[PPT] - APPENDIX Real Estate Market in Japan Japan Investment Briefing 13 PowerPoint Presentation

SLIDE 1

APPENDIX Real Estate Market in Japan

Japan Investment Briefing 13 November 2012 | London

SLIDE 2

Market outlook Sector Space Market Capital Market Office Bottomed out Concentrated on prime buildings Residential Relatively stable Dominated by REITs Retail Sluggish retail sales Wide gap between prime area and others Logistics Strong demand Severe competition Hotel Recovered Not many transactions

APPENDIX

Opportunity in 2013 by sector

2

SLIDE 3

REIT market

J-REIT Index (2010-2012)

800 850 900 950 1,000 1,050 1,100 1,150 1,200 Aug-2010 Oct-2010 Dec-2010 Feb-2011 Apr-2011 Jun-2011 Aug-2011 Oct-2011 Dec-2011 Feb-2012 Apr-2012 Jun-2012 Aug-2012 Oct-2012

3.11 Earthquake Source: Tokyo Stock Exchange

3

APPENDIX

SLIDE 4

Tokyo New York - Midtown Singapore Frankfurt London - City Hong Kong

Yr/Mo Yr/Mo Yr/Mo Yr/Mo Yr/Mo Yr/Mo

Tokyo is keeping stable and high yield gap.

Source: Colliers International, Deutsche Securities

Yield gap

APPENDIX

4

SLIDE 5

Office market

Average Asking Rent

Source: CBRE

Vacancy Rate

8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012

Nagoya Tokyo CBD Osaka

6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012

Tokyo CBD Osaka Nagoya

(JPY/tsubo)

Office Space Market

5

APPENDIX

SLIDE 6

Office market

Source: CBRE Vacancy rates and average rents in Tokyo CBD March 2001 – June 2011

Vacancy declines with lower rent

rent Vacancy Rate

① ② ③ ④

High Low

Low

High current

Rent declines with higher vacancy Rent rises with lower vacancy Vacancy rises with higher rent

Cycle 8-9 years 2.0%, 14,160 2.0%, 12,810 7.6%, 13,680 3.6%, 14,120 4.5%, 13,970 6.1%, 13,750 5.9%, 13,410 5.4%, 13,040 3.2%, 12,700 6.9%, 13,290 3.8%, 14,400

12,000 13,000 14,000 15,000 0% 1% 2% 3% 4% 5% 6% 7% 8% Vacancy Rate [%] Average asking rent [JPY / Tsubo] 2011/3

2010/3 2009/3 2008/3 2007/3 2006/3 2005/3 2004/3 2003/3 2002/3 2001/3 2012/3

Cycle of Tokyo Office Market

6

APPENDIX

SLIDE 7

7 Office market

15,000 20,000 25,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (円/坪) 0% 2% 4% 6% 8% 10%

Asking rent per tsubo and Vacancy rate

(Office, Tokyo central 5 wards, monthly) Vacancy rate [RHS] 16,675 JPY/tsubo (Sep. 2012)

22,901 JPY/tsubo (Aug. 2008) 17,529 JPY/tsubo (Oct. 2004)

Source: Miki Shoji Co., Ltd.

(JPY/tsubo/month)

Past : Rent decreased and vacancy rate increased
Now : Rent decreases and vacancy increases have slowed down

APPENDIX

Japanese unit 1 Tsubo = 3.30578 sqm = 35.58 sqf 10,000 JPY/Tsubo/month = 30.25 EUR/sqm/month = 42.15 USD/sqf/year = 25.94 GBP/sqf/year Average rent [LHS] 8.9%

SLIDE 8

20% 6% 2% 54% 84% 83% 74% 36% 25% 62% 88% 98% 32% 6% 17% 26% 50% 60%

14
14
14
14
35
35
35
35

48 48 48 48 66 66 66 66 78 78 78 78 22 22 22 22

96
96
96
96
82
82
82
82
42
42
42
42
100
80
60
40
20

20 40 60 80 100

2003年 2004年 2005年 2006年 2007年 2008年 2009年 2010年 2011年

100
80
60
40
20

20 40 60 80 100 上昇した割合下落した割合成約賃料DI

ほとんどのビルで上昇上昇と下落が同程度ほとんどのビルで下落下落したビルが多い上昇したビルが多い

上昇した割合（ % ）下落した割合（ % ）

Office market

Rent DI

(properties managed by Xymax, Tokyo 23 wards)

Source: Xymax Real Estate Marketing Institute

Taking Rent DI （= increases – decreases) Increase Decrease Ratio of increased rent (%) Rent increased from the year before All the rental contracts Ratio of decreased rent (%) Rent decreased from the year before All the rental contracts

Decrease = Increase Decrease > Increase Decrease < Increase Decreased in nearly all buildings Increased in nearly all buildings

Rent decreases have also slowed

8

APPENDIX

SLIDE 9

Office market

9

APPENDIX

Global comparison : average cap rate

SLIDE 10

Residential market

TSE Home Price Indices (Existing Condominiums)

Source: Tokyo Stock Exchange

60 70 80 90 100

200 2001 200 200 200 200 200 200 200 200 2010 2011 2012

Tokyo Kanagawa Chiba Saitama

(Jan. 2000 = 100)

10

APPENDIX

SLIDE 11

Retail market

Source: Ministry of Economy, Trade and Industry

(2002 = 0)

20
15
10
5

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Overall Japan Tokyo

Japan Tokyo 2002 22,033 3,736 2003 21,759 3,646 2004 21,467 3,591 2005 21,328 3,576 2006 21,145 3,547 2007 21,199 3,564 2008 20,951 3,490 2009 19,776 3,189 2010 19,579 3,129 2011 19,593 3,027 Annual Sales in JPY billion

Annual Sales of Department Stores and Supermarkets

11

APPENDIX

SLIDE 12

Logistics market

Vacancy Rate

(Large Multi-tenant Properties in Tokyo Metropolitan Area)

Asking Rent

(Medium and Large Properties in Tokyo Metropolitan Area)

Source: CBRE

Tokyo Chiba Saitama Kanagawa

12

APPENDIX

SLIDE 13

Logistics market

Source: CBRE quarterly survey vol. 35

Expected NOI Cap Rate for Multi-tenant Property in Tokyo’s Waterfront

13

APPENDIX

SLIDE 14

Logistics market

Major Developments of Multi-tenant Lease Properties

Project Name Developer City Prefecture Inland or Waterfront Land Area (sqm) Gross Floor Area (sqm) Completion Prologis Park Zama 2 Prologis Zama Kanagawa Inland 49,821 115,952

Aug. 2012

Logiport Kitakashiwa LaSalle Investment Management Kashiwa Chiba Inland 53,486 127,164

Oct. 2012

GLP Misato III Global Logistic Properties Misato Saitama Inland 38,901 93,831 May 2013 Tokorozawa Logistics Center Orix Real Estate Miyoshi Saitama Inland 51,820 72,126 April 2013 Kawagoe Logistics Center Orix Real Estate Kawagoe Saitama Inland 25,501 54,888 May 2013 SGH Logistics Kashiwa MLT2 SG Realty (Sagawa Express) Kashiwa Chiba Inland 103,734* 122,000 June 2012 D Project Sagamihara Logistics Center Daiwa House Sagamihara Kanagawa Inland 41,777 104,201 June 2012 Prologis Park Narashino 4 Prologis Narashino Chiba Waterfront 46,168 108,500

Aug. 2013

Ichikawa Shiohama Project Global Logistic Properties and Mitsui Fudosan Ichikawa Chiba Waterfront 52,921 121,086

Dec. 2013

GLP Atsugi Global Logistic Properties Atsugi Kanagawa Inland 44,511 107,657

Dec. 2013

Logiport Sagamihara LaSalle Investment Management and Mitsubishi Estate Sagamihara Kanagawa Inland 94,197 210,826

Aug. 2013

Source: CBRE

14

APPENDIX

SLIDE 15

Hotel market

Occupancy Rate of Hotels in Japan

Source: Japan City hotel Association

15

APPENDIX

SLIDE 16

Hotel market

Buyers and Cap Rate by Hotel Types

16

APPENDIX

SLIDE 17

Hotel market

Cap Rate of Full-service Hotels

Source: Japan City hotel Association

17

APPENDIX

SLIDE 18

Hotel market

Major Transactions of Hotels in Tokyo (2011)

Month Hotel Guest rooms Seller Buyer Price

(mil. JPY)

Mar. Hotel Avanshell Akasaka 71 Lone Star Mitsubishi Estate

Mar.

Hotel Ascent Shinjuku 63 Leopalace 21 Daiwa House Industry

Apr.

Comfort Hotel Tokyo Higashi Nihonbashi 259 Maya Investment Godo Kaisha Japan Hotel Fund 3,746 Jun. Art Hotels Hamamatsucho 120 City Group Fortress Investment Group

Jun.

Art Hotels Omori 220 City Group Fortress Investment Group

Jul.

Ofu Hotel Kamata 92 Araigumi Aoki

Aug.

Hotel Monterey Sanno 166 Sanno Estate Mitsubishi Corp.

Nov.

Chisan Ground Akasaka 136 Lone Star Sotetsu Holdings

Dec.

Asakusa Vista Hotel 136 Galileo Japan Trust Tokai Kanko 1,050 Dec. JAL City Yotsuya 185 Tokyo Tatemono United Urban Investment Corp. 4,200

Compiled by Jones Lang LaSalle based on public data

18

APPENDIX

SLIDE 19

Finance market

Legal Final Maturity of CMBS

(in JPY millions) Compiled by Sumitomo Mitsui Trust Research Institute Co., Ltd. based on data by Japan Securities Dealers Association

200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

19

APPENDIX

SLIDE 20

Finance market

Changes in new loans for real estate and lending index of financial institutions

New loans for capital expenditures of real estate industry (% change from same quarter previous year) (left side) Lending attitude DI (all industry, large companies) (right side) Lending attitude DI (real estate, large companies) (right side)

Source: Compiled by RREEF Research based on data by Bank of Japan

20

APPENDIX

SLIDE 21

Finance market

Source: Compiled by RREEF Research based on data by Bank of Japan, Urban Research Institute Corporation, and Real Capital Analytics

Real estate transaction volume and real estate lending index of financial institutions

(in trillion JPY) Transaction volume (12 month total, left) Lending attitude (6 months before, right)

21

APPENDIX

SLIDE 22

Development

Construction Cost

Earthquake Reconstruction Shortage of materials, skilled labours Increase in construction cost

22

APPENDIX

SLIDE 23

Development

147,719 126,783 344,355 176,361 134,681 210,813 258,820 133,976 215,859 236,573 214,600

145,300 145,300 145,300 145,300 327,500 327,500 327,500 327,500

183,558

200,000 400,000 600,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

0% 2% 4% 6% 8% 10%

Large new supply in 2012 but halved in 2013

Largest supply after 2003

Source: CBRE ( -2012), Xymax Real Estate Marketing Institute (2013- )

New supply of office buildings (Tokyo 23 wards, annual)

About half of 2012 will be supplied in 2013 Vacancy rate % (right)

（坪）

23

APPENDIX

SLIDE 24

Unique Features: Medium-sized office buildings

5,000,000 10,000,000 15,000,000 Net Rentable Area below 50 tsubo 50-100 tsubo 100-200 tsubo

ver 200 tsubo

(tsubo) Total: 12,671,256 tsubo 5,000 10,000 15,000 20,000 25,000 Number of Buildings Total: 22,022 buildings size of typical floor plate

Large buildings Small and medium buildings

Compiled by Xymax Real Estate Marketing Institute based on Public statistics

Office Buildings in Tokyo CBD

24

APPENDIX

SLIDE 25

Unique Features: Medium-sized office buildings

Companies in Japan

Small and Medium 4,198,000 (99.7%) Large 12,000 (0.3%) Number of Companies

(including private business establishments)

4,210,000 companies

Large 12,290,000 (31%) Small and Medium 27,840,000 (69%) Number of Employees

(including private business establishments)

40,130,000 employees

Source: Statistics of business establishments and companies (2006), Ministry of Internal Affairs and Communications Definitions of small- and Medium-size companies Manufacturer: capital less than JPY 300 million, or employees less than 300 Wholesaler: capital less than JPY 100 million, or employees less than 100 Retailer: capital less than JPY 50 million, or employees less than 50 Service: capital less than JPY 50 million, or employees less than 100

25

APPENDIX

SLIDE 26

Unique Features: Medium-sized office buildings

60 70 80 90 100 110 120 J a n

2

J a n

2

1 J a n

2

2 J a n

2

3 J a n

2

4 J a n

2

5 J a n

2

6 J a n

2

7 J a n

2

8 J a n

2

9 J a n

2

1 J a n

2

1 1 J a n

2

1 2

Large buildings

(typical floor plate: over 200 tsubo)

More volatile

Overall Less volatile

Jan. 2000 = 100

Compiled by Xymax Real Estate Marketing Institute based on data by Sanko Real Estate

Office Market Index (Vacancy Rate X Asking Rent)

26

APPENDIX

Medium size buildings supposed to be more stable

SLIDE 27

Unique Features: Medium-sized office buildings

27

APPENDIX

Volatility of office rent by floor plate size

SLIDE 28

Unique Features: Two years leases

Distribution of 4,306 tenants as of April 2012

517 560 491 333 282 313 299 284 213 160 854 100 200 300 400 500 600 700 800 900 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 and up

Source: Xymax Real Estate Marketing Institute

Occupancy Period of Offices Managed by Xymax

Average Occupancy Period

(as of April each year)

(years)

5.50 6.00 6.50 7.00 2008 2009 2010 2011 2012

28

APPENDIX

SLIDE 29

Unique Features: Earthquake protection 1971 1981 1995

1978（S53） Miyagi Pref. Earthquake 1995（H7） Great Hanshin Earthquake 1966（S41） Tokachioki Earthquake

◆ ◆ ◆ ◆Revision of Building Standard Act

Reinforcement of Columns

◆ ◆ ◆ ◆Revision of Building Standard Act New standards established:

For Medium quake, minor cracks only For Large quake, avoid collapse

Old seismic standards New seismic standards

Old standards New standards No particular regulations Avoid collapse Minor cracks only

History of seismic standards

29

APPENDIX

SLIDE 30

Unique Features: Earthquake protection

Source: Japan Institute of Architect 1995

Damage by building age

・Special attentions should be paid to the buildings constructed under the old seismic standards (before 1971). Such buildings had severe damage and were not able to repair. ・Damage was also observed in buildings constructed under the new seismic standards. However, in terms of saving human life (avoid total collapse and secure spaces to live until being rescued), such buildings were much better than those constructed under the old seismic standards.

Building damage in Great Hanshin Earthquake

Year of construction Before 1971 1972-1980 After 1981 Little or no damage Minor repair is required Large-scale repair is required Total collapse or partial collapse (impossible to repair)

30

APPENDIX

SLIDE 31

Unique Features: Earthquake protection

Source: Ministry of Land, Infrastructure, Transport and Tourism

Building damage in Great Hanshin Earthquake

Comparison of damage by earthquake

Buildings constructed before 1981 (before the new seismic standards) and after

Built Before 1981 Built After 1982

Little or no damage Severe damage Minor or moderate damage Little or no damage

Minor or moderate damage Severe damage

31

APPENDIX

SLIDE 32

Unique Features: Earthquake protection

Purpose of relocation

(Interviews with tenants of buildings managed by Xymax, Tokyo 23 wards)

Source: Xymax Real Estate Marketing Institute

Tenants places greater emphasis on seismic safety

32

APPENDIX

0% 5% 10% 15% 20% 25% 30% 35% 40%

人員増コスト削減耐震強化・設備改善拠点統合建物取り壊しによる立地改善人員減経営統合定借期間終了その他

2009-2010(n=47) 2011-(n=54)

Increase of workers Cost reduction

Better seismic capacity, better building specifications

Consolidation of locations Building demolition Better location Decrease of workers Merger, management integration Expiration of fixed-term lease Other

SLIDE 33

Unique Features: Earthquake protection

Less quake-resistant buildings consist 34%

Source: MLIT

595,080 (61.1%) 29,340 (3.0%) 327,600 (33.6%) 8,930 (0.9%) 13,390 (1.4%)

Compliant to new seismic standards Not compliant to new standards or not being confirmed Unknown Constructed after 1981 Unknown date of construction

Total: 974,000 buildings (100%)

Buildings constructed before 1981 356,940 (37.6%)

33

APPENDIX

SLIDE 34

Unique Features: Free rent

Free Rent Period of Offices Managed by Xymax

Tokyo

3% 83% 80% 81% 57% 46% 56% 71% 77% 76% 52% 46% 25% 10% 21% 40% 47% 57% 28% 15% 68% 68% 74% 0% 12% 6% 1% 0% 0% 1% 13% 31% 52% 0.8 months 1.2 months 1.2 months 0.8 months 1.7 months 2.5 months 3.0 months 0.6 months 4.7 months 2.0 months 3.8 months 1 2 3 4 5 6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Average Free Rent Period (months) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Ratio of tenants with free rent (%) Ratio of tenants with free rent (%) 2 months and more (%) 6 months and more (%) Average free rent period (months)

Source: Xymax Real Estate Marketing Institute

34

APPENDIX

SLIDE 35

Japanese units

35

1.00 Tsubo = 3.30578 sqm = 35.5831 sqf 10,000 JPY/Tsubo/month = 30.25 EUR/sqm/month = 42.15 USD/sqf/year = 25.94 GBP/sqf/year 1.00 USD = 80 JPY 1.00 GBP = 130 JPY 1.00 EUR = 100 JPY

“Tsubo” : Japanese traditional unit to measure area

APPENDIX

SLIDE 36

Appendix 1 :

Details of “Tokyo Mid Office Fund”

This presentation was created as a reference material for internal consideration within your company (or for discussion with your company),

and does not assure that the content can be realized.

The content of this presentation was accurately created based on information and materials presently received, but does not guarantee the

truth or accuracy of numbers, terms, etc.

Xymax is engaged in the Building Lots and Building Transactions Business, Investment Management Business, Investment Advisory and

Agency Business , Type II Financial Instruments Business as a part of its ordinary business. If you engage in the transactions proposed this time based on this proposal, Xymax may receive certain benefits from transactions other than from transactions through agreements with your company, as a result of this presentation.

Global Marketing Department 1-1-1 Akasaka Minato-ku, Tokyo Japan 107-0052 Tel: +81-3-5544-6840 Fax: +81-3-5544-6841 www.xymax.co.jp/english