Sustainable Equity

Hoshino Resorts REIT, Inc. (HRR) and Hoshino Resort Asset Management Co., Ltd. (Asset Management Company) believe that it is important to maximize investor value through ESG-conscious investment and asset management to improve the sustainability of HRR. Based on this belief, HRR has formulated a framework and raised funds through sustainable equity ^{(Note 1)} as part of its sustainability efforts.
It will not stop with fundraising through sustainable equity, etc. but will continue to contribute to the future through distinctive investment and asset management as it achieves its goal of creating shared value (CSV) aimed at solving social issues in accordance with its sustainability policy.

Sustainable equity is the sum of sustainability equity and green equity.

Overview of Sustainable Equity Fundraising (As of May 1, 2025)

Overview of Sustainable Equity Fundraising

Overview of the Sustainability Equity Framework

HRR has formulated the Sustainability Equity Framework as a basic policy for implementing sustainable equity, compliant with the Sustainability Bond Guidelines (SBG) 2021 and other principles and guidelines. The suitability of this framework has been evaluated by Rating and Investment Information, Inc. (R&I). HRR conducts, evaluates, and manages sustainability finance based on this framework and aims to provide ESG investment opportunities to a wide range of investors interested in sustainability. To view R&I's evaluation report, please see the following.

[R&I Evaluation Report on Sustainability Equity Framework]

1. Use of procured funds

HRR plans to use the proceeds raised through sustainability equity to acquire assets that meet the following social eligibility criteria and green eligibility criteria (hereinafter collectively “eligibility criteria”) and to implement construction work, or to refinance the funds

2. Eligibility criteria

[Social eligibility criteria]

HRR, the Asset Management Company, the lessee, or the operator shall, for the target property, implement two or more of the following “Initiatives for related parties, including users of real estate”, and two or more of the “ Initiatives for local communities” (however, at least one of 1 through 4 shall be included). If the property falls (2) to (4) of under the Green eligibility criteria described below, the social beneficial impacts of the property on which the relevant asset is to be installed shall apply mutatis mutandis.

The numbers shown in "Social issues" and "Stages of social issues" in the following table are in accordance with the "Interim Summary of the ESG Investment Promotion Study Group Addressing Social Issues in the Real Estate Sector" (the Ministry of Land, Infrastructure, Transport and Tourism). Please refer to the following document.

[The ESG Investment Promotion Study Group Addressing Social Issues in the Real Estate Sector (the Ministry of Land, Infrastructure, Transport and Tourism) ](Only available in Japanese)

< Initiatives for related parties, including users of real estate >

*Related parties, including users of real estate: tenants, employees, residents, visitors, workers engaged in real estate development, etc.

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	Social issues	Stages of social issues	Output	Outcome	Impact
1	Healthy living and workstyle	①, ②, ③	Implementation of “Ease of Work Survey” related to society and wellness	Realization of healthy and comfortable work environments Improving turnover, labor productivity, health and satisfaction	Improvement of health and comfort
2	Comfort of the workplace environment	①, ②	Publication of the Sustainability Guide	Voluntary action on climate change and social issues	Raising awareness of environmental and social issues
3	Preparation for natural disasters	①	Implementation of regular building safety management checks, disaster drills, stockpiling of emergency supplies, food, medicine, etc.	Disaster preparedness and training	To protect people's lives and livelihoods
4	Preparation for natural disasters	①	Analysis of portfolio resistance (resilience) from historical disaster data	Understanding current circumstances to apply past lessons to disaster prevention	To protect people's lives and livelihoods
5	Realization of diverse work styles and improved productivity	③	Promoting the use of internship programs, intra-group personnel exchange programs, training programs for new graduates, career development programs, and professional development programs	Early development of high-quality human resources and formation of career vision	To exercise one's motivation and ability

< Initiatives for local communities >

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	Social issues	Stages of social issues	Output	Outcome	Impact
1	Local charm and rich economy	③, ④	To explore local industry and history, and provide guests with more appeal for their stay	Revitalization of the culture of festivals and other events, secondary industries such as processed foods, and primary industries such as agriculture	Increase in the number of nonresident population Rejuvenation of the local population
2	Local charm and rich economy	③, ④	Plans to develop hot spring areas and install commercial facilities, etc.	Revitalization of stores in town Enhancing appeal for guests Fostering various communities	Interaction between regions and outside areas Fostering a new culture Economic revitalization
3	Prosperous economy	③	Providing workplaces to increase local employment Employee transfers from outside areas	Securing stable employment Enriching people’s lives	Meaningful work Rich life
4	To protect people's lives and livelihoods	①, ②	Providing shelters (places and food)	Protection of stranded commuters and local residents	Cooperation and coexistence with local communities
5	Dignity is preserved	①	Providing low-cost hotels	Realization of a simple and comfortable stay	Realization of an inclusive society
6	Dignity is preserved	①	Prevention of pandemics and establishment of patient care facilities	Prevention of infectious diseases	Reduction in the number of infected people and strain on hospital beds
7	Healthy living and local charm	②, ④	Conservation of the natural environment and protection of organisms (animals, plants and fungi) Building coexistence with the natural environment and organisms	Ecosystem conservation Enhancing regional appeal Maintenance of a healthy lifestyle	Realization of diversity Increase in the number of nonresident population Interaction between regions and outside areas Improvement of health and comfort

[Green Eligibility Criteria for the Sustainability Equity Framework]

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(1) Eligibility criteria for green building equity investments	(1) Green building/energy efficiency (buildings) and additional initiatives contributing to the environment (renewable energy, highly eco-efficient and environmentally adaptive products, environmentally friendly production technologies and processes, and initiatives that contribute to environmentally sustainable management of biological and natural resources and land use) Properties which have acquired or are scheduled to acquire certifications from third-party certification authorities by satisfying criteria ① to ④ below. If the initiatives specified in (i) to (v) are implemented for ① to ④, the entire property shall be considered a Green Eligible Property. < Additional Initiatives > (i) Procurement of natural energy (hydroelectric power, etc.) through EIMY (Energy In My Yard) (ii) Procurement of natural energy other than that indicated in (i) (iii) Implementation of 3Rs (reduce, reuse, and recycle) through zero emissions activities (iv) Reduction of usage of plastic products Switching from individually packaged soaps to pump bottles Toothbrush recycling Elimination of plastic drink bottles, etc. (v) Nature conservation activities ① BELS certification For the 2016 standards: 5 stars The following levels of BELS certification (based on FY2024 standards) excluding factories and logistics facilities with BEI > 0.75 Non-residential: Level 4 or higher Residential: Energy consumption performance level 3 or higher and thermal insulation performance level 5 or higher ② Silver or higher in LEED certification (for LEED BD+C v4 and later) Certified within 36 months from the time of funding ③ A or above in CASBEE certification ④ At least 3 stars in DBJ Green Building certification
(2) Renewable energy	Acquisition or installation of renewable energy power generation facilities.
(3) Energy Efficiency (Equipment)	Costs related to the introduction of energy-saving equipment, such as updating air conditioning systems, converting lighting fixtures to LED, or installing energy storage systems (with a projected reduction in usage or emissions of 30% or more compared to traditional methods).
(4) Renovation Works	Renovation works related to owned assets that enable beneficial environmental improvements, such as reductions in CO2, energy, water usage, or emissions (with a projected reduction in usage or emissions of 30% or more compared to traditional methods).

3. Project evaluation and selection process
(Applicable at the time of implementation of the sustainability equity offering)

Projects that meet the eligibility criteria for the use of funds procured through sustainability equity financing are selected by the Chief Sustainability Officer (CSuO) and are evaluated and discussed by the ESG Committee, which is composed of the President & CEO of the Asset Management Company, the Chief Investment Officer, the Chief Strategy Officer (CSO), the CFO, the Compliance Officer, and the CSuO. Following these evaluations and discussions, projects are decided on by the Board of Directors of the Asset Management Company and reported to the Board of Directors of HRR.

The names of departments and positions are listed according to the current company structure.

4．Funding management method
(applicable at the time of implementation of the sustainability equity offering)

(1) Plan for the allocation of procured funds

Funds procured through sustainability equity, after being credited to the account, will be allocated without delay to fund the acquisition of eligibility criteria, to fund the acquisition of existing properties that meet the eligibility criteria, and the implementation of construction work, or to refinance the borrowings required for the acquisition of eligibility criteria.

(2) Methods for tracking and managing procured funds

The Finance Department manages the allocation status of funds procured through sustainability equity using internal electronic files and other media. The CFO conducts reviews and makes periodic reports to the Board of Directors of the Asset Management Company and the Board of Directors of HRR as necessary.

(3) Internal control and external audits regarding tracking management

Reports on the allocation of funds procured through sustainability equity are made to the Board of Directors of the Asset Management Company and the Board of Directors of HRR as necessary, and internal audits are conducted by the Compliance Department and an audit corporation.

(4) Method of managing unallocated funds

Funds procured through sustainability equity will be managed in the form of cash or cash equivalents until a decision is made regarding their allocation.
After all funds are allocated, the sustainability equity amount and ratio will be calculated and managed

5．Reporting

(1) Disclosure status regarding fund allocation

The following two points will be disclosed on HRR’s website for each accounting period.

Any fund allocation plans for unallocated funds at the time of procurement through sustainability equity.
Sustainability equity amount and ratio

The acquisition balance of sustainability-qualified assets, calculated based on the Sustainability Finance Framework, subtracting the maximum amount of sustainability eligible liabilities from the total acquisition amount of sustainability-qualified assets, is considered to be sustainability equity. The ratio of the total investment amount on the balance sheet is disclosed as the sustainability equity ratio.
In addition, when implementing a sustainability equity offering, the equity funds raised shall be managed and appropriated in accordance with the Sustainability Finance Framework.

The remaining amount, obtained by deducting the maximum borrowing amount calculated based on the Sustainability Finance Framework established by HRR from the total acquisition amount of properties that meet the eligibility criteria, is considered to be sustainability equity (funds procured through capital increases that are allocated to targets that meet the eligibility criteria (2) to (4) of the Sustainability Finance Framework are added to the sustainability equity amount). It is divided by the total investment amount on HRR's balance sheet to indicate the sustainability equity ratio.
(However, funds procured through borrowings based on the eligibility criteria (2) to (5) of the Sustainability Finance Framework and assets that do not fall under the eligibility criteria of the Sustainability Equity Framework are excluded.)
Each HRR accounting period, the sustainability equity amount and ratio is to be disclosed on its website

(2) Method and frequency of disclosing impact reporting

Every year, the Key Performance Indicators (KPIs) shown in (3) below are disclosed on HRR’s website only as applicable.

(3) KPIs in impact reporting

[Impact reporting related to social projects]

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Output (Results of initiatives for each property)	The name and overview of the property acquired will be disclosed on HRR’s website
Outcome (Social and environmental changes and benefits brought about by the output)	Reducing turnover and improving labor productivity and satisfaction by providing a healthy and comfortable working environment Voluntary action on climate change and social issues Response to disasters (preparation and training) Understanding the current situation and apply past lessons to disaster prevention Early development of high-quality human resources and formation of career vision Revitalization of the culture of festivals and other events, secondary industries such as processed foods, and primary industries such as agriculture Creation of various communities by contributing to the revitalization of stores in town, and provision of attractiveness to guests, day-trippers, and local residents Securing stable employment and enriching people’s lives Protection of stranded commuters and local residents Provision of low-cost hotels for simple and comfortable stays (operation of various types of hotels) Commercial facilities (complex facilities) for day-trippers and local residents in addition to guests Local disaster prevention and resilience, including protection of stranded people during disasters Prevention of infectious diseases Ecosystem conservation
Impact (Social effects (targets) aimed at by realizing outcomes, including short- and long-term changes)	Improvement of health and comfort Raising awareness of environmental and social issues To protect people’s lives and livelihoods Exercising motivation and ability Increase in the number of nonresident population and rejuvenation of the local population Support for the fostering a new culture and revitalization of the economy through the formation of communities consisting of the local community and the nonresident population Meaningful work and rich life Cooperation and coexistence with the local communities Realization of an inclusive society Reducing number of infected people and strain on hospitals Realization of diversity

[Impact reporting related to green projects]

Number and type of environmental certifications for acquisition assets
(For renewable energy projects) Annual power generation and (estimated) CO2 reductions for the power generation equipment for which funds were allocated
Annual power generated by EIMY (hydroelectric power, etc.)
Energy-saving effects from the replacement of air conditioning equipment, etc
Amount of environmentally-friendly energy other than EIMY power that was procured
Ongoing composting of food waste (from 2011)
Reduction in amount of plastic container usage

① Ongoing switchover to use of pump bottles for shampoo, conditioner, and body soap (from 2019)
② Gradual switchover from mineral water in plastic drink bottles

Number of toothbrushes recycled
Overview of Nature Conservation Activities

Reporting based on the Sustainability Equity Framework

(1) List of Sustainability Equity Eligible Assets (as of May 1, 2025)

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Green Building Certification^{（※1）（※2）}	Property name	Acquisition Price (million yen)^（※4）
BELS^（※3）	Property name	Acquisition Price (million yen)^（※4）
★★★★★	HOSHINOYA Okinawa	12,210
★★★★★	KAI Kaga	3,160
★★★★	Iriomote Hotel (Hotel building)	3,650
★★★	HOSHINOYA Taketomi Island	4,955
★★	KAI Tamatsukuri	680
-	Total	24,655

The scope of evaluation for BELS certification or CASBEE certification may be only for part of the property. However, the total acquisition price for each property is used as the acquisition price.
In cases where multiple buildings within the property were granted BELS certification or CASBEE certification, the highest rating awarded to the relevant property is used.
With the revision and enforcement of the notification for the Buildings Energy-efficiency Labelling system in April 2024, the energy conservation performance labelling has become a seven-step system, but the ratings here are based on the five steps under the previous system. Due to the revision and enforcement of the notification, the eligible criteria for BELS certification (based on the FY2016 standards) have been changed from three stars or higher (i.e., two stars or higher plus additional initiatives) to five stars. However, given the nature of equity, which has no maturity (such as repayment), we have not retroactively applied the exclusion to properties that were already considered eligible sustainability equity assets at the time of the Sustainability Equity Framework update.
Amounts are rounded down to the nearest unit.

(2) Reporting on the status of fund allocation (as of May 1, 2025)

There are no unallocated funds at the time of procurement through sustainability equity.
There has been no sale of assets that are subject to the use of funds.

(3) Sustainability equity amount and ratio

Sustainability equity amount	Percentage of total investment
13,940 million yen	9.82%

LTV is based on the ratio of interest-bearing liabilities as of May 1, 2025 to the total acquisition price of properties owned by HRR.
Monetary amounts are rounded down to the nearest unit and ratios are rounded to the nearest unit.

*Please see the Sustainable Finance page for more information on impact reporting.

[Sustainable Finance]

Overview of the Green Equity Framework

HRR has formulated a Green Equity Framework as a basic policy for green finance, compliant with the Green Bond Principles and other principles and guidelines. Rating and Investment Information, Inc (R&I) has evaluated the appropriateness of the framework. Please see JCR's evaluation report below.

[R&I Green Equity Framework Evaluation Report]

HRR conducts, evaluates, and manages green equity financing based on this framework. It aims to provide ESG investment opportunities to a wide range of investors interested in sustainability.

1. Use of procured funds
(Applicable at the time of implementation of the green equity offering)

HRR plans to use the proceeds raised through green equity to acquire green building that meet the following eligibility criteria and to implement construction work, or to refinance the funds.