いちごオフィスリート投資法人（8975） – Acquisition of Office Asset (Ichigo Higashi Ikebukuro 3 Chome Building)

Make The WorldMore Sustainable [Provisional Translation Only] This English translation of the original Japanese document is provided solely for information purposes. Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail. June 14, 2022 Issuer Ichigo Office REIT Investment Corporation (“Ichigo Office,” 8975) 1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo Representative: Yoshihiro Takatsuka, Executive Director www.ichigo-office.co.jp/english Asset Management Company Ichigo Investment Advisors Co., Ltd. Representative: Hiroshi Iwai, President Inquiries: Norio Nagamine, Head of Ichigo Office Tel: +81-3-3502-4891 Acquisition of Office Asset (Ichigo Higashi Ikebukuro 3 Chome Building) Ichigo Office decided today to acquire an office asset, the Ichigo Higashi Ikebukuro 3 Chome Building. 1. Asset Acquisition Summary Asset Number Asset Name1 O-97 Ichigo Higashi Ikebukuro 3 Chome Building Asset Type Date Built Office March 31, 1988 Legal Form of Asset Trust beneficiary interest in real estate (juekiken) Appraisal Value2 JPY 3,930 million Acquisition Price3 JPY 3,840 million Seller4 Domestic TMK (tokutei mokuteki kaisha) Contract Date June 14, 2022 Closing Date June 20, 2022 (expected) Financing Method5 Cash-on-hand, Loans (expected) Settlement Method Lump-sum payment 1 Ichigo Office will change the building name from the Seiwa Ikebukuro Building to the Ichigo Higashi Ikebukuro 3 Chome Building. For purposes of this release, the building is referred to as the Ichigo Higashi Ikebukuro 3 Chome Building. 2 Appraisal Value is calculated by Tanizawa Sogo Appraisal as of April 1, 2022, and is in compliance with the appraisal guidelines of Ichigo Investment Advisors (“IIA”) as well as the rules of the Investment Trusts Association of Japan. 3 Acquisition Price excludes incidental expenses such as fees and property, city planning, and consumption taxes. 4 The seller, a domestic company (TMK), did not provide consent to disclose its name. 1 5 This asset acquisition will be financed by cash-on-hand and JPY 1,900 million of new loans, as announced in today’s release “New Loans.” 2. Acquisition Rationale As a specialized office REIT with stable earnings and a diversified portfolio, Ichigo Office continues to execute on its strategy to grow shareholder value by focusing its portfolio on high-quality, mid-size office assets. Ichigo Office is acquiring the Ichigo Higashi Ikebukuro 3 Chome Building, a mid-size office building in Central Tokyo with growth potential, to increase the quality of its portfolio, using proceeds from the asset sale announced in the February 17, 2022 release “Sale of Portfolio Asset (Ichigo Akasaka 5 Chome Building).” The Ichigo Higashi Ikebukuro 3 Chome Building is located in the east side of Ikebukuro Station, an area that is expected to see a further increase in convenience on the back of new redevelopment projects following the completed redevelopment of the former Toshima Ward Office site. In addition to conducting value-add capex on the building, Ichigo Office can draw upon its operational know-how from owning four other assets in the Ikebukuro area to drive stable earnings from the building. The existing tenants of the Ichigo Higashi Ikebukuro 3 Chome Building meet the tenant standard stated in the “Financial Report (Yuka Shoken Hokokusho)” (Japanese only) disclosed on January 27, 2022. Please refer to Section 3 “Details of the Ichigo Higashi Ikebukuro 3 Chome Building” immediately below for additional details on the asset’s features and characteristics that underpinned the acquisition decision. 3. Details of the Ichigo Higashi Ikebukuro 3 Chome Building (1) Location The Ichigo Higashi Ikebukuro 3 Chome Building is located near Ikebukuro Station, one of Tokyo’s three major train stations, alongside Shibuya and Shinjuku stations, that offers convenient access to central Tokyo and the surrounding suburbs via the JR Lines, the Tokyo Metro, and several private railway lines and enjoys a large number of passengers. The Higashi Ikebukuro area benefits from stable tenant demand spanning multiple industries owing to a large number of office buildings along trunk roads such as Meiji Dori road as well as many retail stores and restaurants along the Sunshine 60 Dori road. (2) Features The Ichigo Higashi Ikebukuro 3 Chome Building is a mid-size office building located within an 8-minute walk from the JR Ikebukuro Station and a 9-minute walk from the Higashi Ikebukuro Station on the Tokyo Metro Yurakucho Line. Each floor has a standard floor plate of 145 tsubo (480m2) with a ceiling height of 2.8 meters, and is equipped with zoned air conditioning systems and raised-access floors, catering to the demands of diverse tenants. Current tenants include those from the IT and electronic parts manufacturing industries. 2 (3) Building Location and Photos 3 Asset Name Legal Form of Asset Trustee Period of Trust Contract Location Land Building Property Right Area Zoning Coverage Ratio Floor Area Ratio Property Right Use Structure Total Floor Area Date Built Appraiser Appraisal Value Appraisal Date Value by Direct Capitalization Method Architect1 Builder1 Structural Designer1 Inspection Agency1 PML (Assessor) Collateral Tenant Overview Number of Tenants Monthly Rental Income Tenant Security Deposits Leasable Area Leased Area Occupancy Property Management Company Master Lease Company Master Lease Type Asset Overview Ichigo Higashi Ikebukuro 3 Chome Building Trust beneficiary interest in real estate (juekiken) Mitsubishi UFJ Trust and Banking Corporation June 29, 2018 – June 30, 2032 (expected) 3-13-3 Higashi Ikebukuro, Toshima-ku, Tokyo Freehold 856.89m2 Commercial 80% 700% Freehold Office, Machine Room Steel Reinforced Concrete, 6 Floors, 1 Basement Floor 4,050.27m2 March 31, 1988 Tanizawa Sogo Appraisal Co., Ltd. JPY 3,930 million April 1, 2022 JPY 4,030 million Kato Yoshihiro Architects & Engineers Co., Ltd. Taisei Corporation Kato Yoshihiro Architects & Engineers Co., Ltd. Toshima Ward 8.0% (Sompo Risk Management Inc.) None Lease Details (as of April 30, 2022) 6 JPY 14.350 million JPY 131.974 million 2,764.59m2 2,764.59m2 Apr 2020 Oct 2020 Apr 2021 Oct 2021 Apr 2022 100% 100% 100% 100% 100% Shimizu Comprehensive Development Corporation (expected) Ichigo Office REIT Investment Corporation (expected) Pass-through (expected) 4 Special Items 1. A memorandum of understanding is in place with the neighbor on the eastern border of the building (lot numbers 66-2, 66-3, 66-4, 66-5, 66-8, 66-15, 66-17, and 66-19) with respect to rectifying the following encroachments during any future renovation work: a. Co-owned doors on the north and south sides encroach into each party’s lot. b. The service drop line to the building encroaches into the aerial space of the northeastern neighbor’s property (lot number 66-15). 2. Part of the asset’s floor lights and brick flooring encroach into the property of the northwestern neighbor (lot number 66-16). No memorandum of understanding exists with respect to this encroachment. 3. Part of the building’s plantation encroaches into the property of the southwestern neighbor (lot number 66-14). No memorandum of understanding exists with respect to this encroachment. 1 Names of the architect, builder, structural designer, and inspection agency are those as of the building’s construction date. 5 Appraisal Details Ichigo Higashi Ikebukuro 3 Chome Building JPY 3,930,000,000 Tanizawa Sogo Appraisal Co., Ltd. April 1, 2022 Amount Note Calculated using an income approach, with a DCF valuation as a basis and verified using a direct capitalization valuation JPY 216,111,225 Based on expected long-term, stable rental income, common area service income, parking lot income, and other income JPY 11,922,042 Based on long-term, normalized vacancy rates JPY 8,210,102 Based on actual amounts JPY 10,686,703 Based on actual amounts JPY 5,040,000 Based on engineering reports Based on contractual rates and reference to rates at similar assets Based on tenant acquisition costs at similar assets JPY 2,782,156 JPY 1,792,257 JPY 11,675,400 Based on FY2021 actual amounts JPY 554,260 Based on insurance estimates JPY 408,378 Based on actual amounts JPY 163,039,927 JPY 922,087 Based on a 1.0% investment yield JPY 10,800,000 Based on engineering reports Appraisal Value JPY 3,930,000,000 Value by Direct Capitalization Method Income JPY 4,030,000,000 JPY 204,189,183 Expenses JPY 41,149,256 Asset Name Appraisal Value Appraiser Appraisal Date Forecast Full-Occupancy Rental Income Forecast Decrease in Rental Income due to Vacancy Administrative & Maintenance Expenses Utility Expenses Repair Expenses PM Fee Leasing Brokerage Fees Taxes Insurance Premiums Other Expenses Net Operating Income (NOI) Income from Investments of Deposits Capital Expenditure Net Profit JPY 153,162,014 Cap Rate 3.8% Based on transactions of similar assets, taking into consideration the asset’s location and specific characteristics, rights, and terms and conditions of the contract 6 Value via DCF Method JPY 3,880,000,000 Based on transactions of similar assets and the current yield of financial assets, taking into consideration the asset’s location and specific characteristics 3.9% Terminal Cap Rate 4.0% Cap rate adjusted for uncertainties JPY 3,760,000,000 85.9% 14.1% Notes Note: Appraisal NOI Yield: 4.2% (calculated by dividing NOI by Acquisition Price) Discount Rate Accounting Value Land Building None 4. Seller Profile Name Relationship to Ichigo Office or Ichigo Investment Advisors (IIA) 5. Broker Profile Name Address Representative Principal Business Capital Establishment Date Relationship to Ichigo Office or Ichigo Investment Advisors (IIA) Brokerage Fee The seller, a domestic TMK, did not provide consent to disclose its name. The seller does not have any material capital, personnel, or transactional relationship with Ichigo Office or IIA. In addition, the seller is not a related party as defined in the Act on Trusts and Investment Corporations or the internal rules of IIA. Japan Asset Advisors Co., Ltd. 3-3-4 Kanda Kajicho, Chiyoda-ku, Tokyo Kazuhiro Minami, President & Representative Director 1. Real estate transactions, leasing, management, brokerage, intermediation, and appraisal; as well as the consulting thereof 2. Research and investment of real estate, securitized real estate, bonds, securities, and financial assets 3. Other businesses relating to the aforementioned businesses JPY 80 million November 15, 2005 The broker does not have any material capital, personnel, or transactional relationships with Ichigo Office or IIA. In addition, the broker is not a related party as defined in the Act on Trusts and Investment Corporations or the internal rules of IIA. The broker did not provide consent to disclose the fee. 7 6. Acquisition Schedule Acquisition Decision Date Contract Date Closing Date 7. Earnings Impact June 14, 2022 June 14, 2022 June 20, 2022 (expected) The impact of this asset acquisition on Ichigo Office’s October 2022 and April 2023 fiscal period earnings is described in today’s release “April 2022 Fiscal Period Earnings.”. 8 Reference 1. Earnings Profile of Asset Being Acquired A. Rental Income B. Rental Expenses (excluding depreciation)3 C. NOI (A-B) D. NOI Yield4 E. Depreciation5 F. Post-depreciation NOI (C-E) G. Post-depreciation NOI Yield4 H. Occupancy6 Forecast1 At Acquisition2 (JPY million) 200 43 156 4.1% 16 140 3.7% 96% 194 39 155 4.1% 17 137 3.6% 100% 1 Amounts exclude one-off factors in the year of acquisition and are calculated based on current and future anticipated fluctuations in occupancy. 2 Shows first-year amounts used to calculate the DCF-based valuation, excluding one-off factors in the year of acquisition. 3 Rental Expenses include incidental expenses such as service provider fees, taxes, maintenance and repair fees, insurance premiums, and other fees. 4 Calculated based on Acquisition Price. 5 Depreciation is as estimated by Ichigo Office using the straight-line method. 6 Occupancy at acquisition is as of April 30, 2022. 2. Engineering Report Summary Asset Name Inspector Name Inspection Date Short-Term Repair Expenses1 – Long-Term Repair Expenses2 Current Replacement Cost Ichigo Higashi Ikebukuro 3 Chome Building Tokio Marine dR Co., Ltd. April 2022 JPY 185.72 million JPY 1,444.7 million 1 Short-Term Repair Expenses are defined as repair expenses beyond the scope of ordinary maintenance within a year from the time of inspection. 2 Long-Term Repair Expenses are defined as cumulative repair expenses considered necessary for the maintenance of the asset within twelve years from the time of inspection. 9 Asset Name Area1 Acquisition Price (JPY million) % of Portfolio2 Appendix C: Post-Transaction Portfolio No. O-02 O-03 O-04 O-05 O-06 O-07 O-09 O-10 O-11 O-12 O-14 O-15 O-16 O-17 O-18 O-19 O-20 O-21 O-22 O-23 O-24 O-26 O-27 O-28 O-29 Ichigo Nishisando Building Ichigo Mita Building Ichigo Nanpeidai Building Ichigo Hanzomon Building Ichigo Hijirizaka Building Ichigo Shibuya Kamiyamacho Building Ichigo Shibakoen Building Ichigo Ebisu Nishi Building Ichigo Ginza 612 Building Ichigo Uchikanda Building Ichigo Yotsuya 4 Chome Building Ichigo Tameike Building Ichigo Jimbocho Building Ichigo Hakozaki Building Ichigo Kudan 2 Chome Building Ichigo Kudan 3 Chome Building Ichigo Gotanda Building Ichigo Shin Yokohama Building Ichigo Minami Ikebukuro Building Ichigo Nakano North Building Ichigo Eitai Building Ichigo Ikejiri Building Ichigo Nishi Ikebukuro Building Ichigo Nishi Gotanda Building Ichigo Kichijoji Building O-34 Ichigo Sakae Building O-37 Ichigo Marunouchi Building O-38 O-39 O-42 O-46 O-47 Ichigo Toyamaeki Nishi Building Ichigo Mirai Shinkin Building Ichigo Takamatsu Building Ichigo Kanda Nishikicho Building Ichigo Akihabara North Building O-48 Ichigo Sakaisuji Honmachi Building O-49 O-50 Ichigo Kanda Ogawamachi Building Ichigo Hatchobori Building Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Tokyo Metro Area Tokyo Metro Area Tokyo Metro Area Tokyo Metro Area Tokyo Metro Area Tokyo Metro Area Central Tokyo Tokyo Metro Area Four Major Regional Cities Four Major Regional Cities Other Regional Cities Other Regional Cities Other Regional Cities Central Tokyo Central Tokyo Four Major Regional Cities Central Tokyo Central Tokyo 10 3,254 2,740 1,920 1,550 1,200 1,505 1,100 1,917 1,773 1,140 550 580 1,820 1,150 763 844 5,060 1,816 1,460 764 1,490 2,030 639 765 2,160 4,705 6,710 1,645 1,158 3,010 2,130 5,500 1,940 2,210 1,905 1.6 1.3 0.9 0.7 0.6 0.7 0.5 0.9 0.8 0.5 0.3 0.3 0.9 0.5 0.4 0.4 2.4 0.9 0.7 0.4 0.7 1.0 0.3 0.4 1.0 2.2 3.2 0.8 0.6 1.4 1.0 2.6 0.9 1.1 0.9 No. Asset Name Area1 Acquisition Price (JPY million) % of Portfolio2 Ichigo Ebisu Green Glass Ichigo Omori Building Ichigo Takadanobaba Building Ichigo Omiya Building Ichigo Sagamihara Building Ichigo Ofuna Building Ichigo Sendai East Building Ichigo Kumamoto Building Ichigo Jingumae Building Ichigo Shibuya Dogenzaka Building Ichigo Hiroo Building Ichigo Sasazuka Building Ichigo Nihonbashi East Building Ichigo Sakurabashi Building Ichigo Shinkawa Building Ichigo Kudan Building Ichigo Higashi Gotanda Building O-51 O-52 O-53 O-54 O-55 O-56 O-57 O-58 O-59 O-60 O-61 O-62 O-63 O-64 O-65 O-66 O-67 O-68 Axior Mita O-69 Ichigo Higashi Ikebukuro Building O-70 Koriyama Big-i (Office Section) Ichigo Kawasaki Building O-71 Ichigo Shibuya East Building O-72 Ichigo Ningyocho Building O-73 O-74 Ichigo Nishi Honmachi Building O-75 Ichigo Hakata Building O-76 Ichigo Nishiki First Building O-77 O-78 O-79 O-80 Ichigo Ikenohata Building Ichigo Ikebukuro East Building Ichigo Motoazabu Building Ichigo Otsuka Building O-81 Ichigo Nagoya Building O-82 Ichigo Fushimi Building O-83 Ichigo Nishiki Building O-84 Ichigo Minami Morimachi Building O-85 Ichigo Shibuya Udagawacho Building 11 Central Tokyo Central Tokyo Central Tokyo Tokyo Metro Area Tokyo Metro Area Tokyo Metro Area Other Regional Cities Other Regional Cities Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Central Tokyo Tokyo Metro Area Other Regional Cities Tokyo Metro Area Central Tokyo Central Tokyo Four Major Regional Cities Four Major Regional Cities Four Major Regional Cities Tokyo Metro Area Tokyo Metro Area Central Tokyo Tokyo Metro Area Four Major Regional Cities Four Major Regional Cities Four Major Regional Cities Four Major Regional Cities Central Tokyo 5,900 3,850 1,580 3,430 1,174 2,000 1,840 1,450 7,200 3,650 3,960 4,780 4,700 2,500 2,360 3,190 3,660 1,800 4,570 1,660 1,750 1,350 1,450 2,190 1,380 2,000 5,130 3,010 1,890 2,740 3,420 2,340 1,330 1,040 3,500 2.8 1.8 0.8 1.6 0.6 1.0 0.9 0.7 3.4 1.7 1.9 2.3 2.2 1.2 1.1 1.5 1.7 0.9 2.2 0.8 0.8 0.6 0.7 1.0 0.7 1.0 2.5 1.4 0.9 1.3 1.6 1.1 0.6 0.5 1.7 No. Asset Name Area1 Acquisition Price (JPY million) % of Portfolio2 O-86 Win Gotanda Building O-87 Ichigo Hongo Building O-88 Oimachi Center Building O-89 Win Gotanda Building 2 O-90 MIF Building O-91 Ichigo Uchi Honmachi Building O-92 O-93 Ichigo Minami Otsuka Building Ichigo Nogizaka Building O-94 Ichigo Hakata East Building O-95 O-96 O-97 Ichigo Nakameguro Building Ichigo Tachikawa Building Ichigo Higashi Ikebukuro 3 Chome Building Z-09 Future IZUMI Z-10 Ichigo Shibuya Bunkamura Dori Building Z-11 Twicere Yokohama Isogo (Retail Section) Z-14 Ichigo Kamata Building Central Tokyo Tokyo Metro Area Central Tokyo Central Tokyo Central Tokyo Four Major Regional Cities Tokyo Metro Area Central Tokyo Four Major Regional Cities Tokyo Metro Area Tokyo Metro Area Tokyo Metro Area Subtotal – Office (82 Assets) Other Regional Cities Central Tokyo Tokyo Metro Area Tokyo Metro Area Subtotal – Other (4 Assets) Total (86 Assets) 3,100 2,300 1,680 3,300 2,200 1,900 2,780 3,315 2,250 1,495 3,830 3,840 202,667 1,210 2,400 1,620 1,400 6,630 209,297 1.5 1.1 0.8 1.6 1.1 0.9 1.3 1.6 1.1 0.7 1.8 1.8 96.8 0.6 1.1 0.8 0.7 3.2 100.0 TK Equity Investment GK Kizuna1 TK Equity Interest 50 – 1 Central Tokyo refers to Chiyoda, Minato, Chuo, Shinjuku, Shibuya, and Shinagawa Wards. Tokyo Metro Area refers to Tokyo (excluding the six wards above), Kanagawa, Chiba, and Saitama Prefectures. Four Major Regional Cities refers to Osaka, Nagoya, Fukuoka, and Sapporo. 2 % of Portfolio is based upon acquisition price. 12