Merger of MIRAI Corporation and
Sakura Sogo REIT Investment Corporation
Execution of Memorandum of Understanding- Supplementary Material for the Press Release
Dated July 19, 2019 MIRAI Corporation
Security Code: 3476
AM Company: Mitsui Bussan & IDERA Partners Co., Ltd.
http://3476.jp/en

July 19, 2019

Sakura Sogo REIT Investment Corporation
Security Code:3473
AM Company: Sakura Real Estate Funds Management, Inc.
http://sakurasogoreit.com/en

To Unitholders in MIRAI Corporation and Sakura Sogo REIT Investment Corporation

1◼ MIRAI Corporation (hereinafter “MIRAI”) and Sakura Sogo REIT Investment Corporation (hereinafter“Sakura” and together with MIRAI Corporation sometimes collectively referred to as “Investment
Corporations”) concluded a memorandum of understanding on the merger of Investment Corporations(hereinafter the “Merger”) today. The Merger will create various synergies. The Investment Corporations
consider that the Merger should strengthen the governance and further growth of the entire REIT industry◼ Under the “deemed approval system,” which is REIT-specific, unitholders absent from a shareholder
meeting without exercising their voting rights are considered to favor all proposals presented at themeeting. This could cause a situation where the will of unitholders may not be necessarily reflected in theconsensus even when some unitholders present proposals which could have a conflict of interest◼ MIRAI and Sakura herein present our counterproposal against Star Asia Group proposal so that Sakura
unitholders can have a clear and tangible option. We would like our unitholders to exercise your rights
after deliberating which proposal should serve for continued growth of Investment Corporations andmaximizing the value of your investment

Key Benefits of Merger
1

Provide MIRAI and Sakura unitholders a tangible option to improve unitholder value◼ Sakura unitholders will have a tangible option by MIRAI making a “counter offer” to Star Asia while MIRAI unitholders can enjoy
additional growth opportunity◼ The Merger is expected to deliver enhanced earnings and distributions per unit

2

Strong support from dual sponsors, Mitsui & Co. and IDERA Capital. Experienced management who will befocused on maximizing unitholders’ value.
◼ After the Merger, Mitsui Bussan & IDERA Partners will be the sole management of MIRAI. Sakura Real Estate Funds, and Galileo Group,a sponsor of Sakura will withdraw from those roles◼ Achieve medium and long-term improvement in unitholders’ value based on a strong financial base and governance structure aiming tomaximize the benefits of unitholders

3

A quality, diversified REIT focusing on office buildings in the Tokyo area
◼ A portfolio with stability and growth potential, comprised largely of office buildings in the Tokyo area with stable demand and highprofitability potential◼ The ratio of offices in Tokyo area is expected to be 46.9% (Note 1) after the Merger◼ Enhanced diversification by asset and tenant type4

Improve the market presence by expanding AUM and improving liquidity through the Merger◼ AUM after the Merger is expected to be 200.7 billion yen (Note 1), enhancing the presence in the REIT market◼ The market capitalization after the Merger is anticipated to be 112.0 billion yen (Note 2) which should result in enhanced liquidity,
increased demand from institutional investors and potential inclusion in FTSE EPRA/NAREIT Global Real Estate index.
◼ These factors should result in a lower cost of capital and enhanced growth prospects for MIRAI post Merger

Note 1:
Note 2:

Simple aggregation of acquisition prices of assets of MIRAI & Sakura as of June 28, 2019 (excluding assets to be disposed) and a calculation result based on the same figure without taking into account reappraisal associated with the Merger.
Simple aggregation of market capitalization of MIRAI and Sakura as of June 28, 20192

Indicative Timetable for Merger Implementation

3

As of July 19, 2019, two respective general meetings of unitholders are scheduled to be held by Sakura and Star
Asia Group on the same day. The Merger requires an extraordinary resolution (two-thirds or more) at the general
meeting of unitholders of each investment corporation
Jul 19, 2019

Execute MOU on the Merger of MIRAI and Sakura

Jul 24, 2019

Annual General Meeting of MIRAI (Not relevant to the Merger process）

By Aug 6, 2019

Execute Definitive Merger Agreement of MIRAI and Sakura

Aug 30, 2019

General Meeting of Sakura Unitholders(convened by Sakura)

General Meeting of Sakura Unitholders(convened by Star Asia Group)

Resolutions by Sakura

Resolutions by Sakura① Execute merger agreement with MIRAI② Cancel the AM agreement with Sakura Real Estate
Funds Management (hereinafter “SREFM”)

Resolutions by Star Asia Group

Resolutions by Star Asia Group① Amend part of the Article of Incorporation of Sakura(to prevent Sakura unitholders voting on the Merger
proposal)

Not determined① Appoint Mr. Hagino as executive officer (from Mitsui&Co., Asset Management Holdings Ltd.)② Conclude new asset management agreement with
Mitsui Bussan & IDERA Partners Co., Ltd.

① Exonerate Mr. Muranaka (SREFM)② Appoint Mr. Sugihara (ex Star Asia AM CFO)
③ Terminate AM agreement with SREFM④ Conclude AM agreement with Star Asia Investment

General Meeting of MIRAI Unitholders (about the Merger with Sakura）
Subject to approval of MIRAI and Sakura resolutions relating to the Merger
Nov 1, 2019 (scheduled)

MIRAI (Anticipated Merger Effective Date）

Note: The above timeline and described propositions at the general meetings of unitholders scheduled on August 30, 2019 are tentative as of the date of this presentation and subject to change. For further details of the general meetings of unitholders, please refer to the convocation notice andreference materials issued for the respective general meetings of unitholders.

Rationale and Benefits of the Merger

Rationale of the Merger

4

Benefits from the Merger◼ Improvement in liquidity by increasing market
capitalization◼ Enhance the positioning in the REIT market◼ Provide a great opportunity to achieve theexpanded mid-term management plan
“Repower 2020-ER” earlier than expected◼ Enhancement of earnings stability throughfurther risk diversification◼ Acquisition of real estate portfolio focusing on
the Tokyo area and office◼ Expansion of growth potential by improving
valuation◼ More flexible management by expanding AUM
and promoting diversification◼ Receipt of a hostile takeover proposal fromStar Asia Group◼ Limited external growth opportunities thanoriginally planned and higher financing cost

◼ Enhancement of cost reduction effects
including lower cost of capital and governancestructure backed by Mitsui & Co.’s highcreditworthiness◼ Room for increasing growth potential throughincreasing scaleNote: The financial forecasts after the Merger will be disclosed after the merger ratio is determined.

Merger Scheme

5Merger Scheme (Investment Corporation)

MergermethodAbsorption-type merger with MIRAI being the surviving
entity and Sakura being the absorbed entity after the
MergerResolution Subject to approval of the proposal relating to the mergerof theagreement at the general meeting of unitholders of eachgeneralinvestment corporation (extraordinary resolution (Note))
meeting of (The Merger is condition on the approvals at the general meetings of unitholders ofunitholders both MIRAI and Sakura)

Overview of the Merger
After the Merger

Sponsor(Wholly-owned subsidiaryof Mitsui & Co.)

(Wholly-owned subsidiaryof Mitsui & Co.)

Sponsors’ support

Sponsors’ support

Sponsors’ support

Asset management agreement

Asset management agreement

Asset management agreement

Asset
manager

Note:

Absorptiontype
mergerInvestment
corporation

The approval based on the extraordinary resolution requires the attendance of unitholders holding a majority of the outstanding investment units at the general meeting of unitholders and a two thirds (2/3) or more affirmative votes of the voting rights held by such unitholders inattendance. The deemed agreement system shall be applied if no conflicting proposal is submitted.

Overview of Investment Corporation after Merger

6

MIRAI (Note 1)

Sakura (Note 1)

MIRAI (after the Merger) (Note 2)

143,129 million yen

57,580 million yen

200,709 million yen

Number of properties

29

18

47

Total assets

152,493 million yen

61,643 million yen

214,137 million yen

Appraisal NOI yield (Note 3)

5.0%

5.1%

5.1%

Average property age

20.5 years

22.6 years

21.1 years

Occupancy rate (Note 4)

99.5%

97.5%

98.9%

Interest-bearing debt

74,700 million yen

29,200 million yen

103,900 million yen

RatingA+ (Positive) (JCR)
A (Stable) (R&I)-

A+ (Positive) (JCR) / A (Stable) (R&I)

AUM(Based on acquisition price)

Portfolio(As of the end of fiscal period)

Financials

MIRAI

Shinjuku
Eastside Square(Shinjuku-ku, Tokyo)
Note 1：
Note 2：
Note 3：Note 4：

ShinagawaSeaside Parktower(Shinagawa-ku, Tokyo)

Tokyo Front Terrace(Shinagawa-ku, Tokyo)

SakuraShibuyaWorld East Building(Shibuya-ku, Tokyo)

Hotel Wing International
Select Ueno/Okachimachi(Taito-ku, Tokyo)

Takadanobaba Access
Seishin BLDG.
The Portal Akihabara
NK BLDG.
(Shinjuku-ku, Tokyo) (Shinjuku-ku, Tokyo) (Chiyoda-ku, Tokyo) (Chiyoda-ku, Tokyo)

Figures for the fiscal period ended April 2019 and as of June 28, 2019 of MIRAI and the fiscal period ended December 2018 and as of June 28, 2019 of Sakura are presented, respectively.
AUM and total assets are the simple sum of the assets held by MIRAI and Sakura (excluding assets to be disposed), and do not take into account the revaluation accompanying the Merger.
Appraisal NOI yield of MIRAI (after the Merger) is calculated based on a weighted average of acquisition prices.
As of the end of May 2019. Occupancy rate of MIRAI (after the Merger) is calculated based on a weighted average of acquisition prices.

Overview of Investment Corporation after Merger
Asset type6,540 million yen
4 properties
3.3%
29,165 million yen
15 properties
14.5%

7

Area diversification

11,080 million yen
3 properties
5.5%

13,636 million yen
3 properties
6.8%

OthersResidential

29,062 million yen
11 properties
14.5%

OthersHotel

Nagoya area

Asset typeArea

OfficeOsaka area

Tokyo area

Retail

47,781 million yen
9 properties
23.8%

Note 1：
Note 2：

106,143 million yen
16 properties
52.9%

40,226 million yen
12 properties
20.0%

Simple aggregation of acquisition prices of assets of MIRAI & Sakura as of June 28, 2019 (excluding assets to be disposed) and a calculation result based on the same figure without taking into account reappraisal associated with the Merger.
Calculated on an acquisition price basis.

117,785 million yen
21 properties
58.7%

Post Merger Management Structure Aiming to Maximize
Value and Unitholders’ Interests

8

After the Merger, the management policy on governance for Sakura unitholders will reflect following three aspects.

Aiming to maximize value and unitholders’ interests

Future management policy

Management
systemHandling ofmerger fee◼ MIRAI’s executive director will replace Sakura’s executive director if
approved at by unitholders on August 30, 2019MIRAI aims to achieve quantitative targets, such as maintaining andimproving DPU and reducing risk premium, towards achieving the
expanded mid-term management plan “Repower 2020-ER”
announced in December 2018

◼ Major unitholder, director structure, etc. of MIRAI after the Merger
will remain unchanged, with investment, management or director
involvement by SREFM or Galileo

Stabilized DPU
1,425 yen or more

Achieved

Top 3 assets
Up to 40%

Achieved

NOI yield after depreciation
4.0% or more

Achieved◼ Sakura’s Articles of Incorporation specify that even if Sakura becomesan absorbed corporation, merger fee shall be paid; SREFM has agreed
to waive this fee to support successful implementation of this
proposal

Repower 2020
(June 2017)◼ MIRAI will pay the merger fee stipulated in its Articles ofIncorporation (up to 1% of appraisal value on the effective date) tothe Asset Management Company, and the amount will be disclosed inpresentation materials, etc.

LTV
Up to 45%

Clarification of
cost burden◼ MIRAI and Mitsui Bussan & IDERA Partners determine cost burden of
the Investment Corporation and the Asset Manager on the basis ofburden classification stipulated in the asset management agreement

Repower
2020-ER(December 2018)◼ Although it depends on the policy and each business agreement,
Mitsui Bussan & IDERA Partners confirm that all costs associated withplanned acquisition that is not completed will be the burden of theAsset Manager and not the Investment Corporation

Effects of
the above

Move forward

AUM
200 billion yen or more

Expected to achieve

Higher credit rating
Included in global index

Move forward

Comparison with Star Asia REIT

① Property Metrics

Sakura (Note 1)

MIRAI (Note 1)

Star Asia (Note 1)
Others 5.1%

Others 12.0%

Others 20.6%

Three
metropolitan
areas

Area diversification

9

79.4%

Osaka area
23.2%

Nagoya area
9.5%
Tokyo area
56.2%

Osaka area
18.8%

Osaka area
21.9%
Three
metropolitan
areas

88.0%

Three
metropolitan
areasTokyo area
59.7%

94.9%

Tokyo area
73.0%

45.4%

47.5%

18.4%

57,580 million yen

143,129 million yen

102,315 million yen

Appraisal value

60,901 million yen

151,554 million yen

Total amount of acquisition
price after listing

3,100 million yen

56,037 million yen

48,420 million yen

5.5%/4.6%

4.9%/4.1%

4.9%/4.1%

Not disclosed

43.5%

Not disclosed

97.5%

99.5%

98.1%

22.6 years

20.5 years

20.6 years

Tokyo area office ratio
AUM(Based on acquisition price)

Actual NOI yield / Actual NOI
yield after depreciation

VS

111,375 million yen(Based on acquisition price)

Tenant diversification(Top 10 ratio based on rent)

Occupancy rate (Note 2)
Average property age(Weighted averages based on
acquisition price)
Note 1：
Note 2：

Figures for the fiscal period ended April 2019 and as of June 28, 2019 of MIRAI, the fiscal period ended December 2018 and as of June 28, 2019 of Sakura and the fiscal year ended January 2019 of Star Asia Investment Corporation are presented, respectively.
Occupancy rate of MIRAI and Sakura are as of the end of May 2019.

Comparison with Star Asia REIT
Sakura (Note 1)② Financial Metrics
MIRAI (Note 1)

Shinsei
31.0%Star Asia (Note 1)
SMBC
25.8%

SMBC
30.8%

SMBC
31.0%

Resona
10.1%

10

SMTB
19.4%

Mizuho20.1%

Mizuho
23.0%

SMTB
14.0%

Ratio of loans from the 3 megabanks + related trust banks +government-affiliated (DBJ)

34.2%

81.9%

67.6%

Commitment line-

3.0 billion yen-

LTV based on total assets

44.8%

49.0%

47.1%

Financing cost (interest rate)

0.83%

0.53%

Average remaining maturity

4.3 years

7.2 years

4.0 years

Fixed interest debt ratio (Note 2)

76.4%

100.0%

83.3%

Rating-Expense ratio

0.81%

0.57%

0.62%

9.2%

15.8%

10.4%

69 million yen

466 million yen

182 million yen(based on total assets)

Unit price fluctuation(Closing price on the day of listingvs 2019/5/10)

Average trading value（2018/5/11～2019/5/10）
Note 1：
Note 2：JCR：
R&I：

A+ (Positive)
A (Stable)

VS

0.57%

-

These figures are based on IR presentation materials of MIRAI for the fiscal period ended April 2019, Sakura for the fiscal period ended December 2018, and Star Asia Real Estate Investment Corporation for the fiscal period ended January 2019, respectively.
Figures represent floating-rate borrowings, including those with interest rate swap agreements.

Comparison with Star Asia Group③ Disclosure and Governance

MIRAIStar Asia◼ Established the mid-term management plan “Repower 2020” in June 2017

◼ No disclosure of the interim management plan

◼ Actively disclose IR information via streaming movie and VR technology◼ Start video streaming since January 2019

Online video (You Tube)11

VR of properties owned

Summary manga of financial results

Disclosure◼ Continue to disclose the details on the IR materials since April 2017

◼ Disclosure started in the fiscal year ended July 2018

◼ Environmentally certified over the asset portfolio: 18.6%◼ Acquisition of DBJ Green Building Certification for 3 properties“E”nvironment
ActionMIUMIU Kobe

Shinagawa Seaside Parktower◼ Disclose concrete social activities“S”ocial
ActionNursery in Mi-Nara“G”overnanceActionCo-sponsor of
IBSA Blind Soccer
WGP 2019

Mottainai Campaign Supported by
Tokyo Metropolitan Gov.
Bureau of Environment(Shinagawa Seaside Parktower)

VS–

Iwatsuki Logistics–

Baraki Logistics–

Honmachibashi Tower◼ Disclosure of Conceptual Efforts–

Local: Aiming to contribute to local communities through property holdings and tenant–

Business partners: Building mutual trust based on fair trade–

Employees: Support individual growth by accepting gender, nationality, ethnicity, raceand generation–

Investors: Aiming to maximize unitholders' profits based on the principle of "principle ofinvestor profit first"–

Borrowers: Seek to share information to build relationships of mutual trust◼ Same-boat investment by the sponsors◼ Same boat investment by sponsors◼ Basic Policy on REIT-Oriented Business Conduct◼ "Basic policy on the principle of customer-oriented business operations"– Itemize and quantify the AM fees and its upper limit
Note: This comparison table is based on the IR presentation materials of MIRAI as of April 2019 and Star Asia Investment Corporation as of January 2019.

– Clarify the upper limit on the level of fees

Disclaimer
Monetary amounts are rounded down to the nearest unit.
Percentage figures are rounded off to the first decimal place.
This material contains forward-looking business results, plans, and management targets and strategies. Such forward-looking statements are based on current
assumptions and conditions, including those regarding anticipated future developments and business environmental trends, and these assumptions andconditions may not always be correct. Such forward-looking statements assume the investment policy of Investment Corporations, the market environment,interest rate conditions, business practices and other fact relationships and applicable laws and regulations as of the date this material was published and they do
not reflect or take into consideration any change in circumstances occurring after such date. Forward-looking statements involve known and unknown risks,
uncertainties and other factors, whether express or implied, and the actual performance, operating results, financial situation and other results of MIRAI mayvary significantly due to a variety of factors.
This material is provided for your information and does not constitute a solicitation to buy the investment securities of Investment Corporations or to conclude
any other financial instrument transaction contract. In making investments, investors should do so based on judgements and responsibilities of their own.
The investment units of Investment Corporations are closed-end fund investment units, whereby investment units are not redeemable at the request of investors.
Investors wishing to liquidate their investment units will in principle need to sell them to third parties. The market value of the investment units will be influenced
by investor supply and demand at securities exchanges and will fluctuate in accordance with the situation for interest rates, economic circumstances, real estate
prices, and other market factors. It is therefore possible that investors will not be able to sell the investment units at their acquisition price and, as a result, may
suffer losses.
Investment Corporations plans to make cash distributions to investors, but whether or not distributions are made and the amount of distributions thereof are notguaranteed under any circumstances. Gains or losses on the sale of real estate, losses on the disposal of fixed assets accompanying the replacement ofstructures, and other factors would cause fiscal-period income to vary greatly, which would result in change in amount of distribution to be made.
Information provided herein does not constitute any of the disclosure documents or performance reports required by the Financial Instruments and Exchange Act
or the Act on Investment Trusts and Investment Corporations or by the Securities Listing Regulations of the Tokyo Stock Exchange.
This material is to be read and used at the responsibility of customers. Investment Corporations and related persons involved in the preparation and publicationof this material will not bear any responsibility for any damage arising from the use of this material (whether for direct or indirect damage, and regardless of thecause thereof).
While every effort has been made to avoid errors and omissions regarding the information presented in this material, the material has been created as an easy
reference for customers, and the presented information may contain inaccuracies of misprints. MIRAI bears no responsibility for the accuracy. This material issubject to change/discontinuation without notice. Investment Corporations is not obliged to update or announce any of the information contained in this material(including forward-looking statements).
Investment Corporations holds the copyrights to the information appearing in this material. Copying, altering, publishing, distributing, appropriating, or displaying
this information or using it for commercial purposes without the prior approval of Investment Corporations is prohibited. Also, trademarks (trademarks, logos,
and service marks) related to MIRAI appearing in this material are owned by Investment Corporations, and copying, altering, publishing, distributing,appropriating, or reproducing such trademarks or using them for commercial purposes without the permission of Investment Corporations is prohibited.
@ Investment Corporations. All rights reserved.
Asset Manager : Mitsui & IDERA Partners Co., Ltd.
-Financial Instruments Business Operator (Director of Kanto Finance Bureau (Kinsho) No.2876)
Asset Manager : Sakura Real Estate Funds Management, Inc.
-Financial Instruments Business Operator (Director of Kanto Finance Bureau (Kinsho) No.2907)

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