29th Fiscal Period
Report on Performance andManagement Status (Semiannual Report)

Security Code 8968

September 1, 2018 to February 28, 2019

Fukuoka REIT
Corporation

8968

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation
To Our Unitholders

Status of the Investment Corporation

We would like to express our sincere appreciation to all unitholders for your continued support of Fukuoka REIT Corporation (FRC).
We are pleased to report on the performance results and management status of FRC for the twenty-ninth fiscal period (September
1, 2018 to February 28, 2019).
FRC was listed in June 2005 and started as Japan’s first REIT
specializing in regional properties. Since then, we have exhibited consistent growth and achieved stable performance through the supportof our unitholders and sponsor companies.
The business conditions of the Fukuoka and Kyushu area are
expanding moderately.
Consumer spending in the Fukuoka and Kyushu area is increasing moderately, given improvements in the employment and income
environments. Looking ahead, a mild expansion is expected to continue, although attention should be paid to the impact of the uncertainty about overseas economies and the impact of a labor shortageon the supply side.
According to the government’s 2019 Land Market Value Publication announced in March 2019, the commercial land price in Fukuoka
City, the central area of FRC’s investment targets, rose 12.3% yearon-year. The increase is due to strong demand for real estate properties used for stores, offices and hotels, backed by an increase in inbound tourists, robust corporate activities thanks to the city’senhanced support for establishing startups, and other factors. The
figure for residential land also rose 5.3% year-on-year in the light of anincreasing population. As such, the city’s land prices have continued
rising for the seventh consecutive year both for commercial land andresidential land, marking higher rates of increase. Furthermore, thehighest rate of increase in the commercial land price in Japan wasrecorded in Naha City, Okinawa, standing at 17.5%.
FRC acquired a hotel in Okinawa, its first investment in theprefecture, in the 29th fiscal period.
As of December 7, 2018, FRC acquired Tissage Hotel Naha (acquisition price: 2,835 million yen) located in Naha City, Okinawa. Completed in February 2018, it is a newly-built hotel in Naha City, the centerof Okinawa Prefecture that has become a popular destination for
tourists both from Japan and abroad in recent years and is anticipated to achieve high growth. The property offers high convenience as it
is approximately a 10-minute drive from Naha Airport and approxi-

mately a 9-minute walk from Asahibashi Station on the Yui Rail, andfeatures a room composition that can attract leisure demand. The
acquisition has expanded the asset size of FRC to 195.9 billion yen.
Canal City Hakata aims to become an international shopping
center offering the greatest joy in Asia.
Canal City Hakata, the flagship of FRC, launched “Space Invaders Groovy,” the ninth offering of interactive games at Canal Aqua
Panorama. The worldview expressed with a combination of fountains, music, light and images creates experiential value unique toCanal City Hakata, and provides entertainment not found anywhere
else for both domestic and inbound visitors. The tenth offering was
decided to be a program featuring “EVANGELION” (Japanese manga/anime series) as the theme, and is scheduled to open to the public in June 2019. In addition, the Canal City Theater, which attracted
many audiences with the “Little Mermaid” musical last year, presents
the “Lion King” musical again after an interval of approximately ten
years. The musical, which has been loved by a wide-span of generations, celebrated the 20th anniversary in December 2018 since its
first performance in Japan. What is more, with the Rugby World Cup
games to be held in Japan this year, Fukuoka and other cities in Kyushu have been selected as host cities of several games. The invitation of a sports event on a global scale is expected to bring about
great economic effects on Fukuoka and Kyushu.
Going forward, FRC will continue to exert its strengths as a REIT
specializing in regional properties and quickly respond to market
changes, while receiving support and cooperation from powerfulsponsors leading the Kyushu business world. As we do so, we will
strive to achieve growth of our portfolio in the medium to long termand secure stable earnings through steady asset management. We
at FRC will also pursue our mission of maximizing unitholder interests
over the medium to long term based on our management philosophyof “Act Local, Think Global.”
We greatly appreciate your continued support and cooperation.

FRC is Japan's first REIT specializing in regional properties. FRC manages a portfolio centering on retail facilities featuring excellent design and entertainment qualities and superior office buildings throughout all of Kyushu. With a central focus on Fukuoka,
and in Yamaguchi Prefecture and Okinawa Prefecture, we are utilizing our strength of knowing the local characteristics of realestate, which is a very regional-specific business.

Overview of the Investment Corporation
Name:
Fukuoka REIT Corporation
Representative: Etsuo Matsuyuki, CEO & Representative Director
Asset manager: Fukuoka Realty Co., Ltd. (Fukuoka Local Finance Branch Bureau (financial instruments) No. 10)
Listed date:

Etsuo Matsuyuki

June 21, 2005 (Tokyo Stock Exchange, and Fukuoka Stock Exchange)

Sponsors

5%

5%

5%

5%

THE BANK OFFUKUOKA, LTD.

THE NISHI-NIPPONCITY BANK, LTD.

Development Bank of Japan Inc.

SAIBU GAS CO., LTD.

50%

Director

10%

Outsidedirector

Fukuoka Realty Co., Ltd.

FUKUOKA JISHO
CO., LTD. (Note 1)

Kyushu Electric Power Co., Inc.

(Asset Manager)

5%

5%

5%

5%

Kyudenko Corporation

Nishi-Nippon Railroad Co., Ltd.

Kyushu Railway Company

ROYAL HOLDINGS Co., Ltd.

(Note 1) Concluded MOU with Fukuoka REIT Corporation and Fukuoka Realty Co., Ltd. concerning pipeline support.

Overview of the Asset Manager
Name:
Fukuoka Realty Co., Ltd.
Representative: Etsuo Matsuyuki CEO & Representative Director
Address:
2-25, 1-Chome, Sumiyoshi, Hakata Ward, Fukuoka City

Portfolio

Telephone: +81-92-272-3900
Established: December 26, 2003
Capital:200,000,000 yen

Investment type (based on acquisition price)
Retail

CEO & Representative Director,
Fukuoka REIT Corporation

CONTENTSI.

ProfileOffice buildings

59.2%

26.9%

Others13.9%

Investment area (based on acquisition price)

Overview of Fukuoka REIT Corporation
To Our Unitholders ........................................................................................................ 1
Profile .............................................................................................................................................. 2
Trend of Growth in Asset Size of FRC / Financial Summary ......................................................... 3
Portfolio Overview .......................................................................................................................... 5
Sustainability .................................................................................................................................. 7

II. Semiannual Report ............................................................................................................... 8III. Independent Auditor's Report ...................................................................................... 25
IV. Balance Sheet ....................................................................................................................... 26
V. Statement of Income ......................................................................................................... 28
VI. Statement of Changes in Net Assets ........................................................................ 29
VII. Cash Flow Statement ........................................................................................................ 30
VIII. Notes to Financial Statements ..................................................................................... 31

FUKUOKA REIT CORPORATION

1

Other
Kyushu areas

Fukuoka metropolitan area

77.2%

22.8%

Total leasable floor space

Occupancy rate at end of period

580,665.27 m2

99.7%*Figures are based on properties owned as of February 28, 2019.
FUKUOKA REIT CORPORATION

2

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

Trend of Growth in Asset Size of FRC
FRC More than Doubled Asset Size and Diversified Investment Types
Retail (total acquisition price, left axis)(mm yen)

Office buildings (total acquisition price, left axis)

Since Listing

Others (total acquisition price, left axis)

Number of investment properties (right axis)

Occupancy Rate (right axis)

200,000
99.8

99.0

99.4

99.4

99.7

98.8

99.4

99.2

99.1

98.8

99.0

99.6

98.6

98.1

99.3

98.8

99.3

98.1

97.0

99.6

99.5

22,081
3,171

150,000

2,060

100,000

37,20025,80030,20050,0005

55,0732,060

37,20037,2008
55,07337,200

14
11

7

3,171

62,773

3,171

3,171

37,20037,200

15

3,171

15

3,171

3,171

3,171

43,10043,10043,10043,100

16

16

16

16

11

67,44371,07374,62374,62374,62374,62374,623

43,1003,171

43,1007,251

43,10019
17

17

103,323

103,323

103,323

11,581

7,251

45,70012,831

11,581

48,50048,50023

2348,50024

99.6

22,081

99.5

99.4

22,081

19,281

13,931
48,50048,50048,5002727

2748,50099.8

99.6

99.7 (properties) (%)

24,331

27,16624,331

24,331

52,73048,50025

25

40 10099.6

48,50048,50026

26

28

52,730
29

20

30

90

20

103,323

103,323

103,323

103,323

103,323

109,163

109,163

109,163

105,223

105,223

105,223

116,083

116,083
10

74,62354,333

0

2nd
3rd
4th
5th
6th
7th
8th
9th
10th
11th
12th
13th
14th
15th
16th
(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)

22nd
17th
18th
19th
20th
21st
23rd
24th
25th
26th
27th
28th
29th
(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)0

Financial Summary
 inancial Highlights for 29th Fiscal Period and Business Forecasts forF
30th and 31st Fiscal Periods
Category

29th fiscal period

30th fiscal period

31st fiscal period(September 1, 2018 to February 28, 2019)(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

ActualForecast

Forecast

Operating revenues

mm yen

9,242

9,305

9,321

Leasing NOI (Note 1)

mm yen

5,591

5,642

5,673

Depreciation and amortization expenses

mm yen

1,622

1,654

1,666

Operating income

mm yen

3,306

3,311

3,328

Ordinary income

mm yen

2,935

2,930

2,946

Profitmm yen

2,934

2,929

2,945

Dividend per unityen (1)

3,687

–

–

Latest dividend forecast per unityen (2)

3,600

3,680

3,700

yen (1)-(2)

+87

–

–

units

796,000

796,000

796,000

Difference from forecast
Total number of investment units outstanding(at end of period)(Note 1) “Leasing NOI” is calculated using "Leasing business revenues − Expenses related to leasing business + Depreciation and amortization expenses."
FUKUOKA REIT CORPORATION

3

Dividend Performance
29th fiscal period end

February 28, 201929th fiscal period dividend

3,687 yen per unit

(semiannual periods ending every February and August)29th fiscal period days
Dividend yield

181 days
4.4% {(Dividend / Days × 365) / Unit price (as of February 28, 2019)}（yen）

4,000 3,802

3,687 3,726

3,468

3,672 3,699 3,674 3,609

3,475 3,479

3,356 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 3,680 3,700

3,000

2,000

1,000

0

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

*FRC implemented a 5-for-1 split of its investment units with March 1, 2014 as the effective date. Dividend per unit indicates the value after the 5-for-1 split.
Figures in parentheses indicate the value before the 5-for-1 split.
FUKUOKA REIT CORPORATION 4(Forecast) (Forecast)I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation
Purchase of earthquake
insurance

Portfolio Overview
1

Retail2

Canal City Hakata

3

Retail4

RetailRetail25 Others(hotel)26 Others(hotel)Others27 (logistics)

Others28 (logistics)

Park Place Oita

SunLive City Kokura

Hotel FORZA Oita

Tissage Hotel Naha

Tosu Logistics Center

LOGICITY Minato Kashii

One of the largest entertainment-type
retail facilities in Japan and comprising
United Cinemas and others

One of the largest entertainment-type
retail facilities in Japan and comprisingGrand Hyatt Fukuoka and others

A leading retail facility in the Oita area,
providing “park entertainment” for families

One of the largest malls in Kitakyushu andanchored by a SunLive supermarket
chosen by local consumers

A business hotel located walking distancefrom Oita Station and specialized for
lodging to meet business needs

A hotel in Naha City, Okinawa Prefecture
located a 10-minute car ride from Naha
Airport. Guestrooms are of sufficient sizeand quality to take in leisure demand.

A logistics facility located in the Green
Logistics Park Tosu, operating around theclock and with three temperature zones

A logistics facility among the largest in the
Fukuoka area, with a location featuring
traffic convenience and concentration ofsuch facilities

5

6

7

8

Others29 (logistics)

RetailCanal City Hakata• B

FRC has purchased earthquake insurance
for all the properties it owns.

RetailRetailRetailInvestment Policy
Investment area
Konoha Mall Hashimoto

Square Mall Kagoshima Usuki

Kumamoto Intercommunity SC

A community-based retail facility with SunLive
as its anchor tenant and directly connected to
Hashimoto Station via a pedestrian bridge

A retail facility in Kagoshima, designed byJohn Jerde who designed Canal City
Hakata and Roppongi Hills

Located along a major arterial road andcomprising Sports Depo, Golf 5 andStarbucks coffee

Located in a new residential area andcomprising BON REPAS supermarket
and Matsumoto Kiyoshi drug store

9

10 Retail11 Retail12 Office Building

RetailHanahata SC

LOGICITY Hisayama
Approximately 5 km from the Fukuoka
Interchange featuring traffic convenience,and has good general-purpose capabilities

Investment type

60 - 90%

Fukuoka metropolitan area

40 - 70%

Retail20 - 50%

Office buildings

10 - 30%

Other Kyushu areas(including Okinawa and Yamaguchi
prefectures)

0 - 30%

Others(Hotel, Residence, Logistics andother facilities)

0 - 10%

OthersPortfolio Map
Having a large floor area and tenanted byan electric appliance store widely
attracting customers from nearby cities

14 Office Building

Located east of Marinoa City Fukuoka
and has stable attractiveness throughsynergy with the Outlet building

An office building expected to exert
synergy with Canal City Hakata, withshowroom functions

15 Office Building

29

28

Fukuoka
Metropolitan Area

4

Island City

FukuokaSaga

16 Office Building

27
9Nagasaki

Oita

25
3

e
Lin

13 Office Building

Canal City Business Center Building

22

7

Sh
in
ka
ns
en

Located on a corner of a heavy-trafficintersection and comprising Sports Depoand Golf 5

Marinoa City Fukuoka (Marina Side Building)ssway
Kyushu Expre

K’s Denki Kagoshima

ii
sh
Ka
JR

Kurume Higashi Kushiwara SC

Miyazaki3

Kagoshima

Gofukumachi Business Center

Sanix Hakata Building

Taihaku Street Business Center

Higashi Hie Business Center

An office building facing major arterial
roads Meiji-dori Street and Taihaku-doriStreet, and directly connected to
Gofukumachi Station on the city subway

A highly-convenient, station-front officebuilding that is a two-minute walk from
Hakata Station

Good location along Taihaku-dori Street, a
two-minute walk from Gion subway stationand ten-minute walk from Hakata Station

Directly connected to Higashi Hie subway
station, a two-minute ride to Hakata Stationand three-minute ride to Fukuoka Airport

17 Office Building

18 Office Building

19 Office Building

Others20 (residence)

Tenjin Nishi-Dori Center Building

Tenjin North Front Building

Higashi Hie Business Center II

Amex Akasakamon Tower

An office building facing Tenjin Nishi-doriStreet where commercial facilities areconcentrated

A relatively new office building scarce in
the Tenjin area that features Kyushu’s
largest integration of urban functions

Directly connected to Higashi Hie subway
station, a two-minute ride to Hakata
Station and highly recognized for its
excellent business continuity plan (BCP)

A tower-type rental condominium near
downtown Fukuoka, with traffic convenience and environment that matches awide range of generations

Others22 (residence)

Others23 (residence)

Hakata Bay

KyushuArea

Okinawa

26

Fukuoka Expressway,
Route 1 (Loop Line)

SubwayKuko Line

JR Sasaguri

13

FUKUOKAYAHUOKU!DOME

20 23

Ohori Park

202

18

21

15

Hakata
1
12
14
2

17
Tenjin19

3

SubwayNanakumaLine

202

Others24 (residence)

A large, high-rise (20-story) rental
condominium, approximately a seven-minute walk from Tenjin subway station

A rental condominium in the Yakuin/Hirao
area that is popular among younger
generations and has plentiful bus networks

FUKUOKA REIT CORPORATION

5

0

1km

FukuokaE

ne
Li

A rental condominium comprised of units
mainly for singles and small families tomatch the local characteristics

202

ifu
za
Da

Granfore Yakuin Minami

ay
sw
es
pr
Ex

A high-quality rental condominium in a
popular residential area of Fukuoka,
featuring traffic and living convenience

D-Wing Tower

ine
aL
im
sh
go
Ka

5

JR

Ni
sh
Omitetut su
a Te
Lin nj
e in

263

385

Aqualia Chihaya

Fukuoka Airport

16

24

202

City House Keyaki Dori

Line

an
rb
U

Others21 (residence)

Fukuoka IC

Fuku
R o u o ka E x
te 4p
K a sr e s s w a y
u ya
Line,

3

6
10

11

Sa
ny
o

Kumamoto

xpr
ess
wa

y R oute

op Line)
5 (Lo8FUKUOKA REIT CORPORATION

6

Fukuoka
Metropolitan
Area

I. Overview of Fukuoka REIT Corporation

Sustainability

II. Semiannual Report

Supported Initiatives

Signing of the PRI and PFA21 as of September 2018

Principles for Responsible
Investment (PRI)

Principles for Financial Action towards
a Sustainable Society(Principles for Financial Action for the 21st Century)

Overview of Asset Management
1. Changes in operating results and financial position

Initiatives of the 29th fiscal period
On March 25, 2019, the company once again obtained DBJ Green Building certification from the Development Bankof Japan Inc. The ranking was raised from 4 star to 5 stars in recognition of the following points that were rated positively for Canal City Hakata and Canal City Hakata • B.
• Working to reduce environmental load through energy and resource conservation• Consideration given to the diversity and comfort of the visitors• Consideration given to disaster prevention, crime prevention measures, greening, biodiversity, etc.

8,122
[8,117]5,202[4,593]
2,920
2,562
2,556
178,063[1.7]
93,699[0.0]
91,1428,194[8,194]
5,228[4,614]
2,965
2,624
2,623
177,283[(0.4)]
93,766[0.1]
91,142

9,178[9,178]5,940[5,287]
3,238
2,861
2,860
193,112[8.9]
101,799[8.6]
98,9389,242[9,242]
5,936[5,274]
3,306
2,935
2,934
195,433[1.2]
101,874[0.1]
98,938units

747,000

747,000

747,000

796,000

796,000(c)/(d)yen(e)

mm yen(e)/(d)yen

125,434
2,556
3,422[3,422][–]

125,5242,623
3,512[3,512][–]

127,888
2,860
3,593[3,593][–]

127,982
2,934
3,687[3,687][–]mm yen[Leasing business revenues]

mm yenOperating expenses

mm yen[Expenses related to leasing business]

mm yenOperating income
Ordinary income
ProfitTotal assets

mm yenNet assets

 reen Building certificaGtion acquisition ratio

mm yen(a)

mm yen(b)

mm yen(c)

mm yen(Building-Housing Energy-efficiency Labeling System)

This is a system in which a third party evaluates andannounces the energy-conservation performanceof non-residential buildings based on the “Guidelines for Evaluation of Energy
Conservation Performanceof Non-residential Buildings(2013)”. Four properties owned
by Fukuoka REIT Corporation
were certified.

[as of March 31, 2019] (based on total floor space)%[Change from previous period]

BELS

68.7%

Certified as a “Fukuoka ‘Work Style Reform’ Promotion Company”
Certified on August 28, 2018, as a “Fukuoka ‘Work Style Reform’ Promotion Company”
under an initiative aimed at promoting work style reforms at companies in Fukuoka City.
Points recognized included implementation of campaigns such as “no overtime promotion
month”, encouraging employees to take annual paid holidays, helping employees to balancechildrearing and work, simplification or elimination of internal documents, review of meeting
durations etc.

Unitholders’ equity
Total number of investment
units outstanding
Net assets per unit
Total dividend
Dividend per unit%
(Note 3) mm yen(d)Real estate appraisals Japan Real Estate Institute
The Tanizawa Sogo Appraisal Co., Ltd.
Daiwa Real Estate Appraisal Co., Ltd,

Deliberations by the Investment Management Committee
Deliberations/resolution by the Compliance Assessment Committee
Resolution/decision-making report by Board of Directors
Fukuoka REIT Corporation Board of Executive Officers

FUKUOKA REIT CORPORATION

7

Market reports

Analysis on trade areas and competition situation
Adequate rent levels, etc.

Engineering reports

Law abidance and earthquake resistance
Check of soil contamination, toxic substance anduse status
Replacement market price, expenses for long-term
maintenance and repairs, etc.

(March 1, 2018 toAugust 31, 2018)

29th fiscal period(September 1, 2018 to
February 28, 2019)yen%

2.4 [4.8]

1.5 [2.9]

1.5 [3.0]

1.5 [3.1]

1.5 [3.0]%

4.5 [9.1]

2.7 [5.4]

2.8[5.6]

2.9 [5.8]

2.9 [5.8]

%

53.5

52.6

52.9

52.7

52.1

%
%

[2.2]
60.5

[(0.9)]
100.0

[0.3]
100.0

[(0.2)]
100.0[(0.6)]
100.0

properties

25

26

26

28

29

m2

523,817.31

548,564.96

548,564.93

576,907.98

580,665.27

%

99.4

99.8

99.6

99.6

99.7

mm yen

1,455

1,474

1,500

1,602

1,622

mm yen

1,789
5,010
181

741
4,998
184

600
5,079
181

657
5,493
184

947
5,591
181

Ratio of ordinary income to total (Note 4)
assets(Note 4)Return on net assets
Ratio of net assets to total(c)/(b)assets(Note 4)

Occupancy rate

Inspection by Compliance Department general manager

28th fiscal periodyen【Other reference information】
Number of investment
properties (at end of period)
Total leasable floor space

Third-party assessment by external experts

27th fiscal period(September 1, 2017 to
February 28, 2018)[Dividend in excess of earnings per unit](at end of period)

Proposals by responsible department(March 1, 2017 toAugust 31, 2017)[Earnings dividend per unit][Change from previous period]

Fukuoka Realty has established a Basic policy on Compliance, as well as compliance regulations and other internal rules toprevent conflicts of interest. We conduct conflict of interest risk management pertaining to our dealings with stakeholders in an
appropriate manner based on the abovementioned rules and regulations with preliminary assessment carried out by the Compliance Department general manager and deliberations conducted by the Compliance Assessment Committee (consisting of theCompliance Department general manager and three outside experts).

(September 1, 2016 to
February 28, 2017)

125,4102,538
3,398[3,398][–]

Payout ratio

Governance System

Decision-making
process

9,730[8,072]
5,145[4,517]
4,585
4,199
4,198
175,063[(2.5)]
93,681[1.7]
91,142

Operating revenues[Change from previous period]

External evaluation
Received the ratings of “Green Star”
and “4 stars” in the first time participation of GRESB 2018.

26th fiscal period(unit)

Reacquisition of DBJ Green Building Certification (6 properties out of 9 properties)

The GRESB assessment

25th fiscal period (Note 5)

Fiscal Period(at end of period)

Depreciation and amortization
expensesCapital expenditures
Leasing NOI
Days in fiscal period(Note 4) mm yen
days(Note 1) Consumption tax is not included in operating revenues, etc.
(Note 2) In the above table, monetary amounts are rounded down to the nearest specified unit and percentage figures are rounded off to one decimal place.
(Note 3) No consideration has been given to the change in unitholders’ equity due to distribution of dividend in excess of earnings that came from reserve for temporary difference adjustments. The same shallapply hereafter.
(Note 4) The indicators are calculated by using the following methods. Furthermore, the figures in square brackets represent annualized value based on the number of days in each fiscal period.
Ratio of ordinary income to total assets
Return on net assets
Payout ratio
Leasing NOI

Ordinary income / average total assets
Average total assets = (Total assets at beginning of period + total assets at end of period) / 2
Profit / average net assets
Average net assets = (Net assets at beginning of period + net assets at end of period) / 2
Dividend per unit (excluding dividend in excess of earnings) / profit per unit
Profit per unit = Profit / total number of investment units outstanding
Leasing business revenues – expenses related to leasing business + depreciation and amortization expenses(Note 5) For the 25th fiscal period, profit amounted to 4,198 million yen as a result of recording 1,657 million yen from gain on sales of real estate. However, because 1,660 million yen in reserve fortemporary difference adjustments was reversed, the total dividend obtained by deducting the amount of the reserve for temporary difference adjustments from unappropriated surplus of 4,199 million
yen came to 2,538 million yen. The payout ratio after taking into account the reversal of the reserve for temporary difference adjustments stands at 100.0%.

FUKUOKA REIT CORPORATION

8

II. Semiannual Report

II. Semiannual Report

Overview of Asset Management
2. Management assessment

Moreover, the credit ratings assigned to FRC as of the end of the 29th fiscal period are as follows:
Credit Rating Agency(1) Brief history of the investment corporation
Fukuoka REIT Corporation (hereinafter “FRC”) was established on July 2, 2004 based on the “Act on Investment Trusts andInvestment Corporations” (Act No. 198 in 1951 including later revisions, hereinafter the “Investment Trusts Act”) and listed on
the Tokyo Stock Exchange, Inc. and the Fukuoka Stock Exchange on June 21, 2005 as the nation’s first real estate investment
trust specializing in regional properties (code number: 8968). FRC invests in real estate throughout Kyushu (including Okinawa
Prefecture), with a central focus on Fukuoka City, and Yamaguchi Prefecture (hereinafter the “Fukuoka and Kyushu areas”) byusing expertise in regional characteristics, a strength in the real estate industry.
FRC started asset management activities on November 9, 2004 after acquisition of four properties such as Retail in Canal
City Hakata (excluding some areas of specialty shops, hotels, theaters, offices and common space), a commercial complex
where specialty shops, cinema complex, theaters, amusement facilities, hotels and offices are integrally developed (hereinafter“Canal City Hakata”). As of the end of the 29th fiscal period (February 28, 2019), FRC manages a total of 29 properties
comprising 11 Retail, 8 Office buildings and 10 Others.

(2) Investment environment and portfolio performance
During the fiscal period under review (the 29th fiscal period), the Japanese economy showed a modest recovery despite
weakness seen recently in exports and production in some areas. Looking ahead, with the employment and income
environment continuing to improve, the economy is expected to continue recovering moderately due to various politicalmeasures proving effective, among other factors, although weakness will remain in certain areas for some time.
In the Fukuoka and Kyushu area, the core investment target area for FRC, the economy is expanding moderately. With
regard to the outlook, a mild expansion is expected to continue, although attention should be paid to the impact of theuncertainty of overseas economies and the impact of a labor shortage on the supply side, among other factors.
As for land price trends, the average rate of change for residential land price rose for the second consecutive year while
the figure for commercial land price and the combined average for residential and commercial land price rose for the fourthconsecutive year, all on a national average basis, according to the 2019 Land Market Value Publication. Meanwhile in Fukuoka
City, the central area of FRC's investment targets, land prices continued rising for seven consecutive years, up 12.3% year-onyear for commercial land and up 5.3% year-on-year for residential land, marking higher rates of increase.
Under such circumstances, FRC acquired Tissage Hotel Naha on December 7, 2018. Completed in February 2018, Tissage
Hotel Naha is a newly-built hotel located in Naha City, Okinawa Prefecture, which is anticipated to achieve high growth.
As for existing properties, FRC continued its efforts to reinforce competitive advantages and customer drawing ability at
Canal City Hakata and other major retail properties, and focused on maintaining and increasing the occupancy rate of its
owned properties. As a result of these endeavors, the average occupancy rate of all properties FRC owns was 99.7% at theend of the 29th fiscal period.
When analyzing FRC’s portfolio (on an acquisition price basis) as of the end of the 29th fiscal period by investment target
area, the investment ratio in the Fukuoka metropolitan area accounted for 77.2%; when analyzing by property type, Retail,
Office buildings, and Others accounted for 59.2%, 26.9% and 13.9%, respectively.

(3) Summary of fundraising
In the 29th fiscal period, FRC conducted refinancing while raising new funds by utilizing the commitment line to procure
2,000 million yen in short-term debt as funds for the acquisition of the above-mentioned property and other purposes.
FRC refinanced the short-term debt into long-term debt during the fiscal period. As a result, the balance of its interestbearing debt outstanding (including investment corporation bonds) at the end of the period totaled 77,500 million yen,with the loan-to-value ratio (ratio of interest-bearing debt (including investment corporation bonds) to total assets) at
39.7% and the ratio of fixed-interest rate debt (ratio of interest-bearing debt with fixed interest rates (including investment
corporation bonds) to total interest-bearing debt) at 90.2% as of the same date.
Going forward, FRC will continue its endeavors to reduce refinancing risks by dispersing debt repayment dates andextending debt duration. At the same time, FRC will work to mitigate risks of rising interest rates by shifting to fixedinterest rate borrowings and through other measures.

FUKUOKA REIT CORPORATION

Overview of Asset Management

9

Rating Type

RatingRating Outlook

Issuer Rating

A+

StableLong-term Issuer Rating

AA−

StableRating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)(4) Summary of performance and dividend
As a result of these management efforts, operating revenues totaled 9,242 million yen and operating income after excluding
operating expenses such as expenses related to leasing business and asset management fees totaled 3,306 million yen.
Ordinary income was 2,935 million yen and profit amounted to 2,934 million yen. Management decided to make a dividend of
3,687 yen per investment unit to meet the requirements of special tax measures for an investment corporation (as stipulated
in Article 67-15 of the Act on Special Measures Concerning Taxation of Japan [Act No. 26 in 1957 including later revisions]).
Under this law, an investment corporation is allowed to deduct the maximum amount of dividends paid to investors from its
taxable income.

3. Change in the number of investment units issued

Changes in unitholders’ capital from the incorporation of FRC to the end of the 29th fiscal period are as follows:
Date
July 2, 2004
November 8, 2004
June 20, 2005
July 21, 2005
September 7, 2006
March 1, 2011
March 1, 2013
March 1, 2014
April 27, 2015
March 1, 2018

Item
Established through private placement
Additional issue of investment units through private offering
Additional issue of new investment units through public offering
Additional issue of new investment units through third-party allotment
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering
Split of investment units
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering

Number of investment units
issued (units)
Increase
Balance250
250
82,80083,0507,000
90,0502,000
92,05015,000107,050
16,000123,050
14,950138,000
552,000
690,000
57,000747,000
49,000796,000

Unitholders’ capital(mm of yen)

Increase
125
41,4005,944
1,698
11,096
8,913
10,263–
11,701
7,795

Balance
125
41,52547,46949,16760,264
69,17779,441
79,441
91,142
98,938Remarks(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(Note 10)(Note 1) FRC was established with an issue of investment units at 500,000 yen per unit.
(Note 2) New investment units were issued through private offering at the issue price of 500,000 yen per unit for the purpose of procuring funds for acquiring new properties, etc.
(Note 3) New investment units were issued through public offering at the issue price of 880,000 yen per unit (purchase price of 849,200 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 4) New investment units were issued through third-party allotment at the purchase price of 849,200 yen per unit.
(Note 5) New investment units were issued through public offering at the issue price of 766,360 yen per unit (purchase price of 739,772 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 6) New investment units were issued through public offering at the issue price of 576,083 yen per unit (purchase price of 557,078 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 7) New investment units were issued through public offering at the issue price of 710,580 yen per unit (purchase price of 686,529 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 8) FRC implemented a 5-for-1 split of its investment units.
(Note 9) New investment units were issued through public offering at the issue price of 212,257 yen per unit (purchase price of 205,290 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 10) New investment units were issued through public offering at the issue price of 164,414 yen per unit (purchase price of 159,102 yen) for the purpose of procuring funds for acquiring new properties, etc.

[Changes in market price of investment certificates]
The highest and lowest (closing price) market prices on the Real Estate Investment Trust Section of the Tokyo Stock
Exchange, Inc., on which FRC’s investment certificates are listed, in each fiscal period are as follows:
Fiscal period
HighestLowest25th fiscal period

26th fiscal period

27th fiscal period

28th fiscal period

29th fiscal period

192,000 yen
169,000 yen

182,800 yen
162,100 yen

183,400 yen
157,500 yen

177,600 yen
162,600 yen

176,100 yen
159,900 yen(September 1, 2016 to
February 28, 2017)(March 1, 2017 toAugust 31, 2017)(September 1, 2017 to
February 28, 2018)

FUKUOKA REIT CORPORATION(March 1, 2018 toAugust 31, 2018)10(September 1, 2018 to
February 28, 2019)

II. Semiannual Report

II. Semiannual Report

Overview of Asset Management
4. Results of dividend, etc.
With respect to the dividend (excluding dividend in excess of earnings) for the 29th fiscal period, FRC determined to distributethe whole unappropriated surplus (except for the fraction amount, which is the dividend per unit of less than 1 yen) to be eligible
for special tax measures for an investment corporation (as stipulated in Article 67-15-1 of the Special Taxation Measures Act)
that allow FRC to deduct the maximum amount of earnings dividend from its taxable income. Accordingly, dividend per unit for
the fiscal period was 3,687 yen.
(thousands of yen)
Fiscal period
ProfitUnappropriated surplus
Undistributed earnings
Total dividends[Dividend per unit]

Earnings dividends[Earnings dividend per unit]

25th fiscal period

26th fiscal period(September 1, 2016 to
February 28, 2017)(March 1, 2017 toAugust 31, 2017)

4,198,931
4,199,108
221
2,538,306[3,398 yen]
2,538,306[3,398 yen]

Of the contribution refund,
distribution of the reserve
for temporary difference
adjustments(Of the contribution refund per unit,
distribution per unit of the reserve fortemporary difference adjustments)

28th fiscal period(September 1, 2017 to
February 28, 2018)

2,556,294
2,556,515
281
2,556,234[3,422 yen]
2,556,234[3,422 yen]–Contribution refund[Contribution refund per unit]

27th fiscal period

[–]

–
[–]

[– ]

(March 1, 2018 toAugust 31, 2018)

2,623,635
2,623,917
453
2,623,464[3,512 yen]
2,623,464[3,512 yen]

–

[–]

–

[–]

–

29th fiscal period–[–]

6. Significant events that have occurred after the end of the 29th fiscal period
No relevant items.

Overview of the Investment Corporation(September 1, 2018 to
February 28, 2019)

2,860,088
2,860,542
514
2,860,028[3,593 yen]
2,860,028[3,593 yen]

–

[– ]

–

[–]

2,934,877
2,935,391
539
2,934,852[3,687 yen]
2,934,852[3,687 yen]

–

[–]

–

[–]

1. Summary of unitholders’ capital
Fiscal period
Total number of authorized
investment units
Total number of investment units
outstanding
Number of unitholders

25th fiscal period

26th fiscal period

27th fiscal period

28th fiscal period

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

747,000 units

747,000 units

747,000 units

796,000 units

796,000 units

10,25910,1909,897

10,49910,478as of February 28, 2017as of August 31, 2017as of February 28, 2018as of August 31, 2018

29th fiscal period

as of February 28, 2019

2. Matters related to investment units
The following table sets forth the major unitholders of FRC as of February 28, 2019.

Of the contribution refund,
distribution through the
reduction in unitholders’capital for tax purposes

–

–

[–]

(Of the contribution refund per unit,
distribution per unit through the
reduction in unitholders’ capital fortax purposes)

–

[–]

[–]

–

[–]

–

[–]

5. Future portfolio management policy and vital issues
FRC will further reinforce management and leasing capabilities by cooperating with property management companies
including sponsor companies, and secure and maintain the stable operation of the properties by making the most use of theiradvantages.
FRC will continue to make investments based on the basic policy stipulated in its Articles of Incorporation and its basic
philosophy: focusing on “specialized areas in which FRC can demonstrate its competitive edge” that are in “high growthpotential markets.” By geographic location, of the Fukuoka and Kyushu areas, FRC will invest 60% to 90% of its assets in the
Fukuoka metropolitan area, since the Fukuoka metropolitan area is expected to have a high population growth rate in the future.
In addition to the Fukuoka metropolitan area, management has decided to actively acquire properties in major cities, if there areregions or properties where FRC can generate investment merits through its knowledge of the local land. FRC will acquire highquality properties through use of its advantages, such as information gathering ability in the areas, good knowledge of regional
properties and close relations with the local business community and governments, so that investors can continue to invest in
FRC with assurance.
Moreover, on March 28, 2019, partial amendments were made to the investment ratio in the investment policy, as described
below, in order to allow FRC to more flexibly investigate investments in excellent properties of investment types other than retailfacilities – office buildings and others (hotels, residential properties, logistics facilities and public facilities, etc.) – for the purposeof securing stable earnings over the medium to long term and achieve steady growth of its investment assets.
Use
RetailOffice buildings
OthersMeanwhile, FRC will build stronger relationships with financial institutions to realize stable fundraising and try to maintain a solid
financial structure.

Before amendments
60〜80%
20〜40%
0〜20%

After amendments
40〜70%
20〜50%
0〜30%

Investment units held (units)

NameJapan Trustee Service Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
Fukuoka Jisho Co., Ltd.
The Nomura Trust and Banking Co., Ltd. (Investment trust account)
Trust & Custody Service Bank, Ltd. (Securities investment trust account)
Mizuho Trust & Banking Co., Ltd.
NORTHERN TRUST CO. (AVFC) RE HCR00
STATE STREET BANK WEST CLIENT – TREATY 505234
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
MetLife, Inc.
Total

162,657
84,761
68,07531,59522,645
13,506
12,631
11,70011,626
11,217
430,413(Note) Percentage of total number of investment units outstanding is rounded down to the nearest specified unit.

Investment Target
Urban, regional and community facilities
Class A properties, sale and leaseback
Hotels, residential properties, logistics facilities and public facilities, etc.

FUKUOKA REIT CORPORATION11FUKUOKA REIT CORPORATION

12

Percentage of total number ofinvestment units outstanding (%) (Note)
20.43
10.64
8.55
3.96
2.84
1.69
1.58
1.46
1.46
1.40
54.07

II. Semiannual Report

II. Semiannual Report

Overview of the Investment Corporation

Status of FRC’s Assets under Management

3. Matters related to directors

1. FRC’s asset structure(1) The names of FRC’s directors, etc. and their fees for the 29th fiscal period are as
follows:
Title

Name of directors, etc.

Major concurrent assignments

28th fiscal period
Type of asset

CEO and Representative Director, Fukuoka Realty
Co., Ltd.
Representative Council, Shindo Law Firm
Representative Partner, Kawasho Authorize
Accountant OfficeEtsuo Matsuyuki
Hiroyasu ShindoSupervisory Directors

Yasuo Kawasho
PricewaterhouseCoopers
Aarata LLC

Independent Auditor–(mm of yen) (Note 2)

3,600

FRC will review at its Board of Directors meetings decisions regarding the dismissal of the Independent Auditor in accordancewith the provisions of the Investment Trusts Act, and review decisions not to reappoint the Independent Auditor following thecomprehensive consideration of the audit quality, audit fee and other various conditions.

4. Names of asset management company, asset custodian and generaladministrators as of the end of the 29th fiscal period
The following table sets forth the asset management company, asset custodian and general administrators of FRC as ofFebruary 28, 2019.

Fukuoka Realty Co., Ltd.

Asset Custodian

Mitsubishi UFJ Trust and Banking Corporation

General Administrator (accounting matters, etc.)

Mitsubishi UFJ Trust and Banking Corporation

General Administrator (administration of unitholders’ list)

Sumitomo Mitsui Trust Bank, Limited

General Administrator (administration of investment corporation bonds registry)

Sumitomo Mitsui Banking Corporation

General Administrator (administration of investment corporation bonds registry)

Mizuho Bank, Ltd.

(%) (Note 3)(mm of yen) (Note 2)

38.8

Other Kyushu areas

36,88919.1

36,698

18.8

Fukuoka metropolitan area

46,35724.0

46,035

23.6

－

－

－

－

Fukuoka metropolitan area

20,63910.7

20,537

10.5

Other Kyushu areas

2,632

1.4

5,554

2.8

Deposits and other assets

10,7595.6

10,717

5.5

Total amount of assets (Note 4)

193,112[182,465]

100.0[94.5]

195,433[184,723]

100.0[94.5]

Real estate trust
beneficiary interest

Office buildings

OthersOther Kyushu areas(Note 1) “Fukuoka metropolitan area” refers to cities, towns and villages where 10% or more of the population commute to Fukuoka City for school and work, according to the 2015 census, which states “thenumber of workers and students aged 15 years or older (students including those aged 14 years or younger: particular reference) commuting between their homes and places of work or school” conductedby Fukuoka City and the Statistics Bureau of the Ministry of Internal Affairs and Communications. “Other Kyushu areas” refers to the Fukuoka and Kyushu area excluding the Fukuoka metropolitan area.
(Note 2) “Total value of properties held” is based on the value on the balance sheet (the value of real estate trust beneficiary interest is the book value after depreciation).
(Note 3) Concerning the “Percentage of total assets,” the numbers are rounded off to one decimal place. The total of individual percentages in the above table may not equal 100%.
(Note 4) Figures in square brackets for “Total amount of assets” refer to the value and percentage of real estate held in effect to the total amount of assets.

2. Major assets owned by FRC
The following is an overview of the major assets (top ten properties on a book value basis) owned by FRC as of February 28,
2019.
Real estate property name (Note 1)

Book value(mm of yen)

Total leasable floor Total leased floor
space (m2)space (m2)Occupancy rate(%) (Note 2)

Percentage of total
leasing businessrevenues (%) (Note 3)

Main use

Canal City Hakata

30,10746,604.75

46,604.75

100.0

14.0

RetailCanal City Hakata·B

29,13968,827.77

68,137.75

99.0

17.5

RetailPark Place Oita

19,557

113,834.22

113,559.44

99.8

12.7

RetailCanal City Business Center Building

13,22623,031.01

23,031.01

100.0

6.9

Office buildings

Konoha Mall Hashimoto

10,197

22,121.03

22,121.03

100.0

9.1

RetailGofukumachi Business Center

9,036

19,905.34

19,905.34

100.0

5.8

Office buildings

LOGICITY Minato Kashii

7,897

43,233.72

43,233.72

100.0

Undisclosed (Note 4)

Taihaku Street Business Center

5,995

14,677.30

14,545.78

99.1

3.3

Office buildings

SunLive City Kokura

5,628

61,450.22

61,450.22

100.0

3.1

RetailMarinoa City Fukuoka (Marina Side Building)

5,455

33,069.82

33,069.82

100.0

1.9

Retail136,241446,755.18

445,658.86

99.8

－

－

Total

13

(%) (Note 3)

75,889(Note 1) The properties listed above are owned in the form of trust beneficiary interest.
(Note 2) “Occupancy rate” refers to the percentage of leased floor space to leasable floor space and the numbers are rounded off to one decimal place.
(Note 3) “Percentage of total leasing business revenues” is rounded off to one decimal place.
(Note 4) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

FUKUOKA REIT CORPORATION

Percentage of
total assets

39.3

Name

Asset Management Company

Total value of
properties held

Percentage of
total assets

75,8339,000(2) Policy on deciding to dismiss and not to reappoint the Independent Auditor

as of February 28, 2019

Fukuoka metropolitan area

Retail6,000(Note 1) The CEO and Representative Director and Supervisory Directors do not possess investment units of FRC under their own name or under another person’s name. Although there are cases where theSupervisory Directors may be directors of companies other than those stated above, none of the companies or those stated above have vested interest in FRC.
(Note 2) The fees for the CEO and Representative Director and Supervisory Directors are the amounts paid to them in the 29th fiscal period, and the fee to the Independent Auditor is the amount payable to it(estimate) for audits pertaining to the 29th fiscal period.

Category of entrustment

Total value of
properties held

(Note 1)

Total fee for each title for the
29th fiscal period(thousands of yen) (Note 2)

CEO and Representative Director

Area

Use

29th fiscal period

as of August 31, 2018

FUKUOKA REIT CORPORATION

14OthersII. Semiannual Report

II. Semiannual Report

Status of FRC’s Assets under Management

Status of FRC’s Assets under Management
3. Details of real estate properties in the portfolio

28th fiscal period

The following table provides details of the real estate properties owned by FRC as of February 28, 2019.
Real estate property nameLocation

Canal City Hakata
Canal City Hakata·B
Park Place Oita
SunLive City Kokura
Konoha Mall Hashimoto
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC
Hanahata SC
Kurume Higashi Kushiwara SC
K’s Denki Kagoshima
Marinoa City Fukuoka (Marina Side
Building)

2-22, 1-chome, Sumiyoshi, Hakata
Ward, Fukuoka City
2-1, 1-chome, Sumiyoshi, Hakata
Ward, Fukuoka City1, 2-chome, Koen Dori Nishi, Oita
City, Oita
14-1, 2-chome, Kami Kuzuhara,
Kokura Minami Ward, Kitakyushu City
27-2, 2-chome, Hashimoto, Nishi
Ward, Fukuoka City
2-18, 2-chome, Usuki, Kagoshima
City, Kagoshima
1-5, 1-chome, Kozono, HigashiWard, Kumamoto City
9-12, 4-chome, Hanahata, Minami
Ward, Fukuoka City
370-3 Higashi Kushiwara, Kurume
City, Fukuoka
4-12, Tokai-cho, Kagoshima City,
Kagoshima
12-30, 2-chome, Odo, Nishi Ward,
Fukuoka City

Form ofownership
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Retail subtotal:
Canal City Business Center Building
Gofukumachi Business Center
Sanix Hakata Building
Taihaku Street Business Center
Higashi Hie Business Center
Tenjin Nishi-Dori Center Building
Tenjin North Front Building
Higashi Hie Business Center II

2-25, 1-chome, Sumiyoshi, Hakata
Ward, Fukuoka City
10-10, Kami Gofukumachi, Hakata
Ward, Fukuoka City
1-23, 2-chome, Hakataeki Higashi,
Hakata Ward, Fukuoka City
3-21 Gokushomachi, Hakata Ward,
Fukuoka City
1-2, 3-chome, Higashi Hie, Hakata
Ward, Fukuoka City
5-28, 2-chome, Tenjin, Chuo Ward,
Fukuoka City
4-20, 4-chome, Tenjin, Chuo Ward,
Fukuoka City
5-13, 1-chome, Higashi Hie, Hakata
Ward, Fukuoka City

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Office buildings subtotal:
Amex Akasakamon Tower
City House Keyaki Dori
Aqualia Chihaya
D-Wing Tower
Granfore Yakuin Minami
Hotel FORZA Oita
Tissage Hotel Naha
Tosu Logistics Center
LOGICITY Minato Kashii
LOGICITY Hisayama

4-23, 2-chome, Maizuru, Chuo
Ward, Fukuoka City
16-21, 2-chome, Kego, Chuo
Ward, Fukuoka City
3-12, 4-chome, Chihaya, Higashi
Ward, Fukuoka City
10-38, 2-chome, Daimyo, Chuo
Ward, Fukuoka City
11-20, 1-chome, Hirao, Chuo
Ward, Fukuoka City
5-18, 1-chome, Chuo-cho, Oita
City, Oita
14-1, 2-chome, Nishi, Naha City,
Okinawa
1607 Momota, Himekata-cho Aza,
Tosu City, Saga
3-4, 2-chome, Minato Kashii,
Higashi Ward, Fukuoka City
2335-3 Oaza Yamada, Hisayamamachi, Kasuya County, Fukuoka

Others subtotal:
Total

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Total leasable
floor space (m2)Period-end
appraisalvalue

46,604.75

32,00030,107

68,827.77

30,00029,139113,834.22

19,80019,55761,450.22

8,340

5,628

Japan Real Estate Institute(mm of yen)
(Note)

Book value
at end ofperiod29th fiscal period(March 1, 2018 to August 31, 2018)

Real estate property nameReal estate appraiser(mm of yen)

(September 1, 2018 to February 28, 2019)

Total leasing
Percentage ofTotal leasing
Percentage of
Number of tenants Occupancy rate
Number of tenants Occupancy ratebusiness revenues total leasing
business revenues total leasingat end of period at end of period
at end of period at end of period
during period business revenues
during periods business revenues(Note 1)(%) (Note 3)(Note 1)(%) (Note 3)(mm of yen)(%) (Note 4)(mm of yen)(%) (Note 4)

22,121.03

10,60010,197

Tanizawa Sogo Appraisal
Co., Ltd.

14,602.88

5,620

4,411

Japan Real Estate Institute

Canal City Hakata
Canal City Hakata·B
Park Place Oita
SunLive City Kokura
Konoha Mall Hashimoto
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC
Hanahata SC
Kurume Higashi Kushiwara SC
K’s Denki Kagoshima
Marinoa City Fukuoka (Marina Side Building)

6,968.66

2,860

2,005

Japan Real Estate Institute

Retail subtotal:

2,801.15

1,250

990

6,467.80

2,790

2,075

7,296.17

3,710

3,019

33,069.82

6,060

5,455

384,044.47

123,030

112,587

23,031.01

15,80013,226

19,905.34

14,3009,036

6,293.75

5,980

3,845

Japan Real Estate Institute

14,677.30

8,410

5,995

Japan Real Estate Institute13,614.59

7,580

4,505

Tanizawa Sogo Appraisal
Co., Ltd.

3,339.32

3,100

2,694

Japan Real Estate Institute5,252.41

3,900

2,543

Japan Real Estate Institute6,214.77

4,440

4,187

Tanizawa Sogo Appraisal
Co., Ltd.

92,328.49

63,51046,035

4,821.25

1,840

1,720

2,710.86

1,140

927

5,619.69

1,720

1,206

7,187.59

3,560

2,710

2,496.06

1,310

1,126

5,785.44

1,820

1,433

Japan Real Estate Institute

4. Details of renewable energy generation facilities in the portfolio

3,758.76

3,030

2,924

Tanizawa Sogo Appraisal
Co., Ltd.

5. Details of the rights to operate public facilities, etc. in the portfolio

4,173.29

1,430

1,195

Japan Real Estate Institute43,233.72

8,880

7,897

24,505.65

5,250

4,949

104,292.31
580,665.27

29,980216,520

26,092
184,715

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Japan Real Estate InstituteTanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

Canal City Business Center Building
Gofukumachi Business Center
Sanix Hakata Building
Taihaku Street Business Center
Higashi Hie Business Center
Tenjin Nishi-Dori Center Building
Tenjin North Front Building
Higashi Hie Business Center II

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

Office buildings subtotal:

Daiwa Real EstateAppraisal Co., Ltd.
Daiwa Real EstateAppraisal Co., Ltd.
Japan Real Estate InstituteTanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

(Note) "Period-end appraisal value” refers to the evaluation value based on appraisals by a real estate appraiser in conformity with the method and standards for asset evaluation stipulated in FRC’s Articles of Incorporation
and rules stipulated by The Investment Trusts Association, Japan.
FUKUOKA REIT CORPORATION 15

1 [50]
1 [47]
1 [104]
1
1 [127]
12
2
2
1
1
1
24 [348](Note 2)

1 [61]
35
16
1 [67]
1 [25]
1
11
2
68 [218](Note 2)

99.9
99.0
99.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1,256
1,576
1,207
292
838
257
90
40
88
111
177

13.7
17.2
13.2
3.2
9.1
2.8
1.0
0.4
1.0
1.2
1.9

99.8

5,937

64.7

99.1
100.0
100.0
98.2
100.0
100.0
100.0
100.0

633
544
201
300
338
86
143
167

6.9
5.9
2.2
3.3
3.7
0.9
1.6
1.8

99.5

2,415

26.3
0.7
0.4
0.7
1.3
0.4
0.7
–
Undisclosed

Amex Akasakamon Tower
City House Keyaki Dori
Aqualia Chihaya
D-Wing Tower
Granfore Yakuin Minami
Hotel FORZA Oita
Tissage Hotel Naha

1 [64]
1 [40]
1 [103]
1 [131]
1 [94]
1
–

93.7
95.5
98.6
95.1
95.0
100.0
–

Tosu Logistics Center

1

100.0

66
37
60
116
38
63
–
Undisclosed(Note 5)(Note 5)

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)LOGICITY Minato Kashii
LOGICITY Hisayama

2
1

Others subtotal:

10 [437]

Total

102 [1,003](Note 2)
(Note 2)

99.0
99.6

100.0
99.0
99.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1,294
1,618
1,178
289
838
258
90
41
88
111
178

14.0
17.5
12.7
3.1
9.1
2.8
1.0
0.4
1.0
1.2
1.9

99.7

5,986

64.8

100.0
100.0
100.0
99.1
100.0
100.0
100.0
100.0

633
537
199
306
336
86
140
165

6.9
5.8
2.2
3.3
3.6
0.9
1.5
1.8

99.9

2,405

26.0

1 [66]
1 [40]
1 [104]
1 [131]
1 [97]
1
1

98.8
95.6
99.3
95.0
98.0
100.0
100.0

1

100.0

68
38
59
114
37
63
39
Undisclosed

0.7
0.4
0.6
1.2
0.4
0.7
0.4
Undisclosed(Note 5)(Note 5)

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

99.4

850

9.2

99.7

9,242

100.0

(Note 2)

1 [62]
35
16
1 [69]
1 [25]
1
11
2
68 [221](Note 2)2
1

9.0

11 [444]100.0

103 [1,011]

824
9,178

1 [49]
1 [46]
1 [104]
1
1 [127]
12
2
2
1
1
1
24 [346](Note 2)
(Note 2)

(Note 1) “Number of tenants” is based on the total number of sections stipulated in the tenancy agreements for retail and office buildings among relevant properties. For the number of tenants in pass-through masterleasing properties, the number of sections stipulated in the tenancy agreements with end tenants is shown in square brackets. The Taihaku Street Business Center is an office building with a residential
tower. Its number of tenants comprises 12 for the office building and 57 for the residence in the 29th fiscal period (12 for the office building and 55 for the residence in the 28th fiscal period).
(Note 2) The total of all the tenants in other than pass-through master leasing properties and the total number of sections stipulated in the tenancy agreements with end tenants for pass-through master leasing
properties is shown in square brackets in the subtotal and total columns for “Number of tenants.”(Note 3) “Occupancy rate” refers to the percentage of leased floor space to leasable floor space and the numbers are rounded off to one decimal place.
(Note 4) “Percentage of total leasing business revenues” is rounded off to one decimal place, and the total of individual percentages in the above table may not equal 100%.
(Note 5) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

No relevant items.
No relevant items.

6. Securities incorporated in the portfolio
No relevant items.

FUKUOKA REIT CORPORATION

16

II. Semiannual Report

II. Semiannual Report

Status of FRC’s Assets under Management

Capital Expenditures for Owned Real Estate

7. List of specific transaction and forward exchange transaction contract
amount and status of fair value
The following table provides the contract amount of FRC’s specific transactions and the status of its fair value as of February 28, 2019.
Contract amount, etc. (mm of yen)
Of which, exceeding 1 year

CategoryType

Off-market transaction

Interest rate swap transaction(Receivable floating; Payable fixed)(Note 1)

Fair value(mm of yen) (Note 2)

25,20019,000(208)

25,20019,000(208)

2. Capital expenditures during the 29th fiscal period
Capital expenditures for the real estate properties owned by FRC totaled 947 million yen in the 29th period. Furthermore,
FRC incurred construction costs of 1,177 million yen in total in the period, including 221 million yen in repair and maintenanceexpenses classified as expenses on the statement of income and 8 million yen in expenses for restoration to former state. The
following table provides the overview of major construction work that was completed in the 29th fiscal period.
Real estate property nameLocation

PurposeConstruction cost

Period(mm of yen)

Canal City Hakata

Hakata Ward, Fukuoka City

Renovation of external walls of South Building

From October 2017 to
February 2019

130

Canal City Hakata·B

Hakata Ward, Fukuoka City

Renovation of external walls of South Building

From October 2017 to
February 2019

259

8. Status of other assets

Canal City Hakata·B

Hakata Ward, Fukuoka City

Formation of tenant sections

From January 2019 toFebruary 201924

All real estate trust beneficiary interests owned by FRC have been entered under “3. Details of real estate properties in theportfolio” on page 15. There is no incorporation of other specified assets as of the end of the 29th fiscal period.

Park Place Oita

Oita City, Oita

Introduction of parking lot control systems

From December 2018 to
February 201952

Park Place Oita

Oita City, Oita

Installation of parking lot guiding boards

From December 2018 to
February 201952

Marinoa City Fukuoka (Marina Side
Building)

Nishi Ward, Fukuoka City

Replacement of wood decks

From January 2019 toFebruary 201915

Marinoa City Fukuoka (Marina Side
Building)

Nishi Ward, Fukuoka City

Renovation of external walls

From January 2019 toFebruary 201914

Canal City Business Center Building

Hakata Ward, Fukuoka City

Replacement of mechanical security systemmonitoring terminals

From May 2018 toSeptember 201823

Canal City Business Center Building

Hakata Ward, Fukuoka City

Renovation of external walls of South Building

From October 2017 to
February 2019

33

Total

(Note 1) The contract amount, etc. of the interest rate swap transaction is based on the notional principal amount.
(Note 2) The fair value is calculated by the counterparty of the transaction contract based on the actual interest rate on the market and other factors.

9. Status of owned assets by country and region
As of the end of the 29th fiscal period, no overseas real estate properties in countries or regions other than Japan areincorporated into FRC’s portfolio.

Capital Expenditures for Owned Real Estate

3. Reserves for long-term repair and maintenance plans

1. Planned capital expenditures
The following table provides major items of capital expenditures associated with currently planned renovations, etc. for realestate properties owned by FRC as of the date of this Semiannual Report. The planned construction costs indicated below
may be partly classified as expenses. In addition, FRC will implement renewal construction work in order to maintain andimprove the competitiveness of properties in the market as well as tenant satisfaction, on top of the construction, facilities andreplacement work for which expenditures will be made regularly.
Planned construction cost
(mm of yen)

Real estate property
nameLocation

PurposeSchedule
Total

Construction
Amountcost
already paid

Canal City Hakata

Hakata Ward,
Fukuoka City

Water supply piping for guestrooms

From September 2019 toFebruary 2020

15

–

–

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Replotting of floor sections

From February 2019 to
May 2019

31––Park Place Oita

Oita City, Oita

Replacement of air-conditioning units

From March 2019 toNovember 2019

174

–

–

Park Place Oita

Oita City, Oita

Renovation of external walls

From April 2019 toFebruary 2020

101

–

–

Gofukumachi Business Hakata Ward,
CenterFukuoka City

Enhancement of multilevel mechanical parking From June 2019 toequipment
August 2019

56

–

–

Higashi Hie BusinessCenterReplacement of outdoor unit compressors

13

–

–

Hakata Ward,
Fukuoka City

From August 2019 to
October 2019

FUKUOKA REIT CORPORATION17

FRC has deposited the following amounts from the cash flows generated during the 29th fiscal period in order to fund largescale repair and maintenance work in the medium- to long-term, based on long-term repairs and maintenance plans preparedfor respective properties.
(millions of yen)
Fiscal period

25th fiscal period(September 1, 2016 to
February 28, 2017)

26th fiscal period(March 1, 2017 toAugust 31, 2017)27th fiscal period(September 1, 2017 to
February 28, 2018)

28th fiscal period(March 1, 2018 toAugust 31, 2018

29th fiscal period(September 1, 2018 to
February 28, 2019)

Balance of deposits at beginning of period

800

1,000

1,000

1,000

1,000

Deposits during the period

200

–

–

–

–

Amounts used from deposits during the period
Deposits carried forward to the next period

–

–

–

–

–

1,000

1,000

1,000

1,000

1,000

FUKUOKA REIT CORPORATION

18

II. Semiannual Report

II. Semiannual Report

Expenses and Liabilities

Expenses and Liabilities

1. Details of expenses related to asset management
29th fiscal period

28th fiscal period

Item

Category(thousands of yen)

(March 1, 2018 to August 31, 2018)

Lender(September 1, 2018 to February 28, 2019)(a) Asset management fees

520,829532,061(b) Asset custody fees(c) Administrative service fees

6,702
53,872

7,182
54,581(d) Directors’ compensations

9,600

9,600

(e) Other operating expenses

61,761

59,167

Total

652,766

662,592(Note) Aside from the amounts of the asset management fees shown above, 37,725 thousand yen was paid in the 28th fiscal period for asset management, capitalized in the acquisition costs, related to theacquisition of Konoha Mall Hashimoto, Higashi Hie Business Center II and Park Place Oita Daiichi Parking, and 14,175 thousand yen was paid in the 29th fiscal period for asset management, capitalized
in the acquisition costs, related to the acquisition of Tissage Hotel Naha.

2. Status of debt

As of the end of the 29th fiscal period (February 28, 2019), FRC has the following debt from respective financial institutions.
Category
LenderSumitomo Mitsui Banking
Corporation
Mizuho Bank

The Norinchukin Bank

Current
maturities The Bank of Sagaof long-term
MUFG Bank
debt
The Nishi-Nippon City Bank
Mizuho Bank

Balance as of Balance as of Average
Drawdown date September 1, February 28, interest
2018
2019
rate

Repayment
date

Repayment
methodUse offunds

Description(mm of yen)

(mm of yen)(%) (Note 1)

January 31, 2012

500

–

1.338

January 31, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

200

200

July 31, 2014

3,000

3,000

0.538

July 31, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

500

500

September 25, 2014

–

500

0.520

September 25, 2019

February 1, 2013

–

2,500

0.775

February 29, 2020

February 28, 2013

–
4,200

1,700
8,400

0.569

February 29, 2020

Subtotal
The Nishi-Nippon City Bank

February 1, 2013

2,500

–

0.775

February 29, 2020

Mizuho Bank

February 28, 2013

1,700

–

0.569

February 29, 2020

Aozora Bank

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Refinance fundAcquisition fund
Refinance fundAcquisition fund
Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

June 28, 2013

1,000

1,000

0.469

June 30, 2020

Mizuho Bank
The Norinchukin Bank
The Hiroshima Bank
The Kitakyushu BankThe Iyo Bank
The Higo Bank

July 31, 2014

2,300
1,000
1,400
800
500
300

2,300
1,000
1,400
800
500
300

0.835

July 30, 2021

Development Bank of Japan

August 29, 2014

4,000

4,000

1.010

August 31, 2022

September 25, 2014

500

–

0.520

September 25, 2019

Sumitomo Mitsui Banking
Corporation

June 30, 2015

1,600

1,600

0.790

June 30, 2022

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Trust Bank

July 31, 2015

1,500

1,500

0.564

July 31, 2023

Refinance fundDevelopment Bank of Japan

August 31, 2015

4,000

4,000

0.880

August 31, 2023

The Bank of Fukuoka

August 31, 2015

400

400

0.419

August 31, 2022

The Nishi-Nippon City Bank

August 31, 2015

400

400

0.870

August 31, 2023

The Bank of Fukuoka

February 29, 2016

2,000

2,000

0.419

February 29, 2024

The Nishi-Nippon City Bank

February 29, 2016

2,000

2,000

0.440

February 29, 2024

Development Bank of Japan

February 29, 2016

2,000

2,000

0.620

February 28, 2025

Mizuho Bank

February 29, 2016

500

500

0.440

February 29, 2024

Shinsei Bank

July 29, 2016

700

700

0.400

July 31, 2024

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

MUFG Bank

Long-term
debt

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Sumitomo Mitsui Trust Bank September 30, 2016

300

300

0.413

FUKUOKA REIT CORPORATION

19

September 30, 2025

Lump-sum uponmaturity

Lump-sum uponmaturity
Lump-sum uponmaturity

Refinance fund

Refinance fund

Refinance fund
Refinance fund

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee
No collateral/
No guarantee

Long-term
debt

Balance as of Balance as of Average
Drawdown date September 1, February 28, interest
2018
2019
rate

Repayment
date

Repayment
methodUse offunds

Description(mm of yen)

(mm of yen)(%) (Note 1)

1,500
100
100
100
100
100
100

0.718

December 30, 2025

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Development Bank of JapanThe Oita Bank
The Kagoshima Bank
The Kitakyushu BankThe Eighteenth BankThe Shinwa Bank
The Hiroshima Bank

December 30, 2016

1,500
100
100
100
100
100
100

The Bank of Fukuoka

December 30, 2016

1,500

1,500

0.419

December 30, 2026

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

MUFG Bank

March 31, 2017

800

800

0.481

March 31, 2025

Refinance fundResona Bank

March 31, 2017

600

600

0.658

March 31, 2027

The Higo Bank

March 31, 2017

300

300

0.481

March 31, 2025

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

The Bank of Fukuoka
The Nishi-Nippon City BankThe Oita Bank
The Kitakyushu Bank
The Miyazaki BankThe Shinwa BankThe Iyo BankThe Eighteenth Bank

June 30, 2017

1,300
1,000
700
700
700
600
500
500

1,300
1,000
700
700
700
600
500
500

0.777

June 30, 2026

Refinance fundNo collateral/
No guarantee

Development Bank of Japan

June 30, 2017

1,800

1,800

0.650

December 31, 2026

The Bank of Fukuoka

July 31, 2017

2,000

2,000

0.792

July 31, 2027

The Nishi-Nippon City Bank

Lump-sum uponmaturity

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

July 31, 2017

2,000

2,000

0.892

July 31, 2027

The Nishi-Nippon City Bank
The Bank of Fukuoka
The Oita Bank
The Kitakyushu BankThe Eighteenth BankThe Shinwa Bank
The Hiroshima Bank

August 31, 2017

500
500
100
100
100
100
100

500
500
100
100
100
100
100

0.850

August 31, 2027

Resona Bank

September 29, 2017

2,000

2,000

0.494

September 30, 2027

The Bank of Fukuoka

December 29, 2017

1,500

1,500

0.812

December 30, 2027

Development Bank of Japan

December 29, 2017

500

500

0.680

December 30, 2027

The Nishi-Nippon City Bank

February 28, 2018

1,900

1,900

0.750

February 29, 2028

Sumitomo Mitsui Trust Bank

February 28, 2018

1,100

1,100

0.600

February 26, 2027

MUFG Bank

February 28, 2018

1,500

1,500

0.500

February 27, 2026

Resona Bank

February 28, 2018

600

600

0.567

February 29, 2028

Development Bank of Japan

March 1, 2018

2,500

2,500

0.720

March 1, 2028

MUFG Bank

March 30, 2018

600

600

0.480

March 31, 2026

The Nishi-Nippon City Bank

March 30, 2018

600

600

0.802

March 31, 2028

The Bank of Fukuoka

March 30, 2018

500

500

0.802

March 31, 2028

Mizuho Bank

March 30, 2018

500

500

0.630

March 31, 2028

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Lump-sum uponmaturity

Sumitomo Mitsui Banking
Corporation

March 30, 2018

500

500

0.504

March 31, 2025

Lump-sum uponmaturity

MUFG Bank

March 30, 2018

500

500

0.490

March 31, 2027

Sumitomo Mitsui Trust Bank

March 30, 2018

400

400

0.576

March 31, 2027

The Oita Bank

March 30, 2018

400

400

0.646

March 31, 2028

The Hiroshima Bank

March 30, 2018

400

400

0.646

March 31, 2028

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

FUKUOKA REIT CORPORATION

20

Refinance fund

Refinance fund
Refinance fund
Refinance fund

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

No collateral/
No guarantee

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fundAcquisition fund
Refinance fund
Refinance fund
Refinance fund

Refinance fund
Refinance fund
Refinance fund
Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guaranteeII. Semiannual Report

II. Semiannual Report

Expenses and Liabilities
Category
LenderLong-term
debt

Acquisitions and Sales during the 29th Fiscal Period

Balance as of Balance as of Average
September
1, February 28, interest
Drawdown date
2018
2019
rate

Repayment
date

Repayment
methodUse offunds

Description(mm of yen)

(mm of yen)(%) (Note 1)

Shinsei Bank

March 30, 2018

300

300

0.400

March 31, 2025

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Banking
Corporation

January 31, 2019

–

500

0.655

January 31, 2029

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

MUFG Bank

January 31, 2019

–

500

0.590

January 31, 2028

Refinance fund

The Nishi-Nippon City Bank

January 31, 2019

–

400

0.419

January 31, 2029

The Bank of Fukuoka

January 31, 2019

–

300

0.419

January 31, 2029

The Oita Bank

February 28, 2019

–

200

0.334

February 27, 2026

The Kagoshima Bank

February 28, 2019

–

200

0.334

February 27, 2026

The Higo Bank

February 28, 2019

–

200

0.334

February 27, 2026

Resona Bank

February 28, 2019

–

200

0.488

February 28, 2029

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

66,30070,50064,10072,500Subtotal
Total

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund

(Note) The average interest rate is a weighted-average figure during the fiscal period and is rounded to the third decimal place. Furthermore, the average interest rate of debt for which FRC conductedinterest rate swap transactions in order to hedge against interest rate fluctuation risks is the weighted-average figure during the fiscal period taking into consideration the effect of interest rate swaps.

3. Investment corporation bonds
As of February 28, 2019, FRC has the following investment corporation bonds outstanding.
Issue

Issue date

Balance as of Decrease during Balance as of
September 1, the fiscal period February 28,
2019
2018
(mm of yen)
(mm of yen)First Series ofUnsecured Bonds
Second Series ofUnsecured Bonds
Third Series ofUnsecured Bonds

Maturity
date

Coupon(%)

Use

Description(mm of yen)

December 30, 2013

2,000

–

2,000

1.32

December 29, 2023

July 31, 2017

2,000

–

2,000

1.00

July 30, 2032

July 31, 2018

1,000

–

1,000

1.20

July 30, 2038

5,000

–

5,000

Total

Maturity
methodLump-sumupon maturity(Note 1)
Lump-sumupon maturity(Note 1)
Lump-sumupon maturity(Note 1)

Repayment of debt
Repayment of debt
Repayment of debt

No collateral/
No guarantee(Note 2)
No collateral/
No guarantee(Note 2)
No collateral/
No guarantee(Note 2)

1. Acquisition and sale of real estate, asset-backed securities,
infrastructure assets, etc. and infrastructure-related assets, etc.
Acquisition
Property nameAcquisition price(Note) (mm of yen)

Acquisition date
Tissage Hotel Naha

Disposition
Disposition price(mm of yen)

Disposition date

2,835

–

–

–

–

–

2,835

–

–

–

–

Total

(Note) Acquisition price is the amount (transaction price indicated in the sales agreement) excluding expenses (transaction brokerage fees, taxes and other public charges, etc.) required for the acquisition of
the relevant real estate trust beneficiary interest.

2. Acquisition and sale of other assets
No relevant items.

3. Survey on prices of specified assets, etc.
(1) Real estate, etc.
Acquisition or
disposition

Property name

Type of asset

Acquisition

Tissage Hotel Naha

Real estate in trust

Acquisition price ordisposition priceTransaction date
(Note 1)(mm of yen)

Real estateappraisal value(Note 2)(mm of yen)

2,835

3,030

December 7, 2018

Real estateappraiser

Appraisal date

Tanizawa Sogo
November 1, 2018
Appraisal Co., Ltd.

(Note 1) Acquisition price is the amount (transaction price indicated in the sales agreement) excluding related expenses (transaction brokerage fees, taxes and other public charges, etc.) required for theacquisition of the relevant real estate trust beneficiary interest.
(Note 2) The above appraisals were valuated by applying the “Real Estate Appraisal Standards, Chapter 3: Valuation for price of real estate for securitization.”(2) Other
Other than the transactions described in "(1) Real estate, etc." above, FRC carried out no transaction that was required to havethe value, etc. reviewed pursuant to the provisions of Article 201 of the Investment Trusts Act.

4. Short-term investment corporation bonds
No relevant items.

5. Subscription rights to shares
No relevant items.

21

Gain or loss on sale
(mm of yen)

December 7, 2018

(Note 1) The Bonds may be repurchased and cancelled by FRC at any time on and after the date following the payment date, unless otherwise determined by the book-entry transfer agent.
(Note 2) The bonds are subject to the limited pari passu clause among specified investment corporation bonds.

FUKUOKA REIT CORPORATION

Book value(mm of yen)

FUKUOKA REIT CORPORATION

22

II. Semiannual Report

II. Semiannual Report

Acquisitions and Sales during the 29th Fiscal Period

Acquisitions and Sales during the 29th Fiscal Period
4. Transactions with interested parties, etc.

5. Transactions with the asset management company regarding
concurrent work conducted by the asset management company(1) Transaction status
No relevant items.

The asset management company (Fukuoka Realty Co., Ltd.) does not concurrently conduct any class 1 financial instruments
transaction business, class 2 financial instruments transaction business, land and building transaction business or real estatesyndication business, and has no such transactions with FRC.

(2) Amount of fees paid, etc.
FRC paid the following fees to the interested parties, etc. during the 29th fiscal period. Furthermore, interested parties, etc.
refer to the interested parties of the asset management company who have concluded an asset management agreement with
FRC and are designated in Article 123 of the Enforcement Order of the Act on Investment Trusts and Investment Corporations.
Of these interested parties, etc., the below table indicates the business partners to which FRC paid fees, etc. during the 29th
fiscal period.
Category

Total paid fees(A)(thousands of yen)
(Note 1)

Property leasing brokerage fees (Note 2)

16,929Property management fees (Note 3)354,855

Outsourcing fees (Note 2) (Note 4)

1,553,987

Other operating expenses (Note 2)

1,492,185

Breakdown of transactions with interested parties, etc.
Paid amount (B)Paid party(thousands of yen)

Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Sunlife Co., Ltd.
Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Sunlife Co., Ltd.

Percentage of total
amount(B)/(A)
(%)

9,867
477
179,858
165,823
940,654441,336
112,593247,699
302,305250(Note 1) Aside from the paid fees shown above, FRC paid the following amounts for repairs, etc. that were ordered to interested parties, etc. during the 29th fiscal period. The amounts include
construction work fees paid to third parties through interested parties, etc.
Fukuoka Jisho Co., Ltd.
860,503 thousand yen
FJ. Entertainment Works Ltd.
251,228 thousand yen
Sunlife Co., Ltd.
62,267 thousand yen(Note 2) The property leasing brokerage fees, outsourcing fees and other operating expenses include property leasing brokerage fees, etc. paid to third parties through interested parties, etc.
(Note 3) The property management fees do not include the following construction supervision fees. In addition, of the fees below, the construction supervision fees paid upon acquiring real estate areincluded in the acquisition cost of the relevant real estate.
Fukuoka Jisho Co., Ltd.
11,932 thousand yen
FJ. Entertainment Works Ltd.
11,994 thousand yen(Note 4) The outsourcing fees shown above are paid fees, etc. regarding building management outsourcing fees, and do not coincide with the outsourcing fees described in VIII. Notes to Financial
Statements (Notes to statement of income) that include property management fees and others.

58.3
2.8
50.7
46.7
60.5
28.4
7.2
16.6
20.3
0.0

Overview of Accounting
1. Assets, liabilities, principal and profits/loss
Please refer to the IV. Balance Sheet, V. Statement of Income, VI. Statement of Changes in Net Assets, VII. Cash Flow
Statement, and VIII. Notes to Financial Statements on later pages of this report.

2. Changes in calculation method of depreciation
No relevant items.

3. Changes in valuation method of real estate and infrastructure assets,
etc.
No relevant items.

4. Overview of self-managed investment trust beneficiary certificatesNo relevant items.

5. Disclosure on corporation owning foreign real estate
No relevant items.

6. Disclosure on real estate owned by corporation owning foreign realestateNo relevant items.

Other
1. Handling of fractions of monetary amounts and percentage figures
Unless otherwise stated, the figures less than the specified unit are rounded down for monetary amounts and rounded off to
one decimal place for percentage figures throughout this Semiannual Report.

FUKUOKA REIT CORPORATION23FUKUOKA REIT CORPORATION

24

III. Independent Auditor's Report

IV. Balance Sheet(thousands of yen)Account

28th fiscal period(as of August 31, 2018)

29th fiscal period(as of February 28, 2019)

AssetsCurrent assets
Cash and deposits

2,609,937

3,570,388

Cash and deposits in trust

5,386,980

4,796,296

Operating accounts receivable542,640

676,783

Prepaid expenses

254,144297,375

Consumption taxes receivable

598,560

–

4,737

4,182

9,397,000

9,345,026

OthersTotal current assets
Non-current assets
Property, plant and equipment
Buildings in trust*1

98,000,220*1

100,692,867

Accumulated depreciation(27,296,476)(28,811,313)

Buildings in trust, net

70,703,743

71,881,554

Structures in trust

1,855,414

1,873,277

Accumulated depreciation(700,178)(729,404)

Structures in trust, net

1,155,236

1,143,873

Machinery and equipment in trust

1,295,492

1,400,813

Accumulated depreciation(422,173)(462,805)

Machinery and equipment in trust, net

873,319

938,007

Vehicles and transport equipment in trust

747

747

Accumulated depreciation

(485)

(533)

Vehicles and transport equipment in trust, net

261

214

Tools and fixtures in trust

1,328,883

1,378,452

Accumulated depreciation(1,083,830)(1,117,165)

Tools and fixtures in trust, net
Lands in trust

245,052*1

103,814,610

104,918,451

113,234

7,088

176,905,458

179,150,475

5,545,883

5,545,883

Construction in progress in trust
Total property, plant and equipment

261,286*1

Intangible assets
Leasehold right in trust

14,39026,6545,560,273

5,572,537

15

17

Other intangible assets in trust
Total intangible assets
Investment and other assets
Deferred tax assets
Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

327,135

327,135

Long-term prepaid expenses

850,645972,221

Total investment and other assets
Total non-current assets

1,187,795

1,309,374

183,653,528

186,032,387

Deferred assets
Investment corporation bond issuance expenses

42,55140,449Investment unit issuance expenses

19,177

15,342

Total deferred assets

61,72855,791

193,112,257

195,433,205

Total assets

FUKUOKA REIT CORPORATION25FUKUOKA REIT CORPORATION

26

IV. Balance Sheet

V. Statement of Income(thousands of yen)(thousands of yen)Account

28th fiscal period(as of August 31, 2018)

29th fiscal period(as of February 28, 2019)

Account

28th fiscal period(March 1, 2018 to August 31, 2018)

29th fiscal period(September 1, 2018 to February 28, 2019)

Operating revenues

Liabilities
Current liabilities

Leasing revenues – real estate*18,478,614*1

8,604,955

Operating accounts payable

Other leasing revenues – real estate*1699,815*1

637,878

649,469

905,301

4,200,000

8,400,000

Accounts payable-other

18,856

20,908

Accrued expenses

363,618

368,137

992

1,047

Current maturities of long-term debt

Income taxes payable
Accrued consumption taxes

Total operating revenues

9,178,430

9,242,834

Operating expenses
Expenses related to leasing business*1*2

5,287,625

Asset management fees*1*2

5,274,003

520,829532,061–

199,254

Asset custody fees

6,702

7,182

Advances received

1,049,850

1,043,991

Administrative service fees

53,87254,581

Deposits received

1,327,250

1,103,147

Director’s compensations

9,600

9,600

Total current liabilities

7,610,038

12,041,787

Other operating expenses

61,761

59,167

Investment corporation bonds

5,000,000

5,000,000

Operating incomeLong-term debt

66,300,000

64,100,000

Non-operating revenues

375,482

Non-current liabilities

Total operating expenses

Tenant leasehold and security deposits
Tenant leasehold and security deposits received in trust

375,422*1

Total non-current liabilities
Total liabilities

5,940,392

5,936,596

3,238,038

3,306,238

Interest received

37

39

12,041,779

Others531

2,162

83,702,912

81,517,261

Total non-operating revenues

569

2,202

91,312,950

93,559,049

12,027,489*1

Net assets

Non-operating expenses
Interest expenses

254,894

245,801

Unitholders’ equity

Interest expenses on investment corporation bonds

24,20029,200Unitholders’ capital

Amortization of investment corporation bond issuance
expenses

1,722

2,102

Amortization of investment unit issuance expenses

4,770

3,835

Financing related expenses

91,901

91,53530

37377,518

372,511

Ordinary income

2,861,088

2,935,928

Profit before income taxes

98,938,764

98,938,764

Unappropriated surplus

2,860,542

2,935,391

Total surplus

2,860,542

2,935,391

101,799,306

101,874,156

Surplus

Total unitholders’ equity
Total net assets*3

Total liabilities and net assets

101,799,306
193,112,257*3

101,874,156
195,433,205

OthersTotal non-operating expenses

2,861,088

2,935,928

Income taxes-current

998

1,053

Income taxes-deferred

1(2)

Total income taxes

1,000

1,051

2,860,088

2,934,877

Surplus brought forward

453

514

Unappropriated surplus

2,860,542

2,935,391

ProfitFUKUOKA REIT CORPORATION27

FUKUOKA REIT CORPORATION

28

VI. Statement of Changes in Net Assets
28th fiscal period (March 1, 2018 to August 31, 2018)
Item
Balance as ofMarch 1, 2018
Changes in thecurrent fiscal
periodIssuance of new
investment units
Dividend of
surplusProfitTotal of changes
in the current
fiscal period
Balance as ofAugust 31,
2018

Unitholders’ capital
91,142,766

Unitholders’ Equity
Surplus
Unappropriated surplus

Total unitholders’ Total net assets
equity2,623,917

93,766,684(2,623,464)

Balance as of
September 1,
2018
Changes in thecurrent fiscal
periodDividend of
surplusProfitTotal of changes
in the current
fiscal period
Balance as ofFebruary 28,
2019

Net cash provided by (used in) operating activities
Profit before income taxes

2,861,088

2,935,928

Depreciation and amortization expenses

1,602,568

1,622,792

Amortization of investment corporation bond issuance expenses

1,722

2,102

Amortization of investment unit issuance expenses

4,770

3,835

Interest received

(37)

(39)

279,094

275,001

7,795,998

Interest expenses(2,623,464)(2,623,464)

Decrease (increase) in operating accounts receivables(82,691)(134,143)

Decrease (increase) in consumption taxes refund receivable(598,560)

598,560

Increase (decrease) in accrued consumption taxes(298,500)

199,254

Increase (decrease) in operating accounts payable

61,299(10,519)

(638)

2,530

27,1035,784

2,860,088

2,860,088

2,860,088

236,624

8,032,622

8,032,622

Increase (decrease) in accounts payable-other
98,938,764

2,860,542

Unitholders’ capital
98,938,764

Unitholders’ Equity
Surplus
Unappropriated surplus
2,860,542

101,799,306

101,799,306

Increase (decrease) in accrued expenses
Increase (decrease) in advances received

59,676(5,858)

Increase (decrease) in deposits expenses

558,514(224,102)

Decrease (increase) in prepaid expenses(thousands of yen)

Total unitholders’ Total net assets
equity101,799,306

101,799,306

Decrease (increase) in long-term prepaid expenses
Others, net
SubtotalInterest income received(2,860,028)(2,860,028)(2,860,028)

2,934,877

2,934,877

2,934,877

74,84974,84974,8492,935,391

101,874,156

101,874,156(43,231)(121,575)

3,314

3,668

4,421,137

5,109,987

37

39(276,266)

Income taxes paid

(778)

(998)

Income taxes refund

428–

4,149,768

4,832,761

Purchase of property, plant and equipment in trust(12,130,191)(3,601,665)

Purchase of intangible assets in trust(3,775,257)(15,881)

8,534

60

Net cash provided by (used in) investment activities

Proceeds from tenant leasehold and security deposits
Repayments of tenant leasehold and security deposits

98,938,764

6,646(64,233)(271,057)

Interest expenses paid

Net cash provided by (used in) operating activities–

29th fiscal period(September 1, 2018 to
February 28, 2019)7,795,998

29th fiscal period (September 1, 2018 to February 28, 2019)
Item

93,766,684(thousands of yen)
28th fiscal period(March 1, 2018 toAugust 31, 2018)

Account(thousands of yen)

7,795,998

7,795,998

VII. Cash Flow Statement(6,536)–

1,023,194

149,480

Repayments of tenant leasehold and security deposits in trust(228,985)(135,190)

Payments of tenant leasehold and security deposits in trust(217,135)–

Proceeds from tenant leasehold and security deposits in trust

Proceeds from restricted trust deposits

2,872

5,343

Payments for restricted trust deposits(2,751)(6,268)(15,326,254)(3,604,122)

Net cash provided by (used in) investment activities
Net cash provided by (used in) financial activities
Proceeds from short-term debt

4,100,000

4,800,000

Repayments of short-term debt

(4,100,000)(4,800,000)

Proceeds from long-term debt

7,200,000

2,500,000

Repayments of long-term debt

(1,600,000)(500,000)

Proceeds from issuance of investment corporation bonds

1,000,000–

Proceeds from issuance of investment units

7,795,998–(13,660)–

Payments of investment corporation bond issuance expenses(23,013)–

Dividends paid

Payment of investment unit issuance expenses(2,624,781)(2,859,795)

Net cash provided by (used in) financial activities

11,734,542(859,795)

Net increase (decrease) in cash and cash equivalents

558,055

368,843

Balance of cash and cash equivalents at beginning of period
Balance of cash and cash equivalents at end of period

FUKUOKA REIT CORPORATION

29

7,392,916
7,950,972*1

FUKUOKA REIT CORPORATION

30

7,950,972*1

8,319,815

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Significant accounting policies)
1. Depreciation method for non-current assets(Notes to accounting standards not yet adopted)(1) Property, plant and equipment
Depreciation is calculated using the straight-line method.
The useful lives of major categories of property, plant and equipment are as follows:
Buildings in trust:
10 – 65 years
Structures in trust:
15 – 60 years
Machinery and equipment in trust:
15 – 30 years
Vehicles and transport equipment in trust:
7 years
Tools and fixtures in trust:5 – 20 years(2) Intangible assets
Intangible assets are amortized utilizing the straight-line method.
(3) Long-term prepaid expenses
Long-term prepaid expenses are amortized utilizing the straight-line method.

2. Accounting for deferred assets

Investment unit issuance expenses
Investment unit issuance expenses are amortized utilizing the straight-line method over three years.
Investment corporation bond issuance expenses
Investment corporation bond issuance expenses are amortized utilizing the straight-line method overthe period through redemption.

3. Standards for recognition of revenues and expenses

Accounting treatment of property taxes, etc.
In connection with property taxes, city planning taxes and depreciated asset taxes, FRC uses themethod of charging the corresponding amounts of assessed taxes to the current fiscal period as
expenses related to leasing business.
The amount equivalent to property taxes, etc. for the initial fiscal year paid to the seller as settlementmoney upon acquisition of real estate or trust beneficiary interests in real estate as entrusted property
are not expensed but capitalized as part of the acquisition cost of the relevant property.
The amount equivalent to property taxes, etc. capitalized in the acquisition cost of real estate, etc. was89,171 thousand yen for the 28th fiscal period. The amount equivalent to property taxes, etc.
capitalized in the acquisition cost of real estate, etc. was 52 thousand yen for the 29th fiscal period.

4. Method of hedge accounting(1) Method of hedge accounting
Deferred hedge accounting is applied for interest rate swap transactions. However, special accounting
is applied for interest rate swap transactions that satisfy the requirements for special accounting.
(2) Hedging instruments and hedged items
Hedging instrument: interest rate swap transactions
Hedged items: interest rates of borrowings(3) Hedging policy
FRC conducts derivative transactions to hedge interest rate fluctuation risks for floating-rate borrowings
based on FRC’s Articles of Incorporation.
(4) Method for assessing the effectiveness of hedging
Assessment of the effectiveness of hedging is omitted as requirements are satisfied for special
accounting for interest rate swap transactions.

5. Scope of funds (cash and cash equivalents) in cash
flow statement

The funds (cash and cash equivalents) in the cash flow statement consist of cash on hand and cash intrust; deposits that can be withdrawn at any time and deposits in trust; and short-term investments witha maturity of 3 months or less from the date of acquisition, which are readily convertible to cash and bear
only an insignificant risk of value fluctuation.

6. Other significant items fundamental to preparing thefinancial statements(1) Accounting methods for trust beneficiary interests in real estate as entrusted property
Regarding trust beneficiary interests in owned real estate as entrusted property, all asset and liability
accounts of the entrusted properties as well as all revenue and expense accounts generated by theentrusted properties are recorded in relevant accounts on the balance sheet and statement of income.
Furthermore, the following material accounts are separately stated on the balance sheet for entrusted
properties recorded in relevant accounts.
① Cash and deposits in trust② Buildings in trust, structures in trust, machinery and equipment in trust, vehicles and transport
equipment in trust, tools and fixtures in trust, lands in trust and construction in progress in trust③ Leasehold right in trust④ Other intangible assets in trust⑤ Lease and guarantee deposits in trust⑥ Tenant leasehold and security deposits received in trust(2) Accounting for consumption taxes
National and local consumption taxes are accounted with the consumption taxes excluded.

FUKUOKA REIT CORPORATION

31• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 issued by the Accounting Standards Board ofJapan (ASBJ) on March 30, 2018)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30 issued by ASBJ on
March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) jointly
developed a comprehensive accounting standard for revenue recognition, and issued it as Revenue from Contracts with
Customers (IFRS 15 issued by IASB and Topic 606 issued by FASB) in May 2014. IFRS 15 is applicable for accounting
periods beginning on January 1, 2018 and thereafter, and Topic 606 is applicable for accounting periods beginning after
December 15, 2017. In accordance with this, the ASBJ has developed a comprehensive accounting standard for revenue
recognition and issued it together with its implementation guidance. In developing the accounting standard for revenue
recognition, the ASBJ made it a basic policy to adopt the basic principles of IFRS 15 as a starting point. By doing so, the
ASBJ established the accounting standard from the viewpoint of comparability, which is a benefit for securing consistency
with IFRS 15, between financial statements based on Japanese GAAP and those based on other accounting standards.
Alternative treatments were also added, to the extent that they do not harm the comparability, in cases where there areitems to be considered in the actual practices conducted in Japan to date.
(2) Scheduled date of adoption
FRC will adopt the Accounting Standard and Implementation Guidance from the beginning of the fiscal period ending
February 2022.
(3) Impact of adoption of the accounting standard and implementation guidance
The amount of impact on the financial statements by the adoption of the Accounting Standard and Implementation
Guidance for Revenue Recognition is being assessed at present.

(Notes to changes in the presentation)
As of the beginning of the 29th fiscal period, FRC applied the Partial Amendments to Accounting Standard for Tax EffectAccounting (The Accounting Standards Board of Japan Statement No. 28 issued on February 16, 2018) and changed thepresentation method so that deferred tax assets are classified as investment and other assets and deferred tax liabilities
are classified as non-current liabilities.
As a result, deferred tax assets amounting to 15 thousand yen which were presented under current assets on the balance
sheet for the 28th fiscal period have been reclassified as deferred tax assets in the investment and other assets category.

FUKUOKA REIT CORPORATION

32

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to balance sheet)(Notes to statement of income)*1. Assets pledged as collateral and secured liabilities
Assets pledged as collateral are as follows:*1. Breakdown of revenues and expenses related to real estate leasing business.
(thousands of yen)
28th fiscal period

29th fiscal period

as of August 31, 2018

Buildings in trust
Lands in trust

as of February 28, 2019

6,175,454
16,101,020
22,276,475

Total(thousands of yen)

6,155,043
16,101,020
22,256,064

Secured liabilities are as follows:(thousands of yen)
28th fiscal period

29th fiscal period

as of August 31, 2018

Tenant leasehold and security deposits
received in trust

as of February 28, 2019

1,446,671

1,414,298

2. Balance of unused committed line of credit
FRC has executed committed line of credit agreements with its banks primarily to conduct efficient and dynamic cash management.
[Committed line of credit agreement 1](thousands of yen)
28th fiscal period

29th fiscal period

as of August 31, 2018

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
periodas of February 28, 2019

6,000,000－

6,000,000－

6,000,000

6,000,000

28th fiscal period

29th fiscal period(March 1, 2018 to August 31, 2018)(September 1, 2018 to February 28, 2019)

A. Real estate leasing business revenues
Leasing revenues - real estate
Rents
Common charges
Parking revenues
Other leasing revenues - real estate
Incidental income
Other miscellaneous income
Total real estate leasing business revenues
B. Expenses related to real estate leasing business
Expenses related to leasing businessOutsourcing fees
Repair and maintenance expenses
Taxes and other public charges
Insurance premiums and trust compensation
Utilities expenses
Depreciation and amortization expenses
Other expenses related to real estate leasing businessTotal expenses related to real estate leasing business
C. Revenues and expenses related to real estate leasing business (A - B)

6,883,299
1,123,477
471,838

8,478,614

674,484
25,331(thousands of yen)
28th fiscal period

29th fiscal period

as of August 31, 2018

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
period

1,913,254
220,275
661,889
58,540595,918
1,602,568
235,179

7,000,000－

7,000,000－

7,000,000

7,000,000

28th fiscal period

29th fiscal period

as of August 31, 2018as of February 28, 201950,00050,0001,908,842
221,346
661,774
55,689569,325
1,622,792
234,232

5,287,625
5,287,625
3,890,804(thousands of yen)
28th fiscal period

29th fiscal period(March 1, 2018 to August 31, 2018)(September 1, 2018 to February 28, 2019)

Expenses related to leasing businessas of February 28, 2019

*3. Minimum net assets designated in Article 67- 4 in the Act on Investment Trusts and Investment Corporations.
(thousands of yen)Item616,581
21,296

699,815
9,178,430*2. Transactions with affiliated companies.
[Committed line of credit agreement 2]

7,045,595
1,111,443
447,916

1,474,309

1,493,926(Notes to statement of changes in net assets)
28th fiscal period

29th fiscal period(March 1, 2018 to August 31, 2018)

Total number of authorized investment units andtotal number of investment units issued
Total number of authorized investment units
Total number of investment units issued(September 1, 2018 to February 28, 2019)10,000,000 units
796,000 units

10,000,000 units
796,000 units(Notes to cash flow statement)*1. Relationship between the balance of cash and cash equivalents at end of period and the amounts of the corresponding accounts on the balance sheet.
(thousands of yen)
28th fiscal period

29th fiscal period(March 1, 2018 to August 31, 2018)

Cash and deposits
Cash and deposits in trust
Restricted trust deposits (Note)
Cash and cash equivalents(September 1, 2018 to February 28, 2019)

2,609,937
5,386,980(45,945)
7,950,972

3,570,388
4,796,296(46,870)8,319,815(Note) Restricted trust deposits are trust deposits reserved for refunding tenant leasehold and security deposits deposited by tenants and for other purposes.

(Notes to leases)
The future lease revenues under the non-cancellable operating leases [as lessor] are as follows:(thousands of yen)
28th fiscal period

29th fiscal period(as of August 31, 2018)

Due within 1 year
Due after 1 year
Total
FUKUOKA REIT CORPORATION

33(as of February 28, 2019)5,460,765
20,411,538
25,872,304
FUKUOKA REIT CORPORATION

5,456,188
19,862,497
25,318,685
34

8,604,955

637,878
9,242,834

5,274,003
5,274,003
3,968,831

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to financial instruments)

2. Matters concerning fair value of financial instruments

1. Matters concerning status of financial instruments

The following table includes the book values for financial instruments as recorded on the balance sheet, the corresponding
fair values and the difference between these amounts as of August 31, 2018. Please note that the following table does notinclude those financial instruments for which determination of fair value is considered to be extremely difficult (refer to (Note 2)).

(1) Policy on handling financial instruments
In order to secure stable earnings and steady growth of assets under management, FRC procures funds primarily throughborrowings from financial institutions, issuance of investment corporation bonds or issuance of investment units forproperty acquisitions, repair and maintenance work, repayment of interest-bearing debt and other purposes.
In procuring interest-bearing debt, FRC borrows funds primarily in long-term, fixed interest debt based on the policy of
establishing a solid financial structure, and conducts conservative operations intended to secure financial stability andliquidity by dispersing debt payment dates and utilizing committed lines of credit and through other measures.
With regard to surplus funds, FRC manages them as various deposits and savings, etc. to support efficient management
while considering security.
FRC conducts derivative transactions only for the purpose of hedging the risk of future interest rate fluctuation, and not
for the purpose of speculation.
(2) Description of financial instruments and associated risks, and risk management structure
Debt and investment corporation bonds are funds procured primarily for acquiring real estate trust beneficiary interests andrefinancing of borrowings. Borrowings and investment corporation bonds are exposed to liquidity risks upon debt payment
dates, but FRC works to mitigate these risks by such measures as appropriately controlling the ratio of interest-bearing
debt to total assets and executing commitment line agreements with local financial institutions that are lenders to secure
on-hand liquidity.
In addition, borrowings with floating interest rates are exposed to interest rate fluctuation risks. However, FRC works
to reduce the risks by such measures as adjusting the ratio of the balance of borrowings with floating interest rates tototal borrowings in accordance with the financial environment and other factors. FRC conducts derivative transactions(specifically interest rate swap transactions) for part of its borrowings with floating interest rates in order to hedge the risk
of future fluctuations in the rates of interest payable. Furthermore, assessment of the effectiveness of these interest rate
swaps is omitted as it has been determined that they have met the requirements for special accounting. FRC executes andmanages its derivative transactions in accordance with its financial derivative transaction management policies and, it does
so only with financial institutions it determines to have a certain level of creditworthiness, by reference to their credit ratings,
to reduce counterparty risks.
FRC manages surplus funds in large time deposits. Such deposits are subject to the risks of failure of the financial
institutions holding the deposits as well as other credit risks. FRC mitigates the risks by limiting its deposits to financial
institutions with a certain level of creditworthiness, by reference to their credit ratings, as well as by setting short durations
for these deposits.
Tenant leasehold and security deposits received in trust are deposits from tenants and are exposed to liquidity risks if
tenants move out before the contracts expire. FRC mitigates this risk by such measures as securing on-hand liquidity.
(3) Supplementary explanation on matters concerning fair value of financial instruments
The fair value of financial instruments, aside from values based on market price, may include values based on reasonablecalculations when there is no market price. Certain assumptions are made in calculating those values, and there may becases where the values will vary when different assumptions are used.
As for the contract value and other conditions of derivative transactions indicated in “2. Matters concerning fair value offinancial instruments,” the contract value is not an indicator of the market risks related to such transactions.

(thousands of yen)

(1) Cash and deposits(2) Cash and deposits in trust
Total of assets(3) Short-term debt
(4) Current maturities of long-term debt
(5) Investment corporation bonds(6) Long-term debt
(7) Tenant leasehold and security deposits received in trust
Total of liabilities(8) Derivative transactions
Total of derivative transactions

Book value recorded on thebalance sheet
2,609,937
5,386,980
7,996,917–
4,200,000
5,000,000
66,300,000
654,987
76,154,987––

Fair value

Difference(Note 1)

2,609,937
5,386,980
7,996,917–
4,202,876
5,218,003
66,438,703
653,918
76,513,502
–
–

–
–
–
–
2,876
218,003138,703(1,068)358,515––

The following table includes the book values for financial instruments as recorded on the balance sheet, the corresponding
fair values and the difference between these amounts as of February 28, 2019. Please note that the following table does notinclude those financial instruments for which determination of fair value is considered to be extremely difficult (refer to (Note 2)).
(thousands of yen)

(1) Cash and deposits(2) Cash and deposits in trust
Total of assets(3) Short-term debt
(4) Current maturities of long-term debt
(5) Investment corporation bonds(6) Long-term debt
(7) Tenant leasehold and security deposits received in trust
Total of liabilities(8) Derivative transactions
Total of derivative transactions

Book value recorded on thebalance sheet
3,570,388
4,796,296
8,366,685–
8,400,000
5,000,000
64,100,000
614,280
78,114,280––

Fair value

Difference(Note 1)3,570,388
4,796,296
8,366,685–
8,408,528
5,338,493
66,509,457
613,876
80,870,357
–
–

–
–
–
–
8,528
338,4932,409,457(403)
2,756,077––(Note 1) Calculation method for fair value of financial instruments(1) Cash and deposits, (2) Cash and deposits in trust and (3) Short-term debt
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated at that book value.
(4) Current maturities of long-term debt, (5) investment corporation bonds and (6) Long-term debt
The fair value of long-term debt with fixed interest rates (including debt with practical fixed interest rates through interest rate swaps) and investment corporation bonds (the “debt, etc.”) is
calculated by discounting the total amount of principal and interest by the rate assumed as being applicable in the event of a new drawdown of similar debt, etc.
The fair value of long-term debt with floating interest rates is based on the book value, as the contract terms require the interest rates to be revised in a certain period of time (within six months)
and thus is considered to be nearly equal to the book value.
(7) Tenant leasehold and security deposits received in trust
The fair value of tenant leasehold and security deposits received in trust, which are deposited by the lessees, is calculated by discounting the future cash flows of such deposits by a reasonably
estimated rate that takes into account the term remaining until the reimbursement deadline and credit risks.
(8) Derivative transactions
Please refer to (Notes to derivative transactions)(Note 2) Financial instruments for which determination of fair value is considered extremely difficult.

(thousands of yen)
28th fiscal period

29th fiscal period(as of August 31, 2018)

Tenant leasehold and security deposits
received in trust(*)(as of February 28, 2019)11,372,502

11,427,498* Tenant leasehold and security deposits received in trust are not subject to the requirement to disclose fair value, as it is considered extremely difficult to determine
the fair value. This is because future cash flows cannot be estimated since there is no market price and it is difficult to assume the reimbursement dates due to thepossibility of cancellation, renewal and re-execution of lease contracts by lessees even if the contract terms are fixed, and because the past rate of tenants moving outof the properties owned by FRC may not be indicative of future move out rates as they are too specific to individual circumstances.

( )FUKUOKA REIT CORPORATION35FUKUOKA REIT CORPORATION

36

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to derivative transactions)(Note 3) Amount of redemption of monetary claims scheduled to be due after closing of accounts (as of August 31, 2018)(thousands of yen)

1. Derivatives to which hedge accounting is not applied

Due in 1 year or less
2,609,937
5,386,980
7,996,917

Cash and deposits
Cash and deposits in trust
Total

28th fiscal period (as of August 31, 2018)
Not applicable.

Amount of redemption of monetary claims scheduled to be due after closing of accounts (as of February 28, 2019)(thousands of yen)

29th fiscal period (as of February 28, 2019)
Not applicable.

Due in 1 year or less
3,570,388
4,796,296
8,366,685

Cash and deposits
Cash and deposits in trust
Total

2. Derivatives to which hedge accounting is applied
28th fiscal period (as of August 31, 2018)(Note 4) Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of August 31, 2018)(thousands of yen)

Long-term debt
Investment
corporation bonds

Due in 1 year or less
4,200,000–

1 to 2 years
5,700,000–

2 to 3 years
6,300,000

3 to 4 years
6,000,000––

4 to 5 years
5,900,000

Due after 5 years
42,400,000–(thousands of yen)
Method of hedge accounting

5,000,000
Special accounting for interest rate swaps

Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of February 28, 2019)(thousands of yen)

Long-term debt
Investment
corporation bonds

The following is the contract amount or amount equivalent to the principal provided in the contract as of the closing ofaccounts for each method of hedge accounting.

Due in 1 year or less
8,400,000–

1 to 2 years
1,000,000–

2 to 3 years
6,300,000

3 to 4 years
6,000,000––

4 to 5 years
10,400,000

Due after 5 years
40,400,000

2,000,000

3,000,000

Contract amount, etc.
Calculation
Fair value method for theOf which,fair value
exceeding 1 year

Type of derivative transactions, etc. Main hedged item
Interest rate swap transaction
Receivable floating; Payable fixedLong-term debt

25,000,000

21,300,000(*)–(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt for accounting purposes. Accordingly, their fair value is included in the fair value of the relevant
long-term debt (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

29th fiscal period (as of February 28, 2019)
The following is the contract amount or amount equivalent to the principal provided in the contract as of the closing ofaccounts for each method of hedge accounting.
(thousands of yen)

(Notes to investment securities)

Method of hedge accounting

28th fiscal period (as of August 31, 2018)
Not applicable.

Special accounting for interest rate swaps

Contract amount, etc.
Calculation
Fair value method for theOf which,fair value
exceeding 1 year

Type of derivative transactions, etc. Main hedged item
Interest rate swap transaction
Receivable floating; Payable fixedLong-term debt

25,200,000

19,000,000(*)–(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt for accounting purposes. Accordingly, their fair value is included in the fair value of the relevant
long-term debt (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

29th fiscal period (as of February 28, 2019)
Not applicable.

(Notes to retirement benefits)
28th fiscal period (as of August 31, 2018)
Not applicable as FRC does not have any retirement benefit system.

29th fiscal period (as of February 28, 2019)
Not applicable as FRC does not have any retirement benefit system.

(Notes to tax effect accounting)
1. Breakdown of primary causes for occurrence of deferred tax assets and deferred tax liabilities.

(thousands of yen)

28th fiscal period

29th fiscal period(as of August 31, 2018)

Deferred tax assets
Amount of accrued business taxes not deductible from taxable income
Total deferred tax assets
Deferred tax assets, net

FUKUOKA REIT CORPORATION37FUKUOKA REIT CORPORATION(as of February 28, 2019)

15
15
15

38

17
17
17

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements

2. Breakdown of significant causes of the difference between the effective statutory income tax rate and the effective income tax rate after application of tax effectaccounting.
(%)
28th fiscal period

29th fiscal period(as of August 31, 2018)

28th fiscal period (from March 1, 2018 to August 31, 2018)
Not applicable.

(as of February 28, 2019)31.53(31.52)0.02
0.03

Effective statutory income tax rate
Deductible dividend amount
Other
Effective income tax rate after application of tax effect accounting(2) Affiliated companies, etc.

31.30
(31.29)0.02
0.04

29th fiscal period (from September 1, 2018 to February 28, 2019)
Not applicable.

(3) Sister companies(Notes to equity method income and earnings)

28th fiscal period (from March 1, 2018 to August 31, 2018)

28th fiscal period (from March 1, 2018 to August 31 2018)(thousands of yen)

Not applicable as FRC does not have any affiliated companies.

29th fiscal period (from September 1, 2018 to February 28, 2019)

Classification

Name

Location

CapitalBusiness
description

FRC’s shareof votingrights, etc. [orownership ofsuch in FRC]

20,000Real estatebusiness–

Consignment
Consignmentof real estate 1,021,869
of real estate
management,(Note 5)management, etc. etc. (Note 1)

Operatingaccounts
payable–Asset
Payment
management ofof asset
FRC, etc. andmanagement
concurrent service fees (Note 4)of officer (Note 3)

Accruedexpenses

Not applicable as FRC does not have any affiliated companies.

(Notes to transactions with related parties)

FJ.
Subsidiaries of Entertainment Hakata Ward,other affiliates Works Ltd. Fukuoka City

1. Transactions with related parties(1) Parent company and major corporate unitholders(Note 2)

Subsidiaries of Fukuoka Realty Hakata Ward,other affiliates
Co., Ltd.
Fukuoka City

28th fiscal period (from March 1, 2018 to August 31, 2018)(thousands of yen)Classification

Name

Location

Capital

Fukuoka Jisho Hakata Ward,
4,000,000
Other affiliates
Co., Ltd.
Fukuoka City
(Note 3)Business
description

Generalreal estatebusiness

FRC’s share of
voting rights, Description of Description ofetc.
relationshiptransaction

Transaction
amountCategory

Balanceat end ofperiodPurchase ofreal estate

15,090,000––

Consignmentof real estate
management,
etc. (Note 2)

1,474,309

Operatingaccounts
payable112,812[or ownership ofsuch in FRC]

Ownership in
Consignment
FRC Directof real estate[8.55%]
management,
Indirect [0.94%]
etc.

(Note 1)

(Note 4)(Note 4)(Note 4)(Note 1) Transaction terms and conditions are determined in reference to appraisal values by third parties and after negotiating on prices.
(Note 2) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 3) FRC has concluded a building lease and management consignment agreement with Fukuoka Jisho Co., Ltd. for Canal City Hakata, Canal City Hakata·B, Canal City Business Center and Taihaku
Street Business Center. The lease contract is a master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s
revenues. For properties covered by the said type of agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 4) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

29th fiscal period (from September 1, 2018 to February 28, 2019)

Classification

Other affiliates

Name

Location

Capital

Fukuoka Jisho Hakata Ward,
4,000,000
Co., Ltd.
Fukuoka City
(Note 2)Business
description

Generalreal estatebusiness

FRC’s share of
voting rights, Description of Description ofetc.
relationshiptransaction[or ownership ofsuch in FRC]

Ownership in
Consignment
FRC Directof real estate[8.55%]
management,
Indirect [0.94%]
etc.

Consignment of realestate management,
etc. (Note 1)(thousands of yen)Transaction
amountCategory

Balanceat end ofperiod

1,493,926

Operatingaccounts
payable101,575(Note 3)(Note 3)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded a building lease and management consignment agreement with Fukuoka Jisho Co., Ltd. for Canal City Hakata, Canal City Hakata·B, Canal City Business Center and Taihaku
Street Business Center. The lease contract is a master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s
revenues. For properties covered by the said type of agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

FUKUOKA REIT CORPORATION

39

Asset
management
200,000of FRCand otherbusinesses

Description ofrelationship

Description of Transaction
Categorytransaction
amount520,829(Note 5)

Balanceat end ofperiod

211,411(Note 5)

261,314(Note 5)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded with FJ. Entertainment Works Ltd. a real estate lease and management consignment agreement for Park Place Oita and a building lease and management consignment agreementfor Konoha Mall Hashimoto. The agreements are master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s
revenues. For the properties covered by the said type of the agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Etsuo Matsuyuki, CEO & Representative Director of FRC, concurrently serves as a CEO & Representative Director of Fukuoka Realty Co., Ltd.
(Note 4) The amount of the asset management fees is decided based on the asset management consignment agreement following discussion between the concerned parties.
(Note 5) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

29th fiscal period (from September 1, 2018 to February 28, 2019)(thousands of yen)Classification

Name

Location

FJ.
Subsidiaries of Entertainment Hakata Ward,other affiliates Works Ltd. Fukuoka City

CapitalBusiness
description

FRC’s shareof votingrights, etc. [orownership ofsuch in FRC]

20,000Real estatebusiness–

Consignment
Consignmentof real estateof real estate
management,
management, etc. etc. (Note 1)

961,363–

Asset
Payment
management ofof asset
FRC, etc. andmanagement
concurrent service fees (Note 4)of officer (Note 3)

532,061(Note 2)

Subsidiaries of Fukuoka Realty Hakata Ward,other affiliates
Co., Ltd.
Fukuoka City

Asset
management
200,000of FRCand otherbusinesses

Description ofrelationship

Description of Transaction
Categorytransaction
amount(Note 5)(Note 5)

Operatingaccounts
payableAccruedexpenses

Balanceat end ofperiod180,017(Note 5)

264,355(Note 5)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded with FJ. Entertainment Works Ltd. a real estate lease and management consignment agreement for Park Place Oita and a building lease and management consignment agreementfor Konoha Mall Hashimoto. The agreements are master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s
revenues. For the properties covered by the said type of the agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Etsuo Matsuyuki, CEO & Representative Director of FRC, concurrently serves as a CEO & Representative Director of Fukuoka Realty Co., Ltd.
(Note 4) The amount of the asset management fees is decided based on the asset management consignment agreement following discussion between the concerned parties.
(Note 5) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

FUKUOKA REIT CORPORATION

40

VIII. Notes to Financial Statements(4) Directors and major individual unitholders

The following table provides the income (loss) from properties for lease.

(thousands of yen)

28th fiscal period (from March 1, 2018 to August 31, 2018)
Use

Not applicable.

29th fiscal period (from September 1, 2018 to February 28, 2019)

RetailNot applicable.

2. Parent company and major affiliated companies

Office buildings

28th fiscal period (from March 1, 2018 to August 31, 2018)
Not applicable.

29th fiscal period (from September 1, 2018 to February 28, 2019)

OthersNot applicable.
Total(Notes to asset retirement obligations)
28th fiscal period (from March 1, 2018 to August 31, 2018)

28th fiscal period

29th fiscal period(March 1, 2018 toAugust 31, 2018)(September 1, 2018 to
February 28, 2019)

Amount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing business

5,937,957
3,679,834
2,258,123

5,986,689
3,658,315
2,328,374

2,415,877
1,240,489
1,175,387

2,405,402
1,229,333
1,176,068

824,595
367,301
457,294

850,742386,354464,387

9,178,430
5,287,625
3,890,804

9,242,834
5,274,003
3,968,831

Not applicable.

(Note) Real estate leasing business revenues and expenses related to real estate leasing business are comprised of leasing business revenues and accompanying expenses (outsourcing fees, depreciation
and amortization expenses, taxes and other public charges, etc.), and are recorded as Leasing revenues - real estate, Other leasing revenues - real estate and Expenses related to leasing business,
respectively.

29th fiscal period (from September 1, 2018 to February 28, 2019)(Notes to segment information)

Not applicable.

[Segment information](Notes to properties for lease)

Descriptions omitted as FRC has a single business segment of real estate leasing business.

FRC owns retail, office buildings and residential properties for lease in the Kyushu area centering on Fukuoka Prefecture. The
following table provides the book value recorded on the balance sheet, amount of change during the period and fair value ofthese properties for lease.

[Related information](thousands of yen)
Use

RetailAmount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

Office buildings

Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

OthersAmount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

Total

Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

28th fiscal period

29th fiscal period(March 1, 2018 toAugust 31, 2018)(September 1, 2018 to
February 28, 2019)

102,228,826
10,580,536
112,809,363
122,730,000

112,809,363( 219,213)
112,590,150
123,030,000

42,497,225
3,867,209
46,364,435
62,070,000

46,364,435(328,948)
46,035,486
63,510,000

23,419,151(127,217)
23,291,933
27,020,000

23,291,933
2,805,442
26,097,376
29,980,000

168,145,203
14,320,528
182,465,732
211,820,000

182,465,732
2,257,280
184,723,013
216,520,000(Note 1) Amount recorded on the balance sheet is the cost of acquisition less accumulated depreciation.
(Note 2) Of the amount of change during the 28th fiscal period, the amount of increase is primarily attributable to acquisition of three properties (Konoha Mall Hashimoto, Higashi Hie Business Center II and Park
Place Oita Daiichi Parking) (15,265 million yen in total) and capital expenditures (657 million yen), and the amount of decrease is primarily attributable to depreciation and amortization expenses (1,602
million yen). Of the amount of change during the 29th fiscal period, the amount of increase is primarily attributable to acquisition of Tissage Hotel Naha (2,936 million yen in total) and capital
expenditures (947 million yen), and the amount of decrease is primarily attributable to depreciation and amortization expenses (1,622 million yen).
(Note 3) The fair value at end of period is the appraisal value provided by outside real estate appraisers.

FUKUOKA REIT CORPORATION

41

28th fiscal period (from March 1, 2018 to August 31, 2018)( 1) Information by product and service
Descriptions are omitted as FRC’s operating revenues under single product/service classification for outside customers
exceed 90% of operating revenues recorded in the statement of income.

( 2) Information by region(a) Operating revenues
Descriptions are omitted as FRC’s operating revenues for outside customers in Japan exceed 90% of operating
revenues recorded in the statement of income.
(b) Property, plant and equipment
Descriptions are omitted as the amount of FRC’s property, plant and equipment located in Japan exceeds 90% of
property, plant and equipment recorded on the balance sheet.

( 3) Information by major customer
Descriptions are omitted as FRC’s operating revenues for an individual outside customer are less than 10% of operating
revenues recorded in the statement of income.

29th fiscal period (from September 1, 2018 to February 28, 2019)( 1) Information by product and service
Descriptions are omitted as FRC’s operating revenues under single product/service classification for outside customers
exceed 90% of operating revenues recorded in the statement of income.

( 2) Information by region(a) Operating revenues
Descriptions are omitted as FRC’s operating revenues for outside customers in Japan exceed 90% of operating
revenues recorded in the statement of income.
(b) Property, plant and equipment
Descriptions are omitted as the amount of FRC’s property, plant and equipment located in Japan exceeds 90% of
property, plant and equipment recorded on the balance sheet.
FUKUOKA REIT CORPORATION

42

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements( 3) Information by major customer
Descriptions are omitted as FRC’s operating revenues for an individual outside customer are less than 10% of operating
revenues recorded in the statement of income.

(Schedule of property, plant and equipment, and intangible assets)(thousands of yen)
Balance as of
September 1,
2018

Increase

Buildings in trust

98,000,220

Structures in trust
Machinery andequipment in trust

Type of asset(Notes to per unit information)
28th fiscal period(March 1, 2018 to August 31, 2018)

Net assets per unit (yen)Profit per unit (yen)29th fiscal period(September 1, 2018 to February 28, 2019)

127,888
3,593

127,982
3,687(Note 1) Profit per unit was calculated by dividing the profit by the daily weighted average number of investment units. Diluted profit per unit is not stated as there are no dilutive investment units.
(Note 2) Profit per unit was calculated based on the following data:

28th fiscal period(March 1, 2018 to August 31, 2018)

Profit (thousands of yen)Amounts not attributable to ordinary unitholders (thousands of yen)
Profit attributable to ordinary investment units (thousands of yen)
Average number of units during the fiscal period (units)(September 1, 2018 to February 28, 2019)

in trust

2,934,877–
2,934,877
796,000

Land in trust
Construction inprogress in trust(thousands of yen)
29th fiscal period

28th fiscal period

Account(March 1, 2018 to August 31, 2018)

Accumulated Depreciation for
depreciation
the period

Net property
andequipment

Remarks

2,697,377

4,730

100,692,867

28,811,313

1,515,752

71,881,554(Note 1)

1,855,414

17,863–

1,873,277

729,404

29,226

1,143,873(Note 1)

1,295,492

105,320–

1,400,813

462,805

40,631

938,007(Note 1)

747

–

–

747

533

47

214

1,328,883

49,760191

1,378,452

1,117,165

33,517261,286(Note 1)

103,814,610

1,103,841–

104,918,451––

104,918,451(Note 1)

113,234

5,224

111,370

7,088

–

–

7,088

(Note 2)

206,408,602

3,979,387

116,292

210,271,697

31,121,221

1,619,175

179,150,475

Leasehold right in
trust

5,545,883––

5,545,883––

5,545,883

Total intangible Other intangible
assetsassets in trust

46,871

15,881–62,75236,097

3,617

26,654

Subtotal(Notes to cash distributions)

Balance as ofFebruary 28,
2019

Vehicles andTotal property, transport
equipment in trust
plant andequipment Tools and fixtures

29th fiscal period

2,860,088–
2,860,088
796,000

Decrease

Subtotal(September 1, 2018 to February 28, 2019)

I. Unappropriated surplus

2,860,542

2,935,391

II. Total dividend[Dividend per investment unit]

2,860,028

2,934,852[3,593 yen]

[3,687 yen]Total

5,592,754

15,881–

5,608,635

36,097

3,617

5,572,537

212,001,357

3,995,268

116,292

215,880,333

31,157,319

1,622,792

184,723,013(Note 1)

(Note 1) The increase in the 29th fiscal period is due to acquisition of Tissage Hotel Naha, and capital expenditures for existing properties.
(Note 2) The decrease in the 29th fiscal period is due to the transfer to relevant accounts as a result of construction completion.

(Schedule of other specified assets)
III. Surplus brought forward

Method for calculating dividends

514

539

The amount of dividends shall be decided in accordancewith the dividend policy stipulated in Article 38-1-1 of
FRC’s Articles of Incorporation and must exceed 90% of
FRC’s distributable profits as stipulated in Article 67-151 of the Special Taxation Measures Act.
Following the above policy, FRC shall decide to distribute
2,860,028 thousand yen, which is almost the entire
amount of unappropriated surplus, as earnings dividends.
Moreover, dividend in excess of earnings as stipulated in
Article 38-2 of FRC’s Articles of Incorporation will not beprovided.

The amount of dividends shall be decided in accordancewith the dividend policy stipulated in Article 38-1-1 of
FRC’s Articles of Incorporation and must exceed 90% of
FRC’s distributable profits as stipulated in Article 67-151 of the Special Taxation Measures Act.
Following the above policy, FRC shall decide to distribute
2,934,852 thousand yen, which is almost the entire
amount of unappropriated surplus, as earnings dividends.
Moreover, dividend in excess of earnings as stipulated in
Article 38-2 of FRC’s Articles of Incorporation will not beprovided.

(Note) Amounts other than the amounts of dividend per unit are rounded down to the nearest thousand yen.

(Notes to significant subsequent events)
No relevant items.

Not applicable.

(Schedule of investment corporation bonds)
Issue

Issue date

First Series of December 30,
Unsecured Bonds
2013

Balance as of
Decrease
Balance as
September 1, during the fiscal February 28,
2018period2019

Coupon(%)

Maturity date

Maturity
methodUse

Description(thousands of yen)(thousands of yen)(thousands of yen)

2,000,000–

2,000,000

1.32

December 29,
2023

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee

July 30,2032

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee

July 30,
2038

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee

Second Series ofUnsecured Bonds July 31, 2017

2,000,000

Third Series ofJuly 31, 2018
Unsecured Bonds

1,000,000

Total

5,000,000–

2,000,000–

1.00

1,000,000–

1.20(Note 1)

(Note 1)

(Note 1)(thousands of yen)

(Schedule of contract amount, etc. and fair value of derivative transactions
and forward exchange transactions)(thousands of yen)
TypeInterest rate swap transaction
Receivable floating; Payable fixed
Total(Note 2)5,000,000

Not applicable.

Off-market transaction(Note 2)

(Note 1) The bonds may be repurchased and cancelled by FRC at any time on and after the date following the payment date, unless otherwise determined by the book-entry transfer agent.
(Note 2) The bonds are subject to the limited pari passu clause among specified investment corporation bonds.
(Note 3) Amount of redemption of investment corporation bonds scheduled to be due within 5 years after period end.

(Schedule of securities)

Category(Note 2)Category

Investment corporation bonds

Due in 1 year or less–

1 to 2 years

2 to 3 years––

Contract amount, etc.
Fair value
Of which,(Note 2)exceeding 1 year

(Note 1)

25,200,000

19,000,000(208,837)

25,200,000

19,000,000(208,837)(Note 1) The contract amount, etc. of the interest rate swap transaction is based on the notional principal amount.
(Note 2) The fair value is calculated by the counterparty of the transaction contract based on the actual interest rate on the market and other factors.

FUKUOKA REIT CORPORATION43FUKUOKA REIT CORPORATION

44

3 to 4 years–

4 to 5 years

2,000,000

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Schedule of debt)
Category
LenderBalance as of
Balance as of
Average
September 1,
February 28,
Increase
Decreaseinterest rate Repayment date(thousands of yen) (thousands of yen)
2018
2019
(thousands of yen)(thousands of yen)

The Bank of Fukuoka(Note 2)–

Resona Bank (Note 2)–

150,000

150,000–

The Nishi-Nippon City
Bank (Note 2)–

785,714785,714–

Resona Bank (Note 2)–

110,000

110,000–

The Bank of Nagasaki(Note 2)–78,571

78,571–The Oita Bank (Note 2)–

78,571

78,571–The Bank of Saga
(Note 2)–

47,142

47,142–750,000

750,000(%) (Note 1)

–

0.413

0.413

January 31, 2019

January 31, 2019

Category
Use of funds

Description
LenderAcquisition fundAcquisition fundNo collateral/
No guarantee–

333,333

333,333–

Resona Bank (Note 2)–

66,666

66,666–The Nishi-Nippon City
Bank (Note 2)–

285,714285,714–

Resona Bank (Note 2)–

40,00040,000–

The Bank of Nagasaki(Note 2)–

28,571

28,571–The Oita Bank (Note 2)–

28,571

28,571–The Bank of Saga
(Note 2)–

17,142

17,142–

Subtotal–

2,800,000

2,800,000–

Sumitomo Mitsui Banking
Corporation

500,000–

500,000–

Mizuho Bank

200,000––

200,000

3,000,000––

3,000,000

500,000––

500,000

MUFG Bank–

500,000–

500,000

0.520

September 25, 2019

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank–

2,500,000–

2,500,000

0.775

February 29, 2020

Acquisition fundNo collateral/
No guarantee

Mizuho Bank–

1,700,000–

1,700,000

0.569

February 29, 2020

Refinance fundNo collateral/
No guarantee

4,200,000

4,700,000

500,000

8,400,000

Current
maturities
of longterm debt

The Bank of Saga

Subtotal
The Nishi-Nippon CityBank
Mizuho Bank

2,500,000
1,700,000––

2,500,000
1,700,000

–
–

0.411

0.411

1.338

0.538

0.775
0.569
0.469

February 28, 2019

January 31, 2019

July 31, 2019

February 29, 2020
February 29, 2020

Refinance fund

Refinance fund

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee

No collateral/
No guarantee

Acquisition fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Long-termdebt(%) (Note 1)

Use of funds

Description––

2,000,000

0.620

February 28, 2025

Refinance fundNo collateral/
No guarantee

Mizuho Bank

500,000––

500,000

0.440

February 29, 2024

Refinance fundNo collateral/
No guarantee

Shinsei Bank

700,000––

700,000

0.400

July 31, 2024

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui TrustBank
Development Bank ofJapan

300,000––

300,000

0.413

September 30, 2025

Refinance fundNo collateral/
No guarantee

1,500,000––

1,500,000

100,000––

100,000

0.718

December 30, 2025

Refinance fundNo collateral/
No guarantee

The Kagoshima Bank

100,000––

100,000

The Kitakyushu Bank

100,000––

100,000

The Eighteenth Bank

100,000––

100,000

The Shinwa Bank

100,000––

100,000

The Hiroshima Bank

100,000––

100,000

The Bank of Fukuoka

1,500,000––

1,500,000

0.419

December 30, 2026

Refinance fundNo collateral/
No guarantee

MUFG Bank

800,000––

800,000

0.481

March 31, 2025

Refinance fundNo collateral/
No guarantee

Resona Bank

600,000––

600,000

0.658

March 31, 2027

Refinance fundNo collateral/
No guarantee

The Higo Bank

300,000––

300,000

0.481

March 31, 2025

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

1,300,000––

1,300,000

The Nishi-Nippon City
Bank

0.777

June 30, 2026

Refinance fundNo collateral/
No guarantee

1,000,000––

1,000,000

The Oita Bank

700,000––

700,000

The Kitakyushu Bank

700,000––

700,000

The Miyazaki Bank

700,000––

700,000

The Shinwa Bank

600,000––

600,000

The Iyo Bank

500,000––

500,000

The Eighteenth Bank

500,000––

500,000

Development Bank ofJapan

1,800,000––

1,800,000

0.650

December 31, 2026

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

2,000,000––

2,000,000

0.792

July 31, 2027

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank
The Nishi-Nippon CityBank

2,000,000––

2,000,000

0.892

July 31, 2027

Refinance fundNo collateral/
No guarantee

0.850

August 31, 2027

Refinance fundNo collateral/
No guarantee

1,000,000––

1,000,000

500,000––

500,000

Mizuho Bank

2,300,000––

2,300,000

The Bank of Fukuoka

500,000––

500,000

The Norinchukin Bank

1,000,000––

1,000,000

The Oita Bank

100,000––

100,000

The Hiroshima Bank

1,400,000––

1,400,000

The Kitakyushu Bank

100,000––

100,000

The Kitakyushu Bank

800,000––

800,000

The Eighteenth Bank

100,000––

100,000

The Iyo Bank

500,000––

500,000

The Shinwa Bank

100,000––

100,000

The Higo Bank

300,000––

300,000

The Hiroshima Bank

100,000––

100,000

4,000,000––

4,000,000

1.010

August 31, 2022

Refinance fundNo collateral/
No guarantee

Resona Bank

2,000,000––

2,000,000

0.494

September 30, 2027

Refinance fund–

500,000–

0.520

September 25, 2019

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee

500,000

The Bank of Fukuoka

1,500,000––

1,500,000

0.812

December 30, 2027

Refinance fund

1,600,000

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee

0.790

–

–

500,000

0.680

December 30, 2027

Refinance fundNo collateral/
No guarantee

Refinance fund

1,900,000––

1,900,000

0.750

February 29, 2028

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Development Bank of
Japan
The Nishi-Nippon City
Bank
Sumitomo Mitsui TrustBank

500,000

No collateral/
No guarantee

1,100,000––

1,100,000

0.600

February 26, 2027

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

MUFG Bank

1,500,000––

1,500,000

0.500

February 27, 2026

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Resona Bank

600,000––

600,000

0.567

February 29, 2028

Refinance fundNo collateral/
No guarantee

Development Bank ofJapan

2,500,000––

2,500,000

0.720

March 1, 2028

Acquisition fundNo collateral/
No guarantee

MUFG Bank

600,000––

600,000

0.480

March 31, 2026

Refinance fundNo collateral/
No guarantee

Development Bank ofJapan
MUFG Bank
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui TrustBank
Development Bank ofJapan
The Bank of Fukuoka
The Nishi-Nippon CityBank

1,600,000
1,500,000
4,000,000
400,000
400,000

–
–
–
–
–

–
–
–
–
–

1,500,000
4,000,000
400,000
400,000

0.564
0.880
0.419
0.870

June 30, 2020

Refinance fund(thousands of yen)Aozora Bank

0.835

Long-term
debt

February 28, 2019

No collateral/
No guarantee(thousands of yen)
2,000,000

The Oita Bank

Short-term The Bank of Fukuoka(Note 2)debt

The Norinchukin Bank

Development Bank ofJapan

No collateral/
No guarantee

Balance as of
Balance as of
Average
September 1,
February 28,
Increase
Decreaseinterest rate Repayment date(thousands of yen) (thousands of yen)
2018
2019

July 30, 2021

June 30, 2022
July 31, 2023
August 31, 2023
August 31, 2022
August 31, 2023

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

2,000,000––

2,000,000

0.419

February 29, 2024

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank

2,000,000––

2,000,000

0.440

February 29, 2024

Refinance fundNo collateral/
No guarantee

FUKUOKA REIT CORPORATION45FUKUOKA REIT CORPORATION

46

VIII. Notes to Financial Statements

Category
LenderLong-term
debt

Balance as of
Balance as of
Average
September 1,
February 28,
Increase
Decreaseinterest rate Repayment date(thousands of yen) (thousands of yen)
2018
2019
(thousands of yen)(thousands of yen)(%) (Note 1)

Use of funds

Description

The Nishi-Nippon City
Bank

600,000––

600,000

0.802

March 31, 2028

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

500,000––

500,000

0.802

March 31, 2028

Refinance fundNo collateral/
No guarantee

Mizuho Bank

500,000––

500,000

0.630

March 31, 2028

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Banking
Corporation

500,000––

500,000

0.504

March 31, 2025

Refinance fundNo collateral/
No guarantee

MUFG Bank

500,000––

500,000

0.490

March 31, 2027

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui TrustBank

400,000––

400,000

0.576

March 31, 2027

Refinance fundNo collateral/
No guarantee

The Oita Bank

400,000––

400,000

0.646

March 31, 2028

Refinance fundNo collateral/
No guarantee

The Hiroshima Bank

400,000––

400,000

0.646

March 31, 2028

Refinance fundNo collateral/
No guarantee

Shinsei Bank

300,000––

300,000

0.400

March 31, 2025

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Banking
Corporation–

500,000–

500,000

0.655

January 31, 2029

Refinance fundNo collateral/
No guarantee

MUFG Bank–

500,000–

500,000

0.590

January 31, 2028

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon City
Bank–

400,000–

400,000

0.419

January 31, 2029

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka–

300,000–

300,000

0.419

January 31, 2029

Refinance fundNo collateral/
No guarantee

The Oita Bank–

200,000–

200,000

0.334

February 27, 2026

Refinance fundNo collateral/
No guarantee

The Kagoshima Bank–

200,000–

200,000

0.334

February 27, 2026

Refinance fundNo collateral/
No guarantee

The Higo Bank–

200,000–

200,000

0.334

February 27, 2026

Refinance fundNo collateral/
No guarantee

Resona Bank–

200,000–

200,000

0.488

February 28, 2029

Refinance fundNo collateral/
No guarantee

66,300,000

2,500,000

4,700,000

64,100,000

70,500,000

10,000,000

8,000,000

72,500,000

Subtotal
Total(Note 1) The average interest rate is a weighted-average figure during the fiscal period and is rounded to the third decimal place. Furthermore, the average interest rate of debt for which FRC conductedinterest rate swap transactions is the weighted-average figure during the fiscal period taking into consideration the effect of interest rate swaps.
(Note 2) The debts were made based on the commitment line agreements between FRC and respective banks.
(Note 3) Amount of repayment of long-term debt scheduled to be due within 5 years after period end.

(thousands of yen)
Category
Long-term debt

1 to 2 years
1,000,000

2 to 3 years
6,300,000

3 to 4 years
6,000,000

FUKUOKA REIT CORPORATION

4 to 5 years
10,400,00047