MHR Announces Partial Transfer of Trust Beneficiary Interest in Domestic Real Estate (Laforet Harajuku(Land):Partial Transfer) (PDF：105KB)

March 17, 2022

For Translation Purposes Only

Real Estate Investment Fund Issuer:

Mori Hills REIT Investment Corporation

(Securities Code: 3234)

1-12-32 Akasaka, Minato-ku, Tokyo

Hideyuki Isobe, Executive Director

Asset Manager:

Mori Building Investment Management Co., Ltd.

Hideyuki Isobe, President & CEO

Inquiries: Akira Nemoto

General Manager of Financial Department

TEL: [phone]

MHR Announces Partial Transfer of Trust Beneficiary Interest in Domestic Real Estate

(Laforet Harajuku (Land): Partial Transfer)

Mori Hills REIT Investment Corporation (hereinafter "MHR") announces that Mori Building Investment Management Co., Ltd. (hereinafter the "Asset Manager"), the asset management company for MHR, has determined today to conduct the partial asset transfer (hereinafter the "Transfer") described below.

1. Overview of Transfer

Property name	Laforet Harajuku (Land)
Asset to be transferred	Trust beneficiary interest (Note 1)	Trust beneficiary interest (Note 1)
(7% quasi co-ownership interest)	(7% quasi co-ownership interest)
Book value	1,545 million yen (Note 2)	1,545 million yen (Note 2)
Transfer price	2,898 million yen (Note 3)	2,898 million yen (Note 3)
Gain (loss) on transfer	1,347 million yen (Note 4)	1,345 million yen (Note 4)
Sales agreement date	March 17, 2022
Anticipated transfer date	July 1, 2022	December 1, 2022
Buyer	Mori Building Co., Ltd.

(Note 1) MHR plans to transfer trust beneficiary interest in ownership of land (land of Laforet Harajuku; hereinafter the "Property") to which fixed-termbusiness-use leasehold rights are attached for the purpose of owning retail and other facilities. However, MHR will continue to hold the remaining 86% of the quasi co-ownership interest in the trust beneficiary interest.

(Note 2) Book value indicates the estimate of the book value of the property as of the anticipated transfer date based on the book value as of January 31, 2022. The same shall apply hereinafter.

(Note 3) The transfer price does not include transfer-related costs and other expenses. The same shall apply hereinafter.

(Note 4) The gain (loss) on transfer represents the amount obtained by deducting the book value and transfer- related costs from the transfer price above. The same shall apply hereinafter.

(Note 5) In conjunction with the transfer of the quasi co-ownership interest in the trust beneficiary interest related to the Property, MHR plans to conclude an agreement with the buyer and trustee and plans to agree that written approval from the buyer is necessary if MHR would like to transfer the quasi co-ownership interest it holds.

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2. Reason for the Transfer

The Property is land with fixed-termbusiness-use leasehold rights and when the agreement related to the establishment of the leasehold rights terminates in September 2030, as a general rule, the agreement will not be renewed. Because the agreement stipulates that the building is to be removed and the land returned, MHR must conduct a transfer or take other measures in the future. In addition, considering the share of the entire portfolio represented by the Property, there will be a relatively large decrease in rent income after the transfer, and the harm that this will cause to stable dividends is an issue.

MHR conducted a comprehensive review of trends in the economic environment and real estate market conditions, the impact of the transfer on the portfolio, etc. while taking into account the current asset management status. As a result, MHR has determined that maintaining and increasing the rent income of the entire portfolio, by splitting and transferring a small portion of the Property while using the special tax treatment for property replacement of specified assets and returning a portion of the gain from the transfer as dividends while retaining a portion as internal reserves to utilize for acquiring new properties, will contribute to improving the interests of unitholders.

The sponsor Mori Building Co., Ltd., which will be the buyer, is able to acquire the split portion of the ownership interest while becoming a property pipeline for new acquisitions, which is the policy that will be implemented concurrently with the transfer. In addition, Mori Building has an excellent track record in many development projects in Japan and overseas, including Laforet Harajuku, which is the building on the Property. As a future option, MHR may also transfer all of its ownership interest and participate with a minority interest in future redevelopment led by Mori Building.

3. Details of the Asset to be Transferred

Details of the asset to be transferred

	Property name			Laforet Harajuku (Land)
				Trust beneficiary interest
	Type of specified asset		((1): 7% quasi co-ownership interest (transfer on July 1,
		2022) and (2): 7% quasi co-ownership interest (transfer
				on December 1, 2022))
	Trustee			Sumitomo Mitsui Trust Bank, Limited
	Trust establishment period		From July 1, 2022 to July 31, 2042 (anticipated)
	Location			1-11-6 Jingumae, Shibuya-ku, Tokyo
	(Residential indication)
	Area (Note 1)			2,565.06 m2
	Form of ownership		Ownership
	Book value			(1): 1,545 million yen
			(2): 1,545 million yen
	Transfer price			(1): 2,898 million yen
			(2): 2,898 million yen
	Gain (loss) on transfer		(1): 1,347 million yen
		(2): 1,345 million yen
	Appraisal	Appraiser		Japan Real Estate Institute
	Appraisal		5,796 million yen (Appraisal date: January 31, 2022)
		value (Note 2)
	Anticipated Transfer date		(1): July 1, 2022
		(2): December 1, 2022
Content of lease (As of March 17, 2022)
	Lessee			Mori Bldg. Ryutsu System Co., Ltd.
	Type of agreement		Fixed-termbusiness-use land lease agreement
	Term of agreement		From September 15, 2010 to September 14, 2030
		(20 years)
				2

	Gross rent income (annual rent)	186,984,000 yen
	(Note 3)
	Deposits/Guarantees	None
	Total leasable floor area (Note 4)	359.11 m2
	Total leased floor area (Note 5)	359.11 m2
Other special consideration	None

(Note 1) Area is the area of the entire site as indicated in the real estate registry.

(Note 2) The appraisal value represents the figure for the 14% quasi co-ownership interest in the trust beneficiary interest.

(Note 3) The gross rent income (annual rent) represents the figure obtained by multiplying the monthly rent indicated in the rent review memorandum related to the agreement for establishing the fixed-termbusiness-use leasehold rights by the 14% quasi co-ownership interest in the trust beneficiary interest, rounding down the amount below the unit and multiplying that amount by 12.

(Note 4) The total leasable floor area represents the figure obtained by multiplying the floor area deemed leasable to the lessee by the 14% quasi co-ownership interest in the trust beneficiary interest, rounded to the second decimal place.

(Note 5) The total leased floor area represents the figure obtained by multiplying the floor area leased to the lessee by the 14% quasi co-ownership interest in the trust beneficiary interest, rounded to the second decimal place.

1. Items Concerning Forward Commitments, etc.
   The purchase agreements concerning the Transfer are forward commitments, etc. (i.e. a postdated purchase agreements where the execution is scheduled over one month ahead of the payment and delivery of the property, and other similar agreements), as provided in "Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc." Under the purchase agreements, when the purpose of the purchase agreements cannot be fulfilled due to a breach of the purchase agreements by a party, the non-breaching party may cancel the purchase agreements related to each quasi co-ownership interest in the trust beneficiary interest upon notice if each delivery has not been executed.
   However, because MHR is the seller under the purchase agreements and there are no concerns about financing risks, etc. related to execution of the purchase agreements, the likelihood of MHR's financial conditions being significantly impacted is low.
2. Profile of Buyer

Name	Mori Building Co., Ltd.
Location	6-10-1 Roppongi, Minato-ku, Tokyo
Representative	President and CEO, Shingo Tsuji
Scope of business	General developer
Capital	79,500 million yen (as of September 30, 2021)
Established	June 2, 1959
Major shareholder	Morikiyo Co., Ltd. etc. (as of September 30, 2021)
Net assets	429,906 million yen (as of September 30, 2021)
Total assets	1,870,438 million yen (as of September 30, 2021)
Relationship with MHR or Asset Manager (as of March 17, 2022)
		Mori Building is a major unitholder (15.0% stake) of MHR. Mori
		Building is also the wholly owning parent company (100%
	Capital relationship	stake) of the Asset Manager, and thus constitutes a related
	party, etc. as defined in the Act on Investment Trusts and
		Investment Corporations (Act No. 198 of 1951, includes
		subsequent revision) (hereinafter the "Investment Trust Act").
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	Personnel relationship	One director and one auditor of the Asset Manager are sent
	from this company.
		Mori Building has executed a support agreement and
		information provision agreement with MHR and the Asset
		Manager and an advisory business consignment agreement
		with the Asset Manager, and provides support, etc. in
		connection with property acquisitions, etc. In addition, Mori
	Business relationship	Building has executed a brand license agreement with MHR
	and grants the license to use the brand name "Mori Hills REIT"
		and the "m" mark. Furthermore, as for assets MHR owns in the
		form of trust beneficiary interest, Mori Building has executed a
		building lease agreement (so-called master lease agreement)
		with a trustee, and leases the entire property as a master
		lessee. The company also executed a property management
		agreement and conducts property management of the property.
	Application of status	Mori Building falls under the category of other related party of
	as a related party	MHR. In addition, it is a parent company of the Asset Manager.

1. Profile of Broker Not applicable.
2. Transaction with Related Parties, etc.
   A transaction with a related party, etc. will occur with the Transfer.
   Accordingly, to comply with applicable laws and regulations and with the asset management agreement, as well as to prevent the interests of MHR from being negatively impacted with respect to the transfer price and other terms and conditions, the Asset Manager has taken steps pursuant to the Related Parties Transaction Guidelines.

The Buyer constitutes a related party, etc. of the Asset Manager and the Transfer constitutes a transaction with a

Transfer of the Assetrelated party, etc. as defined in the Investment Trust Act. In accordance with provisions of the Investment Trust Act, the Asset Manager will deliver a written notice to MHR.

1. Payment Method
   Lump sum payment upon delivery
   Regarding the proceeds from the transfer, MHR plans to allocate a portion for dividends and retain a portion as internal reserves.
2. Date of Transfer

Asset to be transferred	Trust beneficiary interest	Trust beneficiary interest
((1): 7% quasi co-ownership	((2): 7% quasi co-ownership
	interest)	interest)
Date of decision of transfer	March 17, 2022
Date of execution of transfer	March 17, 2022
agreement
Payment receipt date	July 1, 2022 (anticipated)	December 1, 2022 (anticipated)
Delivery date	July 1, 2022 (anticipated)	December 1, 2022 (anticipated)

10. Future Prospect

For the forecast of business results, please refer to the press release "Financial Report for the Thirty-First Fiscal Period ended January 31, 2022" separately announced today.

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11. Summary of Appraisal Report

Property name	Laforet Harajuku (Land)
Appraisal value	5,796,000 thousand yen
Appraiser	Japan Real Estate Institute
Appraisal date	January 31, 2022
									(thousand yen)
Items	Contents	Summaries, etc.
(Note)
					Price based on the discounted cash flow method
					(hereinafter the "DCF method") is used because the
Price	5,796,000	Property is land to which fixed-termbusiness-use
leasehold rights are attached and, as a general rule,
					the agreement will not be renewed when it
					terminates.
	Price based on the DCF	5,796,000	―
	method
		Operating profit	186,984	―
			Possible total	186,984	Recorded the	rent income based on	the	current
			revenue	agreements.
					Not recorded because the fixed-termbusiness-use
			Vacancies, etc.	0	land lease agreement is a long-term agreement, and
			loss , etc.	taking into consideration the prohibition on early
					terminations, creditworthiness of lessees, etc.
			Operating costs	27,952	―
			Maintenance	0	Not recorded because there are no maintenance
			costs	costs.
			Utilities	0	Not recorded because there are no costs for utilities.
			Maintenance	0	Not	recorded	because	there	are no costs for
			and repairs	maintenance and repairs.
					Recorded by taking into consideration such factors
			PM fee	93	as the fee rate of similar real estate and the factors
					specific to the subject real estate.
			Tenant		Not	recorded	because	there	are	no	tenant
			recruitment	0
			recruitment costs, etc.
			costs, etc.
					Recorded by taking into consideration documents
			Property taxes	27,858	related to property taxes, contents of burden
					adjustment measures, etc.
			Insurance	0	Not	recorded	because	there are no insurance
			premium	premiums.
			Other expenses	0	There are no expenses otherwise to record.
			Operating	159,031	―
		net income
			Investment		Investment income is not recorded because there
			income	0	are no lump sums that have the characteristics of
			of lump sum		deposits.
			Capital	0	Not	recorded	because	there	are	no	capital
			expenditures	expenditures.
		Net return	159,031	―

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