Industrial & Infrastructure Fund Investment : Notice Concerning IIF Atsugi Logistics Center 3 Redevelopment Project

July 7, 2021

To all concerned parties:

Investment Corporation

Industrial & Infrastructure Fund Investment Corporation

(Tokyo Stock Exchange Company Code: 3249）

Representative:	Kumi Honda, Executive Director
	URL: https://www.iif-reit.com/english/
Asset Management Company
Mitsubishi Corp.-UBS Realty Inc.
Representative:	Katsuji Okamoto, President & CEO
Inquiries:	Hidehiko Ueda,
	Head of Industrial Division

TEL: [phone]

Notice Concerning IIF Atsugi Logistics Center Ⅲ Redevelopment Project

Industrial & Infrastructure Fund Investment Corporation ("IIF") announced today that Mitsubishi Corp.- UBS Realty Inc., IIF's asset manager (the "Asset Manager"), has decided to carry out a redevelopment project (the "Redevelopment Project") for IIF Atsugi Logistics Center Ⅲ (the "Property") , which is owned by IIF, and concluded the fixed-term building lease reservation contract related to the Redevelopment Project today.

1. Reasons for the Redevelopment Project

IIF promotes redevelopment initiatives for existing properties as part of its external growth strategy. In accordance with this strategy, after securing the tenant after redevelopment, IIF plans to demolish the Property, construct a cold storage facility (the "Property After Redevelopment") on the premises of the Property and acquire it, with the purpose of establishing a long-term stable revenue foundation and improving competitiveness of the Property.

Key Point

1. Improvement of competitiveness by building a cold storage facility
2. Improvement of NOI and appraisal value (unrealized gain) by realizing upside through utilization of surplus floor-area ratio
3. Conclusion of the long fixed-term building lease reservation contract

(contract term: 15 years)

• Images of the Property After Redevelopment

※Those are rendering images prepared on the assumption that the building is scheduled to be completed, and may differ from the actual building. The same shall apply hereafter.

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• Background to the Redevelopment Project

Since the acquisition of the Property in March 2012, we have continued to operate the Property in a stable manner. However, as about 40 years have passed since its building completion as of today, we have considered the operation of the Property in the future at the view of creating the stable portfolio in mid-to-long term.

The Property is located in prime industrial area allowing for 24-hour operation along the main highway nearby IC on Ken-O expressway. In addition, the surplus floor- area ratio to cap floor-area ratio is large (the current floor area ratio of about 100% compared to the cap floor-area ratio of 200%), and there is a rent gap between the current rent and the market rent. Therefore, the property has been recognized as having the upside potential in the future. Since continuing to own the Property may require large-scale renovation to maintain competitiveness, we have carefully considered several operational options, such as continuous lease or redevelopment, for the Property from February 2022, the expiration date of the fixed-term building lease contract with Tokyo Logistics Factory Co., Ltd. (the "Tenant"), the major logistics 3PL (a third party logistics) company.

We have carefully considered the possibility of carrying out a redevelopment project in several operational options for the Property in collaboration with the Tenant, and, based on the examination about economics, the scale and specifications of the building after redevelopment, the various risks related to redevelopment and the impact of temporary expenses and downtime on the profit and loss of the portfolio during the redevelopment period, have judged that building a cold storage facility expanding its demand backed by the recent increase in demand for frozen foods, and carrying out redevelopment on balance of IIF after securing the tenant after redevelopment maximize unitholder's value. Therefore, we concluded the fixed-term building lease reservation contract (the "Contract") for 15 years with the Tenant concerning the Property After Redevelopment and determined to carry out the Redevelopment Project.

After the Redevelopment Project, the appraisal value (survey value) of the Property After Redevelopment will be 7,030 million yen (an increase of 3,830 million yen) and the unrealized gain will be 2,597 million yen (unrealized gain ratio + 58.6%), which are expected to greatly improve compared to the figures before the Redevelopment Project.

The Tenant is also the lessee of the IIF Akishima Logistics Center owned by IIF, and the Redevelopment Project will be realized through much discussion by leveraging the favorable relationship with the Tenant. As a result, IIF will be able to improve profitability of the Property, continue long-term and stable lease contract, realize improvement of asset value, and further deepen relationships with the Tenant simultaneously through the redevelopment on balance of IIF to keep development profit after securing tenants after redevelopment.

CRE proposal to capture new facility needs

Proposal of building a cold storage facility

IIF

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• Effects of the Redevelopment Project
  The following effects are expected as a result of the Project.

（Note 1）The figures for "total floor area" and "floor area ratio" after redevelopment, are shown for reference based on the current plan for the Redevelopment Project. The actual figures for "total floor area" and "floor area ratio" after redevelopment may change in the future due to changes of the plan for the Redevelopment Project. The same shall apply hereafter.

（Note 2）The figure for "(anticipated) acquisition price" after redevelopment is reference value by totaling anticipated acquisition price of the Property After Redevelopment (the total of construction costs, design fee, and CM fees) and the price of land already acquired (the acquisition price of the land described in the trust beneficiary right purchase and sale agreement for the Property at the time of the acquisition in 2012). As the construction contract regarding to the Property After Redevelopment has not been concluded as of today, construction costs, design fee, and CM fees are reference value based on the estimation and will be announced again after the conclusion of the construction contract regarding to the Property After Redevelopment. Accordingly, the actual acquisition price of the Property After Redevelopment may change in the future due to changes of the plan for the Redevelopment Project. The same shall apply hereafter.

（Note 3）The figure for "appraisal value" before redevelopment is the survey value based on the survey report as of January 31, 2021. The figure for "appraisal value" of the Property After Redevelopment is the survey value based on the survey report based on the plans for the Redevelopment Project as of June 1, 2021. Please refer to the below for more detail; "4. Summary of Survey Report (After the Redevelopment Project)". The same shall apply hereafter.

（Note 4）The figure for "unrealized gain" before redevelopment is the difference between the survey value based on the survey report as of January 31, 2021 and the book value as of January 31, 2021. The figure for "Unrealized gain" of the Property After Redevelopment is the difference between the survey value based on the survey report on the plans for the Redevelopment Project as of June 1, 2021 and the anticipated acquisition price. The same shall apply hereafter.

（Note 5）The figure for "Annual NOI" before redevelopment is the total actual NOI for the 26th fiscal period ended July 31, 2020 and the 27th fiscal period ended January 31, 2021 of the Property. The figure for "Annual NOI" after redevelopment is the net operating income for the first fiscal year under the DCF method indicated in the survey report on the plan for the Redevelopment Project as of June 1, 2021. The figure for "Annual NOI" after redevelopment is the estimated value after the completion of the Property After Redevelopment based on the plan for the Redevelopment Project, and there is no guarantee that it will be realized and the actual annual NOI after redevelopment may change in the future due to changes of the plan for the Redevelopment Project. The same shall apply hereafter.

（Note 6）NOI yield = Annual NOI / (Anticipated) acquisition price

NOI yield after depreciation = Annual NOI after depreciation* / (Anticipated) acquisition price

NOI yield after depreciation (after adjustment by optimal payable distribution**) = (Annual NOI after depreciation + depreciation (annual) of Property After Redevelopment × 30%) / (Anticipated) acquisition price

*Annual NOI after depreciation= Annual NOI-depreciation (annual)

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Depreciation of the Property is calculated using the total actual depreciation for the 26th fiscal period ended July 31, 2020 and the 27th fiscal period ended January 31, 2021 of the Property. Depreciation of the Property After Redevelopment is an estimate calculated by using the depreciation rates under the straight-line method in proportion to the useful life for the Property After Redevelopment. The same shall apply hereafter.

• • Approval of changes in the Articles of Incorporation of IIF at the General Meeting of Unitholders of IIF is mandatory to implement optimal payable distribution. As of today, IIF has not decided on implementation of the optimal payable distribution, nor the call of the General Meeting of Unitholders for such amendment. NOI yield after depreciation (after adjustment by optimal payable distribution) described in this document is a reference value based on estimate as of today, and there is no guarantee that it will be realized. The same shall apply hereafter.
• The Scheme and the Schedule of Redevelopment Project (scheduled)

IIF and the "Tenant" concluded fixed-term building lease reservation contract relating to the "Property After Redevelopment" after completion of the Redevelopment Project as of today. In addition, Suzuyo Construction Co., Ltd. ("Suzuyo Construction") is scheduled to be employed as a designer and a contractor in the Redevelopment Project. Suzuyo Construction is a group company of Suzuyo & Co., Ltd., the lessee of the IIF Nishinomiya Logistics Center, and was employed as a construction contractor for the IIF Nishinomiya Logistics Center Expansion Project completed in May 2016. IIF will promote the Redevelopment Project by utilizing professional and abundant knowledge of Suzuyo Construction about operations of logistics and various know-how in development of logistics facility.

Conclusion of fixed-term building lease reservation contract	July 7, 2021
Basic design and detailed design	From July 2021 to December 2021 (scheduled)
Conclusion of construction contract	January 2022 (scheduled)
Application for building certification	January 2022 (scheduled)
Demolition term	From February 2022 to April 2022 (scheduled)
Construction term	From May 2022 to September 2023 (scheduled)
Start of newly operation	October 2023 (scheduled)

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2. Information about the Property

								Before the Redevelopment Project		After the Redevelopment Project
	Property name				IIF Atsugi Manufacturing Center Ⅲ
	Type of asset					Trust beneficiary right in real estate
	Location					3007-7, Kamiechi Aza Uenohara, Atsugi-shi, Kanagawa
	Acquisition date				March 7, 2012		March 7, 2012
										September 30, 2023 (Note 1)
	Acquisition price				2,290 million yen		4,432 million yen (anticipated)
	Appraisal Value (Survey value)			3,200 million yen		7,030 million yen
			(As of January 31, 2021)		(As of June 1, 2021)
	Appraiser					Japan Real Estate Institute
				Land area				17,415.20m2
	Land			Zoning				Industrial exclusive area
				Type of possession			Ownership
								＜Main building＞
								3-storiedsteel-framed reinforced
				Building structure/			concrete building with zinc-
						coated steel plate roof		4-storiedsteel-framed building (Note 2)
				stories
							＜Attached building＞
								One-story ferroconcrete building
								with deck roof
				Construction			October 23, 1981		September 30, 2023 (Note 2)
						August 22, 2000（Expansion）
				completion
				Total floor area			16,470.24m2		23,369.28m2 (Note 2)
	Building			Current	floor	area		100.8％（200％）/		132.9％（200％）/
				ratio(cap) /
				Current	building-to-		42.6％（45％）		45％（45％）
				land ratio(cap)
				Type of possession			Ownership
								＜Main building＞
								Warehouse,
				Use				goods discharge spot		Warehouse (Note 2)
								＜Attached building＞
								Guardhouse
				Earthquake PML		7.3%		- (Note 3)
	Collateral conditions				None
	Special notes					None
	Designer					Nikken Sekkei Ltd (Note 4)		Suzuyo Construction Co., Ltd.
						(Planned)
	Contractor					KAJIMA CORPORATION (Note 4)		Suzuyo Construction Co., Ltd.
						(Planned)

(Note 1) "Acquisition date" after the Redevelopment Project is the scheduled date of completion and delivery as of today. It may change depending on the progress of the Redevelopment Project in the future.

(Note 2) "Building structure / stories", "Construction completion", "Total floor area" and "Use" of the Property After Redevelopment are described based on the basic design as of today.

(Note 3) "Earthquake PML" of the Property After Redevelopment is not described because it is difficult to calculate it as of today.

(Note 4) The "Designer" and "Contractor" before the Redevelopment Project are described at the time of new construction.

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