Investment Policies

Basic Policies

The Investment Corporation's basic investment policy is to invest primarily in real estate including real estate-backed securities, which have real estate as their principal investments, in order to obtain stable earnings therefrom and steady growth in investment assets from a medium- to long-term perspective. The Asset Management Company has formulated guidelines concerning investment and management policies ("Management Guidelines") that apply to the Investment Corporation's investment assets in accordance with the Investment Corporation's Articles of Incorporation, the Asset Management Agreement, the Investment Corporation's basic investment policy and the Asset Management Company's own internal rules. The Management Guidelines have been formulated by the Asset Management Company taking into account comprehensive factors including the general state of the economy, real estate market conditions, and trends in the capital and financial markets. The Asset Management Company shall adopt a flexible posture and, as conditions change, amend the Management Guidelines in line with changes in markets stated above at its own discretion and in accordance with the Investment Corporation's Articles of Incorporation and the Asset Management Agreement.

Portfolio Development

The Investment Corporation’s basic investment policy is to obtain stable earnings therefrom and steady growth in investment assets from a medium- to long-term perspective, pursuant to Article 26 of its Articles of Incorporation. To this end, the Investment Corporation shall strive to establish and develop an optimal investment portfolio taking into account changes in a variety of markets and trends including the real estate market, local economies, financial conditions, matters relating to taxation and statutory requirements in the context of its own financial standing, while at the same time endeavoring to minimize assorted risks, based on the following policies.

Selection Policy Investment Criteria
The Investment Corporation places the highest priority on securing stable earnings. To this end, the Investment Corporation invests primarily in Core Assets, which make up a key part of the portfolio consisting of residential properties (Including primarily residential-use multipurpose facilities) and retail properties (Including primarily retail-use multipurpose facilities). At the same time, while focusing on securing stable earnings, the Investment Corporation invests in Balance Assets, which complement the aforementioned Core Assets, comprising properties for office and the other use, with the aim of minimizing portfolio risk through investment diversification by asset class. Please refer to the asset class allocation below.
When selecting real estate-related assets, the Investment Corporation comprehensively considers a wide range of factors including the general state of economy and real estate market conditions, conditions in surrounding areas of the property's location, city planning and other future trends. Other factors include individual considerations such as the property's scale, shape and boundaries relative to roadways. With regard to real estate-related assets characterized for their long-term competitive advantage, the Investment Corporation bases its selection on criteria including profitability based on forecast cash flows.

Investment Diversification by Asset Class
In an effort to secure stable earnings from a medium- to long-term perspective, the Investment Corporation shall maintain a balanced investment portfolio comprised of different asset classes. In principle, the Investment Corporation adheres to the following asset class allocation ratios.

Asset Class		Allocation Rate (Acquisition Price Basis)
Core Assets	Residences	70 - 85%
	Retail properties	15 - 30％
Balance Assets	Office, etc.	0 - 15%

In the course of its efforts to establish and develop an optimal investment portfolio, the Investment Corporation may temporarily invest in investment assets that exceed the aforementioned ratios while striving to secure stable profits from a medium- to long-term perspective.

The Asset Management Company has recognized that the residential property market offers greater stability when compared with real estate assets of alternative classes. Compared with retail properties and offices the vast majority of tenants in the residential property market are individuals that are less susceptible to changes in economic and other conditions. At the same time, rental rates for residences have also exhibited greater stability on a historical basis. In addition, given the relative lower investment amount for a single investment asset and the larger number of tenants, the residential property market offers significant diversification, which in turn reduces the level of risk. As an integral component of life, the residential property market offers inherent benefits. In this context, tenant demand is anticipated to remain steady, facilitating efforts to secure a continuous stream of new tenants. For these reasons, the residential property market is expected to better contribute to maintaining stable profits from a medium- to long-term perspective.

The retail properties market offers its own unique benefits, not least of which is the tendency toward long-term tenants. The comparative ease in securing long-term lease agreements is also expected to contribute to stable earnings from a medium- to long-term perspective.

For the aforementioned reasons as well as the focus on securing stable profits, the Investment Corporation has positioned residences and retail properties as its “core” investment assets.

In addition, the Investment Corporation shall invest in non-core assets of office buildings and other real estate-related assets, collectively referred to as "balance" assets.

Investment in balance assets is subject to due diligence and strict considerations relating to stable occupancy. Investment in this asset class is expected to complement core assets and promote further diversification, minimize risk and enhance portfolio quality.

Asset Diversification by Geographic Region

In accordance with its Articles of Incorporation, the Investment Corporation shall primarily invest in investment assets located in the Tokyo metropolitan area (comprising Tokyo, Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture), and major cities in Japan such as government designated cities and neighboring areas within commuting distance . Key geographic regions, as identified in the Management Guidelines formulated by the Asset Management Company, comprise Central Tokyo, the Jonan area, adjoining cities and areas within commuting distance of these areas. These regions offer significant acquisition opportunities, large leasing market scale and strong supply and demand potential, and are therefore consistent with the basic policy to secure stable earnings outlined in the Investment Corporation’s Articles of Incorporation. Conscious of minimizing risks associated with specific economic regions, earthquakes and other portfolio risks, the Investment Corporation shall also invest in assets located in cabinet-order designated cities outside Tokyo and the Jonan area (hereinafter referred to as "Major Regional Cities").

In an effort to secure stable earnings from a medium- to long-term perspective, the Investment Corporation shall therefore maintain a balanced investment portfolio determined also by geographic region. In principle, the Investment Corporation adheres to the following geographic region ratios.

Real Estate Investment by Geographic Region

Region	Specific Area	Allocation Rate (Acquisition Price Basis)
		Residences	Retail properties	Office, etc.
Central Tokyo Jonan Area	Central Tokyo: Chiyoda Ward Chuo Ward Minato Ward Bunkyo Ward Shibuya Ward Shinjuku Ward Jonan area: Setagaya Ward Meguro Ward Shinagawa Ward Ota Ward	approx.50% (Note2)	Based on an assessment of the specific characteristics of each property and region	Based on an assessment of the specific characteristics of each property and region
Greater Tokyo Adjoining Cities	Tokyo: Areas other than Central Tokyo and the Jonan Area (excluding islands) Kanagawa Prefecture: Kawasaki City Yokohama City Others Chiba Prefecture: Ichikawa City Urayasu City Funabashi City Matsudo City Others Saitama Prefecture: Kawaguchi City Toda City Saitama City Others (Additional areas within commuting distance)	approx.80% including Central Tokyo and the Jonan Area (Note2)
Major Regional Cities (Note1)	Sapporo City Sendai City Nagoya City Kyoto City Osaka City Kobe City Hiroshima City Kitakyushu City Others (Additional areas within commuting distance)	approx.20% (Note2)

Note1:

"Major Regional Cities" refers to cabinet-order designated cities and cities in major regional areas that, in principle, have a population exceeding 500,000, or a commercial district of equivalent standing.

Note2:

Approximately means ±10%.
In the course of its efforts to establish and develop an optimal investment portfolio, the Investment Corporation may temporarily invest in investment assets that exceed the aforementioned ratios while striving to secure stable profits from a medium- to long-term perspective.