NIPPON REIT Investment : Summary of Financial Results for the Fiscal Period Ended June 30, 2021 (REIT)

August 17, 2021

Summary of Financial Results

for the Fiscal Period Ended June 30, 2021 (REIT)

Name of issuer:

NIPPON REIT Investment Corporation

URL:

http://www.nippon-reit.com/

Listed Stock Exchange:

Tokyo Stock Exchange

Securities Code:

3296

Representative:

Toshio Sugita, Executive Officer

Asset Management Company:

Sojitz REIT Advisors K.K.

Representative:

Toshio Sugita, President & CEO

Contact Information:

Takahiro Ishii, General Manager, Corporate Planning Dept.

TEL

[phone]

Scheduled filing date of securities report:

September 28, 2021

Scheduled date of delivery of distributions:

September 17, 2021

Supplementary materials for the financial results: Yes

Investor conference for the financial results:

Yes (for analysts and institutional investors, in Japanese)

（Amount of less than

one million yen is omitted）

1. Financial Results for the Fiscal Period Ended June 30, 2021 (January 1, 2021 - June 30, 2021)

(1）Operating Results

(Description of % is indicated as the change rate compared with the prior

period)

Operating Revenues

Operating Income

Ordinary Income

Net Income

For the fiscal period ended

Yen in millions

%

Yen in millions

%

Yen in millions

%

Yen in millions

%

June 30, 2021

9,410

(7.1)

5,499

(9.7)

4,859

(10.7)

4,858

(10.7)

December 31, 2020

10,127

17.0

6,088

27.5

5,444

31.1

5,443

31.1

Net Income per Unit

Return on Equity

Return on Assets

Ordinary Income to

Operating Revenues

For the fiscal period ended

Yen

%

%

%

June 30, 2021

10,798

3.7

1.8

51.6

December 31, 2020

12,098

4.1

2.0

53.8

(2）Distributions

Cash Distributions

Total Cash Distributions

per Unit

Cash Distributions

(excluding cash

Total Cash Distributions

Cash Distributions

(excluding cash

in Excess of Earnings

Payout Ratio

distributions in

in Excess of Earnings

Ratio to Net Assets

distributions in excess

per Unit

excess of earnings)

of earnings per unit)

For the fiscal period ended

Yen

Yen in millions

Yen

Yen in millions

%

%

June 30, 2021

10,800

4,859

-

-

100.0

3.7

December 31,

12,100

5,444

-

-

100.0

4.1

2020

(3）Financial Position

Total Assets

Total Net Assets

Equity Ratio

Net Assets per Unit

For the fiscal period ended

Yen in millions

Yen in millions

%

Yen

June 30, 2021

276,120

131,393

47.6

292,029

December 31,

277,192

131,978

47.6

293,331

2020

(4）Cash Flows

Cash Flows from

Cash Flows from

Cash Flows from

Cash and Cash

Equivalents at End of

Operating Activities

Investing Activities

Financing Activities

Period

For the fiscal period ended

Yen in

millions

Yen

in millions

Yen

in millions

Yen

in millions

June 30, 2021

11,220

(5,944)

(5,437)

16,253

December 31, 2020

14,347

(14,938)

1,605

16,413

2. Forecast of management status for the Fiscal Period Ending December 2021 (from July 1, 2021 to December 31, 2021) and the Fiscal Period Ending June 2022 (from January 1, 2022 to June 30, 2022)

(Description of % is indicated as the change rate compared with the prior period)

Cash

Distributions

per Unit

Cash

(excluding

Distributions

Operating Revenues

Operating Income

Ordinary Income

Net Income

excess

in Excess of

of

Earnings

earning

per Unit

s

per Unit)

For the fiscal period

Yen in

%

Yen in

%

Yen in

%

Yen in

%

Yen

Yen

millions

millions

millions

millions

ending

10,042

6.7

5,904

7.4

5,249

8.0

5,248

8.0

11,665

-

December 31, 2021

June 30, 2022

8,513

(15.2)

4,579

(22.4)

3,937

(25.0)

3,936

(25.0)

8,750

-

(Reference)

(Forecasted Net Income / Forecasted Number of Investment Units at end of the period)

Forecasted Net Income per unit for the fiscal period ending December 31, 2021: 11,665 yen

Forecasted Net Income per unit for the fiscal period ending June 30, 2022:

8,750 yen

• Others
• 1. Changes in accounting policies, changes in accounting estimates and retrospective restatement
  1. Changes in accounting policies due to revisions to accounting standards and other regulations: None
  2. Changes in accounting policies due to reasons other than above (a): None
  3. Changes in accounting estimates: None
  4. Retrospective restatement: None
  1. Number of investment units issued and outstanding
  1. Number of investment units issued and outstanding, including treasury units:

As of June 30, 2021	449,930 units	As of December 31, 2020	449,930	units
(b) Number of investment treasury units:		As of December 31, 2020
As of June 30, 2021	0 unit	0	unit

* The Status of Statutory Audit

This summary of financial results is not subject to audit procedures by certified public accountant or audit firm.

* Special matters

Forward-looking statements contained in this material are based on the information that NIPPON REIT has obtained as of the date hereof and certain assumptions that NIPPON REIT believes reasonable and the actual management status, etc. may significantly differ due to various reasons. In addition, the forecast is not a guarantee of the amount of distributions. For details of the assumptions underlying forecast of management status, please refer to the "Assumptions Underlying Forecast of Management Status for Fiscal Period Ending December 2021 (from July 1, 2021 to December 31, 2021) and Fiscal Period Ending June 2022 (from January 1, 2022 to June 30, 2022)" on page 8.

This document is the English language translation of the Japanese announcement of the financial statements ("Kessan Tanshin") and is provided solely for information purposes. There is no assurance as to the accuracy of the English translation. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail.

Contents
1. Management Status	2
(1)	Management Status	2
(2) Investment Risks	9
2. Financial Statements	10
(1)	Balance Sheets	10
(2)	Statements of Income and Retained Earnings	12
(3)	Statement of Change in Net Assets	13
(4)	Statements of Cash Distribution	14
(5)	Statements of Cash Flows	15
(6)	Notes to the Going Concern Assumption	17
(7)	Summary of Significant Accounting Policies	17
(8)	Notes to Financial Statements	18
(9)	Changes in Total Number of Investment Units Issued and Outstanding	30
3. Reference Information	31
(1)	Status of Value of Investment Assets	31
(2)	Status of Capital Expenditure	53

1

1. Management Status

1. Management Status
   I. Overview of the Fiscal Period under Review A. Brief History of NIPPON REIT

NIPPON REIT was established on September 8, 2010 by Polaris Investment Advisors K.K. (now Sojitz REIT Advisors K.K. (hereafter referred to as the "Asset Management Company")) as the founder under the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended). Registration with the Kanto Local Finance Bureau was completed on October 26, 2010 (registration number 72, filed with the Director of the Kanto Local Finance Bureau).

NIPPON REIT issued new investment units through a public offering (144,200 units) on April 23, 2014 as the payment date and listed on the J-REIT section of the Tokyo Stock Exchange (securities code: 3296) on April 24.

Furthermore, NIPPON REIT issued investment units through public offerings in February 2015, July 2015 and July 2018 and third-party allotments in March 2015, July 2015 and July 2018, and the total number of investment units issued and outstanding as of the end of the fiscal period under review (June 30, 2021) is 449,930 units.

B. Investment Environment and Management Performance

(i) Investment Environment

During the fiscal period under review ended June 2021 the Japanese Economy recorded a decrease in the real GDP by 1.0% (3.9% decrease on an annual basis: second preliminary figures for the term from January 2021 to March 2021). While prolonging effects of the COVID-19 infection, the recovery of consumer spending remained sluggish because revenues of the non-manufacturing sector and the employment situation are showing weakness. Nevertheless, business sentiment has been picking up recently, as evidenced by a moderate rise in corporate goods prices on the background of increase in industrial production and exports. Looking ahead, the recovery in business sentiment is expected to continue because of the effects of various governmental measures to prevent the spread of the COVID-19 infection and promotion of vaccination, as well as an improvement in overseas economic trends. However, attention should be paid to the effect of the spread of COVID-19 infection on domestic and global economy and the impact of fluctuations in financial markets.

In the office properties leasing market, the vacancy rate in Tokyo's five central wards (Chiyoda, Chuo, Minato, Shinjuku and Shibuya wards) was 6.19% up by 4.22 percentage points on a year on year basis as of the end of June 2021 reported by Miki Shoji Co., Ltd. Moreover, the average rent in the same area was 21,160 yen per tsubo, down by 7.5% on a year on year basis, as downward trend continues from August 2020. We have watched closely whether such trends will continue.

In the rental market for residential properties, it remains generally stable for both the occupancy rate and rent level. However, as the effect caused by postponement of relocation of office workers and students on the background of progress of teleworking and remote college classes still remains, it must be necessary to pay close attention to the demographic movements in the three major metropolitan areas and the supply-demand environment for residences.

In the leasing market of retail properties, although restriction of economic activities as prevention measure of spread of COVID-19 infection remains, there are some signs of recovery and consumption style is changing from consumption from staying at home in previous year. We saw a 11.9% year-on-year increase in retail sales announced by the Ministry of Economy, Trade and Industry in April 2021. While sales at supermarkets decreased by 0.9% year-on-year, sales at department stores showed a 158.3% year-on-year increase due to large increase of sales of apparel and accessories.

Considering the future leasing market deliberately, from now on, it is appropriate for market participants to pay closely work style reform's where to go and etc. and its impact on the leasing market. An influence of COVID-19 infection spread of term and seriousness may determine the impact to the extent of various types and classes of leasing properties.

2

As regards the current real estate transactions market, while investors show preference to asset types which are less susceptive to the effect of COVID-19, domestic investors such as listed REITs, private placement REIT, and real estate companies, as well as foreign investors, remain actively engaged in acquiring properties as the reason for strong needs of asset management under the worldwide low interest rate environment and relative stable real estate leasing market in Japan. As the result, expected market yields on prime properties remain at low levels and transaction prices remain high.

1. Management Performance a. External Growth
   NIPPON REIT owned 100 properties (with a total acquisition amounts of 255,406 million yen) and 2 equity interests in a silent partnership (investment amount 120 million yen, 10 real estate-backed properties) as of the end of the fiscal period ended December 2020.
   During the fiscal period under review (fiscal period ended June 2021) NIPPON REIT transferred 3 properties (The transfer amounts not disclosed) and acquired 6 properties (Total acquisition amounts of 5,063 million yen) as follows, as asset replacement executed from February to March 2021.

			Transfer price or
Transaction	Property	Property name	Acquisition price	Transaction date
Number	（Yen in millions）
			(Note 1)
Transfer	A-13	Higashi Ikebukuro Center Building	Not disclosed	February 25, 2021
(Note2)
Transfer	A-20	FORECAST Uchikanda	Not disclosed	February 25, 2021
(Note2)
Transfer	A-43	Marunouchi Sanchome Building	Not disclosed	February 25, 2021
(Note 2)
Acquisition	A-73	TENSHO OFFICE SHINBASHI 5	1,200	February 25, 2021
Acquisition	B-33	Residence Kinshicho (Note 3)	700	February 26, 2021
Acquisition	B-34	Meister house Kawasaki	709	February 26, 2021
Acquisition	B-35	LIESSE Tsurumai (Note 4)	1,082	February 26, 2021
Acquisition	B-36	Komatsubara Yamamoto Mansion	670	February 26, 2021
Acquisition	B-37	Belleza Kanayama	702	March 1, 2021

(Note 1) The transfer prices and the acquisition prices represent amount of consideration stated in the purchase agreements of each of the trust beneficiary interests in real estate. The transfer prices and the acquisition prices do not include expenses related to the transfer or the acquisition, consumption taxes and local tax. Furthermore, the transfer price and the acquisition price of less than one million yen is omitted.

(Note 2) Not disclosed because consent has not been obtained from the buyer. However, the transfer price of each property is determined by the Asset Management Company to be reasonable in consideration of the appraisal value of each property etc.

(Note 3) The name of property was changed from "MAISON Dino" to "Residence Kinshicho" on August 1, 2021. The same applies hereinafter.

(Note 4) This property includes two separate buildings, which are structurally independent each other, and these two buildings are counted as one property. The same applies hereinafter.

Also, NIPPON REIT acquired the following silent partnership equity interest as pipelines for external growth, and has been granted the right of first negotiation pertaining to the acquisition of total of 6 real estate-backed properties.

Name	Number of real estate -	Investment amount	Acquisition date
	backed properties	(Note)
Godo Kaisha NRT Growth 17	6	50	June 29, 2021
Subordinated equity interest in
silent partnership

(Note) The investment amount does not include various expenses required for the transaction. Furthermore, investment amount of less than one million yen are omitted.

3