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Message from the Executive Director

On behalf of HEIWA REAL ESTATE REIT, Inc., and HEIWA REAL ESTATE Asset Management CO., LTD., I would like to express our sincere appreciation to all of our investors for your continued patronage and support.
  It is with great pleasure that I take this opportunity to report briefly on our operating performance and financial results for the 30th Fiscal Period (ended November 30, 2016).
Backed by the solid sponsorship of HEIWA REAL ESTATE CO., LTD., we achieved steady progress in implementing a number of strategies aimed at securing financing and ensuring internal and external growth during the fiscal period. We also succeeded in reducing costs, particularly those associated with financial procurement, while maintaining a high occupancy rate for the property portfolio. As a result, during the period under review, we posted operating revenues of ¥5,698 million, ordinary income of ¥1,820 million, and net income of ¥1,085 million. We also decided on a distribution per unit of ¥1,884.
  Among our activities during the period under review, especially noteworthy were initiatives to improve the quality of HEIWA REAL ESTATE REIT’s portfolio by replacing properties. We decided to sell SHIBUYA AX HILLS and HF NAKAMEGURO BUILDING, which had been acquired in 2007, when real estate prices were rising steeply. Yields from these properties were relatively low from the outset, and prospects for improvement appeared limited. Nevertheless, owing to the large-scale redevelopment of Shibuya Station and the surrounding area, property prices in the area have increased. Accordingly, we were able to sell off SHIBUYA AX HILLS at a price above its book value, and HF NAKAMEGURO BUILDING at a price exceeding its appraisal value. In addition, we decided to acquire ACROSS SHINKAWA BUILDING and SENJU MILDIX II. Both of these properties are outstanding in terms of location, scale, and specifications, so we expect them to contribute to improving the quality of the portfolio and enhancing earnings power.
  Looking ahead, we intend to work actively to replace properties with the aim of improving the overall quality of the portfolio. As we carry out these endeavors, we look forward to your continued encouragement and support.

Masaaki Higashihara
Executive Director
HEIWA REAL ESTATE REIT, Inc.

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