Ichigo Office REIT Investment : Acquisition of Six Office Assets

Make The World

More 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.

May 20, 2024

Issuer

Ichigo Office REIT Investment Corporation ("Ichigo Office," 8975) 2-6-1Marunouchi, Chiyoda-ku,Tokyo

Representative: Keisuke Chiba, Executive Director

www.ichigo-office.co.jp/en

Asset Management Company

Ichigo Investment Advisors Co., Ltd.

Representative: Hiroshi Iwai, President

Inquiries: Yuji Kamo, Head of Ichigo Office

Tel: [phone]

Acquisition of Six Office Assets

Ichigo Office decided today to acquire three office assets in central Tokyo and three in central Fukuoka.

Because the seller of the Ichigo Hakata Gion Building, Ichigo Tenjin North Building, Ichigo Gotanda West Building, and Ichigo Otemachi North Building is a related party as defined in the Investment Trust and Investment Corporation Law (1951 Law No. 198 and including afterward revisions, "Investment Law"), Ichigo Office carefully reviewed and approved these four asset acquisitions at today's Board of Directors meeting.

1. Asset Acquisition Summary

Total appraisal value: JPY 16.18 billion, Total acquisition price: JPY 15.466 billion

Asset Number	O-102		O-103
Ichigo Akihabara East		Ichigo Hakata Meiji Dori
Asset Name1
	Building		Building
Asset Type		Office
Date Built	March 1988		October 2007
Legal Form of Asset	Trust beneficiary interest in real estate (juekiken)
Appraisal Value2,3	JPY 3,370 million		JPY 3,460 million
Acquisition Price4	JPY 3,240 million		JPY 3,080 million
Seller	GK Kizuna1
Broker		None
Contract Date	May 20, 2024
Closing Date	May 30, 2024 (expected)
Financing Method	New Share Issuance via Third-Party Allotment,
Loans, & Cash-on-hand
Settlement Method	Lump-sum payment

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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Asset Number	O-104	O-105	O-106	O-107
Ichigo Hakata	Ichigo Tenjin	Ichigo Gotanda	Ichigo Otemachi
Asset Name1
	Gion Building	North Building	West Building	North Building
Asset Type		Office
Date Built	February 2009	October 1985	March 1985	February 2008
Legal Form of Asset	Trust beneficiary interest in real estate (juekiken)
Appraisal Value2,3	JPY 1,710 million	JPY 1,570 million	JPY 4,010 million	JPY 2,060 million
Acquisition Price4	JPY 1,700 million	JPY 1,550 million	JPY 3,950 million	JPY 1,946 million
Seller		Ichigo Estate
Broker		None
Contract Date		May 20, 2024
Closing Date		May 30, 2024 (expected)
Financing Method	New Share Issuance via Third-Party Allotment, Loans, & Cash-on-hand
Settlement Method		Lump-sum payment

1. Ichigo Office will change the building names from the Ogaku Building, FORECAST Hakata Gion Building, Tenjin First Building, and COCORO Gotanda to the Ichigo Akihabara East Building, Ichigo Hakata Gion Building, Ichigo Tenjin North Building, and Ichigo Gotanda West Building, respectively, after the acquisitions. For purposes of this release, the buildings are referred to as the Ichigo Akihabara East Building, Ichigo Hakata Gion Building, Ichigo Tenjin North Building, and Ichigo Gotanda West Building.
2. Appraisal Values for the Ichigo Akihabara East Building, Ichigo Hakata Meiji Dori Building, Ichigo Tenjin North Building, Ichigo Gotanda West Building, and Ichigo Otemachi North Building are calculated by Tanizawa Sogo Appraisal as of May 1, 2024, and are in compliance with the appraisal guidelines of Ichigo Investment Advisors ("IIA") as well as the rules of the Investment Trusts Association of Japan.
3. Appraisal Value for the Ichigo Hakata Gion Building is calculated by Daiwa Real Estate Appraisal as of May 1, 2024, and is in compliance with the appraisal guidelines of IIA as well as the rules of the Investment Trusts Association of Japan.
4. Acquisition Price excludes incidental expenses such as fees and property, city planning, and consumption taxes.
5. Please refer to today's release "Issuance of New Shares via Third-Party Allotment" for details.
6. Please refer to today's release "New Loans for Acquisition of Office Assets" for details.

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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2. Acquisition Rationale

Ichigo Office has a target of consistently generating total returns to shareholders of greater than 8% per annum, and believes that the acquisition of high-qualitymid-size office assets with earnings upside and increasing asset values via value-add capex is essential to achieve this target.

As announced on April 26, 2024, Ichigo Office sold the Ichigo Ofuna Building on April 26, 2024 and is selling the Ichigo Kudan 2 Chome Building on October 31, 2024, and is using the proceeds from the sales to finance the acquisition of six office assets (three in central Tokyo and three in central Fukuoka) with earnings upside.

As a result of the asset sales and acquisitions, Ichigo Office's portfolio will consist of 89 office assets, comprising 97.8% of the portfolio. Post-acquisition, Ichigo Office will draw upon its operational capabilities to carry out value-add activities at the newly acquired office assets to drive higher NAV per share, tenant satisfaction, and earnings growth.

Ichigo Office has developed value-add plans for the newly acquired office assets in line with each asset's location and characteristics, as detailed in today's release "April 26th Asset Sales & Today's Asset Acquisitions Supplementary Material."

Ichigo Office's sponsor Ichigo (2337) is strengthening its sponsor commitment to its listed J-REITs and solar power producer to drive growth and shareholder value. Of the assets being acquired, Ichigo Office is acquiring the Ichigo Akihabara East Building and Ichigo Hakata Meiji Dori Building by exercising the preferential negotiation right it received to acquire underlying assets of the bridge fund created with the support of Ichigo and its subsidiary Ichigo Estate, and is acquiring the Ichigo Hakata Gion Building, Ichigo Tenjin North Building, Ichigo Gotanda West Building, and Ichigo Otemachi North Building from Ichigo Estate.

The existing tenants of the assets being acquired satisfy the tenant standard stated in the "Financial Report (Yuka Shoken Hokokusho)" (Japanese only) disclosed on January 29, 2024.

Please refer to Section 3 "Acquisition Details" below for additional details on each asset's features and characteristics that underpinned the acquisition decision.

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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3. Acquisition Details Notes to Acquisition Details

• The location and description of each office are based on information obtained by IIA via real estate appraisal reports, building evaluation reports, market reports, and publicly available information on the builders' websites.
• Legal Form of Asset is a type of specified real estate asset.
• Trustee refers to the trustee as of today or the expected trustee.
• Period of Trust Contract refers to the trust period specified under the trust contract as of Ichigo Office's acquisition date.
• Location refers to the postal address (or the location in the real estate registry (if multiple locations are available, one of the multiple locations) if a postal address is not available) of the office.
• Land and Building Property Rights refer to the type of right to be acquired by Ichigo Office or the trustee.
• Land Area is the land area in the real estate registry.
• Zoning is the type of zoning stipulated in the City Planning Act Article 8, Clause 1, Item 1.
• Coverage Ratio is the ratio of the building to the land stipulated in the Building Standards Act Article 53, Clause 1, and is determined for each zone for city planning purposes. An asset may have more than one coverage ratio.
• Floor Area Ratio is the ratio of the building area to the land area stipulated in the Building Standards Act Article 52, and is determined for each zone for city planning purposes. An asset may have more than one floor area ratio.
• Building Use refers to the main use included in the real estate registry.
• Building Structure refers to the structure mentioned in the real estate registry. The following abbreviations are used with regards to structure: RC stands for reinforced concrete; SRC for steel-reinforced concrete; F for number of floors; and B for basement.
• Total Floor Area refers to the total floor area in the real estate registry, and includes the area of attached buildings.
• Date Built refers to the date built in the real estate registry.
• Appraiser refers to the author of the real estate appraisal report
• Appraisal Value, Appraisal Date, and Value by Direct Capitalization Method are based on the real estate appraisal report from the Appraiser.
• Names of the architect, builder, structural designer, and inspection agency are those as of when the building was built.
• Collateral refers to whether there is collateral after Ichigo Office's acquisition.
• Lease Details refer to the tenant lease contracts for each office, excluding the Number of Tenants.
• Number of Tenants, Rental Income, Deposit, Leasable Area, and Leased Area are based on the lease contract and any other relevant memoranda of understanding effective as of each office's acquisition date.
• Property Management Company refers to the property management companies appointed to provide property management services for each office as of each office's acquisition date.
• Master Lease Company refers to the master lease companies appointed to provide master lease services for each office as of each office's acquisition date.
• Master Lease Type refers to the main type of master lease contract. Pass-through refers to when the rent amount paid by the tenant to the master lease company is equal to the rent paid by the master lease company, and Rent Guarantee refers to when the master lease company pays a guaranteed rent, both under a master lease contract effective as of each office's acquisition date.
• Special Items include items that significantly impact real estate rights and use, value, earnings, and disposal as of May 13, 2024.

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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(1) Ichigo Akihabara East Building

1. Location

The Ichigo Akihabara East Building is located near Akihabara Station on the JR Yamanote, Sobu, and Keihin Tohoku Lines, the Tsukuba Express Line, and the Tokyo Metro Hibiya Line, which offers convenient access to the Tokyo Metropolitan area and various places within Tokyo. The area around the station developed as an electric town with stores selling home electronics and electronic devices, and more recently, has become a leading Japanese sub-culture hub that attracts both domestic shoppers and tourists.

The Showa Dori area on the east side of Akihabara Station is an attractive Central Business District (CBD) and home to many mid-size office and retail buildings.

2. Building Features

The Ichigo Akihabara East Building is a mid-size office building located within a three- minute walk from Akihabara Station on the JR Yamanote and other JR Lines and a one- minute walk from Akihabara Station on the Tokyo Metro Hibiya Line.

The standard floor plate is 90 tsubo (297m2), and the building has OA sub-floors, individual air conditioning units, and 24 parking spaces, therefore catering to the needs of the average tenant.

The building is currently occupied by an IT company, a temp agency, and a franchise coffee shop.

3. Building Photos and Location Map

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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				Asset Overview
	Asset Name		Ichigo Akihabara East Building
	Form of Ownership	Trust beneficiary interest in real estate (juekiken)
	Trustee		Sumitomo Mitsui Trust Bank, Ltd.
	Period of Trust Contract	February 28, 2005 - May 31, 2034 (expected)
	Location		2-19 Kandasakumacho, Chiyoda-ku, Tokyo
			Property Right	Freehold
	Land		Area	421.21m2
		Zoning	Commercial
			Coverage Ratio	80%
			Floor Area Ratio	800% (600% for part of the building)
			Property Right	Freehold
			Use	Office, Parking lot
	Building	Structure	Steel Reinforced Concrete, B1F/8F
			Total Floor Area	2,776.30m2
			Date Built	March 22, 1988
	Appraiser		Tanizawa Sogo Appraisal Co., Ltd.
	Appraisal Value	JPY 3,370 million
	Appraisal Date	May 1, 2024
	Value by Direct Capitalization	JPY 3,550 million
	Method
	Architect		NAOI Architecture & Design Office
	Builder		Sampei Construction Co., Ltd.
	Structural Designer	NAOI Architecture & Design Office
	Inspection Agency	Chiyoda Ward
	Seismic PML (Assessor)	6.9% (Sompo Risk Management Inc.)
	Collateral		None
			Lease Details (as of March 31, 2024)
Number of Tenants	4
Monthly Rental Income	JPY 11.193 million
Tenant Security Deposits	JPY 103.076 million
Leasable Area	2,100.93m2
Leased Area	2,100.93m2
Occupancy		Apr 2022		Oct 2022		Apr 2023	Oct 2023	Mar 2024
	100%		100%		100%	100%	100%
Property Management	Ken Corporation Co., Ltd.
Company
Master Lease Company	Ichigo Office
Master Lease Type	Pass-through

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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Special Items

The boundary line between the road and the south side of the building has yet to be determined. The south-side boundary line is expected to be pushed back towards the building by 20~30cm from the L-shaped gutter along the road and any future reconstruction must be planned within the finalized boundary, which is estimated to have an area of 414.65m2.

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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Appraisal Details

Asset Name		Ichigo Akihabara East Building
Appraisal Value		JPY 3,370,000,000
Appraiser		Tanizawa Sogo Appraisal Co., Ltd.
Appraisal Date		May 1, 2024
				Amount (JPY)				Note
									Calculated using an income approach,
Appraisal Value	3,370,000,000				with a DCF valuation as a basis and
									verified using a direct capitalization
									valuation
	Value by Direct Capitalization	3,550,000,000
	Method
		Income	167,248,132
									Based on expected long-term, stable
			Maximum Obtainable	177,864,349				rental income, common area service
			Rental Income						income, parking lot income, and other
									income
			Vacancy Loss	10,616,217				Based on long-term, normalized
						vacancy rates
		Expenses	38,978,713
			Administrative and	9,529,818				Based on historical actual amounts
			Maintenance Expenses
			Utility Expenses	10,134,886				Based on historical actual amounts
									Based on engineering reports,
									reference to similar assets, and a 3:7
			Repair Expenses	3,430,000				(Repair Expenses: Capital
						Expenditure) allocation based on the
									Corporate Tax Law Basic Interpretive
									Regulations
			PM Fee	2,187,844				Based on existing contractual fees
			Leasing Brokerage Fees	1,168,314				Based on assumption that 10% of
									tenants will change annually
			Taxes	11,367,300				Based on FY2023 actual amounts
			Insurance Premiums	324,310				Based on quotes from insurance
						companies
			Other Expenses	836,241				Based on historical actual amounts
		Net Operating Income	128,269,419
		(NOI)
			Income on Investment of	704,889				Based on a 1.0% investment yield
			Deposits Received
									Based on engineering reports,
									reference to similar assets, and a 3:7
			Capital	8,330,000				(Repair Expenses: Capital
			Expenditure						Expenditure) allocation based on the
									Corporate Tax Law Basic Interpretive
									Regulations

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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		Net Profit	120,644,308
		Cap Rate	3.4%	Based on transactions of similar assets
		located in nearby areas
	Value via DCF Method	3,290,000,000
		Discount Rate	3.5%	Base rate adjusted for individual risks
		assuming a holding period of ten years
		Terminal Cap Rate	3.6%	Cap rate adjusted for uncertainties
Value via Cost Approach	3,900,000,000
	Ratio of Land	93.3%	Land value divided by total land and
	building value
	Ratio of Building	6.7%	Building value divided by total land
				and building value
			Notes
None

Note: Appraisal NOI Yield: 4.0% (calculated by dividing NOI by Acquisition Price)

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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(2) Ichigo Hakata Meiji Dori Building

1. Location

The Ichigo Hakata Meiji Dori Building is located in the Gofukucho area adjacent to Fukuoka's prime CBDs, the Hakata Station area and the Tenjin area. The area offers convenient access to public transportation, including multiple subway lines and bus routes.

Along Taihaku Dori and Meiji Dori, both major thoroughfares in the Gofukucho area, is a commercial district with many high-rise office buildings.

The Gofukucho area is expected to see continued growth as recent years has seen new buildings built in the vicinity along with ongoing new building constructions and redevelopment projects.

2. Building Features

The Ichigo Hakata Meiji Dori Building is a mid-size office building located within a one-minute walk from Gofukucho Station on the Fukuoka City Subway Hakozaki Line and a four-minute walk from Nakasu Kawabata Station on the Kuko Line.

The standard floor plate is 155 tsubo (512m2) with a ceiling height of 2.9 meters, and the building has OA sub-floors, individual air conditioning units, and 30 parking spaces, therefore catering to the needs of the average tenant.

The building is currently occupied by a lighting equipment manufacturer, a financial services company, and a pharmaceutical company.

3. Building Photos and Location Map

Disclaimer: This release has been prepared for the purpose of announcing to the public certain matters relating toasset acquisitions, and has not been prepared for the purpose of solicitation of investment.

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