December 20, 2018
For Immediate Release
Real Estate Investment Trust Securities Issuer
Star Asia Investment Corporation
Representative: Atsushi Kato, Executive Director(Code: 3468)
Asset Management Company
Star Asia Investment Management Co., Ltd.
Representative: Atsushi Kato
President and CEO
Contact: Toru Sugihara
Director and CFO
TEL: +81-3-5425-1340

Notice Concerning Acquisition of Mezzanine Loan Debt
-Star Asia Mezzanine Loan Debt Investment Series 3 (C Beneficiary Interest)-

Star Asia Investment Corporation (“SAR”) announces that Star Asia Investment Management Co., Ltd. (the “Asset Manager”),
to which SAR entrusts the management of its assets, has decided today to invest in mezzanine loan debt (the acquisition of
mezzanine loan debt is hereinafter referred to as the “Acquisition”). Details are as follows.
The Acquisition is the third investment following the Star Asia Mezzanine Loan Debt Investment Series 1 and 2 as announced
in “Notice Concerning Acquisition of Mezzanine Loan Debt (Subordinate Bonds)” dated October 25, 2017 and “NoticeConcerning Acquisition of Mezzanine Loan Debt -Star Asia Mezzanine Loan Debt Investment Series 2 (Subordinate
Beneficiary Interest)-“ dated December 20, 2017. SAR regards the continued diversification of revenue-generating
opportunities such as these as a differentiation strategy in pursuit of maximization of unitholder value. Going forward, SAR
will continue to discuss measures to create new investment opportunities corresponding to the state of the real estatemarket, without being bound by previous examples.

1. Overview of the Acquisition(1) Asset to be acquired(2) Name of asset to be acquired(3) Trustee(4) Trust period(5) Collateral asset for loan
claims (non-recourse loan) as
asset in trust(6) Amount of the C BeneficiaryInterest(7) Planned acquisition price of
the C Beneficiary Interest(8) Planned dividend yield (Note 2)(9) LTV of loan claims (nonrecourse loan) as asset intrust

The C Beneficiary Interest: Beneficiary interest of trust with the base loan
claims as asset in trust (the base loan shall be a nonrecourse loan to GK CHK(the “GK”), whose collateral asset shall be the trust beneficiary interest with
The Royal Garden Residence Shirokanedai as the main asset in trust (the“Collateral Asset”)) (Note 1)
Star Asia Mezzanine Loan Debt Investment Series 3

Shinsei Trust & Banking Co., Ltd. (”Shinsei Trust”)
From December 26, 2018 to December 26, 2026
Collateral Asset: The beneficiary interest in trust with The Royal Garden
Residence Shirokanedai as the main asset in trust
126,000,000 yen

126,000,000 yen (excluding acquisition expenses, etc.)
Base rate (Note 3) +5%
Approximately 65.2% (Note 4)
The appraisal value of the Collateral Asset, which is used as the denominatorfor calculating LTV, is 1,850 million yen.

1(10) Contract date of C BeneficiaryInterest transfer agreement(11) Planned acquisition date of C
Beneficiary Interest(12) Dividend payment date of C
Beneficiary Interest(13) Final redemption date(14) Acquisition financing(15) Settlement method(16) Seller(17) Overview of C BeneficiaryInterest structure

December 21, 2018
December 26, 2018
Last day of January, April, July and October (Four times a year)(The first dividend payment date is April 30, 2019.)
December 26, 2024 (Note 5)
Cash on handLump-sum settlement upon acquisition of the C Beneficiary Interest
Shinsei Bank, Ltd. (“Shinsei Bank”)
Operator: GK
GK[Borrowing]
Non-recourse
loanCollateral Asset
The Royal
GardenResidence
Shirokanedai

Approximately
1,207 million yen

1.850 million yen(Appraisal value)

Shinsei Trust（A-ABL Lender）
Approximately 781
million yen
Shinsei Bank
（B-ABL Lender）[Lending]
Approximately 300
Non-recourse
million yen
loan
Shinsei Bank（C BeneficiaryApproximatelyInterest)）
1,207
126
million yen
million yen
SAR（D BeneficiaryInterest)）
Approximately 0.01
million yen
Shinsei Bank

(Equity)
Silentpartnershipinvestment, etc.

1.

2.

3.

4.

Loan (non-recourse loan) as asset in trust of the C Beneficiary Interest will
be executed by Shinsei Trust to the GK based on cash totaling
approximately 1,207 million yen comprising of approximately 781 million
yen to be loaned to Shinsei Trust, the trustee, from Shinsei Bank on
December 26, 2018 as A-ABL (monetary loan with limited special contract
for non-exempt property), approximately 300 million yen to be loaned as
B-ABL, approx. 126 million yen to be entrusted for the C BeneficiaryInterest and approx. 0.01 million yen to be entrusted for the D BeneficiaryInterest.
Of the C Beneficiary Interest and D Beneficiary Interest granted to Shinsei
Bank, SAR plans to acquire the C Beneficiary Interest from Shinsei Bank.
The GK plans to acquire the Collateral Asset using the payment for silent
partnership investment, etc. and the borrowing (non-recourse loan) from
Shinsei Trust on the same day.
Dividend for the C Beneficiary Interest will be conducted based on theinterest for the borrowing (non-recourse loan), which is paid to Shinsei
Trust by the GK. We expect to receive 1% of principal per year.
The C Beneficiary Interest is subordinated to the A-ABL lender and B-ABL
lender, but is prioritized over the D Beneficiary Interest in terms of dividend
payment and redemption of principal. On the other hand, dividend
payment to the C Beneficiary Interest and redemption of principal andinterest of the non-recourse loan from Shinsei Trust to the GK areprioritized over those for “equity (silent partnership investment, etc.),” inprinciple. Particularly with redemption of principal, even when the value of2

(18) Relationship between
SAR/the Asset Manager and
the GK* Based on information as ofDecember 20, 2018.

the Collateral Asset should fall, “equity (silent partnership investment,etc.)” of the GK is the first to incur loss, and after all “equities (silent
partnership investment, etc.)” have incurred loss and all the D BeneficiaryInterest have incurred loss, then the principal of the C Beneficiary Interest
incurs loss.
Capital relationship
There is no capital relationship to report between
SAR/the Asset Manager and the GK.
Personnel
There is no personnel relationship to report between
relationship
SAR/the Asset Manager and the GK. Furthermore,
there is no personnel relationship to report between
associated persons and associated companies of
SAR/the Asset Manager and associated persons andassociated companies of the GK.
Business relationship
There is no business relationship to report between
SAR/the Asset Manager and the GK. Furthermore,
there is no business relationship to report between
associated persons and associated companies of
SAR/the Asset Manager and associated persons andassociated companies of the GK.
Related party status
There is no related party status to report between
SAR/the Asset Manager and the GK.

(Note 1) For an overview of the Collateral Asset, please refer to 2. Reason for the Acquisition <Overview of the Collateral Asset>.
(Note 2) SAR is scheduled to receive an up-front fee upon the acquisition of the C Beneficiary Interest separately from thescheduled dividend. The up-front fee will be offset with the acquisition expenses, etc. and the remaining amount, if
any, will be recorded as revenue.
(Note 3) Base rate is JBA 3-month JPY TIBOR. The Japanese yen TIBOR by JBA can be confirmed on the website of the JBA TIBOR
Administration (http://www.jbatibor.or.jp/english/rate/). For each interest calculation period, the rate announced at
11 a.m. (Tokyo time) two business days prior to the last day of the previous calculation period of the relevant calculation
period (The first date is December 21, 2018) will be applied as the base rate.
(Note 4) The figure indicates the ratio of (a) amount procured from the GK’s loans through a loan claim (non-recourse loan),which is the main trust asset of trust pertaining to the C Beneficiary Interest (approximately 1,207 million yen) to (b)the appraisal value indicated in the appraisal report obtained by SAR regarding the Collateral Asset (1,850 million yen),rounded to one decimal place.
(Note 5) The final redemption date of the C Beneficiary Interest is December 26, 2024. However, C Beneficiary Interest may beredeemed in line with early repayment of loans from Shinsei Trust due to the sale of the Collateral Asset and otherreasons.

2. Reason for the Acquisition
The Acquisition will not only realize diversification of investment targets, but also likely boost distributable profits since
it will be conducted with cash on hand held by SAR, allowing SAR to receive dividend income (planned dividend yield:
more than 5%) from effective use of own funds. Therefore, SAR has decided on the Acquisition judging that such willcontribute to maximization of unitholder value. The Asset Manager recognized the following points upon deciding theacquisition of the C Beneficiary Interest.
① The appraisal value of the Collateral Asset GK has acquired is 1.850 million yen, and LTV against the amountof the C Beneficiary Interest and senior debts (approximately 1,207 million yen) calculated based on this figure
is 65.2%. Therefore, risk of loss while holding the Subordinate Beneficiary Interest is judged to be low.
② The Collateral Asset is an office building that falls under the category of “middle-sized assets in the Tokyo area
(Note)” defined by SAR and is believed to have strong liquidity. In addition, since the loan can be redeemed
at 65.2% of the appraisal value as explained in ① above, the certainty of redemption of the C BeneficiaryInterest through sale of the Collateral Asset or refinancing is judged to be high.
③ The certainty of interest payment for the loan claim of the trust asset of the C Beneficiary Interest is assessed tobe high since its rent income is highly stable as shown in the evaluation of the Collateral Asset below.

3④ As planned dividend yield of the C Beneficiary Interest is “base rate + 5%” (please refer to 1. Overview of theAcquisition above.), securement of profits that surpass the after-amortization yield of real estate portfolio canbe expected.
⑤ The Collateral Asset, a newly constructed property and planned for transaction with no occupancy, has certain
appeal to potential tenants who desire to live in the Shirokanedai area, as described in <Evaluation of theUnderlying Asset by the Asset Manager> below. Furthermore, it is confirmed to secure dividend income withthe allowance, etc. for the interest payment for borrowings.
(Note) Refers to real estate, etc. with an acquisition price lower than 10 billion yen.

Overview of Collateral Asset and evaluation of Collateral Asset by the Asset Manager are as follows.
<Overview of Collateral Asset>
Type of specified asset
Real estate beneficiary interest in trust
Property name

The Royal Garden Residence Shirokanedai

Planned acquisition date

December 26, 2018

Planned buyer

GK CKH

Location

3-80-11 Shirokanedai, Minato-ku, Tokyo

Use (Note 1)
Structure (Note 2)

Residence
Reinforced concrete structure 1 floor below ground / 8 floors above ground

Land (Note 3)
Area

443.40 m2

Building (Total floor area)
1,606.61 m2(Note 4)

Type ofLand
ownership
Building(Note 5)

Proprietary ownership

Construction completion
Earthquake PML (Note 6)

June 22, 2018
6.5%

Appraisal value

Proprietary ownership

1,850 million yen

Appraisal
Appraisal NOI (Note 8) 70,707,771 yen
obtained by
December 1, 2018
the GK (Note 7) Appraisal date
AppraiserRich Appraisal Institute co.,Ltd
Total number of end tenants (Note 9) 0
Occupancy rate (Note 9)
Special notation0%
Not applicable.

(Note 1) “Use” indicates the use stated in the real estate registry, and may differ from the present state.
(Note 2) ”Structure” indicates the structure stated in the real estate registry of the building.
(Note 3) “Land” is the entire land area of The Royal Garden Residence Shirokanedai stated in the real estate registry andmay differ from the present state.
(Note 4) “Building (Total floor area)” is the total floor area of The Royal Garden Residence Shirokanedai stated in the realestate registry and may differ from the present state.
(Note 5) “Type of ownership” is the type of right held by the trustee of The Royal Garden Residence Shirokanedai.
(Note 6) The PML (probable maximum loss) calculated in the evaluation of seismic risk analysis conducted by Tokio Marine& Nichido Consulting Co., Ltd., which was entrusted by the GK upon acquisition of the Collateral Asset as part ofefforts to grasp the appropriate price of the real estate is indicated. “Probable Maximum Loss” means the probablemaximum loss that may result from an earthquake and, herein, refers to the extent of damage that may be suffered
due to an earthquake of the assumed maximum scale (earthquake with a probability of occurring once in 475 years= earthquake with a probability of occurrence in 50 years of more than 10%) in the scheduled use period (50 years

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= useful life of a general building), expressed as the estimated cost of restoring such damage (physical loss
corresponding to a probability of more than 90% in the event of occurrence of such earthquake) as a percentage(%) of the replacement cost
(Note 7) Items other than the indicated above that are stated in the real estate appraisal report the GK has obtained forgrasping the appropriate price of the real estate at the time of its acquisition of the Collateral Asset are notdisclosed as consent has not been obtained from the planned buyer of the Collateral Asset.
(Note 8) “Appraisal NOI” indicates the amount of net operating income (NOI) obtained through the direct capitalization
method, stated in the real estate appraisal report.
(Note 9) No leasing has begun as of this date.

<Evaluation of the Underlying Asset by the Asset Manager>
The Royal Garden Residence Shirokanedai, the Collateral Asset, is a newly built apartment house located an
approximately 2-minute walk from Shirokanedai Station on the Tokyo Metro Namboku Line and Toei Mita Line.
The Collateral Asset is situated in a quiet residential area behind Meguro-dori Street and Sakurada-dori Street.
Shirokanedai is one of the foremost high-end residential districts in Tokyo and has a corresponding brand strength.
Moreover, access to major office areas such as Otemachi and Nagatacho is excellent.
The Collateral Asset has the same level of specifications, quality, etc. as condominiums, such as in having adisposer installed. There is diversity in the layout of each room for the 16 units. The residential room on the top
floor in particular is a maisonette room with approximately 200 m2 of exclusive area. As such, the AssetManagement Company believes that the Collateral Asset will have a corresponding appeal to rental demanders
who prefer the Shirokanedai area.
3. Seller profile
Name

Shinsei Bank, Ltd.
Nihonbashi Muromachi Nomura Building
Location
2-4-3 Nihonbashi-Muromachi, Chuo-ku, Tokyo
Representative
Hideyuki Kudo, Representative Director, President
Main business(1) Acceptance of deposits and installment savings, extending loans, discounting bills
description
and notes and exchange transactions(2) Guarantee of obligations, acceptance of bills and notes and any other businessincidental to the banking business mentioned in the preceding item
(3) Underwriting of, handling of offering and placing of, and sale and purchase of Japanese
government bonds, municipal bonds, government-guaranteed bonds, handling ofprivate offering and other securities, etc.
(4) In addition to the previous items, any business in which banks are permitted to engage
under the Banking Act, the Secured Bond Trust Act, the Company Bond Registration
Act and other laws(5) Any other business incidental or relating to the businesses mentioned in any of theforegoing items
Capital512.2 billion yen
Established
December 1, 1952
Net assets
827,350 million yen
Total assets
8,288,448 million yen
Major shareholders
SATURN IV SUB LP (JPMCB 380111)
and shareholding ratio
13.18%
Relationship with SAR or the Asset Manager
Capital relationship
There is no capital relationship to report.
Personnel relationship
There is no personnel relationship to report.
Business relationship
SAR has debt financed by the seller as of December 21, 2018.
Related party status
Not applicable.
(Note) The above is based on information as of September 30, 2018.

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4. Transaction with interested person, etc.
The acquisition of the C Beneficiary Interest is not a transaction with an interested person, etc. under the Act on
Investment Trusts and Investment Corporations (Act No. 198 of 1951）or interested person, etc. defined in the “Rules
on Transactions with Interested Parties” set forth by the Asset Manager.
5. Schedule for the transaction
Decision date of the Acquisition

December 21, 2018

Contract date of the C Beneficiary Interest transfer agreement

December 21, 2018

Date of drawdown from Shinsei Trust to the GK

December 26, 2018

Planned acquisition date of the C Beneficiary Interest

December 26, 2018

(Note) The Acquisition will be conducted on the assumption that the GK acquires the Collateral Asset on December 26, 2018 using
the borrowings from Shinsei Trust and payment for silent partnership investment, etc.

6. Settlement method
The Acquisition is planned to be settled through lump-sum payment of the acquisition price on the planned acquisition date.
7. Future outlook
Since the impact of the acquisition of the C Beneficiary Interest on the forecast for operating results for the 6th fiscal period
ending January 31, 2019 (August 1, 2018 to January 31, 2019) and the 7th fiscal period ending July 31, 2019 (February 1,
2019 to July 31, 2019) announced on September 13, 2018 is minimal, there is no change to the forecast.

* Star Asia Investment Corporation website address: http://starasia-reit.com/en/

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