Hankyu Hanshin REIT : Notice Concerning Acquisition and Transfer of Domestic Real Estate Trust Beneficiary Interest

(Translation of Japanese Original)

October 18, 2021

For Immediate Release

REIT Issuer

Hankyu Hanshin REIT, Inc. (Securities Code: 8977)

19-19Chaya-machi,Kita-ku, Osaka

Yoshiaki Shiraki, Executive Director

Asset Management Company

Hankyu Hanshin REIT Asset Management, Inc.

Yoshiaki Shiraki, President & Representative Director

Contact:

Kiyotaka Okano

General Manager, Financial and IR Department

Email: [e-mail]

Notice Concerning Acquisition and Transfer of Domestic Real Estate Trust Beneficiary Interest

Hankyu Hanshin REIT, Inc. (hereafter "HHR") hereby notifies that Hankyu Hanshin REIT Asset Management, Inc., the asset management company that HHR has selected to manage its assets (hereafter the "Asset Management Company"), today decided to make the following acquisition and transfer of assets.

		Details
1. Overview of Acquisition and Transfer
(1) Overview of Acquisition
H-CUBE MINAMIAOYAMA
1)	Specified asset type:	Trust Beneficiary Interest (Trustee: Mizuho Trust & Banking Co., Ltd.)
2) Property name:	H-CUBE MINAMIAOYAMA
3)	Planned acquisition price: 6,650,000,000 yen
		(excluding acquisition-related expenses, property tax, city planning tax and
		consumption tax, among others)
4) Appraisal value:	7,300,000,000 yen (Date of appraisal: September 15, 2021)
5)	Planned acquisition date:	December 14, 2021
6)	Seller:	Hankyu Hanshin Properties Corp.
7) Acquisition fund:	Proceeds from funds procured from the transfer of Sphere Tower Tennozu
(2) Overview of Transfer
Sphere Tower Tennozu
1)	Specified asset type:	Trust Beneficiary Interest (equivalent of 33% quasi co-ownership)
2)	Property name:	Sphere Tower Tennozu
3)	Planned transfer price:	8,600,000,000 yen
4) Appraisal value:	8,250,000,000 yen (Date of Appraisal: May 31, 2021)
5)	Planned transfer date:	December 10, 2021
6)	Planned buyer:	Domestic corporation
		(Please refer to postscript "6. Overview of Buyer and Seller") (Note)

(Note) Not disclosed as consent has not been obtained from the transferee.

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1. Reason for Acquisition and Transfer

HHR has been examining asset replacement for improving the quality of its portfolio and sustainable growth of distribution. As a result, it has been decided that a strategic asset replacement (hereafter the "Replacement"), in which an urban retail facility (H-CUBE MINAMIAOYAMA) in central Tokyo owned by Hankyu Hanshin Holdings Group (hereafter "the Sponsor Group") is acquired and "Sphere Tower Tennozu" owned by HHR is transferred, will be conducted.

"H-CUBE MINAMIAOYAMA" is a development project of the Sponsor Group following "nanohana Ebisubashi (site)" and "MANDAI Shimoshinjo Store" acquired in March 2020, and is an urban retail facility located in the Omotesando and Minami-Aoyama area, where domestic and foreign fashion brand stores are concentrated. The property is located on a corner facing a street with high convenience, which is in a 2- minute walk from Omotesando Station on the Tokyo Metro, and the medium-to-long-term needs for opening stores can be expected due to the highly competitive location in the area, now and after the COVID-19 epidemic is settled. As such, HHR determined that the acquisition of the property will contribute to increasing unitholder value.

"Sphere Tower Tennozu" is located in the Tennozu area and is an office building directly connected to the nearest station and maintains a high occupancy rate. On the other hand, we have been considering replacement in line with our medium-term policy, as unrealized losses are arising and repair costs are expected to increase in the future due to the aging of the building. We have recently been proposed

acquisition for a whole building from the transferee, and we have decided to sell it jointly with a quasi-co-owner (Note 1).

After the Replacement, in addition to improving the average yield after depreciation of the entire portfolio, the improvement of quality of the portfolio, such as an increase in unrealized gains and shorter average age of buildings (Note 2).

(Note 1) For specific figures on gains on transfer, please refer to "4. Details of assets to be acquired and transferred

(2) Details of assets to be transferred."

(Note 2) For specific figures of average yield after depreciation and unrealized gains and losses, please refer to "Status of Portfolio" below.

HHR evaluated the following points when deciding on the acquisition of "H-CUBE MINAMIAOYAMA". The property is an urban retail facility located a 2-minute walk from Omotesando Station, which is

connected to the Tokyo Metro (Ginza Line, Chiyoda Line, Hanzomon Line).

The Minami-Aoyama area, where the property is located, is the area with the highest fashion and lifestyle sensitivity, and is one of Japan's leading areas with high needs for roadside stores of designer brands and high fashion. The property is located on a corner facing a particularly accessible street connecting Miyuki- dori Street and Kotto-dori Street. The building has 1 basement floor and 2 stories above ground. It is divided into 2 sections, north and south, and both sections have good visibility from the street. As it is located in an area of concentrated roadside stores in Minami-Aoyama and stands on the movement line of abundant traffic, the potential of the property as a roadside store is high. Moreover, the property has characteristics that match the expectations of brands that desire to open a store in the area. Thus, we judged that high rental demand can be expected.

The property currently houses cosmetics brand ORBIS and fashion brand Brooks Brothers.

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[Status of Portfolio]
	End of 32nd	Asset planned to	Asset planned to	After planned
	be transferred	be acquired
	fiscal period	asset replacement
	Sphere Tower	H-CUBE
	(ended May 2021)	(Note 3)
	Tennozu	MINAMIAOYAMA
Number of properties	31 properties	1 property	1 property	31 properties
Date of		December 10,	December 14,
acquisition/transfer
	2021	2021
(planned)
Acquisition/transfer		8,600	6,650
price (planned)		million yen	million yen
Asset scale	169,534			166,779
million yen			million yen
(Average) NOI yield	4.7%	3.6%	4.0%	4.7%
(Note 1)
(Average) yield after	3.5%	2.1%	3.9%	3.6%
depreciation (Note 1)
Unrealized gain/loss	28,570	−132	607	29,676
(Note 2)	million yen	million yen	million yen	million yen

(Note 1) (Average) NOI yield is calculated by dividing the sum total of (a) the difference between the real estate lease operation income and real estate lease operation expenses of each property and (b) depreciation, by total acquisition planned price. (Average) yield after depreciation is calculated by dividing the sum total of difference between the real estate lease operation income and real estate lease operation expenses of each property, by total acquisition planned price. (Average) NOI yield and (Average) yield after depreciation are calculated based on the following figures.

・End of 32nd fiscal period:	Actual figures for the 32nd fiscal period.
・Asset to be transferred:	Actual figures for the 32nd fiscal period.
・Asset to be acquired:	The first fiscal year's operating revenues and operating costs using the
	DCF method as indicated in the appraisal reports are used.
・After the Replacement (planned):	Figures after subtracting the figures of the Asset Planned to be
	Transferred and adding the Asset Planned to be Acquired to the actual
	figures for the 32nd fiscal period

(Note 2) Unrealized gain/loss indicates the difference between the appraisal value and the book value and is calculated

based on the following figures.
・Asset to be transferred:	Actual figures for the 32nd fiscal period.
・Asset to be acquired:	Figures calculated based on the book value (expected value) which are
	the total of the acquisition price (planned) and acquisition expenses that
	are to be recorded as assets pursuant to the accounting policy of HHR
・After the Replacement (planned):	Figures obtained by adding/subtracting unrealized gain/loss of the
	Asset Planned to be Transferred and the Asset Planned to be Acquired
	as well as expected capital expenditures and depreciation in the 33rd
	fiscal periods to/from unrealized gain/loss at the end of the 32nd fiscal

period.

(Note 3) The figures after the Replacement (planned) are figures considering only the transfer of the Asset Planned to be Transferred and the acquisition of the Asset Planned to be acquired (as for unrealized gain/loss, expected capital expenditures and depreciation in the 33rd fiscal periods are also added/subtracted) after the end of the 32nd fiscal period and may differ from actual figures.

3. Use of the transfer price

The use of the transfer price of "Sphere Tower Tennozu", scheduled on December 10, 2021, will be used to fund the acquisition of "H-CUBE MINAMIAOYAMA" and to replenish our own funds or use it to fund the acquisition of future specified assets.

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4. Details of the Assets Planned to be Acquired and Transferred

(1) Details of Asset Planned to be Acquired

Property name	H-CUBE MINAMIAOYAMA
Specified asset type	Trust beneficiary interest
Trustee of the trust	Mizuho Trust & Banking Co., Ltd.
Period of trust	June 30, 2017 to November 30, 2027 (Note 1)
Planned acquisition price	6,650,000,000 yen
Appraisal value	7,300,000,000 yen (Date of appraisal: September 15, 2021)
(Appraisal organization: DAIWA REAL ESTATE APPRAISAL CO., LTD. )
Location	Address	5-7-1 Minamiaoyama, Minato-ku, Tokyo
	Building coverage	70%		Month/	February, 2020
		Year built
					Steel-frame, reinforced
	Floor area ratio	160%		Structure/	concrete structure with
		Floor	flat roof/ 2 floors with 1
Land			Building		underground floor
	category 2 medium-
	Zone use	to high-rise exclusive		Use	shop
		residential districts
	Site area	497.12 m2		Total floor	801.24 m2
				area
	Form of ownership	Right of ownership		Form of	Right of ownership
		ownership
Design	company	Mitsubishi Jisho Sekkei,	Inc.
Construction company	Shinwa Construction Co., Ltd.
Building recognition	The Building Center of Japan
organization
Property Manager	Hankyu Hanshin Building Management Co., Ltd.
Earthquake PML	10.7％（ERS Corporation and OYO RMS Corporation）
(evaluators)
Collateral	None
		 The transaction agreement for the acquisition corresponds to a forward
		commitment, etc. (referring to transaction agreements dated forward in
		which settlement and handing over of property is conducted more than
		one month after the conclusion of the agreement, and other related
		agreements) stipulated in the Comprehensive Guidelines for Supervision
		of Financial Instruments Business Operators, etc. Also, if HHR acts in
		serious violation of the terms of the transaction agreement (Including
		cases where it was found that the representations and warranties under
		the transaction agreement were incorrect or incorrect in important
Other matters to note	respects), the seller may cancel the agreement. It has been agreed that
if the agreement is cancelled in such a situation HHR shall pay the seller
		an amount equivalent to 10% of the sale price as a penalty. In addition,
		under the transaction agreement, the obligation of HHR to pay the sale
		price shall take effect on the date of execution of the sale and purchase,
		on condition that the company has completed the financing (including,
		but not limited to, loans and capital increases) necessary for the payment
		of the purchase price.
		 According to the Engineering Report, there are multiple points pointed
		out regarding the Building Standard Law, etc., but said points are
		scheduled to be corrected promptly after HHR acquires the target real
		estate.

(Note 1) The period of trust (planned) at the time of acquisition by HHR.

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(2) Details of Asset to be Transferred

Property name	Sphere Tower Tennozu
Specified asset type	Trust Beneficiary Interest (equivalent of 33% quasi co-ownership)
Trustee of the trust	Mitsubishi UFJ Trust and Banking Corporation
Period of trust	March 31, 2003 to June 30, 2027
Proposed transfer price	8,600,000,000 yen
Appraisal value	8,250,000,000 yen (Date of appraisal: May 31, 2021)
(Appraisal organization: Japan Real Estate Institute)
Book value	8,380,000,000 yen (Note 1)
Gain/loss on transfer	32,000,000 yen (expected amount)
Location (address)	2-2-8 Higashishinagawa, Shinagawa-ku, Tokyo
Acquisition date	October 2, 2007
	Building coverage	80%			Month/	(1) April 1993
			Year built	(2) June 1991
						(1) Steel-frame, reinforced
						concrete, steel
						reinforced concrete
	Floor area ratio	500%			Structure/	structure with flat roof/
			27 floors with 2
			Floors
					underground floors
						(2) Reinforced concrete
Land				Building		structure with flat roof/
				with 4 underground floors
						(1) office, shop
	Zone use	Commercial			Use	(2) machine room (district
	district			cooling and heating
						system)
					Total floor	(1) 43,477.68 m2
	Site area (Note 2)	6,106.11 m2			area
			(2) 3,674.04 m2
					(Note 2)
	Form of ownership	Right of			Form of	Right of ownership
	ownership			ownership
Tenant	details (Note 3)
	Total number of	23
	tenants
	Total rent income	592 million yen (Note 4) (Note 5)
	Security deposits	315 million yen (Note 5)
	Leasable area	8,818.09 m2	(Note 5)
	Leased area	8,731.47 m2	(Note 5)
	Occupancy rate	99.0%
		・The transaction agreement for the transfer corresponds to a forward
		commitment, etc. (referring to transaction agreements dated forward in
		which settlement and handing over of property is conducted more than
		one month after the conclusion of the agreement, and other related
		agreements) stipulated in the Comprehensive Guidelines for Supervision
Other matters to note	of Financial Instruments Business Operators, etc. Also, if HHR acts in
serious violation of the terms of the transaction agreement (Including
		cases where it was found that the representations and warranties under
		the transaction agreement were incorrect or incorrect in important
		respects), the buyer may cancel the agreement. It has been agreed that
		if the agreement is cancelled in such a situation HHR shall pay the buyer
		an amount equivalent to 10% of the sale price as a penalty.

(Note 1) The figure (expected value) as of December 10, 2021 is indicated with amounts rounded down to the nearest million yen.

(Note 2) The total area of the asset including the site and the whole building.

(Note 3) The figure as of May 31, 2021 is indicated.

(Note 4) The total of actual figures for the 31st fiscal period (ended November 2020) and 32nd fiscal period (ended May 2021) is indicated.

(Note 5) Total rent income, security deposit, leasable area, and leased area are indicated with amounts equivalent of 33% quasi co-ownership by HHR.

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