Tokyu REIT : Notice Concerning Completion of Additional Acquisition with the Completion of Extension Work of Domestic Real Estate (Tokyu Toranomon Building)

June 30, 2022

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: [phone]

Notice Concerning Completion of Additional Acquisition with the Completion of Extension

Work of Domestic Real Estate (Tokyu Toranomon Building)

TOKYU REIT, Inc. ("TOKYU REIT") today announced that the extension work and the existing building renovation work at Tokyu Toranomon Building (the "Extension Work") described in "Notice Concerning Commencement of Extension Work (Tokyu Toranomon Building)" dated September 14, 2020, as well as the additional acquisition of the extended portion (the "Additional Acquisition") have been completed. Brief details are as follows.

1. Additional Acquisition Details

Property Name	Tokyu Toranomon Building (Extended Portion)
Location	1-21-19, Toranomon, Minato-ku, Tokyo
Acquisition Price	¥1,722 million (Note 1)
Floor Area	2,050.64 m2 (Note 2)
Construction Company	Tokyu Construction Co., Ltd.
Acquisition Date	June 30, 2022
Funds for Acquisition	Cash on hand and borrowings

(Note 1) The total amount of construction costs, design costs, construction supervision costs and fee for construction management business ("CM Fee") is indicated.

CM Fee is calculated using the amount scheduled to be paid (estimate) as of the date of this document.

(Note 2) Based on the details of the application for registration of change of the heading of buildings scheduled to be conducted after the date of this document.

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2. Details of Asset to Be Acquired
			Before Extension Work	After Extension Work (Note 1)
Property Name	Tokyu Toranomon Building
Type of Specified Asset	Domestic real estate
				1-216-2,1-217-1,1-217-2,1-217-3,1-217-4,1-220-1,1-220-2,1-220-3, 1-
			Land:	220-4,1-220-5,1-220-6,1-220-7,1-220-8,1-220-9,1-220-10,1-220-11, 1-
		Registered		220-12,1-220-13,1-220-14,1-220-15, Toranomon, Minato-ku, Tokyo
Location		Building:	1-216-2,1-217-1,1-217-2,1-217-3,1-217-4,1-220-1,1-220-2,1-220-3,
			1-220-4,1-220-5,1-220-6,1-220-7,1-220-9,1-220-10,1-220-11,1-220-
			(Note 2)
			12, 1-220-13,1-220-14,1-220-15, Toranomon, Minato-ku, Tokyo
		Residential	1-21-19, Toranomon, Minato-ku, Tokyo
			Approximately a one-minute walk from Toranomon Hills Station, Tokyo Metro
	Access	Hibiya Line
			Approximately a three-minute walk from Toranomon Station, Tokyo Metro Ginza Line
	Use (Note 2)	Office and retail
Area Classification	Commercial district
Site/Floor Area	Land:	2,016.83 m2	2,016.83 m2
	(Note 3)	Building:	11,983.09 m2	14,033.73 m2
Structure (Note 3)	S, 10F
Completion Date	April 2010		April 2010
	(Note 3)		June 2022 (Extended Portion)
Design Company	Tokyu Architects & Engineers Inc.
Construction Company	Tokyu Construction Co., Ltd.
Inspection Authority	The Building Center of Japan
			PML (Probable Maximum Loss) of 4.7% is based on the earthquake risk assessment
			(detailed) report prepared by Engineering and Risk Services Corporation and OYO
			RMS Corporation (as of June 27, 2022). PML refers to the expected damages caused
			by earthquakes. Although there is no single authoritative definition of PML, it refers
Earthquake Resistance	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.
Type of Ownership	Land:	Proprietary ownership
Building:	Proprietary ownership
					August 16, 2013
Acquisition Date	August 16, 2013	January 9, 2015 (Contiguous Land)
January 9, 2015 (Contiguous Land)	(Site of Extended Portion)
					June 30, 2022 (Extended Portion)
					¥18,572 million
			¥16,850 million	(breakdown)
Acquisition Price	(breakdown)	¥15,000 million
¥15,000 million	¥1,850 million (Contiguous Land)
			¥1,850 million (Contiguous Land)	(Site of Extended Portion)
					¥1,722 million (Extended Portion)
			¥22,200 million	¥24,400 million
Appraisal Value	(effective date of value: January 31, 2022)	(effective date of value: June 29, 2022)
			Appraiser: Japan Real Estate Institute
Security/Guarantee	None

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Special Items

Lease Details

In 1946, a city planning decision was made to the effect that the road facing the west side of the Land will be widened from the boundary as of the date of the acquisition toward the Land side. Therefore, building restrictions pursuant to the City Planning Act (Act No. 100 of 1968, including amendments thereto) apply to the concerned portion (about 51.76 m2). The Building has been constructed in a form that can respond in the event that a project does become decided (The specific timing, etc. of project decision have not been made as of today).

Total Number of Tenants: 4, Occupancy Rate: 44.3 % (Assumed figures as of July 1, 2022)

(Note 1) "After Extension Work" indicates the information for the entire property after the Extension Work.

(Note 2) Based on the details of the application for registration of change of the heading of buildings scheduled to be conducted after the date of this document.

(Note 3) The description before the Extension Work is as shown in the register, and the description after the Extension Work is based on the details of the application for registration of change of the heading of buildings scheduled to be conducted after the date of this document.

3. Effect of Extension Work

	Before Extension Work	After Extension Work	Change
Total Floor Area (Note 1)	12,557.47 m2	14,640.55 m2	+2,083.08 m2
Total Leasable Floor Area	9,016.59 m2	11,029.27 m2	+2,012.68 m2
Floor Area per Standard Floor	984.55 m2	1,187.18 m2	+202.63 m2
NOI (Note 2)	¥795 million	¥808 million	¥+12 million
NOI Yield (Note 3)	4.72%	4.35%	-0.37pts
NOI after Depreciation (Note 2)	¥655 million	¥601 million	¥-54 million
NOI Yield after Depreciation (Note 3)	3.89%	3.24%	-0.65pts

(Note 1) Total floor area is the figure based on the description in the certificate of inspection and differ from the figures in the register.

(Note 2) NOI and NOI after depreciation before Extension Work are the annualized figures for the actual NOI and NOI after depreciation eliminating special factors from income and expenses in the fiscal period ended July 2020 (34th Fiscal Period) before the commencement of the Extension Work, while those after Extension Work are the annualized figures for the estimated NOI and NOI after depreciation eliminating special factors from the estimated income and expenses in the fiscal period ending July 2023 (40th Fiscal Period) as of the date of this document.

(Note 3) NOI yield and NOI yield after depreciation is calculated by dividing the NOI or the NOI after depreciation indicated in (Note 2) by the acquisition price of Tokyu Toranomon Building indicated in 2. Details of Asset to Be Acquired.

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4.	Property Appraisal Summary	(JPY in thousands)	(rounded down to the nearest specified unit)
		Property Name: Tokyu Toranomon Building	Estimation	Notes
		Appraisal Firm: Japan Real Estate Institute

Effective Date of Value

Type of Value

Appraisal Value

Value Indicated by Income Capitalization Approach

Value Indicated by Direct Capitalization Method

(1) Operating Revenue (a.−b.)

a. Potential Gross Income

(rental income, common area charges income, utilities reimbursement, etc.)

b. Vacancy Loss

1. Operating Expenses (c.+d.+e.+f.+g.+h.+i.+j.)
2. 1. Building Maintenance Cost
   2. Utilities Expenses
   3. Repair Expenses
   4. Property Management Fee
   5. Tenant Solicitation Expenses, etc.
   6. Property Taxes

June 29, 2022

Market Value

¥24,400,000

¥24,400,000

¥24,500,000

¥1,025,522

¥1,068,096

¥42,574

¥257,606

¥40,000

¥57,240

¥6,866

¥22,417

¥7,087

¥122,765

-

-

The value indicated by the income capitalization approach

The same weight on both the value indicated by the direct capitalization method and that by the DCF method.

-

-

The stabilized rent and common area maintenance charges, which were based on the current rents and the market rent/CAM charges.

The stabilized occupancy rate, which was based on the past occupancy rate of the subject property and its future prediction as well as the occupancy rate of similar properties in the local market.

-

The characteristics of the subject property, its previous years' numbers, and the maintenance cost of similar properties.

The previous years' numbers of the subject property and its occupancy rate of rentable space.

The past figures of the subject property in addition to its future management plan, the cost levels of similar buildings, and the annual average repair/replacement costs in the available engineering report of the subject property.

The characteristics of the subject property and the management fees of similar properties as well as the previous years' numbers of the subject property.

The annual average amount of the subject property based on the expected turnover rate of tenants.

Estimated taxes payable based on the subject property's taxable assessed value, which is listed in its property tax information, and its tax increment limit.

i. Property Insurance

j. Other Expenses

1. Net Operating Income (NOI) ((1)−(2))
2. Investment Profits from Refundable Deposits
3. Capital Expenditure

¥1,231

¥0

¥767,916

¥8,513

¥16,830

The subject property's current premiums and those of similar properties.

There are no other expenses.

-

(The outstanding deposit amount based on the stabilized security deposit and occupancy rate) x (An invested yield of 1.0% per annum)

We assumed that a constant amount for capital expenditures would be set aside on a yearly basis considering the building age of the subject property, typical annual expenditures of similar properties, and the average amount of repair/replacement expenditures estimated in the engineering report.

			(6) Net Cash Flow (NCF) ((3)+(4)−(5))	¥759,599		-
			(7) Overall Capitalization Rate	3.1%		-
		Value Indicated by DCF Method	¥24,200,000		-
			Discount Rate	2.8%		-
			Terminal Capitalization Rate	3.1%		-
	Value Indicated by Cost Approach	¥23,700,000		-
		Ratio of Land Value	88.5%		-
		Ratio of Building Value	11.5%		-
				We placed the most emphasis on the value indicated by the income
Reconciliation before Arriving at the Value Conclusion	capitalization approach, which	we judged better reflects the actual price
formation process in the commercial real estate market. We used the value
				indicated by the cost approach for reference only.

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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5. Transactions with Interested Persons, Etc.

• Order of Extension Work

The Extension Work of the Property was outsourced to Tokyu Construction Co., Ltd., which falls under the category of a Related Party (Note), to which self-imposed rules of Tokyu REIM for preventing conflicts of interest are applied. Accordingly, TOKYU REIT had implemented procedures in accordance with the rules and concluded a contract agreement. Moreover, concerning the fees for the Extension Work, TOKYU REIT had received an opinion report from Index Consulting Inc. and Index Engineering Inc. stating that the fees were within the standard range with regard to the details of the Extension Work.

• Outsourcing of Design and Supervision of Extension Work

Design and supervision of the Extension Work were outsourced to Tokyu Architects & Engineers Inc. which falls under the category of a Related Party (Note), to which self-imposed rules of Tokyu REIM for preventing conflicts of interest are applied. Accordingly, TOKYU REIT had implemented procedures in accordance with the rules and concluded a design service consignment agreement and construction supervision consignment agreement. Moreover, concerning the fees for the design and supervision of the Extension Work, TOKYU REIT had received an opinion report from Index Consulting Inc. stating that the fees were within the standard range with regard to the details of the Extension Work.

• Outsourcing of Construction Management Services

Construction management services for the Property were outsourced to Tokyu Corporation which falls under the category of a Related Party (Note), to which self-imposed rules of Tokyu REIM for preventing conflicts of interest are applied. Accordingly, TOKYU REIT had implemented procedures in accordance with the rules and concluded a property management agreement. Moreover, concerning the fees for the construction management services, TOKYU REIT had received an opinion report from Index Consulting Inc. stating that the fees were within the standard range with regard to the details of the Extension Work.

Regarding the above transactions with interested persons, etc., multilayered checks based on the self-imposed rules of Tokyu REIM for preventing conflicts of interest had been implemented and, based on the above results, approval was granted at a meeting of TOKYU REIT's board of directors before the Extension Work.

(Note) Related Party includes interested persons, etc. specified in Article 123 of the "Ordinance for Enforcement of the Act on Investment Trusts and Investment Corporations" and refers to either of 1. through 3. below.

1. Tokyu Corporation and its subsidiaries (refers to any entity that falls under the following (i) to (iii))

1. Tokyu Corporation
2. A consolidated subsidiary of Tokyu Corporation
3. A tokutei mokuteki kaisha (TMK) or special purpose entity (SPE) that was established based on the intention of Tokyu Corporation or a consolidated subsidiary of Tokyu Corporation and where the share of investment by undisclosed associations or other investment shares in that entity by the respective company exceeds 50%.

1. Affiliates within the scope of consolidation of Tokyu Corporation.

3. Tokyu Fudosan Holdings Corporation and its subsidiaries (refers to any entity that falls under the following (i) to (iii))

1. Tokyu Fudosan Holdings Corporation ("Tokyu Fudosan Holdings")
2. A consolidated subsidiary of Tokyu Fudosan Holdings
3. A tokutei mokuteki kaisha (TMK) or special purpose company (SPC) that was established based on the intention of Tokyu Fudosan Holdings or a consolidated subsidiary of Tokyu Fudosan Holdings and where the share of investment by undisclosed associations or other investment shares in that entity by the respective company exceeds 50%.

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