United Urban Investment Corporation

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To Our Unitholders

Ikuo Yoshida
Executive Officer
United Urban Investment Corporation

I would like to take this opportunity to express my sincere gratitude to you for your support and patronage of United Urban Investment Corporation ("United Urban").

I, Ikuo Yoshida, assumed the position of the Executive Officer of United Urban on September 1, 2017. I will dedicate all my effort to achieve our future growth and would like to humbly ask you for the same support and help given to my predecessor.

United Urban was listed in the real estate investment trust section of the Tokyo Stock Exchange (the J-REIT section) in December 2003 as a diversified J-REIT, investing in properties varied both in types of use and geographical location. Since its listing, United Urban has been making efforts to maintain or improve its revenues and reduce various risks for the purpose of obtaining stable earnings over the medium to long term. As of November 30, 2017 (at the end of the 28th fiscal period), its asset size was 610.9 billion yen, and United Urban is one of the largest among all J-REITs in terms of asset size.

In the 28th fiscal period, United Urban acquired Yoshikawa Logistics Center (acquisition price: 1.96 billion yen) located in the suburbs of Tokyo and the preferred equity securities of the specific purpose company in order to get the preferred negotiation right for acquisition of the property (United Urban’s contribution: 50 million yen). On the other hand, taking into consideration of the real estate transaction market, the potentiality of the relevant properties, etc., United Urban concluded large-scaled sales of its properties (8 properties, total sales price: 13.57 billion yen, gain on sale: 1.28 billion yen) to improve the asset quality and rise its portfolio profitability. Also, following from the previous fiscal periods, United Urban has implemented the strategic investment such as large-scale renovation particularly in hotel properties to increase the value of the properties from the long term perspective. In addition, United Urban repaid 14.2 billion yen of borrowing with the proceed of the abovementioned properties’ sale, and the amount of interest bearing liabilities at the end of the 28th fiscal period decreased to 271.6 billion yen from 285.8 billion yen as of the end of 27th fiscal period.

The performance of our existing properties has been good due to the robust business performance of Japanese corporations and increase of foreign tourists. The properties acquired during the previous fiscal period (27th fiscal period ended May 31, 2017) have also contributed to this fiscal period's profit increase. As a result, in the 28th fiscal period, United Urban was able to achieve operating revenues of 25,926 million yen, operating income of 12,482 million yen and net income of 11,319 million yen. Succeeding the previous fiscal period, a part of net income (1,136 million yen) was retained as “reserve retained for distribution” in order to strengthen the capability to cope with the risk (the corporate tax was not imposed for this reserve). In addition, United Urban reversed approx.75 million yen of the negative goodwill (“reserve for temporary difference adjustments”) and added it to the cash distribution. Consequently, the cash distribution per unit for the 28th fiscal period became 3,358 yen (increased by approx. 3% or 108 yen per unit from the previous period) breaking our highest DPU record, and we could increase cash distribution per unit for eight consecutive fiscal periods from the 21st fiscal period.

Moreover, during the 29th fiscal period ending May 31, 2018, United Urban will acquire a large-scale complex comprising a hotel and retail facilities, “RIHGA Royal Hotel Kokura・ARUARU City” (acquisition price: 16.6 billion yen) on January 26, 2018 and will strive for improvement of the asset quality and rise the portfolio profitability through replacement of the properties.

All of our officers and employees of United Urban and its asset manager, Japan REIT Advisors Co., Ltd. (JRA) shall have firm awareness of ESG (Environment, Social and Governance) and make efforts to achieve the sustained growth of United Urban while coexisting with the society and the environment.

Your continuous support and kind attention will be highly appreciated.

January 2018

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