For Translation Purposes Only For Immediate Release March 29, 2019 United Urban Investment Corporation Ikuo Yoshida Executive Officer (Securities Code: 8960) Asset Management Company: Japan REIT Advisors Co., Ltd. Norimasa Gaun President and CEO Inquiries: Kenichi Natsume Chief Financial Officer TEL: +81-3-5402-3680 Notice Concerning Sale of Property (Maison Ukima) United Urban Investment Corporation ( United Urban ) hereby announces that Japan REIT Advisors Co., Ltd. ( JRA ), the asset management company to which United Urban entrusts asset management services, has decided on the sale of property today as set forth below. 1. Overview of the Sale United Urban is going to sell the trust beneficial interests in the property shown below (the Asset to be Sold ). Property Number Type of Use (Note 1) Property Name D7 Residence Maison Ukima Location Kita-ku, Book Value (as of February 28, 2019) (millions of yen (rounded down to unit stated)) Difference between Scheduled Date of Book Value and Sale Price Sale Scheduled Sale Price (Note 2) (Scheduled) (Note 3) 3,076 3,190 113 April 1, 2019 (Notes) 1. Type of Use is shown as per United Urban s determination. 2. Scheduled Sale Price is shown without miscellaneous expenses for the sale, consumption tax, etc. The word is used with the same definition in this release. 3. Difference between Book Value and Scheduled Sale Price shows an indicative amount calculated by using the book value as of February 28, 2019. Therefore, such amount is different from the actual gains or losses. The amount is rounded down to the nearest million yen. The word is used with the same definition in this release. 2. Reason of the Sale United Urban has been working to improve the quality and profitability of its portfolio through replacement of the properties, taking into account cash flow stability of each property and other factors. United Urban has leased the Asset to be Sold to TAIHEIYO CEMENT CORPORATION under a fixed-term lease agreement (expiration date is October 25, 2019). The tenant s intention to renew the agreement cannot be confirmed as of the date of this document. In case of the tenant change, United Urban has been engaged in the leasing activities together with feasibility study on a conversion to regular apartment or disposition, etc. Among the various offers and opinions, United Urban has decided to sell the Asset to be Sold, as selling the Asset to be Sold (the Sale ) is thought to best meet its interest in the long term. United Urban will use the proceeds from the Sale to acquire properties or to repay interest bearing debt considering increase of the unitholders interest. 1 / 6
3. Details of the Sale (1) Summary of the Sale 1. Name of Asset : Maison Ukima 2. Type of Asset : Trust beneficial interest in real estate 3. Scheduled Sale Price : 3,190 million 4. Book Value : 3,076 million (as of February 28, 2019) 5. Difference between Book Value : 113 million and Scheduled Sale price 6. Appraisal Value : 3,110 million (Note) 7. Scheduled Date of Agreement : April 1, 2019 (conclusion of the sale and purchase agreement) 8. Scheduled Date of Sale : April 1, 2019 (transfer of the trust beneficial interest) 9. Buyer : Domestic company (undisclosed) (Note) The amount describes the appraisal value as of November 30, 2018 calculated by a real estate appraiser. Real Estate Institute. Please refer to 9. Summaries of Appraisal Report for details. (2) Outline of Asset to be Sold Property Name Maison Ukima Type of the Property Trust beneficial interest in real estate Trustee Mizuho Trust & Banking Co., Ltd. Trust Agreement term From December 26, 2000 to October 31, 2024 Location (Note 1) Lot number 1-3-1 Ukima, Kita-ku, Displayed Address 1-3-1 Ukima, Kita-ku, Use of property (Note 1) Apartment (147 doors) Area (Note 1) Land 6,456.64m 2 Building 12,691.43m 2 Structure and Scale (Note 1) SRC12F Completion Date (Note 1) March 1992 Type of Ownership Land Proprietary Ownership Building Proprietary Ownership Total Number of Tenants 1 Total Rental Revenues Details 247,320 thousand (yearly) of Security Deposit 82,440 thousand Tenant (Note 2) Total Leasable Floor Space 12,691.43 m 2 Total Leased Floor Space 12,691.43 m 2 Occupancy Ratio 100.0% The appraisal agency is Japan Other Special Notation - (Notes) 1. Each piece of information in the Location (Lot number), Use of property, Area, Structure and Scale and Completion Date is described as it appears on the real estate register. The words are used with the same definition in this release. 2. Figures described in the Details of Tenant are as of February 28, 2019. 4. Overview of The Buyer. The buyer of the Asset to be Sold is a domestic company. Details of the buyer are not disclosed as the consent for disclosure has not been obtained. As of today, the buyer falls under neither the category of the related parties, etc. (the Related Party ) under the Act on Investment Trusts and Investment Corporations of Japan (Act No. 198 of 1951, as amended) nor the category of the sponsor/stakeholder ( Sponsor/Stakeholder ) under the self-imposed rules (rules for conflicts of interest) of JRA. In addition, United Urban and JRA have no significant capital ties, personal relationships and transactions with the buyer, and the buyer does not fall under a related party of United Urban and JRA. 2 / 6
5. Outline of Intermediary (1) Outline of Broker The broker is a domestic company. However, the broker s details are not disclosed because the broker has not given its consent for the disclosure of its profile, etc. As of today, the broker falls under neither the category of the Related Party nor the category of Sponsor/Stakeholder. In addition, United Urban and JRA have no significant capital ties, personal relationships and transactions with the broker, and the broker is not a related party of United Urban and JRA. (2) Amount and Details of Commission The amount of commission is not disclosed, due to unavoidable circumstances where the consent for the disclosure has not been obtained from the broker. The amount of commission for the broker is an amount less than the upper limit (3% of the scheduled sale price plus 60,000 yen (excluding consumption taxes) stipulated in the Building Lots and Buildings Transaction Business Act). 6. Transactions with Interested Party and Sponsor/Shareholder Not applicable. 7. Method of Payment and Transfer Schedule (1) Method of Payment The payment to the buyer will be paid in a lump-sum upon the delivery of Asset to be Sold. (2) Transfer Schedule March 29, 2019 April 1, 2019 Decision of transfer Conclusion of sale and purchase agreement of trust beneficial interest, transfer of trust beneficial interest and payment (scheduled) 8. Outlook of Operation United Urban does not make any changes to the forecasts of financial results for the thirty-first fiscal period (period ending May 31, 2019) and the thirty-second fiscal period (period ending November 30, 2019) as the effect of the sale of the Asset to be Sold is not significant. 3 / 6
9. Summaries of Appraisal Report Appraisal Value Appraisal Agency 3,110,000 thousand Japan Real Estate Institute Date of Value Estimate November 30, 2018 Item Details Grounds Income approach price 3,110,000 - Price by Direct Capitalization Method 3,140,000 - (1) Total profit (Effective total profit: 1+2+3+4-5-6) 1. Potential total profit (rental revenues, common area charges) 313,891-294,528 (thousand yen, unless otherwise indicated) Assessed unit prices such as rents that can be stably received over the medium to long term after the current fixed-term lease agreement expires, based on the level of rent and common area cost when assuming to lease the Asset to be Sold, In addition, recorded rental revenues and common area charges based on this. 2. Utility revenues 0 No utility revenues to be recorded. 3. Parking revenues 23,580 Assessed unit prices such as fees that can be stably received over the medium to long term after the current fixed-term lease agreement expires, based on the level of parking fee when assuming to lease the parking. In addition, recorded parking revenues based on this. 4. Other revenues 14,741 Assumed the number-of-month-equivalent key money that will be received from individual tenants, annual average tenant replacement rate and average contract period; and recorded key money based on the above. Revenue from antenna fee is recorded as other revenues. 5. Losses from vacancies 18,958 Assessed an occupancy ratio level that will remain stable over the medium to long term based on the occupancy status of and the supply and demand trends of competing or alternative, etc. real estate with similar features in a comparable area within the same sphere of supply and demand, and past occupancy status of and future prospects of the subject property for each use; and recorded the losses from vacancies, etc. as calculated based on the occupancy ratio level thus assumed. 6. Bad debt losses 0 Judged that no bad debt losses need to be recorded in view of the circumstances, etc. of similar real estates. (2) Total expenses (7+8+9+10+11+12+13+14) 69,096-7. Administrative and maintenance Recorded administrative and maintenance fees in reference to 10,560 fees management fees of similar real estates. Recorded utility expenses by taking into account utilities of 8. Utilities 5,000 similar real estate and the individualities, etc. of the Property with reference to prior actual amounts. 9. Repairs 14,883 Recorded restitution fees based on the level of restitution fees per room that will ordinarily arise in correlation with tenant replacement, the proportion of the lessor s burden, average timing of expense payment, degree of restitution and other factors. Also recorded by taking into account the level of expenses for similar properties and other factors in the process of assessment of repairs. 10. Property and other tax 17,483 Recorded in accordance with documents related to taxes and other public charges. 11. Property Management Fee 8,995 This is a consignment fee payable to the outsource responsible for overall control of the tenant management service and building management service, etc. In order to assess property management fee, recorded such fee by taking into account the fee rates for similar real estates and the individualities, etc. of the Asset to be Sold. 12. Advertising expenses for tenants, etc. 11,779 Recorded the administrative fees associated with advertising and contracting new tenants with reference to current agreement terms, lease terms of similar properties in the area. Also recorded the commission fees needed for advertising and the advertisement fees. Renewal fees are calculated based on the average annual replacement rate and occupancy rate of tenants, etc., and compensation fees paid to the contractor when concluding a renewal contract, etc. 4 / 6
13. Casualty insurance 396 Recorded casualty insurance fee by taking into account insurance costs indicated on the insurance policy to be purchased and the rate, etc. of insurance costs of buildings similar to the subject building. 14. Other expenses 0 No other expenses to be recorded under other expenses. (3) Net operating income (NOI: (1)-(2) ) 244,795 - (4) Operating profit of lump-sum money 457 Assumed a number-of-month-equivalent lease deposits that will remain stably passable over the medium to long term based on the required number-of-month-equivalent lease deposits for the new lease contract as appraised; and calculated an operating profit of lump-sum money by multiplying the assumed number-of-month-equivalent lease deposits as adjusted for the occupancy ratio by an investment yield. Moreover, we assessed 1.0% as being the appropriate investment yield from the perspective of fund management during the period of deposit, by taking into account the level of interest rate, etc. of both sides of investment and procurement. The renovation fee to maintain the building actually occurs (5) Capital expenditures (including irregularly. Here, assumed to accumulate expected expenses 25,389 on average every fiscal period, and assessed capital routine repairs) expenditures, taking into account the level of capital expenditure and the age for similar real estates, etc. (6) Net cash flow (NCF: (3)+(4)-(5)) 219,863 - (7) Cap rate 7.0% Assessed based on a real-estate investment yield set for each area, by adjusting it with the spreads arising from location requirements, standing of the building and other conditions for the Asset to be Sold and by taking into account any future uncertainties and yields from similar real estate deals, etc. Price by Discounted Cash Flow method 3,070,000 - Discount rate 4.5% Terminal cap rate 4.9% Assessed by comprehensively taking into account the individuality of the subject property, in reference to investment yields from similar real estate deals, etc. Assessed by comprehensively taking into account the future trend of investment yield, risk of the subject property as investment objective, general forecasts on economic growth, and trends in real estate price and rent etc., in reference to investment yields from similar real estate deals, etc. Cost approach price 2,870,000 Land ratio: 72.8%, Building ratio: 27.2% Other specific matters the appraisal agency has paid attention in appraising the property None Attached Materials Portfolio Summary 5 / 6
Reference Material [Distribution by Type of Use] Type of Use Number of Properties (Note 1) Portfolio Summary As of April 1, 2019 (Scheduled) (Scheduled) Acquisition Price (Note 2) Amount (million yen) Ratio Retail Property 35 192,654 31.0% Office Building 36 201,764 32.5% Hotel 17 131,915 21.2% Residence 21 45,086 7.3% Others 13 50,208 8.1% Total 119 621,627 100.0% [Distribution by Geographical Location] Location (Note 3) Number of Properties (Scheduled) Acquisition Price (Note 2) Amount (million yen) 6 Central Wards of 26 130,965 21.1% 23 Wards of 12 44,081 7.1% Metropolitan Area 33 211,253 34.0% Ratio Other Regions 48 235,328 37.9% Total 119 621,627 100.0% (Notes) 1. Each of maricom-isogo / SYSTEM PLAZA YOKOHAMA (Site), a retail property/office building complex and Shin-Osaka Central Tower and SS30, an office building/hotel complex has been counted as per each of types of use, while counted as one property in the total column. Therefore, the aggregate number of properties of each type is not equal to that of the total column. 2. Figures have been rounded to the nearest unit. There is the possibility the aggregated figures shown is not the same at the actual figures. The percentage is shown by rounding down to the nearest digit and there is the possibility that the aggregated figures are not the same as the actual total figures. 3. The definition of geographical location is as set forth below. Metropolitan Area (Note a) Other Regions (Note b) 6 Central Wards of 23 Wards of Metropolitan Area Major Japanese cities including Chiyoda-ku, Minato-ku, government designated cities Chuo-ku, Shinjuku-ku, 23 wards of except Metropolitan Area (excluding those in Shibuya-ku, and for 6 Central Wards of excluding 23 wards of Metropolitan Area) and the Shinagawa-ku surrounding areas thereof Notes a. Metropolitan Area refers to as well as Kanagawa, Chiba, Saitama, Ibaraki, Gunma, Tochigi and Yamanashi prefectures. b. Osaka Area: Osaka Prefecture, Kyoto Prefecture and Hyogo Prefecture, Nagoya Area: Aichi Prefecture, Mie Prefecture and Gifu Prefecture and, Other cities: excluding Metropolitan Area, Osaka Area or Nagoya Area. 4. Property to be acquired contained in the above charts is as follows; Type of Use Type Location Property Name Scheduled Acquisition Date Scheduled Acquisition Price Amount Ratio (millions of yen) 23 Wards of Residence Apartment GRAN FONTE April 1, 2019 2,700 0.4% 5. The latest information about United Urban s portfolio is disclosed on United Urban s website. http://www.united-reit.co.jp/eng_cms/portfolio/port_list.html 6 / 6