October 15, 2007

FINANCIAL REPORTFOR THEFISCAL PERIOD ENDING AUGUST 2007
(March 1, 2007 – August 31, 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)
Hidekazu Tanaka, Managing Director and CFO
Tel: +81-(0)92-272-3900

Planned submission date for securities report: November 26, 2007
Planned start of dividend payments: November 22, 2007
Figures have been rounded down to eliminate amounts of less than one million yen.

1.

PERFORMANCE FOR THE FISCAL PERIOD ENDING AUGUST 2007

(1) Business Results(Mn yen)

Periodthrough
August 2007
PeriodthroughFebruary
2007

Operating
Revenues

Percentage
ChangeOperating
ProfitPercentage
ChangeOrdinary
ProfitPercentage
ChangeNet Profit

Percentage
Change¥5,2327.4%¥2,362

6.9%¥1,966

5.4%¥1,965

5.9%¥4,8708.3%¥2,21011.4%¥1,8668.7%¥1,856

8.2%

Net Profit per
Unit

Return on
Unitholders’Equity (ROE)¥18,359¥17,422(Yen)

Periodthrough
August 2007
PeriodthroughFebruary
2007<Reference>
Annualized

Ordinary
Profit to Total
Assets<Reference>
Annualized

Ordinary Profit toOperating Revenues

3.2%(6.4%)

1.7%(3.4%)

37.6%

3.3%

(6.6%)

1.7%(3.4%)

38.3%

Notes:
1. The settlement period for the fiscal period ending in August 2007 began on March 1, 2007 and ended on
August 31, 2007 for a length of 184 days and the fiscal period ended in February 2007 began on September 1,
2006 and ended on February 28, 2007 for a total of 181 days.
2. Net profit per unit for the Fourth Fiscal Period is calculated using the weighted average number of investment
units based on the number of days in the respective fiscal periods (107,050 units for the period ending August
2007 and 106,553 units for the period ended February 2007).
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
August 2007

¥18,360

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(%)¥1,965¥0¥–

100.0%

3.2%

1

Period ended
February
2007¥17,341¥1,856

¥0

¥–

99.9%

3.0%

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

(3) Financial Position

Period ending
August 2007
Period ended
February
2007

Total Assets(mn yen)

Unitholders’ Equity(mn yen)

Unitholders’ Equity to
Total Assets(%)

Unitholders’ Equity per
Unit
(yen)

¥117,815¥62,13952.7%¥580,471¥117,259¥62,02252.9%¥579,382

Note: The unitholders’ equity as of August 31, 2007 totaled 62,139,000,000 yen and as of February 28, 2007 totaled
62,022,000,000 yen.

2.

FORECAST OF RESULTS FOR THE FISCAL PERIOD ENDING IN FEBRUARY
2008

Period ending
February
2008
Period ending
August 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)¥5,160¥1,897¥1,895¥17,700¥0¥5,257¥1,843¥1,841¥17,200¥0

Excluding excess ofearnings

Reference: Estimated forecast net profit per unit for the period ending February 2008 is 17,700 yen and is 17,200
yen for the period ending August 2008.
Notes:
1. Forecasts presented above are based on “Assumptions for Operating Forecasts for the Periods ending February
2008 (September 1, 2007 – February 29, 2008) and August 2008 (March 1 – August 31, 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 August 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 eleven properties as of the end of
February 28, 2007 and during this fiscal period added a regional shopping center along a central
thoroughfare of Fukuoka City and sold a community shopping center.
As a result of these deals, 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 including continued increases in exports and capital investments
and solid personal consumption. Additionally, in Kyushu, the core investment area of FRC, the economy
continued a gradual recovery driven by buoyant production centering on the manufacturing industry.
The trend in land prices has also been strong with land prices rising over a greater geography due tovoracious demand for condominiums and offices in the three major metropolitan areas and core regional
cities, along with improvement in corporate performance. In Fukuoka, retail land prices rose 15.2%
year-on-year with some areas of the popular Hakata Ward increasing by more than 30%.
Within this environment, FRC acquired the regional shopping center Hara SATY on March 1, 2007 for 5.41
billion yen. This regional shopping center is located along a central thoroughfare of Fukuoka City andenjoys a strong market volume. On the other hand, the Kominedai Community Mall was sold for 784
million yen on March 9, 2007 due to fears over potential drops in occupancy and NOI returns brought on by
the ending of a leasing agreement with a key tenant and other factors.
An analysis of our present portfolio on an acquisition price basis reveals that 71.9% of our portfolio is in the
Fukuoka metropolitan area and that the FRC portfolio breaks down into 63.2% commercial, 34.9% officeand 1.9% residential.
On the other hand, operations and management are working to raise occupancy levels of our residential
property and are also focused on reinforcing competitiveness and the ability to draw customers at Canal City
Hakata and the other major retail properties. These efforts have raised occupancy of our portfolio at period
end to 99.7%.
(c) Overview of Fund Procurement
This fiscal period saw no significant change to the fund procurement environment despite the trend ofincreasing interest rates in the market. FRC also did not procure any new funds (excluding the refinancing
of borrowings using a commitment line) and so the balance of outstanding borrowings as of the end of the3fiscal period remained the same period-on-period at 44.1 billion yen and a 37.4% LTV as of the end of thisfiscal period.
(d) Overview of Business Performance and Distributions
As a result of these management efforts operating revenues totaled 5,232 million yen and the operating
profit totaled 2,362 million yen with ordinary profit totaling 1,966 million yen and net profit 1,965 million
yen.
Distributions totaled 18,360 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 February 2008(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 high growth potential” and “specialized
areas in 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 population growth potential of any metropolitan area in Japan in the future
making it a market with high growth potential. FRC will also invest in core cities of Kyushu andYamaguchi Prefecture by applying our local perspective closely linked with the community that enables us
to proactively 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 and plans call for broad
investment in all of these types.
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 source 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 February 2008 and August 2008
The following are the operating forecasts for the fiscal periods ending in February 2008 (September 1, 2007
– February 29, 2008) and ending in August 2008 (March 1, 2008 – August 31, 2008). These forecasts are
based on a number of assumptions (not listed in this summary) that are subject to change.
Fiscal Period Ending in February 2008
Operating revenues¥5,160 million
Ordinary profit¥1,897 million
Net profit¥1,895 million
Distributions per unit
¥17,700

4

Distributions in excess of earnings per unit

¥0

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

¥5,257 million¥1,843 million¥1,841 million¥17,200¥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.

Sixth Fiscal Period(as of August 31, 2007)

Variation

Value

Share

%

Period-on-Period%%

Current assets
Cash and deposits

6,561,682

2,369,396(4,192,286)

Cash and deposits in trust

3,493,655

3,979,594

485,939

Operating receivables

248,290

275,251

26,960─3737Consumption taxes receivable

99,443

─(99,443)

Other current assets

229,751

273,658

43,906

Deferred tax assets

Total current assets

10,632,823

9.1

6,897,937

5.9(3,734,885)(35.1)

II. Fixed assets
1. Tangible fixed assets
Buildings

136,683─

(136,683)

Structures

805

─

(805)

641,782─

(641,782)

Buildings in trust

41,797,815

42,225,480

427,665

Structures in trust

397,201

423,282

26,080Machinery and equipment in trust

295,701

289,014(6,686)

Tools and fixtures in trust

291,519

279,354(12,164)

59,463,999

64,120,972

4,656,972

25,397

─

(25,397)

Land

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

103,050,906

87.9

107,338,104

91.1

4,287,198

4.2

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

97,73918,397

Total investments and other assets

3,510,975

3.0

3,529,373

3.0

18,3970.5

106,561,881

90.9

110,867,477

94.1

4,305,595

4.0

Total fixed assets
III. Deferred assets
Establishment expenses

22,381

16,786(5,595)Investment unit issuance expenses

42,06233,650(8,412)

Total deferred assets
Total assets

64,4440.0

50,4360.0(14,007)(21.7)

117,259,149

100.0

117,815,851

100.0

556,701

0.5

6

(Unit: thousand yen)
Fiscal Period
Category

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

Sixth Fiscal Period(as of August 31, 2007)

Share

Liabilities

Variation

Share

Value
%

Value

Period-on-Period%%

I. Current liabilities
Accrued business fees

284,348

295,862

11,514

Short-term debt
Long-term debt to be repaid within
1 year
Accounts payable

8,500,000

8,500,000

──

6,600,000

6,600,000

55,34033,529(21,810)

Expenses payable

285,860

310,417

24,557

Income taxes payable

1,210

591

(618)

Consumption taxes payable─

101,182

101,182

Rents received in advance

589,863

629,392

39,528Deposits held

500,819705,736

Total current liabilities

8.7

10,217,442

17,176,712

204,916
14.6

6,959,270

68.1

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

29,000,000(6,600,000)

98,595─

(98,595)

9,222,293

9,409,271

186,977

97,94690,405(7,541)45,018,836

38.4

38,499,677

32.7(6,519,159)(14.5)

55,236,278

47.1

55,676,389

47.3

440,1110.8

Unitholders’ equity
I. Unitholders’ capital
1. Total investment

60,264,380

60,264,380

1,856,438

1,965,487

109,049

Total surplus

1,856,438

1,965,487

109,049

Total unitholders’ capital

62,120,818

2, Surplus
Unappropriated profit

53.0

62,229,867

52.8

109,049

0.2

II. Valuation and Conversions
1. Profit and loss on deferred hedge(97,946)(90,405)

Total valuation and conversions(97,946)(0.1)(90,405)

(0.1)

7,541

─

Total unitholders’ equity

62,022,871

52.9

62,139,462

52.7

116,590

0.2

Total liabilities and unitholders’ equity

117,259,149

100.0

117,815,851

100.0

556,701

0.5

7

7,541

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

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

Sixth Fiscal Period(as of August 31, 2007)

Percentage

Value

Percentage

4,870,051

100.0

5,232,084

Real estate leasing revenues

4,544,795

4,874,882

Other real estate leasing revenues
Capital gains from real estate
Anonymous association dividend

189,256

216,627
4,574
136,000

II. Operating expenses

136,000
2,659,590

54.6

2,869,239

Real estate leasing expenses

2,251,250

2,437,428

Asset management fees

297,694

325,517

Custodian fees

9,041

10,344General administration fees

30,43133,300

Director compensation

9,600

9,600

Other operating expenses

61,57253,047

Operating profit

Value

Period-on-Period%%
I. Operating revenues

Variation

100.0%
362,032

7.4

─
54.8

209,6487.9

2,210,461

45.4

2,362,845

45.2

152,383

6.9

III. Non-operating profit (loss)

12,247

0.2

5,598

0.1

(6,649)(54.3)

Interest income

3,728

5,394

Other non-operating revenues

8,519

203
7.7

45,027

12.6

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

356,6137.3

401,641

295,397

333,144

5,595

5,595

8,412

8,412

44,22552,231

2,982

2,257

Ordinary profit

1,866,095

38.3

1,966,802

37.6

100,706

5.4

Net profit before taxes

1,866,095

38.3

1,966,802

37.6

100,706

5.4

Income and other taxes

9,654

Deferred income taxes

19

0.2

(37)

0.0

1,856,421

38.1

1,965,403

37.6

Net profit
Carried forward profit (loss)
Unappropriated profit

1,436(8,275)(85.5)
108,981684

67

1,856,438

1,965,487

109,0498

5.9

(3) Cash Distribution Statement
Category

Fifth Fiscal Period

Sixth Fiscal Period

September 1, 2006 – February 28, 2007

March 1, 2007 – August 31, 2007

I. Unappropriated profit (thousand yen)

¥1,856,438¥1,965,487

II. Amount of distributions (thousand yen)

¥1,856,354¥1,965,438(Amount of distribution per investmentunit) (yen)III. Profit carried forward to next period(thousand yen)(¥17,341)(¥18,360)

¥84

¥49

Note) Figures other than the distributions per investment unit have numbers below a thousand yen rounded down.
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 distribute ¥1,856,354

policy, FRC decided to distribute ¥1,965,438

thousand yen, which is almost the entire

thousand yen, 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

Fifth Fiscal Period

Sixth Fiscal Period

September 1, 2006 – February 28, 2007

March 1, 2007 – August 31, 2007

CategoryI.

Cash flows from operating activities
Net profit before taxes

1,866,095

1,966,802

Depreciation and amortization

688,585

741,902

5,595

5,595

Amortization of establishment expenses
Investment unit issuance depreciation

8,412

8,412

Interest income(3,728)（5,394）

Interest expenses

295,397

333,144

─

(4,574)

Increase/Decrease in operating receivables

85,518(26,960)

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

99,443

─

101,182

9,821

7,769

Increase/Decrease in accounts payable

8,966(19,157)

Increase/Decrease in expenses payable

13,783

14,747

Capital gains from real estate

Increase/Decrease in consumption taxes payable
Increase/Decrease in accrued business fees

Increase/Decrease in rent received in advance

54,60939,528(230,248)

211,278

34,033(43,339)

Increase/Decrease in long-term pre-paid expenses

21,909(18,397)

Other(21,540)(7,947)

2,826,966

3,404,034

Increase/Decrease in deposits held
Increase/Decrease in pre-paid expenses

SubtotalInterest received

3,728

5,394

(273,950)(323,334)(9,977)(1,727)2,546,767

3,084,367

─783,223

Payments for return of key money and security deposits(10,105,000)(5,796,651)

Payments for key money and security deposits on deposit(4,533)(98,595)

Proceeds from key money and security deposits in trust

632,917353,104

Payments for key money and security deposits in trust(111,214)(172,487)

Payments for issuance of investment units(50,475)─

(488,662)

─(10,126,968)(4,931,407)

Proceeds from short-term debt

8,500,000

4,000,000

Repayments of short-term debt

(8,100,000)(4,000,000)

Proceeds from long-term debt

1,000,000

─Proceeds from investment unit issuance

11,096,580

─

Dividends paid

(1,715,020)(1,859,306)

Interest paid
Income taxes paid
Net cash provided by operating activities
II. Cash flows from investing activities
Proceeds from tangible assets in trust

Payments for depositing deposits and deposits in trustwith use limitations
Net cash used in investing activities
III. Cash flows from financing activities

Net cash provided by financing activities

10,781,559(1,859,306)

IV Increase/Decrease in cash and cash equivalents

3,201,358(3,706,347)

V. Cash and cash equivalents at start of period

6,365,317

9,566,675

VI. Cash and cash equivalents at end of period

9,566,675

5,860,328

10