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Investment in Modern Logistics Facilities

We intend to invest mainly in “modern logistics facilities”, which refers to highly-functional leasable logistics facilities with a minimum gross floor area of 10,000m2. There is a limited supply of modern logistics facilities, and demand for modern logistics facilities is expected to increase based on the growth of Japanese 3PL operators* as well as the e-commerce market. We intend to focus on modern logistics facilities with the following features, among others, which in our view indicate high functionality: more than 50% of the gross floor area with a floor-to-ceiling height of 5.5 meters or more and a floor load tolerance of 1.5 tons/m2 or more.

* Third-party logistics (“3PL”) operators provide partial or complete supply chain management services for client businesses. A typical 3PL company provides unified operational, storage and transportation operations that can be adjusted and customized to fit the scale and needs of client businesses to match market trends in the goods and services of the customer industry, and to match the demand for supply and logistics related services.

Growth in the Japanese 3PL Market

Since there has been an increasing need for outsourcing services as businesses look to review their logistics networks and cut costs and improve utilization of logistics networks, the market for companies that provide efficient and high-quality 3PL services has grown.

Growth in the Japanese 3PL Market

Source: Logi-Biz
*The fiscal year is represented by the calendar year (from April to March) in which the period begins.

We believe the demand for modern logistics facilities will grow as more companies attempt to improve their profitability by outsourcing logistics facilities, rather than owning and operating logistics facilities in-house, in order to mitigate business risks, and as 3PL operators increasingly choose to use modern logistics facilities.

Growth in E-Commerce

The e-commerce market has been steadily growing together with increasing consumption of internet and telephone based shopping services. We believe that the movement of goods to be delivered to customers via e-commerce will continue growing steadily into the future.

Growth in E-Commerce

Source: Ministry of Economy, Trade and Industry, E-Commerce Market Survey
Note: Based on B-to-C e-commerce in Japan.

As the e-commerce market grows in scale, we expect that there will be further increases in demand for large-scale highly convenient and functional logistics facilities, supported by the increased need to provide for diverse small package deliveries, with individualized shipping time requirements, and a heightened awareness of personal information security.

Limited Supply of Modern Logistics Facilities

The existing stock of logistics facilities in Japan is in most cases user-owned and built on a small scale. As of March 31, 2016, modern logistics facilities are scarce, comprising only 3.9% of the total logistics facilities market.

Limited Supply of Modern Logistics Facilities

Source: Ministry of Land, Infrastructure, Transport and Tourism (MLIT), Statistics for Commenced Construction Projects

Limited Supply of Modern Logistics Facilities

Source: CBRE, as of Mar. 2016

Strong Demand for Modern Logistics Facilities

The supply of modern logistics facilities in Japan has been limited due to the scarcity of land sufficient for such facilities and as a result, the vacancy rate has dropped over the last years. We believe the supply of modern logistics facilities will continue to be insufficient over the short to medium term relative to the anticipated increasing demand for such facilities and that demand for modern logistics facilities will continue to be strong.

Steady Demand for Modern Logistics Facilities

Source: MLIT, Statistics for Commenced Construction Projects
*The fiscal year is represented by the calendar year (from April to March) in which the period begins.

Steady Demand for Modern Logistics Facilities

Source: CBRE

Characteristics of Modern Logistics Facilities

We intend to invest mainly in modern logistics facilities with the following features, among others, which in our view indicate high functionality:

Large-scale Facilities:
We intend to invest mainly in large-scale logistics facilities with gross floor areas of 10,000m2 or more.
Functionality:
We intend to focus on modern logistics facilities with more than 50% of the gross floor area with a floor-to-ceiling height of 5.5 meters or more and a floor load tolerance of 1.5tons/m2 or more.

Functions of Modern Logistics Facilities

In investing in modern logistics facilities, we will also consider the following functions:

Functions of Modern Logistics Facilities

* Please note that the foregoing information shows major functions at “GLP Tokyo Ⅱ”, one of the properties we intend to acquire, as an example of a modern logistics facility. We do not intend to invest only in leasable logistics facilities with all of the above functions.

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