AEON REIT Investment Corporation

Transcription

1 AEON REIT Investment Corporation 3 rd Fiscal Period Ended July 2014 Materials for Investor Meeting September 17, 2014 Securities Code: Asset Manager: AEON Reit Management Co., Ltd.

2 Table of Contents I. Overview of Operations in 3 rd Fiscal Period Ended July 31, Summary of Financial Results for 3 rd Fiscal Period Ended July 31, 2014 P Trends of Major Indicators P Topic 1: Completion of First JREIT Acquisition of Overseas Properties P Topic 2: Expansion of Companies with Which Support Agreements Are Concluded P Topic 2: Expansion of Companies with Which Support Agreements Are Concluded (Company Outlines) P Trend of Investment Unit Price P Portfolio Data P Portfolio Map P Portfolio List P Performance of Properties in Portfolio (1) P Performance of Properties in Portfolio (2) P Performance of Properties in Portfolio (3) P Financial Highlights (1) P Financial Highlights (2) P Forecasts for 4 th Fiscal Period Ending January 31, 2015 and 5 th Fiscal Period Ending July 31, 2015 P Roadmap for Growth P. 19 II. AEON REIT s Investment Strategy 1. Basic Philosophy P Basic Policy P A Highly Stable Portfolio Centered on the Aeon Group s LargeScale Retail Properties P Strategic Cash Management and a Stable Financial Position P Framework for Maximizing Unitholder Value P. 25 Appendix P. 26 2

3 I. Overview of Operations in 3 rd Fiscal Period Ended July 31, 2014

4 Summary of Financial Results for 3 rd Fiscal Period Ended July 31, 2014 Jan Period July 2014 Period July 2014 Period Major Reasons for Difference During 3 rd Period (vs. Previous Period) 2 nd Period Results 3 rd Period Results vs. Previous Period 3 rd Period Forecast vs. Forecast (A) (B) (B A) (C) (B C) Mainly due to the difference between the number of operating days and the depreciation accounting period for assets, etc. Operating Revenue Operating Expenses (millions of yen) (millions of yen) 2,773 7,420 4,646 7, ,572 4,615 3,043 4,613 2 Number of operating days 2 nd period: 71 days, 3 rd period: 181 days Depreciation accounting period for assets, etc. 2 nd period: 3 months, 3 rd period: 6 months Expenses Related to Rent Business (millions of yen) 1,439 4,163 2,723 4, Major Reasons for Difference During 3 rd Period (vs. Forecast) (Of Which, Depreciation) Operating Income Ordinary Income Net Income (millions of yen) (millions of yen) (millions of yen) (millions of yen) 1,111 2,230 1,119 2, ,201 2,805 1,603 2,807 (2) 761 2,338 1,577 2, ,337 1,577 2,331 6 Difference in operating expenses Increase in expenses related to rent business [+25] Increase in unplanned repairs and maintenance Increase in depreciation from capital expenditures [+16] Decrease in other operating expenses [ 25] Decrease in IR expenses and experts compensations Distributions per Unit (yen) 686 2,461 1,775 2, Number of Investment Units Issued (units) 950, , ,000 Difference in ordinary income Increase in nonoperating income [+1] Interest on refund of consumption taxes Decrease in nonoperating expenses [ 4] Decrease in interest expenses 4

5 Trends of Major Indicators Asset size (based on acquisition price) 資産規模 ( 取得価額ベース ) ((billions 億円 ) of yen) Aggregate market value at end of period (billions of yen) NOI from leasing activities (millions of yen) 6,000 5,000 5, , ,000 2, ,000 1,000 0 Jan 2014 Period (2nd Period) July 2014 Period (3rd Period) 0 Jan 2014 Period (2nd Period) July 2014 Period (3rd Period) 0 Jan 2014 Period (2nd Period) July 2014 Period (3rd Period) 1 Distributions 口当たり分配金 per( 円 unit ) (yen) 1 口当たりNAV ( 円 ) ( 注 ) per unit (Note) (yen) 3,000 2,461 2,440 2, , , ,635 2, ,000 1, ,000 0 Jan 2014 Period (2nd Period) July 2014 Period (3rd Period) Jan 2015 Period (4th Period Forecast) July 2015 Period (5th Period Forecast) 0 Jan 2014 Period (2nd Period) July 2014 Period (3rd Period) Note: NAV (Net asset value) per unit = (Total unitholders capital at end of period + Unrealized profit or loss of the whole portfolio at end of period) / Number of total investment units issued at end of period 5

6 Topic 1: Completion of First JREIT Acquisition of Overseas Properties M1 AEON Taman Universiti Shopping Centre Acquisition Date 1 June 25, 2014 Acquisition Price 2 Appraisal Value 2 20,000,000 RM ( 658 million) (Coownership interest of 18.18% of the total) 20,000,000 RM ( 645 million) (Coownership interest of 18.18% of the total) NOI Yield 3 6.7% Address Lot 49045, Mukim Pulai, Daerah Johor Bahru, Negeri Johor, Malaysia Date of Construction May 30, 2002 Lot Area 35,070 m 2 Total Floor Area 22,870 m 2 Tenant AEON CO. (M) BHD. Southeast Asia (Malaysia) Malaysia (Johor Bahru) Johor Bahru (Property location) Notes: 1.The date on which the registration procedures were completed, after obtaining approvals, etc., from the state government with jurisdiction in Malaysia. AEON REIT acquired trust beneficiary rights issued by the following process. AEON CO. (M) BHD., which owns the entire abovementioned property located in Malaysia, transferred the rights similar to the coownership interest (18.18% of the total) to AEON REIT while simultaneously concluding the declaration of trust with itself as the trustee, and originating a trust with the rights similar to the coownership interest as the trust property. 2.RM refers to the Malaysian Ringgit and Acquisition Price in Japanese yen is the total yen amount of the considerations actually paid in Japanese yen by AEON REIT to AEON CO. (M) BHD. over several times (excluding transaction fees and other various costs, rounded down to the nearest unit). The weighted average exchange rate calculated from the exchange rates applied at each payment was to 1 RM, rounded down to the nearest hundredth. Appraisal Value was converted to Japanese yen based on the exchange rate as of the end of the fiscal period (July 31, 2014; 1 RM = 32.27; rounded down to the nearest hundredth). 3.Calculated by dividing NOI (coownership interest; 18.18% of the total), which was obtained using the standard income approach (investment method) applied to real estate for investment in Malaysia, and was contained in the relevant appraisal report, by the acquisition price (rounded to the nearest tenth). 6

7 Topic 2: Expansion of Companies with Which Support Agreements Are Concluded Utilizing the Aeon Group s collective strengths, we expanded the number of companies with which we concluded support agreements (pipeline support agreements and shopping center management agreements) to further strengthen external growth Sponsor support agreement Trademark license agreement Sponsor AEON CO., LTD. AEON REIT Investment Corporation AEON Reit Management Co., Ltd. Stable growth of our portfolio over the medium to long term Pipeline support agreement Shopping center management agreement Pipeline support companies Shopping center management support companies AEON Retail Co., Ltd. AEON Mall Co., Ltd. Memorandum of understanding on investments in properties in Malaysia Overseas support company AEON CO. (M) BHD. Pipeline Support Agreement Major support terms Provision of information on properties owned Grant of preferential negotiating rights on the retail properties operated by the support companies Provision of information on the potential sale of properties owned by third parties Consideration for having a store or other as a tenant in any of AEON REIT s properties Provision of warehousing services (temporary possession of properties to be acquired) Advice on investment strategy and property acquisition by the support companies Coownership (kyōyū or jun kyōyū) of any property with AEON REIT Cooperation to ensure the sufficiency of human resources AEON Hokkaido Corporation AEON KYUSHU CO., LTD. AEON RYUKYU CO., LTD. AEON TOWN Co., Ltd. Added in 3 rd period Utilize the Aeon Group s collective strengths Shopping Center Management Agreement Operational provision from the Aeon Group Research on individual properties Advice on and backup services for the management of individual properties Activation and redevelopment of individual properties in the medium to long term 7

8 Topic 2: Expansion of Companies with Which Support Agreements Are Concluded (Company Outlines) AEON Hokkaido Corporation AEON KYUSHU CO., LTD. AEON RYUKYU CO., LTD. AEON TOWN Co., Ltd. Location Shiroishi Ward, Sapporo City, Hokkaido Hakata Ward, Fukuoka City, Fukuoka Shimajiri County, Okinawa Mihama Ward, Chiba City, Chiba Segment in Aeon Group (contents of business) GMS Business (general merchandise store, etc.) GMS Business (general merchandise store, etc.) GMS Business (general merchandise store, etc.) Shopping Center Development Business Month and year of establishment April 1978 June 1972 March 1975 June 1992 Paidin capital 6,100 million 3,144 million 360 million 100 million Operating revenue (most recent fiscal period) billion billion 67.6 billion N/A Number of stores Listed Listed on Tokyo Stock Exchange first section and Sapporo Securities Exchange Listed on Tokyo Stock Exchange JASDAQ market 124 (shopping centers operated) Main properties held/operated Note: AEON REIT has no plans to acquire any of the properties shown above as of the date of these materials. 8

9 Trend of Investment Unit Price AEON REIT Investment Unit Price and Trading Volume (Yen) 150,000 Trading Volume (Right axis) 140,000 AEON REIT Investment Unit Price (Left axis) (Units) 50,000 40, ,000 30, ,000 20, ,000 10, ,000 Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug Comparison between AEON REIT Investment Unit Price and TSE REIT Index 140 AEON REIT TSE REIT Index Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 Jun 2014 Jul 2014 Aug 2014 Note: The AEON REIT investment unit price and the TSE REIT Index are compared with the closing price on the AEON REIT s listing date set at

10 Portfolio Data Portfolio Highlights Portfolio properties Total acquisition price 2 Book value at end of period Appraisal value bn 157.1bn 167.8bn Average building age 1 Average remaining lease term 3 Properties with master lease contracts Unrealized profit (Appraisal value book value at end of period) 10.5 years 19.3 years 100% bn (+ 2.0bn vs. previous period) Distribution of Portfolio Property type SRSC RSC 17.6% 82.4% Region Hokkaido and Tohoku Kanto Tokai, Hokuriku and Chubu 11.3% Kinki Chugoku and Shikoku Kyushu Malaysia Investment AEON LakeTown mori 13.3% AEON MALL Kurashiki 11.3% AEON MALL Mitouchihara 10.4% AEON MALL Kumamoto 8.8% AEON MALL Nogata 7.1% AEON Sagamihara 6.4% AEON MALL Suzuka 6.1% AEON MALL Ayagawa 5.5% AEON MALL Hiezu 4.9% AEON MALL KasaiHojo 4.5% Other 21.7% Notes: 1. Calculated as the weighted average age of the building based on the acquisition price as of July 31, The acquisition price is the amount (the sale and purchase price, etc., shown on the sale and purchase agreement, etc.) excluding expenses incurred on the acquisition of each property (commission, taxes and dues, etc.). 3. Remaining lease term as of July 31, Appraisal value as of July 31, % 38.7% 4.5% 21.6% 15.9% 0.4% 10

11 Portfolio Map Malaysia AEON Taman Universiti Shopping Centre Hokkaido and Tohoku Tokai, Hokuriku and Chubu AEON MALL Morioka AEON MALL Ishinomaki Kinki, Chugoku and Shikoku AEON MALL Ogaki AEON MALL Suzuka AEON MALL KasaiHojo AEON MALL Hiezu AEON MALL Meiwa Kanto AEON MALL Ayagawa AEON MALL Kurashiki Kyushu AEON LakeTown mori AEON LakeTown kaze AEON MALL Nogata AEON MALL Kumamoto Shopping Center AEON MALL Mitouchihara AEON MALL AEON Ota Sagamihara 11

12 Portfolio List Property number Property name Location Leasable area Acquisition price Portfolio composition Book value at end of period Appraisal value 1 Unrealized profit (loss) 2 Capitalization rate 3 NOI 4 PML 5 (m2) (Millions of yen) (%) (Millions of yen) (Millions of yen) (Millions of yen) (%) (Millions of yen) (%) Acquistion date SRSC1 AEON LakeTown mori 6 Koshigaya City, Saitama November , , % 20,934 22,100 1, % % SRSC2 AEON LakeTown kaze 6 Koshigaya City, Saitama November , , % 6,624 7, % % RSC1 AEON MALL Morioka Morioka City, Iwate November , , % 5,264 5, % % RSC2 AEON MALL Ishinomaki Ishinomaki City, Miyagi November , , % 6,623 7, % % RSC3 AEON MALL Mitouchihara Mito City, Ibaraki November , , % 16,293 17,300 1, % % RSC4 AEON MALL Ota Ota City, Gunma November , , % 6,775 7,820 1, % % RSC5 AEON Sagamihara Shopping Center Sagamihara City, Kanagawa November , , % 10,208 10, % % RSC6 AEON MALL Ogaki Ogaki City, Gifu November , , % 4,837 5, % % RSC7 AEON MALL Suzuka Suzuka City, Mie November , , % 9,596 10, % % RSC8 AEON MALL Meiwa Taki County, Mie November , , % 3,276 3, % % RSC9 AEON MALL KasaiHojo Kasai City, Hyogo November , , % 7,136 7, % % RSC10 AEON MALL Hiezu Saihaku County, Tottori November , , % 7,632 8, % % RSC11 AEON MALL Kurashiki Kurashiki City, Okayama November , , % 17,691 18,700 1, % % RSC12 AEON MALL Ayagawa Ayauta County, Kagawa November , , % 8,545 9, % % RSC13 AEON MALL Nogata Nogata City, Fukuoka November , , % 11,122 12,800 1, % % RSC14 AEON MALL Kumamoto Kamimashiki County, Kumamoto November , , % 13,905 14, % % 1,682, , % 156, ,190 10,720 5, % June , [ 20 million RM ] 0.4 % 713 [ 21 million RM ] 645 [ 20 million RM ] (68) [ (1 million) RM ] % Overseas Subtotal 22, % (68) % Total 1,705, , % 157, ,835 10,652 5,488 Domestic Subtotal M1 AEON Taman Universiti Shopping Centre 7 Johor, Malaysia Notes: Appraisal value shown on the appraisal report of each property as of the valuation date of July 31, Unrealized profit (loss) = Appraisal value Book value at end of period Capitalization rate using the direct capitalization method. NOI = Real estate leasing business revenue Real estate leasing business expenses + Depreciation Each property undergoes a seismic risk analysis to forecast the loss rate related to damage from the recurrence of an earthquake during a 475 year period. The number for Domestic Subtotal is not an average, but rather the PML value for the whole domestic portfolio. 6. Acquisition price, Book value at end of period, Appraisal value, Unrealized profit (loss), and NOI describe AEON REIT s prorata portion of the quasicoownership interest (jun kyōyūmochibun) in the trust beneficiary rights (40% for each property). 7. Acquisition price, Book value at end of period, Appraisal value, Unrealized profit (loss), and NOI describe AEON REIT s portion of the amount equivalent to the rights (18.18%) similar to the coownership interest (kyōyūmochibun) of the trust property for which the rights were transferred from AEON CO. (M) BHD., which holds the whole property. 12

13 Performance of Properties in Portfolio (1) 120% The properties in our portfolio have stable sales and occupancy rates YoY Sales Comparison 1 of End Tenants in 17property Portfolio 110% 100% 90% 96.8% 106.8% 103.9% 106.0% 113.2% 97.6% 98.0% 97.4% 100.4% 102.9% 102.2% 99.2% 103.9% 80% Mar May 2011 Jun Aug 2011 Sep Nov 2011 Dec 2011 Feb 2012 Mar May 2012 Jun Aug 2012 Sep Nov 2012 Dec 2012 Feb 2013 Mar May 2013 Jun Aug 2013 Sep Nov 2013 Dec 2013 Feb 2014 Mar May % Actual EndTenant Occupancy Rate 2 in 17property Portfolio 99% 98% 97% 96% 95% 99.3% 99.4% 99.5% 99.5% 99.8% 99.7% 99.8% 99.9% 99.9% 99.7% 99.9% 99.9% 99.6% May 2011 Aug 2011 Nov 2011 Feb 2012 May 2012 Aug 2012 Nov 2012 Feb 2013 May 2013 Aug 2013 Nov 2013 Feb 2014 May 2014 Notes: 1. The total amount of sales of end tenants of the 17 portfolio properties for the four periods of March May, June August, September November and December February each year as a percentage of sales for the same periods of the previous year 2. The percentage of total leased area in the 17 portfolio properties that is actually occupied by end tenants (including area in which end tenants have committed to opening stores) 3. Yearonyear sales comparisons and the actual occupancy rates shown above are data based on interviews of master lease companies. The percentage of properties with master lease contracts is 100%. 4. Yearonyear sales comparisons and the actual occupancy rates shown above have been rounded to the nearest tenth of a percent. 13

14 Performance of Properties in Portfolio (2) Rent Revenue at Master Lease Companies 1 of 17 Properties in Portfolio (Billions of yen) Rent revenue (billions of yen) Indexed YoY comparison % 102.8% 105.4% 105.2% 112.9% 103.1% 99.4% 102.7% 102.5% 103.2% 103.6% 100.5% 104.3% 120% 100% % 60% % % 0.0 Mar May 2011 Jun Aug 2011 Sep Nov 2011 Dec 2011 Feb 2012 Mar May 2012 Jun Aug 2012 Sep Nov 2012 Dec 2012 Feb 2013 Mar May 2013 Jun Aug 2013 Sep Nov 2013 Dec 2013 Feb 2014 Mar May % Mar Feb (12month period) 43.1 billion (YoY) 102.3% Mar Feb (12month period) 45.0 billion (YoY) 104.3% Mar Feb (12month period) 46.0 billion (YoY) 102.4% Notes: 1.Revenue such as rent income and income incidental thereto received by the master lease company from end tenants 2.The rent revenue figures above are data based on interviews of master lease companies. 3.The indexed YoY comparison figures above have been rounded to the nearest tenth of a percent. 4.Rent revenue from AEON Taman Universiti Shopping Centre is converted to Japanese yen based on the exchange rate as of the end of July 2014 (1 RM = 32.27; rounded down to the nearest hundredth). 14

15 Performance of Properties in Portfolio (3) Distribution of YoY Indexed Sales Growth for six months of End Tenants by Property 1 Sales Trends of Individual Properties for December 2013 May Average of 17 properties in ARI portfolio % Yearonyear sales index <90% 90% 95% 95% 100% 100% 105% 105% 110% 110% % of total 29.4% 52.9% 17.6% 0 Notes: 1. Sales of each property for Dec May 2014 are expressed as a percentage of sales for the same period a year earlier (Dec May 2013). 2. The yearonyear sales index above presents data based on interviews of master lease companies. 3. The figures in the yearonyear sales index above have been rounded to the nearest tenth of a percent. As a result, the total amount may not always total 10. Percentage of properties with sales index of 100% or higher: 70.6% (Reference) Consumer Confidence Index (Households of two or more persons, seasonally adjusted series) July 2014: Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Source: Consumer Confidence Survey by Department of Business Statistics, Economic and Social Research Institute, Cabinet Office of Japan Note: Changed to the postal survey method starting with the survey for April Until the survey for March 2013, surveys were carried out by the directvisit and selfcompletion questionnaires method (with telephone surveys at certain times)

16 Financial Highlights (1) Trend in Major Financial Indicators Longterm, Stable Debt Structure 2 nd Period (January 31, 2014) 3 rd Period (July 31, 2014) Shortterm loans payable Longterm loans payable Tenant leasehold and security deposits 4,000 million million 63,000 million 63,000 million 7,411 million 7,411 million Fixed 固定金利比率 rate 85.7% Floating 変動金利比率 rate 14.3% Total debt 74,411 million 70,411 million LTV (LTV excluding 43.4% (39.0%) 41.4% (37.1%) leasehold deposits) (Note) Average time to maturity Average interest rate on borrowings 5.2 years 5.0 years 0.92% 0.95% 長期負債比率 Longterm 10 Note: LTV = Total interestbearing debt plus tenant leasehold and security deposits (including tenant leasehold and security deposits in trust) / Total assets that AEON REIT holds

17 Financial Highlights (2) Debt Snapshot Bank consortium led by Mizuho Bank, Sumitomo Mitsui Banking Corporation and Sumitomo Mitsui Trust Bank Amount Term (billions of yen) Borrowing date Repayment due date Interest rate Longterm 63.0 Breakdown November 25, 2013 (Initial borrowing term 3 years) November 25, 2013 (Initial borrowing term 5 years) November 25, 2013 (Initial borrowing term 7 years) November 25, 2013 (Initial borrowing term 10 years) October 20, 2016 October 22, 2018 October 20, 2020 October 20, 2023 Floating (base rate %) Effective fixed rate % Effective fixed rate % Effective fixed rate % Notes: 1. Refers to the Japanese yen TIBOR released by the Japanese Bankers Association; provided, however, that if there is no corresponding time period, it refers to the interest rate reasonably set by the agent by the straightline method. 2. While funds are borrowed at floating rates, the interest rates are fixed in effect by entering into interest rate swap agreements to hedge interest rate fluctuation risk. The figures are the interest rates calculated after taking into consideration the effect of interest rate swaps. Distribution of Maturities 9.0bn 27.0bn 22.0bn 5.0bn 5% 8% 3% Mix of Lenders 3% 3% 2% 2% 2% 3% 8% 8% 11% Credit Rating 16% Japan Credit Rating Agency, Ltd. (JCR) Longterm Issuer Rating 14% 13% Mizuho Bank Sumitomo Mitsui Banking Corporation Sumitomo Mitsui Trust Bank Bank of TokyoMitsubishi UFJ The Norinchukin Bank Mizuho Trust & Banking Co. Mitsubishi UFJ Trust & Banking Corporation Resona Bank AEON BANK Development Bank of Japan The Hyakugo Bank The Mie Bank The Chiba Bank The 77 Bank Hiroshima Bank AA (Stable)

18 Forecasts for 4th Fiscal Period Ending January 31, 2015 and 5th Fiscal Period Ending July 31, 2015 July 2014 Period Jan Period Major Reasons for Difference During 4th Period (vs. 3rd period) July 2015 Period 3rd Period Results 4th Period Forecasts vs. 3rd Period 5th Period Forecasts vs. 4th Period (A) (B) (B A) (C) (C B) Operating Revenue (millions of yen) 7,420 7,418 (2) 7,418 0 Operating Expenses (millions of yen) 4,615 4, , (millions of yen) 4,163 4, , Expenses Related to Rent Business Difference in operating revenue (Of Which, Depreciation) (millions of yen) 2,230 2, , Operating Income (millions of yen) 2,805 2,784 (20) 2,764 (19) Ordinary Income (millions of yen) 2,338 2,325 (12) 2,315 (10) (millions of yen) 2,337 2,319 (18) 2,307 (11) Fullperiod revenue contribution from Taman Decrease in rent that varies in line with property tax fluctuation Difference in operating expenses Increase in expenses related to rent business [+6] Decrease in repairs and maintenance expenses Increase in depreciation from capital expenditures [+18] Major Reasons for Difference During 5th Period (vs. 4th period) Net Income Decrease in real estate rent revenue [ 2] Difference in operating expenses Increase in expenses related to rent business [+18] Distributions per Unit (yen) 2,461 2,440 (21) 2,430 Number of Investment Units Issued (units) 950, , ,000 (10) Increase in depreciation from capital expenditures [+14] Note: The above performance is an estimation determined based on certain assumptions as of September 11, The actual performance may vary due to changes in the circumstances surrounding AEON REIT including acquisition or disposition of properties, the trend of real estate market, etc. in the future. Furthermore, this estimation does not guarantee the amount of distributions. 18

19 Roadmap for Growth Medium to LongTerm Asset Scale Targets By realizing a mutually beneficial relationship with our sponsor, we will aim for assets of 300 billion after three years and 500 billion after five years (Note). End of 2 nd period 3 years after listing 5 years after listing billion billion At time of listing billion Key Measures External growth using the Aeon Group s pipeline Strategic cash management using internal reserves Expansion of overseas investment and diversification of types and regions of properties Management of leverage with LTV in the 40 50% range Note: The figures above are targets made as of the date of these materials and there is a possibility that they may not be realized due to future events or the market environment. 19

20 II. AEON REIT s Investment Strategy

21 Basic Philosophy AEON REIT invests primarily in retail and related properties(note) that are an integral part of the communities in which they are located. We believe that these properties and facilities form the backbone of the local communities and their retail business infrastructure. Our mission is to contribute to the betterment of individual lives and local communities through investment in retail and related properties. In doing so, we seek to generate stable revenues and achieve the steady growth of our asset portfolio over the medium to long term. Note: Refers to retail properties, logistics facilities and related facilities. Retail properties refer to facilities containing retail businesses and other merchandising businesses, entertainment and amusement facilities and other facilities that attract customers (including parking lots and equipment and systems for logistics). Logistics facilities refer to warehouses and other storage facilities for distribution and transport of merchandise and other goods. 21

22 Basic Policy A growth strategy based on a mutually beneficial relationship between AEON REIT and Aeon Group(Note) We will aim to maximize value for unitholders by building a mutually beneficial relationship between AEON REIT and the Aeon Group. 3 Maximize unitholder value/improve asset management stability Improve financing capabilities 1 4 AEON REIT Investment Corporation Acquire retail properties from Aeon Group 2 Expand asset size 1 Sell retail properties to AEON REIT Investment Corporation Invest for growth 2 Aeon Group Operate retail properties 4 Increase profits/ Raise the value of Aeon Group 3 Note: Refers to the group comprising the holding company AEON Co., Ltd. and its 263 consolidated subsidiaries and 31 equitymethod associates (as of February 28, 2014). 22

23 A Highly Stable Portfolio Centered on the Aeon Group s LargeScale Retail Properties Investment Properties Centered on LargeScale Retail Properties and Investment Ratios Investment percentage 1 Type Domestic Overseas 85% or more No more than 15% Retail properties, etc. SRSC (Super regional shopping center) 2 Largescale RSC retail (Regional shopping center) 3 property 80% or more Overseas Investment Targets Investment Areas ASEAN region7, China and other countries/regions with good medium to longterm economic growth prospects Investment Targets In principle, retail properties that are leased in their entirety under master lease contracts to the Aeon Group, which manages and operates the properties Note 7: Indonesia, Malaysia, Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Myanmar and Cambodia CSC (Community shopping center) 4 Other retail property NSC (Neighborhood shopping center) 5 No more than 20% SM (Supermarket) 6 Logistics facility No more than 10% Notes: 1. Calculated based on acquisition price. 2. Larger commercial area than regional shopping centers. A super regionaltype shopping center having a number of anchor tenants and a shopping mall forming a complex of over 200 specialty stores. 3. A regionaltype shopping center having a general merchandise or other similar store as the anchor tenant and a complex of over 50 specialty stores. 4. A retail property having a general merchandise store, a discount store, a large grocery supermarket or another similar store as the anchor tenant, and a complex of approximately specialty stores. 5. A smallscale retail property serving a small commercial area, having a grocery supermarket or another similar store as the anchor tenant and a complex of approximately specialty stores generally selling household goods. 6. A grocery supermarket mainly selling high purchase frequency commodities such as food and household goods. 23

24 Strategic Cash Management and a Stable Financial Position Strategic Cash Management In the largescale retail properties that we target for investment, the depreciation expense accounts for a large percentage of the property value. By deploying internal reserves in an amount equal to the depreciation expense, we plan to increase capital efficiency and stabilize cash flow. (1) Investment contributing to an increase in income (2) Measures aimed at stabilizing financial position (3) Capital strategies that protect unitholder interests a. Appropriation of funds to acquire new properties b. Investing in revitalization of property to boost revenue and competitiveness c. Reduction in the cost of our debt by repayment of interestbearing debt Growth driven by efficient use of capital d. Distributions in excess of retained earnings e. Increased capital efficiency through unit buybacks 1 Note 1: AEON REIT s articles of incorporation provide that it may repurchase its investment units under certain circumstances. This provision in our articles of incorporation will become effective on December 1, 2014, the date on which the amendments to the Act on Investment Trusts and Investment Corporations, which were enacted by the Japanese Diet on June 12, 2013, come into force. Stable Financial Position Policies LTV 2 Maintain leverage with an LTV of 40 50% range Extension of debt maturities & fixing of interest rates Set loan terms according to the status of cash flows based on tenant lease terms and content Mix of lenders Achieve appropriate diversification of different lender financial institutions, primarily megabanks Note 2: LTV = Total interestbearing debt plus tenant leasehold and security deposits (including tenant leasehold and security deposits in trust) / Total assets that AEON REIT holds

25 Framework for Maximizing Unitholder Value Transparent DecisionMaking Process Dropped or instructions given to modify content Drafting of proposal by the responsible department Approval by the Compliance Officer Returned Deliberation and resolution by the Investment Committee* Deliberation and resolution by the Compliance Committee* Report to the Asset Manager s board of directors and AEON REIT Dropped or instructions given to modify content * An outside expert must attend the meeting and agree in order for the resolution to pass. Further Aligning the Interests of Unitholders and the Aeon Group Ownership of investment units by Aeon Group Ownership interest 19.0% (as of July 31, 2014) Coownership of properties with Aeon Group Coowned properties 3 (as of July 31, 2014) Introduction of an Asset Management Fee Structure Linked to Distributions per Unit Management Fee Structure Management fee ManageTotal assets 0.3%1 {No. of operating days / 365} ment fee I ManageDPU before deducting Management fee II NOI %1 ment fee II Implemented in 3rd period Introduction of Cumulative Investment Unit Purchase Program We introduced a program on May 1, 2014, that enables the acquisition of AEON REIT s investment units, using the cumulative investment unit purchase program through securities firms, for directors and employees of AEON REIT and the Asset Manager. The program will help to further raise awareness towards enhancing the value of AEON REIT s investment unit price and improving business performance, and provide greater financial motivation in line with the interests of the unitholders. Calculation Method Acquisition fee Acquisition price 0.5%1 [Related party transactions: Acquisition price 0.25%1] Disposition fee Disposition price 0.5%1 [Related party transactions: no disposition fee paid] Notes: 1. Each rate shown above represents the maximum rate in each fee category. 2. NOI refers to total real estate leasing revenue for the relevant fiscal period less real estate leasing expenses (excluding depreciation and loss on retirement of noncurrent assets). 25

26 Appendix Balance Sheet for 3rd Fiscal Period (as of July 31, 2014) Statement of Income for 3rd Fiscal Period (ended July 31, 2014) Unitholder Information Aeon Group Profile

27 Balance Sheet for 3rd Fiscal Period (as of July 31, 2014) (Assets) Assets I. Current assets 2nd Period 3rd Period As of January 31, 2014 As of July 31, 2014 Difference Amount Percentage Amount Percentage Amount (thousands of yen) (%) (thousands of yen) (%) (thousands of yen) 11,807, % 11,575, % Cash and deposits 2,615, % 7,730, % Cash and deposits in trust 4,364, % 3,558, % 337, % 286, % ,490, % 159,642, % 158,179, % 140,479, % 139,137, % 88,798, % 87,254, % 659, % 626, % 50,903, % 51,257, % 117, % 18,045, % 18,045, % Leasehold rights in trust 18,045, % 18,045, % Investments and other assets 159,642, % 996, % 1,107, % 986, % 10,000 10, , % 158, % 194, % 158, % 171,644, ,913, Prepaid expenses Deferred tax assets Consumption taxes receivable II. Noncurrent assets Property and equipment Buildings in trust Structures in trust Land in trust Construction in progress in trust Intangible assets Longterm prepaid expenses Lease and guarantee deposits III. Deferred assets Investment unit issuance expenses Total assets vs. Previous Period (%) (232,054) (2.0)% (1,463,305) (0.9)% (35,291) (18.2)% (1,730,650) (1.0)% 27

28 Balance Sheet for 3rd Fiscal Period (as of July 31, 2014) (Liabilities and Net Assets) Liabilities I. Current liabilities 2nd Period 3rd Period As of January 31, 2014 As of July 31, 2014 Difference vs. Amount Percentage Amount Percentage Amount (thousands of yen) (%) (thousands of yen) (%) (thousands of yen) Previous Period (%) 4,229, % 812, % 46, , % Shortterm loans payable 4,000, % Accounts payable other 149, % 137, % 20,327 16,396 1, , % 11,816 4,897 70,411, % 70,411, % 63,000, % 63,000, % 7,411, % 7,411, % 74,641, % 71,224, % (3,416,682) (4.6)% 97,003, % 98,689, % 1,686, % 96,351, % 96,351, % 652, % 2,338, % 97,003, % 98,689, % 1,686, % 171,644, ,913, (1,730,650) (1.0)% Operating accounts payable Accrued expenses Income taxes payable Accrued consumption taxes Other II. Noncurrent liabilities Longterm loans payable Tenant leasehold and security deposits in trust Total liabilities (3,416,682) (80.8)% 0 Net Assets I. Unitholders equity Unitholders capital Surplus Total net assets Total liabilities and net assets 28

29 Statement of Income for 3rd Fiscal Period (ended July 31, 2014) 2nd Period 3rd Period From August 1, 2013 to January 31, 2014 From February 1, 2014 to July 31, 2014 Difference Amount Percentage Amount Percentage Amount (thousands of yen) (%) (thousands of yen) (%) (thousands of yen) Operating revenue 2,773, ,420, Rent revenue real estate 2,773, ,420, Operating expenses 1,572, % 4,615, % Expenses related to rent business 1,439, % 4,163, % 102, % 328, % 3, % 6, % Administrative service fees 13, % 36, % Directors compensations 3, % 3,600 Other operating expenses 9, % 76, % 1,201, % 2,805,142 Nonoperating income 91 Interest income 91 Asset management fee Asset custody fee I. Operating income Other vs. Previous Period (%) 4,646, % 3,043, % 37.8% 1,603, % 1,386 1,295 1,423.1% , % Nonoperating expenses 440, % 467, % Interest expenses 116, % 301, % 17, % 35, % 207, % 99, % 131, % II. Ordinary income 761, % 2,338, % 1,577, % III. Income before income taxes 761, % 2,338, % 1,577, % IV. Net income 759, % 2,337, % 1,577, % 435 2,338, % 1,686, % Amortization of investment unit issuance expenses Other offering costs associated with issuance of investment units Borrowing related expenses Retained earnings (deficit) brought forward V. Unappropriated retained earnings (undisposed loss) (107,855) 652,135 (3.9)% 23.5% 29

30 Unitholder Information Number of Unitholders and Number of Investment Units by Unitholder Type Number of Investment Units 2nd Period (January 31, 2014) Number of Investment Units % of Total Number of Unitholders 3rd Period (July 31, 2014) Number of Investment Units % of Total 2nd Period (January 31, 2014) 3rd Period (July 31, 2014) Number of Unitholders Number of Unitholders % of Total % of Total Individuals and others 187, % 134, % 20, % 16, % Financial institutions (including financial instruments business operators) 405, % 456, % % % Other domestic corporations 238, % 233, % % % Foreign corporations 118, % 124, % % % 950, , , , Total Major Unitholders Investment Unit Ownership Ratio by Unitholder Type Jan Period (2nd Period) Individuals and others 19.8% July 2014 Individuals Period and others (3rd 14.2% Period) Financial institutions (including financial instruments business operators) 42.6% Financial institutions (including financial instruments business operators) 48.1% Foreign Other domestic corporacorporations tions 25.1% 12.5% Number of Units 180,095 % of Total 19.0% 148, % 6.3% 55, % 5 The Master Trust Bank of Japan, Ltd. (trust account) Trust & Custody Services Bank, Ltd. (securities investment trust account) The Nomura Trust & Banking Co., Ltd. (trust account) 60,296 43, % 6 NOMURA BANK LUXEMBOURG S. A. 29, % 7 Sumitomo Mitsui Trust Bank, Limited 27, % 8 Mizuho Bank, Ltd. 20, % 9 Century Tokyo Leasing Corporation 20, % 10 THE BANK OF NEW YORK, NONTREATY JASDEC ACCOUNT 15, % Total 599, % Unitholder Name 1 AEON Co., Ltd. 2 Japan Trustee Services Bank, Ltd. (trust account) 3 4 Foreign Other domestic corporacorporations tions 24.6% 13.1% 30

31 Aeon Group Profile Business Operations Spanning 14 Countries Synergy from Multiple Businesses The Aeon Group is drawing on its experience in Japan to develop retail properties in major cities in Asia as well. The Aeon Group has achieved significant success. It has the highest operating revenue1 in the Japanese retail industry, and the retail properties it operates have grown to 18,008 stores and locations, including alliance partners. The Aeon Group s multiple businesses include financial services, shopping center development and service businesses, which complement its core retail business centered on general merchandise stores. Synergy generated by combining these highly competitive businesses helps drive further growth. The Aeon Group has achieved significant success, operating retail properties encompassing 18,008 stores/locations as of February 28, Kazakhstan 7 Business spanning 14 countries India 1 Total 18,008 stores/locations GMS (general merchandise store) 598 SM (supermarket) 1,708 DS (discount store) 152 Home center 123 Convenience store 4,463* Specialty store 3,664 Drugstore 3,146 Other retail store 589 Financial service 531 Service business 1,394 Other business 7 Myanmar 1 Laos 1 China Thailand Malaysia The number of stores and office locations, including consolidated subsidiaries and equitymethod associates * Includes alliance partners Cambodia 2 Discount stores South Korea 1,913 General merchandise stores AEON Mall Drugstores/pharmacies Vietnam Philippines Japan 542 1, ,186 3,792 3, ,424 Supermarkets 168 malls in Japan and overseas Number of Group employees 6,395.1 bn 420,000 Number of consolidated subsidiaries: 263 Shopping center development business Strategic retail stores Retail business Synergy creation Indonesia 5 6 Service business Consolidated operating revenue AEON Town Number of equitymethod associates: 31 Financial services business AEON Card AEON s emoney (WAON) AEON Bank Australia 1 Notes: 1. Based on retail sales rankings published in the Nikkei newspaper (June 25, 2014). 2. Items for which the date is not specified are as of February 28, AEON DELIGHT AEON Fantasy Cardholders Cards issued Number of accounts 33.9 million aprx million 3.68 million (as of March 31, 2014) (as of July 31, 2014) Deposits Annual card shopping volume 1,715.7 billion 1,580.0 billion (as of March 31, 2014) 31

32 Disclaimer These materials contain forwardlooking statements with respect to the future business results, plans, and management targets and strategies of AEON REIT Investment Corporation (AEON REIT). These forwardlooking statements are based on assumptions made at the present time about future events and the operating environment. There is no guarantee that these assumptions are correct. Various factors could cause actual future results to differ materially from those expressed or implied by the forwardlooking statements contained herein. While all reasonable measures have been taken to ensure that the information presented herein is correct, AEON REIT makes no assurance or guarantee as to the accuracy or completeness of that information. The contents of the information may be changed or eliminated without notice. These materials include analyses, judgments and other views based on information currently available to AEON REIT and AEON Reit Management Co., Ltd. As such, actual operating results may differ from these views. Furthermore, there are other views that differ from these, and AEON REIT and AEON Reit Management Co., Ltd. may change these views in the future. These materials are provided for the sole purpose of presenting general information and explaining the management strategies of AEON REIT, and are not intended as a solicitation to purchase AEON REIT s investment units, nor to enter into any other financial instruments transaction agreement. When making investments, investors are advised to use their own judgment and discretion. Disclaimer for Dutch Investors The units of AEON REIT Investment Corporation ( AEON REIT ) are being marketed in the Netherlands under Section 1:13b of the Dutch Financial Supervision Act (Wet op het financieel toezicht, or the Wft ). In accordance with this provision, AEON Reit Management Co., Ltd. (the AIFM ) has notified the Dutch Authority for the Financial Markets of its intention to offer these units in the Netherlands. The units of AEON REIT will not, directly or indirectly, be offered, sold, transferred or delivered in the Netherlands, except to or by individuals or entities that are qualified investors (gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft, and as a consequence neither the AIFM nor AEON REIT is subject to the license requirement pursuant to the Wft. The AIFM is therefore solely subject to limited ongoing regulatory requirements as referred to in Article 42 of the European Alternative Investment Fund Managers Directive (European Directive 2011/61/EU) (the AIFMD ). Please visit AEON REIT s home page ( to access its latest annual report referred to in Article 22(1) of the AIFMD or information provided under Article 23 of the AIFMD. Asset Manager: AEON Reit Management Co., Ltd. (Registration of financial instruments business: Kanto Local Finance Bureau, DirectorGeneral (Financial Instruments), No. 2668) Contact Information Please direct inquiries to: AEON Reit Management Co., Ltd. Finance and Planning Department TEL: