Properties Handling Policy

(1)Property acquisition operations

TOKYU REIT shall acquire properties that will contribute to the enhancement of asset value and the growth of profits from a medium- to long-term perspective, by carefully monitoring the trends of the real estate transaction market and implementing proper due diligence.

(a)Property information collection operations (Sourcing)
In addition to its own information sources, TOKYU REIT shall seek property information from a wide range and make an effort to collect highly reliable information.

(b)Property evaluation operations (Valuation)
Evaluation shall be conducted pursuant to the internal rules of the asset management company.

(c)Property assessment operations (Due diligence)

(ⅰ)Property assessment
Property assessment shall be conducted pursuant to the internal rules of the asset management company.

(ⅱ) Outsourcing to experts
TOKYU REIT can outsource portions of investigation items to an expert when assessing properties. When selecting experts, a comprehensive evaluation shall be conducted in a fair manner by taking into consideration expertise, cost-benefit performance, independence, etc.

(d)Contract/delivery operations
Operations shall follow the internal rules of the asset management company. The payment/receipt for the purchase/sale and delivery of the property shall be made at the same time, and property registration application shall be filed on the delivery date.

(2)Matters Concerning Criteria for Selection of Tenants

In the selection of tenants, efforts shall be made to select prime tenants by utilizing property management companies, along with considering appropriate leasing terms and conditions, etc. based on identifying market trends through such means as regularly obtaining market reports from external organizations.
Conclusions of lease agreements with tenants shall be comprehensively determined by Tokyu REIM, which has been entrusted with investment management by TOKYU REIT, by conducting an investigation of creditworthiness and for any affiliation with antisocial forces and by taking into consideration the rent level, deposit amount, lease agreement period, type of contract and other leasing terms and conditions, etc. in accordance with internal rules, etc., including the investment management plans that are decided at meetings of Tokyu REIM’s Board of Directors. In addition, regarding creditworthiness, tenants’ financial situation, corporate size, capital relationship, etc. shall be considered and, in the case of retail properties, whether the business type/category matches the location and property size and whether it is in harmony with other tenants shall also be taken into consideration.
Furthermore, a condition shall be that leasing terms and conditions exceed the contract terms and conditions provided in the investment management plans. In addition, in cases where taking into the consideration market trends, tenants’ creditworthiness, contract area, vacancy rate, etc. General Manager, Portfolio Management concludes reasonably that contracting is deemed to be ideal even if the terms and conditions fall short of the contract terms and conditions stated in the investment management plans, the decision shall be made by resolution of Tokyu REIM’s Board of Directors after going through the process similar to that for formulation and amendment of the plans.
In addition, cases of property leasing to related parties shall be based on appropriate leasing terms and conditions and require prior approval of TOKYU REIT’s Board of Directors.

(3)Property management operations

With an aim to maximize asset value from a medium- to long-term perspective, TOKYU REIT shall conduct appropriate risk management while striving to maintain/improve market competitiveness of the property.

(a) Leasing operations
In an aim to maximize the cash flows of each property from a medium- to long-term perspective, TOKYU REIT shall strive to enhance tenant satisfaction by implementing the following.
● Tenant marketing by assessing market trends
● Duly ascertaining tenant needs by establishing trust relationships with tenants

(b) Management operations
TOKYU REIT shall strive to reduce real estate management cost, etc. and maintain/enhance asset value by conducting appropriate and efficient management operations.

(c) Repairs and maintenance/capital expenditure
TOKYU REIT shall conduct repairs and maintenance, or expend capital after having prepared an appropriate efficient repair and maintenance plan for each property

(d) Selection of property management companies
In principle, TOKYU REIT shall select property management companies from Tokyu Corporation taking into account their strength in tenant marketing, which is based on their familiarity with local areas, and their information network with respect to tenants, as well as cost reductions due to economies of scale. However, TOKYU REIT shall not be hindered from selecting companies other than Tokyu Corporation as the property management company, depending on the respective property’s characteristics, continuity of management, or other factors.
In the said case, PM outsourcing terms and conditions with Tokyu Corporation, etc. and other related parties shall be pursuant to Rules on Related-Party Transactions.

(e) Renewal of property management contracts
(i)Performance checks shall regularly be conducted by the asset management company. In the event the company does not meet criteria set forth by the asset management company, the contract shall not be renewed.
(ii)With regards to the rates of fees at the time of renewal, their adequacy is verified in advance by comprehensively taking into account their operations, marketability of the fee, etc. In the said case, PM contract renewal terms and conditions and such with Tokyu Corporation, etc. and other related parties shall be pursuant to Rules on Related-Party Transactions.

(f) Placement of insurance such as non-life insurance
In order to avert the risk of buildings receiving damage as a result of disasters, accidents, etc., earnings decreasing, or receiving requests for indemnity from a third party, TOKYU REIT shall, in principle, place fire insurance, rent insurance and liability insurance on real estate it owns.Earthquake insurance enrollment shall be determined by comprehensively taking into account the insurance premium, deductible, cash reserve, etc.

(4)Property sales operations

TOKYU REIT shall aim to maximize a sales price by opting a sales means suitable for the characteristics of a property. Selection of a buyer shall be made based on its credibility of transactions such as fund procurement capability in addition to the sales price.

(5)Environmental consideration

Tokyu Real Estate Investment Management Inc. (“TREIM”) recognizes the growing importance of environmental consideration in the property investment and management sector. Based on the fact that the real estate sector accounts for a major part of carbon emissions, the idea of environmentally-friendly property management throughout the lifecycle has been becoming common. As an investment management company for Tokyu REIT, TREIM aims to maximize its unitholders’ value through pursuing growth, stability and transparency. To achieve our objectives, we realize that environmental consideration and proper disclosure will become even more important, and establish the “Environmental Policy” as a base to implement environmentally-friendly daily operations and to continue communications with our stakeholders on our activities.
TREIM recognizes the importance of environmental consideration in the property investment and management sector. As a responsible corporation, we continue to act towards reducing environmental impact and helping transition to a sustainable society.

  1. Implementation of Environmentally-friendly Operation

  2. (i)Reduce Energy Consumption and Green House Gas (“GHG”) Emissions
    (ii)Reduce Water Consumption and Waste
    (iii)Pursue Health, Safety and Well-Being

  3. Management Structure to Ensure Environmental Consideration
    (i)Management Structure as a Responsible Corporation
    (ii)Collaboration with our stakeholders

    As part of its corporate social responsibility, TOKYU REIT continuously acts towards reducing the environmental impact and helping transition to a sustainable society. Participating in the GRESB (Global Real Estate Sustainability Benchmark) (Note 1) survey since 2014, TOKYU REIT acquired “Green Star” for three consecutive years from 2015. In addition, DBJ Green Building Certification (Note 2) was acquired from Development Bank of Japan Inc. for three office properties (Setagaya Business Square, Tokyu Toranomon Building and Tokyu Bancho Building) and additionally for two retail properties (cocoti, and QFRONT). Furthermore, TOKYU REIT acquired BELS (Building-Housing Energy-efficiency Labeling System) (Note 3) for one property (Tokyu Ikejiri-ohashi Building) in January 2017. TOKYU REIT has continuously acquired “Class S" in the classification and evaluation system of businesses (Note 4) based on the regular reports under Energy Conservation Law since 2015, and such is announced on the website of the Ministry of Economy, Trade and Industry.

  4. (Note 1) GRESB (Global Real Estate Sustainability Benchmark) is a benchmark developed by a group of leading western pension funds. It evaluates the sustainability considerations of real estate companies and the managing entities, and is being utilized by major institutional investors for example when selecting investment targets.

    (Note 2) The DBJ Green Building Certification program (the “Program”) is a certification program established by DBJ in April 2011 in order to support real estate demonstrating environmental and social awareness (“Green Buildings”). The Program recognizes and certifies socially and economically desirable real estate, based on a comprehensive assessment that includes not only the property’s environmental performance but also its addressing of disaster prevention, community consideration, and other requirements of various stakeholders, and supports initiatives thereof.

    (Note 3) The “Evaluation Guideline for Energy-efficiency Labeling for Non-residential Buildings” was compiled and established by the Ministry of Land, Infrastructure, Transport and Tourism in April 2014 with the Housing Performance Evaluation and Indication Society setting implementation guidelines for evaluation. Energy-efficiency evaluation and indication of buildings (or architectural structures) are expected to be utilized by real estate companies, building owners, brokers, tenants, investors, financial institutions, etc. and to further contribute to improving energy-efficiency of non-residential buildings.

    (Note 4) Evaluation is made based on regular reports submitted pursuant to Article 15, Paragraph 1 of the law concerning the rational use of energy, etc. (Energy Conservation Law), under coordination of the Energy Efficiency and Conservation Subcommittee of Advisory Committee for Natural Resources and Energy (August 2015). Business operators are classified into “Class S (business operators with excellent energy saving performance),” “Class A (business operators with middle-level energy saving performance),” “Class B (business operators with stagnant energy saving performance)” and “Class C (business operators with insufficient energy saving performance requiring special attention); where “Class S” business operators are required to “decrease 5-year average original unit price by 1% or more (non-binding target)” and to “have achieved the benchmark target.”

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