Integrated Report

2019

Fukuoka REIT Corporation
January 2020

Contents

01 Introduction
01

Corporate Profile/Characteristics

02

Relationship with Fukuoka Realty Co., Ltd.

04

Macroeconomic Environment around Fukuoka City

06

J-REIT Mechanism and Fukuoka REIT Corporation s Business Model

08

History and Business Performance10

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

12 Value-Creation Activities
12

CEO s Message

14

Strategies of Each Department

16

Overview of Properties Owned

18

Risks and Opportunities

20

Financial Strategies and TSR (Total Shareholder Return)

22 Foundation Underpinning Management
22

Sustainability Policy and Materiality

24

Environmental Issues

28

Social Issues

30

Organizational Issues

32 Data Section
32

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

34 Glossary
34

Glossary

Editorial Policy
With the aim of conveying details of the Investment Corporation s value
creation process in an easy-to-understand manner, we are issuing an
Integrated Report from this fiscal year. In editing this report, the editors adopt
clear and accessible language, with reference to the International Integrated
Reporting Framework of the International Integrated Reporting Council (IIRC)
and the Guidance for Collaborative Value Creation of Japan s Ministry of
Economy, Trade and Industry (METI). We consider that this and subsequent
reports will lead to active dialogue with investors and other stakeholders.

Corporate Profile/Characteristics

Fukuoka REIT Corporation (FRC)

Based on our intention to Act Local, Think Global: Drawing funds to the region by introducing
excellent properties in Fukuoka and Kyushu to investors locally and around the world,
possibilities in regional growth through urban development will provide FRC with a continuous
stream of investment opportunities as well as income from assets under ownership for FRC
while at the same time delivering profitable returns to unitholders.

Introduction

FRC was listed as the first region-specific REIT in Japan on June 21, 2005. We believe that

Corporate Profile
Name

Fukuoka REIT Corporation

Securities code

8968

Listed dateJune 21, 2005 FRC listed on Tokyo Stock Exchange and Fukuoka
Stock Exchange

Accounting periods

February, August

Asset management company

Fukuoka Realty Co., Ltd.

Sponsors

Fukuoka Jisho Co., Ltd.
Kyushu Electric Power Co., Inc.
Nishi-Nippon Railroad Co., Ltd.
ROYAL HOLDINGS Co., Ltd.
THE BANK OF FUKUOKA, LTD.
THE NISHI-NIPPON CITY BANK, LTD.
SAIBU GAS CO., LTD.
Kyudenko Corporation
Kyushu Railway Company
Development Bank of Japan Inc.

Fukuoka REIT Corporation Characteristics
Japan s First Region-Specific REIT

1

2

Taking advantage of our strength in knowing the local characteristics of real estate, which is a very
regional-specific business, we invest in real estate for rent in the Fukuoka and Kyushu areas, where
growth potential exists. By appropriately managing the invested real estate, we continue to securestable earnings over the medium to long term while providing stable dividends.

Excellent Portfolio
The real estate owned by FRC will continuously maintain and improve dividends through the creation of
stable cash flow and strategic initiatives.

Support Structure Comprises Sponsor Companies

34Powerful companies that lead the business world in Fukuoka and Kyushu, and accept our way of
thinking, participate as shareholders of Fukuoka Realty Co., Ltd. FRC proactively utilizes the support
from its sponsor companies while aiming to steadily expand its asset scale.

Stable Financial Base
We are reducing refinancing risk (by the conservative control of LTV and extending debt duration). We
also maintain good relationships with financial institutions, including our three sponsor banks.

Payment of Stable Dividends Continuing Since Listing

5

Utilizing its sponsor pipeline and other advantages, FRC continues to distribute stable dividends perunit through the acquisition of carefully selected excellent properties and effective asset managementin the Fukuoka and Kyushu area.

Fukuoka REIT Corporation 201901

Introduction

Relationship with Fukuoka Realty Co., Ltd.

Fukuoka REIT Corporation s Basic Policy【Our Mission】
Taking advantage of our strength in knowing the local characteristics
of real estate, which is a very regional-specific business, we invest inreal estate for rent in the Fukuoka and Kyushu areas. By appropriately
managing the invested real estate, we will achieve stable earnings
over the medium to long term while making efforts to keep providing
stable dividends for the future.
【Act Local】
We̶Fukuoka REIT (FRC) and Fukuoka Realty̶are currently
the only listed real estate investment corporation and asset
management company registered outside the Tokyo metropolitan
and Kansai areas under the Act on Investment Trusts andInvestment Corporations, the Financial Instruments and Exchange
Act and their respective enforcement orders.
We also seek differentiation in the selection of investment
target properties and the management of owned assets throughthe enhancement of our information-gathering ability and ability
to discern the profitability of properties by utilizing our speed anddepth of information based on knowledge of local land and broad
network centering on the local government and business world.
【Think Global】
Regarding real estate and financial markets, FRC will keep closely
tracking movements occurring across the whole of Japan and theentire world, taking into consideration the logic of capital markets
with global ideas, and appropriately reflecting such in our asset
management. We will also keep diligently pursuing dialogue withinvestors, focusing on fulfilling our accountability, and utilizing
Fukuoka Realty s fund management skills for investors under astrict compliance policy. We will proactively engage in IR activities
to fulfill our accountability to global capital markets. In conjunction,
we will take heed of Fukuoka Realty s corporate governance andcompliance.

Contribution to Regional Revitalization and Development of Attractive Communities
FRC believes that attracting domestic and foreign excellent
investment funds to regional real estate financial markets will
stimulate community development of the Fukuoka and Kyushu
areas. Although we are not directly involved in community
development or real estate development, we expect that ouracquisition of properties will lead to new funds passing to sellers
and part of those funds being directed to new development,
etc. With funds injected into FRC from Japan and abroad, newinvestment funds will flow to the Fukuoka and Kyushu areas

Act Local
Real estate is a local business• Distinctive capability for gathering
qualitative information of real estatemarket (speed, in-depth information)• Specialization in local properties• Solid network among the local
government and business world

as a whole. Based on this perspective, we believe that we cancontribute to regional revitalization and community development in
the Fukuoka and Kyushu areas.
Funds will be returned to unitholders by distributing theearnings from owned assets.
Through the promotion of community development and therevitalization of regional economies in the Fukuoka and Kyushu
areas, we will aim for FRC earnings stability.

Investment Policy
Our Mission
Region-Specific REIT
Featuring our expertise on local realestate markets, Fukuoka and Kyushu, tomaximize profits of investors

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

Investment target areas

Fukuoka
metropolitan area

60-90％
Other Kyushu areas

Investment type

Retail40-70％
Office buildings(including Okinawa and Yamaguchi prefectures)

10-30％
Other

20-50％
Others(hotels, residences, logistics, etc.)

0-10％

02

Fukuoka REIT Corporation 20190-30％

As an asset management company of FRC, Fukuoka Realty applies its deep knowledge and expertise in the Fukuoka andKyushu area to provide sound asset management, guided by the basic philosophy Act Local, Think Global. In this way
Fukuoka Realty strives to secure medium-to-long-term portfolio growth and stable revenue.

Comprising employees with various experiences in real estate,finance, and other fields, Fukuoka Realty Co., Ltd. possesses ahigh level of expertise and makes full use of local knowledge andknow-how to manage FRC s assets.

Introduction

Corporate Profile of Fukuoka Realty Co., Ltd.

Real Estate Investment Trust

Fukuoka REIT Corporation

Real Estate

Investors［Securities code: 8968］
Holdings

Investments

Rents, etc.

Dividends

Company
entrusted withasset
management

Asset management company

Fukuoka Realty Co., Ltd.

Leading companies in the Fukuoka and Kyushu region who arein agreement in with FRC s concept participate as shareholders(sponsors) of Fukuoka Realty Co., Ltd. FRC aims to steadily
expand the scale of its assets by actively utilizing the support fromthe sponsor companies. With regard to the properties owned anddeveloped by the sponsor companies, Fukuoka Jisho Co., Ltd.,FRC and Fukuoka Realty Co., Ltd. have concluded a pipeline
support memorandum of understanding (MOU) to seek stable andcontinuous acquisition opportunities.

5%

5%

5%

5%

THE BANK OFFUKUOKA, LTD.

THE NISHI-NIPPONCITY BANK, LTD.

Development Bank ofJapan Inc.

SAIBU GAS CO., LTD.

50%
FUKUOKA JISHO CO.,LTD.＊

Directors

Outside directors

Fukuoka Realty Co., Ltd.

10%
Kyushu Electric Power
Co., Inc.

(Asset Manager)

5%

5%

5%

5%

Kyudenko Corporation

Nishi-Nippon Railroad
Co., Ltd.

Kyushu Railway
Company

ROYAL HOLDINGS
Co. Ltd.

* Concluded MOU with Fukuoka REIT Corporation and Fukuoka Realty Co. Ltd. concerning pipeline support.

Fukuoka REIT Corporation 201903

Macroeconomic Environment around Fukuoka City

Total population of Fukuoka City

Population growth ratio（Thousands）

Fukuoka City, where the population is concentrated, is expected to continue growing in the years to come. Compared with (%)
1,600

1.4

1,582
the country as a whole, the high ratios of young people and those of working age in the population are leading to demand
for
1,570
1.12

1,550
office buildings and residential properties, and there is great potential
as an investment
target area. 0.99 1,512 1,526 1,541
0.99
0.89

1,500 0.85
0.73

1,482
1,454

0.83
1,417

1,430 1,441

Population Continues to Grow in Fukuoka City

1,404 Cities
National and
Major
1,400
1,392
1,382

As of December 1, 2018, the total population of Fukuoka City was

1,350

1,497

1.02

0.99
0.89

1.2
0.90

0.95

1.0
0.77

1,466

0.8

Young People and Working Age Population Ratios <2015>
0.6
0.4

Compared with other cities, the population composition of Fukuoka City isapproximately 1.58 million (estimated), and has been consistently increasing

characterized by a higher proportion of young people. Of the cities listed in0.2

1,300

since 1985. This population of about 1.58 million people makes Fukuoka thethe chart below, the ratio of young people in Fukuoka City (the proportion

fifth most populous of government-designated cities. According to estimates

2003 s 2004
2006 2007 accounted
2008 2009 2010for2011
2012 2013 between
2014 2015 the2016 ages
2017 2018
0of a city
total2005
population
by peopleof 150from the National Institute of Population and Social Security Research (2018and 29) ranks first at 17.4%. Fukuoka City s working-age population ratio

estimates), it is estimated that the population will reach about 1.6 million in(the proportion of the city s total population made up of people between the2020 and continue to increase until 2035.

ages of 15 and 64) ranks third at 64.8%.

Total population of Fukuoka City

Population growth ratio(%)（Thousands）

(%)

1,600

1.4

0.99 1,512

0.99
0.89

1,500 0.85
0.73

1,450
1,400

1,382

1,392

0.89 0.82
1,482

0.78
1,454

0.83
1,404

1,430 1,441

1,417

1,497

1,526

1,541

1.02

0.99
0.89

1,556

1,570

1,582

0.90
0.95

1.0
0.77

1,466

0.8
0.6
0.4

1,350

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

Kawasaki
Tokyo Metropolitan area

OkayamaKumamoto

16.0

NagoyaHiroshima

15.00

Kitakyusyu

57.0

58.0

Yokohama

Sapporo• Youth population• Working-age population

59.0

Saitama

Chiba

Nationwide

Hamamatsu
Shizuoka

Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Fukuoka City Estimated Population andFukuoka City Registered Population, published by Fukuoka City.

Sagamihara
Osaka

Niigata

Kobe
Sakai

14.0

0

Fukuoka
Sendai

17.0

0.2

1,300

17.4% (1st)64.8% (3rd)

Kyoto

1.2

Youth population

1.12

1,550

• Youth population• Working-age population

18.0(Percentage of city population aged 15 to 29)

Introduction

1,450

0.89 0.82
0.78

1,556

60.0

61.0

62.0

14.5%
60.0%

63.0

64.0

65.0

66.0

(%)

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

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

(%)• Youth population

18.0

17.4% (1st)Breakdown of Foreign Visitors <2018> (Fukuoka City)• Working-age
population
64.8%
(3rd)
Changes in Numbers of Foreign
Visitors(FukuokaCity)

Fukuoka(Percentage of city population aged 15 to 29)

Kyoto

At 47.2%, South Korea accounts for almost half of foreign visitors toto increase from 2014 onward.Okayama
The reasons cited for the increasein the area
Tokyo Metropolitan

Fukuoka City. In the years to come, the number of tourists is set to rise

number of foreigners entering the countryKumamoto
include relaxed
tourist visa issuance
Osaka

Sagamihara

due to, for example, the growth of the middle classes brought about

requirements and an increase in the number of flights by low-cost carrier

Saitamaby economic growth in Southeast Asia (Thailand, Singapore, Malaysia,

Yokohama(LCC) airlines. Fukuoka Airport in particularHiroshima
has been
Sappororemarkable for its risingIndonesia, etc.) and their exemption from short-term stay visa requirements

trend15.0
in routes to and from Southeast
Asia in accordance with the increase
NiigataKobe

for visiting Japan. Looking ahead, a further increase in the number of people

Chiba
in LCC flight services. Dueof its functions, such as the
Sakai to the enhancement

entering Japan is expected due to the increasing number of direct flight

duplication of parallel taxiways
and the addition of an expanded runway, aHamamatsu

services from Southeast Asia to Fukuoka.

Youth population

SendaiThe numberof foreigners entering Japan throughFukuoka City has continued
17.0
Kawasaki

16.0

NagoyaNationwide

14.0

Shizuoka
Kitakyusyu
Youth population
14.5%is planned.
gradual increasein thenumber of •arrivaland departure slots• Working-age population

Fukuoka Airport
Fukuoka 0
Airport(Thousands people)(Thousands people)
4,000
4,000

Hakata Port

57.0Hakata
58.0
Port

1,000
1,000
0
0

210
210
193
193
884
884
2014
2014

Working-age population

574
574
183
183

847
847
161
161

1,392
1,392

1,631
1,631

2015
2015

2016
2016

800
800
143
143

Taiwan 9.6% [322]Taiwan 9.6% [322]

2,205
2,205

2,414
2,414

Number of persons
Number of persons
disembarking from ships
disembarking from ships
on irregular service routes
on irregular service routes
23.8% [[800]]
23.8% 800

2017
2017

2018
2018

842
842
167
167

Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Statistics on Legal Migrants (Ministry ofJustice) and Number of International Vessel Passengers (Fukuoka City Port and Airport Bureau).

04

Thailand 1.1% [38]Thailand 1.1% [38]Europe/U.S.A./Australia 2.6% [87]Europe/U.S.A./Australia 2.6% [87]Hong Kong 5.9% [197]
Hong Kong 5.9% [197](%)(Percentage of city population aged 15 to 64)

3,000
3,000
2,000
2,000

60.0%

Number of persons disembarking from ships on irregular service routes

59.0
62.0from ships
63.0on irregular
64.0 service
65.0
Number60.0
of persons61.0
disembarking
routes 66.0

Fukuoka REIT Corporation 2019

Completed floor space (total floor space)

Net absorption (absorption demand)

Vacancy rate

Others 3.1% [103]Others 3.1% [103](Thousands people)(Thousands people)

South Korea
South Korea
47.2
47.2%
%
[1,584][1,584]China 6.7% [224]
China 6.7% [224]Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Statistics on Legal Migrants (Ministry ofJustice) and Number of International Vessel Passengers (Fukuoka City Port and Airport Bureau).

(%)
(%)
130
130

Fukuoka
Fukuoka

Central Tokyo (5 wards)
Central Tokyo (5 wards)

Osaka
Osaka

Nationwide

Fukuoka City

Tokyo Metropolitan area (23 wards)

2011

2013

Osaka

Nagoya

(%)
6
4
2
0
-2
-4
-6
2010

-8

2012

2014

2015

2016

2017

2018

2019

【Commercial Land】■ Average Year-on-Year Rates of Changes in Publicly Announced Prices for Commercial Land

With regard to commercial land, in the official annual fluctuation rates for 2019

Nationwide

5

addition to the increase in domestic and foreign tourists and the firm office0

market, progress has been made in the redevelopment business, and the rate

-5

of increase has exceeded that of other cities since 2018.

-10
2010

-15

With regard to residential land, amid the ongoing improvement in theemployment
andincomeenvironment,
the lowfrom
interest
rate service
environment
Fukuoka Airport
HakataPort
Number of persons disembarking
ships on irregularroutesThailand 1.1% [38]4,000
underpinned
demand for housing. Demand is strong mainly in highly

Transport
and Tourism574
for 2019 the national
average was 0.6%, the third
161
2,000
(Thousands
people)
183

800

1,631
1,000
1,392 housing demandrisebrought 842
about by population
3,000 in 2013 due to strong
884

143
800
167
842
847 has risen every
3,000
inflow,and the rate of land price increase
year up until
2019.
143
574
2016
2017
2018
2014
2015
167
0
161
847
2,000
183
574
210
161
2,414
2,000
2,205
193
183
1,631
210
1,000
1,392
2,414
2,205
193
884
1,631
1,000
1,392
884
Fukuoka
Office Market/ Fukuoka BusinessDistrict
2016
2017
2018
2014
2015
0
0

2014

2015

2016

2017

Tokyo Metropolitan area (23 wards)

6
4

Taiwan 9.6% [322]Thailand 1.1% [38]

2017

2018

2019

Osaka

NagoyaOthers 3.1% [103]Europe/U.S.A./Australia
Thailand1.1%
Numberof [38]persons 2.6% [87]Kong 5.9% [197]disembarking
from ships
0 HongEurope/U.S.A./Australia
2.6% [87]onKongirregular
service-2 Hong
5.9%[197] routes
Taiwan-4
23.8% [9.6%800] [322](ThousandsOthers
people) 3.1% [103]South Korea

2

210 year of positive growth. In Fukuoka City, land prices beganconsecutive
2,414 to
2,205
4,000
193

2016

Others 3.1% [103]Nationwide
FukuokaCity
Hong
Kong 5.9%
[197]

143
prices of residential areas announced847
by the Ministry167
of Land, Infrastructure,
4,000

2015

(%)

800
convenient areas, and in the annual fluctuation rates842
of the official land
Number of persons disembarking from ships on irregular service routes

2014■ Average
Year-on-Year Ratesof Changes
in Publicly Announced Price for Residential Land
Europe/U.S.A./Australia
2.6%
[87]

(Thousands
people)has been
maintained and housing acquisition support measures have

Number of persons disembarking from ships on irregular service routes

2012

Note: The publicly announced price indicates the land price disclosed by the Ministry of Land, Infrastructure,
Transport and Tourism as of January 1 of each year.
Source: Prepared by Fukuoka Realty Co., Ltd. based on data from Ministry of Land, Infrastructure, Transport andTourism Land Price Survey 2010-2019.

【Residential Land】

Hakata Port

2013

Nagoya10

In Fukuoka City, land prices began to rise in 2013 ahead of other cities. In

Hakata Port

2011

Osaka

15

the national average was 2.8%, a fourth consecutive year of positive growth.

3,000
Fukuoka Airport

Tokyo Metropolitan area (23 wards)(%)

announced by the Ministry of Land, Infrastructure, Transport and Tourism,(Thousands
Fukuokapeople)
AirportFukuoka City

Introduction

Land Price Trends in Fukuoka City and Other Major Cities <2010–2019>47.2%[1,584]

Taiwan 9.6% [322](Thousands people)
Numberof persons
China2013
South2018
Korea
6.7% [224]
2010
2011
2012
2014
2015
2016
2017
2019
-8
disembarking
from ships(Thousands people)
NumberofpersonsSouth
Korea
Note: The publicly announced price indicates the land price disclosed by the Ministry ofLand, Infrastructure,%onirregular
serviceroutesTransport
and Tourism
asof January
disembarking
fromships1 of each year.
[1,584] %Source: Prepared by Fukuoka
Co., Ltd. based on data from Ministry of Land, Infrastructure,
Transport and] Realty routes
23.8% [800service
on irregular
Tourism Land Price Survey 2010-2019.
[1,584]
23.8% [800]
China 6.7% [224]

-6

47.2
47.2

Nationwide

Fukuoka City

Tokyo Metropolitan area (23 wards)

China 6.7
% [224]
Central Tokyo (5 wards)
Osaka(%) Fukuoka(%)
15 Average Asking Rents■

2018■ Vacancy Rates and Supply and Demand

Osaka

Nagoya130
10Completed floor space (total floor space)(Tsubo)40,00035,00015.38

As of Aug. 2019

14.72
13.23

1.71%

FukuokaVacancy1.87
rate %Net absorption (absorption demand)

14

2.13%

(%)
12
(%)
16

3.07

Vacancy rate

2.29%
2.32%
4.09%

2.04

1.87

2.04

1.87

2.04

1.87

5,000
-10,00000-15,000-5,000(%)
16

Central Tokyo
(5 wards)

Completed floor space (total floor space)
11.98
Osaka
(Tsubo)Completed floor space (total floor space)
Net absorption(absorption demand)
10.86
30,000
Sapporo15.38(Tsubo)40,00010.99
14.72
Nagoya15.38
40,00025,00014.72 13.23
Sendai
7.70
35,00013.23 11.98
35,00020,0006.30
11.98 10.86
30,00010.99
10.86
30,00015,0004.26
25,000
10.99
7.70
3.07
25,00010,0007.70
20,0006.30
20,000
5,000
6.30
15,0004.26
15,00004.26 3.07
10,00010,000-5,0005,000

The average asking rent of the Fukuoka business district rose 5.2% in the 12 months from August 2018 to August 2019.

Vacancy rate

Net absorption (absorption demand)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

16
10
14

5
120
0 Fukuoka

Central Tokyo (5 wards)

Osaka

(%)
-5 Fukuoka
110

Central Tokyo (5 wards)

Osaka

(%)
-10
130
100
-15
130
120
90
120
110
0
110
100

14
8
12

100
90

12
6
10

90
0

2010

2011

2012

2013

As of Aug. 2019
Fukuoka

2014¥10,341

Central Tokyo
(5 wards)
2015
2016
Osaka

¥21,78420172018¥11,657

2019(Yen/tsubo)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20192005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

10
4
8

Note:
The 2005
figuresfrom 2005
to200820182009
areof December
31 every
2006
2007 Occupancy
2010
2011 20122013year.
2014 2015 2016 2017 2018 2019floor space
floorasspace
0 Leasable
Source: Prepared by Fukuoka Realty Co., Ltd based on data from Miki Shoji Co., Ltd. Office Market Data.
(Tsubo)28
6800,000

06
4■ Trends
in Leasable
Floor Space and Occupancy Floor Space
700,000
Leasable floor space
Occupancy floor space

42

600,000(Tsubo)800,000

20

800,000
500,000
700,0000

700,000
600,0000(Planed) (Planed) (Planed)-5,000 Statistics from 2008 to 2018 are based on the figures as of the end of December.
Note:-10,000
Note: Office building-related data for each city is data for areas and buildings included in surveys
conducted by Miki Shoji Co., Ltd.
-10,000
Note: Net absorption (absorption demand) shows the change in the occupied floor space during a specific
It is 2009
calculated
subtracting
occupied
Decemberof theprevious
2008
2010by2011
2012 the2013
2014 floor
2015 space2016 on2017
2018 31201920202021 year-15,000 period.
(Planed) (Planed) (Planed)from the occupied floor space on December 31 of the applicable year.
2008 floor
2009space2010(total
2011floor
2012
2013
2014
2015 2020,2016 and20172021
201820192020 finalized,
2021-15,000 Completed
space)
figuresfor 2019,
have
not been(Planed) (Planed) (Planed)
and the floor space and expected completion dates are subject to change.
Source: Prepared by Fukuoka Realty Co., Ltd based on data from Miki Shoji Co., Ltd. Office Market Data.

(Tsubo)Leasable floor space

Occupancy floor space

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

600,000
500,000
500,000

Source: Prepared by Fukuoka Realty Co., Ltd based on data from Miki Shoji Co., Ltd. Office Market Data.

Fukuoka REIT Corporation 201905

J-REIT Mechanism and Fukuoka REIT Corporation s Business Model

To contribute to the revitalization of Fukuoka and Kyushu and attractive urban development, FRC selects and procures funds
for investment by utilizing local government and business networks as well as its information-gathering ability and know-how.

Introduction

We aim to maximize the profits of investors by providing them with stable earnings over the medium to long term.

J-REIT Mechanism
Real estate properties

Investments

Investment corporation
Fund procurement(debt)

Rental income

Asset warehousing company
Company entrusted with business

Management ofassetsOwned real estate for rent

Payments ofprincipal and interest

Financial institutions
Bond investors

Investment

CapitalEntrustment of asset management services

Real estate managementcompany

Commissioned remuneration

Asset management company

Financial capital¥93,228 million¥101,878 million¥195,106 million¥77,500 million
39.7%

Manufacturing capital
The finding of excellent properties that cangenerate stable cash flow over the long term

• Total leasable area
• Total acquisition priceSponsor companies

See p.14* As of August 31, 2019

• Total liabilities• Net assets• Total assets• Total debt
• LTV

Investment

Investment
Strategy

Main Management Resources(Inputs)

Building of a solid financial base throughconservative control of LTV

Investors

Dividends

Commissioned
remuneration

Fund p
rocu
rem
en
t (fi
na

Property management

Borrowings/bondse)ncAcquisition

Our Mission

Act Local
Think Global

580,664.27㎡¥195,979 million

Human capital• Excellent human resources withspecialized skills• Support framework for flexible working
styles• Support system for career development• No. of officers and employees
41• Number of qualification holders:
Real estate appraisers 2 / Attorneys 2 /First-class registered architects 2 / MBA 1• Proportion of female employees 46.3％

Contribution to regional
revitalization and developmentof attractive communities

Research
SalesIntellectual capital• A varied skill set formed through humanresource training• Experience and knowledge of IR
activities based on long years ofpractical implementation• Gathering of information deeply rooted inlocal communities

Response to ESG issu

Social relationship capital• Co-creative and trusting relationships
with tenants• Cooperative framework with property
management companies• Coordination with local society, local
communities• Maintenance of good relationships of trustwith sponsors

Natural capital• Land in properties held in the Fukuoka
and Kyushu area (52.7ha)• Energy, water, air and other natural
resources used in the operation ofproperties owned

06

Fukuoka REIT Corporation 2019

• Natural environment and biodiversity inthe areas around properties owned

Sustainability Policy
See p.22

Environmental Issues

Social Issues

See p.24

See p.28

1. Enables efficient diversified investment
in real estate

Introduction

J-REIT Characteristics

Properties Owned
by Fukuoka REIT
Corporation
RetailOffice buildings

Logistics

Hotels

2. Relatively stable high yields
3. Corporate taxes highly advantageous
due to conduit status
4. Enables daily trading on stock
exchanges
Residences

5. Full and ample information disclosure

Total 29
properties
Management
Strategy

Created Value(Outcomes)

See p.14

Hotels2 properties

Management

Info

rm

a

dis

o
cl

s

Office buildings
8 properties

Financial
Strategyues

See p.30• NOI• NOI yield¥5,633 million • Unrealized gain
5.7% • NAV ratio¥34,087 million
1.07×Intellectual capital• Number of IR meetings
In Japan 229, Abroad 68 (annual)• Track record of winning awards IR Excellent Company Encouragement
Award <2014> /Nikko Best IR Website Award <2018>

Social relationship capitalSee p.15

Organizational Issues

Manufacturing capital• Number of qualification holders:
Real estate brokers 28 / ARES Certified Masters 19 /Certified building administrators 4

mm

ur

e

co

Valuation• TSR for past 10 years Annual rate 9.6% • Average interest rate paid
0.72%
• Dividends¥3,693 • Average remaining duration to maturity 6.0 years• Dividend yield
4.1%
JCR: AA- (stable), R&I A+ (stable)• Credit Ratings

Human resource capitalu niManagementnti oResidences
5 propertiesc a tio n (I R )Logistics
3 properties* As of August 31, 2019

Financial capital• Conducting of tenant satisfaction surveys• Participation in local clean-up activities (276 times in total)• Record high number of visitors to Canal City Hakata (2017: 17,020 thousands)• Human resource exchanges with sponsors (3 people dispatched to sponsors, 2
people accepted from sponsors)
Retail11 properties

Natural capital• Reduction of energy consumption and greenhouse-gas emissions inproperties owned• Preservation of water resources* Promoting disclosure so that environmental performance data can be compared to the previous year in the future.

• Green building certification rate (total floor space basis): 68.7％

Fukuoka REIT Corporation 201907

History and Business Performance

Carefully selecting and investing in properties that can generate stable cash flow over the years, FRC is working tocontinuously expand the scale of its assets. In addition to retail and office buildings, we are diversifying investment types byIntroduction

expanding the scope of investment into such properties as residences, hotels and logistics facilities.

■ Retail■ Office buildings■ Residences(Acquired properties)
Canal City Hakata
Canal City Business Center Building
Park Place Oita
Gofukumachi Business Center■ Logistics■ Hotels

Number of properties
Tosu Logistics Center 1,250

32,00014,60015,700
11,200

D-Wing Tower
2,800
Hotel FORZA Oita
1,530
Tenjin North Front Building 2,800

SunLive City Kokura 6,633

Tenjin Nishi-Dori Center Building 2,600

Sanix Hakata Building
4,400
Kominedai Community Mall 740

Acquisition Price(Millions of yen)

Aqualia Kego
2,800
Aqualia Chihaya 1,280

Taihaku Street Business Center 7,000

200,000

Amex Akasakamon Tower
2,060
Square Mall Kagoshima Usuki 5,300
Kumamoto Intercommunity SC 2,400

Canal City Hakata・B 28,700

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

150,000

K’s Denki Kagoshima 3,550
Higashi Hie Business Center 5,900

100,000
17

17
16
15

14

16

16

16

15

11

11
50,00087540Listed

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

Jun. 2005

Aug. 2005

Feb. 2006

Aug. 2006

Feb. 2007

Aug. 2007

Feb. 2008

Aug. 2008

Feb. 2009

Aug. 2009

Feb. 2010

Aug. 2010

Feb. 2011

Aug. 2011

Feb. 2012

Fukuoka REIT
Corporation andFukuoka Realty Co.,
Ltd. events

World events• 1st Public Offering (Sept.) (before 5:1 unit split)
Number of investment units: 15,000
Offer price (per unit): ¥766,360
Total issue price: ¥11,096 million• Postal privatization bill passed(Oct.)• BOJ lifts quantitative monetary easing policy forfirst time in five years (Mar.)• Company Law promulgated (May)• BOJ decides to maintain zero interest rate policy(June)• BOJ decides to raise short-term interest rate by
0.5%, comes into effect same day (Feb.)• J-REIT’s overseas real estate investment ban lifted following
partial revision of TSE listing regulations (May)• Lehman Brothers crisis (Sept.)• J-REIT ETFs listed on TSE (Sept.)• BOJ decides to make J-REIT investment corporation bonds, etc.
eligible as collateral (Jan.)• Start of "nimoca" services, the first IC card ticket on Kyushu
railways (May)• New Kitakyushu Airport opened (Mar.)

Fukuoka/
Kyushuevents• 2nd Public Offering (Mar.) (before 5:1 unit split)
Number of investment units: 16,000
Offer price (per unit): ¥576,083
Total issue price: ¥8,913 million• Canal City Hakata South Building renovation• Facebook launched (Mar.)• CSR study groups begin (Apr.)• Volunteer support for disaster-affected areas (July)• IR Kyushu subcommittee established (Nov.)• Fukuoka Urban Growth Strategy Project established (Apr.)• Canal City Hakata communal area environment renewal (treeplanting, additional benches, etc.)• Tenjin VIORO shopping mall opens (Sept.)• Kyushu National Museum opened(Oct.)• BOJ announces purchase of J-REIT• Chuetsu Offshore Earthquake, Niigata Prefecture (June)• Financial Instruments and Exchange Act promulgated (Sept.)• Japan Post privatization (Oct.)• Launch of the Democratic Party of Japan administration (Sept.)• Established Real Estate Market Stabilization Fund (Sept.)• Tenjin Loft store opens (Nov.)• Kyushu University Ropponmatsu Campus closes (Sept.)

08

Fukuoka REIT Corporation 2019

• Great East Japan Earthquake (Mar.)

investment units (Oct)• F ukuoka PARCO store opens (Mar.)• Kyushu bullet train route to
Kagoshima opens (Mar.)Planned acquisition dateJune 30, 2020

Name of property planned for
acquisition
LOGICITY Wakamiya
Planned acquisition price¥1,700 million

Number of properties (planned)

30

Total acquisition price (planned)¥197,679 million

Introduction

Granfore Yakuin Minami 1,100
Tissage Hotel Naha 2,835

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

Konoha Mall Hashimoto
10,000Higashi Hie Business Center II 4,230
Park Place Oita (adjacent land)
860
Park Place Oita (Sports Club NAS) 1,470
Aeon Hara Shopping Center (sold) (5,410)
Aqualia Kego (sold)(2,800)（Number of properties）

LOGICITY Hisayama 5,050

27

40

27

27

25

30

26

26

25

29

29

28

24
23

23

20
20

19

10

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

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

Panorama fountain installed at Canal City Hakata• 5:1 investment unit split implemented (Mar.)• IR briefing held for Platinum WOMAN individual investors (Aug.)• Incorporated into the FTSE EPRA/NAREIT Global Real Estate Index (Sept.)• Receives the IR Excellent Company Encouragement Award (Dec.)• Fukuoka International House opens (Apr.)• Second course donated to Fukuoka University held (Aug.)• Fukuoka Realty Co., Ltd. 10th anniversary (Dec.)• 10th anniversary of Fukuoka REIT Corporation’s listing• Tax exemption procedure counter and free Wi-Fi set up for inboundcustomers at Canal City Hakata• Tokyo awarded 2020 Olympics (Sept.)• Fukuoka City’s population tops 1.5 million (May)• Launch
of the Liberal Democratic
Party administration (Dec.)• Openingof entire Fukuoka Urban
Expressway (July)• 5th Public Offering (Mar.)
Number of investment units: 49,000
Offer price (per unit): ¥164,414
Total issue price: ¥7,795 million• Canal City Hakata 20th anniversary• J apan’s largest 3D projection mapping and new Aqua

• F irst issue of investment corporation bonds (Dec.)• First course donated to Fukuoka University held (Sept.)• Second issue of investment
corporation bonds (July)• 4th Public Offering (Apr.)
Number of investment units: 57,000
Offer price (per unit): ¥212,257
Total issue price: ¥11,701 million• 3rd Public Offering (Mar.) (before 5:1 unit split)
Number of investment units: 14,950
Offer price (per unit): ¥710,580
Total issue price: ¥10,263 million• Consumption tax hike to 8% (Apr.)• Nippon Individual Savings Account (NISAs) launched (Apr.)• GPIF starts investing in J-REITs with adoption of new index (Apr.)• Bank of Japan decides to adopt a negative interest rate policy (Jan.)• Long-term interest rates negative for the first time in history (Feb.)• Number of visiting cruise ships in 2015: 259• JR Oita City shopping mall opens (Apr.)• Vegetable Stadium, new fruit and vegetable
market, opens in Island City (Feb.)

0• Third issue of investment corporation bonds (July)• Office building rent increase revisions advanced due to strong office market• C anal City Hakata inbound continues to perform well, sets new visitor records (17.02
million in fiscal 2017)• Formulation of sustainability policy (Jan.)• Park Place Oita 15th anniversary renovation• Fukuoka City Science Museum re-opened (Oct.)• Sacred Island of Okinoshima and Associated Sites in the Munakata
Region registered as World Cultural Heritage sites (July)• Foreign visitors to Japan top 20 million• Foreign visitors to Japan top 30 million• M7.3 Kumamoto Earthquake (Apr.)• Higashi Kyushu Expressway fully opened (Apr.)• Central Wharf cruise quay extension
work completed (Aug.)• Fukuoka City designated as National Strategic Special Zone (May)• Tenjin Big Bang project launched (Feb. 2015)• Number of visiting cruise ships in 2014: 115

Fukuoka REIT Corporation 201909

Introduction

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

Financial Highlights
Total Operating Revenues(Millions of yen)

Profit(Millions of yen)

9,730 (Note 1)

10,000

9,178
8,423

8,343

7,789

8,234

8,122

9,242

9,231

5,000
4,198 (Note 1)

8,194

8,000

4,000

6,000

3,000

2,661

2,860

2,669

2,556

2,369

4,000

2,000

2,000

1,000

2,934

2,939

2,623

938 (Note 1)

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

3,687

3,693

NOI

Dividend per Unit (Note 2)(Millions of yen)

(Yen)

6,000
5,229

5,237

5,493
5,164

4,829

5,010

4,998

5,591

5,633

4,000
3,435

5,079

4,500

3,000

3,000

2,000

1,500

1,000

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

0

3,563

3,574

3,479

(Millions of yen)

(%)
50

1,500

1,390

1,458

1,471

1,470

1,455

1,474

3,512

3,593

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

39.3

38.9

39.1

39.7

39.7

LTV

2,000
1,622

3,422

Feb. 2015

Depreciation and Amortization Expenses

1,602

3,398

42.3

1,651

1,500

39.9

39.9

40.1

38.1

40

30
1,000
20

500
10

0

10

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

Fukuoka REIT Corporation 2019

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

Number Officers and Employees (Note 3)

Percentage of Female Employees (Note 4)（People）

(%)

50

50
41

40

38

39

40

38

38

39

41

48.7
44.7

45.0

43.9

44.7

40

30

20

20

10

10

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

46.3

0

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

Number of IR Meetings in Japan and Abroad (Note 6)(Years/Months)(Meetings)

10

200
8.6
7.7

7.5
6.0

6.2

6.5

6.9

7.10

169

7.11

154

160

6.11

148

147

120

4

80

2

40

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

0

149

129

126

122

6

0

46.3

40.0

Average Number of Years of Employment (Note 5)

8

46.2

44.7

41

35

30

0

Introduction

Non-Financial Highlights

116
106

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019(Note 1) Due to differences in accounting and tax treatment, the gain and loss on sale of AEON Hara Shopping Center and Aqualia Kego transferred in the 25th fiscal period were handled as follows:(1) The amount of impairment loss for AEON Hara Shopping Center recorded in the profit and loss statement for the 24th fiscal period was recorded as reserve for temporary difference adjustments.
(2) The gain on sale of Aqualia Kego was recorded in the income statement for the 25th fiscal period.
(3) Reversal of reserve for temporary difference adjustment was recorded in the statement on cash dividend for the 25th fiscal period.
(Note 2) Dividends per unit for the 24th and 25th periods were calculated as follows:
Dividend for the 24th term: Profit + Reserve for temporary difference adjustments – Surplus brought forward
Dividend for the 25th term: Profit - Reversal of the reserve for temporary difference adjustments – Surplus brought forward(Note 3) The number of officers and employees indicates the total number of directors and auditors, permanent employees, contract employees, temporary employees, secondees, etc. who are employed on a full-time basis
at Fukuoka Realty Co., Ltd.
(Note 4) The percentage of female employees are calculated as the ratio of women to the number of directors, auditors and employees(Note 5) Average number of years of employment is calculated as the average service years of permanent and contract employees of Fukuoka Realty Co., Ltd.
(Note 6) The number of IR meetings in Japan and abroad shows the total number of IR meetings with institutional investors and analysts through interviews and telephone conferences.
With regard to the environmental performance data of properties owned, a system is currently in place so that important data can be compared with the previous year.

Fukuoka REIT Corporation 201911

CEO s Message

Value-Creation Activities

Featuring our expertise on the local real estate markets of Fukuoka andKyushu to maximize the profits of investors.

Etsuo Matsuyuki
CEO & Representative Director
Fukuoka Realty Co., Ltd.

Q

What are the characteristics and strong points ofFukuoka REIT Corporation and Fukuoka Realty
Co., Ltd.?

FRC, the investment corporation, was listed in June 2005 withassets of ¥73.5 billion (four properties including retail facilities andoffice buildings). Over the ensuing period, we have achieved steady
growth, and as of August 31, 2019, assets stood at ¥195.9 billion (29properties including retail facilities, office buildings, residences, hotels
and logistics facilities). This represents an expansion of roughly 2.7
times over 14 years for an annual rate of growth in the 7% range.
Fukuoka Realty, the asset management company, was establishedin December 2003, and currently has over 40 employees.
We operate in a limited area, so our growth has come about
by being local professionals with a disciplined perspective, andby using the utmost care to select and invest in properties. Overthe years we have conducted five public offerings. Each time weundertake a PO, we emphasize two points, first, that the unit
price is over one times the net asset value, and that distributions
will increase after properties have been acquired. This reflects theimportance that we place on returning profits to new and existing
unitholders. → See p.20 Financial Strategies and TSR (Total Shareholder Return)Among 63 J-REIT issues (as of August 2019), FRC clearly
differentiates itself by its specialization in regional properties.
Fukuoka, our core area of operation, is undergoing organic
as well as inbound population growth, which is driving its
growth as a region. We well understand that linked to our own
expansion is the ability to skillfully seize upon such growth inour real estate investments.

12

Fukuoka REIT Corporation 2019

In addition, it goes without saying that for an asset managementcompany to create economic and social value, each and every oneof its employees must be a valuable resource. Critical here will beto elicit individual abilities and how to heighten value. This is why
every effort is being made to promote training and other activities.
Starting with elective language training and support for acquiring
qualifications, employees on a regular career track are required
to obtain master qualification from the Association for Real Estate
Securitization (ARES) as well certification as a real estate broker.
Support is also provided for short-term studies at Ritsumeikan Asia
Pacific University (APU) as well as a university in Singapore, theKyushu Asia Institute of Leadership (KAIL), and courses at Kyushu
University Business School.

Q

What value should Fukuoka Realty create?

REITs help diversify the ways in which players in the real estatemarket procure funds. With the aim of expanding the asset
formation methods of institutional investors such as pension funds
and individual investors, they also provide a financial schemethat has been recognized for their tax system merits, namely, asa pass-through (conduit) for returns that work to maintain social
infrastructure.
→ See p.6 J-REIT Mechanism and Fukuoka REIT Corporation s Business Model

Consequently, Fukuoka Realty creates value through its
core operations by helping to improve the efficiency of the realestate market.

One thing I always say to our employees is, Think with yourown head! Adopting the concept that this is the way we ve always
done it prevents employees from taking the initiative and thinking
proactively. I would hope that employees be more voracious. For thisreason, we are making efforts to support training and other activities.
In the days when I was in banking, no matter what the topic ofdiscussion I would be questioned on the process, such as Why isthis? Why did that happen? However, I would not have been very
persuasive if my answer was That s the way it s always been.
Without thinking for yourself about Why did that happen? , you
won t be able to explain things very well. By thinking with your own

Value-Creation Activities

Over the long term, REITs have an important role in maintaining
and raising the value of real estate. For example, Canal City Hakata
is entering its 24th year since completion, and we have beensystematically conducting exterior repair work and other operations
for the past seven years. Moreover, as a measure to counter the
threat of e-commerce to our retail facilities, steps were taken toinvest roughly ¥1.5 billion in the introduction of projection mapping,a fountain, and devices that make for acoustically and visuallyinteresting real-world shopping that has enjoyable experiencevalue in the autumn of 2016. The result was an increase in visitors.
On the other hand, we are now in an age where management
is expected to have a more conscious view of environmental,social and governance (ESG) concerns as a company or business
entity, as a way to address issues with regard to the environmentand society, such as climate change. Fukuoka Realty is no
exception, and from last year the asset management company has
participated in the Global Real Estate Sustainability Benchmark(GRESB) survey. For the second consecutive year, we acquired a
4 Star rating. In the past, Fukuoka faced difficulties with water
shortages, so proactive steps were taken to instill a thoroughconsciousness of water conservation, and to recycle or reusewater. Going forward, Fukuoka Realty is considering increasing
opportunities for employees to learn through sustainability activities
such as GRESB so as to further raise awareness within the
Company. With regard to social value, we are participating in theonce-a-month Clean-Up Day (Note 1) initiative. Through such efforts,
we are afforded the opportunity to realize a variety of insights toimprove ourselves in ways that we would not normally recognize.
This is the kind of thing I would like to see continue.

head, you will become better attuned to when convention andconditions change. Independent thinking will enable you to elicit
conclusions and methods that differ from the past, giving rise to yourown ideas.
Moreover, it is important to communicate freely with fellow
employees, and to overcome the boundaries of rank or
department. When I came to the Company in 2011, there werepartitions separating desks, making for an environment where it
was difficult to talk freely. I observed the situation for a year, andfinally did away with the partitions and put in place an environment inwhich it was easier to communicate. By deepening communication
with other departments, a variety of cross-organizational projects
can be expected to emerge resulting in new ideas and reform in
the manner business is conducted.
(Note 2) In partnership with the Japan Investor Relations Association (JIRA).

Q

To which stakeholders would you like to provide
this Integrated Report?

→ See p.29 Initiatives for Local Communities(Note 1) Local community cleaning activities undertaken with the goal of taking action for safety andsecurity, and improving the environment.

Q

What is it that you see as insufficient, or would
like to enhance in order to foster future growthand create value?

Specializing in Japan s regions means that while we have strong
capabilities with gathering and providing local information,
disparities arise with regard to information with Tokyo. That s why
in 2011 we set up the IR Kyushu subcommittee (Note 2), throughwhich we learn about the latest IR trends, for use in our own IR
activities. This serves as a forum to learn, and in reality, has also
provided the trigger for publishing this Integrated Report.
→ See p.29 Initiatives for Local Communities

In addition, quite a few employees have recently participated in
ARES subcommittees, where they are enthusiastically exchanging
opinions among J-REIT asset management companies.

I expect this will be the first integrated report by an asset
management company for real estate investment corporations
and REITs. Important stakeholders for REITs are, foremost,investors and banks that are financial capital providers. We havebeen strengthening our efforts toward ESG for years now, butwith our acquisition of GRESB status we anticipate receiving
various comments and opinions from investors in and outside ofJapan. When engaging in investor relations activities in Europe,
we leveraged our ESG Evaluation analysis report as we met withinvestors. I am looking for this Integrated Report to provide theseinvestors with a deeper understanding of Fukuoka REIT.
For the very reason that we are a regionally focused REIT
company, demonstrating our efforts to create value will help deepen
understanding from a wide range of regional stakeholders. This inturn will earn us a great deal of support. Moreover, we are looking to
use this Integrated Report as a tool to boost the understanding of
not only employees, but also tenants, in our efforts to address ESG
concerns and value creation activities. Furthermore, we hope togarner support in this type of integrated-centric management.

Fukuoka REIT Corporation 201913

Value-Creation Activities

Strategies of Each Department

Investment Department

Keitaro Otsubo
General Manager of the Investment Department
Fukuoka Realty Co., Ltd.

With property appraisal skills that can only be possessed by a local hand,
the Investment Department strives to discover those properties that have thepotential to generate stable cash flow over the medium to long term.
The environment which surrounds the real estate investment market
continues to be favorable for the procurement of funds, and the investor
base that is considering investment in real estate is expanding. For thatreason, property prices continue to rise in the Fukuoka and wider Kyushu
regions, Fukuoka Realty's core areas of operation.
Against this backdrop, we engage in investments by leveraging our
expertise and ability to gather and provide information based on a familiarityof particular conditions on the ground in Fukuoka and throughout Kyushu.
The Company s 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.

As for our investment policy, we continue to execute investments basedon a fundamental consideration, namely making targeted investments insuch overlapping domains as markets with high growth potential as wellas fields in which we excel and that enable us to exert our competitive
advantage. As a general rule, our investments will be made in Fukuoka andthe greater 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, with regard to investment type we adopt a flexible policythat covers a variety of properties.
We also utilize a network of sponsor companies in our pursuit of evenmore acquisition opportunities.
Selecting investment real estate entails conducting a range of meticulous
surveys, such as economic-type surveys that cover projected revenue
streams for each individual property and future potential of the area inwhich it is situated, physical surveys that take into account such factors as
the property s condition and ability to withstand earthquakes, and surveys
related to rights and legal issues, among others. Upon careful examinationof a particular property s price, we then decide whether or not to acquire it
based on an overall determination of its impact on our portfolio as a whole,the degree to which it will contribute to raising value, and other factors.
Going forward, we will steadily seize upon opportunities to invest in realestate in the Fukuoka and Kyushu areas, and ensure sound asset scopeand portfolio growth.

■ Properties Acquired

Konoha Mall Hashimoto(acquired March 2018)

Higashi Hie Business Center II(acquired March 2018)

Property Management
Department
Hideya Kanno
General Manager of the Property Management Department
Fukuoka Realty Co., Ltd.

The Property Management Department draws up plans for management
and investment so as to maximize the value of real estate owned by theInvestment Corporation.
FRC s portfolio currently consists of retail, office buildings, hotels,
residences, and logistics facilities. Given the constant changes in theenvironment surrounding these real estate properties, we systematicallyconduct research into the reorganization of delivery bases and delivery
methods, and keep a close eye on the future potential of respective asset
types. In carrying out these tasks, we constantly keep in close touch withthose in the local community, bringing to bear FRC s specialization in the area.

14

Fukuoka REIT Corporation 2019

Tissage Hotel Naha(acquired December 2018)

In operating and managing real estate held, we maintain a management
strategy that is characterized by its ongoing organic growth and that
presupposes a consistently high occupancy rate, based on management
plans that reflect the results of our research. We work to secure rental income
and NOI growth through a variety of measures including the replacement of
tenants of properties held, the cutting of costs, and re-investments intended
to raise the value of assets. At the flagship retail facility Canal City Hakata,we especially focus on management that ensures the property remains
bustling with activity. To this end, we engage in the proactive replacement of
tenants, creation of new experience value, and provision of events that areboth popular and topical with the aims of increasing visitors and bolstering
revenues.
In addition, while we seek organic growth, we also consider replacing realestate held depending upon building age, the various conditions associatedwith the real estate leasing contracts we have with tenants, the amount of
future anticipated re-investment, and conditions in the real estate buying andselling market. Our aim is to achieve value maximization for FRC over the
medium to long term by optimizing the real estate portfolio.

（%）

99.8

99.7

100

99.4

99

99.3
99.2

99.0

99.1

99.0

99.0

99.1

99.3
99.0

99.5

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

99.6

99.6

99.8

99.7

99.4

99.6

99.7

99.6

99.1
98.7

Value-Creation Activities■ Trends in FRC Property Occupancy Rates

96

0

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

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* FRC s occupancy rates from the second to fourth fiscal periods represent occupancy rates as of the end of each period. The fifth to the 30th fiscal periods are calculated as a weighted average occupancy rate during theperiod. Total leased area is stated as a percentage of total leasable area.

Finance Department

Keishi Tamura
General Manager of the Finance Department
Fukuoka Realty Co., Ltd.

The Finance Department draws up capital and finance strategies so as tomaximize profits for all unitholders.
The J-REIT market environment continues to benefit from favorable conditions
with respect to the procurement of funds owing to sustained capital inflows.
Meanwhile, the investor base is expanding on account of new entrants, chiefly
regional financial institutions. In addition, the monetary easing policy adopted by
the Bank of Japan is expected to continue with a low interest rate environment
for the foreseeable future. For the medium to long term, though, we recognize
the need for prudent financial management are an acute awareness toward thesudden risks that may occur in financial markets.
Under these circumstances, we will proactively engage in investor and public
relations to support our capital policy. Coupled with efforts to set a basic policy
for investor relations activities that offers a steady stream of timely, fair, accurate■ LTV Trends

and easy-to-understand information that covers a variety of issues necessary
for investment decisions, we will publicize our strengths as a REIT specializing
in regional properties and actively disclose non-financial matters as well as otherinformation. We will continue to fully disclose information, and conduct investor
relations through conversations with a medium- to long-term perspective.
Doing so will lead to a deepening of mutual understanding with all unitholders,the building of relationships of trust, and positive steps to attract outstanding
investment funds from both in and outside Japan.
Our financial policy aims to build a firm financial foundation through conservative
LTV management. At 39.7% as of the end of the 30th fiscal period (August 2019),
we successfully maintain a relatively low and conservative LTV. At the same time,
a commitment line limit has been set at ¥13.0 billion. Through these and othermeans, we are securing the flexible and fluid procurement of funds.
In undertaking new borrowings and refinancing, we seek to fix interest-bearing
debt over the long term and to diversify repayment dates while keeping a close
eye on interest rate levels. Going forward, we strive to maintain good relationships
with financial institutions with which we have existing relationships, startingwith our three sponsor banks, regional banks that operate primarily in Kyushu,
central financial institutions and others, while gaining an ample amount of new
procurement sources. In addition, in July 2019, FRC conducted its first funds
procurement through a green loan, as green finance. We will continue to move
forward with endeavors that support sustainability.

■ Average Interest Rate in the Fiscal Period (Note 1) and Average
Remaining Duration to Maturity
Average remaining duration to maturity (Year)

Average interest rate paid in the fiscal period (%)

（%）

（%）

（year）

45

1.0

10

39.3

38.9

39.1

39.7

39.7

40

0.9
0.79

6.4

6.3

6.0

8

6.0

35

0.8

30

0.7

4

25

0.6

2

0

26th

Aug. 201727th

Feb. 2018

28th

Aug. 201829th

Feb. 201930th

Aug. 2019

026th

Aug. 2017

0.73

0.73

5.4

27th

Feb. 2018

28th

Aug. 2018

0.73

29th

Feb. 2019

0.72

30th

Aug. 2019

60(Note 1) Interest is stated as rounded to two decimal places.

Fukuoka REIT Corporation 201915

Overview of Properties Owned

FRC carefully selects and invests in properties with the potential to generate stable cash flow over the long term. To diversify

Value-Creation Activities

risk within a given area, we own properties with widely divergent uses, with a focus in particular on retail and office buildings.

Number of properties owned:

29

Total acquisition price:¥195.9(August 31, 2019)* Acquisition price data is rounded down to the nearest ¥100 million.

billion■ Retail: 11
12

Canal City Hakata

3

8

Kumamoto Intercommunity SC

9Hanahata SC

5Park Place Oita

Canal City Hakata・B

7

4

SunLiveCity Kokura
10

Kurume Higashi Kushiwara SC

6

Konoha Mall Hashimoto

Square Mall Kagoshima Usuki

11

K s Denki Kagoshima

Marinoa City Fukuoka (Marina Side Building)■ Office buildings: 8
1213

Canal City Business Center Building

Gofukumachi Business Center

18

19

Tenjin North Front Building

14

15

Sanix Hakata Building

Taihaku Street Business Center

16

Higashi Hie Business Center

17

Tenjin Nishi-Dori Center Building

Higashi Hie Business Center II■ Other properties (hotels, residences, logistics): 10 (plus 1 facility expected to be acquired)20

21

Amex Akasakamon Tower (residences)

City House Keyaki Dori (residences)

26

27

22

23

Aqualia Chihaya (residences)
28

24

D-Wing Tower (residences)29

25

Granfore Yakuin Minami (residences)■ Property planned for
acquisition

Hotel FORZA Oita (hotels)
30

Planned acquisition date:June 30, 2020
Planned acquisition price:¥1.7 billion
Tissage Hotel Naha (hotels)

16

Fukuoka REIT Corporation 2019

Tosu Logistics Center (logistics facility)

LOGICITY Minato Kashii (logistics facility)

LOGICITY Hisayama (logistics facility)

LOGICITY Wakamiya (logistics facility)

Value-Creation Activities

Across Kyushu

Fukuoka City

Asset Ratio (As of August 31, 2019)■ Investment Target Areas (Acquisition price basis)■ Investment Type (acquisition price basis)
Office buildings
26.9%

Retail 59.2%

Property nameAcquisition date

Acquisition price(Millions of yen)
(Note 1)

Canal City Hakata

Nov. 9, 2004

32,00016.3%

Canal City Hakata・B

Mar. 2, 2011

28,700

14.6%

SunLiveCity Kokura

Fukuoka metropolitan area (Acquisition price basis) 77.2%■ Office Buildings■ RetailPark Place Oita

Others13.9%

Investment
ratio(Note 2)

Park Place Oita acquiredon November 9, 2004
Additional land acquired
on May 28, 2015
Additional land and building
acquired on September 1, 2016
Additional land acquiredon July 6, 2018

18,620Jul. 1, 2005

6,633

3.4%

Property name

Canal City BusinessCenter Building
Gofukumachi BusinessCenterSanix Hakata Building

9.5%

Taihaku Street
Business Center
Higashi Hie BusinessCenterTenjin Nishi-Dori
Center Building
Tenjin North Front
Building
Higashi Hie BusinessCenter II

Other Kyushu area
22.8%

■ Others
Acquisition date

Acquisition price(Millions of yen)
(Note 1)

Investment
ratio(Note 2)

Nov. 9, 2004

14,6007.4%

Nov. 9, 2004

11,2005.7%

Sept. 30, 2005

4,400

2.2%

Mar. 16, 2006

7,000

Mar. 13, 2009

Property name

Amex Akasakamon
Tower
City House Keyaki
Dori

Acquisition date

Acquisition price(Millions of yen)
(Note 1)

Investment
ratio(Note 2)

Sept. 1, 2006

2,060

1.1%

Dec. 20, 2007

1,111

0.6%

Aqualia Chihaya

Mar. 1, 2012

1,280

0.7%

3.6%

D-Wing Tower

Mar. 1, 2013

2,800

1.4%

5,900

3.0%

Granfore Yakuin Minami

Nov. 4, 2014

1,100

0.6%

Feb. 1, 2013

2,600

1.3%

Hotel FORZA Oita

Mar. 1, 2013

1,530

0.8%

Mar. 28, 2013

2,800

1.4%

Tissage Hotel Naha

December 7, 2018

2,835

1.4%

Mar. 1, 2018

4,230

2.2%

Tosu Logistics Center

Mar. 28, 2014

1,250

0.6%

Konoha Mall
HashimotoSquare Mall
Kagoshima Usuki
Kumamoto
Intercommunity SC

Mar. 1, 2018

10,0005.1%

Sept. 28, 2006

5,300

2.7%

LOGICITY Minato Kashii

Mar. 27, 2015

8,150

4.2%

Nov. 30, 2006

2,400

1.2%

LOGICITY Hisayama

Jun. 1, 2017

5,050

2.6%

Hanahata SC

Sept. 3, 2007

1,130

0.6%

Total acquisition price−

195,979

100.0%

Kurume Higashi
Kushiwara SC

Feb. 1, 2008

2,500

1.3%

K s Denki Kagoshima

Mar. 27, 2008

3,550

1.8%

Marinoa City Fukuoka(Marina Side Building)

May 1, 2015

5,250

2.7%

(Note 1) Acquisition price data is the sales price identified in purchase and sale agreement between FRC and the seller, and exclude acquisition charges, taxes and other expenses.
(Note 2) Investment ratio data is rounded to the first decimal place.

Fukuoka REIT Corporation 201917

Risks and Opportunities

To achieve sustainable growth, FRC keeps close track of highly significant risks and opportunities while assessing their

Value-Creation Activities

impact on the Investment Corporation and its stakeholders.

Significant Risks

Risks from Changes
in BusinessConditions• Increase in vacancy rates• Decrease in rent

Market-Related
Risks• Increase in interest rates• Fluctuations in theinvestment unit priceImpact on Stakeholders• Consider extending lease agreement terms, fixing ofrent, etc. according to property characteristics• Vacancy rate increases associated with worsening realestate market conditions, decrease in distributions
due to rent decreases• Rent reduction, rent nonpayment and vacating risks
due to deterioration of lessee s financial situation• Risk of increase in interest payment due to increase ininterest rates caused by market trends at the time ofborrowing• Risk that FRC s investment unit price may fluctuate
due to factors that include unitholder supply
and demand, interest rate conditions, economic
conditions, and real estate market conditions• Risk of not being able to acquire planned assets
because additional units cannot be issued at thedesired time and under desired conditions due tofluctuations in unit price

Risks from Natural
Disasters• Response to climatechangeEnvironmentRelated Risks• Reduction ofenvironmental load
• Soil pollution and toxic
substances

Risks from Property
Degradation,
Deterioration• Increase in repair andmaintenance expenses• Decline in property
competitiveness18

Fukuoka REIT Corporation 2019

Measures to Address Risks (Opportunities)• Buildings may be lost, suffer deterioration or damage
due to the occurrence of natural disasters, such as
earthquakes, storms and floods, or severe weather
due to climate change, and their value may beaffected, with a decrease in rent due to the nonoperation of properties• Increase in property management costs due to more
stringent environmental laws and regulations, such as thestrengthening of the Building Energy Conservation Law• Risk of damage to health of building users due to thepresence of toxic substances in the soil or in building
materials, etc. of properties owned, risk of bearing thecost of compensation for damage to health or for removalof toxic substances• Increase in expenses required for large-scale repairs,
etc. due to the deterioration of properties, and large
capital expenditures may reduce cash flows• Possibility of tenants vacating and a reduction in rent
due to a loss of property competitiveness resulting
from changes in the surrounding environment• Appropriate occupancy screening when tenants movein and thorough credit management during period oflease• Deposits and security deposits against rent
delinquency, etc., collateral by means of guarantor
companies, etc.
• Treat deterioration in real estate market as opportunity
to acquire excellent properties and execute strategic
investments through appropriate financial management
utilizing information-gathering ability (opportunity)• Long-term fixing of interest-bearing debt andrepayment period limit diversification• Conservative interest-bearing debt management andcommitment lines to ensure flexibility and agility infunding• Conducting of proactive IR activities• Consider that it is possible to purchase insurance at a
relatively low cost compared with other areas, arrange
earthquake insurance coverage for all properties• Improve resilience (ability to respond to disasters,etc.) by conducting disaster drills at each property,
stockpiling emergency food and formulating business
continuity plans (BCPs)• Work to maintain and improve environmental
performance through renovation opportunities forproperties owned; acquire Green Building certification,etc. to obtain results of environmental/social initiatives
in visual form and improve property competitiveness• Aim to reduce vacancy rates by pursuing healthfuland comfortable conditions in properties owned andby increasing leasing demand for properties with highenvironmental performance (opportunity)• Conduct thorough physical investigations at thetime of property acquisition; property acquisition
after confirming the presence or absence of toxic
substances and taking of measures• Maintain/improve property competitiveness throughappropriate maintenance and repair work, value-up
investment, and extending the number of service life
years
• Based on an understanding of real estate market
trends, capital market environment, etc., in the eventthat the strategic holding of a property becomesless significant from the perspective of property
performance, competitiveness, and future profitability,
consider replacement of that property if it is determinedthat selling it is in the interest of unitholders

Property
Concentration
Risks• Region (Fukuoka/Kyushu)• Retail facilities

Regulatory Risks• New laws and regulations• Changes in the tax
system

Impact on Stakeholders• As FRC s properties owned are concentrated in
Fukuoka and Kyushu, the vacancy rate may increase
due to a worsening economic situation in that region,and profitability may deteriorate due to a decrease inrent• Possibility of adverse effects on profits due to overall
consumer consumption as well as other overall trends
in the retail industry that reflect the nature of retailfacilities as a main investment target• Possibility of a limitation on rights with respect
to properties owned and an increase in property
management expenses, etc. due to newly
established, revised or abolished laws and regulations• Possibility of an increased burden from taxes and fees
due to tax reform

IT-Related Risks• Information leaks• Risk of leakage of confidential information due todelays in strengthening cyber security

Measures to Address Risks (Opportunities)• Invest in various types of properties to reduce the riskof portfolio fluctuation by diversifying rental market
cycles and tenant industries

Value-Creation Activities

Significant Risks• In retail facilities, such as Canal City Hakata/Canal
City Hakata・B, operate bustling facilities by replacing
tenants and providing new experience value, etc.,
thereby reducing the risk of profit fluctuation bydispersing tenants• In addition to receiving information from Fukuoka
Realty s affiliated organizations, tax accountants,
law firms, etc., participate in external training, obtain
information, and take measures to reduce any impact
from an early stage• Strengthen confidential information management
systems by introducing two-factor authentication forsoftware as well as applications and by conducting
training on cyber security and information management• Enable property differentiation by introducing advanced
technologies into properties owned (opportunity)

Compliance Risks• Violations oforganizational laws andregulations• Conflicts of interest• In the event that Fukuoka Realty violates its duty of careas 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 FRC s survival and profitability• Potential conflict of interest issues with sponsors

Human ResourceRelated Risks• Deterioration in thecaliber of humanresources• Dependence on humanresources• Risk of deterioration in organizational strength due
to a failure in maintaining the human resources base,in terms of such factors as ability, experience, andknow-how of the asset management company forsmooth business operations• Heavy reliance on FRC s directors and auditors
as well as on the human resources of the asset
management company; and the risk that the outflow
of these human resources could have an adverse
effect on operations• Prevent violations of laws and regulations, transactions
involving conflicts of interest, etc. through deliberations
and audits by the Compliance Assessment Committee• Improve employees awareness toward compliance byconducting regular compliance training• Improve organizational strength and increase employee
loyalty by hiring and fostering excellent humanresources• Improve employee motivation by realizing work-lifebalance and the stabilization of work through healthmanagement (Opportunity)

Fukuoka REIT Corporation 201919

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,

Value-Creation Activities

FRC is aiming 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

To date, FRC has maintained its management with an emphasis

dividend of more than 90% of revenue, there is virtually no corporate

on financial stability. Going forward, we will continue to build a

tax and there are no retained earnings, so revenue will be distributed

solid financial base through the conservative management of LTV.

as a dividend almost as it is. In the case of general stock companies,

Specifically, the Investment Corporation's financial policy is to keep LTV

etc., corporate tax will be imposed on the tax income raised by the

below a certain level and to use long-term fixed interest rate entities tocompany, internal reserves for the next business will be deducted, andreduce the risk from future interest rate hikes.

the remainder paid as dividends. Therefore, J-REITs tend to have higher
dividend yields than general stock companies.

In the years to come, we will place an even greater emphasis on therole of finance in supporting the expansion of our assets and work to

Another characteristic is that financing (funds procurement) is basedon certain financial disciplines, taking into account the balance between

expand our fund procurement sources and methods while maintaining
financial stability.

capital and debt (to achieve an optimal capital structure).

External Growth and Internal Growth
Through the steady growth of the scale of its assets (external growth)
̶by means of the acquisition of carefully selected real estate in the
Fukuoka and Kyushu area utilizing the sponsor pipeline, etc.̶andeffective asset management (internal growth), FRC has been distributing
stable dividends per unit since its listing. Going forward, we will strive tomaintain and improve our dividend per unit through the creation of stable
cash flows by the acquisition of excellent properties and the continuationof strategic initiatives.
The acquisition of real estate, etc. to expand the scale of assets andincrease 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• The value obtained by dividing the investment unit price by net
asset value (NAV) per unit (NAV ratio) is almost to or greaterthan one• To grow stabilized dividends after property acquisition
The difference (unrealized gain or loss) between the total real estateappraisal 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. An NAV ratio of one or less is
considered to be undervalued. Were the situation to continue, we would
consider acquiring our own investment units, etc., and believe that weshould be cautious about raising capital.

■ Trends in NAV per Investment Unit

■ NAV Ratio Trends(Yen)(Times)200,000

2.0

150,000
123,041

131,215
127,080 128,375

136,051

144,472

156,204
152,259 150,328 152,639
148,558

1.67

167,118
161,315 164,250

1.52

1.5

1.0

500,000

0.5

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

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

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

Fukuoka REIT Corporation 2019

1.34
1.25

1.22

1.14

100,000

0 17th20

As a capital policy for external growth when raising capital, FRC
conducts management while bearing in mind two criteria:

0

17th

18th

19th

20th

21st

1.31

1.31

22nd

23rd

24th

1.18

25th

1.08

1.11

26th

27th

1.06

1.03

28th

29th

1.07

30th

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

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

150,000
123,041

131,215
127,080 128,375

136,051

144,472

148,558

152,259 150,328 152,639

1.5

1.14

100,000

1.0

500,000

0.5

0 17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

0

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

Among listed REITs, dividends are characteristically very stable. In■ Figure 1：Past Dividends and Dividend Yields
Dividend per investment unit (Yen)contrast, the dividend yield has fluctuated between 3.1% and 4.5%

(Yen)over the past seven years, indicating that investment unit prices have

4,000

fluctuated due to fluctuations in the stock market, interest rate trends,
and fluctuations in market supply and demand.
Figure 2 shows the total shareholder return (TSR), taking into

（％）

3,257

3,479

3,512

3,398 3,422

3,593

3,687 3,693

8

6
4.3

years is that investment unit prices were rising due to shopping spree

3,291 3,243 3,278

3,435

3,563 3,574

3,000

account FRC s dividends and capital gains.
One of the reasons for the deterioration in TSR over the past five

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

17th

4.5
3.8

3.7

2,000

3.3

3.7

3.9

3.7

4.1

4.1

4.2

4.4

4.1

4

3.1

cruise passengers five years ago. With regard to dividends, in 2017,
we considered it best practice to avoid future risks when the real

2

1,000

estate market is booming, and this included the sale of two properties
and a dividend decrease in the 25th fiscal period. Dividends havebeen continuously improving up until the end of the 30th fiscal period,0

the most recent term, with the 25th fiscal period regarded as a

17th

18th

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

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

0Note: With March 1, 2014, as the effective date, FRC investment units were split at a ratio of 5:1. Dividends
prior to the 19th fiscal period are shown as values divided by five.
Note: Dividend yield = (Dividend per investment unit / Operating days x 365) / Investment unit price as ofthe end of the fiscal periodbottoming out.

■ Figure 2：Investment Unit Price Performance (10 years, including dividends)
Fukuoka REIT Corporation

TOPIX Real Estate Business Index

TSE REIT Index

（％）
350

300

250

200

150

■ TSR over the past 10 years
Past year

100

50

Past 3 years

Past 5 years

Past 10 years

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

Fukuoka REIT Corporation

9.0%

7.3%

2.4%

7.4%

1.4% 149.8%

9.6%

TOPIX Real Estate Business Index

1.6%

21.0%

6.6%

-2.5%

-0.5%

77.0%

5.9%

TSE REIT Index

23.6%

28.5%

8.7%

51.9%

8.7% 219.7%

12.3%* Annual rate conversion is the geometric mean of cumulative returns.

0Aug. 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

Note: FRC s investment unit price performance is expressed as an index, using the investment unit price as of August 31, 2009 as 100. TSR over the past 10 years indicates profitability based on dividends from andinvestment unit price made on August 31, 2009, as of August 31, 2019. The TOPIX real estate index and TSE REIT index are indexed in the same way, using dividend-included data.
Source: Prepared by Fukuoka Realty Co., Ltd. based on data provided by Bloomberg L.P.

Fukuoka REIT Corporation 201918th

Feb. 2013 Aug. 2013

Value-Creation Activities

Dividends and TSR
Figure 1 shows FRC S past dividends and dividend yields.

1.25

21

Sustainability Policy and Materiality

FRC and Fukuoka Realty believe maximizing profits for unitholders over the medium to long term requires not only the pursuitof profitability, but also consideration for the environment, society, and governance. With this in mind, we focus on ESG

Foundation Underpinning Management

issues as part of the real estate investment management process.

Sustainability Policy

1. Promoting Energy Conservation of Portfolio Properties• We will monitor the energy consumption levels of the properties wemanage, and work to improve management to lower the levels over the
medium to long term.
• We will endeavor to improve the energy consumption efficiency ofbuildings and facilities when undertaking renovations, so as to enhance
property value and mitigate environment-related risks as well as reduce
operating costs.
2. Responding to Climate Change Risks• We will endeavor to help mitigate climate change risks by working to
reduce greenhouse gas emissions from the properties we manage
through utilization of renewable energy and other energy conservation
measures.
3. Contributing to the Creation of a Recycling Society• We will monitor water consumption and waste management at theproperties we manage and promote water saving and recycling throughbetter management, in an effort to utilize limited resources efficiently.
• We will investigate the adoption of water-saving equipment and waterreuse systems at the opportunities of renovating buildings.
4. Pursuing Well-Being and Safety• We will endeavor to provide healthy and comfortable indoor spaces atthe properties we manage, striving to enhance tenant satisfaction andproperty competitiveness• We will implement measures to prevent and reduce disasters at theproperties we manage, such as ensuring earthquake resistance and fully
preparing emergency equipment, to provide safe and secure buildings.

5. Utilizing Green Building Certifications• We will investigate the obtainment of green building certifications andother environmental assessments in order to visualize the results of ourinitiatives on the environment and society at the properties we manage
as well as to enhance property competitiveness.
6. Enlightening Employees• To implement the Policy, we will provide our employees with educationand training sessions on ESG awareness in real estate investment andmanagement operations, heightening their awareness and enriching theirexpertise.
7. Collaboration with Tenants and Suppliers• In implementing the Policy, assuming that it is essential to obtainunderstanding and cooperation from the tenants of respective properties
and our major business partners including property managementcompanies, we will work to build good relations with each of them in aneffort to establish a collaborative structure.
8. Establishing Internal Organizations• In order to manage the implementation of what is provided in the Policy,
we will organize a sustainability promotion committee within the Company.
• We will set up specific objectives, etc. for each of our initiatives andreview them periodically.
9. Monitoring and Disclosing Environmental and Social Performances• We will continuously grasp the status and results of our efforts based on
the Policy, while monitoring the status of ESG initiatives on our own by
utilizing external assessment systems and surveys including GRESB.
• We will disclose information and achievements regarding our ESG
initiatives to unitholders and other stakeholders in a timely andappropriate manner.
Established January 29, 2018

System for Promoting Sustainability
Fukuoka Realty has established the Sustainability Promotion
Committee to promote sustainability initiatives in a continuous andsystemic manner based on its Sustainability Policy. To achieve thegoals of the Sustainability Policy, the Company has put in place the"Regulations Concerning Sustainability Management" manual. In
the context of the Company s internal systems, collaboration withstakeholders, and information disclosure policy, the Committee
in principle meets at least twice a year to examine goals andmeasures related to sustainability. The Sustainability Promotion
Committee includes the CEO & Representative Director, and eachgeneral manager of the Property Management Dept., Investment
Dept., Finance Dept., Planning Dept., and Compliance Dept. The
CEO & Representative Director, who chairs the Committee, makes
a decision regarding the implementation of sustainability-related
measures. The chair of the Committee also periodically reports on
targets and results, as well as progress in certain issues, to theBoards of Directors of both the Company and FRC.

■ Organizational Chart for the Asset Management Company
General Meeting of Shareholders
Auditors
Board of Directors
Compliance Assessment Committee

CEO & Representative Director
Risk Management Committee
Deliberations regarding risk management

Executive Committee

Investment Committee

Decision-making on management matters ingeneralDecision-making in regard to the investment in andoperation of assets owned by FRC

Fukuoka REIT Corporation 2019

Sustainability Promotion Committee
Decision-making in regard to the promotion ofsustainability

Property Management Department

22

Compliance Department

Deliberations on compliance-related matters• General Manager of Compliance Dept. (Attorney)• Outside Compliance Committee Members (Attorneys,
Certified Public Accountant and Tax Accountant, Real
Estate Appraisers)

Investment Department

Finance Department

Planning Department

Fukuoka Realty identifies materiality (important issues to address) in
its sustainability initiatives based on the requests and expectationsof its stakeholders and the expected impact on and importanceto the Investment Corporation. By promoting initiatives based on

Environment

Materiality significant issues

Society

Policies and targets

Related SDGs

Reduction of environmental load

・Coordinate with Property Management and Building Management on promotion of management andreduction of energy consumption, greenhouse gas emissions, water consumption, and waste output

Maintenance and enhancementof environmental and construction
performance

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

Creation ofpleasant
workplaces

Governancemateriality policies and targets derived through cooperation withstakeholders, the Company targets sustainable growth at FRC
alongside contributions toward solving social issues.

Assetmanagementcompany・Improve quality of operations by enhancing and expanding employee education systems and promoting
acquisition of qualifications
・Continue to improve office environments and work on providing pleasant working environments
・Give consideration to work-life balance and boost employee satisfaction

Tenants

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

Contributions to boosting theattractiveness and revitalization of
Fukuoka and Kyushu

・Enhance dissemination of information regarding the strengths and charms of Fukuoka and Kyushu
・Support research and studies on the local economy and industries; promote attractive urban development incollaboration with local business circles

Co-creation with the local community

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

Information disclosure and dialogue
with stakeholders

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

Compliance / Risk Management

・Ensure thorough compliance, including with laws and ordinances, and the elimination of any conflict ofinterest with interested parties, and develop and operate an appropriate internal risk management system tomaintain and improve corporate value

Foundation Underpinning Management

Identification of Materiality significant issues

Process for Identifying Materiality
STEP 1

STEP 2

STEP 3

Identify social issues
Based on the needs of society and the expectationsof stakeholders within and outside of the Company,
prepare a list of social issues taking into accountconditions at other companies in the same industry,
items used at assessment agencies, ESG disclosure
standards, and SDGs.

Narrow and prioritize issues
Narrow and prioritize identified issues based on theirimportance to stakeholders and the importance toand degree of impact on the FRC s business basedon potential risks and opportunities. Prepare draft
proposals regarding materiality.

Deliberate at the management level, confirm appropriateness
Ensure that the Sustainability Promotion Committee, established by
the asset management company, deliberates on all draft proposals
regarding materiality. Materiality is identified after investigating
appropriateness based on the opinions and advice of experts acting
on behalf of stakeholders. Reports are ultimately delivered to theBoard of Directors of the asset management company and the Boardof Directors of the Investment Corporation.

We put in place the Sustainability Policy in January 2018 and established theSustainability Promotion Committee with the goal of continuously and systematicallypromoting initiatives based on the policy. We believe factoring ESG considerations
Akira Eguchi
Executive Managing Director
Fukuoka Realty Co., Ltd.

into our real estate investment management process is part of our responsibility as theasset management company for FRC, a regionally specialized REIT.

Fukuoka REIT Corporation 201923

Environmental Issues

FRC and Fukuoka Realty are promoting environmental initiatives in order to reduce the environmental impact of at FRC s

Foundation Underpinning Management

properties.

Acquiring External Certifications■ Participation in GRESB Assessment 2019 ( Green Starand 4 Star Ratings)
The Global Real Estate Sustainability Benchmark (GRESB) wasestablished by a group of European pension funds and is thebenchmark for measuring sustainability in real estate companies
and managing organizations. FRC was given four Green Stars in
the five-level GRESB Real Estate Assessment conducted in 2019.

■ Initiatives We Support
In September 2018 Fukuoka Realty Co., Ltd. endorsed thePrinciples for Responsible Investment (PRI) and Principles for
Financial Action for the 21st Century (PFA21) and became asignatory to these initiatives. Through ESG-conscious asset
management, Fukuoka Realty is contributing still further to theachievement of a sustainable society.

■ Ratio of Properties Certified as Green Buildings
As of the end of August 2019, the ratio of properties within theentire portfolio certified as green buildings was 68.7%.
The DBJ Green Building Certification is a third-party certification
system established by the Development Bank of Japan forreal estate properties that feature excellent environmental andsocial considerations. Fukuoka REIT Corporation has acquired
certification for nine of its properties owned as domestic top-classbuildings or buildings that exhibit exceptionally high environmental
and social awareness.
In addition, the Building Energy-Efficiency Labeling System (BELS)
is a system in which third parties evaluate, indicate, and certify theenergy conservation performance of non-residential buildings, basedon the Evaluation Guidelines for the Building Energy-Efficiency
Labeling System for Non-Residential Buildings (2013). FRC has
acquired certification for four of its properties owned.

2017

Canal City Hakata
Canal City Hakata・B
Park Place Oita
Canal City Business Center Building
Gofukumachi Business Center
Higashi Hie Business Center
Konoha Mall Hashimoto
LOGICITY Hisayama

2017

Higashi Hie Business Center II

2018Green Building
Certification

Fukuoka REIT Corporation 20192018

(total floor space basis)

Higashi Hie Business Center II

24

2018

68.7%

Higashi Hie Business Center

LOGICITY Minato Kashii

LOGICITY Hisayama

Funding used as investment to produce positive effects on theenvironment is called green finance, and the market, focused on
green bonds, is expanding year by year. Given the growing interestin environmental issues such as climate change, the market scale
for green finance is expected to expand moving forward as thenumber of investors focused on ESG investment increases.
As the preference by those providing funding to invest in
solutions to environmental issues and companies actively working
to reduce their environmental impact increases, we believe therelative cost of funding through green bonds and other instruments
may decline.

Based on these conditions and with the goal of further
advancing ESG activities and expanding funding methods, FRC
established the Green Finance Framework in June 2019 in line with
the Green Bond Principles 2018, the Green Bond Guidelines 2017by the Ministry of the Environment, and the Green Loan Principles.
In July 2019, FRC was the first investment corporation toundertake green financing, procuring ¥2.2 billion in green loans inline with this framework.

Use of Funds Procured through Green Finance

Eligible Green Projects

The funds procured through green finance will be allocatedtoward the acquisition of Eligible Green Projects, the repaymentof borrowings required in the acquisition of eligible green assets,or the redemption of investment corporation bonds issued andoutstanding.

Eligible Green Projects are specified assets held by FRC thathave received or are scheduled to receive one of the following
certifications from third-party certification organizations at the timeof procurement or the reporting date.

Foundation Underpinning Management

Green Finance Framework(1) DBJ Green Building certification of 4 or 5 stars or a 3-star evaluation(2) CASBEE certification of S, A or B+ rank
(3) BELS evaluation of 3, 4 or 5 stars

Maximum Green Finance Procurement AmountThe amount of liability (Eligible Green Project liability) derived bymultiplying the total acquisition price of Eligible Green Projects
by total assets LTV (debt/total assets) as of the end of thelatest fiscal period is recognized as the maximum green financeprocurement amount.

Total properties
owned¥195.9 billion(acquisition price)

29 properties★★★
(3-star)Eligible Green
Projects¥138.4 billion

70.6%

★★★★
(4-star)Eligible Green
Projects¥138.4 billion
10 properties★★★★★
(5-star)

ReportingAfter procuring green finance, FRC will announce the total
amount of Eligible Green Projects, the amount of liabilities related
to Eligible Green Projects and the amount of funds from green
finance as of the end of each fiscal period (February and Augusteach year). The Investment Corporation will also announce thefollowing indicators related to Eligible Green Projects as of the endof February each year.
• The number of properties classified as Eligible Green Projects,

and the number and type of obtained environmental certifications.
Total assets LTV

39.7%
Maximum green financeprocurement amount
Eligible Green Project liability¥54.9 billion

Fukuoka REIT Corporation 201925

Foundation Underpinning Management

Environmental Issues

Environmental Initiatives at Properties Owned

Retail

Our goal for retail facilities is to create environmentally friendly facilities. Accordingly, we are
implementing energy and resource-saving initiatives at these locations.

Canal Water Filtration System (rainwater utilization system)
Canal City Hakata s symbolic canal has botha recreational function and is a source of waterto fight fires in the case of an emergency. At
all times, this canal holds roughly 1,200 tonsof water, and rainwater is used in order toconserve resources.

Groundwater Filtration System (RO treatment system)
For Fukuoka, which has suffered water shortages in the past,water is a truly precious resource.
Canal City Hakata and Konoha Mall Hashimoto use dedicatedwaterworks facilities to produce all of the tap water they consume.
The facilities water treatment system uses a special film called RO
film (Note 1) to treat groundwater.

(Note 1) RO film: A film perforated with holes so incredibly tiny that water molecules are virtually the onlymolecules that can pass through them. Water passed through this film is purified, as
impurities and hazardous substances are unable to permeate it. RO film can thus be used
to generate drinkable water from even seawater and muddy water.

Sixth Annual Green Social Contribution Award (2018)

Canal City Hakata
With the aim of creating an environmentally friendly facility, Canal City
Hakata is engaged in greening, recycling, and energy and resourcesaving activities. Canal City Hakata received a Sixth Annual Green Social
Contribution Award in recognition of its efforts to contribute to the regional
community and improve the environment since its opening. These efforts
include the creation of an area where visitors can relax, focusing on artificial
canals, and installing a rooftop garden at the facility hotel.

26

Fukuoka REIT Corporation 2019

Canal City HakataWe are implementing heat island measures at office buildings. This includes the promotion of LED
lighting in common areas. Among other initiatives, steps have been taken to promote the greening of
exterior walls as well as the planting of exterior foliage.

Progress in the Conversion to LED Lighting

Other Initiatives• Gofukumachi Business Center (interior shared spaces, someexternal areas, etc.)• Sanix Hakata Building (interior recessed lighting)• Taihaku Street Business Center (entrance, interior sharedspaces, etc.)

We are working to reduce our environmental impact by promoting
energy and resource-saving measures, including the greeningof exterior walls, planting of exterior
foliage, installation of sensors that
detect the presence or absence ofhuman activity to reduce light usage,and implementation of waste recycling
initiatives.

Foundation Underpinning Management

OfficeBuildings

Higashi Hie Business Center

OthersWe are also working on environmental measures in logistics, housing, and other facilities.

Introducing Renewable Energy Equipment

Planting of Exterior Foliage

Solar panels have been installed on theroofs of LOGICITY Hisayama and LOGICITY
Minato Kashii.

At the Aqualia Chihaya property, we areconducting greening measures such as
replacement of trees and plants raised.

Solar panels

Before planting

After planting

LOGICITY Minato Kashii

LOGICITY Hisayama

Aqualia Chihaya

Fukuoka REIT Corporation 201927

Social Issues

We are actively engaged in employee and tenant-related measures to ensure a comfortable working environment.
As a member of the local community, we are focused on ensuring a safe and secure living environment while building aFoundation Underpinning Management

relationship of trust with members of the local community through participation in the planning of a variety of events.

Initiatives for Employees and TenantsInitiatives for Employees (* As of August 31, 2019)
Fukuoka Realty: Number of officers andemployees, number of credentialed employees
Average number of years of continuous
service by permanent employees:
8 years and 6 months
Number of full-time officers and employees:
41 (22 male and 19 female)・Employees seconded from sponsors: 2
・Employees seconded to a sponsor: 3
Number of credentialed personnel (aggregate total)
・Real estate brokers: 28
・Certified Building Administrators: 4
・First-class registered architects: 2・ARES Certified Masters: 19
・Real estate appraisers: 2・Attorneys: 2
・MBA: 1・Administrative Scriveners: 1
・SME management consultants: 1

Supporting flexible working styles
・Child-rearing support (maternity leave,
childcare leave system)
・Nursing care leave
・Leave for voluntary work
・No overtime days
・Employee welfare (401K, cumulative
investment system, etc.)
・Encouraging use of paid holidays etc.
Employee training
・Regular study groups by the Kyushu
Economic Research Center・Compliance training
・ESG training
・Nursing care training
・Overseas inspection
tour (Shenzhen) etc.
Support for career development

・Employee satisfaction survey, every year
・Self-assessment system
・Career interview
・Secondment system (dispatching employees
to sponsor companies)
・Promotion from contract employee topermanent employee status
・Offering of training programs tailored to eachmanagement level
・System for supporting acquisition ofqualifications (Real Estate Securitization
Master, Real Estate Transaction Agent, etc.)
・Support for language learning, the studying
of bookkeeping etc.

ESG training (waste disposal site tour)

Overseas inspection tour (Shenzhen)

Creating a Comfortable Working Environment
Work style reforms at the Asset Management Company
Fukuoka Realty was certified as a Fukuoka Work Style Reform
Promotion Company on August 28, 2018. This system recognizes
companies that have achieved at least a certain number of theinitiative items that were selected by Fukuoka City as indicators
to advance work style reforms.

Recognized initiatives• There is a training system for employees• There is a support system for self-development initiatives• There is a system to support career advancement and to consult aboutcareer building• There is a certification acquisition support system as well as subsidized
English and bookkeeping training systems• The company has measures in place to encourage shorter working hours• There is a system in place allowing employees to take time off inincrements of hours or half-days• There is a personnel development system, including training contributing
to career advancement, etc.

Tenant Initiatives
With a focus on the health and comfort of tenant employees, we
improved the employee break room at Konohana Mall Hashimoto,a property owned by FRC.
We also engage in a variety of tenant initiatives each year topromote the understanding of sustainability.
・Undertaking of emergency drills intended to improve tenant safety andsecurity
・Implementation of tenant satisfaction surveys
・Distribution of sustainability guidebooks
・Sponsoring of events to improve sustainability awareness・Sustainability training, etc.

28

Fukuoka REIT Corporation 2019

■ Employee Resting Area

BeforeAfter

Initiatives for Local Communities
Environment Promotion Events

At Canal City Hakata, employees
participate in events that involve
sprinkling water on sidewalks to coolthem down and promote well-being.

Safety Town Council

Clean-Up Days

Participation in Community Events

Support for Local Revitalization

At Park Place Oita, we established a
Safety Town Council that partners
with related institutions and groups to
conduct crime-prevention patrols andproactively strives to prevent youth
misconduct.

Executives and employees actively
participate in clean-up activities, ofwhich there have been 276 as of August
31, 2019.

Every year, male employees of theCompany participate in the Hakata Gion
Yamakasa festival (Hachiban Yamakasa
Kasariyama, Kamikawabata-dori). CEO
Etsuo Matsuyuki rode on a float at theevent in 2018.

In collaboration with DOGAN beta, INC.,
steps were taken to establish OnRAMP
with the aim of supporting and fostering
entrepreneurs in Kyushu.

Foundation Underpinning Management

Initiatives for Local Communities

Real Estate, Finance, and the Economy Gathering
We have held gathering to exchange information and opinions on

and Construction Industries

real estate, finance, and the economy annually since 2008 with the

Bureau of the Ministry ofcooperation of the Japan Real Estate Institute.

Land, Infrastructure, Transport

Local real estate companies, financial institutions, and government

and Tourism speaking on theagencies participate in the conference, which contributes to networking

promotion of ESG investment inand further stimulation of the local economy.

Japanese real estate. In the second part, Shuhei Yamada, Nikkei Asia

It has been designated as a continuing education course for ARES

Tech chief editor and Japan Center for Economic Research, spoke on
the light and shadow of the Chinese economy, specifically the risks

masters.
The first part of the 12th lecture in 2019 featured Sachio Muto,

and opportunities stemming from rapid development. The lectures

head of the Real Estate Market Division within the Land Economy

were attended by about 230 people.

Other Activities

Promoting the Attractiveness of Fukuoka and Kyushu

Kyushu IR GroupThe Kyushu IR Group, which enteredits ninth year in 2019, was establishedin cooperation with the Japan Investor
Relations Association. The Group assists in learning about the latest
IR trends with IR employees of companies located in Fukuoka andKyushu, and fosters the forming of networks between participatingcompanies.

With the goal of promoting understanding of
the charms and strengths of Fukuoka andKyushu, we have published details of dialogue
between Fukuoka City Mayor Takashima
and Company CEO Etsuo Matsuyuki in a
publication aimed at foreign investors.

Website■ FY2019 Study Group Themes
Schedule

Theme and Lecturer

ESG Disclosure and Internal Consensus
First Study Group(August 2019)

Seconds Study
Group (November
2019)

Third Study Group(pending)

Linking Japan

Sysmex Corporation
General Manager of the Corporate Communications
Division, Secretary General Manager

Ms. Noriko Okada

Preparing the Non-Financial Information Required by Investors
Resona Bank, Limited
Group leader for Asset Management Department s
Responsible Investment Group(pending)

Mr. Minoru Matsubara

FRC s website places an emphasis on being easy to use, easy tounderstand, and providing a wealth of information. The site aims to provide
not only financial information, but also information on the economy andmacroenvironment in Fukuoka and Kyushu, as well as the real estatemarket and details of measures being introduced at various properties
owned. The Investment Corporation also distributes a variety of information
through social networking sites andIR mail so that even investors who are
not familiar with Fukuoka and Kyushu
can gain a strong understanding ofcurrent conditions.

Fukuoka REIT Corporation 201929

Organizational Issues

As a listed REIT, FRC is working to strengthen corporate governance as part of its effort to fulfill its responsibilities toFoundation Underpinning Management

unitholders and other stakeholders.

Basic Policy on Customer-Oriented Business Operations
Fukuoka Realty has adopted all seven principles set forth in the Principles for Customer-Oriented Business Conduct, announced by
the Financial Services Agency on March 30, 2017, and formulated a basic policy to realize customer-oriented business operations on
September 20, 2017.
■ Fukuoka Realty s Basic Policy

1
2

Fukuoka Realty is a financial business operator that operates listed REITs. We will constantly strive to provide high-quality services so that we canmeet the investment needs of unitholders.
Fukuoka Realty, as an asset management company knowledgeable about the particular circumstances of the region, strives to maximize the profit of
our unitholders by utilizing information and expertise, to provide investors with stable earnings over the medium to long term.

3

Fukuoka Realty will make the fiduciary duty entrusted to it by unitholders its primary consideration and appropriately manage any conflict of interest.

4

Fukuoka Realty s officers and employees will engage in honest and fair operations on a daily basis and act responsibly toward the Company s
investors and other stakeholders.

5

Fukuoka Realty will proactively engage in voluntary IR activities in addition to statutory disclosure and timely disclosure and increase the fairness andtransparency of information disclosure.

■ Seven Principles
Principle 1 Establishment and Announcement of Policy on Customer-Oriented Business Conduct
Fukuoka Realty is a financial business operator managing a listed REIT which, through investing in real estate properties, supports and facilitates asset formationof a wide range of investors. As such, we have established a clear basic policy to implement customer-oriented business conduct throughout the investment chain
and have publicized it on our website, etc. Moreover, we continuously check on the status of our endeavors in order to realize better customer-oriented businessconduct.
Principle 2 Pursuit of Customers' Best Interest
As a financial business operator, we maintain a high level of professionalism and professional ethics, and conduct operations with integrity and fairness forunitholders in an effort to secure their best interests. We also strive to ensure that such business conduct will be deeply rooted in our corporate culture.
Principle 3 Appropriate Management of Transactions with Conflicts of Interest
For transactions with our interested parties including Fukuoka Jisho Co., Ltd., one of our sponsors having 50% equity, which may cause conflicts of interest,
we work to accurately grasp the possibility of conflicts of interest with unitholders pursuant to laws and regulations as well as our internal rules, etc. If any suchpossibility is found, our Compliance Department investigates the matter in advance before the relevant transaction takes place, and deliberation is made in advanceat the Investment Committee and the Compliance Assessment Committee which invites outside experts if necessary. Through these steps, we appropriately
manage transactions that may have conflicts of interest. Specifically, when acquiring real estate from any interested party, for example, we follow the processes
established in our in-house rules for determining whether a certain deal is a transaction with a conflict of interest as stipulated in our Asset Management Guidelines.
By doing so, we prevent any disadvantage to unitholders from arising. When acquiring real estate from any interested party, we conduct an investigation andgive full consideration, for instance conducting the transaction at a price equal to or less than the appraisal value provided by a third party, before deciding on theinvestment.
Principle 4 Clarification of Fees and Commissions
We provide information through statutory and timely disclosure and voluntary disclosure so that unitholders can understand our asset management fees and othercommissions or expenses to be borne by the Investment Corporation, including what types of services are paid for.
Provision of Important Information in an Easy-to-Understand Manner
Principle 5
We do not solicit the sale or recommendation, etc. of financial instruments or financial services. However, as an asset management company of a listed REIT, we
provide important information that relates to investment decision-making for unitholders in an easy-to-understand manner through statutory and timely disclosure
as well as voluntary disclosure so that such information can be readily understood. We also post such information on our website in a timely manner in an effort toprovide information desirable for investors from an investor-oriented perspective.
Principle 6 Provision of Services Suitable for Unitholders
We strive to understand the needs and requirements of unitholders, and conduct asset management taking into account such needs and requirements. Specifically,
we aim to secure stable distributions, increase distributions over the medium to long term and conduct investment that can contribute to society, among otherendeavors.
Principle 7 Preparing a Framework, etc. for Appropriately Motivating Employees
We established a "Code of Conduct" to ensure our officers and employees always act in the best interest of unitholders. In addition, we regularly and continuously
carry out education and training on compliance for all of our employees so that they can secure fairness in business conduct and thoroughly implement appropriate
management for transactions that may involve conflicts of interest, as well as enhance their awareness on compliance.

30

Fukuoka REIT Corporation 2019

When a transaction such as the purchase and sale of a property
between FRC and a stakeholder, including a sponsor, takes place,the asset management company must address any possibilityof prioritizing the interests of interested parties over investors.
Fukuoka Realty has accordingly established a Basic Policy on
Compliance, as well as compliance regulations and other internal
rules to prevent any conflict of interest. Based on these rules, we
obtain a preliminary assessment from the Compliance Department
General Manager and ensure deliberations by the Compliance
Assessment Committee, consisting of the Compliance Department
General Manager and three outside experts in order to engage
in the management of any conflict of interest pertaining to ourdealings with stakeholders in an appropriate manner.

■ Decision-Making Process
Proposals from the responsible department

General Manager of Compliance Dept.

Deliberations by the Investment
Management Committee

Deliberations and resolution by theCompliance Assessment Committee

Resolution/decision-making reportby the Board of Directors■ FRC Directors
FRC Board of Executive Officers

Third-party assessment byexternal experts(Real estate appraisals)• Japan Real Estate Institute• The Tanizawa Sogo Appraisal
Co., Ltd.
• Daiwa Real Estate Appraisal
Co., Ltd.
[Market reports]• Analysis on trade areas andcompetitive environment• Adequate rent levels, etc.

Foundation Underpinning Management

Governance System[Engineering reports]• Compliance with statutory andregulatory requirements andearthquake resistance• Check of soil contamination,
toxic substances, and thestatus of use• Replacement price, expenses
for long-term maintenance andrepairs, etc.

(Note) The prior consent of the Investment Corporation s Board of Directors is obtained in cases
falling under the provisions of Article 201-2 (1) of the Act on Investment Trusts and Investment
Corporations.

Risk Management

Supervisory Director

CEO and Representative Director

Supervisory Director

Yasuo Kawasho

Etsuo Matsuyuki

Hiroyasu Shindo■ Fukuoka Realty Governance Structure

We have established a system for comprehensively managing
risks by setting up the Risk Management Committee as theorganization to manage various risks. In terms of the basic policy
on risk management and the risk items to be managed, theCompany has established the Risk Management Regulations andthe Risk Management Committee monitors whether the risks areunder control.

Compliance Training
We carry out periodic compliance training to improve awarenesswithin the Company and to maintain the compliance system.

Director(Non-Executive)

Director(Non-Executive)

CEO and
Representative
Director

Hidenori Hara Yoshiro Watanabe Etsuo Matsuyuki

Executive
Managing
Director

Director(Non-Executive)

Auditor(Non-Executive)

Akira Eguchi

Hiroshi Shimuta Masanori Tasaka

Joint training with sponsors

In-house training (group discussions)

Fukuoka REIT Corporation 201931

Data Section

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

9th

10th

11th

12th

13th

14th

15th

16th

17th

Feb. 2009

Aug. 2009

Feb. 2010

Aug. 2010

Feb. 2011

Aug. 2011

Feb. 2012

Aug. 2012

Feb. 2013

Operating revenue

5,466

5,621

5,640

5,663

5,662

7,045

6,931

7,094

7,200

Operating income

2,405

2,371

2,408

2,412

2,317

2,729

2,637

2,595

2,622

Ordinary income

1,933

1,861

1,863

1,797

1,763

2,083

2,046

2,005

2,005

Profit

1,932

1,860

1,862

1,796

1,762

2,082

2,045

1,992

2,004

NOI

3,597

3,656

3,698

3,637

3,537

4,406

4,351

4,372

4,444

Total assets

125,222

130,836

130,705

132,349

132,497

155,657

155,792

159,601

160,574

Net assets

62,196

62,124

62,126

62,061

62,026

71,25971,222

71,17071,182

Interest-bearing debt

51,90057,30057,22559,15059,07569,50069,42573,35074,675Interest-bearing debt ratio（%）

41.4

43.8

43.8

44.7

44.6

44.6

44.6

46.0

46.5

Depreciation (Net per unit)

864

950

954

953

958

1,164

1,177

1,242

1,268

Capital expenditures

486

109

141

154

685

254

1,031

1,285

431

2,681

2,338

3,150

2,394

2,545

3,294

3,677

3,617

3,120

Cash flow provided by (used in) investing activities(485)(5,966)(233)(3,398)(162)(20,086)(566)(6,016)(3,067)

Cash flow provided by (used in) financing activities(1,969)3,467(1,928)56(1,871)

17,548(2,153)

1,881

(666)

Cash and cash equivalents at year-end

6,049

5,889

6,877

5,928

6,440

7,197

8,154

7,637

7,024

3,609

3,475

3,479

3,356

3,293

3,384

3,324

3,238

3,257

Financial information
Earnings (Millions of yen)

Financial conditions (Millions of yen)

Cash flow (Millions of yen)
Cash flow provided by (used in) operating activities

Per-unit indicators (Yen)Distribution (Net per unit)
EPS (Net profit per unit)

3,609

3,475

3,479

3,356

3,293

3,384

3,324

3,238

3,257

BPS (Net assets per unit)

116,200

116,066

116,070

115,947

115,884

115,822

115,762

115,676

115,696

NAV (NAV per unit)

135,880

129,966

129,320130,141

125,647

123,001

121,447

122,299

123,041

FFO (FFO per unit)

5,225

5,252

5,263

5,137

5,083

5,276

5,237

5,258

5,319

Investment unit information
Investment unit price (Yen)

68,60098,80098,200107,400

120,800

108,400

107,200

109,600

153,600

Total number of investment units issued

535,250535,250535,250535,250535,250

615,250

615,250

615,250

615,250

Non-financial information
Number of employees
Percentage of female employees（%）

35

33

35

36

36

37

38

35

36

34.3

42.4

40.0

36.1

36.1

37.8

39.5

42.9

36.1

Average number of years of employment（Years/Months）

3.0

3.4

3.10

4.2

4.6

4.10

5.2

5.8

5.7

The number of IR meetings（Note 1）

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

＊ Gains and Aqualia losses on the sale of the Aeon Hara Shopping Center and Aqualia Kego, which were transferred in the 25th fiscal period, were handled in the following manner due to differing tax and accounting standards.
1) An amount equivalent to impairment losses on the Aeon Hara Shopping Center booked in the profit and loss statement in the 24th fiscal period was booked as an allowance for a temporary difference adjustment on the statement
concerning the allotment of funds, for the 25th fiscal period2) Gains on the sale of Aqualia Kego were recorded on the profit and loss statement for the 25th fiscal period.
3) The return of allowances for a temporary difference adjustment was booked on the statement concerning the allotment of funds, for the 25th fiscal period.
＊ Distributions per unit are calculated as follows.
24th fiscal period: [net profit] + [reserve for temporary difference adjustment] – [earnings carried forward to the next period]
25th fiscal period: [net profit] - [ return of reserve for temporary difference adjustment] – [earnings carried forward to the next period]＊ The Investment Corporation undertook a five-for-one split effective March 1, 2014. Distributions and NAV per unit up to the 19th fiscal period have been retroactively adjusted to reflect this split.
(Note 1) The number of IR meetings convened in Japan and abroad from the 9th to 20th fiscal periods is not recorded, as records do not exist for these periods.
For other notes regarding this summary, please refer to page 11. Rounding of amounts and ratios in this document: Unless otherwise stated, amounts and ratios are rounded down to the first decimal point.

32

Fukuoka REIT Corporation 2019

19th

20th

21st

22nd

23rd

24th

25th

26th

27th

28th

29th

30th

Feb. 2014

Aug. 2014

Feb. 2015

Aug. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Feb. 2019

Aug. 2019

7,565

7,574

7,779

7,789

8,423

8,343

8,234

9,730

8,122

8,194

9,178

9,242

9,231

2,848

2,801

2,824

2,860

3,167

3,141

3,069

4,585

2,920

2,965

3,238

3,306

3,318

2,272

2,239

2,263

2,370

2,663

2,670

2,616

4,199

2,562

2,624

2,861

2,935

2,939

2,271

2,238

2,262

2,369

2,661

2,669

938

4,198

2,556

2,623

2,860

2,934

2,939

4,751

4,732

4,800

4,829

5,229

5,237

5,164

5,010

4,998

5,079

5,493

5,591

5,633

167,857

167,492

167,824

167,369

181,597

181,445

179,513

175,063

178,063

177,283

193,112

195,433

195,106

81,712

81,67981,70381,81193,804

93,812

92,081

93,681

93,69993,766

101,799

101,874

101,878

71,10071,025

71,15070,77572,40072,32571,95066,67569,90068,90075,50077,50077,500

42.4

42.4

42.4

42.3

39.9

39.9

40.1

38.1

39.3

38.9

39.1

39.7

39.7

1,343

1,354

1,387

1,390

1,458

1,471

1,470

1,455

1,474

1,500

1,602

1,622

1,651

612

848

740

328

445

630

665

1,789

741

600

657

947

476

3,609

3,699

3,890

3,735

4,167

4,174

4,336

3,685

3,590

4,292

4,149

4,832

4,863

(7,897)(916)(2,312)(1,452)(14,488)

(606)

(772)

4,220

(6,029)(478)(15,326)(3,604)(1,043)4,651(2,359)(2,115)(2,635)

10,934(2,747)(3,043)(7,872)667(3,555)

11,734(859)(2,933)

7,387

7,810

7,273

6,920

7,533

8,353

8,873

8,905

7,134

7,392

7,950

8,319

9,205

3,291

3,243

3,278

3,435

3,563

3,574

3,479

3,398

3,422

3,512

3,593

3,687

3,693

3,291

3,243

3,278

3,434

3,563

3,573

1,256

5,621

3,422

3,512

3,593

3,687

3,692

118,423

118,376

118,410

118,567

125,574

125,585

123,267

125,410

125,434

125,524

127,888

127,982

127,987

127,080

128,375

131,215

136,051

144,472

148,558

152,259

150,328

152,639

156,204

161,315

164,250

167,118

5,238

5,207

5,288

5,450

5,515

5,543

5,448

5,351

5,395

5,520

5,606

5,725

5,767

145,000

171,400

199,000

227,000

188,700

194,200

186,100

177,100

164,300

173,100

170,400

169,300

178,300

690,000

690,000

690,000

690,000

747,000

747,000

747,000

747,000

747,000

747,000

796,000

796,000

796,000

40

40

34

35

38

41

39

40

38

38

39

41

41

37.5

35.0

38.2

40.0

44.7

43.9

48.7

45.0

44.7

44.7

46.2

46.3

46.3

6.1

6.2

7.1

7.5

6.0

6.2

6.5

6.9

6.11

7.7

7.10

7.11

8.6

N/A

N/A

N/A

122

154

147

106

126

116

169

129

148

149

Fukuoka REIT Corporation 2019

Data Section

18th
Aug. 201333

Glossary

Glossary

Asset type
Refers to the type of asset application, such as office buildings, retail facilities, and residences.
BPS
An abbreviation of Book-value Per Share. This shows net assets per unit and is viewed as an indicator for stability.
Calculation method for BPS: net assets/total number of units issued
Cap rate
This is also referred to as the return yield and represents the return on a real estate investment used when determining the appraisal price or theoretical price of areal estate property. In general, NOI or NCF (Net Cash Flow) divided by the cap rate is considered the theoretical price of a real estate property. The cap rate varies
depending on the characteristics of a property, such as whether it is new or older, grade and size, as well as factors such as proximity to transportation and location.
Capital expenditureThis refers not only to the maintenance and repair of real estate or equipment, but also the costs of maintaining and improving the value of these assets, which arerecorded by the investment corporation as assets and are subject to depreciation.
Commitment line
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 with the bank.
Commitment in this case indicates a contracted promise. The borrower can secure stable working capital regardless of business conditions.
Conflict of interest
In general, this refers to when an act is in one s own interest, while at the same time disadvantageous to the interests of another. For a J-REIT, this often refers to aconflict between a unitholder and the interests of the investment corporation or asset management company.
Engineering reports
Reports outlining the results of a physical survey of a property. These often include surveys on building conditions, soil contamination, long-term repair andrefurbishing costs, and earthquake risk.
EPS
An abbreviation of Earnings Per Share. This shows net profit per unit and is viewed as an indicator of a company s ability to generate earnings.
Calculation method for EPS: net profit/ total number of units issued
ESG
ESG is an abbreviation for Environment, Social, and Governance. The idea that a company needs to maintain focus on these three concepts to ensure long-term
growth is gaining ground throughout the world. With an emaphasis on sustainability, ESG management is focused on pursuing strategies with the environment andsociety in mind.
External growth/Internal growth
For J-REITS, per-unit profit growth achieved through new real estate acquisitions is referred to as external growth. This growth is achieved by the investment
corporation acquiring new real estate that is expected to produce high yields at relatively low funding costs. The acquisition of new real estate can also expand thescale of the business and diversify risk, with reduced transaction costs thanks to scale merits also contributing to growth. In contrast, internal growth is profit growthachieved through the efficient management of existing real estate.
FFO/FFO ratio
An abbreviation of Funds From Operations. This shows how much cash flow is generated from rental income. The larger FFO per unit, the greater the company s
profitability.
Calculation method for FFO: net profit – gains/losses from the sale of real estate + depreciation; FFO per unit: FFO/total number of units issued
The FFO ratio is similar to PER. A lower value indicates an attractive share price versus fund profitability.
Calculation method for FFO ratio: Investment unit price/FFO per unit
Green bonds
These are bonds issued by companies and local governments in order to raise the funds necessary for green projects in Japan and overseas.
Green loan
A loan in which the use of funds is limited to environmentally friendly businesses.
Interest-bearing debt
This refers to liabilities with interest that must be repaid. Specifically, this refers to long- and short-term loans from banks and funds procured on the market, including
through the issuance of corporate bonds.
Investment corporation bonds
These are bonds issued by investment corporations in accordance with the Act on Investment Trusts and Investment Corporations and are equivalent to corporate
bonds. Investment corporation bonds are issued to secure financing, with funds used to acquire real estate, undertake repairs on existing buildings, repay borrowings
and fund reimbursements.
IR
IR refers to Investor Relations, which is essentially public relations activities aimed at investors. These include the provision of information necessary to making soundfinancial decisions, including financial conditions at the company, to shareholders and investors.

34

Fukuoka REIT Corporation 2019

LTV
An abbreviation for Loan to Value, and an indicator of a company s borrowing ratio as well as a measure of stability in borrowing. The lower the value, the greater the
degree of safety against redemption of debt.
Calculation method for LTV (%): Interest-bearing debt /total assets multiplied by 100

Glossary

Materiality
Materiality involves the identification of related important issues and an evaluation of the impact of corporate activity on social issues. The process involves prioritizing
and providing an easy to understand picture of the importance of each of the issues being confronting.
NOI
An abbreviation for Net Operating Income. This reflects net income stemming from the real estate leasing and REIT business, deducting expenses such asadministrative costs and property taxes from rents in a given fiscal period. Costs not related to cash expenditures, including depreciation, interest paid on borrowings,
or taxes are not deducted. This is used to assess real estate and REIT asset value and is similar to EBITDA, which focuses on operating cash flow in assessing
corporate value. When determining the theoretical real estate property price, it is a common practice to divide NOI by the capitalization yield (cap rate).
NOI yield
This refers to annual NOI divided by property price and is an indicator for the investment yield of the real estate leasing business. If can also be used as a REIT
investment metric. A higher NOI yield indicates greater profitability, with greater distributions to the investor.
Calculation method for NOI yield: NOI/acquisition price multiplied by 100
NAV/NAV ratio
NAV is an abbreviation for Net Asset Value at an investment trust. Net assets are defined as total investment trust balance sheet assets minus liabilities, with the baseprice based on the number of units. For REITs, the term net assets refers to net assets plus unrealized gains or losses reflecting the difference between book value ofthe property owned and the appraised value.
Calculation method for NAV: Net assets + unrealized gains or losses – distributions
NAV/unit is NAV/total number of units issued
NAV ratio is somewhat similar to PBR (stock price/net asset ratio) taking into account the market value of real estate. It can be used to assess whether an investment
unit is under or overvalued.
Calculation method for NAV ratio: investment unit price/NAV per unit
Pipeline support agreement
Pipeline support agreements refer to contracts that provide the opportunity to acquire a property form a sponsor in advance of and in priority to a third party.
Public offering (PO)This is one way to secure financing. A public offering targets general investors as shareholders, offering new shares for an established price based on current
market value.
Renewable energy
Unlike limited fossil-based energy resources such as natural gas, crude oil, and coal, renewable energy sources are always present in nature, and include solar, windand geothermal resources.
Replacement costThis refers to the construction costs required if a building is re-built to a structure equivalent to the current building. Replacement cost is often used in engineering
reports.
SponsorA J-REIT sponsor is a shareholder of the company (asset management company) managing the assets of the investment corporation. Sponsors (shareholders) of
Fukuoka Realty include leading companies in the Kyushu Economy, such as Fukuoka Jisho Co., Ltd., and Kyushu Electric Power Co., Inc.
Sustainability
Sustainability is often used in reference to environmental issues, but has recently become a key word in reference to corporate social responsibilities.
TSR
An abbreviation for Total Shareholder Return. This can also be called total shareholder (investor) yield and reflects combined capital gains and distributions, reflecting
the overall investment yield for investors.
Calculation method for TSR (%): (Distribution per unit + increase in investment unit price)/initial investment unit price multiplied by 100* Regarding amount, percentage, and ratio rounding: Unless otherwise noted, in these materials, monetary amounts are rounded down to the nearest whole unit, and percentages and ratios are rounded off to one decimal places.

These materials may contain future performance, plans, management targets and strategies. These forward-looking descriptions are based on present assumptions on future eventsand trends in the business environment, but such assumptions may not necessarily be accurate. Actual results may differ materially due to various factors. Neither Fukuoka REIT
Corporation nor Fukuoka Realty shall be liable for the accuracy, rationality and completeness of information contained in these materials, whether they were prepared by Fukuoka
REIT Corporation or Fukuoka Realty or provided by a third party. These materials have not been prepared to entice investment. When applying to purchase investment units issued by
Fukuoka REIT Corporation, do so based on your own judgment and responsibility.

Fukuoka REIT Corporation 2019

35

MEMO

MEMO

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

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

facebook.com/fukuokarealty

fukuoka_realty

To better understanding of FRC and its operations, FRC is focusing efforts on IR activities.
FRC uses its website to post press releases and various disclosure materials and provide information on its portfolio of investment properties and other items. In addition, FRC uses social
media such as Twitter, Facebook and Instagram to disseminate a wide range of information on the Fukuoka and Kyushu area, including information on these regions economies, realestate markets, retail facilities, tourist attractions and much more. We invite you to make use of these information resources.