Fukuoka REIT Corporation
Q&A Summary for the 29th Fiscal Period (Period Ended February 2019)
Earnings Briefing Session for Institutional Investors/Analysts
Date: April 15, 2019 (Mon.), 3:30pm – 4:30 pm
Q1: Significant upward rent revisions are forecast in the 30th fiscal period. I would like toknow if this pace is expected to continue given the situations of the office market.
A1: Upward rent revision so far has resulted in a rent increase of around 1 million yen permonth, but the forecast figure is around 2 million yen. Previously, we revised rents of tenants
who had moved in during economic recession at rents lower than the market rent as of late.
However, as the market has improved, we have expanded the target tenants for rent revision.
Although the outcome all depends on negotiations, this is something we would like tocontinue pursuing.
Q2: Although the initial forecast made at the beginning of the 29th fiscal period, which justended, predicted sales figures of Konoha Mall Hashimoto would fall due to factors related tonearby retail properties, they turned out to be flat. Will the figures remain flat going forward,
or do you expect them to increase?
A2: While some pointed out at the previous earnings briefing session that the forecast was
too conservative, we successfully ended the period with a better-than-expected result. We
are forecasting a decrease in sales of 3% this time, but would like to increase sales as muchas possible by capitalizing on the property’s strength as a community-based commercialfacility. To this end, we will be planning tenant replacement and such as well.
Q3: As to the change in investment policy, was the change made to align with the current
portfolio? Alternatively, is this representative of your determination to perform focusedacquisition of office buildings in light of the strong market trends?
A3: Fukuoka Jisho Co., Ltd., the sponsor, owns other office buildings besides Tenjin BusinessCenter, and is planning to rebuild some of the buildings going forward. Amid such, we would
like to increase the number of office buildings in our portfolio by negotiating acquisitions withthe sponsor.
Q4: There have been more REITs conducting property replacement, but Fukuoka REIT has
not sold a major property since the sale of AEON Hara Shopping Center. Going forward, will
there be no selling of properties because you see no necessity in such, or is it that you haveno plans for conducting property replacement?
A4: All properties are currently with unrealized gain and there are no properties that need tobe replaced immediately. However, we may conduct property replacement depending on thesituations of the market in the future.
Q5: While dividend growth and external growth are linked, contribution of internal growth todividend seems small. Can we expect to see internal growth going forward?
A5: As a matter of fact, I just explained that approximately half of the 130 yen forecast
dividend increase for the 30th fiscal period is from external growth, while the other half isfrom internal growth. For us, there is no doubt that external growth is important, but we would
also like to see a dividend increase from internal growth. We will pursue such through the
reduction of utility expenses, etc. I mentioned, while continuing to increase percentage-ofsales rent at Active Retail category properties and implement upward rent revision at officebuildings among other things.
Q6: At the beginning of the session, you explained that DPU in the range of 3,800 yen will
be in sight as the medium-term goal. For achieving that target, you mentioned increase insales of Active Retail properties such as Konoha Mall Hashimoto, as well as increase in rentof office buildings. Could you give us a breakdown of the 3,800 yen with regards to internal
growth and external growth?
A6: The range of 3,800 yen we mentioned as dividend does not factor in external growth at
this time. We will work towards this target through the accumulation of efforts on internal
growth, including upward rent revisions at office buildings, increase of percentage-of-sales
rent at Active Retail category properties, cost reduction such as reduction of utility expenses
carried out this time and reduction of depreciation.
Q7: GOP-linked rent was additionally mentioned in the section for changes to the guidelines
this time. Going forward, do you intend to increase the percentage of GOP-linked rent orvariable rent for properties acquired through pipeline support or for existing buildings?
A7: Some of the properties we own already had GOP-linked rent, but we decided to newly
state it in the guidelines because we included Tissage Hotel Naha in the portfolio under theinvestment type of hotel this time. Situations differ as to how we should treat acquisition ofhotels from the sponsor. We will discuss that with the sponsor when performing acquisition
from the sponsor, and will carefully consider which type will be beneficial to unitholders overthe medium to long term when performing acquisition from outside parties.
This material contains statements on future business performances, plans, managementtargets and strategies, etc. These forward-looking statements are based on the latest
judgments made by Fukuoka REIT Corporation and Fukuoka Realty Co., Ltd., and the actual
results of Fukuoka REIT Corporation may differ materially from those in the forward-looking
statements due to various factors. Therefore, Fukuoka REIT Corporation and Fukuoka Realty
Co., Ltd. do no guarantee their respective future performances described in this material orin the explanations made on the basis of this material. Although Fukuoka REIT Corporationand Fukuoka Realty Co., Ltd. have prepared this material based on the information believed
to be reliable, it makes no guarantee as to the accuracy, rationality or completeness of thecontent. Please note that all the descriptions of this material are effective as of the date when
this material was prepared, and may be subject to change without prior notice. This material
is solely for the purpose of providing information to investors, and is not intended for soliciting
investment or other activities. When making a final decision on investment, investors arekindly requested to do so based on their own judgment and responsibility, fully recognizing
and understanding the investment-related risks including a decrease in investment value.