Heiwa Real Estate : June 07, 2024Notice regarding Conclusion of Capital and Business Alliance Agreement between the Company and Taisei Corporation, and Related Tripartite Agreement including Mitsubishi Estate Co., Ltd.(177KB)

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

June 7, 2024

For immediate release

Kiyoyuki Tsuchimoto, Representative Executive Officer, President and CEO Heiwa Real Estate Co., Ltd.

1-10, Nihonbashi Kabuto-cho,Chuo-ku, Tokyo

(Code No. 8803) TSE Prime Market, NSE Premier Market, Fukuoka, and Sapporo

Notice regarding Conclusion of Capital and Business Alliance Agreement between the Company and

Taisei Corporation, and Related Tripartite Agreement including Mitsubishi Estate Co., Ltd.

Heiwa Real Estate Co., Ltd. (hereinafter, "Heiwa Real Estate" or the "Company") resolved at the Board of Directors' meeting held today to enter into a capital and business alliance (hereinafter, the "Alliance") with Taisei Corporation (hereinafter, "Taisei") and signed a capital and business alliance agreement (hereinafter, "Alliance Agreement") as of today. Additionally, the Company, Taisei, and Mitsubishi Estate Co., Ltd. (hereinafter, "Mitsubishi Estate") have signed an agreement concerning tripartite collaboration. This agreement (hereinafter, the "Cooperation Agreement") pertains to the Alliance Agreement and a capital and business alliance agreement between the Company and Mitsubishi Estate dated February 17, 2011.

1. Reasons for Concluding the Alliance and the Cooperation Agreement

The Company engages in the Building Business, encompassing the development, leasing, management, acquisition, and sale of buildings such as the Tokyo Stock Exchange Building and Osaka Stock Exchange Building, along with other stock exchange buildings in Nagoya and Fukuoka, as well as offices, commercial facilities, and residential properties. The Company is also involved in Asset Management Business, which includes managing assets for HEIWA REAL ESTATE REIT, Inc., and providing brokerage services for real estate transactions. Under the Group Purpose, "Enriching everyone's future with Bazukuri that draws people in," and guided by the Group Long-term Vision "WAY 2040," the Company is committed to various growth strategies based on the slogan, "Pursue perpetual dynamic growth to become the 'Bazukuri Company.'" These strategies include efforts to expand redevelopment business (deploy Bazukuri endeavors that draw people in throughout Japan), cultivate profit growth while enhancing capital efficiency (expand leasing business, reinvest gains from property sales, and enter new business areas), and boost social value (promote sustainability initiatives). The Company has been considering business alliances with potential collaborators who can work together to achieve these goals.

Taisei, a partner in the Alliance, has an outstanding track record, particularly in urban redevelopment, as one of Japan's leading general contractors. Moreover, both the Company and Taisei believe they can establish a strong collaborative relationship, especially in asset management and sustainability initiatives. Based on these considerations, the Company concluded that Taisei is the optimal business alliance partner to collaboratively develop these areas.

Through the Alliance, it is expected that establishing a medium- to long-term collaborative relationship will lead to greater corporate value for both companies. This will be achieved by further leveraging their respective strengths in business foundations, expertise, and other domains to (1) expand and accelerate redevelopment

1

business, (2) collaborate on new business areas such as investments in new real estate (asset classes), and (3) promote business alliances in the fields of sustainability and digital transformation (DX).

As part of the Alliance, in addition to the business partnership, Taisei will become the largest shareholder of the Company by acquiring its common shares from both Simplex Asset Management Co., Ltd. and Simplex Asset Management (HK) Company Limited (hereinafter, collectively referred to as "Simplex") and Mitsubishi Estate. Through this, Taisei and the Company expect to establish a close business collaboration and leverage business synergies, thereby enhancing corporate value mutually.

Additionally, since the Company has already formed a capital and business alliance with Mitsubishi Estate, the conclusion of the Cooperation Agreement aims to establish mutual understanding between the three parties-Heiwa Real Estate, Taisei, and Mitsubishi Estate-regarding how the new Alliance Agreement relates to the existing alliance with Mitsubishi Estate.

These three companies shall respect the spirit, purpose, and content of each other's capital and business alliance agreements. For the Company and Mitsubishi Estate, this refers to the capital and business alliance agreement dated February 17, 2011, between the two companies. For the Company and Taisei, it pertains to the Alliance Agreement being discussed presently. Through mutual cooperation and coordination in advancing capital and business alliances based on their respective agreements, the three companies aim to establish a collaborative relationship and enhance their individual corporate value.

2. Details of the Alliance and the Cooperation Agreement

(1) Details of the Alliance

The Company and Taisei have agreed to collaborate in various business domains, with the main contents outlined as follows.

1) Collaboration in redevelopment business, etc.

To facilitate the progress of long term redevelopment projects, the parties have agreed to establish and develop a collaborative relationship for redevelopment projects in the Nihonbashi Kabutocho district, along with Mitsubishi Estate. They will also engage in sincere discussions to: a) examine and promote redevelopment projects in Sapporo, b) establish a comprehensive cooperative relationship, including mutual provision of know-how related to redevelopment projects as needed, and c) collaborate on redevelopment projects that either or both may consider promoting in the future.

2) Collaboration in new business fields such as new real estate investment

The Company aims to venture into new business fields to achieve the Group Long-term Vision, and the parties have agreed to actively collaborate on business alliances in new business fields such as investment in logistics facilities, a new asset class.

3) Collaboration in sustainability and DX

The parties have agreed to actively collaborate on business alliances in the fields of sustainability and DX.

In addition, Taisei has agreed to nominate one person as a candidate for an executive officer position at the Company.

Taisei acknowledges and fully respects the Company's commitment to maintaining listing status and management autonomy, prioritizing the collective interests of all shareholders in addition to its own.

(2) Details of the Cooperation Agreement

2

The Company, Taisei, and Mitsubishi Estate shall mutually respect the spirit, purpose, and content of each other's capital and business alliance agreements, and shall advance the alliances based on their respective agreements. In doing so, they shall cooperate and collaborate with each other within the required scope.

(3) Number of shares to be newly acquired by the counterparty and percentage of shares outstanding

The Company and Taisei, as well as the Company and Mitsubishi Estate, have agreed to smoothly advance their respective capital and business alliance agreements and the tripartite collaborative relationship. To facilitate this process, Taisei has today entered into share transfer agreements with both Simplex and Mitsubishi Estate (hereinafter, the "Share Transfer Agreements"). Under these agreements, Taisei will acquire all of the common shares of the Company held by Simplex (5,829,000 shares, representing 16.30% of the total voting rights (357,527) as of March 31, 2024, with the percentage rounded to two decimal places. This number includes one voting right for 100 shares that, while registered under the Company's name in the shareholder register, are not substantially owned by the Company.) and a portion of the common shares of the Company held by Mitsubishi Estate (388,500 shares, representing 1.09% of the voting rights) through off-market transactions. The transfer of shares is scheduled to be completed on June 10, 2024, upon which Taisei will become one of the Company's major shareholders as well as the largest shareholder among major shareholders, and have relationships with other affiliated companies. Regarding the transfer of shares, please refer to the "Notice of Change concerning the Company's Major Shareholders and Largest Shareholder" released today. The Company also plans to acquire common shares of Taisei in the market, ensuring that the voting rights ratio does not exceed 0.5%.

In addition, the Company has resolved today to execute a share repurchase and has determined the specific acquisition method (hereinafter, "the Share Repurchase" based on this resolution). An announcement titled "Notice of Decision to Conduct a Share Repurchase through the Tokyo Stock Exchange Trading Network for Off-Floor Share Repurchases" has been released today. Mitsubishi Estate plans to sell a portion of its common shares of the Company back to the Company as part of this share repurchase.

(Reference) The number of common shares of the Company and the percentage of voting rights held by each company after the Alliance and the Share Repurchase (planned)

Taisei	Mitsubishi Estate
6,750,100 shares (20.12% of voting rights) (planned)	1,677,300 shares (5.00% of voting rights) (planned)

Note: The percentage of voting rights (planned) is calculated based on the figure obtained by deducting the number of shareholders' voting rights that the Company plans to acquire from shareholders intending to sell their stake in the Company via the Share Repurchase scheme from the total number of shareholder voting rights as of March 31, 2024 (357,527).

3. Overview of partner in the Alliance and the Cooperation Agreement

(1)	Company name	Taisei Corporation
(2)	Address	1-25-1,Nishi-Shinjuku,Shinjuku-ku, Tokyo 163-0606, Japan
(3)	Name and position of	Yoshiro Aikawa, President and Chief Executive Officer
representative
		Planning, surveying, designing, supervising, construction and
(4)	Main businesses	installation, engineering, management, and consulting related to building
works, civil engineering works, plant installation works, and other
		construction works of all kinds

3

(5)	Paid-in capital	¥122,742 million
(6)	Date of incorporation	December 28, 1917
(7)	Major shareholders and	The Master Trust Bank of Japan, Ltd. (Trust Account)
shareholding ratio		16.14%
	(As of March 31, 2024)	Custody Bank of Japan, Ltd. (Trust Account)		5.23%
		Taisei Associates' Shareholding Plan		3.33%
		NORTHERN TRUST CO. (AVFC) RE SILCHESTER
		INTERNATIONAL INVESTORS INTERNATIONAL
		VALUE EQUITY TRUST				3.22%
		STATE STREET BANK AND TRUST COMPANY 505223	2.28%
		Taisei Employees' Shareholding Plan		1.97%
		NORTHERN TRUST CO. (AVFC) RE U.S. TAX
		EXEMPTED PENSION FUNDS		1.80%
		STATE STREET BANK AND TRUST COMPANY 505234	1.78%
		Retirement Benefit Trust in Mizuho Trust (Mizuho Bank,
		Ltd. Account)				1.55%
		Meiji Yasuda Life Insurance Company		1.54%
		Capital relationship	Taisei holds 532,600 shares of the
		Company's shares.
	Relationship between
	Personnel relationship	Not applicable
(8)	the listed company and
		Taisei receives orders for construction and
	said company	Transactional relationship
	other related work from the Company.
		Status as related party	Not applicable
(9)	Financial position and operational performance over the past three years (millions of yen)
	Fiscal year-end	March 31, 2022		March 31, 2023		March 31, 2024
	Consolidated net assets	872,835		833,944			961,000
	Consolidated total assets	1,956,200		2,016,717			2,583,641
	Net assets per share	4,335.78		4,402.01			5,039.98
	Consolidated net sales	1,543,240		1,642,712			1,765,023
	Consolidated operating	96,077		54,740			26,480
	income
	Consolidated ordinary income	103,247		63,125			38,910
	Net income attributable to	71,436		47,124			40,272
	owners of parent
	Net income per share (yen)	350.88		241.24			215.75
	Dividend per share (yen)	130		130			130
4. Overview of partner in the Cooperation Agreement
(1)	Company name	Mitsubishi Estate Co., Ltd.
(2)	Address	Otemachi Park Building, 1-1, Otemachi 1-chome,Chiyoda-ku, Tokyo
100-8133, Japan
(3)	Name and position of	Atsushi Nakajima, Representative Corporate Executive Officer, President
representative	& Chief Executive Officer
(4)	Main businesses	Development and leasing of office buildings, retail, hotels, logistics, and

4

		other facilities
		Development and sale of real estate for investment purposes in Japan and
		overseas
		Development and sale of land for housing, research, and other facility
		use
		Management of airports, leisure facilities, etc.
		Brokerage of real estate and related consulting services
		Asset management business
(5)	Paid-in capital	¥142,414 million
(6)	Date of incorporation	May 7, 1937
(7)	Major shareholders and	The Master Trust Bank of Japan, Ltd. (Trust Account)
shareholding ratio	17.41%
	(As of March 31, 2024)	Custody Bank of Japan, Ltd. (Trust Account)	6.11%
		Meiji Yasuda Life Insurance Company	3.33%
		STATE STREET BANK WEST CLIENT - TREATY 505234	1.91%
		SSBTC CLIENT OMNIBUS ACCOUNT	1.72%
		Takenaka Corporation		1.43%
		Obayashi Corporation		1.29%
		Shimizu Corporation		1.29%
		JP MORGAN CHASE BANK 385781	1.27%
		JP MORGAN CHASE BANK 385632	1.15%
			Mitsubishi Estate holds 4,274,100 shares
		Capital relationship	of the Company's shares, and the
		Company holds 365,000 shares of
	Relationship between		Mitsubishi Estate's shares.
	Personnel relationship	Not applicable
(8)	the listed company and
	The Company and Mitsubishi Estate are
	said company
		engaged in joint development for
		Transactional relationship
		numerous real estate development
			projects.
		Status as related party	Not applicable

1. Financial position and operational performance over the past three years (millions of yen)

Fiscal year-end	March 31, 2022	March 31, 2023	March 31, 2024
Consolidated net assets	2,236,432	2,379,941	2,624,593
Consolidated total assets	6,493,917	6,871,959	7,583,748
Net assets per share	1,514.58	1,664.47	1,896.25
Consolidated net sales	1,349,489	1,377,827	1,504,687
Consolidated operating	278,977	296,702	278,627
income
Consolidated ordinary income	253,710	271,819	241,158
Profit attributable to owners of	155,171	165,343	168,432
parent
Earnings per share (yen)	116.45	125.54	131.96
Dividends per share (yen)	36	38	40

5

5. Schedule

(1)	Date of Board of Directors' resolution	June 7, 2024
(2)	Date of conclusion of the Alliance and the Cooperation	June 7, 2024
	Agreement
(3)	Start date of the Alliance and the Cooperation Agreement	June 7, 2024
(4)	Date of conclusion of Share Transfer Agreements	June 7, 2024
(5)	Completion date of share transfer procedures	June 10, 2024 (planned)
(6)	Execution date of the Share Repurchase	June 10, 2024 (planned)

6. Expected impact of the Alliance and Cooperation Agreement

For the impact on performance forecasts for the fiscal year ending March 31, 2025 due to the conclusion of the Alliance and the Cooperation Agreement, please refer to the "Notice of Upward Revision to Planned Dividend" announced today. The Company believes that the conclusion of the Alliance and Cooperation Agreement will contribute to the enhancement of performance and corporate value over the medium to long term.

6