This translation of the original Japanese financial report (kessan tanshin) is provided solely for information purposes.
Should there be any discrepancy between this translation and the Japanese original, the latter shall prevail.

REIT Financial Report for the 3rd Fiscal Period
January 22, 2018
REIT Issuer:
Ooedo Onsen Reit Investment Corporation
Securities Code: 3472
Representative: Fuminori Imanishi, Executive Director
Asset Manager:
Representative:
Inquiries to:

Stock Exchange Listing: TSE
URL: https://oom-reit.com

Ooedo Onsen Asset Management Co. Ltd.
Fuminori Imanishi, Chief Executive Officer
Shinya Ito, General Manager, Planning and Coordination
Department

Scheduled date of submission of periodic securities report (yuka shoken hokokusho):Scheduled date of start of distribution payments:
Preparing supplementary explanatory materials on financial results:
Holding of brief session on financial results:+81-3-6262-5200
February 27, 2018
February 15, 2018

Yes
Yes (for institutional investors and analysts)[Amounts are rounded down to the nearest million yen, except for per unit figures]
1. Status of Management and Assets for the 3rd Fiscal Period
3rd Fiscal Period: Fiscal period ended November 2017 (from June 1, 2017 to November 30, 2017)(1) Management Status
Fiscalperiod3rd
2nd

Operatingrevenuemillion yen
1,032
1,021

%
1.1
101.2

Profitper unit[% figures show the period-on-period increase (decrease)]
Ordinary
Profitprofit% million yen% million yen
%
(5.3)
421
(5.6)
420
(5.6)
105.6
446
564.5
445
576.1

Operatingprofitmillion yen
519
547

Ratio of ordinary profit to
Ratio of ordinary profit tototal assets
operating revenue
yen
%
%
%
3rd
2,384
2.6
1.4
40.8
2nd
2,526
2.8
1.5
43.7
(Note) The calculation period for the 2nd fiscal period is a period of 182 days from December 1, 2016 to May 31, 2017, and the 3rd
period is a period of 183 days from June 1 2017 to November 30, 2017.
Fiscalperiod(2)

Ratio of profit tounitholders’ equity

Distribution Status

Fiscal period

Distribution
per unit

Total
distribution(excludingexcess cash
distribution)(excludingexcess cash
distribution)

Excess cash
distribution
per unit

Total excess
cash
distribution

Distribution
per unit

Total
distribution(includingexcess cash
distribution)(includingexcess cash
distribution)

Distribution
Ratio of
Payoutdistribution to
ratio
net assetsyenyenmillion yen
yenmillion yen
million yen
%
%
3rd
2,385
420
7
1
2,392
421
100.0
2.6
2,533
2nd
2,526
445
7
1
446
100.0
2.8
(Note 1) The entire amount of total excess cash distribution is equivalent to the increase amount of the allowance for adjustment of
temporary difference.
(Note 2) Distribution payout ratio is rounded down to the first decimal place.

(3) Financial Position
Fiscalperiodmillion yen
29,20829,440

million yen
16,171
16,197

Unitholders’ equity to total
assets%55.4
55.0

Net cashprovided by (used in)operating activities
million yen
689
2,273

Net cashprovided by (used in)investing activities
million yen
(153)
(47)

Net cashprovided by (used in)financing activities
million yen(557)(1,854)

Total assets

3rd
2nd

Net assets

Net assets
per unityen
91,77791,925(4) Cash Flow Status
Fiscalperiod3rd
2nd

1

Cash andcash equivalents
at end of period
million yen
1,018
1,039

2. Management Status Forecasts for the 4th Fiscal Period and the 5th Fiscal Period
4th Fiscal Period: Fiscal period ending May 2018 (from December 1, 2017 to May 31, 2018)
5th Fiscal Period: Fiscal period ending November 2018 (from June 1, 2018 to November 30, 2018)

FiscalperiodOperatingrevenue

Operatingprofit[% figures show the period-on-period increase (decrease)]
Distribution
Distribution
Excess cash
per unit
per unit
distribution
Profit(including(excluding excess
excess cash
per unit
cash distribution)

Ordinary
profitdistribution)

millionmillionmillionmillion
%
%
%
%
yen
yen
yen
yen
yen
4th
1,444
39.9
725
39.7
556 32.1
555 32.1
2,358
5th
1,451
0.5
703 (3.0)
564
1.5
563
1.5
2,395
(Reference) Estimated Profit per unit for the 4th Fiscal Period: 2,358 yen; 5th Fiscal Period: 2,394 yen

yen

yen

12
12

2,370
2,407

* Other(1) Changes in Accounting Policies, Changes in Accounting Estimates and Retrospective Restatement(i) Changes in accounting policies accompanying amendments to accounting standards, etc.:
None(ii) Changes in accounting policies other than (i):None(iii) Changes in accounting estimates:None(iv) Retrospective restatement:
None(2) Total Number of Investment Units Issued and Outstanding(i) Total number of investment units issued and outstanding(including own investment units) at end of period:(ii) Number of own investment units at end of period:

3rd

176,200 units

2nd176,200 units

3rd

0 units

2nd

0 units* Presentation of the status of implementation of audit procedures
At the time of disclosure of this financial report (kessan tanshin), the audit procedures pursuant to the Financial Instruments andExchange Act have not been completed.
* Explanation of the appropriate use of the management status forecasts, and other matters of special note
The management status outlook and other forward-looking statements contained in this document are based on information thatare currently available and certain assumptions that are deemed reasonable by the Investment Corporation. Accordingly, the actual
management status, etc. may differ materially due to various factors. In addition, the forecast is not a guarantee of the amount ofcash distribution. For the assumptions for the management status forecasts, please refer to “Assumptions Underlying Forecasts of
the Financial Results for the Fiscal Periods Ending May 2018 and November 2018” on page 11.

2

1. Affiliated Juridical Persons of the Investment Corporation“Structure of the Investment Corporation” in the most recent periodic securities report (yuka shoken hokokusho)(submitted on August 24, 2017) has been changed as follows.

(Note) Ooedo-Onsen Monogatari Co., Ltd., Ooedo-Onsen Monogatari Group Co., Ltd., Kagawa Prefecture Tourism
Development Ltd. and Reoma Unity Co., Ltd. are each considered a “Specified affiliated corporation” of the AssetManager as set forth in Article 12-3 of the Cabinet Office Ordinance on Disclosure of Information, etc. on Regulated
Securities (Ministry of Finance No. 22 of 1993; including subsequent revisions).

2. Management Policy and Management Status
2.1. Management Policy
Disclosure is omitted because there are no significant changes from the “Investment Policy,” “Investment
Targets” and “Distribution Policy” in the most recent periodic securities report (yuka shoken hokokusho)(submitted on August 24, 2017).
2.2. Management Status(1) Overview of the Fiscal Period under Review
a. Brief History of the Investment Corporation
Ooedo Onsen Reit Investment Corporation (the “Investment Corporation”) was established on March 29,
2016 (capital: 200 million yen, issued investment units: 2,000 units) by Ooedo Onsen Asset Management Co.,
Ltd. (the “Asset Manager”) as the founder under the Act on Investment Trusts and Investment Corporations(Act No. 198 of 1951, as amended) (the “Investment Trust Act”) and with Ooedo-Onsen Monogatari Co., Ltd.
(“Ooedo-Onsen Monogatari”) as the sponsor. Registration with the Kanto Local Finance Bureau was completed
on May 13, 2016 (registration number 119, filed with the Director of the Kanto Local Finance Bureau).
Subsequently, pursuant to the basic policy calling for “key investments in onsen and spa-related facilities
under the Ooedo business model (Note 1) that can achieve stable revenues and sustained growth” and “growthstrategy taking maximum advantage of support from the Ooedo-Onsen Monogatari Group (Note 2),” theInvestment Corporation issued new investment units via public offering (174,200 units) with August 30, 2016as the payment date and listed on the Real Estate Investment Trust Securities Market of Tokyo Stock Exchange,
Inc. (“Tokyo Stock Exchange”) (Securities Code: 3472) on August 31, 2016. Furthermore, the Investment
Corporation acquired 9 onsen and spa-related facilities (Note 3) (total acquisition price (Note 4): 26,844 million
yen) during the first fiscal period (the fiscal period ended November 2016). The total number of investment
units issued and outstanding of the Investment Corporation as of the end of the fiscal period under review(November 30, 2017) stands at 176,200 units.
(Note 1) “Ooedo onsen model” is business expertise introduced in facilities operated by the Ooedo-Onsen Monogatari Groupcapable of maintaining high profitability and stable occupancy, which are possessed by the Ooedo-Onsen MonogatariGroup and believed to be highly competitive.

－

3 －(Note2 ) “Ooedo-Onsen Monogatari Group” is comprised of the Investment Corporation’s sponsors, Ooedo-Onsen MonogatariGroup Co., Ltd. (the “Sponsor Group Parent Company”) and Ooedo-Onsen Monogatari Co., Ltd. (may be referred to
as “Sponsors” collectively with the Sponsor Group Parent Company); and its consolidated subsidiaries (meaning
subsidiaries provided for in Article 8, Paragraph 3 of the Regulation on the Terminology, Forms, and Preparation
Methods of Financial Statements (Ordinance of the Ministry of Finance No. 59 of 1963, as amended), including theAsset Manager). The same applies hereinafter.
(Note 3) “Onsen and spa-related facilities” refers to facilities which provide as a primary function onsen or hot baths, andinclude baths (public bathing facilities which employ onsen or other similar facilities; the same hereinafter), ryokan(lodging of which main structure and facilities are Japanese style), hotels (lodging of which main structure and facilities
are Western style), resort facilities (facilities to provide opportunities for sports or recreational activities during leisuretime), amusement parks, or other leisure facilities (including multi-use facilities that contain the foregoing) that include
hot baths as part of their core facilities. Onsen and spa-related facilities also refers to facilities as a whole, including
not only buildings with onsen or hot baths, but also the buildings and sites that are adjacent to such buildings oroperated as one facility. The same applies hereinafter.
(Note 4) “Acquisition price” indicates the purchase prices of properties stated in the sale and purchase agreements (not including
expenses, such as consumption tax, local consumption tax, or sale and purchase fees), rounded down to the nearest
million yen.

b. Investment Environment and Management Performance
The Japanese economy during the fiscal period under review showed continuous improvement in corporate
earnings centering on major companies with real GDP growth rate (the second preliminary estimates) for July
2017 to September 2017 up 2.5% from the previous fiscal period. However, consumer sentiment remained
weak due to stagnating real wages index. Under such circumstances, according to the Onsen Use Survey by
the Nature Conservation Bureau of the Ministry of the Environment, the total number of annual guests ofaccommodation facilities throughout a fiscal year has continued to increase from fiscal year 2013 to 2015,
albeit a continuing mild decline in the number of accommodation facilities, assuring stable demand for onsen.
Under such environment, the occupancy rate (Note 1) of the 9 onsen and spa-related facilities the Investment
Corporation acquired (total acquisition price: 26,844 million yen) in the first fiscal period was 100% as of theend of the fiscal period under review. In addition, the guestroom occupancy rate for the 9 properties owned
remained high at 89.6% on average for the fiscal period under review, resulting in cumulative totals of ADR(Note 3), RevPAR (Note 4) and sales mostly maintaining the actual results of the same period of the previous
year. As to unrealized gain/loss (Note 5) of the entire portfolio as of the end of the fiscal period under review,
unrealized gain of 1,198 million yen, which was increase by 174million yen from the end of the previous fiscal
period (May 31,2017) was recorded as a result of decline of book value due to depreciation and other factors,
while total appraisal value remained the same as that on the end of the previous fiscal period..
Furthermore, during the fiscal period under review, the Investment Corporation did not acquire any new
facilities. However, the Investment Corporation drew up plans for repairs and capital expenditures that take
into account the status, features, etc. of the owned properties and implemented necessary repairs and capital
expenditures, under trust-based collaboration with the Ooedo-Onsen Monogatari Group (Note 6), the operatorcum-tenant. (Repair expenses are basically borne by tenants based on the lease agreements.)(Note 1) Occupancy rate refers to the ratio of leased area to leasable area.
(Note 2) Guestroom occupancy rate is calculated using the following formula.
Guestroom occupancy rate = number of guestrooms sold during relevant period / number of rooms available for saleduring relevant period ×100 (%)(Note 3) Average daily rate (ADR) is calculated for a given time period by dividing total room revenue by the number of totalrooms sold(Note 4) Revenue per available room (RevPAR) is calculated for a given time period by dividing total room revenue by the
number of total rooms available for sale.
(Note 5) Unrealized gain/loss is calculated using the following formula.
Unrealized gain/loss = Total appraisal value of owned assets as of the end of the fiscal period under review – Totalbalance sheet amount (including equipment attached to buildings, structures, tools, furniture and fixtures as well asleasehold right)(Note 6) The Investment Corporation has leased properties it owns since September 1, 2016 pursuant to the lease agreement
concluded with Ooedo-Onsen Monogatari Co., Ltd. on July 29, 2016. However, the Sponsor Group Parent Company
has succeeded the contractual status following the absorption-type split between Ooedo-Onsen Monogatari Co., Ltd.
and the Sponsor Group Parent Company taking effect on November 1, 2017. Furthermore, the Investment Corporationand the Asset Manager concluded a sponsor support agreement with the Sponsors on November 1, 2017. The former
sponsor support agreement (as amended, the “former sponsor support agreement”) concluded on July 29, 2017
between Ooedo-Onsen Monogatari Co., Ltd., the Investment Corporation and the Asset Manager was invalidated
upon conclusion of the sponsor support agreement from that time on. In the sponsor support agreement, Ooedo-Onsen
Monogatari Co., Ltd. and the Sponsor Group Parent Company undertake the same obligations as those of sponsors
specified in the former sponsor support agreement as sponsors, and thus there is no substantive changes to the termsof the former sponsor support agreement due to the renewal of the agreement.

－4 －c. Overview of Capital Procurement
During the fiscal period under review, the Investment Corporation conducted scheduled repayment of 55
million yen each on July 31 and October 31, 2017 using cash on hand. As a result, the total amount of interestbearing debt stood at 11,624 million yen and the ratio of interest bearing liabilities to total assets (LTV) at 39.8%
as of the end of the fiscal period under review.
Since there was no issuance of new investment units during the fiscal period under review, unitholders’ capital
stands at 15,752 million yen and the total number of investment units issued and outstanding at 176,200 units.
d. Overview of Financial Performance and Distributions
As a result of the operations described above, business performance in the fiscal period under review
generated operating revenue of 1,032 million yen, operating profit of 519 million yen, ordinary profit of 421
million yen and profit of 420 million yen.
Concerning cash distribution for the fiscal period under review, pursuant to the cash distribution policies
provided in the Investment Corporation’s articles of incorporation, the amount of distribution was to be in excess
of an amount equivalent to 90% of the Investment Corporation’s earnings available for distribution as definedin Article 67-15, Paragraph 1 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, as
amended; the “Special Measures Concerning Taxation Act”). Accordingly, the Investment Corporation decided
to distribute 2,385 yen per unit (excluding excess cash distribution).
Furthermore, in accordance with the policy for “distribution of cash in excess of profit” as stated in theInvestment Corporation’s articles of incorporation, the Investment Corporation made a distribution for the
1,233,400 yen allowance for adjustment of temporary difference (as defined in Article 2, Paragraph 2, item 30of the Ordinance on Accountings of Investment Corporations (Cabinet Office Ordinance No. 47 of 2006, as
amended; the “Investment Corporations Accountings Ordinance”) for the purpose of reflecting the effect on
distributions of the difference between accounting and tax treatment of earnings in association with therecording of interest expenses of asset retirement obligation and recording of depreciation of building bookvalue corresponding to asset retirement obligation (as defined in Article 2, Paragraph 2, item 30 (b) of theInvestment Corporations Accountings Ordinance). This resulted in excess distribution per unit of 7 yen.
As a result, distribution per unit for the fiscal period under review was 2,392 yen (of which, excess distribution
per unit was 7 yen).
(2) Outlook for the Next Fiscal Perioda. Management Environment in the Next Fiscal Period
The Japanese economy in the next fiscal period onward needs a pickup in personal consumption in addition
to the ongoing growth trend outperforming the previous fiscal period’s real GDP backed by maintenance of
current strong foreign demand. As to the world economy, uncertainties are expected to remain with issues that
require close attention, such as movements in the administration of U.S. interest-rate policy, the Chinese
economy as well as North Korean issue, on top of interest rate trends in Japan.
In the hotel sector, eyeing the enforcement of the private lodging law in June 2018, the number of companies
seeking various business opportunities is on the rise, requiring attention to their impact on the existing lodging
facility industry. However, supply of guestrooms continues to increase against the backdrop of rising demand
for accommodation from increasing foreign visitors to Japan and strong demand from Japanese customers.
Under such circumstances, demand for onsen, which is deeply rooted in Japanese culture, has not only
continued to be stable but also been expected to expand backed by an increase in inbound tourists in line withthe progress in the tourism-oriented country policy promoted by the government as well as by the presence of alarge senior-age group arising from the aging of society, as well as their families. For these reasons, businessresults of the facilities owned by the Investment Corporation are expected to remain stable.
b. Future Management Policy and Challenges to Address(a) External Growth Strategy
i. Utilization of Sponsor Pipeline
Looking at the supply aspect of onsen and spa-related facilities, the number of inquiries for potential deal
information to the Ooedo-Onsen Monogatari Group is expected to increase as more ryokans decide to cease
operation and more hotels are put in the market for sale for various reasons such as a lack of successors anddeclining competitiveness due to aging properties.
In the period of one year from January 2017 to December 2017, the Ooedo-Onsen Monogatari Group acquireda total of 2 onsen and spa-related facilities (1 facility in Gero onsen in Gifu Prefecture in April 2017 and 1
facility in Kushimoto onsen in Wakayama Prefecture (Note 1) in June 2017). The Investment Corporation
believes active acquisition will take place going forward as there are a number of inquiries for potential deal
information (Note 2).
－

5 －Furthermore, in accordance with the sponsor support agreement concluded with the Ooedo-Onsen
Monogatari Group on November 1, 2017, the Investment Corporation is granted with preferential negotiatingrights for acquisition of facilities owned by the Ooedo-Onsen Monogatari Group and will also be preferentiallyprovided with third party property sales information acquired by the Ooedo-Onsen Monogatari Group. The
Investment Corporation intends to continuously acquire mainly onsen and spa-related facilities with the Ooedo
business model owned and operated by the Ooedo-Onsen Monogatari Group by utilizing abovementioned
support.
(Note 1) The Ooedo-Onsen Monogatari Group acquired shares of Kushimoto Onsen Hotel Co., Ltd., which owns the facility.
(Note 2) It is not guaranteed the Investment Corporation will be able to acquire these properties in the future.

ii. Synchronization with Revitalization Process of the Ooedo-Onsen Monogatari GroupThe Ooedo-Onsen Monogatari Group has expanded revitalization businesses since 2007 in which the OoedoOnsen Monogatari Group acquires onsen and spa-related facilities in various locations across the nation andthen introduces the Ooedo onsen model. The Investment Corporation intends to expand asset size bycontinuously acquiring properties that have achieved high profitability and stable operations through therevitalization process (Note 3).
On the other hand, the Investment Corporation believes that the Ooedo-Onsen Monogatari Group will beable to acquire new properties subject to revitalization by utilizing sales proceeds gained through sales ofproperties that have achieved high profitability and stable operations to the Investment Corporation, and thus
be able to expand its business platform as an operator of onsen and spa-related facilities.
In order to realize such a win-win relationship between the Investment Corporation and the Ooedo-Onsen
Monogatari Group, the Investment Corporation is provided with information on properties subject torevitalization as early as when the Ooedo-Onsen Monogatari Group starts discussions, and exchanges views
with the Investment Corporation’s own investment criteria while taking into account conflict of interest. At thesame time, the Ooedo-Onsen Monogatari Group also works to select properties with an eye to selling them tothe Investment Corporation. Furthermore, in renewal plans and such to take place after acquisition of properties
subject to revitalization, the Ooedo-Onsen Monogatari Group also implements, reflecting opinions of theInvestment Corporation, various measures to enable long-term operations such as seismic retrofitting andsecurement of legal compliance, assuming sales to the Investment Corporation.
(Note)

Revitalization processes are roughly divided into three phases; a phase to discuss acquisition of properties subject torevitalization, a renewal phase after acquisition of properties subject to revitalization and a phase to aim for stable
operation after opening renewed facilities.

iii. Utilization of Network Unique to the Asset Manager
In addition to the above, the Investment Corporation plans to consider selective investment in facilities
operated by those other than the Ooedo-Onsen Monogatari Group and facilities owned by third parties thatcover a market with a large number of potential users approachable from the perspective of “onsen/spa” andexpect stable operation, by utilizing a network unique to the Asset Manager in the future while maintaining
facilities owned or developed by the Ooedo-Onsen Monogatari Group as its main investment targets. The
Investment Corporation believes such can improve liquidity in terms of asset class through acquisition of awide range of onsen and spa-related facilities and other properties.
(b) Internal Growth Strategy
i. Rent Structure Emphasizing Stability
The Investment Corporation adopts a rent system which is comprised of primary rent (fixed rent combinedwith GOP-linked variable rent) with an addition of secondary rent (amount equivalent to real estate
management costs of respective facility) in the long-term lease agreements concluded with the Ooedo-Onsen
Monogatari Group companies which are the tenants of the owned assets (Note). This along with having tenants
bear repair expenses in principle allow the Investment Corporation to pursue benefits from the upside of a
GOP-linked rent income when facilities are generating favorable operating results while securing stability of
cash flow over the long term.
(Note)The rent system has been adopted in the lease agreements for the currently owned assets. However, this does notguarantee the same rent system will be adopted in the lease agreements for the facilities that the Investment Corporationacquires in the future.

ii. Strategic CAPEX (Note 1) Utilizing Value-Increasing Potential (Note 2)
The Investment Corporation implements proactive strategic CAPEX for properties with value-increasing
potential and aims to enhance the profitability of its portfolio.
Specifically, the Investment Corporation seeks value-increasing measures, such as increasing the number ofrooms and expanding open-air baths as well as increasing potential earnings that owned assets are supposed togenerate, by collaborating with the Ooedo-Onsen Monogatari Group which possesses know-how on adding
value to onsen and spa-related facilities. Seeking benefits from the upside of value-increasing investments, the－ 6 －Investment Corporation aims to gain additional rent income and to increase variable rent from expanded tenantearnings.
(Note 1) “Value-increasing potential” refers to the capability for potential enhancement of asset value that investments, etc. canbring.
(Note 2) CAPEX (Capital Expenditure) does not refer to repair expenses for maintenance of real estate but refers to expenditure
for enhancing value and competitiveness of real estate and its facilities.

(c) Financial Strategy
The Investment Corporation implements flexible financial strategies while emphasizing establishment of aconservative financial base. Although the Investment Corporation has set the upper limit of LTV at 60% inprinciple, it plans to maintain a conservative level at around 40% amid normal operation for the time being. As
to debt financing, the Investment Corporation aims to reduce financing costs while at the same time diversifying
financing sources. In addition, the Investment Corporation works to diversify/level repayment dates of interestbearing debt to reduce refinancing risks.
(3) Significant Subsequent Events
a. Issuance of New Investment Units
Issuance of new investment units was resolved at the board of directors meetings held on November 9 andNovember 20, 2017 as follows. Payments for the issuance of new investment units via primary offering andvia third-party allotment were completed on December 1, 2017 and on December 26, 2017, respectively. The
proceeds from the primary offering was allocated to part of funds for the acquisition of the 5 properties (pleaserefer to “c. Acquisition of Assets” later in this document) acquired on December 4, 2017 and the payment of
their related expenses. The proceeds from the third-party allotment will be allocated to part of funds for
repayment of loans, acquisition of specified assets (as defined in Article 2 Paragraph 1 of the Act on Investment
Trusts and Investment Corporations) in the future and payment of expenses related to the acquisition. As aresult, unitholders’ capital stands at 20,653 million yen and the total number of investment units issued andoutstanding at 235,347 units as of December 26, 2017.
(a) Issuance of new investment units via primary offering (public offering)Number of new investment units offered : 56,330 units
Issue price: 85,937 yen
Total issue price: 4,840,831,210 yen
Issue amount: 82,852 yen
Total issue amount: 4,667,053,160 yen
Payment deadline: December 1, 2017
Initial date of reckoning dividend: December 1, 2017(b) Issuance of new investment units via third-party allotment
Number of new investment units offered : 2,817 units
Issue amount: 82,852 yen
Total issue amount: 233,394,084 yen
Allottee: Nomura Securities Co., Ltd.
Payment deadline: December 26, 2017
Initial date of reckoning dividend: December 1, 2017b. Borrowing of Funds
The Investment Corporation made borrowings as follows on December 4, 2017 to partially fund acquisitionof the 5 properties acquired on December 4, 2017 (please refer to “c. Acquisition of Assets”) and their related
expenses.
Short-term loan (Note 1) (Tranche 2-A)
Lender: Syndicate with Sumitomo Mitsui Banking Corporation as the arranger(Note 7)
Loan amount: 580 million yen
Interest rate (Note 2): Base interest rate (JBA 1-month JPY TIBOR) (Note 3) (Note 6) plus 0.35%
Drawdown date
: December 4, 2017－7 －

Interest payment date

: The first interest payment date shall be the last day of December 2017, andsubsequent interest payment dates shall be the last day of every month(Note 5) and the principal repayment date.
Principal repayment date
: November 30, 2018 (Note 5)
Principal repayment method : Lump-sum repayment at maturity. If the borrower receives a refund of
consumption tax, the borrower shall make an early repayment of therefunded amount to the lender on the interest payment date following the
day on which the borrower receives the refund (“Refund Receipt Date”)(or, if the interest payment date that comes immediately after the Refund
Receipt Date is within 10 business days of the Refund Receipt Date, on thenext interest payment date after such interest payment date).
Security: Unsecured and unguaranteed
Long-term loan (Note 1) (Tranche 2-B)
Lender: Syndicate with Sumitomo Mitsui Banking Corporation as the arranger(Note 8)
Loan amount: 2,340 million yen
Interest rate
: Base interest rate (JBA 3-month JPY TIBOR) (Note 4) (Note 6) plus 0.65%
Drawdown date
: December 4, 2017
Interest payment date
: The first interest payment date shall be the last day of January 2018, andsubsequent interest payment dates shall be the last day of January, April,
July and October every year (Note 5) and the principal repayment date.
Principal repayment date
: November 30, 2020 (Note 5)
Principal repayment method : Starting with the first repayment on the last day of January 2018, principal
shall be repaid on the last day of January, April, July and October every
year (Note 5) in installments of 18,135,000 yen to be prorated in proportion
to the amount of unpaid principal of each individual lender’s individualloan pertaining to Tranche 2-B, and the loan outstanding shall be repaid on
the principal repayment date.
Security: Unsecured and unguaranteed
Long-term loan (Tranche 2-C)
Lender: Syndicate with Sumitomo Mitsui Banking Corporation as the arranger(Note 9)Loan amount: 2,500 million yen
Interest rate
: Base interest rate (JBA 3-month JPY TIBOR) (Note 4) (Note 6) plus 0.80%
Drawdown date
: December 4, 2017
Interest payment date
: The first interest payment date shall be the last day of January 2018, andsubsequent interest payment dates shall be the last day of January, April,
July and October every year (Note 5) and the principal repayment date.
Principal repayment date
: November 30, 2021 (Note 5)
Principal repayment method : Starting with the first repayment on the last day of January 2018, principal
shall be repaid on the last day of January, April, July and October every
year (Note 5) in installments of 19,365,000 yen to be prorated in proportion
to the amount of unpaid principal of each individual lender’s individualloan pertaining to Tranche 2-C, and the loan outstanding shall be repaid on
the principal repayment date.
Security: Unsecured and unguaranteed
Short-term loan (Tranche 2-D)
Lender: Syndicate with Sumitomo Mitsui Banking Corporation as the arranger(Note 10)－8 －

Loan amountInterest rate
Drawdown date
Interest payment date

: 230 million yen: Base interest rate (JBA 1-month JPY TIBOR) (Note 3) (Note 6) plus 0.35%: December 4, 2017
: The first interest payment date shall be the last day of December 2017, andsubsequent interest payment dates shall be the last day of every month(Note 5) and the principal repayment date.
Principal repayment date
: November 30, 2018 (Note 5)
Principal repayment method : Lump-sum repayment at maturity (Note 11)
Security: Unsecured and unguaranteed(Note 1) Short-term loan refers to a loan due within one year from the drawdown date, and long-term loan refers to aloan due within a period longer than one year from the drawdown date. The same applies hereinafter.
(Note 2) Borrowing expenses, etc. payable to the lenders are not included. The same applies hereinafter.
(Note 3) The base interest rate applicable to the calculation period for the interest payable on each interest payment dateshall be the JBA one-month Japanese yen TIBOR (Tokyo Interbank Offered Rate) (Note 6) two business days
prior to the interest payment date for the immediately preceding interest calculation period (in case of the firstinterest calculation period, two business days prior to the borrowing date). However, in cases where there is norate corresponding to the interest calculation period, the base interest rate for such interest calculation period
shall be calculated based on the method provided for in the loan agreements. The base interest rate corresponding
to the first interest calculation period is 0.04545%.
(Note 4) The base interest rate applicable to the calculation period for the interest payable on each interest payment dateshall be the JBA three-month Japanese yen TIBOR (Tokyo Interbank Offered Rate) (Note 6) two business days
prior to the interest payment date for the immediately preceding interest calculation period (in case of the firstinterest calculation period, two business days prior to the borrowing date). However, in cases where there is norate corresponding to the interest calculation period, the base interest rate for such interest calculation period
shall be calculated based on the method provided for in the loan agreements. Furthermore, each interest rate
will be 0% when it is below 0%. The base interest rate corresponding to the first interest calculation period is
0.04625%.
(Note 5) If this date falls on a day that is not a business day, the repayment date shall be the immediately following
business day or, if that immediately following business day falls in the next calendar month, the immediately
preceding business day.
(Note 6) Please refer to the Japanese Bankers Association (JBA) TIBOR Administration’s website(http://www.jbatibor.or.jp/english/) regarding Japanese yen TIBOR.
(Note 7) The syndicate consists of Sumitomo Mitsui Banking Corporation(Note 8) The syndicate consists of Sumitomo Mitsui Banking Corporation, The Toho Bank, Ltd., The Nomura Trust andBanking Co., Ltd., The Bank of Fukuoka, Ltd. and The Shinwa Bank, Ltd.
(Note 9) The syndicate consists of The Mie Bank, Ltd., The Tochigi Bank, Ltd., The First Bank of Toyama, Ltd., Fukoku
Mutual Life Insurance Company, The Bank of Kochi, Ltd., The Bank of Fukuoka, Ltd. and The Shinwa Bank,
Ltd.
(Note 10) The syndicate consists of Sumitomo Mitsui Banking Corporation.
(Note 11) Early repayment of the entire amount on January 31, 2018 using part of proceeds from the issuance of new
investment units via third-party allotment (233,394,084 yen) has been decided.

c. Acquisition of Assets
The Investment Corporation acquired 5 onsen and spa-related facilities with a total acquisition price of 9,861
million yen on December 4, 2017 as described below, using the proceeds from the issuance of new investment
units (please refer to “a. Issuance of New Investment Units” above) and borrowings (please refer to “b.
Borrowing of Funds” above).
Property name

Ooedo-Onsen Monogatari Nagasaki Hotel Seifu

Specified asset type

Real estate

Location (residence indication)

523, Otorimachi, Nagasaki-shi, Nagasaki

SellerKagawa Prefecture Sightseeing LLC.

Acquisition price (Note)

1,637 million yen

Property name

Ooedo-Onsen Monogatari Kounkaku

Specified asset type

Real estate

Location (residence indication)

1-10, Aza-Kurumayu, Narukoonsen, Osaki-shi,
Miyagi－9 －Seller

Kagawa Prefecture Sightseeing LLC.

Acquisition price (Note)

1,040 million yen

Property name

Kinugawa Kanko Hotel

Specified asset type

Real estate

Location (residence indication)359-2, Aza-Nakashima, Kinugawaonsentaki, Nikkoshi, Tochigi

SellerOoedo-Onsen Monogatari Co., Ltd.

Acquisition price (Note)

3,870 million yen

Property name

Ooedo-Onsen Monogatari Kinosaki

Specified asset type

Real estate

Location (residence indication)

1232-1, Aza-Kikuyashima, Momoshia, Kinosakicho,
Toyooka-shi, Hyogo

SellerOoedo-Onsen Monogatari Co., Ltd.

Acquisition price (Note)

2,084 million yen

Property name

Ooedo-Onsen Monogatari Higashiyama Grand Hotel

Specified asset type

Real estate

Location (residence indication)

5-1, Aza-Kamiyumoto, Oaza-Yumoto,Higashiyamamachi, Aizuwakamatsu-shi, Fukushima
Prefecture

SellerOoedo-Onsen Monogatari Co., Ltd.

Acquisition price (Note)

1,230 million yen(Note) “Acquisition price” indicates the purchase price of each property in the sale and purchaseagreement (not including expenses, such as consumption tax, local consumption tax, or sale andpurchase fees), rounded down to the nearest million yen.

－

10 －

Assumptions Underlying Forecasts of the Financial Results
for the Fiscal Periods Ending May 2018 and November 2018
Item
Calculation
periodAssumption
・・Managed Assets

・・・
Operatingrevenue・・

Fiscal period ending May 2018 (4th fiscal period: from December 1, 2017, to May 31,2018) (182 days)
Fiscal period ending November 2018 (5th fiscal period: from June 1, 2018, to November
30, 2018) (183 days)
14 properties, which are 9 properties the Investment Corporation owns as of November
30, 2017 and 5 properties acquired on December 4, 2017 (Ooedo-Onsen Monogatari
Nagasaki Hotel Seifu, Ooedo-Onsen Monogatari Kounkaku, Kinugawa Kanko Hotel,
Ooedo-Onsen Monogatari Kinosaki and Ooedo-Onsen Monogatari Higashiyama Grand
Hotel (the “Assets Newly Acquired”)), are assumed as managed assets.
It is assumed there will be no change (acquisition or disposition of assets), except for theacquisition of the Newly Acquired Assets, through to the end of the fiscal period ending
November 2018.
The managed assets may actually change due to acquisition of assets other than the owned
properties above, the disposition of assets under management, etc.
Lease operations revenue from the owned assets is calculated based on the leaseagreements effective as of the date of this document, taking into consideration market
trends and other factors. It is assumed that no rent payments will be behind or declined bytenants.
Rent is calculated based on the following assumptions:[Ooedo-Onsen Monogatari Reoma Resort]
Fixed rent: 62,456,896 yen monthly
Variable rent: 5,181,730 yen monthly; and will be calculated using the following
calculation method after June 2019(1) Modified GOP (Note 1) for the most recent one-year period × 5.0% (yearly; themonthly amount is 1/12th thereof)(2) Only if 64.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
With regard to Ooedo-Onsen Monogatari Reoma Resort, a fixed-term land leaseagreement has been executed with the tenant, and the Investment Corporation receives
a separate monthly land rent of 89,100 yen based on the fixed-term land lease agreement.
[Ooedo-Onsen Monogatari Ise-shima]
Fixed rent: 18,009,399 yen monthly
Variable rent: 962,993 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 4.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 77.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ito Hotel New Okabe]
Fixed rent: 12,296,799 yen monthly
Variable rent: 1,471,251 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 5.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 52.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.

－

11 －

Operating
revenue[Ooedo-Onsen Monogatari Atami]
Fixed rent: 15,619,380 yen monthly
Variable rent: 939,716 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 4.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 74.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Toi Marine Hotel]
Fixed rent: 9,098,235 yen monthly
Variable rent: 1,016,579 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 7.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 72.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Awara]
Fixed rent: 10,963,033 yen monthly
Variable rent: 608,360 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 3.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 62.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Kamoshika-so]
Fixed rent: 5,953,916 yen monthly
Variable rent: 655,836 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 6.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 62.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Ikaho]
Fixed rent: 6,126,558 yen monthly
Variable rent: 708,097 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 7.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 67.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Kimitsu-no-mori]Fixed rent: 4,098,412 yen monthly
Variable rent: 436,860 yen monthly from December 2016; and will be revised every six
months and calculated as follows:(1) Modified GOP for the most recent one-year period × 5.0% (yearly; the monthly
amount is 1/12th thereof)(2) Only if 52.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Nagasaki Hotel Seifu]
Fixed rent: 9,788,199 yen monthly (however, 10,286,583 yen monthly until May 2018)
Variable rent: 0 yen until May 2018. 498,384 yen monthly from June 2018; and will berevised every six months and calculated as follows:

－

12 －

(1)
(2)

Modified GOP for the most recent one-year period × 2.2% (yearly; the monthly
amount is 1/12th thereof)
Only if 44.7% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.

[Ooedo-Onsen Monogatari Kounkaku]
Fixed rent: 7,017,209 yen monthly (however, 7,772,214 yen monthly until May 2018)
Variable rent: 0 yen until May 2018. 755,005 yen monthly from June 2018; and will berevised every six months and calculated as follows:(1)
Modified GOP for the most recent one-year period × 4.5% (yearly; the monthly
amount is 1/12th thereof)(2)
Only if 45.3% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Kinugawa Kanko Hotel]
Fixed rent: 22,478,074 yen monthly (however, 23,666,168 yen monthly until May 2018)
Variable rent: 0 yen until May 2018. 1,188,094 yen monthly from June 2018; and will berevised every six months and calculated as follows:(1)
Modified GOP for the most recent one-year period × 2.4% (yearly; the monthly
amount is 1/12th thereof)(2)
Only if 47.5% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Kinosaki]
Fixed rent: 12,447,999 yen monthly (however, 13,098,944 yen monthly until May 2018)
Variable rent: 0 yen until May 2018. 650,945 yen monthly from June 2018; and will berevised every six months and calculated as follows:(1)
Modified GOP for the most recent one-year period × 2.4% (yearly; the monthly
amount is 1/12th thereof)(2)
Only if 47.7% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
[Ooedo-Onsen Monogatari Higashiyama Grand Hotel]
Fixed rent: 8,631,767 yen monthly (however, 9,572,334 yen monthly until May 2018)
Variable rent: 0 yen until May 2018. 940,567 yen monthly from June 2018; and will berevised every six months and calculated as follows:(1)
Modified GOP for the most recent one-year period × 4.5% (yearly; the monthly
amount is 1/12th thereof)(2)
Only if 45.0% of the modified GOP exceeds one year’s fixed rent, variable rent
will apply.
Fiscal Period Ending May 2018 (4th fiscal period)(Millions of yen)Primary rent (Note 2)
Fixed
Variablerent
rent(Note 3)(Note 4)375
31
(Note 6)

Property name
Ooedo-Onsen Monogatari
Reoma Resort
Ooedo-Onsen MonogatariIse-shima

Secondary
rent(Note 5)

Total
(Note 7)

34

440

108

7

3

119

Ito Hotel New Okabe

73

10

9

92

Ooedo-Onsen Monogatari
Atami

93

7

4

105

－

13 －

Ooedo-Onsen Monogatari
Toi Marine Hotel
Ooedo-Onsen Monogatari
Awara
Ooedo-Onsen Monogatari
Kamoshika-so
Ooedo-Onsen Monogatari
Ikaho
Ooedo-Onsen Monogatari
Kimitsu-no-moriOoedo-Onsen Monogatari
Nagasaki Hotel Seifu
Ooedo-Onsen Monogatari
Kounkaku
Kinugawa Kanko Hotel

54

6

1

63

65

4

9

79

35

4

6

46

36

5

4

46

24

3

5

33

60

-

6

67

45

-

5

50

139

-

8

148

Ooedo-Onsen Monogatari
KinosakiOoedo-Onsen Monogatari
Higashiyama Grand Hotel

77

-

6

83

56
(Note 6)

-

10

67

Total (Note 7)

1,248

80

115

1,444

Fiscal Period Ending November 2018 (5th fiscal period)(Millions of yen)Primary rent (Note 2)

Secondary
rent(Note 5)

Total
(Note 7)

31

34

440

108

7

3

119

73

10

9

92

93

7

4

105

54

6

1

63

65

4

9

79

35

4

6

46

36

5

4

46

24

3

5

33

58

2

6

68

42

4

5

51

134

7

8

150

74

3

6

84

52
(Note 6)

5

10

68

1,230

104

116

1,451

Fixed
rent
(Note 3)375
(Note 6)

Property name
Ooedo-Onsen Monogatari
Reoma Resort
Ooedo-Onsen MonogatariIse-shima
Ito Hotel New Okabe
Ooedo-Onsen Monogatari
Atami
Ooedo-Onsen Monogatari
Toi Marine Hotel
Ooedo-Onsen Monogatari
Awara
Ooedo-Onsen Monogatari
Kamoshika-so
Ooedo-Onsen Monogatari
Ikaho
Ooedo-Onsen Monogatari
Kimitsu-no-moriOoedo-Onsen Monogatari
Nagasaki Hotel Seifu
Ooedo-Onsen Monogatari
Kounkaku
Kinugawa Kanko Hotel
Ooedo-Onsen Monogatari
KinosakiOoedo-Onsen Monogatari
Higashiyama Grand Hotel
Total (Note 7)－

14 －Variablerent(Note 4)

(Note 1) “GOP” refers to gross operating profit, which is the amount remaining after deducting
expenses arising directly from managing each facility, such as labor expenses and generaland administrative expenses, from each facility’s sales. “Modified GOP” is the amountremaining after deducting real estate-related expenses for the property to be borne by thetenant (including, but not limited to, taxes and public charges, non-life insurance
premiums and land and house rent, but excluding an amount equivalent to Secondary
rent (defined below in Note 5)) from the GOP of each facility for the Modified GOP
Calculation Period (defined below in Note 4). The same applies hereinafter.
(Note 2) “Primary rent” refers to the sum of the fixed rent and the variable rent. The same applies
hereinafter(Note 3) “Fixed rent” refers to the monthly amount provided for in each facility’s lease agreement.
The same applies hereinafter.
(Note 4) “Variable rent" refers to the amount obtained by multiplying each facility’s modified GOP
for the most recent one-year period (for the six months starting from December of eachyear, this means the one-year period from March of that year to February of the following
year; for the six months starting from June of each year, this means the one-year period
from September of the previous year to August of that year) (these one-year periods arereferred to as “modified GOP Calculation Periods”) regarding each facility by the
specific rate provided for in each lease agreement (yearly; the monthly amount is 1/12th
thereof). The same applies hereinafter. For Ooedo-Onsen Monogatari Reoma Resort, it
will be 31 million yen until May 2019 and the amount obtained by the above calculation
method for June 2019 onward.
(Note 5) “Secondary rent” refers to an amount equivalent to the total amount of taxes, publiccharges, nonlife insurance premiums, and other expenses (real estate management
expenses) to be borne by the Investment Corporation for each facility owned by theInvestment Corporation. The same applies hereinafter.
(Note 6) Land rent based on the fixed-term land lease agreement is included in the fixed rent.
(Note 7) Rents of properties are rounded down to the nearest million yen. Therefore, the total ofeach property’s rent, the total of fixed rents, the total of variable rents and the total of
secondary rents may not add up to the figure indicated in the Total column.

Operatingexpenses

・

・

・
・

・
Non-operating
expenses・・

Borrowings

・Of the expenses related to leasing activities, which are a major component of operating
expenses, the expenses related to leasing activities other than the depreciation arecalculated based on past actual figures and by reflecting factors that cause expenses tofluctuate.
Generally, fixed asset taxes, city planning taxes, and other taxes for the sale and purchaseof real estate and the like are calculated on a pro rata basis and settled at the acquisition
date. However, at the Investment Corporation, for the fiscal period ending May 2018, theamount for only a certain period will be expensed, as the amount equivalent to thesettlement money for portfolio assets is included in the acquisition cost. The total amountof fixed asset taxes, city planning taxes, and other taxes included in the acquisition costof the Newly Acquired Assets is expected to be 5 million yen (an amount equivalent totaxes for 28 days). The amount to be expensed is expected to be 86 million yen for the
fiscal period ending May 2018 and 102 million yen for the fiscal period ending November
2018.
Building repair expenses are not expected to arise, as these expenses will, in principle, beborne by the tenant based on the lease agreement effective as of the date of this document.
Depreciation, which is calculated using the straight-line method inclusive of incidental
expenses and additional capital expenditure in the future, is assumed to be 417 million
yen for the fiscal period ending May 2018, and 424 million yen for the fiscal period ending
November 2018.
Expenses related to General Meeting of Unitholders are assumed to be 6 million yen for
the fiscal period ending May 2018.
The total amount of interest expenses and other borrowing-related expenses is expected
to be 137 million yen for the fiscal period ending May 2018, and 138 million yen for the
fiscal period ending November 2018.
As one-time expenses in the fiscal period ending May 2018, it is planned that expenses
for the issuance of new investment units, which was resolved at the Investment
Corporation’s board of directors meeting held on November 9, 2017, will be 28 million
yen; and these expenses will be fully amortized in the fiscal period ending May 2018.
The balance of loans outstanding as of November 30, 2017 is 11,624 million yen.
－

15 －

・

・

・
・

・

Outstanding
Investment Units・・
Distribution perunit(Excludingexcess cash
distribution)

・

Excess cash
distribution per
unit

・

・

・

Other

・

・

It is assumed that borrowings of 5,650 yen in total will be made in December 2017 as partof funds for acquiring the Newly Acquired Assets and the balance of loans outstanding
will be 16,857 million yen at the end of the fiscal period ending May 2018 and 16,091
million yen at the end of the fiscal period ending November 2018.
In the fiscal period ending November 2018, current portion of short-term loans (230
million yen) will be due for repayment on November 30, 2018, but it is assumed that early
repayment of the entire amount will be conducted on January 31, 2018.
In the fiscal period ending May 2018 and the fiscal period ending November 2018, it isassumed that scheduled repayment of 186 million yen will be conducted separately.
In the fiscal period ending May 2018, current portion of long-terms loans (500 million
yen) will be due for repayment on May 31, 2018, but it is assumed that they will be
refinanced for the same amount.
It is assumed that 580 million yen will be repaid using the expected refund of consumption
tax for property acquisition on November 30, 2018 as refund of consumption tax is
expected to be conducted in the fiscal period ending November 2018.
A total of 235,347 units, which is the sum of 176,200 units that have been issued as of theend of the fiscal period ended November 2017, 56,330 units issued via primary offeringand 2,817 units issued via third-party allotment in line with secondary distribution via
over-allotment that were resolved at the Investment Corporation’s board of directors
meetings held on November 9 and November 20, 2017, is assumed.
Distribution per unit is calculated by using the above 235,347 units as the total number ofinvestment units issued and outstanding at the end of each fiscal period.
Distribution per unit (excluding excess cash distribution) is calculated based on the policy
for cash distributions provided for in the Investment Corporation’s articles ofincorporation.
Distribution per unit (excluding excess cash distribution) may change due to various
factors, including changes of portfolio, changes in rent revenue due to a relocation oftenant, etc., the occurrence of unexpected capital expenditures, and other reasons.
Recording of allowance for adjustment of temporary difference of 2,824,164 yen is
expected concerning the difference in accounts for tax and accounting purposes associatedwith recording of asset retirement obligation.
Regarding conducting excess cash distribution, the Investment Corporation will have abasic policy of conducting excess cash distribution of which amount will be equivalent to
the increased amount of allowance for adjustment of temporary difference. Pursuant to
the policy, it is assumed that 12 yen of excess distribution per unit will be conducted ineach of the fiscal periods ending May 2018 and ending November 2018.
It is assumed that revisions that affect the above forecast figures will not be made to laws
or ordinances, tax systems, accounting standards, listing regulations, or rules or the likeset by The Investment Trusts Association, Japan.
It is assumed that unforeseen material changes in general economic trends, in real estatemarket conditions, or in any other factors will not occur.

2.3. Investment Risks
Disclosure is omitted because there are no significant changes from “Investment Risks” set out in the mostrecent periodic securities report (yuka shoken hokokusho) (submitted on August 24, 2017).

－

16 －

3. Financial Statements
3.1. Balance Sheets

AssetsCurrent assets
Cash and deposits
Prepaid expenses
Deferred tax assets
Other
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Accumulated depreciation
Buildings, net
Structures
Accumulated depreciation
Structures, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Total property, plant and equipment
Intangible assets
Leasehold right
SoftwareTotal intangible assets
Investments and other assets
Long-term prepaid expenses
Lease and guarantee deposits
Total investments and other assets
Total non-current assets
Total assets

－

17 －

2nd Fiscal Period(from December 1, 2016
to May 31, 2017)(Thousands of yen)
3rd Fiscal Period(from June 1, 2017 toNovember 30, 2017)

1,970,733
106,72815
1,105
2,078,582

1,949,727
116,674
13
3,625
2,070,040

18,169,276(394,939)
17,774,336
1,259
(7)
1,251
9,264,041
27,039,629

18,263,856(662,458)
17,601,397
1,259
(51)
1,207
255
(17)
237
9,263,321
26,866,164

157,802
6,963
164,765

157,802
6,161
163,963

147,310
10,000157,31027,361,706
29,440,289

98,491
10,000108,491
27,138,619
29,208,659

Liabilities
Current liabilities
Operating accounts payable
Current portion of long-term loans payable
Accounts payable - otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Advances received
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Tenant leasehold and security deposits
Asset retirement obligations
Total non-current liabilities
Total liabilities
Net assets
Unitholders' equity
Unitholders' capital
Deduction from unitholders' capital
Allowance for temporary difference adjustment
Total deduction from unitholders' capital
Unitholders' capital, net
Surplus
Unappropriated retained earnings (undisposed loss)
Total surplus
Total unitholders' equity
Total net assets
Total liabilities and net assets

－

18 －

2nd Fiscal Period(from December 1, 2016
to May 31, 2017)(Thousands of yen)
3rd Fiscal Period(from June 1, 2017 toNovember 30, 2017)

90,263723,000
226,007
8,212
915
61,072
184,050
1,211
1,294,733

63,196
723,000
197,098
7,508
870
20,086
185,105
3,731
1,200,597

11,012,750
868,270
67,248
11,948,269
13,243,002

10,901,250
868,270
67,397
11,836,917
13,037,515

15,752,576

15,752,576

(528)
(528)
15,752,047(1,762)(1,762)
15,750,814

445,238
445,238
16,197,286
16,197,286
29,440,289

420,330
420,330
16,171,144
16,171,144
29,208,659

3.2. Statements of Income(Thousands of yen)
2nd Fiscal Period(from December 1, 2016
to May 31, 2017)
Operating revenue
Lease business revenue
Total operating revenue
Operating expenses
Expenses related to rent business
Asset management fee
Asset custody fee
Administrative service fees
Directors' compensations
Other operating expenses
Total operating expenses
Operating profit
Non-operating income
Interest income
Interest on refund
Total non-operating income
Non-operating expenses
Interest expenses
Borrowing related expenses
Total non-operating expenses
Ordinary profit
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitRetained earnings brought forward
Unappropriated retained earnings (undisposed loss)

－

19 －

3rd Fiscal Period(from June 1, 2017 toNovember 30, 2017)

1,021,730
1,021,730

1,032,755
1,032,755

318,123
114,178
1,367
12,892
3,600
23,598473,760
547,969

355,550
110,490
1,315
12,3973,600
30,309513,663
519,092

8
2,267
2,275

10
－
10

47,40356,788104,191
446,053446,053916
9926
445,127111
445,238

45,04453,011
98,056
421,047
421,047872
2
874
420,172157
420,330

3.3. Statements of Unitholders’ Equity
2nd Fiscal Period (from December 1, 2016 to May 31, 2017)(Thousands of yen)
Unitholders’ equity
Unitholders’ capital

Surplus

Deduction fromunitholders' capital

Unappropriatedretained
Unitholders’ Allowance
Unitholders’
Totalearnings
capitalfordeduction capital, net (undisposedadjustment
from
loss)
of temporary unitholders’difference
capitalBalance at beginning ofcurrent period
Changes of items during
period15,752,576-- 15,752,576

Distribution of surplus
Excess cash distribution
from allowance fortemporary difference
adjustment

(528)

(528)

Total net
assets65,834

65,834 15,818,410 15,818,410(65,722)(65,722)(528)

ProfitTotal changes of items
during period
Balance at end of current
periodTotal
surplusTotal
unitholders’equity(65,722)(65,722)

(528)

(528)

445,127

445,127

445,127

445,127

378,876

378,876

-

(528)

(528)

(528)

379,404

379,404

15,752,576(528)(528) 15,752,047

445,238

445,238 16,197,286 16,197,286

3rd Fiscal Period (from June 1, 2017 to November 30, 2017)(Thousands of yen)
Unitholders’ equity
Unitholders’ capital

Surplus

Deduction fromunitholders' capital

Unitholders’capitalBalance at beginning ofcurrent period
Changes of items during
period15,752,576

Unappropriatedretained
Unitholders’
AllowanceTotal
earnings
fordeduction capital, net (undisposedadjustment
from
loss)
of temporary unitholders’difference
capital(528)(528) 15,752,047

Distribution of surplus

445,238(445,081) (445,081)

Excess cash distribution
from allowance fortemporary difference
adjustment(1,233)(1,233)(1,233)

ProfitTotal changes of items
during period
Balance at end of current
period445,238

Total
surplus16,197,286 16,197,286(445,081)(445,081)(1,233)(1,233)

420,172

420,172

420,172(26,142)(26,142)(1,233)(1,233)(1,233)(24,908)(24,908)

15,752,576(1,762)(1,762) 15,750,814

420,330

420,330

20 －Total net
assets420,172-－

Total
unitholders’equity16,171,144 16,171,144

3.4. Statements of Cash Distributions
(Yen)
Item

2nd Fiscal Period(from December 1, 2016
to May 31, 2017)

3rd Fiscal Period(from June 1, 2017
to November 30, 2017)

I. Unappropriated retained earnings
II. Addition of excess distribution
Of which, allowance for adjustment of
temporary difference
III. Distribution amount[Distribution amount per unit]
Of which,
Distribution amount from earnings[Of which, excess cash distribution per unit]
Of which,
Allowance for adjustment of temporary
difference

445,238,882
1,233,400

420,330,089
1,233,400

1,233,400

1,233,400

446,314,600[2,533]

421,470,400[2,392]445,081,200

420,237,000[2,526][2,385]

1,233,400

1,233,400[Of which, excess cash distribution per unit
(pertaining to allowance for adjustment of
temporary difference)]
IV. Retained earnings carried forward

[7]

[7]

Method of calculating distribution amount

157,682

93,089As described above, distribution per unit
for the fiscal period under review is 2,533
yen.
Concerning cash distribution (excludingexcess cash distribution), in order to ensurethat the maximum amount of cash
distribution of earnings would be included indeductible expenses based on application of
special provisions for taxation on investment
corporations (Article 67-15, Paragraph 1 of
the Special Measures Concerning Taxation
Act), the Investment Corporation decided to
distribute almost the entire amount of theearnings provided in Article 136, Paragraph
1 of the Act on Investment Trusts andInvestment Corporations, excluding the
portion where cash distribution perinvestment unit would be less than JPY1. As
a result, the Investment Corporation declareda cash distribution per investment unit
(excluding excess cash distribution) of 2,526
yen.
In addition, pursuant to the policy for“distribution of money in excess of profits”
as stated in its articles of incorporation, theInvestment Corporation decided to make a
distribution for the 1,233,400 yen allowance
for adjustment of temporary difference forthe purpose of reflecting the effect on
distributions of the difference in accounts for
tax and accounting purposes in association
with expenses related to asset retirement
obligations (as defined in Article 2,
Paragraph 2, item 30 (b) of the Investment
Corporations Accountings Ordinance). This
resulted in distribution of allowance foradjustment of temporary difference of 7 yen
per investment unit.

As described above, distribution per unit
for the fiscal period under review is 2,392
yen.
Concerning cash distribution (excludingexcess cash distribution), in order to ensurethat the maximum amount of cash
distribution of earnings would be included indeductible expenses based on application of
special provisions for taxation on investment
corporations (Article 67-15, Paragraph 1 of
the Special Measures Concerning Taxation
Act), the Investment Corporation decided to
distribute almost the entire amount of theearnings provided in Article 136, Paragraph
1 of the Act on Investment Trusts andInvestment Corporations, excluding the
portion where cash distribution perinvestment unit would be less than JPY1. As
a result, the Investment Corporation declareda cash distribution per investment unit
(excluding excess cash distribution) of 2,385
yen.
In addition, pursuant to the policy for“distribution of money in excess of profits”
as stated in its articles of incorporation, theInvestment Corporation decided to make a
distribution for the 1,233,400 yen allowance
for adjustment of temporary difference forthe purpose of reflecting the effect on
distributions of the difference in accounts for
tax and accounting purposes in association
with expenses related to asset retirement
obligations (as defined in Article 2,
Paragraph 2, item 30 (b) of the Investment
Corporations Accountings Ordinance). This
resulted in distribution of allowance foradjustment of temporary difference of 7 yen
per investment unit.

－

21 －

3.5. Statements of Cash Flows(Thousands of yen)
2nd Fiscal Period(from December 1, 2016
to May 31, 2017)
Cash flows from operating activities
Profit before income taxes
Depreciation
Borrowing related expenses
Interest income
Interest expenses
Decrease (increase) in operating accounts receivable
Increase (decrease) in operating accounts payable
Decrease (increase) in consumption taxes refund
receivable
Increase (decrease) in accrued consumption taxes
Decrease (increase) in prepaid expenses
Increase (decrease) in accounts payable - other
Increase (decrease) in advances received
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from long-term loans payable
Decrease in short-term loans payable
Repayments of long-term loans payable
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

－

22 －

3rd Fiscal Period(from June 1, 2017 toNovember 30, 2017)

446,053
264,32956,788(8)47,403326(15)421,047
268,383
53,011(10)
45,044－
1,946

1,431,892－

61,072
3,902
8,760
793
148
2,321,448
8(46,770)(1,322)
2,273,362(40,986)(14,137)
986
1,055
148
736,48910(45,748)(917)
689,833(45,760)(1,523)(47,284)(153,024)－(153,024)

500,000(2,177,000)(111,500)(66,251)(1,854,751)
371,327
668,635
1,039,962－－(111,500)(446,314)(557,814)(21,005)
1,039,962
1,018,957