□ IntroductionCEOʼs Message■ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

but rather is in an area adjacent to Nakasu and Kawabata,on retail facilities and incorporate other assets, such as

which, despite being situated in the heart of Fukuoka, didresearch-and-development facilities and data centers, as

not see much daytime foot traffic at the time we devel-

well as those in sponsor business fields, like energy-related

oped this property. Hakata has a long history as a home tofacilities in the infrastructure sector.

wholesale districts and as a center for many other mer-

Although there has been much debate over office as-

chants, but a large site was left behind when the area emp-

sets, for example, regarding how work styles will changetied out after the center of business moved to Tenjin andpost COVID-19, when we consider the location of Fukuo-

Hakata stations. So, we developed Canal City Hakata withka in Kyushu, it is clear that this type of asset will holdthe desire to create a new city here. With the birth of Canalfirm. Moreover, I believe developments as part of Tenjin

City Hakata in this area where people rarely came before,

Big Bang must prepare workplace environments that candespite being in the heart of the city, the development hascontribute to new office formats, work-style reforms, andbecome a new tourist destination in Fukuoka that attracts

sustainability.

visitors from a wide area and receives many people fromaround Asia.
Canal City Hakata is home to a movie theater and play-

Q What is the appeal of Fukuoka?

houses, and we have aimed to make it into an entertain-

Zenji Koike

Q

Please tell us about yourself.

After working for a local bank (currently THE NISHI-NIPPONCITY BANK, LTD.) following my graduation from university, I
joined Fukuoka Jisho Co., Ltd., one of our sponsors, wheremeals, walking the grounds, and watching the fountains

ging about my home. But the best thing about Fukuoka isand performance events. Under the initial concept of cre-that the city is extremely compact, which I think makes it

ating a new city here, we developed the property with thethe perfect size for people to really experience the scale ofgoal of limitlessly raising the accessibility of people in a way

their lives. Including the region around Fukuoka City, the ur-that links to Hakata and Tenjin. I believe that the property

ban area has a population of about 2.6 million people. The

continues to realize this aim.

average commute time is less than half that of the Tokyo

On the other hand, one of the very real challenges themetropolitan area, the city is surrounded by nature, withproperty faces is the recent transformation in consump-both the ocean and mountains nearby, and it is compact

tion activity, namely a decrease in the weight of in-personwith sufficient public transportation infrastructure.

shopping and the shift to e-commerce. So, the question is

Although it might not offer the same amount of informa-

how can we incorporate efforts aimed at e-commerce into

tion as Tokyo, in a metropolis like Tokyo the scope that can

Canal City Theater and plans events at our retail facilities.

conventional retail facilities? For tenants, brick-and-mortar

be grasped on oneʼs own is always limited. In contrast, I

More recently, I served the past four years as Chairman

store sales and e-commerce sales both lead to profits, so

feel Fukuoka is an extremely comfortable city because theof Sunlife Co., Ltd., which is involved in building manage-

it is important for us to consider these as a whole. One

residents can grasp the overall layout of their city as theirment, so I have experienced most types of work involved

potential approach that involves the entire facility is to elim-

sphere of everyday life. Which is why people like me whoin real estate.

inate inventory at brick-and-mortar stores and instead use

are from Fukuoka feel that Tokyo is a very difficult place tothese like showrooms where customers choose products

reside when we imagine living there.

Other than work, I was a member of the yacht clubthat can be shipped to them from another location.

Every year, I participate in the Hakata Gion Yamakasa

I spent many years primarily involved in duties related tofor four years during my time in university, where I sailed

retail property development and operations. Canal City

470-class two-person yachts. I still love the ocean but no

When Fukuoka REIT Corporation was initially listed on

Festival, a unique experience that offers many opportuni-

Hakata is a particularly special property for me because I

longer sail. Currently, my entire interest in sports involves

the stock exchange, one area of concern for our inves-ties to interact with local people. As part of my duties, I

was involved in its development and operations following

golfing and running. I ran my first marathon during thetors was the high ownership weight of Canal City Hakata.

have also had the privilege of being involved in the festival

its opening, as well as in many aspects of the Canal City

first Fukuoka Marathon seven years ago and have entered

However, we have since achieved a balance by investing

as the person responsible for the Canal City Hakata kazari

Hakata East Building, from its development in 2011 to

civic marathons in different areas two or three times every

in office building, hotel, residential, and logistics facilities

yamakasa (decorated float). It is at these times when inter-year since.

in addition to retail facilities. Challenges like the recent

acting with all of those who were born and grew up here,

COVID-19 pandemic also tend to drive structural changes

and who are involved in the festival as a part of their life-

Q Hakata and FRC’s other assets?

in consumption, though, where city-center retail facilities

style, that I have strongly felt the character of Hakata andsee a greater amount of volatility. In terms of asset balance,

the humanity of the city. My grandfather was a descendent

I therefore feel we should invest more in office buildingsof a wholesale merchant from the Hakata area, so I too

Canal City Hakata is not located near one of Fukuokaʼsand logistics facilities, which are growing due to e-com-

carry the blood of the Hakata merchants. I am always re-

major transportation hubs such as Tenjin or Hakata Station,

merce. We are also looking to curtail the weight placed

minded that I am glad to have been born and raised in thisattracting tenants.
I also served as General Manager of the Office of the
President and General Manager of the Administration Division, so I have acquired experience throughout the compa-

What is the future strategy for Canal Cityny, including development as a real estate developer andin property management. And I managed the company(currently FJ. Entertainment Works Ltd.) that operates the16

I am originally from Fukuoka, so I could go on forever brag-

Fukuoka REIT Corporation 2021

Value-Creation Activities

Value-Creation Activities

President and CEO
Fukuoka Realty Co., Ltd.

ment retail facility where people can pass the time enjoying

Fukuoka REIT Corporation 2021

17

□ IntroductionCEOʼs Message

skills, build a career, and accumulate knowledge at eachof the area. Although those of us from Hakata might not

rank. Moreover, as a Company we intend to create a sys-

be the most polite people, we are very kind-hearted. Moretem that firmly supports employees and provides them withthan anything, the people here love this city and its local

opportunities besides just training to extend their knowl-

By the time I received the baton as president from myfestivals.

edge so that they can capture and address future changes

predecessor, Mr. Matsuyuki, our asset scale already ex-

in the industry.

ceeded 200 billion yen. Although the investment unit price

Q of sustainability management?

What are your thoughts on the future

operations as we manage various crises.

sure on me, but we have set the asset scale target for thealty manages FRC, we see that creating different types ofthe environment. Our main sponsor, Fukuoka Jisho Co.,

however, we must manage the company from a long-termvalue through business clearly relies on the core of humanLtd., is an unlisted owner-operator company. In this re-perspective and not aim to grow our asset scale blindly.

resources, or rather human capital. When I was appointed

spect, it can be led by the objectives of top management

Because I know this city, because I know this region, I am

as president, I thought that the employees of REIT manage-

and can move with speed and flexibility. On the other hand,aware there is still so much more we can do. We intend toment companies would be specialists in real estate finance,

this presents the risk that it will not highly prioritize the cor-

continue investing in a way that only a region-specific REIT

many of whom would be focused on their own occupations

porate governance code required of listed companies andcan and grow our assets in a way that supports this region.

and fields of specialty, and would mainly be concerned

consideration of ESG, for example.

If we can manage this, I believe we will effortlessly clear our

Meanwhile, FRC, to which we have entrusted manage-

asset scale goal of 250 billion yen.

ment operations, is a listed company. So, I believe it is

Although I feel we are starting to see an end to the

In other words, I thought they would be smart, intellectual

necessary for us to properly fulfill our responsibilities in a

COVID-19 pandemic, there is no chance that everything

employees who would avoid becoming overly attached.

speedy manner together with our sponsor companies aswill return to the way it was before, which is why I believe

But I was reassured when I realized that, unexpectedly,

we listen to the feedback of the market. In particular, it isthat lifestyles, working environments, business models,

everyone at here actually had a special place in their hearts

important for us to think about first properly acknowledging

and a variety of other areas will continue to change af-

for the city, whether it was in terms of working for a

the demands made by global institutional investors. In otherter COVID-19. Now is truly a time during which we must

region-specific REIT management company, providing

words, one truly urgent challenge is properly employing

consider how to set and manage our priorities. I therefore

social value for this region, or contributing to society. So, I

the concept of “integrated thought” throughout the orga-

sent a message to our employees saying that if that is thenization while prioritizing ESG in order to fulfill the social

case, then let us all endeavor together in this kind of work.

responsibilities that are demanded by those at the forefront

It has become difficult to create a sense of belonging

of the times in line with our management philosophy of “ActZenji Koike President and CEO
Place of birth: Fukuoka City
Hobbies: Running, golf
Profile1988 Joined Fukuoka SOGO Bank (currently THE NISHI-NIPPONCITY 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 Current position starting in June

Value-Creation Activitiesof the REIT management company for which they worked.

Local, Think Global.”

think these are very important concepts. If we were to only

FRC was also the first in the J-REIT industry to publish

pursue profits for ourselves and business rationalization

an integrated report. But we must continue to evolve inte-

to grow the company, something contrary to a sense of be-

grated thinking and integrated reporting through a virtuous

longing would emerge, which is why I feel that it is import-

cycle. In other words, we must do more than simply enrichant for managers to find a balance between the two. It iswhat we include in the report and instead pursue this con-my hope that our employees feel that their work is reward-

tent in a manner that coincides with effectiveness. There ising and engage in their work with a constant awareness ofno question that I also feel responsibility as the head of the

how their work can contribute to the city and society.

Company. And we must match ESG with business in a waythat considers how we should engage in the real estate

concerned, I hope that we attract both new graduate

business to create a sustainable society for the future. For

employees, as well as employees who have built up differ-

us to support community building and the lifestyles of peo-ent careers elsewhere and moved or returned to Fukuoka

ple through real estate, we must look 10, 20, even 50 years

with a desire to work in the city. I want our employees to

into the future, be quick to pick up on what is required

maintain the broad vision of Act Local, Think Global here in

now for that purpose, and both consider how to link these

Fukuoka and Kyushu. And so I feel we must also offer sys-requirements to growth for FRC and to actually engage intematic training whereby employees can properly acquire

meeting these requirements.

Fukuoka REIT Corporation 2021

ers a solid business model that is built on a core approach

good position. In this sense, this also puts a lot of prestime being at 250 billion yen. As a region-specific REIT,

As far as future recruitment and employee training are

believe we must construct and reveal to all our stakehold-recovered, so I received this baton while we were in a very

As far as ESG is concerned, I do not think we can wait on

and loyalty toward companies in the world of today. But I□ Data Section

such as ESG and that enables us to continue businessand management resources in terms of how Fukuoka Re-

about building a career that would serve them regardless□ Foundation Underpinning Management

fell at one point last year due to COVID-19, it has since

When we think about materiality (management challenges)

Value-Creation Activities

Q Finally, do you have a message as president?

city whenever I speak to those who defend the traditions

Q What are your thoughts on human assets?

18■ Value-Creation Activities

Fukuoka REIT Corporation 2021

19

□ Introduction

Message from the Executive Director

Executive Director,
Fukuoka REIT Corporation
Advisor, Fukuoka Realty Co., Ltd.

Etsuo Matsuyuki

sanitizers available and applying antibacterial coatings tohandrails and such, and communicated our efforts to prevent the spread of infection through videos on our website
and on televisions in our facilities. Prior to COVID-19, Canal
City Hakata hosted a large duty-free shop and we had
focused our energies on attracting inbound customers, butwith the end of the contract period for the large duty-free
shop, we turned our attention to reinforcing efforts to
attract domestic customers, including working with NITORI
to open store in March 2021.

Q was the one thing that you were most happy

Commuting on packed trains in Tokyo has been considereda fact of life until now, but remote work has become a norm
due to COVID-19 and in the future workplace functions willprobably no longer need to be located in Tokyo. In fact, I
think we will start to see cases where companies transfer
some head office functions to Fukuoka, for example, where
life is easier. JAPANET HOLDINGS Co., Ltd. has led the way
in doing so by transferring some of its head office functions
to the Tenjin Business Center, which was completed in
September 2021. So, I believe that we will see an increasing
number of cases where the impact of COVID-19 has acted
as a positive factor for attractive regional cities.
Inbound demand will also likely return at some point. Given the geographical advantages of being near the rest of
Asia, a recovery in inbound demand will probably connect
to further revitalization of Fukuoka.

about, and that you were most challenged by?

Value-Creation Activities

Q

20

Over the nine years between June 2012 when I was appointed as President of Fukuoka Realty and June 2021, or
10 years if you include my time as Senior Vice President
and General Manager of the Planning Department, I was
involved in managing FRC.
In terms of external growth, the corporation most recently recorded an asset scale of approximately 202 billion
yen, well above the nearly 150 billion yen asset scale atthe time I was appointed. In other words, we successfully
achieved the 200 billion yen goal established at the timeof my appointment. We also nearly doubled the number ofproperties we manage from 17 to 32 over this time, andwe successfully increased the number of asset types fromjust three, namely office buildings, retail, and residence, tofive, including hotel and logistics. Although logistics haverecently attracted a lot of attention, we were able to acquire
several at an early stage and now own four such properties.
Moreover, we executed three public offerings during
my time in office and were buoyed by a turnaround in themarket. Together, these developments slightly more thandoubled our market capitalization from 68.5 billion yen the
day before my appointment to 148.6 billion yen on the day
I left office. Although we sold off three properties during
this time, this move helped to improve our situation, in part
because the Aeon Hara Shopping Center presented challenges as a property with unrealized losses at the time of

Fukuoka REIT Corporation 2021

What was most challenging, and that left the deepest
impression on me, was the broad adjustment that occurredfollowing the interest rate hike observation on the New
York Stock Exchange immediately before we executed our
public offering in February 2018. This adjustment led to instability in Japanʼs markets and caused us to really hesitate
until the last minute on whether we should proceed withthe public offering.
There are so many things I was happy about, though,including the public offering we made the year immediately
after I was appointed president to acquire Hotel FORZA
Oita. Having been involved in developing this property
during my time at Fukuoka Jisho Co., Ltd., I put extra effort
into explaining this property to investors.
I believe this happened during the public offering in
2018, but I remember one investor giving the move very
high marks, saying he had nothing but praise for this solid
public offering.

Q recent efforts to address COVID-19.

Please tell us about the Company’s mostFollowing the first State of Emergency Declaration regarding COVID-19 in April and May 2020, we temporarilyclosed Canal City Hakata and our other retail facilities inFukuoka City. We did not take this approach during any of
the subsequent State of Emergency Declarations, however, and instead implemented various measures in terms ofoperations. To relieve our customers of any uncertainty, we
implemented physical measures that included making hand

Q

Although there is no clear end to COVID-19 insight, what are your thoughts on the changes
that might occur in the future?

Q interest in ESG and non-financial information?
What are your thoughts on the increasing

After we announced our results for the 33rd fiscal period in
April 2021, I primarily held IR meetings over the telephonewith institutional investors. One of the notable aspects ofthese meetings was that many participants asked questions about ESG. This was completely different from previous periods. Normally, I would spend most of these roughly
one-hour meetings explaining the results and spend a little
time discussing ESG at the end. One investor, however,requested that I spend 30 minutes of the hour-long meeting
discussing ESG, which showed me just how much interest
in ESG and non-financial information has grown.

Q human resources development?
How did you tackle the issue of□ Foundation Underpinning Management□ Data Section

After I was appointed as president of the asset management company, the number of employees changed very
little despite growth in the asset scale, indicating the productivity of each employee had increased. Moreover, theratio of female employees increased each year and recently
reached 50%. I actively engaged in employee training bydirectly presenting challenges to responsible employees,
regardless of their age or position, and actively supported
their efforts to acquire certifications.
Another move I made that I think is unusual for a REIT
asset management company was to assign employees to
Fukuoka Jisho Co., Ltd., as one of our sponsors. I felt that
this might help to connect to broader career development
for the assignees, but I was also just happy to see them
participate in various areas at Fukuoka Jisho Co., Ltd.
People are an asset for asset management companies. I
therefore engaged in these efforts under the belief that thedegree to which each individual employee grows will as aresult connect to the growth of FRC and to the value that
we deliver to our stakeholders.

Q Mr. Koike as the new President and CEO of
Finally, please tell us what you expect fromthe asset management company.

President and CEO Koike was born and raised in Fukuoka
and has been deeply involved in Hakata Gion Yamakasa asa representative festival of the region and in support duties
for local professional sports. I believe this experience willserve as a major benefit for the growth of FRC.
As far as external growth is concerned, the market has
not emerged as a buyersʼ market, even after the spreadof COVID-19, but I hope that he firmly engages in acquisitions from the outside despite the current environment,
and I anticipate he will leverage the sponsor pipeline forthis purpose.
Of the properties owned by FRC, hotels and retail facilities were affected the most by COVID-19. We curtailed
hotel-related risk by selling off the Canal City Hakata・B
Grand Building（88.28% co-ownership interest in Grand
Building）. In contrast to our community-based retail facilities, which have tended to fare relatively well, as a citybased retail facility Canal City Hakata also enjoyed thestrong support of inbound customers, so continues to face
severe challenges. I therefore look forward to President
Koike thoroughly demonstrating his experience working on
the development and management of Canal City Hakata
as he undertakes various efforts toward future recovery.

Fukuoka REIT Corporation 2021

Value-Creation Activities

its sale. More recently, we sold off the Canal City Hakata・
B Grand Building（88.28% co-ownership interest in Grand
Building）
and engaged in asset replacement.
In terms of financials, we executed three public offerings
to reduce the 44.6% LTV prior to my appointment to 41.3%
and succeeded in extending the average debt durationfrom 2.9 years to 5.4 years, thereby achieving even greater
stability for the financial base as a strength of FRC.
In terms of internal growth, we worked to increase officebuilding rents starting in the 25th fiscal period. Although I
have been told that rents on Fukuokaʼs office market are
unlikely to rise and fall, in part due to the support of property
management companies, we were able to raise rent per unit
approximately 7% compared with the outset of this initiative.
Looking back over the past nine years, what

Please provide us with an overview of yourroughly nine years as president of the asset
management company.

■ Value-Creation Activities

21□ Introduction

Strategies of Each Department

Investment Department

Value-Creation Activities

We acquired the Tenjin Nishi-Dori Business Center (Land with leasehold interest)
property on June 1, 2021.
This property deal covers the acquisition of land for our sponsorʼs redevelopment project.1 As we concluded a land lease agreement that in the future will
shift the fixed land lease fees during the redevelopment period to variable landlease fees linked to tenant rents, this represents a scheme that will start togenerate cash flow at the same time as the acquisition and will be able tocapture the growth of Fukuokaʼs Tenjin business district going forward.1
Furthermore, this is a lease contract that includes preferential negotiation rights
for the building, and the acquisition of the building is expected in the future.
Acquisition dateJune 1, 2021
Acquisition price7,700 million yen
Appraisal value
7,790 million yen
SellerFukuoka Jisho Co., Ltd.
NOI yield*
3.5%

1. Co-creation with the local community
2. Maintenance and enhancement of environmental and construction performance
3. Creation of pleasant workplaces (tenants)

General Manager of the Investment Department

Takeshi Usumoto

As for our investment policy, we will continue to execute investments based on considerations that consider the making of targeted
investments in such overlapping domains as “markets with highgrowth potential” and “fields in which we excel and that enable us toexert our competitive advantage.”
As a general rule, our investments will be made in Fukuoka and thegreater Kyushu region, and among these, there is a particular focus
on the Fukuoka Metropolitan Area, in which a majority of our investments are made. That said, regarding investment type, while continuing to keep a careful eye on the potential for growth in the COVID-19
pandemic era, we adopt a flexible policy that covers a variety ofproperties.
We also utilize a network of sponsor companies in our pursuit ofeven more acquisition opportunities.
Selecting real estate for investment entails conducting a range of
meticulous surveys, such as economic-type surveys that coverprojected revenue streams for each individual property and the future
potential of the area in which it is situated, physical surveys thatconsider such factors as the propertyʼs condition and ability to withstand earthquakes, and surveys related to rights and legal issues,
among others. After rigorously examining a particular propertyʼs value,
we then decide whether to acquire it based on a determination of its
impact on our overall portfolio, the degree to which it will contribute toraising value, and other factors.
Going forward, we will steadily seize upon opportunities to invest inreal estate in the Fukuoka and Kyushu areas, and ensure sound asset
scope and portfolio growth.

Acquisition Case Study: Hakata Chikushi-Dori Center Building
On August 30, 2021, FRC resolved to acquire the Hakata Chikushi-Dori Center
Building as of March 1, 2022.
Based on a proposal for the sale of this property to the owner (seller) of thehead office located in Fukuoka City, FRC considered acquiring the property.
Giving the seller sufficient time to examine the proposal while gathering information on needs and returning the effect of reducing building management costs tothe seller made this an attractive proposal. Looking ahead, I also believe that wewill be able to efficiently manage the building by having FRC perform thelarge-scale repairs that will occur in the future on behalf of a seller whose main
business is not real estate.2 We believe this transaction to be an example ofgood value co-creation that we were able to tackle while fully demonstrating thestrengths of regional REITs and satisfying the needs of sellers (tenants).3
Acquisition date(scheduled)
March 1, 2022
Acquisition price(planned)
4,320 million yen
Appraisal value
4,540 million yen
NOI yield*
5.3%*Calculated based on the appraisal report NOI.

General Manager ofthe Real Estate Management Department

Hideya Kanno
Park Place Oita while working to improve the facilityʼs appeal andstrengthening cooperation with the surrounding area.1
In each of these measures, we maximized consideration to facility
safety, ensuring hygiene security and cooperation with the local
community while formulating an investment plan to realize attractive
sales floors and fulfilling working environments. In asset types such as
office buildings and logistics properties, we are also pursuing the roleand ideal image of real estate in future eras, considering safety andsecurity, and at the same time striving to maintain the competitivenessof each asset. 2
Going forward, we will further emphasize the sustainability aspect inour asset management of real estate. Regarding factors such ascontinuous relationships with tenants, measures for employee working
environments and the business environment, and consideration for theenvironment,3 as growth opportunities for our real estate portfolio, wewill steadily respond to maximize long-term and stable profits.

The Real Estate Management Department aims for the long-term andstable optimization of assets managed by FRC, while drawing up
plans for asset management. As a comprehensive REIT investing in adiverse range of asset types, we will work on internal growth throughaggressive investment in our portfolio of assets while deriving maximum value from our real estate portfolio over the long term. This will
be achieved against the backdrop of the regionʼs potential for growth,
including the rising population in our primary destination for investments, the Fukuoka Metropolitan Area, which is also home to anincreasing number of companies.
Due to the spread of COVID-19 infections, the business environment continued to be difficult in 2021, but we took a variety of measures to ensure the long-term stability of our real estate portfolio. In
the management of each asset, we focused on preventing the spreadof infection and endeavored to ensure that tenants and facility visitors
could utilize them with peace of mind by thoroughly ensuring thesafety of facility environments and hygiene.
Concerning Grand Hyatt Fukuoka, where the harsh businessenvironment continued, we replaced properties based on the prospectof future business recovery and the present value of the real estate.
This ensures the long-term stability of the portfolio and at the sametime improves the quality of the portfolio by the acquisition of alternative properties.
In the meantime, we also actively considered investments with aneye on the post-COVID era and promoted efforts to increase future
profits. In terms of internal growth, against the backdrop of increasing
demand for daily necessities brought about by the current changes in
the living environment, at Konoha Mall Hashimoto we replaced tenantsin the Hashimoto Marche food market zone to improve the attractiveness of food-related products. At SunLiveCity Kokura renewal was
carried out jointly with our tenants, further enhancing its appeal as thebest store in the area. We are also promoting environmental renewal at

Asset replacement (June 1, 2021)
Capture the medium- to long-term growth potential of office buildings in
the Tenjin area
Reduce the risk of having a full-service hotel that is subject to large impact of COVID-19
Sponsorsupport
Property
nameTenjin Nishi-DoriBusiness Center(Land with Leasehold
Interest)

Acquisition
price

7,700 million yen

Assetreplacement

Gain on sale
104 million yen

Property
nameCanal City Hakata・B
Grand Building(88.28% coownership in Grand
Building )Transfer
price

7,700 million yen

Value-Creation Activities

With property selection skills that can only be possessed by a local
hand, the Investment Department strives to discover those properties
that have the potential to generate stable cash flow over the medium
to long term.
Amid conditions that are as harsh as they have ever been due tothe impact of COVID-19 infections, the trend toward a pickup in thereal estate investment market environment is continuing. Althougheconomic conditions in Fukuoka and the wider Kyushu region—FRCʼs
core areas of operation—remain harsh, office buildings, logistics, andresidential asset types are maintaining strong management performance and property transaction prices remain high.
Looking at land price trends, according to the 2021 Land Market
Value Publication, the national average has declined for the second
consecutive year, although the rate of decline has narrowed for alluses. In contrast, in Fukuoka City, the central area of FRCʼs investment targets, commercial land prices increased 7.7% year on year
and those for residential land increased, for the ninth consecutive year,
4.4% year on year.
Against this backdrop, we will continue to make investments thatleverage our expertise and ability to gather and provide information,
based on our familiarity with the particular conditions on the ground inFukuoka and throughout Kyushu.
The Companyʼs strengths include the “speed and density of its
information,” “a feel for the local market,” “a powerful local network
across a broad area including administrative and economic authorities,” and “a real estate management structure with a long-term
commitment to the local community.”

Fukuoka REIT Corporation 2021

□ Data Section

Related Materiality

Acquisition Case Study: Tenjin Nishi-Dori Business Center(Land with Leasehold Interest)
See p.7

22□ Foundation Underpinning Management

Real Estate Management Department

Related Materiality
1. Contributions to boosting the attractiveness and revitalization of Fukuoka and Kyushu
2. Maintenance and enhancement of environmental and construction performance
3. Creation of pleasant workplaces(tenants)*Calculated based on the appraisal report NOI.

■ Value-Creation Activities■ Trends in FRC Property Occupancy Rates
（%）

99.8

99.7

100

99.8 99.7

99.4

99

99.3
99.2

99.0

99.1 99.0

99.0 99.1

99.3
99.0

99.3

99.1

98.9

99.2

98

98.1

97

Temporarily dipped on theimpact of store closuresdue to Canal City Hakata
South Building renovation

99.5

99.5 99.6

99.6

21st

22nd

24th

99.7

99.7
99.6

99.4

99.6

99.6
99.3

99.1

99.5

98.7

96

0

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

23rd

25th

26th

27th

28th

29th

30th

31st

32nd

33rd

34th

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 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

Note: FRCʼs occupancy rates from the second to fourth fiscal periods represent occupancy rates as of the end of each period. The fifth to the 34th fiscal periods are calculated as a weighted average occupancy rate during the period.
Total leased area is stated as a percentage of total leasable area.

Fukuoka REIT Corporation 2021

23

□ Introduction

Strategies of Each Department

Finance Department■ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

Planning Department
Related Materiality

Related Materiality
1. Co-creation with the local community
2. Information disclosure and dialogue with stakeholders

General Manager of the Finance Department

Hiroyuki Ayabe

Financial Strategy/Capital Strategy
Regarding our financial strategy, we are first and foremost maintaining
a conservative interest-bearing debt ratio from the perspective ofbuilding a solid financial base. The interest-bearing debt ratio at theend of the 34th fiscal period (August 2021) was 41.2%.
Next, from the perspective of ensuring the flexibility and agility offinancing, we have set a commitment line with a maximum amount of
13 billion yen. By also deciding on a three-year commitment period,
we are taking measures that will be able to address any deteriorationin the fund procurement environment due to the prolonged impact of
COVID-19.
In addition, from the perspective of reducing the risks from interest
rate rises and refinancing, we seek to fix interest-bearing debt over thelong term and to diversify repayment dates while keeping a close eye
on interest rate levels. While maintaining good relationships withfinancial institutions with which we have existing relationships—startingwith our three sponsor banks but including regional banks that
operate primarily in Kyushu and the megabanks—we will strive todiversify our procurement sources.1
In addition, we will actively incorporate consideration for ESG
issues. In July 2019, FRC helped to resolve environmental issues byconducting its first funds procurement by means of green finance. By
having conducted procurement via “a mechanism for financial institutions to donate a part of the profits obtained through borrowing as

Floating
5.9％

100％

million yen

IR Activities2
Coupled with compiling the various types of information necessary forinvestment decisions, our primary consideration is to offer a steadystream of timely, fair, accurate, and easy-to-understand information,
which is the basic policy of IR activities.
While proactively disclosing (increasing the amount of) non-financial
information that does not appear in the income statement or balance
sheet, such as publicizing our strengths as a REIT specializing inregional properties and the real estate situation in Kyushu and Fukuoka, we will work to improve the content. I believe that doing so willlead to a deepening of mutual understanding with all unitholders, thebuilding of relationships of trust, and ensuring positive steps toward
attracting outstanding investment funds from other parts of Japan andoverseas to Kyushu and Fukuoka.
Prior to the COVID pandemic, we met and held meetings in personwith more than 200 institutional investors each year. When face-toface IR activities would have been beset with difficulties, we continued
our IR activities with the highest priority placed on preventing the
spread of COVID-19 infections. We are incorporating innovative ideas,such as making full use of a range of Internet tools to hold efficientmeetings. I would like us to consider actively holding briefing sessions
for individual investors as well.
In the years to come, I believe that taking a long-term view inproactively working to raise the level of sustainability will be indispensable for achieving optimal profits for investors. We will convey ourefforts in an easy-to-understand manner through, for example, integrated reports, our website and financial briefing documents, andother materials.

Fixed
94.1％

End of the 34th
fiscal period

Floating(Millions of yen)

Fixed

Implemented a corporate version of the hometown
tax payment for projects related to industry,
tourism, etc., in seven cities. (View of Tosu City
donation acceptance ceremony)

TOPIC

Main Sponsor: Introducing Fukuoka Jisho Co., Ltd.

■ Corporate philosophy

We are committed to creating
attractive towns and regionswith steadfast devotion.

7,000
6,600

2,000

5,000
4,000

5,600

5,900

3,000

1,000

4,400 7,000 7,000

2,500

4,200

0

400

0

700

4,900

1,200 2,700

2,000 1,900

2,000

6,300
5,400

4,200

2,000

1,500
300

700

Tenjin Business Center(Completed September 2021)

0

0

0

1,000

0 35th 36th 37th 38th 39th 40th 41st 42nd 43rd 44th 45th 46th 47th 48th 49th 50th 51st 52nd 53rd 54th 55th 56th 57th- 68th
67th

Fukuoka REIT Corporation 2021

■ Corporate Version Hometown Tax Donation
Programas real estate brokers, and 25 are certified masters of the Association
for Real Estate Securitization (ARES ). We are also actively promoting
work-style reforms and have been certified as a Fukuoka work-stylereform promotion company by Fukuoka City.2
To ensure the safety of employees, we have put in place crisis management procedures. While giving top priority to protecting human lives
and rescues in the event of a crisis, these are designed to bring about
the prompt recovery and continuation of operations and for the purposeof cooperation with stakeholders for the continuation of the asset management business.1,2
Nowadays, sustainability-related work is gaining in importance, andwe are planning and managing the progress of sustainability promotion
plans as well as continuing to acquire GRESB Real Estate evaluations.3
Since this investment corporation is a regional REIT, we are actively
exchanging opinions with research institutes on regional economies
and industries in Kyushu, Okinawa, and Yamaguchi to contribute to theenhancement and revitalization of Fukuoka and Kyushu. We are also
holding regular dialogues with the local companies that are Fukuoka
Realtyʼs sponsors to promote attractive urban development in collaboration with local communities.4 At Fukuoka Realty in 2021, we implemented the corporate version of the hometown tax payment in sevencities where FRC-owned properties are located (Kagoshima , Kumamoto, Kurume, Miyawaka, Naha, Oita, and Tosu)5 in an effort to contribute to resolving social issues and revitalizing the local communities.
In the months and years ahead, I intend to lead the company to promote business operations in which all employees are aware that they
are contributing to the social issues that the world should address,
such as the SDGs.

Investment corporation bonds

2,000

24

The Planning Department is in charge of FRCʼs institutional management and accounting operations, as well as Fukuoka Realtyʼs personnel affairs, general affairs, and sustainability-related operations.
As FRCʼs institutional management, there are deliberations conducted by the Executive Committee and the Investment Committee, resolutions on important matters passed by the Board of Directors at Boardof Directorsʼ meetings, and appropriate management and operations
carried out in compliance with laws and internal rules.1
In our accounting business tasks, we prepare financial statements,
such as asset management reports and securities reports. Regarding
the financial statements of investment corporations, in addition to theaccounting systems with which general business companies are tocomply, it is necessary to remain in compliance with accounting-related
rules specific to investment corporations. From the perspective of satisfying the conduit status requirements that are the premise of calculations for the payment of dividends to unitholders, we are working on
preparing financial statements after accumulating appropriate accounting treatment from both accounting and tax perspectives.
In personnel and general affairs, we are striving to secure human resources, promote diversity, improve employee motivation, build an employee education system, and ensure employee safety.2
As of the end of August 2021, the company had 40 officers andemployees, and the ratio of female was 50.0%.The company also includes diverse professional human resources, such as a lawyer, three
real estate appraisers, three first-class architects, and two MBA holders. We are also actively providing training after employees have joined
the Company while working to improve the quality of our business byrecommending the acquisition of qualifications: 28 people are qualified

Keishi Tamura■ Diversification of debt maturities (as of August 31, 2021)

6,000

End of the 34th
fiscal period

82,400■ Long-term ratefunds for research into the development of a new COVID vaccine atnational universities” in March 2021, FRC has been able to contributeto resolving a social problem.1
Regarding our capital strategy, we will ascertain the market timing
and raise capital in line with external growth, which is one of thegrowth drivers. We will also consider the balance between distribution
growth after capital procurement and LTV control as well as otherfactors.

General Manager of the Planning Department

Executive Director Etsuo Matsuyuki (left) and Tosu City Mayor Yasushi
Hashimoto (right)

See p.7

Value-Creation Activities

Value-Creation Activities

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 IR (including SR and public relations) activities
to convey FRCʼs situation in a timely, fair, and accurate manner.
Amid the impact of COVID-19, which looks as if it will be protracted, the Tokyo Stock Exchange REIT Index has been returning to its
pre-COVID state after having temporarily seen a precipitous decline in
March 2020. With the Bank of Japan maintaining monetary easing, itis thought that low interest rates will continue, although I believe that it
will be necessary to practice financial management that remains awareof suddenly changing risks in the financial market.
Under such circumstances, the financial strategy, capital strategy,
and IR activities that we can consider are as follows.

■ Fixed and floating rate

1. Compliance/Risk management
2. Creation of pleasant workplaces (Fukuoka Realty)
3. Maintenance and enhancement of environmental and construction performance
4. Contributions to boosting the attractiveness and revitalization of Fukuoka and Kyushu
5. Co-creation with the local community

See p.3■ Overview (As of May 31, 2021)
Name

Fukuoka Jisho Co., Ltd.

Established

July 1961

Industries

Real estate (comprehensive developer)

Representative

Ichiro Enomoto, President and CEO

Employees

188

Net sales

20.4 billion yen

Ordinary income

6.2 billion yen

Total assets

202.9 billion yen

Borrowings

113.7 billion yen

Equity ratio

35.1%

Fukuoka REIT Corporation 2021

25

□ Introduction

Risks and Opportunities■ Value-Creation Activities□ Foundation Underpinning Management□ Data Section

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

Significant Risks

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

Impact on Stakeholders• Buildings might be lost, suffer deterioration
or damage due to the occurrence of natural
disasters, such as earthquakes, storms, andfloods, or severe weather due to climatechange, and their value could be affected,
with a decrease in rent due to the non-operation of properties• Soil pollution and toxic
substances
Related Materiality

Human Resource Related
Risks• Deterioration in the caliber ofhuman resources• Dependence on human resources
Related Materiality
・Creation of pleasant workplaces（assetmanagement company）• Consider that it is possible to purchase insurance at a rela-

tively 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 foodsupplies, strengthening flood countermeasures, and formulatSee p.34
ing a business continuity plan
（BCP）

Significant Risks• Increase in vacancy rates• Decrease in rent
Related Materiality
・Creation of pleasant workplaces（tenants）•Increase in property management costs due
to more stringent environmental laws andregulations, such as the strengthening of the
Building Energy Conservation Law•Risk of damage to the health of building users due to the presence of toxic substancesin the soil or in building materials, and otheritems, of properties owned; risk of bearing
the cost of compensation for damage tohealth or for 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, in termsof such factors as ability, experience, andknow-how of the asset management company for smooth business operations•Heavy reliance on FRCʼs directors and auditors as well as on the human resources of theasset management company; the risk thatthe outflow of these human resources could
have an adverse effect on operations

through renovation opportunities for properties owned;
acquire Green Building and other certification, to obtain the
results of environmental/social initiatives in visual form andSee p.35
improve property competitiveness• Aim to reduce vacancy rates by pursuing healthful andcomfortable conditions in properties owned and by increasing leasing demand for properties with high environmental
performance• Conduct thorough physical investigations at the time ofproperty acquisition; property acquisition after confirming thepresence or absence of toxic substances and taking of appropriate measures

Market-Related Risks• Increase in interest rates• Fluctuations in the investment
unit price
Related Materiality
・Information disclosure and dialogue withstakeholders• Pandemic
Related Materiality
・Maintenance and enhancement of environmental and construction performance・Creation of pleasant workplaces（assetmanagement company）
・Creation of pleasant workplaces（tenants）• Improve organizational strength and increase employee loyalty by hiring and fostering excellent human resources• Increase in repair and maintenance expenses• Improve employee motivation by realizing a work-life balance
and the stabilization of work through health management• Decline in property competitivenessSee p.36

Related Materiality
・Maintenance and enhancement of environmental and construction performance•Risk that such external factors as infectious
diseases and epidemics in Japan and overseas could interfere with the normal operationand management of FRCʼs properties•Decrease in rental income from real estate
due to such factors as a downturn in visitors,
which might have an adverse effect on for
example earnings• In addition to physical infectious disease countermeasures,

expand the COVID-19 workplace vaccination program
scope to cover retail facility tenant employees as a meansof promoting a safe and secure facility environment for asset
management company employees, tenants, and consumers• New laws and regulations• Changes in the tax system
Related Materiality
・Compliance/Risk Management• Region（Fukuoka/Kyushu）• Retail facilities
Related Materiality
・Co-creation with the local community
・Contributions to boosting the attractivenessand revitalization of Fukuoka and Kyushu

26

Fukuoka REIT Corporation 2021

• Vacancy rate increases associated withworsening real estate market conditions;decrease in dividends due to rent decreases• Rent reduction, rent nonpayment, and vacating risks due to deterioration of a lesseeʼsfinancial situationand introduce a telework system with a view to ensuring business continuity•Possibility of adverse effects on profits due
to overall consumer consumption as well asother overall trends in the retail industry thatreflect the nature of retail facilities as a maininvestment target

well as monitoring of operating status and thorough credit
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 an opportunity
to acquire excellent properties and execute strategic investments through appropriate financial management utilizing
information-gathering capabilities• 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• Increase in expenses required for such items
as large-scale repairs, due to the deterioration 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 an increasein property management expenses and otheritems, due to newly established, revised, or
abolished laws and regulations• Possibility of an increased burden from taxes
and fees due to tax reform• Long-term fixing of interest-bearing debt and repayment
period limit diversification• Conservative interest-bearing debt management and commitment lines to ensure flexibility and agility in funding• Conducting of proactive IR activities

See p.24• Maintain/improve property competitiveness through appropriate maintenance and repair work, value-up investment, andextending the number of service life years• Based on an understanding of conditions including real estatemarket trends and the capital market environment, if thestrategic holding of a property becomes less significant fromthe 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, andlaw firms, participate in external training, obtain information,and take measures to reduce any impact from an early stage• Invest in various types of properties to reduce the risk of

portfolio fluctuation by diversifying rental market cycles andSee pp.10-13
tenant industries• In retail facilities, such as Canal City Hakata/Canal City Haka-ta・B, operate bustling facilities by replacing tenants and providing new experience and other value, thereby reducing therisk of profit fluctuation by dispersing tenants• Revitalize the entire region and connect this growth to thegrowth of properties owned• Strengthen confidential information management systems by

IT-Related Risks• Information leaks
Related Materiality•As FRCʼs properties owned are concentrated
in Fukuoka and Kyushu, the vacancy rate
might increase due to a worsening economic
situation in that region, and profitability could
deteriorate due to a decrease in rent

• Appropriate occupancy screening when tenants move in as

See p.37• Set up satellite offices at the asset management company

・Compliance/Risk Management

Property Concentration
Risks

items as rent, according to property characteristics• 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

Risks from Property
Degradation, Deterioration

Measures to Address Risks and Opportunities• Consider extending lease agreement terms, fixing of such

Risks from Changes in
Business Conditions

Regulatory Risks
Infectious Disease,
Epidemic, and Other
Related Risks

Impact on Stakeholders

Value-Creation Activities

Value-Creation Activities

・Reduction of environmental load
・Maintenance and enhancement of environmental and construction performance

Measures to Address Risks and Opportunities• Work to maintain and improve environmental performance

Environment-Related Risks• Reduction of environmental load

● Opportunities

Compliance Risks• Violations of organizational laws
and regulations• Conflicts of interest
Related Materiality
・Compliance/Risk Management• Risk of leakage of personal and confidential
information due to delays in strengthening
cybersecurity（Asset Manage• If Fukuoka Realty Co., Ltd.
ment Company）
violates its duty of care asa good manager（duty of care）
and its duty
to faithfully perform tasks for FRC（duty offidelity）
under the law or specified contracts,
the possibility exists that this could adversely
affect FRCʼs survival and profitability• Potential conflict of interest issues with sponsors

introducing two-factor authentication for software as well as
applications and by conducting training on cybersecurity andinformation management• Enable property differentiation by introducing advanced technologies into properties owned• Prevent violations including those of laws and regulations aswell as transactions involving conflicts of interest, throughdeliberations and audits by the Compliance Assessment
Committee• Improve employee awareness of compliance by conducting
See p.40
regular compliance trainings

Fukuoka REIT Corporation 2021

27

50,000

0.5

0 21st 22nd 23rd 24th 25th 26th 27th

28th 29th

30th

31st 32nd 33rd 34th

0Feb. 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

□ Introduction

Financial Strategies and TSR（Total Shareholder Return）

Increasing the scale of its assets by incorporating low-cost borrowings in its fund procurement on the markets, FRC is aiming■ Value-Creation Activities□ Foundation Underpinning Management

21st 22ndFeb. 2015 Aug. 2015

□ Data Section

Dividends and TSR

to return higher dividends to its unitholders.
Basic Approach to Financial Strategy
A feature of J-REITs is that, if certain conditions are met, such as
the dividend of more than 90% of revenue, there is virtually no
corporate tax and there are no retained earnings, so revenue will
be distributed as a dividend almost as it is. In the case of general stock companies, etc., corporate tax will be imposed on the
tax income raised by the company, internal reserves for the next
business will be deducted, and the remainder paid as dividends.
Therefore, J-REITs tend to have higher dividend yields than generalstock companies.
Another characteristic is that financing (funds procurement)is based on certain financial disciplines, taking into account thebalance between capital and debt (to achieve an optimal capital

structure).
To date, FRC has maintained its management with an emphasis on financial stability. Going forward, we will continue to build asolid financial base through the conservative management of LTV.
Specifically, the Investment Corporationʼs financial policy is to keep
LTV below a certain level and to use long-term fixed interest rate
entities to reduce the risk from future interest rate hikes.
In the years to come, we will place an even greater emphasis on
the role of finance in supporting the expansion of our assets andwork to expand our fund procurement sources and methods while
maintaining financial stability.

Through the steady growth of the scale of its assets (external
growth) by means of the acquisition of carefully selected real estatein the Fukuoka and Kyushu area utilizing the sponsor pipeline, etc.
―and effective asset management (internal growth), FRC has been
distributing stable dividends per unit since its listing. Going forward,
we will strive to maintain and improve our dividend per unit throughthe creation of stable cash flows by the acquisition of excellent properties and the continuation of strategic initiatives.
The acquisition of real estate, etc., to expand the scale of assets
and increase the cash flow to fund dividends offers the following
advantages:• Ability to diversify risks for properties and tenants• Enables efficient management of properties by taking advantage of economies of scale

As a capital policy for external growth when raising capital, FRC
conducts management while bearing in mind two criteria:• The value obtained by dividing the investment unit price by
net asset value (NAV) per unit (NAV ratio) is almost equal to or
greater than one• To grow stabilized dividends after property acquisition
The difference (unrealized gain or loss) between the total realestate appraisal value and the total real estate book value (excluding trust construction in progress) added to total net assets, NAV is
calculated based on market value-based net assets. NAV ratio of
one or less is considered to be undervalued. Were the situation tocontinue, we would consider acquiring our own investment units,etc., and believe that we should be cautious about raising capital.

■ Figure 3：Investment Unit Price Performance (10 years, including
dividends)
FRC■ Trends in NAV per Investment Unit

（Times）

200,000

2.0

150,000 136,051

144,472

148,558

152,259 150,328

152,639 156,204

161,315 164,250

167,118 170,680

171,592 171,943 175,502

0 21st 22nd 23rd 24th 25th 26th 27th

28th 29th

30th

31st 32nd 33rd 34th

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

Note: NAV per investment unit = (Net assets + unrealized gain/loss - Total Dividends) / Total number ofinvestment units issued as of the end of the period

28

Fukuoka REIT Corporation 2021

0

3,479

3,398 3,422

3,512

3,593

3,250

3,361

8

3,539

3,000

6

3.7

2,000

3.7

3.7

3.9

4.1

4.1

4.4

4.2

4.3

4.1

4.7
4.0

4.0

4

3.1

1,000

2

0

0

21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th

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

Note: Dividend yield = (Dividend per investment unit / Operating days x 365) / Investment unit price as ofthe end of the fiscal period
Dividend per investment unit (Yen)Dividend yield (as of the end of the fiscal period) (%)■ Figure 2：TSR over the past 10 years
第21期 第22期 第23期
第26期3第27期
第30期
第31期 第32期 第33期
第34期
Past 第24期
1 year 第25期 Past
year 第28期 第29期
Past
5 yearPast 10year
2015年 2015年 2016年 2016年 2017年 2017年 2018年 2018年 2019年 2019年 2020年 2020年 2021年 2021年
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期
2月期
8月期

Cumulative
Cumulative
Cumulative
Annual rate
Annual rate
Annual rate
total
total
total

FRC

33.6%

15.4%

4.9%

13.2%

2.5% 125.4%

8.5%

TOPIX Real
Estate Business
Index

22.6%

8.4%

2.7%

29.0%

5.2% 142.0%

9.2%

TSE REIT
Index

27.3%

49.8%

14.4%

55.7%

9.3% 252.9%

13.4%

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

140

120

400

80

1.22
1.31 1.31

0.5

3,563 3,574

（%）

100

1.5

50,0003,435

3,687 3,693 3,642

TSE REIT Index

Aug.2020

300

1.0

4,000

Dividend yield (as of the end of the fiscal period) (%)

（%）
160

1.67

100,000

Dividend per investment unit (Yen)（Yen）■ Figure 4：Investment unit price performance for the most recent
fiscal year (one year, including dividends)（%）■ NAV Ratio Trends（Yen）

TOPIX Real Estate Business Index■ Figure 1：Past Dividends and Dividend Yields

Value-Creation Activities

Value-Creation Activities

External Growth and Internal Growth

Figure 1 shows FRCʼs past dividends and dividend yields.
Among listed REITs, dividends are characteristically stable. In
contrast, the dividend yield has fluctuated between 3.8% and 4.7%
over the past seven years, indicating that investment unit prices
have fluctuated due to fluctuations in the stock market, interest
rate trends, and fluctuations in market supply and demand.
Figures 2 and 3 show the total shareholder return（TSR）, taking
into account FRCʼs dividends and capital gains.
TSR performance has been 8.5% annually over the past 10
years. Performance declined temporarily due to the impact of
COVID-19 but recovered relatively quickly and had returned to preCOVID levels as of the end of August 2021. At the present time,
there is a divergence in performance between FRC and the TSE
REIT Index, but we believe that the main factor driving the increasein the TSE REIT Index is the high performance of the logistics sector. In contrast, our TSR performance over the most recent fiscal
year has exceeded that of the TSE REIT Index, as shown in Figure
4. From now on, we will work to improve performance by making
a connection from the recovery stage to the internal growth stage,by managing properties in anticipation of the situation returning tonormal after the COVID-19 pandemic, and by swiftly conducting
aggressive external growth centered on our sponsor pipeline.
In terms of our property portfolio, we will gradually reduce ourportfolio of retail facilities and further diversify risks as a comprehensive REIT by acquiring mainly office buildings and logistics
properties in Fukuoka and Kyushu that are deemed stable over the
medium to long term.
As an asset management company knowledgeable about thecircumstances of the region, we will continue to maximize the profitof our unitholders by utilizing information and expertise.

1.18

1.08 1.11 1.06
1.07
1.03

0.98

0.98

1.00

Feb.2021

Aug.2021

200

0.80

100

21st 22nd 23rd 24th

25th

26th

27th

28th

29th

30th

31st 32nd 33rd 34th

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

Note: NAV ratio = Investment unit price as of the end of the period / NAV per investment unit

0

Aug.
2011

Feb.
2012

Aug.
2012

Feb.
2013

Aug.
2013

Feb.
2014

Aug.
2014

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

Note: FRCʼs investment unit price performance is expressed as an index, using the investment unit price as of August 31, 2011, as 100. TSR over the past 10 years considers dividends and investment unit prices in indicating
the profitability of investments made on August 31, 2011, as of August 31, 2021. The TOPIX real estate index and the TSE REIT index are indexed in the same way, using dividend-included data. Similarly, the graph forthe most recent fiscal year is indexed with the investment unit price as of August 31, 2020, as 100.

Fukuoka REIT Corporation 2021

29