Semi-Annual Report for the 12th Period From June 1, 2017 to November 30, 2017 Activia Properties Inc. 1-1 Minami-Aoyama 1-chome, Minato-ku, Tokyo https://www.activia-reit.co.jp/en/ Semi-Annual Report for the 12th Period From June 1, 2017 to November 30, 2017 Cash Distributions (Result) The 12th Period (November 30, 2017) Cash distributions per unit ¥9,346 Cash Distributions (Forecast) The 13th Period (May 31, 2018) Cash distributions per unit ¥ 9,400 The 14th Period (November 30, 2018) Cash distributions per unit ¥ 9,410 (Note) Activia Properties Inc. (API) implemented a 2-for-1 investment unit split with October 1, 2015 as the effective date. Contents 04 Message 58 III Statements of Operations Basic Policy of Activia Properties Inc. 06 Topics 59 IV Statements of Changes in Unitholders’ Equity Focused investment in Urban Retail 12 Financial Situation 60 V Statements of Cash Distributions properties and Tokyo Office properties 13 API’s Basic Policy 61 VI Statements of Cash Flows Activia Properties Inc. aims at proactive 15 Portfolio List 62 VII Notes to Financial Statements management through selecting assets Utilization of the comprehensive support 16 Portfolio Map 76 VIII Schedule of Financial Statements that appeal to retail customers and and capabilities of the Tokyu Fudosan 17 Properties Acquired Before the 11th Period 84 Independent Auditor’s Report office tenants as urban centers and hubs for Holdings Group’s value chain business activity, in order to maximize unitholder 27 Overview of API 85 Overview of the Asset Manager value over the medium to long term. API also Strong governance structure aimed at 29 I Asset Management Report 86 Information on Unitholders takes initiatives to improve its asset management. maximizing unitholder value 56 II Balance Sheets Message Fifth Public Offering Implemented, the Ministry of Land, Infrastructure, Transport and rent at hotels continued to increase backed by Tourism. As such, demand related to inbound favorable sales. Now We Aim to Enhance the Scale of tourism trended higher. The occupancy rate at the end of the period Assets on a Continuing Basis and The J-REIT market has been showing signs has recorded 100.0% for the first time since listed. of recovery despite episodes of sluggish In December 2017 (the 13th period), we Maximize Our Unitholder Value performance, amid sentiment that yields have conducted a public offering for a fifth consecutive Nariaki Hosoi been relatively undervalued. Moreover, asset year, and related to this offering, we acquired Executive Director sizes have continued to expand in line with three properties (with a total acquisition price Activia Properties Inc. financing activity and property acquisitions of ¥23.6 billion), including two Urban Retail Thank you very much for your continued support of Tokyo (Chiyoda-ku, Minato-ku, Chuo-ku, carried out by J-REITs amid the Bank of Japan’s properties, which are DECKS Tokyo Beach for Activia Properties Inc. Shibuya-ku and Shinjuku-ku) which continues ongoing monetary easing policy and an upbeat (49% co-ownership interest) and A-FLAG Recently we have closed all accounts for the downward trend, meanwhile rent levels have real estate market. KITA SHINSAIBASHI, and one Activia Account 12th period (June 1, 2017 to November 30, 2017). continued its upward trend. In addition, the market Property, which is Commercial Mall Hakata. With We owe this achievement to your understanding has also been firm in major cities outside Tokyo, Under these circumstances, API has achieved these acquisitions, API raised its portfolio to and continuous support, for which we wish to amid an ongoing trend of declining vacancy rates upward rent revisions at lease contract renewal in 42 properties and the total acquisition price to extend our deep appreciation to you. and rising rent levels. Tokyo Office properties for ten consecutive fiscal ¥431.5 billion, and the ratio of focused investment With respect to the environment surrounding periods, from the 4th period ended November to Urban Retail properties and Tokyo Office During this period, the Japanese economy retail properties, consumer sentiment has been 2013 to the 13th period ending May 2018. properties grew to 80.6%. held to a path of recovery. This was partially mounting a firm recovery despite some apparent Given such conditions, as the result of the due to a trend of rising exports associated with signs of weakness, amid an employment 12th period, we recorded operating revenue of From the 13th period and onward, we will seek moderate growth in the global economy, and also environment that shows indications of further ¥12,720 million, operating profit of ¥7,074 million to maximize unitholder value over the medium due to increased robustness in capital investment tightening. Moreover, in the quarter spanning and profit of ¥6,217 million. And we achieved to long term by pursuing external and internal brought about by improvement in corporate July to September 2017, tourism consumption ¥9,346 for distributions per unit (DPU), an increase growth. We will accomplish this by leveraging the earnings and business sentiment. by overseas visitors to Japan increased in both from the initial forecast (¥9,167). expertise and network of TLC REIT Management In the rental office market, favorable conditions the number of overseas visitors to Japan and In particular, in the 12th period, the ratio Inc. as well as by utilizing the value chain of the have persisted. In that regard, supply has per-person travel expenditure, according to the of upward rent revisions achieved to all leases Tokyu Fudosan Holdings Group. continued to tighten relative to demand with the Consumption Trend Survey for Foreigners Visiting subject to revision was 87%, the highest rate We would be most grateful for your continued average vacancy rate of the five central wards Japan released by the Japan Tourism Agency of ever. In Urban Retail properties also, sales-linked support and encouragement. Thank you. Financial Highlights (Millions of yen) 11th Period 12th Period 11th Period 12th Period Operating revenue Total assets ¥ 12,107 ¥ 12,720 ¥ 425,977 ¥ 426,838 Operating profit Net assets ¥ 6,980 ¥ 7,074 ¥ 208,451 ¥ 208,523 Unitholders’ equity to total Ordinary profit ¥ 6,152 ¥ 6,218 assets (%) 48.9% 48.9% Profit Net assets per unit (yen) (Note) ¥ 6,151 ¥ 6,217 ¥ 313,359 ¥ 313,467 (Note) API implemented a 2-for-1 investment unit split with October 1, 2015 as the effective date. 4 5 Topics 3 new assets acquired (¥23.6 bn) External Growth UR-15 DECKS Tokyo Beach (49% co-ownership interest) Acquisition of assets focusing on location and quality n In the 12th period, we decided to acquire three retail properties, and as of January 17, 2018, we have acquired 25 properties with a total acquisition price of ¥263.4 billion, and our AUM has grown by 2.5 times to ¥431.5 billion (acquisition price basis) in 5.5 years since IPO (June 2012). ¥431.5 bn ¥407.9 bn ¥407.9 bn ¥356.9 bn ¥326.7 bn ¥282.6 bn ¥292.9 bn ¥241.7 bn ¥231.0 bn ¥184.3 bn The deck is lit up throughout the year 21 properties 27 properties 28 properties 30 properties 31 properties 32 properties 35 properties 39 properties 39 properties 42 properties Three attractions of DECKS Tokyo Beach : decks, promenades 4th period 5th period 6th period 7th period 8th period 9th period 10th period 11th period 12th period As of Jan.17, 1. Odaiba, a major sightseeing spot in Tokyo (2013.11) (2014.5) (2014.11) (2015.5) (2015.11) (2016.5) (2016.11) (2017.5) (2017.11) 2018 -minute A major entertainment hub with domestic and international visitors 2walk from Rainbow Bridge the nearest An area in which development and infrastructure improvement projects are under train station Odaiba Marine Park (Battery no.3) way in preparation for the 2020 Olympic and Paralympic Games Daiba turnoff Odaiba Rainbow Park Metropolitan Expressway New assets acquired Odaiba Marine Park Route No.11 2. Excellent location facing the waterfront (Tokyo Olympic triathlon, marathon swimming venue) Acquisition price Appraisal value Appraisal Occupancy rate Acquisition Bayside shopping mall on the beach with a scenic view of Rainbow Bridge and Category Property name Source Location DECKS Tokyo Beach (¥mn) (¥mn) NOI yield (as of November 30, 2017) date the heart of Tokyo Water-bus stop DECKS Tokyo Beach From Sponsor Minato-ku, January 5, (Odaiba Marine Park) Odaiba Statue of Liberty UR 12,740 12,887 4.4% 100% 3. Rare, hands-on experience based retail tenants Hilton Tokyo Odaiba Aqua City Odaiba (49% co-ownership interest) Group Tokyo 2018 A wide variety of tenants with some being the one and only outlet in Japan or in Shiokaze Park Odaiba-kaihinkoen Sta. (Tokyo Olympic Daiba Sta. Ariake turnoff Fuji Television Metropolitan Expressway A-FLAG KITA Via Asset Osaka-City, December 1, the Tokyo metropolitan area beach volleyball venue) 357 UR 4,725 4,770 4.3% 100% Grand Nikko Bayshore Route SHINSAIBASHI Manager Osaka 2017 Tokyo Daiba Rinkai Line Tokyo Teleport Sta. Via Asset Fukuoka-City, January 5, Location Daiba, Minato-ku, Tokyo Diver City Tokyo Plaza Tokyo Center Promenade Water Science AA Commercial Mall Hakata 6,100 6,270 5.0% 100% kagakukan Sta. Fune-no- Museum Manager Fukuoka 2018 West Promenade A 2-minute walk from Odaiba-kaihinkoen Station Yume-no-ohashi bridge Museum of Palette Town on the Yurikamome Line Maritime Science Anniversaire Tokyo Bay Total / Average 23,565 23,927 4.6% — — Aomi Sta. Nearest station Yurikamome Line A 5-minute walk from Tokyo Teleport Station on New pier for Fuji Television's large cruise ships Wangan Studio the Rinkai Line (planned) National Museum of Acquisition price ¥12,740 million Emerging Science Aomi-Chuo Our portfolio strategy and Innovation Port Park Appraisal value ¥12,887 million TOKYO minatorie Telecom Center Sta.