External Environment (Initiatives of Fukuoka City)

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

Beijing

Busan Osaka Tokyo

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

⑧

①⑦

④
②
③
⑤

Kushida Shrine
Station⑬
JR Hakata Station⑩ ⑪

Canal City Hakata⑥⑨

Nishitetsu Fukuoka(Tenjin) Station

Initiatives Aimed at Attracting Companies

Who We Are

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

ShanghaiRedevelopment Project⑭⑫■ Attracting International Financial Functions, TEAM FUKUOKA
Note: Focus areas

Hakata Connected■ Redevelopment Projects■ Redevelopment Projects

Name
Photo provided by Fukuoka City

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

57

57

2,989

2,600

50

2,157

2,500
2,000

40

Business
Opening Rate
(FY2021)6.3％

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

(

53

65

1st

)

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.”

16⑨

Completion month

The Nishi-Nippon City Bank Head Office Main
Building Reconstruction ProjectFebruary 2025
(scheduled)① dori Business Center Reconstruction Project

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)

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

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

■ Main Deregulation in the Tenjin Big Bang Area
(National Strategic Special Zone)■ 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

No. ofemployees

64

58

3,500

(Number of companies)

Name

Sustainability

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).

Completion month

Sumitomo Life Fukuoka Building/Tenjin Nishi-

Photo provided by Fukuoka City

Growth Strategy

Tenjin Big Bang

● 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● Measures to Address Risks ● Opportunities

Respond to risks and opportunities

Significant risks

Impact on stakeholders

Respond to risks and opportunities• 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

Related Materiality• Reduction of environmental load
• Maintenance and enhancementof environmental and construction
performance

Human Resource
Related Risks

Related Materiality• Creation of pleasant workplaces(Asset Management Company)

Infectious Disease, Epidemic,
and Other Related Risks• Pandemic
Related Materiality

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• 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

Related Materiality• Creation of pleasant workplaces(tenants)

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

Market-Related Risks• Increase in interest rates• Fluctuations in the investment unit
price
Related Materiality• Information disclosure and dialogue
with stakeholders

Risks from Property
Degradation, Deterioration• Increase in repair and maintenanceexpenses• Decline in property competitiveness
Related Materiality• Maintenance and enhancementof environmental and construction
performance

Regulatory Risks• 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● 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• New laws and regulations• Changes in the tax system
Related Materiality• Compliance/Risk management• 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● Invest in various types of properties to reduce the risk of• Information leaks

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

Compliance Risks• Violations of organizational laws andregulations• Conflicts of interest
Related Materiality• Compliance/Risk management

Glossary18• 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 priceas well as monitoring of operating status and thoroughcredit management during the lease period● Deposits and security deposits against items including

rent delinquency; collateral by such means as guarantor
companies● 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● 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• 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

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

portfolio fluctuation by diversifying rental market cycles
and tenant industries
See pp.2–3• Rent reduction, rent nonpayment, andvacating risks due to deterioration of alesseeʼs financial situation

IT-Related Risks
Related Materiality• 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

• Vacancy rate increases associated withworsening real estate market conditions;decrease in dividends due to rent
decreases• 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• Maintenance and enhancementof environmental and construction
performance• Creation of pleasant workplaces(Asset Management Company)• Creation of pleasant workplaces (tenants)• 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• Increase in vacancy rates• Decrease in rent

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

Sustainability• Deterioration in the caliber of humanresources• Dependence on human resources• 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

Risks from Changes in
Business Conditions

Growth Strategy• Reduction of environmental load
• Soil pollution and toxic substances• Increase in property management costs
due to more stringent environmental laws
and regulations, such as the strengtheningof the Building Energy Conservation Law● Consider extending lease agreement terms, fixing of such

Who We Are● Consider that it is possible to purchase insurance at a

Risks from Natural
Disasters● 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

Canal City Hakata Alpen FUKUOKA

General Manager of theReal Estate Management
Department

Kuniaki Mishima

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.

Fukuoka REIT Corporation 2023

Data Section

20

Park Place Oita

Sustainability

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.

Real EstateManagement
Department

Growth Strategy

Hideya Kanno

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.

Who We Are

Executive Officer andGeneral Manager of theInvestment Department

Management Strategy

21

Financial Strategy

Finance
Department

Procured funds through green finance, a first for FRC

Regarding our ﬁnancial strategy, we will ﬁrst and foremost
maintain a conservative interest-bearing debt ratio from the22

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

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

3.7

3.9

4.1

4.1

4.2

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

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

Past 5 years

Past 10 years

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.

Investment unit Price Performance for the Most Recent Fiscal Year
0 23rdSecured a 12.4 billion yen green loan to fund the acquisitionof the Hakata FD Business Center in September 2023

Past 3 years
Cumulative
total

24th 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

120

（%）

FRC

TOPIX Real Estate Index

TSE REIT Index

110
100
90
80
August 2022

February 2023

August 2023

Data Section

Financial Strategy/Capital Strategy

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（％）

Sustainability

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.

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)

July 2019

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.

Growth Strategy

Hiroyuki Ayabeshowcasing 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.

Who We Are

Executive Officer andGeneral Manager of the
Finance Department

perspective 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.

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