Semi-Annual Report
6th Fiscal Period(from May 1, 2017 to October 31, 2017)

Message to Our Unitholders

Performance highlights

Since its listing on the Tokyo Stock Exchange Real Estate Investment Trust Section (the J-REIT market) in
December 2014, Sekisui House Reit, Inc. (“SHR”) has steadily accumulated a track record, and has settled
its accounts for the 6th fiscal period (namely, the fiscal period ended October 2017). I, on behalf of SHR,
would like to extend my heartfelt thanks to unitholders as this could not have been managed without
your support.

Distribution per unit
Distribution per unit
6th Fiscal Period Ended October 2017

2,710 yen

I hereby report on the management status and financial results for the 6th fiscal period of SHR.
The management performance for the 6th fiscal period resulted in operating revenue of 4,580 million
yen, operating income of 2,987 million yen, ordinary income of 2,626 million yen, and net income of
2,625 million yen, and the distribution per unit declared for the 6th fiscal period was 2,710 yen.

Business results and distribution
5th FP (Actual)(ended Apr. 2017)

6th FP (Actual)(ended Oct. 2017)

7th FP (Forecast)(ending Apr. 2018)

8th FP (Forecast)(ending Oct. 2018)

Operating revenue(million yen)

4,144

4,580

4,646

4,655

Operating income(million yen)

2,704

2,987

2,992

2,968

Ordinary income(million yen)

2,381

2,626

2,617

2,597

Net income(million yen)

2,380

2,625

2,616

2,596

Distribution per unit
(yen)

2,663

2,710

2,700

2,680

Operating revenue/Net income(million yen)

Operating revenue

Distribution per unit

Net income

5,000

4,580
4,000

4,646

(yen)
3,000

4,655

2,663

2,710

2,700

2,680

In the fiscal period under review, SHR conducted its third public offering in May 2017 since its listing andacquired two properties (comprising additional portions of two properties, parts of which are alreadyowned by SHR) for 21.2 billion yen with the funds procured, etc. Through this, SHR’s asset size hasgrown from 179.5 billion yen at the end of the 5th fiscal period to 200.7 billion yen. With this, SHR has
achieved the targeted asset size of 200 billion yen in approximately two years and six months from its
listing, while asset types within its portfolio have expanded to include a hotel asset for the first time.
In terms of debt finances, SHR obtained a short-term loan of 7.6 billion yen in May 2017, which was usedas part of the funds to acquire the properties. SHR subsequently made early repayment of this short-termloan with funds procured through its issuance of investment corporation bonds and funds received undera long-term loan, etc. In November 2017 (at the beginning of the 7th fiscal period), SHR obtained longterm fixed interest rate loans (including floating interest rate loans, the rates of which were fixed byinterest rate swap transactions) for the refinancing of an existing borrowing under which 14 billion yen
was due for repayment, thereby extending the term of its debts and diversifying the dates for repaymentof its debts, as well as promoting fixed interest rate debt.
By taking full advantage of the sponsor support from Sekisui House, Ltd. (“Sekisui House”), which has anestablished track record of developing commercial properties, SHR will continue to seek to secure stableearnings and steady growth of its investment assets andthereby aim to maximize unitholder value.
I ask for the continued support and encouragement ofunitholders.

2,500

4,144

2,000

3,000

2,625

2,616

2,596

2,380

1,500

2,000
1,000

1,000

500

Junichi Inoue00

5th FP
6th FP
7th FP
8th FP(ended Apr. 2017) (ended Oct. 2017) (ending Apr. 2018) (ending Oct. 2018)
ActualActualForecast

Forecast

5th FP
6th FP
7th FP
8th FP(ended Apr. 2017) (ended Oct. 2017) (ending Apr. 2018) (ending Oct. 2018)
ActualActualForecast

Executive Director of Sekisui House Reit, Inc.
President & Representative Director of
Sekisui House Investment Advisors, Ltd.

Forecast

1

I Overview of SHR

Characteristics of SHR

Strategies of SHR

SHR is a J-REIT that has Sekisui House as its sponsor and invests in commercial properties
centering on office buildings

SHR seeks to provide high-quality social capital and to maximize the unitholder value
through the 3 strategies(as of October 31, 2017)

Asset Size

Status of Portfolio

Number ofowned properties
Aggregateacquisition price6properties
200.7billion yen

Occupancy rate
Total appraisal
value
Unrealized gain

Portfolio Quality

100.0%
233.0billion yen
35.0billion yen

1

6.8 years
PML value
2.1%
OfficeAsset typebuilding 91.4%
ratio
Hotel
8.6%
(acquisition
price basis)

Financial BaseGreater Tokyo

55.3%

Osaka area

41.5%

All acquisitions are of recently built and high quality commercial properties
developed by Sekisui House
Reducing earthquake-related risks by owning properties with high quakeresistant performance such as having a seismically isolated mechanism, etc.

2

Entrusting Sekisui House with real estate management/operation and utilizing
information network, etc. on tenant attraction

LTV(total asset basis)(Note)JCR

Taking full advantage of versatile support by
Sekisui House

Selecting a leasing agreement type from among a fixed-rent/pass-through typemaster lease, a direct lease, etc., in accordance with property characteristics

Credit Rating

40.7%
Long-term debt
ratio
100.0%
Fixed interest rate
93.0%
debt ratio

GrowthStrategy

Utilization of the pipeline support agreement for property acquisition torealize external growth

3.2%

Nagoya area

Investment in commercial properties focused on “strategic
locations” and “high quality”

The 6 properties owned are in strategic locations of central Tokyo, Osaka andNagoyaLocation Ratio (acquisition price basis)

Average building
age

Investment
Strategy

AA– (Stable)
3(Note)(Note) The information is as of Nobember 30, 2017.

Financial
Strategy

Stable and sound financial operations

Managing LTV (total assets basis) (ratio of interest-bearing liabilities to total
assets) at a conservative level between 40% and 50%

Owned properties

Promoting extension of the term of debts, diversification of dates for
repayment and fixation of interest rates in order to reduce risks of fluctuation
in interest rates and refinancing risk
Obtained AA- rating (Rating Outlook: Stable) for the long-term issuer
rating from Japan Credit Rating Agency, Ltd. (JCR)

Garden City
Shinagawa
Gotenyama

2

Gotenyama SH
Building

HommachiMinami Garden
City

Hommachi
Garden CityHK Yodoyabashi
Garden Avenue

Hirokoji
Garden Avenue

3Development of asset size

CSR and Environmental Activities

Achievement of 200 billion yen in asset size within approximately
two years and six months since listing
SHR has conducted a public offering for the third consecutive
year, and has additionally acquired two properties for 21.2 billion
yen with the funds procured and other source of funds. Throughthis, SHR’s asset size has reached 200.7 billion yen (comprising six
properties) within approximately two years and six months since
its listing, enabling for steady expansion of its asset size as well as
growth in distribution per unit and improvement in NAV per unit.
Of the two properties acquired, one was SHR’s first hotel asset,
allowing for expansion of the type of assets within its portfolio.
IPO(3 properties)
JPY 114.3 billion

Five Out of Six Owned Properties Received DBJ Green Building
Certifications High Rankings

2nd follow-on PO(3 properties)
JPY 26.6 billion

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

additional acquisition

Hotel portion

Hommachi Minami Garden City
Hommachi Garden City (Office building portion)

Hirokoji Garden Avenue
GC Shinagawa
Gotenyama

Hommachi GC

Garden City Shinagawa Gotenyama

additional acquisition(the 2nd portion acquired)Award of “Green Star” in the Global Real Estate Sustainability
Benchmark (“GRESB”) Survey

1st follow-on PO(1 property)
JPY 38.6 billion
GC Shinagawa
Gotenyama
HK Yodoyabashi GA(the 3rd portion acquired)200.7
billion yen

Hommachi GC

GC Shinagawa
Gotenyama

4 Stars

HK Yodoyabashi Garden Avenue

Office building portion

200

5 Stars(the 1st portion acquired)21.2

Hirokoji GA

billion yen

In the GRESB Survey conducted in 2017, SHR received a “Green Star” rating,which is awarded to participants highly evaluated in both dimensions of“Management & Policy” and “Implementation & Measurement” with regard toactivities for environmental considerations and sustainability. SHR also received“3 Stars” in the GRESB Rating.
In keeping with its policy of sustainability, SHR will further promote asustainability strategy such as the implementation of measures to mitigate
impact on the environment.

ESG initiatives of Sekisui House
26.6

Gotenyama SH
Building

Development of Philosophy and Value Creation

billion yen

150

In 2005, Sekisui House defined “a sustainable society” as the vision to aspire to and in this connection announced four
values—environmental, economic, social and homeowner—in order to attain and confirm this goal, which is intended
to achieve balanced management based on its corporate philosophy.

179.5
billion yen

38.6

HommachiMinami GC

billion yen

ESG initiatives targeting sustainable growth

152.9
billion yen

114.3
Acquisition Price
100.0 billion yen

billion yen

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)

End of 6th FP(as of Oct. 31, 2017)(Note) “Garden City” and “Garden Avenue” are abbreviated as “GC” and “GA”, respectively.

End of 1st FP
End of 2nd FP
End of 3rd FP
End of 4th FP
End of 5th FP
End of 6th FP(as of Apr. 30, 2015) (as of Oct. 31, 2015) (as of Apr. 30, 2016) (as of Oct. 31, 2016) (as of Apr. 30, 2017) (as of Oct. 31, 2017)
Distribution per unit (yen)

1,603

2,458

2,477

2,596

2,663

2,710

Net Asset Value per unit (yen)115,610

125,531133,030

138,885

142,888

149,859

Environment

SocialGovernance

Environmental
Management

Improvements
in Sociability

GovernanceImprove CS,ES and SS (note)
Human rights
Promotion of diversity
Workstyle innovation “Creating
thrilling and exciting workplaces”
Social contribution activities

Compliance risk management
Establishment of corporate ethics

Global warming prevention
Ecosystem conservation
Resource recycling(note) CS (Customer Satisfaction), ES (Employee Satisfaction), SS (Shareholder Satisfaction)

4

5

Growth strategies that take full advantage of the versatile support by Sekisui House
External growth strategies: Pipeline Support by Sekisui HouseInternal growth strategies: Sponsor Support by Sekisui House

Grant of preferential negotiation rights with regard to the sale of domestic real estate, etc. owned ordeveloped by Sekisui House
Provision of information on domestic real estate, etc. owned or developed by third parties
Provision of warehousing functions
Support for redevelopment of owned properties

Investment strategy
Investment focusing on Prime Properties
Promoting continuous external growth primarily through property acquisitions from the sponsor

Provision of property management services for owned properties
Provision of know-how and services related to operation management of highly value-added realestate possessed by Sekisui House
Upon acquiring properties in respect of which a certain period has passed since the date ofconstruction, coordination in terms of strategies such as renovation or repairment with valueenhancement, etc. after acquisition of such properties
Investigation and discussion regarding such matters as execution of master lease agreements informats responding to the property characteristics

Status of portfolio by types of lease agreements (leased floor area basis) (Note)

Investigating property acquisitions from third parties other than the sponsor, from the perspective ofselective investment

Fixed-Rent Type Master Lease

Direct Lease

Continuing to focus on office buildings as the main driver of external growth, while investigating theacquisition of hotels and retail properties from the perspective of expanding the scope of the portfolio

Pass-ThroughType
Master Lease

74.1%

17.9%

8.0%

Track record of acquisition by utilizing the pipeline support
ensure stability

All 6 properties SHR has acquired since its listing are properties developed by Sekisui House.

expectupsideExamples of urban redevelopment projects by Sekisui House
SHR’s characteristics in terms of portfolio

Governor of Osaka Award at the 14th
Osaka Machinami Award in 1994
Umeda Sky Building(Shin Umeda City) (Osaka)Completion in Mar.1993

Characteristic
174.1% of the portfolio (ratio of lease types) (Note) adopts fixed-rent type master lease by
Sekisui House. Rent revenue is stable over the long term, as SHR can receive
predetermined rents from Sekisui House regardless of how the market conditions and theoccupancy status are.

Characteristic2

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

Characteristic
3

HK Yodoyabashi Garden Avenue and Hirokoji Garden Avenue adopt pass-through typemaster lease by Sekisui House. Since SHR can receive rent which is 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.

CASBEE OSAKA OF THE YEAR
2013
Akasaka Garden City
(Tokyo)Completion in Jan.2006

Grand Front Osaka(Osaka)Completion in Apr.2013

Otemon Tower·JX building(Tokyo)Completion in Nov.2015(Source) Sekisui House,Ltd.

Status of preferential negotiation rights held by SHR
Asset Type

Ratio of unacquired floor area (Note)

Garden City Shinagawa Gotenyama Shinagawa-ku, Tokyo

Office building

19.0%

Hommachi Minami Garden City

Office building

43.6%

Property Name

Location
Osaka-shi, Osaka(Note) “Ratio of unacquired floor area” refers to the ratio of the floor area that SHR does not own but in respect of which it holds preferential
acquisition negotiation rights in the relevant building, as against the total floor area in the relevant building that is exclusively owned, rounded
to the nearest first decimal place. Specifically, such floor area refers to the floor area which is exclusively owned and over which SHR holds
preferential acquisition negotiation rights in the Garden City Shinagawa Gotenyama and Hommachi Minami Garden City properties.

6(Note) Ratio of the leased floor for each lease type under the relevant lease agreements, in respect of the properties, that are valid as of October
31, 2017 (or, if a master lease agreement is concluded for the property, the master lease agreement), to the total sum of leased floor areas
indicated in such lease agreements, rounded to the nearest first decimal place. “Ratio of lease types” refers to such ratio of the leased floorarea for each lease type.

7

Overview of portfolio
Balance Percentage(billion yen)(%)

End of 5th FP
After refinance(as of Apr. 30, 2017) (as of November 30, 2017)
Total interest-bearing liabilities(billion yen)

77.3

LTV (total asset basis) (%)

84.4

40.8

Fixed interest rate debt ratio (%)

40.7 (Note 1)

76.6

Long-term debt ratio (%)

93.0

100.0

100.0

0.75

0.73

Average financing interest rate
(Note 2)(%)
Average remaining term ofinterest-bearing liabilities (Note 3) (years)

4.2

4.5

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

19.10

Sumitomo Mitsui Banking Corporation

17.03

22.6
20.2

Mizuho Bank, Ltd.

10.15

12.0

Sumitomo Mitsui Trust Bank, Limited

9.46

11.2

Resona Bank, Limited

6.00

7.1

Mitsubishi UFJ Trust and Banking Corporation

5.00

5.9

Development Bank of Japan Inc.

4.24

5.0

The Norinchukin Bank

4.23

5.0

Mizuho Trust & Banking Co., Ltd.

4.19

5.0

Investment Corporation Bonds

5.00

5.9

Outline of portfolio (as of October 31, 2017)
PropertyNo.

J-1

Garden City
Shinagawa
Gotenyama

the 1st and 2nd
portion acquired

55.6

27.7

—

29,235.95

the 3rd portion acquired

4.0

2.0

—

2,000.39

Sub-total

59.6

29.7

71.0

31,236.34

AmountFinancing term
Average financing interest rate (Note 2)

Short-term loan
(floating)

Investment
corporation bonds

Long-term loan
(floating)Long-term loans(fixed)7.10 billion yen

3.00 billion yen

1.86 billion yen

2.24 billion yen

1.0 years

5.0 years

4.0 years

6.3 years

1M TIBOR

1M TIBOR

0.24 %+0.18 %

+0.20 %

0.42 %

19,999.97

100.0

6.7

Shinagawa-ku,
Tokyo

1.9

J-3

Hommachi Minami Garden City

23.1

11.5

28.6

16,699.46

100.0

6.7

Osaka-shi,
Osaka

4.5

Office building portion

38.6

19.2

44.6

17,006.94

J-4

Hommachi
Garden City

Hotel portion

17.2

8.6

17.7

18,092.98

100.0

7.5

Osaka-shi,
Osaka

4.2

Sub-total

55.8

27.8

62.3

35,099.92

J-5

HK Yodoyabashi Garden Avenue

4.4

2.2

5.57

4,554.52

100.0

2.3

Osaka-shi,
Osaka

7.5

J-6

Hirokoji Garden Avenue

6.35

3.2

7.11

4,442.75

100.0

6.6

Nagoya-shi,
Aichi

2.7

Total/Average

200.75100.0

233.08112,032.96

100.0

6.8

Greater Tokyo:Shinagawa Gotenyama area

7.00 billion yen

Umeda Station

Financing term

3.0 years

4.6 years

5.5 years

Kita
Ward

M
eg
ur
o

Average financing interest rate (Note 2)+0.25 %

0.35 %

0.41 %

MidosujiInvestment corporation bonds

2.0
3.15

0

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

(Note 1) The information is as of the end of the 6th FP (FP ended October 2017).
(Note 2) “Average financing interest rate” indicates a weighted average (annual) interest rate using the balance of interest-bearing liabilities. In respectof the interest rates of interest-bearing liabilities for which an interest rate swap was conducted, interest rates taking into account the effectof the interest rate swap are used.
(Note 3) “Average remaining term of interest-bearing liabilities” indicates the average remaining term from the respective date on which the averageremaining term of interest-bearing liabilities was calculated to maturity dates thereof, weighted by the balance of the respective interestbearing liabilities.
(Note 4) Including floating interest rate loans, the rates of which are fixed by interest rate swap transactions.

8

J-3

Taisho Ward

Namba
StationHanshin Expressway Loop
Route
Tanimachisuji

10.0

en

10.0

7.0

Shinsaibashi
Station

kans

5

12.34

Nishi Ward

Shin

17.0

aido

14.0

4.05

Kitashinagawa
StationShinagawa-ku

J-1

Nagoya area:Nagoya Meieki area
Tok

J-4

3.0

10

Government Office
Chuo Ward
Chuo-odori Street

J-6

NagoyaStation

Line
Main
oya
Nag
tsu
eite
Line
ri M
Main
i-do
aido
iek
Tok
Me

15

Ya
ma
tedo
ri
Osaki Station

Yodoyabashi
Station Osaka Prefectural

Hommachi
Station

1.86

Ri
ve
r

e
in Linu Ma
Keiky

Diversification of repayment date (as of November 30, 2017)

Osaka City Hall

J-2

e
Lin

J-5

Shinagawa
StationMinato-ku

i Keihin
Daiich7.00 billion yen

Osaka
Station

te
no
ma
Ya

14.00 billion yen

Floating interest rate borrowing

2.1

Portfolio map
Osaka area:Hommachi-Yodoyabashi arearieLin -dousa dasak ura
A
k
ei
To Sa
GotandaStationFixed interest rate borrowing

0.5

58.5

Long-term loans(fixed) (Note 4)

20

Shinagawa-ku,
Tokyo

25.7

Long-term loans(fixed) (Note 4)(billion yen)

6.7

51.5

Long-term loan
(floating)

1M TIBOR

100.0

Gotenyama SH Building

7th FP (November 2017)

Amount

PML
value
(%)

J-2

Refinancing activities in 6th FP and 7th FP
6th FP (July and August 2017)

Building
Leasable area Occupancy
age
Locationrate(m2)(years)(%)

Acquisition Investment Appraisal
price
ratio
value
(billion yen)(%)(billion yen)

Property name

Tokaido Shinkanse
nInterest-bearing liabilities (as of November 30, 2017)

ine-dori L
Sakuratationnter S
sai CeKoku

a Linehiyam
Higas

Ring Route

Debt finance

NagoyaExpressway

Stable and sound financial operations

Sakura-dori

Nishiki-doriHirokoji-dori

9Introduction of portfolio
Greater Tokyo

Osaka area

J-1 Garden City Shinagawa Gotenyama

Office building

Environmentally friendly maison-like office building that blends in with the townscape of abundant
greenery and a long and distinguished history

Location(indication of residential address)

J-3 Hommachi Minami Garden City

Office building located along the Midosuji street, which is the main street in Osaka City, and is capable ofbeing a landmark in the vicinity(indication of residential address)

3-6-1 Kitakyuhojimachi, Chuo-ku, Osaka-shi,
Osaka

Location

6-7-29 Kitashinagawa, Shinagawa-ku, Tokyo

Acquisition Price

59.6 billion yen

Acquisition Price

23.1 billion yen

Structure, Floors

RC, 9F/B1F

Structure, Floors

S/SRC, 25F/B2F

Total Floor Area

62,975.42m2

Total Floor Area

46,010.88m2

Leasable Area

31,236.34m2

Leasable Area

16,699.46m2

J-2 Gotenyama SH Building

Office building

Office building located upland with high business continuity incorporating a seismically isolated device

Location(indication of residential address)

6-5-17 Kitashinagawa, Shinagawa-ku, Tokyo

J-4 Hommachi Garden City

Office building

Acquisition Price

51.5 billion yen

Structure, Floors

S/SRC, 7F/B1F

Total Floor Area

19,812.85m2

Leasable Area

19,999.97m

hotel

Complex facility capable of becoming a landmark as it stands on Midosuji street and its height exceeds theconventional height control due to application of special urban renaissance district rules

Location(indication of residential address)

10

Office building

3-6-4 Hommachi, Chuo-ku, Osaka-shi, Osaka

Acquisition Price

55.8 billion yen

Structure, Floors

S/SRC, 27F/B2F

Total Floor Area

49,163.16m2

Leasable Area

35,099.92m2

2

11

Introduction of portfolio

Overview of SHR and the Asset Management Company

Osaka area

Structure diagram

J-5 HK Yodoyabashi Garden Avenue

Office building

Comfortable and safe office building with strength of iron and tenderness of natural stone

Asset Custodian

2

SEKISUI HOUSE REIT, INC.

Mitsubishi UFJ Trust andBanking Corporation

General Meetingof Unitholders

Transfer Agent

34-3-9 Fushimimachi, Chuo-ku, Osaka-shi,(indication of residential address) Osaka
Acquisition Price

4.4 billion yen

Structure, Floors

S/SRC/RC, 13F/B2F

Total Floor Area

16,953.28m

Leasable Area

4,554.52m2

Administrative Agentfor Operation of
Administrative Instruments

SEKISUI HOUSE INVESTMENTADVISORS, LTD.

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

Mizuho Trust & Banking Co., Ltd.
Location

4

Parent Company of theAsset Management
Company / Sponsor

Independent Auditor
Administrative Agentfor Investment
Corporation Bonds

5100%
ownership

6

Mitsubishi UFJ Trust andBanking Corporation

2

Asset Management
Company1Ernst & Young ShinNihon LLC
SEKISUI HOUSE, LTD.

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
1

Asset Management Agreement

2

Asset Custody Agreement

3

Administrative Agreement (Administration of Investment Units)

4

General Administrative Agreement

5

Fiscal Agency Agreement

6

Pipeline Support Agreement / Sponsor Support Agreement, etc.

Nagoya area

J-6 Hirokoji Garden Avenue

Office building

Office building located in the Nagoya Meieki area, a core area in Nagoya, with an elegant exterior using
natural materials

4-24-16, Meieki, Nakamura-ku, Nagoya-shi,(indication of residential address) Aichi
Location

12

Acquisition Price

6.35 billion yen

Structure, Floors

S/SRC, 12F/B1F

Total Floor Area

7,017.98m2

Leasable Area

4,442.75m2

Overview of the Asset Management Company
Organization chart
Trade Name

Sekisui House Investment Advisors, Ltd.

Shareholder

Sekisui House, Ltd. (100%)

Paid-in Capital

400 million yen

Location

1-6-6 Motoakasaka, Minato-ku, Tokyo

General Meetingof Shareholders
AuditorBoard ofDirectors
Investment
Committee

President &Junichi Inoue
Representative Director

Compliance
Committee
President &Representative
Director

Corporate Management
Planning OfficeComplianceOfﬁcerReal Estate
Investment andManagement Division

Management
Division

Real Estate
Investment
Department

Real EstateManagement
Department

IR andFinance
Department

General Affairs
and Accounting
Department13

Outline of asset management operation1.

 Management Performance
On May 24, 2017, SHR acquired real estate trust beneficiary interests as assets in trust for Garden City
Shinagawa Gotenyama (the 3rd portion acquired) (Shinagawa-ku, Tokyo; acquisition price: 4,000 million yen)

Developments in Asset Management in the Fiscal Period under Review

and Hommachi Garden City (Hotel portion) (Chuo-ku, Osaka-shi, Osaka; acquisition price: 17,200 million yen.).
As a result, the assets held by SHR as of the end of the fiscal period under review are six properties with an(1) Brief History of the Investment Corporation
Sekisui House Reit, Inc. (“SHR”), that has as its sponsor Sekisui House, Ltd. (“Sekisui House”), one of theaggregate acquisition price of 200,750 million yen and total leasable area of 112,032.96m2. In addition, of the six
properties, master lease agreements with Sekisui House as lessee have been executed for five properties and aleading homebuilders in Japan with an established development and management track record also in theproperty development business, was established on September 8, 2014 and is listed on the Real Estate

long-term lease agreement with one tenant as lessee has been executed for one property, resulting in occupancy
rate as of the end of the fiscal period under review of 100.0%.

Investment Trust Section of the Tokyo Stock Exchange, Inc. (“Tokyo Stock Exchange”) on December 3, 2014(securities code: 3309).
SHR’s policy is to conduct asset management that seeks to secure stable earnings over the medium to long termand steady growth of its investment assets, mainly by investing in commercial properties (Note 1), in particular(3) Overview of Fund Procurementa. Issuance of New Investment Units

commercial properties which are situated in strategic locations or are of a high quality (referred to by SHR as
prime properties) positioned as its core investment targets.

During the fiscal period under review, SHR issued new investment units through the public offering (of 71,400
units) on May 24, 2017, and issued additional new investment units by way of third-party allotment (of 3,600

Based on the policy described above, SHR acquired three properties (with an aggregate acquisition price (Note2) of 114,300 million yen) on December 3, 2014, the day it was listed, and thereafter began managing them.

units) on June 12 of the same year. As a result, as of the end of the fiscal period under review, unitholders’capital is 110,189 million yen and the total number of investment units issued and outstanding is 969,000 units.

After acquiring a property (with an acquisition price of 38,600 million yen) on May 19, 2015, SHR acquired three
additional properties (with an aggregate acquisition price of 26,650 million yen), one of which is an additionalb. Borrowings and Issuance of Investment Corporation Bonds

portion of a property part of which is already owned by SHR on May 24, 2016. Thereafter, on May 24, 2017, SHR
acquired two additional properties (with an aggregate acquisition price of 21,200 million yen), both of which are

For the acquisition of the aforementioned real estate trust beneficiary interests (relating to two underlying
properties), SHR procured short-term loans in the total amount of 7,600 million yen on May 24, 2017 to use asadditional portions of properties part of which are already owned by SHR. As of October 31, 2017 (the end of the
fiscal period under review), SHR owns six properties (with an aggregate acquisition price of 200,750 million yen)funds for acquisitions and related expenses. As for its short-term loans, SHR also made early partial repaymentsof 3,500 million yen with (i) proceeds from its issuance of new investment units by way of the third-party

as its investment assets.

allotment conducted on June 12, 2017 and its cash on hand on June 15, 2017, (ii) proceeds from its issuance ofinvestment corporation bonds on July 13, 2017 at a total issue amount of 3,000 million yen (which is the second(Note 1) “Commercial properties” refer to real estate mainly used for business purposes other than for residence, such as officebuildings, retail properties and hotels. Residential properties include student dormitories, company housing and serviced
housing for the elderly. The same shall apply hereinafter.
(Note 2) “Acquisition price” is the sale and purchase price stated in the sale and purchase agreement for each of the owned assets(excluding consumption tax and local consumption tax, as well as commission and various other expenses; rounded down to
the nearest million yen). The same shall apply hereinafter.

such issuance for SHR) and its cash on hand on July 14, 2017. The remaining short-term loans of 4,100 million
yen were refinanced to long-term loans on August 31, 2017. SHR has worked to diversify the repayment dates of
its debts, extend the term of its debts and change part of the interest rates of its debts to fixed rates.
As a result, as of the end of the fiscal period under review, the balance of interest-bearing liabilities is 84,400

million yen and the ratio of total interest-bearing liabilities to total assets (“LTV (total assets basis)”) is 40.7%.

(2) Management Environment and Management Performance
Management Environment
During the fiscal period under review, amid a moderate recovery of private consumptionbacked byc. Credit Rating
The following table sets forth the rating status of SHR as of the end of the fiscal period under review.

improvements in employment and income levels, corporate earnings have continued to improve. This has
enabled the Japanese economy to continue on a trend of moderate recovery.

Credit Rating Agency

Rating TypeIn the real estate transaction market, competition for property is still overheated. Amid strong investor appetite
for property acquisition as a result of sustained low vacancy rates, a nearly unchanged financing environment,

Japan Credit Rating Agency, Ltd.

Long-term issuer rating: AA−(JCR)Rating outlook: Stable

and the like, high-quality properties remain in short supply; accordingly, cap rates continue to be below.
As for the office leasing market, as a result of firm and sustained demand, vacancy rates are currently

Japan Credit Rating Agency, Ltd.
(JCR)

Bond rating: AA−experiencing a moderate decline in regional major cities as well as in central Tokyo.
With regard to the environment surrounding retail properties, according to the Outlook for Economic Activity(4) Overview of Business Performance and Distributions

and Prices (October 2017) released by the Bank of Japan, sales figures of department stores have picked up.
Sales in supermarkets across Japan have also been on a gradual uptrend. Furthermore, sales of convenience

Results in the fiscal period under review are operating revenue of 4,580 million yen (an increase of 10.5% overthat of the previous fiscal period), operating income of 2,987 million yen (an increase of 10.5% over that of thestores in Japan are continuing on an upward trajectory. In line with these trends, improvements in private
consumption have solidified. In light of these movements, demand for new store openings has remained firm andprevious fiscal period) and ordinary income of 2,626 million yen (an increase of 10.3% over that of the previous
fiscal period), resulting in net income of 2,625 million yen (an increase of 10.3% over that of the previous fiscal

rent levels have remained steady across the country.
The hotel market remains favorable. The number of foreign tourists visiting Japan is still increasing: from July

period). In addition, concerning distributions, the decision has been made to distribute the entire amount of
unappropriated retained earnings (excluding the portion in respect of which distribution per investment unit is

to September 2017, the number of foreign tourists to Japan totaled around 7.44 million, representing an 18.8%
quarter-on-quarter increase as compared to the previous year. In addition, the average hotel-occupancy rates inless than 1 yen), with the intention of having the maximum amount of distribution of earnings included indeductible expenses based on the application of special tax treatment for investment corporations (Article 67-15

major cities across Japan have stayed high, and have exceeded occupancy levels in the same period of theprevious year.

of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, as amended)). As a result, thedistribution per investment unit is 2,710 yen (an increase of 1.8% over that of the previous fiscal period).




14

15

2.

3.

Status of Capital Increase, etc.

Performance of Distribution, etc.

The following table sets forth the increase(/decrease) in unitholders’ capital and the total number of investment
units issued and outstanding since the establishment of SHR through to the end of the fiscal period underDistribution per unit for the fiscal period under review (that is, the 6th fiscal period) is 2,710 yen. The policy is
to distribute almost the entire amount of unappropriated retained earnings with the intention of applying thereview.

special treatment of corporation tax under which the amount equivalent to distribution of earnings is deductible
from the taxable income of investment corporations as deductible expenses (Article 67-15 of the Act on Special

Date

Event

Total number ofinvestment units
issued and outstanding(units)Unitholders’ capital(million yen)
Increase(Decrease)

Balance

Increase(Decrease)

Measures Concerning Taxation).
2nd fiscal period 3rd fiscal period 4th fiscal period 5th fiscal period 6th fiscal period
From:
From:
From:
From:
From:
May 1, 2015
Nov. 1, 2015
May 1, 2016
Nov. 1, 2016
May 1, 2017
Fiscal period
To:
To:
To:
To:
To:
Oct. 31, 2015
Apr. 30, 2016
Oct. 31, 2016
Apr. 30, 2017
Oct. 31, 2017

Note

Balance

September 8, 2014

Private placement forincorporation

200

200

2,000

2,000

(Note 1)

December 2, 2014

Public offering

63,69063,890600,000

602,000(Note 2)

December 24, 2014

Third-party allotment

3,184

67,07430,000632,000(Note 3)

May 19, 2015

Public offering

19,67386,748154,200

786,200(Note 4)

June 12, 2015

Third-party allotment

995

87,7437,800

794,000(Note 5)

Total amount of unappropriated1,951,805

1,967,034

2,321,003

2,381,018

2,626,016

Amount of accumulated earnings(thousand yen)

153

296

179

296

26

Total amount of cash distribution(thousand yen)

1,951,652

1,966,738

2,320,824

2,380,722

2,625,990[2,458][2,477][2,596][2,663][2,710]1,951,652

1,966,738

2,320,824

2,380,722

2,625,990[2,458][2,477][2,596][2,663][2,710]

㸫

㸫

㸫

㸫

㸫

[㸫]

[㸫]

[㸫]

[㸫]

[㸫]

㸫

㸫

㸫

㸫

㸫

[㸫]

[㸫]

[㸫]

[㸫]

[㸫]

㸫

㸫

㸫

㸫

㸫

[㸫]

[㸫]

[㸫]

[㸫]

[㸫]

retained earnings (thousand yen)[Distribution per unit] (yen)Total amount of distribution of

May 24, 2016

Public offering

11,70699,45095,200889,200(Note 6)

June 21, 2016

Third-party allotment

590

100,040

4,800

894,000(Note 7)

earnings out of the total amountof cash distribution

May 24, 2017

Public offering

9,661

109,70271,400965,400(Note 8)[Distribution of earnings per unit]

June 12, 2017

Third-party allotment

487

110,1893,600

969,000(Note 9)(thousand yen)
(yen)
Total amount of refund ofinvestment in capital out of the(Note 1) New investment units were issued at an offer price of 100,000 yen per unit upon the establishment of SHR on September 8,
2014.
(Note 2) New investment units were issued at an offer price of 110,000 yen (with the issue price being 106,150 yen) per unit through apublic offering to procure funds for the acquisition of new properties.
(Note 3) New investment units were issued at an issue price of 106,150 yen per unit by way of third-party allotment and proceeds
thereof were intended to use to make part repayment of loans. Out of proceeds from the issuance of new investment units, aportion was allocated for partial repayment of loans and the remaining was allocated to fund part of the acquisition cost of anew property.
(Note 4) New investment units were issued at an offer price of 131,917 yen (with the issue price being 127,587 yen) per unit through apublic offering to procure funds for the acquisition of a new property.
(Note 5) New investment units were issued at an issue price of 127,587 yen per unit by way of third-party allotment and proceeds
thereof were intended to use to make part-repayment of loans or as part of future acquisition funds for specified assets.
(Note 6) New investment units were issued at an offer price of 127,140 yen (with the issue price being 122,967 yen) per unit through apublic offering to procure funds for the acquisition of new properties.
(Note 7) New investment units were issued at an issue price of 122,967 yen per unit by way of third-party allotment and proceeds
thereof were intended to use to make future part-repayment of loans or as part of future acquisition funds for specified assets.
(Note 8) New investment units were issued at an offer price of 139,912 yen (with the issue price being 135,320 yen) per unit through apublic offering to procure funds for the acquisition of new properties.
(Note 9) New investment units were issued at an issue price of 135,320 yen per unit by way of third-party allotment, with the proceeds
thereof intended to be used for the partial repayment of the short-term loans that had been taken up to finance the acquisitionof the new properties.

total amount of cash distribution(thousand yen)[Amount of refund of investment
in capital per unit] (yen)Total distribution amount fromreserve for temporary difference
adjustments out of total amountof refund of investment in capital
(thousand yen)[Distribution amount fromreserve for temporary difference
adjustments per unit out of
amount of refund of investment
in capital per unit] (yen)
Total distribution amount from
distribution reducing unitholders’[Changes in Market Price of Investment Securities]

capital for tax purpose out of total
amount of refund of investment

The following table sets forth the fiscal period high and low (closing price) on the Tokyo Stock Exchange Realin capital(thousand yen)

Estate Investment Trust Section on which SHR investment securities are listed.

[Distribution amount from
distribution reducing unitholders’2nd fiscal period
3rd fiscal period
4th fiscal period
5th fiscal period
6th fiscal period
Fiscal period From: May 1, 2015 From: Nov. 1, 2015 From: May 1, 2016 From: Nov. 1, 2016 From: May 1, 2017
To: Oct. 31, 2015
To: Apr. 30, 2016
To: Oct. 31, 2016
To: Apr. 30, 2017
To: Oct. 31, 2017High (yen)142,500

133,500

157,900

153,900

146,400

Low (yen)

111,400

116,700

125,800

138,000

125,900

capital for tax purpose out of
amount of refund of investment
in capital per unit](yen)



16

17

4.

(3) Financial Strategy

Future Management Policy

SHR has adopted as its policy the conduct of stable and sound financial operations in order to secure stableearnings over the medium to long term and enhance unitholder value. Specifically, the policy is to form strong(1) Future Trends Outlook
Looking ahead, the Japanese economy is expected to recover moderately, supported by the effects of various
economic policies, under circumstances where employment rates and income levels continue rising, according to
the Monthly Economic Report (November 2017) released by the Cabinet Office.

and stable business relationships with leading domestic financial institutions, centering on megabanks,bolstered by the creditworthiness of the sponsor Sekisui House, and also to reduce refinancing risks and risks of

Notwithstanding this, we have to be mindful of the impact of economic uncertainties overseas, such as thepolicies adopted by the U.S. government, issues involving North Korea, and fluctuations in global financial andfluctuations in interest rates by exploring the extension of borrowing periods and working to diversify dates for
repayment, etc., while pursuing the optimum balance between fixed-rate and floating-rate debts.

capital markets.
In the office leasing market, although the impact of possible future mass supply in the Tokyo area requires close

In addition, SHR’s LTV policy (on a total assets basis) is to manage LTV at the conservative level of between
40% and 50% with attention being paid to the maintenance of funding capacity. SHR’s LTV, which was at 40.8%

attention, firm demand, backed by sustained strong corporate earnings, is expected to continue, including inregional cities.

at the end of the previous fiscal period, became 40.7% at the end of the current fiscal period.
SHR will work to diversify its sources for direct and indirect financing, such as by issuing investment

As to the real estate market, as long as there is no environmental changes that cause a shift to risk avoidancetrends in the Japanese and overseas financial markets, the cap rate is likely to remain low for the time being.

corporation bonds and the like in consideration of the market environment, SHR’s financial standing, and otherfactors, as a whole, while striving to continue stable and sound financial operations.

The hotel market will likely continue to see sustained high occupancy rates, supported by the expected increasein foreign tourists’ numbers and firm domestic demand.
(2) Future Management Policy and Challenges to Address
In the next and subsequent fiscal periods, SHR will continue to focus on prime properties, commercial properties
situated in strategic locations or that are of a high quality, as its core commercial property investment targets.
By implementing growth strategies that take full advantage of the real estate development and operation
capabilities and other strengths of Sekisui House, which has established an extensive track record of developing
and operating commercial properties, SHR will, through the support of its sponsor, seek to secure stableearnings over the medium to long term and steady growth of its investment assets and thereby aim to maximize
unitholder value. Meanwhile at Sekisui House Investment Advisors, Ltd. (the “Asset Management Company”),
investment opportunities will also be explored through its own initiatives in efforts to advance portfolio
diversification.
SHR’s policy is to set as its core investment areas the Three major metropolitan areas with Three large cities,
namely the Tokyo 23 Wards, Osaka City and Nagoya City, all of which SHR has knowledge in the course ofdevelopments made by Sekisui House (Note).
SHR has executed a pipeline support agreement with Sekisui House. This agreement provides for utilization of
the urban redevelopment business track record and know-how of Sekisui House, allowing SHR to seek fromSekisui House property acquisition support for external growth (pipeline support). Specifically, such support will(a) grant to SHR preferential negotiation rights with regard to the sale of domestic real estate, etc. owned ordeveloped by Sekisui House, (b) provide SHR with information on real estate, etc. owned or developed in Japanby third parties, (c) provide SHR with warehousing functions, and (d) provide SHR with support for theredevelopment of owned properties. In addition, SHR can seek from Sekisui House (a) property management
services for owned assets, and (b) in relation to management of owned assets for internal growth, (i) technologies
and know-how that contribute to the improvement of tenant satisfaction or other factors, including energyefficiency and eco-friendliness, that contribute to the enhancement of property value, (ii) personnel support,
including provision of know-how required for the operation of SHR, and (iii) support in areas such as negotiationof master lease agreements.
By implementing growth strategies that take full advantage of the versatile support from Sekisui House forexternal growth and internal growth as described above, SHR will seek to secure stable earnings and steady
growth of its investment assets and thereby aim to maximize unitholder value.
(Note)The “Three large cities” refer to the Tokyo 23 wards, Osaka City and Nagoya City. In addition, the “Three major metropolitan
areas” refer to “Greater Tokyo,” the “Osaka area” and the “Nagoya area,” where “Greater Tokyo” refers to Tokyo, Kanagawa
Prefecture, Chiba Prefecture and Saitama Prefecture, the “Osaka area” refers to Osaka Prefecture, Kyoto Prefecture, Hyogo
Prefecture and Nara Prefecture and the “Nagoya area” refers to Aichi Prefecture. The same shall apply hereinafter.





18

19

5.

iv) Overview of certain financial information in respect of SHI as at the end of September 2017 (being the end of

Significant Subsequent Eventsthe latest fiscal period from April 1, 2017 to September 30, 2017)
Business:
Investment and management, mainly in respect of Specified Assets, based on the(1) Merger with Sekisui House Residential Investment Corporation
SHR and Sekisui House Residential Investment Corporation (“SHI,” and collectively with SHR, the “TwoInvestment Corporations”), at their respective board of directors meetings held on January 24, 2018, resolved to
execute an absorption-type merger, with May 1, 2018 as the effective date, whereby SHR will be the surviving

Operating revenue:

Investment Trusts Act
6,916 million yen

corporation and SHI will be the dissolving corporation in the merger (the “Investment Corporation Merger”),
and executed a merger agreement (the “Investment Corporation Merger Agreement”) on January 24, 2018.

Net income:
Total assets:

2,493 million yen
210,009 million yeni) Purpose of the Investment Corporation Merger
Two Investment Corporations reached the conclusion that expanding the scale of their assets and increasing

Liabilities:
Net assets:

108,667 million yen
101,341 million yen

their market presence through a merger of the Two Investment Corporations, and improving the opportunity
for growth by utilizing the integrated corporate strength of the Sekisui House Group, thereby securing strong(2) Split of Investment Units

returns and stability and growth of distributions through the steady increase of assets under management,
would be their best strategy for maximizing unitholder value; accordingly, the Two Investment Corporations

SHR resolved, at the board of directors meeting held on January 24, 2018, to split its investment units as follows(the “Investment Unit Split”).

concluded the Investment Corporation Merger Agreement.

i) Purpose of the Investment Unit Split
As described in “(1) Merger with Sekisui House Residential Investment Corporation” above, SHR and SHI
have agreed to implement the Investment Corporation Merger and for this purpose have executed theInvestment Corporation Merger Agreement on January 24, 2018.

ii) Merger Ratio
As a result of the Investment Corporation Merger, for every 1 SHI investment unit, 1.65 post-Investment
Unit Split (as defined at “(2) Split of Investment Units” below; the same shall apply hereinafter.) SHR
investment units will be allocated and delivered (Note). Fractions of less than one investment unit will occur

The Investment Corporation Merger will be carried out through an absorption-type merger having SHR as
the surviving corporation, and the merger ratio, before considering the Investment Unit Split, would be SHR

in the number of investment units that must be delivered, and therefore, those fractional units of less than
one share will be sold through market transactions, and the proceeds from the sales will be delivered to the

1: SHI 0.825. However, based on this merger ratio, 0.825 units of SHR would be allotted to every unit of SHI,
which would mean that a number of SHI unitholders would receive less than one SHR unit. For this reason,

unitholders allocated fractional shares in accordance with the fraction pursuant to the provisions of Article
88 of the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, including subsequent

in order to enable SHI unitholders to continue holding SHR units even after the Investment Corporation
Merger, for the purpose of issuing 1 SHR unit or more to all SHI unitholders, it was decided that the SHR

amendments, the “Investment Trusts Act”).

units will be split 2-for-1.

(Note) SHR plans to split one investment unit into two investment units with April 30, 2018 as the record date for splitting theinvestment units and May 1, 2018 as the effective date; the allocation ratio shown above and the number of new
investment units SHR will allocate and deliver are subject to the Investment Unit Split taking effect. For more details on
the Investment Unit Split, please refer to “(2) Split of Investment Units” stated below.

ii) Method of the Investment Unit Split
SHR units owned by the unitholders set forth or recorded in the final unitholder roster on April 30, 2018 (theday before the effective date of the Investment Corporation Merger) will be split 2-for-1. The Investment Unit
Split shall come into effect on May 1, 2018 (the effective date of the Investment Corporation Merger),iii) Merger Consideration
As of the date of this document, in addition to the abovementioned investment units, SHR intends to pay SHI

provided that all conditions precedent for the Investment Corporation Merger set forth in the Investment
Corporation Merger Agreement are satisfied.

unitholders (the unitholders stated or recorded in the final unitholders register on April 30, 2018, the dayprior to the effective date of the Investment Corporation Merger (excluding the SHI unitholders whoiii) Number of investment units to increase after the Investment Unit Split

demanded the purchase of their investment units pursuant to the provisions of Article 149-3 of theInvestment Trusts Act (excluding those unitholders who retracted such purchase demand) hereinafterreferred to as the “Unitholders Subject to Allocation”)), or the registered pledgees of investment units held inlieu of the cash distributions for the business period of SHI’s final term, a merger consideration in the form of
cash distribution based on SHI’s distributable income for that same period in an amount (dropping any
fractions of a yen) which is the quotient resulting from dividing the amount of SHI’s distributable income on
the date prior to the effective date of the merger by the number of issued SHI investment units on that date
reduced by the number of investment units held by unitholders other than the Unitholders Subject to(a)Total number of outstanding units prior to the Investment Unit Split: 969,000 units(b)

Increase in the number of units through the Investment Unit Split: 969,000 units(c)Total number of outstanding units following the Investment Unit Split: 1,938,000 units(d)Total number of outstanding units following the Investment
Corporation Merger: 3,762,091 units(Note 1)(e)

Number of authorized investment units following the Investment Unit
Split and the Investment Corporation Merger: 20,000,000 units(Note 2)

Allocation within a reasonable period from the effective date of the Investment Corporation Merger.
In addition, as of the date of this document, SHI will put before a general meeting of its unitholders, which is(Note 1): The number under the assumption that, in connection with the Investment Corporation Merger, 1.65 SHR units
following the Investment Unit Split would be allocated to every SHI unit with respect to all outstanding SHI units(1,105,510 units) as of the date of this document.

scheduled to be held on March 27, 2018, a proposal for an amendment of its articles of incorporation with aview to changing its accounting periods from the current March 31 and September 30 to April 30 and October(Note 2): SHR’s authorized investment units constitute 10,000,000 units, but as a result of the Investment Corporation Merger, asof the date of this document, the articles of incorporation are expected to be partially amended, with the authorized

31. If the aforementioned amendment is approved, the last period before the effective date of the Investment
Corporation Merger is expected to be a seven-month business period from October 1, 2017 to April 30, 2018.

investment units to be changed as of the effective date of the Investment Corporation Merger. Therefore, the figures
statedstated above has been calculated taking into account such changes.
above has been calculated taking into account such changes.

iv) Timeline of the Investment Unit Split
Announcementof the recordiv)(a)Timelineof the Investment
Unit date
Split



20

March 30, 2018 (tentative)

(b)
(a)

Record dateAnnouncementof the record date

April 30,March
30,2018
2018(tentative)(tentative)

(c)
(b)

Effective
date
Recorddate

May 1,
2018(tentative)
April
30,
2018
(tentative)(c)

Effective date

May 1, 2018 (tentative)

21v) Impact on Information of per Unit

<Floating Interest Rate Borrowing>

Information on a per unit basis, on the assumption that the Investment Unit Split is executed at the
beginning of the previous fiscal period is as set forth in the following table.
(a)

Net assets per unit:(ended April 2017) 57,282 yen(ended October 2017) 58,212 yen(b)

Net income per unit:(ended April 2017)(ended October 2017)

1,331 yen

Category

LenderLoan

Interest rate

amount(Note 2) (Note 3)(mm yen)(Note 4)syndicateTokyo-(Reference Information)

1-monthLenderamount(Note 2) (Note 3)(Note 4)date

methoddatemethod(Note 6)

dated Nov.

term

Loan

2017

28, 2017,

Tokyo-

Base rate (JBA

with The

1-monthBank of

Security

Tokyo-

5,050

Mitsubishi

The Bank of
Mitsubishi

UFJ, Ltd. as
750

method(Note 7)(Note 8)

Securityarranger

0.32000%

July 13,2022

agreement
Nov. 30,

Repayment(Note 5)

Repayment

date

loan

(Note 1)
syndicate(mm yen)individualLong<Fixed Interest Rate Borrowing>
Repayment

based on the

TIBOR) plus
(Note 5)

arrangerthe existing borrowing totaling 14,000 million yen which was due for repayment on November 30, 2017.

Borrowing

Repayment

Borrowing

Japanese Yen
0.21%

UFJ, Ltd. as(1) Borrowing of Funds
SHR conducted the borrowing of funds on November 30, 2017 as described below for use as repayment funds ofCategory

5,050

Mitsubishi

Drawdown

methodBase rate (JBA

Bank ofInterest rate

Borrowing

date

Loan

1,368 yenwith The

Loan

Drawdown

Japanese Yen
TIBOR) plus
0.26%

Lump-sum
repayment
at maturity

with theUnsecured
Unguaranteed

lendershown to theleft as theloanerMay 31,
2023(Note 6)(Note 1)

UFJ, Ltd.

(Note 1) The loan syndicate comprises Sumitomo Mitsui Banking Corporation, Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited,

Loan

Resona Bank, Limited, The Norinchukin Bank and Mizuho Trust & Banking Co., Ltd.

syndicate

July 13,with TheBank of

Borrowing(Note 2) Borrowing expenses, etc. payable to the lender are not included.

2022(Note 3) The base rate applicable to the calculation period for the interest payable on an interest payment date shall be the one-monthbased on theJapanese Yen TIBOR (Tokyo Interbank Offered Rate) published by JBA TIBOR Administration two business days prior to the

Mitsubishi

individualinterest payment date immediately preceding the respective interest payment date. The base rate is subject to review every interest

UFJ, Ltd. as

loanarranger

agreement,

Tokyo-Long(Note 1)term

The Bank ofTokyoMitsubishi

1,200

750

0.35341%

Nov. 30,

dated Nov.

201728, 2017,

0.34000%

payment date. However, in cases where there is no rate corresponding to the interest calculation period, the base rate shall be theLump-sum
repayment
at maturity

with thebase rate corresponding to the concerned period calculated based on the method provided in the contract.

Unsecured(Note 4) The first interest payment date shall be the last day of December 2017, and subsequent interest payment dates shall be the last

Unguaranteed

days of every month and the principal repayment date. However, if the concerned date is not a business day, then it shall be thenext business day, and if that next business day falls into the next calendar month, then it shall be the business day immediately

lenders

UFJ, Ltd.

shown to thepreceding the concerned date. The first interest calculation period shall be from November 30, 2017 to the last day of December

Loanleft as the2017.

syndicateloanerwith The(Note 6) The interest rate is fixed at 0.41800%, in fact, by conclusion of the interest rate swap agreement.

2023

Bank ofTokyo-(Note 5) The interest rate is fixed at 0.34800%, in fact, by conclusion of the interest rate swap agreement.

May 31,

1,200(Note 7) If the concerned date is not a business day, then the repayment date shall be the next business day, and if that next business day

0.42622%

falls into the next calendar month, then it shall be the business day immediately preceding the concerned date.

Mitsubishi(Note 8) During the period from the Borrowing’s drawdown to the repayment date, SHR may make early repayment of loans, in whole or in

UFJ, Ltd. as

part, if SHR gives prior written notice and other certain terms and conditions are met.

arranger(Note 1)

(2) Acquisition and Sale of Assets(Note 1) The loan syndicate comprises Mitsubishi UFJ Trust and Banking Corporation and Development Bank of Japan Inc.
(Note 2) Borrowing expenses, etc. payable to the lender are not included.
(Note 3) The first interest payment date shall be the last day of May 2018, and subsequent interest payment dates shall be the last days of
May and November of each year and the principal repayment date. However, if the concerned date is not a business day, then it
shall be the next business day, and if that next business day falls into the next calendar month, then it shall be the business day
immediately preceding the concerned date.
(Note 4) The first interest calculation period shall be from November 30, 2017 to the last day of May 2018.
(Note 5) If the concerned date is not a business day, then the repayment date shall be the next business day, and if that next business day
falls into the next calendar month, then it shall be the business day immediately preceding the concerned date.
(Note 6) During the period from the Borrowing’s drawdown to the repayment date, SHR may make early repayment of loans, in whole or inpart, if SHR gives prior written notice and other certain terms and conditions are met.

SHI entered into real estate sale and purchase agreements to acquire Prime Maison Shirokanedai Tower and 5
other properties, and to sell Esty Maison Machida and 11 other properties (such acquisitions and the sales being
hereinafter collectively referred to as the “Asset Replacement”). As of the date of this document, the settlementand delivery of the Asset Replacement is scheduled to take place on May 1, 2018, which is the effective date of theInvestment Corporation Merger as described in “(1) Merger with Sekisui House Residential Investment
Corporation” above. Due to the Investment Corporation Merger, SHR, which will be the surviving corporation after
the merger, is scheduled to succeed to and assume the status of either purchaser or seller, and exercise all rights andperform all duties thereof, under the sale and purchase agreements pertaining to the Asset Replacement. In the eventthat the Investment Corporation Merger does not take effect, SHR will not be considered a party related to SHI
because SHI will execute the Asset Replacement as a purchaser or seller.



22

23

Outline of the Investment Corporation
1.

3.

Status of Capital
Fiscal period

Total number of investment units

auditor of SHR in the fiscal period under review.

As of the end of As of the end of As of the end of As of the end of As of the end of
2nd fiscal period 3rd fiscal period 4th fiscal period 5th fiscal period 6th fiscal period(Oct. 31, 2015) (Apr. 30, 2016) (Oct. 31, 2016) (Apr. 30, 2017) (Oct. 31, 2017)
10,000,000

10,000,000

10,000,000

10,000,000

10,000,000

Total number of investment units
issued and outstanding (units)

794,000

794,000

894,000

894,000

969,000

Unitholders’ capital (million yen)

87,74387,743100,040

100,040

110,189

Number of unitholders (persons)

18,08916,545

13,74912,44914,490authorized (units)

Matters Concerning Directors, etc.

(1) Name of executive director, supervisory directors and independent auditor
The following table sets forth information on the executive director, supervisory directors and independent

Position
Executive
Director

Name

Junichi Inoue

Total amount of compensationfor each position during period(thousand yen)

President & Representative Director,
Sekisui House Investment Advisors, Ltd.

㸫

Director, Shigeru Nomura Certified Public
Accountant Office
Supervisory

Shigeru Nomura

Matters Concerning Investment Units
Of the unitholders as of the end of the fiscal period under review, the following are the top ten unitholders interms of investment unitholding ratio.

Outside Director, Eiken Chemical Co., Ltd.
Member of Corporate Revitalization

1,800

Committee, The Resolution and Collection
Corporation (RCC)

Director
2.

Key concurrently held position, etc.

Tatsushi Omiya

Outside Director, QB Net Holdings Co., Ltd.
Partner, City Law Offices

1,800

Ernst & Young
ShinNihon LLC

㸫13,800(Note 2)

Number ofunits owned(units)Percentage of
owned units tototal units issued
and outstanding(%)

Japan Trustee Services Bank, Ltd. (Trust Account)

245,286

25.31

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

128,376

13.25

Sekisui House, Ltd.

65,200

6.73

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

50,411

5.20

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

35,728

3.69(2) Policy for determining whether to dismiss or refuse the reappointment of independent auditor
Dismissal of the independent auditor is subject to consideration at a meeting of the board of directors of SHR in

STATE STREET BANK - WEST PENSION FUND CLIENTS - EXEMPT 505233

16,177

1.67

accordance with the provisions of the Investment Trusts Act. Refusal of reappointment of the independent
auditor is also subject to consideration at a meeting of the board of directors of SHR by taking into account the

STATE STREET BANK AND TRUST COMPANY 505012

13,688

1.41

quality of audits, amount of audit fee and various other circumstances in a comprehensive manner.

The Hachijuni Bank, Ltd.

12,8181.32

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

10,309

1.06

STICHTING PENSIOENFONDS METAAL EN TECHNIEK

10,204

1.05

588,197

60.70

Name

Total
(Note)

Independent
Auditor(Note 1) None of the executive director or supervisory directors owns SHR investment units in his own name or in the name of anotherperson. In addition, supervisory directors may be officers of other corporations other than those stated above, but none of suchcorporations, including those stated above, has vested interest in SHR.
(Note 2) The total amount of compensation for the Independent Auditor, as stated above, is an approximation and includes
compensation for preparing comfort letters for the issuance of new investment units in May 2017 and the issuance of theSecond Series Unsecured Investment Corporation Bonds in July 2017, as well as compensation for auditing English financial
statements.

(3)

Matters concerning entities that have been ordered to suspend operations within the past two years
On December 22, 2015, SHR’s independent auditor received an order from the Financial Services Agency tosuspend operations relating to the conclusion of new contracts for three months (from January 1, 2016 to March
31, 2016).

Percentage of owned units to total units issued and outstanding is rounded to the nearest second decimal place.



24

25

4.

Condition of investment assets

Asset Management Company, Asset Custodian and Administrative AgentsThe following table sets forth information on the asset management company, asset custodian andadministrative agents of SHR as of the end of the fiscal period under review.
Entrustment category

Asset Management Company

Sekisui House Investment Advisors, Ltd.

Asset Custodian

Mitsubishi UFJ Trust and Banking Corporation

Administrative Agent (Transfer Agent)Mizuho Trust & Banking Co., Ltd.

Administrative Agent (Administrative Agent forOperation of Administrative Instruments)
Administrative Agent (Administrative Agent for
Investment Corporation Bonds)

1.

Name

Composition of Assets of the Investment Corporation
The following table sets forth the composition of assets of SHR as of the end of the fiscal period under review.

Type ofasset

Geographical area,etc.

Mitsubishi UFJ Trust and Banking Corporation

Three major

As of the end of 6th fiscal period(Oct. 31, 2017)

Total amountheld(million yen)

As a percentage
of total assets(%)

Total amountheld(million yen)

As a percentage
of total assets(%)(Note 1)

(Note 2)

(Note 1)

(Note 2)

177,418

93.6

198,055

95.6

Other areas

㸫

㸫

㸫

㸫

Total of real estate in trust

177,418

93.6

198,055

95.6

Deposits and other assets

12,209

6.4

9,086

4.4

Total amount of assets

189,627100.0

207,142100.0

Real estatein trust

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

As of the end of 5th fiscal period(Apr. 30, 2017)

metropolitan areas(Note 1) “Total amount held” is the carrying amount (or, for real estate in trust, the depreciated book value) as of the end of the fiscal
period under review, rounded down to the nearest million yen.
(Note 2) Figures under the heading “As a percentage of total assets” have been rounded to the nearest first decimal place.
(Note 3) SHR does not own any overseas real estate, etc. as of the end of the fiscal period under review.


2.

Major Portfolio Assets
The following table sets forth an overview of the portfolio assets of SHR as of the end of the fiscal period underreview.
Book value
at the end of
period(million yen)
(Note 1)

Leasablearea(m2)(Note 2)

Leasedarea(m2)(Note 3)

Occupancy
rate(%)(Note 4)

As a percentage of
total property-related
operating revenue(%) (Note 5)

58,974

31,236.34

31,236.34

100.0

28.5

50,722

19,999.97

19,999.97

100.0

23.8

22,481

16,699.46

16,699.46

100.0

12.8

17,006.94

17,006.94

100.0

19.7

17,27018,092.98

18,092.98

100.0

7.7

Hotel

HK Yodoyabashi
Garden Avenue

4,391

4,554.52

4,554.52

100.0

3.3

Officebuilding

Hirokoji
Garden Avenue

6,326

4,442.75

4,442.75

100.0

4.1

Officebuilding

Total

198,055

112,032.96

112,032.96

100.0

100.0

㸫

Name ofreal estate, etc.
Garden City
Shinagawa Gotenyama(Note 6)
Gotenyama SH
Building
Hommachi Minami
Garden City

Main
use

Officebuilding
Officebuilding
Officebuilding

Office building portion

26

Hommachi

37,888Garden City
(Note 7)

Hotel portion

Officebuilding

27

(Note 1) “Book value at end of period” refers to the depreciated book value of each property as of the end of the fiscal period underreview, rounded down to the nearest million yen. As such, the sum total of the “Book value at end of period” of each property
may not match the figure indicated in the column for the total.
(Note 2) “Leasable area” refers to the floor area available for leasing based on the lease agreement or building drawing, etc. for each
property that is valid as of the end of the fiscal period under review, rounded down to the second decimal place.
(Note 3)“Leased area” refers to the sum total of the leased area indicated in the respective lease agreements for each of the properties
that are valid as of the end of the fiscal period under review (or, if a pass-through type master lease agreementthat is valid
as of the end of each fiscal period has been concluded for the property, the lease agreements with the respective end tenants
concluded as of the end of the fiscal period under review).
(Note 4) “Occupancy rate” refers to the ratio of leased area to leasable area of each property as of the end of the fiscal period underreview, rounded to the nearest first decimal place. The figure indicated in the total column is the occupancy rate of the entire
portfolio, which is the ratio of total leased area of each property to total leasable area of each property, rounded to the nearest
first decimal place.
(Note 5) Figures under the heading “As a percentage of total property-related operating revenue” indicate the ratio of property-related
operating revenue of each property to total property-related operating revenue, rounded to the nearest first decimal place. As
such, the sum total of the figures in respect of each property may not match the figure indicated in the column for the total.
The same shall apply hereinafter.
(Note 6) SHR acquired sectional ownership rights to all of the exclusively-owned portions of the 4th, 7th and 8th floors and part of the
exclusively-owned portions of the 2nd, 3rd and 6th floors of Garden City Shinagawa Gotenyama, together with theaccompanying right of site (ratio of right of site: 2,103,349/3,857,806 (or approximately 54.5%)) (the “1st portion acquired”), on
December 3, 2014. Subsequently, SHR acquired sectional ownership rights to part of the exclusively-owned portions of the 2nd,
3rd, 5th and 6th floors of Garden City Shinagawa Gotenyama, together with the accompanying right of site (ratio of right ofsite: 820,252/3,857,806 (or approximately 21.3%)) (the “2nd portion acquired”), on May 24, 2016. Further SHR acquired
sectional ownership rights to part of the exclusively-owned portions of the 2nd floor and all of the exclusively-owned portionsof the 9th floor of Garden City Shinagawa Gotenyama, together with the accompanying right of site (ratio of right of site:
200,039/3,857,806 (or approximately 5.2%)) (the “3rd portion acquired”), on May 24, 2017.
(Note 7) SHR acquired sectional ownership rights to all of the exclusively-owned portions used as office and retail property in
Hommachi Garden City, together with the accompanying right of site, on May 19, 2015 ( “Hommachi Garden City (Officebuilding portion)” or “Office building portion”). The ratio of the exclusively-owned area is approximately 52.7% of the
exclusively-owned area of the entire building, and the ratio of right of site is 68,645/100,000 for the office portion and
1,104/100,000 for the retail portion, totaling 69,749/100,000 (or approximately 69.7%)). SHR subsequently acquired sectional
ownership rights to all of the exclusively-owned portions used as a hotel in Hommachi Garden City, together with theaccompanying right of site, on May 24, 2017 ( “Hommachi Garden City (Hotel portion)” or the “Hotel portion”). The ratio of the
exclusively-owned area is approximately 47.3% of the exclusively-owned area of the entire building and the ratio of right ofsite is 30,251/100,000 (or approximately 30.3%)). SHR owns sectional ownership rights and the accompanying rights of site, as
well as the annex to the entire Hommachi Garden City building. Hommachi Garden City includes co-ownership interest in thecommon portion pursuant to the relevant bylaws (parking, management offices, etc.), but there is no accompanying ratio ofright of site.

3.

Details of Assets (Real Estate, etc.) in the Portfolio
The following table sets forth an overview of the assets held by SHR as of the end of the fiscal period under

Name ofreal estate, etc.

Location

Garden City
Shinagawa Gotenyama

6-7-29 Kitashinagawa,Shinagawa-ku, Tokyo

Gotenyama
SH Building

6-5-17 Kitashinagawa,

Hommachi Minami
Garden City

3-6-1 Kitakyuhojimachi,

Hommachi
Garden City

3-6-4 Hommachi, Chuo-ku,

Shinagawa-ku, Tokyo

Chuo-ku, Osaka-shi, Osaka

Osaka-shi, Osaka

Type of ownership
Real estate trust
beneficiaryinterests
Real estate trust
beneficiaryinterests
Real estate trust
beneficiaryinterests
Real estate trust
beneficiaryinterests

Estimated value
at end of period(million yen)
(Note 2)58,97471,00050,72258,50022,481

28,6004-24-16, Meieki, Nakamuraku, Nagoya-shi, Aichi
㸫

㸫

Total

4,391

5,570

6,326

7,110

198,055

233,080(Note 1) “Book value at end of period” refers to the book value after depreciation of each property as of the end of the fiscal period
under review, rounded down to the nearest million yen. As such, the sum total of the figures in respect of each property may
not match the figure indicated in the column for the total.
(Note 2) “Estimated value at end of period” refers to the value stated in each real estate appraisal report (based on real estateappraisal reports prepared by Daiwa Real Estate Appraisal Co., Ltd., The Tanizawa Sōgō Appraisal Co., Ltd., Rich Appraisal
Institute Co., Ltd. and Japan Real Estate Institute with the end of the fiscal period under review as the date of valuation),rounded down to the nearest million yen.

The following table sets forth the status of leasing of real estate, etc. held by SHR.
5th fiscal period
6th fiscal period
From: Nov. 1, 2016
From: May 1, 2017
To: Apr. 30, 2017
To: Oct. 31, 2017
PropertyPropertyAs a
As a
relatedrelatedNumber Occupancy
percentage Number Occupancy
percentage
operatingoperating
of
rate
of
rate
of totalof total
revenuerevenuetenants[at end oftenants[at end of
propertyproperty[during[during
Name of[at endfiscal[at endfiscalrelatedrelatedfiscalfiscalreal estate, etc.
of fiscal
period]of fiscal
period]operatingoperatingperiod]period]period](%)
period](%)
revenuerevenue(million(million(Note 1)
(Note 2)
(Note 1)
(Note 2)
(%)
(%)
yen)
yen)
(Note 3)(Note 3)
Garden City
1
100.0
1,233
29.8
1
100.0
1,307
28.5
Shinagawa
Gotenyama
Gotenyama SH
1
100.0
1,089
26.3
1
100.0
1,088
23.8
Building
Hommachi
1
100.0
586
14.2
1
100.0
586
12.8
Minami
Garden City
Office building portion
1
100.0
903
21.8
1
100.0
903
19.7
HommachiHotel portion
Garden City
㸫
㸫
㸫
㸫
1
100.0
352
7.7
1 (7)

100.0

145

1 (9)

100.0

185

2 (16)

100.0

4,144

3.5

1 (7)

100.0

151

3.3

4.5

1 (9)

100.0

189

4.1

100.0

2 (16)

100.0

4,580

100.0

(Note 1) “Number of tenants” refers to the sum total of the number of tenants under, and indicated in, the respective lease agreements
for each property that are valid as of the end of each fiscal period (or, if a master lease agreementthat is valid as of the end ofeach fiscal period has been concluded for the property, the number of lessees under the master lease agreement). If a passthrough type master lease agreementthat is valid as of the end of each fiscal period has been concludedfor the property, thenumber of end tenants for the property is indicated in parenthesis.
In the “Total” column, a tenant that leases spaces in multiple properties is counted as one. The sum total of the number of end
tenants for properties where pass-through type master lease agreementsthat are valid as of the end of each fiscal period
have been concluded is indicated in parenthesis.
(Note 2) “Occupancy rate” refers to the ratio of leased area to leasable area of each property as of the end of each fiscal period, rounded
to the nearest first decimal place. The total column indicates the occupancy rate of the entire portfolio, which indicates theratio of total leased area of each property to total leasable area of each property, rounded to the nearest first decimal place.
(Note 3) “Property-related operating revenue [during fiscal period]” refers to the sum total of property-related operating revenue ineach fiscal period in respect of each property, rounded down to the nearest million yen. As such, the sum of “Property-related
operating revenue [during fiscal period]” in respect of each property may not match the figure indicated in the column for the
total.

44,600Hotel portion
17,270

Hirokoji
Garden Avenue

Real estate trust
beneficiaryinterests
Real estate trust
beneficiaryinterests

Hirokoji
Garden Avenue
Total

Office building portion
37,888

4-3-9 Fushimimachi,
Chuo-ku, Osaka-shi, OsakaHK
Yodoyabashi
Garden Avenue

review.
Book value
at end of period(million yen)
(Note 1)

HK Yodoyabashi
Garden Avenue

17,700



28

29

4.

Capital expenditures for property

Details of Renewable Energy Power Generation Facility, etc.
Not applicable.

1.
5.

Details of Right to Operate Public Facility, etc.

SHR, is as follows. However, a portion of such amounts may ultimately be classified as expenses in the course of
the accounting process.

Not applicable.

6.

Name of real estate,
etc.

Details of Investment Securities
Not applicable.

7.

Hommachi Garden
City (Hotel portion)(Chuo-ku, Osaka-shi,
Osaka)

as of the end of the fiscal period under review.
Contract amount, etc.
Type(thousand yen) (Note 1)
Amountdue after 1 year

Shinagawa Gotenyama(Kitashinagawa,(Note 2)

Shinagawa-ku, Tokyo)(Under which floating interest
rates are receivable and fixed

City (Office building
portion) (Chuo-ku,

50,350,000

50,350,000㸫Upgrading of integrated
heat meters

From: January 2018
To: January 2018

Payment for

Amountamountthe fiscal period
under review

already
paid

8

㸫

㸫

Total

Upgrading of integrated
watt meters

From: January 2018
To: March 2018

7

㸫

㸫

Upgrading of integrated
heat meters

From: January 2018
To: January 2018

6

㸫

㸫

Installation of emergency

From: December 2017
To: March 2018

5

㸫

㸫

From: August 2018
To: September 2018

4

㸫

㸫

Osaka-shi, Osaka)
Garden City
Shinagawa Gotenyama(Note 1) The contract amount, etc. of interest rate swap transactions is based on notional principal amounts.
(Note 2) The fair value is omitted because the transaction meets the criteria for special accounting under the Accounting Standards for
Financial Instruments.

(Kitashinagawa,Shinagawa-ku, Tokyo)
Garden City
Shinagawa Gotenyama

Status of Other Assets
Trust beneficiary interests with real estate as the main assets in trust are stated in “3. Details of Assets (Real(Kitashinagawa,Shinagawa-ku, Tokyo)

Estate, etc.) in the Portfolio” above. As of the end of the fiscal period under review, there are no specified assets
other than real estate, etc., asset-backed securities, etc. and infrastructure assets, etc. in the portfolio.

9.

Scheduled period

Hommachi Gardeninterest rates are payable)

8.

Purpose

Garden City
Fair value(thousand yen)Interest rate swap transaction
Transaction other thanmarket transaction

Scheduled amount (million yen)
(Note)(location)

Table of Status of Contract Amount, etc. and Fair Value of Specified Transactions
The following table sets forth the status of contract amount, etc. and fair value of specified transactions at SHR

Category

Schedule of Capital Expenditures
The main capital expenditure amounts accompanying renovation work, etc. currently planned for assets held by(Note)

power generators

Replacement of battery
for guide light”Scheduled amount” refers to the amount arrived at by multiplying (i) the full amount required for the work by (ii) the ratio of
SHR’s ownership in the real estate trust beneficiary interest.

Status of Holding of Assets by Country and Region
As of the end of the fiscal period under review, there are no portfolio real estate, etc. in any other country or
region besides Japan.



30

31

2.

Capital Expenditures During Period
An overview of capital expenditures conducted by SHR for its assets during the fiscal period under review is as
set forth in the following table. Total capital expenditures during the fiscal period under review was 12 million
yen and, together with 28 million yen of repair expenses charged to expenses in the fiscal period under review,

Condition of expenses
Details of Expenses Pertaining to Management, etc.
(Unit: thousand yen)work amounting to 40 million yen was implemented.
Name of real estate, etc.
(location)
Hommachi Garden City
(Hotel portion) (Chuo-ku,
Osaka-shi, Osaka)Purpose

PeriodPayment amount(million yen)

Upgrading of integrated heatmetersFrom: October 2017
To: October 2017

3

Upgrading of water meters

From: August 2017
To: September 20172

Hommachi Garden City
(Office building portion)(Chuo-ku, Osaka-shi,
Osaka)
Garden City Shinagawa
Gotenyama(Kitashinagawa,

Replacement of central device forlighting control system and UPS

From: July 2017
To: September 20172

Shinagawa-ku, Tokyo)

3.

Item
Asset management fee

5th fiscal period
From: Nov. 1, 2016
To: Apr. 30, 2017

6th fiscal period
From: May 1, 2017
To: Oct. 31, 2017332,503359,562

Asset custody fee

3,520

3,526

Administrative service fees

11,820

11,485

Directors’ compensations

3,600

3,600

Other expenses

35,86436,614387,308

414,789

Total(Note)In respect of asset management fees,in addition to the amounts shown above, there are management fees for property
acquisition (which are not applicable in the 5th fiscal period and amounting to 31,800 thousand yen in respect of the 6th fiscal

Other capital expenditures

3

Total

12

period) included in the book value of real estate, etc.

Cash Reserves for Long-Term Repair Plans
No cash was reserved for long-term repair plans as of the end of the fiscal period under review.

32

33

Condition of investment transactions
1.

4. Status of Transactions with Interested Persons, etc. (Note 1)(1) Status of Transactions

Status, etc. of Sale and Purchase of Real Estate, etc., Asset-Backed Securities, etc., Infrastructure Assets, etc.
and Infrastructure-Related Assets
Acquisition
Name ofreal estate, etc.

Garden City
Shinagawa Gotenyama

Disposition
dateBook value(million yen)

Gain (Loss)on sale(million yen)

4,000

㸫

㸫

㸫

㸫

May 24,2017

17,200

㸫

㸫

㸫

㸫

㸫

21,200㸫㸫㸫㸫

Acquisitiondate

May 24,2017

Total(Note)

Amount of purchase, etc.

Total amount

Disposition
price(million yen)
(Note)(3rd portion acquired)
Hommachi Garden
City (Hotel portion)

Disposition

Acquisition
price(million yen)
(Note)

Amount of purchase and sale, etc.

Category

Amount of sale, etc.
㸫 million yen

21,200 million yen

Breakdown of status of transactions with interested persons
Sekisui House, Ltd.

㸫 million yen

21,200 million yen [100.0%](2) Amount of Commission Fee, etc. (Note 2)

Category“Acquisition price” and “Disposition price” refer to the sale and purchase price as stated in the sale and purchase agreement
for each property (excluding consumption tax and local consumption tax, as well as commissions and other various expenses;

Management fee

rounded down to the nearest million yen). The same shall apply hereinafter.

(Note 3)

Total amount ofcommission fee, etc.
(A)(thousand yen)
26,177

Breakdown of transactions with interested persons, etc.
Payee

Sekisui House, Ltd.

Amount paid(B)(thousand yen)

As apercentage of
total amount(B /A)(%)

26,177100.0(Note 1) “Interested persons, etc.” refers to interested persons, etc. of the asset management company with which SHR has executed anasset management agreement as provided in Article 123 of the Order for Enforcement of the Act on Investment Trusts and2.

Investment Corporations (Orderfor Enforcement No. 480 of 2000, as amended) and Article 26, Item 27 of the Rules on

Status, etc. in respect of Sale and Purchase of Other Assets

Investment Reports, etc. of Investment Trusts and Investment Corporations of The Investment Trusts Association, Japan.

Not applicable.
Main assets other than the abovementioned real estate, etc., asset-backed securities, etc., infrastructure assets,(Note 2) There are no payments for repair work, etc. for orders placed to interested persons, etc. during the fiscal period under review

etc. and infrastructure-related assets are essentially bank deposits or bank deposits within assets in trust.
(Note 3) “Management fee” has been rounded down to the nearest thousand yen.

besides the commission fee, etc. indicated above.


3.

Investigation into Value, etc. of Specified Assets

5.

(1) Real Estate, etc. (Appraisal)
Acquisitionordisposition

Name ofreal estate, etc.

Garden City
ShinagawaAcquisition

Acquisition

Gotenyama(3rd portion
acquired)
Hommachi
Garden City
(Hotel portion)

Appraisal
firm

Date of
value

4,000

4,290

DAIWA
REAL
ESTATEAPPRAISAL
CO.,LTD.

March 31,2017

Real estate
trust
beneficiaryinterests

17,20017,600(Note 2)

Japan Real
EstateInstituteMarch 31,2017

㸫21,20021,890㸫㸫Type ofasset

May 24,2017

Real estate
trust
beneficiaryinterests

May 24,
2017
㸫

Total

Acquisition
price or
disposition
price(million yen)Appraisalvalue(million yen)
(Note 1)

Transaction
date

Status, etc. of Transactions with the Asset Management Company Pertaining to Business Operations ofConcurrent Business Engaged in by the Asset Management Company
There are no applicable transactions because as of the end of the fiscal period under review, the AssetManagement Company does not concurrently engage in any type I financial instruments or type II financial
instruments business (as defined in the Financial Instruments and Exchange Act), building lots and buildings
transaction business, or specified joint real estate ventures.
(Note 1) The appraisal stated above is derived by applying the “Real Estate Appraisal Standards; Particulars; Chapter 3: Appraisal on
Value of Real Estate Subject to Securitization.”(Note 2) The limited market value of the hotel portion (based on the increased value from holding the building in its entirety) of
Hommachi Garden City is used. The market value of the Hotel portion (excluding the increased value from holding the wholebuilding) is 17,200 million yen.

(2) Others
Not applicable.

34

35

Other information
1.

Financial Section (Audited)

Notice(1) General Meeting of Unitholders
No general meetings of unitholders were held during the fiscal period under review.
(2) Meeting of the Board of Directors of the Investment Corporation
In the fiscal period under review, regarding the matters, etc. provided in Items 2, 3, 5, 6 and 8 of Article 109,
Paragraph 2 of the Investment Trusts Act, the following matters were approved at a meeting of the board of
directors of SHR, as well as other matters deemed important.
Approval date

Matters approved

Overview
Administrative functions pertaining tosolicitation of persons to subscribe for new
investment units and other business
operations related to the issuance of new
investment units and secondary

May 9, 2017Conclusion of a new investment unit
underwriting agreement

distribution of investment units approvedat the meeting of the board of directors
held on the same date were entrusted to
Nomura Securities Co., Ltd., SMBC Nikko

Contents
Financial Statements
Balance Sheet

38

Statement of Income and Retained Earnings

40
0Statement of Changes in Net Assets

41
1

Handling of fractions of monetary amounts and percentage figures

Statement of Cash Distributions

42
2

Amounts have been rounded down and ratios have been rounded to the nearest specified unit unless otherwise
indicated in this document.

Statement of Cash Flows

43
3

Notes to Financial Statements

44
4

Supplementary Schedules

57
7

Independent Auditor’s Report622

Securities Inc., Mizuho Securities Co., Ltd.,
Daiwa Securities Co. Ltd. and Mitsubishi
UFJ Morgan Stanley Securities Co., Ltd.

2.




36

37

1. Financial Statements(1) Balance Sheet(Thousands of yen)(Thousands of yen)

5th Fiscal Period(As of April 30, 2017)

AssetsCurrent assets
Cash and deposits
Cash and deposits in trust
Operating accounts receivable
Prepaid expenses
Deferred tax assets
Consumption taxes receivable
Other
Total current assets
Non--current assets
Property, plant and equipment
Buildings in trust
Accumulated depreciation
Buildings in trust, net
Structures in trust
Accumulated depreciation
Structures in trust, net
Machinery and equipment in trust
Accumulated depreciation
Machinery and equipment in trust, net
Tools, furniture and fixtures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust, net
Land in trust
Construction in progress in trust
Total property, plant and equipment
Intangible assets
Other
Total intangible assets
Investments and other assets
Lease and guarantee deposits
Long-term prepaid expenses
Total investments and other assets
Total non--current assets
Deferred assets
Investment corporation bond issuance costs
Investment unit issuance costs
Total deferred assets
Total assets

38

4,115,187
7,662,531
16,70984,52316
㸫
11,35011,890,319

5th Fiscal Period

6th Fiscal Period(As of October 31, 2017)

1,756,618
6,518,376
19,33076,1987
372,744㸫
8,743,275

53,345,801(2,678,821)
50,666,979
672,428(43,390)629,038
411
(23)
387
1,259
(297)
961
126,120,644
9,699
177,427,710

59,604,170(3,399,530)
56,204,639
683,807(52,592)
631,215
921
(58)
862
1,259
(447)
811
141,218,283
㸫

3,882
3,882

3,147
3,147

20,181
239,863
260,044
177,691,637

20,181
227,164
247,345
198,306,306

17,45328,02645,479189,627,436

35,04557,907
92,952
207,142,534

Liabilities
Current liabilities
Operating accounts payable
Current portion of long-term loans payable
Accounts payable – otherAccrued expenses
Income taxes payable
Accrued consumption taxes
Total current liabilities
Non--current liabilities
Investment corporation bonds
Long-term loans payable
Tenant leasehold and security deposits in trust
Total non--current liabilities
Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
Surplus
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Total net assets (Note 4)
Total liabilities and net assets(As of April 30, 2017)

6th Fiscal Period(As of October 31, 2017)

130,929
14,000,000
376,804
79,170938
284,571
14,872,413

172,924
14,000,000
402,587
82,238743
㸫
14,658,493

2,000,000
61,300,000
9,033,710
72,333,710
87,206,123

5,000,000
65,400,000
9,268,730
79,668,730
94,327,223

100,040,294

110,189,294

2,381,018
2,381,018
102,421,312
102,421,312
189,627,436

2,626,016
2,626,016
112,815,310
112,815,310
207,142,534

The accompanying notes are an integral part of these financial statements.

198,055,813

39

(2) Statement of Income and Retained Earnings(Thousands of yen)

Operating revenue
Rent revenue – real estate (Note 5)
Other lease business revenue (Note 5)
Total operating revenue
Operating expenses
Expenses related to rent business (Note 5)
Asset management fee
Asset custody fee
Administrative service fees
Directors’ compensations
Other operating expenses
Total operating expenses
Operating income
Non--operating income
Interest income
Interest on refund
Subsidy income
Total non-operating income
Non--operating expenses
Interest expenses
Interest expenses on investment corporation bonds
Borrowing related expenses
Amortization of investment unit issuance costs
Amortization of investment corporation bond issuance costs
Other
Total non-operating expenses
Ordinary income
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
Net income
Retained earnings brought forward
Unappropriated retained earnings

5th Fiscal Period

6th Fiscal Period(From November 1, 2016 to(From May 1, 2017 toApril 30, 2017 )October 31, 2017

4,121,417
22,9704,144,387

4,550,426
30,0814,580,508

1,053,022
332,503
3,520
11,8203,600
35,864
1,440,331
2,704,056

1,178,033
359,5623,526
11,4853,600
36,614
1,592,823
2,987,685

50
1,521
10,935
12,50746
㸫㸫

283,125
3,383
39,818
7,006
934
515
334,784
2,381,779
2,381,779
945
(5)
940
2,380,839
179
2,381,018

293,464
5,568
43,16014,3842,258
2,416
361,252
2,626,479
2,626,479750
9759
2,625,719
296
2,626,016(3) Statement of Changes in Net Assets
5th Fiscal Period (From November 1, 2016 to April 30, 2017)







(Thousands of yen)

Unitholders’ equity
Unitholders’capitalBalance at beginning of periodSurplus
Unappropriatedretained earnings

100,040,294

Total
surplusTotal
unitholders’equityTotal
net assets

2,321,003

2,321,003 102,361,297 102,361,297

Distribution from surplus(2,320,824)(2,320,824)(2,320,824)(2,320,824)

Net income

2,380,839

2,380,839

2,380,839

2,380,839

㸫60,01560,01560,01560,015100,040,294

2,381,018

Changes of items during period

Total changes of items during period
Balance at end of period (Note 6)

6th Fiscal Period (From May 1, 2017 to October 31, 2017)


2,381,018 102,421,312 102,421,312

(Thousands of yen)

Unitholders’ equity
Unitholders’capital46
Balance at beginning of period

100,040,294

Surplus
Unappropriatedretained earnings

Total
surplusTotal
unitholders’equityTotal
net assets

2,381,018

2,381,018 102,421,312 102,421,312(2,380,722)(2,380,722)

Changes of items during period
Issuance of new investment units

10,149,000

Distribution from surplus
Net income
Total changes of items during period
Balance at end of period (Note 6)

10,149,000

10,149,000(2,380,722)(2,380,722)

2,625,719

2,625,719

2,625,719

2,625,719

10,149,000

244,997

244,997

10,393,997

10,393,997

110,189,294

2,626,016

2,626,016 112,815,310 112,815,310

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

40

41

(4) Statement of Cash Distributions
Item(5) Statement of Cash Flows
5th Fiscal Period

6th Fiscal Period(From November 1, 2016 to(From May 1, 2017 toApril 30, 2017 )October 31, 2017 )Ϩ. Unappropriated retained earnings

2,381,018,583yen

2,626,016,489yen

ϩ. Cash distributions

2,380,722,000yen[2,663yen]

2,625,990,000yen[2,710yen][Cash distributions per unit]
Ϫ. Retained earnings carried forward
Method of calculating amount of distribution

296,583yen(Thousands of yen)

26,489yen

The basic policy is to distributein excess of an amountThe basic policy is to distributein excess of an amountequivalent to 90% of theamount of earnings available

equivalent to 90% of theamount of earnings available

for distribution of SHR
provided in Article 67-15,

for distribution of SHR
provided in Article 67-15,

Paragraph 1 of the Act on
Special Measures Concerning

Paragraph 1 of the Act on
Special Measures Concerning

Taxation as set forth in Article
46, Paragraph 1, Item 2 of theTaxation as set forth in Article
46, Paragraph 1, Item 2 of the

Articles of Incorporation of
SHR.

Articles of Incorporation of
SHR.

Based on such policy, SHR
decided to pay out aBased on such policy, SHR
decided to pay out a

distribution of earnings of
2,380,722,000 yen, which is the

distribution of earnings of
2,625,990,000 yen, which is thelargest integral multiple of thetotal number of investment

largest integral multiple of thetotal number of investment

units issued and outstanding(894,000 units) in an amountunits issued and outstanding(969,000 units) in an amountnot in excess of unappropriatedretained earnings for the

not in excess of unappropriatedretained earnings for theperiod.
SHR will not distribute cash inperiod.
SHR will not distribute cash inexcess of earnings as set forthin Article 46, Paragraph 2 ofexcess of earnings as set forthin Article 46, Paragraph 2 of

the Articles of Incorporation of
SHR.

the Articles of Incorporation of
SHR.

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Amortization of investment corporation bond issuance costs
Amortization of investment unit issuance costs
Interest income
Interest expenses
Decrease (increase) in operating accounts receivable
Decrease (increase) in consumption taxes receivable
Decrease (increase) in prepaid expenses
Decrease (increase) in long-term prepaid expenses
Increase (decrease) in operating accounts payable
Increase (decrease) in accounts payable – other
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property, plant and equipment in trust
Proceeds from tenant leasehold and security deposits in trust
Repayments of tenant leasehold and security deposits in trust
Net cash provided by (used in) investing activities
Cash flows from financing activities
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Proceeds from issuance of investment corporation bondProceeds from issuance of investment units
Dividends paid
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 7)

5th Fiscal Period

6th Fiscal Period(From November 1, 2016
to April 30, 2017)(From May 1, 2017 to
October 31, 2017)

2,381,779
650,209
934
7,006
(50)
286,5097,543
461,715
3,593
35,763(31,608)
26,524
284,571(10,886)
4,103,606
50(280,352)(823)
3,822,480

2,626,479
730,830
2,258
14,384(46)
299,032(2,621)(372,744)
8,324
12,69858,92628,855(284,571)
11,3503,133,158
46(295,964)(945)
2,836,294(68,745)
2,177
(180)
(66,747)(21,377,917)
235,020
㸫
(21,142,896)

㸫
㸫
㸫
㸫
㸫
(2,321,072)(2,321,072)
1,434,660
10,343,058
11,777,719

7,600,000(7,600,000)
4,100,000
2,980,150
10,104,734(2,381,007)
14,803,877(3,502,724)
11,777,719
8,274,994

The accompanying notes are an integral part of these financial statements.

42

43

(6) Notes to Financial Statements

4. Method of hedge
accounting

1. Organization
Sekisui House Reit, Inc. (“SHR”) is a Japanese real estate investment corporation established in September 2014
under the Act on Investment Trusts and Investment Corporations of Japan (the “Investment Trust Act”).
On December 3, 2014, SHR commenced its investment operations when it was listed on the Real Estate Investment
Trust Securities Market of the Tokyo Stock Exchange, and it acquired three properties (total acquisition cost of¥114.3 billion) on the same day.
SHR is externally managed by a licensed asset management company, Sekisui House Investment Advisors, Ltd.
2. Basis of Presentation
SHR maintains its accounting records and prepares its financial statements in accordance with accounting
principles generally accepted in Japan (“Japanese GAAP”), including provisions set forth in the Financial
Instruments and Exchange Act, the Investment Trust Act, the Companies Act and the related regulations, which are
different in certain respects as to the application and disclosure requirements of International Financial ReportingStandards.
The accompanying financial statements are basically a translation of the financial statements of SHR, which wereprepared in accordance with Japanese GAAP and were presented in its Securities Report filed with the Kanto Local
Finance Bureau. In preparing the accompanying financial statements, certain reclassifications and modifications
have been made to the financial statements issued domestically in order to present them in a format which is morefamiliar to readers outside Japan. In addition, the notes to the financial statements include certain information
which might not be required under Japanese GAAP but is presented herein as additional information.
SHR’s fiscal period is a six-month period, which ends at the end of April and October of each year.
SHR does not prepare consolidated financial statements as it has no subsidiaries.
Unless otherwise specified, amounts have been rounded down to the nearest thousand yen in the accompanying
financial statements and the notes thereto. As a result, the amounts shown in the financial statements and notes
thereto do not necessarily agree with the sum of the individual account balances.
3. Summary of Significant Accounting Policies
1. Method of depreciation
and amortization of noncurrent assets

2. Accounting fordeferred assets

3. Standards forrevenue and expense
recognition

44(1)Property, plant and equipment (including assets in trust)
Depreciation is calculated using the straight-line method.
The useful lives of principal property, plant and equipment are as follows:
Buildings      6-65 years
Structures     
36-40 years
Machinery and equipment  10-18 years
Tools, furniture and fixtures  2-6 years(2)Intangible assets
Intangible assets are amortized utilizing the straight-line method.
(3)Long-term prepaid expenses
Long-term prepaid expenses are amortized utilizing the straight-line method.
(1) Investment corporation bond issuance costs
Investment corporation bond issuance costs are amortized utilizing thestraight-line method over the redemption periods.
(2) Investment unit issuance costs
Investment unit issuance costs are amortized utilizing the straight-line
method (over 3 years).
Accounting for property taxes
In accounting for property tax, city planning tax, depreciable asset tax, etc. onreal estate, etc., of the tax amount assessed and determined, the amountcorresponding to the applicable calculation period is expensed as expenses
related to rent business.
Reimbursement of property tax, paid to the seller upon the acquisition of realestate or trust beneficiary interests of real estate as assets in trust, is notrecognized as expenses related to rent business in the corresponding fiscal
period but included in the acquisition cost of the property.
Property taxes capitalized as a part of the acquisition cost amounted to 78,845
thousand yen for the 6th fiscal period, and there were no property taxes
capitalized for the 5th fiscal period.

5.

6.

(1)Method of hedge accounting
Deferral hedge accounting is applied. However, the special accounting
treatment is applied to interest rate swaps that meet the criteria for the
special accounting treatment.
(2)Hedging instruments and hedged items
Hedging instruments: Interest rate swap transactions
Hedged items:
Interest on loans(3)Hedging policy
SHR conducts derivative transactions for the purpose of hedging the risks set
forth in its Articles of Incorporation based on its basic risk management policy.
(4)Method for assessing the effectiveness of hedging
Interest rate swaps meet the criteria for the special accounting treatment andan assessment of the effectiveness is thus omitted.
The funds (cash and cash equivalents) in the statement of cash flows consist of cash
Scope of funds in theon hand and cash in trust; deposits that can be withdrawn at any time and deposits
statement of cash flows
in trust; and short-term investments with a maturity of three months or less fromthe date of acquisition, which are readily convertible to cash and bear only an
insignificant risk of price fluctuation.
Other significant matters (1)Accounting for trust beneficiary interests of real estate, etc. as assets in trust
serving as basis forConcerning trust beneficiary interests of real estate, etc. as assets in trust, allpreparation of
accounts of assets and liabilities within assets in trust as well as all accounts
financial statementsof revenue and expenses from the assets in trust are recognized in the relevant
account items on the balance sheet and the statement of income and retained
earnings.
The following material items of the assets in trust recognized in the relevant
account items are separately listed on the balance sheet.
ͳሻ Cash and deposits in trustʹሻ Buildings in trust; Structures in trust; Machinery and equipment in trust;Tools, furniture and fixtures in trust; Land in trust; Construction inprogress in trust͵ሻ Tenant leasehold and security deposits in trust(2)Accounting for consumption tax, etc.
Consumption tax and local consumption tax are excluded from the correspondingtransaction amounts.

45

4. Notes to Balance Sheet

7. Notes to Statement of Cash Flows*1. Reconciliation of cash and cash equivalents at end of period to the corresponding balance sheet items*1. Minimum net assets designated in Article 67-4 of the Investment Trust Act(Thousands of yen)(Thousands of yen)

5th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)

50,00050,0005. Notes to Statement of Income and Retained Earnings*1. Breakdown of property-related operating revenue and expenses(Thousands of yen)

5th Fiscal Period

6th Fiscal Period(From November 1, 2016

(From May 1, 2017 to
October 31, 2017)

to April 30, 2017)

A. Property-related operating revenue
Rent revenue – real estate
Rental income
Other
Utilities revenue
Other

17,447
5,522

4,121,417

4,538,496
11,9304,550,426

22,97024,706
5,375

30,081

Total property-related operating revenue

4,144,387

4,580,508

B. Property-related operating expenses
Expenses related to rent businessSubcontract expenses
Property management fees

24,77924,99624,546
26,177

Trust fees
Utilities expenses

2,265
18,253

2,704
20,595

Property and other taxes
Insurance expenses

296,203
6,151

334,107
6,291

Repair expenses
Depreciation

25,632649,474

28,342730,095

Other expenses related to rent business

Cash and deposits

4,115,187

1,756,618

Cash and deposits in trust

7,662,531

6,518,376

Cash and cash equivalents

11,777,719

8,274,994

5th Fiscal Period

6th Fiscal Period(As of October 31, 2017)

8. Lease Transactions
Operating lease transactions as lessor
Future minimum lease payments

5,266

1,053,022

5,171(As of April 30, 2017)

Due within 1 year

8,178,120

9,159,073

Due after 1 year

38,316,796

35,656,637

46,494,917

44,815,711

Total
9. Financial Instruments
1. Status of financial instruments(1) Policy for financial instruments

Making it a policy to conduct stable and sound financial operations that would contribute to steady growthof its investment assets as well as efficient management and stability of management, SHR shall procure
funds through borrowings or the issuance of investment corporation bonds for the purposes of utilizing
such funds for the acquisition of assets, payments of repair expenses or distributions, operations of SHR,
1,178,033

Total property-related operating expenses

1,053,022

1,178,033

C. Property-related operating income [A − B]

3,091,364

3,402,475

6. Notes to Statement of Changes in Net Assets*1. Total number of authorized investment units and total number of investment units issued

Total number of authorized investment units

6th Fiscal Period(From May 1, 2017 to
October 31, 2017)(Thousands of yen)

4,109,999
11,418Other lease business revenue

Total number of investment units issued

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

6th Fiscal Period

5th Fiscal Period

6th Fiscal Period(From November 1, 2016
to April 30, 2017)(From May 1, 2017 to
October 31, 2017)

10,000,000 units

10,000,000 units

894,000 units

969,000 units

repayment of obligations or other.
For derivative transactions, the policy is that derivative transactions shall be limited to those for the
purpose of hedging the risk of fluctuations in interest rates on liabilities and foreign currency risk in thecase of overseas real estate investments, and that no speculative transactions shall be conducted.
(2) Description of financial instruments and associated risks, and risk management structure
The funds procured through borrowings shall be used mainly for the acquisition of investment assets andfor repayment of loans.
The availability and terms and conditions of borrowings and the issuance of investment corporation bonds
may be affected by SHR’s financial creditworthiness, the interest rate situation and other factors, andthere is thus no guarantee that funds can be procured at SHR’s desired timing and terms and conditions.
Furthermore, loans with floating interest rates are susceptible to subsequent market trends.
SHR manages and limits the liquidity risk and the risk of fluctuations in interest rates associated withsuch fund procurement by diversifying fund procurement sources and means and by maintaining the ratio
of interest-bearing liabilities to total assets and the ratio of floating-rate loans to total loans at appropriate
levels. Furthermore, for certain loans with floating interest rates, derivative transactions (interest rate
swap transactions) are used as a hedging instrument for hedging the risk of fluctuations in interest rates
based on rules that set forth the basic policy for handling derivative transactions and risk management.
(3) Supplementary explanation of matters concerning fair value of financial instruments
The fair value of financial instruments, aside from values based on market price, includes values based onreasonable calculations when there is no market price. As the calculations involve variable factors, there
may be cases where the corresponding values will vary when different assumptions are adopted. In
addition, the contract amounts of derivative transactions in “2. Matters concerning fair value of financial
instruments” do not represent the market risk involved in the derivative transactions.

46

47

(Note 2) Financial instruments for which fair value is recognized to be extremely difficult to determine
Tenant leasehold and security deposits in trust are not subject to valuation of fair value because a reasonable estimation of
cash flows is recognized to be extremely difficult because there is no market price and the difficulty of calculating the actual
deposit period from when lessees move in to when they move out.

2. Matters concerning fair value of financial instruments
The following is the carrying amount and fair value of financial instruments as of April 30, 2017 andOctober 31, 2017, and the difference between them.
The following table does not include those for which fair value is recognized to be extremely difficult todetermine (please refer to (Note 2)).

(Thousands of yen)Item

5th Fiscal Period (As of April 30, 2017)(Thousands of yen)Book value
recorded on thebalance sheet

Fair value

6th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)

9,033,710

9,268,730

Tenant leasehold and security deposits in trust

Difference(Note 3) Redemption schedule of monetary claims after the closing date(1) Cash and deposits

4,115,187

4,115,187

㸫(2) Cash and deposits in trust

7,662,531

7,662,531

㸫Total assets

5th Fiscal Period

5th Fiscal Period (As of April 30, 2017)(Thousands of yen)
Due after
5 years

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Cash and deposits

4,115,187

㸫

㸫

㸫

㸫

㸫

11,777,719

11,777,719

㸫(3) Current portion of long-term loans payable

14,000,000

14,000,000

㸫(4) Investment corporation bonds

2,000,000

1,980,000(20,000)

Cash and deposits in trust

7,662,531

㸫

㸫

㸫

㸫

㸫

61,300,000

62,904,555

1,604,555

Total

11,777,719

㸫

㸫

㸫

㸫

㸫

77,300,000

78,884,555

1,584,555㸫㸫㸫

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

Cash and deposits

1,756,618

㸫

㸫

㸫

㸫

㸫

Cash and deposits in trust

6,518,376

㸫

㸫

㸫

㸫

㸫

Total

8,274,994

㸫

㸫

㸫

㸫

㸫

(5) Long-term loans payable
Total liabilities(6) Derivative transactions

6th Fiscal Period (As of October 31, 2017)

6th Fiscal Period (As of October 31, 2017)(Thousands of yen)Book value
recorded on thebalance sheet(1) Cash and deposits(2) Cash and deposits in trust
Total assets(3) Current portion of long-term loans payable

Fair value

Difference

1,756,618

1,756,618

㸫

6,518,376

6,518,376

㸫

8,274,994

8,274,994

㸫14,000,000

㸫

14,000,000(4) Investment corporation bonds

5,000,000

4,980,500(19,500)(5) Long-term loans payable

65,400,000

66,990,706

1,590,706

84,400,000

85,971,206

1,571,206

㸫㸫㸫

Total liabilities(6) Derivative transactions(Note 1) Method of calculating the fair value of financial instruments(1) Cash and deposits and (2) Cash and deposits in trust
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thusstated at that book value.
(4) Investment corporation bonds
The fair value of investment corporation bonds are based on the quoted market price.
(3)Current portion of long-term loans payable (5) Long-term loans payable
As the current portion of long-term loans payable and long-term loans payable with floating interest rates reflect interest ratechanges within a short period of time, the fair value is approximately the same as the book value and is thus stated at thatbook value (provided, however, that for long-term loans payable with floating interest rates that qualify for the special
accounting treatment of interest rate swaps (please refer to “11. Derivative Transactions”), the fair value is based on themethod of calculation in which the sum total amount of principal and interest accounted for with the interest rate swap is
discounted by the rate assumed in the event of a similar new drawdown). In addition, for those with fixed interest rates, thefair value is based on the method of calculation in which the sum total amount of principal and interest is discounted by therate assumed in the event of a similar new drawdown corresponding to the remaining period.
(6) Derivative transactions
Please refer to “11. Derivative Transactions”.

(Thousands of yen)
Due after
5 years(Note 4) Repayment schedule of investment corporation bonds and loans after the closing date

5th Fiscal Period (As of April 30, 2017)

Current portion of longterm loans payable
Investment corporation
bonds(Thousands of yen)
Due after
5 years

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

14,000,000

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

2,000,000

㸫㸫

14,000,000

11,050,000

17,000,000

19,250,000

Due in1 year or less

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

14,000,000

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

㸫

3,000,000

2,000,000

㸫㸫

14,000,000

12,910,000

17,000,000

21,490,000

Long-term loans payable
6th Fiscal Period (As of October 31, 2017)

Current portion of longterm loans payable
Investment corporationbonds
Long-term loans payable(Thousands of yen)
Due after
5 years

10. Securities
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.

48

49

13. Income Taxes
1. Breakdown of deferred tax assets and deferred tax liabilities by major cause

11. Derivative Transactions
1. Derivatives to which hedge accounting is not applied
5th Fiscal Period (As of April 30, 2017)
Not applicable.

(Thousands of yen)

6th Fiscal Period (As of October 31, 2017)
Not applicable.

5th Fiscal Period

6th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)16

7

 Total deferred tax assets

16

7

Net deferred tax assets

16

7

Deferred tax assets
 Accrued business taxes not deductible fromtaxable income

2. Derivatives to which hedge accounting is applied
The following is the contract amount or the amount equivalent to the principal provided in the contract asof the closing date for each method of hedge accounting.
5th Fiscal Period (As of April 30, 2017)(Thousands of yen)

Method ofhedge
accounting

Type ofderivative transactions

Specialaccounting
treatment forinterest rate
swaps

Interest rate swap
transaction
Floating interest ratereceivable and fixedinterest rate payable

Contract amountMain
hedgeditem
Long-term
loans
payableOf which,over
1 yearFair value

50,350,000*㸫Interest rate swap
transaction
Floating interest ratereceivable and fixedinterest rate payable

Contract amountMain
hedgeditem
Long-term
loans
payable50,350,000

Of which,over
1 yearFair value

50,350,000*

Calculation
method offair value㸫* As derivative transactions qualifying for the special accounting treatment for interest rate swaps are accounted for with the hedged
long-term loans payable, the fair value is included in the fair value of the underlying long-term loans payable (please refer to “ 9.
Financial Instruments; 2. Matters concerning fair value of financial instruments (Note 1)”).

12. Retirement Benefits
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.

6th Fiscal Period(As of April 30, 2017)(As of October 31, 2017)

31.74

31.74

[Adjustments](31.73)(31.73) Other

0.03

0.02

Effective income tax rate
after application of tax-effect accounting

0.04

0.03

 Deductible cash distribution(Thousands of yen)

Specialaccounting
treatment forinterest rate
swaps

(%)
5th Fiscal Period
Statutory tax rate

50,350,000

6th Fiscal Period (As of October 31, 2017)

Type ofderivative transactions

effective income tax rate after application of tax-effect accounting

Calculation
method offair value* As derivative transactions qualifying for the special accounting treatment for interest rate swaps are accounted for with the hedged
long-term loans payable, the fair value is included in the fair value of the underlying long-term loans payable (please refer to “ 9.
Financial Instruments; 2. Matters concerning fair value of financial instruments (Note 1)”).

Method ofhedge
accounting

2. Breakdown of major items that caused significant differences between the statutory tax rate and the

14. Profit or Loss of Affiliates Accounted for Under the Equity Method
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.
15. Transactions with Related Parties
1. Parent company and major corporate unitholders.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.
2. Subsidiaries and affiliates.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.
3. Sister companies.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.

50

51

17. Investment and Rental Properties

4. Directors and major individual unitholders.
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Type

Directoror close
relative

Name

Description ofbusiness or
occupation

JunichiInoue

Executive Directorof SHR and
Representative
Director of Sekisui
House Investment
Advisors, Ltd.

Percentage ofvoting rights
held by (in) SHR

Description oftransaction

㸫

Payment of asset
management fee
to Sekisui House
Investment
Advisors, Ltd.
(Note 1)

Transaction
amount(Thousands ofyen)

332,503

Account
item

Accounts
payable– other

Balanceat end of period(Thousands ofyen)

SHR owns rental office buildings, etc. in Tokyo and other areas for the purpose of earning revenue from leasing.
The following is the carrying amount, amount of increase (decrease) during the period and fair value of theseinvestment and rental properties.
(Thousands of yen)

Balance at beginning of period

Type

Directoror close
relative

Name

JunichiInoue

Executive Directorof SHR and
Representative
Director of Sekisui
House Investment
Advisors, Ltd.

㸫Payment of asset
management fee
to Sekisui House
Investment
Advisors, Ltd.
(Note 1)

Transaction
amount(Thousands ofyen)

391,362(Note 2)

Account
item

Accounts
payable– other

Balanceat end of period(Thousands ofyen)

388,327(Note 1) A transaction conducted by Junichi Inoue as a representative of a third party (Sekisui House Investment Advisors, Ltd.) andthe fee amount is based on terms and conditions set forth in the Articles of Incorporation of SHR.
(Note 2) The amount includes 31,800 thousand yen of asset management fees pertaining to real estate acquisitions included in thebook value of property, plant and equipment.
(Note 3) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

16. Asset Retirement Obligations
5th Fiscal Period (From November 1, 2016 to April 30, 2017)
Not applicable.
6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Not applicable.

(From May 1, 2017 to
October 31, 2017)

177,986,512

Fair value at end of period

177,418,011(568,501)

20,637,802

177,418,011

198,055,813

205,120,000

233,080,000

Amount of increase (decrease) during period
Balance at end of period

Description oftransaction(From November 1, 2016

Carrying amount6th Fiscal Period (From May 1, 2017 to October 31, 2017)
Percentage ofvoting rights
held by (in) SHR

6th Fiscal Period

to April 30, 2017)359,103(Note 1) A transaction conducted by Junichi Inoue as a representative of a third party (Sekisui House Investment Advisors, Ltd.) andthe fee amount is based on terms and conditions set forth in the Articles of Incorporation of SHR.
(Note 2) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

Description ofbusiness or
occupation

5th Fiscal Period(Note 1) Carrying amount is the book value less accumulated depreciation.
(Note 2) Net decrease during the 5th fiscal period is mainly attributable to depreciation (649,474 thousand yen).
Net increase during the 6th fiscal period is mainly attributable to the acquisition of new properties (21,355,798 thousandyen), offset by depreciation (730,095 thousand yen).
(Note 3) Fair value at the end of the period is the appraisal value by outside real estate appraisers.

The property-related operating income in the 5th and 6th fiscal periods for investment and rental properties ispresented in “5. Notes to Statement of Income and Retained Earnings”.
18. Segment Information
1. Segment information
Segment information is omitted because SHR operates a single segment, which is the real estate leasing
business.
2. Related information
5th Fiscal Period (From November 1, 2016 to April 30, 2017)(1) Information about products and services
Information about products and services is omitted because net sales to external customers for a single
products and services category are in excess of 90% of operating revenue on the statement of income andretained earnings.
(2) Information about geographic areas
ͳሻ Operating revenue
Information about net sales is omitted because net sales to external customers in Japan are in excessof 90% of operating revenue on the statement of income and retained earnings.
ʹሻ Property, plant and equipment
Information about property, plant and equipment is omitted because the property, plant andequipment located in Japan is in excess of 90% of property, plant and equipment on the balance sheet.
(3) Information about major customers(Thousands of yen)

Name of customer

Operating revenue

Name of related segment

Sekisui House, Ltd.

2,724,312

Real estate leasing businessNot disclosed (Note)

1,088,998

Real estate leasing business(Note)

The customer is a general business company in Japan, but the name is not disclosed because consent has not beenobtained from the customer. The customer is not a group company of Sekisui House, Ltd.

6th Fiscal Period (From May 1, 2017 to October 31, 2017)52

53

(1) Information about products and services
Information about products and services is omitted because net sales to external customers for a single
products and services category are in excess of 90% of operating revenue on the statement of income andretained earnings.
(2) Information about geographic areas
ͳሻ Operating revenue

Information about property, plant and equipment is omitted because the property, plant andequipment located in Japan is in excess of 90% of property, plant and equipment on the balance sheet.
(3) Information about major customers(Thousands of yen)

Operating revenue

Name of related segment

Sekisui House, Ltd.

3,151,016

Real estate leasing businessNot disclosed (Note)

1,088,998

Real estate leasing business(Note)The Two Investment Corporations, at their respective Board of Directors’ meetings held on January 24, 2018,resolved to execute the Investment Corporation Merger, with May 1, 2018 as the effective date, and executed
the Investment Corporation Merger Agreement on the same day.

Information about net sales is omitted because net sales to external customers in Japan are in excessof 90% of operating revenue on the statement of income and retained earnings.
ʹሻ Property, plant and equipment

Name of customer

20. Significant Subsequent Events
1. Merger between SHR and SHI

The customer is a general business company in Japan, but the name is not disclosed because consent has not beenobtained from the customer. The customer is not a group company of Sekisui House, Ltd.

(1) Purpose of the Investment Corporation Merger
The Two Investment Corporations reached the conclusion that expanding the scale of their assets andincreasing their market presence through a merger of the Two Investment Corporations, and improving
opportunities for growth by utilizing the integrated corporate strength of the Sekisui House Group, thereby
securing strong returns and stability and growth of distributions through the steady increase of assets undermanagement, would be their best strategy for maximizing unitholder value; accordingly, the Two Investment
Corporations concluded the Investment Corporation Merger Agreement.
(2) Merger Ratio
As a result of the Investment Corporation Merger, for every 1 SHI investment unit, 1.65 post-Investment
Unit Split SHR investment units will be allocated and delivered (Note). The number of investment units thatmust be delivered will include fractional amounts of less than one unit, and therefore, those fractionalamounts will be sold through market transactions, and the proceeds from the sales will be distributed to theunitholders allocated such fractional amounts on a proportional basis pursuant to the provisions of Article 88of the Investment Trust Act.

19. Per Unit Information
5th Fiscal Period

6th Fiscal Period(From November 1, 2016
to April 30, 2017)(From May 1, 2017
to October 31, 2017)

Net assets per unit

114,565yen

116,424yen

Net income per unit

2,663 yen

2,737 yen

(Note 1) Net income per unit is calculated by dividing net income by the daily weighted average number of investment units.
In addition, diluted net income per unit is not stated because there are no dilutive investment units.
(Note 2) The following is the basis for calculating net income per unit.

Net income (Thousands of yen)

5th Fiscal Period

6th Fiscal Period(From November 1, 2016
to April 30, 2017)(From May 1, 2017

2,380,839

to October 31, 2017)

2,625,719

Amount not attributable to common unitholders (Thousands of yen)㸫㸫

Net income attributable to common investment units (Thousands ofyen)

2,380,839

2,625,719

894,000

959,253

Average number of investment units during period (Units)(Note) SHR plans to split one investment unit into two investment units with April 30, 2018 as the record date and May 1, 2018as the effective date; the allocation ratio shown above and the number of new investment units SHR will allocate anddeliver are subject to the Investment Unit Split taking effect. For more details on the split of investment units, pleaserefer to “2. Split of Investment Units” stated below.

(3) Merger Consideration
As of the date of these financial statements, in addition to the abovementioned investment units, SHR
intends to pay the Unitholders Subject to Allocation or the registered pledgees of investment units held inlieu of cash distributions for the fiscal period of SHI’s final term, a merger consideration in the form of cash
distribution based on SHI’s distributable income for that same period in an amount (excluding amounts lessthan one yen), which is the quotient resulting from dividing the amount of SHI’s distributable income for the
fiscal period up to the date prior to the effective date of the merger by the number of issued SHI investment
units on that date less the number of investment units held by unitholders other than the Unitholders
Subject to Allocation within a reasonable period from the effective date of the Investment Corporation
Merger.
In addition, SHI will put before a general meeting of its unitholders, which is scheduled to be held on March
27, 2018, a proposal to amend its articles of incorporation with a view to changing its fiscal periods thatcurrently end on March 31 and September 30 to April 30 and October 31, to enable the implementation of theInvestment Corporation Merger. As a result, if the aforementioned amendment is approved, the last fiscal
period before the effective date of the Investment Corporation Merger is expected to end on April 30, 2018.
Specifically, such period is expected to be a seven-month fiscal period from October 1, 2017 to April 30, 2018.
(4) Summary of Certain Financial Information in Respect of SHI as at September 30, 2017 (end of the latest
fiscal period from April 1, 2017 to September 30, 2017)
Business description: Investment and management, mainly in respect of Specified Assets, based on the

54

Operating revenue:

Investment Trust Act
6,916 million yen

Net income:
Total assets:

2,493 million yen
210,009 million yen

Liabilities:
Net assets:

108,667 million yen
101,341 million yen

55

2. Split of Investment Units
SHR resolved at the Board of Directors’ meeting held on January 24, 2018, to split its investment units asfollows.

(7) Supplementary Schedules
6th Fiscal Period (From May 1, 2017 to October 31, 2017) ͳǤ Schedule of securities(1) Shares(1) Purpose of the Investment Unit Split
As described in “1. Merger between SHR and SHI” above, SHR and SHI have agreed to implement theInvestment Corporation Merger and for this purpose have executed the Investment Corporation Merger
Agreement on January 24, 2018.
The Investment Corporation Merger will be carried out through an absorption-type merger with SHR as thesurviving corporation, and the merger ratio, before considering the Investment Unit Split, would be SHR 1:

Not applicable.
(2) Securities other than shares
Not applicable.
2. Contract amount and fair value of derivative transactions

SHI 0.825. However, based on this merger ratio, 0.825 units of SHR would be allocated for every unit of SHI,
which would result in a number of SHI unitholders receiving less than one unit of SHR. For this reason, so(Thousands of yen)Contract amount (Note 1)

that SHI unitholders may continue to hold SHR units even after the Investment Corporation Merger iscompleted, and for the purpose of issuing at least 1 SHR unit to all SHI unitholders, it was decided to
conduct a 2-for-1 split of SHR units.

Category

Transaction other thanmarket transaction(2) Method of the Investment Unit Split
SHR units owned by the unitholders set forth or recorded in the final unitholder register on April 30, 2018(the day before the effective date of the Investment Corporation Merger) will be split 2-for-1. The Investment
Unit Split shall come into effect on May 1, 2018 (the effective date of the Investment Corporation Merger),provided that all conditions precedent for the Investment Corporation Merger set forth in the Investment
Corporation Merger Agreement are satisfied.

Total number of outstanding units prior to the Investment Unit Split: 969,000 units

2)

Increase in the number of units due to the Investment Unit Split: 969,000 units

3)

Total number of outstanding units following the Investment Unit Split: 1,938,000 units

5)Interest rate swap transaction
Floating interest rate receivableand fixed interest rate payable

50,350,000

50,350,000

㸫

Total

50,350,000

50,350,000㸫(Note 1) The contract amount of interest rate swap transactions is based on the notional principal.
(Note 2) The fair value is omitted because the transaction meets the criteria for the special accounting treatment under the
Accounting Standards for Financial Instruments.

(Thousands of yen)1)

Total number of outstanding units following the Investment
Corporation Merger
Number of authorized investment units following the Investment Unit
Split and the Investment Corporation Merger

Fair value(Note 2)

Of which,over 1 year͵Ǥ Schedule of property, plant and equipment and intangible assets(3) Increase in Number of Investment Units Due to the Investment Unit Split

4)

Type

Balanceat beginningof period

Amount ofdecreaseduringperiodBalanceat end ofperiod53,345,801

6,258,369

㸫59,604,170

3,399,530

672,428

11,379㸫

683,807

411

510

㸫

1,259

㸫

㸫

126,120,644

15,097,638

9,699

㸫

Subtotal

180,150,244

21,367,897

Intangible Other
assetsSubtotal

7,350

㸫Type of assets: 3,762,091 units (Note 1)

Buildings
in trust: 20,000,000 units (Note 2)

Structures

Note 1: This figure was calculated under the assumption that, in connection with the Investment Corporation Merger, 1.65 SHR

in trust

units following the Investment Unit Split would be allocated for every SHI unit with respect to all outstanding SHI units

andequipment inof the date of these financial statements, the articles of incorporation are expected to be partially amended, with the
Therefore, the figures stated above have been calculated taking into account such changes.

Property,plant andequipment(4) Timeline of the Investment Unit Split

Net balanceat end ofperiodNotes

720,70956,204,639(Note)

52,5929,201

631,215(Note)

921

58

34

862

㸫

1,259

447

149

811

㸫

㸫 141,218,283

㸫㸫

141,218,283

㸫

㸫

㸫

㸫

㸫

9,699 201,508,442

3,452,629

730,095

198,055,813

㸫

㸫

7,350

4,202

735

3,147

㸫

㸫

7,350

4,202

735

3,147

㸫

9,699 201,515,792

3,456,832

730,830

198,058,960

㸫oraccumulated
amortization

For theperiodMachinery(1,105,510 units) as of the date of these financial statements.
Note 2: SHR’s authorized investment units constitute 10,000,000 units, but as a result of the Investment Corporation Merger, as
number of authorized investment units to be changed as of the effective date of the Investment Corporation Merger.

Accumulated depreciation

Amount ofincreaseduringperiodtrust
Tools,
furniture andfixtures in1)

Announcement of the record date

March 30, 2018 (tentative)

trust

2)

Record date

April 30, 2018 (tentative)

Land in trust

3)

Effective date

May 1, 2018 (tentative)

Constructionin progress

9,699(Note)

in trust(5) Impact on Per Unit Information
Information on a per unit basis, on the assumption that the Investment Unit Split was executed at the
beginning of the previous fiscal period is set forth in the following table.
(fiscal period ended April 30, 2017)(fiscal period ended October 31,
1)
Net assets per unit:
57,282 yen2017) 58,212 yen(fiscal period ended April 30, 2017)(fiscal period ended October 31,
2)
Net income per unit:
1,331 yen2017) 1,368 yen

Total(Note)

56

7,350

㸫

180,157,594

21,367,897

The increase during the period is attributable to the acquisition of Garden City Shinagawa Gotenyama (additional
acquisition), Hommachi Garden City (hotel portion).

57

ͶǤ Schedule of other specified assets
Real estate trust beneficiary interests are included above in “͵Ǥ Schedule of property, plant and equipment

Issue date

Balance at
Amount ofBalance
beginning ofdecrease during
at end of period
periodperiod(Millions of yen)
(Millions of yen) (Millions of yen)First Series
September 8,
Unsecured Investment
2016
Corporation Bond
Second Series
July 13,
Unsecured Investment
2017
Corporation Bond

2,000

Total

Couponrate(%)

Redemption Use of
dateproceeds

0.340

September 8,(Note 1) Unsecured
2026

2,000

㸫

㸫

㸫

3,000

2,000

㸫

5,000

0.240

July 13,
2022

Security

Short-termloans payableͷǤ Schedule of investment corporation bonds
Name(Thousands of yen)
Category

and intangible assets”.

͸Ǥ Schedule of loans payable(Note 1) Unsecured(Note 1) The proceeds are used as funds for repayment of loans payable.
(Note 2) This investment corporation bonds are equipped with pari passu clause among specified investment corporation bonds.
(Note 3) The following is the maturity schedule of investment corporation bonds within five years of the balance sheet date.

Investment Corporation Bonds

1 to 2 years㸫

2 to 3 years㸫

3 to 4 years㸫

4 to 5 years㸫

3,000,000



Amount ofincreaseduringperiodAmount ofdecreaseduringperiodBalanceat end ofperiodThe Bank of TokyoMitsubishi UFJ, Ltd.

㸫4,560,000

4,560,000

㸫

Sumitomo Mitsui Banking
Corporation㸫

3,040,000

3,040,000

㸫㸫

7,600,000

7,600,000

1,500,000

㸫㸫

1,500,000

1,100,000

㸫㸫

1,100,000

The Norinchukin Bank

1,500,000

㸫㸫

1,500,000

Mizuho Bank, Ltd.

2,100,000

㸫㸫

2,100,000

1,300,000

㸫㸫

1,300,000

1,200,000

㸫㸫

1,200,000

2,100,000

㸫㸫

2,100,000

1,300,000

㸫㸫

1,300,000

1,900,000

㸫㸫

1,900,000

3,300,000

㸫㸫

3,300,000

800,000㸫㸫

800,000

800,000㸫㸫

800,000

1,800,000

㸫㸫

1,800,000

600,000㸫㸫

3,000,000

㸫㸫

3,000,000

1,800,000

㸫㸫

1,800,000

1,000,000

㸫㸫

1,000,000

900,000㸫㸫

900,000

4,200,000

㸫㸫

4,200,000

800,000㸫㸫

800,000

Subtotal
The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.

Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trust andBanking Corporation(Millions of yen)Due in1 year or lessLenderBalanceat beginningof periodResona Bank, Limited

Long-term loans payable

The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.
The Norinchukin Bank
Mizuho Bank, Ltd.
Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trust andBanking Corporation
Resona Bank, Limited
The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.

  

The Norinchukin Bank
Mizuho Bank, Ltd.
Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trust andBanking Corporation
Resona Bank, Limited58

㸫

Averageinterest
Repayment Repayment Use of
Securityrate
due date
method proceeds(%)(Note 1)
Purchase UnMay. 23, Lump-sum of assets secured
2018
0.21000
payment
andUn㸦Note 2㸧 at maturity related guaranexpenses teed
㸫
㸫
㸫
㸫
㸫

0.28095

600,000 0.65830

700,000㸫㸫

700,000

2,400,000

㸫㸫

2,400,000

900,000㸫㸫

3,700,000

㸫㸫

3,700,000

2,000,000

㸫㸫

2,000,000

900,000㸫㸫

900,000

1,400,000

㸫㸫

1,400,000

900,000 0.94060

Nov. 30,2017
㸦Note 3㸧Nov. 30,
2019

Purchase UnLump-sum of assets secured
payment
andUnat maturity related guaranexpenses teedNov. 30,
2021

59

The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.
Mizuho Bank, Ltd.
Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui Trust
Bank, Limited
Mitsubishi UFJ Trustand Banking
Corporation
The Bank of TokyoMitsubishi UFJ, Ltd.
The Norinchukin Bank
Mizuho Bank, Ltd.

Long-term loans payable

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

Amount ofdecreaseduringperiodBalanceat end ofperiod4,200,000

㸫㸫

4,200,000

300,000㸫㸫

700,000㸫㸫

700,000㸫㸫

3,700,000

700,000㸫㸫

700,000㸫㸫

1,650,000

㸫㸫

650,000㸫㸫

1,650,000 0.61760
650,000㸫㸫

950,000

500,000㸫㸫

500,000㸫㸫

1,650,000

0.62760

㸫㸫

850,000

200,000㸫㸫

200,000

550,000㸫㸫

550,000

700,000㸫㸫

700,000 0.88470

650,000㸫㸫

650,000 0.88500

350,000㸫㸫

350,000

650,000㸫㸫

650,000

350,000㸫㸫

350,000

Resona Bank, Limited

300,000㸫㸫

300,000

The Bank of TokyoMitsubishi UFJ, Ltd.

750,000㸫㸫

750,000 1.00850

Mizuho Bank, Ltd.

400,000㸫㸫

400,000

300,000㸫㸫

300,000

700,000㸫㸫

700,000

350,000㸫㸫

350,000

500,000㸫㸫

500,000

Resona Bank, Limited

100,000㸫㸫

100,000

The Bank of TokyoMitsubishi UFJ, Ltd.

1,810,000

㸫㸫Mizuho Bank, Ltd.

900,000㸫㸫Resona Bank, Limited
The Bank of TokyoMitsubishi UFJ, Ltd.
Development Bank ofJapan Inc.
Mizuho Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited

Mitsubishi UFJ Trust andBanking Corporation

Nov. 30,
2020

Lump-sumpayment
at maturity
Nov. 30,2022

㸫Amount ofdecreaseduringperiod

1,560,000

㸫㸫

1,560,000

830,000㸫㸫

830,000

Resona Bank, Limited

550,000㸫㸫

550,000

Development Bank ofJapan Inc.

370,000㸫㸫

370,000

The Norinchukin Bank

370,000㸫㸫

370,000

370,000㸫㸫

370,000㸫

870,000㸫

870,000

Unsecured
UnguaranRepayme teed
nt of
loans
payableBalanceat end ofperiod0.25595

Mizuho Trust & Banking
Co., Ltd.
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited

㸫

480,000㸫

480,000

Resona Bank, Limited

㸫300,000㸫

300,000

The Norinchukin Bank

㸫210,000㸫

210,000

The Bank of TokyoMitsubishi UFJ, Ltd.

㸫

990,000㸫

990,000 0.37000

Mizuho Bank, Ltd.

㸫

550,000㸫

550,000㸫

260,000㸫

260,000

0.23286

0.45254㸫

220,000

㸫Nov. 30,
2020

Aug. 31,2021

Lump-sum Repayme Unpayment
nt of
securedat maturity loans
Unpayable guaranteed

Nov. 30,2023

220,000㸫

220,000㸫

220,000

Subtotal

75,300,000

4,100,000

㸫

79,400,000

㸫

㸫

㸫

㸫

㸫

Total

75,300,000

11,700,000

7,600,000

79,400,000

㸫

㸫

㸫

㸫

㸫

(Note 1) Average interest rate is the weighted average interest rate during the period. Interest rates are rounded to six decimal
places. The interest rates for loans hedged by interest rate swap transactions used to hedge the risk of interest rate
fluctuations are the interest rates reflecting the effect of the interest rate swaps.
(Note 2) SHR made early repayment of 500 million yen on June 15, 2017, 3,000 million yen on July 14, 2017 and 4,100 million yen
on August 31, 2017.
(Note 3) These loans are recorded in current liabilities on the balance sheet as current portion of long-term loans payable as of theend of the 6th fiscal period.
(Note 4) The following is the maturity schedule of long-term loans within five years of the balance sheet date.

(Thousands of yen)Due in1 year or less1.01850

Nov. 30,
2023

Long-term loans payable

14,000,000

1 to 2 years

2 to 3 years㸫

14,000,000

3 to 4 years
12,910,000

4 to 5 years
17,000,000

1,810,000 0.60500
900,000
0.67000

㸫Amount ofincreaseduringperiodMitsubishi UFJ Trust andBanking Corporation
Development Bank ofJapan Inc.
Mizuho Trust & Banking
Co., Ltd.

0.89470

440,000

Purch
ase ofassetsandrelated
expen
ses

Nov. 30,2024

400,000

950,000

1,650,000

1.47450

Averageinterest
Repayment Repayment Use of
Securityrate
due date
method proceeds(%)(Note 1)

Balanceatbeginningof period

LenderSumitomo Mitsui Banking
Corporation
Sumitomo Mitsui Trust
Bank, Limited

300,000

3,700,000

400,000

Averageinterest
Repayment Repayment Use of
Securityrate
due date
method proceeds(%)(Note 1)Category

Amount ofincreaseduringperiod

850,000

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

60

Balanceatbeginningof period

Long-term loans payable

Category

LenderSep. 8,2026

440,000

61



Memo

62

63