Sekisui House Reit : Notice Concerning Acquisition and Disposition of Trust Beneficiary Interest in Domestic Real Estate

June 15, 2022

Real Estate Investment Trust Securities Issuer

Sekisui House Reit,Inc.

Representative:	Atsuhiro Kida, Executive Director
	(Securities Code:3309)
Asset Management Company
Sekisui House Asset Management, Ltd.
Representative:	Toru Abe,
	President & Representative Director
Inquiries:	Koichi Saito, Chief Manager,
	Investor Relations Department

TEL:[phone] (main)

Notice Concerning Acquisition and Disposition of Trust Beneficiary Interest in Domestic Real Estate

(Acquisition of Prime Maison EGOTANOMORI and One Other Property

and Disposition of The Ritz-Carlton, Kyoto)

Sekisui House Reit, Inc. ("SHR") hereby announces that Sekisui House Asset Management, Ltd. ("SHAM"), to which SHR entrusts management of its assets, has decided today for SHR to acquire and dispose the following assets (hereinafter respectively referred to as the "Asset Acquisition" and the "Asset Disposition";the Asset Acquisition and the Asset Disposition are hereinafter collectively referred to as the "Transaction") as described below.

At the time of the decision on the Transaction, since the counterparty to the Transaction falls under the category of interested persons, etc. as provided in the Act on Investment Trustsand Investment Corporations(Act No.198 of 1951, as amended) (the "Investment Trusts Act"), and under the category of interested parties as provided in SHAM's internal rules: Rules for Transactions with Interested Parties, SHAM has obtained, in accordance with the Rules for Transactions with Interested Parties, the consent of SHR based on approval at the Board of Directors Meetingof SHR held today.

1. Summary of the Transaction

1. Summary of the Asset Acquisition

		Type of			Planned	Sales and	Planned
Property name	Location		acquisition price	purchase	acquisition	Seller
use
				(Note 1)	contract date	date
Prime Maison		Nakano-ku,	10,500	million yen	To be	August 2,
	determined	2022
EGOTANOMORI		Tokyo		Sekisui
				(Note 2)	(Note 3)
		Residence					House,
Prime Maison	Shinjuku-ku,			June 15,	August 2,
	2,200	million yen	Ltd.
Waseda dori		Tokyo		2022	2022
		Total			12,700 million yen	―	―	―
a.	Type of specified asset	:	Trust beneficiary interests in trust assets which are
				comprised of domestic real estate
b.	Brokerage		:	Not applicable
c.	Acquisition financing	:	Proceeds from the Asset Disposition
d.	Settlement method	:	Payment of entire amount at time of delivery

(Note 1) "Planned acquisition price" refers to the amount described in each sale and purchase contract or the amount that has been determined as the price to be described in the sale and purchase price (excluding consumption tax, local consumption tax, commission and other various expenses; rounded down to the nearest million yen). The same applies hereinafter.

(Note 2) "Sales and purchase contract date" for "Prime Maison EGOTANOMORI" will be on or after the date of approval by the Urban Renaissance Agency, the owner of the leased land, for the transfer of the ordinary fixed-term land leasehold rights from Sekisui House, Ltd., the Seller, to the trustee. Discussions regarding the approval are in progress; however, this approval by the Urban Renaissance Agency has not been obtained as of today. The sales and purchase contract date will be disclosed as soon as it has been determined. The same applies hereinafter.

(Note 3) "Planned acquisition date" for "Prime Maison EGOTANOMORI" refers to the expected date of settlement as of today, and is subject to change due to the actual contract date and other conditions. The same applies hereinafter.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version and the English translation, the Japanese version shall prevail.

1

1. Summary of the Asset Disposition

							Difference	Sale and
				Planned			between		Planned
Property		Type		Book value	purchase
	disposition		planned		disposition	Buyer
	name		of use		(Note2)	disposition	contract
		price (Note 1)			Date
					price and book	Date
							value (Note 3)
The Ritz-			23,000		22,324	675		June 15,		August 2,	Sekisui
	Carlton,		Hotel				House,
		million yen		million yen	million	yen	2022		2022
	Kyoto					Ltd.
	Total		23,000		22,324	675		―		―	―
		million yen		million yen	million	yen
a.	Type of specified asset	:	Trust beneficiary interests in trust asset which is comprised
						of domestic real estate
b.	Brokerage			:	Not applicable
c.	Settlement method	:	Receipt of entire amount at time of delivery

(Note 1) "Planned disposition price" is the saleand purchase price stated in the sale and purchase agreement (excluding consumption tax and local consumption tax and commission and other various expenses; rounded down to the nearest million yen). The same applies hereinafter.

(Note 2) "Book value" is the estimated value as of the date of disposition. The amount is rounded down to the nearest million yen.

(Note 3) For "Difference between planned disposition price and book value", the difference in disposition price and book value amount is rounded down to the nearest million yen.

2. Reason for the Transaction

SHR conducts the Transaction based on the targets and policies of asset management stipulated in its Articles of Incorporation, with the aim of improvingthe profitabilityof its portfolio and securingstable earnings.

In addition, SHR believes that the replacement of assets through the Transaction will have the followingeffects:

• Improving earnings efficiency (portfolio NOI yield) by disposing of the hotel with deteriorated earnings environment (NOI yield of 1.7%) and acquiring two residential properties (appraisal NOI yield of 4.9%).
• Securing stable funds for distributions by recording gain on disposition.
• Expanding investment in real estate with superior environmental performance, etc., in consideration of ESG.

In addition, while the investment ratio in hotelswill temporarilydecrease as a result of the Transaction, there will be no change in SHR's portfoliodevelopment policy and the investment ratio over the medium-tolong-term. Once recovery in domestic tourism demand and inbound demand can be confirmed, SHR will aim to achieve external growth over the medium- to long-term while resuminginvestment in hotels includingthe mentioned Asset to be Disposed (Note 1). SHR will alsocontinue to hold preferential negotiation rights for the Asset to be Disposed even after the Asset Disposition.

Asset to be Disposed	1 Hotel Property
Planned disposition price	23,000million yen
Building age (Note 2)	8.7years
NOI (Note 3)	370million yen
NOI yield (Note 4)	1.7%
NOI after depreciation (Note 3)	264million yen
NOI yield after depreciation	1.2%
(Note 4)
(Reference)	22,120million yen
Acquired price (Note 5)
Gain on disposition (expected)	613million yen
(Note 6)

Assets to be Acquired (Note 7)	2 Residential Properties
Planned acquisition price	12,700million yen
Average building age (Note 8)	3.6years
Appraisal NOI (Note 9)	627million yen
Appraisal NOI yield (Note 11)	4.9%
Appraisal NOI after	379million yen
depreciation (Note 10)
Appraisal NOI yield after	3.0%
depreciation (Note 11)

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version and the English translation, the Japanese version shall prevail.

2

(Note 1) "Asset to be Disposed" refers to the one hotel property described in 1. Summary of the Transaction (2) Summary of the Asset Disposition. The same applies hereinafter.

(Note 2) "Building age" refers to the building age as of today.

(Note 3) "NOI" and "NOI after depreciation" are the sum of the amounts of NOI and NOI after depreciation for the fiscal periods ended October 31, 2021 (14th Fiscal Period) and April 30, 2022 (15th Fiscal Period).

(Note 4) "NOI yield" and "NOI yield after depreciation" are calculated by dividing the NOI and NOI after depreciation respectively described in (Note 3) by the acquired price and rounded to the first decimal place. The same applies hereinafter.

(Note 5) "(Reference) acquired price" refers to the sum of the acquisition price of assets to be disposed at the time of acquisition.

(Note 6) "Gain on disposition (expected)" refers to the approximate amount as of today, and is subject to change.

(Note 7) "Assets to be Acquired" refers to the two residential properties described in 1. Summary of the Transaction (1) Summary of the Asset Acquisition. The same applies hereinafter.

(Note 8) "Average building age" is calculated by weighting and averaging the building age of each building as of today with the planned acquisition price.

(Note 9) "Appraisal NOI" refers to the sum of the amount of appraisal NOI of each appraisal report as of June 1, 2022.

(Note 10) "Appraisal NOI after depreciation" refers to the amount obtained by subtracting the sum of the total estimated depreciation cost converted anually for the fiscal periods ending October 31, 2022 (16th Fiscal Period) and April 30, 2023 (17th Fiscal Period) from the appraisal NOI described in (Note 9) above.

(Note 11) "Appraisal NOI yield" and "Appraisal NOI yield after depreciation" are calculated by dividing appraisal NOI and appraisal NOI after depreciation described in (Note 9)and (Note 10)by the expected acquisition price, respectively, and calculated by weighted average of the expected acquisition price base and rounded to the first decimal place.

1. Reason for the Asset Acquisition
   Assets to be Acquired are, among others, rental condominiums planned and developed by Sekisui House, Ltd. ("Sekisui House"), the sponsor of SHR, and are to be acquired as part of a growth strategy that makes the most of the real estate development and management capabilities of the Sekisui House Group (Note 1), which has a wealth of experience. SHR considers high quality residential properties and commercial properties located in strategic locations to be investment targets that are expected to generate stable earnings over the medium-tolong-term, and this is referred to as Prime Properties, and is a priority investment target. The Assets to be Acquired are located in Tokyo 23 wards, which is in Greater Tokyo (Note 2), an important investment area for SHR, and which a wealth of rental demand can be anticipated.
   SHR also judges that both properties fall under the category of Prime Properties from the viewpoint of high basic performance as residences, such as comfort and safety, approaches to environmental considerationsin response

to social demands,and buildingssuited to the townscape.

(Note 1) "Sekisui House Group" refers to a group of companies comprised of Sekisui House and its consolidated subsidiaries an d its affiliates accounted for by the equity method.

(Note 2) "Greater Tokyo" refers to Tokyo, Kanagawa prefecture, Chiba prefecture, and Saitama prefecture.

The characteristics of the Assets to be Acquired taken into consideration upon decidingon the Asset Acquisition are as follows:

1. Prime Maison EGOTANOMORI i. Location characteristics
2. 
   The property is located approximately a 10-minute walk from Shin-egota Station on the Toei Subway Oedo Line and approximately a 15-minute walk from Numabukuro Station on the Seibu Shinjuku Line. Thisproperty consists of five properties: Prime Maison EGOTANOMORI EAST/WEST (rental condominiums for families), MAST ONE EGOTANOMORI (a rental condominium for students and single-persons), GRAND MAST EGOTANOMORI (serviced housingfor the elderly) and NICHII HOMEEgotanomori (a paid nursinghome with long-term care) (hereinafter referred to as "Prime Maison EGOTANOMORI", and each building referred to as "Prime Maison EGOTANOMORI EAST", "Prime Maison EGOTANOMORI WEST", "MAST ONE EGOTANOMORI", "GRAND MAST EGOTANOMORI" and "NICHII HOMEEgotanomori").
   These properties are a part of the Egotanomori Project, which wasdeveloped under the concept of "creatinga sustainable community nurtured by multiple generations", and are located on a premise of approximately 39,500 ㎡ close to Egotanomori Park in cooperation with a condominium "Grande Maison EGOTANOMORI" and Tokyo General Hospital to form a residentialarea with a good livingenvironment.
   One section of the Prime Maison EGOTANOMORI consists of "Live In Labo", a place where diverse generations

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version and the English translation, the Japanese version shall prevail.

3

in the region can come together to interact, and through this Live In Labo, interactions acrossgenerations and households help foster the community, and a town is created where one household can continue to live and choose a residence accordingto their life stage. There are also elementary schools,junior high schools, libraries, etc. in the neighborhood, as well as a children's club, a day-care center, a restaurant, and a convenience store on the premises, allowingpeople to live with peace of mind amid the establishment of a single community.

1. Property characteristics
   The property has pedestrian-vehicle separation within the premises, with beauty and safety of the district pursued and maintained systematically. Additionally, concierges are placed at the entrance hall counters to provide a variety of lifestyle support services, and paid car sharing services and customer parking are also available. Solar power generation is installed on the roof of the buildings, which is used to sustain part of the electricity used in the common areas. This property is also equipped with a stockpile of disaster prevention equipment, a bench with oven function, and a well with access to water in case of a disaster.
   As for this property, SHR intends to execute a pass-through type master lease agreement (Note 1) ("Pass-through Type ML Agreement") with Sekisui House Real Estate Tokyo, Ltd. ("Sekisui House Real Estate Tokyo") as the master lease company. Provided, however, as for GRANDMAST EGOTANOMORI, which isa senior asset (Note 2), a fixed rent covering the entire building is scheduled to be paid by the master lease company based on the special provision in the above Pass-through Type ML Agreement. In addition, a building lease contract for NICHII HOME Egotanomori, which is also a senior asset, has been concluded with one tenant covering the entire building (remainingterm:26.2years). Furthermore, MASTONE EGOTANOMORI isleased bytwo tenants (average remainingterm:6.8 years). Thanks to these tenants' composition,stable earnings are expected to be

recorded from the property.

(Note 1) A "pass-through type master lease agreement" is a master lease method in which the rent paid by the master lease company is always the same as the rent paid by the end tenant. The same applies hereinafter.

(Note 2) "Senior asset" refers to serviced housing for the elderly, paid nursing homes and adult day care centers.

1. Prime Maison EGOTANOMORI EAST, Prime Maison EGOTANOMORI WEST
   Prime Maison EGOTANOMORI EAST consists of 14 floors above ground and 175 units in total, and the rooms are 1LDK, 2LDK, and 3LDK. Prime Maison EGOTANOMORI WEST consists of nine floors above ground and 91 units (includingthree stores) in total, and the roomsare 1LDK, 2LDK and 4LDK. Both rental condominiums are ideal for families raising children, equipped with an entrance hall, a dual security system, and a guest room to accommodate friends and others. In addition, the use of "ENE-FARM", a residential fuel cell that simultaneously produces electricity and heat, is equipped in all units, allowing generated electricity to be used within the household and hot water made from the heat generated during power generation can be used in the bath and kitchen. The properties are also equipped with intercoms with monitors, bathtub with bathwater reheating functions, bathroom ventilation heating and dryers, bidet toilet, and a delivery box.
2. GRAND MAST EGOTANOMORI
   GRAND MAST EGOTANOMORI is a serviced housingfor the elderly, and consists of 14 floorsabove ground and 121 units in total, and the rooms are 1LDK and 2LDK. The kitchen uses safe induction heating (IH) stoves and the entrance to the bathroom is barrier-free with no steps and equipped with handrails. The restrooms are also spacious so people in wheelchairs can access them without any inconvenience. In addition to providing daily life support services such as a daily safety check, an emergency button in the unit for emergency response and provision of lifestyle consultations, this property also provides interactive events and paid meal services to improve the quality of life.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version and the English translation, the Japanese version shall prevail.

4

1. 1. MAST ONE EGOTANOMORI
      MAST ONE EGOTANOMORI is a rental condominium for students and single-persons, and consists of six floors above ground and 141 units in total, and the rooms are 1R, 1K and 1LDK. The premise is equipped with a crime prevention system that is managed by personnel 24 hours a day to ensure a secure lifestyle. Other equipment includes intercoms with monitors, bathtub with bathwater reheating functions, bidet toilet, and free internet.
   2. NICHII HOMEEgotanomori
      NICHII HOMEEgotanomori is a paid nursinghome for the elderly who need nursingand medicalcare, and consists of six floors above ground and 94 units in total, and the rooms are 88 units for single use, and six units for married couples. There are livingand diningrooms that can be used not only for meals, but also for a variety of purposes including seasonal events and recreation. In addition, there are a full range of shared facilities,such as a functional trainingroom, a lounge, a hair salon and a computer area. With three cooperative medical institutions, this property aims to provide a fun, worry-free lifestyle while still observinga reliable and well-developed medical system.
2. Prime Maison Waseda dori i. Location characteristics
3. 
   Prime Maison Waseda dori is located approximately a three-minute walk from Waseda Station on the Tokyo Metro Tozai Line, and approximately a 12-minute walk from Edogawabashi Station on the Tokyo Metro Yurakucho Line, and Ushigome-yanagicho Station on the Toei subway Oedo Line, making it convenient to access Shinjuku and Shibuya. The property is located in the "Waseda" area, which is known as an educational district with Waseda University and Gakushuin Women's College, etc. are located, and the surroundingarea is well-equipped with various convenience facilities such as supermarkets, post offices, and hospitals,providing a good livingenvironment.

1. 1. Property characteristics
      The property consists of 11 floors above ground and 65 units in total, and the rooms are 1R, 1K, and 1LDK, characterized by a simple and modern appearance due to the cast concrete. In terms of equipment, automatic lock, securitycameras,intercomswith monitors,bathroom ventilation heatingand dryers, delivery boxes, etc. are equipped. This property is expected to receive demand from single-persons and DINKs who emphasize convenience.
      SHR intends to execute a Pass-through Type ML Agreement with Sekisui House Real Estate Tokyo, asthe master lease company.
2. Reason for the Asset Disposition
   The asset to be disposed, "The Ritz-Carlton, Kyoto", is the premier brand hotel of Marriott International of which SHR holds 49.0% quasi-co-ownership upon acquisitions of trust beneficiary interest in the said real estate as of January 2019 and April 2020.
   Due to the recent spread of COVID-19, demand in domesticand inbound tourismhave significantlydecreased,and the hotel industry has continued to be severely affected. However, as of late, public health policy has shifted from initial response where severe preventative measures including restriction of travel were taken place, to taking measures to reduce the negative impact on economic activities to the greatest extent. This has resulted in a favorable economic recovery with strong tourism demand during the period when the state of emergency and pre-emergency measures was lifted. In terms ofinbound demand,strict entry restrictionshave been implemented for foreign nationals who wish to enter Japan for the purpose of leisure. However, as of June 2022, the Japanese government has implemented relaxation of immigration restrictions, and has indicated its intention to ease the restrictions on entry in stages, and expectations for recovery is on the rise.

Disclaimer: This translation is for informational purposes only. If there is any discrepancy between the Japanese version and the English translation, the Japanese version shall prevail.

5