Kenedix Office Investment : Supplementary Material on the Acquisition and Sale, etc. Announced Today

Supplementary Material on the Acquisition and Sale, etc. Announced Today

"Notice Concerning Acquisition of Property (Shinbashi M-SQUARE Bright) and Sale of Properties(KDX Nihonbashi Honcho Building, KDX Nihonbashi Edo-dori Building and KDX Shin-Nihonbashi Building)"

"Notice Concerning Revision of the Operating Forecasts and Distribution Forecasts for the Fiscal Period Ending October 31, 2020 (the 31st Fiscal Period) and for the Fiscal Period Ending April 30, 2021 (the 32nd Fiscal Period)"

June 26, 2020

Outline of the asset reshuffle announced today

Highlight of the asset reshuffle

 Acquired a relatively new property in urban central area with scarcity value supported by the sponsor  Reduced the risk of future increases in repair/maintenance expense, etc. by selling three relatively old properties  Recorded gain on sale of properties over two fiscal periods with an increase in DPU expected during COVID-19 crisis

Acquired in 31st fiscal period

Sold in 31st fiscal period

Sold in 32nd fiscal period

Effects after the transaction

Shinbashi M-SQUARE

KDX Nihonbashi Honcho

Bright

Bldg.

KDX Nihonbashi Edo-dori Bldg.

KDX Shin-Nihonbashi

Bldg.

Seller	Zao Properties TMK
Anticipated acquisition price	16,300 mn yen
Appraisal value (As of May 1, 2020)	20,500 mn yen
NOI yield after depreciation (estimate) (Note 1)	3.3%
Scheduled date of acquisition	June 30, 2020
Completion date	September 2018

Mid-long term estimate

Growth in DPU

+140 yen/period

(Note 2)

Decrease in average age

-28.8 years

(Note 3)

Gains on sales of properties secured

(Note 4)

Increase in retained earnings

+700 mn +600 mn yen yen

31st fiscal period	32nd fiscal period
(2020/10)	(2021/4)
+1.0 bn	+1.1 bn
yen	yen
31st fiscal period	32nd fiscal period
(2020/10)	(2021/4)

Note 1: The yield for property to be acquired is calculated by dividing the annualized NOI after depreciation (estimate) calculated by the Asset Management Company excluding extraordinary factors for the acquisition year by the anticipated acquisition price. The yield for the properties to be sold is calculated by dividing the sum of the rental operating income (NOI after depreciation (actual)) for the 29th (2019/10) and 30th (2020/4)

fiscal periods by the anticipated sale price

Note 2：Calculated by deducting the estimated costs for borrowing (9.7 billion yen) to allocate funds for acquisition and the sum of the rental operating income of the properties to be sold in 30th fiscal period (2020/4) from the NOI after depreciation (estimate) of the property to be acquired and then dividing the value by the total number of investment units issued and outstanding as of the end of the 30th fiscal period (2020/4)

(truncated to the nearest ten yen)

Note 3: Calculated by deducting the weighted average age of the properties to be sold at acquisition price from the age of the property to be acquired as of June 30, 2020 Note 4: Gains on sales of properties are estimated based on the estimated book value and selling expenses, etc.

Dividend and reserve for reduction entry

Highlight of revised forecasts

 Dividend is expected to significantly exceed the previous forecast amount, with part of the gain on sale being distributed  Seek to maximizing retained earnings utilizing the special taxation measure applicable up to the 32nd fiscal period  Increase both DPU and retained earnings to be fully prepared for uncertainties in the business environment

Changes in DPU (Note 1)

Changes in balance of reserve for reduction entry (Note 3)

(yen)

(mn yen)

第30期

4,116

3,493

第29期

29th fiscal

（19/10期）

30th fiscal

（20/4期）

period 実(2績019/10)period実(績2020/4)

31st fiscal period (2020/10)

第31期 （20/10期） 当初予想

第31期 （20/10期） 今回予想

第32期 第32期

第29期

2,775

2,775

32nd fiscal

29th fiscal

（21/4期） （21/4期）

（19/10期）

当pe初ri予od想 (20今2回1予/4想)

period (2019/10) period (2020/4)

実績

Actual

Actual

Previous forecast

Revised forecast

Previous forecast

Revised forecast

Actual

30th fiscal

（20/4期）

実績

第30期

第31期

第31期

31st fiscal

（20/10期）

（20/10期）

Actual

当初予想 Previous forecast

period

(2020/10)

今回予想

第32期 （21/4期） 当初予想

32nd fiscal period (2021/4)

第32期 （21/4期） 今回予想

Revised forecast

LTV

(Note 2)

42.1%

42.9%

43.9%

43.9%

Reserve for reduction entry per unit

forecast

Previous Revised

forecast

6,476 yen

6,476 yen

8,152 yen

9,605 yen

New borrowing will cover the shortage of funds for asset reshuffle in the 31st fiscal period

Borrowing +9.7 bn yen

Partial repayment of borrowing is considered after the sale

Note 1: Figures per unit are calculated based on the number of investment units issued and outstanding as of the end of each fiscal period (the same applies hereinafter)

Note 2: LTV for the 31st (2020/10) and 32nd (2021/4) fiscal periods are calculated by dividing the outstanding interesting-bearing debt (estimate) as of the end of the relevant fiscal period by the total asset (estimate) based on the implementation of asset reshuffle announced today (rounded to the first decimal place)

Note 3: The forecast balance of the reserve for reduction entry is calculated by adding the estimated provision of reserve for reduction entry for each fiscal period to the estimated balance of reserve for reduction entry on the balance sheet as of the end of the 30th fiscal period (2020/4)

Properties to be acquired and sold in and after the 31st fiscal period (2020/10)

Property to be acquired

Properties to be sold

Property name

Location

Total floor area

Completion date

Occupancy rate

(As of May 31, 2020)

Number of tenants

(As of May 31, 2020)

Anticipated acquisition price

Appraisal value

(As of May 1, 2020)

Seller

Acquisition route

Scheduled date of acquisition

Property name	KDX Nihonbashi Honcho Bldg.	KDX Nihonbashi Edo-dori Bldg.
Location	Chuo-ku, Tokyo	Chuo-ku, Tokyo
Floor area	5,110.45m2	1,722.17m2
Completion date	January 1984	March 1985
Book value (Note 4)	3,905 mn yen	1,381 mn yen
Anticipated sale price	5,000 mn yen	1,550 mn yen
Difference between anticipated sale price and book value:(Anticipated sale price - book value) / book value	28.0%	12.2%
Appraisal value (As of April. 30, 2020)	4,950 mn yen	1,510 mn yen
Buyer	Mitsui Fudosan Co., Ltd.	Mitsui Fudosan Co., Ltd.
Acquisition date	November 12, 2010	August 2, 2016
Scheduled date of sale	June 30, 2020	June 30, 2020

NOI yield (estimate) (Note 1)	3.6%
NOI yield after depreciation (estimate) (Note 2)	3.3%
Appraisal NOI yield (Note 3)	3.7%

NOI yield (actual) (Note 5)	5.4%	4.4%	5.8%
NOI yield after depreciation (actual) (Note 6)	4.8%	3.8%	4.4%
Sale price NOI yield (Note 7)	4.3%	3.9%	4.2%

Note 1: Calculated by dividing the annualized NOI (estimate) calculated by the Asset Management Company excluding extraordinary factors for the acquisition year by the anticipated acquisition price (rounded to the nearest first decimal place; the same applies to the yields hereinafter)

Note 2: Calculated by dividing the annualized NOI after depreciation (estimate) calculated by deducting the depreciation expenses (estimate) from NOI (estimate) by the anticipated acquisition price Note 3: Calculated by dividing the NOI based on the direct capitalization method described in the appraisal report as of May 1, 2020 by the anticipated acquisition price

Note 4: The figures indicate the estimated book values as of the scheduled date of sale (rounded down to the million)

Note 5: Calculated by dividing the sum of the NOI (actual) for the 29th (2019/10) and 30th (2020/4) fiscal periods by the acquisition price

Note 6: Calculated by dividing the sum of rental operating income (actual) for the 29th (2019/10) and 30th (2020/4) fiscal periods by the acquisition price Note 7: Calculated by dividing the sum of the NOI (actual) for the 29th (2019/10) and 30th (2020/4) fiscal periods by the anticipated sale price

Disclaimer

The contents of this document, including summary notes, quotes, data and other information, are provided solely for informational purposes and not intended for the purpose of soliciting investment in, or as a recommendation to purchase or sell, any specific products.

Please be aware that matters described herein may change or cease to exist without prior notice of any kind. This document contains forward-looking statements and anticipations of future results, based on current assumptions and beliefs in light of currently available information and resources. Risks and uncertainties, both known and unknown, including those relating to the future performance of the real estate market in Japan, interest rate fluctuations, competitive scenarios, and changing regulations or taxation, may cause Kenedix Office Investment Corporation (KDO)'s actual results, performance, achievements and financial performance to be materially different from those explicitly or implicitly expressed in this document.

With respect to any and all terms herein, including without limitation, this document, the information provided is intended to be thorough. However, no assurance or warranties are given with respect to the accuracy or completeness thereof.

Neither KDO nor Kenedix Real Estate Fund Management, Inc. (KFM) shall be liable for any errors, inaccuracies, loss or damage, or for any actions taken in reliance thereon, or undertake any obligation to publicly update the information contained in this document after the date of this document.

Revised editions of this document will be posted on our website (https://www.kdo-reit.com/en/) if there should be major corrections going forward.