Supplementary Material – Rebuttal to Star Asia
Sakura Sogo REIT Investment Corporation（Code：3473）

Sakura Sogo REIT Presentation Material

Sakura Sogo REIT Investment Corporation

Message to Sakura Unitholders•

Hostile approach taken by Star Asia creates a dangerous precedent and threatens the value of Sakura
unitholders’ investment and the stability of the entire J-REIT sector•

Sakura can demonstrate superior performance relative to Star Asia and that the Sakura REIT portfolio
is of a higher quality than the Star Asia REIT portfolio•The “merger proposal” put forward by a unitholder controlled by a competitor (Star Asia) is NOT in thebest interests of Sakura unitholders

Seishin Building / Shinjuku-Ku

Matsuya Residence Sekime / Osaka

Takadanobaba Access / Shinjuku-Ku
Sakura Sogo REIT Presentation Material2Section 1
Dangerous precedents for J-REIT Sector

Sakura Sogo REIT Presentation Material

Sakura Sogo REIT Investment CorporationStar Asia is attempting to bypass fair merger protocols
Approach taken by Star Asia creates dangerous precedents for the J-REIT sector•Unitholder using tactics to benefit a related party with misaligned interests with all other Sakura unitholders•

Attempt to eliminate any bone-fide and fair negotiations for a merger•

Attempt to eliminate any possible alternative proposals that may offer superior value for Sakura unitholders•

Attempt to replace existing manager without legitimate reasons, or expressing any concern with the manager prior to issuing thenotice•

Unitholder taking a strategic stake in Sakura REIT for the sole purpose of taking this abusive action•

Attempt to take advantage of “Deemed Approval” system which exposes all unitholders to significant risk in these circumstances (referslide 7)•Proposing a merger without disclosing any meaningful information about the merger terms, the merger ratios or the merger benefits, ifany, to Sakura unitholders•

Proposing to have a single manager for two REITs with the same or very similar investment mandate creating serious conflicts ofinterest•

Providing no detail about how, or if, these conflicts of interest can be satisfactorily managed•

Ultimate objective is to force Sakura unitholders to a meeting where they will have no option other than to accept a forced merger,
irrespective of the proposed terms

Potential to severely disadvantage other J-REIT unitholders, not just Sakura unitholders
Sakura Sogo REIT Presentation Material

4Attempt to Bypass Fair Merger Protocols (1)ProcessStar Asia Proposal

Sakura Sogo REIT Investment Corporation

Sakura’s View

1

Unitholder request for
extraordinary
unitholders meeting

Request extraordinary
unitholders meeting as soon aspossible• Eliminate any and all bona-fide and fair negotiation formerger• Eliminate any and all possible alternatives for Sakura
unitholders• Star Asia made no attempt to discuss any potential
merger or concerns with management

Change executive director
and asset manager(Decided by the approval ofmore than 50% of Sakuraunitholders)• Attempt by Star Asia to force a merger by:- replacing the manager without legitimate reasons
and,- without disclosing merger terms and merger ratio• Attempt to control and force merger effectively negating
the two thirds voting threshold required by law (referslide 7)

2

General unitholders
meeting

Sakura Sogo REIT Presentation Material

5Attempt to Bypass Fair Merger Protocols (2)Process

Sakura Sogo REIT Investment Corporation

Star Asia ProposalSakura’s viewMerger Agreement
Negotiations

Same asset manager in controlof two REITs with sameinvestment mandate• Serious conflicts of interest with no clear plan to manage• Fair negotiation highly unlikely given disproportionate
ownership interest• Star Asia Group owns 17.9% of Star Asia REIT and
only 3.6% of Sakura REIT
• At this point, no alternative options would remain for
Sakura unitholders• Likely that Sakura would be neglected as both REITs
compete against each other. This may lead to erosion invalue of Sakura and ultimately less favorable mergerterms

General unitholders
meeting to approve
the proposed merger

Approving the proposed merger(Decided by the approval of
two thirds of Sakuraunitholders)• Unitholder meeting to approve merger when there will be,
in a practical sense, no alternative other than to accept aforced merger irrespective of terms

34

The process proposed by Star Asia Group to effect the merger is not consistent with thenormal merger protocol (Refer to slide 7)

Sakura Sogo REIT Presentation Material

6Issue of “Deemed Approval System” in Japanese Investment Trust

Sakura Sogo REIT Investment CorporationNormal Merger
Merger under
Commercial
CodeBoards of both parties negotiate and agree on conditions of merger
Sign merger agreement which includes merger ratio

Hostile TakeoverStar Asia
Proposal

Key concern
with abusing theDeemed
Approval
System

Sakura will be in effect under thecontrol of Star Asia

No request for
discussion overfund management
No discussion /negotiation offeredregarding merger
proposal

Minority (3.6%) unitholder
requests for generalunitholders meeting
To change Sakura
executive director andasset manager by 50%
approval

Approved byshareholders meetingby two thirds voting
thresholdNo bone-fide andfair negotiation on
behalf of the current
Sakura unitholders

No alternative other than toaccept a forced merger
irrespective of terms

Merger ratio andterms
determined

Approved byunitholders meeting by
two thirds voting
threshold

1. There is a unique system to investment corporations called “deemed approval system”, i.e. unitholders
who do not exercise their voting rights will be deemed to have agreed to the proposal
2. Unitholders of a REITs are not proactive in exercising their voting rights at general unitholders meeting,which means Star Asia can leverage its 3.6% holding. For example, if 50% of unitholders do not vote,the Star Asia proposal will be deemed to been approved by 53.6%
3. Therefore, the Star Asia Proposal could be approved even if half or more (in the case of a merger, morethan one third) of the Sakura unitholders who cast their vote dissenting from the Star Asia Proposal

Sakura Sogo REIT Presentation Material

7Section 2
Sakura Management and portfolio superior to Star Asia

Sakura Sogo REIT Presentation Material

Sakura Sogo REIT Investment Corporation

Sakura REIT can demonstrate superior performance
Sakura REIT can demonstrate superior performance relative to Star Asia REIT andthat the Sakura REIT portfolio is of a higher quality than the Star Asia REIT
• Higher annual compound growth in net assets per unit (last four Fiscal Periods)• Distribution– more sustainable, lower volatility– higher average distribution yield on IPO issue price1• No unrealised losses vs Star Asia REIT (7 properties/ 429mn JPY)
• Superior portfolio asset mix• Consistently higher occupancy vs Star Asia REIT

There are no legitimate reasons to replacethe Executive Director or Asset Manager of Sakura REIT

Note 1: Excludes gains on asset sales

Sakura Sogo REIT Presentation Material

9Sakura Delivers Superior Performance to Unitholders

Sakura Sogo REIT Investment Corporation

Sakura REIT

Star Asia REIT

“Sakura REIT has demonstrated clear outperformance from 1 February 2017. This is the period
during which Star Asia REIT has completed 3 follow-on public offerings.”
(Yen)

(Yen)

98,000Growth in net assets(NAV) per unit
(Note 1)(Note 2)

97,00096,00095,77996,47096,882

97,405

CAGR

95,0002.22%

94,000(FP2-FP5)

93,00092,00091,0000

Properties withunrealized losses(# of properties /amount)

FP2

FP3

FP4

FP5113 ,20 0
113 ,00 0
112 ,80 0
112 ,60 0
112 ,40 0
112 ,20 0
112 ,00 0
111 ,80 0
111 ,60 0
111 ,40 0
111 ,2000

112,965
112,537

112,4121.27%

111,884

FP3CAGR(FP3-FP6)FP4FP5FP6“No property in Sakura’s portfolio has an appraisal value less than book value. In contrast,Star Asia REIT has 7 assets (20% of the portfolio) with unrealized losses. This suggests theyare either paying too much for each property or the properties are under performing postacquisition”

No unrealized losses

7 properties with

429 mn yen total unrealized losses(as of the end of FP6)

Average DPU yieldon IPO issue price(ex. gains on sale)(Note 3)

“Sakura has achieved a higher average distribution yield post IPO relative to Star Asia REIT”

5.8%

5.3%

Note 1: Net assets (NAV) per unit = ((net assets – total amount of DPU+ appraisal based unrealized gain) / total number of investment units issued and outstanding}
Note 2: CAGR of NAV = (Growth in net assets (NAV) per unit for the past 4 FP)^(1 / operating fiscal period)-1
Note 3: Average distribution yield per unit based on actual distributions (ex. gains on asset sales) / IPO issue price

Sakura Sogo REIT Presentation Material

10Distribution – Less Volatility, More Sustainable

Sakura Sogo REIT Investment Corporation

Distribution per unit (DPU)“Sakura’s actual DPU is less volatile and supported by strong underlying portfolio performance”
Return of gain on sale(Yen)

Includes net realized gainon sale of Comfomall
Sapporo (142 mn yen)

5,000
4,000

Sakura REITAverage DPU Yield

5.8% (ex. Gains on sale)

3,000
2,000
1,000

2,863
1,529

2,863

2,676

3,460
2,344

1,529

2,772

0FP1FP2FP3

Distribution per unit excluding gain on sal e

FP4

2,662

2,662(Note 1)

FP5

Distribution per unit with gain on sale“In contrast Star Asia’s DPU has been volatile and relies on asset sale gains in several fiscal
periods. This is unsustainable longer term”
Average DPU Yield(Yen)

5.3% (ex. Gains on sale)

5,000

Star Asia REIT

4,000
3,000
4,423

2,000
1,000
0

3,112

3,112

4,0772,773

2,487

2,254

2,773

2,684

3,720968968
FP1FP2FP3

Distribution per unit excluding gain on sal eFP4FP5FP6

Distribution per unit with gain on saleNote 1: The figure is calculated after conversion to 6 months

Sakura Sogo REIT Presentation Material

11Comparison of Investment Portfolios: Key Metrics

Sakura Sogo REIT Investment Corporation

Sakura REIT

Star Asia REIT

“Sakura’s portfolio has a disproportionately high weighting to Central Tokyo office. This is
widely acknowledged as the strongest sector currently in the Japan real estate market”

Investment Ratio:Central Tokyo OfficeCentral TokyoOfficeCentral Tokyo
Office

13.2%

40.5%

Other

Other
86.8%

59.5%

“Sakura’s portfolio is well balanced for growth (office / residential) and stability (retail / other).
Star Asia REIT has a significant weighting to logistics and hotels (50+%). Almost half of thehotels in Star Asia REIT’s portfolio have appraisal values less than current book value”

Investment Ratio
by Asset Type

Residential
11.7%

Retail
40.0%

Other
4.3%
Office
44.0%

Hotel
20.1%

Logistics
30.3%

Office34.8%

Residential
14.9%

Note: On acquisition price basis as of the most recent FP end

Sakura Sogo REIT Presentation Material

12Consistently Higher Occupancy

Sakura Sogo REIT Investment Corporation

Sakura REIT

Star Asia REIT

“Sakura REIT has consistently outperformed Star Asia in terms of portfolio occupancy”（%）

Occupancy Rate
(Total portfolio)

100 .099.0
98.0

Average
Sakura REIT: 98.2%
Star Asia REIT: 97.4%

97.0
96.0
95.0

Sakura total portfolio

Star Asia total portfolio“Sakura REIT has also outperformed Star Asia REIT in maintaining high levels of occupancy
in its residential portfolio. This is an asset class that has regular tenant turnover and isindicative of the leasing capabilities of the asset manager.”（％）

100 .0Occupancy Rate

98.0

(Residential)

96.0

Average
Sakura REIT: 96.4%
Star Asia REIT: 94.9%

94.0
92.0
90.0

Sakura Residential

Star Asia Residential

Sakura Sogo REIT Presentation Material

13Section 3Conclusion

Sakura Sogo REIT Presentation Material

Conclusion

Sakura Sogo REIT Investment Corporation

The “merger proposal” from Star Asia is NOT in the best interests of Sakura unitholders

Sakura REIT considers the notice to be abusive and ignores the interests of Sakura unitholders.
Sakura REIT considers the notice as a “hostile takeover” attempt and rejects such notice and request withouthesitation.
The Executive Director of Sakura and Sakura Real Estate Funds Management remain fully committed tocontinue to protect the best interests of Sakura unitholders at all times.

La Park Kishiwada SC/ Osaka

Abode Yoyogi Parkside/ Shibuya-ku

Nara Building/ Shin Yokohama

Hiei Kudan Building/ Chiyoda-Ku

Azabu Amerex Building/ Minato-Ku
Sakura Sogo REIT Presentation Material15Disclaimer

Sakura Sogo REIT Investment Corporation

This presentation material has been prepared solely for providing information, and not for soliciting investments
in certain products.
The presentation material includes, in addition to a description of Sakura Sogo REIT Investment Corporation(hereinafter the “Investment Corporation”), data published by third parties. Furthermore, it includes presentanalysis, judgments and other opinions of the Sakura Real Estate Funds Management, Inc. (hereinafter the“Asset Management Company”) regarding such information.
The Investment Corporation or the Asset Management Company bear no responsibility with regard to theaccuracy of the data published by third parties.

Sakura Sogo REIT Presentation Material

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