5-4. Rent Systems and Present Condition of 23 Portfolio Properties (4)(End of 25th Fiscal Period)
Properties Mainly Using the Fixed-rent System
Property nameMain rent system

Present conditions

LaLaport KOSHIEN(site)RSC (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
Mitsui Fudosan Co., Ltd. With the renewal in spring 2017, 44 shops, including some appearing in
Kansai Region for the first time, newly opened or reopened after renovation.

AEON MALL
SAKAIKITAHANADA (site)
RSC (Note)

Long-term, fixed

Hankyu REIT owns the site only, and there is a contract for a long-term, fixed-term land lease withthe building owner Sumitomo Mitsui Trust Bank, Limited for the shopping center land with landleasehold right, which occupies most of the site. One-year-long large-scale renovation, including thesite vacated by Sakai Kitahanada Hankyu, has been taking place since spring 2017 in stages.

MANDAI Toyonaka Honan
Store (site)
NSC (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
MANDAI Co., Ltd.

DAILY QANAT Izumiya
Horikawa Marutamachi Store(site)SM (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
Izumiya Co., Ltd. The store is becoming more well-known and the business continues to be strong.
With more foreign tourists visiting Japan coming to the store, tax-free shopping has been madeavailable.

MANDAI Gojo Nishikoji Store(site)NSC (Note)

Long-term, fixed

Rent income is stable based on a contract for a fixed-term land lease for business purposes with
MANDAI Co., Ltd.

LIFE Shimoyamate
Store (site)
SM (Note)

Long-term, fixed

Sales have been strong since the property’s opening in October 2013. As a community-based store,
it houses shops closely related to daily life, such as a grocery store, drugstore and 100-yen shop.

The store is bustling mainly with local customers who come on bicycle.
Rent income is stable based on a contract for a fixed-term land lease for business purposes with Life
Corporation. It boasts top-class sales of personal delivery service in Kansai Region.

(Note) RSC: Regional Shopping Center; NSC: Neighborhood Shopping Center; SM: Supermarket

43

5-5. Appraisal Value

Appraisal value increased by 1.5%, generating unrealized income of JPY 20.4 bn
Cap rate decreased for all properties
Change in Unrealized income/Loss and Cap Rate
・Asset replacement
Acquired 2 properties,
transferred 2 properties

JPY 20,461 mn
・Asset acquisition
Acquired 3 properties

・Asset acquisition
Acquired 4 properties

・Asset transfer
Transferred 2 properties

・Asset acquisition
Acquired 2 properties(JPY mn)

30,000

5.2%

20,000

4.9%

10,000

4.6%

0

4.3%

-10,000

4.0%
16th
period
第16期

17th
period
第17期

18th
period
第18期

19th
period 20th
period
第19期
第20期

21st
period第21期

2013.5
May
2013

Nov.
2013
2013.11

May 2014
2014.5

Nov. 20142014.11Nov.
2015
2015.11May
2015
2015.5

period22nd
period 23rd
第22期
第23期
2016
2016.52016.11May
2016 Nov.

24th
period
第24期

25thperiod
第25期

May
2017
2017.52017.11Nov.
2017

Unrealized income/loss
Weighted average cap rate (right axis) (Note)(Note) Cap rates are the weighted average based on appraisal values

445-6. List of Appraisal Values(Unit: millions of yen)

Acquisition
price① End of previous period(24th fiscal period)
Appraisalvalue

Cap rate(Note)② End of current period(25th fiscal period)
Appraisal value

Cap rate(Note)③ValueChangerecorded on the Unrealized(②-①)/① balance sheet at income/loss(Note)②-③
end of current
periodChange(②-①)(Note)

Value to book
ratio
②/③

HEP Five (14% of the quasi co-ownership of thetrust beneficiary interests)

6,468

8,862

3.6%

8,890

3.5%

28

0.3%

5,558

Kitano Hankyu Building

7,740

7,140

4.6%

7,350

4.5%

210

2.9%

7,702

-352

95.4%

Dew Hankyu Yamada

6,930

8,630

4.5%

8,690

4.4%

60

0.7%

5,530

3,159

157.1%

Takatsuki-Josai Shopping Center

8,600

8,320

5.0%

8,480

4.9%

160

1.9%

7,003

1,476

121.1%

Nitori Ibaraki-Kita Store (Site)

1,318

1,710

4.8%

1,720

4.7%

10

0.6%

1,340

379

128.3%

Kohnan Hiroshima Nakano-Higashi Store (Site)

2,175

1,890

5.6%

1,890

5.5%

0

0.0%

2,280

-390

82.9%

3,331

159.9%

Hotel Gracery Tamachi

4,160

4,420

4.4%

4,120

4.3%

-300

-6.8%

3,653

466

112.8%

LaLaport KOSHIEN (site)

7,350

7,720

4.3%

7,770

4.2%

50

0.6%

7,748

21

100.3%

HANKYU NISHINOMIYAGARDENS (28% of the quasi co-ownership of
the trust beneficiary interests)

18,30024,472

4.3%

24,976

4.2%

504

2.1%

17,3837,592

143.7%AEON MALL SAKAIKITAHANADA (site)

8,100

9,750

4.3%

9,980

4.2%

230

2.4%

8,189

1,790

121.9%

MANDAI Toyonaka Honan store (site)

1,870

2,290

4.4%

2,310

4.3%

20

0.9%

1,889

420

122.3%DAILY QANAT Izumiya Horikawa Marutamachi
Store (site)

3,100

3,550

4.3%

3,680

4.2%

130

3.7%

3,127

552

117.7%

kotocross Hankyu Kawaramachi

2,770

3,270

4.4%

3,330

4.3%

60

1.8%

2,668

661

124.8%

LIFE Shimoyamate Store (site)

1,421

1,610

4.3%

1,640

4.2%

30

1.9%

1,434

205

114.4%

MANDAI GOJO Nishikoji Store (site)

4,182

4,660

4.4%

4,750

4.3%

90

1.9%

4,213

536

112.7%KOHYO Onohara Store

1,631

1,710

5.0%

1,750

4.9%

40

2.3%

1,647

102

106.2%OASIS Town Itami Konoike (site)

7,100

7,270

4.2%

7,440

4.1%

170

2.3%

7,391

48

100.7%

Shiodome East Side Bldg.

19,025

14,4004.0%

14,700

3.9%

300

2.1%

17,183-2,483

85.5%

Hankyu Corporation Head Office Building

10,20011,900

4.1%

12,200

4.0%

300

2.5%

9,568

2,631

127.5%

Ueroku F Building

2,980

2,740

5.2%

2,790

5.1%

50

1.8%

2,609

180

106.9%

Sphere Tower Tennozu (33% of the quasi coownership of the trust beneficiary interests)

9,405

6,831

4.0%

6,864

3.9%

33

0.5%

8,525

-1,66180.5%

LAXA Osaka

5,122

5,670

4.8%

5,720

4.7%

50

0.9%

4,233

1,486

135.1%

1,680

1,970

3.5%

2,030

3.4%

60

3.0%

1,726

303

117.6%

141,628

150,785

4.3%

153,070

4.2%

2,285

1.5%

132,608

20,461115.4%

Kita-Aoyama San cho-me Buiding
Total(Note) Cap rates are cap rates and discount rates based on the direct capitalization method used for appraisal value calculations (Nitori Ibaraki-Kita Store (site), Kohnan Hiroshima
Nakano-Higashi Store (site), LaLaport KOSHIEN (site), AEON MALL SAKAIKITAHANADA (site) and LIFE Shimoyamate Store (site) are allocated a discount rate using the DCF
method) and the total is the weighted average cap rate based on appraisal values.

45

6. Financial Strategies46

6-1. Initiatives toward Strengthening Financial Foundation
Continued stable financial operations by striking a balance between reduction of debt financing costs, andextension of borrowing periods and diversification of debt repayment dates
Trends of Debt Financing Costs and Average Remaining Years
6.0 years

1.50%
5.1 years

1.40%
1.30%

4.8 years
4.4 years

1.00%

4.0 years

3.4 years
1.07%

1.10%

1.06%

Amount ofdebt financing

Borrowing
periodFixed/variable(1) July 24, 2017

JPY 2.5 bn

1 yearVariable(2) September 29, 2017

JPY 3.0 bn

10 years

Fixed(3) October 31, 2017

JPY 1.5 bn

7 months

Variable

Refinancing date

5.0 years
4.4 years 4.4 years 4.4 years

1.23%

1.20%

Overview of Refinancing

1.04%

3.0 years

1.08%
2.7 years

0.94%

0.92%

0.88%

0.90%
0.80%

Long-Term Debt Ratio and Fixed Debt Ratio

2.0 years
1.0 years

End of
End of
End of
End of
End of
End of
End of
End of18th period 19th period 20th period 21st period 22nd period 23rd period 24th period 25th period
Ave. debt financing cost (including investment corporation bonds)

As of:

Long-term
debt ratio

Fixed debt ratio

End of 25th FP (As of November 30, 2017)

89.1%

85.7%

Status of Ratings

Ave. remaining years on loans payable and investment corporation bonds

Diversification of Debt Repayment Dates (As of November 30, 2017)
(1)

(3)

Rating agency

RatingJCR (Japan Credit Rating Agency, Ltd.)AA- (Stable)

R&I (Rating and Investment Information, Inc.)

A+ (Stable)(2)
Investment
corporation bonds
JPY 2.0 bn

Investment
corporation bonds
JPY 2.0 bn

47

6-2. Basic Financial Policy / Debt Outstanding
Basic Financial Policy

Debt Outstanding by Lender (JPY mn)● Maintain sound financial position● Maintain favorable trading relationship with financial institutions● Realize lower fund procurement costs(effective use of security deposits/guarantees)● Reduce financing risks (diversification of debt repayment dates)● Reduce interest rate fluctuation risks (focus on long-term, fixed-rateborrowings)

As of end of
24th period

As of end of
25th period

JPY 65.9 bn

JPY 65.9 bn

0.92%

0.86%

0.94%

0.88%

4.4 years

4.4 years

95.1%

89.1%

Fixed debt ratio

85.7%

85.7%

LTV (Note)

42.2%

41.4%

Interest-bearing debt ratio

44.6%

44.5%

Investment corporation bonds

JPY 4.0 bn

JPY 4.0 bn

Investor rating (R&I)

A+（stable）

A+（stable）

AA（stable）

AA（stable）

Interest-bearing debt
Avg. funding cost (interest-bearing debt
+ utilized amount of security deposits
and guarantees)
Avg. debt financing cost (including
investment corporation bonds)
Avg. remaining years on long-termloans payable and investment
corporation bonds
Long-term debt ratio

Investor rating (JCR)(Note) Details of the calculation method for “LTV” are presented on P66.

3,400
5.2%

1,500
2.3%

As of November 30, 2017

4,000
6.1%
12,200
18.5%

6,900
10.5%
6,900
10.5%

11,500
17.5%
9,300
14.1%

10,20015.5%

Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
The Senshu Ikeda Bank, Ltd.
Mizuho Trust and Banking Co., Ltd.
Investment corporation bonds

Total JPY 65.9 bn
Registration for Issuance ofInvestment Corporation Bonds
Planned value of issuance (upper limit): JPY 100,000 mn
Planned issuance period: Dec. 19, 2017 to Dec. 18, 201948

6-3. Asset Scale and LTV (Loan to Value)

Total acquisition priceTotal appraisal value at the end of period

LTV at end of period (based on management guidelines)

Interest-bearing debt ratio at the end of period

Capital increaseby 2nd public offering(JPY bn)(%)

Capital increaseby 1st public offering

270
240

46.1

210

57.9

180
150

28.8

55.6 56.1 55.9 56.0 55.9 55.8

60.0

53.5
48.6 47.3
45.4

49.4
31.0 30.0 30.7

55.2

46.0

45.6

Capital increaseby 4th public offering

Capital increaseby 3rd public offering

46.9 46.2 45.4 45.5
45.2 45.5 45.5 46.7

40.8 40.3

43.2 43.4 42.9

44.4 43.2
43.0 44.5
42.9 43.0

44.6 44.5 43.0

41.9 43.0 42.2 41.4 40.2

39.1

50.0
40.0
30.0

120
90
60

20.0
18.0

21.3

18.2 18.9

10.0
30
0

Number ofproperties

0.0
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 After the PO
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP and acquisition
new properties'05/11 '06/05 '06/11 '07/05 '07/11 '08/05 '08/11 '09/05 '09/11 '10/05 '10/11 '11/05 '11/11 '12/5 '12/11 '13/05 '13/11 '14/05 '14/11 '15/05 '15/11 '16/05 '16/11 '17/5 '17/11 of(Note)

5

6

7

8

9

11

11

16

15

15

15

15

15

15

15

16

19

19

23

23

23

21

23

23

23

25

(Note) Figures after public offering and new property acquisition include estimated figures and thus may differ from actual figures.

49

7. Overview of Financial Results for 25th Fiscal Period507-1. Income Statement / Cash Distribution Statement
Income Statement

Item
1. Operating revenues
Lease operating revenues
2. Operating expenses
Lease-related expenses
Asset management fees
Directors' compensation
Asset custody fees
Adminstrative service fees
Independent auditors' fees
Other operating expenses
Operating income
3. Non-operating revenues
Interest income
Other non-operating revenues
4. Non-operating expenses
Interest expense
Borrowing related expenses
Interest expense on investment
corporation bonds
Amortization of deferred investment
corporation bond issuance costs

Cash Distribution Statement(Unit: millions of yen)
24th Fiscal Period
25th Fiscal Period(Operation period:182 days) (Operation period:183 days)
ChangeDec. 1, 2016 to May 31, 2017 Jun. 1, 2017 to Nov. 30, 2017
AmountPercentage
AmountPercentage
4,740
100.0
4,902
100.0
162
(1)
4,740
4,902
58.2
-8
2,760
2,752
56.1
(2)
2,297
2,269
344
349
3
3
18
18
36
36
10
10
49
63
43.9
170
41.8
2,150
1,979
-1
1
0.0
3
0.1
0
0
2
1
357
7.3
0
357
7.5
289
289
54
55

Item
Retained earnings at the end ofcurrent period
Distributions(Distribution per unit (JPY))
Retained earnings carried forward

ChangeAmountAmountAmount

1,623,922

1,719,286

95,364

1,623,407(2,717)515

1,719,007(2,877)279

95,600(160)-235(Main factors for increase/decrease)(1) Operating revenues
Increase in income from lease (Itami):

JPY +100 mn(100% rent collection from July 3, 2017 (2 months earlier than initial assumption))

Increase in air-conditioning usage fee income (Tennozu):
JPY +13 mn
Increase in utilities expense income:

JPY +47 mn(2) Operating expenses

11

11

Decrease in repair expense:

JPY -60 mn

1

1

Increase in utilities expense:

JPY +54 mn

Other non-operating expenses
Ordinary income
Extraordinary Losses

0
1,625
―

Income before income taxes
for current period

1,625

1,720

Income taxes- current
Income taxes- deferred
Net income for current period

1
-0
1,623

1
0
1,718

Retained earnings brought forwardfrom the previous period
Retained earnings at the end ofcurrent period(Unit: thousands of yen)
24th Fiscal Period 25th Fiscal Period

34.3

34.3

0
1,793
73

0

0

1,623

1,719

36.6
1.5

168
73

35.1

95

(3)

(3) Extraordinary loss
Payment of settlement money (Tamachi):

JPY +73 mn

Lease operating revenues/expenses
Breakdown: See pages 53 and 54

51

7-2. Balance Sheet(Unit: millions of yen)

(Unit: millions of yen)Item

24th Fiscal Period

25th Fiscal Period(as of May 31, 2017)(as of Nov. 30, 2017)

AmountAmountRatio (%)

Ratio (%)

ChangeItem
AmountAssets24th Fiscal Period

25th Fiscal Period(as of May 31, 2017)(as of Nov. 30, 2017)

AmountAmountRatio (%)

Ratio (%)

ChangeAmountLiabilities

I Current assets total

14,164

Cash and deposits

6,410

6,973

Operating accounts payable

Cash and deposits in trust

7,424

7,616

7

1

98

83

221

152

2

2

Operational income receivables
Deposits paid
Prepaid expenses
OthersII Fixed assets total

133,646

9.6

90.4

14,830133,100

10.0

90.0

665

-546

I Current liabilities total

2,157

2,085

Structures

211

203

Tools, furniture and fixtures
Land

0

0

18,14318,143

9.4

11,944539

540

Short-term debt

3,200

7,200

Long-term debt due within one year

9,000

3,000

8.1

-1,888Distribution payable

76

Accrued expenses

166

161

1

1

Interest-bearing
debt

73

63

JPY 65,900 mn

661

731

Income taxes payable
Accrued consumption taxes

1. Tangible fixed assets
Buildings

13,832

Advances received
Deposits received
Security deposits due within one year

II Long-term liabiliteies total
Investment corporation bonds

0

0

182

238

4,000

4,000

Total
security deposits
JPY 7,168 mn

60,71841.1

62,630

42.3

1,911

Buildings in trust

25,423

24,951

Structures in trust

527

516

Long-term debt

49,70051,700

Security deposits

1,344

1,297

Security deposits in trust

5,674

5,633

JPY 1,391 mn
was allocated forpropertyacquisitions

Machinery and equipment in trust

157

148

Tools, furniture and fixtures in trust

69

76

85,46685,46639

94

Land in trust
Construction in progress in trust
Tangible fixed assets total

132,196

89.4

131,686

OthersIntangible fixed assets total

957

957

63

59

1,020

0.7

1,016

50.4

74,574

50.4

I Unitholders' capital

71,65948.5

71,65948.4

II Surplus total

1,623

1.1

1,719

1.2

22

Net assets

89.0

-509

2. Intangible fixed assets
Leasehold rights

74,551

Liabilities total

Retained earnings at the end ofcurrent period

0.7

-4

1,623

1,719

Net assets total

73,283

49.6

73,37849.6

95

Liabilities and net assets total

147,834

100.0

147,953

100.0

118

3. Investments, other assets
Long-term prepaid expenses

419

Lease and guarantee deposits

10

Investment, other assets total

429

0.3

397

0.3

-32

23

0.0

22

0.0

-1

100.0

118

III Total deferred assets
Deferred investment corporationbond issuance costs

Assets total

387
10

23
147,83422
100.0

147,95352

7-3. Income and Expenditure by Property (1)(Unit: millions of yen)
HEP Five

Item(14% of the quasi
Kitano Hankyu
co-ownership of theBldg.
trust beneficiaryinterests)

Dew Hankyu
YamadaKohnanNitori IbarakiHotel Gracery
Hiroshima
Kita Store (site)
TamachiNakano-Higashi(Note)Store (site)

TakatsukiJosai SC

Number of operating daysof 25th fiscal period

183

183

183

183

Lease operating revenues
total

311

576

373

Income from lease

244

376

Utilities expense income

14

Other incomes

183

LaLaport
KOSHIEN(site)NISHINOMIYAGARDENS(28% of thequasi coownership of
the trust
beneficiaryinterests)

AEON MALL
SAKAI
KITAHANADA(site) (Note)

MandaiToyonaka
Honan Store(site) (Note)

DAILY QANAT
IzumiyaHorikawa
MarutamachiStore(site) (Note)

183

183

183

183

183

183

183

284

68

118

257

618

255

283

68

113

257

617

138

52

―

―

―

―

―

52

61

66

0

0

4

0

0

174

419

231

129

6

50

106

200

Property/Facility
management fees

43

116

75

10

0

1

1

0

Utilities expense

25

149

51

0

―

―

―

―

3

0

1

22

―

―

0

6

26

3

5

―

―

―

―

―

Lease operating costs total

Rent paid
Advertising and promotion
expenses
Repair expense

3

8

1

0

―

―

―

1

Nonlife insurance
premium

0

1

0

0

―

0

0

1

Tax and public dues

24

49

26

26

6

14

102

58

6

1

3

0

―

0

1

0

―

32

0

130

Other expenses

40

89

65

68

NOI
(Lease operating income +Depreciation)

177

246

207

223

60

62

100

150

548

211

53

88

Lease operating income

136

157

142

155

60

62

68

150

418

211

53

88

24

59

27

0

―

―

―

―

26

―

―

―

Depreciation

Capital expenditure(Note) The Asset Management Company decided rent information is not disclosed as consent was not obtained from the tenants, and there is a possibility
disclosure may affect the competitiveness of Hankyu REIT and eventually damage the interests of unitholders.

537-3. Income and Expenditure by Property (2)(Unit: millions of yen)kotocross
HankyuKawaramachi

Item

LIFE
Shimoyamate
Store(site) (Note)

MANDAI Gojo
Nishikoji
Store (site)(Note)

183

183

KOHYO
OnoharaStore(note)

HankyuCorporation
Head Office
Bldg.

Ueroku F Bldg.

Sphere Tower
Tennozu
33% of thequasi coownership of
the trust
beneficiaryinterests)

183

183

183

183

183

Shiodome
East
Side Bldg.

OASIS Town
Itami Konoike(site)LAXA Osaka

Kita-Aoyama
San cho-me
Bldg.
(Note)

Total(23 properties)

183―

Number of operating daysof 25th fiscal period

183

Lease operating revenues
total

102

402

359

135

175

254

4,902

Income from lease

102

376

359

115

114

254

4,403

Utilities expense income

―

22

―

11

17

―

257

Other incomes

―

3

―

8

43

―

241

46

179

161

91

199

163

2,269

1

18

1

22

28

2

336

Utilities expense

―

26

―

11

55

―

321

Rent paid

12

0

―

―

―

17

65

Advertising and promotion
expenses

―

―

―

―

―

―

35

Repair expense

―

4

0

4

21

28

74

Lease operating costs
total
Property/Facility
management fees

Nonlife insurance premiumTax and public dues
Other expenses
Depreciation

183

183

0

0

1

0

0

2

12

10

21

47

12

29

47

557

0

2

0

1

1

1

23

21

104

110

39

63

63

841

NOI
(Lease operating income +Depreciation)

76

34

109

43

131

327

308

82

38

154

35

3,474

Lease operating income

55

34

109

35

131

222

197

43

-24

90

31

2,632

0

―

―

―

―

0

78

19

13

21

0

273

Capital expenditure(Main repair expense)
LAXA Osaka

Repair work on the south building exterior wall

(Main capital expenditure)
JPY 24 mn(Note) The Asset Management Company decided rent information is notdisclosed as consent was not obtained from the tenants, and there is apossibility disclosure may affect the competitiveness of Hankyu REIT andeventually damage the interests of unitholders.

Kitano Hankyu Building

Renovation of B1 restrooms
JPY 24 mn
Elevator modernization
JPY 23 mn
Dew Hankyu Yamada
Renovation of refractory coating in 6F parking JPY 23 mn
HANKYU NISHINOMIYA GARDERNS
ITV camera upgrading
JPY 10 mn
Hankyu Corporation Head Office Building
Sprinkler facility upgrading
JPY 44 mn
Air conditioning upgrading
JPY 25 mn
Ueroku F Building
Emergency power generator upgrading
JPY 16 mn

54

7-4. Financial Indicators

Item

24th Fiscal Period

25th Fiscal Period

Remarks

Operation period

182

183

24th fiscal period: Dec. 1, 2016 to May. 31, 2017
25th fiscal period: Jun. 1, 2017 to Nov. 30, 2017

Return On Assets (ROA)

1.1%

1.2%

Ordinary income / {(Total assets at beginning of period+ Total assets at end of period) /2 }

2.2%

2.4%

Calculated from duration of operation

2.2%

2.3%

Net income / {(Net assets at beginning of period + Net assets at end of
period) /2 }

4.4%

4.7%

Calculated from days of operation

49.6%

49.6%

Net assets / Total assets

42.2%

41.4%

(47.4%)(47.3%)(Amount of interest-bearing debt + Security deposits - Matched money to security deposits)/(Total assets(*) - Matched money to security deposits)*Appraisal-value basis (Ratios in brackets are based on book value)

44.6%

44.5%

9.2 times

9.5 times

Net Operating Income (NOI)

JPY 3,288 mn

JPY 3,474 mn

Net lease operating income + Depreciation

Funds From Operation (FFO)

JPY 2,469 mn

JPY 2,560 mn

Net income for current fiscal period +Depreciation - Income/loss on sale ofreal estate(per annum)
Return On Equity (ROE)(per annum)

Ratio of net assets at end of period

Loan To Value ratio at end of period (LTV)
Ratio of interest-bearing debts to total assets
at end of period
Debt Service Coverage Ratio (DSCR)Interest-bearing debt / Total assets
Pre-interest and pre-depreciation Net income for current fiscal period / Interest
expenses55

8. APPENDIX

56

8-1. Portfolio List (As of End of 25th Fiscal Period) (1)As of November 30, 2017Classifi- Codecation (Note 1)

Name

Total leasablearea (m2)(Note 3)

Occupancy Total number
PML
rate
of tenants(Note 4)(Note 3)(Note 3)

(Proposed) dateof acquisition(Proposed)
acqusition
price (JPY mn )Investment
ratio

Appraisal value(JPY mn)

Cap rate(Note 5)5.0%

Feb. 1, 2005

6,468

4.6%

8,890

3.5%

10.1%

Feb. 1, 2005

7,740

5.5%

7,350

4.5%

Kita-ku,
Osaka City

Nov. 1998

19.1

6,337.37

100.0%

1(2,958.94)(99.7%)(129)

Kitano Hankyu Bldg.

Kita-ku,
Osaka City

Jun. 1985

32.5

28,194.15

100.0%

2(18,477.35)(98.8%)

(24)

R3(K)

Dew Hankyu Yamada

Suita City,
Osaka Prefecture

Oct. 2003

14.2

13,027.28

100.0%

27

4.7%

Feb. 1, 2005

6,930

4.9%

8,690

4.4%

R4(K)

Takatsuki-Josai
Shopping Center

Takatsuki City,
Osaka Prefecture

Apr. 2003

14.7

31,451.81

100.0%

1

5.9%

Nov. 15, 2005

8,600

6.1%

8,480

4.9%

R5(K)

Nitori Ibaraki-Kita Store(site)

Ibaraki City,
Osaka Prefecture――

6,541.31

100.0%

1―

Mar. 29, 2006

1,318

0.9%

1,720

4.7%

R6

Kohnan Hiroshima NakanoHigashi Store (site)

Aki-ku,Hiroshima City――

25,469.59
60.14

100.0%

1―

Oct. 2, 2006
Apr. 9, 2007

2,170
5

1.5%

1,890

5.5%

R8

Hotel Gracery Tamachi

Minato-ku,
Tokyo

Sep. 2008

9.2

4,943.66

100.0%

1

10.3%

Dec. 25, 2008

4,160

2.9%

4,120

4.3%

R9(K)

LaLaport KOSHIEN(site)

Nishinomiya City,
Hyogo Prefecture――

126,052.16

100.0%

1

6.4%

Jan. 22, 2009

7,350

5.2%

7,770

4.2%

Nishinomiya City,
Hyogo Prefecture

Oct. 2008

9.2

65,372.41

100.0%

1

9.2%

Apr.16, 2013

18,30012.9%

24,976

4.2%

HEP Five

Retail-use facilites

Location

Building
age
Completion date(Years)(Note 2)R1(K)(14% of the quasi co-ownership of
the trust beneficiary interests)

R2(K)

R11(K)

HANKYU NISHINOMIYAGARDERNS(28% of the quasi co-ownership of
the trust beneficiary interests)

R12(K)AEON MALL
SAKAIKITAHANADA(site)

Kita-ku,
Sakai City
Osaka Prefecture――

64,104.27

100.0%

2―

Jun. 27, 2013

8,100

5.7%

9,980

4.2%

R13(K)

MANDAI Toyonaka Honanstore (site)

Toyonaka city
Osaka Prefecture――

8,159.41

100.0%

1―Jun. 27, 2013

1,870

1.3%

2,310

4.3%

Kamigyo-ku,
Kyoto city――

3,776.15

100.0%

1―Jun. 4, 2014

3,100

2.2%

3,680

4.2%

DAILY QANAT Izumiya
R14(K) Horikawa Marutamachi Store(site)
R15(K)

kotocross Hankyu
Kawaramachi

Shimogyo-ku,
Kyoto city

Oct. 2007

10.2

4,400.13

100.0%

1

2.6%

Jun. 4, 2014

2,770

2.0%

3,330

4.3%

R16(K)

LIFE Shimoyamate Store(site)

Chuo-ku,
Kobe city――

2,397.83

100.0%

1―Jun. 4, 2014

1,421

1.0%

1,640

4.2%

R17(K)

MANDAI Gojo
Nishikoji Store (site)

Ukyo-ku
Kyoto city――

9,182.80

100.0%

1―Jun. 24, 2014

4,182

3.0%

4,750

4.3%

R18(K)KOHYO Onohara Store

Minoh City,
Osaka Prefecture

May 2016

1.6

3,310.31

100.0%

1

5.3%

Jul. 1, 2016

1,631

1.2%

1,750

4.9%

―

―

17,997.10

100.0%

1―

Nov. 25, 2016

7,100

5.0%

7,440

4.1%

OASIS Town Itami Konoike
Itami City,
R19(K)
Hyogo Prefecture(site)

57

8-1. Portfolio List (As of End of 25th Fiscal Period) (2)Name

Location

Completion date

Buildingage(Years)(Note 2)

O1

Shiodome East Side Bldg.

Chuo-ku,Tokyo

Aug. 2007

10.3

9,286.58

100.0%

6

4.6%

Feb. 29, 2008

O2(K)Hankyu Corporation Head
Office Building

Kita-ku,
Osaka City

Sep. 1992

25.2

27,369.37

100.0%

1

3.7%

M1(K)

Ueroku F Bldg.

Chuo-ku,
Osaka City

Sep. 1993

24.2

4,611.82

93.8%

11

M2

(33% of the quasi co-ownership of
the trust beneficiary interests)

Shinagawa-ku,
Tokyo

Apr. 1993(Note 6)24.7

8,818.09

93.0%

M3(K)

LAXA Osaka

Fukushima-ku,
Osaka City

Feb. 1999

18.8

30,339.91

M5

Kita-Aoyama San cho-me
Building

Minato-ku,
Tokyo

Sep. 2013

4.2

Mixed-use (complex)
facilities

Office-use
facilities

Classifi- Codecation (Note 1)

Sphere Tower Tennozu

Retail-use
facilites

METS OZONE

R21

Vessel Inn Hakata Nakasu

Higashi-ku,
Nagoya City,
Aichi Prefecture
Hakata-ku,
Fukuoka City

Occupancy Total number
PML
rate
of tenants(Note 4)(Note 3)(Note 3)

(Proposed)
acqusition
price (JPY mn )Investment
ratio

Appraisal value(JPY mn)

19,025

13.4%

14,7003.9%

Apr.10, 2013

10,2007.2%

12,2004.0%

3.2%

Nov. 1, 2005

2,980

2.1%

2,790

5.1%

24

2.7%

Oct. 2, 2007

9,405

6.6%

6,864

3.9%

100.0%

1

3.7%

Jan. 22, 2009

5,122

3.6%

5,720

4.7%

619.76100.0%

3

7.4%

Nov. 12, 2013

1,680

1.2%

2,030

3.4%

16.2

501,823.43(488,728.20)

99.8%(99.8%)

91
(241)

3.5%

―

141,628100.0%

153,070

4.2%

Apr. 2002

15.7

15,681.37

100.0%

13

5.6%

Feb. 15, 2018

5,400

―

5,600

4.5%

Jul. 2009

8.4

2,776.49

100.0%

1

0.2%

Mar. 29, 2018

2,760

―

2,780

4.2%

16.0

520,281.29(507,186.06)

99.8%(99.8%)

105
(255)

3.3%

―

149,788―

161,450

4.2%

Portfolio total (End of 25th FP)

R20

Total leasablearea (m2)(Note 3)

Portfolio total (including new properties (to be) acquired)(Proposed) dateof acquisition

Cap rate(Note 5)(Note 1) The properties owned by Hankyu REIT are assigned codes classified by facility (type of use) and region.
The letters on the left represent the facility (type of use):“R” is for retail-use facility, “O” is for office-use facility and “M” is for mixed-use (complex) facility.
The numerals are the numbers assigned to each facility in the chronological order of the acquisition.
The letter “K” in parentheses to the right of the numerals indicates that the property is located in Kansai Region.
(Note 2) The portfolio total is the weighted average building age by (planned) acquisition price.
(Note 3) Figures in parenthesis indicate the total leasable area for end-tenants, the occupancy rate based on the said area, and the number of end-tenants, respectively.
For HEP Five, 14% quasi co-ownership of the trust beneficiary interests is indicated as the leasable area.
For Sphere Tower Tennozu, 33% quasi co-ownership of the trust beneficiary interests is indicated as the leasable area.
For HANKYU NISHINOMIYA GARDENS, 28% quasi co-ownership of the trust beneficiary interests is indicated as the leasable area.
(Note 4) PML of LaLaport KOSHIEN (site) is calculated for the parking garage space administration building (394.88 m2).
PML of the entire portfolio including new properties (to be) acquired is calculated after adding METS OZONE and Vessel Inn Hakata Nakasu to the existing
properties.
(Note 5) Cap rates and discount rates are based on the direct capitalization method used for appraisal value calculations (Nitori Ibaraki-Kita Store (site), Kohnan Hiroshima
Nakano-Higashi Store (site), LaLaport KOSHIEN (site), AEON MALL SAKAIKITAHANADA (site) and LIFE Shimoyamate Store (site) are allocated a discount rateusing the DCF method) and the portfolio total is the weighted average cap rate based on appraisal values.
58(Note 6) The completion date for the office and store portions is indicated.

8-2. Trends of Distribution per Unit

JPY 2,877

Irregular period (303 days)598-3. Income Ratio by Rent Category and Sales-Based Overage Rent System Mechanism
Income Ratio by Rent Category
and Variation Factors
25th period
Income Ratio

1.0%
Overage-rent
tenants

Fixed-rent
tenants

7.4%

91.6%

<Variable-rent portion>
Rent income varies
in accordance with thesales of part of shops in
HEP Five, Dew Hankyu
Yamada, Kitano Hankyu
Building and others.
<Fixed-rent portion>
Rent income varies inaccordance with theoccupancy rates andrent levels of HEP
Five, Kitano Hankyu
Building and others.

Rent income varies
in accordance withthe occupancy rates
and rent levels of
remaining properties

Concept Diagram ofGeneral Sales-Based Overage Rent System

Rent income

Variable-rent
portionFixed-rent
portionPoint from where
sales-based overagerent is generated

Tenant sales

Total rent income(excluding warehouse income)60

8-4. Change in Population in Areas along Hankyu/Hanshin Lines

The population in Kansai Region is either remaining flat or trending downwards due to theaging population along with a decreasing birthrate, but areas along Hankyu/Hanshin lines are
relatively popular and the population in these areas has been increasing consistently after
bottoming out in 1996

106
105
104
103

Along Hankyu and Hanshin lines
Kansai region
Osaka
Great Hanshin-Awaji Earthquake
Hyogo
Kyoto

102
101
100
99
98
97

Population along Hankyu/Hanshin lines
has been increasing consistently
since the earthquake

96
95'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16(Source) Japan Geographic Data Center “Population Summary of the Basic Resident Registers”(Note) The graph indicates the change in populations where the populations in 1991 are set at 100.

61

8-5. Hankyu/Hanshin Lines and Properties Owned

628-6. Overview of the Hankyu Umeda Area and the “Umeda 1-Chome 1-Banchi Project”

Umekita 2nd phase(Town opening in sequence from around spring 2023;
Infrastructure development scheduled to be completed
in fiscal 2026)

Perspective drawing of the completed “Umeda 1-Chome 1-Banchi Project”(Looking from Umeda Hankyu Building (Hankyu Umeda Main Store))
Location

Site area

Floor area ratio

1-1 Umeda, Kita-ku,
Osaka-shi, and other

B2F to 9F
Department store
zone

Approx. 12,200 m2

2,000%

Total floor area:
Approx. 100,000 m2
11F to 38F

Office zone
New JR station(Tentative name: Kita-umeda Station)(Scheduled to open in spring 2023)

Umeda 1-Chome
1-Banchi Project

Total floor area
Number offloorsApprox. 260,000 m2

Total floor area:
Approx. 143,000 m2

38 floors above groundand 3 floors below

11F
Conference zone

HeightMain use

Total floor area:
Approx. 4,000 m2

Approx. 190 m
Department store,
office, hall, etc.

Other(parking space, etc.)

Total floor area:
Approx. 13,000 m2

Overview of “Construction Plan”(Note 1) Includes properties jointly owned with the Hankyu Hanshin Holdings Group.
(Note 2) Includes properties jointly owned with other companies.

●1st phase work
July 2015: 1st phase new construction work has commenced
Spring 2018: Completion of 1st phase buildings(Shin-Hankyu Building, east section of Daihanshin Building)* Partial opening of new department store●2nd phase work
Spring 2018: Start demolition of west side of Daihanshin Building
Spring 2019: 2nd phase new construction work will commence
Fall 2021: Completion of 2nd phase building(New department store section)* Full opening of new department store
Spring 2022: Full completion* Opening of office-use zone63

8-7. Infrastructure Constructions/Redevelopment Projects in Kansai Regionl Full-fledged infrastructure construction and redevelopment in 2020 and onward
l Measures including development of Umekita 2nd phase, construction of
Nakanoshima Regenerative Medicine Center, attraction of the World Expo 2025
to Yumeshima Island and the integrated resorts (IR) scheme are underway orplannedl Enhancement of convenience with shorter travel time to Kansai International
Airport from Umeda area after the opening of the Naniwasuji Line

Osaka International Airport(Itami Airport)

Umekita 2nd phase

Kawaramachi

Kyoto

Naniwasuji Line/Naniwasuji Renraku Line*
Naniwasuji Line
Naniwasuji Renraku Line

Development project for
Nakanoshima Regenerative Medicine Center*To continue with research and discussion
Juso

Shin-Osaka

Umeda area

Kobe-sannomiya

USJ
Hankyu Railway

Kobe Airport Terminal
Namba Shinsaibashi area

Yumeshima Island Osaka World Expo(currently working to win the bid)
Integrated resorts (IR) scheme
Terminal exclusively for LCC
international flights(Operations started in Jan. 2017)(Note)
Prepared by Hankyu REIT AssetManagement, Inc. based on
publicly announced materials(including projections based onassumptions and outlook for the
future as of February 2018).

Hanshin Electric Railway
Properties owned by Hankyu REIT

Currently
approx.

60 minTo be shortened by around 20 to
25 minutes with the opening of the
Naniwasuji Line

Kansai International Airport<Plans and Events in Kansai Region (including plans and targets)>
2019

Rugby World Cup

2021

World Masters Games 2021 Kansai

2021

Opening of Nakanoshima Regenerative Medicine Center

2022

Completion of the entire Umeda 1-Chome 1-Banchi Project2025

Osaka World Expo (if the bid is won)

Fiscal 2026

Umekita 2nd phase (completion of infrastructure development)(Town opening in sequence from around spring 2023)

Spring 2031

Opening of the Naniwasuji Line

2037 (the earliest)

Launch of the Maglev bullet train service between Shin-Osaka and Nagoya

648-8. HANKYU NISHINOMIYA GARDENS and Properties in the Vicinity

Hankyu Imazu LineACTA NISHINOMIYAWest Bldg.

ACTA NISHINOMIYA
East Bldg.

Hankyu Kobe Line

HANKYU NISHINOMIYAGARDENS

Nishinomiya
Kitaguchi Sta.

Hyogo Performing
Arts Center

Konan University

Aerial photograph takenfrom south side facing north65

8-9. Details of Value Calculation Methods
Average NOI yield =[Total real estate lease operation income* - Real estate lease operation expenses* + Total depreciation*] concerning owned real estate or new
assets (to be) acquired as of each period ÷Total acquisition price
Average yield after depreciation =[Total real estate lease operation income* - Real estate lease operation expenses*] concerning owned real estate or new assets (to be)acquired as of each period ÷Total acquisition priceUnrealized
income/loss=
Total appraisal value of owned real estate or new assets (to be) acquired as of each period - Total book value** Figures are based on results. However, for OASIS Town Itami Konoike (site), METS OZONE and Vessel Inn Hakata Nakasu, the net operating revenues andoperating expenses in the first year (in the second year for OASIS Town Itami Konoike (site)) based on the discounted cash flow (DCF) method recorded in theappraisal report are used for figures other than depreciation, and amounts calculated following Hankyu REIT’s accounting policy are used for depreciation. For
public charges and taxes, they are posted in expenses from the first fiscal year and yields on an on-going basis are calculated.

LTV=

Amount of outstanding debts + Security deposits or guarantees - Matched money
Total amount of assets - Matched money

When corporate bonds have been issued, the amount of outstanding debts shall include the amount of outstanding bonds.
l Matched money refers to cash or deposits reserved in the trust account to guarantee the deposit and security money for the assets
owned by Hankyu REIT as the object of the trust beneficiary interests.
l The total amount of assets refers to the amount in the assets section of the most recent balance sheet for each period. However, withrespect to tangible fixed assets, the difference between appraisal value and book value at the end of the fiscal period shall be added to or
subtracted from the book value of the tangible fixed assets at the end of the fiscal period.
l LTV after public offering/new acquisition of properties, interest-bearing debt ratio, average debt financing cost and average funding costare calculated under the following assumptions.
l As to security deposits or guarantees, security deposits or guarantees for new assets (to be acquired) are added to those of the 25thFP.
l Matched money is assumed to be unchanged from the 25th FP.
l Total amount of assets is obtained by adding the proceeds from public offering and third-party allotment, security deposits orguarantees of new assets (to be) acquired and the difference between the appraisal value and expected asset capitalization amountof new assets (to be) acquired, to the total amount of assets in the 25th FP.
l

Since Hankyu REIT implemented a five-for-one split of its investment units with December 1, 2014 as the effective date, the figures that
retrospectively reflect the implementation of the five-for-one split are indicated.

66

8-10. Portfolio PML and Anti-Seismic Measures
As of November 30, 2017Classification

Retail-use
facilities

Office-use
facilities

Mixed-use(complex)facilities

Code

Name

PML

R1(K)

HEP Five(14% of the quasi co-ownership of the trust beneficiary interests)

5.0%

R2(K)

Kitano Hankyu Bldg.

10.1%

R3(K)

Dew Hankyu Yamada

4.7%

R4(K)

Takatsuki-Josai
Shopping Center

5.9%

R5(K)

Nitori Ibaraki-Kita Store(site)―

R6

Kohnan Hiroshima Nakano-Higashi Store (site)―

R8

Hotel Gracery Tamachi

10.3%

R9(K)

LaLaport KOSHIEN(site)

6.4%

R11(K)

HANKYU NISHINOMIYA GARDERNS(28% of the quasi co-ownership of the trust beneficiary interests)

9.2%

R12(K)AEON MALL SAKAIKITAHANADA(site)―

R13(K)

MANDAI Toyonaka Honanstore (site)―

R14(K)DAILY QANAT Izumiya
Horikawa Marutamachi Store(site)―

R15(K)

kotocross Hankyu Kawaramachi

2.6%

R16(K)

LIFE Shimoyamate Store(site)―

R17(K)

MANDAI Gojo
Nishikoji Store (site)―
5.3%

R18(K)KOHYO Onohara Store

R19(K)OASIS Town Itami Konoike (site)―

O1

Shiodome East Side Bldg.

4.6%

O2(K)

Hankyu Corporation Head Office Building

3.7%

M1(K)

Ueroku F Bldg.

3.2%

M2

Sphere Tower Tennozu(33% of the quasi co-ownership of the trust beneficiary interests)

2.7%

M3(K)

LAXA Osaka

3.7%

M5

Kita-Aoyama San cho-me Building

7.4%

Portfolio total (End of 25th FP)

Retail-use
facilities

3.5%
5.6%

R20

METS OZONE

R21

Vessel Inn Hakata Nakasu

0.2%

Portfolio total (including new properties (to be) acquired)

3.3%●What is PML?
PML (Probable Maximum Loss) refers to the estimatedamount of the maximum loss from earthquake damage
expressed as a percentage, and indicates the ratio of
projected maximum physical loss amount of a building
from a probable earthquake of maximum magnitude(assumed to happen once every 475 years, or a 10%
probability of occurring during any 50 year span) during its
use (a 90% non-exceedance probability) against the priceto reacquire it.
●Portfolio PML
The total PML value for multiple buildings scattering inwide areas is always smaller than the weighted average
PML value of each building. This is called the portfolio
effect. Hankyu REIT calculates the portfolio PML by taking
into account the geographical diversity of buildings acrossa wide range of areas.
As shown in the table to the left, the portfolio PML ofHankyu REIT is 3.3% (including new properties (to be)acquired).
●Policy on earthquake insurance coverage
Hankyu REIT will decide to cover earthquake insurance inaccordance with the following standard set forth in its
management guidelines:“Hankyu REIT will investigate earthquake insurance
coverage when the PML of an individual property exceeds
15%.”(Note 1) PML of LaLaport KOSHIEN (site) is calculated for the parking
garage space administration building (394.88m2).
(Note 2) PML of the entire portfolio including new properties (to be)acquired is calculated after adding METS OZONE and Vessel Inn
Hakata Nakasu to the existing properties.

67

8-11. Investment Unit Price
Relative Price

Relative value based on 100 of the closing price basis on
January 4, 2017 / closing price basis

Per Unit Trading Trends(Oct. 26, 2005 — January 31, 2018)

130.00High (closing price basis)120.00

JPY 276,000(Jun. 2007)

Low (closing price basis)110.00JPY 65,000(Dec. 2011)

100.00January 4, 2017 — January 31, 2018
High (closing price basis)90.00

JPY 156,500(Feb. 24, 2017)

80.00
'17/1

'17/3

'17/5

'17/7

'17/9

'17/11'18/1

Source: QUICK

Low (closing price basis)

JPY 130,100(Nov. 29, 2017/ Jan. 5, 2018)

Price on January 31, 2018 (closing price basis)
JPY 134,800

Unit Price (closing price basis)(Unit: JPY thousand)(Units)

280

7,000

240

6,000

200

5,000

160

4,000

120

3,000

'05/10/26

80

2,000

40

1,000
0

0
'05/5 '05/11 '06/5 '06/11 '07/5 '07/11 '08/5 '08/11 '09/5 '09/11 '10/5 '10/11 '11/5 '11/11 '12/5 '12/11 '13/5 '13/11 '14/5 '14/11 '15/5 '15/11 '16/5 '16/11 '17/5 '17/11

Source: QUICK━ Volume━ Unit price68

8-12. Analysis of Unitholder Attributes at End of 25th Fiscal Period
Unitholder Composition

Top 10 Unitholders

Number ofunitholders(persons)

Ratio toownership

Number ofinvestment
units held
(units)Ratio tonumber ofinvestment
units

Financial institutions(excluding trust banks)

86

0.65%

116,850

19.56%

Trust banks

11

0.08%

247,21641.38%

12,83396.77%

147,426

24.67%

Other organizations

217

1.64%

54,813

9.17%

Foreign organizations,
etc.

114

0.86%

31,195

5.22%

13,261100.00%597,500

100.00%Ownership by category

Individuals, etc.

Total

Number of units
Ownership
held (units)

Unitholder name
Japan Trustee Services Bank, Ltd.
(Trust account)

139,267

23.31%The Master Trust Bank of Japan, Ltd.
(Trust account)

65,47710.96%

Hankyu Corporation

21,0003.51%

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

20,319

3.40%

Trust & Custody Services Bank, Ltd.
(Securities investment trust account)

16,061

2.69%

The Hachijuni Bank, Ltd.

13,6202.28%

THE CHUKYO BANK, Ltd.

11,385

1.91%

The Senshu Ikeda Bank, Ltd.

7,710

1.29%

Aozora Bank, Ltd.

6,292

1.05%

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

6,260

1.05%

Total investment

307,391

51.45%

Number of outstanding units

597,500

100.00%

Ratio of Units by Unitholder Category
19.02%
33.83%

16.09%

17.77%

17.44%

19.56%

43.42%

42.29%

43.86%

41.38%

23.59%

22.93%

21.73%

24.67%

9.24%
7.65%

9.16%
7.86%

9.16%
7.80%

9.17%
5.22%

34.34%

47.27%
23.91%

13.39%

33.96%

26.31%
34.41%

22.27%
9.29%
7.78%
As of end of
1st period

13.46%
8.62%
10.14%

23.20%
11.31%
4.83%

13.63%
9.03%

As of end of
As of end of
As of end of
5th period
10th period
15th period
Foreign organizations, etc.
Other organizations

As of end of
20th period
Individuals, etc.

As of end of
23rd period
Trust banks

As of end of
As of end of
24th period
25th period
Financial institutions(excluding trust banks)698-13. Organization of Hankyu REIT Asset Management, Inc.
(As of November 30, 2017)
Corporate Data

General Meeting of
Shareholders
Auditors

Trade nameHankyu REIT Asset Management, Inc. (Note)

Headquarters

19-19, Chayamachi, Kita-ku, Osaka 530-0013,
Japan

EstablishedMarch 15, 2004

Paid-in capital

JPY 300 mn

Shareholder

Hankyu Corporation (100%)

Board of Directors
Number of
officers and employees

President &Representative Director

Internal Audit Department
Compliance Committee

32
President &Representative
Director

Yoshiaki Shiraki

Managing Director

Toshinori Shoji

Director

Hideo Natsuaki

Director

Hiroshi Aoyama

Director (part-time)

Kenji Yamaguchi

Director (part-time)

Noriyuki Yagi

Corporate Auditor(part-time)

Ken Kitano

Corporate Auditor(part-time)

Koji Yoshida

Executive officers

Investment Management
Committee
Compliance Department

Financial instruments trading business(investment management business)

Investment
Planning
Department

Investment
Management
Department 1

Investment
Management
Department 2

IR and Public
Relations
Department

Corporate
Administrationand Supervision
Department

Principal businesses

lFinancial product trader:
Director-General of the Kinki Finance Bureau
Ministry of Finance (Kinsho) No. 44
lReal estate transaction license:
The Governor of Osaka Prefecture (3) No. 50641
lApproval of discretionary dealing trustee, etc.:
No. 23 by Minister of Land, Infrastructure,
Transport and Tourism(Note) The company name is scheduled to change to Hankyu Hanshin REIT Asset Management, Inc. on April 1, 2018.

70

8-14. Compliance and Internal Audit Systems of Hankyu REIT Asset Management, Inc.
Build robust compliance and internal audit systems by systematically ensuring multiple check functions based on thebasic policy for building internal control systems.
Constituent member

Compliance System

Directors, Corporate Auditors

Implementation(Note)

Decision criteria•

Achieve comprehensive compliance by establishing aCompliance Officer and a Compliance Department

A majority of directors in attendance, and approvalof a majority of the attending directors are required.

•

The Compliance Committee, including outside experts,
deliberates on Conflicts of Interests Transaction (note)•

The Compliance Officer attends the Investment
Committee meeting and checks for compliance issues•

Appointed a person to be in charge of efforts to prevent
improper requests and exclude anti-social forces

Constituent member

Board of Directors

President &Representative Director

Chairman: Compliance officer
Committee members: President & Representative
Director, full-time Directors and outside experts
Observers: Corporate Auditors (do not participate inresolutions) and other persons recommended by
the Chairman and approved by the Committee

Internal Audit System

Decision criteria

Compliance Committee

Investment Management
Committee

Proposals by
Department/Office

Approval of all of the attending committee members
is required under the condition where 3/4 or more
have attended including a compliance officer andtwo outside experts.
Constituent member
Chairman: President & Representative Director
Vice chairman: full-time director designated bychairmanCommittee members: full-time director (excluding
compliance officer), office managers of respective
department (other than full-time director orcompliance officer)•

Establish PDCA cycle for improving operations in eachdepartment/office by systematically implementing theinternal audit every fiscal year based on the annualinternal audit plan.

•

Utilize external consulting entity to secure independence
of internal audit and obtain an extremely effective internal
audit.

(Note) Interested party transactions that meet a certain criteria must
gain approval of Hankyu REIT’s Board of Directors’ Meeting.

Decision criteria
Approval of all of the attending committee members
is required under the condition where 3/4 or more
including the chairman and vice chairman haveattended together with the compliance officer.

7071

8-15. Company Structure of Hankyu REIT
(As of November 30, 2017)(Note 1)

(Note 2)

(Note 3)(Note 1) The company name is scheduled to change to Hankyu Hanshin REIT Asset Management, Inc. on
April 1, 2018.
(Note 2) Hanshin Electric Railway Co., Ltd. is scheduled to be added to real estate information service
companies on April 1, 2018. On the same day, Hankyu Realty Co., Ltd. and Hankyu Investment
Partners, Inc. are scheduled to change their company names to Hankyu Hanshin Properties Corp.
and Hankyu Hanshin Real Estate Investment Advisors, Inc., respectively.
(Note 3) Hankyu Hanshin Properties Corp. is scheduled to become the parent company by succeeding theentire shares of the Asset Management Company owned by Hankyu Corporation on April 1, 2018.
(Note 4) In preparation for the event that the number of Executive and Supervisory Directors is less thanthat stipulated in laws and regulations, Toshinori Shoji was elected as alternate Executive Directorand Hiroumi Shioji was elected as alternate Supervisory Director at the General Unitholders’Meeting held on August 25, 2016.

72