Fukuoka REIT Corporation(8968)
http://www.fukuoka-reit.jp

Overview of 6th Fiscal Period Performance

Fukuoka Realty Co., Ltd.

(March 1, 2007 – August 31, 2007)

1

REIT Overview

ProfileProfileInvestment
Investment Unit
Unit Price
Price【Name】

Fukuoka REIT Corporation【Asset Manager】

Fukuoka Realty【Sponsors】

Fukuoka Jisho, Kyushu Electric Power, The
Bank of Fukuoka, The Nishi-Nippon City
Bank, Nishi-Nippon Railroad, Saibu Gas,
Kyudenko, Kyushu Railway Company,
Royal Holdings【Listed date】

June 21, 2005 (TSE and FSE)

【Current Price】【Outstanding Units】【Market Cap】
【High (since IPO)】【Low (since IPO)】

960,000 yen (as of August 31, 2007)
107,050102.768 billion yen (as of August 31, 2007)
1,300,000 yen (February 26th, 2007)
763,000 yen (September 15, 2005)

Portfolio
Portfolio Summary
Summary【Asset Types】

Financial
Financial Highlights
Highlights【Total Assets】

117.8 billion yen (as of August 31, 2007)【Total Debt】

44.1 billion yen (as of August 31, 2007)【Debt Rating】

S&P A- (stable)【LTV (Interest-bearing liabilities/total assets)】

37.4%

Retail 62.9%, Office 34.2% andResidential 2.9%
【Asset Location】
Fukuoka metropolitan area 72.4%,
other Kyushu 27.6%【Total Leasable Area at End of Period】 328,071.73m2【Occupancy at End of Period 】 99.7%
Note: The values are arrived at using the assets under management and assets
scheduled to be acquired (contract base) as of August 31, 2007. The
planned acquisition price is used for City House Keyaki Dori and thepreferred silent partnership interest is not included. The figures for the
total leasable area and occupancy are the figures for the assets undermanagement as of August 31, 2007.

Dividend
Dividend Information
Information【Previous Fiscal Period (6th) End】
【Cash Dividend for 6th Fiscal Period (actual)】【Yield】【Spread vs. JGB】

August 31, 2007 (semi-annual periods ending every February and August)
18,360 yen per unit
3.79% (Annualized dividend for the 6th period/the investment unit price as of August 31, 2007)
2.18% (Comparison with 10-year JGB as of August 31, 2007)2

Table of Contents

1.

Financial Statement

42.

Portfolio

133.

Strategy24

4.

Compliance29

5.

Appendix

33

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

Financial Statement(Presentation of Accounts for Sixth Fiscal Period)

Financial Statement

Settlement Highlights of the 6th Fiscal Period (ended August 2007)
Primary Factors for Period-on-Period
Variation in Net Profit Compared

Category

6th Fiscal Period

5th Fiscal Period

March 1, 2007 August 31, 2007

September 1, 2006 February 28, 2007

Variation

Factors for increase

Operating revenues

5,232 mm yen

4,870 mm yen

362 mm yen

Operating profit

2,362 mm yen

2,210 mm yen

152 mm yen

Ordinary profit

1,966 mm yen

1,866 mm yen

100 mm yen

Net profit

1,965 mm yen

1,856 mm yen

109 mm yen

Distribution per unit

18,360 yen

17,341 yen

Number of investment
units (as of end of period)

107,050

107,050

Length184 days

181 days

11 properties

11 properties

327 tenants

314 tenants

Properties (period end)
(note)

Tenants (period end)
Leaseable floor space(period end)

Occupancy (average)
Occupancy (period end)

328,071.73m2

304,024.87m2

99.7 ％
99.7 ％

99.2 ％
99.4 ％

1,019 yen●Acquisition of Hara SATY during the 6th fiscal period
178 million yen
Rent income
212 million yen
Cost- 35 million yen●Full-period operation of 2 new properties acquired during
the 5th fiscal period (Square Mall Kagoshima Usuki andKumamoto Intercommunity SC) 49 million yen
Rent income
86 million yen
Cost- 37 million yen

Factors for decrease●Payment start for property and city planning taxes
29 million yen
Amex Akasakamon Tower
4 million yen
Taihaku Street Business Center 25 million yen●Financing costs
45 million yen
Average borrowings balance during the fiscal period(increased through the acquisition of Hara SATY)[5th fiscal period]
39,976 million yen[6th fiscal period]
44,100 million yen

Distribution per unit
●Park Place Oita

●Actual(surpassing forecast)

18,360 yen●Forecast at period start
17,600 yen

A ripple effect to a whole building by
the increase of 3rd floor in April 2005,
and SevenEleven in April 2007.
●Canal City Hakata
Succeeded in increase of income byexchanging tenants (ZARA, RAMEN
Stadium)(Note) Properties planned for acquisition and the silent partnership interest have been excluded.

5

Financial Statement

Profit and Loss Statement for the 6th Fiscal Period (ended August 2007)

Primary Factors for Period-on-Period Variation(unit: thousand yen)

Category
I. Operating revenues

6th Fiscal Period

5th Fiscal Period

March 1, 2007 – August 31, 2007

September 1, 2006 – February 28, 2007

Percentage
(%)

Value

5,232,084

100.0

Percentage
(%)

Value

4,870,051

Real estate leasing revenues
Other revenues from realestate leasing
Gains from sale of real estate

4,874,882

4,544,795

216,627

189,256

4,574-

Silent partnership distribution

136,000

136,000

II. Operating expenses
Real estate leasing expenses

2,869,239

54.8

2,659,590

2,437,428

2,251,250

Asset management fees

325,517297,694

Asset custodian fee

10,344

9,041

General administration fees

33,30030,431

Director compensation

9,600

9,600

Other operating expenses
III. Operating profit

53,047

Variation
Period on Period
Variation (%)

Value

100.0

362,0327.4

54.6

209,648

7.9

61,57245.2

2,210,461

45.4

152,383

6.9

Non-operating revenues

5,598

0.1

12,2470.2(6,649)(54.3)

Interest received

5,394

7.3

45,027

12.6

Other non-operating revenues

3,728

203
401,6418,519
7.7

356,613Interest paid
Amortization of establishment
cost
Investment unit issuance fee
write off
Expenses related to financing

333,144295,397

5,595

5,595

8,412

8,412

52,231

44,225

Other non-operating expenses

2,257

2,982

(1) Cost of Hara SATY acquired during the 6th fiscal period
35 million yen(2) Cost of properties acquired during the 5th fiscal period● Square Mall Kagoshima Usuki
22 million yen● Kumamoto Intercommunity SC
15 million yen(3) Payment start for property and city planning taxes● Taihaku Street Business Center
25 million yen● Amex Akasakamon Tower
4 million yen(4) Sales promotion expenses at Park Place Oita
22 million yen(5) Increases in asset management fees
● Asset management fees 1(linked with asset size under management) 18 million yen● Asset management fees 2(linked with revenues)
7 million yen● Asset management fees 3(linked with profits)
2 million yen

Increase
Increase in
in non-operating
non-operating expenses
expenses

Ordinary profit

1,966,802

37.6

1,866,095

38.3

100,706

5.4

Net profit before tax
Corporation, inhabitant andbusiness tax
Adjustment to corporation tax

1,966,802

37.6

1,866,095

38.3

100,706

5.4

1,436

9,654

0.2

(37)

19

0.0

Net profit

1,965,403

1,856,421

38.1

37.6

(1) Contribution of Hara SATY acquired during the 6th
fiscal period
212 million yen(2) Full-period operation of properties acquired during the
5th fiscal period●Square Mall Kagoshima Usuki
36 million yen●Kumamoto Intercommunity SC
50 million yen(3) Sale of Kominedai Community Mall
●Gains from sale and penalty on breach of contract
31 million yen●Lost rent income-32 million yen(4) Revenue increase at Park Place Oita
●Seasonal fluctuations (differences in managed days, etc.)
13 million yen●Opening of Seven-Eleven store
2 million yen●Gain from penalty on breach of contract
12 million yen

Increase
Increase inin operating
operating expenses
expenses

2,362,845

IV. Non-operating expenses

Increase
Increase inin operating
operating revenues
revenues(1) Increase in financing costs●Interest paid
●Loan-related expenses

37 million yen
8 million yen[Average borrowings balance during the fiscal period and average interest rate]

Fiscal period

108,981

Profit carried forward

84

16

67

Unappropriated profit

1,965,487

1,856,438

109,049

5.9

6th fiscal period
5th fiscal period
Variation

Averagebalance44,10039,976
4,123

Averageinterest rate
1.49854%1.49009%
0.00845%

Interest paid
333
295
37

6

Financial Statement

Balance Sheet for the 6th Fiscal Period (ended August 2007)(unit: thousand yen)

6th Fiscal Period(as of August 31,
2007)

Category
AssetsI. Current assets

compa
rison
(%)

Value

5th Fiscal Period(as of February 28,
2007)

compar
ison
(%)

Value

Variation
Percentage(%)

Value

Cash and deposits in trust
Operating receivables
Deferred tax assets
Consumption tax receivables
Other current assets
Total current assets

2,369,396

6,561,682

3,979,594

295,862

284,348

11,514

485,9398,500,000-

Long-term debt payable due
within one year

6,600,000-

6,600,000

Accrued business fees

248,290

26,96037-−
99,443(99,443)

Accounts payable

33,52955,340(21,810)273,658

229,751

43,906

Expenses payable

310,417285,860

24,557

591

1,210

(618)

Consumption taxes payable

101,182-

101,182

Rent received in advance629,392

589,863

39,528Deposits held

705,736

500,819

204,916

6,897,937

5.9

9.1

10,632,823(3,734,885)(35.1)

Sale of Kominedai Community Mall

(136,683)

Structures

-

805

(805)

Land

-

641,782(641,782)

Buildings in trust

42,225,480

41,797,815

427,665

Structures in trust

423,282

397,201

136,683

26,080Machinery and equipment in
trust

289,014295,701(6,686)

Tools and fixtures in trust

279,354291,519(12,164)

64,120,972

59,463,999

4,656,972-

25,397(25,397)

107,338,104

91.1

103,050,906

87.9

4,287,198

Total fixed assets

Income taxes payable

Total current liabilities

17,176,712

Long-term debt
Deposits and guarantees on
DepositDeposits and guarantees on
deposit in trust
Derivative liabilities

4.2

8.7

6,959,270

29,000,000

35,600,000(6,600,000)-

98,595(98,595)

9,409,271

9,222,293

186,97768.1

90,40597,946(7,541)

Total fixed liabilities

38,499,677

32.7

45,018,836

38.4(6,519,159)(14.5)

Total liabilities

55,676,389

47.3

55,236,278

47.1

440,1110.8

3,421,633
10,0003,421,633
10,000-97,73979,342

18,39760,264,380

60,264,380

51.4

-

3,529,373
110,867,477

3.0
94.1

3,510,975
106,561,881

3.0
90.9

18,397

Unappropriated profit

1,965,487

1,856,438

Total reserves

1,965,487

1,856,438

1.6

4,305,595

109,049

Total unitholders’ capital

62,229,867

62,120,818

53.0

109,049

I. Unitholders’ capital
1. Total capital
2. Reserves

0.5
4.0

Founding fees

16,78622,381(5,595)

II. Difference of valuation andconversion

Investment unit issuancefees

33,65042,062(8,412)

1. Deferred hedge profit/loss(90,405)

Total difference of valuationand conversion(90,405)

Total assets

10,217,442

Net Assets

III. Deferred assets

Total deferred assets

14.6

II. Fixed liabilities

2. Investment and other assets
Investment securities

Percentage(%)

Value

8,500,000-

Guarantees and deposits
Long term pre-paid
expenses
Total investment and other
Assetscompari
son
(%)

Value

Short-term debt

Buildings

Total tangible assets

compari
son
(%)

Value

Variation

37

1. Tangible fixed assets

Temporary account ofconstruction in trust(as of February 28, 2007)

275,251

II. Fixed assets

Land in trust(as of August 31, 2007)

I. Current liabilities(4,192,286)

3,493,655

Category

5th Fiscal Period

Liabilities

Funds for acquiring Hara SATY(acquired during the 6th fiscal period on March 1, 2007)
for which payment was delayed by one day in the 6th fiscal period

Cash and cash equivalents(unit: thousand yen)

6th Fiscal Period

50,4360.0

64,4440.0(14,007)(21.7)

117,815,851

100.0

117,259,149

100.0

556,7010.5

52.8

109,049(97,946)(0.1)(97,946)

0.2

7,541
(0.1)

7,541

-

Total net assets

62,139,462

52.7

62,022,871

52.9

116,590

0.2

Total liabilities and net assets

117,815,851

100.0

117,259,149

100.0

556,701

0.5

Acquisition of Hara SATY

7

Financial Statement

Cash Flow Statement for the 6th Fiscal Period (ended August 2007)(unit: thousand yen)

6th period (184 days)
March 1, 2007 – August 31, 2007

Ⅰ Cash flows from operating activities
Net Profit before tax
Depreciation
Amortization of founding fees
Investment unit issuance fee depreciation
Interest received
Interest paid
Gains from sale of real estate
Increased/decreased amount of operations receivables
Increased/decreased amount of uncollected consumption tax
Increased/decreased amount of consumption taxes payable
Increased/decreased accrued business payments
Increased/decreased unpaid fees
Increased/decreased unpaid expenses
Increased/decreased advanced rents
Increased/decreased deposits held
Increased/decreased advance payments
Increased/decreased long-term advance payments
Other
SubtotalInterest received
Interest paid
Corporation tax payment, etc.
Net cash provided by operating activities
Ⅱ Cash flow from investment activities
Gains from selling tangible fixed assets
Expenses for acquiring tangible fixed assets placed in trust
Expenses for paying security deposits and guarantees on deposit
Income from security deposits and guarantees on deposit in trust
Expenses from returning security deposits and guarantees on deposit in trust
Expenses for investment unit issuance fees
Expenses for depositing entrusted deposits with use limitations
Net cash provided by investment activities
Ⅲ Cash flow from financing activities
Proceeds from short-term debt
Expenses from repayment of short-term debt
Proceeds from borrowing long-term loans
Income from issuance of investment units
Distribution payment
Net cash provided by financing activities
Ⅳ Increased/decreased cash and cash equivalents
Ⅴ Cash and cash equivalents at start of period
Ⅵ Cash and cash equivalents at end of period

5th period (181 days)

September 1, 2006 – February 28, 2007

1,966,802
741,902
5,595
8,412(5,394)
333,144(4,574)(26,960)
99,443
101,182
7,769(19,157)
14,74739,528211,278(43,339)(18,397)(7,947)
3,404,034
5,394(323,334)(1,727)3,084,367

1,866,095
688,585
5,595
8,412(3,728)295,397
85,518(10,246)
9,821
8,966
13,78354,609(230,248)
34,033
21,909(21,540)
2,826,966
3,728(273,950)(9,977)2,546,767

783,223(5,796,651)(98,595)
353,104(172,487)(4,931,407)(10,105,000)(4,533)632,917(111,214)(50,475)(488,662)(10,126,968)

４,000,000(４,000,000)(1,859,306)(1,859,306)(3,706,347)
9,566,675
5,860,328

8,500,000(8,100,000)
1,000,000
11,096,580(1,715,020)
10,781,559
3,201,358
6,365,317
9,566,675

8

Financial Statement

Leasing Business Income and Expenditure(unit: million yen)

Category

Canal
City
Hakata

Park
Place
Oita

(Fiscal period)

SunLive
City
KokuraKominedai
Community
Mall

Square Mall
Kagoshima
Usuki

KumamotoIntercommunity
SC

Canal City
Business
CenterHara
SATY

Gofukumachi
Business
CenterSanix
HakataBuilding

Taihaku
StreetBusiness
CenterAmex
Akasakamon
Tower

6th Fiscal Period (March 1, 2007～August 31, 2007）
184
Days

184
Days

184
Days

1,402

932

292

28

262

1,374

901

292

1

Other Income

27

31

0

Total leasing business
expenses ②

665

558

Outsourcing fees

355

Maintenance expenses

184
Days

181
Days

Variation

184
Days

184
Days

184
Days

184
Days

89

212

711

561

203

320

73

5,091

4,734

357

225

89

212

709

494

189

320

63

4,874

4,544

330

27

36

0

0

2

67

14

0

9

216

189

27

95

0

132

30

35

351

276

92

159

41

2,437

2,251

186

278

8

1

33

2

6

205

73

19

61

5

1,052

1,010

42

8

18

0

0

0

0

0

8

6

2

1

0

46

40

6

Expenses for restoration
to former state

0

0

0

0

0

0

0

0

0

0

0

1

1

0

1

Tax and public charges

71

77

37

(3)

17

6

0

46

38

16

25

4

339

275

63

Insurance premiums andtrust compensation

7

6

2

0

1

0

0

5

3

1

1

0

31

30

0

Depreciation

177

125

45

0

46

18

26

83

94

35

64

21

741

688

53

Other expenses

44

52

0

0

32

1

0

1

60

17

4

7

223

204

18

Real estate rental businessprofit (loss) ③（=①－②）

736

374

197

29

130

59

177

359

284

110

160

31

2,654

2,482

171

ＮＯＩ ④
（=③＋depreciation）

914

500

243

29

177

78

204

443

379

146

225

53

3,395

3,171

224

5.7% 6.3%

7.3%

-

6.6%

6.5%

7.5%

6.0%

6.7%

6.6%

6.4%

5.2%

6.3%

6.3%

0.0%

Rent

ＮＯＩ yield（Annual conversion of ④
/Acquisition price）(Note 2)

184
Days

5th

184
Days

Total Leasing businessincome ①

184
Days

6th

184
Days

(Length)

9
Days

Total

(Note 1) Payment of property taxes and city planning taxes for Hara SATY is expected to start in the 8th fiscal period.
(Note 2) NOI yield of Kominedai Community Mall has not been calculated, as the property was sold on March 9, 2007.
(Note 3) Calculated without the NOI and acquisition price of Kominedai Community Mall.

(Note 1)

(Note 3)9

Financial Statement

Forecasts for 7th and 8th Fiscal Periods
8th Fiscal Period(forecast)

7th Fiscal Period(forecast)

6th Fiscal Period(results)

5th Fiscal Period(results)

4th Fiscal Period(results)

3rd Fiscal Period(results)

March 1, 2008 –August 31, 2008
(184 days)

September 1, 2007 –February 29, 2008
(182 days)

March 1, 2007 –August 31, 2007
(184 days)

September 1, 2006 –February 28, 2007
(181 days)

March 1, 2006 –August 31, 2006
(184 days)

September 1, 2005 February 28, 2006
(181 days)

Operating revenue

5,257 mm yen

5,160 mm yen

5,232 mm yen

4,870 mm yen

4,496 mm yen

4,050 mm yen

Operating profit

2,287 mm yen

2,303 mm yen

2,362 mm yen

2,210 mm yen

1,983 mm yen

1,751 mm yen

Ordinary profit

1,843 mm yen

1,897 mm yen

1,966 mm yen

1,866 mm yen

1,716 mm yen

1,698 mm yen

Net profit

1,841 mm yen

1,895 mm yen

1,965 mm yen

1,856 mm yen

1,715 mm yen

1,697 mm yen

Distribution per unit
(results)－－

18,360 yen

17,341 yen

18,632 yen

18,438 yen

Forecasts made at previous
fiscal period results
announcement－

17,700 yen

17,600 yen

17,000 yen

18,200 yen

16,700 yen

Forecasts made at last two
fiscal periods results
announcement

17,200 yen

17,000 yen

17,600 yen

Category

Difference between forecasts for the 7th and 8th fiscal periods
The risk of interest rates rising and the risk of NOI decreasing including
vacancy room risks were considered[Reference]● Depreciation 802 mm yen● Payment start of property and city planning taxes for Hanahata SC,
Hara SATY and City House Keyaki Dori

Difference between the 6th fiscal period results and theforecast for the 7th fiscal period
Incorporation of Hanahata SC into the portfolio (September 3, 2007)
Incorporation of City House Keyaki Dori into the portfolio (planned
for December 2007)
Deletion of Kominedai Community Mall from the portfolio
The risk of interest rates rising and the risk of NOI decreasing
including vacancy room risks were considered[Reference]● Depreciation
767 mm yen(Note) The above forecast values were calculated based on set premises. There is the possibility that the actual operating revenues, ordinary profit, net profit and distribution per unit will change and thesevalues are not guaranteed by being entered here.

10Financial Statement

Status of Interest-bearing Debt
Total interest-bearing debt as of the end of the 6th fiscal period 44.1 billion yen(Note) The above figures have been calculated by setting the end of the 6th fiscal period(August 31, 2007) as the first day for calculation.

11

Financial Statement

Itemization of Borrowings(as of August 31, 2007)

Nishi-Nippon City Bank

2,000,000,000

Feb 27, 2007

Repayment
Maturity
Feb 27, 2008

Lump sum upon maturity

AnnualInterest
1.05333％(*1)

Sumitomo Trust and Banking

1,500,000,000

Feb 27, 2007

Feb 27, 2008

Lump sum upon maturity

1.05333％ (*1)

Floating

Mizuho Corporate Bank

1,500,000,000

Feb 28, 2007

Feb 29, 2008

Lump sum upon maturity

1.05333％ (*1)

Floating

Mitsubishi UFJ Trust and Banking

1,500,000,000

Feb 28, 2007

Feb 29, 2008

Lump sum upon maturity

1.03333％ (*1)

Floating

Subtotal
Aozora Bank, Fukuoka Bank, Nishi-Nippon
City Bank, Oita Bank, Iyo Bank, The Bankof Saga, Eighteenth Bank, Miyazaki Bank,
Yamaguchi Bank, Shinwa Bank, Chikuho
Bank
Subtotal
Development Bank of Japan
Mizuho Corporate Bank, Norinchukin Bank,
Shinkin Central Bank, Hiroshima Bank, Iyo
Bank, The Bank of Saga, Yamaguchi Bank,
Higo Bank, Shinwa Bank
Fukuoka Bank
Nishi-Nippon City BankThe Dai-ichi Mutual Life Insurance
Shinsei Bank

6,500,000,000
6,600,000,000

Jun 29, 2005

Jun 23, 2008

Lump sum upon maturity

1.20667％ (*2)

Floating

6,600,000,000
12,000,000,000

Nov 9, 2004

Aug 31, 2009

Lump sum upon maturity

1.39000％

Fixed

10,000,000,000

Aug 25, 2006

Jul 30, 2010

Lump sum upon maturity

1.92250％ (*4)

Madefixed (*4)

2,000,000,000
2,000,000,000
1,000,000,000
1,000,000,000

Aug 25, 2006
Aug 25, 2006
Aug 25, 2006
Aug 25, 2006

Jul 29, 2011
Jul 29, 2011
Jul 29, 2011
Jul 29, 2011

Lump sum upon maturity
Lump sum upon maturity
Lump sum upon maturity
Lump sum upon maturity

2.05174％
2.05174％
2.05174％2.00174％

Fixed
Fixed
Fixed
Fixed

Sumitomo Trust and Banking

1,000,000,000

Sep 29, 2006

Jul 29, 2011

Lump sum upon maturity

1.80296％

Fixed

Subtotal
Fukuoka Bank, Resona Bank, Kumamoto
Family Bank, Saikyo Bank and Shinwa
Bank
Subtotal

29,000,000,000
Jun 29, 2007

Oct 31, 2007

Lump sum upon maturity

1.09917％ (*3)

-

Type

LenderShort-term debt

Long-term debt
payable due within
one yearLong-term debt

Commitment Line (*5)

Amount (JPY)

Total

2,000,000,000

Borrowing Date

Payment Method

Interest

Description

Floating
No collateral
No guarantee

No collateral
No guarantee

No collateral
No guarantee

No collateral
No guarantee

2,000,000,000
44,100,000,000

Status of Forming of Commitment Lines
Commitment Period
Start
End

Type

LenderCredit Limit(JPY)

Commitment line agreement (1)Fukuoka Bank

3,000,000,000

Jul 2, 2007

Jun 30, 2008

No collateral
No guarantee

Commitment line agreement (2) (*6)

Fukuoka Bank, Resona Bank, Kumamoto
Family Bank and Shinwa Bank

5,000,000,000

Aug 24, 2007

Jul 31, 2008

No collateral
No guarantee

Total

Description

8,000,000,000(*1) From August 31, 2007 to September 28, 2007 (not inclusive of that day)(*2) From June 26, 2007 to September 25, 2007 (inclusive of that day)(*3) From June 29, 2007 to October 31, 2007 (not inclusive of that day)(*4) Fukuoka REIT has concluded a swap agreement to fix interest rates on borrowings with floating interest and the interest rate at which the swap agreement was concluded is entered.
(*5) These are the borrowings for commitment line agreement 2 before its renewal.
(*6) Commitment line agreement 2 was renewed on August 21, 2007, in accordance with the commitment period of the initially-concluded commitment line agreement reaching maturity on August 23, 2007.

12

Portfolio

Portfolio

J-REIT Specialized in Fukuoka/Kyushu Area
Supported by Kyushu Business World

Investment Policy

14

Portfolio

Portfolio Map

15

Portfolio

Portfolio Table
Property Name

Age
(Note 1)

Acquisition
Acquisition(planned)Price(mm yen)(Note 2)Retail(Note 3)

Primary Tenants at End of Period(2 top tenants for each property)(m2)

11y 4m32,000

Nov 9, 2004

Sponsor27

Washington Hotel and Comme ca Store

47,858.67

Park Place Oita

5y 4m

15,700

Nov 9, 2004

Sponsor80

JUSCO and K’s Denki

100,925.97

99.7%

SunLiveCity Kokura

2y 5m

6,633

Jul 1, 2005

External

1

SunLive

61,450.22

100.0%

Square Mall Kagoshima Usuki

11m

5,300

Sep 28, 2006

Sponsor

11

Sports Depo/Golf 5 and Best Denki

14,661.72

100.0%

Kumamoto Intercommunity SC

9m

2,400

Nov 30, 2006

Sponsor2

Sports Depo/Golf 5 and Starbucks Coffee

6,968.66

100.0%

30y 10m

5,410

Mar 1, 2007

Sponsor

1

SATY

27,580.75

100.0%（2,801.15）（100.0%）-1,130

Sep 3, 2007

Sponsor（2）

BON REPAS and Matsumotokiyoshi

Total for Retail－

68,573－－－－

Canal City Business Center
Building

11y 4m

14,600

Nov 9, 2004

Sponsor

45

TOTO and Bell System 24

23,018.04

99.6%

Gofukumachi Business Center3y 10m

11,200

Nov 9, 2004

Sponsor

19

Sanyo Shinpan and NTT West Japan – Kyushu

19,906.21

100.0%

Sanix Hakata Building

6y 3m

4,400

Sep 30, 2005

External

13

SANIX and Idemitsu

6,293.67

100.0%

14,652.68

98.6%

Total for Office
City House Keyaki Dori
Amex Akasakamon Tower

－

5y 4m

7,000

Mar 16, 2006

Sponsor66－

37,200

－

－

－

－

－

11/2007(completion)

1,111

－
Dec 2007(plannedacquisition)

External

(42)

-

-

-

2y 1m

2,060

Sep 1, 2006

External

62-

4,755.14

－

3,171

－

－

－

－

－

Total or Weighted Average for All Properties

9y 5m

108,944(Note 4)Issue
Preferred interest in silent partnership whose operator is
CCH Bridge Y.K.
Portfolio Total－

NTT Comware and Tokyo Kaijo & Nichido Jimu
Outsourcing

Total for Residential

Other

100.0%

Hanahata SC

Taihaku Street Business Center

Residential

SourceTotal
Leasable Area Occupancy
at End ofat End ofPeriodPeriodCanal City Hakata

Hara SATY

Office(planned)

TimingTenants at
End ofPeriod

327

Price
(mm
yen)

Acquisition
date

Assumed IRR

3,400

2006.2.27

8.0%

328,071.73

92.8%
－
99.7%

(Note 5)112,344(Note 1) Figures in the Age column are the building ages as of the end of the 6th fiscal period.
(Note 2) All values in the Acquisition (Planned) Price column exclude fees, public charges and expenses.
(Note 3) Properties acquired through arrangement by sponsors have been indicated as “sponsor” in the source column.
(Note 4) The weighted average age has been obtained by dividing the total Ages of each of the above-listed properties (the building age of the notyet completed property has been set as 0) by the weight of their respective Acquisition (planned) Prices. Figures in the Occupancy column
have been obtained by dividing the total leased areas of the above-listed properties as of August 31, 2007 by the total leasable areas.
(Note 5) The figure in the Assumed IRR column is based on the "Survey on Investment Profitability Value of Preferred Equity" by Japan Real Estate Institute.
(Note 6) Figures have been calculated by using figures of owned properties and acquired properties (on a contractual basis) as of August 31, 2007, but excluding figures for the preferred interest in silent partnerships.
(Note 7) Figures in parentheses in the above list are not included in the respective total figures.

(Note 6)16

Portfolio

List of Property Prices
Property Name

Acquisition

Acquisition

TimingPrice (mm yen)(planned)(planned)(Note 1)

Most Recent
Appraisal(mm yen)Acquisition
CAP

Appraisal
CAP(NCF base)(Note 2)

(NCF base)(Note 3)

Appraisal Company

Most Recent
Capitalization
MethodAppraisal(mm yen) (Note 4)

Most Recent DCF Method
Appraisal (mm yen) (Note 5)
Appraisal Discount Final CAP(mm yen)
Rate
Rate

RetailCanal City Hakata

Nov 9, 2004

32,00037,500

6.0%

4.9%

Tanizawa Sogo Appraisal

38,50037,000

5.0%

5.2%Park Place Oita

Nov 9, 2004

15,70020,000

6.6%

5.5%

Japan Real Estate Institute20,10019,800

5.2%

5.6%

SunLiveCity Kokura

Jul 1, 2005

6,633

8,450

6.6%

5.6%

Japan Real Estate Institute

8,460

8,430

5.0%

5.4%

Square Mall Kagoshima Usuki

Sep 28, 2006

5,300

5,930

6.2%

5.8%

Japan Real Estate Institute

5,950

5,910

5.5%

6.0%

Kumamoto Intercommunity SC

Nov 30, 2006

2,400

2,550

6.5%

6.3%

Japan Real Estate Institute

2,580

2,520

6.1%

6.6%

Hara SATY

Mar 1, 2007

5,410

5,550

6.8%

6.6%

Japan Real Estate Institute

5,600

5,490

5.6%

7.7%

Hanahata SC

Sep 3, 2007

1,130

1,170

6.4%

6.0%

Tanizawa Sogo Appraisal

1,200

1,160

6.0%

6.3%

－

68,573

81,150－－－82,39080,310－－Canal City Business Center Building

Nov 9, 2004

14,60016,800

6.3%

5.1%

Tanizawa Sogo Appraisal

17,10016,700

5.1%

5.4%

Gofukumachi Business Center Building

Nov 9, 2004

11,20013,700

6.3%

5.1%

Tanizawa Sogo Appraisal

14,00013,500

5.3%

5.4%

Sanix Hakata Building

Sep 30, 2005

4,400

5,440

5.9%

4.9%

Japan Real Estate Institute

5,490

5,390

4.7%

5.1%

Taihaku Street Business CenterMar 16, 2006

7,000

8,090

6.0%

5.2%

Japan Real Estate Institute

8,150

8,030

4.9%

5.4%

－

37,20044,030－－－44,74043,620－－Dec 2007

1,111

1,120

5.4%

5.3%

Daiwa Real Estate Appraisal

1,130

1,100

5.2%

5.5%

Sep 1, 2006

2,060

2,070

5.4%

5.2%

Daiwa Real Estate Appraisal

2,110

2,050

5.0%

5.4%

－

3,171

3,190

－

－

－

3,240

3,150

－

－

－

108,944

128,370

6.23%

5.35%

Total for Retail

OfficeTotal for Office
Residential

City House Keyaki Dori
Amex Akasakamon Tower
Total for Residential

Total or Weighted Average for All Properties(planned acquisition)(Note 1) All values in the Acquisition (Planned) Price columns exclude fees, public charges and expenses.
(Note 2) Figures in the Acquisition CAP (NCF basis) column have been calculated by dividing the direct capitalization method NCFs in the appraisal
reports (including survey reports) by the acquisition (planned) prices.
(Note 3) The Appraisal CAP (NCF basis) figures are the cap rates under the direct capitalization method in the appraisal reports (including survey reports).
(Note 4) Figures in the Most Recent Capitalization Method Appraisal are evaluation values based on the direct capitalization method in appraisal reports
for each owned property as of August 31, 2007. In the case of City House Keyaki Dori, they are evaluation values based on the direct
capitalization method in the most recent appraisal reports.
(Note 5) The figures in the Most Recent DCF Method Appraisal are based on the DCF method in appraisal reports for each owned property as of August
31, 2007. In the case of City House Keyaki Dori, they are figures based on the DCF method in the most recent appraisal reports.

17

Portfolio

History of Occupancy Rate by Property

Portfolio occupancy of
99.7%
during the
6th fiscal period(Note 1) The occupancy is the percentage the leased area comprises of the leasable area.
(Note 2) The information used for each datum is that for the end of each month.

18

Portfolio

History of Retail Property Sales(Note) This represents a monthly tally of sales for each store at Canal City Hakata.

(Note) This represents a monthly tally of sales for each store at Park Place Oita.

(Note)This represents a monthly tally of sales for SanLiveCity Kokura
without showing the actual figures. The figures for SunLiveCity Kokura
are not indicated because we have not obtained approval from
SunLiveCity Kokura for their disclosure.

19

Portfolio

Rental Portfolio (including common expenses)(Note 2)

(Note 4)(Note 1)

(Note 3)(Note 1) Figures in the pie graphs do not include the rents (including common expenses) of Kominedai Community Mall, which was sold on March 9, 2007.
(Note 2) Ratios indicated in the pie graphs are figures obtained by dividing the actual rents (including common expenses) for the 6th fiscal period, as totaled for eachremaining contract period of residents at Amex Akasakamon Tower, by total rents (including common expenses) for the 6th fiscal period from the property.
(Note 3) Ratios indicated in the pie graphs are figures obtained by dividing the rents (including common expenses) for the 6th fiscal period, as totaled for eachremaining contract period of tenants at Canal City Business Center Building, Gofukumachi Business Center, Taihaku Street Business Center and Sanix Hakata
Building, by total rents (including common expenses) for the 6th fiscal period from those properties.
(Note 4) Ratios indicated in the pie graphs are figures obtained by dividing the rents (including common expenses) for the 6th fiscal period, as totaled for eachremaining contract period of tenants at Canal City Hakata, Park Place Oita, SunLiveCity Kokura, Square Mall Kagohima Usuki and Kumamoto Intercommunity
SC and Hara SATY, by total rents (including common expenses) for the 6th fiscal period from those properties.

20

Portfolio

Breakdown of Tenant Rent Types (including common expenses) for Retail Properties(Note 1) Figures in the pie graphs do not include the rents (including common expenses) of Kominedai Community Mall, which was sold on March 9, 2007.
(Note 2) "Fixed rent tenants" are tenants whose monthly rent (including common expenses) are fixed. Moreover, the indicated ratios are figures obtained by dividing the actual rent (including common expenses) for the 6th fiscal period from the tenants with
fixed rent housed in Canal City Hakata, Park Place Oita, SunLiveCity Kokura, Square Mall Kagoshima Usuki, Kumamoto Intercommunity SC and Hara SATY, by the total of actual rents (including common expenses) for the 6th fiscal period from those properties.
(Note 3) Entirely percentage of sales tenants are tenants whose monthly rents (including common expenses) shall be calculated by multiplying their monthly sales amount by a certain percentage. The indicated ratios are figures obtained by dividing the actual
rent (including common expenses) for the 6th fiscal period from the tenants with rent entirely linked to sales housed in Canal City Hakata, Park Place Oita, SunLiveCity Kokura, Square Mall Kagoshima Usuki, Kumamoto Intercommunity SC and Hara SATY by the total
amount of actual rent (including common expenses) for the 6th fiscal period from those properties.
(Note 4) Percentage of sales with minimum guarantee tenants are tenants whose monthly rents (including common expenses) are fixed and who are required by contract to pay extra rents that are calculated by multiplying the excess sales amounts, when
their sales exceed certain amounts, by percentage. The indicated ratios are figures obtained by dividing the actual rent (including common expenses) for the 6th fiscal period from the tenants with percentage of sales and minimum guarantee housed in Canal City
Hakata, Park Place Oita, SunLiveCity Kokura, Square Mall Kagoshima Usuki, Kumamoto Intercommunity SC and Hara SATY by the total amount of actual rent (including common expenses) for the 6th fiscal period from those properties.
(Note 5) Fixed rent + percentage of sales tenants are tenants whose monthly rents (including common expenses) are fixed and who are (except for certain tenants) required by contract to pay extra rents that are calculated by multiplying their sales amounts by the percentage
of sales. The indicated ratios are figures obtained by dividing the actual rent (including common expenses) for the 6th fiscal period from the tenants with fixed + percentage of sales housed in Canal City Hakata, Park Place Oita, SunLiveCity Kokura, Square Mall
Kagoshima Usuki, Kumamoto Intercommunity SC and Hara SATY by the total amount of actual rent (including common expenses) for the 6th fiscal period from those properties.

21Portfolio

Overview of Top 10 Tenants
Store

Rank

TenantProperty

Total
Leased Areas(m2)

Leasing Ratio
Rent Structure(%)

Contract Type

Remaining
contract years(years)1

Jusco Park Place Oita
/Hara SATY

AEON Kyushu

Park Place Oita, Hara SATY

86,169.09

26.3

Fixed /
Fixed + floating

Ordinary Lease/ Fixedterm Lease

14
11

2

SunLiveCity Kokura

SunLive

SunLiveCity Kokura

61,450.22

18.8

Fixed + floating

Ordinary Lease

17

3

K’s Denki andMr. consent

K’s Holdings

Park Place Oita

13,705.32

4.2

Fixed

Ordinary Lease

14

4

Sports Depo/Golf 5

Alpen

Square Mall Kagoshima Usuki,
Kumamoto Intercommunity SC

13,522.97

4.1

Fixed

Fixed-term Lease

19
19

5

Washington Hotel

Canal City-Fukuoka
Washington Hotel

Canal City Hakata

12,831.17

3.9

Fixed + floating

Ordinary Lease

8

6

Sports Authority

MegaSports

Canal City Hakata, Park Place Oita

8,274.30

2.5

Fixed + floating,
Fixed

Fixed-term Lease/
Ordinary Lease

4
4

7

Comme ca StoreFIVE FOXes

Canal City Hakata

7,859.12

2.4

Fixed

Ordinary Lease

4

8

United Cinema Canal City
13

United Cinemas

Canal City Hakata

7,303.80

2.2

Fixed + floating

Ordinary Lease

8

9

Sanyo Shinpan

Sanyo Shinpan

Gofukumachi Business Center

5,862.87

1.8

Fixed

Ordinary Lease

1

10

T Joy

T Joy

Park Place Oita

5,729.25

1.8

Fixed + floating

Ordinary Lease

14

Outside top 10 tenants

104,378.97

31.9

Entire portfolio

327,087.08

100.0

22

Portfolio

Plan to Expand Floors at Park Place Oita
Illustrative image of the patio to be newly built and the portion of increased floors● Park Place Oita
Address: 1-1, 2-chome, Koen Dori Nishi, Oita City
Land area: 179,491.81m2
Total floor area: 75,699.92m2
2
Leasing floor area: 100,925.97m(Including a parking or some areas which lease to some tenants)● Overview of the latest plan to increase floors (planned)
Total floor area: 4,516.92m2
Shop area: 3,100m2
Number of shops: Approximately 20
Total construction cost: Approximately 1,045 million yen
Completion date: Late March 2009 (planned)
Opening date: Late April 2009 (planned)

The picture is an illustrative image and may differ from the reality.

Image of shop dispositions

Implementation Overview● Increase floor areas to effectively utilize the floor area rateavailable for the site
● Introduce quality tenants with competitiveness, including
select shops, sports casual shops and miscellaneous import goods(to realize further concentration of fashion)● Build a patio on the space surrounded by the existing portions and the
portions for increased floors as an environmental staging(increase casual tours of customers within the premises by making the
one-sided mall into double-sided mall.)● Ensure high profitability, as compared with the total construction cost,at the increased-floor portions alone. Also, enhance sales(Note) The portions within the framing line in yellow are owned by FRC.

by activating the entire area (increase profitability)23

Strategy

Strategy

Fukuoka REIT’s Strategy for the Post Subprime Mortgage Loan Issue

25

Strategy

Investment Categories
Use

Category

OfficeBuildings

Class A

Urban
Retail Properties

Regional

Community

Other

Residential,
hotel,
industrial

Current
Investment Ratio

Definition and Key Investment Factors● Strong properties that satisfy
Fukuoka REIT’s own Class A standards(location, size, specs, age, etc.
used to classify buildings)(based on theacquisition (planned)
price)

Canal City
Business Center
Building

Gofukumachi
Business Center

Taihaku Street
Business Center

Sanix Hakata
Building● Roadside stores, department storesand major specialty stores● Located in popular urban centers● Suburban shopping centers positioned
to draw customers from a broad area
● Located near trunk roads● A size that gives it superiority in the trade area
● The specialty shop tenants● Lifestyle affiliated shopping center● Roadside category killer● Neighborhood shopping centers with fresh foodsupermarkets as an anchor andbookstores, restaurants, etc.

Park Place
Oita

SunLiveCity
KokuraSquare Mall
Kumamoto
Kagoshima Intercommunity
Usuki
SC

● Family-type residential properties with good location● Master-lease hotels handled by excellent operators● Industrial properties through sale and leaseback by sponsors

City House
Keyaki Dori

34.1%

Canal City
Hakata29.4%

Hara SATY

25.5%

Hanahata
SC

8.1%

Amex
Akasakamon
Tower

2.9%

Investment Policy to Focus on Core Assets Remain Unchanged,
but Efforts will be Made on Small- and Medium-sized Assets for the Moment

26

Strategy

Future Strategy by Investment Category
Properties Located in City Centers(Class A Office Buildings and Urban SCs)
Fukuoka: 5.0% (Tokyo: 4.2%) [April 2007]*Source: "Survey of Real Estate Investors" by Japan Real Estate Institute

CAP Rate

Cash Flows

Notes

Suburban Properties(Regional SCs and Community SCs)
Fukuoka: 6.0% (Tokyo: 5.5%) [April 2007]*Source: "Survey on Real Estate Investors" by Japan Real Estate InstituteFurther decrease in CAP rate is expected over ashort term due to overheating of the market.
However, the CAP rate of 3 to 4% in Fukuoka
does not agree with the theoretical values basedon the assumption of long-term ownership.

The superiority of a retail property is determined byindividual factors rather than by the area.
Thus, it is necessary to judge the risk-return for
individual properties.

There are some cases in which rents have risen on
a spot basis (i.e., the concluded unit price fora newly-built building increased to a level about 20%
higher than the neighborhood market price),but this is not yet widespread.

Rent increases can be expected by the percentage ofsales at retail properties that prosper. At retail facilities
that do not do well, there remain risks of demands for
decreased rents, even for ordinary lease (these risks can beeliminated if the fixed-term lease designatesthat claims for decreasing rent are not allowed).

For Class A offices, Tokyo-based (foreign-capital) funds
will provide newly-built floor areas of nearly 20,000 tsubos
per year, or about 4% of the market, in the years to come.
It is necessary to judge whether this supply would provoke
latent demand in the market or would worsen the
demand-supply situation.

The structure of “weak-to-the-wall” will become clear due
to an intensified competitive environment. Consumer needs
are greatly changing over time, and the proposal capabilities(ability to devise new SC business models) of developers
and operators will be a key factor.
◆ Cooperate with the sponsors to develop multi-use SCs

FRC Investment Policy◆ Continue acquisition of properties at CAP rates
with allowance by utilizing the sponsors’ pipelines.
◆ Conduct acquisition of properties at competitive CAP
rates only in premium locations.

that are differentiated and have added value (propose
quality lifestyles and entertainment factors) andincorporate them into the portfolio.
◆ Reduce the downside risks of roadside SCs
through fixed-term leased
housing contracts, and earn steady and solid yields.

27

Strategy

External Growth Roadmap(Note 1) This is a preferred silent partnership interest in CCH
Bridge YK, the SPC that is the operator that manages
the portion owned by Canal City Hakata SPC.
(Note 2) This has been calculated by combining the acquisition
prices of owned properties as of the end of August
2007 and the planned acquisition price of City House
Keyaki Dori.

[IPO period]
・ Listing with incorporatinglarge-scale flagshipproperties into theportfolio[The first PO period]
・ Implemented PO toexpand the portfolio[Period to use additional LTV
capabilities]
・ Raise distributions throughproperties acquired byutilizing the additional LTV
capabilities.

[The second PO period]
・ Incorporate largescale
properties into theportfolio via a PO.

28

ComplianceCompliance

Organizational Structure of Asset Manager
Organizational Chart of Fukuoka Realty
Full-time directors and employees: 40(as of October 1, 2007)■Investment Management Committee (8)President, Vice President, Senior Managing Director, Managing Director, Investment Department General Manager, Management Department General
Manager, Planning Department General Manager, and Compliance Officer (1 each)■Compliance Assessment Committee (3)Compliance Department General Manager (1) and Outside Compliance Committee Members (lawyer and real estate appraiser; 1 each)○Certifications of Full-time Staff (total number per certificate)*Real estate agents (9)*Condominium manager (1)*Lawyer (1)*Real estate appraisers (2)*Real estate consultant (1)*SME analysts (2)*First class architect (1)*Japanese securities analysts (2)*MBA holders (5)*Building managers (3)*Tax attorney (1)30Compliance

Introduction of New Executives

31ComplianceDecision-Making Process of Fukuoka REIT

32

Appendix

Appendix

New Properties to be Acquired in the 7th Fiscal Period (Hanahata SC and City House Keyaki Dori)Residential

Community SC

Hanahata SC

Sep 3, 2007

1.13 bn yen

6.4％

Characteristics• Synergy of a high quality gourmet supermarket and a popular drug store• Established in a new housing area where population growth is expected to occur

Overview- Address: 4-chome, Hanahata, Minami
Ward, Fukuoka City
- Total leasable area: 2,801.15m2- Built: July 10, 2007
- Property manager: Fukuoka Jisho

City House Keyaki DoriCharacteristics• Near the Tenjin district with good access and walking distance from Tenjin Station andAkasaka Station on the Municipal Subway Line• Planned to have 13 stories above ground (total floor area of 3,531.37m2) and havethirty 2LDK units (about 58m2 per unit) and twelve 3LDK units (about 75m2 per unit)• Anti-seismic structure for high safety and security

Dec 20, 2007

1.11bn yen

5.4％

Overview• Address:Kego 2-chome, Chuo Ward,
Fukuoka City
• Total floor area:3,531.37m2• Scheduled completion date:November 30,
2007• Property manager:DMC (a member of the
Daio Group, a giant residential
management company in the Tenjin area)(planned)

Store- BON REPAS- Matsumotokiyoshi

34

Appendix

Retail Property Description: Canal City Hakata and SPC
Urban SC

Canal City Hakata (red line)

Nov 9, 2004

32bn yen

6.0％

Characteristics• Within walking distance from Hakata Station and located near the
popular area of Nakasu• Renowned tourist destination in Fukuoka with over 10 million visitors ayear• Distinguished design by Jon Jerde renowned for his work on Las Vegas’
Fremont Mall and Tokyo’s Roppongi Hills
Stores• Washington Hotel• Comme Ca Store• United Cinema (cinema complex)• OPA (Canal City OPA)
• Sports Authority• Others

Overview• Address:

1-chome, Sumiyoshi,
Hakata Ward,
Fukuoka City
• Total leasable area: 47,858.67m2• Built:
April 15, 1996
• Property manager: Fukuoka Jisho

Preferred Silent Partnership Interest with
CCH Bridge Y.K. as Operator (blue line)
Characteristics• Ownership of preferred silent partnership interest (3.4 billion yen) in CCH Bridge
Y.K.(*), a special purpose company
Tenants of the Section Owned by Canal City Hakata SPC• Top luxury hotel in the region: Grand Hyatt Fukuoka (370 guest rooms)• OPA Shopping Mall (more than 100 specialty shops)• One of the largest MUJI (Mujirushi Ryohin) stores in Kyushu• Fukuoka City Theater of Shiki Theater Company• Others（Note）A contract to reserve acquisition of the SPC-owned section has been concluded with CCH Bridge Y.K.
The acquisition reservation contact has established an option for FRC to execute the reservation fulfillment right through March 1, 2010.
The transaction shall be conducted at a price appraised either by the Tanizawa Appraisal Office or the Japan Real
Estate Institute, with the appraisal to be made within 60 days from the conclusion date of the transaction agreement.

35

Appendix

Retail Property Description: Park Place Oita and SunLiveCity Kokura
Regional SC

Park Place Oita
Nov 9, 2004

15.7bn yen

6.6％

Characteristics• Located in new town development next to Oita Prefectural Sports Park
(World Cup Soccer Stadium)• Near Oita-Mera Interchange with parking for about 4,000 cars
• Designed as an open mall in a forest by Jon Jerde
Overview• Address:2-chome, Koen Dori Nishi, Oita CityStores• Total leasable area:100,925.97m2• Jusco• Built:March 26, 2002
• K’s Denki
April 17, 2002
• T Joy
April 28, 2004
• Sports Authority
April 9, 2007
• Plaza Capcom• Property manager: FJ Real Estate• Others

Regional SC

SunLiveCity Kokura
Jul 1, 2005

6.63bn yen

6.6％

Characteristics• Lies along National Highway 10 and near the Kokura Higashi
Interchange on the Kyushu Expressway with parking for about 2,000
cars• Leading regional mall in Kitakyushu region with about 110 specialty
stores centering on the SunLive Supermarket• Core development in the Kami Kuzuhara Rezoning District (about
120,000 tsubos), a large commercial zoneStore
• SunLive

Overview• Address: 2-chome, Kami Kuzuhara, Kokura Ward,
Kitakyushu City
• Total leasable area:61,450.22m2• Built:March 17, 2005
• Property manager: Fukuoka Jisho

36

Appendix

Retail Property Description: Square Mall Kagoshima Usuki and Kumamoto Intercommunity SC
Community SC

Square Mall Kagoshima Usuki
Sep 28, 2006

5.3bn yen

6.2％

Characteristics• Located at one of the busiest thoroughfares of Kyushu (along Prefectural
Highway 217) with 42,000 cars passing per 12 hours in 1999
• Leading category killers of each industry as tenants• Design by John Jerde creates great appeal to users• Concluded long-term leases with tenants that enjoy a high level of credibility
Stores• Sports Depo/Golf 5• Nishimatsuya• Honeys• ABC Mart
• Best Denki, etc.

Community SC

Overview• Address: Usuki 2-chome, Kagoshima City
• Floor space:14,661.72m2• Built: September 28, 2006
• Property manager Fukuoka Jisho

Kumamoto Intercommunity SC
Nov 30, 2006

2.4bn yen

6.5％

Characteristics• Located at one of Kyushu’s busiest thoroughfares (along National Highway 57
Bypass) with 39,000 cars passing per 12 hours in 1999
• Concluded long-term leasehold contracts with highly regarded tenants
Stores• Sports Depo and Golf 5• Starbucks(drive thru coffee shop)

Overview• Address:Kozono 1-chome,
Kumamoto City
• Floor area:6,968.66m2• Built: November 30, 2006
• Property manager:Fukuoka Jisho

37

Appendix

Retail and Residential Property Description: Hara SATY and Amex Akasakamon Tower
Regional SC

Hara SATY
Mar 1, 2007

5.41bn yen

6.8％

Characteristics• Excellent location for retail property in Fukuoka suburb• 286,000 people within 3km radius (equivalent to a suburb in the Tokyo
metropolitan area) and lacks competitor with equal size in the area
• First SATY to open in Fukuoka (following full-scale renovation of a former
Daiei store)• Long-term fixed lease agreement with Aeon Kyushu (former Mycal Kyushu)
has been concluded (12 years, no early cancellation allowed, no decrease inrents allowed)
Overview
Store• Location: 6-chomeSawara Ward, Fukuoka City
• SATY• Floor space: 27,580.75m2• Built: October 26, 1976(Renovated in spring 2007)• Property Manager: Fukuoka Jisho

Residential

Amex Akasakamon Tower
Sep 1, 2006

2.06bn yen

5.4％

Characteristics• Property is near the Tenjin area and enjoys strong transit convenience (withinwalking distance of the metro subway’s Akasaka and Tenjin stations)• A tower rental condominium with 2LDK（55.58m2）to 4LDK (144.84m2) units.
Overview• Address:2-chome Maizuru, Chuo Ward, Fukuoka City
• Leasable area:4,755.14m2• Built: July 26, 2005
• Property manager: DMC (a member of the Daio Group, a giant residential
management company in the Tenjin area)38

Appendix

Office Property Description: Canal City Business Center Building and Gofukumachi Business Center
Class A Building

Canal City Business Center Building
Nov 9, 2004

14.6bn yen

6.3％

Characteristics• Pioneer of multi-use office and retail complexes• Enjoys benefit of popularity and name recognition of Canal City Hakata• Used by TOTO Ltd. as Fukuoka office and showroom
Tenants• TOTO• Bell System 24• USEN Corporation• Aflac Japan• Mitsubishi Electric Building
Techno-Service• Others

Class A Building

Overview• Address:1-chome, Sumiyoshi, Hakata Ward,
Fukuoka City
• Total leasable area:23,018.04m2• Built:April 15, 1996
• Property manager:Fukuoka Jisho

Gofukumachi Business Center
Nov 9, 2005

11.2bn yen

6.3％

Characteristics• Faces Meiji Dori and Taihaku Street and directly connects to Gofukumachi
Subway Station• Designed by Michael Graves, designer of the Museum of Newark• Top Quality Specs in Region■1 floor: 620 tsubos ■Ceiling height: 2,900mm ■Optic fiber cables• Sanyo Shimpan, NTT West Japan-Kyushu, Sony Life Insurance and otherleading firms use the premises as a call center
Tenants• Sanyo Shimpan• NTT West Japan-Kyushu• Sony Life Insurance• Suntory• Sunny• Others

Overview• Address:Kami Gofukumachi,Hakata Ward,
Fukuoka City
• Total leasable area:19,906.21m2• Built:October 16, 2003
• Property manager:Fukuoka Jisho

39

Appendix

Office Property Description: Sanix Hakata Building and Taihaku Street Business Center
Class A Building

Sanix Hakata Building
Sep 30, 2005

4.4bn yen

5.9％

Characteristics• Two-minute walk from Hakata Station (Shinkansen), and Fukuoka Airport isa mere five-minute subway ride away
• The concentration of hotels and government offices surrounding thebuilding make it an optimal location for business
Tenants• Sanix• The Nishi-Nippon
City Bank• ROHM• Idemitsu Kosan• Others

Class A Building

Overview• Address:2-chome, Hakataeki Higashi, Hakata Ward,
Fukuoka City
• Total leasable area:6,293.67m2• Built:March 31, 2001
• Property manager:Fukuoka Jisho

Taihaku Street Business CenterMar 16, 2006

7bn yen

6.0％

Characteristics• Superbly located with excellent accessibility: ten-minute walk from Hakata
Station and a two-minute walk from Gion Subway Station; located along the“Taihaku Street” central thoroufare• Exemplary facility specs for Fukuoka City office buildings:- Functional floor plan of 333 tsubos, 2.7m ceiling height, free accessfloor of 100mm, optical fiber cables, independent air conditioning
systems, etc.
• Accompanied by luxurious 59-room residential tower- 1LDK – 3LDK units tomeet requirements of downtown commuters
Tenants• NTT Comware• Tokio Marine Nichido
Jimu Outsourcing• Fujitsu Network Solutions• Tokio Marine & Nichido
Anshin Life Insurance• Others

Overview• Address:3-21 Gokushomachi, Hakata Ward, Fukuoka City
• Total leasable area:Office Tower: 11,225.30m2
Residential Tower:3,427.38m2• Built:March 7, 2002
• Property manager:Fukuoka Jisho

40

Appendix

Office Market in Fukuoka
Vacancy Rate of Office Buildings

Changes in Average Rent of Office Buildings(excluding common expenses)(Note) Each of the above graphs was prepared by Fukuoka Realty based on office market reports by CB Richard
Ellis and data provided by Ikoma Data Service System.
(Reference) “Vacancy (%)”: (vacancy area within zones/total area of leased rooms within zones) x 100“Offering rent”: unit price per tsubo of monthly rent (excluding common expenses)

41

Appendix

Case Study of Fukuoka Office Market
Survey on leasing status of offices representing each area

(Note) The above data has been prepared by Fukuoka Realty based on a variety of materials.

Some newly built office buildings have successfully concluded leasing contracts at rates
about 20% higher than the market price in neighboring areas

42

Appendix

Standard Land Price in Fukuoka City
Percentage of Change in Fukuoka City Land Prices(2005 - 2006) (YOY)

Percentage of Change in Fukuoka City Land Prices(2006 - 2007) (YOY)(Note 1) All of the reference sites for the land study located in central Fukuoka City are shown.
(Note 2) The red bars indicate locations where land prices have increased and the red numbers indicate the increase rate in land prices.
The blue bars indicate where land prices have decreased and the blue numbers indicate the decrease rate in land prices.
(Source) Land Prices Study by Fukuoka Prefecture (2005 – 2007) and the Geographical Survey Institute’s 1/25000th Scale Map of Fukuoka (based on spatial data)

43

Appendix

Real Estate Transaction Cases around Hakata Station
Major transaction cases in 2006 through the endof August 2007

The tenth largest rise in standard land price in Japan→Real estate transaction cases by J-REITs→Real estate transaction cases by parties other than J-REITs (local real estate firms, funds, etc.)(Source) Prepared by Fukuoka Realty based on the Nikkei Real Estate Market Information, newspaper articles
and other materials(Source) Prepared by Fukuoka Realty based on the website of the Ministry of Land, Infrastructure and Transport“Hakata Station Area” is Active with Kyushu Shinkansen Line to be Open in 201144

Appendix

CAP Analysis(Source) Prepared by Fukuoka Realty based on the “Real Estate Investor Survey” by Japan Real Estate Institute45

Appendix

Population Growth in the Fukuoka Metropolitan Area
Population Change in Principal Metropolitan Areas in Japan(Indicated by index with figures in 1985 as 100)

Personnel Exchange within Kyushu as Seen inStudents Entering Universities(Note) Actual results for fiscal 2006, excluding students entering two-year collegesand vocational schools(Source) Kyushu Data Book 200746

Presentation of Accounts for Fifth Fiscal Period

Portfolio

Acquisition Strategy

Management

FinanceCompliance

Environmental Analysis and Management Policy

AppendixSize of the Fukuoka Metropolitan Area

Populations
Populations ofof Major
Major JapaneseJapanese
Metropolitan
Metropolitan Areas
Areas
Fukuoka Metropolitan Area
Fukuoka City and municipalities from which 10% or more of the population
commutes to school or work in Fukuoka City
Fukuoka City population: 1.34 million
Fukuoka metropolitan area population: 2.37 million

Tokyo
Metropolitan Area
30.28 million people

Osaka
Metropolitan Area
12.20 million people

Fukuoka
Metropolitan Area
2.47 million people

NagoyaMetropolitan Area
5.46 million people

Source：Tabulated by the Japan Economic Research Institute based on
the 2000 National Census conducted by the Ministry of Internal Affairs
and Communications

Fukuoka is the Fourth Largest Metropolitan Area in Japan following Tokyo, Osaka and Nagoya

47

Where is Fukuoka / Kyushu

Tokyo
Osaka

Kyushu Region

Fukuoka Pref.

■ 7 prefectures■ 1.5h flight from Tokyo, Seoul,■ “#16” GDP in the world
Shanghai■ 14mm Population■ Population: 2.47mm■ Industry(Metropolitan Area), 5mm－Semiconductor(Pref.)－Automotive■ Strong history of commerce－Processed foodwith Korea and China of
products
more than 1,000 years

Kyushu, Westernmost Island of the 4 Main Japanese Islands, is the Closest to Asia

48

Kyushu's GDP is Near Australia's in Size
Country Comparison of Kyushu's GDP(Source)Global Statistics 2005: National Economic Figures issued by the Statistics
Bureau of the Ministry of Internal Affairs and Communications and the2004 Prefectural Citizens Economic Figures issued by the Cabinet Office's
Economic and Social Research Institute

Kyushu's Commercial Capital:
Concentration on Fukuoka(Source)From the left, the Area Study of National Prefectures and Municipalities (official values as of October 1, 2006) issued by the Geographical Survey Institute, Estimated Present
Population on October 1, 2006 issued by the Statistics Bureau of the Ministry of Internal Affairs and Communications, 2004 Prefectural Citizens' Economic Figures issued by the
Economic and Social Research Institute of the Cabinet Office and the 2004 Commercial Statistics Study of the Ministry of Economy, Trade and Industry

49

Appendix

Strong Capital Investment in Kyushu
Long-term Trend of Capital Investment
Capital investment in Kyushu continues strongly

Locations of Major Plants Related to Automobiles and Semiconductors
Large manufacturers actively continue investment in Kyushu

DENSO Kitakyushu Plant(Kitakyushu City)

Toyota Motors Kyushu, Kanda Plant(Kanda-machi, Fukuoka Prefecture)

Toyota Motors Kyushu(Wakamiya City, Fukuoka Prefecture)

Nissan Motor, Kyushu Plant(Kanda-machi, Fukuoka Prefecture)
ROHM Fukuoka(Yukuhashi City, Fukuoka
Prefecture)
Daihatsu Auto Body
(Nakatsu City, Oita Prefecture)

Power Device Division,
Mitsubishi Electronic(Fukuoka City)

Oita Canon(Kunisaki City, Oita Prefecture)

Tokyo Electron Kyushu(Tosu City, Saga Prefecture)

Toshiba, Oita Plant(Oita City)
Nagasaki Technology Center,Sony Semiconductor Kyushu(Isahaya City, Nagasaki Prefecture)
Aishin Kyushu(Jonan Town,
Kumamoto
Prefecture)(Note) Graph formed after establishing the capital investment value of all industries in 2002 as 100 and indexing based on this(Source) “Capital Investment Trend in Kyushu Region 2007” by Development Bank of Japan
Fujitsu Integrated
Microtechnology, Kyushu Plant(Satsuma-Sendai City, Kagoshima
Prefecture)

NEC Kyushu(KumamotoPrefecture)
Honda Motor,
Kumamoto Plant
Fuji Photo Film
(Kikyuyo Town,
Kumamoto Prefecture)

Asahi Kasei
Microsystems
Kyushu(Nobeoka City,
Miyazaki Prefecture)

Miyazaki Oki Electric(KiyotakeTown, Miyazaki Prefecture)
KYOCERA Corporation Kagoshima
Kokubu Plant(Kirishima City, Kagoshima Prefecture)

Automobile
IT(Source) Prepared by Fukuoka Realty based on “Kyushu Handbook (2007)” of Development varlety of Home Page.

50

Appendix

New Concentration of Industry Starts to Bud (Solar Island)
Facilities involved in producing
thin-film solar batteries in Kyushu

Nishinihon Shimbun newspaper, March 9, 2007 (9th page)(Source) Prepared by Fukuoka Realty based on the “Emerging New Industrial Concentration” by
Development Bank of Japan and newspaper articles

Many major production bases for thin-film solar cells are concentrated in Kyushu

51Appendix

Consumption Trends
Fluctuations in Monthly (YOY) Comparisons of Large Retail Store Sales(May 2006 - July 2007)

Source: Commercial Sales Statistics issued by the Ministry of Economy, Trade and Industry(Reference) Year-on-year comparison for the immediate past year (August 2006 – July 2007)
・Nationwide (total): 99.7%
・Fukuoka (total): 99.6%
・Nationwide (total): 98.2%
・Fukuoka (department store total): 98.9%
52

Appendix

Significance of “Community SC”

53Appendix

Analysis of Investor Attributes and Volume Ownership Reports
Distribution by Investor Category(Breakdown of Investment Units)

Major Investors (End of 6th Fiscal Period)

Filing of Volume Ownership Report (as of September 28, 2007)

54

Appendix

History of Investment Unit PriceHistory of Investment Unit Price55

Appendix

Risk Dispersion Effects of Incorporating FRC into Portfolio【Calculation methods, etc.】

Comparison of effective frontiers that incorporate FRC or not(From the listing of FRC [June 21, 2005] to September 28, 2007)

・Two types of portfolio have been assumed: portfolio

comprising seven J-REITs (Note 1) that were listed
prior to FRC and have investment ratio of morethan 50% for office buildings, and portfolio
comprising the seven J-REITs plus FRC.

(Note 1) Nippon Building Fund (NBF), Japan Real Estate (JRE),
ORIX JREIT (OJR), Japan Prime Realty (JPR), Global
One Real Estate (GOR), Nomura Real Estate Office
Fund (NOF) and Mori Trust Sogo REIT (MTR)

・The return rates of the individual J-REITs areannualized total return rates (investment unit pricefluctuation rates + distribution yields) between June21, 2005 and September 28, 2007. The risks are
standard deviation of annualized daily change rates
for the closing prices of investment units for the said
period.

・Based on the above conditions, a graph has been
prepared to indicate effective frontiers of the two
types of portfolio. (The risks have been plotted on
the x-axis and return on the y-axis in curves on thegraph for the combination of the J-REITs that form
the portfolio. They were effectively combined sothat the risks were set at lowest if the J-REITs
show the same returns while setting the return at
highest if the risks are the same.)
・As indicated in the table below, FRC has relatively

small correlation coefficient of the investment unit
price fluctuation rate against the 7 office-centered
REITs that were covered. Thus, we believe theincorporation of FRC into portfolio will enableeffective diversification of portfolio.

(Note) Prepared by Fukuoka Realty

Correlation coefficient of price fluctuation rate against FRC
NBF
0.45

FRC Has Relatively Low Correlation with Office-centered REITs in Tokyo

JRE
0.43

OJR
0.51

JPR
0.45

GOR
0.37

NOF
0.53

MTR
0.47

56

Appendix

Canal City Hakata II and New Hakata Station Building to Change the Hakata Station Area
In 2011, the Hakata Station area will simultaneously see the full opening of the Kyushu Shinkansen,
opening of the New Hakata Station Building and the birth of Canal City Hakata II.
Given this development, the local community in the area is endeavoring to create a new town.
Canal City Hakata II (planned)

Site area

New Hakata Station (planned)

About
3,000 tsubos
Canal City Hakata

Hakata Station

Expected view of new Hakata Station at completion

Working Group of Organization Promoting
Hakata Station Area Town Creation
The working group is an organization to subjectively conduct area managementof the Hakata Station area in the future. It creates ideas to build a “face” of thearea that is suitable for the “gateway” to Kyushu, and aims to take the initiative,
united with the local community, for systematic town creation and managementof public spaces.

【Companies participating in the working group】●Kyushu Railway Company ●The Nishi-Nippon City Bank
○Japan Post Holdings (former Japan Post)○Hakata Station Building ○Fukuoka Asahi Building○Fukuoka Traffic Center●Fukuoka Jisho ○Mitsui Fudosan ○Fukuoka City*● mark indicates that it is a sponsor of Fukuoka Realty

57

Appendix

Fukuoka City Management Study Group

What is Fukuoka City
Management Study Group?
Young businessmen who work in Fukuoka andlove Fukuoka have voluntarily formed a groupto promote “town creation” of Fukuoka.
“Town creation” has been promoted by the
initiatives of the government. As businessmenin the private sector, the members aim topromote town creation, led by the private
sector, or provide cooperation and support totown creation led by the government, by fully
utilizing practical management sense andliberal ideas.

Members(Alphabetical order)
Ichiro Enomoto, Fukuoka Realty
Takayuki Karube, Kyushu University
Takehiro Kawahara, Fukuoka Sunpalace
Shinji Tagawa, Nishi Nippon Railroad
Hiroshi Takeda,
Development Bank of Japan Kyushu Branch
Wataru Tanaka, Kyushu Railway Company
Shigeru Tawara, Kyushu Electric Power
Isamu Nakamura, Kyushu Railway Company
Kazuhiro Nishioka, Kyudenko
Takehide Nozaki, Nishi Nippon Railroad
Toshiyuki Maekawa,
Kyushu Railway Company
Taichi Goto, Fukuoka Urban Laboratory
Akifumi Nobae, Fukuoka Keizai Doyukai

Proposal document the Study Group submitted
to the Mayor of Fukuoka City

58

Appendix

Survey Report on Commercial Facilities

What is the Urban Commercial Facilities
Study Report?
Fukuoka Realty manages assets of FRC thatowns Canal City Hakata, an urban commercial
facility, as a flagship property. As such, theasset manager has compiled a survey report,
including visits to commercial facilities in the
U.S. and Europe, in cooperation with theproperty management company, with apurpose of pursuing how urban commercial
facilities should be in the future.

Index of the report
1. Changes in commercial market
2. Interview with consumers
3. Overseas case study: the U.S.
4. Overseas case study: Europe
5. Ever evolving urban commercial facilities
in Japan
6. Urban commercial facilities for the future59