Ichigo Preserves and Improves Real Estate[Provisional Translation Only]
This 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.

October 14, 2016
REIT Issuer
Ichigo Office REIT Investment Corporation (8975)
1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo
Representative: Yoshihiro Takatsuka, Executive Director
www.ichigo-office.co.jp/english
Asset Management Company
Ichigo Investment Advisors Co., Ltd.
Representative: Wataru Orii, President
Inquiries: Hiroto Tajitsu, Head of Administration
Tel: +81-3-3502-4891

Office Asset Acquisition(Ichigo Shibuya Udagawacho Building)
Ichigo Investment Advisors Co., Ltd. (“IIA”), the asset management company of Ichigo
Office REIT Investment Corporation (“Ichigo Office REIT”), has decided today to acquire
an office asset (total acquisition price JPY 3,500 million).
I. Acquisition Summary
Asset Name1

Ichigo Shibuya Udagawacho Building

Asset Type / Asset No.

Office / O-85

Date Built

March 2016

Legal Form of Asset32

Trust beneficiary interest in real estate (juekiken)

Appraisal ValueJPY 3,780,000,000

Acquisition Price4

JPY 3,500,000,000

Seller5

Domestic operating company

Contract Date

October 14, 2016

Closing Date

November 2, 2016

Financing Method

Cash-on-hand and borrowing (expected)6

Settlement Method

Lump-sum payment

1

Upon acquisition, the current building name, Shibuya BLUE Building, will bechanged to Ichigo Shibuya Udagawacho Building.
2
As of today, the asset has not been entrusted. The seller will entrust the asset on
the Closing Date and Ichigo Office REIT will own the asset in the form of a trust
beneficiary interest in real estate.
3
Appraisal value is as of September 1, 2016.
4
Acquisition price excludes incidental expenses such as property, city planning,and consumption taxes.
5The seller is a domestic operating company and has not given consent to disclose
its identity.
6
Financing details will be announced when determined.
1II. Acquisition Rationale
Ichigo Office REIT continues to execute on its strategy to drive sustainable dividend
growth (Stage V, Growth Strategy Roadmap) and “increase portfolio size and scale
and be smart in portfolio restructuring.”
Consistent with this growth strategy, Ichigo Office REIT has been strategically
restructuring its portfolio including the sale of one asset already done in the October
2016 fiscal period1. Part of the proceeds from this sale was used to partially repay aloan with a relatively high borrowing cost2. The acquisition of the Ichigo Shibuya
Udagawacho Building makes further use of the remaining proceeds along withadditional borrowing, and will contribute to stronger earnings and dividends going
forward3.
Ichigo Shibuya Udagawacho Building is located in the prime area of Shibuya,
benefiting from rapid re-development projects and strong tenant demand fromcompanies in industries such as IT, advertisement, and media. While occupancy of thebuilding as of September 30, 2016 (only 7 months after building completion) stands at
67.3%, Ichigo Office REIT will leverage the experience and expertise it has fromoperating its other seven portfolio assets in the Shibuya area4 to quickly lease-up thebuilding.
1For details, please refer to the September 23, 2016 release “Notice of Completionof Asset Acquisitions (Five Office Assets).”
2For details, please refer to the October 6, 2016 release “Notice of Partial
Repayment of Existing Loan.”
3For an overview of the results of portfolio restructuring, please refer to “3.
Overview of the Results of Portfolio Restructuring” below.
4
For details, please refer to section III “Asset Details” below.
III. Asset Details
Ichigo Office REIT will leverage its experience and expertise in the mid-size officebuilding space to increase the value of the acquired office building and to strengthen
the overall earnings profile of its portfolio. To this end, the following assessment has
been made of the office building to be acquired.
(i) Location
The Shibuya area can be largely broken-down into the retail district to thenorthwest of Shibuya station and the business district in the vicinity of major
throughways such as the Meiji and Roppongi Streets. The retail district largely
caters to younger consumers whereas the business district appeals to many IT
companies.
In recent years a number of large-scale re-development projects have been
underway around Shibuya Station, and as a result the area is expected to continue
to attract more consumers and businesses.
A re-development project, scheduled for completion in June 2019, is currently
underway directly southwest of the office building to be acquired, and is expected
to result in a multi-purpose building complex consisting of offices and residentialfloors.

2

(ii) Features
The building is a new mid-size office building located within a 7-minute walkfrom Shibuya Station on the JR Yamanote Line.
The standard floor plate is 162m2, and is expected to be competitive in the leasing
market due to its individual air conditioning units and raised access flooring.
Tenants include a convenience store on the first floor, a restaurant on the secondfloor, and IT companies in the upper floors.
(iii) Asset Photos and Location

3Legal Form of Asset
Trustee
Period of Trust Contract
Location
Property RightAreaLandZoningCoverage Ratio
Floor Area Ratio

Building

Property Right
ZoningStructure
Total Floor Area
Construction Date

Appraiser
Appraisal Value
Appraisal Date
Value by Direct Capitalization
MethodArchitect1
Builder1
Structural Designer1
Inspection Agency1
PML (Assessor)
Collateral

Asset Overview
Trust beneficiary interest in real estate (juekiken)(expected)
Mitsubishi UFJ Trust and Banking Corporation(expected)
November 2, 2016 - November 30, 2026 (expected)
10-2 Udagawacho, Shibuya-ku, Tokyo
Freehold
416.91m2
Commercial
80%500%Freehold
Office, Retail
Steel 9 Floors
1,575.46m2
March 4, 2016
Daiwa Real Estate Appraisal Co., Ltd.
JPY 3,780,000,000
September 1, 2016
JPY 3,890,000,000
Zen Sekkei K.K.
Tokyu Construction Co., Ltd.
Structural Consultants East
SBI ArchiQuality Co., Ltd.
3.30% (Sompo Risk Management & Health Care Inc.)
None (expected)

Rent Overview (as of September 30, 2016)
6

Number of Tenants
Monthly Rental IncomeDeposit
Leasable Space
Leased Space
Occupancy
Property Management Company
Master Lease Company
Master Lease TypeJPY 9,746 thousand
JPY 60,428 thousand
1,491.38m2
1,003.46m2
67.3%
To Be Determined
Ichigo Office REIT Investment Corporation (expected)
Pass-through (expected)

4

Special Items
1. The road to the south of the building is a city planning road, and part of the land of thebuilding is included in the area that might be subject to future road construction. If andwhen such city planning road might be constructed, it is estimated that the building landarea would recede by roughly 55m2 thus potentially resulting in the current floor area ratio
and height of the building being in violation of existing building codes.
2. According to Article 42 Item 2 of the Building Standards Law, 87.98m2 of land on thesouth eastern side of the building would be deemed as a road.
1

The names of the architect, builder, structural designer, and inspection agency arethose as of the date when the building was completed.

5NameAppraisal Value
Appraiser
Appraisal DateAppraisal Value
Value by Direct
Capitalization Method
IncomeMaximum
Obtainable Rental
IncomeVacancy LossExpenses
Administrative andMaintenanceExpensesUtility Expenses
Repair Expenses
PM FeeLeasing Brokerage
Fees
Taxes
Insurance
Premiums
Other Expenses
Net Operating Income(NOI)
Income on
Investment ofDeposits Received
Capital Expenditure
Net Profit
Cap Rate
Value via DCF Method
Discount Rate
Terminal Cap Rate
Value via Cost Approach
Land
Building

Appraisal Overview
Ichigo Shibuya Udagawacho Building
JPY 3,780,000,000
Daiwa Real Estate Appraisal Co., Ltd.
September 1, 2016
AmountNote
Valuation determined via both a direct
JPY 3,780,000,000 capitalization valuation and DCF valuation
JPY 3,890,000,000
JPY 160,759,243
Based on rental income, common area
JPY 166,642,341 service income, parking lot income, andother income
JPY 5,883,098 Based on mid- to long-term vacancy rate
JPY 20,493,953
Based on similar assets and past actual
JPY 3,898,000 amounts
Based on similar assets and past actual
JPY 812,088 amounts
Based on similar assets and amounts on
JPY 503,520 engineering reports
JPY3,212,189 Based on contract rate and similar assets
Based on the standard turnover rate with
JPY 1,208,009 competition, past actual amounts, and similar
assetsBased on FY2016 actual amounts andJPY 10,489,588 current replacement cost
JPY 209,800 Based on the standard for similar assets
JPY 160,759 Consumable goods, etc.
JPY 140,265,290
JPY 783,955 Based on 1.0% investment yield
Based on similar assets and amounts on
JPY1,174,880 engineering reports
JPY 139,874,365
Based on transactions of similar assets and acomprehensive assessment of the asset’s
3.6% location, its individual characteristics,
property right, etc.
JPY 3,730,000,000
Based on transactions of similar assets and3.4% the yields of financial assets with the asset’s
individual characteristics taken into account
3.8% Based upon risk-adjusted NOI
JPY 3,480,000,000
86.1%
13.9%
6

NotesNone
Reference:
Appraisal NOI yield: 4.0% (calculated by dividing Net Operating Income byAcquisition Price, rounded off to the nearest tenth of a percent.)

IV. Seller Profile
Domestic Operating Company1
The seller does not have any capital, personnel, orbusiness relationship of note with Ichigo Office REIT
Relationship withor IIA. In addition, the seller is not an interested party
Ichigo Office REIT or IIA1
as defined in the Enforcement Ordinance of theInvestment Trust and Investment Corporation Law orthe internal rules of the Asset Management Company.
1
The seller is a domestic operating company and has not given consent to disclose
its identity.
Name

V. Broker Profile
Name
Address
Representative
Principal Businesses
CapitalEstablishment Date
Relationship withIchigo Office REIT or IIA

Brokerage Fee

Alliance Communication
2-30-16 Hatchobori, Chuo-ku, Tokyo
Shotaro Mizoguchi, Representative Director
Acquisition, sale, brokerage, lease, and management of realestate
JPY 10 million (as of September 1, 2016)
April 10, 2006
The broker does not have any capital, personnel, orbusiness relationship of note with Ichigo Office REIT/IIA.
In addition, the broker is not an interested party as definedin the Enforcement Ordinance of the Investment Trust andInvestment Corporation Law or the internal rules of theAsset Management Company.
The broker has not given consent to disclose theinformation.

VI. Acquisition Schedule
Acquisition Approval and Contract Date
Settlement and Transfer Date

October 14, 2016
November 2, 2016 (expected)

VII. Earnings Outlook
There is no revision to Ichigo Office REIT’s earnings forecast announced on June
14, 2016, because the impact of the acquisition on Ichigo Office REIT’s earnings
forecast for the April 2017 fiscal period is minimal.

7

Reference
1. Rental Income and Expenses Details(million yen)
At Acquisition2
A. Rental Income
156
131
3
B. Rental Expenses (excluding depreciation)
1920
C. NOI（A-B）
136
111
D. NOI yield4
3.9%
3.3%
5
E. Depreciation
1414
F. Post-depreciation NOI (C-E)
121
96
6
G. Occupancy
97.0%
67.3%
1Amounts exclude special factors in the year of acquisition, and are calculated
based on current and future anticipated fluctuations in occupancy.
2
Shows first-year amounts used to calculate the DCF-based valuation, excluding
special factors in the year of acquisition.
3
Rent-related expenses include incidental expenses such as service provider
expenses, property, city planning, and consumption taxes, and other fees.
4
Assumed NOI yield and NOI yield at Acquisition are calculated by dividing theAssumed NOI and NOI at Acquisition by the acquisition price, respectively(rounded off to the nearest tenth of a percent.)
5Depreciation amount is estimated by Ichigo Office REIT.
6Occupancy at acquisition is as of September 30, 2016.
Projected1

2. Engineering Report Summary
Name of Inspector
Date of Inspection
Short-term Repair Expense1
Long-Term Repair Expense2
Current Replacement Cost

Tokio Marine & Nichido Risk Consulting Co., Ltd.
September 2016
–JPY 12,834 thousand
JPY 419,600 thousand

1

Short-term Repair Expense is defined as repair expenses considered necessary
beyond the scope of ordinary maintenance within a year from the time ofinspection.
2Long-term Repair Expense is defined as repair expenses considered necessary forthe maintenance of the asset within twelve years from the time of inspection.

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3. Portfolio Restructuring Result
Asset Acquired

Asset Sold

Ichigo Shibuya Udagawacho Building(Shibuya-ku, Tokyo)

Ichigo Yokosuka Building(Yokosuka, Kanagawa)Portfolio
Restructuring

Construction Date: March 2016

Construction Date: December 1981

Acquisition Price

JPY 3,500 million

Sale PriceAppraisal Value1

JPY 3,780 million

Appraisal Value2

JPY 982 million

Annual NOI4

JPY 73 million

Annual NOI3

JPY 136 million

JPY 1,000 million

Increase in Asset Size5

Total Acquisition Price + JPY 2,500 million

Increase in NOI6

NOI + JPY 62 million

1Appraisal value as of September 1, 2016.
Appraisal value as of April 30, 2016.
3
The annual NOI has been calculated by IIA (fractions less than JPY 1 million havebeen truncated). Please refer to Reference 1 for details.
4
The annual NOI is the actual NOI of the April 2016 fiscal period annualized(fractions less than JPY 1 million have been truncated).
5
Difference between the expected acquisition price of the asset to be acquired andthe acquisition price of the asset sold.
6
Calculated by subtracting the actual annual NOI of the asset sold from theexpected annual NOI of the asset to be acquired (fractions less than JPY 1 million
have been truncated).
29

Post-Acquisition Portfolio Assets
No.

Asset

O-02
O-03
O-04
O-05
O-06

Ichigo Nishisando Building
Ichigo Mita Building
Ichigo Nanpeidai Building
Ichigo Hanzomon Building
Ichigo Hijirizaka Building
Ichigo Shibuya KamiyamachoBuilding
Ichigo Akasaka 5 Chome Building
Ichigo Shibakoen Building
Ichigo Ebisu Nishi Building
Ichigo Ginza 612 Building
Ichigo Uchikanda Building
Ichigo Yotsuya 4 Chome Building
Ichigo Tameike Building
Ichigo Jimbocho Building
Ichigo Hakozaki Building
Ichigo Kudan 2 Chome Building
Ichigo Kudan 3 Chome Building
Ichigo Gotanda Building
Ichigo Shin Yokohama Building
Ichigo Minami Ikebukuro Building
Ichigo Nakano North Building
Ichigo Eitai Building
Ichigo Ikejiri Building
Ichigo Nishi Ikebukuro Building
Ichigo Nishi Gotanda Building
Ichigo Kichijoji Building
Ichigo Sakae Building
Ichigo Marunouchi Building
Ichigo Toyamaeki Nishi Building
Ichigo Mirai Shinkin Building
Ichigo Takamatsu Building
Ichigo Kanda Nishikicho Building
Ichigo Akihabara North Building
Ichigo Sakaisuji Honmachi Building
Ichigo Kanda Ogawamachi Building
Ichigo Hatchobori Building
Ebisu Green Glass
Ichigo Omori Building

O-07
O-08
O-09
O-10
O-11
O-12
O-14
O-15
O-16
O-17
O-18
O-19
O-20
O-21
O-22
O-23
O-24
O-26
O-27
O-28
O-29
O-34
O-37
O-38
O-39
O-42O-46
O-47
O-48
O-49
O-50
O-51
O-52

Acquisition
Price2(mm yen)

% ofPortfolio3

Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo

3,254
2,740
1,920
1,550
1,200

1.7
1.4
1.0
0.8
0.6

Central Tokyo

1,505

0.8

Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Central Tokyo
Tokyo Metropolitan Area
Four Major Regional Cities
Four Major Regional Cities
Other Regional Cities
Other Regional Cities
Other Regional Cities
Central Tokyo
Central Tokyo
Four Major Regional Cities
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo

735
1,100
1,917
1,773
1,140
550
580
1,820
1,150
763
844
5,060
1,816
1,460
764
1,490
2,030
639
765
2,160
4,705
6,710
1,650
1,158
3,010
2,130
5,500
1,940
2,210
1,905
5,900
3,850

0.4
0.6
1.0
0.9
0.6
0.3
0.3
0.9
0.6
0.4
0.4
2.6
0.9
0.8
0.4
0.8
1.0
0.3
0.4
1.1
2.4
3.4
0.8
0.6
1.5
1.1
2.8
1.0
1.1
1.0
3.0
2.0Area110Acquisition
Price2(mm yen)

% ofPortfolio3

Central Tokyo
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Other Regional Cities
Other Regional Cities
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Central Tokyo
Tokyo Metropolitan Area
Other Regional Cities
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Four Major Regional Cities
Four Major Regional Cities
Four Major Regional Cities
Tokyo Metropolitan Area
Tokyo Metropolitan Area
Central Tokyo
Tokyo Metropolitan Area
Four Major Regional Cities
Four Major Regional Cities
Four Major Regional CitiesFour Major Regional Cities

1,580
3,430
1,174
2,000
1,840
1,450
7,200
3,650
3,960
4,780
4,700
2,500
2,360
3,190
3,660
1,800
4,570
1,660
1,750
1,350
1,450
2,190
1,380
2,000
5,130
3,010
1,890
2,740
3,420
2,340
1,330
1,040

0.8
1.8
0.6
1.0
0.9
0.7
3.7
1.9
2.0
2.5
2.4
1.3
1.2
1.6
1.9
0.9
2.3
0.9
0.9
0.7
0.7
1.1
0.7
1.0
2.6
1.5
1.0
1.4
1.8
1.2
0.7
0.5

Central Tokyo

3,500

1.8

171,417

88.1

Central Tokyo

1,360

0.7Central Tokyo
Central Tokyo
Central Tokyo

701
946
1,970

0.4
0.5
1.0

No.

Asset

Area1

O-53
O-54
O-55
O-56
O-57
O-58
O-59
O-60
O-61
O-62
O-63
O-64
O-65
O-66
O-67
O-68
O-69
O-70
O-71
O-72
O-73
O-74
O-75
O-76
O-77
O-78
O-79
O-80
O-81
O-82
O-83
O-84

Ichigo Takadanobaba Building
Ichigo Omiya Building
Ichigo Sagamihara Building
Ichigo Ofuna Building
Ichigo Sendai East Building
Ichigo Kumamoto Building
Ichigo Jingumae Building
Ichigo Shibuya Dogenzaka Building
Ichigo Hiroo Building
Ichigo Sasazuka Building
Ichigo Nihonbashi East Building
Ichigo Sakurabashi Building
Ichigo Shinkawa Building
Ichigo Kudan Building
Ichigo Higashi Gotanda Building
Axior Mita
Ichigo Higashi Ikebukuro Building
Koriyama Big-i (Office Section)
Ichigo Kawasaki Building
Ichigo Shibuya East Building
Ichigo Ningyocho Building
Ichigo Nishi Honmachi Building
Ichigo Hakata Building
Nishiki First Building
Ichigo Ikenohata Building
Ichigo Ikebukuro East Building
Ichigo Motoazabu Building
Ichigo Otsuka Building
Ichigo Nagoya Building
Ichigo Fushimi Building
Ichigo Nishiki BuildingIchigo Minami Morimachi Building
Ichigo Shibuya Udagawacho
Building

O-85

Subtotal - Office (71 Assets)
R-04
R-06
R-09
Z-02

Ichigo Serviced Apartments
Takanawadai
B-SITE Hamamatsucho
Ichigo Serviced Apartments Ginza
Ichigo Fiesta Shibuya

11Acquisition
Price2(mm yen)

% ofPortfolio3

Tokyo Metropolitan Area
Tokyo Metropolitan Area
Tokyo Metropolitan Area

3,218
1,640
1,310

1.7
0.8
0.7

Four Major Regional Cities

558

0.3

Four Major Regional Cities
Other Regional Cities

638
1,2100.30.6

Central Tokyo

2,400

1.2

Tokyo Metropolitan Area

1,620

0.8Tokyo Metropolitan Area

2,430

1.2

Tokyo Metropolitan Area

1,700

0.9

Tokyo Metropolitan Area
Subtotal - Others (15 Assets)
Total (86 Assets)

1,400
23,101
194,518

0.7
11.9
100.0

No.

Asset

Area1

Z-03
Z-04
Z-05

Ichigo Burg Omori
Ichigo Pagoda Asakusa
Ichigo Machida East Building
Ichigo Sapporo Minami 2 Nishi 3
Building
Ichigo Daimyo Balcony
Konami Sports Club Izumi Fuchu
Ichigo Shibuya Bunkamura Dori
Building
Twicere Yokohama Isogo(Retail Section)
Lions Square Kawaguchi
Ichigo Shin Yokohama Arena Dori
Building
Ichigo Kamata BuildingZ-07
Z-08
Z-09
Z-10
Z-11
Z-12
Z-13
Z-14

1

Central Tokyo refers to Chiyoda, Minato, Chuo, Shinjuku, Shibuya, and Shinagawa
Wards. Tokyo Metropolitan Area refers to Tokyo (excluding the six wards above),
Kanagawa, Chiba, and Saitama Prefectures. Four Major Regional Cities refers toOsaka, Nagoya, Fukuoka, and Sapporo.
2Acquisition Price excludes incidental expenses such as acquisition fees, property, city
planning, and consumption taxes, and other fees. For the 37 assets acquired via theREIT merger on November 1, 2011 (O-02 to O-42 and Z-02 to Z-08), the appraisal
value as of October 31, 2011 is shown.
3% of Portfolio is based upon acquisition price.

12