Hello, everyone. I’m Zenji Koike. I’m CEO of Fukuoka Realty. Thank you verymuch for tuning in to the performance overview of Fukuoka REIT Corporation forthe 37th fiscal period, which is from September 1 last year to the end of February
this year.

01Let me start with the executive summary on page 1 and talk about the dividends.
You’ll find the numbers at the bottom of the page. The dividend payout for the
37th fiscal period was 3,580 yen per unit, beating our own expectations by 60
yen. It is in large part due to a rise in rent revenue driven by the stronger-thanexpected recovery in the inbound tourism consumption, which Canal City Hakata
benefited from greatly. This graph clearly shows that the recovery in the dividend
payout continues and the payout for the 38th fiscal period is expected to go up by
20 yen per unit to 3,600 yen per unit and remain flat for the 39th fiscal period.
Next, please take a look at the upper left part of the page for external growth. We
acquired Kumamoto East Front Building on March 28 and will acquire one
residential property named Axion Befu Ekimae Premium in April and one newly
built office building, Hakata FD Business Center, in September, both of which areproperties in Fukuoka City. The acquisition of the three properties will boost ourasset size to 223 billion yen and will also lower the percentage of retail properties
in our portfolio to less than 50 percent. And, as a comprehensive REIT, we willcontinue to pursue portfolio diversification.
Next to the right is a summary for internal growth. Sales of our active retail arerecovering generally. Recovery in sales has been particularly strong at Canal
City Hakata, our main retail property, up 27.8 percent from a year earlier,following the government’s travel subsidies to stimulate tourism demand andreopening of the borders last October, driving rebound in Korean tourists inparticular. In addition, the opening of a new subway station, Kushida Shrine
Station, on March 27, as a result of the extension of Nanakuma Line, further
improved access to Canal City Hakata. I will give you an update on the2renovation plan for Canal City Hakata, the Future Vision, later in this presentation.
Our office buildings were 99.8 percent occupied as of the end of the 37th fiscal
period. We continued to raise rent on rent revisions or tenant turnovers by 23
million yen on a six-months basis. Also, the vacancy at Higashi Hie BusinessCenter created by the move-out of a big tenant in last September was filled in justtwo months, more quickly than anticipated. Moreover, we were able to raise therent to the market rent level for this property.
When it comes to our finances, as you can see, we remain steadfast to ensure thestability of our financial structure. Total interest-bearing debt stood at 83.9 billion
yen at the end of the 37th fiscal period. And we will continue to mitigate
refinancing risk through diversifying repayment dates and other means. We will
also consider ways to mitigate risk of higher funding costs as result of risinginterest rates; rebalancing the fixed and floating rates is one of the options.
Last but not least, here are our sustainability initiatives at the bottom. We
received four stars in the GRESB survey for two years in a row. We also achieveda GRESB Public Disclosure Level of “A”, the highest level, for our outstanding
disclosure of ESG activities. Also, eighty-percent of our properties in the portfolio
are now certified as “Green Buildings,” up 2 percentage points from the previous
fiscal period. And that is a quick overview of the executive summary.

2Now let’s go to the next page to discuss more details about our dividend payouts.
These are the factors that determined our dividend payout for the last fiscal
period as well as form the basis of the dividend forecast for the next two fiscal
periods.
We were able to raise the dividend for the 37th fiscal period from the previous
period by 57 yen per unit because the recovery of active retail and the gain on
the sale of Kurume Higashi Kushiwara Shopping Center more than absorbed theimpact of the vacancy at Higashi Hie Business Center and rising costs such as
repairing expenses. We also beat our own expectations by 60 yen per unit on an
increase in rent revenue from Canal City Hakata following the rebound in foreign
tourists, especially, Korean tourists.
For the 38th fiscal period, the drop in revenue from Canal City Hakata due to therenovation and the increase in repair expenses will continue to be offset by thegain on the disposal of Kurume Higashi Kushiwara Shopping Center.
Furthermore, now that Higashi Hie Business Center’s vacancy has been
completely filled and the properties we acquire during this fiscal period come on
board, we expect the dividend payout will go up by 20 yen per unit to 3,600 yen
per unit for the 38th fiscal period. For the 39th fiscal period, any decline of a gainon sale of a property will be offset by an increase in revenue from Canal City
Hakata, a cutback on repairing expenses, and the incremental revenue from thethree properties we acquire during this fiscal period. Thereby we expect tocontinue to pay 3,600 yen per unit as dividend for the 39th fiscal period.

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The next page is about our approach to external growth. Our current asset size
is about 206 billion yen as of the end of February 2023. With one office building
we acquired in the beginning of the current fiscal period, coupled with anotheroffice building and one residential property to be acquired during this fiscal
period, the asset size will grow to 223 billion yen. Our immediate goal is to reach
250 billion yen in asset size and the next target is 300 billion yen. We willcontinue to grow our portfolio by acquiring properties not only from our sponsor
but also by leveraging our local connections and external sources, focusing onsustainability of a property. The addition of the three properties will also lower thepercentage of retail properties in our portfolio to 48.9 percent, which is below our
50-percent target. As a comprehensive REIT, we continue to pursue an optimal
portfolio with a perfect balance of risk and return.

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Pages 4 and 5 describe details about the acquisitions. The two properties
mentioned on Page 4 are both from external sources. On the left side of thepage it is Kumamoto East Front Building, which we acquired for 1 billion 450
million yen on March 28. This is our first office building in our portfolio which islocated outside Fukuoka Prefecture. We focus our attention to Kumamoto
because this is where Taiwanese chipmaker TSMC is building its plant andbringing with it so many companies related to TSMC, helping fuel a businessboom. This office building has good access to the city center, via the city tram,
where banks and government offices abound. It has a typical tenant space of
128 tsubo or about 4,500 square feet per floor, which is quite spacious comparedto other office buildings in the area, perfectly meeting the needs of the market.
On the right-hand side it is Axion Befu-Ekimae Premium, which we will acquire forapproximately 1.5 billion yen on April 27. Located just a two-minute walk from
Befu Station on the Fukuoka City Subway Nanakuma Line, which has been
extended to Hakata Station since March, this high-grade apartment property sits
in a residential area which we expect will be increasingly popular, and we aresure that it is a good investment. The property has a good access to the city
center; it takes only ten minutes to Tenjin-Minami and 14 minutes to Hakata by
subway. Its equipment is comparable to that of an upscale “for-sale”
condominium. So, this is a very competitive property in the area.

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Please go to the next page. This is a property which we will acquire using thepipeline or connection with our sponsor Fukuoka Jisho. We will acquire Hakata
FD Business Center for 14.1 billion yen on September 1. This high-spec, newly
built office building is truly a rare find in the sense that it has so much space andis located in the Gofukumachi area, a major business district following Tenjin and
Hakata. The building is one of the most advanced office buildings in Fukuoka,
being equipped with such advanced features as high-quality ventilation system,
BCP, Business Continuity Planning, functions, or quake-resistant technology. It isalso a very unique architecture and definitely becomes a landmark of the city as
the building develops in an inverted pyramid so that the upper levels are larger
than the lower levels, with its crystalline facade covered with a glass curtain wall.
For your reference, the weighted-average NOI for the three properties is 4.2
percent. And the acquisition of the three properties will make our portfolio
stronger and more sustainable and ensure a stable return on investment into the
future.

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The next slide, page 6, is about updates on the office market in Fukuoka. The
chart on the left-hand side shows that the vacancy rate for March rose 79 basis
points from the previous month to 5.89 percent due to the big supply of new officebuildings in the city, while the vacancy rate for existing buildings remained low at
4.28 percent.
And if you look at the upper right corner of the page, you can see average rents
as of March within the orange lined box. The March average rent for Fukuoka
continued to rise, up 1.8 percent from February, showing that the office market in
Fukuoka remains strong. We’d also like to note that the office buildings owned by
Fukuoka REIT are very competitive given their extremely low vacancy rates.

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Here are details about the leasing development for Higashi Hie Business Center
on Page 7. As I said earlier, this building had a significant vacancy,
approximately 1,450 tsubo or over 50,000 square feet, or 35 percent of its
rentable area at the end of last September. However, the vacant space was filledin just two months or so thanks to its prime location, high-spec characteristics,
and our focused efforts to find new tenants. Furthermore, we could successfully
fill the space with multiple tenants, not just one big tenant, as well as close therent gap, as expected, with the market rent leases, which are above ourportfolio’s average rent unit price north of 12,500 yen. And that will translate into
a 13 million yen increase in rent revenue on a six-months basis under normal
operations.

8Please go to the next page. It is showing the historical and projected occupancy
rates for office buildings in our portfolio. The weighted-average occupancy rate
for the ten office buildings in our portfolio, which excludes the land for Tenjin
Nishi-Dori Business Center, remains at a high level of 98.7 percent for the 37th
fiscal period. As I mentioned earlier, the big vacancy at Higashi Hie BusinessCenter has been completely filled and the occupancy rate is expected to remainhigh. And, according to CBRE’s appraisal data, our portfolio rent is still 13.3
percent lower than the market rent, so we will continue to work hard to raise rent,
as illustrated in the chart you see at the bottom right of the page.

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The next page, Page 9, describes the latest developments surrounding our main
retail property, Canal City Hakata. This chart clearly shows that Canal City
Hakata’s sales have been recovering to 2018 levels particularly since last
October as distant customers and foreign tourists are coming back, helped by thegovernment’s travel subsidies and the reopening of the borders. And as you can
see the numbers just below that, there is a huge rebound in Korean tourists
whereas the number of visitors from Chinese mainland still remains very small.
That means when Chinese tourists begin to come back that will further boost
sales for Canal City Hakata.
It is also important to point out that the opening of a new subway station “Kushida
Shrine Station” as a result of the Nanakuma Line’s extension has dramatically
improved access between the residential areas in the southwestern part of thecity and Canal City Hakata, let alone from Hakata Station. The data you see atthe bottom right of the page show that the traffic to Canal City Hakata increased
following the extension and the opening of the new station.

10Here are more updates on Canal City Hakata’s renovation plan or the Future
Vision, as we call it. As a first step, we will have the opening of a premier general
sporting goods store, Alpen Fukuoka, on Level 1 through Level 3 of the South
Building this fall. This is going to be one of the biggest in Kyushu and Alpen
Group’s first flagship store in western Japan, following Alpen Tokyo, which was
opened in Shinjuku in April last year. We hope that the opening of Alpen Fukuoka
will advance sports culture in the local community and provide real opportunities
for people to enjoy new experiences and try out activities that interest them.
And as a second step, we are planning to renovate the entire dining zone on thefirst basement level of the Grand Building. I can’t really provide any more details,
except that there will be two dining zones. Neo-Bistro and Bar Zone will be anarea where there is no wall between the restaurants and customers can enjoy
fine dining in a casual atmosphere. The other is Gastronomy Zone, whichhouses a collection of reservation-required, destination restaurants. The goal isfor Canal City Hakata to become the showcase of a new food culture that blends
Fukuoka specialities with various Asian cuisines. We are already looking forprospective tenants. Also, Fukuoka Jisho has announced its redevelopment planfor Canal City Hakata East Building. Fukuoka Jisho is the owner of the East
Building.
So, Canal City Hakata is clearly transforming into a space where ‘work’ and ‘play’
fuse into one and that produces a fusion of Fukuoka and Asian cultures, enrichingpeople’s lives.

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The next page, Page 11, describes the situation of our logistics assets. The
logistics property market in Fukuoka has been very bullish with very low vacancy
rates between 2019 and 2022. Despite the significant amount of new supply
since 2022, CBRE expects only a modest rise in the vacancy rate and thatdemand continues to be strong. Also, it is very likely that the market continues tobe extremely bullish not only in Fukuoka suburban areas but also in Tosu area,
Saga Prefecture, and the rent unit price is expected to go up even in the face ofthe large supply of new logistics facilities. And we will raise rent for our logistics
properties at the time of leasing contract renewals. Currently we own four
logistics properties and every single one of them is running at 100 percent
occupancy.

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The next page, Page 12, is about the situation of our residences and hotels. The
average occupancy rate of our five residential properties remained high at 97.3
percent for the 37th fiscal period. And we keep trying to raise rent at the time oftenant turnovers.
Axion Befu Ekimae Premium, which we are going to acquire, is located in Jonan
Ward, which is an area where the population and the number of households are
growing. Access to the city center from Befu Station, the nearest station of thisbuilding, has been improved following the extension of the Fukuoka City Subway
Nanakuma Line, and we expect it to be increasingly more popular as a residential
area.
All the hotels in our portfolio are room-only hotels. Demand is definitely
recovering as demonstrated by the fact that we had variable rent revenue fromTissage Hotel Naha for the first time in three years.

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From here I’m going to talk about our finances. Let’s take a look at page 13. In
anticipation of possible higher financing costs due to the recent rise in base rates,
we will make sure to bring our financing costs under control by diversifying debt
maturities, adjusting borrowing terms, and rebalancing the fixed and floating
rates.
If and when we do refinancing or require a new borrowing going forward, we willborrow for a shorter period of time, not for seven or ten years as we did in thepast, and at floating rates at least for some part of the borrowing to minimize any
possible impact on the dividend.

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When it comes to LTV at the bottom of Page 14, it will go up as a result of the
new acquisitions. However, it still remains well below the upper threshold of 50
percent and we believe that it will likely come down to the normal level sooner
than later.

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The next page, Page 15, is about the appraisal value of our portfolio. Only Canal
City Hakata saw its book value exceeding its appraisal value, and the total
unrealized gains increased 3.5 billion yen from the previous fiscal period to 46.5
billion yen as of the end of the 37th fiscal period.

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Next, I’m going to talk about what we are doing with respect to sustainability,
which is one of our management priorities. When it comes to our actions for theenvironment, two residential properties we own are now certified as Rank A by
the CASBEE, Comprehensive Assessment System for Built Environment
Efficiency, and today 80 percent of the properties in our portfolio are certified as“Green Building.”
We also put up results of the qualitative assessment of financial impact based on
scenario analysis for TCFD on the next page. We are currently conducting aquantitative assessment as well, and we will announce the results once theassessment is completed.
One of our latest actions for Society is the registration with Fukuoka City SDGs
Registration System, which seeks to enhance visibility of the contribution to
SDGs by companies.
We understand that sustainability continues to be one of the important criteria forreal estate investment, so we want to continue to discuss with our investors how
to move forward.

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Having explained thus far, I will now dig a little deeper into our income statements
and dividend payouts for the 37th fiscal period and give you forecast for the next
two fiscal periods. Let me begin with the results of the 37th fiscal period ascompared with those of the 36th fiscal period.
Factors that affected the operating profit and loss are described in the text within
the orange box. Operating revenues excluding gain on sale increased 91 million
yen from the 36th fiscal period. The 127 million yen increase in rent revenue
from our Active Retail was more than enough to cover the losses due to the big
vacancy at Higashi Hie Business Center. The gain on sale came from thedisposition of Kurume Higashi Kushiwara Shopping Center. Operating expenses
increased 164 million yen from the previous fiscal period due in large part to anincrease in utilities expenses and expenses for repair and maintenance, which
had been postponed during the pandemic. And we paid 3,580 yen per unit, up 57
yen per unit, as dividend for the 37th fiscal period.

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The next page compares the results of the 37th fiscal period to our own
expectations. Again, factors that affected the operating profit and loss aredescribed in the text within the orange box. Operating revenues rose 121 million
yen and operating expenses increased 76 million yen. Repair and maintenanceexpenses went up more than expected, but the increase in rent revenue from
Canal City Hakata on the upsurge in customer traffic was more than enough tocover the rising expenses. The actual payout beat our expectations by 60 yen
per unit.

20Here is our business forecast for the 38th fiscal period on page 20. You can findthe main assumptions for the forecast within the green lined box. The drop in
rent revenue from Canal City Hakata and rising expenses will be covered by thegain on sale of Kurume Higashi Kushiwara Shopping Center, rent revenue fromnewly acquired properties, and a recovery in rent revenue from Higashi Hie
Business Center. The DPU for the 38th fiscal period is expected to be 3,600 yen,
up 20 yen per unit, from the 37th fiscal period.

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This is our forecast for the 39th fiscal period on page 21. Again, the main
assumptions are found within the green lined box. The sharp drop in gain on saleof Kurume Higashi Kushiwara Shopping Center will be covered by rent revenue
from newly acquired properties and a recovery in rent revenue from Canal City
Hakata as the renovation in some of its floors will have been completed by then.
We expect that the DPU for the 39th fiscal period will remain the same as for the
38th fiscal period at 3,600 yen.
And that brings to an end to the performance overview for the 37th fiscal period.
Thank you very much for watching.

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