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Yoshiaki Shiraki Executive Director, Hankyu REIT, Inc. President and Representative Director, Hankyu REIT Asset Management, Inc.

To All Readers:

Hankyu REIT strives to eliminate risks in addition to the maintenance and increase of distributions.

Hankyu REIT reached a settlement with Fujita Kanko Inc., the plaintiff, on September 13, concerning a lawsuit over rent reduction for Hotel Gracery Tamachi.
The details of the settlement describe a monthly rent reduction of approximately 1.44 million yen (approximately 7.4%). The plaintiff had demanded a rent reduction of approximately 4.56 million yen (approximately 23.5%). Hankyu REIT filed a counterclaim to increase rent by approximately 1.41 million yen (approximately 7.3%).

Notice Concerning Settlement for Rent Reduction Action (Hotel Gracery Tamachi)

Although it was regretful that our claim was not attained, the details of the settlement are favorable when compared to the median value of the claims from both parties. Moreover, there were concerns that further lengthening of the trial would increase risk as nearly three years had elapsed since the plaintiff filed the suit.

Avoiding a significant impact on revenue and expenditure by exercising operational ingenuity is possible in coming to an appropriate settlement at this point in time.
We judged that the stabilization of distribution per unit and elimination of future risk factors will serve the interests of unitholders over the medium-to-long-term.

Temporary expenditure (payment of settlement money) will accrue in conjunction with the settlement. We were able to review each expenditure item and confirm that revenue and expenditure are generally well balanced.

Accordingly, there are no changes to the forecasted distribution of 2,800 yen for the 25th fiscal period (fiscal period ending November 2017) and 2,900 yen for the 26th fiscal period (fiscal period ending May 2018).

As mentioned earlier, Hankyu REIT recognizes the “maintenance and increase of distributions” as its vital mission.
We will continue to strive for a steady increase of distributions through various measures.

We look forward to your continued support and patronage.

September 2017