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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 hotels and residential properties and position them as Core Assets. With regard to domestic hotel assets, INV will consider potential acquisition of properties that are expected to contribute to stable growth in the portfolio revenue, and that will contribute to stable revenues with a fixed rent scheme, based on a comprehensive review of trends of foreign tourists, demand for accommodations from business and tourist travelers in and surrounding areas in which potential investment targets are located, and terms of leasing contracts, etc. With regard to overseas hotel assets, INV will carefully select high-quality hotels with expected stable demand, in order to enhance the stability of revenues through geographically-diversified asset allocation and realize the improvement of profitability through investments in highly profitable properties. These high-quality hotels should be operated by an international hotel operator with a wide-ranging track record of hotel operation globally with strong expertise in marketing and sales activities, or such an international operator should provide operational know-how, systems or branding for such hotels. INV will examine investment in residential properties with a focus on highly-competitive properties consisted of smaller units located in major cities, based on analyses of occupancy rates, trends of rental markets and whether there are competitive properties or not. INV will position office buildings, retail properties, Senior Housing Properties, parking facility, 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 further improve its ability to collect information on property transactions, INV will endeavor to expand the information channels unique to the Asset Manager while broadly pursuing opportunities to acquire properties in the market. In addition, INV will have periodical information exchanges and other opportunities to work with Fortress Investment Group LLC and its affiliates (“Fortress Group”), which is a sponsor of INV and a subsidiary of Softbank Group Corp., the parent company holding a 100% stake in the Asset Manager directly or indirectly, in an effort to collect market information in more diverse ways. In principle, in the category of overseas hotel assets, INV will only invest in hotels developed, owned or operated by Fortress Group, the sponsor of INV, to ensure that INV can obtain adequate information necessary for investment decisions, and obtain sufficient support for post-acquisition operations. CIM executed "Sponsor Support Agreement" with Fortress Investment Group Japan Godo Kaisha (the "Support Company"), one of sponsor support companies, 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.
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.
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. While aiming to increase revenues by capitalizing upon the corporate marketing expertise and hotel operations of Mystays Hotel Management Co., Ltd., the tenant of INV’s domestic hotel assets, INV will aim to stabilize and maximize hotel revenues and rental income from domestic hotels by appropriately managing hotel operators such as Mystays Hotel Management. INV will also seek to stabilize and maximize hotel revenues from overseas hotel assets by appropriately selecting and managing hotel operators with experience in the relevant areas, or by making arrangements for appropriate selection and management of operators based on support from Fortress Group.
  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.