Frontier Real Estate Investment : Notice Concerning the Acquisition of Real Estate Properties in Japan (Two Properties Including TENJIN216)

Translation Purpose Only

February 14, 2020

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.

Goro Toyama

Chief Executive Officer and Representative Director

Inquiries:

Mitsui Fudosan Frontier REIT Management Inc.

Takashi Iwamoto

Chief Finance Officer and Director

Tel: [phone]

Notice Concerning the Acquisition of Real Estate Properties in Japan

(Two Properties Including TENJIN216)

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 February 14, 2020, to acquire TENJIN216 and La La Chance HIROSHIMA Geihinkan (land interest) (collectively, the "Acquisition;" the two aforementioned properties are hereinafter collectively referred to as the "Assets to Be Acquired"). As the seller of these properties is a related party of the Asset Management Company as defined by the latter's internal rules regarding transactions with related parties, in line with said rules, the Asset Management Company obtained authorization from the Investment Corporation based on an approval granted by the Investment Corporation's Board of Directors meeting held on February 13, 2020.

1. Details of Assets to Be Acquired

(1)	Property name	TENJIN216	La La Chance HIROSHIMA
			Geihinkan (land interest)
(2)	Type of asset to	Real estate	Real estate
	be acquired
(3)	Planned	¥2,550 million	¥1,040 million
	acquisition	(Land: ¥2,259.3 million,
	price *1	Building: ¥290.7 million)
(4)	Contract date	February 14, 2020	February 14, 2020
(5)	Planned	March 4, 2020	March 13, 2020
	acquisition date	(Delivery and clearance date)	(Delivery and clearance date)
(6)	Seller *2	Mitsui Fudosan Co., Ltd.	Mitsui Fudosan Co., Ltd.
(7)	Broker	None	None
(8)	Acquisition	Self-financing and loans (planned)	Self-financing and loans (planned)
	financing
(9)	Payment	Single payment at the time of delivery	Single payment at the time of delivery
	method

*1 The amount noted here excludes miscellaneous acquisition costs, real property taxes, city planning taxes, consumption taxes, etc.

*2 Please refer to "4. Seller Profile," below.

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2. Rationale

The proposed acquisitions are in line with the Investment Corporation's "Basic Policy of Asset Management" and "Investment Stance" as stipulated in its Articles of Incorporation. Specifically, the Investment Corporation expects the Acquisition to help expand its asset size while enhancing the diversity of its properties in terms of geographical location and type of tenant. By doing so, the Investment Corporation aims to maintain and improve the quality, profitability and stability of its portfolio. In its decision to acquire these assets, the Asset Management Company also considered, inter alia, the following factors:

1. Evaluation of the Sites TENJIN216
   TENJIN216 is located in the Fukuoka/Tenjin area, which boasts a concentration of business and commercial facilities representing Kyushu. The area is served by Nishitetsu Fukuoka (Tenjin) Station, the Nishi-Nippon Railroad terminus, as well as Fukuoka City Subway's Tenjin Station and Tenjin-Minami Station. On an annual basis, these stations see a cumulative total of more than 100 million incoming and outgoing train passengers. TENJIN216 is situated on a corner-lot location at the crossing of Tenjin-Nishi Avenue and Marronnier Avenue. The former avenue boasts an array of stores with street level access, including apparel brand shops as well as service providers. Moreover, in September 2019 an Apple store relocated to a site about a block to the north of the property, reflecting the ongoing concentration of commercial facilities in the area. In addition, a variety of projects associated with the Tenjin Big Bang, an initiative led by Fukuoka City to attract investment, are currently being undertaken in this Tenjin area and the nearby Daimyo area. Accordingly, the number of visitors to the area in which the property is located is expected to grow even larger.

La La Chance HIROSHIMA Geihinkan (land interest)

La La Chance HIROSHIMA Geihinkan (land interest) is located near JR Hiroshima Station (about 10 minutes by foot), a station boasting the highest volume of passenger traffic in the Chugoku region. Moreover, the property is situated within Hiroshima Ball Park Town, a district undergoing an urban development project encompassing land that was occupied by the train yard of the former JR Freight Higashi Hiroshima Station, with Hiroshima Municipal Baseball Stadium (MAZDA Zoom-Zoom Stadium Hiroshima) serving as the project's core facility. Currently, streets around JR Hiroshima Station are also undergoing massive redevelopment, including the reconstruction of station buildings. As the property is easily accessed by foot from JR Hiroshima Station and situated along the main road leading up to the stadium, which serves as a symbol of Hiroshima, it is believed to have significant potential to attract visitors.

1. Features of the Properties TENJIN216
   TENJIN216 is an urban retail facility completed in November 2019 by expanding and renovating an existing building constructed in 1989 and acquired by Mitsui Fudosan Co., Ltd. in 2018. The renovation involved the additional development of two floors below ground as well as the renewal of areas for common use. Furthermore, a new compartment with glass curtain walls was installed on a corner of the premises to house retail facilities. The glass curtain walls were installed to fully take advantage of the property's location at the Tenjin-Nishi Avenue and Marronnier Avenue crossing, making it even more eye-catching from the street. As all the retail facility segments are directly accessible from Tenjin-Nishi Avenue, the property is capable of ushering in shoppers and other visitors in an extremely smooth manner. Tenants include two foreign-capital apparel brands, boasting a track record in domestic marketing spanning more than 30 years, in addition to two service brands housed on higher floors.

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La La Chance HIROSHIMA Geihinkan (land interest)

On the site, La La Chance HIROSHIMA Geihinkan (land interest), a wedding facility that offers great house- style weddings, was established by the land lessee in 2015. La La Chance HIROSHIMA Geihinkan boasts significant competitive advantages in the neighboring commercial area, as similar facilities are hard to find in the vicinity of JR Hiroshima Station or elsewhere in central Hiroshima City.

3. Details of the Assets to Be Acquired

Name of asset	TENJIN216
Type of asset	Real estate
Location (residence indication)	2-5-16 Tenjin, Chuo-ku, Fukuoka City, Fukuoka
		Lot area	282.36 m2 (registered)
		Use	Commercial district
Land	Plot ratio	500%
		Building to land ratio	80%
		Ownership	Property ownership
		Structure / Number of floors	Steel reinforced concrete, flat roof construction, one floor
		below ground and five floors above ground (registered)
Building	Construction completed	August 20, 1989; expanded on November 7, 2019
Gross floor area	1,274.54 m2 (registered)
		Use	Stores
		Ownership	Property ownership
Planned	acquisition price	¥2,550 million
Appraisal value	¥2,560 million
Appraiser		Japan Real Estate Institute
PML in earthquake	1%
Collateral		None
Lease details
	Lessor	Frontier Real Estate Investment Corporation
	Lessee	Not disclosed*
	Type of contract	Not disclosed*
	Contract term	Not disclosed*
	Annual rent	¥125 million
	Termination during the contract term	Not disclosed*
	Rent revision	Not disclosed*
	Leasehold deposit	¥114 million
	Security deposit	None
	Number of tenants	4
	Total leasable floor space	1,041.21 m2
	Total leased floor space	1,041.21 m2
	Occupancy rate	100% (total leased floor space / total leasable floor space)
			The property is currently not equipped with fire shutter
			clamping prevention devices in conformity with criteria
Note		stipulated in the Building Standards Act. However, the
	seller has agreed with the Investment Corporation to, by
			March 31, 2020, responsibly rectify this situation at its own
			expense.

*Not disclosed, as the Investment Corporation has not obtained the lessee's permission.

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	Name of asset		La La Chance HIROSHIMA Geihinkan (land interest)
	Type of asset		Real estate
	Location (registered)		3-410-14,3-329-25 Nishikaniya, Minami-ku, Hiroshima City,
		Hiroshima
					Lot area		7,466 m2 (registered)
					Use		Neighboring commercial district
	Land		Plot ratio		300%
		Building to land ratio		80%
					Ownership		Proprietary ownership for land with fixed-termbusiness-use
						leasehold interest
	Planned	acquisition price		¥1,040 million
	Appraisal value		¥1,170 million
	Appraiser			Japan Real Estate Institute
	PML in earthquake		－*1
	Collateral			None
	Lease details
			Lessor		Frontier Real Estate Investment Corporation
			Lessee		IKK Inc.
			Type of contract		Fixed-termbusiness-use land lease contract
			Contract term		Not disclosed*2
			Annual rent		Not disclosed*2
			Termination during the contract term	Not disclosed*2
			Rent revision		Not disclosed*2
			Leasehold deposit		Not disclosed*2
			Security deposit		Not disclosed*2
			Number of tenants		1
			Total leasable floor space		7,467.58 m2
			Total leased floor space		7,467.58 m2
			Occupancy rate		100% (total leased floor space / total leasable floor space)
	Note			None
	*1		PML in earthquake is not calculated	as the property consists only of land interest.
*2		Not disclosed, as the Investment Corporation has not obtained the lessee's permission.
4. Seller Profile
	Company Name	Mitsui Fudosan Co., Ltd.
	Address		2-1-1Nihonbashi-Muromachi,Chuo-ku, Tokyo
	Name and title of	Masanobu Komoda, President and CEO
	representative
	Capital		¥339,766 million (as of September 30, 2019)
	Established	July 15, 1941
	Net assets	¥2,515,141 million (as of September 30, 2019)
	Total assets	¥7,100,590 million (as of September 30, 2019)
	Major shareholders and	The Master Trust Bank of Japan, Ltd. (trust account) (9.99%) (as of
	ownership ratio	September 30, 2019)
	Business		Acquisition, ownership, disposal, lease, sale, and management of
						real estate
	Relationship with the Investment	Corporation and/or the Asset Management Company
			Capital relationship	As of December 31, 2019, the seller held 5.63% of the Investment
						Corporation's outstanding investment units. Moreover, the seller
						holds all of the outstanding shares in the Asset Management
						Company.
			Personal relationship	As of December 31, 2019, eight of the Asset Management Company's
						officers and employees (excluding non-executive directors) were
						personnel seconded from the seller.

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	Business relationship	The seller is the contractor for the Investment Corporation's SC
		management services, provider of new tenant mediation services,
		broker for real estate transactions, seller for some of the Investment
		Corporation's real estate holdings, and lessee of the Investment
		Corporation's real estate holdings.
	Status of classification as	The seller is not considered a related party of the Investment
	related parties	Corporation. The seller is the parent company of the Asset
		Management Company.

5. Status of Previous Property Owners

Name of asset	TENJIN216
	(location)	(2-5-16 Tenjin, Chuo-ku, Fukuoka City, Fukuoka)
	Status of	Previous owner, etc.	Owner before the previous, etc.
property owner
	Name	Mitsui Fudosan Co., Ltd.	Other than a party with a special
	interest
	Relationship
	with party	100% parent company of the Asset	-
	with a
	Management Company
	special
	interest
	Background
	and purpose	For the purpose of development	-
	of
	acquisition
	Acquisition	-	-
	price*
	Acquisition	November 7, 2019
	date	(expansion of building)	-
		April 13, 2018

* This information is omitted because the previous owner held the property for more than one year.

Name of asset	La La Chance HIROSHIMA Geihinkan (land interest)
	(location)	(3-410-14,3-329-25 Nishikaniya, Minami-ku, Hiroshima City, Hiroshima)
	Status of	Previous owner, etc.	Owner before the previous, etc.
property owner
	Name	Mitsui Fudosan Co., Ltd.	Other than a party with a special
	interest
	Relationship
	with party	100% parent company of the Asset
	with a	－
	Management Company
	special
	interest
	Background
	and purpose	For the purpose of development	－
	of
	acquisition
	Acquisition	-	－
	price*
	Acquisition	March 14, 2014	－
	date

* This information is omitted because the previous owner held the property for more than one year.

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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 SC management agreement laying out the precise scope of the operations (including property management operations) for TENJIN216, one of the Assets to Be Acquired, will be concluded following the Acquisition.

7. Transactions with Related Parties, etc.

Since the seller of the Assets to Be Acquired falls under the category of related parties set forth in the Asset Management Company's internal rules regarding transactions with related parties, in line with said rules, the Asset Management Company obtained authorization from the Investment Corporation, based on the approval granted by the Investment Corporation's Board of Directors meeting held on February 13, 2020, following a resolution of the Compliance Committee on February 12, 2020. The Asset Management Company's Board of Directors then resolved to conclude the contract on February 14, 2020.

8. Outlook

The expected effect of the Acquisition on the operating forecast for the 32nd and 33rd fiscal periods ending June 30 and December 31, 2020, respectively, has already been factored into the operating forecast published today under "Forecast of Results for the 32nd and 33rd Fiscal Periods" in the "Summary of Financial Results for the 31st Fiscal Period."

9. Summary of Property Appraisal

Name of asset	TENJIN216
Appraisal value	¥2,560,000,000
Appraiser	Japan Real Estate Institute
Date of appraisal	December 31, 2019
			Item			Content	Remarks
							Calculated using the capitalization
							method, with reference to both the value
Indicated value by income		¥2,560,000,000	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		¥2,610,000,000
	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

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			Item	Content		Remarks
			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	¥94,599,000
			Operating profit on	Not disclosed*
			lump-sum payments
			Capital expenditure	Not disclosed*
		Net income	¥93,823,000
		Cap rate	3.6%
	DCF value	¥2,510,000,000
						Assessed taking into account the
						individual characteristics, etc., of the
			Discount rate	3.4%		target property comprehensively, with
						reference to investment yields, etc., of
						similar real estate.
						Assessed taking into account the future
						trends of investment yields, risks of the
						target property as an investment target,
			Terminal cap rate	3.8%		general outlook for future economic
				growth rate, trends in real estate prices
						and rents, etc., comprehensively, with
						reference to transactional yields, etc., of
						similar real estate.
Indicated value by cost approach	¥2,530,000,000
	Land ratio	88.6%
	Building ratio	11.4%
				Due to the site characteristics, building use, and other
				attributes of the real estate property in question, demand would
				primarily come from corporate investors with the ability to raise
Other matters considered by	capital and who, in general, tend to prioritize revenue potential
appraiser in carrying out appraisal	in their transactions.
				Given this, the appraisal value was determined through a
				combination of the direct reduction method and the DCF
				method, with the cost approach value as a reference.

• As these items include information about the lessee that the Investment Corporation is obliged to keep confidential and information that could be used to calculate such information, the Asset Management Company has deemed that disclosing such items could result in the infringement of confidentiality requirements and thus prove disadvantageous to the Investment Corporation and ultimately harm the interests of unitholders and investors. Accordingly, these items are not disclosed.

Name of asset	La La Chance HIROSHIMA Geihinkan (land interest)
Appraisal value	¥1,170,000,000
Appraiser	Japan Real Estate Institute
Date of appraisal	December 31, 2019

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	Item	Content	Remarks
DCF value	¥1,170,000,000
			Assessed taking into account the
			individual characteristics, etc., of the
	Discount rate	6.9%	target property comprehensively, with
			reference to investment yields, etc., of
			similar real estate.

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 Acquisition

This document is released to media organizations through the Kabuto Club (the press club of the Tokyo Stock Exchange); the Ministry of Land, Infrastructure, Transport and Tourism Press Club; and the Press Club for the Ministry of Land, Infrastructure, Transport and Tourism Construction Paper.

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

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1. Maps of the surrounding areas of the Assets to Be Acquired and exterior photographs of the assets TENJIN216

■Surrounding area

■Property exterior

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La La Chance HIROSHIMA Geihinkan (land interest) ■Surrounding area

■Property exterior

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2. Overview of the investment portfolio after the Acquisition

			(Planned)
			acquisition	Percentage
Property name	Location	Acquisition date	price (Millions	of portfolio
			of yen)	*2
			*1
AEON STYLE Shinagawa Seaside	Shinagawa,	August 9, 2004	20,100	6.0%
Tokyo
AEON MALL Ibaraki	Ibaraki City,	August 9, 2004	18,100	5.4%
Osaka
	Fukuoka			1.2%
Papillon Plaza*3	City,	August 9, 2004	3,990
	Fukuoka
Kamiikedai Tokyu Store	Ota, Tokyo	August 9, 2004	1,490	0.4%
Belltown Tambaguchi Eki-Mae Store	Kyoto City,	August 29, 2005	2,130	0.6%
Kyoto
AEON MALL NAGOYADOME-Mae	Nagoya	March 23, 2006	24,800	7.4%
City, Aichi
Summit Store Takinogawa Momiji-Bashi	Kita, Tokyo	September 29,	3,100	0.9%
2006
Home Center Kohnan Hiroshima	Hiroshima			0.6%
City,	April 13, 2007	1,940
Minami-Machi (land interest)
Hiroshima
Frespo Tosu (land interest)	Tosu City,	November 8,	3,178	0.9%
Saga	2007
	Hiroshima	February 19,		6.9%
You Me Town Hiroshima	City,	23,200
2008
	Hiroshima
Queen's Isetan Suginami-Momoi	Suginami,	July 4, 2008	3,560	1.1%
Tokyo
Mitsui Outlet Park IRUMA	Iruma City,	July 10, 2008	19,900	5.9%
Saitama
Costco Wholesale Warehouse Iruma	Iruma City,	July 10, 2008	2,600	0.8%
(land interest)	Saitama
Desigual Harajuku	Shibuya,	October 15, 2008	3,100	0.9%
Tokyo
	Higashi-			3.5%
Ito-YokadoHigashi-Yamato	Yamato	January 13, 2009	11,600
	City, Tokyo
AEON TOWN Tanashi-Shibakubo	Nishi-Tokyo	February 18,	3,100	0.9%
City, Tokyo	2009
	Fukuoka	December 16,		1.1%
Don Quijote Fukuoka Tenjin	City,	3,700
2009
	Fukuoka
Mitsui Shopping Park LaLaport IWATA	Iwata City,	July 2, 2010	15,200	4.5%
Shizuoka
GINZA GLASSE	Chuo, Tokyo	July 2, 2010	13,600	4.1%
Shimura Shopping Center	Itabashi,	January 18, 2011	4,430	1.3%
Tokyo
Mitsui Shopping Park LaLagarden	Kasukabe	February 16,		3.0%
City,	10,000
KASUKABE	2011
Saitama
Summit Store Yokohama Okano	Yokohama	February 24,		1.7%
City,	5,700
(land interest)	2012
Kanagawa

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(Planned)

acquisition

Percentage

Property name

Location

Acquisition date

price (Millions

of portfolio

of yen)

*2

*1

Fukuoka

February 28,

3.0%

VIORO

City,

10,100

2012

Fukuoka

Rakuhoku HANKYU SQUARE

Kyoto City,

July 4, 2012

8,800

2.6%

Kyoto

Ikebukuro Square

Toshima,

February 1, 2013

20,400

6.1%

Tokyo

Kohnan Kawasaki-Odasakae Mall

Kawasaki

2.1%

City,

January 31, 2014

7,000

(land interest)

Kanagawa

Annex building:

March 25, 2014

Mitsui Shopping Park LaLaport SHIN-

Misato City,

Main building:

7.1%

April 1, 2015

23,770

MISATO

Saitama

August 10, 2016

(additional

acquisition)

Shinsaibashi Square

Osaka City,

March 2, 2015

8,620

2.6%

Osaka

Costco Wholesale Warehouse Shin-

Misato City,

April 1, 2015

3,810

1.1%

Misato (land interest)

Saitama

KOJIMA × BIC CAMERA Naha Store

Naha City,

January 25, 2016

1,850

0.6%

Okinawa

Super Viva Home Zama and Super

Zama City,

July 31, 2017

4,320

1.3%

Sanwa Zama Higashihara (land interest)

Kanagawa

March 28, 2018

SAKAE GLOBE

Nagoya

March 22, 2019

15,650

4.7%

City, Aichi

(additional

acquisition)

Summit Store Higashi-Nagasaki

Toshima,

June 8, 2018

2,022

0.6%

(land interest)

Tokyo

March 22, 2019

Toshima,

September 5,

6.2%

Ikebukuro GLOBE

2019

20,800

Tokyo

(additional

acquisition)

Shinsaibashi MG Building

Osaka City,

March 22, 2019

5,840

1.7%

Osaka

Fukuoka

0.8%

TENJIN216

City,

March 4, 2020

2,550

Fukuoka

La La Chance HIROSHIMA Geihinkan

Hiroshima

0.3%

City,

March 13, 2020

1,040

(land interest)

Hiroshima

Total

335,091

100.0%

*1 (Planned) acquisition price amounts are rounded down to the nearest million yen.

*2 Percentage of portfolio figures are based on (planned) acquisition price and are rounded to the nearest decimal place.

*3 Figures represent the acquisition price for the land of Papillon Plaza only.