Sustainability-Related Disclosure

STATEMENT ON PRINCIPAL ADVERSE IMPACTS OF INVESTMENT DECISIONS ON SUSTAINABILITY FACTORS

Product Name: SANKEI REAL ESTATE Inc.

SANKEI REAL ESTATE Inc. (“SRE”) promotes environmental or social characteristics, but does not have as its objective a sustainable investment within the meaning of article 9(1) of Regulation (EU) 2019/2088 ("SFDR"). We have no employees in accordance with the prohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan, and relies on Sankei Building Asset Management Co., Ltd. (the “Asset Manager”), to manage and operate the properties in our portfolio. SRE and the Asset Manager are hereinafter referred to collectively as “we,” “us” or “our.”

Summary

No sustainable investment objective	The financial products offered by SRE promote environmental or social characteristics, but do not have as its objective sustainable investment.
Environmental or social characteristics of the financial product	We believe that environmental, social and governance, or ESG, considerations are essential for our medium- to long-term competitiveness and the sustained growth of unitholder value. From this perspective, the Asset Manager has established the Sustainability Policy (defined below) which includes policies such as preserving the environment, reducing the environmental impact of assets under management, serving the local community, ensuring compliance with laws and regulations and establishing/maintaining a system of internal controls to monitor the same. Also, we continually track energy and water consumption and GHG emissions at our properties and measure our achievement against established targets based on the Energy Conservation Policy (defined below), the Water Conservation Policy (defined below), the GHG Emission Reduction Policy (defined below) and the Policy on Climate Change and Resilience (defined below). We present our key initiatives as described below based on these policies.
Investment strategy	SRE invests directly or indirectly through trust beneficiary interests in real estate and real estate-related assets. We do not invest in investee companies and have therefore opted to provide information on the governance policies adopted by SRE and the Asset Manager. We contribute to the establishment of sustainable society by investing in Green Buildings. Also, we intend to conduct management that takes into consideration ESG factors toward social sustainability while enhancing unitholder value over the medium to long term. The Asset Manager’s Sustainability Policy has given significant consideration to ESG factors in our investment and asset management processes. Prior to our investment in a property, we conduct a due diligence review of the property, covering items including building safety, soil contamination, any history of natural disasters and the usage and management of any hazardous substance (such as asbestos, PCB (polychlorinated biphenyl) and chlorofluorocarbon) used within buildings.
Proportion of investments	SRE offers financial products which promote environmental or social characteristics, but does not have sustainable investments as its objective. As of February 28, 2023, 34.6 % of the properties in the portfolio were Green Buildings (defined below), and 65.4 % were not Green Buildings based on the total floor area (calculated in proportion to co-owners’ shares).
Monitoring of environmental or social characteristics	We use the following green building certifications as indicators to measure the attainment of the environmental and social characteristics we promote: DBJ Green Building Certification; BELS Certification; CASBEE Certification; and GRESB Real Estate Assessment. Although we have not set specific targets for the acquisition ratio or rank of green building certifications, we are considering increasing the number of Green Buildings in our portfolio. We also continually monitor and track energy and water consumption and GHG emissions at our properties and measure our achievement against established targets based on the Energy Conservation Policy and other ESG-related policies.
Methodologies	The Asset Manager has established the Sustainability Promotion Office in December 2021 to effectively promote the sustainability in our business practice. The Sustainability Promotion Office collects and compiles data and internal reports on sustainability and related issues, and tracks and measures progress for meeting our ESG performance indicators and targets. The Sustainability Promotion Office has used the appropriate methodologies described below to track and measure our sustainability-related performance indicators and targets described above.
Data sources and processing	At the property level, the Asset Manager obtains certain ESG-related data from property managers, issuers of green building certifications and external consultants, depending on the type of data. At the portfolio level, the Asset Manager seeks to ensure data quality by confirming internally. The Asset Manager uses this data to measure its performance with respect to environmental and social characteristics as well as for analysis of its action plans to achieve the environmental and social characteristics promoted by SRE.
Limitations to methodologies and data	The primary limitation to methodologies and data is the necessity of reliance on property managers for data at the property level. Like many other real estate investment corporations and asset managers, we rely on data provided by the tenants, and independent verification of accuracy of such data provided by the tenants and property managers presents challenges. In addition, data at the property level provided by the tenants and property managers is generally updated on an annual basis. Accordingly, property-specific data will therefore not always be fully up-to-date. Data at the portfolio level is compiled internally at the Asset Manager and there is no third-party quality assurance or verification for the property-level data, but the data is confirmed by the relevant departments. Limitations to the methodologies and data are not expected to affect the attainment of the environmental or social characteristics promoted by SRE in any material way.
Due diligence	Prior to our investment in a property, the Asset Manager conducts due diligence on the property that considers various ESG factors. The Asset Manager investigates: (i) the use of asbestos and whether asbestos-containing building materials have been used; (ii) whether PCB (polychlorinated biphenyl)-containing machines and wastes exist; (iii) for any property or facility with a total annual energy consumption over 1,500 kiloliters of crude oil (after conversion) for three consecutive years, what measures are in place to ensure compliance with the Tokyo Metropolitan Environmental Security Ordinance, including whether the property has a plan for implementing global warming countermeasures; (iv) potential soil contamination situations; and (v) earthquake resistance and probable maximum loss and each property’s green building certification.
Engagement policies	We basically do not consider investing in properties (i) that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances, unless the defects are deemed curable immediately after the investment, and (ii) that are involved in the extraction, storage, transport or manufacture of fossil fuels.
Designated reference benchmark	SRE has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by SRE.

No sustainable investment objective

The financial products offered by SRE promote environmental or social characteristics, but do not have as its objective sustainable investment.

Environmental or social characteristics of the financial product

We believe that environmental, social and governance, or ESG, considerations are essential for our medium- to long-term competitiveness and the sustained growth of unitholder value. From this perspective, the Asset Manager has included a sustainability policy (the “Sustainability Policy”) in its asset management guidelines. The Sustainability Policy includes policies such as preserving the environment, reducing the environmental impact of assets under management, serving the local community, ensuring compliance with laws and regulations and establishing/maintaining a system of internal controls to monitor the same. In addition to the Sustainability Policy, the Asset Manager has established an energy conservation policy (the “Energy Conservation Policy”), a water conservation policy (the “Water Conservation Policy”), a GHG emission reduction policy (the “GHG Emission Reduction Policy”) and, in March 2023, a policy on climate change and resilience (the “Policy on Climate Change and Resilience”), based on which we continually track energy and water consumption and GHG emissions at our properties and measure our achievement against established targets. We present below our key initiatives based on these policies.

Reducing energy consumption. The Asset Manager has established targets for energy consumption under the Energy Conservation Policy to reduce energy consumption. Targets for energy consumption are: (i) 5% reduction in energy consumption between 2021 and 2025 with 2019 as the base year in areas within our portfolio where the Asset Manager can manage energy consumption and (ii) 1% reduction in energy consumption between 2021 and 2025 with 2019 as the base year in areas used by tenants where the Asset Manager cannot manage energy consumption. To reach the above targets, we have made efforts such as installation of LED lighting, light control systems that use daylight sensors, and “low emissivity glass” that has improved comfort for tenants by mitigating excessive heat from sunlight at our certain properties.
Reducing water use. The Asset Manager has established targets for water consumption under the Water Conservation Policy to reduce water consumption. Targets for water consumption are: (i) reduction by 1% of water consumption every year and (ii) reduction by an average of 1% per year in 5 years of water consumption. To achieve the targets, we have installed water-saving appliances to reduce water usage and water-recycling facilities for rainwater and recycled water to reduce water consumption at our certain properties.
Reducing GHG consumption. The Asset Manager has established targets for GHG consumption under the GHG Emission Reduction Policy to reduce GHG consumption. Targets for GHG consumption are: (i) reduction by 1% of GHG consumption every year in Scope1 and Scope 2, (ii) reduction by 5% of GHG consumption from 2021 to 2025 with 2019 as the base year in Scope1 and Scope 2 and (iii) reduction by 1% of GHG consumption from 2021 to 2025 with 2019 as the base year in Scope3. To achieve targets, we engage in efforts to raise tenants’ awareness of the importance of reducing GHG consumption, use renewable energy and install energy-efficient devices such as LED lighting and low emissivity glass.
Utilization of solar power energy. At one of our properties, we have installed a solar power generation system and solar panels.
Acquisition of green building certifications. To track the environmental performance of our properties, we rely on certifications issued by third-party organizations, such as the Development Bank of Japan’s Green Building certification, Building Energy-efficiency Labeling System certification, Comprehensive Assessment System for Built Environment Efficiency (“CASBEE”) certification, and other equivalent certifications. We call our properties that receive any such certifications “Green Buildings”.
Events for local communities. At one our properties, we organized, together with our sponsor, THE SANKEI BUILDING CO., LTD., various events for our local communities such as an environmental education event for children and an event to lower the temperature to mitigate the heat island phenomenon, to contribute to relationship-building within the local community. Also, in connection with the annual marathon held in Osaka, where one of our properties is located, we participate, together with our sponsor, in clean-up events involving cleaning public spaces one week prior to the marathon.
Initiatives for employees. The Asset Manager recognizes the value of its human resources and has implemented initiatives for its employees, such as supporting our employees to participate in a variety of internal and external training sessions and establishing childcare/caregiver leave programs, time off for sick/injured children or those being cared for, and reduced working hours during childcare and nursing care.
Improving tenant satisfaction. The Asset Manager has implemented initiatives for tenants such as disaster drills, distribution of disaster prevention equipment and satisfaction survey to improve tenant satisfaction.

Investment strategy

SRE invests directly or indirectly through trust beneficiary interests in real estate and real estate-related assets. We do not invest in investee companies and have therefore opted to provide information on the governance policies adopted by SRE and the Asset Manager. The due diligence policy as described below is related to target real estate property.

We contribute to the establishment of sustainable society by investing in Green Buildings. Also, we intend to conduct management that takes into consideration ESG factors toward social sustainability while enhancing unitholder value over the medium to long term. The Asset Manager’s Sustainability Policy has given significant consideration to ESG factors in our investment and asset management processes.

Prior to our investment in a property, we conduct a due diligence review of the property, covering items including building safety, soil contamination, any history of natural disasters and the usage and management of any hazardous substance (such as asbestos, PCB (polychlorinated biphenyl) and chlorofluorocarbon) used within buildings. As a general rule, we do not invest in properties that do not meet the standards for soil contamination and other environmental contamination set in accordance with the Air Pollution Control Act of Japan, the Soil Contamination Countermeasures Act of Japan and other applicable environmental laws and ordinances, unless any defects are deemed curable immediately after the investment.

Investment research and investment decision-making. We conduct preliminary investment research to understand how our activities impact material ESG factors and how these can affect our reputation, capital value and stakeholders. Our investment research analyzes various ESG factors such as how we can reduce our environmental load, coexist with local communities where the property is located, contribute to solving social issues, and achieve sustainable growth for all stakeholders. We consider these ESG factors throughout an asset’s lifecycle by tracking and monitoring the sustainability performance of our assets and collaborating with our workforce, partners and communities. The Asset Manager’s investment committee (the “Investment Committee”) considers due diligence findings on ESG factors along with other economic and operational considerations when making a final decision to invest in a property.
Due diligence. Prior to our investment in a property, the Asset Manager conducts due diligence on the property that considers various ESG factors. Upon the review of environmental issues discovered through due diligence review, we evaluate risks associated with climate change and environmental issues.

While there is no third-party rating used to assess our governance practices, we, along with the Asset Manager, have introduced the following measures to assess and enhance our governance systems:

Decision-making in the case of property transactions with an interested party. Before entering into a property transaction with an interested party, in order to address conflicts of interest, the Asset Manager must generally obtain approval from its compliance committee, which includes outside experts, such as real estate appraisers, who have the knowledge and experience related to real estate to make an objective judgment, and the Investment Committee, as well as approval from our board of directors.
Organization for promoting sustainability. In order to establish an appropriate management structure and promote our initiatives based on the Sustainability Policy, the Asset Manager has established a sustainability promotion office (the “Sustainability Promotion Office”) on December 1, 2021.
Internal audit. The Asset Manager examines whether internal management and risk control are being conducted appropriately and efficiently in accordance with applicable laws and regulations and internal rules, reports the results to its representative director and the board of directors. Based on the results, the representative director notifies the divisions subject to internal audits of the issues and makes instructions regarding improvements. Internal audits cover all organizations, divisions and operations within the Asset Manager.
Whistleblower protection. We have a whistleblower protection system that our employees may use to report a compliance violation by phone, email, online or sealed letter. An outside consulting firm receives the report, and the compliance division of the Sankei Building Group initiates an investigation and implements appropriate measures. All of our employees are informed of this system through our internal portal. Through this system, we promote early detection and elimination of violations of laws, regulations and internal rules by our employees.

Proportion of investments

SRE offers financial products which promote environmental or social characteristics, but does not have sustainable investments as its objective. As of February 28, 2023, 34.6 % of the properties in the portfolio were Green Buildings, and 65.4 % were not Green Buildings based on the total floor area (calculated in proportion to co-owners’ shares).

Monitoring of environmental or social characteristics

We use the following green building certifications as indicators to measure the attainment of the environmental and social characteristics we promote. Although we have not set specific targets for the acquisition ratio or rank of green building certifications, we are considering increasing the number of Green Buildings in our portfolio.

DBJ Green Building Certification. The DBJ Green Building Certification is certification developed by the Development Bank of Japan Inc. (“DBJ”) to identify and certify real estate properties that satisfy various social needs including environmental quality.
BELS Certification. The Building-Housing Energy-efficiency Labeling System (“BELS”) is a third-party certification system, established under the jurisdiction of Japan’s Ministry of Land, Infrastructure, Transport and Tourism, to rate houses and buildings based on energy saving performance in accordance with the Act on Improving Energy Consumption Performance for Architectural Structures of Japan.
CASBEE Certification. CASBEE is a system established under the leadership of Japan’s Ministry of Land, Infrastructure, Transport and Tourism for the purpose of recognizing and assessing well-managed properties with significant environmental benefits.
GRESB Real Estate Assessment. To track our ESG performance, we obtain a third-party assessment, GRESB Real Estate Assessment (“GRESB”), which is an annual benchmarking assessment to measure the level of ESG integration achieved by real estate companies and funds. Launched in 2009 by a group of major European pension funds that played leading roles in launching Principles for Responsible Investment (PRI), the GRESB framework looks at the sustainability efforts of real estate companies and funds, rather than at the property level.

We also continually monitor and track energy and water consumption and GHG emissions at our properties and measure our achievement against established targets based on the Energy Conservation Policy and other ESG-related policies.

Methodologies

The Asset Manager has established the Sustainability Promotion Office in December 2021 to effectively promote the sustainability in our business practice. The Sustainability Promotion Office collects and compiles data and internal reports on sustainability and related issues, and tracks and measures progress for meeting our ESG performance indicators and targets. The Sustainability Promotion Office has used the following methodologies to track and measure our sustainability-related performance indicators and targets.

Green building certifications. To confirm and assess each property’s attainment of social or environmental characteristics through the rank obtained by each property, we use green building certifications, which are issued by third-party organizations. For the properties that have not acquired a green building certification, the Sustainability Promotion Office considers potential measures to meet the standards for obtaining a green building certification with the aim of increasing the number of green building certifications on our properties. The status of green building certifications held by properties in our portfolio are reported to the sustainability promotion committee of the Asset Manager (the “Sustainability Promotion Committee”) and disclosed on our website. We also utilize the evaluation points of green building certifications to improve our properties.
ESG data coverage. We continually monitor and track energy and water consumption and GHG emissions at our properties to analyze and prepare action plans for reduction of these consumption and emissions. The Sustainability Promotion Office collects and compiles data related to energy and water consumption and GHG emissions from the property managers. This data is reported to the Sustainability Promotion Committee quarterly. The Sustainability Promotion Committee creates and supervises the action plans for reduction of these energy and water consumption and GHG emissions based on the analysis of this data.

Data sources and processing

Green building certifications. At the property level, the property managers initially provide energy and water consumption and GHG emissions data to the Asset Manager. The Sustainability Promotion Office of the Asset Manager collects and submits those data and other relevant environmental performance data and supporting materials to the established third-party organizations that issue green building certifications for the properties in our portfolio. For CASBEE Certifications and BELS Certifications, the acquisition operations above are outsourced to external consultants. The Sustainability Promotion Office calculates and tracks the properties that hold green building certifications. Obtaining environmental certifications issued by the established third-party organizations helps to ensure the quality of data processing and the credibility and quality of green buildings.
ESG data coverage. At the property level, the Sustainability Promotion Office of the Asset Manager collects energy and water consumption and GHG emissions data from the property managers monthly. At the portfolio level, the Sustainability Promotion Office compiles these data. To ensure data quality, the Asset Manager confirms the data internally.

Limitations to methodologies and data

The primary limitation to methodologies and data is the necessity of reliance on property managers for data at the property level. Like many other real estate investment corporations and asset managers, we rely on data provided by the tenants, and independent verification of accuracy of such data provided by the tenants and property managers presents challenges. In addition, data at the property level provided by the tenants and property managers is generally updated on an annual basis. Accordingly, property-specific data will therefore not always be fully up-to-date.

Data at the portfolio level is compiled internally at the Asset Manager and there is no third-party quality assurance or verification for the property-level data, but the data is confirmed by the relevant departments.

Limitations to the methodologies and data are not expected to affect the attainment of the environmental or social characteristics promoted by SRE in any material way.

Due diligence

Prior to our investment in a property, the Asset Manager conducts due diligence on the property that considers various ESG factors. (i) The Asset Manager investigates the use of asbestos and whether asbestos-containing building materials have been used. The Asset Manager conducts asbestos content testing when existing records and disclosure on the use of asbestos are insufficient, and requires the seller to remove, seal, or contain any remains in accordance with relevant laws on waste disposal and cleaning. (ii) The Asset Manager investigates whether PCB (polychlorinated biphenyl)-containing machines and wastes exist based on information in the property’s records and in the seller’s disclosure and reports. (iii) For any property or facility with a total annual energy consumption over 1,500 kiloliters of crude oil (after conversion) for three consecutive years, the Asset Manager investigates what measures are in place to ensure compliance with the Tokyo Metropolitan Environmental Security Ordinance, including whether the property has a plan for implementing global warming countermeasures. For properties under emission reduction obligations, the Asset Manager would confirm the progress and prospect of meeting the emission reduction targets and deadlines. (iv) The Asset Manager investigates potential soil contamination situations through a clear and objective decision-making process with information from reports, seller’s disclosure materials, and field investigations, in order to eliminate the possibility of soil contamination. The Asset Manager requires that any existing soil contamination issue be addressed in accordance with relevant environmental laws. (v) The Asset Manager also evaluates earthquake resistance and probable maximum loss, and reviews each property’s green building certification at the time of acquisition. Upon the review of environmental issues discovered through due diligence review, we evaluate risks associated with climate change and environmental issues.

Engagement policies

We basically do not consider investing in properties that do not meet the standards for soil contamination and other environmental contamination in accordance with the Air Pollution Control Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances, unless the defects are deemed curable immediately after the investment.

Also, we do not invest in real estate properties involved in the extraction, storage, transport or manufacture of fossil fuels.

Designated reference benchmark

SRE has no benchmark index designated as a reference benchmark to meet the environmental or social characteristics promoted by SRE.

REMUNERATION AND SUSTAINABILITY RISKS (SFDR ARTICLE 5 DISCLOSURE)

The Asset Manager has a remuneration policy in place which aims to support its strategy, values and long-term interest, including its interest in sustainability. The Asset Manager’s remuneration policy is consistent with the integration of sustainability risks as follows.

Employees receive remuneration that consists of grade-based salary and allowances including statutory overtime allowance, additional overtime allowance, midnight allowance, holiday allowance and accommodation allowance.
Each employee’s grade-based salary is determined upon comprehensive consideration of the following factors: (i) ability and experience, (ii) performance evaluation, in some cases, including contribution to sustainability targets, (iii) job type and (iv) final year of school and length of service.
Each employee’s remuneration is increased or decreased based on performance evaluation, ability, responsibilities and other factors including contribution to sustainability targets in April each year.
Methods of calculation and payment, timing of payment are determined based on compensation rules.
Each employee may receive twice-a-year bonuses based on evaluation and other factors including contribution to sustainability targets.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE IMPACT OF SUCH RISKS ON THE RETURNS OF SANKEI REAL ESTATE INC. (SFDR ARTICLE 6 DISCLOSURE)

The Asset Manager has established the Sustainability Promotion Committee, which generally meets every quarter, to consider and propose objectives, policies and measures related to sustainability. We identified for ourselves a set of material ESG issues including sustainability risks through discussion at the Sustainability Promotion Committee. The material ESG issues are subject to periodical review and update to reflect changes in society and environment.

The Asset Manager has established an environment management system (EMS) and implements a PDCA (plan, do, check and act) cycle every year to manage the environmental load of our portfolio and achieve our environmental targets. The sustainability risks of our properties are periodically evaluated with the purpose of identifying and understanding the sustainability risks of our properties. If significant sustainability risks are discovered based on the evaluation results, the office will propose improvement measures aimed at reducing such risks.

Under this organizational structure, we have instituted a number of initiatives to promote the environmental and social characteristics. Such initiatives include initiatives for saving energy and water and reducing GHG emissions, and initiatives for employees and local communities.

In order to conduct sustainable asset management while maximizing the value of our properties, we have taken into consideration ESG factors in our investment and asset management processes.

While sustainability issues will severely impact our business activities, we believe that such issues may also become potential business opportunities to create new value for sustainable growth. Accordingly, we position our commitment to sustainability as a top priority in our management strategies.

The Asset Manager’s investment decision-making process involves assessment of material ESG-related risks and opportunities to ensure that our investment strategy is sustainable. With each acquisition opportunity, SANKEI REAL ESTATE Inc. and the Asset Manager review ESG-related due diligence findings and risk assessment. These findings and assessment are required to be considered by the Asset Manager’s Investment Committee and Board of Directors of SANKEI REAL ESTATE Inc. before a final decision is made on the investment.

As part of due diligence review prior to investment in a property, the Asset Manager conducts due diligence on the property, including environment assessment and evaluation of earthquake resistance and probable maximum loss. The Asset Manager also reviews each property’s green building certification at the time of acquisition. In addition to the review of environmental issues discovered through due diligence review, we evaluate risks associated with climate change and environmental issues.

As a result of the growing interest in ESG factors among our investors and other stakeholders, we believe that insufficient engagement in ESG-related issues could materially adversely impact our reputation, business activities and our unit price. Having established the Sustainability Policy, we will take ESG factors into serious consideration when investing in new properties and managing our portfolio in accordance with such policy. We believe that our ongoing ESG initiatives will contribute to our sustainable growth and improve unitholders’ value while mitigating such ESG-related risks. In addition, we believe that such initiatives also contribute to reduction of the environmental impact of Japan’s overall economy while contributing to local communities and regional economies and at the same time generate sustainable growth in returns.

Physical risks

The assets in which we invest are exposed to physical climate risks, which may be realized through, for example, floods, storms, heat and limited access to natural resources, which in turn may cause the value of the assets to decline. Specifically for SANKEI REAL ESTATE Inc., the following risks are particularly relevant.

Flood risk: This is a relevant risk for SANKEI REAL ESTATE Inc., because some of the assets in which it invests are located in areas that may be flooded. Flooding in any of these areas may cause our assets to be immersed in water, which in turn may have a negative effect on the value of these assets. The Asset Manager addresses this risk at the time of acquiring any property by reviewing the hazard map provided by the local government and the history of flooding in the relevant area. Following acquisition of any property, the Asset Manager also monitors updates to the hazard map and addresses any flood risk as appropriate by taking preventive measures such as storing and setting up tarpaulin and waterproof board as necessary and renovating buildings to make them water-resistant. This risk is assessed as low for SANKEI REAL ESTATE Inc. because we believe these preventive measures to be effective.

Transition risks

The assets in which we invest are exposed to physical transition risks, which may be realized through, for example, changes in regulations, technical developments and/or social developments, which in turn may cause the value of the assets to decline. Specifically for SANKEI REAL ESTATE Inc., the following risks are relevant.

General transition risk: SANKEI REAL ESTATE Inc. invests in a variety of real estate located in a range of areas. New government policy, technical developments and/or changes in consumer (tenant) preferences may affect the performance of our properties, and certain developments may even make our properties obsolete. The Asset Manager addresses this risk by monitoring and educating itself of trends among tenants, particularly in terms of what they seek from our properties. This risk is assessed as low for SANKEI REAL ESTATE Inc. because we believe that we are capable of making timely upgrades and renovations to our properties and selling them as land for development, which can be used for various purposes.