Heiwa Real Estate REIT : Additional Documentation for Press Releases

Additional Documentation for Press Releases

Notice Concerning Asset Acquisition and Transfer

Notice Concerning Revision of Management Status Forecasts for Fiscal Period Ending May 2024 (45th Fiscal Period) and November 2024 (46th Fiscal Period)

March 25, 2024

Overview of Replacement of Assets Beginning in the 45th Period

• ◼ Announced the acquisition of three properties and the transfer of two properties beginning in the 45th Fiscal Period. The replacement of these properties will increase assets under management to 235.0 billion yen.

• ◼ A 50% quasi-co-ownership interest in the HF NIHONBASHI HAMACHO BUILDING will be transferred in the 45th and the 46th Fiscal Periods. The recording of gains on transfer in two consecutive periods will contribute to the consistent increase of distributions.

HF KITASENJU RESIDENCE

Location

Sumida-ku, Tokyo

Total Floor Space

1,717.79㎡

Construction Date

February 1. 2019

Proposed Acquisition Price

1,380 million yen

Appraisal Value

1,670 million yen

NOI Yield (Note 1)

4.0%

NOI Yield After Depreciation (Note 1)

3.4%

HF HIKIFUNE RESIDENCE

SHINWA ESAKA BUILDING

February 29, 2024

March 29, 2024 (Scheduled)

January 18, 2024

Announcement of the 44th FP financial statements

First transfer: April 12, 2024 (Scheduled)

December 22, 2023

Second transfer: June 3, 2024 (Scheduled)

HF NAKANOSHIMA RESIDENCE

Location

Chuo-ku, TokyoTotal Floor Space

4,226.25㎡

Construction Date

February 15, 1987

Book Value (Note 2)

1,994 million yen

Appraisal Value

2,660 million yen

(as of November 2023)

Proposed Transfer Price

3,520 million yen

Estimated Gain (Note 3)

1,471 million yen

NOI yield based on the proposed transfer price (Note 4)

3.7%

HF NIHONBASHI HAMACHO

BUILDING

(Note 1) NOI Yield = NOI ÷ Proposed acquisition price / NOI Yield After Depreciation = (NOI - Depreciation) ÷ Proposed acquisition price

NOI is NOI for 12 months, which serves as the assumption for the value indicated by the income approach under the direct capitalization method shown in the appraisal report of acquired asset.

Depreciation is based on estimates made by the Investment Corporation according to the service life of assets.

(Note 2) Book Value is estimated amount as of scheduled the transfer date.

(Note 3) Estimated Gain is the difference between the scheduled transfer price and the sum of the book value and fees related to the transfer. Since the gain has been calculated for reference only, it may differ from the amount of actual gain (loss) on transfer. (Note 4) The yield was calculated adding the NOI for the 43rd FP (the fiscal period ended May 31, 2023) and the 44th FP (the fiscal period ended November 30, 2023) and dividing this total by the proposed transfer price.

Overview of the property to be acquired

HF HIKIFUNE RESIDENCE

＜Conceptual image of the property to be acquired ＞

5F

4F

3F

2F

1F

＜View from the property to be acquired＞

• • The property to be acquired is an eight-minute walk from Keisei-Hikifune Station on the Keisei Oshiage Line. The Keisei Oshiage Line shares tracks with the Toei Subway Asakusa Line and the Keikyu Main Line, and tenants of the property are able to easily access major Tokyo train stations without changing trains. It takes around 15 minutes (ride time; the same applies hereafter) to travel from Keisei-Hikifune Station to Nihonbashi Station. The ride from the Keisei-Hikifune Station to Shinagawa Station and Haneda Airport Station is around 30 minutes and around 50 minutes, respectively. The property is within walking distance of Hikifune Station on the Tobu Isesaki Line and the Tobu Kameido Line. The Tobu Isesaki Line shares tracks with the Tokyo Metro Hanzomon Line. The property is conveniently located regarding public transportation.

• • The property has a supermarket on the first floor, and the entrance to the supermarket faces the community's Kirakira Tachibana Shopping Street. The area is home to many small establishments, such as restaurants and delicatessens, which exude a charming ambiance of old downtown. There are multiple retail facilities around Hikufune Station which make living in the area convenient. In Sumida-ku, Tokyo, where the property is located, the population and number of households are increasing. Tokyo Skytree opened near the property in May 2012, and the area's popularity is increasing as a residential area. The Investment Corporation anticipates stable demand for properties in the area.

• ◼ The distribution per unit forecasts for the 45th Period and 46th Period have been revised upward to 3,340 yen and 3,360 yen respectively, considering the replacement of assets announced followingthe announcement of results for the 44th Fiscal Period (Note 1).

• ◼ The Investment Corporation aims to pay distributions per unit of 3,800 yen in the medium term by realizing unrealized gains and recording gains on transfer, actively leveraging its ample internal reserves and steadily achieving internal growth.

(January 18,2024)

(January 18,2024)

(Note 1) The acquisition of HF KITASENJU RESIDENCE, SHINWA ESAKA BUILDING, and HF HIKIFUNE RESIDENCE and the transfer of the HF NIHONBASHI HAMACHO BUILDING, which were announced after the publication of the financial report for the 44th

Fiscal Period on January 18, 2024

(Note 2) Comparison with the FY2018 total Scope 1 and Scope 2 emissions, excluding Scope 3 (emissions by tenants).

(Note 3) Renewable power will be introduced at all properties except properties where a management association manages power, such as properties whose ownership is shared and properties owned by unit owners, and properties where contracts with tenants are unusual. The individually owned portions of residential properties are excluded.

Status of the Investment

Corporation

• 1 Realizing unrealized gains and recording gains on transfer

• 2 Leveraging ample internal reserves actively

• 3 Managing a strong portfolio

Use of gain on transfers

Realized unrealized gains through continuous asset replacement

Replace assets continually to realize unrealized gains (57.52 billion yen (50,021 yen per unit)* and an unrealized gain margin of 25.9%*).

Use the gains to improve the quality of the portfolio and increase distributions.

60,000

Trend in unrealized gains per unit

40,000

20,000

5,373

0

32nd FP 33rd FP 34th FP 35th FP 36th FP 37th FP 38th FP 39th FP 40th FP 41st FP 42nd FP 43rd FP 44th FP

Actively leverage internal reserves totaling 5.7 billion yen (4,959 yen per unit)* as a source of future distributions.

Ample internal reserve balance

Trend in internal reserve balance per unit

5,500.0

5,490

4,500.0

3,500.0

2,500.0

1,879

1,500.0

32nd FP 33rd FP 34th FP 35th FP 36th FP 37th FP 38th FP 39th FP 40th FP 41st FP 42nd FP 43rd FP 44th FP

*As of the end of November, 2023

History of Property Acquisition and Disposition

(after Main Sponsor Change)

Acquisition KAYABACHO HEIWA BUILDINGHIROKOJI AQUA PLACE	PO	HF WAKAMATSU-HI G KAWADA RESIDENCEH	PO	PO	HF BANSUI-DORI RESIDENCE HF NISHI-KOEN RESIDENCE HF KANDA OGAWAMACHI T BUILDING	PO	HF YUSHIMA BUILDING (Land) (Additional acquisition)HF HAKATA- HIGASHI RESIDENCEARK Mori BuildingSENJU MILDIX IIHF HACHIOJI RESIDENCESOUTHERN SKY TOWER HACHIOJIACROSS SHINKAWA BUILDING HF SENDAI ITSUTSUBASHI RESIDENCEHF TABATA RESIDENCEHF RYOGOKU RESIDENCENihonbashi Horidomecho First
MITA HEIWA BUILDING （leasehold land） SAKAE MINAMI HEIWA BUILDING KOBE KYU-KYORYUC HEIWA BUILDIN	HF SENDAI HONCHO BUILDING HF NIHONBASHI HAMACHO BUILDING F SAKURADORI BUILDING	HF KUDAN MINAMI BUILDING KOJIMACHI HF BUILDING HF UENO BUILDING HF SENDAI RESIDENCE EAS	HF MEIEKI-KITA RESIDENCE HF KANNAI RESIDENCEHF HIGASHI-NISSO 5 BUILDING SAPPORO RESIDENCE
16th 17th 19th 21st	23rd 24th 25th	27th	28th	29th	30th 31st 32nd 33rd 34th
'09/11 '10/05 '11/05 '12/05 '13/05 '13/11 '14/05 '15/05 '15/11 '16/05 '16/11 '17/05 '17/11 '18/05 '18/11

Sannomiya Sanwa Toyo Building Glenpark Ikedayama

Rune Higashiterao

HF Minami 6 Jo Residence HF Tenjin-Minami Residence HF Minami 5 Jo ResidenceKCA Building

Super Hotel Osaka Tennoji

Disposition

Super Hotel Kyoto Karasumagojyo Super Hotel Sendai Hirose-dori Super Hotel Saitama OmiyaSHIBUYA AX HILLSHF NAKAMEGURO BUILDINGANWA TSUKASAMACHI HF SHIN-YOKOHAMA BUILDINGBUILDING

HF TORANOMON BUILDING HIROKOJI AQUA PLACE

MITA HEIWA

BUILDING (leasehold land)HF TENJIN-HIGASHI RESIDENCE ※50% quasi-co-ownership

• ⚫ This material has been prepared for the purpose of providing information and is not intended for soliciting, encouraging, or marketing specific products.

• ⚫ This material is not a disclosure document, nor is it a report as defined in the Financial Instruments and Exchange Act, Investment Trusts and Investment Corporations Act, public listing regulations of the Tokyo Stock Exchange or other related laws or regulations.

• ⚫ The contents of this information material contain a statement on future forecasts, but the statement was made based on the judgment by this investment corporation and this fund management company on the basis of the information available on the date of the preparation of this information material. The contents do not guarantee the future performance of this investment corporation, management results, financial contents, etc. In addition, the accuracy and certainty of the contents of this information material are not guaranteed. Please understand in advance that the contents may be revised or abolished without prior notice.

• ⚫ Because this investment corporation invests in real estate and real estate-related assets whose prices fluctuate due to the economic situation, interest rate trends, demand and supply of investment equities, real estate market conditions, fluctuations in prices of real estate managed and rent revenue, disasters, etc., the market price of the investment equities, etc., may fall or the distribution amount may be reduced and the investment corporation may not be able to sell in the price higher than the price when obtained this investment corporation's investment equities or investment corporation bonds and, consequently, investors may suffer losses.

• ⚫ For the purchase of this investment corporation's investment equities or investment corporation bonds, please contact each securities company. Before your purchase, please read the contents of the pre-contract document (or prospectus), etc. carefully.

• ⚫ The contents of these materials may not be duplicated or transcribed without prior permission.

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