Changes in Real Estate. December 2, 2010

Transcription

1 Changes in Real Estate Asset Management Industry December 2, 2010

2 Kenedix Overview Kenedix has been operating as a real estate asset management business since the dawn of the real estate securitization market as a major player. Corporate Data History Company Name President Kenedix, Inc. Atsushi Kawashima Founded April 1995 Stock Listing Tokyo Stock Exchange 1 st Section Capital* Employees* Headquarters Affiliated Companies Note: *As of Sep ,322 million 159 (Kenedix Group) KDX-Shinbashi Building, 2-2-9, Shinbashi, Minato-ku, Tokyo, JAPAN Kenedix Advisors Inc. Kenedix REIT Management, Inc. Kenedix Asset Management, Inc. Kenedix Development Inc. Mitsui & Co., Logistics Partners Ltd. Pacific Servicing Co., Ltd. Kenedix Westwood, LLC 1995 Kennedy Wilson Japan was established as a base of Kennedy Wilson Inc. in Japan 1999 First investment in the office building at Kawasaki 2002 Listed on Hercules Market of the Osaka Stock Exchange 2003 AM business for pension funds Listed on the 2 nd section of the Tokyo Stock Exchange AUM was exceeded 100 bn 2004 Listed on the 1 st section of the Tokyo Stock Exchange 2005 IPO of 2 J-REITs (Kenedix Realty Investment Corp & Japan Logistics Fund) 2006 Investment in US Residential AM company 2007 IPO of Group LPT (Challenger Kenedix Japan Trust) 2008 AM business for German investor 2009 Sales of KDX Toyosu Gransquare and undertaking of asset management business Capital and business alliance with MAX-REALTY INC. Established supervisory company for asset management business 2010 AM business for Korean investor AUM was exceeded 100 bn Capital and business alliance with ITOCHU Corporation 2

3 Table of Contents 1. Changes in Kenedix 2. Changes in Business Environment 3. Recent Case Studies 4. Direction of Real Estate Asset Management Industry 3

4 1. Changes in Kenedix 4

5 1,000 Stock Price of Kenedix and Event of Asset Management Industry (logarithmic axis which is base of 10) Year 2003 office excessive supply problem 100 Exposing subprime loan problem Falsification problem of End of zero-rate policy (Aug 2007) earthquake-resistance strength (Jul 2006) Effectuation of Financial Instruments and Exchange Act (Sep 2007) Lehman s Fall J-REITs listing rush (Sep 2009) Challenger Kenedix Japan Trust listed on the ASX The pension fund of residence created Kenedix Realty Investment Corp. got listed on TSE Japan Logistics Fund, Inc. got listed on the TSE Kenedix got listed on the 1 st sec. of the TSE Chain bankruptcy of Real Estate Companies Sale of KDX Toyosu Grandsquare Deletion of Notice Concerning Precaution about the Going Concern Assumption Greek Debt Crisis Private fund for Korean Institutional Investors created The pension fund created Beginning civil rehabilitation proceedings of Urban Corporation 10 1 Beginning civil rehabilitation proceedings of Creed Corporation Notice Concerning Precaution about the Going Concern Assumption Public Offering Beginning civil rehabilitation proceedings of Pacific Holdings Inc. Kenedix Stock 株価推移 Price (A score of 100 on this picture (2003/12/12 represents the をstock 100price として指数化 at Dec. 12, ) 2003 ) Public Offering and Exchange Offering of the Bonds Establishment of Kenedix Asset Management, Inc. 03/12 04/06 04/12 05/06 05/12 06/06 06/12 07/06 07/12 08/06 08/12 09/06 09/12 10/06 5

6 Changes in Consolidated Balance Sheets Balance Sheet Restructuring (Millions of yen) 450, ,886 Total Assets Net Assets Interest bearing debt DE Ratio (right axis) 400, , , , , , ,000 50, , , , , , , ,038 95,171 57,558 54,525 55,092 42, , , , ,731 71, / / / / / / Asset Sale Asset Sale Asset Sale Asset Sale Dec 2008: Sold of TK investments in Pension fund 9 and 10 Jun 2009: Sold KDX Toyosu Grandsquare May 2010: Established Korea Fund Jul 2010: Sold nursing home portfolio 0.0 Lehman s Fall (Sep 2008) Oct - Nov 2009: Dec 2009: Jun 2010: Jul Aug 2010: Project Lindbergh~ Received JPY14.4bn JPY14.6bn, 3yr Project Normandy~ JPY18.1bn PO and 5yr bank loan to newly syndicated loan Public offering and thirdparty new CB issuance of established KDAM agreement with SMBC allotment (to JPY2.1bn from SMBC, etc and BTMU as co-arranger ITOCHU) of stock totaling approx. 15bn Equity Debt Debt Equity 6

7 Changes in Consolidated Income Statement Historical Net Profit or Net Loss (Millions of yen) 35,000 30,000 25,000 20,000 Net Profit Net Loss 14,662 10,850 15,000 10,000 9,015 18,438 5, ,757 1, , (forecast) (Millions of yen, figures in parentheses Segment Data (Gross Profit) (forecast) represent composition ratio) Real Estate Investment Rental Revenue 1,086 ( 9.2%) 2,657 (11.9%) 7,846 (21.5%) 11,829 (52.8%) 6,450 (47.7%) 5,884 (49.0%) Business Gain on Sale of Properties* 2,154 (18.3%) 10,565 (47.2%) 18,619 (50.9%) 5,564 (24.8%) 3,515 (26.0%) 1,596 (13.3%) Real Estate Investment Advisory Business Fee Income 2, (19.2%) 1,954 ( 8.7%) 2,835 ( 7.8%) 1,881 ( 8.4%) 954 ( 7.1%) 472 ( 3.9%) Dividend Income from Investment in TK 1,361 (11.6%) 2,213 ( 9.9%) 1,474 ( 4.0%) 144 ( 0.6%) 290 ( 2.1%) 468 ( 3.9%) Asset Management Business Asset Management Fees 1,433 (12.2%) 1,915 ( 8.6%) 2,223 ( 6.1%) 2,611 (11.6%) 3,078 (22.8%) 3,555 (29.6%) Incentive Fees 2,572 (21.9%) 2,119 ( 9.5%) 2,055 ( 5.6%) 345 ( 1.5%) 66 ( 0.5%) 26 ( 0.2%) NPL Investment Management Business Fee Income 526 ( 4.5%) 581 ( 2.6%) 522 ( 1.4%) 161 ( 0.7%) 129 ( 1.0%) 54 ( 0.4%) Gain on Collection Profit on NPL etc. 361 ( 3.1%) 381 ( 1.7%) 948 ( 2.6%) -122 ( -0.5%) -963 ( -7.1%) -54 ( -0.4%) Note: *Included Dividend Income from Investment in TK in 2008, Valuation Loss of Properties in2009 Total 11, 749 (100%) 22,385 (100%) 36,549 (100%) 22,413 (100%) 13,515 (100%) 12,001 (100%) 7

8 2. Changes in Business Environment 8

9 Expected Returns by Real Estate Investors Expected Return for Office Buildings (Class A) Lehman s 9 (%) Fall Ueno Marunouchi/Otemachi Toranomon Osaka Nagoya 3 99/04 00/04 00/10 01/04 01/10 02/04 02/10 03/04 03/10 04/04 04/10 05/04 05/10 06/04 06/10 07/04 07/10 08/04 08/10 09/04 09/10 10/04 Source: Japan Real Estate Research Institute 9

10 Transactions before Lehman s Fall Buyer Date of Acquisition Transaction Value (yen) Area Type of property Note Global One Real Estate Investment Corporation Mar bn Saitama City, Saitama Office Meiji Yasuda Life Insurance Saitama-Shintoshin Building (Land Axis Tower) The fund which was created by Secured Capital Japan Co., Ltd. Apr 2007 Over 40 bn Nishinomiya City, Hyogo Retail Daiei Koshien Mapletree logistics trust Apr bn (5 assets) Logistics Morgan Stanley Apr bn Hotel 14 Hotels which was owned by ANA Group DA Office Investment Corporation Jun bn Shibuya-ku, Tokyo Office Shinjuku Maynds Tower TMK which was created by Tokyo Tatemono Co., Ltd., Shoei Co., Ltd.etc. Jun bn Nakano-ku, Tokyo Land The site of Nakano National Police Academy (34,842 m2 ) SPC which was created by Goldman Sachs Aug bn Chuo-ku, Tokyo Retail Tiffany Ginza Building Industrial & Infrastructure Fund Investment Corporation Sep bn Kobe City, Hyogo Infrastructure t IIF Kobe District i t Heating and Cooling Center Mitsui Fudosan Co., Ltd. Sep bn Chiyoda-ku, Tokyo Hotel (Share) 33% share of the Imperial Hotel, Ltd. ProLogis, GIC Real Estate Sep bn (17 assets) Logistics ProLogis Park 17 assets SPC which was created by Tokyu Land Corporation Sep bn Chuo-ku, Tokyo Office, Retail Ginza Toshiba Building Mitsubishi Estate Co., Ltd., Heiwa Real Estate Co., Ltd. Jul bn Shinjuku-ku, Tokyo Land North Shinjuku 1 block The Dai-ichiichi Life Insurance Company, Ltd. Nov bn Koto-ku, Tokyo Land Toyosu 3-3 block New City Residence Investment Corporation Dec 2007 Source: Prepared by Kenedix based on Nikkei Fudosan Market Joho Data 27.6 bn Toshima-ku, Tokyo Residence MyAtria Tokyo Precious Tower 10

11 Symbolic Deals in 2007 April 13th, 2007 August 30th, 2007 ANA conducted an auction to sell 13 of its domestic hotels, and decided to sell these assets in a single bulktransaction to Morgan Stanley Other than Morgan Stanley, foreign funds such as the Blackstone Group, domestic real estate funds, and leading real estate companies are said to have had interest in the transaction The deal amounted to billion yen. Book value for the assets were billion yen, and profits from the sale were billion yen In returning its focus to its core business, ANA will utilize proceeds from the sale on its airline business, such as on purchases of new, fuel- efficient planes Sale of flagship store in Ginza for a total of 38 billion yen, amounting to 180 million yen per "tsubo" (35.54 sq. ft.), which is 80% higher than the top officially posted land price at the time (Yamano Music Co. Ltd. Ginza flagship store, million yen per "tsubo") Tiffany & Co. had acquired the land and building, which h it had formerly leased, in 2003 for approximately 16.5 billion yen Tiffany & Co. had acquired the asset to secure this globally prime location in the long term, but switched to a lease contract based on Goldman's attractive offer terms Source: Prepared by Kenedix based on publicly available news sources 11

12 Transactions after Lehman s Fall Buyer Date of Acquisition Transaction Value (yen) Area Type of property Note Mori Building Co., Ltd. and Toyota Motor Corporation Oct bn Koto-ku, Tokyo Land The site of Palette-Town Union Investment Nov bn Shibuya-ku, Tokyo Office Shibuya Duplex Tower NTT Urban Development Co. Dec bn Chuo-ku, Osaka Office Tradepia Yodoyabashi Japan Real Estate Investment Corporation Dec bn Minato-ku, Tokyo Office Shiodome Building SPC which was created by Mitsubishi Ett Estate Jan bn Saitama City, Saitama Land Saitama-shintoshin 8-1A Area SPC which was created by AIG Group Feb bn Kobe City, Hyogo Logistics Logistic facility in Nada-ku, Kobe City SPC which was created by Mitsubishi Estate Mar 2009 Under 80 bn Chiyoda-ku, Tokyo Office Asahi Mutual Life Insurance Otemachi Building The Group of 6 organizations, which includes NTT Urban Development etc. Mar bn Minato-ku, Tokyo Land (Lease Rights) The site of Shibaura Water Reclamation Centers Furukawa Co., Ltd. Mar bn Chuo-ku, Tokyo Office Furukawa Building (Buyback of liquidized asset) Nippon Life Insurance Company May bn (about 1.2bn$) Chiyoda-ku, Tokyo Office AIG Otemachi Building Carlyle, and the pension fund of Korea Jun 2009 Under 35 bn Koto-ku, Tokyo Office KDX Toyosu Grandsquare Japan Prime Realty Investment Corporation Jun bn Sumida-ku, Tokyo Office OLINAS Tower SPC which was created by Secured Capital Japan Co., Ltd. Dec 2009 Source: Prepared by Kenedix on Nikkei Fudosan Market Joho Data 140 bn Chiyoda-ku, Tokyo Office Pacific Century Place Marunouchi (Sectional ownership of office area) 12

13 Social Situation aftermath of Lehman s fall Headlines of Newspaper 13

14 Bunkrupt Companies in Real Estate Related Industry Total amount of debt 1,444 bn 1,119 bn 134 bn Suruga Corporation Toshin Jyuken Reicof Co., Ltd. Creed Corporation Kondo Sangyo Co., Ltd. Shoei Fudosan Inc. Magara Construction Co., Ltd. Miyabi Estex Co., Ltd. Zephyr Co., Ltd. Eisen Fudosan Sampei Construction Co., Ltd. Fuji House Matsuya Housing The Japan General Estate t Co., Ltd. * Urban Corporation* Nichimo Co., Ltd. C est Bon Pacific Holdings* Soken-Homes S-Grant. Co., Ltd. Urban Design System Co., Ltd. Azel Nissan Rinkai Construction Co., Ltd. Chuo Corporation Human21 Corp. Joint Corporation* Re-Plus Inc. New City Corporation C s Create Co., Ltd. Anabuki Construction Inc.* Landcom Corporation Araigumi Co., Ltd. New City Residence Investoment Corporation* Dyna City Inoue Kogyo Co., Ltd. Dixroki Noel Oriental Shiraishi Corporation Yamazaki Construction Co., Ltd. Morimoto Co., Ltd. * Kowa Jisho Dia Kensetsu Co., Ltd. Source: Prepared by Kenedix based on Teikoku Databank, Ltd. and each companies data Note: *Over 100 bn of debt Commercial RE Co., Ltd. Properst Daiwa System Co., Ltd. Total numbers of company: 45 companies Total amounts of debt : 2,697 bn 14

15 J-REIT Dividend Yield by Each Assets 16% 14% 12% Office Residential Retail Industrial Lehman s Fall 10% 8% 6% 4% 2% 0% 05/07 06/01 06/07 07/01 07/07 08/01 08/07 09/01 09/07 10/01 10/07 Note: Bloomberg 15

16 J-REIT Real Estate Transaction Volume 200 (Numbers of transaction) Disposition Acquisition Lehman s Fall Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q Source: Prepared by Kenedix based on REIT data 16

17 Advertised Leasing Rates and Vacancy Rate 25 (Thousand yen / Month, tsubo) *Tsubo = 3.3 square meters Average Rent (left axis) Vacancy Rate (right axis) Lehman s Fall Oct % (%) /01 02/07 03/01 03/07 04/01 04/07 05/01 05/07 06/01 06/07 07/01 07/07 08/01 08/07 09/01 09/07 10/01 10/07 Source: Miki Shoji Co., Ltd., five central wards of Tokyo 0 17

18 Liquidity of Office Building Transactions 9% CapRate* Lehman s Fall 8% 7% 6% 5% 4% 3% 2% 07/01 07/04 07/07 07/10 08/01 08/04 08/07 08/10 09/01 09/04 09/07 09/10 10/01 10/04 10/07 10/10 Note: *Cap Rate of sales = Latest actual NOI/Sales value, Cap Rate of purchase =Appraisal NCF/Appraisal value (The office buildings which are located in 23 wards, Tokyo) 18

19 Restarting of J-REIT Finance in Capital Market J-REIT Equity Offering P T f t Announcement Purpose Type of property Price(*2) Property purchased Avg. cap rate(*1) (Billions of yen) (Number of properties) (Billions of yen) (%) Japan Logistics Fund, Inc. 2010/2/4 Acquisition Logistics % Mori Hills REIT Investment Corporation 2010/3/5 Acquisition Office building % MORI TRUST Sogo Reit, Inc. 2010/5/24 Repayment Office building 39.0 Advance Residence Investment Corporation 2010/6/4 Acquisition Residence % Frontier Real Estate t Investment t Corporation 2010/6/22 Acquisition iti Commercial facility % Japan Logistics Fund, Inc. 2010/8/12 Acquisition Logistics % J-REIT Offering of Investment Corporation Bond Announcement Purpose Price Interest rate Period Rating(*3) (Billions of yen) (%) Global One Real Estate Investment Corporation 2010/9/17 Repayment % 3 years AA- Global One Real Estate Investment Corporation 2010/9/17 Repayment % 7 years AA- ORIX JREIT Inc. 2010/11/11 Repayment % 5 years A+ Nomura Real Estate Office Fund, Inc. 2010/11/12 Repayment % 4 years AA- Nomura Real Estate Office Fund, Inc. 2010/11/12 Repayment % 7 years AA- Japan Logistics Fund, Inc. 2010/11/18 Repayment % 5 years AA Note:* 1 Cap Rate = appraisal NCF / purchase price,*2 Estimated after costs,*3 Rating by Japan Credit Rating Agency, Ltd. Source: Prepared by Kenedix based on REIT press release 19

20 Reorganization through Merger of J-REITs Name of company post-merger situation Effective date of the merger Merger ratio Parties to the merger Size of properties Type of (Number of property properties) Major sponsor Invincible Investment Corporation Feb : 0.8 TGR Investment Inc bn LCP Investment Corporation (55) Residence Office building Commercial facility The LCP Group LP Kyokuto Securities Co., Ltd. etc Advance Residence Investment Corporation Mar : 0.66 Advance Residence Investment Corporation Nippon Residential Investment Corporation bn (182) Residence ITOCHU Corporation ITOCHU Property Development Nippon Tochi-Tatemono Co., Ltd. etc Japan Retail Fund Investment Corporation Mar : Japan Retail Fund Investment Corporation LaSalle Japan REIT Inc bn (59) Commercial facility Mitsubishi Corporation UBS A.G Blife Investment Corporation Apr : 0.23 Blife Investment Corporation New City Residence bn Residence Investment Corporation (128) Commercial facility Daiwa House Industry Co., Ltd Morimoto Co., Ltd. Capita Land Group Japan Rental Housing Investment Inc. Jul : 0.75 Japan Rental Housing Investment Inc. Prospect Reit Investment Corporation Apple Ringo Investment bn Residence BV (185) Apple Ringo Holdings BV etc Heiwa Real Estate REIT, Inc. Oct : 0.75 Crescendo Investment Corporation Japan Single-residence REIT Inc bn (90) Complex Heiwa Real Estate Co., Ltd. United Urban Investment Corporation Source: Prepared by Kenedix based on REIT data Dec : 0167 United Urban Investment Corporation Nippon Commercial Investment Corporation bn (87) Complex Marubeni Corporation Credit Suisse Group etc 20

21 Trend of New Global Money Buyer Country/ Aria Note Transaction Value Feb 2010 Keck Seng Investments Hong Kong A residence, which locates in Shintomi-cho, Chuo-ku, Tokyo 1.7 bn Mar 2010 Mapletree Singapore IXINAL Monzen-nakacho (Fukuzumi, Koto-ku, Tokyo) N/A Mar 2010 YTL Corporation Malaysia A sky Resort, Niseko Villege, which locates in Niseko-cho, Hokkaido 6 bn Apr 2010 The fund of company syndicate based on Hong Kong Hong Kong Storia Shinagawa (residence) Over 7 bn Mar 2010 CLSA Capital Partners France Yanagibashi First Building in Yanagibashi 2-chome, Taito-ku, Tokyo N/A May 2010 Corporate Investor based on Korea Korea Various Office and Retail assets 10 bn Jun 2010 Parkway Life Singapore A total of 6 nursing homes 3.9 bn Jun 2010 Keck Seng Investments Hong Kong New City Apartments Nihonbashi Suitengu 2.1 bn Jun 2010 IPC Corporation Singapore A total of 2 business hotels, which locates in Tokyo (Hotel Sky Court Asagaya, Hotel Sky Court Asakusa) 1.8 bn Jul 2010 AM alpha Germany Lune Aoyama office building in Kita-Aoyama 3-chome, Minato-ku, Tokyo N/A Jul 2010 Parkway Life Singapore A total of 5 nursing homes, which consists of 274 rooms 3 bn A total of 3 Logistic facilities which locates in Chiba, Saitama (Iwaki logistics center, Iruma Jul 2010 Mapletree Logistics Trust Singapore 13 bn logistics center, Noda logistics center) Aug 2010 Corporate Investor based on US USA Source: Prepared by Kenedix on Nikkei Fudosan Market Joho Data A total of 18 office and residential properties which were sold by Japan Retail Fund Investment Corporation 33.2 bn 21

22 3. Recent Case Studies 22

23 Case Study 1: Company Type Transaction Deal Summary Scheme Summary December 2009 Date of Contract (Date of basic contract for sponsor ship of Pacific Holdings, Inc., etc) ケネディクス Foreign Investor Asset size Approx. 46 bn Investor Management period Foreign investor Kenedix 3-5 years Minority Investment & Loan Majority Investment & Loan Asset type Office buildings, rental condos, Commercial facilities, lands and others Companies undergoing corporate reorganization proceedings Pacific Holdings, Inc., and others Holding of Assets Asset Asset Management ( 46bn) (Support of Reorganization) 23

24 Case Study 2: Acquisition of Real Estate Portfolio Deal Summary Scheme Summary Date of fundraising April 2010 Asset size Approx. 13 bn Debt ( 9 bn) Investor Institutional investor Financial Lender Loan to Value Financial Institution 70% Asset ( 13 bn) Loan Institution Asset type Office buildings, rental condos, commercial facilities, parkings Equity ( 4 bn) Investment Institutional Investor Asset Management 24

25 Case Study 3: New Fund-Raising (Korean Fund) Deal Summary Scheme Summary Date of fundraising May 2010 Asset size Approx. 10 bn Investor Lender Three Korean institutional investors (pension funds and financial institutions) Three major financial institutions Asset ( 10 bn) Debt ( 6 bn) Loan Large Banks (Non-recourse loan) Loan to Value Management period 60% 5 years Equity ( 4 bn) Investment Korean Pension Investor Asset type Office buildings and commercial facilities Asset Management MAX-REALTY INC. 25

26 Case Study 4: Rescue Asset Management Deal Summary Scheme Summary Date of contract August 2010 Asset size Approx. 17 bn Investor Lender Loan to Value Foreign investor Financial institution NA Asset ( 17 bn) Debt ( 15 bn) Loan Financial Institution Management period Asset type Disposal at once Rental condos Equity ( 2 bn) Investment Foreign Investor Asset Management 26

27 Case Study 5: Acquisition of Real Estate Portfolio from J-REIT Deal Summary Scheme Summary Date of fundraising September 2010 Asset size Investor Approx. 33 bn Foreign investor Kenedix Senior Debt ( 17 bn) Loan Financial Institution Lender Loan to Value Asset type Financial institution Foreign financial institution 75% Office buildings and rental condos Asset ( 33 bn) Foreign Mez Debt Loan Financial ( 80 bn) Institution Equity ( 80 bn) Majority investment Foreign Investor Asset Management Minority investment 27

28 4. Direction of Real Estate Asset Management Industry 28

29 Recent Reorganization of Real Estate Asset Management Companies Announce ment 1. October October November 4 Period of TOB 2010/10/18~2010/12/1 2010/11/1~2010/12/ /11/5~2010/12/10 Tender Offeror Macquarie Goodman Japan Pte. Ltd. NEC Capital Solutions Pacific Alliance Group EL BidCo Limited(MBO) TOB TOB TOB Offeree J-REP Risa Partners Secured Capital Japan Company (2392) (8793) (8992) Purpose Acquisition 100% ownership Acquisition 100% ownership Acquisition 100% ownership Source: Prepared by Kenedix based on each companies data 29

30 Business Model Shift of Real Estate Asset Management Company Expansion Turmoil Recovery (~2007) (Late 2007~2009) 2009) (2010~) Real Estate Market Having overcome the "2003 Issue", enjoyed favorable real estate fundamentals against a backdrop of the longest economic growth post-war Widespread and sharp market downturn, stimulated by the overall financial crisis Recovery in rent remains stagnant, but vacancies seem to be bottoming out Polarization between Tokyo and rural areas Equity Investors Acceleration in inflow of capital from funds, in parallel with the expansion of the J- REIT market Increasing activity, predominantly Maintained a firm wait-and-see stance among opportunistic investors that fear against the pitfall of real estate the risk of not investing fundamentals; resulting in a dry-up of risk-oriented capital Entry by new investors, such as those from Asia Lenders Diversification and increase in liquidity of debt, such as the supply of high-leverage CMBS debt by foreign investment banks Foreign lenders fled the market, and the cost of credit rose steeply under a general credit crunch Though still selective, lenders are becoming more aggressive Competitors Low barriers of entry prior to the enactment of the Financial Instruments and Exchange Act and market growth attracted new entrants, resulting in excessive competition Many players either exited or went out of business due to the rapid market downturn Increased activity from foreign players that have close access to capital globally Business Model Returns from leveraged balance sheets drove profit growth in an expanding market Heavy focus on survival, through equitization Return to focus on Pure Asset Management Further focus on growth in size and capitalizing on the market growth in Asia 30

31 Growth in Assets Under Management (AUM) and Our Target (Billions of yen) Net increase in AUM 14,000 14,250 12,000 10,892 3,358 10,000 9,399 1,493 8, ,000 7,349 1,094 6,000 4,000 2, ,404 1, , , , ,453 2,404 5,444 1,587 3,857 1,905 5,444 7,349 8,443 9,399 10, Q 2013E 31

32 本資料の取り扱いに関して Disclaimer This presentation was prepared for the purpose of explaining the business operations and strategies of Kenedix and the Kenedix Group. This is not a solicitation to invest in Kenedix. Although Kenedix has carefully checked the contents of this presentation, Kenedix makes no guarantee whatsoever concerning the accuracy, usefulness or suitability of this information. In addition, the contents of this presentation may be revised at any time without prior notice. This presentation includes forecasts, outlooks, goals, plans and other forward-looking statements about results of operations, the financial condition and other aspects of the operations of Kenedix and the Kenedix Group. These statements are based on current forecasts, beliefs, assessments and other items. Furthermore, certain assumptions are used to prepare forecasts, outlooks, goals, plans and other statements concerning the future. Due to the nature of these statements t t and assumptions, there is no assurance that t these statements will match future events. In addition, these statements may be inaccurate from an objective standpoint and future results of operations may differ greatly from these statements. There are many uncertainties and risk factors that may cause these differences. Please refer to the latest materials released by Kenedix for information about items that are regarded as possible major risk factors at this time. Kenedix holds the copyright to this presentation unless specifically designated otherwise. 32