Notice Concerning Acquisition and Leasing of Trust Beneficiary Interests in Domestic Real Estate

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Notice Concerning Acquisition and Leasing of Trust Beneficiary Interests in Domestic Real Estate March 1, 2017 For Immediate Release Investment Corporation: Daiwa House REIT Investment Corporation 2-4-8, Nagatacho, Chiyoda-ku, Tokyo Jiro Kawanishi, Executive Director (TSE Code: 8984) Asset Manager: Daiwa House Asset Management Co., Ltd. Koichi Tsuchida, President and CEO Inquiries: Haruto Tsukamoto, Director and CFO TEL. +81-3-3595-1265 Notice Concerning Acquisition and Leasing of Trust Beneficiary Interests in Domestic Real Estate Daiwa House Asset Management Co., Ltd. (the “Asset Manager”), the asset manager to which Daiwa House REIT Investment Corporation (“DHR”) entrusts the management of its assets, hereby announces that it has decided to acquire assets (hereinafter referred to as the “Assets Scheduled for Acquisition”) and to lease the Assets Scheduled for Acquisition as follows. The decision has been approved by the board of directors of DHR based on the Act on Investment Trust and Investment Corporations (Act No. 198 of 1951, as amended) and the Asset Manager’s voluntary rules concerning conflicts of interest. 1. Acquisition and leasing overview (1) Assets Scheduled for Acquisition Anticipated Anticipated acquisition Property Real estate in trust Asset Class Location date of price Seller number (Property name) acquisition (million yen) (Note 1) Misato City, Daiwa House LM-001 DPL Misato (Note 2) Logistics 16,831 Saitama Industry Co., Ltd. Kawagoe City, Daiwa House LB-035 D Project Kawagoe III Logistics 7,200 Saitama Industry Co., Ltd. Kazo City, Daiwa House LB-036 D Project Kazo Logistics 3,300 Saitama Industry Co., Ltd. Urayasu City, DH Fund Four LB-037 D Project Urayasu III Logistics 8,500 Chiba Godo Kaisha Tomisato City, Daiwa House LB-038 D Project Tomisato Logistics 5,000 Chiba Industry Co., Ltd. Kyotanabe City, Daiwa House LB-039 D Project Kyotanabe Logistics 3,520 Kyoto April 11, Industry Co., Ltd. Sendai City, 2017 Daiwa House LB-040 D Project Sendai Izumi Logistics 1,510 Miyagi Industry Co., Ltd. Oyama City, Daiwa House LB-041 D Project Oyama Logistics 2,000 Tochigi Industry Co., Ltd. Sano City, Daiwa House LB-042 D Project Sano Logistics 1,780 Tochigi Industry Co., Ltd. Tatebayashi City, Daiwa House LB-043 D Project Tatebayashi Logistics 3,100 Gunma Industry Co., Ltd. Kakegawa City, Daiwa House LB-044 D Project Kakegawa Logistics 6,000 Shizuoka Industry Co., Ltd. Hiroshima City, Daiwa House LB-045 D Project Hiroshima Seifu Logistics 3,820 Hiroshima Industry Co., Ltd. Disclaimer: This announcement is prepared for the public disclosure of acquisition and leasing of trust beneficiary interests in domestic real estate by DHR and has not been prepared for the purpose of soliciting investment. - 1 - Anticipated Anticipated acquisition Property Real estate in trust Asset Class Location date of price Seller number (Property name) acquisition (million yen) (Note 1) Tosu City, Daiwa House LB-046 D Project Tosu II Logistics 1,700 Saga Industry Co., Ltd. Castalia Shinsakae II Nagoya City, Daiwa House RE-143 Residential April 11, 1,800 (Note 3) Aichi Industry Co., Ltd. 2017 Other Property Hiroshima City, Daiwa House OT-004 Sharp Hiroshima Building (Office) 1,850 Hiroshima Industry Co., Ltd. (Note 4) Total 67,911 - (Note 1) Excluding such amounts as expenses related to acquisition, amounts equivalent to reimbursement of taxes and dues, etc., and amount equivalent to consumption taxes. (Note 2) Daiwa House Industry Co., Ltd., the seller, is planning repair work of certain facilities for the property from March 25, 2017 to May 15, 2017. As of the planned acquisition date of April 11, 2017, as such facilities will still be subject to repair work, DHR will pay to Daiwa House Industry Co., Ltd. an amount excluding the value of such facilities for the acquisition of the property. Daiwa House Industry Co., Ltd. will, on the condition that it completes the repair work within the planned period, transfer the repaired facilities to the trustee of the property on May 15, 2017 or another mutually agreed date, and DHR will pay the amount equivalent to the value of such facilities to Daiwa House Industry Co., Ltd. upon such transfer. The anticipated acquisition price for DPL Misato includes the facilities subject to repair work that will be subsequently transferred to DHR. (Note 3) Although the current property name is “Roygent Shinsakae I”, DHR intends to amend the name to “Castalia Shinsakae II” upon the acquisition by DHR, therefore, we use the amended name. The same applies hereafter. (Note 4) Sharp Hiroshima Building is categorized as “Other property” under DHR’s investment guidelines. We describe its specific use in parentheses. (2) Execution date of the purchase agreements : March 1, 2017 (3) Planned date of acquisition : April 11, 2017 (Note 1) (4) Seller : Please refer to 4. Seller Profile below. (5) Acquisition funds : Proceeds from issuance of new investment units, debt financing and cash reserves (Note 2) (6) Method of settlement : Payment of entire amount upon transfer (7) Sum total for annual rent (Note 3) : 4,083 million yen (8) Sum total for tenant leasehold and security : 1,568 million yen deposits (Note 4) (Note 1) Daiwa House Industry Co., Ltd., is scheduled to carry out renovation works on the facilities installed within DPL Misato (from March 25, 2017 to May 15, 2017). Thus the delivery date of such facilities is different from above date. Please refer to the “(1) Assets Scheduled for Acquisition”. (Note 2) Please refer to the press releases “Notice Concerning Issuance of New Investment Units and Secondary Offering of Investment Units” and “Notice Concerning Debt Financing, and Repayment and Prepayment of Loans” dated today. (Note 3) “Annual rent” means the amount calculated by multiplying the monthly rent of the building as indicated in respective lease agreement or lease reservation agreement in relation to each property in trust as of December 31, 2016 by 12 on an annual basis (as to properties in trust for which multiple lease agreements or lease reservation agreements are entered into, the total amount indicated in such lease agreements or lease reservation agreements). If a pass-through type master lease agreement is or is scheduled to be entered into, the annual rent is the amount calculated by multiplying the monthly rent as indicated in each sublease agreement in relation to each property in trust as of December 31, 2016 by 12 on an annual basis (as to properties in trust for which multiple sublease agreements are entered into, the total amount indicated in such sublease agreements). However, while Castalia Shinsakae II, which is currently subject to a pass-through type master lease agreement, but is scheduled to be subject to a sublease type master lease agreement by the time DHR acquires the property, the annual rent includes the common area charges and is calculated based on the assumption that the sublease type masterlease agreement is retroactively effective from December 31, 2016. Under the “pass-through type master lease agreement” rent and other fees are collected directly from end tenants in principle and rents are received only when subleasing actually takes place. Meanwhile, under the “sublease type master lease agreement,” a certain guaranteed amount of rent is received regardless of any fluctuation in received rents. (Note 4) “Tenant leasehold and security deposits” means the amount calculated based on the leasehold and security deposits indicated in respective lease agreement or lease reservation agreement in relation to each property in trust as of December 31, 2016 (as to properties in trust for which multiple lease agreements or lease reservation agreements are entered into, the total amount indicated in such lease agreements or lease reservation agreements). If a pass-through type master lease agreement is or is scheduled to be entered into, leasehold and security deposits are those indicated in the sublease agreements of end-tenants as of December 31, 2016 (as to properties in trust for which multiple sublease agreements are entered into, the total amount indicated in such sublease agreements). However, Castalia Shinsakae II, which is currently subject to a pass-through type master lease agreement but is scheduled to be subject to a sublease type master lease agreement by the time DHR acquires the property, the leasehold and security deposits are calculated based on the assumption that the sublease type master lease agreement is retroactively effective from Disclaimer: This announcement is prepared for the public disclosure of acquisition and leasing of trust beneficiary interests in domestic real estate by DHR and has not been prepared for the purpose of soliciting investment. - 2 - December 31, 2016. Meanwhile, leasehold and security deposits that do not need to be returned to the tenant pursuant to the lease agreements or lease reservation agreements are excluded from this calculation. 2. Rationale for Acquisition and Leasing Based on the targets and policies prescribed in DHR’s Articles of Incorporation, the Asset Manager decided to acquire and lease the Assets Scheduled for Acquisition having deemed that the acquisition would expand the asset size, further increase the stability of cash flow through increased portfolio diversification and secure stable revenues in the long term. All of the anticipated acquisitions will be through the pipeline of Daiwa House Group. Furthermore, the tenants of the Assets Scheduled for Acquisition are deemed to comply with the tenant selection standards stipulated in the “Report on Operating Systems, etc. of Issuers of Real Estate Investment
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