Presentation of Financial and Other Information

In this document:

Š References to “Japanese GAAP” are to generally accepted accounting principles in . References to “U.S. GAAP” are to generally accepted accounting principles in the United States. References to “IFRS” are to the International Financial Reporting Standards. Unless otherwise stated, we have prepared our financial statements in accordance with Japanese GAAP.

Š All financial and other information presented in this document is unaudited. We have prepared our interim financial statements, which are not included in this document, for the period from September 11, 2017, the date of our incorporation to February 28, 2018 in accordance with Japanese GAAP, which differs from generally accepted accounting principles in other countries, such as the IFRS or U.S. GAAP. Our forecast financial information that appears in “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019” has been prepared on a basis consistent with accounting policies to be applied in preparing our financial statements in accordance with Japanese GAAP.

Š References to “yen” and “¥” are to the lawful currency of Japan.

Š We have truncated certain financial and operational data amounts to the relevant digit, and rounded percentages to the nearest decimal point, unless otherwise indicated. Therefore, numbers in tables may not add up to totals.

Š Our fiscal periods cover every six months ending on the last day of February and August of each year, except that our first fiscal period began on September 11, 2017 (the date of our incorporation) and will end on August 31, 2018.

Š References to “we”, “our”, “us”, and similar references are to Takara Leben Real Estate Investment Corporation.

Š References to the “Asset Manager” are to Takara PAG Real Estate Advisory Ltd.

Š References to the “Sponsors” are to Takara Leben Co., Ltd., PAG Investment Management Limited, Kyoritsu Maintenance Co., Ltd. and Yamada Denki Co., Ltd.

Š References to “Takara Leben” are to Takara Leben Co., Ltd.

Š References to the “Takara Leben Group” are to an enterprise group composed of Takara Leben and its subsidiaries (including Leben Community Co., Ltd.) and affiliates.

Š References to “PAG” are to PAG Investment Management Limited.

Š References to “PAG Group” are to a group of companies having its head office in Hong Kong to which PAG belongs.

Š References to “Kyoritsu Maintenance” are to Kyoritsu Maintenance Co., Ltd.

Š References to the “Kyoritsu Maintenance Group” are to a group of companies composed of Kyoritsu Maintenance and its subsidiaries.

Š References to “Yamada Denki” are to Yamada Denki Co., Ltd.

1 Š References to the “Yamada Denki Group” are to a group of companies composed of Yamada Denki and its subsidiaries.

Š References to the “Sponsor Group” are to Takara Leben Group, PAG Group, Kyoritsu Maintenance Group and Yamada Denki Group.

Š References to “Sumitomo Mitsui Trust” are to Sumitomo Mitsui Trust Bank, Limited.

Š References to “tsubo” are to the Japanese unit of area measurement equal to the size of two standard tatami mats, or approximately 3.3058 m2.

Š References to the “ITA” are to the Act on Investment Trusts and Investment Corporations of Japan and the regulations thereunder.

Š References to “J-REIT” or “J-REITs” are generally to listed Japanese investment corporations (to¯shi ho¯jin) incorporated pursuant to the ITA that invest primarily in real estate or certain real-estate related assets.

Š References to the “global coordinator” are to SMBC Nikko.

Š References to the “Japanese joint lead managers” are to SMBC Nikko and Mizuho Securities Co., Ltd.

Š References to the “international manager” are to SMBC Nikko Capital Markets Limited.

Š References herein to “the offerings” are to the international offering and the Japanese offering described herein, unless the context otherwise requires.

Š References to “Tokyo metropolitan area” are to Tokyo, Kanagawa, Chiba and Saitama prefectures.

Š References to “ metropolitan area” are to Aichi, Gifu and Mie prefectures.

Š References to “Osaka metropolitan area” are to Osaka, Kyoto and Hyogo prefectures.

Š References to “Fukuoka metropolitan area” are to Fukuoka prefecture.

Š References to Japan’s “four major metropolitan areas” are to the Tokyo, Nagoya, Osaka and Fukuoka metropolitan areas.

Š References to Japan’s “major regional cities” are to ordinance-designated cities, core cities, specially- designated cities and prefectural capital cities, excluding those included in Japan’s four major metropolitan areas. References to “ordinance-designated cities” are to the cities of Sapporo, Sendai, Niigata, , Hamamatsu, Okayama, and Kumamoto as of the date of this document. References to “core cities” are to Japanese cities that have a population of at least 200,000 persons and are designated as such by an ordinance under the Local Autonomy Act of Japan. References to “specially-designated cities” are to Japanese cities that had a population of at least 200,000 persons and were designated as such by an ordinance under the same act at the time of the abolishment of the system of specially-designated cities as of April 1, 2015.

Forward-looking Statements

This document includes forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “aim”, “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “intend”, “may”, “plan”, “potential”, “predict”, “seek”, “should” or “will”, by the negative of these terms or by other similar terminology. These statements discuss expectations, identify strategies, contain projections of our financial condition or results of operations or state other forward-looking information. In particular, this document contains our forecasts for our revenues, profit and the distributions expected to be made on our units in “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019” and forecasted net operating income yields for the properties in our anticipated initial portfolio in “Anticipated Initial Portfolio—NOI Yield”, all of which are highly speculative. The forward-looking statements in this document are subject to various risks, uncertainties and assumptions about our business. Potential risks and uncertainties that could cause our actual results to differ materially from our expectations include, without limitation:

2 Š any adverse conditions in the Japanese economy;

Š our lack of operating history;

Š the lack of full financial statements for any of the 27 properties in our anticipated initial portfolio;

Š our ability to acquire properties to execute its growth strategy;

Š the effect of changes in prevailing interest rates, including as a result of additional monetary easing by the Bank of Japan;

Š inability of us to close all or any of our anticipated acquisitions of properties;

Š competition for tenants for properties and difficulty of finding replacement tenants;

Š high geographic concentration of our real estate portfolio in certain areas, especially the Tokyo metropolitan area;

Š our ability to promptly sell properties in response to changing economic, financial or other conditions;

Š any natural or man-made disaster, such as an earthquake, acts of war or terrorism or other casualty event;

Š our access to financing necessary to expand its property portfolio;

Š our lack of control over operating costs;

Š the performance of us and other key third-party service providers, to which we are required to assign its business, administrative and management functions; and

Š potential legislative, regulatory and accounting changes in Japan.

In addition to the foregoing, important risks and factors that could cause our actual results to differ materially from our expectations are discussed under “Risk Factors” and elsewhere in this document. Furthermore, with respect to any forward-looking statements in “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019” and “Anticipated Initial Portfolio—NOI Yield”, prospective investors must read them together with all assumptions presented in such section. Our expectations expressed in these forward-looking statements may not be achieved, and our actual results could differ materially from and be worse than our expectations. We do not intend, and disclaim any duty, to update or revise any forward-looking statements contained in this document to reflect new information, future events or otherwise. We caution you not to place undue reliance on the forward-looking statements contained in this document.

3 RISK FACTORS

An investment in our units involves significant risks. You should consider carefully the risk factors described below as well as other information contained in this document before making any investment decision.

Property and Business Risks

Any adverse conditions in the Japanese economy could adversely affect us

We are a J-REIT listed on the and engaged in the management and leasing of selected office, residential, hotel, and and other properties located in Japan. As such, our business performance and the cash distributions we make depend largely on the performance of the Japanese economy as a whole, the outlook for which remains highly uncertain and involves factors beyond our control.

A number of macroeconomic factors may adversely affect the Japanese economy, including its real estate industry, such as:

Š volatility in market interest rates and Japanese and international stock markets;

Š volatility in the exchange rate of the Japanese yen against the currencies of Japan’s major trading partners;

Š uncertainty regarding the full effects of the expansionary monetary and fiscal measures that the Japanese government and the Bank of Japan are pursuing in an effort to counter deflation and the exact nature of the structural reforms to complement such stimulus measures;

Š the potential impact of the increase in the consumption tax rate in Japan, which is expected to increase from 8% to 10% in October 2019, and other planned or potential increases in personal income, social security and other taxes;

Š demographic factors such as Japan’s aging population and decreasing overall population;

Š downgrades of Japan’s credit rating by several ratings agencies in recent years, as well as any future downgrades;

Š the deterioration of political relations between Japan and some of its neighboring countries or any of Japan’s major trading partners, political instability and fighting in the Middle East and any act of violence, terrorism, war, armed conflict, or provocation, including ongoing tensions with North Korea relating to its nuclear program;

Š political developments abroad, such as the policies pursued by the presidential administration in the United States and the planned withdrawal of the United Kingdom from the European Union, commonly referred to as “Brexit”;

Š any deterioration in the world economy more generally, including stagnation in advanced countries, market volatility in China and uncertainty regarding the growth prospects of a number of emerging countries as well as the uncertain impact of the further increases in interest rates by the U.S. Federal Reserve Board and the timing for any rise in interest rates in other developed countries; and

Š volatility in oil prices and other commodity prices.

If the Japanese economy and demand for office, residential, hotel, and retail and other properties deteriorate, there may be downward pressure on rents and property values of our properties, which would have a material adverse effect on our profitability and the value of our portfolio. Also, uncertain prospects of the overall global economy may lead many potential tenants to be conservative in their decision-making and discourage them from switching from other properties to ours or expanding their use of our properties. The business of our tenants or end-tenants may suffer from a downturn or continued weakening of the economy, which may prevent them from making contracted lease payments, cause them to seek to renegotiate or terminate their leases pursuant to the terms of such leases or otherwise, or cause our tenants or end-tenants to become insolvent, any of which could reduce our rent revenue. Any such reduction in revenues would adversely affect our business, financial condition and results of operations.

4 Furthermore, any adverse conditions in the Japanese economy could adversely affect our access to debt or equity financing, making it difficult for us to secure necessary financing in the future, including to refinance existing debt, to acquire additional properties, or to carry out our expansion plans. For example, at the time of the global financial crisis following the turmoil in the subprime market in the United States and the collapse of Lehman Brothers Holdings, Inc. and many of its affiliates in 2008, the Japanese economy was adversely affected and the J-REIT sector experienced extreme difficulties in securing necessary funds through debt or equity financing.

Any of these or other factors arising out of adverse conditions in the Japanese economy, individually or in the aggregate, could have a material adverse effect on our properties, and, in turn, on our business, financial condition or results of operations and result in decreases in our unit price and the distributions that we can make on our units.

We have no operating history and this document contains limited financial data, making it difficult to evaluate our track record, prospects and future financial results

We were incorporated on September 11, 2017 and will be acquiring our initial portfolio of 27 properties with the net proceeds from the offerings and concurrent borrowings under the anticipated term loans. We therefore have no historical operations and do not have a track record for you to evaluate and you should not rely upon the past performance in Japan of our Sponsors and their group entities to predict our future results. Accordingly, an investment in our units will be subject to a number of risks generally associated with a new business. We may not be able to effectively manage our growth, implement our investment strategy or otherwise operate successfully, which could have a material adverse effect on our ability to generate earnings, to make distributions to our unitholders, and the value of our units may decline.

We prepared the financial forecasts included in this document without the benefit of historical financial statements for any of the 27 properties in our anticipated initial portfolio

We prepared the financial forecasts included in this document under the caption “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019” based partly upon certain assumptions and the limited information available to us about the 27 properties in our anticipated initial portfolio. See “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019—Key Assumptions Underlying the Forecasts Announced on June 25, 2018”. While we believe the bases for the forecasts and the assumptions underlying our forecasts are reasonable, neither historical financial statements nor historical unaudited financial data exist for these 27 properties. In the absence of historical financial statements, we used unaudited financial data we obtained from the current owners (or their related persons) of each property to prepare the forecasts. Such financial data contain substantially less detail than would be contained in audited financial statements, the notes thereto, supporting schedules and related financial disclosures. In addition, although such financial data are typically subject to the seller’s representation as to their accuracy, the absence of an audit may enhance the risk that they are materially inaccurate. Had full financial statements for these properties existed, the financial forecasts included herein may have been materially different. Without such full financial statements, prospective investors may not have sufficient information to evaluate the reasonableness of the forecasts contained in this document, the assumptions underlying these forecasts and the merits and risks of an investment in our units.

Financial forecasts are necessarily speculative, and one or more of the assumptions underlying the forecasts may turn out to be incorrect. Other potential risks and uncertainties that could cause our actual results to differ materially from our forecasts are set forth in “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019”, as well as elsewhere in “Risk Factors”.

We may not be able to acquire properties to execute our growth and investment strategy in a manner that is accretive to earnings

We intend to leverage our strengths to develop a diversified portfolio of properties, including office, residential, hotel and retail and other properties, and our flexibility in shifting our investment focus, in terms of both asset type and geographic area, to capture the most compelling acquisition opportunities, to produce stable returns and cash distributions to our unitholders and achieve steady increases in the value of our portfolio over the medium-to-long term. See “Our Business—Our Investment Strategy”. Our ability to achieve profitable rental revenues and asset growth in order to increase unitholder value thus depends largely on our ability to identify and acquire such properties and retain tenants on favorable terms. Like other J-REITs, we may face increases in real

5 estate prices, as well as interest rates, and greater competition from other real estate investors as described below, making it difficult for us to continually identify suitable properties that we can purchase on acceptable terms. In addition, our future acquisitions may have lower revenues or higher costs than we expect, which would lower the overall rate of return on our portfolio, and this decrease in revenue may, in turn, result in lower earnings available for cash distributions per unit, particularly if we fund the acquisition of such properties by issuing additional units.

We also face significant and intensifying competition from other real estate investors in acquiring attractive properties. Our competitors may have greater financial resources and may be better positioned to acquire properties. These real estate investors could enjoy significant competitive advantages that result from, among other factors, a lower cost of capital or tolerance for lower returns, stronger industry relationships and enhanced operating efficiencies. This competition will result in increased prices paid for properties, and as a result we may not be able to acquire attractive properties on favorable terms in the future. Such factors may impede our ability to expand our property portfolio and thus may have a material adverse effect on the future growth of our business.

Increases in volatility of prevailing market interest rates, including as a result of the Bank of Japan’s additional monetary easing, could increase our interest expense and may result in a decline in the market price of our units

While interest rates in Japan have remained low following downward adjustments by the Bank of Japan as a result of the global financial crisis in 2008, it is possible that stimulus measures implemented by the Bank of Japan could cause interest rates to increase in the future. Historically, since April 2013, the Bank of Japan has been pursuing a major policy for quantitative and qualitative monetary easing, including the establishment of an inflation target to achieve price stability of 2% in terms of the year-on-year rate of change in the consumer price index in Japan. To achieve this inflation target, the Bank of Japan has announced that it would increase the yen monetary base as well as the amounts of outstanding Japanese government bonds and exchange-traded funds on the Bank of Japan’s balance sheet, among other measures. In February 2016, the Bank of Japan introduced a negative interest rate of minus 0.1% for new reserves in excess of those required, subject to further decreases as necessary. In September 2016, the Bank of Japan introduced a new framework for strengthening quantitative and qualitative monetary easing with yield curve control. There is no guarantee, however, that the Bank of Japan continues monetary easing. Also, measures implemented in the future by the Bank of Japan may, among other factors, increase market volatility and result in increased interest rates in Japan in the future.

In addition, market interest rates can be affected by the monetary policy of other countries. Monetary easing affecting the U.S. dollar, Japanese yen and Euro could potentially result in rapid inflation, which the Bank of Japan or other central banks may not be able to control. In addition, it is unclear how the fiscal policies of the U.S. presidential administration will affect inflation. In response to inflationary trends, central banks in major economies may increase policy interest rates, which could have an even more pronounced adverse effect on our financial condition and results of operations, as well as our ability to pay distributions on our units.

To the extent that we have any debt with unhedged floating rates of interest or we take out new debt, any increase in market interest rates could result in increased interest payments on our borrowings, which in turn could reduce the amounts available for cash distributions to unitholders. Higher interest rates may also limit our capacity for short- and long-term borrowings, which would in turn limit our ability to acquire properties. Thus, higher market interest rates could cause the market price of our units to decline. We may attempt to mitigate our exposure to interest rate volatility by using interest rate hedging arrangements that convert variable interest rates to fixed interest rates and by diversifying our debt to include more long-term borrowings and investment corporation bonds with varying maturity dates. However, these measures may not be effective in reducing our exposure to interest rate changes. For example, the counterparties to our hedging arrangements may not honor their obligations. Failure to effectively mitigate our exposure to interest rate volatility may have a material adverse effect on our financial condition and results of operations, as well as our ability to pay cash distributions on our units.

In addition, we believe that investors consider the distribution yield on J-REIT units, expressed as a percentage of the cash distribution amount against the price of the units, relative to yen market interest rates, such as the interest rate on ten-year Japanese government bonds, as an important factor in deciding whether to buy or sell J-REIT units. If market interest rates rise, prospective purchasers of J-REIT units may expect a higher distribution yield, and the market price of our units could decline if our distribution yields do not increase. Higher interest rates would not, however, result in more funds being available for us to distribute to unitholders

6 and, in fact, would likely increase our borrowing costs and might decrease our profits and our funds available for cash distribution.

We may not close all or any of the acquisitions of the properties in our anticipated initial portfolio

We intend to acquire 27 new properties in connection with the offerings. See “Anticipated Initial Portfolio”. As of the date of this document, we have entered into purchase agreements for the acquisition of these 27 properties, subject to satisfaction of certain customary closing conditions provided in the respective purchase agreements. Although we currently expect to acquire all of these properties, there can be no assurance that these conditions will all be satisfied. Any such non-satisfaction of a closing condition may prevent us from completing all or any of the anticipated property acquisitions. A delay in or failure to close the acquisition of some or all of these properties, or our inability to locate suitable alternative properties in a timely manner or at all, may have a material adverse effect on our business, financial condition and results of operations.

The past experience of our Sponsors and their group companies in the Japanese real estate market is not an indicator or guarantee of our future results

The past experience of our Sponsors and their group companies in the Japanese real estate market does not imply or guarantee any level of our future performance, especially since our business and that of the Asset Manager differ from the businesses operated by them. Moreover, although Takara Leben and PAG sponsored our formation and the formation of the Asset Manager and Takara Leben, PAG Real Estate Holdings Limited, an affiliate of PAG, Kyoritsu Maintenance and Yamada Denki are shareholders of the Asset Manager holding 60%, 30%, 5% and 5% of issued and outstanding shares respectively, we and the Asset Manager are required by law to make investment decisions with respect to our portfolio independently from our Sponsors. Our performance depends on our ability and that of the Asset Manager as well as future events and market conditions, which may be different from or inconsistent with those faced by our Sponsors and their group companies in their businesses, including business strategies, regulatory settings, local and national economic circumstances, degrees of competition and circumstances pertaining to the real estate market.

Our reliance on our Sponsors and their group companies could have a material adverse effect on our business

We rely on our Sponsors and their group companies in a number of important ways. Sponsors have entered into sponsor support agreements with the Asset Manager, which, among other things, state that each Sponsor will offer the Asset Manager information on the proposed sale of any property that meets the Asset Manager’s investment guidelines, which the Sponsor owns. In the case of PAG, this extends to properties owned by funds that it manages or advises. In the case of Takara Leben, this extends properties owned by its subsidiaries or by funds which are managed or advised by Takara Leben or its subsidiaries. In addition, Takara Leben has granted the Asset Manager preferential negotiation rights with respect to any such properties. Further, our Sponsors have agreed to provide other operational support, including secondment of personnel to the Asset Manager, market research support, property acquisition and management support. See “Our Business— Utilization of Support from the Sponsor Group” and “The Sponsor Group—Sponsor Support Agreement and Other Affiliate Support Agreements”.

While our Sponsors have agreed to provide these and other types of support, there can be no assurance that such efforts will be sufficient to manage our growth, implement our investment strategy or otherwise allow us to operate successfully. In addition, if our or the Asset Manager’s relationship with our Sponsors or their group companies deteriorates, or if our Sponsors or their group companies otherwise ceases to or fail to provide support to us or the Asset Manager, there may be a material adverse effect on our business, financial condition and results of operations.

Moreover, there may be limitations on our ability to acquire properties through the sponsor support agreements that the Asset Manager entered into with our Sponsors. For example, although Takara Leben has granted us preferential negotiation rights for properties that meet the Asset Manager’s investment guidelines, which it or its subsidiaries own, or which are owned by funds that Takara Leben or its subsidiaries manage or advise, there is no obligation for Takara Leben to sell us properties for which we receive such preferential negotiation rights, unless both parties agree on pricing and other terms. In other words, Takara Leben is only obligated to negotiate in good faith based on preferential negotiation rights granted under the sponsor support agreement. In addition, while PAG has agreed to provide us with information regarding properties that meet the Asset Managers investment guidelines, which it plans to sell, there can be no assurance that the properties in which we and the Asset Manager express an interest will be sold to us on terms that are acceptable.

7 There are potential conflicts of interest between us and certain Sponsor Group companies, including the Asset Manager

The Asset Manager owes us fiduciary duties under the FIEA and its asset management agreement with us. However, the fact that Takara Leben and PAG Real Estate Holdings Limited, an affiliate of PAG, own 60% and 30% of the voting rights of the Asset Manager, respectively, gives rise to potential conflicts of interest in performing their obligations to us. In addition, Takara Leben and PAG will provide the Asset Manager with key personnel, which could potentially lead to a conflict of interest. Further, while the Asset Manager has various arrangements with Sponsor Group companies pursuant to which they will provide support to us, none of these companies has any non-compete or similar obligations that would prevent it from pursuing its own interests in real estate business in a manner that may conflict with our interests. Therefore, there may be conflicts of interest if Sponsor Group companies’ interests are not aligned with those of our other unitholders. While we aim to align the interests of our Sponsor Group companies with our own, by encouraging our Sponsor Group companies to hold investments in our units (see “Our Business—Our Competitive Strengths—Alignment of interests of the Asset Manager and our Sponsor and unitholders—Interest-aligning investments by our Sponsors”), such efforts may be insufficient to adequately align our interests. If the Asset Manager or any Sponsor Group company acts or is caused to act in the interest of our Sponsors or Sponsor’s Group company or companies or affiliates in a manner compromising our interests or those of our other unitholders, there may be a material adverse effect on our business, financial condition and results of operations. Furthermore, Takara Leben Group and PAG Group operate real estate investment businesses, respective investment targets of which may overlap with those of ours. If our Sponsors, contrary to obligations under sponsor support agreements, fail to provide support to us including provision of property sale information, or amend or terminate sponsor support agreements in light of such overlaps in investment targets, or otherwise, there may be a material adverse effect on our business, financial condition and results of operation. In addition, we expect to acquire 27 properties including those from Takara Leben or funds managed by PAG Group and we intend to purchase additional properties from these Sponsors or Sponsor Group companies in the future as well. In connection with such purchases, there may be conflicts of interest if these Sponsor or Sponsor’s Group companies pursue their own or their client’s interest, and the Asset Manager’s internal rules on related-party transactions may not be sufficient to prevent the Asset Manager from acting against our best interest. See “Asset Manager—Rules Regarding Related-Party Transactions”.

Certain properties in our anticipated initial portfolio cater to a single tenant or a small number of tenants, which may make it difficult to find substitute tenants or to sell or re-lease such property upon tenant default or early lease terminations

Certain properties in our anticipated initial portfolio are leased to, or will be leased to, a single or small number of tenants, especially with regard to hotel and retail properties, which tend to cater to a single tenant or a limited number of tenants. These types of properties are relatively illiquid compared to other types of properties. This illiquidity will limit our ability to quickly respond to changes in economic or other conditions with respect to such properties. For instance, if any of these individual lessees were to terminate their leases or have difficulty in making rent payments, we may be forced to decrease rent in order to secure a substitute lessee or incur significant refurbishment expenses to prepare a property for a new lessee, or forced to endure a longer vacant period for leasing. In addition, in the event we are forced to sell the property, we may have difficulty selling it to a party other than the tenant due to the special purpose for which the property may have been designed. These and other limitations may affect our ability to sell or re-lease properties and thereby have a material adverse effect on our business, financial condition and results of operations, thereby decreasing the amounts available for cash distributions and the market price of our units.

We may face significant competition in seeking tenants and it may be difficult to find replacement tenants

Properties in our anticipated initial portfolio and the properties that we acquire in the future may face competition for tenants with other properties on the basis of a wide range of factors, including location, appearance, functionality, age, construction quality, maintenance and design. We will also compete for tenants on the basis of rent levels and other lease terms. This competition may create a number of risks for our business. Tenants may consider our competitors to have superior properties, and any of our tenants may terminate or decide not to renew their leases with us in the future. As a result, we may lose tenants to our competitors or have difficulty in renewing leases or renting properties with terms favorable or acceptable to us. An increase in the number of competing properties, particularly in close proximity to our properties, could increase competition for tenants, negatively affect the relative attractiveness of our properties and force us to reduce rents or incur additional costs in order to make our properties more attractive.

8 If we are not able to consistently compete for tenants or if we are unable to retain or find suitable replacement tenants, our occupancy rates may decline and we may have to take measures, such as lowering rent levels, in order to fill vacancies. This, in turn, could have a material adverse effect on our business, financial condition and results of operations.

The properties in our portfolio may become concentrated in certain areas, especially the Tokyo metropolitan area

Although our target portfolio is intended to achieve geographic diversification, our portfolio may become concentrated in certain areas from time to time, especially the Tokyo metropolitan area, during the course of its implementation of our growth strategy. In such event, our business may become highly susceptible to circumstances and developments that may adversely impact those areas.

Illiquidity in the real estate market may limit our ability to grow or adjust our portfolio

Real estate investments can be illiquid, and we may be limited in our ability to purchase or sell properties or related assets promptly in order to grow or adjust our portfolio as we deem appropriate. If liquidity in the Japanese real estate market is not sufficient for us to acquire suitable properties on acceptable terms, or to sell properties promptly on acceptable terms in response to changes in the economy or our focus on investment guidelines, our business, financial condition and results of operations could be materially and adversely affected. See “—Legal and Regulatory Risks—Some of the properties that we may acquire in the future may be held in the form of stratified ownership (kubun shoyu¯) interests, and our rights relating to such properties may be affected by the intentions of other owners”.

We may suffer large losses if any of our properties incurs damage from a natural or man-made disaster or acts of violence or war

Damage to any one or more of the properties in our anticipated initial portfolio, due to a natural disaster, such as a flood, volcanic eruption, earthquake or tsunami (including calamities as a result of any of the foregoing, such as land liquefaction), or due to a man-made disaster, such as a fire or industrial accident, could adversely affect our business, financial condition and results of operations. For example, Japan is earthquake-prone and has historically experienced numerous large earthquakes that have resulted in extensive property damage, such as the Great East Japan Earthquake in March 2011, which resulted in a tsunami and leakage of radioactive material at the Fukushima nuclear power plants, and the series of earthquakes that occurred on or after April 14, 2016 centering on Kumamoto prefecture, which caused major manufacturers’ plants and facilities in the region to suspend production. Furthermore, our tenants may be adversely affected by any natural disaster, causing them to leave our properties or seek lower rent.

Although we have obtained customary engineering and seismic risk reports to which we refer in the acquisition and management of our properties, these reports are highly speculative and subject to numerous assumptions that severely limit our ability to evaluate or mitigate these risks. Therefore, a large disaster may have a material adverse effect on any or all of our properties or tenants and, in turn, our business, financial condition and results of operations.

Furthermore, we may be impacted by various disputes between Japan and some of its neighboring countries, such as China and North Korea, which may result in acts of violence or war if they continue or escalate. These events may directly impact the value of our assets through damage, destruction, loss or increased security costs. More generally, even when Japan is not involved, any act of violence or war, including armed conflicts, could result in increased volatility in or damage to, the worldwide financial markets and economy. Increased economic volatility could adversely affect our tenants’ ability to pay rent on their leases or our ability to borrow money, issue new investment corporation bonds or issue new units at acceptable terms and have a material adverse effect on our financial condition, results of operations and ability to pay distributions to unitholders.

Hotel and retail properties in our anticipated initial portfolio may entail risks uncommon to other J-REITs that invest in other types of properties, including risks related to sales-linked rent

Hotel and retail properties are expected to constitute 6.9% and 3.1%, respectively, of our anticipated initial portfolio on an anticipated acquisition price basis. In addition to the performance of the Japanese economy overall, the performance of our portfolio may therefore be affected by the performance of the Japanese hotel and retail industries, which involves factors beyond our control and the control of our tenants. Trends in these industries may negatively affect the demand for hotel and retail properties and the financial health of our tenants.

9 Furthermore, although our anticipated initial portfolio does not include a property with a lease that provides for sales-linked rent, to the extent that we have such leases in the future, our rental revenue will be more vulnerable to such tenants’ business risks, risks associated with tenants’ arbitrarily lowering rent and risks associated with inaccuracy of rent calculations. A decline in demand or the ability of our tenants to pay rents may reduce the revenue we can generate from our properties and thereby have a material adverse effect on our business, financial condition and results of operations, thereby decreasing the amounts available for cash distributions and the market price of our units.

We may not complete the expected debt financing as contemplated in this document, in which case we may not be able to acquire some or all of the properties that we intend to acquire, or we may be forced to accept alternative financing with less advantageous terms

We intend to finance the acquisition of the 27 properties in the anticipated initial portfolio in part through borrowings entered into with financial institutions as described under “Factors Expected to Affect Financial Condition and Result of Operations—Capital Resources and Requirements—Commitments”. However, as of the date of this document, we have only received non-binding letter of intent from the lenders with respect to this debt financing. We expect to enter into definitive loan agreements immediately prior to the closing of the offerings, and we therefore will not receive the proceeds of the debt financing until after the closing of the offerings. The execution of such loan agreements will be subject to due diligence procedures and the final internal approval by each of the above lenders, in addition to the satisfaction of certain other requirements. In addition, we expect that the loan agreements will include customary closing conditions, including the closing of the offerings. Thus, there is a risk that we will not be able to complete the debt financing as contemplated in this document. If we are not able to procure debt financing, we may not be able to acquire some or all of the properties that we intend to acquire. If we cannot complete the acquisition of any of our properties, we may be required to pay termination penalties under the relevant purchase agreement to the seller. Moreover, even if we are able to procure alternative debt financing, such financing may be on terms that are less favorable than those that are described in this document. Among other things, such alternative loan arrangements may include higher interest rates, or impose more covenants or restrictions, than the loan arrangements we currently anticipate. Any such failure to complete the debt financing as currently contemplated may have a material adverse effect on our business, financial condition and results of operations.

Any inability to obtain financing for future acquisitions or to refinance our existing debt could adversely affect the growth of our portfolio or our financial condition

Our ability to use our cash flow from operations to finance property acquisitions is severely limited since we must distribute in excess of 90% of our distributable profit for each fiscal period to our unitholders in order to receive and maintain favorable tax status under the Act on the Special Measures Concerning Taxation of Japan, or the Special Taxation Measures Act. See “Our Business—Operation and Property Management Policies—Distribution Policy”.

Therefore, we depend on outside financing, including debt financing and refinancing and funds obtained from additional equity offerings, for our property acquisitions and refinancing needs. Our reliance on outside financing to expand our property portfolio creates potentially significant risks for our business and the value of our units, including the following:

Š Based on factors such as a negative assessment of our financial prospects by potential financing sources or adverse conditions in capital or other financial markets, any of our sources of external funding could cease to be available on terms satisfactory to us, as was the case for the J-REIT sector generally after the global financial crisis of 2008.

Š If we are unable to refinance our indebtedness, if so required, or are otherwise unable to obtain financing at times and on terms satisfactory to us or at all, we may be forced to abandon potential acquisitions or to sell assets on unattractive terms or at unfavorable times.

Š Restrictions on our activities under debt financing arrangements may prevent us from borrowing additional funds or issuing new investment corporation bonds at the times or upon terms sufficiently favorable for property acquisitions, capital expenditures or general corporate purposes, or to refinance our indebtedness at maturity on terms as favorable as those of our original indebtedness. See “—Liquidity and other limitations on our activities under debt financing arrangements may adversely affect our business, financial condition and results of operations”.

10 Š We may lose acquisition opportunities to our competitors if our cost of capital increases as compared to that of our competitors, making us particularly vulnerable during times of economic downturn.

The failure to obtain financing for our future acquisitions, including the properties in our anticipated initial portfolio, could in turn have a material adverse effect on our business, financial condition and results of operations.

Liquidity and other limitations on our activities under debt financing arrangements may adversely affect our business, financial condition and results of operations

We may incur significant additional indebtedness to finance future acquisitions under credit facilities, further borrowings or new investment corporation bonds. The limitations imposed on us by any such credit facility, loan agreements or investment corporation bonds could have significant adverse consequences, including the following:

Š We may be subject to restrictive covenants in connection with any future indebtedness that may restrict our operations and limit our ability to make cash distributions to unitholders, to dispose of the properties or to acquire additional properties. Furthermore, we may violate restrictive covenants contained in the loan agreements we execute, such as the maintenance of debt service coverage or loan-to-value ratios, which may entitle the lenders to require us to collateralize our properties or demand that the entire outstanding balance be paid.

Š Our cash flow may be insufficient to meet our required principal and interest payments, which may trigger events of default that also, entitle lenders or bondholders to require us to collateralize our properties or demand that the entire balance be paid.

While we currently do not intend to collateralize any of the properties in our anticipated initial portfolio, if we were to encumber any of our properties and were unable to meet interest or principal payments of such indebtedness, such properties could be foreclosed upon by or otherwise transferred to our lenders. Furthermore, we may be prevented from arranging debt financing quickly, or at all, due to the tax laws, which require that any lender of ours must be a certain qualified institutional investor as specified by such tax laws in order for us to maintain favorable tax treatment. Any or all of these factors could have a material adverse effect on our business, financial condition and results of operations.

A high loan-to-value, or LTV, ratio may increase our exposure to changes in interest rates and have a material adverse effect on our results of operations

We seek to keep our LTV ratio, which is the ratio of the aggregate principal amount of our interest- bearing debt to the total assets of our portfolio as a whole, at a conservative level. We have set an upper limit of 60% as a general rule for our LTV ratio in order to facilitate stable financial conditions. An increase in our LTV ratio may increase our interest expense and exposure to changes in interest rates, which in turn may adversely affect our results of operations. Furthermore, even if we maintain a conservative LTV ratio, macroeconomic factors or market conditions beyond our control could increase our interest expense or exposure to changes in interest rates. Any such change may reduce or increase the volatility of the amount of cash distributions to our unitholders.

Any future borrowings or issuances of investment corporation bonds would be senior to our units upon liquidation, which could adversely affect the market price of our units

We may, at any time in the future, decide to increase our capital resources through borrowings or bond issuances. Our decision to do so will depend on market conditions and other factors beyond our control, and we cannot predict or estimate the amount, timing or nature of such borrowings or issuances. Because, upon liquidation, our lenders and bondholders will be entitled to receive our available assets prior to distribution to the holders of our units, any such future borrowings or issuances may adversely affect the market price of our units.

We may suffer impairment losses relating to our properties

Pursuant to Japanese GAAP, we may from time to time be required to recognize impairment losses in relation to certain long-lived assets, including land and buildings, which will be recorded as charges to our income statement during the periods to which any such impairments relate. Because any such impairments would correspondingly reduce our profit and retained earnings for the period in which they occur, our cash distributions may be significantly reduced for any such period as a result of such impairment.

11 The Act on Partial Amendment to the Income Tax Act, etc., or the 2015 Tax Reform Act, includes provisions which enable us to avoid the occurrence of possible additional taxable income due to the different treatment of impairment losses under Japanese GAAP and Japanese tax law, by making cash distributions in excess of retained earnings as defined in our articles of incorporation of an amount equivalent to the amount recognized as an increase in allowance for temporary difference adjustments, or ATDA. We plan to use any ATDA to avoid additional taxable income arising from the tax-accounting mismatches should they occur. However, depending on the amount of the impairment losses and the amount of ATDA we are able to recognize for the relevant period, we may not be able to fully offset such additional taxable income, which could result in reduced distributions for the relevant period.

Decreases in tenant leasehold deposits and/or security deposits may increase our funding costs

Consistent with industry practice in the real estate sector in Japan, we expect that the tenant leases of our properties will generally require the tenants to make tenant leasehold deposits and/or security deposits. We expect to receive deposits from tenants in the total initial amount of ¥2,469 million in connection with our anticipated initial portfolio. We generally do not expect to be required to pay interest on these tenant leasehold and security deposits. We may, from time to time, use such tenant leasehold deposits and/or security deposits as a source of funding, upon release from the trustee, in cases where the relevant trust agreement permits such use. While these deposits may reduce our cost of capital in relation to other borrowings for property acquisitions or otherwise, if the size of these deposits relating to our properties decreases, or if we need to repay them more quickly than expected, we may be required to obtain funding at a higher effective cost of capital, thus having a material adverse effect on our portfolio returns.

Our lack of control over operating rental revenues and certain costs may adversely affect our business

Our operating costs, such as property and facility management fees, utilities, depreciation, property taxes and insurance, are largely fixed. Our rental revenues, on the other hand, may decrease due to rising vacancy rates or decreased rents. Also, some of our operating costs, such as utility expenses, are not fixed and may increase, and our tenants may not agree to pay any or all of these costs. Competitive conditions in the local rental market may limit our ability to increase rents to cover such operating cost increases while maintaining our occupancy rates. Any such decreases in rental revenues or increases in operating costs could thus have a material adverse effect on the profitability of our portfolio, thereby decreasing the amounts available for cash distributions and possibly the market price of our units.

We may lose rental revenues in the event of lease terminations, decreased lease renewals, the default of a tenant as a result of financial difficulty or insolvency, or careless management of our properties by our tenants

If our tenants terminate their lease agreements during the term of the lease or fail to renew their lease agreements at the end of the term, our overall occupancy rate may fall, resulting in a decrease in expected revenues. Furthermore, we may be limited in protecting ourselves against such losses by contractual provisions that limit a tenant’s right to terminate, such as early termination penalties, if the courts refuse to uphold such contractual provisions or limit their effect. In addition, tenants have a statutory right to demand the reduction of rent under certain circumstances, which may cause a reduction in rent or a refund of excess rent order by the court. Tenants may also seek the protection of bankruptcy laws, which could result in delays in the receipt of rent payments, our inability to collect rental income, delays in the termination of the tenant’s lease or a delay in our ability to re-let or sell the space.

Moreover, the daily management of our properties is generally in the hands of our tenants. Careless or imprudent management of our properties may result in a material adverse effect on the value of our properties.

Master lease agreements expose us to the risk of becoming an unsecured creditor of our master lessees in the event of their insolvency

We may enter into master lease arrangements for some of the properties in our anticipated initial portfolio. Under a master lease agreement, the master lessee has or will have the primary leasehold interest in the property that is subleased to the end-tenants. The master lease agreements for properties in our anticipated initial portfolio will be all “pass-through” master lease agreements except for one property, Higashi-Ikebukuro Central Place. Under a pass-through master lease agreement, the master lessee in principle only pays us the rent received from end-tenants, thus exposing us primarily to the credit of end-tenants. However, in the event that the master

12 lessee becomes insolvent before transferring rent payments to us, we would become the unsecured creditor of the master lessee, with respect to substantially all rent generated from the property. As a result, we are also exposed to the credit risk of master lessees of “pass-through” master lease arrangements.

In addition, to the extent we enter into a fixed-rent master lease agreement in the future, the master lessee will pay us fixed rent amounts regardless of rent payments made by the end-tenants, thus subjecting us to the credit of the master lessee. Therefore, any insolvency of the master lessees of such properties would lead to losses and could have a material adverse effect on our business, financial condition and results of operations. In addition, under a master lease agreement, if we give the master lessee a right to sublet the property in part or as a whole, we may not be able to choose end-tenants of the property or force tenants to leave. Any of the foregoing could materially and adversely impact our business, financial condition and results of operations.

Our cost of complying with regulations applicable to the properties that we intend to acquire could adversely affect the results of our operations

Although we believe that the properties in our anticipated initial portfolio are substantially compliant with current requirements imposed by applicable administrative laws and local ordinances, the enactment of new or additional regulations, including those related to building standards and handicap access, could force us to incur costs in modifying our properties to comply with such regulations or prevent us from disposing of our properties. In addition, such new regulations may cause us to incur significant additional costs in making any improvements to our properties. Furthermore, there is a possibility that the use or areas of the property may be restricted when such improvements are made depending on the zoning of the property location if such property is a large-scale facility designated under the City Planning Act of Japan, or City Planning Act. The ultimate cost of any such compliance requirements is not currently ascertainable but, if significant, could have a material adverse effect on our business, financial condition and results of operations.

We may be exposed to regulatory and financial risks related to climate change

Climate change is receiving increasing attention from scientists and legislators. The debate is ongoing as to the extent to which the climate is changing, the potential causes of this change and its potential impacts. Some attribute climate change to increased levels of greenhouse gases, including carbon dioxide and methane, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. Under Japanese law or regulations of local governments, owners of certain real estate properties may face obligations to report on or limit their emissions of greenhouse gases. Any such measures may force us to rebuild or repair our properties in order to reduce emissions or obtain emissions credits. We or any of our tenants may also face new requirements mandating a substantial reduction or regulation in greenhouse gas emissions and implementation of further measures, which could have far-reaching and significant impacts on us and our tenants. Any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on us or demand for our properties.

Any property defect may adversely affect our financial condition and results of operations

The properties in our portfolio may have defective title, design, construction or other defects or problems that may require significant capital expenditures or repair or maintenance expenses, or may result in payment or other obligations to third parties, despite our due diligence investigations of these potential issues prior to our acquisition. For instance, the borders of a property may not be completely settled when we purchase it, potentially causing us to incur expenses in resolving our property rights. Moreover, the engineering and other reports that we rely upon as part of our investigation of a property are subject to potential inaccuracies or deficiencies, because many of these property defects are difficult or impossible to ascertain due to the limitations inherent in the scope of the inspections, the technologies or techniques used therein and other factors. Any or all of these factors could give rise to significant expenses, which may, in turn, have a material adverse effect on our business, financial condition and results of operations.

Moreover, statutory or negotiated representations and warranties made by the sellers of properties that we intend to acquire may not protect us from liabilities arising from property defects. Although in most real property sales transactions in Japan, the seller owes statutory warranty obligations to the purchaser for any latent defects in the property, such statutory warranty obligations may be contractually waived by the purchaser and often are limited in the case where the seller is a licensed real estate dealer. Furthermore, in addition to being subject to possible statutory or contractual limitations, our ability to enforce claims under representations and warranties may also be subject to contractual and statutory limitations, including limitations with respect to

13 properties purchased from an insolvent owner. The seller’s financial condition, and the possibility that we may only be able to assert a claim against a limited liability special purpose entity with immaterial assets, which may have been dissolved and liquidated following the sale of its properties, may also limit our protection under statutory and contractual warranty obligations. Many of the sellers of the properties in our anticipated initial portfolio are limited liability special purpose entities with immaterial assets aside from the properties that we acquired or expect to acquire from them, and were dissolved or are expected to be dissolved and liquidated following the sale of the properties. Any of these factors could subject us to potentially significant liability for property defects, which would have a material adverse effect on our business, financial condition and results of operations. In addition, any defects in a property may lower its value or make it difficult to dispose of such property as we deem appropriate. Even if we were able to sell such a property, there is a risk that the defects could result in potentially significant expenses. Additionally, as we are generally deemed to be a registered real estate transaction manager under the Building Lots and Building Transaction Business Act of Japan, under certain circumstances we are not permitted to ask the purchaser to waive statutory warranty obligations. In such a case, we could bear unforeseen expenses in relation to defects of the disposed property and repairs of damages. Any of the factors above could have a material adverse effect on our business, financial condition and results of operations.

Since October 2015, a number of Japanese engineering firms have admitted to falsifying data in installation reports for foundation piles in relation to construction projects and potentially performing faulty installations. To the best of our knowledge, none of these engineering firms were involved in the construction of the properties we intend to acquire. However, we cannot guarantee that these or other engineering firms did not falsify installation data or perform faulty installations of foundation piles in relation to the construction of any of these properties. In addition, if falsification of installation data or faulty installation of foundation piles is revealed to be pervasive in Japan, general confidence in Japan’s property market may be adversely affected, which in turn may adversely affect our business.

We rely on expert appraisals and engineering, environmental and seismic reports, which are subject to significant uncertainties

We obtain appraisals as well as engineering, environmental and seismic reports to assist us in determining whether to acquire properties and how to operate properties that we own or will own. However, these reports are not intended to be a representation as to the past, present or future value or engineering, environmental or seismic condition of the relevant property. Furthermore, different review methodologies or different sets of assumptions could affect the results of such reports and the conclusions drawn from them. Thus, different experts reviewing the same property could reach significantly different conclusions.

Property appraisals are largely based on forward-looking information that is inherently speculative and difficult to verify, and the appraisal values provided to us may not reflect the prices that we could obtain upon the sale of the relevant property. The appraisal values of the properties provided to us represent the analysis and determination of the relevant appraiser based on his or her particular assumptions, estimations and judgments about the value of the properties appraised, which necessarily include subjective elements. Different sets of assumptions or different estimations and judgments could result in significantly different appraisal values for the same property. Thus, other qualified appraisers could reach materially different conclusions regarding the value of our properties, including those we intend to acquire. See “Appraisals and Engineering, Environmental and Seismic Reviews—Appraisals”.

Although the engineering, environmental and seismic reports we have obtained for our properties, including those in our anticipated initial portfolio, have not revealed any liabilities that we believe will have a material adverse effect on our business, because such risks are often hidden or difficult to evaluate, the reports we have obtained may not meaningfully assess such risks. Furthermore, the reviews conducted in preparation of such reports typically have a more limited scope than similar reviews conducted in similar situations in other jurisdictions. If we were to discover any significant, unidentified engineering, environmental or seismic liabilities, the value of the affected property could fall, we may be required to incur additional costs and discharge of the liability could be time consuming. See “Appraisals and Engineering, Environmental and Seismic Reviews—Engineering, Environmental and Seismic Reviews”.

In addition, in accordance with customary practice in Japan, we may from time to time disclose certain information relating to the PML of our properties based on reports we receive from third parties. PML percentages are based on complicated, highly speculative building engineering reports that include many subjective factors and are based on numerous assumptions. Neither we nor the Asset Manager are experts in

14 earthquake risk and analysis, nor do we have the ability to assess or independently verify the analysis of PML percentages provided to us, and the uncertainties inherent in such reports limit the value to us. There is no assurance that a property’s PML will correspond to the actual loss suffered in the event of an earthquake. Therefore, the information contained in such reports should not be referred to or relied upon in making an investment decision. See “Appraisals and Engineering, Environmental and Seismic Reviews—Engineering, Environmental and Seismic Reviews—Seismic Reviews”.

We rely on industry and market data that are subject to significant uncertainties

In addition to expert appraisals and engineering, environmental and seismic reports, we rely on certain market reports and industry and market data and analyses obtained from third-party industry sources, such as the Health, Labour and Welfare Ministry, the Ministry of Economy, Trade and Industry, the Ministry of International Affairs and Communications, Japan Real Estate Institute and Sanko Estate Co., Ltd. in order to make property investment and operating decisions. We generally do not independently verify the data or analyses obtained from these sources, and such data and analyses reflect the particular assumptions, estimates and judgments used by these sources at such times. Thus, there is no assurance that any industry and market data and analyses obtained from these sources are accurate evaluations of the relevant market conditions at the time we use them to make investment or operating decisions. If any of these data or analyses proves to be incorrect, misleading or incomplete, any decisions we make in reliance on such data or analyses expose us to potential risks. For example, we may be induced to make certain investments at prices that are too high, to sell certain other investments at prices that are too low or to miss favorable opportunities altogether.

If we purchase or commit to purchase properties under renovation or still in the development stage or we purchase properties that we intend to renovate, we will be exposed to increased risks and uncertainties with respect to the successful management and leasing of these properties

As part of our growth strategy, from time to time, we may purchase properties that are under renovation or that we intend to renovate, or which are still in the development phase or newly developed but not fully leased, with a view to enhancing the value of such properties and their rental revenues. Such properties may have high vacancy rates, may not be developed in accordance with anticipated budgets or schedules. We may incur losses at such properties if they are not completed in a timely manner according to anticipated budgets or during any initial period of low tenant occupancy, since property-related expenses such as depreciation are largely fixed. Additionally, there can be no assurance that investments in the renovation of properties we intend to renovate will result in increased property value or rental revenues, or that we will be able to fully recoup our investments. Such factors may materially and adversely affect our business, financial condition and results of operations. In addition, we may in the future enter into purchase agreements or other arrangements with third parties to acquire a property in the development stage upon completion of its development. In such case, unlike in the case of acquisitions of finished properties through purchase agreements, the property may not be delivered as contracted if the development is delayed, changed or terminated, and we may assume significant risk in finding tenants for such properties. As a consequence, revenues from development may fall materially below our projections, may not be generated as projected in a planned period or may not be generated at all, or we may suffer unexpected costs, damage or losses in connection with such properties. Any of these factors may result in material adverse effects to our business, financial condition and results of operations.

Buildings that we intend to acquire may violate earthquake resistance standards or other building codes, and any such buildings may collapse in even minor earthquakes or may be required to be strengthened or demolished by us at significant expense

In Japan, architectural plans for buildings must be reviewed by either a licensed third-party engineering firm or an architect or local government for compliance with building codes, including earthquake resistance standards. The level of complexity of structural calculations makes it very difficult to retroactively audit the work of firms or local governments that performed the calculations when a building was originally designed and built. Any retroactive calculations must be based on original plans and volumes of supporting data, which may no longer exist, and can take months to complete and result in significant costs. Consequently, we review properties for compliance with building codes, but we do not have third parties verify that seismic risk calculations with respect to buildings we own or intend to acquire are in fact correct. Moreover, because the support structures of existing buildings can be hidden and are impossible to verify directly, fraud or mistakes in the construction or inspection phase may be impossible to subsequently detect.

As a result, we cannot provide any assurance that any of the properties in our portfolio will not subsequently be discovered to have been built in violation of earthquake resistance standards and other building

15 codes. If any of our buildings are non-compliant, they may collapse in even a minor earthquake, or we may be forced to spend large sums of money and dedicate significant management and other resources to strengthening, improving or destroying any such buildings. Any such non-compliance could result in liabilities for compensating victims, costs for strengthening, destroying or rebuilding properties and loss of rental revenues. Our reputation could also be severely damaged.

Moreover, any party responsible for such frauds or mistakes in the construction of properties may subsequently become insolvent, and we may not be able to recover damages, requiring us to bear some or all of such expenses. Any or all of the foregoing could result in material adverse effects on our business, financial condition or results of operations.

The environmental assessments of our properties made prior to our ownership may not uncover all environmental liabilities, and Japanese laws subject property owners to strict environmental liabilities

Prior to our acquisition of a property, we arrange for an environmental assessment of the property conducted by an independent engineering firm. See “Appraisals and Engineering, Environmental and Seismic Reviews”. These assessments include an on-site visual inspection of the property, an examination of current and historical uses of the property, discussions with persons in charge of property management and a review of relevant historical documents. However, such assessments may not be adequate to identify all potential environmental problems, which can be hidden or otherwise impossible to detect without special expertise and equipment, or at all.

Under the Soil Contamination Countermeasures Act of Japan, or Soil Contamination Countermeasures Act, a current owner of real property may be held strictly liable for the removal or remediation of hazardous or toxic substances, such as lead, arsenic and trichloroethylene, on or under such property, whether or not the current owner knows of or is responsible for the presence of such hazardous or toxic substances. We may also be held liable under other laws for the use of asbestos and polychlorinated biphenyls, or PCBs, at any of our properties. In addition, the presence of hazardous or toxic substances, or the failure to properly remediate such substances, may have a material adverse effect on the owner’s ability to dispose of the real property or borrow funds using the real property as collateral. If we discover any environmental liabilities at our properties, the value of our properties could decrease, and we may be required to remediate the underlying hazard and discharge the related environmental liabilities at a substantial cost. As a result, there may be a material adverse effect on our business, financial condition or results of operations. In addition, when excessive moisture accumulates in buildings or on building materials and is not discovered or treated, mold growth may occur. Because of Japan’s climate, in which the summer months have relatively high levels of humidity, mold growth may become problematic. The presence of significant mold at any of our properties could require us to undertake a costly remediation program to contain or remove the mold from the affected properties or expose us to liability and could have a material adverse effect on our business, financial condition and results of operations.

We may also become liable if, directly or indirectly, a third party is injured or otherwise suffers a loss as a result of the presence of toxic substances on our properties, and in such a case it is unclear whether we can be indemnified by those who are actually responsible. In such event, unanticipated clean-up costs that we may incur, the adverse effect on the ability to sell properties, the likely adverse impact on our tenants affected by such substance, and the risk of prosecution by governmental authorities may materially and adversely affect our business, financial condition and results of operations.

Entering into forward commitment contracts or contracts to purchase properties under development may expose us to contractual penalties and market risks

We may enter into forward commitment contracts from time to time to acquire properties, including all of the properties in our anticipated initial portfolio. A forward commitment contract in this context is defined as a purchase and sale agreement signed one month or more in advance of the actual date on which the purchase price is paid and the property is transferred to the purchaser, as well as certain other similar contracts. Under any of the foregoing contracts, the purchaser may be required to indemnify the seller for losses in the event that the agreement is cancelled by the purchaser. In addition, such contracts may include a penalty provision under which a certain portion of the sales price is charged to the purchaser in the event of cancellation by the purchaser. The purchase agreements for all of the properties we intend to acquire provide, among other things, that either we or the seller can terminate the agreement, in part or in whole, with prior notification upon a material violation by the other party of the terms of the agreement. If we cancel the purchase of any of the properties in our anticipated initial portfolio, we may be subject to a termination penalty of 10% or 20% (depending on the agreement) of the

16 purchase price (excluding the consumption tax and the local consumption tax amount), depending on the purchase contract, unless such cancellation is due to a failure to obtain financing for the purchase of these properties.

Since the above transactions allow for a period of time between signing and the time from which we are able to make use of the asset, we as a purchaser may be vulnerable to changes in market conditions and other factors. With respect to forward commitment contracts, such changes could affect our ability to obtain financing for the purchase on favorable terms, or at all. Additionally, we may lose any deposit we have made with respect to the property, be liable to prospective tenants with whom we have already contracted or encounter difficulties acquiring tenants for the new property, and suffer unexpected administrative costs. Any such development could have a material adverse effect on our business, financial condition and results of operations.

Management and Governance Risks

Unitholders have limited control over changes in our investment policies

Amendment of the investment policies set forth in our articles of incorporation requires a vote of our unitholders. However, such investment policies are subject only to broad principles, and the manner in which we implement our investment objectives may be determined by our board of directors or delegated by our board of directors to the Asset Manager without a vote of our unitholders. Because of this broad authority, strategies for implementing our investment objectives may be changed without the vote of our unitholders in a way that could be inconsistent with the expectations of our unitholders. In addition, if any unitholder is successful in acquiring control over us, our investment objectives and business may be significantly modified from what is described in this document.

Our success depends on the performance of service providers to which we are required to assign various key functions

Under the ITA, we are not permitted to have employees and must outsource substantially all of our activities to third parties. The activities that are outsourced include our investment and financing activities, the management and custody of our assets, and certain administrative functions. We also rely on the abilities of third party operators, including Kyoritsu Maintenance, for operating certain special types of properties such as hotels or dormitories. As a result, our business success depends on the performance of the service providers we engage to perform these functions and our ability to maintain our relationships with these parties.

In particular, we rely on the Asset Manager to achieve our business objectives. The Asset Manager has broad discretion in carrying out its activities and is the party primarily responsible for the formation and implementation of our business strategy, which includes our acquisition and financing activities, as well as the oversight of our day-to-day operations. The Asset Manager manages our assets, oversees property management for each property and directs numerous programs to be implemented by the property managers. Moreover, the Asset Manager was recently incorporated on January 15, 2016, and has no history of operating a J-REIT. Accordingly, the Asset Manager may not be able to effectively manage our growth, implement our investment strategy or otherwise operate our properties successfully, which could have a material adverse effect on our ability to generate earnings, to make distributions to our unitholders, and the value of our units may decline.

Our reliance on third parties to conduct our business activities exposes us to potential risks. The Asset Manager, property managers or operators, building maintenance companies, custodian and general administrator or other third-party service providers may not provide adequate services or may not remain in business. The termination provisions in our agreements with the Asset Manager and with our custodian and general administrator permit us to terminate their services only under limited circumstances. Also, as our portfolio continues to grow, the Asset Manager may face human resource constraints in managing our portfolio effectively. Even if a third party’s performance is favorable, that party may seek to terminate its agreement with us or may not renew its agreement with us at the end of its term. In such a case, we may not be able to appoint appropriate replacements on terms satisfactory to us in a timely manner or at all.

As a result of these risks, we may face difficulties in managing our properties and conducting our business.

Our performance depends on the efforts of key personnel of the Asset Manager

Our performance is dependent on the efforts of key personnel of the Asset Manager to make appropriate judgments and decisions regarding the operation of our business, including the formulation of strategies for

17 implementing our business goals and the acquisition, management and disposal of properties. See “Asset Manager—Management of the Asset Manager”. We rely on the Asset Manager to retain directors and employees with relevant professional experience and knowledge in real estate and finance in order to continue to grow our business. Takara Leben and PAG also provide human resources to the Asset Manager based on the sponsor support agreements. However, competition for such highly skilled business personnel exists not only from other real estate companies, including J-REITs and other real estate investment funds, but also from investment and commercial banks. There can be no assurance that the Asset Manager will be successful in retaining sufficient numbers of appropriately qualified personnel to help manage and grow our business. Failure to retain qualified personnel could have a material adverse effect on our business, financial condition and results of operations, thereby decreasing the market price of our units and the amounts available for cash distributions.

J-REITs and their asset managers are subject to tight supervision by the regulatory authorities

The Japanese regulatory authorities have implemented various measures to supervise J-REITs and their asset managers. For instance, the Japanese regulatory authorities have taken action on a number of occasions, including the issuance of administrative orders, against several J-REITs and their asset managers for corporate governance issues, such as the breach by an asset manager of its duty of care or other fiduciary duties owed to a J-REIT, as well as failure to take proper appraisal measures when arranging for a J-REIT to purchase properties owned by an asset manager’s group company, thus resulting in the properties being acquired by the J-REIT at unacceptably high prices.

Although we believe our internal controls are adequate and that we are in material compliance with all applicable laws and regulations, we may in the future be the subject of regulatory investigations or orders, and such regulatory investigations or orders and their outcome could have a material adverse effect on the market price of our units. In addition, in the event of any administrative order or other sanction being imposed on the Asset Manager as a result of any inappropriate action taken with respect to its management of our assets, the Asset Manager’s management of our assets may also be adversely affected, and there may be harm to the reputation of both the Asset Manager and us.

Taxation Risks

Our failure to satisfy a complex series of requirements pursuant to Japanese tax regulations would disqualify us from certain taxation benefits and significantly reduce our cash distributions to our unitholders

We intend to maintain our current favorable tax treatment available to J-REITs that comply with Japanese tax laws. Most importantly, we expect to be able to treat our cash distributions as a deductible expense from our taxable income, provided that we satisfy all the requirements for such treatment under Japanese tax laws and regulations. If we are unable to meet such requirements, some of which are very complex or difficult to interpret or apply, or if the relevant governmental agencies fail to interpret certain tax laws and regulations in a manner consistent with our interpretation, we will not be able to take advantage of this favorable tax treatment. In such a case, we would not be able to deduct our cash distributions from our taxable income as expenses. Instead, we would have to pay cash distributions after our taxable income has been subject to Japanese corporate income tax at the regular rate.

Some of the significant tax requirements, all of which must be met to qualify for this favorable tax treatment and the associated risks are as follows:

Š We must make cash distributions to our unitholders in each fiscal period in excess of 90% of our distributable profit, as defined in the Special Taxation Measures Act. Our articles of incorporation require that we make cash distributions for each fiscal period in excess of 90% of our distributable profit, as defined in the Special Taxation Measures Act, in principle, up to the extent of retained earnings as of the end of such fiscal period. Our distributable profit, as defined in the Special Taxation Measures Act, is generally calculated based on the amount of our income before taxes under Japanese GAAP. However, if our distributable profit is significantly higher than our retained earnings for any fiscal period, we may not be able to pay cash distributions in excess of 90% of our distributable profit. Such an event may arise, for example, where we incur corporate taxes due to possible discrepancies between the treatment of certain transactions under Japanese GAAP and Japanese tax laws. Moreover, we may not be able to borrow funds or dispose of assets in order to generate the cash necessary for distributions. In such a case, we may not be able to make cash distributions in an amount sufficient to maintain our favorable tax treatment, even if we wished to do so. The 2015 Tax Reform Act enables any surplus cash distributions in excess of retained earnings that

18 are accounted as ATDA to be treated as profits distributions and deductible for tax purposes. As a result of these Japanese tax law changes, we do not expect to incur corporate taxes due to any temporary differences between the treatment of certain transactions under Japanese GAAP and Japanese tax laws.

Š Our largest unitholder and its affiliates must not collectively hold more than 50% of our outstanding units or voting rights. Under the ITA, we are not permitted to restrict the transfer of our units and, therefore, we have no control over the trading and ownership of our units or whether we satisfy this tax requirement. Furthermore, we may not be able to ascertain the identity of all of our unitholders or determine whether any of them are affiliates, rendering it difficult to accurately determine whether this tax requirement is being satisfied.

Š Our borrowings must be from institutional investors as defined by the FIEA and the Special Taxation Measures Act. If the Japanese tax authorities determine that our tenant leasehold or security deposits are borrowings, we would fail to satisfy this requirement.

Š Our units must be held only by institutional investors as defined by the FIEA and the Special Taxation Measures Act or by 50 or more investors at the end of each fiscal period. As stated above, we have no control over the trading and ownership of our units. Hence, we have no control over whether we will satisfy this tax requirement.

If the Japanese tax authorities disagree with our interpretations of the Japanese tax laws and regulations for prior periods, we may be forced to pay additional taxes for those periods

The Japanese tax authorities may from time to time investigate the basis of the determinations we make to satisfy relevant Japanese tax laws and regulations. If the tax authorities audit us and order us to retroactively change our determination related to the requirements for deductions for cash distributions, such deductions claimed in prior periods may be reclassified as taxable income in respect to the relevant prior period. In such a case, our tax burden would increase for the fiscal period in which we recognize this additional tax expense and force us to reduce the amounts of cash distributions to our unitholders for the fiscal period in which we recognize the additional tax expense or for subsequent periods.

We may not be able to benefit from reductions in certain real estate transfer taxes enjoyed by qualified J-REITs

When we acquire properties, we may also benefit from reductions in real estate registration taxes and real estate acquisition taxes, provided that we comply with an additional series of tax requirements. However, if we are unable to meet any of these additional tax requirements, some of which are very complex or difficult to interpret or apply, or if the relevant governmental agencies fail to interpret certain tax laws and regulations in a manner consistent with our interpretation, we will not be able to take advantage of this favorable tax treatment.

Changes in Japanese tax laws may significantly increase our tax burden

The Japanese taxation system is undergoing changes in connection with reform measures designed to stimulate the overall economy in Japan. These and other factors could lead to unanticipated changes in the tax laws and regulations relating to J-REITs, or their interpretation by the relevant tax authorities, which may significantly increase our tax burden for any fiscal period and, consequently, force us to reduce the amounts of cash distributions to our unitholders.

Legal and Regulatory Risks

Our ownership rights in some of our properties may be declared invalid or limited

We expect that all of the properties in our anticipated initial portfolio will be, held in a trust structure under which the title to the property is or will be registered in the name of the trustee. However, such registration of title does not guarantee absolute ownership under Japanese law. For example, if the former owner of a property that we acquire subsequently becomes subject to bankruptcy, corporate reorganization or civil rehabilitation proceedings, we could face a claim for avoidance or fraudulent conveyance. If, for example, we acquired the property while the seller or a former owner was insolvent, or if as a result of the sale of the property to us, the seller becomes insolvent, we may be required to return the property or beneficiary interest in the property to the seller or a former owner without refund of the purchase price, or we may have to pay significant

19 amounts to settle such claims. Further, if the former owner of a property that we acquire was or becomes unable to pay its debts at the time of our acquisition of the property, the acquisition may be voided by the creditors of the former owner. We may also lose the beneficiary interest in a trust property if the seller or a former owner is found to have originally entrusted the property with a trustee to avoid having the property foreclosed by creditors. Although we do not believe that any of the properties in our anticipated initial portfolio are currently subject to significant risks of this type, these risks cannot be completely eliminated. As a result, future changes in the conditions of any owners or former owners of the properties that we intend to acquire could jeopardize our ownership of the properties.

There is no title insurance available in Japan, which limits our ability to obtain protection from property ownership risks. Moreover, because the rights and obligations attached to some of our properties are complicated, in part because of the manner in which we acquire and hold our properties, our ownership rights in some of our properties may be declared invalid, or the rights held by third parties may limit our rights in the properties. For example, for tax reasons, when we purchase a property, we may seek to delay the date on which we apply for transfer of property rights to be transferred to us on the public real estate register. Although we will seek to take steps such as pre-registering the property rights in order to ensure priority in the real estate register, during this period of delay we may not be able to assert our ownership in the event that the seller becomes insolvent. Any of these circumstances could have a material adverse effect on our business, financial condition and results of operations.

We may lose our rights in a property in our portfolio if the purchase of the property is recharacterized as a secured financing

Depending on the underlying facts and circumstances surrounding the purchase of a property, the purchase may not meet “true sale” requirements under Japanese law and may be recharacterized as a secured financing. In such a case, the relevant property would be deemed to be an asset of the seller, and we would lose our ownership interest in the property. We would instead hold only a security interest in the property. Recharacterization could occur when the seller becomes insolvent by way of bankruptcy, corporate reorganization or civil rehabilitation proceedings. Under Japanese law, whether a purchase may be recharacterized as a secured financing is determined through a consideration of various factors, including, without limitation, the intention of the seller and purchaser, whether the seller recorded the purchased property on its balance sheet, whether the seller transferred the economic risk to the purchaser, and whether the seller and purchaser contracted a buy-back arrangement permitting the seller to reacquire the property. Although we have no reason to believe that the acquisition of any of the properties in our anticipated initial portfolio would be recharacterized as a secured financing, any such acquisition may be so recharacterized following a legal or regulatory proceeding.

Our leasehold or subleasehold rights may be terminated or may not be asserted against a third party in some cases

Under Japanese law, buildings and the underlying land upon which they are built can be owned independently of each other. See “Regulation—Laws and Regulations Relating to Japanese Real Estate”. To the extent that we hold leasehold or subleasehold interests in the underlying land upon which the buildings are built, either individually or together, we may not be able to reclaim our deposit with the lessor of the underlying land if the lessor of the underlying land were to become insolvent, and we may, in any bankruptcy or other such proceeding, become an unsecured creditor with respect to tenant leasehold and security deposits paid to the lessor.

Leasehold interests may also be terminated in certain events. Further, if a leasehold interest is not perfected, it may not be asserted against third parties, including any new owner of the underlying land. We hold, and intend to hold, leasehold interests in a manner customary for the Japanese real estate market and take appropriate measures to prevent such events from occurring, or to enable us to address such events should they occur; however, such events may still occur.

Some of the properties that we may acquire in the future may be held in the form of stratified ownership (kubun shoyu¯) interests, and our rights relating to such properties may be affected by the intentions of other owners

We may acquire interests in additional properties, in the form of stratified ownership (kubun shoyu¯) interests. Stratified ownership refers to a type of ownership recognized under Japanese law, whereby the building

20 is divided into different portions by, for example, floors or apartments, which can be separately owned. There are risks associated with stratified ownership if there are other owners of stratified ownership interests in the same building. For example, each owner of a portion of a stratified building is entitled to transfer its stratified ownership interest at its own discretion. There is a risk that another owner of a stratified ownership interest may transfer its ownership to a third party. Additionally, there may be rules regarding the sale of interests by the owners, and certain decisions regarding property use may require a majority or super-majority vote of all owners. In such a case, we may not be able to sell our interests or use our property in the way we wish without being subject to applicable procedures.

We may from time to time acquire properties for which third parties hold leasehold interests in the land and own the buildings thereupon, which may subject us to various risks

Under Japanese law, buildings and the underlying land upon which they are built can be owned independently of each other. We may from time to time acquire properties for which we own only the underlying land and one or more third parties hold leasehold interests in such land and own the buildings on the land. Fixed term leasehold interests expire on the date set forth in the lease agreement and may only be renewed with the agreement of both parties. Ordinary leasehold interests, on the other hand, only expire if the land owner refuses to renew the terms based on a legitimate reason. In either case, unless specified otherwise in the fixed-term leasing agreement, upon the expiration of the leasehold interest, the lessee may be able to require us to purchase the building at the then prevailing market price, and there can be no assurance that such market price will be favorable to us. Also, in the case of an ordinary leasehold interest, there can be no assurance that our reason for refusing to renew the lease will be accepted as legitimate, in which case we may be forced to renew the lease on terms that we do not consider favorable. For more information, see “Regulation—Laws and Regulations Relating to Japanese Real Estate—Land Leases.”

While a lessee must in principle obtain our consent as the land owner before transferring its leasehold interest to another party, a lessee may be able to transfer its leasehold interest without our consent in certain cases, such as where the lessee obtains court approval in lieu of our consent as permitted by Japanese law or where the lease permits certain transfers of the leasehold interest. In such cases, the leasehold interest may be transferred to a party which has financial difficulties or that is otherwise not acceptable to us, which could in turn harm our ability to collect lease payments.

In addition, in the event that the financial condition of a holder of a leasehold interest deteriorates or such holder becomes subject to bankruptcy, corporate reorganization or civil rehabilitation proceedings, there may be a default on the rent payments due under the lease, and the total amount of such delinquent rent payments could exceed any leasehold and security deposits that were pledged as collateral. Moreover, in Japan, it is common to periodically revise the rent set forth in the land lease agreement, and the lessee is entitled to deduction rights under certain circumstances under Japanese law. If rent is revised downward due to such periodic revision or under deduction rights provided to the lessee under Japanese law, rent revenue from land with leasehold interests will decrease, and may adversely affect our results of operations.

Some of the properties that we may acquire in the future may be held in the form of a property or trust beneficiary co-ownership interest (kyo¯yu¯ mochibun), and our rights relating to such properties may be affected by the rights and intentions of other owners

We may in the future acquire interests in some properties in the form of co-ownership interests (kyo¯yu¯ mochibun) with third parties. Under Japanese law, a co-owner of a property has the right to sell its interest in the property without the consent of the other co-owners, unless there is an agreement between the co-owners that requires such consent or grants a right of first refusal. In general, a co-owner has the right to demand that such property be partitioned. Although special provisions may be included to contractually prohibit the exercise of such right of partition, such provisions are only valid for a period of not more than five years. If a co-owner of one of our properties becomes subject to bankruptcy proceedings, corporate reorganization or civil rehabilitation proceedings, the trustees in the proceedings of such co-owner may have the right to demand that such property be partitioned. Although the other co-owners of the property may, if so agreed, have a right of first refusal to purchase the ownership interests of the defaulting or selling co-owner, we may not be able to exercise such rights on favorable terms. In addition, a sale of our co-ownership interest under such circumstances may result in liquidation proceeds that are less than the appraisal value of the property or interests being sold, which would have an adverse effect on our business, financial condition and results of operations.

A co-owner of a property may mortgage its interest in the property. However, such mortgage becomes applicable to the entire property when the co-owned property is partitioned. Accordingly, each of the co-owners

21 in such case would be subject to such mortgage in proportion to its ownership interest. There is a risk that our interest in a property that was formerly owned through a co-ownership interest and owned by us independently following a partition may be subject to a mortgage that was placed on it by another co-owner.

We also may from time to time acquire trust beneficiary interests in properties in the form of co-ownership (jun kyo¯yu¯) with other trust beneficiaries. Risks associated with acquiring such interests are similar to those associated with co-ownership interests in real estate properties. For example, a holder of a co-ownership trust beneficiary interest may choose to dispose of such interest to a third party if it receives consent from the trustee, thus allowing for the possibility of having a co-owner that we would prefer not to have. In addition, unless there is an agreement among the holders of the co-ownership interests, there is a possibility that an owner may not be able to have its opinions reflected in the instructions provided to the trustee pursuant to the trust agreement or that a holder of co-ownership interests may be liable for the full amount of liabilities to the trustee unpaid by other holders. Any such risks may have a material adverse effect on our business, financial condition and results of operations.

We may hold interests in some properties through Japanese anonymous association (tokumei kumiai) agreements, and our rights relating to such properties may be limited

We may hold tokumei kumiai interests with respect to properties that we acquire. Under tokumei kumiai arrangements, a tokumei kumiai agreement is executed between a tokumei kumiai investor and an operator, which uses capital contributed by the tokumei kumiai investor to acquire properties or other assets subject to the tokumei kumiai agreement and manages and disposes of such properties or other assets pursuant to the terms of the agreement. Multiple investors may enter into separate but substantially equivalent tokumei kumiai agreements with the operator. The tokumei kumiai investors receive distributions from the property’s income or incur losses.

There are certain risks associated with holding tokumei kumiai interests in properties, including the following:

Š In general, all of the capital contributed by investors in a tokumei kumiai, as well as all of the assets subject to a tokumei kumiai agreement, belong to the operator. The tokumei kumiai investors have no ultimate decision-making power or ownership rights over the capital contributions or the assets owned by the operator under such agreements, except for the right to receive distributions and repayment of capital contributions. In addition, except for distributions of income or the incurring of losses under the tokumei kumiai agreement, the tokumei kumiai investors have no right to the property’s income or expenses. The tokumei kumiai investors may also be required to make additional capital contributions under certain conditions pursuant to such tokumei kumiai agreements.

Š Under the Commercial Code of Japan, in the event a tokumei kumiai investor becomes bankrupt, the tokumei kumiai agreement between such investor and the operator is automatically terminated and the operator must return the capital contribution to such investor. In general, because the operator is often a special purpose company with no assets other than the property acquired through the capital investments made pursuant to the tokumei kumiai agreement, depending on the timing, amount of capital and other factors, the operator may be forced to dispose of the property in order to raise the funds necessary to return the capital contribution of such investor. As a result, the other investors in the tokumei kumiai interests may receive reduced or no distributions or a reduced amount of original capital contribution when it is returned.

Š Even if we conclude that a tokumei kumiai agreement that we expect to enter into satisfies all the requirements for tokumei kumiai tax status under Japanese law, pursuant to which there is no taxation at the operator level, the relevant government authorities may disagree. In such a case, the operator may be taxed on the asset’s income, leaving a smaller amount available for the tokumei kumiai investors.

Any or all of these factors could in turn have a material adverse effect on our business, financial condition and results of operations.

We will own all of the properties in our anticipated initial portfolio through trust beneficiary interests and may suffer losses as a trust beneficiary

We expect that all of the properties in our anticipated initial portfolio will be owned, through trust beneficiary interests in Japanese trusts that hold or will hold those properties as title holders. Although we are

22 party to various contractual arrangements to reduce trust-related risks, we may suffer certain trust-related liabilities and losses that would not arise if we had direct ownership of these properties, including liabilities to third parties arising from the disposition of a trust property, compensation of the trustee and property defects or losses due to unauthorized disposition or collateralization of a trust property by the trustee or the trustee’s insolvency.

There are important differences regarding the rights of unitholders in a J-REIT compared to those of shareholders in a corporation

Under the ITA and our articles of incorporation, unitholders who do not attend and exercise their voting rights at a general meeting of unitholders are deemed to be in agreement with proposals submitted at the meeting, except in cases where contrary proposals are also being submitted. Accordingly, unitholders who do not properly exercise their voting rights may have their votes counted in favor of the proposals submitted at the meeting, regardless of their wishes.

Additionally, under the ITA, the rights of our unitholders and management are different from what might be expected in a non-J-REIT corporation. For instance, our financial statements which contain statements regarding our cash distributions will be approved solely by our board of directors without unitholder approval. As such, a general meeting of our unitholders may not necessarily be held every fiscal period.

The AIFMD may negatively affect our ability to market our units in the EEA and increase our compliance costs associated with the marketing of our units in the EEA

The AIFMD, which was adopted on June 8, 2011 and was required to be implemented by each member state of the EEA into its national legislation by July 22, 2013, seeks to regulate managers of alternative investment funds located in the EEA and the marketing of funds by non-EEA alternative investment fund managers in the EEA. Under the AIFMD, we qualify as an alternative investment fund, and the Asset Manager qualifies as an alternative investment fund manager, or AIFM. As such, our units may not be marketed (within the meaning given to the term “marketing” under the AIFMD or, if different, under the local law of the relevant Member State), and this document may not be sent to prospective investors domiciled or with a registered office, in any Relevant Member State of the EEA unless: (i) our units may be marketed under any national private placement regime (including the AIFMD) or other exemption in the Relevant Member State; or (ii) our units can otherwise be lawfully marketed or sold in that Relevant Member State in circumstances in which the AIFMD does not apply.

The AIFMD initially allows the marketing of non-EEA alternative investment funds, such as us, by its investment manager or its agent under national private placement regimes of individual Member States, and subject to any additional conditions imposed by national laws. As of the date of this document, we have made the relevant filings under the AIFMD only in the United Kingdom and the Netherlands to market our units under their respective national private placement regimes, and we currently do not intend to market (within the meaning given to the term “marketing” under the AIFMD, or, if different, under the local law of the relevant Member State) our units in any other member states of the EEA. It is expected that the European Union may soon introduce a “passporting regime” applicable to non-EEA AIFMs under which we may become subject to different and additional marketing restrictions and disclosure requirements. The AIFMD requires Member States to implement private placement regimes that meet the requirements of the AIFMD but also allows for stricter requirements which certain Member States have adopted. It is possible that we or the Asset Manager may be required to take significant measures beyond those expressly set out in the AIFMD to comply with national rules implementing the AIFMD in certain Member States where international units are to be marketed or not market the international units in such jurisdictions.

Accordingly, the restrictions and requirements under the current national private placement regimes and under any future passporting regime may adversely affect our ability to market our units to EEA investors in connection with these offerings and in connection with any future offerings. Any limitations on our ability to market our units to and raise capital from EEA investors may have an adverse effect on the range of investment strategies that we are able to pursue. Furthermore, any of the foregoing regimes may materially increase our compliance costs associated with the marketing of our units in the EEA.

23 FINANCIAL DATA FOR THE ANTICIPATED INITIAL PORTFOLIO

Overview

We were incorporated as an investment corporation (to¯shi ho¯jin) in Japan under the ITA on September 11, 2017. Although our first fiscal period will end on August 31, 2018, we have yet to commence operations of our real estate business, as we currently do not own any properties. We thus have no operational history, and neither the audited financial statements nor the financial data contained in “Selected Financial Data” included in this document is indicative of our future operations. Further, we have not prepared any pro forma combined financial statements to the properties in our anticipated initial portfolio.

The financial data presented in this section for the properties we expect to include in our anticipated initial portfolio are based upon information we obtained from the current owner of the interests with respect to each such property. The financial data are presented for the six-month periods ended August 31, 2017 and February 28, 2018. Investors should not attempt to annualize the data for periods shorter than one year contained in the tables. The financial data are presented on a property-by-property basis. The financial data contain substantially less detail than would be contained in audited financial statements, the notes thereto, supporting schedules, related financial disclosures and an MD&A. Additionally, the financial data presented below may not reveal matters of significance to an investor regarding the properties we intend to acquire that would have been revealed if audited historical financial statements and accompanying MD&A were included herein on a consolidated or property-by-property basis. Accordingly, investors should not place undue reliance on the following financial data. See “Risk Factors—Property and Business Risks—We have no operating history, and this document contains limited financial data, making it difficult to evaluate our track record, prospects and future financial results”. Due to the incomplete nature of the financial data for the properties we intend to acquire and the possibility that different accounting principles were used by the current owners of the properties, investors should not attempt to consolidate the following information, as it will not generate an accurate presentation of the financial history of the properties we intend to acquire or provide an appropriate basis to evaluate our consolidated business prospects.

Moreover, the financial data included below for the properties we intend to acquire may not be indicative of the future performance of the properties as a whole. In addition, the financial data do not reflect certain additional expenses that we expect to incur, such as the fees payable to property managers and the Asset Manager, general administrative expenses, depreciation and amortization and non-operating expenses such as interest and financing expenses.

Financial Data

The following are certain financial data for the 27 properties in our anticipated initial portfolio, prepared in accordance with Japanese GAAP.

The following tables show operating revenues, operating expenses, net operating income and occupancy rates for each of the properties in our anticipated initial portfolio. The number of operating days during the six months ended August 31, 2017 was 184 days for all the properties and the number of operating days for the six months ended February 28, 2018 was 181 days for all the properties.

Six months ended August 31, 2017 Property Net operating Occupancy rate (as number Property name Operating revenue Operating expenses income of August 31, 2017) (in millions) (in millions) (in millions) (%) O-01 NT Building ¥ 289 ¥ 79 ¥ 210 90.4 O-02 Higashi-Ikebukuro Central Place 244 63 181 83.2 O-03 Nagoya Center Plaza Building 199 63 135 98.2 O-04 TTS Minami Aoyama Building 87 14 73 100.0 O-05 Omiya NSD Building 101 28 73 100.0 O-06 SAMTY Shin-Osaka Center Building —(1) —(1) —(1) 100.0 O-07 Hakata Gion Building 82 20 62 100.0

24 Six months ended August 31, 2017 Property Net operating Occupancy rate (as number Property name Operating revenue Operating expenses income of August 31, 2017)

O-08 Chuo Bakuromachi Building —(1) —(1) —(1) 93.4 O-09 L.Biz Jimbocho Building 24 4 19 100.0 O-10 Shinsaibashi Building —(1) —(1) —(1) 100.0 O-11 MB Odakyu Building —(1) —(1) —(1) —(1) O-12 Sendai Nikko Building 50 17 33 87.7 O-13 Morioka Ekimae-dori Building 78 20 58 92.6 O-14 Nagano Central Building 53 15 38 88.5 O-15 EME Koriyama Building 50 16 34 96.5 O-16 Central Building 47 15 32 90.2 O-17 Yamagata Ekimae-dori Building 41 13 27 96.0 R-01 Amare Tokaidori 35 6 29 84.5 R-02 Dormy Ukimafunado 30 1 28 100.0 R-03 Benefis Hakata-Minami Grand Suite 39 6 32 86.1 R-04 LUXENA HIGASHI-KOENJI 26 7 18 100.0 R-05 Alpha Space Toritsudai 16 5 11 100.0 R-06 J City Hatchobori 40 9 30 85.0 H-01 Dormy Inn Matsuyama(2) —— — — H-02 Hotel Sunshine Utsunomiya —(1) —(1) —(1) 100.0 C-01 Prio Daimyo II —(1) —(1) —(1) 100.0 C-02 Co-op Sapporo Shunko —(1) —(1) —(1) —(1)

Notes: (1) We have not obtained permission from the former owner of this property to release the information missing from this table. (2) We do not have financial data for Dormy Inn Matsuyama as operations began in December 2017.

Six months ended February 28, 2018 Occupancy rate (as Property Net operating of February 28, number Property name Operating revenue Operating expenses income 2018) (in millions) (in millions) (in millions) (%) O-01 NT Building ¥ 311 ¥ 89 ¥ 222 100.0 O-02 Higashi-Ikebukuro Central Place 233 44 189 83.2 O-03 Nagoya Center Plaza Building 200 70 129 100.0 O-04 TTS Minami Aoyama Building 88 20 68 100.0 O-05 Omiya NSD Building 111 32 79 92.0 O-06 SAMTY Shin-Osaka Center Building 112 27 85 100.0 O-07 Hakata Gion Building 84 21 62 100.0 O-08 Chuo Bakuromachi Building 58 24 34 100.0 O-09 L.Biz Jimbocho Building 24 4 19 100.0 O-10 Shinsaibashi Building 37 13 24 100.0 O-11 MB Odakyu Building(2) 22 4 18 100.0 O-12 Sendai Nikko Building 59 18 41 99.0 O-13 Morioka Ekimae-dori Building 79 25 53 95.2 O-14 Nagano Central Building 50 19 31 87.1 O-15 EME Koriyama Building 55 16 38 94.2 O-16 Utsunomiya Central Building 43 16 27 82.4 O-17 Yamagata Ekimae-dori Building 40 17 22 93.3 R-01 Amare Tokaidori 31 8 22 71.8 R-02 Dormy Ukimafunado 29 3 26 100.0 R-03 Benefis Hakata-Minami Grand Suite 32 6 25 84.4 R-04 LUXENA HIGASHI-KOENJI 34 6 28 98.2 R-05 Alpha Space Toritsudai 16 5 11 93.4 R-06 J City Hatchobori 37 4 33 86.2 H-01 Dormy Inn Matsuyama(3) 25 2 23 100.0 H-02 Hotel Sunshine Utsunomiya 63 12 51 100.0 C-01 Prio Daimyo II 28 6 22 100.0 C-02 Co-op Sapporo Shunko —(1) —(1) —(1) —(1)

Notes: (1) We have not obtained permission from the former owner of this property to release the information missing from this table. (2) Financial data for MB Odakyu Building is for the period from January 1, 2018 to February 28, 2018 (59 days). (3) Operating revenue data and net operating income for Dormy Inn Matsuyama are for the period from January 1, 2018 to February 28, 2018 (59 days). Furthermore, fire insurance and liability insurance expenses are not included in operating expenses as it is borne by Takara Leben and Takara Leben West Japan CO., LTD along with the other properties.

25 SELECTED FINANCIAL DATA

You should read the following selected financial data together with “Factors Expected to Affect Financial Condition and Results of Operations”. Our selected financial data have been derived from our audited interim financial statements, which covered the period from September 11, 2017, the date of our incorporation, to February 28, 2018 and which are not included in this document. The following selected financial data have been prepared in accordance with Japanese GAAP, which differs in certain material respects from IFRS and U.S. GAAP.

We have yet to commence operations of our real estate business, as we currently do not own any properties. We expect to acquire our first properties with the net proceeds from the offerings and concurrent borrowings. Therefore, the following selected financial data for the interim period ended February 28, 2018 are not indicative of our future operations following the acquisition of our anticipated initial portfolio. See “Risk Factors—Property and Business Risks—We have no operating history, and this document contains limited financial data, making it difficult to evaluate our track record, prospects and future financial results”.

We prepare our financial statements in accordance with Japanese GAAP, which differs in certain material respects from IFRS, U.S. GAAP and generally accepted accounting principles in other jurisdictions.

As of/for the interim period ended February 28, 2018 (in thousands, expect amounts per unit) Selected Income Statement Data: Operating revenues ¥- Operating expenses 4,826 Operating loss (4,826) Ordinary loss (7,580) Net loss (7,701)

Selected Balance Sheet Data: Total assets ¥ 144,591 Total net assets 142,298 Unitholder’s capital 150,000

Amounts per Unit:(1) Net assets per unit 94,865 Net loss per unit (5,134) Distributable amount per unit -

Note: (1) Per unit amounts are calculated using the total number of units issued and outstanding as of April 21, 2018, the date on which we made a 10-for-1 unit split of our investment units, bringing the current total number of issued units held by current investors to 1,500 units.

26 FORECASTS FOR THE FISCAL PERIODS ENDING AUGUST 31, 2018, FEBRUARY 28, 2019 AND AUGUST 31, 2019

The forecasts and other information contained below are forward-looking statements, which are based upon our expectations, assumptions, estimates and projections at the time we announced these forecasts on July 19, 2018, in accordance with the rules of the Tokyo Stock Exchange. The following forecasts and underlying assumptions are subject to various risks and uncertainties, and our actual results may differ materially from those contained in these forecasts and assumptions. In addition, the forecasts and underlying assumptions are subject to a considerable degree of subjectivity. Differing judgments could lead to different forecasts or assumptions under the same set of facts and circumstances. Prospective investors should read the following forecasts and other information together with the risks and uncertainties contained in “Risk Factors” and elsewhere in this document and make their own independent assessment of our future performance and prospects. Potential risks and uncertainties that could cause our actual results to differ materially from our forecasts include, without limitation:

Š any adverse conditions in the Japanese economy;

Š our lack of operating history;

Š the lack of full financial statements for any of the 27 properties in our anticipated initial portfolio;

Š our ability to acquire properties to execute its growth strategy;

Š the effect of changes in prevailing interest rates, including as a result of additional monetary easing by the Bank of Japan;

Š inability of us to close all or any of our anticipated acquisitions of properties;

Š competition for tenants for properties and difficulty of finding replacement tenants;

Š high geographic concentration of our real estate portfolio in certain areas, especially the Tokyo metropolitan area;

Š our ability to promptly sell properties in response to changing economic, financial or other conditions;

Š any natural or man-made disaster, such as an earthquake, acts of war or terrorism or other casualty event;

Š our access to financing necessary to expand its property portfolio;

Š our lack of control over operating costs;

Š the performance of us and other key third-party service providers, to which we are required to assign its business, administrative and management functions; and

Š potential legislative, regulatory and accounting changes in Japan.

We make no representation that we will achieve the results anticipated by the forecasts.

We have no duty to review or revise the forecasts after the date of their announcement. We have no duty to update these forecasts except pursuant to the rules of the Tokyo Stock Exchange, which require an investment corporation listed on the exchange to announce revised forecasts promptly if the investment corporation revises the original forecasts and if the revised forecasts deviate from the most recent forecasts by more than a prescribed percentage—10% or more for operating revenue, 30% or more for either ordinary income or loss, or net income or loss, and 5% or more for distributions.

While we prepared the forecasts by applying accounting principles that we believe are substantially consistent with Japanese GAAP, these forecasts have not been audited or reviewed by our independent auditor and we cannot assure you that the principles applied are in fact consistent with Japanese GAAP. The application of Japanese GAAP requires the recording, compilation, evaluation and adjustment of actual historical financial data, none of which we have performed. Investors are cautioned that Japanese GAAP differs in material respects

27 from IFRS and U.S. GAAP. The prospective financial information included in this document has been prepared by and is the responsibility of, our management. We and our management believe that the forecasts for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019 have been prepared on a reasonable basis, reflecting the best estimates and judgments, and represent, to the best of our management’s knowledge and opinion, our expected course of action. However, because this information is highly subjective, it should not be relied on as necessarily indicative of future results.

Our independent auditors have neither examined, compiled nor applied any agreed-upon procedures for the prospective financial information contained herein and accordingly, they do not express an opinion or any other form of assurance on such information or its achievability. Our independent auditors assume no responsibility for and deny any association with the prospective financial information and any other information derived therefrom included elsewhere in this document.

Forecasts Announced on July 19, 2018

The following table shows our forecasted operating revenues, net income and distributions per unit for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, which we generated based on various assumptions, including those presented below. Our fiscal periods cover every six months ending on the last day of February and August of each year, except our first fiscal period began on September 11, 2017, the date of our incorporation, and will end on August 31, 2018.

Fiscal period ending August 31, 2018 February 28, 2019 August 31, 2019 (forecast) (forecast) (forecast) (in millions, except distributions per unit) Total Operating revenues ...... ¥ 374 ¥ 2,115 ¥ 2,099 Net income ...... 9 1,114 1,003 Distributions per unit(1) ...... ¥ 26 ¥ 3,226 ¥ 2,905

Note: (1) Distributions per unit are calculated as total distributions divided by units outstanding as of the record date for the related distribution. For the forecast for each of the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, we assumed that there would be 345,500 units outstanding as of August 31, 2018, February 28, 2019 and August 31, 2019, which would be the record dates for the related distributions.

Certain General Assumptions Underlying the Forecasts

For the purposes of our forecasts presented above, we have made the following general assumptions:

Š We assumed that there would be no material changes to applicable legislation and regulations, including those related to taxation.

Š We assumed that all agreements, including the asset management agreement, property management agreements, and lease and sublease agreements, would be enforceable and performed in accordance with their respective terms.

Š We assumed that there would be no material changes to Japanese GAAP, our accounting procedures or our distribution policies.

Š We assumed that, in connection with the offerings, we would issue and sell 344,000 units to the underwriters as described in “Purchase and Sale”, at a price of ¥92,563 per unit. We also assumed that the net proceeds from the offerings would be used as described in “Use of Proceeds” and that we would not conduct any other equity offering for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019.

Š We assumed that there would be no non-operating income or expenses of any extraordinary nature for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019.

Š We assumed that we would distribute 100.0% of our net profit for each of the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, and that we would not make distributions in excess of profit.

Š We assumed there would be no material changes in the Japanese economy or real estate market.

28 Š We assumed compliance with the provisions set forth in the ITA, the FIEA, Japanese GAAP, the Corporation Tax Act of Japan, the Special Taxation Measures Act and the various rules and regulations of the Tokyo Stock Exchange and the ITAJ.

Key Assumptions Underlying the Forecasts Announced on June 25, 2018

Portfolio Assets

We assumed that each of the properties in our anticipated initial portfolio would be in operation continuously from the anticipated acquisition date, pro-rating our assumed revenues and expenses from the properties in our anticipated initial portfolio for the fiscal period beginning on September 11, 2017, the date of our incorporation, and ending on August 31, 2018 in order to reflect the fact that we will not acquire the properties until July 30, 2018.

With respect to the forecasts for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, we assumed that there would be no material changes to the composition of our portfolio during such fiscal periods other than the acquisition of the 27 new properties that we intend to acquire in connection with the offerings. We assumed that the acquisitions of 27 properties would take place on July 30, 2018 for an aggregate acquisition price of ¥64,370 million.

Operating Revenue

We assumed that operating revenue will consist principally of rental revenues generated by the properties assumed to be in our portfolio for all or a portion of the relevant forecast period, as described above. We assumed the amounts of our anticipated revenues based on contractual rates specified in lease agreements, relevant lease agreements and information obtained from current holders, as further described below.

Rental revenue. We assumed that our revenue will consist principally of rental revenues (including contractual rent and common charges) generated by the properties assumed to be in our portfolio. We assumed revenues based on contractual rates specified in agreements deemed effective as of July 30, 2018 with respect to the forecasts for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019. We then made adjustments on a property-by-property basis, based on (1) the operating track record of the property with respect to the properties that we currently own or (2) information that the Asset Manager obtained during its due diligence investigation of the property, with respect to the properties that we intend to acquire, including historical operating information if available, and in both cases, also factoring in known and assumed tenant departures (including early terminations), market conditions, discussions with property managers and other relevant matters. We made certain assumptions with respect to the likelihood of future tenant departures, the amount of time a property would be left vacant after tenant departures, as well as the rent levels of subsequent tenants, based on market information. We assumed no delinquencies or non-payment of rents by tenants.

Operating Expenses

We expect to incur customary operating expenses arising from the operation of our properties, including the following:

Leasing Business Operating Expenses

Management consignment. We assumed that we will incur management consignment expenses of approximately ¥27 million, ¥156 million and ¥156 million for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, respectively, which are based on the calculation methods indicated in the relevant property management agreements and, with respect to the 27 new properties that we intend to acquire in the fiscal period ending August 31, 2018, relevant information obtained during due diligence in connection with such properties. Included in these amount are assumed maintenance fees of ¥21 million, ¥120 million and ¥120 million, respectively, and assumed property management fees of ¥6 million, ¥36 million and ¥36 million, for the same periods.

Repair. We assumed that we will incur certain repair and maintenance expenses in connection with the ongoing repairs and maintenance of the properties assumed to be in our portfolio for all or a portion of the relevant forecast period. We assumed repair expenses of ¥5 million, ¥31 million and ¥31 million for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, respectively. These amounts based on the repair plans of the Asset Manager for each fiscal period.

29 Property taxes and city planning taxes. Property taxes are imposed annually on the record owner of each property as of January 1 of each year. When a property is sold, the purchaser of the property typically reimburses the seller, pursuant to the purchase agreement, for the pro rata portion of the property taxes that has previously been paid by the seller and that corresponds to the period from the acquisition date to the end of the calendar year in which such acquisition occurs (or, in some cases, to the end of March of the subsequent year). As is customary for property transactions in Japan and in accordance with Japanese GAAP, we intend to capitalize such pro rata portions of the property taxes. Accordingly, with respect to the forecasts for the fiscal period ending August 31, 2018 and a portion of the fiscal period ending February 28, 2019, we assumed we would capitalize ¥137 million in property taxes in relation to the 27 new properties that we intend to acquire in the fiscal period ending August 31, 2018. As such portions of the property taxes are included in acquisition costs, they will not be recorded as expenses for the fiscal period in which we acquire these properties.

Depreciation. We assumed that we will incur depreciation of approximately ¥91 million, ¥275 million and ¥275 million for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, respectively, calculated using the straight-line depreciation method.

Other Operating Expenses

Asset management fee. We assumed asset management fee of less than ¥1 million, ¥106 million and ¥101 million for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, respectively, based on the asset management agreement, as described in “Asset Manager—Asset Management Agreement— Asset Management Fees”.

Non-operating Expenses

Initial start-up costs. We expect to incur initial start-up costs of ¥19 million for our initial fiscal period ending August 31, 2018. We plan to redeem the initial start-up costs in a lump sum.

Investment unit issuance expenses. We assumed offering-related costs of approximately ¥88 million to be incurred during the fiscal period ending August 31, 2018. This amount will be amortized on a monthly basis over three years from the time that these expenses are incurred, with ¥2 million, ¥14 million and ¥14 million expected to be amortized for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, respectively

Interest expenses. We assumed interest expenses and borrowing-related expenses of approximately ¥156 million, ¥125 million and ¥121 million for the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, respectively. These expenses are in turn based on outstanding interest-bearing liabilities of ¥34,600 million, ¥33,260 million and ¥33,260 million, as of the end of the fiscal periods ending August 31, 2018, February 28, 2019 and August 31, 2019, respectively. It is assumed that a total of ¥34,600 million will be borrowed on July 30, 2018, in connection with the acquisition of the 27 new properties. A refund of consumption tax paid in the fiscal period ending August 31, 2018 is scheduled to take place during the fiscal period ending February 28, 2019. Therefore, it is assumed that a part of such borrowings will be repaid using such refund during the fiscal period ending February 28, 2019.

30 FACTORS EXPECTED TO AFFECT FINANCIAL CONDITION AND RESULT OF OPERATIONS

The following describes our expected primary items of revenue and expense and certain factors that may affect such items, as well as our expected liquidity and capital resources. We expect all amounts in our financial statements to be expressed in Japanese yen.

Operating Revenue

Rental revenue. We expect to receive almost all of our operating revenue as leasing business revenue pursuant to lease contracts that have been or will be entered into with the tenants of our properties, along with common service fees and parking lot fees.

Our rental revenue may be affected by a number of factors, including the occupancy rates of our properties, the contractual rent payments payable by our tenants and our aggregate leasable area. Our ability to operate our properties at a high level of occupancy and attractive rent levels will depend upon a number of factors, including the attractiveness of our properties, the performance of the Asset Manager, property managers and other third parties to which we outsource our key business functions, the demand for space in relevant rental markets, the supply of relevant properties in such markets and the rate of inflation or deflation in the Japanese economy.

Other rental revenue. We expect to receive almost all of our other rental revenue from utility reimbursements. The lease agreements with many of our tenants will require us to pay utility charges, which are reimbursed by the tenants. We will record our reimbursable utility charges on a gross basis, and thus include utility charges and related reimbursements accrued during any fiscal period in both our operating revenue and operating expenses for the period. As a result, any increase or decrease in the number of properties with a utility charge reimbursement arrangement will affect our operating revenue and operating expenses, but does not materially affect our operating profit.

Gain on sales of real estate properties. From time to time, we expect to rebalance our portfolio through dispositions of properties. In such cases, we will record gain on sales of real estate properties when the disposition price is greater than the aggregate of the book value of the disposed property and related selling expenses.

Operating Expenses

Leasing Business operating expenses. We expect to incur customary operating expenses arising from the operation of our properties including the following:

Š Management consignment. Management consignment expenses are composed of maintenance fees and property management and facility management fees.

O Maintenance fees. We expect to reimburse our property managers for cost of maintain the properties they manage. The general condition of each property will affect the amount of expenditures we make for ongoing maintenance.

O Property management fees. With respect to our anticipated acquisitions, we expect to compensate Takara Property Co., Ltd. as the property manager with respect to all 27 our anticipated portfolio. See “Our Business—Operation and Property Management Policies”. We expect property and facility management fees to increase largely in line with the increase in the size of our portfolio.

Š Repair expenses. We will incur expenses associated with the ongoing repair of the properties in our portfolio. The general condition of each property affects the amount of expenditures we make for ongoing repairs.

Š Property taxes. Property taxes are imposed annually on the record owner of each property as of January 1 of each year and are paid in installments. When a property is sold, the purchaser of the property typically reimburses the seller, pursuant to the purchase agreement, for the pro rata portion of the property taxes that has previously been, or will be, paid by the seller and that relates to the period from the acquisition date to the end of the calendar year in which such acquisition occurs (or, in some cases, to the end of March of the subsequent year). As is customary for property transactions in Japan and in accordance with Japanese GAAP, we capitalize such pro rata portion of the property taxes.

31 In accordance with the above, the amount of our property taxes depends on the timing and size of our property acquisitions and dispositions, as well as property taxes rates.

Š Depreciation. Depreciation expenses depend on the acquisition costs of our properties and the assignment of components of our properties to accounting categories with varying estimated useful lives. We use the straight-line method to calculate the depreciation expenses for our properties.

Š Utilities expenses. As discussed above in “—Operating Revenue—Other rental revenue”, with respect to lease agreements for certain properties that are expected to require us to pay utility charges and be reimbursed by tenants, we expect to record reimbursable charges on a gross basis.

Š Other expenses related to our rent business. We expect to incur certain other property-related expenses, such as insurance, loss on retirement of noncurrent assets, rent expenses, trustee fees, leasing commissions and advertising fees.

Š Loss on sales of real estate properties. We expect to record loss on sales of real estate properties when the disposition price is less than the aggregate of the book value of the disposed property and related selling expenses.

Š Asset management fee. Pursuant to the asset management agreement, we will pay an asset-based and income before tax based fee to the Asset Manager. In addition, we will pay the Asset Manager acquisition fees in connection with the acquisition of properties and fees in relation to our merger. The amount of such fees depends upon the size of our portfolio and our portfolio income before tax, and on acquisitions of properties, or mergers. See “Asset Manager—Asset Management Agreement—Asset Management Fee” for discussion of the asset management fee.

Š Other. We also will incur expenses for asset custody fee, administrative service fees, directors’ compensation and other operating expenses, consisting of appraisal fees, audit fees, tax advisory and legal fees and other fees.

Property Acquisitions and Dispositions

Although we expect to have 27 properties in our anticipated initial portfolio, any acquisitions or dispositions of properties that we make may still be relatively significant in relation to our portfolio as a whole, and may have a significant impact on our operating revenue and expenses. For any fiscal period in which we acquire a property, our operating revenue and expenses will increase for the portion of the fiscal period in which the property is in operation. For any fiscal period in which we dispose of a property, our operating revenue and expenses will decrease for the portion of the fiscal period in which we no longer operate the property. We thus expect that increases or decreases in our operating revenue and expenses attributable to acquired or disposed properties, relative to our total operating revenue and expenses, will continue to be significant for the near to medium term.

Non-operating Expenses

Initial start-up costs. We expect to incur initial start-up costs during our initial fiscal period ending August 31, 2018, which we plan to amortize in one lump sum during the same year.

Amortization of issuance of new investment units. We will incur costs in connection with the initial public offering, We expect to amortize offering costs, monthly, over a period of three years on a straight-line basis.

Interest expenses. Our interest expenses will depend principally on the amounts outstanding under our borrowings, investment corporation bonds and the interest rates that our lenders charge us or which are due to our bond holders, which in turn depend on various factors, including:

Š the level of tenant leasehold and security deposits obtained from tenants at out properties (and release from the trustee for our own use), which effectively reduce our need for borrowings;

Š our financial strength and creditworthiness as perceived by our lenders;

32 Š the frequency with which we acquire and dispose of properties; and

Š the extent to which we avail ourselves of other forms of financing, including through equity financing.

Borrowing related expenses. We expect to incur costs in relation to our financing activities separate from interest expenses described above. These costs will include arrangement fees to banks arranging loans and other closing costs, which are generally charged as expenses in the fiscal period incurred. We also expect to incur up-front fees in relation to a borrowing which we will pay at the time of the borrowing but amortize over the life of the borrowing on a straight-line basis for purposes of reporting in our income statement.

Accounting Policies and Standards

We intend to comply with the provisions set forth in the Investment Trust Act, the FIEA and its related accounting regulations, Japanese GAAP, the Corporation Tax Act, the Special Taxation Measures Act, and the various rules and regulations of the Tokyo Stock Exchange and the ITAJ.

Capital Resources and Requirements

Funds for Operations and Acquisitions

We seek to manage our capital resources and liquidity sources to provide adequate funds for current and future financial obligations and other cash needs and acquisitions.

Funds for financial obligations and other cash needs. Net cash generated from operating activities will constitute our primary source of liquidity to fund distributions, interest payments on outstanding debt, fees to the Asset Manager, property managers and other service providers, property taxes, repairs and maintenance and capital expenditures for our properties in the ordinary course of business. We believe we will have adequate liquidity to meet our needs for the one-year period following the offerings.

Funds for acquisitions. We seek to achieve steady growth in revenues through growth of our property portfolio. Our ability to use our cash flows from operations to finance property acquisitions is severely limited, because we are required to distribute more than 90% of all of our distributable income, calculated in accordance with the Special Taxation Measures Act, for each fiscal period to our unitholders in order to avail ourselves of the tax benefit under the said Act. Therefore, we expect to depend primarily on outside financing in order to finance property acquisitions as follows:

Š Borrowings from financial institutions. We expect borrowings from financial institutions to be a primary source of funds to acquire properties.

Š Equity financing. We expect to use equity financing from time to time for our property acquisitions. We expect equity financing to continue to be a key source of funds for acquisitions in the medium-to-long term.

Š Tenant leasehold and security deposits. We consider the effects of assumption of tenant leasehold and security deposits in evaluating our liquidity needs. See “—Commitments—Tenant leasehold and security deposits”. We do not expect to pay any interest on tenant leasehold and security deposits. When we acquire a property, we typically expect to apply the deposits in relation to the property toward its acquisition price.

Š Debt capital markets financing. We may use proceeds from the issuance, from time to time, of primarily long-term investment corporation bonds to finance new property acquisitions or to refinance debt incurred in connection with prior property acquisitions. We may issue investment corporation bonds in the future based on market conditions and other factors.

We believe that the sources of funds above will be sufficient for us to finance and implement our growth strategy in the medium-to-long term.

Financing Policy Under our articles of incorporation, we have a formal internal limit of ¥1 trillion on the aggregate principal amount of borrowings and investment corporation bonds outstanding for such purposes as property acquisitions, property repair, repayment of tenant leasehold and security deposits, payment of distributions to

33 unitholders, payment of our expenses and repayment of our indebtedness. We borrow only from institutional investors as defined in the Special Taxation Measures Act. Our short-term and long-term borrowings are unsecured.

By financing our property acquisitions only after we identify our acquisition candidates, we seek to limit the amount of our cash and cash equivalents for which we have no immediate use.

Commitments

Borrowings. In connection with the acquisitions of the 27 new properties, we expect to enter into borrowings in an amount of ¥34,600 million, although we have not entered into a definitive agreement with any financial institution as of the date of this document. We are considering a mix of long- and short-term borrowings, with terms as described below; however, we have not yet determined the allocation of these long- and short-term loans.

Interest Repayment Collateral / Financial institution Classification(1) rate(2) Maturity(3) method Use of funds Guarantee

Base rate plus Short-term July 30, 2019 0.20% To use the funds Long-term Base rate plus July 30, 2020 toward part of Syndicate arranged by Lump-sum 0.30% the purchase price Unsecured and Sumitomo Mitsui repayment upon of 27 new non-guaranteed Banking Corporation Long-term Base rate plus July 30, 2021 maturity 0.40% properties and related costs Long-term Base rate plus July 29, 2022 0.50%

Notes: (1) “Short-term” means loans due within one year and “long-term” means loans due after one year. (2) The base rate is expected to refer to the one-month and three-month Japanese yen TIBOR announced by JBA TIBOR Administration for floating interest rates two business days prior to the drawdown date or immediately preceding interest payment date for short-term borrowing and long- term borrowing respectively. Although interest rates are all scheduled to be floating interest rates, interest rates may be fixed by interest rate swaps on all or part of the long-term borrowings. (3) We can make an early repayment of all or part of our borrowings subject to certain conditions, such as prior written notice to the relevant financial institutions.

Restrictive covenants. We expect that our loan agreements will contain restrictive covenants, including covenants limiting our ability to grant pledges, requiring us to maintain certain financial ratios, as well as other restrictions. We do not expect any covenants to restrict our operations for the foreseeable future, absent extraordinary events affecting our liquidity or financial position.

Tenant leasehold and security deposits. A tenant leasehold deposit (shiki-kin) is a deposit that the property owner receives from the tenant as security for non-payment of rent and other liabilities on the part of the tenant. A tenant security deposit (hosho¯-kin) is a deposit that the property owner receives from the tenant separately from the tenant leasehold deposit. No interest accrues on our tenant leasehold and security deposits, and the tenant receives the deposits at the end of the lease contract, less any deductions taken by us as the property owner. The security deposit is generally repaid commencing from certain times at the lease term and finishing at the end of the lease term pursuant to certain provisions in each lease agreement.

Contingencies

We are not a party to any material legal proceedings or any off-balance sheet financing transactions. We do not intend to enter into securitization transactions with respect to rental receivables or other assets.

34 OVERVIEW OF OFFICE, RESIDENTIAL, HOTEL AND RETAIL PROPERTY MARKETS IN JAPAN

Industry and Market Data

Industry and market data used in this document, including in “Overview of Office, Residential, Hotel and Retail Property Markets in Japan”, have been obtained from independent industry sources prepared by third parties such as the Health, Labour and Welfare Ministry, Ministry of Economy, Trade and Industry, Ministry of International Affairs and Communications, Japan Tourism Agency and Ministry of Land, Infrastructure, Transport and Tourism. While we believe that each of these sources is reliable, we have not independently verified industry or market data from third-party sources, and we cannot assure the accuracy or completeness of the data, including with respect to whether the sample sizes are sufficient to capture trends in the market as a whole. In some cases, we have made statements in this document regarding our industry and our position in the industry based on our experience in the industry and our own investigation of market conditions. Furthermore, certain data are based on sampling of selected historical data and may result in statistical deviation. We cannot assure you that any of these statements are accurate or that our statements correctly reflect our position in our industry. While we believe our internal research is reliable and the market definitions we use are appropriate, neither our internal research nor these definitions have been verified by any independent source. We do not intend, and disclaim any duty or obligation, to update or revise any of the industry and market data presented below to reflect new information, future events or otherwise.

Market Trends in the Office Property Market in Japan

Stability of office properties located in four metropolitan areas

According to the preliminary 2016 Economic Census for Business Activity published by the Ministry of Economy, Trade and Industry of Japan, over half of all offices in Japan are located in the four metropolitan areas—the Tokyo, Osaka, Nagoya and Fukuoka metropolitan areas—which are the center of economic activity in Japan. The following chart indicates the monthly jobs-to-applicants ratio, which is the ratio of job openings to job seekers for any given month, for each of Japan’s four major metropolitan areas, as well as nationwide. The jobs-to-applicants ratio in Tokyo, Osaka and Aichi prefectures grew more than the national average from 2011 to 2017, and the jobs-to-applicants ratio in Fukuoka prefecture has nearly tracked the national average. We believe that continuing improvement of the jobs-to-applicants ratio will continue to support demand for office properties in the areas which represent the four metropolitan areas.

Changes in the Jobs-to-Applicants Ratio

(x) 2.5

2.0

1.5

1.0

0.5

0 2011 2012 2013 2014 2015 2016 2017 Tokyo Osaka Aichi Fukuoka Whole country

Source: Prepared by the Asset Manager based on Health, Labour and Welfare Ministry, “Employment Referrals for general workers” Note: (1) “The jobs-to-applicants ratio” refers to the ratio of job offerors to job applicants, calculated by dividing the number of monthly active job openings by the number of monthly active applications. The number of monthly active job openings is the sum of the number of the active job openings carried over from the previous month and the number of new job openings in the month, including for part-time job. The number of monthly active applications is the sum of the number of active applications carried over from the previous month and the number of new applications in the month. The number of new job openings is the number of newly offered jobs during the relevant month. The number of new applications is the number of applicants newly applying for jobs during the relevant month.

35 Stable demand for small to medium scale office properties

According to the preliminary 2016 Economic Census for Business Activity conducted by the Ministry of Economy, Trade and Industry of Japan, 94.0% of all offices in Japan had 29 or fewer employees, as of June 1, 2016. For the foreseeable future, we expect the demand for small- or medium-scale office properties will continue to be more stable than that for large offices because a substantial portion of all offices will continue to serve a relatively small number of employees.

Number of Offices by the Number of Employees (nationwide)

30 to 99 100 or more employees employees 5% 1% 10 to 29 employees 1 to 9 23% employees 71%

Source: Prepared by the Asset Manager based on Ministry of Economy, Trade and Industry “2016 Economic Census for Business Activity (flash report)”

Market Trends in the Residential Property Market in Japan

Stability of residential properties located in Japan’s four major metropolitan areas

Over half of the population in Japan has been concentrated in Japan’s four major metropolitan areas since 2011, and this population distribution is expected to continue for the foreseeable future. The number of households in Japan’s four major metropolitan areas has similarly grown since 2011. We expect these areas to continue to provide more attractive residential markets, as the number of households continues to grow in these areas.

Percentage of Population in Japan’s Four Major Metropolitan Areas

(%) 60 58 54 54 54 54 54 55 56 53 54 52 50 2011 2012 2013 2014 2015 2016 2017 Source: Prepared by the Asset Manager based on Ministry of International Affairs and Communications “Population, demographics and household survey based on the Basic Resident Register”

Household Growth Rate in Japan’s Four Major Metropolitan Areas

(%) 108 107 110 106 104 105 105 100 101 100

95 2011 2012 2013 2014 2015 2016 2017

Source: Prepared by the Asset Manager based on Ministry of International Affairs and Communications “Population, demographics and household survey based on the Basic Resident Register”

36 Market Trends in the Hotel Property Market in Japan

Stability of hotel properties located in Japan’s four major metropolitan areas

The total number of overnight guests in Japan reached its highest level ever in 2015, at approximately 504 million. Although this number decreased to approximately 492 million in 2016, it increased to approximately 498 million in 2017, which we view as a sign of recovery of this market. In particular, the total number of overnight guests in Japan’s four major metropolitan areas as a percentage of the total number of overnight guests nationwide continued to grow, from 39.4% in 2011 to 44.0% in 2017. We believe that there will continue to be stable demand for hotels in these areas.

Total Number of Overnight Guests in Japan

Total number of overnight guests Total number of foreign overnight guests (million) 750

500

250

0 2011 2012 2013 2014 2015 2016 2017

Source: Prepared by the Asset Manager based on Japan Tourism Agency, Ministry of Land, Infrastructure, Transport and Tourism “Overnight Travel Statistics Survey 2017” Note: (1) “Total number of overnight guests” is the total number of overnight guests (which refers to people who use bedding when staying at the facilities, including children and infants) each month. The “total number of foreign overnight guests” means the total number of foreign overnight guests (which refers to people who are not domiciled in Japan) each month. However, facilities where it is difficult to provide information on whether the guest is domiciled in Japan or not, are allowed to count and report foreigners who do not have Japanese citizenship as foreign overnight guests. The results of each year are based on tentative quarterly survey results (which are estimated by tracing back the quarterly value to the number of target facilities of each month which reflects the number of opened and closed facilities of the target facilities of each year).

Percentage of Overnight Guests in Japan’s Four Major Metropolitan Areas

45%

44%

43%

42%

41%

40%

39%

38%

37% 2011 2012 2013 2014 2015 2016 2017

Source: Prepared by the Asset Manager based on Japan Tourism Agency, Ministry of Land, Infrastructure, Transport and Tourism “Overnight Travel Statistics Survey 2017”

Stable demand for hotels that are primarily for lodging

Hotels that are primarily for lodging, which generally are hotels with limited incidental facilities such as restaurants and banquet halls, maintain high occupancy rates even during economic fluctuations. Therefore, we believe that the demand for such hotels will remain solid for the foreseeable future, regardless of economic fluctuation.

37 Trends in Occupancy Rate by Hotel Type

Resort hotels City hotels Inns (Ryokan) Business hotels 100%

50%

0% 2011 2012 2013 2014 2015 2016 2017

Source: Prepared by the Asset Manager based on Japan Tourism Agency, Ministry of Land, Infrastructure, Transport and Tourism “Overnight Travel Statistics Survey (flash report 2017)” Notes: (1) In the source above, Japan Tourism Agency classifies hotels into four types which are resort hotels, city hotels, inns (ryokan) and business hotels. “Resort hotels” are hotels that are located in holiday and health resorts, with their main target being tourists. “City hotels” are hotels that are located in urban areas, excluding resort and business hotels. “Inns (ryokan)” are facilities other than cheap lodging houses that are constructed mainly in the Japanese style, where they accommodate people in return of lodging fee as business. “Business hotels” are hotels with their target focused on traveling business men. (2) “Occupancy rate” is calculated by dividing the total number of occupied rooms with the total number of available rooms. The total number of rooms is calculated by multiplying the number of available rooms by the number of days of each month respectively. The total number of occupied rooms is the number of rooms that were used by guests each month. The results of each year are based on tentative quarterly survey results (which are estimated by tracing back the quarterly value to the number of target facilities of each month which reflects the number of opened and closed facilities of the target facilities of each year).

Market Trends in the Retail Property Market in Japan

Stability of retail properties located in Japan’s four major metropolitan areas

Annual retail sales in Japan’s four major metropolitan areas accounted for over half of all retail sales nationwide, and the proportion of retail sales in Japan’s four major metropolitan areas to national retail sales has been on an upward trend since 2003. Therefore, we believe the demand for retail properties in Japan’s four major metropolitan areas will remain stable.

Proportion of Retail Sales in Japan’s Four Major Metropolitan Areas

60% Four major metropolitan areas Other areas 55% 50% 45% 40% 1994 1997 2000 2003 2006 2009 2012 2014 2016

Source: Prepared by the Asset Manager based on Ministry of Economy, Trade and Industry, “2016 Economic Census for Business Activity (Flash Report)” Notes: (1) The proportion of retail sales in Japan’s four major metropolitan areas and that in other areas are based on the relevant annual retail sales of retail sales to the total annual retail sales in Japan. (2) “2016 Economic Census for Business Activity (Flash Report)” covers places of business of retail according to the Japan Standard Industrial Classification Division. “The total annual retail sales” refers to the sales amount of tangible goods sold at places of business from January 1 to December 31 of the year, including the consumption tax.

38 Stability of community-based retail properties and growing demand for urban retail properties

Sales at community-based retail properties, which are defined as properties that primarily target a commercial area within a 1-km to 10-km radius, and are generally frequented by customers on a daily basis, such as supermarkets, drugstores and cleaners, have been more stable than the sales of general merchandise stores and department stores, where sales decreased by approximately 27.2% between 2003 and 2017.

Sales by Retail Property Type

Sales in food retail General merchandise stores Department stores Sales in the entire retail 125 100 75 50 2003 2005 2007 2009 2011 2013 2015 2017

Source: Prepared by the Asset Manager based on Ministry of Economy, Trade and Industry, “Current Survey of Commerce” Notes: (1) Indexation using sales prices in 2003 as 100. (2) The index of “General Merchandise Store (GMS)” is based on the data of retailing as a whole excluding the sales amount of department stores.

The amount of consumption by inbound tourists increased from ¥813.5 billion in 2011 to ¥3,747.6 billion in 2016, as the number of inbound tourists increased. We believe these trends will continue to support demand for urban retail properties, located near major stations or in busy commercial areas, with good visibility from or attractiveness to customers.

Trends in Consumption by Inbound Tourists

(billion yen) 4,000 3,747.6 3,477.1 3,500 3,000 2,500 2,027.8 2,000 1,416.7 1,500 1,084.6 1,000 813.5 500 0 2011 2012 2013 2014 2015 2016

Source: Prepared by the Asset Manager based on Japan Tourism Agency, Ministry of Land, Infrastructure, Transport and Tourism, “Consumption Trend Survey for Foreigners Visiting Japan”, “Consumption Trend Survey for Foreigners Visiting Japan–2015 Annual Report” Note: (1) The amount of consumption by inbound tourists is calculated by adding the amount of the domestic revenue from packaged tours to the amount of travel expenditures by inbound tourists in Japan. The amount of travel expenditures is the amount of expenditures during stay in Japan such as costs of accommodation, food and drinks, transportation, entertainment services and shopping and includes accommodation and transportation fees that are paid individually before the trip. Packaged tours fares include costs of accommodation, food and drinks, transportation and entertainment services and domestic revenue is estimated as such amount of expenditure excluding round-trip flight or voyage fares.

39 OUR BUSINESS

General Overview

We were incorporated on September 11, 2017 under the ITA as a Japanese investment corporation (to¯shi ho¯jin) formed to own and operate real estate properties and real property-related assets. This type of investment corporation is commonly referred to as a J-REIT. Our operations and activities related to our properties and assets are delegated to third parties, including the Asset Manager, Takara PAG Real Estate Advisory Ltd. See “Asset Manager”.

Our mission is to achieve strong growth and quality asset management expected by institutional investors through the utilization of the unique capabilities of our Sponsors as well as to maximize unitholder value while creating a sustainable environment and contributing to communities and society. We plan to achieve external growth by making full use of the strengths of each of our Sponsors and steadily acquiring attractive properties. We will also pursue internal growth by leveraging our management’s expertise and asset management capabilities as well as market insights obtained from our Sponsors and our Sponsors’ ability to make improvements to properties to increase their value.

We intend to invest mainly in office and residential properties with respect to which we will be able to utilize the strengths of our Sponsors, including Takara Leben Group’s development capability and PAG’s sourcing capability, as well as their leasing expertise and ability to increase property value. We also intend to invest in hotel, retail and other properties when we believe we can leverage our Sponsors’ strengths. We expect that 70% or more of our portfolio will be allocated to office and residential properties, while 30% or less will be allocated to hotel, retail and other properties, on an acquisition price basis.

While we currently do not own any properties as of the date of this document, we intend to acquire an initial portfolio of 27 properties with the aggregate acquisition price of ¥64.3 billion. See “Anticipated Initial Portfolio”.

We expect that our units will be admitted for trading on the Tokyo Stock Exchange on or about July 27, 2018. Our registered head office is located at 1-14-15, Akasaka, Minato-ku, Tokyo, Japan. Our general telephone number is +81-3-6435-5264.

Our Market Opportunity

We believe that developments in the Japanese economy present a unique opportunity for investing in a diversified portfolio of properties with stable revenues in the medium-to-long term. These developments include the following:

Š Stability of office rents in four major metropolitan areas. We believe that demand for office properties in Japan’s four major metropolitan areas will remain stable in the near-to-medium term, driven in part by further improvements in the jobs-to-applicants ratio in these areas. We believe this provides an opportunity to invest in office properties, with stable rental revenue, in these areas. In particular, we believe that demand will be especially stable for small- to medium-sized office properties, which we expect to be in higher demand than large-sized office properties.

Š Population shift to Japan’s four major metropolitan areas supporting residential market. Over half of the population is concentrated in Japan’s four major metropolitan areas, and we expect Japan’s population distribution to continue to shift toward these areas. In addition, the household growth rate in these areas continues to increase. We believe that this trend makes residential properties in these areas attractive acquisitions, with the potential for stable rental revenues.

Š Stable demand for hotels in Japan’s four major metropolitan areas. The total number of overnight guests in Japan, for each of the past three years, has been around 500 million, and we believe this trend of strong demand will continue. In addition, the number of overnight guests in Japan’s four major metropolitan areas as a percentage of the number of overnight guests in Japan as a whole grew from 39.4% in 2011 to 44.0% in 2017. We believe that this creates an opportunity to invest in hotels with stable revenues in these areas. In particular, in recent years, hotels with limited incidental facilities (such as restaurants and banquet halls) have demonstrated demand that is particularly resilient to economic fluctuation, making them attractive targets for investment.

40 Š Stable demand for retail properties in Japan’s four major metropolitan areas, with community-based retail properties outperforming other retail property types. Japan’s four major metropolitan areas currently account for over half of all retail sales nationwide. Also, community-based retail properties have shown stable demand for the past 14 years. We expect both of these trends to continue, making community-based retail properties in Japan’s four major metropolitan areas attractive targets for investment.

Our Competitive Strengths

We believe that the following strengths provide us with a competitive advantage in achieving our investment objectives:

Š A comprehensive real estate developer’s capabilities and a fund manager’s sourcing capabilities. We will leverage the unique combination of capabilities offered by two of our Sponsors, Takara Leben Group and PAG.

O Takara Leben Group. Takara Leben Group has an established track record in selling houses and condominiums, and has also built expertise in developing residential, office, hotel, retail and other properties throughout Japan. In 2016, Takara Leben also created a corporate division specifically for the purpose of investing in and selling properties, mainly to us. In addition to the development and sale of properties, Takara Leben Group operates in a number of other real estate-related businesses, including property and asset management.

O PAG. Since 1997, PAG (including its predecessor) has been investing in properties in Japan, during which time it has established a track record as one of the leading real estate investment management firms in Japan. Between 1997 and 2017, PAG’s cumulative investments in real estate properties (excluding loan debts) reached approximately ¥1.7 trillion. This includes total new investments of ¥118.6 billion in 2017. PAG also regularly sells real estate properties to J-REITs. Total sales to J-REITs between 2013 and 2017 were ¥163.5 billion. PAG’s long track record of real estate investment has been supported by PAG’s strong sourcing capabilities. Prior to 2011, PAG Investment Management Limited was known as Secured Capital Japan Co., Ltd., which was delisted from the Tokyo Stock Exchange and merged with PAG in 2011.

Š A diversified portfolio that leverages each of our Sponsors’ strengths across four asset types. Each of our Sponsors has its own unique capabilities and deep expertise in each of the asset types that will make up our diversified portfolio—office, residential, hotel and retail properties. Takara Leben has an established track record in sales of houses and condominium apartments as well as a broad range of development projects and a stable supply of various types of properties. PAG is one of the largest alternative investment managers in Asia. Kyoritsu Maintenance has operated dormitories and hotels for approximately 40 years. Yamada Denki has a strong presence in the home appliance retail market, giving it expertise in retail properties. See “Takara Leben, PAG, Kyoritsu Maintenance and Yamada Denki”. Thus, our Sponsors provide us with a means of support relating to each of the four asset types in which we currently plan to invest.

Š Institutional quality asset management and internal growth supported by each of our Sponsors’ expertise in management and operational capabilities. Each of Takara Leben Group, PAG, Kyoritsu Maintenance and Yamada Denki has unique management and operational capabilities that will be of significant value to us. For example:

O Takara Leben Group has established a compelling value chain that spans across a wide range of property-related services from development to asset/property management;

O PAG has extensive leasing, renewal and conversion expertise acquired from its asset management experience;

O Kyoritsu Maintenance has been one of the leading operators of dormitories and hotels for the past 40 years in Japan; and

O Yamada Denki, which is the largest home appliance distributor in Japan, has valuable market insight into and knowhow on the retail properties market and its operations throughout Japan, backed by its nationwide network of retail stores.

41 Š Alignment of interests of the Asset Manager, our Sponsors and unitholders. We also believe that our governance structure supports enhancement of our unitholders’ interests, by aligning the interests of the Asset Manager and our Sponsors with those of our unitholders.

O Interest-aligning investments by our Sponsors. PAG purchased 150 units at the time of our incorporation and currently holds 1,500 units following the 10-for-1 unit split on April 21, 2018. Takara Leben Group, PAG Group and Yamada Denki will invest up to ¥3.4 billion, collectively, of our total outstanding units, at the time of our initial public offering. Of the ¥3.4 billion total, Takara Leben Group, PAG Group and Yamada Denki will invest up to ¥2.3 billion, ¥1.0 billion and ¥0.1 billion, respectively.

O Management fee structure. We have adopted a management fee structure where a portion of the management fee is linked to our net income before taxes before deduction of a portion of the asset management fee. We also do not pay any disposition fee to the Asset Manager in connection with a property disposition on the basis that capital gains from a property disposition, if any, reflected in our net income before taxes, which increases the asset management fee, should provide sufficient compensation to the Asset Manager for its assistance on the disposition of properties. We believe that this fee structure will provide enough incentives to the Asset Manager to maximize unitholder value.

O Performance-linked remuneration structure. A portion of the bonus for each of the Asset Manager’s full-time directors and executive director in charge of investment management is directly linked to our net income per unit and relative performance of our investment unit price against the Tokyo Stock Exchange REIT Index.

Our Investment Strategy

We plan to take advantage of the market opportunities described above and pursue our investment objective through the following strategies:

External Growth

Š Leverage Takara Leben Group’s development capabilities and PAG’s sourcing capabilities. We will have access to a variety of property information and acquisition channels established through Takara Leben Group’s development capabilities and PAG’s sourcing capabilities, in order to achieve solid external growth.

O Takara Leben Group. We have preferential negotiation rights to acquire properties that are owned by Takara Leben and its subsidiaries, or by a fund managed or advised by Takara Leben or its subsidiaries, and that meet the Asset Manager’s investment guidelines. We currently have such rights on 21 properties, located across Japan, as indicated in the following chart. Specifically, ten properties are located in the Tokyo metropolitan area, two in the Nagoya metropolitan area, three in the Osaka metropolitan area, one in the Fukuoka metropolitan area, four in major regional cities and one in other areas. These properties are also diversified across asset type, with eight residences, eight hotels, three offices and two retail and other properties.

42 Property No. of Leasable Usage Property name (tentative name) category Location units/lots area Area category Office Tokyo Office 1 Under Chiyoda-ku, Tokyo 9 lots 1,678 m2 Tokyo metropolitan area development Tokyo Office 2 Existing Shibuya-ku, Tokyo 6 lots 446 m2 Tokyo metropolitan area Other City Office Existing Yamagata, 8 lots 6,681 m2 Major regional city Yamagata Residence Tokyo Resi 1 Under Nerima-ku, Tokyo 111 units 5,369 m2 Tokyo metropolitan area development Tokyo Resi 2 Under Setagaya-ku, 84 units 4,038 m2 Tokyo metropolitan area development Tokyo Tokyo Resi 3 Under Koto-ku, Tokyo 86 units 2,380 m2 Tokyo metropolitan area development Tokyo Resi 4 Existing Suginami-ku, 16 units 1,024 m2 Tokyo metropolitan area Tokyo Tokyo Resi 5 Existing Ota-ku, Tokyo 15 units 1,323 m2 Tokyo metropolitan area Other City Resi 1 Under Nagareyama, 111 units 5,690 m2 Tokyo metropolitan area development Chiba Other City Resi 2 Under , 90 units 2,448 m2 Tokyo metropolitan area development Kanagawa Other City Resi 3 Existing Koriyama, 36 units 2,183 m2 Major regional city Fukushima Hotel Nagoya Hotel Under Nagoya, Aichi 155 rooms 2,530 m2 Nagoya metropolitan area development Osaka Hotel Under Osaka, Osaka 233 rooms 7,179 m2 Osaka metropolitan area development Kyoto Hotel 1 Under Kyoto, Kyoto 118 rooms 2,780 m2 Osaka metropolitan area development Kyoto Hotel 2 Under Kyoto, Kyoto 191 rooms - Osaka metropolitan area development Fukuoka Hotel Under Fukuoka, Fukuoka 150 rooms 3,470 m2 Fukuoka metropolitan development area Other City Hotel 1 (Kyoritsu Operation) Under Mito, Ibaraki 264 rooms 7,683 m2 Major regional city development Other City Hotel 2 (Kyoritsu Operation) Under Morioka, Iwate 177 rooms 5,036 m2 Major regional city development Other City Hotel 3 Under Onomichi, 244 rooms - Other area development Hiroshima Retail and Other City Retail 1 Existing Fujisawa, 3 lots 605 m2 Tokyo metropolitan area other assets Kanagawa Other City Retail 2 Under Nagoya, Aichi 1 lot 2,904 m2 Nagoya metropolitan area development

Note: (1) The information for the above properties is as of the date of this document, and is subject to change in the future. As of the date of this document, we have no definitive plans to acquire any of the properties listed above, nor is there any guarantee that we will be able to acquire any of these properties.

O PAG. PAG has an extensive track record in selling properties to J-REITs, amounting to a total sale price of ¥163.5 billion between 2013 and 2017, with an average annual sale price of ¥32.7 billion. We plan to leverage the sponsor support agreement with PAG and the Asset Manager to take advantage of compelling opportunities to acquire properties from PAG or funds managed or advised by it.

Š Take advantage of multi-Sponsor property pipelines. We will have opportunities to acquire properties that have been developed and/or managed through collaboration among more than one Sponsor. For example, Dormy Inn Matsuyama, one of the properties we anticipate acquiring in connection with the offerings, was developed and is managed through collaboration between Takara Leben Group and Kyoritsu Maintenance.

See “Takara Leben, PAG, Kyoritsu Maintenance and Yamada Denki—Sponsor Support Agreements”.

Internal Growth

Š Execute institutional quality asset management with our Sponsors’ support. Takara Leben Group and PAG each has a proven track record in leasing and increasing property value, and we will take advantage of their expertise to conduct proactive property management. For example, in 2017, Takara Leben Group successfully entered into a lease agreement with a new tenant for L. Biz Jimbocho, an office property, within approximately a month after commencement of tenant leasing upon receipt of a termination notice from the property’s only tenant and achieved higher rent without any vacancy period. In 2017, PAG converted a plasma display factory in Amagasaki, Hyogo that had suspended operations, into a large logistics facility, with such conversion being executed at a cost lower than what it would have cost to demolish and redevelop the property. In 2017, PAG also renovated a retail property in Ginza, Chuo-ku, Tokyo, in a way that matched the redevelopment trends of its surroundings, as a result of which the property commanded higher rents from

43 tenants. We aim to achieve internal growth of properties in our portfolio by taking advantage of such expertise of Takara Leben Group and PAG.

Š Revitalize properties utilizing Takara Leben Group’s revitalization capabilities. We aim to enhance the competitiveness of our properties where we believe their value can be increased through capital expenditures. Toward this end, we will leverage support from both Takara Leben Group and PAG, but also expect to take advantage of the expertise of the Asset Manager’s experienced management team, composed of experts in development, investment, leasing, management and increasing property value. In addition, if extensive repair is required or it becomes necessary to rebuild a property or convert its asset type due to changes in the environment, we will consider selling the property to Takara Leben Group, which has recently commenced a property revitalization business, and reacquiring the property after it is improved or revitalized by Takara Leben Group. We believe that this method will not only improve our profitability, but can also revitalize the real estate market and contribute to the economic activity of the surrounding communities.

Š Kyoritsu Maintenance’s operational capabilities and Yamada Denki’s market insights. We will capitalize on the extensive experience Kyoritsu Maintenance has built operating a large number of dormitories and hotels over nearly 40 years. In addition, we will also utilize Yamada Denki’s expertise in the retail business and its insight into regional retail markets amassed through its nationwide network of 12,029 stores (as of March 31, 2018), which we believe will give us valuable insights in terms of managing retail properties in our portfolio.

Our Financing Strategy

We will execute a sound, proactive and flexible financing strategy for the purpose of producing stable profits and achieving continued growth of our unitholder value:

Š Conduct equity finance at appropriate timing. We will tap the capital markets when we need funds to acquire properties, but will do so upon considering the dilutive effect of equity finance and market conditions.

Š Improve capital efficiency through cash management. We will conduct appropriate cash management to improve our capital efficiency. We will strive to maximize our unitholders’ return by effectively applying cash-on-hand, which is primarily derived from our depreciation expense and tenant deposits, toward property acquisitions, improving the profitability of our portfolio, repairs and capital expenditures to strengthen the competitiveness of our properties, repayment of interest-bearing debt to reduce interest expense and distributions in excess of retained earnings to stabilize distributions.

Š Maintain a sound financial foundation by improving balance sheet stability. We will implement a capital management strategy pursuant to which we will aim to maintain an appropriate LTV level, maintain sufficient capacity for acquisition, increase long-term borrowings as a percentage of total borrowings and fixed interest ratio, obtain longer duration of debts, and decrease the weighted average interest rate.

See “—Financing Policies”.

Other Initiatives

We plan to introduce a unitholder benefits program whereby unitholders of record who owns at least ten units as of the record date receive ¥2,500 worth of vouchers (five ¥500 tickets) to use at Yamada Denki group stores, all across Japan (with certain exceptions). One ¥500 ticket can be used for every ¥1,000 purchased. The record date is the final day of each fiscal period and the first record date is August 31, 2018. The vouchers will be sent in the middle of May to unitholders of record as of the end of February each year and in the middle of November to unitholders of record as of August 31 of each year. Unitholders of record as of the end of February each year can use the voucher from July 1 to December 31 of the year and unitholders of record as of August 31 of each year can use it from January 1 to June 30 of the following year.

Asset Allocation Policy

We invest in diverse properties that will provide stable revenues in the medium-to-long term, including properties which we believe will become more competitive with the support of our Sponsors, and which allow for our continued growth. We consider investments in real estate, real estate equivalents such as land leasehold rights and surface rights and real estate based securities such as trust beneficiary interests in real estate.

44 Target Allocation

The following table shows our target allocation by location.

Location Anticipated investment percentage(1) Core areas(2) ...... 70%or higher Sub areas(3) ...... 30%or lower

Notes: (1) Each investment percentage is a target over the medium-to-long term, which is subject to revision, depending on real estate market conditions and future property acquisitions. (2) Core areas means Japan’s four major metropolitan areas. (3) Sub areas means areas other than Japan’s four major metropolitan areas, centered on Japan’s major regional cities. These include core regional areas comprised of cities designated by government ordinance, designated mid-size cities, specially designated cities and prefectural capitals.

The following table shows our target portfolio allocation by asset type.

Asset type Anticipated investment percentage(1) Office / Residential ...... 70%or higher Hotel / Retail and other(2) ...... 30%or lower

Notes: (1) Each investment percentage is a target over the medium-to-long term, which, depending on real estate market conditions and future property acquisitions, may exceed or fall below the relevant anticipated investment percentage. (2) Retail and other includes retail properties, industrial properties (including logistic facilities, data centers, factories and research and development properties) and parking areas.

Investment Policy

Property Selection

We plan to generally invest in properties whose value is over ¥500 million and which would account for 25% or less of our portfolio’s total value, following the acquisition of such property. We also consider the following factors when selecting properties:

Š Profitability. We generally plan to invest in properties with an occupancy rate of at least 80% or other properties that we believe have a sufficient probability of reaching an 80% occupancy rate.

Š Facilities and specifications. We generally plan to invest in properties with facilities and specifications that meet or exceed the market standards in the relevant market, or can be improved to meet or exceed such market standards.

Š Building structure. We generally plan to invest in properties constructed with reinforced concrete, steel- reinforced concrete or steel frame; however, we may not apply this standard to buildings on properties for which we acquire only a lease-hold interest.

Š Seismic review. We generally plan to acquire properties with PML scores that do not exceed 15%; however, we may invest in certain properties with PML scores in excess of 15%, if acquiring such property would not increase the PML score of our entire portfolio above 15%, after verifying the value at risk of such property.

Š Legal compliance. We generally plan to invest in properties that comply with the City Planning Act, the Building Standards Act of Japan, or the Building Standards Act, and other related laws and regulations, or with violations that can be cured after the acquisition.

Š Hazardous substances. We also plan to invest in properties where, according to engineering reports made by outside experts, environmentally hazardous substances such as asbestos and PCB are unlikely to exist, or appropriate measures are taken in compliance with all related laws and regulations.

Š Soil quality. We generally do not plan to invest in a property located in an area that requires notification or certain action related to the soil quality under the Soil Contamination Countermeasures Act. We plan to adjust the acquisition price where soil contamination is found through ground investigation.

Š Property rights. We generally plan to invest in properties only where we are able to own an entire building and land, but on a case by case basis after examination, we may also acquire co-ownership interests in properties, compartmentalized interests in properties, buildings with leasehold rights on the underlying land, and/or rights only to the underlying land of a properties but not to the buildings on such properties.

45 Š Tenants. We will consider each tenant’s characteristics, creditworthiness and purpose of use of the property.

Š Development properties. We generally do not plan to invest in development properties. We may invest in properties under development only where there is a low risk of failure to gain required authorization or completion and a high probability of occupancy and the investment will not materially affect the portfolio as a whole.

We also plan to invest in properties based on the following additional policies:

Š Office. We plan to invest in small scale properties with a floor size of less than 2,000 m2 and medium scale properties with a floor size between 2,000 m2 and 20,000 m2 and located generally within a ten-minute walk from the nearest station. We currently plan to consider investing in large scale properties with a floor size of 20,000 m2 or more after our assets under management reach more than ¥150 billion, which we believe is a scale that will allow us to improve our ability to handle the downside risk, because of their anticipated higher volatility. We also comprehensively consider demand for office properties in our investment target areas, including vacancy rates in the relevant area or trends in rent standards, building age, earthquake-resistance and status of property management, to judge the property’s competitiveness.

Š Residential. We generally plan to invest in properties located within a ten-minute walk from the nearest station or major bus stop, except those which are located within an area commutable to education facilities or near vendors that provide daily needs, such as banks, post offices, hospitals or supermarkets and are expected to have stable demand. We invest in three different types of rental residences, which may be single, compact or family type, but excluding luxury residences, which are residences with at least one room whose monthly rent is over ¥500,000. We also comprehensively consider demand for residences in our investment target areas, including vacancy rates in the relevant area or trends of rent standards, vital statistics, nearby facilities and the existence of educational and medical institutions to judge the property’s competitiveness.

Š Hotel. We plan to invest in hotels located in areas easily accessible to major transportation hubs such as airports, major railway stations and highways adjacent to terminals or busy areas. We generally plan to invest in medium scale hotels with 30 to 299 guest rooms that are primarily for lodging, which are hotels with limited or minimal non-lodging facilities such as restaurants and banquet halls. As part of our growth strategy , once our assets under management reach ¥150 billion (see below), we also plan to carefully consider investing in large scale or small scale hotels with over 300 or fewer than 30 guest rooms, as well as full-service and resort hotels, because of anticipated higher volatility. In addition, we plan to comprehensively consider property specifications such as accommodations and other necessary facilities, the operator’s trustworthiness and operation capability, trends in the number of offices and trends in the number of tourists in areas nearby, and access to nearby facilities and business areas to judge the property’s competitiveness.

Š Retail. We plan to invest in properties which are easily accessible, using the best means of transportation, based on the characteristics of the commercial area in which the property is located, generally within a ten- minute walk from the nearest station or bus stop where the train or bus provides the easiest access to the property. We plan to invest in community-based retail properties which service a commercial area within a 5- to 10-km radius and a floor size of about 10,000 to 30,000 m2 and neighborhood shopping centers which service a commercial area of 5 km or less radius and a floor size of about 3,000 to 10,000 m2. As part of our growth strategy, once our assets under management reach ¥150 billion (see below), we also plan to carefully consider investing in large scale suburban properties with a floor size of over 30,000 m2, regional shopping centers that service a trading area of over 10 km radius and many specialty stores or comprehensive supermarkets that provide daily needs that service a commercial area of over 10 km radius because of their anticipated higher volatility. We plan to also comprehensively consider the size and kind of the commercial area, demographic forecasts, surrounding environment, tenant composition and sales of key tenants and other relevant conditions to judge the property’s competitiveness.

Š Other. We may invest in other properties that contribute to our portfolio management such as industrial properties and parking lots. We plan to invest in industrial properties which can generate stable profits over the medium-to-long term from logistics facilities, data centers, factories and research laboratories based on tenants’ creditworthiness and substitutability. We plan to invest in parking lots in front of stations, in business districts or in busy areas which can generate stable profits over the medium-to-long term based on the operator’s credibility and the operating conditions. We plan to also consider the possibility of future development in parking lots.

46 Š Land property with leaseholds. We may invest in land properties with leaseholds based on the above standards, considering the terms of the lease agreement, characteristics of tenants, land property value as well as the possibility of acquiring the building. We plan for the maximum percentage of such investments in our portfolio to be 10%.

We expect to shift our growth strategies regarding assets, such as small-or-medium-scale offices, single or compact residences, residences for families, hotels specialized in lodging, community-based retail properties, urban retail properties and additional assets such as large-scale offices, resort and full-service hotels, luxury residences and large scale suburban retail properties, depending on the growth stage of our portfolio, as follows:

Š Until assets under management reach ¥150 billion. We plan to focus on stability, acquiring assets we refer to as “base assets”, such as offices, residences, hotels, retail properties and other facilities, considered by the Asset Manager to have stable cash flows with high reliability, secure liquidity to some extent, and contribute to our stable management.

Š After assets under management exceed ¥150 billion. After careful consideration, we plan to focus on further growth by increasing our ability to handle the downside risk and expanding the range of assets in which we invest to include assets that we refer to as “growth assets”, such as large-scale offices, luxury residences, full-service hotels, resort hotels, small and large scale hotels and large scale suburban retail properties. Ultimately, we plan to have an asset allocation of base assets of 70% or higher and growth assets and additional assets of 30% or lower, aiming to achieve a total asset size of ¥300 billion.

Due Diligence

Prior to our investment in a property, we will conduct economic, physical and legal due diligence reviews, generally covering the following matters. In conducting such due diligence review, we review engineering, environmental and such other review reports prepared by independent third-party experts and real estate appraisals prepared by third-party property appraisers.

Economic Due Diligence

Š Acquisition price. We will verify whether the acquisition fee is appropriate, including by comparing it to the appraisal value while, at the same time, also reviewing the appropriateness of such appraisal value.

Š Tenant evaluation. This includes evaluation of the creditworthiness and rent payment status of the tenant, and the tenant’s business and financial status. We will also evaluate the risk of termination and suitability of the lease agreement.

Š Market analysis. This includes analysis of rent, including its suitability. We may consider obtaining market reports from third parties.

Š Profits. This involves reviewing the expected cash flows of investment properties, to evaluate the likelihood that such cash flows will actually be achieved.

Physical Due Diligence

Š Basic information. This includes examining the disclosure by the seller, confirming the basic information regarding the property and investigating the site by the Asset Manager.

Š Construction and facilities. This includes confirmation of key elements of the building such as its industrial design, main structure, age and designer and investigation of the site by the Asset Manager.

Š Earthquake performance. This includes reviewing the engineering report to verify the earthquake resistance and risk of a property (PML). We also consider the effect of a potential acquisition on the entire portfolio’s PML.

Š Confirmation of important documents. This includes confirmation of important documents, such as boundary confirmation documents, applications for confirmation, inspection documents, as-built drawings and lease agreements.

47 Š Capital expenditure and repairing expenses. This includes projecting anticipated repairs, verification based on repair records and whether the building contractor has issued a warranty or provides maintenance services.

Š Environmental due diligence. This includes investigation and review of the past and current use and containment of asbestos, CFC, PCBs and other toxic substances, history of land use and soil contamination reports.

Legal Due Diligence

Š Legality. This includes receiving engineering reports to evaluate a property’s compliance with laws and regulations, such as the Construction Standard Act, the Fire Service Act and the City Planning Act, and also examining issues discovered during legal inspections and on-site inspections by the Asset Manager.

Š Property rights-related investigations. This includes confirmation of the type of property rights (surface rights, lease or otherwise) and title to be transferred, such as whether the seller holds clear rights and title to the target property. We will examine carefully the following factors:

(i) for compartmentalized ownership interests, the security deposits for repair plans and characteristics of owners of compartmentalized units, existence of a manager, the proportion of voting rights and the terms of management regulation;

(ii) for co-ownership interests, characteristics of co-owners, the existence of agreements among co-owners and methods for requesting division of co-ownership interests;

(iii) for leased properties, characteristics of the land owner, appropriateness of the land rent, perfection of leasehold rights and whether there is any consent fee when selling a leasehold right and the amount of such fee; and

(iv) for properties leased to others, characteristics of the leaseholder, appropriateness of the land rent and perfection of leasehold rights.

Š Other rights. This includes confirmation of whether there is any illegal occupation, mortgage, revolving mortgages, servitudes or right of way.

Š Contracts. We will confirm the terms and conditions of trusts and other agreements.

Š Boundary survey. We will also likely conduct a boundary survey to confirm the property boundaries and the existence of any documents and assess whether there are any encroachments or potential conflicts.

Investment in tokumei kumiai interests and real estate-backed securities

We may invest in tokumei kumiai interests, real estate-backed securities and other real estate-related securities, up to (but not including) 25% of our total assets, subject to the condition that such investments meet the other investment criteria of our policies, and that we would have the opportunity to acquire the properties in respect of such securities when divested by the relevant issuer.

Forward Commitment Contracts

We expect to enter into contracts for the acquisition of properties under which the settlement of the contract occurs more than one month following the execution of the contract and may enter into additional such contracts in the future. Before making a decision to enter into any such contract, with regard to how big the financial impact on us could be and taking into consideration the effect on our unitholders, we will carefully examine and deal with such risk by taking measures such as setting up standards for factors such as (i) maximum amount of contract penalties of the contract, (ii) maximum amount of acquisition price of such property, (iii) maximum length of time allowable between execution of the contract and settlement and (iv) method for raising settlement fund. If we execute a forward commitment contract in the future, we will disclose, in a timely manner, such commitment including the terms and the financial impact, in case of contractual default. In order to address the risks of changes in property value during the commitment period, we plan to disclose to the public periodically the appraisal information for the property to be acquired. If necessary, we will take necessary measures, such as paying the termination penalty and terminating the contract, or attempting to renegotiate the purchase price with the counterparty, if the appraisal value falls below the acquisition value.

48 Operation and Property Management Policies

Our goal is to achieve stable profits in the medium-to-long term. In order to maintain and improve the value of our portfolio and the competitiveness of each property and to expand our revenue, we will conduct adequate repair and maintenance measures based on our operation and property management policies stated below.

Property Management

We retain a property manager that contributes to our profitability upon consideration of its property operation or management experience and capabilities, track record, ability to manage based on our management plans, costs and management continuity.

Repair and Capital Expenditure

In order to maintain the value of our properties as well as the satisfaction of our tenants, we formulate and execute repair and capital expenditure plans for each property based on discussion with the property manager. The amount of repair and capital expenditures for each property shall generally be less than the depreciation expense for each property, and the total of such amount shall generally be less than the total depreciation expense for our portfolio.

We reserve funds for maintenance and repairs as necessary for medium-to-long term portfolio management in light of depreciation expenses, maintenance and repair plans.

Insurance Policy

We take out appropriate casualty insurance (including fire and comprehensive liability) for our properties in order to secure our ability to compensate third parties if any of our properties suffers damage or in the event of an accident or disaster that results in injury, death or property damage.

If we acquire a property with a PML that exceeds 15%, we will consider taking out earthquake insurance for the portion that exceeds 15%, after evaluating the expected impact an earthquake would have on the property and our portfolio as a whole as well as the effect the insurance premiums would have on our financial performance.

Disposition Policy

In general, we acquire properties for medium-to-long term investment purposes and do not sell our properties in the short-term. However, we may consider a disposal of any of our properties in occurrence of the following circumstances:

Š where we believe it will increase unitholder value, and disposition would be appropriate from the perspective of our medium-to-long term strategy,

Š where the property is subject to impairment based on our accounting standard, and

Š where the property is likely to affect our business results due to reasons such as where a large-scale repair is needed or where reconstruction of the property in accordance with the change in the surrounding environment or the change in asset type (conversion) of the property is required, we will consider reacquisition of such properties after we sell them to Takara Leben Group and have Takara Leben Group reconstruct or redevelop the properties.

Distribution Policy

We make cash distributions to unitholders and registered unit pledgees whose names are listed or recorded as such on the register of unitholders as of the last day of each fiscal period in accordance with the following distribution policies:

Distribution amount. In accordance with Japanese tax law we distribute in excess of 90% of our distributable profit. We calculate distributable profit (as defined in the Special Taxation Measures Act) for the

49 purpose of determining our cash distributions based on generally accepted accounting principles. However, this shall not apply in case of tax loss or when there is no tax earning due to carry over of loss, and we will distribute a cash amount which we reasonably determine.

Distribution in excess of retained earnings. If we determine it appropriate to do so, taking into consideration factors such as the economic conditions, real estate market or leasing market trends, we are able to distribute cash to our unitholders in excess of retained earnings up to the maximum amount calculated in accordance with applicable law and standards (including standards set by ITAJ). In addition, we may also distribute cash in excess of retained earnings if we determine it appropriate to alleviate the burden of taxation.

Distribution method. As a general rule, we make cash distributions for each fiscal period, if any, to unitholders within three months of the end of the same fiscal period.

We do not pay and have no obligation to pay cash distributions not claimed within three years of the distribution date. Unclaimed cash distributions do not accrue interest.

We will distribute cash in accordance with our protocol and protocols of ITAJ.

Financing Policies

Debt Finance

Our financing activities are guided by the following policies:

Š We may take out borrowings or issue long-term or short-term investment corporation bonds for the purpose of investing in properties, conducting repairs or other work, paying cash distributions, repaying our obligations (including repayment of tenant leasehold or security deposits, and obligations related to borrowings or long-term or short-term investment corporation bonds) and other activities. We effectively control debt maturities by diversifying maturity dates for our borrowings and long-term or short-term investment corporation bonds in order to minimize refinancing and interest rate risk.

Š The maximum amount of each borrowing and investment corporation bond issuance will be ¥1 trillion, and the aggregate amount of all such debt will not exceed ¥1 trillion. We may only borrow from lenders that are certain qualified institutional investors as specified by applicable tax laws, and we aim to form and maintain good relationships with such lenders. We may take out borrowings or issue investment corporation bonds by collateralizing our investment properties.

Š We diversify our funding sources and maintain multiple financing options including committed lines of credit or borrowings.

LTV Ratio

When we take out borrowings and issue investment corporation bonds, we consider our LTV ratio, which is the ratio of the aggregate principal amount of our interest-bearing debt, minus anticipated dividends, divided by our total assets.

We have set an upper limit of 60% as a general rule for the LTV ratio in order to operate with a stable financial condition. We may, however, temporarily exceed such levels as a result of property acquisitions or other events.

Equity Finance

We may issue additional investment units for the purpose of property acquisitions, repair of our properties, repayment obligations including repayment of borrowings or other activities. In such event, we ensure our financial soundness and are mindful of the potential for dilution of our investment units in order to achieve stable growth in unitholders’ value.

50 Management

Our Executive and Supervisory Directors

The following table provides information about our executive and supervisory directors, as of the date of this document.

Name Position Age Expiration of current term Masayuki Ishihara ...... Executive Director 52 March 2020 Norifusa Hashimoto ...... Supervisory Director 59 March 2020 Toshiaki Kawashima ...... Supervisory Director 71 March 2020

Our articles of incorporation require that we have one or more executive directors and two or more supervisory directors. Our articles of incorporation also require that we have at least one more supervisory director than the number of executive directors.

Our board of directors currently comprises one executive director and two supervisory directors. Except for our initial directors, all directors are elected at general meetings of our unitholders. The executive director represents us and has responsibility for the administration of our affairs. The supervisory directors have a statutory duty to review the executive director’s administration of our affairs. Our executive director and supervisory directors work together to ensure that we comply with tax and other legal and regulatory requirements, including those arising under the ITA and related J-REIT regulatory provisions. Certain responsibilities of the executive director set out in the ITA, such as convoking general meetings of unitholders and entering into the asset management agreement, require a resolution of our board of directors. The quorum for a resolution is a majority of the members of our board of directors, and the adoption of a resolution requires a majority of the votes present. If any director has conflicts of interest with respect to a proposed resolution, the director is not counted for purposes of achieving a quorum, and he or she is disqualified from voting.

In accordance with the provisions of our articles of incorporation, the term of office for directors is two years, although directors can serve any number of consecutive terms. The terms for the directors currently in office will expire in March 2020.

Under the ITA, our board of directors has limited functions, which include approving:

Š our financial documents, including the balance sheet, income statement, the asset management report, the statement of distributions, as well as incidental documents related to the various aforementioned financial documents;

Š the convocation of general meetings of our unitholders;

Š the terms of issuing new investment units;

Š the terms of issuing investment corporation bonds;

Š the termination of our asset management agreement with the Asset Manager, which is then, in principle, subject to approval by the general meeting of our unitholders;

Š the appointment of our general administrator;

Š the appointment of an administrator for any of our investment corporation bonds;

Š any merger agreement, subject to approval by the general meeting of our unitholders (except for short-form mergers);

Š any agreement or amendment thereto pertaining to the management or custody of assets;

Š any payment of fees, charges or other expenses pertaining to the management and custody of our assets;

Š the disposal or cancellation of our units (regarding the number of units);

Š allotment of unit acquisition rights without consideration;

Š the details and number of unit acquisition rights when cancelling such rights; and

Š transactions with related parties of the Asset Manager specified in the ITA.

51 As of the date of this document, the members of our board of directors are as follows:

Name Position Brief personal history Masayuki Ishihara Executive Director April 1989 Fixed income trading division The Nikko Securities Co., Ltd (current SMBC Nikko Securities Inc.) January 1999 Fixed income investment division, Head of fixed income since 2001 Nikko Asset Management Co., Ltd July 2005 Deputy President, Chief investment officer, Global head of fixed income Nikko Asset Management Americas, Inc. August 2008 Chief operating officer of investment, head of investment planning, head of passive investment division Nikko Asset Management Co., Ltd January 2013 Chief risk officer, Global head of risk management, head of risk management division Nikko Asset Management Co., Ltd April 2016 PAG Investment Management Limited Temporary transferred to Takara PAG Real Estate Advisory Ltd (formerly PAG Real Estate Advisory Ltd) June 2016 President and CEO PAG Real Estate Advisory Ltd. (current Takara PAG Real Estate Advisory Ltd) September 2017 Executive Director Takara Leben Real Estate Investment Corporation (present) February 2018 Executive Chairman and CEO Takara PAG Real Estate Advisory Ltd (present)

Norifusa Hashimoto Supervisory Director April 1988 Joined as Associate (Partner from 1994) Aoki, Christensen & Nomoto October 1995 Auditor Nihon Waters K. K. (present) February 2000 Partner Atsumi & Usui March 2000 Auditor March Asset Management Co., Ltd.(present) April 2002 Partner Paul Hastings LLP January 2008 Partner Allen & Overy LLP January 2012 Partner White & Case LLP January 2016 Partner Kaynex Law Offices (present) February 2017 Auditor Narashino Okubo Mirai Project Co., Ltd. (present) May 2017 Auditor Hirosaki Geijutsu Souzou Co., Ltd. (present) June 2017 Auditor Higashi Okazaki Station Northeast District Complex Facility Co., Ltd. (present) September 2017 Supervisory Director Takara Leben Real Estate Investment Corporation (present)

Toshiaki Kawashima Supervisory Director April 1970 Arthur Andersen March 1978 Registrated as Certified Public Accountant December 1982 CFO, CAO later Salomon Brothers Asia Securities Ltd. (current Citigroup Global Markets Japan Inc.) March 1999 Chairman of Finance Division Nikko Salomon Smith Barney Ltd. (current Citigroup Global Markets Japan Inc.) January 2004 Managing Executive Officer, Chairman of Finance Division Nikko Citigroup Securities Inc. (current Citigroup Global Markets Japan Inc.) March 2005 Managing Executive Officer, Chairman of Administration Division Nikko Citigroup Securities Inc. (current Citigroup Global Markets Japan Inc.) June 2005 Director Japan Securities Depository Center Inc.

52 Name Position Brief personal history January 2006 Advisor Nikko Citigroup Securities Inc. (current Citigroup Global Markets Japan Inc.) June 2009 External Statutory Auditor Citibank Japan Ltd. (current Citibank, N.A., Tokyo Branch) July 2010 Kawashima CPA Firm September 2010 Director Shoto Co., Ltd. (present) November 2011 External Statutory Auditor Citibank Japan Ltd. (current Citibank, N.A., Tokyo Branch) June 2012 External Statutory Auditor Japan Display Inc. (present) September 2017 Supervisory Director Takara Leben Real Estate Investment Corporation (present) March 2018 External Statutory Auditor StormHarbour Japan Ltd. (present)

None of our directors holds any of our units. Upon the listing of our units, the Asset Manager plans to introduce an incentive plan through the cumulative investment unit investment program of the Asset Manager. We have not entered into any transactions with any of our directors.

Compensation

Our articles of incorporation provide that we may pay our executive director up to ¥800,000 per month and each of our supervisory directors up to ¥500,000 per month. Our board of directors is responsible for determining a reasonable compensation amount for our executive director and each of our supervisory directors, taking into account general price movements and wage movements.

Directors’ Insurance

We maintain customary insurance policies for our directors.

Limitation of Liability

Although our directors are liable for damages that result from their failure to perform their duties, pursuant to the ITA, our articles of incorporation provide that, so long as a director has acted in good faith and has not been grossly negligent, our board of directors may consider the particular circumstances and resolve to exempt such director from liability to the extent permitted by laws and regulations.

Independent Auditors

Under the ITA, we must appoint independent auditors, which must be either certified public accountants or a public accounting firm, by resolution at a general meeting of unitholders, except for the first independent auditors that were appointed at our incorporation. PricewaterhouseCoopers Aarata LLC is our current independent auditor.

Our board of directors is responsible for determining the compensation of our independent auditor, up to ¥20 million per each fiscal period, as provided under our articles of incorporation.

Legal Proceedings

We are not involved in or threatened by any legal arbitration, administrative or other proceedings, the results of which might, individually or in the aggregate, be material in the context of the offerings.

Employees

We have no employees in accordance with the prohibition on having employees under the ITA.

53 TAKARA LEBEN, PAG, KYORITSU MAINTENANCE AND YAMADA DENKI

Takara Leben Group

Takara Leben Group is a group of companies whose main company is one of our Sponsors, Takara Leben, a Tokyo Stock Exchange-listed company. Since the establishment of Takara Leben in 1972, Takara Leben Group has accumulated expertise in development, sale and creation of property value, leasing and management as a comprehensive property developer. Takara Leben has sold stand-alone houses since 1972, directly or through one of its subsidiaries, engaged in property leasing since 1982 and engaged property management since 1988. Takara Leben extended its business to sales of condominium apartments under the brand “Lebenheim” in 1994. Takara Leben is also currently engaged in the solar business. Takara Leben reported unaudited sales and total assets, for the fiscal year ended March 2018, of ¥110.8 billion and ¥177.9 billion, respectively.

By leveraging this diverse background, in 2016, Takara Leben Group started developing properties for investment for the purpose of selling them primarily to us. From April 2015 to March 2018, Takara Leben Group purchased and developed income properties, including those under construction, at a total cost of approximately ¥50 billion and expects to additionally invest approximately ¥90 billion between the fiscal periods ending in March 2019 to the fiscal period ending in March 2021.

Takara Leben Group includes the following subsidiaries, in addition to Takara Leben:

Š Takara Property Co., Ltd., a consolidated subsidiary of Takara Leben, has mainly provided property leasing and management services since 1979, managing 62 buildings as of March 31, 2018;

Š Leben Community Co. Ltd., a consolidated subsidiary of Takara Leben, has provided apartment management services mainly in greater Tokyo since 1988, managing 923 apartments and 44,653 rooms as of March 31, 2017;

Š Takara Asset Management Co., Ltd., a consolidated subsidiary of Takara Leben, has engaged in private fund and infrastructure fund business since 2013. Takara Asset Management Co., Ltd. established Takara Leben Infrastructure Fund in August 2015, which was listed on the infrastructure fund section of the Tokyo Stock Exchange, which is the first listing by an infrastructure fund on that exchange; and

Š Sunwood Corporation, one of the affiliate of Takara Leben, has conducted development and sales of condominium apartments mainly in greater Tokyo for over 20 years since its establishment in 1997.

Takara Leben Group has an established track record in sales of stand-alone houses and condominium apartments. Takara Leben Group sold 29,013 rooms and 430 apartments from July 1994 to March 2018, including those sold through joint enterprises with third parties, and it developed apartments at a total cost of approximately ¥364.6 billion between March 2007 and March 2017. Takara Leben Group has also engaged in urban development projects. Most recently, Takara Leben has redeveloped a property composed of mixed use retail properties, a hotel and condominiums near Toyama Station. We currently have no plans to acquire these properties, nor is there any guarantee that we would be able to do so.

PAG Group

PAG Group is one of the largest independent alternative investment management companies, and is based in major cities of Asia, Oceania such as Tokyo, Hong Kong, Shanghai, Beijing, Shenzhen, Singapore, Sydney, Seoul, and in major cities in Europe such as London. PAG’s investor base spreads across broad geographic areas, 38% in the United States, 25% in Europe, 23% in Asia Pacific, 10% in Canada and 4% in the Middle East and other areas, as of December 31, 2017. PAG’s investor base also covers a wide range of investor types, including 44% for pension funds, 18% for sovereign wealth funds, 16% for banks and insurers, 14% for funds of funds and 8% for endowments and foundations. As of December 31, 2017, its total assets under management were over ¥2 trillion. PAG has a track record of over 20 years in Japanese real estate market and has established its position as one of the largest private equity real estate funds managers focusing on investment advisory, investment management of properties in Japan and management of mortgage credits.

Kyoritsu Maintenance

Kyoritsu Maintenance, a Tokyo Stock Exchange-listed company (Ticker: 9616), has conducted management of dormitories, budget hotels and resort hotels since 1979. Kyoritsu Maintenance has been an

54 industry leader especially in dormitory and hotel businesses, with an approximately 40 year operating history. Kyoritsu Maintenance operated 473 dormitories (as of March 31, 2018) (and provided services to 250 other dormitories) 69 budget hotels under the name Dormy Inn and 27 resort hotels, as of March 31, 2018. In recent years, it has participated in the senior life business and PKP (an acronym used by Kyoritsu Maintenance, which stands for “Public”, “Kyoritsu” and “Partnership”, and refers to providing outsourcing services to local municipalities) in response to the changing social environment with a rapidly aging population. Kyoritsu Maintenance has also accumulated expertise outside dormitory leasing and management through its affiliates’ development of dormitories and hotels, including identifying new development projects and taking them from development to operation. Kyoritsu Maintenance reported unaudited sales and total assets, for the fiscal year ended March 2018, of ¥152.0 billion and ¥190.9 billion, respectively.

Yamada Denki Group

Yamada Denki, a Tokyo Stock Exchange-listed company, is one of the largest retail-sector companies in Japan, with a strong network of 12,029 stores, 19,752 employees and 40 major subsidiaries as of March 31, 2018. Yamada Denki also focuses on servicing community infrastructure, including by proposing residential, renovation, housing equipment and furniture projects, which have a close relationship with home appliances, and developing new types of stores which integrates home appliance business with financial and real estate services. Yamada Denki reported unaudited sales and total assets for fiscal year ended March 2018 of ¥1,573.8 billion and ¥1,175.5 billion, respectively.

Sponsor Support Agreements

We capitalize on the value chain and expertise of each of our Sponsors to achieve external and internal growth based on sponsor support agreements executed with them. In addition, Takara Leben, Kyoritsu Maintenance and Yamada Denki have licensed their trademarks to us and the Asset Manager, which will allow us to use their names and logos on the properties in our portfolio. PAG IPR HOLDINGS LIMITED, which belongs to PAG group, has also entered into the license agreement.

Sponsor Support Agreement with Takara Leben

Takara Leben will provide the following information, expertise and business assistance to the Asset Manager pursuant to its sponsor support agreement with the Asset Manager:

Š Provision of information on properties owned by Takara Leben Group and grant of preferential negotiation rights. Takara Leben will provide the Asset Manager with information on the proposed sale of a property that meets the Asset Manager’s investment guidelines, which Takara Leben or its subsidiaries own, as well as properties owned by funds managed or advised by Takara Leben or its subsidiaries, in advance of notifying third parties. If the Asset Manager is provided with information on the proposed sale to consider acquisition of the property, Takara Leben will grant the Asset Manager preferential negotiation rights with respect to the acquisition of such property.

Š Provision of information owned by third parties. When Takara Leben acquires information on the proposed sale of a property that meets the Asset Manager’s investment guidelines and owned by those other than Takara Leben and its subsidiaries, it will promptly provide to the Asset Manager any information on such proposed sale as long as Takara Leben considers it appropriate.

Š Provision of warehousing function. In cases where it is difficult for us to directly purchase a property from a third party, the Asset Manager may request Takara Leben to purchase and temporarily own a property.

Š Discussion regarding co-ownership of assets. The Asset Manager can request Takara Leben to co-own a property that meets the Asset Manager’s investment guidelines.

Š Support for property management services. Takara Leben will provide leasing support services, introduce property management companies or building management companies, and provide other appropriate services with respect to a property that meets the Asset Manager’s investment guidelines based on discussion with the Asset Manager when requested.

Š Provision of environmentally friendly technology and expertise. Takara Leben will provide environmentally friendly technology and expertise with respect to properties that meet the Asset Manager’s investment guidelines based on discussion with the Asset Manager when requested.

55 Š Provision of information on properties sold by us. Takara Leben will preferentially provide the Asset Manager with information on prospective purchasers who are reasonably motivated to buy a property (including Takara Leben itself if it plans to acquire the property) when the Asset Manager notices the disposition plan.

Š Provision of information on financing. Takara Leben will provide the Asset Manager with information and advice on financing, when requested.

Š Provision of market information. Takara Leben will provide the Asset Manager with market information on sales or development of properties, leasing market or other relevant things.

Š Other sponsor support. In addition to the above, Takara Leben will support the Asset Manager with advice on acquisitions and the management of properties that meets the Asset Manager’s investment guidelines, securing human resources and other appropriate services, when requested.

Sponsor Support Agreement with PAG

PAG will provide the following information, expertise and business assistance to the Asset Manager pursuant to its sponsor support agreement with the Asset Manager:

Š Provision of information on properties owned by PAG Group. PAG will generally make reasonable efforts to provide the Asset Manager with information on the proposed sale of a property that meets the Asset Manager’s investment guidelines, which PAG owns, as well as properties owned by funds managed or advised by PAG.

Š Provision of information owned by third parties. When PAG acquires information on the proposed sale of a property that meets the Asset Manager’s investment guidelines and owned by those other than PAG, it will provide to the Asset Manager any information on such proposed sale as long as PAG considers it appropriate.

Š Provision of market information. PAG will provide the Asset Manager with market information on sales or development of properties, leasing market or other relevant things.

Š Support for property management services. PAG will introduce property management companies or building management companies, or provide other appropriate services with respect to a property that meets the Asset Manager’s investment guidelines based on discussion with the Asset Manager, to the extent possible, when requested.

Š Provision of environmentally friendly technologies and expertise. PAG will provide environmentally friendly technologies and expertise with respect to a property that we own, or intend to own, based on discussions with the Asset Manager, when requested.

Š Other sponsor support. In addition to the above, PAG will support the Asset Manager with advice on acquisitions, and management of a property, that meets the Asset Manager’s investment guidelines, securing human resources and other appropriate services, when requested.

Sponsor Support Agreement with Kyoritsu Maintenance

Š Provision of information on properties developed by Kyoritsu Maintenance Group and Takara Leben Group and grant of preferential negotiation rights. Kyoritsu Maintenance will provide the Asset Manager with information on Takara Leben Group’s proposed sale of properties co-developed with Kyoritsu Maintenance Group and that meet the Asset Manager’s investment guidelines in priority to third parties. If the Asset Manager is so provided with information on the proposed sale and offer to consider acquisition of the property, Kyoritsu Maintenance will grant the Asset Manager preferential negotiation rights with respect to the acquisition of such property.

Š Support as a back-up operator. Where a lease agreement on a dormitory or hotel that we own or intend to acquire is terminated or is expected to be terminated, Kyoritsu Maintenance will consider in good faith, leasing the property as an operator with the Asset Manager, when requested.

56 Š Provision of market information. Kyoritsu Maintenance will provide the Asset Manager with market information on the sale and development of properties, as well as relating to the leasing market and other relevant matters.

Sponsor Support Agreement with Yamada Denki

Š Provision of information on properties owned by Yamada Denki Group or developed by Yamada Denki Group and Takara Leben Group. Yamada Denki will generally make reasonable efforts to provide the Asset Manager with information on the proposed sale of a property that Yamada Denki Group owns or develops together with Takara Leben Group and that meets the Asset Manager’s investment guidelines without delay in priority to third parties.

Š Provision of information owned by third parties. When Yamada Denki acquires information on the proposed sale of a property that meets the Asset Manager’s investment guidelines and which is owned by a third-party other than Yamada Denki and its affiliate, Yamada Denki will provide the Asset Manager information on such proposed sale, as long as Yamada Denki considers it to be appropriate.

Š Provision of market information. Yamada Denki will provide the Asset Manager with information relating to markets surrounding properties that meet the Asset Manager’s investment guidelines, when requested.

57 ASSET MANAGER

The Asset Manager is Takara PAG Real Estate Advisory Ltd., a joint stock company incorporated under Japanese law in January 2016. The Asset Manager is owned by Takara Leben Co., Ltd. as a 60% shareholder, PAG Real Estate Holding Limited, an affiliate of PAG, as a 30% shareholder, Kyoritsu Maintenance Co., Ltd. as a 5% shareholder and Yamada Denki Co., Ltd. as a 5% shareholder. As of May 31, 2018, the Asset Manager employed ten (excluding directors) full-time employees, including real estate and finance professionals with extensive experience in property acquisitions and dispositions, leasing management, marketing, finance, tax, financial reporting and data processing and risk assessment and management.

Asset Management Agreement

We are party to an asset management agreement with the Asset Manager to which we entrust the operation and management of our properties.

Asset Management Fees

Under the asset management agreement as currently in effect, we pay asset management fees and acquisition and disposition fees to the Asset Manager as follows:

Š Management fees.

O Type 1 management fee. After our initial fiscal period, we will pay the Asset Manager a type 1 management fee for each subsequent fiscal period. This type 1 asset management fee is calculated based on the following formula: the amount of up to 0.3% per year of our total assets (as stated in our balance sheet at the end of the immediately preceding fiscal period in accordance with Japanese GAAP) multiplied by the number of actual operation days from the acquisition date to the end of the fiscal period divided by 365 (rounded down to a whole yen). The type 1 management fee is payable within three months after the end of the relevant fiscal period.

O Type 2 management fee. We pay the Asset Manager a type 2 management fee for each fiscal period. This type 2 management fee is calculated based on the following formula: the amount of up to 10% of the net profit before taxes and the type 1 and the type 2 management fee, which is equal to the net profit before taxes minus the type 1 and type 2 management fees and creditable consumption taxes. Creditable consumption taxes refer creditable consumption taxes for all expenses (not including depreciation expenses and loss on retirement of fixed assets). The type 2 management fee is payable within three months after the end of relevant fiscal period.

Where the aggregate of the amount calculated by the formula above and the type 1 management fee exceeds the upper limit amount of the management fee, which is 0.5% of the aggregate of our total assets (as stated in our balance sheet at the end of the immediately preceding fiscal period in accordance with Japanese GAAP) and the acquisition price for each property-related asset acquired during the fiscal period minus the book value of the assets disposed during the fiscal period (as stated in our balance sheet at the end of the immediately preceding fiscal period in accordance with Japanese GAAP), divided by 365 (rounded down to a whole yen), the type 2 management fee is equal to the upper limit amount of the management fee minus the type 1 management fee (rounded down to a whole yen).

Š Acquisition fees. For each new property that we acquire, we pay the Asset Manager an acquisition fee of up to 1.0% of the acquisition price, payable by the end of the following month of the acquisition of the property (rounded down to a whole yen).

Š Merger fees. Where the Asset Manager investigates and evaluates the assets of the other party of the consolidation-type merger or the absorption-type merger or conduct any services related to the merger and the merger takes effect, we pay the Asset Manager a merger fee of up to 1.0% of the appraisal price of the property-related assets which the other party possesses and are held by the corporation established by the consolidation-type merger or surviving the absorption-type merger, payable within three months after the end of the month in which the merger takes effect (rounded down to a whole yen).

Š Officer/Employee unit purchase plan. The Asset Manager is contemplating the introduction of an officer/ employee unit purchase plan, following our initial public offering, to incentivize its officers and employees to continuously work toward improvement of our unit value in the mid-to-long term.

58 Services Provided by the Asset Manager

The Asset Manager provides the following services to us:

Š Asset management. The Asset Manager formulates and executes our investment strategy based on our basic investment policy with respect to our portfolio composition and other characteristics of our investment properties.

Š Administration. The Asset Manager provides management services regarding Act on the Use of Numbers to Identify a Specific Individual in Administrative Procedures.

Š Other. The Asset Manager also provides services related to the above matters and based on our individual requests.

Management Structure of the Asset Manager

The Asset Manager has a fiduciary responsibility for exercising a duty of care and a duty of loyalty to us. Under the management organization shown below, the Asset Manager operates while paying particularly careful attention to avoid conflicts of interest.

Shareholders’ meeting

Corporate Auditor

Board of Directors

Investment Committee Compliance Committee

President & CEO

Compliance Department (Compliance Officer)

Investment Management Finance and Planning Department Department

Approval Process of the Asset Manager

Approval Process for Investment Guidelines

The Asset Manager establishes investment guidelines and property management plans that set forth its basic investment and asset management policies.

The draft guidelines shall be drafted by the Drafting Department. The draft guidelines thereto are subsequently submitted to the Compliance Officer to confirm that the draft guidelines conform to applicable laws and other compliance-related matters. If the Compliance Officer does not find any compliance issues with the draft guidelines, the Compliance Officer will notify the department that proposed the draft guidelines of the Compliance Officer’s approval. The draft guidelines are then submitted to the Investment Committee by the head of the relevant department. If the Compliance Officer determines that there is a compliance issue relating to the draft guidelines, the Compliance Officer may stop the approval process and instruct the department that proposed the draft guidelines to redraft and resubmit them.

59 The Investment Committee evaluates the draft guidelines considering such factors as compliance with our articles of incorporation, trends in the real estate market, our portfolio composition and our investment strategies. If the Compliance Officer, who is a member of the Investment Committee without right to vote, determines that there is an important issue in the process of deliberation, the Compliance Officer may stop the approval process. In this case, the same process that applies where the Compliance Officer finds a matter that may raise compliance issues (as described above) will apply. If the Investment Committee does not approve the draft guidelines, the Investment Committee shall identify the issue(s) with the guidelines and instruct the head of the department that proposed the draft guidelines to redraft, resubmit or withdraw the draft guidelines. The head of the department in charge of drafting instructs the relevant department to redraft, resubmit or abandon the draft guidelines based on the instruction by the Investment Committee. Upon approval of the Investment Committee, the proposed guidelines thereto become effective.

Upon approval by the Investment Committee, the draft guidelines (together with any relevant materials) are reported by the head of the department in charge of drafting the Asset Manager’s board of directors without delay. If it is difficult to report without delay because of the schedule of the board meeting, the head of the department in charge of drafting can report individually to each director instead. The head of the department in charge of drafting then reports the draft guidelines (together with any relevant materials) to us.

60 The following chart summarizes the investment approval process for investment guidelines:

Proposal by the Investment Management Department Instruct to modify and resubmit or drop proposal

Approval by the Compliance Officer Confirmation of the existence of legal, regulatory issues and other compliance issues

If the Compliance Officer deems necessary

The Compliance Committee deliberation and resolution

Brought to the Investment Committee Instruct to modify by the Head of the Investment Management Department and resubmit or drop proposal

The Investment Committee deliberation and resolution (Compliance Officer may order suspension of deliberation if any procedural issues are observed)

Report to Board of Directors and Us

Approval Process for Acquisitions

The Investment Department prepares a draft acquisition plan with respect to selected real estate property in light of the results of the detailed due diligence including as necessary, evaluation of appraisal value, building evaluation, soil pollution surveys, earthquake risk surveys and legal due diligence, which are submitted to the Compliance Officer (or, in case the draft acquisition plan involves a related parties transaction, the Compliance Committee). The Compliance Officer must confirm whether there is any compliance-related issue and, if no such compliance issues are identified, the Compliance Officer will notify the Investment Department of the approval of the investment plan.

Upon approval by the Compliance Officer, the Head of the Investment Management Department will submit the approved draft acquisition plan to the Investment Committee. If the Compliance Officer determines

61 that there is a compliance issue relating to the acquisition plan, the Compliance Officer shall instruct the Investment Department to abandon or amend the draft acquisition plan. If the Compliance Officer has instructed that the draft acquisition plan be amended, the Investment Department may not submit the draft acquisition plan to the Investment Committee until obtaining approval from the Compliance Officer for the amended draft acquisition plan. If the Compliance Officer instructs that the draft acquisition plan be abandoned, such draft acquisition plan may not be submitted to the Investment Committee.

If the Compliance Officer finds that the draft acquisition plan involves a related-party transaction or other matters that may raise compliance issues, the Compliance Officer must submit the draft acquisition plan to the Compliance Committee prior to deliberation and approval by the Investment Committee. Upon approval by the Compliance Committee of the draft acquisition plan, the draft acquisition plan is submitted to the Investment Committee by the Head of Investment Management Department. If the Compliance Committee finds a compliance issue, the Compliance Committee must identify the issue and send back the draft acquisition plan to the Investment Management Department.

The Investment Committee will review whether the real estate property meets the requirements of our investment policies as well as the appropriateness of the purchase price in light of the due diligence results, and will determine whether to approve the acquisition and the purchase price. If the Compliance Officer determines at this stage that there is an important issue with the process of deliberation, the Compliance Officer may stop the approval process of the Investment Committee. In this case, the same process that applies where the Compliance Officer finds a matter that may raise compliance issues (as described above) will apply. If the Investment Committee does not approve the draft acquisition plan, the Investment Committee must identify the issue(s) with the draft acquisition plan and instructs the Head of the Investment Management Department to abandon or amend the draft acquisition plan. Upon approval of the Investment Committee, the proposed draft acquisition plan becomes effective.

Upon approval by the Investment Committee, the draft acquisition plan (together with the relevant materials) is reported to the Asset Manager’s board of directors by the Head of the Investment Management Department without delay. If it is difficult to report without delay because of the schedule of the board meeting, the Head of the Investment Management department can report individually to each of director instead.

In the event of any draft acquisition plan relating to transaction with related parties, the draft acquisition plan that obtained the necessary approvals described above must be submitted to and approved by us. Upon our approval, the proposed draft acquisition plan becomes effective. If we do not approve the draft acquisition plan, we shall identify the issue(s) with the plan and instruct the Asset Manager. The draft acquisition plan by the Investment Management Department shall be examined and approved by the Compliance Officer, and approved by the Compliance Committee before deliberation to the Investment Committee. The Head of the Investment Management Department can obtain approval from us after the approval by the Investment Committee. If we instruct that the draft acquisition plan be abandoned, such draft acquisition plan may be abandoned.

62 The following chart summarizes the acquisition approval process:

Proposal by the Investment Management Department (Due diligence by the Investment Management Department)

Instruct to suspend or modify Approval by Compliance Officer Confirmation of the existence of legal, regulatory issues and other compliance issues

If related-party transaction or Compliance Officer deems necessary

The Compliance Committee deliberation and resolution

Brought to the Investment Committee by the Head of the Investment Management Department

Instruct to suspend or modify The Investment Committee deliberation and resolution (Compliance Officer may order suspension of deliberation if any procedural issues are observed)

Report to the Board of Directors

Report to Us

If the proposal is regarded as a related party transaction, obtain our approval based on preliminary approval of our Board

Approval Process for Dispositions

The same process used to approve acquisitions (excluding the process for due diligence) applies to the approval of dispositions of properties.

63 The following chart summarizes the disposition approval process:

Proposal by the Investment Management Department

Instruct to suspend or modify Approval by the Compliance Officer Confirmation of the existence of legal, regulatory issues and other compliance issues

If related-party transaction or Compliance Officer deems necessary

The Compliance Committee deliberation and resolution

Brought to the Investment Committee by the Head of the Investment Management Department

The Investment Committee deliberation and resolution Instruct to (Compliance Officer may order suspension of deliberation suspend if any procedural issues are observed) or modify

Report to Board of Directors

Report to Us If the proposal is regarded as a related party transaction, obtain our approval based on preliminary approval of our Board

Approval Process for Leasing and Management

The same process used to approve acquisitions (excluding the process for due diligence) applies to the approval of leasing or management of properties. However, this is applicable to leasing where a leasing term regarding a new contract or change in a leasing term with a key tenant (excluding that the Head of the Investment Committee considers it as not material, or that the influence on the distribution amount is expected to be below 1% and on the operating profit to be below ¥100,000,000 and the Head of the Investment Committee judges it to be matters to be reported), and to management where a large-scale repair the total amount of which is above ¥100,000,000 for each properties (excluding a function maintenance work within the budget).

64 Approval Process for Funding

The same process used to approve acquisitions (excluding the process for due diligence) applies to the approval of dispositions of properties. However, all actions required of the Investment Management Department in the acquisition approval process shall be performed by the Financial Planning Department, and all actions required of the Head of Acquisitions and the Head of the Investment Management Department in the acquisition approval process shall be performed by the Head of the Financial Planning Department.

The following chart summarizes the approval process for leasing and management and funding:

Proposal by Investment Management Department or Finance and Planning Department

Instruct to suspend or modify Approval by Compliance Officer Confirmation of the existence of legal, regulatory issues and other compliance issues

If related-party transaction or Compliance Officer deems necessary

The Compliance Committee deliberation and resolution

Brought to Investment Committee by the Head of the Investment Management Department Instruct to suspend or modify

Investment Committee deliberation and resolution (Compliance Officer may order suspension of deliberation if any procedural issues are observed)

Report to Board of Directors and Us

If the proposal is regarded as a related party transaction, obtain our approval based on preliminary approval of our Board

Corporate Governance of the Asset Manager

The Asset Manager’s board of directors consists of five members. The Asset Manager has one corporate auditor. The Asset Manager’s articles of incorporation provide for no fewer than three directors, and no fewer than one corporate auditor. All directors and corporate auditors are elected at general meetings of shareholders of

65 the Asset Manager by a majority of the voting rights of the shareholders in attendance representing in the aggregate a majority of the total number of voting rights of all shareholders. The normal term of office of directors and corporate auditors is two years and four years, respectively, although they may serve any number of consecutive terms.

Fiduciary Duty of the Asset Manager

In addition to the Asset Manager’s contractual obligations to us under the asset management agreement, the FIEA provides that the Asset Manager owes us a fiduciary duty and must conduct its activities as the Asset Manager in good faith. The FIEA also prohibits the Asset Manager from engaging in certain specified conduct, including entering into transactions outside the ordinary course of business or with related parties of the Asset Manager that are contrary to or violate our interests. The Asset Manager is subject to potential liability for damages from breaches of its duties to us under the FIEA. See “Regulation—Act on Investment Trusts and Investment Corporations—Conflicts of Interest” for additional discussion of the Asset Manager’s duties to us under the FIEA.

Rules Regarding Related-party Transactions

The Asset Manager has adopted an internal set of rules that apply to all related-party transactions. These rules require strict compliance by the Asset Manager with laws and regulations regarding related-party transactions. They also contain specific procedures to be followed in the event of any acquisition, disposition, leasing activity or other transaction that involves a related party.

For the purpose of these rules, a related party includes:

(i) the Asset Manager itself, shareholders (including those holding class shares) of the Asset Manager, or their directors and officers;

(ii) PAG Investment Management Limited;

(iii) any subsidiaries or affiliates of the party described in (i) and (ii);

(iv) those specified as related parties in the ITA;

(v) any special purpose company of which the party described in (i) through (iv) is entrusted with investment advisory duties or investment management duties;

(vi) any special purpose company, more than 50% of the capital or the TK interest of which is contributed, or more than 50% of the preferred shares of which are subscribed for the party described in (i) through (iv); and,

(vii) any special purpose company established for holding assets temporally before disposed to us, which the party described in (i) through (iv) established as a promoter or a shareholder at incorporation.

When one of the parties involved in the sale or purchase of any property or other transaction is a related party, the rules that apply include the following:

Š Asset acquisition and disposals. We will in principle conduct an acquisition from or disposal to a related party in respect of real estate, real estate leasehold rights, surface rights, or trust beneficiary interests in any of the foregoing, at a price based on an appraisal (which does not include taxes, acquisition fees, trust-related fees and other costs) by a qualified independent real estate appraiser. The appraised value should generally be the upper limit of any anticipated acquisition transaction price and the lower limit in any anticipated disposal transaction price. If we acquire a property from a related party, we may add certain one-time expenses associated with the creation of a special purpose entity, including brokerage, trust and other fees, to the upper limit price. We will in principle conduct acquisition from or disposal to a related party in respect of other assets at market price, or at a fair price if market price is difficult to determine. If we acquire another asset from a related party, we may include certain one-time expenses associated with the creation of a special purpose entity, including brokerage, trust and other fees, in the acquisition price.

Š Real estate leasing. When leasing a property to a related party, the terms must be deemed appropriate based on a consideration of market prices and standard leasing terms.

66 Š Real estate brokerage services such as trading and leasing properties. Brokerage and other commissions must be within the range specified in the Building Lots and Building Transaction Business Act of Japan.

Š Placing construction orders. The Asset Manager must obtain an estimate for similar services from an unrelated third party before a related party may receive the order. The Asset Manager can retain the related party only when the estimate does not deviate from the standards of the unrelated party; provided, however, the Asset Manager may retain a related party with careful consideration of the standard of the market price, where a construction is too specific to obtain an estimate or a change in constructers may result in confusion over responsibilities. This may not apply if the estimate of the order is less than ¥10,000,000, or urgent repairing or restoration.

Š Funding. When funding from a related party, the terms must be deemed appropriate based on a consideration of market prices.

See “Regulation—Act on Investment Trusts and Investment Corporations—Conflicts of Interest” for additional discussion of the Asset Manager’s duties to us under the FIEA. See also “Related-party Transactions” for additional information regarding currently anticipated related-party transactions.

Management of the Asset Manager

Directors

The following tables provide brief biographies of the directors of the Asset Manager.

Name Position Brief personal history Qualifications Masayuki Ishihara Executive April 1989 Fixed income trading division Chartered Financial Analyst Chairman The Nikko Securities Co., Ltd (current SMBC (Japan, U.S.) Nikko Securities Inc.) Real Estate Broker January 1999 Fixed income investment division, Head of ARES Certificated Master fixed income since 2001 Nikko Asset Management Co., Ltd July 2005 Deputy President, Chief investment officer, Global head of fixed income Nikko Asset Management Americas, Inc. August 2008 Chief operating officer of investment, head of investment planning, head of passive investment division Nikko Asset Management Co., Ltd January 2013 Chief risk officer, Global head of risk management, head of risk management division Nikko Asset Management Co., Ltd April 2016 PAG Investment Management Limited Temporary transferred to Takara PAG Real Estate Advisory Limited (formerly PAG Real Estate Advisory Limited) June 2016 President and CEO PAG Real Estate Advisory Ltd. (current Takara PAG Real Estate Advisory Ltd.) September 2017 Executive Director Takara Leben Real Estate Investment Corporation (present) February 2018 Executive Chairman and CEO Takara PAG Real Estate Advisory Limited (present)

Tetsuo Funamoto President April 1976 The Chuo Trust & Banking Co., Ltd. (current Real Estate Appraiser Sumitomo Mitsui Trust Bank, Limited) Real Estate Broker November 2002 Temporary transferred to Takara Leben Co., Ltd. Head of Development department November 2004 Transferred to Takara Leben Co., Ltd. Head of Development department June 2006 Director and Head of Development department Takara Leben Co., Ltd.

67 Name Position Brief personal history Qualifications August 2008 Director Marunouchi Servicer Co., Ltd. January 2009 Managing Director, Head of Development department, Building manager, Director of Detached Housing Business, Head detached headquarters, Detached house manager, Building Sales Manager successively Takara Leben Co., Ltd. April 2010 Director TAFUKO Co., Ltd (current Leben Zestock Co., Ltd.) April 2012 Managing director and executive officer, Head detached headquarters, Detached house manager, Building Sales Manager, Director of detached development successively Takara Leben Co., Ltd. October 2014 Director Nikko kensetsu Co., Ltd. (current Nikko Takara Corporation CO., LTD.) April 2016 Representative Director and President Takara Investment Co., Ltd. October 2016 Representative Director and President Takara Asset Management Co., Ltd. February 2018 Representative Director and President Takara PAG Real Estate Advisory Limited (present) Director Takara Asset Management Co., Ltd.

Kazuhiro Kono Director April 1988 Machida Rehouse Co., Ltd. ( Mitsui Fudosan Real Estate Broker Group ) ARES Certificated Master September 1995 Urban Development System Co., Ltd. October 2001 McDonald’s Company (Japan), Ltd. April 2004 MORIMOTO Co., Ltd. June 2006 Director Morimoto Asset (current Daiwa House Asset Management Co., Ltd.) October 2006 Senior Managing Director Daiwa House Asset Management Co., Ltd. January 2009 Director Daiwa House Asset Management Co., Ltd. July 2011 Head of asset management Daiwa House Asset Management Co., Ltd. September 2016 Takara Leben Co., Ltd. Temporary transferred to Takara Investment Co., Ltd. October 2016 Project Manager Temporary transferred to Takara Asset Management Co., Ltd. February 2018 Temporary transferred to PAG Real Estate Advisory Limited (current Takara PAG Real Estate Advisory Limited) Senior Managing Director & CIO Takara PAG Real Estate Advisory Limited (present)

Tetsu Kasuga Director October 1995 KPMG Peat Marwick LLP Japanese Practice JP CPA December 1997 Goldman Sachs Group, Inc. Tokyo branch US CPA January 2001 Deutsche Trust Company Limited Japan. Chartered Financial Analyst (Japan) September 2003 Transaction Service Division Real Estate Broker ChuoAoyama PricewaterhouseCoopers September 2005 Unified Partners, Ltd. Investment Division December 2007 Managing Director Trigate Capital K.K. Managing May 2009 Executive Officer Mi-Casa Asset Management Inc. November 2013 Executive Officer Japan Elevator Service Co., Ltd. (current Japan Elevator Service Holdings Co., Ltd.)

68 Name Position Brief personal history Qualifications February 2015 Tosei Asset Advisors, Inc. August 2016 Takara Leben Co., Ltd. Temporary transferred to Takara Investment Co., Ltd. October 2016 Temporary transferred to Takara Asset Management Co., Ltd. February 2018 Temporary transferred to PAG Real Estate Advisory Limited (current Takara PAG Real Estate Advisory Limited) Managing Director & CFO Takara PAG Real Estate Advisory Limited (present)

Hideki Toyosaka Director April 1989 The Tokai Bank, Ltd. (current MUFG Bank, Ltd.) July 1990 Temporary transferred to Blum, Gersen & Wood Lawyers, in New York November 1994 Noevir Co., Ltd. September 2000 The Nikko Securities Co., Ltd. (current SMBC Nikko Securities Inc.) September 2007 Nikko Asset Management Co. Ltd. Director of Risk Management April 2009 The Head of Legal of AIU Insurance Company (current AIG General Insurance Company) March 2010 Chief Legal Affairs and Compliance Secured Capital Japan Co., Ltd. (current PAG Investment Management Limited) June 2011 Chief Legal Affairs and Compliance Secured Capital Investment Management Co., Ltd. (current PAG Investment Management Limited) May 2014 General Counsel and General Manager of Corporate Administration Department PAG Investment Management Limited (present) January 2016 Representative Director PAG Real Estate Advisory Limited (current Takara PAG Real Estate Advisory Limited) June 2016 Director Takara PAG Real Estate Advisory Limited (present)

Corporate Auditors

The following tables provide brief biographies of the Asset Manager’s corporate auditors.

Name Position Brief personal history Kensuke Suzuki Auditor November 2004 Noguchi Kunio Tax Accountant Office Takara Leben Co., Ltd. Accounting & Finance June 2006 section April 2010 Accounting Department Section June 2011 Corporate Planning Division April 2017 General Planning Division February 2018 Auditor Takara PAG Real Estate Advisory Limited (present)

Key Employees

The following tables provide brief biographies of the Asset Manager’s key employees.

Name Position Brief personal history Qualifications Yoichiro Kimoto April 1999 DAIKYO INCORPORATED Real Estate Broker April 2002 Head of Asset Management ARES Certificated Master of RISA Partners, Inc. January 2010 ASIA PACIFIC LAND (JAPAN) LIMITED January 2011 Mitsui Fudosan Investment Advisors, Inc.

69 Name Position Brief personal history Qualifications June 2016 PAG Investment Management Limited. CIO PAG Real Estate Advisory Limited February 2018 Executive Officer and Head of Investment Department Takara PAG Real Estate Advisory Limited (present)

Name Position Brief personal history Hiromi Takeuchi Compliance Officer April 1993 Yano Law Office April 2005 Mixing Co., Ltd. Legal department September 2008 SCJ Investment Management Co., Ltd. (current PAG Investment Management Limited.) Business administration department May 2014 Secured Capital Investment Management Co., Ltd. (current PAG Investment Management Limited.) Compliance Department February 2018 Compliance Officer PAG Real Estate Advisory Limited (current Takara PAG Real Estate Advisory Limited.) (present)

Note: There are 14 employees as of the date of this document.

70 ANTICIPATED INITIAL PORTFOLIO

Overview of the Anticipated Initial Portfolio

We currently do not own any properties. In connection with the offerings, we intend to acquire 27 new properties during the fiscal period ending August 31, 2018. We expect that our anticipated initial portfolio will contain a total leasable area of 100,926.16 m2. We anticipate that we will own all of the properties in the form of trust beneficiary interests.

We note that information for the properties is given as of April 30, 2018 unless otherwise stated in this document. The information does not refer to subsequent changes resulting from, for example, the addition, or expected addition, of new tenants or the loss, or expected loss, of former or current tenants. We do not believe, however, that any such changes have had or will have a material adverse effect on our portfolio.

For a description of this trust beneficiary ownership structure, see “Description of the Trust Agreements and the Statutory Rights Regarding the Property Trusts”.

Anticipated Acquisitions

The following table provides summary information for the 27 properties that we intend to acquire on July 30, 2018.

Annual Property Location (city or Date of Number of contracted Leasehold and Total leased Total leasable Occupancy (Anticipated) number Property ward, prefecture) construction(1) tenants(2) rent(3) security deposits(4) area(5) area(6) rate(7) acquisition price

(in millions) (in millions) (m2)(m2) (%) (in millions) 27 anticipated acquisitions Office (O) O-01 ...... NT Building Shinagawa-ku, Tokyo March 1996 14 ¥ 614 ¥ 518 10,104.08 10,104.08(8) 100.0 ¥ 12,350 O-02 ...... Higashi-Ikebukuro Central Toshima-ku, Tokyo November 1984 Place 5 451 397 7,057.09 7,799.60 90.5 9,780 O-03 ...... Nagoya Center Plaza Nagoya, Aichi November 1978 Building 35 328 269 9,435.37 9,560.33 98.7 4,870 O-04 ...... TTS Minami Aoyama Minato-ku, Tokyo May 1984 Building 6 200 132 1,995.65 1,995.65 100.0 4,090 O-05 ...... Omiya NSD Building Saitama, Saitama March 1993 9 177 121 3,687.10 4,006.68 92.0 3,493 O-06 ...... SAMTY Shin-Osaka Osaka, Osaka April 1991 Center Building 9 189 112 5,022.79 5,022.79 100.0 3,450 O-07 ...... Hakata Gion Building Fukuoka, Fukuoka November 2007 16 141 59 3,653.70 3,653.70 100.0 2,500 O-08 ...... Chuo Bakuromachi Osaka, Osaka April 1993 Building 20 104 41 3,739.57 3,739.57 100.0 1,485 O-09 ...... L.Biz Jimbocho Chiyoda-ku, Tokyo June 2009 1 57 35 859.82 859.82 100.0 1,006 O-10 ...... Shinsaibashi Building Osaka, Osaka December 1990 7 47 19 1,408.52 1,408.52 100.0 772 O-11 ...... MB Odakyu Building Sendai, Miyagi March 1993 27 108 71 3,228.03 3,368.98 95.8 1,680 O-12 ...... Sendai Nikko Building Sendai, Miyagi March 1989 5 114 80 2,514.81 2,540.11 99.0 1,740 O-13 ...... Morioka Ekimae-dori Morioka, Iwate April 1987 Building 20 137 100 4,263.79 4,480.31 95.2 1,480 O-14 ...... Nagano Central Building Nagano, Nagano November 1994 21 86 60 2,485.47 2,619.93(8) 94.9 898 O-15 ...... EME Koriyama Building Koriyama, Fukushima March 1988 20 95 80 2,760.56 2,931.65 94.2 900 O-16 ...... Utsunomiya Central Utsunomiya, Tochigi September 1995 Building 16 81 51 2,551.90 2,768.91 92.2 771 O-17 ...... Yamagata Ekimae-dori Yamagata, Yamagata November 1984 Building 8 66 39 2,337.01 2,505.92 93.3 600 Subtotal/average(9) ...... 239 2,995 2,184 67,105.26 69,366.55 96. 7 51,866 Residential (R) R-01...... Amare Tokaidori Nagoya, Aichi July 2007 72 67 11 2,639.04 3,036.65 86.9 1,100 R-02...... Dormy Ukimafunado Itabashi-ku, Tokyo April 1997 2 62 49 2,442.40 2,442.40 100.0 1,080 R-03...... Benefis Hakata-Minami Fukuoka, Fukuoka March 2009 Grand Suite 61 60 1 2,447.94 2,782.51 88.0 1,032 R-04...... LUXENA HIGASHI- Suginami-ku, Tokyo July 2008 KOENJI 33 58 10 1,354.89 1,405.29 96.4 1,060 R-05...... Alpha Space Toritsudai Meguro-ku, Tokyo April 1990 12 32 3 847.66 907.13 93.5 589 R-06...... J City Hatchobori Hiroshima, Hiroshima November 2005 63 80 12 2,480.43 2,623.39 94.6 1,200 Subtotal/average(9) ...... 243 359 86 12,212.36 13,197.37 92.5 6,061 Hotel(H) H-01 ...... Dormy Inn Matsuyama Matsuyama, Ehime October 2017 1 153 51 5,119.15 5,119.15 100.0 2,427 H-02 ...... Hotel Sunshine Utsunomiya, Tochigi February 1991 Utsunomiya 2 127 31 5,267.16 5,267.16 100.0 2,000 Subtotal/average(9) ...... 3 280 82 10,386.31 10,386.31 100.0 4,427 Retail and Other (C) C-01 Prio Daimyo II Fukuoka, Fukuoka April 2002 6 52 34 761.01 761.01 100.0 980 C-02 Co-op Sapporo Shunko Asahikawa, Hokkaido August 1994 1 83 83 7,214.92 7,214.92 100.0 1,036 Subtotal/average(9) 7 135 117 7,975.93 7,975.93 100.0 2,016 Total ...... 492 3,769 2,469 97,679.86 100,926.16 96.8 64,370

Notes: (1) Date of construction of the main building, as described in the property registry. (2) The number of tenants is equal to the aggregate number of end tenants with which lease agreements have been entered into as of April 30, 2018. For properties with master lease agreements, if the master lease agreement is a pass-through-type master lease agreement, the number of end tenants is indicated and if the master lease agreement is a fixed-type master lease agreement, the number of master lessees is indicated.

71 (3) The annual contracted rent for each property is yearly rent described in the lease agreements or calculated by multiplying the aggregate anticipated monthly rent (limited to rent for space occupied by tenants as of April 30, 2018), including common service fee (if any) and excluding usage fees for warehouses, parking lots and sales-linked rents, regardless of whether the rent was free or discounted as of April 30, 2018, as indicated in the lease agreements as of April 30, 2018, by 12 (if there are multiple lease agreements, the aggregate anticipated monthly rent for all lease agreements), excluding consumption tax. (4) Indicates the total leasehold and security deposits from the relevant tenants set forth in lease agreements effective as of April 30, 2018. (5) The total leased area is equal to total leased area to tenant in each property based on the lease agreements for building or floor plans as of April 30, 2018. (6) The total leasable area is equal to gross floor area of leasable space in each property, based on the lease agreements for building or floor plans as of April 30, 2018. (7) The occupancy rate is calculated by dividing total leased area (as of April 30, 2018) for each property by the total leasable area. The subtotal and total is calculated by dividing aggregate leased area for each property type by aggregate leasable area. (8) For NT Building and Nagano Central Building, the figures provided are in proportion to our compartmentalized ownership. (9) The occupancy rate is provided as an average of the relevant figures, while all other figures on these lines are given as their subtotals. (10) The average occupancy rate, broken down by region, was 96.6% in core areas (Japan’s four major metropolitan areas) and 97.1% in sub areas (areas other than Japan’s four major metropolitan areas, centered on Japan’s major regional cities).

Status of the Properties that We Intend to Acquire on July 30, 2018

We entered into a trust beneficiary interest purchase agreement on June 13, 2018 with each current holder of the trust beneficiary interest for each of property that we intend to acquire. The closing of our acquisition is scheduled to take place on July 30, 2018 and the 27 purchase agreements are substantially similar. The closing in each case is conditioned on the satisfaction of certain conditions, including the closing of the offerings.

The acquisitions of four properties of these are considered related-party transactions under the internal rules of the Asset Manager for related-party transactions. In accordance with those rules, our board of directors approved the acquisitions on MB Odakyu Building, Dormy Ukimafunado, Co-op Sapporo Shunko and Dormy Inn Matsuyama following prior approval by the Asset Manager’s Compliance Committee and Investment Committee, as well as a report to the Asset Manager’s Board of Directors. See “Asset Manager—Investment Policy and Acquisition Approval Process” and “Asset Manager—Rules Regarding Related-party Transactions”.

Portfolio Diversification

The following tables provide various breakdowns of our anticipated initial portfolio, based on several different criteria.

Distribution by Property Type

Number Percentage of Property type of properties Acquisition price total acquisition price (in millions) (%) Office ...... 17 ¥ 51,866 80.6 Residential ...... 6 6,061 9.4 Hotel ...... 2 4,427 6.9 Retail and Other...... 2 2,016 3.1 Total ...... 27 ¥ 64,370 100.0

Distribution by Location

Number Percentage of Location of properties Acquisition price total acquisition price (in millions) (%) Core areas(1) Tokyo metropolitan area ...... 8 ¥ 33,448 52.0 Nagoya metropolitan area ...... 2 5,970 9.3 Osaka metropolitan area ...... 3 5,707 8.9 Fukuoka metropolitan area ...... 3 4,512 7.0 Sub areas(2) Ordinance-designated city ...... 3 4,620 7.2 Core City ...... 7 9,512 14.8 Special city at the time of the effective date ...... 1 600 0.9 Seat of prefectural capital ...... 0 — — Other Other ...... 0 — — Total ...... 27 ¥ 64,370 100.0

Notes: (1) Core areas means areas located in Japan’s four major metropolitan areas. (2) Sub areas means areas other than Japan’s four major metropolitan areas, centered on Japan’s major regional cities. These include core regional areas composed of cities designated by government ordinance, designated mid-size cities, specially designated cities and prefectural capitals.

72 Distribution by Asset size

Number Percentage of Size of properties Acquisition price total acquisition price (in million) (%) Over ¥10 billion ...... 1 ¥ 12,350 19.2 ¥5 billion to over ¥10 billion ...... 1 9,780 15.2 Less than ¥5 billion ...... 25 42,240 65.6 Total ...... 27 64,370 100.0

NOI Yield

We consider the NOI yield of our properties on an individual property basis as well as for our entire portfolio to be useful as performance measures that reflect the revenues and expenses directly associated with owning and operating our properties. NOI yield (after depreciation) and NOI yield (before depreciation) are calculated as follows:

Š Annualized NOI (after depreciation). We calculate NOI (after depreciation) for a property as the sum of rental revenues and other rental revenues minus property-related expenses for the relevant fiscal period. We calculate annualized NOI (after depreciation) by dividing the property’s NOI (after depreciation) for the relevant fiscal period by the number of operating days within that period and multiplying the result by 365

Š Annualized NOI (before depreciation). We define NOI (before depreciation) for a property as the sum of rental revenues and other rental revenues minus property related expenses plus depreciation expenses for the relevant fiscal period. We calculate annualized NOI (before depreciation) for a property by dividing the property’s NOI (before depreciation), for the relevant fiscal period by the number of operating days within that period and multiplying the result by 365.

Š NOI yield (after depreciation). We calculate NOI yield (after depreciation) for a property by dividing the annualized NOI (before depreciation) for the property by its acquisition price.

Š NOI yield (before depreciation). We calculate NOI yield (before depreciation) for a property by dividing the annualized NOI (before depreciation) for the property by its acquisition price.

We presented below NOI yield (after depreciation) and NOI yield (before depreciation) based on our forecasts for the fiscal period ending February 28, 2019 and based on the NOI as estimated by the relevant direct capitalization method included in most recent appraisal reports available for our properties in the anticipated initial portfolio.

Forecast NOI Yield

We consider forecast NOI yield of our properties based on our forecast assumptions with respect to such properties to be useful as a performance measure that reflects our expectations of the performance of our properties as of the date of the announcement of our forecasts. Each of the forecast NOI yields presented below is NOI yield (before depreciation) based on our forecast assumptions for the fiscal period ending February 28, 2019 set forth in “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019”. Accordingly, the forecast NOI yield information set forth below constitutes forward-looking information subject to various risks, uncertainties and assumptions about the future performance of our properties, including those set forth in “Risk Factors” and elsewhere in this document. The forecasts and underlying assumptions we used to prepare our forecast NOI yields are subject to a considerable degree of subjectivity, and our actual results may differ materially from the information presented below.

73 The following table shows the forecast NOI yield for each of the 27 properties we intend to acquire, as of August 31, 2019.

Property Forecast NOI yield (%) NT Building 4.1 Higashi-Ikebukuro Central Place 4.3 Nagoya Center Plaza Building 5.2 TTS Minami Aoyama Building 4.0 Omiya NSD Building 4.6 SAMTY Shin-Osaka Center Building 4.4 Hakata Gion Building 4.7 Chuo Bakuromachi Building 5.3 L.Biz Jimbocho Building 4.6 Shinsaibashi Building 4.4 MB Odakyu Building 5.3 Sendai Nikko Building 5.2 Morioka Ekimae-dori Building 7.4 Nagano Central Building 7.4 EME Koriyama Building 8.3 Utsunomiya Central Building 8.3 Yamagata Ekimae-dori Building 7.5 Amare Tokaidori 5.5 Dormy Ukimafunado 5.4 Benefis Hakata-Minami Grand Suite 5.5 LUXENA HIGASHI-KOENJI 4.4 Alpha Space Toritsudai 4.1 J City Hatchobori 5.6 Dormy Inn Matsuyama 5.6 Hotel Sunshine Utsunomiya 5.6 Prio Daimyo II 4.4 Co-op Sapporo Shunko 7.1

The following table shows average forecast NOI yield of the 27 new properties, as well as broken down by geographic area.

Location Average forecast NOI yield Portfolio Forecast NOI yield for the 27 properties in our anticipated portfolio ...... 4.9% Core areas (1) ...... 4.5% Sub areas(2) ...... 6.0%

Notes: (1) Core areas means Japan’s four major metropolitan areas. (2) Sub areas means areas other than Japan’s four major metropolitan areas, centered on Japan’s major regional cities. These include core regional areas comprised of cities designated by government ordinance, designated mid-size cities, specially designated cities and prefectural capitals.

Appraisal NOI Yield

We present below the appraisal NOI yield for the 27 properties we intend to acquire, as well as the portfolio appraisal NOI yield for our anticipated initial portfolio, based on the following:

Š Appraisal NOI yield (before depreciation). The appraisal NOI yield of a property is calculated as NOI (before depreciation) as estimated by the relevant direct capitalization method included in the most recently available appraisal report for the property, divided by the (anticipated) acquisition price.

Š Appraisal NOI yield (after depreciation). The appraisal NOI yield of a property is calculated as NOI (after depreciation) as estimated by the relevant direct capitalization method included in the most recently available appraisal report for the property, divided by the (anticipated) acquisition price.

We present appraisal NOI yield information below for investors who may be interested in comparing such information with the forecast NOI yield information presented in “—NOI Yield” above. However, we make no representation whatsoever as to whether such comparison should inform any investor’s decision as to whether to invest in our units.

74 As discussed in greater detail in “Appraisals and Engineering, Environmental, Seismic and Other Reviews—Appraisals—Limitations of Appraisals”, appraisal values, along with any measures used to generate appraisal values such as NOI, are inherently speculative and subject to various assumptions, estimations and judgments. We thus provide the following information regarding appraisal NOI yields to you “as is” without warranty or guarantee of any kind as to its accuracy or usefulness to us, the Asset Manager or to you. There are potential risks and uncertainties specific to appraisal NOI yields that may significantly diminish the utility of comparing any forecast NOI yield to appraisal NOI yield, including but not limited to the following:

Š Information that an appraiser uses to estimate the NOI of a property may be more limited than the information we or the Asset Manager have to estimate the net operating income of the same property, as an appraiser can make this estimation only based on information that it can acquire or that is disclosed to it. For instance, the appraiser’s ability to enter a property to inspect buildings and observe tenant activities is more limited, and the appraiser must rely more heavily on documents and other written materials to analyze the property. Limitations in the information used to appraise the value of a property could magnify the subjectivity of the appraisal process.

Š In estimating anticipated operating revenues or operating expenses, an appraiser may be at an inherent disadvantage in analyzing the impact of factors that are internal to the operations of the Asset Manager. In addition, the appraiser may give undue weight to market data to supplement its analysis.

Š As discussed in further detail in “Appraisals and Engineering, Environmental, Seismic and Other Reviews—Appraisals”, we have retained five appraisers to appraise the value of the 27 properties in our anticipated initial portfolio. Because each appraiser employs its own appraisal methodology subject to a unique set of assumptions, estimations and judgments, to the extent that there is any meaningful value in comparing various forecast NOI yields and appraisal NOI yields, such value is likely to be significantly diminished by different appraisers’ uses of inconsistent appraisal methodologies.

Š The NOI of a property contained in the appraisal reports we obtain reflects the analysis and assumptions of the relevant appraiser as of March 31, 2018 for the properties in our anticipated initial portfolio. If we were to obtain updated appraisal reports, such reports may contain NOI amounts materially different from those we have used to calculate Appraisal NOI yield below.

In general, when estimating anticipated NOI of a property, the appraiser makes its own independent assumptions, estimates and judgments with respect to anticipated operating revenues and operating expenses, which in turn require making assumptions, estimates and judgments generally with respect to the same set of factors that are described under “Operating Revenues” and “Operating Expenses” in “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 and August 31, 2019—Key Assumptions Underlying the Forecasts Announced on June 25, 2018 ”. Such items typically include the following:

Š Operating revenues: rent, common charges, utilities, parking and other revenues, loss from vacancy and delinquent payments, primarily based on review of each tenant’s business, comparable transactions and other market data; and

Š Operating expenses: repair and maintenance, utilities, property management fees, advertisement and other leasing costs, taxes, insurance and other costs, primarily based on review of engineering reports, rent rolls and other historical financial data, comparable transactions, projections from us, public tax records and insurance cost estimates.

75 The following table shows appraisal NOI yield (before depreciation) and appraisal NOI yield (after depreciation) for each of the 27 properties we intend to acquire:

Appraisal NOI yield Appraisal NOI yield Property (before depreciation) (after depreciation) (%) Anticipated acquisitions NT Building 4.6 3.8 Higashi-Ikebukuro Central Place 4.4 3.7 Nagoya Center Plaza Building 5.7 5.0 TTS Minami Aoyama Building 4.0 3.7 Omiya NSD Building 5.3 4.9 SAMTY Shin-Osaka Center Building 5.2 4.5 Hakata Gion Building 4.8 3.9 Chuo Bakuromachi Building 6.1 5.6 L.Biz Jimbocho Building 4.5 3.9 Shinsaibashi Building 5.3 4.5 MB Odakyu Building 5.5 4.0 Sendai Nikko Building 5.2 4.3 Morioka Ekimae-dori Building 7.0 5.0 Nagano Central Building 8.1 6.2 EME Koriyama Building 7.3 5.4 Utsunomiya Central Building 8.7 7.1 Yamagata Ekimae-dori Building 8.9 6.8 Amare Tokaidori 5.6 4.0 Dormy Ukimafunado 5.3 4.6 Benefis Hakata-Minami Grand Suite 5.3 4.0 LUXENA HIGASHI-KOENJI 4.4 3.7 Alpha Space Toritsudai 4.7 4.2 J City Hatchobori 5.7 4.9 Dormy Inn Matsuyama 5.4 3.8 Hotel Sunshine Utsunomiya 5.7 4.5 Prio Daimyo II 4.7 4.5 Co-op Sapporo Shunko 6.8 5.2

Tenants

Ten Largest End-tenants

The following table provides information regarding the ten largest end-tenants in our portfolio after our anticipated acquisition of 27 new properties, by leased area as of April 30, 2018.

Ten Largest End-tenants by Leased Area

Total leased Percentage of the total Lease expiration End-tenants Property area(1) portfolio(2) date(1) (m2) Kyoritsu Maintenance Co., Ltd. Dormy Ukimafunado ...... 7,391.00 7.3 March 31, 2021 Dormy Inn Matsuyama ...... December 7, 2047 Co-op Sapporo Co-op Sapporo Shunko...... 7,214.92 7.2 August 31, 2019 S Hotel Operations Utsunomiya LLC Hotel Sunshine Utsunomiya ...... 5,267.16 5.2 April 20, 2027 NISSEICOM, LIMITED NT Building ...... 3,657.45 3.6 May 15, 2020 NTT FINANCE CORPORATION Higashi-Ikebukuro Central Place ...... 2,945.80 2.9 April 30, 2019 Samty Co., Ltd. SAMTY Shin-Osaka Center Building ...... 1,661.59 1.6 April 20, 2022 Hakata Gion Building ...... April 20, 2019 SMBC Nikko Securities Inc. Sendai Nikko Building ...... 1,557.01 1.5 April 30, 2019 Resona Bank, Limited Nagoya Center Plaza Building ...... 1,418.58 1.4 April 30, 2019 SAMTY Shin-Osaka Center Building ...... February 7, 2020 Dai-ichi Life Insurance Company, Nagoya Center Plaza Building ...... 1,408.21 1.4 June 26, 2019 Limited Yamagata Ekimae-dori Building ...... February 29, 2020 Astellas Pharma Inc. Morioka Ekimae-dori Building ...... 1,322.08 1.3 February 28, 2019 EME Koriyama Building...... July 8, 2019 Yamagata Ekimae-dori Building ...... February 25, 2019

76 Notes: (1) The total leased area is equal to the total leased area in each property under the lease agreement with the end-tenant as of April 30, 2018. (2) Percentage of the total portfolio is calculated by dividing leased area of each tenant by total leased area of our portfolio.

Our top ten tenants, by anticipated annual rent, account for 35% of the anticipated annual rent of our entire anticipated initial portfolio.

Key Properties

The following table provides information regarding our key properties, which we define as any property that represents 10% or more of the total annual contracted rent of our portfolio after our anticipated acquisition of two new properties, as of February 28, 2018.

Total Percentage of number Annual total annual Total leased Total leasable Occupancy Property of tenants contracted rent(1) contracted rent(2) area(3) area(4) rate(5) (in millions) (%) (m2)(m2) (%) NT Building ...... 14 ¥ 614 16.3 10,104.08 10,104.08 100.0 Higashi-Ikebukuro Central Place ...... 5 451 12.0 7,057.09 7,799.60 90.5

Notes: (1) The annual contracted rent for each property is yearly rent described in the lease agreements or calculated by multiplying the aggregate anticipated monthly rent (limited to rent for space occupied by tenants as of April 30, 2018), as indicated in the lease agreements as of April 30, 2018, by 12. (2) The percentage of total annual contracted rent is calculated by dividing annual contracted rent by aggregate annual rent for all properties. (3) The total leased area is equal to the total leased area based on the sublease agreements with the end-tenants as of April 30, 2018. (4) The total leasable area is equal to the gross floor area of leasable space in each property, based on the lease agreements for building or floor plans. (5) The occupancy rate is calculated by dividing total leased area by the total leasable area as of April 30, 2018.

Property Descriptions of Our Anticipated Portfolio

Top Ten Properties by Anticipated Acquisition Price of our Anticipated Initial Portfolio

The following are brief property descriptions of our top ten properties by anticipated acquisition price of our anticipated initial portfolio.

NT Building. This property is a 17-story office building, with an additional two floors underground and approximately 10,104 square meters of leasable space. Located near JR/Tokyu/Rinkai Oimachi station, which is next to Shinkansen Shinagawa station, it gives easy access to Tokyo/Saitama area, Yokohama area and Shibuya/ area. Over 70% of tenants use this property as their head office and we expect stable operation of this property.

Higashi-Ikebukuro Central Place. This property is a seven-story office building, with an additional one floor underground and approximately 7,799 square meters of leasable space. Ikebukuro station, the nearest station by 11-minute walk, is serviced by JR, Tokyo metro, Tobu and Seibu line and will become more and more important as a main terminal station as the Tokyo metro is extended to Yokohama. This property is equipped with an OA floor and individual air-conditioning system and meets the needs of large- to medium-sized tenants.

Nagoya Center Plaza Building. This property is a 12-story office building, with an additional two floors underground and approximately 9,560 square meters of leasable space. It is connected to Higashiyama subway line/ Sakuradori line , which is 11 minutes from , the center of Tokai area, and six minutes from , known as business and retail area. The property has s modern façade with high visibility. Floors can be divided to meet the needs of tenants which focus on the balance of location and cost.

TTS Minami Aoyama Building. This property is an eight story multi-purpose building, with shops on the first two stories and offices on the upper floors. The property has about 1,995 square meters of leasable space, with the office floors mostly serving small- to medium-sized office tenants. The first two floors are designed to meet the needs of retail tenants, and provide high visibility from the nearby street. We believe the property’s location in the exclusive Aoyama area adds to the property’s competitiveness.

Omiya NSD Building. This property is a nine-story office building, with approximately 4,006 square meters of leasable space. In addition to be only five minutes from JR/Tobu/New Shuttle Omiya Station, it is also serviced by numerous bus lines, giving the property excellent access to the rest of the prefecture, as well as neighboring cities and prefectures. The property has a stylish façade and each of the floors can be sub-divided to meet the various needs of tenants.

77 SAMTY Shin-Osaka Center Building. This property is an eight-story office building, with approximately 5,022 square meters of leasable space. Located near JR Shin-Osaka Station, it also services by the Midosuji subway line and the Hankyu Kyoto line. Because the building is in an area with rental rates that are more competitive than premium downtown locations such as Umeda and Yodoyabashi, this is a property for which we expect stable demand.

Hakata Gion Building. This property is an eight-story office building, with approximately 3,653 square meters of leasable space. Located in one of Fukuoka’s largest commercial districts, it is located three minutes from a municipal subway station and four minutes from the JR Hakata station. In addition to be well suited to large tenants, floors can be partitioned to meet the needs of small- to medium-sized tenants.

Dormy Inn Matsuyama. This property is a 13-story hotel building with 174 guest rooms and approximately 5,119 square meters of leasable space. It is located near a bus stop and it takes around 30 minutes by bus to Matsuyama airport, facing the center of commerce. The property is equipped with an open-air hot spring. The tenant and the operator of the property is Kyoritsu Maintenance, one of our Sponsors with a great deal of experience in hotel management.

Hotel Sunshine Utsunomiya. This property is a 13-story hotel building with an additional one floor underground. It has 160 guest rooms and approximately 5,267 square meters of leasable space. It takes only five minutes on foot from JR Utsunomiya station. Large scale renovations including all guest rooms were conducted twice in 2015 and 2017 and sustain a competitive edge. It is equipped with facilities such as conference rooms, free coffee lounge and laundry.

Sendai Nikko Building. This property is an eight-story office building with an additional floor underground, with approximately 2,540 square meters of leasable space. It is centrally located in Sendai, and is walking distance from several train stations. In addition to be well suited to large tenants, floors can be partitioned to meet the needs of small- to medium-sized tenants.

78 APPRAISALS AND ENGINEERING, ENVIRONMENTAL AND SEISMIC REVIEWS

We rely on third parties for appraisals, as well as engineering, environmental and seismic reports. For a description of the limitations of such third-party reports, see “Risk Factors—Property and Business Risks—We rely on expert appraisals and engineering, environmental and seismic reports, which are subject to significant uncertainties”.

Appraisals

Prior to our determination to acquire any property, the Asset Manager, on our behalf, retains a qualified real estate appraiser to conduct an appraisal of the property and provide an appraisal report, which it takes into account in making an investment decision. The Asset Manager also retains real estate appraisers to provide us with follow-up appraisal reports on properties in our portfolio at the end of each fiscal period, and we publicly disclose the revised appraisal values in Japan, as is customary for J-REITs. We make these disclosures solely to comply with legal requirements and market practice in Japan.

Limitations of Appraisals

We have included below for informational purposes only the appraisal values determined by Japan Real Estate Institute, Tanizawa So¯go¯ Appraisal Co., Ltd., Daiwa Real Estate Appraisal Co., Ltd., JLL Morii Valuation & Advisory K.K. and Chuo Real Estate Appraisal Co., Ltd. Property appraisals are largely based on forward-looking information that is inherently speculative and difficult to verify. We cannot represent to you or guarantee that the appraisal values in this section reflect the prices that we could obtain upon a sale of the relevant property.

The appraisal values of the properties provided to us represent the analysis and determination of the relevant appraiser based on his or her particular assumptions, estimations and judgments about the value of the properties appraised, which necessarily include subjective elements. Different sets of assumptions and/or different estimations and judgments based on a set of assumptions may result in significantly different appraisal values of the same property.

Thus, other qualified appraisers could have reached materially different conclusions than those reached by the appraisers in their reports to us with respect to the value of the properties currently in our portfolio and those that we intend to acquire. We thus provide the appraisal values to you “as is” without warranty or guarantee of any kind as to their accuracy or usefulness to us, the Asset Manager or you.

There are also certain factors regarding real estate appraisals in Japan that may reduce the reliability of the appraisal reports to us, including the following:

Š the utilization of cash flow based property valuation techniques involves a large number of estimates and reductions;

Š the methodologies of the appraiser involve a significant amount of professional discretion, which may be affected by customs and practices in the real estate markets in Japan (for example, the appraiser makes a discretionary professional judgment in choosing between relative weightings of the cost method, discounted cash flow method or direct capitalization method in determining the final value for a particular property); and

Š the liquidity of the Japanese real estate market has historically been relatively low, limiting the amount of comparable sales data that are available to an appraiser.

Each appraisal report we receive is valid only as of the date of the appraisal of the relevant property. All of the appraisals we have received with respect to the 27 properties in our anticipated initial portfolio are dated as of March 31, 2018.

Each appraisal is valid only as of its date. This means that any operating revenue, operating expense and net operating income data that the appraisers used to generate appraisal values and described below in “—Appraisal Value and Assumptions for the 27 Properties in Our Anticipated Initial Portfolio” are more dated as compared to the assumptions we used for the purpose of generating the forecasts

79 described in “Forecasts for the Fiscal Periods Ending August 31, 2018, February 28, 2019 an August 31, 2019”. We therefore caution you not to draw a comparison between any appraisal-related information and forecasts-related information without recognizing the differences in the underlying assumptions caused by the different dates as of which such information is current.

Japan Real Estate Institute, Tanizawa So¯go¯ Appraisal Co., Ltd., Daiwa Real Estate Appraisal Co., Ltd., JLL Morii Valuation & Advisory K.K. and Chuo Real Estate Appraisal Co., Ltd. are solely responsible for the appraisal reports of the properties in our anticipated initial portfolio. Neither we nor the Asset Manager give any representation or other assurance with respect to the accuracy or completeness of the appraisal values and other information they provide to us, and the publicly released appraisal information should not be relied upon by you in making an investment decision. You should carefully read the appraisal values and other information below with the rest of this document and make your own independent assessment of our future performance and prospects.

Methodology

The appraisers derived the appraisal values of the properties in accordance with the guidelines issued by the Japanese Association of Real Estate Appraisers. Under the guidelines, when retained to appraise a large-scale retail property for sale, an appraiser must derive the appraisal value from a combination of the cost method and a cash flow-based method. The cash flow-based method used is the discounted cash flow method, and to supplement the result of derivations based on that method, the appraiser also derives the value based on the direct capitalization method.

We used five appraisers, Japan Real Estate Institute, Tanizawa So¯go¯ Appraisal Co., Ltd., Daiwa Real Estate Appraisal Co., Ltd., JLL Morii Valuation & Advisory K.K. and Chuo Real Estate Appraisal Co., Ltd., to reduce the risk of delays and cost-inefficiencies in the appraisal process that may be brought by a single appraiser handling all of the appraisal work. Although the appraisers generally used the methods described below in similar ways, each appraiser derived key numerical assumptions and values subjectively, considering multiple factors with different weights placed on different factors based on such appraiser’s broad discretion, subject to assumptions, estimations and judgments.

Discounted Cash Flow (DCF) Method. According to this method, the value of a property is generally the sum of the present values (obtained by using the applicable discount rate) of (i) cash flows from the property for each year during a certain holding period (e.g., ten years) and (ii) the terminal value, which is equal to the estimated sales proceeds from a hypothetical property sale at the end of such holding period, calculated by capitalizing the net cash flow for the year immediately after the holding period (e.g., the 11th year) using the terminal capitalization rate, minus estimated expenses for such sale. Because benefits to be received in the future are worth less than the same benefits received in the present, this method weights income projected in the early years more heavily than the income and the sale proceeds to be received later.

Future cash flows and their fluctuations, the terminal capitalization rate and the discount rate are key components of the discounted cash flow method and are subject to assumptions, estimations and judgments regarding factors such as the occupancy rate, competition, rental revenues and expenses, growth potential, lease agreements, anchor or core tenants’ business performance, macro-economic conditions and available information regarding comparable properties.

Direct Capitalization (DC) Method. According to this method, the value of a property is the stabilized net cash flow from the property, discounted by an expected rate of return, or capitalization rate. The direct capitalization method focuses on stabilized annual net cash flow (rather than estimating cash flows for multiple years), using it as a basis to calculate the value of the property. Net cash flow generated in the first stabilized year and the capitalization rate are key components of the direct capitalization method and are subject to assumptions, estimations and judgments regarding factors such as the occupancy rate, competition, rental revenues and expenses, lease agreements, anchor or core tenants’ business performance, macro-economic conditions and available information regarding comparable properties.

Cost Method. According to this method, the value of a property is the current replacement cost of the property, adjusted to reflect any increase or reduction in value. Both the current replacement cost and the reduction in value with respect to each appraised property are subject to a number of assumptions, estimations and judgments regarding the utility, geographic conditions, conditions of the relevant market, construction costs, estimated useful life and available information regarding comparable transactions. This method is generally used

80 to corroborate the cash flow-based methods described above and does not have significant weight in appraisals for J-REIT transactions.

Appraisal Value and Assumptions for the 27 Properties in Our Anticipated Initial Portfolio

The following table shows the appraisal values of the 27 properties in our anticipated initial portfolio, as well as the appraiser for each of the properties as of the dates given below.

Property number Property name Appraisal value Appraiser (in millions) O-01 NT Building ¥12,700 Japan Real Estate Institute O-02 Higashi-Ikebukuro Central Place 10,000 Japan Real Estate Institute O-03 Nagoya Center Plaza Building 4,880 Japan Real Estate Institute O-04 TTS Minami Aoyama Building 4,220 The Tanizawa So¯go¯ Appraisal Co., Ltd. O-05 Omiya NSD Building 3,600 Daiwa Real Estate Appraisal Co., Ltd. O-06 SAMTY Shin-Osaka Center Building 3,600 Daiwa Real Estate Appraisal Co., Ltd. O-07 Hakata Gion Building 2,600 Daiwa Real Estate Appraisal Co., Ltd. O-08 Chuo Bakuromachi Building 1,890 Daiwa Real Estate Appraisal Co., Ltd. O-09 L.Biz Jimbocho Building 1,070 The Tanizawa So¯go¯ Appraisal Co., Ltd. O-10 Shinsaibashi Building 801 Daiwa Real Estate Appraisal Co., Ltd. O-11 MB Odakyu Building 1,740 JLL Morii Valuation & Advisory K.K. O-12 Sendai Nikko Building 1,790 The Tanizawa So¯go¯ Appraisal Co., Ltd. O-13 Morioka Ekimae-dori Building 1,670 Daiwa Real Estate Appraisal Co., Ltd. O-14 Nagano Central Building 1,120 Daiwa Real Estate Appraisal Co., Ltd. O-15 EME Koriyama Building 1,030 Daiwa Real Estate Appraisal Co., Ltd. O-16 Utsunomiya Central Building 981 Daiwa Real Estate Appraisal Co., Ltd. O-17 Yamagata Ekimae-dori Building 814 Daiwa Real Estate Appraisal Co., Ltd. R-01 Amare Tokaidori 1,200 The Tanizawa So¯go¯ Appraisal Co., Ltd. R-02 Dormy Ukimafunado 1,100 JLL Morii Valuation & Advisory K.K. R-03 Benefis Hakata-Minami Grand Suite 1,070 The Tanizawa So¯go¯ Appraisal Co., Ltd. R-04 LUXENA HIGASHI-KOENJI 1,070 The Tanizawa So¯go¯ Appraisal Co., Ltd. R-05 Alpha Space Toritsudai 605 Daiwa Real Estate Appraisal Co., Ltd. R-06 J City Hatchobori 1,310 The Tanizawa So¯go¯ Appraisal Co., Ltd. H-01 Dormy Inn Matsuyama 2,490 Chuo Real Estate Appraisal Co., Ltd. H-02 Hotel Sunshine Utsunomiya 2,090 Daiwa Real Estate Appraisal Co., Ltd. C-01 Prio Daimyo II 1,090 Daiwa Real Estate Appraisal Co., Ltd. C-02 Co-op Sapporo Shunko 1,080 Chuo Real Estate Appraisal Co., Ltd.

We present below a summary of key assumptions, included in appraisal reports, which were used by the appraisers in applying the discounted cash flow method, direct capitalization method and cost method to the 27 properties in our anticipated initial portfolio.

The following table shows information regarding total appraisal value of the 27 properties in our anticipated portfolio, as well as a breakdown by geographic region.

Location Total appraisal value (in millions) Portfolio appraisal value of the 27 properties in our anticipated portfolio ...... ¥ 67,611 Core areas (Japan’s four major metropolitan areas)(1) ...... 51,496 Sub areas (area centered on Japan’s major regional cities)(2) ...... 16,115

Notes: (1) Core areas means Japan’s four major metropolitan areas. (2) Sub areas means areas other than Japan’s four major metropolitan areas, centered on Japan’s major regional cities.

81 Discounted Cash Flow Method

Higashi- TTS Minami SAMTY Shin- Ikebukuro Nagoya Center Aoyama Omiya NSD Osaka Center NT Building Central Place Plaza Building Building Building Building Cash flows: Holding period (years) ...... 10 10 10 10 10 10 Present value of cash flows during the holding period (millions of yen)...... ¥ 4,055 ¥ 3,402 ¥ 1,950 ¥ 1,310 ¥ 1,255 ¥ 1,183 Terminal value (millions of yen): Sale price...... ¥ 12,412 ¥ 9,745 ¥ 4,795 ¥ 4,240 ¥ 3,619 ¥ 3,624 Sale expenses ...... 372 292 143 84 72 72 Terminal value...... 12,039 9,453 4,651 4,155 3,547 3,552 Present value ...... 8,212 6,386 2,855 2,860 2,284 2,354 Discount rate(1) ...... 3.9% 4.0% 5.0% 3.8% 4.5% 4.2% Terminal capitalization rate(2) ...... 4.4% 4.4% 5.4% 3.9% 4.9% 4.6% Estimated value (millions of yen) ...... ¥ 12,300 ¥ 9,790 ¥ 4,810 ¥ 4,170 ¥ 3,540 ¥ 3,540

Chuo Hakata Gion Bakuromachi L.Biz Jimbocho Shinsaibashi MB Odakyu Sendai Nikko Building Building Building Building Building Building Cash flows: Holding period (years) ...... 10 10 10 10 10 10 Present value of cash flows during the holding period (millions of yen) ...... ¥ 904 ¥ 611 ¥ 354 ¥ 259 ¥ 655 ¥ 638 Terminal value (millions of yen): Sale price ...... ¥ 2,580 ¥ 1,917 ¥ 1,080 ¥ 810 ¥ 1,694 ¥ 1,800 Sale expenses ...... 51 38 21 16 50 36 Terminal value ...... 2,528 1,879 1,058 794 1,643 1,764 Present value ...... 1,675 1,257 708 531 1,048 1,130 Discount rate(1) ...... 4.2% 4.1% 4.1% 4.1% 4.6% 4.6% Terminal capitalization rate(2) ...... 4.6% 4.5% 4.2% 4.5% 5.0% 4.7% Estimated value (millions of yen) ...... ¥ 2,580 ¥ 1,870 ¥ 1,060 ¥ 791 ¥ 1,700 ¥ 1,770

Morioka Utsunomiya Yamagata Ekimae-dori Nagano Central EME Koriyama Central Ekimae-dori Amare Building Building Building Building Building Tokaidori Cash flows: Holding period (years) ...... 10 10 10 10 10 10 Present value of cash flows during the holding period (millions of yen) ...... ¥ 735 ¥ 459 ¥ 461 ¥ 393 ¥ 334 ¥ 441 Terminal value (millions of yen): Sale price ...... ¥ 1,648 ¥ 1,127 ¥ 993 ¥ 991 ¥ 821 ¥ 1,230 Sale expenses ...... 32 22 19 19 16 24 Terminal value ...... 1,615 1,105 973 971 805 1,205 Present value ...... 937 647 569 579 471 747 Discount rate(1) ...... 5.6% 5.5% 5.5% 5.3% 5.5% 4.9% Terminal capitalization rate(2) ...... 6.0% 5.9% 5.9% 5.7% 5.9% 5.0% Estimated value (millions of yen) ...... ¥ 1,670 ¥ 1,110 ¥ 1,030 ¥ 973 ¥ 806 ¥ 1,190

Benefis LUXENA Dormy Hakata-Minami HIGASHI- Alpha Space J City Dormy Inn Ukimafunado Grand Suite KOENJI Toritsudai Hatchobori Matsuyama Cash flows: Holding period (years) ...... 10 10 10 10 10 10 Present value of cash flows during the holding period (millions of yen) ...... ¥ 406 ¥ 402 ¥ 367 ¥ 197 ¥ 510 ¥ 1,050 Terminal value (millions of yen): Sale price ...... ¥ 1,069 ¥ 1,090 ¥ 1,070 ¥ 594 ¥ 1,330 ¥ 2,390 Sale expenses ...... 32 21 21 11 26 47 Terminal value ...... 1,037 1,068 1,048 582 1,303 2,342 Present value ...... 674 662 688 401 793 1,450 Discount rate(1) ...... 4.4% 4.9% 4.3% 3.8% 5.1% 4.9% Terminal capitalization rate(2) ...... 4.8% 5.0% 4.4% 4.2% 5.2% 5.3% Estimated value (millions of yen) ...... ¥ 1,080 ¥ 1,060 ¥ 1,060 ¥ 599 ¥ 1,300 ¥ 2,500

82 Hotel Sunshine Co-op Sapporo Utsunomiya Prio Daimyo II Shunko Cash flows: Holding period (years) ...... 10 10 10 Present value of cash flows during the holding period (millions of yen) ...... ¥ 809 ¥ 352 ¥ 502 Terminal value (millions of yen): Sale price ...... ¥ 2,072 ¥ 1,070 ¥ 1,072 Sale expenses ...... 41 21 21 Terminal value ...... 2,031 1,048 1,050 Present value ...... 1,283 715 581 Discount rate(1) ...... 4.7% 3.9% 6.1% Terminal capitalization rate(2) ...... 5.1% 4.3% 6.5% Estimated value (millions of yen) ...... ¥ 2,090 ¥ 1,070 ¥ 1,080

Notes: (1) The discount rate is based on factors such as market capitalization rates for comparable properties and the risk premium of individual properties over the base rate. The cash flows have generally been estimated to be stable during the hypothetical holding of ten years. (2) The terminal capitalization rate is based on factors such as the capitalization analysis and future uncertainties.

Direct Capitalization Method

Higashi- TTS Minami SAMTY Shin- Ikebukuro Nagoya Center Aoyama Omiya NSD Osaka Center NT Building Central Place Plaza Building Building Building Building (in millions, except percentages) Operating revenue: Rental revenue ...... ¥ 612 ¥ 497 ¥ 312 ¥ 182 ¥ 190 ¥ 188 Common area charges ...... 83 0 49 12 36 28 Utilities ...... 57 42 54 8 14 19 Parking...... 17 8 13 3 15 10 Other ...... 6 0 4 0 1 7 Subtotal ...... 778 549 433 206 258 254 Vacancy-related loss ...... 33 22 17 12 13 9 Default-related loss ...... 0 0 0 0 0 0 Total ...... 744 526 416 194 244 244 Operating expenses: Maintenance expenses ...... 39 17 40 5 17 14 Utility expenses ...... 56 32 44 6 14 19 Repairs ...... 11 4 10 2 6 4 Property and facility management fee .... 8 4 6 2 4 3 Tenant marketing expenses ...... 5 4 2 1 1 1 Real estate taxes ...... 56 29 31 11 15 19 Insurance expenses ...... 1 0 1 0 0 0 Other property-related expenses ...... 0 0 0 0 0 2 Total ...... 179 93 137 30 61 66 Net operating income ...... 565 433 278 163 183 178 One-time gain ...... 5 3 3 1 1 1 Capital expenditure ...... 26 10 24 5 8 15 Net cash flow ...... ¥ 544 ¥ 427 ¥ 257 ¥ 159 ¥ 176 ¥ 164

Other data: Occupancy rate ...... 96% 96% 96% 95% 95% 96% Capitalization rate(1) ...... 4.2% 4.2% 5.2% 3.7% 4.7% 4.4%

Estimated value ...... ¥ 13,000 ¥ 10,200 ¥ 4,950 ¥ 4,320 ¥ 3,750 ¥ 3,740

83 Chuo Hakata Gion Bakuromachi L.Biz Jimbocho Shinsaibashi MB Odakyu Sendai Nikko Building Building Building Building Building Building (in millions, except percentages) Operating revenue: Rental revenue ...... ¥ 117 ¥ 80 ¥ 43 ¥ 35 ¥ 88 ¥ 99 Common area charges ...... 33 40 9 17 25 20 Utilities ...... 15 14 1 8 15 9 Parking ...... 10 9 0 8 8 7 Other ...... 0 1 0 0 1 1 Subtotal ...... 177 145 55 70 140 137 Vacancy-related loss ...... 8 8 0 3 5 7 Default-related loss ...... 0 0 0 0 0 0 Total ...... 168 137 55 66 134 129 Operating expenses: Maintenance expenses ...... 11 8 2 6 13 7 Utility expenses ...... 13 12 1 6 11 9 Repairs ...... 5 4 0 1 3 3 Property and facility management fee ...... 2 2 1 1 3 3 Tenant marketing expenses ...... 1 0 0 0 0 0 Real estate taxes ...... 14 16 3 8 8 14 Insurance expenses...... 0 0 0 0 0 0 Other property-related expenses ...... 0 0 0 0 0 0 Total ...... 48 46 10 25 41 40 Net operating income ...... 119 91 44 40 92 89 One-time gain ...... 0 0 0 0 0 0 Capital expenditure ...... 3 8 1 5 7 7 Net cash flow ...... ¥ 117 ¥ 82 ¥ 44 ¥ 35 ¥ 85 ¥ 82

Other data: Occupancy rate ...... 95% 95% 100% 95% 96% 95% Capitalization rate(1) ...... 4.4% 4.3% 4.0% 4.3% 4.8% 4.5%

Estimated value ...... ¥ 2,660 ¥ 1,920 ¥ 1,100 ¥ 823 ¥ 1,780 ¥ 1,840

Morioka Utsunomiya Yamagata Ekimae-dori Nagano Central EME Koriyama Central Ekimae-dori Amare Building Building Building Building Building Tokaidori (in millions, except percentages) Operating revenue: Rental revenue ...... ¥ 144 ¥ 77 ¥ 95 ¥ 65 ¥ 77 ¥ 73 Common area charges ...... 0 22 0 30 0 6 Utilities ...... 8 8 5 6 12 0 Parking ...... 14 11 8 10 6 3 Other ...... 0 0 1 0 0 0 Subtotal ...... 168 119 110 112 96 82 Vacancy-related loss ...... 12 9 10 8 7 5 Default-related loss ...... 0 0 0 0 0 0 Total ...... 156 109 100 104 89 77 Operating expenses: Maintenance expenses ...... 16 10 10 11 11 2 Utility expenses ...... 14 10 11 9 10 0 Repairs ...... 4 2 3 3 3 3 Property and facility management fee ...... 4 3 2 3 2 2 Tenant marketing expenses ...... 1 0 0 0 0 1 Real estate taxes ...... 9 9 4 9 6 4 Insurance expenses...... 0 0 0 0 0 0 Other property-related expenses ...... 0 0 0 0 0 1 Total ...... 52 36 34 37 36 16 Net operating income ...... 103 72 65 67 53 61 One-time gain ...... 1 0 0 0 0 0 Capital expenditure ...... 7 8 8 12 6 2

Net cash flow ...... ¥ 97 ¥ 65 ¥ 57 ¥ 55 ¥ 47 ¥ 59

Other data: Occupancy rate ...... 93% 92% 92% 94% 95% 95% Capitalization rate(1) ...... 5.8% 5.7% 5.7% 5.5% 5.7% 4.8%

Estimated value ...... ¥ 1,680 ¥ 1,150 ¥ 1,020 ¥ 1,000 ¥ 831 ¥ 1,230

84 Benefis LUXENA Dormy Hakata-Minami HIGASHI- Alpha Space J City Dormy Inn Ukimafunado Grand Suite KOENJI Toritsudai Hatchobori Matsuyama Operating revenue: Rental revenue ...... ¥ 62 ¥ 64 ¥ 56 ¥ 31 ¥ 82 ¥ 153 Common area charges ...... 0 4 3 1 2 0 Utilities ...... 0 0 0 0 0 0 Parking...... 0 3 0 3 1 0 Other ...... 0 1 1 0 3 0 Subtotal ...... 63 73 62 37 89 153 Vacancy-related loss ...... 0 3 3 2 4 0 Default-related loss ...... 0 0 0 0 0 0 Total ...... 63 70 59 35 84 153 Operating expenses: Maintenance expenses ...... 0 1 2 2 1 0 Utility expenses ...... 0 0 0 0 1 0 Repairs ...... 2 3 1 0 3 4 Property and facility management fee ...... 1 2 102 3 Tenant marketing expenses ...... 0 1 1 0 1 0 Real estate taxes ...... 2 5 2 1 5 12 Insurance expenses ...... 0 0 0 0 0 0 Other property-related expenses ...... 0 1 1 0 0 1 Total ...... 6 15 12 7 16 21 Net operating income ...... 56 54 46 27 68 131 One-time gain ...... 0 0 0 0 0 0 Capital expenditure ...... 5 2 1 3 2 6 Net cash flow ...... ¥ 51 ¥ 52 ¥ 45 ¥ 24 ¥ 66 ¥ 125 Other data: Occupancy rate ...... 100% 95% 95% 95% 95% 100% Capitalization rate(1) ...... 4.6% 4.8% 4.2% 4.0% 5.0% 5.1%

Estimated value ...... ¥ 1,120 ¥ 1,090 ¥ 1,080 ¥ 618 ¥ 1,330 ¥ 2,460

Hotel Sunshine Co-op Sapporo Utsunomiya Prio Daimyo II Shunko Operating revenue: Rental revenue...... ¥ 127 ¥ 48 ¥ 83 Common area charges ...... 0 8 0 Utilities...... 0 3 0 Parking ...... 0 0 0 Other ...... 0 0 0 Subtotal ...... 127 60 83 Vacancy-related loss ...... 0 3 0 Default-related loss ...... 0 0 0 Total ...... 127 57 83 Operating expenses: Maintenance expenses ...... 0 1 0 Utility expenses ...... 0 4 0 Repairs ...... 0 0 2 Property and facility management fee ...... 011 Tenant marketing expenses ...... 0 0 0 Real estate taxes ...... 14 3 8 Insurance expenses ...... 0 0 0 Other property-related expenses ...... 0 0 0 Total ...... 14 11 12 Net operating income ...... 113 46 70 One-time gain ...... 0 0 0 Capital expenditure ...... 11 0 3 Net cash flow ...... ¥ 101 ¥ 45 ¥ 67

Other data: Occupancy rate ...... 100% 95% 100.0% Capitalization rate(1) ...... 4.9% 4.1% 6.3%

Estimated value ...... ¥ 2,080 ¥ 1,120 ¥ 1,080

Note: (1) The capitalization rate is based on factors such as market capitalization rates for comparable properties and future fluctuations and the discount rate analysis.

85 Cost Method

Property number Property name Land value Building value Estimated value (in millions) O-01 NT Building ¥ 6,200 ¥ 1,800 ¥ 10,200 O-02 Higashi-Ikebukuro Central Place ¥ 3,630 ¥ 549 ¥ 5,430 O-03 Nagoya Center Plaza Building ¥ 2,220 ¥ 444 ¥ 3,460 O-04 TTS Minami Aoyama Building ¥ 3,770 ¥ 190 ¥ 3,960 O-05 Omiya NSD Building ¥ 2,504 ¥ 413 ¥ 3,220 O-06 SAMTY Shin-Osaka Center Building ¥ 1,717 ¥ 506 ¥ 2,460 O-07 Hakata Gion Building ¥ 1,387 ¥ 758 ¥ 2,450 O-08 Chuo Bakuromachi Building ¥ 1,288 ¥ 298 ¥ 1,740 O-09 L.Biz Jimbocho Building ¥ 880 ¥ 190 ¥ 1,070 O-10 Shinsaibashi Building ¥ 529 ¥ 195 ¥ 807 O-11 MB Odakyu Building ¥ 635 ¥ 320 ¥ 1,030 O-12 Sendai Nikko Building ¥ 1,470 ¥ 310 ¥ 1,780 O-13 Morioka Ekimae-dori Building ¥ 217 ¥ 372 ¥ 709 O-14 Nagano Central Building ¥ 149 ¥ 368 ¥ 627 O-15 EME Koriyama Building ¥ 153 ¥ 248 ¥ 479 O-16 Utsunomiya Central Building ¥ 225 ¥ 386 ¥ 724 O-17 Yamagata Ekimae-dori Building ¥ 125 ¥ 186 ¥ 373 R-01 Amare Tokaidori ¥ 369 ¥ 473 ¥ 842 R-02 Dormy Ukimafunado ¥ 506 ¥ 126 ¥ 668 R-03 Benefis Hakata-Minami Grand Suite ¥ 560 ¥ 490 ¥ 1,050 R-04 LUXENA HIGASHI-KOENJI ¥ 810 ¥ 290 ¥ 1,100 R-05 Alpha Space Toritsudai ¥ 442 ¥ 71 ¥ 560 R-06 J City Hatchobori ¥ 944 ¥ 406 ¥ 1,350 H-01 Dormy Inn Matsuyama ¥ 690 ¥ 1,270 ¥ 2,350 H-02 Hotel Sunshine Utsunomiya ¥ 480 ¥ 338 ¥ 937 C-01 Prio Daimyo II ¥ 802 ¥ 89 ¥ 991 C-02 Co-op Sapporo Shunko ¥ 335 ¥ 217 ¥ 630

Engineering, Environmental and Seismic Reviews

The Asset Manager, on our behalf, retained third-party experts to conduct engineering, environmental and seismic reviews of the properties in our anticipated initial portfolio. The Asset Manager selects the expert that it believes to be nationally recognized in Japan for such services.

Limitations of Engineering, Environmental and Seismic Reviews

These reviews are not intended to present a representation as to the past, present or future engineering, environmental and seismic conditions of any of those properties. These reviews did not reveal any engineering, environmental or seismic liabilities that we believe would have a material adverse effect on our business, assets, financial condition or results of operations. However, because these risks are often hidden or difficult to evaluate, these reviews may not meaningfully assess these risks. Furthermore, these reviews typically have a more limited scope than similar reviews conducted in similar situations in other jurisdictions.

If there is any significant unidentified engineering, environmental or seismic liability, the value of the properties could fall and we may incur costs and require time to discharge the liability. If different methodologies are employed or different sets of assumptions are used, the engineering, environmental and seismic reviews of the same properties, and the conclusions drawn from them, may differ. Other experts may reach significantly different conclusions from those reached by the independent engineering firm we have retained regarding the same properties.

We have no duty to review or revise the engineering, environmental and seismic reviews of any of our properties after the dates of the reports that present these reviews, and we do not intend to do so. None of the third-party experts have updated their assessments, reviews or investigation of these properties. Thus, with respect to each property, the assessment, review or investigation by the relevant third-party expert is effective only as of the date of its engineering report.

Engineering Reviews

The Asset Manager typically engages an engineering firm to conduct an engineering review prior to our decision to acquire the property. These engineering reviews are typically not subsequently revised or updated. In

86 connection with these reports, the engineering firm assesses the structural condition of, and estimated capital expenditures for, the buildings on properties that we may acquire.

The report prepared by the engineering firm generally covers the following with respect to the relevant property:

Š an analysis of the condition of the building with respect to deterioration;

Š an analysis of maintenance and repair requirements;

Š an environmental assessment with respect to soil pollution, poisonous substances, hazardous substances and asbestos, among other things;

Š an analysis of earthquake resistance; and

Š the state of compliance with building regulations.

The engineering reviews conducted by the engineering firm in support of its report in respect to a property typically include:

Š an on-site visual inspection of the property;

Š an examination of current and historical uses of the property and the surrounding areas;

Š discussions with persons in charge of property management; and

Š a review of relevant historical documents.

The scope of each engineering firm’s on-site inspection is typically limited to the examination of the exterior of the building, areas not occupied by tenants and to those areas for which the tenants’ consents to enter are obtained. In general, the engineering firm categorizes the maintenance and repair requirements into categories such as immediate, short-term (which generally means within one year), and long-term (which generally means within 12 years).

Based on these engineering reviews, which were provided to us prior to our acquisition of each property and have not been updated, we believe the properties in our anticipated initial portfolio with all applicable building codes in Japan in all material respects.

Environmental Reviews

The engineering firm conducted its environmental reviews of the properties that we intend to acquire, as described in this document, based on publicly available documents and other information provided primarily by the former owners and property managers of the properties. The environmental reviews covered a wide range of possible sources of environmental problems, including asbestos, lead, polychlorinated biphenyls (PCBs), substances harmful to the ozone layer, water and air and garbage. Based on these reviews, which were provided to us prior to our acquisition of each property and have not been updated, we believe the properties in our anticipated initial portfolio comply with all environmental laws and regulations in Japan in all material respects.

Seismic Reviews

The Asset Manager engaged consultants to conduct seismic reviews of the properties in our anticipated initial portfolio, as is customary in Japan for managers of portfolios of such properties. Based on the seismic reviews, we believe all such properties complied with all applicable engineering and seismic codes in Japan as of the dates of their reports, which were provided to us prior to our acquisition of each property and have not been updated.

The seismic reviews are based on information such as the design and engineering drawings of the properties and visual assessments. For each property and for our portfolio as a whole, the firm estimated potential damage from earthquakes based on complex modeling tools that take into account factors such as historical frequencies and magnitudes of earthquake events, building construction, site soils and site distances to known

87 fault lines, but do not include estimates for secondary damage from items such as fires after earthquake events. The firm reports the results of its analysis as the PML that a property will experience over the next 50 years due to a large earthquake event of a scale expected to occur once in 475 years (with a 10% probability of occurrence in the next 50 years). This PML is typically the estimated total cost associated with restoring a property damaged in connection with such an earthquake event to its condition prior to that event, expressed as a percentage of the replacement cost associated with the property.

PML percentages are based on complicated, highly speculative building engineering reports that include many subjective factors and are based on numerous assumptions. Neither we nor the Asset Manager are experts in earthquake risk and analysis, nor do we have the ability to assess or independently verify the analysis of PML percentages provided to us, and the uncertainties inherent in such reports limit the value of them to us. There is no assurance that a property’s PML will correspond to the actual loss suffered in the event of an earthquake.

88 RELATED-PARTY TRANSACTIONS

Since our incorporation on September 11, 2017, we have not entered into material transactions with our executive or supervisory directors, or companies with whom they have a relationship, or with any of our principal unitholders or affiliates other than those discussed below. See “Asset Manager—Rules Regarding Related-party Transactions” for additional information regarding internal rules governing related-party transactions that have been adopted by the Asset Manager.

We believe that the terms of each transaction described below are at least as favorable to us as those that we could have obtained from an unaffiliated party in an arm’s-length transaction.

Transactions with the Asset Manager

Asset Management

We expect to pay the Asset Manager the two types of asset management fees. One is calculated based on the amount of our total assets, and the other is calculated based on our income before income taxes and before payment of asset management fees. We also expect to pay asset acquisition fees, asset disposition fees and certain other fees. See “Asset Manager” for a further discussion of our fee arrangements with the Asset Manager.

Transactions with our Sponsors

Our material transactions with Sponsors and their group companies since the date of our incorporation are as follows:

Property Acquisitions

In connection with our initial public offering, we expect to acquire three properties on July 30, 2018 in related-party transactions from Takara Leben and one property on the same date in a related-party transaction from Takara Leben and Takara Leben West Japan CO., LTD. The aggregate acquisition price of these acquisitions will be ¥6,223 million.

For a discussion of our policies regarding related-party transactions, see “Asset Manager—Rules Regarding Related-party Transactions”.

Leasing of Properties

Among the properties in our anticipated initial portfolio, we expect the trustee of Higashi Ikebukuro to enter into a master lease agreement with Takara Property Co., Ltd. See “Anticipated Initial Portfolio”— Anticipated Acquisitions”.

Property Management and Operation of Properties

We plan to select Takara Property Co., Ltd., a consolidated subsidiary of Takara Leben, as the property manager for each of the 27 properties expected to be in our anticipated initial portfolio following our anticipated acquisitions. Takara Property Co., Ltd. will be the sub-property manager for L.Biz Jimbocho, Luxena Higashi- Koenji, Dormy Ukimafunado, Dormy Inn Matsuyama and Co-op Sapporo Shunko. We expect to pay the property manager a property management fee for each fiscal period based on revenue generated by our properties. See “Our Business—Operation and Property Management Policies”.

Purchases of Our Units

At the time of our incorporation, we issued 150 units to PAG in return for a capital contribution of ¥150,000,000. Takara Leben, PAG JREIT Co-Invest Limited, an affiliated of PAG, Leben Community Co. Ltd., a consolidated subsidiary of Takara Leben, and Yamada Denki will each purchase from the Japanese underwriters, 18,700, 10,400, 5,200 and 1,000 units, respectively. The allotment of units to each designated purchaser will be determined at a later date.

89 PRINCIPAL UNITHOLDERS

The following table provides the number of units held by our principal unitholders and the percentage of total outstanding units as of the date of this document and as adjusted to give effect to the offerings.

Percentage of total Number of units owned units outstanding (as Number of units Percentage of total units (as adjusted for the adjusted for the Principal unitholder owned (actual) outstanding (actual) offerings) offerings)

Takara Leben...... - - 18,700(1) 5.4%(1) PAG JREIT Co-Invest Limited ...... - - 10,400(1) 3.0%(1) Leben Community Co. Ltd ...... - - 5,200 1.5% PAG Investment Management Limited ...... 1,500 100.0% 1,500 0.4% Yamada Denki ...... - - 1,000 0.3% Total ...... 1,500 100.0% 36,800 10.7%

Note: (1) These amounts and percentages are estimated assuming that the over-allotment option is not exercised at all. These amounts and percentages will decrease if any of the over-allotment option is exercised.

90 CUSTODIAN, GENERAL ADMINISTRATOR AND TRANSFER AGENT

Sumitomo Mitsui Trust Bank, Limited is the custodian of our assets, the general administrator of our affairs and our transfer agent.

Asset Custody Agreement and General Administration Agreement

We and Sumitomo Mitsui Trust Bank, Limited are parties to an asset custody agreement and a general administration agreement. The current terms of the asset custody agreement and the general administration agreement end on September 11, 2022, but these agreements are automatically extended for successive three-year periods unless six-months’ advance termination notice is provided.

Pursuant to the asset custody agreement and the general administration agreement, Sumitomo Mitsui Trust Bank, Limited provides custodial and administrative services to us, including the following:

Š custody of our assets;

Š administration of accounting matters;

Š administration of directors’ meetings;

Š administration of unitholders’ meetings (except for services concerning dispatch of documents related to unitholders’ meetings and acceptance and counting of voting instructions, which are provided by Sumitomo Mitsui Trust Bank, Limited under transfer agency agreement);

Š preparation of financial documents; and

Š administration of tax payments.

Under the asset custody agreement, we pay Sumitomo Mitsui Trust Bank, Limited a monthly amount of service fees for any calendar month as agreed upon by us and Sumitomo Mitsui Trust Bank, Limited based on our portfolio, up to the monthly amount to be calculated by the following formula: the amount of total assets as of the last day of the month immediately preceding the relevant calendar month recorded on the trial balance sheet × 0.03% ÷ 12. The amount of fees for any month during which services were not provided by the custodian of our assets for the full month shall be calculated pro-rata based on the actual days on which services were provided. Any fractional amount less than ¥1 obtained by the foregoing calculation formula shall be rounded down.

Sumitomo Mitsui Trust Bank, Limited calculates the custodian fee on a monthly basis and sends us an invoice the following month of the month in which the fiscal period ends or thereafter. We shall pay the fees by the end of the month immediately following the month in which we receive the invoice (payment dates that fall on a bank holiday will be changed to the previous business day) by depositing or transferring payment into Sumitomo Mitsui Trust Bank, Limited’s bank account. We are responsible for the payment of consumption taxes, local consumption taxes, and bank remittance charges.

Under the general administration agreement, we pay Sumitomo Mitsui Trust Bank, Limited a monthly amount of service fees for any calendar month as agreed upon by us and Sumitomo Mitsui Trust Bank, Limited based on our portfolio, up to the monthly amount to be calculated by the following formula: the amount of total assets as of the last day of the month immediately preceding the relevant calendar month recorded on the trial balance sheet × 0.09% ÷ 12. The amount of fees for any month during which services were not provided by the general administrator of our affairs for the full month shall be calculated pro-rata based on the actual days on which services were provided. Any fractional amount less than ¥1 obtained by the foregoing calculation formula shall be rounded down.

Sumitomo Mitsui Trust Bank, Limited calculates the general administration fee on a monthly basis and sends us an invoice the following month of the month in which the fiscal period ends or thereafter. We shall pay the fees by the end of the month immediately following the month in which we receive the invoice (payment dates that fall on a bank holiday will be changed to the previous business day) by depositing or transferring payment into Sumitomo Mitsui Trust Bank, Limited’s bank account. We are responsible for the payment of consumption taxes, local consumption taxes and bank remittance charges.

91 Transfer Agency Agreement

We and Sumitomo Mitsui Trust Bank, Limited are parties to a transfer agency agreement. The current terms of the transfer agency agreement ends on July 27, 2021, but this agreement is automatically extended for successive one-year periods unless three-months’ advance termination notice is provided.

Under the transfer agency agreement, we pay to Sumitomo Mitsui Trust Bank, Limited a transfer agent fee in an amount that is mutually agreed upon up to the monthly amount calculated based on the number of unitholders or the amount of transfer agency services as described below. We may pay fees for additional services that are not described in the transfer agency agreement as determined by mutual consultation.

Sumitomo Mitsui Trust Bank, Limited calculates the fees on a monthly basis and sends us an invoice by the fifteenth day of the following month. We shall pay the fees by the end of the month in which we receive the invoice (payment dates that fall on a bank holiday will be changed to the next business day) by depositing or transferring payment into Sumitomo Mitsui Trust Bank, Limited’s bank account. We are responsible for the payment of necessary expenses.

Standard Fees. Standard fees are for services such as administration of the unitholders’ register, confirmation of unitholders in certain days, compilation of statistical data, preparation of lists of principal shareholders, shareholders and officers and arrangement of data of unitholder disqualified. Monthly amount for such standard fee is equal to the total amount calculated in the manner below, provided that the minimum monthly amount is set at ¥210,000.

Number of unitholders Fees per unitholder Not more than 5,000 unitholders ...... ¥ 86 Over 5,000 and up to 10,000 ...... 73 Over 10,000 and up to 30,000 ...... 63 Over 30,000 and up to 50,000 ...... 54 Over 50,000 and up to 100,000 ...... 47 Over 100,000 unitholders ...... 40

Fee per unitholder disqualified during the month is ¥50.

Administration of Distributions. These fees are for the calculation of distributions, creation of distribution records, preparation of payment receipts, payment arrangement of stamp tax, preparation of distribution statements, confirmation of unpaid distributions, preparation of unpaid distribution records, preparation of wire transfer notices and wire transfer tape or payment voucher of distributions, application of special tax rates, preparation of statements related to distributions and arrangements of tax-related procedures. The amount for such fees is determined based on the total number of unitholders and calculated according to the table below, provided that the minimum amount is set at ¥350,000.

Number of unitholders Fees per unitholder receiving distributions Not more than 5,000 Unitholders ...... ¥ 120 Over 5,000 and up to 10,000 ...... 105 Over 10,000 and up to 30,000 ...... 90 Over 30,000 and up to 50,000 ...... 80 Over 50,000 and up to 100,000 ...... 60 Over 100,000 Unitholders ...... 50

With respect to distributions made to a specified bank account, we incur an additional charge of ¥150 per distribution made.

Payment of Distributions. These fees are for payment of distributions after the handling period and payment arrangements and administration of unpaid distributions. Fee per payment receipt is ¥450 and fee per unpaid distributions payment receipt as of the end of each month is ¥3.

Management Fees for Notices, Certificates and Investigations. These fees are for services such as receipt of notices for changes to the unitholders’ register, update of unitholders’ register, preparation of certificates and investigation against tax inquiry as well as the collection and registration of individual or corporate numbers of unitholders’ not subject to Book-Entry Transfer System for Stocks, etc. (kabushiki to¯ furikae seido). Fee per notice is ¥300 per notice, fee per investigation is ¥1,200, fee per issuance of a certificate is ¥600 and fee per registration of individual or corporate number is ¥300.

92 Mailing of Notices. These fees are mailing fees for convocation notices, meeting notices and other notices. For standard size mail, mailing fee is ¥25 for up to two types of documents and ¥5 is added for each additional type if mailed by implements, and if it mailed by hand, mailing fee is ¥40 for up to two documents and ¥15 is added for each additional document. Mailing fee per postcard is ¥10.

Handling of Returned Mail. These fees are for the organization and forwarding of returned convocation notices, meeting notices, and other returned mail. Fee for each piece of returned mail is ¥200.

General Unitholders’ Meetings. These fees are for the preparation of notices regarding voting ballots and organization/tabulation of voting ballots. Fee for preparation of voting ballots is ¥15. Fee per ballot is ¥70. Fee per ballot via electrical means is ¥35 and an additional fee for non-unified ballots is ¥70, and, in case of competing unitholder proposals, an additional fee is ¥70, provided that the minimum amount is set at ¥30,000.

Transfer System. These fees are for receipt of general unitholders’ notification data, updates to the unitholder registry, creation of new address and name data, requests and receipts of individual or corporate numbers from a Book Entry Organization (furikae kikan), maintenance, cancellation and termination of individual or corporate numbers and providing individual and corporate numbers to relevant government agencies. Fee per general unitholders’ notification data is ¥150, fee per new address and name data is ¥100 and fee per process of an individual or corporate number is ¥300.

Auditor Fee

We may pay the independent auditor up to ¥20 million per fiscal period. The board of directors is responsible for determining the actual compensation amount.

93 OTHER POLICIES WITH RESPECT TO INVESTMENT AND OTHER ACTIVITIES

Basic Policies

We seek to achieve our investment objectives within the framework of the following basic policies, which are reflected in our articles of incorporation as follows:

Š We invest in properties that will provide stable profits in the medium-to-long term and allow for our continued growth. We consider investments in real properties, real property equivalents such as land leasehold rights and surface rights and real property based securities such as trust beneficiary interests in real property. In principle, assets are not acquired for short-term buying and selling.

Š The Asset Manager has established its investment guidelines to provide the details of the basic policies set forth in our articles of incorporation.

Š Our main investment properties are office, residential, hotel and retail properties. Our selection of investment properties is largely based on consideration of multiple factors such as the age, size, functionality, location and surrounding environment of the properties, existence and situation of surrounding competing properties and tenant composition.

Š We invest in properties which we determine as competitive at the time of acquisition. We may also invest in properties which are expected to improve competitiveness through our capital expenditure or our Sponsor’s creation of value conducted during the operation period

Š Pursuant to Article 116(ii) of the Order for Enforcement of the ITA (Cabinet Order No. 480 of November 17, 2000, as amended), we may acquire shares of or invest in a corporation that owns real estate overseas in excess of the total number of issued shares of or the total amount of investment in such corporation (excluding those shares or the amount of investment of such corporation owned by itself) multiplied by the rate set forth in Article 221 of the Order for Enforcement of the ITA.

Other Policies under the Asset Management Agreement

The Asset Manager has established its investment guidelines to provide the details of the basic policies set forth in our articles of incorporation. To the extent it is permitted in our articles of incorporation, the Asset Manager may amend or revise the investment guidelines from time to time without a vote of our unitholders or our approval. The investment guidelines are internal rules of the Asset Manager, are reported to us and are intended to guide the implementation of our investment objectives and management of our operations. The Asset Manager has broad discretion to develop our business strategies and to manage our operations. See “Asset Manager”. At any given time our business operations or the characteristics of our property portfolio may be inconsistent with the investment guidelines. Various strategies with respect to the achievement of our investment objectives are described above under “Our Business”, and certain other policies with respect to the operation of our business are described elsewhere in this document and below.

Compliance with Certain Japanese Tax Law Matters

We manage our investments in such a manner as to qualify for lower property registration and acquisition taxes and for deductibility of cash distributions to our unitholders from our income under Japanese tax laws applicable to J-REITs. Also, we comply with applicable laws and regulations in order to take advantage of lower withholding tax on cash distributions and capital gains that may be available to certain overseas unitholders.

Methods, Standards and Reference Dates for Asset Evaluation

We evaluate our invested assets based on generally accepted accounting principles applicable to J-REITs. We maintain the credibility of our evaluations by strictly adhering to the consistency principle of accounting and by carefully and diligently conducting our activities for the benefit of our investors.

The asset evaluation methods and standards to be used depend on the type of invested asset:

Š Real estate, surface rights and real estate leasehold rights. Evaluation is made at the value obtained by deducting the accumulated depreciation amount from the acquisition price. Depreciation, in principle, is

94 calculated on a straight-line basis for both the building and the facilities; provided, however, that if the calculation performed on a straight-line basis for the facilities becomes inappropriate due to any justifiable reason, a different method may be used for such calculation, as long as it can reasonably be determined that no problems will arise with respect to the protection of unitholders.

Š Beneficiary interests in trusts of real estate, surface right and real estate leasehold rights. Real estate, surface rights and real estate leasehold rights of the trust assets are evaluated as described in the immediately preceding paragraph, and the financial assets contained in the trust assets are evaluated following generally accepted accounting principles in Japan applicable to J-REITs, after which the trust beneficiary interests are evaluated by subtracting the total amount of trust liabilities from the total amount of trust assets to obtain the trust net asset value.

Š Equity interests in real estate anonymous associations (tokumei kumiai) or beneficiary interests in trusts of money principally invested in real estate anonymous associations. Real estate-related assets of anonymous associations are evaluated in accordance with both of the items above. Financial assets of anonymous associations are evaluated following generally accepted accounting principles in Japan applicable to J-REITs. The equity interests in anonymous associations are then evaluated by subtracting the total amount of anonymous association liabilities from the total amount of anonymous association assets, obtaining the amount equivalent to the investment corporation’s equity interest in the net asset value of the anonymous association.

Š Securities.

O When such securities are listed, an evaluation is made at a value based on the market price.

O For all other securities, as a general principle, evaluations are made based on a reasonable manner applied consistently every fiscal period. If none of the quotation or reasonable prices is available, then the price is set at the acquisition price.

Š Monetary claims. Evaluations are made at the amount equivalent to the acquisition price less any allowance for bad debt; provided, however, that if the difference between the acquisition price and the face value is deemed to be attributable to interest adjustment, the monetary claims that have been acquired at a price lower or higher than the face value thereof are evaluated at the amount equivalent to the value, as based on the amortized cost method, less the allowance for bad debt.

Š Rights in derivative transactions. Derivative transactions are evaluated (1) based on the closing or most recent price or bid and offer prices quoted on a stock exchange in case such derivatives are listed on a stock exchange, (2) based on a reasonable manner to ascertain expected market price, or acquisition price, in a case of unlisted derivatives, (3) in accordance with the hedge accounting principles in case of derivatives deemed as hedging transactions pursuant to the generally accepted accounting principles in Japan applicable to J-REITs and (4) in accordance with special rules applicable to interest rate swaps under the financial instruments accounting standards in case the derivatives satisfying the criteria of the financial instruments accounting standards.

Š Hard to value assets. Hard to value assets include assets such as equity interests in real estate anonymous associations (tokumei kumiai) and beneficiary interest in trusts of money principally invested in real estate anonymous associations, the valuation of which is mentioned above, as well as tenant leasehold and security deposits. Future cash flows of hard to value assets are difficult to estimate. We value hard to value assets differently depending on the asset, but pursuant to the evaluation rules of the ITAJ or in accordance with generally accepted accounting principles in Japan applicable to J-REITs. Our methods for valuing particular hard to value assets will be delineated in our audited financial statements from the first fiscal period for which we produced such financial statements.

Š Other. Unless otherwise provided for above, the assets are evaluated pursuant to the evaluation rules of the ITAJ or in accordance with generally accepted accounting principles in Japan applicable to J-REITs.

If another asset evaluation method is used other than that mentioned above in order to make a report on values to be disclosed in a securities registration statement, annual securities report or asset management report, we evaluate assets in the following manner:

Š Real estate, surface rights and real estate leasehold rights. Real estate, surface rights and real estate leasehold rights are evaluated based on appraisal value.

95 Š Trust beneficiary interests in trusts of real estate, surface rights or real estate leasehold rights. While trust assets that are real estate, surface rights or real estate leasehold rights are evaluated as described in the previous item, financial assets contained in the trust assets are evaluated in accordance with generally accepted accounting principles, and the trust beneficiary interests are evaluated by subtracting the total amount of trust liabilities from the total amount of trust assets to obtain the trust net asset value.

Š Equity interests in real estate anonymous associations. Assets that are equity interests in real estate anonymous associations are evaluated following the first item above. Financial assets that are equity interests in anonymous associations will be evaluated following generally accepted accounting principles. The equity interests in anonymous associations are then evaluated by subtracting the total amount of liabilities for equity interests in anonymous associations from the total amount of assets for equity interests in anonymous associations to obtain the net asset value of equity interests in the anonymous associations.

The reference date for asset evaluations, in principle, is the last day of each fiscal period; however, in the case of securities or other assets, which may be evaluated at a value based on market price, the reference date is the last day of each month.

Net asset value per unit, based on the book values of our assets, is calculated by subtracting our total liabilities from our total assets and dividing the result by our total outstanding units and is presented in the notes to our financial statements. We prepare such financial statements (including balance sheets and statements of income) for each fiscal period as well as an asset management report and statements related to the distribution of cash for approval by our board of directors. If approved by our board of directors, our unitholders are notified of such approval, and all financial statements, along with an independent auditors report, are delivered to our unitholders without delay.

Continued Application of Asset Evaluation Methods and Standards

In accordance with the consistency principle of accounting, we will not change the asset evaluation methods and standards delineated above. However, if the asset evaluation methods and standards which we have adopted become inadequate, we may change these methods and standards.

Other

In addition to the foregoing policies, in undertaking our operations, we also consider various macroeconomic factors, such as overall economic and financial conditions, consumer and corporate trends and conditions in the real estate market, as well as sudden changes in our managing environment, or changes in the distribution or attributes of our investors and other factors and take whatever actions we deem necessary to protect the interests of our unitholders.

Financial Futures Transactions and Financial Derivative Transactions

In order to primarily reduce our interest rate fluctuation risk and other risks, we may invest in financial derivative transactions, considering economic conditions and market interest rates.

Cash Management Policy

We conduct an efficient and appropriate cash management by monitoring and accurately recognizing our expected financial needs of our portfolio. To be more precise, in aim of further growth through effective capital use, we use imp rest fund equivalent to the amount of depreciation costs and tenant leasehold or security deposits for the purposes such as the following: property acquisition, repairs or other capital expenditures, the repayment of indebtedness, acquisition of our investment units when we determine that the price of our investment units is far from the standards and the payment of distribution.

Disclosure Policy

We disclose information in a timely manner for transparency to investors promptly, accurately and fairly with a view to contributing to the informed investment decisions by investors, and such disclosure will be made in accordance with and in the form required by the ITA, the FIEA and other applicable laws and ordinances as well as by the Tokyo Stock Exchange, ITAJ and other organizations.

96 STRUCTURE AND FORMATION

We were incorporated as an investment corporation (to¯shi ho¯jin) in Japan under the ITA on September 11, 2017. The following chart shows our structure after giving effect to the offerings.

Sponsors(1)

Takara Leben Group, Takara Leben (60%) PAG Group and PAG Investment Management Yamada Denki Public (PAG Real Estate Holding (10.7%)(2) (89.3%)(2) Limited) (30%) Kyoritsu Maintenance (5%)(3) Yamada Denki (5%)

(4) (5)

(5) Custodian, General Asset Manager Takara Leben Real Estate Investment Administrator and Transfer Takara PAG Real Estate Corporation Agent Advisory Ltd.

Sumitomo Mitsui Trust

Notes: (1) The percentage in parentheses next to each of our Sponsors indicates the equity shares of each Sponsor in the Asset Manager. (2) Equity share information is estimated assuming that the over-allotment option is not exercised at all, and is subject to revision if any of the over- allotment option is exercised. See “Principal Unitholders” for further information. (3) Kyoritsu Maintenance also provides services as a hotel operator based on the sponsor support agreement between the Asset Manager. See “Takara Leben, PAG, Kyoritsu Maintenance and Yamada Denki—Sponsor Support Agreements”. (4) The Asset Manager has entered into sponsor support agreements separately with each Sponsor. (5) The Asset Manager and we have entered into trademark license agreements with each Sponsor, excluding PAG. With PAG IPR HOLDINGS LIMITED, the IP holding company of PAG, and a member of the PAG group, the Asset Manager and we have has entered into a license deed.

97 DESCRIPTION OF THE TRUST AGREEMENTS AND THE STATUTORY RIGHTS REGARDING THE PROPERTY TRUSTS

In connection with the offerings, we plan to acquire all 27 new properties of our initial portfolio as trust beneficiary interests through trusts pursuant to trust agreements with certain major Japanese trust banks. Our beneficiary interests represent interests in the principal in and profits from the trusts, pursuant to the trust agreements and the Trust Act of Japan, or the “Trust Act”, which took effect on September 30, 2007. In this section, the “New Trust Act” refers to the Trust Act that took effect on September 30, 2007, replacing the previous Trust Act, which applies to trust agreements entered into after the New Trust Act took effect. The “Old Trust Act” refers to the Trust Act before its replacement by the New Trust Act on September 30, 2007, which generally continues to apply to trust agreements entered into before the amendment took effect, unless the parties agree to the application of the New Trust Act to the trust.

Management of Properties

Under trust agreements, the property trustee is generally required to manage and dispose of the trust property in accordance with the provisions of the trust agreement and the instructions from the beneficiary interest holder made pursuant to such trust agreement, subject to certain exceptions. In addition, the trust agreement usually gives the trustee the right to dispose of the trust assets if fees, expenses and damages are not paid after the lapse of a specified grace period. The trust agreement generally provides that the trustee is not obligated to sell a property of the trust to a certain purchaser, even if directed to do so by the trust beneficiaries, if the trustee will owe warranty liabilities to that purchaser as a result of such sale or in certain other circumstances specified in the trust agreement.

The trust agreements generally provide that the trustee is not liable to us or any third party for any damages as long as the trustee uses due care as a good manager.

Beneficiary Interests

Our beneficiary interests represent interests in the principal in and profits from the trusts. Pursuant to our instructions (or joint instructions in case of trust beneficiary co-ownership interests), the trustee deposits the rents collected from our tenants after deduction of expenses to a bank account designated by us to the extent of the amount to which we are entitled.

Fees and Expenses

The trustee is generally entitled to the trust fee as agreed in the trust agreements. The trust expenses and fees are payable from the trust funds. In the event that the trust funds are insufficient to pay trust expenses, the trustee may generally request us and/or the co-owner of trust beneficiary interests to pay all or part of the amount of the trust expenses, unless such costs and expenses arise from breaches of its duty of care.

Termination Events

Under the Old Trust Act and the New Trust Act, trust agreements terminate under certain circumstances, including:

Š the termination events provided in the trust agreement; or

Š the objective of the trust has been attained or has become impossible to attain.

In addition, under the New Trust Act, trust agreements terminate under certain circumstances, including:

Š a court with competent jurisdiction so orders;

Š the trust itself commences a bankruptcy procedure;

Š the trustee has held all of the beneficiary interests of the trust for one year;

Š the trust is merged into another trust;

98 Š there has been no trustee with respect to the trust for one year; or

Š the trustee receives no payment for its trust fees or expenses from the beneficiary interest holder upon the trustee’s request when the trust’s funds are insufficient to pay the trustee’s fees and expenses.

Our trust agreements may provide that the trust agreement may generally be terminated in certain limited circumstances, including:

Š expiration of the trust period;

Š impossibility of the execution of the trustee’s duty due to reasons other than those caused by the trustee;

Š breach by a party followed by notice of termination by the non-breaching party;

Š disposition of all of the trust properties; and

Š except in case of a trust agreement in respect of land as the sole asset, where, within a certain number of days following the termination of the relevant property management agreement or master lease agreement, the trustee is unable to execute, or has not received any instructions from the beneficiary interest holder to execute, a new agreement with a third party satisfactory to the trustee.

Settlement of Accounts Following Termination

Disposition of property prior to termination. If the property is disposed of prior to the termination of the trust agreement, the trustee pays us and/or the co-owner of trust beneficiary interests the proceeds from the disposition of the property after deduction of the aggregate unpaid balance of the trust expenses and fees from the trust funds.

Delivery of property following termination. If the property is not disposed of prior to the termination of the trust agreement, the trustee must deliver to us the property after deduction of the aggregate unpaid balance of the trust expenses and fees from the trust funds. The trustee is also required to file an application with the real estate registry for the transfer.

Insufficient funds for the trustee. If the trust funds are insufficient to fulfill the monetary obligations of the owner or co-owner of trust beneficiary interests, the trustee may generally demand that we and/or the co-owner of trust beneficiary interests pay the obligations. In the event that we and/or such co-owner do not pay the obligations within a certain number of days after receipt of the notice, the trustee is entitled to sell the related trust property and apply the proceeds of the sale to the deficiency.

Governing Law and Submission to Jurisdiction

The laws of Japan govern each of our trust agreements, and the Tokyo District Court is the exclusive forum for any legal action, suit or proceedings in connection with our trust agreements.

Statutory Rights regarding the Property Trusts

Under the Trust Act, a trustee has numerous statutory rights, including the following:

Š a preferential right to collect its fees and expenses relating to a trust from the assets owned by the trust to a certain extent;

Š a right to receive compensation from the assets owned by the trust for certain damages which the trustee has suffered; and

Š a right to retain possession of the trust assets after the underlying trust agreement terminates or expires until outstanding fees, expenses and damages are paid in full.

The assets of a trust under the Old Trust Act are generally believed to belong to the trust and not to the trustee in the event the trustee becomes subject to insolvency proceedings, such as bankruptcy, civil rehabilitation or corporate reorganization, although the Old Trust Act does not provide clear conclusion as to this

99 issue. As long as the real estate which constitutes part of the trust property has been registered in the trust’s name and the trust assets are booked and maintained separately from the trustee’s own assets (or the assets belonging to other trusts), the risk that the real estate will be deemed to belong to the trustee is small. Under the New Trust Act, the assets of a trust belong to the trust, not to the trustee in the event the trustee becomes subject to insolvency proceedings.

100 DESCRIPTION OF THE UNITS

The following is a summary of material information concerning our units, our articles of incorporation, the ITA and related laws and regulations. This summary is not exhaustive and is qualified in its entirety by reference to the full provisions of our articles of incorporation and the ITA and related laws and regulations.

General

We are authorized by our articles of incorporation to issue up to 10,000,000 units, of which 1,500 units are issued and outstanding as of the date of this document. All issued units have no par value and are fully paid.

Under the Act Concerning Book-Entry Transfer of Corporate Bonds, Stocks, etc., or the Book-Entry Act, a central clearing system was established and the units of all Japanese investment corporations listed on any Japanese stock exchange are subject to the clearing system of book-entry of units handled by a central clearing system, JASDEC. All our units will be subject to the clearing system for book-entry of units, upon listing. The transfer of such units is effected exclusively through entry in the accounts maintained under the system. However, in any event that any such clearing organization will cease to handle our units in the future or other similar events take place, unit certificates will be issued, and units may then be transferred by delivery of certificates of units to the transferee under the ITA.

Under our unit handling regulations, a non-resident unitholder is required to appoint a standing proxy in Japan or to provide a mailing address in Japan. Japanese securities firms and commercial banks customarily act as standing proxies and provide related services for a standard fee.

Distributions

By resolution of our board of directors, we may make distributions in cash, to the extent permitted under rules of JITA and our articles of incorporation to our unitholders or pledgees whose names are recorded in our register of unitholders as of the last day of February and August in each year, respectively, in proportion to the number of units held by them. Under our articles of incorporation, we are not required to pay any cash distributions unclaimed for a period of three years after the date on which such distributions first become payable.

Voting Rights

A unitholder is entitled to one vote for each unit. Unitholders whose names appear in our register of unitholders on the record date we set in advance by public notice with respect to each general meeting of unitholders are entitled to vote at the relevant general meeting of unitholders, or for such meetings convened on or after November 1, 2019 without delay, or subsequently convened on or after November 1, 2019 every two years thereafter without delay, the last day of August immediately prior to such meeting will be the record date in accordance with our articles of incorporation. Except as otherwise provided by law or by our articles of incorporation, unitholders may adopt a resolution at a general meeting of unitholders by a majority vote cast in writing, by electromagnetic method (in accordance with applicable law and upon our approval) or through a proxy who is also a unitholder having voting rights. Unitholders who do not attend and do not exercise their voting rights at the meeting are deemed to be in agreement with proposals submitted at such meeting, except in the case of proposals for which contrary proposals are also being submitted at the meeting.

Unitholders may vote on the following matters, which require a majority of the voting rights represented at the meeting under our articles of incorporation:

Š election of any of our executive director, supervisory director or our independent auditor or removal of our independent auditor;

Š approval of the asset management agreement with the Asset Manager except for the Asset Manager at the time of our incorporation;

Š approval of the termination of the asset management agreement except under specific cases set forth under the ITA; and

Š other matters as required by the ITA, our articles of incorporation or any other law.

101 A resolution for removal of any of our executive director or supervisory director requires a quorum of a majority of the total issued units and a majority of the voting rights represented at the meeting.

The following resolutions, in particular, require a quorum of a majority of the total issued units and at least a two-thirds vote of the voting rights represented at the meeting:

Š consolidation of our units;

Š partial waiver of our executive director, supervisory director or independent auditor from liability for damages to us, except in certain cases stipulated in the ITA;

Š amendment of our articles of incorporation;

Š our dissolution; and

Š our mergers with any other investment corporation, except where we are the surviving corporation and the number of units to be delivered to unitholders of the non-surviving corporation upon merger will not exceed one-fifth of the total number of our issued units.

Other Rights of Unitholders

In addition to the rights set out above, unitholders have, among other things, the following rights:

Derivative Action

Unitholders who have held units continuously for at least six months have the right to demand in writing that an action be brought against:

Š the asset manager and/or general administrators to which we outsource administrative functions pursuant to the ITA; and

Š the executive directors, the supervisory directors and/or our independent auditors.

Right to Sue for Cancellation or Nullification of Resolutions

Unitholders have the right to file a lawsuit demanding that a resolution passed at a general meeting of unitholders be cancelled within three months from the date of such resolution, in the following circumstances:

Š the convocation of the meeting or voting procedures by which the resolution was passed were in breach of our articles of incorporation or any law or regulation, or were particularly inequitable;

Š the resolved matter is in breach of our articles of incorporation; or

Š the resolution is particularly unfair due to the exercise of voting right by a unitholder with a special interest in the resolution.

In addition, unitholders have the right to file a lawsuit confirming that a resolution had been null if the resolutions were in breach of law or regulation. Unitholders also have the right to file a lawsuit confirming the non-existence of the resolutions if the resolutions by unitholders have not existed.

Right to Request to Bar the Executive Director to Prevent Misconduct

If our executive director engages in, or if it is possible for our executive director to engage in, activities:

Š that are out of our corporate purpose or are in breach of our articles of incorporation or any law or regulation; and

Š which may cause us to incur irreparable damages;

then any unitholder who has held units continuously for at least six months may request to bar such activities of our executive director.

102 Right to Request Bar on Issuance of New Units

Unitholders have the right to request a bar on our issuance of new units, if:

Š the issuance of new units is in breach of any law or regulation or our articles of incorporation or is made in a particularly unfair manner; and

Š unitholders may suffer disadvantage from the issuance of new units.

Right to Sue for Nullification of Newly Issued Units

Unitholders are entitled to sue for the nullification of our newly issued units if the issue of such units is in serious breach of any law or regulation or our articles of incorporation. However, they must bring the suit within six months from the date of such issuance.

Right to Request Bar on Merger

With certain exceptions, unitholders have the right to request a bar on our merger with any other investment corporation, if:

Š the merger is in breach of any law or regulation or our articles of incorporation; and

Š unitholders may suffer disadvantage from the merger.

Right to Sue for the Nullification of Merger

Unitholders are entitled to sue for nullification of any merger if there is a material flaw in the merger procedure. However, they must bring the suit within six months from the effective date of the merger.

Right to Make Submissions of Agenda for General Meeting of Unitholders

Any unitholder who has held at least 1% of the issued units continuously for at least six months is entitled to request that the executive director add certain items or include certain specified matters in the agenda for the general meeting of unitholders. Such unitholders are also entitled to request that the executive director provide unitholders with a summary of the proposal made by the relevant unitholder with respect to the agenda for the general meeting of unitholders. The unitholder must make this request at least eight weeks prior to the date of the general meeting of unitholders.

Right to Convene a General Meeting of Unitholders

Any unitholder who has held at least 3% of the issued units continuously for at least six months is entitled to request that a general meeting of unitholders be convened. The unitholder must set out in the request the relevant agenda items for the meeting, which are limited to items for which the unitholder can exercise its voting rights, and the reason for the meeting. If the executive director does not convene the requested meeting without delay or the executive director does not convene the meeting to be held no later than eight weeks from the date of the request, the unitholder can convene the meeting with the permission of the director of the local finance bureau of the Ministry of Finance.

Right to Request the Appointment of an Inspector

Any unitholder who has held at least 1% of the issued units continuously for at least six months is entitled to request the director of the local finance bureau of the Ministry of Finance to appoint an inspector in advance of a general meeting of unitholders, to investigate the procedures for the convocation of the meeting and manner of passing the proposed resolutions.

Any unitholder who holds at least 3% of the issued units is entitled to request the director of the local finance bureau of the Ministry of Finance to appoint an inspector to investigate our business and financial affairs if there is any reason to believe that there has been an act of dishonesty or material fact in breach of any law or regulation or provision of our articles of incorporation in connection with the administration of our affairs.

103 Right to Request the Dismissal of Directors

Any unitholder who has held at least 3% of the issued units continuously for at least six months is entitled to request a court to dismiss any of our directors if:

Š such director has acted dishonestly or there is a material fact in breach of his or her fiduciary duties or any law, regulation or provision of our articles of incorporation in performing his or her duties; and

Š the dismissal of such director has been rejected at a general meeting of unitholders.

Such request must be made within 30 days from the date of such general meeting of unitholders.

Right to Request Our Dissolution

Any unitholder who holds at least 10% of the issued units is entitled to sue for dissolution of us if:

Š either (i) our management has reached a deadlock in the course of business that causes or may cause irreparable damage to us; or (ii) assets are being administered or disposed of in a grossly improper way, thereby endangering our existence; and

Š there are circumstances which make the dissolution unavoidable.

Right to Inspect Books and Records

Unitholders have the right to inspect or make copies of our accounting books and records or documents during our business hours upon submission of a request to our executive director stating the reasons for which they wish to inspect the books.

Consolidation of Units

We may, upon resolution of the general meeting of unitholders, conduct a consolidation of our units. In order to conduct a consolidation of our units, we must also give public notice at least two weeks prior to the effective date of the consolidation of our units stating the effective date of the consolidation and the ratio of units before and after the consolidation.

Unit Splits

We may at any time split the issued units into a greater number of units by resolution of our board of directors. Subsequent to the split, unitholders whose names appear in the register of unitholders on a record date we specify upon at least two weeks’ prior public notice will receive the units under the unit split.

Redemption of Units

As we are a closed-end investment corporation, unitholders are not entitled to request the redemption of their investment by us. See “Regulation—Act on Investment Trusts and Investment Corporations—Open-end J-REITs or Closed-end J-REITs”.

Acquisition of Own Units

We may acquire our own units by agreement with unitholders with cash consideration, by way of purchasing any Japanese stock exchange on which they are listed or by way of tender offer, in either case, by resolution of the board of directors. Such acquisition of our own units may be allowed to the extent the amount to be paid in consideration of the acquisition of our own units will not exceed the amount obtained by (i) the net asset amount minus (ii) the minimum net asset amount provided by our articles of incorporation (which is currently ¥50 million) plus ¥50 million.

We must dispose of or cancel our own units we acquired at an appropriate time by resolution of the board of directors.

104 Issuance of Additional Units

Unitholders have no pre-emptive rights with respect to issuance of additional units. We may issue units at the times and upon the terms resolved at the meetings of our board of directors up to the number prescribed by our articles of incorporation. The issue price of the units must be a fair price in view of the detail of the assets we hold.

Unit Acquisition Rights for Rights Offerings

We may issue unit acquisition rights (shinto¯shiguchi yoyakuken) solely for finance through rights offerings by resolution of our board of directors. Holders of unit acquisition rights are entitled to acquire units from us upon payment of the applicable exercise price and subject to other terms and conditions or may sell the unit acquisition rights on the stock exchange where such rights are listed.

Liquidation

In the event of our liquidation, the assets remaining after payment of all debt, liquidation expenses and taxes will be distributed to the unitholders in proportion to the number of units held.

Reporting of Substantial Unitholding

The FIEA requires any person who has become, beneficially and solely or jointly (as the case may be in accordance with the FIEA), a holder of more than 5% of the total issued units of an investment corporation listed on any Japanese stock exchange, to file a report concerning such unitholdings with the director of the competent local finance bureau of the Ministry of Finance within five business days. A similar report must also be made if the percentage of such holding subsequently increases or decreases by 1% or more or if any change occurs in material matters set out in reports previously filed. Any report so filed will be made available for public inspection.

All reports must be filed only through the Electronic Disclosure for Investors’ NETwork (EDINET) system.

Notices and Reports to Unitholders

We furnish to unitholders:

Š financial statements, business reports and statements regarding cash distributions, together with supporting schedules of these documents for each fiscal period;

Š convocation notices of general meetings of unitholders; and

Š notices of resolutions adopted at general meetings of unitholders.

Record Date of the Register of Unitholders

The record dates for the payment of cash distributions are the last day of February and August, respectively, and the record dates for the exercise of voting rights at a general meeting of unitholders are the last day of August 2019 and the last day of August every two years thereafter. In addition, we may at any time set a record date by a resolution of the board of directors upon at least two weeks prior public notice to determine the unitholders entitled to exercise their rights.

105 REGULATION

Act on Investment Trusts and Investment Corporations

Overview

Under the ITA, investment corporations must primarily make investments that are specifically prescribed by such law. Real estate is among the prescribed investments. Permitted investments are not limited to physical real estate but include investments in specifically prescribed real estate-related rights, such as trust beneficiary interests in real estate. Investment corporations that invest primarily in real estate have come to be known as J-REITs.

The ITA provides for two different types of investment vehicles: investment trusts and investment corporations. To date, all listed J-REITs have been formed as investment corporations.

Investment corporations issue units similar to shares in joint stock corporations. Holders of units are called unitholders. A board of directors oversees investment corporations. Unitholders at a general meeting of unitholders make certain decisions of the investment corporation. See “Description of the Units—Voting Rights”.

Equal Treatment of Unitholders

Under the ITA, investment corporations are required to treat unitholders equally in proportion to the number of units held, in principle.

Open-end J-REITs or Closed-end J-REITs

Under the ITA, investment corporations, including J-REITs, may be either open-end or closed-end. Unitholders of an open-end J-REIT are able to require that their units be redeemed at a fair value in view of the detail of the assets held by such J-REIT, and in accordance with its articles of incorporation. Units of an open-end J-REIT do not meet the listing criteria of the Tokyo Stock Exchange. Unitholders of a closed-end J-REIT cannot require that their units be redeemed. We are a closed-end J-REIT.

Investment Trusts Association, Japan Rules

J-REITs must comply with the J-REIT rules of the ITAJ, which is a self-regulatory organization of asset managers and security firms registered under the FIEA. These rules, in part, as applied to investment corporations, are as follows:

Š J-REITs must be formed with the objective of investing, directly or through investment vehicles, more than 50% of their total assets in real estate or real estate-related rights;

Š J-REITs must comply with the accounting requirements of the ITAJ, as well as legally prescribed corporate accounting procedures;

Š J-REITs may only use the valuation methods prescribed in the rules of the ITAJ, which emphasize market price valuation;

Š publicly listed closed-end J-REITs must calculate and announce the net asset value per unit at the end of each fiscal period (usually six months);

Š closed-end J-REITs may return capital up to 60% of the amount obtained by deducting the amount of their accumulated depreciation recorded as of the end of the preceding fiscal period from the amount of their accumulated depreciation calculated as of the end of the relevant fiscal period; and

Š the asset manager to which a J-REIT outsources the management of its assets must keep and disclose to the J-REIT’s unitholders at its offices copies of asset management plans, which must include the prescribed information, in addition to operating reports required by law.

106 Investment Assets

A J-REIT must invest primarily in specified assets as defined in the ITA. Specified assets include, but are not limited to, securities, real estate, leaseholds of real estate, surface rights (chijo¯-ken) (i.e., the right to use land for the purpose of having a structure on it), and trust beneficiary interests in securities or real estate, leaseholds of real estate or surface rights, power plants for generation of renewable energy (as defined in the relevant law), management rights with respect to public facilities (as defined in the relevant law).

A listed J-REIT must invest substantially all of its assets in real estate, real estate-related assets and liquid assets as provided by the listing requirements. Real estate in this context includes, but is not limited to, real estate, leaseholds of real estate, surface rights, and trust beneficiary interests in these assets, and real estate- related assets in this context include, but are not limited to, anonymous association (tokumei kumiai) interests for investment in real estate.

Pursuant to the ITA, investment corporations may not develop land for housing or to construct buildings.

Registration

Investment corporations must register with the director of the relevant local finance bureau of the Ministry of Finance prior to commencing their investment activities. We registered with the Kanto Local Finance Bureau on October 11, 2017.

Transfer of Units

The ITA prohibits an investment corporation from placing any restrictions on the transfer of its units.

General Meeting of Unitholders

General meetings of unitholders are held in accordance with the ITA and our articles of incorporation. We are required to give public notice of each general meeting not less than two months prior to the date thereof.

Under the ITA and our articles of incorporation, we are not required to give said prior public notice for a general meeting of unitholders, provided that the general meeting is convened on or after November 1, 2019 without delay or on or after November 1 of every two years thereafter without delay in accordance with our articles of incorporation, and provided, further, that the relevant general meeting is held within 25 months after the date of such immediately preceding general meeting.

In any case, we are required to serve to each unitholder a convocation notice of each unitholders’ meeting not less than two weeks prior to the date thereof. This convocation notice, when served to unitholders residing outside of Japan, will be sent to their standing proxy or mailing address in Japan pursuant to our unit handling regulations.

Corporate Governance

The corporate governance of J-REITs requires at least one executive director and at least one more supervisory director than the number of executive director(s) to constitute the board of directors. With respect to auditing of financial statements and certain rights of unitholders, such as voting rights and derivative suits, J-REITs are structurally similar to joint stock corporations incorporated under the Companies Act.

Mandatory Outsourcing of Operations

Under the ITA, an investment corporation is required to entrust to external entities the functions pertaining to:

Š the management of its assets;

Š the custody of its assets; and

Š certain other administrative functions.

107 An investment corporation must entrust the management of its assets to a third-party asset manager registered as such under the FIEA. Except for the asset management agreement entered into with the asset manager set forth in the articles of incorporation at the incorporation of the investment corporation, the asset management agreement does not become effective without the approval of the general meeting of unitholders.

An investment corporation must entrust the custody of its assets to a third party with the qualifications set forth in the ITA.

An investment corporation must entrust to third parties certain administrative functions, including:

Š the offering or placement of units or investment corporation bonds or allotment of unit acquisition rights without consideration;

Š preparation and keeping of the register of holders of units, unit acquisition rights or investment corporation bonds and other administrative functions relating to the register of holders of units, unit acquisition rights or investment corporation bonds;

Š logistic matters upon issuance of units, unit acquisition rights or investment corporation bonds;

Š administration of its organization;

Š accounting matters; and

Š as otherwise provided in the relevant ministerial ordinance.

Conflicts of Interest

Certain conflicts of interest may arise with respect to transactions, such as those between an investment corporation and the asset manager that manages such investment corporation.

The FIEA provides that an asset manager assumes a fiduciary duty of loyalty and exercises its duties in good faith. In the event of damage to the investment corporation as a result of breach of these duties, the asset manager bears liability for damages. The FIEA specifically prohibits certain conduct, including the following:

Š transactions between the investment corporation and the asset manager or any of its directors, officers, corporate auditors or employees, except in certain specified circumstances;

Š transactions between investment corporations managed by the same asset manager, except in certain specified circumstances;

Š transactions under terms that differ from ordinary transactions on an arm’s-length basis that are contrary to the interests of the investment corporation;

Š transactions by the asset manager for the benefit of its own or third parties and contrary to the interests of the investment corporation; and

Š transactions by the asset manager with unjustifiable constraint under the control by third parties.

The ITA requires that the asset manager must obtain prior consent from the investment corporation which must be approved by the board of directors of the investment corporation in order to acquire, sell or lease real estate or securities from or to the asset manager’s related parties specified in the ITA on behalf of the investment corporation, with certain exceptions.

In addition, the asset manager must report to the investment corporation prescribed matters with regard to the transactions with related parties without delay, in addition to the periodic report to be made at least once every three months.

Investment Restrictions and Policy

In addition to the investments specifically permitted by the ITA and other laws and regulations, an investment corporation is subject to investment restrictions under the ITA and other laws and regulations. The investment by the investment corporation must be made in accordance with the basic investment policy as set out in its articles of incorporation.

108 If an investment corporation’s articles of incorporation permit the acquisition of its own units, with cash consideration, by agreement with the unitholders, the investment corporation may repurchase its own units with the approval of its board of directors, subject to certain restriction on the acquisition price, requirements and procedures under the ITA and other related laws and regulations. Our articles of incorporation permit such acquisition of our own units. Except for such acquisition, the purchase of our own units is prohibited, with certain limited exceptions provided by the ITA.

Capital of the Investment Corporation

Investment corporations are required to maintain a minimum amount of net assets at all times. Each investment corporation’s articles of incorporation set forth this amount, which must be equal to ¥50 million or more. Registered investment corporations are required to promptly notify the director of the relevant local finance bureau of the Ministry of Finance if their net assets are likely to fall below ¥100 million. If the registered investment corporation’s net assets fall below ¥50 million and do not recover within a certain period not less than three months after a notice from the director of the relevant local finance bureau of the Ministry of Finance, the director of the relevant local finance bureau of the Ministry of Finance must revoke the investment corporation’s registration. In addition, a J-REIT that lists its units on the Tokyo Stock Exchange must maintain net assets of not less than ¥500 million. If a J-REIT’s net assets fall below ¥500 million as of the end of a fiscal period and do not recover within one year, the J-REIT will be delisted.

Finance

An investment corporation may, with the approval of its board of directors, issue units up to the number specified in its articles of incorporation from time to time. The issue price of the units must be a fair price in view of the detail of the assets held by the investment corporation. Unitholders have no pre-emptive rights in relation to an issuance of new units. An investment corporation may, with the approval of its board of directors, issue unit acquisition rights solely for finance through rights offerings from time to time.

A closed-end investment corporation may, by resolution of its board of directors, issue investment corporation bonds up to the amount specified in its articles of incorporation, and in accordance with the ITA.

An investment corporation may borrow money up to the amount specified in its articles of incorporation. In order for us to enjoy the favorable tax treatment available to J-REITs, we must borrow only from qualified institutional investors as defined in the FIEA (limited to institutional investors as defined in the Special Taxation Measures Act).

Merger

Investment corporations may merge with other investment corporations with the approval of unitholders representing at least two-thirds of the number of units having voting rights represented at a general meeting of unitholders, although such approval is not required for the surviving corporation when the number of units to be delivered to the unitholders of the non-surviving corporation upon merger will not exceed one-fifth of the total number of issued units of the surviving corporation. The quorum of the general meeting is a majority of the total number of issued units. Any unitholder which expresses its opposition to the merger prior to the general meeting of unitholders and votes against the approval of such merger at the meeting is entitled to request the investment corporation to purchase its units at the fair price.

Disclosure Requirements Applicable to J-REITs under Tokyo Stock Exchange Rules

J-REITs and asset managers thereof are subject to disclosure requirements under the rules of the Tokyo Stock Exchange that are similar to those imposed on other listed companies.

J-REITs and Asset Managers

Investment corporations’ decisions concerning the issuance of new units, unit splits or consolidation of units, among others, must be disclosed. Other matters to be disclosed include the receipt from the regulatory authority of their orders to improve operations and information regarding the asset managers.

109 Assets and Performance of J-REITs

Any information over a certain level of assets of J-REIT must be disclosed. In particular, the following must be disclosed:

Š a transfer of assets the value of which as of the end of the latest fiscal period is ¥50 million or more;

Š a purchase of assets the price of which is expected to be ¥50 million or more;

Š a loss equivalent to 3% or more of net assets as of the most recent fiscal period, or to 30% or more of ordinary income or net income for the most recent two fiscal periods in case the fiscal period consists of six months each, as a result of natural disaster or other damage; and

Š differences in expected operating revenues from the most recent forecast for the period announced pursuant to the rules of the Tokyo Stock Exchange of 10% or more, differences in expected ordinary income or loss, or net income or loss from the most recent forecast of 30% or more or differences in expected distributions from the most recent forecast of 5% or more.

Financial Results

As is the case of joint stock corporations, investment corporations and asset managers are required to publicly announce summaries of investment corporations’ financial results once they are finalized. These reports include forecasted distributions and value of assets held by J-REITs.

Imposition of Insider Trading Regulation

Under the FIEA, directors or agents of a J-REIT, and directors, auditors, officers, employees and agents of its asset manager or certain affiliated corporations of the asset manager, including the parent company of the asset manager, are prohibited from trading units of the J-REIT when such director, auditor, officer, employee or agent has come to know certain material facts concerning the J-REIT or the asset manager in the course of his/ her duty before such material facts are made public. Among others, (i) a unitholder or (ii) a person that has entered into or is under negotiation to enter into a contract with a J-REIT, its asset manager or certain affiliated corporations of the asset manager (in the case of a corporation as to either (i) or (ii) above, including its officers and employees) are also subject to this insider trading prohibition where such unitholder or person has come to know a material fact in the course of (a) exercising his/her unitholder’s right under the ITA to request an opportunity to inspect the accounting books and records of the J-REIT or (b) through the conclusion of, negotiation for, or performance of, such contract, as the case may be.

Laws and Regulations Relating to Japanese Real Estate

Land Leases

Under Japanese law, buildings can be owned independently of the underlying land upon which they are built. It is not uncommon in Japan for the owner of a building to differ from the owner of the underlying land.

Perfection

Under the Civil Code of Japan, in order to perfect a leasehold interest in the underlying land, the lessee is required to register its leasehold interest in the real estate register. The Land and Building Lease Act and its preceding legislation provide, however, that the lessee is also able to perfect its leasehold interest in the underlying land by registering the ownership of the building standing on the land if the lessee owns such building. If the lessee does not duly perfect its leasehold interest in the land, the lessee cannot assert its leasehold interest against a new purchaser of the underlying land. The leasehold interest is also subject to any mortgage over the underlying land that is registered prior to the perfection of the leasehold interest in the land. The lessee, as a general rule, loses its leasehold interest to a prior registered mortgage if and when the mortgagee becomes entitled to foreclose on the land. The mortgagee or its successor could then require that the lessee vacate the land prior to the end of its lease term.

Transfer and Sublease

The transferability of a lessee’s interest in a land lease depends on whether the lease is a chijo¯-ken or a chinshaku-ken. A chijo¯-ken entitles a lessee to transfer its interest to a third party (or sublease the land) without

110 the consent of the landlord. In the case of a chinshaku-ken, however, any transfer (or sublease) of a lessee’s interest is subject to the consent of the landlord, unless otherwise agreed in the land lease contract. In the event that the lessee transfers or subleases its leasehold interest in the land together with the transfer of the building standing on the land, if the landlord refuses to give consent, the lessee may seek judicial permission for the transfer or sublease. A court may authorize the transfer (or sublease) with or without payment to the landlord for compensation in lieu of consent, unless such transfer or sublease would prejudice the landlord’s rights. In making its decision, a court considers the length of the remaining term of the land lease, the history of the land lease contract, the circumstances requiring such transfer of the lease rights and any other relevant facts.

In the event the owner of a building holds a subleasehold interest in the underlying land, and the contract between the owner of the land and the leaseholder thereof is terminated, depending on the circumstances of the termination, the owner of the building may not be able to assert its subleasehold interest against the owner and may lose the property.

Termination

The Land and Building Lease Act permits special fixed-term land lease contracts, or teiki shakuchi-ken, which may take the form of any of the following three kinds of contracts:

Š those with a nonrenewable term of at least 50 years containing a waiver by the lessee of its right to demand that the landlord purchase the building owned by the lessee at the end of the term;

Š those with a nonrenewable term of at least 30 years providing that the building owned by the lessee must be sold to the landlord for reasonable consideration at the end of the term; and

Š those to be used only for business purposes (except for a building used for residence), with a nonrenewable term of between at least ten years and less than 50 years and including a waiver by the lessee of its right to demand that the landlord purchase the building at the end of such term.

Except for the three special lease contracts above, the land lease contract will be subject to certain conditions favorable to the lessee as follows:

Š the initial term of the contract is for a period of at least 30 years;

Š the term of the contract is subject to extension by the lessee unless the landlord has a justifiable reason for not agreeing to such extension in light of a number of factors including the landlord’s and the lessee’s needs for the land for their own use, the history of the land lease contract, the present use of the leased land, and the amount of money the landlord is offering to pay the lessee to partially compensate the lessee for vacating the land; and

Š the lessee has the right to demand that the landlord purchase at market price the building on the leased land owned by the lessee at the end of the term of the land lease contract when the contract is not extended or renewed.

Building Leases

Contract Period

A building lease may have either a fixed or an indefinite term. If the building lease provides for an indefinite term or a term of less than one year (which is deemed an indefinite term lease under the Land and Building Lease Act), then the lease may be terminated on six months’ prior notice by the lessor or on three months’ prior notice by the lessee; although, if the lease provides for a longer notice period, then this longer period notice must be given. If the building lease is for a fixed term of one year or more, then it cannot be terminated prior to the end of that term, unless the building lease specifically provides otherwise. In case of termination by the lessor, the lessor’s notice is subject to the conditions set out below.

Even if the building lease is for a fixed term of one year or more, unless the lessor or the lessee notifies its intention not to extend the lease from one year to six months before the expiration of the term, the building lease is deemed to be extended without a fixed term.

111 The lessor may not make such notice for termination of, or intention not to extend, the building lease unless it has a justifiable reason. Factors to be considered in determining whether there is such a justifiable reason include:

Š the lessor’s and the lessee’s (including any sublessee’s) needs for the building for their own use;

Š the history of the building lease contract;

Š the present use of the leased building;

Š the current condition of the building; and

Š the amount of money the lessor is offering to pay the lessee to partially compensate the lessee for vacating the building.

Notwithstanding the above, if the building lease contract is a special fixed-term building lease contract, or a type known as teiki tatemono chintaishaku, for which it is clearly specified in writing, such as in a notarized document, that the building lease will not be extended, and this feature is explained to the lessee in writing, the building lease will be terminable without any justifiable reason described above upon expiration of the fixed term if notice of termination of the building lease is given between one year and six months before the expiration of such term.

Tenant Leasehold and Security Deposits

Upon execution of a building lease, the lessee is usually required to pay a tenant leasehold deposit. The tenant leasehold deposit is paid by the lessee as security for rent and other obligations. The tenant leasehold deposit does not bear interest and any outstanding amount after deduction for any charges is usually refundable after the buildings are vacated. Upon execution of a building lease, the lessee may also pay a tenant security deposit, which essentially guarantees the lessee’s obligations to the lessor and sometimes bears interest. The tenant security deposit is fully or partially refundable either after a specified period of time has passed under the building lease or at the end of the building lease, depending on the terms of the building lease. The amounts payable for a tenant leasehold deposit and tenant security deposit vary from location to location and from case to case in Japan.

Adjustment of Rent

Generally, either party to a building lease may demand that the rent be increased or decreased in response to changes in market conditions, even where a properly executed lease exists. If the parties cannot come to an agreement, a court may order an adjustment after considering the following:

Š whether there have been any changes in tax or other liabilities imposed on the building and/or the underlying land, the value of the building and/or the underlying land and any other relevant economic conditions; and

Š the level of rent under comparable leases in neighboring areas.

If the court determines that the rent should be decreased, the lessor will be ordered to return any excess rent collected and pay interest at a rate of 10% per annum for the excess amount to the lessee.

With respect to such special fixed-term building lease contracts known as teiki tatemono chintaishaku, the rent may not be subject to such adjustment if so agreed in the building lease.

Property Subject to Co-ownership

Co-ownership refers to a type of ownership where one party owns a certain percentage interest in the whole building or property or trust beneficiary interest, while the other owners own the remaining percentage interest.

Sale of Co-ownership Interest

A co-owner of a property subject to co-ownership is entitled to sell its co-ownership interest to any person or entity without the consent of the other co-owners, unless an agreement between the co-owners requires

112 the consent or grants a right of first refusal of the co-owners. In the case of trust beneficiary co-ownership interests, any co-owner may sell its co-ownership interest without the consent of the other co-owners, unless an agreement between the co-owners requires the consent or grants a right of first refusal of the co-owners, but in each case, the sale of the trust beneficiary co-ownership interests requires the trustee’s consent.

Sale of Property under Co-ownership and the Right to Partition

Sale or any other disposal of a co-owned property may not be made without the consent of the other co-owners. A co-owner may demand that a co-owned property be partitioned, giving each co-owner a right to a specific portion of the property that each co-owner may dispose of at its discretion. If co-owners cannot agree upon a partition, a court may be asked to intervene. If partition is not practicable or may cause a significant decrease in the value of the co-owned property, the court may order that the property be sold by public auction. Each co-owner would then receive the proceeds of the sale of the co-owned property on a pro rata basis. The Civil Code of Japan permits the co-owners to agree not to exercise their right to demand partition of the co-owned property, subject to the following limitations:

Š the agreement must be for a period of not more than five years, and any period of renewal must be limited to not more than five years;

Š the agreement not to partition a co-owned property is not effective against a third-party purchaser of a co-ownership interest unless the agreement is registered; and

Š the agreement is not effective against a trustee, or a person in similar capacity, of a co-owner in bankruptcy, corporate reorganization or civil rehabilitation proceedings, although the other co-owners may purchase the co-ownership interest of the co-owner in such proceedings.

Administration of the Property

Co-owners generally decide on matters relating to the administration of co-owned properties by majority vote on the basis of co-owned property interest value, unless otherwise agreed among the co-owners; provided, however, that any conduct pertaining to the preservation of the co-owned property may be performed by each co-owner without such majority approval. Accordingly, a co-owner that is not able to get a majority share of the co-owned property interests may not participate in the administration of the co-owned property.

Claims and Obligations Relating to Properties under Co-ownership

When an underlying property that is co-owned is leased to tenants, the obligation of the co-owners to hold and refund the tenant leasehold deposits paid by the tenants is generally considered to be indivisible and the rents receivable by the co-owners are also deemed to be indivisible.

Real Estate Registration System

There is a real estate registration system in Japan under which ownership of real estate, as well as certain other real estate-related rights, such as the right to use real estate or security rights over real estate is registered. An owner of unregistered real estate or a holder of other unregistered rights cannot assert its title or rights against a third party, with certain exceptions such as the perfection of the land leasehold interest described above.

The real estate register, however, does not necessarily reflect the true holder of the title or right. In practice, parties who plan to enter into a real estate transaction usually rely upon the register, as it is generally the best indication of the true owner of the real estate-related title or right. However, a party has no recourse to anyone but the seller even if, relying on the register, it purchases real estate or a related right from the seller and the information contained in the register turns out to be incorrect. The purchaser may seek reimbursement from the seller pursuant to statutory or contract-based warranties but, in general, cannot acquire the ownership of or title to the real estate.

Liabilities of the Owner of Real Estate

Under Japanese law, if any damage has been caused to another person by reason of any defect in the construction or maintenance of a structure on land, the person in possession of the structure is liable to

113 compensate the injured person for damages it suffers; provided, however, that, if the person in possession has exercised due care in order to prevent the occurrence of such damage, the owner of the structure is liable for such damage.

It is customary to obtain third-party liability insurance over real estate. However, in certain circumstances, insurance may not be available, or, even if obtained, the insurance may not cover a liability in relation to the property.

A purchaser of real estate may, in some instances, seek reimbursement from the seller pursuant to statutory or contract-based warranties for liability to a third party that was caused by a defect in the property existing at the time of the sale. However, these warranties are sometimes limited or excluded or may prove insufficient if the seller, which may be a special purpose vehicle, lacks funds to compensate the purchaser for its loss.

Warranty Obligations

Unless contractually excluded, a seller of real estate owes statutory warranty obligations to a purchaser for any latent defect in the real estate. Statutory warranties are generally effective for one year from the date on which the purchaser becomes aware of the existence of the latent defect and can be enforced during this period by a cancellation of the underlying sale or by requesting damages from the seller. These statutory warranty obligations may be contractually excluded or substantially reduced in the sale and purchase agreement under which the real estate is purchased.

Soil Contamination Countermeasures Act

Under the Soil Contamination Countermeasures Act, a current owner of land may be held strictly liable for the removal or remediation of hazardous or toxic substances on or under such land, whether or not the current owner knew of, or was responsible for, the presence of such hazardous or toxic substances. Moreover, if the contamination of the real estate property were to cause damage to a third party, the owner of such contaminated property may be obligated to compensate such third party for such damages under the Civil Code. In addition, the presence of hazardous or toxic substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to dispose of the real estate or borrow using the real estate as collateral.

City Planning Act and Building Standards Act

All construction in Japan is regulated by the City Planning Act and the Building Standards Act. The main objective of the City Planning Act is to ensure balanced land development and promote public welfare, and the main objective of the Building Standards Act is to establish minimum standards concerning the site, structure, earthquake durability, equipment and building use. Under the City Planning Act, developers must obtain permission from the prefectural governor (or the mayor, if the construction is planned in a city designated by the government) prior to beginning any development action (as defined in the City Planning Act) on land that has been designated as a city planning area or a quasi-city planning area by the prefecture (or city) in which such land is situated. The permitted use of buildings that are constructed in each use zone is designated pursuant to the Building Standards Act.

Properties Subject to Stratified Ownership

Stratified ownership (kubun shoyu¯) refers to a type of ownership recognized under the Act for Stratified Ownership of Buildings in Japan, or the Stratified Ownership Act, whereby the building is divided into different portions, the majority of which are owned separately. The separate individual portions may be used for a variety of purposes, such as a private dwelling, shop, office or warehouse. Properties subject to stratified ownership have two parts:

Š private-use portions of the building, which a stratified owner owns exclusively and can independently transfer; and

Š common-use portions, which all, or several, of the stratified owners of the building own together and are able to use jointly (such as the entrance area).

Stratified owner meetings are held at least once a year, and approvals by: (i) the majority of all of the owners and (ii) those owners who, in the aggregate, have a majority of the voting rights, are required to make

114 decisions, unless otherwise provided in the Stratified Ownership Act or the rules agreed upon by the stratified owners. Voting rights are granted to stratified owners in proportion to their interest in the stratified building unless otherwise provided in the rules agreed upon by the stratified owners.

For the administration of certain matters, such as modifications that will significantly change the shape or function of a common use area, a decision is required by approval by: (i) 75% or more of all the stratified owners of the stratified building, unless the owners agree to change such 75% to a lower percentage (but not less than a simple majority), and (ii) those owners who, in the aggregate, have 75% or more of the total voting rights. Similarly, the rules agreed upon by the stratified owners can only be amended with the approval of: (i) 75% or more of all of the stratified owners of the property, and (ii) those owners who, in the aggregate, have 75% or more of the total voting rights.

Moreover, with respect to a decision to rebuild the property, approval by: (i) 80% or more of all of the stratified owners of the stratified building, and (ii) those owners who, in the aggregate, have 80% or more of the total voting rights, is required.

Owners of stratified ownership interests are entitled to sell their interests at their discretion. The consent of the other stratified owners is not necessary, unless the rules agreed upon by the stratified owners provide otherwise. The Stratified Ownership Act prohibits a sale or other disposal of a stratified owner’s interest separately from its right to use the underlying building site, except as otherwise set forth in the rules agreed upon by the stratified owners.

115 JAPANESE FOREIGN EXCHANGE REGULATIONS

Overview

The Foreign Exchange and Foreign Trade Act of Japan, as amended, and the cabinet orders and ministerial ordinances thereunder, together, the Foreign Exchange Regulations, govern certain matters relating to the acquisition and holding of units by non-residents of Japan.

The Foreign Exchange Regulations define “non-residents of Japan” as:

Š individuals who are not resident in Japan; or

Š corporations whose principal offices are located outside Japan. Generally, branches and other offices of non-resident corporations located within Japan are regarded as residents of Japan, and branches and other offices of Japanese corporations located outside Japan are regarded as non-residents of Japan.

Acquisition of Investment Units

In general, the acquisition of units of a J-REIT listed on the Tokyo Stock Exchange by a non-resident of Japan from a resident of Japan may be made without any restriction. However, a resident of Japan who transfers units to a non-resident of Japan must file a report to the Minister of Finance following the transfer of units to the non-resident of Japan, unless:

Š the consideration for the transfer is ¥100 million or less; or

Š the transfer is made through a bank or financial instruments business operator firm licensed or registered as such under relevant Japanese laws.

Distributions and Proceeds of Sale

Under the Foreign Exchange Regulations, distributions paid on, and the proceeds of sales in Japan of, investment units of a J-REIT held by non-residents of Japan may, in general, be converted into any foreign currency and repatriated abroad subject to certain exceptions. The acquisition of investment units by non-residents of Japan by way of a unit split is not subject to any notification or reporting requirements.

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