Mori Hills REIT Investment Corporation
Results of the 26th Fiscal Period ended July 31, 2019
Presentation Material
September 17, 2019

TSE Code： 3234
https://www.mori-hills-reit.co.jp/en/(Asset Manager) Mori Building Investment Management Co., Ltd.
https://www.morifund.co.jp/en/

Disclaimer

This document has been prepared by Mori Hills REIT Investment Corporation (“MHR”) for informational
purposes only and should not be construed as an offer of any transactions or the solicitation of an offer of
any transactions. Please inquire with the various securities companies concerning the purchase of MHR
investment units.
This document’s content includes forward-looking statements about business performance; however, noguarantees are implied concerning future business performance. Although the data and opinions
contained in this document are derived from what we believe are reliable and accurate sources, we do notguarantee their accuracy or completeness. The contents contained herein may change or cease to exist
without prior notice. Regardless of the purpose, any reproduction and/or use of this document in any
shape or form without the prior written consent from MHR is prohibited.
This document contains charts, data, etc. that were prepared by Mori Building Investment Management
Co., Ltd. (hereafter, the “Asset Manager”) based on charts, data, indicators, etc. released by third parties.
Furthermore, this document includes statements based on analyses, judgments, and other observations
concerning such matters by the asset manager as of the date of preparation.

1

Contents

1. Executive summary
2. Investment highlights

3

4

Unit price performance5

Financial results

6

Dividends per unit growth record

7

Continuous growth through “positive cycle”

8Increase in appraisal NAV per unit

9

Forecasts

10

Highest Property Portfolio among all J-REITs

11

External growth

22Internal growth25

Financial management

29

MHR’s representative property

31

3. Operation highlights

35

Factors that led to changes in dividends per unit
from the previous fiscal period

36

Change in assets under management

37

Change in unrealized capital gain/loss

38

Appraisal value

39

Change in the rent and occupancy rates

40

Tenant status by month and major tenants

41

Financial overview (as of July 31, 2019)42

Debt status (as of July 31, 2019)43

Unitholders breakdown (as of July 31, 2019)44

4. Business environment recognition &MHR’s policy/strategy

45

Business environment recognition

46

MHR’s policy/strategy

47

Market-related information

48

5. Appendix

54

2

1. Executive summary
Financialsummary

Operating revenue: 9,561 million yen, operating income: 5,971 million yen,

26th period

net income: 5,344 million yen Increased revenue and income period-over-period(Jul. 2019)

DPU: 2,850 yen (+1.0% from 25th period) Increasing for 18 consecutive fiscal periods
DPU increased by +3.5% over previous year, continuing steady rate of growth
NAV per unit increased by +10.5% over previous year, among largest increase for all J-REITs

External growth

Possible to acquire premium properties in central Tokyo without a competitive bidding process
by utilizing the abundant sponsor pipeline
Further improvement in asset value of MHR’s properties are expected due to development bysponsor in surrounding area

Internal growth

Occupancy ratio continued to be strong, office 99.9% and residential 96.8%.
Steady internal growth due to rent revision and replacement
Office rent gap ratio increased from △4.0% in 25th period to △6.5% in 26th period

Financialmanagement

Maintained the target level by book value basis LTV 45.7%, appraisal value basis LTV 39.4%,
remaining duration of debt 4.4 years
Fixed interest rate ratio at the end of the period was 90.0% and was raised to 94.6% after theend of the period by taking into account the decline in interest rates

3

2. Investment highlights

42-1 Unit price performance(yen)

200,000
PublicOffering inMar. 2013

190,000

PublicOffering in
Sep. 2013

PublicOffering in
Aug. 2014

PublicOffering inFeb. 2016

PublicOffering in
Aug. 2018180,000
170,000
160,000
150,000
140,000

Mori Hills REIT

130,000
120,000
110,000
100,000
90,000TSE REIT Index

80,00070,00060,00050,00040,00030,0009th

Sep. 14, Jan. 31,
2011
2010

Market
value

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

Jul. 31,2011

Jan. 31,
2012

Jul. 31,2012

Jan. 31,
2013

Jul. 31,2013

Jan. 31,
2014

Jul. 31,2014

Jan. 31,
2015

Jul. 31,2015

Jan. 31,
2016

Jul. 31,2016

Jan. 31,2017

Jul. 31,2017

Jan. 31,2018

Jul. 31,2018

Jan. 31, Jul. 31,
2019
2019

41.9 bn yen(Sep. 14, 2010)26th

300 bn yen(Jul. 31, 2019)(Note 1) Unless otherwise stated in this document, all amounts are rounded down below the unit and all fractions and areas are rounded up below the decimal point.
(Note 2) TSE REIT Index is adjusted as of the 8th period result announcement (Sep. 14, 2010) and shows the relative performance vs. MHR’s unit price performance.

52-2 Financial results
25th period

26th period

26th period

Jan. 31, 2019

Jul. 31, 2019

Jul. 31, 2019

ActualActualDifference

Forecasted

Operating Highlights (million yen)
Operating revenue

9,423

9,561

+ 137

9,538

Rent revenues

9,170

9,323

+ 153

9,300

253

237

238

3,477

3,589

△ 15

+ 111

3,604

3,131

3,225

+ 94

3,257

346

364

+ 17

347

5,945

5,971

+ 25

5,934

1

1

+0

1

653

627

629

Ordinary income

5,293

5,346

+ 52

5,307

Net income

5,292

5,344

△ 25
+ 52

5,306

Total dividends

5,291

5,343

+ 52

5,306

1,874,960

1,874,960－

1,874,960

2,822

2,850

+ 28

2,830

Increase/decrease factor for 26th period

Profit on real estate rental

6,292

6,336

+ 43

6,281

・Operating income (+37 mn yen)

Deprec iation

1,074

1,057

1,063

NOI

7,367

7,394

+ 26

7,345

NOI yield

3.8%

3.8%

△ 16

0.0PT

3.8%

385,194

390,690+ 5,495

390,690

Other operating revenues

Operating expenses
Expenses related to properties
SG&A

Operating income
Non-operating inc ome
Non-operating expenses

DPU
Total units outstanding (units)
DPU (yen)

Other Indices (million yen)

Acquisition price(weighted average based on the numberof operating days during the period) (Note)

Increase/decrease factor (25th – 26th)・Operating revenue (+137 mn yen)
- Property acquisition in 25th period- Office operating revenue (Pass-through)- Utilities and other revenue

・Operating expenses (+111 mn yen)
- Maintenance and repairs- Property acquisition in 25th period- Property taxes for properties acquiredin 24th and 25th
- Property taxes for existing properties- Depreciation of existing properties- Utilities

+123
+31
△20

+55
+47
+31
+16
△35
△18

・Non-operating expenses (△25 mn yen)

- Amortization of investment unit issuance cost △21- Interest on investment corporate bonds△6(Forecasted - Actual)- Residential (Pass-through)- Office (Pass-through)- Asset management fee

+24
+21
△20

(Note) If properties are acquired during the period, the acquisition price is the weighted average based on the number of operating days.

62-3 Dividends per unit growth record(yen/unit)

3,000

Increase over previous year: +3.5%
2,800

18 consecutive
fiscal period increase

2,822

2,860 2,870
2,850 (forecast) (forecast)

2,753

Longest among
all J-REITs
2,567

2,600

2,606 2,610

2,659

2,502

(116.7% increase in 9 years)

2,367

2,400

2,303

2,200

2,151
2,019

2,000

1,910
1,833

1,800
1,670
1,589

1,600

1,400

1,200

1,724 1,740

1,315

8th
9th
10th
11th
12th
13rd
14th
15th
16th
17th
18th
19th
20th
21st
22nd
23rd
24th
25th
26th
27th
28th
periodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodperiodJul. 2010 Jan. 2011 Jul. 2011 Jan. 2012 Jul. 2012 Jan. 2013 Jul. 2013 Jan. 2014 Jul. 2014 Jan. 2015 Jul. 2015 Jan. 2016 Jul. 2016 Jan. 2017 Jul. 2017 Jan. 2018 Jul. 2018 Jan. 2019 Jul. 2019 Jan. 2020 Jul. 2020

※ Implemented a 5-for-1 investment unit split effective on February 1, 2014. Actual dividends per unit was divided by 5 for the periods before the split of investment units in the graph.

72-4 Continuous growth through "positive cycle”
Continuous growth of “Dividends and NAV per unit” through “positive cycle”- Public offering at premium level + New acquisition at discount to appraisal value + High-grade properties in central Tokyo page
7

Dividends per unitpage9

NAV per unit

18 consecutive fiscal period increase

17 consecutive fiscal period increase

Increase over previous year: +3.5%

Increase over previous year: +10.5%(116.7% increase in 9 years)(119.5% increase in 8.5 years)

PBR

Impliedcap rate

1.5x

3.1%

[Most recent NOI yield at acquisition]

Continuous
growth through“positive cycle”

NAV per unit

1.2x

[Factors for NAV increase]

Toranomon
Hills

3.4%

1. Public offering at premium level

Holland Hills

4.3%

2. New acquisition at discount to appraisal
valueContinuous growth driven by external
growth, financial cost reduction andinternal growth

3. Increased unrealized capital gain on
properties(Note) Financial indicators on this page are calculated based on the figures as of the end of the 26th fiscal period (July 31, 2019).

8

2-5 Increase in appraisal NAV per unit
(yen/unit)

Increase over previous year: +10.5%

140,000

137,697
134,550130,000

17 consecutive
fiscal period increase

124,618
117,627

120,000(119.5% increase in 8.5 years)

112,546 112,811

114,893

110,000

99,665100,000

90,00086,941

101,957

104,064

88,82681,99280,00078,02778,43412th
periodJul. 2012

13rd
periodJan. 2013

72,73570,00062,73164,85660,00050,0009th
periodJan. 201110th
periodJul. 201111th
periodJan. 201214th
periodJul. 201315th
periodJan. 201416th
periodJul. 201417th
periodJan. 201518th
periodJul. 201519th
periodJan. 201620th
periodJul. 2016

21st
periodJan. 201722nd
periodJul. 201723rd
periodJan. 201824th
periodJul. 201825th
periodJan. 201926th
periodJul. 2019※ Implemented a 5-for-1 investment unit split effective on February 1, 2014. Actual dividends per unit was divided by 5 for the periods before the split of investment units in the graph.

92-6 Forecasts
26th period

27th period

28th period

Jul. 31, 2019

Jan. 31, 2020

Jul. 31, 2020

ActualForecast

Difference

Forecast

Operating Highlights (million yen)
Operating revenue

9,561

9,616

+ 54

9,577

Rent revenues

9,323

9,362

+ 38

9,356

237

253

+ 15

221

3,589

3,630

+ 40

3,594

3,225

3,270

+ 45

3,255

364

359

338

5,971

5,986

△5

+ 14

5,983

1

0

1

627

621

Ordinary inc ome

5,346

5,365

△1

Net income

5,344

Total dividends

Other operating revenues

Operating expenses
Expenses related to properties
SG&A

Operating inc ome
Non-operating income
Non-operating expenses

+ 18

5,382

5,364

△5

602

+ 19

5,381

5,343

5,362

+ 18

5,381

1,874,960

1,874,960－

1,874,960

2,850

2,860

+ 10

2,870

DPU
Total units outstanding (units)
DPU (yen)

Increase/decrease factor (26th – 27th)・Operating revenue (+54 mn yen)
- Rent revision of land (Laforet Harajuku)- Utilities and other revenue- Office operating revenue (Pass-through)・Operating expenses (+40 mn yen)
- Property taxes for properties acquired in24th and 25th period- Property management fee- Property taxes for existing properties- Utilities- Depreciation of existing properties- Maintenance and repairs

・Operating revenue (△38 mn yen)

- Full period contribution of rent revision of land

Profit on real estate rental

6,336

6,345

+9

6,321

- Utilities and other revenue- Office operating revenue (Pass-through)Depreciation

1,057

1,036

1,048

・Operating expenses (△35 mn yen)

NOI

7,394

7,382

NOI yield

3.8%

3.7%

△ 21

Acquisition pric e(weighted average based on the numberof operating days during the period)

390,690

390,690

△ 12

7,369

－

390,690△ 0.1PT

3.8%

+31
+21
+15
+12
△21
△13

Increase/decrease factor (27th – 28th)(Laforet Harajuku)

Other Indices (million yen)

+25
+21
+16

- Property taxes for existing properties- Maintenance and repairs- Utilities

+12
△32
△16
+15
△44
△14

・Non-operating expenses (△19 mn yen)
- Interest expenses, etc.

△19

10

2-7 Highest quality property portfolio among all J-REITs
Investment strategy based on long-term perspective(1) Responding to demographics

Investment in central Tokyo

Responding to the declining populationand change of working style“Global large corporate cluster”
x “IT and venture company cluster”(2) Responding to economic trends
and disasters

Investing in high-quality assets

Responding to tenant demand during
economic downturns and to disasters(3) Addressing aging assets
Responding to asset value decline
due to aging

Property with excellent facilities, earthquake
resistance and environmental performance“Positive aging" by creating added value
Area management, peripheral development
and renovation

Location

Qualityof assetsValuecreation112-8 (1) Location
Highest property percentage in Central Tokyo among J-REITs

Tokyo’s Five
Central Wards
and their vicinity

Tokyo’s ThreeCentral Wards

87.5%

100%

(Note) The ratios represent proportion of acquisition price to total acquisition price.

Estimated population in central Tokyo
Area

Population in2015

Estimated
population in
2045

Change3 central wards
in Tokyo

442,000

594,000+34.3%

5 central wards
in Tokyo

1,000,000

1,175,000+17.5%

Tokyo

13,515,000

13,606,000

+0.7%

Osaka

8,839,000

7,335,000

Aic hi

7,483,000

6,899,000△ 17.0%127,094,000

106,421,000

Nationwide△ 7.8%△ 16.3%(Source) Prepared by the Asset Manager based on the “Regional Population Projections forJapan (estimated in 2018)” by the National Institute of Population and Social
Security Research.

122-9 (1) Location
Focusing investment in premium area

Overlapping zone of global large corporate withIT and venture companies in central Tokyo

1. Global large corporate cluster in central Tokyo×
2. IT and venture company cluster in central Tokyo

Large corporate headquarters in central Tokyo(c ompany)

Foreign company

Domestic company

22
20
18

17

16

16

14
12

10

10

8

8

8

6

5

3

3

Hamamatsucho

4

Kyobashi4

Shiodome

5

Akasaka5

4
2
Shinjuku

Shinagawa

Toranomon

Nihonbashi

Roppongi

OtemachiMarunouchi

Roppongi
Roppongi
Akasaka
Akasaka
Toranomon
Toranomon

0(Source) "Large corporation" refers to the top 100 domestic companies and the top 30
foreign companies based on market capitalization. Prepared by the AssetManager based on market capitalization data as of July 31, 2019 by Refinitiv andpublicly available information for the headquarters’ locations.

13

2-10 (1) Location
Head office location of IPO companies (2018)

IT firms located in Minato ward（Companies）

20
16
15
12

11

10
5

5

0

MinatoMinatoward

Shibuyaward

Shinjuku
ward

Chiyoda
ward

5

Chuo
ward

3

3

Shinagawaward

Bunkyoward(Source) Prepared by the Asset Manager based on the Securities Registration Statement(at the time of IPO) of companies newly listed in Japanese Market (TOKYO PRO
Market excluded) from January to December 2018 those head offices are locatedin Tokyo.

Venture capitalists located in Minato ward
NVCC
SBI Investment
JAFCO
WiL
NTT DOCOMO Ventures
Incubate Fund
STRIVE
Eight Roads Ventures Japan
Infinity Ventures

B Dash Ventures
Itochu Technology Ventures
Sony Innovation Fund
Dentsu Innovation Partners
Hakuhodo DY Ventures
TBS Innovation Partners
Fuji Startup Ventures
ORIX Capital
Monex Ventures(Note) Prepared by the Asset Manager based on the disclosed data etc. as of July 31, 2019.

Apple
Facebook
Microsoft
Tencent
Cisco Systems
Netflix
Softbank
NVIDIA
Baidu
Expedia
Nexon

m3
Oracle Japan
SBI Holdings
Mercari
GREE
HEROZ
Bengo4.com
NHN JAPAN
UUUM
RPA Holdings
ZIGExN

Monex Group
OpenDoor
UzabaseMoney Forward
ValueCommerce
istyleEvolable Asia
EnigmoGunosyItokuroKLab(Note) Prepared by the Asset Manager based on the disclosed data etc. as of July 31, 2019.

Consideration of work style change
Change in required officespace- Space to promote interaction- Enhanced facilities with excellent
environment- Corporate cluster that promotes
growthNeed for truly “high-grade
properties in central Tokyo”
rises further

Expansion of satellite offices

Need for truly “high-grade
properties in central Tokyo”
remains unchanged

Increase in remote work14

2-11 (2) Quality of assets
High-grade properties with extensive facilities＜Overview and facilities of representative properties＞
Property nameGross floor
area

Access fromthe nearest
stationNumber ofshops &
restaurants

Roppongi Hills

Connected to758,208㎡- Roppongi
Station

215-

Toranomon Hills(After total
project completion)

ARK Hills

Atago Green Hills

Connected to791,460㎡- Toranomon
Hills Station
2-minute w alk
from Roppongi
310,745㎡1-chome
Station3-minute w alk
151,106㎡- from Onarimon
Station

Hotel
(spa)

Mori Art Museum
Tokyo C ity View
(NAGO MI SPA AND FITNESS)TOHO C inemas

Grand Hyatt Tokyo

Not fixed Andaz Tokyo(approx. 8,000
tsubo)

Cultural facility
Observatory(AO SPA AND CLUB)ANA InterContinental
56- (THANN SANCTUAR Y-

Suntory Hall

Conference

ShareofficeResidential

Green
coverage ofthe site

Academyhills
Ropponngi Hills
Club

〇

〇

28.5%

Toranomon Hills
Forum

〇

〇

30.3%

ARK Hills Club

〇

〇

43.2%

〇

〇

51.7%

SPA AKASAKA)

21-

-

-

-

(Source) Prepared by the Asset Manager based on disclosed materials as of July 31, 2019.
(Note 1) Describes the outline of the entire areas and facilities including properties owned by MHR.
(Note 2) “Connected” under the “Access from the nearest station” describes the possible direct connection by concourse etc..

152-12 (2) Quality of assets
Earthquake-resistant feature

Lowest portfolio
PML of all listed
J-REITs

0.93%

Environmental performance

Ratio of GB certified
properties in portfolio

Best among
all J-REITs

93.2%
In highest Ratings
70.5％※ PML refers to the probable maximum loss ratio expected to result from an earthquake.
A smaller figure indicates superiority in earthquake-resistance.

PML

Earthquakeresistant feature

Roppongi Hills Mori Tower

0.59%

Seismic damping

ARK Mori Building

0.78%

Seismic damping

0.73%

Seismic damping

1.56%

Seismic damping

Toranomon Hills Mori Tower

0.50%

Seismic damping

Holland Hills Mori Tower

0.85%

Seismic damping

Akasaka Tameike Tower

1.79%

Seismic damping

2.35%

Seismic damping

2.34%

Seismic damping

5.94%

－

2.20%

－

2.20%

－

Property nameKoraku Mori Building
ARK Hills South Tower

MORI Tower
Atago Green Hills

Forest Tower

Type

OfficeOffice(Partly
residential)

Plaza
Roppongi First Plaza
Roppongi View Tower

Highest among
all J-REITs

Residential※ In acquisition price base by excluding Laforet Harajuku (Land)

CASBEE for Existing Buildings: Rank S

Roppongi Hills
Mori Tower

ARK Mori
Building

Atago Green Hills Toranomon Hills(MORI Tower)
Mori Tower

CASBEE for Existing Buildings: Rank A

Akasaka Tameike
Tower

Koraku Mori
Building

Holland Hills
Mori Tower

DBJ Green Building
Certification: Four stars

ARK Hills
South Tower16

2-13 (3) Value creation
Developments around MHR’s properties

Shintora-Dori CORE (Completed Sep. 2018)(Toranomon Hills area)
Toranomon Hills Mori
Tower
Opened Jun. 2014

Toranomon Hills Residential
tower (Tentative name)
Projected completion Jan. 2021

Toranomon Hills Station Tower

Toranomon Hills Business
tower(Tentative name)
Projected completion Jul. 2023

Projected completion Dec. 2019

Total area: approx. 7.5ha
Total floor area: approx. 800,000㎡

Toranomon Hills Station of
Hibiya subway line
Partially in-service by 2020

Office space: approx. 300,000㎡
Residential units: approx. 720
Retail space: approx. 26,000㎡
Green space: approx. 15,000㎡

Mixed use Tower located at the center of future
grand boulevard in Tokyo
A 15-story mixed use tower with commercial facilities with a
total rental floor area of approximately 10,000m²“THE CORE KITCHEN/SPACE” cafe located on the 1st floor
which faces the Shintora–Dori creates a new community withon site “Community Manager” and the event space attracts
diverse people to exchange and disseminate new ideas.
Incubation offices with shared lounges and meeting rooms
are located on the 3rd floor and start-ups expanding into
Japan from overseas and venture companies have moved in.

17

2-14 (3) Value creation
Toranomon Hills Business Tower (projected completion Dec. 2019)
An international-standard, large-scale officebuilding with an innovation center
Business Tower is a 36-story office tower, featuring
international-standard, large-scale office space ofapproximately 94,000m², and retail facility area ofapproximately 6,300m².
The tower is directly connected to “Toranomon Hills”
Station of the Hibiya subway line as well as theexisting Toranomon station. A bus terminal is planned
to be established on the first floor to function as a“Gateway to Tokyo” via various bus lines including
the BRT (Bus Rapid Transit) connecting city center
and waterfront areas, and via airport limousine buses.
At the 2020 Tokyo Olympics and Paralympics, the bus
terminal will serve as a transportation hub forathletes and spectators, connecting to the athletes’
villages in the Harumi area as well as to all of thestadiums and arenas in the city center and waterfront
area.

<Retail>A retail area of approx.
6,300m² located through B1
to the 3rd floor is equippedwith a high-quality
supermarkets, large-scaledining facilities and stores tosupport the daily lives of the
global citizens in the
Toranomon Hills area to live,
work and gather.

<Innovation center>
An innovation center ofapprox. 3,000m² locatedon the 4th floor serves as
a networking site whereentrepreneurs and juniorstaff to executives of large
companies can work
together. This center aims
to support the creation of
new businesses to foster
innovation.
18

2-15 (3) Value creation
Development around MHR’s properties (Toranomon-Azabudai Project: projected completion Mar. 2023)
The future version of “Hills” boasts an astonishingscale and impact
Large central square of approx. 6,000m² is set in thecenter of the city and various city functions such as offices,
residences, hotel, an international school, retail facilities
and cultural facilities will be tightly integrated.
Total floor area will be 860,400m², with 213,900m² ofoffice space, approx. 1,400 residential units. Approx.
20,000 office workers and 25-30 million people per year
are expected to visit.
The main tower will soar 64 stories and 330m in height.
Offices in the main tower, the West Tower and Podium
Building will encourage free and creative work.

“Modern Urban Village”, a city-within-a-city full of greenery andconnects people

The core concept of the “Toranomon-Azabudai Project” is a “Modern Urban
Village,” a unique neighborhood that will combine the sophistication of amegalopolis with the intimacy of a small village. It will be a completely new city
like no other in the world. It will cover an area of approx. 8.1 ha and will featureextensive greenery totaling approx. 2.4 ha including a 6,000m² central square.

19

2-16 (3) Value creation
Creating community and innovation through the Area Management by sponsors

Toranomon Hills Area

Thursday Gathering(Toranomon Hills Mori Tower)

Partnership withworld's largest
innovation center

Events“OUR PARKS”“Thursday Gathering” by

Various events e.g. “Our

Cambridge Innovation Center

Parks” are held in the open

promotes exchanges between

spaces, Oval Plaza and Atrium,

entrepreneurs, investors,

where vast lawn spreads out.

business managers of large

It creates a third place forcompanies and students tocommunity and activates the

support the creation of newarea of Toranomon.

innovations.

ELLE Cinema Night(Toranomon Hills Mori Tower)

Collaboration with
Royal College of Art

Design Academy(Shintora-Dori CORE)

Enjoy the charm ofJapanese Market"Design Academy" in

Dining facility “Touring stand”

collaboration with the Royalis installed on the road for theCollege of Art, provides

first time in Tokyo. There are

educational programs to spursales of gourmet cuisine using

creation of new industries withseasonal ingredients froman environmental focus andaround Japan and various

world-class learning andinteracting opportunities.

Traveling stand(Shintora-Dori)workshops to experience
community activities.

20

2-17 (3) Value creation
Creating community and innovation through the Area Management by sponsors
Roppongi Hills Area

ARK Hills Area
Japan’s First
WeWork

©WeWork

Art Festival
representing Tokyo

Two open-floors connected by

Tokyo-based art festival

inner stairs that encourage“Roppongi Art Night”

people from a variety ofintegrates the art and the city

industries from startups toto improve the cultural image

large companies to meet andof Roppongi and create acollaborate.

pioneering model of urban(c) Roppongi Art Night Execution Committee

development in Tokyo.

Roppongi Art Night(Roppongi Mori Tower)(ARK Hills South Tower)

Atago Green Hills Area
Workplace where
venture capitalgathers

Support creation of
next-generation
business model“KaleidWorks” consists of an"Ignition Lab MIRAI" is an

office area where independentinteractive space jointly

venture capitalists

operated with Silicon Valley

representing Japan are locatedbased VC, WiL. Innovators

and a lounge area. People whofrom a variety of large

want to innovate in a widecompanies gather to create
and operationalize newrange of fields can interact on
KaleidWorks(ARK Mori Building)common grounds in shared

Ignition Lab MIRAI(Atago Green Hills (Mori Tower))business models.

spaces.

21

2-18 External growthBusiness environment
recognition

Closely watching the acquisition price level as property acquisitioncompetitions are overheatedExternal growth policy

Proceed with external growth utilizing sponsors’ abundant property
pipeline(Note) Please refer to “Section 4. Businessenvironment recognition and MHR's
policy/strategy” for details.

Change in rent and vacancy rate of office buildings (Tokyo’s five central wards)
(%)

200
8.9%
8.1%

180
160

9.0%

10.0

8.7%

9.0
⇒ Estimate

7.3%

145

149

5.5%

4.2%

6.0
4.0%

124

4.7%

120

3.6%

3.1%

120

125

127

5.0
4.0
3.0

2.9%

109

100

114

2.6%

101

100

80
2004

Rent index
Vacancy rate

7.0

6.1%

140

8.0

2005

2006

2007

2008

2009

2010

92

92

95

2011

2012

2013

99
2014

104

109

3.0%

114
1.9%

2.1%

2.0
1.0
0.0

2015

Change in return on real estate investment

(%)

4.9

2016

2017

2018

2019

(Source)
Prepared by the Asset Manager based on the“Spring 2019 Office Rent Forecast in Tokyo,
Osaka and Nagoya (2019-2025)” by the OfficeMarket Trends Research Committee(Japan Real Estate Institute and Miki Shoji Co.,
Ltd.).
(Note)The rent index targets large and medium
buildings (standard floor area of 100 tsubo ormore) in Tokyo’s five central wards. The rent
index is rebased to 100 as of 2010.

2020

Mori Building’s extensive property
pipeline

4.6
4.3

4.3%

4.2%

4.2%

3.5%

3.7
3.4

Cap rate of class A
office buildings(Marunouchi and Otemachi)

Number of properties under(as of the end of March)(as of April 1, 2019)

2.0 trillion yen

4.0%
4.0

Total assets:management: 96 buildings

3.5%
3.2%
3.0%

3.1

MHR has “preferential negotiation rights”

2.8
05

07

09

11

13

15

17

19

(Source) Prepared by the Asset Manager based on “The Japanese Real
Estate Investor Survey” by the Japan Real Estate Institute.
(Note) Figures reflect the time of survey as of April each year.

22

2-19 External growth
Trend in assets under management (based on acquisition price)(billion yen)

450

Growth utilizing
sponsor’s pipeline

400

390

352

350

300

250

billion yen

390

252

252

15th
Jan.
2014

16th
Jul.
2014

281

281

17th
Jan.
2015

18th
Jul.
2015

339

339

338

20th
Jul.
2016

21st
Jan.
2017

22nd
Jul.
2017

360

293

230
210

200

13th
Jan.
2013

14th
Jul.
2013

19th
Jan.
2016

23rd
Jan.
2018

24th
Jul.
2018

25th
Jan.
2019

26th
Jul.
2019

Acquired premium properties in central Tokyo lower than appraisal values(Acquired as of September 3, 2018)
Toranomon Hills
Mori Tower

Holland Hills
Mori Tower

Acquisition price 26,070 million yen

Acquisition price 4,570 million yen

Appraisal value

28,830 million yen

Appraisal value

5,260 million yen

Location

Minato-ku, Tokyo

Location

Minato-ku, Tokyo

Toranomon
Hills Mori
Tower

Holland Hills
Mori Tower

Discount ofacquisition priceto appraisal
value (Note 2)△9.6%△13.2%△4.4%

Building age

4.3 years

13.6 years

21.3 years

PML

0.50%

0.85%

5.18%

Recent officeacquisition bylisted REITs(Note 1)

(Note 1) Average based on information of acquisitions disclosed (41 properties excluding acquisitions at IPO) from January
to July 2018.
(Note 2) Discount of acquisition price to appraisal value = (Acquisition price – appraisal value) / appraisal value23

2-20 External growthMori Building Group’s involvement

MHR (Note 1)
In Operation(注4)

MB Group (Note 2)(注5)

Planning / Under Construction(Source) Prepared by the Asset Manager based on Mori Building’s “Mori Building Handy Map Mori Building Map/Home Route Support Map 2019.”(Note 1) Some of the properties have been partially acquired and held by MHR.
(Note 2) Properties are developed, owned, managed and planned for development by Mori Building Group, and there are no properties currently anticipated to be acquired by MHR.

24

2-21 Internal growth(Note) Please refer to “Section 4. Businessenvironment recognition and MHR's
policy/strategy” for details.

Business environment
recognition

Central Tokyo office rents forecast to continue moderate rise, butclose attention to be paid to demand trends

Internal growth policy

Maintain stability of cash flow through fixed rent master leases, whileachieving rent increase revision with pass-through type leases

Trend in occupancy rates
（%）

99.5

100

99.7

99.9

160

98.4

98.2
96.7
97.3
95

Trend in asking rent

96.3

97.9

150

97.7

Areas with concentration of IT firms
such as Minato-ku and Shibuya-ku
have outperformed

Shibuya・Dogenzaka

96.8
95.7

140

Roppongi・
Azabu

130

Toranomon・
Shimbashi

120

5 central
wards

90

110

Office (total)

85

Residential (total)
Office (pass-through)

100

90

80
21st
January 2017

22nd
July 2017

23rd
January 201824th
July 2018

25th
January 2019

26th
July 2019

2011

2012

2013

2014

2015

2016

2017

2018

(Source) Prepared by the Asset Manager based on “Office Market Report” by Sanko
Estate Co., Ltd.
(Note) The average of asking rent (including common area revenue) that targets
a large scale building with a standard floor area of 200 tsubo or more is
rebased to 100 as of 2011.

25

2-22 Internal growth
Result of rent revision and tenant replacement (pass-through type)
Rent revision rate (office)Net impact of rent revisions accumulated since 16th period（%）(monthly rent basis)+10

Impact of a few large
renewing tenants withabove market rent

(million yen)+18

+16.7 mn yen

+16

+6.9%

+6.3%

※ Average of all contracts subject to revision

+1.5%

0
22nd
Jul. 2017

23rd
Jan. 201824th
Jul. 2018

3.1
2.7

2.3
+7.7 mn yen

1.4

+2.5%

21st
Jan. 2017

3.7+11.9 mn yen+10+8+13.0 mn yen+10.7 mn yen

+4.2%

+2.1%

4.2

Office

+14
+12

+5

+15.4 mn yen

Residential

25th
Jan. 201926th
Jul. 2019

+6

12.5

11.7
9.1

8.4

+4

9.9

6.3
+2

Rent revision rate (residential)+0
16th- 21st

（%）
+10

22nd
Jul. 2017

23rd
Jan. 201824th
Jul. 2018

25th
Jan. 201926th
Jul. 2019

Net impact on increase/decrease of tenant replacement(Monthly rent basis)(million yen)

+6.7%

12.0
+5.5%

+5.1%

+5.4%

+5.3%

+5.9%

(Residential)(Office)+17.7％

11.0
10.0
9.0

+5

8.0
7.0

+12.0％※ Average of
all contracts
with replacement

14.0

+9.0％

12.0

+9.5％

10.0
8.0

5.0

21st
Jan. 2017

22nd
Jul. 2017

23rd
Jan. 201824th
Jul. 2018

4.0

Old tenant

3.0

New tenant

6.0
4.0
2.0

2.0

0
25th
Jan. 201926th
Jul. 2019

18.0
16.0

6.0

※ Average of all contracts subject to revision

20.0

0.0
25th
Jan. 201926th
Jul. 201925th
Jan. 201926th
Jul. 201926

2-23 Internal growth
Comparison with office market rent (pass-through type)
Rent gap (Total monthly rent)

Rent gap by revision (Total monthly rent)(million yen)(million yen)

400

120

120

Above market rent
(over +5%)

100

88

Above market rent

300

(under +5%)

80

63
200

60

48

Below market rent

40

100

21

20

0

0
25th
Jan. 201926th
Jul. 201927th
Jan. 2020

28th
Jul. 2020

29th
Jan. 2021

17

30thJul. 2021

31stJan. 2022

32nd
Jul. 2022
or afterRate of rent gap

△4.0%

△6.5%

This indicates that contracts have
not reached market rent levels andhave room for upside

Occupancy rate remained at high level due to vigorous
office demand
Rents have increased steadily in the area where MHR’s
properties are located and rent revisions have progressively
increased(Note 1) Market rent is based on the report by CBRE K.K.
(Note 2) Rent gap = Total tenants’ rent ÷ “Total market rent” – 1(Note 3) Figures reflect move outs of end tenants confirmed as of July 31, 2019.

Rent gap of MHR’s properties are expanding period-overperiod and MHR continues to promote internal growth27

2-24 Internal growth
Overview of fixed rent master lease
Ratio of fixed rent master lease

Concept of contract expiration

Fixedrent
64.8%

Realize accumulated
rent upside bytransition to passthrough type

Steadyoutlook onrental market
conditions

End tenant’s
rent is highUncertain
outlook onrental market
conditions

End tenant’s
rent is highContinue fixed typeML with rent increase(B)

End tenant’s
rent is samelevel

Continue fixed type
ML at same rent

(C)

Contract expiration
is high in 1Q of 2021

React to any future
economic trend

(A)

(A)
(B)

Economic trend

(C)

2019

2013

2021

Monthly rent by contract expiration
Property nameRoppongi Hills Mori Tower(10 floors)

ARK Mori Building(8 floors + DHC)

Atago Green Hills(approx. 32.9％ of entire
property)
Toranomon Hills Mori Tower(approx. 6.9％ of entire
property)
Total

Total monthly% of portfolio
rent
total rent
(mn yen)

490.5

225.2

31.4%

14.4%

Breakdownof property

Leased floor
area
(㎡)

Payer ofmanagement
associated fee

Monthly rent by contract expiration (mn yen)
2020

2021

2022

2023 or after

Expiration of
the leaseagreement

23rd & 24th

8,993.45

－

114.6

－

－

Jul. 2021

19th & 22nd

8,609.47

－

－

－

95.0

Sep. 2023

20th

3,879.19

－

－

－

42.8

Jul. 2024

28th

4,460.13

25th

MHR

49.2

－

－

－

Sep. 2020

4,156.66

－

45.8

－

－

Jan. 2021

26th, 27th & 29th

12,942.64

－

142.9

－

－

Mar. 2021

13th/12th & 22nd

7,952.55

－

77.9

－

－

Jan. 2021

23rd & 25th

5,742.95

－

55.5

－

－

Jan. 2021

4th, 15th & 24th

7,680.52

－

73.8

－

－

Jan. 2021

DHC

3,212.41

Master lessee

－

－

－

17.9

Mar. 2023

MHR

168.7

10.8%

Office, residential& retail

29,667.58

Master lessee

－

－

168.7

－

Apr. 2022

129.2

8.3%

Part of 28th to
35th floors

12,209.08

MHR

－

－

129.2

－

Jul. 2022

1,013.8

64.9%

49.2

510.7

297.9

155.8

(4.9%)(50.4%)(29.4%)(15.4%)

28

2-25 Financial management
Business environment
recognition

Interest rates are expected to remain low considering monetary
policies and assuming rise over the medium to long term

Financial management
policyMove to lower interest rates targeting mid 40% range LTV (book value
basis) and 4 years or longer average remaining duration of debt

Reduction in LTV(Note) Please refer to “Section 4. Businessenvironment recognition and MHR's
policy/strategy” for details.

Overview of debt financing

(%)

60.0

57.4%

End of 25th
periodLTV (appraisal value basis)

LTV (book value basis)

53.7%

55.0

Debt Balance

50.0
49.3%

48.8%

44.5%

44.7%

43.2%

42.4%

44.1%

45.0

43.8%
40.0

46.2% 45.7%

45.4%(Note 2)

LTV (appraisal value basis)
Avg. remaining duration

42.3%
40.4%

39.4%

35.0
9th
10th 11th
period period period
Jan.
2011

Jul.
2011

Jan.
2012

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

Jul.
2015

Jan.
2016

Jul.
2016

Jan.
2017

Jul.
2017

Jan.
2018

Jul.
2018

Jan.
2019

(including borrowing expenses)

179,222 mn yen

46.2%

45.7%

40.4%

39.4%

4.3 years

4.4 years(Note 1) LTV (book value basis) is calculated as [Interest bearing debt
/Total assets].
(Note 2) LTV (appraisal value basis) is calculated as [Interest-bearing
debt/Appraisal value based total assets (Total assets + Total
appraisal value - Total book value)].

Jul.
2019

＜Long-term debt ratio＞

2.1%

2.0%

182,222 mn yen

Long-term debt ratio/
Fixed rate ratio

Reduction in average interest rate
(%)
2.25

26th

・・・ period period period period period period period period period period
Jan.
2015

(Note 1)

LTV (book value basis)

Jan. 31, 2019

End of 26th
periodJul. 31, 2019

＜Fixed rate ratio＞

2.00
1.75
1.50

Long-term

1.2%

1.25

100%

0.9%

1.00

0.76%

0.74%

Fixed
90.0%

0.69% 0.69%

0.75
0.50
0.25
Jan.
2011

Jul.
2011

Jan.
2012

・・・

9th 10th 11th
period period period

17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th
period period period period period period period period period period
Jan.
2015

Jul.
2015

Jan.
2016

Jul.
2016

Jan.
2017

Jul.
2017

Jan.
2018

Jul.
2018

Jan.
2019

Jul.
2019

(Note) Total interest-bearing debt cost is calculated as [(interest expenses +interest expenses on investment corporation bonds + borrowing expenses+ amortization of investment corporation bond issuance costs) ×365
÷operating days during each period ÷average interest-bearing debt
balance during each period].

29

2-26 Financial management
Extension in remaining duration of debt

Rating(years)

5.0
4.4

4.5

4.5
4.2
3.8

3.7

4.0

4.0

4.3

4.4

Japan Credit Rating (JCR)

3.7

Long-term issuer rating:

3.2

3.5

AA (Stable)

3.0
2.5
2.0
1.5

1.5
1.2

1.4

・・・

1.0
9th
10th 11th
period period period
Jan.
2011

Jul.
2011

Jan.
2012

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

Jan.
2015

Jul.
2015

Jan.
2016

Jul.
2016

Jan.
2017

Jul.
2017

Jan.
2018

Jul.
2018

Jan.
2019

Jul.
2019

・・・ period period period period period period period period period period

Overview of maturity (as of July 31, 2019)(billion yen)

20
Long-term loans

Investment corporation bonds

15

10
15.9

7
6
6.5

5
5

3.5

0

12.5

9.5

9.2

11.2

7.2

8.3
6.1

7.6

6.0
2

2

2

9.1

3.6
3.8
4

1.5

7.7

7

5.2

2

3.5

1.4

2.7

27th 28th 29th 30th 31st 32nd 33rd 34th 35th 36th 37th 38th 39th 40th 41st 42nd 43rd 44th 45th 46th 47th 48th
period period period period period period period period period period period period period period period period period period period period period period
Jan.
2020

Jul.
2020

Averageinterest 0.7% 0.7%
rate

Jan.
2021

Jul.
2021

Jan.
2022

Jul.
2022

Jan.
2023

Jul.
2023

Jan.
2024

Jul.
2024

Jan.
2025

Jul.
2025

Jan.
2026

Jul.
2026

Jan.
2027

Jul.
2027

Jan.
2028

Jul.
2028

Jan.
2029

Jul.
2029

Jan.
2030

Jul.
2030

0.7% 0.8% 0.9% 0.7%30

2-27 MHR’s representative property (1) Roppongi Hills

Roppongi Hills Mori Tower
Since its opening in 2003 as Japan’s largest ever urban

Roppongi
Hills

redevelopment at about 11.6 hectares, more than 40 million people
have visited Roppongi Hills each year from all over the world. As
this community has matured, Roppongi Hills has only multiplied its
global magnetic attraction. Japan real estate development had been
limited by an economic perspective until Mori Building
revolutionized the concept by creating a community where
humanity, culture, interaction and vision toward the next era isborn.

OfficeRoppongi Hills Mori Tower

Roppongi Hills Mori Tower is the main tower of Roppongi Hills and is 54 floors above
ground and 238 meters high and has established itself as a landmark of Tokyo. Offices
located from the 8th floor to the 48th floor boast floor plates of about 1,360 tsubo(about 4,500m²), among the largest floor areas of skyscrapers in Japan. It is a state-ofthe-art office building with an ultra high-speed network, outstanding earthquake
resistance performance and thorough security.

31

Residence

Roppongi Hills Residence

In Roppongi Hills where international cultural is fosteredand people come to interact, Mori Building designed
these residences with the comfort of the people as a toppriority, to provide the template for a “new life
overflowing with affluence and warmth”.

RetailShops and Restaurants

Retail facilities are comprised of more than 200 “onlyone” shops and restaurants divided into four areas withdifferent concepts. There are many shops on the lower
floors of the buildings and on the street so visitors canenjoy shopping, eating and drinking while walking
around the open spaces that are full of greenery.

Hotel

Grand Hyatt Tokyo

Grand Hyatt Tokyo offers a dynamic city space featuring
10 highly distinctive restaurants and bars, 387
guestrooms designed for the highest level of relaxation,
13 banquet facilities and much more. The wide range ofCinemaTOHO Cinemas Roppongi Hills

One of the top cinema complexes in Japan, TOHO offers ninemovie screens, a variety of daily show times and facilities

facilities inside the hotel and in Roppongi Hills enable
guests to enjoy leisurely time at the hotel to the fullest
extent.

with unprecedented comfort and functions. These theaters
ushered in a whole new culture of movie going in Roppongi.

Stable Supply of Power from the Independent Power Station
Roppongi Hills uses its own energy plant (a specially designated power

MuseumMori Art Museum“The world’s nearest art museum to the sky”, the museum
collaborates with a network of highly respected internationalart museums to create a space to appreciate the world’s top
modern art. It is open until 10 pm during exhibitions towelcome visitors after work or dinner.

supply business facility) to supply electrical power to the area. Because thisplant uses city gas (medium pressure gas) as the fuel, it is not affected bypower restrictions on the use of electricity and is able to provide an extremely
stable supply of electricity. The use of a power supply with triple redundantsafety allows the building to construct a power supply system with highreliability.

32

2-28 MHR’s representative property (2) Toranomon Hills

Toranomon Hills Mori Tower
Toranomon
Hills

Toranomon Hills is located in the “Special Zone for Asian
Headquarters” where Tokyo Metropolitan Government seeks toattract foreign companies. This building is Tokyo’s new landmark
and consists of Japan’s first Andaz hotel “Andaz Tokyo”, highspecification offices, a high class residential area with outstanding
views where hotel services are available, international-standard
conference facilities and commercial facilities to supports various
urban functions, along with an open space of about 6,000m².

OfficeToranomon Hills Mori Tower

Offices occupy the 6th to the 35th floors of “Toranomon Hills Mori Tower”, a super highrise tower with 52 floors rising 247 meters above ground with a gross floor area of
30,000 tsubo. Standard rent floors’ average size are about 1,000 tsubo (about 3,300m²)
with a ceiling height of 2.8 meters and they provide flexible and comfortable workspaces
without pillars. Six transit stations and 11 lines are nearby and provide access to Haneda
Airport which makes this building an optimal global business base.

33

Residence

Toranomon Hills Residence

Pleasing views of central Tokyo such as Tokyo Tower,
Rainbow Bridge, Tokyo Sky Tree and the open green
space of the Imperial Palace can be viewed fromresidences located on the 37th to 46th floors. Hotelservices in cooperation with Andaz Tokyo are available.

RetailShops and Restaurants

With the concept of "Communication Hub", restaurants
are designed to provide international cuisine that satisfy
customers from Japan and overseas. Various people suchas office workers, conference attendees and hotel guests
gather in this space uniquely designed to facilitatecommunication.

Hotel

Andaz Tokyo

Hyatt’s boutique lifestyle hotel "Andaz Tokyo" isJapan's first Andaz. Andaz means "personal style" in
Hindi. The hotel values the individuality of the area andincorporates the charm of the land into design and its’service.

Evolving as an International Urban Center and a Global
Business Hub
Upon completion of Toranomon Hills Business Tower, Toranomon Hills
Residential Tower (Tentative name) and the currently planned Toranomon Hills
Station Tower (Tentative name), the total area of the Toranomon Hills
complex including Toranomon Hills Mori Tower will reach about 7.5 hectares
and about 800,000m2 of the total floor space. The area will evolve into a true
"international unban center and a global business hub" with integratedfunctions such as international standard offices, residences, hotels, retailfacilities and transportation infrastructure.

34

3. Operation highlights

35Factors that led to changes in dividends per unit
3-1 from the previous fiscal period(yen/unit)

26th period (Jul. 2019)

25th period

27th period (Jan. 2020) forecast

2,900
Dividends per unit

2,860

yen/unit＋2

2,850

yen/unit

＋2

2,850

(forecast)

＋3
＋5

＋3

2,822

＋26

yen/unit
△3

2,800

NOI
change ofexisting
properties

Properties
acquiredin 25thFinancingcosts
decrease

OthersNOIchange inexisting
properties

OthersMajor factors behind change in NOI from existing properties：

Major factors behind change in NOI from existing properties:＋ Decrease in depreciation＋ Rent revenue of office (Pass-through)－ Increase in maintenance and repairs－ Increase in property taxes for existing properties－ Property taxes for properties acquired in 24th period recorded as expense(equivalent to 3 months)

Financingcosts
decrease

+19
+17
△30
△9
△4

＋ Rent revision of land (Laforet Harajuku)＋ Decrease in depreciation＋ Rent revenue of office (Pass-through)＋ Decrease in maintenance and repairs－ Property taxes for properties acquired in 24th and 25th period recorded
as expense (equivalent to 3 months)－ Increase in property management fee－ Increase in property taxes for existing properties(Note) Factors that led to change are arrived at by dividing the change from the previous fiscal period by 1,874,960 units and indicated as an approximate figure in yen.

+14
+11
+9
+7
△18
△11
△8

36

3-2 Change in assets under management(billion yen)

400

390

390

billion yen

25thperiod
Jan.
2019

26th
periodJul.
2019

Existing properties

352
350

339

360

338

293

300

281
252
250

201
200

159
150

142

・・・・

100

50

0
1st
period
Jan.
2007

2nd
period
Jul.
2007

3rd
period
Jan.
2008

4th
period
Jul.
2008

5th
period
Jan.
2009

・・・・

15th
period
Jan.
2014

16th
period
Jul.
2014

17th
period
Jan.
2015

18th
period
Jul.
2015

19th
period
Jan.
2016

20th
period
Jul.
2016

21st
period
Jan.
2017

22nd
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

37

3-3 Change in unrealized capital gain/loss(billion yen)

(%)

70

70
Unrealized capital gain/loss

62
bn yenUnrealized capital gain/loss ratio

60

60

56

50

50

40

40

28

30

30

20.2%
20

14.9%

16.5%

20

11
8.2%
10

10

0

0

△10

△10
△14.9%

△20
△30
△40

△20

△31
1st
period
Jan.
2007

2nd
period
Jul.
2007

3rd
period
Jan.
2008

4th
period
Jul.
2008

5th
period
Jan.
2009

6th
period
Jul.
2009

7th
period
Jan.
2010

8th
period
Jul.
2010

9th
periodJan.
2011

Unrealized capital gain/loss = Period end appraisal value – Period end book value
Unrealized capital gain/loss ratio = Unrealized capital gain/loss / Period end book value
10th
period
Jul.
2011

・・・

17th
period
Jan.
2015

18th
period
Jul.
2015

19th
period
Jan.
2016

20th
period
Jul.
2016

21st
period
Jan.
2017

22nd
period
Jul.
2017

23rd
period
Jan.
2018

24th
period
Jul.
2018

25th
period
Jan.
2019

26th
period
Jul.
2019

△30
△40

38

3-4 Appraisal value（million yen）
As of end of 25th period
Jan. 31, 2019
Principal
use

Property
name

PropertyNo.

Acquisition
price

Book
value

(A)
Appraisal
value(Note 1)

OfficeAs of end of 26th period
July. 31, 2019

Yield (Direct
capitalization
method)(B)
Appraisal
value(Note 1)

Yield (Direct
capitalization
method)Discount
rate
(DCF)

Terminal
yield
(DCF)

Difference（B)－(A）

Difference（B)/(A)－1

Unrealized
capital gain（B)-book
value

Roppongi Hills
Mori Tower

O-0

115,380

112,049

142,800

3.1%

143,300

3.0%

2.7%

3.2%

500

0.4%

31,250ARK Mori Building

O-1

62,48061,548

61,1003.4%

61,800

3.3%

3.0%

3.5%

700

1.1%

251

Koraku Mori Building

O-4

27,20024,791

24,6003.6%

25,400

3.5%

3.1%

3.8%

800

3.3%

608

Akasaka Tameike Tower

O-6

43,93041,74732,0003.4%

32,800

3.3%

3.0%

3.5%

800

2.5%

Atago Green Hills

O-7

42,09040,40844,9003.6%

45,700

3.5%

3.0%

3.7%

800

1.8%

△ 8,947

ARK Hills South Tower

O-8

19,15018,78924,5003.2%

24,700

3.1%

2.9%

3.3%

200

0.8%

5,910

Toranomon Hills
Mori Tower

O-9

36,21036,07442,8502.8%

43,200

2.7%

2.4%

2.9%

350

0.8%

7,125

Holland Hills Mori Tower

O-10

16,33016,30320,0003.4%

20,700

3.3%

2.9%

3.5%

700

3.5%

4,396

362,770

351,713392,750－

397,600

－

－

－

4,850

1.2%

45,886

Sub total

5,291

Roppongi First Plaza

R-3

2,100

2,240

2,340

4.1%

2,440

4.0%

3.8%

4.2%

100

4.3%

199

ResidenRoppongi View Tower
tial

R-4

4,000

4,082

2,940

4.2%

3,010

4.1%

3.9%

4.3%

70

2.4%

6,100

6,322

5,280

－

5,450

－

－

－

170

3.2%

△ 1,072

21,82022,074

39,2003.9%

39,900

－

3.9%

－

700

1.8%

17,825

21,82022,074

39,200－39,900

－

－

－

700

6.1%

17,825

390,690

380,110437,230－

442,950

－

－

－

5,720

1.3%

62,839Sub total
Laforet Harajuku (Land)
Retail (Note 2)andothers
Sub total
Total

S-1

△ 872

(Note 1) “Appraisal values” at the end of each fiscal period are based on the Ordinance Concerning Calculation of Investment Corporations, asset valuation methods and standards defined in the
Articles of Incorporation of the Company and rules defined by the Investment Trust Association. Figures in the property appraisal reports created by Japan Real Estate Institute areindicated for properties other than ARK Hills South Tower and figures in the property appraisal report created by Daiwa Real Estate Appraisal Co., Ltd. are indicated for ARK Hills South
Tower, respectively.
(Note 2) For Laforet Harajuku (Land), value in the “Yield (Direct capitalization method)” column for the 25th period shows the discount rate used in the DCF analysis.

393-5 Changes in the rent and occupancy rates(yen/tsubo)(%)

40,000100

35,00095

30,00090

25,00085

20,00080

15,00075

10,000

70

5,000

65

0

19th period
Jan. 2016(actual)20th period
Jul. 2016(actual)21st period
Jan. 2017(actual)22nd period
Jul. 2017(actual)23rd period
Jan. 2018(actual)24th period
Jul. 2018(actual)25th period
Jan. 2019(actual)26th period
Jul. 2019(actual)27th period
Jan. 2020(forecast)

28th period
Jul. 2020(forecast)

Office rent (yen/tsubo)

29,25330,306

31,281

31,06930,642

30,62930,84230,92431,016

31,123

Residential rent (yen/tsubo)

13,894

14,75015,272

15,27814,85815,09515,302

15,49815,612

15,513

Office occupancy (%)

98.4％

98.8％

98.2％

95.7％

98.4％

99.5％

99.7％

99.9％

100.0％

99.4％

Residential occupancy (%)

99.3％

97.4％

97.3％

96.7％

96.3％

97.9％

97.7％

96.8％

95.4％

95.7％

Retail occupancy (%)

100％

100％

99.2％

99.7％

100％

100％

100.0％

99.2％

98.8％

98.5％

60

(Note) The above rents and occupancy rates indicate the average rent and the average occupancy rate during relevant fiscal periods.

40

3-6 Tenant status by month and major tenants
Office: Rent and occupancy rate

Residential: Rent and occupancy rate(yen/tsubo)
40,000(%)
100(yen/tsubo)

(%)
100

25,00035,00020,00030,00090

25,00090

15,00020,00015,00080

10,000

70

Feb.
2019

Mar.

Rent (yen/tsubo)

30,897

Occupancy rate

99.9%

Apr.

May

Jun.

30,90030,93430,93130,93830,94399.9%

100.0%

99.9%

99.9%

100.0%

End tenants

Property nameLeased space

0

70

Feb.
2019

Mar.

Apr.

May

Jun.

Jul.

Rent (yen/tsubo)

15,40715,45815,457

15,551

15,556

15,559

Occupancy rate

97.5%

97.2%

96.7%

96.3%

96.6%

96.6%

Jul.

Top 5 tenants

Tenant Contribution by Industry
Type-Office（N ote 1 ）Ratio

109,845.73 ㎡

63.3%

Mori Building Co., Ltd.

Roppongi Hills Mori Tower
ARK Mori Building
Koraku Mori Building
Atago Green Hills
ARK Hills South Tower
Toranomon Hills Mori Tow er

Mylan Seiyaku Ltd.

Holland Hills Mori Tower

3,458.53 ㎡

2.0%

Mitsubishi UFJ Research andConsulting Co.,Ltd.

Holland Hills Mori Tower

3,195.61 ㎡

1.8%

Showa Leasing Co., Ltd.

Koraku Mori Building

2,683.90 ㎡

1.5%Mori Building Ryutsu
System Co., Ltd.

Laforet Harajuku (Land)2,565.06 ㎡

1.5%

121,748.83 ㎡

70.1%

Total of top 5 tenants

80

5,000

5,000
0

10,000(Note 1) Leased space is the lease area stated in the lease contract with the end tenant.
It is multiplied by the relevant percentage of ownership for each properties.
(Note 2) This indicates the figures as of July 31, 2019.

Others24.3%

Information
andcommunication
34.5%

Law firms,
etc.
11.7%
Financial
institution / Manufacturing
16.0%
insurance
13.5%(Note 1) As for fixed rent master lease, ratios are based on monthly rents of tenants who are
actually using the floor areas as of July 31, 2019.
It is multiplied by the relevant percentage of ownership for each property.
(Note 2) Business types are classified by the Asset Manager.

41

3-7 Financial overview (As of July 31, 2019)
Long-term debt ratio/Fixed rate ratio＜Long-term debt ratio＞＜Fixed rate ratio＞

Long-term
Fixed
90.0%

100%

Major financial indicator
End of 21st period
Jan. 31, 2017
Debt balance

End of 25th period
Jan. 31, 2019

End of 26th period
Jul. 31, 2019

182,222 mn yen

179,222 mn yen

Long-term loan

157,222 mn yen

157,222 mn yen

Investment corporation bonds

25,000 mn yen

22,000 mn yen

46.2%

45.7%

40.4%

39.4%

15.6x

15.4x

4.3 years

4.4 years

0.50%

0.50%

LTV (Book value basis) (Note 1)
LTV (Appraisal value basis)(Note 2)DSCR (Note 3)
Avg. remaining duration
Weighted avg. interest rate

Outstanding balances
Lenders

BalanceRatio

MUFG Bank, Ltd.

42,296 mn yen

26.9%

Mizuho Bank, Ltd.

27,498 mn yen

17.5%

Sumitomo Mitsui Banking Corporation

23,025 mn yen

14.6%

Sumitomo Mitsui Trust Bank, Limited

20,923 mn yen

13.3%

The Bank of Fukuoka

7,300 mn yen

4.6%

The Norinchukin Bank

7,000 mn yen

4.5%

Resona Bank, Limited.

6,430 mn yen

4.1%

Development Bank of Japan Inc.

5,950 mn yen

3.8%

Shinsei Bank, Limited

4,700 mn yen

3.0%

Mizuho Trust & Banking Co., Ltd.

3,800 mn yen

2.4%

Aozora Bank, Ltd.

3,000 mn yen

1.9%

The Nishi-Nippon City Bank, Ltd.

2,300 mn yen

1.5%

The Hiroshima Bank, Ltd.

1,000 mn yen

0.6%

Oita Bank Co. Ltd.

1,000 mn yen

0.6%

Shinkin Central Bank

1,000 mn yen

0.6%

Total borrowings

157,222 mn yen

100%

Investment corporation bonds

22,000 mn yen

Total interest-bearing debt

179,222 mn yen(Note 1) LTV (Book value basis) is calculated as [Interest bearing debt/Total assets].
(Note 2) LTV (Appraisal value basis) is calculated as [Interest-bearing debt/Appraisal value
based total assets (Total assets ＋Total appraisal value－Total book value)].
(Note 3) DSCR is calculated as [Net income before interest expenses +Depreciation/
Interest expenses].

42

3-8 Debt status (As of July 31, 2019)
Debt
LenderSumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
The Bank of Fukuoka, The Norinc hukin Bank,
Development Bank of Japan Inc ., Shinsei Bank, Limited
Mizuho Bank, Ltd., MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd., MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank,Limited
Resona Bank, Limited.
Aozora Bank, Ltd.
Resona Bank, Limited.
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Development Bank of Japan Inc .
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd., MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
MUFG Bank, Ltd., Mizuho Bank, Ltd.,
Sumitomo Mitsui Trust Bank, Limited
Shinsei Bank, Limited
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
The Norinc hukin Bank, Resona Bank, Limited.
Shinsei Bank, Limited, Mizuho Trust & Banking Co., Ltd.
The Hiroshima Bank, Ltd.
Sumitomo Mitsui Banking Corporation, MUFG Bank, Ltd.
Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited
The Bank of Fukuoka, Development Bank of Japan, Inc .
Aozora Bank, Ltd.
MUFG Bank, Ltd., Mizuho Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Shinkin Central Bank
The Norinc hukin Bank
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
The Bank of Fukuoka
Resona Bank, Limited.
Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
Mizuho Trust & Banking Co., Ltd.
Oita Bank Co. Ltd.
The Norinc hukin Bank

Balance(mn yen)Rate ofinterest

Borrowingdate

Maturity
date

11,4000.44%

2013/11/29

2019/11/30

2,022

0.40%

2014/5/30

2020/5/31

5,000

0.38%

2014/8/1

2020/5/31

2,000
2,500

0.32%
0.32%

2014/8/29
2014/8/29

2019/8/31
2019/8/31

6,000

0.62%

2014/11/28

2020/11/30

6,500

0.75%

2014/11/28

2021/11/30

1,700

0.80%

2015/3/27

2023/3/27

6,500

0.57%

2015/5/29

2021/5/31

6,500

0.70%

2015/5/29

2022/5/31

6,000

0.49%

2015/8/31

2021/8/31

2,500

0.65%

2015/9/16

2023/8/31

3,200

0.50%

2015/11/30

2022/11/30

6,300

0.62%

2015/11/30

2023/11/30

7,500

0.33%

2016/3/31

2023/3/31

7,100

0.41%

2016/3/31

2024/3/31

7,200

0.50%

2016/3/31

2025/3/31

1,000
500
1,100
1,000
500
500
2,000
1,100
500
1,000
600

0.18%
0.37%
0.47%
0.52%
0.52%
0.61%
0.48%
0.58%
0.58%
0.23%
0.49%

2016/3/31
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/8/1
2017/11/30
2017/11/30

2022/9/30
2024/7/31
2025/7/31
2026/7/31
2026/7/31
2027/7/31
2028/7/31
2029/7/31
2029/7/31
2022/11/30
2024/11/30

Lender
The Nishi-Nippon City Bank, Ltd.
The Bank of Fukuoka
Resona Bank, Limited.
Mizuho Trust & Banking Co., Ltd.
Shinsei Bank, Limited
The Nishi-Nippon City Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Development Bank of Japan Inc .
MUFG Bank, Ltd.
Mizuho Bank, Ltd.
Mizuho Bank, Ltd.
The Nishi-Nippon City Bank, Ltd.
Sumitomo Mitsui Trust Bank, Limited
Mizuho Bank, Ltd.
The Bank of Fukuoka
The Norinc hukin Bank
Shinsei Bank, Limited
Mizuho Trust & Banking Co., Ltd.
Sumitomo Mitsui Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Development Bank of Japan Inc .
MUFG Bank, Ltd.
Resona Bank, Limited.
Mizuho Bank, Ltd.
The Bank of Fukuoka
The Norinc hukin Bank
Sumitomo Mitsui Banking Corporation
MUFG Bank, Ltd.
Mizuho Bank, Ltd.
Total

Balance
Rate of(mn yen) interest
1,000 0.49%
500 0.47%
500 0.47%
1,500 0.47%
500 0.54%
500 0.54%
2,650 0.55%
2,600 0.58%
750 0.64%
4,700 0.41%
2,700 0.60%
3,000 0.19%
800 0.26%
2,400 0.33%
3,000 0.43%
1,300 0.38%
1,300 0.43%
1,300 0.52%
1,300 0.47%
3,600 0.56%
1,400 0.67%
500 0.67%
5,000 0.43%
1,300 0.48%
1,400 0.42%
2,000 0.22%
3,000 0.32%
1,144 0.41%
3,904 0.29%
1,952 0.42%

Borrowingdate
2017/11/30
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/2/28
2018/5/23
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2018/8/31
2019/5/31
2019/5/31
2019/5/31
2019/5/31
2019/5/31

Maturitydate
2024/11/30
2025/8/31
2025/8/31
2025/8/31
2025/8/31
2025/8/31
2026/2/28
2027/2/28
2027/2/28
2027/8/31
2030/2/28
2022/5/23
2022/8/31
2023/8/31
2024/8/31
2024/8/31
2024/8/31
2025/8/31
2025/8/31
2026/8/31
2027/8/31
2027/8/31
2028/2/29
2028/8/31
2029/8/31
2026/5/31
2026/5/31
2027/11/30
2028/11/30
2029/5/31

157,222(Note) The interest rates above are the interest rates actually fixed following the conclusion of aninterest swap agreement.

Investment corporation bonds
Bond
9th Series Unsecured Corporation Bond (7 years)
11th Series Unsecured Corporation Bond (7 years)
12th Series Unsecured Corporation Bond (10 years)
13th Series Unsecured Corporation Bond (5 years)
14th Series Unsecured Corporation Bond (10 years)
15th Series Unsecured Corporation Bond (5 years)
16th Series Unsecured Corporation Bond (10 years)
17th Series Unsecured Corporation Bond (10 years)
18th Series Unsecured Corporation Bond (10 years)
19th Series Unsecured Corporation Bond (10 years)

Total

AmountRate of(mn yen) Interest
2,000 1.26%
2,000 0.69%
2,000 0.87%
3,000 0.32%
2,000 0.82%
3,500 0.38%
1,500 0.89%
2,000 0.34%
2,000 0.49%
2,000 0.50%

Payment
date
2013/5/24
2014/2/24
2014/11/27
2015/5/26
2015/5/26
2015/11/26
2015/11/26
2016/8/30
2017/1/31
2017/6/30

Maturity
date
2020/5/22
2021/2/24
2024/11/27
2020/5/26
2025/5/26
2020/11/26
2025/11/26
2026/8/28
2027/1/29
2027/6/30

22,00043

3-9 Unitholders breakdown (As of July 31, 2019)
Unitholders breakdown

End of 26th period＜Number of unitholders＞
Other domestic
Financialcorporations
institutions
1.5%
Foreign(Incl. securities
corporations
companies)
and individuals
1.4%
1.9%

＜Number of investment units＞

Foreigncorporations
and individuals
17.8%

Individuals
6.3%

Other
domestic
corporations
17.1%

Individuals
95.2%

End of 25th period

Top 10 unitholders

Other domestic
Financialcorporations
institutions
1.6%
Foreign(Incl. securities
corporations
companies)
and individuals
1.4%
1.7%

Financial
institutions(Incl. securities
companies)
58.8%

Foreigncorporations
and individuals
18.9%(Investment
trust 34.7%)

Individuals
6.4%

Other
domestic
corporations
17.1%

Individuals
95.3%

Financial
institutions(Incl. securities
companies)
57.6%

Name

Rank

Number of units
held

Ratio

1

Japan Trustee Services Bank, Ltd.
(Trust account)

434,41823.2％

2

Mori Building Co., Ltd.

281,272

15.0％

3

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

224,900

12.0％

4

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

73,300

3.9％

5

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

49,2502.6％

6

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.

24,741

1.3％

7

STATE STREET BANK WEST CLIENT - TREATY
505234

20,835

1.1％

8

Trust & Custody Services Bank, Ltd.
(Money trust taxable account)

18,054

1.0％

9JAPAN SECURITIES FINANCE CO., LTD.

16,632

0.9％

10

Shikoku Railway Company

16,6200.9％

1,160,022

61.9％

Total of top 10 unitholders(Investment
trust 33.5%)44

4. Business environment recognition & MHR’s policy/strategy

454-1 Business environment recognition
Real estate market / Lending attitude

Interest rate trends / Macro environment

Low vacancy rates and gradual increase of rents of officeLong-term interest rates remain low due to the monetarybuildings in central Tokyo is ongoing.

easing policy and the core CPI rate of increase is at a low level.

(Forecast of Office Market Trends Research Committee for Tokyo’s five10-year bond rates: △0.28% (August 30, 2019)

central wards)

Core CPI: +0.6% (July 2019)

Vacancy rate (forecast): 2.1% in 2019 → 3.0% in 2020
Rent index (forecast): 125 in 2019 → 127 in 2020

In the June 2019 preliminary business conditions composite
index, the leading index was at 93.3 (1.6 PT decrease from previous

Although cap rates remain at historically low levels,

month) and the coincident index was at 100.4 (3.0 PT decrease fromthe rate of decrease seems more moderate.

previous month). Trends is starting to weaken, especially the(Japan Real Estate Institute’s “The Japanese Real Estate Investor Survey”)

leading indicators become deteriorated.

Class A buildings in Marunouchi
Cap rate: 3.0% in Oct. 2018 → 3.0% in Apr. 2019
Lending attitude toward the real estate industry continues tobe highly positive.

The growth of money stock is limited.
The issue of wage increases can be seen from the consumer
confidence survey and the monthly labor survey. Future trends
will be scrutinized.

Rents of office buildings in central Tokyo are expected to

Global business sentiment is partly showing signs ofcontinue moderate rise for the time being, but the rate of

decline, attention should be paid to future trends.

increase may gradually become moderate depending on

Given the Bank of Japan's monetary policy, the interest

business sentiment.

rate level is expected to remain low for a while, but it is

Cap rates remain at low levels and sufficient attention isnecessary to assume an interest rate rise in the medium

required for acquisition pricing.

to long term.

Continues to “MHR’s policy/strategy” on the next page46

4-2 MHR’s policy/strategy
External growthpolicyTarget premium properties in Central Tokyo and aim for annual external growth of 30 billion to 50 billion yen
by best utilizing sponsors’ pipeline. (Set target yield at the upper 3% range for NOI-based yield and 3.0% or higher
for after-depreciation-based yield.)

Focus on portfolio size expansion in order to further enhance stability and liquidity as an investment
corporation while also considering disposition depending on conditions.

Internal growthpolicySteadily achieve the revision of pass-through type properties with rent increases while maintaining the ratioof the fixed rent master leases at current level.
Properly implement office property repairs as necessary and conduct value-enhancement renovation forresidential properties if such is judged to be cost-effective (there are no office properties that require large-scale
renewal in terms of building age or competitiveness).

Financialmanagement
policyTarget LTV (book value basis) in the mid 40% range (though it may temporarily exceed the target level asnecessary) in order to secure property acquisition capacity while maintaining a durable position for times of
economic slowdown.
Target average remaining duration of debt of 4 years or longer, and gradually increase the fixed rate ratio at
the appropriate timing.
Seek to raise ROA by utilizing free cash for property acquisition rather than reserving it more than necessary.

Policy regarding the entire investment corporation
Promote portfolio size expansion while maintaining an asset quality level that is one of thebest in the industry and aim for continuous improvement of dividends and NAV per unit47

4-3 Market-related information (1)Change in rent and vacancy rate of office buildings (Tokyo’s five central wards)
200
8.1%

180

160

(%)
10.0

8.9% 9.0% 8.7%

9.0

⇒ Estimate

8.0

7.3%

7.0

6.1%
145

5.5%

149

4.2%

140

6.0
4.0%
3.6%

124

3.1%

4.7%

120
109

100

2.9%

114

2.6%

101

100
92

80

92

95

99

104

109

120

125

114
1.9%

5.0

127

125

3.0%

3.9% 3.6%
3.4% 3.1%

123

123

125

123

4.0
3.0

2.8%

2.1%

2.0
1.0
0.0

Rent index
Vacancy rate
(Source)
Prepared by the Asset Manager based on the“Spring 2019 Office Rent Forecast in Tokyo,
Osaka and Nagoya (2019-2025)” by the OfficeMarket Trends Research Committee(Japan Real Estate Institute and Miki Shoji Co.,
Ltd.).
(Note)The rent index targets large and medium
buildings (standard floor area of 100 tsubo ormore) in Tokyo’s five central wards. The rent
index is rebased to 100 as of 2010.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

New supply of office buildings (Tokyo’s five central wards)(thousand/tsubo)

700⇒ Estimate

600
500

530
478

473

460

400

361

343
294

300
221

265

245

220

254

260

250

239

200

(Source)
Prepared by the Asset Manager based on the“Spring 2019 Office Rent Forecast in Tokyo,
Osaka and Nagoya (2019-2025)” by
the Office Market Trends Research Committee(Japan Real Estate Institute and Miki Shoji
Co., Ltd.).

150

100
0
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

48

4-4 Market-related information (2)Change in rents and vacancy rates of luxury housing (Minato ward)(yen/tsubo)
24,000(%)
14.0

22,000

12.0

Minato ward’s averagevacancy rate over past
10 years: 8.2%

20,00010.0

18,0008.0
5.4％

16,0005.3％ 6.0

12,00010,000

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

19,335

4.0

19,05014,000

18

19
1H

2.0
0.0

Avg. rents of Minato ward
Avg. vacancy rates of Minato ward
(Source)
Prepared by the Asset Manager based on Ken Real
Estate Investment Advisors’ “Ken Residential
Market Report” included in real estate appraisal
reports by Japan Real Estate Institute regarding
properties held by MHR.
(Note)
Data is based on rental housing with monthly rentof 300,000 yen or more or exclusive floor area of
30 tsubo or more.
“Avg. rents of Minato ward” is the contracted rent
including the management fee.
In the case of years, “Avg. vacancy rates of
Minato ward” is the average of the relevant year’s
January to March, April to June, July to September
and October to December figures, and “Avg. rentsof Minato ward” is the annual average.

Change in number of foreign residents in Minato ward
(people)24,000No. of foreigners registered under the
Ministry of Justice

Method for foreigner
registration was revised in2012 impacting head count

22,000The population of the Basic Resident Register(Source)
Prepared by the Asset Manager based on “Numberof registered foreign residents” prepared by
Statistics Division Bureau of General Affairs of Tokyo.

20,000(Note 1)
“Number of foreign residents” was the number offoreigners registered under the Ministry of Justiceuntil 2012. However, as the foreigner registration
system was abolished based on revision of the law,
the figure is the population of the Basic Resident
Register. Therefore, the data may not be consistent.

18,00020,25816,00014,000
03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19
01

19
04

(Note 2)
Number of foreign residents as of January 1 of eachyear is used for the year-based figures.

19
07

49

4-5 Market-related information (3)Change in return on real estate investment

(%)
6.5

6.0

6.0%

6.0%

6.0%

5.7%

5.5

5.5%

5.0

5.1%
4.9%

4.5%
4.5

4.9%
4.5%

4.5%

4.2% 4.2%

4.2%

4.5%
4.0%

4.0%

4.5%

4.0%
4.2%

3.8%

4.0%

3.7%

3.8%

3.8%
3.5%

4.8%

4.6%

4.3%

4.0%

4.3%

3.5

Cap rate of class A officebuildings (Marunouchi andOtemachi)

5.8%

5.2%
5.0%

4.0

6.0%

3.5%

3.5%

3.0

3.4%

4.5%

3.6% 3.5% 3.5%

3.2%

3.0% 3.0%

2.5
Apr.
2005

Apr.
2006

Apr.
2007

Apr.
2008

Apr.
2009

Apr.
2010

Apr.
2011

Apr.
2012

Apr.
2013

Apr.
2014

Change in real estate transaction amount(billion yen)
6,000

Apr.
2015

Apr.
2016

Apr.
2017

Apr.
2018

Expected cap rate of class A
office buildings (Marunouchi andOtemachi)
Expected cap rate of high-end
multifamily residences (highrise)(Source)
Prepared by the Asset Manager based on“The Japanese Real Estate Investor Survey” by theJapan Real Estate Institute.

Apr.
2019

Lending attitude DI (real estate industry)
+ 25
+ 20
+ 15

5,000

+ 10
4,000

+5

3,000

△5

+0
△ 10
△ 15

2,000

△ 20
△ 25

1,000
0
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
FY
04 05 06 07 08 09 10 11 12 13 14 15 16 17 18(Source) Prepared by the Asset Manager based on the “Real Estate Transaction Survey”(Estimated amount of domestic real estate transactions publicized by listedcompanies) by the Urban Research Institute.

△ 30
△ 35

Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar.
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
(Source) Prepared by the Asset Manager based on “National Short-Term Economic
Survey on Enterprises in Japan” by the Bank of Japan. Difference between
the proportion of firms feeling the lending attitude to be accommodative
less firms feeling the lending attitude to be restrictive.

50

4-6 Market-related information (4)Change in 10-year bond interest rates
(%)

1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
△ 0.1
△ 0.2
△ 0.3
△ 0.4

Jan.
2013

(Source)
Prepared by the Asset Manager based on
Refinitiv.

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

Change in core CPI (year-on-year comparison)
(%)
+ 2.0

Based on figures excluding thedirect effects of the consumption
tax rate increase

+ 1.5

+ 1.0

(Source)
Prepared by the Asset Manager based on“Consumer Price Index” by Statistic Bureau,
Ministry of Internal Affairs andCommunications and “Economic Statistics
Monthly” by the Bank of Japan.

+ 0.5

+ 0.0

(Note)
Figures from April 2014 to April 2015 arederived on “the basis of excluding the direct
impact of the consumption tax rate increase”(Bank of Japan’s “Economic Statistics Monthly”).

△ 0.5
△ 1.0

Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

51

4-7 Market-related information (5)Business conditions composite index
110
108
106
104
102

Leading index

100
Coincident index

98(Source)
Prepared by the Asset Manager based on the“Business Conditions Composite Index” by
the Cabinet Office.

96
94
92

(Note)The index is rebased to 100 as of 2015.

90
Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul

Money stock (M3: year-on-year comparison)
(%)

+3.8
+3.6
+3.4
+3.2
+3.0
+2.8
+2.6
+2.4
+2.2
(Source)
Prepared by the Asset Manager based on “Money
Stock Statistics” by the Bank of Japan.

+2.0
+1.8
Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

52

4-8 Market-related information (6)Total cash earnings (year-on-year comparison)
(%)

+ 4.0
+ 3.0
+ 2.0
+ 1.0
+ 0.0
Nominal

△ 1.0

Real

△ 2.0

(Source)
Prepared by the Asset Manager based on “Monthly
Labour Survey (establishments with 5 or more
employees)” by the Ministry of Health, Labour andWelfare.

△ 3.0
△ 4.0
△ 5.0

Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul

Consumer confidence survey
54
52
50
48
46

Employment

44

Consumer confidence index

42

Income growth40(Source)
Prepared by the Asset Manager based on“Consumer Confidence Survey” by the Cabinet
Office.

38
36
Jan.
2013

Jul.

Jan.
2014

Jul.

Jan.
2015

Jul.

Jan.
2016

Jul.

Jan.
2017

Jul.

Jan.
2018

Jul.

Jan.
2019

Jul.

53

5. Appendix

54

5-1 Financial highlights
Indic es

25th period
Period ended Jan. 31, 2019

26th period
Period ended Jul. 31, 2019

Net income

5,292 mn yen

5,344 mn yen

Depreciation and amortization

1,075 mn yen

1,058 mn yen

CAPEX

237 mn yen

635 mn yen

Total assets

394,539 mn yen

392,256 mn yen

Total net assets

195,578 mn yen

195,336 mn yen

Calculation formula

Total net assets/unit (BPS)

104,310 yen

104,181 yen Total net assets/Total units outstanding

Unit price (as of end of each period)

144,500 yen

160,300 yen

1,874,960 units

1,874,960 units

5,291 mn yen

5,343 mn yen

Dividends/unit

2,822 yen

2,850 yen

Dividend yield

3.9%

Total units outstanding
Total dividends

FFO

6,367 mn yen

3.6% Dividends per unit (annualized)/Unit price as of end of period
6,402 mn yen Net income + Depreciation and amortization - Gain or loss on sales of real estate properties

FFO/unit

3,396 yen

3,414 yen FFO/Total units outstanding

Annualized

6,736 yen

6,886 yen Based on a period of 365 days

FFO multiple
PER

21.5x

23.3x Unit price as of end of period/FFO per unit (annualized)

25.8x

27.9x Unit price as of end of period/Net income per unit (average during the periods, annualized)

PBR

1.4x

1.5x Unit price as of end of period/Net assets per unit

ROA

1.4%

1.4% Ordinary income/Average of total assets during the period

2.8%

2.7% Based on a period of 365 days

2.8%

2.7% Net income/Average of total net assets during the period

5.6%

5.5% Based on a period of 365 days

Annualized
ROE
Annualized
NAV
NAV/unit
NAV multiple

252,276 mn yen
134,550 yen
1.1x

258,176 mn yen Total net assets + Total appraisal value - Total book value - Total liabilities
137,697 yen
1.2x Unit price as of end of period/NAV per unit

Interest-bearing debt

182,222 mn yen

LTV (book value basis)

46.2%

45.7% Interest-bearing debt/Total assets

LTV (appraisal value basis)

40.4%

39.4% Interest-bearing debt/(Total assets + Total appraisal value - Total book value)

Operating days

184 days

179,222 mn yen

181 days(Note) Annualized values are calculated based on a period of 365 days.

55

5-2 Balance sheet(thousand yen)(thousand yen)

25th period

26th period

25th period

26th period

Period ended Jan. 31, 2019

Period ended Jul. 31, 2019

Period ended Jan. 31, 2019

Period ended Jul. 31, 2019

32,756,858

30,265,364

3,000,000

5,000,000

27,900,000

22,922,000

1,856,858

2,343,364

166,204,431

166,654,327

22,000,000

17,000,000

129,322,000

134,300,000

14,391,619

14,570,283

490,812784,044

198,961,290

196,919,691

196,067,964

196,121,658

AssetsLiabilities

Current assets

12,879,664

11,021,912

C ash and deposits

5,431,643

3,923,970

C ash and deposits in trust

6,374,508

6,295,543

Other

1,073,511

802,398

381,541,783

381,133,241

349,880,238

349,458,688

30,652,121

30,651,335

Noncurrent assets
Property, plant and equipment
Intangible assets
Investments and other assets

Deferred assets
Total assets

1,009,423

1,023,217

118,511

101,365

394,539,959

392,256,519

Current liabilities
C urrent portion of investment
corporation bonds
C urrent portion of long-termloans payable
Other

Noncurrent liabilities
Investment corporation bonds
Long-term loans payable
Lease and guarantee depositedin trust
Other

Total liabilities
Net assets
Unitholders' equity
Unitholders' capital,net
Total surplus

190,460,106(Note)

190,285,734

5,607,858

5,835,924

291,944

291,944

5,315,914

5,543,979△ 489,295

Total net assets△ 489,295△ 784,831

195,578,668

195,336,827

Total liabilities and net assets

394,539,959

392,256,519

Voluntary retained earnings
Unappropriated retained
earnings

Valuation and translation
adjustments

Deferred gains or losses onhedges△ 784,831（Note) Figure after deducting allowance for temporary difference adjustments.

56

5-3 Income statement(thousand yen)

25th period

26th period

Period ended Jan. 31, 2019

Period ended Jul. 31, 2019

Operating revenue

9,423,895

9,561,876

Rent revenues

9,170,318

9,323,944

253,577

237,9313,477,948

3,589,931

3,131,002

3,225,332

Asset management fee

245,488

260,906

Direc tors' compensation

4,200

4,200

Asset custody fee

9,058

9,863

Administrative service fees

19,166

19,861Other operating expenses

69,031

69,767

5,945,947

5,971,944

1,204

1,985

51

58

1,128

979

24

947

653,502627,646

Interest expenses

363,550

375,336

Interest expenses on investment corporation bonds

73,96568,555Am ortization of inve stm e nt corpora tion bonds issua nce cost

11,613

10,193

Borrowing expenses

174,101

164,678

Amortization of investment unit issuanc e c ost

28,363

6,952

Other

1,907

1,930

Ordinary income

5,293,648

5,346,284

Income before income taxes

5,293,648

5,346,284

Net income

5,292,242

5,344,831

Unappropriated retained earnings

5,315,914

5,543,979

Other operating revenues
Operating expenses
Expenses related to properties

Operating income
Non-operating inc ome
Interest income
Gain on forfeiture of unclaimed dividends
Other
Non-operating expenses

OfficeResidential
RetailLand
Other rent revenue

Parking revenue
Utilities and other revenue
Cancellation penalty

Property management fees
Property taxes
Utilities
Maintenance and repairs
Insurance premium
Custodian fees
Depreciation
Rent expenses
Other lease business expenses

7,830,373
774,821
83,593
629,400
5,756

59,861
175,152
2,917

1,082,549
659,480
142,229
117,152
17,1805,950
1,057,798
126,872
16,11857

5-4 Statement of cash flows/Retained earnings
Statement of cash flows(thousand yen)(thousand yen)

25th period

26th period

25th period

26th period

Period ended Jan. 31, 2019

Period ended Jul. 31, 2019

Period ended Jan. 31, 2019

Period ended Jul. 31, 2019

6,167,720

7,147,955

Income before income taxes

5,293,648

5,346,284

Proceeds from long-term loans payable

24,600,000△ 8,289,514

Depreciation and amortization

1,075,178

1,058,120

Repayments of long-term loans payable

Amortization of investment corporation bonds
issuance cost

11,613

10,193

Redemption of investment corporation bonds△ 10,500,000－△ 12,000,000

Amortization of investment unit issuance cost

28,363

6,952

Proceeds from issuance of investment units

16,186,522△ 3,000,000
－

△ 51

△ 58

Dividends paid
Net increase (decrease) in cash and cash equivalents

2,057,520△ 5,289,514

437,515△ 979△ 4,818,556

443,892

Cash and cash equivalents at beginning of the period

9,748,631△ 1,586,638
11,806,152

279,706

Cash and cash equivalents at the end of the period

11,806,152

10,219,514

Increase (decrease) in accounts payable△ 195,865

421,879

Increase (decrease) in accrued expenses△ 114,701

21,705

15,761Retained earnings

Increase (decrease) in advances received

115,157

Decrease (increase) in prepaid expenses△ 64,913△ 4,105△ 333△ 20,520

6,606,189

7,598,606

51

58△ 437,495△ 449,279

Net cash provided by (used in) operating activities

Interest income
Gain on forfeiture of unclaimed dividends
Interest expenses
Decrease (increase) in accounts receivable

Other, net
SubtotalInterest income received
Interest expenses paid
Income taxes paid

Net cash provided by (used in) investing activities
Purchase of property, plant and equipment in
trust
Repayments of lease and guarantee deposited intrust
Proceeds from lease and guarantee deposited intrust△ 1,128△ 1,024

41,479△ 1,430△ 29,578,166△ 445,080△ 24,574△ 66,699△ 30,891,345
1,337,753△ 620,364
241,984

25,467,966

Net cash provided by (used in) financing activities(yen)
25th period

26th period

Period ended Jan. 31, 2019

Period ended Jul. 31, 2019

Ⅰ Unappropriated retained earnings
Addition of dividends in excess ofⅡearnings
Allow ance for temporary difference
adjustments
Ⅲ Amount of Dividends
Amount of dividends per unit
Dividends of earnings

5,315,914,348

5,543,979,968

174,371,280

294,368,720

174,371,280

294,368,720

5,291,137,120

5,343,636,000

2,822

2,850

5,116,765,840

5,049,267,280

2,729

Dividends of earnings per unit
Allow ance for temporary difference
adjustments
Dividends in excess of earnings
per unit

12,000,000(Note)

174,371,280

2,693(Note)

294,368,720

93

157

199,148,508

494,712,688(allow ance for temporary difference adjustments)

Ⅳ Retained earnings carried forward(Note) Due to consideration of the impact of the items of deduction from net assets(deferred gains or losses on hedges).

58

5-5 Status of income and expenditures (1)(thousand yen)P rope rty num ber

O -0

O -1

O -4

O -6

P rope rty na m e

R oppongi Hills Mori Towe r

AR K Mori Building

Korak u Mori Building

Ak asa ka Ta m e ik e Towe r

Acquisition priceP e riod
O pe ra tion da ys

115,380,000
25th

26th

Ja n. 2019

Jul. 2019

184 days

181 da ys

62,480,000
Diffe rence

25th

26th

Jan. 2019

Jul. 2019

184 da ys

181 da ys

27,200,000
Differe nce

25th

26th

Ja n. 2019

Jul. 2019

184 da ys

181 days

O ccupa ncy ra te

100%

100%

△ 3 days
0.0PT

100%

100%

△ 3 da ys
0.0P T

100%

99.4%

Avg. O ccupancy rate
(during pe riod)

100%

100%

0.0PT

100%

100%

0.0P T

100%

99.6%

Num ber of te na nts

1

1

0

1

1

0

23

22

Re nt reve nue s

43,930,000
25th

26th

Ja n. 2019

Jul. 2019△ 3 da ys

184 days

181 da ys△ 0.6P T

99.0%

98.0%

△ 3 days△ 0.4P T

96.8%

98.6%

1.8PT

△1

143

141

4,268

755,277

782,237

85,64983,093840,927

865,330

Diffe re nce

Difference△ 1.0PT△2

2,943,450

2,943,450－

1,351,486

1,351,486－

648,400

652,669

－

－

－

－

－

－

100,445

90,364

2,943,450

2,943,450－

1,351,486

1,351,486－

748,846

743,033△ 10,080

412,351

412,351－

167,795

167,795－

61,26868,904△ 5,812

7,635

166,741

160,883

233,476

240,650

7,174

77,94280,724

2,782

30,63632,902

2,266

42,37842,330

－

－

－

－

－

－

79,822

69,85532,722

29,679

－

－

－

355

－

5,895

5,221

89,917

4,083

1,873

1,889

15

1,714

1,675

2,084

392,638

352,789

63,75864,946

1,187

93,45296,0172,565

139,189

140,814

1,624

O the r e x pe nse s

376

377

△ 39,849

△ 39

2,134

De pre cia tion (1)

△ 95

△ 674

41,485

4,179

△ 355

△ 9,967

0

2,793

2,794

0

83,094

83,954860

11,082

10,605

1,043,022

1,010,253

314,519

318,150

3,631

355,884

358,532

2,647

435,734

476,315

40,5811,900,427

1,933,197△ 32,769△ 476

32,7691,036,967

1,033,336

392,961

384,501

389,0152,293,066

2,285,986

1,100,726

1,098,282

486,414

480,519

529,829

4,609,863

61,1172,183,505

2,214,768

31,262964,897

969,003△ 5,894544,3824,548,745△ 2,443△ 16,178

Annualize d NO I

△ 7,079△ 8,460

405,193

NO I (3) ((1)+(2))△ 3,6314,105

1,079,889

1,068,440

Annualize d NO I/
Acquisition price

3.9%

4.0%

0.1PT

3.5%

3.5%

0.1P T

3.5%

3.6%

0.0P T

2.5%

2.4%△ 11,449－

173,176

173,176

57,02747,08645,07743,668109,503

69,6182,112,810△ 180,255

1,043,698

1,051,195

441,336436,850△ 1,408

39,8842,293,066△ 9,940

504,498

420,326

O the r operating
reve nue s
Tota l property
ope rating re ve nue
P roperty
m a nage m ent
P roperty tax e s(Note 1)

Utilities
Ma inte na nce a nd
repa irs
Insura nce
pre m ium

(Note 2)

Tota l property
ope rating ex pense s
P roperty ope rating
incom e (2)CAP EX (4)NCF (3)-(4)7,497△ 4,486

26,959△ 2,556

24,402△ 5,858△ 47△ 3,042

48,431△ 49△ 14,553△ 0.0PT△ 84,171(Note 1) For property tax, city planning tax and depreciable assets tax, MHR charges the amount of property taxes assessed and determined applicable to the fiscal period to expenses related to properties. Registeredowners of properties in Japan as of January 1 are responsible for paying property taxes for the calendar year based on assessments by local governments. Therefore, registered owners who sold properties to
MHR were liable for property taxes for the calendar year, including the period from the date of the acquisition by MHR until the end of the year. MHR reimbursed sellers of properties for the equivalent amount ofproperty taxes and included the amount in the acquisition cost of real estate.
(Note 2) “Other expenses” denotes the sum of custodian fees, rent expenses, and other lease business expenses (residential property management costs, and other property-related miscellaneous expenses) in aggregate.
(Note 3) Property acquired during the relevant period. “Annualized NOI/ Acquisition price” was calculated by taking into consideration the changes in acquisition price during the relevant period.
“Annualized NOI” denotes the value which is based on the acquisition price as of the end of the relevant period.

595-6 Status of income and expenditures (2)(thousand yen)P rope rty num be r

O -7

O -8

O -9

O -10

P rope rty na m e

Ata go Gre e n Hills

ARK Hills South Towe r

Toranom on Hills Mori Towe r

Holla nd Hills Mori Towe r

Acquisition price

42,090,000

19,150,000

36,210,000 (before acquisition 10,140,000)

16,330,000 (before acquisition 11,760,000)

25th

26th

Ja n. 2019

Jul. 2019

O pe ra tion days

184 da ys

181 da ys

O ccupa ncy rate

100%

Avg. O ccupa ncy ra te(during pe riod)100%

Num ber of tena nts

1

P e riod

Re nt re venues

25th

26th

Ja n. 2019

Jul. 2019

184 days

181 days

100%△ 3 da ys
0.0P T

98.3%

99.9%

△ 3 days
1.6PT

100%

100%

0.0P T

98.3%

99.1%

0.8PT

100%

1

0

42

43

1

Diffe re nce

Diffe rence

25th (Note 3)

26th

25th (Note 3)

Ja n. 2019

Jul. 201926th

Ja n. 2019

Jul. 2019

184 da ys

181 da ys

184 days

181 da ys

100%△ 3 da ys
0.0P T100%

100%△ 3 days

100%

0.0P T

100%

100%

0.0PT

1

1

0

24

24

0

Diffe re nce

Diffe rence

0.0PT

1,012,320

1,012,320－

472,458

480,659

8,200

676,307775,581

99,274

495,055

516,131

21,076－－－35,814

31,746－－－

31,66630,451

1,012,320

1,012,320－

508,273

512,405△ 4,068
4,132

676,307775,581

99,274

526,722546,583△ 1,215

2,664

2,664

－

47,19548,7091,513

78,80690,374

11,56796,600102,029

5,429

68,65568,806150

32,951

34,563

1,611

8,030

33,81825,787

19,89527,732

7,837

－

－

－

36,69232,097

－

－

－

8,441

8,113

－

－

－

3,001

3,799

△ 4,595

797

－

－

－

1,617

6,925

△ 327

3,426

3,533

106

1,048

1,026

1,104

1,267

162

946

1,047

101

De pre ciation (1)178,221

181,625

3,403

44,21244,225△ 22
1389,420101,038

11,61744,64047,3082,667

O the r e x pense s

44,86743,477

978

2,941

1,963

63

71

7

202

209

7

297,835

300,106△ 1,389
2,270

166,080

167,362

1,281

177,425

226,569

49,143

172,344

193,366

21,022

714,484

712,213342,192

345,0422,850

498,881549,01250,131

354,378

353,216

NO I (3) ((1)+(2))

892,706

893,839△ 2,270
1,132

386,405389,268

2,863

588,302

650,050

61,748399,019

400,524△ 1,161Annualized NO I

1,770,858

1,802,493

31,635766,510

784,989

18,4781,340,044

1,310,875

807,687

4.2%

4.3%

0.1P T

4.0%

4.1%

0.1PT

3.7%

3.6%

△ 29,169

833,359

Annualized NO I/
Acquisition price

5.1%

4.9%

CAP EX (4)33,649186,454

152,804

－

2,167

2,167

－

－

△ 0.1P T△ 25,671－

13,371

19,7516,380

NCF (3)-(4)859,056

707,385△ 151,671

386,405

387,101

695

588,302

650,050

61,748385,647

380,772

O the r ope ra tingreve nue s
Tota l prope rty
ope rating revenue
P roperty
m a nage m e nt
P roperty ta x es
(Note 1)

Utilities
Ma inte nance andrepa irs
Insura nce
pre m ium

(Note 2)

Tota l prope rty
ope rating e xpe nses
P roperty opera tingincom e (2)19,860

5,308

1,505

△ 0.2PT△ 4,87460

5-7 Status of income and expenditures (3)(thousand yen)P rope rty num be r

R -3

R-4

S-1

P rope rty na m e

Roppongi First P la za

R oppongi Vie w Towe r

La fore t Ha rajuk u (La nd)

Acquisition price

2,100,000

4,000,000

21,820,000

P e riod
O pe ra tion days

25th

26th

Ja n. 2019

Jul. 2019

184 da ys

181 da ys

25th

26th

Ja n. 2019

Jul. 2019△ 3 da ys

184 days

181 days△ 5.5P T

96.8%

95.1%

△ 8.9P T

94.9%

93.9%

△2

89

87

△ 6,851

100,512101,211－－Diffe re nce

25th

26th

Ja n. 2019

Jul. 2019△ 3 days

184 da ys

181 da ys△ 1.7PT100%△ 1.0PT

100%△2

P ortfolio total

390,690,000 (before acquisition 360,050,000)
25th (Note 3)

26th

Ja n. 2019

Jul. 2019

184 days

181 da ys

100%△ 3 da ys
0.0P T

99.6%

99.4%

△ 3 days

100%

0.0P T

99.4%

99.4%

0.0PT

1

1

0

365

359

698

629,400

629,400－

9,170,318

9,323,944

2,276

2,276

－

－

－

253,577

237,931100,512

103,487

2,975

629,400

629,400－

9,423,895

9,561,876△ 15,645

13,643

15,671

2,028

－

－

－

1,061,959

1,082,549

20,589Diffe rence

Diffe re nce

Diffe rence

O ccupa ncy rate

92.9%

87.4%

Avg. O ccupa ncy ra te(during pe riod)

96.7%

87.8%

Num ber of tena nts

39

37

85,64878,796－－85,64878,796

14,892

13,165△ 6,851

7,496

7,718

△ 1,726
222

11,432

11,739306

74,75278,492

3,740

607,648

659,480

51,832

1,302

1,326

24

1,098

1,156

57

－

－

－

160,080

142,229

8,021

10,020

1,999

1,253

1,268

15

－

－

－

61,629117,152△ 17,850

235

230

352

343

－

－

17,014

17,180165

12,39512,017

16,85917,015

155

－

－

－

1,074,791

1,057,798

O the r e x pense s

3,835

3,822

△ 378

△8

－

De pre ciation (1)

△5

585

686

100

－

－

－

147,879

148,941△ 16,992

48,17848,302

124

45,22547,881

2,656

74,75278,492

3,740

3,131,002

3,225,332

94,32937,47030,49455,28755,606318

554,648

550,9076,336,544

43,65149,86542,512

72,147

72,621

474

554,648

550,907△ 3,740

6,292,892

NO I (3) ((1)+(2))△ 6,975

7,367,683

7,394,342

26,658Annualized NO I

98,91885,728143,118

146,447

3,328

1,100,252

1,110,946

10,693

14,823,744

14,911,243

87,498Annualized NO I/
Acquisition price

4.7%

4.1%

△ 13,189△ 3,740

3.6%

3.7%

0.1PT

5.0%

5.1%

0.1P T

3.8%

3.8%

0.0PT

CAP EX (4)

4,627

5,840

1,212

43,89548,039

4,143

－

－

－

237,533

635,687

398,154

NCF (3)-(4)45,23836,671△ 8,566

28,251

24,582△ 3,669

554,648

550,907△ 3,740

7,130,150

6,758,654△ 371,495

Re nt re venues
O the r ope ra tingreve nue s
Tota l prope rty
ope rating revenue
P roperty
m a nage m e nt
P roperty ta x es
(Note 1)

Utilities
Ma inte nance andrepa irs
Insura nce
pre m ium

(Note 2)

Tota l prope rty
ope rating e xpe nses
P roperty opera tingincom e (2)△ 12△ 7,353△ 0.6P T△ 0.2PT△6

153,626

137,981

55,523

1,061

61

5-8 Unit price performance since IPO
Relative price performance (Since IPO - July 31, 2019)
200
180

Performance since listing160(At listing vs. July 31, 2019)

MHR:
+6.9%
TSE REIT Index: +9.8%

140
120
100
80
60
40
20
0
Jul. 31,
Nov. 30, Jul. 31,
Jul. 31,
Jul. 31,
2010
2006
2009
2008
2007
(Source) Prepared by the Asset Manager based on Refinitiv.
(Note)
Rebased to 100 as per IPO priceJul. 31,
2011

Jul. 31,
2012

Jul. 31,
2013

Jul. 31,
2014

Jul. 31,
2015

Jul. 31,
2016

Jul. 31,2017

Jul. 31,2018

Jul. 31,2019

Unit price per period-end (closing price)
Ac counting period

Unit pric e

Ac counting period

Unit pric e

Ac counting period

Unit pric e

1st （January 2007）

1,100,000 yen

11th (January 2012)

252,200 yen

21st (January 2017)

153,500 yen

2nd (July 2007)

1,080,000 yen

12th (July 2012)

330,500 yen

22nd (July 2017)

138,900 yen(Reference)
IPO Price(November 30, 2006)(Split adjusted)

3rd (January 2008)

716,000 yen

13th (January 2013)

485,000 yen

23rd (January 2018)

137,100 yen

4th (July 2008)

465,000 yen

14th (July 2013)

548,000 yen

24th (July 2018)

138,100 yenHigh

5th (January 2009)

265,000 yen

15th (January 2014)

135,900 yen

25th (January 2019)

144,500 yen(May 8, 2007: in trade)

6th (July 2009)

352,000 yen

16th (July 2014)

151,100 yen

26th (July 2019)

160,300 yen

7th (January 2010)

264,900 yen

17th (January 2015)

166,600 yen

8th (July 2010)

177,300 yen

18th (July 2015)

9th (January 2011)

281,000 yen

10th (July 2011)

258,100 yen

750,000 yen(150,000 yen)

1,460,000 yen(Split adjusted)(292,000 yen)

145,300 yen(August 12, 2010: in trade)

168,200 yen

19th (January 2016)

152,100 yen(Split adjusted)(33,640 yen)

20th (July 2016)

160,500 yen

Low(Note) Implemented a 5-for-1 investment unit split on February 1, 2014 (effective date).

62

5-9 Investment criteria
Investments focusing on Premium Properties for development of urban-type portfolio
Investments focusing on Premium Properties
Among properties that are located in Tokyo’s five central wards and in surrounding areas,
our investments mainly focus on “Premium Properties” that are able to maintain theircompetitiveness going forward based on their quality, size and specification.
Foc us on
Premium Properties

Premium properties

50％ or more

Office building

Premium Properties
Type

Location

Scale

Gross floor area of 10,000㎡ ormore per buildingStandard leasable floor area of
1,000㎡ or more

Officebuildings

Tokyo's five central wards
and their vincity

Residential
properties

Tokyo's five central wards
Gross floor area of 2,000㎡ or
and their vincity
more per building(Primarily in the "three-A" area)〈Office buildings〉〈Residential properties〉〈Retail fac ilities〉

Office building foc us〈Department stores, downtown shopping centers,
large specialty stores & retail complexes, etc.〉

Flourishing areas of Tokyo's five Gross floor area of 10,000㎡ or
central wards and their vincity
more per-building
Retail facilities

50％ or more

Tokyo' five central wards
foc usTokyo's five central
wards and their vincity

50％ or more（Tokyo Metropolitan Area:
80％ or more）〈Street front luxury brand shops, etc.〉

Exclusive, well-known
retail destinations such as
Ginza area, Aoyama area, andOmotesando area

Gross floor area of 1,000㎡ ormore per building(Note 1)

Tokyo’s five central wards： Minato, Chiyoda, Chuo, Shinjuku and Shibuya ward

(Note 2)Three-A area： Akasaka and Roppongi area, Aoyama and Harajuku area and Azabu and Hiroo area

(Note 3)

Ratios are based on the acquisition prices.

(Note 4)

Tokyo Metropolitan Area： Tokyo Metropolis, Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture

Earthquake-resistance foc us

Investment focused on
properties' earthquake
resistance, the safety of thearea, disastercountermeasures, etc.

63

5-10 Sustainability initiatives
Approach and System of Sustainability
Mori Hills REIT Investment Corporation (MHR) and Mori Building Investment Management Co., Ltd. (MIM) aim to contribute to
the creation and development of cities by providing investment opportunities in high-quality urban assets to investors, as statedin the Basic Policy of MHR and Company Mission of MIM.
MHR and MIM aim to contribute to the realization of a sustainable society and maximization of unitholder value in the medium tolong term by emphasizing ESG (Environment, Social and Governance) and investing in high-quality urban assets while striving
to improve various environmental and social performance levels.

Sustainability Promotion System
Operations connected to sustainability will be promoted primarily by the Sustainability Committee to be established by MIM.
The Chairperson of the Committee shall be the President & CEO while all directors and some planning staff shall comprise thecommitteepersons. Various initiatives will be implemented based on the Sustainability Promotion Program which is establishedevery fiscal year.
In principle, the Committee shall meet once a month and shall formulate policies and the Sustainability Promotion Program,monitor progress of programs, deliberate various suggestions from departments, etc. in light of social conditions and theoperating status of MHR. The President & CEO approves the policies and promotion programs, constantly monitors the thoroughpromotion of sustainability, and establishes and maintains a sustainability promotion structure as a responsible party inpromoting sustainability.
Moreover, sustainability-related efforts shall be reported on periodically to the Board of Directors of both MHR and MIM. Each
Board oversees the status of initiatives for important issues related to ESG and the status of compliance and risk management.

Initiatives Throughout the Entire Supply Chain
Promotion of sustainability operations, whether environmental or social, requires initiatives that involve the whole supply chain.
We believe that joint initiatives with various stakeholders of aligned values are necessary.
By actively stimulating interactive communication with stakeholders such as tenants, local residents, property managementcompanies and our sponsor Mori Building that provides the property pipeline, and aligning our values, we aim to contribute to
the realization of a sustainable society.
645-11 Sustainability initiatives: Environment＜Green Building Certification and External
Assessment＞〇 Promotion of Energy-conservation〇 Green Building Certified Properties
Property Name

Type of Assessment

RatingRoppongi Hills Mori Tower

Rank S

ARK Mori Building

Rank SCASBEE for
Existing Buildings

Koraku Mori Building

Rank A

Atago Green Hills MORI Tower

Rank S
DBJ Green Building
Certification

Toranomon Hills Mori Tower
Holland Hills Mori Tower

CASBEE for
Existing Buildings

MHR promotes energy-conservation through initiatives such as
replacement of LED lighting in common areas and repair work of
air-conditioning. MHR also makes active efforts to reduce
environmental loads through proper separation and disposal ofwaste.

(Roppongi View Tower: Renovation of common area with LED lighting)

Rank A

Akasaka Tameike Tower

ARK Hills South Tower＜Reduction of Environmental Loads＞

4 stars
Rank S
Rank S(Certificates Coverage Ratio)
Certified Properties

Portfolio Data

Ratio

In ac quisition pric e343.7 bn yen

368.8 bn yen

93.2%

In leasable floor area

143,592㎡

172,136㎡

83.4%

In number of properties

8 properties

10 properties

80.0%※ Excluding Laforet Harajuku (Land)○ GRESB Real Estate Rating
In the 2019 GRESB Survey, MHR received a“Green Star” rating for the eighthconsecutive year, and “received 4 Stars”
in the GRESB Rating.

〇 Collaborating with Tenants

MHR holds an “environmental countermeasure council”
once or twice a year depending on the office building. The council
generates a report on the efforts to improve sustainability andraises awareness for power saving methods.
MHR also promotes environmental initiatives by communicatingwith tenants. MHR provides “WEB cloud services” as a tool tomake tenants’ energy usage visible, and offers helpful measures
for tenants’ energy conservation.
In addition to these efforts, MHR is further deepening
relationships with tenants by introducing “green leases” which
serve to align financial incentives and secure commitments fromboth parties. MHR is gradually expanding this approach since theintroduction of the first green lease in ARK Hills South Tower.

65

5-12 Sustainability initiatives: Social＜Initiatives with Employees＞＜Initiatives with Tenants and Local Communities＞〇 Talent Development〇 Tenant Satisfaction Surveys

MHR conducts “tenant satisfaction surveys” once every two
To cultivate human resources with flexible thinking and highyears in office buildings and once a year in most residential
ethical standards together with a high degree of expertise,properties.
mainly in real estate and finance, MHR introduces essential
The survey content starts with general matters such as
knowledge and skills through on-the-job-training (OJT) andlocation and image to matters related to facilities and other hard
conventional training to improve staff effectiveness, to clarify
aspects as well as soft aspects such as management systems. The
company issues and to constantly improve management
thoughts of the tenants are used as a reference in our property
methods. MHR conducts a semi-annual staff assessment
management.
program - "Personnel Assessment and Feedback" as a corecomponent of our talent development strategy.
〇 Local Communities
MHR also subsidizes the expense for acquiring licenses and
MHR aim to foster a rich environment for the local community
qualifications by public and private organizations necessary
through various communication activities. In MHR’s properties
for work to improve employees' skills as professionals in thesuch as Roppongi Hills and ARK Hills, events and activities arereal estate fund business.
held like the “Hills Marche” and “Hills Machi-Iku Project” inwhich local people can participate.

(Qualifications held by employees as of the end of August 2019)
・ ARES Certified Master: 7
・ Real Estate Appraiser: 3
・ Real Estate Transaction Agent: 9
・ Certified Building Administrator: 4・ Certified Public Accountant: 3
・ Chartered Member of Securities Analysts Association of Japan: 1・ Certified Internal Auditor: 1〇 Employee Stock Ownership Plan (ESOP)MHR established the "ESOP" by aligning interests of MHR’s
investors and MIM’s employees aiming to improve
unitholders' value over the medium to long term, and to
improve welfare benefits for MIM’s employees.

〇 Promoting Women’s Participation＜Initiatives with Investors＞

MHR is aiming for a workplace environment where each
employee can fully demonstrate their individuality andabilities and MHR is working on creating a pleasant working
environment for women. A child-care leave system andflexible working hours are provided and MHR promotes active
use of a short-time work system and paid holidays.

〇 All Japanese Listed Companies'
Website Ranking

Nikko Investor Relations Co., Ltd. announces
a valuation of websites of all listedcompanies by investigating the degree of
information disclosure based on objective
evaluation items from its unique perspective.
MHR’s website has received “Total Ranking:
The Best Site" for the fourth consecutive
years.

66

5-11 Sustainability initiatives: Governance＜Corporate Governance＞＜Compliance＞

MHR shall have at least one executive director and at least two
Compliance Department conducts inspections on legal compliancesupervisory directors (or, at least one more than the number of and confirms consistency with internal rules. MIM confirms whether
the executive directors), and the board of directors shall be
there are any conflict of interest transactions with related parties. In
comprised of the executive directors and supervisory directors.
this way, MIM is striving to ensure comprehensive internal control,
In addition to a general meeting of all unitholders, MHR’s
while also striving to enhance its risk management structure as wellgovernance structure consists of one executive director, two
as its effectiveness.
supervisory directors, the board of directors and an accounting
Furthermore, MIM has a set of internal rules (self-imposed
auditor, and entrusts its operation to the asset management
regulations) which stipulate rules such as its Related Parties
company.
Transaction Guidelines. These Guidelines stipulate matters
MIM is required to perform its business operations in good faithand with due care of a prudent manager for MHR in line with the concerning transactions, etc. with related parties. Through MIM’scompliance with these Guidelines, MIM has established a structure
purpose of the investment management business, andaccordingly performs sincere asset investment and management which ensures that the aforementioned transactions are managed
appropriately and that MIM sufficiently executes the duty of care of apertaining to real estate properties based on an appropriate
compliance structure and internal control structure in order forgood manager and duty of loyalty to MHR.
MHR to gain high trust from the securities market and investors. (Process to counter transactions involving conflicts of interest)(MIM’s organization)(Note) Director who are classified as a related party officer is not able to participate in the resolution
when acquiring asset from a related party.

67

5-14 Portfolio map (As of July 31, 2019)

MHR (Note 1)
In Operation(注4)

MB Group (Note 2)(注5)

Planning / Under Construction(Source) Prepared by the Asset Manager based on Mori Building’s “Mori Building Handy Map Mori Building Map/Home Route Support Map 2019.”(Note 1) Some of the properties have been partially acquired and held by MHR.
(Note 2) Properties are developed, owned, managed and planned for development by Mori Building Group, and there are no properties currently anticipated to be acquired by MHR.

68

5-15 Portfolio overview (As of July 31, 2019)
Type

Office building
Roppongi
Hills
Mori Tower

ARK
Mori Building

O-0

O-1

O-4

Premium

Premium

Premium

Location

Roppongi,
Minato-ku,
TokyoAkasaka,Minato-ku,
TokyoCompletion

Apr. 2003

Building age

16 years 3 months

Office building (Partly residential)
Atago Green Hills

Toranomon
Hills Mori
Tow erHolland Hills
Mori Tow er

AkasakaTameikeTow er

O-8

O-9

O-10

O-6

Premium

Premium

Premium

Premium

Premium

Koraku,Bunkyo-ku,
TokyoRoppongi,
Minato-ku,
Tokyo

Toranomon,
Minato-ku,
Tokyo

Toranomon,
Minato-ku,
TokyoAkasaka,Minato-ku,
TokyoMar. 2000

Jul. 2013

May. 2014

Jan. 2005

Sep. 2000

33 years 4 months

19 years 4 months

6 years 0 month

5 years 2 months

14 years 6 months

18 years 10 months

Total number offloors54 aboveground,6 below

37 aboveground,4 below

19 aboveground,6 below

20 aboveground,4 below

52 aboveground,5 below

24 aboveground,2 below

25 aboveground,2 below

42 aboveground,2 below

43 aboveground,4 below

Gross floor area

approx.
442,150㎡

approx.
177,486㎡

approx.
46,154㎡

approx.
53,043㎡

approx.
241,581㎡

approx.
35,076㎡

approx.
46,971㎡

approx.
85,266㎡

approx.
60,815㎡

Property nameKoraku Mori
ARK Hills
Building
South Tow er

Residential

RetailRoppongi
First
Plaza

Roppongi
View
Tower

Laforet
Harajuku(Land)

O-7

R-3

R-4

S-1

Premium

Premium-

Premium

Toranomon,
Minato-ku,
TokyoRoppongi,
Minato-ku, Tokyo

Jingumae,
Shibuya-ku,
Tokyo

Jul. 2001

Oct. 1993−

25 years 9 months−

2 aboveground,1 below

20 above ground,
1 below−

approx.
2,083㎡

approx.
22,906㎡−

MORI Tower Forest Tower

Plaza

Photo

Ownership(Note 1)Land

Building

PML (Note 2)
Earthquakeresistant feature(Note 3)Acquisition price（mn yen）
Occupancy rate
(Note 4)Mar. 1986(Large-scalerenovation in 2005)

C o- owners hip
C o-owners hip(approx. 1 7 .7 % ) (approx.1 0 .9 % )L eas edC o-owners hip(approx. 2 5 % )Atago,
Minato-ku, Tokyo

Jul. 2001

Oct. 2001

18 years 0 month 17 years 9 months 18 years 0 month

C o- owners hip
C o- owners hip
C o- owners hip(approx. 1 2 .7 % ) (approx. 6 2 .9 % ) (approx. 5 6 .4 % )C o- owners hip

C o- owners hip

C o- owners hip(approx. 2 8 .8 % )(approx. 4 7 % )(approx. 4 6 % )C o- owners hip

Compartmentalized
ownership(approx. 46.4%）

Compartmentalized
ownership(approx. 44.7%)−

O wners hip

Compartmentalized
ownership(approx. 13.6%)

Compartmentalized
ownership(approx. 17.9%)

Compartmentalized
ownership(approx. 57.9%)

C o-owners hip

C o- owners hip(approx. 2 5 % )(approx. 6 .9 % )Compartmentalized
ownership(approx. 48.5%)

Compartmentalized
ownership(approx. 65.5%)

0.59%

0.78%

0.73%

1.56%

0.50%

0.85%

1.79%

2.35%

2.34%

5.94%

2.20%

2.20%

−

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

Seismic
Damping

−

−

−

−

115,380

62,48027,20019,15036,21016,33043,93042,090

2,100

4,000

21,820

100%

100%

99.4%

99.9%

100%

100%

98.0%

100%

87.4%

95.1%

100%

(approx. 3 2 .9 % )Average building age
18.4 years(Note 5)

Portfolio PML
0.93% (Note 2)

Total acquisition price390,690 mn yen

69

5-15 Portfolio overview (Note)(Note 1) “Type of ownership” denotes the type of rights held by MHR or the Trustee. “Ownership” stands for ownership, “Co-ownership” stands for the ownership of beneficiary interests,“Compartmentalized ownership” denotes ownership and the rights for exclusive use in or over parts of a building, and “Leased land” denotes Leasehold land. The land site of Atago
Green Hills includes joint ownership in quasi-undivided interests of leasehold land and easement.
(Note 2) This indicates the figure described in the “Report on evaluation of seismic PML for portfolio” dated June 4, 2018 by Sompo Risk Management & Health Care Inc.
(Note 3) ARK Mori Building adopts “slitwall” as an earthquake-resistant feature.
(Note 4) “Occupancy rate” indicates the figures as of July 31, 2019.
(Note 5) For calculation of the “Average building age” of Atago Green Hills, we have assumed that construction of the building was completed on July 30, 2001.

70