NIPPON REIT Investment : Summary of Financial Results for the Fiscal Period Ended June 30, 2022 (REIT)

August 16, 2022

Summary of Financial Results

for the Fiscal Period Ended June 30, 2022 (REIT)

Name of issuer:

NIPPON REIT Investment Corporation

URL:

https://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 26, 2022

Scheduled date of delivery of distributions:

September 20, 2022

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, 2022 (January 1, 2022 - June 30, 2022)

(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, 2022

8,534

(15.0)

4,599

(23.9)

3,971

(26.3)

3,970

(25.6)

December 31, 2021

10,041

6.7

6,043

9.9

5,390

10.9

5,335

9.8

Net Income per Unit

Return on Equity

Return on Assets

Ordinary Income to

Operating Revenues

For the fiscal period ended

Yen

%

%

%

June 30, 2022

8,825

3.0

1.4

46.5

December 31, 2021

11,859

4.1

2.0

53.7

(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, 2022

8,825

3,970

-

-

100.0

3.0

December 31, 2021

11,665

5,248

-

-

98.4

4.0

(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, 2022

274,895

130,592

47.5

290,249

December 31, 2021

276,577

131,869

47.7

293,089

(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, 2022

6,300

(580)

(5,238)

16,541

December 31, 2021

12,981

(8,303)

(4,871)

16,059

2. Forecast of management status for the Fiscal Period Ending December 2022 (from July 1, 2022 to December 31, 2022) and the Fiscal Period Ending June 2023 (from January 1, 2023 to June 30, 2023)

(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
December 31, 2022		8,434	(1.2)	4,392	(4.5)	3,716	(6.4)	3,716		(6.4)	8,259	-
June 30, 2023		8,538	1.2	4,392	0.0	3,717	0.0	3,716		0.0	8,260	-
(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, 2022: 8,259 yen

Forecasted Net Income per unit for the fiscal period ending June 30, 2023: 8,260 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, 2022	449,930 units	As of December 31, 2021	449,930	units
(b) Number of investment treasury units:
As of June 30, 2022	0 unit	As of December 31, 2021	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 2022 (from July 1, 2022 to December 31, 2022) and Fiscal Period Ending June 2023 (from January 1, 2023 to June 30, 2023)" on page 7.

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	8
2. Financial Statements	9
(1)	Balance Sheets	9
(2)	Statements of Income and Retained Earnings	11
(3)	Statement of Change in Net Assets	12
(4)	Statements of Cash Distribution	13
(5)	Statements of Cash Flows	14
(6)	Notes to the Going Concern Assumption	16
(7)	Summary of Significant Accounting Policies	16
(8)	Notes to Financial Statements	18
(9)	Changes in Total Number of Investment Units Issued and Outstanding	31
3. Reference Information	32
(1)	Status of Value of Investment Assets	32
(2)	Status of Capital Expenditure	55

1

1. Management Status

1. Management Status
   I. Overview of the Fiscal Period ended June 30, 2022

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 current period (June 30, 2022) is 449,930 units.

B. Investment Environment and Management Performance

(i) Investment Environment

The Japanese economy during the current period (the fiscal period ended June 30, 2022) saw a decrease of 0.1% (an annual decrease of 0.5%) in the real GDP growth rate (second preliminary figures) for the period from January to March 2022 compared to the previous period. The consumer spending, capital spending and employment situation are recovering as economic and social activities are normalized while they showed repeated standstill for recovery due to the expansion of a variant of COVID-19 and enforcement of priority preventative measures. Revenues of corporates are recovering as a whole while corporate business outlookshows a standstill for recovery movements. It is necessary to keep a close watch continuously on factors such as downward risk by the effect of the rising prices of raw material and constraint in supply while the effect of prolonged situation in Ukraine and restrained economic activities in China are concerned, as well as fluctuations in financial and capital markets.

In the office properties leasing market, the vacancy rate as of the end of June 2022 in Tokyo's five central wards (Chiyoda, Chuo, Minato, Shinjuku and Shibuya wards) announced by Miki Shoji Co., Ltd., was 6.39%, up 0.2% from the same month last year. Moreover, the average rent in the same area as of the end of June 2022 was 20,273 yen per tsubo, down 4.19% from the same month last year, as downward trend continues from August 2020. It is necessary to keep a close watch continuously whether such trends will continue in future.

In terms of the residential properties leasing market, while the situation remains generally stable for both occupancy rate and rent level, it is necessary to keep a close watch on supply and demand conditions in the residential leasing properties including the demographic migration in the three major metropolitan areas due to the effect caused by changes in implementation of remote working and remote lessons by higher education facilities triggered by the spread of a variant of COVID-19 infection.

In the leasing market of retail properties, as restriction of economic activities as prevention measure of spread of COVID-19 infection has been relaxed, we saw a 3.7% year-on-year increase in retail sales announced by the Ministry of Economy, Trade and Industry in May 2022. Retail sales in department stores, fuel stores, woven fabrics, apparel and apparel accessories stores showed increasing trends while motor vehicle stores, electrical appliance stores and food and beverage stores showed decrease. While sales at department stores showed 56.0% year-on- year increase, sales at supermarkets decreased by 1.9% year-on-year.

With regard to the real estate transaction market, expected yields of investment grade properties remain at a low level and transaction prices stay high, reflecting that the appetite for acquisition of properties by domestic investors such as listed REITs, private placement REIT, and real estate companies, as well as overseas investors is still high supported by the monetary easing policy by the Bank of Japan as well as advancing depreciation of Japanese yen.

2

1. Management Performance a. External Growth
   NIPPON REIT owned 107 properties (with a total acquisition amounts of 255,935 million yen) and one equity interests in a silent partnership (investment amount 50 million yen, six real estate-backed properties) as of the end of the fiscal period ended December 2021.
   During the current period (fiscal period ended June 2022) NIPPON REIT transferred one property (the transfer amounts of 1,430 million yen) in February 2022 as follows, as asset replacement executed from August 2021.

Property

Transfer price

Property name(Yen in millions)Transaction date

Number

(Note)

A-42

Sunworld Building

1,430

February 28, 2022

(Note) The transfer price represents amount of consideration stated in the transfer agreement of the trust beneficiary interest in real estate. The transfer price does not include expenses related to the transfer, consumption taxes and local tax. Furthermore, the transfer price of less than one million yen is omitted.

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

Name	Number of real estate -	Investment amount	Acquisition date
backed properties	(Yen in millions)(Note)
Godo Kaisha NRT Growth 18
Subordinated equity interest in	3	30	March 29, 2022
silent partnership

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

As a result, the portfolio as of the end of the current period consisted of 62 office properties (Note 1) with a total acquisition amount of 182,022 million yen, 42 residential properties (Note 2) with a total acquisition amount of 64,592 million yen and two retail properties (Note 3) with a total acquisition amount of 8,120 million yen, totaling 106 properties with a total acquisition amount of 254,735 million yen, and two equity interests in a silent partnership (with a total investment amount of 80 million yen and total of nine real estate-backed properties) with a total leased area of 305,960.51㎡ and 98.0% of average occupancy rate.

(Note 1) "Office Properties" refer to an office building whose primary use is the office. The same shall apply hereinafter.

(Note 2) "Residential Properties" refer to a rental housing whose primary use is a residence (including a dormitory, a company- rented-house and a service apartment which an operator rents all of or a significant portion of). The same shall apply hereinafter.

(Note 3) "Retail Properties" refer to real estate consisting of commercial tenants (merchandise sales, food and drink/service industry, amusement facilities, etc.) as the main tenant. The same shall apply hereinafter.

b. Internal Growth

NIPPON REIT emphasizes management that maintains and increases the portfolio's asset value and actively reaches out to new and existing tenants with business activities while strengthening relations with existing tenants, implementing measures that boost the competitiveness of properties in light of tenant needs and the features of each property. Through such efforts were kept to be done, the portfolio occupancy rate was maintained at a high level of 98.0% as of the end of the current period.

C. Procurement of Funds

(i) Borrowings and Repayments

In order to prepare funds for repayment of long-term loans due on April 20, 2022 (3,320 million yen), the long-term borrowings of 3,320 million yen on the same day were implemented as the loans due.

As a result, the balance of interest-bearing debt as of June 30, 2022 was 132,620 million yen and the ratio of interest-bearing debt to total assets (LTV) was 48.2%.

3