Ichigo Office REIT Investment : Acquisition of TK Equity Interest in Four Office Assets (Bridge Fund) and Preferential Negotiation Right With Sponsor Support

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.

January 27, 2022

Issuer

Ichigo Office REIT Investment Corporation ("Ichigo Office," 8975) 1-1-1Uchisaiwaicho, Chiyoda-ku,Tokyo

Representative: Yoshihiro Takatsuka, Executive Director

www.ichigo-office.co.jp/en

Asset Management Company

Ichigo Investment Advisors Co., Ltd.

Representative: Hiroshi Iwai, President

Inquiries: Norio Nagamine, Head of Ichigo Office

Tel: [phone]

Acquisition of TK Equity Interest in Four Office Assets (Bridge Fund) and

Preferential Negotiation Right With Sponsor Support

Ichigo Office today decided to acquire a TK (tokumei kumiai) equity interest in a bridge fund ("Ichigo Office Bridge Fund") and received a preferential negotiation right, free of charge, to the four underlying office assets in the Ichigo Office Bridge Fund.

1. Acquisition Summary

Legal Form of Asset	TK equity interest in trust beneficiary interest in real estate
(juekiken)
Asset Name	GK Kizuna1 TK equity interest (Ichigo Office Bridge
Fund)1
	Ichigo Hakataeki Higashi Building (Hakata, Fukuoka),
Underlying Real Estate	Ichigo Hakata Meiji Dori Building (Hakata, Fukuoka),
Fukuoka Kensetsu Kaikan (Hakata, Fukuoka), Ogaku
	Building (Chiyoda, Tokyo)
Investment Amount	JPY 50 million (excluding ancillary acquisition costs)
0.94% TK equity interest stake
Contract Date	January 27, 2022
Closing Date	January 28, 2022
Financing Method	Cash-on-hand
Settlement Method	Lump-sum payment

1 GK Kizuna1 is the TK Operator of the Ichigo Office Bridge Fund setup via TK equity investments. For details, please refer to the TK Operator Profile under Section 3 "Asset Summary."

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2. Acquisition Rationale

Ichigo Office is working to drive sustainable growth and maximize shareholder value through both organic growth leveraging Ichigo's value-add capabilities and acquisition- driven growth via the use of bridge funds and Ichigo's sponsor support.

Today a new bridge fund, the Ichigo Office Bridge Fund created with the support of Ichigo and its subsidiary Ichigo Estate, is acquiring four high-qualitymid-size office assets that offer return stability and upside earnings potential. Ichigo Office is also receiving a preferential negotiation right, free of charge, to acquire the four assets from the Ichigo Office Bridge Fund, therefore securing the opportunity to acquire high- quality assets. Ichigo Office is also making optimal use of its cash on hand by acquiring a TK equity interest in the Ichigo Office Bridge Fund.

Ichigo Trust Pte. Ltd. ("Ichigo Trust"), Ichigo Office's major shareholder which has a sponsor support agreement with Ichigo Office, is acquiring a 99% TK equity interest in the Ichigo Office Bridge Fund, providing strong support for Ichigo Office's growth.

The preferential negotiation right acquired by Ichigo Office gives Ichigo Office the option, not the obligation, to acquire the trust beneficiary interest (juekiken) or the underlying office assets of the Ichigo Office Bridge Fund. Ichigo Office's TK equity investment is expected to yield a 6.5% return, backed by stable rental income from the underlying assets of the Ichigo Office Bridge Fund.1

Please refer to Section 6 "Asset Details" for additional asset details.

1 The expected yield on the TK equity investment is calculated by dividing Ichigo Office's TK equity interest (0.94%) of the forecast distribution amount by Ichigo Office's TK equity investment amount. The forecast distribution amount is calculated by subtracting administrative, management, and borrowing expenses of the Ichigo Office Bridge Fund from the DCF-based,first-year net operating income shown on Tanizawa Sogo Appraisal Co., Ltd.'s appraisal report as of November 30, 2021.

3. Asset Summary

1. TK (tokumei kumiai) Overview

TK Operator	GK Kizuna1
TK Agreement	The later of January 31, 2032 or the business day following
the date on which the TK operator completes repaying all
Period
debt obligations (expected)
Total TK Investment	JPY 50 million
Amount
				GK Kizuna1
					Non-recourse loan
			Trust beneficiary		JPY 7,410 million2
			interest in real estate		Senior TK equity
TK Agreement			(juekiken)		JPY 1,500 million3
Details			JPY 12,740 million1
			Subordinated TK equity
					JPY 3,830 million4
	1 The amount includes asset acquisition costs, TK
	establishment costs, and reserves. The appraisal value of the
	underlying assets calculated by Tanizawa Sogo Appraisal
	Co., Ltd. as of November 30, 2021 is JPY 13,140 million.

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1. Non-recourseloan from SMBC (expected)
2. The senior TK equity holder did not provide consent to disclose its name, but is a domestic securities company that is not a related party as defined in the Act on Investment Trusts and Investment Corporations or the internal rules of Ichigo Investment Advisors (IIA), the asset management company.
3. Ichigo Office and Ichigo Trust will invest JPY 50 million (0.94% ownership) and JPY 3,780 million (70.92% ownership), respectively, in subordinated TK equity. Ichigo Trust is not a related party as defined in the Act on Investment Trusts and Investment Corporations or the internal rules of IIA.
4. Ichigo Estate is expected to become the asset manager of the Ichigo Office Bridge Fund, and is a related party as defined in the Act on Investment Trusts and Investment Corporations and the internal rules of IIA.
5. SMBC Nikko Securities Inc. is expected to serve as the private placement agent for Ichigo Office's TK equity investment.

Calculation Period:

Bi-annually (Jan 1st - Jun 30th; Jul 1st - Dec 31st). However, the first calculation period runs from January 28, 2022 until the end of June 2022, and the last calculation period runs from the day following the last day of the calculation period immediately preceding the last day of the TK agreement, to the latest of the day all assets from the TK operation other than cash (including related deposits) have been sold, the day the TK operator's debt obligation amount is determined, or the last day of the TK agreement.

Distributions:

Any profits arising in each calculation period will be distributed generally in the following order.

1. Profits will be distributed to the TK operator up to an amount equivalent to any cumulative losses (should they exist) that have been distributed to the TK operator during prior calculation periods.
2. Profits will be distributed to the senior TK equity holder up to an amount equivalent to any cumulative losses (should they exist) that have been distributed to the senior TK equity holder during prior calculation periods.
3. Profits not distributed to the senior TK equity holder under 2 above due to insufficient profits will be distributed to the senior TK equity holder.
4. Profits will be distributed to the senior TK equity holder up to an amount equivalent to profits multiplied by the senior TK equity holder's relative interest among TK investors and further prorated by the number of days in the calculation period divided by 365.

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1. Profits will be distributed to each subordinated TK equity holder according to their respective TK equity interests and up an amount equivalent to any respective cumulative losses (should they exist) that have been distributed to each subordinated TK equity holder during prior calculation periods.
2. Any remainder shall be distributed to each subordinated TK equity holder according to their respective TK equity interests.

Any losses arising in a calculation period will be distributed generally in the following order, after an amount equivalent to the calculation period's expected senior profit distribution is added to the balance of undistributed profits to the senior TK equity holder.

1. Losses will be distributed to each subordinated TK equity holder according to their respective TK equity interest, but not exceeding their respective TK investments.
2. Losses shall be distributed to the senior TK equity holder but not to exceed the senior TK equity holder's investment.
3. Any remainder shall be distributed to the TK operator.

		Ichigo Office's preferential negotiation right
	Description	for acquisition of the trust beneficiary interest
	or underlying real estate. (See Section 6
		"Asset Details" for details)
	Exercise
	Period of	From January 31, 2022 to January 31, 2025
	Preferential
	Negotiation
	Right
		If Ichigo Office offers to acquire the entire
		trust beneficiary interest at a price equivalent
		to or above the Acquisition Price detailed
Preferential	below, the TK Operator shall engage in
negotiations in good faith and make the sale
Negotiation Right	to Ichigo Office should an agreement be
	Conditions	reached.
	Acquisition Price
	for Exercise
	of	JPY 12,570 million
	Preferential	Breakdown by Asset
	Negotiation	Ichigo Hakataeki Higashi Building:
	Right	JPY 3,500 million
		Ichigo Hakata Meiji Dori Building:
		JPY 3,080 million
		Fukuoka Kensetsu Kaikan:
		JPY 2,750 million
		Ogaku Building:
		JPY 3,240 million
		(all prices above exclude tax)

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B. TK Operator Profile

Name	GK Kizuna1
Address	1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo
Representative	Managing Member: Ippan Shadan Hojin IES2
Manager: Kenta Itoi
	1. Investment in trust beneficiary interests in real estate
Business	(juekiken)
2. Acquisition, development, holding, management, and sale of
	real estate
	3. Other businesses relating to the aforementioned businesses
Paid-In Capital	JPY 100,000
Establishment Date	January 4, 2022
Total Assets	JPY 12,740 million (expected)
Net Assets	JPY 100,000
	Although the TK Operator is not a related party as defined in the
Relationship to	Act on Investment Trusts and Investment Corporations, it is a
Ichigo Office or	related party as defined in the internal rules of IIA, because it
Ichigo Investment	receives asset management services from Ichigo Estate, which is
Advisors (IIA)	a related party as defined in the Act on Investment Trusts and
	Investment Corporations.

C. Related Party Transaction Management

Because Ichigo Estate is providing asset management services to the Ichigo Office Bridge Fund, the Ichigo Office Bridge Fund is a related party as defined in the internal rules of the Asset Management Company. The Ichigo Office Bridge Fund is acquiring the trust beneficiary interest in real estate from Ichigo Estate and a SPC that receives asset management services from Ichigo Estate.

Because the Ichigo Office Bridge Fund is acquiring the trust beneficiary interest in real estate using funds procured via TK equity investments, including an investment from Ichigo Office, and Ichigo Office is acquiring a preferential negotiation right to the trust beneficiary interest in real estate from the Ichigo Office Bridge Fund, these transactions have been reviewed and managed as acquisitions from a related party per IIA's rules.

4. Acquisition Schedule

Acquisition Decision Date	January 27, 2022
TK Agreement Execution Date	January 27, 2022
TK Investment Settlement Date	January 28, 2022 (expected)
Asset Acquisition Date	January 31, 2022 (expected)

5. Earnings Outlook

Although the impact of this TK equity interest acquisition on Ichigo Office's April 2022 and October 2022 fiscal period earnings forecasts announced on December 14, 2021 is minimal and the forecasts are unchanged, Ichigo Office believes the opportunity to acquire high-quality assets via the Ichigo Office Bridge Fund will contribute to its sustainable growth and grow long-term value for Ichigo Office shareholders.

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