Corporate Profile/Characteristics

Fukuoka REIT Corporation (FRC)

Based on our intention to Act Local, Think Global: Drawing funds to the region by introducing
excellent properties in Fukuoka and Kyushu to investors locally and around the world,

Contents

01 Introduction

possibilities in regional growth through urban development will provide FRC with a continuous
stream of investment opportunities as well as income from assets under ownership for FRC

01

Corporate Profile/Characteristics

02

Relationship with Fukuoka Realty Co., Ltd.

04

Macroeconomic Environment around Fukuoka City

06

J-REIT Mechanism and Fukuoka REIT Corporation s Business Model

08

History and Business Performance

Name

Fukuoka REIT Corporation

10

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

Securities code

8968

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

Accounting periods

February, August

Asset management company

Fukuoka Realty Co., Ltd.

Sponsors

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

12 Value-Creation Activities
12

CEO s Message

14

Strategies of Each Department

16

Overview of Properties Owned

18

Risks and Opportunities

20

Financial Strategies and TSR (Total Shareholder Return)while at the same time delivering profitable returns to unitholders.

Corporate Profile

22 Foundation Underpinning Management
22

Sustainability Policy and Materiality

24

Environmental Issues

28

Social Issues

30

Organizational Issues

Fukuoka REIT Corporation Characteristics
Japan s First Region-Specific REIT

1

32 Data Section
32

Financial/Non-Financial Highlights (11-Year/22-Period Summary)

34 Glossary
34

Introduction

FRC was listed as the first region-specific REIT in Japan on June 21, 2005. We believe that

2

Taking advantage of our strength in knowing the local characteristics of real estate, which is a very
regional-specific business, we invest in real estate for rent in the Fukuoka and Kyushu areas, where
growth potential exists. By appropriately managing the invested real estate, we continue to securestable earnings over the medium to long term while providing stable dividends.

Excellent Portfolio
The real estate owned by FRC will continuously maintain and improve dividends through the creation of
stable cash flow and strategic initiatives.

Glossary

Support Structure Comprises Sponsor Companies

3

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

Editorial Policy
With the aim of conveying details of the Investment Corporation s value
creation process in an easy-to-understand manner, we are issuing an

4Integrated Report from this fiscal year. In editing this report, the editors adopt

Stable Financial Base
We are reducing refinancing risk (by the conservative control of LTV and extending debt duration). We
also maintain good relationships with financial institutions, including our three sponsor banks.

clear and accessible language, with reference to the International Integrated
Reporting Framework of the International Integrated Reporting Council (IIRC)

Payment of Stable Dividends Continuing Since Listing

and the Guidance for Collaborative Value Creation of Japan s Ministry of
Economy, Trade and Industry (METI). We consider that this and subsequent
reports will lead to active dialogue with investors and other stakeholders.

5

Utilizing its sponsor pipeline and other advantages, FRC continues to distribute stable dividends perunit through the acquisition of carefully selected excellent properties and effective asset managementin the Fukuoka and Kyushu area.

Fukuoka REIT Corporation 201901

Relationship with Fukuoka Realty Co., Ltd.

As an asset management company of FRC, Fukuoka Realty applies its deep knowledge and expertise in the Fukuoka andKyushu area to provide sound asset management, guided by the basic philosophy Act Local, Think Global. In this way

Fukuoka REIT Corporation s Basic Policy

Corporate Profile of Fukuoka Realty Co., Ltd.

【Our Mission】
Taking advantage of our strength in knowing the local characteristics
of real estate, which is a very regional-specific business, we invest inreal estate for rent in the Fukuoka and Kyushu areas. By appropriately
managing the invested real estate, we will achieve stable earnings
over the medium to long term while making efforts to keep providing
stable dividends for the future.
【Act Local】
We̶Fukuoka REIT (FRC) and Fukuoka Realty̶are currently
the only listed real estate investment corporation and asset
management company registered outside the Tokyo metropolitan
and Kansai areas under the Act on Investment Trusts andInvestment Corporations, the Financial Instruments and Exchange
Act and their respective enforcement orders.
We also seek differentiation in the selection of investment
target properties and the management of owned assets throughthe enhancement of our information-gathering ability and ability
to discern the profitability of properties by utilizing our speed anddepth of information based on knowledge of local land and broad
network centering on the local government and business world.
【Think Global】
Regarding real estate and financial markets, FRC will keep closely
tracking movements occurring across the whole of Japan and theentire world, taking into consideration the logic of capital markets
with global ideas, and appropriately reflecting such in our asset
management. We will also keep diligently pursuing dialogue withinvestors, focusing on fulfilling our accountability, and utilizing
Fukuoka Realty s fund management skills for investors under astrict compliance policy. We will proactively engage in IR activities
to fulfill our accountability to global capital markets. In conjunction,
we will take heed of Fukuoka Realty s corporate governance andcompliance.

Comprising employees with various experiences in real estate,finance, and other fields, Fukuoka Realty Co., Ltd. possesses ahigh level of expertise and makes full use of local knowledge andknow-how to manage FRC s assets.

Introduction

Introduction

Fukuoka Realty strives to secure medium-to-long-term portfolio growth and stable revenue.

Real Estate Investment Trust

Fukuoka REIT Corporation

Real Estate

Investors［Securities code: 8968］
Holdings

Investments

Rents, etc.

Dividends

Company
entrusted withasset
management

Contribution to Regional Revitalization and Development of Attractive Communities
FRC believes that attracting domestic and foreign excellent
investment funds to regional real estate financial markets will
stimulate community development of the Fukuoka and Kyushu
areas. Although we are not directly involved in community
development or real estate development, we expect that ouracquisition of properties will lead to new funds passing to sellers
and part of those funds being directed to new development,
etc. With funds injected into FRC from Japan and abroad, newinvestment funds will flow to the Fukuoka and Kyushu areas

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

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

Investment Policy
Our Mission
Region-Specific REIT
Featuring our expertise on local realestate markets, Fukuoka and Kyushu, tomaximize profits of investors

Think Global
Capital market theory• Accountability and transparent dialogue
with investors• Decent policy to comply• Fund management skills

Investment target areas

Fukuoka
metropolitan area

60-90％
Other Kyushu areas

Investment type

Retail40-70％

Asset management company

Fukuoka Realty Co., Ltd.

Leading companies in the Fukuoka and Kyushu region who arein agreement in with FRC s concept participate as shareholders(sponsors) of Fukuoka Realty Co., Ltd. FRC aims to steadily
expand the scale of its assets by actively utilizing the support fromthe sponsor companies. With regard to the properties owned anddeveloped by the sponsor companies, Fukuoka Jisho Co., Ltd.,FRC and Fukuoka Realty Co., Ltd. have concluded a pipeline
support memorandum of understanding (MOU) to seek stable andcontinuous acquisition opportunities.

5%

5%

5%

5%

THE BANK OFFUKUOKA, LTD.

THE NISHI-NIPPONCITY BANK, LTD.

Development Bank ofJapan Inc.

SAIBU GAS CO., LTD.

50%
FUKUOKA JISHO CO.,LTD.＊

Directors

Outside directors

Fukuoka Realty Co., Ltd.

10%
Kyushu Electric Power
Co., Inc.

(Asset Manager)

Office buildings(including Okinawa and Yamaguchi prefectures)

10-30％

20-50％

Other

Others(hotels, residences, logistics, etc.)

0-10％

02

Fukuoka REIT Corporation 2019

0-30％

5%

5%

5%

5%

Kyudenko Corporation

Nishi-Nippon Railroad
Co., Ltd.

Kyushu Railway
Company

ROYAL HOLDINGS
Co. Ltd.

* Concluded MOU with Fukuoka REIT Corporation and Fukuoka Realty Co. Ltd. concerning pipeline support.

Fukuoka REIT Corporation 201903

Macroeconomic Environment around Fukuoka City

Total population of Fukuoka City

Population growth ratio（Thousands）

Fukuoka City, where the population is concentrated, is expected to continue growing in the years to come. Compared with (%)
1,600

1,582
the country as a whole, the high ratios of young people and those of working age in the population are leading to demand
for
1,570

6

office buildings and residential properties, and there is great potential as an investment
target area. 0.99 1,512 1,526 1,541
0.99

2

1.12

1,550

0.89

1,500 0.85
0.73

1,450

0.89 0.82
1,482

0.78
1,454

0.83
1,417

1,430 1,441

1,497

1.02

0.99
0.89

1,556

1.0
0.77

1,466

-4
0.8

-6
2010

-8

As of December 1, 2018, the total population of Fukuoka City was

1,350

Compared with other cities, the population composition of Fukuoka City is【Commercial Land】

approximately 1.58 million (estimated), and has been consistently increasing

characterized by a higher proportion of young people. Of the cities listed in0.2
1,300With regard to commercial land, in the official annual fluctuation rates for 2019

since 1985. This population of about 1.58 million people makes Fukuoka thethe chart below, the ratio of young people in Fukuoka City (the proportion

announced by the Ministry of Land, Infrastructure, Transport and Tourism,

fifth most populous of government-designated cities. According to estimates

2003 s 2004
2006 2007 accounted
2008 2009 2010for2011
2012 2013 between
2014 2015 the2016 ages
2017 2018
0of a city
total2005
population
by peopleof 150the national average was 2.8%, a fourth consecutive year of positive growth.

from the National Institute of Population and Social Security Research (2018and 29) ranks first at 17.4%. Fukuoka City s working-age population ratio

In Fukuoka City, land prices began to rise in 2013 ahead of other cities. In

estimates), it is estimated that the population will reach about 1.6 million in(the proportion of the city s total population made up of people between the

addition to the increase in domestic and foreign tourists and the firm office2020 and continue to increase until 2035.

ages of 15 and 64) ranks third at 64.8%.

market, progress has been made in the redevelopment business, and the rate

-5

of increase has exceeded that of other cities since 2018.

-10

Young People and Working Age Population Ratios <2015>
0.6
0.4

(%)

0.99 1,512

0.99
0.89

1,500 0.85
0.73

1,450
1,400

1,382

1,392

0.89 0.82
1,482

0.78
1,454

0.83
1,404

1,430 1,441

1,417

1,497

1,526

1.02

1,541

0.99
0.89

1,556

1,582

1.4
1.2

0.90
0.95

1.0
0.77

1,466

0.8
0.6

1,350

0.4

1,300

0.2

Kumamoto

16.0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

NagoyaHiroshima

15.00

Kitakyusyu

57.0

Nationwide

Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Fukuoka City Estimated Population andFukuoka City Registered Population, published by Fukuoka City.

60.0

3,000
Fukuoka Airport

Hakata Port

Number of persons disembarking from ships on irregular service routes

Hakata Port

Number of persons disembarking from ships on irregular service routes

4,000

2010

61.0

63.0

64.0

65.0

66.0

(%)

Working-age population

0800

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

2015

40,000• Youth population
17.4% (1st)• Working-age
population
64.8%
(3rd)
Changes in Numbers of Foreign
Visitors(FukuokaCity)

35,000Fukuoka

Kyoto(Percentage of city population aged 15 to 29)

Breakdown of Foreign Visitors <2018> (Fukuoka City)At 47.2%, South Korea accounts for almost half of foreign visitors toto increase from 2014 onward.Okayama
The reasons cited for the increasein the area
Tokyo Metropolitan

Fukuoka City. In the years to come, the number of tourists is set to rise

Youth population

SendaiThe numberof foreigners entering Japan throughFukuoka City has continued
17.0
Kawasaki

Kumamoto

Sagamihara

number of foreigners entering the country include relaxed
tourist visa issuanceOsaka

due to, for example, the growth of the middle classes brought about

requirements and an increase in the number of flights by low-cost carrier

NagoyaSaitamaby economic growth in Southeast Asia (Thailand, Singapore, Malaysia,

Yokohama(LCC) airlines. Fukuoka Airport in particularHiroshima
has been
Sappororemarkable for its risingIndonesia, etc.) and their exemption from short-term stay visa requirements

16.0

trend15.0
in routes to and from Southeast
Asia in accordance with the increase
NiigataKobe

for visiting Japan. Looking ahead, a further increase in the number of people

Chiba
in LCC flight services. Dueof its functions, such as the
Sakai to the enhancement

entering Japan is expected due to the increasing number of direct flight

duplication of parallel taxiways
and the addition of an expanded runway, aHamamatsu

services from Southeast Asia to Fukuoka.

Nationwide

14.0

Shizuoka
Kitakyusyu
Youth population
14.5%is planned.
gradual increasein thenumber of •arrivaland departure slots• Working-age population

Fukuoka Airport

Hakata Port

58.0
Fukuoka 0
Airport 57.0Hakata
Port(Thousands people)(Thousands people)
4,000
4,000

1,000
1,000
0
0

210
210
193
193
884
884
2014
2014

Number of persons disembarking from ships on irregular service routes

59.0
62.0from ships
63.0on irregular
64.0 service
65.0
Number60.0
of persons61.0
disembarking
routes 66.0

3,000
3,000
2,000
2,000

60.0%

574
574
183
183

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

847
847
161
161

1,392
1,392

1,631
1,631

2015
2015

2016
2016

800
800
143
143

Taiwan 9.6% [322]Taiwan 9.6% [322]

2,205
2,205

2,414
2,414

Number of persons
Number of persons
disembarking from ships
disembarking from ships
on irregular service routes
on irregular service routes
23.8% [[800]]
23.8% 800

2017
2017

2018
2018

842
842
167
167

Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Statistics on Legal Migrants (Ministry ofJustice) and Number of International Vessel Passengers (Fukuoka City Port and Airport Bureau).

04

Fukuoka REIT Corporation 2019

Completed floor space (total floor space)

Thailand 1.1% [38]Thailand 1.1% [38]Europe/U.S.A./Australia 2.6% [87]Europe/U.S.A./Australia 2.6% [87]Hong Kong 5.9% [197]
Hong Kong 5.9% [197](%)

Net absorption (absorption demand)

Vacancy rate

Others 3.1% [103]Others 3.1% [103][1,584][1,584]China 6.7% [224]
China 6.7% [224]Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Statistics on Legal Migrants (Ministry ofJustice) and Number of International Vessel Passengers (Fukuoka City Port and Airport Bureau).

(%)
(%)
130
130

Fukuoka
Fukuoka

Central Tokyo (5 wards)
Central Tokyo (5 wards)

Osaka
Osaka

15.38

As of Aug. 2019

14.72

2016

2017

2018

2019

Others 3.1% [103]Tokyo Metropolitan area (23 wards)

Osaka

Nagoya6
4

Taiwan 9.6% [322]Thailand 1.1% [38]Others 3.1% [103]Europe/U.S.A./Australia
Thailand1.1%
Numberof [38]persons 2.6% [87]Kong 5.9% [197]disembarking
from ships
0 HongEurope/U.S.A./Australia
2.6% [87]onKongirregular
service-2 Hong
5.9%[197] routes
Taiwan-4
23.8% [9.6%800] [322](ThousandsOthers
people) 3.1% [103]South Korea

47.2%[1,584]

Taiwan 9.6% [322](Thousands people)
Numberof persons
China2013
South2018
Korea
6.7% [224]
2010
2011
2012
2014
2015
2016
2017
2019
-8
disembarking
from ships(Thousands people)
NumberofpersonsSouth
Korea
Note: The publicly announced price indicates the land price disclosed by the Ministry ofLand, Infrastructure,%onirregular
serviceroutesTransport
and Tourism
asof January
disembarking
fromships1 of each year.
[1,584] %Source: Prepared by Fukuoka
Co., Ltd. based on data from Ministry of Land, Infrastructure,
Transport and] Realty routes
23.8% [800service
on irregular
Tourism Land Price Survey 2010-2019.
[1,584]
23.8% [800]
China 6.7% [224]

-6

47.2
47.2

Nationwide

Fukuoka City

Tokyo Metropolitan area (23 wards)

Osaka

Nagoya13.23

0-15,000-5,000

The average asking rent of the Fukuoka business district rose 5.2% in the 12 months from August 2018 to August 2019.

(%)
16

Central Tokyo
(5 wards)

1.71%

FukuokaVacancy1.87
rate %Net absorption (absorption demand)

14

2.13%

(%)
12
(%)
16

3.07

Vacancy rate

2.29%
2.32%
4.09%

2.04

1.87

2.04

1.87

2.04

1.87

5,000
-10,000
0South Korea
South Korea
47.2
47.2%
%

2015

China 6.7
% [224]
Central Tokyo (5 wards)
Osaka(%) Fukuoka(%)
15 Average Asking Rents■

2018

Vacancy rate

Net absorption (absorption demand)

Completed floor space (total floor space)
11.98
Osaka
(Tsubo)Completed floor space (total floor space)
Net absorption(absorption demand)
10.86
30,000
Sapporo15.38(Tsubo)40,00010.99
14.72
Nagoya15.38
40,00025,00014.72 13.23
Sendai
7.70
35,00013.23 11.98
35,00020,0006.30
11.98 10.86
30,00010.99
10.86
30,00015,0004.26
25,000
10.99
7.70
3.07
25,00010,0007.70
20,0006.30
20,000
5,000
6.30
15,0004.26
15,00004.26 3.07
10,00010,000-5,0005,000(Thousands people)(Thousands people)

Nagoya130
10(Tsubo)

18.0

2017

■ Vacancy Rates and Supply and DemandCompleted floor space (total floor space)

(%)

2016

2014

2

183

2014

2012

Nationwide
FukuokaCity
Hong
Kong 5.9%
[197]

143
800
167
842
847 has risen every
3,000
inflow,and the rate of land price increase
year up until
2019.
143
574
2016
2017
2018
2014
2015
167
0
161
847
2,000
183
574
210
161
2,414
2,000
2,205
193
183
1,631
210
1,000
1,392
2,414
2,205
193
884
1,631
1,000
1,392
884
Fukuoka
Office Market/ Fukuoka BusinessDistrict
2016
2017
2018
2014
2015
0

(Percentage of city population aged 15 to 64)

2013

Osaka

(%)

1,631
1,000
1,392 housing demandrisebrought 842
about by population
3,000 in 2013 due to strong
884

62.0

2011

Thailand 1.1% [38]210 year of positive growth. In Fukuoka City, land prices beganconsecutive
2,414 to
2,205
4,000
193

Tokyo Metropolitan area (23 wards)■ Average
Year-on-Year Ratesof Changes
in Publicly Announced Price for Residential Land
Europe/U.S.A./Australia
2.6%
[87]

(Thousands
people)has been
maintained and housing acquisition support measures have(Thousands
Fukuokapeople)
AirportFukuoka City

Note: The publicly announced price indicates the land price disclosed by the Ministry of Land, Infrastructure,
Transport and Tourism as of January 1 of each year.
Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Ministry of Land, Infrastructure, Transport andTourism Land Price Survey 2010-2019.

Transport
and Tourism574
for 2019 the national
average was 0.6%, the third
161
2,000
(Thousands
people)

14.5%
60.0%

2019

5

143
prices of residential areas announced847
by the Ministry167
of Land, Infrastructure,

Yokohama

Sapporo• Youth population• Working-age population

59.0

Saitama

2018

0

800
convenient areas, and in the annual fluctuation rates842
of the official land

Chiba

Nationwide

Hamamatsu
Shizuoka

58.0

Osaka

Niigata

Kobe
Sakai

Sagamihara

2017

10

4,000
underpinned
demand for housing. Demand is strong mainly in highly

Tokyo Metropolitan area

Okayama

14.0

0Kawasaki

2016

15

employment
andincomeenvironment,
the lowfrom
interest
rate service
environment
Fukuoka Airport
HakataPort
Number of persons disembarking
ships on irregularroutesSendai

17.0

2015

(%)

With regard to residential land, amid the ongoing improvement in the
Fukuoka2014■ Average Year-on-Year Rates of Changes in Publicly Announced Prices for Commercial Land

【Residential Land】

17.4% (1st)64.8% (3rd)Kyoto

Youth population

1.12

1,550

1,570

(Percentage of city population aged 15 to 29)

1,600• Youth population• Working-age population

18.0

2012

Land Price Trends in Fukuoka City and Other Major Cities <2010–2019>

-15
(%)

（Thousands）

2013

Nagoya-2

1,404 Cities
National and
Major
1,400
1,392
1,382

Population growth ratio

2011

Osaka

0

0.90

Population Continues to Grow in Fukuoka City

Total population of Fukuoka City

Tokyo Metropolitan area (23 wards)

4

1.2

0.95

Fukuoka City

Introduction

Introduction

Nationwide

(%)

1.4

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

16
10
14

5
120
0 Fukuoka

Central Tokyo (5 wards)

Osaka

(%)
-5 Fukuoka
110

Central Tokyo (5 wards)

Osaka

(%)
-10
130
100
-15
130
120
90
120
110
0
110
100

14
8
12

100
90

12
6
10

90
0

2010

2011

2012

2013

As of Aug. 2019
Fukuoka

2014¥10,341

Central Tokyo
(5 wards)
2015
2016
Osaka

¥21,78420172018¥11,657

2019(Yen/tsubo)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20192005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

10
4
8

Note:
The 2005
figuresfrom 2005
to200820182009
areof December
31 every
2006
2007 Occupancy
2010
2011 20122013year.
2014 2015 2016 2017 2018 2019floor space
floorasspace
0 Leasable
Source: Prepared by Fukuoka Realty Co., Ltd based on data from Miki Shoji Co., Ltd. Office Market Data.
(Tsubo)28
6800,000

06
4■ Trends
in Leasable
Floor Space and Occupancy Floor Space
700,000
Leasable floor space
Occupancy floor space

42

600,000(Tsubo)800,000

20

800,000
500,000
700,0000

700,000
600,0000(Planed) (Planed) (Planed)-5,000 Statistics from 2008 to 2018 are based on the figures as of the end of December.
Note:-10,000
Note: Office building-related data for each city is data for areas and buildings included in surveys
conducted by Miki Shoji Co., Ltd.
-10,000
Note: Net absorption (absorption demand) shows the change in the occupied floor space during a specific
It is 2009
calculated
subtracting
occupied
Decemberof theprevious
2008
2010by2011
2012 the2013
2014 floor
2015 space2016 on2017
2018 31201920202021 year-15,000 period.
(Planed) (Planed) (Planed)from the occupied floor space on December 31 of the applicable year.
2008 floor
2009space2010(total
2011floor
2012
2013
2014
2015 2020,2016 and20172021
201820192020 finalized,
2021-15,000 Completed
space)
figuresfor 2019,
have
not been(Planed) (Planed) (Planed)
and the floor space and expected completion dates are subject to change.
Source: Prepared by Fukuoka Realty Co., Ltd based on data from Miki Shoji Co., Ltd. Office Market Data.

(Tsubo)Leasable floor space

Occupancy floor space

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

600,000
500,000
500,000

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

Fukuoka REIT Corporation 201905

J-REIT Mechanism and Fukuoka REIT Corporation s Business Model

To contribute to the revitalization of Fukuoka and Kyushu and attractive urban development, FRC selects and procures funds
for investment by utilizing local government and business networks as well as its information-gathering ability and know-how.

Introduction

Introduction

We aim to maximize the profits of investors by providing them with stable earnings over the medium to long term.

J-REIT Mechanism
Real estate properties

Investments

J-REIT Characteristics

Investment corporation
Fund procurement(debt)

Rental income

Property management

Borrowings/bonds

Asset warehousing company
Company entrusted with business

Management ofassetsOwned real estate for rent

Payments ofprincipal and interest

Financial institutions
Bond investors

Capital

Office buildings

Logistics

Hotels

3. Corporate taxes highly advantageous
due to conduit status

Investors

Dividends

Real estate managementcompany

Retail

2. Relatively stable high yields

Investment

Commissioned
remuneration
Entrustment of asset management services

1. Enables efficient diversified investment
in real estate

Properties Owned
by Fukuoka REIT
Corporation

4. Enables daily trading on stock
exchanges

Commissioned remuneration

Asset management company

Investment

Sponsor companies

Residences

5. Full and ample information disclosure

Total 29
properties• Total leasable area
• Total acquisition priceManagement

Our Mission

Act Local
Think Global

580,664.27㎡¥195,979 million

Human capital• No. of officers and employees
41• Number of qualification holders:
Real estate appraisers 2 / Attorneys 2 /First-class registered architects 2 / MBA 1• Proportion of female employees 46.3％

Contribution to regional
revitalization and developmentof attractive communities

Management

Research

Valuatione• Excellent human resources withspecialized skills• Support framework for flexible working
styles• Support system for career development

SalesIntellectual capital• A varied skill set formed through humanresource training• Experience and knowledge of IR
activities based on long years ofpractical implementation• Gathering of information deeply rooted inlocal communities

Info

Response to ESG issues• Coordination with local society, local
communities• Maintenance of good relationships of trustwith sponsors

Natural capital• Land in properties held in the Fukuoka
and Kyushu area (52.7ha)• Energy, water, air and other natural
resources used in the operation ofproperties owned

06

Fukuoka REIT Corporation 2019

rm

a

n
ti o

Residences
5 properties

dis

o
cl

s

Office buildings
8 properties• Natural environment and biodiversity inthe areas around properties owned

Organizational Issues

See p.28

See p.30

Manufacturing capital• NOI• NOI yield¥5,633 million • Unrealized gain
5.7% • NAV ratio¥34,087 million
1.07×Intellectual capital• Number of IR meetings
In Japan 229, Abroad 68 (annual)• Track record of winning awards IR Excellent Company Encouragement
Award <2014> /Nikko Best IR Website Award <2018>• Conducting of tenant satisfaction surveys• Participation in local clean-up activities (276 times in total)• Record high number of visitors to Canal City Hakata (2017: 17,020 thousands)• Human resource exchanges with sponsors (3 people dispatched to sponsors, 2
people accepted from sponsors)

See p.22

Social Issues• TSR for past 10 years Annual rate 9.6% • Average interest rate paid
0.72%
• Dividends¥3,693 • Average remaining duration to maturity 6.0 years• Dividend yield
4.1%
JCR: AA- (stable), R&I A+ (stable)• Credit Ratings

Social relationship capital

Sustainability Policy

See p.24* As of August 31, 2019

Financial capital• Number of qualification holders:
Real estate brokers 28 / ARES Certified Masters 19 /Certified building administrators 4

See p.15

Environmental Issues

Created Value(Outcomes)

Human resource capital

Financial
StrategySocial relationship capital• Co-creative and trusting relationships
with tenants• Cooperative framework with property
management companies

Logistics
3 propertieso n (I R )The finding of excellent properties that cangenerate stable cash flow over the long term

Acquisitionc a ti

Manufacturing capital

Hotels2 properties

e)
nc

u ni

¥93,228 million¥101,878 million¥195,106 million¥77,500 million
39.7%

See p.14mm• Total liabilities• Net assets• Total assets• Total debt
• LTV

See p.14

co

Building of a solid financial base throughconservative control of LTV* As of August 31, 2019

Management
StrategyurFinancial capital

Investment
Strategy

Fund p
rocu
rem
en
t (fi
na

Main Management Resources(Inputs)

Retail11 properties

Natural capital• Reduction of energy consumption and greenhouse-gas emissions inproperties owned• Preservation of water resources* Promoting disclosure so that environmental performance data can be compared to the previous year in the future.

• Green building certification rate (total floor space basis): 68.7％

Fukuoka REIT Corporation 201907

History and Business Performance
Planned acquisition dateJune 30, 2020

Name of property planned for
acquisition
LOGICITY Wakamiya

Carefully selecting and investing in properties that can generate stable cash flow over the years, FRC is working toPlanned acquisition pricecontinuously expand the scale of its assets. In addition to retail and office buildings, we are diversifying investment types by

Number of properties (planned)

30

Total acquisition price (planned)¥197,679 million■ Retail■ Office buildings■ Residences(Acquired properties)
Canal City Hakata
Canal City Business Center Building
Park Place Oita
Gofukumachi Business Center■ Logistics■ Hotels

Number of properties

Granfore Yakuin Minami 1,100
Tissage Hotel Naha 2,835

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

Tosu Logistics Center 1,250
32,00014,60015,700
11,200

D-Wing Tower
2,800
Hotel FORZA Oita
1,530
Tenjin North Front Building 2,800

SunLive City Kokura 6,633

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

Tenjin Nishi-Dori Center Building 2,600

Sanix Hakata Building
4,400
Kominedai Community Mall 740

Acquisition Price(Millions of yen)Park Place Oita (Sports Club NAS) 1,470
Aeon Hara Shopping Center (sold) (5,410)
Aqualia Kego (sold)(2,800)Aqualia Kego
2,800
Aqualia Chihaya 1,280

Taihaku Street Business Center 7,000

200,000

Introduction

Introduction

expanding the scope of investment into such properties as residences, hotels and logistics facilities.

¥1,700 million（Number of properties）

LOGICITY Hisayama 5,050

Amex Akasakamon Tower
2,060
Square Mall Kagoshima Usuki 5,300
Kumamoto Intercommunity SC 2,400

40Canal City Hakata・B 28,700

Aeon Hara Shopping Center
5,410
Kominedai Community Mall (Sold) (740)Hanahata SC
1,130City House Keyaki Dori
1,111
Kurume Higashi Kushiwara SC 2,500

150,000

K’s Denki Kagoshima 3,550

27

Higashi Hie Business Center 5,900

27

27

25

30

26

26

25

29

29

28

24
23

23

20
100,000

20

19
17

17
16
15

14

16

16

16

15

11

11
50,000

10
8
7
5
4

0

Listed

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Jun. 2005

Aug. 2005

Feb. 2006

Aug. 2006

Feb. 2007

Aug. 2007

Feb. 2008

Aug. 2008

Feb. 2009

Aug. 2009

Feb. 2010

Aug. 2010

Feb. 2011

Aug. 2011

Feb. 2012

Aug. 2012

Feb. 2013

Aug. 2013

Feb. 2014

Aug. 2014

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

Fukuoka REIT
Corporation andFukuoka Realty Co.,
Ltd. events

World events• 1st Public Offering (Sept.) (before 5:1 unit split)
Number of investment units: 15,000
Offer price (per unit): ¥766,360
Total issue price: ¥11,096 million• Postal privatization bill passed(Oct.)• BOJ lifts quantitative monetary easing policy forfirst time in five years (Mar.)• Company Law promulgated (May)• BOJ decides to maintain zero interest rate policy(June)• BOJ decides to raise short-term interest rate by
0.5%, comes into effect same day (Feb.)• Canal City Hakata South Building renovation• J-REIT’s overseas real estate investment ban lifted following
partial revision of TSE listing regulations (May)• Lehman Brothers crisis (Sept.)• J-REIT ETFs listed on TSE (Sept.)• BOJ decides to make J-REIT investment corporation bonds, etc.
eligible as collateral (Jan.)• Start of "nimoca" services, the first IC card ticket on Kyushu
railways (May)• New Kitakyushu Airport opened (Mar.)

Fukuoka/
Kyushuevents• 2nd Public Offering (Mar.) (before 5:1 unit split)
Number of investment units: 16,000
Offer price (per unit): ¥576,083
Total issue price: ¥8,913 million• 3rd Public Offering (Mar.) (before 5:1 unit split)
Number of investment units: 14,950
Offer price (per unit): ¥710,580
Total issue price: ¥10,263 million• Facebook launched (Mar.)• CSR study groups begin (Apr.)• Volunteer support for disaster-affected areas (July)• IR Kyushu subcommittee established (Nov.)• F irst issue of investment corporation bonds (Dec.)• BOJ announces purchase of J-REIT• Chuetsu Offshore Earthquake, Niigata Prefecture (June)• Financial Instruments and Exchange Act promulgated (Sept.)• Japan Post privatization (Oct.)• Great East Japan Earthquake (Mar.)

investment units (Oct)• Launch of the Democratic Party of Japan administration (Sept.)• Established Real Estate Market Stabilization Fund (Sept.)• Tenjin Loft store opens (Nov.)• F ukuoka PARCO store opens (Mar.)• Kyushu bullet train route to
Kagoshima opens (Mar.)• 10th anniversary of Fukuoka REIT Corporation’s listing• Tax exemption procedure counter and free Wi-Fi set up for inboundcustomers at Canal City Hakata• Tokyo awarded 2020 Olympics (Sept.)• Fukuoka City’s population tops 1.5 million (May)• Kyushu University Ropponmatsu Campus closes (Sept.)• Launch of the Liberal Democratic
Party administration (Dec.)• Openingof entire Fukuoka Urban
Expressway (July)08

Fukuoka REIT Corporation 2019

Panorama fountain installed at Canal City Hakata• 5:1 investment unit split implemented (Mar.)• Fukuoka International House opens (Apr.)• Second course donated to Fukuoka University held (Aug.)• Fukuoka Realty Co., Ltd. 10th anniversary (Dec.)• 5th Public Offering (Mar.)
Number of investment units: 49,000
Offer price (per unit): ¥164,414
Total issue price: ¥7,795 million• Canal City Hakata 20th anniversary• Japan’s largest 3D projection mapping and new Aqua

• IR briefing held for Platinum WOMAN individual investors (Aug.)• Incorporated into the FTSE EPRA/NAREIT Global Real Estate Index (Sept.)• Receives the IR Excellent Company Encouragement Award (Dec.)• Fukuoka Urban Growth Strategy Project established (Apr.)• Canal City Hakata communal area environment renewal (treeplanting, additional benches, etc.)• Tenjin VIORO shopping mall opens (Sept.)• Kyushu National Museum opened(Oct.)• F irst course donated to Fukuoka University held (Sept.)• Second issue of investment
corporation bonds (July)• 4th Public Offering (Apr.)
Number of investment units: 57,000
Offer price (per unit): ¥212,257
Total issue price: ¥11,701 million• Consumption tax hike to 8% (Apr.)• Nippon
Individual Savings Account (NISAs) launched (Apr.)•G PIF starts investing in J-REITs with adoption of new index (Apr.)• Bank of Japan decides to adopt a negative interest rate policy (Jan.)• Long-term interest rates negative for the first time in history (Feb.)• Number of visiting cruise ships in 2015: 259• JR Oita City shopping mall opens (Apr.)• Vegetable Stadium, new fruit and vegetable
market, opens in Island City (Feb.)

0• Third issue of investment corporation bonds (July)• Office building rent increase revisions advanced due to strong office market• C anal City Hakata inbound continues to perform well, sets new visitor records (17.02
million in fiscal 2017)• Formulation of sustainability policy (Jan.)• Park Place Oita 15th anniversary renovation• Fukuoka City Science Museum re-opened (Oct.)• Sacred Island of Okinoshima and Associated Sites in the Munakata
Region registered as World Cultural Heritage sites (July)• Foreign visitors to Japan top 20 million• Foreign visitors to Japan top 30 million• M7.3 Kumamoto Earthquake (Apr.)• Higashi Kyushu Expressway fully opened (Apr.)• Central Wharf cruise quay extension
work completed (Aug.)• Fukuoka City designated as National Strategic Special Zone (May)• Tenjin Big Bang project launched (Feb. 2015)• Number of visiting cruise ships in 2014: 115

Fukuoka REIT Corporation 201909

Financial Highlights

Non-Financial Highlights

Total Operating Revenues(Millions of yen)

Profit

9,730 (Note 1)

10,000

9,178
8,423

8,343

7,789

8,234

8,122

9,242

9,231

Number Officers and Employees (Note 3)

Percentage of Female Employees (Note 4)(Millions of yen)（People）

(%)

5,000

50

50

4,198 (Note 1)

8,194

8,000

4,000

6,000

3,000

2,661

2,860

2,669

2,556

2,369

4,000

2,000

2,000

1,000

41
40
2,934

38

39

40

38

38

39

Introduction

Introduction

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

41

48.7
44.7

45.0

43.9

44.7

46.2

44.7

46.3

46.3

41
40

35

40.0

2,939

2,623

30

30

20

20

10

10

938 (Note 1)

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019NOI(Millions of yen)
5,493
5,164

4,829

5,010

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

4,998

5,591

5,633

3,435

5,079

3,563

3,574

3,479

3,398

3,422

3,512

3,593

3,687

3,693

25th

26th

27th

28th

29th

30th

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

7.7

7.5
6.2

6.5

6.9

7.10

169

7.11

154

160

6.11

148

147

122

6

120

4

80

2

40

149

129

126
116
106

2,000

1,500

1,000

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

39.3

38.9

39.1

39.7

39.7

Depreciation and Amortization Expenses(Millions of yen)

(%)
50
1,602

1,390

1,458

1,471

1,470

1,455

1,474

1,622

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

LTV

2,000

1,500

24th
Aug. 2016

200

6.0

0

23rd
Feb. 2016

8.6

3,000

3,000

22nd
Aug. 2015(Meetings)

10

8
4,500

21st
Feb. 2015

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

4,000

0

Average Number of Years of Employment (Note 5)

(Yen)
5,237

21st
Feb. 2015

Dividend per Unit (Note 2)

6,000
5,229

0

42.3

1,651

1,500

39.9

39.9

40.1

38.1

40

30
1,000
20

500
10

0

10

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

Fukuoka REIT Corporation 2019

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019(Note 1) Due to differences in accounting and tax treatment, the gain and loss on sale of AEON Hara Shopping Center and Aqualia Kego transferred in the 25th fiscal period were handled as follows:(1) The amount of impairment loss for AEON Hara Shopping Center recorded in the profit and loss statement for the 24th fiscal period was recorded as reserve for temporary difference adjustments.
(2) The gain on sale of Aqualia Kego was recorded in the income statement for the 25th fiscal period.
(3) Reversal of reserve for temporary difference adjustment was recorded in the statement on cash dividend for the 25th fiscal period.
(Note 2) Dividends per unit for the 24th and 25th periods were calculated as follows:
Dividend for the 24th term: Profit + Reserve for temporary difference adjustments – Surplus brought forward
Dividend for the 25th term: Profit - Reversal of the reserve for temporary difference adjustments – Surplus brought forward(Note 3) The number of officers and employees indicates the total number of directors and auditors, permanent employees, contract employees, temporary employees, secondees, etc. who are employed on a full-time basis
at Fukuoka Realty Co., Ltd.
(Note 4) The percentage of female employees are calculated as the ratio of women to the number of directors, auditors and employees(Note 5) Average number of years of employment is calculated as the average service years of permanent and contract employees of Fukuoka Realty Co., Ltd.
(Note 6) The number of IR meetings in Japan and abroad shows the total number of IR meetings with institutional investors and analysts through interviews and telephone conferences.
With regard to the environmental performance data of properties owned, a system is currently in place so that important data can be compared with the previous year.

Fukuoka REIT Corporation 201911