April 9, 2008

FINANCIAL REPORTFOR THEFISCAL PERIOD ENDING FEBRUARY 2008
(September 1, 2007 – February 29, 2008)
Fukuoka REIT Corporation is listed on the Tokyo Stock Exchange and Fukuoka Stock Exchange with the securities
code number 8968.
URL: http://www.fukuoka-reit.jp
Inquiries:

Fukuoka Realty Co., Ltd. (Asset Manager)
Hidekazu Tanaka, Managing Director and CFO
Tel: +81-(0)92-272-3900

Planned submission date for securities report: May 27, 2008
Planned start of dividend payments: May 19, 2008
Figures have been rounded down to eliminate amounts of less than one million yen.

1.

PERFORMANCE FOR THE FISCAL PERIOD ENDING FEBRUARY 2008

(1) Business Results(Mn yen)

Period throughFebruary 2008
Period throughAugust 2007

Operating
Revenues

Percentage
ChangeOperating
ProfitPercentage
ChangeOrdinary
ProfitPercentage
ChangeNet Profit

Percentage
Change¥5,179

(1.0%)¥2,3820.8%¥1,981

0.7%¥1,9800.8%¥5,2327.4%¥2,362

6.9%¥1,966

5.4%¥1,965

5.9%

Net Profit per
Unit

Return on
Unitholders’Equity (ROE)¥18,498¥18,359(Yen)

Period throughFebruary 2008
Period throughAugust 2007

<Reference>
Annualized

Ordinary
Profit to Total
Assets<Reference>
Annualized

Ordinary Profit toOperating Revenues

3.2%(6.4%)

1.7%(3.4%)

38.3%

3.2%

(6.4%)

1.7%(3.4%)

37.6%

Notes:
1. The settlement period for the fiscal period ending in February 2008 began on September 1, 2007 and ended on
February 29, 2008 for a length of 184 days and the fiscal period ended in August 2007 began on March 1, 2007
and ended on August 31, 2007 for a total of 182 days.
2. Net profit per unit for the Seventh Fiscal Period is calculated using the weighted average number of investment
units based on the number of days in the respective fiscal periods (107,050 units for the period ending
February 2008 and 107,050 units for the period ended August 2007).
3. Changes in accounting policies: No
4.
Percentage changes for operating revenues, operating profit, ordinary profit and net profit represent thepercentage of increase (decrease) compared to the previous fiscal period.
5. The net profit rate for net assets and ordinary profit rate to total capital respectively use the average value ofthe net assets and total capital for the beginning and end of the fiscal period.

(2) Distributions
Total
Distributions(mn yen)Distribution in
Excess ofEarnings per
Unit
(Yen)

Total
Distributions in
Excess ofEarnings(mn yen)PayoutRatio(%)

Distribution
Ratio toUnitholders’Equity(%)¥18,499¥1,980¥0¥–100.0%

3.2%¥18,360¥1,965¥0¥–

100.0%

3.2%

Distribution per Unit(yen)
Excluding excess ofearnings

Period ending
February 2008
Period ended
August 2007

Note: The payout ratio is rounded down to the first decimal place.

1(3) Financial Position

Period ending
February 2008
Period ended
August 2007

Total Assets(mn yen)

Unitholders’ Equity(mn yen)

Unitholders’ Equity to
Total Assets(%)

Unitholders’ Equity per
Unit
(yen)

¥121,654¥62,100

51.0%¥580,104¥117,815¥62,13952.7%¥580,471

Note: The unitholders’ equity as of February 29, 2008 totaled 62,100,000,000 yen and as of August 31, 2007 totaled
62,139,000,000 yen.

2.

FORECAST OF RESULTS FOR THE FISCAL PERIOD ENDING AUGUST 2008

Period ending
August 2008
Period ending
February 2009

Distribution per
Unit
(yen)

Distribution in
Excess of Earnings
per Unit(yen)

Operating Revenues(mn yen)Ordinary Profit(mn yen)

Net Profit(mn yen)¥5,466¥1,907¥1,905¥17,800¥0¥5,392¥1,864¥1,863¥17,400¥0

Excluding excess ofearnings

Reference: Estimated forecast net profit per unit for the period ending August 2008 is 17,800 yen and for the period
ending February 2009 is 17,400 yen.
Notes:
1. Forecasts presented above are based on “Assumptions for Operating Forecasts for the Periods ending August
2008 (March 1, 2008 – August 31, 2008) and February 2009 (September 1, 2008 – February 28, 2009)”
identified in a separate reference. Forecasts for operating revenues, ordinary profit, net profit, distribution perunit and distribution in excess of earnings per unit may differ from actual results due to changes in conditions.
Accordingly, Fukuoka REIT Corporation does not guarantee any amount.

2

3. Management Conditions(1) Overview of the Fiscal Period Ending February 2008(a) Key Milestones for the Investment Corporation
Fukuoka REIT Corporation (hereafter, “FRC”) was established on July 2, 2004 based on the Investment
Trusts and Investment Corporations Law and listed on the Tokyo Stock Exchange and Fukuoka Stock
Exchange (securities code: 8968) on June 21, 2005. FRC is the first real estate investment trust in Japan
specializing on a specific region (hereafter, “regional J-REIT”) with Kyushu as a whole (the focus being on
Fukuoka and including Okinawa Prefecture) and Yamaguchi Prefecture as the investment target areas. This
enables Fukuoka REIT to exploit the traditional characteristic of the real estate industry of having strong
local characteristics.
FRC acquired four properties and commenced actual management on November 9, 2004. One of the four
properties acquired was Canal City Hakata [Canal City Hakata here refers to the retail property portion of
the entire Canal City Hakata (the entire Canal City Hakata here refers to the retail complex where stores,
major stores, cinema complex, theater, amusement facilities, hotels, offices, etc. were integrally developed;
the same hereafter) excluding some stores, some hotels, theater, offices and some of the common-use
portion; the same hereafter]. Since this start, FRC expanded to include eleven properties as of the end of
August 31, 2007 and during this fiscal period added two community shopping centers located along major
suburban thoroughfares and one rental condominium for families that was newly completed in one of theleading residential areas of Fukuoka City.
As a result, FRC owns and manages fourteen properties as of the end of this fiscal period (excluding silent
partnership interests) and these include eight retail properties, four office buildings and two residential
properties.
(b) Investment Environment and Management Performance
The domestic Japanese economy expanded moderately during this fiscal period as a result of continued
increases in domestic and overseas demands resulting from continued increases in exports and capital
investment and the strong floor in personal consumption with high levels of corporate earnings being
maintained. There are growing concerns regarding the deceleration of the U.S. economy as a result of thesubprime loan problem, changes in the financial market and financial products market and crude oil pricing
trends. However, Kyushu, the core investment area of FRC, continued a gradual economic recovery driven
by strong capital investment centering on export firms.
According to announced official land prices for 2008 by the Ministry of Land, Infrastructure, Transport andTourism, average residential land in the three major metropolitan areas rose 4.3% on average and commercial
land rose 10.4%. In Fukuoka, the core investment target, residential land rose 1.3% year-on-year andcommercial land rose 13.6%. In particular, Hakata Ward, with its rich culture and popularity as adestination, and parts of Chuo Ward saw rises by more than 30%.
Within this environment, FRC acquired the community shopping center Hanahata Shopping Center in
Minami Ward, Fukuoka City, a highly densely populated area of the City. The property was acquired on
September 3, 2007 for 1,130 million yen. FRC also completed acquisition of City House Keyaki Dori, afamily-type rental condominium with an excellent location and good specs distinctly different from theabundant supply of singles-type condominiums in the same area. This was acquired for 1,111 million yen
on December 20, 2007. FRC also acquired the Kurume Higashi Kushiwara Shopping Center on February 1,
2008 for 2,500 million yen. This community shopping center is located near the center of Kurume City
and at the intersection of National Highway Route 3 and Route 210, where there is heavy traffic.
An analysis of our present portfolio on an acquisition price basis reveals that 70.8% of our portfolio is in the
Fukuoka metropolitan area and that the FRC portfolio breaks down into 63.8% commercial, 33.4% officeand 2.8% residential.
On the other hand, operations and management are continuing to work to raise the occupancy rates of our3

residential properties and are also focused on reinforcing competitiveness and the ability to draw customers
at Canal City Hakata and the other major retail properties. These efforts have raised occupancy of ourportfolio at period end to 98.8%.
(c) Overview of Fund Procurement
A total of 3.9 billion yen was newly procured this fiscal period with an aim to acquire new qualified assets.
Additionally, in February 2008 9.5 billion yen of short-term borrowings were switched to long-termborrowings in consideration of the diversification of repayment dates, lengthening of borrowing durations
and at the timing of the drop in the medium to long-term interest market. As a result, the balance of FRC
borrowings as of the end of this fiscal period is 48 billion yen and the LTV as of this fiscal period is 39.5%.
(d) Overview of Business Performance and Distributions
As a result of these management efforts operating revenues totaled 5,179 million yen and the operating
profit totaled 2,382 million yen with ordinary profit totaling 1,981 million yen and net profit 1,980 million
yen.
Distributions totaled 18,499 yen per investment unit. This was because almost all unappropriated profits asof the end of this fiscal period were distributed and this enabled application of the tax exception that allows
for unappropriated profit distributions to be recorded as expenses (Special Taxation Measures Law Article
67-15).
(2) Forecasts for the Fiscal Period Ending in August 2008(a) Future Management Policy
FRC will continue to invest based on the basic policy defined in the Articles of Incorporation and the basic
thinking of making domains that coincide with both “markets with high growth potential” and “specialized
areas in which competitive advantages can be demonstrated” as investment targets.
FRC has set the percentage of investment at 60~90% for the Fukuoka metropolitan area, and Fukuoka isrecognized to have the greatest population growth potential of any metropolitan area in Japan in the future
making it a market with high growth potential. FRC will also invest in core cities of Kyushu andYamaguchi Prefecture by applying our local perspective closely linked with the community that enables us
to proactively invest in communities and properties where investment merits can be secured.
By investment type, FRC has set the following targets for its portfolio: 60~80% retail properties, 20~40%
office buildings and 0~20% other properties. FRC will continue to expand our assets under management
centering on retail properties. Investments in the retail property category can be further broken down into
the relatively large urban and regional types and also the community type and plans call for broad
investment in all of these types.
Meanwhile, concerning fund procurement, FRC will continue to take steps to heighten the soundness of our
finances as well as build strong relationships with financial institutions to ensure stable fund procurement.
To accomplish this task, FRC will eliminate competition as much as possible by adequately capitalizing on
the strengths of FRC, including the capacity to gather information regarding Fukuoka and Kyushu, local
knowledge and perspectives concerning properties and by utilizing our network rooted in the local businessworld and government. We will proceed to acquire high-quality properties that you our investors cancontinue to invest in with assurance.
(b) Forecast of Financial Results for the Fiscal Period Ending in August 2008 and February 2009
The following are the operating forecasts for the fiscal periods ending in August 2008 (March 1, 2008 –August 31, 2008) and ending in February 2009 (September 1, 2008 – February 28, 2009). These forecasts
are based on a number of assumptions (not listed in this summary) that are subject to change.
Fiscal Period Ending in August 2008

4

Operating revenues
Ordinary profit
Net profit
Distributions per unit
Distributions in excess of earnings per unit

¥5,466 million¥1,907 million¥1,905 million¥17,800¥0

Fiscal Period Ending in February 2009
Operating revenues
Ordinary profit
Net profit
Distributions per unit
Distributions in excess of earnings per unit

¥5,392 million¥1,864 million¥1,863 million¥17,400¥0Note) Forecasts presented above are based on certain assumptions, and actual operating revenues, ordinary
profit, net profit, distribution per unit and distribution in excess of earnings per unit may differ due tochanges in conditions. Accordingly, FRC does not guarantee any amount.

54. Financial Statements, etc.
(1) Balance Sheets(Unit: thousand yen)
Fiscal Period
Category

Sixth Fiscal Period(as of August 31, 2007)

Seventh Fiscal Period(as of February 29, 2008)

Value

Value

Share

AssetsI.

Variation

Value

Share

%

Period-on-Period%%

Current assets
Cash and deposits

2,369,396

1,649,844(719,551)

Cash and deposits in trust

3,979,594

4,034,804

55,209Operating receivables

275,251

232,783(42,467)

Deferred tax assets

37

18

(19)

Consumption taxes receivable─

50,60850,608273,658

127,375(146,283)

Other current assets
Total current assets

6,897,937

5.9

6,095,433

5.0(802,503)(11.6)

II. Fixed assets
1. Tangible fixed assets
Construction in process─483,728

483,728

Buildings in trust

42,225,480

43,734,843

1,509,363

Structures in trust

423,282

493,273

69,991

Machinery and equipment in trust

289,014283,946(5,068)Tools and fixtures in trust

279,354339,276

59,92264,120,972

66,666,541

2,545,569

Land in trust
Total tangible fixed assets

107,338,104

91.1

112,001,609

92.1

4,663,505

4.3

2. Investments and other assets
Investment securities

3,421,633

3,421,633

─

Guarantees and deposits

10,00010,000─Long-term pre-paid expenses

97,73989,809(7,930)Total investments and other assets

3,529,373

3.0

3,521,443

2.9(7,930)(0.2)

110,867,477

94.1

115,523,052

95.0

4,655,575

4.2

Total fixed assets
III. Deferred assets
Establishment expenses

16,786

11,190(5,595)Investment unit issuance expenses

33,65025,237(8,412)

Total deferred assets
Total assets

50,4360.0

36,4280.0(14,007)(27.8)

117,815,851

100.0

121,654,914

100.0

3,839,063

3.3

6

(Unit: thousand yen)
Fiscal Period
Category

Sixth Fiscal Period(as of August 31, 2007)
Value

Seventh Fiscal Period(as of February 29, 2008)

Share

Liabilities

Variation

Share

Value
%

Value

Period-on-Period%%

I. Current liabilities
Accrued business fees

295,862

282,910(12,951)

Short-term debt
Long-term debt to be repaid within
1 year
Accounts payable

8,500,000

2,900,000(5,600,000)

6,600,000

6,600,000─

33,52922,458(11,071)

Expenses payable

310,417306,176(4,240)

591

287

(304)

Income taxes payable
Consumption taxes payable

101,182─(101,182)

Rents received in advance629,392

657,928

28,536

Deposits held

705,736489,977

Total current liabilities

14.6

17,176,712

11,259,739(215,758)
9.3(5,916,973)(34.4)

II. Fixed liabilities
Long-term debt
Key money and security deposits
on deposit
Key money and security deposits
in trust
Derivative losses
Total fixed liabilities
Total liabilities

29,000,000

38,500,000

9,500,000

─

80,28880,2889,409,271

9,570,159

160,887

90,405

144,515

54,10938,499,677

32.7

48,294,963

39.7

9,795,286

25.4

55,676,389

47.3

59,554,702

49.0

3,878,312

7.0

Unitholders’ equity
I. Unitholders’ capital
60,264,380

60,264,380

─

1,965,487

1,980,347

14,859Total surplus

1,965,487

1,980,347

14,859Total unitholders’ capital

62,229,867

1. Total investment
2, Surplus
Unappropriated profit

52.8

62,244,727

51.1

14,8590.0

II. Valuation and Conversions
1. Profit and loss on deferred hedge(90,405)(144,515)

Total valuation and conversions(90,405)(0.1)(144,515)(0.1)(54,109)─

Total unitholders’ equity

62,139,462

52.7

62,100,212

51.0(39,249)(0.1)

Total liabilities and unitholders’ equity

117,815,851

100.0

121,654,914

100.0

3,839,063

3.3

7(54,109)(2) Profit and Loss Statement(Unit: thousand yen)
Fiscal Period
Category

Sixth Fiscal Period(as of August 31, 2007)
Value

Seventh Fiscal Period(as of February 29, 200807)

Percentage

Value

Percentage

5,232,084

100.0

5,179,178

Real estate leasing revenues

4,874,882

4,871,952

Other real estate leasing revenues

216,627

171,225

Capital gains from real estate

4,574

─

Anonymous association dividend

136,000

136,000

II. Operating expenses

2,869,239

54.8

2,796,387

Real estate leasing expenses

2,437,428

2,365,097

Asset management fees

325,517

321,104

Custodian fees

10,344

10,252

General administration fees

33,30033,828

Director compensation

9,600

9,510

Other operating expenses

53,04756,594

Operating profit

Value

%

%
I. Operating revenues

Variation
Period-on-Period

%

100.0

(52,905)

(1.0)

54.0

(72,851)(2.5)

2,362,845

45.2

2,382,791

46.0

19,946

0.8

III. Non-operating profit (loss)

5,598

0.1

7,149

0.1

1,551

27.7

Interest income

5,394

7,149

Other non-operating revenues

203

─
7.9

6,952

1.7

IV. Non-operating expenses

401,6417.7

408,594

Interest payment

333,144

345,043

Amortization of establishment
expenses

5,595

5,595

Expenses related to public offeringof investment units

8,412

8,412

Expenses related to financing

52,231

46,564

Other non-operating expenses

2,257

2,978

Ordinary profit

1,966,802

37.6

1,981,346

38.2

14,544

0.7

Net profit before taxes

1,966,802

37.6

1,981,346

38.2

14,544

0.7

Income and other taxes

1,436

Deferred income taxes

(37)

0.0

19

0.0

1,965,403

37.6

1,980,297

38.2

Net profit
Profit earnings brought forward
Unappropriated retained earnings forthe period

1,029

(349)
(25.0)
14,894

84

49

(34)

1,965,487

1,980,347

14,8598

0.8

(3) Cash Distribution Statement
Category

Sixth Fiscal Period

Seventh Fiscal Period

March 1, 2007 – August 31, 2007

September 1, 2007 – February 29, 2008

I. Unappropriated retained earnings for theperiod (thousand yen)
II. Amount of distributions (thousand yen)

¥1,965,487¥1,980,347¥1,965,438¥1,980,317(Amount of distribution per investmentunit) (yen)III. Profit carried forward to next period(thousand yen)(¥18,360)(¥18,499)

¥49

¥29

Note) Figures other than the distributions per investment unit have numbers below a thousand yen rounded down.
Method of calculating amount of distributions

Article 38(1)(i) of FRC’s Articles of

Article 38(1)(i) of FRC’s Articles ofIncorporation stipulates the policy that

Incorporation stipulates the policy that“distributions shall surpass an amount equal“distributions shall surpass an amount equal

to 90% of the amount of FRC’s profit

to 90% of the amount of FRC’s profit

available for dividends that is regulated inavailable for dividends that is regulated in

Article 67-15 of the Special Taxation

Article 67-15 of the Special Taxation

Measures Law.” In accordance with thisMeasures Law.” In accordance with thispolicy, FRC decided to distribute ¥1,965,438

policy, FRC decided to distribute ¥1,980,317

thousand yen, which is almost the entire

thousand yen, which is almost the entire

amount of unappropriated profit, as profit

amount of unappropriated profit, as profit

distributions. Further, distributions of cash

distributions. Further, distributions of cash

in excess of profit as designated in Article

in excess of profit as designated in Article

38(2) of the Articles of Incorporation will not

38(2) of the Articles of Incorporation will not

be made.

be made.

9

(4) Cash Flow Statement(Unit: thousand yen)
Fiscal Period

Sixth Fiscal Period

Seventh Fiscal Period

March 1, 2007 – August 31, 2007

September 1, 2007 – February 29, 2008

CategoryI.

Cash flows from operating activities
Net profit before taxes

1,966,862

1,981,346

Depreciation and amortization

741,902763,679

5,595

5,595

Amortization of establishment expenses
Investment unit issuance depreciation

8,412

8,412

Interest income(5,394)（7,149）Interest payment

333,144

345,043

Capital gains from real estate(4,574)

─

Increase/Decrease in operating receivables(26,960)

42,467

Increase/Decrease in consumption taxes receivable

99,443(50,608)

Increase/Decrease in consumption taxes payable

101,182(101,182)

7,769(1,499)

Increase/Decrease in accounts payable(19,157)(17,077)

Increase/Decrease in expenses payable

14,747(1,061)

Increase/Decrease in accrued business fees

Increase/Decrease in rent received in advance

39,52828,536

Increase/Decrease in deposits held

211,278(215,758)

Increase/Decrease in pre-paid expenses(43,339)

30,932

Increase/Decrease in long-term pre-paid expenses(18,397)

7,930

Other

(7,947)

12,874

3,404,034

2,832,481

SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities

5,394

7,149

(323,334)(348,222)(1,727)(15,388)3,084,367

2,476,020

783,223

─

II. Cash flows from investing activities
Proceeds from sales of tangible assets
Payments for purchases of tangible fixed assets
Payments for purchases of tangible fixed assets in trust
Proceeds from key money and security deposits─(477,708)(5,796,651)(4,837,312)─

80,288

Payments for key money and security deposits on deposit(98,595)─Proceeds from key money and security deposits in trust

353,104

285,856

Payments for key money and security deposits in trust
Net cash used in investing activities(172,487)(124,969)(4,931,407)(5,073,844)

III. Cash flows from financing activities
Proceeds from short-term debt

4,000,000

15,300,000

Repayments of short-term debt

(4,000,000)(20,900,000)

Proceeds from long-term debt

─

9,500,000

Dividends paid

(1,859,306)(1,966,518)

Net cash provided by financing activities(1,859,306)

1,933,481

IV Increase/Decrease in cash and cash equivalents(3,706,347)(664,341)

V. Cash and cash equivalents at start of period

9,566,675

5,860,328

VI. Cash and cash equivalents at end of period

5,860,328

5,195,986

10