26th Fiscal Period Financial Report (REIT) - heiwa-re.co.jp · PDF file26th FP ¥2,854 million (¥2,324 ... information” on page 33 of the Japanese version of the “26th Fiscal

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26th Fiscal Period Financial Report (REIT)

January 21, 2015

REIT Issuer: HEIWA REAL ESTATE REIT, Inc. Stock Exchange Listing: TSE

Securities Code: 8966 URL: http://www.heiwa-re.co.jp/

Representative: (Title) Executive Director (Name) Masaaki Higashihara

Asset Management Company: HEIWA REAL ESTATE Asset Management CO., LTD.

Representative: (Title) President & Representative Director (Name) Takaya Ichikawa

Inquiries: (Title) General Manager, Planning & Finance Department (Name) Shinya Ito

TEL: +81-3-3669-8771

Scheduled date of submission of periodic securities report (yuka shoken hokokusho): February 25, 2015

Scheduled date of commencement of distribution payments: February 17, 2015

Supplementary materials: Attached

IR Conference: Yes (for institutional investors, securities analysts)

[Amounts are rounded down to the nearest million yen]

1. Status of Management and Assets for the 26th Fiscal Period

26th Fiscal Period (26th FP): Fiscal period ended November 2014 (from June 1, 2014 to November 30, 2014)

(1) Management

[% figures show the period-on-period increase (decrease)]

Operating revenue Operating income Ordinary income Net income

26th FP ¥5,052 million (0.1%) ¥2,148 million (0.9%) ¥1,502 million 3.9% ¥1,501 million 3.9%

25th FP ¥5,059 million 9.6% ¥2,168 million 8.2% ¥1,445 million 8.2% ¥1,444 million 8.2%

Net income

per unit

Ratio of

net income to

unitholders’ equity

Ratio of

ordinary income to

total assets

Ratio of

ordinary income to

operating revenue

26th FP ¥1,703 1.8% 1.0% 29.7%

25th FP ¥1,653 1.8% 1.0% 28.6%

(2) Distributions

Distribution per unit

(excluding distribution

in excess of earnings)

Total distributions

(excluding distribution

in excess of earnings)

Distribution in

excess of earnings

per unit

Total distributions

in excess of

earnings

Payout ratio

(Note 1)

Ratio of

distributions

to net assets

(Note 2)

26th FP ¥1,703 ¥1,501 million ¥0 ¥0 million 100.0% 1.8%

25th FP ¥1,670 ¥1,472 million ¥0 ¥0 million 101.9% 1.9%

(Note 1) Payout ratio shows figures that have been calculated using the following formula:

Total distributions (excluding total distributions in excess of earnings) ÷ Net income × 100

(Note 2) Ratio of distributions to net assets shows figures that have been calculated using the following formula:

Total distributions (excluding total distributions in excess of earnings) ÷ [(Net assets at beginning of period + Net assets at

end of period) ÷ 2] × 100

(Note 3) Sources of funds for paying total distributions for the 25th Fiscal Period include funds applied from retained earnings

brought forward (¥27 million) and therefore the amount of total distributions differs from the amount of net income.

(3) Financial Position

Total assets Net assets

Ratio of

unitholders’ equity to

total assets

Net assets

per unit

26th FP ¥157,382 million ¥82,033 million 52.1% ¥93,067

25th FP ¥157,016 million ¥82,115 million 52.3% ¥93,160

(4) Cash Flows

Net cash

provided by (used in)

operating activities

Net cash


investing activities

Net cash


financing activities

Cash and

cash equivalents

at end of period

26th FP ¥2,854 million (¥2,324 million) (¥1,472 million) ¥7,066 million

25th FP ¥2,144 million (¥9,954 million) ¥8,326 million ¥8,009 million

http://www.heiwa-re.co.jp/

HEIWA REAL ESTATE REIT, Inc. (8966) 26th Fiscal Period Financial Report

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2. Management Status Forecasts for the 27th and 28th Fiscal Period

27th Fiscal Period (27th FP): Fiscal period ending May 2015 (from December 1, 2014 to May 31, 2015)

28th Fiscal Period (28th FP): Fiscal period ending November 2015 (from June 1, 2015 to November 30, 2015)

[% figures show the period-on-period increase (decrease)]

Operating revenue Operating income Ordinary income Net income

Distribution per unit

(excluding

distribution in

excess of earnings)

Distribution in

excess of earnings

per unit

27th

FP

¥5,394

million 6.8%

¥2,299

million 7.0%

¥1,658

million 10.4%

¥1,657

million 10.4% ¥1,742 ¥0

28th

FP

¥5,391

million (0.1%)

¥2,268

million (1.3%)

¥1,628

million (1.8%)

¥1,627

million (1.8%) ¥1,711 ¥0

(Reference) Estimated net income per unit: 27th Fiscal Period: ¥1,742 28th Fiscal Period: ¥1,711

* Other

(1) Changes in Accounting Policies, Changes in Accounting Estimates, Restatements

(i) Changes in accounting policies accompanying amendments to accounting standards, etc.: No

(ii) Changes in accounting policies other than (i): No

(iii) Changes in accounting estimates: No

(iv) Restatements No

(2) Number of Investment Units Issued and Outstanding

(i) Number of investment units issued and outstanding at

end of period (including own investment units):

26th Fiscal

Period: 881,447 units

25th Fiscal

Period: 881,447 units

(ii) Number of own investment units at end of period: 26th Fiscal

Period: 0 units

25th Fiscal

Period: 0 units

(Note) For the number of investment units on which the calculation of net income per unit is based, see “Note on per-unit

information” on page 33 of the Japanese version of the “26th Fiscal Period Financial Report (REIT)” for the period ended November 2014.

* Statement on Status of Review Procedures

Financial statement review procedures based on the Financial Instruments and Exchange Act are still ongoing at the time of

disclosure of this financial report.

* Explanation on the Appropriate Use of the Management Status Forecasts, and Other Matters of Special Note

(Caution Concerning Forward-Looking Statements, Etc.)

The management status outlook and other forward-looking statements contained in this document are based on information currently

available to and certain assumptions deemed reasonable by the Investment Corporation. Accordingly, actual management status and

other results may vary materially due to various factors. This forecast is not a guarantee of actual distributions paid. See the Japanese

version of the “Management status forecast assumptions for 27th and 28th Fiscal Period (from December 1, 2014 to May 31, 2015 and

from June 1, 2015 to November 30, 2015 respectively)” on page 10 for notes on assumptions used in management status forecasts and

on the use of management status forecasts.


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1. Related Corporations of the REIT

No disclosure necessary, since there have been no material changes from “Structure of the REIT” in the most

recent Annual Securities Report (submitted August 27, 2014).

2. Operating Policies and Operations

(1) Operating policies

No disclosure necessary, since there have been no material changes from “Investment policies,” “Targets of

investments” and “Distributions policy” in the most recent Annual Securities Report (submitted August 27,

2014).

(2) Operations

a. General situation during the 26th Fiscal Period

The REIT is striving based on its Basic Philosophy of “Steady Growth of Assets Under Management” and

“Stable Medium- to Long-Term Profits,” as well as “Active Use of the Heiwa Real Estate Group” (below,

collectively referring to Heiwa Real Estate Co., Ltd. [below, “Heiwa Real Estate”] and the subsidiaries of Heiwa

Real Estate; the same hereinafter) to manage its assets with the purpose of maximizing investor’s value.

Following is a summary of our asset management during the 26th Fiscal Period.

(i) Brief background of the REIT

Investment units in the REIT have been listed on the Real Estate Investment Trust Section (J-REIT Section) of

the Tokyo Stock Exchange (below, TSE) since March 8, 2005 (Securities Code: 8966). Subsequently, the REIT

executed a capital increase through public offering and underwriting of investment units issued through private

placement on several occasions and an investment unit split and investment unit issuance through a merger with

Japan Single-residence REIT Inc. (below, JSR) on October 1, 2010 (below, this event is referred to as the merger)

by the 25th Fiscal Period. As a result, total investment units outstanding were 881,447 and unitholders' capital

was 70,527 million yen as of the end of the 26th Fiscal Period.

(ii) Operating environment

The Japanese economy during the 26th Fiscal Period showed signs of weakness mainly on the personal

consumption and production fronts, with unexpected negative growth in real GDP for July-September 2014,

reflecting the impact of decline in reaction to the rush demand before the consumption tax hike, production

adjustments in the manufacturing industry and unseasonable weather. However, the economy returned to a

modest recovery track in the second half of the fiscal period, as the stimulus measures adopted by the Japanese

Government and continued quantitative and qualitative monetary easing by the Bank of Japan fostered continued

improvement in corporate earnings and the employment and income environment, and a gradual recovery in

personal consumption and capital investment. The economy is expected to continue recovering in the future,

largely due to additional monetary easing by the Bank of Japan, the postponement of a further consumption tax

hike, a weakening yen and low oil prices. Under these circumstances, the TSE REIT Index recorded a substantial

rise to 1,826.72 points as of November 30, 2014, after ending the previous fiscal period at 1,565.02, primarily

due to the effect of additional monetary easing by the Bank of Japan on October 31.

(a) Office building leasing market

The latest office building market data from Miki Shoji Co., Ltd. shows a decline in the average office building

vacancy rate in the five central wards of Tokyo (Chiyoda, Minato, Chuo, Shibuya and Shinjuku), to 5.55% at

the end of the 26th Fiscal period (November 2014) from 6.52% as of the end of the 25th Fiscal Period (May

2014), as a result of steady reduction in vacancies in both new and existing office buildings. This was the 17th

month consecutive decline in the average office building vacancy rate in the survey. The office building leasing

market is showing signs of a steady improvement trend driven by an increase in demand for office space

backed by improved corporate economic sentiment. Average asking rents levels for a standard floor also rose

steadily from 16,501 yen per tsubo at the end of the previous Fiscal Period to 16,950 yen per tsubo as at the end

of the Fiscal period under review, suggesting a trend of bottoming out of market rents.


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(b) Residential leasing market

According to the IPD/Recruit Residential Index, rents for rental apartments in the metropolitan areas in

November 2014 rose 0.94% compared to the same month of the previous year, indicating that demand for

rental housing is decent due to continuous net positive migration into the metropolitan areas and an

increasing number of households with relatively few members. Since new housing starts for rental housing

decreased year on year and supply was limited compared with previous peak levels, the supply-demand trend

on the residential leasing market remained firm. For assets under management by the REIT, occupancy rates

remained high throughout the Fiscal Period under review, and the number of properties with higher rent

levels increased, contributing to a steady rise in profitability. The outlook for the residential market

remains stable, buoyed by the further advancement of improvements in employment and consumption in

the economic recovery process.

(c) Real estate

According to the Land Price Survey by prefectural governments as of July 1, 2014, which was announced

in September 2014, in the Tokyo and Osaka areas, official land prices in residential areas began to rise on

the back of growing housing demand fuelled by improved consumer sentiment, and, in the three

metropolitan areas, official land prices in commercial areas also grew at a faster pace than the year before.

The rise in official land prices in residential areas can be largely attributed to firm housing demand driven

by low interest rates and mortgage tax breaks, whilst the increase in official land prices in commercial areas

is primarily attributable to a succession of large-scale developments and greater willingness to invest in real

estate due to low interest rates. On the other hand, official land prices in the regional areas continued to

fall, both in the residential and commercial areas. However, in the regional government ordinance

designated cities that the REIT regards as investment target areas, the prices in both commercial and

residential areas have actually been rising.

(iii) Management performance

(a) External growth

For the 26th Fiscal Period, the REIT acquired no new properties, not die it transfer any of its existing

properties. As a result, portfolio assets as of the period end were 92 properties (total acquisition price 147,669

million yen) (excluding the acquisition of equity interest in a silent partnership), including 28 office buildings

(total acquisition price 62,266 million yen), 60 residential buildings (total acquisition price 81,223 million yen)

and four hotels (total acquisition price 4,180 million yen).

(b) Internal growth

The REIT has consistently endeavored to increase profitability by improving and maintaining its occupancy

rates. During the 26th Fiscal Period, with the aim of maintaining the high occupancy rate achieved at the

end of the previous fiscal period, the REIT continued to be engaged in tenant leasing activities, working to

shorten vacancy duration as well as systematic efforts to increase its investment value based on tenant

needs and the characteristics of each individual property. Partly as a result of these initiatives of

improving and maintaining the competitiveness of its assets, the occupancy rate for all properties held by

the REIT climber further to 97.31% as at the end of the 26th Fiscal Period, compared to 96.24% as at the

end of the previous fiscal period. Moreover, as in the previous fiscal period, the REIT successfully maintained

a high and stable average month-end occupancy rate of more than 96% throughout the fiscal period under

review. Moreover, as part of the initiatives that the REIT has been working on continuously, it changed

the names of the following two managed assets in the period between the start of the fiscal period under

review and the date of this report, for the purpose of seeking to improve the caliber of its appeal to

potential tenants and achieve more efficient leasing.

Properties renamed on January 5, 2015

Property no. Former property name New property name

Of-31 Nihonbashi Hamacho Central Building HF Nihonbashi Hamacho Building

Of-32 Sendai Green Place HF Sendai Honcho Building


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(iv) Procurement of funds

On October 31, 2014, the REIT took out Term Loan 24 Tranches A, B and C (loan amounts of 800 million

yen, 2,531 million yen and 2,400 million yen respectively) to repay Term Loan 10 (loan balance 5,731

million yen), the principal of which was maturing on the same date. An overview of the loan is provided

below. This has enabled the REIT to extend its borrowing periods and diversify its maturities (average

borrowing period as of the end of November: 5.41 years, average remaining period 3.53 years) and to lower

its borrowing cost (average borrowing interest rate as of the end of November 1.28%). On June 3, 2014, the

REIT executed interest rate swap agreements for the previously borrowed three term loans (loan balance

7,678 million yen) to fix interest rates and to hedge against the risk of higher interest expenses in the event

that rates rise in the future (ratio of fixed interest rate debt as of the end of November 86.54% (including

interest rate caps)). [Term Loan 24 Tranche A]

Lender Loan amount Principal

repayment date

Principal

repayment method Purpose Summary

ORIX Bank Corporation 800 million yen May 31, 2019

(Note)

Lump sum

repayment on the

principal

repayment date

Funds to repay

existing loans

Unsecured

Non-

guaranteed

[Term Loan 24 Tranche B]


repayment date

Principal


Sumitomo Mitsui Banking

Corporation

The Norinchukin Bank

The Bank of Fukuoka

Sompo Japan Nipponkoa

Insurance Inc.

2,531 million

yen

May 31, 2019

(Note)

Lump sum

repayment on the

principal

repayment date

Funds to repay

existing loans

Unsecured

Non-

guaranteed

[Term Loan 24 Tranche C]


repayment date

Principal



Corporation

Aozora Bank, Ltd.

Mizuho Trust & Banking Co., Ltd.

The Bank of Fukuoka

2,400 million

yen

October 31, 2022

(Note)

Lump sum

repayment on the

principal

repayment date

Funds to repay

existing loans

Unsecured

Non-

guaranteed

(Note) Or the previous business day if the date shown is not a business day.

As a result, the total loan amount at period end was 69,011 million yen (period end LTV: 43.8%).

The ratings of the REIT as of the date of this document are as follows:

Credit rating agency Issuer rating

Rating and Investment Information, Inc. (R & I) Rating: A-; Rating outlook: Stable

Japan Credit Rating Agency, Ltd. (JCR) Rating: A-; Rating outlook: Stable


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(v) Performance and distributions

The management described above led to 26th Fiscal Period results of 5,052 million yen in operating revenues,

2,148 million yen in operating income, and after deducting interest expenses on loans, 1,502 million yen in

ordinary income and 1,501 million yen in net income.

Concerning the distribution of monies (“distributions”) as prescribed in Article 137 of the Act on Investment

Trusts and Investment Corporations (Act No. 198 of 1951 and subsequent amendments; “the Investment

Trusts Act”), the REIT shall not make distributions in excess of unappropriated retained earnings for the

current fiscal period under review as stipulated in Article 32, paragraph 1 of its articles of incorporation

(“Articles of Incorporation”), and the amount of distributions shall be more than 90% of the earnings

available for distribution in accordance with Article 67-15 of the Act on Special Measures Concerning

Taxation (Act No. 26 of 1957 and subsequent amendments; “the Special Taxation Measures Act”). Based on

the above policy, the REIT decided the distributions from earnings that it shall pay out shall be

1,501,104,241 yen, which is the maximum value of the integral multiple of the number of units issued and

outstanding (881,447 units) in an amount that is not in excess of net income. The resulting distributions per

investment unit were 1,703 yen.

b. Outlook for next period

Management policy and future issues

The REIT has developed and managed a high quality portfolio, primarily consisting of office and residence

properties located in Tokyo’s 23 Wards, with the aim of maximizing investor value through our Basic Philosophy

of “Steady Growth of Assets under Management” and “Stable Medium- to Long-Term Profits” as well as through

the “use of the Heiwa Real Estate Group.” In subsequent periods we will continue to adhere to the above

philosophy, aiming to further maximize investor value through the stable management of our portfolio and

pursuing a strategy of steady growth.

(a) External growth

The REIT has endeavored in particular to enhance the quality of its portfolio and bolster its financial

footing. As noted below, using capital procured through new investment unit issuances determined on

November 7, 2014 and November 17, 2014, as well as Term Loan 25 Tranches A, B and C (loan amounts

of 1,300 million yen, 1,300 million yen and 900 million yen respectively) newly borrowed on December 4,

2014, the REIT acquired three office properties (Of-33 Daiwa Ueno Building (trust beneficial interest,

acquisition price: 3,400 million yen), Of-34 Kojimachi HF Building (trust beneficial interest, acquisition price:

1,350 million yen), Of-35 HF Kudan-Minami Building (trust beneficial interest, acquisition price: 2,720

million yen) and one residential property (Re-75 HF Sendai Residence East (trust beneficial interest,

acquisition price: 1,630 million yen) with support from Heiwa Real Estate on December 4, 2014. While the

REIT will aim to continually expand the scale of its assets and consider the replacement of assets, it will

continue to strive to increase profitability and investor value by acquiring properties in its endeavors to

enhance its medium-to long-term portfolio quality in the future. Given the sound financing environment and

the expectations for higher property prices on the back of the expected economic recovery, competitors are

maintaining a strong appetite for the acquisition of properties. As a result, the property acquisition environment

is likely to remain challenging. We will endeavor to promptly obtain information on excellent properties by

using our pipeline with Heiwa Real Estate and building up our unique information routes as an asset

management company. As a basic strategy, we aim to increase opportunities for primarily acquiring properties

owned and developed by Heiwa Real Estate, and additionally for acquiring properties owned and developed by

other developers to expand our portfolio, contributing to stable profitability over the medium to long term.


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(b) Internal growth

The REIT believes that by using the database and information network developed by the Heiwa Real Estate

Group and its property management company, it can quickly detect leasing market trends and conduct precise

property management, enabling it to maintain and increase occupancy rates and rent levels in assets under

management. To maintain and increase occupancy rates, it will deal with tenants by focusing on minimizing

departures and will undertake leasing management, including reducing the period of time for work for

restoration to the original state, to shorten the period between the time when properties are vacated and the

acquisition of new tenants. To make our properties more competitive, we continuously and actively make

value-building investments in repairs and improvements of assets under management to maintain and enhance

their medium- to long-term value, taking into account each property’s asset age, facility level and other aspects.

Through these measures, our goal is to maintain and further improve occupancy rates at high and stable levels.

(c) Financial strategy

The REIT actively implements measures in an effort to stabilize its financial foundations and achieve

sustainable growth. Concerning borrowings, the REIT will continue to strive to extend its borrowing

periods and diversify its maturities by maintaining an appropriate loan-to-value ratio, while promoting

measures to reduce risks from higher interest rates in the future and cut financial costs. It will also

endeavour to further strengthen its bank formation by strengthening its relationships with financial

institutions. By achieving these measures and initiatives on a continuous basis, the REIT will strive to

build sound financial systems that are resilient to changes in the funding environment.

(d) Promotion of more timely disclosure

We practice information disclosure that is accurate, fair and timely, complying with the TSE’s Securities

Listing Regulations and other regulations, laws, etc. relating to timely disclosure. The REIT discloses

information on its decisions on the acquisition of new properties, etc. as a rule at the time of the decision by a

REIT organization such as the Board of Directors, while events such as damage to assets under management

resulting from incidental occurrences are disclosed at the time they are discovered. As a rule, REIT information

is disclosed through the TSE’s TDnet, press releases to the TSE press club (Kabuto Club), Ministry of Land,

Infrastructure, Transport and Tourism Press Club, etc., and through the REIT’s website.

c. Significant subsequent events

A. New investment unit issuance

At meetings of the Board of Directors convened on November 7 and November 17, 2014, decisions were

reached to issue new investment units as detailed below. Payments were completed for the new investment

units issued through public offering on December 1, 2014, and for the new investment units issued through

private placement on December 24, 2014. As a result, as of the date of this report, the total value of the REIT’’s

capital subscription was 76,372 million yen, while the number of its total outstanding investment units was

951,147 units.

1. New investment unit issuance through general offering (public subscription)

a. New investment units issued 66,400 units

b. Issue price 86,790 yen

c. Total issue price 5,762,856,000 yen

d. Issue value 83,852 yen

e. Total issue value 5,567,772,800 yen

f. Payment due date December 1, 2014

g. Distribution initial reckoning date December 1, 2014

2. New investment issuance through private placement

a. New investment units issued 3,300 units

b. Issue value 83,852 yen

c. Total issue value 276,711,600 yen

d. Allotted to SMBC Nikko Securities Inc.

e. Payment due date December 24, 2014


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B. Borrowing of capital

The following capital loans were taken out on December 4, 2014 for purposes including allocation to the

acquisition capital of the four properties acquired on the same date (see “C. Asset Acquisitions” below).

[Term Loan 25 Tranche A]


repayment date

Principal



Corporation

Sumitomo Mitsui Trust Bank,

Limited

The Bank of Fukuoka

Mitsubishi UFJ Trust and Banking

The 77 Bank, Ltd.

1,300 million

yen

May 31, 2018

(Note)

Lump sum

repayment on the

principal

repayment date

Funds to repay

existing loans

Unsecured

Non-

guaranteed

[Term Loan 25 Tranche B]


repayment date

Principal



Corporation

Aozora Bank, Ltd.

Sumitomo Mitsui Trust Bank,

Limited

The Bank of Fukuoka

Mitsubishi UFJ Trust and Banking

The 77 Bank, Ltd.

1,300 million

yen

October 31, 2018

(Note)

Lump sum

repayment on the

principal

repayment date

Funds to repay

existing loans

Unsecured

Non-

guaranteed

[Term Loan 25 Tranche C]


repayment date

Principal


Development Bank of Japan Inc. 900 million yen October 31, 2022

(Note)

Lump sum

repayment on the

principal

repayment date

Funds to repay

existing loans

Unsecured

Non-

guaranteed

(Note) Or the previous business day if the date shown is not a business day.

C. Asset Acquisitions

Pursuant to the basic policy on asset management as prescribed in the REIT’s Articles of Incorporation,

the four properties listed below were acquired on December 4, 2014 using the net proceeds from new

investment unit issuances (see “A. New investment unit issuance”) and borrowings (see “B. Borrowing of

capital”).

Property no.: Of-33 Property name: DAIWA UENO BUILDING

Acquisition date December 4, 2014

Acquisition price 3,400 million yen

Address (Indication of

residential address) 5-6-10 Ueno, Taito-ku, Tokyo

Use Offices, parking space

Completed February 7, 1990

Structure Steel frame, steel-frame reinforced concrete flat-roofed

10-story structure with 1 underground level

Total floor area 6,212.84 m2

Total available rental area 4,160.67 m2


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Property no.: Of-34 Property name: KOJIMACHI HF BUILDING




residential address) 3-2-4 Kojimachi, Chiyoda-ku, Tokyo

Use Offices, parking space

Completed March 31, 1994





Property no.: Of-35 Property name: HF KUDAN MINAMI BUILDING




residential address) 3-9-14 Kudan-Minami, Chiyoda-ku, Tokyo

Use Offices, garage

Completed March 31, 1991





Property no.: Re-75 Property name: HF SENDAI RESIDENCE EAST (Note 1)



Address (Lot number)

219-3, 219-4, 220-1, 220-2, 221, 222, 223 and 223-1

Mototera-Koji, Miyagino-ku, Sendai, Miyagi Prefecture,

and 5-14 Kakyoindori, Miyagino-ku, Sendai, Miyagi

Prefecture (See Note 2)

Use Co-housing

Completed July 23, 2008

Structure Steel-frame reinforced concrete flat-roofed 12-story

structure



(Note 1) The name of the building as of the date of this report is Agilia Sendai East. However, since the name of

the building will be changed to HF Sendai East on February 1, 2015, this report show the name after the

change.

(Note 2) The building address according to land registry is shown as there is no indication of a residential address.

The site area is subject to designation of replotting. However, the address in the table is the location of

the former plot according to the land registry.


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d. Outlook for the 27th and 28th Fiscal Period

Operations are forecast to be as follows during the 27th Fiscal Period (from December 1, 2014 to May 31, 2015).

See “Management status forecast assumptions for 27th Fiscal Period (from December 1, 2014 to May 31, 2015)

and 28th Fiscal Period (from June 1, 2015 to November 30, 2015)” below for assumptions used in this forecast.

Operating revenues 5,394 million yen

Operating income 2,299 million yen

Ordinary income 1,658 million yen

Net income 1,657 million yen

Distributions per unit

(excluding distributions in excess of earnings) 1,742 yen

Distributions in excess of earnings per unit ‒ yen

(Note) The above forecast figures were calculated using a fixed set of assumptions and are valid as of the time of

this notice. Actual net income, distributions, etc., may vary due to changes in conditions. Forecast figures

are not a guarantee of the amount of distributions.

Operations are forecast to be as follows during the 28th Fiscal Period (from June 1, 2015 to November 30, 2015).

See “Management status forecast assumptions for 27th Fiscal Period (from December 1, 2014 to May 31, 2015)

and 28th Fiscal Period (from June 1, 2015 to November 30, 2015)” below for assumptions used in this forecast.

Operating revenues 5,391 million yen

Operating income 2,268 million yen

Ordinary income 1,628 million yen

Net income 1,627 million yen


(excluding distributions in excess of earnings) 1,711 yen

Distributions in excess of earnings per unit ‒ yen

(Note) The above forecast figures were calculated using a fixed set of assumptions and are valid as of the time of

this notice. Actual net income, distributions, etc., may vary due to changes in conditions. Forecast figures

are not a guarantee of the amount of distributions.

Management status forecast assumptions for 27th Fiscal Period (from December 1, 2014 to May 31, 2015) and

28th Fiscal Period (from June 1, 2015 to November 30, 2015)

Item Assumptions

Management period 27th Fiscal Period: from December 1, 2014 to May 31, 2015 (182 days)

28th Fiscal Period: from June 1, 2015 to November 30, 2015 (183 days)

Assets under

management

Assumption of 96 properties under management, with Daiwa Ueno Building, Kojimachi HF

Building, HF Kudan-Minami Building and HF Sendai Residence East acquired on December

4, 2014 (below, collectively Acquired Assets) added to the 92 properties owned at the end of

November 2014.The actual number of properties owned may vary if properties are newly

acquired, transferred, etc. With respect to its equity interest in the silent partnership whose

assets under management were Daiwa Ueno Building and Kojimachi HF Building, the REIT

received profit distributions commensurate with its equity interest and the return of its equity

interest in the period ending May 2015 (the 27th Fiscal Period) due to the end of management

by the silent partnership as a result of acquisition by the REIT.

Total outstanding

investment units

Assumption of 951,147 total outstanding investment units, comprised of the 881,447 units at

the end of November 2014 plus the new investment units (66,400 units) issued through the

general offering determined by meetings of the Board of Directors on November 7 and

November 17, 2014, and the new investment units (3,300 units) pertaining to private

placement accompanying sale through over allotment.

Per-unit net income and distributions for the fiscal period under review calculated on

treatment of the aforementioned 951,147 units as the outstanding investment units as of the

end of each fiscal period.


11

Item Assumptions

Operating revenues

Operating revenues are calculated based on the assumption of the above assets under

management.

Operating revenues are calculated taking into account such factors as cancellation notices

currently received and the future market environment, using the history of acquired assets as

our standard.

Operating expenses

Operating expenses are calculated based on the assumption of the above assets under

management.

Assumptions concerning major operating expenses are as follows:

27th Fiscal Period: from December 1, 2014 to May 31, 2015

Public charges and taxes (fixed property tax, city planning tax, etc.): 360 million yen

Maintenance and repair fees: 187 million yen

Management commissions: 562 million yen

Depreciation: 899 million yen

28th Fiscal Period: from June 1, 2015 to November 30, 2015

Public charges and taxes (fixed property tax, city planning tax, etc.): 391 million yen

Maintenance and repair fees: 164 million yen

Management commissions: 545 million yen

Depreciation: 906 million yen

For fixed asset taxes, city planning taxes and other taxes pertaining to owned properties, of

the amount of tax for which assessments have been determined, adopted for expense

processing is the method of treating the amount corresponding to the calculation periods in

question as rental business expenses. The general approach to real estate and other

transactions with regard to fixed asset taxes, city planning taxes and other taxes is to conduct

calculations pursuant to proportional division of periods with the previous owners, with the

precision calculations made at the time of acquisition. However, because the portions

equivalent to the said precisely calculated amounts are included in the acquisition cost, they

are not listed as expenses. The portion equivalent to the precisely calculated amounts of fixed

asset taxes, city planning taxes and other taxes expected to be included in the acquisition costs

of real estate, etc. are anticipated to be 5 million yen.

Maintenance and repair fees are based on the amount deemed necessary during the period.

However, emergency maintenance and repair fees may arise as a result of unforeseeable

factors and actual fees may therefore vary significantly from the forecast.

Non-operating

expenses

We forecast 623 million yen in interest payment and borrowing-related expenses for the 27th Fiscal Period, and 626 million yen in such expenses for the 28th Fiscal Period. We additionally forecast 17 million yen in amortization of investment unit issuance expenses for the 27th Fiscal Period, and another 17 million yen in such expenses for the 28th Fiscal Period.

Interest-bearing

liabilities

The balance of interest-bearing liabilities at the end of the 25th Fiscal Period was 69,011 million yen.

Calculations are based upon assumptions of a borrowing balance of 72,511 million yen on the final day of the 27th Fiscal Period and 72,511 million yen on the final day of the 28th Fiscal Period, resulting from new borrowings of 3,500 million yen as one portion of the acquisition capital for the Acquired Assets in December 2014.

We assume full refinancing of the value of borrowings for which repayment dates will come due in May and October of 2015, respectively.


(excluding

distributions in

excess of earnings)

Distributions per unit (excluding distributions in excess of earnings) are calculated assuming the distribution of monies policy prescribed by the REIT’s bylaws. Total distributions for the 27th Fiscal Period are assumed to be 1,657 million yen (1,742 yen distribution per unit), based on the forecast net income of 1,657 million yen.. Total distributions for the 28th Fiscal Period are assumed to be 1,627 million yen (1,711 yen distribution per unit), based on the forecast net income of 1,627 million yen.

Distributions per unit (excluding distributions in excess of earnings) may change because of

various factors, including changes in leasing income attributable to changes of assets under

management or changes in tenants or to unexpected maintenance and repair work.

Distributions in

excess of earnings

per unit We do not expect any distributions in excess of earnings at this time.

Other

We assume no amendments to laws, the tax system, accounting standards, TSE rules, or The

Investment Trusts Association, Japan rules, etc., that would affect the above forecast figures.

We assume that no major unforeseen changes will occur in the general economic trends, real

estate market conditions, etc.


12

(3) Investment risk

No disclosure necessary, since there have been no material changes from “Investment risk” in the most recent

Annual Securities Report (submitted August 27, 2014).


13

3. Financial Statements

(1) Balance Sheet

(Unit: 1,000 yen)

25th Fiscal Period

(As of May 31, 2014)

26th Fiscal Period

(As of November 30, 2014)

Assets

Current assets

Cash and deposits 5,408,327 6,472,394

Cash and deposits in trust 5,715,432 5,726,641

Operating accounts receivable 102,193 103,949

Prepaid expenses 268,841 250,304

Consumption taxes receivable, etc. 210,729 –

Other 1,334 7,051

Allowance for doubtful accounts (466) (387)

Total current assets 11,706,392 12,559,953

Noncurrent assets

Property, plant and equipment

Buildings 12,065,890 12,153,844

Accumulated depreciation (2,789,087) (2,975,396)

Buildings, net 9,276,802 9,178,448

Structures 70,571 71,302

Accumulated depreciation (28,528) (30,617)

Structures, net 42,042 40,685

Machinery and equipment 232,499 235,299


Machinery and equipment, net 123,861 119,481

Tools, furniture and fixture 102,942 124,226


Tools, furniture and fixtures, net 47,979 63,286

Land 27,452,042 27,452,042

Buildings in trust 40,753,734 41,050,370

Accumulated depreciation (5,571,655) (6,153,977)

Buildings in trust, net 35,182,079 34,896,392

Structures in trust 288,274 288,274


Structures in trust, net 243,083 237,657

Machinery and equipment in trust 339,857 377,681


Machinery and equipment in trust, net 228,042 250,244

Tools, furniture and fixtures in trust 565,753 627,365


Tools, furniture and fixtures in trust, net 255,089 283,249

Land in trust 67,315,435 67,315,435

Total property, plant and equipment 140,166,458 139,836,924

Intangible assets

Leasehold right 715,719 715,719

Leasehold rights in trust 3,315,665 3,315,665

Other 3,669 2,485

Total intangible assets 4,035,055 4,033,871


14

(Unit: 1,000 yen)

25th Fiscal Period

(As of May 31, 2014)

26th Fiscal Period


Investment and other assets

Investment securities 143,061 143,061

Guarantee deposits 10,016 10,016

Long-term prepaid expenses 498,724 434,040

Derivatives 224,729 134,898

Other 185,322 195,396

Total investments and other assets 1,061,854 917,413

Total noncurrent assets 145,263,367 144,788,209

Deferred assets

Investment unit issuance 46,454 34,619

Total deferred assets 46,454 34,619

Total assets 157,016,215 157,382,782

Liabilities

Current liabilities

Operating accounts payable 336,028 615,028

Current portion of long-term loans payable 10,531,000 10,620,000

Accrued expenses 650,449 658,496

Accrued consumption tax, etc. – 97,748

Advances received 807,945 779,315

Other 11,253 8,284

Total current liabilities 12,336,678 12,778,872

Noncurrent liabilities

Long-term loans payable 58,480,700 58,391,700

Tenant leasehold and security deposits 948,709 922,620

Tenant leasehold and security deposits in trust 3,101,410 3,132,314

Derivative liabilities 32,812 123,460

Total noncurrent liabilities 62,563,632 62,570,095

Total liabilities 74,900,310 75,348,968

Net Assets

Unitholders’ equity

Unitholders’ capital 70,527,819 70,527,819

Surplus

Investment surplus 7,406,652 7,406,652

Unappropriated retained earnings (undisposed loss) 4,534,660 4,564,300

Total surplus 11,941,312 11,970,952

Total unitholders’ equity 82,469,131 82,498,771

Valuation and translation adjustments

Deferred hedge gain or loss (353,226) (464,957)

Total valuation and translation adjustments (353,226) (464,957)

Total net assets 82,115,904 82,033,814

Total liabilities and net assets 157,016,215 157,382,782


15

(2) Profit and Loss Statement

(Unit: 1,000 yen)

25th Fiscal Period

(December 1, 2013 –

May 31, 2014)

26th Fiscal Period

(June 1, 2014 –

November 30, 2014)

Operating Revenues

Rent revenue-real estate 4,626,607 4,650,423

Other lease business revenue 424,889 395,900

Dividend distribution from silent partnership 8,103 6,395

Total operating revenue 5,059,600 5,052,718

Operating expenses

Expenses related to rent business 2,267,121 2,269,925

Asset management fee 452,301 455,872

Asset custody fee 19,635 19,346

Administrative service fees 42,372 39,575

Directors’ compensation 8,006 8,006

Audit fee 9,660 9,664

Other operating expenses 92,083 101,572

Total operating expenses 2,891,181 2,903,964

Operating income 2,168,419 2,148,754

Non-operating income

Interest income 756 818

Reversal of dividends payable 847 817

Other 2,470 2,243

Total non-operating income 4,074 3,880

Non-operating expenses

Interest expenses 514,004 501,843

Borrowing related expenses 199,129 134,377

Amortization of investment unit issuance expenses 11,834 11,834

Other 2,237 2,316

Total non-operating expenses 727,206 650,372

Ordinary income 1,445,287 1,502,261

Income before income taxes 1,445,287 1,502,261

Income taxes-current 605 605

Total income taxes 605 605

Net income 1,444,682 1,501,656

Retained earnings brought forward 3,089,977 3,062,643

Unappropriated retained earnings (undisposed loss) 4,534,660 4,564,300


16

(3) Statements of Changes in Net Assets (Unitholders’ Equity)

25th Fiscal Period (December 1, 2013 – May 31, 2014) (Unit: 1,000 yen)


Unitholders’

capital /

Total Capital

Surplus

Total unitholders’

equity Investment surplus

Unappropriated

retained earnings

(undisposed loss)

Total surplus

Balance at the beginning of the

period 64,652,643 7,406,652 4,405,647 11,812,299 76,464,942

Changes of items during the period

Issuance of new investment

units 5,875,176 5,875,176

Dividends from surplus (1,315,669) (1,315,669) (1,315,669)

Net income 1,444,682 1,444,682 1,444,682

Net changes of items other than


Total changes of items during the

period 5,875,176 – 129,013 129,013 6,004,189

Balance at the end of the current

period 70,527,819 7,406,652 4,534,660 11,941,312 82,469,131


Total net assets

Deferred hedge

gain or loss

Total valuation

and translation

adjustments


period (272,482) (272,482) 76,192,460


Issuance of new investment

units 5,875,176

Dividends from surplus (1,315,669)

Net income 1,444,682


unitholders’ equity (80,744) (80,744) (80,744)


period (80,744) (80,744) 5,923,444


period (353,226) (353,226) 82,115,904


17

26th Fiscal Period (June 1, 2014 – November 30, 2014)

(Unit: 1,000 yen)


Unitholders’

capital /

Total Capital

Surplus

Total unitholders’

equity Investment surplus

Unappropriated

retained earnings

(undisposed loss)

Total surplus


period 70,527,819 7,406,652 4,534,660 11,941,312 82,469,131


Dividends from surplus (1,472,016) (1,472,016) (1,472,016)

Net income 1,501,656 1,501,656 1,501,656




period 29,640 29,640 29,640


period 70,527,819 7,406,652 4,564,300 11,970,952 82,498,771


Total net assets

Deferred hedge

gain or loss

Total valuation

and translation

adjustments


period (353,226) (353,226) 82,115,904


Dividends from surplus (1,472,016)

Net income 1,501,656


unitholders’ equity (111,730) (111,730) (111,730)


period (111,730) (111,730) (82,090)


period (464,957) (464,957) 82,033,814


18

(4) Statements of Cash Dividend Distributions

(Unit: yen)

25th Fiscal Period


May 31, 2014)

26th Fiscal Period

(June 1, 2014 –

November 30, 2014)

I. Unappropriated retained earnings 4,534,660,431 4,564,300,558

II. Distributions 1,472,016,490 1,501,104,241

Distributions per unit (excluding

distributions in excess of earnings) 1,670 1,703

III. Retained earnings brought forward 3,062,643,941 3,063,196,317

How distributions were calculated

Following the policy prescribed in Article

32-1 of the REIT’s bylaws, distributions are

defined as anything in excess of 90% of the

“amount of distributable income” stipulated

in Article 67-15 of the Act on Special

Measures Concerning Taxation, up to the

amount of the REIT’s unappropriated

retained earnings. Based on this policy, we

applied 27,333,815 yen in retained earnings

from the previous fiscal period to

1,444,682,675 yen in net income from the

fiscal period under review, distributing

1,472,016,490 yen as profit distributions.

The REIT does not distribute monies in

excess of income as prescribed in Article

32-2 of its bylaws.

Following the policy prescribed in Article

32-1 of the REIT’s bylaws, distributions are

defined as anything in excess of 90% of the

“amount of distributable income” stipulated

in Article 67-15 of the Act on Special

Measures Concerning Taxation, up to the

amount of the REIT’s unappropriated

retained earnings. Based on this policy, the

REIT decided the distributions from

earnings that it shall pay out shall be

1,501,104,241 yen, which is the maximum

value of the integral multiple of the number

of units issued and outstanding

(881,447units) in an amount that is not in

excess of net income. The REIT does not

distribute monies in excess of income as

prescribed in Article 32-2 of its bylaws.


19

(5) Cash Flow Statement

(Unit: 1,000 yen)

25th Fiscal Period


May 31, 2014)

26th Fiscal Period

(June 1, 2014 –

November 30, 2014)

Cash Flows from Operating Activities

Income before income taxes 1,445,287 1,502,261

Depreciation 836,500 838,593

Increase (decrease) in allowance for doubtful accounts 100 (78)

Investment unit issuance amortization 11,834 11,834

Interest income (756) (818)

Interest expenses 514,004 501,843

Decrease (increase) of operating accounts receivable (18,085) (2,289)

Decrease (increase) of consumption taxes receivable (210,729) 210,729

Increase (decrease) in accrued consumption taxes (78,051) 97,748

Decrease (increase) of long-term prepaid expenses 35,740 64,683

Increase (decrease) in operating accounts payable (69,447) 80,589

Increase (decrease) in accrued expenses 33,358 14,096

Increase (decrease) in advances received 96,519 (28,630)

Increase (decrease) in deposits received 1,554 (2,020)

Other (9,101) 9,828

Subtotal 2,588,729 3,298,371

Interest income received 756 818

Interest expenses paid (443,862) (443,783)

Income taxes paid (1,461) (1,251)

Cash Flows from Operating Activities 2,144,162 2,854,154

Cash Flows from Investment Activities

Payments into time deposits – (2,000,000)

Purchase of property, plant and equipment (122,645) (85,013)

Purchase of property, plant and equipment in trust (7,349,333) (213,245)

Purchase of intangible assets (2,472,255) -

Proceeds from receipt of tenant leasehold and security deposits 39,592 139,879

Repayments of tenant leasehold and security deposits (49,576) (165,968)

Proceeds from tenant leasehold and security deposits in trust 670,940 89,319

Repayments of tenant leasehold and security deposits in trust (112,190) (71,535)

Proceeds from payment of trust deposits corresponding to tenant

leasehold and security deposits in trust 112,190 71,535

Deposits of trust deposits corresponding to tenant leasehold and

security deposits in trust (670,940) (89,319)

Cash Flows from Investment Activities (9,954,217) (2,324,348)

Cash Flows from Financing Activities

Proceeds from long-term loans payable 9,508,700 5,731,000

Repayment of investment corporation bonds (5,708,700) (5,731,000)

Proceeds from issuance of investment units 5,875,176 –

Payments for investment unit issuance expenses (32,849) –

Distributions paid (1,315,668) (1,472,315)

Cash Flows from Financing Activities 8,326,657 (1,472,315)

Increase (decrease) in cash and cash equivalents 516,602 (942,508)

Cash and cash equivalents at beginning of period 7,492,626 8,009,229

Cash and cash equivalents at end of period 8,009,229 7,066,721


20

4. Reference Information

(1) Investment status

Asset

type Use Area

25th Fiscal Period

(As of May 31, 2014)

26th Fiscal Period


Value of holding

(Million yen)

(Note 1)

Ratio to total

assets

(%)

Value of holding

(Million yen)

(Note 1)

Ratio to total

assets

(%)

Real estate

(Note 2)

Office

Tokyo 23 Wards 16,586 10.6 16,556 10.5

Metropolitan Area

(Note 3) 5,107 3.3 5,073 3.2

Residence

Tokyo 23 Wards 11,839 7.5 11,823 7.5

Metropolitan Area

(Note 3) 4,125 2.6 4,116 2.6

Subtotal 37,658 24.0 37,569 23.9

Real estate

in trust

(Note 2)

Office

Tokyo 23 Wards 26,135 16.6 26,084 16.6

Other (Note 4) 14,313 9.1 14,288 9.1

Residence

Tokyo 23 Wards 48,491 30.9 48,412 30.8

Metropolitan Area

(Note 3) 1,211 0.8 1,204 0.8

Other (Note 4) 12,452 7.9 12,400 7.9

Hotel

Metropolitan Area

(Note 3) 990 0.6 983 0.6

Other (Note 4) 2,945 1.9 2,924 1.9

Subtotal 106,539 67.9 106,298 67.5

Real estate, etc., subtotal 144,197 91.8 143,868 91.4

Equity interest in silent partnership (Note 5) 143 0.1 143 0.1

Deposits and other assets 12,675 8.1 13,371 8.5

Total assets 157,016 100.0 157,382 100.0

(Note 1) “Value of holding” is based on the balance sheet amount (carrying amount after depreciation in the case of real estate in trust,

etc.) as of the end of the period.

(Note 2) Values for “Real estate” and “Real estate in trust” do not include value of assets under construction.

(Note 3) “Metropolitan Area” refers to Tokyo (other than Tokyo 23 Wards) and Kanagawa, Saitama and Chiba prefectures.

(Note 4) “Other” refers to investment areas other than Tokyo 23 Wards and Metropolitan Area.

(Note 5) All “equity interest in silent partnership” is equity interest in a silent partnership that is related to the silent partnership under

the management of Herb, a limited liability company.

25th Fiscal Period

(As of May 31, 2014)

26th Fiscal Period


Balance sheet amount

(Million yen)

Ratio to total assets

(%)


(Million yen)


(%)

Liabilities 74,900 47.7 75,348 47.9

Net assets 82,115 52.3 82,033 52.1


21

(2) Investment assets

(i) Main issues of investment securities

The summary of investment securities held by the REIT as of November 30, 2014 is as follows:

Asset type Issues Book value

(Million yen)

Appraised value

(Million yen)

(Note 1)


(%)

Equity interest in silent

partnership

Equity interest in a silent

partnership under the

management of Herb, a

limited liability company

(Note 2)

143 143 0.1

(Note 1) The book value is stated as the appraised value.

(Note 2) The asset under management by the manager is real estate trust beneficiary rights for trust properties, Daiwa Ueno Building

and Kojimachi HF Building.


22

(3) Investment real estate properties

(i) Overview of portfolio assets

Property

no. Property name Address

Form of asset

(Note 1)

Appraisal

value

(Million yen)


(Million yen)

(Note 2)

Acquisition price

(Million yen)

(Note 3)

Percentage of investments

(%)

(Note 4)

Of-01 HF GOTANDA BUILDING Shinagawa-ku,

Tokyo

Trust beneficial

interest 1,283 1,349 1,290 0.87

Of-05 Suitengu Heiwa Bldg Chuo-ku, Tokyo Trust beneficial

interest 1,246 1,461 1,550 1.05

Of-06 HF MONZEN-NAKACHO BUILDING Koto-ku, Tokyo Trust beneficial

interest 2,310 2,404 2,500 1.69

Of-07 HF HAMAMATSUCHO BUILDING Minato-ku,

Tokyo

Trust beneficial

interest 1,520 1,547 1,530 1.04

Of-08 Kokusai Tameike Bldg Minato-ku,

Tokyo Trust beneficial

interest 2,590 2,789 2,700 1.83

Of-09 Grace Building Sengakujimae Minato-ku,

Tokyo

Trust beneficial

interest 1,490 1,177 1,220 0.83

Of-10 HF SHIN-YOKOHAMA BUILDING Yokohama-shi,

Kanagawa Real estate 1,080 1,417 1,550 1.05

Of-11 Nihonbashi Daiichi Bldg Chuo-ku, Tokyo Trust beneficial

interest 1,760 2,239 2,150 1.46

Of-12 Hatchobori SF Bldg Chuo-ku, Tokyo Real estate 2,410 3,126 3,092 2.09

Of-13 Shibuya AX Hills Shibuya-ku,

Tokyo Real estate 1,400 1,829 1,860 1.26

Of-14 KCA Bldg Chiyoda-ku,


Of-15 HF NAKAMEGURO BUILDING Meguro-ku,


Of-16 Anwa Tsukasacho Bldg Chiyoda-ku,


Of-17 Hatchobori MF Bldg Chuo-ku, Tokyo Real estate 935 1,125 1,110 0.75

Of-18 M2 Harajuku Shibuya-ku,

Tokyo

Trust beneficial

interest 4,315 3,496 3,418 2.31

Of-20 Funabashi Face Bldg Funabashi-shi,

Chiba Real estate 2,920 3,656 3,900 2.64

Of-21 Adesso Nishiazabu Minato-ku,

Tokyo Trust beneficial

interest 456 624 640 0.43

Of-22 HF TORANOMON BUILDING Minato-ku,


Of-23 HF IKEBUKURO BUILDING Toshima-ku,


Of-24 HF YUSHIMA BUILDING Bunkyo-ku,


Of-25 Kayabacho Heiwa Bldg Chuo-ku, Tokyo Trust beneficial

interest 5,770 4,814 4,798 3.25

Of-26 HIROKOJI AQUA PLACE Nagoya-shi,

Aichi

Trust beneficial

interest 4,097 2,848 2,930 1.98

Of-27 Kobe Kyukyoryuchi Heiwa Building Kobe-shi, Hyogo Trust beneficial

interest 2,580 2,285 2,310 1.56

Of-28 Mita Heiwa Building (leasehold land) Minato-ku,

Tokyo

Trust beneficial

interest 2,563 2,269 2,230 1.51

Of-29 Sakae Minami Heiwa Building Nagoya-shi,

Aichi

Trust beneficial

interest 1,810 1,557 1,580 1.07

Of-30 HF SAKURADORI Building Nagoya-shi,

Aichi Trust beneficial

interest 5,580 4,868 4,900 3.32

Of-31 HF Nihonbashi Hamacho Building Chuo-ku, Tokyo Trust beneficial

interest 2,150 1,908 1,900 1.29

Of-32 HF Sendai Honcho Building Sendai-shi,

Miyagi

Trust beneficial

interest 3,050 2,728 2,700 1.83

Office subtotal 61,372 62,002 62,266 42.17

Re-03 HF ICHIKAWA RESIDENCE Ichikawa-shi,

Chiba

Trust beneficial

interest 491 396 430 0.29

Re-05 HF MEGURO RESIDENCE Meguro-ku,

Tokyo

Trust beneficial

interest 599 649 660 0.45


23

Property


Form of asset

(Note 1)

Appraisal

value

(Million yen)

Balance sheet

amount

(Million yen)

(Note 2)

Acquisition

price

(Million yen)

(Note 3)

Percentage of

investments

(%)

(Note 4)

Re-09 HF KASAI RESIDENCE Edogawa-ku,

Tokyo

Trust beneficial

interest 664 596 650 0.44

Re-11 HF WAKABAYASHI-KOEN

RESIDENCE

Setagaya-ku,

Tokyo

Trust beneficial

interest 3,775 3,247 3,610 2.44

Re-12 HF HIMONYA RESIDENCE Meguro-ku,

Tokyo

Trust beneficial

interest 1,519 1,458 1,560 1.06

Re-14 HF MINAMIAZABU RESIDENCE Minato-ku,

Tokyo

Trust beneficial

interest 1,212 1,316 1,370 0.93

Re-15 HF AZABUJUBAN RESIDENCE Minato-ku,

Tokyo

Trust beneficial

interest 1,080 1,183 1,260 0.85

Re-16 HF GAKUGEIDAIGAKU RESIDENCE Meguro-ku,

Tokyo

Trust beneficial

interest 881 938 1,000 0.68

Re-17 HF HIGASHIKANDA RESIDENCE Chiyoda-ku,

Tokyo

Trust beneficial

interest 1,190 967 1,100 0.74

Re-18 HF HIGASHINIHONBASHI

RESIDENCE Chuo-ku, Tokyo

Trust beneficial

interest 1,370 1,071 1,210 0.82

Re-19 HF NERIMA RESIDENCE Nerima-ku,

Tokyo

Trust beneficial

interest 721 609 690 0.47

Re-20 HF SHIROKANETAKANAWA

RESIDENCE

Minato-ku,


Re-21 HF MEIDAIMAE RESIDENCE Setagaya-ku,

Tokyo Real estate 903 1,013 1,070 0.72

Re-22 HF NIHONBASHI RESIDENCE Chuo-ku, Tokyo Trust beneficial

interest 975 1,088 1,130 0.77

Re-23 HF KAMISHAKUJII RESIDENCE Nerima-ku,

Tokyo Real estate 897 905 950 0.64

Re-24 HF KINSHICHO RESIDENCE Sumida-ku,


Re-25 HF GINZA RESIDENCE EAST Chuo-ku, Tokyo Trust beneficial

interest 4,350 5,689 5,940 4.02

Re-26 HF SHIN-YOKOHAMA RESIDENCE Yokohama-shi,

Kanagawa Real estate 2,520 3,148 3,350 2.27

Re-29 HF HAKUSAN RESIDENCE Bunkyo-ku,


Re-30 HF MAGOME RESIDENCE Ota-ku, Tokyo Real estate 1,210 1,579 1,630 1.10

Re-31 HF GAKUGEIDAIGAKU RESIDENCE

II

Meguro-ku,

Tokyo

Trust beneficial

interest 1,110 1,602 1,650 1.12

Re-33 HF KAMEIDO RESIDENCE Koto-ku, Tokyo Real estate 1,010 1,042 1,050 0.71

Re-34 HF TANASHI RESIDENCE Nishitokyo-shi,

Tokyo Real estate 753 968 911 0.62

Re-35 HF SHIBA-KOEN RESIDENCE Minato-ku,

Tokyo

Trust beneficial

interest 793 808 836 0.57

Re-36 HF MITA RESIDENCE Minato-ku,

Tokyo

Trust beneficial

interest 1,120 1,042 1,080 0.73

Re-37 HF TAKANAWA RESIDENCE Minato-ku,

Tokyo

Trust beneficial

interest 774 722 749 0.51

Re-38 La Residence de Shirokanedai Minato-ku,

Tokyo

Trust beneficial

interest 813 707 730 0.49

Re-39 HF GINZA RESIDENCE EAST II Chuo-ku, Tokyo Trust beneficial

interest 1,530 1,447 1,460 0.99

Re-40 HF HACCHOBORI RESIDENCE II Chuo-ku, Tokyo Trust beneficial

interest 1,970 1,822 1,890 1.28

Re-41 HF HACCHOBORI RESIDENCE III Chuo-ku, Tokyo Trust beneficial

interest 889 743 793 0.54

Re-42 HF GINZA RESIDENCE Chuo-ku, Tokyo Trust beneficial

interest 1,030 879 944 0.64

Re-43 HF KOMAZAWA-KOEN RESIDENCE

TOWER

Setagaya-ku,

Tokyo

Trust beneficial

interest 6,650 6,562 6,520 4.42

Re-44 HF UMEDA RESIDENCE TOWER Osaka-shi, Osaka Trust beneficial

interest 1,990 1,774 1,920 1.30

Re-45 HF NAKANOSHIMA RESIDENCE Osaka-shi, Osaka Trust beneficial

interest 472 434 453 0.31

Re-46 HF AWAZA RESIDENCE Osaka-shi, Osaka Trust beneficial

interest 648 537 577 0.39


24

Property


Form of asset

(Note 1)

Appraisal

value

(Million yen)

Balance sheet

amount

(Million yen)

(Note 2)

Acquisition

price

(Million yen)

(Note 3)

Percentage of

investments

(%)

(Note 4)

Re-47 HF MARUNOUCHI RESIDENCE Nagoya-shi,

Aichi

Trust beneficial

interest 673 576 624 0.42

Re-48 HF HIRAO RESIDENCE Fukuoka-shi,

Fukuoka

Trust beneficial

interest 1,820 1,676 1,780 1.21

Re-49 HF KAWARAMACHI NIJO

RESIDENCE Kyoto-shi, Kyoto

Trust beneficial

interest 514 512 534 0.36

Re-52 HF TENJIN-HIGASHI RESIDENCE Fukuoka-shi,

Fukuoka

Trust beneficial

interest 553 453 502 0.34

Re-53 HF SHIJO KAWARAMACHI


Trust beneficial

interest 2,050 1,727 1,820 1.23

Re-54 La Residence de Sendagi Bunkyo-ku,

Tokyo

Trust beneficial

interest 883 793 820 0.56

Re-55 HF SENDAGI RESIDENCE Bunkyo-ku,

Tokyo

Trust beneficial

interest 946 838 870 0.59

Re-56 HF KOMAZAWA-KOEN RESIDENCE Setagaya-ku,

Tokyo

Trust beneficial

interest 647 589 615 0.42

Re-57 HF MUSASHI KOYAMA RESIDENCE Shinagawa-ku,

Tokyo

Trust beneficial

interest 974 813 842 0.57

Re-58 HF KOKUBUNJI RESIDENCE Kokubunji-shi,

Tokyo

Trust beneficial

interest 879 808 839 0.57

Re-59 HF HISAYAODORI RESIDENCE Nagoya-shi,

Aichi

Trust beneficial

interest 1,140 1,033 1,080 0.73

Re-60 HF KARASUMA KURAMAGUCHI


Trust beneficial

interest 627 544 572 0.39

Re-61 HF NISHI-SHINJUKU RESIDENCE

WEST

Shinjuku-ku,

Tokyo

Trust beneficial

interest 2,160 2,000 1,990 1.35

Re-62 HF NISHI-SHINJUKU RESIDENCE

EAST

Shinjuku-ku,

Tokyo

Trust beneficial

interest 1,260 1,175 1,170 0.79

Re-63 HF HIGASHI SHINJUKU RESIDENCE Shinjuku-ku,

Tokyo

Trust beneficial

interest 1,480 1,307 1,360 0.92

Re-64 HF HIGASHI-SHINSAIBASHI

RESIDENCE Osaka-shi, Osaka

Trust beneficial

interest 602 546 566 0.38

Re-65 HF KITA-YOBANCHO RESIDENCE Sendai-shi,

Miyagi

Trust beneficial

interest 966 764 809 0.55

Re-66 HF ATAGOBASHI RESIDENCE Sendai-shi,

Miyagi

Trust beneficial

interest 807 631 684 0.46

Re-67 HF KYUDAIBYOINMAE RESIDENCE Fukuoka-shi,

Fukuoka

Trust beneficial

interest 456 399 426 0.29

Re-68 HF ASAKUSABASHI RESIDENCE Taito-ku, Tokyo Trust beneficial

interest 827 742 771 0.52

Re-69 HF ICHIBANCHO RESIDENCE Sendai-shi,

Miyagi

Trust beneficial

interest 969 785 834 0.56

Re-70 HF HIGASHI-NAKANO RESIDENCE Nakano-ku,

Tokyo

Trust beneficial

interest 991 909 942 0.64

Re-72 HF WASEDA RESIDENCE Shinjuku-ku,

Tokyo

Trust beneficial

interest 2,280 2,027 2,090 1.42

Re-73 HF WASEDA RESIDENCE II Shinjuku-ku,

Tokyo

Trust beneficial

interest 932 847 872 0.59

Re-74 HF WAKAMATSUKAWADA

RESIDENCE

Shinjuku-ku,

Tokyo

Trust beneficial

interest 1,210 1,208 1,158 0.78

Residence subtotal 79,245 77,958 81,223 55.00

Ho-01 Super Hotel Osaka Tennoji Osaka-shi,

Osaka

Trust beneficial

interest 1,170 1,016 1,080 0.73

Ho-02 Super Hotel Kyoto Karasumagojyo Kyoto-shi,

Kyoto

Trust beneficial

interest 989 847 900 0.61

Ho-03 Super Hotel Saitama Omiya Saitama-shi,

Saitama

Trust beneficial

interest 1,130 983 1,050 0.71

Ho-04 Super Hotel Sendai Hirose-dori Sendai-shi,

Miyagi

Trust beneficial

interest 1,270 1,060 1,150 0.78

Hotel subtotal 4,559 3,907 4,180 2.83

Total 145,176 143,868 147,669 100.00


25

(Note 1) The “Form of asset” column shows the REIT’s form of ownership of the asset. The form is shown as “Trust beneficial interest” if the REIT is listed as

a beneficiary in the registry and as “Real estate” if the REIT is listed as the owner.

(Note 2) The “Balance sheet amount” column shows the acquisition price (including acquisition-related costs and subsequent capital expenditures) minus

cumulated depreciation as of November 30, 2014.

(Note 3) The “Acquisition price” column shows the sales value listed in the real estate sales agreement or trust beneficial interest sales agreement (not including

amount corresponding to consumption taxes or costs necessary to make acquisition; same applies below). However, for properties acquired as a result

of the merger (40 properties, from Re-35 HF SHIBA-KOEN RESIDENCE through Re-73 HF WASEDA RESIDENCE II, and from Ho-01 Super Hotel

Osaka Tennoji through Ho-04 Super Hotel Sendai Hirose-dori), the column shows the appraisal value as of October 1, 2010, the day the merger took

effect.

(Note 4) The “Percentage of investments” column shows the percentage of each property’s acquisition price to total acquisition price of all acquired assets,

rounded to the nearest one-hundredth of one percent.

DISCLAIMER:

Heiwa Real Estate REIT, Inc. makes no assurance or warranty with respect to the completeness or accuracy of this

English translation. In the event of any discrepancy between the Japanese original and this English translation, the

Japanese original shall prevail. For complete and accurate information, please refer to the Japanese original.

Documents

26th Fiscal Period Financial Report (REIT) - heiwa-re.co.jp · PDF file26th FP ¥2,854 million (¥2,324 ... information” on page 33 of the Japanese version of the “26th Fiscal