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Invesco Office J-REIT, Inc.
6-10-1, Roppongi, Minato-ku Tokyohttp://www.invesco-reit.co.jp/en/
Invesco Office J-REIT, Inc.
6th Fiscal Period Semi-Annual ReportFrom November 1, 2016 to April 30, 2017
(Securities Code: 3298)
1,0052,605 2,575 2,697 2,733 2,8793,638
FP1(Actual)
FP2(Actual)
FP3(Actual)
FP4(Actual)
(¥)
01,0002,000
4,000
FP5(Actual)
FP7(Forecast)
FP6(Actual)
3,000
We would first like to extend our sincere gratitude for your continued support and business with Invesco Office J-REIT, Inc. (the “Investment Corporation”).
The Investment Corporation was listed on the Real Estate Investment Trust (REIT) Securities Market of the Tokyo Stock Exchange on June 5, 2014, with the fundamental goal of maximizing investor value by making focused investments in large-scale office buildings located in metropolitan areas.
The Investment Corporation has completed its sixth fiscal period (ended April 30, 2017), and we are pleased to report the following results.
During the sixth fiscal period, with a view to enhance its portfolio value, the Investment Corporation disposed of Harumi Island Triton Square Office Tower Z in December 2016. Net proceeds from the disposition were used to acquire Kinshicho Prime Tower in January 2017. The Investment Corporation also acquired Aqua Dojima East in March 2017 using cash on hand. With these transactions, the Investment Corporation’s portfolio expanded to 14 properties representing a total acquisition price of ¥161.9 billion (up from 13 properties representing a total acquisition price of ¥154.2 billion as of the end of the fifth fiscal period).
Regarding the disposition of Harumi Island Triton Square Office Tower Z, the Investment Corporation recorded a gain on the sale of the property of ¥784 million, all of which was distributed to unitholders.
Furthermore, consistent with its long-term financial strategy, the Investment Corporation issued the first and the second series of its investment corporation bonds. The proceeds of such bonds were then used to repay existing loans and provide operating capital following the successful completion of the Aqua Dojima East acquisition. The issuance of the investment corporation bonds also allowed the Investment Corporation to broaden its source of funding, reduce funding costs, and improve the stability of fund-raising capability in the mid- to long-term by prolonging the funding period. In addition, to further enhance investor value and effectively utilize cash on hand, the Investment Corporation acquired a number of its own investment units, resulting in a return of profits to investors and improved DPU.
On the asset management front, the occupancy rate of the entire portfolio stood at 96.8% as of the end of April 2017 through steady leasing activities for vacant spaces in holding properties. Along with improving the occupancy rate, we are also working to further increase revenues from the entire portfolio and promote internal growth by pursuing the possibility of raising rents when renewing lease contracts.
As a result, operating results for the sixth fiscal period reflected operating revenues of ¥6,543 million, operating income of ¥3,324 million, ordinary profit of ¥2,967 million and net income of ¥2,966 million, all surpassing the forecasts. Distributions per unit were ¥3,638.
With your support, we look forward to continuing to work diligently to build up our portfolio by making focused investments in large-scale office buildings located in metropolitan areas. We aim to maximize investor value by securing stable earnings in the medium and long term and steadily enhancing the value of assets.
We ask for the continued support and encouragement of our investors as we pursue these goals. Yasuyuki TsujiYugo Minemura
Yugo Minemura Yasuyuki TsujiExecutive Director,
Invesco Office J-REIT, Inc.Representative in Japan,
Invesco Global Real Estate Asia Pacific, Inc.
To Our Unitholders FP6 Highlights
As of the end of April 2017
Distributions
Financial Summary
¥2,966 mm ¥115,640Net Income NAV per Unit (Note)
¥6,543 mm
¥3,638
Operating Revenues
FP6 Actual DPU
¥179,894 mm
¥2,879
Total Assets
FP7 DPU Forecast
¥3,324 mm
Operating Income
¥81,935 mm
Net Assets
¥2,967 mm
Ordinary Income
¥100,467Net Asset per Unit
Changes in DPU
(Note1) As for the number of total investment units forecasted for the period, it is based on the assumption of 815,547 units which are issued as of the end of April 2017. For the earnings forecast for the fiscal period ending October 31, 2017 (FP7) in case considering acquiring and cancelling own investment units, please refer to page 9.
(Note2) As the Investment Corporation has not made cash distribution in excess of retained earnings, actual DPU for FP6 and DPU forecast for FP7 described above do not include any portion of the amount that exceeds the profits.
(Note) NAV per unit is calculated dividing net asset value, reflecting the gap between book-value and appraisal value of investment assets, by the number of outstanding investment units.
Table of Contents
To Our Unitholders
FP6 Highlights ·············································· 1
Overview of Invesco Office J-REIT, Inc. ···· 2
External Growth··········································· 3
Further Diversification in the Portfolio ······ 4
New Portfolio Properties in FP6 ··········· 6
Major Initiatives during FP6 and Future Growth Strategy ··························· 8
Internal Growth ········································· 10
Overview of Portfolio Properties ······· 12
Portfolio Properties ································· 14
Financial Information ······························ 20
Investment Unit Information ··············· 21
Asset Management Report ·················· 22
Balance Sheets ········································· 48
Statements of Income ···························· 50
Statements of Changes in Net Assets ···· 51
Statements of Cash Distributions ······ 52
Statements of Cash Flows ···················· 53
Notes to Financial Statements ··········· 54
Independent Auditor’s Report ············ 72
Overview of Invesco Group ·················· 73
1
Invesco Office J-REIT, Inc.
Aqua Dojima East
The Investment Corporation believes that metropolitan areas—centers for economic ac t i v i t y whe re compan i e s and l abo r concentrate—have relatively large size of office building markets, and consequently, there are abundant investment opportunities and relatively high leasing demand can be expected.
Large-scale office buildings are believed to enjoy relatively high and stable rents paid by quality corporate tenants with ample rent payment capacity.
The Asset Manager has conducted real property investment and asset management in Japan for the past 18 years, has a c u m u l a t i v e i n v e s t m e n t a m o u n t o f app rox ima te l y ¥1 .1 t r i l l i o n , and ha s experience in investment and managing as many as 122 properties.
Invesco Group is one of the world’s leading independent asset managers and provides global management capabilities.
Invesco Real Estate, one business division of the Invesco Group, has accumulated asset management expert ise by engaging in management of global real property direct investment and investment in real estate-related products such as publicly traded real property securities on a world-leading scale.
Focused investment in large-scale office
buildings in metropolitan areas
Asset management by an independent asset
manager with an ample track record
Asset management that leverages the Invesco Group’s high levels of
specialization
1
3
2Aiming to enhance the portfolio quality, the Investment Corporation acquired Kinshicho Prime Tower (purchase price: ¥15.1bn) in January 2017 utilizing funds generated from disposition of Harumi Island Triton Square Office Tower Z in December 2016. In addition, the Investment Corporation acquired Aqua Dojima East (purchase price: ¥1.9bn) in March 2017 by using available cash in hand. Through these acquisitions, the Investment Corporation enhanced property and tenant diversification with steady asset growth.
Overview of Invesco Office J-REIT, Inc. External Growth
FP5(at the end of October 2016)
FP6(at the end of April 2017)
No. of properties 13 properties 14 properties
Total purchase price ¥154.2bn ¥161.9bn
Average building age 18 years 19 years
Average occupancy rate 98.6% 96.8%
NOI yield (Note1) 5.0% 5.1%
NOI yield after depreciation (Note1) 4.0% 4.1%
Diversification by Tenants (Note2)
Diversification in Area (Note3)
LTV 47.7% 49.5%
Change in Portfolio and LTV
Top 10 tenant 43.7%Others 56.3%
Top 10 tenant 38.7%Others 61.3%
23 wards of Tokyo 65.5%Tokyo metropolitan area other than the above 18.8%Other major urban areas 12.4%Other investment target regions 3.2%
23 wards of Tokyo 66.0%Tokyo metropolitan area other than the above 17.9%Other major urban areas 13.0%Other investment target regions 3.1%
Top 10 tenant ratio43.7% (39.1%)
Top 10 tenant ratio38.7% (32.9%)
Investment ratio of Tokyo metropolitan area 84.3%
Investment ratio of Tokyo metropolitan area 83.9%
Total number of tenants
384
Total number of tenants
426
(Note1) For Aqua Dojima East, the ratio is calculated by the following formula: appraisal NOI before depreciation by a direct capitalization method as of the end of FP6/ purchase price. For other managed assets, the ratio is calculated using the following formula: (actual NOI before depreciation during the fiscal period / operating days during the fiscal period*365 days) / total purchase price of the portfolio as of the end of the fiscal period. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses.
(Note2) Tenant ratio based on leased area and the ratio based on rental income is shown in parentheses.(Note3) Investment ratio is based on the purchase price.
2 3
Invesco Office J-REIT, Inc.
IPO FP1(October 2014)
FP2(April 2015)
FP4(April 2016)
FP3(October 2015)
FP5(October 2016)
FP6(April 2017)
December 2016
1,5421,449
1,619
786
1,049
(¥100mm)Purchase price
0
2,000
1,600
1,200
800
400
Assets acquired at IPO (Initial portfolio properties) Assets newly acquired during FP5 Asset disposed during FP6
Assets newly acquired during FP6
Assets newly acquired during FP3Ebisu Prime Square Harumi Island Triton
Square Office Tower ZCs Tower, Cs Tower Annex
Queen’s Square Yokohama Nagoya Prime Central Tower
Hakata Prime East
Sun Towers Center Building
Akiba CO Building
Sendai Honcho Building
Shinagawa Seaside East Tower
Aqua Dojima EastKinshicho Prime Tower
Harumi Island Triton Square Office Tower Z
Tokyo Nissan Nishi Gotanda Building
ORTO Yokohama Nishi Shinjuku KF Building
3 assets worth ¥26.3 billion5 assets worth ¥78.6 billion 5 assets worth ¥49.2 billion
2 assets worth ¥17.0 billion
Further Diversification in the Portfolio
Expansion of asset under managementThe Investment Corporation has continuously grown in asset under management since its listing. The asset under management has reached ¥161.9bn after new acquisition in March 2017. The Investment Corporation aims to expand asset under management by acquiring quality assets.
4 5
Invesco Office J-REIT, Inc.
N e w P o r t f o l i o P r o p e r t i e s i n F P 6
KinshichoPrime Tower
Kameido Sta.Kinshicho Sta.
Kinshi Park
Sobu Line
Metropolitan Expressway
Route No.7 Komatsugawa Line
Hanzom
on Subway Line
Keiyo Road
Kuramaebashi-dori St.
KinshichoExit
Watanabebashi Sta. Oebashi Sta.
Yodoyabashi Sta.
Naniwabashi Sta.
Osaka Sta.
Umeda Sta.
Nishi-Umeda Sta. Higashi-Umeda Sta.
Kitashinchi Sta.
Aqua Dojima East
Osaka City Hall
Hanshin Expressway RouteNo.1 Loop Line
Mido-suji Ave.
Tokaido Line
Osaka Loop Line
Yotsubashi-sujiAve.
Residential Address 1-5-7, Kameido, Koto-ku, Tokyo
Date of Building August 31, 1994
Gross Floor Area of the whole building 28,789.18 sqm
Ownership Structure (Land) Ownership
Ownership Structure (Building) Ownership
Nearest station/ Walking distance
9 minutes walking distance from Kameido Station on JR Sobu Line7 minutes walking distance from Kinshicho Station on Tokyo Metro Hanzomon Line8 minutes walking distance from Kinshicho Station on JR Sobu Line
Residential Address 1-4-4, Dojimahama, Kita-ku, Osaka-shi, Osaka
Date of Building April 21, 1993
Gross Floor Area of the whole building 24,726.19 sqm
Ownership Structure (Land) Ownership (sectional ownership) (Note)
Ownership Structure (Building) Co-ownership of sectional ownership
Nearest station/ Walking distance
10 minutes walking distance from Osaka Station on JR Tokaido Main Line or Osaka Loop Line6 minutes walking distance from Nishi Umeda Station on Subway Yotsubashi Line2 minutes walking distance from Watanabebashi Station on Keihan Nakanoshima Line
Kinshicho Prime Tower Aqua Dojima East
The Property is 8 minutes walking distance from the JR Kinshicho station.
It has good access to central business districts, and is approximately 8 minutes to Tokyo station by the JR Sobu Line (Rapid Service). The property is an office tower with 17 stories with 1 basement floor and has a parking lot which can accommodate 113 cars.
Standard floor area is approximately 998 sqm (approximately 302 tsubo) and the regular shaped office floor without pillars provides flexible layout and is highly competitive in terms of size.
The property has high locational competitiveness as it is located 10-minute walk from Osaka station, a major terminal station in Kansai district and has good accessibility from widespread areas.
It has an excellent location and is located in front of Dojima entrance of Hanshin Expressway.
Standard floor area is approximately 630sqm (approx imate ly 191 tsubo) and prov ides a comparably wide standard floor area in the market.
(Note) The land of the property is owned partially by each sectional owner and the sectional owners agree to use other sectional owners’ land each other.
6 7
Invesco Office J-REIT, Inc.
FP1 FP2 FP3 FP4 FP5 FP6 June 6, 2017
(%)
0.0
0.5
1.0(Year)
0.0
3.0
6.0
3.3
0.74 0.70 0.70 0.700.61 0.59
2.8 2.7 2.2 2.7 2.3 2.7
0.58
Major Initiatives during FP6 and Future Growth Strategy
Amendments to asset management guideline adding rules regarding investment unit buyback
On April 21, 2017, Invesco Global Real Estate Asia Pacific, Inc. (“IGRE” or “Asset Manager”) added provisions regarding the investment unit buyback (“unit buyback”) and retirement to the asset management guidelines as part of its financial and capital management strategy.
Credit Rating Acquisition and Issuance of Investment Corporation BondsAfter acquiring its credit rating in October 2016, the Investment Corporation issued investment corporation bonds in April 2017 for the purpose of diversifying the funding methods, reducing funding cost and prolonging funding period, and simultaneously aiming to improve stability of funding in mid- to long-term. Details of issuance of the investment corporation bonds are as follows.
Effective capital policy to improve investor value
Assuming that net income and the total available dividend remains unchanged, decreasing the number of issued investment units will:
Increase the net income per unit Increase the dividend per unit (DPU)
1. Increase Net Income Per Unit and DPU
Provide returns to investors by efficiently using available cash in hand
D P U i n c r e a s e s i n l i n e w i t h decrease in investment units
NAV per unit increases if IOJ buys its own investment units below NAV per unit
2. Return Profit to Investors
Acquiring investment units might be regarded as an efficient way of utilizing available cash in hand, depending on the state of the real estate market
3. Efficient Use of Available Cash in Hand
Assumed main sources of capital for unit buyback are as follows:
1. Available cash in hand generated from the gap between depreciation expenses and capital expendituresDepreciation expenses are costs by which property and equipment are depreciated over the remaining period of use and recorded as expenses in the income statement. Because depreciation expenses are not funded by cash, the amount of depreciation expenses remains as cash in hand. In contrast, capital expenditures, which are expenses paid to repair property and equipment, are not recorded as profit/loss but are funded by the payment of cash. As a result, the difference between the actual capital expenditure and depreciation expenses remains as cash in hand.
2. Potential excess funds generated from asset dispositionsThe Investment Corporation does not intend to sell its own assets to provide funds to acquire investment units.
Expected Benefits of Unit Buyback
(Note 3) The Investment Corporation will terminate the transaction regarding the unit buyback when either total number of acquired own investment units or total acquisit ion price reaches the maximum amount, or when the acquisition period ends.
Details of Unit Buyback
Total Number of Own Investment Units to be acquired 10,000 units (maximum)
Total Acquisition Price ¥800mm (maximum)
Acquisition Period From June 13, 2017 to July 20, 2017
Unit BuybackBased on the amendments of the asset management guidelines above, the Investment Corporation decided to conduct a buyback of our investment units as the first J-REIT to formally approve such a measure by using the capital source mentioned above at “1. Available cash in hand generated from the gap between depreciation expenses and capital expenditures”, which was an accumulated total of approximately ¥1,487 million at the end of FP6. After the completion of the unit buyback, the Investment Corporation plans to cancel all acquired own units in FP7 ending October 31, 2017.
The Investment Corporation aims to improve investor value by increasing DPU, BPU (Note1) or NAV (Note2) per unit in line with decrease in outstanding investment units.
(Note1) Book-value per unit is calculated by dividing net asset value mentioned in the financial statements by the issued number of investment units.(Note2) NAV per unit is calculated by dividing net asset value, reflecting the gap between book value and appraisal value of investment assets, by issued number of investment units.
Issue Date Amount of Issued Duration Interest rate Redemption date
First Series Bonds April 20, 2017 ¥1.8 bn 5 years 0.320% April 20, 2022
Second Series Bonds April 20, 2017 ¥1.6 bn 7 years 0.520% April 19, 2024
Consideration of Efficient Use of Available Cash in HandIf the Investment Corporation conducts effective use of available cash in hand of ¥800 mm for the following transactions, the impact on DPU is expected to be as follows. The Investment Corporation ultimately decided that unit buyback would be the most effective initiative in terms of DPU improvement.
(Reference Information)Impact on DPU amount from the unit buyback mentioned aboveExpected DPU amount for FP7 ending October 31, 2017 with taking into consideration the unit buyback is as follows. It is expected that the DPU forecast for FP7 would increase by ¥29 compared to the case without taking into account the unit buyback.
1 Unit buyback(See “Reference Information” below)
Impact to DPU: +¥29
2 Prepayment of short-term borrowing
Impact to DPU: +¥2
3 Asset acquisition
* IOJ is not considering buying an asset for ¥800 million
DPU forecast for FP7 with taking into consideration the unit buyback:
Average purchase price: ¥100,900 (closing price of June 9, 2017)
No. of units of unit buyback and retirement: 7,928 units
(Assumption)
Average remaining years (Right scale) Average borrowing rate (Left scale)
¥2,908
By issuing investment corporation bonds and repayment of borrowings which came due on June 2017, it tends to improve the Investment Corporation’s financial stability both in average borrowing rate and average remaining years.
(Note) Each expected number mentioned above is calculated based on certain conditions as the date hereof, and the actual DPU amount may differ in accordance with the changes in such assumed conditions. Also, these figures are not a guarantee of the amount of DPU in the future.
8 9
Invesco Office J-REIT, Inc.
January 1, 2017 April 30, 2017 June 17, 2017
(%)
80
90
100
85.089.6 92.7
January 1, 2017 April 30, 2017 June 17, 2017
(%)
80
90
100
84.290.0 98.2
Internal Growth
Successful in Leasing and Occupancy ImprovementsIn FP6, the average portfolio occupancy rate resulted a 96.7% because some major tenants vacated from Ebisu Prime Square, Nagoya Prime Central Tower and Sendai Honcho Building.
The Investment Corporation is focusing on leasing activities at Ebisu Prime Square whose several tenants vacated during FP6, Sun Towers Center Building which occupancy rate is expected to decrease and Aqua Dojima East which is a newly acquired asset in March 2017.
The average portfolio occupancy rate in FP7 is expected to improve to 98.1% due to new leases in Nagoya Prime Central Tower, Sendai Honcho Building and Shinagawa Seaside East Tower.
(Note) The number of move-in/move out tenant is only for office tenants (including City/Plaza).
Leasing achievements at Ebisu Prime Square Leasing achievements at Sendai Honcho Building
Proactive Cost Control during FP6 and FP7
• The anchor tenant that occupied a total of 4.25 floors (2,057sqm) vacated at the end of December 2016 and February 2017 resulting in a total of 2,780 sqm of available space.
• Implemented floor space division to further tenant diversification and improve flexibility in leasing. As a result, succeeded in filling 1,657sqm of space through leasing the vacant space to 10 tenants.
• The building was fully renovated including entrance lobby space and common areas at each floor in January 2017. The renovation work was highly evaluated in the market.
• The occupancy rate improved to 98.2% as at June 17, 2017 with successful leasing to 12 new tenants (leased area: 2,233sqm).
Leasing Achievements (Note) Leasing Achievements
6 tenants moved out 6 tenants moved out 10 tenants moved in 12 tenants moved in
Stable demand for rare large vacant spaces in Ebisu sub market. Succeeded in leasing after tenant relocations.
Effective renovation led to successful leasing.
Occupancy rate Occupancy rate
¥28.8 million per period ¥27.2 million per period ¥4.5 million per period
DPU Improvement Approximately ¥74 per unit
Reduction in Building Maintenance Costs
Reduction in Power Supply Contract Costs
Other Income Improvement
Leasing Achievements by Individual AssetThe Investment Corporation was focusing on leasing at Ebisu Prime Square due to the anchor tenant relocation in FP6. In addition, occupancy rate of Sendai Honcho Building was improved because of renewal works at entrance lobby and common areas of each floor.
Cost reduction has contributed to enhanced NOIBy reviewing building maintenance and power supply contracts of each asset as well as a change in vending machine vendor and introduction of sub-leasing for cancelled parking lots, the Investment Corporation succeeded in reducing total expenses of the portfolio. Also, portfolio income was improved by initiatives to increase revenue, such as vending machine installments.
(Note) Figures above are assumed impact of cost reduction through a whole fiscal period.
FP5 (12 assets) FP6 (12 assets)
(¥/tsubo) (%)
14,500
15,000
15,500
16,000
16,500
-3.0
-1.0
1.0
3.0
5.0
15,38415,862
15,41416,020
3.03.8
FP4 FP5 FP6
(%)
0
5069.8%
(44 contracts)
56.2%(46 contracts)
39.3%(19 contracts)
30.2%(14 contracts)
4.5%(2 contracts)
100
79.4%(46 contracts)
0.1%(1 contract)
20.5%(9 contracts)
Summary for Lease Renewal Status and Portfolio Average Rent (Office part)The Investment Corporation renewed 67 contracts in FP6 of which 19 contracts (39.3% of total leased area renewed in FP6) were renewed with upward revisions and the average rent increased by 7.8% from the previous contracted rents. In addition, 46 contracts (56.2% of total leased area renewed in FP6) were renewed with the same rent.
In FP7, it is expected that many lease contract renewals whose in place rent are lower than market rent. Accordingly, the Investment Corporation aims to continuously raise rents in FP7 due to potential for further upward rent revisions for the tenants whose rent is lower than the market price to improve rental revenue.
(%)
85
90
95
100(m2)
0
15,000
12,000
9,000
6,000
3,000
FP4 FP5 2016November December
2017January February March April May June
(Forecast)July
(Forecast)August
(Forecast)September(Forecast)
October(Forecast)
(Month)
FP498.4%
FP598.8%
FP696.7%
FP7 (Forecast)98.1%
Portfolio average occupancy rate during fiscal period
Leasing Achievements and Occupancy
Move-in Move-out Actual occupancy rate Estimated occupancy rate
Lease Renewal Status (Leased Area Basis) Average Rent at the end of Fiscal Period (included CAM) (Note)
Upward revision Flat Downward revision Portfolio average rent Market rent Rent difference
(Note) It is a comparison based on 12 assets which is adjusted by excluding Triton Square Z from the portfolio at the end of FP5 and Kinshicho Prime Tower and Aqua Dojima East from the portfolio at the end of FP6. Market rent above represents contracted rent for a typical floor of assets managed by the Investment Corporation evaluated by CBRE.
10 11
Invesco Office J-REIT, Inc.
Nagoya City
Osaka City
Fukuoka City5
15
Sendai City12
13
Date as of the end of April 2017
Property Summary
Property name LocationPurchase
price (¥mm)
Appraisal value (Note1)
(¥mm)
Investment ratio (Note2)
(%)
1 Ebisu Prime Square Shibuya-ku, Tokyo 25,014 27,538 15.4
3 CS Tower / CS Tower Annex Taito-ku, Tokyo 13,700 16,300 8.5
4 Queen’s Square Yokohama Yokohama-shi, Kanagawa 16,034 18,200 9.9
5 Nagoya Prime Central Tower Nagoya-shi, Aichi 14,600 18,000 9.0
6 Tokyo Nissan Nishi-Gotanda Building Shinagawa-ku, Tokyo 6,700 7,340 4.1
7 ORTO Yokohama Yokohama-shi, Kanagawa 13,000 14,400 8.0
8 Nishi-Shinjuku KF Building Shinjuku-ku, Tokyo 6,600 7,030 4.1
9 Shinagawa Seaside East Tower Shinagawa-ku, Tokyo 25,066 26,600 15.5
10 Akiba CO Building Chiyoda-ku, Tokyo 8,078 9,330 5.0
11 Sun Towers Center Building Setagaya-ku, Tokyo 6,615 7,070 4.1
12 Sendai Honcho Building Sendai-shi, Miyagi 5,000 5,200 3.1
13 Hakata Prime East Fukuoka-shi, Fukuoka 4,500 4,620 2.8
14 Kinshicho Prime Tower Koto-ku, Tokyo 15,145 15,600 9.4
15 Aqua Dojima East Osaka-shi, Osaka 1,910 2,010 1.2
Total 161,962 179,238 100.0
1
814
4
611
9
310
Yokohama City
TokyoMetropolitan Area
7
Portfolio Map
Overview of Portfolio Properties (As of the end of FP6)
¥161.9bn
Purchase Price
5.1%
Average NOI Yield(Note1)
96.8%
Average Portfolio Occupancy Rate
2.32%
Portfolio PML
¥11.5bn
Average Purchase Price per Property
64,163sqm
Average Gross Floor Area per Property(Note2)
Date as of the end of April 2017
(Note1) For Aqua Dojima East, the ratio is calculated by the following formula: appraisal NOI before depreciation by a direct capitalization method as of the end of FP6/ purchase price. For other managed assets, the ratio is calculated using the following formula: (actual NOI before depreciation during the fiscal period / operating days during the fiscal period*365 days) / total purchase price of the portfolio as of the end of the fiscal period. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses.
(Note2) Average total floor area is the sum of the floor areas of the whole building as indicated in the registry. For each asset’s total floor area, please refer to the information on “Gross Floor Area (a whole building)” in “New Portfolio Properties acquired in FP6” and “Portfolio Properties” sections.
(Note1) The date of value for the asset was April 30, 2017.(Note2) The investment ratio is based on the purchase price. As percentage of investment ratio is rounded to the second decimal place, total of the ratio may not be 100%.
Portfolio Diversification
Diversification in Area
Tokyo 23 wards
66.0%
Tokyo Metropolitan Area other than the above
17.9%
Other Major Urban Areas
13.0%
Other investment target regions
3.1%
Diversification by Size
Gross Floor Area of over
10,000 sqm 88.2%
Gross Floor Area of over
5,000 sqm 11.8%
12 13
Invesco Office J-REIT, Inc.
Ebisu Prime Square
CS Tower / CS Tower Annex
1
3
Ebisu Sta.JR Ebisu Sta.
Tokyo Metro Hibiya Line
JR Line
Meiji St.
Komazawa St.
Ebisu Prime Square
Shibuya-bashi
Residential Address 1-1-7/39/40, Hiroo, Shibuya-ku, Tokyo
Date of Building January 31, 1997
Gross Floor Area of the whole building 67,581.00 sqm
Ownership Structure (Land)
Ownership rights (quasi-co-ownership interests of the trust beneficial interests: 49%)
Ownership Structure (Building)
Ownership rights (quasi-co-ownership interest of the trust beneficial interests: 49%)
Residential Address 5-20-8/6, Asakusabashi, Taito-ku, Tokyo
Date of Building August 31, 1991
Gross Floor Area of the whole building 32,996.92 sqm (Note)
Ownership Structure (Land) Rights to site
Ownership Structure (Building)
Sectional ownership (co-ownership interests of part of the sectional ownership)
Asakusabashi Sta.
Iwamotocho Sta.
Kiyosubashi-dori St.
Akihabara Sta.
JR Akihabara Sta.
Bakurocho Sta.
CS Tower/CS Tower Annex
Kuramaebashi-dori St.
JR Sobu Line
Kanda River
JR Line
Tokyo Metro Hibiya Line
Toei Shinjuku Line
(Note) This section states the structure/ stories and gross floor area of the whole building including this property, inclusive of those corresponding to the interests of the other sectional owners and co-owners.
P o r t f o l i o P r o p e r t i e s
Minatom
irai Line
Minatomirai Sta.
Queen’s Square Yokohama
Kokusai Center Sta.
Nagoya Prime Central Tower
JR Nagoya Sta.
Nagoya Sta.
Meitetsu Nagoya Sta.
Kintetsu Nagoya Sta.
Tokaido ShinkansenMeitetsu Nagoya Main Line
JR Line
Nagoya City Subway
Higashiyama Line
Nagoya City Subway
Sakura-dori Line
Queen’s Square Yokohama
4
Residential Address 2-3-2/3/4/5/7/8/9, Minatomirai, Nishi-ku, Yokohama, Kanagawa
Date of Building June 30, 1997
Gross Floor Area of the whole building 498,282.77 sqm (Note)
Ownership Structure (Land) Ownership rights (co-ownership interests)
Ownership Structure (Building) Sectional ownership (co-ownership interests)
(Note) The area of the entire building of Queen’s Square Yokohama recorded on the registry is stated here.
(Note) The gross floor area of the whole building for the parking space of Nagoya Prime Central Tower.
Nagoya Prime Central Tower5
Residential Address 2-27-8, Meieki, Nishi-ku, Nagoya, Aichi Prefecture
Date of Building March 18, 2009
Gross Floor Area of the whole building 59,602.89 sqm (Note)
Ownership Structure (Land) Ownership rights (co-ownership interests)
Ownership Structure (Building)
(Office) Sectional ownership(Parking lot) Interests acquired for the common spaces
under the regulations and the common spaces of the condominium
14 15
Invesco Office J-REIT, Inc.
P o r t f o l i o P r o p e r t i e s
Meguro Sta.
Fudo-Mae Sta.
Gotanda Sta.Central Circular Route
Yamate-dori St.
Metropolitan Expressway
Route No.2 Meguro Line
JR Yamanote
Line
Tokyu Meguro Line
Tokyo Nissan Nishi-Gotanda Building
Toei Asakusa Line
Koyasu Sta.
Shin-Koyasu Sta.
Oguchi Sta.
Keikyu-Shin-Koyasu Sta.
Daiichi Keihin Rd.
Daini Keihin Rd.
Keikyu Line
JR Keihin-Tohoku
Line
JR Yokoham
a Line ORTO Yokohama
Tokyo Nissan Nishi-Gotanda Building
ORTO Yokohama
6
7
Residential Address 4-32-1/9, Nishi-Gotanda, Shinagawa-ku, Tokyo
Date of Building April 25, 1990 (completed renewal works in 2010)
Gross Floor Area of the whole building 21,404.84 sqm (Note)
Ownership Structure (Land) Rights to site
Ownership Structure (Building) Sectional ownership
(Note) The structure/number of stories and the gross floor area are stated for the whole building that make up the subject property and the area includes common areas as well as other exclusive use areas of a condominium.
(Note) The structure/number of stories and the gross floor area are stated as total spaces of office building, commercial building, parking Garage and the area includes common areas as well as other exclusive use space of a condominium.
Residential Address 1-2-4/5, Shin-Koyasu, Kanagawa-ku, Yokohama, Kanagawa
Date of Building November 30, 2000
Gross Floor Area of the whole building 57,261.81 sqm (Note)
Ownership Structure (Land) Rights to site
Ownership Structure (Building)
Sectional ownership (co-ownership interests for a portion of the sectional ownership)
JR Shinjuku Sta.
Tochomae Sta.
Shinjuku Nishiguchi Sta.
Nishi-Shinjuku Sta.
Ome Kaido St.
Nishi-Shinjuku KF Building
Toei Oedo Line
Tokyo Metro Marunouchi Line
JR Line
Shinagawa SeasideEast Tower
National Route N
o.357
Daiichi Keihin Rd.
ShinagawaSeaside Sta.
Rinkai Line of theTokyo Waterfront AreaRapid Transit
TokyoMonorail
Oimachi Sta.
Samezu Sta.
Aomono-yokocho Sta.
Metropolitan Expressw
ayRoute N
o.1 Haneda Line
Keikyu Line
Tokaido Line
Nishi-Shinjuku KF Building8
Shinagawa Seaside East Tower9
Residential Address 8-14-24, Nishi-Shinjuku, Shinjuku-ku, Tokyo
Date of Building January 29, 1993
Gross Floor Area of the whole building 9,828.37 sqm
Ownership Structure (Land) Rights to site
Ownership Structure (Building) Sectional ownership (Note)
Residential Address 4-12-8, Higashi-Shinagawa, Shinagawa-ku, Tokyo
Date of Building August 31, 2004
Gross Floor Area of the whole building 43,014.06 sqm
Ownership Structure (Land) Ownership
Ownership Structure (Building) Ownership
(Note) Although ownership structure for the subject property is sectional ownership, the seller owns the entire sectional ownerships of the subject property though the trustee.
16 17
Invesco Office J-REIT, Inc.
P o r t f o l i o P r o p e r t i e s
Akiba CO Building
Kuramaebashi-dori St.Suehirocho Sta.
JR Akihabara Sta.
AkihabaraDai Building
Akihabara UDX
Sobu Line
Ginza Subw
ay Line
Tsukuba Express
Yamanote Line,
Keihin-Tohoku Line
Chuo-dori St.
Sun TowersCenter Building
Sangen-jaya Sta.
Sangen-jaya Sta.
Carrot Tower
Metropolitan ExpresswayRoute No.3 Shibuya Line
Setagaya-dori St.
National Route No.246
National Route No.246
Tokyu Den-en-toshi Line
Tokyu Den-en-toshi Line
Tokyu SetagayaLine
Akiba CO Building10
Sun Towers Center Building11
Residential Address 3-16-12 Soto-Kanda, Chiyoda-ku, Tokyo
Date of Building May 23, 2000
Gross Floor Area of the whole building 6,957.74 sqm
Ownership Structure (Land) Ownership
Ownership Structure (Building) Ownership
Residential Address 2-11-22, Sangen-jaya, Setagaya-ku, Tokyo
Date of Building June 22, 1992
Gross Floor Area of the whole building 25,577.35 sqm (Note)
Ownership Structure (Land) Ownership (sectional ownership)
Ownership Structure (Building) Sectional ownership
(Note) The land of the Property is owned partially by each sectional owner and the sectional owners agree to use other sectional owners' land each other.
Tohoku-ShinkansenTohoku-Main Line
Senseki Line
Subway Tozai Line
Subway Namboku Line
Ekimae-dori St.
Higashi Nibancho-dori St.
Sendai Sta.
Aoba-dori Sta.
Hirose-dori Sta.
Atago
Kamisugi-dori St.
Route 4
Sendai Sta.Aoba-dori Ichibancho Sta.
Sendai HonchoBuilding
Subway Kuko LineNakahie Park Dori St.
Chikushi Dori St.
Hakata Sta.
Hakata Prime EastNakahie Park
Sanyo-Shinkansen LineKyusyu-Shinkansen LineJR Line
Sendai Honcho Building12
Hakata Prime East13
Residential Address 2-3-10, Honcho, Aoba-ku, Sendai, Miyagi
Date of Building November 26, 1984
Gross Floor Area of the whole building 13,049.82 sqm
Ownership Structure (Land) Ownership
Ownership Structure (Building) Ownership
Residential Address 2-10-35, Hakataeki-Higashi, Hakata-ku, Fukuoka-shi, Fukuoka
Date of Building April 22, 1992
Gross Floor Area of the whole building 9,213.20 sqm
Ownership Structure (Land) Ownership
Ownership Structure (Building) Sectional ownership (Note)
(Note) Although ownership structure for the subject property is sectional ownership, the seller owns the entire sectional ownerships of the subject property though the trustee.
18 19
Invesco Office J-REIT, Inc.
(¥mn)
FP7 FP8 FP9 FP10 FP11 FP12 FP13 FP14 FP15 FP16 FP17 FP18 FP19 FP20 FP210
4,000
8,000
12,000
16,000
0 0 00005,500 5,500
10,6006,600
12,55012,00012,000 13,350
7,500
1,800
1,600
Investment Unit Information
(Note) The bond rating is for the first and second series bonds.
Financial Stability and FlexibilityThe fundamental policy of Investment Corporation is the conduct of stable and sound financial management to ensure stable income over the medium to long term together with steady growth in asset value. In regard to borrowings, the Investment Corporation will seek stable financial management through building diversified bank formation centered on leading Japanese financial institutions.
Diversification of Debt Maturities
Lender’s Diversification
Mitsubishi UFJ Trust and Banking Corporation 4%
Shinsei Bank 3%
Aozora Bank 2%
The Bank of Fukuoka 2%
ORIX Bank Corporation 1%
The Nishi-Nippon City Bank 1%
Sumitomo Mitsui Banking Corporation 28%
The Bank of Tokyo-Mitsubishi UFJ 17%
Mizuho Bank 15%
Sumitomo Mitsui Trust Bank 11%
Resona Bank 11%
Development Bank of Japan 5%
49.5%
LTV
2.7years
Average remaining years
100.0%
Long-term loan ratio
Fixed interest rate ratio
86.6%
¥89bn
Interest bearing debt
Average borrowing rate
0.58%
Details of Credit Rating
Rating Agency Subject Rating Rating Outlook
Japan Credit Rating Agency, Ltd. (JCR)
Long-term Issuer Rating A+ Stable
Bond Rating (Note) A+ —
Borrowings Corporate Bonds
Financial Information (As of June 6, 2017)
Status of Credit RatingCurrent credit rating of the Investment Corporation is as follows.
Trend of Investment Unit PriceThe Investment Corporation’s investment unit price at Tokyo Stock Exchange has trended since June 5, 2014 as follows. The data is as of June 23, 2017.
As of June 6, 2017
As of June 6, 2017
Unitholders Composition
Breakdown by Units (Units) Total 815,547 Breakdown by Unitholders (Unitholders) Total 24,211
Domestic individuals
303,930 (37.27%) Financial institutions
316,395 (38.79%) Domestic corporations
34,693 (4.25%) Foreign corporations and individuals
160,529 (19.68%)
Domestic individuals
23,576 (97.38%) Financial institutions
89 (0.38%) Domestic corporations
394 (1.63%) Foreign corporations and individuals
152 (0.63%)
Investment Unit Price (Closing price: ¥) Trading Volume (No. of units)
As of the end of April 2017
130,000
110,000
90,000
70,000
0
140,000
60,000
40,000
20,000
0June 30,
2015December 30,
2014IPO December 30,
2015June 30,
2016December 30,
2016June 23,
2017
(Note) As percentage of unitholders ratio is rounded to the third decimal place, total of the ratio may not be 100%.
(Note) GRESB (Global Real Estate Sustainability Benchmark) is a benchmark to evaluate sustainability performance of private and listed real estate portfolio from environmental and social perspectives.
Environmental Initiatives and Energy-Saving Measures The Investment Corporation acquired certification for each asset as follows.
Invesco Group has been a Member of GRESB since 2014
Certification for CASBEEfor Real Estate
DBJ Green Building Certification
(Note) CASBEE (The Comprehensive Assessment System for Built Environment Efficiency) is a tool for assessing and rating the environmental performance of buildings built and used in Japan.
(Note) DBJ Green Building Certification is a certification system that Development Bank of Japan selects and evaluates properties with environmental and social awareness, which is necessary in the current real estate market, based on its comprehensive assessment measure.
Nagoya Prime Central Tower Acquired “S Rank” Certification number: HPCAS-15-00001-1
CS Tower Acquired “A Rank” Certification number: HPCAS-14-00016-1
ORTO Yokohama Acquired “A Rank” Certification number: HPCAS-15-00011-1
Tokyo Nissan Nishi-Gotanda Building Acquired “A Rank” Certification number: HPCAS-15-00013-1
Ebisu Prime Square Achieved 3 stars (Properties with excellent environmental and social awareness) as of February 27, 2017
20 21
Invesco Office J-REIT, Inc.
1. Overview of the asset management performance
(1) Investment performance of the Investment Corporation
Fiscal Period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period
November 1,2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016
to April 30, 2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017
Operating revenue (million yen) 3,009 4,003 4,183 5,684 6,543
[Revenues from the real estate rental business] (million yen) [3,009] [4,003] [4,179] [5,678] [5,755]
Operating expenses (million yen) 1,699 2,327 2,453 3,087 3,218
[Expenses for the real estate rental business] (million yen) [1,403] [1,976] [2,041] [2,592] [2,583]
Operating income (million yen) 1,309 1,675 1,730 2,597 3,324
Ordinary income (million yen) 1,128 1,397 1,463 2,230 2,967
Net income (million yen) 1,127 1,396 1,462 2,229 2,966
Total assets (million yen) 89,285 117,757 118,088 172,204 179,894
[Comparison with the previous fiscal period] (%) [-0.1] [+31.9] [+0.3] [+45.8] [+4.5]
Net assets (million yen) 44,134 55,287 55,353 81,183 81,935
[Comparison with the previous fiscal period] (%) [+1.6] [+25.3] [+0.1] [+46.7] [+0.9]
Interest-bearing debt (million yen) 40,200 56,200 56,200 82,100 89,000
Unitholders’ equity (million yen) 43,007 53,891 53,891 78,913 78,913
Total number of investment units issued (units) 432,680 542,210 542,210 815,547 815,547
Net assets per unit (yen) 102,002 101,967 102,088 99,544 100,467
Total distributions (million yen) 1,127 1,396 1,462 2,228 2,966
Distributions per unit (yen) 2,605 2,575 2,697 2,733 3,638
[Profit distributions per unit] (yen) [2,605] [2,575] [2,697] [2,733] [3,638]
[Distributions in excess of earnings per unit] (yen)
[-]
[-]
[-]
[-]
[-]
Ratio of ordinary income to total assets (Note 4) (%) 1.3 1.3 1.2 1.5 1.7
[Annualized value] (%) [2.5] [2.7] [2.5] [3.0] [3.4]
Return on equity (Note 4) (%) 2.6 2.8 2.6 3.3 3.6
[Annualized value] (%) [5.2] [5.6] [5.3] [6.5] [7.3]
Ratio of unitholders’ equity to total assets at the end of the period (Note 4)
(%) 49.4 47.0 46.9 47.1 45.5
[Change from the previous fiscal period] (%) [+0.8] [-2.5] [-0.1] [+0.3] [-1.6]
Payout ratio (Note 4) (%) 100.0 100.0 100.0 100.0 100.0
Other Reference information
Number of operation days Days 181 184 182 184 181
Number of assets Assets 5 8 8 13 14
Depreciation (million yen) 428 537 561 710 752
Capital expenditure (million yen) 194 236 328 333 648
NOI (Net operating income) (Note 4) (million yen) 2,034 2,564 2,698 3,796 3,924
FFO (Funds from operation)(Note 4) (million yen) 1,556 1,933 2,023 2,939 2,934
FFO per Unit (Note 4) (yen) 3,596 3,566 3,731 3,604 3,598
LTV (Book value basis) (%) 45.0% 47.7% 47.6% 47.7% 49.5%
(Note1) The fiscal period of the Investment Corporation is for six months; from May 1 and to October 31 of each year and from November 1 to April 30 of the following year.
(Note 2) Consumption tax is not included in Operating Income and etc. (Note 3) Unless otherwise mentioned, the amounts of money shown above are rounded down and the percentages are rounded off to one decimal place. (Note 4) Each figure above is calculated by the formula below;
The ratio of ordinary income to total assets Ordinary income / [(Total assets at the beginning of the period + Total assets at the end of the period)/ 2] × 100
Return on equity Net income / [(Net assets at the beginning of the period + Net assets at the end of the period) / 2] × 100
The ratio of unitholders’ equity to total assets at the end of the period
Net assets at the end of the period / Total assets at the end of the period × 100
Payout ratio Distributions per unit (excluding distributions in excess of earnings) / Net income per unit × 100 The payout ratio in the first fiscal period and the third fiscal period and the fifth fiscal period is calculated using the following formula, as the number of investment units during the period changed because of capital increase through public offering during the period. Payout ratio = Total distributions (excluding distributions in excess of earnings) / Net income × 100
Rental business NOI Revenues from the real estate rental business – Expenses for the real estate rental business + Depreciation
FFO Net income + Depreciation – Gains or losses on sales of real estate FFO per unit FFO / Total number of investment units issued
(2) Summary of operating results for the fiscal period ended April 30, 2017 (the “Sixth Fiscal Period”)
a) Historical background of the Investment Corporation
The Investment Corporation was established on February 27, 2014 by Invesco Global Real Estate Asia
Pacific, Inc. as the organizer under the Act on Investment Trusts and Investment Corporations of Japan
(hereinafter referred to as the “Investment Trust Act”). The Investment Corporation was listed on the Real
Estate Investment Trust Securities Market of the Tokyo Stock Exchange (Securities code: 3298) on June 5,
2014.
The Investment Corporation is managed by Invesco Global Real Estate Asia Pacific, Inc. (hereinafter
referred to as the “Asset Management Company”). The Asset Management Company belongs to the Invesco
Group, one of the world’s leading independent asset management companies. The Investment Corporation
aims to provide investors with opportunities to invest in office buildings in Japan with a strong focus on
large-scale office buildings (see Note 1) located in Japan’s major urban areas (see Note 2). These assets will
be selected by experienced investment management specialists belonging to the Asset Management
Company with the view to maximize investor value.
(Note 1) “Large-scale office buildings” refers to real estate related assets (real estate related assets which are defined in Article 28, Paragraph 1
of the Investment Corporation’s Articles of Incorporation (hereinafter referred to as the “Articles of Incorporation”)) are buildings or mortgage-backed securities for which the underlying assets are buildings which have scale that meets the following standards and therefore regarded as “large-scale” and are used primarily as office space. Tokyo Metropolitan Area: Total floor area of 10,000 m2 or greater with a standard exclusive floor area on one floor covering at least 600 m2. Other regions: Total floor area of 7,000 m2 or greater with a standard exclusive floor area on one floor covering at least 400 m2.
(Note 2) The Investment Corporation defines “major metropolitan areas” as the Tokyo Metropolitan Area (Tokyo, Yokohama-shi, Kawasaki-shi, Saitama-shi, and Chiba-shi), Osaka-shi, Nagoya-shi and Fukuoka-shi; and sets this as its focused investment target area.
b) Investment Environment and Business Performance
During the Sixth Fiscal Period, domestic demand in the Japanese economy improved and accordingly,
gradual growth in the domestic economy continued. The appreciation of the Japanese yen from the beginning
of 2016 turned to depreciation after the presidential election of the United States in November 2016 and
supported exports and the earnings of corporations. On the other hand, the future outlook is unclear due to
increased geopolitical risks from the policies of the new administration in the United States and the rapid rise
of protectionism in some developed countries.
Asset Management Report
22 23
Invesco Office J-REIT, Inc.
As for the domestic office leasing market, demand for office space continued to increase as a result of the
corporate sector’s strong performance. However, the market showed signs of change. Because of the
psychological impact arising from huge supply after 2018, rent increase slowed in the central Tokyo
metropolitan area. In regional areas where the new supply is relatively small, the trend of increasing
occupancy rates and rents still remain stable. With regards to real estate transactions, due to the difficulties in
fund management stemming from the negative interest policy by Bank of Japan, acquisitions by both listed
and private J-REITs increased and transaction volume turned to increase compared to that of last year.
Under these conditions, the Investment Corporation disposed of trust beneficiary interests of Harumi Island
Triton Square Office Tower Z (Chuo-ku, Tokyo, Disposition price: 10,100 million yen) on December 16,
2016. Also, the Investment Corporation acquired trust beneficiary interests of two properties in the Sixth
fiscal period as follows: Kinshicho Prime Tower (Koto-ku, Acquisition price: 15,145 million yen) on
January 20, 2017 and Aqua Dojima East (Osaka-shi, Osaka, Acquisition price: 1,910 million yen) on March
31, 2017. These acquisitions were based on the Investment Corporation’s management philosophy.
The fiscal period under review ended with the ownership of real estate trust beneficiary interests relating to
fourteen (14) properties (total acquisition price: 161,962 million yen) that have a total leasable area of
212,887.94 m2.
Regarding property management the occupancy rate of the entire portfolio was 96.8% as of the end of the
fiscal period under review. Along with this, the Investment Corporation pursued to improve earnings of the
entire portfolio by seeking the possibility to increase rent on lease renewals.
c) Overview of Financing Activities
The fundamental policy of the Investment Corporation is to conduct stable and sound financial management
to secure stable income over the medium to long term together with steady growth in asset value. Financing
activities in the Sixth Fiscal Period are as follows.
The Investment Corporation borrowed 5,500 million yen on January 20, 2017. The loan proceeds were used
for the acquisition of trust beneficiary interests of Kinshicho Prime Tower and payment for related cost. Also,
the Investment Corporation issued the 1st Unsecured Investment Corporation Bonds (Special pari passu
conditions among specified investment corporation bonds) of 1,800 million yen and the 2nd Unsecured
Investment Corporation Bonds (Special pari passu conditions among specified investment corporation
bonds) of 1,600 million yen. The proceeds of issuing these corporate bonds were used for the repayment of
short term loans of 2,000 million yen, which came due on April 28, 2017.
Outstanding loans as of the end of the Sixth Fiscal Period totaled 89,000 million yen. The ratio of total
interest-bearing debt (the total amount of loans and bonds) to total assets (i.e., the loan-to-value or “LTV”)
was at 49.5% at the end of the Sixth Fiscal Period.
(Credit Rating)
As of the end of the Sixth Fiscal Period, credit ratings of the Investment Corporation are as follows.
Rating Agency Rating Rating Outlook
Japan Credit Rating Agency, Ltd.
(JCR)
Long-term Issuer Rating: A+ Stable
Bonds : A+ - (Note) Rating for the 1st Unsecured Investment Corporation Bonds and the 2nd Unsecured Investment Corporation Bonds.
(Shelf Registration Statement regarding investment corporation bonds)
The Investment Corporation filed a shelf registration statement regarding investment corporation bonds
(excluding short-term investment corporation bonds) on February 27, 2017. The details of the statement are
as follows.
Amount to be issued 50,000 million yen
Planned period of issuance From March 7, 2017 to March 6, 2019
Use of proceeds
Acquisition of specific assets (as defined under Paragraph 1,
Article 2 of the Investment Trust Act, as amended), debt
repayment, redemption of investment corporation bonds
(including short-term investment corporation bonds), refund of
tenant security deposit, payment of repairs and maintenance
expenses, working capital, etc.
d) Overview of Financial Results and Cash Distribution
As a result of the above, operating revenue amounted to 6,543 million yen, operating income amounted to
3,324 million yen, ordinary income amounted to 2,967 million yen, and net income amounted to 2,966
million yen for the fiscal period under review.
It was decided that all retained earnings would be distributed, except a fraction of less than one (1) yen per
investment unit, with the aim to maximize the tax deductible expense of the profit distribution that is allowed
under the special provisions for taxation (Article 67-15 of the Act on Special Measures Concerning
Taxation). Consequently, distributions per investment unit amounted to 3,638 yen.
24 25
Invesco Office J-REIT, Inc.
(3) Status of Issuance of New Investment Units
Changes to Total Unitholders’ Equity, net from the establishment of the Investment Corporation through the end
of the Sixth Fiscal Period are as follows:
(Note 1) At the incorporation of the Investment Corporation, investment units were issued with an issue price per unit of 100,000 yen. (Note 2) New investment units were issued through a public offering with an issue price per unit of 103,000 yen (issue value: 99,395 yen). (Note 3) New investment units were issued through a third-party allotment accompanying a capital increase through a public offering with an issue price
per unit of 99,395 yen. (Note 4) New investment units were issued through a public offering with an issue price per unit of 102,960 yen (issue value: 99,369 yen). (Note 5) New investment units were issued through a third-party allotment accompanying a capital increase through a public offering with an issue price
per unit of 99,369 yen. (Note 6) New investment units were issued through a public offering with an issue price per unit of 94,672 yen (issue value: 91,545 yen). (Note 7) New investment units were issued through a third-party allotment accompanying a capital increase through a public offering with an issue price
per unit of 91,545 yen.
[Changes in Investment Unit Price at the Tokyo Stock Exchange]
Fiscal Period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period November 1,2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016 to April 30, 2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017
Highest (yen) 126,900 112,800 107,600 101,900 104,400
Lowest (yen) 99,700 87,300 94,200 84,800 81,100
Date Event
Total Number of Investment Units Issued and Outstanding
(units)
Total Unitholders’ Equity, (millions of Yen) Notes
Change Balance Change Balance
February 27, 2014 Incorporation through private placement 1,500 1,500 150 150 (Note1)
June 4, 2014 Capital increase through public offering 411,000 412,500 40,851 41,001 (Note 2)
June 25, 2014 Capital increase through third-party allotment 20,180 432,680 2,005 43,007 (Note 3)
May 26, 2015 Capital increase through public offering 104,300 536,980 10,364 53,371 (Note 4)
June 24, 2015 Capital increase through third-party allotment 5,230 542,210 519 53,891 (Note 5)
May 31, 2016 Capital increase through public offering 261,500 803,710 23,939 77,830 (Note 6)
June 29, 2016 Capital increase through third-party allotment 11,837 815,547 1,083 78,913 (Note 7)
(4) Actual Cash Distribution per Unit
Pursuant to the distribution policy as defined in Article 35, Paragraph 1 of the Articles of Incorporation of the
Investment Corporation, the amount of distributions shall be the amount that does not exceed the amount of
profits but exceeds 90% of the distributable profit as defined in Article 67-15 of the Act on Special Measures
Concerning Taxation. Based on the distribution policy, the Investment Corporation declared a distribution per
unit of 3,638 yen.
(5) Future Management Policy and Other Issues
The pace of recovery of the Japanese economy is expected to be accelerated slightly because of the resurgent
investment in public sector and private sector. However, it is necessary to remain cautious about the global
economy’s future, especially the political administration in the US, the possible outcome of the monetary easing
measures by FRB, economic trends in China, and impact from volatility in exchange rates and natural resource
prices. Also, it will be necessary to pay attention to the monetary easing policy by Bank of Japan.
In the office leasing market, the potential demand from the newly-built offices and corporate expansion remains
steady. However, it is expected that cyclical expansion will slow down. In the central business district in Tokyo
area, the market is expected to be loosened because of the huge and concentrated supply in this area and it is
likely that the rent in a higher price ranges is expected to decrease.
As for the real estate transaction market, in case the investment demand and the favorable financing
Fiscal Period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period November 1,2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016 to April 30, 2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017
Total net income (thousands of yen) 1,127,368 1,396,523 1,462,617 2,229,474 2,967,250
Retained earnings brought forward
(thousands of yen) 237 332 277 584 290
Total distributions (thousands of yen) 1,127,131 1,396,190 1,462,340 2,228,889 2,966,959
[Distribution per Unit] (yen) [2,605] [2,575] [2,697] [2,733] [3,638]
Total Profit distribution
(thousands of yen) 1,127,131 1,396,190 1,462,340 2,228,889 2,966,959
[Profit distributions per unit] (yen) [2,605] [2,575] [2,697] [2,733] [3,638]
Total Return of capital
(thousands of yen) - - - - -
[Return of capital per unit] (yen) [-] [-] [-] [-] [-]
Of total return of capital, total distribution from allowance for temporary difference adjustment
(thousands of yen) - - - - -
[ Of return of capital per unit, total distribution per unit from allowance for temporary difference adjustment]
(yen) [-] [-] [-] [-] [-]
Of total return of capital, total distribution through reduction in unitholders; capital for tax purpose
(thousands of yen) - - - - -
[Of total return of capital per unit, total distribution per unit through reduction in unitholders; capital for tax purpose]
(yen) [-] [-] [-] [-] [-]
26 27
Invesco Office J-REIT, Inc.
environment continue to be steady, it is expected that the transaction volume and price will be likely to increase.
However, in the mid-term, it is necessary to be prepared for the situation that real estate prices head downward
by further adjustments in the capital market.
In view of the market environment described above, the Investment Corporation recognizes that it is crucial to
pursue external growth through the acquisition of properties that will help enhance portfolio quality and
profitability. This will be achieved by making maximum use of the investment expertise the Asset Management
Company has accumulated over the past eighteen (18) years in Japan and the close relationships it has built with
various market players as an independent asset manager. The Investment Corporation also needs to quickly
achieve regional and tenant diversification in relation to the managed assets to secure stable earnings across its
entire portfolio. Furthermore, the Investment Corporation considers it necessary to pursue internal growth
through improvement in the profitability of managed properties, as rents in the office lease market are currently
trending upward.
Based on the recognition of the issues described above, the Investment Corporation has been aiming to provide
stable profit and to enhance the portfolio quality by investing mainly in large-scale office buildings in
metropolitan areas such as the Tokyo area and steadily operating them, and it has been conducting its asset
management for the purpose of improving both DPU amount and investors’ value. However, as the current real
estate investment market is fiercely competitive and it is necessary to sustainably secure and increase
opportunities to acquire assets in order to maximize investor value through external growth, the Investment
Corporation has determined to broaden the type of investable assets which it may invest, into the assets other
than office building subject to certain limitations. By broadening the type of investable assets and assessing
appropriate investment timing to make rigorously selected investments in various assets, the Investment
Corporation aims to realize sustainable external growth. As a result of expanding the size of the portfolio,
diversification of both asset and tenants is expected to be improved. Portfolio sustainability is also expected to
be improved by combining assets having different cash flow characteristics. For these circumstances, upon the
resolution of the General Meeting of Unitholders, which was held on January 31, 2017, the Investment
Corporation amended the part of the Articles of Incorporation and accordingly, the Investment Corporation
amended the Asset Management Guideline.
a) Investment Policy / External Growth Strategy
Japan’s economic activities are extremely concentrated in major urban areas, which serve as the base for
business and consumption. Office buildings located in major urban areas offer a wealth of investment
opportunities and relatively high rental demand can be expected. In addition, due to the concentration of
economic activity, demand for office buildings as the site for economic activity and essential
infrastructure is also likely to increase. Given the potential for growth driven by the scale of economic
activity and population in these districts, office buildings located in major urban areas are likely to remain
attractive investment targets.
Rents of office buildings in the Tokyo Metropolitan Area and other major urban areas show an upward
trend, especially large office buildings. Rents in these areas can expect to rise ahead of other rents in a
recovery phase and that may offer upside revenue potential through increased rents and higher occupancy
rates. In addition, such office buildings are generally occupied by blue-chip companies with strong lease
payment capacity. Depending on the equipment specifications, these office buildings can promise stable
rents that are relatively high compared to other office buildings. Furthermore, relatively strong tenant
demand can be expected in the areas in which such office buildings are located and it may also be possible
to maintain high occupancy rates through tenant diversification and flexibility when setting rents.
From this perspective, the Investment Corporation will continue to place its focus on large-scale office
buildings (investment ratio of 70% or more) located in major metropolitan areas as its investment targets.
At the same time, in the current fiercely competitive real estate investment market, the Investment
Corporation regards it is necessary to sustain and expand the opportunities of acquiring assets, and
therefore, the Investment Corporation plans to invest in investable assets other than large-scale office
buildings are planned to be middle-scale offices, retail facilities, residential properties, hotels, logistics and
others. The investment ratio of these assets is to be limited to less than 30% of the total portfolio. The
Investment Corporation expects this investment policy leads to increase of opportunities to acquire assets
that can improve the quality and profitability of the portfolio, and contribute to continuous external growth.
Furthermore, it is expected that the diversification of both assets and tenants and the profitability of
portfolio can be improved by combing the assets with different types of profit characteristics.
b) Management Policy / Internal Growth Strategy
The Investment Corporation will endeavor to (i) maintain and improve tenant satisfaction through
meticulous property management services, (ii) maintain and improve rental income and occupancy rates,
(iii) perform appropriate management and repairs, and (iv) promote rationalization and efficiency of
management costs.
In its tenant leasing activities, the Investment Corporation will set appropriate rent levels based upon its
assessment and understanding of market trends and consideration of real estate characteristics for each
managed asset. It will also fully utilize property management companies (hereinafter referred to as the
“PM Companies”) to select high-quality tenants. Leasing activities will also be carried out by giving
consideration to the impact of the tenant composition of not only each individual property, but also the
portfolio as a whole.
Since existing tenants are important clients, the Investment Corporation will make regular contact with
them through the PM Companies to quickly identify tenant trends. Such trends include tenants that are
considering increasing or decreasing leased space and tenants who are dissatisfied or are considering
termination. At such time, the Investment Corporation will take appropriate and swift action.
The Investment Corporation will prepare a repair and maintenance plan along with a capital expenditure
plan as part of the annual management review for each managed asset. The Investment Corporation will
systematically carry out necessary repairs, maintenance and capital expenditures to improve the market
competitiveness of the managed assets and to improve tenant satisfaction.
c) Financing Strategy
In line with the fundamental policy of conducting steady and sound financial management to ensure stable
income over the medium-to-long term and to support continuous growth in asset value, the Investment
Corporation, paying careful attention to financial market trends, raises funds as follows.
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Invesco Office J-REIT, Inc.
Decisions on equity financing will be made on a comprehensive basis taking into account such matters as
(i) the timing of new real property-related asset acquisitions, (ii) the specific LTV on each asset, (iii) the
repayment schedules, (iv) the terms of the interest bearing debt, and (v) the market environment. This will
all be viewed while giving consideration to the possible dilution of the interests of existing investors and
any resulting decrease in the trading price of investment units.
In debt financing, the Investment Corporation aims to keep LTV levels within the range of 40% to 50% to
maintain stable leverage control. However, there may be times when those LTV levels are temporary
exceeded. The Investment Corporation will seek stable financial management through repayment dates,
diversification of lenders and the use of long-term fixed debt. At the same time, the Investment
Corporation will take into account borrowing costs. In regard to lenders, the Investment Corporation will
build a stable bank foundation centered on leading Japanese financial institutions.
Furthermore, for the purpose of improving capital efficiency and returning profit to unitholders, as a part
of financial and capital policy, Investment Corporation will examine acquisition and cancellation of its
own investment units. When such examination, improving investors’ value in mid- to long-term is
prioritized and the decision whether to conduct such acquisition is based on the prudent assessments of
level of investment unit price, situation of cash in hand, financial situation, and market environment.
(6) Significant Events after the Balance Sheet Date
(1) Resolution regarding acquisition of own investment units
The Investment Corporation has decided to acquire own investment units (hereinafter referred to as the
“Acquisition of Own Investment Units”) based on the Article 80-2 of the Investment Trust Act applied by the
reading of terms in the Article 80-5 of the Investment Trust Act at a meeting of the board of directors of the
Investment Corporation held on June 12, 2017. The Investment Corporation plans to cancel all the acquired
units during the fiscal period ending October 31, 2017.
a) Reason for acquisition of own investment units
Considering various facts such as the level of investment unit price, situation of cash in hand, financial
situation and market environment, the Investment Corporation expects that improving capital efficiency
and returning profit to investors through acquiring own investment units will improve the investors’ value
in the mid- to long-term. In case the market price of investment units is below its book-value per unit
(BPU) or NAV per unit, the Investment Corporation believes that acquiring its own investment units and
cancelling them will improve investors’ value. DPU is expected to increase due to the fact that the number
of outstanding investment units decreases.
b) Details of acquisition of own investment units
Total number of own investment units to be acquired 10,000 units (maximum)
Total acquisition price 800 million yen (maximum)
Method of acquisition The Investment Corporation entrusts the market purchase
of its own investment units at Tokyo Stock Exchange to
a securities company by discretionary transaction
contract
Acquisition period From June 13, 2017 to July 20, 2017
(Reference – Subsequent Events)
The Investment Corporation undertook the borrowing of funds for the purpose of refinancing the existing
loan of 13,000 million yen which came due on June 6, 2017.
Classification Lender Date of Borrowing
Borrowing Amount
(millions of yen)
Interest Rate (Notes 1 and 2)
Maturity Date
Purpose of Borrowing Security
Long-
term
Sumitomo Mitsui Banking Corporation
June 6 2017
1,250
Base rate (JBA one-month JPY TIBOR) plus
0.25%
November 30, 2018 (Note 3) Unsecured and
Unguaranteed
The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
1,250
Mizuho Bank, Ltd. 1,000 Sumitomo Mitsui Trust Bank, Ltd. 1,000
Resona Bank, Ltd. 1,000 Sumitomo Mitsui Banking Corporation
June 6 2017
1,250
Base rate (JBA three-month JPY TIBOR) plus 0.45%
(Note 4)
November 30, 2021 (Note 3) Unsecured and
Unguaranteed
The Bank of Tokyo-Mitsubishi UFJ, Ltd.,
1,250
Mizuho Bank, Ltd. 1,000
Sumitomo Mitsui Trust Bank, Ltd. 1,000
Resona Bank, Ltd. 1,000
Development Bank of Japan Inc. 2,000
Total 13,000 - - - - (Note 1) Loan fees and other charges to be paid to the lenders are not included.
(Note 2) “Base Rate” applicable to the period for the calculation of the interest payable on an interest payment date is the one-month or
three-month Japanese yen Tokyo Interbank Offered Rate (TIBOR) published by Japanese Bankers Association (“JBA”) TIBOR
Administration as of a date two (2) business days prior to the most recent interest payment date of each interest payment date. The
base rate will be reviewed on every payment date. However, if there is no base rate that corresponds to the interest calculation
period, the base rate corresponding to the period calculated based on the method defined in the agreements will apply.
(Note 3) “Purpose of Borrowing” is to refinance the existing loan which came due on June 6, 2017.
(Note 4) The interest rate of the borrowing mentioned above is floating. For the purpose of avoiding the interest-rate risk, the Investment
Corporation concluded an interest rate swap agreement and the interest rate are effectively fixed at 0.5375%.
2. Overview of the Investment Corporation
(1) Over view of the unitholders’ equity
Fiscal period Second Fiscal Period Third Fiscal Period Fourth Fiscal Period Fifth Fiscal Period Sixth Fiscal Period November 1, 2014 May 1,2015 November 1,2015 May 1,2016 November 1,2016 to April 30,2015 to October 31, 2015 to April 30, 2016 to October 31, 2016 to April 30, 2017
Total number of investment units that the Investment Corporation is authorized to issue (unit)
10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
Total number of investment units issued and outstanding (unit)
432,680 542,210 542,210 815,547 815,547
Total unitholders’ equity (millions of yen)
43,007 53,891 53,891 78,913 78,913
Number of unitholders 11,935 15,708 16,640 24,826 24,211
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Invesco Office J-REIT, Inc.
(2) Overview of the unitholders
Principal unitholders Number of units owned (units)
Ratio of number of units owned to total number of units issued (Note1)(%)
Japan Trustee Services Bank, Ltd. (trust account) 88,357 10.83 The Master Trust Bank of Japan, Ltd. (trust account) 68,188 8.36 Trust & Custody Services Bank, Ltd. (securities investment trust account) 54,747 6.71 The Nomura Trust and Banking Co., Ltd. (investment trust account) 28,076 3.44 HSBC BANK PLC A/C CLIENTS, NON TREATY 1(Note 2) 24,504 3.00 NORTHERN TRUST CO. (AVFC) RE IEDU UCITS CLIENTS NON LENDING 15 PCT, TREATY ACCOUNT 15,087 1.84 GOLDMAN, SACHS & CO. REG 13,550 1.66 Japan Trustee Services Bank, Ltd. (trust account 9) 6,995 0.85 State Street Bank and Trust Company 505001 6,463 0.79 Morgan Stanley & Co. LLC 6,433 0.78
Total 312,400 38.30 (Note 1) Each figures described in “Ratio of number of units owned to total number of units issued” are rounded off to one decimal. (Note2) HSBC BANK PLC A/C CLIENTS, NON TREATY 1 holds 24,504 units as trustee for the benefit of Invesco Investments (Bermuda) Ltd. Invesco
Investments (Bermuda) Ltd. is a subsidiary of Invesco Ltd., the parent company of the Asset Manager.
(3) Overview of the directors
a) The members of the board of directors as of the end of the Sixth Fiscal Period is as follows
Position Name Concurrent post Total fees paid during the sixth fiscal period
(thousands of yen)
Executive Director (Note1), (Note2), (Note 3)
Yugo Minemura Fund Manager at Invesco Global Real Estate Asia Pacific Inc. -
Yoshifumi Matsumoto Head of Business Development at Invesco Global Real Estate Asia Pacific Inc. -
Supervisory Director (Note1), (Note2), (Note 4)
Takashi Shimokado Attorney at law of Shimokado International Law Office 3,900
Eiji Kawasaki - Accounting Auditor (Note2)
Pricewaterhouse Coopers Aarata LLC - 10,500
(Note 1) Executive directors and supervisory directors do not own investment units issued by the Investment Corporation under their name or other third parties’ name. In addition, supervisory directors may be appointed as a director of other companies but such companies are not related parties to the Investment Corporation.
(Note 2) No fee is paid to executive directors. As for supervisory directors, the actual amount paid during the sixth fiscal period is described herein. Regarding the fees for the accounting auditor, the amount described herein is equivalent to the accounting audit fee for the sixth fiscal period and the accounting audit fee for issuing comfort letters for investment corporation bonds.
(Note 3) Executive director Yoshifumi Matsumoto stepped down from his office on January 31, 2017 and Yugo Minemura was newly elected as an executive director at the 3rd general unitholders’ meeting held on the same day.
(Note 4) Supervisory directors of the Investment Corporation were reelected at the 3rd general unitholders’ meeting held on January 31, 2017. (Note 5) At the 3rd general unitholders’ meeting held on January 31, 2017, Yasuyuki Tsuji was elected as a substitute executive director in preparation for
cases where there is vacancy or a shortfall in the number of executive directors as provided by laws and regulation.
b) Policy for Determining Dismissal or refusal of reappointment of auditors
The Board of Directors of the Investment Corporation will determine whether to dismiss an auditor in accordance
with the provisions of the Investment Trusts Act and will determine whether to refuse reappointment by
comprehensively considering the quality of the auditing, the amount of remuneration for the auditing and various
other factors.
(4) Asset manager, Custodian, and General administrators
The asset manager, custodian and general administrators for the Investment Corporation as the end of the sixth fiscal
period are as follows;
Names
Asset manager Invesco Global Real Estate Asia Pacific Inc.
Custodian Sumitomo Mitsui Trust Bank, Limited
General administrator (transfer agent) Mitsubishi UFJ Trust and Banking Corporation
General administrator (operation) Sumitomo Mitsui Trust Bank, Limited
General administrator (accounting) Tokyo Kyodo Accounting Office
General administrator (Financial agent) Sumitomo Mitsui Banking Corporation
3. Overview of Investment Assets
(1) Status of Investment
Type of Assets Region
Fifth Period As of October 31, 2016
Sixth Fiscal Period As of April 30, 2017
Total Amount Held
(millions of yen) (Note 1)
Percentage to Total
Assets (%) (Note 2)
Total Amount Held
(millions of yen) (Note 1)
Percentage to Total Assets
(%) (Note 2)
Entrusted Real
Estate (Note 3)
Major Metropolitan
Areas (Note 4)
Tokyo Metropolitan Area (Note 5)
Tokyo 23 Wards 102,536 59.5 108,605 60.4 Tokyo Metropolitan Area Outside the 23
Wards 28,975 16.8 29,029 16.1
Other Major Metropolitan Areas 19,060 11.1 20,868 11.6
Other Investment Target Regions 5,225 3.0 5,337 3.0
Total Entrusted Real Estate 155,798 90.5 163,841 91.1 Silent Partnership Equity Interest (Note 6) 102 0.1 - -
Deposits and Other Assets 16,303 9.5 16,052 8.9 Total Assets 172,204 100.0 179,894 100.0
(Note 1) Total amount held is based on the balance sheet carrying amount (book value less depreciation in the case of entrusted real estate). (Note 2) Percentage to total assets is rounded to one decimal place. (Note 3) All entrusted real estate is used primarily as offices. (Note 4) “Major Metropolitan Areas” refer to Tokyo Metropolitan Area, Osaka-shi, Nagoya-shi, and Fukuoka-shi. (Note 5) “Tokyo Metropolitan Area” refers to Tokyo, Yokohama-shi, Kawasaki-shi, Saitama-shi, and Chiba-shi. (Note 6) “Silent Partnership Equity Interest “mentioned herein is the total amount of Silent Partnership Equity Interests, which is operated by Godo Kaisha
Condor Property.
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Invesco Office J-REIT, Inc.
(2) Major Investment Assets
The table below shows the Investment Corporation’s major investment assets as of the end of the Sixth Fiscal
Period.
Name of Property Book Value (millions of
Yen)
Leasable Area (m2)
(Note 1)
Leased Area (m2) (Note 2)
Occupancy Rate (%) (Note 3)
Percentage to Total Real Estate Rental Revenues
(%) (Note 4) Main Usage
Ebisu Prime Square 25,413 17,354.06 15,542.33 89.6 12.8 Office
CS Tower/CS Tower Annex 13,812 19,998.31 19,998.31 100.0 9.5 Office
Queen’s Square Yokohama 16,046 41,954.39 41,445.10 98.8 16.5 Office
Nagoya Prime Central Tower (Note 5) 14,379 17,117.10 14,866.38 86.9 Not disclosed Office
Tokyo Nissan Nishi-Gotanda Building 6,899 8,522.42 8,522.42 100.0 4.3 Office
ORTO Yokohama 12,983 23,593.92 23,582.14 100.0 9.6 Office
Nishi-Shinjuku KF Building 6,845 6,287.78 6,287.78 100.0 3.2 Office
Shinagawa Seaside East Tower 25,260 27,892.63 27,892.63 100.0 15.2 Office
Akiba CO Building 8,316 5,514.42 5,514.42 100.0 Not disclosed Office
Sun Towers Center Building 6,695 7,876.60 7,204.68 91.5 3.9 Office
Sendai Honcho Building 5,337 8,962.47 8,069.17 90.0 3.1 Office
Hakata Prime East 4,535 7,018.05 7,018.05 100.0 2.7 Office
Kinshicho Prime Tower 15,360 17,606.11 17,167.33 97.5 4.9 Office
Aqua Dojima East 1,953 3,189.68 3,059.86 95.9 0.2 Office
Total 163,841 212,887.94 206,170.60 96.8 - - (Note 1) Unless otherwise specified, “Leasable Area” is part of the total area that is available for lease in accordance with the relevant lease agreement or
architectural drawing pertaining to each managed asset as of the end of the Sixth Fiscal Period that is the area equal to the Investment Corporation’s interest.
(Note 2) Unless otherwise specified, “Leased Area” represents the part of the total leased area stated in the relevant lease agreement pertaining to each managed asset as of the end of the Sixth Fiscal Period, which is the area equal to the Investment Corporation’s interest. If a pass-through-type contract is concluded with respect to the managed asset, “Leased Area” represents the part of the total leased area according to the lease agreement with the end tenant which is the area equal to the Investment Corporation’s interest, and if a fixed-type master lease agreement under which the Investment Corporation receives constant rent regardless of fluctuations in end tenant’s rent, “Leased Area” represents the part of the leased area according to the master lease agreement that is the area equal to the Investment Corporation’s interest.
(Note 3) “Occupancy Rate” represents the ratio of leased area to leasable area pertaining to each managed asset as of the last day of the Sixth Fiscal Period unless otherwise specified, rounded to one decimal place. Total section shows the ratio of total leased area to total leasable area pertaining to each managed asset, rounded to one decimal place.
(Note 4) Information is not disclosed for some properties because the tenant’s authorization has not been obtained. (Note 5) Regarding Nagoya Prime Central Tower, the Investment Corporation holds sectional ownership as well as an interest of bylaw common
elements and housing complex common elements, but the master lease agreement stipulates that the master lease company shall add together the rents for the entire office building and parking lot building (office building common areas) so that distributions can be received based exclusively on owned area percentage. Consequently, Leased Area and Leasable Area represent the part of each area of the entire building that is the area equal to the Investment Corporation’s exclusively owned area percentage, and Total Number of Tenants and Occupancy Rate represent the total number of tenants and occupancy rate for the entire building.
(Note 6) “Leased Area” and “Occupancy Rate” represent the leased area and occupancy rate pursuant to the lease agreement that is in effect as of the end of the Sixth Fiscal Period, and does not take into account situations where the lease agreement pertaining to an end tenant is to be cancelled, to be terminated or in the event of non-payment of rents.
(3) Details of investment assets
a) Details of investment in real estate and real estate related assets
The table below shows the Investment Corporation’s entrusted real estate and real estate related assets as of the
end of the Sixth Fiscal Period.
Name of Property Location Holding method Leasable Area
(m2) (Note 1)
Book Value at End of Period
(millions of yen)
Assessed Value at End of Period (millions of yen)
(Note 2)
Ebisu Prime Square Shibuya-ku, Tokyo Trust beneficiary interest 17,354.06 25,413 27,538
CS Tower/CS Tower Annex
Taito-ku, Tokyo Trust beneficiary interest 19,998.31 13,812 16,300
Queen’s Square Yokohama
Yokohama-shi, Kanagawa Trust beneficiary interest 41,954.39 16,046 18,200
Nagoya Prime Central Tower
Nagoya-shi, Aichi Trust beneficiary interest 17,117.10 14,379 18,000
Tokyo Nissan Nishi-Gotanda Building
Shinagawa-ku, Tokyo Trust beneficiary interest 8,522.42 6,899 7,340
ORTO Yokohama Yokohama-shi, Kanagawa Trust beneficiary interest 23,593.92 12,983 14,400
Nishi-Shinjuku KF Building
Shinjuku-ku, Tokyo Trust beneficiary interest 6,287.78 6,845 7,030
Shinagawa Seaside East Tower
Shinagawa-ku Tokyo Trust beneficiary interest 27,892.63 25,260 26,600
Akiba CO Building Chiyoda-ku, Tokyo Trust beneficiary interest 5,514.42 8,316 9,330
Sun Towers Center Building
Setagaya-ku, Tokyo Trust beneficiary interest 7,876.60 6,695 7,070
Sendai Honcho Building Sendai-shi, Miyagi Trust beneficiary interest 8,962.47 5,337 5,200
Hakata Prime East Fukuoka-shi, Fukuoka Trust beneficiary interest 7,018.05 4,535 4,620
Kinshicho Prime Tower Koutou-ku, Tokyo Trust beneficiary interest 17,606.11 15,360 15,600
Aqua Dojima East Osaka-shi, Osaka Trust beneficiary interest 3,189.68 1,953 2,010
Total 212,887.94 163,841 179,238 (Note 1) Unless otherwise specified, “Leasable Area” is part of the total area that is available for lease in accordance with the relevant lease agreement or
architectural drawing pertaining to each managed asset as of the end of the Sixth Fiscal Period that is the area equal to the Investment Corporation’s interest.
(Note 2) “Assessed Value at End of Period” represents the appraisal value shown on the appraisal report of property as of the valuation date of the last day of the Sixth Fiscal Period rounded to the nearest million yen.
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Invesco Office J-REIT, Inc.
The table below shows the leasing status of the real estate and real estate related assets of the Investment
Corporation as the end of the period.
Name of Property
Fifth Fiscal Period From May 1, 2016 to October 31 ,2016
Sixth Fiscal Period From November 1, 2016 to April 30 ,2017
Total Number of
Tenants (Note 1)
Occupancy Rate (%) (Note 2)
Real Estate Rental Revenues (millions of yen)
(Note 3)
Percentage to Total Real
Estate Rental Revenues
(%) (Note 3)
Total Number of
Tenants (Note 1)
Occupancy Rate (%) (Note 2)
Real Estate Rental Revenues (millions of yen)
(Note 3)
Percentage to Total Real Estate Rental Revenues
(%) (Note 3)
Ebisu Prime Square 92 97.5 798 14.1 94 89.6 738 12.8
Harumi Island Triton Square Office Tower Z (Note 4) 1 100.0 Not disclosed Not disclosed - - Not disclosed Not disclosed
CS Tower/CS Tower Annex 25 99.8 559 9.9 26 100.0 544 9.5
Queen’s Square Yokohama 93 98.8 982 17.3 93 98.8 949 16.5
Nagoya Prime Central Tower 42 92.6 Not disclosed Not disclosed 46 86.9 Not disclosed Not disclosed Tokyo Nissan Nishi-Gotanda Building 8 100.0 251 4.4 8 100.0 247 4.3
ORTO Yokohama 23 100.0 549 9.7 22 100.0 550 9.6
Nishi-Shinjuku KF Building 16 98.7 186 3.3 18 100.0 185 3.2
Shinagawa Seaside East Tower 16 100.0 757 13.3 16 100.0 877 15.2
Akiba CO Building 1 100.0 Not disclosed Not disclosed 1 100.0 Not disclosed Not disclosed
Sun Towers Center Building 13 100.0 195 3.4 12 91.5 223 3.9
Sendai Honcho Building 35 95.1 158 2.8 38 90.0 181 3.1
Hakata Prime East 19 100.0 135 2.4 19 100.0 155 2.7
Kinshicho Prime Tower - - - - 15 97.5 284 4.9
Aqua Dojima East - - - - 18 95.9 12 0.2
Total 384 98.6 5,678 100.0 426 96.8 5,755 100.0 (Note 1) Unless otherwise specified, “Total Number of Tenants” represents the number of tenants under the lease agreement indicated in the relevant
lease agreement pertaining to each managed asset as of the end of the Sixth Fiscal Period. If pass-through-type master lease agreements under which rents from end tenants are received intact, in principle, (hereinafter referred to as “pass-through-type master lease agreement(s)”) are concluded with respect to managed assets, “Total Number of Tenants” represents the total number of end tenants. “Total Number of Tenants” is calculated taking one tenant that leases multiple leased spaces as one tenant if the leased spaces are the same property and as multiple tenants if the leased spaces are spread across multiple properties. With regards to the numbers of tenants at Nagoya Prime Central Tower, please refer to note 5 in “(2) Major investment asset”.
(Note 2) “Occupancy Rate” represents the ratio of leased area to leasable area pertaining to each managed asset as of the last day of the Sixth Fiscal Period unless otherwise specified, rounded to one decimal place. Total section shows the ratio of total leased area to total leasable area pertaining to each managed asset, rounded to one decimal place.
(Note 3) Information is not disclosed for some properties because the tenant’s authorization has not been obtained. (Note 4) Harumi Island Triton Square Office Tower Z was disposed on December 16, 2016.
b) Details of renewable energy power generation facility
Not applicable.
c) Details of right to operate public facility public facilities
Not applicable.
d) Details of securities
Not applicable.
(4) Details of amount of money defined in specified transactions contract derivatives and market value
Details of amount of money defined in specified transactions contract derivatives and market value as the end of sixth
fiscal period is as follows.
category Transaction Amount described in transaction contract
(thousands of yen) (Note 1)
Market value
(thousands of yen)
(Note2) More than 1 year
Transaction other than
market place transaction
Interest rate swap
transaction
55,400,000 55,400,000 -48,499
Total 55,400,000 55,400,000 -48,499 (Note 1) The amount described in transaction contract regarding interest rate swap is based on estimated principal amount. (Note 2) Market value is evaluated by the value which was calculated by using the actual market interest rate of the counterparty of the contract. (Note 3 Special accounting treatment is applied to the interest-rate swaps in accordance with the “Accounting Standard for Financial Instruments”
(issued by the Accounting Standards Board of Japan(ASBJ) on March 10, 2008;ASBJ Statement No.10) and therefore interest rate swaps are not stated at fair value in the balance sheets.
(5) Details of other asset
The details of trust beneficiary interests which the Investment Corporation owns are described in above (3) and there
are no other assets as the end of the sixth fiscal period.
(6) Details of investment asset in overseas
As of the end of the sixth fiscal period, there is no real estate investment asset located outside Japan.
4. Capital Expenditure
(1) Future Plan for Capital Expenditure
The following table summarizes the major capital expenditure plan associated with renovation scheduled as of the
end of the Sixth Fiscal Period for real estate and entrusted real estate held by the Investment Corporation as of the
said date. Estimated construction cost includes the amounts to be expensed for accounting purpose.
Name of Property Location Purpose Planned Period
Estimated Construction Cost (thousands of yen) (Note)
Total Amount Paid During the Period
Total Amount Paid
Ebisu Prime Square Shibuya-ku, Tokyo
Replacement of security system in Tower building (Period II)
From January 2017 to October 2017 27,738 - -
Renewal of rest rooms in Tower building
From July 2017 to October 2017 32,193 - -
Renewal of standard floors in Tower building
From July 2017 to October 2017 14,995 - -
CS Tower/CS Tower Annex Taito-ku, Tokyo
Renewal of common spaces (1 floor) From May 2017 to July 2017 15,200 - -
Repair of external wall (east side) From June 2017 to September 2017 30,350 - -
Queen’s Square Yokohama
Yokohama-shi, Kanagawa
Replacement of accounting system From April 2017 to March 2018 26,965 - -
Replacement of automatic fire alarms in office area
From June 2017 to March 2018 24,233 - -
Replacement of broadcast facilities in hotel area
From June 2017 to March 2018 17,770 - -
Replacement of automatic fire alarms in retail area
From April 2018 to March 2019 33,200 - -
Replacement of automatic fire alarms in hotel area
From April 2019 to March 2020 39,291 - -
Replacement of broadcast facilities in office and retail area
From April 2020 to March 2021 43,921 - -
Tokyo Nissan Nishi-Gotanda Building
Shinagawa-ku, Tokyo
Replacement of floor tiles of outdoor structure on the ground floor (Period I)
From August 2017 to October 2017 11,065 - -
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Invesco Office J-REIT, Inc.
Name of Property Location Purpose Planned Period
Estimated Construction Cost (Thousands of Yen) (Note)
Name of Property Location
Total Amount Paid During the Period
Total Amount Paid
ORTO Yokohama Yokohama-shi, Kanagawa Replacement of air conditioning system From May 2017 to
October 2017 10,000 - -
Nishi-Shinjuku KF Building
Shinjuku-ku, Tokyo
Renewal of rest rooms and kitchens (2nd and 3rd floor)
From May 2017 to October 2017 13,786 - -
Kinshicho Prime Tower
Koto-ku, Tokyo
Replacement of steam pipes From May 2017 to October 2017 10,500 - -
Construction of new entrance on the ground floor
From May 2017 to October 2017 12,000 - -
(Note) “Estimated Construction Cost” represents the amount equal to the Investment Corporation’s interest that was actually borne by the Investment
Corporation.
(2) Capital Expenditure Incurred
The following table summarizes the major construction to real estate and entrusted real estate held as of the end of the
Sixth Fiscal Period by the Investment Corporation that resulted in capital expenditures for the current period. Capital
expenditures for the current period amounted to 648,489 thousand yen. The total construction costs amounted to
811,150 thousand yen, including repair and maintenance of 162,661 thousand yen that was accounted for as an
expense in the current period. Name of Property Location Purpose Period Construction Costs
(thousands of yen) (Note)
Ebisu Prime Square
Shibuya-ku, Tokyo
Replacement of air-conditioning system in common spaces (Period II)
From June 2016 to January 2017 12,644
Replacement of security system in Tower building (Period I)
From January 2017 to March 2017 14,376
Replacement of central management system
From September 2016 to March 2017 38,082
Queen’s Square Yokohama
Yokohama-shi, Kanagawa
Replacement of central management system for equipment information
From February 2015 to February 2017 193,045
Tokyo Nissan Nishi-Gotanda Building
Shinagawa-ku, Tokyo
Replacement of high pressure electric power receiving facilities
From December 2016 to January 2017 16,139
ORTO Yokohama
Yokohama-shi, Kanagawa
Replacement of parts of co-generation system
From November 2016 to December 2016 11,000
Nishi-Shinjuku KF Building
Shinjuku-ku, Tokyo
Renewal of rest rooms (4th, 5th, and 6th floor) and kitchens (4th and 6th floor)
From January 2017 to April 2017 17,826
Sendai Honcho Building
Sendai-shi, Miyagi
Renewal of common spaces (Entrance lobby and 10 standard floors)
From October 2016 to January 2017 124,800
(Note) “Construction Costs” represents the amount equal to the Investment Corporation’s interest that was actually borne by the Investment Corporation.
(3) Reserved Amount for Long-Term Repairs Plan
The Investment Corporation formulates long-term repair plans for each real estate and entrusted real estate, and
allocates a portion of its cash flows generated during the period to a reserve for repairs to meet large-scale repair
projects over the medium-to-long terms. The following amount has been transferred to the reserve from period cash
flows.
(millions of Yen) Second Fiscal
Period November 1, 2014 through
April 30, 2015
Third Fiscal Period
May 1, 2015 through
October 31, 2015
Fourth Fiscal Period
November 1, 2015 through
April 30, 2016
Fifth Fiscal Period
May 1, 2016 through
October 31, 2016
Sixth Fiscal Period
November 1, 2016 thorough April 30, 2017
Reserve at the beginning of the period 29 29 29 34 129
Reserve for the fiscal period under review - - 5 94 -
Reversal of reserve for the fiscal period under review - - - - -
Reserve brought forward to the next period 29 29 34 129 129
5. Expenses and Liabilities
(1) Details of expenses related to asset management
(thousands of Yen)
Item Fifth Fiscal Period From May 1, 2016 to October 31 ,2016
Sixth Fiscal Period From November 1, 2016 to April 30 ,2017
Asset Management Fee
(Note)
410,212 510,620
Fee for general administrator
and custodian
16,472 17,618
Director’s Compensation 4,800 3,900
Other expenses 63,178 102,850
Total 494,663 634,989 (Note) “Asset Management Fee” mentioned above includes the fee regarding asset disposition and acquisition (493,590 thousand yen was recorded for the
fifth fiscal period and 221,050 thousand yen was recorded for the sixth fiscal period)
38 39
Invesco Office J-REIT, Inc.
(2) Details of the borrowings
Details of the borrowings as the end of the sixth fiscal period are as follows.
Classification Lender Date of the borrowing
Balance at the beginning of the period (millions of
yen)
Balance at the end
of the period (millions of
yen)
Average interest rate
(%)
Payment due date
Payment Method Use Security
Short-term
Loans
The Bank of
Tokyo-Mitsubishi UFJ, Ltd. April 28,
2016
1,000 -
0.33000 (Note1 Bullet
Payment (Note6
Unsecured/
Non-
guaranteed Sumitomo Mitsui
Banking Corporation 1,000 -
Subtotal 2,000 - - - - - -
Current
Portion of
Long-term
Loans
The Bank of
Tokyo-Mitsubishi UFJ, Ltd.
June 6,
2014 2,500 2,500 0.57000
June 6,
2017
Bullet
Payment (Note5
Unsecured/
Non-
guaranteed
Sumitomo Mitsui
Banking Corporation
June 6,
2014
(Note 2)
2,500 2,500
0.45862
Mizuho Bank, Ltd. 2,000 2,000
Sumitomo Mitsui Trust
Bank, Limited 2,000 2,000
Resona Bank, Ltd. 2,000 2,000
Development Bank of
Japan Inc. 2,000 2,000
Sumitomo Mitsui
Banking Corporation January 20,
2017
- 3,100
0.28179 January 31,
2018
Bullet
Payment (Note5
Unsecured/
Non-
guaranteed
Mizuho Bank, Ltd. - 1,600
The Bank of
Tokyo-Mitsubishi UFJ, Ltd. - 800
Subtotal 13,000 18,500 - - - - -
Classification Lender Date of the borrowing
Balance at the beginning of the period (millions of
yen)
Balance at the end
of the period (millions of
yen)
Average interest rate
(%)
Payment due date
Payment Method Use Security
Long-term
Loans
The Bank of
Tokyo-Mitsubishi UFJ, Ltd.
September 30,
2014 3,000 3,000 0.72150
June 6,
2018
Bullet
Payment
(Note5
Unsecured/
Non-
guaranteed
Sumitomo Mitsui
Banking Corporation
September 30,
2014
(Note 2)
3,000 3,000
0.74150
(Note4)
Mizuho Bank, Ltd. 1,500 1,500
Sumitomo Mitsui Trust
Bank, Limited 1,500 1,500
Resona Bank, Ltd. 1,500 1,500
Development Bank of
Japan Inc. 1,500 1,500
The Bank of
Tokyo-Mitsubishi UFJ, Ltd. June 6, 2014 4,000 4,000 0.91500
June 6,
2019
Bullet
Payment
(Note5
Unsecured/
Non-
guaranteed
Sumitomo Mitsui
Banking Corporation
June 6, 2014
(Note 2)
4,000 4,000
0.93400
(Note4)
Mizuho Bank, Ltd. 1,000 1,000
Sumitomo Mitsui Trust
Bank, Limited 1,000 1,000
Resona Bank, Ltd. 1,000 1,000
Development Bank of
Japan Inc. 1,000 1,000
The Bank of
Tokyo-Mitsubishi UFJ, Ltd. June 1, 2015 3,800 3,800 0.80400
May 31,
2020
Bullet
Payment (Note7
Unsecured/
Non-
guaranteed
Sumitomo Mitsui
Banking Corporation
June 1, 2015
(Note 2)
3,800 3,800
0.81400
(Note4)
Sumitomo Mitsui Trust
Bank, Limited 1,000 1,000
Resona Bank, Ltd. 1,000 1,000
Mitsubishi UFJ Trust and
Banking Corporation 1,000 1,000
Sumitomo Mitsui
Banking Corporation June 1, 2016
(Note 3)
600 600 0.45772
November
29, 2019
Bullet
Payment (Note5
Unsecured/
Non-
guaranteed Mizuho Bank, Ltd. 300 300
40 41
Invesco Office J-REIT, Inc.
Classification Lender Date of the borrowing
Balance at the beginning of the period (millions of
yen)
Balance at the end
of the period (millions of
yen)
Average interest rate
(%)
Payment due date
Payment Method Use Security
Long-term
Loans
Sumitomo Mitsui
Banking Corporation
June 1, 2016
(Note 3)
2,300 2,300
0.35700
(Note4)
November
29, 2019
Bullet
Payment (Note5
Unsecured/
Non-
guaranteed
Sumitomo Mitsui Trust
Bank, Limited 1,400 1,400
Resona Bank, Ltd. 1,400 1,400
Mizuho Bank, Ltd. 2,400 2,400
Mitsubishi UFJ Trust
and Banking Corporation 700 700
Shinsei Bank, Ltd. 1,250 1,250
Aozora Bank, Ltd. 1,000 1,000
The Bank of Fukuoka 1,000 1,000
ORIX Bank Corporation 500 500
The Nishi-nippon City Bank,
Ltd. 500 500
Sumitomo Mitsui
Banking Corporation
June 1, 2016
(Note 3)
2,550 2,550
0.53700
(Note4)
May 31,
2021
Bullet
Payment (Note5
Unsecured/
Non-
guaranteed
Sumitomo Mitsui Trust
Bank, Limited 1,400 1,400
Resona Bank, Ltd. 1,400 1,400
Mizuho Bank, Ltd. 2,500 2,500
Mitsubishi UFJ Trust
and Banking Corporation 700 700
Shinsei Bank, Ltd. 1,000 1,000
Aozora Bank, Ltd. 1,000 1,000
The Bank of Fukuoka 1,000 1,000
ORIX Bank Corporation 500 500
The Nishi-nippon City Bank,
Ltd. 500 500
Sumitomo Mitsui
Banking Corporation
June 30,
2016
(Note 3)
2,000 2,000
0.44500
(Note4)
November
30, 2020
Bullet
Payment (Note8)
Unsecured/
Non-
guaranteed
Sumitomo Mitsui Trust
Bank, Limited 1,000 1,000
Resona Bank, Ltd. 1,000 1,000
Mitsubishi UFJ Trust
and Banking Corporation 1,000 1,000
Mizuho Bank, Ltd. 1,600 1,600
Subtotal 67,100 67,100 - - - -
Total 82,100 85,600 - - - -
(Note 1) Repayment was made on April 28, 2017. (Note 2) Borrowings from Syndicate Loan with The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Sumitomo Mitsui Banking Corporation as arranger. (Note 3) Borrowings from Syndicate Loan with Sumitomo Mitsui Banking Corporation as arranger and Mizuho Bank, Ltd. as co-arranger. (Note 4) Borrowings for which interest rate swap transactions were implemented in order to hedge the interest rate volatility risk. The interest rates are
effectively fixed through interest rate swap agreement. (Note 5) All borrowings were used to fund acquisition of trust beneficiary interests in real estate and related expenses. (Note 6) All borrowings were used to refinance the short-term loans of 2,000 million yen that were due for repayment on April 28, 2016. (Note 7) All borrowings were used to fund acquisition of trust beneficiary interests in real estate and related expenses and refinance the short-term loans of
3,200 million yen that were due for repayment on June 5, 2015, and refinance the short-term loans of 5,000 million yen on May 11, 2015. (Note 8) All borrowings were used to refinance the short-term loans of 6,600 million yen that were due for repayment on June 30, 2016.
(3) Details of investment corporation bonds
The following table lists bond series, issue amounts, interest rates, issue dates, redemption dates and remarks with
respect to each investment corporation bond issuance we have conducted under such debt registration statement.
Name Issue date
Balance at the beginning of the period
(millions of yen)
Balance at the end
of the period (millions of yen)
Coupon rate
Redemption date
Redemption Method
Use of proceeds Security
First Series Unsecured Investment
Corporation Bonds
April 20, 2017 - 1,800 0.320% April 20,
2022 Bullet
Payment (Note1)
Unsecured/
Non- guarante
ed Note2
Second Series Unsecured Investment
Corporation Bonds
April 20, 2017 - 1,600 0.520% April 19,
2024 Bullet
Payment (Note1)
Unsecured/
Non- guarante
ed (Note2
Total - - 3,400 - - - - -
(Note 1) All investment corporation bonds were used as the funds for repayment of the short-term loans of 2,000 million yen that were due for repayment on
April 28, 2017 and for acquisition of trust beneficiary interests in real estate (Aqua Dojima East) and related expenses of 1,987 million yen.
(Note 2) This investment corporation bonds is equipped with pari passu clause among special investment corporation bonds.
(4) Details of short-term investment corporation bonds
Not applicable
(5) New unit acquisition rights
Not applicable
42 43
Invesco Office J-REIT, Inc.
6. Status of purchase and disposal of assets during the sixth fiscal period
(1) Purchase and disposals of real estate and etc., asset backed securities, etc., infrastructure asset, etc., infrastructure
related assets
Name of the property
Acquisition Disposition
Date of acquisition Acquisition price
(millions of yen) Date of disposition
Disposition price
(millions of yen) Book value
Profit/Loss
(millions of yen)
Harumi Island Triton Square
Office Tower Z - - December 16, 2016
10,100
(Note) - -
Kinshicho Prime Tower January 20, 2017 15,145 - - - -
Aqua Dojima East March 31, 2017
1,910
(Note) - - - -
Total 17,055 10,100 - -
(Note) “Acquisition price” and “Disposition price” mentioned herein are the price of asset described in each related purchase and sale agreement.
Consumption tax and cost regarding acquisition or disposition are not included.
(2) Purchase and disposals of other assets
Not applicable
Assets other than real estate and etc., asset backed securities, etc., infrastructure asset, etc., infrastructure related
assets are primarily consisted of bank deposit and bank deposit of trust account.
(3) Investigation of the appraisal value of price of specified assets
a) Real estate assets etc.
Acquisition or
disposition Name of the property Transaction date Asset type
Acquisition price or
disposition price
(millions of yen)
Appraisal value
(millions of yen)
Appraiser As of
Acquisition Kinshicho Prime Tower January 20, 2017 Trust beneficiary
interest 15,145 15,600 The Tanizawa S g Appraisal Co., Ltd.
October 31, 2016
Aqua Dojima East March 31, 2017 Trust beneficiary interest 1,910 2,010 Morii Appraisal & Investment
Consulting, Inc. February 28, 2017
Disposition Harumi Island Triton Square Office Tower Z
December 13, 2017
Trust beneficiary interest 10,100 10,900 Japan Real Estate Institute October 31,
2016 Total 27,155 28,510 - -
(Note 1) “Acquisition price” and “Disposition price” mentioned herein are the price of asset described in each related purchase and sale agreement.
Consumption tax and cost regarding acquisition or disposition are not included.
(Note 2) The appraisals of the above-mentioned real estate were conducted by applying “Real Estate Appraisal Standard Section 3: Appraisals Regarding Prices
of Real Estate for Securitization.”
b) Investment securities
Not applicable
c) Others
Not applicable
(4) Transaction involving related parties
Not applicable
(5) Transactions with Asset Management Company regarding subsidiary business managed by such asset management
companies.
As the end of sixth fiscal period, the Asset Management Company conducts type II Financial Instruments Business
and Building Lots and Building Transaction Business as its subsidiary business. However, there are no transactions
with regards to such subsidiary business.
7. Status of Accounting
(1) Assets, liabilities, net assets, and profit/loss etc.
Please refer to “Balance Sheets”, “Statements of Income”, “Statements of Changes in Net Assets”, “Statements of
Cash Distributions” and “Notes to Financial Statements”.
(2) Changes in calculation method of depreciation
Not applicable
(3) Changes in valuation method for reals estate etc. and Infrastructure assets etc.
Not applicable
8. Others
(1) Notices
a) General unitholders meeting
The 3rd general unitholders’ meeting was held on January 31, 2017. Details of the proposals which were passed at
the meeting are as follows.
Approved items Detail
Amendment of the
Articles of
Incorporation
The proposal regarding the amendment of the Articles of Incorporation was passed. The details are as follows (i) Once the Investment Corporation specifies certain date of convocation of the general unitholders
meeting in the Articles of Incorporation, it is allowed to omit the public notice in the procedures for such convocation under the Investment Trust Act and the Articles of Incorporation. Currently, it is stated that certain date is December 25, 2017 and the Investment Corporation changes it to December 25, 2018. In addition, a provision relating to the record date for determining which unitholders may exercise voting rights at the general unitholders meeting will be amended.
(ii) The investment target of the Investment Corporation is mainly office buildings in metropolitan areas such as the Tokyo area. Considering the current real estate market situation, the Investment Corporation stays focus on investment in large scale office buildings in metropolitan areas, but plans to broaden its investable assets to enable selectively invest in other office buildings, retail facilities, residential properties, hotels, logistics and other (including the complex of these assets). The corresponding provisions are amended.
(iii) To ensure the possible option to outsource the operation of the assets under management of the Investment Corporation, the corresponding provisions are amended. In line with the outsourcings, the corresponding provisions regarding the calculation method of Asset Management Fees (2) are amended. As the date hereof, the Investment Corporation does not expect to outsource the operation of any assets under management or any assets considering acquisition.
(iv) A new provision is added to clarify that it is allowed for the Investment Corporation to lease real estate and sublease it to the third party.
(v) To conform the definition of distributable amount which is described in the rules of the Investment Trusts Association, Japan the corresponding provisions are amended.
(vi) Considering the current situation of economic environment, real estate market, real estate leasing market, J-REIT market, the corresponding provisions are made to clarify the standard of distribution in excess of amount of profit.
(vii) Other than mentioned above, respective amendments will be made in line with necessary changes in expressions, clarification, and revision of wording.
44 45
Invesco Office J-REIT, Inc.
Election of one
executive director
Yugo Minemura was elected as an executive director.
Election of one
substitute executive
director
Yasuyuki Tsuji was elected as a substitute executive director.
Election of two
supervisory directors
Takashi Shimokado and Eiji Kawasaki were elected as supervisory directors.
b) Board of the directors of the Investment Corporation
Details of major agreements that the Board of Directors of the Investment Corporation approved to conclude and
modify during the sixth fiscal period are as follows.
Date of approval Approved items Details
January 27, 2017 Execution of the second
amendment to the Asset
Management Agreement
In accordance with the amendment to the Articles of Incorporation which was
authorized on January 31, 2017, the articles regarding asset management fees
were revised.
February 27, 2017 Execution of the
investment corporation
bond underwriting contract
With regards to issuance of investment corporation bonds which was
approved at the meeting of the board of directors held on the same day, the
Investment Corporation appointed SMBC Nikko Securities Inc., Nomura
Securities Co., Ltd. and Mizuho Securities Co., Ltd. and entrusted operations
regarding offering of investment corporation bonds.
February 27, 2017 Execution of the financial
agent agreement
With regards to issuance of investment corporation bonds which was
approved at the meeting of the board of directors held on the same day, the
Investment Corporation appointed Sumitomo Mitsui Banking Corporation as a
financial agent and entrusted operations regarding administrative work related
to issuing investment corporation bonds, the payment of interest or
redemption money to investment corporation bondholders, the preparation and
keeping of the registry and other administrative work, the reception of offers
from bondholders and other works related to mentioned above.
(2) Disclosure regarding in-house investment trust beneficiary interests
Not applicable
(3) Disclosure regarding affiliated foreign real estate companies and real estate owned by them
Not applicable
(4) Rounding method for amount of money and ratios described in this document
Unless otherwise specified, amount of money are rounded down to the nearest units and ratios are rounded off to
one decimal place.
Financial Statements Balance Sheets Statements of Income Statements of Changes in Net Assets Statements of Cash Distributions Statements of Cash Flows Notes to Financial Statements Independent Auditor’s Report
46 47
Invesco Office J-REIT, Inc.
Balance Sheets (Unit: Thousands of Yen)
Fifth Fiscal Period As of October 31, 2016
Sixth Fiscal Period As of April 30, 2017
ASSETS Current assets: Cash and cash deposits 3,711,863 4,108,833 Entrusted cash and entrusted cash deposits 10,264,404 10,230,271 Account receivables - operating 438,068 402,022 Consumption tax receivable 648,094 183,882 Income taxes receivable 1,386 2,251 Short-term prepaid expenses 270,814 251,269 Deferred tax assets 21 6 Other current assets 1,518 5,867
Total current assets 15,336,173 15,184,404 Fixed assets: Property and equipment Entrusted buildings 40,348,924 41,543,129
Accumulated depreciation (2,445,998) (2,974,670) Entrusted buildings, net 37,902,926 38,568,458
Entrusted building improvements 370,321 318,568 Accumulated depreciation (70,988) (75,407) Entrusted building improvements, net 299,332 243,161
Entrusted machineries 20,386 19,735 Accumulated depreciation (2,362) (2,935) Entrusted machineries, net 18,024 16,800
Entrusted furniture and equipment 62,847 81,622 Accumulated depreciation (12,451) (18,341) Entrusted furniture and equipment, net 50,396 63,280
Entrusted land 117,507,265 124,928,377 Entrusted construction in progress 20,525 21,603
Total property and equipment 155,798,472 163,841,681 Intangible assets: Other intangible assets 4,738 6,009
Total intangible assets 4,738 6,009 Investment and other assets:
Investment in securities 102,531 - Security deposits and guarantee deposits 10,101 10,088 Long-term prepaid expenses 463,185 384,660 Derivative assets 58,496 79,972 Other investments 430,545 363,971
Total investment and other assets 1,064,859 838,693 Total fixed assets 156,868,069 164,686,384
Differed assets: Investment corporation bond issuance expenses - 23,823
Total differed assets - 23,823 TOTAL ASSETS 172,204,243 179,894,611
The accompanying notes form an integral part of these financial statements.
The accompanying notes form an integral part of these financial statements.
(Unit: Thousands of Yen)
Fifth Fiscal Period As of October 31, 2016
Sixth Fiscal Period As of April 30, 2017
LIABILITIES Current liabilities: Accounts payable - operating 563,516 371,428 Short-term loans 2,000,000 - Current portion of long-term loans 13,000,000 18,500,000 Accounts payable - other 332,734 412,735 Accrued expenses 82,475 82,938 Income tax payable 738 645 Rent received in advance 678,569 593,832 Other current liabilities 151,203 160,928
Total current liabilities 16,809,237 20,122,508 Non-current liabilities: Investment corporation bonds - 3,400,000 Long-term loans 67,100,000 67,100,000 Entrusted tenant leasehold and security deposits 7,093,376 7,311,222 Deferred tax liabilities 18,478 25,263
Total non-current liabilities 74,211,855 77,836,485 TOTAL LIABILITIES 91,021,093 97,958,994 NET ASSETS
Unitholders' equity: Unitholders' equity 78,913,658 78,913,658 Surplus:
Retained earnings 2,229,474 2,967,250 Total surplus 2,229,474 2,967,250
Total Unitholders' equity 81,143,132 81,880,908 Valuation and translation adjustments: Deferred income on hedges 40,017 54,708
Total valuation and translation adjustments 40,017 54,708 TOTAL NET ASSETS *1 81,183,149 *1 81,935,617 TOTAL LIABILITIES AND NET ASSETS 172,204,243 179,894,611
48 49
Invesco Office J-REIT, Inc.
Statements of Income (Unit: Thousands of Yen)
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017 Operating revenues
Rental revenues *1 5,151,585 *1 5,239,918 Other rental revenues *1 527,258 *1 515,660 Gain on sales of real estate properties *2 - *2 784,581 Dividend income from investments in securities 5,470 3,142 Total operating revenues 5,684,314 6,543,304
Operating expenses Property-related expenses *1 2,592,499 *1 2,583,389 Asset management fees 410,212 510,620 General administration and Custodian fees 16,472 17,618 Compensation for directors 4,800 3,900 Other operating expenses 63,178 102,850 Total operating expenses 3,087,162 3,218,378
Operating income 2,597,151 3,324,925 Non-operating revenues
Interest income 38 44 Interest income on tax refund - 4,349 Other non-operating revenues 99 238 Total non-operating revenues 138 4,632
Non-operating expenses Interest expense 242,619 252,167 Interest expense on investment corporation bonds - 382 Amortization of investment corporation bonds issuance costs - 344
Public offering costs 25,054 - Financing costs 97,936 107,694 Other non-operating expenses 1,440 1,545 Total non-operating expenses 367,050 362,134 Ordinary income 2,230,238 2,967,423
Net income before income taxes 2,230,238 2,967,423 Current income taxes 1,051 742 Deferred tax expenses (9) 15 Total income taxes 1,042 757 Net income 2,229,196 2,966,666
Retained earnings at beginning of period 277 584 Retained earnings at the end of period 2,229,474 2,967,250 The accompanying notes form an integral part of these financial statements.
Statements of Changes in Net Assets Fifth Fiscal Period: From May 1, 2016 to October 31, 2016
(Unit: Thousands of Yen)
Unitholders' Equity Valuation and translation adjustments
Total Net Assets Unitholders'
Equity
Surplus Total
Unitholders' Equity
Deferred income on
hedges
Total valuation
and translation
adjustments
Retained Earnings
Total Surplus
Balance at the beginning of the period 53,891,022 1,462,617 1,462,617 55,353,640 - - 55,353,640
Changes during the period:
Issuance of new investment units 25,022,635 - - 25,022,635 - - 25,022,635
Cash distribution declared - (1,462,340) (1,462,340) (1,462,340) - - (1,462,340)
Net income - 2,229,196 2,229,196 2,229,196 - - 2,229,196 Net changes of items other than unitholders' equity - - - - 40,017 40,017 40,017
Total changes during the period 25,022,635 766,856 766,856 25,789,491 40,017 40,017 25,829,509
Balance at the end of the period *1
78,913,658 2,229,474 2,229,474 81,143,132 40,017 40,017 81,183,149
Sixth Fiscal Period: From November 1, 2016 to April 30, 2017
(Unit: Thousands of Yen)
Unitholders' Equity Valuation and translation adjustments
Total Net Assets Unitholders'
Equity
Surplus Total
Unitholders' Equity
Deferred income on
hedges
Total valuation
and translation
adjustments
Retained Earnings
Total Surplus
Balance at the beginning of the period 78,913,658 2,229,474 2,229,474 81,143,132 40,017 40,017 81,183,149
Changes during the period:
Cash distribution declared - (2,228,889) (2,228,889) (2,228,889) - - (2,228,889)
Net income - 2,966,666 2,966,666 2,966,666 - - 2,966,666 Net changes of items other than unitholders' equity - - - - 14,691 14,691 14,691
Total changes during the period - 737,776 737,776 737,776 14,691 14,691 752,467
Balance at the end of the period *1
78,913,658 2,967,250 2,967,250 81,880,908 54,708 54,708 81,935,617
The accompanying notes form an integral part of these financial statements.
50 51
Invesco Office J-REIT, Inc.
Statements of Cash Distributions
Fifth Fiscal Period From May 1, 2016 to
October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017 I. Unappropriated retained earnings 2,229,474,086 yen 2,967,250,139yen II. Distributions 2,228,889,951 yen 2,966,959,986yen
(Distributions per unit) 2,733 yen 3,638yen III. Retained earnings carried forward 584,135 yen 290,153yen Calculation method of distribution amount
Pursuant to the distribution policy as defined in Article 35, Paragraph 1 of the Articles of Incorporation of the Investment Corporation, the amount of distributions shall be the amount that does not exceed the amount of profits but exceeds 90% of the distributable profit as defined in Article 67-15 of the Act on Special Measures Concerning Taxation. Based on the distribution policy, the Investment Corporation declared a distribution amount of 2,228,889,951 yen, which does not exceed retained earnings and is the greatest value among integral multiples of 815,547 units, which is the number of investment units issued. Note that the Investment Corporation has not paid any portion of the amount that exceeds the profits defined in Article 35, Paragraph 2 of the Articles of Incorporation of the Investment Corporation.
Pursuant to the distribution policy as defined in Article 35, Paragraph 1 of the Articles of Incorporation of the Investment Corporation, the amount of distributions shall be the amount that does not exceed the amount of profits but exceeds 90% of the distributable profit as defined in Article 67-15 of the Act on Special Measures Concerning Taxation. Based on the distribution policy, the Investment Corporation declared a distribution amount of 2,966,959,986 yen, which does not exceed retained earnings and is the greatest value among integral multiples of 815,547 units, which is the number of investment units issued. Note that the Investment Corporation has not paid any portion of the amount that exceeds the profits defined in Article 35, Paragraph 2 of the Articles of Incorporation of the Investment Corporation.
The accompanying notes form an integral part of these financial statements.
Statements of Cash Flows (Unit: Thousands of Yen)
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017 Cash flows from operating activities:
Net income before income taxes 2,230,238 2,967,423 Depreciation expenses 711,158 753,532 Amortization of investment corporation bonds issuance costs - 344 Public offering costs 25,054 - Financing costs 97,936 107,694 Interest income (38) (44) Interest expense 242,619 252,550 (Increase) decrease in account receivables - operating (102,124) 36,046 (Increase) decrease in consumption tax receivable (648,094) 464,212 (Increase) decrease in income taxes receivable (1,386) (864) (Increase) decrease in short-term prepaid expenses (23,066) 6,896 (Increase) decrease in long-term prepaid expenses (17,792) (5,521) (Increase) decrease in other current assets 34,830 62,225 Increase (decrease) in accounts payable - operating 171,753 (73,673) Increase (decrease) in accounts payable - other 78,229 53,795 Increase (decrease) in consumption tax payable (198,012) - Increase (decrease) in rental received in advance 426,505 (84,736) Decrease in property and equipment held in trust due to sale - 9,190,016 Increase (decrease) in other current liabilities 148,091 9,724 Others 1,155 903 Sub-total 3,177,058 13,740,523 Interest received 38 44 Interest expenses paid (219,206) (252,088) Income taxes paid (766) (738)
Net cash provided by (used in) operating activities 2,957,123 13,487,742 Cash flows from Investing activities:
Purchase of entrusted property and equipment (50,526,106) (18,080,298) Payments for purchases of intangible assets - (2,277) Redemption of investment in securities 304,359 101,531 Purchase of investment in securities (102,535) - Payment of entrusted leasehold and security deposits (101) 12
Net cash provided by (used in) investing activities (50,324,382) (17,981,032) Cash flows from Financing activities:
Repayments of short-term borrowings (6,600,000) (2,000,000) Proceeds from long-term borrowings 32,500,000 5,500,000 Payment of financing costs (402,387) (11,000) Proceeds from issuance of investment corporation bonds - 3,400,000 Payment of investment corporation bonds issuance costs - (24,167) Proceeds from issuance of investment units 25,022,635 - Payment of investment units issuance costs (25,054) - Distribution payments (1,461,578) (2,226,551)
Net cash provided by (used in) financing activities 49,033,614 4,638,280 Net change in cash and cash equivalents 1,666,355 144,990 Cash and cash equivalents at the beginning of period 5,216,535 6,882,891 Cash and cash equivalents at the end of period *1 6,882,891 *1 7,027,882
The accompanying notes form an integral part of these financial statements.
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Invesco Office J-REIT, Inc.
Notes to Financial Statements 1. Organization Invesco Office J-REIT, Inc. (the “Investment Corporation”) is a real estate investment trust mainly investing in office properties. The Investment Corporation was established on February 27, 2014, with Invesco Global Real Estate Asia Pacific, Inc. as the organizer under the Act on Investment Trusts and Investment Corporations of Japan (the “Investment Trust Act”) and registered with the Kanto Local Finance Bureau on March 20, 2014. On June 5, 2014, the Investment Corporation was listed on the real estate investment trust securities market of Tokyo Stock Exchange. During the Sixth fiscal period, the Investment Corporation disposed trust beneficiary interests of Harumi Island Triton Square Office Tower Z (Chuo-ku, Tokyo, Disposition price: 10,100 million yen) on December 16, 2016. Also, the Investment Corporation acquired trust beneficiary interests in two properties during the Sixth fiscal period as follows: Kinshicho Prime Tower (Koutou-ku, Acquisition price: 15,145 million yen) on January 20, 2017 and Aqua Dojima East (Osaka-shi, Osaka, Acquisition price: 1,910 million yen) on March 31, 2017. As of April 30, 2017, the Investment Corporation held 14 properties, and total acquisition cost of which was 161,962 million yen.
2. Basis of Presentation
The Investment Corporation maintains its books of accounts in accordance with the provisions set forth in the Investment Trust Act, the Financial Instruments and Exchange Act of Japan and other related accounting regulations and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards or accounting principles generally accepted in the United States of America. The accompanying financial statements have been compiled from the financial statements of the Investment Corporation, which were in accordance with Japanese GAAP and were filed with the Director of the Kanto Local Finance Bureau as required by the Financial Instruments and Exchange Act of Japan. In preparing the accompanying financial statements, certain rearrangements have been made to the financial statements issued domestically in order to present them in a form that is more familiar to readers outside Japan. The accompanying financial statements are stated in Japanese yen, the currency of the country in which the Investment Corporation is incorporated and operates. As permitted by the regulation under the Financial Instruments and Exchange Act of Japan, amounts of less than one thousand yen have been omitted. As a result, the totals shown in the accompanying financial statements in yen do not necessarily agree with the sums of the individual amounts. The Investment Corporation does not prepare consolidated financial statements. The Investment Corporation has six-month fiscal periods ending April 30 and October 31 of each calendar year. 3. Summary of Significant Accounting Policies
1. Basis and Method of
Valuation of Assets Securities Other securities Non-marketable securities
The cost method based on the moving-average method is applied to securities with no market price available. The equity method is applied to an investment in silent partnership. The net income from the silent partnership is allocated to the Silent Partnership Equity Interest owned by the Investment Corporation.
2. Method of Depreciation of Fixed Assets
(1) Property and equipment The straight-line method is used. The useful lives of property and equipment are listed below. Entrusted buildings 2 to 46 years Entrusted building improvements Entrusted machineries
4 to 20 years 2 to 17 years
Entrusted furniture and equipment 4 to 15 years (2) Intangible fixed assets
The straight-line method is used. (3) Long-term prepaid expenses
The straight-line method is used.
3. Accounting Method for (1) Public offering costs:
Deferred Assets All public offering costs are expensed when incurred. (2) Investment corporation bonds issuance costs:
Bond issuance costs are amortized by applying the straight-line method for the entire redemption period.
4. Recognition of Revenue and Expenses
Accounting treatment of fixed asset tax and other property-related taxes: For fixed asset tax, city planning tax, depreciable asset tax, etc., the amount of tax levied on real properties held corresponds to the accounting period and is recorded as property-related expenses. The amount equivalent to fixed asset tax to be paid by the Investment Corporation in the first year of acquisition relating to the real properties or trust beneficiary interests in real estate is not recorded as an expense, but included in the acquisition cost for the related properties. The fixed asset tax included in acquisition costs for properties acquired during the Sixth Fiscal Period was 95,606 thousand yen.
5. Method of Hedge Accounting
(1) Method of hedge accounting: Deferred hedge accounting is generally used for interest rate swaps. Special treatment is applied for interest rate swaps which satisfy the requirements for special treatment.
(2) Hedge instruments and hedged items: Hedge instruments: Interest rate swap transactions Hedged items: Interest on borrowings
(3) Hedging policy: The Investment Corporation conducts derivative transactions for the purpose of hedging risks provided for in the Articles of Incorporation of the Investment Corporation pursuant to the regulations that stipulate the basic policy of risk management.
(4) Method of assessing hedge effectiveness: The effectiveness of hedging is measured by comparing the cumulative total cash flow fluctuation of the hedged items and that of the hedging instruments and verifying the ratio of differences in the amount of changes from both the hedged items and the hedging instruments. The assessment of hedge effectiveness is omitted for the interest rate swaps which satisfy the requirements for special treatment.
6. Scope of Cash and Cash Equivalents in the Statements of Cash Flows
Cash and cash equivalents in the statements of cash flows include cash on hand, entrusted cash, demand deposits, entrusted cash deposits, and highly liquid short-term investments that are readily convertible, bear little risk in price fluctuations, and mature within three months from the date of acquisition.
7. Other Significant Information for Preparation of Financial Statements
(1) Accounting policy for trust beneficiary interests in real estate: With regard to trust beneficiary interests in real estate, all assets and liabilities as well as all revenue and expense items associated with all entrusted assets are accounted for under the respective account item of the balance sheet and statements of income and retained earnings. Of the entrusted assets accounted for under the respective account item, the following significant items are separately indicated on the balance sheet:
i) Entrusted cash and entrusted cash deposits; ii) Entrusted buildings, entrusted building improvements, entrusted machineries, entrusted
furniture and equipment, entrusted land and entrusted construction in progress; and iii) Entrusted tenant leasehold and security deposits.
(2) Accounting policy for consumption tax: All amounts in the accompanying financial statements exclude consumption tax.
4. Net Assets *1. Minimum net assets as provided in Article 67, paragraph 4, of the Act on Investment Trusts and Investment
Corporations (Unit: Thousands of Yen)
Fifth Fiscal Period
As of October 31, 2016 Sixth Fiscal Period
As of April 30, 2017
Statutory Minimum Net Assets under Article 67 50,000 50,000
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Invesco Office J-REIT, Inc.
5. Breakdown of Rental and Other Operating Revenues and
Property-Related Expenses *1. Breakdown of net operating income (loss)
(Unit: Thousands of yen)
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017 A. Rental and other operating revenues:
Rental revenues
Rental revenues 4,019,495 4,016,686 Common area service fee 850,859 924,308 Other rental revenues 281,229 298,923 Total rental revenues 5,151,585 5,239,918
Other rental-related revenues Other rental-related revenues 527,258 515,660 Total other rental-related revenues 527,258 515,660
Total rental and other related revenues 5,678,843 5,755,579 B. Property-related expenses:
Property management fees 675,275 667,776 Utility expenses 601,624 526,495 Insurance 15,420 14,521 Repair and maintenance 134,639 162,661 Other taxes 395,728 392,590 Depreciation expenses 710,266 752,526 Other rental-related expenses 59,544 66,817
Total property-related expenses 2,592,499 2,583,389 C. Net operating income (A-B) 3,086,344 3,172,189
6. Breakdown of Gain on Sales of Real Estate Properties *2. Breakdown of gain on sales of real estate properties
Fifth Fiscal Period (From May 1, 2016 to October 31, 2016) Not applicable. Sixth Fiscal Period (From November 1, 2016 to April 30, 2017)
(Unit: Thousands of yen) Harumi Island Triton Square Office Tower Z
Revenue from sales of real estate properties 10,100,000 Cost of property 9,190,016 Other related expenses 125,401 Gain on sales of real estate properties 784,581
7. Unitholders’ Equity *1. Total number of authorized investment units and total number of investment units issued
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017
Total number of authorized investment units 10,000,000 units 10,000,000 units Total number of investment units issued 815,547 units 815,547 units
8. Cash and Cash Equivalents *1. Reconciliation between cash and cash equivalents at end of period and relevant amount on the balance sheets
(Units: Thousands of Yen)
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017
Cash and deposits 3,711,863 4,108,833 Entrusted cash and entrusted cash deposits 10,264,404 10,230,271 Entrusted cash deposits with restrictions (Note) (7,093,376) (7,311,222) Cash and cash equivalents 6,882,891 7,027,882
(Note) Entrusted cash deposits with restrictions are retained for the refund of tenants’ leasehold and security deposits. 9. Leases The Company leases its properties to tenants. The future minimum lease payments to be received under non-cancelable operating leases of properties as of October 31, 2016 and April 30, 2017 are as follows:
(Units: Thousands of Yen)
Fifth Fiscal Period As of October 31, 2016
Sixth Fiscal Period As of April 30, 2017
Due within 1 year 2,147,214 2,130,672 Due after 1 year 1,813,295 1,800,793 Total 3,960,510 3,931,465
10. Financial Instruments (1) Qualitative information about financial instruments
(a) Policy for financial instruments
The Investment Corporation’s basic policy is to conduct stable and sound financial management to contribute to the continuous growth of assets under management and their efficient and appropriate management. The Investment Corporation procures funds by borrowing, issuing investment corporation bonds (including short-term investment corporation bonds; same shall apply hereinafter), and issuing investment units for the purpose of acquiring assets, paying repair, maintenance and other management expenses, making distributions, and funding the Investment Corporation’s operations including necessary working capital and debt repayments.
Temporary surpluses and entrusted tenant leasehold and security deposits are also invested in bank deposits considering the safety of the investment and convertibility into cash. Derivative transactions are carried out only to hedge the risk of fluctuations in interest rates associated with borrowings and other risks.
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(b) Content and risks of financial instruments and risk management system
Investment in the equity interest in the silent partnership are exposed to credit risks of the issuer of the silent partnership as well as to general price risks of the overall real estate market. The Investment Corporation tries to mitigate such risks by monitoring the financial status of the issuer and environment of overall real estate market. Proceeds from borrowings and issuing investment corporation bonds are received mainly for the purpose of acquiring real estate and trust beneficiary interests in real estate. Proceeds from borrowings and issuing investment corporation bonds are exposed to liquidity risk on due dates. However, the Investment Corporation manages this risk mainly by appropriately managing the LTV (loan-to-value) ratio to limit the impact of higher market interest rates on the Investment Corporation’s operations and endeavoring to maintain and strengthen its ability to raise capital from capital markets through capital increases. Also, management constantly monitors on-hand liquidity by preparing monthly cash flow projections and formulates fund raising plans at an early stage to maintain required capital. Floating-rate loans are exposed to the risk of fluctuations in interest rates. However, the Investment Corporation manages this risk mainly by adjusting the ratio of outstanding floating-rate loans to total borrowing depending on the finance environment. Furthermore, these risks are managed through derivative transactions (interest rate swaps) as hedging instruments in certain floating-rate loans in order to fix interest rate payments and hedge the risk of fluctuations in interest rates. The hedge effectiveness of the interest rate swaps is assessed by comparing the cumulative changes in the cash flows of the hedging instruments and the hedged items and based on the respective amount of changes; provided, however, that the assessment of hedge effectiveness is omitted for those interest rate swaps that satisfy the requirements for special treatment. Derivative transactions are conducted and managed in accordance with the internal regulations that specify the basic policy of risk management. The surplus funds deposited to the financial institutions are exposed to the financial institutions’ credit risk. However, the risks are managed through our selection of financial institutions with certain creditworthiness and by limiting the term of the deposit to short term.
Entrusted tenant leasehold and security deposits are deposits provided by tenants under lease agreements. This is exposed to liquidity risk due to the cancellation of the lease agreement before the original term. The risks are managed by monitoring liquidity on hand.
(c) Supplementary remarks on fair value of financial instruments
The fair value of financial instruments is based on market prices or reasonably calculated value if there is no market price available. As certain assumptions are used in calculating these values, these values may vary in the event different assumptions are used.
(2) Matters regarding fair value of financial instruments
Balance sheet carrying amounts, fair values, and the difference between the two values are shown below. Financial instruments whose fair value is considered to be extremely difficult to determine are not included in the table below (Note 2).
Fifth Fiscal Period (as of October 31, 2016)
(Unit: Thousands of Yen)
Balance Sheet
Carrying Amount (Note1)
Fair Value (Note1)
Difference
(1) Cash and deposits 3,711,863 3,711,863 - (2) Entrusted cash and entrusted cash deposits 10,264,404 10,264,404 - Total assets 13,976,267 13,976,267 - (3) Short-term loans 2,000,000 2,000,000 - (4) Current portion of long-term loans 13,000,000 13,006,247 6,247 (5) Long-term loans 67,100,000 67,532,053 432,053 Total liabilities 82,100,000 82,538,300 438,300 (6) Derivative transactions 58,496 58,496 -
Sixth Fiscal Period (as of April 30, 2017)
(Unit: Thousands of Yen)
Balance Sheet
Carrying Amount (Note1)
Fair Value (Note1)
Difference
(1) Cash and deposits 4,108,833 4,108,833 - (2) Entrusted cash and entrusted cash deposits 10,230,271 10,230,271 - Total assets 14,339,104 14,339,104 - (3) Current portion of long-term loans 18,500,000 18,500,995 995 (4) Investment corporation bonds 3,400,000 3,394,940 (5,060) (5) Long-term loans 67,100,000 67,531,915 431,915 Total liabilities 89,000,000 89,427,850 427,850 (6) Derivative transactions 79,972 79,972 -
(Note 1) Measurement of fair values of financial instruments: (1) Cash and deposits and (2) Entrusted cash and entrusted cash deposits
The book value is used as the fair value of these assets, given that the fair value is equivalent to the amount of the book value, as it is settled in a short time.
(3) Current portion of long-term loans and (5) Long-term loans Because the interest rates of current portion of long-term loans and long-term loans carrying floating interest rates are to be revised periodically and thus their fair value is essentially the same as the book value, the book value is used as the fair value of these liabilities. The fair value of current portion of long-term loans and long-term loans carrying fixed interest rates is calculated by discounting the total of principal and interest at the rate assumed when a new, similar loan corresponding to the remaining period is made. The fair values for interest rate swaps, to which special treatment is applied, are included in the fair value of long-term loans as the hedged item. Some current portion of long-term loans and long-term loans are cancellable loans with a clause on early cancellation through exercise of early cancellation rights (i.e., compounded financial instruments), and these are included in the fair value of the current portion of long-term loans and long-term loans.
(4) Investment corporation bonds The fair value of investment corporation bonds is based on market prices.
(6) Derivative transactions Please refer to “12. Derivative Transactions” described below.
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(Note 2) Balance sheet carrying amounts of financial instruments whose fair value is considered to be extremely difficult to
determine:
(Unit: Thousands of Yen) Fifth Fiscal Period
As of October 31, 2016 Sixth Fiscal Period
As of April 30, 2017 (1)Investment in securities 102,531 - (2)Entrusted tenant leasehold and security deposits 7,093,376 7,311,222
(1) Investment in securities (Silent Partnership Equity Interest) are not subject to fair value disclosure because there are no market prices to compare and it is not possible to reasonably estimate future cash flows. Therefore it is considered to be extremely difficult to determine their fair values.
(2) Entrusted tenant leasehold and security deposits, which are deposited by lessees of rental properties, are not subject to fair value disclosure because there are no market prices to compare. It is not possible to reasonably estimate future cash flows because, even if a lease agreement period is specified, there is the possibility of midterm cancellation, renewal or re-contract and it is impossible to estimate the real deposit term, and therefore it is considered to be extremely difficult to determine their fair values.
(Note 3) Redemption schedule for monetary claims after the balance sheet date
Fifth Fiscal Period (as of October 31, 2016) (Unit: Thousands of Yen)
Due within One (1) Year Cash and deposits 3,711,863 Entrusted cash and entrusted cash deposits 10,264,404 Total 13,976,267
Sixth Fiscal Period (as of April 30, 2017) (Unit: Thousands of Yen)
Due within One (1) Year Cash and deposits 4,108,833 Entrusted cash and entrusted cash deposits 10,230,271 Total 14,339,104
(Note 4) Expected amount of repayments of loans and investment corporation bonds after the balance sheet date
Fifth Fiscal Period (As of October 31, 2016) (Unit: Thousands of Yen)
Due within 1 year
Due after 1 to 2 years
Due after 2 to 3 years
Due after 3 to 4 years
Due after 4 to 5 years
Due after 5 years
Short-term loans 2,000,000 - - - - - Long-term loans 13,000,000 12,000,000 12,000,000 23,950,000 19,150,000 -
Sixth Fiscal Period (As of April 30, 2017)
(Unit: Thousands of Yen)
Due within 1 year
Due after 1 to 2 years
Due after 2 to 3 years
Due after 3 to 4 years
Due after 4 to 5 years
Due after 5 years
Investment corporation bonds
- - - - 1,800,000 1,600,000
Long-term loans 18,500,000 12,000,000 25,350,000 17,200,000 12,550,000 -
11. Securities Fifth Fiscal Period (As of October 31, 2016) Silent partnership equity interest (102,531 thousand yen on the balance sheet amount) are not subject to fair value disclose because there are no market price to compare and it is not possible to reasonably estimate future cash flows. It is considered to be extremely difficult to determine their fair values. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
12. Derivative Transactions (1) Derivative transactions not applying hedge accounting:
Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
(2) Derivative transactions applying hedge fund accounting:
The following table shows the contracted amount or principal equivalent amount as set forth in the contract as of the balance sheet date for each hedge accounting method.
Fifth Fiscal Period (As of October 31, 2016)
(Unit: Thousands of Yen)
(Note) Fair value for interest rate swaps with this special treatment is included in the fair value of “Long-term loans” in “10. Financial Instruments, (2) Matters regarding fair value of financial instruments” described above, as it is accounted for as a single unit with the hedged long-term loan.
Sixth Fiscal Period (As of April 30, 2017)
(Unit: Thousands of Yen)
Hedge Accounting
Method Type of Derivative Transaction
Major Hedged
Item
Contracted Amount Fair
Value
Measurement Method for Fair Value Portion Due
after 1 Year
Standard method Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate
Long-term loans 31,600,000 31,600,000 58,496
The fair value is based on the price
presented by the
correspondent financial
institutions. Special treatment for interest rate swaps
Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate
Long-term loans 23,800,000 23,800,000 (Note) -
Total 55,400,000 55,400,000 58,496 -
Hedge Accounting
Method Type of Derivative Transaction
Major Hedged
Item
Contracted Amount Fair
Value
Measurement Method for Fair Value Portion Due
after 1 Year
Standard method Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate
Long-term loans 31,600,000 31,600,000 79,972
The fair value is based on the price
presented by 60 61
Invesco Office J-REIT, Inc.
(Note) Fair value for interest rate swaps with this special treatment is included in the fair value of “Long-term loans” in “10. Financial Instruments, (2) Matters regarding fair value of financial instruments” described above, as it is accounted for as a single unit with the hedged long-term loan.
13. Retirement Benefits
Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
14. Income Taxes (1) Significant components of deferred tax assets and liabilities
(Unit: Thousands of Yen)
Fifth Fiscal Period As of October 31, 2016
Sixth Fiscal Period As of April 30, 2017
Deferred tax assets: Accrued business office taxes, currently not deductible 21 6 Total deferred tax assets 21 6
Deferred tax liabilities: Deferred income on hedges 18,478 25,263 Total deferred tax liabilities 18,478 25,263
Net deferred tax assets (liabilities) (18,457) (25,256) (2) Reconciliation of significant differences between the normal effective statutory tax rate and the effective
tax rate (Unit: %)
Fifth Fiscal Period As of October 31, 2016
Sixth Fiscal Period As of April 30, 2017
Normal effective statutory tax rate 31.74 31.74 Adjustments: Distributions paid included as tax deductible (31.72) (31.74) Other 0.03 0.03 Effective tax rate after application of deferred tax accounting 0.05 0.03
the correspondent
financial institutions.
Special treatment for interest rate swaps
Interest rate swap transaction Payment: fixed interest rate Receipt: floating interest rate
Long-term loans 23,800,000 23,800,000 (Note) -
Total 55,400,000 55,400,000 79,972 -
15. Profit or Loss of Affiliates Accounted for Under the Equity Method
Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
16. Related Party Transactions (1) Parent Company, major corporate unitholders and other
Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
(2) Affiliated companies and other Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
(3) Fellow subsidiary companies and other Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
(4) Directors, major individual unitholders and other Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
17. Asset Retirement Obligations
Fifth Fiscal Period (As of October 31, 2016) Not applicable. Sixth Fiscal Period (As of April 30, 2017) Not applicable.
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18. Investment and Rental Properties The Investment Corporation holds large office buildings in major metropolitan areas. The balance sheet carrying amounts, changes during the period, and fair values of these rental properties are as follows: (Unit: Thousands of Yen)
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017
Balance sheet carrying amounts
Balance at beginning of period 105,937,067 155,798,472 Changes during the period 49,861,404 8,043,209
Balance at end of period 155,798,472 163,841,681 Fair value at end of period 170,478,000 179,238,000
(Note 1) The balance sheet carrying amount is the acquisition cost (including incidental expenses associated with acquisition) less accumulated depreciation. Intangible fixed assets (totaling 4,738 thousand yen at the end of the Fifth Fiscal Period and 6,009 thousand yen at the end of the Sixth Fiscal Period) are not included.
(Note 2) Relating to the changes during the Fifth Fiscal Period, the increase is mainly due to asset acquisitions (50,237,755 thousand yen) and capital expenditures (333,915 thousand yen), while the decrease is principally attributable to depreciation (710,266 thousand yen). In the Sixth Fiscal Period, the increase is mainly due to asset acquisitions (17,337,262 thousand yen) and capital expenditures (648,489 thousand yen), while the decrease is principally attributable to asset disposition (9,190,016 thousand yen) and depreciation (752,526 thousand yen).
(Note 3) The fair value at the end of the period is the appraisal value provided by an independent real estate appraiser. As for the fair value at the end of the Fifth Fiscal Period, the fair value of Harumi Island Triton Square Office Tower Z is the sales price (10,100,000 thousand yen) which was stated in the sales and purchase agreement as of December 7, 2016.
The profit or loss concerning investment and rental properties is indicated under “5. Breakdown of Rental and Other Operating Revenues and Property-Related Expenses” 19. Segment Information (1) Segment Information
Disclosure is omitted as the Investment Corporation is comprised of a single reportable segment engaged in the real estate rental business.
(2) Related information
Fifth Fiscal Period (From May 1, 2016 to October 31, 2016) (a) Information about products and services
Disclosure is omitted as operating revenues from external customers of products and services within a single segment exceeds 90% of operating revenues on the Statements of Income.
(b) Information about geographical area
i) Operating revenues Disclosure is omitted since operating revenues from external customers in Japan exceeds 90% of operating revenues on the Statements of Income.
ii) Property and equipment Disclosure is omitted since the amount of property and equipment located in Japan exceeds 90% of property and equipment on the Balance Sheet.
(c) Information about major customers
Disclosure is omitted as there is no external customer whose operating income accounts for 10 percent or more of total operating revenues on the Statements of Income.
Sixth Fiscal Period (From November 1, 2016 to April 30, 2017) (a) Information about products and services
Disclosure is omitted as operating revenues from external customers of products and services within a single
segment exceeds 90% of operating revenues on the Statements of Income.
(b) Information about geographical area i) Operating revenues
Disclosure is omitted since operating revenues from external customers in Japan exceeds 90% of operating revenues on the Statements of Income.
ii) Property and equipment Disclosure is omitted since the amount of property and equipment located in Japan exceeds 90% of property and equipment on the Balance Sheet.
(c) Information about major customers
(Unit: Thousands of Yen)Name of customer Operating Revenues Related segment
(Note) 784,581 Property rental business
(Note) Name of customer is not disclosed because the customer’s authorization has not been obtained. The customer is not a related or interested parties under the Investment Trust Act.
20. Per Unit Information
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017 Net assets per unit 99,544 yen 100,467 yenNet income per unit 2,898 yen 3,637 yen(Note 1) Net income per unit is calculated by dividing net income by the day-weighted average number of investment units for the
period. Fully diluted net income per investment unit is not presented, as there is no potential dilutive investment unit. (Note 2) The basis for calculating net income per unit is as follows:
Fifth Fiscal Period
From May 1, 2016 to October 31, 2016
Sixth Fiscal Period From November 1, 2016 to
April 30, 2017 Net income (Thousands of Yen) 2,229,196 2,966,666 Amount not attributable to common unitholders (Thousands of Yen) - - Net income attributable to common investment units (Thousands of Yen) 2,229,196 2,966,666 Average number of investment units for the period (Units) 769,115 815,547
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Invesco Office J-REIT, Inc.
21. Significant Subsequent Events (1) Resolution regarding acquisition of own investment units
The Investment Corporation has decided the acquisition of own investment units based on the Article 80-2 of Investment Trust Act applied upon reading the terms in the Article 80-5, Paragraph 2 of the Investment Trust Act at a meeting of the board of directors of the Investment Corporation held on June 12, 2017. The Investment Corporation cancelled all the acquired units on August 10, 2017.
(a) Reason for acquisition of own investment units
Considering various facts such as the level of investment unit price, situation of cash in hand, financial situation and market environment, the Investment Corporation expects that improving capital efficiency and returning profit to investors through acquiring own investment units will improve the investors’ value in mid- to long-term. In case the market price of the investment units is below its book-value per unit (BPU) or NAV per unit, the Investment Corporation believes that acquiring own investment units and cancelling them will improve investors’ value. DPU is expected to increase due to the fact that the number of outstanding investment units decreases.
(b) Details of acquisition of own investment units
Total number of own investment units to be acquired 10,000 units (maximum) Total acquisition price 800 million yen (maximum) Method of acquisition The Investment Corporation entrusts
the market purchase of its own investment units at Tokyo Stock Exchange to a securities company by discretionary transaction contract
Acquisition period From June 13, 2017 to July 20, 2017 (2) Result regarding acquisition of own investment units
The Investment Corporation has acquired own investment units based on the above resolution regarding acquisition of own investment units.
Details of acquisition of own investment units Total number of own investment units acquired 7,640 units Total acquisition price 799,984,693 yen Method of acquisition The Investment Corporation entrusts
the market purchase of its own investment units at Tokyo Stock Exchange to a securities company by discretionary transaction contract
Acquisition period From June 13, 2017 to July 10, 2017 (3) Cancellation of own investment units
The Investment Corporation has decided the cancellation of own investment units based on the Article 80-2 and 80-4 of Investment Trust Act at a meeting of the board of directors of the Investment Corporation held on July 27, 2017. The total investment amount of the Investment Corporation is 78,113 million yen, and the total number of outstanding investment units is 807,907 units after the cancellation of own investment units.
Total number of own investment units cancelled 7,640 units Date of cancellation August 10, 2017
22. Contract Amounts and Fair Value of Derivative Transactions
(Unit: Thousands of Yen)
Classification Type Contract Amount
Fair Value
Amount over one year
Transactions other than market transactions
Interest rate swap transactions 55,400,000 55,400,000 48,499 Floating rate receipt, Fixed rate
payment Total 55,400,000 55,400,000 48,499
(Note 1 The contract amount of interest rate swap transactions is based on the notional principals. (Note 2 The fair value is based on the estimation made by the interest rate swap counterparty using the prevailing interest rate. (Note 3 Special accounting treatment is applied to the interest-rate swaps in accordance with the “Accounting Standard for Financial Instruments” (issued by the Accounting Standards Board of Japan(ASBJ) on March 10, 2008;ASBJ Statement No.10) and therefore interest rate swaps are not stated at fair value in the balance sheets.
23. Property, Plant and Equipment Property, plant and equipment consists of the following as of April 30, 2017:
(Unit: Thousands of Yen)
Type of asset Balance at
the beginning of the period
Increase during the
period (Note 1)
Decrease during the
period (Note 2)
Balance at the end of the
period
Depreciation Net balance at the end of the period
Remarks Accumulated depreciation
Depreciation for the period
Property, plant and
equipment
Entrusted buildings 40,348,924 3,093,171 1,898,966 41,543,129 2,974,670 726,672 38,568,458 -
Entrusted building improvements
370,321 3,524 55,276 318,568 75,407 18,619 243,161 -
Entrusted machineries 20,386 1,677 2,328 19,735 2,935 923 16,800 -
Entrusted furniture and equipment
62,847 20,142 1,367 81,622 18,341 6,310 63,280 -
Entrusted land 117,507,265 14,865,052 7,443,940 124,928,377 - - 124,928,377 -
Entrusted construction in progress
20,525 1,077 - 21,603 - - 21,603 -
Subtotal 158,330,272 17,984,644 9,401,879 166,913,037 3,071,355 752,526 163,841,681 -
Intangible assets 8,920 2,277 - 11,197 5,187 1,005 6,009 -
Total 158,339,192 17,986,921 9,401,879 166,924,234 3,076,543 753,532 163,847,690 -
(Note 1 The increase during the period is primarily attributable to the acquisition of Kinshicho Prime Tower and Aqua Dojima East. (Note 2) The decrease during the period is primarily attributable to the disposition of Harumi Island Triton Square Office Tower Z.
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Invesco Office J-REIT, Inc.
24. Investment Corporation Bonds The following summarizes investment corporation bonds outstanding as of April 30, 2017:
(Unit: Thousands of Yen)
Name Issue date Balance at
the beginning of the period
Decrease during the
period
Balance at the end
of the period
Coupon rate
Redemption date
Use Security
First Series Unsecured Investment
Corporation Bonds
April 20, 2017
- - 1,800,000 0.320% April 20,
2022 (Note1)
Unsecured/ Non-
guaranteed Note2
Second Series Unsecured Investment
Corporation Bonds
April 20, 2017
- - 1,600,000 0.520% April 19,
2024 (Note1)
Unsecured/ Non-
guaranteed (Note2
Total - - - 3,400,000 - - - -
(Note 1) All investment corporation bonds were used as the funds for repayment of the short-term loans of 2,000 million yen that were due for repayment on April 28, 2017 and for acquisition of trust beneficiary interests in real estate (Aqua Dojima East) and related expenses of 1,987 million yen. (Note 2) This investment corporation bonds is equipped with pari passu clause among special investment corporation bonds. (Note 3) The following is the maturity schedule of investment corporation bonds within five years of the balance sheet date.
(Unit: Thousands of Yen)
Due after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Investment Corporation Bonds - - - 1,800,000
25. Loans The following summarizes short-term loans, current portion of long-term loans and long-term loans outstanding as of April 30, 2017:
(Unit: Thousands of Yen)
Classification Lender Balance at
the beginning of the period
Increase during the
period
Decrease during the
period
Balance at the end
of the period
Average interest rate (%)
Payment due date Use Remarks
Short-term Loans
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 1,000,000 - 1,000,000 -
0.33000 (Note1 (Note6
Unsecured/ Non-
guaranteed/ Floating
interest rate Sumitomo Mitsui Banking Corporation 1,000,000 - 1,000,000 -
Subtotal 2,000,000 - 2,000,000 - - - - -
Current Portion of Long-term
Loans
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 2,500,000 - - 2,500,000 0.57000 June 6,
2017 (Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate Sumitomo Mitsui Banking Corporation 2,500,000 - - 2,500,000
0.45862 (Note2)
June 6, 2017 (Note5
Unsecured/ Non-
guaranteed/ Floating
interest rate
Mizuho Bank, Ltd. 2,000,000 - - 2,000,000
Sumitomo Mitsui Trust Bank, Limited 2,000,000 - - 2,000,000
Resona Bank, Ltd. 2,000,000 - - 2,000,000
Development Bank of Japan Inc. 2,000,000 - - 2,000,000
Sumitomo Mitsui Banking Corporation - 3,100,000 - 3,100,000
0.28179 January 31, 2018 (Note5
Unsecured/ Non-
guaranteed/ Floating
interest rate
Mizuho Bank, Ltd. - 1,600,000 - 1,600,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd. - 800,000 - 800,000
Subtotal 13,000,000 5,500,000 - 18,500,000 - - - -
Long-term Loans
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3,000,000 - - 3,000,000 0.72150 June 6,
2018 (Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate Sumitomo Mitsui Banking Corporation 3,000,000 - - 3,000,000
0.74150 (Note2) (Note4)
June 6, 2018
(Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate
Mizuho Bank, Ltd. 1,500,000 - - 1,500,000
Sumitomo Mitsui Trust Bank, Limited 1,500,000 - - 1,500,000
Resona Bank, Ltd. 1,500,000 - - 1,500,000
Development Bank of Japan Inc. 1,500,000 - - 1,500,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 4,000,000 - - 4,000,000 0.91500 June 6,
2019 (Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate
Sumitomo Mitsui Banking Corporation 4,000,000 - - 4,000,000
0.93400 (Note2) (Note4)
June 6, 2019
(Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate 68 69
Invesco Office J-REIT, Inc.
Classification Lender Balance at
the beginning of the period
Increase during the
period
Decrease during the
period
Balance at the end
of the period
Average interest rate (%)
Payment due date Use Remarks
Long-term Loans
Mizuho Bank, Ltd. 1,000,000 - - 1,000,000
0.93400 (Note2) (Note4)
June 6, 2019 (Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate
Sumitomo Mitsui Trust Bank, Limited 1,000,000 - - 1,000,000
Resona Bank, Ltd. 1,000,000 - - 1,000,000
Development Bank of Japan Inc. 1,000,000 - - 1,000,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3,800,000 - - 3,800,000 0.80400 May 31,
2020 (Note7
Unsecured/ Non-
guaranteed/ Fixed
interest rate Sumitomo Mitsui Banking Corporation 3,800,000 - - 3,800,000
0.81400 (Note2) (Note4)
May 31, 2020 (Note7
Unsecured/ Non-
guaranteed/ Fixed
interest rate
Sumitomo Mitsui Trust Bank, Limited 1,000,000 - - 1,000,000
Resona Bank, Ltd. 1,000,000 - - 1,000,000
Mitsubishi UFJ Trust and Banking Corporation
1,000,000 - - 1,000,000
Sumitomo Mitsui Banking Corporation 600,000 - - 600,000
0.45772 (Note3)
November 29, 2019 (Note5
Unsecured/ Non-
guaranteed/ Floating
interest rate Mizuho Bank, Ltd. 300,000 - - 300,000
Sumitomo Mitsui Banking Corporation 2,300,000 - - 2,300,000
0.35700 (Note3) (Note4)
November 29, 2019 (Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate
Sumitomo Mitsui Trust Bank, Limited 1,400,000 - - 1,400,000
Resona Bank, Ltd. 1,400,000 - - 1,400,000
Mizuho Bank, Ltd. 2,400,000 - - 2,400,000
Mitsubishi UFJ Trust and Banking Corporation
700,000 - - 700,000
Shinsei Bank, Ltd. 1,250,000 - - 1,250,000
Aozora Bank, Ltd. 1,000,000 - - 1,000,000
The Bank of Fukuoka 1,000,000 - - 1,000,000
ORIX Bank Corporation 500,000 - - 500,000
The Nishi-nippon City Bank, Ltd. 500,000 - - 500,000
Sumitomo Mitsui Banking Corporation 2,550,000 - - 2,550,000
0.53700 (Note3) (Note4)
May 31, 2021 (Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate
Sumitomo Mitsui Trust Bank, Limited 1,400,000 - - 1,400,000
Resona Bank, Ltd. 1,400,000 - - 1,400,000
Mizuho Bank, Ltd. 2,500,000 - - 2,500,000
Mitsubishi UFJ Trust and Banking Corporation
700,000 - - 700,000
Shinsei Bank, Ltd. 1,000,000 - - 1,000,000
Aozora Bank, Ltd. 1,000,000 - - 1,000,000
The Bank of Fukuoka 1,000,000 - - 1,000,000
Classification Lender Balance at
the beginning of the period
Increase during the
period
Decrease during the
period
Balance at the end
of the period
Average interest rate (%)
Payment due date Use Remarks
Long-term Loans
ORIX Bank Corporation 500,000 - - 500,000 0.53700 (Note3) (Note4)
May 31, 2021 (Note5
Unsecured/ Non-
guaranteed/ Fixed
interest rate
The Nishi-nippon City Bank, Ltd. 500,000 - - 500,000
Sumitomo Mitsui Banking Corporation 2,000,000 - - 2,000,000
0.44500 (Note3) (Note4)
November 30, 2020 (Note8)
Unsecured/ Non-
guaranteed/ Fixed
interest rate
Sumitomo Mitsui Trust Bank, Limited 1,000,000 - - 1,000,000
Resona Bank, Ltd. 1,000,000 - - 1,000,000
Mitsubishi UFJ Trust and Banking Corporation
1,000,000 - - 1,000,000
Mizuho Bank, Ltd. 1,600,000 - - 1,600,000 Subtotal 67,100,000 - - 67,100,000 - - - - Total 82,100,000 5,500,000 2,000,000 85,600,000 - - - -
(Note 1) Repayment was made on April 28, 2017. (Note 2) Borrowings from Syndicate Loan with The Bank of Tokyo-Mitsubishi UFJ, Ltd. and Sumitomo Mitsui Banking Corporation as arranger. (Note 3) Borrowings from Syndicate Loan with Sumitomo Mitsui Banking Corporation as arranger and Mizuho Bank, Ltd. as co-arranger. (Note 4) Borrowings for which interest rate swap transactions were implemented in order to hedge the interest rate volatility risk. The interest rates are effectively fixed through interest rate swap agreement.
(Note 5) All debts were used to fund acquisition of trust beneficiary interests in real estate and related expenses. (Note 6) All debts were used to refinance the short-term loans of 2,000 million yen that were due for repayment on April 28, 2016. (Note 7) All debts were used to fund acquisition of trust beneficiary interests in real estate and related expenses and refinance the short-term loans of 3,200 million yen that were due for repayment on June 5, 2015, and refinance the short-term loans of 5,000 million yen on May 11, 2015. (Note 8) All debts were used to refinance the short-term loans of 6,600 million yen that were due for repayment on June 30, 2016. (Note 9) The following is the maturity schedule of long-term loans within five years of the balance sheet date.
(Unit: Thousands of Yen)
Due after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years
Long-term loans 12,000,000 25,350,000 17,200,000 12,550,000
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Invesco Office J-REIT, Inc.
The Invesco Group sets its mission as helping investors worldwide achieve their financial objectives, and is a world-leading independent asset manager that provides global management capabilities. The Invesco Group engages in business on a global scale and has offices in more than 20 countries. As of the end of March 2017, the balance of assets under management of Invesco Group was approximately US$834.8 billion (approximately ¥74.9 trillion).
Invesco Ltd. is publicly traded on the NYSE. The credit rating agencies listed below have assigned the ratings indicated to Invesco Ltd.
Rating Company RatingMoody’s Investors Service A2 Stable
Standard & Poor’s A / Negative
Fitch Ratings A- Stable
Invesco Real Estate, one business division of the Invesco Group, places priority on core asset management, but also has experience with value-added asset management and opportunistic asset management. Having experience with leasing and renewals as well as property sales and acquisitions and leverage control, Invesco Real Estate possesses diverse real estate management know-how.
Invesco Real Estate manages real estate and securities through 21 offices in 16 countries worldwide with assets under management of US$66.1billion (approximately ¥7.4 trillion).(Note) The yen amounts for assets under management presented above have been converted from U.S. dollars using the exchange rate as of the end of March 2017 (US$1 = ¥114.405).
Invesco Real Estate’s Investment Properties
1 Office: Washington DC, USA
2 Retail: Las Vegas, NV, USA
3 Hotel: Paris, France
4 Retail: Seoul, South Korea
5 Residential: New York, NY, USA
6 Office: London, UK
7 Logistics: Melbourne, Australia
1 2
3
4
5 6 7
Overview of Invesco Group
Breakdown of Invesco Real Estate’s Asset Under Management (As of March 31, 2017)
North America
US$28.2bn 42% Europe
US$8.4bn 13% Asia
US$5.1bn 8% Publicly traded real property securities
US$24.4bn 37%
Real property direct investment
US$41.7bn 63% Publicly traded real property securities
US$24.4bn 37%
(Note) As percentage of asset under management is rounded to the first decimal place, total of the ratio may not be 100%.
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Invesco Office J-REIT, Inc.