（証券コード：3279/API） Activia Properties Inc. (Code: 3279/API)
Financial Results Presentation for the 18th Fiscal Period Ended November 2020 – January 2021 Section1 1. Executive Summary 2. Financial Results・Forecasts Section2 3. Internal Growth 4. External Growth
5. Finance・ESG Appendix
Relaxing green courtyard (A-PLACE Shinagawa Higashi） 1. Executive Summary
Measures to Reiterate “Unitholder Value Improvement” ~ Keys Points for Future Operation ~ 3 ➢ Moving to the new phase where API would be able to demonstrate unique advantages, such as prime location & high quality, after finishing the phase of supporting our tenants to continue their business operations ➢ Occupancy rate is expected to improve after marking its lowest rate during the first half of 2021. Thereafter, as soon as possible, we aim to return to the normalized operation level for all the property types excluding hotels.
Business environment Operational results Key points
• Potential size of the negative • Fulfilled our social impacts from COVID-19 re- responsibility with minimizing • Leasing strategy aiming at expansion in Japan and overseas negative impact on DPU internal growth is the priority Response to remains uncertain • Implement measures to improve • Continue to grant relief to COVID-19 • Vaccination will raise positive our unitholder value including retailers in response to expectations for post COVID-19 additional provision on sales- circumstances economic recovery linked rent to contract
• Leasing activities prolonged due to • Continued to achieve steady increased vacancies rent increase amid the dropping Focus on rent increase at tenant Overheated market rent level will be hit ratio • • replacement leveraging adjusted Office • Strong tenant demand respective locational and • In FY2021, demand & supply confirmed from latter half of the qualitative priority balance is expected to improve due period backed by our to recovery in corporate earnings competitiveness
• Retailers prefer to secure prime • Achieved rent increase in prime • Hybrid of retail and office location core properties location and locations in front reflecting diverse tenant needs of train stations Retail • Appetite to open stores is expected • Continue to negotiate with to come back in Summer 2021 or • Operation at suburban properties tenant candidates after AEO at later continues to remain steady Tokyu Plaza Omotesando Harajuku
Players continue to be keen in • Continue to consider asset Consider asset replacement with External buying assets at transaction market • • replacement consideration of risk actualization Growth Lender attitudes are unchanged • Issued Green Bonds with Aim to further lengthen maturity with paying close attention to • • favorable terms & conditions and reduce cost in refinancing & Finance COVID-19 impact 1. Executive Summary
Response to COVID-19 and Growth Strategy ~ Path to Post COVID-19 ~ 4
➢ Maintaining occupancy rate was prioritized in FP18 ended Nov. 2020 and secured capacity to perform leasing strategy in FP19 ending May 2021 and beyond ➢ Focus on leasing of offices in FP19 ending May 2021 and beyond, aiming particularly for rent increase leveraging rent gap upon tenant replacement ➢ Support DPU for FP19 & FP20 by continuing asset replacement and cost reduction at upcoming refinancing Period ended Period ending Period ending Nov. 2020 May 2021 Nov. 2021 (FP18) (FP19) (FP20)
Maintain occupancy with fulfilling social responsibility
Prioritize to maintain & raise rent level in office leasing Bottom ✓ Maintained occupancy rate of approx. 99% at end of DPU improvement by external growth Up FP18 ended Nov. 2020 and financial strategy ✓ Actual DPU were ¥400 ✓ Aim to improve DPU and higher than the initial ✓ DPU for FP19 and FP20 portfolio quality with forecast even after are forecasted to decline continued strategy of temporary rent reductions as we will lose some asset replacement were granted to 79 retail revenue due to downtime. tenants However, stabilized DPU ✓ Consider DPU will be improved after ✓ DPU bottomed up by ¥18 management such as to owing to sales-linked rent closely examining the rent stagger the timings of Stabilized structure newly introduced gap for each tenant acquisition and disposal of DPU to tenants that enjoyed assets to mitigate COVID- temporary rent reduction ✓ Aim to invite attractive 19 impact retailers at tenant replacement in street side ✓ Refinance scheduled in store of EDGE Shinsaibashi FP20 ending May 2021 is and other opportunities an opportunity to extend taking portfolio’s locational the duration and reduce advantage cost 1. Executive Summary
COVID-19 Impact on DPU ~ Breakdown of Factors in Actual and Forecast DPU ~ 5
Period ended Period ending Period ending Nov. 2020 May 2021 Nov. 2021 (FP18) (FP19) (FP20)
Reduced 0 sales-linked rent -200 Downtime
COVID -400
Impact Tempor -600 ary reduct- -800 ion
- -774 19 -1,000 -847 -860 -958 -1,200 (¥/unit) -1,195 As of As of As of Jul. Nov. Actual Jul. New New 2020 2020 2020
(¥/unit) As of Jul. 2020 9,500 As of Nov. 2020 Actual / New
(As of Jan. 2021) DPU
9,5459,547 9,000 9,450 9,280 9,280 9,300 9,040
8,500 ～～～～～～1. Executive Summary Flexible Response to Relief Requests and 6 Relief Requests from Retailers and Negotiation Status ~ Establishment of Alternative Lease Condition ~
Number of relief requests Breakdown of requests and negotiation status ✓ Incoming relief requests are settling ✓ Having agreed temporary rent reduction to 79 tenants, impact on DPU was smaller down as tenant sales showing signs of than the initial forecast by ¥400 recovery and thanks to governmental ✓ Possible impact of cases under negotiation will be relatively immaterial and we will supports work to reach to agreement during FP19 ending May 2021
Total (up to 2020.11) Negotiation outcomes by November 2020 Progress till end of Dec. 2020 210 requests # of # of Number of requests of temporary rent requests tenants reduction Temporary rent reduction 157 Reduction agreed 79 【Till Nov. 2020】 20 under negotiation 【Dec. 2020】 11 additional requests 25 Lease cancellation 39 No reduction 58 # of Payment deferral 14 Under negotiation 20 tenants 11 7 Temporary rent reduction：Response tailored to each Reduction agreed 11 No reduction 2 20.9 20.10 20.11 tenant considering tenant profiles and circumstances Lease cancellation : Impact is immaterial as they are Under negotiation 18 primarily small lease spaces Alternative lease conditions ✓ As a result of the temporary rent relief negotiations, 40% of the negotiated tenants agreed to the following alternative lease conditions Opportunity for internal growth Reduce underlying risk Rent increase after reduced Extension of non-cancellable 1 ３ rent payment 4 tenants period 9 tenants Lost revenue due to reduced rent will be • Approx.40% • Extended also notice period to secure retrieved in some cases of total 79 longer period for leasing activities tenants received Sales-linked rent newly applied temporary ２ reduction ４ /breakpoint change 8 tenants Lease renewal 12 tenants • Sales link rent structure introduction • Some agreements switched to enables us to grasp true sales conditions fixed-term lease of tenants, which will give a great advantage in future rent negotiations 1. Executive Summary New Contracts Are Steadily Progressing. We Still Hold Bargaining Office Leasing Status ~ Power Which Allows Us to Ask for Higher Rent from Existing Tenants ~ 7 1．Trend in new lease contract & cancellation 2．Trend in areas moved-in & moved-out ✓ Lease cancellations outnumbered new contract at the time of ✓ Moved-out area expanded for FP18 ended Nov.2020 and FP19 COVID-19 expansion phase, as many tenants wanted to reduce cost ending May 2020 due to increased number of tenant departures ✓ Newly contracted area is exceeding cancelled area since ✓ Aim to improve situation in FP19 through continued leasing October with gradually accumulated contract conclusions activities recently well performed
New lease Cancellation Moved Moved 契約締結 解約申出 (tsubo) 退去 入居 ネットNet (tsubo) contracted applied out in 1,500 2,000 Forecast base
1,000 1,000
500 0
0 △-1,000
Actual -500 △-2,000 (as of Dec. 2020）
-1,000 △-3,000 2018.518.5期 2018.1118.11期 2019.519.5期 2019.1119.11期 2020.520.5期 2020.1120.11期 21.52021.5期 -1,500 （第FP1313期） （第FP1414期） （第FP1515期） （第FP1616期） （第FP1717期） （第FP1818期） （第FP1919期） 20.4 20.5 20.6 20.7 20.8 20.9 20.10 20.11 20.12 3．Office occupancy at end of period Rent gap (Tokyo Office) ✓ Occupancy on rent generating basis is expected to bottom at ✓ Although rent gap was closer from FP17 due to our end of FP19 ending May 2021 and rebound for end of FP20 achievement in rent growth and adjusted market rent, we still ending Nov.2021 hold bargaining power with tenants for higher rent Occupancy Occupancy (contract引渡稼働率 賃料発生稼働率(cash basis) (¥/per month per tsubo) Basis) 29k 99.7% @29.0 TOAvg.平均賃料 TO rent 100% マーケット平均賃料Avg. market 97.5% rent @27.027k Rent gap 97.4% -6% 95%
@25.025k 92.6%
90% 2018.5 2018.11 2019.5 2019.11 2020.5 2020.11 2021.5 2021.11 @23.023k FP13 FP14 FP15 FP16 FP17 FP18 FP19 FP20 2018.11 2019.5 2019.11 2020.5 2020.11 18.11期 19.5期 19.11期 20.5期 20.11期 (Assumption) (Assumption) FP14 FP15 FP16 FP17 FP18 （第14期） （第15期） （第16期） （第17期） （第18期） 2. Financial Results・Forecasts Results Exceeded Initial Forecast and Revised Forecast DPU Summary for FP18 Ended Nov. 2020 ~ as Well as Previous Period Results ~ 8 ➢ With revenue increase in sales-linked rent at hotels, rent growth at lease renewal and benefit from asset replacement absorbing increase in expenses due to property-related taxes for three properties acquired in 2019, DPU for FP18 ended Nov. 2020 resulted to be ¥9,547 (+¥39 vs. previous period) ➢ Up ¥507 or 5.6% from initial forecast and up ¥97 or 1.0% from revised forecast as a result of measures taken to minimize the COVID-19 impact (¥/unit) vs. initial forecast 10,000 +¥507 vs. revised forecast +¥97
9,508 9,547
Benefit from Temporary 9,500 disposition & acquisition rent （Note 1） Temporary reduction business -501 closure Sales-linked rent +602 9,383 at hotels +162 Taxes & Increase public Benefit from 9,000 in expenses, asset dues etc. replacement -277 Downtime, Upward -28 etc. （Note 2） rent +205 -114 revision Expensed property- +112 related taxes for Tokyu Plaza Ginza (Land), Q ～ plaza HARAJUKU and ～ EDGE Shinsaibashi, etc. 8,5000 2020.5 2020.11 (FP17) (FP18) （Actual） （Actual） (Note 1) Benefit from disposition & acquisition refers to the amount equivalent to ¥125 per unit, calculated by deducting gain on sale and lost profit, etc. of A-PLACE Shinbashi Ekimae disposed of on March 19, 2020 from the operating profit of Ebisu Prime Square acquired on January 10, 2020. (Note 2) Benefit from asset replacement refers to the amount equivalent to ¥205 per unit, calculated by deducting lost profit of A-PLACE Shinbashi Ekimae disposed of as of March 19, 2020 from the operating profit of Ebisu Prime Square acquired as of January 10, 2020. 2. Financial Results・Forecasts Aim to Increase DPU from the Official Guidance through Cost Control and 9 DPU Summary for FP19 Ending May 2021 (Forecast) ~ Minimization of COVID - 19 Impact ~ ➢ DPU for FP19 ending May 2021 is expected to be ¥9,280, down ¥267 from FP18, as we incorporate some negative impacts such as drop in revenue from sales-liked rent at hotels. Also, we decided to factor in some buffer in our borrowing cost assumptions ➢ DPU for FP20 ending Nov. 2021 is expected to be ¥9,300, up ¥20 from FP19 due to increase in expenses incl. property-related taxes and interest rate despite COVID-19 impact mitigation such in downtime and rent reduction
(¥/unit) 9,547
9,500
9,280 9,300 Sales-linked Existing properties -98 rent Newly expensed -92 at hotels -240 Debt finance Temporary （Interest Taxes and Upward rent rate） rent reduction 9,000 public Debt -130 dues finance revision +149 (Interest rate （Interest Downtime, +48 -190 Increase Assumption: Temporary rate） etc. 0.775%) in rent -45 +147 reduction (Interest rate expenses Decrease Downtime, Assumption: -89 Upward +355 etc. in 0.80%) rent -385 expenses revision +95 ～ +38 ～ ～ 8,5000 2020.11 2021.5 2021.11 (FP18) (FP19) （FP20） （Actual） （Forecast） （Forecast） 2. Financial Results・Forecasts Solid Performance with Improvement in Key Indicators Performance by Key Indicators ~ Even Though DPUs are Forecasted to Decrease Due to COVID - 19 ~ 10 ➢ Both DPU and NAV per unit for FP18 ended Nov. 2020 saw increase thanks to growth in revenue and profit even under COVID-19 impact ➢ Continuously achieved robust internal growth driven by rent increase at office as well as lengthened average maturity and lowered interest rate of debt
vs. Previous FP19 ending FP20 ending Financial Result (FP18 ended Nov. 2020) period Management Forecast May 2021 Nov.2021
Operating revenue ¥15.1bn +¥0.1bn Operating revenue ¥14.9bn ¥15.3bn
(Gain on sale of real estate) (¥0.0bn) (-¥0.1bn) (Gain on sale of real estate) (-) (-)
Profit ¥7.4bn +¥0.0bn Profit ¥7.2bn ¥7.2bn
DPU (Note 1) ¥9,547 +¥39 DPU ¥9,280 ¥9,300
NAV per unit ¥462,945 +¥2,567 (Note 1) Includes distributions in excess of earnings of ¥33
Internal Growth in Office vs. Previous Properties Under Management vs. End of Debt finance vs. End of (FP18 ended Nov. 2020) period (End of Nov. 2020) May 2020 (As of Jan 15, 2021) May 2020
Ratio of area Number of Interest-bearing 54% -30pt 44 - ¥244.4bn +¥0.0bn with increased rent properties debts Increased LTV ¥91mn -¥91mn 46.5% +0pt amount AUM ¥509.2bn - (book value) Core asset Avg. remaining Increase rate 22.0% +6.7pt 79.7% - 4.5years +0.2years ratio (UR+TO) years to maturity Avg. interest Average rent ¥21.8k +¥0.2k 0.53% -0.02pt Appraisal value ¥606.9bn +¥1.3bn rate Commitment Rent gap -8% +2.6pt ¥21.0bn - Unrealized gain ¥101.3bn +¥2.0bn line
(Note 2) Figures for “Internal Growth in Office” are calculated based on all offices of Tokyo Office properties and Activia Account properties. Increased amount refers to the amount of the total difference before and after rent revision (at contract renewal or tenant replacement) adjusted to the period covered. Section1 1. Executive Summary 2. Financial Results・Forecasts Section2 3. Internal Growth 4. External Growth
5. Finance・ESG Appendix
Open entrance with double-height ceiling (A-PLACE Ebisu Minami) Rent gap 3. Internal Growth (overall TO) Healthy Progress in Rent Revision, -6％ Status of Tokyo Office Properties ~ Tenant Replacement Internal Growth at Record High ~ 12 1. Rent revision status ✓ Posted record-high for rent increase rate for FP18 ended Nov. 2020 thanks to lease renewals with major tenants despite COVID-19 crisis
Area 増額面積 Area subject to (up) 改定対象面積rent revision Flexible approach at rent reviews Area減額面積 Ratio増額改定割合 of area with (down) increased rent 78% 82% GLA 38,220 Step-up rent (image) Advantage for tenants tsubo 70% ✓ Avoid sharp rent rise 62% Rent Executed rent 61% increases in several phases Advantage for lessor
6,342 4,534 tsubo ✓ Stable growth of DPU tsubo 5,261 3,878 tsubo 3,317 tsubo 3,262 tsubo tsubo 19 tenants 2,089 779 tsubo tsubo to renew lease
After revision with rent increase -17 tsubo -11 tsubo Before Term in FP19 ending revision Increased amount +¥23.0mn +¥47.1mn +¥99.5mn +¥109.5mn +¥52.8mn Rent gap 1st year 2nd year 3rd year per period May 2021 and Increase ratio +5.2% +9.1% +12.0% +17.1% +20.9% -11％ -7％ beyond 2018.11 2019.5 2019.11 2020.5 2020.11 2021.5 2021.11 Trend in gap between FP14 FP15 FP16 FP17 FP18 FP19 FP20 contracted rent vs. market 2. Tenant replacement status ✓ Secured high level of rent thanks to ✓ Aim at further growth in rent increase with having achieved a record high competitiveness of our properties contracted rent amount in renewed lease for FP19 ending May 2021 (¥/per month per tsubo) +8.1% Increased Decreased @30.030k +9.7% rent amount rent amount Under +9.9% leasing (Note) Average increase rate +19.9% +4.4% activities Market rent @28.028k Area subject +29.1% ¥40.2 to tenant +1.3% -0.4% million replacement ¥31.4mn @26.026k +17.1% 2,401 tsubo ¥19.4mn +13.7% Rent in place +7.4% Rent gap ¥9.2mn ¥6.5mn @24.024k ¥2.4mn -14% ¥-0.3mn ¥-0.1mn Fixed-term 100% 100% 100% 86% 100% @22.022k contract 2018.11 2019.5 2019.11 2020.5 2020.11 2021.5 (Based on number of 2018.11 2019.5 2019.11 2020.5 2020.11 2021.5 Avg. contract contracts) FP14 FP15 FP16 FP17 FP18 FP19 term 2.5yrs 4.0yrs 3.2yrs 3.5yrs 2.9yrs 3.1yrs (Note) Based on contracts concluded by Dec. 2020, indicated in a red frame is progress after forecast announcement Rent gap 3. Internal Growth （AA overall) -17％ Recorded a Highest Rent Increase at Tenant Replacement Status of Activia Account Offices ~ and Upward Revision Progresses for FP19 and Beyond ~ 13 1. Rent revision status ✓ Ratio of area with increased rent settled at 11% for FP18 due to limited opportunities Offices of Activia Account of negotiation during crisis enhancing its presence ✓ For FP19 ending May 2021 and beyond, rent growth by upward revision progresses thanks to improved tenant sentiment ✓ Rate of AA offices in overall offices achieving rent GLA growth is on rise since FP16 ended Nov. 2019 Area Area subject to 20,786 増額面積(up) 改定対象面積rent revision Rent At tsubo (¥mn/period) 入替 改定 占有率AA office ratio Ratio of area with growth at upward 減額面積Area 増額改定割合 80% tenant (down) increased rent 50 revision 50% 5,707 replacement 60% tsubo 40 35% 40%
34% 3,612 29% tsubo 30 30% 4,009 11% tsubo 2,835 891 20 20% tsubo tsubo 1,494 254 270 595 tsubo tsubo tsubo tsubo 10 10% -97 tsubo Rent gap Increased amount +¥1.6mn +¥5.9mn +¥19.4mn +¥29.3mn +¥2.0mn 0 0% per period -20％ -13％ 2018.5 2018.11 2019.5 2019.11 2020.5 2020.11 Increase ratio +3.9% +5.2% +9.7% +8.6% +11.6%
2018.11 2019.5 2019.11 2020.5 2020.11 2021.5 2021.11 FP14 FP15 FP16 FP17 FP18 FP19 FP20 Trend in gap with contracted rent 2. Tenant replacement status ✓ Achieved also in AA offices a rent higher than ✓ Rent increase and increase ratio in FP18 saw record high thanks to tenant market replacement in approx. 1,000 tsubo Under (¥/per month per tsubo) +30.5% leasing @20.0 Increased amount 20k activities (Note) Average increase rate +11.8% +10.6% Area subject @18.0 +2.8% to tenant 18k +8.0% replacement +7.4% +22.6% ¥30.1 +19.3% +21.5% million 546 tsubo Market rent +20.6% @16.016k Rent gap ¥10.2mn ¥11.8mn ¥6.6mn ¥8.8mn ¥0.3mn -22% Rent in place Ratio of fixed- @14.014k term contract 17% 25% 14% 33% 57% (Based on number of contracts) 2018.11 2019.5 2019.11 2020.5 2020.11 2021.5 @12.012k FP14 FP15 FP16 FP17 FP18 FP19 2018.11 2019.5 2019.11 2020.5 2020.11 Avg. contract (Note) Based on contracts concluded by Dec. 2020, indicated in a red frame is progress after forecast announcement term 2.6years 2.2years 2.3years 2.3years 2.3years 3. Internal Growth Rejuvenation of Tenants Accelerates in API’s Offices Even ~ ~ 14 Tenant Replacement Status for Post COVID-19 Backed by Sustainable Trust to API １．Moved-in & moved-out tenant analysis Moved-in Moved-out
✓ Reasons for move-in reflect recent ✓ Led by service sector incl. ✓ Departures are primarily related to cost reduction and office trend in relocation such as to a better consulting farms, IT consolidation and only few are related to work-from-home place or within the same area companies follow backed by ✓ Service sector incl. ad and temporary staffing agencies stands out
立地・エリアLocation DX trend Finance, restaurant & Finance, Service Other Service Area extension内部増床 within construction, Work-from- bar, etc. Other (consulting, (Ad, temporary building of existing tenant etc. home Telecom 14% 20% etc.) Cost staff agencies, related 5% 規模（面積）Area size 30% reduction Real etc.) 29% 31% Wholesale 31% estate Specification Moved-in スペック（築年含む） manufacturer 5% Moved-out (incl. building age) （20 tenants） Office 10% Other consolidation Apparel （42 tenants） Landmark effect ランドマーク性 Real 19% 21% Work-from- 7% of location IT IT Wholesale estate home not 20% 17% manufacturer 20% related その他Other 21% 71% (Note) Based on number of responses, multiple responses allowed (Note) Based on number of contract (Note) Based on number of contract (Note) Based on number of contract for June 2020 and beyond for June 2020 and beyond for June 2020 and beyond ２．Replacement examples ３．Examples of tenants recently arrived TO-2 A-PLACE Ebisu Minami • A spacious feature located at west TO-18 Ebisu Prime Square (Code: 4431, listed on TSE Mothers side of and at 4-min. walk from train Smaregi, Inc. Rent Avg. DT station in Feb. 2019) increase +1.1 • All of newly contracted leases are • A DX company offering a cloud POS system for +26％ months from within Ebisu area (relocation or restaurants & bars and distributers area expansion within same • Relocated from within Ebisu area for area 5 blocks building) expansion, tenant utilizes the space as a • All blocks are scheduled to be sophisticated office equipped with a showroom 958 tsubo leased out AA-13 EDGE Shinsaibashi AA-10 Umeda Gate Tower • A standard floor of 260 tsubo, which is rare in Umeda DAIKYO INCORPORATED Rent Avg. DT • After the major tenant (Yammer) increase • One of major real estate developer known for +1.0 partial cancellation and subsequent Lions Mansion +33％ successful leasing, tenant mix is now month • Its Osaka branch decided to add one floor more diversified within this building in August 2020. The 4 blocks • Aiming for rent growth at tenant branch has occupied over 10 years 775 tsubo replacement in two blocks which will be vacated shortly memo 15 3. Internal Growth
Status of Retail Tenants ~ Tenants Have Already Started to Prepare for Post COVID-19 ~ 16
(Tokyu Plaza Omotesando Harajuku ・ １. Sales trend DECKS Tokyo Beach) ２. Actual cases of rent increase ✓ Except for inbound tourists, the traffic is returning. However, ✓ Diversified tenant demands are opportunities for API tenant turnover has not yet fully recovered as the consumers are ✓ We will continue to pursue internal growth in properties on not yet really circulating across variety of retail facilities good location especially in street-level stores
Tokyu Plaza Omotesando Harajuku AA-13 EDGE Shinsaibashi Rent increased +57% 80% DECKS Tokyo Beach at tenant replacement in the street-level store 60% Q plaza （246 tsubo – 1 block） Shinsaibashi
Opened in ✓ This tenant highly appreciated 40% Nov. 2020 this very visible & sizable block, Shinsaibashi PARCO (Daimaru which is located at the street- Shinsaibashi North corner of Midosuji Street and is 20% Building) Shinsaibashi suitable for the showroom function OPA Renovated in Sep. 2019 in order to improve the brand PUMA ・ Daimaru 0% Daimaru Shinsaibashi awareness. The background of south building Main Building this evaluation is derived from 20.5 20.6 20.7 20.8 20.9 20.10 20.11 20.12 Apple Store ・ Opened in reactivation of Shinsaibashi Feb. 2020 area, thanks to Daimaru ・ PRADA Louis Vuitton Maison reopening and many refurbished Lease structures & features Osaka EDGE Midosuji brand shops ・ DOLCE & Shinsaibashi GABBANA Diversified expiry dates Fixed-term ratio Appraisal value ✓ Contract terms are diversified ✓ Realized long-term ✓ Rent level exceeded the though the contract renewal with stable operation by value estimated at 62％ fixing lease terms EMPORIO ・ property acquisition a major tenant comes soon ARMANI ¥20bn ¥21.3bn (End of May 2020) (End of Nov. 2020) Lease contract already renewed for 5,700 tsubo in 25% Hotel in Sapporo 43,044 Blocks for ✓ This tenant highly appreciated the tsubo Fixed- TO restaurants & bars location in front of a station with term high customer-drawing power 3% 6% 1% 2% of Tokyo Office 17,352 ✓ Rent increase achieved despite 2,277 tsubo 3,917 1,021 1,450 89％ tsubo tsubo tsubo tsubo properties amid pandemic thanks to a Rent increased +20% proactive approach including 2021.52021.5 2021.112021.11 2022.52022.5 2022.112022.11 2023.52023.5 2023.112023.11 having switched to a fixed-term (第(FP19)19期) (第(FP20)20期) (第(FP21)21期) (第(FP22)22期) (第(FP23)23期) (第(FP24)24期) at lease renewal and beyond contract at the previous lease (55 tsubo – 1 block） (Note) Based on the total fixed rents in renewal and introduced step-up (Note) Percentages on the bar are based on the GLA commercial properties of UR&AA rent 3. Internal Growth More Time Is Needed to Return to Normal Operation Status of Hotels ~ ~ 17 Post-COVID Recovery in Demand and Growth Are Expected 1. Overview of hotels ２. KPIs UR-2 UR-8 UR-7 Property Tokyu Plaza A-FLAG SAPPORO Kobe Kyu Kyoryuchi Room occupancy RevPAR
Akasaka 25Bankan Avg. of FP18 Avg. of FP18 87% 77% ended Nov. 2020: 24% ended Nov. 2020: 27% 72% 93% 101%
74% 33% 30% 36% 37% 23% 25% 20% 19% 26% 23% 18% 23% 13% 13% 6% 4% 7% 6%
Akasaka Excel Hotel Sapporo Tokyu Hotel Oriental Hotel 12Dec.月 Jan.1月 Feb.2月 Mar.3月 Apr.4月 May5月 6Jun.月 7Jul.月 Aug.8月 Sep.9月 Oct.10月 Nov.11月 Dec.12月 Jan.1月 Feb.2月 Mar.3月 Apr.4月 May5月 6Jun.月 7Jul.月 Aug.8月 9Sep.月 10 Oct.月11 Nov.月 Tokyu REI Hotel 17th Period ended 18th Period ended 17th Period ended 18th Period ended May 2020 Nov.2020 May 2020 Nov. 2020 Operator Tokyu Hotels Tokyu Hotels Plan・Do・See (Note) Average of 3 hotels (Note) Average of 3 hotels, Y-on-Y Sales-linked rent # of rooms 487 575 116 ✓ Due to the staggered timing to recognize sales-linked rent as revenue, Recovery in Recovery slowed Number of weddings COVID-19 impact will be significant in performance of FP19 ending business needs incl. down after a is on uptrend backed international events rebound in by the reliability of the May 2021 and beyond and business travels infection in the city. hotel. 257.8 (in millions of yen) Operation is expected Recovery in Accommodation 185.6 status domestic tourists segment saw a 60.8 We is expected recovery to 2020 assume zero performance level sales-linked rent thanks to the 2019.11 2020.5 2020.11 2021.5 2021.11 improvement in ADR (FP16) (FP17) (FP18) (FP19) (FP20) (Forecast) (Forecast)
Akasaka・ 2021.5 (FP19) ３. Contracts Sapporo赤坂・札幌 2020.11(FP18) 2021.11(FP20) 2020.11(FP18) 2021.11(FP20) ✓ Discussion on contract renewal with the operator for Tokyu Plaza 神戸Kobe 2021.5 (FP19) Akasaka is ongoing. We will disclose related information after 20192019年 20202020年 20212021年 conclusion of a new contract
Akasaka Current Under negotiation Sapporo Current Contract renewed (Already signed) Kobe Current contract Oct. 2021 Mar. 2027 4. External Growth
Asset Replacement Strategy ~ No Change in Principal Philosophy ~ 18
➢ Asset replacement is continuously positioned as our principal policy for external growth. Asset to be disposed will be selected by the following criteria; ①Profitability ②Building age ③Competitiveness ➢ Assets to be acquired will be carefully selected in terms of growth potential. We are targeting to acquire offices in the south of JR Yamanote Line. In particular, those in the greater Shibuya area and Shinagawa・Gotanda area are the principal candidates Disposition policy Acquisition policy ①Profitability ✓ Southern area of JR Yamanote Line is known to be close proximity to the residential districts. Yamanote Line is known to be linking Properties with relatively low yield and limited upside potential major stations in Tokyo Contribution to DPU thanks Acquired Disposed ✓ to asset replacement (NOI yield after Replaced depreciation: 3.1%⇔2.5%) During FP Ended ✓ Upside potential when rent May 2020 gap closes 3 ✓ Increase in unrealized gain
②Building age 4 Properties requiring a large amount of cash in future for maintenance expenses and capital expenditure, etc. 8 ✓ Tokyo Kikai Honsha Building which had been Disposed Disposed suffering lowered competitiveness due to age During FP deterioration was disposed. We now own 5 12 Ended the land interest only 14 May 2014 ✓ Not just avoiding the risk, we obtained the 13 priority negotiation right once this 18 building gets redeveloped 2 1 ③Competitiveness 6 Properties with a risk of significant rent decrease, long-term vacancy, etc.
Acquired Disposed ✓ Acquired a recently-build property in the greater Replaced Shibuya area developed 9 16 During FP 15 10 Ended by Sponsor May 2019 ✓ Gain on sale of property was split over two periods (Note) Numbers refer to asset 11 numbers in Tokyo Office properties 4. External Growth
Sponsor Support ~ Aiming for External Growth through a More Developed Approach ~ 19 ➢ Continuing external growth adapting to market environment by utilizing the “asset-recycling model” in addition to “fund-recycling model” ➢ Aiming for maximization of unitholder value with taking full advantage of the collaboration with Sponsor along with enhancing corporate governance １. External growth supported by Sponsor ２. Variety of support from Sponsor ✓ Extend to the “asset-recycling model” to ensure asset Acquisition by source replacement between API and Sponsor in addition to “fund- recycling model” Third party Sponsor support ¥71.1bn Sponsor 81%
Fund-recycling model Warehousing Since IPO ¥32.2bn （Total） ¥364.6bn Held by Developed Development Asset Sponsor by Sponsor ¥124.2 ¥137.3bn Property Co-ownership of Asset-recycling model management properties ✓ Internal growth ✓ Enforce “same-boat Note support investment principle” Property Funds Tokyu Plaza UR-1 Asset Alternative Omotesando Harajuku replacement property UR-15 DECKS Tokyo Beach API Provide human Investment capital ✓ Additional unit ✓ Solid foundation of human acquisition conducted capital with expertise in during FP18 ended office and retail asset Tokyu Plaza A-PLACE Nov. 2020 management UR-1 TO-12 Shiodome Building TO-16 TO-18 Ebisu Prime Omotesando Harajuku Shinagawa higashi Square 10.5% 39/100 officers & employees *As of Nov. 30, 2020 *Number of employee seconded from Sponsor as of Aug. 2020 5. Finance・ESG
Stable Financial Management ~ LTV Management and Continuous Reduction of Debt Cost ~ 20 1. Trend in LTV ✓ LTV at the end of the FP18 ended Nov. 2020 was 46.5% (appraisal LTV was 39.0%), being controlled within the guidance range of 40% to 50% 50% 47.7% LTV 鑑定AppraisalLTV LTV Appraisal 46.5% 46.5% LTV 45.5% LTV
46.5% 39.0% 41.6%
39.0% 40% 39.1% Acquisition Rating 38.2% capacity (JCR)
AA(Stable) ¥36.6bn *Purchased by *at LTV 50% 2016.11 2017.52017.5 2017.112017.11 2018.52018.5 2018.112018.11 2019.5 2019.112019.11 2020.52020.5 2020.112020.11 Bank of Japan FP12 FP13 FP14 FP15 FP16 (第FP1010期) (第FP1111期) (第12期) (第13期) (第14期) (第15期) (第16期) (第FP1717期) (FP18第18期) * As of November 30, 2020 7.0年２. Trends in average period remaining to maturity and average interest rate 1.00% ✓ Lowered average interest rate while maintaining average remaining period to maturity. We will Avg. Fixed continue to work for debt cost reduction Avg. years 6.0年 Avg. interest 0.80%interest interest remaining to 0.67% 平均残存年数 平均金利rate rate ratio maturity rate 0.55% 0.56% 5.0年 0.53% 0.60% 0.53% 92%
4.0年 0.40% Avg. Long- remaining term 4.54.5 period to borrowing 4.1 4.4 years 4.1 yearsyears maturity ratio 3.0年 years years 0.20% 4.5 years 99% 2.0年 0.00% 2016.11 2017.5 2017.11 2018.5 2018.11 2019.5 2019.11 2020.5 2020.11 2016.11 2017.5 2017.11 2018.5 2018.11 2019.5 2019.11 2020.5 2020.11 * As of January 15, 2021 FP10 FP11 FP12 FP13 FP14 FP15 FP16 FP17 FP18 2021.1.15 (第10期) (第11期) (第12期) (第13期) (第14期) (第15期) (第16期) (第17期) (第18期) 5. Finance・ESG
Solid Financial Formation ~ Diversified Lender Formation and Well-balanced Maturity Ladder ~ 21 １. Refinance results, etc. ２. List of lenders Maturity extended and interest rate lowered as thanks to ✓ ✓ Diversified loan amounts and lenders the 4th and 5th refinance results as highlighted below
〈Before〉 〈After〉 Sumitomo Mitsui Trust Bank Amount Interest Interest MUFG Bank Duration Duration rate rate 9% Mizuho Bank 18% Sumitomo Mitsui Banking Corporation 1. Oct. 2020* ¥4.0bn 0.8yrs 0.17% Development Bank of Japan 10.0yrs 0.51% Mizuho Trust & Banking 2. 〃 * ¥0.48bn 0.6yrs 0.32% Resona Bank 18 lenders The Norinchukin Bank 3. Nov. 2020 ¥1.52bn 0.6yrs 0.32% 1.0yr 0.22% The Bank of Fukuoka 9% 4. Dec. 2020 ¥5.3bn 7.0yrs 1.08% 9.0yrs 0.45% Shinkin Central Bank ¥244.4 The 77 Bank 5. Jan. 2021 ¥6.7bn 7.0yrs 1.08% 9.0yrs 0.46% The Gunma Bank billion 24% Nippon Life Insurance Company 6. 〃 ¥5.0bn 1.0yrs 0.17% 7.5yrs 0.28% 9% Sumitomo Mitsui Insurance Company Taiyo Life Insurance Company 4.1yrs 0.66% 8.3yrs 0.41% THE NISHI-NIPPON CITY BANK Total / Ave. ¥23bn +4.3yrs -0.24pt 18% Tokyo Marine & Nichido Fire Insurance The Bank of Kyoto Investment Corporation Bonds * Refinanced by the 12th Investment Corporation Bond (¥4.5bn) ３. Maturity ladder ✓ Diversified maturity periods in preparation for refinancing and reestablished commitment line (¥21bn) for potential （¥bn）refinancing risk
20020 銀行等借入Borrowings 投資法人債Investment 新規RefinanceNew corporation borrowings Commitment line Credit line bonds 1.0 + ¥21bn 16015 ¥12bn 1.5 5.0 2.0 2.0 120 1.0 10
17.5 17.1 80 15.3 15.4 13.8 14.1 14.5 14.0 14.1 5 13.5 12.0 12.0 12.0 11.0 12.0 40 5.0 6.0 4.0 4.5 0 1.7 0 0.5 1.0 1.0 2021.521.5期 2021.1121.11期 2022.522.5期 2022.1122.11期 2023.523.5期 2023.1123.11期 2024.524.5期 2024.1124.11期 2025.525.5期 25.112025.11期 26.52026.5期 2026.1126.11期 2027.527.5期 27.112027.11期 28.52028.5期 28.112028.11期 29.52029.5期 29.112029.11期 30.52030.5期 31.112030.11期 ・・・ 32.52032.5期 ・・・ 2038.538.5期 5. Finance・ESG
Initiatives for ESG ~ Environment ~ 22
E (Environment)
API’s Materiality (core issues) Related SDG targets (to 2030) 7.3 Double the global rate of improvement in energy efficiency ・ Reducing environmental impact 12.5 Substantially reduce waste generation through prevention, reduction, recycling and reuse 12.8 Ensure that people everywhere have the relevant information and awareness for sustainable development and lifestyles in harmony with nature
1. Green certification （As of Nov. 30, 2020) 2. Environmental performance improvement GRESB Real Estate ✓ Continuous reduction of environmental impact through Green-certified assets Assessment PDCA cycle with Environmental Management System 66 % Environmental Management System
56 % GFA based
28
CASBEE DBJ Green BELS Assessment Energy Certification Building certification CO2 Emission Consumption
★★★★★ 1 property （MWh/㎡） （t-CO2/㎡） 0.26 0.096
0.092 New 0.24 Low-Carbon Small and Medium-Sized 0.088 S(★★★★★) 11 properties ★★★★★ 4 properties Model Building 0.22 A(★★★★) 13 properties ★★★ 2 properties 0.084 ★★ 4 properties A1 1 property ★ 1 property 0.20 0.080 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 （FY） （FY） 5. Finance・ESG
Initiatives for ESG ~ Social ~ 23
S (Social)
API’s Materiality (core issues) Related SDG targets (to 2030) ・ Human capital development 11.3 Enhance inclusive and sustainable urbanization and capacity for participatory, integrated and sustainable ・ Contribution to local community human settlement planning and management in all countries ・ Health and well-being of tenants 12.8 Ensure that people everywhere have the relevant information and awareness for sustainable development ・ Supplier engagement and lifestyles in harmony with nature 1. For local communities ３. For investors Utilization of Regional Revitalization ✓ Conducted IR activities adapted to under COVID-19 crisis Support Tax System by Asset Manager such as teleconferences and webinars ✓ Donated to a fundraising program to support ✓ Proactively disseminate information to investors even medical staff in Hokkaido pref. where A-FLAG under uncertain market environment including participation to Sapporo is located with aim to strengthen panel discussions organized by securities companies relationship with the local community Date Organizer Seminar title Participation to cleanup campaign by Sep. 1 Daiwa The future of office REITs post-COVID-19 Asset Manager The capital allocation of diversified REITs under With Nov. 5 Daiwa ✓ Continuously participate to community COVID-19 cleanups organized by a certified NPO “Green Nov. 24 Mizuho REIT top management interview Bird” Distribute assembly kit made by thinned wood in an owned property ✓ Distributed a musical instrument assembly kit made by thinned wood in an owned property to propose an opportunity to think about sustainability ２. For employee of Asset Manager ４. For suppliers ✓ Continue to endorse staggered work hours and work- ✓ Enacted “Green Procurement Standards” in Sep. 2020 to from-home to keep employee safe and healthy promote developed initiatives based on Sustainability Policies in corporation with suppliers ✓ Introduced a series of communication tools such as Zoom and Teams for training and meeting organization in order to ✓ Provided ESG trainings to PM companies in order to make adapt to diversifying working styles contribution to ESG in PM operation 5. Finance・ESG
Initiatives for ESG ~ Governance ~ 24
G (Governance)
API’s Materiality (core issues) Related SDG targets ・ Management framework 12.8 By 2030, ensure that people everywhere have the relevant information and awareness for sustainable corresponding to multifaceted development and lifestyles in harmony with nature social demand towards 16.7 Ensure responsive, inclusive, participatory and representative decision-making at all levels sustainable society 1. Organizational Structure 3. Appropriate decision-making process of the Asset Management Company ✓ Property acquisition transaction with related-parties requires ✓ Newly established Corporate Management Division in Aug. resolution by the Compliance Committee to avoid conflicts of 2020 for the purpose of strengthening the structure of the interest, etc. which helps to protect the interests of unitholder value management
Resolved with two-thirds majority vote including the votes of the Compliance Officer and all outside
experts
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Report Report the of to Board
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Manager Officer 2. Performance-based asset management fee ✓ API became the first J-REIT to introduce DPU-based
management fee structure Report Report ✓ Raised type II ratio effective from FP17 ended May 2020 in API to order to strengthen incentives to maximize unitholder value AM Fee type I AM Fee type II (asset based） （DPU / NOI based） Total assets at end of the DPU Resolved in unanimous vote of preceding FP × all members present including an outside expert × NOI 0.25％ × （Up to 0.3％) 0.00021% (Up to 0.00021％) (Note) Total AM fee of type I and type II is up to total assets at end of each period × 0.5％ 5. Finance・ESG Tenant Survey Conducted from June to July 2020 with Aim to Maintain 25 Initiatives for ESG ~ and Raise Property Value through Improvement in Their Satisfaction ~ ➢ Tenant survey is conducted regularly since IPO as we believe that improvement in tenant satisfaction level leads to higher property value ➢ The most recent survey results marked a significant improvement, and we aim at further satisfaction of tenants 1. Overall evaluation 3. Initiatives towards improvement in ✓ A preferable result with increase in “Very satisfied” and tenant satisfaction decrease in “Somewhat unsatisfied - Unsatisfied” Policy set after previous survey Satisfaction score Answers ・ Most of requests from tenants are related to wet area (toilet, hand basin, Very Somewhat unsatisfied・ 76.8 satisfied etc.) and cleanliness of building 29% unsatisfied 3% → Cost-effective and environment-friendly measures are taken for requests FY2020 20202020年度 on physical aspect
66.9 Physical aspect Service aspect Finish work and installation of Training session for 2017FY2017年度 before water-saving toilets in W.C. after cleaning staff FY2017 FY2020 18% 16%
Water saving Urinals -66%・toilets -47% Against COVID-19 2. Evaluation by subject Disinfection, anti-virus Improved from the previous survey in both physical and ✓ surface coating, etc. in service aspects Renovation before of elevators after common space Physical aspect Service aspect
Cleanliness Building Building Energy saving Hardware ハード 清掃状況of building 管理員keeper 清掃員cleaning staff -22% 77.0 75.1 74.1 Policy for further 74.0 72.0 improvement 69.8
68.8 ・ Implement PDCA cycle with continuously conducting surveys ・ Provide response tailored to each property with aim to increase rate of 63.9 “very satisfied” ・ Conduct works which contribute to both tenant satisfaction and FY2017 FY2020 FY2017 FY2020 reduction in environmental impact 5. Finance・ESG
Distribution of Unitholders ～ At End of FP18 Ended November 2020 ～ 26
1. Distribution of Unitholders by # of Unitholders and # of Units 2. Top 10 Unitholders
End of Nov. 2020 (the 18th Period) End of May 2020 (the 17th Period) Investment Ratio # of # of Name # of # of units (%) unit- Ratio Ratio unit- Ratio Ratio units units holders holders Individual, Custody Bank of Japan, Ltd. 6,904 91.5% 30,349 3.9% 7,140 92.0% 31,188 4.0% 1. 164,779 21.4% other (Trust accounts)
Financial 176 2.3% 452,150 58.6% 175 2.3% 443,133 57.5% The Master Trust Bank of Japan, Ltd. institution 2. 124,293 16.1% (Trust accounts) Other domestic 168 2.2% 88,744 11.5% 167 2.2% 81,154 10.5% company 3. Tokyu Land Corporation 81,137 10.5% Foreign institution, 273 3.6% 160,534 20.8% 252 3.2% 163,488 21.2% other The Nomura Trust and Banking Co,. Ltd 4. 35,472 4.6% Securities (Investment accounts) 21 0.3% 39,447 5.1％ 24 0.3% 52,261 6.8％ company Custody Bank of Japan, Ltd. Total 7,542 100.0％ 771,224 100.0% 7,758 100.0％ 771,224 100.0% 5. (Securities investment trust accounts) 22,030 2.9%
Foreign Securities institution, company other 6. Mizuho Securities Co., Ltd. 17,901 2.3% Securities 39,447 Individual, 273 (3.6%) company other Other domestic 21 (0.3%) Foreign （5.1%） company institution, 30,349 7. SSBTC CLIENT OMNIBUS ACCOUNT 13,037 1.7% 168 (2.2%） other （3.9%） 160,534 Mitsubishi UFJ Morgan Stanley Securities Financial 8. 8,579 1.1% institution （20.8%） Co., Ltd. By By 176 (2.3%) Investment Unitholder unit 9. The Bank of New York 133970 8,311 1.1% 7,542 771,224 Other Financial domestic 10. State Street Bank West Client Treaty 505234 8,304 1.1% company institution 88,744 452,150 （58.6%） Total 483,843 62.7% Individual, other （11.5%） 6,904 (91.5%) Disclaimer
This document is provided solely for informational purposes and should not be construed as an offer, solicitation or recommendation to buy or sell any specific product including investment units. Any decisions making on investment absolutely rest on your own judgment and on your own responsibility.
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The information contained in this document is not audited and there is no guarantee regarding the accuracy and certainty of the information. Analyses, judgments and other non-factual views of the Asset Manager merely represent views of the Asset Manager as of the preparation date. Different views may exist and the Asset Manager may change its views in the future.
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Disclaimer for Dutch Investors
The units of the Investment Corporation 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, the Asset Manager has notified the Dutch Authority for the Financial Markets of its intention to offer these units in the Netherlands. The units of the Investment Corporation 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 Asset Manager nor the Investment Corporation is subject to the license requirement pursuant to the Wft. The Asset Manager 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 the Investment Corporation’s home page (https://www.activia-reit.co.jp/en/) to access information provided under Article 23 of the AIFMD.