代表取締役執行役員社長 柏﨑 和義

On behalf of TOKYU REIT, I would like to express my sincere appreciation to all of you, our unitholders, for your continued support and patronage to us.

I hereby report our operating environment and results for the 30th fiscal period from February 1, 2018 to July 31, 2018.

Kazuyoshi Kashiwazaki
Executive Director
TOKYU REIT, Inc.
Representative Director & President, Chief Executive Officer
Tokyu Real Estate Investment Management Inc.

In the current fiscal period, revenue and income increased from the previous fiscal period with the ending of the free rent period at Setagaya Business Square, increase in the occupancy rates of other properties as well as upward rent revisions and other factors despite the decrease in revenue during the free rent period of tenants who moved into Tokyu Toranomon Building in the previous fiscal period. The occupancy rate of the overall portfolio remained high at 99.3%.
As a result, we achieved an operating revenue of 7,119 million yen (increase of 87 million yen from the previous fiscal period) and net income of 2,678 million yen (increase of 184 million yen from the previous fiscal period).
In addition, we conducted property replacement by disposing TOKYU REIT Kiba Building and acquiring Lucid Square Ebisu in August 2018 and acquired REVE Nakameguro (land with leasehold interest) in September 2018. Gain on sale of real estate is expected to be 316 million yen in the fiscal period ending January 2019 with the disposition of TOKYU REIT Kiba Building.
Distribution per unit for the fiscal period ended July 2018 will be 2,739 yen, an increase of 89 yen from the previous fiscal period. For the next fiscal period onwards, distribution per unit for the fiscal period ending January 2019 is forecasted to be 3,020 yen with the recording of the above gain on sale of real estate, an increase of 281 yen from the previous fiscal period, and 2,800 yen for the fiscal period ending July 2019 with the reversal of reserve for reduction entry of 52 million yen (53 yen per unit) equivalent to the repair and maintenance expenses for the exterior wall repair work of TOKYU REIT Shinjuku Building.
As for the assessment of the current investment environment, the price of real estate in the Tokyo metropolitan area continues to peak and the sales and replacement phase in the “Long-Term Investment Management Strategy (Surf Plan) (Note 1)” is expected to continue until 2020. Within the Tokyo Metropolitan Area, the price of real estate in Shibuya and the Tokyu Areas is expected to continue rising through 2020 as development in the Greater
Shibuya Area (within a radius of 2.5 km from Shibuya Station) and the Tokyu Areas will be implemented continuously following the redevelopment of the area surrounding Shibuya Station by Tokyu Corporation, the sponsor. Therefore, there will be an increase in unrealized gains from properties owned by TOKYU REIT, which places Central Tokyo and the Tokyu Areas as focused investment target areas. As a result, NAV (Note 2) of TOKYU REIT is forecasted to continue increasing, resulting in NAV per unit surpassing investment unit price.
Based on such recognition,TOKYU REIT will conduct property replacement after taking into consideration the total return (Note 3), property age, location, etc. of the properties it owns, as well as consider as a measure until 2020 the acquisition of treasury investment units by using surplus funds that accrued from property replacement. 
TOKYU REIT will strive to maximize unitholder value through “investment in highly competitive properties in areas with strong growth potential.”
TOKYU REIT greatly appreciates your continued support.

September 2018


(Notes)
1. The “Long-Term Investment Management Strategy (Surf Plan)” is a strategy of TOKYU REIT formed by its investment management company Tokyu REIM. Under this strategy, while replacing properties through a value and contrarian investment approach by focusing on the cyclicality of real estate prices, TOKYU REIT aims to build a portfolio that boasts lasting competitiveness and balance sheets that are strong against even difficult economic times.
2. NAV=Unitholders’ capital + Reserve for reduction entry (after appropriation of net income) +Unrealized gains/losses.
3. Total return from owned properties is comprised of income return (rental revenues, etc.) of each fiscal period and future capital return (gain on sale).