Japan Logistics Fund, Inc. - 8967.jp · Japan Logistics Fund, Inc. ... Japan Transcity ... (Note 3) This property is a development project that is still under construction

Mitsui & Co., Logistics Partners Ltd.http://8967.jp/eng/

Japan Logistics Fund, Inc.Presentation MaterialFor the Fiscal Period ended July 2017Autumn 2017

Table of Contents

1 Executive Summary 3

2 Chapter 1: Fiscal Period ended July 2017 4

3 Chapter 2: Toward Achieving stable + Growth 2.0 10

4 Chapter 3: Earnings Overview and Forecasts 19

5 Chapter 4: Market Overview 23

6 To Our Investors 29

Section

2

stable + Growth 2.0

DPU

Fiscal Period ended July 2017

Executive Summary

Executive Summary 3

(Note) OBR = Own Book Redevelopment, which refers to the on-balance-sheet redevelopment of properties owned by the REIT.

Yokohama Machida Logistics Center:

Takatsuki Logistics Center:

Yachiyo Logistics Center III:

Kasugai Logistics Center:

Pursued stable cash flows through the acquisition of properties with

high competitiveness in terms of location and specifications.

Diversified the portfolio in terms of location, specifications and size.

Pursued high profitability through independent sourcing.

Achieved higher profitability than the market yield by leveraging the

past OBR experience and expertise.

External growth:

Financial strategies:

Resilience against

environmental changes:

Stable DPU growth through continued property acquisition

“Sourcing from the real estate market” and “independent sourcing”

Financial strategies for stable and sustainable DPU growth

Absorb market environment changes by leveraging unrealized gains

built on quality and quantity.

July 2017 Results:

January 2018 Forecast:

July 2018 Forecast:

¥4,180 DPU

¥4,350 DPU

¥4,270 DPU

Chapter 1Fiscal Period ended July 2017

(yen)

Floor: 3,200 yen

Floor: 3,600 yen

4,180 yen(Actual)

4,350 yen(Forecast)

stable stable + Growth 2.0stable + Growth

Floor: 3,800 yen

Target DPU4,280 yen

Progress of stable + Growth 2.0

Continue the mid-term business plan with quantitative DPU targets and a timeline for reaching those targets amid an uncertain outlook for the financial and real estate markets.

5

(Note) Figures through Fiscal Period 17 (ended Jan. 2014) have been adjusted for investment unit splits.

Toward final stage to achieve targets

4,270 yen(Forecast)

Fiscal Period ended July 2017: Chapter 1

(FP 23)(FP 14) (FP 15) (FP 16) (FP 17) (FP 21)(FP 19) (FP 27)(FP 18) (FP 20) (FP 22) (FP 24) (FP 25) (FP 26)

3,000

3,500

4,000

4,500

2012/07 2013/01 2013/07 2014/01 2014/07 2015/01 2015/07 2016/01 2016/07 2017/01 2017/07 2018/01 2018/07 2019/01

DPU

Results Ended Jul. 2017Newly Acquired Assets

6

Pursued stable cash flows through the acquisition of properties with high competitiveness in terms of location and

specifications


M-32 Yokohama Machida Logistics Center Location advantage

Yokohama Machida

Logistics Center

Yokohama Machida IC

Route 16

Tomei Expressway

To Atsugi

To Machida

To Yokohama

To TokyoDate of acquisition September 1, 2017

Location Machida, Tokyo

Acquisition price 25,452 million yen

Appraisal value 25,900 million yen

Anticipated NOI yield 3.8%(Note)

Main tenantsUTOC Corporation

Japan Transcity Corporation and others

Number of tenants 6

Gross leasable area 64,816.35 m2

Location with extremely high scarcity adjacent to Yokohama Machida Interchange, which functions as a strategic place in the Tokyo metropolitan area

Large multitenant logistics property equipped with a double ramp way enabling efficient operation

Excellent property with expected stable cash flows as the core property in the portfolio, given its high competitiveness in terms of location and facilities

Acquisition highlights

(Note) Anticipated NOI yield = Assumed NOI / Acquisition priceAnticipated NOI is an estimate of annual earnings stripping out extraordinary factors in the year of acquisition made by the asset manager. It does not represent forecasts for the FP ending January 2018 and the FP ending July 2018.

Results Ended Jul. 2017Newly Acquired Assets and Assets to Acquire

7

Takatsuki: Diversified the portfolio in terms of location, specifications and size.

Yachiyo III: Pursued high profitability through independent sourcing.


T-11 Takatsuki Logistics Center M-33 Yachiyo Logistics Center III (Asset to acquire) (Note 2)

Excellent inland location enabling wide-area distribution to the whole Kansai region including Osaka, a major consumption area

Low-floor logistics property for which firm demand from tenants can be expected in line with cargo characteristics

Acquisition of a property that will contribute to the stability of the earnings base while promoting geographical diversification of the portfolio

Date of acquisition October 2, 2017

Location Takatsuki, Osaka



Anticipated NOI yield 4.6%(Note 1)

Main tenants LONCO JAPAN

Number of tenants 1



Expected date of acquisition Not yet determined(Note 3)

Location Yachiyo, Chiba

Expected acquisition price 3,286 million yen(Note 4)

Appraisal value 4,140 million yen(Note 5)

Anticipated NOI yield 5.3%(Note 1)

Gross leasable area 18,019.58 m2(Note6)

Excellent location in the Tokyo metropolitan area adjacent to Route 16, a major loop road. Box-type logistics property with high versatility and provides consideration for the work

environment of tenants Joint investment project with a construction company


(Note 1) Anticipated NOI yield = Anticipated NOI / (Expected) acquisition price. Anticipated NOI is an estimate of annual earnings stripping out extraordinary factors in the year of acquisition made by the asset manager. It does not represent forecasts for the FP ending January 2018 and the FP ending July 2018.

(Note 2) The sale and purchase agreement for the acquisition of this property qualifies as a forward commitment as stipulated by the Comprehensive Guidelines for the Supervision of Financial Instruments Operations and others set by the Financial Services Agency. (Note 3) This property is a development project that is still under construction. The date of its delivery will, in principle, be the day after one year from the date of the registration of the preservation of ownership of the building. If otherwise agreed upon between JLF and the seller, the delivery date will

be the date agreed upon. (Note 4) The acquisition price of this building is the price defined in the sale and purchase agreement. JLF will be allowed to reduce the purchase price under certain circumstances, and therefore, the acquisition price could change in the future.(Note 5) The appraisal value of the property is calculated by using “Appraisal of Uncompleted Buildings.” (Note 6) The gross leasable area is based on the current plan and could change in the future.

Results Ended Jul. 2017OBR

Achieved higher profitability than the market yield by leveraging the past OBR experience and expertise.

8

T-10 Kasugai Logistics Center (OBR #4)


Date of acquisition (building) August 1, 2017

Location Kasugai, Aichi



Main tenants Settsu Warehouse Co., Ltd.

Number of tenants 1


Effects of OBR

(Note 1) Pre-OBR NOI represents annualized result for the FP ended January 2016. Other figures are as of the end of January 2016. Post-OBR NOI is the estimate of annual earning after stripping out extraordinary factors in the fiscal year when construction was completed; these figures do not represent forecasts for the FP ending January 2018 and the FP ending July 2018. Other figures are as of the date of delivery.

(Note 2) This is the direct capitalization rate for the appraisal value of Komaki Logistics Center as of the end of the FP ended July 2017.


Excellent location enabling wide-area distribution to the entire Chubu region including Nagoya, a major consumption area.

Multitenant property with high versatility that is able to be used as a BCP (business continuity plan) base.

Fourth OBR based on cooperative investment with a construction company.

Pre-OBR(land only)*1

Post-OBR(land + building)*1

Gross leasable area 15,767.90 m2 +4,776.36 m2 20,544.26 m2

Appraisal value 1,050 million yen +3,510 million yen 4,560 million yen

Acquisition price 830 million yen +2,670 million yen 3,500 million yen

NOI 47 million yen +180 million yen 225 million yen

NOI yield(acquisition price) 5.8% 6.4%

Market yield: 4.7%*2

Tenant Settsu Warehouse Co., Ltd.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

18/01(FP25)

20/07(FP30)

23/01(FP35)

25/07(FP40)

28/01(FP45)

30/07(FP50)

33/01~(FP55~)

0

2

4

6

8

10

18/01(FP25)

20/07(FP30)

23/01(FP35)

25/07(FP40)

28/01(FP45)

30/07(FP50)

33/01~(FP55~)

Loans

Bonds

Lease expiration ladder (based on annual rental revenue) Debt maturity (redemption) ladder

Results Ended Jul. 2017Stability in Earnings and Balance Sheet Efforts to support stable DPU growth

(%) (billion yen)

Tenant distribution (based on annual rent revenue)

Interest-bearing liabilities

¥117.7 billion

9

Stability of financial standingStability of earnings base

Better balance

Average remaining life of leases6.0 years

Percentage of debt on fixed rates (Note 3)

97.5%Average remaining

maturity on debt5.9 years

Recent debt financing activities

Extending average remaining life while lowering average funding costs

Debt procured (Note 4)

¥26.0 billion

Average remaining maturity on debt7.8 years

Average debt cost

0.39%

(Note 1) Figures as of October 2, 2017(Note 2) Tri-net Logistics changed its company name to “Mitsui & Co. Global Logistics, Ltd.” in April 2017. (Note 3) Percentage of interest-bearing liabilities for which the interest rate is fixed. (Note 4) Represents the sum of funds for the acquisition of Yokohama Machida Logistics Center and for the acquisition of Takatsuki Logistics Center, both of which were decided on August 24, 2017, in addition to funds for refinancing borrowings maturing in August 2017.

Average NOI yield

5.9%Occupancy rate

98.0%

Average debt cost

0.73%


As of October 2, 2017Sagawa Express

SettsuWarehouse

NAKANOSHOKAI

NIPPONEXPRESS

Ricoh LogisticsSystem

Hitachi Transport SystemTOMY COMPANY

Sagawa Global LogisticsVantec

Mitsui & Co.Global Logistics

Ratio of top 10 tenants 55.9%

As of July 31, 2013

Ratio of top 10 tenants 74.9%

Other44.1%

Tri-net Logistics(Note 2)

Sagawa Express

SettsuWarehouse

NAKANOSHOKAI

TOMY COMPANYSagawa Global LogisticsYamato Transport

NIPPON EXPRESS

Amazon Japan Logistics

Ricoh LogisticsSystem

Other25.1%

Chapter 2Toward Achieving stable + Growth 2.0

Secure borrowing capacity to fund future growth

Property acquisitions at appropriate prices

Contrarian investing

Continued execution of OBR projects as a means to

independent growth

Increased resistance to environment changes through

growth in unrealized gain

2

1

3

4

Property acquisitions at appropriate pricesContrarian investing

1

Large unrealized

gain

3

ConservativeLTV level

4

OBR

2

Growth strategy for stable + Growth 2.0 A unique strategy that pursues stable and sustainable DPU growth

11Toward Achieving stable + Growth 2.0 : Chapter 2

DPU Growth through Continued Property Acquisition

Achieved stable and sustainable DPU growth through continued property acquisition in our investment

performance over the past 12 years.

12Toward Achieving stable + Growth 2.0: Chapter 2

JLF’s total acquisition price and DPU(Note 2) (Note 3) (Note 4)JLF’s total acquisition price and market anticipated yield(Note 1)

(%) (billion yen) (yen) (billion yen)

Continue to pursue stable and sustainable DPU growth through continued property acquisition.

(Note 1) Market anticipated yield on multitenant logistics properties located in the Tokyo Bay Area(Source) Prepared by the asset manager based on information from CBRE’s Quarterly Survey/

Japanese Real Estate Investment.

(Note 2) Implemented a 5-for-1 investment unit split effective February 1, 2014. Historical DPU through the FP ended January 2014 have been adjusted for the investment unit split.

(Note 3) DPU in the FP ended January 2006 is the value for one fiscal period (6 months). (Note 4) DPU in the FP ending January 2018 and the FP ending July 2018 are estimates as of

September 11, 2017.

0

50

100

150

200

250

300

3.5

4.0

4.5

5.0

5.5

6.0

05/01 06/01 07/01 08/01 09/01 10/01 11/01 12/01 13/01 14/01 15/01 16/01 17/01

Total acquisition price of JLF (rhs)Market anticipated yield (lhs)

0

50

100

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300

2,200

2,400

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2,800

3,000

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06/01 07/01 08/01 09/01 10/01 11/01 12/01 13/01 14/01 15/01 16/01 17/01 18/01

Total acquisition price of JLF (rhs)

DPU (lhs)

Continued Property Acquisition External growth through sourcing from the real estate market and independent sourcing

Toward Achieving stable + Growth 2.0: Chapter 2 13

Number of properties acquired: 6(Note)

(including 2 OBRs) Total acquisition price: ¥55.35 billion(Note)

Risk premium specific to property = Stability of cash

flows

Base rate fluctuates with the financial environment and supply-demand trends of logistics properties.

Evaluation standards for cash flow stability remain unchanged.

Appropriate price = Base rate +

Risk premium specific to property

Sourcing from the real estate market

Aim to secure higher yield than in acquisition through sourcing from the real estate market, levering JFL’s own knowledge.

Generation of acquisition opportunities

Promotion of off-market transactions

Independent sourcing

M-32 Yokohama Machida Logistics Center

Acquisition price¥25.45 billion

T-11 Takatsuki Logistics CenterM-19 Souka Logistics Center (additional acquisition)Acquisition

price¥1.55 billion


Acquired in FP2018/1



M-31 ShinKiba Logistics Center II


Sponsor pipeline


Asset to acquireM-33 Yachiyo Logistics Center III

Planned acquisition price

¥3.28 billion

Cooperative investment with a construction company

OBR



T-3 Kiyosu Logistics Center (building portion) OBR #3

T-10 Kasugai Logistics Center (building portion) OBR #4



(Note) The date of acquisition of Yachiyo Logistics Center III is not yet determined, and the acquisition price could change. Therefore, the property is not included in the number of properties acquired as well as the total acquisition price.

“More than 150%” and “Land”make up11.1%

Criteria for and Benefits of OBR Projects Moving forward, we aim to continuously execute OBR projects.


(Note 1) Calculated based on estimates of annual earnings, excluding extraordinary factors incurred during the fiscal year when construction was completed, and it is not forecasts for the FP ending January 2018 and the FP ending July 2018.

(Note 2) The building portion of Kasugai Logistics Center was completed in April 2017, and the acquisition was completed in August 2017. (Note 3) Ratios are figures as a result of classifying the portfolio held by JLF at the present moment based on the criteria for OBR projects. The number of properties is the number of properties which JLF thinks are OBR candidates at the

present moment based on the criteria for OBR projects. We have not decided on the redevelopment of all properties. (Note 4) Represents an estimate of the maximum allowable building size per floor-to-area zoning allowances for current OBR candidates. Might differ from the actual area resulting from any real OBR project.

Actual results of OBR Criteria for executing OBR projects and future potential(Note 3)

OBR #1Daito

Logistics CenterCompleted July 2010

9.8%(Results

FP Ended July 2011)

Track record

NOI yield after OBR

OBR #2Yachiyo

Logistics CenterCompleted Dec. 2014

6.7%(Results

FP Ended Jan. 2016)

OBR #3Kiyosu

Logistics CenterCompleted Feb. 2017

8.5%(Estimate)(Note 1)

Track record

NOI yield after OBR

OBR #4Kasugai

Logistics CenterCompleted

Aug. 2017(Note 2)

6.4%(Estimate)(Note 1)

Good location Better profitability than if bought from the market

Small writedown on fixed assets due to building age Significant untapped FAR

By building age (based on number of properties)

10 years or less37.8%

More than 10 yearsAnd 20 years or less

35.6%

More than 20 years

24.4%

Land 2.2%

By untapped FAR (based on number of properties)

“More than 20 years”and “Land” make up26.7%

50% or less53.3%More than 50%

and 150% or less35.6%

More than 150%8.9%

Land 2.2%

Currently about 2 – 3 candidate properties(Note 3)

Potential to add about 150,000 m2 to gross floor area (equivalent to about 11% of the portfolio)(Note 4)

0.0

10.0

20.0

30.0

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50.0

3,000

3,500

4,000

4,500

13/01(FP15)

14/01(FP17)

15/01(FP19)

16/01(FP21)

17/01(FP23)

17/07(FP24)

17/10(Exp.)

19/01(FP27)

DPU (lhs) LTV (appraisal value base, rhs)

Financial Strategies

Pursue the achievement of sustainable DPU growth and balance sheet stability

Financial strategies for sustainable and stable DPU growth

(yen) (%)

15

(Note) The figure is calculated based on the LTV at the end of July 2017 and the following factors taken into account; a) the acquisition of Yokohama Machida Logistics Center and Takatsuki Logistics Center, b) the completion of Kasugai Logistics Center OBR project, and c) the impact of equity public offering.

JCRAA+

Moody’sA1

R&IAA

Financial strategy on capital sideFinancial strategy on liability side

Toward Achieving stable + Growth 2.0: Chapter 2

Target LTV under the main scenario of “stable +

Growth 2.0”LTV: around 35.0%

34.9%(Exp.)(Note)

4,180 yen4,280 yen

Number of units offered

Public offering: 42,750 unitsO.A.: 2,250 units

Offer price 206,017 yen

Total offer price 9,270 million yen (including O.A.)

Issue price 199,044 yen

Total issue price 8,956 million yen

Date of issueresolution September 11, 2017

Pricing date September 20, 2017

Payment date September 27, 2017

(Target)

LTV

Credit rating

Overview of capital increase through public offering

(billion yen)

Resilience vs. EnvironmentQuality of Unrealized Gains

High-quality unrealized gains that hold value even during property price stagnation


A strong portfolio with a high-quality unrealized gain that can absorb even substantial changes in the real estate market environment

(%)

Property price stagnation period

(Note) The figure is calculated based on the LTV at the end of July 2017 and the following factors taken into account; a) the acquisition of Yokohama Machida Logistics Center and Takatsuki Logistics Center and b) the completion of Kasugai Logistics Center OBR project.

0.0

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45.0

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20

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100

06/01(FP1)

07/01(FP3)

08/01(FP5)

09/01(FP7)

10/01(FP9)

11/01(FP11)

12/01(FP13)

13/01(FP15)

14/01(FP17)

15/01(FP19)

16/01(FP21)

17/01(FP23)

17/10(Exp.)

Unrealized gain (lhs) Unrealized gain as % of portfolio (rhs)

Assumptions as of Oct. 2017(Note)

Unrealized gain: 87.2 billion yenAs % of portfolio: 34.9%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

J-REIT avg. JLF

-80

-60

-40

-20

0

20

40

60

80

-1,500

-1,000

-500

0

500

1,000

1,500

0% 5% 10% 15% 20% 25% 30%

J-REIT avg. (lhs) JLF (rhs)

Resilience vs. EnvironmentSize of Unrealized Gains

How far would appraisal values need to drop to eliminate portfolio unrealized gain?

JLF 25.8%vs.

J-REITs average* 12.5%

How far would appraisal values need to drop to push LTV up to 50%?

JLF 30.2%vs.

J-REITs average* 16.8%

Unrealized gain or loss (billion yen)

(Appraisal depreciation)

25.8%12.5% 16.8%

(LTV)

Unrealized gain of 87.2 billion yen to withstand changes to the market environment

17

(Note) Figures were calculated by the asset manager based on information disclosed by REITs, excluding JLF, using figures for the latest available period-end.

30.2%


A strong portfolio with a sufficiently sized unrealized gain that can absorb even substantial changes in the real estate market environment

Unrealized gain or loss (billion yen)

(Appraisal depreciation)

Mitsui & Co. Asset Management Business Main sponsor, Mitsui & Co., is bolstering its domestic real-estate asset management business

18

(Note 1) Real estate management company of the Mitsui & Co. group that is managing the diversified J-REIT Mirai. (Note 2) Real estate management company of the Mitsui & Co. group, with a track record of forming many private equity funds focusing primarily on logistics properties.

Investing equity in multiple asset managers overseasCIM Group, LLCCambridge Industrial Trust ManagementTICON Management and others

Domestic Asset Management

Business

Overseas Asset Management

Business


Internal growth External growth Sharing the know-how and network of

professionals, such as leasing team and architects in the properties management department gathered in MAH.

Making maximum use of the customer network of Mitsui & Co. for leasing.

Increase in the number of projects brought into the MAH Group and expectation for joint investment projects with private funds within the Group

Expansion of property sourcing routes using the MAH Group’s network

Mitsui & Co., Logistics Partners

Mitsui & Co., Asset Management

Holdings(MAH)

Mitsui Bussan & Idera Partners Co., Ltd.(Note 1)

Mitsui & Co., Realty Management Ltd.(Note 2)

Internal growth

External growth

Investing equity in multiple asset managers overseas CIM Group, LLC Cambridge Industrial Trust

Management TICON Management and others

Earnings Overview and ForecastsChapter 3

New acquisitions (Souka, ShinKiba II) +431 Completion of Kiyosu OBR project +97 Existing properties (tenant turnover and others) -258 Depreciation/Write-offs of fixed assets -148 G&A expenses -34 Non-operating P/L (higher debt costs and others) -1

Existing properties (higher repair expenses and others) -23 Depreciation/Write-offs of fixed assets +5 G&A expenses +5 Non-operating P/L (lower debt costs and others) +29

Fiscal Period Results

Vs. previous period (impact on net income) Vs. forecast at beginning of period (impact on net income)

Ended Jan. 2017 Ended Jul. 2017 Period-on-period FP 24 Forecast Vs. forecast atFP 23 actual FP 24 actual change as of Mar. 10, 2017 beginning of period

(A) (B) (B-A) (C) (B-C)

Operating revenue (Million yen) 7,748 7,995 +246 7,960 +34

NOI (Million yen) 6,420 6,691 +270 6,714 -23Depreciation/Loss on write-offs (Million yen) 1,709 1,858 +148 1,863 -5

Net income (Million yen) 3,591 3,678 +87 3,661 +17

DPU* (Yen) 4,081 4,180 +99 4,160 +20

FFO per unit (Yen) 6,023 6,291 +268 6,270 +21

Investment units outstanding (Units) 880,000 880,000 - 880,000 -

Number of properties (Properties) 42 43 +1 43 -

Appraisal values (Million yen) 272,800 306,590 +33,790Unrealized gain as % of portfolio (%) 39.4 39.2 -0.2

Interest-bearing liabilities (Million yen) 71,700 94,700 - 94,700 -

LTV (%) 26.3 30.9 +4.6

BPS (Yen) 146,175 146,257 +82

NAV per unit (Yen) 233,867 244,322 +10,455

Earnings Overview and Forecast: Chapter 3 20

(Million yen) (Million yen)

Full-period contribution of properties acquired in the previous period (Yokohama Machida, Takatsuki)

Existing properties (tenant turnover and others) Taxes and public dues of newly acquired properties (6 properties) Depreciation/Write-offs of fixed assets G&A expenses Non-operating P/L (lower debt costs, reversal of investment unit issuance

cost and others)

Forecasts

New acquisitions (Yokohama Machida, Kasugai, Takatsuki) Full-period contribution of properties acquired in the previous period

(Souka, ShinKiba II, Kiyosu) Existing properties (tenant turnover and others) Depreciation/Write-offs of fixed assets G&A expenses Non-operating P/L (higher debt costs, investment unit issuance cost

and others)

Ended Jul. 2017 Ending Jan. 2018 Period-on-period Ending Jul. 2018 Period-on-periodFP 24 actual FP 25 forecast (Note) change FP 26 forecast (Note) change

(A) (B) (B-A) (C) (C-B)

Operating revenue (Million yen) 7,995 8,801 +806 8,758 -42

NOI (Million yen) 6,691 7,456 +765 7,318 -138

Depreciation/Loss on write-offs (Million yen) 1,858 2,060 +202 2,022 -37

Net income (Million yen) 3,678 4,023 +345 3,950 -73

DPU* (Yen) 4,180 4,350 +170 4,270 -80

FFO per unit (Yen) 6,291 6,570 +279 6,450 -120

Investment units outstanding (Units) 880,000 925,000 +45,000 925,000 -

Number of properties (Properties) 43 45 +2 45 -

Appraisal values (Million yen) 306,590

Interest-bearing liabilities (Million yen) 94,700 117,700 +23,000 117,700 -

LTV (%) 30.9

21

(Note) These forecasts have been calculated based on certain assumptions made as of September 11, 2017, and are subject to change as a result of factors, including fluctuations in rental revenue resulting from tenant turnover, the purchase or sale of real estate, and the issuance of additional investment units. Furthermore, these forecasts do not guarantee the amount of cash distributions.

FP 25 forecast (impact on net income. Vs. previous period results) FP 26 forecast (impact on net income. Vs. previous period results)

Earnings Overview and Forecast: Chapter 3

+598

+137+29

-202-94

-123

+43-39

-141+37-20

+47

(Million yen) (Million yen)

(Note) Portfolio Map A portfolio of 45 properties with am AUM of 267.9 billion yen

22

Market OverviewChapter 4

0.0

1.0

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3.0

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6.0

7.0

8.0

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200

400

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1,000

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1,400

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019New supply area (lhs) New demand area (lhs) Vacancy rate (rhs)

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500

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3,000


Supply & Demand Balance of Logistics Properties

(thousand ㎡) Forecast

24

(Source)CBRE

Market Overview: Chapter 4

4 Major Metropolitan Area (Tokyo, Osaka, Nagoya, Fukuoka) Kinki Area (Osaka)

Tokyo Metropolitan Area Chubu Area (Nagoya)

ForecastForecast

Forecast

(%)

(%)

(%)

(%)

(thousand ㎡)

-5.0

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(thousand ㎡)

(thousand ㎡)

Size of Tokyo Logistics Centers and Tenant Demand

25

(Note 1) Compilation of logistics properties for lease with a GFA of at least 5,000 m2 in the Tokyo Metropolitan Area. LMT refers to Large Multi-Tenant properties, or multitenant logistics properties with a GFA of at least 10,000 tsubo. The same applies below.

(Source) Prepared by the asset manager based on information from CBRE.

(Note 2) Percentage shown reflects JLF’s stake of ownership in cases where JLF owns a partial sake in the property.


Reference: JLF portfolio as of the end of October 2017Vacancy rates of LMT and non-LMT in the Tokyo Metropolitan Area (Note 1)

By number of properties

Building a stable portfolio by holding an appropriate ratio of LMT and non-LMT.

0.0

5.0

10.0

15.0

20.0

25.0

07/03 08/03 09/03 10/03 11/03 12/03 13/03 14/03 15/03 16/03 17/03

LMT

Non-LMT

(%)

By gross leasable area (GLA) (Note 2)

LMT31.4%

Non-LMT64.3%

Land4.3%

Non-LMT77.8%

Land2.2%

LMT20.0%

Sep. 2018 155,000m²

Aug. 201961,000m²

Nov. 201996,000m²

Sep. 201788,000m²

Jun. 201856,000m²

Aug. 201831,000m²

Sep. 201843,000m²

Oct. 201877,000m²

Sep. 201870,000m²

Planned completionGFA

Legend

Feb. 201871,000m²

10km

Development Plans for Tokyo Metropolitan Area(Properties to be completed in or after September 2017)

May. 201856,000m²

Feb. 201838,000m²

Feb. 201835,000m²

Oct. 2021161,000m²

2019204,000m²

Oct. 2018140,000m²

Feb. 201871,000m²

26

(Source) Prepared by the asset manager based on information CBRE and ICHIGO Real Estate Service.(Note) Properties at least 30,000m2 scheduled for completion in or after September 2017.

Feb. 201849,000m²

Oct. 2018131,000m²

Mar. 201953,000m²

2022304,000m²

Aug. 201833,000m²

Jan. 2018143,000m²

Apr. 2019 54,000m²

Feb. 2018130,000m²

Mar. 201839,000m²

Feb. 2018144,000m²

Jun. 202032,000m²

Jun. 2019 84,000m²

Jun. 201849,000m²


Spring 201931,000m²

Feb. 201864,000m²

Mar. 2018112,000m²

Spring 2019

53,000m²

Jul. 201897,000m²

After 2022Total

655,000m²

Nov. 201858,000m²

Dec. 201845,000m²

May. 2019300,000m²

Aug. 201994,000m² 2024

169,000m²

Nov. 201783,000m²

Dec. 201764,000m²

May. 201896,000m²

Jul. 2018133,000m²

Jul. 201843,000m²

Sep. 2018100,000m²

Dec. 2018229,000m²

Feb. 2019140,000m²

Mar. 201991,000m²

Aug. 201973,000m²

Oct. 2019225,000m²

Dec. 2019123,000m²

Oct. 2020323,000m²

Kinki Area (Osaka) Chubu area (Nagoya)

27

Jan. 201981,000m²

Mar. 201960,000m²

2km

Sep. 2017242,000m²

202032,000m²

Sep. 2018119,000m²

Oct. 2017280,000m²

Oct. 2018161,000m²

Feb. 2018158,000m²

Dec. 2019390,000m²

Apr. 201864,000m²

Oct. 201864,000m²

Sep. 201839,000m²

Jul. 201835,000m²

5km

Nov. 201939,000m²

Oct. 201790,000m²

Jan. 2018122,000m²

Feb. 201837,000m²

Apr. 202048,000m²

Spring 202046,000m²

Feb. 201899,000m²

2021125,000m²

(Source) Prepared by the asset manager based on information CBRE and ICHIGO Real Estate Service.(Note) Properties at least 30,000m2 scheduled for completion in or after September 2017.

Planned completionGFALegend


Development Plans for Kinki Area and Chubu Area(Properties to be completed in or after September 2017)

To Our Investors

Looking back on 2017, in the future we will probably think of it as the year of political confusion. There are various actions in Japan and Europe, including elections and national referendums. In the U.S., the severity of political confusion is increasing due to the feeling of deadlock, and rising geopolitical risk, the effects of hurricane damage as well as the impact on the economy are also concerns. Meanwhile, the monetary policy of major central banks has entered a stage where steering it is difficult, but the Bank of Japan has little intention of changing its stance on the existing monetary policy due to its aim to achieve the price target.

We held a series of discussions about what to do under such circumstances and decided to maintain our goal of achieving stability and growth in distributions. Demand for investment in logistics properties has been increasing year after year, and new players haveconsecutively emerged in the logistics real estate market to seize the investment opportunity. Even in the uncertain environment created by the BoJ’s monetary easing of the introduction of negative interest rates, our strategy of “sourcing from the real estate market” to acquire excellent properties at an appropriate price, “independent sourcing” to create our own acquisition opportunities, and “OBR” to increase the value of portfolio assets and profitability in a balanced manner remains unchanged. The most important thing when acquiring properties is to think with our whole heart and to decide if the acquisition will contribute to stability and growth in distributions from the long-term perspective as part of the portfolio, which is our original point.

“Thinking with our whole heart” means to concentrate completely on one thing without considering anything else. This year marks the 13th anniversary of JLF as Japan’s first listed REIT specialized in logistics properties. At this time, we have achieved higher “unrealized gains” through the enhancement of the value of the portfolio assets by pursuing our goal of stability and growth in distributions through continued property acquisition and the implementation of OBR. We will solidly aim for stability and growth in distributions while maintaining our sprit at the time of our founding, as we did when we overcame various phases of uncertainty.

We will continue to manage the portfolio in a way that leverages the strengths of JLF. We appreciate your continued support and kindness.

Keita TanahashiPresident

Mitsui & Co., Logistics Partners Ltd.

Message from the President Thinking with our whole heart

29In Conclusion

Memo

30

Memo

31

• Monetary amounts are rounded down to millions or thousands of yen.• Percentage figures are rounded off to the first decimal place.• This material contains forward-looking business results, plans, and management targets and strategies. Such forward-looking statements are based on

current assumptions and premises, including those regarding anticipated future developments and business environment trends, and these assumptions and premises may not always be correct. Actual results could differ considerably because of a variety of factors.

• This material has not been prepared for the purpose of soliciting the purchase of the investment units of Japan Logistics Fund (“JLF”) or to solicit the signing of other financial product transaction contracts. In making investments, investors should do so based on their own judgment and responsibility.

• The investment units of JLF are closed-end fund investment units, whereby investment units are not redeemable at the request of investors. Investors wishing to liquidate their investment units will in principle need to sell them to third parties. The market value of the investment units will be influenced by investor supply and demand at securities exchanges and will fluctuate in accordance with the situation for interest rates, economic circumstances, real estate prices, and other market factors. It is therefore possible that investors will not be able to sell the investment units at their acquisition price and, as a result, will suffer losses.

• JLF plans to make cash distributions to investors, but whether distributions are made and the amount thereof are not guaranteed under any circumstances. Gains or losses on the sale of real estate, losses on the disposal of fixed assets accompanying the replacement of structures, and other factors can cause fiscal-period income to vary greatly, causing the amount of distributions paid to investors to change.

• Information provided herein does not constitute any of the disclosure documents or performance reports required by the Financial Instruments and Exchange Act or the Act on Investment Trusts and Investment Corporations or by the Securities Listing Regulations of the Tokyo Stock Exchange.

• This material is to be read and used at the responsibility of customers. JLF and related persons involved in the preparation and publication of this material will not bear any responsibility for any damage arising from the use of this material (whether for direct or indirect damage, and regardless of the cause thereof).

• While every effort has been made to avoid errors and omissions regarding the information presented in this material, the material has been created as an easy reference for customers, and the presented information may contain inaccuracies or misprints. JLF bears no responsibility for the accuracy, completeness, suitability, or fairness of the information in this material.

• JLF holds the copyright to the information appearing in this material. Copying, altering, publishing, distributing, appropriating, or displaying this information or using it for commercial purposes without the prior approval of JLF is prohibited. Also, trademarks (trademarks, logos, and service marks) related to JLF appearing in this material are owned by JLF, and copying, altering, publishing, distributing, appropriating, or reproducing such trademarks or using them for commercial purposes without the permission of JLF is prohibited.

• Photographs appearing on the cover or within this material are used as illustrations of logistics and they may not be properties held by or planned to be acquired by JLF.

© Japan Logistics Fund, Inc. All rights reserved.

Disclaimer

Asset Management Company: Mitsui & Co., Logistics Partners Ltd.

- Financial instrument business registered with the Director of the Kanto Local Finance Bureau registration No.400 (financial instruments)- Member of The Investment Trusts Association, Japan

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Japan Logistics Fund, Inc. - 8967.jp · Japan Logistics Fund, Inc. ... Japan Transcity ... (Note 3) This property is a development project that is still under construction