Information of website

真面目に、

地道に、

堅実に。

Semiannual Report for the13th Fiscal Period

From July 1 to December 31, 2018

1-18-1 Shimbashi, Minato-ku, Tokyohttp://www.nippon-reit.com/en/

Information of websitehttp://www.nippon-reit.com/en/

We introduce the characteristics and current status on our website.

005_0601424551903.indd すべてのページ 2019/03/28 9:16:06

1

12th period(Jun. 2018)

Results

13th period(Dec. 2018)

Results

14th period(Jun. 2019)

Forecast


Forecast

Operating revenues ¥7,225mn 8,458mn 8,983mn 8,579mn

Operating income ¥3,835mn 4,640mn 4,903mn 4,565mn

Ordinary income ¥3,329mn 3,840mn 4,268mn 3,895mn

Net income ¥3,329mn 3,839mn 4,268mn 3,895mn

Distributions per unit ¥8,500 ¥8,536 ¥9,486 ¥8,657

Financial Results

Track Record and Forecast of DPU

: Actual DPU : Forecast DPU

5,000

6,000

5,500

6,500

7,000

7,500

8,000

8,500

9,500

9,000

(¥/unit)

6th periodJune

6,8276,827

Dec.7th period

7,5817,581

June8th period

7,5197,519

Dec.9th period

7,8007,800

Dec.13th period

8,5368,536

June14th period (Forecast)

9,4869,486

Dec.5th period

7,1097,109

June10th period

8,2178,217

June12th period

8,5008,500

Dec.11th period

9,2119,211

2014 2015 2016 2017 2018 2019Dec.

15th period (Forecast)

8,6578,657

Targets

9,0009,000

DPU of the 13th period stood at ¥8,536,exceeding the forecast.

Growth in NAV per unit

JuneJune Dec. June Dec. Dec.Dec. June JuneDec.20152014 2016 2017 2018

6th5th4th 7th 8th 9th 10th 11th200,000

350,000

300,000

250,000

(¥/unit)

258,559258,559296,409296,409

298,863298,863302,095302,095

310,132310,132321,274321,274

247,275247,275

12th 13th

324,820324,820

334,542334,542342,122342,122

“NAV per unit” is calculated by following formula, with figures as of the end of respective period. ((Net Asset + Total Appraisal Value – Total Book Value) / Investment Units Issued and Outstanding) – DPU

To Our Unitholders01 Financial Highlights02 Overview of NIPPON REIT03 Characteristics of middle-sized office04 External Growth Strategies06 Internal Growth Strategies08 Financial management09 Sustainability Initiatives

Contents10 Asset Management Report44 Balance Sheets46 Statements of Income and Retained

Earnings47 Statements of Changes in Net Assets48 Statements of Cash Flows49 Notes to Financial Statements

68 Independent Auditor’s Report70 Portfolio Summary72 Portfolio Map74 List of portfolio as of the end of 13th

period80 Investment Units81 Unitholder Information

Financial Section

First, I would like to express my sincere gratitude for unitholders’ continued support of NIPPON REIT Investment Corporation (“NRT”).I would like to give a report on our operations and financial performance for the thirteenth fiscal period (ended December 2018).During the fiscal period under review, NRT raised capital by way of public offering for a third time in July 2018 and added 21 properties (around 40.2 billion yen) to its portfolio. Through this capital increase, we further strengthened the growth potential and stability of our portfolio by expanding investments such as residential properties in Tokyo whilst maintaining “a high ratio of medium-sized office properties in Tokyo,” which is one of our features. At the same time, our risk tolerance was further strengthened through the increased diversification of our properties and tenants. NRT’s asset size was around 247.9 billion yen, while its market capitalization exceeded 150 billion yen, and NRT also broadened its unitholder base through its inclusion in a global index. On increasing our capital by way of public offering, we reassessed our investment philosophy and policy and announced our new brand message NIPPON VISION. This is a policy of conducting operations from an independent perspective aimed at creating the potential value of real estate with our “unique perspective” based on our “solid style of Japane quality.” In line with this policy, we pursued a number of initiatives including maintaining high occupancy rates, increasing rents, creating new revenue opportunities through engineering management, and reducing costs. We achieved steady growth in distributions, with DPU for the thirteenth fiscal period exceeding our forecast of 8,373 yen by 163 yen, to reach 8,536 yen. Finally, we show our commitment to continue to work with our asset management company Sojitz REIT Advisors K.K. and sponsor companies in order to permanently maintain and improve the value of our portfolio and to maximize unitholder value. We would like to ask you for the support and guidance continued.

To Our Unitholders

Creating the future with our “unique perspective” based on our “solid style of Japan quality”

NIPPON VISION

Financial Highlights

Executive OfficerNIPPON REIT Investment Corporation

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2 3

Characteristics of middle-sized officeOverview of NIPPON REIT

Externalgrowth

cycle

Internalgrowth

cycle

NIPPON REIT’s Positive Cycle

Strict disciplinecapturing opportunities

in a timely manner

Portfolio by pursuingstability and robustness

Enhance Unitholders’ Value

EnhancePortfolio Quality

TripartManagement

Limited Supply There is few properties newly supplied and the supply-demand balance is tight.

Low volatilityThe rent is stable because it is difficult to decline sharply.

Building value-up potentialProperties with a certain number of years passed have growth potential through strategic value-up investment that

is not found in newly built properties.

Strong demandThere are many target tenants of SME.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

400,000

300,000

200,000

100,000

0

3,000 tsubo or larger and smaller than 10,000 tsubo 10,000 tsubo or larger

O�ce Building Supply in 23 Wards of Tokyo

Tota

l lea

sed

area

(tsu

bo)

Source: prepared by Asset management company based on data provided from Xymax Real Estate Institute Corporation

2022

2005

60,000

50,000

40,000

30,000

20,000

10,0002007 2009 2011 2013 2015 20192017

Office Rent Trend by Building Grade in 23 Wards of Tokyo

Ave

rage

ass

umed

rent

(¥/t

subo

)

Grade A Grade A- Grade B

Source : CBRE K.K

1 9 employees

74.4%

10 29 employees

17.1%29 or fewer employees

91.5%

Composition of O�ces by Number of Employees in 23 Wards of Tokyo

Source: prepared by Asset management company based on data provided from Statistics Bureau, MIC

Large-sized (5,000 tsubo or larger)Small-and medium-sized (between 300 and 5,000 tsubo)

O�ce Building Stocks in 23 Wards of Tokyo

Tota

l lea

sed

area

(tsu

bo)

Source: prepared by Asset management company based on data provided from Xymax Real Estate Institute Corporation

600,000

0

100,000

200,000

300,000

400,000

500,000

Building Age (year)

2610141822263038424650 3434

Portfolio focusing on properties in Tokyo

Top-level risk diversification among J-REIT

Realization of improvement of unitholders’ value by positive cycle

Growing rental income can be expected by focusing on office properties in Tokyo where rents are in the upward phase.

Top level risk diversification has little impact on revenue from tenant move-out and leads to stabilization of DPU.

We realize improvement of unitholders’ value by positive cycle which is virtuous circle with both external growth

and internal growth by steadily advancing the internal growth of the acquired properties.

NIPPON REIT invests mainly in middle-sized offices.

Office

Residence21properties¥44.7bn

Retail3properties ¥10.1bn

77.9%

18.0%

4.1%

Certain Ordinance-Designated and other cities “COD”

0.9%

87properties

¥247.9bn(based on

acquisition price)

63properties¥193.0bn

Three Major Metropolitan areas (excluding 23 wards of Tokyo) “TMM”

21.2%

23 wards of Tokyo (excluding 6 central wards of Tokyo)

11.8%

6 central wards

of Tokyo

66.1%Greater Tokyo

84.2%

Proportion of the 5 largest properties

22.4%

Proportion of the 5 largest tenants

7.3%

87properties

¥247.9bn(based on

acquisition price)

620tenants

229,235m2

Portfolio diversification

Tenant diversification

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4 5

External Growth Strategies

Track record of the external growth

Target NOI yield(Note) 4.5%(NOI yield after depreciation:4.0%)

Well diversified portfolio(portfolio and tenant diversification)

Highly concentrated in central Tokyo (office)(over 60% of properties are located in 6 central wards of Tokyo)

High growth potential(potential for building·rent gap)

High competitiveness in location(area with growth potential)

Stable Mid-sized office(low rent volatility·well balanced supply)

Maintain the acquisition target since IPO

Flexible replacement depending on the market condition

Pursue external growth through offering which contribute to maximization of Unitholders’ Value

Striving to achieve the medium to long term AUM target ¥300bn through disciplined external growth

(Note) “Target NOI Yield” refers to the NOI yield based on NIPPON REIT’s cash flow projection at the time of the acquisition against acquisition price.

Implemented plan to enable timely and flexible replacement of properties (calling “Tiering”) and revise it every year

Realized improvement of portfolio through the asset replacement implemented in 11th period and 14th period (refer to page 5 for details) by result of Tiering

Achieved enhancement of portfolio quality and profitability, DPU increase at the same time

300(¥bn)

200

250

100

150

50

Track record of AUM and pipeline, Medium to long term AUM target

IPO

70.470.4


73.873.8

6th period(June 2015)

157.8157.8


225225

204.8204.8


297297

204.8204.8


204.8204.8

225225


204.8204.8

102102


249249

207.7207.7


315315

207.7207.7


247.9247.9

14th period(Forecast)

(June 2019)

249.2249.2

Targets

300.0300.0

: AUM (based on acquisition price): Total amount of pipeline Expanded the AUM through acquisition

of new properties of approx. 40.2 billion yen with public offering in July 2018

Acquired assets

Improvement in portfolio quality Return to UnitholderValue-enhancing Strategy / Ensuring growth potential

Transferred assetsAsset Replacement

Overview of asset replacement implemented in 14th period

Kameido i-Mark Building

FORECAST Iidabashi

Imazaki Mansion N1

TENSHOOCHANOMIZU BUILDING

my atria Meieki

LAPUTA KUJO

Wald Park Minamioi

5 properties

¥7.7BnAverage appraisal NOI yield (1): 4.6%Average appraisal NOI yieldafter depreciation (2) : 3.9%Average building age : 10 years

2 properties

¥7.2BnAverage appraisal NOI yield (1): 4.5%Average appraisal NOI yieldafter depreciation (2)

: 3.7%

Average building age : 34 years

Acquired assets Transferred assets

NameKameido

i-Mark Building

TENSHO OCHANOMIZU

BUILDING

Wald Park Minamioi

ImazakiMansion N1

LAPUTA KUJO

NameFORECASTIidabashi

my atria Meieki

PlaceKoto ward,

TokyoChiyoda ward,

TokyoShinagawa ward, Tokyo

Higashiosaka,Osaka

Osaka,Osaka

PlaceChiyoda ward,

TokyoNagoya, Aichi

Type Office Office Residence Residence Residence Type Office Residence

Completion (Building age)

Sep.2010 (8years)

Nov.2018 (0years)

Feb.2005 (13years)

Mar.1999 (19years)

Mar.1998 (20years)

Completion (Building age)

Nov.1978 (40years)

Mar.2006 (12years)

Acquisitionprice

¥2,580mn ¥1,800mn ¥715mn ¥1,180mn ¥1,480mn Transfer price ¥5,490mn ¥1,782mn

Appraisal value

¥2,650mn ¥1,820mn ¥735mn ¥1,210mn ¥1,501mnBook value

(as of the end of Feb. 2019)

¥5,392mn ¥1,226mn

Appraisal NOI yield (after depreciation)

4.7%(3.6%) 3.9%(3.3%) 4.2%(3.8%) 5.3%(4.7%) 4.8%(4.3%)Appraisal NOI yield (after depreciation)

4.2%(3.8%) 5.7%(3.4%)

Younger building age(enhanced liquidity)Make the portfolio younger with enhanced liquidity, by acquiring 5 properties (average age: 10years) including 2 office properties located in Tokyo (average age: 5 years)

Improvement in profitabilityImprove the profitability of the portfolio with the Acquired assets, an average appraisal NOI yield after depreciation of which is 3.9% (+0.2% vs. assets to be transferred)

Stabilized cash flowStabilize the cash flow of the portfolio by selling my atria Meieki, the property which will be expropriated

Return based on realized gains Achieve unitholder returns funded from unrealized gains that come from sales of the 2 properties of ¥492mm: DPU of ¥1,106 Plan to review repair expenses for the 14th period, along with the gains on sales

Stock-based redevelopment schemeSell the office property located in one of the 6 central wards of Tokyo (FORECAST Iidabashi) in order to enhance its value in collaboration with a general constructor, and be positioned to take advantage of its potential for external growth by securing the right of first negotiation

NIPPON

REIT

SHIMIZU

CORPORATION

Opportunity for redevelopment / Asset acquisition

14th Period(after replacement)

14th Period(before replacement)

15th Period

Right of first negotiation after

value enhancement

Overview of transferred asset and acquired assets

DPU Forecast for 14th and 15th Periods

1,106

8,380

¥9,486

8,556 8,622

Gains on sales etc.Normalized

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6 7

Internal Growth Strategies

Occupancy Rate Trend

Examples of Engineering Management (Strategic value-enhancing investment)

Outline of Engineering ManagementAs a result of our flexible and proactive leasing activities, as well as the enhanced tenant satisfaction and building

competitiveness stemming from our Engineering Management, we have been maintaining high occupancy rate.

We are working to improve tenant satisfaction as well as to maintain and enhance profitability and competitiveness of the portfolio. Through

the Engineering Management, we aim to further increase asset value by pursuing economic efficiencies such as reducing costs of works.

We maintain and improve permanent asset value by “Engineering Management” that combines “planned capital

investment” and “strategic value- enhancing investment”.

1. Planned capital investmentRepair, renewal and maintenance of facilities necessary for maintenance and improvement of long-term asset value

2. Strategic value- enhancing investmentInvestment leading to improvement of profitability and maximized cost-effectiveness from the following four points of view

FORECAST Shinjuku SOUTH Residence Nihombashi Hakozaki

CO2 reduction achieved by replacing air conditioners of whole building and LED lightings installed

Lease-up by renovation of the whole building

Set up new storage room on the basement floor

The NOI improvement record of approx. ¥245mn/p.a. from 7th period to 13th period through the engineering management

Profitability enhancementMeasures to increase rents / raise income, etc.

Improvement of tenant satisfactionMinimization of tenant vacancy risk

Shorten leasing periods

Cost reductionReduction of management cost through energy conservation, etc.

Environmental considerationInstallation of high energy efficiency equipment etc.

Occupancy rate tend and forecast

Rent increase (decrease) upon tenant replacement (office)

Status of rent increase (decrease) upon contract renewals (office /monthly rent)

13th period 14th period (Forecast)

June2015

Dec.2015

June2016

Dec.2016

June2017

Dec.2017

7th period 8th period 9th period 10th period

June2018

June2019

Dec.2018

12th period11th period

100%

95%

90%

Total Office Residence Retail

Retail 97.5% 98.4% 93.7%(Forecast)Residence 98.5% 98.3% 97.6%(Forecast)Office 99.8% 99.4% 99.7%(Forecast)Total

99.1%

99.5% 99.1% 98.9%(Forecast)





13th period(Dec 2018)

6,500

6,000

5,500

4,500

5,000

4,000

(1,000)

0

(500)

2,500

2,000

1,500

1,000

500

3,000

3,500

(¥,000/month)

3,8343,834

5,4945,494

(635)(635)

3,5073,507

5,8745,874

6,3966,396

7.5%7.5%6.9%6.9%

5.9%5.9%6.8%6.8%

5.8%5.8%

20

10

0

15

(15)

5

(5)

10

(10)

0

9th period (Dec. 2016)



12th period (June 2018)


5,000

4,000

3,000

2,000

1,000

(1,000)

(2,000)

(3,000)

(4,000)

(5,000)

0

(¥.000/month)

* “Rent increase ratio” is calculated in each period as below, rounded to the first decimal place. (total rent increase after rent renewal - total rent before rent renewal )/ total rent before rent renewal)

* “Rent increase ratio” is calculated in each period as bellow, rounded to the first decimal place. ((total rent increase after rent renewal - total rent before rent renewal )/ total rent before rent renewal)

Total rent increase Total rent decrease Rent increase ratio*Total rent increase Total rent decrease Rent change ratio*

2,7372,7371,8691,869

3,8063,8064,8574,857

3,9093,909

(3,637)(3,637)

(1,068)(1,068)

(465)(465) (504)(504) (522)(522)

(1.8%)(1.8%)

3.2%3.2%

10.2%10.2%

12.6%12.6%13.2%13.2%

(%)(%)

Replaced air conditioners of whole building and installed LED lightings through a year construction periodRealized considerable energy saving to plan reduction of costs and improvement of tenants’ satisfaction

Lease-up of al l residences real ized at ear l iest by strategic renovation of the whole building.

Achieved 100% of occupancy rate as of Sep. 2018 with earlier accomplishment.

Converted backyard on the basement floor into new storage room¥1.21mn p.a. revenue increase to be expected

Before

Under Construction After

Before

Before

After

After

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8 9

Sustainability InitiativesFinancial management

14thJune

6thJune

7thDec.

8thJune

9thDec.

10thJune

11thDec.

12thJune

13thDec.

47.0 47.045.6 46.1 45.9 45.7 45.7 46.1 46.0 46.9

LTV Control Range(Note)

(45%~50%)

55%

50%

45%

40%15thDec.

20162015 2017 2018 2019

(Note) The “LT V control range” refers to the LT V level that the Investment Corporation is scheduled to maintain going forward and that is within the range of the LTV level under current policy (45%-55%), as described in item 17 of this document.

(Note) These ratings do not apply to the units of the Investment Corporation. Moreover, with regard to said units, no credit ratings have been provided or submitted for inspect ion by credit rat ing agencies, nor are any credit rat ings scheduled to be provided or submitted for inspection as a result of requests from the Investment Corporation.

Totalinterest-bearing debt

Average remainingborrowing period

Long-term debt ratio

Loan-to-value ratio

Fixed-interestrate ratio

1,261billion

3.62years

100.0%

46.9%

100.0%

Japan Credit Agency, Ltd. (JCR)

Long-term issuer rating(Note)A (Stable)

MUFG Bank, Ltd. 48.6%

Mizuho Bank, Ltd. 13.7%

Sumitomo Mitsui Banking Corporation 9.5%

Resona Bank, Limited 7.2%

Sumitomo Mitsui Trust Bank, Limited 5.5%

Shinsei Bank, Limited 4.6%

Mizuho Trust & Banking Corporation 4.7%

Development Bank of Japan Inc. 1.9%

Aozora Bank, Ltd. 0.6%

The Nomura Trust and Banking Co., Ltd. 0.6%

Meiji Yasuda Life Insurance Company 0.4%

Investment Corporation bonds 2.8%

11 Banks ＋ Investment Corporation bonds

Borrowingamount

126.8bn

In order to build a stable financial base over the medium- to long-term, we introduce our basic policy of the

financial strategy which is well-balanced fund procurement between borrowing costs and financial stability.

During the fiscal period under review, we issued investment corporation bonds for the third time and realized

diversification of ways for funding while keeping relevant costs at low level. Going forward, we will continue to

promote the stabilization of our financial base, taking into account interest costs.

Sojitz REIT Advisors K.K. , an asset management company of NIPPON REIT, has established the Sustainability Policy

and practices it with an understanding that taking viewpoint of ESG (Environment, society and Governance)

seriously contributes to realization of basic policy of NIPPON REIT such as maximization of unitholders’ value

while focusing on income growth and stability.

Financial Highlights

Historical and forecast LTV

Bank formation

Certifications

Green Lease initiatives Contribution to the local community

Comprehensive Assessment System for Built Environment

Efficiency (CASBEE) is a method for evaluating and rating

the environmental performance of buildings and the built

environment. It is a comprehensive assessment of the

quality of a building, evaluating features such as interior

comfort and scenic aesthetics, in consideration of

environment practices that include using materials and

equipment that save energy or achieve smaller

environmental loads.

To install LED light and some ecological equipments with

government subsidy, We make efforts to reduce energy.

And, making a contract with each tenant for Green Lease,

we earn part of incomes that are performed by reduction

of utility costs.

Sojitz REIT Advisors K.K., an asset management company of

NIPPON REIT, participates in the “Project of donation with

books” providing books that have been read by executives

and employees and donated the purchase price.

We received the “Green Star recognition”, the highest in the

four available categories, for the second consecutive year.

We have also received “3 stars” in “GRESB Rating”, which is

evaluated in 5 grades depending on the relative ranking of

the overall GRESB Score.

GRESB is a benchmark developed by a group of leading

European pension funds.

Before introduction of

Green Lease

Electricity cost -60% reduction expected

After introduction of

Green Lease

Electricitycosts 90%

Electricitycosts 40%

Green Lease structure case

Maintenance costs10%

Green Lease fee by tenant

30%

Effects of cost

reduction for tenant

30%

repairexpense

LED Light

allocated

FORECAST Ichigaya

La Verite AKASAKA

as of Feb. 2019

As of the end of the 13th period

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10 11

Asset Management Report 1. Summary of Asset Management

(1) Historical Operating Results

Period

9th fiscal period 10th fiscal period 11th fiscal period 12th fiscal period 13th fiscal period

From July 1, 2016

to December 31, 2016

From January 1, 2017

to June 30, 2017

From July 1, 2017



to June 30, 2018

From July 1 , 2018


Operating revenues (Yen in millions) 6,836 6,947 7,553 7,225 8,458

Of which, rental revenues and other revenues related to property leasing

(Yen in millions) (6,804) (6,906) (7,142) (7,177) (8,458)

Operating expenses (Yen in millions) 3,309 3,250 3,438 3,389 3,818

Of which, property-related expenses (Yen in millions) (2,606) (2,530) (2,679) (2,664) (3,039)

Operating income (Yen in millions) 3,527 3,696 4,115 3,835 4,640

Ordinary income (Yen in millions) 3,055 3,218 3,608 3,329 3,840

Net income (Yen in millions) 3,054 3,218 3,607 3,329 3,839

Total assets (a) (Yen in millions) 226,398 226,434 230,417 230,689 269,146

Period-on-period changes (%) (0.2) (0.0) (1.8) (0.1) (16.7)

Net assets (b) (Yen in millions) 112,389 112,540 112,924 112,639 130,378

Period-on-period changes (%) (0.1) (0.1) (0.3) (△0.3) (15.7)

Unitholders’ equity (Yen in millions) 109,285 109,285 109,285 109,285 126,515

Number of investment units Issued and outstanding (c) (Unit) 391,760 391,760 391,760 391,760 449,930

Net assets per unit (b) / (c) (Yen) 286,883 287,268 288,248 287,522 289,774

Total distributions (d) (Yen in millions) 3,055 3,219 3,608 3,329 3,840

Distributions per unit (d) / (c) (Yen) 7,800 8,217 9,211 8,500 8,536

Of which, earnings distributions per unit

(Yen) (7,800) (8,217) (9,211) (8,500) (8,536)

Of which, distributions per unit in excess of earnings per unit (Yen) (－) (－) (－) (－) (－)

Ordinary income to total assets ratio (Note 3)

(%) 1.4 1.4 1.6 1.4 1.5

Annualized (Note 3) (%) (2.7) (2.9) (3.1) (2.9) (3.0)

Return on equity (Note 3) (%) 2.7 2.9 3.2 3.0 3.2

Annualized (Note 3) (%) (5.4) (5.8) (6.3) (6.0) (6.3)

Equity ratio (b) / (a) (%) 49.6 49.7 49.0 48.8 48.4

Period-on-period changes (%) (△0.1) (0.1) (△0.7) (△0.2) (△0.4)

Payout ratio (Note 3) (%) 100.0 100.0 100.0 100.0 100.0

Period


From July 1, 2016



to June 30, 2017

From July 1, 2017



to June 30, 2018

From July 1, 2018


(Reference Information)

Number of investment properties 65 65 66 66 87

Total leasable area (m2) 255,393.62 255,398.17 255,783.88 255,531.31 306,621.28

Number of tenants (Note 4) 966 978 1,242 1,239 1,878

Occupancy rate at the end of the period

(%) 98.8 99.8 99.8 99.5 99.1

Depreciation during the period (Yen in millions) 753 734 751 776 907

Capital expenditures during the period (Yen in millions) 466 396 1,086 893 1,420

Rental NOI (Net Operating Income) (Note 3)

(Yen in millions) 4,952 5,111 5,215 5,292 6,335

FFO (Funds From Operations) per unit (Note 3) (Yen) 9,726 10,091 10,170 10,489 10,573

Interest-bearing debt (e) (Yen in millions) 103,570 103,570 106,170 106,170 126,170

Interest-bearing debt to total assets ratio (e) / (a)

(%) 45.7 45.7 46.1 46.0 46.9

Number of operating days (Days) 184 181 184 181 184

(Note 1) NIPPON REIT’s fiscal periods cover every six months from January 1 to June 30 and from July 1 to December 31 of each year.

(Note 2) Operating revenues, etc., do not include consumption taxes. (Note 3) The following denotes the calculation methods for the indicators used by NIPPON REIT. It should be noted that

calculations on an annual basis are calculated using the number of business days for each period. Ordinary income to total assets ratio Ordinary income/average total assets × 100

Average total assets = (Total assets at beginning of period + total assets at end of period) ÷ 2

Return on equity Net income / average net assets × 100 Average net assets = (Net assets at beginning of period + net assets at end

of period) ÷ 2 Payout ratio

Distribution per investment unit (excluding cash distributions in excess of earnings per unit) ÷ net income per investment unit × 100 Payout ratio of the 13th fiscal period was calculated using the following formula, as new investment units have been issued: Total amount of distribution (excluding cash distributions in excess of earnings) ÷ net income × 100

Rental NOI (Net Operating Income)

Income from property leasing for the fiscal period under review (rental revenues – rental expenses) + depreciation + loss on retirement of non-current assets

FFO (Funds From Operations) per unit (Net income + depreciation + loss on retirement of non-current assets + deferred asset amortization – gain / loss on sales of real estate) ÷ total investment units issued and outstanding Furthermore, gain on exchange of real estate properties of the 11th fiscal period is calculated as gain (loss) on sales of real estate properties.

(Note 4) This denotes the total number of tenants (excluding those for warehouses, billboards, and parking lots) in leasing contracts for each building acquired at the end of the period. It should be noted that in the event a pass-through master lease contract is entered into for said assets, the total number of end-tenants is used in the calculation (excluding those for warehouses, billboards, and parking lots).

(Note 5) Monetary figures are truncated, while percentages are rounded.

Asset Management Report

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12 13

(2) Overview of the Fiscal Period under Review A. Brief History of NIPPON REIT NIPPON REIT was established on September 8, 2010, by Polaris Investment Advisers K.K. (now Sojitz REIT Advisors K.K. [hereafter referred to as the “Asset Management Company”]) as the founder under the Act on Investment Trusts and Investment Corporations (the “Investment Trusts Act”). Registration with the Kanto Local Finance Bureau was completed on October 26, 2010 (registration number 72, filed with the Director of the Kanto Local Finance Bureau). NIPPON REIT issued new investment units through a public offering (144,200 units) with April 23, 2014, as the payment date and was listed on the J-REIT section of the Tokyo Stock Exchange (securities code: 3296) on April 24, 2014. Furthermore, NIPPON REIT issued investment units through public offerings in February 2015, July 2015, and July 2018, and third-party allotments in March 2015, July 2015, and July 2018, and the total number of investment units issued and outstanding as of the end of the fiscal period under review (December 31, 2018) is 449,930 units.

B. Investment Environment and Management Performance (i) Investment Environment The Japanese economy during the fiscal period under review (the fiscal period ended December 2018) saw a decrease by 0.6% (an annual decrease by 2.5%) in the real GDP growth rate (second preliminary figures) for the second quarter compared to the same period of the previous year, due to a depressed private consumption and external demand affected by restriction in supply and deteriorating consumer sentiment caused by a series of natural disasters such as the earthquake in Hokkaido and torrential rain. The effect of the natural disasters was temporary and restriction in supply and deteriorating consumer sentiment are expected to settle down. Private consumption and exports are picking up, as business investment and Industrial production increases moderately. Consumer prices have been increasing moderately as well, while corporate profits and firms’ judgment on current business conditions and the employment situation are improving steadily. With regard to future prospects, a continuous and gradual recovery is expected, supported by the effects of the policies implemented by the Japanese government, while employment and income environment is improving. A certain level of attention, however, should be paid to the effects of trade frictions on economy, the uncertainty in overseas economies and the effects of fluctuations in the financial and capital markets. In the office properties leasing market, the vacancy rate as of the end of December 2018 in Tokyo’s five central wards (Chiyoda, Chuo, Minato, Shinjuku and Shibuya wards) announced by Miki Shoji Co., Ltd., was 1.88%, down1.24% from the same month last year. Moreover, the average rent in the same area as of the end of December 2018 was 20,887 yen per tsubo, up 8.94% from the same month last year. Such small-scale upward trends are ongoing. In terms of the residential properties leasing market, the situation remains generally stable for both occupancy rate and rent level, and this is expected to continue due to the well-balanced supply and demand. The background is that the population of Japan has been concentrating in three major metropolitan areas, in spite of a limited supply of residential properties for lease in the same area. The retail properties leasing market saw a 1.4% year-on-year increase in retail sales according to figures announced by the Ministry of Economy, Trade and Industry in November 2018, showing gradual recovering trends mainly in retail business such as fuel retailing, car dealing, medicinal supplies and cosmetics, food and beverage retailing. On the other hand, decreasing trends were showing mainly in machinery-equipment, textiles, apparel including woven fabrics, apparel, accessories and notions. Sales at department stores and GMS decreased by a 2.2% year-on-year basis. As for short-term prospects, private consumption is expected to move toward recovery, supported by the improving environment in both the employment market and income growth. With regard to the real estate transaction market, expected yields remain at a low level and transaction

prices stay high, reflecting that appetite for acquisition of properties by domestic investors such as J-REIT, private REIT, real estate companies and overseas investors is still high while the favorable funding environment continues. (ii) Management Performance a. External Growth NIPPON REIT owned 66 properties (with a total acquisition price of 207,795 million yen) and silent partnership equity interest (investment amount 740 million yen, 16 real estate-backed properties) as of the end of the fiscal period ended June 2018. During the fiscal period under review (fiscal period ended December 2018) NIPPON REIT acquired the following 21 properties (with a total acquisition price of 40,202 million yen) using funds raised through a public offering in July 2018:

Transaction Property number Property name Acquisition price

(Note 1) Acquisition date

Acquisition A-58 Towa Kandanishikicho Building 960

July 3, 2018

Acquisition A-59 Yusen Higashi-Nihombashi Ekimae Building 1,152

Acquisition A-60 Hiroo ON Building 2,392

Acquisition A-61 TK Gotanda Building 4,130

Acquisition A-62 Gotanda Sakura Building (Note 2) 1,460

Acquisition A-63 Esprit Kameido 1,265

Acquisition A-64 Alte Building Higobashi 1,453

Acquisition A-65 DIA Building Meieki 1,167

Acquisition B-10 Residence Hiroo 2,590

Acquisition B-11 Residence Nihombashi Hakozaki 1,300

Acquisition B-12 Primegate Iidabashi (Note 3) 5,200

Acquisition B-13 Residence Edogawabashi 1,230

Acquisition B-14 Merveille Senzoku 740

Acquisition B-15 Field Avenue (Note 4) 3,110

Acquisition B-16 Domeal Kitaakabane 785

Acquisition B-17 Dormy Kitaakabane 986

Acquisition B-18 Splendid Shin-Osaka III 2,428

Acquisition B-19 ZEPHYROS Minami-horie 1,608

Acquisition B-20 Charmant Fuji Osakajominami 905

Acquisition B-21 Piacere Fuminosato 571

Acquisition C-3 BECOME SAKAE 4,770

Total 40,202 (Note 1) The acquisition prices represent the amount of consideration stated in the purchase agreements of real estate

and the trust beneficiary interests in real estate. The acquisition price does not include the expenses related to the acquisition (includes the amount NIPPON REIT paid as a consideration for the succession of the status of the buyer) and consumption taxes. Furthermore, acquisition prices of less than one million yen are omitted.

(Note 2) The type of asset for No. A-62 is real estate and the others are trust beneficiary interests in real estate. (Note 3) Although part of the building (1F to 4F) named “S&S Building” is listed as an office/retail store, the real estate is

presented as “Primegate Iidabashi”, which includes the office area. The same shall apply hereinafter. (Note 4) This property includes a separate building, which is structurally independent from the main building, and these

two buildings are counted as one property. The same shall apply hereinafter.

As a result, the portfolio as of the end of the fiscal period under review consisted of 63 office properties (Note

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1) (with a total acquisition price of 193,086 million yen), 21 residential properties (Note 2) (with a total acquisition price of 44,728 million yen) and 3 retail properties (Note 3) (with a total acquisition price of 10,183 million yen), totaling 87 properties (with a total acquisition price of 247,998 million yen) with a total leased area of 303,742.00 m2 and a 99.1% average occupancy rate.

(Note 1) Office properties are office buildings whose primary usage is offices. The same shall apply hereinafter. (Note 2) Residential properties are rental houses whose primary usage is residence (including dormitories, company

houses and serviced apartments, all or major portion of which are leased by operators). The same shall apply hereinafter.

(Note 3) Retail properties are properties primarily leased to commercial tenants (such as retailers, restaurants, service providers and amusement facilities). The same shall apply hereinafter.

b. Internal Growth NIPPON REIT emphasizes asset management that maintains and increases the portfolio’s asset value and actively reaches out to new and existing tenants for the prosperous future opportunities while strengthening relations with existing tenants, implementing measures that boost the competitiveness of properties in light of tenant needs and the features of each property. Through such tireless efforts, the portfolio occupancy rate had been maintained at a high level of 99.1% as of the end of the fiscal period under review. C. Procurement of Funds (i) Issuance of New Investment Units In order to obtain funds to acquire new properties, NIPPON REIT issued 55,400 units of new investment units through a public offering and raised funds amounting to 16,409 million yen on July 2, 2018. In connection with the public offering, NIPPON REIT issued 2,770 units of new investment units through a third-party allotment and raised funds amounting to 820 million yen on July 24, 2018. As a result, the balance of unitholders’ capital and the number of investment units issued and outstanding as of December 31, 2018, were 126,515 million yen and 449,930 units, respectively. (ii) Borrowings and Repayments Borrowings totaling 20,000 million yen were implemented on July 3, 2018, to use as part of funds for acquisition of new properties and their related expenses. In order to prepare funds for payment of loans due on August 20, 2018 (total amount 13,400 million yen), borrowings totaling 13,400 million yen were implemented on the same day as the loan due. Issuance of investment corporation bonds totaling 1,500 million yen was implemented on November 30, 2018, and borrowings totaling 1,500 million yen due on August 20, 2019, were repaid early using the raised funds. As a result, the balance of interest-bearing debt as of December 31, 2018, was 126,170 million yen and the ratio of interest-bearing debt to total assets (LTV) was 46.9%. (iii) Credit Rating NIPPON REIT’s credit rating as of December 31, 2018, is as follows:

Credit Rating Agency Rating type Rating outlook

Japan Credit Rating Agency, Ltd. Long-term issuer rating: A Stable

D. Overview of Business Performance and Distributions As a result of the operations described above, business performance in the fiscal period under review generated operating revenues of 8,458 million yen, operating income of 4,640 million yen, ordinary income of 3,840 million yen and net income of 3,839 million yen. Concerning distributions, NIPPON REIT is set to be eligible for application of the special provisions for taxation on investment corporations (Article 67-15 of the Special Taxation Measure Act of Japan), ensuring a scope that does not exceed unappropriated retained earnings, and also minimizing unitholders’ burdens of income tax, etc. For the fiscal period, NIPPON REIT decided to distribute 3,840,602,480 yen, which is the amount equivalent to the maximum integral multiple of the total number of investment units issued and outstanding, 449,930 units. As such, cash distributions per unit were 8,536 yen.

(3) Changes in Number of Total Investment Units Issued and Outstanding Changes in the number of investment units issued and outstanding and total unitholders’ equity for the past 5 years to the end of the current period are as follows:

Date Type of issue

Number of investment units

issued and outstanding (Unit)

Total unitholders’ equity

(Yen in millions) (Note 1) Note

Increase

(Decrease) Total

Increase

(Decrease) Total

January 17, 2014 Unit split 200 400 - 100 (Note 2)

April 23, 2014 Public offering 144,200 144,600 35,066 35,166 (Note 3)

May 23, 2014

Issuance of new

investment units

through third-party

allotment

7,210 151,810 1,753 36,919 (Note 4)

February 10, 2015 Public offering 145,000 296,810 46,137 83,057 (Note 5)

March 10, 2015

Issuance of new

investment units

through third-party

allotment

7,250 304,060 2,306 85,364 (Note 6)

July 1, 2015 Public offering 84,000 388,060 22,911 108,276 (Note 7)

July 28, 2015

Issuance of new

investment units

through third-party

allotment

3,700 391,760 1,009 109,285 (Note 8)

July 2, 2018 Public offering 55,400 447,160 16,409 125,695 (Note 9)

July 24, 2018

Issuance of new

investment units

through third-party

allotment

2,770 449,930 820 126,515 (Note10)

(Note 1) “Total unitholders’ equity” is truncated to the nearest million yen. (Note 2) NIPPON REIT implemented a two-for-one split of investment units with an effective date of January 17, 2014. (Note 3) In order to obtain funds to acquire new properties, NIPPON REIT issued new investment units through a public

offering at the offer price of 252,000 yen (issue price of 243,180 yen) per unit. (Note 4) In connection with the public offering, NIPPON REIT issued new investment units through a third-party allotment at the

issue price of 243,180 yen per unit. (Note 5) In order to obtain funds to acquire new properties, NIPPON REIT issued new investment units through a public

offering at the offer price of 330,037 yen (issue price of 318,189 yen) per unit (Note 6) In connection with the public offering, NIPPON REIT issued new investment units through a third-party allotment at the





issue price of 296,206 yen per unit.

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(Changes in market price of investment securities) The highest and lowest (closing) prices in the J-REIT section of the Tokyo Stock Exchange, upon which NIPPON REIT’s investment securities are listed, are as follows for the period indicated:

Period


From July 1, 2016



to June 30, 2017

From July 1, 2017



to June 30, 2018

From July 1, 2018


Highest (Yen) 285,000 299,400 337,500 337,500 382,500

Lowest (Yen) 250,500 277,600 288,200 308,500 325,500

(4) Distributions Concerning distributions for the period under review, in order to be eligible for application of the special provisions for taxation on investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation) and ensure a scope that does not exceed unappropriated retained earnings and that can minimize unitholder burdens of income tax, etc., NIPPON REIT decided to distribute 3,840,602,480 yen, which is the amount equivalent to the maximum integral multiple of the total number of investment units issued and outstanding, 449,930 units. As such, cash distributions per unit were 8,536 yen for the period under review.

Period


From July 1, 2016



to June 30, 2017

From July 1, 2017



to June 30, 2018

From July 1, 2018


Unappropriated retained earnings (Yen in

thousands) 3,080,273 3,242,988 3,631,760 3,352,625 3,862,444

Retained earnings (Retained earnings brought forward)

(Yen in thousands) 24,545 23,896 23,258 22,665 21,842

Cash distributions declared (Yen in

thousands) 3,055,728 3,219,091 3,608,501 3,329,960 3,840,602

Distributions per unit (Yen) (7,800) (8,217) (9,211) (8,500) (8,536)

Of the above, total earnings distributions

(Yen in thousands) 3,055,728 3,219,091 3,608,501 3,329,960 3,840,602

Earnings distributions per unit (Yen) (7,800) (8,217) (9,211) (8,500) (8,536)

Of the above, total capital refunds (Yen in thousands) －－－－－

Capital refunds per unit (Yen) (－) (－) (－) (－) (－)

Of total capital refunds, total distributions from allowance for temporary difference

(Yen in thousands) －－－－－

Distributions from allowance for temporary difference per unit (Yen) (－) (－) (－) (－) (－)

Of total capital refunds, total distributions from reduced capital distributions

(Yen in thousands) －－－－－

Distributions from reduced capital distributions per unit (Yen) (－) (－) (－) (－) (－)

(Note) Amounts are truncated to the relevant digit.

(5) Future Operating Policies and Issues to Be Addressed A. Management Policy With the corporate policy of “untiringly pursuing the best interest of NIPPON REIT’s unitholders”, NIPPON REIT plans to engage in the following measures to maximize unitholders’ value through flexible and timely investment, and also seeks the best interest of unitholders by utilizing the features of diversified assets and focusing on the growth potential and stability of revenues.

B. External Growth Strategy In order to diversify various risks by combining assets with different revenue features while considering the future outlook of the macro economy and real estate market in Japan, as well as not missing appropriate investment opportunities, NIPPON REIT will invest in “three types of assets deeply rooted in the Japanese society (office, residence, and retail)”. Furthermore, NIPPON REIT will focus on mid-sized office properties located in central areas of Tokyo, which are its main target of investment in consideration of the balance of supply and demand, and will build up a diversified portfolio by also investing in residential properties and retail properties. With the Asset Management Company’s own property acquisition network as the base and also utilizing the real estate investment networks of sponsors such as Sojitz Corporation, the main sponsor and sub-sponsor companies of Cushman & Wakefield Asset Management K.K. (hereafter referred to as “Cushman”) and Agility Asset Advisers Inc., NIPPON REIT will increase its asset size through property acquisitions centered on negotiation transactions with third parties so as to promote external growth. Furthermore, regarding property acquisitions from third parties, NIPPON REIT will attempt to avoid the loss of opportunities for property acquisitions and aim to maximize growth opportunities by means of temporary ownership and recovery functions provided through the warehousing function of Sojitz Corporation, and temporary ownership functions provided by bridge funds in which the above-mentioned sponsor companies are involved in the formations. C. Internal Growth Strategy NIPPON REIT will manage assets to maintain and increase the competitiveness of the portfolio and of individual properties according to their features based on the unique networks and expertise that the officers and employees of the Asset Management Company have originally nurtured at sponsor companies. Moreover, by entrusting property management operations and building management operations mainly to Sojitz General Property Management Corporation (hereafter referred to as “SGPMC”), a subsidiary of the main sponsor of Sojitz Corporation, we will promote the maintenance of the occupancy rate and increase in profitability through the utilization of SGPMC’s knowledge based on experience and cost reduction effects via economies of scale. With appropriate processes as a given, SGPMC will also be assigned as the main consignee for renovations and planned repairs in addition to the daily administrative operations. Along with SGPMC’s consistent support ranging from building diagnostics to repair-designs, selection of construction companies and construction management based on its knowledge nurtured through large-scale repair consulting and such, NIPPON REIT will aim to practice effective and deliberate repairs in order to maintain and increase the value of assets under management, considering the priority of construction work and optimization of costs, upon sufficient consideration of cost-effectiveness. Furthermore, regarding leasing plans for offices, new asking rent and renewed rent for existing tenants will be set with reference to various data, etc., provided by Cushman, a sub-sponsor, and agile leasing activities will be implemented according as the operational leasing policy stipulated for new potential tenants.

D. Financial Strategy NIPPON REIT’s basic policy for its financial strategy is to conduct fund procurement in a diversified and well-balanced manner so as to establish a stable financial foundation over the medium to long term. Regarding the LTV of interest-bearing debt, the targeted ceiling is set at 60%. NIPPON REIT's LTV as of the end of the fiscal period under review was 46.9% and the current policy is to keep the LTV level between 45% and 55%. With regard to lenders, NIPPON REIT will maintain a strong bank formation that is solidly established on the

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syndicated finance group as of the end of the fiscal period under review. (6) Significant Subsequent Events A. Acquisition of Properties NIPPON REIT acquired trust beneficiary interests in real estate on January 31 and February 27 and 28, 2019, as described below.

Property name Location Acquisition date

Acquisition price

(Yen in millions)

(Note 1)

Seller

Wald Park Minamioi Shinagawa ward,

Tokyo January 31, 2019 715

Not disclosed

(Note 2)

TENSHO OCHANOMIZU

BUILDING

Chiyoda ward,

Tokyo February 27, 2019 1,800

Not disclosed

(Note 2)

Kameido i-Mark Building Koto ward,

Tokyo February 27, 2019 2,580

SHIMIZU

CORPORATION

LAPUTA KUJO Osaka, Osaka February 28, 2019 1,480 Not disclosed

(Note 2)

Imazaki Mansion N1 Higashiosaka,

Osaka February 28, 2019 1,180

Not disclosed

(Note 2)

Total 5 properties 7,755 ―

(Note 1) The acquisition prices represent the amount of consideration stated in the purchase agreements of real estate and the trust beneficiary interests in real estate. The acquisition price does not include the expenses related to the acquisition and consumption taxes. Furthermore, acquisition prices of less than one million yen are omitted.

(Note 2) This information is not disclosed as the seller’s consent to disclosure has not been obtained.

B. Transfer of Properties NIPPON REIT transferred trust beneficiary interests in real estate on February 26 and 27, 2019, as described below.

Property name Location Transfer date

Transfer price

(Yen in millions)

(Note 1)

Book value

(Yen in millions)

(Note 2)

Seller

FORECAST

Iidabashi

Chiyoda

ward, Tokyo

February 27,

2019 5,490 5,396

SHIMIZU

CORPORATION

my atria Meieki Nagoya,

Aichi

February 26,

2019 1,782 1,231

Not disclosed

(Note 3)

Total 2 properties 7,272 6,627 ―

(Note 1) The transfer prices represent the amount of consideration stated in the transfer agreements of real estate and the trust beneficiary interests in real estate. The transfer price does not include the expenses related to the transfer and consumption taxes. Furthermore, transfer prices of less than one million yen are omitted.

(Note 2) The book values represent the balance sheet amount as of December 31, 2018. Furthermore, book values of less than one million yen are omitted.

(Note 3) This information is not disclosed as the purchaser’s consent to disclosure has not been obtained.

C. Borrowing of Funds NIPPON REIT decided on February 18, 2019, to borrow funds of commencement day on February 18, 2019. This borrowing was used to acquire LAPUTA KUJO and Imazaki Mansion N1 described in “A. Acquisition of Properties” and also to cover its related costs.

Lender Amount

(Yen in million) Interest rate Fix / Floating

Repayment

due date Repayment method

MUFG Bank, Ltd. 700

Interest rate of

base rate plus

0.20% (Note 1)

Floating July 22, 2019 Lump-sum payment

at maturity (Note 2)

(Note 1) The first payment date was March 20, 2019, and the subsequent interest payment dates were and shall be the 20th day of every month (if the date is not a business day, then it shall be the next business day) and the principal repayment date. The base rate applicable to the interest payable on an interest payment date shall be the JBA one-month Japanese Yen TIBOR announced two business days prior to the interest payment date immediately preceding the respective interest payment date. In the event that the interest calculation period is more than one month or less than one month, the base rate corresponding to the interest calculation period shall be calculated using the method stipulated in the loan agreement.

(Note 2) NIPPON REIT can make early repayment of the borrowing, in whole or in part, if it gives prior written notice and other certain terms and conditions are met by the repayment date.

2. Overview of the Investment Corporation (1) Status of Investment Units

Period 9th fiscal period 10th fiscal period 11th fiscal period 12th fiscal period 13th fiscal period

December 31, 2016 June 30, 2017 December 31, 2017 June 30, 2018 December 31, 2018

Total number of investment units authorized

(Unit)

4,000,000 4,000,000 4,000,000 4,000,000 4,000,000

Total number of investment units issued and outstanding

(Unit)

391,760 391,760 391,760 391,760 449,930

Total unitholders’ capital (Note)

(Yen in millions) 109,285 109,285 109,285 109,285 126,515

Number of unitholders 24,814 22,653 19,723 18,897 16,347

(Note) Total unitholders’ capital is truncated to the nearest million yen.

(2) Matters Concerning Investment Units

The top 10 unitholders in terms of the percentage of investment units held as of December 31, 2018, are as follows:

Name Number of investment

units held (Unit)

Percentage of units held to the total number of units

issued and outstanding (%)

(Note)

Japan Trustee Services Bank, Ltd. (Trust Account) 100,401 22.31

The Master Trust Bank of Japan, Ltd. (Trust Account) 87,788 19.51

The Nomura Trust and Banking Co., Ltd. (Investment Trust Account) 17,873 3.97

Sojitz Corporation 15,500 3.44

Trust & Custody Service Bank, Ltd. (Securities Investment Trust Account) 13,663 3.04

STATE STREET BANK WEST CLIENT – TREATY 505234 7,113 1.58

SSBTC CLIENT OMNIBUS ACCOUNT 5,577 1.24

DFA INTERNATIONAL REAL ESTATE SECURITIES PORTFOLIO 5,055 1.12

JP MORGAN CHASE BANK 385771 4,902 1.09

STICHTING PENSIOENFONDS METAAL EN TECHNIEK 3,903 0.87

Total 261,775 58.18 (Note) Percentage of units held to the total number of units issued and outstanding is rounded to the second decimal place

and may not add up to the total.

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20 21

(3) Officers

The following table provides information about our executive and supervising officers, and independent auditor during the fiscal period under review:

Position Name Major concurrent position

Total compensation per title during the 8th

fiscal period (Yen in thousands)

(Note 1)

Executive Officer Toshio Sugita President & CEO, Sojitz REIT Advisors K.K. －

Supervising Officer Yasuhiro Shimada Partner,

Atsumi & Sakai 1,200

Hisashi Yahagi Representative council, Toranomon Partners

1,200

Independent Auditor KPMG A ZSA LLC － 33,000 （Note 2）

(Note 1) Total compensation for each position in the applicable business period has been truncated to the nearest thousand yen.

(Note 2) The fee of the independent auditor includes the audit fee of English financial statements and documentation preparation fee for the comfort letter for the issuance of global public offering in July 2018 and issuance of investment corporation bonds in November 2018.

(Note 3) Termination of the independent auditor is carried out in accordance with the Investment Trust Act. The Board of Officers of NIPPON REIT determines the refusal of reappointment of an independent auditor, factoring in various circumstances, including the quality of the audits performed and compensation for said audits.

(Note 4) In connection with the resignation of Masataka Nogi as a director (full-time) of Sojitz REIT Advisors K.K., NIPPON REIT resolved to cancel the election of substitute executive officer at the meeting of the Board of Officers.

(4) Asset Manager, Asset Custodian, and General Administrative Agent

NIPPON REIT’s asset manager, asset custodian, and general administrative agent as of December 31, 2018, are as follows:

Business Name

Asset Manager Sojitz REIT Advisors K.K.

Asset Custodian Mitsubishi UFJ Trust and Banking Corporation

General Administrative Agent (Transfer agent) Mitsubishi UFJ Trust and Banking Corporation

General Administrative Agent (Administrative work for organizational operation) Mitsubishi UFJ Trust and Banking Corporation

General Administrative Agent (Accounting administration) Mitsubishi UFJ Trust and Banking Corporation

General Administrative Agent (Administrative work for investment corporation bonds)

MUFG Bank, Ltd.

3. Portfolio of the Investment Corporation (1) Composition of Assets

Type of assets

Property type Area

12th fiscal period (June 30, 2018)

13th fiscal period (December 31, 2018)

Total amount held (Yen in millions)

(Note 1)

Ratio to total assets (%)

(Note 2)

Total amount held (Yen in millions)

(Note 1)

Ratio to total assets (%)

(Note 2)

Real estate

Office properties

Six central wards of Tokyo (Note 4) －－ 1,483 0.6

Real estate Total －－ 1,483 0.6

Real estate in trust (Note 3)

Office properties

Six central wards of Tokyo (Note 4)

129,287 56.0 138,562 51.5

Three major metropolitan areas (Note 5) (excluding six central wards of Tokyo)

53,580 23.2 57,828 21.5

Subtotal 182,868 79.3 196,391 73.0

Residential properties

Three major metropolitan areas (Note 5) (including six central wards of Tokyo)

19,909 8.6 41,607 15.5

Certain ordinance-designated and other cities (Note 6)

2,173 0.9 2,168 0.8

Subtotal 22,082 9.6 43,775 16.3

Retail properties ‐ 5,524 2.4 10,303 3.8

Real estate in trust Total 210,475 91.2 250,470 93.1

Investment securities (Note 7) 667 0.3 －－

Deposits and other assets 19,546 8.5 17,192 6.4

Total assets (Note 8) 230,689

(210,475)

100.0

(91.2)

269,146

(251,954)

100.0

(93.6) (Note 1) “Total amount held” represents the amount recorded on the balance sheets as of the end of the respective period (for

real estate in trust, book value less depreciation) and truncated to the nearest million yen. (Note 2) “Ratio to total assets” represents the percentage of the amount of respective assets recorded on the balance sheets to

total assets. Figures are rounded to one decimal place and may not add up to subtotals or the total. (Note 3) “Real estate in trust” excludes “Construction in progress in trust.” (Note 4) “Six central wards of Tokyo” refers to Chiyoda, Chuo, Minato, Shinjuku, Shibuya, and Shinagawa wards. (Note 5) “Three major metropolitan areas” refers to the Tokyo, Osaka, and Nagoya economic areas. “Tokyo economic area”

refers to the Tokyo metropolitan area, Kanagawa Prefecture, Chiba Prefecture, and Saitama Prefecture. “Osaka economic area” refers to Osaka Prefecture, Kyoto Prefecture, and Hyogo Prefecture. “Nagoya economic area” refers to Aichi Prefecture, Gifu Prefecture, and Mie Prefecture.

(Note 6) “Certain ordinance-designated and other cities” refers to Japanese cities that have been designated as ordinance-designated cities by order of the Cabinet under the Local Autonomy Law of Japan and that are located outside of the three major metropolitan areas (i.e., Sapporo, Sendai, Niigata, Shizuoka, Hamamatsu, Okayama, Hiroshima, Fukuoka, Kitakyushu, and Kumamoto) and also to prefectural capital cities that are located outside of the three major metropolitan areas.

(Note 7) “Investment securities” represents the equity interests in silent partnerships of Godo Kaisha Nicolas Capital 10, Godo Kaisha Nicolas Capital 11, NRT Growth 12 and NRT Growth 13 for the 12th fiscal period. There was no relevant information for the 13th fiscal period.

(Note 8) Figures in total assets shown in parentheses represent the portion corresponding to a substantive holding of real estate, etc., in total assets.

011_0601424551903.indd 20-21 2019/03/28 20:17:12

22 23

(2) Principal Assets Held The overview of principal assets held by NIPPON REIT as of December 31, 2018 (top 10 properties in terms of book value at the end of the period) is as follows:

Property name

Book value (Yen in

millions) (Note 1)

Total leasable area (m

2)

(Note 2)

Total leased area (m

2) (Note 3)

Occupancy rate (%) (Note 4)

Rate to total revenues from

property leasing (%) (Note 5)

Primary use

Omiya Center Building 15,500 14,311.77 14,311.77 100.0 6.3 Office

FORECAST Shinjuku SOUTH 14,848 13,875.04 13,875.04 100.0 7.1 Office

Tower Court Kitashinagawa 10,898 16,913.29 16,508.40 97.6 4.8 Residential

Shibakoen Sanchome Building 7,421 7,882.60 7,882.60 100.0 2.7 Office

FORECAST Gotanda WEST 7,232 8,981.55 8,981.55 100.0 2.8 Office

Homat Horizon Building 6,673 6,077.01 6,077.01 100.0 2.4 Office

FORECAST Shinjuku AVENUE 6,262 4,337.15 4,337.15 100.0 2.6 Office

FORECAST Sakurabashi 6,035 6,566.76 6,566.76 100.0 2.6 Office

FORECAST Takadanobaba 5,940 5,661.49 5,661.49 100.0 2.2 Office

FORECAST Iidabashi 5,396 4,066.50 4,066.50 100.0 1.6 Office

Total 86,211 88,673.16 88,268.27 99.5 35.0 (Note 1) “Book value” is truncated to the nearest million yen. (Note 2) “Total leasable area” is the total area of the relevant building that NIPPON REIT considers leasable based on relevant

lease agreements or floor plans. The same shall apply hereafter. (Note 3) “Total leased area” is the aggregate leased area described in the relevant lease agreements as of the fiscal period end.

For properties subject to pass-through master leases, total leased area is the aggregate of the leased areas indicated in the relevant sublease agreements with end-tenants as of the fiscal period end.

(Note 4) “Occupancy rate” is calculated by dividing total leased area by total leasable area as of the fiscal period end, and rounding that figure to the first decimal place.

(Note 5) “Rate to total revenues from property leasing” is rounded to the first decimal place and may not add up to the total.

(3) Description of Portfolio The overview of portfolio assets held by NIPPON REIT as of December 31, 2018, is as follows:

Property name Location (Indication of residential address)

Form of ownership Total leasable area (m

2)

Appraisal value (Yen in millions)

(Note 1)

Book value (Yen in millions)

(Note 2)

FORECAST Nishishinjuku 7-16-11 Nishi-Shinjuku, Shinjuku-ku, Tokyo

Trust beneficiary interest

1,945.68 3,010 2,151

Nihombashi Playa Building 1-9-12 Nihonbashi Hamacho, Chuo-ku, Tokyo


2,490.08 2,400 2,030

FORECAST Yotsuya 2-11-6 Yotsuya, Shinjuku-ku, Tokyo


1,678.15 1,860 1,379

FORECAST Shinjuku AVENUE 2-5-12 Shinjuku, Shinjuku-ku, Tokyo


4,337.15 7,890 6,262

FORECAST Ichigaya (Note 3)

3-29 Ichigaya Honmuracho, Shinjuku-ku, Tokyo


3,844.66 5,840 4,565

FORECAST Mita 1-3-31 Mita, Minato-ku, Tokyo


1,786.18 2,300 1,743

FORECAST Shinjuku SOUTH 4-3-17 Shinjuku, Shinjuku-ku, Tokyo


13,875.04 17,200 14,848

FORECAST Sakurabashi 4-5-4 Hatchobori, Chuo-ku, Tokyo


6,566.76 6,430 6,035

GreenOak Kayabacho 1-3-3 Shinkawa, Chuo-ku, Tokyo


2,995.35 3,350 3,000

GreenOak Kudan 1-11-5 Kudankita, Chiyoda-ku, Tokyo


2,594.46 3,300 2,904

GreenOak Takanawadai 2-26-10 Shirokanedai, Minato-ku, Tokyo


2,621.74 2,610 2,214

Higashi Ikebukuro Center Building

4-41-24 Higashi-Ikebukuro, Toshima-ku, Tokyo


4,219.65 2,970 2,703

Central Daikanyama 14-23 Daikanyamacho, Shibuya-ku, Tokyo


1,898.83 3,770 3,643

Hiroo Reeplex B’s 5-15-27 Minamiazabu, Minato-ku, Tokyo


1,500.85 3,290 2,869

Shibakoen Sanchome Building 3-1-38 Shibakoen, Minato-ku, Tokyo


7,882.60 9,680 7,421

FORECAST Iidabashi 3-11-13 Iidabashi, Chiyoda-ku, Tokyo


4,066.50 5,490 5,396

Kudankita 325 Building 3-2-5 Kudankita, Chiyoda-ku, Tokyo


2,007.07 2,100 1,942

FORECAST Uchikanda 1-3-3 Uchikanda, Chiyoda-ku, Tokyo


1,230.44 1,310 1,290

Itohpia Iwamotocho 2-chome Building

2-11-2 Iwamotocho, Chiyoda-ku, Tokyo


3,447.16 3,100 2,899




3,056.56 2,830 2,704

Itohpia Iwamotocho ANNEX Building



3,064.20 2,430 2,249

Pigeon Building 4-4 Hisamatsucho, Nihonbashi, Chuo-ku, Tokyo


3,022.25 2,970 2,944

FORECAST Ningyocho 2-13-9 Ningyocho, Nihonbashi, Chuo-ku, Tokyo


2,277.62 2,080 2,141

FORECAST Ningyocho PLACE 3-4-14 Ningyocho, Nihombashi, Chuo-ku, Tokyo


1,867.95 1,900 1,655

FORECAST Shin-Tokiwabashi 3-1-2 Nihombashi Hongokucho Chuo-ku, Tokyo


1,808.65 2,150 2,119

011_0601424551903.indd 22-23 2019/03/28 20:17:12

24 25



2)


(Note 1)


(Note 2)

Nishi-Shinjuku Sanko Building 7-22-35 Nishi-Shinjuku, Shinjuku-ku, Tokyo


2,479.80 2,370 2,242

Iidabashi Reeplex B’s 1-14 Shin- Ogawamachi, Shinjuku-ku, Tokyo


1,401.68 1,450 1,301

FORECAST Shinagawa 1-20-9 Kita-Shinagawa, Shinagawa-ku, Tokyo


2,276.36 2,350 2,397

Nishi-Gotanda 8-chome Building

8-3-16 Nishi- Gotanda, Shinagawa-ku, Tokyo


2,999.68 2,490 2,289

Towa Higashi-Gotanda Building 1-7-6 Higashi- Gotanda, Shinagawa-ku, Tokyo


2,939.16 2,240 2,077

FORECAST Takadanobaba 3-28-2 Takada, Toshima-ku, Tokyo


5,661.49 5,640 5,940

Mejiro NT Building 2-1-1 Mejiro, Toshima-ku, Tokyo


4,497.27 3,600 3,101

Toshin Higashi- Ikebukuro Building

5-44-15 Higashi-Ikebukuro, Toshima-ku, Tokyo


1,645.18 1,110 992

Mitsui Woody Building 2-4-14 Toyo, Koto-ku, Tokyo


4,006.20 2,690 2,688

Itabashi Honcho Building 36-1 Shimizucho, Itabashi-ku, Tokyo


6,356.89 3,450 3,120

ANTEX24 Building 1-1-14 Taito, Taito-ku, Tokyo


2,267.59 1,740 1,784

Itohpia Kiyosubashidori Building

1-38-9 Taito, Taito-ku, Tokyo


2,651.27 1,900 1,657

East Side Building 1-1-11 Yanagibashi, Taito-ku, Tokyo


2,096.92 1,560 1,385

I•S Minamimorimachi Building 2-6-5 Higashi-Temma, Kita-ku, Osaka, Osaka


4,164.82 2,630 2,326

Sunworld Building 1-6-2 Kita-Horie, Nishi-ku, Osaka, Osaka


3,012.86 1,280 1,289

Marunouchi Sanchome Building

3-14-32 Marunouchi, Naka-ku, Nagoya, Aichi


4,219.19 1,980 1,675

MK Kojimachi Building 4-2-1 Kojimachi, Chiyoda-ku, Tokyo


1,748.92 2,090 1,812

Toranomon Sakura Building

3-22-1 Toranomon, Minato-ku, Tokyo


3,049.79 4,460 4,288

La Verite Akasaka 1-5-7 Motoakasaka, Minato-ku, Tokyo


1,707.18 2,250 2,147

Kanda Ocean Building 1-15-2 Uchikanda, Chiyoda-ku, Tokyo


1,484.74 1,650 1,466

Shinto GINZA EAST 3-1-10 Tsukiji, Chuo-ku, Tokyo


1,206.28 1,460 1,357

FORECAST Kayabacho 1-10-14 Shinkawa, Chuo-ku, Tokyo


3,882.61 3,090 3,126

FORECAST Waseda FIRST

1-1 Babashitacho, Shinjuku-ku, Tokyo


4,340.66 4,920 4,822

FORECAST Gotanda WEST 8-9-5 Nishi- Gotanda, Shinagawa-ku, Tokyo


8,981.55 7,190 7,232

Omiya Center Building 1-9-6 Sakuragicho, Omiya-ku, Saitama, Saitama


14,311.77 19,000 15,500



2)


(Note 1)


(Note 2)

Sumitomo Mitsui Bank Koraibashi Building

2-1-1 Fushimicho, Chuo-ku, Osaka, Osaka


5,106.77 3,330 3,018

NORE Fushimi 1-16-7 Nishiki, Naka-ku, Nagoya, Aichi


3,857.58 3,230 2,754

NORE Meieki 1-3-18 Meiekiminami, Nakamura-ku, Nagoya, Aichi


4,280.75 2,930 2,459

Homat Horizon Building 5-6-2, Gobancho, Chiyoda-ku, Tokyo


6,077.01 7,130 6,673

Sannomiya First Building 3-2-11, Isobedori, Chuo-ku, Kobe, Hyogo


3,630.88 1,600 1,486

Towa Kandanishikicho Building 3-4-2, Kanda-nishikicho, Chiyoda-ku, Tokyo


1,324.07 1,000 972

Yusen Higashi-Nihombashi Ekimae Building

3-7-19, Higashi-nihombashi, Chuo-ku, Tokyo


1,620.54 1,230 1,170

Hiroo ON Building 5-19-9, Hiroo, Shibuya-ku, Tokyo


2,248.59 2,620 2,422

TK Gotanda Building 8-3-6, Nishi-gotanda, Shinagawa-ku,Tokyo


3,719.98 4,300 4,344

Gotanda Sakura Building 1-22-6, Higashi-gotanda, Shinagawa-ku,Tokyo Real estate 1,501.86 1,590 1,483

Esprit Kameido 2-36-12, Kameido, Koto-ku, Tokyo


2,010.81 1,290 1,281

Alte Building Higobashi 1-15-27, Edobori, Nishi-ku, Osaka, Osaka


3,482.92 1,570 1,473

DIA Building Meieki 3-8-7, Meieki, Nakamura-ku, Nagoya, Aichi


1,781.72 1,240 1,187

Tower Court Kitashinagawa 3-11-13 Kita-19Shinagawa, Shinagawa-ku, Tokyo


16,913.29 14,200 10,898

Sky Hills N11 2-4-10 Kita-Juichijo-Nishi, Kita-ku, Sapporo, Hokkaido


8,567.50 1,770 1,537

my atria Meieki 3-9-6 Meieki, Nakamura-ku, Nagoya, Aichi


2,890.70 1,540 1,231

my atria Sakae 1-29-26 Sakae, Naka-ku, Nagoya, Aichi


3,121.60 1,230 1,050

Mac Village Heian 2-24-88 Heian, Kita-ku, Nagoya, Aichi


2,250.00 889 750

Seam Dwell Tsutsui 3-28-25 Tsutsui, Higashi-ku, Nagoya, Aichi


1,800.00 771 688

Ciel Yakuin 2-7-35 Watanabe-Dori, Chuo-ku, Fukuoka, Fukuoka


1,544.87 740 630

Kanda Reeplex R’s 2-5-1 Kandatacho, Chiyoda-ku, Tokyo


2,180.93 1,990 1,756

Splendid Namba 2-1-23, Inari, Naniwa-ku, Osaka, Osaka


6,212.36 3,790 3,392

Residence Hiroo 5-1-10, Minami-azabu, Minato-ku, Tokyo


1,983.15 2,630 2,626

Residence Nihombashi Hakozaki

13-2, Nihombashi, Hakozaki, Chuo-ku, Tokyo


1,449.00 1,530 1,437

Primegate Iidabashi 6-36, Shin-ogawamachi, Shinjuku-ku, Tokyo


6,055.81 5,290 5,241

011_0601424551903.indd 24-25 2019/03/28 20:17:12

26 27

Property name Location (Indication of residential address) Form of ownership

Total leasable area (m2)


(Note 1)


(Note 2)

Residence Edogawabashi 4-22, Suidocho, Shinjuku-ku, Tokyo


1,246.42 1,260 1,247

Merveille Senzoku 1-10-1, Kitasenzoku, Ota-ku, Tokyo


841.26 743 752

Field Avenue 6-2-2, Ikegami, Ota-ku, Tokyo (Annex building: 6-2-1, Ikegami, Ota-ku, Tokyo)


3,092.63 3,110 3,140

Domeal Kitaakabane 1-14-20, Akabane-kita, Kita-ku, Tokyo


1,697.11 785 800

Dormy Kitaakabane 1-14-15, Akabane-kita, Kita-ku, Tokyo


2,471.42 997 1,002

Splendid Shin-Osaka III 2-1-11, Higashinakajima, Higashiyodogawa-ku, Osaka, Osaka


4,299.12 2,480 2,455

ZEPHYROS Minami-horie 1-16-16, Minami-horie, Nishi-ku, Osaka, Osaka


2,826.73 1,670 1,631

Charmant Fuji Osakajominami 3-3-8, Uchikyuhojimachi, Chuo-ku, Osaka, Osaka


1,512.00 906 919

Piacere Fuminosato 1-12-18, Hannancho, Abeno-ku, Osaka, Osaka


1,374.08 577 582

Otakibashi Pacifica Building 7-10-18 Nishi-Shinjuku, Shinjuku-ku, Tokyo


1,383.31 3,510 3,423

Komyoike Act 2-1-3 Kamotanidai, Minami-ku, Sakai, Osaka


6,173.41 2,190 2,081

BECOME SAKAE 3-32-6, Sakae, Naka-ku, Nagoya, Aichi


4,615.66 4,840 4,799

Total 306,621.28 279,348 251,954

(Note 1) “Appraisal value” represents the appraisal value as set forth on the relevant appraisal reports as of December 31, 2018, and truncated to the nearest million yen.

(Note 2) “Book value” is the value recorded on the balance sheets as of December 31, 2018 (for real estate and real estate in trust, acquisition price [including acquisition-related expenses] less depreciation expenses) and truncated to the nearest million yen.

(Note 3) For the concerned property, the name “FORECAST Ichigaya” is used for the first through seventh floors as a property for office use, and the name of “Eponoqu Ichigaya” is used for the eighth and ninth floors as a property for residential use. However, the entire property including the residential portion is named “FORECAST Ichigaya.”

The status of rental business related to properties held by NIPPON REIT is as follows:

Property name

12th fiscal period (From January 1, 2018 to June 30, 2018)

13th fiscal period (From July 1, 2018 to December 31, 2018)

Number of tenants

(as of the end of period) (Note 1)

Occupancy rate

(as of the end of period) (%)

(Note 2)

Revenues related to property leasing

(during the period) (Yen in

millions) (Note 3)

Rate to total revenues related to property

leasing (%) (Note 4)

Number of tenants


Occupancy rate


(Note 2)



millions) (Note 3)



FORECAST Nishishinjuku 17 100.0 88 1.2 17 100.0 90 1.1

Nihombashi Playa Building 2 100.0 80 1.1 1 84.6 72 0.9

FORECAST Yotsuya 13 100.0 54 0.8 13 100.0 53 0.6

FORECAST Shinjuku AVENUE

6 100.0 203 2.8 6 100.0 216 2.6

FORECAST Ichigaya 22 100.0 138 1.9 23 100.0 153 1.8

FORECAST Mita 5 100.0 63 0.9 5 100.0 65 0.8

FORECAST Shinjuku SOUTH

19 100.0 580 8.1 19 100.0 597 7.1

FORECAST Sakurabashi 5 100.0 219 3.1 5 100.0 216 2.6

GreenOak Kayabacho 8 100.0 95 1.3 8 100.0 96 1.1

GreenOak Kudan 3 100.0 98 1.4 3 100.0 99 1.2

GreenOak Takanawadai 10 93.4 81 1.1 11 100.0 82 1.0

Higashi Ikebukuro Center Building 6 100.0 123 1.7 6 100.0 131 1.6

Central Daikanyama 4 100.0 86 1.2 4 100.0 88 1.0

Hiroo Reeplex B’s 8 100.0 84 1.2 8 100.0 84 1.0

Shibakoen Sanchome Building

4 100.0 223 3.1 4 100.0 228 2.7

FORECAST Iidabashi 22 100.0 136 1.9 22 100.0 139 1.6

Kudankita 325 Building 8 100.0 56 0.8 8 100.0 62 0.7

FORECAST Uchikanda 5 100.0 42 0.6 5 100.0 41 0.5


10 100.0 98 1.4 10 100.0 99 1.2


9 100.0 84 1.2 9 100.0 85 1.0


6 100.0 77 1.1 6 100.0 78 0.9

Pigeon Building 1 100.0 Not

disclosed (Note 5)

Not disclosed (Note 5)

1 100.0 Not

disclosed (Note 5)


FORECAST Ningyocho 6 100.0 60 0.8 6 100.0 62 0.7

FORECAST Ningyocho PLACE

7 100.0 52 0.7 7 100.0 56 0.7

FORECAST Shin-Tokiwabashi

11 100.0 58 0.8 10 100.0 57 0.7

Nishi-Shinjuku Sanko Building

8 100.0 70 1.0 8 100.0 72 0.9

Iidabashi Reeplex B’s 6 100.0 44 0.6 6 100.0 44 0.5

FORECAST Shinagawa 6 100.0 71 1.0 6 100.0 66 0.8

Nishi-Gotanda 8-chome Building

8 100.0 81 1.1 8 100.0 80 1.0

Towa Higashi-Gotanda Building 7 100.0 70 1.0 7 100.0 75 0.9

FORECAST Takadanobaba 7 100.0 175 2.4 7 100.0 181 2.2

Mejiro NT Building 5 100.0 115 1.6 5 100.0 119 1.4

Toshin Higashi- Ikebukuro Building 3 100.0 41 0.6 2 84.7 45 0.5

Mitsui Woody Building 6 100.0 95 1.3 6 100.0 96 1.1

011_0601424551903.indd 26-27 2019/03/28 20:17:12

28 29

Property name



Number of tenants


Occupancy rate


(Note 2)



millions) (Note 3)



Number of tenants


Occupancy rate


(Note 2)



millions) (Note 3)



Itabashi Honcho Building 4 100.0 145 2.0 4 100.0 146 1.7

ANTEX24 Building 7 100.0 55 0.8 7 100.0 55 0.7


8 100.0 65 0.9 8 100.0 70 0.8

East Side Building 4 100.0 50 0.7 4 100.0 52 0.6

I•S Minamimorimachi Building

16 100.0 95 1.3 16 100.0 96 1.1

Sunworld Building 1 100.0 Not

disclosed (Note 6)


1 100.0 Not

disclosed (Note 6)


Marunouchi Sanchome Building 22 100.0 72 1.0 22 100.0 77 0.9

MK Kojimachi Building 8 90.8 51 0.7 7 81.6 48 0.6

Toranomon Sakura Building

12 100.0 110 1.5 12 100.0 114 1.4

La Verite Akasaka 6 100.0 58 0.8 6 100.0 58 0.7

Kanda Ocean Building 24 100.0 47 0.7 23 97.0 51 0.6

Shinto GINZA EAST 6 100.0 36 0.5 6 100.0 36 0.4

FORECAST Kayabacho 13 98.7 93 1.3 14 100.0 93 1.1

FORECAST Waseda FIRST 8 100.0 137 1.9 8 100.0 137 1.6

FORECAST Gotanda WEST 13 100.0 236 3.3 13 100.0 239 2.8

Omiya Center Building 28 100.0 504 7.0 28 100.0 532 6.3


23 100.0 126 1.8 27 100.0 99 1.2

NORE Fushimi 7 100.0 101 1.4 7 100.0 106 1.3

NORE Meieki 20 100.0 97 1.4 20 100.0 101 1.2

Homat Horizon Building 12 100.0 199 2.8 11 100.0 203 2.4

Sannomiya First Building 24 100.0 68 1.0 24 100.0 71 0.8

Towa Kandanishikicho Building

- - - - 5 100.0 35 0.4

Yusen Higashi-Nihombashi Ekimae Building

- - - - 8 100.0 37 0.4

Hiroo ON Building - - - - 3 100.0 70 0.8

TK Gotanda Building - - - - 8 100.0 100 1.2

Gotanda Sakura Building - - - - 10 100.0 47 0.6

Esprit Kameido - - - - 9 80.3 39 0.5

Alte Building Higobashi - - - - 11 100.0 64 0.8

DIA Building Meieki - - - - 10 100.0 59 0.7

Tower Court Kitashinagawa 277 99.6 405 5.6 272 97.6 407 4.8

Sky Hills N11 1 100.0 61 0.9 1 100.0 61 0.7

my atria Meieki 62 88.0 51 0.7 62 92.4 51 0.6

my atria Sakae 1 100.0 38 0.5 1 100.0 38 0.5

Mac Village Heian 1 100.0 27 0.4 1 100.0 28 0.3

Seam Dwell Tsutsui 1 100.0 24 0.3 1 100.0 24 0.3

Ciel Yakuin 41 97.7 23 0.3 42 100.0 26 0.3

Property name



Number of tenants


Occupancy rate


(Note 2)



millions) (Note 3)



Number of tenants


Occupancy rate


(Note 2)



millions) (Note 3)



Kanda Reeplex R’s 40 97.9 55 0.8 41 100.0 54 0.6

Splendid Namba 244 97.2 113 1.6 239 94.3 112 1.3

Residence Hiroo - - - - 53 98.2 61 0.7


- - - - 1 100.0 Not

disclosed (Note 6)


Primegate Iidabashi - - - - 66 100.0 141 1.7

Residence Edogawabashi - - - - 37 100.0 31 0.4

Merveille Senzoku - - - - 27 96.8 19 0.2

Field Avenue - - - - 57 100.0 74 0.9

Domeal Kitaakabane - - - - 1 100.0 Not

disclosed (Note 6)


Dormy Kitaakabane - - - - 1 100.0 Not

disclosed (Note 6)


Splendid Shin-Osaka III - - - - 152 98.6 73 0.9

ZEPHYROS Minami-horie - - - - 68 95.1 47 0.6

Charmant Fuji Osakajominami

- - - - 62 98.4 25 0.3

Piacere Fuminosato - - - - 43 98.0 18 0.2

Otakibashi Pacifica Building 7 90.8 92 1.3 9 100.0 88 1.0

Komyoike Act 25 99.0 140 2.0 26 96.9 142 1.7

BECOME SAKAE - - - - 11 100.0 135 1.6

Total 1,239 99.5 7,177 100.0 1,878 99.1 8,458 100.0

(Note 1) “Number of tenants” is the aggregate number of tenants as described in the relevant lease agreements for respective properties as of the end of respective periods, excluding warehouses, signboards, and parking lots. For properties subject to a pass-through master lease, the number of tenants is the total number of end-tenants, except for certain pass-through master leases under which properties are leased en bloc to a sublessee who pays a fixed amount of rent to the master lessee, for which we consider the number of tenants to be one.

(Note 2) “Occupancy rate” is rounded to the first decimal place. (Note 3) “Revenues related to property leasing” is truncated to the nearest million yen. (Note 4) “Rate to total revenues related to property leasing” is rounded to the first decimal place, and may not add up to 100%. (Note 5) This information is not disclosed as tenants’ consent to disclosure has not been obtained. (Note 6) This information is not disclosed as sublessees’ consent to disclosure has not been obtained.

(4) Contract Amount and Market Value for Specific Transactions

Category Type Contract amount (Yen in thousands) (Note 1) Market value (Yen in

thousands) (Note 2) Due after 1 year

Off-market transactions Interest rate swap Receive floating / Pay fix

111,100,000 90,200,000 △267,902

(Note 3)

Total 111,100,000 90,200,000 △267,902 (Note 1) ”Contract amount” is based on the notional principal. Figures are truncated to the nearest thousand yen. (Note 2) “Market value” is based on the price indicated by the financial institution managing the transaction. Figures are

truncated to the nearest thousand yen. (Note 3) With regard to the “Interest rate swap Receive floating / Pay fix” transaction for which special treatment is applied in

accordance with the “Accounting Standards for Financial Instruments”, such market value is not included in the balance sheet.

011_0601424551903.indd 28-29 2019/03/28 20:17:13

30 31

(5) Other Assets Beneficiary interests in trust assets comprised mainly of real estate are presented earlier in this report under “(3) Description of Portfolio.” Aside from the assets presented in “(3) Description of Portfolio,” NIPPON REIT has no major investment assets other than those included in its portfolio as of December 31, 2018.

(6) Holding of Assets by Country and Region NIPPON REIT does not own assets outside of Japan.

4. Capital Expenditure for Properties Held

(1) Schedule of Capital Expenditures The following are the main capital expenditures NIPPON REIT plans to implement during the 14th fiscal period accompanying planned renovations and repairs for those properties held. The following scheduled construction amount includes the portion charged to expenses in accounting:

Property name Location Purpose Schedule

Scheduled construction amount (Yen in millions) (Note)

Total

Amount to be paid in the current

fiscal period

Amount already

paid


Shinjuku Ward, Tokyo

Roof painting repair

From January 2019 to June 2019 14 －－

CENTRAL Daikanyama

Shibuya Ward, Tokyo

Major repair and maintenance


FORECAST Uchikanda

Chiyoda Ward, Tokyo

Basement leasable area expansion



Chiyoda Ward, Tokyo

Exterior wall repair

From November 2018 to June 2019 68 －－

Mitsui Woody Building

Koto Ward, Tokyo

Substation renovation



Taito Ward, Tokyo

Ventilation system and lighting renewal


Sunworld Building Osaka, Osaka

Mechanical parking facility maintenance


Marunouchi Sanchome Building

Nagoya, Aichi

Whole building renewal


FORECAST Gotanda WEST

Shinagawa Ward, Tokyo

Whole building renewal (No.4)


Homat Horizon Building

Chiyoda Ward, Tokyo

Total heat exchanger renewal


BECOME SAKAE Nagoya, Aichi

Renewal work at 7th floor


(Note) The scheduled construction amount is truncated to the nearest million yen.

(2) Capital Expenditures during the Period Below are the main capital expenditures that NIPPON REIT used to carry out construction in the fiscal period under review. In the fiscal period ended December 31, 2018 (13th period), capital expenditures totaled 1,420 million yen. With the addition of 182 million yen posted as expenses for renovations and repairs, total capital expenditures for construction came to 1,602 million yen.

(Note) Capital expenditures are truncated to the nearest million yen.

Property name Location Purpose Period

Capital expenditures

(Yen in millions) (Note)


Shinjuku Ward, Tokyo

Electrical equipment repair (stage 2)

From August 2018 to August 2018 15

Ventilation system renewal (stage 3)

From July 2018 to July 2018 11

Hiroo Reeplex B’s Minato Ward, Tokyo Elevator renewal From October 2018

to October 2018 13


Chiyoda Ward, Tokyo Exterior wall repair From June 2018

to November 2018 68


Chiyoda Ward, Tokyo Exterior wall repair From March 2018

to August 2018 55

Pigeon Building Chuo Ward, Tokyo Exterior wall repair From May 2018

to December 2018 33

FORECAST Takadanobaba

Toshima Ward, Tokyo

Ventilation system renewal From September 2018 to December 2018 66

Installation of LED lighting From September 2018 to December 2018 21

Mitsui Woody Building Koto Ward, Tokyo

Ventilation system renewal for 2nd floor, installation of LED lighting

From October 2018 to December 2018 71


Taito Ward, Tokyo Elevator renewal From November 2018

to December 2018 15

I•S Minamimorimachi Building

Osaka, Osaka Ventilation system renewal From August 2018

to December 2018 73

FORECAST Gotanda WEST

Shinagawa Ward, Tokyo

Equipment renewal (stage 3)

From July 2018 to December 2018 289


Osaka, Osaka

Ventilation system renewal on 3rd, 5th, 8th and 9th floors

From August 2018 to August 2018 35

Ventilation system renewal From November 2018 to December 2018 90

NORE Meieki Nagoya, Aichi Security system renewal From December 2018

to December 2018 10

Homat Horizon Building

Chiyoda Ward, Tokyo

Restroom renewal from 1st to 8th floors

From April 2018 to August 2018 73

Exterior wall repair From July 2018 to December 2018 54

Sannomiya First Building

Kobe, Hyogo Ventilation system renewal From September 2018

to December 2018 78

Sky Hills N11 Sapporo, Hokkaido

Installation of internet system and security system

From November 2018 to December 2018 10


Chuo Ward, Tokyo Whole building renewal From July 2018

to August 2018 70

Komyoike Act Sakai, Osaka

Fire alarm receiver renewal

From June 2018 to December 2018 12

Other capital expenditures 247

Total 1,420

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(3) Cash Reserves for Long-Term Repairs and Maintenance Plans Based on a long-term repair and maintenance plan compiled for each property, NIPPON REIT sets aside the following cash reserves from cash flows during the fiscal period in order to provide the payment of funds for major repairs and maintenance, etc., over the medium to long term:

(Yen in thousands)

Operating period 9th fiscal period

From July 1, 2016 to December 31, 2016

10th fiscal period From January 1, 2017

to June 30, 2017

11th fiscal period From July 1, 2017


12th fiscal period From January 1, 2018

to June 30, 2018

13th fiscal period From July1, 2018

to December 31, 2018 Balance of reserves at the beginning of the period

694 687 747 121 27

Amount of reserves during the period 458 456 460 800 1,700 Amount of reversal of reserves during the period

466 396 1,086 893 1,420

Reserves carried forward 687 747 121 27 307

(Note) Figures in the above table are truncated to the nearest million yen.

5. Expenses and Liabilities (1) Expenses in Connection with Management of Assets

(Yen in thousands)

Item 12th fiscal period

From January 1, 2018 to June 30, 2018

13th fiscal period From July 1, 2018


(a) Asset management fees (Note 1) 536,111 566,187

(b) Asset custody fees 13,014 13,241

(c) Administrative service fees 46,767 47,578

(d) Directors’ compensation 2,400 2,400

(e) Independent auditors’ fees 15,000 13,500

(f) Other operating expenses 111,812 135,996

Total 725,104 778,903

(Note 1) In addition to the amount shown above for asset management fees, there were management fees related to the acquisition of properties included in the book value of respective properties (12th fiscal period: 1,650 thousand yen, 13th fiscal period: 336,625 thousand yen), and for the transfer of trust beneficiary interest.

(Note 2) Figures in the table above are truncated to the nearest thousand yen.

(2) Debt Financing The status of borrowing per financial institution as of December 31, 2018, is as follows:

Classification

Borrowing date

Balance at the beginningof the period

(Yen in millions) (Note 1)

Balance at the end of the period


Average interest rate (%) (Note 2)

Repayment due date

Method of repayment Use Note

Lender

Short-term debt

MUFG Bank, Ltd. September 28, 2017 2,600 - 0.25 August 20,

2018

Lump-sum repayment at maturity

(Note 3) Unsecured Unguaranteed

Subtotal 2,600 -

Current portion of long-

term debt

MUFG Bank, Ltd. January 8, 2015 5,700

- 0.22 (Note 4)

August 20, 2018



Mizuho Bank, Ltd.

February 12, 2015

500 -

0.22 (Note 4)

August 20, 2018



Sumitomo Mitsui Banking Corporation 600 -

Resona Bank, Limited 1,000 -

Sumitomo Mitsui Trust Bank, Limited 1,000 -

Shinsei Bank, Limited. 1,000 -

Mizuho Trust & Banking Co., Ltd. 1,000 -

MUFG Bank, Ltd. April 24, 2014 1,070 1,070 0.91 April 24,

2019



MUFG Bank, Ltd.

April 24, 2015

2,300 2,300

0.51 (Note 4)

April 24, 2019


(Note3) Unsecured Unguaranteed

Mizuho Bank, Ltd. 1,100 1,100

MUFG Bank, Ltd. 1,500 1,500 Sumitomo Mitsui Banking Corporation 1,250 1,250

Resona Bank, Limited 500 500

SumitomoMitsuiTrust Bank, Limited 1,250 1,250

Shinsei Bank, Limited 500 500 Mizuho Trust & Banking Co., Ltd. 500 500

Aozora Bank, Ltd. 500 500 The Nomura Trust and Banking Co., Ltd. 500 500

MUFG Bank, Ltd.

July 2, 2015

- 2,500

0.54 (Note 4)

July 22, 2019



Mizuho Bank, Ltd. - 2,000

MUFG Bank, Ltd. - 2,000

Sumitomo Mitsui Banking Corporation

- 1,500

Resona Bank, Limited - 1,000

Sumitomo Mitsui Trust Bank, Limited

- 500

Shinsei Bank, Limited - 750

Mizuho Trust & Banking Co., Ltd.

- 750

Subtotal 21,770 21,970

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Classification

Borrowing date






Repayment due date


Lender

Long-term debt

MUFG Bank, Ltd.

July 2, 2015

2,500 -

0.54 (Note 4)

July 22, 2019



Mizuho Bank, Ltd. 2,000 -

MUFG Bank, Ltd. 2,000 -

Sumitomo Mitsui Banking Corporation 1,500 -

Resona Bank, Limited 1,000 -

Sumitomo Mitsui Trust Bank, Limited 500 -

Shinsei Bank, Limited 750 -

Mizuho Trust & Banking Co., Ltd. 750 -

MUFG Bank, Ltd. July 3, 2018 - -

(Note 5) 0.46 August 20, 2019 (Note 5)

Lump-sum repayment at maturity (Note 5)


MUFG Bank, Ltd.

February 12, 2015

2,500 2,500

0.85 February 20, 2020



Mizuho Bank, Ltd. 500 500

MUFG Bank, Ltd. 1,000 1,000


Sumitomo Mitsui Trust Bank, Limited 500 500

Shinsei Bank, Limited 500 500

Mizuho Trust & Banking Co., Ltd. 500 500

MUFG Bank, Ltd. March 12, 2015 3,500 3,500 0.84 February 20,

2020



MUFG Bank, Ltd.

July 2, 2015

2,000 2,000

0.65 (Note 4)

July 21, 2020





Sumitomo Mitsui Banking Corporation 500 500



Shinsei Bank, Limited 1,750 1,750

Mizuho Trust & Banking Co., Ltd. 1,750 1,750

MUFG Bank, Ltd.

April 25, 2016

2,000 2,000

0.36 (Note 4)

April 20, 2021




MUFG Bank, Ltd. 500 500

Sumitomo Mitsui Banking Corporation 2,500 2,500


Development Bank of Japan Inc. 1,000 1,000

Classification

Borrowing date






Repayment due date


Lender

Long-term debt

MUFG Bank, Ltd.

August 22, 2016

4,000 4,000

0.38 (Note 4)

August 20, 2021





Resona Bank, Limited 1,000 1,000

Shinsei Bank, Limited 500 500

Mizuho Trust & Banking Co., Ltd. 500 500

MUFG Bank, Ltd.

July 3, 2018

- 2,850

0.41 (Note 4)

August 22, 2022



Mizuho Bank, Ltd. - 1,400

Sumitomo Mitsui Banking Corporation - 700

Resona Bank, Limited - 550

Sumitomo Mitsui Trust Bank, Limited - 300


Mizuho Trust & Banking Co., Ltd. - 350

Aozora Bank, Ltd. - 250

The Nomura Trust and Banking Co., Ltd. - 250

MUFG Bank, Ltd. February 12, 2015 500 500 1.24 February 20,

2023



MUFG Bank, Ltd.

April 24, 2017

1,700 1,700

0.48 (Note 4)

April 20, 2023







MUFG Bank, Ltd.

August 21, 2017

1,600 1,600

0.50 (Note 4)

August 21, 2023







Development Bank of Japan Inc. 400 400

MUFG Bank, Ltd.

July 3, 2018

- 2,900

0.48 (Note 4)

August 21, 2023



Mizuho Bank, Ltd. - 800






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Classification

Borrowing date






Repayment due date


Lender

Long-term debt

MUFG Bank, Ltd.

April 24, 2017

1,900 1,900

0.56 (Note 4)

April 22, 2024






MUFG Bank, Ltd.

April 24, 2018

500 500

0.52 (Note 4)

April 22, 2024


(Note3) Unsecured Unguaranteed




MUFG Bank, Ltd.

August 21, 2017

1,400 1,400

0.58 (Note 4)

August 20, 2024








MUFG Bank, Ltd.

July 3, 2018

- 1,050

0.54 (Note 4)

August 20, 2024








MUFG Bank, Ltd.

August 20, 2018

- 1,950

0.57 (Note 4)

August 20, 2024






Shinsei Bank, Limited. - 600


Mizuho Bank, Ltd. July 3, 2018 - 1,000 0.58

(Note 4) January 20,

2025



MUFG Bank, Ltd.

April 24, 2017

1,400 1,400

0.70 (Note 4)

April 21, 2025






MUFG Bank, Ltd.

April 24, 2018

700 700

0.61 (Note 4)

April 21, 2025




Sumitomo Mitsui Banking Corporation 500 500



Classification

Borrowing date






Repayment due date


Lender

Long-term debt

MUFG Bank, Ltd.

August 21, 2017

1,200 1,200

0.71 (Note 4)

August 20, 2025








MUFG Bank, Ltd.

July 3, 2018

- 1,500

0.63 (Note 4)

August 20, 2025






Development Bank of Japan Inc. - 400

MUFG Bank, Ltd.

August 20, 2018

- 3,000

0.68 (Note 4)

August 20, 2025






Shinsei Bank, Limited. - 200


MUFG Bank, Ltd.

April 24, 2018

200 200

0.75 (Note 4)

April 20, 2026


(Note 3) Unsecured Unguaranteed Resona Bank, Limited 200 200


Meiji Yasuda Life Insurance Company

April 24, 2018 500 500 0.70 April 20,

2026



MUFG Bank, Ltd.

August 20, 2018

- 3,650

0.83 (Note 4)

August 20, 2026








MUFG Bank, Ltd. April 24, 2018

1,000 1,000 0.96 (Note 4)

April 20, 2028


(Note 3) Unsecured Unguaranteed Mizuho Bank, Ltd. 200 200

Subtotal 79,800 100,700

Total 104,170 122,670

(Note 1) “Balance at the beginning of the period” and “Balance at the end of the period” are truncated to the nearest million yen. (Note 2) “Average interest rate” is the weighted-average interest rate during the period, rounded to the second decimal place. (Note 3) Used for acquisition of assets, repayment of loans, and related expenses deemed reasonable (Note 4) Interest rate swap agreement is concluded and the interest rate is substantively fixed. Therefore, the effect of interest

rate swap is factored into the interest rate provided. (Note 5) Early repayment was made in full (1,500 million yen) on December 7, 2018.

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(3) Investment Corporation Bonds The status of investment corporation bonds as of December 31, 2018, is as follows:

Name Issuance date

Balance at the beginning of the period


Balance at the end of the

period (Yen in millions) (Note 1)

Interest rate (％)

Redemption date Redemption method Use Note

NIPPON REIT 1st unsecured bonds

April 24, 2018 1,000 1,000 0.54 April 24,

2025


(Note 1) (Note 2)

NIPPON REIT 2nd unsecured bonds

April 24, 2018 1,000 1,000 0.70 April 24,

2028


(Note 1) (Note 2)

NIPPON REIT 3rd unsecured bonds

November 30, 2018 - 1,500 0.88 November 30,

2028


(Note 1) (Note 2)

Total 2,000 3,500

(Note 1) Use as the funds for part of repayment of loans (Note 2) The bond is subject to the pari passu clause among specified investment corporation bonds.

(4) Status of Short-Term Investment Corporation Bonds Not applicable

(5) Status of Unit Acquisition Rights Not applicable

6. Status of Purchases and Sales during the 13th Fiscal Period (1) Status of Purchases and Sales of Real Estate, Asset-Backed Securities, Infrastructure Assets, and

Infrastructure-Related Assets

Property name

Acquisition Transfer

Date of acquisition

Acquisition price (Yen in

millions) (Note)

Date of transfer

Transfer price (Yen in

millions)


Gain or loss on (Yen in millions)

Towa Kandanishikicho Building July 3, 2018 960 －－－－

Yusen Higashi-nihombashi Ekimae Building July 3, 2018 1,152 －－－－

Hiroo ON Building July 3, 2018 2,392 －－－－

TK Gotanda Building July 3, 2018 4,130 －－－－

Gotanda Sakura Building July 3, 2018 1,460 －－－－

Esprit Kameido July 3, 2018 1,265 －－－－

Alte Building Higobashi July 3, 2018 1,453 －－－－

DIA Building Meieki July 3, 2018 1,167 －－－－

Residence Hiroo July 3, 2018 2,590 －－－－

Residence Nihombashi Hakozaki July 3, 2018 1,300 －－－－

Primegate Iidabashi July 3, 2018 5,200 －－－－

Residence Edogawabashi July 3, 2018 1,230 －－－－

Merveille Senzoku July 3, 2018 740 －－－－

Field Avenue July 3, 2018 3,110 －－－－

Domeal Kitaakabane July 3, 2018 785 －－－－

Dormy Kitaakabane July 3, 2018 986 －－－－

Splendid Shin-Osaka III July 3, 2018 2,428 －－－－

ZEPHYROS Minami-horie July 3, 2018 1,608 －－－－

Charmant Fuji Osakajominami July 3, 2018 905 －－－－

Piacere Fuminosato July 3, 2018 571 －－－－

BECOME SAKAE July 3, 2018 4,770 －－－－

Total － 40,202 －－－－

(Note) “Acquisition price” does not include acquisition-related expenses. Figures have been truncated to the nearest million yen.

(2) Transaction of Other Assets Other assets, aside from previously mentioned real estate, asset-backed securities, infrastructure assets, and infrastructure-related assets consist mainly of bank deposits and bank deposits included in the trust asset deposits.

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(3) Review on Value of Specified Assets A. Real estate

Acquisition or transfer Name Transaction

date Type of asset

Acquisition price or

transfer price (Yen in millions) (Note 1) (Note 2)

Appraisal value (Yen in millions) (Note 2)

Appraiser Appraisal date

Acquisition Towa Kandanishikicho Building July 3, 2018 Trust Beneficiary

Interest 960 1,000 Japan Real

Estate Institute May 1, 2018

Acquisition Yusen Higashi-nihonbashi Ekimae Building

July 3, 2018 Trust Beneficiary Interest 1,152 1,210 Japan Real


Acquisition Hiroo ON Building July 3, 2018 Trust Beneficiary Interest 2,392 2,510 Japan Real


Acquisition TK Gotanda Building July 3, 2018 Trust Beneficiary Interest 4,130 4,300 Japan Real


Acquisition Gotanda Sakura Building July 3, 2018 Real estate 1,460 1,500

Japan Real Estate Institute May 1, 2018

Acquisition Esprit Kameido July 3, 2018 Trust Beneficiary Interest 1,265 1,280 Japan Real


Acquisition Alte Building Higobashi July 3, 2018 Trust Beneficiary Interest 1,453 1,560

JLL Morii Valuation &

Advisory K.K. May 1, 2018

Acquisition DIA Building Meieki July 3, 2018 Trust Beneficiary Interest 1,167 1,240



Acquisition Residence Hiroo July 3, 2018 Trust Beneficiary Interest 2,590 2,630

DAIWA REAL ESTATE

APPRAISAL CO.,LTD.

May 1, 2018

Acquisition Residence Nihombashi Hakozaki July 3, 2018 Trust Beneficiary

Interest 1,300 1,300 Japan Real


Acquisition Primegate Iidabashi July 3, 2018 Trust Beneficiary Interest 5,200 5,200 Japan Real


Acquisition Residence Edogawabashi July 3, 2018 Trust Beneficiary

Interest 1,230 1,250 JLL Morii

Valuation & Advisory K.K.

May 1, 2018

Acquisition Merveille Senzoku July 3, 2018 Trust Beneficiary Interest 740 740



Acquisition Field Avenue July 3, 2018 Trust Beneficiary Interest 3,110 3,110

Japan Real Estate Institute May 1, 2018

Acquisition Domeal Kitaakabane July 3, 2018 Trust Beneficiary Interest 785 785 Japan Real


Acquisition Dormy Kitaakabane July 3, 2018 Trust Beneficiary Interest 986 995 Japan Real


Acquisition Splendid Shin-Osaka III July 3, 2018 Trust Beneficiary Interest 2,428 2,470

DAIWA REAL ESTATE

APPRAISAL CO.,LTD.

May 1, 2018

Acquisition ZEPHYROS Minami-horie July 3, 2018 Trust Beneficiary

Interest 1,608 1,670

DAIWA REAL ESTATE

APPRAISAL CO.,LTD.

May 1, 2018

Acquisition Charmant Fuji Osakajominami July 3, 2018 Trust Beneficiary

Interest 905 906

DAIWA REAL ESTATE

APPRAISAL CO.,LTD.

May 1, 2018

Acquisition Piacere Fuminosato July 3, 2018 Trust Beneficiary Interest

571 575

DAIWA REAL ESTATE

APPRAISAL CO.,LTD.

May 1, 2018

Acquisition BECOME SAKAE July 3, 2018 Trust Beneficiary Interest

4,770 4,800 Japan Real


(Note 1) “Acquisition price or transfer price” does not include acquisition or transfer-related expenses, property tax, city planning tax and consumption tax, etc.

(Note 2) Figures have been truncated to the nearest million yen. (Note 3) The above appraisal was conducted in accordance with the “Japanese Real Estate Appraisal Standards, Detailed

exposition Chapter 3 Appraisal regarding price of securitized real estate.”

B. Others Name of the investigator KPMG AZSA LLC

Summary of the result and investigation method: Transactions that have been investigated during the applicable period from July 1, 2018, to December 31, 2018, consisted of 3 interest rate swap transactions. Regarding the interest rate swap transactions, KPMG AZSA LLC is entrusted with the investigation of comparable prices, name of the counterparty, the agreed figures, the transaction period, and other details regarding the relevant interest rate swap transactions, as stipulated on Article 201 of the Investment Trust Act and an Agreed-Upon Procedures Reports on such transactions based on Practical Guidelines for Specialized Operations 4460 “Practical Guidelines for Agreed-Upon Procedures Pertaining to Investigation into the Value, etc., of Specified Assets of Investment Trusts and Investment Corporations” published by the Japanese Institute of Certified Public Accountants were received. Furthermore, the investigation is not part of the financial statement audit, and does not ensure the validity of the price and internal control systems.

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(4) Related Party Transactions A. Status of Transactions

Classification Purchase price or Sales price, etc. (Note 1)

Purchase price, etc. (Yen in millions) Sales price, etc. (Yen in millions)

Total 40,202 －

Breakdown of transaction status with related party (Note 2)

Godo Kaisha NRT Growth 12 13,080 (32.5%) － (－%)

Total 13,080 (32.5%) － (－%)

B. Amount of Fees Paid

Classification Total amount paid (A)

(Yen in thousands) (Note 4)

Breakdown of transactions with related parties (Note 2) Rate to total amount

paid (B/A) (Note 5) Payment recipient Amount paid (B) (Yen in

thousands) (Note 4)

Property management fees 576,734 Sojitz General Property Management Corporation 290,860 50.4%

Other property-related expenses 255,668 Sojitz General Property Management

Corporation 30,805 12.0% (Note 1) “Transaction prices” does not include acquisition-related expenses, property tax, city planning tax and consumption tax,

etc. Figures have been truncated to the nearest million yen. (Note 2) In accordance with the Order for Enforcement of the Investment Trusts Act and Articles 26 and 27 of the Investment

Trust Association of Japan’s rules related to management reports for investment trusts and investment corporations, “related parties” are defined as the related parties of the asset management company that have entered into an asset management contract with NIPPON REIT.

(Note 3) The above tables include related party transactions as stipulated by Rules on Related Party Transactions of the asset management company in addition to the related party transactions during the fiscal period under review.

(Note 4) “Total amount paid” and “Amount paid” have been truncated to the nearest thousand yen. (Note 5) “Rate to total amount paid” has been rounded to the first decimal place. (Note 6) The following are fees paid to the related parties in the fiscal period under review other than those listed above and

commission fees. Note that the amount is truncated to the nearest thousand yen.

Sojitz General Property Management Corporation

Repair work (in addition to repair expenses, this also includes capital expenditures)

497,941 thousand yen

(5) Status of Transactions with Asset Management Company Pertaining to Business Operated by the Asset Management Company as a Subsidiary Business

Not applicable because the asset management company does not engage in any business as a subsidiary business that is a type-I financial instruments business, type-II financial instruments business, real estate brokerage, or real estate specified joint enterprise.

7. Accounting (1) Status of Assets, Liabilities, Principal, and Profit / Loss Please refer to “Balance Sheets,” “Statements of Income and Retained Earnings,” “Statements of Change in Net Assets,” “Notes to Financial Statements,” and “Note 20. Distribution Information.” (2) Changes in Method to Calculate Depreciation Expenses Not applicable (3) Changes in Method to Evaluate Properties and Infrastructure Assets Not applicable (4) Status of Beneficiary Certificates of Investment Trust Established by NIPPON REIT Not applicable (5) Disclosures as a Corporation Holding Real Estate Overseas and Relating to Real Estate Held by a

Corporation Holding Real Estate Overseas Not applicable

8. Other

(1) Notice The overview of conclusions and changes, etc., of major contracts approved by meeting of the Board of Officers of NIPPON REIT during the fiscal period under review is as follows:

Approval date Subject Description

September 28, 2018 Signed an amendment to the sponsor support agreement

Resolved the conclusion of the amendment to the sponsor support agreement between the asset management company and Cushman & Wakefield Asset Management K.K. on September 28, 2018.

October 26, 2018 Signed a General administrative agreement regarding Investment Corporation Bonds

Concerning issuance of Investment corporation bonds, resolved the conclusion of the following contracts, etc.: A. The underwriting contract for the NIPPON

REIT 3rd unsecured bonds among the Investment Corporation, Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Mizuho Securities Co. Ltd. and SMBC Nikko Securities Inc.

B. The Financial Agency Agreement for the NIPPON REIT 3rd unsecured bonds MUFG Bank, Ltd.

(2) Other Unless otherwise stated, monetary amounts are truncated and percentages are rounded off to the nearest specified unit in this report.

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44 45

NIPPON REIT Investment Corporation BALANCE SHEETS

As of June 30, 2018 and December 31, 2018

As of June 30, 2018 December 31, 2018 (Yen in thousands) Assets Current Assets:

Cash and deposits (Notes 5 and 6) ¥ 12,032,033 ¥ 8,981,536 Cash and deposits in trust (Notes 5 and 6) 6,105,500 5,964,196 Tenant receivables 87,585 88,158 Prepaid expenses 374,967 437,146 Income taxes refundable 9,865 1,065 Consumption taxes refundable – 496,617 Other current assets 14,661 5,842

Less: allowance for doubtful accounts (0) (0) Total Current Assets 18,624,613 15,974,563

Investment Properties (Notes 7 and 8): Buildings – 234,960

Land in trust (Note 9) 149,411,625 180,791,041 Buildings in trust (Note 10) 50,843,163 59,444,603 Structures in trust 171,631 197,330 Machinery and equipment in trust 345,584 357,904 Tools, furniture and fixtures in trust 92,852 122,424 Construction in progress in trust 72,898 5,256

Less: accumulated depreciation (6,205,501) (7,110,510) Leasehold rights – 1,251,662 Leasehold rights in trust 15,806,402 16,658,938 Other intangible assets 9,841 5,835 Total Investment Properties, net 210,548,497 251,959,446

Other Assets: Investment securities (Note 6) 667,069 – Lease and guarantee deposits 10,110 10,160 Long-term prepaid expenses 781,528 1,129,373 Deferred investment corporation bond issuance costs 20,320 35,152 Deferred tax assets (Note 18) – 0 Others 37,046 38,290 Total Other Assets 1,516,075 1,212,978

Total Assets ¥ 230,689,186 ¥ 269,146,988 The accompanying notes are an integral part of these financial statements.

NIPPON REIT Investment Corporation BALANCE SHEETS

As of June 30, 2018 and December 31, 2018

As of June 30, 2018 December 31, 2018 (Yen in thousands) Liabilities Current Liabilities:

Short-term debt (Notes 6 and 15) ¥ 2,600,000 ¥ – Long-term debt due within one year (Notes 6 and 15) 21,770,000 21,970,000 Accounts payable 1,251,212 1,539,384 Accrued expenses 217,659 247,820 Accrued consumption taxes 40,897 – Advances received 1,227,838 1,391,630 Other current liabilities 1,246,730 588,439 Total Current Liabilities 28,354,338 25,737,275

Long-Term Liabilities: Investment corporation bonds (Notes 6 and 16) 2,000,000 3,500,000 Long-term debt (Notes 6 and 15) 79,800,000 100,700,000 Tenant security deposits – 65,153 Tenant security deposits in trust (Note 6) 7,894,084 8,766,512 Deferred tax liabilities (Note 18) 891 – Total Long-Term Liabilities 89,694,976 113,031,666

Total Liabilities 118,049,315 138,768,941 Net Assets (Notes 14 and 19) Unitholders’ Equity:

Unitholders’ capital 109,285,298 126,515,601 Units authorized: 4,000,000 units Units issued and outstanding: 391,760 units as of June 30, 2018 and 449,930 units as of December 31, 2018

Retained earnings 3,352,625 3,862,444 Total Unitholders’ Equity 112,637,924 130,378,046

Valuation and Translation Adjustments: Deferred gains on hedges (Note 6) 1,946 – Total Valuation and Translation Adjustments 1,946 –

Total Net Assets 112,639,871 130,378,046 Total Liabilities and Net Assets ¥ 230,689,186 ¥ 269,146,988

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

011_0601424551903.indd 44-45 2019/03/28 20:17:14

46 47

NIPPON REIT Investment Corporation STATEMENTS OF INCOME AND RETAINED EARNINGS

For the six-month periods ended June 30, 2018 and December 31, 2018

For the six-month periods ended

June 30, 2018 December 31, 2018 (Yen in thousands) Operating Revenues:

Rental revenues (Note 11) ¥ 6,551,743 ¥ 7,678,447 Other revenues related to property leasing (Note 11) 625,895 780,485 Dividend income 47,868 –

Total Operating Revenues 7,225,507 8,458,932 Operating Expenses:

Property-related expenses (Note 11) 2,664,876 3,039,219 Asset management fees 536,111 566,187 Asset custody fees 13,014 13,241 Administrative service fees 46,767 47,578 Directors’ compensation 2,400 2,400 Independent auditors’ fees 15,000 13,500 Other operating expenses 111,812 135,996

Total Operating Expenses 3,389,981 3,818,123 Operating Income 3,835,526 4,640,809 Non-Operating Revenues:

Interest income 84 80 Reversal of distributions payable 1,226 3,662 Interest on refund 8 38

Total Non-Operating Revenues 1,318 3,781 Non-Operating Expenses:

Interest expense 278,644 347,971 Interest on investment corporation bonds 2,269 7,417 Amortization of investment corporation bond issuance costs 614 1,507 Borrowing related expenses 225,843 335,206

Investment unit issuance expenses – 112,068 Others 5 17

Total Non-Operating Expenses 507,377 804,187 Ordinary Income 3,329,467 3,840,403 Extraordinary Income: Subsidy income (Note 12) 104,414 – Total Extraordinary Income 104,414 – Extraordinary Losses: Loss on reduction of investment properties (Note 13) 103,833 – Total Extraordinary Losses 103,833 – Income Before Income Taxes 3,330,048 3,840,403

Income taxes – current 681 621 Income taxes – deferred 0 2

Total Income Taxes (Note 18) 681 624 Net Income 3,329,367 3,839,779 Retained Earnings at Beginning of Period 23,258 22,665 Retained Earnings at End of Period ¥ 3,352,625 ¥ 3,862,444


NIPPON REIT Investment Corporation STATEMENTS OF CHANGES IN NET ASSETS


Unitholders’ Equity

Valuation and Translation Adjustments

Number of Units

Unitholders’ Capital

Retained Earnings

Total Unitholders’

Equity

Deferred Gains on Hedges

Total Valuation and

Translation Adjustments

Total Net Assets

(Units) (Yen in thousands)

Balance as of December 31, 2017 391,760 ¥ 109,285,298 ¥ 3,631,760 ¥ 112,917,058 ¥ 7,254 ¥ 7,254 ¥ 112,924,313

Cash distributions declared －－ (3,608,501) (3,608,501) －－ (3,608,501)

Net income －－ 3,329,367 3,329,367 －－ 3,329,367 Net changes of items other than

unitholders’ equity －－－－ (5,308) (5,308) (5,308)

Balance as of June 30, 2018 391,760 ¥ 109,285,298 ¥ 3,352,625 ¥ 112,637,924 ¥ 1,946 ¥ 1,946 ¥ 112,639,871

Issuance of investment units 58,170 17,230,303 － 17,230,303 －－ 17,230,303

Cash distributions declared －－ (3,329,960) (3,329,960) －－ (3,329,960)

Net income －－ 3,839,779 3,839,779 －－ 3,839,779 Net changes of items other than

unitholders’ equity －－－－ (1,946) (1,946) (1,946)

Balance as of December 31, 2018 449,930 ¥ 126,515,601 ¥ 3,862,444 ¥ 130,378,046 ¥ － ¥ － ¥ 130,378,046


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NIPPON REIT Investment Corporation STATEMENTS OF CASH FLOWS


For the six-month periods ended June 30, 2018 December 31, 2018 (Yen in thousands) Cash Flows from Operating Activities:

Income before income taxes ¥ 3,330,048 ¥ 3,840,403 Depreciation and amortization 776,033 907,332 Amortization of investment corporation bond issuance costs 614 1,507 Loss on retirement of investment properties 3,277 8,711 Loss on reduction of investment properties 103,833 － Investment unit issuance expenses － 112,068 Interest income (84) (80) Interest expense 280,914 355,388 Increase in tenant receivables (352) (573) Increase in prepaid expenses (4,338) (62,178) Increase in long-term prepaid expenses (20,624) (347,845) Increase in consumption taxes refundable － (496,617) Decrease in accrued consumption taxes (97,692) (40,897) Increase (decrease) in accounts payable (47,853) 66,208 Increase in accrued expenses 7,634 23,360 Increase in advances received 81,368 163,791 Interest income received 84 80 Interest expense paid (293,694) (348,587) Income taxes refunded (paid) (2,993) 8,178 Others, net 739,859 (650,001)

Net Cash Provided by Operating Activities 4,856,035 3,540,247 Cash Flows from Investing Activities:

Payments for purchases of investment properties other than intangible assets － (234,960) Payments for purchases of investment properties in trust other than intangible assets in trust (1,038,302) (39,769,669)

Payments for purchases of intangible assets － (1,251,662) Payments for purchases of intangible assets in trust (9,954) (848,737) Proceeds from tenant security deposits － 66,174 Payments of tenant security deposits － (1,020) Proceeds from tenant security deposits in trust 339,923 1,263,566 Payments of tenant security deposits in trust (348,187) (353,565) Payments of lease and guarantee deposits － (50) Proceeds from withdrawal of investment securities 95,477 632,278 Payments for purchases of investment securities (194,091) － Other payments (1,244) (1,244)

Net Cash Used in Investing Activities (1,156,379) (40,498,889) Cash Flows from Financing Activities:

Repayments of short-term debt － (2,600,000) Proceeds from long-term debt 7,500,000 33,400,000 Repayments of long-term debt (9,500,000) (12,300,000) Proceeds from issuance of investment corporation bonds 1,979,064 1,483,660 Proceeds from issuance of investment units － 17,118,234 Distributions paid (3,599,245) (3,335,053)

Net Cash Provided by (Used in) Financing Activities (3,620,181) 33,766,841 Net Change in Cash and Cash Equivalents 79,475 (3,191,800) Cash and Cash Equivalents at Beginning of Period 18,058,058 18,137,533 Cash and Cash Equivalents at End of Period (Note 5) ¥ 18,137,533 ¥ 14,945,733


NIPPON REIT Investment Corporation

NOTES TO FINANCIAL STATEMENTS

As of and for the six-month periods ended June 30, 2018 and December 31, 2018 Note 1 – Organization and Basis of Presentation Organization

NIPPON REIT Investment Corporation (hereinafter referred to as “NIPPON REIT”) was established on September 8, 2010 with ¥100 million in capital (200 units) as an investment corporation under the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, including subsequent revisions, hereinafter referred to as the “Investment Trust Act”) by the founder (the former Polaris Investment Advisors K.K.; now, Sojitz REIT Advisors K.K.).

Commencing on July 1, 2014, the fiscal period has been amended from an annual period to a semi-annual

period ending on June 30 and December 31. Prior to this amendment, the annual fiscal period was a 12-month period from July 1 to June 30. NIPPON REIT made this amendment in order to increase the frequency of distributions to its unitholders.

NIPPON REIT is an externally managed real estate fund, established as an investment corporation. Sojitz REIT

Advisors K.K., as NIPPON REIT’s asset management company, is engaged in acquiring, managing, leasing, and renovating office properties, residential properties and commercial properties. Sojitz Corporation, Cushman & Wakefield Asset Management K.K. and Agility Asset Advisers Inc. currently own 67%, 18% and 15%, respectively, of Sojitz REIT Advisors K.K.

NIPPON REIT implemented a two-for-one split of investment units on January 17, 2014, issued new

investment units through a public offering (144,200 units) on April 23, 2014 and then was listed on the J-REIT section of the Tokyo Stock Exchange on April 24, 2014. Furthermore, NIPPON REIT issued new investment units through a third-party allotment (7,210 units) on May 23, 2014, a public offering (145,000 units) on February 10, 2015, a third-party allotment (7,250 units) on March 10, 2015, a public offering (84,000 units) on July 1, 2015 and a third-party allotment (3,700 units) on July 28, 2015, a public offering (55,400 units) on July 2, 2018 and the third-party allotment (2,770 units) on July 24, 2018. As of December 31, 2018, the total number of investment units issued and outstanding was 449,930 units.

As of December 31, 2018, NIPPON REIT had ownership or trust beneficiary interests in 87 properties with

approximately 306,621.28 square meters of rentable space and had leased space to 1,878 tenants. The occupancy rate for the properties was approximately 99.1%. Basis of Presentation

The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust Act, the Financial Instruments and Exchange Act and their 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 from International Financial Reporting Standards or accounting principles generally accepted in the United States of America.

The accompanying financial statements have been reformatted and translated into English from the financial

statements of NIPPON REIT prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Act. In preparing the accompanying financial statements, relevant notes have been expanded and certain reclassifications have been made from the Japanese GAAP financial statements. Certain supplementary information included in the statutory Japanese GAAP financial statements, but not required for fair presentation, is not presented in the accompanying financial statements. Certain reclassifications have been made to the prior period’s financial statements to confirm to the presentation for the current period.

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As permitted by Japanese GAAP, amounts of less than one thousand yen or one million yen have been omitted. Consequently, the totals shown in the accompanying financial statements do not necessarily agree with sums of the individual amounts. Note 2 – Summary of Significant Accounting Policies (a) Cash and Cash Equivalents

Cash and cash equivalents consist of cash, demand deposits, and short-term investments which are highly liquid,

readily convertible to cash and with insignificant risk of market value fluctuation, with maturities of three months or less from the date of acquisition. (b) Allowance for Doubtful Accounts

Allowance for doubtful accounts is provided at the amount considered sufficient to cover probable losses on

collection. The amount is determined by estimating an uncollectible amount based on the analysis of certain individual accounts that may not be collectable.

(c) Investment Properties

Investment properties are recorded at cost, which includes the allocated purchase price and, related costs and expenses for acquisition of the trust beneficiary interests in real estate. Investment property balances are depreciated using the straight-line method over the estimated useful lives as follows:

Buildings in trust and buildings .................. 2-63 years Structures in trust ....................................... 2-45 years Machinery and equipment in trust .............. 10 years Tools, furniture and fixtures in trust ........... 2-15 years

Costs related to the renovation, addition and improvement of properties are capitalized. Expenditures for repairs

and maintenance which do not add to the value or prolong the useful life of a property are expensed as incurred. (d) Intangible Assets

Intangible assets are amortized using the straight-line method.

(e) Long-Term Prepaid Expenses

Long-term prepaid expenses are amortized using the straight-line method.

(f) Investment Units Issuance Costs

Issuance costs of investment units are expensed when incurred.

(g) Investment Corporation Bond Issuance Costs

Investment corporation bond issuance costs are amortized using the straight-line method through to the redemption date. (h) Investment Securities

Available-for-sale securities without market prices are stated at cost determined by the moving average method. Equity interest in a silent partnership is stated at net amount equivalent to the interest in the relevant partnership. (i) Income Taxes

Deferred tax assets and liabilities are computed based on the difference between the financial statements and income tax bases of assets and liabilities using the statutory tax rate.

(j) Real Estate Taxes

Investment properties are subject to various taxes, such as property taxes and city planning taxes. Owners of the properties are registered by records maintained in each jurisdiction by the local government. The taxes are imposed on the registered record owner as of January 1 of each year, based on an assessment made by the local government.

When a property is purchased within the calendar year, the taxes for the corresponding calendar year are

imposed on the seller. NIPPON REIT pays the seller the corresponding amount of taxes for the period from the property acquisition date to December 31 of the calendar year and capitalizes these amounts as acquisition costs of the property, rather than expensing them. In subsequent calendar years, such taxes on investment properties are charged as operating expenses in each fiscal period.

The following is a summary of capitalized real estate taxes.

For the six-month periods ended June 30, 2018 December 31, 2018 (Yen in thousands) Capitalized real estate taxes ¥ － ¥ 75,889

(k) Consumption Taxes

Consumption taxes are excluded from transaction amounts. Generally, consumption taxes paid are offset against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld is included in the current assets while the excess of amounts withheld over payments is included in the current liabilities. Non-deductible consumption taxes related to the acquisition of properties are treated as the cost of the applicable properties. (l) Hedge Accounting

NIPPON REIT enters into derivative transactions for the purpose of hedging risks defined in the Articles of Incorporation of NIPPON REIT in accordance with its financial policy. NIPPON REIT uses interest rate swaps as hedging instruments in order to hedge the risk of interest rate fluctuations related to borrowings. The deferral method is applied for hedge transactions. For interest rate swaps which qualify for hedge accounting and meet specific criteria, the special treatment is applied. Under the special treatment, the related differentials paid or received under such swap contracts can be recognized and included in interest expense or income of the hedged assets or liabilities, and the interest rate swaps are not required to be measured at fair value separately. NIPPON REIT evaluates hedge effectiveness by comparing the cumulative changes in cash flows of hedging instruments and the hedged items and assessing the ratio between the changes. However, the assessment of hedge effectiveness for interest rate swaps which meet the special criteria is omitted. (m) Revenue Recognition

Revenues from property leasing consist of rental revenues including base rents, common area charges and parking space rental revenues, and other revenues related to property leasing such as utilities charge reimbursements and others. Rental revenues are generally recognized when earned and considered realizable over the life of each lease. Utilities charge reimbursements are recognized when earned and their amounts can be reasonably estimated. (n) Accounting for Trust Beneficiary Interests in Real Estate

For trust beneficiary interests in real estate owned by NIPPON REIT, all accounts of assets and liabilities within the assets in trust as well as all accounts of revenue generated and expenses incurred from the assets in trust are recognized in the relevant accounts of the balance sheets and, statements of income and retained earnings.

The following assets in trust are recognized and presented separately on the balance sheets. (i) Cash and deposits in trust

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(ii) Land in trust, buildings in trust, structures in trust, machinery and equipment in trust, tools, furniture and fixtures in trust, construction in progress in trust and leasehold rights in trust

(iii) Tenant security deposits in trust Note 3 – Change in Presentation

Effective from the beginning of the six months period ended December 31, 2018, NIPPON REIT adopted “Partial Amendments to Accounting Standards for Tax Effect Accounting (Accounting Standards Board of Japan (“ASBJ”) Statement No. 28, issued on February 16, 2018),” etc. Accordingly, deferred tax assets and deferred tax liabilities are presented in “Other Assets” and “Long-Term Liabilities,” respectively on the accompanying balance sheet as of December 31, 2018.

As a result of this change, deferred tax liabilities of ¥891 thousand previously presented in “Current Liabilities”

has been reclassified to “Long-Term Liabilities” on the accompanying balance sheet as of June 30, 2018. Note 4 – New Accounting Standards Issued but not yet Effective “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, issued on March 30, 2018) “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, issued on March 30, 2018) (a) Overview

The International Accounting Standard Board (“IASB”) and the Financial Accounting Standards Board (“FASB”) jointly developed a comprehensive accounting standard for revenue recognition, and issued “Revenue from Contracts with Customers” (IFRS No. 15, issued by IASB and Topic 606, issued by FASB) in May 2014. Considering the situation that IFRS No. 15 is effective for the fiscal periods beginning on or after January 1, 2018 and Topic 606 is effective for the fiscal periods beginning after December 15, 2017, ASBJ developed a comprehensive accounting standard for revenue recognition and issued it together with the implementation guidance. ASBJ’s basic policy developing the accounting standard for revenue recognition was to establish accounting standards as a starting point by incorporating the basic principles of IFRS No. 15 from the viewpoint of comparability of financial statements which is one of benefits of maintaining consistency with IFRS No. 15, and to add alternative treatments to the extent that they do not impair comparability in cases where previous practices and others in Japan should be considered. (b) Date of the adoption

NIPPON REIT will adopt the accounting standard and implementation guidance from the beginning of the six-month period ending December 31, 2021. (c) Impact of the adoption of the respective accounting standard

NIPPON REIT is currently evaluating the effect of the adoption. Note 5 – Cash and Cash Equivalents

Reconciliation between cash and deposits and cash and deposits in trust in the balance sheets and cash and cash equivalents in the statements of cash flows is as follows:

As of June 30, 2018 December 31, 2018 (Yen in thousands) Cash and deposits ¥ 12,032,033 ¥ 8,981,536 Cash and deposits in trust 6,105,500 5,964,196 Cash and cash equivalents ¥ 18,137,533 ¥ 14,945,733

Note 6 – Financial Instruments (a) Qualitative Information for Financial Instruments Policy for Financial Instrument Transactions

NIPPON REIT raises funds mainly through borrowings, issuance of investment corporation bonds and investment units for acquisition of investment properties, capital expenditures, renovations or repayment of bank borrowings. In financing through interest-bearing debt, NIPPON REIT raises funds with longer term, fixed-rate and well-diversified maturities to secure stable and liquid financing capacity.

NIPPON REIT enters into derivative transactions solely for the purpose of hedging interest rate fluctuation

risks arising from borrowings and does not use derivative transactions for speculative purposes. Nature and Extent of Risks Arising from Financial Instruments

Proceeds from borrowings and investment corporation bonds are used mainly for acquisition of investment properties, capital expenditures, renovations, operations or repayment of outstanding borrowings. These borrowings and investment corporation bonds are exposed to liquidity risks upon refinance. The floating-rate borrowings are exposed to potential risks of rising interest rates.

Bank deposits are used for investing NIPPON REIT’s surplus funds. These bank deposits are exposed to credit

risks such as bankruptcy of the depository financial institutions. Risk Management of Financial Instruments

Liquidity risk is managed by diversifying lending financial institutions and planning and executing diversified financing methods including financing through capital markets, such as issuance of investment corporation bonds and issuance of investment units.

Interest rate volatility risk is managed primarily by increasing the proportion of borrowings under long-term

fixed rates. Derivative transactions may be entered into in order to hedge interest rate fluctuation risk. As of December 31, 2018, NIPPON REIT uses derivative transactions (interest rate swaps) as hedging instruments in order to avoid the risk of interest rate fluctuations and to fix the amount of interest payments for borrowings with floating rates. NIPPON REIT evaluates hedge effectiveness by comparing the cumulative changes in cash flows of hedging instruments and the hedged items and assessing the ratio between the changes. However, the assessment of hedge effectiveness for interest rate swaps which meet the special criteria is omitted.

Credit risk is managed by diversifying the depository financial institutions.

Supplemental Explanation regarding Fair Value of Financial Instruments

The fair value of financial instruments is based on their quoted market price. When there is no observable

market price available, fair value is based on a price that is reasonably estimated. Since certain assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result in a different value.

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(b) Fair Value of Financial Instruments

The book values, fair values and differences between them were as follows:

As of June 30, 2018 As of December 31, 2018 (Yen in thousands)

Assets Book value Fair value Difference Book value Fair value Difference Cash and deposits ¥ 12,032,033 ¥ 12,032,033 ¥ – ¥ 8,981,536 ¥ 8,981,536 ¥ – Cash and deposits in trust 6,105,500 6,105,500 – 5,964,196 5,964,196 –

Total ¥ 18,137,533 ¥ 18,137,533 ¥ – ¥ 14,945,733 ¥ 14,945,733 ¥ –

Liabilities Short-term debt ¥ 2,600,000 ¥ 2,600,000 ¥ – ¥ － ¥ － ¥ – Long-term debt due within one year 21,770,000 21,770,003 3 21,970,000 21,977,143 7,143

Investment corporation bonds 2,000,000 1,997,000 (3,000) 3,500,000 3,494,800 (5,200) Long-term debt 79,800,000 79,566,838 (233,161) 100,700,000 100,515,130 (184,869)

Total ¥ 106,170,000 ¥ 105,933,842 ¥ (236,157) ¥ 126,170,000 ¥ 125,987,074 ¥ (182,925)

Derivatives ¥ 2,842 ¥ (9,366) ¥ (12,208) ¥ － ¥ － ¥ －

The financial instruments whose fair values are deemed extremely difficult to determine are excluded from the

above table. Methods used to estimate the fair value of financial instruments and derivative transactions are as follows:

Assets and Liabilities: (1) Cash and deposits, cash and deposits in trust and short-term debt

Due to the short maturities, the book value of these assets and liabilities is deemed a reasonable approximation of the fair value; therefore, the book value is used as the fair value equivalent.

(2) Long-term debt due within one year and long-term debt

For long-term debt with floating interest rates that reflects market interest rates within a short period of time, the book value is deemed a reasonable approximation of the fair value and there are no significant changes in NIPPON REIT’s credit standing after borrowing; therefore, the book value is used as the fair value equivalent. However, for long-term debt with floating interest rates hedged by interest rate swaps applying the special treatment, the fair value is calculated based on the total amount of principal and interest which are processed as a single unit with the interest rate swaps discounted at the current interest rate applicable to similar borrowings. For long-term debt with fixed interest rates, the fair value is calculated based on the total amount of principal and interest discounted at the current interest rate applicable to similar borrowings. (3) Investment corporation bond

Calculated based on Reference Statistical Prices for OTC Bond Transactions provided by Japan Securities Dealers Association.

Derivative Transactions:

There were no derivative transactions to which hedge accounting was not applied as of June 30, 2018 and December 31, 2018.

Derivative transactions to which hedge accounting was applied were as follows:

Hedge accounting

method

Type of derivative

transaction Hedged item

As of June 30, 2018 Contracted amount Fair value

(Note 3) Total Due after one year

(Yen in thousands) Deferral method Interest rate swaps

Receive floating/Pay fixed Long-term debt ¥ 10,800,000 ¥ – ¥ 2,842

Special treatment for interest rate swaps

Interest rate swaps Receive floating/Pay fixed

Long-term debt 97,700,000 (Note 1)

87,800,000 (Note 1)

(12,208) (Note 2)

Total ¥ 108,500,000 ¥ 87,800,000 ¥ (9,366) Notes: 1. The amount includes the contract amount (¥18,500,000 thousand) of the interest rate swap contracts that were entered into on

June 29, 2018. The execution date for the borrowing hedged by the interest rate swap is July 3, 2018. 2. For the interest rate swaps which were entered into on June 29, 2018, since the occurrence of long-term debt which is

processed as a single unit due to applying the special treatment of interest rate swaps is not recognized as of June 30, 2018, the fair value as of June 30, 2018 is presented. As derivatives applying the special treatment of interest rate swaps other than the interest rate swaps above are processed as a single unit with long-term debt that is designated as the hedged item, the fair value is included in the fair value of Long-term debt in “(b) Fair Value of Financial Instruments” above and not included in the above table.

3. The fair value is provided by financial institutions.

Hedge accounting

method

Type of derivative

transaction Hedged item

As of December 31, 2018 Contracted amount Fair value

(Note 3) Total Due after one year

(Yen in thousands) Special treatment for interest rate swaps

Interest rate swaps Receive floating/Pay fixed

Long-term debt ¥ 111,100,000 ¥ 90,200,000 (Note 1)

Total ¥ 111,100,000 ¥ 90,200,000 ¥ － Notes: 1. Derivatives applying the special treatment of interest rate swaps are treated as a single unit with long-term debt that is

designated as the hedged item. The fair value is included in the fair value of aforementioned (2) Long-term debt due within one year and Long-term debt in “(b) Fair Value of Financial Instruments”.

Financial instruments whose fair values are deemed extremely difficult to determine are as follows:

The fair value of tenant security deposits and tenant security deposits in trust is not disclosed because these

deposits do not have a readily available market price, and it is difficult to estimate a period as to when these deposits will be returned. Although the tenant agreements stipulate a tenancy period, the historical analysis of actual tenancy periods do not indicate any pattern of tenancy period due to their unique nature as early termination or renewal/re-contract of tenancy agreements is possible, which makes it impracticable to reasonably estimate the future cash flows. The book values of tenant security deposits and tenant security deposits in trust are presented in the following table. As of June 30, 2018 December 31, 2018 (Yen in thousands)

Book value: Tenant security deposits ¥ – ¥ 65,153 Tenant security deposits in trust 7,894,084 8,766,512

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The fair value of investment securities is not disclosed because these securities do not have available market price, and it is difficult to estimate fair values. The book values of investment securities are presented in the following table. As of June 30, 2018 December 31, 2018 (Yen in thousands)

Book value: Godo Kaisha Nicolas Capital 10 Subordinated Equity interest in silent partnership (Note 1) ¥ 51,887 ¥ –

Godo Kaisha Nicolas Capital 11 Equity interest in silent partnership (Note 2) 427,063 – Godo Kaisha NRT Growth 12 Subordinated Equity interest in silent partnership (Note 3) 50,932 –

Godo Kaisha NRT Growth 13 Equity interest in silent partnership (Note 4) 137,187 – Total ¥ 667,069 ¥ –

Notes: 1. The assets under management include trust beneficiary interests in real estate of Residence Hiroo, Merveille Senzoku,

Splendid Shin-osaka III, Charmant Fuji Osakajominami and Piacere Fuminosato. 2. The assets under management include trust beneficiary interests in real estate of Yusen Higashi-Nihonbashi Ekimae

Building, Residence Edogawabashi, ZEPHYROS Minami-horie, Alte Building Higobashi, DIA Building Meieki and Hiroo ON Building.

3. The assets under management included trust beneficiary interests in real estate of Primegate Iidabashi, Field Avenue and BECOME SAKAE.

4. The assets under management included trust beneficiary interests in real estate of Towa Kandanishikicho Building and Esprit Kameido.

The redemption schedule for monetary claims was as follows:

As of June 30, 2018 Due within

one year Due after one to two years

Due after two to three years

Due after three to four years

Due after four to five years

Due after five years

(Yen in thousands)

Cash and deposits ¥ 12,032,033 ¥ – ¥ – ¥ – ¥ – ¥ –

Cash and deposits in trust 6,105,500 – – – – –

Total ¥ 18,137,533 ¥ – ¥ – ¥ – ¥ – ¥ –

As of December 31, 2018 Due within






(Yen in thousands)

Cash and deposits ¥ 8,981,536 ¥ – ¥ – ¥ – ¥ – ¥ –

Cash and deposits in trust 5,964,196 – – – – –

Total ¥ 14,945,733 ¥ – ¥ – ¥ – ¥ – ¥ –

The redemption schedule for short-term debt and long-term debt was as follows:

As of June 30, 2018 Due within






(Yen in thousands)

Short-term debt ¥ 2,600,000 ¥ – ¥ – ¥ – ¥ – ¥ –

Investment corporation bond – – – – – 2,000,000

Long-term debt 21,770,000 20,500,000 19,500,000 10,000,000 6,100,000 23,700,000

Total ¥ 24,370,000 ¥ 20,500,000 ¥ 19,500,000 ¥ 10,000,000 ¥ 6,100,000 ¥ 25,700,000

As of December 31, 2018 Due within






(Yen in thousands)

Short-term debt ¥ – ¥ – ¥ – ¥ – ¥ – ¥ –

Investment corporation bond – – – – – 3,500,000

Long-term debt 21,970,000 20,500,000 18,500,000 7,000,000 16,000,000 38,700,000

Total ¥ 21,970,000 ¥ 20,500,000 ¥ 18,500,000 ¥ 7,000,000 ¥ 16,000,000 ¥ 42,200,000

Note 7 – Investment Properties

Investment properties consisted of the following: As of June 30, 2018 As of December 31, 2018 (Yen in thousands)

Acquisition cost

Accumulated depreciation and

amortization Book value

Acquisition cost

Accumulated depreciation and

amortization Book value

Buildings ¥ – ¥ – ¥ – ¥ 234,960 ¥ (3,053) ¥ 231,906

Land in trust 149,411,625 – 149,411,625 180,791,041 – 180,791,041

Buildings in trust 50,843,163 (6,114,724) 44,728,438 59,444,603 (6,987,861) 52,456,741

Structures in trust 171,631 (37,690) 133,941 197,330 (42,332) 154,998

Machinery and equipment in trust 345,584 (31,722) 313,861 357,904 (48,292) 309,611

Tools, furniture and fixtures in trust 92,852 (21,364) 71,487 122,424 (28,970) 93,454

Construction in progress in trust 72,898 – 72,898 5,256 – 5,256

Leasehold rights – – – 1,251,662 – 1,251,662

Leasehold rights in trust 15,806,402 – 15,806,402 16,658,938 – 16,658,938

Other intangible assets 9,954 (112) 9,841 6,155 (319) 5,835

Total ¥ 216,754,112 ¥ (6,205,614) ¥ 210,548,497 ¥ 259,070,276 ¥ (7,110,830) ¥ 251,959,446

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Note 8 – Fair Value of Investment Properties

The book value, net changes in the book value and the fair value of the investment properties including office properties, residential properties and commercial properties were as follows:

For the six-month periods ended June 30, 2018 December 31, 2018 (Yen in thousands)

Book value: Balance at beginning of period ¥ 210,445,943 ¥ 210,475,599 Change during period 29,655 41,478,591 Balance at end of period ¥ 210,475,599 ¥ 251,954,190

Fair value ¥ 232,226,000 ¥ 279,348,000 Notes: 1. The fair value is determined based on appraisal values provided by external real estate appraisers. 2. The book value includes leasehold rights and leasehold rights in trust, but excludes construction in progress in trust. 3. For the six-month period ended June 30, 2018, the increase was primarily due to capital expenditures and the offsetting

decrease was due to depreciation. 4. For the six-month period ended December 31, 2018, the increase was primarily due to the acquisition of 21 properties

including “Primegate Iidabashi” (¥40,911,158 thousand) and offsetting decrease was primarily due to depreciation.

Note 9 – Reduction Entry for Investment Properties Acquired through Exchange The following table shows the amount deducted from the acquisition costs of investment properties acquired

through exchange.

As of June 30, 2018 December 31, 2018 (Yen in thousands)

Land in trust ¥ 416,596 ¥ 416,596

Note 10 – Reduction Entry for Investment Properties Acquired due to Government Subsidies Received

The following table shows the amount deducted from the acquisition costs of investment properties acquired due to government subsidies received.


Buildings in trust ¥ 201,203 ¥ 198,024

Note 11 – Rental Revenues and Expenses

Rental revenues and expenses were as follows: For the six-month periods ended June 30, 2018 December 31, 2018 (Yen in thousands)

Revenues from property leasing: Rental revenues:

Base rents ¥ 5,340,869 ¥ 6,340,589 Common area charges 989,568 1,076,546 Parking space rental revenues 221,305 261,311

Total rental revenues 6,551,743 7,678,447 Other revenues related to property leasing:

Utilities charge reimbursements 494,329 602,936 Others 131,566 177,549

Total other revenues related to property leasing 625,895 780,485 Total revenues from property leasing 7,177,639 8,458,932

Property-related expenses: Property management fees 499,049 576,734 Utility expenses 446,685 554,322 Insurance expenses 6,992 8,365 Repair expenses 197,036 182,114 Taxes and dues 515,873 515,919 Depreciation 776,033 907,332 Loss on retirement of investment properties 3,277 8,711 Trust fees 23,100 30,050 Other 196,828 255,668 Total property-related expenses 2,664,876 3,039,219

Income from property leasing ¥ 4,512,762 ¥ 5,419,712

Note 12 – Subsidy Income

Subsidy income of ¥104,414 thousand for the six-month period ended June 30, 2018 represents income received from Subsidies for Cost of Measures to Curb Carbon Dioxide Emissions Fiscal 2017 and Energy Use Rationalization Business Support Program 2017. Note 13 – Loss on Reduction of Investment Properties

Loss on reduction of investment properties represents the amount directly deducted from acquisition costs for the investment properties acquired due to government subsidies received. The details were as follows:

For the six-month periods ended June 30, 2018 December 31, 2018 (Yen in thousands) Building in trust ¥ 103,833 ¥ –

Note 14 – Net Assets

NIPPON REIT issues non-par value investment units in accordance with the Investment Trust Act and all of the amounts issued are designated as stated capital. NIPPON REIT maintains at least ¥50,000 thousand as the minimum net assets as required by the Investment Trust Act.

011_0601424551903.indd 58-59 2019/03/28 20:17:14

60 61

Note 15 – Short-Term Debt and Long-Term Debt

Short-term debt and Long-term debt consisted of the following: As of June 30, 2018 December 31, 2018 (Yen in thousands)

Short-term debt: 0.25% unsecured loan due 2018 (Note 2) ¥ 2,600,000 ¥ –

Total short-term debt ¥ 2,600,000 ¥ –

Long-term debt: 0.22% unsecured loans due 2018 (Notes 2 and 3) 10,800,000 – 0.91% unsecured loan due 2019 (Note 2) 1,070,000 1,070,000 0.51% unsecured loans due 2019 (Notes 2 and 3) 9,900,000 9,900,000 0.54% unsecured loans due 2019 (Notes 2 and 3) 11,000,000 11,000,000 0.85% unsecured loans due 2020 (Note 2) 6,000,000 6,000,000 0.84% unsecured loan due 2020 (Note 2) 3,500,000 3,500,000 0.65% unsecured loans due 2020 (Notes 2 and 3) 11,000,000 11,000,000 0.36% unsecured loans due 2021 (Notes 2 and 3) 8,500,000 8,500,000 0.38% unsecured loans due 2021 (Notes 2 and 3) 10,000,000 10,000,000 0.41% unsecured loans due 2022 (Notes 2 and 3) – 7,000,000 1.24% unsecured loan due 2023 (Note 2) 500,000 500,000 0.48% unsecured loans due 2023 (Notes 2 and 3) 5,600,000 5,600,000 0.50% unsecured loans due 2023 (Notes 2 and 3) 3,900,000 3,900,000 0.48% unsecured loans due 2023 (Notes 2 and 3) – 6,000,000 0.56% unsecured loans due 2024 (Notes 2 and 3) 3,400,000 3,400,000 0.52% unsecured loans due 2024 (Notes 2 and 3) 3,200,000 3,200,000 0.58% unsecured loan due 2024 (Notes 2 and 3) 3,500,000 3,500,000 0.54% unsecured loans due 2024 (Notes 2 and 3) – 2,000,000 0.57% unsecured loans due 2024 (Notes 2 and 3) – 4,350,000 0.58% unsecured loan due 2025 (Notes 2 and 3) – 1,000,000 0.70% unsecured loans due 2025 (Notes 2 and 3) 2,600,000 2,600,000 0.61% unsecured loans due 2025 (Notes 2 and 3) 2,000,000 2,000,000 0.71% unsecured loans due 2025 (Notes 2 and 3) 2,800,000 2,800,000 0.63% unsecured loans due 2025 (Notes 2 and 3) – 2,500,000 0.68% unsecured loans due 2025 (Notes 2 and 3) – 4,200,000 0.75% unsecured loans due 2026 (Notes 2 and 3) 600,000 600,000 0.70% unsecured loan due 2026 (Note 2) 500,000 500,000 0.83% unsecured loans due 2026 (Notes 2 and 3) – 4,850,000 0.96% unsecured loans due 2028 (Notes 2 and 3) 1,200,000 1,200,000

Total long-term debt ¥ 101,570,000 ¥ 122,670,000

Notes: 1. The interest rates presented are weighted average interest rates. 2. Funds were used for acquisition of investment properties, repayment of outstanding borrowings and payment of any other

associated expenses as deemed reasonable. 3. As interest rates on these loans are substantively fixed by the interest rate swaps, the interest rates after reflecting the effect

of the interest rate swaps are stated.

Note 16 – Investment Corporation Bonds Investment corporation bonds consisted of the following:

As of June 30, 2018 December 31, 2018 (Yen in thousands) 1st 0.54% unsecured bonds due 2025 ¥ 1,000,000 ¥ 1,000,000 2nd 0.70% unsecured bonds due 2028 1,000,000 1,000,000 3rd 0.88% unsecured bonds due 2028 – 1,500,000

Total ¥ 2,000,000 ¥ 3,500,000

Note 17 – Leases

The future minimum rental revenues under existing non-cancelable operating leases were as follows:

As of June 30, 2018 December 31, 2018 (Yen in thousands) Due within one year ¥ 340,798 ¥ 608,367 Due after one year 537,595 1,431,026

Total ¥ 878,394 ¥ 2,039,393

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62 63

Note 18 – Income Taxes

NIPPON REIT is subject to Japanese corporate income taxes on all of its taxable income. However, NIPPON REIT may deduct the amount distributed to its unitholders from its taxable income when certain requirements, including a requirement to distribute in excess of 90% of distributable profit for the fiscal period, are met under the Special Taxation Measure Act of Japan. If NIPPON REIT does not satisfy all of the requirements as specified in the Act, the entire taxable income of NIPPON REIT will be subject to regular corporate income taxes in Japan.

NIPPON REIT has made distribution in excess of 90% of its distributable profit for the six-month periods

ended June 30, 2018 and December 31, 2018 in order to be able to deduct such amount from taxable income. The following table summarizes the significant difference between the statutory tax rate and NIPPON REIT’s

effective tax rate.

For the six-month periods ended June 30, 2018 December 31, 2018 Statutory tax rate 31.74% 31.51% Deductible cash distributions (31.74) (31.51) Per capita inhabitant taxes 0.02 0.02 Others 0.00 0.00 Effective tax rate 0.02% 0.02%

The significant components of deferred tax assets and liabilities were as follows:


Deferred tax assets: Accrued enterprise tax ¥ 3 ¥ 0 Allowance for doubtful accounts 0 0

Total deferred tax assets 3 0 Deferred tax liabilities:

Deferred gains on hedges 895 –

Total deferred tax liabilities 895 –

Net deferred tax liabilities ¥ (891) ¥ 0

Note 19 – Per Unit Information

Information about earnings per unit and net assets per unit was as follows: For the six-month periods ended June 30, 2018 December 31, 2018 (Yen)

Earnings per unit: Net income per unit ¥ 8,498 ¥ 8,546 Weighted average number of units outstanding (units) 391,760 449,282

As of June 30, 2018 December 31, 2018 (Yen)

Net assets per unit ¥ 287,522 ¥ 289,774

The computation of earnings per unit is based on the weighted average number of units outstanding during the period. The computation of net assets per unit is based on the number of units outstanding at each period end as stated on the balance sheets. Note 20 – Distribution Information

Pursuant to the terms of the distribution policy set forth in Article 35 paragraph (1) item (2) of NIPPON REIT’s Articles of Incorporation, the amount of distributions is defined to be in excess of an amount equivalent to 90% of NIPPON REIT’s distributable profit as defined in Article 67-15 of the Special Taxation Measure Act of Japan, but not in excess of an amount of profit set forth in the Articles of Incorporation.

Cash distributions are declared by the board of directors after the end of each period. Such distributions are

payable to unitholders of record at the end of each period. Information of cash distributions per unit and the board of directors meeting dates when the distributions were proposed and approved were as follows:

For the six-month periods ended June 30, 2018 December 31, 2018 (Yen) Cash distributions per unit ¥ 8,500 ¥ 8,536 Board of directors meeting dates August 16, 2018 February 18, 2019

Retained earnings brought forward after the cash distributions were as follows:

For the six-month periods ended June 30, 2018 December 31, 2018 (Yen) Unappropriated retained earnings ¥ 3,352,625,792 ¥ 3,862,444,951 Cash distributions declared 3,329,960,000 3,840,602,480 Retained earnings brought forward ¥ 22,665,792 ¥ 21,842,471

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64 65

Note 21 – Related-Party Transactions

Related-party transactions for the six-month period ended June 30, 2018 were as follows:

Classification Name Location

Capital stock

(Yen in thousands)

Occupation Ratio of voting rights

Nature of transaction

Amount of transaction

(Note 2) (Yen in

thousands)

Account

Balance at the end of period

(Note 2) (Yen in

thousands)

Directors and their relatives

Toshio Sugita – –

Executive Officer of NIPPON REIT and President, Director & CEO of Sojitz REIT Advisors K.K.

–

Payment of asset management fees to Sojitz REIT Advisors K.K. (Note 1)

¥ 537,761 Accrued expenses ¥ 147,090

Notes: 1. This was executed by Toshio Sugita as a representative director of a third party (Sojitz REIT Advisors K.K.) and terms and

conditions of related-party transactions are based on those stipulated in NIPPON REIT’s Article of Incorporation for asset management fees.

2. Consumption taxes are not included in transaction amounts and are included in the balance at the end of the period.

Related-party transactions for the six-month period ended December 31, 2018 were as follows:

Classification Name Location

Capital stock

(Yen in thousands)

Occupation Ratio of voting rights

Nature of transaction

Amount of transaction

(Note 2) (Yen in

thousands)

Account

Balance at the end of period

(Note 2) (Yen in

thousands)

Directors and their relatives

Toshio Sugita – –

Executive Officer of NIPPON REIT and President, Director & CEO of Sojitz REIT Advisors K.K.

–

Payment of asset management fees to Sojitz REIT Advisors K.K. (Note 1)

¥ 902,812 Accrued expenses ¥171,896

Notes: 1. This was executed by Toshio Sugita as a representative director of a third party (Sojitz REIT Advisors K.K.) and terms and

conditions of related-party transactions are based on those stipulated in NIPPON REIT’s Article of Incorporation for asset management fees.

2. Consumption taxes are not included in transaction amounts and are included in the balance at the end of the period.

Note 22 – Segment Information Segment Information

Segment information is omitted as NIPPON REIT has one segment, which is property leasing business. Related Information Information about Products and Services

Disclosure of this information is omitted as operating revenues to external customers for a single product/service category account for more than 90% of the operating revenues on the statements of income and retained earnings. Information by Geographic Areas (1) Operating revenues

Disclosure of this information is omitted as domestic operating revenues account for more than 90% of total operating revenues. (2) Investment properties

Disclosure of this information is omitted as domestic investment properties account for more than 90% of the book value of the total investment properties. Information on Major Tenants

Disclosure of this information is omitted as there is no tenant that accounts for 10% or more of the operating revenues recorded in the statements of income and retained earnings.

011_0601424551903.indd 64-65 2019/03/28 20:17:15

66 67

Note 23 – Subsequent Events (a) Acquisition of Properties

NIPPON REIT acquired trust beneficiary interests in real estate on January 31, February 27 and 28, 2019 as described below.

Property name Type of asset Location Acquisition date Acquisition price (Yen in millions)

(Note 1) Seller

Wald Park Minamioi Trust beneficiary interests in real estate

Shinagawa ward, Tokyo January 31,2019 ¥ 715 Not disclosed

(Note 2) TENSHO OCHANOMIZU BUILDING

Trust beneficiary interests in real estate

Chiyoda ward, Tokyo February 27, 2019 1,800 Not disclosed

(Note 2)

Kameido i-Mark Building Trust beneficiary interests in real estate

Koto ward, Tokyo February 27, 2019 2,580 SHIMIZU

CORPORATION

LAPUTA KUJO Trust beneficiary interests in real estate Osaka, Osaka February 28, 2019 1,480 Not disclosed

(Note 2)

Imazaki Mansion N1 Trust beneficiary interests in real estate

Higashiosaka, Osaka February 28, 2019 1,180 Not disclosed

(Note 2)

Total 5 properties ¥ 7,755 ―

Notes: 1. The acquisition prices represent the amount of consideration stated in the purchase agreements of the trust beneficiary

interests in real estate. The acquisition price does not include the expenses related to the acquisition and consumption taxes. Furthermore, the acquisition price of less than one million yen is omitted.

2. This information is not disclosed as the consent has not been obtained from the seller.

(b) Transfer of Properties

NIPPON REIT transferred trust beneficiary interests in real estate on February 26 and 27, 2019 as described below.

Property name

Type of asset Location Transfe

r date

Transfer price


Book value


Purchaser

FORECAST Iidabashi


Chiyoda ward, Tokyo

February 27, 2019 ¥ 5,490 ¥ 5,396 SHIMIZU

CORPORATION

my atria Meieki


Nagoya. Aichi

February 26, 2019 1,782 1,231 Not disclosed (Note 3)

Total 2 properties ¥ 7,272 ¥ 6,627 ―

Notes: 1. The transfer prices represent the amount of consideration stated in the transfer agreements of real estate and the trust

beneficiary interests in real estate. The transfer price does not include the expenses related to the transfer and consumption taxes. Furthermore, the transfer price of less than one million yen is omitted.

2. The book values represent the balance sheet amount as of December 31, 2018. Furthermore, the book value of less than one million yen is omitted.

3. This information is not disclosed as the consent has not been obtained from the purchaser.

(c) Borrowing of Funds

NIPPON REIT borrowed funds on February 28, 2019. This borrowing was used as a part of funds for acquisition of LAPUTA KUJO and Imazaki Mansion N1 described in “(a) Acquisition of Properties” and its related costs.

Lender Amount

(Yen in millions) Interest rate Fix / Floating Repayment due date Repayment method

MUFG Bank, Ltd. ¥ 700 Interest rate of base rate plus 0.20% (Note 1) Floating July 22, 2019 Lump-sum payment at

maturity (Note 2) Notes: 1. The first interest payment date shall be March 20, 2019, and the subsequent interest payment dates shall be the 20th day of

every month (if the date is not a business day, then it shall be the next business day.) and the principal repayment date. The base rate applicable to the interest payable on an interest payment date shall be JBA one-month Japanese Yen TIBOR announced two business days prior to the interest payment date immediately preceding the respective interest payment date. In the event that the interest calculation period is more than one month or less than one month, the base rate corresponding to the interest calculation period shall be calculated using the method stipulated in the loan agreement.

2. NIPPON REIT can make early repayment of the borrowing, in whole or in part, if certain terms and conditions are met such as prior written notice by the repayment date.

011_0601424551903.indd 66-67 2019/03/28 20:17:15

68 69

011_0601424551903.indd 68-69 2019/03/28 20:17:16

70 71

Portfolio Summary

(Note) The investment ratio is the acquisition value of each acquired asset, divided by the total acquisition value of assets acquired. The ratio is rounded off to the first decimal place.

Area No. Property Name Location CompletionAcquisition

Price(¥mn)

Appraisal Value(¥mn)

Invest-ment ratio(%)

Offi

ce

Central A-1 FORECAST Nishishinjuku Shinjuku Ward, Tokyo Feb. 2009 2,260 3,010 0.9

Central A-2 Nihombashi Playa Building Chuo Ward, Tokyo Feb. 2009 2,130 2,400 0.9

Central A-3 FORECAST Yotsuya Shinjuku Ward, Tokyo Jan. 2009 1,430 1,860 0.6

Central A-4 FORECAST Shinjuku AVENUE Shinjuku Ward, Tokyo Sep. 2008 6,500 7,890 2.6

Central A-5 FORECAST Ichigaya Shinjuku Ward, Tokyo Aug. 2009 4,800 5,840 1.9

Central A-6 FORECAST Mita Minato Ward, Tokyo Sep. 2009 1,800 2,300 0.7

Central A-7 FORECAST Shinjuku SOUTH Shinjuku Ward, Tokyo Nov. 1980 13,990 17,200 5.6

Central A-8 FORECAST Sakurabashi Chuo Ward, Tokyo Apr. 1985 5,760 6,430 2.3

Central A-9 GreenOak Kayabacho Chuo Ward, Tokyo Mar. 1990 2,860 3,350 1.2

Central A-10 GreenOak Kudan Chiyoda Ward, Tokyo Dec. 1987 2,780 3,300 1.1

Central A-11 GreenOak Takanawadai Minato Ward, Tokyo Jan. 2010 2,260 2,610 0.9

Metropolitan A-13 Higashi Ikebukuro Center Building Toshima Ward, Tokyo Nov. 1991 2,520 2,970 1.0

Central A-14 Central Daikanyama Shibuya Ward, Tokyo Aug. 1991 3,510 3,770 1.4

Central A-16 Hiroo Reeplex B’s Minato Ward, Tokyo May 1987 2,827 3,290 1.1

Central A-17 Shibakoen Sanchome Building Minato Ward, Tokyo Jun. 1981 7,396 9,680 3.0

Central A-18 FORECAST Iidabashi Chiyoda Ward, Tokyo Nov. 1978 5,230 5,490 2.1

Central A-19 Kudankita 325 Building Chiyoda Ward, Tokyo Aug. 1987 1,850 2,100 0.7

Central A-20 FORECAST Uchikanda Chiyoda Ward, Tokyo Dec. 1976 1,240 1,310 0.5

Central A-21 Itohpia Iwamotocho 2-chome Building Chiyoda Ward, Tokyo Feb. 1991 2,810 3,100 1.1

Central A-22 Itohpia Iwamotocho 1-chome Building Chiyoda Ward, Tokyo Jan. 1991 2,640 2,830 1.1

Central A-23 Itohpia Iwamotocho ANNEX Building Chiyoda Ward, Tokyo Nov. 1991 2,100 2,430 0.8

Central A-24 Pigeon Building Chuo Ward, Tokyo Aug. 1989 2,837 2,970 1.1

Central A-25 FORECAST Ningyocho Chuo Ward, Tokyo Nov. 1990 2,070 2,080 0.8

Central A-26 FORECAST Ningyocho PLACE Chuo Ward, Tokyo Feb. 1984 1,650 1,900 0.7

Central A-27 FORECAST Shin-Tokiwabashi Chuo Ward, Tokyo Aug. 1991 2,030 2,150 0.8

Central A-28 Nishi-Shinjuku Sanko Building Shinjuku Ward, Tokyo Sep. 1987 2,207 2,370 0.9

Central A-29 Iidabashi Reeplex B’s Shinjuku Ward, Tokyo Jun. 1992 1,249 1,450 0.5

Central A-30 FORECAST Shinagawa Shinagawa Ward, Tokyo Feb. 1989 2,300 2,350 0.9

Central A-31 Nishi-Gotanda 8-chome Building Shinagawa Ward, Tokyo Dec. 1993 2,210 2,490 0.9

Central A-32 Towa Higashi-Gotanda Building Shinagawa Ward, Tokyo Sep. 1985 2,033 2,240 0.8

Metropolitan A-33 FORECAST Takadanobaba Toshima Ward, Tokyo Jan. 1986 5,550 5,640 2.2

Metropolitan A-34 Mejiro NT Building Toshima Ward, Tokyo Jul. 1990 3,094 3,600 1.2

Metropolitan A-35 Toshin Higashi-Ikebukuro Building Toshima Ward, Tokyo Nov. 1989 979 1,110 0.4

Metropolitan A-36 Mitsui Woody Building Koto Ward, Tokyo Mar. 1990 2,475 2,690 1.0

Metropolitan A-37 Itabashi Honcho Building Itabashi Ward, Tokyo Jan. 1993 3,146 3,450 1.3

Metropolitan A-38 ANTEX24 Building Taito Ward, Tokyo Feb. 1988 1,691 1,740 0.7

Metropolitan A-39 Itohpia Kiyosubashidori Building Taito Ward, Tokyo Mar. 1988 1,550 1,900 0.6

Metropolitan A-40 East Side Building Taito Ward, Tokyo May 1988 1,372 1,560 0.6

Metropolitan A-41 I•S Minamimorimachi Building Osaka, Osaka Aug. 1988 2,258 2,630 0.9

Metropolitan A-42 Sunworld Building Osaka, Osaka Mar. 1993 1,200 1,280 0.5

Metropolitan A-43 Marunouchi Sanchome Building Nagoya, Aichi Jul. 1988 1,626 1,980 0.7

Central A-44 MK Kojimachi Building Chiyoda Ward, Tokyo Mar. 1997 1,781 2,090 0.7

Central A-45 Toranomon Sakura Building Minato Ward, Tokyo Jul. 1983 4,120 4,460 1.7

Central A-46 La Verite AKASAKA Minato Ward, Tokyo Dec. 1986 2,000 2,250 0.8

Central A-47 Kanda Ocean Building Chiyoda Ward, Tokyo Jan. 1990 1,440 1,650 0.6

Central A-48 Shinto GINZA EAST Chuo Ward, Tokyo Sep. 1990 1,352 1,460 0.5

Area No. Property Name Location CompletionAcquisition

Price(¥mn)

Appraisal Value(¥mn)

Invest-ment ratio(%)

Offi

ce

Central A-49 FORECAST Kayabacho Chuo Ward, Tokyo Jan. 1990 3,000 3,090 1.2

Central A-50 FORECAST Waseda FIRST Shinjyuku Ward, Tokyo Jul. 1986 4,775 4,920 1.9

Central A-51 FORECAST Gotanda WEST Shinagawa Ward, Tokyo Sep. 1989 6,520 7,190 2.6

Metropolitan A-52 Omiya Center Building Saitama, Saitama Mar. 1993 15,585 19,000 6.3

Metropolitan A-53 Sumitomo Mitsui Bank Koraibashi Building Osaka, Osaka Mar. 1994 2,850 3,330 1.1

Metropolitan A-54 NORE Fushimi Nagoya, Aichi Nov. 2006 2,840 3,230 1.1

Metropolitan A-55 NORE Meieki Nagoya, Aichi Jan. 2007 2,520 2,930 1.0

Central A-56 Homat Horizon Building Chiyoda Ward, Tokyo Aug. 1987 6,705 7,130 2.7

Metropolitan A-57 Sannomiya First Building Kobe, Hyogo Nov. 1993 1,390 1,600 0.6

Central A-58 Towa Kandanishikicho Building Chiyoda ward, Tokyo Aug. 1992 960 1,000 0.4

Central A-59 Yusen Higashi-Nihombashi Ekimae Building Chuo ward, Tokyo Feb. 2001 1,152 1,230 0.5

Central A-60 Hiroo ON Building Shibuya ward, Tokyo Mar. 1995 2,392 2,620 1.0

Central A-61 TK Gotanda Building Shinagawa ward, Tokyo Jun. 1989 4,130 4,300 1.7

Central A-62 Gotanda Sakura Building Shinagawa ward, Tokyo Nov. 1993 1,460 1,590 0.6

Metropolitan A-63 Esprit Kameido Koto ward, Tokyo Jun. 1991 1,265 1,290 0.5

Metropolitan A-64 Alte Building Higobashi Osaka, Osaka Jun. 1993 1,453 1,570 0.6

Metropolitan A-65 DIA Building Meieki Nagoya, Aichi Dec. 1991 1,167 1,240 0.5

Resi

denc

e

Central B-1 Tower Court Kitashinagawa Shinagawa Ward, Tokyo Feb. 2009 11,880 14,200 4.8

ODC, etc. B-2 Sky Hills N11 Sapporo, Hokkaido Mar. 2001 1,570 1,770 0.6

Metropolitan B-3 my atria Meieki Nagoya, Aichi Mar. 2006 1,280 1,540 0.5

Metropolitan B-4 my atria Sakae Nagoya, Aichi Mar. 2007 1,110 1,230 0.4

Metropolitan B-5 Mac Village Heian Nagoya, Aichi Sep. 2006 785 889 0.3

Metropolitan B-6 Seam Dwell Tsutsui Nagoya, Aichi Feb. 2007 695 771 0.3

ODC, etc. B-7 Ciel Yakuin Fukuoka, Fukuoka Mar. 2005 640 740 0.3

Central B-8 Kanda Reeplex R’s Chiyoda Ward, Tokyo Jan. 2006 1,813 1,990 0.7

Metropolitan B-9 Splendid Namba Osaka, Osaka Jan. 2015 3,502 3,790 1.4

Central B-10 Residence Hiroo Minato ward, Tokyo Feb. 2004 2,590 2,630 1.0

Central B-11 Residence Nihombashi Hakozaki Chuo ward, Tokyo Mar. 2002 1,300 1,530 0.5

Central B-12 Primegate Iidabashi Shinjuku ward, Tokyo Mar. 1994 5,200 5,290 2.1

Central B-13 Residence Edogawabashi Shinjuku ward, Tokyo Mar. 2000 1,230 1,260 0.5

Metropolitan B-14 Merveille Senzoku Ota ward, Tokyo Sep. 2002 740 743 0.3

Metropolitan B-15 Field Avenue Ota ward, Tokyo Aug. 2000S e p. 2 0 1 6 3,110 3,110 1.3

Metropolitan B-16 Domeal Kitaakabane Kita ward, Tokyo Mar. 2001 785 785 0.3

Metropolitan B-17 Dormy Kitaakabane Kita ward, Tokyo Mar. 1997 986 997 0.4

Metropolitan B-18 Splendid Shin-Osaka III Osaka, Osaka Feb. 2015 2,428 2,480 1.0

Metropolitan B-19 ZEPHYROS Minami-horie Osaka, Osaka Mar. 2002 1,608 1,670 0.6

Metropolitan B-20 Charmant Fuji Osakajominami Osaka, Osaka Apr. 2004 905 906 0.4

Metropolitan B-21 Piacere Fuminosato Osaka, Osaka Feb. 1999 571 577 0.2

Reta

il Central C-1 Otakibashi Pacifica Building Shinjuku Ward, Tokyo Oct. 2008 3,350 3,510 1.4

Metropolitan C-2 Komyoike Act Sakai, Osaka Apr. 1988 2,063 2,190 0.8

Metropolitan C-3 BECOME SAKAE Nagoya, Aichi Aug. 2005 4,770 4,840 1.9

Total — 247,998 279,348 100.0

012_0601424551903.indd 70-71 2019/03/28 20:14:32

72 73

B-7

B-2

A-52

C-2

Setagaya

Shinagawa

Meguro

Shibuya

Shinjuku

Toshima

Nakano

Nerima

Kita

Adachi

Itabashi

Arakawa

TaitoBunkyo

Chiyoda

Chuo

Minato

Ota

Koto

Sumida

A-37

A-34A-33

A-13

A-35

A-39

A-38

A-36

Tokyo

Shinjuku

Ikebukuro

Ueno

Shinagawa

Shibuya

A-40

A-63

B-16B-17

B-14

B-15

Tokyo

Akihabara

Shinjuku

ShinagawaGotanda

Shibuya

Ichigaya

Iidabashi

Shinjuku

Shibuya

Minato

Chiyoda

Chuo

Shinagawa

Meguro

TaitoBunkyo

Koto

C-1

A-1

A-3

A-11

A-28

A-4A-5

A-29

A-7

A-32

A-18

A-10 A-21

A-22A-23

A-9

A-8

A-20

A-17

A-2A-24

A-25A-26

A-27

A-6

A-30

B-1

A-16A-14

A-19

A-50

A-47

A-45

A-46 A-49

A-48

A-44

A-56

A-31A-51

B-8

A-39A-38

A-40

B-12B-13

A-59

A-60

A-61

A-62

A-58

B-11

B-10

妙見山

剣尾山

妙見山

剣尾山山陰本線山陰本線

A-57 OsakaOsaka

Shin OsakaShin OsakaShin KobeShin Kobe

B-18

B-19B-20

B-21

B-9

A-42

A-41

A-53A-64

Naniwa

Abeno

ChuoNishi

Kita

Higashiyodogawa

Shin OsakaShin Osaka

OsakaOsaka

B-3

B-4

B-5

A-43

A-54

A-55

B-6

A-65

C-3Nakamura

Naka

Kita

Higashi

Chikusa

ShowaNakagawa

NagoyaNishi

Chikusa

Tsurumai

Fushimi Sakae

Nagoya

Ozone

Office PropertiesResidential PropertiesRetail PropertiesThree Major Metropolitan Areas

Portfolio Map

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List of portfolio as of the end of 13th period Office Residence Retail

A-1 FORECAST Nishishinjuku

A-14 Central Daikanyama

A-18 FORECAST Iidabashi

A-5 FORECAST Ichigaya

A-20 FORECAST Uchikanda

A-10 GreenOak Kudan

A-24 Pigeon Building

A-4 FORECAST Shinjuku AVENUE

A-7 FORECAST Shinjuku SOUTH

A-9 GreenOak Kayabacho

A-2 Nihombashi Playa Building A-16 Hiroo Reeplex B’s

A-21 Itohpia Iwamotocho 2-chome Building

A-11 GreenOak Takanawadai

A-25 FORECAST Ningyocho

A-3 FORECAST Yotsuya A-17 Shibakoen Sanchome Building

A-6 FORECAST Mita

A-8 FORECAST Sakurabashi

A-22 Itohpia Iwamotocho 1-chome Building

A-13 Higashi Ikebukuro Center Building

A-26 FORECAST Ningyocho PLACE

A-23 Itohpia Iwamotocho ANNEX Building

A-27 FORECAST Shin-Tokiwabashi

A-19 Kudankita 325 Building

A-29 Iidabashi Reeplex B’sA-28 Nishi-Shinjuku Sanko Building A-30 FORECAST Shinagawa A-31 Nishi-Gotanda 8-chome Building

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Office Residence RetailList of portfolio as of the end of 13th period

A-32 Towa Higashi-Gotanda Building A-35 Toshin Higashi-Ikebukuro Building

A-39 Itohpia Kiyosubashidori Building

A-41 I•S Minamimorimachi Building

A-45 Toranomon Sakura Building A-47 Kanda Ocean Building

A-38 ANTEX24 Building

A-33 FORECAST Takadanobaba

A-36 Mitsui Woody Building

A-40 East Side Building A-43 Marunouchi Sanchome Building

A-46 La Verite AKASAKA

A-48 Shinto GINZA EAST

A-42 Sunworld Building

A-44 MK Kojimachi Building

A-34 Mejiro NT Building

A-37 Itabashi Honcho Building

A-49 FORECAST Kayabacho

A-52 Omiya Center BuildingA-50 FORECAST Waseda FIRST

A-53 Sumitomo Mitsui Bank Koraibashi Building

A-51 FORECAST Gotanda WEST

A-55 NORE Meieki

A-59 Yusen Higashi-Nihombashi Ekimae BuildingA-57 Sannomiya First Building

A-56 Homat Horizon Building

A-60 Hiroo ON Building

A-54 NORE Fushimi

A-58 Towa Kandanishikicho Building

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Office Residence RetailList of portfolio as of the end of 13th period

B-1 Tower Court Kitashinagawa

B-6 Seam Dwell Tsutsui

B-2 Sky Hills N11

B-8 Kanda Reeplex R’s

B-4 my atria Sakae

B-7 Ciel Yakuin C-1 Otakibashi Pacifica Building

B-3 my atria Meieki

B-9 Splendid Namba

B-13 Residence Edogawabashi

B-17 Dormy Kitaakabane

B-21 Piacere Fuminosato

B-11 Residence Nihombashi Hakozaki

B-15 Field Avenue

B-19 ZEPHYROS Minami-horie

B-10 Residence Hiroo

B-14 Merveille Senzoku

B-18 Splendid Shin-Osaka III

B-12 Primegate Iidabashi

B-16 Domeal Kitaakabane

B-20 Charmant Fuji Osakajominami

C-2 Komyoike Act C-3 BECOME SAKAEB-5 Mac Village Heian

A-61 TK Gotanda Building A-64 Alte Building HigobashiA-62 Gotanda Sakura Building

A-65 DIA Building Meieki

A-63 Esprit Kameido

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Unitholder InformationInvestment UnitsHistorical Unit PriceThe following shows trends for trading prices (closing prices) and volume for NIPPON REIT, which is traded on the Tokyo Stock Exchange, for the period from April 24, 2014 to Dec. 31, 2018 (the final trading day of the 13th fiscal period).

Investor Memo

Procedures for Notification of Address or Other ChangesInvestors should inform their securities company of any changes to pertinent personal information, including address, name, and official seal for carrying out banking transactions.

Cash DistributionsUnitholders can receive cash distributions by bringing their cash distribution receipt to the nearest Japan Post Bank or post office (banking agent). To receive the cash distributions after the receipt period, designate the method for receipt on the back of the cash distribution receipt and mail it to the Stock Transfer Agency Services, Mitsubishi UFJ Trust and Banking Corporation or go to the head office or a branch office. (Please refer to the investor memo above for contact information.)In addition, for future cash distributions, unitholders should contact their securities company to specify a bank account for cash distribution deposits, or for desired procedures, including filing to opt for separate taxation at the source.Note that NIPPON REIT is not obliged to pay any cash distributions unclaimed for a period of three years after the first day of payment. Unitholders should make arrangements to receive their cash distributions as soon as possible.

Statement of Cash DistributionThe statement of cash distribution we send for cash distribution payments also serves as Notice of Dividend Payment, in accordance with provisions under the Special Taxation Measure Act of Japan. This document can be an attachment to tax forms when filing income taxes. Note that the statement of cash distribution is enclosed and sent along with the cash distribution receipt, which unitholders exchange for dividends. Unitholders who file income taxes should carefully store this document away to prevent loss. However, unitholders who opt for allocation in proportion to the number of investment units should contact their securities company for details.

Book-closing dates for fiscal periods June 30 and December 31 of each year

The General Meeting of Unitholders Held more than once every two years

Unitholder record date for exercising voting rights

Date stipulated in Article 16 of the Articles of Incorporation

Registration deadline for cash distribution payments

June 30 and December 31 of each year (Cash distributions are paid within a three-month period from the registration deadline.)

Listed on the following stock exchange

Real Estate Investment Trust Section, Tokyo Stock Exchange (TSE) (Stock code: 3296)

Notification published in the following newspaper

Nihon Keizai Shimbun

Transfer agentMitsubishi UFJ Trust and Banking Corporation 1-4-5 Marunouchi, Chiyoda-ku, Tokyo, Japan

Contact:(Postal mail and phone inquiries)

Corporate Agency Division Mitsubishi UFJ Trust and Banking Corporation. 1-1, Nikkocho, Fuchu-shi, TokyoPhone: 0120-232-711(toll-free)Mail to: Shin-Tokyo Post Office P.O.B. No.29, 1378081 Corporate Agency

Division Mitsubishi UFJ Trust and Banking Corporation

Unit price (yen)

200,000

250,000

300,000

350,000

400,000

Turnover450,000

0

15,000

30,000

45,000

60,000

April2014

October2014

April2015

October2015

April2016

October2016

October2017

October2018

April2018

April2017

: Unit price : TSE REIT (Note) Index : Turnover

(Note) TSE REIT Index is indexed to the price of NIPPON REIT on April 24, 2014 (¥ 261,100).

UnitholdersBreakdown of Investment Unitholdings and Number of Unitholders by Investor

78,937(17.54%)78,937(17.54%)

258,430(57.44%)258,430(57.44%)

30,164(6.70%)30,164(6.70%)

«By Number of Unit» «By Number of Unitholder»

13th fiscal period(as of Dec. 31, 2018)

449,930units

82,399(18.31%)

Individuals

Financial Institutions

Domestic Corporations

Foreign Corporations

13th fiscal period(as of Dec. 31, 2018)No. of unitholders

16,347

15,760(96.41%)15,760(96.41%)

Individuals

Foreign Corporations 190(1.16%)

290(1.77%)290(1.77%)

Domestic Corporations

107(0.65%)107(0.65%)

Financial Institutions

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