April 19, 2006

FINANCIAL REPORTFOR THEFISCAL PERIOD ENDING FEBRUARY 2007
(September 1, 2006 – February 28, 2007)
Fukuoka REIT Corporation is listed on the Tokyo Stock Exchange and Fukuoka Stock Exchange with the securities
code number 8968.
URL: http://www.fukuoka-reit.jp
Inquiries:

Fukuoka Realty Co., Ltd. (Asset Manager)
Hisashi Okita, Senior Managing Director and CFO
Tel: +81-(0)92-272-3900

Board of directors meeting for approving financial results: April 19, 2007
Planned start of dividend payments: May 24, 2007
Figures have been rounded down to eliminate amounts of less than one million yen.

1.

PERFORMANCE FOR THE FISCAL PERIOD ENDING FEBRUARY 2007

(1) Business Results(Mn yen)

PeriodthroughFebruary
2007
Periodthrough
August 2006

Operating
Revenues

Percentage
ChangeOperating
ProfitPercentage
ChangeOrdinary
ProfitPercentage
ChangeNet Profit

Percentage
Change¥4,8708.3%¥2,21011.4%¥1,8668.7%¥1,856

8.2%¥4,49611.0%¥1,983

13.3%¥1,7161.0%¥1,715

1.1%

Net Profit per
Unit

Return on
Unitholders’Equity (ROE)¥17,422¥18,631(Yen)

PeriodthroughFebruary
2007
Periodthrough
August 2006

<Reference>
Annualized

Ordinary
Profit to Total
Assets<Reference>
Annualized

Ordinary Profit toOperating Revenues

3.3%(6.6%)

1.7%(3.4%)

38.3%

3.4%

(6.7%)

1.7%(3.4%)

38.1%

Notes:
1. The settlement period for the fiscal period ending in February 2007 began on September 1, 2006 and ended on
February 28, 2009 for a length of 181 days and the fiscal period ended in August 2006 began on March 1, 2006
and ended on August 31, 2006 for a total of 184 days.
2. Net profit per unit for the Third Fiscal Period is calculated using the weighted average number of investment
units based on the number of days in the respective fiscal periods (106,553 units for the period ending
February 2007 and 92,050 units for the period ended August 2006).
3. Changes in accounting policies: No
4.
Percentage changes for operating revenues, operating profit, ordinary profit and net profit represent thepercentage of increase (decrease) compared to the previous fiscal period.
5. The net profit rate for net assets and ordinary profit rate to total capital respectively use the average value ofthe net assets and total capital for the beginning and end of the fiscal period.

(2) Distributions
Distribution
per Unit(yen)
Excludingexcess of
earnings

Period ending
February¥17,341

Total
Distributions(mn yen)Distribution in
Excess ofEarnings per
Unit
(Yen)

Total
Distributions
in Excess of
Earnings(mn yen)Payout Ratio(%)

Distribution Ratio to
Unitholders’ Equity(%)¥1,856

¥0

¥–

99.9%

3.0%

1

2007
Period ended
August 2006

¥18,631¥1,715¥0¥–

100.0%

3.4%

Note:
The payout ratio is rounded down to the first decimal place.

(3) Financial Position

Period ending
February
2007
Period ended
August 2006

Total Assets(mn yen)

Unitholders’ Equity(mn yen)

Unitholders’ Equity to
Total Assets(%)

Unitholders’ Equity per
Unit
(yen)

¥117,259¥62,02252.9%¥579,382¥104,183¥50,75448.7%¥551,377

Note: The number of investment units outstanding as of February 28, 2007 totaled 107,050 units and as of August
31, 2006 totaled 92,050 units.

2.

FORECAST OF RESULTS FOR THE FISCAL PERIOD ENDING IN AUGUST 2007

Period ending
August 2007
Period ending
February
2008

Distribution per
Unit
(yen)

Distribution in
Excess of Earnings
per Unit(yen)

Operating Revenues(mn yen)Ordinary Profit(mn yen)

Net Profit(mn yen)¥5,188¥1,886¥1,884¥17,600¥0¥5,124¥1,822¥1,820¥17,000¥0

Excluding excess ofearnings

Reference: Estimated forecast net profit per unit for the period ending August 2007 is 17,600 yen and is 17,000 yen
for the period ending February 2008.
Notes:
1. The Fourth Fiscal Period began on March 1, 2006 and ends on August 31, 2006.
2. Forecasts presented above are based on “Assumptions for Operating Forecasts for the Periods ending August
2007 (March 1 – August 31, 2007) and February 2008 (September 1 – February 29, 2008)” identified in a
separate reference. Forecasts for operating revenues, ordinary profit, net profit, distribution per unit anddistribution in excess of earnings per unit may differ from actual results due to changes in conditions.
Accordingly, Fukuoka REIT Corporation does not guarantee any amount.

2

3. Management Conditions(1) Overview of the Fiscal Period Ending February 2007(a) Key Milestones for the Investment Corporation
Fukuoka REIT Corporation (hereafter, “FRC”) was established on July 2, 2004 based on the Investment
Trusts and Investment Corporations Law and listed on the Tokyo Stock Exchange and Fukuoka Stock
Exchange (securities code: 8968) on June 21, 2005. FRC is the first real estate investment trust in Japan
specializing on a specific region (hereafter, “regional J-REIT”) with Kyushu as a whole (the focus being on
Fukuoka and including Okinawa Prefecture) and Yamaguchi Prefecture as the investment target areas. This
enables Fukuoka REIT to exploit the traditional characteristic of the real estate industry of having strong
local characteristics.
FRC acquired four properties and commenced actual management on November 9, 2004. One of the four
properties acquired was Canal City Hakata [Canal City Hakata here refers to the retail property portion of
the entire Canal City Hakata (the entire Canal City Hakata here refers to the retail complex where stores,
major stores, cinema complex, theater, amusement facilities, hotels, offices, etc. were integrally developed;
the same hereafter) excluding some stores, some hotels, theater, offices and some of the common-use
portion; the same hereafter]. Since this start, FRC expanded to include eight properties as of the end of
August 31, 2006 and during this fiscal period added an additional three properties consisting of two
community shopping centers along central thoroughfares and a tower rental condominium splendidly locatedin a very convenient area next to the CBD and commercial district of Fukuoka City known as Tenjin.
As a result of these acquisitions, FRC owns and manages eleven properties as of the end of this fiscal period(excluding silent partnership interests) and these include six retail properties, four office buildings and one
residential property.
(b) Investment Environment and Management Performance
The domestic Japanese economy expanded gradually during this fiscal period as a result of continued
increases in domestic and overseas demand resulting from continued increases in exports and capital
investment and the strong floor in personal consumption.
The trend in land prices has also been strong with land prices not only rising in the three major metropolitan
areas but also in central regional cities according to the disclosure of 2007 land prices. Commercial land inFukuoka City, the nucleus of our investment targets rose 12.9% year-on-year and as much as 24.8% in the
Hakata Ward, where office demand is growing.
Within this environment, FRC acquired its first dedicated residential property, the Amex Akasakamon Tower,
on September 1, 2006 for a price of 2,060 million yen. This was followed by an acquisition on September
28, 2006 of Square Mall Kagoshima Usaki for 5,300 million yen. Square Mall is a brand new community
shopping center along a central thoroughfare in Kagoshima City that boasts top ranked category killers ineach industry. Later again on November 30, 2006 FRC acquired Kumamoto Intercommunity Shopping
Center for 2,400 million yen. This brand new community shopping center is located on the Eastern Bypassof National Highway 57, a central thoroughfare of Kumamoto City.
An analysis of our present portfolio on an acquisition price basis reveals that 69.8% of our portfolio is in the
Fukuoka metropolitan area and that the FRC portfolio breaks down into 61.5% commercial, 36.5% officeand 2.0% residential.
On the other hand, operations and management continue to focus on reinforcing competitiveness andcustomer attracting ability at Canal City Hakata and the other major retail properties. This combined withfurther efforts to raise occupancy at our office buildings raised the occupancy at the end of this fiscal period
to 99.4%. In the case of Amex Akasakamon Tower, the occupancy prior to acquisition by FRC was 51.8%(as of the end of June 2006) but the occupancy steadily climbed after acquisition to 81.6% as of the end of
this fiscal period.

3

(c) Overview of Fund Procurement
This fiscal period saw the Bank of Japan raised interest rates in February 2007 for the second time but thishad no dramatic impact on the asset procurement environment and FRC newly procured 8.5 billion yen in
short-term borrowings and 1 billion yen in long-term borrowings with the purpose of acquiring new
qualified assets and refinancing existing properties. As a result, the balance of borrowings as of the end of
this fiscal period is 44.1 billion yen and the LTV as of the end of this fiscal period is 37.6%.
In addition, 15,000 new investment units were issued on September 7, 2006 to be allotted to the acquisitionof qualified assets and the total amount procured through this measure was 11 billion yen.
(d) Overview of Business Performance and Distributions
As a result of these management efforts operating revenues totaled 4,870 million yen and the operating
profit totaled 2,210 million yen with ordinary profit totaling 1,866 million yen and net profit 1,856 million
yen.
Distributions totaled 17,341 yen per investment unit. This was because almost all unappropriated profits asof the end of this fiscal period were distributed and this enabled application of the tax exception that allows
for unappropriated profit distributions to be recorded as expenses (Special Taxation measures Law Article
67-15).
(2) Forecasts for the Fiscal Period Ending in August 2007(a) Future Management Policy
FRC will continue to invest based on the basic policy defined in the Articles of Incorporation and the basic
thinking of making domains that coincide with both “markets with growth potential” and “specialized areasin which competitive advantages can be demonstrated” as investment targets.
FRC has set the percentage of investment at 60~90% for the Fukuoka metropolitan area, and Fukuoka isrecognized to have the greatest growth potential of any metropolitan area in Japan in the future making it amarket with high growth potential. FRC will also invest in core cities of Kyushu and Yamaguchi
Prefecture by applying our local perspective closely linked with the community that enables us toproactively invest in communities and properties where investment merits can be secured.
By investment type, FRC has set the following targets for its portfolio: 60-80% retail properties, 20-40%
office buildings and 0-20% other properties. FRC will continue to expand our assets under management
centering on retail properties. Investments in the retail property category can be further broken down into
the relatively large urban and regional types and also the community type.
Meanwhile, concerning fund procurement, FRC will further heighten the soundness of our finances bybuilding strong relationships with financial institutions to ensure stable fund procurement and to reduce theimpact of changes to the financial environment in the future while realizing inexpensive fund procurement
costs.
The recovery trend of land prices is forecast to become increasingly pronounced and the property acquisitioncompetition is expected to intensify further in Fukuoka and other major regional cities. A task for FRC isto further expand growth in the portfolio. To accomplish this task, FRC will eliminate competition as muchas possible by adequately capitalizing on the strengths of FRC, including the capacity to gather information
regarding Fukuoka and Kyushu, local knowledge and perspectives concerning properties and by utilizing
our network rooted in the local business world and government. We will proceed to acquire high-quality
properties that you our investors can continue to invest in with assurance.
(b) Forecast of Financial Results for the Fiscal Period Ending in August 2007 and February 2008
The following are the operating forecasts for the fiscal periods ending in August 2007 (March 1, 2007 ~August 31, 2007) and ending in February 2008 (September 1, 2007 – February 29, 2008). These forecasts
are based on a number of assumptions (not listed in this summary) that are subject to change.
4

Fiscal Period Ending in August 2007
Operating revenues
Ordinary profit
Net profit
Distributions per unit
Distributions in excess of earnings per unit

¥5,188 million¥1,886 million¥1,884 million¥17,600¥0

Fiscal Period Ending in September 2008
Operating revenues
Ordinary profit
Net profit
Distributions per unit
Distributions in excess of earnings per unit

¥5,124 million¥1,822 million¥1,820 million¥17,000¥0Note) Forecasts presented above are based on certain assumptions, and actual operating revenues, ordinary profit, net profit,
distribution per unit and distribution in excess of earnings per unit may differ due to changes in conditions. Accordingly, FRC
does not guarantee any amount.

54. Financial Statements, etc.
(1) Balance Sheets(Unit: thousand yen)
Fiscal Period
Category

Fifth Fiscal Period(as of February 28, 2007)
Value

Value

Share

AssetsI.

Fourth Fiscal Period(as of August 31, 2006)

Variation

Value

Share

%

Period-on-Period%%

Current assets
Cash and deposits

6,561,682

2,935,049

3,626,632

Cash and deposits in trust

3,493,655

3,430,267

63,387

Operating receivables

248,290

333,808(85,518)

─

19

(19)

Consumption taxes receivable

99,44389,196

10,246

Other current assets

229,751

252,634(22,882)

Deferred tax assets

Total current assets

10,632,823

9.1

7,040,976

6.8

3,591,846

51.0

II. Fixed assets
1. Tangible fixed assets
Buildings

136,683

140,384(3,701)

Structures

805

843

(38)

641,782

641,782─

Buildings in trust

41,797,815

37,987,229

3,810,585

Structures in trust

397,201

209,848

187,353

Machinery and equipment in trust

295,701

244,50351,197

Tools and fixtures in trust

291,519

214,652

76,866

59,463,999

54,117,497

5,346,502

25,39724,457939

Land

Land in trust
Temporary account ofconstruction in trust
Total tangible fixed assets

103,050,906

87.9

93,581,200

89.8

9,469,705

10.1

2. Investments and other assets
Investment securities

3,421,633

3,421,633

─

Guarantees and deposits

10,00010,000─Long-term pre-paid expenses

79,342

101,252(21,909)

Total investments and other assets

3,510,975

3.0

3,532,885

3.4(21,909)(0.6)

106,561,881

90.9

97,114,086

93.2

9,447,795

9.7

Total fixed assets
III. Deferred assets
Establishment expenses

22,381

27,977(5,595)Investment unit issuance expenses

42,062

─

42,062

Total deferred assets
Total assets

64,4440.0

27,9770.0

36,467130.3

117,259,149

100.0

104,183,040

100.0

13,076,109

12.6

6

(Unit: thousand yen)
Fiscal Period
Category

Fifth Fiscal Period(as of February 28, 2007)
Value

Fourth Fiscal Period(as of August 31, 2006)

Share

Liabilities

Variation

Share

Value
%

Value
%

Period-on-Period%

I. Current liabilities
Accrued business fees

284,348

232,183

52,164

Short-term debt

8,500,000

8,100,000

400,000

Accounts payable

55,34046,319

9,021

Expenses payable

285,860

250,629

35,230

Income taxes payable

1,210

975

235

Rents received in advance

589,863535,254

54,609Deposits held

500,819

736,848

Total current liabilities

10,217,442

8.7

9,902,209(236,028)
9.5

315,232

3.2

II. Fixed liabilities
Long-term debt
Key money and security deposits
on deposit
Key money and security deposits
in trust
Derivative losses
Total fixed liabilities
Total liabilities

35,600,000

34,600,000

1,000,000

98,595

103,128(4,533)9,222,293

8,694,810

527,483

97,946

128,594(30,647)

45,018,836

38.4

43,526,532

41.8

1,492,303

3.4

55,236,278

47.1

53,428,742

51.3

1,807,536

3.4

60,264,380

51.4

49,167,800

47.2

11,096,580

22.6

Unitholders’ equity
I. Unitholders’ capital
1. Total investment
2, Surplus
Unappropriated profit

1,856,438

1,715,092

141,346

Total surplus

1,856,438

1.6

1,715,092

1.6

141,346

8.2

Total unitholders’ capital

62,120,818

53.0

50,882,892

48.8

11,237,926

22.1

II. Valuation and Conversions
1. Profit and loss on deferred hedge(97,946)(128,594)

Total valuation and conversions(97,946)(0.1)(128,594)(0.1)

30,647

─Total unitholders’ equity

62,022,871

52.9

50,754,298

48.7

11,268,573

22.2

Total liabilities and unitholders’ equity

117,259,149

100.0

104,183,040

100.0

13,076,109

12.6

7

30,647

(2) Profit and Loss Statement(Unit: thousand yen)
Fiscal Period
Category

Fifth Fiscal Period(as of February 28, 2007)
Value

Fourth Fiscal Period(as of August 31, 2006)

Percentage

Value

Percentage

4,870,051

100.0

Value

Period-on-Period%%
I. Operating revenues

Variation

4,496,048

100.0%
374,003

Real estate leasing revenues

4,544,795

4,231,464

313,331

Other real estate leasing revenues

189,256

128,583

60,672

Anonymous association dividend

136,000

136,000

─

II. Operating expenses

2,659,590

54.6

2,512,620

55.9

146,969

Real estate leasing expenses

2,251,250

2,123,240

128,010

Asset management fees

297,694273,293

24,401

Custodian fees

9,041

8,344

696

General administration fees

30,43132,192(1,761)

Director compensation

9,600

9,600

─

Other operating expenses

61,572

65,948(4,375)

Operating profit

8.3

5.8

2,210,461

45.4

1,983,427

44.1

227,033

11.4

III. Non-operating profit (loss)

12,247

0.2

368

0.0

11,879─Interest income

3,728

368

3,359

Other non-operating revenues

8,519

−

8,519

IV. Non-operating expenses
Interest expenses
Amortization of establishment
expenses
Expenses related to public offeringof investment units
Expenses related to financing
Other non-operating expenses

356,613

7.3

267,693

6.0

88,919295,397

171,148

124,249

5,595

5,595

0

8,412

─

8,412

44,22589,099(44,874)

2,982

1,850

1,132

33.2

Ordinary profit

1,866,095

38.3

1,716,102

38.1

149,993

8.7

Net profit before taxes

1,866,095

38.3

1,716,102

38.1

149,993

8.7

Income and other taxes

9,654

0.2

1,048

0.0

8,606

─

Deferred income taxes

19

0.0

(0)

0.0

19

─

1,856,421

38.1

1,715,054

38.1

141,367

8.2

Net profit
Carried forward profit (loss)
Unappropriated profit

16

37

(20)

1,856,438

1,715,092

141,3468

(3) Cash Distribution Statement
Category

Fifth Fiscal Period

Fourth Fiscal Period

September 1, 2006 – February 28, 2007

September 1, 2005 – August 31, 2006

I. Unappropriated profit¥1,856,438,499¥1,715,092,253

II. Amount of distributions¥1,856,354,050¥1,715,075,600(Amount of distribution per investment
unit)（¥17,341）（¥18,632）¥84,449¥16,653

III. Profit carried forward to next period
Method of calculating amount of distributions

Article 38(1)(i) of FRC’s Articles of

Article 38(1)(i) of FRC’s Articles ofIncorporation stipulates the policy that

Incorporation stipulates the policy that“distributions shall surpass an amount equal“distributions shall surpass an amount equal

to 90% of the amount of FRC’s profit

to 90% of the amount of FRC’s profit

available for dividends that is regulated inavailable for dividends that is regulated in

Article 67-15 of the Special Taxation

Article 67-15 of the Special Taxation

Measures Law.” In accordance with thisMeasures Law.” In accordance with thispolicy, FRC decided to distributepolicy, FRC decided to distribute\1,856,354,050, which is almost the entire\1,715,075,600, which is almost the entire

amount of unappropriated profit, as profit

amount of unappropriated profit, as profit

distributions. Further, distributions of cash

distributions. Further, distributions of cash

in excess of profit as designated in Article

in excess of profit as designated in Article

38(2) of the Articles of Incorporation will not

38(2) of the Articles of Incorporation will not

be made.

be made.

9

(4) Cash Flow Statement(Unit: thousand yen)
Fiscal Period
Category
I.

Fifth Fiscal Period
September 1, 2006 – February 28,
2007

Fourth Fiscal Period
September 1, 2005 – August 31, 2006

Cash flows from operating activities
Net profit before taxes

1,866,095

1,716,102

Depreciation and amortization

688,585

619,112

Amortization of establishment expenses

5,595

5,595

8,412

−

Interest income(3,728)(368)

Interest expenses

295,397

171,148

Increase/Decrease in operating receivables

85,518(201,166)

Increase/Decrease in consumption taxes receivable(10,246)(89,196)

Increase/Decrease in accrued business fees

9,821

(86,287)

Increase/Decrease in accounts payable

8,966

25,103

Increase/Decrease in expenses payable

13,783

12,673

Increase/Decrease in rent received in advance

54,60954,165(230,248)

251,306

Increase/Decrease in pre-paid expenses

34,033(53,923)

Increase/Decrease in long-term pre-paid expenses

21,909(7,808)Other(21,540)(7,898)2,826,966

2,408,557

3,728

368

(273,950)(161,247)

Increase/Decrease in deposits held

SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities(9,977)(1,109)2,546,767

2,246,568(10,105,000)(7,380,419)−(114,960)(4,533)(4,533)632,917399,921(111,214)(75,223)

II. Cash flows from investing activities
Payments for purchases of tangible fixed assets in trust
Payments for down payment
Payments for key money and security deposits on deposit
Proceeds from key money and security deposits on
deposit
Payments for key money and security deposits in trust
Payments for purchases of investment securities−(20,212)(50,475)−(488,662)−(10,126,968)(7,195,428)

Proceeds from short-term debt

8,500,000

20,700,000

Repayments of short-term debt

(8,100,000)(27,700,000)

Proceeds from long-term debt

1,000,000

16,000,000

Proceeds from investment unit issuance

11,096,580−

Dividends paid

(1,715,020)(1,696,208)

Payments for issuance of investment units
Payments for depositing deposits and deposits in trustwith use limitations
Net cash used in investing activities
・ Cash flows from financing activities

Net cash provided by financing activities

10,781,559

7,303,791

・ Increase/Decrease in cash and cash equivalents

3,201,358

2,354,931

・ Cash and cash equivalents at start of period

6,365,317

4,010,386

・ Cash and cash equivalents at end of period

9,566,675

6,365,317

10