31st Fiscal Period
Report on Performance andManagement Status (Semiannual Report)

Security Code 8968

September 1, 2019 to February 29, 2020

Old map of Fukuoka castle town and Hakata neighborhood(9th year of Bunka Era: 1812)

Fukuoka REIT
Corporation

8968

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation
To Our Unitholders

Status of the Investment Corporation

First of all, we would like to extend our heartfelt sympathies to those who have been stricken with the COVID-19 infection as wellas to their families and related persons.
We would like to express our sincere appreciation to all unitholders
for your continued support of Fukuoka REIT Corporation (FRC).
We are pleased to report on the performance results and management status of FRC for the thirty-first fiscal period (September 1,
2019 to February 29, 2020).
FRC was listed in June 2005 and started as Japan’s first REIT specializing in regional properties. Since then, we have exhibited consistent growth and achieved stable performance through the support ofour unitholders and sponsor companies.
The business conditions of the Fukuoka and Kyushu area wereexpanding moderately but are currently on a somewhat weak note,
mainly in terms of consumer spending as well as exports and production, due to the impact of COVID-19 infection that broke out recently,
among other factors. On the other hand, the commercial land price inFukuoka City, the central area of FRC’s investment targets, rose
16.5% year-on-year, according to the government’s 2020 Land Market Value Publication announced in March 2020. The rate of increaseis high due to demand competition for office, store and other spaces
caused by the Tenjin Big Bang project making progress in the Tenjin
area, which induces re-construction of buildings through deregulationand creates new spaces and employment, and by the extension of
the City Subway Nanakuma Line (scheduled for fiscal 2022) as well
as by the launch of the Hakata Connected, a project designed toextend the bustle and vigor of Hakata Station into surrounding areas.
The residential land price also rose 6.8% year-on-year in the light of anotable increase in population. As such, the city’s land prices havecontinued rising for the eighth consecutive year both for commercial
land and residential land, marking higher rates of increase.
Occupancy remained solid, with the average period-end occupancy rate of all properties FRC owns standing at 99.7%. FRC posted
operating revenues of 9,162 million yen, operating income of 3,273
million yen, ordinary income of 2,900 million yen and profit of 2,899
million yen for the fiscal period under review. The dividend per unit
came to 3,642 yen.
The actual dividend for the period under review decreased by 8 yen
per unit from the forecast at the time of the announcement of the financial results for the 30th fiscal period. This was mainly due to theeffects of changes in inbound tourists and the impact of COVID-19
infection. While the current situation does not allow us to predict
when the spread of the COVID-19 infection will be contained, we willkeep our endeavors going forward to maintain and increase divi-

dends in a stable manner by generating stable cash flows and ongoing strategic initiatives.
We plan to acquire two new properties (4,990 million yen) in the
32nd fiscal period.
In the fiscal period under review, we concluded an agreement toacquire LOGICITY Wakamiya (Note), the fourth logistics facility for
FRC, in June 2020 (the 32nd fiscal period).
LOGICITY Wakamiya is located in an industrial park that is near
Kyushu Expressway Wakamiya Interchange and has a concentrationof logistics providers’ warehouses along with Toyota Motor Kyushu’s
automobile plant.
In addition, prior to the acquisition of LOGICITY Wakamiya in the
32nd fiscal period, we plan to acquire Higashi Hie Business Center III(completed in March 2020) from Fukuoka Jisho Co., Ltd., the mainsponsor, in May 2020. Since the completion of Higashi Hie BusinessCenter in February 2009, the Higashi-Hie Area has been developing
a number of office buildings and hotels against the backdrop of excellent transportation infrastructure, and its competitiveness as an
office area has improved.
Going forward, FRC will continue to exert its strengths as a REIT
specializing in regional properties and quickly respond to market
changes, while receiving support and cooperation from powerfulsponsors leading the Kyushu business world. We will also strive tomaintain and increase the dividend per unit level through steady asset
management.
We at FRC will also pursue our mission of maximizing unitholderinterests over the medium to long term based on our management
philosophy of “Act Local, Think Global.”
We greatly appreciate your continued support and cooperation.
(Note) The property is currently operating under adifferent name, but its name will bechanged to “LOGICITY Wakamiya” after it isacquired by FRC.

FRC is Japan's first REIT specializing in regional properties. FRC manages a portfolio centering on retail facilities featuring excellent design and entertainment qualities and superior office buildings throughout all of Kyushu. With a central focus on Fukuoka,
and in Yamaguchi Prefecture and Okinawa Prefecture, we are utilizing our strength of knowing the local characteristics of realestate, which is a very regional-specific business.

Overview of the Investment Corporation
Name:
Fukuoka REIT Corporation
Representative: Etsuo Matsuyuki, Executive Director
Asset manager: Fukuoka Realty Co., Ltd. (Fukuoka Local Finance Branch Bureau (financial instruments) No. 10)
Listed date:June 21, 2005 (Tokyo Stock Exchange, and Fukuoka Stock Exchange)

Sponsors

5%

5%

5%

5%

THE BANK OFFUKUOKA, LTD.

THE NISHI-NIPPONCITY BANK, LTD.

Development Bank of Japan Inc.

SAIBU GAS CO., LTD.

50%

Director

Fukuoka Realty Co., Ltd.

FUKUOKA JISHO
CO., LTD. (Note)

Etsuo Matsuyuki
Executive Director
Fukuoka REIT Corporation

10%

Outsidedirector

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.

(Note) Concluded MOU with Fukuoka REIT Corporation and Fukuoka Realty Co., Ltd. concerning pipeline support.

Overview of the Asset Manager
Name:
Fukuoka Realty Co., Ltd.
Representative: Etsuo Matsuyuki, CEO & Representative Director
Address:
2-25, 1-Chome, Sumiyoshi, Hakata Ward, Fukuoka CityCONTENTSI.

ProfilePortfolio

Telephone: +81-92-272-3900
Established: December 26, 2003
Capital:200,000,000 yen

Investment type (based on acquisition price)
RetailOffice buildings

59.2%

26.9%

Others13.9%

Investment area (based on acquisition price)

Overview of Fukuoka REIT Corporation
To Our Unitholders ........................................................................................................ 1
Profile .............................................................................................................................................. 2
Trend of Growth in Asset Size of FRC / Financial Summary ......................................................... 3
Portfolio Overview .......................................................................................................................... 5
Initiatives on Sustainability ............................................................................................................. 7

II. Semiannual Report ............................................................................................................... 9III. Independent Auditor's Report ...................................................................................... 26
IV. Balance Sheet ....................................................................................................................... 27
V. Statement of Income ......................................................................................................... 29
VI. Statement of Changes in Net Assets ........................................................................ 30
VII. Cash Flow Statement ........................................................................................................ 31
VIII. Notes to Financial Statements ..................................................................................... 32

FUKUOKA REIT CORPORATION

1

Other
Kyushu areas

Fukuoka metropolitan area

77.2%

22.8%

Total leasable floor space

Occupancy rate at end of period

580,662.77 m2

99.7%*Figures are based on properties owned as of February 29, 2020.
FUKUOKA REIT CORPORATION

2

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

Trend of Growth in Asset Size of FRC
FRC More than Doubled Asset Size and Diversified Investment Types
Retail (left axis)(mm yen)

Office buildings (left axis)

Residence (left axis)

Logistics (left axis)

Since Listing

Hotels (left axis)

Number of investment properties (right axis)

Occupancy rate (right axis) (Note)

99.6

200,000

99.8

99.0

99.4

99.7

99.4

99.4

98.8

99.2

99.1

98.8

99.0

98.6

99.6

99.3
98.1

29

99.6

99.5

99.4

99.8

99.7 (properties)

29

29

29

100

30

90

20

80

10

70

0

60

99.6

98.1

60.6%
Other thansponsors

39.4%
77,269million yen

118,710As ofmillion yen
February 29, 2020

195,979
million yen

27

100,000

19

15

14
11

16

15

16

16

17

16

27

28

27

25

24

23

23

25

26

26

20

17

11

50,0007(%)

40

Sponsors
properties* Higashi Hie Business Center, which FRC acquired in the10th fiscal period ended August 2009, was acquired bothfrom an outside seller and a sponsor. Accordingly, the acquisition price of the property has been evenly divided andadded to the acquisition price from outside sources and theacquisition from the sponsors, respectively. As for the number of properties, it has been added as a single property to
the number of acquisitions from the sponsors.

150,000

99.5

99.6

97.0

Acquired from sponsors

14

99.6

99.3

98.8

99.7

8

5

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

31st

(Aug. 2005)(Feb. 2006)(Aug. 2006)(Feb. 2007)(Aug. 2007)(Feb. 2008)(Aug. 2008)(Feb. 2009)(Aug. 2009)(Feb. 2010)(Aug. 2010)(Feb. 2011)(Aug. 2011)(Feb. 2012)(Aug. 2012)(Feb. 2013)(Aug. 2013)(Feb. 2014)(Aug. 2014)(Feb. 2015)(Aug. 2015)(Feb. 2016)(Aug. 2016)(Feb. 2017)(Aug. 2017)(Feb. 2018)(Aug. 2018)(Feb. 2019)(Aug. 2019)(Feb. 2020)(Note) The occupancy rate indicates the figure at the end of each fiscal period.

Financial Summary
 inancial Highlights for 31st Fiscal Period and Business Forecasts forF
32nd and 33rd Fiscal Periods
Category

31st fiscal period

32nd fiscal period

33rd fiscal period(September 1, 2019 to February 29, 2020)(March 1, 2020 to August 31, 2020)(September 1, 2020 to February 28, 2021)

ActualForecast

Forecast

Operating revenues

mm yen

9,162

8,893

9,240

Leasing NOI (Note)

mm yen

5,596

5,249

5,608

Depreciation and amortization expenses

mm yen

1,660

1,691

1,635

Operating income

mm yen

3,273

2,887

3,288

Ordinary income

mm yen

2,900

2,509

2,906

Profitmm yen

2,899

2,508

2,905

Dividend per unityen (1)

3,642

–

–

Latest dividend forecast per unityen (2)

3,650

3,150

3,650

yen (1)-(2)

(8)

–

–

units

796,000

796,000

796,000

Difference from forecast
Total number of investment units outstanding(at end of period)(Note) “Leasing NOI” is calculated using “Leasing business revenues − Expenses related to leasing business + Depreciation and amortization expenses.”
FUKUOKA REIT CORPORATION

3

Dividend Performance
Since listing, FRC has continued to deliver dividends in a stable manner. For the 32nd fiscal period, however, FRC forecasts a
decrease in dividends because of the impact of the COVID-19 infection.
31st fiscal period end

February 29, 2020 (semiannual periods ending every February and August) 31st fiscal period days 182 days

31st fiscal period dividend 3,642 yen per unit

Dividend yield

4.4% {(Dividend / Days × 365) / Unit price (as of February 29, 2020)}(yen)

4,000 3,802

3,687 3,726

3,468

3,672 3,699 3,674 3,609

3,475 3,479

3,356 3,293 3,384 3,324

3,238 3,257 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 3,642

3,650
3,150

3,000

2,000

1,000

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 31st 32nd 33rd

Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
[2005
] [2006] [2006] [2007] [2007] [2008] [2008] [2009] [2009] [2010] [2010] [2011] [2011] [2012] [2012] [2013] [2013] [2014] [2014] [2015] [2015] [2016] [2016] [2017] [2017] [2018] [2018] [2019] [2019] [2020] [2020] [2021]*FRC implemented a 5-for-1 split of its investment units with March 1, 2014 as the effective date. Dividend per unit indicates the value after the 5-for-1 split.
FUKUOKA REIT CORPORATION

4(Forecast) (Forecast)I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation
Purchase of earthquake
insurance

Portfolio Overview
1

Retail2

Canal City Hakata

3

Retail4

RetailRetail25 Others(hotel)26 Others(hotel)Others27 (logistics)

Others28 (logistics)

Park Place Oita

SunLive City Kokura

Hotel FORZA Oita

Tissage Hotel Naha

Tosu Logistics Center

LOGICITY Minato Kashii

One of the largest entertainment-type
retail facilities in Japan and comprising
United Cinemas and others

One of the largest entertainment-type
retail facilities in Japan and comprisingGrand Hyatt Fukuoka and others

A leading retail facility in the Oita area,
providing “park entertainment” for families

One of the largest malls in Kitakyushu andanchored by a SunLive supermarket
chosen by local consumers

A business hotel located walking distancefrom Oita Station and specialized for
lodging to meet business needs

A hotel in Naha City, Okinawa Prefecture
located a 10-minute car ride from Naha
Airport. Guestrooms are of sufficient sizeand quality to take in leisure demand.

A logistics facility located in the Green
Logistics Park Tosu, operating around theclock and with three temperature zones

A logistics facility among the largest in the
Fukuoka area, with a location featuring
traffic convenience and concentration ofsuch facilities

5

6

7

8

Others29 (logistics)

RetailCanal City Hakata• B

FRC has purchased earthquake insurance
for all the properties it owns.

RetailRetailRetailInvestment Policy
Investment area
Konoha Mall Hashimoto

Square Mall Kagoshima Usuki

Kumamoto Intercommunity SC

A community-based retail facility with SunLive
as its anchor tenant and directly connected to
Hashimoto Station via a pedestrian bridge

A retail facility in Kagoshima, designed byJohn Jerde who designed Canal City
Hakata and Roppongi Hills

Located along a major arterial road andcomprising Sports Depo, Golf 5 andStarbucks coffee

9Retail10 Retail11 Retail

Hanahata SC
Located in a new residential area andcomprising BON REPAS supermarket
and Matsumoto Kiyoshi drug store

60 - 90%

LOGICITY Hisayama
Approximately 5 km from the Fukuoka
Interchange featuring traffic convenience,and has good general-purpose capabilities

Investment type40-70% RetailFukuoka metropolitanarea

20-50% Office buildings

Other Kyushu areas
10 - 30% (including Okinawa andYamaguchi prefectures)

12 Office Building

0-30%

0 - 10% Others

Others(Hotel, Residence,
Logistics and otherfacilities)

Portfolio Map
Having a large floor area and tenanted byan electric appliance store widely
attracting customers from nearby cities

14 Office Building

Located east of Marinoa City Fukuoka
and has stable attractiveness throughsynergy with the Outlet building

An office building expected to exert
synergy with Canal City Hakata, withshowroom functions

15 Office Building

29

28

Fukuoka
Metropolitan Area

4

Island City

FukuokaSaga

16 Office Building

27
9Nagasaki

Oita

25
3

e
Lin

13 Office Building

Canal City Business Center Building

22

7

Sh
in
ka
ns
en

Located on a corner of a heavy-trafficintersection and comprising Sports Depoand Golf 5

Marinoa City Fukuoka (Marina Side Building)ssway
Kyushu Expre

K’s Denki Kagoshima

ii
sh
Ka
JR

Kurume Higashi Kushiwara SC

MiyazakiSanyo

Kumamoto
3

Fukuoka IC

Kagoshima

Gofukumachi Business Center

Sanix Hakata Building

Taihaku Street Business Center

Higashi Hie Business Center

An office building facing major arterial
roads Meiji-dori Street and Taihaku-doriStreet, and directly connected to
Gofukumachi Station on the city subway

A highly-convenient, station-front officebuilding that is a two-minute walk from
Hakata Station

Good location along Taihaku-dori Street, a
two-minute walk from Gion subway stationand ten-minute walk from Hakata Station

Directly connected to Higashi Hie subway
station, a two-minute ride to Hakata Stationand three-minute ride to Fukuoka Airport

17 Office Building

18 Office Building

19 Office Building

Others20 (residence)

6
10

Tenjin North Front Building

Higashi Hie Business Center II

Amex Akasakamon Tower

An office building facing Tenjin Nishi-doriStreet where commercial facilities areconcentrated

A relatively new office building scarce in
the Tenjin area that features Kyushu’s
largest integration of urban functions

Directly connected to Higashi Hie subway
station, a two-minute ride to Hakata
Station and highly recognized for its
excellent business continuity plan (BCP)

A tower-type rental condominium near
downtown Fukuoka, with traffic convenience and environment that matches awide range of generations

Others22 (residence)

Others23 (residence)

Kyushu University Fukuoka Ex pr
Hakozaki Campus R oute 4 Kas essway,
uya Line
Site

KyushuArea

26

Fukuoka Expressway,
Route 1 (Loop Line)

SubwayKuko Line

JR Sasaguri

13

FUKUOKA
PayPay DOME

20 23
Ohori Park

202

18

21

15

Hakata
1
12
14
2

17
Tenjin19

3

SubwayNanakumaLine

202

Others24 (residence)

A large, high-rise (20-story) rental
condominium, approximately a seven-minute walk from Tenjin subway station

A rental condominium in the Yakuin/Hirao
area that is popular among younger
generations and has plentiful bus networks

FUKUOKA REIT CORPORATION

5

0

1km

FukuokaE

ne
Li

A rental condominium comprised of units
mainly for singles and small families tomatch the local characteristics

202

ifu
za
Da

Granfore Yakuin Minami

ay
sw
es
pr
Ex

A high-quality rental condominium in a
popular residential area of Fukuoka,
featuring traffic and living convenience

D-Wing Tower

ine
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im
sh
go
Ka

5

JR

Ni
sh
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e in

263

385

Aqualia Chihaya

Fukuoka Airport

16

24

202

City House Keyaki Dori

Line

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Others21 (residence)

Hakata Bay

Okinawa

11

Tenjin Nishi-Dori Center Building

3

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wa

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op Line)
5 (Lo8FUKUOKA REIT CORPORATION

6

Fukuoka
Metropolitan
Area

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

Initiatives on Sustainability
J-REIT Mechanism and Fukuoka REIT Corporation s Business Model

Publication of “Integrated Report 2019” — First in the J-REIT Industry

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

provides its financial and non-financial information and encompasses its initiatives for sustainable growth and medium-to

J-REIT Mechanism
Real estate properties

Investments

J-REIT Characteristics

Investment corporation
Fund procurement(debt)

Rental income

Borrowings/bonds
Property management

long-term corporate value creation, as of January 6, 2020.
Aimed at demonstrating FRC’s value-creation process in aneasy-to-understand manner, the Report presents its history,

Asset warehousing company
Company entrusted with business

Management ofassetsPayments ofprincipal and interest

Owned real estate for rent

Financial institutions
Bond investors

Entrustment of asset management services

Office buildings

Logistics

Hotels4. Enables daily trading on stock
exchanges

Commissioned remuneration

Asset management company

Sponsor companies

Investment

Residences

5. Full and ample information disclosure

Total 29
properties
Investment
Strategy

Main Management Resources(Inputs)of Economy, Trade and Industry.

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

• Total leasable area
• Total acquisition priceManagement

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

https://www.fukuoka-reit.jp/eng/• 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

Management

Research

Valuation
SalesIntellectual capital• A varied skill set formed through humanresource training• Experience and knowledge of IR
activities based on long years ofpractical implementation• Co-creative and trusting relationships
with tenants• Cooperative framework with property
management companies

2019
06

fukuoka_realty

Fukuoka REIT Corporation

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.

January 2020

URL: www.fukuoka-reit.jp/eng/ir/pdf/integrated_report_print.pdf

In

a
for m

t

d
io n

is c

lo

• Coordination with local society, local
communities• Maintenance of good relationships of trustwith sponsors

Office buildings
8 properties

See p.22

Organizational Issues

See p.28

See p.30¥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>• 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)

Sustainability Policy
Social Issues• NOI• NOI yield

Social relationship capitalSee p.15

See p.24

Manufacturing capital• Number of qualification holders:
Real estate brokers 28 / ARES Certified Masters 19 /Certified building administrators 4sEnvironmental Issues* As of August 31, 2019

Financial capital• 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 capital

Financial
Strategy

Response to ESG issues

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

Please refer to the Integrated Report 2019.

• Gathering of information deeply rooted inlocal communities

Social relationship capital

Integrated Report

Residences
5 propertiese

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

Logistics
3 propertieso n (I R )Manufacturing capital

Acquisitionc a ti¥93,228 million¥101,878 million¥195,106 million¥77,500 million
39.7%

u ni

and “Guidance for Collaborative Value Creation” by the Ministry* As of August 31, 2019

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

Hotels2 properties

mm

Building of a solid financial base throughconservative control of LTV

Created Value(Outcomes)

See p.14

e)
nc

co

Financial capitalwork” by the International Integrated Reporting Council (IIRC)

See p.14

urpiled in reference to “International Integrated Reporting Frame-

Management
Strategy

Fund p
rocu
rem
en
t (fi
na

dations underpinning management, etc. This report was com-

facebook.com/fukuokarealty

Retail

3. Corporate taxes highly advantageous
due to conduit status

Investors

Dividends

Commissioned
remuneration

Properties Owned
by Fukuoka REIT
Corporation

2. Relatively stable high yields

Investment

CapitalReal estate managementcompany

1. Enables efficient diversified investment
in real estate

management philosophy, value-creation activities and the foun-@fukuokareit8968

Introduction

Introduction

FRC published the “Integrated Report 2019,” which integrally

Retail11 properties

Natural capital• Reduction of energy consumption and greenhouse-gas emissions inproperties owned• Preservation of water resources• Natural environment and biodiversity inthe areas around properties owned* 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 2019

Fukuoka REIT Corporation 2019

To contribute to the revitalization of Fukuoka and Kyushu and attractive urban development, FRC selects and procures funds forinvestment by utilizing local government and business networks as well as its information-gathering ability and know-how. We
aim to maximize the profits of investors by providing them with stable earnings over the medium to long term.

Registration as Signatory

External Evaluation

The Asset Manager became a registered signatory to the Principles for Responsible Investment (PRI) and Principles for Financial
Action for the 21st Century (PFA21) in September 2018.

 rinciples for Responsible
P
Investment (PRI) rinciples for Financial Action Towards
Pa Sustainable Society(Principles for Financial Action for the 21st Century) articipation in GRESBPAssessment 2019
Participated for the second consecutive year and rated “Green Star” and “4Stars” in the GRESB Real Estate Assessment conducted in 2019 by
GRESB (Global Real Estate Sustainability Benchmark).

Ratio of Properties Certified as Green Buildings[as of February 29, 2020]

The ratio of properties certified as green buildings to the entire portfolio is 82.1%(based on total floor space).

Properties certified
as green buildings

DBJ Green Building
Certification

BELS
Assessment

11 properties in total

4 properties in total

82.1%

FUKUOKA REIT CORPORATION7FUKUOKA REIT CORPORATION

807

II. Semiannual Report

Overview of Asset Management

Overview of Asset Management

2. Management assessment(1) Brief history of the investment corporation

1. Changes in operating results and financial position
Fiscal Period(unit)

Operating revenues

mm yen[Leasing business revenues]

mm yen30th fiscal period

31st fiscal period(September 1, 2018 to
February 28, 2019)(March 1, 2019 toAugust 31, 2019)(September 1, 2019 toFebruary 29, 2020)

mm yen

9,242[9,242]
5,936[5,274]
3,306
2,935
2,934
195,433[1.2]
77,500101,874[0.1]
98,9389,231[9,231]
5,913[5,250]
3,318
2,939
2,939
195,106[(0.2)]
77,500101,878[0.0]
98,9389,162[9,162]
5,888[5,226]
3,273
2,900
2,899
194,795[(0.2)]
77,500101,837[(0.0)]
98,938units

747,000

796,000

796,000

796,000

796,000(d)/(e)yen(f)

mm yen127,888
2,860
3,593[3,593][–]

127,982
2,934
3,687[3,687][–]

127,987
2,939
3,693[3,693][–]

127,937
2,899
3,642[3,642][–]mm yenmm yenmm yenmm yen(a)

mm yen(b)

mm yen(c)

mm yen(d)

mm yen[Change from previous period]%[Change from previous period]%

Unitholders’ equity
Total number of investment
units outstanding
Net assets per unit
Total dividend
Dividend per unit

29th fiscal period(March 1, 2018 toAugust 31, 2018)

9,178[9,178]5,940[5,287]
3,238
2,861
2,860
193,112[8.9]
75,500101,799[8.6]
98,938[Expenses related to leasing business]

Interest-bearing debt
Net assets

28th fiscal period(September 1, 2017 to
February 28, 2018)

8,194[8,194]
5,228[4,614]
2,965
2,624
2,623
177,283[(0.4)]
68,90093,766[0.1]
91,142

Operating expenses
Operating income
Ordinary income
ProfitTotal assets

27th fiscal period(e)[Earnings dividend per unit]

yen[Dividend in excess of earnings per unit]

yen

125,5242,623
3,512[3,512][–](Note 3)%

1.5 [3.0]

1.5 [3.1]

1.5 [3.0]

1.5 [3.0]

1.5 [3.0](Note 3)%

2.8[5.6]

2.9 [5.8]

2.9 [5.8]

2.9 [5.7]

2.8 [5.7](d)/(b)

%

52.9

52.7

52.1

52.2

52.3

%

Ratio of ordinary income to total
assetsReturn on net assets
Ratio of net assets to total
assets(f)/(e)(Note 3)

%

[0.3]
100.0

[(0.2)]
100.0[(0.6)]
100.0

[0.1]
100.0

[0.1]
100.0

(c)/(b)

%

38.9

39.1

39.7

39.7

39.8

properties

26

28

29

29

29

m2

548,564.93

576,907.98

580,665.27

580,664.27

580,662.77

%

99.6

99.6

99.7

99.6

99.7

mm yen

1,500

1,602

1,622

1,651

1,660

mm yen

600
5,079
181
4,123
5,520

657
5,493
184
4,462
5,606

947
5,591
181
4,557
5,725

476
5,633
184
4,591
5,767

465
5,596
182
4,559
5,728

[Change from previous period]

Payout ratio
Ratio of interest-bearing debt tototal assets at end of period (LTV)[Other reference information]
Number of investment
properties (at end of period)
Total leasable floor space(at end of period)

Occupancy rate
(at end of period)

Depreciation and amortization
expensesCapital expenditures
Leasing NOI
Days in fiscal period
FFO (Funds from Operation)
FFO per unityen

(Note 3)mm yendays(g)(Note 3) mm yen(g)/(e)yen(Note 1) Consumption tax is not included in operating revenues, etc.
(Note 2) In the above table, monetary amounts are rounded down to the nearest specified unit and percentage figures are rounded off to one decimal place.
(Note 3) The indicators are calculated by using the following methods. Furthermore, the figures in square brackets represent annualized value based on the number of days in each fiscal period.
Ratio of ordinary income to total assets
Return on net assets
Payout ratio
Leasing NOIFFO (Funds from Operation)

Ordinary income / average total assets
Average total assets = (Total assets at beginning of period + total assets at end of period) / 2
Profit / average net assets
Average net assets = (Net assets at beginning of period + net assets at end of period) / 2
Dividend per unit (excluding dividend in excess of earnings) / profit per unit
Profit per unit = Profit / total number of investment units outstanding
Leasing business revenues – expenses related to leasing business + depreciation and amortization expenses
Profit + depreciation and amortization expenses + impairment loss - gain or loss on sales of real estate

FUKUOKA REIT CORPORATION

9

Fukuoka REIT Corporation (hereinafter “FRC”) was established on July 2, 2004 based on the “Act on Investment Trusts andInvestment Corporations” (Act No. 198 in 1951 including later revisions, hereinafter the “Investment Trusts Act”) and listed on
the Tokyo Stock Exchange, Inc. and the Fukuoka Stock Exchange on June 21, 2005 as the nation’s first real estate investment
trust specializing in regional properties (code number: 8968). FRC invests in real estate throughout Kyushu (including Okinawa
Prefecture), with a central focus on Fukuoka City, and Yamaguchi Prefecture (hereinafter the “Fukuoka and Kyushu areas”) byusing expertise in regional characteristics, a strength in the real estate industry.
FRC started asset management activities on November 9, 2004 after acquisition of four properties such as Retail in Canal City
Hakata (excluding some areas of specialty shops, hotels, theaters, offices and common space), a commercial complex where
specialty shops, cinema complex, theaters, amusement facilities, hotels and offices are integrally developed (hereinafter “Canal
City Hakata”). As of the end of the 31st fiscal period (February 29, 2020), FRC manages a total of 29 properties comprising 11
Retail, 8 Office buildings and 10 Others.

(2) Investment environment and portfolio performance
During the fiscal period under review (the 31st fiscal period), the Japanese economy was recovering moderately, but has recently been put in a severe situation, significantly pushed down by the impact of the novel corona virus (COVID-19) infection. Looking
ahead, the severe situation due to the impact of the COVID-19 infection is expected to continue.
In the Fukuoka and Kyushu area, the core investment target area for FRC, the economy was expanding moderately, but isrecently on a somewhat weak note, mainly in terms of consumer spending as well as exports and production, due to the impactof the COVID-19 infection, etc. With regard to the outlook, attention should be paid to the growing impact of the COVID-19 infection as well as the uncertainties over overseas economies and the impact of a labor shortage on the supply side, among
other factors.
As for land price trends, according to the 2020 Land Market Value Publication, the average rate of change in the national average increased for the third consecutive year for residential land and increased for the fifth consecutive year for commercial land
and for the combined average for all land types. In Fukuoka City, the central area of FRC’s investment targets, land prices continued rising for eight consecutive years, up 16.5% year-on-year for commercial land and up 6.8% year-on-year for residential
land, marking higher rates of increase.
Under such circumstances, FRC continued its efforts to reinforce competitive advantages and customer drawing ability at
Canal City Hakata and other major retail properties, and to increase the earning power of office buildings in Fukuoka City throughsuch measures as upward revision of rents, while focusing on maintaining and increasing the occupancy rate of its owned properties. As a result of these endeavors, the average occupancy rate of all properties FRC owns was 99.7% at the end of the 31st
fiscal period. In spite of this, the spread of the COVID-19 infection in Japan and abroad resulted in the number of visitors decreasing at its retail properties and the guestroom occupancy rate falling at its hotels since the second half of February 2020.
When analyzing FRC’s portfolio (on an acquisition price basis) as of the end of the 31st fiscal period by investment target area,
the investment ratio in the Fukuoka urban area accounted for 77.2%; when analyzing by property type, Retail, Office buildings,
and Others accounted for 59.2%, 26.9% and 13.9%, respectively.
On top of these efforts, FRC is engaged in promoting sustainability through environment, social and governance (ESG) considerations based on its Sustainability Policy. For this purpose, it has established the Sustainability Promotion Committee (comprising President/CEO and general managers, Property Management Department, Investment Department, Finance Department, Planning Department and Compliance Department of the Asset Manager), which investigates specific targets andmeasures and supervises the progress in implementation of the measures with regard to the internal system, cooperation withrelated parties outside the company and information disclosure policy, etc. On the implementation side, FRC has established theSustainability Promotion Office under the sustainability officer (general manager of the Planning Department), who is the person
responsible for the practical aspects concerning the targets set at the Sustainability Committee, and the Office is engaged incontinuous operations related to the GRESB Real Estate Assessment (with Green Star and 4 Star ratings), the Principles for
Responsible Investment (PRI) and the Principles for Financial Action for the 21st Century (PFA21) continuing operations andother initiatives.

FUKUOKA REIT CORPORATION

10

II. Semiannual Report

II. Semiannual Report

Overview of Asset Management

Overview of Asset Management(3) Summary of fundraising[Changes in market price of investment certificates]

As FRC conducted refinancing in the 31st fiscal period, the balance of its interest-bearing debt outstanding (including investment
corporation bonds) at the end of the period totaled 77,500 million yen, with the loan-to-value ratio (ratio of interest-bearing debt(including investment corporation bonds) to total assets) at 39.8% and the ratio of fixed-interest rate debt (ratio of interest-bearing debt with fixed interest rates (including investment corporation bonds) to total interest-bearing debt) at 92.4% as of the samedate. In addition, with the expiration of the commitment line agreement (credit limit: 7,000 million yen) with The Nishi-Nippon City
Bank, Ltd. serving as the agent, FRC rearranged the commitment line agreement by extending the commitment period to three
years.
Going forward, FRC will continue its endeavors to reduce refinancing risks by dispersing debt repayment dates and extending
debt duration. At the same time, FRC will work to mitigate risks of rising interest rates by shifting to fixed-interest rate borrowings
and through other measures.

The highest and lowest (closing price) market prices on the Real Estate Investment Trust Section of the Tokyo Stock Exchange,
Inc., on which FRC’s investment certificates are listed, in each fiscal period are as follows:Moreover, the credit ratings assigned to FRC as of the end of the 31st fiscal period are as follows:
Credit Rating Agency
Rating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)

Rating Type
Issuer Rating
Long-term Issuer Rating

RatingA+
AA−

Rating Outlook
StableStable(4) Summary of performance and dividend

Fiscal period
HighestLowestDate
July 2, 2004
November 8, 2004
June 20, 2005
July 21, 2005
September 7, 2006
March 1, 2011
March 1, 2013
March 1, 2014
April 27, 2015
March 1, 2018

Item
Established through private placement
Additional issue of investment units through private offering
Additional issue of new investment units through public offering
Additional issue of new investment units through third-party allotment
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering
Split of investment units
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering

Number of investment units
issued (units)
Increase
Balance250
250
82,80083,0507,000
90,0502,000
92,05015,000107,050
16,000123,050
14,950138,000
552,000
690,000
57,000747,000
49,000796,000

ProfitUnappropriated surplus
Undistributed earnings
Total dividends[Dividend per unit]

Earnings dividends[Earnings dividend per unit][Contribution refund per unit]

Unitholders’ capital(mm of yen) (Note 11)

Increase
125
41,4005,944
1,698
11,096
8,913
10,263–
11,701
7,795

Balance
125
41,52547,46949,16760,264
69,17779,441
79,441
91,142
98,938Remarks(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)11

31st fiscal period(March 1, 2019 toAugust 31, 2019)(September 1, 2019 toFebruary 29, 2020)

177,600 yen
162,600 yen

176,100 yen
159,900 yen

182,500 yen
166,000 yen

191,700 yen
167,900 yen(Of the contribution refund per unit,
distribution per unit of the reserve
for temporary difference
adjustments)

Of the contribution refund,
distribution through the
reduction in unitholders’capital for tax purposes(Of the contribution refund per unit,
distribution per unit through the
reduction in unitholders’ capital fortax purposes)

27th fiscal period

28th fiscal period

29th fiscal period

30th fiscal period

31st fiscal period(September 1, 2017 to
February 28, 2018)(March 1, 2018 toAugust 31, 2018)(September 1, 2018 to
February 28, 2019)(March 1, 2019 toAugust 31, 2019)(September 1, 2019 toFebruary 29, 2020)

2,623,635
2,623,917
453
2,623,464[3,512 yen]
2,623,464[3,512 yen]–[–]

2,860,088
2,860,542
514
2,860,028[3,593 yen]
2,860,028[3,593 yen]–[–]

2,934,877
2,935,391
539
2,934,852[3,687 yen]
2,934,852[3,687 yen]–[–]

2,939,139
2,939,679
51
2,939,628[3,693 yen]
2,939,628[3,693 yen]–[–]

2,899,112
2,899,164
132
2,899,032[3,642 yen]
2,899,032[3,642 yen]
–
[–]

–
[–]

–
[–]

–
[–]

–
[–]

–
[–]

–
[–]

–
[–]

–
[–]

–
[–]

–
[–]

(Note 8)(Note 9)(Note 10)(Note 1) FRC was established with an issue of investment units at 500,000 yen per unit.
(Note 2) New investment units were issued through private offering at the issue price of 500,000 yen per unit for the purpose of procuring funds for acquiring new properties, etc.
(Note 3) New investment units were issued through public offering at the issue price of 880,000 yen per unit (purchase price of 849,200 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 4) New investment units were issued through third-party allotment at the purchase price of 849,200 yen per unit.
(Note 5) New investment units were issued through public offering at the issue price of 766,360 yen per unit (purchase price of 739,772 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 6) New investment units were issued through public offering at the issue price of 576,083 yen per unit (purchase price of 557,078 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 7) New investment units were issued through public offering at the issue price of 710,580 yen per unit (purchase price of 686,529 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 8) FRC implemented a 5-for-1 split of its investment units.
(Note 9) New investment units were issued through public offering at the issue price of 212,257 yen per unit (purchase price of 205,290 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 10) New investment units were issued through public offering at the issue price of 164,414 yen per unit (purchase price of 159,102 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 11) No consideration has been given to the change in unitholders’ equity due to distribution of dividend in excess of earnings that came from reserve for temporary difference adjustments.

FUKUOKA REIT CORPORATION

30th fiscal period(September 1, 2018 to
February 28, 2019)

With respect to the dividend (excluding dividend in excess of earnings) for the 31st fiscal period, FRC determined to distributethe whole unappropriated surplus (except for the fraction amount, which is the dividend per unit of less than 1 yen) to be eligible
for special tax measures for an investment corporation (as stipulated in Article 67-15-1 of the Special Taxation Measures Act)
that allow FRC to deduct the maximum amount of earnings dividend from its taxable income. Accordingly, dividend per unit for
the fiscal period was 3,642 yen.
(thousands of yen)Of the contribution refund,
distribution of the reserve
for temporary difference
adjustments

Changes in unitholders’ capital from the incorporation of FRC to the end of the 31st fiscal period are as follows:

29th fiscal period(March 1, 2018 toAugust 31, 2018)

4. Results of dividend, etc.

Contribution refund

3. Change in the number of investment units issued

28th fiscal period(September 1, 2017 to
February 28, 2018)

183,400 yen
157,500 yen

Fiscal period

As a result of these management efforts, operating revenues totaled 9,162 million yen and operating income after excluding
operating expenses such as expenses related to leasing business and asset management fees totaled 3,273 million yen. Ordinary income was 2,900 million yen and profit amounted to 2,899 million yen. Management decided to make a dividend of 3,642
yen per unit to meet the requirements of special tax measures for an investment corporation (as stipulated in Article 67-15 of the
Act on Special Measures Concerning Taxation of Japan [Act No. 26 in 1957 including later revisions]). Under this act, an investment corporation is allowed to deduct the maximum amount of dividends paid to investors from its taxable income.

27th fiscal period

5. Future portfolio management policy and vital issues
FRC will further reinforce management and leasing capabilities by cooperating with property management companies including
sponsor companies, and secure and maintain the stable operation of the properties by making the most use of their advantages.
FRC will continue to make investments based on the basic policy stipulated in its Articles of Incorporation and its basic philosophy: focusing on “specialized areas in which FRC can demonstrate its competitive edge” that are in “high growth potential
markets.” By geographic location, of the Fukuoka and Kyushu areas, FRC will invest 60% to 90% of its assets in the Fukuoka
metropolitan area, since the Fukuoka metropolitan area is expected to have a high population growth rate in the future. In addition to the Fukuoka metropolitan area, management has decided to actively acquire properties in major cities, if there are regionsor properties where FRC can generate investment merits through its knowledge of the local land. FRC will acquire high quality
properties through use of its advantages, such as information gathering ability in the areas, good knowledge of regional properties and close relations with the local business community and governments, so that investors can continue to invest in FRC withassurance.
FUKUOKA REIT CORPORATION

12

II. Semiannual Report

II. Semiannual Report

Overview of the Investment Corporation

Overview of Asset Management
Meanwhile, FRC will build stronger relationships with financial institutions to realize stable fundraising and try to maintain a solid
financial structure.

6. Significant events that have occurred after the end of the 31st fiscal
periodNo relevant items.

3. Matters related to directors(1) The names of FRC’s directors, etc. and their fees for the 31st fiscal period are as
follows:
Title

Overview of the Investment Corporation

Independent Auditor

Total fee for each title for the
31st fiscal period

Etsuo Matsuyuki
Hiroyasu Shindo
Yasuo Kawasho
PricewaterhouseCoopers
Aarata LLC

CEO and Representative Director, Fukuoka Realty Co., Ltd.
Representative Council, Shindo Law Firm
Representative Partner, Kawasho Authorize Accountant Office
–

6,000
3,600
9,000

(Note 1) The Executive Director and Supervisory Directors do not possess investment units of FRC under their own name or under another person’s name. Although there are cases where the Supervisory Directors may be directors of companies other than those stated above, none of the companies or those stated above have vested interest in FRC.
(Note 2) The fees for the Executive Director and Supervisory Directors are the amounts paid to them in the 31st fiscal period, and the fee to the Independent Auditor is the amount payable to it (estimate) foraudits pertaining to the 31st fiscal period.

1. Summary of unitholders’ capital
Total number of authorized
investment units
Total number of investment
units outstanding
Number of unitholders

Major concurrent assignments(thousands of yen) (Note 2)

Executive Director
Supervisory Directors

Fiscal period

Name of directors, etc.

27th fiscal period

28th fiscal period

29th fiscal period

30th fiscal period

31st fiscal period

as of February 28, 2018as of August 31, 2018as of February 28, 2019as of August 31, 2019as of February 29, 2020

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

10,000,000 units

747,000 units

796,000 units

796,000 units

796,000 units

796,000 units

9,897

10,49910,47810,551

10,473

2. Matters related to investment units
Investment units held (units)

Japan Trustee Service Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
Fukuoka Jisho Co., Ltd.
The Nomura Trust and Banking Co., Ltd. (Investment trust account)
Trust & Custody Service Bank, Ltd. (Securities investment trust account)
Mizuho Trust & Banking Co., Ltd.
STATE STREET BANK WEST CLIENT – TREATY 505234
NORTHERN TRUST CO. (AVFC) RE HCR00
MetLife, Inc.
Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Total

161,985
77,411
72,386
38,21323,854
13,247
12,593
10,261
10,227
10,105430,282

FRC will review at its Board of Directors meetings decisions regarding the dismissal of the Independent Auditor in accordancewith the provisions of the Investment Trusts Act, and review decisions not to reappoint the Independent Auditor following thecomprehensive consideration of the audit quality, audit fee and other various conditions.

4. Names of asset management company, asset custodian and generaladministrators as of the end of the 31st fiscal period
The following table sets forth the asset management company, asset custodian and general administrators of FRC as of February 29, 2020.

The following table sets forth the major unitholders of FRC as of February 29, 2020.
Name(2) Policy on deciding to dismiss and not to reappoint the Independent Auditor

Percentage of total number ofinvestment units outstanding (%) (Note)
20.34
9.72
9.09
4.80
2.99
1.66
1.58
1.28
1.28
1.26
54.05

Category of entrustment
Asset Management Company
Asset Custodian
General Administrator (accounting matters, etc.)
General Administrator (administration of unitholders’ list)
General Administrator (administration of investment corporation bonds registry)
General Administrator (administration of investment corporation bonds registry)Name
Fukuoka Realty Co., Ltd.
Mitsubishi UFJ Trust and Banking Corporation
Mitsubishi UFJ Trust and Banking Corporation
Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.

(Note) Percentage of total number of investment units outstanding is rounded down to the nearest specified unit.

FUKUOKA REIT CORPORATION13FUKUOKA REIT CORPORATION

14

II. Semiannual Report

II. Semiannual Report

Status of FRC’s Assets under Management

Status of FRC’s Assets under Management

1. FRC’s asset structure
Type of asset

Use

3. Details of real estate properties in the portfolio

Area(Note 1)as of February 29, 2020

The following table provides details of the real estate properties owned by FRC as of February 29, 2020.

Percentage of
total assets

Total value of
properties held

Percentage of
total assets(mm of yen) (Note 2)(%) (Note 3)(mm of yen) (Note 2)(%) (Note 3)

75,47336,46145,654–
20,437
5,506
11,574

38.7
18.7
23.4
–
10.5
2.8
5.9

75,02636,19845,344–20,303
5,464
12,458

38.5
18.6
23.3
–
10.4
2.8
6.4

195,106[183,547]

100.0[94.1]

194,795[182,352]

100.0[93.6]

Fukuoka metropolitan area
Other Kyushu areas
Fukuoka metropolitan area
Office buildings
Other Kyushu areas
Fukuoka metropolitan area
OthersOther Kyushu areas
Deposits and other assets
Total amount of assets (Note 4)

31st fiscal period

as of August 31, 2019

Total value of
properties held

RetailReal estate trust
beneficiary interest

30th fiscal period(Note 1) “Fukuoka metropolitan area” refers to cities, towns and villages where 10% or more of the population commute to Fukuoka City for school and work, according to the 2015 census, which states “thenumber of workers and students aged 15 years or older (students including those aged 14 years or younger: particular reference) commuting between their homes and places of work or school” conducted by Fukuoka City and the Statistics Bureau of the Ministry of Internal Affairs and Communications. “Other Kyushu areas” refers to the Fukuoka and Kyushu area excluding the Fukuoka metropolitan area.
(Note 2) “Total value of properties held” is based on the value on the balance sheet (the value of real estate trust beneficiary interest is the book value after depreciation).
(Note 3) Concerning the “Percentage of total assets,” the numbers are rounded off to one decimal place. The total of individual percentages in the above table may not equal 100%.
(Note 4) Figures in square brackets for “Total amount of assets” refer to the value and percentage of real estate held in effect to the total amount of assets.

Real estate property name

Canal City Hakata
Canal City Hakata·B
Park Place Oita
SunLive City Kokura
Konoha Mall Hashimoto
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC
Hanahata SC
Kurume Higashi Kushiwara SC
K’s Denki Kagoshima

2. Major assets owned by FRC
The following is an overview of the major assets (top ten properties on a book value basis) owned by FRC as of February 29,
2020.
Real estate property name (Note 1)
Canal City Hakata
Canal City Hakata·B
Park Place Oita
Canal City Business Center Building
Konoha Mall Hashimoto
Gofukumachi Business Center
LOGICITY Minato Kashii
Taihaku Street Business Center
SunLive City Kokura
Marinoa City Fukuoka (Marina Side Building)
Total

Total leasable
floor space (m2)Book value(mm of yen)

29,743
28,831
19,321
13,046
10,041
8,908
7,862
5,851
5,535
5,430
134,573

46,604.75
68,826.37
113,834.20
23,029.92
22,121.04
19,905.34
43,233.72
14,677.30
61,450.22
33,069.82
446,752.68

Total leased floor Occupancy rate(%) (Note 2)
space (m2)
46,520.56
68,451.33
113,712.33
23,029.92
21,840.73
19,905.34
43,233.72
14,546.43
61,450.22
33,069.82
445,760.40

99.8
99.5
99.9
100.0
98.7
100.0
100.0
99.1
100.0
100.0
99.8

(Note 1) The properties listed above are owned in the form of trust beneficiary interest.
(Note 2) “Occupancy rate” refers to the percentage of leased floor space to leasable floor space and the numbers are rounded off to one decimal place.
(Note 3) “Percentage of total leasing business revenues” is rounded off to one decimal place.
(Note 4) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

Percentage of total
leasing businessrevenues (%) (Note 3)
13.5
17.3
12.9
6.6
9.0
5.9
Undisclosed (Note 4)
3.4
3.1
1.9
–

Marinoa City Fukuoka(Marina Side Building)RetailRetailRetailOffice buildings
RetailOffice buildings
Others
Office buildings
RetailRetail–Location
2-22, 1-chome, Sumiyoshi, Hakata
Ward, Fukuoka City
2-1, 1- chome, Sumiyoshi, Hakata
Ward, Fukuoka City1, 2-chome, Koen Dori Nishi, Oita City,
Oita
14-1, 2-chome, Kami Kuzuhara,
Kokura Minami Ward, Kitakyushu City
27-2, 2-chome, Hashimoto, Nishi
Ward, Fukuoka City
2-18, 2-chome, Usuki, Kagoshima
City, Kagoshima
1-5, 1-chome, Kozono, Higashi- Ward,
Kumamoto City
9-12, 4-chome, Hanahata, Minami
Ward, Fukuoka City
370-3 Higashi Kushiwara, Kurume
City, Fukuoka
4-12, Tokai-cho, Kagoshima City,
Kagoshima
12-30, 2-chome, Odo, Nishi Ward,
Fukuoka City

Retail subtotal:
2-25, 1-chome, Sumiyoshi, Hakata

Canal City Business Center Building Ward, Fukuoka City
Gofukumachi Business Center

Main use

Form ofownership

Sanix Hakata Building
Taihaku Street Business Center
Higashi Hie Business Center
Tenjin Nishi-Dori Center Building
Tenjin North Front Building
Higashi Hie Business Center II

10-10, Kami Gofukumachi, Hakata
Ward, Fukuoka City
1-23, 2-chome, Hakataeki Higashi,
Hakata Ward, Fukuoka City
3-21 Gokushomachi, Hakata Ward,
Fukuoka City
1-2, 3-chome, Higashi Hie, Hakata
Ward, Fukuoka City
5-28, 2-chome, Tenjin, Chuo Ward,
Fukuoka City
4-20, 4-chome, Tenjin, Chuo Ward,
Fukuoka City
5-13, 1-chome, Higashi Hie, Hakata
Ward, Fukuoka City

Office buildings subtotal:
Amex Akasakamon Tower
City House Keyaki Dori
Aqualia Chihaya
D-Wing Tower
Granfore Yakuin Minami
Hotel FORZA Oita
Tissage Hotel Naha
Tosu Logistics Center
LOGICITY Minato Kashii
LOGICITY Hisayama

4-23, 2-chome, Maizuru, Chuo Ward,
Fukuoka City
16-21, 2-chome, Kego, Chuo Ward,
Fukuoka City
3-12, 4-chome, Chihaya, Higashi
Ward, Fukuoka City
10-38, 2-chome, Daimyo, Chuo Ward,
Fukuoka City
11-20, 1-chome, Hirao, Chuo Ward,
Fukuoka City
5-18, 1-chome, Chuo-cho, Oita City,
Oita
14-1, 2-chome, Nishi, Naha City,
Okinawa
1607 Aza Momota, Himekata-cho,Tosu
City, Saga
3-4, 2-chome, Minato Kashii, Higashi
Ward, Fukuoka City
2335-3 Oaza Yamada, Hisayamamachi, Kasuya County, Fukuoka

Others subtotal:
Total

Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Total leasable
floor space (m2)Period-end
appraisalvalue(mm of yen)
(Note)

Book value
at end ofperiodReal estate appraiser(mm of yen)

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

46,604.75

31,80029,743

68,826.37

29,90028,831

113,834.20

20,20019,321

Japan Real Estate Institute61,450.22

8,460

5,535

Japan Real Estate Institute22,121.04

10,50010,041

Tanizawa Sogo Appraisal
Co., Ltd.

14,602.88

5,450

4,343

Japan Real Estate Institute6,968.66

2,860

1,980

Japan Real Estate Institute2,801.15

1,250

978

6,467.80

2,790

2,042

7,296.17

3,710

2,974

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

33,069.82

6,080

5,430

384,043.06

123,000

111,224

23,029.92

16,40013,046

19,905.34

14,6008,908

6,293.75

6,400

3,767

Japan Real Estate Institute

14,677.30

8,650

5,851

Japan Real Estate Institute13,614.59

8,000

4,486

Tanizawa Sogo Appraisal
Co., Ltd.

3,339.32

3,100

2,675

Japan Real Estate Institute5,252.41

4,360

2,502

Japan Real Estate Institute6,214.77

4,590

4,105

92,327.40

66,10045,344

Tanizawa Sogo Appraisal
Co., Ltd.

4,821.25

1,840

1,684

2,710.86

1,140

910

5,619.69

1,820

1,182

7,187.59

3,560

2,681

2,496.06

1,320

1,108

5,785.44

1,890

1,409

Japan Real Estate Institute3,758.76

2,990

2,877

Tanizawa Sogo Appraisal
Co., Ltd.

4,173.29

1,420

1,177

Japan Real Estate Institute43,233.72

8,910

7,862

24,505.65

5,270

4,873

104,292.31
580,662.77

30,160219,260

25,768
182,336

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

Daiwa Real EstateAppraisal Co., Ltd.
Daiwa Real EstateAppraisal Co., Ltd.
Japan Real Estate InstituteTanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

(Note) “Period-end appraisal value” refers to the evaluation value based on appraisals by a real estate appraiser in conformity with the method and standards for asset evaluation stipulated in FRC’s Articles ofIncorporation and rules stipulated by The Investment Trusts Association, Japan.
FUKUOKA REIT CORPORATION15FUKUOKA REIT CORPORATION

16

II. Semiannual Report

II. Semiannual Report

Status of FRC’s Assets under Management

Real estate property name

Canal City Hakata
Canal City Hakata·B
Park Place Oita
SunLive City Kokura
Konoha Mall Hashimoto
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC
Hanahata SC
Kurume Higashi Kushiwara SC
K’s Denki Kagoshima
Marinoa City Fukuoka (Marina Side Building)Retail subtotal:
Canal City Business Center Building
Gofukumachi Business Center
Sanix Hakata Building
Taihaku Street Business Center
Higashi Hie Business Center
Tenjin Nishi-Dori Center Building
Tenjin North Front Building
Higashi Hie Business Center II
Office buildings subtotal:

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

Number ofOccupancy
tenants at end rate at end ofof period
period(Note 1)

1 [51]
1 [48]
1 [106]
1
1 [127]
12
2
2
1
1
1
24 [352](Note 2)

1 [60]
36
16
1 [70]
1 [26]
1
11
2
69 [222](Note 2)(%) (Note 3)

Total leasing Percentage ofTotal leasing Percentage of
Number ofOccupancy
business
total leasing
business
total leasing
tenants at end rate at end ofrevenues
business
revenues
businessof period
periodduring periods
revenues
during periods
revenues(Note 1)(%) (Note 3)(mm of yen)(%) (Note 4)

100.0
99.4
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1,247
1,582
1,188
284
835
257
90
40
88
111
177

13.5
17.1
12.9
3.1
9.0
2.8
1.0
0.4
1.0
1.2
1.9

99.9

5,902

63.9

94.4
100.0
100.0
99.6
100.0
100.0
100.0
100.0

626
545
201
310
345
86
142
166

6.8
5.9
2.2
3.4
3.7
0.9
1.5
1.8

98.6

2,424

26.3
0.7
0.4
0.7
1.2
0.4
0.7
1.0
Undisclosed(mm of yen)(%) (Note 4)

99.8
99.5
99.9
100.0
98.7
100.0
100.0
100.0
100.0
100.0
100.0

1,238
1,586
1,181
281
821
256
90
41
89
111
178

13.5
17.3
12.9
3.1
9.0
2.8
1.0
0.4
1.0
1.2
1.9

99.8

5,876

64.1

100.0
100.0
100.0
99.1
100.0
100.0
100.0
100.0

607
545
205
311
342
86
143
164

6.6
5.9
2.2
3.4
3.7
0.9
1.6
1.8

99.9

2,406

26.3

1 [63]
1 [39]
1 [103]
1 [134]
1 [96]
1
1

95.0
93.3
97.9
97.7
97.0
100.0
100.0

1

100.0

65
36
59
114
39
63
68
Undisclosed

0.7
0.4
0.6
1.3
0.4
0.7
0.8
Undisclosed(Note 5)(Note 5)2

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)1

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

99.2

879

9.6

99.7

9,162

100.0

1 [48]
1 [46]
1 [103]
1
1 [124]
12
2
2
1
1
1
24 [341](Note 2)

1 [63]
36
16
1 [69]
1 [27]
1
11
2
69 [225](Note 2)Amex Akasakamon Tower
City House Keyaki Dori
Aqualia Chihaya
D-Wing Tower
Granfore Yakuin Minami
Hotel FORZA Oita
Tissage Hotel Naha

1 [66]
1 [39]
1 [105]
1 [131]
1 [99]
1
1

98.5
92.3
100.0
94.0
100.0
100.0
100.0

Tosu Logistics Center

1

100.0

67
36
60
113
38
63
88
Undisclosed(Note 5)(Note 5)LOGICITY Minato Kashii

2

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)LOGICITY Hisayama

1

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

Others subtotal:

11 [446]

99.3

904

9.8

11 [441]Total

104 [1,020]

99.6

9,231

100.0

104 [1,007](Note 2)
(Note 2)

Status of FRC’s Assets under Management(Note 2)
(Note 2)

(Note 1) “Number of tenants” is based on the total number of sections stipulated in the tenancy agreements for retail and office buildings among relevant properties. For the number of tenants in pass-throughmaster leasing properties, the number of sections stipulated in the tenancy agreements with end tenants is shown in square brackets. The Taihaku Street Business Center is an office building with aresidential tower. Its number of tenants comprises 12 for the office building and 57 for the residence in the 31st fiscal period (12 for the office building and 58 for the residence in the 30th fiscal period).
(Note 2) The total of all the tenants in other than pass-through master leasing properties and the total number of sections stipulated in the tenancy agreements with end tenants for pass-through master leasing
properties is shown in square brackets in the subtotal and total columns for “Number of tenants.”(Note 3) “Occupancy rate” refers to the percentage of leased floor space to leasable floor space and the numbers are rounded off to one decimal place.
(Note 4) “Percentage of total leasing business revenues” is rounded off to one decimal place, and the total of individual percentages in the above table may not equal 100%.
(Note 5) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

4. Details of renewable energy generation facilities in the portfolio
No relevant items.

5. Details of the rights to operate public facilities, etc. in the portfolio

7. List of specific transaction and forward exchange transaction contract
amount and status of fair value
The following table provides the contract amount of FRC’s specific transactions and the status of its fair value as of February 29,
2020.
Category
Off-market transaction

Contract amount, etc. (mm of yen)
Of which, exceeding 1 year

Type

(Note 1)

Interest rate swap transaction(Receivable floating; Payable fixed)
Total

23,70023,700(401)

23,70023,700(401)(Note 1) The contract amount, etc. of the interest rate swap transaction is based on the notional principal amount.
(Note 2) The fair value is calculated by the counterparty of the transaction contract based on the actual interest rate on the market and other factors.

8. Status of other assets
All real estate trust beneficiary interests owned by FRC have been entered under “3. Details of real estate properties in the portfolio” on page 16. There is no incorporation of other specified assets as of the end of the 31st fiscal period.

9. Status of owned assets by country and region
As of the end of the 31st fiscal period, no overseas real estate properties in countries or regions other than Japan are incorporated into FRC’s portfolio.

Capital Expenditures for Owned Real Estate
1. Planned capital expenditures
The following table provides major items of capital expenditures associated with currently planned renovations, etc. for real estate properties owned by FRC as of the date of this Semiannual Report. The planned construction costs indicated below may
be partly classified as expenses. In addition, FRC will implement renewal construction work in order to maintain and improve thecompetitiveness of properties in the market as well as tenant satisfaction, on top of the construction, facilities and replacement
work for which expenditures will be made regularly.
Planned construction cost
Real estate property
nameCanal City Hakata
Canal City Hakata·B

Location

PurposeTotal
Hakata Ward,
Fukuoka City
Hakata Ward,
Fukuoka City

Renovation of external walls
Renovation of external walls

Park Place Oita

Oita City, Oita

Replacement of air-conditioning units

Park Place Oita

Oita City, Oita

Renovation of external walls

Taihaku Street
Business Center

Hakata Ward,
Fukuoka City

Replacement of air-conditioning units

From August 2019 toJuly 2020
From August 2019 toJuly 2020
From September 2020 to
December 2020
From December 2019 to
May 2020
From January 2020 to
October 2020

6. Securities incorporated in the portfolio
No relevant items.
17(mm of yen)

Schedule

No relevant items.

FUKUOKA REIT CORPORATION

Fair value(mm of yen) (Note 2)

FUKUOKA REIT CORPORATION

18

Construction
Amountcost
already paid

88

–

–

176

–

–

114

–

–

81

–

–

16

–

–

II. Semiannual Report

II. Semiannual Report

Capital Expenditures for Owned Real Estate

Expenses and Liabilities

2. Capital expenditures during the 31st fiscal period

1. Details of expenses related to asset management

Capital expenditures for the real estate properties owned by FRC totaled 465 million yen in the 31st period. Furthermore, FRC
incurred construction costs of 585 million yen in total in the period, including 116 million yen in repair and maintenance expenses classified as expenses on the Statement of Income and 3 million yen in expenses for restoration to former state. The following
table provides the overview of major construction work that was completed in the 31st fiscal period.

Real estate property nameLocation

PurposeCanal City Hakata

Hakata Ward, Fukuoka City

Canal City Hakata·B

Hakata Ward, Fukuoka City

Park Place Oita

Oita City, Oita

Gofukumachi Business Center

Hakata Ward, Fukuoka City

Gofukumachi Business Center

Hakata Ward, Fukuoka City

Higashi Hie Business Center

Hakata Ward, Fukuoka City

PeriodFrom September 2019 to
Water supply piping for guestrooms
February 2020
From October 2019 toReplacement of central monitoring equipment
February 2020
From January 2020 toRenovation of external walls
February 2020
Enhancement of multilevel mechanical parking From October 2019 toequipment
November 2019
From February 2020 to
Replacement of air-conditioning units
February 2020
From July 2019 toRenovation of common spaces
September 2019

Construction cost
(mm of yen)

17

18
32

29th fiscal period

30th fiscal period

31st fiscal period(March 1, 2018 toAugust 31, 2018)(September 1, 2018 to
February 28, 2019)(March 1, 2019 toAugust 31, 2019)(September 1, 2019 toFebruary 29, 2020)

1,000
–
–
1,000

540,190
7,388
55,6749,600
50,325663,178

1,000
–
–
1,000

Category

Drawdown
dateLender19

Balance as of
September 1,
2019

Balance as ofFebruary 29,
2020

Averageinterest
rate(mm of yen)

(mm of yen)(%) (Note)

Repayment
date

MUFG Bank

September 25, 2014

500

–

0.520

September 25, 2019

Current The Nishi-Nippon City Bank
maturities
of long- Mizuho Bank
term debt Aozora Bank

February 1, 2013

2,500

–

0.775

February 29, 2020

February 28, 2013

1,700

–

0.567

February 29, 2020

June 28, 2013

1,000

1,000

0.467

June 30, 2020

5,700
2,300
1,000
1,400
800
500
300

1,000
2,300
1,000
1,400
800
500
300

0.835

July 30, 2021

SubtotalMizuho Bank
The Norinchukin Bank
The Hiroshima Bank
The Kitakyushu BankThe Iyo Bank
The Higo Bank

July 31, 2014

Development Bank of Japan

August 29, 2014

4,000

4,000

1.010

August 31, 2022

Sumitomo Mitsui Banking
Corporation

June 30, 2015

1,600

1,600

0.790

June 30, 2022

Sumitomo Mitsui Trust Bank

July 31, 2015

1,500

1,500

0.564

July 31, 2023

Development Bank of Japan

August 31, 2015

4,000

4,000

0.880

August 31, 2023

The Bank of Fukuoka

August 31, 2015

400

400

0.417

August 31, 2022

The Nishi-Nippon City Bank

August 31, 2015

400

400

0.870

August 31, 2023

The Bank of Fukuoka
Long-term
The Nishi-Nippon City Bank
debt

February 29, 2016

2,000

2,000

0.417

February 29, 2024

February 29, 2016

2,000

2,000

0.440

February 29, 2024

Development Bank of Japan

February 29, 2016

2,000

2,000

0.620

February 28, 2025

Mizuho Bank

February 29, 2016

500

500

0.440

February 29, 2024

Shinsei Bank

July 29, 2016

700

700

0.400

July 31, 2024

Sumitomo Mitsui Trust BankFUKUOKA REIT CORPORATION

534,300
7,276
55,0309,600
55,888662,096

As of the end of the 31st fiscal period (February 29, 2020), FRC has the following debt from respective financial institutions.

28th fiscal period

1,000
–
–
1,000

(a) Asset management fees(b) Asset custody fees(c) Administrative service fees(d) Directors’ compensations(e) Other operating expenses
Total

55

(September 1, 2017 to
February 28, 2018)

1,000
–
–
1,000

31st fiscal period(September 1, 2019 to February 29, 2020)

2. Status of debt

27th fiscal period
1,000
–
–
1,000

30th fiscal period(March 1, 2019 to August 31, 2019)72

FRC has deposited the following amounts from the cash flows generated during the 31st fiscal period in order to fund largescale repair and maintenance work in the medium- to long-term, based on long-term repairs and maintenance plans preparedfor respective properties.
(millions of yen)Balance of deposits at beginning of period
Deposits during the period
Amounts used from deposits during the period
Deposits carried forward to the next period

Item

17

3. Reserves for long-term repair and maintenance plans

Fiscal period(thousands of yen)

September 30, 2016

300

300

0.411

September 30, 2025

Development Bank of JapanThe Oita Bank
The Kagoshima Bank
The Kitakyushu BankThe Eighteenth BankThe Shinwa Bank
The Hiroshima Bank

December 30, 2016

1,500
100
100
100
100
100
100

1,500
100
100
100
100
100
100

0.718

December 30, 2025

The Bank of Fukuoka

December 30, 2016

1,500

1,500

0.417

December 30, 2026

MUFG Bank

March 31, 2017

800

800

0.481

March 31, 2025

FUKUOKA REIT CORPORATION

20

Repayment
methodLump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Lump-sum uponmaturity

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Lump-sum uponmaturity

Lump-sum uponmaturity
Lump-sum uponmaturity

Use offunds
Refinance fundAcquisition fund
Refinance fund
Refinance fund

Refinance fund

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund

Refinance fund

Refinance fund
Refinance fundDescription
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

No collateral/
No guarantee

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

No collateral/
No guarantee

No collateral/
No guarantee
No collateral/
No guaranteeII. Semiannual Report

II. Semiannual Report

Expenses and Liabilities
Category
LenderDrawdown
date

Expenses and Liabilities

Balance as of
September 1,
2019

Balance as ofFebruary 29,
2020

Averageinterest
rate(mm of yen)

(mm of yen)(%) (Note)

Repayment
date

Resona Bank

March 31, 2017

600

600

0.658

March 31, 2027

The Higo Bank

March 31, 2017

300

300

0.481

March 31, 2025

The Bank of Fukuoka
The Nishi-Nippon City BankThe Oita Bank
The Kitakyushu Bank
The Miyazaki BankThe Shinwa BankThe Iyo BankThe Eighteenth Bank

June 30, 2017

1,300
1,000
700
700
700
600
500
500

1,300
1,000
700
700
700
600
500
500

0.777

Development Bank of Japan

June 30, 2017

1,800

1,800

0.650

December 31, 2026

The Bank of Fukuoka

July 31, 2017

2,000

2,000

0.792

July 31, 2027

The Nishi-Nippon City Bank

July 31, 2017

2,000

2,000

0.892

July 31, 2027

The Nishi-Nippon City Bank
The Bank of Fukuoka
The Oita Bank
The Kitakyushu BankThe Eighteenth BankThe Shinwa Bank
The Hiroshima Bank

August 31, 2017

500
500
100
100
100
100
100

500
500
100
100
100
100
100

0.850

August 31, 2027

Resona Bank

September 29, 2017

2,000

2,000

0.493

Repayment
methodLump-sum uponmaturity
Lump-sum uponmaturity

Use offunds
Refinance fund
Refinance fundCategory

Description

Drawdown
dateLenderNo collateral/
No guarantee
No collateral/
No guarantee

Lump-sum uponmaturity

Refinance fundLump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Refinance fundLump-sum uponmaturity

Refinance fund

Refinance fund

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

No collateral/
No guarantee

Balance as ofFebruary 29,
2020

Averageinterest
rate(mm of yen)

(mm of yen)(%) (Note)

Repayment
date

The Higo Bank

February 28, 2019

200

200

0.334

February 27, 2026

Resona Bank

February 28, 2019

200

200

0.488

February 28, 2029

July 31, 2019

1,200
500
500

1,200
500
500

0.521

July 31, 2029

July 31, 2019

1,500

1,500

0.303

January 29, 2027

Mizuho Bank
The Bank of Saga
The Higo Bank

June 30, 2026

Balance as of
September 1,
2019Long-term
The Norinchukin Bank
debt

Repayment
methodLump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

MUFG Bank

September 25, 2019

–

500

0.480

September 29, 2028

The Nishi-Nippon City Bank

February 28, 2020

–

2,500

0.480

February 28, 2030

Mizuho Bank

February 28, 2020

–

1,700

0.420

February 28, 2030

66,80072,50071,50072,500Subtotal
Total

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Use offunds
Refinance fund
Refinance fund

Refinance fund

Refinance fund
Refinance fund
Refinance fund
Refinance fundDescription
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee(Note) The average interest rate is a weighted-average figure during the fiscal period and is rounded to the third decimal place. Furthermore, the average interest rate of debt for which FRC conducted interest
rate swap transactions in order to hedge against interest rate fluctuation risks is the weighted-average figure during the fiscal period taking into consideration the effect of interest rate swaps

3. Investment corporation bonds
As of the end of the 31st fiscal period (February 29, 2020), FRC has the following investment corporation bonds outstanding.

September 30, 2027

The Bank of Fukuoka

December 29, 2017

1,500

1,500

0.812

December 30, 2027

Development Bank of Japan

December 29, 2017

500

500

0.680

December 30, 2027

The Nishi-Nippon City Bank
Long-term
Sumitomo Mitsui Trust Bank
debt
MUFG Bank

February 28, 2018

1,900

1,900

0.750

February 29, 2028

February 28, 2018

1,100

1,100

0.600

February 26, 2027

February 28, 2018

1,500

1,500

0.500

February 27, 2026

Resona Bank

February 28, 2018

600

600

0.567

February 29, 2028

Development Bank of Japan

March 1, 2018

2,500

2,500

0.720

March 1, 2028

MUFG Bank

March 30, 2018

600

600

0.480

March 31, 2026

The Nishi-Nippon City Bank

March 30, 2018

600

600

0.802

March 31, 2028

The Bank of Fukuoka

March 30, 2018

500

500

0.802

March 31, 2028

Mizuho Bank

March 30, 2018

500

500

0.630

March 31, 2028

Sumitomo Mitsui Banking
Corporation

March 30, 2018

500

500

0.504

March 31, 2025

MUFG Bank

March 30, 2018

500

500

0.490

March 31, 2027

Sumitomo Mitsui Trust Bank

March 30, 2018

400

400

0.576

March 31, 2027

The Oita Bank

March 30, 2018

400

400

0.646

March 31, 2028

The Hiroshima Bank

March 30, 2018

400

400

0.646

March 31, 2028

Shinsei Bank

March 30, 2018

300

300

0.400

March 31, 2025

Sumitomo Mitsui Banking
Corporation

January 31, 2019

500

500

0.655

January 31, 2029

MUFG Bank

January 31, 2019

500

500

0.590

January 31, 2028

The Nishi-Nippon City Bank

January 31, 2019

400

400

0.418

January 31, 2029

The Bank of Fukuoka

January 31, 2019

300

300

0.418

January 31, 2029

The Oita Bank

February 28, 2019

200

200

0.334

February 27, 2026

The Kagoshima Bank

February 28, 2019

200

200

0.334

February 27, 2026

FUKUOKA REIT CORPORATION

21

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fundAcquisition fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

Issue

Issue date

Decrease
Balance as of
Balance as of
September 1, during the fiscal February 29,
period2020
2019(mm of yen)

(mm of yen)

(mm of yen)(%)

Maturitydate

Maturity
methodUse

Description

CouponFirst Series ofUnsecured Bonds

December 30, 2013

2,000

–

2,000

1.32

December 29, 2023

Lump-sum uponmaturity(Note 1)

Repayment ofdebt

No collateral/
No guarantee(Note 2)

Second Series ofUnsecured Bonds

July 31, 2017

2,000

–

2,000

1.00

July 30, 2032

Lump-sum uponmaturity(Note 1)

Repayment ofdebt

No collateral/
No guarantee(Note 2)

Third Series ofUnsecured Bonds

July 31, 2018

1,000

–

1,000

1.20

July 30, 2038

Lump-sum uponmaturity(Note 1)

Repayment ofdebt

No collateral/
No guarantee(Note 2)

5,000

–

5,000

Total

(Note 1) The bonds may be repurchased and cancelled by FRC at any time on and after the date following the payment date, unless otherwise determined by the book-entry transfer agent.
(Note 2) The bonds are subject to the limited pari passu clause among specified investment corporation bonds.

4. Short-term investment corporation bonds
No relevant items.

5. Subscription rights to shares
No relevant items.

FUKUOKA REIT CORPORATION

22

II. Semiannual Report

II. Semiannual Report

Acquisitions and Sales during the 31st Fiscal Period

Acquisitions and Sales during the 31st Fiscal Period

1. Acquisition and sale of real estate, asset-backed securities,
infrastructure assets, etc. and infrastructure-related assets, etc.

4. Transactions with interested parties, etc.

No relevant items.

No relevant items.

2. Acquisition and sale of other assets(2) Amount of fees paid, etc.

No relevant items.

(1) Transaction status

FRC paid the following fees to the interested parties, etc. during the 31st fiscal period. Furthermore, interested parties, etc. referto the interested parties of the asset management company who have concluded an asset management agreement with FRC
and are designated in Article 123 of the Enforcement Order of the Act on Investment Trusts and Investment Corporations. Of
these interested parties, etc., the below table indicates the business partners to which FRC paid fees, etc. during the 31st fiscal
period.

3. Survey on prices of specified assets, etc.
(1) Real estate, etc.
No relevant items.

Category(2) Other
Other than the transactions described in “(1) Real estate, etc.” above, FRC carried out no transaction that was required to havethe value, etc. reviewed pursuant to the provisions of Article 201 of the Investment Trusts Act.

Total paid fees (A)(thousands of yen)
(Note 1)

Property leasing brokerage fees (Note 2)

23,792

Property management fees (Note 3)

352,696

Outsourcing fees (Note 2) (Note 4)

1,546,053

Other operating expenses (Note 2)

1,451,739

Breakdown of transactions with interested parties, etc.
Paid amount (B)Paid party

Percentage of total
amount(B) / (A)(thousands of yen)

Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Sunlife Co., Ltd.
Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.

18,272
1,884
177,956
165,531951,651439,693
95,174
237,600
265,489

(%)

76.8
7.9
50.5
46.9
61.6
28.4
6.2
16.4
18.3

(Note 1) Aside from the paid fees shown above, FRC paid the following amounts for repairs, etc. that were ordered to interested parties, etc. during the 31st fiscal period. The amounts include construction work
fees paid to third parties through interested parties, etc.
Fukuoka Jisho Co., Ltd.
283,749 thousand yen
FJ. Entertainment Works Ltd. 146,053 thousand yen
Sunlife Co., Ltd.
59,119 thousand yen(Note 2) The property leasing brokerage fees, outsourcing fees and other operating expenses include property leasing brokerage fees, etc. paid to third parties through interested parties, etc.
(Note 3) The property management fees do not include the following construction supervision fees. In addition, of the fees below, the construction supervision fees paid upon acquiring real estate are includedin the acquisition cost of the relevant real estate.
Fukuoka Jisho Co., Ltd.
10,148 thousand yen
FJ. Entertainment Works Ltd.
6,721 thousand yen(Note 4) The outsourcing fees shown above are paid fees, etc. regarding building management outsourcing fees, and do not coincide with the outsourcing fees described in VIII. Notes to Financial Statements(Notes to statement of income) that include property management fees and others.

5. Transactions with the asset management company regarding
concurrent work conducted by the asset management company
The asset management company (Fukuoka Realty Co., Ltd.) does not concurrently conduct any class 1 financial instruments
transaction business, class 2 financial instruments transaction business, land and building transaction business or real estatesyndication business, and has no such transactions with FRC.

FUKUOKA REIT CORPORATION23FUKUOKA REIT CORPORATION

24

II. Semiannual Report

III. Independent Auditor's Report

Overview of Accounting
1. Assets, liabilities, principal and profits/loss
Please refer to the IV. Balance Sheet, V. Statement of Income, VI. Statement of Changes in Net Assets, VII. Cash Flow Statement, and VIII. Notes to Financial Statements on later pages of this report.

2. Changes in calculation method of depreciation
No relevant items.

3. Changes in valuation method of real estate and infrastructure assets,
etc.
No relevant items.

4. Overview of self-managed investment trust beneficiary certificatesNo relevant items.

5. Disclosure on corporation owning foreign real estate
No relevant items.

6. Disclosure on real estate owned by corporation owning foreign realestateNo relevant items.

Other
1. Handling of fractions of monetary amounts and percentage figures
Unless otherwise stated, the figures less than the specified unit are rounded down for monetary amounts and rounded off to one
decimal place for percentage figures throughout this Semiannual Report.

FUKUOKA REIT CORPORATION25FUKUOKA REIT CORPORATION

26

IV. Balance Sheet

IV. Balance Sheet(thousands of yen)Account

30th fiscal period

31st fiscal period(as of August 31, 2019)(as of February 29, 2020)

(thousands of yen)Account

30th fiscal period

31st fiscal period(as of August 31, 2019)(as of February 29, 2020)

Liabilities

AssetsCurrent liabilities

Current assets
Cash and deposits

3,962,695

5,417,020

Operating accounts payable

Cash and deposits in trust

5,290,603

4,664,012

Current maturities of long-term debt

704,699

659,262

Accounts payable-other

10,313

19,450271,613288,251

Accrued expenses

371,617372,025

5,090

19,263

Income taxes payable

Operating accounts receivable
Prepaid expenses
OthersTotal current assets

10,234,701

11,047,811

Non-current assets
Property, plant and equipment
Buildings in trust*1

101,114,666*1

101,501,588

428,285

614,3945,700,000

1,000,000

726

1,041

261,879

191,370

Advances received

1,054,458

1,082,899

Deposits received

1,361,488

867,707

Total current liabilities

9,188,769

4,148,889

Accrued consumption taxes

Non-current liabilities

Accumulated depreciation(30,359,294)(31,914,629)

Buildings in trust, net

70,755,371

69,586,959

Investment corporation bonds

5,000,000

5,000,000

Structures in trust

1,883,393

1,888,802

Long-term debt

66,800,000

71,500,000

Tenant leasehold and security deposits

392,641

403,248

Accumulated depreciation(758,444)(787,507)

Structures in trust, net

1,124,948

1,101,295

Machinery and equipment in trust

1,414,614

1,480,805

Accumulated depreciation(505,053)(549,601)

Machinery and equipment in trust, net

909,560

931,204

Vehicles and transport equipment in trust

747

747

Accumulated depreciation

(581)

(628)

Vehicles and transport equipment in trust, net

166

118

Tools and fixtures in trust

1,382,487

1,388,990

Accumulated depreciation(1,144,897)(1,170,941)

Tools and fixtures in trust, net

237,589

218,048Lands in trust*1

104,918,451

Construction in progress in trust
Total property, plant and equipment*1

104,918,451

15,164

15,669177,961,252

176,771,746

5,545,883

5,545,883

Tenant leasehold and security deposits received in trust*1

Total non-current liabilities

11,847,068

Other intangible assets in trust

40,46734,993

5,586,351

5,580,876

3

17

Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

327,135

327,135

Long-term prepaid expenses

937,627

1,014,438

1,274,765

1,351,591

184,822,369

183,704,215

Investment corporation bond issuance expenses

38,34636,244

Investment unit issuance expenses

11,506

7,671

Total deferred assets

49,853

43,915

195,106,924

194,795,942

Total intangible assets

93,228,480

92,958,013

98,938,764

98,938,764

Unappropriated surplus

2,939,679

2,899,164

Total surplus

2,939,679

2,899,164

Total liabilities
Net assets
Unitholders’ equity
Unitholders’ capital
Surplus

Total unitholders’ equity
Total net assets

101,878,444*3

Total liabilities and net assets

101,878,444
195,106,924

Investment and other assets
Deferred tax assets

Total investment and other assets
Total non-current assets
Deferred assets

Total assets

FUKUOKA REIT CORPORATION

27

11,905,875
88,809,124

Intangible assets
Leasehold right in trust*1

84,039,710

FUKUOKA REIT CORPORATION

28

101,837,928*3

101,837,928
194,795,942

V. Statement of Income

VI. Statement of Changes in Net Assets

(thousands of yen)Account

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

30th fiscal period (March 1, 2019 to August 31, 2019)

Operating revenues
Leasing revenues – real estate*1

8,530,902*1

8,515,052

Other leasing revenues – real estate*1

700,755*1

647,685

Total operating revenues

9,231,657

9,162,738

Operating expenses
Expenses related to leasing business*1 *2

5,250,066

Asset management fees

540,190*1 *2

5,226,888
534,300

Unitholders’ Equity
Item
Balance as of March 1, 2019
Dividend of surplus(2,934,852)(2,934,852)(2,934,852)

Profit2,939,139

2,939,139

2,939,139

–

4,287

4,287

4,287

98,938,764

2,939,679

101,878,444

101,878,444

55,67455,030Total of changes in the current fiscal period

Director’s compensations

9,600

9,600

Balance as of August 31, 2019

Other operating expenses

50,32555,888

Total operating expenses

5,913,244

5,888,984

3,318,413

3,273,754

Interest received

41

47

Others593

674

Total non-operating revenues

634

722

31st fiscal period (September 1, 2019 to February 29, 2020)Interest expenses on investment corporation bonds

29,20029,200

Amortization of investment corporation bond issuance
expenses

2,102

2,102

Amortization of investment unit issuance expenses

3,835

3,835

Financing related expenses

93,396

93,136

Others3737379,162

374,330

Ordinary income

2,939,885

2,900,146

Profit before income taxes

2,939,885

2,900,146

730

1,048

Total non-operating expenses

Income taxes-current
Income taxes-deferred

14

(14)

Total income taxes

745

1,033

Profit2,939,139

2,899,112

Surplus brought forward

539

51

Unappropriated surplus

2,939,679

2,899,164

FUKUOKA REIT CORPORATION

29(thousands of yen)
Unitholders’ Equity

Item

Non-operating expenses
246,018

Total net assets

Changes in the current fiscal period

Administrative service fees

250,590

Total unitholders’ equity

101,874,156

7,276Interest expenses

98,938,764

Surplus
Unappropriated surplus

101,874,156

7,388

Non-operating revenues

Unitholders’ capital

2,935,391

Asset custody fees

Operating income(thousands of yen)

Balance as of September 1, 2019

Unitholders’ capital
98,938,764

Surplus
Unappropriated surplus

Total unitholders’ equity

Total net assets

2,939,679

101,878,444

101,878,444

Dividend of surplus(2,939,628)(2,939,628)(2,939,628)

Profit2,899,112

2,899,112

2,899,112–(40,515)(40,515)(40,515)

98,938,764

2,899,164

101,837,928

101,837,928

Changes in the current fiscal period

Total of changes in the current fiscal period
Balance as of February 29, 2020

FUKUOKA REIT CORPORATION

30

VII. Cash Flow Statement

VIII. Notes to Financial Statements(thousands of yen)Account

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)(Significant accounting policies)
1. Depreciation method for non-current assets

Net cash provided by (used in) operating activities
Profit before income taxes

2,939,885

2,900,146

Depreciation and amortization expenses

1,651,902

1,660,510

Amortization of investment corporation bond issuance expenses

2,102

2,102

Amortization of investment unit issuance expenses

3,835

3,835

Interest received

(41)

(47)

Interest expenses

279,790

275,218

Decrease (increase) in operating accounts receivables(27,916)

45,437

Increase (decrease) in accrued consumption taxes

62,625(70,509)

Increase (decrease) in operating accounts payable(88,546)

9,652

Increase (decrease) in accounts payable-other(10,882)

8,530

Increase (decrease) in accrued expenses

1,276

2,509

Increase (decrease) in advances received

10,46628,440

Increase (decrease) in deposits expenses

258,341(493,780)

Decrease (increase) in prepaid expenses

25,762(16,638)

Decrease (increase) in long-term prepaid expenses

34,593(76,811)

Others, net(1,501)(14,848)

5,141,693

4,263,749

SubtotalInterest income received

41

47(277,586)(277,320)(1,052)(733)

4,863,095

3,985,742

Purchase of property, plant and equipment in trust(846,296)(289,074)

Purchase of intangible assets in trust(18,665)–

Proceeds from tenant leasehold and security deposits

28,976

24,513

Repayments of tenant leasehold and security deposits(11,817)(13,906)

Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities(2) Intangible assets
Intangible assets are amortized utilizing the straight-line method.
(3) Long-term prepaid expenses
Long-term prepaid expenses are amortized utilizing the straight-line method.
2. Accounting for deferred assets

Investment unit issuance expenses
Investment unit issuance expenses are amortized utilizing the straight-line method over three years.
Investment corporation bond issuance expenses
Investment corporation bond issuance expenses are amortized utilizing the straight-line method over theperiod through redemption.

3. Standards for recognition of revenues and expenses

Accounting treatment of property taxes, etc.
In connection with property taxes, city planning taxes and depreciated asset taxes, FRC uses the methodof charging the corresponding amounts of assessed taxes to the current fiscal period as expenses related
to leasing business.
The amount equivalent to property taxes, etc. for the initial fiscal year paid to the seller as settlementmoney upon acquisition of real estate or trust beneficiary interests in real estate as entrusted property are
not expensed but capitalized as part of the acquisition cost of the relevant property.

4. Method of hedge accounting(1) Method of hedge accounting
Deferred hedge accounting is applied for interest rate swap transactions. However, special accounting isapplied for interest rate swap transactions that satisfy the requirements for special accounting.
(2) Hedging instruments and hedged items
Hedging instrument: interest rate swap transactions
Hedged items: interest rates of borrowings(3) Hedging policy
FRC conducts derivative transactions to hedge interest rate fluctuation risks for floating-rate borrowings
based on FRC’s Articles of Incorporation.
(4) Method for assessing the effectiveness of hedging
Assessment of the effectiveness of hedging is omitted as requirements are satisfied for special accounting for interest rate swap transactions.

Net cash provided by (used in) investment activities

Proceeds from tenant leasehold and security deposits in trust

183,512

198,619

Repayments of tenant leasehold and security deposits in trust(378,222)(139,812)

6,544

1,315

(1) Property, plant and equipment
Depreciation is calculated using the straight-line method.
The useful lives of major categories of property, plant and equipment are as follows:		 Buildings in trust:
10 – 65 years
		 Structures in trust:
15 – 60 years
		 Machinery and equipment in trust:
15 – 30 years
		 Vehicles and transport equipment in trust:
7 years
		 Tools and fixtures in trust:5 – 20 years(7,094)(2,339)(1,043,063)(220,683)

5. Scope of funds (cash and cash equivalents) in cash flow The funds (cash and cash equivalents) in the cash flow statement consist of cash on hand and cash in trust;statement
deposits that can be withdrawn at any time and deposits in trust; and short-term investments with amaturity of 3 months or less from the date of acquisition, which are readily convertible to cash and bear
only an insignificant risk of value fluctuation.

Proceeds from long-term debt

3,700,000

4,700,000

6. Other significant items fundamental to preparing thefinancial statements

Repayments of long-term debt

(3,700,000)(4,700,000)

Dividends paid

(2,933,970)(2,938,346)

Net cash provided by (used in) financial activities(2,933,970)(2,938,346)

Net increase (decrease) in cash and cash equivalents

886,061

826,711

Proceeds from restricted trust deposits
Payments for restricted trust deposits
Net cash provided by (used in) investment activities
Net cash provided by (used in) financial activities

Balance of cash and cash equivalents at beginning of period
Balance of cash and cash equivalents at end of period

8,319,815
9,205,877*1

FUKUOKA REIT CORPORATION

31

9,205,877*1

10,032,589(1) Accounting methods for trust beneficiary interests in real estate as entrusted property
Regarding trust beneficiary interests in owned real estate as entrusted property, all asset and liability
accounts of the entrusted properties as well as all revenue and expense accounts generated by the entrusted properties are recorded in relevant accounts on the balance sheet and statement of income.
Furthermore, the following material accounts are separately stated on the balance sheet for entrusted
properties recorded in relevant accounts.
➀ Cash and deposits in trust➁	Buildings in trust, structures in trust, machinery and equipment in trust, vehicles and transport equipment in trust, tools and fixtures in trust, lands in trust and construction in progress in trust➂ Leasehold right in trust➃ Other intangible assets in trust➄ Lease and guarantee deposits in trust➅ Tenant leasehold and security deposits received in trust(2) Accounting for consumption taxes
National and local consumption taxes are accounted with the consumption taxes excluded.

FUKUOKA REIT CORPORATION

32

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to accounting standards not yet adopted)• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 issued by the Accounting Standards Board ofJapan (ASBJ) on March 30, 2018)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30 issued by ASBJ on
March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) jointly developed a comprehensive accounting standard for revenue recognition, and issued it as Revenue from Contracts with Customers (IFRS 15 issued by IASB and Topic 606 issued by FASB) in May 2014. IFRS 15 is applicable for accounting periods beginning on January 1, 2018 and thereafter, and Topic 606 is applicable for accounting periods beginning after December 15,
2017. In accordance with this, the ASBJ has developed a comprehensive accounting standard for revenue recognition andissued it together with its implementation guidance. In developing the accounting standard for revenue recognition, the ASBJ
made it a basic policy to adopt the basic principles of IFRS 15 as a starting point. By doing so, the ASBJ established theaccounting standard from the viewpoint of comparability, which is a benefit for securing consistency with IFRS 15, between
financial statements based on Japanese GAAP and those based on other accounting standards. Alternative treatments werealso added, to the extent that they do not harm the comparability, in cases where there are items to be considered in theactual practices conducted in Japan to date.
(2) Scheduled date of adoption
FRC will adopt the Accounting Standard and Implementation Guidance from the beginning of the fiscal period ending February 2022.
(3) Impact of adoption of the accounting standard and implementation guidance
The amount of impact on the financial statements by the adoption of the Accounting Standard and Implementation Guidancefor Revenue Recognition is being assessed at present.

(Notes to balance sheet)*1. Assets pledged as collateral and secured liabilities
Assets pledged as collateral are as follows:	(thousands of yen)

Buildings in trust
Lands in trust

30th fiscal period

31st fiscal period

as of August 31, 2019as of February 29, 2020

6,072,749
16,101,020
22,173,769

Total
Secured liabilities are as follows:	(thousands of yen)

Tenant leasehold and security deposits received in trust

30th fiscal period

31st fiscal period

as of August 31, 2019as of February 29, 2020

1,268,243[Committed line of credit agreement 1]
	(thousands of yen)

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of period

30th fiscal period

31st fiscal period

as of August 31, 2019as of February 29, 2020

6,000,000–
6,000,000[Committed line of credit agreement 2]
	
30th fiscal period

31st fiscal period

as of August 31, 2019as of February 29, 2020

7,000,000–
7,000,000

30th fiscal period

31st fiscal period

as of August 31, 2019as of February 29, 2020

50,0006,000,000–
6,000,000(thousands of yen)

*3. Minimum net assets designated in Article 67- 4 in the Act on Investment Trusts and Investment Corporations.
	(thousands of yen)33

1,235,869

2. Balance of unused committed line of credit
FRC has executed committed line of credit agreements with its banks primarily to conduct efficient and dynamic cash management.

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of period

FUKUOKA REIT CORPORATION

5,969,526
16,101,020
22,070,547

50,000FUKUOKA REIT CORPORATION

34

7,000,000–
7,000,000

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to statement of income)(Notes to financial instruments)*1. Breakdown of revenues and expenses related to real estate leasing business.


A. Real estate leasing business revenues
Leasing revenues - real estate		Rents
		 Common charges
		 Parking revenues
Other leasing revenues - real estate		 Incidental income
		 Other miscellaneous income
Total real estate leasing business revenues
B. Expenses related to real estate leasing business
Expenses related to leasing business		 Outsourcing fees		 Repair and maintenance expenses
		 Taxes and other public charges
		 Insurance premiums and trust compensation
		 Utilities expenses
		 Depreciation and amortization expenses
		 Other expenses related to real estate leasing businessTotal expenses related to real estate leasing business
C. Revenues and expenses related to real estate leasing business (A - B)(thousands of yen)
30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

6,961,827
1,101,386
467,689

6,968,555
1,095,890
450,606

8,530,902

664,715
36,039610,648
37,037700,755
9,231,657

1,910,909
123,202734,315
49,910550,418
1,651,902
229,406

1,898,749
116,285
734,254
51,676505,975
1,660,510
259,435

5,250,066
5,250,066
3,981,591*2. Transactions with affiliated companies.
	

8,515,052

647,685
9,162,738

5,226,888
5,226,888
3,935,850(thousands of yen)Item

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

Expenses related to real estate leasing business

1,395,796

1,430,201(Notes to statement of changes in net assets)
Total number of authorized investment units and total number ofinvestment units outstanding
Total number of authorized investment units
Total number of investment units outstanding

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

10,000,000 units
796,000 units

10,000,000 units
796,000 units(Notes to cash flow statement)*1. Relationship between the balance of cash and cash equivalents at end of period and the amounts of the corresponding accounts on the balance sheet.
	(thousands of yen)
30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

Cash and deposits
Cash and deposits in trust
Restricted trust deposits (Note)
Cash and cash equivalents

3,962,695
5,290,603(47,420)
9,205,877

5,417,020
4,664,012(48,444)
10,032,589

1. Matters concerning status of financial instruments(1) Policy on handling financial instruments
In order to secure stable earnings and steady growth of assets under management, FRC procures funds primarily throughborrowings from financial institutions, issuance of investment corporation bonds or issuance of investment units for property
acquisitions, repair and maintenance work, repayment of interest-bearing debt and other purposes.
In procuring interest-bearing debt, FRC borrows funds primarily in long-term, fixed interest debt based on the policy of
establishing a solid financial structure, and conducts conservative operations intended to secure financial stability and liquidity by dispersing debt payment dates and utilizing committed lines of credit and through other measures.
With regard to surplus funds, FRC manages them as various deposits and savings, etc. to support efficient management
while considering security.
FRC conducts derivative transactions only for the purpose of hedging the risk of future interest rate fluctuation, and not forthe purpose of speculation.
(2) Description of financial instruments and associated risks, and risk management structure
Debt and investment corporation bonds are funds procured primarily for acquiring real estate trust beneficiary interests andrefinancing of borrowings. Borrowings and investment corporation bonds are exposed to liquidity risks upon debt payment
dates, but FRC works to mitigate these risks by such measures as appropriately controlling the ratio of interest-bearing debt
to total assets and executing commitment line agreements with local financial institutions that are lenders to secure on-handliquidity.
In addition, borrowings with floating interest rates are exposed to interest rate fluctuation risks. However, FRC works to
reduce the risks by such measures as adjusting the ratio of the balance of borrowings with floating interest rates to totalborrowings in accordance with the financial environment and other factors. FRC conducts derivative transactions (specifically interest rate swap transactions) for part of its borrowings with floating interest rates in order to hedge the risk of futurefluctuations in the rates of interest payable. Furthermore, assessment of the effectiveness of these interest rate swaps isomitted as it has been determined that they have met the requirements for special accounting. FRC executes and manages
its derivative transactions in accordance with its financial derivative transaction management policies and, it does so only withfinancial institutions it determines to have a certain level of creditworthiness, by reference to their credit ratings, to reducecounterparty risks.
FRC manages surplus funds in large time deposits. Such deposits are subject to the risks of failure of the financial institutions holding the deposits as well as other credit risks. FRC mitigates the risks by limiting its deposits to financial institutions
with a certain level of creditworthiness, by reference to their credit ratings, as well as by setting short durations for these
deposits.
Tenant leasehold and security deposits received in trust are deposits from tenants and are exposed to liquidity risks if
tenants move out before the contracts expire. FRC mitigates this risk by such measures as securing on-hand liquidity.
(3) Supplementary explanation on matters concerning fair value of financial instruments
The fair value of financial instruments, aside from values based on market price, may include values based on reasonablecalculations when there is no market price. Certain assumptions are made in calculating those values, and there may becases where the values will vary when different assumptions are used.
As for the contract value and other conditions of derivative transactions indicated in “2. Matters concerning fair value offinancial instruments,” the contract value is not an indicator of the market risks related to such transactions.

(Note) Restricted trust deposits are trust deposits reserved for refunding tenant leasehold and security deposits deposited by tenants and for other purposes.

(Notes to leases)
The future lease revenues under the non-cancellable operating leases [as lessor] are as follows:	

Due within 1 year
Due after 1 year
Total

(thousands of yen)

30th fiscal period

31st fiscal period(as of August 31, 2019)(as of February 29, 2020)

5,491,855
17,646,621
23,138,477

5,695,320
15,560,264
21,255,584

FUKUOKA REIT CORPORATION35FUKUOKA REIT CORPORATION

36

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements

2. Matters concerning fair value of financial instruments(Note 3) Amount of redemption of monetary claims scheduled to be due after closing of accounts (as of August 31, 2019)

The following table includes the book values for financial instruments as recorded on the balance sheet, the corresponding fairvalues and the difference between these amounts as of August 31, 2019. Please note that the following table does not include
those financial instruments for which determination of fair value is considered to be extremely difficult (refer to (Note 2)).
(thousands of yen)(1) Cash and deposits(2) Cash and deposits in trust
Total of assets(3) Short-term debt
(4) Current maturities of long-term debt
(5) Investment corporation bonds(6) Long-term debt
(7) Tenant leasehold and security deposits received in trust
Total of liabilities(8) Derivative transactions
Total of derivative transactions

Book value recorded on thebalance sheet
3,962,695
5,290,603
9,253,298–
5,700,000
5,000,000
66,800,000
573,573
78,073,573––

Fair value(Note 1)

Difference

3,962,695
5,290,603
9,253,298–
5,705,799
5,387,800
70,182,759
573,573
81,849,933
–
–

–
–
–
–
5,799
387,800
3,382,759–
3,776,360––

	(thousands of yen)Due in 1 year or less
3,962,695
5,290,603
9,253,298

Cash and deposits
Cash and deposits in trust
Total

Amount of redemption of monetary claims scheduled to be due after closing of accounts (as of February 29, 2020)

	(thousands of yen)Due in 1 year or less
5,417,020
4,664,012
10,081,033

Cash and deposits
Cash and deposits in trust
Total(Note 4) Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of August 31, 2019)	(thousands of yen)
Long-term debt
Investment corporationbonds

Due in 1 year or less
5,700,000

1 to 2 years
6,300,000

2 to 3 years
6,000,000

3 to 4 years
5,900,000

4 to 5 years
5,200,000

Due after 5 years
43,400,000

–

–

–

–

2,000,000

3,000,000

Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of February 29, 2020))

The following table includes the book values for financial instruments as recorded on the balance sheet, the corresponding fairvalues and the difference between these amounts as of February 29, 2020. Please note that the following table does not include
those financial instruments for which determination of fair value is considered to be extremely difficult (refer to (Note 2)).
(thousands of yen)(1) Cash and deposits(2) Cash and deposits in trust
Total of assets(3) Short-term debt
(4) Current maturities of long-term debt
(5) Investment corporation bonds(6) Long-term debt
(7) Tenant leasehold and security deposits received in trust
Total of liabilities(8) Derivative transactions
Total of derivative transactions

Book value recorded on thebalance sheet
5,417,020
4,664,012
10,081,033–
1,000,000
5,000,000
71,500,000
419,185
77,919,185––

Fair value(Note 1)(thousands of yen)
Long-term debt
Investment corporationbonds

Due in 1 year or less
1,000,000

1 to 2 years
6,300,000

2 to 3 years
6,000,000

3 to 4 years
10,400,000

4 to 5 years
2,700,000

Due after 5 years
46,100,000

–

–

–

2,000,000–

3,000,000

Difference

5,417,020
4,664,012
10,081,033–
1,000,000
5,337,675
74,470,281
419,185
81,227,141
–
–

–
–
–
–
–
337,675
2,970,281–
3,307,956––(Note 1) Calculation method for fair value of financial instruments(1) Cash and deposits, (2) Cash and deposits in trust and (3) Short-term debt
		 As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated at that book value.
(4) Current maturities of long-term debt, (5) investment corporation bonds and (6) Long-term debt
		The fair value of long-term debt with fixed interest rates (including debt with practical fixed interest rates through interest rate swaps) and investment corporation bonds (the “debt, etc.”) is
calculated by discounting the total amount of principal and interest by the rate assumed as being applicable in the event of a new drawdown of similar debt, etc.
		The fair value of long-term debt with floating interest rates is based on the book value, as the contract terms require the interest rates to be revised in a certain period of time (within six months) andthus is considered to be nearly equal to the book value.
(7) Tenant leasehold and security deposits received in trust		The fair value of tenant leasehold and security deposits received in trust, which are deposited by the lessees, is calculated by discounting the future cash flows of such deposits by a reasonably
estimated rate that takes into account the term remaining until the reimbursement deadline and credit risks.
(8) Derivative transactions
		 Please refer to (Notes to derivative transactions)(Note 2) Financial instruments for which determination of fair value is considered extremely difficult.

		(Notes to investment securities)
30th fiscal period (as of August 31, 2019)
Not applicable.

31st fiscal period (as of February 29, 2020)
Not applicable.

(Notes to derivative transactions)
1. Derivatives to which hedge accounting is not applied
30th fiscal period (as of August 31, 2019)
Not applicable.

31st fiscal period (as of February 29, 2020)
Not applicable.

(thousands of yen)
30th fiscal period

31st fiscal period(as of August 31, 2019)(as of February 29, 2020)

Tenant leasehold and security deposits received in trust (*)

11,273,495

11,486,690(*) Tenant leasehold and security deposits received in trust are not subject to the requirement to disclose fair value, as it is considered extremely difficult to determine the fair value. This is because future
cash flows cannot be estimated since there is no market price and it is difficult to assume the reimbursement dates due to the possibility of cancellation, renewal and re-execution of lease contracts bylessees even if the contract terms are fixed, and because the past rate of tenants moving out of the properties owned by FRC may not be indicative of future move out rates as they are too specific toindividual circumstances.

FUKUOKA REIT CORPORATION37FUKUOKA REIT CORPORATION

38

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to equity method income and earnings)
2. Derivatives to which hedge accounting is applied

30th fiscal period (from March 1, 2019 to August 31, 2019)30th fiscal period (as of August 31, 2019)

Not applicable as FRC does not have any affiliated companies.

The following is the contract amount or amount equivalent to the principal provided in the contract as of the closing of accounts
for each method of hedge accounting.
(thousands of yen)Type of derivative transactions,etc.

Main hedged
itemInterest rate swap transaction
Special accounting for interest rate swaps
Receivable floating; Payable fixedLong-term debt

Method of hedge accounting

Contract amount, etc.
Of which,exceeding 1 year
23,700,000

21,200,000

Fair
value

Calculation
method for thefair value(*)–

31st fiscal period (from September 1, 2019 to February 29, 2020)
Not applicable as FRC does not have any affiliated companies.

(Notes to transactions with related parties)
1. Transactions with related parties(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt for accounting purposes. Accordingly, their fair value is included in the fair value of the relevant
long-term debt (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

(1) Parent company and major corporate unitholders
30th fiscal period (from March 1, 2019 to August 31, 2019)

31st fiscal period (as of February 29, 2020)
The following is the contract amount or amount equivalent to the principal provided in the contract as of the closing of accounts
for each method of hedge accounting.
Classification

Name

Other
affiliates

Fukuoka
Jisho Co.,Ltd.

CapitalBusiness
description

Hakata Ward,
4,000,000
Fukuoka City

General realestatebusiness

Location(thousands of yen)
Method of hedge accounting
Special accounting for interest rate swaps

Type of derivative transactions,etc.

Main hedged
itemInterest rate swap transaction
Receivable floating; Payable fixedLong-term debt

Contract amount, etc.
Of which,exceeding 1 year
23,700,000

23,700,000

Fair
value

Calculation
method for thefair value(*)–(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt for accounting purposes. Accordingly, their fair value is included in the fair value of the relevant
long-term debt (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

(Notes to retirement benefits)(Note 2)

FRC’s share of
voting rights, etc.

Descriptionofrelationship(thousands of yen)
Descriptionoftransaction

Transaction
amountCategory

Balance at
end ofperiodConsignment Consignment
Ownership in FRC
of real estate of real estate
Direct [9.01%]
management, management,
Indirect [0.86%]
etc.
etc. (Note 1)

1,395,796

Operatingaccounts
payable63,199[or ownership of suchin FRC](Note 3)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded a building lease and management consignment agreement with Fukuoka Jisho Co., Ltd. for Canal City Hakata, Canal City Hakata·B, Canal City Business Center and Taihaku Street
Business Center. The lease contract is a master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s revenues.
For properties covered by the said type of agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

31st fiscal period (from September 1, 2019 to February 29, 2020)

30th fiscal period (as of August 31, 2019)
Not applicable as FRC does not have any retirement benefit system.

Classification

Name

Other
affiliates

Fukuoka
Jisho Co.,Ltd.

31st fiscal period (as of February 29, 2020)
Not applicable as FRC does not have any retirement benefit system.

CapitalBusiness
description

Hakata Ward,
4,000,000
Fukuoka City

General realestatebusiness

Location(Note 2)

(Notes to tax effect accounting)
1. Breakdown of primary causes for occurrence of deferred tax assets and deferred tax liabilities.
(thousands of yen)

30th fiscal period

31st fiscal period(as of August 31, 2019)(as of February 29, 2020)

Deferred tax assets
Amount of accrued business taxes not deductible from taxable income
Total deferred tax assets
Deferred tax assets, net

3
3
3

17
17
17

2. Breakdown of significant causes of the difference between the effective statutory income tax rate and the effective income tax rate after application of tax effect accounting.
(%)
30th fiscal period

31st fiscal period(as of August 31, 2019)(as of February 29, 2020)

Effective statutory income tax rate
Deductible dividend amount
Other
Effective income tax rate after application of tax effect accounting

FUKUOKA REIT CORPORATION

31.30(31.30)
0.02
0.03

39

(Note 3)

FRC’s share of
voting rights, etc.

Descriptionofrelationship(thousands of yen)

Descriptionoftransaction

Transaction
amountCategory

Balance at
end ofperiodConsignment Consignment
Ownership in FRC
of real estate of real estate
Direct [9.09%]
management, management,
Indirect [0.86%]
etc.
etc. (Note 1)

1,430,201

Operatingaccounts
payable80,427[or ownership of suchin FRC](Note 3)(Note 3)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded a building lease and management consignment agreement with Fukuoka Jisho Co., Ltd. for Canal City Hakata, Canal City Hakata·B, Canal City Business Center and Taihaku Street
Business Center. The lease contract is a master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s revenues.
For properties covered by the said type of agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

(2) Affiliated companies, etc.
30th fiscal period (from March 1, 2019 to August 31, 2019)
Not applicable.

31st fiscal period (from September 1, 2019 to February 29, 2020)
Not applicable.

31.30(31.29)0.02
0.04

FUKUOKA REIT CORPORATION

40

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(3) Sister companies

2. Parent company and major affiliated companies

30th fiscal period (from March 1, 2019 to August 31, 2019)

Classification

Name

Location

Subsidiaries
of otheraffiliates

FJ.
Entertainment Hakata Ward,
Works Ltd. Fukuoka City

Subsidiaries
of otheraffiliates

Fukuoka
Realty Co.,Ltd.

Capital

20,000(Note 2)

Hakata Ward,
Fukuoka City

200,000

FRC’s share ofBusiness voting rights, etc. Description of Description of Transaction
description [or ownership of relationship transaction
amountsuch in FRC]
Ownership in FRC Consignment Consignment
Real estate
Direct [0.08%] of real estate of real estate
954,962(Note 5)business
Indirectmanagement, management,[–]
etc.
etc. (Note 1)
Asset
Asset
management Payment ofmanagementof FRC, etc.
asset
540,190of FRC and–andmanagement(Note 5)otherconcurrent
fees(Note 4)businesses
service ofofficer (Note 3)(thousands of yen)
Category

Operatingaccounts
payableBalance at
end ofperiodClassification

Subsidiaries
of otheraffiliates

Subsidiaries
of otheraffiliates

Name

Location

FJ.
Entertainment Hakata Ward,
Fukoka City
Works Ltd.

Capital

20,000(Note 2)

Fukuoka
Realty Co.,Ltd.

Hakata Ward,
Fukuoka City

200,000

FRC’s share ofBusiness voting rights, etc. Description of Description of Transaction
description [or ownership of relationship transaction
amountsuch in FRC]
Consignment Consignment
Real estateof real estate of real estate
920,425–(Note 5)businessmanagement, management,
etc.
etc. (Note 1)
Asset
Asset
management Payment ofmanagementof FRC, etc.
asset
534,300of FRC and–andmanagement(Note 5)otherconcurrent
fees(Note 4)businesses
service ofofficer (Note 3)(Note 5)30th fiscal period (from March 1, 2019 to August 31, 2019)
Not applicable.

31st fiscal period (from September 1, 2019 to February 29, 2020)
Not applicable.

(Notes to asset retirement obligations)30th fiscal period (from March 1, 2019 to August 31, 2019)

Accruedexpenses

264,201

Not applicable.

(Note 5)31st fiscal period (from September 1, 2019 to February 29, 2020)
Not applicable.

(Notes to properties for lease)
FRC owns retail, office buildings and residential properties for lease in the Kyushu area centering on Fukuoka Prefecture. The
following table provides the book value recorded on the balance sheet, amount of change during the period and fair value ofthese properties for lease.
(thousands of yen)(thousands of yen)
Category

Operatingaccounts
payableBalance at
end ofperiodUse

Retail157,315(Note 5)

Office buildings
Accruedexpenses

266,685(Note 5)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded with FJ. Entertainment Works Ltd. a real estate lease and management consignment agreement for Park Place Oita and a building lease and management consignment agreementfor Konoha Mall Hashimoto. The agreements are master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s
revenues. For the properties covered by the said type of the agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Etsuo Matsuyuki, Executive Director of FRC, concurrently serves as a CEO & Representative Director of Fukuoka Realty Co., Ltd.
(Note 4) The amount of the asset management fees is decided based on the asset management consignment agreement following discussion between the concerned parties.
(Note 5) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

(4) Directors and major individual unitholders

Not applicable.

176,544(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded with FJ. Entertainment Works Ltd. a real estate lease and management consignment agreement for Park Place Oita and a building lease and management consignment agreementfor Konoha Mall Hashimoto. The agreements are master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s
revenues. For the properties covered by the said type of the agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Etsuo Matsuyuki, Executive Director of FRC, concurrently serves as a CEO & Representative Director of Fukuoka Realty Co., Ltd.
(Note 4) The amount of the asset management fees is decided based on the asset management consignment agreement following discussion between the concerned parties.
(Note 5) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

31st fiscal period (from September 1, 2019 to February 29, 2020)

30th fiscal period (from March 1, 2019 to August 31, 2019)

OthersTotal

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period
Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period
Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period
Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

Not applicable.

41

111,944,592(710,278)
111,234,313
123,000,000

46,035,486(380,734)
45,654,752
64,450,000

45,654,752(309,254)
45,345,497
66,100,000

26,097,376(149,117)
25,948,258
30,110,000

25,948,258(175,446)
25,772,812
30,160,000

184,723,013(1,175,409)
183,547,603
217,620,000

183,547,603(1,194,979)
182,352,623
219,260,000(Note 1) Amount recorded on the balance sheet is the cost of acquisition less accumulated depreciation.
(Note 2) Of the amount of change during the 30th fiscal period, the amount of increase is primarily attributable to capital expenditures (476 million yen), and the amount of decrease is primarily attributable todepreciation and amortization expenses (1,651 million yen). Of the amount of change during the 31st fiscal period, the amount of increase is primarily attributable to capital expenditures (465 millionyen), and the amount of decrease is primarily attributable to depreciation and amortization expenses (1,660 million yen).
(Note 3) The fair value at end of period is the appraisal value provided by outside real estate appraisers.

31st fiscal period (from September 1, 2019 to February 29, 2020)

FUKUOKA REIT CORPORATION

112,590,150(645,558)
111,944,592
123,060,000

FUKUOKA REIT CORPORATION

42

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements

The following table provides the income (loss) from properties for lease.
(thousands of yen)
Use

RetailOffice buildings

OthersTotal

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

Amount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing business

5,902,826
3,635,432
2,267,394

5,876,637
3,617,050
2,259,586

2,424,297
1,233,244
1,191,052

2,406,720
1,233,266
1,173,453

904,533
381,388523,144879,380
376,570
502,8099,231,657
5,250,066
3,981,591

9,162,738
5,226,888
3,935,850(Note) Real estate leasing business revenues and expenses related to real estate leasing business are comprised of leasing business revenues and accompanying expenses (outsourcing fees, depreciation andamortization expenses, taxes and other public charges, etc.), and are recorded as Leasing revenues - real estate, Other leasing revenues - real estate and Expenses related to leasing business, respectively.

(2) Information by region(a) Operating revenues
Descriptions are omitted as FRC’s operating revenues for outside customers in Japan exceed 90% of operating revenues
recorded in the statement of income.
(b) Property, plant and equipment
Descriptions are omitted as the amount of FRC’s property, plant and equipment located in Japan exceeds 90% of property, plant and equipment recorded on the balance sheet.

(3) Information by major customer
Descriptions are omitted as FRC’s operating revenues for an individual outside customer are less than 10% of operating
revenues recorded in the statement of income.

(Notes to per unit information)
30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

Net assets per unit (yen)Profit per unit (yen)127,987
3,692

127,937
3,642(Note 1) Profit per unit was calculated by dividing the profit by the daily weighted average number of investment units. Diluted profit per unit is not stated as there are no dilutive investment units.
(Note 2) Profit per unit was calculated based on the following data:

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

2,939,139–
2,939,139
796,000

Profit (thousands of yen)Amounts not attributable to ordinary unitholders (thousands of yen)
Profit attributable to ordinary investment units (thousands of yen)
Average number of units during the fiscal period (units)(Notes to segment information)[Segment information]
Descriptions omitted as FRC has a single business segment of real estate leasing business.

2,899,112–
2,899,112
796,000(Notes to cash distributions)[Related information]



30th fiscal period (from March 1, 2019 to August 31, 2019)(1) Information by product and service
Descriptions are omitted as FRC’s operating revenues under single product/service classification for outside customers exceed 90% of operating revenues recorded in the statement of income.

(2) Information by region(a) Operating revenues
Descriptions are omitted as FRC’s operating revenues for outside customers in Japan exceed 90% of operating revenues
recorded in the statement of income.
(b) Property, plant and equipment
Descriptions are omitted as the amount of FRC’s property, plant and equipment located in Japan exceeds 90% of property, plant and equipment recorded on the balance sheet.

Account

31st fiscal period (from September 1, 2019 to February 29, 2020)(1) Information by product and service
Descriptions are omitted as FRC’s operating revenues under single product/service classification for outside customers exceed 90% of operating revenues recorded in the statement of income.

30th fiscal period

31st fiscal period(March 1, 2019 to August 31, 2019)(September 1, 2019 to February 29, 2020)

I. Unappropriated surplus

2,939,679

2,899,164

II. Total dividend[Dividend per investment unit]
III. Surplus brought forward

2,939,628[3,693 yen]
51

2,899,032[3,642 yen]132

The amount of dividends shall be decided in accordancewith the dividend policy stipulated in Article 38-1-1 of
FRC’s Articles of Incorporation and must exceed 90% of
FRC’s distributable profits as stipulated in Article 67-15-1of the Special Taxation Measures Act.
Following the above policy, FRC shall decide to distribute
2,939,628 thousand yen, which is almost the entire
amount of unappropriated surplus, as earnings dividends.
Moreover, dividend in excess of earnings as stipulated in
Article 38-2 of FRC’s Articles of Incorporation will not beprovided.

The amount of dividends shall be decided in accordancewith the dividend policy stipulated in Article 38-1-1 of
FRC’s Articles of Incorporation and must exceed 90% of
FRC’s distributable profits as stipulated in Article 67-15-1of the Special Taxation Measures Act.
Following the above policy, FRC shall decide to distribute
2,899,032 thousand yen, which is almost the entire
amount of unappropriated surplus, as earnings dividends.
Moreover, dividend in excess of earnings as stipulated in
Article 38-2 of FRC’s Articles of Incorporation will not beprovided.

Method for calculating dividends(3) Information by major customer
Descriptions are omitted as FRC’s operating revenues for an individual outside customer are less than 10% of operating
revenues recorded in the statement of income.

(thousands of yen)

(Note) Amounts other than the amounts of dividend per unit are rounded down to the nearest thousand yen.

(Notes to significant subsequent events)
No relevant items.

(Schedule of securities)
Not applicable.

FUKUOKA REIT CORPORATION43FUKUOKA REIT CORPORATION

44

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Schedule of contract amount, etc. and fair value of derivative transactions
andforward exchange transactions)(thousands of yen)
Category

Type(Note 1)

Interest rate swap transaction
Receivable floating; Payable fixed

Off-market transaction

Contract amount, etc.
Of which, exceeding 1 year

Total

(Scheduleof debt)Balance as of
September 1,
2019

Increase

Decrease

Balance as of
AverageFebruary 29, interest rate(%) (Note 1)
2020

MUFG Bank

500,000–

500,000–

Current The Nishi-Nippon City Bank
maturities
Mizuho Bankof longterm debt Aozora Bank

2,500,000–

2,500,000

1,700,000–

1,000,000

Category

Fair value(Note 2)

23,700,000

23,700,000(401,711)

23,700,000

23,700,000(401,711)(Note 1) The contract amount, etc. of the interest rate swap transaction is based on the notional principal amount.
(Note 2) The fair value is calculated by the counterparty of the transaction contract based on the actual interest rate on the market and other factors.

LenderSubtotal

Buildings in trust
Structures in trust
Machinery and equipmentin trust
Total
Vehicles and transport
property, equipment in trust
plant andequipment Tools and fixtures in trust
Land in trust
Construction in progressin trust
Subtotal
Leasehold right in trust
Total
Other intangible assets inintangible
trust
assetsSubtotal
Total

September 25, 2019

Refinance fund

–

0.775

February 29, 2020

Acquisition fund

1,700,000

–

0.567

February 29, 2020

Refinance fund––

1,000,000

0.467

June 30, 2020

Refinance fund

0.835

July 30, 2021

Refinance fundNo collateral/
No guarantee

4,700,000

1,000,000––

2,300,000(thousands of yen)

The Norinchukin Bank

1,000,000––

1,000,000

Net property
andRemarks
equipment(Note)
69,586,959(Note)
1,101,295

The Hiroshima Bank

1,400,000––

1,400,000

The Kitakyushu Bank

800,000––

800,000

The Iyo Bank

500,000––

500,000

The Higo Bank

300,000––

300,000

Development Bank of Japan

4,000,000––

4,000,000

1.010

August 31, 2022

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Banking
Corporation

1,600,000––

1,600,000

0.790

June 30, 2022

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Trust Bank

1,500,000––

1,500,000

0.564

July 31, 2023

Refinance fundDevelopment Bank of Japan

4,000,000––

4,000,000

0.880

August 31, 2023

Refinance fund

The Bank of Fukuoka

400,000––

400,000

0.417

August 31, 2022

Refinance fund

The Nishi-Nippon City Bank

400,000––

400,000

0.870

August 31, 2023

Refinance fund

The Bank of Fukuoka

2,000,000––

2,000,000

0.417

February 29, 2024

Refinance fund

The Nishi-Nippon City Bank

2,000,000––

2,000,000

0.440

February 29, 2024

Refinance fundDevelopment Bank of Japan

2,000,000––

2,000,000

0.620

February 28, 2025

Refinance fund

500,000––

500,000

0.440

February 29, 2024

Refinance fund

700,000––

700,000

0.400

July 31, 2024

Refinance fund

0.411

September 30, 2025

Refinance fund

0.718

December 30, 2025

Refinance fund

1,414,614

66,190–1,480,805

549,601

44,547931,204

747

–

–

747

628

47

118

1,382,487
104,918,451

6,503
–

–
–

1,388,990
104,918,451

1,170,941–

26,044–

218,048
104,918,451

15,164504–

15,669––15,669210,729,524
5,545,883

465,530–––

211,195,055
5,545,883

34,423,308–

1,655,036–

176,771,746
5,545,883

81,417––

81,41746,424

5,474

34,993

5,627,301
216,356,825–
465,530––

5,627,301
216,822,356

46,424
34,469,732

5,474
1,660,510

5,580,876
182,352,623(Note)(Note)

Long-term Mizuho Bank
debt
Shinsei Bank

(Note) The main increase in the 31st fiscal period is due to construction work at properties.

(Schedule of other specified assets)

Sumitomo Mitsui Trust Bank

300,000––

300,000

Not applicable.

Development Bank of Japan

1,500,000––

1,500,000

The Oita Bank

100,000––

100,000

The Kagoshima Bank

100,000––

100,000

The Kitakyushu Bank

100,000––

100,000

The Eighteenth Bank

100,000––

100,000

The Shinwa Bank

100,000––

100,000

The Hiroshima Bank

100,000––

100,000

The Bank of Fukuoka

1,500,000––

1,500,000

0.417

December 30, 2026

Refinance fund

MUFG Bank

800,000––

800,000

0.481

March 31, 2025

Refinance fund(Schedule of investment corporation bonds)
Issue

Issue date

Balance as of
September 1,
2019

Decreaseduring the
fiscal period

Balance as ofFebruary 29,
2020(thousands of yen)(thousands of yen)(thousands of yen)–

2,000,000

First Series ofUnsecured Bonds

December 30,
2013

2,000,000

Second Series ofUnsecured Bonds

July 31, 2017

2,000,000

Third Series ofUnsecured Bonds

July 31, 2018

Total

–

Coupon(%)

Maturity date

Maturity
methodUse

Description

1.32

December 29,
2023

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee

July 30,2032

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee(Note 2)

Resona Bank

600,000––

600,000

0.658

March 31, 2027

Refinance fund

July 30,
2038

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee

The Higo Bank

300,000––

300,000

0.481

March 31, 2025

Refinance fund

The Bank of Fukuoka

1,300,000––

1,300,000

The Nishi-Nippon City Bank

1,000,000––

1,000,000

The Oita Bank

700,000––

700,000

The Kitakyushu Bank

700,000––

700,000

0.777

June 30, 2026

Refinance fund

The Miyazaki Bank

700,000––

700,000

The Shinwa Bank

600,000––

600,000

2,000,000

1,000,000–

1,000,000

5,000,000–

5,000,000

1.00
1.20

(Note 1)

(Note 1)

(Note 1)

(Note 2)

(Note 2)

(Note 1) The bonds may be repurchased and cancelled by FRC at any time on and after the date following the payment date, unless otherwise determined by the book-entry transfer agent.
(Note 2) The bonds are subject to the limited pari passu clause among specified investment corporation bonds.
(Note 3) Amount of redemption of investment corporation bonds scheduled to be due within 5 years after period end.



(thousands of yen)
Category
Investment corporation bonds

Due in 1 year or less–

1 to 2 years–

FUKUOKA REIT CORPORATION

2 to 3 years–

45

3 to 4 years
2,000,000

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee–

386,922
5,409

Decrease

0.520

Description

2,300,000

Balance as ofAccumulated Depreciation
February 29,
depreciation for the period2020– 101,501,588
31,914,629
1,555,334–
1,888,802
787,507
29,062

Increase

Use of funds

5,700,000

Balance as of
September 1,
2019
101,114,666
1,883,393

Repayment
date

Mizuho Bank

(Schedule of property, plant and equipment, and intangible assets)
Type of asset(thousands of yen)

4 to 5 years–

FUKUOKA REIT CORPORATION46

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

No collateral/
No guarantee

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

No collateral/
No guarantee

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements

Balance as of
September 1,
2019

Increase

Decrease

The Iyo Bank

500,000––

500,000

The Eighteenth Bank

500,000––

500,000

Development Bank of Japan

1,800,000––

The Bank of Fukuoka

2,000,000–

The Nishi-Nippon City Bank

2,000,000

The Nishi-Nippon City Bank

Category

Balance as of
AverageFebruary 29, interest rate(%) (Note 1)
2020

Repayment
date

Use of funds

Description

0.777

June 30, 2026

Refinance fundNo collateral/
No guarantee

1,800,000

0.650

December 31, 2026

Refinance fund–

2,000,000

0.792

July 31, 2027

Refinance fund––

2,000,000

0.892

July 31, 2027

Refinance fund

500,000––

500,000

The Bank of Fukuoka

500,000––

500,000

The Oita Bank

100,000––

100,000

The Kitakyushu Bank

100,000––

100,000

The Eighteenth Bank

100,000––

100,000

The Shinwa Bank

100,000––

100,000

The Hiroshima Bank

100,000––

100,000

Resona Bank

2,000,000––

2,000,000

0.493

September 30, 2027

Refinance fund

The Bank of Fukuoka

1,500,000––

1,500,000

0.812

December 30, 2027

Refinance fundDevelopment Bank of Japan

500,000––

500,000

0.680

December 30, 2027

Refinance fund

The Nishi-Nippon City Bank

1,900,000––

1,900,000

0.750

February 29, 2028

Refinance fund

Sumitomo Mitsui Trust Bank

1,100,000––

1,100,000

0.600

February 26, 2027

Refinance fund

MUFG Bank

1,500,000––

1,500,000

0.500

February 27, 2026

Refinance fundResona Bank
Long-term
Development Bank of Japandebt

600,000––

600,000

0.567

February 29, 2028

Refinance fund

2,500,000––

2,500,000

0.720

March 1, 2028

Acquisition fund

MUFG Bank

600,000––

600,000

0.480

March 31, 2026

Refinance fund

The Nishi-Nippon City Bank

600,000––

600,000

0.802

March 31, 2028

Refinance fund

The Bank of Fukuoka

500,000––

500,000

0.802

March 31, 2028

Refinance fundMizuho Bank

500,000––

500,000

0.630

March 31, 2028

Refinance fund

Sumitomo Mitsui Banking
Corporation

500,000––

500,000

0.504

March 31, 2025

Refinance fund

MUFG Bank

500,000––

500,000

0.490

March 31, 2027

Refinance fund

Sumitomo Mitsui Trust Bank

400,000––

400,000

0.576

March 31, 2027

Refinance fund

The Oita Bank

400,000––

400,000

0.646

March 31, 2028

Refinance fund

The Hiroshima Bank

400,000––

400,000

0.646

March 31, 2028

Refinance fund

Shinsei Bank

300,000––

300,000

0.400

March 31, 2025

Refinance fund

Sumitomo Mitsui Banking
Corporation

500,000––

500,000

0.655

January 31, 2029

Refinance fund

MUFG Bank

500,000––

500,000

0.590

January 31, 2028

Refinance fund

The Nishi-Nippon City Bank

400,000––

400,000

0.418

January 31, 2029

Refinance fund

The Bank of Fukuoka

300,000––

300,000

0.418

January 31, 2029

Refinance fund

The Oita Bank

200,000––

200,000

0.334

February 27, 2026

Refinance fund

The Kagoshima Bank

200,000––

200,000

0.334

February 27, 2026

Refinance fund

The Higo Bank

200,000––

200,000

0.334

February 27, 2026

Refinance fundResona Bank

200,000––

200,000

0.488

February 28, 2029

Refinance fund

LenderFUKUOKA REIT CORPORATION47

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

Balance as of
September 1,
2019

Increase

Decrease

1,200,000––

1,200,000

The Bank of Saga

500,000––

500,000

The Higo Bank

500,000––

500,000

1,500,000–––

500,000

The Nishi-Nippon City Bank–

Mizuho Bank

Category
LenderMizuho Bank

The Norinchukin Bank
Long-termdebt
MUFG Bank

Subtotal
0.850

August 31, 2027

Refinance fundNo collateral/
No guarantee

Total

Balance as of
AverageFebruary 29, interest rate(%) (Note 1)
2020

Repayment
date

Use of funds

Description

0.521

July 31, 2029

Refinance fundNo collateral/
No guarantee

1,500,000

0.303

January 29, 2027

Refinance fund–

500,000

0.480

September 29,
2028

Refinance fund

2,500,000–

2,500,000

0.480

February 28, 2030

Refinance fund–

1,700,000–

1,700,000

0.420

February 28, 2030

Refinance fund

66,800,000

4,700,000–

71,500,000

72,500,000

4,700,000

4,700,000

72,500,000

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee(Note 1) The average interest rate is a weighted-average figure during the fiscal period and is rounded to the third decimal place. Furthermore, the average interest rate of debt for which FRC conducted interest
rate swap transactions is the weighted-average figure during the fiscal period taking into consideration the effect of interest rate swaps.
(Note 2) Amount of repayment of long-term debt scheduled to be due within 5 years after period end.

(thousands of yen)
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

Category
Long-term debt

1 to 2 years
6,300,000

2 to 3 years
6,000,000

3 to 4 years
10,400,000

4 to 5 years
2,700,000

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

FUKUOKA REIT CORPORATION

48