(1) Pursuit of Internal Growth

For the purposes of maximizing portfolio income, the Asset Management Company, Nomura Real Estate Asset Management (NREAM), shall utilize its expertise on office building management, to pursue stable growth of rental income and achieve internal growth through reduction of various operating and management costs.

◆Stable Growth of Rental Revenues

NREAM shall endeavor to maintain and improve occupancy rate and rental income by selecting an appropriate property management company for each property, based on the leasing plan to be established each fiscal period for each investment property, and by engaging in strategic leasing activities.

Similarly, NREAM shall maintain building functionality, avoid obsolescence caused by wear and tear through implementation of formulated large-scale repairs and renovations, and aim to enhance property competitiveness and maintain and improve occupancy rate and rental income.

<Leasing Activities>

In order to secure stable earnings, NREAM shall engage in leasing activities focusing on the following items for each investment property:

1. Understanding of the Sub-Market Trends

   NREAM shall analyze the prospective demand and supply of tenants in the relevant sub-markets for each property, average rent, occupancy rate and trends in the competitive properties, based on information gathered from market reports and real estate brokers. In case a structural change in a sub-market (trends in development of new rental properties, introduction of new public transportation or establishment of a new station) is observed, the effect of such change shall be analyzed.

2. Determination of Priority Sales Targets

   Tenants (or sectors) to be priority sales targets shall be determined by research and analysis of tenant movements and their causes within the sub-market (e.g., corporate integration, change of business, restructuring).

3. Consideration of Optimal Rental Conditions

   To determine the terms and conditions of rents for individual tenants, the credibility, ratio of rental income from such tenant to the entire portfolio income, and the contract form (e.g., whether or not it is a fixed-term building lease) shall be reviewed comprehensively.

4. Understanding Existing Tenants

   NREAM shall establish sufficient communication with existing tenants, to understand the tendencies, complaints and termination or expansion demands from such tenants early, and implement appropriate and timely countermeasures.

◆Reduction of Operation and Management Costs

NREAM shall review the ratio of management costs, maintenance and repairs costs and various other charges for each investment property, and seek reduction of expenses by selection of vendors such as cleaning and security companies through bidding, and implementation of packaged building maintenance for properties in close proximity. In addition, NREAM shall pursue reduction and improve efficiency of personnel and power expenses by implementation of machinery maintenance systems contributing to reduction of permanent expenses.

<Efficient Operation and Management>

To enhance the long-term profit base of investment properties, NREAM shall endeavor to achieve efficient operation and management noting the following:

1. NREAM shall examine the structure of operation and management costs within overall management expenses, and where room for reduction is deemed to exist, consider cost reductions by such measures as replacement of cleaning or security companies or packaging of several properties for such services. In reducing costs, NREAM shall also pay regard to maintaining the competitiveness of the property and the satisfaction of existing tenants.
2. NREAM shall make efforts to introduce machinery maintenance systems, renew principal facilities (electricity and air-conditioning control system) and other technical measures with the aim of enhancing operation and management efficiency.

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(2) Maintain and Enhance Property Values (Large-Scale Renovations and Renewals)

In order to maintain and enhance physical and functional values of properties, NREAM shall implement large-scale renovations (including the renewal of facilities and machineries to maintain functionality and replacements to counter natural wear and tear) and property renewal (including renovating the floor to match the office automation, introducing individual air-conditioning control systems for each floor or room and improvements to the external facade and common areas for aesthetics or general amenity).

1. Determination of Large-Scale Renovation and Renewal Policy at the Time of Acquisition

   NREAM shall formulate policies for large-scale renovations and renewals for each property considering, among other things, the age, historical renovations, and equipment levels.

   In addition to renovations for the purpose of maintenance of functionality, sufficient reviews will be conducted for renewals to distinguish the property from competitors within the sub-market, and to enhance functionality for the purpose of improving competitiveness.

2. Establishment of Large-Scale Renovation and Renewal Plans for Each Fiscal Period

   Renovation and renewal plan for each fiscal period shall be established in accordance with the large-scale renovations and renewals action plan stated above. To implement appropriate renovation and renewal, the content and budget for the plan will be reviewed taking into consideration the information contained in the property's engineering reports.

3. Overall Portfolio Review

   When establishing the above renovation and renewal plan, if the overall portfolio renovation expenses may be reduced by doing similar renovations on multiple properties at the same time, such renovation may be carried out as a package.

   In order to maintain the stability of incomes and expenditures for the overall portfolio, NREAM shall consider the balance between repairs expenses and the capital expenditure reserves (depreciation), and try to level renovation and renewal expenses for the entire portfolio for each fiscal period.

4. Consideration for Existing Tenants

   The implementation of renovations and renewals shall be determined after due consideration of the impact on existing tenants.

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(3) Property Sales Policy

Any determination to sell a real estate related asset or the underlying real estate shall be made after due consideration and a comprehensive assessment of a variety of factors including: the current and projected profitability of the property; future development and stability in the relevant sub-market; measures taken against the deterioration or obsolescence of the property; characteristics of the tenants and lease contracts; and the composition of the portfolio.