Invesco Office J-REIT, Inc. (3298) 8th Fiscal Period Ended April 30, 2018

Transcription

1 Invesco Office J-REIT, Inc. (3298) 8th Fiscal Period Ended April 30, 2018 Invesco Global Real Estate Asia Pacific, Inc.

2 Table of contents 1 Highlights Operational highlights Major achievements Offering overview Improvement of IOJ s positioning in the J-REIT market Achievements and plans for the newly acquired assets Positive earnings variance from recent forecast Continued earnings growth projected Financial impact Improved occupancy Peer comparison Independent third-party evaluations Key facts 2 Strategic overview Market environment Continuous measures to improve investor value Portfolio enhancement and realization of gains on sale Broadened investor base Improved diversification of investor base 3 Portfolio summary Current portfolio composition Portfolio review Investment ratio Rent differential for office space 4 Growth strategy External growth story Unique sourcing capabilities as an independent asset manager Leasing achievements and occupancy Achieved positive rent reversions and rental gap provides headroom for future rental growth Long-term stability focused financial management 5 Appendix Top 10 tenants (Leased area basis) Allocation by industry (Leased area basis) Revenue compositions Environmental initiatives and energy-saving measures Unitholders Achievements of individual assets Portfolio information Balance sheets (Assets) Balance sheets (Liabilities and net assets) Statements of Income Statements of cash flows Office market environment Yield gaps in global office investments Real estate capital liquidity and volatility among global cities Proprietary market research Market overview Office forecast Governance Rotation rules About Invesco group Invesco Real Estate This document is provided for informational purposes only and is not intended as an inducement or invitation to invest in securities issued by Invesco Office J-REIT, Inc.

3 1. Highlights 3 3

4 Operational highlights Achieved medium-term AUM target of 200 bn Acquired 5 strong properties through global offering and asset replacement Improved income stability with top 5 tenant ratio of overall portfolio below 20% Outstanding DPU accretion 8.0% DPU accretion in FP8 ( 400) compared to actual DPU in FP7 ( 370) 1 Forecast DPU expected to increase 6.5% in FP9 ( 426) compared to FP8 actual DPU ( 400) Improved portfolio occupancy Achieved a 98.9% average occupancy rate in FP8 (+0.4 points) Portfolio occupancy rate at the end of FP8 was 99.6% 1 The growth rate was calculated based on the FP7 DPU ( 2,962) divided by eight (approximately 370) in order to reflect an eight-for-one unit split with February 28, 2018 as the record date and March 1, 2018 as the effective date. 4

5 Major achievements As of June 2018 External growth in key metropolitan areas Portfolio enhancements Portfolio growth since IPO 1 : 180.4% (CAGR 2 : 33.7%/year) ( 78.6 bn bn) Top 5 tenant concentration since IPO 4 : 43.1% 18.7% 5 Number of assets since IPO: 5 assets 18 assets Transactions: Successfully acquired 5 strong assets 6 through global offering and asset replacement Leasing success Financial strength and credibility FP8 Average portfolio occupancy rate 3 : 98.9% Credit Rating: Achieved A+/Stable credit rating from JCR FP8 average rent renewal increase: 9.2% Debt costs reduction since IPO: 0.74% 0.55 % 7 1 IOJ was listed on Tokyo Stock Exchange on June 5, Portfolio at IPO consists of five assets. 2 CAGR stands for Compound Annual Growth Rate. 3 Average portfolio occupancy rate during FP8 (4/2018). 5 4 Leased area basis. 5 Calculated based on tenant information as of the end of April Please refer to page 6. 7 Estimated debt cost as of June 30, 2018 after prepayment of a portion of existing short-term loans.

6 Offering overview Conducted first global offering (Reg. S +144A) which has increased IOJ s global presence Acquired 5 strong properties for the acquisition price of 63.5 billion by leveraging the Asset Manager's diverse sourcing capabilities Public offering New assets acquired 1 Offering type Global offering (Reg. S +144A) Property Name Nishi-Shinjuku Prime Square Kojimachi Crystal City Prime Tower Shin-Urayasu Techno Wave 100 IBF Planning Building Launch date April 9, 2018 Pictures Pricing date April 16, 2018 Offering size Approximately 28.4bn 2 Acquisition Price Appraisal Value Appraisal NOI Yield 34,835 million 6,405 million 11,860 million 6,900 million 3,500 million 37,600 million 6,820 million 12,100 million 7,090 million 3,620 million 4.3% 4.2% 5.2% 7.1% 4.0% GFA 36, m 2 21, m 2 76, m 2 50, m 2 2, m 2 6 Asset size growth from FP7 Top 5 tenants ratio from FP7 36.1% (from 161.9bn to 220.4bn) -5.8% (from 24.5% to 18.7% 3 ) FP7 (10/2017) Asset disposition (Sendai Honcho Bldg.) New assets acquired (5 assets) After acquisitions and disposition Tokyo metro. area 83.9% 0.0% 81.3% 85.1% Tokyo 23 wards 66.0% 0.0% 70.5% 68.8% (in which Tokyo central 5 wards) Tokyo metro. area excl. above Other major urban areas (24.5%) (0.0%) (70.5%) (38.3%) 17.9% 0.0% 10.9% 16.3% 13.0% 0.0% 0.0% 9.5% Other areas 3.1% 100.0% 18.7% 5.4% 1 Four of the five properties were acquired through the public offering. IBF Planning Building was acquired by cash proceeds from disposition of the Sendai Honcho Building. 2 Total paid-in capital amount including global offering and greenshoe options. 3 Calculated based on tenant information as of the end of April 2018.

7 Improvement of IOJ s positioning in the J-REIT market Leaped in asset size ranking to the middle of all listed J-REITs Successfully achieved AUM expansion as a result of proactive investor relations initiatives Aiming to achieve a credit rating upgrade and a global index inclusion ( 100 mm) 12,000 IOJ (As of May 31, 2018) IOJ (As of the end of FP7) Asset size 1 (LHS) Dividend yield 1 (RHS) Office J-REIT 7% 10,000 6% 8,000 5% 6,000 Average Dividend Yield: 4.4% 4% 4,000 3% 2,000 2% 0 0% 1% MSCI Japan Index FTSE EPRA TSE REIT Core Index JCR AA JCR AA JCR A+ 1 The figures on asset size and dividend yield are as of May 31, Dividend yield above is calculated by the following formula: each J-REIT s latest DPU forecast as of May 31, 2018/ operating days of the fiscal period 365 days/ share price of each J-REIT as of May 31,

8 Achievements and plans for the newly acquired assets Prime Tower Shin-Urayasu Location Leasable area Connected to JR Keiyo Line and JR Musashino Line Shin-Urayasu station 22, sqm Acquisition date May 1, 2018 Acquisition price Occupancy rate 1min from the nearest station Key Investments Highlights 11,860 million 94.3% as of June 1, 2018 Improved by 2.7 points from January 31, tenants The only office building in the area with large floor plates 7.0 years avg. tenancy period Direct access through pedestrian deck to railway station is attractive for education/medical centers and showrooms Expecting strong tenant demand from solid population growth in the Shin- Urayasu area Stable occupancy due to low tenant turnover with average lease duration of 7.0 years High Quality Specifications The standard office floor is approximately 1,305 sqm. It can be sub-divided up into eight-spaces, satisfying a wide range of occupiers from large tenants to smaller tenants. Great Tenant Diversification With a direct railway line from Tokyo Station, its tenants comprise of not only headquarters and branch offices, but also education and medical services for Shin-Urayasu City. Tenant Type Other Clinic 3.2% 5.3% Call center 14.9% School 16.0% Branch office 52 tenants 16.0% 44.7% Headquarters Asset Management Enhancement Breakdown by Lease Area More than 400ts 300ts- Less than 400ts 200ts- Less than 300ts 16.9% 15.1% 10.9% 17.6% 39.6% Less than 100ts 100ts-Less than 200ts After acquisition, an IT related company leased with a higher rent than the passing rent. Occupancy improved to 94.3% on June 1, 2018 (an improvement of 2.7 points from January 31, 2018). Interest from real estate company to rent (2.5% of total NLA). Ongoing leasing negotiations are expected to be finalized in the coming months. Achieved a JPY3.3 million reduction in electricity expense from June Reviewing operation expenses for further cost savings. 52 tenants Renovation Example The outdated hotwater service area was renovated as part of the initiative to improve tenant satisfaction. 8

9 Achievements and plans for the newly acquired assets Techno Wave 100 Location Leasable Area 7 mins walk from Keikyu Main Line Kanagawa Shinmachi station 22, sqm Acquisition Date May 1, 2018 Acquisition Price Occupancy Rate 7mins from the nearest station Key Investment Highlights 6,900 million 89.9% as of June 1, 2018 Improved by 7.3 points from January 31, tenants 7.3 years avg. tenancy duration Acquired with a high appraisal NOI yield of 7.1% and upside potential through further improvement of occupancy. Asset Management Strategy Acquisition of a poorly managed Class B office building requiring common area renovation and strategic lease up. Occupancy rate increased to 89.9% (an improvement of 7.3 points from January 31, 2018). Target tenants include IT and engineering companies looking for large contiguous spaces at reasonable rents. The renovation will focus on i) the common area on the 9th floor and ii) revitalizing the office lobby and enhancing the entrance. Post acquisition, an apparel company expressed interest to rent (3.7% of total NLA). Leasing negotiations are expected to be finalized in the coming months. Value up renovation example Attractive risk-return profile; returns primarily driven by asset management / value added efforts targeting an increase in NOI. Enjoys high occupancy due to competitive rent with high quality specification and a large floor size. Stable occupancy due to low tenant turnover with an average lease duration of 7.3 years. High Quality Specification The standard office floor is approximately 1,670sqm. It can be sub-divided up into eight-spaces 1, satisfying a wide range of occupiers from large tenants to smaller tenants. Tenant relocation to Techno Wave 100 : Techno Wave 100 : Key Train Stations Shin-Yokohama Station Blue Line : Examples of Tenants ex-locations Kanagawa-shimmachi Station Techno Wave 100 Yokohama Station Tenants previous locations span across a wide region in the surrounding area. Relocation to this property meant a better location with similar rent conditions In September 2017, a major financial institutions consolidated to this asset from four administration offices 9 1 Depending on the division plan, a new door may be required.

10 Achievements and plans for the newly acquired assets Nishi-Shinjuku Prime Square Location Leasable area 8 mins walk from JR/Odakyu Lines Shinjuku station 23, sqm Acquisition date May 1, 2018 Acquisition price Occupancy rate 3 mins from the nearest station ( Seibu Shinjuku station) 34,835 million 99.2% as of June 1, 2018 Improved by 0.2 points from January 31, tenants 40% gap b/w passing and new contract rent Asset management strategy Achieved a 10.3% reduction in building maintenance costs through a property management company change since acquisition. Located in the Shinjuku area: an area with robust office demand and only around 1% market vacancy. Potential upside by converting the 1st floor office area for retail use. Kojimachi Crystal City Location Leasable area Connected to Tokyo Metro Yurakucho Line Kojimachi station 5, sqm Acquisition date May 1, 2018 Acquisition price Occupancy rate 6,405 million 100% (as of June 1, 2018) Improved by 0.7 points from January 31, 2018 Asset management strategy Successfully contracted with a new tenant and improved occupancy rate to 100% from June 1, Achieved 10.9% in positive rent revisions in May/June Potential marriage value by acquiring from co-owners. Direct access to the nearest station 16 Tenants 8.6% gap b/w passing and new contract rent 10

11 Positive earnings variance from recent forecast Financial results for FP8 (ended April 30, 2018) ( mm) FP7 Ended Oct. 31, 2017 Actual Forecast (A) (as of Apr. 9, 2018) FP8 Ended April 30, 2018 Actual (B) (B)-(A) Operating revenue 6,171 6,375 6, Operating income 2,772 3,035 3, Ordinary income 2,394 2,530 2, Net income 2,393 2,529 2, Units issued & outstanding 807,907 6,463,256 6,463,256 - DPU ( ) LTV (%) Total assets 178, ,295 - Earnings variance from recent forecast Operating Revenue Impact to DPU ( ) Increase in utility income Increase in other rental revenue Capital gain from Sendai Honcho Building disposition Decrease in rental revenue -2-0 Operating Revenue Operating Income Increase in utility costs Decrease in BM costs Decrease in repair costs Decrease in other rental expenses Operating Income Ordinary Income ( mm) Decrease in PO costs Ordinary Income Net Income Interest bearing debt 89,000-89,000-1 In connection with the 8-for-1 split of its investment units, actual DPU for FP7 ( 2,962) was divided by eight (approximately 370). 11

12 Continued earnings growth projected Financial forecasts for FP9 (ending October 31, 2018) ( mm) FP8 Ended April 30, 2018 FP9 Ending October 31, 2018 Actual (A) Forecast (B) (B)-(A) Operating revenue 6,397 8,506 2,109 Operating income 3,076 4,218 1,141 Ordinary income 2,590 3,683 1,092 Net income 2,588 3,682 1,093 Units issued & outstanding 6,463,256 8,643,356 2,180,100 DPU ( ) Analysis of Earnings Variance ( mm) Operating Revenue Increase in rental revenue for existing assets +77 Increase in utility income +66 Decrease in other rental revenue -30 Capital gain from Sendai Honcho Building disposition Decrease in rental revenue due to Sendai Honcho Building disposition Increase in rental revenue for new acquisition +2,038 Operating Revenue +2,109 Operating Income Increase in utility expense for existing assets -89 Property tax effect end for existing assets -64 Increase in repair costs -73 Decrease in NOI due to asset disposition +60 Increase in NOI for new acquisition -564 Increase in depreciation expense -115 Increase in other operating expense -124 Operating Income +1,141 Ordinary Income Increase in debt financing costs for new acquisition -128 Decrease in non-operating expenses +79 Ordinary Income +1,092 Net Income +1,093 12

13 Financial Impact DPU forecast for FP9 DPU has increased steadily through external growth ( ) Actual DPU for FP8 Increase in rental revenue Decrease in cancellation penalty Increase in utility expense Property tax effect end Difference in capital gain Decrease in NOI due to Sendai Honcho Bldg. disposition Increase in NOI due to IBF planning Bldg. acquisition Decrease in other expense DPU forecast for FP9 (w/o PO) DPU increase by conducting PO DPU forecast for FP9 DPU forecast for FP9 ending October 31, Capital gain from asset disposition 2 Effect of property taxes 13

14 Improved occupancy Proactive leasing activity achieving results Portfolio occupancy rate improved from 99.2% (end of FP7) to 99.6% (end of FP8) Occupancy Rate Leases Signed 99.2% at the end of FP7 99.6% at the end of FP8 7,243 sqm in FP8 Proactive Leasing examples Kinshicho Prime Tower Increased the occupancy from 97.2% at the end of FP7(10/2017) to 100% by signing two new leases (1,499sqm in total) at the end of FP8 (4/2018) 14 Nagoya Prime Central Tower Achieved 99.0% from 90.9% occupancy at the end of November 2017, the lowest occupancy rate during FP8, with 12 new leases (2,596sqm in total) at the end of FP8 (4/2018) Hakata Prime East Maintained 100% leased with two new leases (349.6sqm in total) by 18% higher rent from in-place tenants at the end of FP8 (4/2018)

15 Peer Comparison Portfolio quality underappreciated Asset quality Average total floor area (sqm) 60,000 40,000 20, ,007 IOJ 20,983 Peer J-REITs Average 33,248 J-REIT Average Valuation Dividend yield (%) IOJ (incl. gain on sales) IOJ (excl. gain on sales) Peer J-REITs Average J-REIT Average Average purchase price ( bn) Dividend yield growth (%) IOJ 8.5 Peer J-REITs Average 4.7 J-REIT Average IOJ (incl. gain on sales) IOJ (excl. gain on sales) Peer J-REITs Average J-REIT Average Growth AUM growth (%) 2 P/NAV IOJ Peer J-REITs Average J-REIT Average IOJ Peer J-REITs Average J-REIT Average Profitability NOI yield after depreciation (%) 3 Liquidity Daily trading volume ( mm) IOJ 3.4 Peer J-REITs Average 4.1 J-REIT Average 1 Based on disclosed data as of May 31, Peer J-REITs include office specialized J-REITs, Global One Real Estate Investment Corporation, Daiwa Office Investment Corporation, Kenedix Office Investment Corporation, Ichigo Office REIT Investment Corporation, Nippon Building Fund Inc. and Japan Real Estate Investment Corporation. 2 AUM Growth is calculated as the percentage increase in AUM between the latest disclosed financial period and six financial periods before. 3 NOI yield after depreciation of peer J-REITs average and J-REIT average are calculated by the following formula: total NOI /operating days 365 days/ total purchase price as of May 31, Dividend yield of peer J-REITs average and J-REIT average are calculated by the following formula: each J-REIT s latest DPU forecast as of May 31, 2018/ operating days of the fiscal period 365 days/ share price as of May 31, Dividend yield growth is calculated by the simple average of the percentage increase in dividend yield between the latest financial period and four financial periods before. 6 P/NAV of peer J-REITs average and J-REIT average are calculated using the following formula: total market capitalization divided by total NAV. Calculated using share price as of May 31, In addition, IOJ s P/NAV is calculated by assumed NAV ( 14,793) which takes into account effects of asset replacement and 5 new asset acquisitions. 7 Daily Trading Volume of peer J-REITs average and J-REIT average are the simple averages of the daily traded volumes of each investment unit from Dec ember 1, 2017 to May 31, Source: Disclosure material, Bloomberg, Capital IQ 15 1, IOJ 1,102.7 Peer J-REITs Average Peer J-REITs Average (excl. NBF, JRE) J-REIT Average

16 Independent third-party evaluations Index inclusion IOJ is included in the following indexes as of the end of May S&P Global Property Russell Global MSCI Japan (Small Cap) Analyst coverage 1 The following is a list of the analysts making recommendations based on IOJ's business performance. Company Analyst Rating Target Price SMBC Nikko Securities Inc. Hiroshi Torii 1 Outperform 2 18,125 2 Nomura Securities Co., Ltd. Tomohiro Araki Buy 3 18, This list is based on information available to Invesco Office J-REIT and the asset management company of Invesco Office J-REIT (hereafter asset management company ) at the time of publication, and is prepared according to the guidelines of Invesco Office J-REIT and its asset management company. Consequently, the list may not be comprehensive or the information may be out of date. Analysts included in this list and others not listed are engaged in providing analysis relating to the business results of Invesco Office J-REIT and its business, or projecting the future business results of Invesco Office J-REIT, based on judgments made independently by the analyst either periodically or on ad hoc basis. Neither Invesco Office J-REIT nor its asset management company, or their respective management teams, have had any part whatsoever in the process by which analysts form their analysis or projections. Invesco Office J-REIT and its asset management company do not in any way endorse or provide assurances concerning the analysis, projections, opinions or recommendations, etc. made by analysts. This list is provided solely for the purpose of providing investors with information concerning companies and analysts who provide analysis or projections relating to the business results, etc. of Invesco Office J-REIT. It does not constitute a solicitation to invest in Invesco Office J-REIT. Any investment decisions you make ultimately rest on your own judgment and are your own responsibility. 2 The rating and target price are as of the most recent report issued on October 10, The target price was divided by eight in connection with the 8-for-1 split of IOJ s investment units which was effective on March 1, The rating and target price are as of the most recent report issued on May 10,

17 Key facts As of the end of May, 2018 Properties Financials No. of properties: 18 properties DPU 4 forecast in FP9 (ending October 2018) : 426 Total purchase price: bn FFO per unit 5 : AFFO per unit 6 : Appraisal value: bn Assumed NAV/unit after asset replacement & PO: 14,793 Unrealized gains 1 : 21.3 bn Book value/unit for FP8 (ended April 2018) : 12,499 Average building size 2 : % in Tokyo Metropolitan Area 3 : Portfolio occupancy (as of April 2018): 59, sqm 85.1 % 99.6 % (14properties basis) 98.2 % (18properties basis) Dividend yield: 5.7 % LTV book value 7 : LTV appraisal value 8 : (Both above are anticipated figures as of June 30, 2018) JCR Long-term issuer rating: 49.8 % 45.8 % A+/Stable 1 Calculated based on assumed book value for the newly acquired 5 assets 2 Average gross floor area of each building 3 Purchase price basis 4 Dividend per unit 5 (FP8 net income + FP8 depreciation expense - gain on sales of property) / the number of units issued and outstanding as of the end of FP8 6 (FP8 net income + FP8 depreciation expense - gain on sales of property capital expenditures) / the number of units issued and outstanding as of the end of FP8 7 Total interest bearing debt (as of June 30, 2018 after prepayment of debt) / total assets 8 Total interest bearing debt (as of June 30, 2018 after prepayment of debt) / (total assets + unrealized gain of existing portfolio) 17

18 2. Strategic overview 18

19 Market environment Real estate fundamentals remain positive Perception on current situation Opportunities and strategy sought Strong corporate performance Opportunities Lowest level of office vacancy in metropolitan areas Positive rent gap Further possibility to increase rents with good business environment because properties located in Tokyo tend to enjoy benefits from both domestic and overseas demand Solid demand from overseas Anticipated interest rate hike in the future Extend funding period while reducing funding costs by issuing bonds (Consideration of issuing corporate bonds, retail bonds and green bonds). Challenges Capital outflow from J-REIT specialized funds (monthly distribution type) Further implementation of a global offering and domestic/ overseas investor relations initiatives Required to differentiate IOJ from other financial products (i.e. increase of private funds or crowd-funding) Expansion of capital inflow through ETFs due to increase weighting of index investing Conduct intensive investor relations initiatives aiming to maximize unit split effects 19

20 Proactive asset management Continuous measures to improve investor value Aim to maximize unitholder value through continued proactive management Asset <Conducted Initiatives> Enhanced proactive asset replacement Further progressed tenant diversification of the portfolio through the expansion of AUM <Future strategy> Further organic growth through active leasing to solve rent difference Further tenant diversification to improve profitability and stability Debt Obtained credit rating Diversified funding sources through corporate and retail bond issuances Control portfolio LTV in the range of 40%-50% to enhance financial stability and flexibility Continued issuance of investment corporation bonds including Green Bonds Equity Unit split to broaden investor base and increase liquidity (FP8) Completed IOJ s first global offering (FP8) First ever J-REIT investment unit buyback aiming for accretion of DPU and NAVPU (FP7) Proactive equity strategy to improve investor value focusing on NAV and DPU growth (i.e. equity financing or unit buyback) IR and Others Continued proactive IR activities to retail investors as well as institutional investors Implemented first ever J-REIT net roadshow for retail investors at PO and web IR via internet Further strategic IR activities to retail investors as well as institutional investors Enhance sustainability and environmental initiatives Achievements Challenges % DPU growth in FP8 compared to previous FP IOJ s unit price outperformed TSE REIT index by approximately 3% since January 2018 Improved proportion of investment units held by both domestic and overseas institutional investors (Total share of domestic and overseas institutional investors is 71.2% as of the end of FP8) Long-term DPU and NAV accretion AA- credit rating achievement Global index inclusion Market liquidity accretion Valuation improvement

21 Portfolio enhancement and realization of gains on sale Key points of asset replacement 1. Maximized the property value by improving occupancy rate with proactive value-added renovation 2. Return gains on sale to unitholders through a market timely disposition 3. Reduction of future property management costs by replacing with a newer property Sendai Honcho Building Transaction yield trend of the Sendai office market Disposition price (total) Appraisal value 1 Capital gain DPU improvement 6,130 million 5,260 million 690 million 43 for FP8/ 48 for FP9 7.5% 7.0% 6.5% 6.0% 5.5% 7.0% Acquired Sendai Honcho Bldg. in June 2016 As of April 1, % Transaction NOI yield 2 3.9% Value creation by proactive asset management Implemented value-add renovation which resulted in higher occupancy rate and NOI after depreciation Occupancy Improvement 86.4% As of January 2017 Improvement of NOI after depreciation 87million As of April 2017 (FP6) 98.7% As of January million As of October 2017 (FP7) 5.0% Source: The Result of the Japanese Real Estate Investor Survey - Japan Real Estate Institute Asset replacement effect Increased in the Tokyo metropolitan area ratio IBF Planning Building is located within the highly competitive Tokyo central 5 wards among the Tokyo 23 wards which IOJ regards as the top priority area. After asset replacement & PO 83.9% Replaced with newer property Sendai Honcho Bldg. 33 years After asset replacement & PO 85.1% IBF Planning Bldg. 10 years 1 The appraisal value of Sendai Honcho Building is as of October 31, The ratio is calculated using the following formula and rounded to the first decimal place. (Sendai Honcho Building s NOI during FP7 / operating days during FP7 365 days) / Sendai Honcho Building s disposition price. 21

22 Broadened investor base Conducted over 220 meetings (including conference calls) with overseas institutional investors since 2017 Implemented first ever net roadshow during PO to enhance investor relations for individual investors of IOJ 23 investors 21.3bn 1 57 investors 59.0bn 1 1 The number of overseas investors who submitted demand and the amount of application at the global offering implemented in April Events highlighted in red are for individual investors. 22 North America UK & Europe Asia-Pacific 2 North America IR (USA & Canada) Citi global property CEO conference arranged by Citi EU IR (U.K., Netherlands and Switzerland) 15 investors 8.3bn 1 Hong Kong, Singapore, Seoul and Malaysia IR Nomura Global Real Estate Forum arranged by Nomura Securities Property Conference Tokyo arranged by SMBC Nikko Mizuho Investment Conference Tokyo arranged by Mizuho Securities Asia Pacific Property Conference arranged by Citi Goldman Sachs NAV-igator arranged by Goldman Sachs Property tours J-REIT Fair sponsored by TSE and ARES J-REIT Fan sponsored by TSE, Nikkei Radio Broadcasting and Pronexus J-REIT nationwide caravan sponsored by ARES Web IR Securities firm branch seminars

23 Improved diversification of investor base Improved proportion of investment units held by both domestic and overseas institutional investors as a result of proactive investor relations initiatives Domestc Individuals Domestic Corporations Overseas Corporations and Individuals Domestic Financial Institutions 1 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 41.7% (24,131) 5.1% (478) 14.3% (132) 39.0% (85) 37.3% (23,576) 4.3% (394) 19.7% (152) 38.8% (89) 29.0% (20,319) 3.3% (342) 21.5% (178) 46.1% (81) 24.3% (18,353) 2.9% (315) 24.4% (175) 48.5% (76) 25.9% (19,935) 2.8% (323) 21.2% (179) 50.0% (90) Total share of domestic and overseas institutional Investors 71.2% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 9.3% 9.0% 24.7 % 57.0 % 0% As of Oct FP5 As of Apr FP6 As of Oct FP7 As of Feb (before unit split) As of Apr FP8 0% J-REIT Average As of May 2018 Total no. of unitholders 24,826 24,211 20,920 18,919 20,527 1 Including financial instruments business operators. 2 The number of investors under each category is shown in parentheses. Source: Prepared by IGRE based on disclosed data as of May

24 3. Portfolio summary 24

25 Current portfolio composition As of the end of May 2018 Highlights (18 assets) Purchase price billion Characteristics 4 By asset type (%) 8.2 Investment ratio by geographic location Quality assets in prime locations Appraisal value billion 91.8 FP8 average occupancy rate 98.9% Large-scale offices Others (mid-size offices) 91.8% 8.2% Average NOI yield 2 5.1% Average purchase price billion Portfolio PML % By geographic location (%) Tokyo Metropolitan Area -Tokyo 23 wards (Tokyo central 5 wards 5 Other Areas % 68.8% 38.3%) 14.9% Fukuoka City 4.5 bn 2.0% Osaka City 1.9 bn 0.9% Nagoya City 14.6 bn 6.6% Urayasu City bn 5.4% Tokyo Metropolitan Area bn 85.1% 1 The figure includes the appraisal values for the 13 holding assets as of the end of FP8 excluding Sendai Honcho Building which was sold on May 17, 2018 and appraisal value for the new 5 assets at the time of acquisition. 2 For the newly acquired 5 assets, NOI yield was calculated by the appraisal NOI before depreciation by a direct capitalization method at the timing of acquisition. For the 13 holding assets as of the end of FP8 excluding Sendai Honcho Building, NOI yield was calculated by annualized actual NOI for FP8. The average NOI yield is calculated by total NOI of the 18 assets divided by total purchase price of those 18 assets. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses. 3 The PML means the extent of the damage that would be incurred due to the largest earthquake (a great earthquake with the likelihood of occurring once in 475 years = a great earthquake with a 10% likelihood of occurring once in 50 years) foreseen during the assumed useful life (50 years being the usual useful life of a building) as a ratio (%) of the replacement value for the foreseeable restoration costs of the damage. The figure stated in the section Total is the PML (portfolio PML) for the entire Investment Corporation s entrusted real estate in the Report on evaluation of seismic PML for portfolio dated March 2018 by Sompo Risk Management & Health Care, Inc. 4 The ratio is calculated based on the purchase price. ORTO Yokohama 5 Tokyo central 5 wards includes Chiyoda-ward, Chuo-ward, Minato-ward, Shinjuku-ward and Shibuya-ward. 25

26 Portfolio Review Total asset size is bn as of the end of May 2018 Property name Ebisu Prime Square Harumi Island Triton Square Office Tower Z 1 CS Tower/ CS Tower Annex Queens Square Yokohama Nagoya Prime Central Tower SOLD Location Tokyo Tokyo Tokyo Yokohama Nagoya Purchase price 25,014 million 9,300 million 13,700 million 16,034 million 14,600 million Property name Tokyo Nissan Nishi- Gotanda Building ORTO Yokohama Nishi-Shinjuku KF Building Shinagawa Seaside East Tower Akiba CO Building Location Tokyo Yokohama Tokyo Tokyo Tokyo Purchase price 6,700 million 13,000 million 6,600 million 25,066 million 8,078 million Property name Sun Towers Center Building Sendai Honcho Building 2 Hakata Prime East Kinshicho Prime Tower Aqua Dojima East SOLD Location Tokyo Sendai Fukuoka Tokyo Osaka Purchase price 6,615 million 5,000 million 4,500 million 15,145 million 1,910 million Property name Nishi-Shinjuku Prime Square Kojimachi Crystal City Prime Tower Shin-Urayasu Techno Wave 100 IBF Planning Building 26 Location Tokyo Tokyo Urayasu Yokohama Tokyo Purchase price 34,835 million 6,405 million 11,860 million 6,900 million 3,500 million 1 Disposed on December 16, Profit from disposition was 783 million. 2 Disposed 40% of co-ownership of trust beneficiary interest on April 18, 2018 and 60% of co-ownership of trust beneficiary interest on May 17, Profit from disposition was 690 million. 3 Properties highlighted in green are newly acquired assets after closing FP8 (4/2018).

27 Investment ratio As of the end of May 2018 Newly acquired 5 prime assets are located in Tokyo central 5 wards, Yokohama and Chiba Investment ratio to Tokyo central 5 wards increased from 24.5% to 38.3% after the new acquisition Nishi-Shinjuku Prime Square 2. Shinagawa Seaside East Tower Investment ratio (% to total purchase price) % 15.8% Location 2 Tokyo central 5 wards (Tokyo 23 wards) Ebisu Prime Square 11.3% 4. Queens Square Yokohama 7.3% 5. Kinshicho Prime Tower 6.9% Nagoya Prime Central Tower 7. CS Tower/ CS Tower Annex 6.6% 6.2% ORTO Yokohama 9. Prime Tower Shin-Urayasu 10. Akiba CO Building 11. Techno Wave Tokyo Nissan Nishi-Gotanda Building 3.7% 3.1% 3.0% 5.9% 5.4% Urayasu, Chiba (Other investment target areas) Yokohama (Tokyo metropolitan area) Sun Towers Center Building 14. Nishi-Shinjuku KF Building 15. Kojimachi Crystal City 16. Hakata Prime East 17. IBF Planning Building 18. Aqua Dojima East 3.0% 3.0% 2.9% 2.0% 1.6% 0.9% Tokyo central 5 wards (Tokyo 23 wards) Tokyo central 5 wards (Tokyo 23 wards) 0.0% 5.0% 10.0% 15.0% 20.0% 1 Properties highlighted in green are newly acquired assets after closing FP8 (4/2018). 2 Target area defined by asset management guideline is shown in parentheses. 27

28 Higher than estimated market rent Lower than estimated market rent Rent differential for office space Upward rent revision opportunity for office comes every 2.7 years Occupancy 1 Rent differential (Office space) 2 % of total net rentable area used as office space Aqua Dojima East 94.9% Hakata Prime East 100.0% Nishi-Shinjuku KF Building 98.4% Queens Square Yokohama 99.5% CS Tower/ CS Tower Annex 99.8% IBF Planning Building 100.0% Nagoya Prime Central Tower 99.0% Nishi-Shinjuku Prime Square 98.7% Kojimachi Crystal City 90.9% Kinshicho Prime Tower 100.0% Akiba CO Building 100.0% ORTO Yokohama 100.0% Ebisu Prime Square 99.8% -22.2% -21.2% -16.3% -16.2% -12.5% -12.3% -11.5% -8.5% -8.0% -6.9% -5.2% -0.7% -0.2% Tokyo Nissan Nishi-Gotanda Bldg % Prime Tower Shin-Urayasu 93.9% Shinagawa Seaside East Tower 100.0% Techno Wave % 0.4% 0.8% 2.3% 5.6% Sun Towers Center Building 100.0% 8.4% -30.0% -20.0% -10.0% 0.0% 10.0% 0.0% 5.0% 10.0% 15.0% 1 Occupancy rate as of April 30, Rent differential with actual rent as of April 2018 and CBRE s estimated market rent for a standard floor used as office space for properties managed by IOJ. 28

29 4. Growth strategy 29

30 Tenant Share AUM External growth story Aim to expand AUM to over bn for long-term DPU and NAV accretion - AA- credit rating achievement - Global index inclusion - Market liquidity accretion - Valuation improvement CAGR 1 since IPO: 33.7% /year (From October 2014 (FP1 end) to May 2018) bn bn 78.6 bn IPO Current As of the end of May 2018 Next mid-term target 43.1 % 18.7 % 2 10% Top 5 tenants ratio 1 CAGR stands for Compound Annual Growth Rate. 2 Calculated based on tenant information as of April

31 Unique sourcing capabilities as an independent asset manager Expand portfolio by leveraging the Asset Manager s diverse sourcing network Portfolio acquisition source ratio Deal sourcing situation % 27.2% Developers and SPCs arranged by developers Foreign property funds Office Tokyo metropolitan area No. of properties: 142 Size ( mm) : ,000 Others No. of properties: 55 Size ( mm) : 600-7, % Domestic property funds Financial institutions Others No. of properties: 140 Size ( mm) : 50-60,000 No. of properties: 206 Size ( mm) : 10-20, % 26.9% Others Total No. of properties: 282 Size ( mm) : 50-60,000 No. of properties: 261 Size ( mm) : 10-20,000 Steady acquisition pipeline from diverse investment sources Procured information on 1,000 acquisition opportunities per annum (on average) over the past 19 years Cumulative investment amount (since 1999) of approximately 1.2 trillion (128 properties) 2 Current AUM is approximately billion (as of May 31, 2018) Cumulative investment amount 2 1: Since the beginning of November 2017 to the end of April IOJ does not guarantee that it will acquire those properties. The size is in terms of value. 2 The above cumulative investment amount is based on the total acquisition price and includes the track record of the assets under the Asset Manager s management when the Invesco Group acquired the Asset Manager from American International Group in December

32 Leasing achievements and occupancy FP8 average occupancy rate improved to 98.9% due to proactive leasing activities Leasing achievements (FP8) Achieved a 99.6% occupancy at the end of FP8 (4/2018): 1.8 points higher than the initial forecast. The average portfolio occupancy rate improved from 99.2% (end of FP7) to 99.6% (end of FP8) through successful tenant back filling in Nagoya Prime Central Tower. Leasing policy and occupancy outlook (FP9) Focusing on leasing activities at newly acquired assets of Prime Tower Shin Urayasu and Techno Wave 100 in FP9 (10/2018). Although the portfolio occupancy rate decreased, FP9 average portfolio occupancy rate is expected to maintain 98.2%. 100% 95% 90% 85% 14, % 9, % 98.7% 98.8% 2, % % 99.6% 2, ,744 1,584 FP7 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 (Est.) 98.5% in FP7 98.3% 98.4% 98.3% 98.3% 98.1% Jun-18 (Est.) Portfolio average occupancy rate during fiscal period 98.9% in FP8 Jul-18 (Est.) Aug-18 (Est.) 98.2% in FP9 (Forecast) Move-in (sqm) Move-out (sqm) Occ.(Result) Occ.(Est) Sep-18 (Est.) 97.7% Oct-18 (Est.) 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 (sqm) 1 The occupancy estimation for FP9 is as of June 1,

33 Proactive Management Achieved positive rent reversions, and rental gap provides headroom for future rental growth Renewed 70 contracts in FP8 of which 12 contracts (20.5% based on total leased area of tenants facing contract renewal) were renewed with upward revisions Net rentable areas for tenants who renewed with upward revisions were 6,000 sqm and the rent increase ratio was 9.2% in FP8 Rent difference of the portfolio with estimated market rent increased to 6.9%, providing further potential for rent growth Lease renewal status (Leased area basis) 1 100% 50% 39.3% (19) 56.2% (46) 14.0% (11) 20.5% (12) 84.4% (34) 79.5% (58) Average rent for the 14 current properties not including 5 new assets ( /tsubo) 17,000 16,000 15,000 15, % 16,073 15, % 16, % 5.0% 2.0% -1.0% Rent difference between in-place rents and market rents (Leased area basis) % 20.0% 10.0% 70 tenants 7.7% Planned 79 tenants 4.5% 94 tenants 12.1% 6.2% 14.9% 12.5% 0% 14,0000 FP7 14 assets Portfolio Aver. Rent Rent Gap FP8 14 assets Market Rent Focus on maintaining More than 10% above market current levels 1: The number of contracts is shown in parentheses. 2 The number is calculated in the case the rent increase contributes to DPU for the whole period. 3: Market rent represents estimated new contract rent for a standard floor used as office space for properties managed by IOJ based on market research by CBRE. 4 Percentage figures and number of tenants represent the percentage or number of lease contracts renewed or to be renewed for office space to total office contracted space. In addition, the chart shows the difference between in-place rents and market rents. Market rents represent contracted rent for a typical floor of assets managed by IOJ evaluated by CBRE % (2) 1.6% (2) FP6 FP7 FP8 Downward Flat Upward FP6 FP7 FP8 NRA (sqm) 10,152 2,122 6,000 Rent increase (%) % 0.0% 4.7% 0.0% Rent difference More than 10% below market Between 10% above and 10% below market 0.7% 2.1% FP8 FP9 FP10 Aim to raise rents Strive to increase or maintain current levels

34 Long-term stability focused financial management As of June 30, 2018 (estimate) Stable financial management through long-term financing and diversified sources Primary concept of unit buyback First J-REIT to formally conduct a unit buyback in June % 120% 110% 100% Constantly considering conducting unit buyback as an option while taking into account the elements below. Unit price Amendment of Guideline (2017/4/21) LTV Acquisition of own investment units (2017/6/12~2017/7/10) 90% Jan-2017 Apr-2017 Jul-2017 Nov-2017 Feb-2018 May-2018 Diversification of debt maturities ( mm) 35,000 30,000 25,000 20,000 15,000 10,000 5, ,500 Surplus cash Outperformed +17.7% Pipeline Bond (Retail) Bond (Corporate) Borrowings 29,850 17,200 26,350 23,300 17,500 IOJ unit price 117.4% 1 (14,780 yen) TSE REIT Index 99.7% ( pt.) 1, Lender formation Borrowings Sumitomo Mitsui Banking Corporation MUFG Bank Mizuho Bank Sumitomo Mitsui Trust Bank Resona Bank Development Bank of Japan Shinsei Bank Corporate Bonds Share (%) Balance ( bn) Amount of Issued Number of Lenders: 13 Total Interest Bearing Debt: 121.3bn Aozora Bank The Bank of Fukuoka ORIX Bank Corporation The Nishi-Nippon City Bank Citibank, N.A., Tokyo Branch Nippon Life Insurance Company Duration Interest rate Average interest rate and remaining terms Share (%) Balance ( bn) Redemption date First series bonds (Corporate) 1.8bn 5Y 0.320% Apr. 20, 2022 Second series bonds (Corporate) 1.6bn 7Y 0.520% Apr. 19, 2024 Third series bonds (Retail) 5.5bn 5Y 0.457% Jan. 26, 2023 Average remaining years (RHS) (%) (Years) Average borrowing rate (LHS) FP1 FP2 FP3 FP4 FP5 FP6 FP7 FP8 Jun LTV book value 1 / LTV appraisal value 2 Fixed interest rate ratio Long term loan ratio Credit rating (JCR) 49.8% / 45.8% 91.0% 96.3% A+ (Stable) 1 As of May 31, IOJ s investment unit price and TSE REIT Index is indexed as June 12, 2017 being100% LTV book value = Total interest bearing debt / Total assets. 3 LTV appraisal value = Total interest bearing debt / (Total assets + Unrealized gain of existing portfolio).

35 5. Appendix 35

36 Top 10 tenants (Leased area basis) As of the end of April 2018 Tenant diversification has improved after the PO Achieved a medium term target of top 5 tenant ratio of overall portfolio below 20% 14 properties basis 1 (not including newly acquired 5 assets) End tenants Property name Ratio of Leased area 2 leased area to total (sqm) leasable area (%) 3 1 Fujitsu Limited ORTO Yokohama 13, Tokyu Hotels Co., Ltd. Queen's Square Yokohama 13, Sotetsu Hotel Shinagawa Seaside Management Co., Ltd. East Tower 9, Yachiyo Engineering CS Tower / CS Tower Co., Ltd Annex 8, Minatomirai Tokyu Queen's Square Square Corporation Yokohama 6, Marvelous Inc. Shinagawa Seaside East Tower 6, Good Smile Company Akiba CO Building 5, Tokyu Corporation Queen's Square Yokohama 5, Not disclosed 4 Kinshicho Prime Tower 3, Tokyo Nissan Nishi 10 Fuji Sash Co., Ltd. 2, Gotanda Building Total of Top 10 Tenants 75, properties basis 1 (not including Sendai Honcho Bldg. but including newly acquired 5 assets) End tenants Property name Ratio of Leased area 2 leased area to total (sqm) leasable area (%) 3 1 Fujitsu Limited ORTO Yokohama 13, Tokyu Hotels Co., Ltd. Queen's Square Yokohama 13, Sotetsu Hotel Shinagawa Seaside Management Co., Ltd. East Tower 9, Yachiyo Engineering CS Tower / CS Tower Co., Ltd Annex 8, INTEC INC. Techno Wave 100 7, Minatomirai Tokyu Queen's Square Square Corporation Yokohama 6, Marvelous Inc. Shinagawa Seaside East Tower 6, Good Smile Company Akiba CO Building 5, Tokyu Corporation Queen's Square Yokohama 5, Infotec Holdings, Inc. Nishi Shinjuku Prime Square 3, Total of Top 10 Tenants 79, Top 5 tenant ratio: 24.8% Top 5 tenant ratio: 18.7% Top 10 tenant ratio: 36.0% Top 10 tenant ratio: 28.5% 1 Calculated based on tenant information as of the end of April Unless otherwise stated, Leased Area represents the part of the total leased area stated in the relevant lease agreement pertaining to each managed real estate and entrusted real estate as of the end of FP8 that is the part equal to IOJ s interest. 3 Ratio of leased area represents the percentage of each tenant s leased area to the total leased area of all managed assets, rounded to one decimal place. 4 Information is not disclosed as the tenant s authorization has not been obtained. 36

37 Allocation by industry (Leased area basis) As of the end of April 2018 Industry allocation remains stable Number of tenants increased by 21.0% after including new 5 assets 14 properties basis 1,2 (not including newly acquired 5 assets) 18 properties basis 1,2 (not including Sendai Honcho Bldg. but including newly acquired 5 assets) Finance & Insurance 5.0% (20) Construction 1.7% (16) Real Estate 2.4% (11) Manufacturing 14.4% (66) Commercial Warehousing 11.6% (67) Fishery, Agriculture & Forestry 0.2%(1) 14 Properties 367 Tenants Information & Communication 23.4% (57) Others 0.8% (6) Services 35.4% (112) Land Transportation 3.0% (3) Electric Power and Gas 1.3% (2) Warehousing and Harbor Transportation 0.7% (4) Air Transportation 0.2% (2) Construction 2.0% (17) Finance & Insurance 4.6% (27) Real Estate 2.4% (17) Manufacturing 14.7% (79) Commercial Warehousing 10.6% (68) Fishery, Agriculture & Forestry0.1%(1) 18 Properties 444 Tenants Information & Communication 25.0% (70) Others 1.7% (9) Services 34.8% (144) Land Transportation 2.5% (5) Electric Power and Gas 1.0% (2) Warehousing and Harbor Transportation 0.5% (4) Air Transportation 0.1% (1) 1 Calculated based on tenant information as of the end of April The chart shows the breakdown of tenants by type of business based on the total number of tenants excluding residential tenants. The number of contracts is shown in parentheses. 37

38 Revenue compositions As of the end of April 2018 Office, retail and hotel rents comprise approximately 97.4% of total revenue Upward rent revision opportunity for office comes every 2.7 years FP8 revenue breakdown by asset type Hotel rent revenue breakdown Retail 9.3% Residential 2.3% Hotel 5.5% Others 0.3% Fixed rent income from 2 hotels was 5.5% of total rent revenue in FP8 Shinagawa Seaside East Tower 2 Queens Square Yokohama 11.0% 30.5% Office 82.7% 89.0% 69.5% Asset type % to total Average lease rent revenue term Office 82.7% 2.7 years Retail 9.3% 7.1 years Hotel 1 5.5% 20.0 years Residential 2.3% 2.6 years Others 0.3% 4.6 years Total 100.0% 5.1 years Fixed base rent Variable rent Rent type % to total rent revenue Fixed base rent 80.6% Variable rent 19.4% Total 100.0% 1 Not including variable rent income. 2 Data is annualized because Shinagawa Seaside East Tower s variable rent allocated bi-period at odd fiscal period. 38

39 Environmental initiatives and energy-saving measures Achieved CASBEE Certificates 1 Nagoya Prime Central Tower CS Tower ORTO Yokohama Tokyo Nissan Nishi-Gotanda Building Acquired S Rank as of January 26, 2015 Acquired A Rank as of September 5, 2014 Acquired A Rank as of October 29, 2015 Acquired A Rank as of December 25, 2015 Achieved DBJ Green Building Certification 2 Ebisu Prime Square Achieved 3 stars (Properties with high quality environmental and social awareness) as of February 27, 2017 Invesco Group has been a Member of GRESB 3 since CASBEE (The Comprehensive Assessment System for Built Environment Efficiency) is a tool for assessing and rating the environmental performance of buildings built and used in Japan. 2 DBJ Green Building Certification is a certification system that Development Bank of Japan selects and evaluates properties with environmental and social awareness, which are necessary in the current real estate market, based on its comprehensive assessment measure. 3 GRESB (Global Real Estate Sustainability Benchmark) is an international real estate industry benchmark to evaluate sustainability performance of private and listed real estate portfolio from environmental and social perspectives. 39

40 Unitholders As of April 2018 Breakdown by units 1 Major unitholders Domestic Individuals 25.9% Unitholders Units owned % of units issued 3 6,463,256 units Financial Institutions % 1 2 The Master Trust Bank of Japan, Ltd. (Trust Account) Japan Trustee Services Bank, Ltd. (Trust Account) 1,141, , Foreign Corporations and Individuals 21.2% Financial Institutions 2 0.4% Domestic Corporations 2.8% Breakdown by unitholders 1 Domestic Corporations 1.6% Foreign Corporations and Individuals 0.9% Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account) The Nomura Trust and Banking Co., Ltd. (Investment Trust Account) 211, , HSBC BANK PLC A/C CLIENTS, NON TREATY , NORTHERN TRUST CO. (AVFC) RE IEDU UCITS CLIENTS NON LENDING 15 PCT TREATY ACCOUNT J.P. MORGAN BANK LUXEMBOURG S.A MLI FOR CLIENT GENERAL OMNI NON COLLATERAL NON TREATY - PB 136, , , ,527 unitholders 9 Japan Trustee Services Bank, Ltd. (Trust Account 9) 67, Osaka Shinkin Bank 63, Domestic Individuals 97.1% Total 3,063, As percentage of unitholders ratio is rounded to the second decimal place, total of the ratio may not be 100%. 2 Including financial instruments business operators. 3 Percentage of units issued is rounded down to the second decimal place. 4 HSBC Bank Plc, as trustee, holds 144,132 units of IOJ in trust for the benefit of Invesco Investments (Bermuda) Ltd. Invesco Limited is the parent company of Invesco Investments (Bermuda) Ltd. and the Asset Management Company. In addition to the above, Invesco Investments (Bermuda) Ltd. has lent 51,900 units to SMBC Nikko Securities Inc. based on the Investment Units Lending Agreement due to the new issuance of investment units through a public offering. 40

41 Achievements of individual assets FP8 (ended April 30, 2018) 41

42 Achievements of individual assets FP8 (ended April 30, 2018) 42

43 Achievements of individual assets FP8 (ended April 30, 2018) 43

44 Achievements of individual assets FP8 (ended April 30, 2018) 44

45 Portfolio information As of the end of May, 2018 Portfolio Details Property Name Location Purchase Price ( mm) Appraisal Value ( mm) Leasable Area (sqm) Investment Ratio (%) Age (Years) NOI Yield 1 (%) Occupancy (%) PML (%) 1 Ebisu Prime Square Shibuya-ku, Tokyo 25,014 27,587 17, CS Tower / CS Tower Annex Taito-ku, Tokyo 13,700 17,200 19, Queen's Square Yokohama Yokohama-shi, Kanagawa 16,034 19,100 41, Nagoya Prime Central Tower Nagoya-shi,Aichi 14,600 19,000 17, Tokyo Nissan Nishi Gotanda Building Shinagawa-ku, Tokyo 6,700 7,410 8, ORTO Yokohama Yokohama-shi, Kanagawa 13,000 14,400 23, Nishi Shinjuku KF Building Shinjuku-ku, Tokyo 6,600 7,080 6, Shinagawa Seaside East Tower Shinagawa-ku, Tokyo 25,066 26,600 27, Akiba CO Building Chiyoda-ku, Tokyo 8,078 9,580 5, Sun Towers Center Setagaya-ku, Tokyo 6,615 7,100 7, Hakata Prime East Fukuoka-shi, Fukuoka 4,500 4,720 7, Kinshicho Prime Tower Koto-ku, Tokyo 15,145 16,100 17, Aqua Dojima East Osaka-shi, Osaka 1,910 2,030 3, Nishi Shinjuku Prime Square Shinjuku-ku, Tokyo 34,835 37,600 23, Kojimachi Cristal City Chiyoda-ku, Tokyo 6,405 6,820 5, Prime Tower Shinurayasu Urayasu-shi, Chiba 11,860 12,100 22, Techo Wave 100 Yokohama-shi, Kanagawa 6,900 7,090 22, IBF Planning Building Shibuya-ku, Tokyo 3,500 3,620 2, Total 220, , , For the newly acquired 5 assets, NOI yield was calculated by the appraisal NOI before depreciation by a direct capitalization method at the timing of acquisition. For the 13 holding assets as of the end of FP8 excluding Sendai Honcho Building, NOI yield was calculated by annualized actual NOI for FP8. The average NOI yield is calculated by total NOI of the 18 assets divided by total purchase price of those 18 assets. However, we have applied adjustments to treat certain capitalized property-related taxes as expenses. 45

46 Portfolio information As of the end of May, 2018 Appraisal Value Overview Property Name Purchase Price (JPY mm) Appraisal Value (JPY mm) (a) (a)-(b) FP8 End (ended April 30, 2018) Direct Cap Rate (%) (c) (c)-(d) Book Value (JPY mm) Unrealized Gain/Loss (JPY mm) FP7 End (ended October 31, 2017) Appraisal Value (JPY mm)(b) Direct Cap Rate (%)(d) 1 Ebisu Prime Square 25,014 27, ,425 2,162 27, CS Tower / CS Tower Annex 13,700 17, ,752 3,448 16, Queen's Square Yokohama 16,034 19, ,949 3,151 18, Nagoya Prime Central Tower 14,600 19, ,120 4,880 18, Tokyo Nissan Nishi Gotanda Building 6,700 7, , , ORTO Yokohama 13,000 14, ,855 1,545 14, Nishi Shinjuku KF Building 6,600 7, , , Shinagawa Seaside East Tower 25,066 26, ,126 1,474 26, Akiba CO Building 8,078 9, ,299 1,281 9, Sun Towers Center 6,615 7, , , Hakata Prime East 4,500 4, , , Kinshicho Prime Tower 15,145 16, , , Aqua Dojima East 1,910 2, , , Total (1) 156, ,907 1, ,876 20, , Property Name Purchase Price (JPY mm) Appraisal Value (JPY mm) (a) At the time of Acquisition Direct Cap Rate (%) (c) 14 Nishi Shinjuku Prime Square 34,835 37, Kojimachi Cristal City 6,405 6, Prime Tower Shinurayasu 11,860 12, Techo Wave 100 6,900 7, IBF Planning Building 3,500 3, Date of value 2017/12/1 2018/1/ /10/ /11/1 2018/2/19 Total (2) 63,500 67, Total (1) + (2) 220, ,

47 Balance sheets (Assets) Seventh Fiscal Period As of October 31, 2017 (Unit: Thousands of Yen) Eighth Fiscal Period As of April 30, 2018 ASSETS Current assets: Cash and cash deposits 3,090,066 5,881,414 Entrusted cash and entrusted cash deposits 10,596,926 10,442,475 Accounts receivables - operating 456, ,664 Accounts receivables - 147,830 Consumption tax receivable 35,654 - Short-term prepaid expenses 281, ,464 Advance payments - 50,000 Deferred tax assets Other current assets 1,518 1,518 Total current assets 14,462,409 17,267,487 Fixed assets: Property and equipment Entrusted buildings 41,795,823 41,855,146 Accumulated depreciation (3,715,638) (4,435,152) Entrusted buildings, net 38,080,184 37,419,994 Entrusted building improvements 319, ,590 Accumulated depreciation (93,211) (111,170) Entrusted building improvements, net 226, ,420 Entrusted machineries 31,443 40,063 Accumulated depreciation (4,053) (5,748) Entrusted machineries, net 27,390 34,314 Entrusted furniture and equipment 106, ,248 Accumulated depreciation (26,070) (37,473) Entrusted furniture and equipment, net 80, ,775 Entrusted land 124,928, ,241,382 Entrusted construction in progress 20,024 41,252 Total property and equipment 163,362, ,088,139 Intangible assets: Other intangible assets 4,889 3,769 Total intangible assets 4,889 3,769 Investment and other assets: Security deposits and guarantee deposits 10,088 10,088 Long-term prepaid expenses 358, ,365 Derivative assets 115, ,734 Others 386, ,350 Total investment and other assets 870, ,539 Total fixed assets 164,237, ,972,448 Deferred assets: Investment corporation bonds issuance expenses 21,755 56,057 Total deferred assets 21,755 56,057 TOTAL ASSETS 178,721, ,295,993 47

48 Balance sheets (Liabilities and net assets) Seventh Fiscal Period As of October 31, 2017 (Unit: Thousands of Yen) Eighth Fiscal Period As of April 30, 2018 LIABILITIES Current liabilities: Accounts payable - operating 533, ,886 Current portion of long-term loans 17,500,000 17,500,000 Accounts payable - other 373, ,589 Accrued expenses 78,755 85,780 Income taxes payable 1,005 2,455 Consumption tax payable - 121,265 Rent received in advance 567, ,905 Other current liabilities 73,108 56,495 Total current liabilities 19,127,750 19,426,378 Non-current liabilities: Investment corporation bonds 3,400,000 8,900,000 Long-term loans 68,100,000 62,600,000 Entrusted tenant leasehold and security deposits 7,470,893 7,539,497 Deferred tax liabilities 36,550 40,351 Total non-current liabilities 79,007,443 79,079,848 TOTAL LIABILITIES 98,135,193 98,506,226 NET ASSETS Unitholders' equity: Unitholders' capital 78,913,658 78,913,658 Deduction from unitholders capital (799,984) (799,984) Unitholders capital, net 78,113,673 78,113,673 Surplus: Retained earnings 2,393,534 2,588,710 Total surplus 2,393,534 2,588,710 Total Unitholders' equity 80,507,207 80,702,384 Valuation and translation adjustments: Deferred income on hedges 79,151 87,382 Total valuation and translation adjustments 79,151 87,382 TOTAL NET ASSETS 80,586,359 80,789,767 TOTAL LIABILITIES AND NET ASSETS 178,721, ,295,993 48

49 Statement of income Seventh Fiscal Period From May 1, 2017 to October31, 2017 (Unit: Thousands of Yen) Eighth Fiscal Period From November 1, 2017 to April30, 2018 Operating revenues Rental revenues 5,565,513 5,550,498 Other rental revenues 606, ,745 Gain on sales of real estate properties - 277,915 Total operating revenues 6,171,882 6,397,159 Operating expenses Property-related expenses 2,805,901 2,688,593 Asset management fees 510, ,616 General administration and custodian fees 16,575 22,298 Compensation for directors 3,000 3,700 Other operating expenses 63,698 93,599 Total operating expenses 3,399,539 3,320,806 Operating income 2,772,342 3,076,352 Non-operating revenues Interest income Refund of unpaid distributions - 1,386 Interest income on tax refund Other non-operating revenues Total non-operating revenues 1,021 1,987 Non-operating expenses Interest expense 253, ,979 Interest expense on investment corporation bonds 7,046 13,599 Amortization of investment corporation bonds issuance costs 2,067 4,619 Public offering costs - 111,562 Financing costs 114, ,439 Other non-operating expenses 1,934 1,580 Total non-operating expenses 379, ,780 Ordinary income 2,394,243 2,590,560 Net income before income taxes 2,394,243 2,590,560 Current income taxes 1,012 2,463 Deferred tax expenses (13) (99) Total income taxes 999 2,363 Net income 2,393,243 2,588,196 Retained earnings at beginning of period Retained earnings at the end of period 2,393,534 2,588,710 49

50 Statements of cash flows Seventh Fiscal Period From May 1, 2017 to October31, 2017 (Unit: Thousands of Yen) Eighth Fiscal Period From November 1, 2017 to April30, 2018 Cash flows from operating activities: Net income before income taxes 2,394,243 2,590,560 Depreciation expenses 768, ,966 Amortization of investment corporation bonds issuance costs 2,067 4,619 Public offering costs - 111,562 Financing costs 114, ,439 Interest income (44) (46) Interest expense 260, ,579 (Increase) decrease in accounts receivables operating (54,815) (29,826) (Increase) decrease in accounts receivables - (147,830) (Increase) decrease in consumption tax receivable 148,228 35,654 (Increase) decrease in income taxes receivable 2,251 - (Increase) decrease in short-term prepaid expenses (18,171) (2,597) (Increase) decrease in advance payments - (50,000) (Increase) decrease in long-term prepaid expenses 14,197 (26,134) (Increase) decrease in other current assets (17,833) (56,196) Increase (decrease) in accounts payable operating 98,039 (98,432) Increase (decrease) in accounts payable other (16,251) 128,416 Increase (decrease) in consumption taxes payable - 121,265 Increase (decrease) in rental received in advance (25,870) (11,057) Decrease in entrusted property and equipment held due to sale - 2,119,842 Increase (decrease) in other current liabilities (87,819) (17,690) Sub-total 3,582,079 5,829,093 Interest received Interest expenses paid (265,037) (252,864) Income taxes paid (652) (1,013) Net cash provided by (used in) operating activities 3,316,433 5,575,262 Cash flows from Investing activities: Purchase of entrusted property and equipment (248,591) (575,192) Net cash provided by (used in) investing activities (248,591) (575,192) Cash flows from Financing activities: Repayments of long-term borrowings (13,000,000) (5,500,000) Proceeds from long-term borrowings 13,000,000 - Payment of financing costs (113,895) - Proceeds from issuance of investment corporation bonds - 5,500,000 Payment of investment corporation bonds issuance costs - (38,922) Payment of own investment units acquisition (799,984) - Distribution to unitholders (2,965,743) (2,392,855) Net cash provided by (used in) financing activities (3,879,623) (2,431,777) Net change in cash and cash equivalents (811,782) 2,568,292 Cash and cash equivalents at the beginning of period 7,027,882 6,216,100 Cash and cash equivalents at the end of period 6,216,100 8,784,392 50

51 Tokyo Yokohama Fukuoka Sapporo Nagoya Osaka Office market environment Since 2015, office rents in Tokyo have been growing significantly compared to other major cities Large enterprises which are major target tenants for large-scale office buildings are concentrated in the prefectures including major urban areas. Office rent growth (Jan Jan. 2018) Office rent trends ( /tsubo) Location of domestic large enterprises by prefecture 1 Percentage of labor force population by region 2 14% 12% 10% 13.0% Tokyo 40.8% Osaka Prefecture 10.0% Aichi Prefecture 5.8% Kanagawa Prefecture 5.1% Fukuoka Prefecture 3.2% Others 35.1% Tokyo and the Three Surrounding Prefectures 30.0% Osaka Prefecture 6.7% Aichi Prefecture 6.1% Fukuoka Prefecture 3.9% Others 53.3% Prefectures including Major Urban Areas of Japan 46.7% 8% 6% 5.4% 4% 3.9% 3.7% 2% 1.9% 1.2% 0% 0 Source: Miki Shoji Co., Ltd. Source: Miki Shoji Co., Ltd. Source: The Small and Medium Enterprise Agency Information presented above is as of July Source: Ministry of Internal Affairs and Communications, Labour Force Survey (March 2, 2018) 51 1 Large Enterprises are companies which are not classified as small and medium enterprises by Small and Medium Enterprises Basic Act in Japan. 2 The percentages in the table are based on the average labor force population in 2017 of each prefecture based on an estimation model as published by the Ministry of Internal Affairs and Communications.

52 Yield gaps in global office investments Although trading yield in the Tokyo office market is relatively low, the spread is above 10-year average which is a standard of debt financing costs, and relatively high level compared to other major global cities Trading yield/cap rate Yield/cap rate spreads to 10-year government bond yields 10.0% 6.0% 8.0% 5.0% 6.0% 4.0% 3.0% 4.0% 2.0% 2.0% 1.0% 0.0% New York Los Angeles London Paris Tokyo Hong Kong 0.0% New York Los Angeles London Paris Tokyo Hong Kong Q year average 10-year range Source: Invesco Global Real Estate Asia Pacific, Inc. using data from Real Capital Analytics (RCA) as of December

53 Real estate capital liquidity and volatility among global cities Assets located in Tokyo have low rent volatility and relatively high yield compared to government bond Comparison of real estate capital liquidity and capital volatility among global cities Rent Volatility 3 Tokyo is relatively stable and profitable Yield Differential (Compared to Government Bond Yield) 2 Source: Jones Lang LaSalle K.K. 1 The figures presented above are from the third quarter of 2011 to the third quarter of Yield Differential (Compared to Government Bond Yield) indicates the average difference for the period described in note 1 above (expressed as a percentage) in direct yield (the estimated rent yield at the end of each quarter assuming lease for a standard period on standard terms at market rent by a high-quality tenant) of A Class Office Buildings and the ten year government bond yield in the relevant country. A Class Office Buildings refer to office buildings of the highest quality and specifications in the best locations in a market. These buildings should have high-quality standard furnishings, state-of-the-art systems and good accessibility. Classification criteria include overall external and internal appearance, entrance, lobby and passage way areas, floor layout, air conditioning, elevators and building management. 3 Rent volatility is calculated as the standard deviation of the year-on-year rate of change for market rent of A Class Office Buildings (as defined in note 2 above) in the relevant city for each quarter during the period described in note1 above. 53

54 Q1 Q3 2012Q1 Q3 2013Q1 Q3 2014Q1 Q3 2015Q1 Q3 2016Q1 Q3 2017Q1 Q3 2018Q1 Proprietary market research Focus on best long-term markets Labor force/ national vs major metropolitan areas Office supply & demand, vacancy trends of overall office vs large-scale office (Greater Tokyo) (mm people) % (K tsubo) % % 80 53% 160 8% % 60 51% 120 6% % 40 49% 80 4% % 20 47% 40 2% % 0 45% 0 0% Nationwide (left axis) Major Metropolitan Areas 1 (left axis) % of Major Metropolitan Areas (right axis) 1 Tokyo, Saitama, Chiba, Kanagawa, Aichi, Osaka and Fukuoka New Supply (left axis) Overall Vacancy (right axis) 2 Over 200 tsubo (661sqm) NRA of standard floor. Net Absorption (left axis) Large Scale Office Vacancy 2 (right axis) Source: National Institute of Population and Social Security Research * The Asset Management Company charted the above based on forecasts as of March Source: Commercial Property Research Institute * The Asset Management Company charted the above based on data reported by Sanko Estate as of May 2018.

55 Expected Income Return Proprietary market research Identifying market characteristics and cycles Expected return/ risk of Income 1 Current market cyclical position 2 High Hiroshima Market Size (NFA, Sqm) Rental/Value Growth Decelerate OSA, KYO, SAP, YOK NAG, SEN, HIR, FUK Peak TKO Rental/Value Decline Accelerate Sendai Fukuoka Sapporo Kobe TKO YOK FUK, HIR, KYO, SAP SEN, NAG, OSA Saitama Yokohama Osaka Nagoya Kyoto 20,000,000 5,000,000 Rental Value Capital Value Tokyo 500,000 Rental/Value Growth Start and Accelerate Trough Rental/Value Decline Decelerate and Stabilize Low Risk of Income Return High 1 Risk measure is represented by Standard Deviation and Expected Return is represented by Long-term Average 2 SAP-Sapporo, SEN-Sendai, SAI-Saitama, TKO-Tokyo, YOK-Yokohama, NAG- Nagoya, KYO-Kyoto, OSA-Osaka, KOB-Kobe, HIR-Hiroshima and FUK-Fukuoka Source: 55 Invesco Real Estate estimated based on ARES (AJPI Quarterly Data, 2005Q1-2014Q4) and CBRE, as of October 2015 Source: Invesco Real Estate estimated as of May 2018

56 Market overview Office market conditions Population growth potential in metropolitan areas Concentration of population and business activities support real estate demand The office sector benefits from long term expansion and upgrade demand alongside economic cycles Office market trends In 2017, due to stable fundamentals and active capital market movements, the total transaction volume of offices was around JPY trillion, an increase of 13%: 47% of the y-o-y increase of overall property Shift of Population Nationwide Major Metropolitan Areas % of Major Metropolitan Areas [Million] (%) Labor Force Distribution Tokyo M.A 30.0% Osaka Pref. 6.7% Aichi Pref. 6.1% Fukuoka Pref. 3.9% Others 53.3% Dynamics of Property Transactions (JPY Billions) Transaction Volume 1H Transaction Volume 2H Annual Office Volume E 2025E 2030E 2035E 2040E 2045E Major Metropolitan Areas 46.7% Source:National Institute of Population and Social Security Research Source: Ministry of Internal Affairs and Communications, Labor Force Survey (March 2, 2018) Source:REAL CAPITAL ANALYSTICS, as of May 2018 Continued population and labor force growth in major metropolitan areas is expected as long term trend A focus on core metropolitan areas helps capture stronger growth prospects and more investment opportunities 56 Office vacancy rates in major cities have been on a downward trend Strengthening demand for high quality space amid the economic recovery and increased BCP concerns after the 3.11 Earthquake have driven vacancies down in the Grade A segment Shift of Office Vacancy Rate (%) Tokyo 23wards Tokyo Grade A Osaka City Nagoya City Fukuoka City Source:CBRE (As of the end of September 2017)

57 Market overview Trends in office supply, demand and vacancy rates Office fundamental dynamics across metropolitan areas IOJ strategically focuses on the large scale high quality offices located in the core CBD within major metropolitan areas, aiming to take advantage of higher occupancy and solid income growth over the long term Source: Commercial Property Research Institute 57

58 Office forecast Supply demand balance in Tokyo Grade A office forecast 1 (K tsubo) New Supply (LHS) Net Absorption (LHS) Vacancy Rate (RHS) Forecast % 8% 6% 4% 2% % Grade B office forecast 2 (K tsubo) New Supply (LHS) Net Absorption (LHS) Vacancy Rate (RHS) Forecast % 8% 6% 4% 2% 0% 1 The definition of Grade A is as follows: location is in the Central Five Wards; GFA is 10,000 tsubo or more and NLA is 6,500 tsubo or more; typical floor plate is greater than 500 tsubo; building age is less than 11 years. 2 The definition of Grade B is as follows: location is in the Tokyo 23 wards; GFA is 2,000 to 7,000 tsubo; typical floor plate is greater than 200 tsubo; there are no criteria in terms of building age but building structure should satisfy new seismic criteria. 3 Vacancy rate is as of the end of December each year. Source: Prepared by IGRE based on information provided by CBRE as of March

59 Governance Strong alignment of interest and robust corporate governance Fee structure By aligning unitholder interests with those of IGRE through the adoption of an asset management fee structure based on total assets and Adjusted EPU during each business term, investment management is designed to focus on investor interests. Decision making process As the objective of maximizing unitholder interests, IGRE and IOJ will use a multi-tiered decision making process diagrammed below for purposes of property acquisition decisions, management decisions and all other important matters. Asset Manager s decision making process Link to adjusted EPU Management fee (Annual Percentage) Amount of Total Assets 0.45% (maximum percentage) Acquisition fee Acquisition Price 1.00% (maximum percentage) (percentage used on a transaction with a related party: 0.50% (maximum percentage)) By aligning unitholder interests with those of IGRE with the adoption of a management fee structure linking a portion of asset management fees to Adjusted EPU, the investment management of IGRE is designed to focus on unitholder interests. Management fee Adjusted EPU NOI % (maximum percentage) Disposition fee Disposition Price 0.50% (maximum percentage) (percentage used on a transaction with a related party: 0.25% (maximum percentage)) Origination Approval Discussion Resolution Discussion resolution Discussion resolution Discussion approval Origination Departments Compliance Officer Related Party Transactions / Compliance Concerns Compliance Committee Investment Committee Board of Directors Related Party Transactions Board of Directors of Investment Corporation Elimination of conflict of interest transactions Revise / Rejection Revise / Rejection Revise / Rejection Revise / Rejection Revise / Rejection Among members of the Invesco Group, the only company that engages in the real property-related business in Japan is IGRE. Accordingly, IGRE will have no conflicts of interest with IOJ in Japan in the asset management business, such as brokerage services, property management, building management, etc. 59

60 Rotation rules Asset Manager s rotation rules on information Sourcing of information on real estate and other transactions (Japan) Sourcing of information on real estate and other transactions in Japan for real estate funds of Invesco Real Estate (managed by the Investment Department ). Registration in the registry of received information on real estate and other transactions (Japan): regular meeting Registration in the Deal Log (Japan) of information on new deals that may match the mandate of one or more of the funds Holding of meetings for information on new transactions (Japan) Introduction of new deals to each fund manager Information on real estate and other transactions in Japan is registered from time to time, and the representative explains the outline of deals at weekly regular meetings of the Investment Department (managed by the Investment Department). If the Director of the Investment Division and the Head of the Investment Department determine that a specific new deal may match the mandate of one or more of the funds, the relevant information on the transactions shall be registered in the Deal Log (Japan). Meetings are held regularly (on a weekly basis). The participants include each of the fund managers related to real estate in Japan. (Meetings are held by the Director of the Investment Division and the Investment Department.) Initial judgment by each fund manager Determine whether any Fund expresses an interest to evaluate the relevant transaction If only IOJ expresses an interest to evaluate the relevant transaction Order under the rotation log If several funds, including IOJ, express an interest to evaluate the relevant transaction If IOJ ranks higher If IOJ ranks lower IOJ will consider the acquisition of the relevant property Other funds will consider the acquisition of the relevant property 60

61 About Invesco group As of the end of March 2018 Invesco Ltd. (NYSE: IVZ) is a leading independent global investment management firm, dedicated to helping investors worldwide achieve their financial objectives 1. Client Focus 2. Independent Investment Management Firm 3. Global Presence An "investor first" mindset and a commitment to helping clients pursue their financial goals US$934.2 billion in AUM around the globe Equity market cap of US$13.1 billion Over 7,000 specialized employees worldwide S&P 500 constituent Credit ratings of holding company, Invesco Ltd. Rating company Moody's Investors Service Standard & Poor's Fitch Ratings Rating A2 Stable A / Negative A- Stable Source: Invesco Group 1 For additional information go to invesco.com/investor relations/credit ratings. 61

62 Invesco real estate As of March 2018 Invesco Real Estate manages real property and securities through 21 offices in 16 countries worldwide with AUM of US$64.8 billion Invesco Real Estate s investment properties (sample) Office: Washington DC, USA Invesco Real Estate s AUM by real estate related assets (US$) 17.8bn 28% Real property North America Retail: Las Vegas, NV, USA Office: San Francisco, CA, USA Europe 5.7bn 9% 11.3bn 17% 30.0bn 46% Asia Global securities 47.0bn 72% Mixed-use: Frankfurt, Germany Office: London, UK Total 64.8 bn IOJ is managed by IGRE which belongs to the Invesco Group. The properties as described on the right side of this page are not owned by IOJ and it has no plan to acquire these properties 62 Retail: Seoul, South Korea The photographs are provided for illustrative purposes only. Logistics: Melbourne, Australia