Interim Financial Results for the Fiscal Period Ending

February 2017 (1st Fiscal Period)

Sakura Sogo
Sogo REIT
REITInvestment
Investment
Corporation
SakuraCorporation
1

Contents

Sakura Sogo REIT Investment Corporation

Characteristics of the Investment Corporation
Basic Principles of the Investment Corporation
Introduction of the Sponsors
Sponsor Support Structure
Business Performance Forecast
Portfolio Investment Guidelines
Portfolio Data
IPO Highlights

3
4
5
6
7
8
9
11

Overview of Interim Financial Results
Interim Balance Sheet and Interim Statement of Income
Operational Status of Portfolio
Financial Highlights

12
13
14
15

Growth Strategy
Short Term Value Enhancing Initiatives
Basic Policy for External Growth
Roadmap for GrowthInternal Growth Strategy and Specific Measures
Basic Policies for Internal Growth
Financial Strategy

16
17
18
19
20
21
22

2

Appendix
23
Macro Environment
24
Portfolio List
25
Portfolio Map
26
Income and Expenditure Forecast by Property for 1st Fiscal
Period (173 operating days)
27
Status of Unitholders
28
Change in Investment Unit Price29
Governance Structure30
Overview of the Investment Corporation
31

Sakura Sogo REIT Investment Corporation

Characteristics of the Investment Corporation

Sakura Sogo REIT Investment Corporation
3

Basic Principles of the Investment Corporation

Sakura Sogo REIT Investment Corporation

The Pursuit of Growth & Stability

Nippon Kanzai Co., Ltd.
An independent Australian real estate and fundmanagement group with an extensive track record inmanagement

A building management and operation company inJapan boasting a history of over 50 years

Our core features and strengths

12Securing Stability through the
Combination and Diversification ofAsset Type and Location

Expected Growththrough Maximization of
Acquisition
Opportunities

3

4

Galileo Group (Note 1) and Nippon Kanzai Leverage off of Nippon Kanzai
Group's (Note 2) Robust Property
Group’s Real Estate
Sourcing (Procurement) Capabilities
Management Know-How

10 year track record of co-managing the existing portfolio(Historical average property occupancy rate maintained at 97.6%)(Note 1) Refers to a corporate group consisting primarily of Galileo Sydney Holdings Pty Limited (hereinafter “Galileo”) and in addition Galaxy JREIT Pty Limited and Werrett Family Pty Ltd.
(Note 2) Refers to a corporate group comprised of Nippon Kanzai Co., Ltd. (hereinafter “Nippon Kanzai”) and in addition 12 consolidated subsidiaries including Tokyo Capital Management Co., Ltd. (hereinafter“Tokyo Capital Management,” Three-s Inc. and Nippon Kanzai Environment Service Co., Ltd., 24 affiliated companies accounted for by the equity-method and other affiliated companies (as of the endof March 2016).

4

Introduction of the Sponsors

Sakura Sogo REIT Investment Corporation

Nippon Kanzai Co., Ltd.
Galileo Group is an independent Australian real estate and fund management group with aproven track record in various real estate investment and developments in Australia, Japanand the U.S. It has experience and know-how in various aspects of real estate investment
and development including investment property acquisition and value increase as well as
financing through equity and loan transactions. It first became involved in investment
activities and management of real estate located in Japan in 2006.

Track Record of Galileo Group

Characteristics of Nippon Kanzai Group

2003

2006

2016

Established an Australian
listed REIT (investment
target: U.S. shopping
centers)

Established an Australian
listed REIT (investment
target: Japanese diversified
portfolio)

Established a REIT listed on
Tokyo Stock Exchange(investment target: Japanesediversified portfolio)■ Acquisitions by Asset Type
(U.S./Japan)■ Galileo Group’s Acquisitions■ Development by Asset

Residential
3.1%

and Developments (global)

Other
3.3% Office
9.4%

Retail84.2%

Development Land lots
(Australia)
5.6%
32.2%

Acquisition(U.S./Japan)
67.8%(Source) Galileo Group(Note) Cumulative figures from 2003 to September 30, 2016.

5

Type (Australia)

Total of500.6
billion yen

Total of339.5
billion yen

Nippon Kanzai Group, established in 1965, is a corporate group headed by Nippon
Kanzai Co., Ltd., one of the major companies involved in building management andoperation offering a full-line of real estate management services. It is entrusted with thebuilding management and operation of a variety of buildings covering office buildings,
condominiums and retail facilities in major cities across Japan and through its business
operations, has acquired extensive know-how in the building management andoperation of buildings of various sizes and varying purposes of use and in a variety oflocations.

Retail6.0%

Total of161.2

billion yen

Residential
88.4%▪ Provision of a Full-Line of Real Estate Management Services
Within its core business of building maintenance, in addition to providing individual
services including facilities management, cleaning and security, it is also a pioneer inthe carrying out of integrated management and the group as a whole covers
business areas such as property management business aimed at increasing realestate value.

▪ High Level of Management
Nippon Kanzai Group is able to achieve more appropriate and efficient building
maintenance and management by developing and leveraging its own originaltechnology and databases described below.

Wide-Area Facility
Management System
WAFMTM

LEAD-Web System

Building Health Record

A network based system whichenables even buildings locatedat distant sites to bemonitored remotely 24 hours
a day, 365 days a year.

A portal site system whichenables management
information of multiple
buildings to be shared withbuilding owners and centrally
managed.

Nippon Kanzai Group's
internal databaseconsolidating the accumulated
data on buildings under its
management.

Sponsor Support Structure

Sakura Sogo REIT Investment Corporation

Leveraging off of the Wide Range of Support Provided by Galileo and Nippon Kanzai GroupThe Asset Management Company receives extensive support for the Investment Corporation‘s external and internal growth based on the Sponsor Support
Agreement executed with Galileo and Nippon Kanzai Group’s core companies, etc.(Note1)
Support Provided
Provision of sales information on held properties and granting of first refusal rights
Provision of information on external properties, etc.

External Growth Support

Provision of warehousing functions
Gathering of information on the real estate transaction market and provision of results of analyses
Examining joint ownership of properties
Provision of advice on investment strategies and global offerings
Provision of advice on the management and operation of properties

Internal Growth Support

Support and cooperation with sourcing, redevelopment and renovations
Dispatching seconded staff and other human resource support

Same Boat Investment by Galileo Group and Nippon Kanzai Group
Both sponsors (Note 2) acquired investment units of the Investment Corporation at the time of IPO in order to align their interests with those of the unitholders’.
As a result, each owns 2.6% of investment units issued and outstanding (5.2% in total by both sponsors).

Nippon Kanzai Co., Ltd.
Investment in the Investment
Corporation by Galileo
Group(Note 1) "Nippon Kanzai Group’s core companies" means Nippon Kanzai and Tokyo Capital Management.
(Note 2) "Sponsors" means Galileo, Nippon Kanzai and Tokyo Capital Management which have executed a Sponsor Support Agreement.

6

Investment in the Investment
Corporation by Nippon Kanzai Group

Business Performance Forecast

Sakura Sogo REIT Investment Corporation

Forecast for the fiscal period ending February 2017 (1st fiscal period)

Unit: million yen

Previous forecast
September 8, 2016

Current forecast November
14, 2016

Increase(decrease)

Operating revenue

2,291

2,280

(11)

Downtime due to tenant replacement

Operating expenses

1,382

1,316

(66)

Recording of fixed asset tax and city planning tax, etc.
upon finalization of tax amountNon-operating income
Non-operating expenses

0
808

0
577

0
(231)

Decrease of investment unit issuance expenses

Ordinary profit

101

387

286

Decrease of operating expenses and non-operating
expenses

Net profit

101

387

286

Increase of ordinary profit

305 yen

1,164 yen

859 yenDistribution per unit

Major factors

Increase of net profit

Forecast for the fiscal period ending August 2017 (2nd fiscal period)
Unit: million yen

Operating revenue
Operating expenses
Non-operating income
Non-operating expenses
Ordinary profit
Net profit

Distribution per unit

Previous forecast
September 8, 2016

Current forecast
November 14, 2016

Increase(decrease)

2,418
1,328
0
137
953
953

2,419
1,329
0
137
953
953

1
1
0
0
0
0

2,863 yen

2,863 yen

0 yen

When assuming investment unit price to be 80,000 yen,
distribution yield is 7.2% (the average of J-REITs is around3.7%).

7

Major factors

As previously forecast in general

Portfolio Investment Guidelines

Sakura Sogo REIT Investment Corporation

1.
2.
3.
4.

Able to make flexible investments with respect to asset type and area and thereby acquire properties which will contribute to the maximization of cash flow.
Able to reduce portfolio concentration risks by aiming to diversify the portfolio by purpose of use as well as diversifying the portfolio areas.
Able to secure the potential for expanding portfolio size through the maximization of acquisition opportunities.
Able to develop new earning opportunities by gaining a proper understanding of the changes in future real estate needs and flexibly responding thereto toachieve ongoing growth.
5. Able to pursue opportunities to recycle capital into alternative investments that will enhance investor value.

Investment Ratio by Asset Type Use (Based on acquisition price) (Note)
Investment Ratio by Asset TypeGrowth↑Office30～60％
Residential

10～30％↓

RetailStability

30～60％
Other

0～20％

Characteristics of Asset Type○○

During economic expansion, up-side potential can be capitalized on
By targeting a wide scale office buildings for investment, it is possible to pursue a large numberof investment opportunities and secure relatively high liquidity.

○

Rental demand and rent rates are relatively stable irrespective of economic changes and tenants
are diversified making residential housing suitable as a medium to long-term stable investment

In areas withstable population, there will always be consumer activity so we can expect to
DUMMYachieve stable rent incomes.
○ A long-term stable cash flow will be created by, as a general rule, executing lease agreementswith a lease term of at least three years or more which do not allow for early termination.
○○

The potential and value, etc. of each individual property will be identified and the goal will be to
conduct flexible property acquisition and investment.

Investment Ratio by Area (based on acquisition price) (Note)
Tokyo Metropolitan Area

Regional Major Cities

Approx. 50%

Approx. 40%

Other

Approx.
10%(Note) The ratios in the above are our target ratios for our asset investment over the medium to long-term which depending on the real estate market and future property acquisitions, etc. which
we may temporarily exceed or fall below.

8Portfolio Data (1)Sakura Sogo REIT Investment Corporation

Portfolio Summary
as of September 30, 2016

No. of Acquired Properties

18

properties

Total Appraised Value

58,258million yen

Average Appraised NOI Yield

5.5%

Average Occupancy Rate

97.9%

Total Acquisition Price

57,360

million yen

Average Appraised NOI Yield after Depreciation

4.6%

Portfolio Diversification

as of September 30, 2016

■ Investment Ratio by Asset Type

Other
6.7%
Residential
11.2%

Retail39.2%
9■ Investment Ratio by Area

Other
7.2%

Office43.0%

Tokyo
Metropolitan Area
51.0%

Major Regional
Cities41.8%

Portfolio Data (2)Sakura Sogo REIT Investment Corporation

Contribution of NOI Yield of the Initial Portfolio and Weighted Average lease Expiry
as of September 30, 2016
OfficeRetailResidential

Other

Appraised NOI yield

Shiroi Logiman

7%
Funabashi Hi-Tech Park

Matsuya Residence Sekime

Funabashi Hi-Tech
La Park Kishiwada
Park Hidan
Seiyu Minakuchi
Suroy Mall Nagamine
Confomall Sapporo

Urban Plaza Imazato
6%Shin-Yokohama Nara Bldg
Royal Hill Kobe Sannomiya II

Suroy Mall Chikushino

Hiei-Kudan Bldg

5% Takadanobaba Access
NK Bldg
Tsukasamachi Bldg

4%

Azabu Amerex Bldg
Seishin Bldg
The size of the circle for each property indicates acquisition price

2 years

4 years

6 years

8 years

10 years

12 years

14 years

16 years

Weighted Average Lease Expiry

10

IPO Summary

Sakura Sogo REIT Investment Corporation

Type of Offering

Debt Profile

Soliciting overseas investors through extraordinary report typeoffering in addition to domestic offering

Stable and sound loan formation in place with a syndicate oflenders

Securities code

3473

Date of listing

September 8, 2016

91,000 yen per unit

Issue price332,000 units

No. of units offered

Total amount of units offered

30,212 million yen

Ratio of domestic/overseas offerings
Domestic:

11

90％ Overseas: 10％

Conservative balance sheet leverage

Average loan maturity

Weighted average cost of all-in debt

48.4 ％
2.73 years
82 bpsSakura Sogo REIT Investment Corporation

Overview of Interim Financial Results

Sakura Sogo REIT Investment Corporation
12

Interim Balance Sheet and Interim Statement of Income
Interim Balance Sheet

Unit: million yen

AssetsCurrent assets
Cash and deposits

Interim Statement of Income
Operating revenue

5,744
731

Lease business revenue
Other lease business revenue
Operating expenses

Unit: million yen
292
255
36
153

Other

3,577
1,436

Expenses related to rent business

116

Non-current assets

58,107

Asset management fee

13

Property, plant and equipment

57,129Asset custody fee/Administrative service fees

4

Investments and other assets

978

Directors’ compensations

6
13

Cash and deposits in trust

Deferred assets
Organization expenses
Total assets

63,851

Current liabilities
Operating accounts payable

Short-term loans payable

Other operating expenses
Operating profit

0Interest income
Non-operating expenses

0
433

9,817

Interest expenses

11

247
8,900

Depreciation of deferred organization expenses

51

Investment unit issuance expenses

166

Accounts payable – other155

Investment unit listing related expenses

Advances received

286

Borrowing related expenses

Other

229

Other

Non-current liabilities

Long-term loans payable
Tenant leasehold and security deposits in trust
Total liabilities

138

Non-operating income

Liabilities

13

Sakura Sogo REIT Investment Corporation

0
204
0

25,074

Ordinary profit (loss)-294

22,000Interim net profit (loss) before income taxes

-294

3,074

Interim net profit (loss)-295

34,892

Unappropriated retained earnings (undisposed loss)-295

Total unitholders’ equity

28,959Unitholders’ capital

29,254

Surplus-295

Total net assets

28,959Total liabilities and net assets

63,851Operational Status of Portfolio
Occupancy

Leasing Status
as of October 31, 2016

Office Central Tokyo

Office Overall

Sakura Sogo REIT Investment Corporation

100.0%

98.4%

OfficeTakadanobaba Access: Through proactive leasing efforts, two out of four floors for which leases were

terminated at the end of October have been contracted at terms more favorable than forecasted. We havealso received LOIs for the residual two floors; one lease agreement is targeted for execution by the end of
November and lease terms for the other floor are under negotiation targeting execution in January 2017.
Furthermore, for two additional floors that will be vacated at the end of December due to a consolidation
within subject property, we have been receiving inquiries continuously since commencing leasing efforts andare already negotiating lease terms for an LOI obtained on 25 November. With positive factors such as
close proximity to Nishi Waseda Station (1 min) and surrounding view of abundant greenery, we do notforesee an extended period of downtime.

Tsukasamachi Bldg: Due to tenancies scheduled for future cancellation still being physically occupied,

RetailResidential

98.5%

95.2%

the number of candidate tenant inspections has been limited. An open house is scheduled for early
December when one of the tenancies becomes vacant. Currently an existing tenant as well as several othercandidate tenants are considering this space. Multiple tenant candidates are considering the 5F space which
will become vacant in April 2017.

Shin-Yokohama Nara Bldg: We received an LOI from a candidate tenant for 6F and are negotiatinglease terms and conditions targeting execution in January 2017. We have been receiving continuous
inquiries for the partial 10F unit that became vacant on 20 November and anticipate it will be retenanted
shortly.

Retail
La Park Kishiwada: Leasing activity for the approx. 200 Tsubo of space on 2F has been conducted

Other Facilities

99.2%

primarily by leveraging off of the nationwide retail tenant network of subject property’s PM company. Goingforward, we will strengthen efforts via engaging a local retail broker who will contact end tenants directly ona retainer basis as well as conveying tenant solicitation information to over 300 local brokers on a regularbasis.

Residential

Overall14

97.9%

As tenant turnover (frequent cancellations and new leases) is the norm, dissimilar to other asset types, wehave made efforts to minimize down time while maintaining appropriate rents for vacant units throughconstant dialogue and sharing of information with local brokers as well as adopting measures and terms
mutually beneficial for both landlord and tenant.

Financial Highlights

Sakura Sogo REIT Investment Corporation

Long-Term Debt Ratio

Fixed Interest Ratio

Short-term

Floatingloans payableinterest rate

28.8%

28.8%

Borrowings
Classific
ation

BorrowedamountLenderInterest rate

Repayment date

4,000

Base Rate +0.2%(floating)

August 31, 2017

4,900

Base Rate +0.2%(floating)

August 31, 2017

Sumitomo Mitsui Banking Corporation, Shinsei Bank,
Limited, Resona Bank, Limited, Aozora Bank, Ltd.

6,000

0.62473% (fixed)

August 31, 2018

Sumitomo Mitsui Banking Corporation, Shinsei Bank,
Limited., Resona Bank, Limited., Aozora Bank, Ltd., The
Nishi-Nippon City Bank, Ltd., The Bank of Fukuoka, Ltd.

4,000

0.71096% (fixed)

August 30, 2019

Sumitomo Mitsui Banking Corporation, Shinsei Bank,
Limited., Resona Bank, Limited., Aozora Bank, Ltd., ORIX
Bank Corporation

6,000

0.81842% (fixed)

August 31, 2020

Sumitomo Mitsui Banking Corporation, Shinsei Bank,
Limited., Resona Bank, Limited., Aozora Bank, Ltd., ORIX
Bank Corporation

6,000

0.93842% (fixed)

August 31, 2021

Sumitomo Mitsui Banking Corporation, Shinsei Bank,
Limited, Resona Bank, Limited, Sumitomo Mitsui Trust

Short Bank, Limited.
-term Sumitomo Mitsui Banking Corporation, Shinsei
Bank, Limited.

Fixed

interest rateLong-term

71.2%

loans payable
71.2%

Longterm

Summary of Repayment Deadlines

30,900Total

Unit: million yen

Balance of Borrowings by Lenders

15,000

The Bank of Fukuoka, Ltd.
The Nishi-Nippon City

12,0009,000

Bank, Ltd.

8,900

3.2%

Sumitomo Mitsui Trust
Bank, Limited.
3.2%

3.2%
Sumitomo Mitsui

6,000

6,000

6,000

6,000

4,000

3,000

ORIX Bank Corporation

Banking Corporation

6.5%

32.2%

Aozora Bank, Ltd.
9.7%

0
2017

15

2018

2019

2020

2021

Collateral(Millions of Yen)

Resona Bank, Limited.

Shinsei Bank, Limited.

9.7%

32.2%

Unsecured andunguaranteedSakura Sogo REIT Investment Corporation

Growth Strategy

Sakura Sogo REIT Investment Corporation
16

Short Term Value Enhancing Initiatives
Capital Recycling

Internal Growth
Strategy

Sakura Sogo REIT Investment Corporation

Basic Policy: Asset repositioning• Identify assets within the portfolio that are non-core with low post depreciation distribution yields and ones with less possibility forfurther upside.
• Divest of them at a premium to their book values• Recycle capital towards accretive acquisitions with a bias towards Tokyo office and residential.

Basic Policy: To realize internal growth by reducing costs and improving rent revenues• Maximize rent: Negotiate rent increases with tenants whose passing rents are below market. Strive to shorten the assumed
vacancy period through speedy leasing activities with thorough review of cost-effectiveness of broker fees.

Financial Strategy•

Improve other revenue streams and reduce costs: Promote actions to increase revenue, such as installing rooftop telcom•

antennas, while reducing costs by updating/changing facility equipment, such as introducing LED lighting, as needed.
Besides these measures, will pursue potential for internal growth by conducting thorough monitoring of property managers andbuilding managing companies of each property going forward.

Basic Policy: Enhance financial stability with the aim of obtaining credit ratings•••

Executed debt financing from a loan syndicate with Sumitomo Mitsui Banking Corporation as the arranger
Achieved diversification of repayment dates and fixation of interest rates
Planning to conduct partial early repayment of borrowings using the refund of consumption taxes as the source of repayment
funds in the 2nd fiscal period. As a result,- assumed total assets-based LTV at the end of the 1st fiscal period (ending February 2017) is 48.6%, and- assumed total assets-based LTV at the end of the 2nd fiscal period (ending August 2017) is 46.6%

Cumulative Investment System• Implement for officers and employees of the asset manager, Sakura Real Estate Funds Management, Inc. to acquire investment unitsof Sakura Sogo REIT.
• This will align the interests of Sakura Sogo REIT with those of the unitholders as is the case with the Sponsor Group.

17Basic Policy for External Growth

Sakura Sogo REIT Investment Corporation

Leveraging Property Sourcing (Procurement) Capabilities of Sponsors

Investment Decisions based on Close Examination of Properties

The Investment Corporation receives extensive property sales information from Galileo
and Nippon Kanzai Group’s core companies based on the Sponsor Support Agreement
and aims to achieve external growth by examining the aggressive acquisition ofproperties which match its investment policies.

The Investment Corporation makes decisions on property
acquisitions consistent with stated investment guidelines based on
careful examination of the potential to enhance the value of theproperties being examined through proactive asset management.

Extensive Property Sourcing Routes
Nippon Kanzai Group’s expertisein building management andmaintenanceWarehousing through Galileo and Nippon Kanzai
Group’s Core Companies, etc.
Sponsor Support Agreement

Nippon Kanzai Co., Ltd.
Network with domestic and global reachGood relationships with property owners• Has accumulated extensive information on realestate transactions in Japan based on its pastexperience in real estate management in Japan
spanning over about ten years.
• Able to build long-term business relationships withreal estate companies, investment business
operators, financial institutions and pension funds,
etc. overseas as an independent Australian realestate and fund management group.
• Able to do business with a wide range of partners
without being restricted to any corporate group.

• Conducts business with a large number ofcompanies through its building management andoperation business which extends to major cities
throughout the country.
• Able to exchange a variety of information on realestate with property owners and other property
holders throughout Japan and able to obtain sales
information on a diverse range of properties acrossJapan.

Direct discussions with fund managers conducting activities
overseas

Access information directly from property owners

18

Careful Examination• Expenses for conducting a reasonable level ofmaintenance and management• Enhancement of cash flow and value throughproper management and maintenanceDecision on Acquisition

Roadmap for Growth

Sakura Sogo REIT Investment Corporation

Medium-term Goal of Asset Size

Securing sourcing routes
through pipeline
agreements with outside
collaborators.

Warehousing
functions throughbridge financeReinforcing IR
activities in Japanand abroad

Planning for capitalincrease throughpublic offering

Obtain credit rating with the enhancementof financial base and proven track record

Improving debt
financing conditions(reducing costs andextending borrowing
periods)

Achieve a scale of150 billion yen
in 3 to 5 years(billion yen)

150

150.0
120
90
60
30

57.3

0
As of listing

19

After 3 to 5 years

Internal Growth Strategy and Specific Measures

Sakura Sogo REIT Investment Corporation

Initiatives Aimed at Maintaining and Improving Rents andOccupancy

Leverage off of Galileo Group and Nippon Kanzai Group’s Know-how
Galileo Group and Nippon Kanzai Group have an extensive track record both within and outside of Japan invarious businesses within real estate services and the Investment Corporation intends to leverage thisexperience with the aim of carrying out proactive investment in order to maintain and improve asset value on
an ongoing basis. The Investment Corporation believes that in particular, Nippon Kanzai Group has extensive
know-how in real estate management not limited simply to management and operation aimed at maintaining
the value of assets already held but also to more aggressively strive to maintain and improve asset value. In
other words, it has the capabilities to make the operation of properties to increase asset value (to take care ofa property) possible. The Investment Corporation aims to obtain this know-how from Nippon Kanzai Group toaggressively realize its internal growth.

• Initiatives aimed at maintaining and improving rent levels andoccupancy rates• Flexible implementation of strategies leading to the improvementof asset value• Optimization of building operation, maintenance and management
costs

Optimization of Building Operation, Maintenance and Management Costs
We aim to carry out systematic repair and maintenance work on properties held using Galileo
Group and Nippon Kanzai Group's know-how to prevent the properties aging or becoming
obsolete and thereby optimize building operation, maintenance and management costs

20

1.

Perform a rental market survey on a quarterly basis and check gaps
with the rents of each tenant and prevailing rents in the market
based on the results thereof after which rent proposals shall be
submitted based on the renewal date.

2. Ongoing comprehensive maintenance shall be carried out in orderto maintain and increase the competitiveness of the properties byregularly observing competing properties in the market.

Nippon Kanzai Co., Ltd.

1

2

3

Confirm the unit prices of items andservices required for building
management at the end of each of oursettlement periods and reflect these in
our operations.

Jointly procure and mutually use eachother’s human resources and parts andcomponents, etc. based on the location of
the properties.

Select and consolidate property managementcompanies and building management companies
based on area and type of real estate.

We aim to increase net revenue, namely maximize cash flow

Asset Manager Sakura Real Estate Funds Management, Inc. strives toaggressively maintain and improve rent levels and occupancy rates
through the following initiatives related to the management andoperation of real estate.

3. Nippon Kanzai Group has developed an integrated database for its
building management and operation business covering a diverse
range of property types which it takes advantage of to formulate
optimal property management strategies and build tenant
relationships
4. Obtain a detailed understanding of the service life of the building
itself and its auxiliary facilities and carry out preventative andsystematic repairs and services and also if necessary, make capital
expenditures and strategic capital investments to facilitate anincrease in rent and secure good tenants

5. Conversion to LED lighting will be promoted in private areas,tenants’ needs will be monitored and determined with the aim of
improving tenant satisfaction to ensure that we are able to respondto changes in the market
6. The performance of property management is reviewed for eachaccounting period and where necessary, improvements arerequested and followed-up on, etc.
7. Even if a proposal is made by a tenant for a reduction in rent, we
will aim to keep the rent at the same level or minimize the rent
reduction to the extent possible by achieving a reduction in costs
and an increase in sales thereof.

Basic Policies for Internal Growth
OfficeSakura Sogo REIT Investment Corporation

RetailResidential

Internal growth through revenue increase

Internal growth through revenue increase

Internal growth through revenue increase

We achieved an average rent increase of 10.6%
for 6 tenants totaling an increase approximately
8.14 million yen/year (starting from February2017), from passing rents. We also plan tonegotiate rent increases with 7 more tenants
going forward. Based on the aforementioned
average increase rate, an increase of about 7.41
million yen/year is targeted (approx. 15.55
million yen in total), pushing up the ratio of sales
in the 2nd and 3rd fiscal periods by 0.3%.

We aim to increase revenue by approx. 2.10
million yen/year by shifting tenant rent revenue
received as a percentage of sales to fixed rents.

We will continue to adhere to our leasing
program and contract new tenants as quickly as
possible and without fail during the busy
seasons.

We continue to investigate opportunities tofurther increase revenue via projects such as
installing telecommunication antennas on therooftop, collecting rooftop ads fees, increasing
on site vending machines and ATMs, etc.

In addition, we will continue to pursue revenue
increases by holding regular events to increase
traffic flow and attract more customers andincrease tenants’ sales.
We continue to investigate the feasibility of
installing rooftop telecommunication antennasand ATM machines, increasing advertisement
signage usage fees, etc.

We will also implement rent-holiday strategies
that are effective in generating rent payments
at an early stage as well as consider employing
measures to reduce initial costs, i.e. having
landlord pay the initial rent guarantee
commission, etc. to guarantors on behalf of thetenants. Furthermore, we will motivate brokers
to approach prospective tenants moreproactively by expanding the variation of
methods for granting incentives to brokeragecompanies, with an aim to raise occupancy
rates and stabilize operations.

Internal growth through cost reduction
We will continue to regularly verify cost reduction opportunities due to amendment of laws, technological renovation, etc.

21

Financial Strategy

Sakura Sogo REIT Investment Corporation

Our basic policy is to build a stable and sound financial base aimed at maintaining and increasing revenue over the medium to long-term.
Equity FinanceCash Management

New investment units shall be issued for the purpose of expanding andincreasing the scale and value of the managed assets and shall be issued
flexibly taking into account the dilution of the rights of existing unitholders
and the decrease in the trading value of the investment units associatedtherewith and comprehensively taking into consideration the acquisition
time for real estate assets to be newly acquired, the loan to value ratiowith respect to total assets (hereinafter "LTV") and the financial
environment and economic market conditions, etc.

The Investment Corporation's policy is to implement appropriate cash management
aimed at improving capital efficiency. The Investment Corporation shall examine theallocation of cash on hand equivalent to depreciation expenses, security deposits andguarantee deposits deposited by tenants and other internal reserves as the main
source of cash to the following.

Main cash funds

Debt Finance
The LTV level shall be up to 60% and flexible and meticulous leveragecontrol shall be conducted with particular attention to maintaining
financial reserves. The Investment Corporation shall build a strong bankformation primarily with major financial institutions as well as take active
initiatives in diversifying funding sources by diversifying lenders andissuing investment corporation bonds (including short-term investment
corporation bonds) in order to build a stable financial base and support
future growth strategies.

22

Depreciation expenses

Security and guarantee deposits• Acquisition of new
properties• Repairs and capital
expenditures• Interest-bearing debt
repayment• Distribution in excess ofoperational surplus

Sakura Sogo REIT Investment Corporation

Appendix

Sakura Sogo REIT Investment Corporation23

Macro Environment

Sakura Sogo REIT Investment Corporation

OfficeRetailResidential

Assumed contracted rents for Grade A for this term are 35,750
yen / tsubo, + 1.0% compared to the previous term. The pricemovements of rents are slow. However, in areas where rents
are relatively lower such as the "Shinjuku" area, it is possible toretenant vacancies rather quickly. Owners are also bullish insuch areas with asking rents also on the rise.

According to the change in sales report for January to Octoberof the current fiscal year based on the data of Japan Council of
Shopping Centers (sales statistics for 2016), sales are overall
showing decreases across the country due primarily to sluggish
sales of shopping centers in regional cities. However, Octobersaw month-on-month sales growth (up 0.4%) for the first timesince July, also indicating a 0.9% year-on-year growth. Many
shopping centers cited effects of sales promotion events as afactor for the strong showing. Comparing October 2015 andOctober 2016, sales of shopping centers nationwide also
indicated growth, leading us to believe that sales promotion
events (Halloween events, etc.) as well as the duration andtiming of sales promotions and discount sales are essential for
expanding sales.

From the perspective of population inflow, excessive inflow to
the Tokyo metro area has continued for 20 straight years, withthe 4 years from 2011 in particular indicating this trend.
Demand for rental properties is expected to grow as
evidenced by this fact, and rental needs in the area are
believed to remain high.

With grade A-, vacancy rates were 2.5%, 0.2 points comparedto the previous term, as a large vacancy of more than 5,000
tsubo occurred due to the retirement of a large tenant inalmost one building rented. Estimated contracted rents
remained at 24,400 yen/tsubo, +0.2% compared to theprevious term. Vacancy for grade B is flat, 2.7% compared withthe previous term. In addition, even in buildings withprolonged vacancy, estimated contracted rents were 20,700
yen/tsubo, +0.2% of the previous term.

Source: CBRE MARKETVIEW Japan Office, Q3 201624

Since the temperatures for the next three months are expected
to be around the average according to the three-monthforecast announced on October 25 by the Meteorological
Agency, normal-year sales can be expected. However, creative
efforts unique to each shopping center featuring characteristicsof the area and facility, such as sales promotion events anddiscount sales more suitable for the respective area, will benecessary going forward.

Source: Nippon Shopping Center Association 2016.11

By prefecture, since Aichi continues to see population inflow;
Osaka experienced excessive inflow in 2015 for the 1st time in
2 years; Fukuoka continues to see not only excessive inflow
but also an increase in population since 1970 (in addition,
Fukuoka City was highly evaluated as a “compact city”). As
such rental needs are expected to grow in these areas.
With the increase of singles and DINKs among the younger
generation (30’s-40’s), it is becoming more and morenecessary accommodate their needs (convenience, large living
spaces, high grade security, internet connectivity, etc.) in orderto remain competitive.

Source : Statistic Bureau, Ministry of Internal Affairs and Communications

Overview of Portfolio

Sakura Sogo REIT Investment Corporation
as of September 30, 2016

Address

AcquisitionPrice(million yen)AppraisedValue(million yen)

Seishin Building

Shinjuku-ku, Tokyo

7,880

7,960

4.3

4.0

OfficeNK Building

Chiyoda-ku, Tokyo

3,730

3,780

4.7

4.4

OF-03

OfficeTsukasamachi Building

Chiyoda-ku, Tokyo

3,820

3,860

4.7

4.3

OF-04

OfficeTakadanobaba AccessShinjuku-ku, Tokyo

3,330

3,370

4.9

4.4

OF-05

OfficeAzabu Amerex Building

Minato-ku, Tokyo

2,020

2,050

4.5

4.3

OF-06

OfficeHiei-Kudan Building

Chiyoda-ku, Tokyo

1,960

1,990

5.0

4.7

OF-07

OfficeShin-Yokohama Nara Building

Yokohama City, Kanagawa

1,910

1,930

5.6

4.9

RT-01

Retail

La Park Kishiwada

Kishiwada City, Osaka

6,460

6,510

6.2

5.0

RT-02

RetailSuroy Mall Chikushino

Chikushino City, Fukuoka

7,670

7,810

5.7

4.8

RT-03

RetailSeiyu Minakuchi

Koka City, Shiga

4,150

4,240

6.1

4.1

RT-04

RetailSuroy Mall Nagamine

Kumamoto City, Kumamoto

4,180

4,320

5.7

4.9

RS-01

Residential

Shiroi Logiman

Shiroi City, Chiba

2,180

2,190

7.4

5.8

RS-02

Residential

Matsuya Residence Sekime

Osaka City, Osaka

1,820

1,850

6.6

5.6

RS-03

Residential

Royal Hill Kobe Sannomiya II

Kobe City, Hyogo

1,480

1,500

5.6

4.0

RS-04

Residential

Urban Plaza Imazato

Osaka City, Osaka

940

959

6.2

5.1

OT-01

Other

Funabashi Hi-Tech Park Hidan

Funabashi City, Chiba

1,720

1,760

6.4

5.3

OT-02

Other

Funabashi Hi-Tech Park

Funabashi City, Chiba

710

749

6.8

5.8

OT-03

Other

Confomall Sapporo

Sapporo City, Hokkaido

1,400

1,430

5.9

4.1

57,36058,258

5.5

4.6

No.

Asset Type

OF-01

OfficeOF-02

Property

Total (18 properties)

25

Appraised NOI Yield after
NOI Yield
Depreciation(%)(%)

Portfolio Map

OF-01 Seishin Bldg

OF-02 NK Bldg.

Sakura Sogo REIT Investment Corporation

OF-03 Tsukasacho Bldg

OF-04 Takadanobaba Access

OF-05 Azabu Amerex Bldg

OF-06 Hiei-Kudan Bldg

OF-07 Shin-Yokohama Nara Bldg

OT-03

RT-01 La Park Kishiwada

RT-02 Suroy Mall Chikushino

RT-03 Seiyu Minakuchi

RT-04 Suroy Mall Nagamine

Chiba
Tokyo
RS-01 Shiroi Logiman

RS-02 Matsuya Residence Sekime

RS-03 Royal Hill Kobe
Sannomiya II

OF-04
RS-04 Urban Plaza Imazato

RS-02
RS-03

RT-02
RT-04
OT-01 Funabashi Hi-Tech
Park Hidan

26

OT-02 Funabashi
Hi-Tech Park

OT-03 Confomall Sapporo

RT-01

RT-03

RS-04

OF-01
OF-05
Kanagawa
OF-07

OF-02
OF-03
OF-06

RS-01

OT-02
OT-01

Income and Expenditure Forecast by Property for 1st Fiscal
Period (173 operating days)

Sakura Sogo REIT Investment Corporation

Unit: thousand yen
Seishin Building

NK Building

Tsukasamachi Building

Takadanobaba Access

Azabu Amerex Building

219,128

116,648

100,416

84,361

62,92963,749159,938
59,19090,85925,79076,05824,35849,26535,096

46,466
16,46354,842
8,907

44,82530,00025,90843,32715,011

14,35912,23816,731
195
10,6385,024

12,72010,127
140
5,260
1,754

6,867
7,406
131
6,346
5,157

14,657
11,825
137
7,023
9,686

7,117
3,389
80
2,024
2,402

10,529
29
122
2,520
1,160

Operating income (loss) from realestate leasing

174,30286,64874,50941,03447,91849,390

Leasing NOI

184,940

91,90880,85548,05749,942

51,909Shin-Yokohama Nara Building

La Park Kishiwada

Suroy Mall Chikushino

Seiyu Minakuchi

Suroy Mall Nagamine

Shiroi Logiman

73,472495,911284,825

152,925

170,660

132,493

41,99731,475

329,478
166,433

255,883
28,942

152,925-

132,11138,549111,741
20,75230,897

296,547

86,154

63,481

62,19263,543

9,379
8,650
130
7,158
5,580

110,572
124,839879
37,02323,23531,4593,903
398
34,647
15,7486,304
363
40,761
16,054

15,202
25,620194
17,297
3,879

31,63332
520
18,202
13,156

Operating revenue from real estateleasing
Lease business revenue
Other Lease business revenue
Operating expenses from real estateleasing
Management fees
Utilities expenses
Insurance premium
Depreciation
Other expenses

Operating revenue from real estateleasing
Lease business revenue
Other Lease business revenue
Operating expenses from real estateleasing
Management fees
Utilities expenses
Insurance premium
Depreciation
Other expenses

Hiei-Kudan Building

Operating income (loss) from realestate leasing

42,575

199,364

198,670

89,444

108,467

68,950

Leasing NOI

49,733

236,387

233,317130,205

125,764

87,152

Matsuya Residence Sekime

Royal Hill Kobe Sannomiya II

Urban Plaza Imazato

Funabashi Hi-Tech Park Hidan

Funabashi Hi-Tech Park Factory

Confomall Sapporo

81,15555,03537,82558,66922,76467,94971,095
10,05950,8494,187

32,858
4,967

58,669-22,764-58,936
9,013

43,90426,65115,804

11,7095,536

32,184

24,428
2,924
196
9,210
7,147

7,843
1,912
114
11,271
5,512

6,985
530
98
5,259
2,932

2,010
101
9,398
201

1,568
140
3,507
321

6,402
9,732
193
12,6403,217

Operating income (loss) from realestate leasing

37,251

28,38422,02046,961

17,22835,765

Leasing NOI

46,46039,65527,27956,35820,735

48,404

Operating revenue from real estateleasing
Lease business revenue
Other Lease business revenue
Operating expenses from real estateleasing
Management fees
Utilities expenses
Insurance premium
Depreciation
Other expenses

27

Status of Unitholders

Sakura Sogo REIT Investment Corporation

as of September 30, 2016

No. of Investment Units by Securities firms
Investor Type12,464Foreigners
39,616
11.9%
Other domestic
corporations
37,306
11.2%

3.7%
Rank

Individuals/others
234,287
70.4%

Financial
institutions
9,328
2.8%

No. of Unitholders
by Investor Type
Other domestic
corporations
281
1.5%

Main Unitholders

Foreigners
30
0.2%

Securities firms
20
0.1%

Financial
institutions
15
0.1%

Individuals/others
18,529
98.2%

28

Name

Number ofUnits Owned(units)Percentage
Share (%)

1

Galaxy JREIT PTY Limited

8,700

2.61

1

Nippon Kanzai Co., Ltd.

8,700

2.61

3

Credit Suisse Securities (Europe) Limited PB
Omnibus Client Account

6,802

2.04

4

Sekai Shindokyo

5,510

1.65

5

JP Morgan Bank (Ireland) PLC 380423

5,337

1.60

6

SMBC Nikko Securities Inc.

4,695

1.40

7

BNYN SA/NV for BNYM for BNY GCM Client
Accounts M LSCB RD

4,566

1.37

8

Credit Suisse AG Sydney Branch

3,398

1.02

9

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

2,743

0.82

10

Mizuho Securities Co., Ltd.

2,321

0.69

(Note) Percentage Share is the number of units owned expressed as a percentage of total
number of investment units issued and outstanding (rounded down to second
decimal place).

September 8, 2016
September 9, 2016
September 12, 2016
September 13, 2016
September 14, 2016
September 15, 2016
September 16, 2016
September 20, 2016
September 21, 2016
September 23, 2016
September 26, 2016
September 27, 2016
September 28, 2016
September 29, 2016
September 30, 2016
October 3, 2016
October 4, 2016
October 5, 2016
October 6, 2016
October 7, 2016
October 11, 2016
October 12, 2016
October 13, 2016
October 14, 2016
October 17, 2016
October 18, 2016
October 19, 2016
October 20, 2016
October 21, 2016
October 24, 2016
October 25, 2016
October 26, 2016
October 27, 2016
October 28, 2016
October 31, 2016
November 1, 2016
November 2, 2016
November 4, 2016
November 7, 2016
November 8, 2016
November 9, 2016
November 10, 2016
November 11, 2016
November 14, 2016
November 15, 2016
November 16, 2016
November 17, 2016
November 18, 2016
November 21, 2016
November 22, 2016
November 24, 2016
November 25, 2016
November 28, 2016
November 29, 2016
November 30, 2016
December 1, 2016
December 2, 2016
December 5, 2016
December 6, 2016
December 7, 2016
December 8, 2016
December 9, 2016
December 12, 2016
December 13, 2016
December 14, 2016
December 15, 2016
December 16, 2016
December 19, 2016
December 20, 2016
December 21, 2016
December 22, 2016
December 26, 2016
December 27, 2016
December 28, 2016
December 29, 2016
December 30, 2016
January 4, 2017
January 5, 2017
January 6, 2017
January 10, 2017
January 11, 2017
January 12, 2017
January 13, 2017
January 16, 2017
January 17, 2017
January 18, 2017
January 19, 2017
January 20, 2017
January 23, 2017
January 24, 2017
January 25, 2017
January 26, 2017
January 27, 2017
January 30, 2017
January 31, 2017

Change in Investment Unit Price

Listing

September 2016

29
October 2016

Sakura Sogo REIT Investment Corporation

Inclusion in the
TSE REIT Index(units)35,000
出来高（左軸）Trading volume(left axis)

20,00015,000November 2016

投資口価格（右軸）Investment unit(yen)price (right axis)

30,00025,000

When assuming investment unit priceto be 80,000 yen, distribution yield is
expected to surpass 7% (the average of
J-REITs is around 3.7%).

10,000December 2016

January 2017

90,00085,00080,00075,00070,00065,00060,0005,000
55,000050,000Governance Structure

Sakura Sogo REIT Investment Corporation

Decision-Making Process where the Acquisition, etc. of Assets Falls Under a Related Party Transaction
The Asset Management Company shall prepare investment guidelines and set forth investment policies, rules for transactions with related parties, policies on
distribution and disclosure and other basic matters and carry out management of the Investment Corporation in accordance with the same.
Drafting of proposals for property acquisitions, etc.
by the Investment Management Division
Drafting
Prior Review / Approval by Compliance Officer(Confirmation of whether there are any issues concerning the status of compliance with laws andregulations and any other compliance matters)

Refer backApproval
Deliberation and resolution by Compliance Committee

Rejection / Refer backConsent
Deliberation and resolution by Investment Management Committee

Rejection / Refer backConsent
Deliberation and Approval by Investment Corporation’s Board of Officers / Consent of theInvestment Corporation
Approval / Consent
Report to Asset Management Company's Board of Directors

30

Rejection / Refer back / No consent

Overview of the Investment Corporation

Sakura Sogo REIT Investment Corporation

Schematic Diagram of the Investment Corporation’s Structure
Investment Corporation

Sponsor / Parent Company of AssetManagement Company

Asset Custody Company/Administrator of Unitholder
Registry/General Administrator related to theoperation of the administrative institution❷

Galileo Sydney Holdings Pty Limited

Sumitomo Mitsui Trust Bank, Limited.

❸
Asset Management Company

Sakura Sogo REIT Investment❶

General Meeting ofUnitholders

Sakura Real Estate Funds Management, Inc.

❸
SponsorTokyo Capital Management Co., Ltd.

Accounting Auditor
PricewaterhouseCoopers Arata

Overview of Asset Management Company
Trade Name

Sakura Real Estate Funds Management, Inc.

Date of Incorporation

July 7, 2015

Stated Capital

101.52 million yen

Shareholder Composition

Galaxy JREIT Pty Limited 50%
Tokyo Capital Management Co., Ltd. 50%(based on voting rights: Galaxy JREIT Pty Limited 100%)

Principal Lines of Business

Discretionary Investment Business,management of Investment Corporation’s assets

Officers

6 Directors (2 Full-time Directors), 1 Statutory Auditor

Financial Instrument Business
Registration

Reg. No.: Director of Kanto Local Finance Bureau (FI) No. 2907
Member of Investment Trusts Association, Japan

Real estate agency business license

License No.: Tokyo Metropolitan Governor (1) No. 98232

Approval as Entrustment - Based
Agency Services for Transactions

Approval No.: Minister of Land, Infrastructure,
Transport and Tourism No. 100

General Administrator for Accounting Affairs
Kaneyama & Associates

Board of Officers
Executive Officer: Makoto Muranaka
Supervisory Officer： Hirotaka Isayama
Supervisory Officer： Shigeru Kaneda

Nippon Kanzai Co., Ltd.

31❹

❶ Asset Management Entrustment Agreement❷ Asset Custody Entrustment Agreement / Entrustment
Agreement for Administrator of the Investment
Unitholder Registry / Entrustment Agreement for
Clerical undertakings (Institution services）❸ Sponsor support agreement❹ Business Entrustment Agreement

General Meeting of Unitholders
Statutory Auditor
Board of Directors
Investment Committee

Compliance Committee

Representative Director and Chairman / Representative Director and President
Compliance Officer

Investment Division

Finance and Planning Division

Disclaimer

Sakura Sogo REIT Investment Corporation

This presentation material has been prepared solely for the purpose of providing information, and not for soliciting investments incertain products.
The presentation material includes, in addition to description of Sakura Sogo REIT Investment Corporation (hereinafter the“Investment Corporation”), charts, data, etc. prepared by Sakura Real Estate Funds Management, Inc. (hereinafter the “AssetManagement Company”) based on data, indices, etc. published by third parties. Furthermore, it includes present analysis,judgements and other opinions of the Asset Management Company regarding such information.
The contents of the presentation material have not been audited, and their accuracy nor integrity is guaranteed. The analysis,judgements, etc. by the Asset Management Company are the current opinions and the contents may be modified or repealed
without any advance notice.
The Investment Corporation or the Asset Management Company bears no responsibilities with regard to the accuracy of data,
indices, etc. published by third parties (including data based on real estate appraisal reports).
The contents of the presentation material include statements on forecast and future operating results. Such statements are basedon the information available at the time of preparation and certain assumptions for unforeseeable factors, and thus do notguarantee future operating results, etc. of the Investment Corporation and may differ from actual operating results, etc.

32