Mori Hills REIT Investment : MHR Announces Asset Acquisition and Lease (Roppongi Hills Mori Tower: Additional Acquisition) （PDF：552KB）

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January 6, 2016

For Translation Purposes Only

Real Estate Investment Fund Issuer: Mori Hills REIT Investment Corporation (Securities Code: 3234)

1-12-32 Akasaka, Minato-ku, Tokyo Hideyuki Isobe, Executive Director

Asset Manager:

Mori Building Investment Management Co., Ltd. Hideyuki Isobe, President & CEO

Inquiries: Ryosuke Kanazawa

General Manager, Planning Department

TEL: [phone]

MHR Announces Asset Acquisition and Lease (Roppongi Hills Mori Tower: Additional Acquisition)

Mori Hills REIT Investment Corporation (hereafter "MHR") announced today that Mori Building Investment Management Co., Ltd. (hereafter the "Asset Manager"), the asset management company for MHR, has determined the asset acquisition and lease described below.

Upon the decision to acquire the asset to be acquired, the Asset Manager obtained the consent of MHR with the approval of the board of directors of MHR pursuant to the Act on Investment Trusts and Investment Corporations (Act No. 198 of 1951, as amended) (hereafter the "Investment Trust Act") and the Related Parties Transaction Guidelines of the Asset Manager.

1. Overview of Acquisition and Lease

   Property name	Roppongi Hills Mori Tower
   Assets to be acquired	Trust beneficial interests (Note 1) Trust beneficial interests (Note 2)
   Anticipated acquisition price	11,200 million yen (Note 3) 34,900 million yen (Note 3)
   Appraisal value	12,800 million yen 39,900 million yen
   Sales agreement date	January 6, 2016
   Acquisition date	February 1, 2016 (anticipated) April 1, 2016 (anticipated)
   Seller	Mori Building Co., Ltd.
   Acquisition financing	Funds procured through the issuance of new investment units, borrowings and cash on hand (anticipated)
   Lessee	Mori Building Co., Ltd. (Note 4)

   (Note 1) MHR plans to acquire the trust beneficial interests in compartmentalized ownership of the 25th floor and the co-ownership interest in the land use rights. (Hereafter the "Asset to Be Acquired on February 1, 2016.")

   (Note 2) MHR plans to acquire the trust beneficial interests in compartmentalized ownership of the 26th, 27th and 29th floors and the co-ownership interest in the land use rights. (Hereafter the "Asset to Be Acquired on April 1, 2016.")

   
   

   Note:

   This document is a press release regarding MHR's asset acquisition and lease (execution of lease agreement), and has not been prepared as an inducement or invitation for investment.

   (Note 3) The indicated anticipated acquisition price does not include acquisition-related costs, consumption taxes and other expenses.

   (Note 4) Please see "3. Details of the Assets to be Acquired and Lease" for leasing terms and conditions, and other details.

   
   

2. Reason for the Acquisition and Lease

   MHR decided on the acquisition (hereafter the "Acquisition") of the property from Mori Building Co., Ltd., its sponsor, as part of measures under its "New 2013 Management Policy."

   
   

   In its policy, MHR aims to further improve portfolio revenue through external growth while maintaining the present portfolio policy that focuses on premium properties (Note 1). Based on this policy, it has decided to undertake the Acquisition. The Acquisition is expected to enhance the portfolio size and increase dividends.

   
   

   Also, in conjunction with the Acquisition, MHR selects as master lessee Mori Building Co., Ltd., which developed the property and is highly specialized in management and operation, based on matters related to tenant selection criteria designated by MHR (for details of the selection criteria, please refer to the "Report on the Management Structure and System of the Issuer of Real Estate Investment Trust Units and Related Parties" dated October 29, 2015).

   
   

   Regarding the Acquisition, MHR is planning to execute a building lease (master lease) and property management agreement with Mori Building Co., Ltd. with an aim to conduct leasing based on a fixed-rent master lease scheme of five years (Note 2). Stable earnings over the long term are projected.

   
   

   (Note 1) "Premium properties" are defined in the management guidelines stipulated by the Asset Manager as office buildings, residential properties or retail and other facilities (retail or other use) located in the central five wards of Tokyo (Minato, Chiyoda, Chuo, Shinjuku and Shibuya) and their vicinity that are able to maintain competitive advantage in the future in terms of quality, size, specifications, etc. This shall apply hereafter.

   (Note 2) A master lease scheme is a scheme in which the trustee or MHR leases a property to the master lessee (sublessor) and the master lessee subleases it to an end tenant (sublessee). A fixed-rent master lease scheme is one type of master lease scheme in which the master lessee pays a fixed amount regardless of the amount paid by the sublessee to the master lessee.

   
   

   Furthermore, MHR particularly values the following points when deciding on the acquisition.

   
   

   The property is the signature tower of Roppongi Hills, with 54 floors above ground and six floors below ground and 238 meters in height. It is a premium property featuring first-class specifications and provides the highest grade working environment.

   
   

   Roppongi Hills, which was completed in 2003, is the embodiment of town creation for the 21st century by Mori Building Co., Ltd. and forms an "Artelligent City" that integrates business, culture and lifestyle. It is one of Japan's largest development projects an urban complex redeveloped from small parcels of land by integrating them and creating a city with high disaster- prevention capabilities, and an environment surrounded by lush greenery combined with various urban functions such as office, residential, recreational and cultural functions.

   
   

   The property is directly connected to Roppongi Station on the Tokyo Metro Hibiya Line by a concourse and is within walking distance of four stations on the Tokyo Metro Hibiya, Namboku and Chiyoda lines and the Toei Subway Oedo Line.

   
   

   In addition, since there are many embassies and cultural attractions in the vicinity, non-Japanese residents and foreign corporations have become concentrated in the area, and the area transmits new culture and information through cultural exchange from restaurants, fashion stores and night spots.

   
   

   The property's office floors from the 8th to 48th floors are designed by placing their core functions at the center. Each standard floor provides a non-pillared large space with leasable area (Note) of approximately 4,500m2 (approximately 1,360 tsubo) and a ceiling height (Note) of 2.7 m to 3.0 m, and can be configured to various layouts, such as large meeting rooms or machinery rooms.

   The property boasts high-grade anti-seismic performance utilizing advanced vibration control devices incorporating semi-active oil dampers (viscous dampers) and anti-bond braces (steel dampers), and is equipped with disaster prevention facilities such as an emergency well and food storage. Furthermore, the property can support stable and continuous business operations of tenants in the case of emergency by providing electricity generated by a facility equipped with a three-layer backup system.

   
   

   MHR has decided on the Acquisition, since, as described above, the property is one of the most widely recognized and the largest-scale office buildings in Japan, incorporates the highest grade of equipment, and thus is anticipated to maintain a competitive edge in the future.

   
   

   (Note) The leasable area of a standard floor indicates the leasable floor area of a standard floor (a floor on or above the second story that is the most standard in the building), and the ceiling height of a standard floor indicates the height from the floor to the ceiling of a standard floor.

   
   

3. Details of the Assets to be Acquired and Lease

4. Asset to Be Acquired on February 1, 2016 Details of the Asset to be Acquired

Property name Roppongi Hills Mori Tower

Type of specified asset Trust beneficial interests (25th floor)

Trustee Sumitomo Mitsui Trust Bank, Limited

Trustestablishment period From February 1, 2016 to January 31, 2031 (anticipated)

Location

(Residential indication) 6-10-1 Roppongi, Minato-ku, Tokyo

Use Offices, Shops, Museum

Area (Note 1)




Structure

Land 57,177.66m2

Building 442,150.70m2

Steel-framed and steel-framed reinforced concrete structure with flat roof, 54 floors above ground and 6 floors below ground

Construction completion April 2003




Designers Mori Building Co., Ltd., first class architect office Irie Miyake Architects & Engineers




Contractors A consortium of Obayashi Corporation and Kajima Corporation

Building verification agency Tokyo Metropolitan Government

Form of ownership

Land Ownership (Note 2)

Building Compartmentalized ownership (Note 3)

Anticipated acquisition price 11,200 million yen

Acquisition date February 1, 2016 (anticipated) Appraiser Japan Real Estate Institute

Appraisal

Appraisal value 12,800 million yen

(Appraisal date: November 1, 2015)

PML (Note 4) 0.59%

Collateral None

Property manager Mori Building Co., Ltd.




Content of lease
Lessee (Note 5)	Mori Building Co., Ltd.
Type of agreement	Regular building lease agreement
Term of agreement	From February 1, 2016 to January 31, 2021 (anticipated)
Gross rent income (annual rent)	550,736,664 yen
Deposits/Guarantees	458,947,220 yen
Total leasable floor area (Note 6)	4,156.66m2
Total leased floor area (Note 7)	4,156.66m2
Other special consideration		None

(Note 1) Area (land) is the area of the entire site, and Area (building) is the total floor area of the entire building, as indicated in the real estate registry.

(Note 2) As for land, land use rights for the property are established. The site area corresponding to the trust beneficial interests that MHR plans to acquire (25th floor) equivalent to the ratio of interest in the building is approximately 968.34m2 (approximately 1.7%).

(Note 3) The exclusive floor area corresponding to the trust beneficial interests that MHR plans to acquire (25th floor) as indicated in the real estate registry is 4,098.62m2 (approximately 1.3%).

(Note 4) PML is the probable maximum loss that a property will experience over the next 50 years (useful life for buildings in general), due to a large-scale earthquake (event of a scale expected to occur with a 10% probability in the next 50 years). This PML is typically the estimated total cost associated with restoring a property damaged in connection with such an earthquake event to its condition prior to that event, expressed as a percentage of the replacement cost associated with that property. Such estimated total cost includes direct damages from earthquakes taking into account factors such as historical frequencies and magnitudes of earthquake events, building construction, site soils and site distances to known fault lines, however does not include estimates for secondary damage from items such as fires after earthquake events. PML figures are reported from Sompo Japan Nipponkoa Risk Management Inc. as of November 13, 2015.

(Note 5) With regard to the property, MHR will outsource building lease operations to Mori Building Co., Ltd. and shall receive a fixed amount of rent from the company, regardless of the rent amount paid by end tenants. Due to this, Mori Building Co., Ltd. is treated as the end tenant in the Acquisition.

(Note 6) Total leasable floor area is the floor area deemed leasable to end tenants. The same shall apply hereafter. (Note 7) Total leased floor area is the floor area being leased to end tenants as set out in the lease agreement.

Moreover, total leasable floor area and total leased floor area exclude storage, parking lots, mechanical rooms, etc. The same shall apply hereafter.