Tokyu REIT : Notice Concerning Disposition (Setagaya Business Square) of Trust Beneficiary Interest in Domestic Real Estate

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: [phone]

Notice Concerning Disposition (Setagaya Business Square)

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 dispose of trust beneficiary interest in domestic real estate (referred to as the "Disposition"). Brief details are as follows.

1. Disposition Details

Property Name	Setagaya Business Square
Location	4-10-1,4-10-2,4-10-3,4-10-4,4-10-5,4-10-6, Yoga, Setagaya-ku, Tokyo
Disposition Price	¥22,750 million
Book Value	¥18,661 million (Expected value as of disposition date)
Amount of Difference	¥4,088 million (Note)
from Disposition Price
Purchaser	GMO Internet, Inc. (Please refer to "5. Purchaser Profile")
Brokerage	Yes (Please refer to "6. Brokerage")
Decision of Disposition	November 22, 2021
Contract Date	November 22, 2021
Disposition Date	December 1, 2021
Receiving of Disposition	December 1, 2021
Costs
(Note) Amount of difference	between the disposition price and the expected book value as of the scheduled disposition date
is indicated.

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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 Disposition 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.

Setagaya Business Square (the "Asset to Be Disposed") is an office building located in Setagaya-ku, Tokyo, which was acquired by TOKYU REIT in September 2003. The Asset to Be Disposed is a flagship property of TOKYU REIT, accounting for 14.6% of the total rentable area (as of September 30, 2021) of TOKYU REIT and contributing to its revenue since the stock listing. On the other hand, the continuous appraisal value of the Asset to Be Disposed remains below its book value, and TOKYU REIT recognizes the importance of resolving this issue. Under these circumstances, an offer was received from the purchaser, and it was determined that disposing of the property was the best option from the perspective of total returns (Note) under the current market environment.

As a result of the Disposition, TOKYU REIT expects to post a gain on sale of real estate of ¥3,354 million for the fiscal period ending January 2022 (37th Fiscal Period). TOKYU REIT plans to reserve ¥2,683 million of the gain on sale of real estate as a reserve for reduction entry of replaced property specified in the "Ordinance on Accountings of Investment Corporations" by applying the "Special Provisions for Taxation in Cases of Repurchase of Specified Assets" (Article 65- 7 of the Special Taxation Measures Law).

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) 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 Disposed

		Property Name	Setagaya Business Square
Type of Specified Assets	Trust beneficiary interest in domestic real estate
		Trustee	Sumitomo Mitsui Trust Bank, Limited
		Trust Period	January 31, 2003 to March 31, 2026
				Registered	Land:	4-260-2,4-260-40, Yoga, Setagaya-ku, Tokyo
Location		Building:	4-260-2,4-260-40,4-260-41, Yoga, Setagaya-ku, Tokyo
				Residential	4-10-1,4-10-2,4-10-3,4-10-4,4-10-5,4-10-6, Yoga, Setagaya-ku, Tokyo
		Access	Approximately a one-minute walk from Yoga Station on the Tokyu Den-en-toshi Line
			Use	Office and retail
	Area Classification	Neighborhood commercial district / Residential Classification 2
		Site/Floor Area	Land:	21,315.68 m2
		(Registered)	Building:	94,373.72 m2
	Structure (Registered)	SRC/RC/S, B2/28F
	Completion Date	September 1993
		(Registered)
	Type of Ownership	Land:	Proprietary ownership (co-ownership ratio 55%)
	Building:	Proprietary ownership (co-ownership ratio 55%)
		Acquisition Date	September 11, 2003
	Acquisition Price	¥22,400 million
	Disposition Date	December 1, 2021
	Disposition Price	¥22,750 million
		Appraisal Value	¥19,100 million (effective date of value: October 1, 2021)
	Appraiser: Daiwa Real Estate Appraisal Co., Ltd.
		Book Value	¥18,661 million (Expected value as of disposition date)
Amount of Difference	¥4,088 million (Note)
from Disposition Price
					For other noteworthy items, please refer to "Part 1: Fund Information, Section 1. Fund
		Special Items	Status, 5. Management Status, (2) Investment Assets,	③ Other Major Investment Assets, b.
		Overview of Individual Real Estate, etc." of the securities report for the 36th Fiscal Period
					submitted October 29, 2021.
		Total Number of	60 (as of July 31, 2021)
			Tenants
		Total Rental Income	¥1,960 million a year (actual results from August 1, 2020, to July 31, 2021)
		Lease Deposits and	¥1,295 million (as of July 31, 2021)
		Guarantee Deposits
Details				NOI	¥974 million a year (actual results from August 1, 2020, to July 31, 2021)
			NOI after	¥527 million a year (actual results from August 1, 2020, to July 31, 2021)
		Depreciation
Lease
	Total Leased Area	23,272.93 m2 (as of July 31, 2021)
		Total Rentable Area	24,920.26 m2 (as of July 31, 2021)
		Occupancy Rates	As of		As of	As of	As of	As of
		over the Last Five	July 31, 2017	July 31, 2018	July 31, 2019	July 31, 2020	July 31, 2021
				Years	95.8 %		96.2 %	99.3 %	99.4 %	93.4 %

(Note) Amount of difference between the disposition price and the expected book value as of the scheduled disposition date is indicated.

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4. Property Appraisal Summary

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

Property Name: Setagaya Business Square	Estimation	Notes
Appraisal Firm: Daiwa Real Estate Appraisal Co., Ltd.
Effective Date of Value	October 1, 2021	―
Type of Value	Market value	―
Appraisal Value	19,100,000	Applied the value indicated by the income approach
	Value Indicated by Income Approach	19,100,000	Assessed by correlation of the value indicated by the direct capitalization
	method with the value indicated by the DCF method
		Value Indicated by Direct Capitalization Method	19,100,000	―
			(1) Operating Revenue (a.−b.)	3,516,269	―
				a. Potential Gross Income		Assessed the stabilized assumed rental income and common area charges
					income of the subject property based on the current contract rent, leasing
				(rental income, common area charges income,	3,700,303	case examples and the level of new rent of similar properties in the prime
				utilities reimbursement, etc.)		market area and the trends thereof, and by taking into consideration such
						factors as the medium- to long-term competitiveness of the subject property
				b. Vacancy Loss	184,034	Recorded that assessed based on the actual vacancy rate of the subject
				property and the standard vacancy rates of similar properties
			(2) Operating Expenses (c.+d.+e.+f.+g.+h.+i.+j.)	1,681,261	―
				c. Building Maintenance Cost	392,858	Recorded that assessed based on the past actual data and the standard level
				of similar properties
				d. Utilities Expenses	616,248	Recorded that assessed based on the past actual data and the standard level
				of similar properties
				e. Repair Expenses	72,134	Recorded the annual average repair expenses as stated in the engineering
				report obtained from the client
				f. Property Management Fee	101,955	Recorded the amount based on the current contract
				g. Tenant Solicitation Expenses, etc.	21,518	Recorded the tenant solicitation expenses, etc. assessed based on that of
				similar properties
				h. Property Taxes	452,856	Recorded that assessed based on the fiscal 2021 actual amount
				i. Property Insurance	8,283	Recorded that assessed based on the actual premium and that of similar
				properties
				j. Other Expenses	15,406	Recorded that assessed based on the past actual data
			(3) Net Operating Income (NOI) ((1)−(2))	1,835,007	―
			(4) Investment Profits from Refundable Deposits	21,679	Recorded that assessed by comprehensively taking into consideration the
			actual state of investment of refundable deposits, etc. from the perspective
						of both the investment aspect and the procurement aspect
			(5) Capital Expenditure	501,105	Recorded by taking the annual average renewal costs in the engineering
			report obtained from the client and considering the construction
						management fee
			(6) Net Cash Flow (NCF) ((3)+(4)−(5))	1,355,581	―
			(7) Co-ownership Ratio	55.0%	―
			(8) NCF (corresponding to the co-ownership ratio)	745,570	―
			((6)×(7))
						Assessed by comprehensively considering the conditions of the subject
			(9) Overall Capitalization Rate	3.9%	properties, such as location, building grade and others, and using the
			overall capitalization rates of similar properties in the primary market area
						as references
		Value Indicated by DCF Method	19,100,000	―
			Discount Rate	3.7%	―
			Terminal Capitalization Rate	4.1%	―
	Value Indicated by Cost Approach	23,300,000	―
		Ratio of Land Value	69.3%	―
		Ratio of Building Value	30.7%	―
					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
Reconciliation before Arriving at the Value Conclusion	real property. In	regard to an income-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 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. Purchaser Profile
		Company Name	GMO Internet, Inc.
		Head Office Address	26-1 Sakuragaokacho, Shibuya-ku, Tokyo
		Representative	Masatoshi Kumagai, CEO, Chairman of the Board and President, Founder and Group CEO
		Business Activities	Internet Infrastructure, Online Advertising and Media, Internet Finance,
		Cryptoassets (Cryptocurrency)
		Capital	¥5,000 million (as of September 30, 2021)
		Foundation Date	May 24, 1991
		Net Assets	¥140,360 million (as of September 30, 2021)
	of the Previous Business Year
		Total Assets	¥1,369,409 million (as of September 30, 2021)
	of the Previous Business Year
	Major Shareholder and	Kumagai Masatoshi Office, Ltd. 31.92 %, etc. (as of September 30, 2021)
		Shareholding Ratio
	Relationship between the Investment Corporation or its Investment Management Company and the Company
			There is no capital relationship to state between TOKYU REIT or its investment management
		Capital Relationship	company and the Company. In addition, there is no capital relationship to note between the
		affiliated persons or affiliated companies of TOKYU REIT or its investment management
			company and the affiliated persons or affiliated companies of the Company.
			There is no personnel relationship to state between TOKYU REIT or its investment
		Personnel Relationship	management company and the Company. In addition, there is no personnel relationship to note
		between the affiliated persons or affiliated companies of TOKYU REIT or its investment
			management company and the affiliated persons or affiliated companies of the Company.
			There is no business relationship to state between TOKYU REIT or its investment
		Business Relationship	management company and the Company. In addition, there is no business relationship to note
		between the affiliated persons or affiliated companies of TOKYU REIT or its investment
			management company and the affiliated persons or affiliated companies of the Company.
		Status of Classification	The Company does not fall under the category of related party of TOKYU REIT or
		its investment management company. In addition, the affiliated persons or affiliated
		as Related Party	companies of the Company do not fall under the category of related party of TOKYU
			REIT or its investment management company.

6. Brokerage

(1) Broker Profile

	Company Name	Tokyu Asset Management Inc.
	Head Office Address	1-10-7 Dogenzaka, Shibuya-ku, Tokyo
	Representative	Hideki Mori, Representative Director and President, Chief Executive Officer
	Business Activities	Type II Financial Instruments Business, investment advisory and agency,
	and real estate specified joint enterprise
	Capital	¥100 million (as of March 31, 2021)
	Foundation Date	December 12, 2007
Relationship between the Investment Corporation or its Investment Management Company and the Company
		The Company is a wholly owned subsidiary of Tokyu Corporation, the parent company
	Capital Relationship	of Tokyu REIM. Tokyu Corporation holds 5.01% of the total number of investment
		units of TOKYU REIT issued and outstanding as of July 31, 2021.
	Personnel Relationship	A non-executive director of Tokyu REIM concurrently holds a position in the Company.
	Business Relationship	TOKYU REIT, Tokyu REIM, and the Company have signed a co-owner basic
	agreement for Setagaya Business Square.
	Status of Classification	Tokyu Corporation, the parent company of the Company, is the parent company of
	Tokyu REIM, and the Company falls under the category of related party of TOKYU
	as Related Party
	REIT and Tokyu REIM.

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