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").

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 May 31, 2018 (at the end of the 29th fiscal period), its asset size was 608.6 billion yen, and United Urban is one of the largest among all J-REITs in terms of asset size.

In the 29th fiscal period, United Urban acquired “RIHGA Royal Hotel Kokura・ARUARU City”, a large-scale complex comprising a hotel and retail facilities, etc. located in Kitakyusyu City (acquisition price: 16.6 billion yen). On the other hand, taking into consideration of the potentiality of the relevant properties and the real estate transaction market, etc., United Urban has decided to sell two retail properties (total sales price: 34.0 billion yen, total estimated gain on sale: 6.1 billion yen) to improve the asset quality and rise its portfolio profitability through the replacement of properties (one property will be sold in three installments over three fiscal periods including the 29th fiscal period). Also, United Urban has continued to implement the strategic investment such as large-scale renovation particularly in hotel properties to increase the value of the properties from the medium- to long-term perspective.

The environment for the asset management of our existing properties has been good due to the robust business performance of Japanese corporations and the increased demand by the inbound tourists. The properties acquired in the 29th fiscal period and the gains on sale of properties have also contributed to this fiscal period's profit increase. As a result, in the 29th fiscal period, United Urban was able to achieve operating revenues of 29,166 million yen, operating income of 13,089 million yen and net income of 11,973 million yen. Succeeding the previous fiscal period, a part of gains on sale (1,264 million yen) was retained in order to strengthen the capability to cope with the risk (the corporate tax was not imposed for this retention). 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 under the provisions of laws and regulations, etc. Consequently, the cash distribution per unit for the 29th fiscal period became 3,530 yen (increased by approx. 5% or 172 yen per unit from the previous fiscal period) breaking our highest DPU record, and we could increase cash distribution per unit for nine consecutive fiscal periods from the 21st fiscal period.

In addition, United Urban used a portion of the proceeds from the properties’ sales including that of previous fiscal period to repay the interest bearing liabilities, and the amount of interest bearing liabilities at the end of the 29th fiscal period decreased to 255.8 billion yen from 271.6 billion yen as of the end of 28th fiscal period.

Moreover, during the 30th fiscal period ending November 30, 2018, United Urban acquired “Chatle Otemachi S・N”, a rental apartment for families located in Kitakyusyu City (acquisition price: 3.3 billion yen) on July 3, 2018. United Urban will continue to put its energy into increasing the profit through the reinvestment of the proceeds from the properties’ sales.

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.

July 2018

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