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Growth Strategy

One of INV' s basic policies is to aim for the sound growth of its investment assets over the medium and long term. To achieve this aim, INV seeks the expansion of the size of its investment assets (external growth) and growth of revenue from management of the assets (internal growth) based on the growth strategy shown below.

(I) External Growth

INV aims for external growth with an emphasis on stable profits over the medium to long term. To attain stable profits over the medium to long term, INV will primarily acquire residential properties and hotels and position them as Core Assets. With respect to hotel properties, taking into consideration trends of foreign travelers, accommodation demand of business trip customers and tourists in the area around properties where INV considers to invest in, and types of lease agreements, INV will consider acquiring both (i) properties which are expected to grow portfolio income and (ii) properties which will contribute to stability of income by adopting a fixed rent scheme. With respect to residential properties, focusing on small-type properties in major urban areas, INV will analyze occupancy rate, rental market trend and existence of competing properties and consider acquiring properties with high competitiveness. Moreover, INV will position office buildings, commercial facilities, Senior Citizens Properties and pay-by-the-hour parking lots, etc. as Sub Assets, which are to complement the Core Assets, and examine the acquisition of a wide variety of property types giving consideration to such factors as the market situation, portfolio composition ratios and the effect of portfolio allocation by geography.
Moreover, in order to improve further capabilities to collect information on property transactions, INV will endeavor to expand the information channels unique to the Asset Management Company while broadly pursuing opportunities to acquire properties in the market. In addition, INV will have periodical information exchanges and other opportunities to work with Calliope Godo Kaisha, our unitholder, as well as Fortress Investment Group LLC and its affiliates, in an effort to collect information on the market in a multi-faceted way. CIM executed "Sponsor Support Agreement" with Fortress Investment Group Japan Godo Kaisha (the "Support Company"), an affiliate of Calliope, on June 3, 2015, in light of details of support which the Support Company provided up to now, in order for CIM to confirm and clarify the position of the Support Company and rights and obligations of both the Support Company and CIM. Moreover, in order to ensure choice of further growth of portfolio in the future, INV renewed a memorandum concerning preferential negotiation rights regarding acquisition of 24 hotel properties and nine residential properties (hereinafter "Memorandum") on March 10, 2016.
As for the outline of the Sponsor Support Agreement and the Memorandum, please see below.

<Outline of the Sponsor Support Agreement>

Outline of support related to external growth in the above Sponsor Support Agreement is as follows:

(Information Services)
Support Company may disclose information regarding real estate to CIM at its absolute discretion when (i) Fortress Investment Group LLC and its affiliated corporations sell real estate which they own, develop or manage, and the Support Company reasonably determines that it conforms to CIM's investment standard, or (ii) sale information is provided by the third parties other than the Sponsor Group.

(Various advisory businesses)
Support Company may provide various advisory businesses to CIM.

(Information exchange)
CIM and the Support Company shall exchange information regarding sale and purchase of real estate and rental market.

<Outline of the Memorandum>
The outline of the preferential negotiation rights in the Memorandum is as follows:
When the related companies of Fortress Group sell trust beneficiary interests concerning subject real estate or subject real estate which they own, they shall give notice thereof to INV prior to giving notice to the third parties during the period from March 10, 2016 through March 9, 2017.
Moreover, if INV notifies a request to purchase trust beneficiary interests concerning subject real estate or subject real estate within 10 business days after receipt of such notification, the related companies of Fortress Group shall discuss in good faith with INV the conditions of purchase and sale thereof during the period of discussion set forth in the Memorandum.

(II) Internal Growth

INV aims to achieve steady internal growth by expanding revenues from investment assets through proactive and efficient operation and management based on the following policies.

A. Maintaining and Improving Income

INV aims to maintain and improve occupancy rates and income from properties by implementing the following measures:

  1. Boost satisfaction of tenants by providing quality services matched to suit the characteristics of individual investment assets and tenant attributes and enhancing relationship with tenants.
  2. Promptly identify tenant trends and engage in flexible leasing activities while working to respond to low seasonal demand
  3. For hotels, aim to improve revenue through utilizing the corporate sales capabilities and management skills of MyStays Hotel Management Co., Ltd., who is the tenant, while at the same time aiming to stabilize and maximize hotel revenues and rental income through appropriate management of operators including MyStays Hotel Management Co., Ltd.
  4. Aim to maximize the value of assets acquired and relative competitiveness by drawing up long-term repair plans and implementing well-organized repairs and capital investments.

B. Reducing operational and management costs

INV aims to reduce operational and management costs by implementing the following measures:

  1. Drive maximization of revenue by regularly verifying appropriate management levels and attempting to reduce maintenance and management fees and payments to various contractors to the extent possible. INV reviews the level of management and reduces costs while ensuring the standards required to maintain and enhance income.
  2. Promote efficient operation and management of assets acquired by leveraging a property management system designed to efficiently manage reports from property management companies.

C. Efficient Supervision of Property Management

INV selects property management companies which have good knowledge and track records in property management in each investment target region so as to efficiently supervise property management in accordance with INV's investment policy of promoting geographically diversified investment.
Property management companies are selected after comprehensively examining their experience and capacity in the operation and management of real properties, track records in managing the assets targeted for acquisition by INV, networks with various contractors, and their capacity to operate and manage properties in accordance with the aims of INV.