NTT UD REIT Investment : Financial REsults Material

http://nud-reit.co.jp/en

Forward Stroke Inc.

Forward Stroke Inc.

39th Semiannual Report

Fiscal Period

Ended April 30, 2022

1-5-1 Otemachi, Chiyoda Ward, Tokyo

http://nud-reit.co.jp/en

Securities Code: 8956

FEATURES OF

NTT UD REIT INVESTMENT CORPORATION

1 Comprehensive Support from NTT Urban Development,

the Sole Comprehensive Real Estate Company in the NTT Group

Since May 2010, when NTT Urban Development (NTT UD) participated as its sponsor, NTT UD REIT Investment Corporation (NUD) has received a broad range of support from NTT UD, including such pipeline support services as supply and information provision of new properties, as well as support for leasing activities and provision of property management operations.

Abundant track record of development and pipelines for office buildings

Operating capability in real estate rental business Fund-raising capability based on its high credibility

Results of Property Acquisitions through NTT UD's Pipelines

(April 2022)

2 Compound Portfolio with Office Buildings and Residential Properties as Main Investment Targets

Mitigates the impact of economic fluctuations by combining asset types that have low correlation to each other in terms of market rent fluctuations

Diversifies the tenant base into different types such as corporations and individuals

	Portfolio Distribution by Asset Type
		(April 2022)
Residence					Office
Stability					Profitability
Stable demands even in a					Exerts strengths when the
receding economy					economy is recovering
28.6%	71.4%

3 Portfolio Focused in the Tokyo Economic Bloc

Focuses investments in the Tokyo Economic Bloc, which enjoys an established economic base due to a high concentration of population and industry

Partially expands the target investment area to Major Regional Cities (strengthening ties with NTT UD)

Portfolio Distribution by Geographical Area

(April 2022)

Other	17.5
9.0%	18.1 bn yen
	bn yen
Other sponsors
9.3%
	158.6
	bn yen

NTT Urban Development

81.7%

Total acquisition price

since May 2010

194.2 billion yen

Major Regional Cities							5 Central Wards of Tokyo
4.0%							(Chiyoda Ward, Chuo Ward, Minato Ward,
						Shinjuku Ward and Shibuya Ward)
						71.5%
Urban Areas Surrounding Tokyo

3.7%

Other 18 Wards of Tokyo

20.7%

1

2

MESSAGE TO OUR UNITHOLDERS

Yuichi Kato	Yutaka Torigoe
Executive Director	President and CEO
	(Asset management company)
NTT UD REIT Investment Corporation	NTT Urban Development Asset Management Corporation
(NUD)	(UDAM)

On behalf of NTT UD REIT Investment Corporation (NUD)

I would like to express our sincere gratitude for the loyal patronage of our unitholders.

With NTT Urban Development Corporation becoming its sole sponsor in October 2020, the Investment Corporation changed its name to NTT UD REIT Investment Corporation in April 2021. Since then, we have continued to ensure steady growth of the portfolio and secure stable earnings by further leveraging support from the sponsor.

In the 39th Fiscal Period that ended April 2022, NUD issued new investment units through public offering, the first such arrangement in approximately six and a half years, to raise capital by 12.3 billion yen. Using the proceeds, we conducted an asset replacement transaction, acquiring Tokyo Opera City Building and transferring Sphere Tower Tennozu. Taking advantage of the leverage capacity, which had expanded as we lowered LTV through the public offering, we acquired interests in Urbannet Uchisaiwaicho Building, located in Minato Ward, Tokyo, from the sponsor in March 2022. Consequently, NUD's owned assets as of April 30, 2022, comprise 59 properties with 27 office buildings and 32 residential properties amounting to 272.6 billion yen in total.

As the property transfer in the asset replacement also contributed, NUD posted operating revenues of 12,589 million yen and net income of 5,681 million yen for the 39th Fiscal Period. Distribution per unit came to 4,054 yen, which surpassed the forecast of 3,975 yen for the period announced in "Financial Report for the 38th Fiscal Period Ended October 31, 2021 (May 1, 2021 - October 31, 2021)" dated December 15, 2021.

The occupancy rate at the end of the fiscal period was 96.3%, up 2.5 percentage points period-on-period, due to progress in filling vacated spaces at NUD's owned properties amid the vacancy rate of offices in Central Tokyo ceasing to rise for the moment.

Looking ahead, we at NUD will continue our utmost efforts to meet the expectations of our unitholders by realizing steady growth of assets and stable management over the medium to long term in line with the growth strategy of the NTT Group. We appreciate and request your continued support and encouragement.

Table	Features of NTT UD REIT Investment Corporation	1
Message to Our Unitholders	3	Independent Auditor's Report	28
of
39th Fiscal Period Performance Highlights	4	Balance Sheets	31
Contents
	Status of External Growth	6	Profit and Loss Statements	33
	Collaboration with the NTT Group	8	Statements of Changes in Unitholders' Equity	34
	Initiatives on ESG Awareness	9	Cash Flow Statements	35
	Management Status in the 39th Fiscal Period	11	Notes to Financial Statements	36
	Financial Status in the 39th Fiscal Period	13	Other Information (Unaudited)	51
	Property Portfolio	15
	Organization of NUD	18	Strategic Policies	55
	Overview of Properties Owned
	(as of the end of the 39th Fiscal Period)	19
	Information for Unitholders	27

39TH FISCAL PERIOD PERFORMANCE HIGHLIGHTS

Financial Results Highlights

Distribution per Unit (Note 1)

38th Fiscal Period (ended October 2021)	¥ 3,130	(Note 1) Number of outstanding investment units at end
		of period:

38th Fiscal Period: 1,316,995 units

39th Fiscal Period (ended April 2022)¥ 4,054 39th Fiscal Period: 1,401,635 units

40th Fiscal Period: 1,401,635 units (forecast)

(Note 2) The figure is based on what was announced in

40th Fiscal Period (ending October 2022) (Note 2)¥ 2,730 (forecast) the Financial Report for the 39th Fiscal Period

Ended April 30, 2022 (November 1, 2021 -

April 30, 2022) dated June 16, 2022.

				38th Fiscal Period	39th Fiscal Period
				(as of October 31, 2021)	(as of April 30, 2022)
Operating Revenues	10,738 million yen	12,589 million yen
Operating Income	4,910 million yen	6,128 million yen
Ordinary Income	4,473 million yen	5,682 million yen
Net Income			4,470 million yen	5,681 million yen
Total Assets			266,706 million yen	280,999 million yen
Net Assets			125,583 million yen	139,431 million yen
Net Assets Ratio	47.1%	49.6%
Net Assets per Unit	95,356 yen	99,477 yen
LTV (Note)		Total assets basis	47.4%	45.5%
	Market value basis	42.0%	39.9%

(Note) LTV (Total assets basis) = interest-bearing liabilities / total assets × 100

LTV (Market value basis) = interest-bearing liabilities / (appraisal value of owned properties and beneficiary interests in trust + book value of preferred securities) × 100

Monthly Occupancy Rate for the 39th Fiscal Period

(%)

100

98
				96.3%	96.6%	96.6% Residential properties
					96.3% Total
96		95.5%	95.3%
95.1%		95.1%	96.2% Office buildings
		94.9%
		94.5%	94.5%
	94.6%
94	94.3%	94.0%	94.1%	94.2%	94.3%
92

90

End of Nov. 2021 End of Dec. 2021

End of Jan. 2022

End of Feb. 2022

End of Mar. 2022

End of Apr. 2022

(Note) The value related to the property backing the preferred securities of an SPC is not included in the calculation of the occupancy rate.

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4

(39th FISCAL PERIOD PERFORMANCE HIGHLIGHTS)

Portfolio Status

38th Fiscal Period

(as of October 31, 2021)

39th Fiscal Period

(as of April 30, 2022)

STATUS OF EXTERNAL GROWTH

Property Replacement (39th Fiscal Period)

November to December 2021:

Acquired Tokyo Opera City Building from NTT UD by utilizing the proceeds from a public offering and transfer of Sphere

No. of properties

Acquisition price

Average building age (Note 1)

Occupancy rate at end of period

No. of tenants

NOI yield (Note 2)

Yield after depreciation (Note 3)

58 properties

260.0 billion yen

23.2 years

93.8%

3,841

4.9%

3.7%

59 properties

272.6 billion yen

23.1 years

96.3%

3,958

4.9%

3.7%

Tower Tennozu. March 2022:

Acquired Urbannet Uchisaiwaicho Building from NTT UD by utilizing the acquisition capacity created by the capital increase through public offering.

Transactions Conducted upon Announcement of Public Offering

Sphere Tower Tennozu	Tokyo Opera City Building	Urbannet
Uchisaiwaicho Building
(Transferred on December 10, 2021)	(Acquired on November 2, 2021)
(Acquired on March 28, 2022)

Distribution by asset type	30.0%
Office Buildings
Residential Properties	70.0%

Distribution by geographical area	3.9% 4.2%

5 Central Wards of Tokyo
Other 18 Wards of Tokyo	27.5%	64.4%
Urban Areas Surrounding Tokyo
Major Regional Cities

28.6%

71.4%

3.7% 4.0%

20.7%	71.5%

Transferred	Acquired
property	properties

						Forward Stroke Inc.
Location	Higashishinagawa, Shinagawa Ward,		Location	Nishishinjuku, Shinjuku Ward,		Shimbashi, Minato Ward,
Tokyo		Tokyo		Tokyo
Buyer	Domestic corporation		Seller	NTT Urban Development Corporation		NTT Urban Development Corporation
Use	Office and store
	Use	Office, store, concert hall, museum,		Office
			exhibition hall
Transfer price	18,000 million yen
	Acquisition price	22,000 million yen		5,640 million yen
Appraisal value upon	17,600 million yen
transfer		Appraisal value upon	23,100 million yen		6,156 million yen
			acquisition

(Note 1) Average building age is calculated by adding the building age of Akihabara UDX (that backs the preferred securities in which NUD holds 19.0% ownership).

(Note 2) NOI yield is calculated by using the following formulas. NOI yield = annualized rental NOI* / investment value**

• Annualized rental NOI = sum total of [(real estate rental income + depreciation + dividend income from preferred securities) x 2] of owned assets (including preferred securities) for each fiscal period
• Investment value = sum total of book value as of the end of each fiscal period of owned assets (including preferred securities) for each fiscal period

(Note 3) Yield after depreciation is calculated by using the following formulas.

Yield after depreciation = annualized real estate rental income* / investment value**

• Annualized real estate rental income = sum total of [(real estate rental income + dividend income from preferred securities) x 2] for owned assets (including preferred securities) for each fiscal period
• Investment value = sum total of book value as of the end of each fiscal period of owned assets (including preferred securities) for each fiscal period

Gain on sale	2,231 million yen
	Appraisal NOI (annual)	1,186 million yen		168 million yen
NOI (annual) (Note 1)	672 million yen
			Appraisal NOI yield	5.4%	3.0%
NOI yield (Note 1)	4.3%
			Building age (Note 2)	25.3 years		2.7 years
Building age (Note 2)	28.6 years
			Occupancy rate (Note 3)
Occupancy rate (Note3)	98.6%		95.2%		98.9%

(Note 1) The NOI and NOI yield of the transferred property are calculated on the basis of the annualized actual NOI and period-end book value of the fiscal period immediately preceding the fiscal period in which the property was transferred.

(Note 2) The building age is calculated with the conclusion date of the respective transaction agreements set as the base date.

(Note 3) The occupancy rate is calculated with the date at the end of the month in which the conclusion date of the respective transaction agreements belong as the base date.

5

6

(STATUS OF EXTERNAL GROWTH)

Overview of Urbannet Uchisaiwaicho Building

Acquired a relatively new, complex building located in Central Tokyo and developed by NTT UD, as part of strengthening

COLLABORATION

WITH THE NTT GROUP

Changes in Asset Size

NUD has steadily expanded its asset size since NTT UD became its sponsor.

ties with the sponsor.

Co-owns the interests in the property's office areas with NTT UD, with an aim to enhance NUD's presence in the Hibiya area where a redevelopment project (Note) by the NTT Group is underway.

Location Characteristics

Multiple train lines including 4 JR lines, 3 subway lines and the New Transit

Yurikamome line are available, providing the property with good access to major city

(bn yen)

May 2010

NTT UD took an equity stake in the REIT's Asset Manager

196.5 196.5 196.5 199.4

Acquisition, brokerage, information provision, etc.		NTT Urban Development Corporation	Other sponsors	Other
																						261.8				272.6
														249.0						260.0
					235.9	235.9				246.4	246.4	243.7	243.7	243.7	246.7							45.2
	235.8	233.2	234.0
224.4										60.2			60.2
216.3	44.4		44.4		44.4			44.4			44.4			59.4		60.2	60.2	60.2	60.2	60.2	60.2
44.4
44.4

centers, the Shinkansen, and airports.

Located in close proximity to the Uchisaiwaicho 1-chome district, which is scheduled for redevelopment going forward, the property is in an area with potential for future growth.

Property Characteristics

A 27-storylarge-scale office/hotel complex with a total floor space of 36,100 m² and a standard floor area of 330 tsubos. A piloti full of greenery has been established on 1F to provide a relaxing space for people in the surrounding area.

Achieving four-sided daylighting full of natural light and a high level of BCP considerations, including a seismic damping structure and a dual-circuit power receiving system using different power lines, the property provides comfortable office spaces good at intellectual productivity and business continuity.

An eco-friendly building that adopts the latest environmental technologies, 100%

utilizing renewable energy.	Forward Stroke Inc.

"Uchisaiwaicho

Facility Overview of Urbannet Uchisaiwaicho Building

Hibiya Park

1-chome District"

Line

Hotel

Portion is co-owned with NTT UD

redevelopment

Compartmentalized ownership

(NUD owning 12.0% interest)

project site

hinkansenS

(third party)

Kokkai-

Street

dori

Street

Office

Tokaido

dori

Compartmentalized ownership

-

Uchisaiwaicho

Nishiginza

Ownership (right of site)

(Owned by a third party)

Tokyo

Metro

Station

Office portion

Hotel portion

Ginza

Line

Sotobori

Urbannet

-

Street dori

Uchisaiwaicho

Hibiya

Tokyo

Toei

Building

Yokosuka

Expressway

-

Nanou

dori

Mita

Yamanote

Shimbashi

Line

"Announcement of TOKYO CROSS PARK Concept, Unparalleled Urban Solutions

JR

Street

Line

Keihin

Station

Line

Toei Asakusa

Forward Stroke Inc.

Forward Stroke Inc.

-

(Note) NTT Group's Hibiya area redevelopment:

Tohoku

Shimbashi

Line/

Park

Line

Station

Combined with Hibiya Park and among the Largest in Tokyo with a Total Floor Space of

Approx. 1.1 Million Square Meters" (dated March 24, 2022) by NTT Urban Solutions

https://www.ntt-us.com/news/2022/03/news-220324-01.html

(in Japanese)

			165.8																					89.2
		165.8	44.4	44.4	44.4	44.4
	146.0																					91.0	89.2
139.3	46.9	46.9							102.3	96.1	96.1	96.1	96.1	96.1	96.1	96.1	91.0	91.0	91.0	91.0
46.9	46.9							110.5	102.3
				110.5	110.5	110.5	110.5
		104.6	104.6																			110.6	110.6	138.2
	99.1											95.3	95.3	93.4	93.4						95.4
92.4									88.9	92.5	90.1	90.1	92.4	92.4	92.4
							69.4	69.4
		14.3	14.3	41.5	41.5	41.5	44.4
15th	16th	17th	18th	19th	20th	21st	22nd	23rd	24th	25th	26th	27th	28th	29th	30th	31st	32nd	33rd	34th	35th	36th	37th	38th	39th

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

period

Apr. 2010

Oct. 2010

Apr. 2011

Oct. 2011

Apr. 2012

Oct. 2012

Apr. 2013

Oct. 2013

Apr. 2014

Oct. 2014

Apr. 2015

Oct. 2015

Apr. 2016

Oct. 2016

Apr. 2017

Oct. 2017

Apr. 2018

Oct. 2018

Apr. 2019

Oct. 2019

Apr. 2020

Oct. 2020

Apr. 2021

Oct. 2021

Apr. 2022

Top 10 Tenants Occupying NUD's Office Buildings (as of April 30, 2022)

						NTT Group
Rank	Tenant name	Leased floor space	Ratio (Note)	Property
1	NTT Facilities, Inc.	10,994m²	5.9%	Urban Ace Higobashi Building, etc.
2	DOCOMO CS, Inc.	10,525m²	5.7%	Urbannet Ikebukuro Building
3	NTT Business Associe East Co., Ltd.	7,488m²	4.0%	Urbannet Omori Building
4	Sumitomo Osaka Cement Co., Ltd.	6,872m²	3.7%	Rokubancho Building
5	NTT Finance Corporation	6,248m²	3.4%	Urbannet Ikebukuro Building, etc.
6	MIRAIT Corporation	5,325m²	2.9%	Urbannet Gotanda NN Building, etc.
7	Nippon Telegraph and Telephone East Corporation	5,159m²	2.8%	Tokyo Opera City Building
8	NTT Learning Systems Corporation	4,801m²	2.6%	Urbannet Azabu Building
9	NTT DATA Corporation	3,552m²	1.9%	Urbannet Mita Building
10	NTT Communications Corporation	2,998m²	1.6%	Granpark, etc.
	Total	63,967m²	34.4%

(Note) The ratio represents the percentage of the leased floor space of the relevant tenants to the gross area under lease of floors practically used for offices.

7

8