Portfolio Development Policy

Investment Ratio by Asset Category

SHR positions and invests in residences, which form "the bases of living" for residents, and office buildings, which form "the basis of operation for businesses", as the core assets of portfolio, and engages in investment in hotels with growth prospects; by doing so SHR will aim to build a portfolio characterized by both high stability and high quality.
Investment ratios by asset category and medium to long term target investment ratio targets are shown in the table below.

Asset Category	Asset Type	Examples of Specific Asset Types	Portfolio Investment Ratio (acquisition price basis)		Medium to Long Term Target Investment Ratio(Note)
Residential Properties	Core Assets Residence	Residences Student dormitories Company housing	30%～55％		Approx.45％
	Office building	Office buildings Data centers	30%～55％		Approx.45％
Commercial Properties	Hotel	Hotels	0%～30％		Approx.15％ （The ratio of Hotel is Approx.10%）
	Retail and other properties	Retail properties Service apartments Senior housing (serviced housing for the elderly, paid nursing homes, and adult day care centers)	0%～10％

(Note)	Target investment ratios for the portfolio are stated as medium to long term target investment ratio. It is not guaranteed or promised that those targets will be achieved, and the actual investment ratios may differ substantially from the targets.

Investment Ratio by Area

SHR has set priority investment areas in light of the characteristics of each asset category, as shown in the following chart. SHR considers Greater Tokyo as its priority investment area for residential properties, with a particular focus on Tokyo 23 wards, where it foresees ample leasing demand and a supply of superior properties, and the Three Major Metropolitan Areas as its priority investment areas for commercial properties with a particular focus on the three largest cities (Tokyo 23 wards, Osaka and Nagoya) where it believes it can achieve stable investment results against a backdrop of robust demand by tenants for bases of business operations. Regarding overseas real estate investment, although investments in residential properties and commercial properties are allowed, SHR will maintain a cautious stance in the near future.

≪Investment Ratio for Residential Properties by Geographical Area≫

Category	Specific Area	Investment Ratio (acquisition price basis)
Greater Tokyo ≪priority investment area≫	①Tokyo ②Kanagawa Prefecture ③Chiba Prefecture ④Saitama Prefecture	70% or more
Major cities	①Designated cities, etc.(Note 1) ②Commutable areas of (1) above(Note 2)	Less than 30%

(Note 1)	"Designated cities, etc." means cities outside of Greater Tokyo which fall under government designated cities, heartland cities, cities which were specially designated cities at the time of the abolishment of the former Specially Designated Cities System or seats of prefectural governments.
(Note 2)	"Commutable area" means the region within 30 minutes' commuting distance from a particular city.

≪Investment Ratio for Commercial Properties by Geographical Area≫

Category	Specific Area	Investment Ratio (acquisition price basis)
Three Major Metropolitan Areas ≪priority investment area≫	①Greater Tokyo ②Osaka Area ③Nagoya Area	80% or more
Other	All of Japan outside of the Three Major Metropolitan Areas	Less than 20%

Click here for current investment ratio data

Investment Policy for Hotel

Based on the investment strategy of investing primarily in Prime Properties, SHR invests in hotels that can be expected to be highly competitive over the medium to long term and, in principle, does not invest in simplified accommodations and the like.
SHR's specific investment areas and investment classes of hotels have been clarified as follows.

≪Strategic Location for Investment in Hotels≫

・Mainly target hotels with business and tourism demand located within the Class S Area for investment

Area Class	Area	Investment Policy (acquisition price basis)
Class S Area	Tokyo 23 wards, Yokohama-shi, Hakone-machi, Kyoto-shi, Osaka-shi, Kobe-shi, Sapporo-shi, Fukuoka-shi, Nagoya-shi, Hiroshima-shi, Kanazawa-shi, Naha-shi and Urayasu-shi	Main investment area (80% or more)
Class A Area	Tokyo, Kanagawa, Osaka, Kyoto, Hyogo, Hokkaido, Fukuoka, Okinawa, Nara, Nagano, Shizuoka and Miyagi other than Class S Area, or areas where hotels that capture narrowed demand are located (ex. Airport Terminal Hotel, etc.)	Investable area
Class B Area	Other than Class S or A area	Selective investment

≪High Quality for Investment in Hotels≫

・Highly competitive Luxury or Upper Upscale hotels are main investment target

Hotel Class (Note)	Content	Investment Policy (acquisition price basis)
Luxury Upper Upscale	Worldwide luxury hotel brands Worldwide exclusive hotel brands	Main investment class (70% or more)
Upscale Upper Midscale	Globally recognized standard hotel brands for higher end-level business/tourist use Globally recognized standard hotel brands for general business/tourist use	Investable class
Midscale Economy	Budget and economic hotel brands Lower price range than Midscale	Not invested in principle

(Note)	Hotel class will be decided base on the hotel class as of the date of acquisition.