Fiscal Results Briefing
5th Fiscal Period Ended April 30, 20170Disclaimer
This document is provided for information purposes only and is not a solicitation for investment, nor a recommendation or invitation to enter into specifictransactions. We caution readers to undertake investment decisions of their own volition.
This document is not a disclosure document or report based upon the Financial Instruments and Exchange Act, the Act on Investment Trusts and Investment
Corporations, public listing regulations of the Tokyo Stock Exchange or other related laws or regulations in Japan.
This document includes charts, data and other information prepared by Sekisui House Investment Advisors, Ltd. (the “Asset Management Company”) based ondata, indices and other information disclosed by third parties, in addition to statements related to Sekisui House Reit, Inc. (the “Investment Corporation”).
Statements on analysis, judgments and other opinions concerning those charts, data and other information of the Investment Corporation or the AssetManagement Company as of the date of this document are also included.
This document is prepared based on accounting policies generally accepted in Japan, unless otherwise specified.
The contents of this document have not been audited and their accuracy and completeness are not guaranteed. Analysis, judgments and other opinions of theInvestment Corporation or the Asset Management Company only reflect the views of the Investment Corporation or the Asset Management Company as of thedate of the document. Therefore, other views and opinions may exist and the Investment Corporation or the Asset Management Company may change its views in
the future.
The figures under the same item of other disclosed materials may differ from figures presented in this document due to different rounding of fractions and the like.
This document includes forward-looking statements with respect to the future performance, plans, managerial goals and strategies of the Investment Corporation.
These statements are based on assumptions of future events or trends of the business environment and there is no assurance that these assumptions are correct.
The actual results may differ significantly due to various factors.
While the Investment Corporation takes reasonable care in the preparation of this document, it does not guarantee the accuracy and completeness of its content.
Readers are also cautioned that the contents of this document may be changed or deleted without prior notice.
The Investment Corporation or the Asset Management Company accepts no responsibility for the accuracy of data, indices and other information disclosed bythird parties.
For the convenience of preparing graphs, the dates indicated herein may differ from actual business dates.
Making a copy of, or appropriation of, the content contained herein without prior permission is prohibited.
This English language document was prepared solely for the convenience of, and reference by, overseas investors. The Investment Corporation gives nowarranties as to its accuracy or completeness.
The material containing the information required under Article 23 (1) and (2) of the AIFMD is available at http://sekisuihouse-reit.co.jp/en/ir/library.html.

Inquiries
Asset Management Company: Sekisui House Investment Advisors, Ltd.
Financial Instruments Business Operator: Director-General of the Kanto Finance Bureau (Kinsho) No. 2791
TEL +81-3-6447-4870（main）

1

Contents

Appendix

About Sekisui House Reit, Inc.
・Executive Summary

3・Balance Sheet

22

・Growth Strategies Utilizing Sekisui House’s Support

5・Statement of Income and Retained Earnings

23

・Management Performance since IPO

7・Entire Portfolio (as of April 30, 2017)24

・Financial Results and Forecast

8・Overview of Third follow-on Public Offering

25

・Portfolio Summary (as of June 14, 2017)9・Overview of Appraisal

26・Acquiring Hotel Asset

10・Types of Lease Agreement27

・Outline of Portfolio

11・Structure of SHR

28

・Portfolio Map and Growth Potential of the Area

13

・Governance System

29

・External Growth

14・Asset Management Company (as of June 14, 2017)30

・Internal Growth

15

・Unitholders Composition

31

・Financial Results

16

・Change in Unit Price

32

・Interest-Bearing Liabilities (as of June 15, 2017)17

・Strategy for Future Growth19

・Our Growth Strategies

20

2Executive Summary
Characteristics of Sekisui House Reit, Inc. (“SHR”)
Characteristic 1

 SHR’s sponsor is Sekisui House, Ltd. (“Sekisui House”), one of

the leading homebuilders in Japan.

Current AUM(aggregate acquisition price)200.7 billion yen
Characteristic 2

 SHR is a diversified REIT focusing mainly on office buildings,

retail properties and hotels (“Commercial Properties”).

 Investing in Commercial Properties located in major

metropolitan areas; Greater Tokyo (55.3%), the Osaka area
(41.5%) and the Nagoya area (3.2%) (acquisition price basis).

Current Portfolio (asset type)

Office buildings 91.4%
Hotels 8.6%
Current Portfolio(area)

Tokyo, Osaka & Nagoya
100% Investing in Prime Properties featuring “strategic locations” andCurrent Portfolio(features)“high quality”.
 All 6 properties have been recently built and 5 properties have arating of 4 or 5 Stars under the DBJ Green Building Certification
system.
Characteristic 3

Prime Properties
100% Strong relationships with major domestic financial institutions.

Current LTV

40.8%(Note) Money amounts less than the indicated figures are rounded down and percentage figures are rounded to the nearest first decimal place otherwise indicated in this document. The same shall apply hereinafter.
(Note) The figures are as of June 14, 2017.

3

Executive Summary
Profile of Sekisui House Reit, Inc.
Corporate Profile
Trade name
Asset management company
Sponsor

JPY 59.6 bil JPY 51.5 bil JPY 23.1 bil JPY 55.8 bil JPY 4.4 bil JPY 6.35 bil/NAGOYA/OSAKA/OSAKA/TOKYO/TOKYO/OSAKA

Owned Assets
Aggregate acquisition price
Number of properties

JPY 200. 7bil
6 properties

Distributions
Fiscal period ends
Actual for 5th fiscal period
Forecast for 6th fiscal period
Forecast for 7th fiscal period

April and October of each year
JPY 2,663 per unit
JPY 2,700 per unit
JPY 2,700 per unit

Financial information
Total interest-bearing liabilities
Unitholders’ capital
Number of investment units
issued and outstanding
Long-term issuer rating

Sekisui House is also the mainsponsor of
Sekisui House Residential
Investment Corporation

Sekisui House Reit, Inc. (securities code: 3309)
Sekisui House Investment Advisors, Ltd.
Sekisui House, Ltd.

1,603

2,458

2,477

2,663

2,596

2,700

2,700

1st FP DPU 2nd FP DPU 3rd FP DPU 4th FP DPU 5th FP DPU 6th FP DPU 7th FP DPU(actual)(actual)(actual)(actual)(actual)(forecast)(forecast)Highlight■Around a 1.8-fold expansion of asset size from the time of IPO■Achieved the target of 200 billion yen in asset size in around 2.5 years since IPO

JPY 84.4 bil
JPY 110.1 bil(billion yen)around200

969,000 units
AA- (stable) [JCR]

100

114.3
bil

2.5 years
200.7
bil

0
IPO

(Note) The figures are as of June 14, 2017.

4

after 3rd follow-on PO

Growth Strategies Utilizing Sekisui House’s Support
Strength and Track Record of Sekisui House’s Development Business Sekisui House’s Corporate Profile and Business Strategies
About Sekisui House

Priority strategies for each business modelSekisui House’s Corporate Profile (As of January 31, 2017)
Corporation Name : Sekisui House, Ltd.
Date of Establishment : August 1, 1960
Capital Stock : 202,591.20 million yen
Cumulative Number of Houses Built : 2,334,222 houses[Built-to-Order Business]
Promote stable growth and work to create quality housing stock by supplying high-valueadded houses.
[Supplied Housing Business]
Develop business for the purpose of increasing the asset value of quality housing stock
created by the Built-to-Order Business.

How Sekisui House became involved in the field of J-REIT
Since 2005, Sekisui House entered the J-REIT field by acquiring an[Development Business]
Promote the creation of quality towns through the environment creation-oriented
development and promote stable growth by increasing the asset turnover ratio.

equity stake in Japan Excellent Asset Management Co., Ltd., the asset
manager for Japan Excellent Inc.（The capital ties have dissolved already.）

In 2010, Sekisui House acquired 75% of Joint Capital Partners Co., Ltd.,the asset manager of Joint Reit Investment Corporation, now known as
Sekisui House Residential Investment Corporation.

[Overseas Business]
Provide Sekisuihouse Quality globally based on the environmental technologies cultivatedin Japan.

 Commitment of properties by Sekisui House Group to its
sponsored J-REITs (as of May 31, 2017)

 Sekisui House’s Consolidated Financial Statements FY2016(16/2-17/1)

Collaboration with our J-REIT platform within Sekisui House’s Development Businesshas become significantly more important.

Net Sales
2,026.9(billion yen)

OthersAsset Type

Number of Properties (Note)

Transaction Price

Total Assets

2,184.8 billion yen

Office8 properties

235.0 billion yen

Net Sales

2,026.9 billion yen

55 properties

103.6 billion yen

Operating Income

184.1 billion yen

63 properties

338.6 billion yen

Net Income

121.8 billion yen(2007-2017)

Residential(2010-2017)

Total(2007-2017)(Note) 2 office properties have been acquired by Japan Excellent, Inc. and 55 residential properties have beenacquired by Sekisui House Residential Investment Corporation.

5

520.7
Development Business
602.6(Including overseas business)

Supplied Housing
Business
823.4

Built-to Order BusinessOutline of Asset Management Operation
6

Garden City Shinagawa Gotenyama

Management Performance since IPO
 Steady External Growth and Increase in Unitholder Value

additional additional
portionportionadditional
portion(billion yen)

3rd follow-on PO(2 properties)
21.2 billion yen

2nd follow-on PO
250

IPO

1st follow-on PO(3 properties)
114.3 billion yen(1 property)
38.6 billion yen(3 properties)
26.6 billion yen

179.5 bil200

152.9 bil
150

Total
acquisition
price
100
LTV
50

6 properties
50.0%
200.7 billion yen

152.9 bil

48.0%

179.5 bil

46.0%

114.3 bil

44.0%
42.0%

42.5％

41.0％

40.0%

40.9％

40.8％

40.8％

40.8％

0

38.0%
End of 1st FP(as of Apr. 30, 2015)

End of 2nd FP(as of Oct. 31, 2015)

End of 3rd FP(as of Apr. 30, 2016)

End of 4ｔｈ FP(as of Oct. 31, 2016)

End of 5th FP(as of Apr. 30, 2017)

after 3rd follow-on PO(as of June 15, 2017)

Unrealized
Gain （Note 1）

5.9 billion yen

11.9 billion yen

17.8 billion yen

24.1 billion yen

27.7 billion yen

29.4 billion yen

Total Market
Value（Note 2）

89.6 billion yen

99.0 billion yen

100.2 billion yen

126.6 billion yen

127.2 billion yen

136.3 billion yen

1st FP (actual)

2nd FP (actual)

3rd FP (actual)

4th FP (actual)

5th FP (actual)

6th FP (forecast)

7th FP (forecast)

1,603 yen

2,458 yen

2,477 yen

2,596 yen

2,663 yen

2,700 yen

2,700 yen

Distribution
per unit

Growth of Distribution per unit
by follow-on POs

Initial Forecast
2,201 yen
Increase of 11.7 ％from initial forecast

Initial Forecast
2,410 yen
Increase of 7.7％ from initial forecast

Initial Forecast
2,590 yen
Increase of 4.2％ from initial forecast(Note 1) The sum of differences between the book values and appraisal values at the end of the 5th FP are calculated and indicated for the assets held as of the end of the 5th FP, while the sum of differences between the acquisition prices and appraisal
values are calculated and indicated for the assets acquired in the 6th FP. However, the unrealized gain of Hommachi Garden City is calculated as the differences between the book values and appraisal values as of March 31, 2017, thelimited market value that includes the increased value from holding the building in its entirety.
(Note 2) Total market value as of end of each FP is calculated based on unit price as of end of each FP respectively and total market value after 3rd follow-on PO is based on June 12, 2017.

7

Financial Results and Forecast Results and Forecast
Actual Results of
2nd FP（as of Oct. 31, 2015)

Actual Results of
3rd FP（as of Apr. 30, 2016)

Actual Results of
4th FP（as of Oct. 31, 2016)

Actual Results of
5th FP（as of Apr. 30, 2017)

Forecast of
6th FP（as of Oct. 31, 2017)

Forecast of
7th FP（as of Apr. 30, 2018)

184 days

182 days

184 days

181 days

184 days

181 days

Operating
Revenue

3,379 million
yen3,467 million
yen4,059 million
yen

4,144 million
yen

4,581 million
yen4,652 million
yen

Operating Income

2,290 million
yen2,278 million
yen2,664 million
yen

2,704 million
yen2,979 million
yen2,994 million
yen

Ordinary Income

1,952 million
yen

1,967 millionyen2,321 million
yen

2,381 million
yen2,617 million
yen2,617 million
yen

Net Income

1,951 million
yen

1,966 million
yen

2,320 million
yen

2,380 million
yen2,616 million
yen2,616 million
yen

Distribution Per
Unit (DPU)

2,458 yen

2,477 yen

2,596 yen

2,663 yen

2,700 yen

2,700 yen

Forecast of 6th FP（as of Oct. 31, 2017)

Forecast of 7th FP（as of Apr. 30, 2018)

Days of Operation

 Results of NOI Forecast of NOI yield
Actual Results of 5th FP（as of Apr. 30, 2017）
Actual Results

Yield (Note)

NOI3,740 million
yen

4.2 %

NOI
(after depreciation)

3,091 million
yen

3.4 %

(Note) Yield is calculated by dividing annualized NOI and NOI (after depreciation) by total acquisition price of the current portfolio.

8

NOI yield

4.2 %

4.1 %

NOI yield(after depreciation)

3.4 %

3.4 %

Portfolio Summary（as of June 14 , 2017）
 Portfolio Highlight
Asset Size（aggregate acquisition price）（Note 2）228.1 billion yen

6 properties Occupancy Rate
91.4 ％
3 major metropolitan
Location
areas
Ratio
8.6 ％
(acquisition
price basis)
Greater Tokyo
6.4 years

100.0 ％

Acquisition
Price (JPY)

Appraisal
Value (JPY)

Investment
Ratio

Total Leasable
Area

Building
Age

55.6 bil

64.5 bil

27.7％

29,235.95 ㎡

4.0bil4.29 bil

2.0％

2,000.39 ㎡

59.6 bil

68.79 bil

29.7％

31,236.34 ㎡（Note 1）

Number of Properties
Asset Type Ratio

200.7 billion yen Total Appraisal Value

Office buildings

100.0 ％

（Note 2）

HotelsAverage Building Age（Note 2）

55.3 ％

 Portfolio Description
No.

Property Name
Acquired portion

Ｊ-1

Garden City
Shinagawa
Gotenyama

Additional acquisition
portionNEW
Subtotal

Occupancy
Rate

Area

100%

6.3 years

Tokyo

Ｊ-2

Gotenyama SH Building

51.5 bil

56.9 bil

25.7％

19,999.97 ㎡

100%

6.4 years

Tokyo

Ｊ-3

Hommachi Minami Garden City

23.1 bil

27.9bil

11.5％

16,699.46 ㎡

100%

6.3 years

Osaka

Office building portion

38.6 bil

44.6 bil

19.2％

17,006.94 ㎡

Hotel portion

17.2 bil

17.6 bil

8.6％

18,092.98 ㎡

100%

7.1 years

Osaka

Subtotal

55.8 bil

62.2 bil

27.8％

35,099.92 ㎡

Ｊ-5

HK Yodoyabashi Garden Avenue

4.4 bil

5.38 bil

2.2％

4,554.52 ㎡

100%

1.9 years

Osaka

Ｊ-6

Hirokoji Garden Avenue

6.35 bil

6.94 bil

3.2％

4,442.75 ㎡

100%

6.2 years

NagoyaＪ-4

Hommachi
Garden City

NEW

(Note 1) Total appraisal value is the sum of appraisal values stated in the appraisal reports as of the end of the 5th FP for the assets held as of the end of the 5th FP and as of March 31, 2017 for assets acquired in the 6th FP. As to Hommachi Garden City
(Office building portion) and Hommachi Garden City (Hotel portion), however, the limited market value that includes the increased value from holding the building in its entirety, which is stated in the appraisal report as of March 31, 2017, is used.
The market values that do not include the increased value from holding the building in its entirety are JPY 43.5 billion for Hommachi Garden City (Office building portion) and JPY 17.2 billion for Hommachi Garden City (Hotel portion).
(Note 2) Average building age is calculated using the weighted average of building age according to the respective acquisition price. Asset type ratio and Location ratio are calculated by dividing the sum of acquisition prices of assets for each asset type orarea by the total acquisition price, rounded to the nearest first decimal place.
(Note 3) As for Garden City Shinagawa Gotenyama, Hommachi Minami Garden City and HK Yodoyabashi Garden Avenue, SHR owns the sectional ownership right as well as accompanying right of site (in the site ownership ratio of approximately 81.0%,
56.3% and 40.6%, respectively).

9Acquiring Hotel Asset The St. Regis Osaka (Hommachi Garden City (Hotel Portion))＜Number of travelers from oversea in Osaka Prefecture＞（thousand people）

7,165

8,000
7,000
6,000
5,000

3,758

4,000
3,000
2,000

2,625

2,028

1,583

1,000
0

2011

2012

2013

2014

2015

(Source) Prepared by the Asset Management Company based on “Globalization of Osaka Seen in Numbers” by Osaka＜Cumulative total number of overnight guests in Osaka Prefecture ＞
cumulative total number of overnight guests from oversea
cumulative total number of overnight Japanese guests（thousand people）
35,00030,00025,000■ “The St. Regis Osaka”,
the highest-end brand of “Marriott International, Inc. ”

20,00030,366

6,200

8,966

10,255

21,76523,34423,881

2,365

3,061

4,315

19,39920,283

19,56722,16921,40021,163

2011

2012

2013

2014

2015

2016

15,00010,000

Hommachi Garden City (Hotel portion) houses “The St. Regis Osaka,” which is a luxury
brand hotel of the “Marriott International, Inc. ”, the American multinational diversified
hospitality company that manages franchises of a broad portfolio of hotels and related
lodging facilities around the world.

5,000
0

(Source) Prepared by the Asset Management Company based on “Overnight Travel Statistics Survey” by Japan
Tourism Agency. *Preliminary figures are indicated for 2016.

■ Fixed-rent type master lease agreement and collaborative investment
scheme through sponsor support＜Occupancy ratio of accomodation in each region＞
Osaka Prefecture

Japan (National average)

Tokyo

Aichi Prefecture（％）

Overview of lease agreement
Type of leaseagreement

31,41928,369

90
85
80
75
70
65
60
55
50
45
40

Fixed-rent type master lease agreement withpartially performance-based pay

In relation to the lease agreement, SHR and the Asset Management Company haveentered into a letter of intent with Sekisui House that states that the parties will holdconsultations in good faith concerning the development of a collaborative investment
scheme for internal growth after the acquisition by SHR.

81.1

81.0

84.8

84.1

76.4

68.2

60.2 71.6

62.1

76.2

2011

78.8
71.2

70.3

60.3

60.0

2015

2016

66.4

56.2
51.8

79.4

82.6

68.0

54.8

55.2

2012

2013

57.4

2014

(Source) Prepared by the Asset Management Company based on “Overnight Travel Statistics Survey” by Japan
Tourism Agency. *Preliminary figures are indicated for 2016.

10

Outline of Portfolio
Property No.

J-1

J-2

J-3

Property name

Garden City Shinagawa Gotenyama

Gotenyama SH Building

Hommachi Minami Garden City

Photo of Properties

Map of Properties

7F
6F
5F
4F

Description of Rights

3F
2F
1F
B1F

Common Area
Common Area
Common Area

Portion acquired before the 3rd follow-on PO

7F
6F
5F
4F
3F
2F
1F

25F

B1F

B2F

24F

～

8F

13F
12F

～

9F

Portion acquired at the time of the 3rd follow-on PO

Portion held by Sekisui House

Types of Lease
Agreement

Fixed-Rent Type Master Lease

Direct Lease

Fixed-Rent Type Master Lease

Environmental
Considerations

DBJ Green Building Certification: 5 Stars-

DBJ Green Building Certification: 4 Stars

Total Floor Area
(entire building)

62,975.42㎡

19,812.85㎡

46,010.88㎡

Leasable Area(acquired portions)

31,236.34㎡

19,999.97㎡

16,699.46㎡

Occupancy Rate

100.0％

100.0％

100.0％

Completion Date

Feb. 2011

Feb. 2011

Feb. 201111

Outline of Portfolio
Property No.

J-4

J-5

J-6

Property name

Hommachi Garden CityHK Yodoyabashi Garden Avenue

Hirokoji Garden Avenue

Photo of Properties

Map of Properties

27F
～

12Ｆ

12Ｆ

11Ｆ

11Ｆ

Hotel

14F

13Ｆ

10Ｆ

Portion held by Third Party

9F
13F

Description of Rights

6F

10F～

5F

Office

3F
2F
1F
B1F
B2F

Retail

7F

7F

11F

Common Area

Portion acquired before 3rd follow-on PO

9F
8F

8F

Common Area

12F

10Ｆ

6F
5F

4F

4F

3F

3F

2F

2F

1F

1F

Portion acquired at the time of the 3rd follow-on PO

Portion held by Sekisui House

Types of Lease
Agreement

Fixed-Rent Type Master Lease

Pass-Through Type Master Lease

Pass-Through Type Master Lease

Environmental
Considerations

DBJ Green Building Certification: 4 Stars(Office building portion)

DBJ Green Building Certification: 4 Stars
CASBEE OSAKA: Rank A

DBJ Green Building Certification: 4 Stars
CASBEE NAGOYA: Rank A

Total Floor Area
(entire building)

49,163.16㎡

16,953.28㎡

7,017.98㎡

Leasable Area(acquired portions)

Office building portion : 17,006.94㎡
Hotel portion: 18,092.98㎡

4,554.52㎡

4,442.75㎡

Occupancy Rate

100.0％

100.0％

100.0％

Completion Date

May 2010

July 2015

Mar. 201112

Portfolio Map and Growth Potential of the Area
Shinagawa Gotenyama Area

■Shinagawa station, a station accessible from the two buildings below, is one of the largest stations in Tokyo and has a high growth rate in terms of passenger numbers.
■Shinagawa station offers easy access to the Shinkansen Line and to Tokyo International Airport.

Hommachi - Yodoyabashi Area
■These three buildings are located in an area known as the Hommachi - Yodoyabashi area, the central business district of Osaka.
■This area offers convenient access to public transportation and also to the Shinkansen Line and to Osaka International Airport.
Nagoya Meieki Area
■ Nagoya Station, the biggest terminal station in the Chubu Area, is located in the Nagoya Meieki Area, which a business and commercial district.
■ A large-scale redevelopment project around Nagoya is underway with an eye to the launch of the Linear Chuo Shinkansen in 2027.
Osaka International Airport (ITAMI)
Osaka Sta.

Narita International Airport

Umeda Sta.

Tokyo Terminal Sta.

Shibuya Sta.

Yodoyabashi Sta.
J-5

Midosuji Ave.
Hommachi Sta.

Tokyo

J-4

J-3

Shinagawa Sta.
J-2
J-1

Osaka
NagoyaNamba Sta.

Shinkansen Line

Tokyo International Airport(HANEDA)

Kansai International Airport
J-5

J-4

J-3

J-6

J-2

J-1

Nagoya Sta.

Shinkansen LineHK Yodoyabashi
Garden Avenue

Hommachi
Garden City

Hommachi Minami
Garden City
Chubu Centrair International Airport

J-6

13

Hirokoji
Garden Avenue

Gotenyama
SH Building

Garden City
Shinagawa Gotenyama

External Growth Investment policy••••

Promoting continuous external growth by focusing on property acquisitions from the sponsor
Applying strict investment selection criteria when considering acquisition from third parties
External growth centering on acquisition of office buildings
Shifting to an external growth strategy that focuses on domestic real estate for the time being

Achieved 200 billion yen in asset size by focusing on domestic real estate through utilization of Sponsor Pipeline andpromotion of continuous external growth.
【Preferential Negotiation Rights for Properties Co-owned with Sekisui House】

Area

Asset type

Ratio of unaquired floor area

Garden City Shinagawa Gotenyama

Tokyo

Office Building

19.0%

Hommachi Minami Garden City

Osaka

Office Building

43.6%

 Urban development undertaken by Sekisui House (Note 1)
1993

2006

2010

2011

2013

2015

Future project（tentative）
Akasaka 5chome PJ(Tokyo)（Note 3）Umeda
Sky Building（Osaka）

Akasaka
Garden City
(Tokyo)Hommachi
Garden City
（Osaka）（asset acquired）

Garden City
Shinagawa
Gotenyama(Tokyo)（asset acquired）(Note 2)

Gotenyama Hommachi Minami Hirokoji Garden
AvenueSH Building
Garden City
(Nagoya)（Osaka）(Tokyo)（asset acquired）（asset acquired）(Note 2)

（asset acquired）

Grand Front
Osaka（Osaka）

The Ritz-Carlton,
Kyoto（Kyoto）

HK Yodoyabashi
Garden Avenue（Osaka）（asset acquired）

OtemonTower
JX Building(Tokyo)（tentative）
ＭＭ21-44 PJ(Tokyo)（Note 3）(Note 1) The above projects include joint projects with other companies and properties that have been sold. SHR has no plan to acquire the above properties as of June 14, 2017.
(Note 2) Although SHR has acquired parts of the above buildings, it still has preferential negotiation rights by acquiring the remaining parts of these buildings. SHR does not have any plan to acquire the remaining parts of these buildings as of the date hereof.
(Note 3) These projects are currently under consideration by Sekisui House and may be changed or cancelled without prior notice.

14

Internal Growth Utilization of sponsor support••••

Provision of property management services for owned assets
Utilization of know-how and services possessed by Sekisui House that can enhance tenant satisfaction for operation management
Coordination in strategies such as renovation and value enhancement, etc. regarding old properties
Investigation and discussion regarding execution of master lease agreements that respond to property characteristics

 Status of lease agreements of portfolio properties (as of June 14, 2017)Management policy emphasizing stability until the portfolio is diversified
Selecting lease type depending on property characteristics
Property Name

HommachiMinami
Garden City

Garden City
Shinagawa Gotenyama

Hommachi
Garden City

Gotenyama
SH BuildingHK
Yodoyabashi
Garden Avenue

Direct Lease

Pass-Through Type Master Lease

Hirokoji
Garden Avenue

Photo of Properties
Lease Type

Fixed-Rent Type Master Lease(Note)

Ratio of Lease Type
(Note)

58.0%

16.1%

17.9%

8.0%

Asset Type

Office building

Hotel

Office building

Office building

Contract Period（Master Lease or
Direct Lease)① portion originallyacquired② portion
additionally acquired③ portion
additionally acquired

From Dec. 2014 From May 2016 From May 2017
to Dec. 2019
to Dec. 2019
to Dec. 2019

Office building
portionFrom Dec. 2014
to Dec. 2019

Hotel portion

From May 2015 From May 2017
to May 2020
to May 2020

Stable rent revenue

From Mar. 2011
to Feb. 2031

From May 2016
to May 2019

From May 2016
to May 2019

Long-term rent revenue

Rent for 92.0% of leased floor area (including direct lease) has been fixed substantively(Note) "Ratio of lease type" refers to the ratio of the leased floor area for each lease type under the relevant lease agreements, in respect of the properties, that are valid as of June 14, 2017 (or, if a master lease agreement that is valid as of June 14,2017 is concluded for the property, the master lease agreement), to the total sum of the leased floor areas indicated in such lease agreements, rounded to the nearest first decimal place.

15

Financial Results
 Status of interest-bearing liabilities （as of June 15, 2017）

 Financial Standing
End of 5th FP(actual)(as of Apr. 30, 2017)77.3 billion yen

84.4 billion yen

Fixed interest rate
debt ratio

76.6%

70.2%

Long-term debt ratio

100.0%

91.6%

40.8％

40.8％

Acquisition capacity until
LTV reaches 50%(Approximate amount)35.0 billion yen

Average financing interest rate

0.75%

0.70%

6.3 years

5.8 years(Note 1)

Average financing term
(Note 2)

Total InterestBearing
Liabilities

Percentage

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

18.11 billion yen

23.4 %

Sumitomo Mitsui Banking Corporation

16.16 billion yen

20.9 %

Mizuho Bank, Ltd.

9.60 billion yen

12.4 %

Sumitomo Mitsui Trust Bank, Limited

8.98 billion yen

11.6 %

Resona Bank, Limited

5.70 billion yen

7.4 %Mitsubishi UFJ Trust and Banking Corporation

4.74 billion yen

6.1 %Development Bank of Japan Inc.

4.02 billion yen

5.2 %The Norinchukin Bank

4.02 billion yen

5.2 %Mizuho Trust & Banking Co., Ltd.

3.97 billion yen

5.1 %Investment Corporation Bonds

20.0 billion yen

2.6 %(as of June 15, 2017)

Total interest-bearing liabilities

LTV (total asset basis)(other than short-term debt)

After 3rd follow-on
PO

38.0 billion yen

 Diversification of Repayment Date（as of June 15, 2017）(billion yen)

Average remaining term ofinterest-bearing liabilities (Note 3)

4.2 years

Investigating lengthening borrowing period and fixing
interest rates for short-term debt 7.1 billion yen

3.8 years

 Credit Rating Information

4.05
14.00

Credit Rating Company

Long-term Issuer Rating

10.00
7.10

JCR

17.00

14.00

AA-（Stable）
2017

2018

2.00

7.00

2019

2020

2021

3.00

3.10

2022

2023

3.15

2024

2025

2026

(Note 1) Average financing interest rate indicates a weighted average (annual) interest rate using the balance of interest-bearing liabilities as of the end of the 5th FP and June 15, 2017. In respect of the average interest rates of interest-bearing liabilities
for which an interest rate swap was conducted in order to hedge the risk of interest rate fluctuations, interest rates taking into account the effect of the interest rate swap are used. The figure is rounded to the nearest second decimal place.
(Note 2) Average financing term indicates the average term from the date of borrowing to maturity dates weighted by the balance of the respective interest-bearing liabilities.
(Note 3) Average remaining term of interest-bearing liabilities indicates the average remaining term from the end of the 5th FP and June 15, 2017 to maturity dates weighted by the balance of the respective interest-bearing liabilities.

16

Interest-Bearing Liabilities (1/2)（as of June 15, 2017) LoanTerm
short

LenderThe Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Development Bank of Japan Inc.

Long

Balance(million yen)
7,100

14,000Interest Rate
Base Rate(JBA 1-month JPY TIBOR)+0.18％
Base Rate(JBA 1-month JPY TIBOR)+0.25％

14,0000.65830% (Note)

17,0000.94060% (Note)

10,0001.47450％ (Note)

Drawdown Date Repayment Date
May 24, 2017

Remarks

May 23, 2018

Nov. 30, 2017

Nov. 30, 2019

Dec. 3, 2014

Nov. 30, 2021

Nov. 30, 2024

UnsecuredandUnguaranteed

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.

5,350

0.62760％ (Note)

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited

1,650

0.89470％ (Note)

Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Mitsubishi UFJ Trust and Banking Corporation
Mizuho Trust & Banking Co., Ltd.

2,350

1.01850％ (Note)

Nov. 30, 2020

July 31, 2015

Nov. 30, 2022

Nov. 30, 2023

(Note) In order to hedge the risk of interest rate fluctuations, an interest rate swap transaction, which substantially secured interest rates, was conducted. Accordingly, the interest rates are calculated taking the effect of this interest rate swap into consideration.

17

Interest-Bearing Liabilities (2/2)（as of June 15, 2017)
Term

LenderBalance(JPY mil)Development Bank of Japan Inc.

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Long

650

0.88500%

1,650

0.61760%700

0.88470%

Drawdown
Date

Repayment
Date

Remarks

Nov. 30, 2022
July 31, 2015

Nov. 30, 2020
Nov. 30, 2022

750

1.00850%

1,810

0.60500%

1,340

0.67000%

4,050

Base Rate(JBA 1-month JPY TIBOR)+0.225％82,400----Interest Rate

Issue Date

Redemption Date

Remarks

Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking Corporation
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Resona Bank, Limited
Development Bank of Japan Inc.
The Norinchukin Bank
Mizuho Trust & Banking Co., Ltd.
Total Loans

Interest Rate

Nov. 30, 2023
Sep. 8, 2026

UnsecuredandUnguaranteed

Sep. 9, 2016
Nov. 30, 2020

 Investment Corporation Bond
Name

Issue Amount(million yen)First Series Unsecured Investment Corporation Bonds(with a clause that ranks them pari passu among specified investment corporation
bonds)

2,000

0.340%

Sep. 8, 2016

Sep. 8, 2026

UnsecuredandUnguaranteed

Total Investment Corporation Bonds

2,000

-

-

-

-

Total Interest-Bearing Liabilities

84,40018Strategy for Future Growth
Sekisui House REIT’s goals are to continue to focus on “Prime Properties”, andexpand and diversify its portfolio at a sustainable pace,by capitalizing on the strong support of Sekisui House.

Sekisui House REIT’s Operational Philosophy
・Provide high-quality social capital and maximize unitholder value
・Invest in commercial properties focused on strategic locations and high quality
・Portfolio development policy centering on office buildings
・Growth strategies that take full advantage of the versatile support of Sekisui House

Sekisui House’s Support for Sekisui House REIT
・External growth through Pipeline Support Agreement
・Fixed-rent type Master Lease with Sekisui House

19

Our Growth Strategies
Current Target

Expanding asset size to 300 billion yen

Strategy

Utilizing Sponsor
Pipeline effectively

Promote continuous external
growth for full-fledged
diversification of portfolio

300 billion yen
Accomplished our goal from IPO “200 bil” in 2.5 years from IPO.

152.9 bil

114.3 bil

After IPO

After 1st follow-on PO

200.7 bil

179.5 bil

After 2nd follow-on PO

After 3rd follow-on PO

 Management Strategies
Investment
Strategies

 Utilizing sponsor pipeline by Sekisui House Investment focusing on Prime Properties
 Continuous expansion of asset size Diversifying portfolio (number of properties / tenants)

Financial
Strategies

 Enhancing liquidity of investment
units by way of public offering Maintainning LTV (total asset basis) at a conservative
level between 40% and 50%
 Promoting extension of borrowing periods,
diversification of repayment dates and fixation of interest rates

20

The current
targetMaximize ourunitholder value
while maintaining stable
DPU growthⅢ. Appendix

Appendix

HK Yodoyabashi Garden Avenue

21Balance Sheet（unit： thousand yen ）4th Fiscal Period
October 31, 2016

5th Fiscal Period
April 30, 2017

4th Fiscal Period
October 31, 2016

Assets

5th Fiscal Period
April 30, 2017

Liabilities
Current liabilities

Current assets
Cash and deposits

2,537,620

4,115,187

Operating accounts payable

Cash and deposits in trust

7,805,438

7,662,531

Current portion of long-term loans payable

Operating accounts receivable

24,252

16,709Prepaid expenses

88,11784,523

Deferred tax assets

10

16

461,715-

Consumption taxes receivable

Other
Total current assets

464

11,35010,917,618

11,890,319

143,397

130,929-

14,000,000

Accounts payable - other347,741

376,804

Accrued expenses

73,014

79,170

Income taxes payable
Accrued consumption taxes

Total current liabilities

815

938

-

284,571564,968

14,872,413

Non-current liabilities

Non-current assets

Investment corporation bond

2,000,000

2,000,000
61,300,000

Long-term loans payable

75,300,000

53,265,090

53,345,801

Tenant leasehold and security deposits in trust

9,031,712

9,033,710

Accumulated depreciation△2,038,527△2,678,821

Total non-current liabilities

86,331,712

72,333,710

Buildings in trust, net

51,226,562

50,666,979

86,896,680

87,206,123

672,428

672,428△34,346△43,390

638,082

629,038

100,040,294

100,040,294

Unappropriated retained earnings

2,321,003

2,381,018

Total surplus

2,321,003

2,381,018

102,361,297

102,421,312

102,361,297

102,421,312

189,257,978189,627,436

Property, plant and equipment
Buildings in trust

Structures in trust
Accumulated depreciation

Structures in trust , net
Machinery and equipment in trust

411

411

Accumulated depreciation

△3

△23

Machinery and equipment in trust, net

407

387

996

1,259

△181

△297

Tools, furniture and fixtures in trust
Accumulated depreciation

815

961

126,120,644

126,120,644

-

9,699

177,986,512

177,427,710

Other

4,617

3,882

Total intangible assets

4,617

3,882

Lease and guarantee deposits

20,181

20,181Long-term prepaid expenses

275,627

239,863

Total investments and other assets

295,808

260,044

178,286,938

177,691,637

Investment corporation bond issuance costs

18,38817,453

Investment unit issuance costs

35,032

28,026

Total deferred assets

53,42045,479189,257,978189,627,436

Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust

Total property, plant and equipment

Total liabilities

Net assets
Unitholders’ equity
Unitholders’ capital

SurplusIntangible assets

Total unitholders’ equity

Investments and other assets

Total non-current assets
Deferred assets

Total Assets

Total net assets

Total liabilities and net assets

22

Statement of Income and Retained Earnings（unit： thousand yen ）4th Fiscal Period
From May 1, 2016 to October 31, 2016

5th Fiscal Period
From November 1, 2016 to April 30, 2017

Operating revenue
Rent revenue - real estate
Other lease business revenue
Total operating revenue

4,032,189

4,121,417

27,09722,9704,059,286

4,144,387

1,021,071

1,053,022

309,334

332,503

Operating expenses
Expenses related to rent business
Asset management fee
Asset custody fee

3,159

3,520

Administrative service fees

11,217

11,820

Directors’ compensations

3,600

3,600

Other operating expenses

46,02635,864

Total operating expenses

1,394,409

1,440,331

2,664,877

2,704,056

Operating income
Non-operating income
Interest income

5850Interest on refund

-

1,521

Subsidy income-

10,93558

12,507283,943

283,125

995

3,383

Borrowing related expenses

48,89839,818

Amortization of investment unit issuance costs

7,006

7,006

311

934

2,241

515

Total non-operating income
Non-operating expenses
Interest expenses
Interest expenses on investment corporation bondAmortization of investment corporation bond issuance costs
Other343,397334,784

Ordinary income

2,321,537

2,381,779

Income before income taxes

2,321,537

2,381,779

Income taxes - current

824

945

Income taxes - deferred

6

△5

831

940

2,320,706

2,380,839

Total non-operating expenses

Total income taxes
Net Income
Retained earnings brought forward

296

179

Unappropriated retained earnings

2,321,003

2,381,018

23

Entire Portfolio（as of April 30, 2017）
Property No.

J-1

J-2

J-3

J-4

J-5

J-6

Property name

Garden City
Shinagawa
Gotenyama

Gotenyama
SH Building

Hommachi Minami
Garden City

Hommachi
Garden CityHK Yodoyabashi
Garden Avenue

Hirokoji
Garden Avenue

Shinagawa-ku, Tokyo

Shinagawa-ku, Tokyo

Osaka-shi, Osaka

Osaka-shi, Osaka

Osaka-shi, Osaka

Nagoya-shi,Aichi

55,60051,50023,10038,600

4,400

6,350

29,235.95

19,999.97

16,699.46

17,006.94

4,554.52

4,442.75

100

100

100

100

100

100

Sekisui House

Non-disclosure (Note 1)

Sekisui House

Sekisui House

Sekisui House

Sekisui House

181

181

181

181

181

181

1,233,719

1,089,001

586,791

903,831

145,388

185,655

1,233,719

1,089,001

586,791

903,801

137,633

170,469

-

-

-

29

7,754

15,185257,929

195,086

186,571298,973

52,91361,548

-

-

-

-

8,530

16,249

8,400

1,200

6,000

6,000

2,137

1,258

650

400

500

250

240

225

-

-

-

-

9,994

8,259

Property and other taxes

75,921

50,62062,28088,075

8,521

10,782

Insurance expenses

1,578

947

969

1,793

546

316

Repair expenses

12,833

-

5,053

7,010

284

400

Depreciation

157,542

139,639

111,557

195,103

21,93923,692

953

2,280

210

740

719

363

975,790

893,914400,220604,857

92,475

124,107

1,133,332

1,033,553

511,778

799,960

114,414

147,799

4.1%

4.0%

4.4%

4.1%

5.2%

4.7%

Address
Acquisition price (million yen)
2

Leasable area (m )Occupancy rate（％）
TenantDays of operation
Notes to Statement of Income （thousand yen）
April 30, 2017（end of 5th FP）① Property-related operating revenue
Rent revenue
Other lease business revenue② Property-related operating expenses
Subcontract expenses
Property management fees
Trust fees
Utilities expenses

Other expenses related to rent business③

Property-related operating income（= ① - ②）

NOI（= ③ + Depreciation）
NOI yield (Note 2)(Note 1) The tenant name cannot be disclosed as consent for disclosure has not been acquired from the tenant.
(Note 2) NOI yield is calculated by dividing annualized NOI by total acquisition price.

24（thousand yen ）Overview of Third follow-on Public Offering Overview of Third follow-on Public Offering
Offering Type
Number of Investment Units
issued through the public offering

Domestic Offering
Total
Primary offering
The third party allotment

Issue price
Issue amountAmount of funds procured（including third-party allotment）

Portfolio

75,000 units
71,400 units
3,600 units

Total acquisition price

139,912 yen
135,320 yen
10.14 billion yen

Pricing Date

200.7 billion yen

Maximum Investment Ratio

31.0 ％

29.7 ％

Portfolio PML

1.9 ％

2.1 ％

6.3 years

6.4 years

27.7 billion yen

29.4 billion yen

Unrealized Gain

2017/5/24
2017/6/12

After 3rd follow-on PO(as of June 15, 2017)179.5 billion yen（Note 1）

2017/5/17
Primary offering
The third party allotment:

End of 5th FP

Average Building Age

2017/5/9

Issuance Resolution Date

Payment Date

 Changes in Key Factor

FinanceEnd of 5th FP

After 3rd follow-on PO(as of June 15, 2017)

 Change in Unit Price（April 3, 2017 – June 12, 2017）
5/17
Pricing Date
Unit price（yen）

Volume（Unit）

5/9
Issuance
Resolution Date

150,000

Total interest-bearing debt

77.3 billion yen

84.4 billion yen

Period-end total assets LTV

40.8 ％

40.8 ％

25,000Acquisition Capacity（Note 2）
20,000145,000

15,000140,000
10,000135,000

5,000

130,000

Number of Investment Units
Issued and outstanding
Total Market Value（Note 3）

4/6 4/11 4/14 4/19 4/24 4/27 5/2 5/10 5/15 5/18 5/23 5/26 5/31 6/5
Volume （Right axis）

Price of SHR （Left axis）

6/8

TSE REIT Index（source）Tokyo Stock Exchange（Note) TSE REIT Index performance is indexed to SHR unit price (145,000 yen) as of end of May 9, 2017, which is pricing date of 3rd follow-on PO date of SHR

25

35.0 billion yen

894,000 units
127.2 billion yen

approximately

38.0 billion yen

969,000 units
136.3 billion yen(Note 1) Average building age after 3rd follow-on PO is calculated using the weighted average of building age.
(Note 2) Acquisition capacity refers to the maximum amount of funds to be procured, upon property acquisitions
by SHR, through new interest-bearing liabilities until LTV (total asset basis) reaches 50%. Please notethat this does not guarantee that such an amount can be actually procured.
(Note 3) Market capitalization is obtained by multiplying the closing price of investment unit at the end of the 5th
FP for End of 5th FP and on June 12, 2017 for After 3rd follow-on PO by the total number of investment
units issued and outstanding on the respective date, rounded off to the specified unit.

0
4/3

approximately

Overview of Appraisal■Appraisal Value List
Capitalization
Property
No.

Property Name

Appraisal
Value ①(million yen)Book Valueor
Acquisition
price ②
(million yen)

Unrealized
Gain/Loss①-②(million yen)

Direct Return Method

DCF Method

Capitalization(million yen)

Cap Rate(%)

Capitalization(million yen)

Discount
Rate (%)

Terminal
Cap Rate(%)

Appraisal NOI(million yen)Appraisal
Institution

J-1

Garden City Shinagawa Gotenyama(Acquired portion)

64,50055,116

9,383

66,2003.4

63,800

3.1

3.6

2,262

DAIWA REAL ESTATEAPPRAISAL CO.,LTD.

J-2

Gotenyama SH Building

56,90050,862

6,037

58,0003.6

56,400

3.6

3.8

2,064

The Tanizawa Sōgō
Appraisal Co., Ltd.

J-3

Hommachi Minami Garden City

27,90022,591

5,308

28,9003.9

27,500

3.6

4.1

1,141

RichiAppraisal InstituteCo., Ltd.

J-4

Hommachi Garden City
(Office building portion)

43,50038,083

5,416

44,1003.6

42,900

3.3

3.8

1,589

Japan Real Estate
InstituteJ-5

HK Yodoyabashi Garden Avenue

5,380

4,413

966

5,610

4.1

5,280

4.1

4.2

232

The Tanizawa Sōgō
Appraisal Co., Ltd.

J-6

Hirokoji Garden Avenue

6,940

6,349

590

7,060

4.3

6,890

4.1

4.5

307

DAIWA REAL ESTATEAPPRAISAL CO.,LTD.

205,120

177,418

27,701

209,870-

202,770

-

-

7,597

-

Subtotal (Assets acquired by end of 5th FP)
J-1
J-4

Garden City Shinagawa Gotenyama(Additional acquisition portion)
Hommachi Garden City
(Hotel portion)

Subtotal (Assets acquired in 6th FP) （Note 1）
J-4

Hommachi Garden City
(Office building portion) （Note 2）Grand total（Note 3）

4,290

4,000

290

4,400

3.5

4,240

3.2

3.7

154

DAIWA REAL ESTATEAPPRAISAL CO.,LTD.

17,60017,200400

17,8003.8

17,300

3.6

4.0

685

Japan Real Estate
Institute

21,89021,200690

22,200-21,540

-

-

840

-

44,60038,0836,516

45,4003.5

43,700

3.3

3.7

1,589

Japan Real Estate
Institute

228,110

198,618

29,491

233,370-

224,310

-

-

8,437

-

(Note 1) Figures for the assets acquired in the 6th FP are based on the appraisal report as of March 31, 2017. As to Hommachi Garden City (Hotel portion), the limited market value that includes the increased value from holding the building in its entirety
is used.
(Note 2) The limited market value that includes the increased value from holding the building in its entirety, which is stated in the appraisal report as of March 31, 2017, is indicated. Figures for the assets acquired in the 6th FP are based on the appraisal
report as of March 31, 2017. As to Hommachi Garden City (Hotel portion), the limited market value that includes the increased value from holding the building in its entirety is indicated.
(Note 3) As to Hommachi Garden City (Office building portion) among assets held as of the end of the 5th FP, the limited market value that includes the increased value from holding the building in its entirety, which is stated in the appraisal report as ofMarch 31, 2017, is indicated.

■Appraisal Value (as of end of 5th Fiscal Period, compared to as of end of 4th Fiscal Period)
PropertyNo.

Appraisal Value (million yen)
Property Name

End of 4th FP ①

Comparison ②-①

End of 4th FP ①

64,500+1,400

3.5

3.4

△0.1

56,90056,900

-

3.6

3.6

-

Hommachi Minami Garden City

27,20027,900

+700

4.0

3.9

△0.1

J-4

Hommachi Garden City
(Office building portion)

42,80043,500

+700

3.7

3.6

△0.1

J-5

HK Yodoyabashi Garden Avenue

5,190

5,380

+190

4.2

4.1

△0.1

J-6

Hirokoji Garden Avenue

6,920

6,940

+20

4.4

4.3

△0.1

Total

202,110205,120+3,010

-

-

-

J-1

Garden City Shinagawa Gotenyama(Acquired portion)

63,100J-2

Gotenyama SH Building

J-3

End of 5th FP ②

Direct Return Method Cap Rate (％)

26

End of 5th FP ②

Comparison ②-①

Types of Lease Agreement
 Image of Lease Scheme

End-Tenant(Sub-lessee)

Tenant(Lessee)LessorFixed-Rent Type
Master Lease

Pass-Through Type
Master Lease

Direct Lease

End-Tenant

End-Tenant

End-Tenant

Rent

Rent

Sekisui House

Sekisui House

Fixed-Rent

Rent

SHR

SHR

Rent

SHR

 Characteristics of SHR’s Internal Growth•

Approximately 74% of the portfolio (ratio of lease types) adopts fixed-rent type master lease with Sekisui House.
Rent revenue is being fixed in order to reduce the impact of tenant vacation, etc. on earnings.

•

HK Yodoyabashi Garden Avenue and Hirokoji Garden Avenue adopt pass-through type master lease with Sekisui
House. Since SHR can receive rent of the same amount as the rent under the lease agreement concluded between
Sekisui House and end-tenants, SHR can benefit from rent revenue upside when the occupancy rate rises or the rent isrevised upward.

•

Gotenyama SH Building adopts direct lease in which the property is directly leased to the end-tenant. A 20-year leaseagreement has been concluded with the tenant, and thus the rent revenue is stable over the long-term.
27

Structure of SHR
 Structure Diagram

Asset Custodian

2

SEKISUI HOUSE REIT, INC.

5

Mitsubishi UFJ Trust and Banking Corporation

Administrative Agent for Operation of
Administrative Instruments
Mitsubishi UFJ Trust and Banking Corporation

General Meeting of Unitholders
Holding approximately 6.7% of investment units
Transfer Agent3(as of June 12,2017)

Board of Directors
Executive Director: Junichi Inoue
Supervisory Director: Shigeru Nomura
Supervisory Director: Tatsushi Omiya

Mizuho Trust & Banking Co.,Ltd.

6

Parent Company of
the Asset Management Company / Sponsor
SEKISUI HOUSE, LTD.

Independent Auditor

Administrative Agent for
Investment Corporation Bonds

4

Ernst & Young ShinNihon LLC

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1

Asset Management Company

100% ownership

SEKISUI HOUSE INVESTMENT ADVISORS, LTD.

1

Asset Management Agreement

4

Fiscal Agency Agreement

52

Asset Custody Agreement

3

Administrative Agreement (Administration of Investment Units)General Administrative Agreement

6

Pipeline Support Agreement / Sponsor Support Agreement, etc.

28Governance System
Adopts a Scheme that Emphasizes Unitholders’ Interests

Strong Alignment of Interests between Sekisui House
and Our Unitholders

 Decision-Making Process

Sekisui House has confirmed that it intends to continue holding
SHR’s investment units on a long-term basis
 Agreement on Consideration of Co-Ownership or Sectional
Ownership with Sekisui House
Sekisui House has confirmed that it will consider faithfully coownership (including beneficiary interests) or sectional ownershipwith us upon our request

Deliberation
and approval

Board of Directorsof Sekisui House Reit

Disapproved

Deliberation
and resolution

Deliberation
and resolution

Compliance Committee

Board of Directors

Rejected

Rejected

Deliberation
and resolution

Investigation
and approval

Compliance Officer

Proposal

Proposing Department

Investment Committee

Rejected

Remanded Same-Boat Investment from Sekisui House Measures to Prevent Transactions Involving Conflict of Interest

Attendance and assent byexternal members are required

Calculation Method

Type 1(Asset-based fee)

Total assets at prior FY-end × (up to) 0.5% (Note 1)

Type 2(DPU-based fee)

DPU (Note 2)× Operating Income (Note 3) × (up to) 0.004% (Note 1)

Type 3(Acquisition Fees)

Purchase price × (up to) 0.5% (Note 1)(up to 0.25%(Note 1) in case of a transaction with a related party)

Type 4(Disposition Fees)

Sale price × (up to) 0.5%
(zero in case of a transaction with a related party)

Acquisition price shall be equal to or less than the appraisal value.

Property Transfer

Transfer price shall be equal to or higher than the appraisal value.

Brokerage fee shall be within the scope of reward stipulated in the Building
Lots and Buildings Transaction Business Act, and shall be determined after
Payment of Brokerage Feetaking into account the levels of contract terms and conditions, difficulty inconducting brokerage and other factors.
a. Consignment shall be made under conditions that are deemed to beappropriate after comprehensively taking into account the market levelsof the outsourcing fees, the content of provided services, total work
volume and other factors.
b. Upon acquiring real estate and other assets, and if their management
and other services have been outsourced to interested parties and will
Outsourcing of Management
continue to be outsourced to the same parties, approval or disapproval of
and Other Services of Realthe acquisition as well as the acquisition price shall be determined by
Estate and Other Assets
paying full attention to the adequacy of the outsourcing terms andconditions.
c. With regard to the interested party’s status of implementing management
and other services, the party’s adequacy as consignee shall be verified
once a year as a rule via assessments and such conducted by an outside
independent appraiser that is not an interested party.
The agreements shall be executed under the terms and conditions that are
Execution of Lease
deemed to be adequate after investigating such factors as the market rent
Agreements for Real Estatelevel and price situation in neighboring markets and, as needed, referring to
and Other Assets
the opinions of third parties that are not interested parties.

 Performance-Based Asset Management FeesManagement Fee

Property Acquisition(Note 1) As of June 14, 2017,
Rate for Type 1 management fee is 0.15%,
Rate for Type 2 management fee is 0. 0023%,
Rate for Type 3 management fee is 0.3％ (or 0.15% in case of a transaction with a related party)(Note 2) DPU= distributable profit before deduction of Type 2 management fee / total number of investment units issued
and outstanding(Note 3) Operating Income before deduction of type 2 management fee

Placement of Orders forConstruction Work, Etc.
with Contract AmountSurpassing 30 million yen

29

Orders may be placed to interested parties only when such factors as theestimated price and the content of services to be provided are notdisadvantageous to SHR after comparing such factors with those of third
parties other than the interested parties.

Asset Management Company（as of June 14, 2017）
 Overview of Asset Management Company
Trade Name Directors and Corporate Auditors

Sekisui House Investment Advisors, Ltd.

（Financial Instruments Business Operator: Director-General of the Kanto
Finance Bureau (Kinsho) No. 2791）

Foundation

President &Junichi Inoue
Representative Director
Director

Atsuhiro Kida（General Manager of Management Division）

Director

Shoichi Maruyama

Director

Ichiro Maeoka（Compliance Officer）

Director

Kimiyoshi Otani

February 17, 2014

Paid-in capital

400 million yen

Shareholder

Sekisui House, Ltd.（100％）

Directors andemployees

24（General Manager of Real Estate Investment Management Division）（Chief Manager of Corporate Management Planning Office）

Hideyuki Kamijyo
Director（Part time）
Auditor（Part time）

 Organization Chart（Executive Officer, Chief Manager of Accounting & Finance
Department of Sekisui House）

Keizo Yoshimoto（Senior Manager of Secretariat of Sekisui House）

General Meeting of
Shareholders
AuditorBoard of Directors
Investment
Committee*Newly - establishedin April 17, 2017

Corporate Management
Planning OfficeCompliance
Committee
President &Representative Director

Real Estate Investment andManagement Division

Real Estate Investment
Department

Compliance
OfficerManagement Division

Real Estate Management
Department

IR and Finance
Department

30

General Affairs andAccounting Department

Unitholders Composition
 Number of Investment Units Issued and Outstanding by Unitholder Typethth

End of 4 FP

End of 5 FP

 Number of Unitholders by Unitholder TypeEnd of 4th FP

comparison

Number ofinvestment
unit（unit）

ratio（％）

Number ofinvestment
unit（unit）

ratio（％）

Number ofinvestment
unit（unit）

ratio（pt）

Individuals, etc

98,25811.0

88,1479.9-10,111-1.1

Individuals, etc

Financial institution

595,972

66.7

607,389

67.9

11,417

1.3City banks

-

-

-

-

-

-

Regional banks

66,841

7.5

66,620

7.5

-221

-0.0

Trust banks

458,46851.3

477,578

53.4

19,110Life insurers

25,492

2.9

15,527

1.7

Casualty insurers

2,384

0.3

1,601

Shinkin banks

24,529

2.7

Others

18,258Nonfinancial corporations
Non-Japanese corporations

Unitholder Type

Securities companies
Total

ratio
（％）

Number ofunit holder（peopleratio（％）

Number ofunit holder（people)

ratio
（pt）

13,18095.9

11,93495.9-1,246

0.0

Financial institution

132

1.0

123

1.0

-9

0.0

City banks

-

-

-

-

-

-

Regional banks

27

0.2

26

0.2

-1

0.0

2.1

Trust banks

9

0.1

9

0.1

-

0.0

-9,965-1.1Life insurers

8

0.1

6

0.0

-2

-0.0

0.2

-783

-0.1

Casualty insurers

3

0.0

2

0.0

-1

-0.0

28,206

3.2

3,677

0.4

Shinkin banks

47

0.3

44

0.4

-3

0.0

2.0

17,857

2.0

-401

-0.0

Others

38

0.3

36

0.3

-2

0.0

88,6399.988,494

9.9

-145

-0.0

Nonfinancial corporations

261

1.9

234

1.9

-27

-0.0

106,043

11.9

105,878

11.8

-165

-0.0

Non-Japanese corporations

155

1.1

140

1.1

-15

-0.0

5,088

0.6

4,092

0.5

-996

-0.1

Securities companies

21

0.2

18

0.1

-3

-0.0

894,000

100.0

894,000

100.0

-

-

13,749100.0

12,449100.0-1,300-

Units

Percentage(Including Security Firms)

Other domestic
その他国内法人
companies

20%

40%

Foreign

外国法人等
Companies/Individuals

88,494units(9.9%)

611,481 units(68.4%)

0%comparison

Number ofunit holder（people）

Financial Institutions
金融機関（証券会社含む）

As ofApril 30, 2017894,000 units

End of 5th FP

60%

Individuals
個人・その他Total

 Major Unitholders（Top 5）（as of April 30, 2017）/Others

105,878
units(11.8%)

80%

Unitholder TypeName
88,147units(9.9%)

100%(Note) Percentages are rounded to the nearest first decimal place.

31

Japan Trustee Services Bank, Ltd. (Trust Account)

269,687 units

30.17%

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

82,226 units

9.20%

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

79,478 units

8.89%

Sekisui House, Ltd.

65,200 units

7.29%

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

34,456 units

3.85%

Change in Unit Price（December 3, 2014 – May 31, 2017）
Volume（Right axis）

TSE REIT Index

Price of SHR（Left axis）（JPY）（Units）

160,000

50,000186,236 units
as of Dec. 3 ,2014

155,000

45,000150,000
40,000145,000
35,000140,000
30,000135,000
130,000

25,000125,000

20,000120,000
15,000115,000
10,000110,000
5,000

105,000
100,000

0
Dec

Jan

Feb Mar

Year
2014

year
2015

Apr May

Jun

Jul

Aug

Sep

Oct

Nov DecJan

Feb Maryear
2016

Apr May

Jun

Jul

Aug

Sep

Oct

Nov DecJan

Feb MarApr Mayyear
2017(Note) TSE REIT Index performance is indexed to SHR unit price (132,000 yen) as of December 3, 2014, which is our listing date. TSE REIT Index refers to the weighted average-type index of market capitalization of all REIT counters.

32

Memo

33

Memo

34

35