Investment criteria for each property

(A)Location Retail Properties;
With respect to the acquisition of retail properties, TOKYU REIT will from time to time conduct a market evaluation to determine the appropriateness of the areas in which TOKYU REIT invests. This evaluation gives attention to such factors as the concentration of consumer population and movement, the number of households in the areas and their average income, growth potential of the area, current competition conditions, possible competition from future developments and compatibility with tenants.
Office Properties;
With respect to the acquisition of office properties, TOKYU REIT will assess an area's concentration of office facilities, local rental market conditions, the amount of floor space and the proximity of the property to the nearest station. TOKYU REIT generally only considers office properties that are within seven minutes' walking distance from a station, or within ten minutes' walking distance for properties with special characteristics(Note 1).
(B)Property Size
(Note 2)(Note3)
Retail Properties;
TOKYU REIT will determine the appropriate size of each retail property with consideration of each location, market size and of the area and standard floor space, as well as the growth potential of the area.
Office Properties;
Appropriate sizes shall be determined taking into account individual locational characteristics and tenant business type for each property.
(Note 2)(Note3)
Retail Properties;
TOKYU REIT considers retail property individually, giving general consideration to the versatility of such property the ability to alter the designed use of such property and the accessibility by retail consumers.
Office Properties;
TOKYU REIT installs fixtures that are above standard with respect to floors, ceilings, facilities in common areas, electricity capacity and air conditioning systems.
(D)Investment Size, Investment Amount and Acquisition Price
Minimum Amount;
Minimum investment amount per property shall be 4 billion yen, in principle. However, minimum investment amount per property for properties located in Tokyu Areas shall be 1 billion yen and minimum investment amount per property for properties located in Central Tokyo (excluding Shibuya ward) shall be 2 billion yen.
As for land with leasehold interest, minimum investment amount per property shall be 1 billion yen regardless of the location being in the investment target areas. However, the above shall not apply to investment targets that are regarded as ancillaries of investment properties.
Limitation of Acquisition Price;
Upon making investments in real estate, etc., the acquisition price is judged individually taking into account the appraisal value. However, it may exceed the appraisal value depending on the property features. Specific management shall be stipulated in the detailed regulations in the management guideline of TOKYU REIT (the “Detailed Regulations”). However, acquisitions from related parties, Tokyu Corporation or warehousing SPCs established with the intent of Tokyu Land Corporation shall be made pursuant to the Rules on Related-Party Transactions.
(Note 2)(Note3)
TOKYU REIT invests only in (i) buildings that are in compliance with current earthquake regulatory standards, (ii) existing buildings that have been reinforced against earthquakes, or (iii) buildings that have a probable maximum loss, or PML, of less than 15%.
(F)Contractual Relationship In principal, when acquiring a property subject to joint ownership, TOKYU REIT acquires more than 50% ownership of such property.
Requirements for acquiring a property with co-ownership interest of less than 50% shall be stipulated in the Detailed Regulations.
(G)Tenants Tenants shall be considered comprehensively by taking into account their creditworthiness, the terms and conditions of the lease agreement, substitutability, property competitiveness, etc. When a hotel is included in the complex that includes office or retail properties, it shall, in principle, meet the following criteria.
A lease agreement which can reduce business/operational risks of the hotel shall be concluded with the tenant of the hotel portion of the complex.
The tenant of the hotel portion of the complex shall be Tokyu Corporation and its subsidiaries or anyone who possesses operational skills equal to those of Tokyu Corporation and its subsidiaries.
(H)Asset-Backed Securities TOKYU REIT invests in asset-backed securities only if such securities contain an option to purchase the underlying assets at the time of maturity and are deemed to provide stable income.
(I)Properties Under Construction TOKYU REIT shall, in principle, invest in properties that are actually generating or expected to generate rental income. For properties such as below, TOKYU REIT shall make investments in properties under construction after taking note of development risks.
(1) Acquisition of a property being constructed by a third-party
Acquisition shall be made when it is confirmed that the leasing risk, price fluctuation risk, etc. after completion will not have an excessive impact on the entire portfolio, provided that TOKYU REIT will not bear the risks of completing the construction and delivery.
(2) Addition to a property already acquired
An addition shall be constructed after analyzing development risks associated with the construction (risks of obtaining permits and approvals, completing the construction, leasing, price fluctuation, etc.) and confirming that those risks will not have an excessive impact on the entire portfolio, provided that such construction will contribute to enhancing the value of the existing property.
(J)Environmental Review Prior to the acquisition of any property, TOKYU REIT investigates such property for toxic substances, soil contamination and other environmental hazards and evaluates any mid- to long-term effects on such property.

(Note 1)The figures are calculated as it takes one minute for 80 meters based on fair competition rules concerning real estate indication.

(Note 2)When acquiring ownership right of land with leasehold interest, regulations on “B) Property size,” “C) Fixtures” and “E) Earthquakes” shall not apply.

(Note 3)From the viewpoints of maintenance of functions, securement of legality, maintenance/enhancement of asset value, etc., TOKYU REIT may acquire a property as an ancillary property of other investment property.
Furthermore, from the viewpoints of maintenance/enhancement of asset value, smoother/more efficient operations, etc., TOKYU REIT may additionally acquire sectional ownership, co-ownership interest or such of a property already owned; or acquire land and building or land in the neighboring areas of a property already owned. In such cases, regulations on “B) Property size,” “C) Fixtures” and “D) Investment size, investment amount and acquisition price” shall not apply. (When acquiring only the ownership of land (raw land) in the adjacent or neighboring areas of a property already owned, regulations on “E) Earthquakes” shall not apply either.

(Note 4)“LTV” refers to interest-bearing liabilities as a percentage of total amount of assets.

(Note 5)“DSCR” refers to net cash flow as a percentage of principal and interest liabilities of interest-bearing liabilities.

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