Financial Strategy

Sustainability

Dividends and TSR

Planning
Department
Table 1 and Figure 2 show the total shareholder return(TSR), taking into account FRCʼs dividends and capitalgains. TSR performance has been 8.1% annually over the
past 10 years. In contrast, returns have remained flat overthe past year as the TSE REIT Index weakened.

■ Figure 1. Past Dividends and Dividend Yields■ Table 1. TSR Over the Past 10 Years

Dividend per investment unit (Yen)Dividend yield (as of the end of the fiscal period) (%)

4,000

3,574

3,479

3,398 3,422

3,512

3,593

3,687 3,693 3,642

3,539 3,536 3,523
3,250

Past 1 year

（％）

(Yen)

8

3,361

Past 3 years

Past 5 years

Who We Are

Figure 1 shows FRCʼs past dividends and dividend yields.
Among listed REITs, our dividends are extremely stable.
In contrast, the dividend yield has ﬂuctuated between
3.8% and 4.7% over the past eight years, indicating thatinvestment unit prices have shifted due to changes inthe stock market, interest rate trends, and ﬂuctuations inmarket supply and demand.

Past 10 years

Cumulative
total

Annualrate

Cumulative
total

Annualrate

Cumulative
total

Annualrate

FRC(0.9)%

7.2%

2.3%

25.2%

4.6%

118.6%

8.1%

TOPIX Real
Estate Index

6.9%

14.0%

4.5%

25.0%

4.6%

126.5%

8.5%

TSE REIT
Index(1.5)%

19.3%

6.1%

60.0%

9.9%

232.3%

12.8%

3,000

3.7

3.7

3.9

4.1

4.1

4.2

4.4

4.7
4.1

4.3

6
4.5

4.0

4.1

4.0

2,000

4

Growth Strategy

ery

v
Reco

General Manager of the Planning Department andGeneral Manager of Sustainability Promotion Office

Keishi Tamura

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

1,000

The Role of the Planning Department

20Note: Dividend yield = (Dividend per investment unit / Operating days x 365) / Investment unit price asof the end of the fiscal period

Investment Unit Price Performance for
the Most Recent Fiscal Year
FRC

TOPIX Real Estate Index

TSE REIT Index(Index)120
110■ Figure 2. Investment Unit Price Performance (10 years, including dividends)
FRC

TOPIX Real Estate Index

Sustainability

The Planning Department is in charge of matters relating to management policy,
general affairs, personnel affairs, accounting, and sustainability. We believe in
the importance of creating an environment in which all employees can fulfill theirpotential in order to contribute to regional revitalization and the development of
attractive communities, based on an understanding of the activities of our asset
management company and under the basic policy of Act Local, Think Global.

0

23rd 24th 25th 26th 27th 28th 29th 30th 31st 32nd 33rd 34th 35th 36th

Feb. 2016 Aug. 2016 Feb. 2017 Aug. 2017 Feb. 2018 Aug. 2018 Feb. 2019 Aug. 2019 Feb. 2020 Aug. 2020 Feb. 2021 Aug. 2021 Feb. 2022 Aug. 2022

100
90

TSE REIT Index

80(Index)

August 2021

400

February 2022

August 2022

Framework for Sustainable Initiatives

200with outside parties, examines speciﬁc goals and measuresrelating to information disclosure policy and other matters,
and identiﬁes the progress made in measures being
implemented. Sustainability ofﬁcers are responsible forpractical matters relating to achieving the goals set by
the committee with the General Manager of the Planning
Department providing general oversight.

Data Section

In 2018, FRC established the Sustainability Policy andRegulations Concerning Sustainability Management topromote sustainability in consideration of environmental,social, and governance (ESG) issues and set up the
Sustainability Promotion Committee comprised of full-time
directors, executive directors, and general managers. The
committee establishes internal organizations, collaborates

300

100

Sustainability Initiatives and GRESB
0

Aug.
2012

Dec.
2012

Apr.
2013

Aug.
2013

Dec.
2013

Apr.
2014

Aug.
2014

Dec.
2014

Apr.
2015

Aug.
2015

Dec.
2015

Apr.
2016

Aug.
2016

Dec.
2016

Apr.
2017

Aug.
2017

Dec.
2017

Apr.
2018

Aug.
2018

Dec.
2018

Apr.
2019

Aug.
2019

Dec.
2019

Apr.
2020

Aug.
2020

Dec.
2020

Apr.
2021

Aug.
2021

Dec.
2021

Apr.
2022

Aug.
2022

Note: FRCʼs investment unit price performance is expressed as an index, using the investment unit price as of August 31, 2012, as 100. TSR over the past 10 years considers dividends and investment unit prices in indicating
the profitability of investments made on August 31, 2012, as of August 31, 2022. The TOPIX Real Estate Index and the TSE REIT Index are indexed in the same way, using dividend-included data. Similarly, the graph forthe most recent fiscal year is indexed with the investment unit price as of August 31, 2021, as 100.

28

FRC has been conducting sustainability initiatives since
our listing that include obtaining DBJ Green Building
Certiﬁcation. ESG-related inquiries from investors started
to increase in 2017 at investor relations activities overseas.

We believe it is necessary to make efforts in line with
global standards, and in 2017 we decided to take part in
the Global Real Estate Sustainability Benchmark (GRESB)
system to further promote our sustainability initiatives.

Fukuoka REIT Corporation 2022

29

Sustainability

IR Kyushu Workshop run jointly by FRC and the Japan
Investor Relations Association.
We attained a 4-star rating in our ﬁrst GRESB Real
Estate Assessment in 2018 and have received ratings
every year since. In 2022, we received another 4-star ratingin this category as was the case in 2021 and obtained an
A-level rating in the GRESB Real Estate Public Disclosure
evaluation.

Materiality and ESG Initiatives

In July 2019, FRC was the ﬁrst company headquartered in the
Kyushu region to be issued a green loan and the ﬁrst J-REIT totake out a syndicate-based green loan. Following this, we haveprocured funds that included a donation to a COVID-19 vaccine
development research fund at Nagasaki University and procured
funds through a sustainability-linked loan. With the latter, a

syndicate was formed in which the Development Bank of Japan,
one of our sponsor banks, serves as the coordinator withcollaboration from The Nishi-Nippon City Bank and The Bank ofFukuoka. Through this loan, the sponsor banks and FRC team
up to set Sustainability Performance Targets in consideration of
the environment and strive to reduce CO2 emissions.

Task Force on Climate-related Financial Disclosures (TCFD)

Environment
reduction in CO2 emissions by 2030 relative to 2019. We
are also looking to acquire Green Building Certiﬁcationand have done so for 77.8% of our properties to date.
We aim to increase this number to 85% or higher by
2030 by maintaining and improving the environmental
performance of existing properties and by adopting a
careful selection process for new properties.

One current focus concerns the Task Force on Climaterelated Financial Disclosures (TCFD). In September 2022,
we established a Policy on Climate Change and Resiliencethat states measures regarding the risks and opportunities
associated with climate change as well as the resilience(strength and buoyancy) of operations and strategies relative toclimate-related issues. We also announced our endorsementof the recommendations of the TCFD and joined the TCFD

Consortium, an organization of Japanese companies
expressing their support of the TCFD.
The TCFD requests companies to evaluate the climaterelated risks and opportunities to their business and to assessand disclose the ﬁnancial impact. FRC has started analyzing
different climate scenarios to identify the risks, opportunities,
and ﬁnancial impact in order to formulate a viable strategy.

We will continue to conduct asset management in consideration of sustainability as Japanʼs ﬁrst region-speciﬁc REIT that
promotes community development and economic revitalization in the Fukuoka and Kyushu areas.
■ Climate Change Scenario Analysis

4℃ scenarioSociety

Technology
Transition
risks

Since then, we have been disclosing information on thestatus of this initiative. With regard to risk management,
we update our risk matrix in a timely manner andregularly conduct drills as part of our business continuity
plan (BCP) to conﬁrm its effectiveness.

Short
term

Medium
term

Long
term

Taxation of CO2 emissions due to introduction of carbon tax

Increased taxation on CO2 emissions for owned properties

S

S

S

S

M

M

Stricter energy-saving standards for existing real estate andintroduction of carbon emission-related restrictions

Increased renovation costs for purpose of compliance
Increased environmental certification acquisition costs

S

S

S

S

M

L

Stricter mandatory emissions reporting requirements in the
Energy Efficiency Act

Increased payments to external companies for purpose of handling reporting

S

S

S

S

S

S

Evolution/Spread of renewable energy and energy-saving
technology

Increased costs of introducing new technology to prevent facilities in owned properties
from becoming technologically obsolete

S

S

S

S

M

L

Increased financing costs for properties with poor environmental performance

S

S

S

S

S

S

Relative decrease in institutional investors’ investment appetite due to delayed
environmental compliance

S

S

S

S

S

S

Increased importance of transition risks

Increased financing costs due to properties being assessed as having high transition risks

S

S

S

S

S

S

Increased value related to environmental performance

Reduced property value and average rents due to environmental certifications such as
DBJ Green Building Certification not being acquired

S

S

S

S

M

L

Tenant needs relating to environmental performance

Decreased revenue due to owned properties’ environmental performance becoming
relatively low, creating stranded assets

S

S

S

S

M

L

Acute

Damage to owned properties due to typhoons/heavy rain

Increased repair costs and insurance premiums: loss of sales opportunities due toflooding, decreased asset value of owned properties with high flooding risks, increased
countermeasure costs

S

S

M

S

S

S

Chronic

Flooding at owned properties in low-elevation areas due to sea
level rise

Increased flooding countermeasure costs

S

S

M

S

S

S

Increased need for A/C due to rising temperatures

Increased A/C operation, maintenance, and repair costs

S

S

M

S

S

S

Introduction of renewable energy at sites

Reduction in externally procured utility costs

S

S

S

S

S

S

Attracting tenants, occupants, and users by offering lowemission facilities and services

Increased revenue by attracting tenants and occupants

S

S

S

S

M

L

Expanding the client base by continuing to provide rental
properties aligned with changing tenant and occupant tastes

Increased revenue from higher rents and improved tenant acquisition and retention

S

S

S

S

M

L

Expanding the investor baseUse of green bonds: increased financing by adapting/appealing to investors who
prioritize environmental issues, decreased financing costs

S

S

S

S

S

S

Energysources
Products andservices

Markets

30

Long
term

Changing social values relating to environmental performanceMarkets

Opportunities

Mediumterm

Decrease in asset value due to delayed environmental
compliance at owned properties

Physicalrisks

GovernanceIn terms of governance-related efforts, we adopted allseven principles set forth in the Principles for CustomerOriented Business Conduct established by the Financial
Services Agency in 2017 and formulated our own
Policies for Customer-Oriented Business Operations.

Policy andlaw

15℃ scenario

Short
term

Fukuoka REIT Corporation 2022

Data Section

In 2022, Fukuoka City launched a registration
system for businesses committed to achieving the wellbeing of their workers and the SDGs with the aims ofenhancing the satisfaction of peopleʼs lives and realizing
a sustainable environment, society, and economy. This is
the ﬁrst such initiative in Japan. FRC registered and has
been certiﬁed as a “master” under the system.
We are also actively communicating with the local
community, including through Twitter since 2010.

Financial impacts

Sustainability

We conducted an analysis to be used for the purpose of assessing the validity of current climate change measures anddeveloping future strategies. Risks, opportunities, and ﬁnancial impacts as shown in the table are assessed below.

Risk/Opportunity factors

As one social initiative, we aim to create an appealing
workplace for employees. In 2018, FRC was recognizedby Fukuoka City as a company that actively seeks topromote work-style reform. We were highly praisedfor our efforts to enhance productivity by supporting
personal development and for our campaign
encouraging no overtime.

Growth Strategy

As part of our sustainability initiatives, we identiﬁed material issues (materiality) for the ﬁrst time in 2019 when we published
our inaugural Integrated Report. In April 2022, we set targets and key performance indicators (KPIs) for each issue. The
status of initiatives being undertaken for each of these issues is outlined below.

In terms of environmental efforts, we are switching
to LED lighting in the properties we own. We plan tocontinue installing e.g. LED lighting in our commercial
facilities this ﬁscal year as well. In addition, we are in talks
with property management companies regarding ways
we can reduce energy consumption when it comes timefor facilities to be upgraded and have targeted a 35%

Sustainability Finance

Who We Are

We worked to increase an understanding of ESG issues
and sustainability with related parties to effectively set goals
for our sustainability activities. This included endorsing
the Principles for Responsible Investment (PRI) and
the Principles for Financial Action for the 21st Century(PFA21) and inviting investors, analysts, and REIT issuers
engaged in advanced sustainability activities to a workshop
concerning disclosure of non-ﬁnancial information at the31

Environmental Issues
IC

Related Materiality

Investment Corporation (FRC)

AMC Asset Management Company

・Reduction of environmental load

Environmental Initiatives
RetailEnvironmental Performance DataICNatural Environment Conservation and Creation

Canal Water Filtration System (rainwater reuse system)

Canal City Hakataʼs symbolic canal has both a recreational
function and is a source of water to fight fires in the case of an
emergency. At all times, this canal holds roughly 1,200 tons ofwater, and rainwater is used to conserve resources.

Although values increased for the fiscal period ended February 2022 compared to the interval in which we closed facilities due to the spreadof the COVID-19 pandemic, we still recorded a reduction of 8.84% in electricity usage and 31.14% in water consumption compared with theperiod ended February 2019.
■ Electricity Usage■ Water Consumption(Data coverage)

(MWh)

70.1％
70.1%
81,33990,000

70.1％

70.2%

70.2%

79,474
71,192

00.0％
70.2%

184

60,000

70.1％
70.1%

70.1％

607,352

596,007

1.37

30,00070.2％ (Basic unit)

405,366

418,232

2.00
1.50

1.35

1.00

400,000

0.94

0.91

160

160

0.50

200,000

28th・29th

30th・31st

32nd・33rd

34th・35th

March 2018–February 2019

March 2019–February 2020

March 2020–February 2021

March 2021–February 2022

0

70.2%

600,000

175

167

70.2%

800,000

74,150180(Data coverage)（m3）(Basic unit)
190

145

28th・29th

30th・31st

32nd・33rd

34th・35th

March 2018–February 2019

March 2019–February 2020

March 2020–February 2021

March 2021–February 2022

0

0.00

(Data coverage)

70.1％
Green
Finance81,33990,000RetailGreywater Plant (kitchen drainage reuse system)

At Canal City Hakata and Konoha Mall Hashimoto, kitchen
wastewater discharged by restaurants is collected and processed
as reclaimed water. It is then used as tap water in on-site
restrooms.

RetailIntroducing Renewable Energy Equipment

At Konoha Mall Hashimoto, we have installed solar panels on
the rooftops to generate renewable energy and contribute to theformation of a recycling-based society.

IC 70.1%

71,192

184

Total properties
owned
206.3 billion yen

Eligible Green
Projects

33 properties

63.9%

At LOGICITY Hisayama and LOGICITY Minato Kashii, we haveinstalled solar panels on the rooftops to generate renewable energy
and contribute to the formation of a recycling-based society.

607,352

596,007

70.2%

1.50
600,000
in the acquisition of eligible green assets, or the redemption of
1.37
405,366
investment
corporation bonds 1.35
issued and outstanding.
1.00
Eligible Green Projects are specified assets held by
0.91FRC thathave received or are scheduled to receive one of the following0.50
200,000
certifications from third-party certification organizations at the time
0.00
30th・31st
32nd・33rd
28th・29thof0 procurement
date.
March 2019-February
2020
March 2020-February 2021
March 2018-February 2019 or the reporting

400,000(1) DBJ Green Building Certification of 4 or 5 stars or a 3-star evaluation(2) CASBEE certification of S, A, or B+ rank
(3) BELS evaluation of 3, 4, or 5 stars★★★★★
（5-star）★★★
（3-star）（m³/m²）
2.00

Eligible Green
Projects
131.8 billion yen
10 properties

Total assets LTV
41.7%

Maximum green financeprocurement amount
Eligible Green Project liability
54.9 billion yen

After procuring green finance, FRC will announce the total amount of eligible Green Projects, the amount of liabilities related to eligible Green
Projects, and the amount of funds from green finance as of the end of each fiscal period (February and August each year). The investment
corporation will also announce the following indicators related to eligible Green Projects as of the end of February each year.
• The number of properties classified as eligible Green Projects, and the number and type of obtained environmental certifications.
■ Sustainable Finance（Actual）
Category

Solar panels

LOGICITY Hisayama

NEW

LenderBalance (Millions of yen)

Average interest rate

Date

Term

Long-term debt
（green loan）

Mizuho Bank/The Bank of Saga/
The Higo Bank

2,200

0.52100%*1

July 31, 201910 yearsLong-term debt
（donation-type loan）

The Juhachi-Shinwa Bank

1,000

0.59000%

March 31, 2021 10 years

Donate part of the interest as funds for research into thedevelopment of a new COVID vaccine at Nagasaki University

Long-term debt
（green loan）

Sumitomo Mitsui Banking
Corporation

1,600

0.72625%

June 30, 2022

Green loan assessment: Green 1*2

4,900

0.91875%*3

August 31, 2022 10 years

Long-term debt
Development Bank of Japan/The Nishi（sustainability-linked loan） Nippon City Bank/The Bank of Fukuoka

NEW

7 years

Description

Green loan assessment: Green 1*2

Third-party opinion on sustainability-linked loan*4*1 FRC has concluded a swap agreement to practically fix the interest rate on debt. The indicated interest rate reflects the effect of the swap agreement.
*2 FRC was assigned the comprehensive assessment of Green 1, the highest rank, regarding compatibility with the Green Loan Principles from Japan Credit Rating Agency, Ltd.（JCR）.
*3 If the CO2 reduction target is achieved, a preferential interest rate is applied from August 2031 until the repayment date from the interest rate of the initial loan.
*4 A third-party opinion has been obtained from Japan Credit Rating Agency, Ltd.（JCR）.
Glossary

32

70.1%

★★★★
（4-star）• Tenjin North Front Building (common spaces)

LED lighting being used at the Sanix Hakata Building

70.1％

800,000

Data Section

We are focusing on converting each property to LED-based
lighting to reduce energy consumption.
〈Office buildings already converted to LED〉
• Gofukumachi Business Center (e.g., interior shared spaces,
some external areas, exterior wall lighting)• Sanix Hakata Building (interior recessed lighting)• Taihaku Street Business Center (e.g., entrance, interior shared spaces)（m3）

Sustainability

Others (logistics facilities) Introducing Renewable Energy Equipment（Mwh/m²）
190

With the goal of further promoting
180 ESG activities and expanding175
60,000financing options through an enhanced investor base, FRC
established the Green Finance Framework in 2019 in line with the160
30,000160
Green Loan Principles, the Green Bond Guidelines 2017
fromthe Ministry of the Environment, and the Green Bond Principles
30th・31st
32nd・33rd
145
28th・29th0
2018
to 2018-February
ensureimplementationof green
financing,
March 2019-February
2020
Marchincluding
2020-February 2021
March
2019
sustainability-linked loans and green loans . The funds procured
through green finance will be allocated toward the acquisition ofeligible Green Projects, the repayment of borrowings required(acquisition price)

Office Buildings Energy-Saving Initiatives Based on the Promotion of LED Lighting

70.2%

79,474Growth Strategy

Note: Total value for 11 properties, including four retail facilities and seven office buildings. Per unit is calculated by adjusting the total floor area（m2）by the occupancy rate. Data coverage is the area ratio of properties subject todata aggregation as compared to all properties and is calculated at the end of the fiscal period. The figure for Canal City Hakata, Canal City Hakata・B, and Canal City Business Center Building reflects total electricity and water
usage for all buildings, including electricity and water usage by some theater areas not owned by FRC. The figure for Park Place Oita covers only the main building section and excludes the section for independently run stores.

（Mwh）

Who We Are

At Canal City Hakata and Park Place Oita, we are making efforts tocoexist with various natural environments by providing green spacein communal areas, installing aquatic spaces, and creating shaded
spaces. We are creating habitats for wild fauna and flora that
contribute to the preservation of biodiversity, as well as providing
places where employees and visitors can relax and interact withnature.

RetailIC

Green bonds
These are bonds issued by companies and local governments to raise the funds
necessary for Green Projects in Japan and overseas.

Sustainability-linked loan
A sustainability-linked loan is a loan that encourages borrowers to achieve ambitious
sustainability performance targets (SPTs).

Green loan
A loan in which the use of funds is limited to environmentally friendly businesses.
Fukuoka REIT Corporation 2022

33

Environmental Issues
IC

Related Materiality

Investment Corporation (FRC)

AMC Asset Management Company

・Maintenance and enhancement of environmental and construction performance

Initiatives for Facility and Building Management

Initiatives We Support and External Certifications

IC

Individual Facility Initiatives

AMC

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

Renovation of Food Court

The food court at Konoha Mall Hashimoto was renovated toaddress the lack of adequate seating at busy times on Saturdays
and Sundays and to enhance the overall environment. In addition
to increasing the number of seats, we provided seating that meetsdiverse needs such as for families with young children to make thearea easier to use and more comfortable.
Office Buildings Renovation of Common Areas

Kids box seats

Baby food seats

Garden court seatsNEW

BeforeAfter

In September 2022, we announced ourendorsement of the recommendations of
the Task Force on Climate-related Financial
Disclosures (TCFD), which was establishedby the Financial Stability Board (FSB) to
examine climate-related disclosures andhow financial institutions should respond.
At the same time, we became a member of
the TCFD Consortium, a group of companies
in Japan that supports the TCFD.

■ Other Initiatives
We Support■ Participation in GRESB
Assessment 2022

In September 2018, Fukuoka Realty Co.,
Ltd., endorsed the basic philosophiesof the Principles for Responsible
Investment (PRI) and the Principles for
Financial Action for the 21st Century(PFA21) and became a signatory to these
initiatives. Through ESG-conscious asset
management, the company is contributing
still further to the achievement of asustainable society.

The Global Real Estate Sustainability
Benchmark (GRESB) was establishedby a group of European pension
funds and is the benchmark formeasuring sustainability in realestate companies and managing
organizations in 2009. FRC was given“Green Stars,”“4 stars (on a 5-starscale)” and disclosure assessment,“A Level” for the GRESB Real Estate
Assessment conducted in 2022.

IC

Growth Strategy

At the Sanix Hakata Building, we overhauled the common space tomaintain the aesthetic appeal of the building and enhance tenantsatisfaction.

Initiatives for Disaster Risk

■ Endorsement of the Recommendationsof the Task Force on Climate-related
Financial Disclosures (TCFD)

NEW

Who We Are

RetailICCountermeasures to Flooding Risks■ Capacity of Storm Water Storage Facilities of Fukuoka City

■ Replacing and Installing New Water Stops (July 2020)■ Instances of Building Inundation in Fukuoka City

We reviewed the specifications and installation locations of existing water
stops throughout the Canal City Hakata premises and either repaired or
installed equipment as part of our countermeasures to river flooding asa result of typhoons and locally heavy rains, which appear likely to comemore frequently and increase in severity due to global warming.

(Number of buildings)

FY1999No storm water storage facilities

FY2022 128,300 m3

Storm water management capacity increased from 59.1 mm/h
to 79.5 mm/h (city center)

4,000

Instances of inundation
have steadily declined

3,173

3,000

1,721

2,000

From FY2000
and FY2022

Storm water drainage
capacity has increased
significantly
Since the launch of the
project in FY2000

3
June 29, 1999

Maximum hourly
precipitation (mm/h)

79.5

July 19, 2003

July 24, 2009 August 30, 2013

104

116

72.5

Instances ofinundation havesteadily declined

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

Canal City Business Center Building

Fukuoka Prefecture is an area in which there are relatively few earthquakes.
According to the probabilistic earthquake prediction map from the Officeof the Headquarters for Earthquake Research Promotion, Earthquake
and Disaster-Reduction Research Division, Research and Development
Bureau, Ministry of Education, Culture, Sports, Science and Technology, theprobability of an earthquake with an intensity of six or greater over the next 30
years is lower in Fukuoka Prefecture than in the Kanto, Chubu, and Kansai
areas. FRC establishes the insurance value of each property based on its
replacement value, earthquake PML value, and other factors, and maintains
earthquake insurance for all its properties (buildings). In addition, FRC
continues to conduct annual property surveys through external organizations
to estimate earthquake damage to properties based on various scenarios.

34

In addition, the Building Energy-Efficiency Labeling System(BELS) is a system in which third parties evaluate, indicate, andcertify the energy conservation performance of non-residentialbuildings, based on the Evaluation Guidelines for the Building
Energy-Efficiency Labeling System for Non-Residential Buildings(2013). FRC has acquired certification for four of its owned
properties.

Other Disaster Prevention Measures

Canal City Hakata (2022)★★★★★ Canal City Hakata・B (2022)
Properties with
Green Building
Certification

77.8%
on total( basedfloor space )★★★★

Park Place Oita (2022)
Konoha Mall Hashimoto (2020)★★★

Canal City Business Center Building (2022)
Gofukumachi Business Center (2022)
Higashi Hie Business Center (2022)
LOGICITY Minato Kashii (2020)
LOGICITY Hisayama (2020)
Higashi Hie Business Center II (2020)★

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

Data Section

Earthquake Risk Countermeasures

As of the end of August 2022, the ratio of properties within theentire portfolio certified as green buildings was 77.8%.
The DBJ Green Building Certification is a third-party certification
system established by the Development Bank of Japan for realestate properties that feature excellent environmental and social
considerations. FRC has acquired certification for 12 of its owned
properties that exhibit environmental and social awareness(including six properties that were recertified in March 2022).

1,122

1,000

Canal City Hakata (north side of the building)■ Ratio of Properties Certified as Green Buildings

Sustainability

Severe damage from flooding in Fukuoka City on June 29, 1999,
contributed to the formulation of the Storm Water Management Action Plan
and the upgrading of rainwater drainage facilities in the areas where theflooding was particularly harsh. Ongoing efforts to implement antiflooding
measures have greatly improved flood safety within the city limits.

■ Emergency Drills

We have conductedcomprehensive disaster drills at
Canal City Hakata since 2017,with all tenants participating(not held in 2020 or 2021 due
to COVID-19). The drills wereconducted in November 2022.
Glossary

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

Higashi Hie Business Center(acquired in March 2016)

Higashi Hie Business Center II(acquired in September 2015)

LOGICITY Minato Kashii(acquired in May 2015)

LOGICITY Hisayama(acquired in March 2016)

Fukuoka REIT Corporation 2022

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Social Issues
Related Materiality

Investment Corporation (FRC)

AMC Asset Management Company

・Contributions toward boosting the attractiveness and revitalization of Fukuoka and Kyushu
・Co-creation with the local community

Initiatives for Employees and TenantsInitiatives for Local Communities

Initiatives for Employees AMC

Initiatives for Local Communities

As of August 31, 2022

The average number of years of continuous serviceof permanent employees
9 years and 4 months
Full-time personnel
Gender ratio Male: 43.9％ Female: 56.1％

・Employees seconded from sponsors:
・Employees seconded to a sponsor:

38

Number of credentialed personnel

AMC

Annual Events

Cleanup Days

At Canal City Hakata, employees of the asset managementcompany participate in events that involve sprinkling wateron sidewalks to cool them down and promote well-being
as part of efforts to enhance the environment.

Asset management company executives andemployees actively participate in cleanup activities, ofwhich there had been 300 as of September 15, 2022.

Safety Town Council

Various Events Held

Support for Flexible Work Styles

Participation in Community Events

・Child-rearing support (maternity leave, childcare leave system, and nursery
support system)
・Nursing care leave
・Leave for voluntary work
・Employee welfare (401K, cumulative investment system, etc.)
・Encouraging use of paid holidays,etc.

Training for Employees
・Regular lectures by Kyushu Economic Research Center・Compliance training
・Sustainability training
・Nursing care training
・In-house recreation,

etc.

Growth Strategy

・Real estate brokers:
23
・ARES Certified Masters:
18
・Certified Building Administrators:
3
・MBA:
2
・CMA:
2
・First-class registered architect:1・Real estate appraiser:
1・Attorney:
1・Administrative Scrivener:
1・SME management consultant:
1・Licensed Representative of Condominium Management Company: 1

IC

Career Development Support
・Employee satisfaction survey
・Self-assessment system
・Career interview
・Secondment system (dispatching of employees to e.g. sponsor companies)
・Promotion from contract employee to permanent employee status
・Offering of training programs tailored to each management level
・System for supporting acquisition of qualifications (Real Estate Transaction
Agent, ARES Certified Masters, etc.)
・Support for language learning,etc.

Health Management/Improvement of Office Environment

・Initiatives for preventing the spread of COVID-19 (such as the installation of thermographic monitors to measuretemperature at office entrances; installation of anti-splash panels and ozone sterilization equipment; distribution ofmasks, thermometers and antiseptic solution; periodical disinfection of tables, chairs, and door knobs, etc.)
・Mandatory health checkups and comprehensive medical examinations

Installing thermographic monitors

・Health counseling by public health nurses

NEW・Application system to restrict excessive overtime work
・Assistance for use of sports clubs
・COVID-19 vaccination at workplaces
Special leave for illness after COVID-19 vaccination
・Installation of personal booths, meeting booths, plants, etc.
・Installation of personal lockers

At Park Place Oita, we established a “Safety Town
Council” that partners with related institutions andgroups to conduct crime-prevention patrols andproactively strive to prevent youth misconduct.

At Canal City Hakata, we implemented an eco-friendly
water station campaign as part of the Blue Earth Project, anenvironmental awareness-raising activity with a local high school.
With the participation of restaurants in the facility, customers
who brought their own bottles were offered free drinking water.
(Period: September 17 to 25, 2022)

Every year, employees of the asset managementcompany participate in the Hakata Gion Yamakasa
Festival. President Zenji Koike rode on one of the
Yamakasa floats.

Gatherings for Real Estate, Finance, and the Economy AMC

The Kyushu Economic Research Center AMC

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

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

Data Section

Meeting booths

Creating a Comfortable Working Environment AMC
NEW

Tenant Initiatives IC

Other Activities AMC

With a focus on the health and comfort of tenant employees, weare improving the employee lounge environments within retailfacilities and renovating office building common areas. Moreover,
FRC is engaging in a variety of initiatives for tenants as a part ofefforts to promote sustainability.

・IR Kyushu Workshop
The Workshop, which entered its 12th year in 2022, was established in cooperation with the Japan Investor Relations Association. The
Workshop assists in learning about the latest IR trends with IR employees of companies located in Fukuoka and Kyushu and fosters theforming of networks between participating companies. Impacted by COVID-19, the study groups were held in a hybrid style that combined
online tools with face-to-face interaction.

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

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

Sustainability

・Initiatives to prevent infectious diseases such as influenza (implementation of influenza vaccination and full coverageof vaccination costs)

Who We Are

Fukuoka Realty: Numbers of credentialed personnel

41［Male: 18 Female: 23］

IC

Related Materiality

・Creation of pleasant workplaces■ Details of the Study Group
Date

etc.

1st workshop
July 2022

Theme and lecturer“The Future of Information Disclosure and Investor Dialogue: Focus on ESG, Post-COVID, and Human Capital”
Professor Shoichi Tsumuraya, Graduate School of Business Administration, Hitotsubashi University(Visiting researcher, Japan Investor Relations Association)
Note: Information on the lecturers is that for the workshops held by the IR Kyushu Workshop.

Fukuoka REIT Corporation 2022

37

Organizational Issues
IC

Related Materiality

AMC Asset Management Company

Investment Corporation (FRC)・Information disclosure and dialogue with stakeholders
・Compliance/Risk management

Stakeholder Engagement

IC

Corporate Governance

AMC

IC

AMC

FRC engages in proactive dialogue with its various stakeholders aimed at sustainable growth and higher corporate value. At
our relationships of trust with stakeholders, we will leverage this concept in our ESG initiatives.

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

Fukuoka Realty Co., Ltd.
Compliance Department
General Manager

・Organizing community and other events
utilizing the common areas of facilities

Daisuke Yokoyama

・Participation in Hakata Town Planning
Promotion Council

Property
Clients
Tenants

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

・Collaboration in environmental
and social initiatives

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

Property
Management
Firms

Unitholders
andInvestors

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

・ESG training

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

Employees

・Various employee education programs
・Employee satisfaction survey■ Managing Conflicts of Interest■ Decision-Making Process

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

Asset management fees linked to unitholder interests:

Dialogue with Employees

FRC works to disclose information in a timely manner to reflect
the importance of dialogue with its unitholders and investors. To
prevent the spread of COVID-19, FRC undertakes various investor
relation activities mainly in an online format for domestic/overseas
institutional investors and individual investors.

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

etc.

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

Management Fee 1*

based on total assets

Management Fee 2

based on operating revenues

Management Fee 3*

based on distributable profit

Management Fee 4

Acquisition fee

Management Fee 5

Transfer fee

38

https://www.fukuoka-realty.jp/english/idea/operation_policy.html#fiduciaryduty● The Tanizawa Sogo Appraisal

Co., Ltd.

● Daiwa Real Estate Appraisal

Deliberations by the Investment
Management CommitteeCo., Ltd.

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

competition situation● Adequate rent levels,

etc.

［Engineering reports］

Resolution/Decision-making reportby the Board of Directors● Law abidance and earthquake

resistance● Check of soil contamination,

toxic substance and use status● Replacement market price,

expenses for long-term
maintenance and repairs, etc.

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

Oct. 2019–
Sept. 2020

Oct. 2020–
Sept. 2021

Oct. 2021–
Sept. 2022

Compliance training(including e-learning)

6 times

6 times

6 times

Sustainability training

1 time2 times

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

■ Fukuoka Realty Co., Ltd. Directors

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

Supervisory Director

Executive Director

Zenji Koike

Takashi Tanabe

Investment unit holdings: None

Investment unit holdings: Five

Investment unit holdings: None

Yasuo Kawasho
Policies for Customer-Oriented Business Operations● Japan Real Estate InstituteInspection by the ComplianceDepartment General Manager■ Training Records■ Fukuoka REIT Corporation
etc.

［Real estate appraisals］

Data Section

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

Third-party assessment byexternal experts

Fukuoka REIT Corporation Board of
Executive Officers■ The Asset Management Fee Structure

Dialogue with Unitholders and Investors

Proposals by the responsible
department

Sustainability

・Career interview

Risk Management and Compliance Initiatives

Growth Strategy

・Announcing results at the Fukuoka Stock
Exchange

Who We Are

As an asset management company for a listed REIT, we strive to enhance compliance and governanceby building appropriate systems and conducting appropriate business operations in pursuit ofunitholdersʼ best interests.
In particular, we recognize that managing transactions between unitholders and a stakeholder suchas a sponsor of FRC that might involve conflicts of interest in an appropriate manner and preventing
such conflicts of interest are important issues to be addressed in governance.
We have established strict rules for transactions with stakeholders to prevent conflicts of interest
and make decisions based on these rules. In addition, we verify the appropriateness of the decisionmaking process through internal audits and other means.
We also ensure objectivity by receiving advice and evaluations from outside specialists to avoid
taking a self-righteous approach in our decisions.

the same time, FRC recognizes that fulﬁlling its required social responsibilities leads to sustainable business activities. Valuing

Glossary

Supervisory Director

Vice President Boardof Directors(Non-Executive)

Vice President Boardof Directors(Non-Executive)

President and CEO

Vice President Boardof Directors(Non-Executive)

Corporate Auditor(Non-Executive)

Yukitaka Ohara

Hiroshi Shimuta

Zenji Koike

Noboru Hashimoto

Masanori Tasaka

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

Fukuoka REIT Corporation 2022

39