Invesco Office J-REIT, Inc. (3298) 9th Fiscal Period Ended October 31, 2018

Transcription

1 Invesco Office J-REIT, Inc. (3298) 9th Fiscal Period Ended October 31, 2018 Invesco Global Real Estate Asia Pacific, Inc. December 14,

2 Table of contents 1 Investor initiatives Highlights IOJ s unit price vs TSE REIT index Forward thinking measures to improve investor value Various initiatives have improved IOJ s price performance Proactive asset management focusing on investor value increase IOJ s positioning in the J-REIT market Widening of investor base Positive earnings variance from recent forecast Continued earnings growth projected Peer comparison Independent third-party evaluations Key facts 2 Operational highlights Portfolio composition Portfolio review Improved occupancy Disciplined asset management approach examples 3 Growth strategies Positive real estate fundamentals Disciplined external growth Medium-term goals Leasing achievements and occupancy Rent reversions and rental gap provides headroom for growth Rent differential for office space Long-term stability through focused financial management 4 Appendix Top 10 tenants Revenue compositions ESG performance Green bond issuance Unitholders Achievements of individual assets Portfolio information Financial statements Office market environment Yield gaps in global office investments Proprietary market research Supply demand balance in Tokyo and office forecast This document is provided for informational purposes only and is not intended as an inducement or invitation to invest in securities issued by Invesco Office J-REIT, Inc

3 About Invesco group Invesco Ltd. (NYSE: IVZ) is a leading independent global investment management firm, dedicated to delivering an investment experience that helps people get more out of life Client focus Independent investment management firm Global presence Invesco Real Estate, a business division of the Invesco Group, is one of the largest real estate investment management firms globally Invesco Real Estate benefits from the firm s exclusive focus on investment management and performance driven culture Invesco Real Estate offers clients access to a range of global investment strategies spanning from core to opportunistic in the private and public space Source: Invesco Group 3

4 1. Investor initiatives 4 4

5 Highlights Proactive asset management Implemented specific proactive initiatives which have improved Invesco Office J-REIT Inc. ( IOJ ) performance IOJ s unit price has outperformed the TSE REIT Index by 54.1% 1 and P/NAV ratio has improved to over 1.1x 2 at the end of November 2018 Sustainable growth 9.7% Dividend per unit ( DPU ) accretion in FP9 ( 439) compared to actual DPU in FP8 ( 400) 5.4% NAV/U improvement reflecting market cap expansion and appraisal value increase Enhanced market position Included in FTSE EPRA / NAREIT Global Real Estate Index Series in September 2018 The proportion of investment units held by overseas institutional investors has been improved to 33% 1 A relative figure of IOJ s unit price and TSE REIT Index based on the closing price at the beginning of FP6 (November 1, 2016) (IOJ: 10,562 (the investment unit price is divided by 8 taking into consideration the impact of the investment unit split) and TSE REIT Index: 1,781.03pt)=100.0%. 2 Calculated based on the actual NAV/U of 14,793 as at the end of May

6 IOJ s unit price vs TSE REIT index 1 IOJ s unit price outperformed TSE REIT index due to proactive asset management (Closing price of November 1, 2016=100.0%) November 28, 2018 Change in outlook of credit rating A+(Stable) to A+(Positive) 160.0% 150.0% December 7, 2016 Asset replacement Disposition Harumi Island Triton Square Office Tower Z Acquisition Kinshicho Prime Tower June 12, 2017 Unit buyback announcement January 11, 2018 Announcement of issuance of investment corporation bonds for retail investors November 30, 2018 IOJ: 156.1% ( 16,490) 140.0% 130.0% 120.0% September 7, 2018 Announcement of inclusion in the FTSE EPRA/NAREIT Global Real Estate Index series Outperformed TSE REIT Index by 54.1pt 110.0% 100.0% March 14, 2018 Asset replacement Disposition Sendai Honcho Building Acquisition IBF Planning Building April 9, 2018 Announcement of follow-on offering ( 28.6bn) November13,2018 Announcement of green bond issuance November 30, 2018 TSE REIT Index: 102.0% (1,816.96pt) 90.0% IOJ TSE REIT Index 80.0% 11/201612/2016 November 2/2017 4/2017 April /2017 7/2017 8/2017October 10/201712/2017 1/2018 3/2018 April /2018 7/2018 8/2018October 10/201811/2018 FP6 (ended April 30, 2017) FP7 (ended October 31, 2017) FP8 (ended April 30, 2018) FP9 (ended October 31, 2018) 6 1 IOJ made an investment units split at a ratio of 8 units per one investment unit effective on March 1, For that reason, for the days on or before February 23, 2018, the investment unit price is divided by 8 taking into consideration the impact of the investment unit split. Showing relative trend of the unit price and TSE REIT Index based on the closing price at the beginning of FP6 (November 1, 2016) (IOJ: 10,562 (the investment unit price is divided by 8 taking into consideration the impact of the investment unit split) and TSE REIT Index: 1,781.03pt)=100.0%.

7 Forward thinking measures to improve investor value Several initiatives were a first for J-REITs Acquisition and cancellation of own investment units First case in J-REITs Overview No. of acquired own investment units:7,640 units (before unit split) Total acquisition price: 799,984,693 Acquisition period: from June 13, 2017 to July 10, 2017 Cancellation date:august 10, 2017 Main resource Cash in hand generated from the gap between depreciation expenses and capital expenditure Investment unit split resulted in a reduction of the minimum investment unit price level for IOJ Objective To broaden IOJ s investor base and improve liquidity by lowering its per unit price through a unit split Online road show for individual investors by using Internet Change in number of investors February 2018 (Before the split) 18,919 22,851 For the public offering conducted in April 2018, IOJ made an online presentation for individual investors Overview Split Ratio:8-for-1 Record Date:February 28, 2018 Effective Date:March 1, 2018 October 2018(FP9) First case in J-REITs IOJ Change in DPU 1 (Before the investment unit split) October 2017(FP7) excluding the effect from unit buyback October 2017(FP7) Issuance of Green Bonds by using a subsidy scheme from the Ministry of the Environment Overview Amount Issued: 5.5bn Duration: 5 years Interest rate: 0.580% Issue date: December 13, 2018 Redemption date: December 13, % Second-party opinion provider: Sustainalytics Japan Use of proceeds: Allocated to refinance the short term banking loan which IOJ borrowed to acquire an eligible green property, Ebisu Prime Square Change in NAV per unit 1 (Before the investment unit split) April 2017(FP6) October 2017(FP7) 14,455 14, % First case in J-REITs Second-party opinion from environmental evaluation agency 7 Individual investors 1 The figures were calculated based on the actual DPU or NAV/U divided by eight in order to reflect an eight-for-one unit split with February 28, 2018 as the record date and March 1, 2018 as the effective date.

8 Various initiatives have improved IOJ s price performance Aiming for further improvement in valuation by improving investor value and decrease in risk premium Theoretical value of the unit price in asset P = NAV per unit Theoretical value of the unit price in profits 1 DPU ( 1 + g ) P = Σ n-1 = n=1 (1 + r f + r p ) n DPU r f + r p - g Improvement in NAV Improvement in profitability Expansion in portfolio size Improvement in positioning Change in NAV per unit 14,467 15,591 Increase in appraisal gain 15.4bn 28.2bn NAV improvement by unit buyback -Change in NAV per Unit 2 - FP6 FP7 14,455 14,859 -Change in unit price 2 - FP % 1.8 x % 12,275 12, % FP7 Change in NOI 3.7bn 5.5bn 1.5 x Change in stabilized DPU % Internal growth cases -Change in NOI- Techno Wave 100 pre-acquisition post-acquisition 249mm 274mm % Prime Tower Shin-Urayasu pre-acquisition post-acquisition 284mm 295mm % Asset size 154.2bn 220.4bn Disposition Increase in stabilized DPU 1.4 x Top 5 tenant ratio 28.1% 18.7% points Top 5 asset ratio 61.2% 52.7% points -Asset swap resulted in improvement of portfolio profitability and stability- Acquisition Enhanced tenant diversification Increase in institutional investors The no. of domestic and overseas institutional investors increased by 46% due to proactive asset management (1.4 x) Global index inclusion Included in FTSE EPRA/NAREIT Global Real Estate Index Series (As of September 24, 2018) Credit rating (JCR) A+ (positive) (As of November 28, 2018) ESG First J-REIT to issue a green bond by using subsidy scheme established by the Ministry of the Environment Improvement in investor's value (FP5 FP9) Decrease in risk premium (FP5 FP9) 8 IOJ s investment units outperformed by 54.1pt during the last 2 years from the beginning of FP6 until the end of Nov The figures were calculated based on the actual DPU or NAV/U divided by eight in order to reflect an eight-for-one unit split with February 28, 2018 as the record date and March 1, 2018 as the effective date. 1 Definition: P: Unit price value per unit DPU: Dividend per unit r f: : Risk free rate r p: : Risk premium g: DPU growth rate

9 Proactive asset management focusing on investor value increase Implementation of timely and effective management initiatives to improve investor value Proactive initiatives SB issue for institutional investors Web IR for retail investors From April 2017 until August 2017 SB issue for retail investors Investment unit split with smallest unit Net roadshow for retail investors Green bond issuance Aiming to improve investor awareness and IOJ s position in the J-REIT market through proactive initiatives in line with market situations Investment unit buyback Timely and effective initiatives in line with market situations Announced in December 2016 Asset replacement in FP6 Disposition of Triton Square Office Tower Z Acquisition of Kinshicho Prime Tower April 2017 Amendment of guidelines June 2017 Buyback August 2017 Cancellation April 2018 Announcement of asset acquisitions through public offering Striving to maximize investor value by improving NAV and DPU through timely and effective initiatives, such as public offering, unit buyback and asset replacement P/NAV (x) Target growth rate of stabilized DPU & NAV per unit 2-3% growth per annum Risk premium management Further mitigation of risk premium through AUM growth and market position improvement 9

10 IOJ s positioning in the J-REIT market As at the end of November 2018 Achieved a global index inclusion in September 2018 ( 100 mm) 12,000 Asset size (LHS) Dividend yield 1 (RHS) Office J-REIT IOJ (As of November 30, 2018) IOJ (As of April 30, 2018) 7% 10,000 6% 8,000 5% 6,000 Average Dividend Yield: 4.7% 4% 4,000 3% 2,000 2% 0 1% 0% MSCI Japan Index FTSE EPRA TSE REIT Core Index JCR AA JCR AA JCR A+ 1 IOJ s dividend yield is calculated based on 379 which is FP10 (4/2019) DPU forecast. Dividend yield of other J-REIT s above is calculated by the following formula: each J-REIT s latest DPU forecast as of November 30, 2018/ operating days of the fiscal period 365 days/ share price of each J-REIT as of November 30,

11 Widening of investor base Increased investment units held by domestic and overseas institutional investors as a result of global offering and proactive investor relation initiatives Domestic individuals Domestic corporations Overseas corporations and individuals Domestic financial institutions 1 100% 90% 80% 70% 60% 50% 40% 30% 20% 41.7% (24,131) 5.1% (478) 14.3% (132) 39.0% (85) 37.3% (23,576) 4.3% (394) 19.7% (152) 38.8% (89) 29.0% (20,319) 3.3% (342) 21.5% (178) 46.1% (81) 24.3% (18,353) 2.9% (315) 24.4% (175) 48.5% (76) 25.9% (19,935) 2.8% (323) 21.2% (179) 18.9% (22,180) 2.8% (347) 33.6% (235) 50.0% (90) 44.7% (89) Total share of domestic and overseas institutional investors 78.3 % 8.9% 8.9% 24.4% 57.8% 10% 0% Total no. of unitholders 2 Oct FP5 Apr FP6 Oct FP7 Feb (before unit split) Apr FP8 24,826 24,211 20,920 18,919 20,527 Oct FP9 22,851 J-REIT Average As of November Including financial instruments business operators. 2 The number of investors under each category is shown in parentheses. 3 Prepared by Invesco Global Real Estate Asia Pacific Inc. ( IGRE or Asset Management Company ) based on disclosed data as of November

12 Positive earnings variance from recent forecast Financial results for FP9 (ended October 31, 2018) FP8 Ended April 30, 2018 FP9 Ended October 31, 2018 Earnings variance from recent forecast ( mm) Actual Forecast (A) (as of June 15, 2018) Actual (B) (B)-(A) Operating revenue 6,397 8,506 8, Operating income 3,076 4,218 4, Ordinary income 2,590 3,683 3, Net income 2,588 3,682 3, Units issued & outstanding 6,463,256 8,643,356 8,643,356 - DPU ( ) Operating revenue Increase in rental revenue (Nishi Shinjuku PS, Shinagawa Seaside etc.) ( mm) Impact to DPU ( ) Increase in utility income Increase in other revenue (Tenants cancellation penalty etc.) Operating revenue Operating income Increase in utility costs Decrease in repair costs Decrease in other rental expenses Decrease in other expenses Operating income Ordinary income LTV (%) Total assets 179, ,448 - Increase in interest payment -5-1 Ordinary income Net income Interest bearing debt 89, ,300-12

13 Continued earnings growth projected Financial forecasts for FP10 (ending April 30, 2019) ( mm) FP9 Ended October 31, 2018 Actual Adjusted results 1 (A) Forecast FP10 Ending April 30, 2019 Adjusted forecast 2 (B) (B)-(A) Operating revenue 8,625 8,161 8,048 8, Operating income 4,339 3,672 3,809 3, Ordinary income 3,799 3,131 3,276 3, Net income 3,797 3,129 3,274 3, Analysis of earnings variance Operating revenue Increase in rental revenue (CS Tower, Sun Towers etc.) ( mm) Impact to DPU ( ) Decrease in utility income Decrease in other revenue Operating revenue Operating income Decrease in utility costs Increase in repair costs Decrease in other rental expenses (Shin-Urayasu, BM fee etc.) Decrease in other expenses Operating income Units issued & outstanding 8,643,356 8,643,356 8,643,356 8,643,356 - Ordinary income Decrease in other costs Ordinary income DPU ( ) Net income Excluded temporary factor from actual DPU number in FP9 (10/2018). Adjusted items are 1) sales profit from asset disposition ( 410mm), 2) turnover rent of Shinagawa Seaside East Tower ( 54mm), 3) property tax effect ( 155mm) and 4) AM fee adjustment due to less amount in initial period of asset acquisition ( 47mm). 2 Excluded temporary factor from forecast DPU number in FP10 (4/2019). Adjusted item is property tax effect ( 119mm). 13

14 Peer Comparison As at the end of November 2018 Asset quality Average total floor area (sqm) 60,000 40,000 20, ,622 IOJ 21,904 14,807 Peer J-REITs Average J-REIT Average Valuation Dividend yield (%) IOJ Peer J-REITs Average J-REIT Average Average purchase price ( bn) DPU growth (%) IOJ Peer J-REITs Average 4.7 J-REIT Average IOJ Peer J-REITs Average J-REIT Average Growth AUM growth (%) 2 P/NAV IOJ Peer J-REITs Average J-REIT Average IOJ Peer J-REITs Average J-REIT Average Profitability NOI yield after depreciation (%) 3 Liquidity Daily trading volume ( mm) 7 1 Based on disclosed data as of November 30, Peer J-REITs includes Nippon Building Fund Inc., Japan Real Estate Investment Corporation., Global One Real Estate Investment Corporation, Kenedix Office Investment Corporation, Ichigo Office REIT Investment Corporation, Daiwa Office Investment Corporation and Japan Excellent, Inc. 2 AUM Growth is calculated as the percentage increase in AUM between the latest disclosed financial period and six financial periods before. 3 NOI yield after depreciation of peer J-REITs average and J-REIT average are calculated by the following formula: total NOI /operating days 365 days/ total purchase price as of November 30, Dividend yield of peer J-REITs average and J-REIT average are calculated by the following formula: each J-REIT s current DPU forecast as of November 30, 2018/ operating days of the fiscal period 365 days/ share price as of November 30, DPU growth is calculated by the simple average of the percentage increase in dividend yield between the current financial period and four financial periods before. 6 P/NAV of peer J-REITs average and J-REIT average are calculated using the following formula: total market capitalization divided by total NAV. Calculated using share price as of November 30, In addition, IOJ s P/NAV is calculated by assumed NAV ( 15,591). 7 Daily Trading Volume of peer J-REITs average and J-REIT average are the simple averages of the daily traded volumes of each investment unit from December 1, 2017 to November 30, Source: Disclosure material, Bloomberg, Capital IQ IOJ Peer J-REITs Average J-REIT Average 1, IOJ Peer J-REITs Average Peer J-REITs Average (excl. NBF, JRE) J-REIT Average

15 Independent third-party evaluations Index inclusion IOJ is included in the following indexes as of the end of November S&P Global Property Russell Global MSCI Japan (Small Cap) FTSE EPRA/ NAREIT Global Real Estate Analyst coverage 1 The following is a list of the analysts making recommendations based on IOJ's business performance. Company Analyst Rating Target price SMBC Nikko Securities Inc. Hiroshi Torii 2 Neutral 2 18,200 2 Nomura Securities Co., Ltd. Tomohiro Araki Buy 3 17,600 3 Citigroup Global Markets Japan Inc. Masashi Miki/ Takashi Hashimoto Buy 4 17, This list is based on information available to IOJ and its Asset Management Company at the time of publication, and is prepared according to the guidelines of IOJ and its Asset Management Company. Consequently, the list may not be comprehensive or the information may be out of date. Analysts included in this list and others not listed are engaged in providing analysis relating to the business results of IOJ and its business, or projecting the future business results of IOJ, based on judgments made independently by the analyst either periodically or on ad hoc basis. Neither IOJ nor its Asset Management Company, or their respective management teams, have had any part whatsoever in the process by which analysts form their analysis or projections. IOJ and its Asset Management Company do not in any way endorse or provide assurances concerning the analysis, projections, opinions or recommendations, etc. made by analysts. This list is provided solely for the purpose of providing investors with information concerning companies and analysts who provide analysis or projections relating to the business results, etc. of IOJ. It does not constitute a solicitation to invest in IOJ. Any investment decisions you make ultimately rest on your own judgment and are your own responsibility. 2 The rating and target price are as of the report issued on July 9, The rating and target price are as of the report issued on June 15, The rating and target price are as of the report issued on July 2,

16 Key facts As at the end of October 2018 Properties Financials No. of properties: 18 properties DPU forecast in FP10 (ending April 2019) : 379 Total purchase price: Appraisal value: bn bn FFO / unit 3 : AFFO / unit 4 : NOI yield: NOI yield after deprecation: Average total floor area 1 : Total leasable area: 4.9 % 4.1 % 59, sqm 279, sqm NAV/unit: 15,591 Book value/unit: 12,770 Dividend yield: (as of November 30, 2018) : 4.6 % % in Tokyo metropolitan area 2 : 85.1 % LTV book value 5 : LTV appraisal value 6 : 49.4 % 44.3 % FP9 average portfolio occupancy rate: 98.4 % JCR Long-term issuer rating (as of November 28, 2018): A+/ Positive 1 Average gross floor area of each building 2 Purchase price basis 3 (FP9 net income + FP9 depreciation expense FP9 gain on sales of property) / the number of units issued and outstanding as of the end of FP9 4 (FP9 net income + FP9 depreciation expense FP9 gain on sales of property FP9 capital expenditures) / the number of units issued and outstanding as of the end of FP9 5 Total interest bearing debt at the end of FP9 / total assets at the end of FP9 6 Total interest bearing debt at the end of FP9 / (total assets at the end of FP9 + unrealized gain of portfolio at the end of FP9) 16

17 2. Operational highlights 17

18 Portfolio composition As at the end of October 2018 Highlights (18 assets) Purchase price billion Characteristics 3 By asset type (%) 8.2 Investment ratio by geographic location Average purchase price billion 91.8 Appraisal value billion Large-scale offices Others (mid-size offices) 91.8% 8.2% FP9 average occupancy rate 98.4% Average NOI yield 1 4.9% Portfolio PML % By geographic location (%) Tokyo Metropolitan Area 85.1% -Tokyo 23 wards 68.8% (Tokyo central 5 wards %) Fukuoka City 4.5 bn 2.0% Osaka City 1.9 bn 0.9% Nagoya City 14.6 bn 6.6% Urayasu City 11.8 bn 5.4% Tokyo Metropolitan Area bn 85.1% Other Areas 14.9% 18 1 NOI yield was calculated by annualized actual NOI for FP9. The average NOI yield is calculated by total NOI of the 18 assets divided by total purchase price of those 18 assets. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses. 2 The PML means the extent of the damage that would be incurred due to the largest earthquake (a great earthquake with the likelihood of occurring once in 475 years = a great earthquake with a 10% likelihood of occurring once in 50 years) foreseen during the assumed useful life (50 years being the usual useful life of a building) as a ratio (%) of the replacement value for the foreseeable restoration costs of the damage. The figure described above is in the Report on evaluation of seismic PML for portfolio dated March 2018 by Sompo Risk Management, Inc. 3 The ratio is calculated based on the purchase price. 4 Tokyo central 5 wards includes Chiyoda-ward, Chuo-ward, Minato-ward, Shinjuku-ward and Shibuya-ward.

19 Portfolio review Property name Ebisu Prime Square Harumi Island Triton Square Office Tower Z 1 CS Tower/ CS Tower Annex Queen s Square Yokohama Nagoya Prime Central Tower SOLD Location Tokyo Tokyo Tokyo Yokohama Nagoya Purchase price 25,014 million 9,300 million 13,700 million 16,034 million 14,600 million Property name Tokyo Nissan Nishi- Gotanda Building ORTO Yokohama Nishi-Shinjuku KF Building Shinagawa Seaside East Tower Akiba CO Building Location Tokyo Yokohama Tokyo Tokyo Tokyo Purchase price 6,700 million 13,000 million 6,600 million 25,066 million 8,078 million Property name Sun Towers Center Building Sendai Honcho Building 2 Hakata Prime East Kinshicho Prime Tower Aqua Dojima East SOLD Location Tokyo Sendai Fukuoka Tokyo Osaka Purchase price 6,615 million 5,000 million 4,500 million 15,145 million 1,910 million Property name Nishi-Shinjuku Prime Square Kojimachi Crystal City Prime Tower Shin-Urayasu Techno Wave 100 IBF Planning Building 19 Location Tokyo Tokyo Urayasu Yokohama Tokyo Purchase price 34,835 million 6,405 million 11,860 million 6,900 million 3,500 million 1 Disposed on December 16, Profit from disposition was 783 million. 2 Disposed 40% of co-ownership of trust beneficiary interest on April 18, 2018 and 60% of co-ownership of trust beneficiary interest on May 17, Profit from disposition was 687 million.

20 Improved occupancy Implemented proactive leasing activities to achieve goals Opportunity for further occupancy improvement in FP10 in the current strong market Portfolio average occupancy rate during FP9 (10/2018) Leases signed 98.2% Forecast as of June 15, % Result 4,830 sqm in FP9 Proactive leasing examples (newly move-in spaces/rent increase ratio 1 ) FP 9 Proactive rent negotiation examples (rent increased spaces/rent increase ratio 2 ) FP 10 FP 9 and 10 Nishi-Shinjuku KF Building 441 sqm / +28% Aqua Dojima East 330 sqm / +28% Sun Towers Center Building 2,827 sqm / +35% Techno Wave 100 1,651 sqm / +21% CS Tower/ CS Tower Annex 12,346 sqm / +7% Nishi-Shinjuku Prime Square 7,109 sqm / +7% 1 Rent increase ratio is a weighted average ratio calculated based on the difference between new tenant s rent and former tenant s rent for the newly leased areas during each FP (FP9 or FP10). 2 Rent increase ratio is a weighted average ratio calculated based on the difference between new rent and previous rent for the leased areas which renewed with upward revision during each FP (FP9 and FP10). 20

21 Disciplined asset management approach - examples Techno Wave 100 Prime Tower Shin-Urayasu Occupancy improved to 94.7% in January 2019 which represents a 7.3% improvement from preacquisition occupancy rate forecast 1 Further occupancy improvement is expected with further active management Occupancy improved to 95.6% in December 2018 which represents a 10.5% improvement from preacquisition occupancy rate forecast 1 Occupancy rate forecast Improvement in NOI Occupancy rate forecast Improvement in NOI 87.4% pre-acquisition % post acquisition in Jan mm pre-acquisition 2 274mm post acquisition in FP9 (10/2018) 85.1% pre-acquisition % post acquisition in Dec mm pre-acquisition 2 295mm post acquisition in FP9 (10/2018) Value creation Creating comfortable work environments through renovating common area Cost control Achieved a 17% cost reduction in building maintenance costs from December 2018 through a competitive bidding Operating expense reduction example Multiple Location Policy In anticipation of an increase in insurance premiums, IOJ seeks a blanket insurance for all 3 properties through a competitive bidding process 21 1 Pre-acquisition occupancy rate forecast is described in the Securities Registration Statement on April Pre-acquisition NOI is IGRE s assumed NOI at the acquisition. Achieving a 19% annual reduction (scheduled) (approximately a 4.7mm reduction per annum) 3 Excludes Tokyo Nissan Nishi-Gotanda Building which is covered under co-owner s insurance policy.

22 3. Our Future strategies 3. Growth strategies 22

23 Positive real estate fundamentals Market perceptions Opportunities and strategy Opportunities Strong corporate performance Lowest level of office vacancy in metropolitan areas Solid demand from overseas Positive rent gap Further possibility to increase rents with good business environment in the major CBDs in Japan Assets located in Japan s major metropolitan areas tend to enjoy benefits from both domestic and overseas demand Challenges Anticipated interest rate hikes in the future Capital outflow from J-REIT specialized funds (monthly distribution type) Extend average funding period while reducing funding costs by issuing investment corporation bonds (continuously consider issuing corporate bonds, retail bonds and green bonds) Aiming to maximize unit split effects through domestic/overseas investor relation initiatives Anticipated further transaction price rising of Tokyo office properties Expansion of capital inflow through ETFs due to increase weighting of index investing Utilize sourcing capability as an independent asset management company 23

24 Disciplined external growth Steadily expand portfolio by leveraging its diverse sourcing network as an independent asset manager Acquisition source ratio (based on purchase price) Deal sourcing situation % 21.9% Total purchase price 220.4bn 27.2% Developers and SPCs arranged by developers Foreign property funds Domestic property funds Financial institutions Office Others Tokyo metropolitan area No. of properties: 146 Size ( mm) : ,000 No. of properties: 218 Size ( mm) : 49-40,000 Others No. of properties: 61 Size ( mm) : ,000 No. of properties: 248 Size ( mm) : 98-80, % 26.9% Others Total No. of properties: 364 Size ( mm) : 49-40,000 No. of properties: 309 Size ( mm) : 98-80,000 Steady acquisition pipeline from diverse investment sources Procured information on 1,000 acquisition opportunities per annum (on average) over the past 19 years Cumulative investment amount (since 1999) of approximately 1.2 trillion (128 properties) 2 Current AUM is approximately billion (as of November 30, 2018) Cumulative investment amount 2 1 Since the beginning of May 2018 to the end of October IOJ does not guarantee that it will acquire those properties. The size is in terms of value. 2 The above cumulative investment amount is based on the total acquisition price and includes the track record of the assets under the Asset Management Company s management when the Invesco Group acquired the Asset Management Company from American International Group in December

25 Medium-term goals Stabilized DPU improved by 101 or 38.7% and AUM increased by 141.8bn or 2.8 times for 4.5 years after IPO Aiming to attain stabilized DPU in the medium term (in the next 3 years) Medium term goal in the next 3 years DPU target (stabilized base): Adjusted FP10 (4/2019) DPU forecast 1 : 365 Key drivers to achieve the medium term goal Asset size bn 220.4bn at the end of FP9 (10/2018) NAV per unit 16,000-19,000 15,591 at the end of FP9 (10/2018) Top 5 tenant ratio Below 10% 18.7% at the end of FP9 (10/2018) LTV book value Below 50% 49.4% at the end of FP9 (10/2018) Credit rating (JCR) AA A+ (positive) as of November 28, 2018 Index inclusion TSE REIT Core Index Not included at the end of FP9 (10/2018) Aiming to further improve investor value and price performance by conducting timely and effective active management initiatives 25 1 Excluded property tax effects from FP10 DPU forecast.

26 Leasing achievements and occupancy FP9 average occupancy rate was 98.4% as a result of proactive leasing activities Leasing achievements (FP9) Leasing policy and occupancy outlook (FP10) Achieved a 98.0% occupancy at the end of FP9 (10/2018): Resulted in 0.3 points higher than the initial forecast The average portfolio occupancy rate in FP9 has been maintained at 98.4% due to successful leasing up in Sun Towers Center Building and tenant back filling in Nishi-Shinjuku KF Building and Aqua Dojima East 100% 95% 90% 85% 99.6% 7,243 6, % 98.5% 98.5% 98.5% 98.4% % 97.9% 97.7% 1,626 2,746 FP8 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 (Est.) 98.9% in FP8 Dec-18 (Est.) Portfolio average occupancy rate during fiscal period 98.4% in FP9 1 The occupancy estimation for FP10 is as of December 4, Focusing on leasing activities at ORTO Yokohama, Prime Tower Shin Urayasu and Techno Wave 100 in FP10 Aiming to improvement of portfolio occupancy rate through proactive leasing activities because it is expected to decrease to 97.9% in FP10 from 98.4% in FP9 98.1% 98.0% 98.0% Jan-19 (Est.) Feb-19 (Est.) 97.9% in FP10 (Forecast) 97.6% Move-in (sqm) Move-out (sqm) Occ.(Result) Occ.(Est) Mar-19 (Est.) Apr-19 (Est.) 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 (sqm)

27 Rent reversions and rental gap provides headroom for growth Renewed 82 contracts in FP9 of which 29 contracts (33.6% based on total leased area of tenants facing contract renewal) were renewed with upward revisions The leased area for tenants that renewed with upward revisions was 15,901 sqm and the rent increase ratio was 6.5% in FP9 Increase in the difference between the current average portfolio rent and the estimated market rent from 6.9% to 8.4%, providing further potential for rent growth 100% 27 Lease renewal status (Leased area basis) 1 50% 0% 14.0% (11) 23.6% (14) 33.6% (29) 84.4% (34) 76.4% (56) 66.4% (53) 1.6% (2) FP7 FP8 FP9 Downward Flat Upward FP7 FP8 FP9 Leased area (sqm) 2,122 6,898 15,901 Rent increase (%) Average rent for the 13 current properties not including 5 new assets ( /tsubo) 17,500 16,750 16,000 15,250 14, , % 16,804 FP8 13 assets 15, % 17,161 FP9 13 assets Portfolio Aver. Rent (Left axis) Market Rent (Left axis) 3 Rent Gap (Right axis) More than 10% above market 1 The number of contracts is shown in parentheses. 2 The number is calculated in the case the rent increase contributes to DPU for the whole period. 3 Market rent represents estimated new contract rent for a standard floor used as office space for properties managed by IOJ based on market research by CBRE. 4 Percentage figures and number of tenants represent the percentage or number of lease contracts renewed or to be renewed for office space to total office contracted space. In addition, the chart shows the difference between in-place rents and market rents. Market rents represent contracted rent for a typical floor of assets managed by IOJ evaluated by CBRE. 9.0% 6.0% 3.0% 0.0% -3.0% Rent difference between in-place rents and market rents (Leased area basis) % 20.0% 10.0% 0.0% 82 tenants 8.3% 11.5% 1.1% 0.0% Rent difference More than 10% below market Between 10% above and 10% below market 95 tenants 13.8% 11.0% Planned 92 tenants 6.8% 7.8% 2.0% 1.3% FP9 FP10 FP11 Aim to raise rents Strive to increase or maintain current levels Focus on maintaining current levels

28 Higher than estimated market rent Lower than estimated market rent Rent differential for office space Positive gaps with the 15 properties of all the 18 properties have occurred Occupancy 1 Rent differential (Office space) 2 % of office leasable area of each asset to total leasable area of the portfolio Hakata Prime East 100.0% Aqua Dojima East 100.0% -25.8% -25.3% Nishi-Shinjuku KF Building 97.0% Queen's Square Yokohama 99.8% Nagoya Prime Central Tower 99.6% CS Tower / CS Tower Annex 100.0% Nishi-Shinjuku Prime Square 99.4% Kinshicho Prime Tower 100.0% Kojimachi Crystal City 100.0% Akiba CO Building 100.0% Ebisu Prime Square 99.3% Tokyo Nissan Nishi-Gotanda Bldg 100.0% IBF Planning Building 100.0% Shinagawa Seaside East Tower 100.0% ORTO Yokohama 95.2% -16.0% -15.8% -12.9% -11.9% -10.4% -9.8% -5.8% -5.2% -1.9% -1.7% -1.4% -0.8% -0.5% Prime Tower Shin-Urayasu 94.9% Sun Towers Center Building 100.0% Techno Wave % 1.4% 1.9% 5.5% -40.0% -30.0% -20.0% -10.0% 0.0% 10.0% 0.0% 5.0% 10.0% 15.0% 1 Occupancy rate as of October 31, Rent differential with actual rent as of October 31, 2018 and CBRE s estimated market rent for a standard floor used as office space for properties managed by IOJ. 28

29 Long-term stability through focused financial management As of December 28, 2018 Stable financial management through long-term financing and diversified debt sources Issued green bond by using the subsidy scheme Average interest rate and remaining terms (%) Diversification of debt maturities ( bn) FP1 (10/14) Average remaining years (RHS) FP2 (4/15) FP3 (10/15) 2.2 FP4 (4/16) FP5 (10/16) FP6 (4/17) Average borrowing interest rate(lhs) FP7 (10/17) FP8 (4/18) 2.6 FP9 Dec.28 (10/18) Bond (Retail) Bond (Corporate) Borrowings (Years) Diversified lender formation Total interest bearing debt: 121.3bn Number of lenders: 13 Share (%) Balance ( bn) Sumitomo Mitsui Banking Corporation MUFG Bank Sumitomo Mitsui Trust Bank Mizuho Bank Resona Bank Shinsei Bank Aozora Bank Citibank, N.A., Tokyo Branch Development Bank of Japan The Nishi-Nippon City Bank The Bank of Fukuoka ORIX Bank Corporation Nippon Life Insurance Company FP10 (4/19) 12.0 FP11 (10/19) 13.4 FP12 (4/20) 10.6 FP13 (10/20) FP14 (4/21) FP15 (10/21) 1.8 FP16 (4/22) 15.5 FP17 (10/22) FP18 (4/23) 5.5 FP19 (10/23) 1.6 FP20 (4/24) Corporate bonds 1st series bonds (Corporate) Apr. 20, nd series bonds (Corporate) Apr. 19, rd series bonds (Retail) Jan. 26, th series bonds (Corporate) Green Bond Amount of Duration issued ( bn) (year) Interest rate (%) Redemption date Dec. 13, LTV book value 1 / LTV appraisal value 2 Fixed interest rate ratio Long term loan ratio Credit rating (JCR) 49.4% / 44.3% 95.5% 96.3% A+ (Positive) 1 LTV book value = Total interest bearing debt / Total assets 2 LTV appraisal value = Total interest bearing debt / (Total assets + Unrealized gain of existing portfolio)

30 4. Appendix 4. Appendix 30

31 Top 10 tenants As at the end of October 2018 Allocation by industry (Leased area basis) 1 Top 10 tenants (Leased area basis) End tenants 1 Tokyu Hotels Co., Ltd. Property name Queen's Square Yokohama Leased area (sqm) 2 Ratio of leased area to total leasable area 3 (%) 13, FUJITSU LIMITED ORTO Yokohama 12, Sotetsu Hotel Management Co,. Ltd. Shinagawa Seaside East Tower 9, Yachiyo Engineering Co., Ltd CS Tower / CS Tower Annex 8, INTEC INC. Techno Wave 100 7, Minatomirai Tokyu Square Corporation 7 Marvelous Inc. Queen's Square Yokohama Shinagawa Seaside East Tower 6, , Good Smile Company Akiba CO Building 5, Tokyu Corporation 10 Sompo Care Inc. Queen's Square Yokohama Shinagawa Seaside East Tower 5, , Total of top 10 tenants 78, The chart shows the breakdown of tenants by type of business based on the total number of tenants excluding residential tenants. The number of contracts is shown in parentheses. 2 Unless otherwise stated, leased area represents the part of the total leased area stated in the relevant lease agreement pertaining to each managed real estate and entrusted real estate as of the end of the fiscal period that is the part equal to IOJ s interest. 3 Ratio of leased area represents the percentage of each tenant s leased area to the total leased area of all managed assets, rounded to one decimal place. 31

32 Revenue compositions As at the end of October 2018 Office, retail and hotel rents comprise approximately 98.1% of total revenue Upward rent revision opportunities for office occur every 2.6 years FP9 revenue breakdown by asset type Hotel rent revenue breakdown Residential 1.7% Hotel Retail 4.1% 7.5% Others 0.2% Fixed rent income from 2 hotels was 4.1% of total rent revenue in FP9 Shinagawa Seaside East Tower 2 Queen s Square Yokohama 12.9% 29.6% Office 86.4% 87.1% 70.4% Asset type % to total Average lease rent revenue term Office 86.4% 2.6 years Retail 7.5% 4.6 years Hotel 1 4.1% 20.0 years Residential 1.7% 2.6 years Others 0.2% 4.3 years Total 100.0% 4.2 years Fixed base rent Variable rent Rent type % to total rent revenue Fixed base rent 80.0% Variable rent 20.0% Total 100.0% 1 Not including variable rent income. 2 Data is annualized because Shinagawa Seaside East Tower s variable rent allocated bi-period at odd fiscal period. 32

33 ESG performance GRESB participation GRESB (Global Real Estate Sustainability Benchmark) was established by a group of European pension funds in order to assess the environment, society and governance (ESG) performance of the real estate sector. Invesco Group has been a member of GRESB since IOJ is preparing to submit to GRESB for the first time in Green building certifications Newly certified assets 32.8 % Nagoya Prime Central Tower CS Tower ORTO Yokohama Tokyo Nissan Nishi-Gotanda Bldg. Nishi-Shinjuku Prime Square Prime Tower Shin-Urayasu Ebisu Prime Square of the portfolio (by floor area) has achieved a green building certification Rank S Rank A Rank A Rank A Rank A Rank B+ 3 Stars CASBEE real estate certification The Comprehensive Assessment System for Built Environment Efficiency ( CASBEE ) is a system for comprehensively assessing and ranking the environmental performance of buildings based on a five evaluation scoring model (S rank, A rank, B+ rank, B rank and C rank; excellent order) with regards to aspects such as the enhancement of environmental performance including consideration for the landscape, on top of the aspect of environmental consideration such as energy saving and recycling with a lower environmental burden. DBJ green building certification The DBJ Green Building Certification System is a grading system which certifies high quality buildings that meet various stakeholders social requirements, such as environmental design, security and disaster prevention based on a five evaluation scoring model (from 5 stars to 1 star; excellent order) originally developed by DBJ. This system aims to promote the expansion of Green Building techniques which lead to a sustainable environment. 33

34 Green bond issuance IOJ represents the first J-REIT to issue green bonds using the subsidy scheme Overview of issuance Items Amount Issued Duration Outline 5.5 billion 5 years Interest rate 0.580% Issue date December 13, 2018 Redemption date December 13, 2023 Second-party opinion provider Sustainalytics Japan Eligible Green Projects 1. Buildings that have achieved certification or recertification B+, A or S under CASBEE 3, 4 or 5 Stars under the DBJ Green Building Certification Program 2. Buildings that reduce CO2 emission by more than the required reduction rate (which was set by the authority) compared to the standard emissions volume (also set by the authority) during the most recent fiscal year 3. Refurbishment More than 10% CO2 emissions or energy consumption reduction More than 10% in water consumption reduction More than one level of improvement in the CASBEE Certification or DBJ Green Building Certification Use of proceeds Ebisu Prime Square 3 stars Properties with excellent environmental and social awareness (Recertification date: February 27, 2017) Proceeds used to refinance the short-term banking loan which IOJ borrowed to acquire an eligible green property, Ebisu Prime Square ( Ebisu ) For the most recent fiscal year, Ebisu reduced CO2 by more than 15% (based on CO2 emission volume), which is a greenhouse gas reduction target set by Tokyo Metropolitan Government as offices designated for global warming countermeasures. Ebisu achieved 3 stars of DBJ Green Building Certification Program. 25% 20% 15% 10% 5% 0% Greenhouse gas reduction performance (based on CO2 emission volume) Actual FY2015 Reduction target FY

35 Unitholders As at the end of October 2018 Breakdown by units 1 Major unitholders Domestic Individuals 18.9% Unitholders Units owned % of units issued 3 Foreign Corporations and Individuals 33.6% Financial Institutions 2 0.4% Total units issued 8,643,356 Breakdown by unitholders 1 Domestic Corporations 2.8% Total unitholder 22,851 Domestic Corporations 1.5% Financial Institutions % Foreign Corporations and Individuals 1.0% The Master Trust Bank of Japan, Ltd. (Trust Account) Japan Trustee Services Bank, Ltd. (Trust Account) The Nomura Trust and Banking Co., Ltd. (Investment Trust Account) Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) 1,378, ,176, , , SSBTC CLIENT OMNIBUS ACCOUNT 202, HSBC BANK PLC A/C CLIENTS, NON TREATY , NORTHERN TRUST CO. (AVFC) RE IEDU UCITS CLIENTS NON LENDING 15 PCT TREATY ACCOUNT STATE STREET BANK WEST CLIENT- TREATY J.P. MORGAN BANK LUXEMBOURG S.A BNYM SA/NV FOR BNYM FOR BNY GCM CLIENT ACCOUNTS M LSCB RD 181, , , , Domestic Individuals 97.1% Total 4,157, As percentage of unitholders ratio is rounded to the second decimal place, total of the ratio may not be 100%. 2 Including financial instruments business operators. 3 Percentage of units issued is rounded down to the second decimal place. 4 HSBC Bank Plc, as trustee, holds 196,032 units of IOJ in trust for the benefit of Invesco Investments (Bermuda) Ltd. Invesco Limited is the parent company of Invesco Investments (Bermuda) Ltd. and the Asset Management Company. 35

36 Achievements of individual assets FP9 (ended October 31, 2018) Ebisu Prime Square the end of Apr (A) the end of Oct (B) (B)-(A) the end of Apr (A) the end of Oct (B) 99.8% 99.3% -0.5% 99.8% 100.0% 0.2% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 629 m2 720 m2-91 m2 100 m2 50 m2 50 m2 The occupancy rate of the office unit remained at 100%. Despite several tenants moving-out, the occupancy rate of the residential units remained at 99.3% at the end of FP9 (10/2018). With the expectation that the expiration of office unit contracts in FP10 (4/2019) will decrease the occupancy rate to 96.1%, IOJ will aim to lease spaces at higher rents. CS Tower / CS Tower Annex (B)-(A) IOJ maintained the occupancy rate of the office units at 100% and successfully raised the rents of the existing two tenants. Despite the expiration of one residential contract, the occupancy rate recovered to 100% in July 2018 due to the successful backfilling of this tenant. IOJ plans early lease-up of the upcoming expiry of the residential contracts in FP10 (4/2019) and will continuously aim to raise the levels of rents through negotiations with existing tenants. 100% 90% 99.8% 99.9% 98.8% 98.7% 99.3% 99.1% 99.3% 100% 95% 99.8% 100.0% 99.7% 100.0% 100.0% 100.0% 100.0% 80% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/ Queen's Square Yokohama the end of Apr (A) the end of Oct (B) (B)-(A) Nagoya Prime Central Tower the end of Apr (A) the end of Oct (B) 99.5% 99.8% 0.3% 99.0% 99.6% 0.7% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 210 m2 81 m2 129 m2 183 m2 67 m2 116 m2 IOJ maintained a high occupancy rate of 99.8% at the end of FP9 (10/2018). In addition, as the hotel occupancy trend remained firm, IOJ successfully raised the rents for several existing tenants through negotiations. In FP10 (4/2019), IOJ will continuously focus on maintaining the high occupancy rate and raising rents through negotiations with existing tenants. (B)-(A) The average occupancy rate in FP9 (10/2018) remained at 99.6%. In addition, IOJ successfully raised the rents of six existing tenants. In FP10 (4/2019), IOJ plans early lease-up of the contracts that are due to expire in FP11 (10/2019) and will continuously aim to raise the levels of rents through negotiations. 100% 95% 99.5% 99.6% 99.8% 99.9% 99.9% 99.9% 99.8% 100% 90% 99.0% 99.6% 99.6% 99.6% 99.6% 99.6% 99.6% 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 80% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 36

37 Achievements of individual assets FP9 (ended October 31, 2018) Tokyo Nissan Nishi-Gotanda Building the end of Apr (A) the end of Oct (B) (B)-(A) the end of Apr (A) the end of Oct (B) 100.0% 100.0% 0.0% 100.0% 95.2% -4.8% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 0 m2 0 m2 0 m2 0 m2 1,142 m2-1,142 m2 IOJ maintained a 100% occupancy rate and successfully raised the rents through negotiations with existing tenants. In FP10 (4/2019), IOJ will continuously focus on maintaining stable asset management and also actively conduct negotiations with existing tenants for further raising rents. ORTO Yokohama (B)-(A) With partial expiration of the office unit contract, the occupancy rate dropped to 95.2% at the end of FP9 (10/2018). Because it is expected that the occupancy rate drops to 92.1% due to the tenant leaving in December 2018, IOJ will aim to fill the vacant spaces in a short time as well as building good relationships with major tenants. 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 95% 95% 95.2% 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/ Nishi-Shinjuku KF Building the end of Apr (A) the end of Oct (B) (B)-(A) Shinagawa Seaside East Tower the end of Apr (A) the end of Oct (B) 98.4% 97.0% -1.5% 100.0% 100.0% 0.0% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 631 m2 723 m2-92 m2 0 m2 0 m2 0 m2 (B)-(A) Despite the expiration of the contracts for one residential unit and one office unit in FP9 (10/2018), IOJ successfully backfilled one of the office units without down time and raised the rents of several existing tenants as it actively negotiated with them. In FP10 (4/2019), IOJ plans early lease-up of the residential units and will continuously aim to raise the level of rents through negotiations. IOJ maintained the occupancy rate at 100% in FP9 (10/2018). Hotel operations also remained strong. IOJ will aim to raise the level of rents through negotiations with tenants and to renew the contracts in FP10 (4/2019). 100% 95% 98.4% 98.4% 98.4% 100.0% 98.5% 98.5% 97.0% 100% 95% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 37

38 Achievements of individual assets FP9 (ended October 31, 2018) Akiba CO Building the end of Apr (A) the end of Oct (B) (B)-(A) Sun Towers Center Building the end of Apr (A) the end of Oct (B) 100.0% 100.0% 0.0% 100.0% 100.0% 0.0% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 0 m2 0 m2 0 m2 47 m2 47 m2 0 m2 (B)-(A) IOJ will aim to continuously conduct a stable asset management by maintaining a good relationship with the tenant occupying the whole building. IOJ will maintain the occupancy rate at 100% in FP10 (4/2019). After a major tenant left the building at the end of November 2018, IOJ successfully filled in the vacant space at a much higher rate without downtime. 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 95% 95% 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/ Hakata Prime East the end of Apr (A) the end of Oct (B) (B)-(A) Kinshicho Prime Tower the end of Apr (A) the end of Oct (B) 100.0% 100.0% 0.0% 100.0% 100.0% 0.0% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 175 m2 175 m2 0 m2 0 m2 0 m2 0 m2 (B)-(A) IOJ maintained the occupancy rate at 100% in FP9 (10/2018) and successfully raise d the rents of three existing tenants. IOJ will continuously aim to raise the level of rents through negotiations with existing tenants in FP10 (4/2019). IOJ maintained the occupancy rate at 100% in FP9 (10/2018) and successfully raised the rents of two existing tenants. IOJ will continuously aim to raise the level of rents through negotiations with existing tenants while keeping the occupancy rate at high levels. 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 90% 95% 80% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 38

39 Achievements of individual assets FP9 (ended October 31, 2018) Aqua Dojima East the end of Apr (A) the end of Oct (B) (B)-(A) Nishi-Shinjuku Prime Square the end of May (A) the end of Oct (B) 94.9% 100.0% 5.1% 99.2% 99.4% 0.2% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 491 m2 329 m2 161 m2 302 m2 140 m2 162 m2 (B)-(A) With the completion of lease-up in office and retail areas, IOJ achieved a 100% occupancy rate in FP9 (10/2018). IOJ also successfully raised the rent of one existing tenant. In FP10 (4/2019), IOJ will aim to secure early lease up of one retail unit to be vacant and raise the level of rents through negotiations on a continuous basis. IOJ maintained a high occupancy rate in FP9 (10/2018) and successfully raised the rents of four existing tenants. In FP10 (4/2019), IOJ will continuously aim to raise the level of rents through negotiations. 100% 95% 94.9% 99.0% 99.0% 99.0% 95.3% 96.3% 100.0% 100% 95% 99.2% 99.2% 99.2% 99.2% 100.0% 99.4% 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 90% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/ Kojimachi Crystal City the end of May (A) the end of Oct (B) (B)-(A) Prime Tower Shin-Urayasu the end of May (A) the end of Oct (B) 90.9% 100.0% 9.1% 93.9% 94.9% 1.1% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 520 m2 0 m2 520 m2 1,542 m2 1,305 m2 237 m2 (B)-(A) IOJ has maintained the occupancy rate at 100% since June 2018 and successfully raised the rent of three existing tenants. In FP10 (4/2019), IOJ will aim to raise the level of rents through negotiations with tenants with low rents. Despite a major tenant leaving the Building in FP9 (10/2018), IOJ achieved the occupancy rate of 94.9% after completing three lease-ups including the major area that was vacated. With two upcoming lease expires in FP10 (4/2019), IOJ will continue to focus on leasing activity and the early lease-up of potential vacant office space. 100% 95% 90% 85% 80% 90.9% 100.0% 100.0% 100.0% 100.0% 100.0% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 100% 95% 90% 93.9% 94.3% 94.3% 94.3% 94.3% 94.9% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 39

40 Achievements of individual assets FP9 (ended October 31, 2018) Techno Wave 100 the end of May (A) the end of Oct (B) (B)-(A) IBF Planning Bldg the end of May (A) the end of Oct (B) 89.9% 87.3% -2.7% 100.0% 100.0% 0.0% Move-in area (C) Move-out area (D) (C)-(D) Move-in area (C) Move-out area (D) (C)-(D) 0 m2 577 m2-577 m2 0 m2 0 m2 0 m2 Due to the expiration of one contract in FP9 (10/2018), the occupancy rate decreased to 87.3% at the end of FP9 (10/2018). In FP10 (4/2019), the occupancy rate is expected to improve to 94.7% in January 2019 as some existing tenants plan to expand their floor area s. In addition, IOJ will aim to improve the satisfaction of existing tenants through ongoing and phased renovation of the communal area (which commenced in FP9). (B)-(A) IOJ maintained the occupancy rate at 100% in FP9 (10/2018). In FP10 (4/2019), IOJ will continuously aim to maintain a high occupancy rate by maintaining a good relationships with major tenants. 100% 95% 90% 85% 80% 89.9% 89.9% 89.9% 89.9% 87.3% 87.3% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 100% 95% 90% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 2018/4/ /5/ /6/ /7/ /8/ /9/ /10/31 40

41 Portfolio information As at the end of October 2018 Portfolio Details Property Name Location Purchase Price ( mm) Appraisal Value ( mm) Leasable Area (sqm) Investment Ratio (%) Age (Years) NOI Yield 1 (%) Occupancy (%) PML (%) 1 Ebisu Prime Square Shibuya-ku, Tokyo 25,014 27,832 17, CS Tower / CS Tower Annex Taito-ku, Tokyo 13,700 18,300 19, Queen's Square Yokohama Yokohama-shi, Kanagawa 16,034 19,400 41, Nagoya Prime Central Tower Nagoya-shi,Aichi 14,600 19,800 17, Tokyo Nissan Nishi Gotanda Building Shinagawa-ku, Tokyo 6,700 7,670 8, ORTO Yokohama Yokohama-shi, Kanagawa 13,000 14,600 23, Nishi Shinjuku KF Building Shinjuku-ku, Tokyo 6,600 7,160 6, Shinagawa Seaside East Tower Shinagawa-ku, Tokyo 25,066 27,300 27, Akiba CO Building Chiyoda-ku, Tokyo 8,078 9,580 5, Sun Towers Center Setagaya-ku, Tokyo 6,615 7,770 7, Hakata Prime East Fukuoka-shi, Fukuoka 4,500 4,830 7, Kinshicho Prime Tower Koto-ku, Tokyo 15,145 16,600 17, Aqua Dojima East Osaka-shi, Osaka 1,910 2,060 3, Nishi Shinjuku Prime Square Shinjuku-ku, Tokyo 34,835 38,300 23, Kojimachi Cristal City Chiyoda-ku, Tokyo 6,405 7,070 5, Prime Tower Shinurayasu Urayasu-shi, Chiba 11,860 12,400 22, Techo Wave 100 Yokohama-shi, Kanagawa 6,900 7,160 22, IBF Planning Building Shibuya-ku, Tokyo 3,500 3,670 2, Total 220, , , The average NOI yield is calculated by total NOI of the 18 assets divided by total purchase price of those 18 assets. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses. 41

42 Portfolio information As at the end of October 2018 Appraisal Value Overview Property Name Purchase Price (JPY mm) Appraisal Value (JPY mm) (a) (a)-(b) FP9 End (ended October 31, 2018) Direct Cap Rate (%) (c) (c)-(d) Book Value (JPY mm) Unrealized Gain/Loss (JPY mm) FP8 End (ended April 30, 2018) Appraisal Value (JPY mm)(b) Direct Cap Rate (%)(d) 1 Ebisu Prime Square 25,014 27, ,407 2,425 27, CS Tower / CS Tower Annex 13,700 18,300 1, ,789 4,511 17, Queen's Square Yokohama 16,034 19, ,856 3,544 19, Nagoya Prime Central Tower 14,600 19, ,020 5,780 19, Tokyo Nissan Nishi Gotanda Building 6,700 7, , , ORTO Yokohama 13,000 14, ,814 1,786 14, Nishi Shinjuku KF Building 6,600 7, , , Shinagawa Seaside East Tower 25,066 27, ,056 2,244 26, Akiba CO Building 8,078 9, ,288 1,292 9, Sun Towers Center 6,615 7, ,732 1,038 7, Hakata Prime East 4,500 4, , , Kinshicho Prime Tower 15,145 16, ,425 1,175 16, Aqua Dojima East 1,910 2, , , Nishi Shinjuku Prime Square 34,835 38, ,471 1,829 37, Kojimachi Cristal City 6,405 7, , , Prime Tower Shinurayasu 11,860 12, , , Techo Wave 100 6,900 7, , , IBF Planning Building 3,500 3, , , Total 220, ,502 6, ,261 28, ,

43 Financial statements Balance sheets (Assets) ASSETS Current assets: Eighth Fiscal Period As of April 30, 2018 Ninth Fiscal Period As of October 31, 2018 Cash and bank deposits 5,881,414 3,465,375 Entrusted cash and entrusted bank deposits 10,442,475 15,683,162 Accounts receivables - operating 486, ,407 Accounts receivables 147,830 - Consumption tax receivable - 537,457 Short-term prepaid expenses 257, ,255 Advance payments 50,000 - Deferred tax assets Other current assets 1,518 26,149 Total current assets 17,267,487 20,656,808 Non-current assets: Property and equipment Entrusted buildings 41,855,146 49,226,879 Accumulated depreciation -4,435,152-5,239,221 Entrusted buildings, net 37,419,994 43,987,657 Entrusted building improvements 331, ,991 Accumulated depreciation -111, ,748 Entrusted building improvements, net 220, ,243 Entrusted machineries 40,063 55,608 Accumulated depreciation -5,748-7,870 Entrusted machineries, net 34,314 47,737 Entrusted furniture and equipment 168, ,938 Accumulated depreciation -37,473-51,723 Entrusted furniture and equipment, net 130, ,215 Entrusted land 123,241, ,873,369 Entrusted construction in progress 41,252 8,121 Total property and equipment 161,088, ,261,344 Intangible assets: (Unit: Thousands of Yen) Other intangible assets 3,769 2,650 Total intangible assets 3,769 2,650 Investment and other assets: Security deposits and guarantee deposits 10,088 10,088 Long-term prepaid expenses 300, ,202 Derivative assets 127,734 96,890 Others 442, ,041 Total investment and other assets 880,539 1,477,222 Total non-current assets 161,972, ,741,217 Deferred assets: Investment corporation bonds issuance expenses 56,057 50,161 Total deferred assets 56,057 50,161 TOTAL ASSETS 179,295, ,448,187 43

44 Financial statements Balance sheets (Liabilities and net assets) LIABILITIES Current liabilities: Eighth Fiscal Period As of April 30, 2018 Ninth Fiscal Period As of October 31, 2018 Accounts payable - operating 490, ,483 Short-term borrowings - 4,500,000 Current portion of long-term borrowings 17,500,000 17,500,000 Accounts payable - other 612, ,688 Accrued expenses 85,780 70,977 Income taxes payable 2,455 2,189 Consumption tax payable 121,265 - Rent received in advance 556, ,251 Other current liabilities 56, ,173 Total current liabilities 19,426,378 24,336,763 Non-current liabilities: Investment corporation bonds 8,900,000 8,900,000 Long-term borrowings 62,600,000 90,400,000 Entrusted tenant leasehold and security deposits 7,539,497 11,393,707 Derivative liabilities - 12,437 Deferred tax liabilities 40,351 26,580 Total non-current liabilities 79,079, ,732,724 TOTAL LIABILITIES 98,506, ,069,488 NET ASSETS Unitholders' equity: Unitholders' capital 78,913, ,320,361 Deduction from unitholders capital -799, ,984 Unitholders capital, net 78,113, ,520,376 Surplus: Retained earnings 2,588,710 3,800,547 Total surplus 2,588,710 3,800,547 Total Unitholders' equity 80,702, ,320,924 Valuation and translation adjustments: (Unit: Thousands of Yen) Deferred income on hedges 87,382 57,774 Total valuation and translation adjustments 87,382 57,774 TOTAL NET ASSETS 80,789, ,378,698 TOTAL LIABILITIES AND NET ASSETS 179,295, ,448,187 44

45 Financial statements Statement of income Operating revenues Eighth Fiscal Period From November 1, 2017 to April30, 2018 Ninth Fiscal Period From May 1, 2018 to October31, 2018 (Unit: Thousands of Yen) Rental revenues 5,550,498 7,417,088 Other rental revenues 568, ,543 Gain on sales of real estate properties 277, ,915 Total operating revenues 6,397,159 8,625,547 Operating expenses Property-related expenses 2,688,593 3,538,904 Asset management fees 512, ,797 General administration and custodian fees 22,298 19,445 Compensation for directors 3,700 3,600 Other operating expenses 93,599 84,216 Total operating expenses 3,320,806 4,285,964 Operating income 3,076,352 4,339,583 Non-operating revenues Interest income Refund of unpaid distributions 1,386 1,023 Interest income on tax refund Other non-operating revenues Total non-operating revenues 1,987 1,082 Non-operating expenses Interest expense 245, ,850 Interest expense on investment corporation bonds 13,599 19,709 Amortization of investment corporation bonds issuance costs 4,619 5,896 Public offering costs 111,562 26,952 Financing costs 110, ,307 Other non-operating expenses 1,580 1,592 Total non-operating expenses 487, ,306 Ordinary income 2,590,560 3,799,359 Net income before income taxes 2,590,560 3,799,359 Current income taxes 2,463 2,198 Deferred tax expenses Total income taxes 2,363 2,219 Net income 2,588,196 3,797,139 Retained earnings at beginning of period 513 3,408 Retained earnings at the end of period 2,588,710 3,800,547 45

46 Financial statements Statements of cash flows Eighth Fiscal Period From November 1, 2017 to April30, 2018 Ninth Fiscal Period From May 1, 2018 to October31, 2018 Cash flows from operating activities: Net income before income taxes 2,590,560 (Unit: Thousands of Yen) 3,799,359 Depreciation expenses 786, ,490 Amortization of investment corporation bonds issuance costs 4,619 5,896 Public offering costs 111,562 26,952 Financing costs 110, ,307 Interest income Interest expense 259, ,559 (Increase) decrease in accounts receivables - operating -29,826-73,743 (Increase) decrease in accounts receivables -147, ,830 (Increase) decrease in consumption tax receivable 35, ,457 (Increase) decrease in short-term prepaid expenses -2,597-31,167 (Increase) decrease in advance payments -50,000 50,000 (Increase) decrease in long-term prepaid expenses -26,134-2,598 (Increase) decrease in other current assets -56, ,321 Increase (decrease) in accounts payable - operating -98, ,615 Increase (decrease) in accounts payable - other 128,416 6,955 Increase (decrease) in consumption tax payable 121, ,265 Increase (decrease) in rental received in advance -11, ,345 Decrease in entrusted property and equipment held due to sale 2,119,842 3,177,329 Increase (decrease) in other current liabilities -17,690 67,657 Subtotal 5,829,093 7,999,686 Interest received Interest expenses paid -252, ,365 Income taxes paid -1,013-2,464 Net cash provided by (used in) operating activities 5,575,262 7,645,914 Cash flows from Investing activities: Purchase of entrusted property and equipment -575,192-66,150,924 Net cash provided by (used in) investing activities -575,192-66,150,924 Cash flows from Financing activities: Proceeds from short-term borrowings - 7,000,000 Repayments of short-term borrowings - -2,500,000 Proceeds from long-term borrowings - 39,800,000 Repayments of long-term borrowings -5,500,000-12,000,000 Payment of financing costs ,169 Proceeds from issuance of investment units - 28,268,522 Proceeds from issuance of investment corporation bonds 5,500,000 - Payment of investment corporation bonds issuance costs -38,922 - Distribution to unitholders -2,392,855-2,583,906 Net cash provided by (used in) financing activities -2,431,777 57,475,446 Net change in cash and cash equivalents 2,568,292-1,029,563 Cash and cash equivalents at the beginning of period 6,216,100 8,784,392 Cash and cash equivalents at the end of period 8,784,392 7,754,829 46

47 Tokyo Yokohama Fukuoka Sapporo Nagoya Osaka Office market environment Since 2015, office rents in Tokyo have been growing significantly compared to other major cities Large enterprises which are major target tenants for large-scale office buildings are concentrated in the prefectures including major urban areas 21% 18% 15% 12% Office rent growth (Jan Oct. 2018) 9% 6% 20.4% 8.3% 7.7% 6.7% Office rent trends ( /tsubo) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6, Tokyo Fukuoka Nagoya Source: Miki Shoji Co., Ltd. Yokohama Sapporo Osaka Location of domestic large enterprises by prefecture 1 Tokyo 40.8% Osaka Prefecture 10.0% Aichi Prefecture 5.8% Kanagawa Prefecture 5.1% Fukuoka Prefecture 3.2% Others 35.1% Percentage of labor force population by region 2 Tokyo and the Three Surrounding Prefectures 30.0% Osaka Prefecture 6.7% Aichi Prefecture 6.1% Fukuoka Prefecture 3.9% Others 53.3% Prefectures including Major Urban Areas of Japan 46.7% 3% 3.1% 2.5% Shift of office vacancy rate (%) 0% Tokyo Yokohama Fukuoka Sapporo Nagoya Osaka Source: Miki Shoji Co., Ltd Source: Prepared by IGRE based on the Small and Medium Enterprise Agency Information as of July Source: Prepared by IGRE based on Ministry of Internal Affairs and Communications, Labour Force Survey Information as of March 2, Source: Miki Shoji Co., Ltd. 1 Large Enterprises are companies which are not classified as small and medium enterprises by Small and Medium Enterprises Basic Act in Japan. 2 The percentage above is rounded to the second decimal place. 47

48 Yield gaps in global office investments As at the end of September 2018 Although trading yields in the Tokyo office market are relatively low, the spread to bonds is approximately equal to the 10-year average and at the most high level compared to other major global cities Trading yield/cap rate Yield/cap rate spreads to 10-year government bond yields 10.0% 6.0% 9.0% 5.5% 5.0% 8.0% 7.0% 4.5% 4.0% 6.0% 3.5% 5.0% 4.0% 3.0% 2.5% 2.0% 3.0% 1.5% 2.0% 1.0% 0.5% 1.0% 0.0% 0.0% ニューヨークロサンゼルスロンドンパリ東京香港 New York Los Angeles -0.5% London Paris Tokyo Hong New York Los Kong Angeles London Paris Tokyo Hong Kong Q year average 10-year range Source: Prepared by IGRE based on information provided Real Capital Analytics (RCA) as of September

49 Expected Income Return Proprietary market research Identifying market characteristics and cycles Expected return/ risk of income 1 Current market cyclical position 2 High Hiroshima Market Size (NFA, Sqm) Rental/Value Growth Decelerate OSA, KYO, SAP, YOK NAG, SEN, HIR, FUK Peak TKO Rental/Value Decline Accelerate Sapporo Fukuoka Sendai Kobe TKO YOK FUK, HIR, KYO, SAP SEN, NAG, OSA Saitama Yokohama Kyoto 20,000,000 Nagoya Osaka 5,000,000 Rental Value Capital Value Tokyo 500,000 Low High Rental/Value Growth Start and Accelerate Trough Rental/Value Decline Decelerate and Stabilize Risk of Income Return 1 Risk measure is represented by Standard Deviation and Expected Return is represented by Long-term Average Source: Invesco Real Estate estimated based on ARES (AJPI Quarterly Data, 2005Q1-2014Q4) and CBRE, as of October SAP-Sapporo, SEN-Sendai, SAI-Saitama, TKO-Tokyo, YOK-Yokohama, NAG- Nagoya, KYO-Kyoto, OSA-Osaka, KOB-Kobe, HIR-Hiroshima and FUK-Fukuoka Source: Invesco Real Estate estimated as of November