Starts Proceed Investment : Notice Concerning Acquisition of Trust Beneficiary Interest in Domestic Real Estate

April 26, 2022

Translation Purpose Only

For Immediate Release

REIT Issuer

Starts Proceed Investment Corporation

3-1-8 Nihonbashi, Chuo-ku, Tokyo

Kazuya Hiraide, Executive Director

(Security Code: 8979)

Asset Management Company

Starts Asset Management Co., Ltd.

Kazuya Hiraide, Representative Director

Inquiries: Hideki Hamaguchi, General Manager of Financial Control and Administration Division

TEL. [phone]

Notice Concerning Acquisition of Trust Beneficiary Interest in Domestic Real Estate

Starts Proceed Investment Corporation ("SPI") announces that Starts Asset Management Co., Ltd., to which SPI entrusts the management of its assets (the "Asset Management Company"), today decided to conduct acquisition of trust beneficiary interest in domestic real estate. The details are as follows.

Since the counterparty of the acquisition transaction is an interested party, etc. as defined in the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended (the "Investment Trusts Act")), the Asset Management Company, pursuant to its internal rules, has obtained consent from SPI to proceed with the transaction based on approval from the meeting of the Board of Directors of SPI held today.

1.

Overview of Acquisition

Property No.	Property name	Seller (Note 1)	Planned contract conclusion date	Planned acquisition date (Note 2)	Planned acquisition price (thousand yen) (Note 3)
C-88	Proceed Ishikawadai (Note 4)	Starts Development Corporation	May 10, 2022	May 10, 2022	810,000

(Note 1) The seller is an interested party, etc. of the Asset Management Company as defined in the Investment Trusts Act. For details, please refer to "5. Overview of Seller" below.

(Note 2) The settlement method is scheduled to be settlement of the entire amount on the planned acquisition date. The acquisition financing is scheduled to be cash on hand.

(Note 3) "Planned acquisition price" does not include miscellaneous acquisition related expenses, fixed property taxes, city planning taxes, consumption taxes and local consumption taxes.

(Note 4) Although a trust has not been established as of today, it is planned to be established before the acquisition upon the acquisition by SPI.

2.

Reason for Acquisition

SPI is promoting an asset replacement strategy to enhance the competitiveness of its portfolio. In addition, based on the asset replacement strategy, the decision was made to acquire the Asset to Be Acquired based on the asset management targets and policies provided in the Articles of Incorporation of SPI under the judgment that it is an asset replacing Proceed Nakanoshimbashi, the Asset to Be Disposed announced in "Notice Concerning Disposition of Trust Beneficiary Interest in Domestic Real Estate" dated March 29, 2022, as well as an asset featuring a combination of younger property age, profitability, growth potential and stability.

The characteristics of the Asset to Be Acquired are as described in "3. Description of the Asset to Be Acquired" below, and the Asset to Be Acquired is an asset consistent with SPI's ESG policy, taking into consideration ESG such as being installed with solar panels.

Description of the Asset to Be Acquired C-88: Proceed Ishikawadai

Overview of specified asset	Overview of leasing (as of January 31, 2022)
Type of specified asset	Trust beneficiary interest	Total number of tenants	1
Use	Rental housing	Number of leased units (Total number of leasable units)	24(25)
Planned acquisition price	810,000 thousand yen
Location (Address)	2-24-7 Higashiyukigaya, Ota-ku, Tokyo	Number of leased parking units (Total number of leasable parking units)	1(2)
PM Company / ML Company	Starts Amenity Corporation	Leased floor area	1,074.40 m2
Master lease type	Pass-through	Total leasable floor area	1,105.45 m2
Trustee	Starts Trust Co., Ltd.	Annual rent revenue	45,888 thousand yen
Period of trust agreement	From: May 10, 2022	Security and guarantee deposits, etc.	3,890 thousand yen
To: April 30, 2052	Occupancy rate	97.2%
Land	Ownership form	Proprietorship	Overview of appraisal report
Site area	519.50 m2	Appraiser	Chuo Real Estate Appraisal Co., Ltd.
Zoning	Category 1 medium-to-high-rise exclusive residential district	Date of appraisal	February 28, 2022
Building-to-land ratio	60%	Appraisal value	854,000 thousand yen
Floor-area ratio	200%	Overview of building condition evaluation report
Building	Ownership form	Proprietorship	Evaluation company	Tokio Marine dR Co., Ltd.
Structure	Reinforced concrete structure with flat roof /5F, B1	Date of evaluation	March 2022
Construction completion date	November 24, 2021	Building replacement value	356,700 thousand yen
Total floor area	1,333.89 m2	Long-term repair costs (12 years)	3,267 thousand yen
Use	Apartment complex	PML (Date of evaluation: March 2022)	13.4%
Collateral
None
Special notations / Status of the property (structure and other matters that have significant impact on the price of the investment property)
None
Remarks
1-minute walk from Ishikawadai Station on the Tokyu Ikegami Line
Area/Property characteristics
The Higashiyukigaya area is located on a hill in the northern part of Ota-ku and belongs to the Omori district. Although there are almost no large commercial facilities, there are many old individual shops such as those of Ishikawadai Kibogaoka Shopping Street, Ishikawadai Ekimae Shopping Street and Yukigaya Shopping Street. A residential district extends behind the shopping streets and because the area is adjacent to the Senzoku scenic area, it is a harmonized townscape with abundant greenery and no feeling of confinement. It is a well-balanced residential district where elementary and junior high schools and Senzokuike Park are located, and there are many families as well as single occupants who reside there, as it offers excellent access to Gotanda Station and Kamata Station using the Tokyu Ikegami Line. Therefore, various residential demand can be expected. The neighborhood is a residential district within a one-minute walk of Ishikawadai Station and lined with medium-rise apartments and detached houses. The property is a full-fledged smart home adopting IoT including smart locks which lock and unlock doors with smartphones. It intends to differentiate itself from competitive properties nearby through efforts such as producing electricity for the common area with a solar power system using solar panels and storage batteries and assuming the use of such electricity to charge the smartphones of tenants in the event of disasters, and strong demand can be expected from its operational status, etc.

[Explanation]

• 1. "Type of specified asset" indicates the type as a specified asset, such as trust beneficiary interests, real estate, etc. "Use" is indicated in accordance with the stated categories in "Part I. Fund Information, Item 1. Situation of the Fund, 2. Investment Policies, (1) Investment Policies, 3) Portfolio Construction Policies" set out in the Securities Report.

• 2. "Planned acquisition price" indicates the amount (transaction price stated in the trust beneficiary interest transaction agreement, etc.) excluding the various expenses (real estate transaction brokerage fee, etc.) required for the acquisition of the asset to be acquired.

• 3. "PM Company / ML Company" indicates the property management company that has concluded a property management agreement and the master lease company that has concluded a master lease agreement, agreements that are effective as of today for each property, or indicates the property management company that is scheduled to conclude a property management agreement and the master lease company that is scheduled to conclude a master lease agreement at the time of acquisition by SPI. For "Master lease type," "Pass-through" is indicated for a master lease in which the trustee and the master lease company has agreed that the master lease company pays the same amount as the rent stated in the sublease agreement concluded between the master lease company and the end tenant to the trustee.

• 4. "Trustee" indicates the trustee or planned trustee at the time of disposition or acquisition by SPI. As to "Period of trust agreement," the starting date is the effective date of the trust agreement that is effective as of today (for trust agreement that is scheduled to be concluded, the scheduled effective date is indicated), and the ending date is the termination date of the trust agreement that is scheduled to be agreed (including agreement for amendments) between the parties of the trust agreement on the same date as acquisition by SPI.

• 5. Concerning the description of "Land" and "Building"

• ・ "Site area," "Structure," "Construction completion date" and "Total floor area" are in accordance with information described in the certificate of entry in real estate registration. For properties that have annex buildings, the annex buildings are not included in "Total floor area." However, it may be different if the description has been found incorrect as a result of investigation.

• ・ "Zoning" indicates the type of zoning district classified in accordance with Article 8, Paragraph 1, Item 1 of the City Planning Act (Act No. 100 of 1968, as amended).

• ・ "Building-to-land ratio" is the ratio of the building area of the building to the site area as stipulated in Article 53 of the Building Standards Act (Act No. 201 of 1950, as amended; the "Building Standards Act") and indicates the maximum figures stipulated in the city plan in accordance with the zoning, etc. Pursuant to Article 53, Paragraph 3 or Paragraph 5 of the Building Standards Act, corner lots in a block and fireproof buildings, etc. in fire prevention districts may be subject to mitigation of building-to-land ratio or may not be subject to building-to-land ratio restriction itself. There are cases in which separate restrictions, mitigations, etc. may apply in accordance with the Building Standards Act or other administrative laws and regulations. In such cases, figures after application of such restrictions, mitigations, etc. are indicated.

• ・ "Floor-area ratio" is the ratio of the total floor area of the building to the site area as stipulated in Article 52 of the Building Standards Act and indicates the maximum figures stipulated in the city plan in accordance with the zoning, etc. Pursuant to Article 52, Paragraph 2 or Paragraph 9 of the Building Standards Act, restrictions due to frontage road width rules or mitigations due to specified road rules may apply in some cases. There are cases in which separate restrictions, mitigations, etc. may apply in accordance with the Building Standards Act or other administrative laws and regulations. In such cases, figures after application of such restrictions, mitigations, etc. are indicated.

• ・ If more than one zoning exists for one property, pursuant to Article 53, Paragraph 2 or Article 52, Paragraph 7 of the Building Standards Act, "Building-to- land ratio" and "Floor-area ratio" indicate the weighted average figures in accordance with the size of area of each zoning that are on the design drawing / completion drawing, etc. from the time of construction.

• 6. Concerning the description of "Overview of leasing"

• ・ For all assets to be acquired, a master lease agreement with Starts Amenity Corporation as a lessee and a sublessor is concluded or scheduled to be concluded among SPI, the trustee and Starts Amenity Corporation at the time of acquisition by SPI. Thus "Total number of tenants" indicates the number with the master lease company as a tenant as of now or after the acquisition.

• ・ "Number of leased units (Total number of leasable units)," "Leased floor area," "Total leasable floor area," "Annual rent revenue" and "Security and guarantee deposits, etc." are indicated in accordance with the same standards as the description of notes for the table illustrated in "Part I. Fund Information, Item 1. Situation of the Fund, 5. Management Status, (2) Investment Assets, 3) Other Major Investment Assets, (iv) Overview of Leasing Status, a. Overview of Leasing Status" set out in the Securities Report. "Number of leased parking units (Total number of leasable parking units)" is indicated in accordance with the same standards as the description of notes at the beginning of "Part I. Fund Information, Item 1. Situation of the Fund, 5. Management Status, (2) Investment Assets, 3) Other Major Investment Assets, (vi) Individual Overview of Real Estate in Trust for Acquired Assets" set out in the Securities Report.

• ・ "Occupancy rate" is the ratio of leased floor area to each tenant to the total leasable floor area of each property and is rounded off to the first decimal place.

• 7. "Overview of appraisal report" describes the content indicated in the appraisal report prepared for the asset to be acquired.

• 8. Concerning the description of "Overview of building condition evaluation report"

• ・ Contents described in the building condition evaluation report and the seismic risk evaluation report that were prepared for the asset to be acquired are provided.

• ・ "Building replacement value" is the total amount of appropriate costs required assuming to reconstruct the subject building on the date of evaluation.

• ・ "Long-term repair costs" is the total amount of expected long-term repair costs (12 years) based on the building condition evaluation report.

• ・ Figures of "PML" are the figures in the report prepared by Tokio Marine dR Co., Ltd. "PML" represents the probable maximum loss that the subject facility or group of facilities may suffer from an earthquake with a 10 % probability of exceedance in 50 years (earthquake corresponding to a 475-year return period) by expressing the amount of physical loss corresponding to a 90 % non-exceedance probability in the event of such earthquake as a percentage of the building replacement value.

• 9. "Collateral" describes the existence/non-existence of collateral as on the date of acquisition of the asset to be acquired.

10. Concerning the description of "Special notations / Status of the property (structure and other matters that have significant impact on the price of the investment property)"

・ In principle, it describes (1) the rights of third parties other than the tenants housed in the asset to be acquired and restrictions, etc. based on such rights, and

(2) restrictions, etc. from administrative laws and regulations related to the asset to be acquired, as of today. In case a specific description refers to fact situations as on the date of acquisition by SPI, description is made based on future prediction that is as rational as possible as of today.

・ When the type of a specified asset that SPI is acquiring is trust beneficiary interest, description of "acquired by SPI" also refers to acquisition by SPI through trust beneficiary interest. In such cases, legal owner or right holder of the real estate that is the trust asset of the trust beneficiary interest is the trustee, and

SPI acquires the trust beneficiary interest.

11. "Area/Property characteristics" is based on the description on the appraisal report, market report, etc. prepared for the Asset to Be Acquired.

Overview of Appraisal Report of the Asset to Be Acquired

Property name	Proceed Ishikawadai
Appraisal value	854,000 thousand yen
Appraiser	Chuo Real Estate Appraisal Co., Ltd.
Date of appraisal	February 28, 2022

(Unit: thousand yen)

Item	Amount	Details
Income approach value Value based on direct capitalization method Operating revenue Effective gross income Vacancy loss, etc. Operating expenses Maintenance expenses Utility expenses Repair expenses PM fees Tenant solicitation expenses, etc. Taxes and public dues Non-life insurance fees Other expenses Net operating income (NOI) Gain on management of income from lump-sum payment Capital expenditures Net income (NCF) Capitalization rate Value of earnings calculated by discounted cash flow (DCF) method Discount rate Terminal capitalization rate	854,000	Estimated by emphasizing income approach value obtained through the DCF method while also relating value based on direct capitalization method
856,000	Assessed by returning net income (NCF) that is stable over the medium to long term by capitalization rate
47,124	-
49,719	Assessed gross income that is stable over the medium to long term, considering the building lease agreement, profitability of the property, etc. and taking into account new rent assumed when the property is newly leased, etc.
2,595	Assessed after setting an occupancy rate (vacancy rate) that is stable over the medium to long term, taking into account past occupancy results, etc. of the property and similar properties
13,200	-
2,653	Assessed by taking into account the historical data, the level of expenses of similar properties, etc., based on the current BM contract terms
630	Assessed by taking into account the level of expenses of similar properties, etc., based on the historical data
1,404	Assessed by taking into account the estimated repair expenses stated in the engineering report, the historical data and the level of expenses of similar properties
1,275	Assessed by taking into account the level of expenses of similar properties, etc., based on the current PM contract terms
2,162	Assessed by taking into account the level of expenses of similar properties, assumed tenant turnover rate (average turnover period), etc., based on the current PM contract terms
4,627	Employed and recorded assessed value
284	Employed and recorded estimated amount
165	Assessed based on the current contract terms, etc.
33,924	-
35	Assessed assuming management yield at 1.0%
583	Assessed by taking into account the estimated renewal expenses stated in the engineering report and the assessment value calculated from a stable perspective over the medium to long term based on the use, age, structure, management status of the target building
33,376	-
3.9％	Assessed by taking into account the characteristics of the property such as location, specifications, rights, etc., using investment yield relating to transactions of similar properties as reference
853,000	-
3.7％	Assessed based on capitalization rate taking into account the current economic growth rate, projected market trends as well as risk premiums such as price fall risk due to deterioration of buildings from aging, future market fluctuation risk, etc.
4.1％	Assessed based on capitalization rate taking into account the current economic growth rate, projected market trends as well as risk premiums such as price fall risk due to deterioration of buildings from aging, future market fluctuation risk, etc.
Cost method value Land ratio Building ratio	871,000	-
52.6％	-
47.4％	-
Other items considered by real estate appraisal agent upon appraisal	Since demand for the property comes mostly from investors emphasizing profitability, appraisal value was determined based on income approach value using cost method value only as reference.

• 5. Overview of Seller (as of April 26, 2022)

  Name	Starts Development Corporation
  Location	3-1-8 Nihonbashi, Chuo-ku, Tokyo
  Representative	Kazuyoshi Yoshizawa, President
  Main business activities	Real estate development, planning and sales
  Capital	320 million yen (as of March 31, 2021)
  Established	October 3, 2005
  Net assets	-4,645 million yen (as of March 31, 2021)
  Total assets	33,628 million yen (as of March 31, 2021)
  Major shareholder and shareholding ratio	Starts Corporation Inc. (100%)
  Relationship with SPI and the Asset Management Company	The company is a subsidiary whose shares issued and outstanding are wholly owned by Starts Corporation Inc., the parent company of the Asset Management Company. Accordingly, the company falls within the scope of an interested party, etc. as defined in the Investment Trusts Act. There is no personnel relationship to report concerning SPI and the Asset Management Company with the seller. The company has concluded a pipeline support agreement with the Asset Management Company and has been providing the Asset Management Company with property information, warehousing function and such, and it currently owns the Asset to Be Acquired based on the agreement. The company falls within the scope of a related party of SPI and the Asset Management Company.

• 6. Overview of Brokerage

  It is not applicable for the Acquisition.

• 7. Transaction with Interested Parties of the Acquisition

  Starts Development Corporation, which is the seller of the Asset to Be Acquired, Starts Amenity Corporation, to which master lease and property management after the acquisition of the Asset to Be Acquired are planned to be entrusted, Starts Pitat House Co., Ltd., to which leasing business of the property management is subcontracted, and Starts Trust Co., Ltd., to which trust services of the Asset to Be Acquired are planned to be entrusted, each falls within the scope of an interested party, etc. of the Asset Management Company as defined in the Investment Trusts Act. Accordingly, all transactions have been determined after following appropriate procedures based on the internal rules of the Asset Management Company and pursuant to standards stipulated by laws and regulations.

  Overview of Planned Company Entrusted with Master Lease and Property Management (as of April 26, 2022)

Name	Starts Amenity Corporation
Location	8-4-3 Ichinoe, Edogawa-ku, Tokyo
Representative	Manabu Nakamatsu, President
Main business activities	Real estate management and operation, construction, interior finishing and other businesses
Capital	350 million yen (as of March 31, 2021)
Established	April 1, 1985
Relationship with SPI and the Asset Management Company	The company is a subsidiary whose shares issued and outstanding are wholly owned by Starts Corporation Inc., the parent company of the Asset Management Company. Accordingly, the company falls within the scope of an interested party, etc. as defined in the Investment Trusts Act. There is no personal relationship to report concerning SPI and the Asset Management Company with the company. The company is leasing all properties excluding one of SPI's acquired assets in a lump based on the master lease agreement. The company has concluded a pipeline support agreement with the Asset Management Company and has been providing the Asset Management Company with property information, warehousing function and such. The company falls within the scope of a related party of SPI and the Asset Management Company.