November 22, 2021

Real Estate Investment Trust Unit Issuer:

TOKYU REIT, Inc.

1-12-1, Dogenzaka,

Shibuya-ku, Tokyo, 150-0043, Japan

Kazuyoshi Kashiwazaki

Executive Director

(Securities Code: 8957)

Investment Management Company:

Tokyu Real Estate Investment Management Inc.

Representative:

Kazuyoshi Kashiwazaki

Representative Director & President, Chief Executive Officer

Inquiries:

Yuji Shimizu

General Manager, Finance and IR

TEL: +81-3-5428-5828

Notice Concerning Acquisition (Aoyama Oval Building)

of Trust Beneficiary Interest in Domestic Real Estate

TOKYU REIT, Inc. ("TOKYU REIT") today announced that its investment management company, Tokyu Real Estate Investment Management Inc. ("Tokyu REIM"), had decided to acquire trust beneficiary interest in domestic real estate (referred to as the "Acquisition"). Brief details are as follows.

1. Acquisition Details

Property Name

Aoyama Oval Building

Location

5-52-2 Jingumae, Shibuya-ku, Tokyo

Acquisition Ratio

Quasi co-ownership ratio of trust beneficiary interest (sectional ownership ratio of building: 97.1%,

land ownership ratio: 97.9%): 47.5%

Acquisition Price

¥18,600 million

(Excluding acquisition-related costs, property tax, city planning tax, etc.)

Seller

Domestic company (Please refer to "5. Seller Profile")

Brokerage

No

Decision of Acquisition

November 22, 2021

Contract Date

November 22, 2021

Acquisition Date

December 10, 2021

Payment of

December 10, 2021

Acquisition Costs

(Note) The above sectional ownership ratio of the building and land ownership ratio are based on the areas recorded in the register, and the numbers are rounded to the nearest first decimal place.

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2. Rationale

TOKYU REIT strives to improve the quality of its portfolio, taking into consideration trends in the capital market and real estate investment market as well as the growth potential of the portfolio's cash flow in the medium to long term. The Acquisition will be conducted as part of these efforts in accordance with the "Scope and Policy of Investment Management" as outlined in the Articles of Incorporation of TOKYU REIT.

The Omotesando and Aoyama area, in which Aoyama Oval Building (the "Asset to Be Acquired") is located, is commercially flourishing and highly demanded by business tenants for opening stores and by apparel, IT, and other businesses in the office market for relocating their offices to the area.

The Asset to Be Acquired is an office building located in a flourishing area four minutes on foot from Omote-sando Station on the Tokyo Metro Ginza Line, Chiyoda Line, and Hanzomon Line and is a highly visible property facing Aoyama-dori Avenue. The land area is approximately 4,700 m2, which is a rare, large commercial site in central Tokyo. The location offers high potential for redevelopment projects in the future. While the building is 33 years old, it is well maintained, receiving appropriate large repair work such as elevator renewal and bathroom and kitchenette improvement, and remains competitive in the market. In addition, a medium to long term increase in value of the Asset to Be Acquired can be expected thanks to its location in a priority investment target area of TOKYU REIT and in Greater SHIBUYA (Note 1), in which redevelopment led by Tokyu Group is under way.

The NOI yield for the latest one year calculated by excluding special factors based on estimated rent level and occupancy rate as of the acquisition date is 3.0%, and stable profit contribution over the medium to long term is expected.

TOKYU REIT judged the Acquisition would further stabilize cashflow and increase total returns (Note 2).

TOKYU REIT will continue to conduct investment management while closely monitoring trends in capital and real estate investment markets, all the while adhering to its investment policy. TOKYU REIT will strive to build a portfolio that leads to improvement in asset value and growth of net income per investment unit.

(Note 1) Within a 2.5-km radius of Shibuya Station

(Note 2) Total income comprising income returns (rental income, etc.) and future capital returns (sale income) of each fiscal period.

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3. Details of Asset to Be Acquired

Property Name

Aoyama Oval Building

Type of Specified Asset

Quasi-co-ownership of trust beneficiary interest in domestic real estate

Trustee

Mizuho Trust & Banking Co., Ltd.

Trust Period

March 30, 2018 to December 31, 2031

Land:

5-52-1,5-52-32,5-52-35,5-52-36,5-52-37,5-52-41,5-53-14,

Registered

Jingumae, Shibuya-ku, Tokyo

Location

Building:

5-52-1,5-52-32,5-52-35,5-52-36,5-52-37,5-52-41,5-53-14,

Jingumae, Shibuya-ku, Tokyo

Residential

5-52-2 Jingumae, Shibuya-ku, Tokyo

Access

Approximately a four-minute walk from Omote-sando Station on the Tokyo Metro

Ginza Line, etc.

Use

Office and retail

Area Classification

Commercial district / Residential Classification 2

Site/Floor Area (Registered)

Land:

4,702.82 m2

Building:

28,629.19 m2

Structure (Registered)

S/SRC, B2/16F

Completion Date (Registered)

October 1988

Design Company

Nihon Building Project Co., Inc. (office of first-class registered architect)

Construction Company

Tokyo Branch, TOKYU CONSTRUCTION CO., LTD.

Inspection Authority

Tokyo Metropolitan Government

PML (Probable Maximum Loss) of 2.4 % is based on the earthquake risk assessment

(detailed) report prepared by Engineering and Risk Services Corporation and OYO

RMS Corporation (as of November 10, 2021). PML refers to the expected damages

Earthquake Resistance

caused by earthquakes. Although there is no single authoritative definition of PML,

it refers to the percentage of expected damages caused by a small- to large-scale

earthquake that may happen within the next 475 years to the replacement value.

Calculations also include data relating to individual property surveys, assessment of

building conditions, conformity to architectural design, ground conditions of the

relevant site, surveys of local factors and structural evaluation.

Land:

Proprietary ownership (quasi co-ownership ratio of trust beneficiary

Type of Ownership

interest with ownership ratio of 97.9% as assets in trust: 47.5%)

Building:

Proprietary ownership (quasi co-ownership ratio of trust beneficiary

interest with ownership ratio of 97.1% as assets in trust: 47.5%)

Acquisition Date

December 10, 2021

Acquisition Price

¥18,600 million

Appraisal Value

¥18,800 million (effective date of value: November 1, 2021)

Appraiser: Japan Valuers Co., Ltd.

Building Assessment Reporter

Tokio Marine dR Co., Ltd.

Date of Building Assessment Report

November 10, 2021

Property Management Company

TOKYU CORPORATION

Master Lessee Company

TOKYU CORPORATION

Type of Master Lease Agreement

Pass-through

Security/Guarantee

TOKYU REIT has no plan to pledge collateral after the acquisition.

1. The building is a sectionally owned building, and six of seven plots of land

registered in the location section of

the registration of the sectionally owned

Special Items

building are owned by trustees and

one plot is jointly owned by trustees,

individuals, and corporations (the "Joint Land Owners"). While the land is not

leased land, a land use lease agreement was signed between the then owner of the

land and the then owner of the building.

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Lease Details

  1. In the case of selling all or part of ownership, the unit owners of the building except the trustees and the Joint Land Owners are required to prioritize the unit owners of the building over a third party when holding negotiations for selling and buying.
  2. Tokyu Corporation engages in the management of the property on behalf of other parties while there are no management rules.
  3. Spraying material containing asbestos is used on a part of the building in trust. While a measure to prevent the scattering of the spraying material containing asbestos will be required by law when demolishing or otherwise disposing of the building, the current condition of use does not require a special measure. The condition is periodically inspected and corrective actions will be taken as necessary.
  4. TOKYU REIT concludes with Tokyu Corporation and the trustees a trust beneficiary interest agreement among quasi co-owners on November 22, 2021, for the acquisition of quasi co-ownership interest of trust beneficiary interest having a sectionally owned building as a trust property (Quasi co-ownership ratio of Tokyu

Corporation after the acquisition by TOKYU REIT is 52.5%). The trust beneficiary

Special Itemsinterest agreement among quasi co-owners requires 1, not demanding division of the trust beneficiary interest, 2, prioritizing other quasi co-owners in holding negotiations when selling all or part of the quasi co-ownership interest of the trust beneficiary interest to a third party, 3, having the buyer succeed to the position under the agreement when selling quasi co-ownership interest, 4, that the beneficiary holding the largest share of the ownership of the beneficiary interest (including quasi co-ownership interest) holds the authority to give instructions to trustees based on a trust agreement and other beneficiaries do not hold such authority unless there is a separate agreement that a party other than the representative beneficiary holds such authority, and 5, that some of matters determined by beneficiary require the consent of all beneficiaries or advance consultation.

6. Tokyu Corporation, a quasi co-owner, is responsible for resolving all of the multiple problems related to legal compliance pointed out in the periodical inspection reports on building facilities, fire protection and fire-control facilities, etc. and building assessment reports at its expense no later than the last calendar day of the fourth month from the delivery of the property.

Total Number of Tenants

25

Assumed Total Rental Income

¥856 million a year

Lease Deposits and

¥1,189 million

Guarantee Deposits

Estimated NOI

¥558 million a year

Estimated NOI after

¥502 million a year

Depreciation

Total Leased Area

16,686.06 m2

Total Rentable Area

17,953.41 m2

Occupancy Rate

92.9 %

As of

As of

As of

As of

As of

Occupancy Rates

October 31,

October 31,

October 31,

October 31,

October 31,

over the Last Five Years

2017

2018

2019

2020

2021

100.0 %

100.0 %

100.0 %

97.9 %

92.9 %

(Note) The above sectional ownership ratio of the building and land ownership ratio are based on the areas recorded in the register, and the numbers are rounded to the nearest first decimal place.

*The above lease deposits, guarantee deposits, total leased area, and total rentable area are total values for the entire trust beneficiary interest of this acquisition (including leasehold held by other unit owners).

*The total number of tenants, total leased area, lease deposits/guarantee deposits, and occupancy rate are as of the end of October 2021.

  • Assumed total rental income, Estimated NOI and Estimated NOI after depreciation are the estimated annual figure excluding special factors from the revenue and expenditure of the acquisition fiscal year (not the forecast figure for the current fiscal period) and are based on the following assumptions.
  1. Total rental income is the estimated figures of total income from the property based on an expected annual average occupancy rate (96.3%) as of the acquisition date (December 10, 2021).
  2. Taxes and public dues are projected to be the same amount as the fiscal 2021 assessment amount.
  3. Repairs and maintenance expenses are calculated based on expected figures assumed for the next one-year period.

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4. Property Appraisal Summary

(JPY in thousands) (rounded down to the nearest specified unit)

Property Name: Aoyama Oval building

Estimation

Notes

Appraisal Firm: Japan Valuers Co., Ltd.

Effective Date of Value

November 1, 2021

Type of Value

Market Value

Appraisal Value

18,800,000

By the Income Approach (after

consideration of the share ratio)

Value Indicated by Income Approach

39,600,000

Reconciled with the value by DCF Method

and the value by Direct Capitalization Method

Value Indicated by Direct Capitalization Method

40,400,000

(1) Operating Revenue (a.b.)

1,877,822

a. Potential Gross Income

Assessed based on both existing rent level

(rental income, common area charges income,

1,946,296

and market rent level.

utilities reimbursement, etc.)

Assessed based on both terms of existing

b. Vacancy Loss

68,473

lease agreement as well as market standard in

the subject vicinity

(2) Operating Expenses (c.+d.+e.+f.+g.+h.+i.+j.)

658,447

c. Building Maintenance Cost

126,000

On actual basis

d. Utilities Expenses

119,337

On actual basis

Based on the annual repairs and restoration

e. Repair Expenses

16,501

cost estimate sourced from the engineering

report

f. Property Management Fee

57,648

Based on the fee ratio from scheduled

agreement

g. Tenant Solicitation Expenses, etc.

10,838

Assessed based on assumed turnover rate

h. Property Taxes

315,161

On actual basis in 2021

i. Property Insurance

1,922

On actual basis

j. Other Expenses

11,036

On actual basis

(3) Net Operating Income (NOI) ((1)(2))

1,219,375

(4) Investment Profits from Refundable Deposits

12,898

1.0% interest rate on the deposit outstanding

Based on the annual repairs and restoration

(5) Capital Expenditure

60,579

cost estimate sourced from the engineering

report

(6) Net Cash Flow (NCF) ((3)+(4)(5))

1,171,693

(7) Overall Capitalization Rate

2.90%

Value Indicated by DCF Method

38,800,000

Discount Rate

2.60%

Terminal Capitalization Rate

3.10%

Value Indicated by Cost Approach

64,700,000

Ratio of Land Value

98.2%

Ratio of Building Value

1.8%

The indicated value by Cost Approach looks into cost aspect of a real

property. On the other hand, the indicated value by Income Approach is

derived from profitability of a real property. In regard to an income-

Reconciliation before Arriving at the Value Conclusion

producing property valuation, the utmost importance should be placed

on the value by the Income Approach. In conclusion, we have regarded

the value by Cost Approach only as guide, and our concluded value is fully

based on the Income Approach. The subject share ratio is then considered

to arrive at the value conclusion.

The above appraisal value conclusion is a value opinion as of the effective date of value, indicated by the licensed real estate appraiser in conformity with the Japanese Real Estate Appraisal Act and Real Estate Appraisal Standards. A reappraisal of the same property could result in another value if it were carried out either by a different appraiser, with different methods, or at a different time. This appraisal does not guarantee or assure, at present or in the future, any sales transactions at the concluded value.

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Tokyu REIT Inc. published this content on 22 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 November 2021 06:33:08 UTC.