Heiwa Real Estate REIT : Notice Concerning Asset Acquisition and Transfer

May 18, 2022

This notice is the English translation of the Japanese announcement on May 18, 2022

REIT Issuer

HEIWA REAL ESTATE REIT, Inc.

5-1 Nihonbashi Kabuto-cho,Chuo-ku, Tokyo

Aya Motomura, Executive Director

(Securities Code: 8966)

Asset Management Company

HEIWA REAL ESTATE Asset Management CO., LTD.

Masanori Hirano, President & Representative Director

Inquiries: Yoshio Ito, General Manager, Planning & Finance Department

TEL. [phone]

Notice Concerning Asset Acquisition and Transfer

HEIWA REAL ESTATE REIT, Inc. (hereinafter referred to as the "Investment Corporation") announced today that HEIWA REAL ESTATE Asset Management CO., LTD. (hereinafter referred to as the "Asset Management Company"), the company to which the Investment Corporation entrusts its asset management operations, decided to execute the acquisition and transfer of assets (hereinafter referred to as the "Acquisition" and "Transfer" respectively, and collectively as the "Transaction"). The details are as follows.

Details

1. Overview of the Transaction Overview of the Acquisition

Property		Type of	Investment		Proposed	Appraisal
Property Name	Investment Area	Acquisition Price	Value
Number	Specified Asset	Category
		(million yen) (Note 1)	(million yen)
	SAKAE CENTER	Trust beneficial		Regional investment
Of-51	interest in real	Office	area	4,000	4,390
BUILDING
	estate		(Nagoya-City, Aichi)
	IWAMOTOCHO TWIN	Trust beneficial		Primary investment
Of-52	interest in real	Office	area	3,380	3,740
BUILDING
	estate		(Chiyoda-ku, Tokyo)
	IWAMOTOCHO TWIN	Trust beneficial		Primary investment
Of-53	interest in real	Office	area	400	531
SAKAE BUILDING
	estate		(Chiyoda-ku, Tokyo)
	HF	Real estate and		Secondary
		investment area
Re-101	KAWAGUCHIEKIMAE	land lease rights	Residence	1,260	1,530
(Kawaguchi-City,
	RESIDENCE	(Note 3)
		Saitama)
	HF HIGASHIOGU	Real estate and		Primary investment
Re-102	land lease rights	Residence	area	1,210	1,410
RESIDENCE
	(Note 3)		(Arakawa-ku, Tokyo)
		Total			10,250	11,601

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(Note 1) The Primary Investment Area refers to the 23 Wards of Tokyo, the Secondary Investment Area refers to Tokyo excluding the Primary Investment Area, major urban areas in Kanagawa Prefecture, Chiba Prefecture and Saitama Prefecture, and the Regional Investment Area refers to major urban areas in the metropolitan area excluding the Primary Investment Area and the Secondary Investment Area. The metropolitan area is the urban area and the surrounding municipalities that are socially and economically connected to Tokyo and the central cities of the metropolitan area are the special wards of Tokyo and the government-designated cities. The same will apply below.

(Note 2) "Proposed acquisition price" is the price described in the trust beneficial interest transaction agreement or real estate transaction agreement (Excluding consumption tax and other dues and expenses required for acquisition, such as leasehold transfer approval fees paid to the leaseholder (land owner)), and does not include the amounts of settlement for fixed property tax, city planning tax, etc.

(Note 3) The Asset to be acquired is a building with leasing rights (leasing rights for the buildings and land). Land leasing rights are ordinary leasing rights.

(1) Agreement execution date:	May 18, 2022
(2) Scheduled acquisition date:	June 3, 2022
(3) Seller:	Heiwa Real Estate Co., Ltd.
(4) Acquisition financing:	The proceeds from the issuance of new investment units (Note 1), borrowings
			(Note 2) and cash on hand
(5) Payment method:	Lump-sum payment at time of delivery
(6) Brokerage:	Not applicable
(Note1) For more information, please see the Notice Concerning Issuance of New Investment Units and Secondary Offering of
	Investment Units released today.
(Note2) Details of Borrowing will be announced when determined.
Overview of the Transfer
Property			Type of		Proposed Transfer Price	Book Value	Appraisal
Property Name			Value
Number		Specified Asset		(Note 1)	(million yen) (Note 2)
			(million yen)
	GRACE BUILDING		Trust beneficial		2,219 million yen
Of-09		interest in real		1: 1,109.5 million yen (50% quasi-co-ownership)	1,097	1,098
SENGAKUJIMAE
		estate		2: 1,109.5 million yen (50% quasi-co-ownership)

(Note 1) The transfer will be made in two parts. "Proposed Transfer price" is the price described in the trust beneficial interest transaction agreement (consumption tax excluded), and does not include the amounts of settlement for fixed property tax, city planning tax, etc.

(Note 2) "Book value" is estimated amount as of scheduled the 1st transfer date. Furthermore, amounts below a million yen have been rounded off.. (Note 3) The amount is calculated as the difference between the scheduled transfer price and the aggregate value of book value and fees related to

the transfer and is for reference only. Therefore, the amount is different from the actual gain (loss).

2. Reason for the Transaction

The Investment Corporation will continue to implement its basic principles, namely the steady growth of its investment portfolio and the achievement of medium and long term sustainable profit. We will aim to maximize unitholder value by striking a balance between steady growth & sustainable profit. We have decided on the Transaction because we expect sustained external growth, the continued improvement of portfolio quality and profitability, and the increase of unitholder value through public offerings and property acquisitions for two consecutive years, as well as property transfers.

1. SAKAE CENTER BUILDING (The property to be acquired)
   The acquired property is a 7-minute walk from Sakae Station on the Nagoya Municipal Subway Higashiyama Line and Meijo Line, a 4-minute walk from Yaba-cho Station on the Meijo Line, and a 5-minute subway ride from Nagoya Station, the largest terminal station in the Chubu region (ride time, hereinafter the same applies). The transportation convenience of the property is excellent. The Sakae area where the acquired property is located

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is lined with department stores such as Matsuzakaya and Mitsukoshi and commercial facilities, and together with the Meieki area around Nagoya Station, is a representative downtown area of Nagoya City. In addition, cultural facilities such as the Nagoya City Art Museum and the Nagoya City Science Museum are located nearby, and in recent years, several redevelopment projects, including the reconstruction of the Chunichi Building, have been underway, making Nagoya one of the commercial and cultural centers of the Nagoya area.

Heiwa Real Estate Co., Ltd. (hereinafter "HEIWA REAL ESTATE" in 2. "Reason for the Transaction"), the sponsor company of the Asset Management Company, owns a total of seven properties in the Sakae area, including the Nagoya Stock Exchange Building. Sakae, where Heiwa Real Estate has been operating for 74 years since its establishment, is not only a highly important area for Heiwa Real Estate's base in the Chubu region, but also one of the areas where the Company is most adept at property management. We believe that the acquisition of the acquired property, which is in this area, will be of great benefit to our portfolio management.

In terms of facilities provided of the acquired property, in addition to the features such as the ceiling, the height of which is 2,500 mm, a 30 mm raised floor, individual air conditioning systems on each floor, and the common areas such as entrances, corridors, and restrooms were renovated in 2016. Therefore, the property is highly competitive with the other office buildings in the area. The property can be divided into lots of 20-60 tsubo, which is expected to capture a variety of demand and ensure stable demand.

The rent gap at the time of the acquisition of the acquired property was 4.8%, suggesting a potential increase in rent income in the future. (Note)

1. IWAMOTOCHO TWIN BUILDING (The property to be acquired)
   The acquired property is located a 3-minute walk from Iwamotocho Station on the Toei Subway Shinjuku Line and a 7-minute walk from Akihabara Station on the JR Yamanote, Sobu, and Keihin Tohoku Lines. From Iwamotocho Station, it is 7 minutes to Tokyo Station, 13 minutes to Shinjuku Station, 22 minutes to Shibuya Station, 13 minutes to Shimbashi Station, and 24 minutes to Shinagawa Station, providing convenient access to major office areas in Tokyo. The Iwamotocho area where the acquired property is located has long flourished as a textile wholesale district and continues to develop as one of the historic commercial and business areas in central Tokyo.
   The acquired property is adjacent to the Iwamotocho Twin Sakae Building. In terms of facilities provided, in addition to the features such as the ceiling, the height of which is 2,450 mm, the 50 mm raised floor, and individual air conditioning systems, a renovation of the co-owned area was completed in 2020. Therefore, the property is highly competitive with the other office buildings in the area.
   The rent gap at the time of the acquisition of the acquired property was 15.3%, suggesting a potential increase in rent income in the future. (Note)
2. IWAMOTOCHO TWIN SAKAE BUILDING (The property to be acquired)
   The acquired property is adjacent to the Iwamotocho Twin Building above. In terms of facilities provided, in addition to the features such as the ceiling, the height of which is 2,450 mm, 65 mm raised floor, and individual

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air conditioning systems, a renovation of the co-owned area was completed in 2020. Therefore, the property is highly competitive with the other office buildings in the area.

The rent gap at the time of the acquisition of the acquired property was 17.7%, suggesting a potential increase in rent income in the future. (Note)

1. HF KAWAGUCHIEKIMAE RESIDENCE (The property to be acquired)
   The acquired property is a residential property that was meticulously planned and developed by Heiwa Real Estate, the Asset Management Company' sponsor company, down to the smallest details including selection of location, specifications and facilities provided based on the assumption that the Investment Corporation will own and operate the property over the medium-to-long term.
   The acquired property is a 3-minute walk from Kawaguchi Station on the JR Keihin Tohoku Line, and has excellent access to major areas in Tokyo, with Ikebukuro Station 11 minutes away, Ueno Station 13 minutes away, Shinjuku Station 17 minutes away, and Tokyo Station 30 minutes away from Kawaguchi Station. The area around Kawaguchi Station is lined with commercial facilities, and Kawaguchi City Hall is 11 minutes on foot from the property. While the area is convenient for daily life, it is also blessed with a natural environment that includes Kawaguchinishi Park (Lilia Park), which is famous for its cherry blossoms. The area has attracted attention in recent years as a comfortable place to live that has good access to the Tokyo metropolitan area. In addition, redevelopment is underway on the east side of Kawaguchi Station, and the area is expected to become even more vibrant.
   The acquired property includes a total of 90 units in a 23.10 m2 1K unit layout (One other unit is a commercial tenant). Demand is expected to be mainly from singles. Regarding the facilities provided, the property is equipped with auto-lock security, home delivery boxes, intercoms with video monitors, and other security features. In addition, the units feature bathrooms separated from toilets, bathroom dryer, heated bidets, free internet, etc. It was completed in September 2021 and is fully competitive with nearby properties. (Note)
2. HF HIGASHIOGU RESIDENCE (The property to be acquired)
   The acquired property is a residential property that was meticulously planned and developed by Heiwa Real Estate, the Asset Management Company' sponsor company, down to the smallest details including selection of location, specifications and facilities provided based on the assumption that the Investment Corporation will own and operate the property over the medium-to-long term.
   The acquired property is located a 3-minute walk from Kumanomae Station on the Nippori-Toneri Liner and Kumanomae stop on the Toden Arakawa Line, and has excellent access to various directions, including central Tokyo, from Kumanomae Station: 3 minutes to Nishi-Nippori Station, 13 minutes to Otemachi Station, 14 minutes to Ikebukuro Station and 16 minutes to Tokyo Station. Nearby is the Arakawa Campus of the Tokyo Metropolitan University, and the area is also blessed with a rich natural environment, including Okunohara Park and the Sumida River, where residents can enjoy a tranquil living environment and excellent transportation access.

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The acquired property includes 49 units in either a 25.10-25.55 m2 1DK unit layout, 28.96-29.37 m2 1LDK unit layout, 54.04-54.92 m2 2LDK unit layout or a 61.59-64.87 m2 3LDK unit layout. There are 12 1DK units, 12 1LDK units, 17 2LDK units and 8 3LDK units to accommodate all lifestyles, and demand is expected from a wide range of people from singles to families. Regarding the facilities provided, the property is equipped with auto-lock security, home delivery boxes, intercoms with video monitors, and other security features. In addition, the units feature bathrooms separated from toilets, bathroom dryer, heated bidets, free internet, etc. It was completed in January 2022 and is fully competitive with nearby properties. (Note)

1. GRACE BUILDING SENGAKUJIMAE (The property to be transfered)
   The acquired property is a residential property that was meticulously planned and developed by Heiwa Real Estate, the Asset Management Company' sponsor company, down to the smallest details including selection of location, specifications and facilities provided based on the assumption that the Investment Corporation will own and operate the property over the medium-to-long term.
   The acquired property is located a 3-minute walk from Kumanomae Station on the Nippori-Toneri Liner and Kumanomae stop on the Toden Arakawa Line, and has excellent access to various directions, including central Tokyo, from Kumanomae Station: 3 minutes to Nishi-Nippori Station, 13 minutes to Otemachi Station, 14 minutes to Ikebukuro Station and 16 minutes to Tokyo Station. Nearby is the Arakawa Campus of the Tokyo Metropolitan University, and the area is also blessed with a rich natural environment, including Okunohara Park and the Sumida River, where residents can enjoy a tranquil living environment and excellent transportation access.
   The acquired property includes 49 units in either a 25.10-25.55 m2 1DK unit layout, 28.96-29.37 m2 1LDK unit layout, 54.04-54.92 m2 2LDK unit layout or a 61.59-64.87 m2 3LDK unit layout. There are 12 1DK units, 12 1LDK units, 17 2LDK units and 8 3LDK units to accommodate all lifestyles, and demand is expected from a wide range of people from singles to families. Regarding the facilities provided, the property is equipped with auto-lock security, home delivery boxes, intercoms with video monitors, and other security features. In addition, the units feature bathrooms separated from toilets, bathroom dryer, heated bidets, free internet, etc. It was completed in January 2022 and is fully competitive with nearby properties.

(Note) The rent gap of the acquired property was calculated using the following formula. Rent gap

• (market rent - monthly contract rent per tsubo for the acquired property) / monthly contract rent per tsubo for the acquired property x 100

Market rent refers to the maximum rent per tsubo including CAM fees which, according to the appraisal of CBRE K.K., is a reasonable level of rent under a new contract as of April 2022, based on comprehensive consideration of a range of factors including contracts concluded most recently for the acquired property, contracts concluded for competing properties with the same use in the surrounding area, and the market environment.

Monthly contract rent per tsubo is calculated by dividing the total amount of monthly rent specified in the lease agreement for the acquired property valid as of March 2022, by the total leasable area of the property.

3. Details of the property to be acquired Of-51 SAKAE CENTER BUILDING

Property number / Property name	Of-51 SAKAE CENTER BUILDING
Type of asset	Trust beneficial interest in real estate
Trustee (Planned)	Sumitomo Mitsui Trust Bank, Limited

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