APPENDIX Real Estate Market In Japan

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APPENDIXReal Estate Market in JapanJapan Investment Briefing13 November 2012 London

APPENDIXMarket outlook2Opportunity in 2013 by pace MarketCapital MarketBottomed outConcentrated onprime buildingsRelatively stableDominated by REITsSluggish retail salesWide gap betweenprime area and othersStrong demandSevere competitionRecoveredNot many transactions

APPENDIXREIT market3J-REIT Index (2010-2012)3.11 g-2010800Source: Tokyo Stock Exchange

APPENDIXYield gap4Tokyo is keeping stable and high yield gap.TokyoNew York - MidtownYr/MoFrankfurtYr/MoLondon - CityYr/MoSingaporeYr/MoHong KongYr/MoYr/MoSource: Colliers International, Deutsche Securities

APPENDIXOffice market5Office Space MarketAverage Asking RentVacancy Rate(JPY/tsubo)15.0%15,00014.0%14,000Tokyo %10,0009,000Nagoya8.0%OsakaOsakaTokyo CBD7.0%6.0%8,000Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012Source: CBRE

APPENDIXOffice market6Cycle of Tokyo Office Market High15,000Vacancy rises withhigher rent④ ①3.8%, 14,400rent2008/32.0%, 14,16014,0006.1%, 13,7503.6%, 14,120③ ②current2011/32002/34.5%, 13,9702004/32005/35.4%, 13,0402007/3Rent rises withlower vacancy Low5.9%, 13,41013,000Cycle8-9 years2003/32001/3Low Average asking rent [JPY / Tsubo]2009/3Rent declines withhigher vacancyVacancy declineswith lower rentVacancy RateHigh 2010/36.9%, 13,2902012/32.0%, 12,8107.6%, 13,6802006/33.2%, 12,70012,0000%1%2%3%4%5%6%7%8%Vacancy Rate [%]Source: CBRE Vacancy rates and average rents in Tokyo CBD March 2001 – June 2011

APPENDIXOffice market7 Past : Rent decreased and vacancy rate increased Now : Rent decreases and vacancy increases have slowed downAsking rent per tsubo and Vacancy rate(Office, Tokyo central 5 wards, monthly)10%25,000(円/坪)(JPY/tsubo/month)Vacancy rate[RHS]8.9%22,901 JPY/tsubo (Aug. 2008)8%6%20,000Average rent[LHS]Japanese unit1 Tsubo 3.30578 sqm 35.58 sqf10,000 JPY/Tsubo/month 30.25 EUR/sqm/month 42.15 USD/sqf/year 25.94 GBP/sqf/year4%16,675 JPY/tsubo(Sep. 2012)17,529 JPY/tsubo (Oct. 9201020112012Source: Miki Shoji Co., Ltd.

APPENDIXOffice market8Rent decreases have also slowedRent DI(properties managed by Xymax, Tokyo 23 wards)100)% 80(合60Ratio of increased rent (%) 割たRent increased from the し40year before昇20上All the rental crease Increase上昇と下落が同程度Decrease 10年下落したビルが多いDecrease -2017%60%2003年2006%-14)%(合-40Ratio of decreased rent (%) 割た-60Rent decreased from the しyear before落下-80All the rental contracts60ほとんどのIncreased inビルで上昇nearly all2011年ほとんどのDecreased inビルで下落nearly allbuildings成約賃料DITaking Rent DI ( increases – decreases)Source: Xymax Real Estate Marketing Institute

APPENDIXOffice market9Global comparison : average cap rate

APPENDIXResidential market10TSE Home Price Indices (Existing Condominiums)(Jan. 2000 200200200200200200200201020112012Source: Tokyo Stock Exchange

APPENDIXRetail market11Annual Sales of Department Stores and Supermarkets(2002 l Sales in JPY 73,5643,4903,1893,1293,027Overall JapanTokyoSource: Ministry of Economy, Trade and Industry

APPENDIXLogistics market12Vacancy RateAsking Rent(Large Multi-tenant Properties in Tokyo Metropolitan Area)(Medium and Large Properties in Tokyo Metropolitan Area)TokyoChibaSaitamaKanagawaSource: CBRE

APPENDIXLogistics market13Expected NOI Cap Rate for Multi-tenant Property in Tokyo’s WaterfrontSource: CBRE quarterly survey vol. 35

APPENDIXLogistics market14Major Developments of Multi-tenant Lease PropertiesProject NameDeveloperCityPrefectureInland orWaterfrontLand Area(sqm)Gross FloorArea (sqm)CompletionPrologis Park Zama 2PrologisZamaKanagawaInland49,821115,952Aug. 2012Logiport KitakashiwaLaSalle Investment ManagementKashiwaChibaInland53,486127,164Oct. 2012GLP Misato IIIGlobal Logistic PropertiesMisatoSaitamaInland38,90193,831May 2013Tokorozawa Logistics CenterOrix Real EstateMiyoshiSaitamaInland51,82072,126April 2013Kawagoe Logistics CenterOrix Real EstateKawagoeSaitamaInland25,50154,888May 2013SGH Logistics Kashiwa MLT2SG Realty (Sagawa Express)KashiwaChibaInland103,734*122,000June 2012D Project SagamiharaLogistics CenterDaiwa HouseSagamiharaKanagawaInland41,777104,201June 2012Prologis Park Narashino 4PrologisNarashinoChibaWaterfront46,168108,500Aug. 2013Ichikawa Shiohama ProjectGlobal Logistic Properties andMitsui FudosanIchikawaChibaWaterfront52,921121,086Dec. 2013GLP AtsugiGlobal Logistic PropertiesAtsugiKanagawaInland44,511107,657Dec. 2013Logiport SagamiharaLaSalle Investment Managementand Mitsubishi EstateSagamiharaKanagawaInland94,197210,826Aug. 2013Source: CBRE

APPENDIXHotel market15Occupancy Rate of Hotels in JapanSource: Japan City hotel Association

APPENDIXHotel market16Buyers and Cap Rate by Hotel Types

APPENDIXHotel market17Cap Rate of Full-service HotelsSource: Japan City hotel Association

APPENDIXHotel market18Major Transactions of Hotels in Tokyo (2011)MonthHotelGuestroomsSellerBuyerPrice(mil. JPY)Mar.Hotel Avanshell Akasaka71Lone StarMitsubishi Estate-Mar.Hotel Ascent Shinjuku63Leopalace 21Daiwa House Industry-Apr.Comfort Hotel Tokyo HigashiNihonbashi259Maya InvestmentGodo KaishaJapan Hotel FundJun.Art Hotels Hamamatsucho120City GroupFortress InvestmentGroup-Jun.Art Hotels Omori220City GroupFortress InvestmentGroup-Jul.Ofu Hotel Kamata92AraigumiAoki-Aug.Hotel Monterey Sanno166Sanno EstateMitsubishi Corp.-Nov.Chisan Ground Akasaka136Lone StarSotetsu Holdings-Dec.Asakusa Vista Hotel136Galileo Japan TrustTokai Kanko1,050Dec.JAL City Yotsuya185Tokyo TatemonoUnited Urban InvestmentCorp.4,2003,746Compiled by Jones Lang LaSalle based on public data

APPENDIXFinance market19Legal Final Maturity of CMBS(in JPY 52016Compiled by Sumitomo Mitsui Trust Research Institute Co., Ltd. based on data by Japan Securities Dealers Association

APPENDIXFinance market20Changes in new loans for real estate and lending index of financial institutionsNew 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

APPENDIXFinance market21Real 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)Source: Compiled by RREEF Research based on data by Bank of Japan, Urban Research Institute Corporation, and Real Capital Analytics

APPENDIXDevelopment22Construction CostEarthquakeReconstructionShortage of materials, skilled laboursIncrease in construction cost

APPENDIXDevelopment23Large new supply in 2012 but halved in 2013New supply of office buildings (Tokyo 23 wards, annual)10%About half of 20128% inwill be 0,000176,361344,355(坪)200,000Vacancy rate % (right)Largest supplyafter 620052004200320020%20010Source: CBRE ( -2012), Xymax Real Estate Marketing Institute (2013- )

APPENDIXUnique Features: Medium-sized office buildings24Office Buildings in Tokyo CBD25,000(tsubo)15,000,000Total: 22,022 buildingsTotal: 12,671,256 tsubo20,000Small and e buildings5,000size of typical floor plate0Number of Buildingsbelow 50 tsubo50-100 tsubo100-200 tsuboover 200 tsubo0Net Rentable AreaCompiled by Xymax Real Estate Marketing Institute based on Public statistics

APPENDIXUnique Features: Medium-sized office buildings25Companies in JapanNumber of CompaniesNumber of Employees(including private business establishments)(including private business establishments)40,130,000 employees4,210,000 companiesLarge12,000(0.3%)Small and Medium4,198,000(99.7%)Large12,290,000(31%)Small and Medium27,840,000(69%)Definitions of small- and Medium-size companiesManufacturer: capital less than JPY 300 million, or employees less than 300Wholesaler: capital less than JPY 100 million, or employees less than 100Retailer: capital less than JPY 50 million, or employees less than 50Service: capital less than JPY 50 million, or employees less than 100Source: Statistics of business establishments and companies (2006), Ministry of Internal Affairs and Communications

APPENDIXUnique Features: Medium-sized office buildings26Office Market Index (Vacancy Rate X Asking Rent)120OverallLess volatile110Medium size buildingssupposed to be morestable1009080Large buildings70(typical floor plate: over 200 tsubo)More 060Jan. 2000 100Compiled by Xymax Real Estate Marketing Institute based on data by Sanko Real Estate

APPENDIXUnique Features: Medium-sized office buildingsVolatility of office rent by floor plate size27

APPENDIXUnique Features: Two years leases28Occupancy Period of Offices Managed by XymaxDistribution of 4,306 tenants as of April 2012Average Occupancy Period(as of April each year)854Year 11 and upYear 107.00160(years)213Year 9284Year 8Year 76.50299313Year 6282Year 5333Year 46.00491Year 3560Year 2517Year 012Source: Xymax Real Estate Marketing Institute

APPENDIXUnique Features: Earthquake protection29History of seismic standards19711981Old seismic standards1966(S41)TokachiokiEarthquake Revision ofBuildingStandard ActReinforcement ofColumns1995New seismic standards1978(S53)Miyagi Pref.Earthquake1995(H7)Great HanshinEarthquake Revision of Building Standard ActOld standardsNew standardsNew standards established:For Medium quake, minor cracks onlyMinor cracks onlyFor Large quake, avoid collapseNo particularregulationsAvoid collapse

APPENDIXUnique Features: Earthquake protection30Building damage in Great Hanshin EarthquakeDamage by building ageYear ofconstructionBefore 19711972-1980After 1981Little or no damageLarge-scale repair is requiredMinor repair is requiredTotal collapse or partial collapse (impossible to repair)・Special attentions should be paid to the buildings constructed under the old seismic standards (before 1971). Such buildings had severe damage and werenot 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 andsecure spaces to live until being rescued), such buildings were much better than those constructed under the old seismic standards.Source: Japan Institute of Architect 1995

APPENDIXUnique Features: Earthquake protection31Building damage in Great Hanshin EarthquakeComparison of damage by earthquakeBuildings constructed before 1981 (before the new seismic standards) and afterBuilt Before 1981Built After 1982Little or no damageMinor or moderate damageLittle or no damageSevere damageMinor ormoderatedamageSeveredamageSource: Ministry of Land, Infrastructure, Transport and Tourism

APPENDIXUnique Features: Earthquake protection32Tenants places greater emphasis on seismic safetyPurpose of relocation(Interviews with tenants of buildings managed by Xymax, Tokyo 23 wards)40%2009-2010(n 47)2011-(n her合統営経Expiration offixed-term 立Decrease of workersるよにし壊り取物建Better ・化強震耐Consolidation oflocations減削トスコBetter seismic capacity,better buildingspecifications増員人Increase of workers0%Cost reduction5%Source: Xymax Real Estate Marketing Institute

APPENDIXUnique Features: Earthquake protection33Less quake-resistant buildings consist 34%13,390(1.4% )Buildings constructedbefore 1981356,940 (37.6%)29,340(3.0% )595,080(61.1% )Total:974,000buildings(100%)Compliant to new seismic standards327,600(33.6% )Not compliant to new standards ornot being confirmedUnknownConstructed after 19818,930(0.9% )Unknown date of constructionSource: MLIT

APPENDIXUnique Features: Free rent34Free Rent Period of Offices Managed by XymaxTokyo6100%90%77%Average Free Rent Period (months)76%71%68%80%68%4356%57%52%46%23.0 months010%1.2 months0%20012002200320041%2005Ratio of tenants with free rent (%)6 months and more (%)0%20061.2 months13%10%0.6 months1%0%200730%20%0.8 months6%3%31%25%21%12%52%40%2.0 months0.8 months60%50%40%15%180%70%4.7 months3.8 months1.7 months28%74%46%47%2.5 months57%83%Ratio of tenants with free rent (%)81%520080%2009201020112 months and more (%)Average free rent period (months)Source: Xymax Real Estate Marketing Institute

APPENDIXJapanese units35“Tsubo” : Japanese traditional unit to measure area1.00 Tsubo10,000 JPY/Tsubo/month 3.30578 sqm 35.5831 sqf 30.25 EUR/sqm/month 42.15 USD/sqf/year 25.94 GBP/sqf/year1.00 USD 80 JPY1.00 GBP 130 JPY1.00 EUR 100 JPY

Thank YouAppendix 1 :Details of “Tokyo Mid Office Fund”Global Marketing Department 1-1-1 Akasaka Minato-ku, TokyoJapan 107-0052 Tel: 81-3-5544-6840Fax: 81-3-5544-6841www.xymax.co.jp/english 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 thetruth or accuracy of numbers, terms, etc.Xymax is engaged in the Building Lots and Building Transactions Business, Investment Management Business, Investment Advisory andAgency Business , Type II Financial Instruments Business as a part of its ordinary business. If you engage in the transactions proposed thistime based on this proposal, Xymax may receive certain benefits from transactions other than from transactions through agreements withyour company, as a result of this presentation.

Source: CBRE Vacancy rates and average rents in Tokyo CBD March 2001 – June 2011 Vacancy declines with lower rent rent Vacancy Rate ① ③ ② ④ High Low Low High current Rent declines with higher vacancy Rent rises with lower vacancy Vacancy rises with higher rent Cycle

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