July 11, 2019
For Immediate Release
Advance Residence Investment Corporation
Securities Code：3269
1-105 Kanda-Jinbocho, Chiyoda-ku, Tokyo
Takeshi Takano, Executive Director
Asset Management Company:
AD Investment Management Co., Ltd.
Takeshi Takano, President
Inquiries:
Hiroshi Kawakami, Managing Director, CFO
TEL. +81-3-3518-0480

Notice Concerning A Replacement Transaction
Acquisitions of "RESIDIA Ichigaya II and Ichigaya-Sadohara”
And Disposition of "RESIDIA Higashi-Ginza”
AD Investment Management Co., Ltd, (ADIM) the asset management company to which Advance Residence
Investment Corporation (ADR) entrusts the management of its assets announced its decision today to have ADR makea replacement transaction (the Transaction) as detailed below as part of ADR`s growth strategy.
1. Details of the Transaction
ADIM decided on the following Transaction pursuant to the target and policy of asset management as
stipulated in its Articles of Incorporation of ADR, to increase the asset under management and build a portfoliothat earns stable income through diversified investment in all regions and in all apartment unit types.
Disposition

Acquisition
Property NameRESIDIA IchigayaSadohara

RESIDIA Ichigaya II

RESIDIA Higashi-Ginza

Location

Shinjuku-ku, Tokyo

Chuo-ku, Tokyo

Type of Asset

Beneficiary Interests in Trust

Beneficiary Interests in Trust

Acquisition / Disposition Price 1

1,915 million yen

4,085 million yen

5,740 million yen

Appraisal Value 2

2,120 million yen

4,880 million yen

5,740 million yen

4.7%

4.8%

4.3%

4.2%

4.3%

3.7%

NOI Yield

3

Yield after Depreciation 4
Book Value

5-

Difference Between
Disposition Price and Book
Value

4,985 million yen.754 million yen

Counterparty

Not disclosed6

Scheduled Contract Date

July 11, 2019

Scheduled Settlement Date

September 26, 2019 or a date to be separately agreed uponwith the Counterparty(no later than September 30, 2019)

Payment Method

full payment on delivery/ cash-on-hand(planned)

full payment on delivery

NOI yield and Yield after Depreciation for the asset to be disposed are calculated based on disposition price.
When calculated based on book value, NOI yield is 4.9%, and Yield after Depreciation are 4.2%.

1

(Note 1) “Acquisition Price” indicates the purchase price for the property entered in the real estate transaction agreement, which is exclusiveof the various expenses required in the acquisition of the concerned property (taxes and public dues, etc.)(Note 2) “Appraisal Value” of the asset to be acquired is as of May 1, 2019, and that of the asset to be disposed is the price as of the end ofJanuary 2019.
(Note 3) “NOI Yield” is calculated as follows.
Acquisition Assets’ NOI Yield = Annualized NOI Listed on the Appraisal ÷ Acquisition Price x 100
Disposition Asset’s NOI Yield = (FP 2018/7 Actual Annualized NOI + FP 2019/1 Actual Annualized NOI)÷ Disposition Price x 100(Note 4) “Yield after Depreciation” is calculated as follows.
“Acquisition Asset’s Yield after Depreciation” is calculated using the figures in the acquisition appraisal of asset-to-be-acquired.
The calculation is as follows; “(Annualized NOI listed on the appraisal at the time of acquisition – depreciation) ÷ acquisition price× 100”.
The calculated yield is rounded at the second decimal point. Depreciation of the asset-to-be-acquired is calculated using samestraight-line method as the portfolio and expect depreciation of 9,904 thousand yen per annum (RESIDIA Ichigaya II) and 21,845
thousand yen per annum (RESIDIA Ichigaya-Sadohara) .
Disposition Asset’s Yield after Depreciation = (FP 2018/7 Actual Annualized NOI + FP 2019/1 Actual Annualized NOI - FP 2018/7
Actual Annualized Depreciation - FP 2019/1 Actual Annualized Depreciation) ÷ Disposition Price x 100(Note 5) “Book value” as of May 31, 2019.
(Note 6) The counterparty of this Transaction is a domestic company whose name and detail are not disclosed according to their wishes. The
counterparty does not constitute parties having particular vested interest in ADR or ADIM.

ADIM judged that the Transaction contributes most in improving the unitholders value after the negotiation
with the counterparty.
ADIM judged that the Transaction contributes most in improving the unitholders value for the following
reasons.
1) A preparatory union for urban redevelopment has been formed for the area where the asset-to-be-disposedis located. If the redevelopment is carried out, ADIM believes that there will be considerable possibility of
disruption in the earnings of the asset.
2) By making the transaction, ADR will be able to secure a stable income, while increasing the revenue frombefore the transaction.
The profiles of the assets-to-be-acquired are as follows
Property Name

Property Profile

RESIDIA Ichigaya II

The property has good access to public transportation. It is about 4 minute-walkto “Ichigaya” station which is a station for four train lines. The neighborhood
is very convenient with many dining facilities as well as supermarkets andconvenience stores. Therefore, the property can expect demands from singles
commuting to city center.

RESIDIA Ichigaya-Sadohara

The property has good access to public transportation. It is about 6 minute-walkfrom Toei Oedo Line “Ushigome Kagurazaka” station and it is also withinwalking distance to “Ichigaya” station which is a station for four train lines
including JR Chuo Line and JR Sobu Line. In addition, concierges are stationed
in the property, and marble is used for the entrance, creating a sense of luxury.
Private space is also equipped with a refrigerator and washing machine, which
are fully equipped as luxury rental apartments.

2(1) P-111

RESIDIA Ichigaya II©Google3

(2) P-112

RESIDIA Ichigaya-Sadohara©Google4

2. Summary of the Assets-To-Be-Acquired
No.

(1)
P-111

Property Number
Name of the Asset-To-Be-Acquired
Address(2)
P-112

RESIDIA Ichigaya II

RESIDIA Ichigaya-Sadohara

2-5 Ichigaya-sadohara, Shinjuku-ku, Tokyo

3-19 Ichigaya-sadohara, Shinjuku-ku, Tokyo

Land
Proprietary ownership

Proprietary ownership

Site Area

600.09m2

966.58m2

ZoningNeighboring commercial area,
Second-class high-rise residential area

Class I residential area

FAR / Building Coverage Ratio

400%/80% , 300%/60%

300%/60%

Type of Ownership

Proprietary ownership

Proprietary ownership

Total Floor Area

2,358.12 m2

7,303.76m2

Structure / Floors

RC with flat roof / 14 floors

RC with flat roof / 5F/B1F

Multi-family housing

Multi-family housing

Type of Ownership

Building

Use
Construction Completion Date

September, 2007

February, 2008

Building Inspector

Japan ERI Co., Ltd.

Town Residency Evaluation Center Co., Ltd.

Building Designer

Taisei Corporation first-class architect officePlantech Style Inc.

Structural Engineer

Taisei Corporation first-class architect officeOrimoto Structure Design Co., Ltd.

TOKAI KOGYO CO., LTD.

ASANUMA CORPORATION Tokyo head office

Sumitomo Mitsui Trust Bank, Limited(planned)

Sumitomo Mitsui Trust Bank, Limited (planned)

Construction Contractor
Trustee
Trust Contract Period

The end of September, 2029 (planned)

The end of September, 2029 (planned)

Property Manager

ITOCHU Urban Community Ltd. (planned)

Mitsui Fudosan Residential Lease (planned)

Master Lessee

ITOCHU Urban Community Ltd. (planned)

Mitsui Fudosan Residential Lease(planned)

Pass-throughPass-throughTokio Marine & Nichido Risk Consulting Co., Ltd.

Tokio Marine & Nichido Risk Consulting Co., Ltd.

April 18, 2019

April 18, 2019

Emergency Repair Costs--

Short-term Repair Costs (within 1 year)--¥60,982 thousand¥572,000 thousand¥154,683 thousand¥1,667,000 thousand

3.8%

7.3%

Point in Time

as of June 30, 2019as of June 30, 2019

Total Tenants

1

1

Leasable Units

57 units

28 units

Master Lease type
Summary of Building Conditions Investigation Report
Investigator
Investigation Date

Long-term Repair Costs (next 12 years)
Building Replacement Price
Earthquake PML
Lease Conditions

Leased Units

52 units

26 units

Leasable Floor Area

2,099.99 m2

4,957.62m2

Leased Floor Area

1,1916.36 m2

4,595.68m2

91.3%

92.7%

Occupancy Rate (based on floor area)
Monthly Rent (including common service charges)¥8,090 thousand¥22,595 thousand

Deposits, Guarantees, etc.

¥14,915 thousand¥72,925 thousand

Breakdown of Residential Unit Type
Single49 units-

Compact

8 units-

Family

-

-

Large

-

28 units

Dormitory

-

-

Other

-

-

None

None

Special Notation*

Please refer to “Notes and definitions on items on the tables in the press releases for asset acquisition” on ADR`s website for details on items on
above table. (https://www.adr-reit.com/en/financial/)53. Summary of Appraisal Report (monetary unit: thousand yen)
Name of Property
Appraiser

RESIDIA Ichigaya II

Appraisal Date

Japan Real Estate Institute

Appraisal Value

Appraisal Items

Appraised Value

Income Capitalization Approach Value

May 1, 2019
2,120,000,000 yen
Basis2,120,000

Direct Capitalization Price

2,160,000

Total Potential Income

117,117

Income capitalization value is estimated using DCF method along with direct capitalization
method for verification.

Rent Income

108,925

Based on the current rent and the assumed rent when newly rented, estimated the rent that canbe stably received over the medium to long term.

Other Income

8,192

Estimated key money, renewal fee income and antenna incom, basing on individual tenant
contract term, and estimate on average tenant replacement rate and average turnover period.

Total Effective Income

110,733

Losses from Vacancies, etc.
Bad Debts Losses
Expenses from Rental Business

6,384 Referred to similar properties to estimate the medium to long-term stabilized vacancy rate.
0 Taking into account of tenant situation, no losses was assumed.
21,110

Maintenance and Management Fees

3,426

Estimated by referring to past fiscal year’s figures and fees for similar properties and taking
into account of property’s specific characteristics.

Utilities Costs

1,550

Estimated by referring to past fiscal year’s figures, cost of similar properties and taking into
account of property’s specific characteristics.

Management Commission Fees

3,082

Estimated by referring to planned contract fee terms, fees on similar properties and taking into
account of property’s specific characteristics.

Taxes and Public Dues

5,293

Estimated the property tax basing on FY2019 taxable value. Estimate on depreciable asset tax
was based on submitted materials.

Non-life Insurance Premiums

128

Estimated basing on contract insurance premium for the property and referring to insurance
premiums for similar properties.

Leasing Expenses

Repair Costs (including restoration fees)

Other Expenses
Net Operating Income

Administration fees on leasing, contract signing for new tenants and tenant renewals were
estimated by referring to contract terms and fees in similar properties in the neighborhood.
Leasing expenses were estimated by looking at how much is needed in leasing to new tenants
4,553
and actual advertising cost for the past FY leasable. Renewal fees were estimated by looking
at how much fee is paid at the time of renewal and considering the expected turnover rate andvacancy rate.

2,668

Estimated repair costs by looking at the restitution cost per unit, percentage of cost borne bytenants, average expensing timing and level of restitution needed. Repair cost were estimatedbasing on actual figures for the past FY, cost in similar properties and referring to averageannual repair and renewal costs listed in the engineering report.

410 Cable TV useage fee.
89,623

Earnings from Deposits
Capital Expenditures

162 Assumed 1% per annum, by taking into consideration both investment yield and financing cost.
3,557

Estimated by referring to the level of capital expenditures in similar properties, building age andannual average of restoration expense listed on the engineering report.

Net Cash Flow

86,228Cap Rate

The cap rate is estimated by adding the yield spread determined by locality, specifications and4.0% age of the building to the base yield as well as referring to actual cap rates in deals for similar
properties.

DCF Price

2,080,000
The discount rate is estimated by comparing the discount rate used in actual deals for similar
properties and reflecting the individual characteristics of the property.

Discount Rate

3.8%

Terminal Cap Rate

Estimated by comprehensively considering future trends in investment yield, risk factors of the
4.2% property as an investment, general forecast on economic growth and general price trend in thereal estate market.

Cost approach value

1,930,000

Land Ratio

80.9%

Building Ratio

19.1%
Other Matters of Consideration
None

6

Name of Property

RESIDIA Ichigaya-Sadohara

Appraisal Date

May 1, 2019

Appraiser

Japan Real Estate Institute

Appraisal Value

4,880,000,000 yen

Appraisal Items

Appraised Value

Income Capitalization Approach Value

Basis

Income capitalization value is estimated using DCF method along with direct capitalization
4,880,000
method for verification.

Direct Capitalization Price

4,950,000

Total Potential Income

289,597
Rent Income
Other Income

Total Effective Income

289,067

Based on the current rent and the assumed rent when newly rented, estimated the rent that canbe stably received over the medium to long term.

530 Accrued trunk room income etc.
258,504

Losses from Vacancies, etc.
Bad Debts Losses
Expenses from Rental Business

31,093 Referred to similar properties to estimate the medium to long-term stabilized vacancy rate.
0 Taking into account of tenant situation, no losses was assumed.
62,161

Maintenance and Management Fees

16,500Estimated by referring to past fiscal year’s figures and fees for similar properties and taking
into account of property’s specific characteristics.

Utilities Costs

4,400

Estimated by referring to past fiscal year’s figures, cost of similar properties and taking into
account of property’s specific characteristics.

Management Commission Fees

6,449

Estimated by referring to planned contract fee terms, fees on similar properties and taking into
account of property’s specific characteristics.

Taxes and Public Dues

13,372Estimated the property tax basing on FY2019 taxable value. Estimate on depreciable asset tax
was based on submitted materials.

Non-life Insurance Premiums

371

Estimated basing on contract insurance premium for the property and referring to insurance
premiums for similar properties.

Leasing Expenses

Repair Costs (including restoration fees)

Other Expenses
Net Operating Income

Capital Expenditures

Cap Rate
DCF Price

11,365

Estimated repair costs by looking at the restitution cost per unit, percentage of cost borne bytenants, average expensing timing and level of restitution needed. Repair cost were estimatedbasing on actual figures for the past FY, cost in similar properties and referring to averageannual repair and renewal costs listed in the engineering report.

2,700 Accrued internet usage fees etc.
196,343

Earnings from Deposits

Net Cash Flow

Administration fees on leasing, contract signing for new tenants and tenant renewals were
estimated by referring to contract terms and fees in similar properties in the neighborhood.
Leasing expenses were estimated by looking at how much is needed in leasing to new tenants
7,004
and actual advertising cost for the past FY leasable. Renewal fees were estimated by looking
at how much fee is paid at the time of renewal and considering the expected turnover rate andvacancy rate.

645 Assumed 1% per annum, by taking into consideration both investment yield and financing cost.
9,023

Estimated by referring to the level of capital expenditures in similar properties, building age andannual average of restoration expense listed on the engineering report.

187,965
The cap rate is estimated by adding the yield spread determined by locality, specifications and3.8% age of the building to the base yield as well as referring to actual cap rates in deals for similar
properties.
4,810,000
The discount rate is estimated by comparing the discount rate used in actual deals for similar
properties and reflecting the individual characteristics of the property.

Discount Rate

3.6%

Terminal Cap Rate

Estimated by comprehensively considering future trends in investment yield, risk factors of the
4.0% property as an investment, general forecast on economic growth and general price trend in thereal estate market.

Cost approach value

4,870,000

Land Ratio

80.2%

Building Ratio

19.8%
Other Matters of Consideration
None

7

4. Financial Impact on ADR in the Event of Failure to Fulfill Forward Commitment or Similar Agreement
Real estate sales transaction agreement (hereafter, “the Agreement 1”) for the assets-to-be-acquired and realestate sales transaction agreement (hereafter, “the Agreement 2”) for the asset-to-be-disposed might constitute a
forward commitment or similar agreement (Note 7) by an investment corporation as stipulated in ”TheComprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc.” by the Financial
Services Agency.
In the event of a violation of provisions in the Agreement by ADR or the seller, the counterparty shall have theright to terminate the Agreement and claim an amount equivalent to 20% of the purchase price of the property as
penalty.
However, under the Agreement 1 there is a condition precedent whereby ADR is required to procure funds foracquiring the asset-to-be-acquired. Therefore, if ADR cannot procure the acquisition fund the Conveyance
Agreement will be annulled or can be terminated by ADR notifying the seller, and except where ADR is at fault,
ADR is not obliged to pay the penalty.
(Note 7)Refers to a postdated purchase and sales agreement under which payment and property delivery shall be made at least 1 month after
the conclusion of the agreement, or any other agreement similar thereof.

5. Counterparty Profile
The Counterparty of the property is a domestic company whose name and detail are not disclosed according totheir wishes. The Counterparty does not constitute parties having particular vested interest in ADR or ADIM.
6. Broker Profile
Trade nameHead Office location
Representative
CapitalCommission
Relationship with ADR or
ADIM

Itochu Property Development, Ltd.
2-9-11, Akasaka, Minato-ku, Tokyo
Norio Matsu, President and Chief Executive Officer
10,225 million yen
180,060 thousand yen(exclusive of consumption tax and local consumption tax)
Itochu Property Development, Ltd is a shareholder of ADIM and thus constitutes aninterested party of the asset management company as defined in the Investment
Trusts and Investment Corporations Law.

7. Disclosures on ADIM’s Vested Interest Concerning the Asset-to-be-acquired and disposed(1) The procedures required in accordance with the provisions of the asset management company’s bylaws“Related-Party Transaction Rules” have been performed for the related-party transaction outlined in “6. Broker
Profile” above.

(2) ADR is scheduled to sign a master lease agreement and delegate property management services regarding the
RESIDIA Ichigaya II to ITOCHU Urban Community Ltd. (IUC). IUC is a related party of ADIM.
Accordingly, the transaction approval procedures stipulated in ADIM’s bylaws on “Rules Regarding Related
Party Transaction” will be performed.

8. Matters Concerning Earthquake Resistance
The validity of structural calculation document on the assets have been examined by a third-party inspector.
ADR has obtained the following inspection results stating that no intentional manipulations, falsifications or othercorruptions in the structural calculation document were found and that the structural calculation is deemed tohave been performed in accordance with the law.
ADR received the notification of structural engineering inspection for the assets to-be-acquired from thedesignated structural inspection institute following “the Building Standard Act” enforced on June 2007.

9. Summary of Asset-To-Be-Disposition Summary8

Property number

C-10

Name of the asset-to-be-disposed

RESIDIA Higashi-Ginza

Address

1-12-5, Tsukiji , Chuo-ku, Tokyo

Acquisition date

April 12, 2007

Land
Type of ownership

Proprietary ownership

Site area

762.08 ㎡

ZoningCommercial area

FAR / Building coverage ratio

600%/80%

Building
Type of ownership

Proprietary ownership

Total floor area

6,607.86m2

Structure / Floors

RC with flat roof, 15F/B1F

Use

Multi-family housing

Construction completion date

September 2006

Trustee

Sumitomo Mitsui Trust Bank, Limited

Contract Term

to February 28, 2027

Lease Conditions
Point in time

as of June 30, 2019

Total Tenants

1

Leasable units

169 units

Leased units

158 units

Leasable floor area

4,871.02 ㎡

Leased floor area

4,531.37 ㎡

Occupancy rate (based on floor area)

93.0%

Monthly rent (including common service
charges)¥ 22,408 thousand

Deposits, guarantees, etc.

¥ 16,676 thousand

Breakdown of residential unit type
Single99 units

Compact

67 units

Family3 units

Large-

Dormitory

-

Other

-

Special Notation
None

910. Appraisal Report Summary (monetary unit: thousand yen)
Real estate appraiser

Japan Real Estate Institute

Appraisal item

Real estate appraisal value

Appraised value

5,740,000,000 yen

BasisIncome capitalization approach value

5,740,000

Direct capitalization price

5,830,000

Total potential profit

315,236

Income capitalization value is estimated using DCF method along with direct
capitalization method for verification.

Rent income

297,090

Based on the current rent and the assumed rent when newly rented, estimated the rent
that can be stably received over the medium to long term.

Other income

18,146

Estimated key money, renewal fee income and antenna income, basing on individual
tenant contract term, and estimate on average tenant replacement rate and average
turnover period.

Total effective profit

292,281
Losses from vacancies, etc.
Bad debts losses

Expenses from rental business

16,9550Referred to similar properties to estimate the medium to long-term stabilized vacancy
rate.
Taking into account of tenant situation, no losses was assumed.

55,389Maintenance and management fees

5,257

Estimated by referring to past fiscal year’s figures and fees for similar properties andtaking into account of property’s specific characteristics.

Utilities costs

4,300

Estimated by referring to past fiscal year’s figures, cost of similar properties and taking
into account of property’s specific characteristics.

Management commission fees

7,026

Estimated by referring to planned contract fee terms, fees on similar properties andtaking into account of property’s specific characteristics.

Taxes and public dues

12,145

Estimated by taking into consideration the contents of the data on taxes and duties andthe burden adjustment measures.

Non-life insurance premiums

352

Estimated basing on contract insurance premium for the property and referring toinsurance premiums for similar properties.

15,209Administration fees on leasing, contract signing for new tenants and tenant renewals
were estimated by referring to contract terms and fees in similar properties in theneighborhood. Leasing expenses were estimated by looking at how much is needed inleasing to new tenants and actual advertising cost for the past FY leasable. Renewal
fees were estimated by looking at how much fee is paid at the time of renewal andconsidering the expected turnover rate and vacancy rate.

Repair costs

9,680

Estimated repair costs by looking at the restitution cost per unit, percentage of costborne by tenants, average expensing timing and level of restitution needed. Repair
cost were estimated basing on actual figures for the past FY, cost in similar properties
and referring to average annual repair and renewal costs listed in the engineering
report.

Other expenses

1,150

Neighborhood fee, sports club facility use charges.

Leasing expenses

Net Operating Income

Net Cash Flow

Cap rate

DCF Price242,982
Earnings from Deposits

166

Assumed 1% per annum, by taking into consideration both investment yield andfinancing cost.

Capital expenditures

9,692

Estimated by referring to the level of capital expenditures in similar properties,building age and annual average of restoration expense listed on the engineering
report.

233,366

4.0%

The cap rate is estimated by adding the yield spread determined by locality,
specifications and age of the building to the base yield as well as referring to actual
cap rates in deals for similar properties.

5,650,000

Discount rate

3.8%

The discount rate is estimated by comparing the discount rate used in actual deals for
similar properties and reflecting the individual characteristics of the property.

Terminal cap rate

4.2%

Estimated by comprehensively considering future trends in investment yield, risk
factors of the property as an investment, general forecast on economic growth andgeneral price trend in the real estate market.

Other matters of consideration
None

10

11. Future Outlook
The effect of the acquisitions and disposition on the management performance forecasts for fiscal periods ending
January 2019, please refer to the ” Notice Concerning the Revision of Management Performance Forecast and theManagement Performance Forecast for Fiscal Period Ending January 2020 (FP19)” dated July 11, 2019.

About Advance Residence Investment Corporation
Advance Residence Investment Corporation is the largest residential J-REIT, investing in over 260 rental apartments locatedmostly in central Tokyo and in other major cities throughout Japan (AUM over 400 billion yen). ADR can be expected have astable dividend in the long-term and can be considered as a defensive J-REIT, on back of the stable income from residential
assets and with the largest dividend reserve among J-REITs.
ADR’s website:

https://www.adr-reit.com/en/[Provisional Translation Only]
English translation of the original Japanese document is provided solely for information purposes.
Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail.

11