January 30, 2020

For Immediate Release
Real Estate Investment Trust Securities Issuer
Star Asia Investment Corporation
Representative:
Atsushi Kato, Executive Officer(Code: 3468)
Asset Management Company
Star Asia Investment Management Co., Ltd.
Representative:
Atsushi Kato, President and CEO
Contact:
Akiko Kanno, Director and CFO
TEL: +81-3-5425-1340
Notice Concerning Execution of Memorandum of Understanding Regarding
Merger with Sakura Sogo REIT Investment Corporation
Star Asia Investment Corporation (“SAR”) announces that SAR resolved at its board of directors meeting
held today to enter into the Memorandum of Understanding (hereinafter referred to as the “MOU”)
pertaining to the merger of SAR and Sakura Sogo REIT Investment Corporation (“SSR”).. SAR believes
that the execution of the MOU is a major step towards the merger of SAR and SSR (hereinafter referred toas the "Merger"). The execution of the MOU will accelerate the process towards consummating the Mergerof SAR and SSR.

1.
(1)

Purpose of Execution of MOU
Background of Execution of MOU
Since there has been certain progress with the petitions filed against SSR by SSR’s unitholder as
detailed below, SAR and SSR agreed to enter into further detailed discussions and procedure toward
the Merger and, therefore, executed the MOU with the goal to maximize value for all unitholders of
SAR and SSR through the Merger. Among other things, the value creation of the Merger will be
generated by reducing operational costs and expanding the portfolio to enhance the return tounitholders with higher and stabilized distribution payments and to realize continued external growththrough the expansion of asset size.
Understanding of Developments Leading Up to Execution of MOU:
Lion Partners GK (“LPGK”), an affiliate of Star Asia Group, announced a proposal for the Merger on
May 10, 2019 and called for a general meeting of unitholders of SSR as part of the necessary actions
to consummate the Merger. Subsequently on June 28, 2019, LPGK received approval from the
Director-General of the Kanto Local Finance Bureau to convene SSR’s general meeting of unitholders

1and held the general meeting of unitholders at 10:00 am on August 30, 2019 (hereinafter referred to as
the “Unitholders’ Meeting Convened by LPGK”). Among the following Proposed Agenda Items 1
through 4, the Unitholders’ Meeting Convened by LPGK voted on Proposed Agenda Items 2 through 4.
Proposed Agenda Item 1 has been withdrawn since Executive Director Makoto Muranaka resigned. All
voted agenda items, Proposed Agenda Item 2 through Proposed Agenda Item 4, were adopted andapproved by resolution as per the original proposals. (With respect to Proposed Agenda Item 2 andProposed Agenda Item 4, an attending unitholder submitted a motion requesting amendment, but both
agenda items were approved as per the original proposals.)

Proposed Agenda Item 1:

Removal of Executive Director Makoto Muranaka

Proposed Agenda Item 2: Appointment of Executive Director Toru Sugihara
Proposed Agenda Item 3:

Cancellation of the asset management entrustment agreement with
Sakura Real Estate Funds Management, Inc.

Proposed Agenda Item 4:Entering into an asset management entrustment agreement with Star
Asia Investment Management Co., Ltd.

In connection with the Unitholders’ Meeting Convened by LPGK, Galaxy JREIT Pty Limited, a SSR
unitholder as well as the shareholder owning 100% voting rights of Sakura Real Estate Funds
Management, Inc , later filed an action seeking rescission of resolutions of unitholders’ meeting as well
as a petition for an order of injunction to suspend performance of duties and to appoint an acting
representative for SSR’s executive director, a petition for an order of injunction to suspend the effects
of resolutions of general meeting of unitholders, etc., and a petition for an order of injunction to prohibit
certain acts on the basis of seeking to preserve the right to seek an injunction against illegal acts
(hereinafter collectively referred to as the “Petitions”). There has been certain progress with the statusof the Petitions as one of the Petitions was dismissed by the court (provided, however, the petitioner
filed an immediate appeal against the court decision) and another one of the Petitions was withdrawn
by the petitioner.
Furthermore, we have been notified by SSR that SSR received an opinion on January 30, 2020 fromthe special committee established by SSR in the course of its review of the Merger and discussions
with SAR that it concluded that it is reasonable for SSR to enter into the MOU and conduct reviews,
negotiations, and due diligence towards the expedited completion of a definitive agreement. The
special committee consists of Shigeru Kaneda and Hirotaka Isayama, Supervisory Directors of SSR,
who are independent from Star Asia Group and the result of the Merger, and Kiyoshi Kondaibo, a third
party.,

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(2)Significance of Merger
SAR was listed on the Real Estate Investment Trust Securities Market of the Tokyo Stock Exchange
in April 2016 as a diversified real estate investment corporation with 18 properties (total acquisition
price: 61.5 billion yen). To date, SAR has conducted three public offerings to acquire properties anddeveloped a portfolio with diversified assets, including office buildings, residence, logistics facilities,
and hotels, predominantly in the Tokyo area. With its basic philosophy since listing being to maximize
unitholders’ interests, SAR has creatively implemented various initiatives for “out-of-the-box” active
management. SAR has implemented four rounds of asset replacements so far which led to theenhancement of its portfolio as well as the distributions of gains on sale to unitholders. Another typicalexample is its investment in mezzanine loan debt. As of today, SAR is the only J-REIT that has a trackrecord in mezzanine loan investments. As described above, SAR has managed its portfolio for 7 fiscal
periods since its listing, and manages a portfolio consisting of 34 properties (total acquisition price:102.3 billion yen) as of today.
SAR believes that the Merger will contribute to: (i) further diversification of its portfolio both in terms ofarea and asset type and increase in portfolio revenue stability through the expansion of asset size; (ii)
improved efficiency of operational costs; and (iii) larger market capitalization and improved liquidity.

(3)

Measures to Ensure Fairness
Details regarding the measures to ensure fairness will be announced upon final determination of themerger ratio for the Merger.
In the course of the consideration of the MOU, SAR has reported on a timely manner as to the statusof the consideration to the board of directors of SAR, being composed of SAR’s executive director and
SAR’s two supervisory directors, whose independence from the asset management company issecured pursuant to the Act on Investment Trusts and Investment Corporations. Also, the board of
directors has deliberated and resolved at its meeting to enter into the MOU.

Also, SAR and SSR have agreed in the MOU that, in principle, neither shall engage in any solicitationor negotiation with any other third party, including having a third party (including, but not limited to, its
own asset management company) engage in such act, with a purpose to achieve a merger or othertransactions that is incompatible with the Merger, until a merger agreement pertaining to the Merger is
executed.

2.
(1)

Summary of Merger
Schedule of Merger
SAR and SSR will proceed the necessary process including due diligence and aim to execute3

merger agreement promptly.

(2)

Method of Merger
The method of the Merger will be determined upon subsequent discussions between SAR and
SSR.

(3)

Allocation of Units upon Merger
SAR and SSR will determine the final merger ratio for the Merger upon discussion in good faith
based on the results of due diligence and third party assessment.

(4)

Effective Term of MOU
The effective term of the MOU is from the date of executing the MOU to the earlier of: (i) May 31,
2020; or (ii) approval of the merger agreement by the general meeting of unitholders of both SAR
and SSR following execution of the merger agreement. However, the term may be extended withthe written agreement of SAR and SSR.

3.

Outline of Merging Parties
SAR
Star Asia Investment Corporation

Sakura Sogo REIT Investment
Corporation

Atago Green Hills Mori Tower 18F,

3-8-11, Kudan Minami, Chiyoda-ku,

2-5-1, Atago, Minato-ku, Tokyo

Tokyo

Atsushi Kato

Toru Sugihara

52,745 million yen

29,254 million yen

December 1, 2015

April 1, 2016

540,824 units

333,001 units

Fiscal Period-EndsJanuary and July

June and December

Main Assets under

Real estate and real estate beneficiary

Real estate and real estate beneficiaryManagement

interests in trustinterests in trust

(1)

Name

(2)

Location

(3)
(4)
(5)

SSR

Name of Executive
Director
Unitholders’ Capital
Date of
Incorporation
Total Number of(6)

Outstanding
Investment Units(Note 1)

(7)
(8)

Total Number of(9)Assets(Note 1)

Office buildings

11

Office buildings

8

Residence

7

Retail4

Logistics facility

8

Residence

4

Hotel

8

Others2

4

Book Value at End(10)of Fiscal Period(Note 1)

(11)

Office buildings

36,068 million yen

Office buildings

26,544 million yen

Residence

15,571 million yen

Retail22,214 million yen

Logistics facility

30,877 million yen

Residence

6,583 million yen

Hotel20,634 million yen

Others2,378 million yen

Sumitomo Mitsui Banking Corporation,

Main Financial

Mizuho Bank, Ltd., and nine other

Banks

9.2%

Japan, Ltd. (Trust account)
Japan Trustee Services(12)

and seven other banks

banks
The Master Trust Bank of

Sumitomo Mitsui Banking Corporation,

7.1%

Large Unitholders

Bank, Ltd. (Trust account)and Holding Ratio

STAR ASIA CAPITAL I LLC

4.5%

STAR ASIA CAPITAL II LLC

4.5%

The Master Trust Bank ofJapan, Ltd. (Trust account)

7.6%

Japan Trustee Services

6.2%

Bank, Ltd. (Trust account)
Lion Partners Godo Kaisha

3.6%

The Nomura Trust and(Note 1)Banking Co., Ltd.

3.1%

(Investment trust account)
BNY GCMSTAR ASIA CAPITAL III LLC

4.5%

CLIENT ACCOUNT JPRD

3.0%

AC ISG (FE-AC)
STAR ASIA CAPITAL IV LLC
(13)

4.5%

Business Results for Last 3 Fiscal Periods(in units of million yen unless otherwise specified; figures rounded down to the nearest unit)

Fiscal Period Ended:

Sakura Sogo REIT Investment

Star Asia Investment Corporation

Corporation

Jul. 2018

Jan. 2019

Jul. 2019

Jun. 2018

Dec. 2018

Jun. 2019

Operating Revenue

2,810

3,844

3,785

1,768

2,362

2,394

Operating Profit

1,576

2,406

2,225

854

1,046

1,037

Ordinary Profit

1,305

2,073

1,965

615

885

874

Net Profit

1,305

2,049

1,964

615

886

885

Net Profit per Unit (yen)

2,775

3,889

3,632

1,847

2,661

2,660

Distributions per Unit (yen)

2,773

3,720

3,625

1,848

2,662

2,660

Net Assets per Unit (yen)100,477

101,400

101,215

89,70090,51390,512

Net Assets

47,287

54,83954,73929,87030,14130,140Total Assets

93,553111,079

110,240

62,752

61,64363,389(14)

Name of AssetStar Asia Investment Management Co.,

Sakura Real Estate Funds

Management

Ltd.

Management, Inc.

Company(Note 2)

(Note 2)

Atago Green Hills Mori Tower 18F,

3-8-11, Kudan Minami, Chiyoda-ku,

2-5-1, Atago, Minato-ku, Tokyo

Tokyo

Location of Asset(15)

Management
Company5Name and Title of(16)

Representative ofAsset Management

Atsushi Kato, President and CEO

Robert Shoji Morikuni,
Representative Director and President

Company(17)

Relationship between Parties Involved
CapitalWhile there is no capital relationship required to be disclosed between SAR and

Relationship

SSR, the asset management company for both SAR and SSR is expected to be(Note 2)

Star Asia Investment Management Co., Ltd., on and after March 1.
While there is no personnel relationship required to be disclosed between SAR and

Personnel
Relationship(Note 2)

SSR, it should be noted that Toru Sugihara, Executive Director of SSR, is an
employee of the Tokyo Branch of Star Asia Management Japan Ltd., a subsidiary ofStar Asia Management Ltd., with which SAR and Star Asia Investment
Management Co., Ltd., SAR’s asset management company, have each executed asponsor support agreement.

Business

There is no business relationship required to be disclosed between: (a) SAR and its

Relationshipasset management company, and their related persons and affiliates; and (b) SSR(Note 2)and its asset management company, and their related persons and affiliates.

Status as Related

SAR and SSR do not fall under related parties that are required to be disclosed.

Party

However, the asset management company for both SAR and SSR is expected to(Note 2)be Star Asia Investment Management Co., Ltd., on and after March 1.

(Note 1) The relevant figures are as of July 31, 2019 for SAR, and as of June 30, 2019 for SSR. The “holding
ratio” is rounded to the nearest tenth.
(Note 2) As stated in “Announcement Concerning Notice of Termination of Asset Management Agreement”
dated September 5, 2019 published by SSR, SSR notified its cancellation of the asset management
entrustment agreement with Sakura Real Estate Funds Management, Inc. (“SREFM”) on August 30,
2019. SSR plans to execute a new asset management entrustment agreement with Star Asia
Investment Management Co., Ltd., and the asset management entrustment agreement with SREFM
is scheduled to be cancelled as of February 29, 2020.

4.
(1)

Post-Merger Status
Status of Surviving Corporation
Surviving Corporation after Merger
(1)

Name

Star Asia Investment Corporation(2)

Location

Atago Green Hills Mori Tower 18F, 2-5-1, Atago, Minato-ku, Tokyo

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(3)

Name of Executive
Director

Atsushi Kato

(4)

Unitholders’ Capital

Not yet been determined, and will be announced once determined.

(5)

Fiscal Period-Ends

Not yet been determined, and will be announced once determined.

(6)

Net Assets

Not yet been determined, and will be announced once determined.

(7)

Total Assets

Not yet been determined, and will be announced once determined.

(8)
(9)

Name of AssetManagement Company
Location of AssetManagement Company

Star Asia Investment Management Co., Ltd.
Not yet been determined, and will be announced once determined.

Name and Title of(10)

Representative of Asset

Not yet been determined, and will be announced once determined.

Management Company(2)

Major Unitholders and Unit Holding Ratio before and after Merger
Not yet been determined, and will be announced once determined.

(3)

Amendment to Asset Management Agreement
As stated in “Announcement Concerning Notice of Termination of Asset Management Agreement”
dated September 5, 2019 published by SSR, SSR notified its cancellation of the asset
management entrustment agreement with SREFM on August 30, 2019. Star Asia Investment
Management Co., Ltd plans to execute a new asset management entrustment agreement with
SSR pursuant to the resolution of Unitholders’ Meeting Convened by LPGK and will continue toprovide asset management services to the merged investment corporation following the Merger.

(4)

Amendment to Investment Policy
Not yet been determined, and will be announced once determined.

(5)

Amendment to Agreement with Sponsor, Etc.
Not yet been determined, and will be announced once determined.

5.

Impact on Distributions per Unit
Not yet been determined, and will be announced once determined.

6.

Outlook
We will make announcements when further material progress is made.
The impact of the execution of the MOU on SAR’s business results in the fiscal period ending January
2020 (from August 1, 2019 to January 31, 2020) is minor and there is no change to the forecast.

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* This press release is distributed to the Kabuto Club; the Ministry of Land, Infrastructure, Transport and Tourism Press
Club; and the Ministry of Land, Infrastructure, Transport and Tourism Press Club for Construction Publications.
* SAR HP URL:

http://starasia-reit.com/en

This is an English translation of the announcement in Japanese dated January 30, 2020. However, no assurance orwarranties are given for the completeness or accuracy of this English translation.

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