Frontier Real Estate Investment : Notice Concerning Acquisition of Real Estate Properties in Japan (Yaoko Sagamihara Hikarigaoka Store and Yaoko Nishiomiya Store)

Translation Purpose Only

March 15, 2024

To All Concerned Parties

6-8-7 Ginza, Chuo-ku, Tokyo

Frontier Real Estate Investment Corporation

Takao Iwadou, Executive Director

(Securities Code: 8964)

Asset Management Company:

Mitsui Fudosan Frontier REIT Management Inc.

Shintaro Ono

Chief Executive Officer and Representative Director

Inquiries:

Mitsui Fudosan Frontier REIT Management Inc.

Teruyuki Hayashi

Chief Finance Officer and Director

Tel: [phone]

Notice Concerning Acquisition of Real Estate Properties in Japan

(Yaoko Sagamihara Hikarigaoka Store and Yaoko Nishiomiya Store)

Frontier Real Estate Investment Corporation (the "Investment Corporation") hereby announces the decision of Mitsui Fudosan Frontier REIT Management Inc., the Investment Corporation's asset management company (the "Asset Management Company"), reached on March 15, 2024, to acquire the Yaoko Sagamihara Hikarigaoka Store and the Yaoko Nishiomiya Store (collectively or individually, the "Acquisition;" the two aforementioned properties are hereinafter collectively referred to as the "Assets to Be Acquired") as described below.

1. Details of Assets to Be Acquired

(1)	Property name	Yaoko Sagamihara Hikarigaoka Store		Yaoko Nishiomiya Store
(2)	Type of Asset to	Real estate		Real estate
	be acquired
(3)	Planned	¥2,000 million		¥2,500 million
	acquisition price1	(Land: ¥1,604 million,		(Land: ¥2,060 million,
		Building: ¥396 million)		Building: ¥440 million)
(4)	Contract date	March 15, 2024
(5)	Planned	May 1, 2024		July 1, 2024
	acquisition date	(Delivery and clearance date)		(Delivery and clearance date)
(6)	Seller	Not disclosed2
(7)	Broker	Yes
(8)	Acquisition	Self-financing (planned)
	financing
(9)	Payment method	Single payment at the time of delivery

1. The amount noted here excludes miscellaneous acquisition costs, real property taxes, city planning taxes, consumption taxes, etc.
2. Not disclosed as the Investment Corporation has not obtained the seller's permission to do so. The seller has no capital relationship, personal relationship, business relationship or other relationship of interest with the Investment Corporation or Asset Management Company.

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2. Rationale

The proposed acquisition is in line with the Investment Corporation's "Basic Policy of Asset Management" as

stipulated in its Articles of Incorporation, and falls under portfolio replacement measures aimed at enhancing

the quality of portfolio over the medium to long term. In its decision to acquire these assets, the Asset

Management Company also considered, inter alia, the following factors:

Yaoko Sagamihara Hikarigaoka Store

1. Evaluation of the Site

This property is located in Sagamihara City, Kanagawa Prefecture and is about 18 minutes by foot from Kamimizo Station of the JR Sagami Line. This location boasts easy access from neighboring retail trading areas supported by local residential districts consisting mainly of single-family houses and spreading alongside crossroads of Prefectural Road 507 that stretches between the JR Sagami Line (which includes Kamimizo and Hashimoto stations) and the JR Yokohama Line (which includes Fuchinobe and Yano stations). The population within a 1 km radius of the retail trading area is estimated at 34,000 and at 209,000 within a 3 km radius. This suggests a sufficient population, backed by robust residential density, which is a hallmark of a metropolitan bedroom community. In sum, the property's location is highly favorable due to the presence of neighboring residential areas surrounded by multiple stations along both the JR Sagami Line and the JR Yokohama Line.

In addition, a future plan calling for establishing a new Linear Central Bullet Train station is expected to involve areas near Hashimoto Station of the JR Sagami Line. We therefore consider the property's location to be quite promising as this plan may well help increase the potential of areas surrounding the property.

1. Features of the Property

The property is a medium-scale shopping center opened in June 2014, consisting of Yaoko, which serves as a core retail facility, as well as Daiso, Paseos and other stores whose differing styles complement each other quite effectively. As a large proportion of shoppers visit the property by car due to its location alongside Prefectural Road 507, it is equipped with a large single-story parking lot capable of housing 150 cars. This parking lot also makes the property stand out from neighboring streets.

Yaoko Nishiomiya Store

1. Evaluation of the Site

The location of this property includes areas subject to the Specific Land Readjustment Project for West Omiya, which currently targets districts near Nishi-Omiya Station of the JR Kawagoe Line. The property is

1. 14-minutewalk from Nishi-Omiya Station. Moreover, the nearby Miyamae Interchange directly connects to the intersection of National Roads 16 and 17, both of which function as arteries of the Tokyo metropolitan area. As such, the property boasts smooth access to interregional trunk roads. The retail trading area population within a 1 km radius is estimated at 11,000 and at 143,000 within a 3 km radius, suggesting a sufficient population. Furthermore, amid recent progress in the construction of single-family houses and

condominiums under the aforementioned project, the local population grew robustly by 153% and 106% within radiuses of 1 km and 3 km, respectively, over the course of the 2015-2020 period (based on the 2020 national census). We have thus concluded that the property's location will remain favorable thanks to expected local population growth.

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1. Features of the Property

The property is a medium-scale shopping center opened in January 2019, consisting of Yaoko, which serves as a core retail facility, as well as Seims, Seria and other stores whose differing styles complement each other quite effectively. As much of the land directly borders the nearest main road, the property is highly visible from the local neighborhood. Moreover, it is equipped with a large single-story parking lot capable of housing 119 cars. Taking these features into account, we have concluded that the p roperty boasts robust competitiveness in Saitama City, where car ownership is high, since it boasts smooth road access and a convenient parking lot.

3. Details of the Assets to Be Acquired

Name of asset	Yaoko Sagamihara Hikarigaoka Store
Type of asset		Real estate
Location (residence indication)	2-18-160 Hikarigaoka, Sagamihara City, Kanagawa
			Lot area	9,798.48 m2 (registered)
			Use	Category 2 residential district, Category 1 exclusive
			district for low-rise residential buildings
Land
	Plot ratio	200%, 100%
			Building to land ratio	60%, 50%
			Ownership	Property ownership
			Structure / Number of floors	Steel frame, alloy plate roof, two floors (registered)
			Construction completed	June 17, 2014
Building		Gross floor area	4,772.17 m2 (registered)
			Use	Stores
			Ownership	Proprietary ownership
Planned acquisition price	¥2,000 million
Appraisal value	¥2,140 million
Appraiser		Daiwa Real Estate Appraisal Co., Ltd.
PML in earthquake	11%
Collateral		None
Lease details
	Lessor		Investment Corporation
	Lessee	Not disclosed*
	Type of contract	Fixed-term building lease contract (fixed-rent master lease
	contract)
	Contract term	Not disclosed*
	Annual rent	Not disclosed*
	Termination during the contract term	Not disclosed*
	Rent revision	Not disclosed*
	Leasehold deposit	Not disclosed*
	Security deposit	Not disclosed*
	Number of tenants	1
	Total leasable floor space *5	4,772.17 m2
	Total leased floor space *5	4,772.17 m2
	Occupancy rate	100% (total leased floor space / total leasable floor space)
Note		None

• Not disclosed as the Investment Corporation has not obtained the lessee's permission to do so.
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Name of asset	Yaoko Nishiomiya Store
Type of asset		Real estate
Location (registered indication)	4-5-1 Nishiomiya, Nishi Ward, Saitama City, Saitama, etc.
			Lot area	14,763.00 m2 (registered)
			Use	Category 2 residential district, Category 1 exclusive
			district for low-rise residential buildings
Land
	Plot ratio	200%
			Building to land ratio	60%
			Ownership	Property ownership
			Structure / Number of floors	Steel frame, alloy plate roof, single floor (registered)
			Construction completed	January 23, 2019, expanded on January 8, 2021
Building		Gross floor area	4,288.93 m2 (registered)
			Use	Stores
			Ownership	Proprietary ownership
Planned acquisition price	¥2,500 million
Appraisal value	¥2,660 million
Appraiser		Daiwa Real Estate Appraisal Co., Ltd.
PML in earthquake	10%
Collateral		None
Lease details
	Lessor		Investment Corporation
	Lessee	Not disclosed*
	Type of contract	Fixed-term building lease contract (fixed-rent master lease
	contract)
	Contract term	Not disclosed*
	Annual rent	Not disclosed*
	Termination during the contract term	Not disclosed*
	Rent revision	Not disclosed*
	Leasehold deposit	Not disclosed*
	Security deposit	Not disclosed*
	Number of tenants	1
	Total leasable floor space *5	4,288.93 m2
	Total leased floor space *5	4,288.93m2
	Occupancy rate	100% (total leased floor space / total leasable floor space)
Note		None

* Not disclosed as the Investment Corporation has not obtained the lessee's permission to do so.

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Translation Purpose Only

1. Seller Profile and the Status of Assets to Be Acquired in Connection with Previous Property Owners, etc.
   Although the seller is a business corporation in Japan, the remainder of its profile (name included) is not being disclosed as the Investment Corporation has not obtained the seller's permission to do so. The seller has no capital relationship, personal relationship, business relationship or other relationship of interest with the Investment Corporation or Asset Management Company.
2. Broker Profile

The broker has no capital relationship, personal relationship, business relationship or other relationship of interest with the Investment Corporation or Asset Management Company.

6. SC Management Agreement

The Investment Corporation has concluded a Basic Agreement Concerning Shopping Center Management for the operation and management of its retail facilities with Mitsui Fudosan Co., Ltd., the parent company of the Asset Management Company, with the aim of utilizing Mitsui Fudosan's expertise. Based on the stipulations of the basic agreement, an amended SC management agreement laying out the precise scope of the operations (including property management operations) for the Assets to Be Acquired, namely, the Yaoko Sagamihara Hikarigaoka Store and the Yaoko Nishiomiya Store, will be concluded following the Acquisition.

7. Matters Related to Forward Commitment

The Acquisition falls under the category of forward commitments, etc. (contracts for forward and future transactions in which settlement and delivery take place one or more months after their signing) (the "Forward Commitment"). The Forward Commitment may be cancelled under certain circumstances, including the violation of legal obligations or when a serious obstacle to the execution of the contract arises. If the Forward Commitment is cancelled, the party responsible for the cancellation is to pay a penalty equivalent to 20% of the real estate purchase price to the other party. In addition, this Forward Commitment is premised on asset replacement involving the sale of Queen's Isetan Suginami-Momoi outlined in a press release issued today under the title "Notice Concerning Sale of Trust Beneficiary Rights to a Real Estate Property in Japan." Because of this premise, this Forward Commitment allows for cancelation by either party if the agreement regarding the sale of trust beneficiary rights to the aforementioned properties is cancelled or otherwise terminated . Accordingly, this Forward Commitment does not necessitate additional financing by the Investment Corporation and, therefore, the likelihood of a significant direct negative impact on its financial status is considered to be low.

8. Outlook

For details on the expected effect of the Acquisition on the results for the 40th fiscal period, ending June 30, 2024, and the 41st period, ending December 31, 2024, please refer to "Notice Concerning the Revision of Operating Forecasts for the Fiscal Period Ending June 30, 2024 and the Fiscal Period Ending December 31, 2024" which was published today.

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9. Summary of Property Appraisal

Property name

Yaoko Sagamihara Hikarigaoka Store

Appraisal value

¥2,140,000,000

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Date of appraisal

February 16, 2024

Item

Content

Remarks

Calculated using

the

capitalization

method, with reference to both the value

Indicated value by income

¥2,140,000,000

indicated

by

the

income approach

approach

obtained by the DCF method and the

value indicated by the income approach

obtained by the direct reduction method.

Direct-reduction method

¥2,180,000,000

value

Operating income

Not disclosed

Underlying gross

Not disclosed

income

Loss from vacancy,

Not disclosed

etc.

Operating costs

Not disclosed

Maintenance and

Not disclosed

management fees

Utility costs

Not disclosed

Repair costs

Not disclosed

Property

Not disclosed

management fees

Tenant advertising

Not disclosed

costs

Taxes and public

Not disclosed

dues

Insurance premium

Not disclosed

Other expenses

Not disclosed

Net operating income

¥92,654,000

Operating profit on

Not disclosed

lump-sum payments

Capital expenditure

Not disclosed

Net income

¥91,663,000

Assessed by taking into account various

Cap rate

4.2%

factors associated with the target property

while

making

comparisons

with

transactions involving similar real estate.

DCF value

¥2,120,000,000

Assessed by comprehensively taking into

account

the

individual

characteristics,

Discount rate

4.0%

etc., of the target property, with reference

to investment yields, etc., of similar real

estate.

Assessed by comprehensively taking into

account the future trends of investment

Terminal cap rate

4.4%

yields, risks associated with the target

property as an investment target, the

general outlook for future economic

growth and trends in real estate prices and

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		Item		Content		Remarks
					rents, etc., with reference to transactional
					yields, etc. of similar real estate.
Indicated value by cost approach	¥2,100,000,000
	Land ratio	80.2%
	Building ratio	19.8%
				Due to the site characteristics, building use, and other
				attributes of the entire property, demand would primarily come
Other matters considered by the		from corporate investors with the ability to raise capital and
	who, in general, tend to	prioritize revenue potential in their
appraiser in carrying out the
	transactions.
appraisal
	Given this, the appraisal value was determined through a
				combination of the direct reduction method and the DCF
				method, with the cost approach value used as a reference.

* Not disclosed as the Investment Corporation has not obtained the lessee's permission to do so.

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Translation Purpose Only

Property name

Yaoko Nishiomiya Store

Appraisal value

¥2,660,000,000

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Date of appraisal

February 16, 2024

Item

Content

Remarks

Calculated using

the

capitalization

method, with reference to both the value

Indicated value by income

¥2,660,000,000

indicated

by

the

income approach

approach

obtained by the DCF method and the

value indicated by the income approach

obtained by the direct reduction method.

Direct-reduction method

¥2,720,000,000

value

Operating income

Not disclosed*

Underlying gross

Not disclosed*

income

Loss from vacancy,

Not disclosed*

etc.

Operating costs

Not disclosed*

Maintenance and

Not disclosed*

management fees

Utility costs

Not disclosed*

Repair costs

Not disclosed*

Property

Not disclosed*

management fees

Tenant advertising

Not disclosed*

costs

Taxes and public

Not disclosed*

dues

Insurance premium

Not disclosed*

Other expenses

Not disclosed*

Net operating income

¥111,312,000

Operating profit on

Not disclosed*

lump-sum payments

Capital expenditure

Not disclosed*

Net income

¥111,364,000

Assessed by taking into account various

Cap rate

4.1%

factors associated with the target property

while

making

comparisons

with

transactions involving similar real estate.

DCF value

¥2,640,000,000

Assessed by comprehensively taking into

account

the

individual

characteristics,

Discount rate

3.9%

etc., of the target property, with reference

to investment yields, etc., of similar real

estate.

Assessed by comprehensively taking into

account the future trends of investment

yields, risks associated with the target

Terminal cap rate

4.3%

property as an investment target, the

general outlook for future economic

growth and trends in real estate prices and

rents, etc., with reference to transactional

yields, etc. of similar real estate.

Indicated value by cost approach

¥2,660,000,000

Land ratio

82.4%

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	Item		Content		Remarks
	Building ratio	17.6%
			Due to the site characteristics, building use, and other
			attributes of the entire property, demand would primarily come
Other matters considered by the		from corporate investors with the ability to raise capital and
	who, in general, tend to	prioritize revenue potential in their
appraiser in carrying out the
	transactions.
appraisal
	Given this, the appraisal value was determined through a
			combination of the direct reduction method and the DCF
			method, with the cost approach value used as a reference.

* Not disclosed as the Investment Corporation has not obtained the lessee's permission to do so.

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Attachments

1. Maps of the surrounding areas of the Assets to Be Acquired and exterior photographs of the assets
2. Overview of the investment portfolio after the asset replacement

Frontier Real Estate Investment Corporation website: https://www.frontier-reit.co.jp/en/

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