Fukuoka REIT Corporation
1-2-25 Sumiyoshi, Hakata, Fukuoka City, Fukuoka, Japan

https://www.fukuoka-reit.jp/eng/

Integrated Report2021@fukuokareit8968

facebook.com/fukuokarealty

fukuoka_realty

To help stakeholders better understand FRC and its operations, FRC is focusing efforts on its IR activities. FRC uses its website to post press releases andvarious disclosure materials and provide information on its portfolio of investment properties and other items. In addition, FRC uses social media such as
Twitter, Facebook, and Instagram to disseminate a wide range of information on the Fukuoka and Kyushu areas, including information on these regionsʼ
economies, real estate markets, retail facilities, tourist attractions, and much more. We invite you to make use of these information resources.

統合報告書

2020

Fukuoka REIT Corporation
December 2021

Contents

01 Introduction
01 Corporate Profile / Characteristics
02 Relationship with Fukuoka Realty Co., Ltd.
04 Macroeconomic Environment around Fukuoka City
08 J-REIT Mechanism and Fukuoka REIT Corporationʼs Business Model
10 History and Business Performance
12 Overview of Properties Owned
14 Financial/Non-Financial Highlights (5-Year Graph)

16 Value-Creation Activities
16 CEOʼs Message
20 Message from the Executive Director
22 Strategies of Each Department
26 Risks and Opportunities
28 Financial Strategies and TSR（Total Shareholder Return）

30 Foundation Underpinning Management
30 Sustainability Policy and Materiality
32 Environmental Issues
36 Social Issues
39 Organizational Issues

42 Data Section
42 Financial/Non-Financial Highlights (11-Year/22-Period Summary)
44 Glossary
Editorial Policy（Retail）
Canal City Hakata（Office buildings）
Gofukumachi Business Center（Logistics）
LOGICITY Hisayama

Introduction（Residence）
D-Wing Tower

With the aim of conveying details of the Investment Corporationʼs value creation
process in an easy-to-understand manner, we have issued this Integrated Report since
fiscal 2019. In editing this report, the editors adopt clear and accessible language,
with reference to the International Integrated Reporting Framework of the International
Integrated Reporting Council (IIRC) and the Guidance for Collaborative Value Creationof Japanʼs Ministry of Economy, Trade and Industry (METI). We consider that this andsubsequent reports will lead to active dialogue with investors and other stakeholders.

Corporate Profile / Characteristics
Ta k i n g ad va nt a g e of o u r s tre n g th i n k n ow i n g th e l o c a lcharacteristics of real estate, which is a region-specific business, toinvest in the wider Kyushu region with a focus on Fukuoka, on June21, 2005, Fukuoka REIT Corporation (FRC) was listed as the firstregion-specific REIT in Japan. FRC believes that attracting excellent
domestic and foreign investment funds to regional financial markets
will stimulate community development in the Fukuoka and Kyushu
areas. Moreover, we believe that possibilities for regional growththrough urban development will provide FRC with a continuous
stream of investment opportunities as well as income fromassets under ownership for FRC while at the same time deliveringprofitable returns to unitholders.

Corporate Profile

FRCʼs Characteristics

Name

Fukuoka REIT Corporation

Securities code

8968

Listed dateJune 21, 2005 : FRC listed on Tokyo Stock
Exchange and Fukuoka Stock Exchange

Accounting periods

February, August

Asset managementcompany

Fukuoka Realty Co., Ltd.

Sponsors

Fukuoka Jisho Co., Ltd.
Kyushu Electric Power Co., Inc.
THE BANK OF FUKUOKA, LTD.
THE NISHI-NIPPON CITY BANK, LTD.
Nishi-Nippon Railroad Co., Ltd.
SAIBU GAS HOLDINGS CO., LTD.
Kyudenko Corporation
Kyushu Railway Company
Development Bank of Japan Inc.

1 Japanʼs First Region-Specific
REIT
Taking advantage of our strength in knowing the local
characteristics of real estate, which is a region-specificbusiness, we invest in real estate for rent in the Fukuoka
and Kyushu areas, where growth potential exists. By
appropriately managing the invested real estate, we
continue to secure stable earnings over the medium tolong term while providing stable dividends.

4 Stable Financial Base
FRC conservatively controls its LTV and diversifies repayment
periods over time. In addition, the Investment Corporation
continue s to maintain good re lationships with f ina ncial
institutions including its three sponsor banks.

2 Excellent Portfolio

3 Support Structure Comprises

To build its portfolio, FRC selectively
invests in a variety of investment
property types, including retail facilities, office buildings, and logistics
properties , etc., with a focus on the
Fukuoka metropolitan area, which
has significant growth potential.

Powerful companies that lead the business worldin Fukuoka and Kyushu, and accept our way of
thinking, participate as shareholders of Fukuoka
Realty Co., Ltd. FRC proactively utilizes the support
from its sponsor companies while aiming to steadily
expand its asset scale.

Sponsor Companies

5 Payment of Stable Dividends Continuing Since Listing
Utilizing its sponsor pipeline and other advantages, FRC continues to distribute stabledividends per unit through the acquisition of carefully selected excellent properties andeffective asset management in the Fukuoka and Kyushu areas.

Fukuoka REIT Corporation 2021

01

■ Introduction

Relationship with Fukuoka Realty Co., Ltd.

FRCʼs Basic Policy□ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

Corporate Profile of Fukuoka Realty Co., Ltd.

【Our Mission】
Taking advantage of our strength in knowing the local characteristics of real estate, which is a region-specific business, we invest
in real estate for rent in the Fukuoka and Kyushu areas. By appropriately managing the invested real estate, we will achieve stableearnings over the medium to long term while making efforts tokeep providing stable dividends for the future.
【Act Local】
We - FRC and Fukuoka Realty Co., Ltd. - are currently the only
listed real estate investment corporation and asset managementcompany registered outside the Tokyo metropolitan and Kansai
areas under the provisions of the Act on Investment Trusts andInvestment Corporations as well as the Financial Instruments andExchange Act. As a region-specific REIT, FRC seeks differentiationin the selection of investment target properties and the management of owned assets through the enhancement of its information
gathering ability and ability to discern the profitability of properties

by utilizing its speed and depth of information based on knowledgeof local land and a broad network centering on local governments
and the business world.
【Think Global】
We will proactively engage in IR activities to fulfill our accountability to global capital markets. In conjunction, we will take heed of
Fukuoka Realtyʼs corporate governance and compliance. Regarding real estate and financial markets, FRC will keep closely tracking
movements occurring across the whole of Japan and the entire
world, taking into consideration the logic of capital markets with
global ideas, and appropriately reflecting such in our asset management.
We will also keep diligently pursuing dialogue with investors,focusing on fulfilling our accountability, and utilizing Fukuoka Realtyʼsfund management skills for investors under a strict compliancepolicy.

Listed on the real estate investment trust sections of the Tokyoand Fukuoka stock exchanges, Fukuoka Realty Co., Ltd., is FRCʼs
asset management company. Having only one Executive Director
and two Supervisory Directors, FRC outsources operations that
include the selection of the real estate to be invested in, asset
management, and other general affairs to outside experts. Amongthe experts to which operations are entrusted, an important roleis played by the asset management company. Generally, FRC
entrusts Fukuoka Realty Co., Ltd., see with surveys of new real es-

tate acquisitions, property selection, the post-acquisition management of real estate management companies outlined by Fukuoka
Realty Co., Ltd., and real estate sales.
Located in Fukuoka City and comprising 40 employees witha variety of experience in real estate, finance, and other fields,
Fukuoka Realty Co., Ltd., possesses a high level of expertise andmakes full use of information unique to the local area in managing
FRCʼs assets.

Real Estate Investment Trust

Fukuoka REIT Corporation

Real Estate

Investors［ Securities code:8968 ］
Holdings

Investments

Rents, etc.

Dividends

FRC and Fukuoka Realty Co., Ltd., believe that attracting domestic and foreign excellent investment funds to regional real estate
financial markets will stimulate community development in the
Fukuoka and Kyushu areas. Although we are not directly involvedin community development or real estate development, we expect
our acquisition of properties to lead to new funds passing to sellers
and part of those funds being directed to new development, etc.
With funds injected into FRC from Japan and abroad, new investment funds will flow to the Fukuoka and Kyushu areas as a whole.

Based on this perspective, we believe that we can contribute toregional revitalization and community development in the Fukuoka
and Kyushu areas.
Funds will be returned to unitholders by distributing the earnings
from owned assets.
Through the promotion of community development and the revitalization of regional economies in the Fukuoka and Kyushu areas,
we will aim for FRC earnings stability.

Investment Policy

Act Local
Real estate is a local business・Distinctive capability for gathering
qualitative information on the real estatemarket (speed, in-depth information)
・Specialization in local properties
・Solid network among local governments
and the business world

Our Mission
Region-Specific REIT
Featuring our expertise on
local real estate markets,
Fukuoka and Kyushu, maximize
profits of investors

Think Global
Capital market theory
・A ccountability and transparent
dialogue with investors
・Decent policy to comply
・Fund management skills

Investment target areas

Investment typeFukuoka
metropolitan area

Retail

60%- 90%
Other Kyushu areas(including Okinawa andYamaguchi prefectures)

10%- 30%
Others0 10%%-

40%-70%
Office buildings

20%- 50%
Others(Hotel, Residence,
Logistics, etc.)

0%- 30%Company
entrusted withasset
management

Introduction

Introduction

Contribution to Regional Revitalization and Development of Attractive Communities

Asset management company

Fukuoka Realty Co., Ltd.
For more details : See pp.8–9

Leading companies in Fukuoka and the Kyushu region that are
in agreement with FRCʼs concept participate as shareholders（sponsors）
of Fukuoka Realty Co., Ltd. FRC is aiming to achievesustainable growth as a REIT through the expanded scale of its
assets through the contribution of excellent properties from among
our sponsors and by actively leveraging their support, including theprovision of relevant information.
With regard to the properties owned and developed by thesponsor companies, Fukuoka Jisho Co., Ltd., FRC, and Fukuoka
Realty Co., Ltd., have concluded a pipeline support memorandumof understanding（MOU）
to seek stable and continuous acquisition
opportunities.

5%

5%

5%

THE BANK OFFUKUOKA, LTD.

THE NISHI-NIPPONCITY BANK, LTD.

Development
Bank of Japan Inc.

55%
Fukuoka Jisho
Co., Ltd. ＊Directors

Fukuoka Realty Co., Ltd.

Outsidedirectors

10%
Kyushu ElectricPower Co., Inc.

(Asset Manager)

Fukuoka Jisho Co., Ltd. overview : See p.25

5%

5%

5%

5%

SAIBU GASHOLDINGS CO., LTD.

Kyudenko
Corporation

Nishi-Nippon
Railroad Co., Ltd.

Kyushu Railway
Company* Concluded MOU with FRC and Fukuoka Realty Co., Ltd., concerning pipeline support.

02

Fukuoka REIT Corporation 2021

Fukuoka REIT Corporation 2021

03

■ Introduction

Macroeconomic Environment around Fukuoka City

□ Value-Creation Activities□ Foundation Underpinning Management

Total population of Fukuoka City

□ Data Section

Population growth ratio(Thousands)

（%）

1,650

1.4
1.12

1,600

0.99 1.02

0.99

Fukuoka Cityʼs Standing: From Regional City to an Asian Economic Metropolis

Hong Kong

1,000km

1,500km

Fukuoka City Initiatives■ Total Population and Population Growth Ratio of Fukuoka City

Fukuoka Cityʼs Activities to Attract “Growth Fields and Head Office Functions”

70

TEAM FUKUOKA attracting international financial functions

60

3,000

40

1,450

2,000

30
20

1,417

1,000

10
0

立地企業数 80

No. of persons employed

雇用者数

70

2016

2017

2018

2019

2020

58

57

57

53

50

2,989

1,041

1,334

1,058

665

（人）
5.00004.0000

60

1,430

1,441

1,454

1,466

1,482

1,497

1,541

1,512 1,526

0.95

1,582

1,614 1,620
1.18

0.84

1.2
1.0

0.90 0.77
0.8
0.6

1,400

0.4

1,350

0.2

0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

0

Note: Total population for 2021 indicates the population as of November 1, and therefore does notreflect the population growth rate.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data from Fukuoka City Estimated Population
and Fukuoka City Registered Population, published by Fukuoka City

Fukuoka

Kyoto
Sendai

17.0

KawasakiOkayama
NagoyaHiroshima

15.0

Saitama
Yokohama

SapporoNiigata

Kobe
Sakai

Tokyo
Metropolitan
area

Sagamihara

Osaka

Kumamoto

16.0

Chiba

Nationwide

Hamamatsu

14.00

No. of companies relocated （社）

0.89

0.89 0.82
0.78

0.99 1,556 1,570

1,595

0

Kitakyushu

57.0

・Youth population
14.5%
・Working-age population 60.0%

Shizuoka

58.0

59.0

60.0

61.0

62.0

63.0

64.0

65.0

66.0 （%）

Working-age population(Percentage of city population aged 15 to 64)

Source: Prepared by Fukuoka Realty Co., Ltd. based on data from the Ministry of Internal Affairs andCommunications, Statistics Bureau Population Census of Japan.

3.000040

Fukuoka: A Balanced
City That Continues to Grow
30

2.000020

According to “Japan Power Cities: Profiling Urban Attractiveness
10
2021,” a survey conductedby the Mori Memorial Foundation,0which analyzes the urban vitality of 138 cities in Japan from relative
2016年
2017年
2018年
2019年
2020年
and multifaceted
perspectives,
Fukuoka
City consistently
received 50社
立地企業数
58社
57社
57社
53社
high marks
as the largest
city in the
Kyushu1.334人
region that1.058人
combines 665人
雇用者数2.989人
1.041人economic vitality and ease of living. In terms of its “daily life and livability” functions, Fukuoka ranked first in the whole country. Aiming
to create a leading city in Asia in which people, the environment,
and urban vitality are in harmony, Fukuoka continues to grow as abalanced city.
■ Category Rankings/Standard Deviation
Economics/Business

75

Transportation/Access

50
2550-point standard deviation line（）
Figures in parenthesis indicate
last yearʼs rankings

Research/Development

6th 80.6 (5th)0（%）

Fukuoka
as a Compact ・City
Youth population
18.0

17.4% (1st)・Working-age population 64.8% (3rd)

Fukuoka

Kyoto

As a compact city, the air, sea, and landSendai
transportation access
17.0
Kawasakipoints of Hakata Station, the Port of Hakata/Chuo Wharf, and FuOkayama
Tokyo
Sagamihara
kuoka Airport are located withina three-kilometerradius of Tenjin,
Osaka
Kumamoto
Metropolitan
16.0
area
NagoyaSaitama
Fukuoka City's central business district. Traveling by the Fukuoka
Yokohama
Hiroshima
City Subway from Fukuoka Airport to theSapporo
city center, it takes about
15.0

Kobe
Sakai

Niigata

Nationwide

Fukuoka City

Chiba

Hamamatsu

14.0

Kitakyushu

ShizuokaIsland City
・Youth population
14.5%
・Working-age population 60.0%
65.0

66.0 （%）

Culture/Exchange

5th 74.1 (5th)Lifestyle/Residence 1st 73.3 (6th)Source: Prepared by Fukuoka Realty Co., Ltd., based on data from
“Japan Power Cities: Profiling
Urban Attractiveness 2021,”
a survey conducted by the Mori Memorial Foundation.

Hakata Station

Fukuoka Airport

Na

Tenjin Station

kag

aw

a（r

Ta
ih

ak

Kushida Shrine Station

ive

r）

ro

i-do

uta
Kok
Tenjin-minami Station

Gion Station

Nakasu Kawabata Station
Hak
ata
Riv
er

r）

Environment

Tenjin Station

Nanakuma Subway Line Extension Project
An intermediate station on the Nanakuma Line extension project that will connect Tenjin and Hakata Station,
Kushida Shrine Station is planned to be adjacent to
Canal City Hakata, FRC's flagship property.

rive

0
57.0
58.0
59.0
60.0
61.0
62.0
63.0
64.0
LegendWorking-age population
JR（Conventional lines）(Percentage of city population aged 15 to 64)
Shinkansen
Nishi-Nippon Railroad
Fukuoka Municipal Subway
Fukuoka Urban Expressway
Nishi Kyushu Expressway
Port of Hakata/Chuo Wharf

0

63rd 51.3 (91st)

five minutes to Hakata and about 10 minutes to Tenjin.
About 60% of commuting times are less than 30 minutes, which
is about half that of Tokyo. In 2022, the Nanakuma Subway Lineextension project will connect Tenjin and Hakata Station, and thusincreased convenience is expected.

awa（

3rd 77.7 (3rd)Standard Deviation by Category

5th 71.1 (2nd)1.0000hink
in-S

Fukuoka REIT Corporation 2021

0.99 1.02
0.89

1,550

0.8

・Youth population
17.4% (1st)・Working-age population 64.8% (3rd)

18.0

u
Yak

Source:“Restoring Vitality!”―Overview of the Initial Budget Proposal for Fiscal 2021 issued by
the Finance Bureau of the City of Fukuoka on February 16, 2021, and press release
issued by the Economy, Tourism & Culture Bureau of the City of Fukuoka on February
12, 2021

1.12

1,500

50

Examples of TEAM FUKUOKA Successes（1）
First success, MCP Holdings Limited attracted from Hong Kong
（2）
CapBridge Financial Pte. Ltd. attracted from Singapore（3）
DHARMA.CAPITAL K.K., the first FinTech company, attracted
from Tokyo

1.4

4,000

1,497

（%）

1,650

0.99

5,000

1,482

Compared to other
1,454 cities, the population composition of Fukuoka
0.6
1,441
1,430
City 1,417
is characterized
by a higher proportion of young people. Of
1,400
the cities listed in the chart below, the ratio of young people in 0.4
Fukuoka City（the proportion of a cityʼs total population accounted
1,350
0.2
for by people ages 15 to 29）
ranks first at 17.4%. Fukuoka Cityʼs
2006 2007 20082009 2010 201120122013 proportion
2014 2015 2016of2017
2019 total
2020 2021
0
working-age
population
ratio
（the
the2018
cityʼspop-0
ulation made up of people ages 15 to 64）
ranks third at 64.8%.
1,450

Population growth ratio

（%）

1,600

(Persons)

80

50

The Japanese government, as a pillar of its growth strategy, aims
to gather financial talent, funds, and information from overseas andto establish Fukuoka as an international financial city. In response,
TEAM FUKUOKA, a promotional organization of industry-academia-government collaboration throughout Fukuoka, was established on September, 2020.
In aiming to attract international financial functions to the city,
TEAM FUKUOKA's efforts included the opening of the Global
Finance Center, a one-stop support portal specializing in international finance, and the appointment of a Fukuoka City international
financial ambassador. The first success, the entry into the market of Hong Kong asset management company MCP Holdings
Limited, was announced in February 2021. In July, the companyʼs
Japanese head office, MCP Japan Holdings, was established.
TEAM FUKUOKA is deciding on many other corporate moves into
the Fukuoka City market.

04

No. of persons employed

1.0■ Young People and Working-Age Population ratios of Nationwide andMajor Cities（2015）(Thousands)

Youth population

Japanet Holdings Co., Ltd., launched its JAPANET@FUKUOKA
project, which features Fukuoka City as one of its new major bases.
In addition to relocating 12 departments, including personnel andaccounting, mid-career recruitment will be strengthened, and theplan is to have commenced operations by the end of 2021.

No. of companies relocated(Companies)

0.84

1,541

1.2

Introduction

Introduction

Example of Major Function Relocation

Total population of Fukuoka City

■ Fukuoka City: Trends in head office function/growth fields company
relocations(Percentage of city population aged 15 to 29)

Having promoted the attraction of “growth fields and head office
functions,” Fukuoka Cityʼs track record in company relocations has
exceeded 50 companies annually for eight consecutive years. With
the progress of risk diversification and telework in the centralized areaof Tokyo, more companies are considering opening bases in regional
cities. Even when impacted by COVID-19, the willingness of companies to enter the market has not diminished. Fukuoka City will thus
continue to make efforts to further establish companies and create
employment by utilizing active PR and incentives.

1.18

1,512 1,526

Legendu-doriCanal City Hakata

Hak

ata-

ekimae-dori

Extension section
Tenjin-minami ~Hakata station
Operating sections
Nanakuma Line
Airport Line

Sumiyoshi-dori

Fukuoka
500km

1,466

Subway Lines（City Center）

Taipei

The total population of Fukuoka City has increased consistently
since 1985, and as of May 1, 2020, the estimated population
exceeded 1.60 million. This total population makes the city the fifth
most populous among government-designated cities, following
Yokohama, Osaka, Nagoya, and Sapporo. According to estimates from the National Institute of Population and Social Security
Research, the population of Fukuoka City is expected to continue
growing until 2035.

Youth population

Tokyo
Busan Osaka

Shanghai

1,500

Blessed with a history and culture nurtured by the sea, an abundant natural environment, extensive urban functions, diverse human resources, and various other assets, Fukuoka City is recognized around the world as a livable city.
Under the “Fukuoka City Comprehensive Plan,” the basic strategy for city management focuseson creating a virtuous cycle of “urban growth” and “greater quality of life.” In aiming to become a“leading Asian city in which people, the environment, and urban vitality are harmonized,” Fukuoka
City is advancing urban planning that recognizes its presence within Asia as a compact, sustainable city that balances economic growth with a safe, secure, high quality of life.

0.89

0.89 0.82

1,595

1,582

Fukuoka Has
0.78a Large Youth Population 0.95 0.90 0.77

(Percentage of city population aged 15 to 29)

Beijing Seoul

0.89

1,550

Population Continues to Grow in Fukuoka City

0.99 1,556 1,570

1,614 1,620

Hakata Station

Source: C reated by Fukuoka Realty Co., Ltd. based on data from Fukuoka
City Transportation Bureau’s Nanakuma Subway Line Extension
Project Leaflet（April 2019）.

Fukuoka REIT Corporation 2021

05

■ Introduction

Macroeconomic Environment around Fukuoka City

□ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

Tenjin Big Bang and Hakata Connected Projects
The Tenjin district of Fukuoka City received special authorization
to relax Civil Aeronautics Act–related building height restrictions
following its designation as a National Strategic Special Zone for
Global Startups & Job Creation. In addition, Fukuoka City has been
advancing the Tenjin Big Bang project to create new spaces andemployment, implementing original policies to deregulate floor area
ratios, and working to significantly improve urban functions.
In the cityʼs Hakata district, the Hakata Connected project has
started to better link the vitality and prosperity of Hakata Station
to the surrounding area. In the area surrounding Hakata Station,
which serves as the overland gateway to the Kyushu region,
municipal functions are being improved via transport infrastructureenhancements, including an extension to the Nanakuma subway
line and the redevelopment of Hakata Ekimae Street. Through suchfactors as the deregulation of floor area ratios, the project will alsoseek to encourage the reconstruction of older buildings as highly
earthquake-resistant, high-tech buildings.

■ Targeted certifications■ Relaxation of height restrictions

Tenjin Big Bang

• Buildings scheduled to be completed by December 31, 2024
• Working on infectious disease countermeasures, buildings
scheduled to be completed by December 31, 2026
（two-year
extension from initial period）
Hakata Connected

Kushida Shrine Station

Nishitetsu Fukuoka(Tenjin) Station

Canal City Hakata

Tenjin Big Bang
Hakata Connected
Note: Focus areas

Tenjin Big Bang

• Around Fukuoka City Hall

Tenjin Big Bang884
0 2014年

Examples of height restriction relaxation• Tenjin, Meiji-dori district（west of the center of Watanabe-dori）
approx. 115 m（26 floors）• Tenjin, Meiji-dori district（east of the center of Watanabe-dori）
approx. 76 m
（17 floors）
to approx. 100 m（22 floors）• Tenjin 1-chome district
approx. 80 m
（18 floors）
to approx. 96 m
（21 floors）

Hakata Connected（1）Creation of spaces to wander that create a connection withand expand on the surrounding area
（2）
Creation of attractive plaza spaces that create a lively atmosphere, for example, by being used for events（3）
Promotion of tree shade and flowers that enrich the town, andeye-catching greening（4）
Consideration given to Universal Design■ Number of buildings to be rebuilt（number of building certification
applications）
Tenjin Big Bang

52 buildings（Construction completed: 42 buildings）
Note: February 2015 to February 2021

Hakata Connected

15 buildings（Construction completed: 7 buildings）
Note: January 2019 to February 2021

Tenjin Big Bang bonus

Maximum floorarea ratio

Hakata Connected bonus

50％

Completed floor space (total floor space)

2018年

2017年

（224千人）中国 6.7%

2018年（坪）
50,000130

Vacancy rate

Net absorption (absorption demand)

120 Fukuoka
（%）
（%）
120
20（%） 110（Tsubo）

As of Oct.
2021
Net absorption (absorption
demand)50,000floor space (total floor space)Completed40,000SendaiCentral Tokyo (5 wards)

40,000
15.38

15.38
14.72

400,000

13.23

6.30%
6.47%

30,00020,000

10.99

11.98

14.72

13.23

10.99

20

12

20,000
10.99

7.70

10.86

7.70

12

6.30

7.706.30

20,000 10,000

4.26

4.26
4.263.07

10,00010,000

0

3.07

2.04

4.66
4.66

3.79

4

2.09

2.04

0

3.79

2.09

2.04

Office/hotel building（25aboveground floors）

2008

2009

2010

2011

2012

2013

2014

2015

Community building（11 aboveground floors）

2016-20,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
0
Note: The figures from 2005 to 2020 are based on the figures as of December.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data from Miki Shoji Co., Ltd., Office Market Data.

Leasable / Floor space

2.09（Provisional
name）（Provisional
name）
Utilization
project
formerUtilization
project
for forthetheformer2017Daimyo
2018 Elementary
2019 2020 School
2021 2022
site
DaimyoElementary
Schoolsite(Planned)(Planned)

800,000
Leasable / Floor space

Leasable / Floor space

2019

2020

2021 2022

Occupancy floor space

Occupancy floor space（Tsubo）

800,000
400,000
800,000

600,0000 2005
600,000

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Source: Prepared by Fukuoka Realty Co., Ltd., based on data from Miki Shoji Co., Ltd., Office Market Data.
400,000
400,000

0 20052018

Occupancy floor space（Tsubo）
600,000

0 200520172014 2015
2015 20162016 20172017 20182018 20192019 2020 20202021 2021

（Tsubo）

Event hall（One aboveground floor）-20,000

2014

2013

40

TenjinBusiness
CenterTenjinBusiness
CenterOffices 5th to 16th floors
Rentable area: Approx. 30,000 m2-10,000 -20,000-10,0002013■ Trends in Leasable Floor Space and Occupancy Floor Space

0（Provisional name）
0
Utilization project for the former
Daimyo Elementary School site

Building Overview（Note）

2012
2012

84

Tenjin Business Center

0 -10,000

1000
2010 20112005 2005 20062006 20072007 20082008 20092009 2010
2011
0
90

4.668

3.79

3.07

6.30

8

11,166 yen

Central Tokyo (5 wards) 20,804 yen(Yen/Tsubo)

110
90
90

16 16

10.86

11.98

As of October. 2021
Fukuoka

130
110

Osaka
4.45%
16
40,00011.982010年 2011年 10.86
2006年 2007年 2008年 2009年
2012年
2013年 2014年 2015年 2.80%
2016年 2017年 2018年 2019年 12
2020年
0 2005年
Sapporo30,00015.38

Central Tokyo (5 wards)120（%） 100
100

4.66%

Fukuoka

13.23

20

Vacancy rate

5.39%

Nagoya

14.72■
FukuokaBusiness District/Average Asking Rents（Y2005=100）
Fukuoka
Central Tokyo (5 wards)（%）The average
Fukuoka askingCentral(5 wards)business district rose 4.8% from January 2020 to October 2021
rent ofTokyo
the Fukuoka
130（%）

Vacancy rate

Net absorption (absorption demand)

Completed floor space (total floor space)（Tsubo）
賃貸可能面積稼働面積（Examples of relaxation of floor space ratios）• Tenjin 1-chome south block
800％→1,400％（maximum）• Tenjin 2-chome south block（along Meiji-dori Ave.）700％→1,300％（maximum）• Tenjin 1-chome north block（14th block） 600％→1,250％（maximum）

47.2■ Fukuoka Business District/Vacancy Rates and Supply and Demandof Office Buildings

30,000Hakata Connected

2017年

2016年

prefecture, including Japanet Holdings Co., Ltd. See p.4 , andoperations have started at a high occupancy rate. In addition,
Fukuoka Jisho Co., Ltd., is proceeding with the redevelopmentof the adjacent Tenjin MMT Building, and the group represented
by Fukuoka Jisho Co., Ltd., hasその他地域
obtained3.1%
preferential
negotiation
タイ 1.1%（38千人）（１０３千人）rightsfor thesite of Fukuoka City Hallʼs former north annex. In
欧州
・米国・豪州
2.6%（87千人）
collaboration
with THE NISHI-NIPPON CITY BANK, LTD., Fukuoka
香港
5.9%（１97千人）
Jisho Co., Ltd., is also advancing a series of redevelopments of
台湾
9.6%（322千人）theBankʼsaging main branch, mainbranchannex,and head ofタイ 1.1%
（38千人）
その他地域
3.1%
（１
０３千人）
タイ
1.1%
（38千人）
その他地域 3.1%
（１０３千人）欧州・
米国
・豪州 2.6%（87千人）
fice buildings
under
the Hakata Connected
initiative.
外国航路（不定期船）
韓国
香港（１97千人）
欧州・米国
・
豪州 2.6%In5.9%
thisway, （87千人）
FRC and sponsor Fukuoka Jisho Co., Ltd., are
上陸人員数
香港 5.9%（１97千人）%actively
involvedin the redevelopment of urban areas in Fukuoka
台湾 9.6%（322千人）23.8%（800千人）（1,584千人）
台湾（322千人）City9.6%
andare promoting
initiatives that will leadto our contributions
外国航路（不定期船）
韓国
上陸人員数
to boostingtheattractiveness中国%（224千人） and revitalization
外国航路（不定期船）
韓国
6.7
47.2of%Fukuoka and23.8region,%（800千人）
上陸人員数
the Kyushu
as stated in the materiality.
（1,584千人）
47.2%
23.8%（800千人）（1,584千人）
中国 6.7%（224千人）The office building market in Fukuoka remains solid, and demand for logistics facilities is robust.

50,000600,000

2006

2006

2007

2007

2008

2008

2009

2009

2010

2010

2011

2011

2012

2012

2013

2013

2014

2014

2015

2015

2016

2016

2017

2017

2018

2018

2019

2019

2020

2020

Northern Kyushu Logistics Facility Supply and Demand Trends(Planned) (Planned)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
2022

(Planned) (Planned)■ Efforts toward becoming a city designed to control
infection
Tenjin Big Bang

Hakata Connected

Completed floor area (total floor area) includes the floor area for common spaces, etc., and therefore differsfrom the leasable floor area.
全国

Check

Infectious disease controls newly added to the existing system torelax floor area ratio（Policy to Encourage the Upgrading of Central
Urban Functions in Fukuoka City）（Formerly）
Global competitiveness（New）
Global competitiveness/
Infection controls

Fukuoka REIT Corporation 2021

2016年

2015年

（Tsubo）

Buildings that contribute to an increase in activity, including thosewith plazas and other areas, which facilitate linkages and ripple
effects, to be granted a maximum floor area ratio of 50%
Current floor area
ratio relaxation
system

2015年

2014年

Business Center is helping to attract companies from outside the

Fukuoka Office and Logistics Facility Market Conditions

800,000■ Expansion of floor area ratio relaxation policy（Policy to Encourage the Upgrading of Central Urban Functions in Fukuoka City）
Tenjin Big Bang

Concerning the Tenjin Nishi-Dori Business Center（Land withleasehold interest）
acquired by FRC on June 1, 2021, we will beable to obtain stable rental income from sponsor and lessee Fukuoka Jisho Co., Ltd., during the redevelopment of the existingbuilding on the property and for the period until either the end of
February博多港利用
or the endofAugust,whichever comes first after nine
福岡空港利用
外国航路（不定期船）
上陸人員数（千人）months elapse following the completion of the redevelopment
4,000（the date certification of inspection is obtained）. Once that period
has elapsed, rental income in line with market fluctuations
will be800
842
3,000 obtained.
Due tothis acquisition,
wewill capture the growthof the福岡空港利用博多港利用
外国航路（不定期船）
上陸人員数
143
167
847上陸人員数（千人）
福岡空港利用
外国航路（不定期船）
area
arising博多港利用
fromTenjinBig
Bang and contribute to boosting the574（千人）4,000
161
2,000
attractiveness and
183 revitalization of the city as a landowner. Main
4,000210
800
2,205 842 the 2,414
193
sponsorTenjinBusi3,000 Fukuoka Jisho Co., Ltd., also completed
143
1,631
800
1,000
1,392
842167847
3,000
884 Center, the first property deregulated by Tenjin Big 143
ness
Bang,
in
574
167
2,000
847161
183 property
SeptemberAs
theis equippedwith Fukuokaʼs
first
2102021.
574
2014年
2015年
2016年
2017年
2018年
2,414
0
161
2,205
2,000
193
1,631 and the incorporates mealarge-scale
seismic183isolation
structure
1,000
1,392
210
2,414
2,205
193 884
1,631
sures to address suchdiseases as COVID-19, the Tenjin
1,000
1,392 infectious0

None■ Certification requirements

・Contributions to boosting the attractiveness and revitalization of Fukuoka and Kyushu

Related Materiality

approx. 67 m
（15 floors）

Hakata Connected（1）
High design quality buildings, including lower zones and public
open spaces（2）
Building design that considers continuity with surrounding
buildings（3）
Promotion of tree shade and flowers that enrich the town, andeye-catching greening（4）
Consideration given to Universal Design

06

JR Hakata Station

FRC and Main Sponsor Fukuoka Jisho Co., Ltd.ʼs Initiatives in Tenjin Big Bang / Hakata Connected

Introduction

Introduction

Buildings scheduled to be completed by December 31, 2028

Nanakuma Subway
Line Extension(scheduled to start its
operation in the FY2022)

TOPIC aximum 50%
Mfloor area ratio relaxation
Maximum 50%
floor area ratio relaxation

福岡市

政令指定都市

九州・沖縄

Notes: 1.Vacancy rates from 2008 to 2020 are based on the figures as of December 31.
（%）

Notes: 2.Office building–related data for each city are the data for areas and buildings included
6
in surveys conducted by Miki Shoji Co., Ltd.
4
Notes:
3.Net absorption（absorption demand）
shows the change in the occupied floor space
during a specific period. It is calculated by subtracting the occupied floor space on De2
cember 31 of the previous year from the occupied floor space on December 31 of the0applicable year
（data for 2021 is based on figures as of the end of August）. Completed-2
floor space（total floor space）
figures for 2021 and 2022 have not been finalized, and-4
the floor space and expected completion dates are subject to change.
Source:Prepared by Fukuoka Realty Co., Ltd., based on data from Miki Shoji Co., Ltd., Office
2010年 Data.
2011年
2012年
2013年
2014年
2015年
2016年
2017年
2018年
2019年
MarketNote: Prepared by Fukuoka Realty Co., Ltd., based on press releases from Fukuoka City andthe operating entity.

■ Logistics Facility Supply/Demand and Vacancy Rates
New supply

New demand

Vacancy rate

（Tsubo）
60,000（%）
12

50,00010

40,000830,000

6

20,0004

10,000

2

2020
2016
2017
2018
2019
0
Note: The figures are covered total floor spaces (more than 5,000m²) which owned by the real estate
investment company and real estate development company in Fukuoka and Saga.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data of CBRE.

0

Fukuoka REIT Corporation 2021

07

■ Introduction

J-REIT Mechanism and Fukuoka REIT Corporationʼs Business Model□ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

To contribute to the revitalization of Fukuoka and Kyushu and attractive urban

J-REIT Characteristics

development, FRC selects and procures funds for investment by utilizing local
government and business networks as well as its information-gathering ability

J-REIT Mechanism① Enables efficient diversified investment
in real estate

and know-how.

Real estate properties

In addition, we place the utmost emphasis on dialogue with stakeholders and④ Enables daily trading on stock exchanges

promote sustainable management that takes into account economic, social⑤ Full and ample information disclosureand environmental concerns by incorporating ESG issues into our investment
management process as a part of our business model.

Asset warehousing company
Company entrusted withbusiness

F

Management ofassetsOwned real estate for
rent

Payments ofprincipal and interest

Financial institutions
Bond investors

Investment

CapitalDividends

Outsourcing
Entrustment of asset
management services

Real estate managementcompany

Main Management Resources (Inputs)

Fund procurement(debt)

Borrowings/bonds
Property management③ Corporate taxes highly advantageous due
to conduit statusearnings over the medium- to long-term.

Investment corporation

Rental income② Relatively stable high yields

We aim to maximize the profits of investors by providing them with stable

Investments

Investors

Commissioned
remuneration

Asset management company

Investment

Sponsor companies

Financial
Strategy

cial Strategy
inan

Total 32 properties

See p.24

Created Value (Outcomes)

See pp.12-13(As of August 31, 2021)

Our Mission

Act Local
Think Global
Management

em

en

t (fi

na

nc e

Office buildings 10 properties

re
c
o
a ti
or m

n

d

Residences 5 properties

08

Fukuoka REIT Corporation 2021

40,761 million yen
1.0×

Human resource capital• Number of IR interviews during the year In Japan 166, Abroad 38 (including
telephone conferences)• Track record of winning awards
IR Excellent Company Encouragement Award (2014) /Nikko Excellent IR Website Award (2020)

Social relationship capital

Sustainability Policy

Logistics 4 properties

See p.30

Environmental Issues

Social Issues

Organizational Issues

See p.32

See p.36

See p.39

Natural capital• Land in properties held in the Fukuoka and Kyushu areas (57.4 ha)• Energy, water, air, and other natural resources used in the operation of properties owned• Natural environment and biodiversity in the areas around properties owned• Unrealized gain
• P/NAVIntellectual capitalis c

Response to
ESG issues

Social relationship capital

5,336 million yen
5.4%• Number of qualification holders: Real estate brokers 28 /ARES Certified Masters 25 / Certified building administrators 4• Average paid leave acquisition rate (FY2020) 64.4%

su
In f

)

Annual rate 8.5%
0.69%
3,539 yen
4.0%
JCR: AA- (stable), R&I: A+ (stable)

lo

c

ur

• A varied skill set formed through human resource training• Experience and knowledge of IR activities based on long years of practical implementation• Gathering of information deeply rooted in local communities• Co-creative and trusting relationships with tenants• Cooperative framework with property management (PM) companies• Coordination with local society, local communities• Maintenance of good relationships of trust with sponsors

Valuation
Sales

o
pr

Intellectual capital

Researchd• Number of officers and employees 40(Male: 20 / Female: 20)• Number of qualification holders:
Real estate appraisers 3 / Attorney 1 /First-class registered architects 3 / MBA 2nFu• Excellent human resources withspecialized skills• Support framework for flexible working
styles• Support system for career development• NOI• NOI yielduni

Human capital• TSR for past 10 years• Average interest rate paid
• Dividend per unit
• Dividend yield• Credit Ratings

Manufacturing capitalo n (IR・SR)

Contribution to regional
revitalization and developmentof attractive communities

Retail 11 properties

cati• Total leasable area
572,215.71m2• Total acquisition price 202,019 million yen

See p.23

ManagementommFinding excellent properties that cangenerate stable cash flow over the longterm

Acquisition

See p.22

Introduction

Manufacturing capital

Financial capitalManagement
Strategy

Investment
Strategya g eme n t S t r a t e g y• Total liabilities
98,049 million yen• Net assets
101,755 million yen• Total assets
199,804 million yen• Total debt
82,400 million yen• Average remaining
duration to maturity
5.7 years
• LTV
41.2%

Ma n

Introduction

Building of a solid financial base throughconservative control of LTV(As of August 31, 2021)

tment Strategy
Inves

Financial capital• Implementation of COVID-19 tenant support measures (assistance withvaccinations as requested and other support)• Participation in local cleanup activities *289 times in total (as of October 15, 2021)• Human resource exchanges with sponsors (4 people dispatched tosponsors, 2 people accepted from sponsors)

Natural capital
Hotels 2 properties• Green building certification rate (total floor space basis) 78.8％• Reduction of electricity usage and water consumption at in properties owned

Fukuoka REIT Corporation 2021

09

■ Introduction

History and Business Performance□ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

Carefully selecting and investing in properties that can generate stable cash flow over the years, FRC is working tocontinuously expand the scale of its assets. In addition to retail and office buildings, we are diversifying investment types by
expanding the scope of investment into such properties as residences, hotels and logistics facilities.
■ Retail■ Office buildings■ Residence■ Logistics(Acquired properties)
Canal City Hakata
Canal City Business Center Building
Park Place Oita
Gofukumachi Business Center
SunLive City Kokura■ HotelNumber of properties
Tosu Logistics Center

32,00014,60015,700
11,200
6,633

Tenjin Nishi-Dori Center Building

2,800
1,530
2,800

Konoha Mall Hashimoto
10,000Higashi Hie Business Center II 4,230
Park Place Oita (adjacent land)
860

2,600

Aqualia Kego
2,800
Aqualia Chihaya 1,280

Taihaku Street Business Center

7,000

LOGICITY Hisayama

2,060
5,300
2,400

Higashi Hie Business Center III
LOGICITY Wakamiya
Park Place Oita (Home Plaza Nafco)

Park Place Oita (Sports Club NAS) 1,470
Aeon Hara Shopping Center (sold) (5,410)
Aqualia Kego (sold)(2,800)200,000
Amex Akasakamon Tower
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC

Tenjin Nishi-Dori Business Center（Land with leasehold interest）7,700
Canal City Hakata・B Grand Building（88.28％ co-ownership）（sold）（7,640）（Note）

1,100

LOGICITY Minato Kashii
8,150
Marinoa City Fukuoka (Marina Side Building) 5,250
Park Place Oita (adjacent land)
590

1,250

D-Wing Tower
Hotel FORZA Oita
Tenjin North Front Building

Sanix Hakata Building
4,400
Kominedai Community Mall
740
Acquisition Price(Millions of yen)

Granfore Yakuin Minami

Canal City Hakata・B

Tissage Hotel Naha

3,290
1,700
990

（Number of properties）

2,835

40

5,050

28,700

Aeon Hara Shopping Center
5,410
Kominedai Community Mall (Sold) (740)Hanahata SC
City House Keyaki Dori
Kurume Higashi Kushiwara SC
150,000

1,130
1,111
2,500

Kʼs Denki Kagoshima

32
31

31

3,550
Higashi Hie Business Center

5,900

27

28

27

27

29

25

30

29

26

26

25

29

24
23

23

20

100,000

20

17

17
16
15

14

16

16

Introduction

Introduction

19

16

15

11

11

50,000

10
8
7
5
4

0

Listed

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Jun. 2005

Aug. 2005

Feb. 2006

Aug. 2006

Feb. 2007

Aug. 2007

Feb. 2008

Aug. 2008

Feb. 2009

Aug. 2009

Feb. 2010

Aug. 2010

Feb. 2011

Aug. 2011

Feb. 2012

Aug. 2012

Feb. 2013

Aug. 2013

Feb. 2014

Aug. 2014

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Fukuoka REIT
Corporation andFukuoka Realty Co.,
Ltd. events• 1 st Public Offering (September)
Number of investment units: 15,000 (before 5:1 unit split)
Offer price (per unit): 766,360 yen (before 5:1 unit split)
Total issue price: 11,096 million yen• Canal City Hakata South Building renovation• 3 rd Public Offering (March)
Number of investment units: 14,950 (before 5:1 unit split)
Offer price (per unit): 710,580 yen (before 5:1 unit split)
Total issue price: 10,263 million yen• 2 nd Public Offering (March)
Number of investment units: 16,000 (before 5:1 unit split)
Offer price (per unit): 576,083 yen (before 5:1 unit split)
Total issue price: 8,913 million yen• Facebook launched (March)• CSR study groups begin (April)• Volunteer support for disaster-affected areas (July)• IR Kyushu subcommittee established (November)• Fukuoka Urban Growth Strategy Project established (April)• Canal City Hakata communal area environment renewal (treeplanting, additional benches, etc.)

Note: The amount is the appraisal value at the time of transfer.

10

Fukuoka REIT Corporation 2021

• Etsuo Matsuyuki appointed as President and CEO of AssetManagement Company（current position: Advisor）• 4th Public Offering (April)
Number of investment units: 57,000
Offer price (per unit): 212,257 yen
Total issue price: 11,701 million yen• Second issue of investment
corporation bonds (July)• F irst issue of investment corporation bonds (December)• 5:1 investment unit split implemented (March)• Canal City Hakata 20th anniversary• Japan’s largest 3D projection mapping and new Aqua

•1st Integrated Report issued• 5th Public Offering (March)
Number of investment units: 49,000
Offer price (per unit): 164,414 yen
Total issue price: 7,795 million yen

0•2nd Integrated Report issued• 15th anniversary of FRC’s listing• 9th General Meeting of Unitholders• f-JOY app released for use at four retailfacilities of the Fukuoka Jisho Group• Asset size reached 200 billion yen

Panorama fountain installed at Canal City Hakata• Third issue of investment corporation bonds (July)• F irst course donated to Fukuoka
University held (September)See p.20• IR briefing held for Platinum WOMAN individual investors (August)• Incorporated into the FTSE EPRA/NAREIT Global Real Estate Index (September)• Receives the IR Excellent Company Encouragement Award (December)• Fukuoka International House opens (April)• Second course donated to Fukuoka University held (August)• Fukuoka Realty Co., Ltd. 10th anniversary (December)• 10th anniversary of FRC’s listing• T ax exemption procedure counter and free Wi-Fi set up for inboundcustomers at Canal City Hakata• C anal City Hakata inbound continues to perform well, sets new visitor records (17.02 million in fiscal 2017)• Formulation of sustainability policy (January)• Park Place Oita 15th anniversary renovation• Zenji Koike appointed as President and CEO
of Asset Management Company

See p.16

Fukuoka REIT Corporation 2021

11

■ Introduction

Overview of Properties Owned

FRC carefully selects and invests in properties with the potential to generate stable cash flow over the long term. It owns
properties with widely divergent uses, mainly retail and office buildings, to diversify risks within the region.
Asset Ratio (As of August 31, 2021)□ Foundation Underpinning Management□ Data Section■ Other properties (Hotel, Residence, Logistics): 11
22

23

24

25

26

27

Amex Akasakamon Tower (Residence)
1/9/2006/2,060

City House Keyaki Dori (Residence)
20/12/2007/1,111

Aqualia Chihaya (Residence)
1/3/2012/1,280

D-Wing Tower (Residence)
1/3/2013/2,800

Granfore Yakuin Minami (Residence)
4/11/2014/1,100

Hotel FORZA Oita (Hotel)
1/3/2013/1,530

28

29

30

31

32

Tissage Hotel Naha (Hotel)
7/12/2018/2,835

Tosu Logistics Center (Logistics)
28/3/2014/1,250

LOGICITY Minato Kashii (Logistics)
27/3/2015/8,150

LOGICITY Hisayama (Logistics)
1/6/2017/5,050

LOGICITY Wakamiya (Logistics)
30/6/2020/1,700

See p.24■ Investment Areas (Acquisition price based on)■ Investment Type (Acquisition price based on)
RetailOffice buildings

OthersFukuoka metropolitan area

Other Kyushu area

54.2%

31.5%

14.3%

76.6%

23.4%

Number of properties owned:

32

Total acquisition price:

202,019 million yen

Note: Acquisition price data
is rounded down to thenearest million yen.

Property name / acquisition date / acquisition price (millions of yen)32

■ Retail: 11
1□ Value-Creation Activities

29
2

3

4

5

31

30
27

6

24

Sta.

Sta.

Canal City Hakata
9/11/2004/32,000

Canal City Hakata・B
2/3/2011/21,060

Park Place Oita
9/11/2004/19,610

SunLiveCity Kokura
1/7/2005/6,633

Konoha Mall Hashimoto
1/3/2018/10,000

7

8

9

10

11

Square Mall Kagoshima Usuki
28/9/2006/5,300

28

Across Kyushu

FUKUOKA
PayPay DOME

Sta.

22 25

Sta.
Sta.

Sta.

Sta.

21

Hanahata SC
3/9/2007/1,130

Kurume Higashi Kushiwara SC
1/2/2008/2,500

Kʼs Denki Kagoshima
27/3/2008/3,550

Sta.

Sta.

BEST DENKI
Stadium

Sta.
Sta.

Sta.
Sta.

Sta.

Sta.

23

Kumamoto Intercommunity SC
30/11/2006/2,400

Introduction

Introduction

Sta.

26

Sta.

Marinoa City Fukuoka (Marina Side Building)
1/5/2015/5,250
Sta.

■ Office buildings: 10
12

13

Fukuoka City
14

15

16

17

■ Trends in Appraisal Value and Unrealized gain
Period-end book value (note)

Unrealized gain = (Period-end appraisal value – Period-end book value (note))(millions of yen)
Canal City Business Center Building
9/11/2004/14,600

Gofukumachi Business Center
9/11/2004/11,200

Sanix Hakata Building
30/9/2005/4,400

Taihaku Street Business Center
16/3/2006/7,000

18

19

20

21

Higashi Hie Business Center13/3/2009/5,900

Tenjin Nishi-Dori Center Building
1/2/2013/2,600

250,000
16,777 19,830 24,255 21,152 22,878 25,541

200,000
150,000
100,000

18,742

20,7996,498

21,07012,465

9,300

8,953

9,394

5,543

6,006

6,989 146,621 146,246 150,603

13,955120,299 119,486 118,686 118,411
1,893 7,894
112,001 115,560 115,195
103,025 107,338-411
93,556
86,777
81,771

6,522

8,243

9,138

11,097 14,434

152,422 158,851 158,007 159,128 159,246

172,406 171,555 168,902

164,527 169,031 168,138

40,761
36,923 37,648 37,927
29,467 31,804 34,087
182,352 184,715 183,532 182,336 187,891 186,972 186,088

50,0000Tenjin North Front Building
28/3/2013/2,800

12

Fukuoka REIT Corporation 2021

Higashi Hie Business Center II
1/3/2018/4,230

Higashi Hie Business Center III
29/5/2020/3,290

Tenjin Nishi-Dori Business Center (Land withleasehold interest) 1/6/2021/7,700

2nd

3rd

4th

5th

6th

7th

8th

9th

10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th

Aug.
2005

Feb.
2006

Aug.
2006

Feb.
2007

Aug.
2007

Feb.
2008

Aug.
2008

Feb.
2009

Aug.
2009

Feb.
2010

Aug.
2010

Note: Period-end book value does not include trust construction in progress.

Feb.
2011

Aug.
2011

Feb.
2012

Aug.
2012

Feb.
2013

Aug.
2013

Feb.
2014

Aug.
2014

Feb.
2015

Aug.
2015

Feb.
2016

Aug.
2016

Feb.
2017

Aug.
2017

Feb.
2018

Aug.
2018

Feb.
2019

Aug.
2019

Feb.
2020

Aug.
2020

Feb.
2021

Aug.
2021

Fukuoka REIT Corporation 2021

13

■ Introduction

Financial/Non-Financial Highlights（5-Year Graph）

Financial Highlights(Millions of yen)
9,730(Note 1)
8,122

9,178

□ Foundation Underpinning Management□ Data Section

Non-Financial Highlights

Total Operating Revenues
10,000□ Value-Creation Activities

9,242

9,231

Profit

9,162
8,518

8,194

8,904

8,867

8,000

Asset Management Company: Number of officers and employees (Note 3)(Millions of yen)（People）

5,000

５0

（%）
60

4,198(Note 1)

40

38

４０

4,000
2,860

2,934

2,939

2,899

2,675

2,816

3,000

4,000

2,000

20

2,000

1,000

10

2,623

2,586

39

38

42

41

41

41

41

40

45.0

44.7

44.7

46.2

46.3

46.3

47.6

51.2

51.2

50.0

45

30

6,000

2,556

Asset Management Company Officers and Employees: Percentage of female employees (Note 4)

30

0

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

0

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

NOI
(Yen)
5,493
5,010

4,998

5,591

5,633

5,596

5,079

5,307

5,347

5,336

4,500

0

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021(Years/Months)

4,000
3,398

3,422

3,512

3,593

3,687

3,693

3,642
3,250

3,361

3,539

10

8.10

8.6

7.11

7.10

7.7

8

3,000

28th

29th

30th

31st

32nd

33rd

34th

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

8.10

200
169
149

148

160

6.11

6.9

Number of IR Meetings in Japan and Abroad (Note 6)

126

120

133

129
116

114

1,000

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

0

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

80

2

40

0

LTV

(Millions of yen)

1,474

1,500

1,602

1,622

1,651

1,660

1,623

1,552

40

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

70.1％

50
1,686

25th
Feb. 2017

Power Consumption (Note 7)

（%）

2,000

1,455

4

38.1

39.3

38.9

39.1

39.7

39.7

39.8

41.4

41.3

41.2

（Data coverage）（Mwh）
90,000 81,339

70.1％

79,47470.2％（Mwh/m²） （m3）
190 800,000

71,192

184（Data coverage）

607,352

175

1,000

70.1％

70.2％

（m³/m²）2.00

596,007

1.50
1.37

1.35

405,366

1.00

400,000

20

0.91

30,000500

70.1％

600,000

180

60,00030

Water Consumption (Note 7)

160

160
200,000

10

0.50

0

54

Introduction

Introduction

27th
Feb. 201890

Depreciation and Amortization Expenses

1,500

26th
Aug. 2017

2,000

1,500

0

25th
Feb. 2017(Meetings)

9.6

9.1

6
3,000

0

Asset Management Company: Average number of years of employment(Note 5)

Dividend per Unit (Note 2)(Millions of yen)

6,000

15

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Notes: 1.Due to differences in accounting and tax treatment, the gain and loss on sale of AEON Hara Shopping
Center and Aqualia Kego transferred in the 25th fiscal period were handled as follows:(1) The amount of impairment loss for AEON Hara Shopping Center recorded in the profit and loss
statement for the 24th fiscal period was recorded as reserve for temporary difference adjustments.
(2) The gain on sale of Aqualia Kego was recorded in the income statement for the 25th fiscal period.
(3) Reversal of reserve for temporary difference adjustment was recorded in the statement on cash
dividend for the 25th fiscal period.
Notes: 2.The dividend per unit for the 25th period was calculated as follows:
Dividend for the 25th term: Profit - Reversal of the reserve for temporary difference adjustments - Surplus brought forward
Notes: 3. The number of officers and employees indicates the total number of directors and auditors, permanent
employees, contract employees, temporary employees, secondees, etc., who are employed on a fulltime basis at Fukuoka Realty Co., Ltd.
Notes: 4. The percentage of female employees is calculated as the ratio of women to the number of directors,
auditors, and employees.
Notes: 5. Average number of years of employment is calculated as the average service years of permanent andcontract employees of Fukuoka Realty Co., Ltd.
Notes: 6. The number of IR meetings in Japan and abroad shows the total number of IR meetings, based on
the dates on which they were held, with institutional investors and analysts through interviews andtelephone conferences generally regarding the results for the previous period.
Notes: 7. Total value for 11 properties, including four retail facilities and seven office buildings. Per unit is calculated
by adjusting the total floor area（m2）by the occupancy rate. Data coverage is the area ratio of properties
subject to data aggregation as compared to all properties, and is calculated at the end of the fiscal period.
The figure for Canal City Hakata, Canal City Hakata B, and Canal City Business Center Building reflects total
electricity and water usage for all buildings, including electricity and water usage by some theater areas not
owned by the Investment Corporation. The figure for Park Place Oita covers only the main building sectionand excludes the section for independently run stores.
•

0

14

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Fukuoka REIT Corporation 2021

0

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

028th・29th

March 2018February 2019

30th・31st

March 2019February 2020

32nd・33rd

145

March 2020February 2021

028th・29th

March 2018February 2019

30th・31st

March 2019February 2020

32nd・33rd

0.00

March 2020February 2021

Fukuoka REIT Corporation 2021

15

□ IntroductionCEOʼs Message■ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

but rather is in an area adjacent to Nakasu and Kawabata,on retail facilities and incorporate other assets, such as

which, despite being situated in the heart of Fukuoka, didresearch-and-development facilities and data centers, as

not see much daytime foot traffic at the time we devel-

well as those in sponsor business fields, like energy-related

oped this property. Hakata has a long history as a home tofacilities in the infrastructure sector.

wholesale districts and as a center for many other mer-

Although there has been much debate over office as-

chants, but a large site was left behind when the area emp-

sets, for example, regarding how work styles will changetied out after the center of business moved to Tenjin andpost COVID-19, when we consider the location of Fukuo-

Hakata stations. So, we developed Canal City Hakata withka in Kyushu, it is clear that this type of asset will holdthe desire to create a new city here. With the birth of Canalfirm. Moreover, I believe developments as part of Tenjin

City Hakata in this area where people rarely came before,

Big Bang must prepare workplace environments that candespite being in the heart of the city, the development hascontribute to new office formats, work-style reforms, andbecome a new tourist destination in Fukuoka that attracts

sustainability.

visitors from a wide area and receives many people fromaround Asia.
Canal City Hakata is home to a movie theater and play-

Q What is the appeal of Fukuoka?

houses, and we have aimed to make it into an entertain-

Zenji Koike

Q

Please tell us about yourself.

After working for a local bank (currently THE NISHI-NIPPONCITY BANK, LTD.) following my graduation from university, I
joined Fukuoka Jisho Co., Ltd., one of our sponsors, wheremeals, walking the grounds, and watching the fountains

ging about my home. But the best thing about Fukuoka isand performance events. Under the initial concept of cre-that the city is extremely compact, which I think makes it

ating a new city here, we developed the property with thethe perfect size for people to really experience the scale ofgoal of limitlessly raising the accessibility of people in a way

their lives. Including the region around Fukuoka City, the ur-that links to Hakata and Tenjin. I believe that the property

ban area has a population of about 2.6 million people. The

continues to realize this aim.

average commute time is less than half that of the Tokyo

On the other hand, one of the very real challenges themetropolitan area, the city is surrounded by nature, withproperty faces is the recent transformation in consump-both the ocean and mountains nearby, and it is compact

tion activity, namely a decrease in the weight of in-personwith sufficient public transportation infrastructure.

shopping and the shift to e-commerce. So, the question is

Although it might not offer the same amount of informa-

how can we incorporate efforts aimed at e-commerce into

tion as Tokyo, in a metropolis like Tokyo the scope that can

Canal City Theater and plans events at our retail facilities.

conventional retail facilities? For tenants, brick-and-mortar

be grasped on oneʼs own is always limited. In contrast, I

More recently, I served the past four years as Chairman

store sales and e-commerce sales both lead to profits, so

feel Fukuoka is an extremely comfortable city because theof Sunlife Co., Ltd., which is involved in building manage-

it is important for us to consider these as a whole. One

residents can grasp the overall layout of their city as theirment, so I have experienced most types of work involved

potential approach that involves the entire facility is to elim-

sphere of everyday life. Which is why people like me whoin real estate.

inate inventory at brick-and-mortar stores and instead use

are from Fukuoka feel that Tokyo is a very difficult place tothese like showrooms where customers choose products

reside when we imagine living there.

Other than work, I was a member of the yacht clubthat can be shipped to them from another location.

Every year, I participate in the Hakata Gion Yamakasa

I spent many years primarily involved in duties related tofor four years during my time in university, where I sailed

retail property development and operations. Canal City

470-class two-person yachts. I still love the ocean but no

When Fukuoka REIT Corporation was initially listed on

Festival, a unique experience that offers many opportuni-

Hakata is a particularly special property for me because I

longer sail. Currently, my entire interest in sports involves

the stock exchange, one area of concern for our inves-ties to interact with local people. As part of my duties, I

was involved in its development and operations following

golfing and running. I ran my first marathon during thetors was the high ownership weight of Canal City Hakata.

have also had the privilege of being involved in the festival

its opening, as well as in many aspects of the Canal City

first Fukuoka Marathon seven years ago and have entered

However, we have since achieved a balance by investing

as the person responsible for the Canal City Hakata kazari

Hakata East Building, from its development in 2011 to

civic marathons in different areas two or three times every

in office building, hotel, residential, and logistics facilities

yamakasa (decorated float). It is at these times when inter-year since.

in addition to retail facilities. Challenges like the recent

acting with all of those who were born and grew up here,

COVID-19 pandemic also tend to drive structural changes

and who are involved in the festival as a part of their life-

Q Hakata and FRC’s other assets?

in consumption, though, where city-center retail facilities

style, that I have strongly felt the character of Hakata andsee a greater amount of volatility. In terms of asset balance,

the humanity of the city. My grandfather was a descendent

I therefore feel we should invest more in office buildingsof a wholesale merchant from the Hakata area, so I too

Canal City Hakata is not located near one of Fukuokaʼsand logistics facilities, which are growing due to e-com-

carry the blood of the Hakata merchants. I am always re-

major transportation hubs such as Tenjin or Hakata Station,

merce. We are also looking to curtail the weight placed

minded that I am glad to have been born and raised in thisattracting tenants.
I also served as General Manager of the Office of the
President and General Manager of the Administration Division, so I have acquired experience throughout the compa-

What is the future strategy for Canal Cityny, including development as a real estate developer andin property management. And I managed the company(currently FJ. Entertainment Works Ltd.) that operates the16

I am originally from Fukuoka, so I could go on forever brag-

Fukuoka REIT Corporation 2021

Value-Creation Activities

Value-Creation Activities

President and CEO
Fukuoka Realty Co., Ltd.

ment retail facility where people can pass the time enjoying

Fukuoka REIT Corporation 2021

17

□ IntroductionCEOʼs Message

skills, build a career, and accumulate knowledge at eachof the area. Although those of us from Hakata might not

rank. Moreover, as a Company we intend to create a sys-

be the most polite people, we are very kind-hearted. Moretem that firmly supports employees and provides them withthan anything, the people here love this city and its local

opportunities besides just training to extend their knowl-

By the time I received the baton as president from myfestivals.

edge so that they can capture and address future changes

predecessor, Mr. Matsuyuki, our asset scale already ex-

in the industry.

ceeded 200 billion yen. Although the investment unit price

Q of sustainability management?

What are your thoughts on the future

operations as we manage various crises.

sure on me, but we have set the asset scale target for thealty manages FRC, we see that creating different types ofthe environment. Our main sponsor, Fukuoka Jisho Co.,

however, we must manage the company from a long-termvalue through business clearly relies on the core of humanLtd., is an unlisted owner-operator company. In this re-perspective and not aim to grow our asset scale blindly.

resources, or rather human capital. When I was appointed

spect, it can be led by the objectives of top management

Because I know this city, because I know this region, I am

as president, I thought that the employees of REIT manage-

and can move with speed and flexibility. On the other hand,aware there is still so much more we can do. We intend toment companies would be specialists in real estate finance,

this presents the risk that it will not highly prioritize the cor-

continue investing in a way that only a region-specific REIT

many of whom would be focused on their own occupations

porate governance code required of listed companies andcan and grow our assets in a way that supports this region.

and fields of specialty, and would mainly be concerned

consideration of ESG, for example.

If we can manage this, I believe we will effortlessly clear our

Meanwhile, FRC, to which we have entrusted manage-

asset scale goal of 250 billion yen.

ment operations, is a listed company. So, I believe it is

Although I feel we are starting to see an end to the

In other words, I thought they would be smart, intellectual

necessary for us to properly fulfill our responsibilities in a

COVID-19 pandemic, there is no chance that everything

employees who would avoid becoming overly attached.

speedy manner together with our sponsor companies aswill return to the way it was before, which is why I believe

But I was reassured when I realized that, unexpectedly,

we listen to the feedback of the market. In particular, it isthat lifestyles, working environments, business models,

everyone at here actually had a special place in their hearts

important for us to think about first properly acknowledging

and a variety of other areas will continue to change af-

for the city, whether it was in terms of working for a

the demands made by global institutional investors. In otherter COVID-19. Now is truly a time during which we must

region-specific REIT management company, providing

words, one truly urgent challenge is properly employing

consider how to set and manage our priorities. I therefore

social value for this region, or contributing to society. So, I

the concept of “integrated thought” throughout the orga-

sent a message to our employees saying that if that is thenization while prioritizing ESG in order to fulfill the social

case, then let us all endeavor together in this kind of work.

responsibilities that are demanded by those at the forefront

It has become difficult to create a sense of belonging

of the times in line with our management philosophy of “ActZenji Koike President and CEO
Place of birth: Fukuoka City
Hobbies: Running, golf
Profile1988 Joined Fukuoka SOGO Bank (currently THE NISHI-NIPPONCITY BANK, LTD.)
1991 Joined Fukuoka Jisho Co., Ltd.
2013 Appointed as Chairman of Canal Entertainment Works Co.,
Ltd. (currently FJ. Entertainment Works Ltd.)2017 Appointed as Senior Executive Officer of Fukuoka Jisho
Co., Ltd.
Appointed as Chairman of Sunlife Co., Ltd.
2021 Current position starting in June

Value-Creation Activitiesof the REIT management company for which they worked.

Local, Think Global.”

think these are very important concepts. If we were to only

FRC was also the first in the J-REIT industry to publish

pursue profits for ourselves and business rationalization

an integrated report. But we must continue to evolve inte-

to grow the company, something contrary to a sense of be-

grated thinking and integrated reporting through a virtuous

longing would emerge, which is why I feel that it is import-

cycle. In other words, we must do more than simply enrichant for managers to find a balance between the two. It iswhat we include in the report and instead pursue this con-my hope that our employees feel that their work is reward-

tent in a manner that coincides with effectiveness. There ising and engage in their work with a constant awareness ofno question that I also feel responsibility as the head of the

how their work can contribute to the city and society.

Company. And we must match ESG with business in a waythat considers how we should engage in the real estate

concerned, I hope that we attract both new graduate

business to create a sustainable society for the future. For

employees, as well as employees who have built up differ-

us to support community building and the lifestyles of peo-ent careers elsewhere and moved or returned to Fukuoka

ple through real estate, we must look 10, 20, even 50 years

with a desire to work in the city. I want our employees to

into the future, be quick to pick up on what is required

maintain the broad vision of Act Local, Think Global here in

now for that purpose, and both consider how to link these

Fukuoka and Kyushu. And so I feel we must also offer sys-requirements to growth for FRC and to actually engage intematic training whereby employees can properly acquire

meeting these requirements.

Fukuoka REIT Corporation 2021

ers a solid business model that is built on a core approach

good position. In this sense, this also puts a lot of prestime being at 250 billion yen. As a region-specific REIT,

As far as future recruitment and employee training are

believe we must construct and reveal to all our stakehold-recovered, so I received this baton while we were in a very

As far as ESG is concerned, I do not think we can wait on

and loyalty toward companies in the world of today. But I□ Data Section

such as ESG and that enables us to continue businessand management resources in terms of how Fukuoka Re-

about building a career that would serve them regardless□ Foundation Underpinning Management

fell at one point last year due to COVID-19, it has since

When we think about materiality (management challenges)

Value-Creation Activities

Q Finally, do you have a message as president?

city whenever I speak to those who defend the traditions

Q What are your thoughts on human assets?

18■ Value-Creation Activities

Fukuoka REIT Corporation 2021

19

□ Introduction

Message from the Executive Director

Executive Director,
Fukuoka REIT Corporation
Advisor, Fukuoka Realty Co., Ltd.

Etsuo Matsuyuki

sanitizers available and applying antibacterial coatings tohandrails and such, and communicated our efforts to prevent the spread of infection through videos on our website
and on televisions in our facilities. Prior to COVID-19, Canal
City Hakata hosted a large duty-free shop and we had
focused our energies on attracting inbound customers, butwith the end of the contract period for the large duty-free
shop, we turned our attention to reinforcing efforts to
attract domestic customers, including working with NITORI
to open store in March 2021.

Q was the one thing that you were most happy

Commuting on packed trains in Tokyo has been considereda fact of life until now, but remote work has become a norm
due to COVID-19 and in the future workplace functions willprobably no longer need to be located in Tokyo. In fact, I
think we will start to see cases where companies transfer
some head office functions to Fukuoka, for example, where
life is easier. JAPANET HOLDINGS Co., Ltd. has led the way
in doing so by transferring some of its head office functions
to the Tenjin Business Center, which was completed in
September 2021. So, I believe that we will see an increasing
number of cases where the impact of COVID-19 has acted
as a positive factor for attractive regional cities.
Inbound demand will also likely return at some point. Given the geographical advantages of being near the rest of
Asia, a recovery in inbound demand will probably connect
to further revitalization of Fukuoka.

about, and that you were most challenged by?

Value-Creation Activities

Q

20

Over the nine years between June 2012 when I was appointed as President of Fukuoka Realty and June 2021, or
10 years if you include my time as Senior Vice President
and General Manager of the Planning Department, I was
involved in managing FRC.
In terms of external growth, the corporation most recently recorded an asset scale of approximately 202 billion
yen, well above the nearly 150 billion yen asset scale atthe time I was appointed. In other words, we successfully
achieved the 200 billion yen goal established at the timeof my appointment. We also nearly doubled the number ofproperties we manage from 17 to 32 over this time, andwe successfully increased the number of asset types fromjust three, namely office buildings, retail, and residence, tofive, including hotel and logistics. Although logistics haverecently attracted a lot of attention, we were able to acquire
several at an early stage and now own four such properties.
Moreover, we executed three public offerings during
my time in office and were buoyed by a turnaround in themarket. Together, these developments slightly more thandoubled our market capitalization from 68.5 billion yen the
day before my appointment to 148.6 billion yen on the day
I left office. Although we sold off three properties during
this time, this move helped to improve our situation, in part
because the Aeon Hara Shopping Center presented challenges as a property with unrealized losses at the time of

Fukuoka REIT Corporation 2021

What was most challenging, and that left the deepest
impression on me, was the broad adjustment that occurredfollowing the interest rate hike observation on the New
York Stock Exchange immediately before we executed our
public offering in February 2018. This adjustment led to instability in Japanʼs markets and caused us to really hesitate
until the last minute on whether we should proceed withthe public offering.
There are so many things I was happy about, though,including the public offering we made the year immediately
after I was appointed president to acquire Hotel FORZA
Oita. Having been involved in developing this property
during my time at Fukuoka Jisho Co., Ltd., I put extra effort
into explaining this property to investors.
I believe this happened during the public offering in
2018, but I remember one investor giving the move very
high marks, saying he had nothing but praise for this solid
public offering.

Q recent efforts to address COVID-19.

Please tell us about the Company’s mostFollowing the first State of Emergency Declaration regarding COVID-19 in April and May 2020, we temporarilyclosed Canal City Hakata and our other retail facilities inFukuoka City. We did not take this approach during any of
the subsequent State of Emergency Declarations, however, and instead implemented various measures in terms ofoperations. To relieve our customers of any uncertainty, we
implemented physical measures that included making hand

Q

Although there is no clear end to COVID-19 insight, what are your thoughts on the changes
that might occur in the future?

Q interest in ESG and non-financial information?
What are your thoughts on the increasing

After we announced our results for the 33rd fiscal period in
April 2021, I primarily held IR meetings over the telephonewith institutional investors. One of the notable aspects ofthese meetings was that many participants asked questions about ESG. This was completely different from previous periods. Normally, I would spend most of these roughly
one-hour meetings explaining the results and spend a little
time discussing ESG at the end. One investor, however,requested that I spend 30 minutes of the hour-long meeting
discussing ESG, which showed me just how much interest
in ESG and non-financial information has grown.

Q human resources development?
How did you tackle the issue of□ Foundation Underpinning Management□ Data Section

After I was appointed as president of the asset management company, the number of employees changed very
little despite growth in the asset scale, indicating the productivity of each employee had increased. Moreover, theratio of female employees increased each year and recently
reached 50%. I actively engaged in employee training bydirectly presenting challenges to responsible employees,
regardless of their age or position, and actively supported
their efforts to acquire certifications.
Another move I made that I think is unusual for a REIT
asset management company was to assign employees to
Fukuoka Jisho Co., Ltd., as one of our sponsors. I felt that
this might help to connect to broader career development
for the assignees, but I was also just happy to see them
participate in various areas at Fukuoka Jisho Co., Ltd.
People are an asset for asset management companies. I
therefore engaged in these efforts under the belief that thedegree to which each individual employee grows will as aresult connect to the growth of FRC and to the value that
we deliver to our stakeholders.

Q Mr. Koike as the new President and CEO of
Finally, please tell us what you expect fromthe asset management company.

President and CEO Koike was born and raised in Fukuoka
and has been deeply involved in Hakata Gion Yamakasa asa representative festival of the region and in support duties
for local professional sports. I believe this experience willserve as a major benefit for the growth of FRC.
As far as external growth is concerned, the market has
not emerged as a buyersʼ market, even after the spreadof COVID-19, but I hope that he firmly engages in acquisitions from the outside despite the current environment,
and I anticipate he will leverage the sponsor pipeline forthis purpose.
Of the properties owned by FRC, hotels and retail facilities were affected the most by COVID-19. We curtailed
hotel-related risk by selling off the Canal City Hakata・B
Grand Building（88.28% co-ownership interest in Grand
Building）. In contrast to our community-based retail facilities, which have tended to fare relatively well, as a citybased retail facility Canal City Hakata also enjoyed thestrong support of inbound customers, so continues to face
severe challenges. I therefore look forward to President
Koike thoroughly demonstrating his experience working on
the development and management of Canal City Hakata
as he undertakes various efforts toward future recovery.

Fukuoka REIT Corporation 2021

Value-Creation Activities

its sale. More recently, we sold off the Canal City Hakata・
B Grand Building（88.28% co-ownership interest in Grand
Building）
and engaged in asset replacement.
In terms of financials, we executed three public offerings
to reduce the 44.6% LTV prior to my appointment to 41.3%
and succeeded in extending the average debt durationfrom 2.9 years to 5.4 years, thereby achieving even greater
stability for the financial base as a strength of FRC.
In terms of internal growth, we worked to increase officebuilding rents starting in the 25th fiscal period. Although I
have been told that rents on Fukuokaʼs office market are
unlikely to rise and fall, in part due to the support of property
management companies, we were able to raise rent per unit
approximately 7% compared with the outset of this initiative.
Looking back over the past nine years, what

Please provide us with an overview of yourroughly nine years as president of the asset
management company.

■ Value-Creation Activities

21□ Introduction

Strategies of Each Department

Investment Department

Value-Creation Activities

We acquired the Tenjin Nishi-Dori Business Center (Land with leasehold interest)
property on June 1, 2021.
This property deal covers the acquisition of land for our sponsorʼs redevelopment project.1 As we concluded a land lease agreement that in the future will
shift the fixed land lease fees during the redevelopment period to variable landlease fees linked to tenant rents, this represents a scheme that will start togenerate cash flow at the same time as the acquisition and will be able tocapture the growth of Fukuokaʼs Tenjin business district going forward.1
Furthermore, this is a lease contract that includes preferential negotiation rights
for the building, and the acquisition of the building is expected in the future.
Acquisition dateJune 1, 2021
Acquisition price7,700 million yen
Appraisal value
7,790 million yen
SellerFukuoka Jisho Co., Ltd.
NOI yield*
3.5%

1. Co-creation with the local community
2. Maintenance and enhancement of environmental and construction performance
3. Creation of pleasant workplaces (tenants)

General Manager of the Investment Department

Takeshi Usumoto

As for our investment policy, we will continue to execute investments based on considerations that consider the making of targeted
investments in such overlapping domains as “markets with highgrowth potential” and “fields in which we excel and that enable us toexert our competitive advantage.”
As a general rule, our investments will be made in Fukuoka and thegreater Kyushu region, and among these, there is a particular focus
on the Fukuoka Metropolitan Area, in which a majority of our investments are made. That said, regarding investment type, while continuing to keep a careful eye on the potential for growth in the COVID-19
pandemic era, we adopt a flexible policy that covers a variety ofproperties.
We also utilize a network of sponsor companies in our pursuit ofeven more acquisition opportunities.
Selecting real estate for investment entails conducting a range of
meticulous surveys, such as economic-type surveys that coverprojected revenue streams for each individual property and the future
potential of the area in which it is situated, physical surveys thatconsider such factors as the propertyʼs condition and ability to withstand earthquakes, and surveys related to rights and legal issues,
among others. After rigorously examining a particular propertyʼs value,
we then decide whether to acquire it based on a determination of its
impact on our overall portfolio, the degree to which it will contribute toraising value, and other factors.
Going forward, we will steadily seize upon opportunities to invest inreal estate in the Fukuoka and Kyushu areas, and ensure sound asset
scope and portfolio growth.

Acquisition Case Study: Hakata Chikushi-Dori Center Building
On August 30, 2021, FRC resolved to acquire the Hakata Chikushi-Dori Center
Building as of March 1, 2022.
Based on a proposal for the sale of this property to the owner (seller) of thehead office located in Fukuoka City, FRC considered acquiring the property.
Giving the seller sufficient time to examine the proposal while gathering information on needs and returning the effect of reducing building management costs tothe seller made this an attractive proposal. Looking ahead, I also believe that wewill be able to efficiently manage the building by having FRC perform thelarge-scale repairs that will occur in the future on behalf of a seller whose main
business is not real estate.2 We believe this transaction to be an example ofgood value co-creation that we were able to tackle while fully demonstrating thestrengths of regional REITs and satisfying the needs of sellers (tenants).3
Acquisition date(scheduled)
March 1, 2022
Acquisition price(planned)
4,320 million yen
Appraisal value
4,540 million yen
NOI yield*
5.3%*Calculated based on the appraisal report NOI.

General Manager ofthe Real Estate Management Department

Hideya Kanno
Park Place Oita while working to improve the facilityʼs appeal andstrengthening cooperation with the surrounding area.1
In each of these measures, we maximized consideration to facility
safety, ensuring hygiene security and cooperation with the local
community while formulating an investment plan to realize attractive
sales floors and fulfilling working environments. In asset types such as
office buildings and logistics properties, we are also pursuing the roleand ideal image of real estate in future eras, considering safety andsecurity, and at the same time striving to maintain the competitivenessof each asset. 2
Going forward, we will further emphasize the sustainability aspect inour asset management of real estate. Regarding factors such ascontinuous relationships with tenants, measures for employee working
environments and the business environment, and consideration for theenvironment,3 as growth opportunities for our real estate portfolio, wewill steadily respond to maximize long-term and stable profits.

The Real Estate Management Department aims for the long-term andstable optimization of assets managed by FRC, while drawing up
plans for asset management. As a comprehensive REIT investing in adiverse range of asset types, we will work on internal growth throughaggressive investment in our portfolio of assets while deriving maximum value from our real estate portfolio over the long term. This will
be achieved against the backdrop of the regionʼs potential for growth,
including the rising population in our primary destination for investments, the Fukuoka Metropolitan Area, which is also home to anincreasing number of companies.
Due to the spread of COVID-19 infections, the business environment continued to be difficult in 2021, but we took a variety of measures to ensure the long-term stability of our real estate portfolio. In
the management of each asset, we focused on preventing the spreadof infection and endeavored to ensure that tenants and facility visitors
could utilize them with peace of mind by thoroughly ensuring thesafety of facility environments and hygiene.
Concerning Grand Hyatt Fukuoka, where the harsh businessenvironment continued, we replaced properties based on the prospectof future business recovery and the present value of the real estate.
This ensures the long-term stability of the portfolio and at the sametime improves the quality of the portfolio by the acquisition of alternative properties.
In the meantime, we also actively considered investments with aneye on the post-COVID era and promoted efforts to increase future
profits. In terms of internal growth, against the backdrop of increasing
demand for daily necessities brought about by the current changes in
the living environment, at Konoha Mall Hashimoto we replaced tenantsin the Hashimoto Marche food market zone to improve the attractiveness of food-related products. At SunLiveCity Kokura renewal was
carried out jointly with our tenants, further enhancing its appeal as thebest store in the area. We are also promoting environmental renewal at

Asset replacement (June 1, 2021)
Capture the medium- to long-term growth potential of office buildings in
the Tenjin area
Reduce the risk of having a full-service hotel that is subject to large impact of COVID-19
Sponsorsupport
Property
nameTenjin Nishi-DoriBusiness Center(Land with Leasehold
Interest)

Acquisition
price

7,700 million yen

Assetreplacement

Gain on sale
104 million yen

Property
nameCanal City Hakata・B
Grand Building(88.28% coownership in Grand
Building )Transfer
price

7,700 million yen

Value-Creation Activities

With property selection skills that can only be possessed by a local
hand, the Investment Department strives to discover those properties
that have the potential to generate stable cash flow over the medium
to long term.
Amid conditions that are as harsh as they have ever been due tothe impact of COVID-19 infections, the trend toward a pickup in thereal estate investment market environment is continuing. Althougheconomic conditions in Fukuoka and the wider Kyushu region—FRCʼs
core areas of operation—remain harsh, office buildings, logistics, andresidential asset types are maintaining strong management performance and property transaction prices remain high.
Looking at land price trends, according to the 2021 Land Market
Value Publication, the national average has declined for the second
consecutive year, although the rate of decline has narrowed for alluses. In contrast, in Fukuoka City, the central area of FRCʼs investment targets, commercial land prices increased 7.7% year on year
and those for residential land increased, for the ninth consecutive year,
4.4% year on year.
Against this backdrop, we will continue to make investments thatleverage our expertise and ability to gather and provide information,
based on our familiarity with the particular conditions on the ground inFukuoka and throughout Kyushu.
The Companyʼs strengths include the “speed and density of its
information,” “a feel for the local market,” “a powerful local network
across a broad area including administrative and economic authorities,” and “a real estate management structure with a long-term
commitment to the local community.”

Fukuoka REIT Corporation 2021

□ Data Section

Related Materiality

Acquisition Case Study: Tenjin Nishi-Dori Business Center(Land with Leasehold Interest)
See p.7

22□ Foundation Underpinning Management

Real Estate Management Department

Related Materiality
1. Contributions to boosting the attractiveness and revitalization of Fukuoka and Kyushu
2. Maintenance and enhancement of environmental and construction performance
3. Creation of pleasant workplaces(tenants)*Calculated based on the appraisal report NOI.

■ Value-Creation Activities■ Trends in FRC Property Occupancy Rates
（%）

99.8

99.7

100

99.8 99.7

99.4

99

99.3
99.2

99.0

99.1 99.0

99.0 99.1

99.3
99.0

99.3

99.1

98.9

99.2

98

98.1

97

Temporarily dipped on theimpact of store closuresdue to Canal City Hakata
South Building renovation

99.5

99.5 99.6

99.6

21st

22nd

24th

99.7

99.7
99.6

99.4

99.6

99.6
99.3

99.1

99.5

98.7

96

0

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

23rd

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Aug. 2005 Feb. 2006 Aug. 2006 Feb. 2007 Aug. 2007 Feb. 2008 Aug. 2008 Feb. 2009 Aug. 2009 Feb. 2010 Aug. 2010 Feb. 2011 Aug. 2011 Feb. 2012 Aug. 2012 Feb. 2013 Aug. 2013 Feb. 2014 Aug. 2014 Feb. 2015 Aug. 2015 Feb. 2016 Aug. 2016 Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Feb. 2020 Aug. 2020 Feb. 2021 Aug. 2021

Note: FRCʼs occupancy rates from the second to fourth fiscal periods represent occupancy rates as of the end of each period. The fifth to the 34th fiscal periods are calculated as a weighted average occupancy rate during the period.
Total leased area is stated as a percentage of total leasable area.

Fukuoka REIT Corporation 2021

23

□ Introduction

Strategies of Each Department

Finance Department■ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

Planning Department
Related Materiality

Related Materiality
1. Co-creation with the local community
2. Information disclosure and dialogue with stakeholders

General Manager of the Finance Department

Hiroyuki Ayabe

Financial Strategy/Capital Strategy
Regarding our financial strategy, we are first and foremost maintaining
a conservative interest-bearing debt ratio from the perspective ofbuilding a solid financial base. The interest-bearing debt ratio at theend of the 34th fiscal period (August 2021) was 41.2%.
Next, from the perspective of ensuring the flexibility and agility offinancing, we have set a commitment line with a maximum amount of
13 billion yen. By also deciding on a three-year commitment period,
we are taking measures that will be able to address any deteriorationin the fund procurement environment due to the prolonged impact of
COVID-19.
In addition, from the perspective of reducing the risks from interest
rate rises and refinancing, we seek to fix interest-bearing debt over thelong term and to diversify repayment dates while keeping a close eye
on interest rate levels. While maintaining good relationships withfinancial institutions with which we have existing relationships—startingwith our three sponsor banks but including regional banks that
operate primarily in Kyushu and the megabanks—we will strive todiversify our procurement sources.1
In addition, we will actively incorporate consideration for ESG
issues. In July 2019, FRC helped to resolve environmental issues byconducting its first funds procurement by means of green finance. By
having conducted procurement via “a mechanism for financial institutions to donate a part of the profits obtained through borrowing as

Floating
5.9％

100％

million yen

IR Activities2
Coupled with compiling the various types of information necessary forinvestment decisions, our primary consideration is to offer a steadystream of timely, fair, accurate, and easy-to-understand information,
which is the basic policy of IR activities.
While proactively disclosing (increasing the amount of) non-financial
information that does not appear in the income statement or balance
sheet, such as publicizing our strengths as a REIT specializing inregional properties and the real estate situation in Kyushu and Fukuoka, we will work to improve the content. I believe that doing so willlead to a deepening of mutual understanding with all unitholders, thebuilding of relationships of trust, and ensuring positive steps toward
attracting outstanding investment funds from other parts of Japan andoverseas to Kyushu and Fukuoka.
Prior to the COVID pandemic, we met and held meetings in personwith more than 200 institutional investors each year. When face-toface IR activities would have been beset with difficulties, we continued
our IR activities with the highest priority placed on preventing the
spread of COVID-19 infections. We are incorporating innovative ideas,such as making full use of a range of Internet tools to hold efficientmeetings. I would like us to consider actively holding briefing sessions
for individual investors as well.
In the years to come, I believe that taking a long-term view inproactively working to raise the level of sustainability will be indispensable for achieving optimal profits for investors. We will convey ourefforts in an easy-to-understand manner through, for example, integrated reports, our website and financial briefing documents, andother materials.

Fixed
94.1％

End of the 34th
fiscal period

Floating(Millions of yen)

Fixed

Implemented a corporate version of the hometown
tax payment for projects related to industry,
tourism, etc., in seven cities. (View of Tosu City
donation acceptance ceremony)

TOPIC

Main Sponsor: Introducing Fukuoka Jisho Co., Ltd.

■ Corporate philosophy

We are committed to creating
attractive towns and regionswith steadfast devotion.

7,000
6,600

2,000

5,000
4,000

5,600

5,900

3,000

1,000

4,400 7,000 7,000

2,500

4,200

0

400

0

700

4,900

1,200 2,700

2,000 1,900

2,000

6,300
5,400

4,200

2,000

1,500
300

700

Tenjin Business Center(Completed September 2021)

0

0

0

1,000

0 35th 36th 37th 38th 39th 40th 41st 42nd 43rd 44th 45th 46th 47th 48th 49th 50th 51st 52nd 53rd 54th 55th 56th 57th- 68th
67th

Fukuoka REIT Corporation 2021

■ Corporate Version Hometown Tax Donation
Programas real estate brokers, and 25 are certified masters of the Association
for Real Estate Securitization (ARES ). We are also actively promoting
work-style reforms and have been certified as a Fukuoka work-stylereform promotion company by Fukuoka City.2
To ensure the safety of employees, we have put in place crisis management procedures. While giving top priority to protecting human lives
and rescues in the event of a crisis, these are designed to bring about
the prompt recovery and continuation of operations and for the purposeof cooperation with stakeholders for the continuation of the asset management business.1,2
Nowadays, sustainability-related work is gaining in importance, andwe are planning and managing the progress of sustainability promotion
plans as well as continuing to acquire GRESB Real Estate evaluations.3
Since this investment corporation is a regional REIT, we are actively
exchanging opinions with research institutes on regional economies
and industries in Kyushu, Okinawa, and Yamaguchi to contribute to theenhancement and revitalization of Fukuoka and Kyushu. We are also
holding regular dialogues with the local companies that are Fukuoka
Realtyʼs sponsors to promote attractive urban development in collaboration with local communities.4 At Fukuoka Realty in 2021, we implemented the corporate version of the hometown tax payment in sevencities where FRC-owned properties are located (Kagoshima , Kumamoto, Kurume, Miyawaka, Naha, Oita, and Tosu)5 in an effort to contribute to resolving social issues and revitalizing the local communities.
In the months and years ahead, I intend to lead the company to promote business operations in which all employees are aware that they
are contributing to the social issues that the world should address,
such as the SDGs.

Investment corporation bonds

2,000

24

The Planning Department is in charge of FRCʼs institutional management and accounting operations, as well as Fukuoka Realtyʼs personnel affairs, general affairs, and sustainability-related operations.
As FRCʼs institutional management, there are deliberations conducted by the Executive Committee and the Investment Committee, resolutions on important matters passed by the Board of Directors at Boardof Directorsʼ meetings, and appropriate management and operations
carried out in compliance with laws and internal rules.1
In our accounting business tasks, we prepare financial statements,
such as asset management reports and securities reports. Regarding
the financial statements of investment corporations, in addition to theaccounting systems with which general business companies are tocomply, it is necessary to remain in compliance with accounting-related
rules specific to investment corporations. From the perspective of satisfying the conduit status requirements that are the premise of calculations for the payment of dividends to unitholders, we are working on
preparing financial statements after accumulating appropriate accounting treatment from both accounting and tax perspectives.
In personnel and general affairs, we are striving to secure human resources, promote diversity, improve employee motivation, build an employee education system, and ensure employee safety.2
As of the end of August 2021, the company had 40 officers andemployees, and the ratio of female was 50.0%.The company also includes diverse professional human resources, such as a lawyer, three
real estate appraisers, three first-class architects, and two MBA holders. We are also actively providing training after employees have joined
the Company while working to improve the quality of our business byrecommending the acquisition of qualifications: 28 people are qualified

Keishi Tamura■ Diversification of debt maturities (as of August 31, 2021)

6,000

End of the 34th
fiscal period

82,400■ Long-term ratefunds for research into the development of a new COVID vaccine atnational universities” in March 2021, FRC has been able to contributeto resolving a social problem.1
Regarding our capital strategy, we will ascertain the market timing
and raise capital in line with external growth, which is one of thegrowth drivers. We will also consider the balance between distribution
growth after capital procurement and LTV control as well as otherfactors.

General Manager of the Planning Department

Executive Director Etsuo Matsuyuki (left) and Tosu City Mayor Yasushi
Hashimoto (right)

See p.7

Value-Creation Activities

Value-Creation Activities

In addition to drawing up and executing financial and capital strategies
that are in the best interests of our unitholders, the Finance Department is responsible for IR (including SR and public relations) activities
to convey FRCʼs situation in a timely, fair, and accurate manner.
Amid the impact of COVID-19, which looks as if it will be protracted, the Tokyo Stock Exchange REIT Index has been returning to its
pre-COVID state after having temporarily seen a precipitous decline in
March 2020. With the Bank of Japan maintaining monetary easing, itis thought that low interest rates will continue, although I believe that it
will be necessary to practice financial management that remains awareof suddenly changing risks in the financial market.
Under such circumstances, the financial strategy, capital strategy,
and IR activities that we can consider are as follows.

■ Fixed and floating rate

1. Compliance/Risk management
2. Creation of pleasant workplaces (Fukuoka Realty)
3. Maintenance and enhancement of environmental and construction performance
4. Contributions to boosting the attractiveness and revitalization of Fukuoka and Kyushu
5. Co-creation with the local community

See p.3■ Overview (As of May 31, 2021)
Name

Fukuoka Jisho Co., Ltd.

Established

July 1961

Industries

Real estate (comprehensive developer)

Representative

Ichiro Enomoto, President and CEO

Employees

188

Net sales

20.4 billion yen

Ordinary income

6.2 billion yen

Total assets

202.9 billion yen

Borrowings

113.7 billion yen

Equity ratio

35.1%

Fukuoka REIT Corporation 2021

25

□ Introduction

Risks and Opportunities■ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

To achieve sustainable growth, FRC keeps close track of highly significant risks and opportunities while assessing theirimpact on the Investment Corporation and its stakeholders.
● Measures to Address Risks

Significant Risks

Risks fromNatural Disasters• Response to climate change
Related Materiality•Reduction of environmental load

Impact on Stakeholders• Buildings might be lost, suffer deterioration
or damage due to the occurrence of natural
disasters, such as earthquakes, storms, andfloods, or severe weather due to climatechange, and their value could be affected,
with a decrease in rent due to the non-operation of properties• Soil pollution and toxic
substances
Related Materiality

Human Resource Related
Risks• Deterioration in the caliber ofhuman resources• Dependence on human resources
Related Materiality
・Creation of pleasant workplaces（assetmanagement company）• Consider that it is possible to purchase insurance at a rela-

tively low cost compared to other areas; arrange earthquake
insurance coverage for all properties• Improve resilience（e.g., ability to respond to disasters）byengaging in a variety of activities; this includes conducting
disaster drills at each property, stockpiling emergency foodsupplies, strengthening flood countermeasures, and formulatSee p.34
ing a business continuity plan
（BCP）

Significant Risks• Increase in vacancy rates• Decrease in rent
Related Materiality
・Creation of pleasant workplaces（tenants）•Increase in property management costs due
to more stringent environmental laws andregulations, such as the strengthening of the
Building Energy Conservation Law•Risk of damage to the health of building users due to the presence of toxic substancesin the soil or in building materials, and otheritems, of properties owned; risk of bearing
the cost of compensation for damage tohealth or for removal of toxic substances•Risk of deterioration in the organizational
strength of Fukuoka Realty Co., Ltd.
（AssetManagement Company）
due to a failure to
maintain the human resources base, in termsof such factors as ability, experience, andknow-how of the asset management company for smooth business operations•Heavy reliance on FRCʼs directors and auditors as well as on the human resources of theasset management company; the risk thatthe outflow of these human resources could
have an adverse effect on operations

through renovation opportunities for properties owned;
acquire Green Building and other certification, to obtain the
results of environmental/social initiatives in visual form andSee p.35
improve property competitiveness• Aim to reduce vacancy rates by pursuing healthful andcomfortable conditions in properties owned and by increasing leasing demand for properties with high environmental
performance• Conduct thorough physical investigations at the time ofproperty acquisition; property acquisition after confirming thepresence or absence of toxic substances and taking of appropriate measures

Market-Related Risks• Increase in interest rates• Fluctuations in the investment
unit price
Related Materiality
・Information disclosure and dialogue withstakeholders• Pandemic
Related Materiality
・Maintenance and enhancement of environmental and construction performance・Creation of pleasant workplaces（assetmanagement company）
・Creation of pleasant workplaces（tenants）• Improve organizational strength and increase employee loyalty by hiring and fostering excellent human resources• Increase in repair and maintenance expenses• Improve employee motivation by realizing a work-life balance
and the stabilization of work through health management• Decline in property competitivenessSee p.36

Related Materiality
・Maintenance and enhancement of environmental and construction performance•Risk that such external factors as infectious
diseases and epidemics in Japan and overseas could interfere with the normal operationand management of FRCʼs properties•Decrease in rental income from real estate
due to such factors as a downturn in visitors,
which might have an adverse effect on for
example earnings• In addition to physical infectious disease countermeasures,

expand the COVID-19 workplace vaccination program
scope to cover retail facility tenant employees as a meansof promoting a safe and secure facility environment for asset
management company employees, tenants, and consumers• New laws and regulations• Changes in the tax system
Related Materiality
・Compliance/Risk Management• Region（Fukuoka/Kyushu）• Retail facilities
Related Materiality
・Co-creation with the local community
・Contributions to boosting the attractivenessand revitalization of Fukuoka and Kyushu

26

Fukuoka REIT Corporation 2021

• Vacancy rate increases associated withworsening real estate market conditions;decrease in dividends due to rent decreases• Rent reduction, rent nonpayment, and vacating risks due to deterioration of a lesseeʼsfinancial situationand introduce a telework system with a view to ensuring business continuity•Possibility of adverse effects on profits due
to overall consumer consumption as well asother overall trends in the retail industry thatreflect the nature of retail facilities as a maininvestment target

well as monitoring of operating status and thorough credit
management during the lease period• Deposits and security deposits against items including rent

delinquency, ; collateral by such means as guarantor companies• Treat deterioration in the real estate market as an opportunity
to acquire excellent properties and execute strategic investments through appropriate financial management utilizing
information-gathering capabilities• Risk of increase in interest payment due toincrease in interest rates caused by market
trends at the time of borrowing• Risk that FRCʼs investment unit pricemight fluctuate due to factors that include
unitholder supply and demand, interest rate
conditions, economic conditions, and realestate market conditions• Increase in expenses required for such items
as large-scale repairs, due to the deterioration of properties, and large capital expenditures could reduce cash flows• Possibility of tenants vacating and areduction in rent due to a loss of property
competitiveness resulting from changes inthe surrounding environment• Possibility of a limitation on rights withrespect to properties owned and an increasein property management expenses and otheritems, due to newly established, revised, or
abolished laws and regulations• Possibility of an increased burden from taxes
and fees due to tax reform• Long-term fixing of interest-bearing debt and repayment
period limit diversification• Conservative interest-bearing debt management and commitment lines to ensure flexibility and agility in funding• Conducting of proactive IR activities

See p.24• Maintain/improve property competitiveness through appropriate maintenance and repair work, value-up investment, andextending the number of service life years• Based on an understanding of conditions including real estatemarket trends and the capital market environment, if thestrategic holding of a property becomes less significant fromthe perspective of property performance, competitiveness,and future profitability, consider replacement of that property
if it is determined that selling it is in the interest of unitholders• In addition to receiving information from such sources as Fukuoka Realtyʼs affiliated organizations, tax accountants, andlaw firms, participate in external training, obtain information,and take measures to reduce any impact from an early stage• Invest in various types of properties to reduce the risk of

portfolio fluctuation by diversifying rental market cycles andSee pp.10-13
tenant industries• In retail facilities, such as Canal City Hakata/Canal City Haka-ta・B, operate bustling facilities by replacing tenants and providing new experience and other value, thereby reducing therisk of profit fluctuation by dispersing tenants• Revitalize the entire region and connect this growth to thegrowth of properties owned• Strengthen confidential information management systems by

IT-Related Risks• Information leaks
Related Materiality•As FRCʼs properties owned are concentrated
in Fukuoka and Kyushu, the vacancy rate
might increase due to a worsening economic
situation in that region, and profitability could
deteriorate due to a decrease in rent

• Appropriate occupancy screening when tenants move in as

See p.37• Set up satellite offices at the asset management company

・Compliance/Risk Management

Property Concentration
Risks

items as rent, according to property characteristics• Risk of not being able to acquire planned
assets because additional units cannot be
issued at the desired time and under desiredconditions due to fluctuations in unit price

Risks from Property
Degradation, Deterioration

Measures to Address Risks and Opportunities• Consider extending lease agreement terms, fixing of such

Risks from Changes in
Business Conditions

Regulatory Risks
Infectious Disease,
Epidemic, and Other
Related Risks

Impact on Stakeholders

Value-Creation Activities

Value-Creation Activities

・Reduction of environmental load
・Maintenance and enhancement of environmental and construction performance

Measures to Address Risks and Opportunities• Work to maintain and improve environmental performance

Environment-Related Risks• Reduction of environmental load

● Opportunities

Compliance Risks• Violations of organizational laws
and regulations• Conflicts of interest
Related Materiality
・Compliance/Risk Management• Risk of leakage of personal and confidential
information due to delays in strengthening
cybersecurity（Asset Manage• If Fukuoka Realty Co., Ltd.
ment Company）
violates its duty of care asa good manager（duty of care）
and its duty
to faithfully perform tasks for FRC（duty offidelity）
under the law or specified contracts,
the possibility exists that this could adversely
affect FRCʼs survival and profitability• Potential conflict of interest issues with sponsors

introducing two-factor authentication for software as well as
applications and by conducting training on cybersecurity andinformation management• Enable property differentiation by introducing advanced technologies into properties owned• Prevent violations including those of laws and regulations aswell as transactions involving conflicts of interest, throughdeliberations and audits by the Compliance Assessment
Committee• Improve employee awareness of compliance by conducting
See p.40
regular compliance trainings

Fukuoka REIT Corporation 2021

27

50,000

0.5

0 21st 22nd 23rd 24th 25th 26th 27th

28th 29th

30th

31st 32nd 33rd 34th

0Feb. 2015 Aug. 2015 Feb. 2016 Aug. 2016 Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Feb. 2020 Aug. 2020 Feb. 2021 Aug. 2021

□ Introduction

Financial Strategies and TSR（Total Shareholder Return）

Increasing the scale of its assets by incorporating low-cost borrowings in its fund procurement on the markets, FRC is aiming■ Value-Creation Activities□ Foundation Underpinning Management

21st 22ndFeb. 2015 Aug. 2015

□ Data Section

Dividends and TSR

to return higher dividends to its unitholders.
Basic Approach to Financial Strategy
A feature of J-REITs is that, if certain conditions are met, such as
the dividend of more than 90% of revenue, there is virtually no
corporate tax and there are no retained earnings, so revenue will
be distributed as a dividend almost as it is. In the case of general stock companies, etc., corporate tax will be imposed on the
tax income raised by the company, internal reserves for the next
business will be deducted, and the remainder paid as dividends.
Therefore, J-REITs tend to have higher dividend yields than generalstock companies.
Another characteristic is that financing (funds procurement)is based on certain financial disciplines, taking into account thebalance between capital and debt (to achieve an optimal capital

structure).
To date, FRC has maintained its management with an emphasis on financial stability. Going forward, we will continue to build asolid financial base through the conservative management of LTV.
Specifically, the Investment Corporationʼs financial policy is to keep
LTV below a certain level and to use long-term fixed interest rate
entities to reduce the risk from future interest rate hikes.
In the years to come, we will place an even greater emphasis on
the role of finance in supporting the expansion of our assets andwork to expand our fund procurement sources and methods while
maintaining financial stability.

Through the steady growth of the scale of its assets (external
growth) by means of the acquisition of carefully selected real estatein the Fukuoka and Kyushu area utilizing the sponsor pipeline, etc.
―and effective asset management (internal growth), FRC has been
distributing stable dividends per unit since its listing. Going forward,
we will strive to maintain and improve our dividend per unit throughthe creation of stable cash flows by the acquisition of excellent properties and the continuation of strategic initiatives.
The acquisition of real estate, etc., to expand the scale of assets
and increase the cash flow to fund dividends offers the following
advantages:• Ability to diversify risks for properties and tenants• Enables efficient management of properties by taking advantage of economies of scale

As a capital policy for external growth when raising capital, FRC
conducts management while bearing in mind two criteria:• The value obtained by dividing the investment unit price by
net asset value (NAV) per unit (NAV ratio) is almost equal to or
greater than one• To grow stabilized dividends after property acquisition
The difference (unrealized gain or loss) between the total realestate appraisal value and the total real estate book value (excluding trust construction in progress) added to total net assets, NAV is
calculated based on market value-based net assets. NAV ratio of
one or less is considered to be undervalued. Were the situation tocontinue, we would consider acquiring our own investment units,etc., and believe that we should be cautious about raising capital.

■ Figure 3：Investment Unit Price Performance (10 years, including
dividends)
FRC■ Trends in NAV per Investment Unit

（Times）

200,000

2.0

150,000 136,051

144,472

148,558

152,259 150,328

152,639 156,204

161,315 164,250

167,118 170,680

171,592 171,943 175,502

0 21st 22nd 23rd 24th 25th 26th 27th

28th 29th

30th

31st 32nd 33rd 34th

Feb. 2015 Aug. 2015 Feb. 2016 Aug. 2016 Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Feb. 2020 Aug. 2020 Feb. 2021 Aug. 2021

Note: NAV per investment unit = (Net assets + unrealized gain/loss - Total Dividends) / Total number ofinvestment units issued as of the end of the period

28

Fukuoka REIT Corporation 2021

0

3,479

3,398 3,422

3,512

3,593

3,250

3,361

8

3,539

3,000

6

3.7

2,000

3.7

3.7

3.9

4.1

4.1

4.4

4.2

4.3

4.1

4.7
4.0

4.0

4

3.1

1,000

2

0

0

21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th

Feb. 2015 Aug. 2015 Feb. 2016 Aug. 2016 Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Feb. 2020 Aug. 2020 Feb. 2021 Aug. 2021

Note: Dividend yield = (Dividend per investment unit / Operating days x 365) / Investment unit price as ofthe end of the fiscal period
Dividend per investment unit (Yen)Dividend yield (as of the end of the fiscal period) (%)■ Figure 2：TSR over the past 10 years
第21期 第22期 第23期
第26期3第27期
第30期
第31期 第32期 第33期
第34期
Past 第24期
1 year 第25期 Past
year 第28期 第29期
Past
5 yearPast 10year
2015年 2015年 2016年 2016年 2017年 2017年 2018年 2018年 2019年 2019年 2020年 2020年 2021年 2021年
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期

Cumulative
Cumulative
Cumulative
Annual rate
Annual rate
Annual rate
total
total
total

FRC

33.6%

15.4%

4.9%

13.2%

2.5% 125.4%

8.5%

TOPIX Real
Estate Business
Index

22.6%

8.4%

2.7%

29.0%

5.2% 142.0%

9.2%

TSE REIT
Index

27.3%

49.8%

14.4%

55.7%

9.3% 252.9%

13.4%

Note: Annual rate conversion is the geometric mean of cumulative returns.

140

120

400

80

1.22
1.31 1.31

0.5

3,563 3,574

（%）

100

1.5

50,0003,435

3,687 3,693 3,642

TSE REIT Index

Aug.2020

300

1.0

4,000

Dividend yield (as of the end of the fiscal period) (%)

（%）
160

1.67

100,000

Dividend per investment unit (Yen)（Yen）■ Figure 4：Investment unit price performance for the most recent
fiscal year (one year, including dividends)（%）■ NAV Ratio Trends（Yen）

TOPIX Real Estate Business Index■ Figure 1：Past Dividends and Dividend Yields

Value-Creation Activities

Value-Creation Activities

External Growth and Internal Growth

Figure 1 shows FRCʼs past dividends and dividend yields.
Among listed REITs, dividends are characteristically stable. In
contrast, the dividend yield has fluctuated between 3.8% and 4.7%
over the past seven years, indicating that investment unit prices
have fluctuated due to fluctuations in the stock market, interest
rate trends, and fluctuations in market supply and demand.
Figures 2 and 3 show the total shareholder return（TSR）, taking
into account FRCʼs dividends and capital gains.
TSR performance has been 8.5% annually over the past 10
years. Performance declined temporarily due to the impact of
COVID-19 but recovered relatively quickly and had returned to preCOVID levels as of the end of August 2021. At the present time,
there is a divergence in performance between FRC and the TSE
REIT Index, but we believe that the main factor driving the increasein the TSE REIT Index is the high performance of the logistics sector. In contrast, our TSR performance over the most recent fiscal
year has exceeded that of the TSE REIT Index, as shown in Figure
4. From now on, we will work to improve performance by making
a connection from the recovery stage to the internal growth stage,by managing properties in anticipation of the situation returning tonormal after the COVID-19 pandemic, and by swiftly conducting
aggressive external growth centered on our sponsor pipeline.
In terms of our property portfolio, we will gradually reduce ourportfolio of retail facilities and further diversify risks as a comprehensive REIT by acquiring mainly office buildings and logistics
properties in Fukuoka and Kyushu that are deemed stable over the
medium to long term.
As an asset management company knowledgeable about thecircumstances of the region, we will continue to maximize the profitof our unitholders by utilizing information and expertise.

1.18

1.08 1.11 1.06
1.07
1.03

0.98

0.98

1.00

Feb.2021

Aug.2021

200

0.80

100

21st 22nd 23rd 24th

25th

26th

27th

28th

29th

30th

31st 32nd 33rd 34th

Feb. 2015 Aug. 2015 Feb. 2016 Aug. 2016 Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Feb. 2020 Aug. 2020 Feb. 2021 Aug. 2021

Note: NAV ratio = Investment unit price as of the end of the period / NAV per investment unit

0

Aug.
2011

Feb.
2012

Aug.
2012

Feb.
2013

Aug.
2013

Feb.
2014

Aug.
2014

Feb.
2015

Aug.
2015

Feb.
2016

Aug.
2016

Feb.
2017

Aug.
2017

Feb.
2018

Aug.
2018

Feb.
2019

Aug.
2019

Feb.
2020

Aug.
2020

Feb.
2021

Aug.
2021

Note: FRCʼs investment unit price performance is expressed as an index, using the investment unit price as of August 31, 2011, as 100. TSR over the past 10 years considers dividends and investment unit prices in indicating
the profitability of investments made on August 31, 2011, as of August 31, 2021. The TOPIX real estate index and the TSE REIT index are indexed in the same way, using dividend-included data. Similarly, the graph forthe most recent fiscal year is indexed with the investment unit price as of August 31, 2020, as 100.

Fukuoka REIT Corporation 2021

29

□ Introduction

Sustainability Policy and Materiality□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

FRC and Fukuoka Realty Co., Ltd., believe maximizing profits for unitholders over the medium to long term requires not only
the pursuit of profitability but also consideration for the environment, society, and governance. With this in mind, we focus on
ESG issues as part of the real estate investment management process.

3. Contributing to the Creation of a Recycling Society• We will monitor water consumption and waste management at theproperties we manage and promote water saving and recycling throughbetter management, in an effort to utilize limited resources efficiently.
• We will investigate the adoption of water-saving equipment and waterreuse systems at the opportunities of renovating buildings.

7. Collaboration with Tenants and Suppliers• In implementing the Policy, assuming that it is essential to obtain understanding and cooperation from the tenants of respective properties andour major business partners including property management companies,
we will work to build good relations with each of them in an effort toestablish a collaborative structure.
8. Establishing Internal Organizations• To manage the implementation of what is provided in the Policy, we willorganize a sustainability promotion committee within the Company.
• We will set up specific objectives, etc., for each of our initiatives andreview them periodically.
9. Monitoring and Disclosing Environmental and Social Performance• We will continuously grasp the status and results of our efforts based on
the Policy, while monitoring the status of ESG initiatives on our own by
utilizing external assessment systems and surveys including GRESB.
• We will disclose information and achievements regarding our ESG initiatives to unitholders and other stakeholders in a timely and appropriatemanner.
Established January 29, 2018

System for Promoting Sustainability
Fukuoka Realty Co., Ltd. has established the Sustainability Promotion Committee to promote sustainability initiatives in a continuousand systemic manner based on its Sustainability Policy. To achieve
the goals of the Sustainability Policy, the Company has put in place
the “Regulations Concerning Sustainability Management” manual.
In the context of the Companyʼs internal systems, collaboration
with stakeholders, and information disclosure policy, the Committee, in principle, meets at least twice a year to examine goals andmeasures related to sustainability. The Sustainability Promotion
Committee includes the President and CEO, a full-time director,
and each general manager of the Real Estate Management Dept.,
Investment Dept., Finance Dept., Planning Dept., and ComplianceDept. The President and CEO, who chairs the Committee, makes
decisions regarding the implementation of sustainability-related
measures. The chair of the Committee also periodically reports on
targets and results, as well as progress in certain issues, to theBoards of Directors of both the Company and FRC.

Fukuoka REIT Corporation 2021

Policies and targets

Related SDGs

Reduction of environmental load

・Coordinate with Property Management and Building Management on promotion of management and reduction of energy consumption, greenhouse gas emissions, water consumption, and waste output

Maintenance and enhancementof environmental and construction
performance

・Carry out performance and function evaluation of properties on a regular basis and ameliorate any deterioration in performance, etc.
・Maintain and improve competitiveness by acquiring green building certifications and through visual representation of building performance

Creation of pleasant workplaces

Asset
managementcompany・Improve quality of operations by enhancing and expanding employee education systems and promoting
acquisition of qualifications
・Continue to improve office environments and work on providing pleasant working environments
・Give consideration to work-life balance and boost employee satisfaction

Tenants

・Promote improvement of employee satisfaction and work toward increasing the job satisfaction of tenant
employees

Contributions toward boosting theattractiveness and revitalization of
Fukuoka and Kyushu

・Enhance dissemination of information regarding the strengths and charms of Fukuoka and Kyushu
・Support research and studies on the local economy and industries; promote attractive urban development in collaboration with local business circles

Co-creation with the local community

・Deepen dialogue and collaboration with the local community through participation in community activities
and various initiatives using properties under our management to grow and develop together with the local
community

Information disclosure and dialogue
with stakeholders

・Disclose financial and non-financial information to stakeholders in an appropriate and timely manner
・Build relationships of trust through proactive dialogue with stakeholders and reflect stakeholder feedback in
our management strategy

Compliance / Risk Management

・Ensure thorough compliance, including with laws and ordinances, and the elimination of any conflict ofinterest with interested parties, and develop and operate an appropriate internal risk management system tomaintain and improve corporate value

Process for Identifying Materiality■ Organizational Chart for the Asset Management Company
Shareholders General Meeting
Corporate Auditor
Board of Directors
Compliance Assessment Committee

Compliance Department

Deliberations on compliance-related matters• General Manager of Compliance Dept. (Attorney)• Outside Compliance Committee Members (Attorneys,
Certified Public Accountant and Tax Accountant, Real
Estate Appraisers)

STEP 1

STEP 2

STEP 3

Identify social issues
Based on the needs of society and the expectationsof stakeholders within and outside of the Company,
prepare a list of social issues taking into accountconditions at other companies in the same industry,
items used at assessment agencies, ESG disclosure
standards, and SDGs.

Narrow and prioritize issues
Narrow and prioritize identified issues based on theirimportance to stakeholders and the importance toand degree of impact on FRCʼs business basedon potential risks and opportunities. Prepare draft
proposals regarding materiality.

Deliberate at the management level, confirm appropriateness
Ensure that the Sustainability Promotion Committee, established by
the asset management company, deliberates on all draft proposals
regarding materiality. Materiality is identified after investigating appropriateness based on the opinions and advice of experts acting on
behalf of stakeholders. Reports are ultimately delivered to the Boardof Directors of the asset management company and the Board of
Directors of FRC.

President and CEO
Risk Management Committee
Deliberations regarding risk management

Executive Committee

Investment Committee

Decision-making on management matters ingeneralDecision-making in regard to the investment in andoperation of assets owned by FRC

Sustainability Promotion Committee
Decision-making in regard to the promotion ofsustainability

Akira Eguchi
Executive Vice President
Fukuoka Realty Co., Ltd.

Real EstateManagement Department

30

Materiality significant issues

Corporation. By promoting initiatives based on materiality policies
and targets derived through cooperation with stakeholders, theCompany targets sustainable growth at FRC alongsidecontributions toward solving social issues.

Foundation Underpinning Management

Foundation Underpinning Management

4. Pursuing Well-Being and Safety• We will endeavor to provide healthy and comfortable indoor spaces atthe properties we manage, striving to enhance tenant satisfaction andproperty competitiveness.
• We will implement measures to prevent and reduce disasters at theproperties we manage, such as ensuring earthquake resistance and fully
preparing emergency equipment, to provide safe and secure buildings.

6. Enlightening Employees• To implement the Policy, we will provide our employees with educationand training sessions on ESG awareness in real estate investment andmanagement operations, heightening their awareness and enriching theirexpertise.

Fukuoka Realty Co., Ltd., is taking steps to identify materiality(important issues to address) in its sustainability initiatives basedon the requests and expectations of its stakeholders and the
expected impact on and importance to the Investment

Environment

2. Responding to Climate Change Risks• We will endeavor to help mitigate climate change risks by working to
reduce greenhouse gas emissions from the properties we manage throughutilization of renewable energy and other energy conservation measures.

5. Utilizing Green Building Certifications• We will investigate the obtainment of green building certifications andother environmental assessments in order to visualize the results of ourinitiatives on the environment and society at the properties we manage
as well as to enhance property competitiveness.

Society

1. Promoting Energy Conservation of Portfolio Properties• We will monitor the energy consumption levels of the properties wemanage and work to improve management to lower the levels over the
medium to long term.
• We will endeavor to improve the energy consumption efficiency ofbuildings and facilities when undertaking renovations, so as to enhance
property value and mitigate environment-related risks as well as reduce
operating costs.

Identification of Materiality significant issues

Governance

Sustainability Policy

Investment Department

Finance Department

In 2019, Fukuoka Realty Co., Ltd., identified seven key “material issues,” taking into consideration “events that are important to stakeholders” and “issues that have a significant impact on the
Companyʼs management,” as well as established its activity policy and targets. Amid the growing
importance of sustainability worldwide, events that could affect the Companyʼs operations continue to evolve. As a result, we are taking steps to review current material issues. In addition, we areengaging in discussions on materiality-related KPIs and the Task Force on Climate-related Financial
Disclosures（TCFD）
or equivalent climate change disclosures. As the asset management company
for Japanʼs first region-specific REIT, we recognize the need to factor ESG considerations into ourreal estate investment management process as part of our overarching mission.

Planning Department

Fukuoka REIT Corporation 2021

31

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Environmental Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Reduction of environmental load

Environmental initiatives
RetailEnvironmental Performance Data and Green FinanceIC

Natural Environment Conservation and Creation

At Canal City Hakata and Park Place Oita, we are making efforts tocoexist with various natural environments by providing green spacein communal areas, installing aquatic spaces, and creating shaded
spaces. We are creating habitats for wild fauna and flora that
contribute to the preservation of biodiversity, as well as providing
places where employees and visitors can relax and interact withnature.

RetailCanal Water Filtration System ( rainwater reuse system )IC

Environmental Performance Data
■ Electricity Usage

Canal City Hakataʼs symbolic canal has both a recreational
function and is a source of water to fight fires in the case of an
emergency. At all times, this canal holds roughly 1,200 tons ofwater, and rainwater is used in order to conserve resources.

（Mwh）
90,000■ Water Consumption(Data coverage)

70.1％
81,339

70.2% （Mwh/m²）

70.1%

190

79,474

184

71,192

175

180

60,00030,000

0

160

160

30th・31st
March 2019-February 2020

28th・29th
March 2018-February 2019

（m3）

70.1％

800,000(Data coverage)
70.1%

607,352

596,007

1.37

1.35

70.2%

（m³/m²）2.00
1.50

600,000
405,366

400,000

0.50

200,000

32nd・33rd
March 2020-February 2021

145

0

1.00

0.91

28th・29th
March 2018-February 2019

30th・31st
March 2019-February 2020

32nd・33rd
March 2020-February 2021

0.00

Notes: 1.Total value for 11 properties, including four retail facilities and seven office buildings.
Notes: 2.Per unit is calculated by adjusting the total floor area（m2）
by the occupancy rate.
Notes: 3.Data coverage is the area ratio of properties subject to data aggregation as compared to all properties and is calculated at the end of the fiscal period.
Notes: 4.The figure for Canal City Hakata, Canal City Hakata・B, and Canal City Business Center Building reflects total electricity and water usage for all buildings, including electricity and water usage by some theater areas
not owned by FRC.
Notes: 5.The figure for Park Place Oita covers only the main building section and excludes the section for independently run stores.

Green Finance

RetailGreywater Plant
 ( kitchen drainage reuse system )Food Residue Recycling ( raw garbage recycling )NEW

Canal City Hakata consigns the collection of raw garbage fromeach restaurant to a recycling company, which recycles it into
animal feed.
■ Food Recycling Flow Chart
Food residue (raw garbage)

Accumulation within
facilities

Restaurant tenants
Pig and poultry farmers, etc.,
sales to mixed feed makers

With the goal of further promoting ESG activities and expanding
financing options through an enhanced investor base, FRC
established the Green Finance Framework in 2019 in line with theGreen Loan Principles, the Green Bond Guidelines 2017 from the
Ministry of the Environment, and the Green Bond Principles 2018
in order to ensure implementation of green financing, including
green loans. The funds procured through green finance will beallocated toward the acquisition of Eligible Green Projects, therepayment of borrowings required in the acquisition of eligible
green assets, or the redemption of investment corporation bonds
issued and outstanding.

Conversion into animal feed

Energy-Saving Initiatives Based on the
Promotion of LED Lighting

We are focusing on converting each property to LED-based
lighting to reduce energy consumption.
〈Office buildings already converted to LED〉
• Gofukumachi Business Center (e.g., Interior shared spaces, some external areas)• Sanix Hakata Building（interior recessed lighting）• Taihaku Street Business Center（e.g., Entrance, interior shared spaces）• Tenjin North Front Building（common spaces） NEW(1) DBJ Green Building certification of 4 or 5 stars or a 3-star evaluation(2) CASBEE certification of S, A, or B+ rank
(3) BELS evaluation of 3, 4, or 5 stars

Recycling company(Kankyou Agency)

Pig and poultry
farmers, etc.

Office Buildings

Eligible Green Projects are specified assets held by FRC thathave received or are scheduled to receive one of the following
certifications from third-party certification organizations at the timeof procurement or the reporting date.

Eligible Green
Projects
131.8 billion yen(acquisition price)

65.2%

32 properties

Introducing Renewable
Energy Equipment

Others（logistics facilities） At LOGICITY Hisayama, LOGICITY Minato Kashii, and Konoha
Mall Hashimoto, we have installed solar panels on the rooftops togenerate renewable energy and contribute to the formation of arecycling-based society.

Total properties
owned
202.0 billion yen★★★
(3-star)★★★★★
(5-star)Eligible Green
Projects
131.8 billion yen
10 properties

Maximum green financeprocurement amount

Total assets LTV

41.2%

★★★★
(4-star)Eligible Green Project liability

Foundation Underpinning Management

Foundation Underpinning Management

At Canal City Hakata and Konoha Mall Hashimoto, kitchen
wastewater discharged by restaurants is collected and processed
as reclaimed water. It is then used as tap water in on-site
restrooms.

Retail54.3 billion yen

After procuring green finance, FRC will announce the total amount of Eligible Green Projects, the amount of liabilities related to Eligible Green
Projects and the amount of funds from green finance as of the end of each fiscal period (February and August each year). The Investment
Corporation will also announce the following indicators related to Eligible Green Projects as of the end of February each year.
• The number of properties classified as Eligible Green Projects, and the number and type of obtained environmental certifications.
■ Green Finance (actual)Type

Long-term loan
(Green loan)

Solar panels

LOGICITY Hisayama

LenderMizuho Bank
The Bank of Saga
The Higo Bank

Amount borrowed(Millions of yen)

2,200Interest rate (annualized)

0.521%(Note 1)

Loan date

Notes

July 31, 2019

Unsecured/unguaranteed
Lump-sum repayment
Fixed interest rate
Green loan assessment: Green 1(Note 2)

Notes: 1. FRC has concluded a swap agreement to establish a fixed interest rate on debt. The indicated interest rate reflects the effects of the swap agreement.
Notes: 2. FRC has received the highest “Green 1” rating from the Japan Credit Rating Agency for our adherence to the Green Loan Principles.

LED lighting being used at the Sanix Hakata Building

32

Fukuoka REIT Corporation 2021

Fukuoka REIT Corporation 2021

33

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Environmental Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Maintenance and enhancement of environmental and construction performance

Disaster Risk Countermeasures IC

Acquiring External Certifications

Aichi
Osaka

■ Storm Water Storage Facilities■ Replacing and Installing New Water Stops (July 2020)■ Instances of Building Inundation in Fukuoka City (zero instances since 2014)

Storm water storage capacity
FY 2020: 128,300m3

FY 1999: No storm water storage facilities

Storm water management capacity improved from 59.1mm/h to 79.5mm/h (city center)(Buildings)
4,000

From FY 2000 to FY 2020…
3,173

A steady decline inbuilding inundations

3,000

1,122

In September 2018, Fukuoka Realty Co., Ltd., endorsed thePrinciples for Responsible Investment (PRI) and the Principles
for Financial Action for the 21st Century (PFA21) and becamea signatory to these initiatives. Through ESG-conscious asset
management, the company is contributing still further to theachievement of a sustainable society.

Since the launch of the
project in FY 2000…

Instances ofinundation havesteadily declined.

3

Maximum hourly
precipitation (mm/h)

Canal City Business Center Building

Storm waterdrainage capacity
increased sharply.

The Global Real Estate Sustainability Benchmark (GRESB) wasestablished by a group of European pension funds and is thebenchmark for measuring sustainability in real estate companies
and managing organizations. FRC was given “Green Stars” and“four stars (in the five-level)” GRESB Real Estate Assessment
conducted in 2021.

1,721

2,000
1,000

Canal City Hakata (north side of the building)■ Initiatives We Support■ Participation in GRESB Assessment 2021
( “Green Star” and “4 Star” Ratings)

Severe damage from flooding in Fukuoka City on June 29, 1999
contributed to the formulation of the Storm Water Management Action
Plan and the upgrading of rainwater drainage facilities in the areas where
the flooding was particularly harsh. Ongoing efforts to implement antiflooding measures have greatly improved flood safety within the city limits.

We reviewed the specifications and installation locations of existing water
stops throughout the Canal City Hakata premises and either repaired or（yen）installed equipment as part of our countermeasures to river flooding asa result of typhoons and locally heavy rains, which appear likely to comemore frequently and increase in severity due to global warming.

Fukuoka

AMC

FRC makes continuous improvements through feedback on the results it receives from acquiring external certifications.

Countermeasures to Flooding Risks

Tokyo

IC

June 29,
1999

July 19,
2003

July 24,2009

August 30,
2013

79.5

104

116

72.5

* Number of buildings: Total number of buildings inundated above and below the floor level. Period coveredis between June 29, 1999, and December 31, 2020.
Source: Fukuoka Realty Co., Ltd., based on data from the “Storm Water Management Action Plan 2026”
pamphlet for the Fukuoka City Storm Water Emergency Control Plan.

Fukuoka Prefecture is an area in which there are relatively few
earthquakes. According to the probabilistic earthquake prediction map
from the Office of the Headquarters for Earthquake Research Promotion,
Earthquake and Disaster-Reduction Research Division, Research andDevelopment Bureau, Ministry of Education, Culture, Sports, Science andTechnology, the probability of an earthquake with an intensity of six orgreater over the next 30 years is lower in Fukuoka Prefecture than in the

Kanto, Chubu, and Kansai areas. FRC establishes the insurance value ofeach property based on its replacement value, earthquake PML value,
and other factors, and maintains earthquake insurance for all its properties（buildings）. In addition, FRC continues to conduct annual property
surveys through external organizations to estimate earthquake damage toproperties based on various scenarios.

■ Probabilistic Earthquake Prediction Map■ Earthquake PML Value (full portfolio) 4.5%

Probability of an earthquake with an intensity of six or greater over the next 30 years(average case / all earthquakes) (reference date on January 1, 2020)■ Ratio of Properties Certified as Green Buildings
As of the end of August 2021, the ratio of properties within theentire portfolio certified as green buildings was 78.8%.
The DBJ Green Building Certification is a third-party certification
system established by the Development Bank of Japan for realestate properties that feature excellent environmental and social
considerations. FRC has acquired certification for 12 of its owned
properties that exhibit environmental and social awareness(including two properties that were recertified in June 2021).

Canal City Hakata（2018）■ Basic Earthquake Insurance Rate★★★★★ Canal City Hakata・B（2018）

Earthquake insurance with coverage beginning on January 1, 2021
Earthquake insurance can be purchased in Fukuoka Prefecture at a relatively
lower cost than in other areas.

27,500Tokyo

Green Building
Certification

78.8%

★★★★

Konoha Mall Hashimoto（2020）
Park Place Oita
（2018）
Canal City Business Center Building（2018）★★★

LOGICITY Minato Kashii（2020）LOGICITY Hisayama（2020）
Gofukumachi Business Center（2018）
Higashi Hie Business Center（2018）
Higashi Hie Business Center Ⅱ（2020）★

SunLive City Kokura（2019）
Marinoa City Fukuoka（Marina Side Building）（2019）(total floor space basis)

11,800Aichi

11,800

Osaka
7,400

Fukuoka

0

5,000

10,00015,000In addition, the Building Energy-Efficiency Labeling System(BELS) is a system in which third parties evaluate, indicate, andcertify the energy conservation performance of non-residentialbuildings, based on the Evaluation Guidelines for the Building
Energy-Efficiency Labeling System for Non-Residential Buildings(2013). FRC has acquired certification for four of its properties
owned.

20,00025,000Foundation Underpinning Management

Foundation Underpinning Management

Earthquake Risk Countermeasures

30,000（Yen）

Note: The basic rate is 10 million yen for one year of insurance, mainly for steel-frame and concrete buildings.
Source: Fukuoka Realty Co., Ltd., based on data from the Ministry of Financeʼs Basic Rates for Earthquake
Insurance (earthquake insurance with contracts starting on January 1, 2021).

Other Disaster Prevention Measures
Disaster Prevention Drills
Note: The mesh for zero probability based on the model calculation conditions is shown in white.
Source: Office of the Headquarters for Earthquake Research Promotion, Earthquake and DisasterReduction Research Division, Research and Development Bureau, Ministry of Education, Culture,
Sports, Science and Technology

We conduct comprehensive disaster drills
at Canal City Hakata, with all tenants
participating. We conduct fire and earthquake
evacuation drills in case of emergency toimprove fire and disaster prevention awarenessand strengthen cooperation between tenants.

Higashi Hie Business Center

Higashi Hie Business Center II

LOGICITY Minato Kashii

LOGICITY Hisayama

（棟）

34

4,000
Fukuoka REIT Corporation 2021

3,173

Fukuoka REIT Corporation 2021

3,000
1,721

35

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Social Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Creation of pleasant workplaces

Initiatives for Employees and Tenants

Tenant Initiatives

Building a Pleasant Workplace Environment
FRC and Fukuoka Realty Co., Ltd., actively push forward initiatives for its employees and tenants. Through dialogue, every effort is madeto provide an attractive work environment where employees can continue to work with peace of mind and with opportunities for humanresource development. From a tenant perspective, both FRC and Fukuoka Realty Co., Ltd., are committed to ensuring safe, secure, andcomfortable spaces while improving satisfaction.
Initiatives for Employees

AMC

Fukuoka Realty Co., Ltd.: Number of officers and employees, number ofcredentialed employees
Average number of years of continuous（*As of August 31, 2021）
service bypermanent employees: 9 years and 6 months
Number of full-time officers and employees: 40（20 male and 20 female）

Employee training• Regular study groups by the Kyushu Economic Research Center• Real estate brokers: 28• Certified building administrators: 4• First-class registered architects: 3• Real estate appraisers: 3• ARES certified masters: 25• Attorney: 1• MBA: 2• Administrative scrivener: 1• SME management consultant: 1• CMA: 2• Compliance training• Sustainability training• Nursing care training• In-house recreation, etc.

Support for career development• Employee satisfaction survey• Career interview• Secondment system（dispatching employees to sponsor companies）• Promotion from contract employee to permanent employee status• Offering of training programs tailored to each management level• System for supporting acquisition of qualifications（e.g., Real Estate Securitization Master, Real EstateTransaction Agent）• Support for language learning, etc.

AMC

Work style reforms at the Asset Management Company

Fukuoka Realty was certified as a “Fukuoka ʻWork Style ReformʼPromotion Company” on August 28, 2018. This system recognizes
companies that have achieved at least a certain number of the“initiative items” that were selected by Fukuoka City as indicators
to advance work style reforms.
Recognized initiatives• There is a system to support career advancement andto consult about career building• There is a certification acquisition support system aswell as subsidized English and bookkeeping training
systems• The company has measures in place to encourage
shorter working hours• There is a system in place allowing employees to taketime off in increments of hours or half-days• There is a personnel development system, including
training contributing to career advancement, etc.

Customer and Business Partner Initiatives
Measures to Prevent the Spread of COVID-19

IC

During the fiscal year under review, we strengthened measures aimed at preventing the further spread of COVID-19 at FRC properties in linewith the guidelines issued by the Ministry of Health, Labour and Welfare. The safety of our employees, customers, and tenants is our firstpriority, and we are working to create the safest and most secure environment for them as possible.

RetailOffice Buildings

Principal measures aimed at preventing the spread of COVID-19• Installation of alcohol-based sanitizing stations and splash guards• Posting of social distancing reminders• Comprehensive health management through tenant employee
temperature checks• Clearing of common-area chairs and tables

Canal・LINE Order

NEW

This service enables users to ordertakeout items and make online
payments in advance anytime,
anywhere, and at any available store.

Location-Specific Initiatives
AMC

Fukuoka Realty Co., Ltd., is working on a variety of measures
aimed at protecting the health of its employees. With the aimof preventing the spread of COVID-19, in the fiscal year underreview we worked to implement thorough measures to preventthe spread of the virus to individuals - administering workplacevaccinations to interested employees and considering alternate
schedules for commuting - and strengthening measures aimed
at preventing the spread of the virus in the office.
• Installing thermo-monitors at office entrances and exits NEW• Distributing masks and thermometers• Shifting morning and other meetings to an online format• Ensuring social distancing in offices• Regular disinfecting of tables, chairs, and doorknobs, etc.

Fukuoka REIT Corporation 2021

• Supporting COVID-19 vaccinations for interested employees（e.g., providing venues）NEW• Holding emergency drills intended to improve tenant safety and security• Implementating tenant satisfaction surveys• Distributing sustainability guidebooks• Sponsoring events to improve sustainability awareness• Providing sustainability training, etc.

Adopted mobile ordering system• There is a training system for employees• There is a support system for self-development initiatives

36

promote sustainability.

Principal measures aimed at preventing the spread of COVID-19• Installation of alcohol-based sanitizing stations at office entrances• Enhanced ventilation in common areas• Posting of notices regarding efforts to prevent the spread of
COVID-19 in elevators

Hotel

Creating a Comfortable Working Environment

Improvement of the Working Environments

A COVID-19 vaccination support venue（July -August 2021）

Principal measures aimed at preventing the spread of COVID-19• Installation and expansion of alcohol-based sanitizing stations• Regular disinfection and sterilization work
• Strict enforcement of social distance at front desks andrestaurants• Thorough health management of hotel employees via
temperature-taking, etc.
Acceptance of COVID-19 patients（those with mild symptoms）NEW• Hotel FORZA Oita

Foundation Underpinning Management

Foundation Underpinning Management• Monitoring working hours• Checking and reporting deviations in working hours（monthly）• Health checkups and physical examinations• Influenza vaccinations• Health consultations with public health nurses

Number of credentialed personnel（aggregate total）• Child-rearing support（maternity leave, childcare leave system）• Nursing care leave• Leave for voluntary work
• No overtime days
• Employee welfare（e.g., 401K, cumulative investment system）• Encouraging use of paid holidays, etc.

With a focus on the health and comfort of tenant employees, we are improving the employee
lounge environments within retail facilities and renovating office building common areas.
Moreover, FRC is engaging in a variety of initiatives for tenants as a part of efforts to

Employee Health• Employees seconded from sponsors: 2• Employees seconded to sponsors: 4

Supporting flexible work styles

IC

IC

Sanitizing Measures

Measures to Prevent the Spread of COVID-19 in Food Courts■ Canal City Hakata■ Park Place Oita

We have implemented measures to prevent the spread of COVID-19 andstrengthen safety and security, including the installation of Air Buster units near theelevators and pedal-operated sanitizing stations in 32 places around the building.

With the goal of ensuring the safety and security of customers, wehave installed splash guards on the Park Place Oita and Konoha Mall
Hashimoto food court tables.

■ Konoha Mall Hashimoto(Fukuoka Realty Co., Ltd., reception)
Installation of splash guards and sanitizing
stations

Installing thermo-monitors
Air Buster unit

Pedal-operated
sanitizing standFukuoka REIT Corporation 2021

37

□ Introduction

Social Issues□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Organizational Issues

Related Materiality

IC

Related Materiality

・Contributions toward boosting the attractiveness and revitalization of Fukuoka and Kyushu
・Co-creation with the local community

Initiatives for Local Communities
Initiatives for Local Communities
Environment Promotion EventsIC

Stakeholder Engagement

AMC

Safety Town Council

Investment Corporation（FRC） AMC Asset Management Company

・Information disclosure and dialogue with stakeholders

Clean-Up Days

Various Events Held

Participation in Community Events

IC

AMC

FRC engages in proactive dialogue with its various stakeholders aimed at sustainable growth and higher corporate value. At the same time,
FRC recognizes that fulfilling its required social responsibilities leads to sustainable business activities. Valuing our relationships of trust withstakeholders, we will leverage this concept in our ESG initiatives.

Environment

At Canal City Hakata, employees of
the asset management company also
participate in events that involve sprinklingwater on sidewalks to cool them down
and promote well-being. (Initiativesuspended in 2021 to prevent the spreadof COVID-19.)

At Park Place Oita, we established a“Safety Town Council” that partners withrelated institutions and groups to conduct
crime-prevention patrols and proactively
strive to prevent youth misconduct.

Real Estate, Finance, and the Economy Gathering

Asset management company executives
and employees actively participate incleanup activities, of which there had
been 289 as of October 15, 2021.

AMC

Every year, male employees of the asset
management company participate in the
Hakata Gion Yamakasa festival（Hachiban
Yamakasa Kazariyama, Kamikawabatadori; Etsuo Matsuyuki, CEO at the time,rode on a float at the event in 2018).
（Initiative suspended in 2021 to preventthe spread of COVID-19.）

The Kyushu Economic Research Center

Region andSociety

Property
Management
Firms

Unitholders
andInvestors

・Organizing community and other events
utilizing facility common areas
・Active participation in the Hakata Town
Planning Promotion Councilʼs activities
・Offering real estate, finance, andeconomic education
・Timely disclosing of financial and nonfinancial information
・Announcing results at the Fukuoka Stock
Exchange

AMC

Fukuoka Realty Co., Ltd., and the Kyushu Economic Research Center haveconcluded a memorandum of understanding in a bid to promote increased
cooperation in the macroeconomic analysis and the Kyushu economy.
Through this initiative, both signatories to the memorandum will share
information on the current state of the Fukuoka-Kyushu economy as well
as issues to be faced thereby revitalizing
economic activity throughout the region. In
addition, study groups on seasonal topics
that are specific to Fukuoka and Kyushu areheld on a regular basis.

・Steps to share issues through regularmeetings
・Management firm evaluation andfeedback
・ESG training

Employees

・Hosting the General Meeting ofUnitholders
・Providing results briefings for investors（institutional and individual investors）
・Holding 1-on-1 meetings（Japan andoverseas）
・Timely disclosing of financial and nonfinancial information

・Various employee education systems
・Employee satisfaction surveys
・Career interviews with employees

In 2021, these gatherings were
held using online tools to preventthe spread of COVID-19.

Other Activities

AMC• IR Workshop

The Kyushu IR Group, which entered its 11th year in 2021, was established in cooperation with the Japan Investor Relations Association.
The Group assists in learning about the latest IR trends with IR employees of companies located in Fukuoka and Kyushu, and fosters theforming of networks between participating companies. Impacted by the COVID-19 pandemic, a study group was held also using online tools
this year.
■ Details of the Study Group
Schedule

First Study Workshop(August 2021)

Second Study Workshop(November 2021)

Theme and Lecturer“IR Trends in 2021- Against the Backdrop of the Revised Corporate Governance Code”
Ms. Yoshiko Sato, Executive Managing Director, Japan Investor Relations Association“ESG Initiatives and Integrated Report Enhancements”
Nahoko Kutsukake, Cheif Manager, Investor Relation Department, MARUI GROUP CO., LTD.

Fukuoka REIT Corporation 2021

Dialogue with Investors and Unitholders

Dialogue with Employees

FRC works to disclose information in a timely manner to reflect
the importance of dialogue with its unitholders and investors. To
prevent the spread of COVID-19, FRC undertakes various investor
relation activities mainly in an online format for domestic/overseas
institutional investors and individual investors.

FRC and Fukuoka Realty Co., Ltd., recognize that humanresources are our greatest asset. As part of our efforts to create
comfortable and healthy workplaces, we are endeavoring to
improve the efficiency of our operations by strengthening theoffice environment and enhancing our systems. In addition, we
provide IR information internally and disseminate details of results
announcements online as part of our efforts to facilitate internal
communication.

・General Meeting of Unitholders (once every two years)
・Results briefings for analysts, institutional investors
・IR for overseas investors
・IR for individual investors
・Enhanced IR tools, information disclosure, etc.

・Employee satisfaction survey
・President interviews, career interviews
・Internal IR・Counseling with public health nurses, etc.

“ESG Investor Perspectives”
Hiroyuki Horii, Managing Executive Officer, Sumitomo Mitsui Trust Asset Management Co., Ltd.

• Participation in the Hakata Town Planning Promotion Councilʼs Activities
We are an active participant in the Hakata Town Planning Promotion
Councilʼs activities and efforts to promote urban development mainly aroundthe Hakata Station area, the gateway to Kyushu and Asia. Through various
initiatives that comply with Hakata Cityʼs development guidelines, our goal is
to assist with efforts that lead to the development and growth of Hakata City
as well as Fukuoka as a whole.

38

Property
Clients
Tenants

Foundation Underpinning Management

Foundation Underpinning Management

We have held gatherings to exchange information and opinions on real estate,finance, and the economy annually since 2008 with the cooperation of the Japan
Real Estate Institute (not held in 2020 in light of concerns over COVID-19).
Local real estate companies, financial institutions, and government
agencies participate in the conference,
which contributes to networking and further
stimulation of the local economy.
It has been designated as a continuing
education course for ARES masters.

At Canal City Hakata, the Farmers Marche
was held, which was realized from thecollaboration between “agriculture”
and “welfare,” providing a place to sell
agricultural products produced at a facility
for the disabled.

・Customer satisfaction surveys at retailfacilities
・Tenant satisfaction surveys
・Collaboration in environmental and social
initiatives• Participation in the Kyushu SDGs Management Promotion ForumWe are also participating in the Kyushu SDGs Management Promotion
Forum, an industry-academic-government-funded platform establishedby the Kyushu Bureau of Economy, Trade and Industry. As a participant
in this forum, energies are directed toward providing information between
companies and supporting SDG management endeavors aimed at solving
regional and social issues.(This event was not held in fiscal 2020.)

Fukuoka REIT Corporation 2021

39

□ Introduction□ Value-Creation Activities■ Foundation Underpinning Management□ Data Section

Organizational Issues
IC

Related Materiality

Investment Corporation（FRC） AMC Asset Management Company

・Compliance/risk management

Corporate GovernanceIC

Policies for Customer-Oriented Business Operations

AMC

Risk Management and Compliance Initiatives

Policies for Customer-Oriented Business Operations■ Decision-Making Process■ Managing Conflicts of Interest

Proposals from the responsible department

Third-party assessment by external
experts (Real estate appraisals)

General Manager of Compliance Dept.

• Japan Real Estate Institute• The Tanizawa Sogo Appraisal Co., Ltd.
• Daiwa Real Estate Appraisal Co., Ltd.

When a transaction such as the purchase and sale of a property
between FRC and a stakeholder, including a sponsor, takes place,the asset management company must address any possibilityof prioritizing the interests of interested parties over investors.
Fukuoka Realty Co., Ltd., has accordingly established a Basic
Policy on Compliance, as well as compliance regulations and otherinternal rules to prevent any conflict of interest. Based on theserules, we obtain a preliminary assessment from the ComplianceDepartment General Manager and ensure deliberations by theCompliance Assessment Committee, consisting of the ComplianceDepartment General Manager and three outside experts in order toengage in the management of any conflict of interest pertaining toour dealings with stakeholders in an appropriate manner.

Note: The prior consent of the Investment Corporationʼs Board of Directors is obtained in cases falling under
the provisions of Article 201-2 (1) of the Act on Investment Trusts and Investment Corporations.

■ FRC Directors■ Changes in the Asset Management Fee Structure［Market reports］• Analysis on trade areas andcompetitive environment• Adequate rent levels, etc.

Deliberations by the Investment
Management Committee
Deliberations and resolution by theCompliance Assessment Committee
Resolution/decision-making reportby the Board of Directors
FRC Board of Executive Officers［Engineering reports］• Compliance with statutory andregulatory requirements andearthquake resistance• Check of soil contamination, toxic
substances, and the status of use• Replacement price, expenses for longterm maintenance and repairs, etc.

Management fees

Calculation Method［Three months following the day after the last fiscal period-end］

Policy 2 Pursuit of Customersʼ Best Interests
As a financial business operator, we maintain a high level of professionalism and professional ethics, conduct operations with integrity and fairness for unitholders, secure stable dividends, increase dividends over the medium to long term and conduct investment that can contribute to society, among other endeavors,
to achieve unitholdersʼ best interests. We also strive to ensure that such business conduct will be deeply rooted in our corporate culture. As an asset management company knowledgeable about the circumstances of the region, we will make efforts that leverage our expertise and ability to gather and provide information to achieve the best interests of our unitholders.
Policy 3 Appropriate Management of Transactions with Conflicts of Interest（1）
We place the highest priority on the fiduciary duty entrusted to us by our unitholders. For transactions with our interested parties, including Fukuoka Jisho
Co., Ltd., one of our sponsors having 55% equity, which might cause conflicts of interest, we work to accurately grasp the possibility of conflicts of interest withany of our unitholders pursuant to laws and regulations, our internal rules, etc. If any such possibility is found, our Compliance Department investigates the matter in advance before the relevant transaction takes place, and deliberation is made in advance at the Investment Committee and the Compliance Assessment
Committee, which invites outside experts if necessary. Through these steps, we appropriately manage transactions that might have conflicts of interest. Specifically, when acquiring real estate from any interested party, for example, we follow the processes established in our in-house rules for determining whether a certain deal is a transaction with a conflict of interest as stipulated in our Asset Management Guidelines. By doing so, we prevent any disadvantage to unitholders
from arising. When acquiring real estate from any interested party, we conduct an investigation and give full consideration, for instance, conducting the transaction at a price equal to or less than the appraisal value provided by a third party, before deciding on the investment.
（2）
As we do not sell financial products and do not have a corporate sales or management department within our company or the Group, there is no possibilityof a conflict of interest when soliciting sales or recommending financial instruments or when choosing an investment destination for assets.

Total assets at last fiscal period-end x 0.25% (previously 0.3%) x No. of days/365 days

Management fee 1 ［From the day after the aforementioned fiscal period-end to the next
(total asset basis)
fiscal period-end］(Total assets at the last fiscal period-end + acquired asset value – disposal
asset value) x 0.25% (previously 0.3%) x No. of days/365 days
Supervisory Director

Executive Director

Supervisory Director

Yasuo Kawasho

Etsuo Matsuyuki

Takashi Tanabe■ Fukuoka Realty Co., Ltd. Directors

Management fee 2
Operating revenue for the last fiscal period x 2.0%
(operating revenue basis)
Management fee 3 (Distributable profit amount before payment of management fee 3 for the last
(distributable profit basis) fiscal period) x 3.6% (previously 2.0%)
Management fee 4 Acquisition fee x 0.5%(acquisition remuneration) (0.25% in the event of acquisition from interested parties)
Management fee 5(sale remuneration)

Sale fee x 0.5%
(0.25% in the event of sale from interested parties)■ Compliance Training (including e-learning)

Vice President Board of
Directors(Non-Executive)

Vice President Board of
Directors(Non-Executive)

Yukitaka Ohara

Hiroshi Shimuta

Daisuke Yokoyama
General Manager of theCompliance Department
Fukuoka Realty Co., Ltd.

40

Policy 1 Establishing and Announcing Policies That Include Those Regarding Customer-Oriented Business Conduct
Fukuoka Realty Co., Ltd., is a financial business operator managing a listed REIT, which, through investing in real estate properties, supports and facilitates theasset formation of a wide range of investors. As such, we have established clear policies to implement customer-oriented business conduct throughout theinvestment chain and have publicized those on our website and via other methods. Moreover, we continuously check on the status of our endeavors to realize
better customer-oriented business operations.

Fukuoka REIT Corporation 2021

President and CEO

Zenji Koike

Executive Vice President Vice President Board of
Corporate Auditor
Directors(Non-Executive)
Akira Eguchi(Non-Executive)
Masanori Tasaka

October 2018September 2019

October 2019September 2020

October 2020September 2021

7 times

6 times

6 times

Noboru Hashimoto

The company prevents transactions with conflicts of interest based on strict rules for transactions
with interested parties in order to fulfill responsibilities entrusted to it on behalf of investors.
We naturally do not engage in transactions that unfairly benefit the company and interested parties
and believe that it is important to not avoid the appearance of impropriety. Accordingly, we take steps
to clearly record the decision-making process behind transactions to enable verification after the fact.
In addition, we verify the objective validity of transactions by receiving evaluations fromindependent third parties, including internal audits conducted by outside specialists.
Beyond this, we work to raise awareness of these issues by regularly conducting compliance training
aimed at ensuring that each employee is cognizant about managing assets entrusted to us by investors.

Policy 4 Clarification of Fees and Commissions（1）
Entrusted by the Investment Corporation to carry out all operations related to asset management, Fukuoka Realty Co., Ltd., in return receives asset management fees from the Investment Corporation. We have adopted an asset management fee system that enables asset management from a long-term perspective
while linking part of the asset management fee amount to the profitable returns to unitholders.
（2）
We provide information through statutory and timely disclosure and voluntary disclosure so that unitholders can understand our asset management fees andother commissions or expenses to be borne by the Investment Corporation, including what types of services are paid for.
Policy 5 Provision of Important Information in an Easy-to-Understand Manner（1）
As an asset management company of a listed REIT, we provide important information that relates to investment decision-making for unitholders in aneasy-to-understand manner through statutory and timely disclosure as well as voluntary disclosure so that such information can be readily understood.
We also post such information on our website in a timely manner to provide information desirable for unitholders from a unitholder-oriented perspective.
（2）
Not soliciting the sale or recommendation, etc., of financial instruments or financial services, we do not provide important information related to these to ourunitholders.

Foundation Underpinning Management

Foundation Underpinning Management

FRC revised management fees 1 and 3 with the aim ofincreasing linkage between asset management fees for the asset
management company and investor profits. The changes listed
below were approved at the Ninth General Meeting of Unitholders
held on May 26, 2020, and became effective on September 1,
2020 (33rd fiscal period start).

As an asset management company entrusted with asset management operations by Fukuoka REIT Corporation（FRC）, Fukuoka Realty
Co., Ltd., has adopted all seven principles set forth in the Principles for Customer-Oriented Business Conduct established by the Financial
Services Agency（announced on March 30, 2017; revised on January 15, 2021）. We have also formulated and announced our own Policies
for Customer-Oriented Business Operations as policies to realize better business operations for our customers.

Policy 6 Provision of Services Suitable for Unitholders（1）
We strive to understand the needs and requirements of unitholders and conduct asset management considering such needs and requirements. Specifically, we
aim to secure stable dividends, increase dividends over the medium to long term, and conduct investment that can contribute to society, among other endeavors.
（2）
We do not solicit the sale or recommendation, etc., of financial instruments or financial services.
Policy 7 Preparing a Framework or Other Mechanism for Appropriately Motivating Employees
Having established our Basic Policy on Compliance to ensure our officers and employees always act in the best interest of unitholders, we conduct assessmentsthat include items by which compliance is assessed in personnel evaluations. In addition, we regularly and continuously carry out education and training on
compliance for all our employees so that they can secure fairness in business conduct and thoroughly implement appropriate management for transactions thatmight involve conflicts of interest, as well as enhance their awareness on compliance.

Established September 20, 2017
Revised October 16, 2018
Revised June 30, 2021
Revised November 29, 2021

Fukuoka REIT Corporation 2021

41

□ Introduction

Financial/Non-Financial Highlights（11-Year/22-Period Summary）□ Value-Creation Activities□ Foundation Underpinning Management■ Data Section

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

Feb. 2011

Aug. 2011

Feb. 2012

Aug. 2012

Feb. 2013

Aug. 2013

Feb. 2014

Aug. 2014

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Operating revenue

5,662

7,045

6,931

7,094

7,200

7,565

7,574

7,779

7,789

8,423

8,343

8,234

9,730

8,122

8,194

9,178

9,242

9,231

9,162

8,518

8,904

8,867

Operating income

2,317

2,729

2,637

2,595

2,622

2,848

2,801

2,824

2,860

3,167

3,141

3,069

4,585

2,920

2,965

3,238

3,306

3,318

3,273

2,966

3,061

3,204

Financial information
Earnings (Millions of yen)

Ordinary income

1,763

2,083

2,046

2,005

2,005

2,272

2,239

2,263

2,370

2,663

2,670

2,616

4,199

2,562

2,624

2,861

2,935

2,939

2,900

2,587

2,677

2,817

Profit

1,762

2,082

2,045

1,992

2,004

2,271

2,238

2,262

2,369

2,661

2,669

938

4,198

2,556

2,623

2,860

2,934

2,939

2,899

2,586

2,675

2,816

NOI

3,537

4,406

4,351

4,372

4,444

4,751

4,732

4,800

4,829

5,229

5,237

5,164

5,010

4,998

5,079

5,493

5,591

5,633

5,596

5,307

5,347

5,336

132,497

155,657

155,792

159,601

160,574

167,857

167,492

167,824

167,369

181,597

181,445

179,513

175,063

178,063

177,283

193,112

195,433

195,106

194,795

199,004

199,559

199,804

Financial conditions (Millions of yen)
Total assets
Net assets

62,026

71,25971,222

71,17071,182

81,712

81,67981,70381,81193,804

93,812

92,081

93,681

93,69993,766

101,799

101,874

101,878

101,837

101,525

101,614

101,755

Interest-bearing debt

59,07569,50069,42573,35074,675

71,10071,025

71,15070,77572,40072,32571,95066,67569,90068,90075,50077,50077,50072,50082,40082,40082,400Interest-bearing debt ratio（%）

44.6

44.6

44.6

46.0

46.5

42.4

42.4

42.4

42.3

39.9

39.9

40.1

38.1

39.3

38.9

39.1

39.7

39.7

39.8

41.4

41.3

41.2

Depreciation and Amortization Expenses

958

1,164

1,177

1,242

1,268

1,343

1,354

1,387

1,390

1,458

1,471

1,470

1,455

1,474

1,500

1,602

1,622

1,651

1,660

1,686

1,623

1,552

Capital expenditures

685

254

1,031

1,285

431

612

848

740

328

445

630

665

1,789

741

600

657

947

476

465

790

687

445

2,545

3,294

3,677

3,617

3,120

3,609

3,699

3,890

3,735

4,167

4,174

4,336

3,685

3,590

4,292

4,149

4,832

4,863

3,985

3,450

5,374

4,724

Cash flow (Millions of yen)

Cash flow provided by (used in) investing activities(162)(20,086)(566)(6,016)(3,067)(7,897)(916)(2,312)(1,452)(14,488)

(606)

(772)

4,220

(6,029)(478)(15,326)(3,604)(1,043)(220)(7,136)(842)(1,425)

Cash flow provided by (used in) financing activities(1,871)

17,548(2,153)

1,881

(666)

4,651

(2,359)(2,115)(2,635)

10,934(2,747)(3,043)(7,872)667(3,555)

11,734(859)(2,933)(2,938)2,000(2,586)(2,674)

Cash and cash equivalents at year-end

6,440

7,197

8,154

7,637

7,024

7,387

7,810

7,273

6,920

7,533

8,353

8,873

8,905

7,134

7,392

7,950

8,319

9,205

10,032

8,348

10,293

10,917

3,293

3,384

3,324

3,238

3,257

3,291

3,243

3,278

3,435

3,563

3,574

3,479

3,398

3,422

3,512

3,593

3,687

3,693

3,642

3,250

3,361

3,539

Data Section

Data Section

Cash flow provided by (used in) operating activities

Per-unit indicators (Yen)Dividend per unit
EPS per unit

3,293

3,384

3,324

3,238

3,257

3,291

3,243

3,278

3,434

3,563

3,573

1,256

5,621

3,422

3,512

3,593

3,687

3,692

3,642

3,249

3,361

3,538

BPS per unit

115,884

115,822

115,762

115,676

115,696

118,423

118,376

118,410

118,567

125,574

125,585

123,267

125,410

125,434

125,524

127,888

127,982

127,987

127,936

127,544

127,656

127,833

NAV per unit

125,647

123,001

121,447

122,299

123,041

127,080

128,375

131,215

136,051

144,472

148,558

152,259

150,328

152,639

156,204

161,315

164,250

167,118

170,680

171,592

171,943

171,502

FFO per unit

5,083

5,276

5,237

5,258

5,319

5,238

5,207

5,288

5,450

5,515

5,543

5,448

5,351

5,395

5,520

5,606

5,725

5,767

5,728

5,368

5,401

5,358

Investment unit information
Investment unit price (Yen)

120,800

108,400

107,200

109,600

153,600

145,000

171,400

199,000

227,000

188,700

194,200

186,100

177,100

164,300

173,100

170,400

169,300

178,300

167,900

136,500

168,500

175,500

Total number of investment units issued

535,250

615,250

615,250

615,250

615,250

690,000

690,000

690,000

690,000

747,000

747,000

747,000

747,000

747,000

747,000

796,000

796,000

796,000

796,000

796,000

796,000

796,000

Non-financial information
Number of employees（Note 1）

36

37

38

35

36

40

40

34

35

38

41

39

40

38

38

39

41

41

42

41

41

40

36.1

37.8

39.5

42.9

36.1

37.5

35.0

38.2

40.0

44.7

43.9

48.7

45.0

44.7

44.7

46.2

46.3

46.3

47.6

51.2

51.2

50.0

Average number of years of employment（Years/Months）（Note 1）

4.6

4.10

5.2

5.8

5.7

6.1

6.2

7.1

7.5

6.0

6.2

6.5

6.9

6.11

7.7

7.10

7.11

8.6

8.10

8.10

9.1

9.6

The number of IR meetings（Note 2）

ー

ー

ー

ー

ー

ー

ー

ー

122

154

147

106

126

116

169

129

148

149

133

54

114

90

（Note 1）
Percentage of female employees（%）＊ Gains and losses on the sale of the Aeon Hara Shopping Center and Aqualia Kego, which were transferred in the 25th fiscal period, were handled in the following manner due to differing tax and accounting standards.
1）An amount equivalent to impairment losses on the Aeon Hara Shopping Center booked in the profit and loss statement in the 24th fiscal period was booked as an allowance for a temporary difference adjustment on thestatement concerning the allotment of funds for the 25th fiscal period2）Gains on the sale of Aqualia Kego were recorded on the profit and loss statement for the 25th fiscal period.
3）The return of allowances for a temporary difference adjustment was booked on the statement concerning the allotment of funds for the 25th fiscal period.
＊ Dividend per unit is calculated as follows.
24th fiscal period: [net profit] + [reserve for temporary difference adjustment] – [earnings carried forward to the next period]
25th fiscal period: [net profit] – [ return of reserve for temporary difference adjustment] – [earnings carried forward to the next period]＊ The Investment Corporation undertook a five-for-one split effective March 1, 2014. Dividend and NAV per unit up to the 19th fiscal period have been retroactively adjusted to reflect this split.
＊ The number of IR meetings in Japan and abroad shows the total number of IR meetings, based on the dates on which they were held, with institutional investors and analysts through interviews and telephone conferences
generally regarding the results for the previous period.
Notes: 1. Data are for the Asset Management Company.
Notes: 2 . The number of IR meetings convened in Japan and abroad from the 13th to 20th fiscal periods is not recorded, as records do not exist for these periods.

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Fukuoka REIT Corporation 2021

Fukuoka REIT Corporation 2021

43

Glossary

Asset type
Refers to the type of asset application, such as office buildings, retail facilities, and residences.
BPS
An abbreviation of Book-Value Per Share. This shows net assets per unit and is viewed as an indicator for stability.
[Calculation method] BPS: net assets/total number of units issued
Cap rate
This is also referred to as the return yield and represents the return on a real estate investment used when determining the appraisal price or theoretical price of areal estate property. In general, NOI or NCF (Net Cash Flow) divided by the cap rate is considered the theoretical price of a real estate property. The cap rate varies
depending on the characteristics of a property, such as whether it is new or older, grade and size, as well as factors such as proximity to transportation and location.
Capital expenditureThis refers not only to the maintenance and repair of real estate or equipment, but also the costs of maintaining and improving the value of these assets, which arerecorded by the investment corporation as assets and are subject to depreciation.
Commitment line
This refers to the upper loan limit a borrower can receive at any time without going through a defined review, within a range agreed upon in advance with the bank.
Commitment in this case indicates a contracted promise. The borrower can secure stable working capital regardless of business conditions.
Conflict of interest
In general, this refers to when an act is in oneʼs own interest, while at the same time disadvantageous to the interests of another. For a J-REIT, this often refers to aconflict between a unitholder and the interests of the investment corporation or asset management company.
Credit rating
A grade that reflects the safety and creditworthiness of a company and its ability to pay the principal and interest of bonds issued by the company based on an
analysis of the companyʼs performance and financial condition.
FRC has obtained the following credit ratings:
Japan Credit Rating Agency, Ltd.
（JCR）
: Long-term issuer rating
Rating and Investment Information Inc.
（R&I）
: Issuer rating
Earthquake PML
Refers to the probable maximum loss as a percentage of the expected maximum damage (Probable Maximum Loss) caused by an earthquake. The higher the PML
value, the higher the buildingʼs seismic risk.
[Calculation method] PML = Expected maximum damage / Replacement cost

EPS
An abbreviation of Earnings Per Share. This shows net profit per unit and is viewed as an indicator of a companyʼs ability to generate earnings.
[Calculation method] EPS: net profit/ total number of units issued
ESG
ESG is an abbreviation for Environment, Social, and Governance. The idea that a company needs to maintain focus on these three concepts to ensure long-term
growth is gaining ground throughout the world. With an emphasis on sustainability, ESG management is focused on pursuing strategies with the environment andsociety in mind.
External growth/Internal growth
For J-REITs, per-unit profit growth achieved through new real estate acquisitions is referred to as external growth. This growth is achieved by the investment
corporation acquiring new real estate that is expected to produce high yields at relatively low funding costs. The acquisition of new real estate can also expand thescale of the business and diversify risk, with reduced transaction costs thanks to scale merits also contributing to growth. In contrast, internal growth is profit growthachieved through the efficient management of existing real estate.
FFO/FFO ratio
An abbreviation of Funds from Operations. This shows how much cash flow is generated from rental income. The larger the FFO per unit, the greater the companyʼs
profitability.
[Calculation method] FFO = Net profit + depreciation and amortization expenses + impairment loss - gains/losses from the sale of real estate
FFO per unit = FFO / total number of units issued
The FFO ratio is similar to PER. A lower value indicates an attractive share price versus fund profitability.
[Calculation method] FFO ratio=Investment unit price/FFO per unit

□ Value-Creation Activities□ Foundation Underpinning Management■ Data Section

LTV
An abbreviation for Loan to Value, and an indicator of a companyʼs borrowing ratio as well as a measure of stability in borrowing. The lower the value, the greater the
degree of safety against redemption of debt.
[Calculation method] LTV (%): Interest-bearing debt /total assets multiplied by 100
Materiality
Materiality involves the identification of related important issues and an evaluation of the impact of corporate activity on social issues. The process involves prioritizing
and providing an easy-to-understand picture of the importance of each of the issues being confronted.
NOI
An abbreviation for Net Operating Income. This reflects net income stemming from the real estate leasing and REIT business, deducting expenses such asadministrative costs and property taxes from rents in a given fiscal period. Costs not related to cash expenditures, including depreciation, interest paid on borrowings,
or taxes are not deducted. This is used to assess real estate and REIT asset value and is similar to EBITDA, which focuses on operating cash flow in assessing
corporate value. When determining the theoretical real estate property price, it is a common practice to divide NOI by the capitalization yield (cap rate).
NOI yield
This refers to annual NOI divided by property price and is an indicator for the investment yield of the real estate leasing business. If can also be used as a REIT
investment metric. A higher NOI yield indicates greater profitability, with greater dividends to the investor.
[Calculation method] NOI yield: NOI/acquisition price multiplied by 100
NAV/NAV ratio
NAV is an abbreviation for Net Asset Value at an investment trust. Net assets are defined as total investment trust balance sheet assets minus liabilities, with the baseprice based on the number of units. For REITs, the term net assets refers to net assets plus unrealized gains or losses reflecting the difference between book value ofthe property owned and the appraised value.
[Calculation method] NAV: Net assets + unrealized gains or losses – dividends
Market net assets value per unit: NAV/total number of units issued
NAV ratio is somewhat similar to PBR (stock price/net asset ratio) taking into account the market value of real estate. It can be used to assess whether an investment
unit is under or overvalued.
[Calculation method] NAV ratio: investment unit price/NAV per unit
Pipeline support agreement
Pipeline support agreements refer to contracts that provide the opportunity to acquire a property form a sponsor in advance of and in priority to a third party.
Public offering (PO)This is one way to secure financing. A public offering targets general investors as shareholders, offering new shares for an established price based on current
market value.
Real Estate Securitization Master Certification System
An educational program conducted by the Association for Real Estate Securitization. Certification that the recipient has broad practical expertise across the realestate and finance fields.
Renewable energy
Unlike limited fossil-based energy resources such as natural gas, crude oil, and coal, renewable energy sources are always present in nature, and include solar, wind,and geothermal resources.
Replacement costThis refers to the construction costs required if a building is rebuilt to a structure equivalent to the current building. Replacement cost is often used in engineering
reports.

Data Section

Data Section

Engineering reports
Reports outlining the results of a physical survey of a property. These often include surveys on building conditions, soil contamination, long-term repair andrefurbishing costs, and earthquake risk.

□ Introduction

SponsorA J-REIT sponsor is a shareholder of the company (asset management company) managing the assets of the investment corporation. Sponsors (shareholders) of
Fukuoka Realty include leading companies in the Kyusyu economy, such as Fukuoka Jisho Co., Ltd., and Kyushu Electric Power Co., Inc.
Stakeholder engagement
Efforts undertaken by a company to better understand matters that are of interest stakeholders in the conduct of activities and decision-making.
Sustainability
Sustainability is often used in reference to environmental issues, but has recently become a key word in reference to corporate social responsibilities.
TSR
An abbreviation for Total Shareholder Return. This can also be called total shareholder (investor) yield and reflects combined capital gains and dividends, reflecting theoverall investment yield for investors.
[Calculation method] TSR (%): (Dividend per unit + increase in investment unit price)/initial investment unit price multiplied by 100

Green bonds
These are bonds issued by companies and local governments to raise the funds necessary for green projects in Japan and overseas.
Green loan
A loan in which the use of funds is limited to environmentally friendly businesses.
Interest-bearing debt
This refers to liabilities with interest that must be repaid. Specifically, this refers to long- and short-term loans from banks and funds procured on the market, including
through the issuance of corporate bonds.
Investment corporation bonds
These are bonds issued by investment corporations in accordance with the Act on Investment Trusts and Investment Corporations and are equivalent to corporate
bonds. Investment corporation bonds are issued to secure financing, with funds used to acquire real estate, undertake repairs on existing buildings, repay borrowings,
and fund reimbursements.
IR
IR refers to Investor Relations, which is essentially public relations activities aimed at investors. These include the provision of information necessary to making soundfinancial decisions, including financial conditions at the company, to shareholders and investors.

44

Fukuoka REIT Corporation 2021

Note: Regarding amount, percentage, and ratio rounding: Unless otherwise noted, in these materials, monetary amounts are rounded down to the nearest whole unit, and percentages and ratios are rounded off to one
decimal places.

These materials might contain future performance, plans, management targets, and strategies. These forward-looking descriptions are based on present assumptions on future
events and trends in the business environment, but such assumptions might not necessarily be accurate. Actual results could differ materially due to various factors. Neither Fukuoka
REIT Corporation nor Fukuoka Realty Co., Ltd., shall be liable for the accuracy, rationality, and completeness of information contained in these materials, whether they were preparedby Fukuoka REIT Corporation or Fukuoka Realty Co., Ltd., or provided by a third party. These materials have not been prepared to entice investment. When applying to purchaseinvestment units issued by Fukuoka REIT Corporation, do so based on your own judgment and responsibility.

Fukuoka REIT Corporation 2021

45