PRESENTATION. Value & Contrary

Transcription

1 FINANCIAL RESULTS PRESENTATION 13th Fiscal August 1, 29 to January 31, 21 Investment in Highly Competitive Properties in Areas with Strong Growth Potential TSE 8957 Value & Contrary

2 Table of Contents 1. TOKYU REIT s Policy and Strategy 2. Topics 3. Fund Management 4. Debt Management 5. Portfolio and Risk Management 6. Market Review 7. Appendix 1

3 1. TOKYU REIT s s Policy and Strategy (1) Investment Policy 2

4 Excess Population Inflow into Three Major Metropolitan Areas ( ) (Number of People) 2, Tokyo Osaka Nagoya 15, 1, ,461 5, *Although showing a declining trend, an excess inflow of more than 1, people has occurred for 9 consecutive years (Year) -5, *Excess inflow continues to occur in the Tokyo Metropolitan Area, while there is excess outflow occurring in the Osaka Metropolitan Area and Nagoya Metropolitan Area. Source: Population Movement from Basic Resident Register, Ministry of Internal Affairs and Communications * Comments by Tokyu REIM 3

5 Product Profile and Investment Policy Investment in Highly Competitive Properties in Areas with Strong Growth Potential 1. Targeted Product Characteristics (1) Yield product with the attractiveness of equity Aim for EPS growth (higher quality of earnings) and enhancement of asset value (2) Risk-Return Profile Establish a low risk, steady return portfolio with promising future growth potential Low Cap Portfolio Strategy Improve investment return while controlling risk through active management (Focus on risk management emphasizing risk vs. return) (3) Global Product High quality product that meets the investment criteria of a wide variety of investors worldwide, including those investing globally for diversification purposes 2. Investment Policy (1) Target Areas Limited to Tokyo Metropolitan Area (over 85% in Tokyo s central 5 wards and in areas along Tokyu rail lines ( Tokyu Areas )) (2) Sector Allocation Office : Retail = 6 : 4 ( 1 points) (3) Size of Properties In principle, invest in properties over 4 billion yen (for all properties), and with over 5, m 2 of floor space (for office properties) High Return Investment Management Company s Commitment and Capability Low Focus on maintaining a unique positioning among REITs with a medium risk // medium return profile Asset Management for Lower Risk / More Consistent Return BONDS REITs REIT A REIT B Risk STOCKS Low Cap Portfolio Strategy High * Strive to further improve portfolio quality * Comments by Tokyu REIM 4

6 Investment Stance of Tokyu REIM Investment Stance of Tokyu REIM Fiduciary Duties of TREIM as REIT Management Company Fund Structure with High Transparency and Accountability Collaboration Brand Strategy Employ an investment stance that enables the fulfillment of the Fiduciary Duties that are fundamental to the fiduciary Investment Manager and to provide significant added value Improvement of disclosure, including IR activities, and the achievement of accountable management through the involvement of an independent third-party in the decision-making process Growth and value enhancement of the Tokyu Areas through the synergies from collaboration with Tokyu Group companies (Capital Reinvestment Model) Leverage the Tokyu Brand name in leasing operations based on brand license agreement Enhanced Measures Against Conflicts of Interest Development of self-imposed rules to secure collaboration and governance to maximize the advantages of such cooperation NEW Diversified Portfolio Strategic Financial Principle Investment Management Fee Resource Allocation Seeking Stability and Growth Long-Term Investment Management Strategy Diversification strategy employed to control downside risk associated with major properties and tenants Strategy focused on managing the required debt and equity risk premium while also securing additional funding availability Management fee structure linked to three performance indices to balance conflict by being in the same boat as unitholders Adoption of a structure to expense rather than capitalize the management fee Restrain the number of properties covered per investment manager, IR cost paid by Investment Management Company (Tokyu REIM) Utilize experience and expertise of employees assigned from Tokyu Group companies Value & Contrary (Surf Plan) presented separately 5

7 Capitalize on Synergies with Tokyu Group Companies in Tokyu Areas Reinvestment of Capital Generated through TOKYU REIT Third Parties Proceeds Properties Investment Proceeds Tokyu Group Companies Capital Market Rules Governing Conflicts of Interest Reinvestment in s target areas Other Use of Proceeds Return Properties * TOKYU REIT is not a Tokyu Group company but a collaborative partner Construction to improve the transportation capacity of Tokyu Lines Office, retail, and residential real estate development in Tokyu Areas Maintain & improve the portfolio value of Maintain & improve the value and population growth of s target areas *Comments by Tokyu REIM 6

8 1. TOKYU REIT s s Policy and Strategy (2) Rationale of the Long-Term Investment Management Strategy 7

9 Long-Term Investment Management of TOKYU REIT (Surf Plan) Value & Contrary Focusing on circularity of real estate prices, TOKYU REIT secures capital gains while interchanging properties, and achieves improvement of both portfolio quality (rejuvenating average age of property) and adjusted ROE Year 7 Year 14 Year 21 Year 28 2 nd phase 3 rd phase 4 th phase 7 years (assumption) 7 years (assumption) 7 years (assumption) Acquire Real Estate Price Sale Preparation Preparation Phase Phase Acquisition Acquisition Phase Phase Selling Selling Phase Phase Preparation Preparation Phase Phase Acquisition Acquisition Phase Phase Selling Selling Phase Phase Preparation Preparation Phase Phase Acquisition Acquisition Phase Phase Selling Selling Phase Phase Preparation Preparation Phase Phase Public Offering Capital Gain Adjusted Capital Yield (Adjusted ROE) Distribution Amount after Deduction of Capital Gains Total Capital Accumulated Distribution of Capital Gains * This page represents the view of Tokyu REIM. 8

10 Concept of Long-Term Investment Management Strategy (Surf Plan) Long-Term View Contrarian Investment Flexible LTV Control Strong BS even during economic downturns Portfolio with appreciated properties Low leverage at bottom of economic cycle Acquisitions during economic downturns (low price) LTV during economic downturns / credit crunch periods Low High (or raise equity) Portfolio with permanent competitiveness through asset replacements Sell old properties Invest in highly competitive properties in areas with strong growth potential Dispositions during boom periods (high price) (capital gains) LTV during boom periods / loose credit periods High Low Target higher adjusted ROE performance DPU might fluctuate, treat distribution of capital gains as a share buyback to measure performance since JREITs have no legal framework for share buybacks or stock dividends. Strengthen financial capability for economic downturns * This page represents the view of Tokyu REIM. 9

11 Rationale of the Surf Plan: Awareness of Issue of the Amplification Effect of Cyclicality Economic trends / new supply Cyclicality of performance of the leasing business Amplified performance of real estate investment managers Pro-cyclicality of lending attitude of financial institutions *Pro-cyclicality = Amplification effect of the cycle Pro-cyclical investment behavior of real estate investors Revenue performance volatility is amplified. Cannot be called stable *This page represents the view of Tokyu REIM. 1

12 Compression Effect of Cyclicality: Objective of the Surf Plan Cyclicality of performance of the leasing business Compressed cyclicality of TOKYU REIT s performance (goal) Pro-cyclicality of lending attitude of financial institutions Counter-cyclical investment behavior of TOKYU REIT which runs contrary to the market By adopting an investment behavior that runs contrary to the market, revenue performance volatility can be compressed. Matches a REIT that aims for stable growth * This page represents the view of Tokyu REIM. 11

13 Long-Term Investment Management Strategy (Disclosed Sep. 14, 29): What Changed? Style Before Long-Term Investment Management Strategy Contrary Dollar cost averaging Value Contrary Value & Contrary Timing Before Long-Term Investment Management Strategy Mainly internal growth phase Acquisition phase Preparation phase Mainly external growth phase Selling phase *This page represents the view of Tokyu REIM. 12

14 ROE (Capital Yield) and Adjusted ROE (Capital Yield after Deduction of Capital Gain) ROE (Capital Yield) Adjusted ROE (Capital Yield after deduction of Capital Gain) Yield (%) ROE = Distribution per Unit / Capital per Unit * Dec. 29: Sell Ryoshin Harajuku Bldg. Jan. 21: Sell Resona Maruha Bldg. Yield (%) Adjusted ROE = Distribution per Unit (after deduction of Capital Gain/Loss) / Capital per Unit (after deduction of Capital Gain/Loss) * Capital Gain is calculated as repayment of capital Capital per Unit ( ) 6, 58, * April 26 Sell Yokohama Yamashita-cho Building (Barneys New York Yokohama Store) Capital per Unit Distribution per Unit Distribution per Unit ( ) * PO Public Offering 9, 8, Capital per Unit (after deduction of Capital Gain/Loss) ( ) 6, 58, Capital per Unit (after deduction of Capital Gain/Loss) * Deducted capital gain from Yokohama Yamashita-cho Building (Barneys New York Yokohama Store) Distribution per Unit (after deduction of Capital Gain/Loss) Distribution per Unit (after deduction of Capital Gain/Loss) ( ) * Deducted capital gain/loss from Resona Maruha Bldg. and Ryoshin Harajuku Bldg. 9, 8, 56, 7, 6, 56, 7, 6, 54, 5, 54, 5, 52, 4, 52, 4, 5, 3, 2, 5, 3, 2, 48, 1, 48, 1, 46, 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 1th Adjusted Capital Yield (Adjusted ROE) 11th 12th 13th 14th (Est.) Total Capital Accumulated Distribution of Capital Gain 46, 1st 2nd 3rd 4th 5th 6th 7th Distribution Amount after Deduction of Capital Gain 8th 9th 1th 11th 12th 13th 14th (Est.) * Comments by Tokyu REIM 13

15 Adjusted ROE Matrix Cumulative Capital Gains Going Forward Distribution per Unit after Deduction of Capital Gain 1, 11, 12, 13, 14, 15, 16, 17, 18, Item Amount Capital ( mn) a 98,2 C apital G ain mn 3.97% 4.37% 4.77% 5.16% 5.56% 5.96% 6.35% 6.75% 7.15% 5 mn 3.99% 4.39% 4.79% 5.19% 5.59% 5.99% 6.39% 6.79% 7.19% 1, mn 4.2% 4.37% 4.82% 5.22% 5.63% 6.3% 6.43% 6.83% 7.23% 2, mn 4.7% 4.47% 4.88% 5.29% 5.69% 6.1% 6.51% 6.91% 7.32% 5, mn 4.22% 4.64% 5.6% 5.48% 5.91% 6.33% 6.75% 7.17% 7.59% Capital Gain ( mn) b 12,716 Yokohama Yamashita-cho Building (Barneys New York Yokohama Store) Resona Maruha Building Ryoshin Harajuku Building Adjusted Capital after Deduction ( mn) 1,637 18,259-7,18 c=a-b 85,34 Outstanding Units (Units) d 169,38 1, mn 4.5% 4.95% 5.4% 5.85% 6.3% 6.75% 7.2% 7.65% 8.1% Adjusted Capital per Unit ( ) e=c/d 53,624 *This page represents the view of Tokyu REIM. 14

16 1. TOKYU REIT s s Policy and Strategy (3) Investment Management Fee 15

17 Overview of Investment Management Fee * Investment management fee structure linked to three performance indices Aimed to balance conflict by being in the same boat as unitholders Objective (Aim) Formula Note Base 1 (Linked to asset valuation) Asset value at end of previous period.15% (.125% for the portion exceeding 2 billion yen) Encourage Investment Management Company to strive for asset appreciation by linking fee to valuation, not to the amount invested Base 2 Enhance Growth Operating cash flow in current period 6.% (Linked to cash flow) (5.% for the portion exceeding 5 billion yen) Operating cash flow is the amount equal to ordinary income plus depreciation and amortization of deferred assets minus profit or loss from valuation Incentive Fee (Linked to investment unit price) Reduce risk premium related to investment unit (Average price in current period Highest average price over all previous periods) number of units.4% Change from 1.% to.4%, approved by General Meeting of Unitholders on April 17, 27 * Apart from the above fees, TOKYU REIT pays service charges to an asset custodian firm, general administration firm, property management firm and accounting auditor, among others. * The above fees are all booked as expenses. TOKYU REIT does not have a fee structure that leaves the income statement unaffected, such as the acquisition incentive fee, which is capitalized as an acquisition cost. Temporary reduction of Total Investment Management Fee (Authorized by General Meeting of Unitholders. (Apr. 15 th, 29)) Reduction period From Feb. 1 st 29 to Jan. 31 st 211 (12 th period to 15 th period) Reduction rate 12 th period: 2%, 13 th period: 4%, 14 th period: 6%, 15 th period: 8% * Comments by Tokyu REIM 16

18 Incentive Fee Structure * The incentive fee arises only when the average investment unit price during the period exceeds the past high (high water mark). Average Closing Price During * x, y and z represent a basis for calculation of the incentive fee z * As of the end of the 13th period, the unit price reached a high of 1,241,537 (average in the 8th period). y * High Water Mark: An increase of 1, will trigger a 4 fee per unit. Average Closing Price During x * The fee structure puts TOKYU REIT in the same boat as unitholders. n n+1 n+2 n+3 n+4 Accounting * Comments by Tokyu REIM Incentive Fee = Number of Units Outstanding at End of Previous x (x, y or z) x.4% 17

19 Purpose for Temporary Investment Management Fee Reduction Being in the same boat as unitholders Management fee structure designed to mitigate conflict with investors Ordinary business risk Management fee s original structure to make incentives in line Built-in stabilizer effect NAV based fee + CF based fee 9.7% reduction from last FP 13 th period, actual 21.3% reduction from last FP 14 th period, estimate Further enhance security for unexpected events Extraordinary business risk Instability caused by unexpected credit crunch Temporary fee reduction for additional measures, enforcements Temporary risk Do not pay out dividends, except for payouts that were not used for additional measures to support credit risk and were booked as profit and paid out as dividends. *This page represents the view of Tokyu REIM. 18

20 2. Topics (1) ) Financial Results and Forecast 19

21 Operating Results 13th Actual Ended Jan. 21 (184 days) 12th Actual Ended Jul. 29 (181 days) Change (%) 13th Forecast as of 12/24/29 Change (%) Distribution per Unit ( ) 79,446 15,55 63, , Average LTV (%) LTV at End of (%) Acquisition Capacity through Debt ( million) a 18,754 15,571 3, ,58-7, Cash and Bank Deposits ( million) b 39, ,8-5, , Total Acquisition Capacity ( million) a+b 57,982 14,791 43, ,958-7, Average Acquisition Price ( million) 21,328 26,648-5, ,328. Occupancy Rate (End of ) (%) NOI Yield (%) Unrealized Gain ( million) 1,178 18,511-8, Adjusted Net Asset Value (NAV) per Unit Reflecting Unrealized Gain ( ) 638, ,988-49, Average Unit Price during the ( ) 478, ,772-18, Average LTV = (Average Balance of Interest-Bearing Debt + Average Balance of Securities Deposit without Reserved Cash) / Appraisal Value at End of Previous or Weighted Average Appraisal Value at Acquisition LTV at End of = (Balance of Interest-Bearing Debt at End of + Balance of Securities Deposit without Reserved Cash at End of ) / (Appraisal Value at End of or Average Appraisal Value at Acquisition + Balance of Cash and Deposits with Banks at End of ) Acquisition Capacity through Debt indicates the potential acquisition by debt assuming a maximum LTV at end of period of 5%. Cash and Bank Deposits = (Balance of Cash and Bank Deposits at End of Balance of Retained Earnings at End of ) NOI Yield = Leasing NOI / Average Acquisition Price of Properties during the Unrealized Gain is the balance after deducting the book value from the appraisal value of properties at the end of the period. Adjusted Net Asset Value per Unit, which reflects Unrealized Gain, does not include Retained Earnings. Detailed B/S and P/L data are in the separate Data Book. 2

22 Forecast 14th (Ending Jul. 21) Estimates Projected EPS: 11, (change from 13 th period -68,446 Net Income: 1,863 million change from 13 th period - 11,593 million (profit decrease) Leasing Operations Profit change from 13 th period - 67 million (profit decrease) 2 properties sold million * Rental Revenue decreased due to sale Kojimachi Square acquired 15 million of property and cancellations/rate Existing 21 properties million reductions Rental Revenue decrease - 25 million * New acquisition is scheduled for March Cancellation Fee 131 million (QFRONT) 19, 21 (Kojimachi Square) Repair Cost increase - 62 million * Forecast does not include New Lease Contract (non contracted) Investment Management Fee 114 million (cost decrease) Non-Operating Expense 62 million (cost decrease) etc. (Interest expense decrease: 29 million) LTV / Total Assets: 43.6% LT Debt Ratio: 1% End Occupancy Estimate: 95.8% Projected EPS: 1, 15th (Ending Jan. 211) Estimates Operating Income: 6,22 million Recurring Profit: 1,694 million Net Income: 1,693 million LTV / Total Assets: 43.7% LT Debt Ratio: 1% End Occupancy Estimate: 95.7% * Tenants submitting their notice of cancellation are expected to leave vacancies up until and past the 15 th period. In addition, rent level factors in the effect of the recent deterioration in the real estate market. * LTV / Total Assets ( End) = Expected End Interest-Bearing Debt / Expected End Total Assets Comments by Tokyu REIM 21

23 2. Topics (2) Disposition and Acquisition of Property 22

24 Purpose of Disposition of Resona Maruha Building and Ryoshin Harajuku Building 1. Realization of maximum value of Resona Maruha Building 2. Reduction of risks of application of impairment accounting loss for Ryoshin Harajuku Building and corresponding recovery of investment unit price 3. Distribution of (net) capital gain 4. Enhancement of revenue-generating potential through replacement of properties (long-term investment management strategy) 5. Securing of cash position (1) Competitiveness in acquisitions in real estate investment market (2) Preparing for risk of another credit crunch 23

25 Disposition of Resona Maruha Building 1. Summary Type of Ownership: (Land) Proprietary ownership <Co-ownership interest: 27%> (Building) Compartmentalized ownership comprising exclusive area of 19,542.77m 2 Completion Date: November 1978 Property Age: 31.3 years (as of the disposition on January 21) Disposition Price: 42, million yen Acquisition Price: 23,26 million yen (acquired on January 15, 24) Capital Gain: 18,258 million yen (17,798 yen per unit) Purchaser: Otemachi Development Tokutei Mokuteki Kaisha (TMK established by Mitsubishi Estate Co., Ltd. and others) Schedule: Disposition contracted on December 24, 29 and closed on January 15, Background June 24: Floor area ratio increased as a result of urban planning change (1,% 1,3%) April 28: Acquisition of lower portion by Otemachi Development Tokutei Mokuteki Kaisha, and confirmation of Resona Bank, Ltd. s intention to leave March 211: Maruha Nichiro Seafoods, Inc. s fixed-term lease agreement expires 3. Consideration of Options Keep under management: Risk of value decreasing due to obsolescence in correlation with redevelopment of adjacent building and other factors; No benefits of value increasing from redevelopment Exchange of assets: As the norm is basically exchange based on appraised value, cannot reap benefits of added value from the Property that cannot be incorporated in the appraisal Hold as sokochi: Rent (Ground rent) income may possibly fall compared to when held as a building. Disposition: Regarded as a measure to maximize unitholder value by realizing added value from the Property and thus was the option selected 4. Disposition Procedures Consider maximization of disposition price and certainty of transaction Decide on disposition price through negotiations with Otemachi Development Tokutei Mokuteki Kaisha (holder of right of first refusal based on agreement between compartmentalized owners) 24

26 Disposition of Ryoshin Harajuku Building 1. Summary Completion Date: March 1989 Property Age: 2.8 years (as of the disposition on December 29) Disposition Price: 8,4 million yen Acquisition Price: 15,356 million yen (acquired on June 27, 28; acquired additional ownership on October 3, 28) Capital Loss: 7,179 million yen (42,388 yen per unit) Purchaser: Japan Prime Realty Investment Corporation Schedule: Disposition contracted on December 24, 29 and closed on December 25, Background Falling appraisal value Risk of application of impairment accounting loss and corresponding decrease in investment unit price 3. Undertakings after Acquisition Changed to complete ownership (acquired 95.74% ownership and then acquired the other compartmentalized owners portions on October 3, 28) Dissolved compartmentalized owners association (reduced management work) Leasing (improved occupancy from 71.8% (at the time of acquisition) to full occupancy) Reduced building maintenance costs 4. Disposition From a conservative standpoint, deemed that reducing risk of application of impairment accounting loss would be best in terms of protection of unitholder value and recovery of investment unit price In pursuit of maximization of disposition price and certainty of disposition, accept bid for tender price and intention for acquisition from only potential buyers that boast high creditworthiness 25

27 Changes in Valuation of the Two Properties Resona Maruha Building Ryoshin Harajuku Building ( million) 45, ( million) 4, 35, 3, 25, 2, 15, 1, 15,356 14,54 13,4 1,6 9,18 8,36 8,4 5, Total Acquisition Price on 6/27/28 and 1/3/28 Appraisal Value at Acquisition Appraisal Value at End of 1th (Note) Appraisal Value at End of 11th Appraisal Value at End of 12th Appraisal Value at Disposition Disposition Price Based on Appraisal Value at Acquisition Based on Appraisal Value at End of 12 th Based on Appraisal Value at Disposition Based on Appraisal Value at Acquisition Based on Appraisal Value at End of 12th Based on Appraisal Value at Disposition NCF (Direct capitalization method) 1,231 million 1,313 million Income capitalization method based on NCF Cap Rate Direct Cap rate 5.4% 4.1% assumption of redevelopment NCF (Direct capitalization method) 598 million 46 million 379 million NCF Cap Rate Direct Cap rate 4.1% 4.4% 4.5% (Note) Appraisal Value at End of 1 th does not include the additional acquisition portion. * Large disparity from disposition price due to presence of values that cannot be incorporated in the appraisal * Assumed to be 34, yen per month/tsubo at time of acquisition, but this dropped to 26, yen per month/tsubo at the end of the 12 th fiscal period (end of July 29) *Comments by Tokyu REIM 26

28 Ideas Behind Disposition of the Two Properties and Reinvestment Disposition of the 2 Properties Realization of maximum value Risk aversion Distribution of capital gain Acquisition Activities Property acquisition based on the long-term investment management strategy (Value & Contrary) Securing of Cash Position Reserve collected funds on hand to increase our negotiating power Replace Properties to Increase Portfolio Quality CF increases (growth through replacement) Rejuvenate age of property Diversification Reduce risk * This page represents the view of Tokyu REIM. 27

29 Acquisition of Kojimachi Square 1. Summary Type of Acquisition: Trust beneficiary interest in real estate Use: Office Tenants: Japan Science and Technology Agency, Construction Industry Engineers Center, etc. Location: Nibancho, Chiyoda-ku, Tokyo Total Land Area: 1,269.24m 2 Total Floor Area: 6,83.47m 2 Approximately a one-minute walk from Kojimachi Station, Tokyo Metro Yurakucho Line Type of Ownership: Land: Proprietary ownership Building: Proprietary ownership Acquisition Price: 9,3 million yen Appraisal Value 9,1 million yen (as of February 1, 21) at Acquisition: Overall Capitalization 4.7% (Direct capitalization method) Rate: Completion Date: January 23 Property age: 7.1 years Acquisition Date: March 19, 21 (scheduled) Seller: Verde Investment Ltd. (a special-purpose company (SPC) established under instruction of Tokyu Land Corporation) 2. Characteristics and Issues Strengths: A one-minute walk from the nearest station, several train lines and stations nearby, competitive building specifications are competitive, relatively new, floors with highly versatile design and high occupancy Weaknesses: Not a very busy commercial area Risk: Fluctuation of rental revenues with changes in the real estate leasing market Special Items: The border of the road cuts into sections of the land (confirmed with the Ward Office that this presents no problem) Urban planning changes to build a road apply to certain sections (approx. 15m 2 ; setback has been completed) 28

30 Reinvestment Simulation Ryoshin Harajuku Building book value 15.5 billion yen 39.6% Resona Maruha Building book value 23.7 billion yen 6.4% Source of funds for reinvestment 39.2 billion yen 1% Expected NOI Yield % 5.2% Based on the assumption that revenue of a full period (half a year) is accounted for % NOI for one full period: 794 million yen NOI for one full period: 1,21 million yen An increase of 227 million yen in NOI per full period Quality of acquired property Kojimachi Square is an investment worth 9 billion yen, against which estimated NOI for half a year is 255 million yen Assuming the 2 properties that were sold were kept In the case where we acquire properties of 5.2% NOI yield through reinvestment *This page represents the view of Tokyu REIM. 29

31 2. Topics (3) Outlook of TOKYU REIT 3

32 Changes in Vacancy Rate 1.% 9.% Changes in Vacancy Rate (TOKYU REIT, Tokyo S-class Office, Tokyo A-class Office, Tokyo 23 wards all-scale Average) TOKYU REIT Tokyo S-class Office Tokyo A-class Office Tokyo 23 wards all-scale Average 8.% 7.% 6.% 5.% 4.% 3.% * Acquired Resona Maruha Bldg. with vacancy rate of 21.1% * Vacancy rate of cocoti reaches 19.4% (2.5% at end of previous period) * Vacancy rate of CONZE Ebisu reaches 12.4% (full occupancy at end of previous period) * Vacancy rate of TOKYU REIT Kamata Bldg. reaches 11.6% (full occupancy end of previous period) * Vacancy rate of Lexington Aoyama reaches 26.9% (78.8% occupancy at end of previous period) * Vacancy rate of TOKYU REIT Toranomon Bldg. reaches 27.6% (full occupancy at end of previous period) * End of Jul. 21 Estimate * End of Jan. 211 Estimate 4.2% 3.1% 4.3% 2.% 1.% * End of Jan. 21 Actual.% Mar. 23 Jun. 23 Dec. 23 Jun. 24 Dec. 24 Jun. 25 Dec. 25 Jun. 26 Dec. 26 Jun. 27 Dec. 27 Jun. 28 Dec. 28 Jun. 29 Dec. 29 Jan. 21 Jul. 21 Jan. 211 (Est.) (Est.) Note : S-class Office and A-class Office are defined by CBRE and Ikoma Data Service System. S-class Office Office buildings located in Tokyo s major 5 wards with especially significant features as an office property (features include total floor space over 2, tsubo, typical floor area over 5 tsubo) A-class Office Located in Tokyo s major 5 wards (Chiyoda, Chuo, Minato, Shinjuku, Shibuya) with features including total floor space of over 1, tsubo and typical floor area over 2 tsubo) Source: CBRE Research Institutions Office Market Report * Comments by Tokyu REIM * TOKYU REIT s portfolio has lower vacancy than the average market rate in Tokyo and has recorded stable performance 31

33 Changes in Tenant Turnover and Vacancy Rate Tenant Turnover % Tenant Turnover % Retail (Urban) Office 7 th 8 th 9 th 1 th 11 th 12 th 13 th 14 th (Est.) Vacancy Rate % 7 th 8 th 9 th 1 th 11 th 12 th 13 th 14 th (Est.) Vacancy Rate % Tenant Turnover % Retail (Urban) Percentage of of Tenants Moving In In Retail (Suburban) Percentage of of Tenants Moving Out Overall Portfolio Vacancy Rate QFRONT TOKYU REIT Omotesando Square Lexington Aoyama TOKYU REIT Shibuya Udagawa-cho Square cocoti CONZE Ebisu Daikanyama Forum Tokyu Saginuma Building Tokyu Saginuma 2 Building Beacon Hill Plaza (Ito-Yokado Noukendai Store) Shonan Mall Fill (sokochi) There have been no no tenants moving out or or moving in in for retail (Suburban) properties, and thus no no new vacancies have occurred. * Pressure of moving out from offices has slightly receded 7 th 8 th 9 th 1 th 11 th 12 th 13 th 14 th (Est.) Vacancy Rate % 32 *Comments by Tokyu REIM

34 Status of Leasing Activities Name of Property Type Status Lexington Aoyama cocoti Retail Retail *During the 13th period, 3 new tenants (apparel store, hair salon and office) moved in (approx. 323 tsubo), and the occupancy rate by the end of the 13th period recovered to 73.1% (21.2% at end of 12th period) *Currently conducting marketing for the remaining 2 vacant spaces (approx. 171 tsubo), targeting merchandising stores such as apparel stores. *One space became vacant (approx. 63 tsubo) in March 29 (12th period) and so the occupancy rate as of the end of the 13th period remains at 97.5%, or the same as the end of the 12th period *In addition to the above, we are currently negotiating with multiple candidates (mainly merchandising stores such as apparel stores) for spaces, including 1 scheduled to be cancelled during the 14th period (approx. 488 tsubo) CONZE Ebisu Retail *One space (approx. 86 tsubo) is scheduled to become vacant during the 14th period *Currently conducting marketing for the above space, targeting restaurants Daikanyama Forum Retail *The occupancy rate at the end of the 13th period was 91.5%, or unchanged from the end of the 12th period *Currently conducting marketing for 1 vacant space (approx. 64 tsubo), targeting merchandising stores, showrooms, etc. TOKYU REIT Toranomon Building Setagaya Business Square TOKYU REIT Kamata Building TOKYU REIT Hatchobori Building Others Office Office Office Office *Two tenants moved out during the 13th period (approx. 845 tsubo) and the occupancy rate fell to 72.4% as of the end of the 13th period (1% at end of 12th period) *Currently conducting marketing for the vacant spaces (approx. 845 tsubo), targeting offices conducting restructurings, or candidates that need to integrate their offices, etc. *Cancellations continued into the 13th period and the occupancy rate fell to 89.4% as of the end of the 13th period (95.1% at end of 12th period) *Currently conducting marketing for 15 vacant spaces (approx. 95 tsubo), including the space scheduled for cancellation as of the end of 13th period, targeting offices conducting restructurings and moving out of central Tokyo, IT-related companies, etc. *The occupancy rate at the end of the 13th period was 1%, or unchanged from the end of the 12th period *One space is scheduled to become vacant in May 21 (14th period) (approx. 257 tsubo) *Currently conducting marketing for the above space, targeting manufacturers of the vicinity, etc. *Tenant in 1F vacated during the 13th period, but we concluded a contract with a store during the same period. The occupancy rate at the end of the 13th period was 99.3%, and we managed to maintain a roughly full occupancy rate (1% at end of 12th period) *For the space for which tenants notified of cancellation (approx. 221 tsubo) during the 13th period, we managed to conclude a contract on February 21 (14th period). The occupancy rate returned to 1%. *Out of the 22 properties, which is the sum of the above 8 properties and others scheduled to be acquired, we expect 15 properties to have full occupancy as of the end of the 14th period and end of the 15th period (Expected portfolio occupancy rate of 95.8% and 95.7% at the end of 14th and 15th period, respectively) * 13th : August 1, 29 January 31, 21 * 14th : February 1, 21 July 31, 21 * 15th : August 1, 21 January 31, 211 (Note) The vacant spaces for Setagaya Business Square, for which we are currently conducting leasing, has been reduced to 12 spaces (approx. 48 tsubo) as of the date this presentation was prepared. 33

35 Status of Existing Tenants Asset Class Retail 14th 15th 16th 17th 18th 19th 13.1% 9.1% 17.6% 2.7% 11.1% 17.5% Urban 1.6% 11.% 8.4% 28.2% 6.2% 5.% Suburban 36.3% 5.4% 36.3% 5.4% 21.% 42.7% Office Total 26.5% 25.4% 25.3% 1.3% 32.2% 26.9% 21.4% 18.9% 22.9% 15.8% 23.7% 23.8% * Retail (Urban): QFRONT, TOKYU REIT Omotesando Square, Lexington Aoyama, TOKYU REIT Shibuya Udagawa-cho Square, cocoti, CONZE Ebisu, Daikanyama Forum * Retail (Suburban): Tokyu Saginuma Building, Tokyu Saginuma 2 Building, Beacon Hill Plaza (Ito-Yokado Noukendai Store), Shonan Mall Fill (sokochi) * Percentage calculated by dividing rent for tenants facing rent renegotiation by total rent by asset class * Rent includes common service charge (except revenue from parking / sign charge). * As of beginning of 14th Divergence from Market Rent Asset Class Retail 6th Beginning (16 Properties) 7th Beginning (17 Properties) 8th Beginning (19 Properties) 9th Beginning (19 Properties) 1th Beginning (2 Properties) 11th Beginning (23 Properties) 12th Beginning (23 Properties) 13th Beginning (21 Properties) 14th Beginning (21 Properties) 9.3% 9.4% 11.1% 1.6% 9.% 9.2% 1.7% -3.3% -1.% Urban 13.3% 14.5% 16.7% 15.9% 13.5% 13.4% 2.5% -4.8% -14.8% Suburban.3%.2%.2%.2%.2%.2%.2% -.3% -.2% Office Total 4.2% 12.5% 14.1% 16.% 15.6% 11.5% -5.9% -19.8% -27.8% 6.3% 11.1% 12.8% 13.7% 12.9% 1.6% -2.9% -12.3% -19.7% * Since occupancy rates are high, it does not mean that continuous rents will immediately decrease to market levels. * The rate of decrease is decelerating. * Divergence = (New market rent - Rent at Beginning of ) / Rent at Beginning of * Market rent is calculated by Tokyu REIM based on market reports of third parties. * Monthly rent at the beginning of each period includes common service charges (except revenue from parking / sign charge). * Market rents underperformed against contracted rents due to market deterioration. * Yokohama Yamashita-cho Bldg. (Barneys New York Yokohama Store) is excluded from the 6th Beginning. * 13th Beginning excludes the Resona Maruha Building and Ryoshin Harajuku Building. *Comments by Tokyu REIM 34

36 Change in Unrealized Gain of the Portfolio Unrealized Gain ( 1 million) % Unrealized Gain over Book Value 8 7 Unrealized Gain Unrealized Gain over Book Value 32.7% 36.2% 33.3% 4% 35% % 23.6% 2.1% 3% 25% 2% % 9.2% 4.9% 6.3% 2.6% 1.2% -.9% % 1% 5% % -5% 1st 1/31/24 2nd 7/31/24 3rd 1/31/25 4th 7/31/25 5th 1/31/26 6th 7/31/26 7th 1/31/27 8th 7/31/27 9th 1/31/28 1th 7/31/28 11th 1/31/29 12th 7/31/29 13th 1/31/21 * % Unrealized Gain over Book Value = Unrealized Gain / Book Value of Asset *Decline in unrealized gain due to declining trend of current asset value *Comments by Tokyu REIM 35

37 Change in Appraisal Value (End of 13th End of 12th ) Name of Property ( million) QFRONT 19,7 19,6.51% 1 118% % % 3.9%.% a Lexington Aoyama 4,88 5,3-7.92% % -29% % 4.5% -.1% a TOKYU REIT Omotesando Square 6,82 7, -2.57% % % % 4.5%.% a Tokyu Saginuma Building 7,89 7,89.% % % % 5.8%.% a Tokyu Saginuma 2 Building 1,39 1,39.% % % % 6.8%.% a TOKYU REIT Shibuya Udagawa-cho Square 7,3 7, % -43 1% 32% % 4.4%.1% b Beacon Hill Plaza (Ito-Yokado Noukendai Store) 8,3 8, % % 123% % 5.3%.2% b cocoti 18,8 2,6-8.74% -1,8 93% % % 4.3%.% c Shonan Mall Fill (sokochi) 5,42 5,71-5.8% -29 % 19% % 5.2%.3% d CONZE Ebisu 4,4 4,5-2.22% -1 17% % % 4.3%.% c Daikanyama Forum 3,19 3,33-4.2% % 55% % 4.3%.1% b Retail Properties Total 87,82 91, % -3,52 7% 21% 4,62 4, % 4.56%.7% Setagaya Business Square 22,4 23,9-6.28% -1,5 11% % 1,143 1, % 5.1%.% a Tokyu Nampeidai-cho Building 5,65 5, % -1-15% 121% % 4.7%.1% a Tokyu Sakuragaoka-cho Building 8,73 8, % % 86% % 4.3%.1% a Tokyo Nissan Taito Building 5,24 5,19.96% 5-15% 25% % 5.2% -.1% a TOKYU REIT Akasaka Hinokicho Building 4,41 4, % -7 97% % % 4.7%.% a TOKYU REIT Kamata Building 6,68 6,9-3.19% % % % 5.3%.% a TOKYU REIT Toranomon Building 13, 14,2-8.45% -1,2 97% % % 4.7%.% a TOKYU REIT Hatchobori Building 5,61 5, % % % % 4.7%.% c Akasaka 4-chome Building (Tokyu Agency Inc. Head Office Building) Appraisal Value at the End of (in JPY mm) Increase / Decrease NCF Direct capitalization method NCF Cap Rate Direct Cap rate Impact Increase / Impact from Decrease from change in (in JPY change in 13th 12th % NCF Cap mm) NCF 13th 12th Change 13th 12th Change Rate 6,76 7, % % % % 4.4%.% b Tokyu Ikejiri-ohashi Building 4,78 5,9-6.9% % % % 5.2%.% c Office Properties Total 83,26 87,46-4.8% -4,2 94% 5% 4,86 4, % 4.89%.2% End of 13th (21 Properties) 171,8 178,8-4.32% -7,72 83% 12% 8,148 8, % 4.72%.4% Appraiser (Note) a Japan Real Estate Institute b HIRO & REAS Network, Inc. c DAIWA REAL ESTATE APPRAISAL Corporation d Jones Lang LaSalle IP, Inc. * Appraisal Value is determined by using several methodologies including the direct capitalization approach and DCF approach. Therefore, the Appraisal Value may differ from the above NFC figures divided by the NCF Cap Rate. * We sold the Ryoshin Harajuku Building on December 25, 29 and the Resona Maruha Building on January 15, 21. The Appraisal Value at End of 12th, Appraisal Value at Disposition and Disposition Price of the 2 properties are as follows: * Ryoshin Harajuku Building (Appraisal Value at End of 12th : 9,18 million; Appraisal Value at Disposition: 8,36 million; Disposition Price: 8,4 million) and Resona Maruha Building (Appraisal Value at End of 12th : 31,6 million; Appraisal Value at Disposition: 34,6 million; Disposition Price: 42, million) 36

38 Status of Debt Balance by Repayment Date: Result of Strategic Debt Management Interest Bearing Debt Balance by Repayment Date (Maturity Ladder) * 19. billion due in a year (due end of Jan. 211) Long-term debt 12. bn Aioi Insurance 1. bn Daido Life Insurance 1. bn Due 21/6/25 Mitsui Sumitomo Insurance 1. bn * Commitment Line Development Bank of Japan Sumitomo Trust Chuo Mitsui Trust 1. bn 1. bn 1. bn Due 21/7/1 Due 21/4/2 Due 21/4/2 Sumitomo Trust 1. bn Chuo Mitsui Trust 1. bn Shinkin Central 2. bn Due 21/7/25 Sumitomo Trust 5. bn Due 21/12/25 Short-term debt Mitsubishi UFJ Trust 7. bn 7. bn Due 21/6/27 ( 1 million) 4 As of End of Jan. 21 (End of 13th ) Short-Term Debt Long-Term Debt Investment Corporation Bonds * Figures in the parentheses indicate changes from the end of the 12th * Debt ratio (due in a year) 19.6% Total 97. bn ( bn) Avg. Remaining Yrs yrs (-.5 yrs) LT Ratio 92.8% ( pts.) Number of Ladders 13 ( ladders) Avg. Ladder Amount 7.46 bn ( bn) * Redemption of Investment Corporation Bonds starts from October th 14th Remaining years to maturity 15th 16th 17th 18th 19th 2th 21st 22nd 23rd 24th 25th th 27th 28th 29th th * Strive to prolong interest-bearing debt and diversify repayment dates Comments by Tokyu REIM 37

39 Changes in Base Interest Rates: Result of Strategic Debt Management (Unit: %) Long term Borrowing Date Duration Jan. Jun. Sep. Mar. Jun. Jul. Nov. Feb. Apr. Jun. 1.5 yr 2. yr yr yr yr 1.39 (Note) 3.5 yr yr yr yr yr yr 6.5 yr 7. yr yr 8. yr (Note) Floating rates are based on JBA Tibor and not the base interest rate as of the date this presentation was prepared (interest rates in the table are the interest rates as of the borrowing date). * Spreads have risen since the Lehman shock, although base interest rates have fallen due to the decline in the market interest rate. Comments by Tokyu REIM 38

40 3. Fund Management 39

41 Changes in Profit (EPS) LTV transition (%) Distribution ( ) 4, 8, 35, 3, * Average LTV = (Average Balance of Interest-Bearing Debt + Average Balance of Securities Deposit without Reserved Cash) / Appraisal Value at End of Previous or Weighted Average Appraisal Value at Acquisition * LTV / Total Assets = End Interest-Bearing Debt / End Total Assets Distribution * Reversal due to appraisal indicating appreciation of property value * Contribution from sale of Yokohama Yamashita-cho Building (Barneys New York Yokohama Store) Duration Average LTV * Contribution from sale of Resona Maruha Bldg. and Ryoshin Harajuku Bldg LTV/Total Assets Duration (years) , 2, 15, 1, 5, (Est.) * Official distribution in the 1st was 9,488 based on the actual operating period of 144 days, but the recalculated distribution of 12,123 based on 184 operating days is used in the above graph for the sake of comparison with figures from the 2nd and thereafter. *Comments by Tokyu REIM 4

42 Changes in Asset Value (Adjusted NAV) Adjusted NAV Multiple Adjusted NAV Multiple = Average Price of Investment Unit (Closing) / Adjusted NAV per Unit Reflecting Unrealized Gain (End of ).75 NAV ( ) 1,, 8, 6, 4, 2, -2, 511,43 51,688-9, % 1st period 524, ,43 13, % 2nd period 572, ,31 24, % 3rd period 599, ,31 51, % 4th period 68, ,697 12, % 5th period 751,59 578, , % 6th period 1/31/24 7/31/24 1/31/25 7/31/25 1/31/26 7/31/26 815, , , % 7th period 1/31/27 94,79 578, , % 8th period 7/31/27 959, , ,3 9th period 1/31/28 975, , , % 68.51% 1th period 7/31/28 * Adjusted NAV at 13th End 817, , , % 11th period 1/31/29 687, ,697 19, % 12th period 7/31/29 NAV per Unit (ex. Retained Earnings) Adjusted NAV per Unit Unrealized Gain per Unit Unrealized Gain Percentage 638, ,697 6, % 2 13th period 1/31/21 Unrealized Gain (%) 1-1 Average Investment Unit Price 53, ,97 69,75 726,82 766,52 92, ,36 1,241,537 1,, ,93 63,57 496, ,579 *Comments by Tokyu REIM 41

43 Capital Gains (Net Cumulative Total as of End of 13 th ) ( 1 million) 2,2 2, 1,5 1, 5 Acquisition Price Cumulative Total bn (24 properties) 1.% Disposition Price Cumulative Total 56.9 bn (3 properties) Portfolio Properties Acquisition Price Total 168. bn (21 properties) 6.2% 2.6% 79.4% Difference 13.2 bn Capital Gains 12.7 bn ( 1 million) Capital Loss bn Ryoshin Harajuku Building Capital Gains (Net Cumulative Total) 12.7 bn Capital Gains 19.9 bn Resona Maruha Building ( 18.3 bn) Yokohama Yamashita-cho Building (Barneys New York Yokohama Store) ( 1.6 bn) *This page represents the view of Tokyu REIM 42

44 External Growth External Growth (Steady Acquisition of Quality Properties) * Investment in highly competitive properties in areas with strong growth potential Total Acquisition Value ( 1 million) 3,5 Average Investment ( 1 million) Total Acquisition Appraisal Value Average Investment 12 Rent Estimates by Region (Rent Level at Survey Date = 1) 2th Survey (Apr. 29) Area Next Year 2 Years 5 Years 1 Years * Rent perspective is almost the same 21st Survey (Oct. 29) Area Next Year 2 Years 5 Years 1 Years 3, Appropriate Asset Size 3 billion or more 2, Marunouchi, Otemachi area Shibuya, Shibuya station area Marunouchi, Otemachi area Shibuya, Shibuya Station area ,5 2, 1,5 1, ,117 1,35 1,11 1,3 1,368 1, ,11 2,243 2,429 1,878 1,816 1,744 1,717 1,717 1,55 1,578 1,596 1,48 2, ,424 2,66 2, ,66 1,77 1,71 1,68 8 *Kojimachi Square Acquisition (scheduled) Nagoya, Station area Osaka, along the Midosuji Line (%) Source: Japan Real Estate Institute Japan Real Estate Investors Survey Nagoya, Station area Osaka, along the Midosuji Line Expected Yield and Transaction Yield of Benchmark Buildings (Marunouchi / Otemachi) * The cap rate for prime locations has risen to the level of 25. IPO 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 1th 11th 12th 13th 23/1 24/4 24/1 25/4 25/1 26/4 26/1 27/4 27/1 28/4 28/1 29/4 29/1 (Estimate) 1/31/24 1/31/25 1/31/26 1/31/27 1/31/28 1/31/29 1/31/21 9/1/23 7/31/24 7/31/25 7/31/26 7/31/27 7/31/28 7/31/29 3/19/21 Source: Japan Real Estate Institute Japan Real Estate Investors Survey (scheduled) * Comments by Tokyu REIM 43

45 Lending Attitude of Financial Institutions & TOKYU REIT s Acquisition Timing of Properties (DI) 2 Acquisitions at IPO 8,3 * Real Estate Credit Ease Acquisition Cost ( million) 9, 8, 1 Looser 7, 6, 5, -1 Lending Attitude 29,86 * Real Estate Credit Crunch Kojimachi Square Acquisition (scheduled) 4, 3, Stricter Acquired Resona Maruha Bldg. 23,26 mn 14,57 8,63 14,7 9,8 Sold Yokohama Yamashita-cho Bldg. (Barneys New York Yokohama Store) 6,48 mn (capital gain: 1,636 mn) 7, 6,81 5,116-6,48 1, ,98 Acquired Ryoshin Harajuku Bldg. 14,16 mn 18,296 1,196 Additionally Acquired Ryoshin Harajuku Bldg. 1,196 mn * Bottom out? Sold Resona Maruha Bldg. Sold Ryoshin Harajuku Bldg. 9,3 2, 1, -8,4-42, -1, Acquisition Price Disposition Price All Industrial Average Real Estate * Acquisition price on secondary y-axis, each bar represents the total acquisition price in the respective month and 3 months prior (i.e., June 28 includes April June 28) Source BOJ (Tankan Survey) * Comments by Tokyu REIM 44

46 Internal Growth Occupancy (%) IPO 1/31/ /31/24 Changes in Occupancy of Overall Portfolio /31/ st 2 nd 3 rd 4 th 5 th * Tokyu Ikejiri-ohashi Building, new lease agreement * Ryoshin Harajuku Building acquired * Resona Maruha Building acquired * Major tenant vacation from Lexington Aoyama *Partial tenant moving out out from from TOKYU REIT REIT Toranomon Building Total Retail Office 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 1/31/28 7/31/28 1/31/29 7/31/29 6 th 7 th 8 th 9 th 1 th 11 th 12 th Average Rent (including Common Area Charge) 99.3 (%) /31/21 13 th /31/24 * Due to the differing number of business days, odd accounting period returns are.1% lower /31/24 NOI Yield of 11 Properties at IPO (after deducting capitalized property and city planning taxes) /31/ /31/25 1 st 2 nd 3 rd 4 th 5 th Year-on-Year Monthly Leasing Revenue Growth Rate /31/26 7/31/26 1/31/27 7/31/27 1/31/28 7/31/28 1/31/29 7/31/ /31/21 6 th 7 th 8 th 9 th 1 th 11 th 12 th 13 th Unit Price ( /Month/Tsubo) 39,965 21,39 21,217 1,757 1,757 1/31/24 42,172 42,243 41,745 42,219 42,95 4,714 41,166 41,557 21,638 21,128 * Acquisition of CONZE Ebisu 21,133 21,3 21,276 21,285 21,37 22,46 18,161 19,111 8,498 8,498 8,498 39,197 4,143 39,546 7,232 7,232 7,232 7,232 7,232 7,232 7,232 38,177 22,873 23,554 23,825 23,388 2,62 19,69 19,984 2,229 2,875 21,246 21,71 21,958 21,48 Retail (Central Tokyo) Retail (Suburb) Office Total 7/31/24 1/31/25 7/31/25 1 st 2 nd 3 rd 4 th 5 th * Acquisition of Daikanyama Forum 1/31/26 7/31/26 1/31/27 7/31/27 1/31/28 7/31/28 1/31/29 7/31/29 * In calculating the above unit price, Shonan Mall Fill is not included. * Retail (Urban): QFRONT, TOKYU REIT Omotesando Sq., Lexington Aoyama, TOKYU REIT Shibuya Udagawa-cho Sq., cocoti, CONZE Ebisu, Daikanyama Forum Retail (Suburb): Tokyu Saginuma, Tokyu Saginuma 2, Beacon Hill Plaza (Ito-Yokado Noukendai Store), Yokohama Yamashita-cho Building (Barneys New York Yokohama Store) (sold in 6th ) 19,538 7,212 1/31/21 6 th 7 th 8 th 9 th 1 th 11 th 12 th 13 th (%) * Rent reduced for some tenants in cocoti, due to new contracts Retail Office Total * Extraordinary situation of mismatch due to effect of rent revisions *Setagaya Business Square, termination of certain lease agreements * cocoti, rents increase for certain lease agreements 6 th 7 th 8 th 9 th 1 th 11 th 12 th * Major tenant vacation from Lexington Aoyama -2.4 * New lease agreements for Lexington Aoyama * Monthly leasing revenue down compared with previous period * Excludes income from parking and signs * Comparison of monthly leasing revenue at the end of each period (based on actual rent charged) * Comments by Tokyu REIM th

47 Composition of Unitholders Changes in Unitholder Composition (Main Segments) (%) st 2 nd 3 rd 4 th 5 th 6 th 7 th 8 th 9 th 1 th 11 th 12 th 13 th Investment Trusts Foreigner Banks (ex. Pensions & trusts) Individual Domestic Corporation Pensions /31/24 7/31/24 1/31/25 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 1/31/28 7/31/28 1/31/29 7/31/29 1/31/21 * Mutual Funds hold the largest share among investors * Number and percentage of foreign investors both recently decreased * Individual ownership percentage (Individuals and Trusts) exceeds 4% of the total Foreign Ownership Percentage / Number of Foreign Investors Individual Ownership Percentage (%) st Number of Foreign Investors 2 nd rd th Foreign Ownership Percentage th th th th 9 th 1 th th th (No. of People) th st 2 nd 3 rd 4 th 5 th 6 th 7 th 8 th 9 th 1 th 11 th 12 th 13 th Individuals & Trusts Trusts Individuals 1/31/24 7/31/24 1/31/25 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 1/31/28 7/31/28 1/31/29 7/31/29 1/31/21 The document is provided for information purpose only and is not intended as an inducement or invitation to invest and trade in securities issued by TOKYU REIT *Comments by Tokyu REIM 46

48 List of Major Unitholders 1 st (ended Jan. 31, 24) 12th (ended July 31, 29) 13th (ended Jan. 31, 21) Unitholders No. of Units Held Share (%) Unitholders No. of Units Held Share (%) Unitholders No. of Units Held Share (%) 1 Tokyu Corporation 5, Kawasaki Gakuen School Corporation 5, Tokyu Land Corporation 3, Japan Trustee Services Bank 3, Shinwa Bank 2, Aozora Bank 2, Hiroshima Bank 2, Resona Bank 2, Morgan Stanley 2, Bank of Ikeda 1, The Gibraltar Life Insurance Company 1, The Chase Manhattan Bank London 1, AIG Star Life Insurance Co., Ltd. 1, Trust & Custody Services Bank, Ltd. 1, The Chase Manhattan Bank London (SL Omnibus Acct.) 1, North Pacific Bank 1, Bank of Bermuda 1, The Hachijuni Bank, Ltd American Life Insurance Company Pictet & Cie NikkoCiti Trust and Banking Corporation 13, Japan Trustee Services Bank Ltd. 12, Trust & Custody Services Bank, Ltd. 11, The Master Trust Bank of Japan, Ltd. 8, Tokyu Corporation 5, AIG Star Life Insurance Co., Ltd. 4, North Pacific Bank, Ltd. 4, Bank of New York, US Pension Fund Global Business , Tokyu Land Corporation 3, The Nomura Trust and Banking Co., Ltd. 3, American Life Insurance Company 2, The Momiji Bank 2, AIG Edison Life Insurance Co., Ltd. 2, The National Mutual Insurance Federation of Agricultural Cooperatives 2, Bank of New York, Treaty JASDEC Account 2, Kansai Urban Banking Corporation 1, The Fuji Fire and Marine Insurance 1, The Hachijuni Bank, Ltd. 1, Pictet & Cie 1, The Gibraltar Life Insurance Co., Ltd. 1, Japan Trustee Services Bank Ltd. 17, NikkoCiti Trust and Banking Corporation 13, Trust & Custody Services Bank, Ltd. 9, The Master Trust Bank of Japan, Ltd. 6, Tokyu Corporation 5, The Nomura Trust and Banking Co., Ltd. 5, AIG Star Life Insurance Co., Ltd. 4, American Life Insurance Company 4, Tokyu Land Corporation 3, The Momiji Bank 3, Bank of New York, US Pension Fund Global Business , AIG Edison Life Insurance Co., Ltd. 2, The National Mutual Insurance Federation of Agricultural Cooperatives 2, The Hachijuni Bank, Ltd. 2, Nippon Vest 2, North Pacific Bank, Ltd. 1, Goldman Sachs and Company Regular Account 1, State Street Bank and Trust Company , Kansai Urban Banking Corporation 1, The Fuji Fire and Marine Insurance 1, Total Units Held by Top 2 Unitholders 94, Total Units Held by Top 2 Unitholders 43, Outstanding Units 169,38 1. Outstanding Units 98, 1. Total Units Held by Top 2 Unitholders 97, Outstanding Units 169,

49 Performance Against Offering Price at IPO Changes in TOKYU REIT s Investment Unit Price and Investment Unit Price with Accumulated Dividends 1,8, IPO of TOKYU REIT 9/1/23 12/18/23 Earnings Revision 1st 7/1/24 2nd PO Announced 2nd 7/6/25 3rd PO Announced 3rd 4th 5th 6th 7th 8th 9th 1th 11th 12th 13th Investment Unit Price (Closing Price) Investment Unit Price with Accumulated Dividends (Closing Price) Offering Price at IPO 1,6, 1,4, 1,2, 1,, 8, 6, 4, Offering Price at IPO (9/1/23): 53, 2, 7/31/24 1/31/24 7/31/25 1/31/25 7/31/26 1/31/26 7/31/27 1/31/27 7/31/28 1/31/28 7/31/29 3/8/21 1/31/29 1/31/21 48

50 Difference Between Dividend Yields of TOKYU REIT and TEPCO (%) Difference of Dividend Yields (TOKYU REIT Tokyo Electric Power Company (TEPCO)) Average spread between Jul. 28 and Dec. 29: 3.27% /1/3 11/1/3 1/1/4 3/1/4 5/1/4 7/1/4 9/1/4 11/1/4 Average spread until Jul % 1/1/5 3/1/5 5/1/5 7/1/5 9/1/5 11/1/5 1/1/6 3/1/6 5/1/6 7/1/6 9/1/6 11/1/6 1/1/7 3/1/7 5/1/7 7/1/7 9/1/7 11/1/7 1/1/8 3/1/8 5/1/8 7/1/8 9/1/8 11/1/8 1/1/9 3/1/9 5/1/9 7/1/9 9/1/9 11/1/9 12/24/9 49

51 4. Debt Management 5

52 ( million).% 58.3% 69.3% 54.3% 77.4% 77.4% 68.9% 68.9% 81.6% 73.2% 84.5% 92.8% 92.8% 1% 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Debt Structure (1) 56,7 1st 1/31/24 R&I S&P Moody s 35, 25, 2nd 7/31/24 35, 15,5 3rd 1/31/25 Issuer Rating: AA- (Rating Outlook: Stable) Long-Term Corporate Credit Rating: A (Outlook: Stable) Short-Term Corporate Credit Rating: A-1 Issuer Rating: A2 (Rating Outlook: Negative) * High credit ratings help to respond to changing monetary situations Short-Term Debt Rating (as of end of 13th period) 35, 29,5 Ratio of Long-Term Debt Investment Corporation Bonds 41, 41, 12, 12, ,3 2,3 5, 13,5 4th 5th 6th 7th 8th 9th 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 1/31/28 * 8.4% if excluding the long-term debt maturing within a year Long-Term Debt 61, 26, 1th 7/31/28 72, 15, (*) 11th 1/31/29 8, 8, 7, 7, 12th 7/31/29 Ratio of Long-Term Debt 13th 1/31/21 8, 14th 7/31/21 (Est.) * Increasing long-term debt position in order to strengthen financial situation (%) Interest Bearing Debt Category Lender Amount ( million) Coupon (%) Debt Origination Date Due Date Short-term Mitsubishi UFJ Trust Bank 7, /6/27 21/6/27 14th Unsecured Unguaranteed Total Short-Term Borrowings 7, Long-term Bonds Aioi Insurance Company 1, Daido Life Insurance Company 1, Mitsui Sumitomo Insurance 1, /6/25 Maturity 21/6/25 14th Development Bank of Japan 4, /6/25 18th National Mutual Insurance Federation of Agricultural Cooperatives 1, /1/25 211/1/25 17th Development Bank of Japan 5, /1/25 218/1/25 29th Nippon Life Insurance 4, /7/31 211/7/31 16th Dai-ichi Life Mutual Life Insurance 4, /7/31 2th Dai-ichi Life Mutual Life Insurance 1, National Mutual Insurance Federation of Agricultural Cooperatives 3, /1/25 214/1/25 21th Sumitomo Trust Bank 5, /6/25 21/12/25 15th Bank of Tokyo- Mitsubishi UFJ 5, /9/25 211/9/25 17th Daido Life Insurance Company 3, /3/1 216/3/1 26th Mizuho Corporate Bank 2, /6/25 16th Mitsubishi UFJ Trust Bank 1, /6/25 213/12/25 21th Development Bank of Japan 5, /6/25 24th Sumitomo Trust Bank 1, Chuo Mitsui Trust Bank 1, Shinkin Central Bank 2, /7/25 21/7/25 14th The Norinchukin Bank 1, /7/25 18th Mizuho Corporate Bank 2, /11/11 211/11/11 17th Chuo Mitsui Trust Bank 2, /11/18 211/5/18 16th Mitsubishi UFJ Trust Bank 2, /11/18 19th Sumitomo Trust Bank 2, /5/25 16th Bank of Tokyo-Mitsubishi UFJ 2, /11/25 212/5/25 18th Mizuho Corporate Bank 1, /11/11 17th Development Bank of Japan 5, /2/25 214/2/25 22th Mizuho Corporate Bank /4/27 211/1/27 17th Chuo Mitsui Trust Bank 2,5 Mitsubishi UFJ Trust Bank 2,5 Chuo Mitsui Trust Bank 2,5 Mitsubishi UFJ Trust Bank 2, Sumitomo Trust Bank /6/25 (As of end of 13 th ) 213/6/25 2th /12/25 21th 213/6/29 2th Chuo Mitsui Trust Bank 4 Mitsubishi UFJ Trust Bank /6/29 18th 29/6/ Bank of Tokyo-Mitsubishi UFJ 1,4 (Floating 212/8/29 19th Rate) Note Unsecured Unguaranteed Total Long-Term Borrowings 8, Total Borrowings 87, #1 Investment Corporation Bond 5, /1/24 19th Unsecured 27/1/24 #2 Investment Corporation Bond 5, /1/24 23th Unguaranteed Total Corporate Bonds 1, Total Interest-Bearing Debt 97, * Average Interest Rate: 1.72% 51 * Comments by Tokyu REIM

53 Debt Structure (2)( Average Duration of Interest-Bearing Debt and Average Interest Distribution and Long-Term Debt Ratio (years) (%) 25, 8, 2, Distribution 58.3% 69.3% 54.3% Long-Term and Fixed-Interest Debt Ratio 77.4% 22, % 68.9% 68.9% 81.6% 73.2% 84.5% 79,446 1.% 92.8% 92.8% (Note 2) (%) %.83% 1.25% 1.7% 1.12% 1.31% 1.42% 1.52% 1.67% 1.63% 1.66% 1.69% 1.72% 1.76% 1st 2nd 3rd 4th 5th 6th 7th Peiod 8th 9th 1th 11th 12th 13th 14th 1/31/24 7/31/24 1/31/25 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 1/31/28 7/31/28 1/31/29 7/31/29 1/31/21 7/31/21 (Est.) Long-Term Interest Bearing Debt Total Interest-Bearing Debt Average Interest * Increase in average interest is limited due to duration management , 1, (Note 1) 12,123.% 14,23 13,45 13,798 14,179 14,182 14,427 15,364 16,56 16,284 15,55 11, 1st 2nd 3rd 4th 5th 6th 7th Peiod 8th 9th 1th 11th 12th 13th 14th 1/31/24 7/31/24 1/31/25 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 1/31/28 7/31/28 1/31/29 7/31/29 1/31/21 7/31/21 (Est.) (Note 1) Official distribution in the 1st was 9,488 based on the actual operating period of 144 days, but the recalculated distribution of 12,123 based on 184 operating days is used in the above graph for the sake of comparison with figures from the 2nd and thereafter. (Note 2) 8.4% excluding the long-term debt maturing within a year * Focus on balance between EPS growth and earnings quality Revision Term of Rent to Average Duration of Interest-Bearing Debt Distribution and LTV / Total Assets (years) Revision Term of Rent Average Duration of Interest-Bearing Debt th 1/31/29 12th 7/31/ th 1/31/21 * Striving to achieve a debt duration longer than the rent revision interval through active debt management ( ) 8, 8, 25, 2, 15, 1, 47.9% 12,123 1st 1/31/ % 14, % 13, % 13,798 Distribution 3.9% 14,179 22, % 35.5% 35.4% 14,182 LTV / Total Assets 14,427 2nd 3rd 4th 5th 6th 7th Peiod 8th 7/31/24 1/31/25 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 The document is provided for information purpose only and is not intended as an inducement or invitation to invest and trade in securities issued by TOKYU REIT 38.1% 15,364 9th 1/31/ % 44.6% 44.7% 16,56 1th 7/31/28 16,284 11th 1/31/29 15,55 12th 7/31/29 79, % 43.6% 11, 13th 14th 1/31/21 7/31/21 (Est.) (%) *Comments by Tokyu REIM

54 5. Portfolio and Risk Management 53

55 Portfolio Overview Location Map of Properties Retail Properties Tokyo Central 5 Wards Tokyo Metropolitan Shibuya Ward QFRONT Lexington Aoyama TOKYU REIT Omotesando Sq. Tokyu Saginuma Bldg. CONZE Ebisu TOKYU REIT Beacon Hill Plaza Tokyu Saginuma 2 Shibuya (Ito-Yokado Nokendai Bldg. Udagawa-cho Sq. Store) cocoti Daikanyama Forum Tokyu Areas Office Properties Ownership Breakdown Setagaya Business Square Tokyu Nampeidaicho Bldg. Tokyu Sakuragaokacho Bldg. Tokyo Nissan Taito Bldg. TOKYU REIT Akasaka Hinokicho Bldg. TOKYU REIT Kamata Bldg. Shonan Mall Fill (sokochi) Tokyo Central 5 Wards + 5+ Tokyu Areas 92.5%* 92.5% * Based on Appraisal Value at end of 13th Fiscal (Property scheduled to be acquired is based on Appraisal Value at Acquisition) TOKYU REIT Toranomon Bldg. TOKYU REIT Hatchobori Bldg. Akasaka 4-chome Bldg. (Tokyu Agency Inc. Head Office Building) Tokyu Ikejiri-ohashi Building Kojimachi Square (Note) (Note) Scheduled to be acquired on March 19, 21 54

56 Portfolio Overview (1) Office / Retail Ratio (Based on Property Values Calculated at End of ) (Years) 17. Weighted Average Property Age 1% 8% 6% 4% 2% % 8% 6% 4% 2% % % Appraisal Value ( million) 4. IPO 9/1/23 1st 1/31/24 2nd 7/31/ Tokyo 65.5 Central Wards 56. 3rd 1/31/ th 7/31/25 5th 1/31/ th 7/31/26 7th Peiod 1/31/27 8th 7/31/27 Retail Office * Figures for Kojimachi Square are based on Appraisal Value at Acquisition th 1/31/ th 7/31/28 11th 1/31/29 12th 7/31/29 Area (Based on Appraisal Values at End of ) Tokyu Areas 84. Shibuya th 1/31/21 3/19/ IPO 1 st 2 nd 3 rd 4 th 5 th 6 th 7 th 8 th 9 th 1 th 11 th 12 th 13 th After Acquisition of Kojimachi Square 8,3 13,5 111,74 136,85 155,9 174,43 187,8 21,12 224,33 242,92 268,68 242,4 219,58 171,8 18,18 Other Areas Tokyo Central 5 Wards Shibuya Ward Tokyu Areas * Figures for Kojimachi Square are based on Appraisal Value at Acquisition. After Acquisition of Kojimachi Square st 2 nd 3 rd 4 th 5 th 6 th 7 th 8 th 9 th 1 th 11 th 12 th 13 th (Properties) 12 units 13 units 16 units 17 units 17 units 16 units 18 units 18 units 19 units 22 units 22 units 2 units 21 units (Note) January 31, 21 is the reference date (Note) Other areas (%) (*) Weighted average of the number of buildings at period end multiplied by the acquisition cost (*) Not including Shonan Mall Fill (sokochi) NOI Yield * Effect of Capitalization of Property Tax and City Planning Tax st 2 2 nd 3 3 rd 4 4 th 5 5 th 6 6 th 7 7 th 8 8 th 9 9 th 1 th 11 th 12 th 13 th NOI NOI NOI NOI Yield based on Acquisition Price NOI Yield based on Appraisal Value NOI Yield based on Book Value After Acquisition of Kojimachi Square 55 * Comments by Tokyu REIM

57 Portfolio Overview (2) Unrealized Gain / Loss and Percentage Against Book Value by Property Unrealized Gain / Loss ( million) 12, *% of Book Value by Property 12% 1, 8, 1,178 Unrealized Gain / Loss % to Book Value 1% 8% 6, 5, % 6% 4, 2, -2, Total 6.33% QFRONT 36.9% 19.2% 17.8% 1, % 1, % 2.1% Lexington Aoyama TOKYU REIT Omotesando Sq. Tokyu Saginuma Bldg. Tokyu Saginuma 2 Bldg. TOKYU REIT Shibuya Udagawa-cho Sq. Beacon Hill Plaza (Ito Yokado Noukendai Store) cocoti Shonan Mall Fill (sokochi) % ,69-1, % -21.2% -22.9% -23.5% CONZE Ebisu 2, % 36.% 35.2% 2,311 2,479 3,38 3.5% 26.7% 15.5% 1,333 1, Setagaya Business Sq. Tokyu Nampeidai-cho Bldg. Tokyu Sakuragaokacho Bldg. Portfolio Return Performance Daikanyama Forum Tokyo Nissan Taito Bldg. TOKYU REIT Akasaka Hinokicho Bldg. TOKYU REIT Kamata Bldg. TOKYU REIT Toranomon Bldg. TOKYU REIT Hatchobori Bldg. Akasaka 4-chome Bldg. (Tokyu Agency Inc. Head Office Bldg.) Tokyu Ikejiri-ohashi Building 4% 2% % ,364-1, %-2% -19.6% -19.4% 5.17% 5.96% * Total return of the 21 properties since acquisition has outperformed the benchmark by.79 points. Outperformed benchmark by.79 pts. Benchmark Hurdle Rate Appraisal NCF Cap Rate at Acquisition (Anticipated Yield) Based on the 21 properties (acquisition price base: 168,33 million) that have been held for more than 4 periods * Fiscal period end property values are utilized as the disposal price (sale price) for the calculation of IRR. * Acquisition price does not include capitalized expenses (such as broker s fees, first year s property / city planning tax, compensation for specialist agents). * Cash flow from leasehold and security deposits are not included. IRR for the 24 properties (the above 21 properties, Yokohama Yamashita-cho Building (Barneys New York Yokohama Store), Resona Maruha Building and Ryoshin Harajuku Building Acquisition Price: 211,699 million) is 6.84% (outperforming the benchmark return of 5.17% by 1.67 points) * Sale price of the Yokohama Yamashita-cho Building (Barneys New York Yokohama Store) is 6,48 million (sold in 6th period). * Sale price of the Resona Maruha Building is 42, million (sold in 13th period). * Sale price of the Ryoshin Harajuku Building is 8,4 million (sold in 13th period). 56 * Comments by Tokyu REIM

58 Risk Management (1) (%) Portfolio PML Trends * PML decreased due to a change in the property value appraisal method utilized by E.R.S. Corporation and Oyo RMS Corporation resulting from the introduction of a new seismic analysis method (Properties) IPO 1st 2nd 3rd 4th 5th 6th th 8th 9th 1th (11) (12) (13) (16) (17) (17) (16) (18) (18) (19) (22) * Not including Shonan Mall Fill (sokochi) 11th 12th 13th (22) (22) (2) (21) Balance of Depreciation and Repair and Maintenance Costs After After Acquisition Acquisition of of Kojimachi Kojimachi Square Square * The source of funds for CapEx is limited to depreciation for REITs, as 1% of profits are distributed. Therefore, we focus on maintaining the proper balance between long-term repair and maintenance estimates and accumulated depreciation. Weighted Average Property Age and CapEx Ratio ( billion) Total Estimated Depreciation (15 years) Estimated Internal Reserve: 9.2bn 12.3 Total Estimated Repair and Maintenance Costs (15 years) 1.6 Accumulated Internal Reserve 9.3bn 1.3 (years) * Rejuvenation of the portfolio and reduction of future repair and maintenance costs Weighted Average Property Age 1. Total Depreciation Total CapEx After 15 Year Estimate 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 1th 11th 12th 13th Acquisition of Actual performance figure Kojimachi (calculated at end of 13th ) Square * Repair and maintenance cost estimates are updated when appropriate. * Not including Shonan Mall Fill (sokochi) * CapEx Ratio = (Total Estimated Repair and Maintenance Costs per ) / (Total Estimated * Including Kojimachi Square (scheduled to be) acquired on March 19, 21 Depreciation per ) 57 * Comments by Tokyu REIM CapEx Ratio %

59 Risk Management (2) Ratio of Tenants with LT Contracts (Based on Leasable Area) * Continue to attract long-term commitments Property Concentration * Ratio of each property decreased as number of buildings increased Long-Term Tenants 57.5% Long-Term Tenants 55.6% * However, the average rent revision interval for all properties is 3.18 years Setagaya Business Sq. 12.4% TOKYU REIT Toranomon Bldg. 7.2% QFRONT 1.9% cocoti 1.4% Kojimachi Sq. 5.1% 11 Properties at IPO Tokyu Group Tenant Concentration (Based (based on Leasable Area) 22 Properties (as of March 19, 21 (scheduled)) (as of end of April 23) (Note) Percentage of leasable area for long-term contracts without rent revision: % 11 Properties at IPO (as of end of April 23) * Lower dependence on Tokyu Group Companies Tokyu Group Companies 41.% Tokyu Group Companies 19.2% 22 Properties (as of March 19, 21 (scheduled)) Setagaya Business Sq. 27.9% Tokyu Sakuragaoka Bldg. 8.2% QFRONT 18.8% Tokyu Saginuma Bldg. 8.6% TOKYU REIT Omotesando Sq. 7.2% 22 properties as of March 19, 21 (scheduled) (based on appraisal value) Top 3: 55.3% Top 5: 7.7% Top 3: 33.8% Top 5: 46.1% 11 Properties at IPO (based on appraisal value as of end of April 23) * Comments by Tokyu REIM 58

60 6. Market Review 59

61 Economic Trends in Japan Economic Indicator: Composite Index (25 = 1) Economic Indicator: : Synthetic economic indicator created by integrating a range of key indicators sensitive to certain economic activities,, including production and employment. There are two indicators: DI and CI. DI shows the direction of change in the economy while CI indicates the strength of economic fluctuations. Each indicator has three types of associated indicators: leading, coincident and lagging indicators. Leading indicators show future trends. The reference index CI was upgraded to the official index in April Jan. 2 Jan. 21 Jan. 22 Jan. 23 Jan. 24 Jan. 25 Jan. 26 Jan. 27 Jan. 28 Jan. 29 Dec. 29 * The Composite Index increased for 1 straight months due to inventory corrections. Source: Cabinet Office * Comments by Tokyu REIM 6

62 Price Trends in Japan Price Index (YoY Change) (%) 9 * Residential rents follow the CPI, while office / retail rents follow the CSPI Consumer Price Index (CPI) Corporate Services Price Index (CSPI) Corporate Goods Price Index (CGPI) -9 2 Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan * The rate of decrease of price indices is gradually decelerating. * Comments by Tokyu REIM Source: Ministry of Internal Affairs and Communications, BOJ 61

63 Regional Economic Trends Economic Conditions by Prefecture Oct. 29 Survey * Business Confidence is recovering Nationwide Jan. 21 Survey (Partially) Recovering / (Partially) Ceasing to fall *Comparison (Partially) Recovering / (Partially) Ceasing to fall Severe situation as tourism has slowed. Upward revision 1 Unchanged 45 Downward revision 1 Source: Ministry of Finance (Note) Color coding on the map shows the direction of the economy, not the prefecture s current economy status. Regional economies are still in a severe situation, although recovery trends can be seen in some areas, such as with upturns in production activity. (Ministry of Finance, 1/29/21) All regions have indicated that their economies have recently begun recovering, although the pace and extent of these recoveries continue to vary. (Bank of Japan, 1/18/21) * Comments and comparison by Tokyu REIM 62

64 Employment Trends in Japan (Unemployment) Unemployment in Tokyo and Nationwide (Raw Data) (%) (%) (Annual Average) Tokyo Nationwide (Quarterly Average) * The unemployment rate, which is a lagging indicator, showed signs of improvement, but is still in a severe situation. Source: Labor Force Survey by the Ministry of Internal Affairs and Communications * Comments by Tokyu REIM 63

65 Employment Trends in Japan (Job Openings) Job to Applicant Ratio (Seasonally Adjusted) (x) Nationwide Hokkaido Tokyo Aichi Osaka Fukuoka Jan. 21 Jan. 22 Jan. 23 Jan. 24 Jan. 25 Jan. 26 Jan. 27 Jan. 28 Jan. 29 Jan. 21 *The Job to Applicant Ratio (Nationwide) marked a record low in January 21. Active Job Openings / Job Applicants in Tokyo (Number of people) 35, Active Job Openings Job Applicants 3, 225, , , , ,672 25, 231,335 2, 235, ,67 15, 176, , , ,16 258,771 22, , , , , , ,179 1, Jan. 21 Jan. 22 Jan. 23 Jan. 24 Jan. 25 Jan. 26 Jan. 27 Jan. 28 Jan. 29 Jan. 21 * The number of active job openings has been below the number of job applicants since January 29. Source: Employment Service by the Ministry of Health, Labour and Welfare * Comments by Tokyu REIM 64

66 Excess Population Inflow into Three Major Metropolitan Areas ( ) (Number of People) 2, 15, Tokyo Osaka Nagoya *Structural population concentration in the Tokyo Metropolitan Area 1, ,461 5, *Although showing a declining trend, an excess inflow of more than 1, people has occurred for 9 consecutive years (Year) -5, * Excess inflow continues to occur in the Tokyo Metropolitan Area, while there is excess outflow occurring in the Nagoya Metropolitan Area. Source: Population Movement from Basic Resident Register, Ministry of Internal Affairs and Communications * Comments by Tokyu REIM 65

67 Office Leasing Market Overview (1) Vacancy by Market (%) 3 25 Dec. 28 Dec Shibuya Sta. Tokyo s Tokyo s Yokohama Osaka Kyoto Kobe Nagoya Sapporo Sendai Kanazawa Hiroshima Takamatsu Fukuoka Southwest Central Wards Area Wards * The vacancy rate is showing an upward trend nationwide and Tokyo s rate is approaching the level of 23. Source: Office Market Report issued by CBRE Research Institutions Shibuya Station Southwest Area does not represent the entire Shibuya Ward, but specifically indicates the Jinnan, Udagawa-cho, Dogenzaka area, including Nampeidai-cho, Sakuragaoka-cho. * Comments by Tokyu REIM 66

68 Vacancy (%) Office Leasing Market Overview (2) 41, ,2 3. Monthly Average Asking Rents per Tsubo Vacancy 26, ,69 22, ,7 Dec. 27 Dec. 28 Dec. 29 Dec. 27 Dec. 28 Dec. 29 Vacancy and Asking Rents for New Tenants by Zone 12, ,12 12,81 12,32 12,76 12, ,74 1,92 1,99 1,26 1,52 1,45 Marunouchi / Otemachi / Aoyama Dojima / Umeda Meieki Sakae Yurakucho Nakanoshima Tokyo Osaka Nagoya *Similar to Osaka and Nagoya, the vacancy rate of prime locations in Tokyo has risen. Source: Office Market Report issued by CBRE Research Institutions Monthly Average Asking Rents per Tsubo ( ) Dec. 27 Dec. 28 Dec. 29 Dec. 27 Dec. 28 Dec. 29 Dec. 27 Dec. 28 Dec. 29 Dec. 27 Dec. 28 Dec. 29 * Comments by Tokyu REIM 45, 4, 35, 3, 25, 2, 15, 1, 5, 67

69 Office Leasing Market Overview (3) Office Rent Revisions in the Three Major Cities (Tokyo, Nagoya and Osaka) 15.% Tokyo Osaka Nagoya 1.% 6.5% 5.%.% -.1% -5.% -2.8% -1.% -15.% * Rent revisions increased in Tokyo between 25 and 28. Source: Office Market Report issued by CBRE Research Institutions * Comments by Tokyu REIM 68

70 Office Leasing Market Overview (4) 125 Office Rent Index (Corporate Services Price Index) 25 = Office Rent Index Nationwide Tokyo Osaka Nagoya Corporate Services Price Index Corporate Goods Price Index point difference 9 * The impact of deflation on contracted rents in Tokyo is slight. Source: Prepared by TREIM based on information from the BOJ website * Comments by Tokyu REIM * The Office Rent Index is calculated based on contracted rents, rather than newly asking rents. 69

71 Office Leasing Market Overview (5): Comparison with Retail Properties 12 Indexed Office Rent and Retail Rent Comparison (25 = 1) Office Rent (Tokyo) Retail Rent (Nationwide) 9 * Unlike office rents, the retail market is less affected by economic fluctuations. Source: Prepared by TREIM based on information from the BOJ website * Comments by Tokyu REIM 7

72 Office Leasing Market Overview (6) Business Sentiment on Vacancy Levels in Tokyo (Now vs. 3 Months Later) Occupancy and Asking Rents in 5 Central Wards of Tokyo 6 Occupancy (%) 1. Average Office Asking Rents ( /Month/Tsubo) 17, , , ,5 15, ,5 14, , , -4-6 Chiyoda Chuo Minato Shinjuku Shibuya 23 Wards 5 Wards Occupancy Average Office Asking Rents 12,5 12, Source: Japan Building Owners and Managers Association Building Management Trend Research Report From January 28, information on the 5 Wards is no longer disclosed. Source: Office Market Report issued by CBRE Research Institutions * The downturn in the Occupancy rate has led to a downward trend in Asking Rents. Business Sentiment on Rent Levels in Tokyo (Now vs. 3 Months Later) Rent Estimates by Region (Rent Level at Survey Date = 1) 6 2th Survey (as of April 29) 21st Survey (as of October 29) 4 Area 1 Yr 2 Yr 5 Yr 1 Yr Area I Yr 2 Yr 5 Yr 1 Yr 2 Marunouchi, Otemachi area Marunouchi, Otemachi area Shibuya, Shibuya Station area Shibuya, Shibuya Station area Chiyoda Chuo Minato Shinjuku Shibuya 23 Wards 5 Wards Nagoya, Station area Nagoya, Station area Osaka, along the Midousuji line Osaka, along Midousuji line Source: Japan Building Owners and Managers Association Building Management Trend Research Report From January 28, information on the 5 Wards is no longer disclosed. Source: Japan Real Estate Institute Japanese Real Estate Investors Survey * The outlook of building owners is recovering. * The rent perspective is unchanged. * Comments by Tokyu REIM 71

73 New Office Supply and Percentage to Total Rental Area Tokyo s 23 Wards Tokyo s 5 Central Wards (tsubo) 45, (%) (tsubo) (%) , , 3. 3, 3. 15, , (Est.) (Est.) *New office supply in Tokyo in 21 is expected to be almost half that of 23.. Osaka Nagoya 45, (tsubo) (%) (tsubo) (%) , 4.5 3, 3. 3, , , (Est.) Source: Prepared by TREIM based on the Office Market Report issued by CBRE Research Institutions (1) New office supply as a percentage of total rental area no longer available since 26 (2) Decrease in rental space caused by rebuilding/demolition not calculated (Est.) New Office Supply. % of Total Rental Area * Comments by Tokyu REIM 72

74 Retail Leasing Market Overview Consumer Confidence Index (Nationwide General Households / Seasonally Adjusted) Average Rent of SC Tenants (Key Tenants) ( per month / tsubo) 5, , Dec. 29 3, 2, 1, Source: Cabinet Office Consumer Confidence Survey Economy Watchers Survey (Leading Indicator: Household Related) Nationwide Minami Kanto Source: Cabinet Office Economy Watchers Survey Department Store & Super Market Sales (YoY Change) Department Stores (Nationwide) Department Stores (Yokohama) Department Stores (Tokyo) Supermarkets (Nationwide) ( per month / tsubo) 5, 4, Jan. 21 3, 2, 1, ( per month / tsubo) 5, 4, 3, 2, Overall Central Area Peripheral Area Suburban Area Average Rent of SC Tenants (Restaurants) Tokyo Kanagawa Nationwide Average Rent of SC Tenants (Retail Stores) , -2. Tokyo Kanagawa Nationwide Source: Website of Japan Department Stores Association, Japan Chain Stores Association Statistics on Sales of Chain Stores Source: Survey on shopping center rents and common service charges by Japan Council of Shopping Centers * Consumption attitude bottomed out in December 28 and since then has gradually recovered. However, the situation still requires careful monitoring. 73 * Comments by Tokyu REIM

75 Real Estate Trading Market Overview (1) Real Estate Transparency Index (CY28) Real Estate Cap Rate, Long-Term Interest, Yield Gap Transparency CY 28 CY 28 CY26 CY24 Change in Country Name Level Rank Score Score Score Transparency Trans-parent 1 Australia United States Canada New Zealand United Kingdom Holland Sweden France Hong Kong Singapore Malaysia Japan % * The cap rate is descending since it does not include the Appraisal Value Yield Gap Average ( ): -2.4% Yield Cap Average ( ): +2.3% Yield Gap Real Estate Cap Rate Long-Term Interest Rate (Single Fiscal Year Income Profit Ratio of Tokyo s 23 Wards) Source: MU-CBex 1998 Mitsubishi UFJ Trust and Banking Corp, CB RE Research Institutions Made by Tokyu REIM 4.% 2.8% 1.2% High Transparency Semi- Trans-parent Low Trans-parency 4 Taiwan Korea Thailand Philippines China India Indonesia Macau na 77 Vietnam The survey addressed the following five attributes of real estate transparency: 1) Availability of investment performance indices, 2) Availability of data on market fundamentals, 3) Listed vehicle financial disclosure and governance, 4) Regulatory and legal factors, and 5) Professional and ethical standards. The market in Japan did not grow as much due to the small number of J-REIT IPOs and decreasing amount of asset acquisitions. This did not help improve disclosure standards or upgrade the investor index which serves as the industry standard. As a result, the transparency in Japan during 28 only improved fractionally. Source: Prepared by TREIM based on information from Jones Lang LaSalle s website Source: Prepared by TREIM based on Jones Lang LaSalle 28 World Real Estate Transparency Index Report For comparison purposes the index based on older standards, not including new attributes, is used. Slight improvement in transparency (26 28) Moderate improvement in transparency (26 28) Significant improvement in transparency (26 28) * Comments by Tokyu REIM 74

76 Real Estate Trading Market Overview (2) Lending Attitude DI by Industry Lending Attitude DI by Size (Real Estate Industry) Lax Tight <Long Term> All Industries Real Estate Construction <Long Term> Total Large Mid Small Lax Tight <Short Term> <Short Term> Source : BOJ Tankan Note: REITs not covered in the survey * The lending attitude for the real estate industry is volatile. Large: Cap size over 1 billion, Mid: Cap size between 1 billion and 1 million, Small: Cap size between 1 million and 2 million For data before April 24, size was based on number of employees. * The lending attitude for the real estate industry bottomed out in March 29 and began to recover. * Comments by Tokyu REIM 75

77 REIT Market Overview (1) /2/27.25% rate increase by BOJ 2/28/27 Fall in Shanghai triggered a massive sell-off globally 5/31/27 TSE REIT Index hits a record high (3,47.85 points) 7/23/27 6/1/28 Daiwa House REIT IPO canceled Global downturn in stocks triggered by concerns over the subprime issue surfacing in the U.S. Capital Market Trends Since 27 (1/4/27 = 1) 7/1/28 Industrial & Infrastructure Fund Investment Corporation PO cancelled 3/1/29 9/15/28 Lehman Bros. filed for Chapter 11 Pacific Holdings filed for protection under the bankruptcy law 5/29/29 Joint Corporation filed for protection under the bankruptcy law 1/9/28 New City Residence Investment Corporation filed for Civil Rehabilitation Act 6/17/29 DA Office Investment Corporation joins Daiwa Securities Group 8/6/29 Advance Residence Investment Corporation and Nippon Residential Investment Corporation decided to sign the agreement to merge 9/18/29 9/5/29 Set up of The Public - Private Fund for stabilizing the real estate market BLife Investment Corporation and New City Residence Investment Corporation signed an agreement to merge, etc. and concerning rehabilitation support 1/29/29 Japan Retail Fund Investment Corporation and LaSalle Japan REIT Inc. decided to sign a merger agreement 11/17/29 TGR Investment Inc. and LCP Investment Corporation signed a merger agreement 2/26/21 Japan Rental Housing Investments Inc. and Prospect Reit Investment Corporation decided to sign a merger agreement /3/21 12/3/27 J-REIT Investment Corporation IPO cancelled 12/1/27 ABLE REIT Investment Corporation IPO cancelled TSE REIT Index TOPIX TOPIX Real Estate Nikkei Stock Average 76

78 REIT Market Overview (2) TOPIX and TSE REIT Index Performance IPO of 12/18/23 7/1/24 7/6/25 TOKYU REIT Earnings 2nd PO Announced 3rd PO Announced 9/1/23 Revision 1st 2nd 3rd 4th 5th 6th 7th TOPIX REIT TSE Index 8th 9th 1th 11th 12th 13th * The TSE REIT Index remains steady after hitting a record low in March /31/24 7/31/24 7/31/25 7/31/26 1/31/25 1/31/26 1/31/27 7/31/27 7/31/28 1/31/28 TSE REIT Index Performance (TOPIX=1) 7/31/29 3/3/21 1/31/29 1/31/21 TSE REIT Index Performance (TSE Real Estate Index=1) 12/18/23 7/1/24 7/6/25 Earnings 2nd PO 3rd PO 12/18/23 7/1/24 7/6/25 IPO of Revision Announced Announced IPO of Earnings Revision 2nd PO 3rd PO TOKYU REIT TOKYU REIT Announced Announced 9/1/23 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 1th 11th 12th 13th 9/1/23 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 1th 11th 12th 13th REIT TSE Index TOPIX /31/24 1/31/24 1/31/25 7/31/25 1/31/26 7/31/26 1/31/27 7/31/27 7/31/28 1/31/28 7/31/29 3/3/21 1/31/29 1/31/21 5 REIT TSE Index 4 7/31/24 7/31/25 7/31/26 1/31/24 1/31/25 1/31/26 1/31/27 TSE Real Estate Index 7/31/27 7/31/28 1/31/28 * Relative Change in the TSE REIT Index when TSE Real Estate is indexed at 1 (Sept. 1, 23 = 1) 7/31/29 3/3/21 1/31/29 1/31/21 * Comments by Tokyu REIM 77

79 REIT Market Overview (3) Spread Over Risk Free Rate Major Interest Rates Dividend Yield of REITs (Note 1) Coupon on 1 Year Bond Dividend Yield of Indices (Note 2) As of 1/31/21 (%) JGB Yield Treasury Yield Long-Term Short-Term ( (Japan) ( ) (US) Prime Rate Prime Rate 1. *Australian LPT does not have depreciation bps bps dps bps bps bps US Australia Japan * Wider spread than the US and Australia. 1/8/1988 1/8/1991 1/8/1994 1/8/1997 1/8/2 1/8/23 1/8/26 1/8/29 3/3/21 Japan / US Yield Gap vs. Exchange Rate (bps) 1,8 1,7 1,6 1,5 1,4 1,3 1,2 1,1 1, /3/23 12/3/23 3/3/24 6/3/24 Spread over USGB 1Y Spread over Australian Spread over JGB 1Y GB 1Y 9/3/24 12/3/24 3/3/25 6/3/25 9/3/25 12/3/25 3/3/26 6/3/26 9/3/26 12/3/26 3/3/27 6/3/27 9/3/27 12/3/27 3/3/28 6/3/28 9/3/28 12/3/28 3/3/29 6/3/29 9/3/29 12/3/29 1/29/21 Source: Bloomberg (Note 1) US data based on the Equity REITs of NAREIT, Australia based on the Property Trust GREEN Book issued by Merrill Lynch, Japan based on average expected yield of J-REITs since IPO (Note 2) US based on S&P5, Australia based on ASX All Ordinaries, Japan based on TOPIX /$ Rate ( ) Exchange Rate Japan / US Yield Gap 7 1/4/1988 1/4/1991 1/4/1994 1/4/1997 1/4/2 1/4/23 1/4/26 1/4/29 (Note) Japan / US Yield Gap = US Treasury Yield - JGB Yield * Comments by Tokyu REIM Japan / US Yield Gap(%) /3/21 78

80 7. Appendix (1) Governance of TOKYU REIT 79

81 Structure of TOKYU REIT, Inc. Investment Property Investment Rental and Other Income General Meeting of Unitholders Board of Directors Masahiro Horie, Executive Director Giichi Yanagisawa, Supervisory Director Maruhito Kondo, Supervisory Director Investment Investment Unit Cash Distribution Financing by Loans and Bonds Accounting Auditor Aarata Audit Firm Tokyo Stock Exchange Unitholder Unitholder Unitholder Purchase and Sale Purchase and Sale TOKYU REIT, Inc. Listed: 23/9/1 Units Outstanding: 169,38 units Accounting : January and July Executive Director: Masahiro Horie Supervisory Director: Giichi Yanagisawa Supervisory Director: Maruhito Kondo Auditor: PricewaterhouseCoopers Aarata Property Management Company Property Management Instructions Investment Management Outsourcing Administrative Functions Outsourcing Investment Management Company Tokyu Real Estate Investment Management Inc. Interest and Other Expenses Asset Custodian Outsourcing Financial Institution Asset Custodian Mitsubishi UFJ Trust and Banking Corporation General Administrator Mitsubishi UFJ Trust and Banking Corporation, and The Sumitomo Trust and Banking Co., Ltd. Tokyu Real Estate Investment Management Inc. Financial Instruments Dealer (Kanto Financial Bureau (Kin-sho) No. 36) Member of the Investment Trusts Association, Japan Established: 21/6/27 Business: Investment management Paid-in Capital: 3 million Shareholders: Tokyu Corporation (6%) Tokyu Land Corporation (4%) Auditor: Ernst & Young ShinNihon LLC 8

82 Governance Structure of TOKYU REIT Tokyu REIM Shareholders Board of Directors Auditor Auditor: Ernst & Young ShinNihon LLC Auditor Office Unitholders Meeting Board of Directors Executive Director: Masahiro Horie Supervisory Director: Giichi Yanagisawa Maruhito Kondo Accounting Auditor PricewaterhouseCoopers Aarata Legal Advisor: Mori Hamada & Matsumoto Investment Committee President and Chief Executive Officer (CEO) Compliance and Risk Management Committee Disclosure Committee Board of Directors Function: Decision making on management strategy Members: CEO, CIO, part-time directors from sponsors (3) Chief Compliance Officer (CCO) Compliance Department Compliance and Risk Management Committee Function: Advisory of compliance and risk management Members: Part-time director (2), External committee member (2) Executive Vice President and Chief Investment Officer (CIO) Asset Tran -saction Portfolio Manage -ment Div. I Portfolio Manage -ment Div. II Chief Financial Officer (CFO) Business Planning IR Asset Safeguarding & Engineering Corporate Secretary Function: Members: Investment Committee Advisory on investment decisions Representative director (chairman), part-time director (3), appraiser (1) Checked by external directors / committee members and two different auditors 81

83 Related Party Transactions Development of self-imposed rules on transactions with group companies and measures to avoid conflicts of interest through multiple checks Rules to Avoid Conflicts of Interest Rules for Transactions with Tokyu Group Companies Acquisition / Disposition Property Management Leasing Acquisition Price Appraisal by the Third Party Disposition Price Second Opinion for the Appraisal by Third Party Fee Opinion from Third Party Performance Check Appropriate Rent Level Disclosure of Leasing Conditions Double Checks for Due Process Investment Management Company Level Check by a third party (auditor) submitted to the Board of Directors and to the Compliance Department REIT Level Prior approval of the Board of Directors only by independent supervisory directors Timely and Proactive Disclosure of Transactions and Rules 82

84 Status of Meetings Held Organizations 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 1th 11th 12th (# of meetings held) 13th Total Aug. Sep. Oct. Nov. Dec. Jan. Total TOKYU REIT Unitholders' Meeting Board of Directors' Meeting Tokyu REIM Board of Directors' Meeting Investment Committee Compliance & Risk Management Committees Third party evaluation regarding compliance of each related-party transaction to the rules (AUP) * The 1st-13th s indicate fiscal periods of TOKYU REIT. * The 1st was from 6/2/23 to 1/31/ Related Party and Investment Management Company Transactions Approved by the Board of Directors (13 th ) Meeting Approved Issues 1 Aug. 29 Renewal of property management agreement Yes (Note) 2 Sep. 29 Payment of investment management fee (Base 2) to Tokyu Real Estate Investment Management 3 Sep. 29 Signing of memorandum regarding settlement of Daikanyama Forum 4 Nov. 29 Signing of memorandum regarding burden of expense for errors in the Semiannual Report Twelfth Fiscal 5 Dec. 29 Tokyu Ikejiri-ohashi Building: Rent revisions of Tokyu Facility Service Co., Ltd. Yes Tokyu Sakuragaoka-cho Building: Substitute parking space contract as a result of construction to upgrade current parking space to mechanical 6 Dec. 29 No parking system 7 Dec. 29 Payment of investment management fee (Base 1) to Tokyu Real Estate Investment Management Additional payment of property management expenses for the property transfer accompanying the sale of the Resona Maruha Building and Ryoshin 8 Dec. 29 No Harajuku Building AUP * Supervisory directors vote prior to the Board of Directors Meeting based on rules rules relating to the avoidance of conflicts of interest. * For transactions that do not apply to specific rules or are deemed minor by the Chief Compliance Officer, AUP is not conducted. (Note) Obtained an AUP report in July 29 83

85 TOKYU REIT s s Initiatives (Governance) TOKYU REIT s Aim, Goals Characteristics of TOKYU REIT s Governance Structure Unitholder first Willing to learn from investors but reject requests from short-term interests Aim to become a Global investment product Willing to become invest-worthy for all investors around the globe Quality decision-making process Among the most excellent governance structures Aim to become the most reputable J-REIT Outperform other J-REITs Involvement of independent outside board members Willing to welcome third-party monitoring to eliminate self-righteousness Optimal balance between sponsor collaboration and independence Strict focus on fiduciary duty Management fee set to being in the same boat as unitholders TOKYU REIT s s Management Characteristics Professional and a company manager with experience as an outside board member 84

86 7. Appendix (2) Others 85

87 Degree of Tightness in Real Estate Finance and Changes in Property Prices Real estate prices are derived from the income capitalization method, but believes that the prices react to changes in real estate finance sentiment in the medium to long term. Up Low Cap Rate Property Tight High Cap Rate Property Real Estate Price (Solid Line) Time Real Estate Finance Attitude (Dotted Line) Real Estate Finance Attitude Down adopts a Low Cap Portfolio Strategy Lax * This page represents the view of Tokyu REIM. 86

88 External Growth Timing and Pace (J-REIT Total vs. TOKYU REIT) (DI) Total Acquisition Price of All J-REITs / TOKYU REIT and Lending Attitude DI * TOKYU REIT has employed contrarian measures during real estate finance easing periods and has decreased its amount of new investment. Real Estate Finance Easing * In the latter half of the real estate finance easing period, the number of new acquisitions by J-REITs has declined in due to disciplinary pricing. ( million) 7, 6, 5, 4, -1 3, -2 2, -3 *Kojimachi Square Acquisition (scheduled) 1, -4 Acquisition Price of All J-REITs Acquisition Price of TOKYU REIT All Industrial Average Real Estate * Acquisition Price = Total acquisition price for properties acquired during the 3 months prior to the month indicated beside each bar in the x-axis (e.g. Jun. 28 -> from April to June 28). (However, values for Mar. 21 are based on actual property acquisitions between January 1, 21 and March 2, 21 plus TOKYU REIT s property acquisition disclosed on March 15, 21.) Source BOJ (Tankan Survey) * Comments by Tokyu REIM 87

89 Changes in Acquisition Hurdle Rate (based on NOI) - External Growth Costs shown as % of implied total acquisition cost Cost calculated based on a maximum LTV of 5% Depreciation expense currently estimated to be around 1.% of acquisition (varies by property) 5.51% 5.47% 5.45% Acquisition Price 1 Debt 5 Equity 5 Depreciation 1.2 Depreciation 1. Depreciation 1. Jan. 21 vs. IPO SG&A 1.4 SG&A.7 Debt.85 SG&A.78 Debt.86 Hurdle Rate Depreciation -.6 pts. -.2 pts. Debt.96 SG&A -.26 pts. Debt -.1 pts. Equity 2.31 Equity 2.92 Equity 2.81 Equity.5 pts. July 24 at IPO July 29 January 21 This is the base rate, coupled with CF growth of properties, utilized for assessment. The SG&A ratio is operating expense excluding leasing costs and capital losses on real estate, etc. divided by the average acquisition cost for the respective period. The cost of debt is equal to 5% of the average interest during the respective period, except for July 24 at the IPO, which is an estimate of the cost of debt based on hearings from banks. We have determined the cost of equity to be 5% of the yield (Estimated Distribution / Investment Unit Price) during each respective period. * This page represents the view of Tokyu REIM. 88