Kenedix Office Investment : Notice Concerning Acquisition of Property (Shionogi Kobe Building)

Translation of Japanese Original

July 27, 2022

To All Concerned Parties

REIT Issuer:

Kenedix Office Investment Corporation

Hikaru Teramoto, Executive Director

(Securities Code: 8972)

Asset Management Company:

Kenedix Real Estate Fund Management, Inc.

Masahiko Tajima, President & CEO

Inquiries:

Hiroaki Momoi

Head of Strategic Planning,

Office REIT Department

TEL: [phone]

Notice Concerning Acquisition of Property (Shionogi Kobe Building)

Kenedix Office Investment Corporation ("the Investment Corporation") announced today that Kenedix Real Estate Fund Management, Inc. ("the Asset Management Company"), the asset management company for the Investment Corporation, decided to acquire the following property ("the Acquisition").

1. Outline of the Acquisition
(1)	Property Name	: Shionogi Kobe Building ("the Property")
(2)	Planned Acquisition Price (Note)	: 3,450 million yen
(3)	Seller	: Domestic general business corporation (non-related party)
(4)	Brokerage	: Applicable
(5)	Contract Date	: July 27, 2022
(6)	Scheduled Acquisition Date	: August 1, 2022
(7)	Anticipated Acquisition Funds	: Cash on hand
(8)	Settlement Method	: Payment in full on settlement

Note: Acquisition costs, adjustment amount of property tax and city-planning tax, and consumption tax, etc. are excluded. (Amounts are truncated to the nearest unit. The same applies below.)

2. Reason for the Acquisition

The decision on the Acquisition was made by comprehensively considering portfolio construction policy, real estate market trends, the characteristics of the Property and other factors to improve and expand the portfolio through expansion of portfolio size.

In the decision to acquire the Property, which is a mid-sized office building that the Investment Corporation has focused on as main investment target, the following characteristics of the Property were evaluated.

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1. Location
   The Sannomiya Station-Front Area, where the Property is located, is the area with the highest concentration of office buildings in Kobe City. It offers excellent commuting convenience because it is served by six lines in total, including the JR Line, and is one station away from Shin-Kobe Station of the Sanyo Shinkansen Line, among other factors. The area is expected to be further vitalized because efforts are being made mainly by the Kobe municipal government and railway companies, among other parties, to redevelop and improve surrounding areas.
   Located around a 6-minute walk from Boeki Center Station on the Kobe New Transit Port Island Line, a 7-minute walk from Sannomiya-Hanadokeimae Station on the Kobe Municipal Subway Kaigan Line and an 8-minute walk from Kobe-Sannomiya Station on the Hanshin Line, the Property features excellent commuting convenience with access to multiple lines, and it is situated adjacent to commercial facilities expanding around Sannomiya (Kobe-Sannomiya) Station and government offices, including the municipal office. In addition, given its proximity to an interchange of the Hanshin Expressway, the Property is characterized by a location preferred by tenants engaging in businesses that require the comparatively frequent use of vehicles.
2. Building
   Equipped with solid-looking external view and entrance hall, the Property has a total floor area of 8,501.91 m2 (about 2,572 tsubo) and a leasable floor area of 598 m2 (about 181 tsubo) on the standard floors, with a ceiling height of 2.7 m. In terms of facilities, it features individual air-conditioning systems, office automation floors, and three elevators. The building also has 80 parking spaces. Consequently, the number of tenants that use cars for business is relatively high. With regularly shaped rental rooms divisible to a minimum of 19 tsubo, the Property is an office building which can flexibly correspond diverse tenant needs including needs for seeking small- and medium-sized lots, and expected to be operated stably into the future.

Through the Acquisition, the portfolio of the Investment Corporation will expand to 98 properties (total: 457.0 billion yen). The investment ratio of office buildings in the portfolio will be 99.4%, and the investment ratio of the Tokyo Metropolitan Area (Note1) in the portfolio will be 79.8% (The figures are based on (planned) acquisition price.

(Note2)).

Note1: Tokyo Metropolitan Area means major cities in Tokyo Metropolitan, Kanagawa, Saitama, and Chiba Prefectures.

Note2: The investment proportions reflect the sale of Kiba Building scheduled to be sold for July 29, 2022, which has already been disclosed in "Notice Concerning Sale of Property (KDX Kiba Building)" dated May 31, 2022.

3. Details of the Property

Property Name		Shionogi Kobe Building
Type of Specified Asset	Real Estate
Location (Lot number)	4-1-6Isogami-dori,Chuo-ku, Kobe, Hyogo
Usage		Office
Type of Structure	Flat-roofed,Steel-framed,Steel-framed reinforced concrete
structure; 10 above-ground floors with 1 underground floor
Site Area	Land	1,290.18 m2
Building (Total Floor Area)	8,501.91 m2
Type of	Land	Proprietary ownership
Ownership	Building	Proprietary ownership
Completion Date	May 13, 1992
Probable Maximum Loss	2.0 % (Sompo Risk Management Inc.)
Acquisition Price	3,450 million yen
Appraisal	Appraisal Value	3,610 million yen
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Base Date for Appraisal	July 1, 2022
Appraiser		Daiwa Real Estate Appraisal Co., Ltd.
Details		Please refer to "10. Summary of Appraisal Report" below.
Existence of Secured Interests after Acquisition	None
Master Lease Company after Acquisition	The Investment Corporation
Property Management Company after Acquisition	Kenedix Property Design, Inc.
Details of Tenant		As of June 30, 2022
Number of End Tenants		19
Total Leasable Area		5,674.72 m2
Total Leased Area		5,404.57 m2
Occupancy Rate		95.2%
Monthly Rent and Common Area Charge	13 million yen (Note)
(Excluding Consumption Tax, etc.)
Security and Guarantee Deposit	118 million yen (Note)
Forecast Income and Expenditure
(Annual Amount)
Forecast Net Operating Income	157 million yen
Forecast Net Operating Income after	121 million yen
Depreciation
	Although a written statement proving that the boundary confirmation authority has
	been entrusted by the owner of the adjacent land has not been confirmed in regard to
Special Considerations	the boundary with the adjacent land (314) of the Property, a boundary confirmation
	sealed by a director of an apartment management association exists. No disputes have
	arisen with the said adjacent land as of today.
Other	Note: Figures include the total amount of monthly rent, common area charge, and security and
guarantee deposit for the end-tenants for which the lease period has started as of June 30,
	2022.

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1. Seller's Profile
   Name and other information of the seller are not disclosed because the seller has not given consent. In addition, there is no special capital relationship, no special personnel relationship or no special business relationship between the Investment Corporation or the Asset Management Company and the seller. Furthermore, the seller is neither a related party, etc. as defined in the Act on Investment Trusts and Investment Corporations ("the Investment Trust Act") nor a related party as defined in the Office REIT Department Related-party Transaction Rules of the Asset Management Company.
2. Acquirer's (Previous Owners of Current Owner) Profile

It is omitted because the seller (the current owner) of the Property is not a special related party of the Investment Corporation or the Asset Management Company.

1. Details of Brokerage
   The brokerage firm of the Property is neither a related party, etc. as defined in the Investment Trust Act nor a related party as defined in the Office REIT Department Related-party Transaction Rules of the Asset Management Company.
2. Related Party Transaction
   Concerning the following transactions with related parties in relation to the Acquisition, the Asset Management Company fully complies with standards provided for in laws and regulations and other rules, based on the Office REIT Department Related-party Transaction Rules. The Asset Management Company's Office REIT Department Asset Management Committee passed a resolution of deliberation and approval on the related-party transactions upon deliberation and resolution at its Compliance Committee.

[Appointment of Property Management Company]

The Investment Corporation will, regarding the Property, enter into a property management agreement with Kenedix Property Design, Inc. on the acquisition date.

The property management fee will be the same as those for other properties in the portfolio.

8. Scheduled Date of the Acquisition

Determination Date of the Acquisition	July 27, 2022
Contract Date
Scheduled Payment Date	August 1, 2022 (planned)
Scheduled Delivery Date

9. Outlook

The impact of the Acquisition on the financial results for the fiscal period ending October 31, 2022 (May 1, 2022 to October 31, 2022) and the fiscal period ending April 30, 2023 (November 1, 2022 to April 30, 2023) is minimal. Therefore, the forecast of financial results for the fiscal period remains unchanged.

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10. Summary of Appraisal Report

Property Name	Shionogi Kobe Building
Appraisal Value	3,610,000,000 yen
Appraiser	Daiwa Real Estate Appraisal Co., Ltd.
Appraisal Date	July 1, 2022

Unit: Yen

			Item	Content	Basis
					Estimated an amount by verifying the value calculated using
Income Capitalization Approach Value	3,610,000,000	the Direct Capitalization Method as well as handling the
value calculated using the Discounted Cash Flow Method as
					a standard
	Value Calculated Using the	3,750,000,000	Assess by using the cap rate based on medium to long-term
	Direct Capitalization Method	stable net cash flow
		(1) Gross Operating Revenue	249,569,546
			Maximum Gross Operating		Assess an amount based on the premise of a level of fair rent
			Revenue	260,167,340	that is believed to remain stable over the medium and long
					term
			Shortfall Attributed to Vacancies	10,597,794	Assess an amount based on the premise of an occupancy rate
			that remains stable over the medium and long term
		(2) Operating Expenses	72,289,702
					Record based on the scheduled contract after conducting
			Maintenance Expenses	19,233,214	validations by checking the level of the maintenance and
					management fees of similar properties
					Assess an amount based on the actual utility expenses in the
			Utility Expenses	15,037,000	past, and by verifying such amount by reference to the levels
					of utility expenses at similar properties
					Record annual average repair, maintenance andrenewal
			Repair Expenses	9,279,750	expenses in the engineering report after considering the
					actual amount of expenses at similar properties
			Property Management Fees	4,682,905	Assess a standardized PM fee ratio based on PM fee ratios at
			similar properties
					Assess an amount in consideration of an estimated tenant
			Tenant Recruit Expenses, etc.	1,442,333	turnover and a vacancy rate, based on the levels of tenant
					recruitment expenses, etc. at similar properties
			Taxes and Dues	20,896,500	Assess an amount based on the fiscal 2022 tax statement, etc.
			Damage Insurance Fees	688,000	Assess an amount based on the building replacement cost
			Other Expenses	1,030,000	Assess other expenses such as consumables based on the
			actual amount in the past
		(3)	Net Operating Income	177,279,844
			(NOI= (1)-(2))
		(4) Gain on Guarantee Deposit	1,545,050	Assess income from investments by using an investment
			Investment	return of 1.0%
					Record an annual average amount of renewal expenses in
		(5) Capital Expenditure	17,675,743	the engineering report added by the amount equivalent to
		CM fees after considering the actual amount of expenses at
					similar properties
		(6) Net Cash Flow	161,149,151
			(NCF=(3)+(4)-(5))
					Assess an amount by comprehensively taking into account
		(7) Capitalization Rate	4.3%	comparison with transaction cases, etc. at similar properties,
		the property's location, the characteristics of the building and
					other conditions
	Value Calculated Using the	3,550,000,000
	Discounted Cash Flow Method
					Assess an amount by comprehensively taking into account
		Discount Rate	4.0%	the property's unique characteristics, etc. by reference to
					transaction yields at similar properties

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