15 th Term Business Report. January 1, 2009 December 31, 2009

Transcription

1 15 th Term Business Report January 1, 2009 December 31, 2009

2 Highlights of Business Results Message from the Management (Millions of yen) 180, , ,000 90,000 60,000 30,000 0 (Millions of yen) 15,000 10,000 5, ,000-10,000-15,000-20,000 Revenue NPL Investment Management Business Asset Management Business Real Estate Investment Advisory Business Real Estate Investment Business Net Income (Note 1) (Note 2) (Millions of yen) 30,000 25,000 20,000 15,000 10,000 5,000 0 Ordinary Income Assets under Management (Billions of yen) 1, Office Buildings Rental Condominiums Commercial Facilities Logistics Facilities Others (Note 3) Message from the Management We are pleased to present our business report for the 15th term (from January 1, 2009, to December 31, 2009). During the year, due to financial market turbulence confounded fund-raising prospects, real estate investment market liquidity was extremely limited. In this environment, the Kenedix Group (the Group ) worked to achieve the objectives of its Medium-Term Management Plan. These efforts included slimming down our balance sheet by selling off some real estate holdings and increasing assets under management by offering new asset management businesses. We established Kenedix Asset Management, Inc. (KDAM), and moved Kenedix REIT Management, Inc. (KDRM), and Kenedix Advisors Co., Ltd. (KDA) under KDAM s umbrella to create a structure that specializes in asset management. We are convinced that shoring up our management base will help to regularize and increase our revenue flow. We remain undaunted in our determination to make steady progress as a real estate asset manager. We ask for your continued support and understanding of our management policy. Note 1: We have taken into account an increase in development projects and present investments in real estate on our own account, which were included in the Real Estate Investment Advisory Business, as the Real Estate Investment Business a new, independent business segment starting with the period ended December 31, Note 2: Previously, when offering real estate for sale, the Group recognized as revenue only the difference between the proceeds and costs. Beginning with fiscal 2007, all proceeds are included in revenue and the corresponding cost of these properties is included in the cost of revenue. Although this change resulted in large increases in revenue, there was no effect on gross profit or other earnings figures. Note 3: The Group uses the following standards for calculating the balance of assets under management (AUM). (1) AUM includes real estate properties for which the Group performs asset management services, but does not include development projects prior to completion. (2) AUM uses the purchase price of a property exclusive of tax. Costs associated with acquisitions, capital expenditures to raise a property s value and other related items are included in the book value of a property for accounting purposes. However, these items are not included in AUM. (3) AUM includes properties that the Group holds itself for a short period of time. AUM also includes properties held by J-REITs (Kenedix Realty Investment Corporation and Japan Logistics Fund) that are managed by Kenedix affiliates. 1 Ryosuke Homma Chairman March 2010 Atsushi Kawashima President

3 Management Interview Management Interview Restructuring Our Management Base to Overcome the Financial Crisis and Reinforcing Group Management to Reverse Our Fortunes Kenedix is working to overcome the effects of the financial crisis by reorganizing its management base. The process for achieving this goal is defined by the three objectives of our Medium-Term Management Plan: to steadily increase assets under management (AUM), downsize our balance sheet and develop a more stable profit structure. In autumn of 2009, the Japanese real estate investment market began showing signs of a comeback, as J-REIT subscriptions increased and J-REIT mergers continued. Nevertheless, the market outlook remains uncertain. Against this backdrop, which includes the Company s biggest full-year losses ever, we asked Chairman Ryosuke Homma and President Atsushi Kawashima to provide a synopsis of performance for the year ended December 31, 2009, as well as their strategies for reversing the trend. Real Estate Investment Market Liquidity Expected to Recover Have you seen any signs that the real estate investment market is recovering? Kawashima: The real estate fundamentals are still sluggish, as is evident from such trends as ongoing increases in office building vacancy rates, but I believe the operating environment is improving gradually. I think that the rise in vacancy rates will peak by early autumn. In fact, during the past two months we have seen an over-influx of tenants into brand-named office buildings. In the past, worsening real estate market conditions prompted rapid increases in the cap rate, which indicates investors expected returns on profit-earning real estate. According to recent hearings of our client investors, they are not expecting higher yields. The Bank of Japan publishes a quarterly tankan business sentiment survey, which expresses a diffusion index (the percentage of firms that feel business is favorable, minus those that feel business is unfavorable) for various sectors. After a long spell of negative numbers, the diffusion index describing the lending attitude of financial institutions is now moving into positive territory. In addition, J-REIT restructuring shows that the market has entered a phase of self-cleansing. I interpret these indicators as signals that real estate market liquidity will increase. Homma: This the case because of the pivotal role J-REITs play in the fund business. In October 2009, investment in residential and office J-REITs was up for the first time in 15 months, and many J-REITs have announced mergers among themselves. Although the effects of these mergers will first become apparent in 2010, I believe that overseas investors will take a positive view of these signs that the J-REIT market has begun a process of self-cleansing. Posting of Highest Ever Losses, but Financial Health Improving How would you evaluate your performance for the year ended December 31, 2009? Kawashima: During the year, revenue dropped 43.4%, to 77.8 billion; operating income fell 48.2%, to 8.4 billion; ordinary income plunged 95.8%, to 0.2 billion; and we recorded a net loss of 18.4 billion, up from a net loss of 10.8 billion 2

4 during the preceding year. We apologize sincerely to our investors for these results. The reason for these losses was a decline in real estate values as economic and real estate market conditions worsened suddenly. These circumstances erased more than 16.0 billion in value from the Group s direct holdings, as well as nearly 2.0 billion in unrealized losses on investments in securities, such as the shares we hold in Commercial RE Co., Ltd., an equity method affiliate to which we provide funding and outsource operations. Homma: We worked to slim down our balance sheet in line with the Medium-Term Management Plan that we announced last February, but we were unable to overcome the effects of ongoing asset deflation. Owing to the stagnant real estate investment market, we faced a decline in fee income such as acquisition fees and incentive fees. Rental income also fell as we disposed of real estate holdings. How is progress on slimming down your balance sheet? Homma: As of June 30, 2008, total assets stood at approximately billion, and interest- bearing debt was around billion. By December 31, 2009, or 18 months later, we had reduced these levels by about half. In short, although we are still only midway down the path, we are making progress toward slimming down our balance sheet and will continue working toward this goal. Kawashima: From a financial standpoint, last autumn we raised funds through a capital subscription and by issuing new convertible bonds (CBs), which strengthened our capital base. These moves were designed to allow us to fund the year-end early redemption of a previous CB issue. Investor demand to roll over these CBs was greater than we had expected, as was demand for new investment, so we were able to handle the early redemption without any problem. In December, we also succeeded in raising 14.0 billion in longterm loans through Sumitomo Mitsui Banking Corporation and other organizations. These measures improved our financial situation. Restructuring the Asset Management Business to Generate Steady Increase in AUM Despite the difficult conditions, AUM appears to be increasing steadily. Kawashima: In the second quarter of the year, we managed to erase the Notice Concerning Precaution about the Going Concern Assumption, and since August we have seen a steady increase in asset management (AM) contracts. Many of these contracts have been for what we term rescue AM, 3 Ryosuke Homma, Chairman

5 Management Interview as they are contracts for services to fill the gap left by asset managers that have withdrawn from the business, as well as contracts that investors or lenders shifted to us as they were looking to improve real estate fund performance. Thanks to this situation, despite adverse market conditions we raised AUM by a net amount of 95.6 billion, to billion as of December 31, Homma: Last June when we sold KDX Toyosu Grandsquare, a large-scale office building, to a fund managed by the Carlyle Group we also took over asset management operations on this property. In August, we received an additional AM contract for another 24.0 billion in Japanese real estate funds held by the Carlyle Group. We consider this contract a vote of confidence in our asset management capabilities. Was the sponsorship of Pacific Holdings, Inc., one aspect of these activities? Kawashima: In December, we concluded a basic contract for sponsorship of three companies in the Pacific Holdings Group. Through this sponsorship, the Kenedix Group aims to help raise the value of their real estate to maximize return to creditors when the properties are sold. In addition to asset management fees, we have the opportunity to earn incentive fees if the properties are sold beyond their expected values. In addition to ensuring that the properties are disposed smoothly, by sponsoring the companies reorganization we are developing a new type of business. Homma: We can envision a number of potential patterns that the reorganizations might take. Although we need to winnow down the possibilities, at this stage we plan to dispose of the properties smoothly. Was the goal of increasing AUM behind your establishment of a company to oversee AM for the Group? Kawashima: Yes, indeed. As AUM grows, we must provide more robust AM offerings. Under the new company s umbrella are KDA., which operates private funds primarily for pension funds, and KDRM, an asset manager of Kenedix Realty Investment Corporation. We established KDAM in October to reorganize this business and enhance the supervision and support of our AM business. Initially, we established KDAM as a wholly owned subsidiary, and later MAX-REALTY INC. acquired a 15% stake. Homma: MAX-REALTY is a real estate investment AM company formed through the joint investment of companies including XYMAX Corporation and Sumitomo Mitsui Banking Corporation. We believe that enhancing our relations with these companies, which have solid fund-raising expertise and extensive information networks, will put us in a stronger position as the AM market grows more selective. Atsushi Kawashima, President 4

6 Revising AUM Growth Targets Upward Planning to Move into the Black in the Year Ending December 31, 2010 We understand that you have revised the targets of the Medium-Term Management Plan for next year. What was the point of these revisions? Kawashima: Though conditions in the real estate investment market remain uncertain, some positive signals of improvements in market conditions are also evident, such as the easing of the credit crunch that occurred in the first half of During the year under review, the Group solved the potential AUM profitability Medium-Term Management Plan Initiatives Faster Growth in AUM 2 Sources of earnings for Kenedix The Frontiers of Earning Growth at Kenedix 2. Value added through active asset management Attract tenants, add value to realize the full potential value of each property Buy and sell properties at optimal prices based on superior market views, earn incentive fees 1 problem of an early CB redemption, which put finances on a more stable footing. The competitive landscape has also changed substantially, as former competitors withdraw from its business or enter bankruptcy. Given this situation, although we will continue to move back to the pure asset management business, as is set forth in our Medium-Term Management Plan, we have revised our timing for the disposal of properties to match the speed of market recovery. The leeway to make this revision came from such factors as increased capitalization during the year and reflects the revaluation of our real estate holdings and the restructuring of our balance sheet. Furthermore, we have raised our AUM acquisition targets in line with changes in the environment for AM contracts. Homma: We announced the Medium-Term Management Plan in February 2009, amid the unprecedented financial crisis precipitated by the Lehman shock, so it was essential to be extremely conservative. Now that business conditions are starting to look more positive, we can afford to be more optimistic. 1. Strong growth in AUM Capture rescue asset management contracts Acquire platforms of other companies Increase activities targeting distressed assets, reorganizing companies, etc. Capture synergies with alliance partner MAX-REALTY Tell us about your business directions for the year ending December 31, Kawashima: Strengthening Group management will be AUM volume 5

7 Management Interview our overriding theme for next year. To this end, we will seek to share our awareness of conditions, expertise and issues among Group companies even more intimately than we have in the past. We will extend this level of sharing, which already takes place among company presidents, to the general manager level. By increasing the amount of information available to younger employees, we expect to provide additional advancement opportunities. We will also offer new in-house training programs to foster the development of our young human resources and enhance personnel skill levels. Homma: Raising the quality of our human resources is an essential part of building our AM business. We intend to start through training to boost the skills of existing human resources, and then to augment these effects by adding personnel. Although our policy of operating with a lean staff remains unchanged, new talent is becoming available as companies go out of business or pull out of areas of competition. This situation presents an opportunity for us. Are you expecting a return to the black? Kawashima: Assiduously adding new AM contracts is the key to ensuring that our revenue base improves steadily. Some of our client investors are also forming new funds, and investors from other parts of Asia are showing interest in Japan. Targeting these investors, we plan to form new funds with superior properties, such as office buildings and commercial facilities. Assuming that the real estate investment market does not go back into a tailspin, causing further losses on property valuation and disposal, we expect to generate net income of 0.4 billion in the year ending December 31, Homma: As I mentioned earlier, to stage a recovery in AM, we need to generate multiple fees from the market. Do you have any closing remarks for your shareholders? Kawashima: We apologize sincerely for not having been able to pay dividends for two years in a row. We will do our utmost to return to the black in the upcoming year, and we intend to generate appropriate revenues to allow us to pay dividends as soon as possible. I ask our investors for their ongoing support as we work toward these goals. Homma: I would like to emphasize that the size of the Japanese real estate asset management market is certain to increase. After the dust from last year s financial crisis settles, the survivors will pick up the pieces. The upcoming year should be a time of optimism for investors. 6

8 Management Discussion Beginning with Financial Soundness, Successfully Addressing Management Issues One by One During the year ended December 31, 2009, Kenedix booked its largest losses ever. Even under these conditions, the Asset Management Department succeeded in steadily increasing assets under management (AUM), and the Finance & Accounting Department and the Corporate Planning Department took on the responsibility of restructuring the balance sheet from the equity side. Despite a difficult financial environment, the Group managed to repay its debts to financial institutions and raise new funds through public subscription, which significantly improved the Group s financial health. Further balance sheet restructuring is a key point of future focus. Against this background, we asked Taiji Yoshikawa, Kenedix Director and General Manager of the Corporate Planning Department, about the Company s activities in the year ended December 31, 2009, and strategies for the year ending December 31, Two Focuses: Reducing Interest-Bearing Debt by Disposing of Properties and Refinancing Taiji Yoshikawa, Director What were some highlights of this year s efforts to restructure the balance sheets? Yoshikawa: One thrust of these activities was to dispose of as much of the Group s real estate as possible, given the illiquid state of the real estate market, and to use the cash generated by the sales to reduce interest-bearing debt. Specifically, in June we sold KDX Toyosu Grandsquare, and in November we sold to a Singapore-based REIT a senior care home an asset category having particularly limited liquidity. We also proceeded with the sales of other properties, giving careful consideration to loan redemption periods. This approach was instrumental in allowing us to reduce interest-bearing debt through the disposal of property. Another aspect of our efforts was to refinance short-term loans. One prominent example of these activities was the March 2009 consolidation of two syndicated loans into a single long-term loan totaling approximately 15.8 billion. In an environment in which numerous competitors are going bankrupt, many financial institutions accepted these loan conversions. 7

9 Management Discussion How were you able to make such steady progress with this restructuring? Yoshikawa: One reason is that we have built strong relationships with the financial institutions where we transact business. I believe that this was the reason they responded favorably to our request amid a difficult environment. We received particularly solid support from our main banks, Sumitomo Mitsui Banking Corporation (SMBC) and The Bank of Tokyo- Mitsubishi UFJ, Ltd. (BTMU). I believe this was due in large part to their evaluation of the steady progress the Group has made in the asset management business. Furthermore, even though real estate investment market liquidity is down substantially, we sold a large-scale property to a major fund operated by the Carlyle Group. The group then commissioned us to conduct asset management (Billions of yen) Quantitative and Qualitative Improvements to the Financial Situation Total assets Net assets Interest-bearing debt Net debt Quantitative improvements Qualitative improvements Jun Dec Dec Note: Net debt = interest-bearing debt non-recourse loans cash and cash equivalents operation for the property, which was instrumental in increasing our AUM. I believe that the reason for this growth is that we have gained the support of investors for our business model, which involves raising property values through asset management and guiding them through to disposal. From a financial perspective, one of this year s highlights was resolving the issue of an early redemption of CBs. How did you handle this? Yoshikawa: The call for the early redemption of CBs amounting to as much as 20.0 billion represented a major issue for management, and we worked with the people involved to (Times) 3.0 explore a variety of options. One possibility was to ask the investors holding the bonds to extend the redemption period, but this 2.5 approach would simply have extended our liability period while limiting the 2.0 Group s leeway to develop business and introduce financial strategies. By clearing 1.5 away this management issue, the Group demonstrated to bondholders a vision linked to a longer term growth strategy. Garnering capital market support for our subscription to increase capital came to a successful conclusion, as 95% of investors subscribed to this conversion. Net DE ratio (right) 1.42 Clearing away the Issue of Accelerated CB Redemption and Raising Substantial Funds from Financial Institutions 0.0 8

10 Management Discussion A capital subscription to replace the CBs, which amounted to 20.0 billion in interest-bearing debt, plus 2.1 billion in new CBs, allowed us to boost our capital. KDAM, a new AM supervisory company, raised about 14.0 billion from financial institutions. What is the purpose of these loans? Yoshikawa: Even though the Group as a whole is reducing its interest-bearing debt, around billion remains. As we progress with our Medium-Term Management Plan, we have no plans to increase borrowings to acquire property beyond this level. At the same time, it is essential to maintain as working capital a certain amount of on-hand liquidity through loans. Cash provides a certain degree of maneuverability that can generate trust. We believe that SMBC and the other financial institutions that provided these loans did so in part because they understood the importance of improving our financial strength and saw the value of our Group in operating as an independent real estate management company. The Financial Case for Revising the Medium-Term Management Plan What is your outlook for the financial environment in the upcoming year? Yoshikawa: Responding first from a micro perspective, the fund-raising environment has improved substantially, as has been evident from our ability to overcome the issues presented by the early redemption of CBs and the financing we secured through SMBC and other leading financial institutions. In particular, refinancing negotiations progressed smoothly. I believe that the financial measures that went into place this year are part of a virtuous cycle that will bear fruit as we move into the upcoming year. From a macro perspective, on the other hand, the general consensus seems to be that financial institutions are still very reluctant to lend funds, although there are some indications that the worst is over in this regard. In the current real estate investment market, J-REIT subscriptions are beginning to rise again, accompanied by the commencement of property acquisitions. Evaluating all of these factors together, real estate investment market liquidity appears likely to improve this year. Please outline next year s financial strategies. Yoshikawa: We plan to maintain the current focus of our financial strategies next year, without accounting for expected improvements in the real estate investment market. Specifically, we are working now to accumulate a provision that will allow us to redeem a scheduled 15.0 billion in straight bonds this November. Next, the 15.8 billion loan that we refinanced on a 15-month term last March will come due in June We hope to elicit the cooperation of SMBC and BTMU to smoothly refinance this loan. We intend to keep reducing interest-bearing debt by selling off properties and to keep restructuring our balance sheet. However, as the revisions to our Medium-Term Management Plan suggest, next year we will not rush to dispose of properties. Rather, we will steadily pursue this goal by selling properties when market conditions are appropriate and keeping financing in place for a certain period. 9

11 2009 TOPICS Decision to Sponsor Reorganization of Pacific Holdings Group 2009 Jul. Aug. A court decision to commence the corporate reorganization of three companies in the Pacific Holdings Group (Pacific Holdings, Inc., Pacific Realty Corporation and Pacific Properties Investment, Inc.) was handed down on March 31, 2009, and on September 30 Kenedix entered into an agreement with the trustee for corporate reorganization of the three companies for negotiating rights to support their reorganization. On December 15, Kenedix concluded a basic sponsorship contract. Under this agreement, a foreign investment company became the majority investor, and Kenedix was designated the minority investor, as well as the manager of the real estate assets held by the three companies. In this role, Kenedix provides guidance on raising the value of and disposing of real estate, thereby maximizing returns to creditors and helping to enhance the future value of the properties. In addition to helping reorganize the three companies, Kenedix considers the agreement a way to increase its assets under management and build a stable revenue structure. Sep. Oct. Nov. Dec. Financial Health Enhanced through Capital Subscription and CB Conversion Offering Kenedix received notification from its bondholders of a request for the early redemption (exercisable in December 2009) of 20.0 billion in CBs (euroyen-denominated convertible bonds with stock acquisition rights) due in In accordance with this request, the Company implemented an additional capital subscription and floated a CB conversion offering. As a result, Kenedix raised approximately 18.1 billion in additionally subscribed capital and succeeded in converting CBs worth approximately 19.0 billion, allowing the early redemption to proceed apace. Through this combined expansion of shareholders equity and CB redemption, Kenedix succeeded in addressing some of the management issues it faced and made progress toward enhancing the Company s financial health and stability, objectives of its Medium-Term Management Plan. KDAM Raises Funds Kenedix Asset Management, Inc. (KDAM), established in October 2009 as part of Group reorganization of the asset management business, received financing of approximately 14.0 billion (five-year loan) from the Company s principal financial institutions. KDAM employed these funds to acquire shares of KDRM and KDA. This move placed the two companies firmly under KDAM s corporate umbrella and helped create an organization to specialize in asset management. 10

12 Consolidated Financial Statements Consolidated Balance Sheets Account title Current period As of December 31, 2009 (Millions of yen) Previous period As of December 31, 2008 Assets 218, ,149 Current assets 98, ,041 Cash and cash equivalents 18,291 11,872 Deposits held in trust 4,916 8,958 Accounts receivable trade 1, Inventories 209,255 Land and buildings for sale 63,909 Land and buildings for sale in progress 2,461 Note receivable (loan pool) 3,210 5,259 Income tax receivable 1,191 5,304 Deferred tax assets Others 3,265 3,037 Allowance for doubtful accounts (137) (125) Fixed assets 120,066 28,108 Tangible assets 98, Intangible assets 275 1,510 Investment and other assets 21,647 26,412 Investment securities 19,047 23,646 Investment in capital Long-term loans 869 1,153 Deferred tax assets Others 1,570 1,323 Allowance for doubtful accounts (300) (32) Total assets 218, ,149 Account title Current period As of December 31, 2009 (Millions of yen) Previous period As of December 31, 2008 Liabilities 164, ,591 Current liabilities 91, ,582 Accounts payable trade Short-term borrowings 16,898 63,712 Long-term borrowings due within one year 48,970 20,117 Corporate bonds due within one year 18,086 5,558 Accured income taxes Security deposits 2,294 7,252 Deferred tax liabilities 1,722 1,725 Others 2,575 2,103 Long-term liabilities 72, ,009 Bonds payable 8,553 40,236 Long-term borrowings 60,529 73,181 Silent partnership contribution received 233 Deferred tax liabilities 7 1 Allowance for employees retirement benefits Security deposits 3,067 Others Net assets 54,525 57,558 Shareholders equity 47,751 47,751 Capital 23,787 14,591 Capital surplus 24,046 14,850 Consolidated retained earnings 5 18,439 Treasury stock (88) (130) Valuation and translation adjustments (1,009) (1,012) Net unrealized holding gains on other securities 31 (24) Deferred hedge gains/losses (3) Foreign currency translation and adjustments (1,038) (988) Minority interests 7,784 10,819 Total liabilities and net assets 218, ,149 11

13 Consolidated Financial Statements Consolidated Statements of Income (Millions of yen) Consolidated Statements of Cash Flows (Millions of yen) Account title Current period From January 1, 2009 to December 31, 2009 Previous period From January 1, 2008 to December 31, 2008 Account title Current period From January 1, 2009 to December 31, 2009 Previous period From January 1, 2008 to December 31, 2008 Revenue 77, ,431 Net cash (provided by) used in operating activities 54,553 (56,864) Cost of revenue 64, ,018 Net cash used in investing activities (10,980) (9,438) Gross profit 13,514 22,413 Selling, general and administrative expenses 5,080 6,145 Operating income 8,433 16,267 Non-operating income Non-operating expenses 8,521 11,397 Ordinary income 225 5,316 Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Decrease in cash and cash equivalents resulting from changes in scope of consolidation (37,809) 44,094 (50) (179) 5,712 (22,388) 16,281 44,962 (328) (6,293) Extraordinary income 249 1,160 Cash and cash equivalents at end of period 21,665 16,281 Extraordinary loss 17,046 11,804 Loss before provision for income taxes and profit distribution to silent partnerships 16,572 5,326 Profit distribution to silent partnerships (6) 74 Loss before provision for income taxes Corporation tax, inhabitant tax and enterprise tax Reversal of income taxes for previous period 16,566 5,401 1,048 1,895 (183) Adjustment of corporation tax, etc. 40 1,997 Minority interests 783 1,739 Net loss 18,438 10,850 12

14 Corporate Profile (As of December 31, 2009) Corporate Profi le Company Information Officers Company name: Kenedix, Inc. Chairman: Founded: April 17, 1995 President: Address: Head office at 2-2-9, Shimbashi, Director: Director: Minato-ku, Tokyo, Director: Capital: 23,787,345,383 Corporate Auditor: Number of employees: 75 (159 on a consolidated basis) Major financial institutions: Sumitomo-Mitsui Banking Corporation The Bank of Tokyo-Mitsubishi UFJ, Ltd. Mizuho Bank, Ltd. Resona Bank, Ltd. The Chuo Mitsui Trust and Banking Co., Ltd. Corporate Auditor: Corporate Auditor: Corporate Auditor: Corporate Auditor: Executive Officer: Executive Officer: Executive Officer: Aozora Bank, Ltd. Executive Officer: Executive Officer: Ryosuke Homma Atsushi Kawashima Taiji Yoshikawa Hiroo Shibaoka Noboru Kashiwagi Eiji Kubota Harutaka Hamaguchi Shintaro Kanno Haruo Funabashi Tamon Ohmura Akira Tanaka Eisuke Fujii Keizo Katayama Kenichi Yamasaki Soushi Ikeda Major Affiliates Website Kenedix Advisors Co., Ltd. Kenedix REIT Management, Inc. Kenedix Asset Management, Inc. Mitsui & Co. Logistic Partners Ltd. Kenedix Development Corporation Pacific Servicing & Asset Management Co., Ltd. Asset One Co., Ltd. CRES CO., LTD. Kenedix Westwood, LLC KW Multi-Family Management Group, LLC 13

15 Shareholder Information (As of December 31, 2009) Shareholder Information Number of Shares Issued and Shareholders Total number of authorized shares: 1,400,000 Number of shares outstanding: 1,211,982 Number of shareholders: 26,037 Major Shareholders (Top 10) Name of Shareholder Shares held Shareholding (%) Goldman Sachs and Company Regular Account JP Morgan Chase Oppenheimer JASDEC Lending Account 65, , The Chase Manhattan Bank , The Master Trust Bank of Japan, Ltd. (trust account) UBS AG London A/C IPB Segregated Client Account 47, , Japan Securities Finance Co., Ltd. 40, Bank of New York. GCM Client Account JPR DISG FEAC Japan Trustee Services Bank, Ltd. (trust account) Rabobank International Equity Finance Account 36, , , Mellon Bank, N.A.Treaty Client Omnibus 19, Distribution of Shares in Terms of Category of Holder Securities companies 37,202 (3.07%) Other domestic companies 18,435 (1.52%) Individual foreigners 591 (0.05%) Memorandum for Shareholders Business year: January 1 to December 31 Ordinary General To be held in March every year Meeting of Shareholders: Record date: December 31 every year (When otherwise required, a date to be determined and announced in advance) Share handling locations Transfer agent: Mailing address: Telephone inquiries: Public announcements The Chuo Mitsui Trust and Banking Co., Ltd. 33-1, Shiba 3-chome, Minato-ku, Tokyo The Chuo Mitsui Trust and Banking Co., Ltd. Stock Transfer Agency Division 8-4, Izumi 2-chome, Suginami-ku, Tokyo, (Toll free in Japan) Transfer agent services are provided at all nationwide branches of The Chuo Mitsui Trust and Banking Co., Ltd., and the head office and all nationwide branches of Japan Securities Agents, Ltd. Notices will be posted in electronic format on our Internet web page ( However, notices will be published in the Nihon Keizai Shimbun when it is impossible to make electronic notification for unavoidable reasons. Individual persons/others 436,789 (36.04%) Foreign companies 530,301 (43.75%) Financial institutions 188,664 (15.57%) Note: The category Individual persons/others includes shares in the name of Japan Securities Depository Center. 14

16 KDX Building, 2-2-9, Shimbashi, Minato-ku, Tokyo , Japan