Starts Proceed Investment : Notice Concerning Disposition of Trust Beneficiary Interest in Domestic Real Estate

March 29, 2022

Translation Purpose Only

For Immediate Release

REIT Issuer

Starts Proceed Investment Corporation

3-1-8 Nihonbashi, Chuo-ku, Tokyo

Kazuya Hiraide, Executive Director

(Security Code: 8979)

Asset Management Company

Starts Asset Management Co., Ltd.

Kazuya Hiraide, Representative Director

Inquiries: Hideki Hamaguchi, General Manager of Financial Control and Administration Division

TEL. [phone]

Notice Concerning Disposition of Trust Beneficiary Interest in Domestic Real Estate

Starts Proceed Investment Corporation ("SPI") announces that Starts Asset Management Co., Ltd., to which SPI entrusts the management of its assets (the "Asset Management Company"), today decided to conduct disposition of trust

beneficiary interest in domestic real estate. The details are as follows.

• 1. Overview of the Disposition

  Property No.	Property name	Buyer	Planned contract conclusion date	Planned disposition date (Note 1)	Planned disposition price (thousand yen) (Note 2)	Assumed book value (thousand yen) (Note 3)	Amount of difference between planned disposition price and assumed book value (thousand yen)
  C-30	Proceed Nakanoshimbashi	Sojitz New Urban Development Corporation	March 30, 2022	April 28, 2022	760,000	661,973	98,027

  (Note 1)	The settlement method for the property is scheduled to be settlement of the entire amount on the planned disposition date.
  (Note 2)	"Planned disposition price" does not include miscellaneous disposition-related expenses, fixed property taxes, city planning taxes, consumption taxes
  and local consumption taxes.
  (Note 3)	"Assumed book value" is the book value assumed as of the planned disposition date.

• 2. Reason for the Disposition

  The disposition is part of our ongoing asset replacement strategy. As the asset to be disposed is 29 years old, the disposition was judged to be ideal at this point in time from the medium- to long-term standpoint, upon taking into account the future increase in maintenance overhead including facility renewal and daily repair work.

Description of the Asset to Be Disposed C-30: Proceed Nakanoshimbashi

Overview of specified asset	Overview of leasing (as of February 28, 2022)
Type of specified asset	Trust beneficiary interest	Total number of tenants	1
Use	Rental housing	Number of leased units (Total number of leasable units)	50 (50)
Planned disposition price	760,000 thousand yen
Location (Address)	2-13-8 Yayoicho, Nakano-ku, Tokyo	Number of leased parking units (Total number of leasable parking units)	0 (0)
PM Company / ML Company	Starts Amenity Corporation	Leased floor area	849.08 m2
Master lease type	Fixed rent	Total leasable floor area	849.08 m2
Trustee	Sumitomo Mitsui Trust Bank, Limited.	Annual rent revenue	39,912 thousand yen
Period of trust agreement	From: March 8, 2004	Security and guarantee deposits, etc.	3,123 thousand yen
To: October 31, 2026	Occupancy rate	100.0 %
Land	Ownership form	Proprietorship	Overview of appraisal report
Site area	353.74 m2	Appraiser	Asset Research Inc.
Zoning	Neighborhood commercial district	Date of appraisal	October 31, 2021
Building-to-land ratio	80 %	Appraisal value	700,000 thousand yen
Floor-area ratio	300 %	Overview of building condition evaluation report
Building	Ownership form	Proprietorship	Evaluation company	Japan Constructive Inspect Association
Structure	Reinforced concrete structure with flat roof / 5F	Date of evaluation	October 2021
Construction completion date	September 24, 1992	Building replacement value	251,656 thousand yen
Total floor area	1,047.01 m2	Long-term repair costs (12 years)	18,636 thousand yen
Use	Apartment complex	PML (Date of evaluation: October 2021)	10.4 %
Collateral
None
Special notations / Status of the property (structure and other matters that have significant impact on the price of the investment property)
None
Remarks
A 2-minute walk from Nakano-shimbashi Station on the Tokyo Metro Marunouchi Line

[Explanation]

1. "Type of specified asset" indicates the type as a specified asset, such as trust beneficiary interests, real estate, etc. "Use" is indicated in accordance with the stated categories in "Part I. Fund Information, Item 1. Situation of the Fund, 2. Investment Policies, (1) Investment Policies, 3) Portfolio Construction Policies" set out in the Securities Report.

2.

"Planned disposition price" indicates the amount (transaction price stated in the trust beneficiary interest transaction agreement, etc.) excluding the various expenses (real estate transaction brokerage fee, etc.) required for the disposition of the asset to be disposed.

• 3. "PM Company / ML Company" indicates the property management company that has concluded a property management agreement and the master lease company that has concluded a master lease agreement, agreements that are effective as of today for the property. For "Master lease type," "Pass-through" is indicated for a master lease in which the trustee and the master lease company have agreed that the master lease company pays the same amount as the rent stated in the sublease agreement concluded between the master lease company and the end tenant to the trustee, whereas "Fixed rent" is indicated for a master lease which requires payment of a fixed rent agreed between the trustee and the master lease company regardless of the sublease agreement concluded between the master lease company and the end tenant.

• 4. "Trustee" indicates the trustee at the time of disposition by SPI. As to "Period of trust agreement," the starting date is the effective date of the trust agreement that is effective as of today, and the ending date is the termination date of the trust agreement.

• 5. Concerning the description of "Land" and "Building"

• ・ "Site area," "Structure," "Construction completion date" and "Total floor area" are in accordance with information described in the certificate of entry in real estate registration. For properties that have annex buildings, the annex buildings are not included in "Total floor area." However, it may be different if the description has been found incorrect as a result of investigation.

• ・ "Zoning" indicates the type of zoning district classified in accordance with Article 8, Paragraph 1, Item 1 of the City Planning Act (Act No. 100 of 1968, as amended).

• ・ "Building-to-land ratio" is the ratio of the building area of the building to the site area as stipulated in Article 53 of the Building Standards Act (Act No. 201 of 1950, as amended; the "Building Standards Act") and indicates the maximum figures stipulated in the city plan in accordance with the zoning, etc. Pursuant to Article 53, Paragraph 3 or Paragraph 5 of the Building Standards Act, corner lots in a block and fireproof buildings, etc. in fire prevention districts may be subject to mitigation of building-to-land ratio or may not be subject to building-to-land ratio restriction itself. There are cases in which separate restrictions, mitigations, etc. may apply in accordance with the Building Standards Act or other administrative laws and regulations. In such cases, figures after application of such restrictions, mitigations, etc. are indicated.

• ・ "Floor-area ratio" is the ratio of the total floor area of the building to the site area as stipulated in Article 52 of the Building Standards Act and indicates the maximum figures stipulated in the city plan in accordance with the zoning, etc. Pursuant to Article 52, Paragraph 2 or Paragraph 9 of the Building Standards Act, restrictions due to frontage road width rules or mitigations due to specified road rules may apply in some cases. There are cases in which separate restrictions, mitigations, etc. may apply in accordance with the Building Standards Act or other administrative laws and regulations. In such cases, figures after application of such restrictions, mitigations, etc. are indicated.

• ・ If more than one zoning exists for one property, pursuant to Article 53, Paragraph 2 or Article 52, Paragraph 7 of the Building Standards Act, "Building-to- land ratio" and "Floor-area ratio" indicate the weighted average figures in accordance with the size of area of each zoning that are on the design drawing / completion drawing, etc. from the time of construction.

• 6. Concerning the description of "Overview of leasing"・

• ・ For the asset to be disposed, a master lease agreement with Starts Amenity Corporation as a lessee and a sublessor is concluded among SPI, the trustee and Starts Amenity Corporation at the time of disposition by SPI. Thus "Total number of tenants" indicates the number with the master lease company as a tenant as of now.

• ・ "Number of leased units (Total number of leasable units)," "Leased floor area," "Total leasable floor area," "Annual rent revenue" and "Security and guarantee deposits, etc." are indicated in accordance with the same standards as the description of notes for the table illustrated in "Part I. Fund Information, Item 1. Situation of the Fund, 5. Management Status, (2) Investment Assets, 3) Other Major Investment Assets, (iv) Overview of Leasing Status, a. Overview of Leasing Status" set out in the Securities Report. "Number of leased parking units (Total number of leasable parking units)" is indicated in accordance with the same standards as the description of notes at the beginning of "Part I. Fund Information, Item 1. Situation of the Fund, 5. Management Status, (2) Investment Assets, 3) Other Major Investment Assets, (vi) Individual Overview of Real Estate in Trust for Acquired Assets" set out in the Securities Report.

• ・ "Occupancy rate" is the ratio of leased floor area to each tenant to the total leasable floor area of the property and is rounded to the first decimal place.

• 7. "Overview of appraisal report" describes the content indicated in the appraisal report or the valuation report prepared for the asset to be disposed.

• 8. Concerning the description of "Overview of building condition evaluation report"

• ・ Contents described in the building condition evaluation report and the seismic risk evaluation report that were prepared for the asset to be disposed are provided.

• ・ "Building replacement value" is the total amount of appropriate costs required assuming to reconstruct the subject building on the date of evaluation.

• ・ "Long-term repair costs" is the total amount of expected long-term repair costs (12 years) based on the building condition evaluation report.

• ・ Figures of "PML" are the figures in the report prepared by Tokio Marine dR Co., Ltd. "PML" represents the probable maximum loss that the subject facility or group of facilities may suffer from an earthquake with a 10 % probability of exceedance in 50 years (earthquake corresponding to a 475-year return period) by expressing the amount of physical loss corresponding to a 90 % non-exceedance probability in the event of such earthquake as a percentage of the building replacement value.

• 9. "Collateral" describes the existence/non-existence of collateral as on the date of disposition of the asset to be disposed.

• 10. "Special notations / Status of the property (structure and other matters that have significant impact on the price of the investment property)" describes, in principle, (1) the rights of third parties other than the tenants housed in the asset to be disposed and restrictions, etc. based on such rights, and (2) restrictions, etc. from administrative laws and regulations related to the asset to be disposed, as of today. In case a specific description refers to fact situations as on the date of disposition by SPI, description is made based on future prediction that is as rational as possible as of today.

Overview of Appraisal Report of the Asset to Be Disposed

Property name	Proceed Nakanoshimbashi
Appraisal value	700,000 thousand yen
Appraiser	Asset Research Inc.
Date of appraisal	October 31, 2021

(Unit: thousand yen)

Item	Amount	Details
Income approach value Value based on direct capitalization method Operating revenue Effective gross income Vacancy loss, etc. Operating expenses Maintenance expenses Utility expenses Repair expenses PM fees Tenant solicitation expenses, etc. Taxes and public dues Non-life insurance fees Other expenses Net operating income (NOI) Gain on management of income from lump-sum payment Capital expenditures Net income (NCF) Capitalization rate Value of earnings calculated by discounted cash flow (DCF) method Discount rate Terminal capitalization rate	700,000	Estimated by emphasizing income approach value obtained through the DCF method while also relating value based on direct capitalization method
707,000	Assessed by returning net income (NCF) that is stable over the medium to long term by capitalization rate
41,274	-
42,775	Assessed gross income that is stable over the medium to long term, considering the current building lease agreement, profitability of the property, etc. and taking into account new rent assumed when the property is newly leased, etc.
1,501	Assessed occupancy rate (vacancy rate) that is stable over the medium to long term, taking into account past occupancy results, etc. of the property and similar properties
7,929	-
978	Employed the most recent actual data
2,640	Employed the most recent actual data
247	Assessed by taking into account the historical data, the level of expenses of similar properties, etc.
1,131	Assessed by taking into account the level of expenses of similar properties, etc.
1,100	Assessed by taking into account the level of expenses of similar properties, assumed tenant turnover rate (average turnover period), etc.
1,690	Employed the most recent actual amount
143	Employed the most recent actual amount
0	-
33,345	-
31	Assessed assuming management yield at 1.0 %
1,553	Employed the estimated renewal expenses stated in the engineering report
31,823	-
4.5 %	Assessed by taking into account the characteristics of the property such as location, specifications, rights, etc., using investment yield relating to transactions of similar properties as reference
697,000	-
4.2 %	Assessed based on capitalization rate taking into account the current economic growth rate, projected market trends as well as risk premiums such as price fall risk due to deterioration of buildings from aging, future market fluctuation risk, etc.
4.6 %	Assessed based on capitalization rate taking into account the current economic growth rate, projected market trends as well as risk premiums such as price fall risk due to deterioration of buildings from aging, future market fluctuation risk, etc.
Cost method value Land ratio Building ratio	476,000	-
74.8 %	-
25.2 %	-
Other items considered by real estate appraisal agent upon appraisal	Since demand for the property comes mostly from investors emphasizing profitability, appraisal value was determined based on income approach value using cost method value only as reference.

• 5. Overview of Buyer (as of March 31, 2021)

  Name	Sojitz New Urban Development Corporation
  Location	17F Hibiya Central Building, 1-2-9 Nishi-Shimbashi, Minato-ku, Tokyo
  Representative	Takashi Sumi, President
  Main business activities	Development/sales business and planning/consignment sales business of new condominiums; and real estate investment/leasing management business
  Capital	3,000 million yen
  Established	November 1, 1995
  Net assets	7,772 million yen
  Total assets	22,684 million yen
  Major shareholder and shareholding ratio	Sojitz Corporation (100 %)
  Relationship with SPI and the Asset Management Company	There is no capital, personnel or business relationship to report concerning SPI and the Asset Management Company with the buyer. The buyer does not fall within the scope of a related party of SPI and the Asset Management Company.

• 6. Overview of Brokerage (as of March 31, 2021)

  Name	Starts Corporate Service Inc.
  Location	3-1-8 Nihonbashi, Chuo-ku, Tokyo
  Representative	Toshiya Arai, President
  Main business activities	Lease brokerage, transaction brokerage and company housing management agency service
  Capital	100 million yen
  Established	October 3, 2005
  Relationship with SPI and the Asset Management Company	The company is a subsidiary whose shares issued and outstanding are wholly owned by Starts Corporation Inc., the parent company of the Asset Management Company. Accordingly, the company falls within the scope of an interested party, etc. as defined in the Act on Investment Trusts and Investment Corporations (Act No.198, 1951, as amended (the "Investment Trusts Act")). There is no personnel relationship to report concerning SPI and the Asset Management Company with the company. The company falls within the scope of a related party of SPI and the Asset Management Company.
  Brokerage fee	22,860 thousand yen (excluding consumption tax, etc.)

• 7. Transaction with Interested Parties of the Disposition

  Starts Corporate Service Inc., which is the broker of the asset to be disposed, falls within the scope of an interested party, etc. of the Asset Management Company as defined in the Investment Trusts Act. Accordingly, the transaction has been determined after following appropriate procedures based on the internal rules of the Asset Management Company and pursuant to standards stipulated by laws and regulations.

• 8. Use of Proceeds from the Disposition

  SPI intends to keep them as cash on hand and use them as part of property acquisition fund in the future.

• 9. Future Outlook

  Because the impact on the management status for the fiscal period ending April 2022 (November 1, 2021 to April 30, 2022) and the fiscal period ending October 2022 (May 1, 2022 to October 31, 2022) announced on December 15, 2021, is minimal, there will be no revisions to the management status forecast.

[Attachment] Portfolio List After the Disposition of the Asset to Be Disposed

* SPI website:https://www.sp-inv.co.jp/en/