Kenedix Retail REIT : Notice Concerning Acquisition of Property (Kitera Town Fukuoka Nagahama)

Translation of Japanese Original

September 22, 2021

To All Concerned Parties

REIT Issuer:

Kenedix Retail REIT Corporation

Representative: Moyuru Watanabe, Executive Director

(Securities Code: 3453)

As se t M an ag e r:

Kenedix Real Estate Fund Management, Inc.

Representative: Masahiko Tajima, President & CEO

Contact:Koichiro Nobata, Head of Planning Division,

Retail REIT Department

TEL:[phone]

Notice Concerning Acquisition of Property (Kitera Town Fukuoka Nagahama)

Kenedix Retail REIT Corporation ("KRR") announced today that Kenedix Real Estate Fund Management, Inc. ("the Asset Manager"), the asset manager for KRR, has decided to acquire the following property.

1. Outline of the acquisition
(1)	Type of acquisition:	Trust beneficiary interest in real estate
(2)	Property name:	Kitera Town Fukuoka Nagahama
(3)	Acquisition price (Note 1):	6,000,000,000 yen

1. Appraisal NOI yield (Note 2): 4.7%

(5)	Date of contract:	September 22, 2021
(6)	Acquisition date:	October 1, 2021
(7)	Seller:	Please refer to Item 4. Seller's profile for details
(8)	Acquisition funds:	Borrowings and cash on hand (Note 3)
(9)	Settlement method:	Payment in full at settlement
(Note 1)	Excluding acquisition costs, adjustment amount of property tax and city-planning tax, consumption tax, etc.
(Note 2)	"Appraisal NOI yield" is calculated by dividing the appraisal NOI of the anticipated property as on the appraisal report as of
	September 1, 2021 by the acquisition price for the property and rounded to the first decimal place.
	"Appraisal NOI" refers to the net operating income before depreciation expenses, which is calculated by deducting the operating
	expenses from the operating revenues described in the appraisal report, and thus, differs from NCF (Net Cash Flow) which is
	calculated by adding the profit from the investment of tenant deposits to and deducting capital expenditures from NOI. The appraisal
	NOI here is the NOI calculated using the direct capitalization method.
(Note 3)	Matters concerning the new borrowings shall be announced after details decided.

2. Reason for the acquisition

KRR makes focused investment in shopping centers for daily needs while it has expanded its investment targets to distribution centers. The acquisition is made to diversify and enhance the portfolio to realize the growth of asset size and secure stable revenues, in accordance with KRR's investment targets and policies as set forth in its Articles of Incorporation.

The leasing of this property has been sluggish and the occupancy rate is 82.8% as of September 10, 2021. This is due to the timing of its completion in November 2020 amid the COVID-19 pandemic. However, the decision to acquire the property was made based on the following reasons. (1) The core tenant is a grocery supermarket, which is stable even amid the pandemic. (2) The property incorporates delivery function as a distribution center for an online supermarket partnered with the grocery supermarket as an example of integration of retail and

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logistics facilities, providing the facility a potential to leverage e-commerce demand. (3) The property is located within 1.5km radius from Tenjin Station and in the catchment area with high population growth rate.

Acquisition highlight:

An NSC that opened in February 2020 in an area with high population growth, neighboring Tenjin area in Fukuoka

1. Features of the building
2. • The property is located in Nagahama area, approximately 1.5km northwest of Tenjin Station. The number of families with young children is increasing with active housing developments in the surrounding area.
   • The property features a grocery supermarket, Sunny, on the first floor. Tenants on the second and third floors include a drugstore, a baby and children's store, a dollar shop, a karaoke lounge and a health club.
   • Sunny, Seiyu's brand in Fukuoka prefecture, is open 24-hours and provides delivery service for its online supermarket, meeting the demand of urban consumers and young families working in central business district.
3. Overview of the surrounding area
4. 1. Location and access
   2. • The property is located in a convenient area within walking distance of Akasaka Station (approximately 7-minute subway ride to Hakata Station) and Ohorikoen Station on the Kuko Line of Fukuoka City Subway. Active housing developments have contributed to the area's recent high population growth while the area is categorized as a harbor district where Fukuoka City Central Wholesale Market Fresh Fish Market, companies associated with the market and logistics companies are located.
   3. Characteristics of the surrounding area
   4. • Based on the 2015 Population Census, the population in the catchment area was approximately 9,800 people in the 0.5km radius, approximately 32,000 people in the 1km radius, and 123,000 people in the 2km radius. Compared to population numbers in 2010, the population in 2015 within the 0.5km, 1km and 2km radius were 109.5%, 109.7% and 108.1%, respectively, showing a high growth rate backed by abundant households with young workers.

3. Details of the property

Property name	Kitera Town Fukuoka Nagahama
Acquisition date	October 1, 2021
Property type (Note 1)	NSC
Type of specified asset	Trust beneficiary interest in real estate
Trustee		Mitsubishi UFJ Trust and Banking Corporation
Trust period		December 15, 2017 to March 31, 2041 (planned)
Seller		GK FRP
Location		1-10-1, Minato, Chuo-ku, Fukuoka, Fukuoka
	Form of ownership	Proprietary ownership
	Land area	3,471.10 m2
Land	Zoning	Commercial area
	Building coverage ratio	80%
	Floor-area ratio	400%
	Form of ownership	Proprietary ownership
Building	Gross floor area	10,217.38 m2
	Date constructed	November 28, 2020
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				Use		Retail store, parking lots
				Structure/No. of floors	S-structure/flat-roofed4-story building
		Architect		Nikkisekkei Co., Ltd.
		Construction company		Ichiken Co., Ltd. Kyushu Branch
		Construction confirmation authority	The Building Center of Japan
		Master lessee		ITOCHU Urban Community Ltd. (planned)
		Type of master lease		Pass-through type (planned)
		PM		Kenedix Real Estate Fund Management, Inc. (planned)
		Sub-PM		ITOCHU Urban Community Ltd. (planned)
		PML		0.4%
		Acquisition price		6,000,000,000 yen
		Appraisal value		6,100,000,000 yen (as of September 1, 2021)
		Real estate appraiser		Japan Real Estate Institute
		Appraisal NOI yield		4.7% (Note 2)
		Collateral		None
		Lease summary		(as of September 10, 2021)
			Number of tenants		13
			Annual rent		280,215 thousand yen
			Tenant deposits		150,075 thousand yen
			Leased area		5,265.50 m2
			Leasable area		6,355.66 m2
			Occupancy rate		82.8%
						Part of this property is not in compliance with the Building
		Remarks		Standards Act and the Fire Service Act. KRR, however, has agreed
			with the seller that renovation and improvement will be completed
						at the expense and responsibility of the seller.
						Notes:
						1. Properties are categorized into the following six types of
						properties: NSC (Neighborhood Shopping Center), SM
						(Supermarket), CSC (Community Shopping Center), Urban
						Station-Front SC (Urban Station-Front Shopping Center), SS
						(Specialty Store) and L (Logistics facility).
						2. "Appraisal NOI yield" is calculated by dividing the appraisal
						NOI of the anticipated property as on the appraisal report as of
		Others		September 1, 2021 by the acquisition price for the property and
			rounded to the first decimal place.
						"Appraisal NOI" refers to the net operating income before
						depreciation expenses, which is calculated by deducting the
						operating expenses from the operating revenues described in the
						appraisal report, and thus, differs from NCF (Net Cash Flow)
						which is calculated by adding the profit from the investment of
						tenant deposits to and deducting capital expenditures from NOI.
						The appraisal NOI here is the NOI calculated using the direct
						capitalization method.
4. Overview of the seller
	Name	GK FRP
	Address	2-1-6 Uchisaiwaicho Chiyoda-ku, Tokyo
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	Name and title of		Representative Partner: General Incorporated Association FRP Holdings
	representative		Executive Kazumasa Hongo
	Description of business		1. Acquisition, holding, disposition, leasing, and management of real estate
						2.	Acquisition, holding, and disposition of trust beneficiary interest in real estate
						3.	Tasks related to the above
	Capital		100,000 yen
	Incorporation		September 22, 2017
	Net assets		Undisclosed, as consent has not been obtained from the seller.
	Total assets		Undisclosed, as consent has not been obtained from the seller.
	Relationship between KRR/the Asset Manager and the seller
			Capital relationship		Kenedix Inc., the Asset Manager's 100% owner and parent company, etc. under
						the Financial Instruments and Exchange Act of Japan (the "FIEA"), contributes
						to the funds of the general incorporated association holding 0.27% equity
						interests of the seller.
			Personnel relationship		No special personnel relationship between KRR/the Asset Manager and the
						seller. Also, no special personnel relationship between the related parties/
						affiliates of KRR/the Asset Manager and the related parties/affiliates of the
						seller.
			Business relationship		No special business relationship between KRR/the Asset Manager and the seller.
						However, Kenedix Investment Partners, Inc. is entrusted with asset management
						business by the seller.
			Related party		The seller is deemed a related party under the "Retail REIT Division on Related-
			transactions		Party Transactions Rules" of the Asset Manager.
5. Status of property acquirer and previous owners
				Name (location)			Kitera Town Fukuoka Nagahama (Fukuoka, Fukuoka)
			Status of property owner			Previous owner	Owner prior to previous owner
				Name			GK FRP	-
					A private property fund in which
					Kenedix, Inc., the 100% parent
					company of the Asset Manager and the
				Relationship with	parent company, etc. under the FIEA,
				holds 0.27% of the total amount of	Not a related party
				related party
				contributions of Tokumei Kumiai, and
					to which Kenedix Investment Partners,
					Inc. has been entrusted to provide the
					asset management business services.
				Background and
				purpose of			Acquired as an investment	-
				acquisition
				Acquisition price			Omitted (Note 1)	-
				Acquisition timing			Land: December 2017	-
					Building: November 2020 (Note 2)

(Note 1) The acquisition price is omitted because the previous owner has owned it for more than one year, and the building is a development

project for the previous owner.

(Note 2) The acquisition timing of the building is based on its completion date.

6. Details of brokerage

Not applicable.

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7. Transactions with related parties

1. Acquisition
   The seller of the acquisition is deemed a related party under the Retail REIT Division Related-party Transactions Rules. The Asset Manager submitted the transaction for deliberation and resolution by the Compliance Committee. Following the approval by the Compliance Committee, the transaction was submitted to the Retail REIT Division's Asset Management Committee for resolution.
2. Delegation of property management to the Asset Manager
   KRR concluded a property management agreement with the Asset Manager. Fees to the Asset Manager regarding the property are at the same level as that of existing properties.

[Details of property management fee]

Property management fee (annual): Total income from properties × 1.5% + on-site personnel expenses Fees associated with the management of construction projects:

	Construction price		Fees
	Less than 1 million yen		None
	1 million yen to less than 2 million yen	6%
	2 million yen to less than 5 million yen		120,000 yen + 5% on the portion exceeding 2 million yen
	5 million yen to less than 10 million yen		270,000 yen + 4% on the portion exceeding 5 million yen
	10 million yen to less than 100 million yen		470,000 yen + 3% on the portion exceeding 10 million yen
	100 million yen to less than 200 million yen	3,170,000 yen + 2% on the portion exceeding 100 million yen
	200 million yen or more	5,170,000 yen + 1% on the portion exceeding 200 million yen
8. Acquisition schedule
	Acquisition decision date		September 22, 2021
	Contract date		September 22, 2021
	Payment date / delivery date		October 1, 2021

9. Future outlook

There are no changes to the forecasts of fiscal periods ending September 30, 2021 and March 31, 2022 as the impact of the acquisition on the financial results is minimal.

10. Summary of real estate appraisal report

Summary of real estate appraisal report

Appraisal value	6,100,000,000 yen
Appraiser	Japan Real Estate Institute
Date of appraisal	September 1, 2021
				Item	Content	Basis
Income capitalization approach value	6,100,000,000 yen	Calculated by the DCF method, with the results verified using the
direct-capitalization method
	Value based on direct capitalization method	6,170,000,000 yen	Calculated by dividing the standardized NCF that is expected to
	remain stable over the medium term by the cap rate
		(1)		Gross operating revenue	390,203,000 yen
				Effective gross operating revenue	397,977,000 yen
						Calculated based on occupancy rates and supply-demand trends of
						similar properties that have replacement competition relationships
				Loss from vacancy, etc.	7,774,000 yen	and other relationships in similar areas in the same supply-demand
						area, the occupancy rates of the property in the past, and expected
						future trends and posted losses from vacancies

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