Kenedix Retail REIT : Notice Concerning Disposition of Properties (K’s Denki Shonan-Fujisawa (Land) and Prime Square Jiyugaoka)

Translation of Japanese Original

December 27, 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 Strategic Planning,

Retail REIT Department

TEL:[phone]

Notice Concerning Disposition of Properties

(K's Denki Shonan-Fujisawa (Land) and Prime Square Jiyugaoka)

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 dispose the following two properties as follows.

1. Outline of the disposition

			(millions of yen)
	Disposition	Book value	Difference between disposition
Property Name	price
(Note 2)	price and book value (Note 3)
	(Note 1)
K's Denki Shonan-Fujisawa (Land)	Undisclosed	3,210	-
Prime Square Jiyugaoka	(Note 4)	2,995	-
Total	6,360	6,206	153

(Note 1) Excluding acquisition costs, adjustment amount of property tax and city-planning tax, etc.

(Note 2) Book values are as of September 30, 2021, rounded off to the nearest million yen.

(Note 3) Figure is referential amount, calculated as a difference between disposition price and book value, and is different from gain or loss on sale. It is rounded off to the nearest million yen.

(Note 4) Undisclosed as KRR has not obtained the buyer's consent. The properties are to be acquired by the same buyer. The dispositions are negotiated and agreed as impartible deals.

(1)	Type of asset:	Trust beneficiary interest in real estate
(2)	Buyer:	Please refer to Item 4. Buyer's profile for details
(3)	Date of contract:	December 27, 2021
(4)	Disposition date:	December 27, 2021
(5)	Use of proceeds:	The proceeds from the disposition are to be allocated as cash on
		hand and used as a portion of funds for future acquisitions of
		specified assets and related expenses, redemption of investment
		corporation bonds or repayment of borrowings.
(6)	Settlement method:	Payment in full at settlement
(7)	Method of buyer selection:	The buyer was selected from several potential buyers after
		verifying the prices and conditions of the disposition.

2. Reason for the disposition

KRR has announced that it will search for opportunities of asset reshuffle as a measure to enhance its unitholder

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value, focusing on DPU growth. The decision for the disposition is made with comprehensive considerations on factors such as enhancement of the portfolio, overall real estate market and the characteristics of individual asset. Prime Square Jiyugaoka is a general health club located between Toritsu-daigaku Station and Jiyugaoka Station on Tokyu Toyoko Line. The property is currently leased to Central Fitness Club, the business sector of which has been severely affected by the Covid-19 pandemic. The appraisal NOI yield to the acquisition price, 3.8%, and the NOI yield after depreciation, 3.1%, are far below the average of our portfolio, which are 5.2% and 4.3%, respectively as of the fiscal period ended September 30, 2021. Moreover, the property is expected to require a certain level of maintenance and capital expenditure constantly as it passed 29 years since its completion. On the other hand, K's Denki Shonan-Fujisawa, which is solely leased to a consumer electronics retailer, has a downside risk considering the remaining period of the fixed-term land lease, lease renewal probability, and its appraised value as a vacant land, which is below its acquisition price and its current appraisal value.

While enhancement on the value of the properties is hard to expect going forward, KRR has reached an agreement with a potential buyer to sell the properties at a price that exceeded the appraisal value and the book value in total. For your reference, the disposition price in the purchase and sales agreement of Prime Square Jiyugaoka is below its book value while that of K's Denki Shonan-Fujisawa is above its book value. However, the dispositions are negotiated and agreed as impartible deals, and thus, each agreement has a clause which enables cancelation of the agreement if the other agreement is canceled. Therefore, KRR determined that disposing of the properties would lead to an increase in unitholder value. KRR will seek to acquire shopping centers for daily needs and retail distribution centers with the proceeds of this property disposition.

2. Details of the properties

T-10 K's Denki Shonan-Fujisawa (Land)

Property name	K's Denki Shonan-Fujisawa (Land)
Property type (Note 1)	SS
Type of specified asset	Trust beneficiary interest in real estate
Trustee		Sumitomo Mitsui Trust Bank, Ltd.
Location		1695-3 Kuzuhara Aza Takiyato, Fujisawa, Kanagawa
		Form of ownership	Proprietary ownership
		Land area	15,578.58 m2
Land	Zoning	Industrial area
		Building coverage ratio	60%
		Floor-area ratio	200%
		Form of ownership	-
		Gross floor area	-
Building	Date constructed	-
		Use	-
		Structure/No. of floors	-
Acquisition price	3,169 million yen
Appraisal value (as of)	3,450 million yen (September 30, 2021)
Real estate appraiser	The Tanizawa Sōgō Appraisal Co., Ltd
Lease summary	(as of September 30, 2021)
	Number of tenants	1
	Annual rent	Not disclosed (Note 2)
	Tenant deposits	141,375 thousand yen
	Leased area	15,578.58 m2
	Leasable area	15,578.58 m2
	Occupancy rate	100.0%
			2

Remarks		None
			Notes:
			1. Properties are categorized into the following six types of
			properties: NSC (Neighborhood Shopping Center), SM
Others		(Supermarket), CSC (Community Shopping Center), Urban
			Station-Front SC (Urban Station-Front Shopping Center), SS
			(Specialty Store) and L (Logistics facility).
			2. Undisclosed as KRR has not obtained the lessee's consent.
T-21 Prime Square Jiyugaoka
Property name	Prime Square Jiyugaoka
Property type (Note 1)	SS
Type of specified asset	Trust beneficiary interest in real estate
Trustee		Sumitomo Mitsui Trust Bank, Ltd.
Location		1-14-18 Nakane, Meguro-ku, Tokyo
		Form of ownership	Proprietary ownership
		Land area	1,290.16 m2
Land	Zoning	Category I residential area (partially Category I low-rise exclusive
	residential area)
		Building coverage ratio	60% (partially 50%)
		Floor-area ratio	300% (partially 100%)
		Form of ownership	Proprietary ownership
		Gross floor area	3,512.55 m2
Building	Date constructed	June 25, 1992
		Use	Health club
		Structure/No. of floors	RC-structure/6-story building with 1 basement floor and flat roof
Acquisition price	2,820 million yen
Appraisal value (as of)	2,820 million yen (September 30, 2021)
Real estate appraiser	Daiwa Real Estate Appraisal Co., Ltd.
Lease summary	(as of September 30, 2021)
	Number of tenants	2
	Annual rent	Not disclosed (Note 2)
	Tenant deposits	Not disclosed (Note 2)
	Leased area	3,512.55 m2
	Leasable area	3,512.55 m2
	Occupancy rate	100.0%
Remarks		None
			Notes:
			1. Properties are categorized into the following six types of
			properties: NSC (Neighborhood Shopping Center), SM
Others		(Supermarket), CSC (Community Shopping Center), Urban
			Station-Front SC (Urban Station-Front Shopping Center), SS
			(Specialty Store) and L (Logistics facility).
			2. Undisclosed as KRR has not obtained the lessee's consent.

4. Overview of the buyer

The name of the buyer and other information are undisclosed as KRR has not obtained the buyer's consent. There

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is no special capital, personnel, or business relationship between KRR / the Asset Manager and the buyer, and the buyer is not deemed a related party under the Investment Trust Law and the Asset Manager's "Retail REIT Department's Internal Regulations on Related Party Transactions".

1. Details of brokerage
   The broker is a domestic company, and the name of broker and other information are undisclosed as KRR has not obtained the broker's consent. The broker is not deemed a related party under either the Investment Trust Law or the "Retail REIT Department's Internal Regulations on Related Party Transactions" of the Asset Manager, and there is no special capital, personnel, business relationship between KRR/the Asset Manager and the broker.
2. Transactions with related parties
   The disposition of the property does not constitute a related-party transaction.

7. Disposition schedule

Disposition decision date/ contract date/ settlement date

December 27, 2021

8. Future outlook

Gains on sale of the property are assumed for the fiscal period ending March 31, 2022. There are no changes to the forecasts of fiscal period beginning from October 2021 and ending March 31, 2022 as the impact on the disposition is minimal.

9. Summary of real estate appraisal reports

(The numbers are in yen unless otherwise noted) T-10 K's Denki Shonan-Fujisawa (Land)

Summary of real estate appraisal report

Appraisal value	3,450,000,000 yen
Appraiser	The Tanizawa Sōgō Appraisal Co., Ltd
Date of appraisal	September 30, 2021
				Item		Content	Basis
Income capitalization approach value		3,450,000,000 yen	Calculated by using the income value by DCF method
	Value based on direct capitalization method		-
		-		Gross operating revenue		-
		-		Effective gross operating revenue		-
		-		Loss from vacancy, etc.		-
		-		Operating expenses		-
		-		Maintenance expenses		-
		-		Utility expenses		-
		-		Repair expenses		-
		-		PM fees		-
		-		Tenant recruit expenses, etc.		-
		-		Taxes and dues		-
		-		Insurance premium		-
		-		Other expenses		-
		-		Net operating income		-
				(NOI= (1)-(2))
		-		Profit from security deposits		-
		-		Capital expenditure		-
		-		Net cash flow (NCF=(3)+(4)-(5))		-

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		-		Cap rate		-
	Value based on DCF method	3,450,000,000 yen
					1st fiscal year to 6th
					fiscal year:	Calculated by considering marketability of the property, the
					4.3%
				Discount rate	contents of the current lease agreement, trends in the real estate
				7th fiscal year to
					investment market etc.
					26.1th fiscal
					year:4.4%
				Terminal cap rate		-
Value based on cost method		-
	Ratio of land			-
	Ratio of building		-
Adjustments in estimated value and considerations	None
taken into account in determining appraisal value
T-21 Prime Square Jiyugaoka
				Summary of real estate appraisal report
Appraisal value	2,820,000,000 yen
Appraiser	Daiwa Real Estate Appraisal Co., Ltd.
Date of appraisal	September 30, 2020
				Item	Content		Basis
							Calculated by using the income value by DCF method as a
Income capitalization approach value	2,820,000,000 yen	standard and verifying it from the income value by direct
							capitalization method
	Value based on direct capitalization method	2,860,000,000 yen	Calculated by capitalizing standardized net income, which is
	considered to be stable over the medium term, with a cap rate
		(1)		Gross operating revenue	Undisclosed
				Effective gross operating revenue	Undisclosed
				Loss from vacancy, etc.	Undisclosed
		(2)		Operating expenses	Undisclosed
				Maintenance expenses	0	yen	None on assumption that the expenses are borne by lessees
				Utility expenses	0	yen	None on assumption that the expenses are borne by lessees
				Repair expenses	Undisclosed
				PM fees	3,594,353 yen	Calculated based on the current PM contract amount
				Tenant recruit expenses, etc.	Undisclosed
				Taxes and dues	Undisclosed
				Insurance premium	Undisclosed
				Other expenses	0 yen
		(3)		Net operating income	115,969,197	yen
			(NOI= (1)-(2))
		(4)		Profit from security deposits	1,346,159	yen	Calculating investment income assuming investment yield is
			1.0%
							Calculated by taking into account the annual average renewal
		(5)		Capital expenditure	14,305,022	yen	cost in the engineering report and the construction management
							fee
		(6)		Net cash flow (NCF=(3)+(4)-(5))	103,010,334 yen
							Calculated by comprehensively considering the location,
		(7)		Cap rate	3.6%	building conditions, and contractual terms of the subject
							property
	Value based on DCF method	2,800,000,000 yen
				Discount rate	3.4%	Calculated based on discount rates for similar real estate
				transactions, comparison with yields on other financial

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