アドバンス・レジデンス投資法人（3269） – Notice Concerning Acquisition of Investment Asset (RESIDIA Setagaya-Wakabayashi)

For Immediate Release March 29, 2022 Advance Residence Investment Corporation Securities Code: 3269 1-105 Kanda-Jinbocho, Chiyoda-ku, Tokyo Wataru Higuchi, Executive Director Asset Management Company: AD Investment Management Co., Ltd. Takeshi Takano, President Inquiries: Isao Kudo, Director TEL. +81-3-3518-0480 Notice Concerning Acquisition of Investment Asset (RESIDIA Setagaya-Wakabayashi) AD Investment Management Co., Ltd. (ADIM), the asset management company to which Advance Residence Investment Corporation (ADR) entrusts the management of its assets announced its decision today to have ADR acquire an asset located in Japan (hereafter, the “Acquisition”) as detailed below as part of ADR’s growth strategy. ADIM decided on the following acquisition pursuant to the target and policy of asset management as stipulated in the Articles of Incorporation of ADR, for steady increase in asset size, and diversification and enhancement of the 1. Details of the Acquisition portfolio. Name of Asset-To-Be-Acquired (Note 1) (Asset type) Proposed Acquisition Price (Note 2) (Price / Appraisal ratio) Real Estate Appraisal Value (Note 3) NOI Yield (Note 4) Yield after Depreciation (Note 5) Building Age (Note 6) Seller Scheduled Contract Date Scheduled Acquisition Date Acquisition Financing (Payment Method) Collateral RESIDIA Setagaya-Wakabayashi (Beneficiary Interests in Trust) 1,100 million yen (85.3%) 1,290 million yen 5.0% 4.0% 24.1 years Not disclosed March 29, 2022 March 30, 2022 or a date to be separately agreed upon with the seller Funds in hand (lump-sum payment on delivery) None (Note 1) The name of the asset-to-be-acquired is scheduled to be changed after acquisition by ADR, and the name after the change is stated here. (Note 2) “Proposed Acquisition Price” refers to the purchase price written in the transfer agreement of the beneficial interest in trust for the asset to-be-acquired and does not include various expenses needed for acquisition, such as taxes and public dues. (Note 3) The appraisal date of the asset-to-be-acquired is as of February 1, 2022. (Note 4) “NOI Yield” is calculated as follows: annualized NOI written in the appraisal document at the time of the acquisition of the asset-to-be-acquired and calculated using direct capitalization method / proposed acquisition price x 100. The calculated yield is rounded to the second decimal point. The appraisal figure for annualized NOI assumes that the exclusively owned area is to be renovated. (Note 5) “Yield after Deprecation” is calculated as follows: (annualized NOI written in the appraisal document at the time of the acquisition of the asset-to-be-acquired and calculated using direct capitalization method – annual depreciation cost) / proposed acquisition price x 100. The calculated yield is rounded to the second decimal point. As is the case with the existing portfolio of ADR, the depreciation cost of the asset to-be-acquired is calculated at the time of acquisition using the straight-line method under certain assumptions and estimated at 11,155,000 yen a year. (Note 6) “Building Age” is the age of the building as of the date of this document and is rounded to the second decimal point. 1 A tough real estate market continues for buyers due to a limited new supply of high quality for-rental residential properties in good locations and the continuing elevated prices of centrally located properties in major cities which can attract a stable rental demand. In this environment, ADR has decided to acquire a for-rental residential property in Setagaya-ku, Tokyo at an acquisition price equivalent to 85.3% of the appraisal value with a NOI yield of 5.0%. On acquiring this property, ADR has highly rated the following attributes of the property: ・Demand is expected from singles and DINKs who commute to the center of Tokyo as the property has good access to transport facilities: the property is a four-minute walk from Wakabayashi Station on the Tokyu Setagaya Line, a 15-ninute walk from Sangenjaya Station on the Tokyu Den-en-toshi Line, with Shibuya Station, a major terminal, being a four-minute ride (Note 7) from Sangenjaya Station. ・The area around Sangenjaya Station has many essential and convenient facilities as well as entertainment ・A further increase in the asset value is expected with the renovation of the property’s exclusively owned area after facilities. acquisition. (Note 7) Ride time when using express train 2 2. Address: 3-7-13 Wakabayashi, Setagaya-ku, Tokyo The Asset-To-Be-Acquired (C) INCREMENT P CORPORATION 3 3. Photos of Asset-To-Be-Acquired 4 4. Summary of Asset-To-Be Acquired Property Number Name of Asset-To-Be-Acquired Address Land Building Type of Ownership Site Area Zoning FAR / Building Coverage Ratio Type of Ownership Total Floor Area Structure / Floors Use Construction Completion Date Building Inspector Building Designer Structural Engineer Construction Contractor Trustee Trust Contract Period Property Manager Master Lessee Master Lease Type Summary of Building Conditions Investigation Report Investigator Investigation Date Emergency Repair Costs Short-term Repair Costs (within 1 year) Long-term Repair Costs (next 12 years) Building Replacement Price Earthquake PML Lease Conditions Occupancy Rate (based on floor area) Monthly Rent (including common service charges) Deposits, Guarantees, etc. Number of Units by Type Point in Time Total Tenants Leasable Units Leased Units Leasable Floor Area Leased Floor Area Single Compact Family Large Dormitory Other Category I exclusive high and medium building residential zone T-181 RESIDIA Setagaya-Wakabayashi 3-7-13 Wakabayashi, Setagaya-ku, Tokyo Proprietary ownership 938.58m2 200%/60% Proprietary ownership 1,535.75m2 Reinforced concrete with flat roof / 3 floors Multi-family housing March 16, 1998 Setagaya-ku Total Housing K.K. C&C Office LLC Tokyo Branch, Kabuki Construction Co., Ltd. Sumitomo Mitsui Trust Banking Corporation (planned) From March 30, 2022 to March 31, 2032 (planned) ITOCHU Urban Community Ltd.(planned) ITOCHU Urban Community Ltd. (planned) Pass-through Tokio Marine dR Co., Ltd. February 7, 2022 46,053 thousand yen 367,000 thousand yen 9.7% As of February 28, 2022 1,239.26m2 1,165.46m2 94.0% 4,195 thousand yen 4,262 thousand yen – – 1 42 40 18 24 0 0 0 0 None Special Notation Please refer to “Notes and definitions on items on the tables in the press releases for asset acquisition” on ADR`s website for details on items on the above table（https://www.adr-reit.com/financial/bukken/） 5 5. Appraisal Report Summary RESIDIA Setagaya-Wakabayashi Price as of February 1, 2022 Appraiser Japan Real Estate Institute Appraisal Value 1,290,000 thousand yen Appraisal Items Appraisal Value (thousands of yen) Basis Income capitalization approach value was appraised using both the DCF method and direct capitalization method. Income Capitalization Approach Value Direct Capitalization Price Total Potential Income Rent Income Other Income Estimated the unit price levels of rents steadily receivable over the medium to long term, based on the average rent under existing lease agreements, as well as rent levels that assume the leasing of the target property after renovation. Recorded income such as key money and renewal fee income by estimating the annual average renewal rate and the average contract period. Total Effective Income 67,339 Losses from Vacancies, etc. 3,172 Estimated steady levels of occupancy rates over the medium to long term based on the occupancy status and supply-demand trends of comparable properties as well as the occupancy status and future trends of the target property. Losses from Delinquencies 0 Recording this item was considered unnecessary given lessee situations. Expenses from Rental Business 12,197 Maintenance and Management Fees 2,636 Estimated by referring to historical figures and the levels of comparable properties and taking into account the uniqueness of the target property. Utilities Costs 550 Estimated by referring to historical figures and taking into account the levels of comparable properties and the uniqueness and other factors of the target property. Management Commission Fees 1,925 Estimated by referring to fees under planned contract terms and taking into account fees of comparable properties and the uniqueness and other factors of the target property. Taxes and Public Dues 2,608 Estimated based on documents concerning taxes and public dues. Non-life Insurance Premiums Leasing Expenses Repair Costs Other Expenses Net Operating Income Earnings from Deposits Capital Expenditures Net Cash Flow DCF Price Cap Rate DCF Price Discount Rate Terminal Cap Rate Cost Approach Value Land Ratio Building Ratio 88 Estimated by taking into account insurance premiums of insurance policies and insurance premiums of buildings comparable to the target building. 2,770 Renewal fees such as administrative fees and advertising fees required for attract new tenants are estimated by referring to contract terms and the lease terms of comparable properties and taking into account the annual average turnover rate and occupancy rate. In addition to restoration costs based on the usual levels of such costs and the percentage to be borne by lessees, repair costs are estimated by taking into account historical figures, the levels of comparable properties, and the annual average of repair/renewal costs in the ER. Estimated as the number of months of steady security deposits over the medium to long term, multiplied by the occupancy rate, and then multiplied by an estimated investment return of 1.0%. Estimated by considering the level of capital expenditures of comparable properties, building age, the annual average repair/renewal expenses in the ER, and other factors. Estimated by adjusting the yield spread determined by location of the target asset, building specifications, and other conditions from the base yield for each area while also considering future uncertainties and actual cap rates in deals for comparable properties. 3.4% Estimated by comprehensively considering the uniqueness of the target property, with reference to investment returns for comparable properties. 3.7% Estimated by considering potential increases in capital expenditures due to the building’s deterioration with age as well as the impact of property market uncertainties and aging of the building on liquidity. Other Matters of Consideration None 6 1,290,000 1,310,000 70,511 67,213 3,298 1,620 55,142 0 51 2,687 52,506 4.0% 1,260,000 1,330,000 95.0% 5.0% 6. Seller Profile The seller is a Japanese stock company. Its details are not disclosed based on the seller’s wishes. The seller does not fall under a party that has a particular vested interest in ADR or ADIM. 7. Property Titleholder (for transactions with parties with special interest) Omitted. Property is not acquired from parties with special interest. 8. Disclosures on ADIM’s Vested Interest concerning the Asset-to-Be-Acquired ADR is scheduled to sign a master lease agreement and delegate property management services regarding the assets-to-be acquired to ITOCHU Urban Community Ltd. (IUC). IUC is a related party of ADIM. Accordingly, the transaction approval procedures stipulated in ADIM’s bylaws on “Rules Regarding Related Party Transaction” will be performed. 9. Matters Concerning Earthquake Resistance The validity of structural calculation documents has been examined by a third-party inspector. ADR has obtained the inspection results stating that no intentional manipulations, falsifications, or other corruptions in the structural calculation document were found and that the structural calculation is deemed to have been performed in accordance with the law. Third-Party Inspector Profile Trade Name Tokio Marine dR Co., Ltd. Head Office Location 1-5-1 Otemachi, Chiyoda-ku, Tokyo Representative Taizo Shimakura, President and Chief Executive Officer Capital 100 million yen Large Shareholder Tokio Marine Holdings, Inc. 1. Examination, research, provision of information, diagnosis, consulting, seminars, publications, and training on safety, disaster prevention, health, environment, product safety, and information management, etc. 2. Contracting of corporate and other business and administration related to safety, disaster prevention, health, environment, product safety, and information management, etc. 3. Design, implementation, and supervision of construction work, civil engineering work, equipment installation, soil contamination removal work, etc. 4. Market data gathering and analysis, risk measurement, due diligence including corporate value calculation, Principal Business Relationship with ADR or ADIM etc. None 7 10. Broker Profile Broker Name Head Office Location Representative Capital Brokerage Fee Relationship with ADR or ADIM 11. Outlook Chuo-Nittochi Solutions Co., Ltd. 1-4-1 Kasumigaseki, Chiyoda-ku, Tokyo Hiroshi Kisanuki, President and Representative Director 450 million yen Not disclosed according to the broker’s wishes. None The impact of this acquisition on the earnings forecast for the 24th fiscal period (from February 1 to July 31, 2022) and the 25th fiscal period (from August 1, 2022 to January 31, 2023), published in the Brief Summary of Kessan Tanshin (Financial Report) dated March 17, 2022, will be negligible, and no change will be made to the forecast. About Advance Residence Investment Corporation Advance Residence Investment Corporation is the largest residential J-REIT, investing in over 270 rental apartments located mostly in central Tokyo and in other major cities throughout Japan (AUM over 460 billion yen). ADR can be expected to have a stable dividend in the long-term and can be considered as a defensive J-REIT, based on the stable income from residential assets and with the largest dividend reserve among J-REITs. ADR’s website: https://www.adr-reit.com 8