Activia Properties : Financial Report for the Fiscal Period Ended May 31, 2023 (December 1, 2022 - May 31, 2023)

July 19, 2023

Financial Report for the Fiscal Period Ended May 31, 2023

(December 1, 2022 - May 31, 2023)

Activia Properties Inc.

Listing:	Tokyo Stock Exchange
Securities code:	3279
URL:	https://www.activia-reit.co.jp/en/
Representative:	Nobuhide Kashiwagi, Executive Director
Investment management company:	TLC REIT Management Inc.
Representative:	Akira Kubo, President & CEO
Contact:	Manabu Kamikawara, General Manager of Strategy Department,
	Activia Management Division
	TEL: [phone]

Scheduled date to file Securities Report: Scheduled date to start distribution payments: Supplementary material on financial report: Financial report presentation meeting:

August 28, 2023

August 18, 2023 Yes

Yes (for institutional investors and analysts)

(Amounts truncated to the nearest million yen)

1. Summary of financial results for the fiscal period ended May 31, 2023 (December 1, 2022 - May 31, 2023)

(1) Operating results	(Percentages show changes from the corresponding amounts for the previous period.)
	Operating revenue	Operating profit	Ordinary profit	Profit
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
Fiscal period ended	17,482	8.1	9,826	10.2	8,859	10.8	8,843	12.7
May 31, 2023
Fiscal period ended	16,178	4.3	8,920	3.4	7,997	3.4	7,844	1.5
November 30, 2022
	Basic earnings per unit	Return on unitholders'	Ordinary profit to	Ordinary profit to
	equity (ROE)		total assets		operating revenue
		Yen		%		%		%
Fiscal period ended	10,904		3.2		1.6		50.7
May 31, 2023
Fiscal period ended	9,653		2.9		1.4		49.4
November 30, 2022

(Note) Basic earnings per unit is calculated by dividing profit by the day-weighted average number of investment units for the period (812,564 units for the fiscal period ended November 30, 2022 and 810,997 units for the fiscal period ended May 31, 2023).

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(2) Cash distributions

	Cash	Total	Cash	Total	Cash	Total
	distributions	distributions	distributions
	distributions	distributions	distributions
	per unit	in excess of	per unit
	(excluding excess	in excess of	(including excess
	(excluding excess	earnings	(including excess
	of earnings)	of earnings)	per unit	earnings	of earnings)	of earnings)
	Yen	Millions of yen	Yen	Millions of yen	Yen	Millions of yen
Fiscal period ended	9,875	7,973	-	-	9,875	7,973
May 31, 2023
Fiscal period ended	9,300	7,556	-	-	9,300	7,556
November 30, 2022
		Distribution
	Payout ratio	ratio to
	unitholders'
		equity
	%	%
Fiscal period ended	90.2	2.9
May 31, 2023
Fiscal period ended	96.3	2.7
November 30, 2022

(Note 1) The difference between total distributions and profit was due to the provision of internal reserves ((fiscal period ended November 30, 2022) ¥344 million) and the provision of reserve for tax purpose reduction entry ((fiscal period ended May 31, 2023) ¥841 million).

(Note 2) Because treasury investment units were canceled during the fiscal period ended May 31, 2023, the payout ratio for the period is obtained by the following formula with figures rounded to the first decimal place: Payout ratio = total distributions (excluding excess of earnings) / profit × 100

(3) Financial position

		Total assets	Net assets
		Millions of yen	Millions of yen
As of May 31, 2023		567,177	274,155
As of November 30, 2022		561,682	274,906
(Reference) Unitholders' equity
As of November 30, 2022:	¥274,906 million
As of May 31, 2023:		¥274,155 million

Unitholders' equity to

total assets

%

48.3

48.9

Net assets per unit

Yen

339,534

338,319

(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
	Millions of yen	Millions of yen	Millions of yen	Millions of yen
Fiscal period ended	48,683	(45,271)	(4,247)	21,350
May 31, 2023
Fiscal period ended	15,252	(1,776)	(7,899)	22,185
November 30, 2022

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2. Forecasts of results for the fiscal period from June 1, 2023 to November 30, 2023 and the fiscal period from December 1, 2023 to May 31, 2024

(Percentages show changes from the corresponding amounts for the previous period.)

									Cash	Cash
	Operating	Operating	Ordinary	Profit	distributions	distributions
	per unit	in excess of
	revenue	profit	profit
			(excluding excess	earnings
									of earnings)	per unit
	Millions	%	Millions	%	Millions	%	Millions	%	Yen	Yen
	of yen		of yen		of yen		of yen
Fiscal period ending	17,260	(1.3)	9,312	(5.2)	8,279	(6.5)	8,278	(6.4)	9,300	-
November 30, 2023
Fiscal period ending	15,071	(12.7)	7,575	(18.7)	6,474	(21.8)	6,473	(21.8)	9,300	-
May 31, 2024

(Reference) Forecasted basic earnings per unit (forecasted profit / total projected number of investment units issued at end of

period)
for the fiscal period ending November 30, 2023:	¥10,252
for the fiscal period ending May 31, 2024:	¥8,017

* Other

1. Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements
2. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: None
   2. Changes in accounting policies due to other reasons: None
   3. Changes in accounting estimates: None
   4. Restatement of prior period financial statements: None
3. Total number of units issued
   a. Total number of units issued at end of period (including treasury investment units)

As of May 31, 2023	807,446 units
As of November 30, 2022	812,564 units

1. Number of treasury investment units at end of period

As of May 31, 2023	- units
As of November 30, 2022	- units

(Note) Please refer to "Per Unit Information" on page 33 for the number of investment units used as the basis for calculating basic earnings per unit.

• Financial reports are exempt from audit conducted by certified public accountants or an audit corporation.
• Other special items

Forward-looking statements presented in this financial report including forecasts of results are based on information currently available to us and on certain assumptions we deem to be reasonable. As such, actual operating and other results may differ materially due to a number of factors. Furthermore, these forecasts are in no way a guarantee of any distribution amount. Please refer to "Assumptions for Forecasts of Investment Performance for the 24th Fiscal Period from June 1, 2023 to November 30, 2023 and the 25th Fiscal Period from December 1, 2023 to May 31, 2024" on pages 11 through 12 for information on assumptions for the forecasts.

This English version is a translation of the original Japanese document and is only for reference purposes. In the case where any differences occur between the English version and the original Japanese version, the Japanese version will prevail.

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Index

1.	Asset Management Status	5
	(1)	Asset Management Status	5
2.	Financial Statements	13
	(1)	Balance Sheet	13
	(2)	Statement of Income	15
	(3)	Statement of Unitholders' Equity	16
	(4)	Statement of Cash Distributions	18
	(5)	Statement of Cash Flows	19
	(6)	Notes on Assumption of Going Concern	20
	(7)	Notes on Important Accounting Policies	20
	(8)	Notes to Financial Statements	21
	(9)	Changes in Total Number of Investment Units Issued and Outstanding	34
3.	Reference Information	37
	(1)	Composition of Invested Assets	37
	(2)	Investment Assets	38

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1. Asset Management Status

1. Asset Management Status

1. Summary of Results for the Current Fiscal Period

(A) Transition of Investment Corporation

Activia Properties Inc. (hereinafter referred to as the "Investment Corporation") was established on September 7, 2011, with unitholders' capital of ¥200 million (400 units), and with TLC Township Inc. acting as organizer in accordance with the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, including subsequent revisions; hereinafter referred to as the "Investment Trust Act"). The Investment Corporation completed its registration in the Kanto Local Finance Bureau on September 20, 2011 (Director-General of the Kanto Local Finance Bureau No. 73). Note that on April 1, 2017, an absorption-type merger took place with what is now TLC REIT Management Inc. (hereinafter referred to as the "Asset Manager") as the surviving company and TLC Activia Investment Management Inc. (its trade name was changed from TLC Township Inc. on April 1, 2012) as the absorbed company.

After that, the Investment Corporation was listed on the real estate investment trust securities market of Tokyo Stock Exchange, Inc. (Securities code 3279) on June 13, 2012. On September 7, 2021, the Investment Corporation carried out its seventh publicly offered capital increase after the listing, and on September 28, 2021, it carried out a third-party allotment.

"Activia" of "Activia Properties," the name of the Investment Corporation, has been coined from the words "activate" and "ia," a suffix meaning "place." By investing in and managing real estate appropriate to its name, the Investment Corporation seeks to become an entity capable of broadly energizing society. The Investment Corporation will also select real estate capable of sustaining customer demand as a location for both corporate activities and urban recreation in popular areas, with the aim of maximizing the medium- and long-term value of unitholders, supported by its proactive management (management to improve the circumstances by taking initiatives and acting for the future).

In the fiscal period under review, which ended on May 31, 2023, the Investment Corporation acquired A-FLAG NISHI SHINSAIBASHI on January 13, 2023, using cash on hand and borrowings. The Investment Corporation also took steps to reshuffle its asset portfolio which involved acquiring Kasumigaseki Tokyu Building on March 28, 2023 and transferring Tokyu Plaza Ginza (Land) (30% co-ownership interest) on April 5, 2023. Consequently, the Investment Corporation held 47 properties (with the total acquisition price of ¥548,485 million) at the end of the fiscal period under review.

(B) Investment Environment in the Fiscal Period Under Review

The Japanese economy underwent a gradual recovery during the fiscal period under review, with improvements in the employment situation and in consumer sentiment.

Following the easing of restrictions on social and economic activities that were imposed due to COVID-19, the environment for retail properties has been characterized by year-on-year improvements in net sales at department stores and restaurants, and in travel turnover.

In the rental office market, the vacancy rate began to show signs of decline due to active use of relocations, despite an increase in new supply. Meanwhile, the average vacancy rate in the five central wards of Tokyo (Chiyoda-ku,Minato-ku,Chuo-ku,Shibuya-ku and Shinjuku-ku) as of May 31, 2023, according to data published by Miki Shoji Co., Ltd., was 6.16%, a decrease of 0.22 percentage points from November 30, 2022. Of these, the vacancy rate in Shibuya-ku remained at a low level compared to the other areas at 4.55%. Rent levels have dropped for 34 consecutive months starting in August 2020. The average rent per tsubo (about 3.3 square meters) in the five central wards of Tokyo as of May 31, 2023, was ¥19,877.

In the first half of the fiscal period under review, the J-REIT market underwent a substantial correction due to policy revisions by the Bank of Japan and financial instability in Europe and the United States. However, in the second half, the Nikkei Stock Average recorded its highest level since the bursting of the 1980s bubble, leading to the perception that the J-REIT market was lagging the stock market and resulting in prices recovering through to the end of May 2023.

(C) Investment Performance

The Investment Corporation acquired A-FLAG NISHI SHINSAIBASHI (with the acquisition price of ¥14,300 million) on January 13, 2023, using cash on hand and borrowings, in accordance with the

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