Heiwa Real Estate REIT : Notice Concerning Revision of Management Status Forecasts for Fiscal Period Ending May 2023 (43rd FP) and Fiscal Period Ending November 2023 (44th FP) and Forecasts for Fiscal Period Ending May 2024 (45th FP)

May 22, 2023

This notice is the English translation of the Japanese announcement on May 22, 2023

REIT Issuer

HEIWA REAL ESTATE REIT, Inc.

5-1 Nihonbashi Kabuto-cho,Chuo-ku, Tokyo

Aya Motomura, Executive Director

(Securities Code: 8966)

Asset Management Company

HEIWA REAL ESTATE Asset Management CO., LTD.

Masanori Hirano, Representative Director, President and Chief Executive Officer Inquiries: Junichi Kawamura, Managing Officer and General Manager of Planning & Finance Department TEL. [phone]

Notice Concerning Revision of Management Status Forecasts for Fiscal Period Ending May 2023 (43rd Fiscal Period) and Fiscal Period Ending November 2023 (44th Fiscal Period) and Forecasts for Fiscal Period Ending May 2024 (45th Fiscal Period)

HEIWA REAL ESTATE REIT, Inc. (the "Investment Corporation") announces revisions to the management status forecasts for the fiscal period ending May 2023 (43rd Fiscal Period: December 1, 2022 to May 31, 2023) and the fiscal period ending November 2023 (44th Fiscal Period: June 1, 2023 to November 30, 2023) announced in the 42nd Fiscal Period Financial Report dated January 18, 2023 and forecasts on the management status for the fiscal period ending May 2024 (45th Fiscal Period: December 1, 2023 to May 31, 2024) . Details are as follows.

Details

1. Revision of Management Status Forecasts for Fiscal Period Ending May 2023 (43rd Fiscal Period) and Fiscal Period Ending November 2023 (44th Fiscal Period) and Forecasts for Fiscal Period Ending May 2024 (45th Fiscal Period)

1. Revision of Management Status Forecasts for Fiscal Period Ending May 2023 (43rd Fiscal Period)

	Operating	Operating	Ordinary	Net income	Distribution
	revenue	income	income	per unit
	(million yen)
	(million yen)	(million yen)	(million yen)	(yen)
Previous forecast (A)	7,974	3,917	3,453	3,453	3,130
Revised forecast (B)	8,035	3,986	3,524	3,524	3,160
Variance (B) - (A)	61	69	71	71	30
Variance (%)	0.8	1.8	2.1	2.1	1.0

(Reference) The expected number of units issued and outstanding at the end of the fiscal period ending May 31, 2023: 1,113,733.

(2) Revision of Management Status Forecasts for Fiscal Period Ending November 2023 (44th Fiscal Period)

	Operating	Operating	Ordinary	Net income	Distribution
	revenue	income	income	per unit
	(million yen)
	(million yen)	(million yen)	(million yen)	(yen)
Previous forecast (A)	7,439	3,386	2,914	2,913	3,150
Revised forecast (B)	8,339	4,130	3,632	3,632	3,180
Variance (B) - (A)	900	743	718	718	30
Variance (%)	12.1	22.0	24.7	24.7	1.0

(Reference) The expected number of units issued and outstanding at the end of the fiscal period ending Nov. 30, 2023: 1,149,933.

(3) Management Status Forecasts for Fiscal Period Ending May 2024 (45th Fiscal Period)

	Operating	Operating	Ordinary	Net income	Distribution
	revenue	income	income	per unit
	(million yen)
	(million yen)	(million yen)	(million yen)	(yen)
Fiscal Period Ending May	7,741	3,550	3,048	3,047	3,200
2024 (45th Fiscal Period)

(Reference) The expected number of units issued and outstanding at the end of the fiscal period ending May 31, 2024: 1,149,933.

2. Reasons for revising the Management Status Forecasts

As stated in the Notice Concerning Acquisition of Assets (Kitahama 1-Chome Heiwa Building and Heiwa Real Estate Kitahama Building) published today, the Investment Corporation resolved to issue new investment units and conduct a secondary offering of investment units in connection with the acquisition of new assets. Following this resolution, the management status and distribution forecasts for the fiscal period ending November 2023 (44th fiscal period) announced on January 18, 2023 will be revised to reflect changes in the assumptions for the forecasts, and new management status and distributions forecasts for the fiscal period ending May 2024 (45th fiscal period) will be announced.

In addition, taking into account the Investment Corporation's management status in the fiscal period ending May 2023 (43rd fiscal period), we have decided to revise the forecasts on management status and distributions for the fiscal period ending May 2023 (43rd fiscal year) that we announced on January 18, 2023.

【Notes】

1. The above figures are the current forecasts calculated based on the assumptions stated in Attachment 1, main assumptions for management status forecasts for 43rd Fiscal Period (from December 1, 2022 to May 31, 2023) , 44th Fiscal Period (from June 1, 2023 to November 30, 2023), and 45th Fiscal Period (from December 1, 2023 to May 31, 2024) . Therefore, it is possible that actual operating revenue, operating income, ordinary income, net income and distribution per unit will vary from the forecasts. These forecasts do not guarantee actual distributions.
2. The Investment Corporation may revise forecasts in the future in the event of significant discrepancy with the figures above is expected.
3. As of today, the Investment Corporation owns 125 properties and trust beneficiary rights to properties, and it plans to acquire 2 trust beneficiary rights to the properties and transfer 1 trust beneficiary right to the property by the end of the fiscal period ended November 30, 2023 (44th Fiscal Period), as stated in Attachment 1, main assumptions for management status forecasts for 43rd Fiscal Period (from December 1, 2022 to May 31, 2023) , 44th Fiscal Period (from June 1, 2023 to November 30, 2023), and 45th Fiscal Period (from December 1, 2023 to May 31, 2024)).
4. Amounts are rounded down to the nearest specified unit, and the rate of increase / decrease is rounded to the first decimal place.
5. • Investment Corporation Website:https://www.heiwa-re.co.jp/en/
   • • 2 -

[Attachment] Main assumptions for management status forecasts for 43rd Fiscal Period (from December 1, 2022 to May 31, 2023) , 44th Fiscal Period (from June 1, 2023 to November 30, 2023), and 45th Fiscal Period (from December 1, 2023 to May 31, 2024)

Item	Assumptions
	43rd Fiscal Period: from December 1, 2022 to May 31, 2023 (182 days)
Management Period	44th Fiscal Period: from June 1, 2023 to November 30, 2023 (183 days)
	45th Fiscal Period: from December 1, 2023 to May 31, 2024 (183 days)
	・The Investment Corporation owns 125 properties and trust beneficiary rights to the properties
	(hereinafter, the "Acquired assets") as of today, and plans to acquire the following 2 properties and
	transfer the following 1 property by the end of the 44th fiscal period.
	・It is assumed that the following 2 properties will be acquired on June 6, 2023: Kitahama 1-Chome
	Heiwa Building and Heiwa Real Estate Kitahama Building (These 2 properties are hereinafter
	collectively referred to as the "Assets to be acquired".)
	・It is assumed that 1 property, HF HATCHOBORI RESIDENCE Ⅲ, will be transferred on August 31,
Assets under	2023. (The property is hereinafter collectively referred to as the "Asset to be transferred" and the
assets owned by the Investment Corporation, the acquired assets and the assets to be acquired
Management
excluding the asset to be transferred, are sometimes referred to as the "Assets under management").
	・In forecasting its management status, the Investment Corporation assumed that the assets to be
	acquired are deemed to have been acquired on June 6, 2023, the assets to be transferred are deemed
	to have been transferred on August 31, 2023 and that there will be no changes in the assets under
	Management (acquisition of new properties, transfer of existing properties, etc.) other than the
	acquisition of the assets to be acquired and the transfer of the assets to be transferred before the end
	of the fiscal period ending May 31, 2024 (45th fiscal period).
	・The actual number of properties owned may vary if properties are newly acquired, transferred, etc.
	・We assume that the number of investment units issued and outstanding for the fiscal period ending May
	31, 2023 (43rd Fiscal Period) will be 1,113,733, or the number of investment units issued and
	outstanding as of May 22, 2023.
	・We assume that in addition to the 1,113,733 investment units issued and outstanding as of May 22,
	2023, we will issue all of 36,200 investment units, which are part of the new investment units to be
	issued through offering (hereinafter the "New Investment Units Issued") according to a decision made
	at a meeting of the Investment Corporation's Board of Directors held on May 22, and the sum of 34,500
	units to be issued through a public offering (hereinafter the "Public Offering" and 1,700 units, or the
Total outstanding	maximum number of units to be issued through a third-party allotment (hereinafter the "Third-Party
Allotment"). For more information about the New Investment Units Issued, please see the Notice
investment units
Concerning Issuance of New Investment Units and Secondary Offering of Investment Units released
	today.
	・Apart from the above it is assumed that no other new investment units will be issued until the end of
	the fiscal period ending May 31, 2024 (45th fiscal period).
	・The latest forecasts on distributions per unit were calculated based on the number of investment units
	issued and outstanding as of today (1,113,733 units), for the fiscal period ending May 31, 2023 (43rd
	Fiscal Period), and on a total of 1,149, 933 units, including the number of investment units in the Public
	Offering and the Third-Party Allotment, for the fiscal periods ending November 30, 2023 (44th Fiscal
	Period) and May 31, 2024 (45th Fiscal Period).

- 3 -

	・Operating revenues are calculated based on the assumption of the above assets under management.
	・We expect to record 551 million yen as a gain on the sale of real estate properties for the fiscal period
	ending May 31, 2023 with respect to GRACE BUILDING SENGAKUJIMAE which was transferred
	on December 5, 2022.
Operating revenues	・We expect to record 602 million yen as a gain on sale of real estate properties for the fiscal period
ending November 30, 2023 (44th Fiscal Period) in relation to the Assets to be Transferred.
	・Operating revenues are calculated based on the past performance of the acquired assets, taking into
	account the cancellation notices currently received and the current market environment.
	・Operating revenues are calculated giving some consideration to the effects of the COVID-19
	pandemic such as decreased rental revenue.
	・Operating expenses are calculated based on the assumption of the above assets under management
	・Assumptions concerning major operating expenses are as follows:
	43rd Fiscal Period (from December 1, 2022 to May 31, 2023)
	Public charges and taxes (fixed property tax, city planning tax, etc.):	476 million yen
	Maintenance and repair fees:	302 million yen
	Management commissions:	750 million yen
	Depreciation:	994 million yen
	44th Fiscal Period (from June,1, 2023 to November 30, 2023)
	Public charges and taxes (fixed property tax, city planning tax, etc.):	507 million yen
	Maintenance and repair fees:	274 million yen
	Management commissions:	768 million yen
	Depreciation:	1,038 million yen
	45th Fiscal Period (from December 1, 2023 to May 31, 2024)
	Public charges and taxes (fixed property tax, city planning tax, etc.):	517 million yen
	Maintenance and repair fees:	291 million yen
Operating expenses	Management commissions:	792 million yen
	Depreciation:	1,033 million yen
	・Fixed property tax and city planning tax, etc. associated with properties held are accounted for as
	expenses related to the lending business by posting the amounts corresponding to the relevant
	calculation period from the amount of tax determined to be due. Although fixed property tax and city
	planning tax, etc. on the buying and selling of real estate properties is generally calculated on a pro-
	rata basis between former and new owners and settled at the time of acquisition, the amount
	equivalent to the settlement money is not expensed, as it is included in the acquisition cost. Taxes
	such as the fixed property tax and city planning tax imposed on the assets to be acquired will not be
	recorded as expenses either in the fiscal period ending May 31, 2023 (43rd Fiscal Period) or the fiscal
	period ending November 30, 2023 (44th Fiscal Period). They will be recorded as expenses, starting
	from the fiscal period ending May 31, 2023 (45th Fiscal Period).
	・For maintenance and repair fees, an amount deemed necessary during the period based on the
	maintenance and repair plans for the properties is posted.
	・Emergency costs may arise as a result of unforeseeable factors, and actual operating expenses may
	therefore vary significantly from the forecast.

- 4 -

	・Interest expenses (including interest on investment corporation bonds) and related borrowing
	expenses are estimated to be 439 million yen for the fiscal period ending in May 2023, 460 million
	yen for the fiscal period ending in November 2023 and 470 million yen for the fiscal period ending in
Non-operating expenses	May 2024. Amortization of investment unit issuance expenses and investment corporation bond
	issuance expenses are estimated to be 20 million yen for the fiscal period ending in May 2023, 27
	million yen for the fiscal period ending in November 2023 and 27 million yen for the fiscal period
	ending in May 2024.
	・The balance of interest-bearing liabilities is 109,817 million yen.
Interest-bearing	・We assume that the Investment Corporation will make early repayment before the due date for short-
liabilities	term borrowings (1,280 million yen) on June 8, 2023 while also refinancing the full amount of
	interest-bearing liabilities that become payable in May 2023, October 2023 and May 2024.
	・Distributions per unit are calculated based on the policy on the distribution of monies prescribed in
	the bylaw.
	・Regarding distributions for the fiscal period ending May 31, 2023 (43rd fiscal period), it is assumed
	that a total of 3,519 million yen will be distributed (distribution of 3,160 yen per unit), consisting of
	the expected net income of 3,524 million yen (3,164 yen per unit), plus the projected reversal of the
	reserve for temporary difference adjustment of 44 million yen (planned reversal amount of 40 yen per
	unit), plus 49 million yen (posted amount of 44 yen per unit) in carried-forward profit. Regarding
	distributions for the fiscal period ending November 30, 2023 (44th fiscal period), it is assumed that a
Distributions per unit	total of 3,656 million yen will be distributed (distribution of 3,180 yen per unit), consisting of the
(excluding distributions	expected net income of 3,632 million yen (3,158 yen per unit), plus 45 million yen (40 yen per unit)
in excess of earnings)	for the projected reversal of the reserve for temporary difference adjustment, plus 21 million yen (19
	yen posted per unit) in carried-forward profit. Regarding distributions for the fiscal period ending
	May 31, 2024 (45th fiscal period), it is assumed that a total of 3,679 million yen (distribution of
	3,200 yen per unit), consisting of the expected net income of 3,047 million yen (2,650 yen per unit),
	plus 632 million yen (550 yen per unit) for the projected reversal of the reserve for temporary
	difference adjustment.
	・Distributions per unit (excluding distributions in excess of earnings) may change because of various
	factors, Including changes in leasing income attributable to changes of assets under management or
	changes in tenants or to unexpected maintenance and repair work.
Distributions in
excess of earnings	・Distributions in excess of earnings are not planned at this point in time.
per unit
	・We assume no amendments to laws, the tax system, accounting standards, TSE rules, or The Investment
Other	Trusts Association, Japan rules, etc, that would affect the above forecast figures.
・We assume that no major unforeseen changes will occur in the general economic trends, real estate
	market conditions, etc.

- 5 -