Nomura Real Estate Master Fund : Notice Concerning Property Acquisition and Disposition

[For Translation Purposes Only]

January 27, 2022

For Immediate Release

To Whom It May Concern

Nomura Real Estate Master Fund, Inc.

Securities Code: 3462

Shuhei Yoshida, Executive Director

Asset Management Company:

Nomura Real Estate Asset Management Co., Ltd.

Koki Miura, President & Chief Executive Officer

Inquiries:

Hiroshi Ishigooka

Executive Officer

Head of NMF Investment Management Group

TEL [phone]

Notice Concerning Property Acquisition and Disposition

Nomura Real Estate Master Fund, Inc. ("NMF" or the "Fund") announces the decision made today by Nomura Real Estate Asset Management Co., Ltd., a licensed asset management company retained by the Fund to provide asset management services, to acquire or dispose of a property (the "Acquisition" or the "Disposition" or collectively the "Transaction"), as described below.

1. Summary of Assets to Be Acquired/Disposed of

(1) Summary of Asset to Be Acquired

			Date of	Scheduled		Anticipated
				Acquisition
Property Name	Use		Purchase and	Date of	Seller
	Price (million)
			Sale Agreement	Acquisition
				(Note 1)
PMO Hamamatsucho Ⅱ	Office			April 1, 2022	Nomura Real	5,500
	January 28,	Estate
PROUD FLAT Togoshi-Ginza	Residential		2022	March 1, 2022	Development,	2,550
(Note 2)			Co., Ltd.
		Total			8,050

(Note 1)The amounts stated exclude acquisition-related costs, property tax, city planning tax, consumption tax and local consumption tax. (Note 2)The asset to be acquired is a compartmentalized ownership building, and the Fund is to acquire a part of the building.

(Note 3)There is no brokerage involved in the acquisition of the asset to be Acquired.

The above property is referred to hereinafter as the "Assets to be Acquired."

(2) Summary of Asset to Be Disposed of

		Scheduled	Scheduled		Scheduled	Book	Difference
			Transfer	Value
Property Name	Use	Date of	Date of	Transferee	(¥ million)
Price	(¥ million)
		Agreement	Disposition		(Note 5)
			(¥ million)	(Note 4)
Sundai Azamino	Retail	January 31,	January 31,	Undisclosed	Undisclosed	1,450	Undisclosed
2022	2022	(Note 2)	(Note 3)	(Note 3)

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Ichibancho stear	Retail	January 27,	March 18,	Undisclosed	Undisclosed	4,405	Undisclosed
2022	2022	(Note 2)	(Note 3)	(Note	3)
		Total			6,582	5,856		725

(Note 1)The amounts stated exclude adjustment amounts of both property taxes and city planning taxes, as well as consumption taxes and local consumption tax, etc.

(Note 2)Undisclosed, since a consent has not obtained from the transferee.

(Note 3) The purchase price of Ichibancho stear is undisclosed since the transferee's consent has not been obtained. Accordingly, the purchase price of Sundai Azamino and the difference between the purchase price and the book value of both assets are also undisclosed. The purchase price of Ichibancho stear surpasses the anticipated book value at the date of disposition and the appraisal value as of the end of the previous fiscal period (as of August 31, 2021.). While the purchase price of Sundai Azamino is below the anticipated book value at the date of disposition, it surpasses the latest appraisal value (as of December 31, 2021) which reflects the scheduled move-out of the tenant.

(Note 4) Anticipated book value at the date of disposition.

(Note 5) This is only a reference value which is the difference between the scheduled transfer price and the anticipated book value, therefore, it is different from gain or loss on sale.

(Note 6)The brokerage involved in the disposition of the asset to be Disposed of is not considered a related party under the Act on Investment Trusts and Investment Corporations ("Investment Trust Act").

(Note 7)The asset to be Disposed of are a trust beneficial interest in trust of real estate.

The above property is referred to hereinafter as the "Assets to be Disposed of." The Assets to be Acquired and Assets to be Disposed of may be separately referred to as the "Asset."

2. Reasons for the Transaction

The Fund determined that the Transaction would help secure stable income and steady growth of the Fund's portfolio over the medium to long term, in line with the asset management objectives and policies specified in the Fund's Articles of Incorporation. As an external growth strategy, the Fund will mainly acquire sponsor-developed properties and will sell properties where there are concerns about their future competitive advantage. This Transaction is a crossover deal that crosses over sectors, taking advantage of the strengths of a diversified type REIT. While disposing of retail facilities where there are concerns about future profitability, the Fund also plans to acquire recently built and well-located offices and residential facilities developed by the sponsor, Nomura Real Estate Development Co., Ltd. Through the asset replacement of the Transaction, which utilizes such sponsor support, the Fund will improve the quality of the portfolio as follows. Please refer to "3. Summary of Assets to Be Acquired/Disposed of" below for details of the reasons for Assets to be Acquired and the reasons for Assets to be Disposed of.

While a loss of 302 million yen for the fiscal period ending February 28, 2022 (September 1, 2021 to February 28, 2022), is expected to be realized on sale of Sundai Azamino, a portion of internal reserves will be drawn down to cover the full loss and avoid impacting distributions. At the same time, a profit of 757 million yen for the fiscal period ending August 31, 2022 (March 1, 2022 to August 31, 2022), is expected to be realized on sale of Ichibancho stear, which will be directed to internal reserves to cover this draw-down.

Reference: Asset age and Green certification status

	Asset to be Disposed of	Asset to be Acquired
	Sundai Azamino	Ichibancho stear	PMO	PROUD FLAT
	Hamamatsucho Ⅱ	Togoshi-Ginza
Asset age (Note 1)	13.2 years	16.1 years	1.7 years	2.0 years
Green			DBJ Green Building
		Certification: ★★★
certification	-	-	-
BELS Certification:
status (Note 2)
		★★

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(Note 1) The asset age entered is as of the scheduled transfer date for the Asset to be Disposed of and as of the scheduled date of Acquisition for the Asset to be Acquired.

(Note 2) The number of stars entered in the certification is as of today.

Reference: Changes in Portfolio Diversification by Property Type

	Greater Tokyo Area : 83.2%		Greater Tokyo Area : 83.7%
Other 0.5% Hotels 0.6%		other 0.5%	Hotels 0.6%
	Retail (Residential			Retail (Residential
	areas)5.4%
			areas) 5.4%
Retail (Station		Retail (Station
areas)11.2%	Office	areas) 10.6%	Office
Residential	43.5%	Residential	44.0%
18.7%		18.9%
	Logistics			Logistics
20.1%		20.1%
	January 27, 2022			After the Transaction

(Note) Based on the (scheduled) acquisition

3. Summary of Assets to Be Acquired/Disposed of

(1)Summary of Asset to Be Acquired

PMO Hamamatsucho Ⅱ

＜Reasons for the Acquisition＞

The main strengths of the Asset to be Acquired are as follows.

• The Asset is a six-minute walk from Hamamatsucho Station on the JR Yamanote and Keihin-Tohoku Lines and Monorail Hamamatsucho Station on the Tokyo Monorail Line, a two-minute walk from Daimon Station on the Toei Asakusa and Oedo Lines, and a seven-minute walk from Shibakoen Station on the Toei Mita Line. Accordingly, with access to three stations on five lines, the Asset is excellent for convenient transportation to major business areas in central Tokyo.
• The Asset is also located very close to JR Tokyo Station and JR Shinagawa Station, where the Shinkansen stops. Therefore, it is very convenient for transportation to various regions in Japan and demand from tenants is expected, including the Tokyo branches of manufacturers and companies headquartered in rural areas. In addition, it has excellent access to Haneda Airport, so demand from foreign companies is also expected to be high. Accordingly, stable demand from tenants can be expected.
• Various redevelopment projects, including a large-scale redevelopment project in front of the station, are underway in the vicinity of JR Hamamatsucho Station and the convenience for businesses and concentration of companies are expected to be strengthened further in the future.
• The Asset has high equipment specifications, including a standard floor ceiling height of 2,750 mm and an electric capacity of 60 VA/m2.

(PMO Series)

• "PMO (Premium Midsize Office)" Series is the core brand of offices developed by the sponsor, Nomura
  Real Estate Development Co., Ltd. With functions and grades equivalent to large -sized buildings, this

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series of office buildings features medium-sized buildings that meet the diverse business needs of the times.

• In addition to boasting a range of tangible innovations and textures, this series also provides intangible services in response to customer feedback, with community spaces, places to exchange informa tion, and other added value that is unique to the Nomura Real Estate Group.

Property Name	PMO Hamamatsucho Ⅱ
Type of Asset	Real estate
Location			Registry	2-101-2 Shibakoen, Minato Ward, Tokyo
(Note 1)
		Street	2-3-6 Shibakoen, Minato Ward, Tokyo
				2-minute walk from Daimon Station on the Toei Asakusa and Oedo Lines
Access		6-minute walk from Hamamatsucho Station on the JR Yamanote and Keihin-
	Tohoku Lines and Monorail Hamamatsucho Station on the Tokyo Monorail Line
				7-minute walk from Shibakoen Station on the Toei Mita Line
Completion Date (Note 1)	July 29, 2020
Use (Note 1)	Office
Structure (Note 1)	Nine-floorsteel-framed structure with flat roof
Architect	Nomura Real Estate Development Co., Ltd., First-Class Architect Office
Builder		Ichiken Co., Ltd., Tokyo Office
Building Inspection Agency	Urban Housing Evaluation Center
Area (Note 1)		Land	494.24 m2
Floor Area	3,109.42 m2
Type of		Land	Land lease right
Ownership		Building	Ownership
Building Coverage Ratio	100% (Note 2)
Floor Area Ratio	600%
Collateral	None
Property Management	Nomura Real Estate Development Co., Ltd.
Company (Note 3)
Master Leasing Company	Nomura Real Estate Development Co., Ltd.
(Note 4)
Type of Master Leasing (Note 4)	Pass through
Seismic Risk (PML)(Note 5)	1.54% (Based on the Earthquake PML Appraisal Report as of January 2022 by
Sompo Risk Management Inc.)
				• The property management company and master leasing company, Nomura Real
				Estate Development Co., Ltd., is considered a related party under the Investment
				Trust Act.
Notes		• If an attempt should be made to dispose of the land lease right, associated with
				the Asset's land, to a third party, the lessor shall be granted preferential
				negotiation rights for a period of time regarding ownership of the	Asset's
				building.
Green certification status	DBJ Green Building Certification 2020: ★★★
BELS Certification: ★★
Anticipated	¥5,500 million
Acquisition Price
Appraisal Value and Method	¥5,950 million (Based on the capitalization approach as of January 1,	2022)
(Appraiser: Japan Real Estate Institute)
Appraisal NOI (Note 6)	¥200 million
Leasing Status (As of January 27, 2022) (Note 7)
Total Number of Tenants	7

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	Total Rental		¥255 million (Including common area management fee)
Income(Annual)
Security Deposits		¥253 million
Occupancy Rate		87.5%
Total Leased Floor Space		2,275.77 m2
Total Leasable Floor Space		2,600.88 m2
Historical Occupancy Rates		August	August	August		August		August
	2017	2018	2019		2020		2021
	(Note 8)
		-	-	-		0%(Note 9)		87.5%
(Note 1) Location and Other Items
	Location (registry), Completion Date, Use, Structure and Area are based on the information in the real estate registry.
(Note 2) Building Coverage Ratio
	The Asset is located in a commercial zone where the building coverage ratio is 80% in principle. However, because the
	Asset is a certified fireproof building in a fire prevention zone, the applied coverage ratio is 100%.
(Note 3) Property Management Company
	Refers to the property management company that is scheduled to be appointed after acquisition.
(Note 4)	Master Lease
	Upon the acquisition of the Asset to be Acquired, the Fund plans to enter into a master lease agreement with Nomura
	Real Estate Development Co., Ltd. Under this agreement, the entire building of	the Asset to be Acquired will be
	collectively leased to Nomura Real Estate Development Co., Ltd. for the purpose of subleasing. The master lease
	agreement is a pass-through scheme, in which Nomura Real Estate Development Co., Ltd., the master lease company,
	pays to the Fund the same amount as the total sum of the rent based on the lease agreements that the master lease
	company concludes with end tenants.
(Note 5) PML (Probable Maximum Loss)
	PML shows the probable losses which would be caused by a maximum size earthquake (a great earthquake which is
	expected to occur once every 475 years, or with 10% probability of once every 50 years) during the anticipated period
	of use (i.e. 50 years as expected life time of a standard building), as a percentage of the expected recovery cost to the
	replacement cost.
(Note 6)	Appraisal NOI
	"Appraisal NOI" is the annual NOI (operating income - operating expenses) described in the real estate appraisal report
	with January 1, 2022 as the appraisal date.
(Note 7)	Leasing Status
	"Total Number of Tenants" is the total number of end tenants actually leasing space in the building of the Asset to
	be Acquired as of today.

"Total Rental Income" is the amount obtained by multiplying by 12 the monthly rent and common area charges stated in the lease agreements by the total number of end tenants as of today actually leasing space in the building of the Asset (rounded down to the nearest million yen). The figure does not include any other incidental rent that may be agreed upon in connection with the said lease agreements, such as parking fees, signboard fees and warehouse fees.

• Security Deposits" indicates the amount of security and other deposits specified in the aforementioned lease agreements (rounded down to the nearest million yen).

"Occupancy Rate" is calculated by dividing Total Leased Floor Space as of today by Total Leasable Floor Space. "Total Leased Floor Space" indicates the total floor space leased to end tenants as of today.

"Total Leasable Floor Space" is the total floor space of offices, retail facilities, logistics facilities, residential facilities, hotels, etc. within the Asset to be Acquired that can be leased as of today (If the common area, etc. is leased, the floor space thereof is included).

(Note 8) Historical Occupancy Rates

There are no applicable occupancy rates for the end of August 2019 and before because the building was not yet completed. The historical occupancy rates are based on the information from the seller.

(Note 9) The occupancy rate as of the end of August 2020 is set at 0% because the leasing activity was scheduled to start on September 1, 2020, although the construction was comleted.

PROUD FLAT Togoshi-Ginza

＜Reasons for the Acquisition＞

The main strengths of the Asset to be Acquired are as follows.

• The Asset is a four-minute walk from Togoshi-ginza Station on the Tokyu Ikegami Line and a six-minute walk from Togoshi Station on the Toei Asakusa Line. Using these stations, it has easy access to the business areas and commercial areas of Shinagawa, Shinbashi and Gotanda making the Asset excellent for convenient transportation.
• The Asset is well located with a four-minute walk from Togoshi-ginza Station, the nearest station. The Togoshi- ginza Shopping Street, which extends east and west of the station, has an abundance of convenient facilities

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