XYMAX REIT Investment : (REIT) Financial Report for the Fiscal Period Ended February 2022

(REIT) Financial Report for the Fiscal Period Ended February 2022

REIT Securities Issuer: Securities Code: Representative:

Asset Management Company: Representative:

XYMAX REIT Investment Corporation 3488

Shotaro Kanemitsu, Executive DirectorListing: Tokyo Stock Exchange

URL:https://xymaxreit.co.jp/en/index.html

Contact:

XYMAX REAL ESTATE INVESTMENT ADVISORS Corporation Shotaro Kanemitsu, Representative Director and President Tatsuya Nakayama, Head of Business Planning Division TEL: [phone]

April 13, 2022

Scheduled date for submission of securities report:	May 30, 2022
Scheduled date for commencement of distribution payment:	May 20, 2022
Supplementary materials for financial results:	Yes
Financial results briefing session:	Yes (for institutional investors and analysts)
(Amounts are rounded down to the nearest million yen)

1.

Status of Management and Assets for the Fiscal Period Ended February 2022(from September 1, 2021 to February 28, 2022)

(1) Results of Operations

(% figures are the rate of period-on-period increase (decrease))Fiscal period ended Feb. 2022

Fiscal period ended Aug. 2021

Operating revenueOperating income

Ordinary income

million yen % million yen 23.5

1,611 1,305

0.9

946 701

% million yen 35.0

(2.1)

Net income

871 648

(0.4)

% 34.3

million yen 870 647

% 34.3

(0.4)Fiscal period ended Feb. 2022

Fiscal period ended Aug. 2021

Net income per unityen

3,895 2,899

Return on equity	ordinary income to	ordinary income to
total assets	operating revenue

% 3.7

2.8

Ratio of

% 2.2

1.7

Ratio of

% 54.1

49.7

(2) Distribution

Distribution per unit (excluding distribution in excess of earnings)	Total distribution (excluding distribution in excess of earnings)	Distribution in excess of earnings per unit	Total distribution in excess of earnings	Payout ratio	Ratio of distribution to net assets
Fiscal period ended Feb. 2022 Fiscal period ended Aug. 2021	yen 3,896 2,900	million yen 870 647	yen - -	million yen - -	% 100.0 100.0	% 3.7 2.8

(3) Financial Position

Total assets	Net assets	Equity ratio	Net assets per unit
Fiscal period ended Feb. 2022 Fiscal period ended Aug. 2021	million yen 41,249 38,971	million yen 23,456 23,233	% 56.9 59.6	yen 104,996 104,000

(4) Cash Flows

Net cash provided by (used in) operating activities million yenNet cash provided by (used in) investing activities million yenNet cash provided by (used in) financing activities million yenCash and cash equivalents at end of period million yenFiscal period ended Feb. 2022

2,583

(3,163)

1,002

3,299

Fiscal period ended Aug. 2021

783

(1,393)

619

2,877

2.

Operating Forecasts for the Fiscal Period Ending August 2022 (from March 1, 2022 to August 31, 2022) and Fiscal Period Ending February 2023 (from September 1, 2022 to February 28, 2023)

(% figures are the rate of period-on-period increase (decrease))

Operating revenue	Operating income	Ordinary income	Net income	Distribution per unit (excluding distribution in excess of earnings)	Distribution in excess of earnings per unit
mn yen	%	mn yen	%	mn yen	%	mn yen	%	yen	yen
Fiscal period ended Aug. 2022 Fiscal period ended Feb. 2023	1,825 1,597	39.8 (12.5)	1,086 880	54.9 (18.9)	966 772	49.0 (20.1)	965 771	49.0 (20.1)	3,867 3,091	- -

(Reference)

Forecast net income per unit

(Forecast net income ÷ Forecast total number of investment units issued and outstanding at end of period) Fiscal period ending August 2022: 3,866 yen Fiscal period ending February 2023: 3,090 yen

* Other

(1) Changes in Accounting Policies, Accounting Estimates, and Retrospective Restatements
i. Changes in accounting policies accompanying amendments to accounting standards, etc.:	Yes
ii. Changes in accounting policies other than i.:	None
iii. Changes in accounting estimates:	None
iv. Retrospective restatements:	None
(Note) Please see "Notes concerning the change of accounting policy" on page 16.
(2) Total number of investment units issued and outstanding

i. Total number of investment units issued and outstanding (including treasury investment units) at end of periodFiscal period ended Feb. 2022

223,400 units

Fiscal period ended Aug. 2021

ii. Number of treasury investment units at end of periodFiscal period ended Feb. 2022

0 unitsFiscal period ended Aug. 2021

0

units

(Note)For the number of investment units serving as the basis for calculation of net income per unit, please see "Notes on Per Unit Information" on page 25.

* This Financial Report is not subject to the audit by the certified public accountant and/or audit corporation

* Explanation of Appropriate Use of Operating Forecasts, and Other Matters of Special Note

The operating forecasts and other forward-looking statements contained in this document are based on information currently available to and certain assumptions deemed reasonable by XYMAX REIT. Accordingly, the actual results of operations, etc. may differ materially due to various factors. Key factors that could affect the actual operational status include a decline in rent revenue, non-payment of rent and bankruptcy of tenants occupying owned properties, as a result of the further spread of the new coronavirus infectious diseases (COVID-19) and the prolongation of the period until the contagion converges. Factors affecting the investment status are not limited to these. In addition, the forecasts are not a guarantee of the amount of distribution. For the assumptions underlying the operating forecasts, matters of note in the use of the operating forecasts, etc., please see "Assumptions Underlying the Operating Forecasts for the Fiscal Period Ending August 2022 (from March 1, 2022 to August 31, 2022) and Fiscal Period February 2023 (from September 1, 2022 to February 28, 2023)" on page 7. Accordingly, the actual operating revenue, operating income, ordinary income, net income, distribution per unit and distribution in excess of earnings per unit may vary due to changes in the circumstances.

Table of Contents

1. Management Status............................................................................................................................................................................. 2

(1) Overview of the Fiscal Period under Review............................................................................................................................... 2

(2) Outlook for the Next Fiscal Period................................................................................................................................................ 3

2. Financial Statements ........................................................................................................................................................................... 9

(1) Balance Sheet ................................................................................................................................................................................. 9

(2) Statement of Income ................................................................................................................................................................... 11

(3) Statement of Unitholders' Equity ............................................................................................................................................... 12

(4) Statement of Cash Distribution .................................................................................................................................................. 13

(5) Statement of Cash Flows ............................................................................................................................................................. 14

(6) Notes on the Going Concern Assumption .................................................................................................................................. 15

(7) Notes on Matters Concerning Significant Accounting Policies ................................................................................................. 15

(8) Notes concerning the change of accounting policy ................................................................................................................... 16

(9) Notes on the Financial Statements ............................................................................................................................................. 16

(10)Changes in Total Number of Investment Units Issued and Outstanding ................................................................................ 26

3. Reference Information ...................................................................................................................................................................... 27

(1) Investment Status ........................................................................................................................................................................ 27

(2) Investment Assets ....................................................................................................................................................................... 28

1. Management Status

(1) Overview of the Fiscal Period under Review

I.

Brief History of the Investment Corporation

XYMAX REIT was incorporated under the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended) (hereinafter, the "Investment Trusts Act") with XYMAX REAL ESTATE INVESTMENT ADVISORS

Corporation (hereinafter, the "Asset Management Company") as the organizer and investments in capital of 300 million yen (3,000 units) on September 14, 2017, and completed the registration with the Kanto Local Finance

Bureau on October 31, 2017 (Registration No. 131 with the Director-General of the Kanto Local Finance Bureau). Later, XYMAX REIT implemented an issuance of new investment units through public offering (209,905 units) with

February 14, 2018 as the payment due date, and listed on the Real Estate Investment Trust Securities Market of Tokyo Stock Exchange, Inc. (hereinafter, "Tokyo Stock Exchange") on February 15, 2018 (securities code: 3488). In addition, an issuance of new investment units through third-party allotment (10,495 units) was implemented on March 20, 2018.

These resulted in total number of investment units issued and outstanding of 223,400 units as of the last day of the fiscal period.

XYMAX REIT utilizes the real estate management (Note 1) strengths of the XYMAX Group (Note 2) to conduct appropriate portfolio management and thereby maximize the value of real estate with the aim of maximizing unitholder value.

• (Note1) "Real estate management" collectively refers to property management, comprehensive building maintenance services, and combined property management and comprehensive building maintenance services (including cases where contracted with such services in subleasing cases). The same shall apply hereinafter.

• (Note2) "XYMAX Group" refers to the corporate group comprising XYMAX Corporation and its consolidated subsidiaries and affiliates accounted for using the equity method. The same shall apply hereinafter.

II. Management Environments

With regard to the economic environment during the fiscal period under review, the spread of COVID-19 stabilized, and the recovery in consumer spending following the resumption of economic activities had an impact. As a result, the real GDP growth rate for the fourth quarter of 2021 increased by 1.1% (an annualized increase of 4.6%). With regard to financial markets, according to "Loans and Discounts Outstanding by Sector" published by the Bank of Japan, total loans outstanding as of the end of December 2021 were 547 trillion yen and loans outstanding for real estate were 91.3 trillion yen, which remained at extremely high levels. We believe that trends in capital markets and financial markets need to continue to be closely monitored, as there are concerns over the impact on J-REIT market from the next fiscal period onwards of rising interest rates in each country, the Ukrainian situation, and the future infectious conditions of COVID-19.

Under these circumstances, the following developments have been observed in the markets for office, retail and hotels and the real estate buy/sell market, in which XYMAX REIT is primarily invested.

As for offices, according to "Office Market Report Tokyo 2021Q4" (Note) published by Xymax Real Estate Institute Corporation, the vacancy rate in the 23 wards of Tokyo in the fourth quarter of 2021 increased by 0.17 percentage points from the previous quarter to 3.58%. Although the vacancy rate rose for seven consecutive quarters, the degree of increase in the vacancy rate has moderated. There have also been moves, such as certain rent reductions by owners and the granting of free rents contributing to the attraction of tenants, which has shortened the time between the notice of cancellation of current tenants and the decision of a successor tenant.

Regarding retail facilities, according to the Ministry of Economy, Trade and Industry's Current Survey of Commerce, retail sales in the fourth quarter of 2021 increased by 1.3% from the same quarter of the previous year. Sales at supermarkets and drugstores, which mainly sell daily necessities, remained firm even under the impact of the spread of COVID-19. In addition, according to a survey of trends in the service industry conducted by the Statistics Bureau of the Ministry of Internal Affairs and Communications, restaurant sales declined 7.0% from the same quarter of the previous year, and a full-fledged recovery is expected to take time.

As for hotels, according to the Japan Tourism Agency's Accommodation Travel Statistical Survey, the total number of guests increased 4.2% year on year in the second half of 2021 (July-December). The movement of people domestically and abroad and the relaxation of restrictions due to COVID-19 continue to fluctuate. However, compared to the secondhalf of 2020, when Go To travel campaigns were implemented, such as in Miyagi Prefecture, where Hotel Vista Sendai owned by XYMAX REIT is located, there are signs of a slight recovery, with the total number of guests increasing in some areas in the second half of 2021.

With regard to the real estate trading market, the real estate market is active and real estate prices have been in a high price range against the backdrop of a favorable financing environment and continued strong demand from overseas investors.

(NOTE) For more information on the survey, please refer to the website (https://soken.xymax.co.jp/) of Xymax Real Estate Institute Co., Ltd.

III. Management Status

As of the last day of the fiscal period under review, XYMAX REIT had 16 properties in its portfolio. Its total acquisition price stood at 37,208 million yen, a total leasable area at 82,725.73 m2 and total leased area at 82,335.25 m2. The occupancy rate as of the last day of the fiscal period under review was 99.5%.

• IV. Financing Status

  (Equity Financing)

  In the fiscal period under review, XYMAX REIT did not procure funds through issuance of new investment units. As of the last day of the fiscal period under review, unitholders' capital was 22,585 million yen.

  (Debt Financing)

  In the fiscal period under review, XYMAX REIT refinanced short-term loans of 1,770 million yen and long-term loans of 3,088 million yen on January 31, 2022 and borrowed a new loan of 1,650 million yen for the purpose to allocate the funds to the purchase price of the new assets, etc.

  As a result, as of the last day of the fiscal period under review, the balance of loans outstanding was 15,700 million yen.

• V. Overview of Business Performance

  Business performance in the fiscal period under review resulted in operating revenue of 1,611 million yen, operating income of 946 million yen, ordinary income of 871 million yen and net income of 870 million yen.

  Concerning distribution for the fiscal period under review, pursuant to the distribution policy provided in XYMAX REIT's Articles of Incorporation, the decision was made to distribute unappropriated retained earnings in the amount of 870,366,400 yen, which is the largest integral multiple of the total number of investment units issued and outstanding (223,400 units) by application of special provisions for taxation on investment corporations (Article 67-15 of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957, as amended)). This resulted in distribution per unit of 3,896 yen.

(2) Outlook for the Next Fiscal Period

I. General Management Outlook

• (A) External Growth Strategy

  Capture wide range of real estate disposition needs through real estate management customer base

  XYMAX REIT captures real estate disposition needs from the customer base of the XYMAX Group based on a sponsor support agreement with XYMAX Corporation with the aim to lead such needs to property acquisition opportunities for XYMAX REIT.

• (B) Internal Growth Strategy

  Utilization of the real estate management insight and know-how and network of the XYMAX Group

  Through the sponsor support agreement with XYMAX Group, XYMAX REIT is provided with various real estate management insight, know-how, databases, management systems, private fund management experience, etc. On this basis, XYMAX REIT can and will perform stable and efficient management.

• (C) Financial Strategy

  Financial management with emphasis on stability and soundness, and LTV ratio control

  XYMAX REIT shall execute a financial strategy that places emphasis on stability and soundness and secure agility in fund procurement, taking into consideration the securing of stable revenue over the medium to long term, steady growth in size of assets under management and stability of management.