2-4-8, Nagatacho, Chiyoda-ku, Tokyo, Japan
https://www.daiwahouse-reit.co.jp/en/

Semi-Annual Reportfor the26th Fiscal Period

From September 1, 2018 to February 28, 2019https://www.daiwahouse-reit.co.jp/en/

Securities Code: 8984

Overview of the 26th Fiscal Period (From September 1, 2018 to February 28, 2019)
We would like to report on the financial results and give an overview of operationsof Daiwa House REIT Investment Corporation (hereinafter referred to as “DHR”) in
the 26th fiscal period (the fiscal period ended February 28, 2019).
DHR acquired one logistics property in September 2018 (acquisition price of ¥3.5
billion) and two retail properties (acquisition price of ¥7.7 billion) and one hotel
property (acquisition price of ¥1.4 billion) in December. We also sold one residential
D Project Urayasu II

Royal Parks Toyosu

property (sale price of ¥1.2 billion), replacing our assets owned as we worked to
expand our asset size while improving the quality of our portfolio.
DHR’s portfolio as of the end of the current fiscal period consisted of 216

Jiro Kawanishi

properties with an asset size of ¥683.4 billion (total acquisition price).

Executive Director

Furthermore, our occupancy rate at the end of the current fiscal period was 99.5%.

Daiwa House REIT Investment Corporation

Regarding financial results for the current fiscal period, due to a high level ofoccupancy in our portfolio and revenue contributions of properties acquired during

Creating Dreams, Building Hearts

the period, we recorded operating revenues of ¥23,127 million, operating incomeof ¥9,960 million, and net income of ¥8,597 million, exceeding our forecasts.

Daiwa House Group symbol - the Endless Heart - represents the Group’s vision of building endless emotional

To calculate distribution, DHR reversed ¥1,980 million as the amount equivalentconnections with each and every one of its customers, as well as the solidarity of the Daiwa House Group.

to amortization of goodwill from reserve for temporary difference adjustments to
As a group that co-creates value for individuals, communities and people’s lifestyles, the Daiwa House Group aims

top up net income, while at the same time, ¥120 million recorded as gain on sale ofto think outside the box and always to create new value in each successive generation. The Daiwa House Group willreal estate properties and refunded consumption taxes relating to properties that

continue to pass on the ideals on which Daiwa House was founded, and work to help realize a sustainable society.

DHR had acquired in prior periods was accumulated in voluntary reserve as reservefor distribution. As a result, total distributions amounted to ¥10,457 million, for
distributions per unit of ¥5,427, exceeding the forecast by ¥127.

Koichi Tsuchida
President and CEO
Daiwa House Asset Management Co., Ltd.

DHR will work to continuously increase unitholder value by ensuring stable revenue
and steady growth of its portfolio over the medium to long term through fully
utilizing its sponsor Daiwa House Group’s comprehensive strengths and knowhow
regarding real estate development.
In closing, we ask for the continued support of our unitholders and the investmentcommunity as we move forward.
FOLEO Otsu Ichiriyama

Daiwa Roynet Hotel Yokohama Kannai

Distributions Per Unit

CONTENTS
Overview of the 26th Fiscal Period
Financial Highlights for the Fiscal Period Ended February 28, 2019
External Growth
Public Offering
Portfolio Highlights
Strengths as a Diversified REIT and Portfolio Status
Internal Growth
Financial Status
ESG Initiatives
Major Portfolio Properties
Portfolio Map

3
4
6
8
10
12
14
15
16
18
19

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • •26th Fiscal Period

I.

Asset Management Report

II.

Balance Sheets• • • • • • • • • • • • • • • • • • • • • • • • • •20• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •54(From September 1, 2018 to February 28, 2019)
Distribution payments start date is May 13, 2019.

5,427

¥

• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • •• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •2• • • • •56

• • • • • • • • • • • • • •57• • • • • • • • • • • • • • • • • • • • • • • • • •58III. Statements of Income and Retained Earnings
IV. Statements of Changes in Net Assets
V.

Statements of Cash Flows

VI. Notes to Financial Statements59• • • • • • • • • • • • • • • • • • • • • • •82• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •84VII. Independent Auditor’s Report
Investor Information• • • • • • • • • • • • • • • • • • • • • •Forecast distributions per unit (Note)
27th Fiscal Period(From March 1, 2019 to August 31, 2019)¥

5,170 28th Fiscal Period(From September 1, 2019 to February 29, 2020)

¥

5,370

(Note) Forecast distributions refer to the forecast as of April 18, 2019, and actual distributions per unit may vary from this figure.
These forecasts do not guarantee the amount of distributions.

3Financial Highlights for the Fiscal Period Ended February 28, 2019
Statements of Income (Summary)

Balance Sheets (Summary)(Yen in millions)Fiscal period
endedAugust 31,
2018(25th period)

Fiscal period
ended
February 28,
2019(26th period)

Operating revenues

22,211

23,127915

Rental revenues

22,211

23,013

801

113

113

Gain on sale of real estate properties–(Yen in millions)

Rental revenues
ChangeRevenue contributions for the fullperiod of the properties acquired in
the fiscal period ended August 31,
2018 (16 properties) +¥635 million
Revenue contributions of theproperties acquired in the fiscal
period ended February 28, 2019(4 properties)+¥244 million

Gain on sale of real estate
properties

Operating expenses

12,942

13,166

224

Rental expenses

8,944

9,184

240

Rental expenses(excluding depreciation)

4,647

4,729

82

Depreciation

4,296

4,454

158

Rental expenses

3,998

3,982

(15)

1,982

1,982

–

Full period costs incurred on
properties acquired in the fiscal
period ended August 31, 2018(16 properties)+¥159 million
Costs incurred on properties
acquired in the fiscal period ended
February 28, 2019 (4 properties)+¥63 million

As ofAugust 31,
2018(25th period)

As ofFebruary 28,
2019(26th period)

771,281

777,727

6,445

Current assets

41,805

42,135329

Non-current assets

729,377735,501

6,124

Investment properties

Investment properties

646,194

654,523

8,328

Intangible assets

77,39875,368(2,030)Goodwill

71,36069,377(1,982)

340,685

348,504

7,818

Increase due to properties acquired(4 properties)+¥12,912 million
Decrease due to properties sold(1 property)–¥1,044 million
Capital expenditures +¥944 million
Depreciation–¥4,454 million

17,94847,10829,15911,60040,51028,910322,737

301,396(21,340)

302,668

280,758(21,910)430,596429,223(1,373)

Reserve for temporary difference
adjustments

Reserve for temporary difference
adjustments

10,7858,804(1,980)Reserve for distribution

1,964

1,986

22

Reversal of the amount equivalent
to amortization of goodwill–¥1,980 million

LTV (excluding goodwill)

44.9%

45.4%

0.5 points

LTV (including goodwill)

40.7%

41.3%

0.6 points

Number of investment units issued

1,927,000
units

1,927,000
units

–
units

Net assets per unit

¥223,454¥222,741¥(713)

Total assets

Gain on sale of real estate
properties in the sale of Morino
Tonari (residential property)

Total liabilities
Other operating expenses
Amortization of goodwill
Loss on sale of real estate properties

99

Operating income
Non-operating income
Non-operating expenses

–

9,269

9,960

690

39

14

(24)

1,538

Interest expenses and borrowing
related expenses

1,377

1,345

Ordinary income
Extraordinary losses(99)

Loss on sale of real estate
properties in the sale of 1 residential
property recorded in the fiscal
period ended August 31, 2018

29

7,770

8,597

827

4

–

(4)

7,765

8,597

831

Interest-bearing debt
Interest-bearing debt
Non-current liabilities
Interest-bearing debt

Loss on sale of real estate
properties

(161)

1,375

Current liabilities

ChangeNet assets

New loans+¥7,000 million
Reclassification of long-term loans
from non-current liabilities to current
liabilities¥28,910 million

Non-operating expenses
Net income
Reversal of reserve for temporary difference
adjustments

1,980

1,980

0

22

120

97

Total distributions

9,723

10,457734

Distributions per unit

¥5,046¥5,427¥381

Accumulation of reserve for distribution

Operating revenues(Yen in millions)

22,21121,015

Operating income

23,127

Accumulation of reserve for
distribution
Gain on sale of real estate
properties accumulated involuntary reserve

Net income(Yen in millions)

9,960

9,392

19,700(Yen in millions)

Investment unit issuance expenses
recorded in the fiscal period ended
August 31, 2018

Distributions per unit

8,597

9,269

7,968

7,765

4,800

4,964

5,194

(Yen)

Total assets

5,427
771,281

5,046
682,359

7,142

8,012

(Yen in millions)

LTV
Increase in LTV due to new loans

LTV

(%)

777,727
excluding goodwill
including goodwill

681,192

604,142

17,531
5,567

48.1

4,393

41.9

Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019(22nd period) (23rd period) (24th period) (25th period) (26th period)

4Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019(22nd period) (23rd period) (24th period) (25th period) (26th period)

Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019(22nd period) (23rd period) (24th period) (25th period) (26th period)

Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019(22nd period) (23rd period) (24th period) (25th period) (26th period)

Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019(22nd period) (23rd period) (24th period) (25th period) (26th period)

46.5

46.4

44.9

45.4

41.4

41.4

40.7

41.3

Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019(22nd period) (23rd period) (24th period) (25th period) (26th period)5External Growth
Assets Acquired in the Fiscal Period Ended February 28, 2019
We acquired one property in September 2018 for ¥3.5 billion and three properties in December for¥9.2 billion.

Retail (mall type)LM-003 DPL Kitakyushu
Building A

Acquisition date

September 27, 2018

Location

Kitakyushu City, Fukuoka

Date ofconstruction

Building A:
October 21, 2015
Building B:
December 9, 2016

Acquisition price¥3,510 million

Leasable area

26,672.98 m2

LesseeYAMAE HISANOKYUSO COMPANY
ASAHI SHOKUHIN

Acquisition date

December 7, 2018

Location

Sakai City, Osaka

Acquisition price¥3,250 million

Leasable area

30,824.72 m2

LesseeDaiwa Information Service
38yToga-Mikita Sta.

ka
ns
en

Building B

Shin-Moji ICKitakE x p y ushu
re s
swa Ur ba n
yR
ou t
e1

61

Harayama Park

Located approximately 1.0 km southeast of Toga-Mikita Station on the Semboku Rapid Railway and surrounded by
Harayamadai Housing Complex in Senboku New Town and an area for for-sale detached homes.
Retail property comprised of four buildings.
A retail complex housing Don Quijote (general discount store), Izumiya (food supermarket) and TOHO Cinemas
Senboku (cinema complex) as the core tenants, with specialty shop zones that include clothing stores, variety
stores and service shops.

Nagano IC

Kitakyushu Airport

10

Kita-Kyushu JCT
Kanda Kita-Kyushukuko IC

RU-001 COMBOX310
Retail (urban type)Daiwa House Group Sublease

Keiyo D2

Hotel

Kokura-Higashi IC

Higashi-Kyushu
Expressway

Super
Autobacs

HO-002 Super Hotel JR Nara Station Sanjo Street

Ky
us
hu

Kokura Sta.

Ex
pr Sanes
sw yo S
hin
ay

199

Located in the southeastern part of Kitakyushu City, 3.0 km from both Nagano IC on the Kitakyushu Urban
Expressway Route 1 and Kokura-Higashi IC on the Kyushu Expressway, the property has good traffic
access to downtown Kitakyushu as well as to Fukuoka City.
The surrounding area is an industrial area with a concentration of business facilities including logistics
properties, offices and factories, making it a good logistics environment allowing 24-hour operations andfrequent deliveries.
The property is a multi-tenant logistics property with a gross floor area of approx. 4,445 tsubo, two stories
in Building A and approx. 3,637 tsubo, two stories in Building B.

aku ilwbo Ramd
Se apiR

Acquisition date

December 7, 2018

Location

Mito City, Ibaraki

Date ofconstruction

April 25, 2006

Acquisition date

December 6, 2018

Location

Nara City, Nara

Date ofconstruction

January 27, 2015

Acquisition price¥1,470 million

Leasable area

2,637.18 m2

Number of guest
rooms

98

LesseeSuper Hotel

Kintetsu-N
ara
Line

Acquisition price¥4,480 million

Leasable area

30,517.69 m2

Lessee

Hotel
Nikko
Nara

Located a two-minute walk from JR Nara Station, the property has high visibility due to being just across thestation-front square, and also offers excellent accessibility, which is an important factor for a hotel targetingbusiness demand.
Super Hotel JR Nara Station Sanjo Street occupies the 2nd to the 6th floors as the main tenant while a real estatecompany is on the 1st floor, a bank is on the 1st and the 2nd floors and a Japanese-style pub is on the 2nd floor.

Daiwa RoyalNorth Exit
Hotel Mets Mito

Excel

JR Joban Line

Mito OPASouth Exit
Located a one-minute walk from the south exit of the JR Mito Station. It boasts excellent proximity to the station asa pedestrian deck from the station is connected to the 3rd floor of the property.
The main tenants are United Cinemas (cinema complex) and Sega (amusement facility), and other tenants include
restaurants and offices as well as Daiwa Roynet Hotel Mito on the 6th to the 13th floors operated by Daiwa Royal
Co., Ltd. of the Daiwa House Group.

6

Mito Sta.

Excel Minami
Hotel Terrace
the Garden Mito

Century Mito
South Gate Tower
Ibaraki Industrial Hall

Assets SoldIn December 2018, we sold one
low-yield residential property
with an NOI yield of 2.7% and an
NOI yield after depreciation of
1.6% in the fiscal period ended
August 31, 2018.

RE-092JR
MainKansai
Line

369

Nara
Sta.

Washington Hotel
Plaza Nara

Kintetsu-Nara Sta.

Hotel Fujita Nara

Sanjo Street
Super Hotel Lohas
JR Nara Eki

Comfort Hotel Nara
754

Yasuragino-michi Avenue

Logistics (multi-tenant type)

RM-011 ACROSSMALL Semboku (Land)

Morino Tonari (Sold on December 7, 2018)

Residential

Location

Shinagawa Ward, Tokyo

Date ofconstruction

June 30, 2008

Sale price¥1,200 million

Leasable area

1,668.24 m2

7

Public Offering
Execution of Public Offering (February 2019)

Assets Acquired in March and April 2019

In February 2019, it was resolved to issue 148,000 new investment units through public offering, and¥35.2 billion of equity was raised.
By raising funds through public offering and new loans, DHR acquired 17 properties for a totalacquisition price of ¥79.8 billion.

LB-060 D Project Itabashi Shingashi

RM-012 iias Tsukuba (30% quasi co-ownership)
Logistics (BTS type)

Retail (mall type)Daiwa House Group Sublease

Overview of Public Offering
Issuance resolution date

Pricing dateFebruary 8, 2019
Number of new investment units issued

February 20, 2019
Number of investment units issued after public offering

148,000 units
Issue price (offer price)

2,075,000 units
Issue value (amount paid in)¥245,784 per unit

¥238,260 per unit

Location

Itabashi Ward, Tokyo

Location

Tsukuba City, Ibaraki

Acquisition price¥12,300 million

Acquisition price¥10,320 million

LB-057, LB-058, LB-059 D Project Kitahachioji I, II, III
Logistics (BTS type)

Total issue value (total amount paid in)

Logistics (BTS type)

Logistics (BTS type)¥35,262 million

Overview of Newly Acquired Assets (assets acquired in the fiscal period
ended February 28, 2019 and assets acquired in March and April 2019)79.8 billion¥

Total acquisition priceOccupancy rate

100.0%
Hachioji City, Tokyo

Location

81.1 billion¥

Total appraisal value

Appraisal NOI yield

4.9%

LB-061 D Project Sagamihara

Acquisition price

LB-062 D Project Kuki VIII

Logistics (BTS type)

By asset class

Average property age

Hotel¥4.5 billion
7.5%

Retail¥16.0 billion
29.8%

Other assets¥1.3 billion
1.7%

98.3%

LB-063 D Project Yokkaichi

Logistics (BTS type)

Properties developed by the Daiwa House Group

Sagamihara City, Kanagawa

Location

Kuki City, Saitama

Location

Yokkaichi City, Mie

Location

Ishioka City, Ibaraki

Acquisition price¥3,900 million

Acquisition price¥6,100 million

Acquisition price¥1,490 million

Acquisition price¥4,050 million

RR-007

Aoyama Tailor Bunkyo
Sengoku Ekimae Store

RR-008 FOLEO Shobu

OT-005Retail (roadside type)

Retail (roadside type)

Nursery Room Berry Bear Omori
Nishi Welcia Ota Omori Nishi Store
Other

Daiwa House Group Sublease

HO-003

Daiwa Roynet Hotel
Nagoya Shinkansenguchi
Hotel

Location

Properties acquired from the Daiwa House Group’s
pipeline

8

Logistics (BTS type)

Location

Logistics¥45.1 billion
61.0%(Acquisition price basis)

LB-064 D Project Ibaraki Ishioka

Logistics (BTS type)

7.1 years

15 properties / 17 properties

Core assets

I: ¥4,300 million II: ¥5,700 million III: ¥7,300 million

Nagoya City, Aichi
Acquisition price16 properties / 17 properties¥4,500 million
Location

Bunkyo Ward, Tokyo

Location

Kuki City, Saitama

Location

Ota Ward, Tokyo

Acquisition price¥750 million

Acquisition price¥5,000 million

Acquisition price¥1,380 million

9Portfolio Highlights
Asset Size (acquisition price basis / as of April 10, 2019)

By asset class
Hotel
1.4%

229 properties ¥750.5 billion
67 properties ¥385.1 billion

Logistics properties

21 properties

Retail properties

5 properties

Other assets¥¥

Other assets
1.7%

Retail
12.7%

Residential properties

95.3 billion

3 properties¥

Core assets

98.3%

10.7 billion

Fiscal period ended August 31, 2017

September 2016

April 2017
(Note 1)) including 1 multi-use complex

Acquired 15 properties (¥67.9 billion) through public offering

Three major
metropolitan
areas of Japan

Less than
5 years
17.1%

Less than
10 years

46.0%
5 years ormore but lessthan 10 years(Acquisition price basis)
29.0%

Fiscal period ended August 31, 2018

Fiscal period ended February 28, 2019 onward
September 2018

Acquired 16 properties (¥96.9 billion

Acquired DPL Misato, the first multi-tenant logistics property for DHR

10 yearsor more54.0%

Greater
Nagoya area
4.2%

Logistics
51.3%

March and April 2018
(Note 1)

GreaterTokyo area
65.9%

79.1%

Residential
32.8%

12.8 billion

By property age

Other areas
20.9%
Greater
Osaka area
8.9%

133 properties ¥246.4 billion

Hotel properties

Fiscal period ended February 28, 2017
Acquired 6 properties (¥17.2 billion

By area(Note 1)) through public offering

Acquired Daiwa Roynet Hotel Yokohama Kannai, the first hotel for DHR

Acquired 1 property(¥3.5 billion (Note 1))

December 2018

Acquisition

Acquired 3 properties(¥9.2 billion (Note 1))

March and April 2019
Acquired 13 properties (¥67.0 billion (Note 1)) through public offering

January 2017
Acquired 1 property (¥5.6 billion (Note 1))

August 2017

Sale

Acquired 2 properties (¥5.4 billion (Note 1))

February 2017

July and August 2017

Sold 1 property (¥0.3 billion(Note 2))

Sold 7 properties (¥10.1 billion

December 2018

June 2018(Note 2))

Sold 1 property (¥2.8 billion

Sold 1 property (¥1.2 billion (Note 2))(Note 2))

Trend of Asset Size (acquisition price)(Yen in billions)

800

700

Assets acquired from the Daiwa House Group’s pipeline
Assets acquired from third parties other than the Daiwa House Group

Public offering inMarch 2017

Merger in
September 2016

500

400

¥491.3 billion¥750.5 billion¥671.7 billion¥577.7 billion

600

Public offering in
February 2019

Public offering inMarch 2018

¥683.4 billion¥577.7 billion¥513.7 billion

Ratio of assets
acquired fromthe Daiwa House Group’s
pipeline

Ratio of assets
acquired fromthe Daiwa House Group’s
pipeline

71.8%

55.9%
0
September 1, 2016
effective date of the Merger

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Distributions per unit

¥4,800¥4,964¥5,194¥5,046¥5,427

As of April 10, 2019

(Note 1) Acquisition prices are listed. (Note 2) Sale prices are listed.

10

11

Strengths as a Diversified REIT and Portfolio Status
Logistics properties 67 properties
DHR’s strengths
Mainly BTS typelogistics properties
with long-term leases
Focused investment incompetitive highperformancelogistics properties

BTS type¥385.1 billion (total acquisition price)

Multi-tenant type

91.3%

Average lease term

DHR’s strengths

8.7%

15.9 years(acquisition price basis)(annual rent basis)

By remaining lease term (annual rent basis)

Ratio of top 10 tenants (leased area basis)
8.9%
6.8%

10.5%

18.5%

Residential properties 133 properties

47.3%
6.5%

Top 10Tenants

Average
Remaining
Lease Term
30.6%

3.0%

15 years or more
10 years or more but less than 15 years
5 years or more but less than 10 years
Less than 5 years

Mitsubishi Shokuhin
Hitachi Capital
Daiwa Logistics
KOKUBU GROUP

DHR’s strengths
Mainly long-termleases with fixedrents
Focused investment inspecialty retailcomplexes
connected toconsumers’ daily life

21 properties
Sublease typemaster lease

Pass-through typemaster lease

49.5% 15.0%

Hitachi Transport System Kanto
Tokyo Nohin Daiko
Nakano Shokai
Major EC company

Land properties (landwith leasehold interest)

Average leaseterm(annual rent basis)

0.1%

Fixed Rent
Ratio

43.8%

99.9 %

13.0 years

2.8%

1.9%
0.1%

9.2%

38.2%

Tokyo
23 Wards

Monthly Rent
Less Than¥200,000

23.6%

32.2%
Less than ¥100,000
Less than ¥150,000
Less than ¥200,000
Less than ¥250,000

Extensive development track record

Leasing capability

Relationships with tenants

Mainly businesshotels with long-termleasesLess than ¥300,000
Less than ¥500,000¥500,000 or more

Highly recognized brand name

Opportunities for external growth

DHR’s strengths

30.1%

86.0 %

Five major wards of Tokyo
Wards other than five major wards of Tokyo
Greater Tokyo area
Other

Focused investment inproperties with goodaccess including
multi-use complexes

16.0%

Average
Remaining
Lease Term

By monthly rent (number of units basis)

33.8%

By rent type (leased area basis)
2.4%

79.2%
(annual rent basis)72.0 %

Hotel properties(annual rent basis)

Pass-through typemaster lease

20.8%

16.7%

11.3%

Hitachi Transport System Central Japan
TakihyoOther

18.8% 16.7% 16.5 years

By remaining lease term (annual rent basis)

By area (acquisition price basis)

3.5% 3.6%¥95.3 billion (total acquisition price)

Direct lease
contract

20.7%

4.3%
4.0%

Overcome Market Challenges andLeverage DHR’s Strengths as a
Diversified REIT with Strong
Support from Sponsor

Retail properties

Sublease typemaster lease(number of units basis)

5.9%

40.4%

Family type
(Over 60 m2)

79.3%

Focused investment inTokyo 23 wards

6.1%

52.7%

9.0 years

Mainly master leaseagreements with the
Daiwa House Group

Compact type
(60 m2 or less)¥246.4 billion (total acquisition price)

Management expertise

3 properties
Daiwa Roynet Hotels¥10.7 billion (total acquisition price)
Other hotels

86.4%

Average lease term

13.6%

12.0 years(acquisition price basis)(annual rent basis)

By remaining lease term (annual rent basis)

By rent type (leased area basis)

7.6%

53.3%

Average
Remaining
Lease Term

8.4 years

Fixed Rent
Ratio

100.0 %

39.1%

33.6%

97.6%

6.6%
15 years or more
10 years or more but less than 15 years
5 years or more but less than 10 years
Less than 5 years

12

Fixed rent
Fixed rent + variable rent
Variable rent

15 years or more
10 years or more but less than 15 years
5 years or more but less than 10 years

Fixed rent13Internal Growth

Financial Status

Continuous Property Rebalancing

Financial Policy

Through continuous property rebalancing, we are working to increase profitability and to decrease theaverage age of our properties in order to realize increased portfolio quality.

DHR is working to improve the stability of its financial base by maintaining and expanding its strong lender formation throughinitiatives geared toward diversifying methods of raising capital through issuance of investment corporation bonds, and bypromoting use of long-term fixed rates on interest-bearing debt and staggering repayment dates. DHR will continue its policy ofstable financial operation by maintaining the ongoing conservative LTV level target (excluding goodwill) of between 40% and 50%.

Assets sold

Assets acquired

10 properties

Number of properties

Number of properties¥14.5 billion

Sale price
Average NOI yield
Average NOI yield after
depreciation

Acquisition price

5.1%

Average NOI yield

3.3%

Average NOI yield after
depreciation

13.4 years

Average property age

Logistics
properties

Interest-bearing Debt (as of April 10, 2019)¥23.7 billion

We took out ¥7,000 million in new loans in the fiscal period
ended February 2019. In addition, we refinanced ¥11,600
million in March 2019 and took out ¥27,500 million in new loans
in April 2019.

5.1%
4.1%
5.6 years

Average property age

Residential
properties

7 properties

Retailproperties

Hotelproperties

Total interest-bearing debt
Total loans
Total investment corporation bonds¥348,768 million¥329,768 million¥19,000 million

LTV (excluding goodwill)

45.2%

LTV (including goodwill)
Castalia
Minamigyotoku II

Castalia
Maihama

Castalia
Urayasu

Castalia
Minamigyotoku

Castalia
Nipponbashi Kouzu

DPL Kitakyushu

Hiratsuka Retail
Property (Land)

ASOBOX(Land)FOLEO
Ome ImaiSuper Hotel JR Nara
Station Sanjo Street

41.5%

Long-term interest-bearing debt ratio

89.4%

Fixed interest ratio

Castalia
Ichikawamyoden

Castalia
Shinsakae

Aprile Tarumi

Crest Kusatsu

ACROSSMALL
Semboku (Land)

Morino Tonari

95.2%

Average interest rate

0.74%

COMBOX 310(Note) The average NOI yields and average NOI yields after depreciation are calculated based on the actual values at the time of sale for assets sold and the appraisal NOI for assets acquired.
The average ages of properties are listed based on the figures at the time of sale and acquisition.

Average remaining maturity

Initiatives to Increase AttractivenessCommitment line

5.3 years¥25,000 million

Residential properties: Value enhancement projects
Room layout change (removed partitions and changed flooring materials)

LenderLoan balance

Ratio(Yen in millions)(%)

Sumitomo Mitsui Trust Bank, Limited

60,10918.2

Sumitomo Mitsui Banking Corporation

60,10018.2

MUFG Bank, Ltd.

56,95417.3

Mizuho Bank, Ltd.

52,10015.8

Development Bank of Japan Inc.

17,900

5.4

The Norinchukin Bank

13,810

4.2

Aozora Bank, Ltd.

13,061

4.0

Resona Bank, Limited

11,5003.5

Mizuho Trust & Banking Co., Ltd.

7,908

2.4

Nippon Life Insurance Company

5,000

1.5

Shinsei Bank, Limited

5,000

1.5

Shinkin Central Bank

4,500

1.4

Mitsui Sumitomo Insurance Company, Limited

4,000

1.2

The Bank of Fukuoka, Ltd.

3,000

0.9

The Chiba Bank, Ltd.

2,465

0.7

The 77 Bank, Ltd.

2,000

0.6

The Nishi-Nippon City Bank, Ltd.

2,000

0.6

The Iyo Bank, Ltd.

1,500

0.5

The Chugoku Bank, Limited

1,500

0.5

The Shizuoka Bank, Ltd.

1,260

0.4

JAPAN POST INSURANCE Co., Ltd.

1,100

0.3

The Bank of Kyoto, Ltd.

1,000

0.3

The Dai-ichi Life Insurance Company, Limited

1,000

0.3

1,000
329,7680.3
100.0

Taiyo Life Insurance Company
Total loans(Note) The amounts were rounded down to the nearest million yen.

Installation of a new kitchen unit and location change of a washing machine

After

BeforeBreakdown by Lender (as of April 10, 2019)

After

BeforeDiversifying Debt Maturities (as of April 10, 2019)(Yen in millions)
30,000Long-term loans

Investment corporation bonds
Commitment line

25,00020,000Trend of Occupancy Rate

15,000

As of February 28, 2019, the occupancy rate was 99.5%, as we continued to maintain stable operations.
Portfolio total

Logistics properties

Residential properties

Retail properties

Hotel properties

10,000

Other assets

(%)

5,000

100
99

0

Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug.
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

Feb. Aug.
2038

98

Rating/Outlook (as of February 28, 2019)

97
96

JCR

95
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End of
End ofSep. 2017 Oct. 2017 Nov. 2017 Dec. 2017 Jan. 2018 Feb. 2018 Mar. 2018 Apr. 2018 May 2018 Jun. 2018 Jul. 2018 Aug. 2018 Sep. 2018 Oct. 2018 Nov. 2018 Dec. 2018 Jan. 2019 Feb. 2019Feb. 2018 (24th period)
Aug. 2018 (25th period)
Feb. 2019 (26th period)

14(Japan Credit Rating Agency, Ltd.)AA (Stable)

R&I(Rating and Investment Information, Inc.)

A+ (Positive)
15

ESG Initiatives
Sustainability Policy

DBJ Green Building Certification (as of March 31, 2019)
Establishment of an internal framework and initiatives

1 Prevention of global warming

5 for employees

We will promote energy conservation measures through the installation ofenergy conservation equipment and so forth to realize a carbon-freesociety. We will also consider introduction of renewable energy power
generation facilities and acquisition of properties that have such
equipment installed.

Harmony with the natural environment

We will establish an internal framework for promoting sustainability andtake steps to develop personnel by conducting regular employee
education and training. We will also aim to create workplaces where
people can work safely and healthily, and workplaces where diverse
employees can work flexibly.

Building of trust relationships with external

2 (preservation of biodiversity)

Promoting acquisition of DBJ Green Building Certification
Number of certified
properties

Certified rate
(gross floor area basis)

22 properties

38.8%

Compared with the end of September 2018
+6 properties

Compared with the end of September 2018
+14.0%

Major certified properties
DPL Misato

Royal Parks Hanakoganei

ACROSSMALL Shinkamagaya

Naha Shin-Toshin Center Building(Daiwa Roynet Hotel Naha-Omoromachi)

6 stakeholders

We will aim for a society that is able to pass on abundant natural
resources to future generations in order to protect and improve natural
capital. We will also promote planting and management considering
harmony with the surrounding environment.

Conservation of natural resources

3 (reducing waste, protecting water resources)
We will work towards the realization of a recycling-oriented society bypromoting water conservation measures through the installation of water
conservation equipment. We will also promote 3R activities (reduce,reuse, and recycle) for resources.

We aim to build trust relationships with external stakeholders and we will
work on our suppliers to enhance the satisfaction of tenant customers
and promote CSR in our supply chain. We will undertake neighborhood
co-existence activities with local residents.

10 properties

Promotion of communication through9 properties

7 information disclosure

We will proactively disclose ESG-related information and utilize or
dialogues with stakeholder such as investors in our future businessactivities. Furthermore, we will aim for continuous acquisition of Green
Building Certification.

Compliance with laws and regulations, and

4 Prevention of chemical pollution

8 risk management

We will aim to realize a society where people and ecosystems to not
suffer adverse effects from chemical substances by promoting reduction,
substitution and appropriate management of harmful chemical substances
when managing real estate, and taking efforts to minimize risks.

2 properties

We will comply with ESG-related laws and regulations. Moreover, we will
strive to implement appropriate risk management, such as giving
consideration for the environmental and social impacts in risk evaluations
when acquiring real estate and promoting awareness of human rights.

1 property

BELS Certification

Green Lease Agreement (as of March 31, 2019)

We received the highest 5-star rating in our first evaluation of
Building-Housing Energy-efficiency Labelling System (BELS)
D Project Machida

Sustainability Target
DHR’s asset manager, Daiwa House Asset Management Co., Ltd., recognizes matters such as energy saving and the reductionof greenhouse gas emissions in asset management operations as important environmental issues and has created individual
policies to reduce the environmental burden.
Furthermore, we have established the following reduction target (medium to long term) for energy use.

For individual properties, reduce specific energy consumption and CO2 emission intensity
by 10% in the ten years from 2018 to 2027

We promoted the conclusion of green lease agreements
and implemented initiatives in cooperation with tenants to
reduce the environmental burden
Installed LED lights
Number of properties with green
lease agreements concluded

Ratio of properties with green
lease agreements concluded(gross floor area basis)

28 properties

25.0%

Compared with the end of September 2018+22 properties

Compared with the end of September 2018+19.0%

Consideration for the Environment
Energy conservation measures

Greening and heat island countermeasures

LED lights

Solar power generation system

Large-scale green area

Rooftop greening

Slope to the upper floor

Large-scale window space allowing the use of natural light

Exterior greening, water-permeable paving

Rooftop terraces

Consideration for Society
Local events

Bicycle rentals

AED

Contributions to local
communities

Neighborhood co-existence
activities

Cleanup activities

Japanese lessons· Implementing cleanup activities· Participating as a volunteer in “Japanese
Lesson for People Returning from China”

Governance
Ensuring the presence of third parties in the decision-making flow to protect unitholder interests
In deciding to acquire assets from interested parties, following unanimous agreement by the Compliance Committee including third-party
external experts, a weighted resolution by the Board of Directors and approval by a DHR officers meeting composed only of third partiesare required.

Ownership of investment units by Daiwa House (“Same Boat Investment”)
Number of investment units held by Daiwa House (holding ratio) 187,200 units (9.0%) (as of March 26, 2019)16

GRESB Real Estate Assessment
In the 2018 assessment, both our “Management& Policy” and “Implementation & Measurement”
were highly evaluated, and we received the“Green Star” rating.
In the “GRESB Rating” based on relativeevaluation, we received the “2-Star” rating.
GRESB: An annual benchmark assessment that evaluates ESG
initiatives in the real estate sector

SMBC Environmental Assessment Loan
We received an “A” rating for ourenvironmental initiatives, having
earned high evaluation in the areasof “environmental management,”“environmental communication”
and “environmental conservation
policy initiatives.”

17

Major Portfolio Properties
Logistics properties

Portfolio Map (as of April 10, 2019)
Greater Osaka area

Logistics properties

Kyoto

LM-001DPL Misato

LB-005

Greater Nagoya area
Gifu

Shiga

D Project Urayasu I
Hyogo

Aichi
Mie

Osaka

RM-011ACROSSMALL
Semboku (Land)

Nara

HO-002
Super Hotel Co., Ltd.
JR Nara Station
Sanjo Street

Logistics properties
Residential properties
Retail properties

LB-063
D Project Yokkaichi

Hotel
Other assets

HO-003
Daiwa Roynet Hotel
Nagoya Shinkansenguchi

Assets acquired in the fiscal
period ended February 28, 2019

Logistics properties

Retail properties

LB-026

RM-009D Project Kuki III

Assets acquired in the fiscal
period ending August 31, 2019

FOLEO Otsu Ichiriyama

RU-001COMBOX310
LB-064
D Project Ibaraki Ishioka
RM-012
iias Tsukuba

LB-062
D Project Kuki VIII
LB-057 · LB-058 · LB-059
D Project Kitahachioji I, II, III

LM-003
DPL Kitakyushu

Residential properties
RE-059Castalia Tower Shinagawa Seaside

Hotel properties
HO-001

Daiwa Roynet Hotel
Yokohama Kannai

OT-003

LB-061
D Project Sagamihara

RR-007
Aoyama Tailor Bunkyo
Sengoku Ekimae Store

Other assets
Naha Shin-Toshin Center Building(Daiwa Roynet Hotel Naha-Omoromachi)

RR-008FOLEO Shobu

GreaterTokyo area

Tokyo
23 Wards
Adachi Ward

LB-060
D Project Itabashi Shingashi

Itabashi
Ward

Arakawa
Ward

Nerima Ward
ToshimaWard

Suginami
Ward

NakanoWard

Shinjuku
Ward

Saitama

IbarakiKita
Ward

BunkyoWard

Katsushika
Ward
SumidaWard

Tokyo

Taito Ward
Edogawa
Ward

ChiyodaWard
Shibuya
Ward

Chiba
Koto Ward

MinatoWard Chuo
Ward

Kanagawa

Setagaya Ward
MeguroWard
Shinagawa
Ward
Ota Ward

18

OT-005
Nursery Room Berry Bear Omori Nishi
Welcia Ota Omori Nishi Store
19

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II. Balance Sheets
Daiwa House REIT Investment Corporation

Daiwa House REIT Investment Corporation

BALANCE SHEETSBALANCE SHEETS, CONTINUED

As of August 31, 2018 and February 28, 2019

As of August 31, 2018 and February 28, 2019

As of

As of

August 31, 2018 February 28, 2019

August 31, 2018 February 28, 2019
(Yen in thousands)
AssetsCurrent assets:
Cash and bank deposits (Notes 3 and 4)
Operating accounts receivable
Prepaid expenses
Consumption taxes receivable
Other current assets
Allowance for doubtful accounts
Total current assets¥37,460,508
176,748
618,449
3,551,655
227(2,137)41,805,452¥41,250,978275,683
609,658―
25(1,225)
42,135,120

Investment properties (Notes 8 and 9)646,194,941

654,523,691

71,360,157
6,035,339
3,489,293
261
2,284,919
99,182
9,342
569
2,337
83,281,402¥771,281,796

69,377,930
5,987,926
3,489,293
261
2,110,873
90,823
9,360
276
2,059
81,068,804¥777,727,616

Other assets:
Goodwill (Note 7)
Leasehold rights in trust (Note 9)
Lease and guarantee deposits in trust
Guarantee deposits
Long-term prepaid expenses
Investment corporation bond issuance costs
Investment securities (Note 5)
SoftwareTrademark rights
Total other assets
Total assets
The accompanying notes are an integral part of these financial statements.

(Yen in thousands)
Liabilities
Current liabilities:
Operating accounts and other payable
Current portion of long-term loans (Notes 4, 6 and 15)
Accrued expenses
Accrued consumption taxes
Advances received
Unearned revenue
Deposits received
Other
Total current liabilities¥1,642,979
11,600,000
1,390,790―
2,675,485
221,735
327,234
90,42917,948,655¥1,364,351
40,510,000
1,418,415
398,538
2,757,226
222,342345,273
91,92947,108,077

Non-current liabilities:
Investment corporation bonds (Notes 4 and 14)
Long-term loans (Notes 4, 6 and 15)
Long-term unearned revenue
Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust
Asset retirement obligations (Note 11)
Derivative liabilities (Notes 4 and 6)
Total non-current liabilities
Total liabilities

19,000,000
283,668,000
928,843
280,916
17,422,350
620,349
816,561
322,737,022
340,685,677

19,000,000
261,758,000
818,279
276,389
17,854,492
626,251
1,063,056
301,396,469
348,504,547

163,230,367

163,230,367

247,667,563

247,667,563

10,785,218
1,964,241
12,749,459
7,765,290
268,182,313
431,412,680

8,804,571
1,986,536
10,791,107
8,597,087
267,055,758
430,286,126(816,561)(816,561)
430,596,119¥771,281,796(1,063,056)(1,063,056)
429,223,069¥777,727,616

Net assets (Notes 12 and 13)
Unitholders’ equity:
Unitholders’ capital
Units authorized:
8,000,000 units as of August 31, 2018 and February 28, 2019
Units issued and outstanding:
1,927,000 units as of August 31, 2018 and February 28, 2019

SurplusCapital surplus
Voluntary reserve
Reserve for temporary difference adjustments
Reserve for distribution
Total voluntary reserve
Unappropriated retained earnings
Total surplus
Total unitholders’ equity
Valuation and translation adjustments
Deferred gains or losses on hedges (Note 6)
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these financial statements.

54

55

III. Statements of Income and Retained Earnings

IV. Statements of Changes in Net Assets

Daiwa House REIT Investment Corporation

Daiwa House REIT Investment Corporation

STATEMENTS OF INCOME AND RETAINED EARNINGSSTATEMENTS OF CHANGES IN NET ASSETSFor the fiscal periods ended August 31, 2018 and February 28, 2019

For the fiscal periods ended August 31, 2018 and February 28, 2019㻌

For the fiscal periods ended

Valuationandtranslation
adjustments

August 31, 2018 February 28, 2019
Unitholders’ equity(Yen in thousands)
Operating revenues:
Rental revenues (Note 10)
Gain on sale of investment properties (Note 18)
Total operating revenues
Operating expenses:
Rental expenses (Note 10)
Loss on sale of investment properties (Note 18)
Asset management fees
Asset custody fees
Administrative service fees
Directors’ remuneration
Amortization of goodwill (Note 7)
Provision of allowance for doubtful accounts
Other operating expenses
Total operating expenses
Operating income
Non-operating revenues:
Interest income
Gain on forfeiture of unclaimed distributions
Settlement received
Reversal of allowance for doubtful accounts
Property tax adjustment at settlement
Refunded consumption taxes
Interest on tax refund
Other non-operating revenues
Total non-operating revenues
Non-operating expenses:
Interest expense
Interest expense on investment corporation bonds
Amortization of investment corporation bond issuance costs
Investment unit issuance expenses
Borrowing related expenses
Other non-operating expenses
Total non-operating expenses
Ordinary income
Extraordinary losses:
Loss on litigation (Note 19)
Total extraordinary losses
Income before income taxes
Income taxes-current (Note 17)
Net income
Unappropriated retained earnings

Surplus¥22,211,576―
22,211,576¥23,013,558
113,532
23,127,090

8,944,104
99,3801,452,834
32,882
83,8596,600
1,982,226
561
339,658
12,942,107
9,269,468

9,184,698―
1,519,464
33,727
89,1966,600
1,982,226―
351,000
13,166,914
9,960,176

178
4,168
10,070――22,295―2,573
39,287

166
4,436
―
266
1,564
6,720
1,518
1
14,674

1,019,240
42,392
7,709
191,068
275,881
2,056
1,538,348
7,770,407

1,036,887
51,092
8,358―
278,819
2,000
1,377,157
8,597,692

4,512
4,512
7,765,895
605¥7,765,290¥7,765,290――
8,597,692
605¥8,597,087¥8,597,087

Voluntary reserve
Numberof units
issuedand out- Unitholders’capitalstanding

CapitalsurplusReserve for
Unapprotemporary
priateddifference Reserve for retained
adjustments distribution earnings(Units)Totalunitholders’equityDeferred
gains orlosses onhedgesTotal net
assets(Yen in thousands)

Balance as of February 28, 2018 1,690,000 ¥108,136,162 ¥247,667,563 ¥12,767,357¥1,617,617 ¥7,142,344 ¥377,331,045¥(1,030,085) ¥376,300,960

Changes during the period:
Issuance of investment units:on March 19, 2018
on April 13, 2018

222,000

51,607,230

―

―

―

―

51,607,230―

51,607,230

―

―

―

―

3,486,975―

3,486,975―

1,982,138―――

346,623(346,623)―――

15,0003,486,975

Reversal of reserve fortemporary difference
adjustments――― (1,982,138)

Reserve for distribution

―

―

―

―

Distributions from retained
earnings

―

―

―

―

― (8,777,860)(8,777,860)―(8,777,860)

Net income

―

―

―

―

―

7,765,290

7,765,290―

7,765,290

Net changes of items otherthan changes of unitholders’equity

―

―

―

―

―

―

―

213,523

213,523

Total changes during the period

237,000

55,094,205― (1,982,138)

346,623

622,945

54,081,635

213,523

54,295,158

Balance as of August 31, 2018

1,927,000 ¥163,230,367 ¥247,667,563 ¥10,785,218¥1,964,241 ¥7,765,290 ¥431,412,680¥(816,561) ¥430,596,119

Changes during the period:
Reversal of reserve fortemporary difference
adjustments――― (1,980,646)

Reserve for distribution

―

―

―

―

Distributions from retained
earnings―――

Net income――

Net changes of items otherthan changes of unitholders’equity―Total changes during the period――

1,980,646―――

22,295(22,295)

―

―

―

―

― (9,723,642)(9,723,642)―(9,723,642)

―

―

―

8,597,087

8,597,087―

8,597,087

―

―

―

―

―

―

(246,495)(246,495)―― (1,980,646)

22,295

831,797(1,126,554)(246,495)(1,373,049)

Balance as of February 28, 2019 1,927,000 ¥163,230,367 ¥247,667,563 ¥8,804,571¥1,986,536 ¥8,597,087 ¥430,286,126¥(1,063,056) ¥429,223,069

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

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

56

57

V. Statements of Cash Flows

VI. Notes to Financial Statements

Daiwa House REIT Investment Corporation

Daiwa House REIT Investment Corporation

STATEMENTS OF CASH FLOWS

Notes to Financial Statements

For the fiscal periods ended August 31, 2018 and February 28, 2019

As of and for the fiscal periods ended August 31, 2018 and February 28, 2019

For the fiscal periods ended
August 31, 2018 February 28, 2019
(Yen in thousands)
Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Amortization of goodwill
Amortization of investment corporation bond issuance costs
Amortization of trademark rights
Amortization of software
Loss on retirement of non-current assets
Investment unit issuance expenses
Interest income
Interest expense
Increase in operating accounts receivable(Increase) decrease in accounts receivable(Increase) decrease in consumption taxes receivable(Increase) decrease in prepaid expenses
Increase (decrease) in operating accounts and other payable
Increase in accrued expenses(Decrease) increase in deposits received
Increase in advances received(Increase) decrease in long-term prepaid expenses
Decrease in allowance for doubtful accounts
Decrease in provision for loss on litigation
Decrease in investment properties due to sales
Decrease in investment properties in trust due to sales
Increase in lease and guarantee deposits in trust
Other
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Acquisition of investment properties
Acquisition of intangible assets in trust
Proceeds from tenant leasehold and security deposits
Repayment of tenant leasehold and security deposits
Proceeds from tenant leasehold and security deposits in trust
Repayment of tenant leasehold and security deposits in trust
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term loans
Repayment of long-term loans
Proceeds from issuance of investment corporation bonds
Proceeds from issuance of investment units
Distribution payment
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period (Note 3)
The accompanying notes are an integral part of these financial statements.

58¥7,765,895
4,296,514
1,982,226
7,709
278
292
16,012
191,068(178)
1,061,632(28,319)(127)(3,785,886)(46,785)
275,412
170,806(47,265)424,696(75,229)(23,989)(89,514)―2,814,320(74,572)
214,356
15,049,353
178(1,168,950)(608)
13,879,972¥8,597,692
4,454,820
1,982,226
8,358
278
292
17,768―(166)
1,087,979(98,934)127
3,950,194
8,790(229,900)
29,267
18,03881,741
174,045(911)―
1,044,407――
104,553
21,230,670
166(1,199,579)(603)
20,030,654(97,941,078)(661,753)
43,535(19,069)
3,801,302(766,840)(95,543,905)(13,850,790)―
26,682(82,788)844,486(457,861)(13,520,271)

32,000,000(3,000,000)
2,971,170
54,903,136(8,771,497)
78,102,808(3,561,123)
41,021,631¥37,460,508

7,000,000―――(9,719,912)(2,719,912)
3,790,470
37,460,508¥41,250,978㻌㻌

Note 1 – Organization and Basis of Presentation㻌
Organization
Daiwa House REIT Investment Corporation (“DHR”) is a real estate investment trust whose sponsor is Daiwa
House Industry Co., Ltd. (“Daiwa House”) and whose asset manager is Daiwa House Asset Management Co., Ltd.
(the “Asset Manager”), a wholly owned subsidiary of Daiwa House.
DHR was listed on the Real Estate Investment Trust (“REIT”) Market of the Tokyo Stock Exchange, Inc. (“TSE”)
on March 22, 2006, and then later merged with New City Residence Investment Corporation on April 1, 2010.
Subsequently, on December 1, 2011, DHR changed its corporate name to Daiwa House Residential Investment
Corporation, and accordingly changed its investment targets to residential properties.
The former Daiwa House REIT Investment Corporation (the Daiwa House REIT Investment Corporation, which
was dissolved upon the merger with DHR as of September 1, 2016, and hereinafter referred to as the “former
DHR”) was established on September 14, 2007, whose asset manager was Daiwa House REIT Management Co.,
Ltd., a wholly owned subsidiary of Daiwa House. The former DHR was listed on the TSE REIT Market on
November 28, 2012, as a REIT that targeted investment in logistics and retail properties.
On September 1, 2016, DHR merged with the former DHR in an absorption-type merger with DHR as thesurviving corporation, and changed its corporate name from Daiwa House Residential Investment Corporation to
Daiwa House REIT Investment Corporation.
After the merger, DHR shifted to a diversified REIT portfolio that targets investment in new asset classes such as
hotel and office properties, in addition to those that DHR and the former DHR had targeted for investments in thepast. As of February 28, 2019, DHR’s portfolio included 216 properties at a total acquisition price of ¥683.4 billion.

㻌Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Act
on Investment Trust and Investment Corporations (the “Investment Trust Act,” Act No. 198 of 1951, as amended)
the Financial Instruments and Exchange Act of Japan and its related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements from International Financial Reporting Standards or accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been reformatted and translated into English from the financial
statements of DHR prepared in accordance with Japanese GAAP. In preparing the accompanying financial
statements, relevant notes have been expanded and certain reclassifications have been made from the Japanese
GAAP financial statements. Certain supplementary information included in the statutory Japanese GAAP financial
statements, but not required for fair presentation, is not presented in the accompanying financial statements.
DHR maintains its accounting records in Japanese yen, the currency of the country in which DHR operates. As
permitted by the regulations under the Financial Instruments and Exchange Act, amounts of less than thousand yen
have been omitted. Unless otherwise specified, amounts of less than the units indicated are truncated, while valuesof ratios are rounded up or down to the nearest value of the last digit in the accompanying financial statements. As aresult, totals shown in the accompanying financial statements do not necessarily agree with the sums of theindividual amounts.

59VI. Notes to Financial Statements
DHR’s fiscal period is a six-month period ending at end of February and August of each year.

(e) Investment Unit Issuance Expenses
The issuance costs of new investment units are expensed when incurred.

Note 2 – Summary of Significant Accounting Policies(f) Investment Securities

㻌(a) Cash and Cash Equivalents
Held-to-maturity bonds are stated at amortized cost using the straight-line method.
Cash and cash equivalents consist of cash on hand and in trust, bank deposits and deposits in trust redeemable on
demand, and short-term investments, which are readily convertible to cash, with maturities of three months or lessfrom the date of acquisition, and insignificant risk of market value fluctuation.

Rental revenues including fixed rent revenues, variable rent revenues and common area charges, are recognizedon an accrual basis over the term of each lease agreement.

(b) Investment Properties㻌
Investment properties are stated at cost, net of accumulated depreciation. The cost of investment properties
includes the allocated purchase price, related costs and expenses for acquisition. Depreciation is calculated on astraight-line basis over the estimated useful lives as stated below.
Years

Buildings
Structures
Machinery and equipment
Tools, furniture and fixtures

2 – 693 – 63
7 – 282 – 28

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures forrepairs and maintenance, which do not add to the value or prolong the useful life of a property, are expensed as
incurred.

(h) Taxes on Property and Equipment
Property and equipment are subject to various taxes, such as property taxes and city planning taxes. An owner ofa property is registered in a record maintained by the local government of the applicable jurisdiction, and taxes are
imposed on the owner registered in the record as of January 1, based on an assessment made by the local
government. The taxes are determined in April to June of each year and are paid in four installments during the year.
When a property is purchased prior to January 1 of any given calendar year, taxes for the previous year are
imposed on the seller. DHR pays the seller the corresponding amount of the taxes for the period from the property’s
acquisition date to December 31 of the previous year as included in the purchase price of the property, andcapitalizes this amount as an acquisition cost of the property.

(i) Income Taxes
Deferred tax assets and liabilities are computed based on the differences between the financial reporting andincome tax bases of assets and liabilities using the enacted tax rates.

(c) Intangible Assets
Intangible assets are amortized on a straight-line basis. The useful lives of major intangible assets are listed below.
Years

Goodwill
Computer software(g) Revenue Recognition

20
5

Leasehold rights (general fixed-term land lease rights) are amortized on a straight-line basis over the life of eachcontract.

(d) Investment Corporation Bond Issuance Costs
Investment corporation bond issuance costs are amortized on a straight-line basis over the redemption periods.

(j) Allowance for Doubtful Accounts
To cover possible losses on collection, allowance for doubtful accounts is provided based on past experience fornormal receivables and on an estimate of the collectability of receivables from companies in financial difficulty.

(k) Consumption Taxes
Consumption taxes withheld and consumption taxes paid are not included in the accompanying statements ofincome and retained earnings. Non-deductible consumption taxes for acquisition of assets are added on to theacquisition cost of each asset.

(l) Trust Beneficiary Interests
For trust beneficiary interests in real estate, each of the trust assets and liabilities as well as all income generated
and expenses incurred in trusts are recorded in the relevant balance sheet and income statement accounts.

(m) Derivatives and Hedge Accounting
Deferral hedge accounting is applied for derivatives. DHR uses interest-rate swaps as hedging instruments in

60

61

VI. Notes to Financial Statements
order to hedge the risk of interest rate fluctuations related to borrowings. Pursuant to Japanese GAAP, DHR applies
the special accounting treatment to interest-rate swaps which qualify for hedge accounting and meet specific criteria.
Under the special accounting treatment, the related differentials paid or received under such swap contracts can berecognized and included in interest expenses or income of the hedged assets or liabilities, and the interest-rate swaps
are not required to be measured at fair value separately.
The assessment of hedge effectiveness is omitted when the significant terms of the hedged item and hedging
instrument, including the notional principal amount, are the same and changes in cash flows of the hedged item canbe expected to be offset in full from the commencement of a hedge relationship and continuously thereafter. The
assessment of hedge effectiveness is also omitted for all interest-rate swaps which meet the specific criteria under
the special accounting treatment.

The Asset Manager stipulates basic provisions of risk management in its risk management rules.
Investment corporation bonds and loans are used to finance acquisitions of real estate and repayments of loans.
Although these financial instruments are exposed to liquidity risk, DHR controls such risk by maintaining the ratio
of interest-bearing debt to total assets under a certain percentage, dispersing repayment dates, and retaining a certain
amount of highly liquid cash and deposits.
Floating rate loans are exposed to the risk of interest rate fluctuations. In order to reduce the impact caused byrising interest rates, DHR closely monitors the movement of interest rates and intends to increase fixed rate loans.
Deposits are exposed to credit risks, including collapse of the financial institutions where deposits are made. DHR
manages such risks through the use of liquid deposits.
Supplemental explanation concerning fair value of financial instruments

Note 3 – Cash and Cash Equivalents
Cash and cash equivalents shown in the statement of cash flows consist of the following balance sheet items.
As ofAugust 31, 2018 February 28, 2019
(Yen in thousands)

Cash and bank deposits
Cash and cash equivalents

Nature and extent of risks arising from financial instruments and risk management¥37,460,508¥37,460,508¥41,250,978¥41,250,978

Note 4 – Financial Instruments(a) Qualitative Information on Financial Instruments
Policy on financial instruments
As a policy, when acquiring real estate and other properties, as well as when repaying its obligations, DHR raises
necessary funds through loans from financial institutions, issuance of investment corporation bonds and issuance ofinvestment units, etc. DHR carefully pays attention to ensure their financing to be long-term, cost effective andstable, while considering applying various financial methods and dispersing repayment dates.
DHR may use derivative financial instruments for such purposes as hedging interest rate fluctuation risk, but does
not use them for speculative purposes. DHR currently uses interest-rate swaps to hedge interest rate fluctuation risk.
Surplus funds can be invested in securities or monetary claims; however, as a current policy of DHR, they aredeposited in interest-bearing accounts.

The fair value of financial instruments is determined by market prices, if available. When there is no observable
market price available, the fair value is based on a price that is reasonably estimated. Since certain assumptions andfactors are reflected in estimating the fair value, different assumptions and factors could result in a different value.

(b) Estimated Fair Value of Financial Instruments
Book value on the balance sheet, fair value and the difference as of August 31, 2018 and February 28, 2019 are as
follows:
As ofAugust 31, 2018

February 28, 2019
(Yen in thousands)

Book value
Fair value Difference
Assets(1) Cash and bank deposits ¥37,460,508 ¥37,460,508¥―(2) Investment securities:
9,342
8,921
(421)
Held-to-maturity bonds
Total¥37,469,850 ¥37,469,429¥(421)
Liabilities(3) Current portion of¥11,600,000 ¥11,613,463¥13,463
long-term loans(4) Investment corporation
19,000,000
19,028,099
28,099bonds(5) Long-term loans
283,668,000 286,291,112 2,623,112(6) Tenant leasehold and624,821609,723(15,098)
security deposits in trust
Total¥314,892,821 ¥317,542,398 ¥2,649,577(7) Derivatives (*)¥(816,561)¥(816,561)¥―

Book value

Fair value

Difference¥41,250,978 ¥41,250,978

¥―

9,360

9,228

(132)

¥41,260,338 ¥41,260,206¥(132)¥40,510,000 ¥40,614,396¥104,396

19,000,000

19,129,020

129,020

261,758,000 265,438,709

3,680,709

603,606

596,174(7,432)¥321,871,606 ¥325,778,301 ¥3,906,694¥(1,063,056) ¥(1,063,056)¥―(*) Amounts arising from derivative transactions are shown on a net basis with any amounts inside parentheses( ) indicating a net liability position.

62

63

VI. Notes to Financial Statements
Notes:
1. Methods to estimate fair value of financial instruments and matters regarding derivatives
Assets:(1) Cash and bank deposits
These instruments are settled in the short term and their fair value is approximately equal to their book value.
Thus, the book value is used as the fair value.
(2) Investment securities
The fair value is based on reference statistical prices for OTC bond transactions.
For the book value on the balance sheet and the fair value of held-to-maturity bonds, and the difference
between the two values, please refer to Note 5 – “Investment Securities” below.
Liabilities:(3) Current portion of long-term loans and (5) Long-term loans
For long-term loans with floating interest rates, their fair value is approximately equal to their book value.
Thus, the book value is used as the fair value. However, for those which are hedged by interest rate swaps
meeting hedge accounting criteria, DHR employs a method to calculate the fair value by discounting thetotal of the principal and interest accounted for under the special accounting treatment for interest rate swaps
by an interest rate assumed to be applied if similar types of loans are entered into.
For long-term loans with fixed interest rates, DHR employs a method to calculate the fair value by
discounting the total of the principal and interest by an interest rate assumed to be applied if similar types ofloans are entered into.
(4) Investment corporation bonds
The fair value of these bonds is measured as the present value, which is calculated by discounting the total ofprincipal and interest by the interest rate assumed based on the remaining period until maturity and creditrisk.
(6) Tenant leasehold and security deposits in trust
For tenant leasehold and security deposit in trust whose fair value is reasonably estimated, the fair value iscalculated by discounting future cash flows by the interest rate assumed for the remaining period of the lease.
(7) Derivatives
Please refer to Note 6 – “Derivative Transactions” below.

As ofAugust 31, 2018
February 28, 2019
(Yen in thousands)¥280,916
16,797,529¥276,389
17,250,886

These are excluded from the scope of fair value disclosure because they are not marketable, and the actual
deposit period is not estimable as leases may be cancelled, renewed or re-signed even if a lease term is set in thelease contract, which in turn makes it difficult to reasonably estimate future cash flows.

64

As of August 31, 2018

Cash and bank deposits
Investment securities
Total

As of February 28, 2019

Cash and bank deposits
Investment securities
Total

Due within
one year

Due after
one totwo years¥37,460,508―¥37,460,508

¥―
―
¥―

Due within
one year

Due after
one totwo years¥41,250,978―¥41,250,978

¥―
―
¥―

Due after
Due after
two tothree tothree years four years(Yen in thousands)

¥―
―
¥―

Due after
four to five
years

¥―
―
¥―

¥―
―
¥―

Due after
Due after
two tothree tothree years four years(Yen in thousands)

Due after
four to five
years

¥―
―
¥―

¥―
―
¥―

¥―
―
¥―

Due after
five years¥―
10,000¥10,000
Due after
five years¥―
10,000¥10,000

4. Repayment schedule for investment corporation bonds and long-term loans after August 31, 2018 and February
28, 2019 is as follows:

As of August 31, 2018

Due after
Due within
one to two
one yearyears

Due after
Due after
two tothree to four
three years
years(Yen in thousands)

Due after
four to fiveyears

Due after fiveyears

Investment corporation bonds
Long-term loans (*)
Total

¥―
¥― ¥3,000,000 ¥4,000,000¥―
11,600,000 36,810,000 16,000,000 33,858,000 35,900,000¥11,600,000 ¥36,810,000 ¥19,000,000 ¥37,858,000 ¥35,900,000¥12,000,000
161,100,000¥173,100,000(*) The figures above include the current portion.

As of February 28, 2019

Due after
Due within
one to two
one yearyears

Due after
Due after
two tothree to four
three years
years(Yen in thousands)

Due after
four to fiveyears

Due after fiveyears

Investment corporation bonds
Long-term loans (*)
Total¥― ¥3,000,000 ¥4,000,000¥―¥―
40,510,000 11,400,000 26,358,000 38,500,000 35,400,000¥40,510,000 ¥14,400,000 ¥30,358,000 ¥38,500,000 ¥35,400,000¥12,000,000
150,100,000¥162,100,000(*) The figures above include the current portion.

2. Financial instruments whose fair value is deemed extremely difficult to determine

Tenant leasehold and security deposits
Tenant leasehold and security deposits in trust

3. Redemption schedule for monetary claims after August 31, 2018 and February 28, 2019 is as follows:

Note 5 – Investment Securities
Investment securities held by DHR are Japanese government bonds deposited with the Tokyo Legal Affairs
Bureau as business security deposits in accordance with the Building Lots and Building Transaction Business Act.
Book value on the balance sheet, fair value and the difference as of August 31, 2018 and February 28, 2019 are as
follows:

65

VI. Notes to Financial Statements
Note 7 – Goodwill

As ofAugust 31, 2018

February 28, 2019
(Yen in thousands)

Book value

Fair value exceeding the book value
Held-to-maturity bonds:
Government bonds
Subtotal

Fair value

DifferenceBook value

Fair value

Difference

¥―
―

¥―
―

¥―
―

¥―
―

¥―
―

¥―
―

Fair value not exceeding the book value
Held-to-maturity bonds:
Government bonds
9,342
Subtotal
9,342¥9,342
Total

8,921
8,921
¥8,921(421)(421)¥(421)

9,360
9,360¥9,3609,228
9,228¥9,228(132)(132)¥(132)On September 1, 2016, DHR merged with the former DHR in an absorption-type merger (the “Merger”) with
DHR as the surviving corporation and the former DHR as the absorbed corporation.
On the business combination date, consideration given for the acquisition was ¥219,425,976 thousand, which was
the amount equivalent to the fair value of DHR investment units allotted, while the fair value of the net assets
acquired from the former DHR was ¥140,136,912 thousand. The excess of the acquisition cost over the fair value ofthe net assets acquired, in the amount of ¥79,289,063 thousand, was recognized as goodwill upon the Merger. The
amount of goodwill is amortized over 20 years using the straight-line method. As of August 31, 2018 and February
28, 2019, the unamortized balances of goodwill from the Merger were ¥71,360,157 thousand and ¥69,377,930
thousand, respectively.

Note 8 – Investment Properties
As of August 31, 2018 and February 28, 2019, investment properties consist of the following property andequipment and property and equipment in trust.

Note 6 – Derivative Transactions(a) Derivative Transactions for Which Hedge Accounting Has Not Been Applied –– None

As of
August 31, 2018(b) Derivative Transactions for Which Hedge Accounting Has Been Applied
Contract amount or notional principal amount of derivative transactions classified by hedge accounting method is
as follows:
As ofType of derivativetransaction

Hedgeditem

August 31, 2018
Contract amountDue after
Total
one yearPrinciple method
Interest-rate swap
Long-term
Receive floating/¥47,500,000 ¥47,500,000
loan
Pay fixed
Special treatment for interest-rate swaps
Interest-rate swap
Long-term
Receive floating/48,268,000 48,268,000
loan
Pay fixed¥95,768,000 ¥95,768,000
Total

February 28, 2019
Contract amount
Fair
Fair
Due after
value
value
Total
one year(Yen in thousands)¥(816,561)(Note 1)

¥47,500,000 ¥47,500,000 ¥(1,063,056)(Note 1)

(Note 2)

48,268,000 30,858,000¥(816,561)¥95,768,000 ¥78,358,000 ¥(1,063,056)(Note 2)Acquisition Accumulated
cost
depreciation

Property and equipment:
Land¥21,637,530
Buildings
26,566,010
Structures
249,493
Machinery and equipment
454,987
Tools, furniture and fixtures
669,144February 28, 2019
(Yen in thousands)
Acquisition AccumulatedNet
cost
depreciation¥― ¥21,637,530
4,374,887 22,191,122
43,759205,733
129,260
325,726
354,201
314,943

Property and equipment in trust:Land
302,954,257― 302,954,257
Buildings
317,552,921 27,516,054 290,036,867
Structures
7,054,268
547,6446,506,624
Machinery and equipment
2,361,439
932,610
1,428,829
Tools, furniture and fixtures
867,589
348,059
519,530
Construction in progress
73,774―73,774¥680,441,418 ¥34,246,477 ¥646,194,941
Total¥20,879,124
26,298,220
245,467
472,105
676,056

Net¥― ¥20,879,124
4,602,743 21,695,476
45,395200,072
138,790
333,314377,657
298,398

310,001,420― 310,001,420
323,844,247 31,322,569 292,521,677
7,302,031
688,505
6,613,525
2,417,497
1,017,666
1,399,830
967,046
401,423565,623
15,228―15,228¥693,118,444 ¥38,594,752 ¥654,523,691

Notes:
1. Fair value is quoted by counterparties based on the prevailing market interest rates.
2. Under the special accounting treatment, interest-rate swaps are accounted for as part of the long-term loans, thehedged item; thus, the fair value is included in the fair value of the long-term loans. (Please refer to Note 4 –“Financial Instruments” above.)

66

67

VI. Notes to Financial Statements
For the fiscal periods ended
August 31, 2018
February 28, 2019
(Yen in thousands)

Note 9 – Fair Value of Investment Properties
DHR owns logistics, residential, retail and hotel properties, and other assets for lease in the Tokyo metropolitan
area and other areas for the purpose of earning rental revenues. The book value of these investment properties
including leasehold rights in trust, net change in the book value and the fair value are as follows:
As of / For the fiscal periods ended
August 31, 2018
February 28, 2019
(Yen in thousands)

Book value:
Balance at beginning of the period
Net change during the period
Balance at end of the period
Fair value at end of the period¥560,376,601
91,853,678¥652,230,280¥731,042,000¥652,230,280
8,281,337¥660,511,618¥753,721,000

Notes:
1. The book value above includes leasehold rights in trust of ¥6,035,339 thousand and ¥5,987,926 thousand as ofAugust 31, 2018 and February 28, 2019, respectively.
2. For the period ended August 31, 2018, the increase is mainly due to acquisitions of 16 properties including
DPL Fukuoka Kasuya (¥97,823,050 thousand), while the decrease is principally attributable to the sale of Crest
Kusatsu (¥2,814,320 thousand) and depreciation. For the period ended February 28, 2019, the increase ismainly due to acquisitions of four properties including COMBOX310 (¥12,912,161 thousand), while thedecrease is principally attributable to the sale of Morino Tonari (¥1,044,407 thousand) and depreciation.
3. The fair value at end of the period represents the value assessed by third-party real estate appraisers.

Rental expenses:
Management fees
Utilities
Taxes and public dues
Repairs
Restoration costs
Insurance premiums
Custodian fees
Depreciation and amortization
Other operating expenses
Total rental expenses
Operating income from property leasing activities¥1,283,640
349,856
1,432,107
746,985
230,219
27,55858,202
4,454,820
601,307¥9,184,698¥13,828,859

Note 11 – Asset Retirement Obligations
DHR has entered into fixed-term land lease agreements with some landowners, and recognizes asset retirement
obligations associated with restoration obligations upon expiration of the lease agreements.
DHR estimates the useful life of applicable assets as the remaining period of the fixed-term land lease agreements(46 – 60 years), and uses a 1.0 – 2.4% discount rate for the calculation of asset retirement obligations. Changes in
asset retirement obligations for the periods ended August 31, 2018 and February 28, 2019 are as follows:
For the fiscal periods ended
August 31, 2018
February 28, 2019
(Yen in thousands)

Note 10 – Rental Revenues and Expenses
Rental revenues generated from investment properties and related expenses for the periods ended August 31, 2018
and February 28, 2019 are as follows:㻌
For the fiscal periods ended
August 31, 2018
February 28, 2019
(Yen in thousands)

Rental revenues:
Rental revenues
Common area charges
Subtotal¥1,303,367
342,082
1,440,930
568,311
311,974
26,911
68,447
4,296,514
585,563¥8,944,104¥13,267,472¥20,695,802
464,918
21,160,720¥21,511,590
473,366
21,984,957

365,832
295,306
389,716
1,050,855¥22,211,576

382,753
283,633
362,213
1,028,600¥23,013,558

Balance at beginning of the period
Increase due to acquisitions of property and equipment
Accretion expense
Balance at end of the period¥439,186
175,465
5,698¥620,349¥620,349―
5,901¥626,251

Other revenues related to property leasing:
Facility charges
Incidental revenues
Other revenues
Subtotal
Total rental revenues

68

69

VI. Notes to Financial Statements
Note 12 – Net Assets

Note 14 – Investment Corporation Bonds

DHR issues only non-par value units in accordance with the Investment Trust Act and all issue amounts of newunits are designated as stated capital. DHR maintains net assets of at least ¥50,000 thousand as required by
Paragraph 4 of Article 67 of the Investment Trust Act.

Note 13 – Distribution Information
In accordance with Article 37.1.1 of the bylaws set forth by DHR for cash distributions, the amount of distribution
is limited to the amount of income and more than 90% of income available for distribution as set forth in Article
67.15 of the Special Taxation Measures Act of Japan (the “Measures”), which allows the REITs to deduct theamount of cash distributions from taxable income to avoid double taxation if certain requirements are met.
Also, DHR implemented its policy of stabilized distributions by utilizing a reserve for temporary difference
adjustments. In accordance with the foresaid policy, a cash distribution is declared for the amount calculated bydeducting the amount of accumulation of reserve for distribution from the total of unappropriated retained earnings
and reversal of reserve for temporary difference adjustments.
Adopting the transitional measure stipulated in the paragraph 3 of supplementary provision of the “Ordinance on
Accountings of Investment Corporations” (Cabinet Office Ordinance No. 27 of 2015), subsequent to February 28,
2017, DHR transferred the reserve for distribution of ¥14,748,347,148, which was the balance retained from gain on
negative goodwill recognized in the past, to the reserve for temporary difference adjustments account. The
Ordinance prescribes that, from the fiscal period following the period in which the amount is reserved, a minimumof 1% of the remaining balance shall be appropriated from reserve for temporary difference adjustments for cash
distributions. Instead of appropriating the minimum amounts as set forth by the Ordinance, DHR appropriated theamounts equivalent to goodwill amortization expenses in accordance with the cash distribution policy set forth in the
Articles of Incorporation from the fiscal period ended August 31, 2017. The amounts appropriated for distributions
related to the periods ended August 31, 2018 and February 28, 2019 were ¥1,980,646,890 and ¥1,980,994,520,
respectively, which were greater than the aforementioned minimum amounts as set forth by the Ordinance.
No cash distribution exceeding the income amount set forth in Article 37.2 of the bylaws of DHR shall be made.
Distributions related to the period but declared after the balance sheet date are summarized as follows:

As ofAugust 31, 2018 February 28, 2019
(Yen in thousands)

Description

Issue date

Maturity date

Interestrate

Daiwa House REIT
Investment Corporation
1st Unsecured Bonds

December 24,
2014

December 24,
2024

0.826%¥2,000,000¥2,000,000

Daiwa House Residential
Investment Corporation
2nd Unsecured Bonds

January 22,
2015

January 22,
2021

0.35%

3,000,000

3,000,000

Daiwa House Residential
Investment Corporation
3rd Unsecured Bonds

January 22,
2015

January 22,
2025

0.67%

3,000,000

3,000,000

Daiwa House REIT
Investment Corporation
5th Unsecured Bonds

December 20,
2016

December 20,
2021

0.24%

4,000,000

4,000,000

Daiwa House REIT
Investment Corporation
6th Unsecured Bonds

December 20,
2016

December 18,
2026

0.57%

4,000,000

4,000,000

Daiwa House REIT
Investment Corporation
7th Unsecured Bonds

July 30, 2018

July 30, 2030

0.69%

2,000,000

2,000,000

July 30, 2018

July 30, 2038

1.03%

1,000,000

1,000,000¥19,000,000¥19,000,000

Daiwa House REIT
Investment Corporation
8th Unsecured Bonds
Total

For the fiscal periods endedAugust 31, 2018
February 28, 2019
(Yen)

㻌

Total

Unappropriated retained earnings
Reversal of voluntary reserve:
Reserve for temporary difference adjustments
Accumulation of voluntary reserve:
Reserve for distribution
Cash distributions
Retained earnings carried forward

70

The following summarizes the status of the DHR’s unsecured investment corporation bonds with special paripassu conditions among specified investment corporation bonds as of August 31, 2018 and February 28, 2019. The
bonds are to be repaid on a lump-sum basis on the maturity date.

Per unit

Total¥7,765,290,290¥8,597,087,441

1,980,646,890

1,980,994,520(22,295,180)¥9,723,642,000(120,252,961)¥10,457,829,000¥―¥―¥5,046

Per unit¥5,42771

VI. Notes to Financial Statements
As ofNote 15 – Long-Term Loans
Long-term loans consist of borrowings from financial institutions under loan agreements. None of the loans are
secured by collateral or guaranteed. The following table summarizes long-term loans as of August 31, 2018 andFebruary 28, 2019.
As of
Due date

Long-term loans:
Fixed-rate long-term loan
Floating-rate long-term loan
Fixed-rate long-term loan
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Fixed-rate long-term loan
Floating-rate long-term loan
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Fixed-rate long-term loan
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Floating-rate long-term loan (*)

72

March 27, 2019
March 29, 2019
November 29, 2019
January 31, 2020
January 31, 2020
April 1, 2020
March 31, 2020
January 31, 2021
April 1, 2021
November 30, 2021
April 30, 2021
January 31, 2022
April 28, 2022
December 28, 2022
April 1, 2022
October 3, 2022
September 28, 2022
September 9, 2022
April 28, 2022
March 27, 2023
September 29, 2023
October 2, 2023
May 31, 2023
March 31, 2023
September 29, 2023
March 31, 2023
September 29, 2023
January 31, 2024
April 1, 2024
September 30, 2024
March 29, 2024
March 29, 2024
April 30, 2024
October 1, 2025
October 1, 2025
May 30, 2025

August 31, 2018
Interest(Yen in thousands)
rate¥4,000,000
7,600,000
10,000,000
17,410,000
1,500,000
1,000,000
6,900,000
3,500,000
3,000,000
7,000,000
9,500,000
6,858,000
10,000,000
10,500,000
3,500,000
3,000,000
4,000,000
1,000,000
6,500,000
2,000,000
1,000,000
4,000,000
4,000,000
10,400,000
10,000,000
1,000,000―
2,000,000
3,000,000
1,000,000
11,000,000
1,000,000
5,000,000
4,000,000
3,000,000
4,000,000

1.07%
0.25
1.29
0.96
0.96
0.57
0.20
0.90
1.05
0.51
0.40
0.61
0.66
0.59
1.21
0.87
0.65
0.43
0.42
1.50
1.00
0.99
0.71
0.41
0.57
0.44
―
0.88
1.52
0.73
0.48
0.55
0.52
1.23
1.18
0.97

February 28, 2019
Interest(Yen in thousands)
rate¥4,000,000
7,600,000
10,000,000
17,410,000
1,500,000
1,000,000
6,900,000
3,500,000
3,000,000
7,000,000
9,500,000
6,858,000
10,000,000
10,500,000
3,500,000
3,000,000
4,000,000
1,000,000
6,500,000
2,000,000
1,000,000
4,000,000
4,000,000
10,400,000
10,000,000
1,000,000
1,000,000
2,000,000
3,000,000
1,000,000
11,000,000
1,000,000
5,000,000
4,000,000
3,000,000
4,000,000

1.07%
0.26
1.29
0.96
0.96
0.57
0.21
0.90
1.05
0.51
0.40
0.61
0.66
0.59
1.21
0.87
0.65
0.43
0.42
1.50
1.00
0.99
0.71
0.41
0.57
0.44
0.43
0.88
1.52
0.73
0.48
0.55
0.52
1.23
1.18
0.97

Due date

Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Floating-rate long-term loan (*)
Floating-rate long-term loan (*)
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Fixed-rate long-term loan
Total long-term loans
Less: current portionLong-term loans, less current
portionSeptember 29, 2025
March 31, 2025
April 30, 2025
September 30, 2025
April 1, 2026
May 29, 2026
September 28, 2026
November 30, 2026
April 30, 2026
April 30, 2026
April 1, 2027
March 31, 2027
July 30, 2027
November 30, 2027
September 30, 2027
April 28, 2028
April 28, 2028
December 29, 2028

August 31, 2018
Interest(Yen in thousands)
rate

9,000,000
11,000,000
5,000,000―
2,000,000
4,000,000
1,000,000
15,000,000
10,000,000
2,000,000
1,500,000
2,000,000
12,100,000
16,000,000
1,500,000
10,000,000
10,000,000―
295,268,000(11,600,000)

0.63
0.70
0.60
―
2.03
1.09
0.69
0.87
0.76
0.65
1.46
0.85
0.89
0.90
0.75
1.02
0.89
―

¥283,668,000

February 28, 2019
Interest(Yen in thousands)
rate

9,000,000
11,000,000
5,000,000
1,000,000
2,000,000
4,000,000
1,000,000
15,000,000
10,000,000
2,000,000
1,500,000
2,000,000
12,100,000
16,000,000
1,500,000
10,000,000
10,000,000
5,000,000
302,268,000(40,510,000)

0.63
0.70
0.60
0.60
2.03
1.09
0.69
0.87
0.76
0.65
1.46
0.85
0.89
0.90
0.75
1.02
0.89
0.88

¥261,758,000(*) DHR entered into an interest-rate swap contract to hedge its exposure to interest rate fluctuation risk. The
stated interest rate includes the effect of the interest-rate swap.
The stated interest rate is the weighted average interest rate for the applicable fiscal period and is rounded to thesecond decimal place.
The repayment schedule for short-term and long-term loans subsequent to August 31, 2018 and February 28, 2019is disclosed in Note 4 – “Financial Instruments.”
DHR has entered into a commitment line agreement with four financial institutions in order to secure flexible andstable financing. The status of the commitment line agreement as of August 31, 2018 and February 28, 2019 is asfollows:
As ofAugust 31, 2018
February 28, 2019
(Yen in thousands)

Total amount of commitment line
Balance executed as loans
Unused line of credit¥20,000,000―¥20,000,000¥25,000,000―¥25,000,000

73VI. Notes to Financial Statements
As ofAugust 31, 2018
February 28, 2019
(Yen in thousands)

Note 16 – Lease Transactions
Future minimum lease revenues under existing non-cancelable operating leases as of August 31, 2018 andFebruary 28, 2019 are as follows:
As ofAugust 31, 2018
February 28, 2019
(Yen in thousands)

Due within one year
Due after one year
Total

¥21,249,137
142,337,743¥163,586,881¥21,668,874
142,417,289¥164,086,163

㻌㻌

Note 17 – Deferred Income Taxes
DHR is subject to Japanese corporate income taxes on all of its taxable income. However, DHR may deduct theamount distributed to its unitholders from its taxable income when certain requirements, including a requirement to
distribute in excess of 90% of distributable profit for the fiscal period, are met under the Measures. If DHR does notsatisfy all of the requirements as specified in the Measures, the entire taxable income of DHR will be subject toregular corporate income taxes in Japan.

As ofAugust 31, 2018
February 28, 2019
(Yen in thousands)

Deferred tax assets:

74

(758)

(740)

(14,555,319)(14,519,107)(174,361)(14,730,439)
14,730,439―¥―(174,340)(14,694,188)
14,694,188―¥―

Based on the cash distribution policy set forth in Article 37 of the Articles of Incorporation, DHR may distributean amount of cash that exceeds profit in order to minimize taxable income. DHR does not assume corporate income
tax payments in future accounting periods; therefore, deferred tax liabilities are not recorded.

(b) Significant Differences Between the Statutory Tax Rate and the Effective Tax Rate After
Applying Deferred Income Tax Accounting
The following table summarizes the significant differences between the statutory tax rate and DHR’s effective tax
rate for financial statement purposes.

(a) Significant Components of Deferred Tax Assets and Liabilities

Excess provision of allowance for doubtful accounts
Deferred interest income
Valuation difference at the time of merger(Long-term prepaid expenses, etc.)
Valuation difference at the time of merger(Land and Buildings)
Loss carryforward assumed at the time of merger
Asset retirement obligations
Deferred gains or losses on hedges
Amortization of fixed-term land lease rights
Other payable (loss on litigation)
Other
Subtotal
Valuation reserve
Total deferred tax assets

Deferred tax liabilities:
Valuation difference at the time of merger(Investment securities)
Valuation difference at the time of merger(Land and Buildings)
Asset retirement costs
Subtotal
Valuation reserve
Total deferred tax liabilities
Net deferred tax assets¥652
360,001¥386
328,554134

90

2,748,571

2,677,223

160,307
195,991
257,982
107,406
28,7132,210
3,861,972(3,861,972)―

160,288
197,832
335,819
122,371―
9,589
3,832,157(3,832,157)―

For the fiscal periods ended
August 31, 2018
February 28, 2019

Statutory tax rate
Adjustments:
Tax-deductible cash distributions paid
Amortization of goodwill
Change in valuation allowance
Other
Effective tax rate

31.74%

31.51%(38.84)8.10(1.01)
0.02
0.01%(37.87)7.26(0.92)
0.01
0.01%

75

VI. Notes to Financial Statements
Note 18 – Gain and Loss on Sale of Investment Properties

Note 20 – Per Unit Information

For the period ended August 31, 2018, DHR sold one investment property and reported a loss as follows:

Earnings per unit for the periods ended August 31, 2018 and February 28, 2019 and net assets per unit as ofAugust 31, 2018 and February 28, 2019 are as follows:

For the fiscal period
endedAugust 31, 2018
(Yen in thousands)
Crest Kusatsu
Proceeds from sale of investment properties
Cost of investment properties sold

Other sales expenses
Loss on sale of investment properties¥2,800,000
2,814,320
85,060¥99,380㻌Earnings per unit:㻌㻌
Net income per unit
Weighted average number of units outstanding (units)Morino Tonari
Proceeds from sale of investment properties
Cost of investment properties sold

Other sales expenses
Gain on sale of investment properties¥1,200,000
1,044,407
42,060¥113,532¥4,083
1,901,777¥4,461
1,927,000㻌
As ofAugust 31, 2018
February 28, 2019
(Yen)

For the period ended February 28, 2019, DHR sold one investment property and reported a gain as follows:
For the fiscal period
ended
February 28, 2019
(Yen in thousands)

For the fiscal periods ended
August 31, 2018
February 28, 2019
(Yen)

Net assets per unit

¥223,454¥222,741

Net income per unit is calculated by dividing net income by the weighted average number of investment units
during the period. Net assets per unit are calculated by dividing net assets by the number of units outstanding at eachbalance sheet date. Diluted earnings per unit are not disclosed since there were no diluted units.

Note 21 – Related-Party Transactions
Related-party transactions for the periods ended August 31, 2018 and February 28, 2019 are as follows:

Note 19 – Loss on Litigation
Asahi Security Co., Ltd., the tenant of D Project Shin-Misato, filed a claim in the Tokyo District Court on June 27,
2014 against Mitsubishi UFJ Trust and Banking Corporation, the trustee of the property, requesting approval of areduction in rent of approximately 16% compared with the current level for the period from May 1, 2014. The
Tokyo District Court rendered the judgement on July 24, 2017, ordering DHR to confirm the rent reduction byapproximately 6% for the period from May 1, 2014 onward. DHR appealed to the Supreme Court through thetrustee on April 18, 2018; however, the appeal was dismissed on October 2, 2018.
DHR fully compensated for the reduced portion of the rent by recognizing loss on litigation by the end of theperiod ended August 31, 2018.

(a) Controlling Company and Major Corporate Investors –– None(b) Affiliates –– None(c) Transactions under Common Control –– None(d) Directors and Major Individual Investors –– None
Note 22 – Segment Information(a) Segment Information
Since DHR has been engaged in a single segment of the real estate leasing business, and there is no other businesssegment for disclosure, segment information has been omitted.

(b) Related Information
Information about products and services

76

77

VI. Notes to Financial Statements
Since operating revenues from external customers for a single segment of product and service account for over
90% of total operating revenues in DHR’s statements of income and retained earnings for the periods ended August
31, 2018 and February 28, 2019, information about products and services has been omitted.
Information about geographic areas(1) Operating revenues
Since operating revenues from external customers within Japan account for over 90% of total operating
revenues in DHR’s statements of income and retained earnings for the periods ended August 31, 2018 andFebruary 28, 2019, information about geographic areas has been omitted.
(2) Investment properties
Since over 90% of total investment properties on the balance sheets as of August 31, 2018 and February 28,
2019, are located within Japan, information about geographic areas on such investment properties has been
omitted.
Information about major customers
Since there is not any customer accounting for 10% or more of total operating revenues in DHR’s statements ofincome and retained earnings for the periods ended August 31, 2018 and February 28, 2019, information aboutmajor customers has been omitted.

Note 23 – Accounting Standards Issued But Not Yet Applied
As of February 28, 2019, DHR has not yet applied the following accounting standard and its implementation
guidance.
“Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (“ASBJ”) Statement No.
29, March 30, 2018)“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March
30, 2018)(a) Overview
Conducting a joint project to clarify the comprehensive principles for recognizing revenues, the International
Accounting Standards Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) in the U.S. issued“Revenue from Contracts with Customers” (IFRS 15 by IASB and Topic 606 by FASB) in May 2014. IFRS 15
became effective from fiscal periods beginning on or after January 1, 2018 and Topic 606 became effective fromfiscal periods beginning after December 15, 2017. Under these circumstances, the ASBJ also developed acomprehensive accounting standard for revenue recognition and issued a new standard together with its
implementation guidance.
As a basic policy for the development of the new standard, the ASBJ determined to adopt the core principles of
IFRS 15 in order to enhance comparability of financial statements, which is one of the benefits of consistency withIFRS 15. In addition, for any item to be considered arising from business practices in Japan, alternative treatments
shall be added to the extent that comparability is not impaired.

78(b) Scheduled Date of Application
DHR will apply the aforementioned standard and guidance from the beginning of the fiscal period ending
February 28, 2022.

(c) Effect of Application of the New Accounting Standard
The effect of application of the aforementioned standard on DHR’s financial statements is currently underevaluation.

Note 24 – Subsequent Events(a) Issuance of New Investment Units
At the Board of Directors’ meetings held on February 8, 2019 and on February 20, 2019, it was resolved to issue
new investment units as described below. The proceeds from the issuance of new investment units through a public
offering were fully received on March 1, 2019, while the proceeds from the issuance of new investment units
through a third-party allotment were fully received on March 26, 2019.
After the issuance, unitholders’ capital increased to ¥198,492 million and the number of investment units issued
and outstanding came to 2,075,000 units.
(1) Issuance of new investment units through a public offering
Number of new investment units issued:
Issue price:
Total issue price:Amount paid in (issue value):
Total amount paid in (issue value):
Payment date:

138,000 units(86,900 units in Japan and 51,100 units overseas)¥245,784 per unit
¥33,918,192,000¥238,260 per unit
¥32,879,880,000
March 1, 2019(2) Issuance of new investment units through a third-party allotment
Number of new investment units issued:
10,000 units
Amount paid in (issue value):¥238,260 per unit
Total amount paid in (issue value):¥2,382,600,000
Payment date:
March 26, 2019
Allottee:
Nomura Securities Co., Ltd.

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VI. Notes to Financial Statements(b) Acquisition of Investment Properties(c) Borrowing of Funds and Repayment of Loans

DHR acquired trust beneficiary interests in the following properties.

Property nameAcquisition price(Note 1)
Asset class(Yen in thousands)

Subsequent to the balance sheet date, DHR obtained the following loans to acquire assets as stated in “(b)Acquisition of Investment Properties” above.
Seller (Note 2)

Acquisition
date

Type

Loan amount(Yen in millions)

Unsecured loan

¥1,000Unsecured loan

D Project Kitahachioji I¥4,300,000

Logistics

DH Development II Godo Kaisha

April 5, 2019

D Project Kitahachioji II5,700,000

Logistics

DH Development II Godo Kaisha

April 5, 2019

D Project Kitahachioji III

7,300,000

Logistics

DH Development II Godo Kaisha

April 5, 2019

D Project Itabashi Shingashi

12,300,000

Logistics

Daiwa House Industry Co., Ltd.

April 10, 2019

D Project Sagamihara

3,900,000

Logistics

Daiwa House Industry Co., Ltd.

April 10, 2019

D Project Kuki VIII

6,100,000

Logistics

Daiwa House Industry Co., Ltd.

April 10, 2019

D Project Yokkaichi

1,490,000

Logistics

Daiwa House Industry Co., Ltd.

April 10, 2019

D Project Ibaraki Ishioka

4,050,000

Logistics

Daiwa House Industry Co., Ltd.

April 10, 2019

10,320,000

RetailDaiwa House Industry Co., Ltd.

April 5, 2019

750,000

RetailDaiwa House Industry Co., Ltd.

April 5, 2019

5,000,000

RetailDaiwa House Industry Co., Ltd.

April 5, 2019

4,500,000

Hotel

Nihon Jyutaku Ryutu Co., Ltd.

April 5, 2019

1,380,000

Other

Daiwa House Industry Co., Ltd.

March 12, 2019

iias Tsukuba(30% quasi co-ownership)
Aoyama Tailor Bunkyo
Sengoku Ekimae StoreFOLEO Shobu
Daiwa Roynet Hotel Nagoya
Shinkansenguchi
Nursery Room Berry Bear
Omori Nishi and
Welcia Ota Omori Nishi StoreInterest rate

Loan execution date

Repayment date

0.45000%(Fixed rate)

April 5, 2019

April 30, 2026

500

0.49677%(Fixed rate)

April 5, 2019

April 30, 2027

Unsecured loan

1,500

0.58880%(Fixed rate)

April 5, 2019

April 28, 2028

Unsecured syndicated loan

6,000

1-monthTIBOR + 0.23%

April 10, 2019

October 31, 2022

Unsecured syndicated loan

8,100

0.39138%(Fixed rate)

April 10, 2019

October 31, 2024

Unsecured syndicated loan

10,4000.74800% (*)

April 10, 2019

April 27, 2029(*) DHR entered into an interest-rate swap contract to hedge its exposure to interest rate fluctuation risk. The
stated interest rate includes the effect of the interest-rate swap.

Notes:
1. The acquisition prices do not include acquisition-related expenses, taxes and dues adjustments at settlement
and consumption taxes.
2. The sellers of the assets: i) Daiwa House, the seller of D Project Itabashi Shingashi, D Project Sagamihara, D
Project Kuki VIII, D Project Yokkaichi, D Project Ibaraki Ishioka, iias Tsukuba, Aoyama Tailor Bunkyo
Sengoku Ekimae Store, FOLEO Shobu and Nursery Room Berry Bear Omori Nishi and Welcia Ota Omori
Nishi Store; and ii) Nihon Jyutaku Ryutu Co., Ltd., the seller of Daiwa Roynet Hotel Nagoya Shinkansenguchi,
are each deemed as an interested party as defined in the Investment Trust Act.
DH Development II Godo Kaisha, the seller of D Project Kitahachioji I, D Project Kitahachioji II and D
Project Kitahachioji III, is a special purpose company (Tokutei Mokuteki Kaisha) which Daiwa House, theparent company of the Asset Manager, has business relationships with, and is accordingly classified as aninterested party as stipulated in the Asset Manager’s internal rules on transactions with interested parties, while
it is not deemed as an interested party under the Investment Trust Act.
The Asset Manager has gone through the necessary discussion and approval procedures in accordance with theAsset Manager’s internal rules on transactions with interested parties.

8081

VII. Independent Auditor’s Report82

83

Investor Information
Investment Unit Price
Investment unit price (closing price)(Yen)

Procedures for Changes of Address, etc.
Investment unit price (Yen)¥261,100Highest price during the 26th ﬁscal period (closing price):¥238,800
Lowest price during the 26th ﬁscal period (closing price):
Investment unit price at the end of the 26th ﬁscal period (closing price): ¥248,800

Trading volume

Trading volume (Units)(Units)300,000

120,000

250,000

80,000200,000

40,000150,000

30,000100,000

20,00050,00010,0000Mar. 22, May 31, Nov. 30, May 31, Nov. 30, May 31, Nov. 30, May 31, Nov. 30,
2006 2006
2006 2007
2007 2008 2008 20092009

0Aug. 31, Feb. 28, Aug. 31, Feb. 29, Aug. 31, Feb. 28, Aug. 31, Feb. 28, Aug. 31, Feb. 28, Aug. 31, Feb. 29, Aug. 31, Feb. 28, Aug. 31, Feb. 28, Aug. 31, Feb. 28,
2010 2011
2011 20122012 20132013 20142014 2015
2015 20162016 20172017 20182018 2019(Note) A 2-for-1 split of investment units was implemented on two occasions, effective as of March 1, 2013 and March 1, 2015.
With regard to investment unit price and trading volume until February 25, 2013, the value shown for investment unit price is divided by four, while the value shown for trading volume
is multiplied by four in consideration of the said split of investment units.
Furthermore, from February 26, 2013 to February 24, 2015, the value shown for investment unit price is divided by two, and the value shown for trading volume is multiplied by two.

22
(0.1%)

87,110 units(4.5%)

202(1.2%)

98,822 units(5.1%)(2.7%)

Number ofunitholders

Number ofinvestment units(16,903)(1,927,000 units)

15,900(94.1%)

Individuals / Other

Other domestic corporations

Foreign corporations and individuals

Distribution Statement
The “Distribution Statement” delivered upon payment of distributions includes the “Payment Notice,” referred to in
the provisions of the Act on Special Measures Concerning Taxation. This document may be used as a supporting
document when declaring income for tax purposes. However, for unitholders who have selected the system of
dividend allotment to securities company accounts in proportion to the number of shares held, the amount ofwithholding tax will be calculated by your securities company, etc. For supporting documents when declaring income
for tax purposes please confirm with your securities company, etc. Furthermore, unitholders who receive distributions
by way of a receipt for distributions also receive a “Distribution Statement” enclosed with it.

Residents in Japan are notified of their Social Security and Tax Number (nicknamed “My Number”) by their city,
town or village. My Number is required when performing tax-related procedures with regard to investment units.

As stipulated by laws and regulations, it is now
required to state the My Number of the unitholder onpayment records that are submitted to the tax office.
Unitholders are therefore requested to submit their
My Number to their securities company.

[Contact address for inquiries on submitting My Number]
Unitholders whose investment units are managed by a securities accountPlease direct your inquiries to your securities company, etc.
Unitholders not conducting transactions via a securities company
Please call the following toll-free phone number.
Stock Transfer Agency Business Planning Dept. of Sumitomo Mitsui
Trust Bank, Limited TEL: 0120-782-031

Securities firms(Note) Ratios in parentheses are rounded to the nearest tenth.

84

1,059,700 units(55.0%)

220,926 units(11.5%)

Financial institutions

You can receive distributions when you bring your receipt for distributions to the local office of the Japan Post Bankin Japan or to a post office (bank agent).
If the period for receiving distributions has elapsed, please contact the transfer agent Sumitomo Mitsui Trust
Bank, Limited.
If you would like to specify an account to which future distributions will be transferred, please follow theprocedures of your securities company, etc.
We will not pay and have no obligation to pay cash distributions not claimed within three years of the distribution
date, as stipulated in our Articles of Incorporation. Please claim these as soon as possible.

Use of the My Number for Investment Unit Related Business

460,442 units(23.9%)

463

Receipt of Distributions

Outline of the Social Security and Tax Number System nicknamed“My Number System” with Regard to Investment Units

Unitholders Data (as of February 28, 2019)316(1.9%)

Please submit changes of address, name, etc., to your securities company, etc. For procedures regarding
investment units registered in special accounts, please contact: Stock Transfer Agency Business Planning Dept. of
Sumitomo Mitsui Trust Bank, Limited.

Note for Unitholders
Account closing date

Last day of February and August of each year

Date for determining distribution
payments

Last day of February and August of each year(Distributions are to be paid within threemonths of each date.)

Outline of the Asset Manager

Unitholders’ Meeting

To be held at least once every two years

Corporate Name : Daiwa House Asset Management Co., Ltd.

Date for finalizing general meeting
voting rights

Date set forth in Section 16.1 in the Articles of Incorporation by DHR

Listing

REIT section of the Tokyo Stock Exchange (Securities code: 8984)

Location: 7th Floor, Nissei Nagatacho Building, 2-4-8, Nagatacho, Chiyoda-ku, Tokyo 100-0014

Established: September 1, 2004

Paid-in Capital: ¥300 million

Shareholder: Daiwa House Industry Co., Ltd. (100%)

Public notices

The “Nikkei” newspaper (Nihon Keizai Shimbun)

Transfer agent

Sumitomo Mitsui Trust Bank, Limited
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8233, JAPANInquiries

Stock Transfer Agency Business Planning Dept. of Sumitomo Mitsui Trust Bank, Limited
8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063, JAPANTEL: 0120-782-031 (toll-free, available within Japan only)
Weekdays 9 a.m. to 5 p.m.
85