Fukuoka REIT Corporation

Integrated Report 2023

Contents

Who We Are

Sustainability

01 Fukuoka REIT Corporation in Numbers

24 Sustainability

02 Overview of Fukuoka REIT Corporation/
History of Asset Portfolio Expansion

26 Materiality

04 Relationship with Fukuoka Realty Co., Ltd.
06 Macroeconomic Environment around Fukuoka
08 CEOʼs Message
12 Value-Creation Story
14 Value-Creation Activities

Growth Strategy
16 External Environment(Initiatives of Fukuoka City)

28 Environmental Response
36 Social Response
38 Corporate Governance

Data Section
40 Overview of Properties Owned
42 Financial/Non-Financial Highlights(5-Year Graph)
44 Financial/Non-Financial Highlights(11-Year/22-Period Summary)

18 Risks and Opportunities
20 Investment Strategy
21 Management Strategy
22 Financial Strategy

Editorial Policy
We have issued our Integrated Report since fiscal
2019 with the aim of imparting knowledge concerning
the value creation process of the Investment
Corporation and the Asset Management Company.
The Report has been positioned as an important toolfor engaging with our unitholders, investors, and otherstakeholders. The International Reporting Framework
recommended by the IFRS Foundation and theMinistry of Economy, Trade and Industryʼs Guidance for Collaborative Value
Creation have been referenced in the preparation of this Report to ensureease of understanding.
Through this Report, we aim to increase understanding of our efforts toenhance corporate value based on the basic philosophies of the Investment
Corporation and the Asset Management Company as well as the value wecreate in working to realize a sustainable society. We will continue striving to
make the Report an effective tool for facilitating constructive dialogue.

Positioning of This Report

Financial
Information
・Earnings report
・Securities report・Asset management
report・Operating systems report

Non-Financial
Information

Integrated
Report・Financial briefing materials
・Online disclosure ofsustainability information
・Corporate profile
・PR information disclosure

Period covered by the report
From September 1, 2022, to August 31, 2023
(Some recent activities after the period covered are included.)International Initiatives We Focus On
Sustainable Development Goals (SDGs)

Principles for Responsible Investment (PRI)The SDGs refer to the international goals
set forth in the 2030 Agenda for Sustainable
Development adopted at the United Nations
Summit in September 2015 as the successor to theMillennium Development Goals (MDGs) establishedin 2001. Given the medium- to long-term expectations stakeholders havefor the resolution of these challenges, our priority issues (materiality) were
established in September 2019 with reference to the SDGs.

PRI comprises an international network offinancial institutions working to realize six
principles for the finance industry with the aim ofencouraging the incorporation of environmental,social, and governance (“ESG”) issues into investment decision-making
processes. Fukuoka Realty Co., Ltd., endorsed and became a signatory of
PRI in September 2018 to promote the consideration of ESG issues in realestate investment management operations and practices that conform tointernational standards.

Fukuoka REIT Corporation in Numbers

Properties owned

Occupancy rate

207,564
million yen

Dividend
per unit

Investment
type

14.6%

)

Office buildings

Retail

51.9%
)

22.6%

R&I:(stable)
A+
LTV

★

Dividend yield

4.6%

Unrealized
gain

42.4% 48,478

Fukuoka
metropolitan area*

million yen

Securities code

77.4%

8968

Accounting periods

February
August* The Fukuoka metropolitan area includes Fukuoka City, Chikushino City, Kasuga City, Onojo City, Munakata City, Dazaifu City, Koga City, Fukutsu City, Itoshima City, Nakagawa City, Umi Town,
Sasaguri Town, Shime Town, Sue Town, Shingu Town, Hisayama Town, and Kasuya Town.
Glossary

LTV
An abbreviation for Loan to Value and an indicator of a companyʼs borrowing
ratio as well as a measure of stability in borrowing. The lower the value, thegreater the degree of safety against redemption of debt.
[Calculation method] LTV (%): (Interest-bearing debt / Total assets) × 100

As of August 31, 2023

These materials might contain future performance projections, plans, managementtargets, and strategies. These forward-looking descriptions are based on present
assumptions on future events and trends in the business environment, butsuch assumptions might not necessarily be accurate. Actual results could differ
materially due to various factors. Neither Fukuoka REIT Corporation nor Fukuoka
Realty Co., Ltd., shall be liable for the accuracy, rationality, and completeness of

Data Section

Credit rating
A grade that reflects the safety and creditworthiness of a company and its
ability to pay the principal and interest of bonds issued by the company
based on an analysis of the companyʼs performance and financial condition.

Sustainability((stable)33.5%

Investment
Other
areas
Kyushu areas
based onacquisition price

JCR: AAyen

Growth Strategy(

based onacquisition price

Credit ratings★

Others3,753

Who We Are

35

99.1%

Asset size

information contained in these materials, whether they were prepared by Fukuoka
REIT Corporation or Fukuoka Realty Co., Ltd., or provided by a third party.

Task Force on Climate-related Financial Disclosures (TCFD)
Cognizant of the fact that climate change is amajor issue facing the international community,
in September 2022 we became a signatory of
the Task Force on Climate-related Financial Disclosures (TCFD) establishedby the Financial Stability Board (FSB), having endorsed the recommendationsof the TCFD that were announced in June 2017. We will strive to disclose
the impact of climate change and implement specific measures basedon the recommendations of the TCFD in addition to continuing to reduce
environmental impact and contribute to the local community.

Note that all information in this document is current at the time of preparationand is subject to change without prior notice.
These materials have not been prepared to entice investment.
When applying to purchase investment units issued by Fukuoka REIT
Corporation, do so based on your own judgment and responsibility.
Any unauthorized reprinting, use, reproduction, distribution, or modification of
all or part of the content contained in this Report is expressly prohibited.

Note: Regarding amount, percentage, and ratio rounding: Unless otherwise noted, in these materials,
monetary amounts are rounded down to the nearest whole unit, and percentages and ratios arerounded off to one decimal place.

Fukuoka REIT Corporation 2023

01
02

Overview of Fukuoka REIT Corporation/History of Asset Portfolio Expansion

FRC was listed as the ﬁrst region-speciﬁc REIT in Japan on June 21, 2005, based on our intention to draw funds to the region
by introducing excellent properties in Fukuoka and Kyushu to investors locally and around the world. We capitalize on distinctive
regional features, a characteristic of the real estate industry, centering our operations on Fukuoka and the broader Kyushu
region, as well as Yamaguchi and Okinawa prefectures. Our portfolio primarily comprises retail facilities and ofﬁce buildings.
Driven by the core philosophy of “Act Local, Think Global,” our mission is to pursue the best interests of unitholders.
Name

Fukuoka REIT Corporation

Representative

Zenji Koike, Executive Director

Security code

8968

Listed dateJune 21, 2005
(Tokyo Stock Exchange, Fukuoka Stock Exchange)

Fiscal periods

February and August

Asset manager

Fukuoka Realty Co., Ltd.

Sponsors(Shareholders of theAsset Management
Company)

Fukuoka Jisho Co., Ltd.
Kyushu Electric Power Co., Inc.
THE BANK OF FUKUOKA, LTD.
THE NISHI-NIPPON CITY BANK, LTD.
Nishi-Nippon Railroad Co., Ltd.

SAIBU GAS HOLDINGS CO., LTD.
Kyudenko Corporation
Kyushu Railway Company
Development Bank of Japan Inc.

Trends in Asset Size (based on acquisition price)■ Retail ■ Office buildings ■ Logistics ■ Residences ■ Hotels(Acquired properties)
Canal City Hakata
Canal City Business Center Building
Park Place Oita
Gofukumachi Business Center

Number of properties

32,00014,60015,700
11,200Tosu Logistics Center 1,250
D-Wing Tower
2,800
Hotel FORZA Oita
1,530
Tenjin North Front Building 2,800

SunLive City Kokura 6,633

Tenjin Nishi-Dori Center Building 2,600

Sanix Hakata Building
4,400
Kominedai Community Mall 740

Acquisition Price(Millions of yen)

Aqualia Kego 2,800
Aqualia Chihaya 1,280

Taihaku Street Business Center 7,000

220,000

Amex Akasakamon Tower
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC

200,000

2,060
5,300
2,400

Canal City Hakata・B 28,700

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

150,000

Kʼs Denki Kagoshima 3,550
Higashi Hie Business Center 5,900
24
23

23

20

100,000

19
17

17
14

15

16

16

16

11

11

50,000

15

16

8
7
5
4

0

Listed

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

Jun.2005

Aug.2005

Feb.2006

Aug.2006

Feb.2007

Aug.2007

Feb.2008

Aug.2008

Feb.2009

Aug.2009

Feb.2010

Aug.2010

Feb.2011

Aug.2011

Feb.2012

Aug.2012

Feb.2013

Aug.2013

Feb.2014

Aug.2014* Amounts indicate acquisition price.
Note: FRC has co-ownership interest in the amount of 88.28%, and the amount indicates the appraisal value at the time of transfer.

02

FRC’s Characteristics
FRC has the following ﬁve main strengths.

2

region-specific
REIT
Asset management
leveraging our in-depth
knowledge of the realestate environmentof the Fukuoka andKyushu areas

3

Excellent portfolio
centered on the Fukuoka
metropolitan area

A portfolio of carefully
selected investments in thehigh growth area of Fukuoka
City, which is gaining attention
in Japan and abroad

4

Solid support from asponsor company involvedin property development

Asset portfolio expansion andhigh occupancy rates facilitatedthrough coordination with oursponsors

Conservative controlof the interest-bearing
debt ratio and longterm diversification of
repayment deadlines

Kumamoto East Front Building
1,450
Axion Befu-Ekimae Premium
1,525
Kurume Higashi Kushiwara SC (1,375)(55% co-ownership interest) (sold)Park Place Oita (Sports Club NAS)
Aeon Hara Shopping Center (sold)
Aqualia Kego (sold)

1,470(5,410)(2,800)Appropriate management ofreal estate investments

Hakata FD Business Center 14,100

Kurume Higashi Kushiwara SC (15% co-ownership interest) (sold) (375)
Hakata Chikushi-Dori Center Building 4,320
Tenjin Nishi-Dori Business Center 7,700(land with leasehold interest）
Canal City Hakata・B(7,640)(Note)
Grand Building (sold)

Granfore Yakuin Minami 1,100
LOGICITY Minato Kashii
8,150
Marinoa City Fukuoka
5,250(Marina Side Building)Park Place Oita (adjacent land) 590

Stable dividends
and steady NAV
growth since listing

Growth Strategy

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

5

Establishmentof a stablefinancial base

Higashi Hie
3,290
Business Center III
LOGICITY Wakamiya 1,700
Park Place Oita
990
(Home Plaza Nafco)

LOGICITY 5,050
Hisayama

40
36

36

Sustainability（Number ofproperties）

Tissage Hotel Naha 2,835

Who We Are

1 Japanʼs first

35
33
31

27

27

29

29

26

26

25

25

32

30

29

28

27

32

31

Data Section

20

10

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb.2015

Aug.2015

Feb.2016

Aug.2016

Feb.2017

Aug.2017

Feb.2018

Aug.2018

Feb.2019

Aug.2019

Feb.2020

Aug.2020

Feb.2021

Aug.2021

Feb.2022

Aug.2022

Feb.2023

Aug.2023

Glossary

NAV
NAV is an abbreviation for Net Asset Value at an investment trust. Net assets are defined as total
investment trust balance sheet assets minus liabilities, with the base price based on the numberof units. For REITs, the term net assets refers to net assets plus unrealized gains or losses
reflecting the difference between the book value of the property owned and the appraised value.

After theacquisitionofHakata FD0[Calculation method] NAV: Net assets + Unrealized gains or losses – Dividends
Market net assets value per unit: NAV / Total number of units issued
Fukuoka REIT Corporation 2023

03
02

Relationship with Fukuoka Realty Co., Ltd.

Structure of FRC
J-REIT, or Japan Real Estate Investment Trust, refers to a publicly traded real estate investment trust. It pools funds from investors andutilizes them to invest in real estate assets such as retail, ofﬁce buildings, and residences. Proﬁts generated from rent income and othersources are distributed to investors. Fukuoka REIT Corporation (FRC), as Japanʼs ﬁrst region-speciﬁc REIT, was listed on the Tokyo Stock
Exchange (TSE) and the Fukuoka Stock Exchange (FSE) on June 21, 2005, becoming the 17th REIT to be listed in the country. The
asset management company of FRC, Fukuoka Realty, upholds the Basic Policy of “Act Local, Think Global” and is entrusted with the key
operations of “acquiring and selling assets,” “asset rental management,” and “ﬁnancing.”[

Relationship between FRC
and Fukuoka Realty]

Real Estate Investment Trust

Lenders

Fukuoka REIT Corporation(TSE and FSE)

Real estate(Retail, Office Buildings, Others)

Investment

Financing

Liabilities
Assets

LeasingrevenuePrincipal andinterest payment

Equity・The Bank of Fukuoka, Ltd.
・The Nishi-Nippon City Bank, Ltd.
・Development Bank of Japan Inc.
・Mizuho Bank, Ltd.
・Sumitomo Mitsui Banking
Corporation
・MUFG Bank, Ltd.
・Sumitomo Mitsui Trust Bank,Ltd.,
and others

Hold units

Investors
Asset management
operation

Real estate
management

Real EstateManagement Company

Asset management
operation
outsourcing

Dividend taxation

Asset Management
Company(Property Management)
Fukuoka Jisho Co., Ltd.,

Dividends

(AM)
etc.

Real estate
management
outsourcing

General Administrator/
Asset Custodian

Fukuoka Realty Co., Ltd.

Accounting auditor

Investment

・Fukuoka Jisho Co., Ltd. (55%)
・Kyushu Electric Power Co., Inc. (10%)
・The Bank of Fukuoka, Ltd. (5%)
・The Nishi-Nippon City Bank, Ltd. (5%)
・Nishi-Nippon Railroad Co., Ltd. (5%)
・Saibu Gas Holdings Co., Ltd. (5%)
・Kyudenko Corporation (5%)
・Kyushu Railway Company (5%)
・Development Bank of Japan Inc. (5%)

General Administrator（Administrator of Unitholdersʼ Register/
Administrator of Special Accounts）

Legal advisor

General Administrator of
Investment Corporation
Bonds

Basic Policy “Act Local, Think Global”
FRC and Fukuoka Realty take advantage of their strengths in having extensive knowledge and a deep understanding of the Fukuoka
and Kyushu regions and the characteristics of the local real estate to invest in properties for rent there. By effectively managing theseinvested properties, we aim to secure stable earnings over the medium to long term while making efforts to keep providing stabledividend distributions into the future.

Act Local
Real estate is a local business・Distinctive capability for gathering
qualitative information on the real estatemarket (speed, in-depth information)
・Specialization in local properties
・Solid network among local governments
and the business world04

Our Mission
Region-Specific REIT

Featuring our expertise on
local real estate markets,
Fukuoka and Kyushu,
maximize profits of investors

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

Organizational Structure of Fukuoka Realty◎Institutional Design

Who We Are

Located in Fukuoka City and comprising 47 employees with a variety of experience in real estate, ﬁnance, and other ﬁelds, Fukuoka Realty
possesses a high level of expertise and makes full use of information unique to the local area in managing FRCʼs assets.

Shareholders General Meeting
Corporate Auditor
Board of Directors
Compliance Assessment Committee

Executive Committee
President and CEO

Growth Strategy

Investment Committee

Sustainability Promotion Committee

Risk Management Committee

Investment Department

Finance Department

Planning Department

Private Fund Management OfficeSustainability

Real Estate Management
Department

Compliance Department◎The Shareholder (Sponsor) Structure

5%5%

The Bank ofFukuoka, Ltd.

The Nishi-Nippon City
Bank, Ltd.

Development Bankof Japan Inc.

55%

Outsidedirectors

Directors

Fukuoka Jisho Co., Ltd.*

Fukuoka Realty Co., Ltd.
(Asset manager)

10%
Kyushu ElectricPower Co., Inc.

5%

5%

5%

5%

Saibu Gas Holdings
Co., Ltd.

Kyudenko
Corporation

Nishi-Nippon
Railroad Co., Ltd.

Kyushu Railway
Company

Data Section

5%

In addition, leading companies in Fukuoka and the Kyushu
region that are in agreement with FRCʼs concept participate asshareholders (sponsors) of Fukuoka Realty. FRC aims to achievesustainable growth as a REIT through the expanded scale of its
assets via the contribution of excellent properties from among oursponsors and by actively leveraging their support, including theprovision of relevant information.
With regard to the properties owned and developed by thesponsor companies, Fukuoka Jisho Co., Ltd., FRC, and Fukuoka
Realty Co., Ltd., have concluded a pipeline support★ memorandumof understanding (MOU) to seek stable and continuous acquisition
opportunities.

* Concluded a contract with FRC and Fukuoka Realty concerning pipeline support.
Glossary

Pipeline support agreement
Pipeline support agreements refer to contracts that provide the opportunity to acquire a property from a sponsor in advance of and in priority to a third party.
Fukuoka REIT Corporation 2023

05
02

Macroeconomic Environment around Fukuoka

Fukuoka City, where population concentration is increasing, is expected to continue developing.
population of Fukuoka City
Population growth ratio
Compared to the national average, it has a high proportion of young Total
peopleand working-age
population, which leads to(Thousands）

demand for ofﬁce buildings and residences, making it a promising area for investment.
1,650

1,613
1.12

1,600

1.02

0.99
1,550 0.89

Population Continues to Grow in Fukuoka City

0.89

0.99 1,556 1,570

0.78

1,500

1,632

1,642

1,595

1,482

1,497

1,512 1,526

(%)
1.4
1.2

1.11

0.89

0.82

Fukuoka’s Youthful Population1,541 0.95

The total population of Fukuoka City has increased consistently
since 1985, and as of May 1, 2020, the estimated population
exceeded 1.60 million. This total population makes the city the ﬁfth
most populous among government-designated cities, following
Yokohama, Osaka, Nagoya, and Sapporo. According to estimatesfrom the National Institute of Population and Social Security
Research, the population of Fukuoka City is expected to continue
growing until 2035.

1,582

1,619

1.0
0.80

0.77

0.90

0.84

0.8

Fukuoka1,454
City1,466
stands out for its high proportion of young people in
1,450
0.6
1,441
its
population,compared to other cities. Among the cities listed in
1,430
1,400the following table, Fukuoka City ranks ﬁrst with a youth
0.4
0.41 population
rate of 16.8% (percentage of city population aged 15 to 29) and
1,350
0.2
fourth with a working-age population ratio of 61.4% (percentage of152013
to 64).
2007 population
2008 2009 2010 aged
2011 20122014 2015 2016 2017 2018 2019 2020 2021 2022 2023 0
0city■ Youth and Working-Age Population Ratios Nationwide and in
Major Cities (2020)■ Total Population and Population Growth Ratio of Fukuoka City(%)
Total population of Fukuoka City

Population growth ratio

0.89

1,500

1,430

0.99 1,556 1,570
0.89

0.78

1,454

1.02

0.82

1,466

1,482

1,497

1,582

1,595

1.4
1.2

1.11
1.0

1,541

0.95

1,512 1,526

0.90

0.80

0.77
0.84

0.8
0.6

1,441

1,400

0.4

0.41

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Osaka
Okayama

15.5

Saitama

NagoyaKumamoto

15.0

Chiba

14.5
Sakai

Hiroshima
SapporoYouth population:

Shizuoka
Kobe

Yokohama

Nationwide

14.0
13.5

Sagamihara

13.9%

Working-age population: 57.8%

Niigata Hamamatsu

13.0
53.0

55.0

57.0

59.0

61.0

63.0

(%)

65.0

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

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

Demand for16.5
residential land has been strong, particularly in highly convenient areas, due tometropolitan
area
Sendai and Tokyo
Kyoto
robust housing demand amid ongoing improvementin the employment
incomeenvironment.
Osaka
16.0
According toannual fluctuation rates in official land prices in residential
areas announced by the
Okayama
Ministry of Land, Infrastructure, Transport and Tourism for 2023, the national average was 1.4%,
15.5
the second consecutive year of positive growth. In Nagoya
Fukuoka City, Saitama
land prices began to rise in2013 due to15.0
strong housing demandKumamotobrought about by populationYokohama
inflow, and the rate of land
Sagamihara
price increase has risen every year up until 2023.

For commercial land, according to annual fluctuation rates in official prices announced by the
Ministry of Land, Infrastructure, Transport and Tourism for 2023, the national average was 1.8%,
representing a second consecutive year of positive growth. In Fukuoka City, land prices began torise in 2013 ahead of other cities. Alongside the robust office market, progress has been made in
redevelopment projects, and the rate of increase has exceeded that of other cities since 2018.

Youth population■ Commercial Land: Year-on-Year Rates of Change in Publicly
Announced Prices(percentage of city population aged 15 to 29)(%)■ Residential
Land: Year-on-Year Rates of Change in Publicly
Youth population:
16.8% (ranked 1st)
17.0
FukuokaAnnounced
PricesKawasakiWorking-age population: 61.4% (ranked 4th)

14.5

National average
10
8

Fukuoka CityTokyo
metropolitan Sapporo
area (23 wards)
Nationwide

14.0
Shizuoka

13.5

Kobe

Hiroshima

Chiba

Sakai

Kitakyushu

6

Youth population:

Osaka

NagoyaTokyo metropolitan area (23 wards)

Osaka

Nagoya

15
10

53.0

55.0

57.0

0

59.0

61.0

63.0

65.0

(%)

Working-age population

50(percentage of city population aged 15 to 64)

-2

-5

-4

-10

-6
-8

Fukuoka City

Working-age population: 57.8%

Niigata Hamamatsu

13.0

2

National average
20

13.9%

4

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

-15

2010

2011

2012

2013

2014

Note: The publicly announced price indicates the land price disclosed by the Ministry of Land, Infrastructure, Transport and Tourism as of January 1 of each year.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data from the Ministry of Land, Infrastructure, Transport and Tourism Land Price Survey 2010–2023.

06

Kawasaki

Tokyo metropolitan area

Sendai

Kyoto

16.0

0

Note: Total population figures from 2007 to 2022 are based on figures as of December 1 each year. The
total population figure for 2023 is based on the figure as of October 1, 2023.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data from Fukuoka City Estimated Population
and Fukuoka City Registered Population, published by Fukuoka City

Fukuoka

16.5

Kitakyushu

0.2

1,350

16.8% (ranked 1st)

Working-age population: 61.4% (ranked 4th)(%)

Youth population

0.99
1,550 0.89

1,450

1,619

1,613
1.12

1,632

1,642

(percentage of city population aged 15 to 29)

1,650
1,600

Youth population:

17.0(Thousands）

2015

2016

2017

2018

2019

2020

2021

2022

2023

New supply (rental area)

Net absorption (absorption demand)

Vacancy rate (Fukuoka)

Vacancy rate (office buildings owned by FRC)

（Tsubo）

Central Tokyo (5 wards)

Fukuoka

35,000

（

15.38
14.72

30,000
13.23
8
11.98

25,00010.86

20,000（%）

As of October 2023

40,00020

6.10%

Who We Are■ Fukuoka Business District: Vacancy Rates and Supply and Demand of Office Buildings

5.78%

Existing buildings
New buildings

4.36%
45.82%）

Nagoya5.54%

Sendai

5.49%

Osaka

4.28%

Sapporo

2.75%

15

10.99

10

6.30

5.78

4.53

4.26

10,000

4.37

3.79

5

3.07

3.78

2.09

2.04

5,000

0

Growth Strategy

7.70

15,0000

0.00-5,000-10,000-20,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

(forecast)

Notes:
1. The vacancy rates from 2008 to 2022 are based on the figures as of December 31. The vacancy rate in 2023 is based on the figure as of October 31, 2023.
2. The vacancy rate of office buildings owned by FRC in 2023 is based on the figure as of August 31, 2023.
3. Office building–related data for each city are the data for areas and buildings included in surveys conducted by Miki Shoji Co., Ltd.
4. Net absorption (absorption demand) shows the change in the occupied floor space during a specific period. It is calculated by subtracting the occupied floor space on December 31 of the previous year from the occupied floor
space on December 31 of the applicable year. New supply (rental floor space) figures for 2023 have not been finalized, and the floor space and expected completion dates are subject to change.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data from Miki Shoji Co., Ltd., Office Market Data

■ Supply/Demand and Vacancy Rates for Logistics Facilities■ Trend in Rent Unit Price

Demand is expected to remain steady in 2023 and 2024, despite substantial supply.
New supply

Demand is high in the vicinity of Fukuoka City, and rental prices are generally on the rise.
（％）

Vacancy rate

New demand(Yen/tsubo)

12

3,800

100,000

10

3,600

80,0008

3,400

60,0006

3,200

40,000

4

3,000

2

2,800

120,000

Forecast

Forecast

10.3

Contract renewal
Rent gap of 10% or more

2.8
20,000

0.8
1.1

0

2016

2017

2018

0.0

0.0

0.0

2019

2020

2021

2022

2023

2024

Note: Refers to medium and large logistics facilities with a total floor space of 5,000 m2 or more in the
Fukuoka metropolitan area.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data from CBRE K.K.

0

Data Section(Tsubo)Sustainability-15,000

2,600

LOGICITY
Minato Kashii

2018

2019

2020

2021

2022

2023

LOGICITY
Hisayama

2024

2025

Note: Refers to large multi-tenant facilities with a total floor space of 5,000 tsubo or more in the Fukuoka
metropolitan area.
Source: Prepared by Fukuoka Realty Co., Ltd., based on data from CBRE K.K.

Fukuoka REIT Corporation 2023

07
02

CEO’s Message

President and CEO
Fukuoka Realty Co., Ltd.

Zenji Koike

As I enter my third year as President, I am acutely
aware of how the COVID-19 pandemic has forced areexamination of our values and conventional wisdom.
I have now been serving as the President of Fukuoka Realty
Co., Ltd., the asset management company for Fukuoka REIT
Corporation (FRC), for a full two years. When I initially tookofﬁce, we were amid the COVID-19 pandemic. However, I am
pleased to report that the situation is gradually returning to
pre-pandemic levels. Throughout the pandemic, we observed
divergent responses and measures on a country-by-country
basis, leading to signiﬁcant ramiﬁcations across various
industries. Even in the real estate sector, it became imperative
for us to reassess the magnitude of risks inherent in the rental
property business. Notably, the hospitality and retail sectors
bore the brunt of the pandemicʼs impact. Conversely, theresidential and logistics facilities sectors experienced relatively
minimal disruption. The logistics facilities segment, in particular,
beneﬁted from the surge in e-commerce, driving an increase indemand. The ofﬁce buildings sector underwent a reevaluation
as workstyles diversiﬁed and remote work gained prominence.
This led companies to reconsider the need for expansive ofﬁce
spaces.
Moreover, the COVID-19 pandemic has led to a complete
reset of all our values and conventional wisdom. The paceof structural changes in our business operations, consumer

08

mindset, and work practices has accelerated. This has givenrise to shifts away from pre–COVID-19 norms, demanding acommitment to adapt to emerging information and evolving
paradigms. As an example, the way consumption takes place
and the perception of value in physical retail spaces havechanged, and as such, we anticipate a range of changes inthe value and functions sought after in urban areas. For us,
this underscores the necessity of contemplating real estate
acquisitions from a long-term ownership perspective andpondering how to effectively manage and enhance their value
as properties cherished by the local community and the cityʼs
residents once they are in our possession.
Sales at Canal City Hakata are approaching pre–COVID-19
levels. However, the current status of inbound tourism reveals
that while South Korean tourists have nearly fully rebounded,group tourists from mainland China have not yet returned.
Inbound visitor numbers remain at approximately 60%–70% of
their pre-COVID-19 levels, indicating a decline in this segment.
Inbound tourism from mainland China heavily relied on cruise
ship visitors, so a substantial recovery is anticipated once
these group tourists are permitted to return. Nonetheless, there
are lingering uncertainties about whether everything will returnto the same levels of pre-pandemic prosperity, stemmingfrom the perception that COVID-19 has altered our worldview,
leading to shifts in consumption patterns and behavior.

Fukuokaʼs real estate market is robust, so we
can expect to see internal growth. However,rising property prices have prompted a strategic
reassessment for external growth.

Data Section

Fukuoka REIT Corporation 2023

Sustainability

We recognize the urgency of addressing sustainability andbelieve it is crucial to act promptly and decisively. In termsof the impact on real estate, we anticipate changes thattranscend conventional paradigms and norms, underscoring
the necessity of mitigating associated risks. Our commitment
to sustainability is a key issue (materiality) for FRC that wewill continue to focus on. In June 2023, we strengthened
our Sustainability Promotion Ofﬁce and established a newframework. We appointed a dedicated female expert as
the ofﬁce manager, who previously served as the deputy
manager of the Real Estate Management Department andhas a deep understanding of the intricacies of our properties
owned. This experienced manager is acutely aware of thesigniﬁcance of balancing costs and returns when advancing
sustainability initiatives. At present, we are actively involvedin both qualitative and quantitative analyses aligned with the
Task Force on Climate-related Financial Disclosures (TCFD)
framework, which we endorsed in September 2022. This
includes an examination of ﬁnancial impacts derived fromclimate change scenario analyses. We view endeavors suchas these and transparent information disclosure as integral
components of our operations.
We are dedicated to maintaining strong communication
with all our stakeholders and embracing a customer-centric
approach to our operations (ﬁduciary duty). We constantly
reﬂect on what serves the best interests of our investors.
Consequently, we believe it is vital to efﬁciently manage
our operations internally, while also taking compliance into
account, to serve the interests of our unitholders effectively.

Growth Strategy

Sustainable management is imperative. Our future
growth strategy necessitates proactive initiatives andnew endeavors.

Who We Are

The real estate market in Fukuoka City is showing resilience.
In our property portfolio, we see potential for rent increases inofﬁce buildings, residences, and logistics facilities. According
to Ofﬁce Market Data issued by Miki Shoji Co., Ltd., theaverage vacancy rate for ofﬁce buildings in the Fukuoka
business district stood at 5.78% as of October. This can be
attributed to the impact of newly constructed ofﬁce buildings
in areas such as Tenjin Big Bang, which were completed withvacancies. While the overall vacancy rate in Fukuoka City has
been increasing, it is important to note that the rental rates
have not experienced a decline. Historically, ofﬁce rental rates
in Fukuoka City have shown a consistent upward trend. In
this sense, we believe that in properties owned, particularly
those located in prime city-center locations with favorable
speciﬁcations, there is room for rent increases, contributing tointernal growth.
It appears highly likely that the 10-year Japanese
government bond yields will increase to around 1%. We will
carefully consider appropriate measures in response to this.
In our reﬁnancing efforts, we will focus on controlling the costof ﬁnancing by reviewing terms such as the loan duration andcomparing them to the conditions before reﬁnancing. Our aim
is to minimize the impact of rising interest rates to the greatest
extent possible. Our relationships with ﬁnancial institutions,
including our sponsor banks, are exceptionally strong, and webelieve that we will continue to achieve stable funding in the
future.
The challenges currently recognized by FRC and Fukuoka
Realty Co., Ltd., center on the persistent upward trajectory ofreal estate prices in Fukuoka, resulting in a highly competitive
acquisition landscape. We are currently navigating ademanding phase in achieving the conventional method ofexternal growth for REITs, which involves the steady acquisitionof new properties to expand our asset base. Moreover, there
is a rising investor demand for sustainability-driven initiatives.
As a result, we believe it is opportune to explore new growthstrategies as a REIT, focusing not only on acquiring properties
but also on property rotation at suitable valuations and realizing
latent gains in existing properties to ensure the continuous andstable distribution of income to investors while aligning withevolving sustainability expectations.
To continue contributing to urban development and regional
betterment in the Fukuoka and Kyushu regions, which wetarget for investment, it is essential to receive fair recognition
as a REIT and to sustain our growth in the future. It is also
necessary to undertake property rotations as needed and toembark on new initiatives. To achieve these objectives, it is

crucial to sustain dividend growth while contributing to thegrowth of key metrics such as the investment unit price, which
in turn contributes to the growth of our market capitalization.
This is essential to garner continued support from investors.
We believe that internal growth in our properties owned isparticularly achievable in the ofﬁce building, residence, andlogistics facility segments. In ofﬁce buildings, there is a positive
rental gap (difference from market rent) of 12.5% in theproperties held by FRC, which we consider to be a promisingsource of future internal growth. In the continuously growing
population of Fukuoka, we believe that there is still room forrent increases in the residential property market. The logistics
facility market has seen a consistent upward trend in rental
rates, so we anticipate room for growth in this segment. In theretail sector, our ﬂagship property, Canal City Hakata, prompts
considerations regarding the future recovery of inboundtourism and the impact of renovations. Nevertheless, we see
potential for positive developments in this regard.

09
02

CEO’s Message

The acquisition strategy of FRC is centered on the “actlocal” aspect of our mission, “Act Local, Think Global.”
When looking at the entire Kyushu region, one example ofthis approach is our keen interest in the expansion of Taiwan
Semiconductor Manufacturing Company into Kumamoto,as it holds potential for future growth. Our sponsor, Fukuoka
Jisho Co., Ltd., shares our proactive approach to various realestate developments, and we plan to collaborate with them on
various information gathering initiatives and long-term efforts
as a REIT.
Recently, I visited three cities and towns in Kumamoto̶
Kikuyo Town, Otsu City, and Koshi City̶inspired by ourparticipation in hometown tax payments. The purpose was
to extend support to municipalities across Kyushu as a
REIT that focuses on Fukuoka and Kyushu. Last year, I had
the opportunity to meet with the governors of Kumamoto
and Kagoshima prefectures, when we exchanged views on
urban development. While we own properties in the capitalsof various Kyushu prefectures, we recognize that theseconnections alone might not provide us with a comprehensive
understanding of the regional circumstances.
To foster future growth, engaging in direct dialogue withgovernment ofﬁcials and exchanging ideas about what isneeded for urban development and regional contributions
in Kyushu will be invaluable for us. In addition, it is crucial
to extend our focus to regions not currently covered by our
REIT investments. We maintain a strong relationship with our
main sponsor, Fukuoka Jisho. We believe that it is essential
to focus on gathering information, identifying local challenges,
and understanding what kind of real estate the region requires
over the long term for the locations that Fukuoka Jisho aims
to develop. More speciﬁcally, this includes industrial properties
such as factories, public facilities, and ventures in the
agricultural sector that could potentially be integrated into our
REIT scheme in the future. We believe it is essential to possess
the capacity to thoroughly research these possibilities.

Strengthening human capital is crucial for the growthof FRC.

While the enhancement of human capital is garneringsocietal attention, we believe there is still much more for us
to accomplish in this regard. To achieve this, it is essential
to consistently implement measures such as creating a
comfortable working environment, providing rewarding
conditions and personnel systems, and investing in educationand development for growth.
As we approach our 20th anniversary in December 2023,
we are determined to foster a strong sense of loyalty anddedication among our employees. Our goal is to create anorganization where individuals can achieve personal growth,career advancement, and a stable foundation for their lives.
In the ever-changing landscape of society and technologicaladvancements, including regenerative AI, it is crucial for eachof us to stay well-informed and grounded, and identify how
we can contribute through real estate, including our ESG
initiatives. Sincerity and dedication are our guiding principles
in approaching all endeavors. We emphasize the importanceof enhancing the value of each individual real estate property,
making informed decisions about new real estate investments,
and pursuing investments that align with our capabilities.
We remain committed to diligent efforts for growth,
adopting various functional strategies while maintaining ﬁscal
responsibility.
I have learned many valuable lessons in my two years aspresident. Drawing from these experiences, my personal goalmoving forward is to continue putting in more effort and striving
for growth. This is a signiﬁcant challenge that I have set formyself. I would like to express my sincere gratitude to all our
stakeholders for their ongoing support.

Zenji Koike President and CEO, Fukuoka Realty Co., Ltd.
Place of birth: Fukuoka City Hobbies: Running, golf

The essence of our business lies in our human capital. Our
goal is to attract and retain talented individuals who contributeto the company and stay with us for the long term. However, intodayʼs environment, talent mobility has increased signiﬁcantly,
and the barriers to changing jobs are lower than in the past.
As a result, we understand that a certain level of employee
turnover is unavoidable. On the other hand, in terms of newhires, we are fortunate to attract individuals with diverse
experiences and are committed to bringing in fresh talent tostrengthen our organizational capabilities. For this purpose, weare reviewing our human resources system to make it morealigned with current needs.

10

Profile1988

Joined Fukuoka SOGO Bank
(currently The Nishi-Nippon City Bank, Ltd.)

1991

Joined Fukuoka Jisho Co., Ltd.

2013

Appointed as Chairman of Canal Entertainment Works Co., Ltd.
(currently FJ. Entertainment Works Ltd.)2017

Appointed as Senior Executive Officer of Fukuoka Jisho Co., Ltd.
Appointed as Chairman of Sunlife Co., Ltd.

2021

Joined Fukuoka Realty Co., Ltd.
Appointed as President and CEO of Fukuoka Realty Co., Ltd.
(current position)

2022

Appointed as Executive Director of FRC in May (current position)

◎Approach to human capital at Fukuoka Realty Co., Ltd.

Who We Are

At Fukuoka Realty, human capital is recognized as the most important asset. Efforts are made to create a workplace where
diverse values and expertise are enhanced, allowing each employee to make the most of their abilities and expertise,irrespective of age, gender, or career background.
For instance, steps are being taken to improve the office environment, with a focus on providing and promoting a
comfortable working atmosphere, while personnel systems are undergoing reform. Furthermore, the education system for
employees is being expanded, and qualification acquisition is actively encouraged to enhance the quality of operations.
Specific initiatives being undertaken are outlined below.

◎Extending the tenure of full-time officers and employees of the Asset Management Company
In 2018, Fukuoka Realty was certified as a “Fukuoka ʻWork Style Reformʼ Promotion Company” and has since beencommitted to expanding and enhancing work-style reforms.
As of August 31, 2023

47

Average number of years of employment

8 years and 3 months*1. The number of full-time officers and employees indicates the total number of directors and auditors, permanent employees, contract employees,
temporary employees, secondees, etc., who are employed on a full-time basis at Fukuoka Realty Co., Ltd.

Growth Strategy

Number of full-time officers and employees*

1◎Ratio of male and female full-time officers and employees
In line with efforts to improve the workplace environment for both men and women and promote their active participation,
personnel systems are being expanded, and a strategic shift in employee mindset is being fostered. Training programs
tailored to respective positions are being conducted accordingly.
As of August 31, 2023

Full-Time Officers and Employees:
Percentage of male and female employees*2

Male: 44.7％ Female: 55.3％
Sustainability*2. The gender ratio is calculated as the ratio of males and females to the number of full-time personnel.

◎Increasing the percentage of qualified employees
To support employees in acquiring the skills and knowledge necessary for their tasks, a one-time bonus is provided for
obtaining certifications recognized by the company. Furthermore, a variety of training programs are implemented throughexternal organizations.
As of August 31, 2023

Number of credentialed personnel
23

CMAs:

3

ARES Certified Masters:

22

First-classregistered architects:

3

Real estate appraisers:

3

Certified Building
Administrators:

5

MBAs:

2

Attorney:

1

Licensed Representative of Condominium
Management Company:

1◎Systems supporting work-life balance (maternity, childcare, and caregiving)

Data Section

Real estate brokers:

In addition to organizational support, training programs are designed to assist employees in achieving a balance between workand family life. The objective is to prevent them from being compelled to leave their positions due to childcare or caregiving
responsibilities by providing the essential skills to sustain their work, along with insights from experienced colleagues.

Past seminars
・Training to learn how to balance caregiving and work responsibilities
・Seminar for women working with time constraints, including those returning from childcare leave and using flexible
hours (working mothers).

Fukuoka REIT Corporation 2023

1102

Value-Creation Story

Promote Attractivein the Fukuoka

Urban
GrowthInput
Financial
capitalBusiness Model

Building of a solid financial base throughconservative control of LTV• LTV …………………………………… 42.4%• Fixed rate……………………………… 92.8%

Acquisition

Manufacturing
capitalFinding excellent properties that can generate

ss strate
gy
sine
u
B

stable cash flow over the long term

Research

Act Local,
Think Global
See p.26*Fukuoka Realty Co., Ltd.

Intellectual
capitalSocialrelationshipcapitalNaturalcapital• A varied skill set formed through humanresource training• Experience and knowledge of IR
activities based on long years of practicalimplementation• Gathering of information deeply rooted in local
communities• Co-creative and trusting relationships withtenants• Cooperative framework with property
management (PM) companies• Coordination with local society, local communities• Maintenance of good relationships of trustwith sponsors• Energy, water, air, and other natural resources
used in the operation of properties owned• Natural environment and biodiversity in theareas around properties owned

 Macro environment
surrounding Fukuoka

See p.6

Management

Human
capital• Excellent human resources with specialized skills• Support framework for flexible working styles• Support system for career development• Number of full-time officers
and employees*: 47• Number of qualification holders*:
Real estate appraisers 3 / Attorney 1 /First-class registered architects 3 / MBAs 2

Ma

na g

M a t e a lit y
ri

nd
eme
nt, valuation, as a les / R e p la c e m e n tExternal Environment

See p.16

Response to ESG issues
Sustainability

See p.24

Environmental
Response

See p.28

SocialResponse

See p.36

Corporate
GovernanceSee p.38

Risks and Opportunities• Ongoing population growth in Fukuoka

See p.18• Ratio of young and working-age people

Related Stakeholders
Clients/Tenants
Total tenants in all properties: 1,018• Customer satisfaction surveys at retail facilities• Tenant satisfaction surveys

12

Region and Society

Population of the 6 prefectures
we have properties in: Approx. 11,722,000• Organizing community and other events utilizing facility common areas• Active participation in the Hakata Town Planning Promotion Councilʼsactivities• Announcement of financial results by the Fukuoka Stock Exchange

Employees

Number of full-time officers
and employees: 47• Various employee education systems• Employee satisfaction surveys• Career interviews with employees

Urban Development
and Kyushu Areas

Greater
Quality ofLife

Who We Are

Output and Outcome
Total 35 properties

Value Creation with Stakeholders

Financial capital• TSR for past 10 years Annual rate 9.9%
• Dividend per unit
3,753 yen /Average interest rate paid 4.6%
• Credit ratings JCR: AA- (stable), R&I: A+ (stable)

Retail 11 properties

4.9%
48,478 million yen
185,197 yen

Region and Society

Human capital• Number of qualification holders:
Real estate brokers 48.9%
out of 47 full-time officers and employees /ARES Certified Masters 46.8%
out of 47 full-time officers and employees
Office buildings 12 properties

Intellectual capital

Residences 6 properties

Social relationship capital

Logistics 4 properties• Human resource exchanges with sponsors(e.g., 3 people accepted from sponsors,
9 people dispatched to sponsors)• Improvement of office environments(introduction of meeting booths, plants
and other greenery)• Implementation of the COVID-19 tenant
support measures (assistance withvaccinations as requested and other support)• Green building certification rate (total floor
space basis) 80.3％• Reduction of electricity usage andwater consumption at properties owned
Electricity usage reduced by 8.3%
compared with 2019
Water consumption reduced by 16.2%
compared with 2019

Initiatives for
Local Communities See p.37

＜Commercial and Hotel＞
・Provide new discoveries for users and enhance satisfaction (e.g., first store in Kyushu)
・Revitalize interaction with surrounding regions through community-based initiatives
・Make it fun to go out and invigorate regional interaction＜Logistics＞
・Increase convenience for the general public by upgrading local distribution networks
Sustainability See p.24

Employees

Employee Initiatives See p.36

・Improve experiences through human resource exchanges and rotation
・Increase motivation through participation in urban development
・Enhance personal connections and capabilities based on various experiences
through connection with society
・Boost employeesʼ job and personal satisfaction through a focused human resource strategy
・Enhance systems that enrich peopleʼs lives and encourage them to remain in service for longer

Unitholders/
Financial Institutions

External Environment(Initiatives of Fukuoka City) See p.16

Sponsors

External Environment(Initiatives of Fukuoka City) See p.16

・Create investment opportunities in realInvestment Strategy See p.20
estate in the Fukuoka and Kyushu areas
・Convey the appeal of the Fukuoka and Kyushu areas by enhancing information disclosure
・Ensure the stable return of profits and secure opportunities for growth throughappropriate investment and management in response to unitholder feedback
・Maintain good relationships with financial institutions and ensure the appropriate
return of profits

Investment Strategy See p.20
・Provide funding for new property development
・Support developments over the medium to long term that lead to local advancement
・Engage in collaborative projects to enable efficient and productive property management
・Strengthen development and operational capabilities through ongoing information exchange
・Bolster human capital through human resource exchanges

Environment/
NatureEnvironmental Initiatives See p.28

・Promote environmental conservation through investment in properties with highenvironmental performance・Contribute to sustainability in the Fukuoka and Kyushu areas over the medium tolong term through active participation
・Co-create in harmony with nature through proactive environmental initiatives in thereal estate market
・Engage in real estate development that takes advantage of the nature found in Kyushu

Data Section

Natural capitalManagement Strategy See p.21

Sustainability• Number of IR interviews during the year
In Japan 171, Abroad 40 (including
telephone conferences)• Track record of winning awards
IR Excellent Company Encouragement Award(2014) / Nikko Excellent IR Website Award (2022)

Hotels 2 properties

Initiatives for Facility and Building
Management See p.30

＜Office Buildings＞
・Create business opportunities, attract companies from other countries and otherregions in Japan, and establish a place for start-ups to flourish＜Commercial＞
・Increase users, create employment, and generate synergies between tenants(differentiate from shopping centers)

Growth Strategy

Manufacturing capital• NOI yield• Unrealized gain
• NAV per unit

Management Strategy See p.21

Clients/TenantsNote: As of August 31, 2023

Unitholders/Financial Institutions
No. of unitholders: 14,164
No. of financial institutions we deal with: 22• General Meeting of Unitholders• Results briefings for investors• 1-on-1 meetings (Japan and overseas)

Sponsors
Sponsors: 9• Contribution of excellent
properties• Ongoing information exchange• Human resource exchanges

Environment/Nature
Property location/Six prefectures(Fukuoka/Saga/Kumamoto/
Oita/Kagoshima/Okinawa)• Environmental preservation (Electricity
and water conservation)• Green Building certification

Glossary

TSR
An abbreviation for Total Shareholder Return.
This can also be called total shareholder(investor) yield and reflects combined capitalgains and dividends, reflecting the overall
investment yield for investors.
[Calculation method] TSR (%): ((Dividend perunit + Increase in investment unit price) / Initialinvestment unit price) × 100
Fukuoka REIT Corporation 2023

13
02

Value-Creation Activities
Acquisition

ss strate
gy
sine
Bu
Management

Research

Act Local,
Think Global

Ma

na g

Investment Strategy See p.20
Financial Strategy

See p.22

Fund procurement (financing)M a t e a lit y
ri

nd
eme
nt, valuation, as al es / R e pl a c e m e nt

External Environment
Response to ESG issues
Sustainability

Environmental Issues

Social Issues

Organizational Issues

Strengths andcharacteristics of thevalue-creation process

Risks and Opportunities

Research

Acquisition

Human resources who are familiar
with the area and have built trusting
relationships collect high-quality
information on properties fromsponsors and the community

Acquisition of excellent real estatein the Fukuoka and Kyushu areas
through sponsor companies andlocal communities• Property appraisal skills unique to a
local person• Robust network• Market research and analysis

Challenges and initiatives
to further strengthen
value creation

Related capital• Intellectual capital• Discovery and acquisition ofproperties that can generate stable
cash flow• Improvement of property value• Financial capital(information-gathering
ability)(financing ability)• Human capital• Manufacturing capital(know-how)(excellent properties)• Social relationship capital• Human capital(relationships of trust,cooperation and collaboration)(discerning eye, expertise)• Employment of exceptional humanresources required for suitablebusiness execution• Asset portfolio expansion andrealization of high occupancy rates• Diversification in fund procurement• Discovery of excellent properties
using networks we created

See p.20

See p.20

Related Stakeholders
Clients/Tenants
Total tenants in all properties: 1,018• Customer satisfaction surveys at retail facilities• Tenant satisfaction surveys

14

Region and Society

Population of the 6 prefectures
we have properties in: Approx. 11,722,000• Organizing community and other events utilizing facility common areas• Active participation in the Hakata Town Planning Promotion Councilʼsactivities• Announcement of financial results by the Fukuoka Stock Exchange

Employees

Number of full-time officers
and employees: 47• Various employee education systems• Employee satisfaction surveys• Career interviews with employees

Management Strategy See p.21
Who We Are

Information communication (IR/SR)Management,
Valuation, and Sales/
Replacement

Management
Constant forward-looking
management with an attention
to detail unique to a regionspecific REIT

• Stable cash flow

• Sound financial position• Derive maximum value from our realestate portfolio over the long term

• Realization of stable distributions
and dividends(management know-how/performance)(know-how)• Social relationship capital• Human capital(relationships of trust, cooperationand collaboration)(know-how)• Social relationship capital• Natural capital(relationships of trust, cooperation,and collaboration)(natural environment)• Management that emphasizes thebest interests of unitholders• Essential environmental initiatives
See p.21• General Meeting of Unitholders• Results briefings for investors• 1-on-1 meetings (Japan and overseas)

Data Section• Management focused on longterm fixed interest rate entities andfinancial stability• Maintenance of NOI in existing
properties

No. of unitholders: 14,164
No. of financial institutions we deal with: 22

Sustainability• Financial capital• Human capital

Unitholders/Financial Institutions

Growth Strategy

Portfolio management from a medium- to long-term
perspective and appropriate financial strategies

Sponsors
Sponsors: 9• Contribution of excellent
properties• Ongoing information exchange• Human resource exchanges

See p.22

Environment/Nature
Property location/Six prefectures(Fukuoka/Saga/Kumamoto/
Oita/Kagoshima/Okinawa)• Environmental preservation (Electricity
and water conservation)• Green Building certification

Fukuoka REIT Corporation 2023

15
02

External Environment (Initiatives of Fukuoka City)

Fukuoka City’s Standing: From Regional City to an Asian Economic Metropolis

Beijing

Blessed with a history and culture nurtured by the sea, an abundant natural environment, extensive
urban functions, diverse human resources, and various other assets, Fukuoka City is recognizedaround the world as a livable city.
Under the “Fukuoka City Comprehensive Plan,” the basic strategy for city management focuseson creating a virtuous cycle of “urban growth” and “greater quality of life.” In aiming to become a“leading Asian city in which people, the environment, and urban vitality are harmonized,” Fukuoka
City is advancing urban planning that recognizes its presence within Asia as a compact, sustainable
city that balances economic growth with a safe, secure, high quality of life.

Seoul
Busan Osaka Tokyo

ShanghaiFukuoka

Initiatives Aimed at Attracting Companies■ Attracting International Financial Functions, TEAM FUKUOKA

Photo provided by Fukuoka City

Photo provided by Fukuoka City

Fukuoka City launched TEAM FUKUOKA with the aim of
attracting international financial functions to the city byconducting promotional activities and creating an environmentthat will generate momentum for the city (in September 2020).

M-DAQ, a globally expanding and Unicorn-class Singapore FinTech
company offering financial services using foreign exchange, and E.SUN
Bank, a leading financial institution in Taiwan that holds the largest sharein financing for SMEs, have established offices in Fukuoka City. The E.Sun
Bankʼs Fukuoka Branch and NN Life Insurance Co., Ltd.ʼs Technology
Operations Center Fukuoka were opened on September 1, 2023.

Change in the Number of Companies with Headquarters Functions/in Growth Area Established in Fukuoka City

Fukuoka City Tops List of Business Opening
Rate in Japan for Three Consecutive Years■ Strong Demand for Creative-Related Industries and Call Centers(People)4,000

No. ofcompanies
established
No. ofemployees

58

3,500

57

57

2,989

53

65

2,600

50

2,157

2,500
2,000

40

Business
Opening Rate
(FY2021)6.3％

1st
21 majorurban areas

Source: Prepared by Fukuoka Realty based on data from “The generalcondition of the Fukuoka City Economy, March 2023” by the Fukuoka
City Economy, Tourism & Culture Bureau.

30

1,334

1,000

1,058

20

665

10

1,041

500

of which, main
fields and functions

70
60

50

3,000

1,500

(

(Number of companies)

64

)

0

Fukuoka City Special Zone for Global Start-Ups &Job Creation (National Strategic Special Zone)

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022Creative-related industries

28

40

38

38

30

41

47

Foreign/foreign-affiliated

18

13

14

15

12

15

12

Call center

12

9

7

2

8

8

6

• Startup Visa

Headquarters functions, etc.

3

1

7

6

0

7

5

• Startup Café

International finance

-

-

-

-

-

6

7

• Fukuoka Growth Next

Source: Prepared by Fukuoka Realty based on data from “Headquarters functions/in growth area” by the Fukuoka City Economy,
Tourism & Culture Bureau.
Note: The breakdown of figures for companies established includes some overlapping data.

Initiatives to support start-ups• Tax Reduction for start-ups(municipal tax, national tax)

• Global Startup Center
Source: Prepared by Fukuoka Realty based on the section of Fukuoka Cityʼs
official site featuring “National Strategic Special Zone for Global Start-Ups& Job Creation.”

16

Redevelopment Project

⑧

①⑦

④
②
③
⑤

Kushida Shrine
Station⑬
JR Hakata Station⑩ ⑪

Canal City Hakata⑥

Who We Are

Nanakuma Subway
Line Extension(Operation started
from March 27, 2023)⑨

Nishitetsu Fukuoka(Tenjin) Station⑭⑫

Note: Focus areas

Growth Strategy

Tenjin Big Bang

Hakata Connected■ Redevelopment Projects■ Redevelopment Projects

Name

Completion month

Sumitomo Life Fukuoka Building/Tenjin Nishi-

Name

⑨

Completion month

The Nishi-Nippon City Bank Head Office Main
Building Reconstruction ProjectFebruary 2025
(scheduled)

May 2025(scheduled)② Tenjin Business Center

September 2021

⑩ CONNECT SQUARE HAKATA

March 2024
(scheduled)

June 2026 (scheduled)⑪ Hakata East Terrace

August 2022

⑫ Hakata Fukami Park Building

February 2021

(provisional name)

Tenjin Business Center Phase 2 Project③ (provisional name)④ (provisional name)

Tenjin 1-chome North 14th Block Building

March 2025
(scheduled)⑤ New Fukuoka Building (provisional name)

December 2024
(scheduled)⑥ Tenjin 1-7 plan (provisional name)March 2026
(scheduled)⑦ (provisional name)

Hulic Fukuoka Building Rebuilding ProjectDecember 2024
(scheduled)⑧ Fukuoka Daimyo Garden City

March 2023⑬

The Nishi-Nippon City Bank Administrative
Head Office Building

September 2028
(scheduled)⑭

Hakata Ekimae 3-chome Project (provisional
name)June 2025 (scheduled)

Sustainability① dori Business Center Reconstruction Project

Source: Created by Fukuoka Realty based on each companyʼs press release.

Source: Created by Fukuoka Realty based on each companyʼs press release.

■ Hakata Connected Bonus① Special permission to relax Civil Aeronautics Act–relatedbuilding height regulations

Expand the system to relax the floor area ratio requirement(measure to facilitate renewal of city center functions)● AroundIncrease the ﬂoor area ratio (up to 50%) for buildings contributing
to expansion of the bustle, such as creation of open spaces thatgenerate connections and expanse.

Fukuoka
City Hall
approx. 67 m
(15 floors)● Tenjin Meiji-dori district(west of the center of Watanabe-dori)
approx. 115 m (26 floors)

Data Section■ Main Deregulation in the Tenjin Big Bang Area
(National Strategic Special Zone)● Tenjin Meiji-dori district(east of the center of Watanabe-dori)
approx. 76 m (17 floors) 〜 approx. 100 m (22 floors)● Tenjin 1-chome district

approx. 80 m (18 floors) 〜 approx. 96 m (21 floors)

Existing system torelax floor area ratio

New incentive
Floor area
ratio of up to50％② Deregulation of floor space ratios (Fukuoka City original)● Tenjin 1-chome south block

800％→1,400％ (maximum)● High-quality, high-value-added buildings● Tenjin 2-chome south block (along Meiji-dori Ave.) 700％→1,300％ (maximum)● Provide floors for tenant relocation● Tenjin 1-chome north block (14th Block)

600％→1,250％ (maximum)● Tenjin 1-chome district north area

Note: The projects are designed to solve problems specific to the area around Hakata Station (limited tothe period of Hakata Connected)

800％→1,400％ (maximum)

Fukuoka REIT Corporation 2023

17

Risks and Opportunities

To achieve sustainable growth, FRC keeps close track of highly signiﬁcant risks and opportunities while extracting signiﬁcantrisks and assessing their impact on the Investment Corporation and its stakeholders.
● Measures to Address Risks ● Opportunities

Significant risks

Impact on stakeholders

Respond to risks and opportunities● Consider that it is possible to purchase insurance at a

Risks from Natural
Disasters• Response to climate change
Related Materiality• Reduction of environmental load

• Buildings might be lost: suffer deterioration
or damage due to the occurrence of natural
disasters, such as earthquakes, storms,
and floods; or experience severe weather
due to climate change, and their value
could be affected, with a decrease in rent
due to the non-operation of properties

relatively low cost compared to other areas; arrange
earthquake insurance coverage for all properties● Improve resilience (e.g., ability to respond to disasters) byengaging in a variety of activities; this includes conducting
disaster drills at each property, stockpiling emergency
food supplies, strengthening flood countermeasures, andformulating a business continuity plan (BCP)
See p.30● Work to maintain and improve environmental performance

EnvironmentRelated Risks• Reduction of environmental load
• Soil pollution and toxic substances
Related Materiality• Reduction of environmental load
• Maintenance and enhancementof environmental and construction
performance

Human Resource
Related Risks• Deterioration in the caliber of humanresources• Dependence on human resources
Related Materiality• Creation of pleasant workplaces(Asset Management Company)

Infectious Disease, Epidemic,
and Other Related Risks• Pandemic
Related Materiality• Maintenance and enhancementof environmental and construction
performance• Creation of pleasant workplaces(Asset Management Company)• Creation of pleasant workplaces (tenants)

Property Concentration
Risks• Region (Fukuoka/Kyushu)• Retail facilities
Related Materiality• Co-creation with the local community• Contributions to boosting theattractiveness and revitalization of
Fukuoka and Kyushu

18• Increase in property management costs
due to more stringent environmental laws
and regulations, such as the strengtheningof the Building Energy Conservation Law• Risk of damage to the health of building
users due to the presence of toxic
substances in the soil or in building
materials, and other items, of properties
owned; risk of bearing the cost ofcompensation for damage to health orfor removal of toxic substances• Risk of deterioration in the organizational
strength of Fukuoka Realty Co., Ltd. (AssetManagement Company), due to a failure
to maintain the human resources base, interms of such factors as ability, experience,and know-how of the Asset Management
Company for smooth business operations• Heavy reliance on FRCʼs directors andauditors as well as on the human resourcesof the Asset Management Company
the risk that the outflow of these humanresources could have an adverse effect on
operations• Risk that such external factors as infectious
diseases and epidemics in Japan andoverseas could interfere with the normal
operation and management of FRCʼs
properties• Decrease in rental income from real estate
due to such factors as a downturn invisitors, which might have an adverse effecton, for example, earnings• As FRCʼs properties owned areconcentrated in Fukuoka and Kyushu,
the vacancy rate might increase due toa worsening economic situation in that
region, and profitability could deteriorate
due to a decrease in rent
• Possibility of adverse effects on profits due
to overall consumer consumption as wellas other overall trends in the retail industry
that reflect the nature of retail facilities as amain investment target

through renovation opportunities for properties owned;
acquire Green Building and other certifications to obtain
the results of environmental/social initiatives in visual form
and improve property competitivenessSee p.31● Aim to reduce vacancy rates by pursuing healthfuland comfortable conditions in properties owned andby increasing leasing demand for properties with highenvironmental performance● Conduct thorough physical investigations at the time ofproperty acquisition; acquire properties after confirming
the presence or absence of toxic substances and taking
appropriate measures● Improve organizational strength and increase employee

loyalty by hiring and fostering excellent human resources● Improve employee motivation by realizing a work-lifebalance and the stabilization of work through healthmanagement
See p.36● In addition to physical infectious disease

countermeasures, expand the COVID-19 workplacevaccination program scope to cover retail facility tenant
employees as a means of promoting a safe and secure
facility environment for Asset Management Company
employees, tenants, and consumers● Set up satellite offices at the Asset Management

Company and introduce a telework system with a view toensuring business continuity● Invest in various types of properties to reduce the risk of

portfolio fluctuation by diversifying rental market cycles
and tenant industries
See pp.2–3

See pp.40–41● In retail facilities, such as Canal City Hakata/Canal

City Hakata・B, operate bustling facilities by replacing
tenants and providing new experiences and othervalue, thereby reducing the risk of profit fluctuation bydispersing tenants● Revitalize the entire region and connect this growth to
the growth of properties owned

● Measures to Address Risks ● Opportunities

Significant risks

Impact on stakeholders

Respond to risks and opportunities

Risks from Changes in
Business Conditions• Increase in vacancy rates• Decrease in rent
Related Materiality• Creation of pleasant workplaces(tenants)• Increase in interest rates• Fluctuations in the investment unit
price
Related Materiality• Information disclosure and dialogue
with stakeholders

Risks from Property
Degradation, Deterioration

Related Materiality• Maintenance and enhancementof environmental and construction
performance

Regulatory Risks• New laws and regulations• Changes in the tax system
Related Materiality• Compliance/Risk management• Rent reduction, rent nonpayment, andvacating risks due to deterioration of alesseeʼs financial situation• Risk of increase in interest payment due toincrease in interest rates caused by market
trends at the time of borrowing• Risk that FRCʼs investment unit pricemight fluctuate due to factors that include
unitholder supply and demand, interest rate
conditions, economic conditions, and realestate market conditions• Risk of not being able to acquire planned
assets because additional units cannot be
issued at the desired time and under desiredconditions due to fluctuations in unit price• Possibility of tenants vacating and areduction in rent due to a loss of property
competitiveness resulting from changes inthe surrounding environment• Possibility of a limitation on rights withrespect to properties owned and anincrease in property management expenses
and other items, due to newly established,revised, or abolished laws and regulations• Possibility of an increased burden fromtaxes and fees due to tax reform• Violations of organizational laws andregulations• Conflicts of interest
Related Materiality• Compliance/Risk management

Glossary● Treat deterioration in the real estate market as anopportunity to acquire excellent properties and executestrategic investments through appropriate financial
management utilizing information-gathering capabilities● Long-term fixing of interest-bearing debt and repayment

period limit diversification● Conservative interest-bearing debt management andcommitment lines to ensure flexibility and agility infunding● Conduct proactive IR activities
See pp.22–23

appropriate maintenance and repair work, value-up
investment, and extending the number of service life
years

● Based on an understanding of conditions including realestate market trends and the capital market environment,
if the strategic holding of a property becomes lesssignificant from the perspective of property performance,competitiveness, and future profitability, consider
replacement of that property if it is determined that selling
it is in the interest of unitholders● In addition to receiving information from such sources as

Fukuoka Realtyʼs affiliated organizations, tax accountants,
and law firms, participate in external training, obtain
information, and take measures to reduce any impact
from an early stage● Strengthen confidential information management systems• Risk of leakage of personal and confidential
information due to delays in strengthening
cybersecurity• Compliance/Risk management

Compliance Risks

rent delinquency; collateral by such means as guarantor
companies• If Fukuoka Realty Co., Ltd. (AssetManagement Company), violates its duty ofcare as a good manager (duty of care) and
its duty to faithfully perform tasks for FRC(duty of fidelity) under the law or specified
contracts, the possibility exists that this could
adversely affect FRCʼs survival and profitability• Potential conflict of interest issues withsponsorCommitment lines
This refers to the upper loan limit a borrower can receive at any time without
going through a defined review, within a range agreed upon in advance withthe bank. Commitment in this case indicates a contracted promise. The
borrower can secure stable working capital regardless of business conditions.

by introducing two-factor authentication for software
as well as applications and by conducting training on
cybersecurity and information management● Enable property differentiation by introducing advanced
technologies into properties owned

Data Section

Related Materiality● Deposits and security deposits against items including● Maintain/improve property competitiveness through• Increase in expenses required for suchitems as large-scale repairs, due to thedeterioration of properties, and large capital
expenditures could reduce cash flows

IT-Related Risks• Information leaks

as well as monitoring of operating status and thoroughcredit management during the lease period

Sustainability• Increase in repair and maintenanceexpenses• Decline in property competitiveness• Vacancy rate increases associated withworsening real estate market conditions;decrease in dividends due to rent
decreases

Growth Strategy

Market-Related Risks

items as rent, according to property characteristics● Appropriate occupancy screening when tenants move in

Who We Are● Consider extending lease agreement terms, fixing of such

● Prevent violations including those of laws and regulations

as well as transactions involving conflicts of interest,
through deliberations and audits by the Compliance
Assessment Committee● Improve employee awareness of compliance byconducting regular compliance trainings
See p.39

Conflicts of interest
In general, this refers to when an act is in oneʼs own interest, while at the same time
disadvantageous to the interests of another. For a J-REIT, this often refers to a conflict between aunitholder and the interests of the Investment Corporation or the Asset Management Company.
Fukuoka REIT Corporation 2023

19

Investment Strategy

Investment
Department

Executive Officer andGeneral Manager of theInvestment Department

Hideya Kanno

The Investment Departmentʼs goal is to acquire excellent
properties that generate stable cash ﬂow over the medium
to long term, which is a feat not easily achievable throughinvestments from outside the region. We achieve this byfocusing on information gathering, building relationships withlocal communities, and conducting property observations
rooted in our investment target areas, leveraging the uniqueadvantages of a region-speciﬁc REIT.
The real estate market in the Kyushu region, especially inFukuoka City, continues to see active investment. This canbe attributed to ongoing urban development, including largescale redevelopment projects and the opening of new subway
station, as well as positive macroeconomic indicators andstable demand for rental properties. In addition, there is a surge
in facility investments in related industries, primarily driven by
the establishment of semiconductor factories in Kumamoto.
This has led to active investment in various parts of Kyushu,
including residential development, logistics facility construction,and new factory projects. However, rising land prices due toactive real estate transactions, increasing construction costs
caused by supply-demand imbalances, and anticipated interest
rate hikes could pose challenges in ensuring the proﬁtability of
future real estate development projects. In this environment,
acquiring investment properties that can generate sufﬁcient
returns is becoming increasingly difﬁcult each year.

20

In this context, leveraging our local expertise in information
gathering and property assessment, we successfully acquired
three properties after March 2023: an existing ofﬁce building,Kumamoto East Front Building; a new rental apartment,
Axion Befu-Ekimae Premium; and a newly built A-classofﬁce building, the Hakata FD Business Center. The Hakata
FD Business Center is a newly built ofﬁce building that we
acquired from our sponsor, Fukuoka Jisho Co., Ltd. We havedemonstrated our leasing capabilities by attracting high-quality
tenants and have initiated operations with an occupancy ratethat surpasses our initial expectations, with a promising futureoccupancy rate ahead. The Kumamoto East Front Building is
a strategically located ofﬁce building in Kumamoto City, andwe have high expectations for its future value appreciation,
considering the potential for new industrial developments andurban revitalization in Kumamoto. In addition, the new rental
apartment, Axion Befu-Ekimae Premium, is conveniently
situated near Befu station of the subway Nanakuma
Line, which has been extended to Hakata Station, and isconstructed to condominium speciﬁcations. This strategic
location enables us to promptly capitalize on the potential
upside resulting from the improving environmental changes.
Through these investments, we believe we can expand ourportfolio, further diversify risk, and achieve stability in mediumto long-term real estate operations.
Furthermore, we are actively researching new industrial
developments and associated facility investments in the
Kyushu region as part of our future investment plans. Our
efforts also extend to exploring potential property acquisitions,which involve gaining in-depth insights into prime location
conditions through on-site assessments. In addition, we
actively collaborate with experts to conduct research on thecompetitiveness of various industries in the Kyushu region,
their future trends, and the ripple effects on other sectors.
These efforts aim to facilitate preparatory investments foracquiring excellent properties in the future while avoiding
excessive competition.
We are also proactively addressing another recent concern:
the environmental performance of real estate. Alongsidesupporting major initiatives, we focus on researching properties
with strong sustainability prospects and enhancing theirenvironmental performance post-acquisition. We also monitor
the increasing environmental consciousness among tenants.
We will continue our investment activities with the aim ofachieving stable medium- to long-term growth for our investors
and contributing to the economic revitalization of various
regions through our investments and operations.

Management Strategy

Real EstateManagement
Department

Park Place Oita

Who We Are

Kuniaki Mishima

Data Section

Fukuoka REIT Corporation 2023

Sustainability

The Real Estate Management Department draws up plans
for asset management with the aim of ensuring long-termand stable expansion in proﬁts from the assets held by FRC.
The Fukuoka metropolitan area, our primary destination
for investing, manifests potential for growth due to a rising
population and an increasing number of companies locating
operations there. Accordingly, as a comprehensive REIT, we areinvesting in the region in a diverse range of asset types. REITs
consist of two types of growth: external growth in which we aim
to increase dividends through investment, and internal growthin which we strive to enhance the proﬁtability of the assets in
our portfolio. The Real Estate Management Department seeks
to maximize the value of our property portfolio over the longterm through renovations and other innovative operational
initiatives that enhance the appeal of our assets.
While real estate prices in the market continue to exhibit
strength, the REIT market has shown a somewhat weaker
trend, compounded by the onset of rising interest rates,
creating a challenging external growth environment.
Consequently, prioritizing a strategy centered on medium- tolong-term internal growth becomes imperative. In 2023, as
the impact of the COVID-19 pandemic gradually subsides
and our overall portfolio transitions toward normal operations,
we executed a range of initiatives aimed at preserving andenhancing the long-term value of our property portfolio.
In Canal City Hakataʼs South Building, where renovations
have taken place since January 2023, Alpen FUKUOKA,

the largest sports superstore in Western Japan, opened its
doors in September. It commenced operations as a newcornerstone for expanding the local sports culture andinvigorating the sports community. Moreover, as the next
step based on our medium- to long-term business strategy,
we are actively advancing renovation plans for the B1F diningzone in the Grand Building, aiming to elevate the overallculinary experience of the facility. Meanwhile, at Konoha Mall
Hashimoto, we initiated restroom renovations, prioritizing
environmental enhancements and upgrades, resulting in
the refreshing of selected restroom facilities. Across all our
retail facilities, including Park Place Oita, we have reinstatedcustomer engagement and promotional events to pre-pandemic
levels, bringing delight to a diverse array of visitors.
In our ofﬁce buildings, we promptly completed planned
backﬁlling in existing properties following the departure ofcertain major tenants in the previous year. For ofﬁce buildings
acquired this ﬁscal year, we are engaged in planned leasing
efforts aimed at achieving full occupancy in a timely manner.
From both construction and environmental performance
perspectives across all asset types, we are advancing updates
in essential facilities, including water supply, drainage, and airconditioning systems, and transitioning to LED lighting andmaking external wall improvements. Our commitment lies inensuring the safety and security of our facilities, enhancing theirperformance, and pursuing energy conservation measures tomaintain their competitiveness.
From an ESG perspective, we have implemented ﬂexible
operating hours and store closure policies in some of our retailfacilities to improve the working conditions for our tenants
aimed at providing a comfortable environment for tenant
employees. We plan to continue placing even greater emphasis
on sustainability and further promoting environmental initiatives
within our portfolio. This includes ongoing efforts to assess andreduce greenhouse gas emissions and waste.

Growth Strategy

Canal City Hakata Alpen FUKUOKA

General Manager of theReal Estate Management
Department

21

Financial Strategy

Finance
Department

Executive Officer andGeneral Manager of the
Finance Department

Hiroyuki Ayabe

In addition to drawing up and executing ﬁnancial and capital
strategies that are in the best interests of our unitholders,the Finance Department is responsible for investor relations(IR; including shareholders relations (SR) and public relations)activities to convey FRCʼs situation in a timely, fair, andaccurate manner.
The reclassiﬁcation of COVID-19 from Category 2 toCategory 5 under the Infectious Diseases Control Law has
led to a reduced impact on the real estate sector. As of
August 2023, the stock market has seen signiﬁcant positive
performance, with all 33 sectors experiencing increases ofmore than 10% compared to the beginning of the year. In
contrast, the Tokyo Stock Exchange REIT Index has remained
relatively stable, showing little change since the beginning of
the year.
While the Bank of Japan is expected to continue its pricestability target of 2% and quantitative and qualitative monetaryeasing with yield curve control policies, the markets are
pricing in future interest rate hikes. As such, I believe that it isnecessary to practice ﬁnancial management with an ongoingawareness of the risks posed by rising interest rates.
Under such circumstances, the ﬁnancial strategy, capital
strategy, and IR activities that we have conceived are as follows.

Financial Strategy/Capital Strategy
Regarding our ﬁnancial strategy, we will ﬁrst and foremost
maintain a conservative interest-bearing debt ratio from the22perspective of building a solid ﬁnancial base. The interestbearing debt ratio at the end of August 2023 was 42.4%. Fromthe perspective of ensuring ﬂexibility and agility in ﬁnancing,
we have set a commitment line with a maximum amount of 13
billion yen. We have also decided on a three-year commitment
period, enabling us to address unexpected deterioration in theﬁnancing environment.
In addition, from the perspective of reducing the risks frominterest rate rises and refinancing, we seek to fix interestbearing debt over the long term and to diversify repayment
dates while keeping a close eye on the yield curve. Specifically,
as we continue to diversify our repayment schedules, we will
implement measures such as 1) adjusting financing periods,
2) optimizing the fixed-to-floating interest ratio, and 3) securinglower spreads to effectively manage our financing costs.
Furthermore, we are committed to diversifying our funding
sources while maintaining strong relationships with our threesponsor banks, regional banks primarily in Kyushu, and major
financial institutions, including mega banks.
Moreover, we are actively incorporating considerationsfor SDGs and ESG challenges from a financial perspective,
contributing to the resolution of environmental and social
issues. Our past financial activities are as follows.
July 2019

Procured funds through green finance, a first for FRC

March 2021

Procured funds via a mechanism for financial institutions
to donate a part of the profits obtained through borrowing
as funds for research into the development of a new
COVID vaccine at national universities→ Newly borrowed 2 billion yen from The Juhachi-Shinwa
Bank that was donated to Nagasaki University

August2022
September
andOctober,2023

Procured funds through a syndicated sustainability-linked
loan from the three sponsor banks of our Asset Management
Company a first for a J-REIT
Secured a 12.4 billion yen green loan to fund the acquisitionof the Hakata FD Business Center in September 2023

The capital strategy for a J-REIT is to target external growth,
one of our key drivers, by identifying trends and timing in the
securities markets and raising capital accordingly to capitalize
on opportunities. We will carefully consider the balance
between the growth of distributions after capital raising and
LTV control, aiming to ensure high-quality management of both
capital and debt.

Investor Relations (IR) Activities
In addition to compiling various types of information crucial
for investment decisions, our primary focus is on providing
a consistent ﬂow of timely, equitable, accurate, and easily
comprehensible information, which forms the core principle ofour IR activities. Speciﬁcally, we aim to enhance our content byproactively disclosing more non-ﬁnancial information that goesbeyond income statements or balance sheets. This includes

3,687 3,693 3,642
3,250

3,361

（％）

3,539 3,536 3,523 3,580

3,753 8.0

Recovery

3,000

3.7

3.9

4.1

4.1

4.4

4.1

4.3

4.7

4.5
4.0

4.0

6.0
4.1

4.4

4.6

2,000

4.0

1,000

2.0

Past 3 years

Past 5 years

Past 10 years

Cumulative
total

Annualrate

Cumulative
total

Annualrate

Cumulative
total

Annual
rate

FRC

-0.5%

39.4%

11.7%

16.0%

3.0%

60.1%

9.9%

TOPIX Real
Estate Index

11.1%

45.6%

13.3%

28.7%

5.2%

22.4%

4.1%

TSE REIT
Index

-3.1%

21.5%

6.7%

31.3%

5.6%

112.2%

16.2%

Note: Annual rate conversion is the geometric mean of cumulative returns.

Sustainability

3.7

4.2

Growth Strategy

3,593
3,479 3,398 3,422 3,512

Figure 1 shows FRCʼs past dividends and dividend yields.
Among listed REITs, our dividends are extremely stable. In
contrast, the dividend yield has ﬂuctuated between 3.7% and4.7% over the past eight years, indicating that investment
unit prices have shifted due to changes in the stock market,
interest rate trends, and ﬂuctuations in market supply anddemand.
Table 1 and Figure 2 show the total shareholder return (TSR),
taking into account FRCʼs dividends and capital gains. TSR
performance has been 9.9% annually over the past 10 years.
In contrast, returns have remained flat over the past year as
the TSE REIT Index weakened.

Past 1 year

Dividend yield (as of the end of the fiscal period) (%)(Yen)
4,000 3,574

Dividends and TSR■ Table 1. TSR Over the Past 10 Years■ Figure 1. Past Dividends and Dividend Yields
Dividend per investment unit (Yen)

To ensure the best interests of our investors, we will continue
to work on financial and capital strategies with a long-term
perspective. We will also strive to communicate our efforts
clearly through our website, financial briefing documents,
integrated report, and other materials.
Who We Are

showcasing our strengths as a REIT specializing in regional
properties and highlighting the real estate landscape in Kyushu
and Fukuoka. I believe that these efforts will foster a deeper
mutual understanding with all unitholders, establish trustbased relationships, and pave the way for attracting external
investment funds from various regions of Japan and abroad
into Kyushu and Fukuoka.
Before the COVID-19 pandemic, we conducted more than
200 face-to-face meetings with institutional investors eachyear. However, in the current environment, we have transitioned
to a hybrid approach for our IR activities, which includes
a combination of in-person, web-based, and telephonemeetings, aiming to maintain the number of interactions.
In June 2023, we held an in-person brieﬁng session for
individual investors in our local Fukuoka area for the ﬁrst timein four years, with 44 participants joining us. In December, we
will conduct a similar brieﬁng session for individual investors
in Tokyo. We also participated in conferences organized by
securities ﬁrms and held a total of 15 face-to-face meetings
with overseas investors in November, marking the ﬁrst suchmeetings in four years.

Investment unit Price Performance for the Most Recent Fiscal Year
0 23rd24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th 35th 36th 37th 38th 0
Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug.
2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023

Note: Dividend yield = (Dividend per investment unit / Operating days x 365) / Investment unit price asof the end of the fiscal period■ Figure 2. Investment Unit Price Performance(10 years, including dividends)
FRC

TOPIX Real Estate Index

（%）

FRC

TOPIX Real Estate Index

TSE REIT Index

110
100
90
80
August 2022

February 2023

August 2023

Data Section

（%）

120

TSE REIT Index

250

200

150

100

50

0

Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug. Dec. Apr. Aug.
2013 2013 2014 2014 2014 2015 2015 2015 2016 2016 2016 2017 2017 2017 2018 2018 2018 2019 2019 2019 2020 2020 2020 2021 2021 2021 2022 2022 2022 2023 2023

Note: FRCʼs investment unit price performance is expressed as an index, using the investment unit price asof August2013,
as 100.
TSR2019年
over thepast2020年
10 yearsconsiders
and2022年
investment
pricesin indicating
2018年
2018年 31,
2018年
2019年
2019年
2020年
2020年
2021年 dividends
2021年 2021年
2022年unit
2022年
2023年
2023年
the profitability of investments made on August 31, 2012, as of August 31, 2023. The TOPIX Real Estate
the TSE
Index12月
are indexed
the same
dividend-included
the
4月 Index
8月 and12月
4月REIT8月
4月 in8月
12月 way,
4月using8月
12月
4月 data.
8月 Similarly,
12月
4月 graph
8月 forthe most recent fiscal year is indexed with the investment unit price as of August 31, 2022, as 100.

Fukuoka REIT Corporation 2023

23

Sustainability

Role of the Planning Department
The Planning Department oversees matters related to corporate policies, general affairs and human resources, accounting,and sustainability as its delegated responsibilities. Understanding the overall activities of the Asset Management Company
and guided by the fundamental principle of “Act Local, Think Global,” we believe it is essential to create an environment
where all employees can contribute to regional revitalization and the creation of an attractive community.

Organizational Approach to Sustainability
In 2018, to promote sustainability through considerationfor environmental, social, and governance (ESG) factors,
FRC established the Sustainability Policy and Regulations
Concerning Sustainability Management. We also formed
the Sustainability Promotion Committee, consisting of fulltime directors, executive officers, and department heads,
to oversee these efforts. The committee is responsible for

Sustainability Initiatives and GRESB
Since going public, we have been actively pursuingsustainability initiatives, including obtaining DBJ Green Building
certification. In our overseas investor relations activities in 2017,
we began to receive increasing inquiries from investors about
ESG. Recognizing the need to align with global standards, we
decided to participate in GRESB in 2017 to further promote
our initiatives in sustainability.
In our efforts to set goals for sustainability initiatives, wesought to deepen our understanding of ESG and sustainability
with various stakeholders, including inviting investors, analysts,
and issuers engaged in innovative practices to an IR workshop
held with the Japan Investor Relations Association to impartknowledge on non-ﬁnancial information disclosure. We havealso endorsed the Principles for Responsible Investment (PRI)
and the Principles for Financial Action for the 21st Century(PFA21).
Through such initiatives, we will continue to conduct asset
management with a focus on sustainability, aiming to contributeto the promotion of urban development and revitalization of thelocal economy in Fukuoka and the Kyushu region as Japanʼsﬁrst region-speciﬁc REIT.
In our ﬁrst GRESB Real Estate Assessment in 2018, weearned a 4-star rating, maintaining GRESB evaluations annually
since. In 2023, as in 2022, we achieved a 4-star rating in the
GRESB Real Estate Assessment, along with a Level A rating in
the GRESB Disclosure Assessment.

24establishing internal structures, collaborating with external
stakeholders, considering specific goals and measures related
to information disclosure policies, and monitoring the progressof implementation initiatives. The practical responsibilities
for goals determined by the committee are held by the
Sustainability Officer, with the general manager of the Planning
Department overseeing the role.

Executive Officer in charge of Planning
Department and General Manager of
Sustainability Promotion Office

Growth Strategy

Keiichi Shimoda

emission reduction measures, it becomes imperative to engage
multiple business partners and afﬁliated companies in these efforts.
We acknowledge that the challenges are multifaceted, as this is
not a task that can be solely accomplished within our organization.
Regarding materiality, we identiﬁed issues that are deemed highly
important for both society and stakeholders, as well as critical forbusiness continuity through discussions at the management level,validation, and approval of their relevance. Moving forward, we aim
to assess the changes in the social and environmental landscape,consider the current evaluations, and explore the items subject
to materiality review. We will continue to proactively engage inactivities that prioritize sustainability.

2018

Establishes Sustainability Policy
Creates Sustainability Promotion Committee
Announces GRESB evaluation results
Signs and registers with PRI
Signs and registers with PFA21
Certified as a “Fukuoka ʻWork Style Reformʼ Promotion Company”

2019

Issues integrated report
Identifies materiality
Implements sustainability finance2022

Registers as a“Master”in the Fukuoka City Well-Being& SDGs Registration System
Endorses TCFD recommendations
Joins TCFD Consortium

2023

Registers with the Fukuoka Prefecture
SDGs Registration System

Fukuoka REIT Corporation 2023

Data Section■ Chronology of FRC Initiatives

Sustainability

FRC is a region-speciﬁc REIT with strong ties to Fukuoka andKyushu. In identifying materiality, we have incorporated an emphasison contributing to the local community. Our commitment tofostering connections with the local community is evident throughactive participation in area management organizations such as the
Hakata Town Planning Promotion Council, as well as involvement
in local events such as the Hakata Gion Yamakasa Festival and the
Hakata Dontaku Festival. In the Kyushu region, we have consistently
implemented the corporate version of the hometown tax program
since ﬁscal 2020, extending our participation beyond Fukuoka to
include Saga Prefecture, Oita Prefecture, Kumamoto Prefecture
Kagoshima Prefecture, and Okinawa Prefecture every year.
Our current primary focus is on addressing climate changerisks. In September 2022, we expressed our support for the
TCFD and concurrently joined the TCFD Consortium. We are now
organizing disclosures based on the TCFD recommendations,which encompass Governance, Strategy, Risk Management, andMetrics and Targets. We are also setting climate-related scenarios,
conducting impact assessments for each scenario, and actively
considering strategies to address them. Given the signiﬁcantchanges in recent abnormal weather patterns, we recognize thisas a crucial issue.
In this integrated report, we disclose our CO2 emissions (Scope
1 + 2). In terms of reducing CO2 emissions, we have set a goal toachieve a 35% reduction by 2030 (compared with 2019 levels).
Calculating emissions within FRCʼs supply chain is a complex
endeavor, and as we transition into the phase of implementing

Planning
Department

Who We Are

In 2023, marking the sixth year, we conducted a comprehensive
organizational review and fortified our framework in order toadvance sustainability through consideration for environmental,social, and governance (ESG) for the realization of a sustainable
society. Over the past five years, we have undertaken a range ofactivities to drive our sustainability agenda forward. These activities
include (1) identifying materiality (key issues) and establishing goals
and KPIs for each materiality; (2) obtaining external certifications
from organizations such as GRESB, DBJ Green Building, andCASBEE; (3) demonstrating our commitment to sustainability
by endorsing initiatives such as the Principles for Responsible
Investment (PRI), the Principles for Financial Action for the 21stCentury (PFA21), and the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations; (4) pursuing sustainability
finance; (5) engaging in community activities rooted in the Fukuoka
region; and (6) implementing initiatives directed toward our
employees and tenant staff.
I was involved in the property management of retail facilities
until I assumed my position at Fukuoka Realty in June 2023. In
Kitakyushuʼs retail facilities, we actively participated in sustainability
initiatives, including waste sorting into 14 categories for recycling.
In Fukuoka and Oita, we implemented on-site measures, such as
reusing kitchen wastewater and rainwater, along with the adoptionof LED lighting to enhance our energy efﬁciency efforts. In addition,
we organized activities such as clothing collection, food drives,
and the sale of non-standard vegetables at on-site
events in retail facilities. I look forward to continuing oursustainability efforts from an on-site perspective.

25

Materiality

Fukuoka REIT Corporation and Fukuoka Realty Co., Ltd., consider it essential to take into account environmental, social,and governance (ESG) factors in addition to pursuing proﬁtability to achieve the best interests of unitholders over the
medium to long term. Accordingly, we strive to respond to various ESG-related issues within our real estate investment andmanagement processes.
Identifying Materiality
Fukuoka Realty, the Asset Management Company, has identified materiality (important issues to address) in its sustainability initiatives basedon the demands and expectations of stakeholders and the expected impact on and importance to FRCʼs business.
Mapping of Issues

Environment

High

Importance to society and stakeholders● Reduction of environmental load
● Maintenance and enhancement of environmental andImportant
items

construction performance

Society● Creation of pleasant workplaces (Asset Management

Company)● Creation of pleasant workplaces (tenants)● Contributions toward boosting the attractiveness andrevitalization of Fukuoka and Kyushu● Co-creation with the local community

GovernanceImportance to business continuity● Information disclosure and dialogue with stakeholders

High● Compliance/Risk management

We have identified eight material issues through the process below from environmental, social, and governance perspectives that are of highimportance to society and stakeholders and to business continuity.

Historical Background to Identification of Materiality
FY2017–January 2018

Began initiatives
regarding participationin GRESB 2018

Formulated
sustainability policy

September 2017

June 2018

Established Policies
That Include Those
Regarding CustomerOriented BusinessConduct

Acquired DBJ Green
Building Certification for
2 properties (9 in total)

August 2018

September 2018

Certified as a “Fukuoka
ʻWork-Style ReformʼPromotion Company”

Announced results of GRESBReal Estate evaluations(participation for first time)

July 2018
Acquired BELS
Certification for 4
properties (reissued)

September 2018
Became a signatoryof the Principles
for Responsible
Investment (PRI)

September 2019

August 2022

February 2023

Identified
materiality

Created “Climate
Change and Resilience
Policy”

Registered with Fukuoka
Prefectureʼs SDGs
certification system

September 2018
Became a signatoryof the Principles for
Financial Action for the
21st Century (PFA21)

April 2022

July 2022

September 2022

Set key performanceindicators (KPIs) for
materiality

Registered with
Fukuoka Cityʼs WellBeing & SDGs
certification system(master level)

Endorsed the TCFD (Task
Force on Climate-related
Financial Disclosures) andparticipated in the TCFD
Consortium

Process for Identifying Materiality
STEP 1

26

STEP 2

Identify social issues

Narrow and prioritize issues

Based on the needs of society andthe expectations of stakeholders
within and outside of the Company,
prepare a list of social issues taking into
account conditions at other companies
in the same industry, items used atassessment agencies, ESG disclosure
standards, and SDGs.

Narrow and prioritize identified
issues based on their importanceto stakeholders and the importanceto and degree of impact on FRCʼsbusiness based on potential risks andopportunities. Prepare draft proposals
regarding materiality.

STEP 3

Deliberate at the management level, confirm
appropriateness
Ensure that the Sustainability Promotion Committee, establishedby the Asset Management Company, deliberates on all draft
proposals regarding materiality. Materiality is identified afterinvestigating appropriateness based on the opinions and adviceof experts acting on behalf of stakeholders. Reports are ultimately
delivered to the Board of Directors of the Asset Management
Company and the Board of Directors of FRC.

Materiality

Society

KPIs and targets

Related SDGs

・(by 2030) 35% reduction in CO2emissions (compared with 2019,
basic unit), 75% waste recycling
rate

Maintenance andenhancement ofenvironmental
and construction
performance

・Carry out performance and function evaluation of properties
on a regular basis and ameliorate any deterioration in
performance
・Maintain and improve competitiveness by acquiring
green building certifications and through visual
representation of building performanceSee p.31

・(by 2030) 85% Green Building
Certification rate or higher

Creation of pleasant
workplaces (AssetManagement
Company)・Improve quality of operations by enhancing and expanding
employee education systems and promoting acquisition ofqualifications
・Continue to improve office environments and work on
providing pleasant working environments
・Give consideration to a work-life balance and boost employee
satisfaction

・Training per employee (numberof times)
・Improve office environment(number of cases)

Creation of pleasant
workplaces (tenants)

・Promote improvement of employee
satisfaction and work toward increasing job
satisfaction of tenant employees

・Conduct regular tenantsatisfaction surveys (allproperties)

Contributions
toward boosting
the attractivenessand revitalization of
Fukuoka and Kyushu

・Enhance dissemination of information regarding strengths andcharms of Fukuoka and Kyushu
・Support research and studies on the local economy and industries
and promote attractive urban development in
See p.37
collaboration with local business circles

・Join and participate in local
economic organizations
・Host local community events(number of times)

Co-creation with thelocal community

・Deepen dialogue and collaboration with local communities
through participation in community activities and various
initiatives using properties under our management to grow anddevelop together with the local community

・Join and participate in area
management organizations
・Continued participation in
activities that contribute to thecommunity (number of times)

Information disclosureand dialogue withstakeholders

・Disclose financial and non-financial information to stakeholders
in an appropriate and timely manner
・Build relationships of trust through proactive dialogue
with stakeholders and reflect stakeholder feedback in the
management strategy

・Dialogue with investors (numberof times)
・Employee ESG training (numberof times)
See p.38

Compliance/Riskmanagement

・Ensure thorough compliance including compliance with laws
and ordinances and elimination of conflicts of interest withinterested parties, and develop and operate an appropriate
internal risk management system to maintain and improve
corporate value・Compliance training(number of times)

See p.36

See p.39

Data Section

・Coordinate with Property Management and Building
Management on promotion of management and reductionof energy consumption, greenhouse gas emissions, water
consumption, and waste output
See p.24
See p.28

Sustainability

Reduction ofenvironmental load

Growth Strategy

Governance

Policies and targets

Who We Are

Environment

Materiality

Process for Revising Materiality
STEP 1

STEP 2

STEP 3

Identify items to be revised

Exchange opinions with third parties

Identify items in materiality to be revised
based on an examination of changes
in the social environment and anassessment of the current situation.

Create proposed revisions to materiality
based on dialogue with stakeholders andan assessment from FRCʼs perspective,
and request third parties to provide theiropinions on the proposed revisions.

Deliberate at the management level, seek resolution
by the Board of Directors
Ensure that the Sustainability Promotion Committee,
established by the Asset Management Company, deliberates
on all proposed revisions in consideration of the opinions
provided by the third parties before any changes are maderegarding materiality. Ultimately, reports are to be delivered
to the directors of the Asset Management Company and theBoard of Directors of FRC.

Fukuoka REIT Corporation 2023

27

Environmental Response
Related Materiality
・Reduction of environmental load

Environmental Performance DataIC

■ GHG Emissions (Scope 1 + 2)

FY2019FY2020

FY2021

FY2022CO2 emissions intensity (t-CO2/m )0.05170.04660.04580.0439

Scope 1 + 2 (t-CO2)

11,059

9,986

9,260

8,815

2

Scope 1

t-CO2

60

64

53

53

Scope 2t-CO210,999

9,923

9,207

8,762

■ Power Consumption(MkWh)

100,000(Data coverage)
72.6％

70.3％

* The properties covered by Scope 1 + 2 include 21 buildings, comprising five retail facilities, nine officebuildings, two logistics facilities, and five residential properties.
* The emissions intensity for the entire Scope 1 + 2 portfolio is calculated by dividing the total emissions of
the covered properties by their total floor area (common areas).

Basic unit (MkWh/m2)

Power consumption (MkWh)(MkWh/m )
2

70.3%

70.7%

For the ﬁscal period ended February 2023, CO2 emissions were reducedby 15.1% compared with the ﬁscal period ended February 2019.

0.180

Well water/Rainwater (m3)Basic unit (m3/m2)

Reclaimed water*2 (m3)

(Data coverage)

(m )
3

72.6％

800,000

88,61180,000City water potable (m3)

■ Water Consumption*1
70.3％

70.3%

70.7%

(m3/m2)1.600

667,074
79,6240.167

82,47982,1900.170

565,663

600,000

1.258
464,518

60,0000.155

40,000

0.153

0.160

400,000

0.150

200,000

1.200

507,865

0.872

1.054
0.953

0.800

0.400

0.149

0

FY2019FY2020

FY2021

FY2022(Mar. 2019–Feb. 2020)(Mar. 2020–Feb. 2021)(Mar. 2021–Feb. 2022)(Mar. 2022–Feb. 2023)

0

FY2019FY2020

FY2021

FY2022(Mar. 2019–Feb. 2020)(Mar. 2020–Feb. 2021)(Mar. 2021–Feb. 2022)(Mar. 2022–Feb. 2023)

For fiscal 2022, power consumption was reduced by 8.3% and water consumption was reduced by 16.2% compared with fiscal 2019.
Note: Total value for 15 properties, including five retail facilities, nine office buildings, and one logistics facility. Basic unit is calculated by adjusting the total floor area (m²) by the occupancy rate. Data coverage is the area ratio
of properties subject to data aggregation as compared to all properties in the portfolio (excluding land) as is calculated at the end of the period. The figure for Canal City Hakata, Canal City Hakata・B, and Canal City
Business Center Building reflects total power and water consumption for the entire Canal City Hakata complex, including power and water consumption for certain theater and hotel areas not owned by the Investment
Corporation. The figure for Park Place Oita covers only the main building section and excludes the section for independently run stores. The figure for Taihaku Street Business Center covers only the office tower andexcludes the residential tower. Water consumption excludes some well water volumes for which data cannot be obtained.
*1. Includes treated water volume.
*2. Includes externally purchased greywater.

Environmental Initiatives

IC

Retail facilities

Retail facilities

Natural Environment Conservation and Creation

Canal Water Filtration System (rainwater reuse system)

At Canal City Hakata and Park

Canal City Hakataʼs symbolic

Place Oita, we are making efforts

canal has both a recreational

to coexist with various naturalfunction and is a source of water

environments by providing green

to fight fires in the case of anspace in communal areas, installing

emergency. At all times, this canalaquatic spaces, and creatingholds roughly 1,200 tons of water,

shaded spaces. We are creating

and rainwater is used to conserve

habitats for wild fauna and flora

resources.

that contribute to the preservation of biodiversity, as well as providing
places where employees and visitors can relax and interact with nature.
Retail facilities

28

Retail facilities

Greywater Plant (kitchen drainage reuse system)

Introducing Renewable Energy Equipment

At Canal City Hakata and Konoha

At Konoha Mall Hashimoto, weMall Hashimoto, kitchen wastewater

have installed solar panels on the

discharged by restaurants is

rooftops to generate renewablecollected and processed asenergy and contribute to thereclaimed water. It is then used asformation of a recycling-based

tap water in on-site restrooms.

society.

IC

Office buildings

Investment Corporation (FRC)

AMC Asset Management Company

Others (logistics facilities)

Introducing Renewable Energy Equipment

We are focusing on shifting to LED-based lighting in each property to

At LOGICITY Minato Kashii and LOGICITY Hisayama, we have installed

reduce energy consumption.

solar panels on the rooftops to generate renewable energy and<Office buildings already converted to LED>

contribute to the formation of a recycling-based society.

Who We Are

Energy-Saving Measures by Switching to LED lighting

・Gofukumachi Business Center(e.g., interior shared spaces, someexternal areas, exterior wall lighting)・Sanix Hakata Building(interior recessed lighting)・Taihaku Street Business Center (e.g.,
entrance, interior shared spaces)
・Tenjin North Front Building(common spaces)

Green Finance

Example of shifting to LED lighting at Sanix
Hakata Building

Solar panels

LOGICITY HisayamaICof borrowings required in the acquisition of Eligible Green Assets, or thefinancing options through an enhanced investor base, FRC establishedredemption of Investment Corporation bonds issued and outstanding.

the Green Finance Framework in 2019 in line with the Green Bond

Eligible Green Assets are specified assets held by FRC that havePrinciples 2018, the Green Bond Guidelines 2017 from the Ministry

received or are scheduled to receive one of the following certificationsof the Environment, and the Green Loan Principles to ensurefrom third-party organizations at the time of procurement or the

implementation of green financing, including sustainability linked loans

reporting date.

and green loans . The funds procured through green finance will beallocated toward the acquisition of Eligible Green Assets, the repayment

Growth Strategy

With the goal of further promoting ESG activities and expanding(1) DBJ Green Building certification of 3, 4, or 5 stars(2) CASBEE certification of S, A, or B+ rank
(3) BELS evaluation of 3, 4, or 5 stars(3-star or B+ rank)

Eligible Green Assets

140.1 billion yen
67.5%(5-star oro S rank)

Eligible Green
Assets140.1 billion yen
13 properties

Total assets LTV
42.4%

Maximum green financeprocurement amountAmount of Green Eligible Liabilities
59.4 billion yen(4-star or A rank)

Sustainability

Total properties
owned
207.5 billion yen
35 properties

As of August 31, 2023

After procuring green finance, FRC will announce the total amount of Eligible Green Assets, the amount of related liabilities, and the amount of funds
from green finance as of the end of each fiscal period (February and August each year). FRC will also announce the following indicators related to
Eligible Green Assets as of the end of February each year.
・The number of properties classified as Eligible Green Assets, and the number and type of environmental certifications obtained.
■ Sustainable Finance (Actual)
LenderAmount(Millions of yen)Interest rate

Procurement dateLong-term loan (green loan)

Mizuho Bank, The Bank of Saga,
Higo Bank

2,200

0.52100%*1

July 31, 201910 years Green loan assessment: Green 1*2

Long-term loan (donation loan)

Juhachi-Shinwa Bank

1,000

0.59000%

March 31, 2021

10 years for research on the development of a new

1,600

0.72625%

June 30, 2022

7 years

Green loan assessment: Green 1*2

4,900

0.91875%*3

August 31, 2022

10 years

Third-party opinion onsustainability linked loan*4

TypeLong-term loan (green loan)
Long-term loan(sustainability linked loan)

Summary

A portion of the interest is donated as funds
coronavirus vaccine at Nagasaki University.

Long-term loan (green loan)

NEW

Sumitomo Mitsui Trust Bank

900

0.50100%

July 31, 2023

5 years

Green loan assessment: Green 1*2

Long-term loan (green loan)

NEW

Sumitomo Mitsui Trust Bank600

0.82900%

July 31, 2023

8 years

Green loan assessment: Green 1*2

Long-term loan (green loan)

NEW

Development Bank of Japan

2,000

0.83750%

August 31, 2023

6 years

Green loan assessment: Green 1*2

Long-term loan (green loan)

NEW

Development Bank of Japan

2,000

0.90689%

August 31, 2023

6.5 years Green loan assessment: Green 1*2

Data Section

Sumitomo Mitsui Banking
Corporation
Development Bank of Japan,
The Nishi-Nippon City Bank,
The Bank of Fukuoka

Term*1. FRC has concluded a swap agreement to establish a fixed interest rate on debt. The indicated interest rate reflects the effects of the swap agreement.
*2. FRC has received the highest “Green 1” rating from Japan Credit Rating Agency for our adherence to the Green Loan Principles.
*3. In case the CO2 reduction target is achieved, the preferential interest rate from the initial borrowing will be applied from August 2031 until the repayment date.
*4. FRC has obtained a third-party opinion from Japan Credit Rating Agency.
Glossary

Sustainability linked loan
A loan that encourages the borrower to achieve ambitious Sustainability Performance
Targets (SPTs).
Green loan
A loan in which the use of funds is limited to environmentally friendly businesses.

Green bonds
Bonds issued by companies and local governments in order to raise the funds forgreen projects in Japan and overseas.
Fukuoka REIT Corporation 2023

29

Environmental Response
Related Materiality
・Maintenance and enhancement of environmental and construction performance

Initiatives for Facility and Building Management

IC

Individual Facility Initiatives
Retail facilities

GHP air-conditioning system update NEW

beforeafter

beforeafter

In Park Place Oita, the update to an energy-efﬁcient GHP airconditioning system contributed to the reduction of running costs andCO2 emissions.

Office buildings

Disaster prevention amplifier updateNEW

At the Gofukumachi Business Center, we have upgraded the disasterprevention amplifier, specifically updating the automatic fire alarm

東京都

receiver (emergency broadcast panel). This enhancement enables early

愛知県

11,800大阪府

11,800detection and evacuation guidance through audible alerts in the event ofa fire, playing a crucial role in ensuring the safety and security of tenants.

27,500

福岡県

7,400

0

Initiatives for Disaster Risk

5,000

10,00015,00020,00025,00030,000 （円）ICCountermeasures to Flooding Risks
Severe damage from flooding in Fukuoka City on June 29, 1999,■ Capacity of Stormwater Storage Facilities of Fukuoka City

contributed to the formulation of the Storm Water Management Action Plan
and the upgrading of rainwater drainage facilities in the areas where theFY1999FY2023No stormwater storage facilities

128,300 m3 (estimate)

flooding was particularly harsh. Ongoing efforts to implement antiflooding

Stormwater management capacity increased from 59.1 mm/h

measures have greatly improved flood safety within the city limits.
■ Replacing and Installing New Water Stops (July 2020)
We reviewed the specifications and installation locations of existing water
stops throughout the Canal City Hakata premises and either repaired or
installed equipment as part of our countermeasures to river flooding asa result of typhoons and locally heavy rains, which appear likely to comemore frequently and increase in severity due to global warming.

to 79.5 mm/h (city center）■ Inundation Instances of Fukuoka City
(Buildings)
4,000

3,173

Instances of inundation
have steadily declined

3,000
1,721

2,000

1,122

1,000
3

Canal City Hakata North Bldg.

Canal City Business Center Building

June 29,
1999

July 19,
2003

July 24,2009

August 30,
2013

Maximum hourly
79.5
precipitation (mm/h）

104

116

72.5

Other Disaster Prevention Measures

Fukuoka Prefecture is an area in which there are relatively few earthquakes.

■ Emergency Drills

According to the probabilistic earthquake prediction map from the Office

We have conductedand Disaster-Reduction Research Division, Research and Development
Bureau, Ministry of Education, Culture, Sports, Science and Technology, theprobability of an earthquake with an intensity of six or greater over the next
30 years is lower in Fukuoka Prefecture than in the Kanto, Chubu, and Kansai
areas. FRC establishes the insurance value of each property based on its
replacement value, earthquake PML value, and other factors, and maintains

Stormwaterdrainage capacity
has increased
significantly
Since the launch of
the project in FY2000

Instances ofinundation havesteadily declined

Source: Prepared by Fukuoka Realty based on data from the “Storm Water Management Action Plan
2026” pamphlet about the Fukuoka City StormWater Emergency Control Plan.

Earthquake Risk Countermeasuresof the Headquarters for Earthquake Research Promotion, Earthquake

Between FY2000 and FY2023

comprehensive disaster drills at
Canal City Hakata since 2017,with all tenants participating(not held in 2020 or 2021 due
to COVID-19). The drills wereconducted in November 2023.

earthquake insurance for all its properties（buildings）. In addition, FRC
continues to conduct annual property surveys through external organizations
to estimate earthquake damage to properties based on various scenarios.
Glossary

30

Earthquake PML
Refers to the probable maximum loss as a percentage of the expected maximum damage (Probable Maximum Loss) caused by an earthquake. The higher the PML value,
the higher the buildingʼs seismic risk.
[Calculation method] PML = Expected maximum damage / Replacement cost

IC

Initiatives We Support and External Certifications

IC

Investment Corporation (FRC)

AMC Asset Management Company

AMC

FRC makes continuous improvements through feedback on the results it receives from acquiring external certifications.

on Climate-related Financial Disclosures (TCFD)■ Participation in GRESB Assessment 2023
The Global Real Estate Sustainability Benchmark (GRESB) was

In September 2022, we announced our endorsement of theestablished in 2009, primarily by leading European pension fundrecommendations of the Task Force on Climate-related Financialgroups that endorse the Principles for Responsible Investment (PRI).

Disclosures (TCFD), which was established by the Financial Stability

GRESB serves as the annual benchmark assessment for measuring

Board (FSB) to examine climate-related disclosures and how financial

environmental, social, and governance (ESG) considerations in real

institutions should respond.

estate companies and funds. The organization conducting and

At the same time, we became a member of the TCFD Consortium,

overseeing this assessment is also named GRESB. In the GRESB

a group of companies in Japan that

Real Estate Assessment conducted in 2023, FRC achieved a rating of

support the TCFD.

4 Stars and Green Star. In addition, we obtained the highest level, A
Level, in the GRESB Public Disclosure Assessment.
Growth Strategy■ Other Initiatives We Support

Who We Are■ Endorsement of the Recommendations of the Task ForceIn September 2018, Fukuoka Realty Co., Ltd., endorsed the basic
philosophies of the Principles for Responsible Investment (PRI) and
the Principles for Financial Action for the 21st Century (PFA21) andbecame a signatory to these initiatives. Through ESG-conscious asset
management, the company is contributing to
the achievementof a sustainable
society.

■ Ratio of Properties Certified as Green Buildings
As of September 1, 2023, the ratio of properties within the entire
The DBJ Green Building Certification is a third-party certification

In addition, the Building Energy-Efficiency Labeling System (BELS)
is a system in which third parties evaluate, indicate, and certify theenergy conservation performance of non-residential buildings, based

system established by the Development Bank of Japan for realon the Evaluation Guidelines for the Building Energy-Efficiency Labeling

estate properties that feature excellent environmental and social

System for Non-Residential Buildings (2013). FRC has acquiredconsiderations. FRC has acquired certification for 13 of its properties

certification for five of its properties owned.

Sustainability

portfolio certified as green buildings was 80.3%.

owned that exhibit environmental and social awareness (including six
properties that were recertified in March 2022).

80.3%

Higashi Hie Business Center(acquired in March 2016)(based on total floor space)

Data Section

Properties with
Green Building
Certification

Canal City Hakata（2021）★★★★★ Canal City Hakata・B（2021）★★★★

Park Place Oita（2021）
Konoha Mall Hashimoto（2020）★★★

Hakata FD Business Center (2023)
Canal City Business Center Building（2021）
Gofukumachi Business Center（2021）
Higashi Hie Business Center（2021）
LOGICITY Minato Kashii (2020)
LOGICITY Hisayama (2020)
Higashi Hie Business Center Ⅱ (2020)★

SunLive City Kokura (2019)
Marinoa City Fukuoka（Marina Side Building）（2019）

Higashi Hie Business Center Ⅱ(acquired in September 2015)

LOGICITY Minato Kashii(acquired in May 2015)

LOGICITY Hisayama(acquired in March 2016)

Tissage Hotel Naha(acquired in November 2022)

Fukuoka REIT Corporation 2023

31

Environmental Response
Related Materiality
・Reduction of environmental load

FRC’s Recognition of Climate Change

TCFD Endorsement(and Participation in the TCFD Consortium)

In the Asset Management Company, we acknowledge the scientifically

The Asset Management Company expressed its support for the Task

proven progression of climate change, as outlined in the Paris

Force on Climate-related Financial Disclosures (TCFD) in September

Agreement (2015), the IPCC Special Report (2018), and the IPCC

2022 to promote disclosure of information related to climate-related

Sixth Assessment Report (Working Group I, 2021). We recognize

issues. Alongside this endorsement, we are also a member of theclimate change as a significant (material) challenge that brings about

TCFD Consortium. Within this consortium, which includes numerous

dramatic changes to the natural environment and social structures,companies and organizations endorsing TCFD in Japan, discussions

exerting a profound impact on the management and overall businesstake place on how information on climate-related issues should beof FRC. Based on this recognition, the Asset Management Company

disclosed and used.

established the Policy on Climate Change and Resilience in August2022. This policy outlines our approach to responding to risks andopportunities associated with climate change, as well as initiatives
to ensure the resilience (strength and buoyancy) of operations andstrategies relative to climate-related issues.

Governance■ System for Promoting Sustainability

risks and opportunities, providing updates on initiatives related to

The Asset Management Company has established a Sustainability

adaptation and mitigation, and reporting on climate change responses,

Policy and related internal regulations as specific practical guidelines toconsistently and systematically promote sustainability initiatives, as wellas the Sustainability Promotion Committee. This Committee meets atleast twice a year in principle to examine goals and measures related

including the establishment of indicators and goals. The Sustainability
Promotion Committee deliberates on each agenda item with theparticipants, and final decisions rest with President and CEO.

to climate change issues and determine the progress of initiatives. It■ Role of Management

comprises President and CEO, Executive Officers, and the general

President and CEO serves as the chairperson of the Sustainability

managers of each division. President and CEO makes final decisions

Promotion Committee and, as the ultimate decision-maker for

regarding sustainability, while the general manager of the Planningsustainability (also the highest authority for climate-related issues),

Department holds the role of Sustainability Officer.

makes final decisions regarding the implementation of related

In addition, to streamline the execution of sustainability initiatives,

measures.

we have established the Sustainability Promotion Office. Comprising

President and CEO also periodically reports on specific targets,sustainability representatives from diverse departments, this officeproposals, and progress on sustainability initiatives determined by theoperates in accordance with decisions made by the ultimate authority

Sustainability Promotion Committee to the Board of Directors of bothon sustainability. This structure enables the effective implementation of

the Investment Corporation and FRC.

activities associated with sustainability promotion.
The Asset Management Company positions climate-related issues■ Oversight by the Board of Directors

as one of its sustainability challenges and has established the following

President and CEO serves as the chair of the Board of Directors for thegovernance structure to address climate-related risks and opportunities

Asset Management Company.

associated with FRC.
President and CEO holds the highest authority for climate-related

The Board of Directors is responsible for making the final decisionon the formulation and revision of the Sustainability Policy, whichissues, serving as the ultimate decision-maker for sustainability. The

represents the specific operational guidelines for sustainability for the

executive overseeing climate-related matters is the general manager

Asset Management Company.

of the Planning Department, responsible for the supervision ofsustainability promotion.
This executive consistently reports to President and CEO within the
Sustainability Promotion Committee, covering various aspects such

Furthermore, the Board of Directors monitors and supervises thesustainability initiatives of the Asset Management Company by receiving
reports from the Sustainability Promotion Committee and offering
guidance as necessary.

as identifying and assessing the impacts of climate change, managing

Strategy
The Asset Management Company has established a process to

32

The Asset Management Company, in conjunction with its

identify, assess, and manage the impacts of climate-related risks andcommitment to the TCFD in September 2022, released the results ofopportunities on its business activities, strategies, and financial plans.

its first scenario analysis. It subsequently conducted a second scenario

Ongoing analyses are being conducted.

analysis, reassessing risks and opportunities.

IC

Investment Corporation (FRC)

AMC Asset Management Company

Scope of Analysis
In the most recent scenario analysis, the focus is on FRCʼs real estate leasing business.
The analysis timeline is set for 2030 (medium term) and 2050 (long term).

In accordance with the TCFD recommendations, it is advisable to

Risk type

Source1.5℃ Scenario

4.0℃ Scenario

articulate the resilience of oneʼs own strategy, taking into account multiple

Transition
riskInternational Energy Agency (IEA)
World Energy Outlook 2020

IEA NZE2050

IEA STEPS

PhysicalriskIntergovernmental Panel on
Climate Change (IPCC)
Fifth Assessment Report

IPCC RCP2.6

IPCC RCP8.5

scenarios, including those aligning with the goal of limiting global warming
to below 2°
C. The scenarios referenced by the Asset Management
Company in conducting the scenario analysis as shown on the right.

Who We Are

External Scenario Referenced

Envisioned Worldview in Each Scenario
Based on each scenario, the Asset Management Company envisions the following worldview.

The 1.5°
C Scenario is premised on the
introduction of stringent regulations,tax measures, and other initiatives tocombat climate change, aiming toTechnological innovation

Climate and weather

Advancement and widespread
adoption of renewable energy andenergy-efficient technologies

Rise in wind and water-related disasters
Progression of chronic climate changes
to a certain extent

Growth Strategy■ 1.5℃ Scenario

achieve a decarbonized society.
As part of a worldwide effort toGovernment regulations

anticipated shift toward decarbonization
within the socioeconomic landscape.

Increased measures forCO2 emission reduction

Evaluation of environmental
regulation compliance andenvironmental certificationin lending assessments

reducing greenhouse gas emissions
and enhancing emission regulations.
This shift has the potential tosignificantly impact the operations ofboth the Asset Management Company

Tenants

Investors

Growing emphasis on
selecting properties based on
environmental performance

Rising importance of evaluating
environmental regulation
compliance and environmental
certification in investment decisions

and FRC.

■ 4.0℃ Scenario
The 4.0°
C Scenario is based on thepremise that stringent regulations andClimate and weather

Increased costs associated withequipment replacement anddisaster recovery

Rise in wind and water-related disasters
Increase in acute weather-related
disasters

a decarbonized society are not
implemented, resulting in a continued
increase in greenhouse gas (GHG)
emissions.
As climate change advances, we
anticipate an increase in the frequency
and intensification of meteorological

Government regulations

FRC

Financial institutions

Enhanced regulations on
disaster prevention andmitigation

Increased operationalcosts due to risingprocurement prices

Expansion of disclosure
requirements related to climate
risks in lending assessments

Data Section

tax measures necessary to achieve

Technological innovation

Sustainability

This entails establishing frameworks forEnhanced regulations oncarbon emissions andenergy consumption

Financial institutions

FRC

address climate change, there is anand climate-related disasters, including
severe typhoons, heavy rainfall, more
frequent heatwaves and droughts, andTenants

the ongoing rise in global sea levels.

Growing emphasis on
selecting properties with highsafety standards against
meteorological disasters

This has the potential to significantly
impact the operations of both the Asset

Investors
Expansion of disclosure
requirements related toclimate risks in investment
assessments

Management Company and FRC.

Fukuoka REIT Corporation 2023

33

Environmental Response
Related Materiality
・Reduction of environmental load

Identification of Risks and Opportunities
The Asset Management Company has identiﬁed risks and opportunities based on scenarios and assessed their impact on business as outlined
below. For the ﬁnancial impact, we conducted both qualitative and quantitative assessments, referring to the aforementioned scenarios and literatureprovided by industry associations.

Qualitative Analysis Results of Climate-Related Risks and Their Financial Impact■ Risks and Opportunities

Note: Items for which evaluation or calculation is difficult are indicated with “-”.
ImportanceTransition risk

Risk and opportunity factors and financial impacts

Physical risk

Response to risks and opportunities

2050

Policy and legal

The introduction of carbon pricing results in an increased carbon tax burden.

Low

MediumAdvancement of CO 2 reduction goals/Energy-efficientrenovations/Introduction of renewable energy/Efficientenergy management

Technology

Expenses increase for energy-saving and energy-creating measures for existing
properties, including energy conservation, energy storage, ZEB/ZEH conversion,and solar power generation.

High

High

Establishment of long-term renovation plansconsidering the useful life span/Utilization of subsidies/
Improvement of portfolio environmental performancethrough acquisition of ZEB/ZEH properties

MarketMarket preferences lead to an increase in vacancy rates and a decline in rents forproperties not aligned with decarbonization.

Low

Low

Delayed adoption of decarbonization measures results in a decline in investment
unit prices and missed opportunities for external growth.

----

Delayed implementation of decarbonization measures leads to an increase in loaninterest rates and a shortening of borrowing periods.

Low

Low

Increased frequency of disasters results in a rise in damage costs and disasterrecovery expenses.

High

High

Increased frequency of disasters leads to a rise in disaster preparedness
expenses.

Low

MediumThe rise in air-conditioning usage due to increasing temperatures results in higher
utility costs.

Low

Low

Expenses for addressing the impacts of rising sea levels increase.

Low

Low

Resource efficiency

Implementation of energy-saving measures leads to a reduction in energy
procurement costs.

Low

Low

Energy sources

As the transition to clean energy progresses, the carbon tax burden decreases.

Low

Low

Products andservices

The increased supply of ZEB properties in the market leads to an increased
opportunity for acquiring such properties.

----

Market preferences lead to an increase in vacancy rates and a decline in rents forproperties not aligned with decarbonization.

Low

MediumThe success of decarbonization measures leads to an expansion of lending
partners and opportunities.

Low

Low

The success of decarbonization measures opens up new investor segments.

----

Reputation

Acute

Chronic

Opportunities

2030

MarketResilience

The success of disaster preparedness measures results in a reduction in damage
costs and disaster recovery expenses.

MediumMediumPromotion of environmental certifications/Understandingof tenant needs through satisfaction surveys/Advocacy ofGreen Lease agreements/Promotion of green initiatives/
Appealing to investors who prioritize environmental
issues/Improvement of portfolio environmental
performance through property replacement
Risk monitoring of property locations/Implementationof disaster preparedness measures (e.g., installationof water stoppers, waterproofing of central monitoring,
reinforcement of power receiving and transforming
facilities)/Conducting BCP training/Insurance coveragefor damages/Conducting hazard risk assessments atthe time of property acquisition
Implementation of air-conditioning efficiency improvement
renovations/Efficient energy management

Energy-efficient renovations/Introduction of renewableenergy/Improvement of portfolio environmental
performance through acquisition of ZEB/ZEH properties/
Decrease in the cost of high-efficiency equipment
Promotion of acquisition of environmental certifications/
Understanding tenant needs through satisfaction
surveys and other measures
Utilization of green financeAppealing to investors who prioritize environmental issues
Risk monitoring of property locations/Implementationof disaster preparedness measures (e.g., installationof water stoppers, waterproofing of central monitoring,
reinforcement of power receiving and transforming
facilities)/Risk mitigation through insurance coverage

Qualitative Analysis Results of Climate-Related Risks and Their Financial Impact
Details of financial impact
Carbon tax burden increases.

Physical risks and opportunities

Scenario
Transition risks and opportunities■ Financial Impact (Millions of yen)

34

Increased costs for energyefficient retrofitting and energygenerating on-site renovations
for existing properties.
Energy procurement costs
decrease with renovations.
Vacancy rates increase andrents decline for properties notaligned with decarbonization.
Damage costs and disasterrecovery expenses increase due
to water damage.
Expenses for water damage
prevention measures increase.
Utility costs increase due to therise in air-conditioning usage.
Expenses for addressing theimpacts of rising sea levels
increase.

Note: Items not yet calculated are represented as “-”.

1.5℃

4.0℃

Additional information

Risk

-352

-

Increase in carbon tax burdenCountermeasure effects

188-

Reduction through energy-saving and energy-generating (on-site) renovations

Risk

-783

-

Opportunity

Reflected in the effects of carbon tax
countermeasures, energy procurement costs, andopportunities in the real estate leasing business

Increase in CAPEX investment
Rise in maintenance costs for energy-generating facilities

Countermeasure effects
and opportunity

119-

Reduction through energy-saving and energy-generating (on-site) renovations

Risk

-91

-

Decrease in real estate leasing business income if no measures are taken

Opportunity

329-

Increase in real estate leasing business income with the implementation ofenergy-saving and energy-generating (on-site) renovations

Risk

-56

-169

Increased probability of heavy rainfall leading to direct damages from floods
and indirect losses such as business interruptions

Countermeasure effects

13

38

Risk mitigation through insurance for direct and indirect damages from flooding
Effects of reducing risk by implementing flood prevention measures

Risk

-65

-103

Increase in insurance premiums
Rise in CAPEX investment for flood prevention projects

Risk

-3

-14

Utility costs increase due to the rise in air-conditioning usage

Countermeasure effects

2-

Reduction through energy-saving and energy-generating (on-site) renovations

Risk

-

-

At present, no significant impact has been identified regarding the depreciationof asset values or the incurrence of costs for properties in flood-prone areas
due to rising sea levels.

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AMC Asset Management Company

climate-related scenarios and literature. The unit is primarily in theform of impact amounts (millions of yen) per year on a cash basis, andthe time frame assumes the year 2050. Note that the accuracy of thecalculations cannot be guaranteed at present. In addition, the assumed
countermeasures are based on simulation and are not decisions orplans that have been executed.

Concrete Initiatives in Response to Risks and Opportunities
We aim to achieve the current CO2 reduction targets associated withtransition risk. We will pursue energy-efﬁcient upgrades, including LED
conversions, and enhance energy efﬁciency during facility updates.
In addition, we will explore initiatives such as the integration of solar
power generation and consider transitioning ZEB and ZEH.
Furthermore, we will look into the greening of externally sourcedenergy.

We are currently mitigating physical risk through insurance coverage.
We will also conduct ongoing risk monitoring, including the review ofhazard maps, and implement necessary measures as required. By
conducting BCP exercises and addressing various operational aspects,
our goal is to effectively mitigate risks.

Growth Strategy

Risk Management
The process by which the Asset Management Company manages climate change–related risks is as follows.
■ Process of Identifying and Evaluating Risk

■ Process of Managing Risks■ Integration into Comprehensive Risk Management
In the Asset Management Company, based on the Risk Management
Regulations, each department head is designated as a risk
management officer. A Risk Management Committee has been
established to monitor the risk management status overseen by theseofficers. The Committee convenes at least once every three months inprinciple, focusing on identifying, understanding, and managing various
potential risks.
The executive with ultimate responsibility for climate-related issues
instructs the inclusion of significant climate-related risks in business andfinancial planning within the existing company-wide risk management
program through the executive in charge of climate-related issues. This
directive aims to integrate the process of identifying, assessing, andmanaging risks within the Risk Management Committee.

Data Section

The executive with ultimate responsibility for climate-related issues
designates responsible departments or individuals and instructs
the formulation of countermeasures for climate-related risks andopportunities of high priority in business and financial planning, asdeliberated in the Sustainability Promotion Committee.
The countermeasure plans formulated by the designateddepartments or individuals are reviewed and approved in internal
forums such as the Sustainability Promotion Committee, depending on
their content, before being implemented.
Regular progress reports on the implemented measures are
submitted to the Committee, where the advancement of responses torisks and opportunities is monitored and verified.

Sustainability

The risks and opportunities related to climate change are addressed
through a climate-related working group. This group, led by
the executive responsible for climate-related issues, convenes
representatives from various departments believed to be necessary
for the identification and assessment of climate-related risks. The
process involves listing and identifying risk items, qualitatively assessing
business impacts, and evaluating risk significance. The outcomes arethen deliberated and assessed, and subsequently presented to the
Sustainability Promotion Committee for consideration.
The Sustainability Promotion Committee deliberates on climaterelated risks identified by the working group that need to be prioritizedbased on the likelihood of occurrence and impact and draws up
risk management responses in order of priority. The Committee
also deliberates on climate-related opportunities and establishes
prioritization for business strategy.
Furthermore, the Committee reports on the deliberation and review
process to the Board of Directors.

Who We Are

This simulation reﬂects only the aspects deemed calculable at present
and does not assess all climate-related risks associated with FRC.
Moving forward, we will strive to evolve our analysis in response todevelopments in global and Japanese climate-related risks.
The simulation was conducted by considering FRCʼs existing
financial information, taking into account information provided by

Investment Corporation (FRC)

Metrics and Targets
The Asset Management Company has established key performance indicators (KPIs) and goals to manage and monitor risks and opportunities.
These metrics, targets, and results are outlined below.
■ Reduction of Environmental Load

・35% reduction in CO2 emissions
by 2030 (compared with 2019, basic unit)■ Maintenance and Enhancement of Environmental and Construction PerformanceSee p.28

・85% Green Building Certification rate or higher by 2030

See p.31

Reference: https://www.fukuoka-reit.jp/en/about/sustainability.html

Fukuoka REIT Corporation 2023

35

Social Response
Related Materiality
・Creation of pleasant workplaces

Initiatives for Employees and TenantsInitiatives for Employees AMC
Support for flexible work styles

Fukuoka Realty: Numbers of credentialed personnel
As of August 31, 2023

8 years and 3 months

・Child-rearing support（maternity
leave, childcare leave system）
・Nursing care leave
・Leave for voluntary work

Full-time personnel

Training for employees

47 (Male: 21 Female: 26)

・Regular lectures by Kyushu
Economic Research Center・Compliance training

The average number of years of continuous serviceof permanent employees

Gender ratio Male: 44.7％ Female: 55.3％

Employees seconded from sponsors:
Employees seconded to a sponsor:

39・Employee welfare (e.g., 401K,
cumulative investment system)
・Encouraging use of paid
holidays
etc.

・ESG training
・Nursing care training
・In-house recreation

etc.

Career development support

Number of credentialed personnel (total number of people)

・Employee satisfaction survey
・Self-assessment system
・Career interview
・Secondment system(dispatching employees tosponsor companies)
・Promotion from contract employee
to permanent employee status

Real estate brokers:
23
ARES Certified Masters:
22
Certified Building Administrators:
5
CMAs:
3
First-class registered architects:
3
Real estate appraisers:
3
MBAs:
2
Attorney:
1
Licensed Representative of Condominium Management Company: 1

・Offering of training programs
tailored to each management level
・System for supporting acquisitionof qualifications (e.g., Real EstateTransaction Agent, Real Estate
Securitization Master)・Support for language learningetc.

Health management/Improvement of office environment
・Initiatives to prevent infectious diseases such as influenza（Implementation of influenza vaccination and full coverage of vaccination costs）
・Mandatory health checkups and comprehensive medical
examinations
・Health counseling by public health nurses
・Application system to restrict excessive overtime work
・Assistance for use of sports clubs
・Installation of personal booths, meeting booths, plants, etc.
・Installation of personal lockers
・Installation of ceiling-mounted projectors
Installation of personal lockers

A Comfortable Working Environment

Initiatives for Tenants

AMC

Meeting booths

IC

With a focus on the health and comfort of tenant employees, we are
improving the employee lounge environments within retail facilities andrenovating ofﬁce building common areas. Moreover, FRC is engaging
in a variety of initiatives for tenants as a part of efforts to promotesustainability.

・Improvement of employee lounge・Implementation of tenant satisfaction surveys
Certified as a “Fukuoka ʻWorkStyle Reformʼ Promotion
Company”（August 2018）36

Registration with Fukuoka City
Well-Being & SDGs Registration
System（July 2022）

Registration with Fukuoka
Prefecture SDGs Registration
System (February 2023)

・Distribution of sustainability guidebooks
・ESG training

etc.

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Related Materiality

Investment Corporation (FRC)

AMC Asset Management Company

・Contribute to increased attractiveness and vitalization of Fukuoka and Kyushu
・Involvement in local community

Initiatives for Local Communities
Initiatives for Local Communities

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AMC

Participation in Clean-Up Days

At Canal City Hakata, employees of the Asset Management
Company participate in events that involve sprinkling water onsidewalks to cool them down and promote well-being as part ofefforts to enhance the environment.

Asset Management Company executives and employees actively
participate in cleanup activities, of which there had been 313 asof October 19, 2023.

Safety Town Council

Various Events Held

Participation in Community Events(Hakata Gion Yamakasa)

At Park Place Oita, we established a “Safety Town Council” thatpartners with related institutions and groups to conduct crimeprevention patrols.

At Canal City Hakata, we held events such as Flea Maniacsʼ
SAKE and a recycling process experience using discarded
plastic, known as SDGs WEEK.

The Kyushu Economic Research Center AMC

We have held gatherings annually since 2008 with the cooperation of
the Japan Real Estate Institute (not held in 2020 due to concerns over
the COVID-19).
Local real estate companies, ﬁnancial institutions, and government
agencies participate in the conference, which contributes to networking
and further stimulation of the local
economy.
It has been designated as acontinuing education course for The
Association for Real Estate Securitization(ARES) masters.

Fukuoka Realty Co., Ltd., and the Kyushu Economic Research Center
have concluded a memorandum of understanding in a bid to promoteincreased cooperation in macroeconomic analysis of the Kyushu
economy. Through this initiative, both signatories to the memorandum
will share information on the current
state of the Fukuoka-Kyushu economy
as well as issues to be faced, thereby
revitalizing economic activity throughout
the region. In addition, study groups
on seasonal topics that are speciﬁc
to Fukuoka and Kyushu are held on aregular basis.

• Kyushu IR GroupThe Kyushu IR Group, which entered its 13th year in 2023, was established in cooperation with the Japan Investor Relations Association. The Group assists inlearning about the latest IR trends with IR employees of companies located in Fukuoka and Kyushu and fosters the forming of networks between participatingcompanies. Impacted by COVID-19, the study groups have been held in a hybrid style that combined online tools with face-to-face interaction.

Data Section

AMC

Sustainability

Gatherings for Real Estate, Finance, and the Economy AMC

Other Activities

Growth Strategy

After a four-year hiatus, employees participated in the regular
Hakata Gion Yamakasa Oiyama event (Hachiban Yamakasa,
Kamikawabata Shopping Arcade).

Who We Are

Annual Events■ Details of the Study Group
Date

Theme and lecturer

1st workshop
July 2023

Guiding Sustainable Evaluation in IR ~ Trends and Disclosure in IR for FY2023 ~Yoshiko Sato, Executive Managing Director, Japan Investor Relations Association

2nd workshop
November 2023

IR Activities at Yaskawa Electric(Expansion of Disclosure Information and Dialogue Opportunities)
Corporate Branding Division, Public Relations & IR Department, Yaskawa Electric Corporation
Daisuke Nakahara, Manager of IR Promotion Section

Note: Information on lecturers is current as of the time of the respective Kyushu IR Group meetings.

Fukuoka REIT Corporation 2023

37

Corporate Governance
Related Materiality
・Information disclosure and dialogue with stakeholders
・Compliance/Risk management

Stakeholder Engagement

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AMC

FRC engages in proactive dialogue with its various stakeholders aimed at sustainable growth and higher corporate value. At
the same time, FRC recognizes that fulﬁlling its required social responsibilities leads to sustainable business activities. Valuing
our relationships of trust with stakeholders, we will leverage this concept in our ESG initiatives.

Environment
・Customer satisfaction surveys
at retail facilities
・Implementation of tenantsatisfaction surveys

・Organizing community and other events
utilizing the common areas of facilities
・Participation in Hakata Town Planning
Promotion Council

Property
Clients andTenants

Region andSociety・Offering real estate, finance, and economic
education
・Disclosure of financial and non-financial
information in an appropriate and timely manner

・Collaboration in environmental
and social initiatives

・Announcing results at the Fukuoka Stock
Exchange

・Steps to share issues throughregular meetings
・Management firm evaluationand feedback

Property
Management
Firms

Unitholders
andInvestors

・Hosting the General Meeting of Unitholders
・Providing results briefings for investors(institutional and individual investors)
・Holding 1-on-1 meetings (Japan and overseas)

・ESG training

・Disclose financial and non-financial informationin an appropriate and timely manner

Employees

・Various employee education programs
・Employee satisfaction survey
・Career interview

Dialogue with Unitholders and Investors

Dialogue with Employees

FRC works to disclose information in a timely manner to reflect
the importance of dialogue with its unitholders and investors. In
our IR activities, we held an in-person financial results briefing forindividual investors in Fukuoka for the first time since the onset of
the COVID-19 pandemic.

FRC and Fukuoka Realty Co., Ltd., recognize that human resources
are our greatest asset. As part of our efforts to create comfortable
and healthy workplaces, we are endeavoring to improve theefficiency of our operations by enhancing the office environment andour systems. In addition, we provide IR information internally anddisseminate details of results announcements online as part of ourefforts to facilitate internal communication.

・General Meeting of Unitholders (once every two years)
・Results briefings for analysts and institutional investors
・IR for overseas institutional investors
・IR for individual investors
・Enhanced IR tools, information disclosure,

Policies for Customer-Oriented Business Operations

38

etc.

・Employee satisfaction survey
・President interviews, career interviews
・Internal IR・Counseling with public health nurses,

etc.

https://www.fukuoka-realty.jp/english/idea/operation_policy.html#fiduciaryduty

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Risk Management and Compliance Initiatives

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AMC Asset Management Company

Investment Corporation (FRC)

AMC■ The Asset Management Fee Structure

As an asset management

Asset management fees linked to unitholder interests

company for a listed REIT, we
and governance by building
appropriate systems andconducting appropriate
business operations in pursuit ofunitholdersʼ best interests.
In particular, we recognizethat managing transactions
between unitholders andGeneral Manager
Compliance Department
Fukuoka Realty Co., Ltd.

a stakeholder such as asponsor of FRC that might

Daisuke Yokoyama

involve conflicts of interest in

preventing such conflicts of interest are important issues to be

Based on total assets

Management Fee 2

Based on operating revenues

Management Fee 3*

Based on distributable profit

Management Fee 4

Acquisition fee

Management Fee 5

Transfer fee* We reduced the ratio of Management Fee 1 and increased the ratio of Management Fee 3 as of the fiscal
period ended February 2021

■ Decision-Making Process*Proposals by the responsible
department

addressed in governance.
We have established strict rules for transactions with stakeholders
to prevent conflicts of interest and make decisions based on theserules. In addition, we verify the appropriateness of the decisionmaking process through internal audits and other means.
We also ensure objectivity by receiving advice and evaluations
from outside specialists to avoid taking a self-righteous approach inour decisions.

■ Managing Conflicts of Interest

Third-party assessment byexternal experts［Real estate appraisals］● Japan Real Estate InstituteInspection by the ComplianceDepartment General Manager● The Tanizawa Sogo Appraisal

Co., Ltd.

● Daiwa Real Estate Appraisal

Deliberations by the Investment
Management CommitteeCo., Ltd.

［Market reports］● Analysis on trade areas andDeliberations/Resolution by theCompliance Assessment Committee

competition situation● Adequate rent levels,■ Training Records■ Fukuoka REIT Corporation, Directors■ Fukuoka Realty Co., Ltd., Directors

etc.

［Engineering reports］

Resolution/Decision-making reportby the Board of Directors

When a transaction such as the purchase and sale of a property
between FRC and a stakeholder, including a sponsor, takes place,
the Asset Management Company must address any possibilityof prioritizing the interests of interested parties over investors.
Fukuoka Realty Co., Ltd., has accordingly established the Basic
Policy on Compliance, as well as compliance regulations and otherinternal rules to prevent any conflict of interest. Based on theserules, we obtain a preliminary assessment from the ComplianceDepartment General Manager and ensure deliberations by theCompliance Assessment Committee, consisting of the ComplianceDepartment General Manager and three outside experts in order toengage in the management of any conflict of interest pertaining toour dealings with stakeholders in an appropriate manner.

● Law abidance and earthquake

resistance● Check of soil contamination,

toxic substance and use status● Replacement market price,

expenses for long-term
maintenance and repairs, etc.

* The prior consent of the Investment Corporationʼs Board of Directors is obtained in cases falling under theprovisions of Article 201-2 (1) of the Act on Investment Trusts and Investment Corporations.

Oct. 2021–
Sept. 2022

Oct. 2022–
Sept. 2023

Compliance training(including e-learning)

6 times

6 times

7 times

Sustainability training

2 times

3 times

4 times

Vice President
Board of Directors(Non-Executive)

Corporate Auditor(Non-Executive)

Data Section

Oct. 2020–
Sept. 2021

Supervisory Director

Executive Director

Zenji Koike

Takashi Tanabe

Investment unit holdings: None

Investment unit holdings: 11

Investment unit holdings: None

Glossary

Supervisory Director

Vice President
Board of Directors(Non-Executive)

Vice President
Board of Directors(Non-Executive)

President and CEO

Yukitaka Ohara Hiroshi Shimuta

Zenji Koike

Sustainability

Fukuoka REIT Corporation Board of
Executive Officers

The term of office for all executive directors and supervisory directors
was set as two years from May 29, 2022.

Yasuo Kawasho

Growth Strategy

an appropriate manner andManagement Fee 1*

Who We Are

strive to enhance compliance

Masanori Kozuma Kazuomi Kamikawa

Engineering reports
Reports outlining the results of a physical survey of a property. These often include surveys on building
conditions, soil contamination, long-term repair and refurbishing costs, and earthquake risk.
Fukuoka REIT Corporation 2023

39

Overview of Properties Owned

FRC carefully selects and invests in properties with the potential to generate stable cash ﬂow over the long term. It owns
properties with widely divergent uses, mainly retail and ofﬁce buildings, to diversify risks within the region.
Asset Ratio (As of September 1, 2023)■ Investment Areas (based on acquisition price)■ Investment Type (based on acquisition price)

RetailOffice buildings

OthersFukuoka metropolitan area

48.6%

37.7%

13.7%

78.8%

Other
Kyushuareas
21.2%

Number ofproperties owned:

Total acquisition price:36

221,664million yen

Note: Acquisition price data is rounded
down to the nearest million yen.

28
25

35

Gannosu Sta.

Nata Sta. Wajiro
Sta.
Tonoharu Sta.

23
A

27

26

31

Sta.

Sta.

36

Across Kyushu
Sta.

Nokonoshima

Sta.
Sta.
Sta.
Sta.

29
Sta.

21
32

Sta.

40

Sta.

Befu
Sta.

Sta.

Sta.

22

Sta.

BEST DENKI
Stadium

Sta.
Sta.

Sta.

Sta.

Sta.

30
34

24

33

Kyus
Haka hu Shinta M kanse
inam
i Linen/FUKUOKA
PayPay DOME

Fukuoka CityIn terms of properties, as of September 1, 2023, we own 11 retail facilities, 13 office buildings, and 12 other properties (including logistics
facilities, residences, and hotels).
In 2023, we acquired a total of three properties, namely Kumamoto East Front Building, Axion Befu-Ekimae Premium, and Hakata FD
Business Center. In addition, we plan to acquire Island City Minato Bay related site with an acquisition date of March 31, 2029.

1

2

3

4

5

6

Canal City Hakata
November 9, 2004/32,000

Canal City Hakata・B
March 2, 2011/21,060

Park Place Oita
November 9, 2004/19,610

SunLive City Kokura
July 1, 2005/6,633

Konoha Mall Hashimoto
March 1, 2018/10,000

Square Mall Kagoshima
Usuki
September 28, 2006/5,300

8

9

10

11

Who We Are

Property name/Acquisition date/Acquisition price (Millions of yen)

Retail:11

7

12Hanahata SC
September 3, 2007/1,130

Kurume Higashi
Kushiwara SC
February 1, 2008/2,500

Kʼs Denki Kagoshima
March 27, 2008/3,550

Marinoa City Fukuoka(Marina Side Building)
May 1, 2015/5,250

13

14

15

16

17

18

19

Gofukumachi BusinessCenterNovember 9, 2004/11,200

Sanix Hakata Building
September 30,
2005/4,400

Taihaku Street BusinessCenterMarch 16, 2006/7,000

Higashi Hie BusinessCenterMarch 13, 2009/5,900

Tenjin Nishi-Dori Center
Building
February 1, 2013/2,600

Tenjin North Front
Building
March 28, 2013/2,800

Higashi Hie BusinessCenter II
March 1, 2018/4,230

20

21

22

23

Higashi Hie BusinessCenter III
May 29, 2020/3,290

Tenjin Nishi-DoriBusiness Center (landwith leasehold interest)
June 1, 2021/7,700

Hakata Chikushi-Dori
Center Building
March 1, 2022/4,320

Kumamoto East Front
Building
March 28, 2023/1,450

Hakata FD BusinessCenter
September 1, 2023/14,100

26

27

28

29

30

31

32

LOGICITY Minato Kashii(Logistics)
March 27, 2015/8,150

LOGICITY Hisayama（Logistics）
June 1, 2017/5,050

LOGICITY Wakamiya（Logistics）
June 30, 2020/1,700

Amex Akasakamon Tower(Residence)
September 1, 2006/2,060

City House Keyaki Dori(Residence)
December 20, 2007/1,111

Aqualia Chihaya(Residence)
March 1, 2012/1,280

D-Wing Tower(Residence)
March 1, 2013/2,800

33

34

35

36

NEW

24

NEW

Canal City BusinessCenter Building
November 9, 2004/14,600

Other
Properties(Logistics,
Residences,
Hotels):1225

Sustainability

Kumamoto
Intercommunity SC
November 30, 2006/2,400

Growth Strategy

OfficeBuildings:
13

Tosu Logistics Center（Logistics）
March 28, 2014/1,250

Data Section

NEW

A

Scheduled tobe acquired:1
Granfore Yakuin Minami（Residence）
November 4, 2014/1,100

Axion Befu-Ekimae
Premium (Residence)
April 27, 2023/1,525

Hotel FORZA Oita (Hotel)
March 1, 2013/1,530

Tissage Hotel Naha
(Hotel)December 7, 2018/2,835

Island City Minato Bay relatedsite (land with leaseholdinterest) (tentative)
March 31, 2029/8,082

Fukuoka REIT Corporation 2023

41

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

Financial Highlights
Total Operating Revenues

Profit2,939(Millions of yen)

(Millions of yen)

2,934

10,000 9,242

9,231

9,162
8,518

8,904

8,867

8,658

8,830

9,037

9,284

2,939

3,000

2,987

2,899
2,586

2,675

2,816

2,814

2,804

2,849

8,000
2,000
6,000

4,000
1,000
2,000

0

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

0

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

NOI

Dividend per Unit

(Millions of yen)

(Yen)
5,633

5,591

6,000

5,596
5,307

5,347

5,336

5,334

5,370

5,274

4,000

3,693

3,642
3,250

4,500

3,000

3,000

2,000

1,500

1,000

0

3,687

5,152

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

0Book value at theend of the period*1

250,000
31,80434,08736,923

184,715

183,532

182,336

37,92740,76142,812

187,891

186,972

186,088

185,177

43,026

46,530190,163

188,746

48,478

3,523

3,580

3,753

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

41.5

41.7

41.6

42.4

（%）
60

50

0000

200,000

3,536

LTV

Unrealized gains = Latest appraisal value –Book value at the end of the period*1
37,6483,539

Feb. 2019

Historical Appraisal Values (Unrealized Gains)(Millions of yen)

3,361

190,913

39.7

39.7

39.8

41.4

41.3

41.2

40

150,000
30
100,000
20
50,000

0

10

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

Glossary

42

0

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

NOI
An abbreviation for Net Operating Income. This reflects net income stemming from the real estate leasing and
REIT business, deducting expenses such as administrative costs and property taxes from rents in a given
fiscal period. Costs not related to cash expenditures, including depreciation, interest paid on borrowings, ortaxes, are not deducted.
This is used to assess real estate and REIT asset value and is similar to EBITDA, which focuses on operating
cash flow in assessing corporate value.
When determining the theoretical real estate property price, it is a common practice to divide NOI by thecapitalization yield (cap rate).

LTV
An abbreviation for Loan to Value and an indicator of
a companyʼs borrowing ratio as well as a measure ofstability in borrowing. The lower the value, the greater
the degree of safety against redemption of debt.
[Calculation method] LTV (%):
(Interest-bearing debt / Total assets) × 100

Non-Financial Highlights
Asset Management Company:
Number of full-time officers and employees*2

Asset Management Company Full-Time Officers and Employees:
Percentage of male and female employees*3
Male

41

41

42

46

44
41

41

40

47

100

80

30

60

20

40

10

20

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

0

Asset Management Company:
Average number of years of full-time employment*4

8.6

8.10

9年
9.1

8.10

47.6

53.7

53.7

52.4

51.2

51.2

50.0

48.8

48.8

50.0

52.3

56.1

56.5

55.3

9年
6か月
9.6

9年
6か月
9.6

47.7

43.9

43.5

44.7

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

Growth Strategy

29thFeb. 2019

10

46.3

41

40

(Years/Months)

46.3

Who We Are

50

0Female（%）（People）

Number of IR Meetings in Japan and Abroad*5(Meetings)

9年
9.4

9年
6か月
8.9

7.11
10か月

200

9年
8.3

148

160

8

149
133

6

116

114

120

105

101
95

90

Sustainability

80

4

54

40

2

0

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

0

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

Power Consumption*6
Power consumption (MkWh)(MkWh)

100,000

Water Consumption*6,*7
City water (tap water) (m3)Basic unit (MkWh/m2)

Treated water*8 (m3)

（Data coverage）
72.6％

70.3％

70.7%

82,47982,190(MkWh/m2)

0.180（Data coverage）(m3)

800,000

88,61180,000

0.167

72.6％

70.3％

70.3%

70.7%

(m3/m2)1.600

667,074
79,6240.170

600,000

565,663
1.258

1.200

507,865464,518

60,0000.160

400,000

0.150

200,000

1.054
0.953

Data Section

70.3%

Well water and rainwater (m3)Basic unit (m3/m2)

0.800

0.872

0.155
0.153

40,000

0.400

0.149

0

March 2019–
February 2020

March 2020–
February 2021

March 2021–
February 2022

March 2022–
February 2023

0March 2019–
February 2020

March 2020–
February 2021

March 2021–
February 2022

March 2022–
February 2023

*1. Book value at the end of period does not include construction in progress.
*2. The number of full-time officers and employees indicates the total number of directors and auditors, permanent employees, contract employees, temporary employees, secondees, etc., who are employed on a full-timebasis at Fukuoka Realty Co., Ltd.
*3. The gender ratio is calculated as the ratio of males and females to the number of full-time personnel.
*4. Average number of years of employment is calculated as the average service years of permanent and contract employees of Fukuoka Realty Co., Ltd.
*5. The number of IR meetings in Japan and abroad shows the total number of IR meetings, based on the dates on which they were held, with institutional investors and analysts through interviews and telephone conferences
generally regarding the results for the previous period. There were fewer face-to-face interviews in the 32nd fiscal period due to the impact of the COVID-19 pandemic.
*6. Total value for 15 properties, including five retail facilities, nine office buildings, and one logistics facility. Basic unit is calculated by adjusting the total floor area (m2) by the occupancy rate. Data coverage is the area ratio
of properties subject to data aggregation as compared to all properties (excluding land) and is calculated at the end of the fiscal period. The figure for Canal City Hakata, Canal City Hakata・B, and Canal City BusinessCenter Building reflects total power and water consumption for the entire Canal City Hakata complex, including electricity and water consumption by some theater and hotel areas not owned by the Investment Corporation.
The figure for Park Place Oita covers only the main building section and excludes the section for independently run stores. The figure for Taihaku Street Business Center covers only the office building and excludes theresidential building. Water consumption excludes some well water volumes for which data cannot obtained.
*7. Includes treated water volume.
Fukuoka REIT Corporation 2023
*8. Includes externally purchased greywater.

43

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

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

Feb. 2013

Aug. 2013

Feb. 2014

Aug. 2014

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Operating revenue

7,200

7,565

7,574

7,779

7,789

8,423

8,343

8,234

9,730

8,122

Operating income

2,622

2,848

2,801

2,824

2,860

3,167

3,141

3,069

4,585

2,920

Ordinary income

2,005

2,272

2,239

2,263

2,370

2,663

2,670

2,616

4,199

2,562

Profit

2,004

2,271

2,238

2,262

2,369

2,661

2,669

938

4,198

2,556

NOI

4,444

4,751

4,732

4,800

4,829

5,229

5,237

5,164

5,010

4,998

Total assets

160,574

167,857

167,492

167,824

167,369

181,597

181,445

179,513

175,063

178,063

Net assets

71,182

81,712

81,67981,70381,81193,804

93,812

92,081

93,681

93,699Interest-bearing debt

74,675

71,10071,025

71,15070,77572,40072,32571,95066,67569,900Interest-bearing debt ratio（%）

46.5

42.4

42.4

42.4

42.3

39.9

39.9

40.1

38.1

39.3

Depreciation and amortization expenses

1,268

1,343

1,354

1,387

1,390

1,458

1,471

1,470

1,455

1,474

431

612

848

740

328

445

630

665

1,789

741

Cash flow provided by (used in) operating activities

3,120

3,609

3,699

3,890

3,735

4,167

4,174

4,336

3,685

3,590

Cash flow provided by (used in) investing activities(3,067)(7,897)(916)(2,312)(1,452)(14,488)

(606)

(772)

4,220

(6,029)Cash flow provided by (used in) financing activities

(666)

4,651

(2,359)(2,115)(2,635)

10,934(2,747)(3,043)(7,872)

667

Cash and cash equivalents at year-end

7,024

7,387

7,810

7,273

6,920

7,533

8,353

8,873

8,905

7,134

Dividend per unit

3,257

3,291

3,243

3,278

3,435

3,563

3,574

3,479

3,398

3,422

EPS

per unit

3,257

3,291

3,243

3,278

3,434

3,563

3,573

1,256

5,621

3,422

BPS

per unit

115,696

118,423

118,376

118,410

118,567

125,574

125,585

123,267

125,410

125,434

123,041

127,080

128,375

131,215

136,051

144,472

148,558

152,259

150,328

152,639

5,319

5,238

5,207

5,288

5,450

5,515

5,543

5,448

5,351

5,395

Investment unit price (Yen)

153,600

145,000

171,400

199,000

227,000

188,700

194,200

186,100

177,100

164,300

Total number of investment units issued

615,250

690,000

690,000

690,000

690,000

747,000

747,000

747,000

747,000

747,000

Number of full-time officers and employees*1

36

40

40

34

35

38

41

39

40

38

Years of service (Years/Months) *

5.7

6.1

6.2

7.1

7.5

6.0

6.2

6.5

6.9

6.11

ー

ー

ー

ー

122

154

147

106

126

116

Financial Information
Earnings (Millions of yen)

Financial conditions (Millions of yen)

Capital expenditures
Cash flow (Millions of yen)

Per-unit indicators (Yen)NAV per unit
FFO

per unit

Investment unit information

Non-Financial Information

1

Number of IR meetings (Japan and overseas）*

2

Notes:
1. Gains and losses on the sale of the Aeon Hara Shopping Center and Aqualia Kego, which were transferred in the 25th ﬁscal period, were handled in the following manner due to differing tax and accounting standards.
1）An amount equivalent to impairment losses on the Aeon Hara Shopping Center booked in the proﬁt and loss statement in the 24th ﬁscal period was booked as an allowance for a temporary difference adjustment on the statement
concerning the allotment of funds for the 25th ﬁscal period.
2）Gains on the sale of Aqualia Kego were recorded on the proﬁt and loss statement for the 25th ﬁscal period.
3）The return of allowances for a temporary difference adjustment was booked on the statement concerning the allotment of funds for the 25th ﬁscal period.
2. Dividend per unit is calculated as follows.
24th ﬁscal period: [Net proﬁt] + [Reserve for temporary difference adjustment] – [Earnings carried forward to the next period]
25th ﬁscal period: [Net proﬁt] – [Return of reserve for temporary difference adjustment] – [Earnings carried forward to the next period]
3. The Investment Corporation undertook a ﬁve-for-one split effective March 1, 2014. Dividend and NAV per unit up to the 19th ﬁscal period have been retroactively adjusted to reﬂect this split.
4. The number of IR meetings in Japan and abroad shows the total number of IR meetings, based on the dates on which they were held, with institutional investors and analysts through interviews and telephone conferences generally
regarding the results for the previous period.
*1. The number of full-time ofﬁcers and employees indicates the total number of directors and auditors, permanent employees, contract employees, temporary employees, secondees, etc., who are employed on a full-time basis at Fukuoka
Realty Co., Ltd.
*2. The number of IR meetings convened in Japan and abroad from the 17th to 20th ﬁscal periods is not recorded, as records do not exist for these periods.

44

27th

28th

29th

30th

31st

32nd

33rd

34th

35th

36th

37th

38th

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

9,162

8,518

8,904

8,867

8,658

8,830

9,037

9,284

2,965

3,238

3,306

3,318

3,273

2,966

3,061

3,204

3,185

3,181

3,223

3,372

2,624

2,861

2,935

2,939

2,900

2,587

2,677

2,817

2,816

2,805

2,851

2,988

2,623

2,860

2,934

2,939

2,899

2,586

2,675

2,816

2,814

2,804

2,849

2,987

5,079

5,493

5,591

5,633

5,596

5,307

5,347

5,336

5,334

5,370

5,274

5,152

177,283

193,112

195,433

195,106

194,795

199,004

199,559

199,804

198,745

201,223

201,442

203,868

93,766

101,799

101,874

101,878

101,837

101,525

101,614

101,755

101,753

101,743

101,788

101,926

68,90075,50077,50077,50072,50082,40082,40082,40082,40083,90083,90086,450

38.9

39.1

39.7

39.7

39.8

41.4

41.3

41.2

41.5

41.7

41.6

42.4

1,500

1,602

1,622

1,651

1,660

1,686

1,623

1,552

1,486

1,514

1,499

1,531

600

657

947

476

465

790

687

445

600

1,946

385

1,602

4,292

4,149

4,832

4,863

3,985

3,450

5,374

4,724

3,146

4,712

4,688

3,939

(478)

(15,326)(3,604)(1,043)(220)(7,136)(842)(1,425)(658)(5,498)(117)(3,436)(3,555)

11,734(859)(2,933)(2,938)2,000(2,586)(2,674)(2,816)(1,314)(2,803)

(298)

7,392

7,950

8,319

9,205

10,032

8,348

10,293

10,917

10,588

8,488

10,255

10,459

3,512

3,593

3,687

3,693

3,642

3,250

3,361

3,539

3,536

3,523

3,580

3,753

3,512

3,593

3,687

3,692

3,642

3,249

3,361

3,538

3,536

3,523

3,580

3,752

125,524

127,888

127,982

127,987

127,936

127,544

127,656

127,833

127,831

127,818

127,875

128,048

156,204

161,315

164,250

167,118

170,680

171,592

171,943

171,502

178,079

178,348

182,750

185,197

5,520

5,606

5,725

5,767

5,728

5,368

5,401

5,358

5,403

5,425

5,319

5,133

173,100

170,400

169,300

178,300

167,900

136,500

168,500

175,500

156,800

170,300

164,600

162,100

747,000

796,000

796,000

796,000

796,000

796,000

796,000

796,000

796,000

796,000

796,000

796,000

38

39

41

41

42

41

41

40

44

41

46

47

7.7

7.10

7.11

8.6

8.10

8.10

9.1

9.6

9.6

9.4

8.9

8.3

169

129

148

149

133

54

114

90

105

101

116

95

Glossary

BPS
An abbreviation of Book Value per Share. This shows net assets per unit
and is viewed as an indicator for stability.
[Calculation method] BPS: Net assets / Total number of units issued
EPS
An abbreviation of Earnings per Share. This shows net profit per unit andis viewed as an indicator of a companyʼs ability to generate earnings.
[Calculation method] EPS: Net profit / Total number of units issued

Data Section

9,231

Sustainability

9,242

Growth Strategy

9,178

Who We Are

8,194

FFO
An abbreviation of Funds from Operations. This shows how much cash flow
is generated from rental income. The larger the FFO per unit, the greater thecompanyʼs profitability.
[Calculation method] FFO: Net profit + Depreciation and amortization expenses +Impairment loss − Gains/losses from the sale of real estate
FFO per unit: FFO / Total number of units issued

Fukuoka REIT Corporation 2023

45

Fukuoka REIT Corporation
1-2-25 Sumiyoshi, Hakata, Fukuoka City, Fukuoka, Japan

https://www.fukuoka-reit.jp/en/@fukuokareit8968

facebook.com/fukuokarealty

fukuoka_realty

To help stakeholders better understand FRC and its operations, FRC is focusing efforts on its IR activities.
FRC uses its website to post press releases and various disclosure materials and provide information on its portfolio of investment properties
and other items. In addition, FRC uses social media such as Facebook and X (formerly Twitter) to disseminate a wide range of information on the
Fukuoka and Kyushu areas, including information on these regionsʼ economies, real estate markets, retail facilities, tourist attractions, and muchmore. We invite you to make use of these information resources.