27th Fiscal Period
Repor t on Performance andManagement Status (Semiannual Report)
September 1, 2017 to Februar y 28, 2018

Fukuoka REIT
Corporation

Security Code 8968

8968

I. Overview of Fukuoka REIT Corporation

ProfileI. Overview of Fukuoka REIT Corporation

Status of the Investment CorporationTo
To OurOur Unitholders
Unitholders
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 andmanagement status of FRC for the twenty-seventh fiscal period(September 1, 2017 to February 28, 2018).
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 thesupport of our unitholders and sponsor companies.
The business conditions of the Fukuoka and Kyushu area are
expanding moderately at a solid pace.
Consumer spending in the Fukuoka and Kyushu area is increasing
moderately, given improvements in the employment and income
environments. Looking ahead, a virtuous circle is expected tocontinue, bolstered by demand in and outside Japan.
According to the 2018 Land Market Value Publication announced
in March 2018, the land price for commercial land in Fukuoka City
increased 10.6% year-on-year, with generally strong demand forstores, hotels and office spaces thanks to an increase in inboundtourists and robust corporate activities, among other factors. The
figure for residential land also rose 4.3% year-on-year. As such, thecity’s land prices continued rising for the sixth consecutive year bothfor commercial land and residential land, marking higher rates ofincrease.
At Canal City Hakata, the number of visitors hit a new record
high.

Moreover, LOGICITY Hisayama, which we acquired in June 2017,
made a full-period contribution to the entire performance in terms ofleasing revenues for the twenty-seventh fiscal period.

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 real estate, which is a very regional-specific business.

Overview of the Investment Corporation

Standing on these asset management operations, we decided
to pay out 3,512 yen as dividend per unit for the fiscal period, anincrease of 90 yen from the previous fiscal period.

Name:Entering the twenty-eighth fiscal period, FRC issued newinvestment units to acquire a retail property and an office building.

Asset manager: Fukuoka Realty Co., Ltd. (Fukuoka Local Finance Branch Bureau (financial instruments) No. 10)

In March 2018, FRC issued new investment units (49,000 units) to
procure approximately 7.795 billion yen. The proceeds were used toacquire Konoha Mall Hashimoto, a retail property (acquisition price:

Fukuoka REIT Corporation

Representative: Etsuo Matsuyuki, CEO & Representative Director
Listed date:June 21, 2005 (Tokyo Stock Exchange, and Fukuoka Stock Exchange)

Sponsors

10 billion yen) and Higashi Hie Business Center II, an office building(acquisition price: 4.23 billion yen).
The acquisition has expanded the asset size of FRC to 192.2 billion
yen. The dividend forecast per unit for the twenty-eighth fiscal period
is expected to grow to 3,570 yen.
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
based on the management philosophy of “Act Local, Think Global.”
We greatly appreciate your continued support and cooperation.

5%

5%

5%

5%

THE BANK OFFUKUOKA, LTD.

THE NISHI-NIPPONCITY BANK, LTD.

Development Bank of Japan Inc.

SAIBU GAS CO., LTD.

50%

Director(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

With regard to office buildings, the vacancy rate in the business
districts of Fukuoka City has remained at an extremely low level,
standing at 3.35% as of February 2018. With the strong leasing
market, the weighted average occupancy rate of the office buildings
owned by FRC for the fiscal period under review was 99.4%

Etsuo Matsuyuki

Name:

Fukuoka Realty Co., Ltd.

TEL:

+ 81- 92- 272- 3900

Representative:

Etsuo Matsuyuki CEO & Representative Director

Established:

December 26, 2003

Address:

2- 25, 1-Chome, Sumiyoshi, Hakata Ward, Fukuoka City

Capital:200, 000, 000 yen

Portfolio

CEO & Representative Director,
Fukuoka REIT Corporation

Investment type (based on acquisition price)
Office buildings

Retail

27.2%

59.1%

CONTENTSII.

Overview of Fukuoka REIT Corporation
To Our Unitholders
ProfileTrend of Growth in Asset Size of FRC / Financial Summary
Portfolio Overview
Initiatives on Sustainability
Semiannual Report

Kyushu Electric Power Co., Inc.

(Note) The figure includes the number of visitors to Canal City Hakata East Building.

Canal City Hakata, the flagship of FRC, saw the number of its
visitors hit a new record high to reach 17.02 million (Note), with thetotal number of visitors since its opening surpassing 300 million.
This achievement was made possible by such factors as facility
operations creating experiential value and emotional consumption,
including water shows and projection mapping, as well as an
South Korea, due to an increased number of flights of low-costcarriers at Fukuoka Airport.

I.

10%

Outsidedirector

Fukuoka Realty Co., Ltd.

FUKUOKA JISHO
CO., LTD. (Note 1)

Others13.7%

Investment area (based on acquisition price)
1
2
3
5
7
8

III. Independent Auditor's Report
IV. Balance Sheet
V. Statement of Income
VI. Statement of Changes in Net Assets
VII. Cash Flow Statement
VIII. Notes to Financial Statements

FUKUOKA REIT CORPORATION

1

25
26
28
29
30
31

Other
Kyushu areas

Fukuoka metropolitan area

77.0%

23.0%

Total leasable floor space

Occupancy rate at end of period

548, 564. 93 m 2

99. 6%*Figures are based on properties owned as of February 28, 2018.

FUKUOKA REIT CORPORATION

2

I. Overview of Fukuoka REIT Corporation

Trend of Growth in Asset Size of FRC
Since Listing

FRC More than Doubled Asset Size and Diversified Investment Types
RetailRetail(total(totalacquisitionacquisitionprice,
price,leftleftaxis)
axis)

OfficeOfficebuildings
buildings(total(totalacquisitionacquisitionprice,
price,leftleftaxis)
axis)

NumberNumberofofinvestment
investmentproperties
properties(right(rightaxis)
axis)

OthersOthers(total(totalacquisitionacquisitionprice,
price,leftleftaxis)
axis)

Occupancy
OccupancyRate
Rate(right(rightaxis)
axis)

(mm
(mmyen)yen)

99
99.6.6200
200,000,000

99
99.8.899
99.4.499
99.4.499
99.0.099
99.7.798
98.8.899
99.4.498
98.6.699
99.2.299
99.1.198
98.8.899
99.6.698
98.8.898
98.1.199
99.0.099
99.3.3

97
97.0.098
98.1.1

99
99.5.599
99.6.699
99.4.499
99.5.5,081
22
22,081,081
22
22,081,281
19
19,281,171
33,171150
150,000,000,171
33,171,060
22,060,000
100
100,000,800
25
25,800,200
30
30,200,200
3737,200,200
3737,200,200
3737,200,171
33,171,060
22,060,200
3737,200,200
3737,2001414,171
33,171,171
33,171,200
37
37,200,200
3737,200

15
15

15
15

,100
43
43,100,171
33,171,171
33,171,171
33,171,100
43
43,100,100
4343,100,100
4343,100,700
4545,700,100
4343,100

16
16

16
16

,100
43
43,100

17
17

17
17

,323
103
103,323,323
103
103,323

16
16

,331
24
24,331,331
24
24,331,931
13
13,931(properties)(properties),500
48
48,500,500
48
48,500,171
33,171

23
23

,500
48
48,500,500
48
48,500,500
48
48,500,500
48
48,500,500
48
48,500

27
27

27
27

27
27

,500
48
48,500

25
25

24
24

,500
48
48,500,500
48
48,500

26
26

26
26

30
30
90
90.0.0%%,730
52
52,730

28
28

25
25

20
20

19
19
16
16

,831
12
12,831100
100.0.0%%,251
77,251,251
77,251

23
23
,100
43
43,100,581
11
11,581

99
99.6.6,331
24
24,331,081
22
22,081,581
11
11,58199
99.8.899
99.3.3

20
20

,223
115
115,22355,333
54
54,333
00

11
11

11
11

,000
50
50,00077,073
55
55,07388,073
55
55,073,773
62
62,773,773
62
62,773,443
6767,443,073
71
71,073,623
74
74,623,623
74
74,623,623
74
74,623,623
74
74,623,623
74
74,623,323
103
103,323,323
103
103,323,323
103
103,323,323
103
103,323,323
103
103,323,323
103
103,323,163
109
109,163,163
109
109,163,163
109
109,163,223
105
105,223,223
105
105,223,223
105
105,223
10
10

,623
74
74,62322ndnd
33rdrd44thth55thth66thth77thth88thth99thth10
10thth1111thth1212thth13
13thth1414thth15
15thth(Aug(Aug2005(Feb2006(Aug2006(Feb2007(Aug2007(Feb2008(Aug2008(Feb2009(Aug2009(Feb2010(Aug2010(Feb2011(Aug2011(Feb2012
2005) ) (Feb
2006) ) (Aug2006) ) (Feb
2007) ) (Aug2007) ) (Feb2008) ) (Aug2008) ) (Feb2009) ) (Aug2009) ) (Feb2010) ) (Aug2010) ) (Feb2011) ) (Aug2011) ) (Feb2012) )

23
23rdrd16
16thth17
17thth18
18thth19
19thth20
20thth21
21stst
22
22nd
nd
24
24thth25
25thth26
26thth27
27thth As
AsofofMarch
March11, ,(Aug(Aug2012(Feb2013(Aug2013(Feb2014(Aug2014(Feb2015(Aug2015(Feb2016(Aug2016(Feb2017(Aug2017(Feb2018
2012) ) (Feb2013) ) (Aug2013) ) (Feb2014) ) (Aug2014) ) (Feb2015) ) (Aug2015) ) (Feb
2016) ) (Aug2016) ) (Feb2017) ) (Aug2017) ) (Feb2018) )
2018
2018

00

Financial Summary
Financial
Financial Highlights
Highlights forfor 27th
27th Fiscal
Fiscal Period
Period andand BusinessBusiness Forecasts
Forecasts forfor 28th
28th
andand 29th
29th Fiscal
Fiscal Periods
Periods
Category

27th fiscal period

28th fiscal period

29th fiscal period(September 1, 2017 to February 28, 2018)(March 1, 2018 to August 31, 2018)(September 1, 2018 to February 28, 2019)

ActualForecast

Forecast

Operating revenues

mm yen

8,194

9,173

9,116

Leasing NOI (Note 1)

mm yen

5,079

5,489

5,493

Depreciation and amortization expenses

mm yen

1,500

1,600

1,607

Operating income

mm yen

2,965

3,235

3,224

Ordinary income

mm yen

2,624

2,842

2,843

Profitmm yen

2,623

2,841

2,842

Dividend per unityen (1)

3,512

–

–

Latest dividend forecast per unityen (2)

3,470

3,570

3,570

yen (1)-(2)

+42

–

–

units

747,000

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
27th fiscal period end

February 28, 2018

27th fiscal period dividend

3,512 yen per unit

(semiannual periods ending every February and August)27th fiscal period days

181 days

Dividend yield

4.1% {(Dividend / Days × 365) / Unit price (as of February 28, 2018)}

（yen）

3,802
4,000 （19,014）3,687 3,726

3,672 3,699 3,674

3,609（18,632）（18,438）（18,373）3,468（18,360）（18,499）（18,049）3,475 3,479
3,563 3,574（17,377）（17,397）3,356 3,293 3,384 3,324 3,238 3,257 3,291 3,243（17,341）
3,435（16,922）（16,783）（16,621）（16,465）（16,458）（16,193）（16,289）（16,219）3,278

3,479

3,398 3,422

3,512 3,570 3,570

25th

27th

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

26th

28th

29th

(Forecast) (Forecast)*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

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

Portfolio Overview
1 Active Retail

Active Retail = Properties with variable rents
Passive Retail = Properties without variable rents

2 Active Retail

3 Active Retail

4 Active Retail

Purchase of earthquake
insurance

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

21 Others(residence)

22 Others(residence)

23 Others(residence)

24 Others(residence)

Canal City Hakata

Canal City Hakata・B

Park Place Oita

One of the largest entertainmenttype retail facilities in Japan andcomprising United Cinemas andothersOne of the largest entertainmenttype retail facilities in Japan andcomprising Grand Hyatt Fukuoka
and others

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

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

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

A rental condominium comprisedof units mainly for singles andsmall families to match the local
characteristics

A large, high-rise (20-story) rental
condominium, approximately aseven-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

5 Active Retail

6 Passive Retail

7 Passive Retail

8 Passive Retail

25 Others(hotel)26 Others(logistics)

27 Others(logistics)

28 Others(logistics)

Kumamoto Intercommunity SC

Hanahata SC

A retail facility in Kagoshima,
designed by John Jerde who
designed Canal City Hakata andRoppongi Hills

Located along a major arterial roadand comprising Sports Depo, Golf 5
and Starbucks coffee

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

9 Passive Retail

10 Passive Retail

11 Passive Retail

12 Office Building

Konoha Mall Hashimoto

Hotel FORZA Oita
A business hotel located walking
distance from Oita Station andspecialized for lodging to meetbusiness needs

Located east of Marinoa
City Fukuoka and has stableattractiveness through synergy with
the Outlet building

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

LOGICITY Minato Kashii

LOGICITY Hisayama

A logistics facility among the largest
in the Fukuoka area, with a location
featuring traffic convenience andconcentration of such facilities

Approximately 5 km from the
Fukuoka Interchange featuring traffic
convenience, and has good generalpurpose capabilities

Island City

Fukuoka

Nagasaki

28

27

4
26
9

Oita

25
3

7

22

Kumamoto
Miyazaki3

Kagoshima

13 Office Building

14 Office Building

15 Office Building

16 Office Building

ressway
Kyushu Exp

Having a large floor area andtenanted by an electric appliancestore widely attracting customers
from nearby cities

Canal City Business Center
Building

Tosu Logistics Center
A logistics facility located in theGreen Logistics Park Tosu, operatingaround the clock and with threetemperature zones

KyushuArea

Fukuoka IC

Fuku
R o u o ka E x
te 4pKasressway,
u ya
Line

3

6
10

e
Lin

Located on a corner of a heavytraffic intersection and comprising
Sports Depo and Golf 5

K s Denki Kagoshima

Granfore Yakuin Minami

ii
sh
Ka
JR

Saga

Kurume Higashi Kushiwara SC

D-Wing Tower◉ Portfolio Map
Fukuoka
Metropolitan Area

Marinoa City Fukuoka(Marina Side Building)

Aqualia Chihaya

Sh
in
ka
ns
en

Square Mall Kagoshima Usuki

A community-based retail facility
with SunLive as its anchor tenantand directly connected to Hashim
oto Station via a pedestrian bridge

City House Keyaki Dori

Sa
ny
o

Property acquiredin the 28 th
fiscal period

SunLive City Kokura

Hakata Bay

JR Sasaguri

Gofukumachi Business Center

Sanix Hakata Building

Taihaku Street Business Center

Higashi Hie Business Center

An office building facing majorarterial roads and directly connected
to Gofukumachi Station on the city
subwayA highly-convenient, station-front
office building that is a two-minute
walk from Hakata Station

Good location along Taihaku-doriStreet, a two-minute walk from Gion
subway station and ten-minute walkfrom Hakata Station

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

Fukuoka Expressway,
Route 1 (Loop Line)11

SubwayKuko Line

17 Office Building

18 Office Building

19 Office Building

Property acquiredin the 28 th
fiscal period

202

5

385

0

1km

Fukuoka
E

e
Lin

202

xpr
ess
wa

y R oute

op Line)
5 (Lo8FUKUOKA REIT CORPORATION

5

ifu
za
Da

A tower-type rental condominium
near downtown Fukuoka, with traffic
convenience and environment thatmatches a wide range of generations

NishOmitetut su
a Te
Lin nji
e n

263

ay
sw
es
pr
Ex

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

3

an
rb
U

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

Fukuoka Airport

16

ine
aL
im
sh
go
Ka

An office building facing Tenjin
Nishi-dori Street where commercial
facilities are concentrated

Tenjin19

JRAmex Akasakamon Tower

Hakata
1
12
14
2

17

21

15

24

202

Higashi Hie Business Center II

18

SubwayNanakumaLine

202

Tenjin North Front Building

20 23

Ohori Park

20 Others(residence)

Tenjin Nishi-Dori Center Building

13

FUKUOKAYAHUOKU!DOMELine

FUKUOKA REIT CORPORATION

6

Fukuoka
Metropolitan
Area

I. Overview of Fukuoka REIT Corporation

Initiatives on Sustainability

II. Semiannual Report

Introducing a Sustainability Policy
Fukuoka Realty Co., Ltd. introduced a Sustainability Policy on January 29, 2018 in recognition of the importance ofincorporating environment, society, and governance (ESG) into the real estate investment management process.

Overview of Asset Management
1. Changes in operating results and financial position●Sustainability Policy①Promoting energy conservation of portfolio properties……………………………………………………………………………………
②Responding to climate change risks……………………………………………………………………………………
③Contributing to creation of a recycling society……………………………………………………………………………………
④Pursuing well-being and safety……………………………………………………………………………………
⑤Utilizing green building certifications……………………………………………………………………………………
⑥Enlightening employees……………………………………………………………………………………
⑦Collaboration with tenants and suppliers……………………………………………………………………………………
⑧Establishing internal organizations……………………………………………………………………………………
⑨Monitoring and disclosing environmental and social performances……………………………………………………………………………………

Environmentally Conscious Facility Operation and External Evaluation
Fukuoka REIT Corporation engages in a wide range of initiatives to contribute to the establishment of a sustainable society.
These initiatives are evaluated by independent third-party organizations. We will continue striving to fulfill our corporate social
responsibilities.

Environmental Initiatives in Facility Operation

Fiscal Period
Operating revenues

mm yen[Leasing business revenues]

mm yenOperating expenses

mm yen[Expenses related to leasing business]

mm yenOperating income
Ordinary income
ProfitTotal assets

mm yenmm yen(a)

mm yen(b)

mm yen(c)

mm yen[Change from previous period]

Net assets%[Change from previous period]

Canal City Hakata

Park Place Oita
Park Place Oita aims for harmonization withnature by planting trees and installing various
planters within the facility.

DBJ Green Building Certification
Six properties had obtained certification as of the end of 2017.

26th fiscal period

8,343[8,343]
5,201[4,577]
3,141
2,670
2,669
181,445[(0.1)]
93,812[0.0]
91,142

8,234[8,234]5,165[4,540]
3,069
2,616
938
179,513[(1.1)]
92,081[(1.8)]
91,142

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

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%(September 1, 2016 to
February 28, 2017)(March 1, 2017 toAugust 31, 2017)27th fiscal period(September 1, 2017 to
February 28, 2018)

Total number of investment
units outstanding
Net assets per unit
Total dividend
Dividend per unit

(d)

units

747,000

747,000

747,000

747,000

747,000(c)/(d)yen(e)

mm yen(e)/(d)yen

125,585
2,669
3,574[3,574][–]

123,2672,598
3,479[1,256][2,223]

125,4102,538
3,398[3,398][–]125,434
2,556
3,422[3,422][–]

125,5242,623
3,512[3,512][–]%

1.5 [3.0]

1.4 [2.9]

2.4 [4.8]

1.5 [2.9]

1.5 [3.0]%

2.8 [5.7]

1.0 [2.0]

4.5 [9.1]

2.7 [5.4]

2.8[5.6]

%

51.7

51.3

53.5

52.6

52.9

%
%

[0.0]
100.0

[(0.4)]
100.0

[2.2]
60.5

[(0.9)]
100.0

[0.3]
100.0

properties[Earnings dividend per unit][Dividend in excess of earnings per unit]

Payout ratio

A mist generating system is used to cool the air
with a watering effect in summer, when solar
radiation is strong.

25th fiscal period (Note 6)(March 1, 2016 toAugust 31, 2016)(Note 3) mm yen

yen(Note 4)[Change from previous period]

Canal City Hakata

24th fiscal period

Unitholders’ equity

Ratio of ordinary income to total (Note 5)
assets(Note 5)Return on net assets
Ratio of net assets to total(c)/(b)assetsConstructing environmentally friendly facilities
designed for energy- and resource-efficiency.

23rd fiscal period(September 1, 2015 toFebruary 29, 2016)(unit)(Note 5)【Other reference information】
Number of investment
properties (at end of period)
Total leasable floor space

27

27

25

26

26

2

554,549.65

554,541.30

523,817.31

548,564.96

548,564.93

%

99.6

99.5

99.4

99.8

99.6

mm yen

1,471

1,470

1,455

1,474

1,500

mm yen

630
5,237
182

665
5,164
184

1,789
5,010
181

741
4,998
184

600
5,079
181

m

(at end of period)

Occupancy rate
(at end of period)

Depreciation and amortization
expensesCapital expenditures
Leasing NOI
Days in fiscal periodyen(Note 5) 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 dividend in excess of earnings per unit for the 24th fiscal period came from the reserve for temporary difference adjustments.
(Note 5) 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■ LOGICITY Hisayama■ Canal City Hakata■ Park Place Oita
■ Canal City Business Center Building

FUKUOKA REIT CORPORATION

7■ Gofukumachi Business Center■ Higashi Hie Business Center

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 6) 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

Overview of Asset Management
Moreover, the credit ratings assigned to FRC as of the end of the 27th 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 27th fiscal period (February 28, 2018), FRC manages a total of 26 properties
comprising 10 Retail, 7 Office buildings and 9 Others.

(2) Investment environment and portfolio performance
During the fiscal period under review (the 27th fiscal period), the Japanese economy showed a modest recovery. Looking
ahead, with the employment and income environment continuing to improve, the economy is expected to continue recoveringmoderately due to various political measures proving effective, among other factors.
In the Fukuoka and Kyushu area, the core investment target area for FRC, the economy is expanding moderately. With
regard to the outlook, the area is expected to see strong overseas demand and solid domestic demand continue going
forward.
As for land price trends, the average rate of change in national average for residential land price took an upward turn for the
first time in ten years, while commercial land price and combined average price for residential and commercial land continued
to rise for three consecutive years, according to the 2018 Land Market Value Publication. In Fukuoka City, the central area of
FRC's investment targets, land prices continued rising for six consecutive years, up 10.6% year-on-year for commercial land
and up 4.3% year-on-year for residential land, marking higher rates of increase.
Under such circumstances, 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 99.6% at theend of the 27th fiscal period.
When analyzing FRC’s portfolio (on an acquisition price basis) by investment target area, the investment ratio in the Fukuoka
urban area accounted for 77.0%; when analyzing by property type, Retail, Office buildings, and Others accounted for 59.1%,
27.2% and 13.7%, respectively.

(3) Summary of fundraising
As FRC conducted refinancing in the 27th fiscal period, the balance of its interest-bearing debt outstanding (including
investment corporation bonds) at the end of the period totaled 68,900 million yen, with the loan-to-value ratio (ratio of interestbearing debt (including investment corporation bonds) to total assets) at 38.9% and the ratio of fixed-interest rate debt (ratio ofinterest-bearing debt with fixed interest rates (including investment corporation bonds) to total interest-bearing debt) at 89.1%
as of the same date. Going forward, FRC will continue its endeavors for dispersion of debt repayment dates and extension ofdebt duration, in an effort to reduce refinancing risks. At the same time, FRC will work to mitigate risks of rising interest rates
by shifting to fixed-interest rate borrowings and through other measures.
Furthermore, FRC made a resolution on February 9, 2018 on the issuance of new investment units (49,000 units) in order tofund acquisition of new specified assets.

S&P Global Ratings Japan Inc. (S&P)

9

RatingRating Outlook

A−
A−2

Positive−

Rating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)

Issuer Rating

A+

StableLong-term Issuer Rating

AA−

Stable(4) Summary of performance and dividend
As a result of these management efforts, operating revenues totaled 8,194 million yen and operating income after excluding
operating expenses such as expenses related to leasing business and asset management fees totaled 2,965 million yen.
Ordinary income was 2,624 million yen and profit amounted to 2,623 million yen. Management decided to make a dividend of
3,512 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 act, 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 27th 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

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

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

Unitholders’ capital(mm of yen)

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

Balance
125
41,52547,46949,16760,264
69,17779,441
79,441
91,142

Remarks(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(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.

Furthermore, while the above table shows the changes in unitholders’ capital through the end of the 27th fiscal period, FRC
resolved at its Board of Directors meeting held on February to issue new investment units, as described in 6. Significant events
that have occurred after the end of the 27th fiscal period.

[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
HighestLowestFUKUOKA REIT CORPORATION

Rating Type
Long-term Corporate Credit Rating
Short-term Corporate Credit Rating

23rd fiscal period

24th fiscal period

25th fiscal period

26th fiscal period

27th fiscal period

209,000 yen
171,300 yen

214,500 yen
186,100 yen

192,000 yen
169,000 yen

182,800 yen
162,100 yen

183,400 yen
157,500 yen(September 1, 2015 toFebruary 29, 2016)(March 1, 2016 toAugust 31, 2016)(September 1, 2016 to
February 28, 2017)

FUKUOKA REIT CORPORATION(March 1, 2017 toAugust 31, 2017)10(September 1, 2017 to
February 28, 2018)

II. Semiannual Report

II. Semiannual Report

Overview of Asset Management

As a result, FRC’s unitholders’ capital came to 98,938,764,550 yen as of May 29, 2018, with the total number of investment
units outstanding at 796,000 units as of the same date.

4. Results of dividend, etc.
With respect to the dividend (excluding dividend in excess of earnings) for the 27th 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 3,512 yen.
(thousands of yen)
Fiscal period
ProfitUnappropriated surplus
Undistributed earnings
Total dividends[Dividend per unit]

Earnings dividends[Earnings dividend per unit]

Contribution refund[Contribution refund per unit]

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)

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)

23rd fiscal period

24th fiscal period(September 1, 2015 toFebruary 29, 2016)

25th fiscal period(March 1, 2016 toAugust 31, 2016)

2,669,627
2,669,786
8
2,669,778[3,574 yen]
2,669,778[3,574 yen]

(September 1, 2016 to
February 28, 2017)938,400
938,409177
2,598,813[3,479 yen]
938,232[1,256 yen]
1,660,581[2,223 yen]

–

[–]

–

27th fiscal period(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]

–

[–]

–

1,660,581[2,223 yen][–]

26th 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]

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

–

[– ]

–

[–]

–

[–]

Issuance of new investment units through public offering
Number of investment units offered:
49,000 units
Issue price:			
164,414 yen
Total issue price:
8,056,286,000 yen
Paid-in amount:		
159,102 yen
Total paid-in amount:
7,795,998,000 yen
Payment date:			
March 1, 2018
Base date for distribution:
March 1, 2018
Furthermore, FRC already acquired the real estate trust beneficiary interests of the following two properties as of March 1,
2018 by using the proceeds obtained from the issuance of new investment units through public offering to partly fund theacquisition.
Property name
Konoha Mall Hashimoto
Higashi Hie Business Center II

Use

Location

2-chome, Hashimoto, Nishi
Ward, Fukuoka City
1-chome, Higashi Hie, Hakata
Ward, Fukuoka City

RetailOffice buildings

Acquisition price(mm of yen) (Note)

Seller

10,000Fukuoka Jisho Co., Ltd.
4,230

(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.

–[–]

Overview of the Investment Corporation
–

–

[–]

–

[–]

[–]

–

[–]

–

[–]

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 urban area, since the Fukuoka urban area is expected to have a high population growth rate in the future. In addition
to the Fukuoka urban area, management has decided to actively acquire properties in major cities, if there are regions orproperties where FRC can generate investment merits through its knowledge of the local land. FRC will acquire high quality
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.
Meanwhile, FRC will build stronger relationships with financial institutions to realize stable fundraising and try to maintain asolid financial structure.

6. Significant events that have occurred after the end of the 27th fiscal period
Issuance of new investment units
FRC issued new investment units through public offering, which was resolved at its Board of Directors meeting held on
February 9, 2018, with the aim of acquiring real estate trust beneficiary interests. Payment completed on March 1 for the newinvestment units issued.
FUKUOKA REIT CORPORATION

11

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

23rd fiscal period

24th fiscal period

25th fiscal period

26th 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

747,000 units

747,000 units

10,330

9,722

10,25910,1909,897

as of February 29, 2016as of August 31, 2016as of February 28, 2017as of August 31, 201727th fiscal period

as of February 28, 2018

2. Matters related to investment units
The following table sets forth the major unitholders of FRC as of February 28, 2018.
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)
STATE STREET BANK – WEST PENSION FUND CLIENTS – EXEMPT 505233
MetLife, Inc.
NORTHERN TRUST CO.(AVFC) RE HCR00
STATE STREET BANK WEST CLIENT – TREATY 505234
Shikoku Railway Company
Total

184,681
95,811
66,07528,02625,131
11,895
11,20010,0169,630
9,130
451,595(Note) Percentage of total number of investment units outstanding is rounded down to the nearest specified unit.

FUKUOKA REIT CORPORATION

12

Percentage of total number ofinvestment units outstanding (%) (Note)
24.72
12.82
8.84
3.75
3.36
1.59
1.49
1.34
1.28
1.22
60.45

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 27th fiscal period are as
follows:
Title

Name of directors, etc.

Major concurrent assignments

26th fiscal period
Type of asset

Total fee for each title for the
27th fiscal period

CEO and Representative Director

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–

Retail

6,000
3,600

Real estate trust
beneficiary interest

Office buildings

8,500

Others(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 27th fiscal period, and the fee to the Independent Auditor is the amount payable to it(estimate) for audits pertaining to the 27th fiscal period.

(2) Policy on deciding to dismiss and not to reappoint the Independent Auditor
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.

as of February 28, 2018

Total value of
properties held

Percentage of
total assets

Total value of
properties held

Percentage of
total assets

Fukuoka metropolitan area

66,21337.2

65,88637.2

Other Kyushu areas
Fukuoka metropolitan area

36,48720.5

36,33820.5

42,79824.0

42,497

24.0

−

−

−

−

Fukuoka metropolitan area

20,876

11.7

20,770

11.7

Other Kyushu areas

1.5(Note 1)(mm of yen) (Note 2)(thousands of yen) (Note 2)

27th fiscal period

as of August 31, 2017

Area

Use

Other Kyushu areas(%) (Note 3)(mm of yen) (Note 2)(%) (Note 3)

2,654

1.5

2,645

Deposits and other assets

9,032

5.1

9,145

5.2

Total amount of assets (Note 4)

178,063[169,053]

100.0[94.9]

177,283[168,145]

100.0[94.8](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 2010 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 urban 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.

4. Names of asset management company, asset custodian and generaladministrators as of the end of the 27th fiscal period
The following table sets forth the asset management company, asset custodian and general administrators of FRC as ofFebruary 28, 2018
Category of entrustment

Name

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,
2018.
Book value

Total leasable floor Total leased floor
space (m2)space (m2)Occupancy rate

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

Asset Management Company

Fukuoka Realty Co., Ltd.

Asset Custodian

Mitsubishi UFJ Trust and Banking Corporation

General Administrator (accounting matters, etc.)

Mitsubishi UFJ Trust and Banking Corporation

Canal City Hakata

30,326

46,602.94

46,194.14

99.1

15.6

RetailGeneral Administrator (administration of unitholders’ list)

Sumitomo Mitsui Trust Bank, Limited

Canal City Hakata·B

29,101

68,820.27

68,411.30

99.4

20.0

RetailGeneral Administrator (administration of investment corporation bonds registry)

Sumitomo Mitsui Banking Corporation

General Administrator (underwriting of investment units)

SMBC Nikko Securities Inc. (Note)

Park Place Oita

18,919113,837.70

113,510.64

99.7

14.5

RetailGeneral Administrator (underwriting of investment units)

Nomura Securities Co., Ltd. (Note)

Canal City Business Center Building

13,342

23,031.09

22,577.76

98.0

7.6

Office buildings

General Administrator (underwriting of investment units)

Mizuho Securities Co., Ltd. (Note)

Gofukumachi Business Center

9,233

19,905.34

19,905.34

100.0

6.6

Office buildings

General Administrator (underwriting of investment units)

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. (Note)

LOGICITY Minato Kashii

7,971

43,233.72

43,233.72

100.0

Undisclosed (Note 4)

General Administrator (underwriting of investment units)

Nishi-Nippon City Tokai Tokyo Securities Co., Ltd. (Note)

Taihaku Street Business Center

6,146

14,677.27

14,554.68

99.2

3.7

Office buildings

General Administrator (underwriting of investment units)

Fukuoka Securities Co., Ltd. (Note)

SunLive City Kokura

5,723

61,450.22

61,450.22

100.0

3.6

RetailMarinoa City Fukuoka (Marina Side Building)

5,456

33,069.82

33,069.82

100.0

2.2

RetailLOGICITY Hisayama

5,024

24,505.65

24,505.65

100.0

Undisclosed (Note 4)

Others131,248

449,134.02

447,413.27

99.6

–

(Note) These firms were appointed as general administrators related to offering of investment units at FRC’s Board of Directors meeting held on February 9, 2018. With payment for the investment units
completed on March 1, 2018, the consigned services were finished.

Real estate property name (Note 1)

Total(mm of yen)(%) (Note 2)(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 CORPORATION13FUKUOKA REIT CORPORATION

14

Main use

Others–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
The following table provides details of the real estate properties owned by FRC as of February 28, 2018.

Real estate property nameForm ofownership

Location

2-22, 1-Chome, Sumiyoshi,
Hakata Ward, Fukuoka City
2-1, 1-Chome, Sumiyoshi,
Canal City Hakata·B
Hakata Ward, Fukuoka City1, 2-Chome, Koen Dori Nishi,
Park Place Oita
Oita City, Oita
14-1, 2-Chome, Kami Kuzuhara,
SunLive City Kokura
Kokura Minami Ward, Kitakyushu
City
2-18, 2-Chome, Usuki,
Square Mall Kagoshima Usuki
Kagoshima City, Kagoshima
1-5, 1-Chome, Kozono, HigashiKumamoto Intercommunity SC
Ward, Kumamoto City
9-12, 4-Chome, Hanahata,
Hanahata SC
Minami Ward, Fukuoka City
370-3 Higashi Kushiwara,
Kurume Higashi Kushiwara SC
Kurume City, Fukuoka
4-12, Tokai-cho, Kagoshima
K’s Denki Kagoshima
City, Kagoshima
Marinoa City Fukuoka (Marina Side 12-30, 2-Chome, Odo, Nishi
Building)
Ward, Fukuoka City
Retail subtotal:
2-25, 1-Chome, Sumiyoshi,
Canal City Business Center Building
Hakata Ward, Fukuoka City
10-10, Kami Gofukumachi,
Gofukumachi Business Center
Hakata Ward, Fukuoka City
1-23, 2-Chome, Hakataeki Higashi,
Sanix Hakata Building
Hakata Ward, Fukuoka City
3-21 Gokushomachi, Hakata
Taihaku Street Business Center
Ward, Fukuoka City
1-2, 3-Chome, Higashi Hie,
Higashi Hie Business Center
Hakata Ward, Fukuoka City
5-28, 2-Chome, Tenjin, Chuo
Tenjin Nishi-Dori Center Building
Ward, Fukuoka City
4-20, 4-Chome, Tenjin, Chuo
Tenjin North Front Building
Ward, Fukuoka City
Office buildings subtotal:
4-23, 2-Chome, Maizuru, Chuo
Amex Akasakamon Tower
Ward, Fukuoka City
16-21, 2-Chome, Kego, Chuo
City House Keyaki DoriWard, Fukuoka City
3-12, 4-Chome, Chihaya,
Aqualia Chihaya
Higashi Ward, Fukuoka City
10-38, 2-Chome, Daimyo, Chuo
D-Wing Tower
Ward, Fukuoka City
11-20, 1-Chome, Hirao, Chuo
Granfore Yakuin Minami
Ward, Fukuoka City
5-18, 1-Chome, Chuo-cho, Oita
Hotel FORZA Oita
City, Oita
1607 Momota, Himekata-cho
Tosu Logistics Center
Aza, Tosu City, Saga
3-4, 2-Chome, Minato Kashii,
LOGICITY Minato Kashii
Higashi Ward, Fukuoka City
2335-3 Oaza Yamada,
LOGICITY Hisayama
Hisayama-machi, Kasuya
County, Fukuoka
Others subtotal:
Total
Canal City Hakata

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
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)

27th fiscal period

26th fiscal period(March 1, 2017 to August 31, 2017)

Period-end
appraisalvalue(mm of yen)
(Note)

Book value
at end ofperiodReal estate property nameReal estate appraiser(mm of yen)

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

46,602.94

31,80030,326

68,820.27

29,70029,101

113,837.70

19,40018,919Japan Real Estate Institute61,450.22

8,150

5,723

Japan Real Estate Institute14,602.88

5,450

4,489

Japan Real Estate Institute6,968.66

2,760

2,030

Japan Real Estate Institute2,801.15

1,250

1,001

6,467.80

2,780

2,109

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

Canal City Hakata
Canal City Hakata·B
Park Place Oita
SunLive City Kokura
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC
Hanahata SC
Kurume Higashi Kushiwara SC
K’s Denki Kagoshima
Marinoa City Fukuoka (Marina Side Building)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(September 1, 2017 to February 28, 2018)

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)

1 [49]
1 [50]
1 [107]
1
12
2
2
1
1
1
23 [226](Note 2)

1 [61]
35
16
1 [68]
1 [25]
1
11
66 [217]

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1,250
1,598
1,228
292
257
89
40
88
111
177

15.4
19.7
15.1
3.6
3.2
1.1
0.5
1.1
1.4
2.2

100.0

5,134

63.3

100.0
100.0
100.0
98.8
100.0
100.0
100.0

639
540
199
299
334
86
139

7.9
6.7
2.5
3.7
4.1
1.1
1.7

99.8

2,239

27.6

91.1
92.2
98.2
99.4
91.9
100.0

0.8
0.5
0.7
1.4
0.5
0.8
Undisclosed

7,296.17

3,710

3,066

33,069.82

5,940

5,456

361,917.61

110,940

102,225

23,031.09

15,20013,342

19,905.34

13,7009,233

6,293.75

5,510

3,896

Japan Real Estate InstituteTosu Logistics Center

1

100.0

65
36
59
113
37
63
Undisclosed(Note 5)(Note 5)

14,677.27

7,740

6,146

Japan Real Estate Institute

LOGICITY Minato Kashii

2

100.0

Undisclosed

Undisclosed(Note 5)

13,614.59

7,090

4,569

Tanizawa Sogo Appraisal
Co., Ltd.

(Note 5)LOGICITY Hisayama

1

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

3,339.32

3,030

2,700

Japan Real Estate Institute

Others subtotal:

10 [434]

99.0

743

5,252.41

3,730

2,606

Japan Real Estate InstituteTotal

99 [877]

99.8

8,117

86,113.77

56,00042,497

4,821.25

1,940

1,747

2,710.86

1,090

946

5,619.69

1,640

1,200

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

Daiwa Real EstateAppraisal Co., Ltd.
Daiwa Real EstateAppraisal Co., Ltd.
Japan Real Estate Institute

2,733
1,145

5,785.44

1,860

1,431

Japan Real Estate Institute4,173.29

1,420

1,214

Japan Real Estate Institute43,233.72

8,800

7,971

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

5,220

5,024
23,415
168,138(Note 2)

15

99.7

5,160

63.0

98.0
100.0
100.0
99.2
100.0
100.0
100.0

624
537
198
300
333
86
140

7.6
6.6
2.4
3.7
4.1
1.1
1.7

99.3

2,221

27.1

1 [66]
1 [42]
1 [97]
1 [134]
1 [99]
1

96.7
100.0
92.9
97.6
100.0
100.0

1

100.0

69
38
58
116
38
63
Undisclosed

0.8
0.5
0.7
1.4
0.5
0.8
Undisclosed(Note 5)(Note 5)2

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)1

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

9.2

10 [443]

99.3

812

9.9

100.0

99 [879]

99.6

8,194

100.0

(Note 2)

(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-throughmaster leasing 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 aresidential tower. Its number of tenants comprises 12 for the office building and 57 for the residence in the 27th fiscal period (12 for the office building and 56 for the residence in the 26th 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.

(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

15.6
20.0
14.5
3.6
3.1
1.1
0.5
1.1
1.4
2.2

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

3,480
1,290

26,740
193,680(Note 2)

1,275
1,638
1,191
292
254
90
40
88
111
177

4. Details of renewable energy generation facilities in the portfolio

7,187.59

24,505.65(Note 2)

1 [60]
1 [39]
1 [103]
1 [136]
1 [91]
1(Note 2)

1 [59]
35
16
1 [69]
1 [25]
1
11
66 [216]

99.1
99.4
99.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0

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

2,496.06

100,533.55
548,564.93

Office buildings subtotal:
Amex Akasakamon Tower
City House Keyaki Dori
Aqualia Chihaya
D-Wing Tower
Granfore Yakuin Minami
Hotel FORZA Oita

1 [49]
1 [47]
1 [104]
1
12
2
2
1
1
1
23 [220]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, 2018.
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)

Total

Fair value(mm of yen) (Note 2)

24,10024,100(137)

24,10024,100(137)(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.

8. Status of other assets
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 27th fiscal period.

2. Capital expenditures during the 27th fiscal period
Capital expenditures for the real estate properties owned by FRC totaled 600 million yen in the 27th period. Furthermore,
FRC incurred construction costs of 857 million yen in total in the period, including 251 million yen in repair and maintenanceexpenses classified as expenses on the statement of income and 5 million yen in expenses for restoration to former state. The
following table provides the overview of major construction work that was completed in the 27th fiscal period.
Real estate property name

As of the end of the 27th fiscal period, no overseas real estate properties in countries or regions other than Japan areincorporated into FRC’s portfolio.

PurposeConstruction cost

Period(mm of yen)

Canal City Hakata

Hakata Ward, Fukuoka City

Replacement of central monitoring equipment

From January 2018 to
February 2018

6

Canal City Hakata・B

Hakata Ward, Fukuoka City

Replacement of foam fire extinguishingapparatus for ground parking lots andcountermeasures against cold waves

From September 2017 toNovember 201734

Canal City Hakata・B

Hakata Ward, Fukuoka City

Replacement of pumps

From October 2017 to
February 201815

Park Place Oita

Oita City, Oita

Replacement of air-conditioning units

From October 2017 toJanuary 2018176

Refurbishment of sites for former tenants

From December 2017 to
February 201838

Replacement of central monitoring equipment

From September 2017 to
February 201814

Canal City Business Center Building

9. Status of owned assets by country and region

Location

Sanix Hakata Building

Hakata Ward, Fukuoka City
Hakata Ward, Fukuoka City

3. Reserves for long-term repair and maintenance plans
FRC has deposited the following amounts from the cash flows generated during the 27th 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.

Capital Expenditures for Owned Real Estate(millions of yen)

1. Planned capital expenditures

Fiscal period

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.

Balance of deposits at beginning of period

23rd fiscal period(September 1, 2015 toFebruary 29, 2016)

24th fiscal period(March 1, 2016 toAugust 31, 2016)

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

PurposeSchedule
Total

Canal City Hakata

Hakata Ward,
Fukuoka City

800

800

1,000

1,000

–

–

200

–

–

Amounts used from deposits during the period

–

–

–

–

–

Deposits carried forward to the next period

800

800

1,000

1,000

1,000

Construction
Amountcost
already paid

Replacement of emergency telephone facilities

From October 2017 to March
2018

27

–

–

Canal City Hakata

Hakata Ward,
Fukuoka City

Renovation of external walls of South Building

From October 2017 to February
2019

130

0

0

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Replacement of emergency telephone facilities

From October 2017 to March
2018

55

–

–

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Renovation of external walls of South Building

From October 2017 to February
2019

258

1

1

Introduction of parking lot control systems

From October 2018 toNovember 2018

52

–

–

52

–

–

Park Place Oita

Oita City, Oita

Park Place Oita

Oita City, Oita

Installation of parking lot guiding boards

From October 2018 toNovember 2018

Konoha Mall
Hashimoto(Note)

Nishi Ward,
Fukuoka City

Work on parking lot control systems

From April 2018 to July 2018

71

–

–

Canal City BusinessCenter Building

Hakata Ward,
Fukuoka City

Renovation of external walls of South Building

From October 2017 to February
2019

33

0

0

(Note) FRC acquired the real estate trust beneficiary interest of the property on March 1, 2018.
FUKUOKA REIT CORPORATION

17(September 1, 2017 to
February 28, 2018)

800(mm of yen)

Location(March 1, 2017 toAugust 31, 2017)27th fiscal period

Deposits during the period

Planned construction cost
Real estate property
name26th fiscal period

FUKUOKA REIT CORPORATION

18

II. Semiannual Report

II. Semiannual Report

Expenses and Liabilities

Expenses and Liabilities

1. Details of expenses related to asset management
27th fiscal period

26th fiscal period

Item(March 1, 2017 toAugust 31, 2017)(a) Asset management fees(b) Asset custody fees(c) Administrative service fees

Category(thousands of yen)

Lender(September 1, 2017 to
February 28, 2018)

479,496
6,618
51,583

Sumitomo Mitsui Banking
Corporation

482,350
6,622
51,813(d) Directors’ compensations

9,600

9,600

(e) Other operating expenses

61,64363,610

Total

608,941

613,997

2. Status of debt

As of the end of the 27th fiscal period (February 28, 2018), FRC has the following debt from respective financial institutions.
Category
LenderThe Bank of Fukuoka(Note 2)

Resona Bank (Note 2)
The Nishi-Nippon City Bank

Short-term
debt

Balance as of Balance as of Average
Drawdown date September 1, February 28, interest
2018
rate (%)
2017
August 31, 2017

(Note 2)

Resona Bank (Note 2)
The Bank of Nagasaki

August 31, 2017

(Note 2)The Oita Bank (Note 2)
The Bank of Saga (Note 2)
Subtotal

Current
maturities
of long-term
debt(mm of yen)

(mm of yen)

583
116
571
80
57
57
34
1,500

–
–
–
–
–
–
–
–

Repayment
date

Repayment
method

0.388

0.388

December 29, 2017

December 29, 2017

Lump-sum uponmaturity

Lump-sum uponmaturity

The Bank of Fukuoka

December 30, 2011

1,500

–

0.657

December 30, 2017

Resona Bank

September 28, 2012

2,000

–

1.033

September 29, 2017

The Nishi-Nippon City Bank

February 28, 2013

1,900

–

0.562

February 28, 2018

Sumitomo Mitsui Trust Bank

February 28, 2013

1,100

–

0.612

February 28, 2018

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

Mitsubishi UFJ Trust andBanking Corporation (Note 3)

February 28, 2013

1,500

–

0.412

February 28, 2018

Aozora Bank

February 28, 2013

600

–

0.412

July 29, 2011

1,000

1,000

March 29, 2013

600

January 31, 2012

The Dai-Ichi Life Insurance
Company
Mitsubishi UFJ Trust andBanking Corporation (Note 3)
Sumitomo Mitsui Banking
Corporation
Subtotal

Use offunds

Description

Refinance fund

Refinance fundNo collateral/
No guarantee(Note 1)

500

–

1.338

January 31, 2012

Refinance fundNo collateral/
No guarantee

Acquisition fund

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

2,500

0.775

February 29, 2020

1,700

0.562

February 29, 2020

Aozora Bank

June 28, 2013

1,000

1,000

0.461

June 30, 2020

200
3,000
500
2,300
1,000
1,400
800
500
300

200
3,000
500
2,300
1,000
1,400
800
500
300

0.538

July 31, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

0.835

July 30, 2021

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

August 29, 2014

4,000

4,000

1.010

August 31, 2022

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

September 25, 2014

500

500

0.520

September 25, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

June 30, 2022

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

July 31, 2014

July 31, 2014

Refinance fund

June 30, 2015

1,600

1,600

0.790

Sumitomo Mitsui Trust Bank

July 31, 2015

1,500

1,500

0.564

July 31, 2023

Development Bank of Japan

August 31, 2015

4,000

4,000

0.880

August 31, 2023

The Bank of Fukuoka

August 31, 2015

400

400

0.412

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

0.412

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

July 29, 2016

700

700

0.400

July 31, 2024

300

300

0.405

September 30, 2025

1,500
100
100
100
100
100
100

0.718

December 30, 2025

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

1,500

0.411

December 30, 2026

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

March 31, 2025

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee

Shinsei Bank

February 28, 2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Trust Bank September 30, 2016

1.800

July 31, 2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

600

0.411

March 30, 2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

December 30, 2016

–

500

1.338

January 31, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

10,2002,100Development Bank of JapanThe Oita Bank
The Kagoshima Bank
The Kitakyushu BankThe Eighteenth BankThe Shinwa Bank
The Hiroshima Bank

1,500
100
100
100
100
100
100

The Bank of Fukuoka

December 30, 2016

1,500

Mitsubishi UFJ Trust andBanking Corporation (Note 3)

March 31, 2017

800

800

0.481

Resona Bank

March 31, 2017

600

600

0.658

March 31, 2027

The Higo Bank

March 31, 2017

300

300

0.481

March 31, 2025

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

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

19

Lump-sum uponmaturity

1,700

Refinance fund

FUKUOKA REIT CORPORATION

January 31, 2019

2,500

Lump-sum uponmaturity

Refinance fundLong-term
debt

Description

February 1, 2013

Refinance fund

Refinance fundUse offunds

February 28, 2013

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

Refinance fundRepayment
methodMizuho Bank

The Bank of TokyoMitsubishi UFJ (Note 3)
Sumitomo Mitsui Banking
Corporation

No collateral/
No guarantee(mm of yen)

The Nishi-Nippon City Bank

Development Bank of Japan(Note 1)

Repayment
date(mm of yen)

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

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

(Note) Aside from the amounts of the asset management fees shown above, 12,625 thousand yen was paid in the 26th fiscal period for asset management, capitalized in the acquisition costs, related to theacquisition of LOGICITY Hisayama.

Balance as of Balance as of Average
Drawdown date September 1, February 28, interest
2018
rate (%)
2017

FUKUOKA REIT CORPORATION

20

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

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
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II. Semiannual Report

II. Semiannual Report

Expenses and Liabilities

3. Investment corporation bonds
As of February 28, 2018, FRC has the following investment corporation bonds outstanding.

Balance as of Balance as of Average
Drawdown date September 1, February 28, interest Repayment date
2018
rate (%)
2017

Category
LenderLong-term
debt(mm of yen)

(mm of yen)

Repayment
methodJune 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

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

Resona Bank

September 29, 2017

–

2,000

0.494

September 30, 2027

The Bank of Fukuoka

December 29, 2017

–

1,500

0.812

December 30, 2027

Development Bank of Japan

December 29, 2017

–

500

0.680

December 30, 2027

The Nishi-Nippon City Bank

February 28, 2018

–

1,900

0.750

February 29, 2028

Sumitomo Mitsui Trust Bank

February 28, 2018

–

1,100

0.600

February 26, 2027

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

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Issue

Issue date

Balance as of Decrease during Balance as of
September 1, the fiscal period February 28,
2018
2017
(mm of yen)
(mm of yen)First Series ofUnsecured Bonds
Second Series ofUnsecured Bonds

Maturity
date

Coupon(%)

December 30, 2013

2,000

–

2,000

1.32

December 29, 2023

July 31, 2017

2,000

–

2,000

1.00

July 30, 2032

4,000

–

4,000

Total

Maturity
methodUse

Description(mm of yen)

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

Repayment of debt
Repayment of debt

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

0.850

August 31, 2027

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

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

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

Mitsubishi UFJ Trust andBanking Corporation (Note 3)

February 28, 2018

–

1,500

0.500

February 27, 2026

Lump-sum uponmaturity

Resona Bank

February 28, 2018

–

600

0.567

February 29, 2028

Lump-sum uponmaturity

54.20065,90062,80064,900

Total

Description(Note 1)Development Bank of Japan

Subtotal

Use offunds

Refinance fundNo collateral/
No guarantee

5. Subscription rights to shares

Refinance fundNo collateral/
No guarantee

No relevant items.

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee(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 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.
(Note 2) The debts were made based on the commitment line agreements between FRC and respective banks.
(Note 3) As of April 16, 2018, Mitsubishi UFJ Trust and Banking Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (which changed its name to MUFG Bank, Ltd. as of April 1, 2018) executed anabsorption-type company split agreement by which the former’s lending operations for domestic corporations shall be succeeded by the latter. With this arrangement, the position, rights andobligations of Mitsubishi UFJ Trust and Banking Corporation related to the operations were succeeded by MUFG Bank, Ltd.

Acquisitions and Sales during the 27th Fiscal Period
1. Acquisition and sale of real estate, asset-backed securities,
infrastructure assets, etc. and infrastructure-related assets, etc.
No relevant items.

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

3. Survey on prices of specified assets, etc.
(1) Real estate, etc.
No relevant items.

(2) Other
FRC carried out no transaction that was required to have the value, etc. reviewed pursuant to the provisions of Article 201 of
the Investment Trusts Act.

FUKUOKA REIT CORPORATION21FUKUOKA REIT CORPORATION

22

II. Semiannual Report

II. Semiannual Report

Acquisitions and Sales during the 27th Fiscal Period

Acquisitions and Sales during the 27th 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.) concurrently conducts land and building transaction business but
there was no relevant transaction conducted in the 27th fiscal period. Moreover, the asset management company does notconcurrently conduct any class 1 financial instruments transaction business, class 2 financial instruments transaction businessor real estate syndication 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 27th fiscal period.
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 with which FRC
conducted transaction during the 27th fiscal period.
Category

Property leasing brokerage fees (Note 2)
Property management fees (Note 3)
Outsourcing fees (Note 2) (Note 4)

Other operating expenses (Note 2)

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

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.
286,751
FJ. Entertainment Works Ltd.
Fukuoka Jisho Co., Ltd.
1,289,880 FJ. Entertainment Works Ltd.
Sunlife Co., Ltd.
Fukuoka Jisho Co., Ltd.
1,229,702 FJ. Entertainment Works Ltd.
Sunlife Co., Ltd.

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

6,377
653
174,612102,897935,267
196,975
98,071
232,854
191,211240

12,711(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 27th fiscal period. The amounts include
construction work fees paid to third parties through interested parties, etc.
Fukuoka Jisho Co., Ltd.
352,755 thousand yen
FJ. Entertainment Works Ltd.
268,794 thousand yen
Sunlife Co., Ltd.
134,625 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.
14,223 thousand yen
FJ. Entertainment Works Ltd.
12,808 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.

50.2
5.1
60.9
35.9
72.5
15.3
7.6
18.9
15.5
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

26th fiscal period(as of August 31, 2017)27th fiscal period(as of February 28, 2018)

AssetsCurrent assets
Cash and deposits

2,253,209

2,924,449

Cash and deposits in trust

4,926,483

4,514,534

Operating accounts receivable

431,417459,948

Prepaid expenses

248,026

260,790

Consumption taxes receivable

258,416––

16

Deferred tax assets

13,21940,8638,130,772

8,200,604

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

87,978,370*1

88,537,835

Accumulated depreciation(24,412,671)(25,801,859)

Buildings in trust, net

63,565,699

62,735,975

Structures in trust

1,579,329

1,583,500

Accumulated depreciation(635,047)(667,932)

Structures in trust, net

944,282

915,568

Machinery and equipment in trust

1,264,341

1,273,527

Accumulated depreciation(344,218)(383,133)

Machinery and equipment in trust, net

920,123

890,394

Vehicles and transport equipment in trust

747

747

Accumulated depreciation

(389)

(437)

Vehicles and transport equipment in trust, net

357

309

Tools and fixtures in trust

1,297,196

1,319,583

Accumulated depreciation(1,026,204)(1,050,837)

Tools and fixtures in trust, net

270,991Lands in trust*1

101,545,140

101,545,140

21,825

6,780

167,268,420

166,362,914

1,765,318

1,765,318

Construction in progress in trust
Total property, plant and equipment

268,745*1

Intangible assets
Leasehold right in trust

19,551

16,9701,784,869

1,782,289

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

10,00010,000

Lease and guarantee deposits in trust

110,000

110,000

Long-term prepaid expenses

720,744786,412

Total investment and other assets

840,744906,412

169,894,034

169,051,616

Investment corporation bond issuance expenses

32,25930,612

Investment unit issuance expenses

6,547

935

Total deferred assets

38,806

31,548178,063,613

177,283,768

Total non-current assets
Deferred assets

Total assets

FUKUOKA REIT CORPORATION25FUKUOKA REIT CORPORATION

26

IV. Balance Sheet

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

26th fiscal period(as of August 31, 2017)27th fiscal period(as of February 28, 2018)

Account

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

Operating revenues

Liabilities
Current liabilities
Operating accounts payable

387,054602,374

Short-term debt

1,500,000–

Current maturities of long-term debt

10,200,000

2,100,000

Leasing revenues – real estate*1

7,605,973*1

7,725,449

Other leasing revenues – real estate*1

511,797*1

468,871

Dividend income
Total operating revenues

4,873

–

8,122,643

8,194,321

Operating expenses

Accounts payable-other

21,833

21,345

Accrued expenses

327,884

328,477

666

772

–

298,500

Asset custody fees

6,618

6,622

997,414990,174

Administrative service fees

51,58351,813

Income taxes payable
Accrued consumption taxes
Advances received

Expenses related to leasing business*1*2

4,593,665

Asset management fees

479,496*1*2

4,614,437
482,350

Deposits received

1,054,757

768,735

Director’s compensations

9,600

9,600

Total current liabilities

14,489,611

5,110,380

Other operating expenses

61,64363,610Total operating expenses

5,202,607

5,228,434

Investment corporation bonds

4,000,000

4,000,000

Operating income

2,920,036

2,965,887

Long-term debt

54,200,000

62,800,000

Non-operating revenues

373,423

Interest received

35

36

Non-current liabilities

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

368,837*1

11,305,882*1

11,233,280

Appropriation of balance related to amended return
OthersTotal non-current liabilities

69,874,720

78,406,704

Total liabilities

84,364,331

83,517,084

Net assets

–

672

2,426

8,541

2,463

Interest expenses

253,565

228,998

Interest expenses on investment corporation bonds

14,86623,200

Amortization of investment corporation bond issuance
expenses

1,093

1,646

Amortization of investment unit issuance expenses

5,612

5,612

Financing related expenses

87,187

84,211

Total non-operating revenues
Non-operating expenses

Unitholders’ equity
Unitholders’ capital

91,142,766

91,142,766

Surplus
Unappropriated surplus

2,556,515

2,623,917

Total surplus

2,556,515

2,623,917

Total unitholders’ equity
Total net assets

7,833

*3

93,699,282*3

Total liabilities and net assets

93,699,282
178,063,613

93,766,684*3

93,766,684
177,283,768

Others4,093

30

366,418

343,698

Ordinary income

2,562,159

2,624,651

Profit before income taxes

2,562,159

2,624,651

666

1,032

Total non-operating expenses

Income taxes-current
Income taxes based on amended return
Income taxes-deferred
Total income taxes
ProfitFUKUOKA REIT CORPORATION

27

5,189

–

9

(16)

5,864

1,015

2,556,294

2,623,635

Surplus brought forward

221

281

Unappropriated surplus

2,556,515

2,623,917

FUKUOKA REIT CORPORATION

28

VII. Cash Flow Statement

VI. Statement of Changes in Net Assets
26th fiscal period (March 1, 2017 to August 31, 2017)

Account(thousands of yen)

Unitholders’ Equity

Item

Balance as ofMarch 1, 2017
Changes in thecurrent fiscal
periodDividend of
surplus
Reversal ofreserve fortemporarydifference
adjustment
ProfitTotal of changes
in the current
fiscal period
Balance as ofAugust 31, 2017

Unitholders’ capital
Deduction from unitholders’ capital
Reserve for
Total deduction
Unitholders’ capital
temporaryfrom unitholders’difference
capitaladjustments
91,142,766(1,660,581)

Surplus
Unitholders’capital, net

Unappropriatedsurplus89,482,185(1,660,581)

4,199,108(2,538,306)

1,660,581

1,660,581

1,660,581(1,660,581)
2,556,294–

1,660,581

1,660,581

1,660,581(1,642,592)

Total surplus

4,199,108(2,538,306)(1,660,581)
2,556,294(1,642,592)

Total
unitholders’equityTotal
net assets

93,681,293(2,538,306)–
2,556,294
17,98893,681,293(2,538,306)–
2,556,294
17,988(thousands of yen)
26th fiscal period(March 1, 2017 toAugust 31, 2017)

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

2,562,159

2,624,651

Depreciation and amortization expenses

1,474,387

1,500,084

Amortization of investment corporation bond issuance expenses

1,093

1,646

Amortization of investment unit issuance expenses

5,612

5,612

Interest received

(35)

(36)

Interest expenses

268,432

252,198

Decrease (increase) in operating accounts receivables(54,967)(28,531)

Decrease (increase) in consumption taxes receivable(258,416)

258,416

Increase (decrease) in accrued consumption taxes(239,564)

298,500

Increase (decrease) in operating accounts payable(15,854)

24,657

Increase (decrease) in accounts payable-other(3,248)(233)

Increase (decrease) in accrued expenses

1,124

2,954

Increase (decrease) in advances received

24,101(7,240)

Increase (decrease) in deposits expenses

302,485(286,022)

Decrease (increase) in prepaid expenses
Decrease (increase) in long-term prepaid expenses
Others, net
Subtotal

91,142,766––

91,142,766

2,556,515

2,556,515

93,699,282

93,699,282

Interest income received

Item
Balance as of
September 1,
2017
Changes in thecurrent fiscal
periodDividend of
surplusProfitTotal of changes
in the current
fiscal period
Balance as ofFebruary 28,
2018

Unitholders’ capital
91,142,766

Unitholders’ Equity
Surplus
Unappropriated surplus
2,556,515(thousands of yen)

(20,758)
4,547,465
36

Income taxes paid

(6,604)(1,311)

Income taxes refund－

517

3,590,662

4,292,149(5,995,095)(409,429)

Net cash provided by (used in) operating activities
Net cash provided by (used in) investment activities

Total unitholders’ Total net assets
equity93,699,282

93,699,282(2,556,234)(2,556,234)(2,556,234)

2,623,635

2,623,635

2,623,635

67,401

67,401

67,401

2,623,917(4,514)
3,874,444(254,559)

Purchase of property, plant and equipment in trust
Purchase of intangible assets in trust

93,766,684

93,766,684

Proceeds from tenant leasehold and security deposits

34,621(60)(30,035)

144,468

42,265

Repayments of tenant leasehold and security deposits in trust(255,520)(114,867)

Redemption of investment securities

100,000－

Purchase of investment securities

(150)

－

Proceeds from restricted trust deposits

3,819

3,058

Payments for restricted trust deposits(7,078)(3,938)(6,029,813)(478,325)

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

14,500,000

4,500,000

Repayments of short-term debt

(13,000,000)(6,000,000)

Proceeds from long-term debt

15,000,000

9,100,000

Repayments of long-term debt

(15,275,000)(8,600,000)

Proceeds from issuance of investment corporation bonds

2,000,000

Payment of investment corporation bond issuance expenses(19,924)－－(2,537,240)(2,555,413)

Net cash provided by (used in) financial activities

667,834(3,555,413)

Net increase (decrease) in cash and cash equivalents(1,771,317)

258,410

Balance of cash and cash equivalents at beginning of period

8,905,823

7,134,506

Balance of cash and cash equivalents at end of period

29－

Proceeds from tenant leasehold and security deposits in trust

Dividends paid

FUKUOKA REIT CORPORATION－(20,197)

Net cash provided by (used in) investment activities
91,142,766(12,764)(65,668)

35

Repayments of tenant leasehold and security deposits

–

3,846
(192,196)(277,213)

Interest expenses paid

27th fiscal period (September 1, 2017 to February 28, 2018)

27th fiscal period(September 1, 2017 to
February 28, 2018)

7,134,506*1

FUKUOKA REIT CORPORATION

30*17,392,916

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Significant accounting policies)
1. Valuation standard and method for assets

2. Depreciation method for non-current assets(Notes to balance sheet)

Securities
Other securities
Securities without fair value
Silent partnership equity interests are stated at their net asset value corresponding to the equity interestsin the silent partnership.
(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 – 70 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.

3. Accounting for deferred assets

4. Standards for recognition of revenues and expenses

5. Method of hedge accounting

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.
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.
was 13,553 thousand yen for the 26th fiscal period.
(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.

6. 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.

7. 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*1. Assets pledged as collateral and secured liabilities
Assets pledged as collateral are as follows:(thousands of yen)
26th fiscal period

27th fiscal period

as of August 31, 2017

Buildings in trust
Lands in trust

as of February 28, 2018

6,328,836
16,101,020
22,429,857

Total

6,320,513
16,101,020
22,421,534

Secured liabilities are as follows:(thousands of yen)
26th fiscal period

27th fiscal period

as of August 31, 2017

Tenant leasehold and security deposits
received in trust

as of February 28, 2018

1,625,100

1,592,726

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)
26th fiscal period

27th fiscal period

as of August 31, 2017

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
periodas of February 28, 2018

6,000,000
700,000

6,000,000－

5,300,000

6,000,000[Committed line of credit agreement 2](thousands of yen)
26th fiscal period

27th fiscal period

as of August 31, 2017

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
periodas of February 28, 2018

7,000,000
800,000

7,000,000－

6,200,000

7,000,000*3. Minimum net assets designated in Article 67- 4 in the Act on Investment Trusts and Investment Corporations.
(thousands of yen)
26th fiscal period

27th fiscal period

as of August 31, 2017as of February 28, 2018

50,00050,000FUKUOKA REIT CORPORATION

32

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements

4. Reserve for temporary difference adjustments*2. Transactions with affiliated companies.

26th fiscal period (from March 1, 2017 to August 31, 2017)

Item(1) Reason for recording reserve, relevant assets, initial difference, reason for reversal and reserve amount
Relevant assets Reason for recording

Land in trust

Incurrence ofimpairment
loss

Initial difference

1,660,581

Balance as ofMarch 1, 2017

Reserve for the 26th Reversal for the 26th
fiscal period
fiscal period

1,660,581––

1,660,581

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

Expenses related to real estate leasing business(thousands of yen)
Balance as ofAugust 31, 2017

(thousands of yen)
26th fiscal period

Reason for reversal

1,468,156

1,431,544*3. The appropriation of balance related to amended return in the statement of income refers to the payment amount of taxes that accrued in accordance with revised tax
returns of income taxes, and shall be borne by the asset management company based on the asset management agreement. This has no impact on the dividend FRC
pays for the 26th fiscal period.

Sale ofrelevant asset(Notes to statement of changes in net assets)(2) Specific method of reversal

26th fiscal period

ItemSpecific method of reversal

Land in trust

FRC reversed the corresponding amount when it disposed
the land in trust.

Total number of authorized investment units andtotal number of investment units issued
Total number of authorized investment units
Total number of investment units issued

27th fiscal period (from September 1, 2017 to February 28, 2018)

Not applicable.

(September 1, 2017 to February 28, 2018)

10,000,000 units
747,000 units

10,000,000 units
747,000 units(Notes to cash flow statement)(Notes to statement of income)*1. Breakdown of revenues and expenses related to real estate leasing business.

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)

27th fiscal period(March 1, 2017 to August 31, 2017)(thousands of yen)

26th fiscal period

26th fiscal period

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

6,111,246
1,073,260
421,466

7,605,973

490,737
21,060511,797
8,117,770

6,242,829
1,063,286
419,333
450,332
18,538*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)

7,725,449

27th fiscal period(March 1, 2017 to August 31, 2017)

Cash and deposits
Cash and deposits in trust
Restricted trust deposits (Note)
Cash and cash equivalents(September 1, 2017 to February 28, 2018)

2,253,209
4,926,483(45,186)
7,134,506

2,924,449
4,514,534(46,066)
7,392,916(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)
468,871
8,194,321

The future lease revenues under the non-cancellable operating leases [as lessor] are as follows:(thousands of yen)
26th fiscal period

27th fiscal period(as of August 31, 2017)

1,593,610
209,443644,377
57,638454,387
1,474,387
159,820FUKUOKA REIT CORPORATION

4,593,665
4,593,665
3,524,104

33

1,576,631
251,107644,21256,825
430,6091,500,084
154,966

Due within 1 year
Due after 1 year
Total

(as of February 28, 2018)

5,728,777
24,694,161
30,422,938

5,869,564
22,529,430
28,398,994

4,614,437
4,614,437
3,579,884

FUKUOKA REIT CORPORATION

34

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 fairvalues and the difference between these amounts as of August 31, 2017. Please note that the following table does not include
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
2,253,209
4,926,483
7,179,693
1,500,000
10,200,000
4,000,000
54,200,000
850,082
70,750,082––

Fair value

Difference(Note 1)

2,253,209
4,926,483
7,179,693
1,500,000
10,215,974
4,157,970
54,319,767
847,905
71,041,617
–
–

–
–
–
–
15,974
157,970
119,767(2,177)
291,535––

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, 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)).
(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
2,924,449
4,514,534
7,438,983–
2,100,000
4,000,000
62,800,000
809,375
69,709,375––

Fair value

Difference(Note 1)2,924,449
4,514,534
7,438,983–
2,112,506
4,270,268
63,751,736
809,100
70,943,612
–
–

–
–
–
–
12,506
270,268
951,736(275)
1,234,237––(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)
26th fiscal period

27th fiscal period(as of August 31, 2017)

Tenant leasehold and security deposits
received in trust(*)(as of February 28, 2018)

10,455,799

10,423,904* 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, 2017)(thousands of yen)

1. Derivatives to which hedge accounting is not applied

Due in 1 year or less
2,253,209
4,926,483
7,179,693

Cash and deposits
Cash and deposits in trust
Total

26th fiscal period (as of August 31, 2017)
Not applicable.

Amount of redemption of monetary claims scheduled to be due after closing of accounts (as of February 28, 2018)

27th fiscal period (as of February 28, 2018)(thousands of yen)

Not applicable.

Due in 1 year or less
2,924,449
4,514,534
7,438,983

Cash and deposits
Cash and deposits in trust
Total

2. Derivatives to which hedge accounting is applied
26th fiscal period (as of August 31, 2017)(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, 2017).

(thousands of yen)
Long-term debt
Investment
corporation bonds

Due in 1 year or less
10,200,000–

1 to 2 years
4,200,000–

2 to 3 years
5,700,000

3 to 4 years
6,300,000–

4 to 5 years
6,000,000––

Due after 5 years
32,000,000

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)

Method of hedge accounting

4,000,000

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, 2018)(thousands of yen)
Long-term debt
Investment
corporation bonds

Due in 1 year or less
2,100,000–

1 to 2 years
8,400,000–

2 to 3 years
1,000,000

3 to 4 years
6,300,000––

4 to 5 years
6,000,000–

Due after 5 years
41,100,000
4,000,000

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

18,500,000

18,500,000(*)–(*) 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)).

27th fiscal period (as of February 28, 2018)
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.
(Notes to investment securities)(thousands of yen)

Method of hedge accounting

26th fiscal period (as of August 31, 2017)

Special accounting for interest rate swaps

Not applicable.

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

24,100,000

24,100,000(*)–(*) 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)).

27th fiscal period (as of February 28, 2018)
Not applicable.

(Notes to retirement benefits)
26th fiscal period (as of August 31, 2017)
Not applicable as FRC does not have any retirement benefit system.

27th fiscal period (as of February 28, 2018)
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)

26th fiscal period

27th fiscal period（as of August 31, 2017）

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, 2018)

–
–
–

38

16
16
16

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.
(%)
26th fiscal period

27th fiscal period（as of August 31, 2017）

Effective statutory income tax rate (Note)
Deductible dividend amount
Other
Effective income tax rate after application of tax effect accounting

26th fiscal period (from March 1, 2017 to August 31, 2017)
Not applicable.

(as of February 28, 2018)31.53(31.45)(0.06)
0.03(2) Affiliated companies, etc.

31.53
(31.52)(0.00)
0.01

27th fiscal period (from September 1, 2017 to February 28, 2018)
Not applicable.

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

26th fiscal period (from March 1, 2017 to August 31, 2017)

26th fiscal period (from March 1, 2017 to August 31, 2017)
Not applicable as FRC does not have any affiliated companies.

27th fiscal period (from September 1, 2017 to February 28, 2018)

Classification

Name

Location

CapitalBusiness
description

Not applicable as FRC does not have any affiliated companies.

(Notes to transactions with related parties)

Subsidiaries ofother affiliates

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

LimitedLiability
Company
FRC1

Other affiliates

Name

Location

Capital

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

Generalreal estatebusiness[or ownership ofsuch in FRC]

Description ofrelationshipOwnership in
Consignment
Consignment
FRC Directof real estate 1,468,156
of real estate
management,(Note 3)[8.85%]
management, etc. etc. (Note 1)
Indirect [1.00%]

Operatingaccounts
payableBalanceat end ofperiod115,875(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.

27th fiscal period (from September 1, 2017 to February 28, 2018)

Classification

Name

Location

Capital

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

Generalreal estatebusiness

FRC’s share of
voting rights,
etc.
[or ownership ofsuch in FRC]

Description ofrelationship(thousands of yen)

Description of Transaction
Categorytransaction
amountOwnership in
Consignment
Consignment
FRC Directof real estate 1,431,544
of real estate
management,(Note 3)[8.85%]
management, etc. etc. (Note 1)
Indirect [1.00%]

Operatingaccounts
payableBalanceat end ofperiod108,885–

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

20,000Real estatebusiness–

Consignment
Consignmentof real estateof real estate
management,
management, etc. etc. (Note 2)

200,000

Asset
managementof FRCand otherbusinesses

–

Asset
Payment
management ofof asset
FRC, etc. andmanagement
concurrent service(Note 5)feesof officer (Note 4)

FUKUOKA REIT CORPORATION

39

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

(Note 1)5,050,000

576,824(Note 6)479,496(Note 6)––

Operatingaccounts
payable131,601

Accruedexpenses

231,921(Note 6)(Note 6)(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 real estate lease and management consignment agreement with FJ. Entertainment Works Ltd. for Park Place Oita. The lease contract is a master lease type with pass-throughrent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s revenues. For the property covered by the said type of agreement, the above tableshows figures that regard end tenants as direct lessees.
(Note 4) Etsuo Matsuyuki, CEO & Representative Director of FRC, concurrently serves as a Director of Fukuoka Realty Co., Ltd.
(Note 5) The amount of the asset management fees is decided based on the asset management consignment agreement following discussion between the concerned parties.
(Note 6) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

27th fiscal period (from September 1, 2017 to February 28, 2018)

Classification

Name

Location

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

Capital

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

20,000Real estatebusiness–

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

553,691

200,000

Asset
managementof FRCand otherbusinesses

–

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

482,350(Note 2)

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

(thousands of yen)

Business
description(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.

Purchase ofreal estate

Real estatebusiness(Note 3)

Description of Transaction
Categorytransaction
amountDescription of Transaction
Categorytransaction
amount10(thousands of yen)Classification[or ownership ofsuch in FRC]

(thousands of yen)
Balanceat end ofperiodDescription ofrelationship

Chuo Ward,
Fukuoka City

26th fiscal period (from March 1, 2017 to August 31, 2017)
FRC’s share of
voting rights,
etc.

FRC’s share of
voting rights,
etc.

Description ofrelationship

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

Operatingaccounts
payableAccruedexpenses

Balanceat end ofperiod101,649(Note 5)

234,846(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 a real estate lease and management consignment agreement with FJ. Entertainment Works Ltd. for Park Place Oita. The lease contract is a master lease type with pass-throughrent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s revenues. For the property covered by the said type of agreement, the above tableshows figures that regard end tenants as direct lessees.
(Note 3) Etsuo Matsuyuki, CEO & Representative Director of FRC, concurrently serves as a 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)

26th fiscal period (from March 1, 2017 to August 31, 2017)
Use

Not applicable.

27th fiscal period (from September 1, 2017 to February 28, 2018)

RetailNot applicable.

2. Parent company and major affiliated companies
Office buildings

26th fiscal period (from March 1, 2017 to August 31, 2017)
Not applicable.

27th fiscal period (from September 1, 2017 to February 28, 2018)

OthersNot applicable.

(Notes to asset retirement obligations)Total

26th fiscal period (from March 1, 2017 to August 31, 2017)

26th fiscal period

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

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 business27th fiscal period (from September 1, 2017 to February 28, 2018)
Not applicable.

(Notes to segment information)(Notes to properties for lease)[Segment information]

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.

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

(thousands of yen)

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

41

2,239,691
1,186,204
1,053,486

2,221,589
1,195,385
1,026,203

743,586
322,357
421,229

812,016
371,896
440,120

8,117,770
4,593,665
3,524,104

8,194,321
4,614,437
3,579,884

26th fiscal period

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

102,935,449(233,757)
102,701,692
110,660,000

102,701,692(472,865)
102,228,826
110,940,000

43,181,769(382,950)
42,798,818
54,580,000

42,798,818(301,593)
42,497,225
56,000,000

18,588,546
4,964,232
23,552,778
26,670,000

23,552,778(133,627)
23,419,151
26,740,000

164,705,765
4,347,524
169,053,289
191,910,000

169,053,289(908,086)
168,145,203
193,680,000[Related information]

26th fiscal period (from March 1, 2017 to August 31, 2017)( 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.

(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 26th fiscal period, the amount of increase is primarily attributable to acquisition of LOGICITY Hisayama (5,081 million yen) and capital expenditures (741 millionyen), and the amount of decrease is primarily attributable to depreciation and amortization expenses (1,474 million yen). Of the amount of change during the 27th fiscal period, the amount of increaseis primarily attributable to capital expenditures (600 million yen), and the amount of decrease is primarily attributable to depreciation and amortization expenses (1,500 million yen).
(Note 3) The fair value at end of period is the appraisal value provided by outside real estate appraisers.

FUKUOKA REIT CORPORATION

5,160,714
3,047,155
2,113,559(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.

Not applicable.

Use

5,134,492
3,085,103
2,049,388

FUKUOKA REIT CORPORATION

42

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to significant subsequent events)

27th fiscal period (from September 1, 2017 to February 28, 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.
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.

(Notes to per unit information)
26th fiscal period(March 1, 2017 to August 31, 2017)27th fiscal period(September 1, 2017 to February 28, 2018)

125,434
3,422

125,524
3,512(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:

26th fiscal period(March 1, 2017 to August 31, 2017)

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)

27th fiscal period

2,623,635–
2,623,635
747,000

Furthermore, FRC already acquired the real estate trust beneficiary interests of the following two properties on March 1,
2018 by using the proceeds obtained from the issuance of new investment units through public offering to partly fund theacquisition.

Property name
Konoha Mall Hashimoto
Higashi Hie Business Center II(thousands of yen)
27th fiscal period

26th fiscal period(March 1, 2017 to August 31, 2017)

Use

Location

SellerRetail2-chome, Hashimoto, Nishi Ward, Fukuoka City

Office buildings

1-chome, Higashi Hie, Hakata Ward, Fukuoka
City

2,556,515

II. Total dividend[Dividend per investment unit]

2,556,234

2,623,464[3,422 yen]

[3,512 yen]

III. Surplus brought forward

2,623,917

281

453

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 shall 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
2,556,234 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 shall 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
2,623,464 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.

FUKUOKA REIT CORPORATION

43

Acquisition price(mm of yen) (Note)
10,000Fukuoka Jisho Co., Ltd.

4,230

(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.

(September 1, 2017 to February 28, 2018)

I. Unappropriated surplus

Method for calculating dividends

Issuance of new investment units through public offering
Number of investment units offered:49, 000 units
Issue price:				
164, 414 yen
Total issue price:			
8, 056, 286, 000 yen
Paid-in amount:				
159, 102 yen
Total paid-in amount:		
7, 795, 998, 000 yen
Payment date:			
March 1, 2018
Base date for distribution:		
March 1, 2018

(September 1, 2017 to February 28, 2018)

2,556,294–
2,556,294
747,000(Notes to cash distributions)
Account

FRC issued new investment units through public offering, which was resolved at its Board of Directors meeting held on
February 9, 2018, with the aim of acquiring real estate trust beneficiary interests. Payment completed on March 1 for the newinvestment units issued.
As a result, FRC’s unitholders’ capital came to 98, 938, 764, 550 yen as of May 29, 2018, with the total number of investment
units outstanding at 796, 000 units as of the same date.

(3) Information by major customer

Net assets per unit (yen)Profit per unit (yen)Issuance of new investment units

FUKUOKA REIT CORPORATION

44

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Schedule of debt)(Schedule of securities)

Category

Not applicable.

Lender(Schedule of contract amount, etc. and fair value of derivative transactions
and forward exchange transactions)(thousands of yen)
Category

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

Type
Interest rate swap transaction
Receivable floating; Payable fixed

Off-market transaction

24,100,000

Total

24,100,000

24,100,000

583,333–

583,333–

Resona Bank (Note 2)

116,666–

116,666–

The Nishi-Nippon City
Bank (Note 2)

571,428–

571,428–

Short-term Resona Bank
The Bank of Nagasaki
debt

80,000–80,000–(Note 2)

57,142–

57,142–The Oita Bank (Note 2)

57,142–

57,142–The Bank of Saga

34,285–34,285–

Subtotal

1,500,000–

1,500,000–

The Bank of Fukuoka

1,500,000–

1,500,000

–

0.657

Resona Bank

2,000,000–

2,000,000

–

1.033

The Nishi-Nippon City
Bank
Sumitomo Mitsui TrustBank
Mitsubishi UFJ Trust andBanking Corporation (Note 3)

1,900,000–

1,900,000

–

0.562

1,100,000–

1,100,000–

1,500,000–

1,500,000

600,000–

600,000

1,000,000––

600,000––(137,971)(Note 2)

(Schedule of property, plant and equipment, and intangible assets)(thousands of yen)
Decrease

Increase(Note 1)

(Note 2)

Balance as ofFebruary 28,
2018

Accumulated
depreciation

Depreciation for Net property andthe period
equipment

Buildings in trust

87,978,370

560,513

1,049

88,537,835

25,801,859

1,389,210

62,735,975

Structures in trust

1,579,329

4,171

–

1,583,500

667,932

32,885915,568

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

Land in trust
Construction inprogress in trust
Subtotal

Total
intangible
assetsBalance as of
September 1,
2017

Leasehold right intrust
Other intangible
assets in trust
Subtotal

1,264,341

9,185

–

1,273,527

383,133

38,914890,394

747

–

–

747

437

47

309

1,297,196

41,264

18,877

1,319,583

1,050,837

36,445

268,745

101,545,140––

101,545,140––

101,545,140

21,825

4,599

19,644

6,780

–

–

6,780

193,686,952

619,734

39,570194,267,115

27,904,201

1,497,503

1,765,318––

1,765,318––

Sumitomo Mitsui
Banking Corporation

Second Series ofUnsecured Bonds

Total

July 31, 2017

2,000,000

2,000,000
4,000,000–––

2,000,000

1.32

July 30,2032

Lump-sumupon maturity

1.00(Note 1)

(Note 1)45

No collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

1,000,000

1.800

July 31, 2018

Refinance fundNo collateral/
No guarantee–

600,000

0.411

March 30, 2018

Refinance fundNo collateral/
No guarantee

500,000–

500,000

1.338

January 31, 2019

Refinance fundNo collateral/
No guarantee

2,100,000

No collateral/
No guarantee

Mizuho Bank

1,700,000––

1,700,000

0.562

February 29, 2020

Refinance fundNo collateral/
No guarantee

1,765,318

Aozora Bank

1,000,000––

1,000,000

0.461

June 30,2020

Refinance fundNo collateral/
No guarantee

0.538

July 31,2019

Refinance fundNo collateral/
No guarantee

0.835

July 30,2021

Refinance fundNo collateral/
No guarantee

Repayment ofdebt

No collateral/
No guarantee(Note 2)

(Note 2)––200,000––

3,000,000

500,000––

500,000

Mizuho Bank

2,300,000––

2,300,000

The Norinchukin Bank

1,000,000––

1,000,000

The Hiroshima Bank

1,400,000––

1,400,000

The Kitakyushu Bank

800,000––

800,000

The Iyo Bank

500,000––

500,000

The Higo Bank

300,000––

300,000

4,000,000––

4,000,000

1.010

August 31, 2022

Refinance fundNo collateral/
No guarantee

500,000––

500,000

0.520

September 25,2019

Refinance fundNo collateral/
No guarantee

1,600,000––

1,600,000

0.790

June 30, 2022

Refinance fundNo collateral/
No guarantee

1,500,000––

1,500,000

0.564

July 31, 2023

Refinance fundNo collateral/
No guarantee

4,000,000––

4,000,000

0.880

August 31, 2023

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

400,000––

400,000

0.412

August 31, 2022

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon City
Bank

400,000––

400,000

0.870

August 31, 2023

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

2,000,000––

2,000,000

0.412

February 29, 2024

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank
Development Bank ofJapan

2,000,000––

2,000,000

0.440

February 29, 2024

Refinance fundNo collateral/
No guarantee

2,000,000––

2,000,000

0.620

February 28, 2025

Refinance fundNo collateral/
No guarantee

500,000––

500,000

0.440

February 29, 2024

Refinance fundNo collateral/
No guarantee

The Norinchukin Bank
The Bank of Saga

168,145,203

Description

200,000
3,000,000

Mizuho Bank

Development Bank ofJapan
The Bank of TokyoMitsubishi UFJ (Note 3)
Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui TrustBank
Development Bank ofJapanMizuho BankFUKUOKA REIT CORPORATION

Refinance fundFebruary 28, 2018

166,362,914

No collateral/
No guarantee(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.

February 28, 2018

No collateral/
No guarantee

Repayment of
debt

4,000,000

0.412
0.412

Refinance fund(thousands of yen)

2,000,000––

Acquisition fundLong-term
debt

Lump-sumupon maturity

No collateral/
No guarantee

January 31,2019

16,970December 29,
2023

Refinance fundFebruary 29, 2020

(Schedule of investment corporation bonds)

December 30,
2013

February 28, 2018

0.775

Not applicable.

First Series ofUnsecured Bonds

No collateral/
No guarantee

0.612

1.338

1,782,289(thousands of yen)

Refinance fund

–

2,580

(thousands of yen)

No collateral/
No guarantee

February 28, 2018

2,500,000

2,580

Use

No collateral/
No guarantee–

29,900Maturity
methodRefinance fund
Refinance fund–29,900Maturity date

December 30, 2017
September 29, 2017

2,500,000

46,871

Coupon(%)

No collateral/
No guarantee

500,000(Schedule of other specified assets)

Issue dateRefinance fund

(Note 3)(Note 1) The main increase in the 27th fiscal period is due to construction work at properties.
(Note 2) The main decrease in the 27th fiscal period is due to disposal.

Issue

December 29, 2017

8,600,000

1,812,189

Balance as of
Decrease
Balance as of
September 1, during the fiscal February 28,
2017period
2018

0.388

–

–

1,500,084

No collateral/
No guarantee

500,000–

27,934,101

Refinance fund

500,000–

196,079,305

December 29, 2017

10,200,000–

39,570The Dai-Ichi Life
Insurance Company
Mitsubishi UFJ Trust andBanking Corporation

0.388

Subtotal

46,871

619,734

Aozora Bank

Description

Sumitomo Mitsui Banking
Corporation
The Nishi-Nippon CityBank

1,812,189
195,499,141

Total

Current
maturities
of longterm debt

Use of funds(thousands of yen)

(Note 2)

(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.

Type of asset(thousands of yen)

The Bank of Fukuoka(Note 2)

(137,971)

24,100,000

Balance as of
Balance as of
Average
September 1,
February 28,
Increase
Decreaseinterest rate Repayment date(thousands of yen) (thousands of yen)
2017
2018
(%) (Note 1)

FUKUOKA REIT CORPORATION

46

VIII. Notes to Financial Statements

Category
Category
LenderLenderBalance
Balanceas
asofofBalance
Balanceas
asofofAverage
Average
September
September1,1,February
February28,
28,
Increase
Increase
Decrease
Decrease
Repaymentdate
dateinterest
interestrate
rate Repayment(thousands(thousandsofofyen)yen)(thousands(thousandsofofyen)
yen)
2017
2017
2018
2018
(%)
(%)(Note(Note1)1)(thousands(thousandsofofyen)
yen)

Use
Useofoffunds
funds

Description
Description

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee(thousands(thousandsofofyen))
yen))

Shinsei
ShinseiBank
Bank

700,000
700,000––––

700,000
700,000

0.400
0.400

Sumitomo
SumitomoMitsui
MitsuiTrust
Trust
Bank
Bank
Development
DevelopmentBank
Bankofof
Japan
Japan

300,000
300,000––––

300,000
300,000

September30,
30,20252025
0.405
0.405 September

1,500,000
1,500,000––––

1,500,000
1,500,000

Oita
OitaBank
Bank

100,000
100,000––––

100,000
100,000

The
TheKagoshima
KagoshimaBank
Bank

100,000
100,000––––

100,000
100,000

The
TheKitakyushu
KitakyushuBank
Bank

100,000
100,000––––

100,000
100,000

The
TheEighteenth
EighteenthBank
Bank

100,000
100,000––––

100,000
100,000

The
TheShinwa
ShinwaBank
Bank

100,000
100,000––––

100,000
100,000

The
TheHiroshima
HiroshimaBank
Bank

100,000
100,000––––

100,000
100,000

The
TheBank
BankofofFukuoka
Fukuoka

1,500,000
1,500,000––––

Mitsubishi
MitsubishiUFJ
UFJTrust
Trust
andandBanking
BankingCorporation
Corporation

800,000
800,000––

ResonaResonaBank
Bank

600,000
600,000

The
TheHigoHigoBank
Bank

July
July31,
31,20242024

December
December30,
30,2025
2025

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

1,500,000
1,500,000

0.411
0.411

December
December30,
30,2026
2026

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee––

800,000
800,000

0.481
0.481

March
March31,
31,2025
2025

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee––––

600,000
600,000

0.658
0.658

March
March31,
31,2027
2027

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

300,000
300,000––––

300,000
300,000

0.481
0.481

March
March31,
31,2025
2025

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

The
TheBank
BankofofFukuoka
Fukuoka

1,300,000
1,300,000––––

1,300,000
1,300,000

The
TheNishi-Nippon
Nishi-NipponCity
City
Bank
Bank

1,000,000
1,000,000––––

1,000,000
1,000,000

Oita
OitaBank
Bank

700,000
700,000––––

700,000
700,000

The
TheKitakyushu
KitakyushuBank
Bank

700,000
700,000––––

700,000
700,000

June
June30,30,2026
2026

Refinance
Refinancefund
fund

700,000
700,000––––

700,000
700,000

0.777
0.777

The
TheMiyazaki
MiyazakiBank
Bank

No
Nocollateral/collateral/
No
Noguarantee
guarantee

The
TheShinwa
ShinwaBank
Bank

600,000
600,000––––

600,000
600,000

500,000
500,000––––

500,000
500,000

The
TheEighteenth
EighteenthBank
Bank

500,000
500,000––––

500,000
500,000

Development
DevelopmentBank
Bankofof
Japan
Japan

1,800,000
1,800,000––––

1,800,000
1,800,000

0.650
0.650

December
December31,
31,2026
2026

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

The
TheBank
BankofofFukuoka
Fukuoka

2,000,000
2,000,000––––

2,000,000
2,000,000

0.792
0.792

July
July31,
31,2027
2027

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

The
TheNishi-Nippon
Nishi-NipponCity
City
Bank
Bank
The
TheNishi-Nippon
Nishi-NipponCity
City
Bank
Bank

2,000,000
2,000,000––––

2,000,000
2,000,000

0.892
0.892

July
July31,
31,2027
2027

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

500,000
500,000––––

500,000
500,000

The
TheBank
BankofofFukuoka
Fukuoka

500,000
500,000––––

500,000
500,000

Oita
OitaBank
Bank

100,000
100,000––––

100,000
100,000

The
TheKitakyushu
KitakyushuBank
Bank

100,000
100,000––––

100,000
100,000

0.850
0.850

AugustAugust31,
31,2027
2027

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

The
TheEighteenth
EighteenthBank
Bank

100,000
100,000––––

100,000
100,000

The
TheShinwa
ShinwaBank
Bank

100,000
100,000––––

100,000
100,000

The
TheHiroshima
HiroshimaBank
Bank

100,000
100,000––––

100,000
100,000

ResonaResonaBank
Bank

––

2,000,000
2,000,000––

2,000,000
2,000,000

September30,2027
30,20270.494
0.494 September

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

The
TheBank
BankofofFukuoka
Fukuoka––

1,500,000
1,500,000––

1,500,000
1,500,000

December30,
30,20272027
0.812
0.812 December

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

Development
DevelopmentBank
Bankofof
Japan
Japan
The
TheNishi-Nippon
Nishi-NipponCity
City
Bank
Bank
Sumitomo
SumitomoMitsui
MitsuiTrust
Trust
Bank
Bank
Mitsubishi
MitsubishiUFJ
UFJTrust
Trustand
and(Note3)3)
Banking
BankingCorporation
Corporation(Note––500,000
500,000––

500,000
500,000

December30,
30,20272027
0.680
0.680 December

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee––

1,900,000
1,900,000––

1,900,000
1,900,000

0.750
0.750

February
February29,
29,2028
2028

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee––

1,100,000
1,100,000––

1,100,000
1,100,000

0.600
0.600

February
February26,
26,2027
2027

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee––

1,500,000
1,500,000––

1,500,000
1,500,000

0.500
0.500

February
February27,
27,2026
2026

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

ResonaResonaBank
Bank

––

600,000
600,000––

600,000
600,000

0.567
0.567

February
February29,
29,2028
2028

Refinance
Refinancefund
fundNo
Nocollateral/collateral/
No
Noguarantee
guarantee

54,200,000
54,200,000

9,100,000
9,100,000

500,000
500,000

62,800,000
62,800,000

65,900,000
65,900,000

9,600,000
9,600,000

10,600,000
10,600,000

64,900,000
64,900,000

Long-termLong-term
The
TheIyoIyoBank
Bank
debt
debt

Subtotal
Subtotal
Total
Total

FUKUOKA REIT CORPORATION(thousands of yen)
Category
Long-term debt

0.718
0.718

(Note
(Note3)3)(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) As of April 16, 2018, Mitsubishi UFJ Trust and Banking Corporation and The Bank of Tokyo-Mitsubishi UFJ, Ltd. (which changed its name to MUFG Bank, Ltd. as of April 1, 2018) executed anabsorption-type company split agreement by which the former’s lending operations for domestic corporations shall be succeeded by the latter. With this arrangement, the position, rights andobligations of Mitsubishi UFJ Trust and Banking Corporation related to the operations were succeeded by MUFG Bank, Ltd.
(Note 4) Amount of repayment of long-term debt scheduled to be due within 5 years after period end.

47

1 to 2 years
8,400,000

2 to 3 years
1,000,000

3 to 4 years
6,300,000

FUKUOKA REIT CORPORATION

4 to 5 years
6,000,000

48