Star Asia Investment : Notice Concerning Investment in Mezzanine Loan Debt

July 27, 2022

For Immediate Release

Real Estate Investment Trust Securities Issuer

Star Asia Investment Corporation

Representative: Atsushi Kato, Executive Officer

(Code: 3468)

Asset Management Company

Star Asia Investment Management Co., Ltd.

Representative:	Atsushi Kato
	President and CEO
Contact:	Akiko Kanno
	Director and CFO
	TEL: [phone]

Notice Concerning Investment in Mezzanine Loan Debt

-Acquisition of Domestic Assets (Star Asia Mezzanine Loan Debt Investment Series 7 (Mezzanine Bonds)) -

Star Asia Investment Corporation ("SAR") announced that Star Asia Investment Management Co., Ltd. (the "Asset Manager"), to which SAR entrusts the management of its assets, has decided today to invest in the Mezzanine Loan Debt Investment Series 7 (Mezzanine Bonds). This is a reinvestment associated with the refinancing of the subordinated bonds acquired as Star Asia Mezzanine Loan Debt Investment Series 1 on October 31, 2017. Details are as follows.

More specifically, SAR is to acquire (hereinafter referred to as "Reinvestment") the "Haneda Hotel Development GK No. 2 Class A Unsecured Bonds" (hereinafter referred to as "the Mezzanine Bonds") to be issued to refinance the "Haneda Hotel Development GK No. 1 Class A Unsecured Bonds" (hereinafter referred to as "the Original Bonds") to be redeemed on maturity on the scheduled repayment date (October 31, 2022), which was issued by Haneda Hotel Development GK (the "GK") for the purpose of acquiring the trust beneficiary interests mainly comprised of Hotel Relief Premium Haneda as the trust asset (the "Underlying Asset").

For details on the Original Bonds, please refer to the announcement made by SAR dated October 25, 2017 entitled "Notice Concerning Acquisition of Mezzanine Loan Debt (Subordinate Bonds)".

1. Reason for the Reinvestment

SAR has held the Original Bonds under "Star Asia Mezzanine Loan Debt Investment Series 1" since October

2017; however, refinancing has been decided, given that the senior loan and the Original Bonds are to mature on the scheduled repayment date.

SAR's assessment of the underlying asset is as described under "3. Overview of the Underlying Asset", and furthermore, as the investment in the mezzanine loan debt is to be made from SAR's own capital, interest income (exceeding 5% p.a.) will be earned as effective use of own funds, and is anticipated to have the effect of boosting distributable profits.

The Reinvestment was decided, as the Asset Manager determined that making such investment in mezzanine loan debt will have the effect of diversifying investment targets and contribute to the maximization of unitholders' interests.

2. Overview of the Reinvestment

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(1)	Planned reinvestment	The Mezzanine Bonds: "Haneda Hotel Development GK No. 2 Class A
	asset	Unsecured Bonds" which are certain bonds to be issued by the GK for the
		Underlying Asset.
(2)	Name of reinvestment	Star Asia Mezzanine Loan Debt Investment Series 7
	asset
(3)	Underlying Asset	Trust beneficial interests mainly comprised of HOTEL RELIEF Premium Haneda
		as the trust asset (Note 1)
(4)	Trustee of Underlying	Mitsubishi UFJ Trust and Banking Corporation
	Asset
(5)	Trust period of	From October 31, 2017 to October 31, 2027
	Underlying Asset
(6)	Face amount of the	Total amount: 400,000,000 yen
	Mezzanine Bonds to be
	acquired
(7)	Issue price of the	400,000,000 yen
	Mezzanine Bonds	100 yen per 100 yen of face amount of each Mezzanine Bond
(8)	Expected interest rate	Base rate (Note 3) +5.0%
	(Note 2)
(9)	LTV	Approximately 65.2 % (Note 4)
		* The appraisal value of the Underlying Asset, which is used as the
		denominator for calculating LTV, is 3,680 million yen.
(10)	Signing date of	July 27, 2022
	Mezzanine Bonds
	Underwriting Agreement
(11)	Planned acquisition date	July 29, 2022
	of the Mezzanine Bonds
(12)	Interest payment dates	Last day of February, May, August and November (Four times a year)
	of the Mezzanine Bonds	(The initial interest payment date is November 30, 2022.)
(13)	Scheduled redemption	July 29, 2027 (Note 5)
	date
(14)	Final redemption date	July 29, 2029 (Note 6)
(15)	Acquisition financing	As the reinvestment amount is the same amount as amount invested in the
		Original Bonds, it will be offset with the redemption amount.
(16)	Settlement method	As the reinvestment amount is the same amount as amount invested in the
		Original Bonds, it will be offset with the redemption amount.
(17)	Seller	Haneda Hotel Development GK

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(18) Overview of the	Name of Business Operator: Haneda Hotel Development GK (the GK)
structure of the
Mezzanine Bonds
	Haneda Hotel Development GK
		Underlying Asset		Senior loan
					(Note 7)
		Relief Premium Haneda		Approximately 2,000 million yen
		Appraisal value		Class A mezzanine bonds
		3,680 million yen		SAR
					400 million yen
					Class B subordinated bonds
					(Note *)
					Silent partnership investment, etc.
				(Note *)
		Reserves and expenses etc.
	1.	On the refinancing to be executed on July 29, 2022, the senior loan will
			be executed, and the Class A mezzanine bonds and the Class B
			subordinated bonds will be issued.
	2.	After acquiring the Mezzanine Bonds, SAR as the bondholder against
			the GK will have the right to receive interest on the Mezzanine Bonds
			and the right to receive redemption of such bonds.
			(*) The Mezzanine Bonds are subordinated to senior loans in terms of
			interest payment and redemption of principal. On the other hand, in
			principle, interest payments and redemption of principal on the
			Mezzanine Bonds are to be made in priority over such payments on
			"silent partnership investments etc." and "Class B subordinated bonds".
			In particular, with respect to redemption of principal, even if the value
			of underlying assets falls, the "silent partnership investments etc." will
			be first to incur a loss, and next principal of the "Class B subordinated
			bonds", and the Mezzanine Bonds will incur a loss only after the full
			principal amount of the "Class B subordinated bonds" is impaired.
(19) Relationship between	Please refer to 4. Overview of the Seller.
SAR/the Asset Manager
and the GK

(Note 1) For overview of the Underlying Asset, please refer to "3. Overview of the Underlying Asset".

(Note 2) SAR is scheduled to receive 1% of face amount of the Mezzanine Bonds to be acquired as an up-front fee upon the acquisition of the Mezzanine Bonds, separately from the interest payments. The up-front fee will be offset with the acquisition expenses, etc. and any remaining amounts will be recorded as revenue.

(Note 3) Base rate is JBA 3-month JPY TIBOR as announced by JBA Tibor Administration. The Japanese yen TIBOR may be confirmed on the website of the JBA TIBOR Administration (http://www.jbatibor.or.jp/english/rate/). The base rate to be applied, for each calculation period, shall be the interest rate announced at 11:00 am (Tokyo Time) on the day which is 2 business days prior to the last day of the calculation period immediately preceding the relevant calculation period (or in the case of the first interest payment, 2 business days prior to the for the loan execution date).

(Note 4) The ratio of the procured amount including the Mezzanine Bonds and the amount of all senior claims to the appraisal value stated in the appraisal report obtained by SAR for the Underlying Asset, rounded to the 1 st decimal point.

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LTV= (the amount including the mezzanine loan debt to be invested in by SAR and all senior claims*) ÷ (the appraisal value indicated in the appraisal report obtained by SAR)

(Note 5) "Scheduled redemption date" means the date on which the remaining principal amount is scheduled to be redeemed in a lump sum.

(Note 6) "Final redemption date" means the last day of the period of grace provided for redemption when the principal is not redeemable by the scheduled redemption date.

(Note 7) The senior loan lenders, Class B subordinated bond holders, and silent partnership investors are not disclosed, as consent for such disclosure has not been obtained from each of the respective party.

3. Overview of the Underlying Asset

Property name	Relief Premium Haneda
Asset type			Real estate beneficiary interest in trust
Owner			Haneda Hotel Development GK
Location (residence indication)	1-25-2 Minamikamata, Ota-ku, Tokyo
Use (Note 1)			Hotel
Structure (Note 2)	Reinforced concrete structure with 12 floors
	Land (Note 3)	Approximately 691m2
Area	Building (Total floor area)	Approximately 2,874m2
	(Note 4)
Type of	Land	Proprietary ownership (beneficiary interest in trust)
ownership
Building	Proprietary ownership (beneficiary interest in trust)
Construction completion	September 2017
Earthquake PML	4.9 % (Inspection body undisclosed)
Appraisal		Appraisal value	3,680 million yen
	Appraisal NOI (Note 7)	170,845,394 yen
obtained by SAR
Appraisal date	July 1, 2022
(Note 6)
	Appraiser	Savills Japan K.K.
Total number of end tenants	1
Occupancy rate (Note 8)	100.0%
Special notation	No matters worth noting.

(Note 1) "Use" indicates the use stated in the real estate registry.

(Note 2) "Structure" indicates the structure stated in the real estate registry of the building.

(Note 3) "Land" is the entire land area of Relief Premium Haneda stated in the real estate registry (rounded to the nearest whole number).

(Note 4) "Building (Total floor area)" is the total floor area of Relief Premium Haneda building stated in the real estate registry (rounded to the nearest whole number).

(Note 5) "Type of ownership" is the type of right held by the trustee of Relief Premium Haneda.

(Note 6) Items other than those indicated above that which are stated in the appraisal report obtained by SAR are not disclosed, as consent for disclosure has not been obtained from the planned buyer of the Underlying Asset.

(Note 7) "Appraisal NOI" indicates the amount of net operating income (NOI) obtained through direct capitalization method, stated in the real estate appraisal report.

(Note 8) The occupancy rate is 100%, as the entire building of the Underlying Asset is leased by a hotel operator.

• Evaluation of the Underlying Asset by the Asset Manager >
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(1) Location

The Underlying Asset is a business hotel located at an approximate 5-minute walk from Keikyu Kamata Station on the Keikyu Line, and an approximate 15-minute walk from Kamata Station on the JR Keihin Tohoku Line. The Kamata area where the property stands features medium- to small-sized office buildings with shops centering around Kampachi-dori Street and a residential area concentrated behind the office buildings. Recently, several business hotels similar to the Underlying Asset have been constructed mainly in the area surrounding Keikyu Kamata Station.

The property provides good transport convenience by offering access to the main business areas in Tokyo in around 20 to 30 minutes, as well as access to Tokyo International Airport in about 10 minutes, and thus has strong appeal to both business and leisure guests.

(2) Hotel features

The hotel has a total of 120 rooms, comprised of 20 single rooms, 22 double rooms, 66 twin rooms, 11 deluxe double rooms, and 1 deluxe twin room, accommodating all types of business and leisure guests.

Furthermore, Core Global Management K.K., the current hotel operator, plans to rebrand the hotel to its own hotel brand name after the refinancing (details yet to be determined). Through the rebranding, by offering flexible styles of stay, the property is expected to become a city-type hotel acquiring new users with differing purposes of stay.

(3) Operator

The hotel operator for the Underlying Asset was changed on July 1, 2022, and Core Global Management K.K. became the new hotel operator.

The company operates multiple resort hotels and city hotels throughout Japan, and has continued to promote business even under the COVID-19 pandemic environment using its own unique marketing strategy and market analysis.

Within the hotel operator's group, there are divisions conducting adequate cleaning services and maintenance and inspection resulting in long-term budget management, and is able to precisely control costs by its organizational capacity, and conduct operations focused on profits. Furthermore, the recovery of accommodation demand is also anticipated going forward.

Based on the above evaluation, hotel operation is expected to remain stable, and it is believed that the certainty of rent payments by the tenant is high.

4. Overview of the Seller

Name	Haneda Hotel Development GK
Location	2-9-15 Yotsuya, Shinjuku-ku, Tokyo (within Aruto Sogo law office)
Representative	Representative Partner, Haneda Hotel Development, Executive Member,
	Takeshi Morita
Main business description	1.	Acquisition, holding, disposal, and management of trust beneficial
		interests.
	2.	Sale and purchase, holding, management, and leasing of real estate.
	3.	Any and all businesses incidental to each of the above items.
Capital	100,000 yen
Date of Establishment	August 15, 2016
Net assets	Not disclosed, as consent for disclosure has not been obtained from the Seller.
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