November 28, 2018

Provisional translation only

Fukuoka REIT Corporation
1-2-25 Sumiyoshi, Hakata Ward, Fukuoka City
Etsuo Matsuyuki
CEO & Representative Director(Securities Code: 8968)
Asset Management Company:
Fukuoka Realty Co., Ltd.
1-2-25 Sumiyoshi, Hakata Ward, Fukuoka City
Etsuo Matsuyuki
CEO & Representative Director
Inquiries:
Keishi Tamura
General Manager of Finance Department
TEL: +81-(0)92-272-3900

Fukuoka REIT Corporation Concludes Agreement to Purchase a New Property
Fukuoka REIT Corporation (FRC) announces that Fukuoka Realty Co., Ltd, an asset managementcompany to which the company entrusts the management of its assets, decided to acquire the following
domestic real estate today.
1. Summary of Acquisition
Property name

Use

Location

Tissage Hotel Naha

Hotel

2-chome, Nishi,
Naha City, Okinawa

Acquisition price

Acquisition date(planned)(planned)

2,835 mm yen

December 7, 2018

2. Reason for Acquisition
FRC invests primarily in retail facilities with excellent design and entertainment qualities and Class A officebuildings, focusing on the Fukuoka and Kyushu region. Other than retail facilities and office buildings, FRC also
works to acquire properties which, by capitalizing on its community-based strengths to establish appropriate
management structures for each property and through other measures, will allow it to secure stable earnings overmedium- to long-term periods. By incorporating such properties into its portfolio, FRC intends to pursue risk
diversification within the region.
Tissage Hotel Naha (hereafter, the “Property”), the property to be acquired, is a newly constructed hotel
completed in February 2018 and is located in Naha City, Okinawa expects strong growth. It incorporates a rent
system combining fixed rent and variable rent to pursue both stability and upside. It is situated in a highly
convenient area and is approximately a 10-minute car ride from Naha Airport and approximately a 9-minute walkfrom Asahibashi Station on the Yui Rail. Guestrooms are comprised mainly of twin/double rooms of 18 m2 orlarger, sizes large enough to take in leisure demand often requiring use of a room by several people.
The acquisition of the Property is FRC’s first investment in the Okinawa area and FRC expects that it will further
enhance the portfolio to secure stable earnings in the future.
3. Detail of Property for Acquisition(1) Overview of Acquisition- 1 -1) Property to be acquired: Real estate trust beneficiary interest(Trustee: Mitsubishi UFJ Trust and Banking Corporation (planned))
2) Property name: Tissage Hotel Naha
3) Acquisition price (planned) (Note1): 2,835 million yen
4) Appraisal value: 3,030 million yen (as of November 1, 2018)5) Acquisition cap rate (Note2): 5.3%
6) Acquisition date (planned): December 7, 20187) Seller: B-Lot Company Limited8) Funding: Cash on hand and borrowings (Note3)9) Payment method: Lump-sum payment upon delivery(Note1)The acquisition price (planned) does not include acquisition expenses, amounts equivalent to the settlementof property taxes and city planning taxes, consumption taxes on the building and other expenses.
(Note2)The acquisition CAP is calculated by the direct capitalization method: NCF/ The acquisition price (planned)
x 100 (%) of the appraisal assessment. It does not include a solar power generating system.
(Note3)For details, please refer to “Notice on Borrowing of Funds” announced today.

(2) Points Valued in Deciding on Acquisition of Property
1) Location conditions
The Property is located in a highly convenient area in Naha City, Okinawa, and is approximately a
10-minute car ride from Naha Airport and approximately a 9-minute walk from Asahibashi Stationon the Yui Rail. With redevelopment planned in 2000, the vicinity of Asahibashi Station has beendeveloped sequentially since 2012 and the redevelopment project was completed in September 2018with the completion of Kahuna Asahibashi A district, a complex housing a bus terminal, retail facility,etc.
In the area surrounding the Property, there is a convenient store, supermarket, and car rental shop
within walking distance, offering highly convenience to hotel guests. Access to Kokusai-dori, theprimary destination in Naha City, is also excellent.
2) Building properties, property management company, etc.
The Property is a newly constructed hotel with 132 guestrooms completed in February 2018.
Guestrooms are comprised mainly of twin/double rooms of 18 m2 or larger, sizes large enough totake in leisure demand often requiring use of a room by several people. The guestrooms are placedin the north and south of the building with the northern rooms facing a flat monthly parking lot andthe southern rooms facing the front road, sufficiently letting in sunlight and offering a view.
Nest Hotel Japan Corporation, the lessee and operating company of the Property, is an operatingcompany of hotel and resort restaurant established in 2013. It has been operating mainly under Nest
Hotel brand and has also operated hotels in the vicinity of the Property.
3) Market Overview
According to “Overnight Travel Statistics” published by Japan Tourism Agency, the total number oflodgers across Japan in 2017 was around 509 million, with Okinawa accounting for roughly 21.68
million and surpassing Kanagawa and Kyoto. The number is the fifth largest among the 47
prefectures, indicating Okinawa as an area with strong needs for lodging. Furthermore, the total
number of foreign lodgers has been on the rise in recent years and reached 4.62 million in 2017.
<Total number of lodgers by each city “2017”and increase rate “2011-2017” >(10,000 guest nights)- 2 -Source: “Overview of statistical survey on overnight travel” by Japan Tourism Agency<Total number of foreign lodgers to Okinawa “2013-2017”>(10,000 guest nights)

Source: “Overview of statistical survey on overnight travel” by Japan Tourism Agency

According to “Overview of Statistics on Tourists to Okinawa” published by Okinawa Prefecture, thenumber of tourists to Okinawa in fiscal 2017 increased by around 0.81 million (around 9.2%) from theprevious fiscal year to around 9.57 million, recording the 9 million range for the first time. The figure
also marked a new record high for the fifth consecutive year. In addition, the number of foreign tourists
to Okinawa in fiscal 2017 was around 2.69 million, accounting for roughly 28.1% of the national total
and renewing the highest record for the tenth consecutive year.
As to the outlook for fiscal 2018, the domestic tourism market is expected to remain strong with theeconomy seeing a mild recovering trend, airline companies expanding flight routes, etc., while the numberof foreign tourists is expected to remain steady backed by factors such as planned launches of LCC flights
between Kaohsiung, Taiwan and Naha, which is likely to increase arrivals by air.
＜Number of tourists in Okinawa “FY2013-FY2017”and foreign visitors ratio＞(10,000 guests)- 3 -Source: “Statistics of tourists in Okinawa” by Okinawa Prefecture

According to “Annual Report of Statistics on Legal Migrants” published by the Ministry of Justice and“Overview of Statistics on Tourists to Okinawa” published by Okinawa Prefecture, Asia is the mostrepresented nationality/area of origin of foreigners entering Okinawa Prefecture, with Taiwan, South
Korea, China and Hong Kong being the top four areas and accounting for over 90% of inbound tourists.
As to trends by country, Taiwan, South Korea and Hong Kong brought a record-high number of tourists
due to the launch of new flight routes, increase in the number of existing flights and such. As for China,
while tourist arrivals by air were roughly equal to those in the previous fiscal year with the launch of new
flight routes, etc., the number of arrivals by sea increased due to the increase in the number of cruises
from China using Okinawa at a port of call.
＜Foreign visitors in Okinawa by each country and area（2017）＞

Source: Statistics on Legal Migrants (Ministry of Justice)<International flight at Naha Airport “summer”>（flights/week）- 4 -(Of which LCC flights)（flights/week）

Source: Overview of regularly scheduled international flights (Ministry of Land, Infrastructure, Transport and Tourism)

Naha airport, as the airport with one runway, there are many passengers, arrivals and departures. The
delay of departure and arrival has become chronic. As a countermeasure, the construction of the second
runway began in January 2014, and it is scheduled to start operation at the end of March 2020. When theextension of the runway is completed, the annual number of arrival and departure is expected to increaseto 185 thousand times.
<Change in Naha Airport arrivals and departures “FY2013-FY2017”>(10,000 times / year)

Source: Ministry of Land, Infrastructure, Transport and Tourism “Record of Airport Management Status”*The number of departure and arrival times is calculated as twice the number of landings.

- 5 -(3) Overview of Asset to be acquired
Property nameTissage Hotel Naha
Property to be acquired Real estate trust beneficiary interest
Acquisition price
2,835 million yen
Trustee
Mitsubishi UFJ Trust and Banking Corporation (planned)
Term of real estate trust From December 7, 2018 to November 30, 2038 (planned)
Location (address)
14-1, 14-7 2-chome, Nishi, Naha City, Okinawa
Area875.38 m2
ZoningCommercial areaLand
Floor area ratio
400%
Building coverage
80%
Type of ownership
Ownership
Structure/floor
Steel-framed with alloy galvanizedsteel roof, 13 floors
Built
February 26, 2018
Building
Total floor area
Main building: 3,758.76 m2
Attached building：42.22 m2
Use
Main building: Hotel and parking
Attached building：Parking
Type of ownership
Ownership
Total rooms
132 rooms
Constructor
Taiko-c.
Designer
Shinsei planning Co., Ltd
Building design officeengaged in structural
Life Design Japan Co. Ltd. First class registered architect officeengineering data
Organization that
authorized building
JAPAN ERI CO., LTD.
construction
Appraisal value
3,030 million yen (as of November 1, 2018)
Appraiser
Tanizawa Sogo Appraisal Co., Ltd
Collateral after
Revolving mortgage with the present owner as a debtor has been establishedacquisitionon the land and building. (However, the property is scheduled to be acquired
after cancelling the pledge)
Property management
Fukuoka Jisho Co., Ltd (planned)
company
Earthquake PML
2.5%（based on the assessment by Tokio Marine & Nichido Risk Consulting
Co., Ltd.）Special notations
None
Total number of tenants
1
Tenant’s name
Nest Hotel Japan Corporation
Type of contract
Fixed-term lease
Status of leasing
Term of contract
10.0 years(remaining years)
9.5years
Early cancellation & rent revision Not available
Contract rents
1) Minimum guarantee rent:- 6 -Security deposits
Leasable floor space
Total leased floor space
Occupancy rate

78,536,486 yen/annually (Note1)
2) Valuable rent: The amount isobtained by subtracting a) minimum
guarantee rent, b) amount obtainedby multiplying the sales of said
month by a set percentage, c) amountobtained by multiplying the GOP of
said month by a set percentage andd) others, from the GOP of said
month.
40 million yen
3,758.76 m2 (Note3)
3,758.76 m2 (Note3)
100% (Note4) (as of October 31, 2018)*All figures for space, floor space, location, use, structure etc. are based on the indications on the registry.
* The earthquake PML figure is based on the earthquake risk assessment report by the indicated estimator. The figure is a
representation of the reporter’s opinion, and does not guarantee the accuracy of its content.
(Note1) The figures of minimum grantee rent are from January 2019 to December 2019 (annually).
(Note2) GOP stands for Gross Operating Profit (sales gross operating profit). The amount is deducted the expenses related
to hotel operating expenses such as administrative outsourcing expenses, personnel, utilities expenses, advertising expenses
and other various expenses from the total sales of hotel.
(Note3) The leasable area indicates the area that can be leased to the end tenants. The total leased area indicates the sum of
the areas designated in the lease agreements that have been concluded with the end tenants by October 31, 2018. A part ofparking lot is no included.
(Note4) The figure indicates the ratio of the total leased area to the leasable area, and has been rounded to the first decimal
place. A part of parking lot is no included.

(4) Overview of Building Status Assessment Report
Surveyor
Tokio Marine &Nichido Risk
Consulting Co., Ltd.

Date of survey report

October 23, 2018

Urgent and short-term
repair and replacement
expenses (Note1)

Long-term repair andreplacement expenses-

5 million yen(Note2)(Note1) Urgent and short-term repair and replacement expenses refer to the amount indicated in the report as repair andreplacement expenses that will be required urgently or within roughly one year.
(Note2) Long-term repair and replacement expenses refer to the amount indicated in the report as average repair andreplacement expenses for 12 years. The indicated figure has been rounded off to the nearest million yen.

(5) Profile of Previous Owners
Name
B-Lot Company Limited
Location
19-10, 2-chome, Shinbashi, Minato Ward, Tokyo
1. Real estate investment development business
Nature of business
2. Real estate consulting business
3. Real estate management business
Representative title
Makoto Miyauchi, President
Specified capital
944 million yen (December 31, 2017)- 7 -Established
October 10 , 2008
Total assets
19,109 million yen (as of December 31, 2017)
Total net assets
4,009 million yen (as of December 31, 2017)
Relationship with FRC and the asset management company
CapitalThere are no significant capital ties.
relationship
Personnel
There are no significant personnel ties.
relationship
Business
There are no significant business relationships as of the 28th fiscal
relationshipperiod.
Related parties or
There are no significant related parties.
not(6) Condition of property acquisition
The acquisition is not from a party having special interests with FRC or the asset management company.
(7) Sales Agent Profile
Name

Mitsubishi UFJ Trust and Banking Corporation

Location

4-5, 1-chome, Marunouchi, Chiyoda Ward, Tokyo

Representative title

Mikio Iketani, President & CEO,Nature of businessSpecified capitalBusiness pertaining to financial services centering on trust banking
business324.2 billion yen (as of March 31, 2018)

EstablishedMarch 10, 1927

Sponsor

Mitsubishi UFJ Financial Group, Inc. (100.0%)

Fees

Not disclosed (Note)

Relationship with FRC and the asset management company
CapitalThere are no significant capital ties.
relationship
Personnel
There are no significant personnel ties.
relationshipThe company is FRC’s lender, asset custodian and provider ofBusiness
general administrative affairs, and a trustee for part of assets
relationshipowned.
Related parties
There are no significant related parties.
or not(Note) The figures are omitted because sales agent did not consent to their disclosure.

(8) Form of Payment
FRC is scheduled to pay the acquisition fee in full on the scheduled acquisition date (December 7, 2018)of the property proceeds from borrowings and cash on hand.
(9) Transaction with Interested Parties
FRC plans to conclude a management consignment agreement with Fukuoka Jisho Co., Ltd., in order toconsign to the company property management for the Property. The company falls within the scope of- 8 -interested parties of the asset management company. Accordingly, the asset management company has
held discussions and obtained approval from its Investment Management Committee, Compliance
Assessment Committee and Board of Directors pursuant to the regulations and other rules of the asset
management company.
(10) Acquisition Schedule
November 28, 2018
November 28, 2018
December 7, 2018
December 7, 2018

Decision of acquisition
Conclusion of agreement
Payment (planned)
Delivery of the property (planned)

4. Outlook
The impact of the transaction on FRC’s operating forecast for the fiscal period ending February 2019
(September 1, 2018 - February 28, 2019) and for the fiscal period ending August 2019 (March 1, 2019 - August
31, 2019), which were announced in the “Earnings Briefing for the Period Ended August 2018” dated October
16, 2018 is considered to be minimal, and FRC will not revise the forecast at present.

- 9 -5. Overview of Appraisal Report
Property Name

Tissage Hotel Naha

Appraisal value

3,030,000 thousand yen

Appraiser

The Tanizawa Sogo Appraisal Co.,Ltd

Pricing dateNovember 1, 2018
FiguresCategory

3,030,000
thousand yen
3,080,000
thousand yen
170,388
thousand yen
170,388
thousand yen
0
thousand yen
14,314thousand yen
0
thousand yen
1,200
thousand yen

Income Capitalization Approach Value
Value Calculated Using the Direct Capitalization Method（1）Gross Operating Revenue
Maximum Gross Operating Revenue
Shortfall Attributed to Vacancies（2）Operating Expenses
Maintenance and management fees
PM fee1,270
thousand yen

Repair and maintenance expenses
Taxes and fees
Damage insurances
Other expenses（3）Net operating income
Profit through management of temporary deposits, etc.
Capital Expenditure Reserve（4）Net Cash Flow

10,571
thousand yen
762
thousand yen
511
thousand yen
156,073
thousand yen
400
thousand yen
5,715
thousand yen
150,758
thousand yen

Reasons, etc.

Assessment based on market
rent level

Premise that the lessee is
responsible for payment
Based on the agreements, etc.
Based on the engineering
report and similar cases ofother properties.
Based on the property tax
notice, etc.

Assessed by reference to suchfactors as FF&E reserve（5）Capitalization rate
4.9%

Value through DCF method

Evaluated considering thelocation, etc. of the property,
future uncertainties,
comparable cases, etc.

3,010,000
thousand yen
FY1~9
4.7%
FY10 or later 4.8%

(1)Discount rate(2)Terminal cap rate

5.1%
2,980,000
thousand yen
37.6%

Value through cost method
Percentage of leased land
Percentage of building

62.4%

Other matters noted by the appraiser in conducting appraisal

Not stated*This document was distributed to Kabuto Club (press club within the Tokyo Stock Exchange), Press Club for the Ministry ofLand, Infrastructure, Transport and Tourism, Construction Trade Paper Press Club for the Ministry of Land, Infrastructure,
Transport and Tourism, Fukuoka Economic Press Club, and Fukuoka Securities Finance Press Club
*Fukuoka REIT Corporation’s website is http://www.fukuoka-reit.jp/eng/- 10 -

(Attachments)
Reference 1: Outlook of the property
Reference 2: Location of the property
Reference 3: Map of FRC’s portfolio
Reference 4: List of FRC’s portfolio- 11 -

Reference 1: Outlook of the property- 12 -

Reference 2: Location of the property- 13 -

Reference 3: Map of FRC’s portfolio- 14 -

Reference 4: List of FRC’s portfolio
Use

Property Name

Acquisition Date(planned)

AcquisitionPrice

Acquisition
Cap Rate(planned) (mm yen)
(Note1)(NCF basis)(Note2)

Investment
Ratio(Note3)

Canal City Hakata

Nov. 9, 2004

32,000

6.0%

16.3%

Canal City Hakata・B

Mar. 2, 2011

28,700

5.4%

14.6%

Nov. 9, 2004
(Initial acquisition)
May 28, 2015
(Additional acquisitionof a part of land)
Sep. 1, 2016
(Additional acquisitionof a part of land andbuilding)
July 6, 2018
(Additional acquisitionof a part of land)

18,620

6.0%

9.5%

SunLiveCity Kokura

Jul. 1, 2005

6,633

6.6%

3.4%

Konoha Mall
HashimotoMar. 1, 2018

10,000

5.3%

5.1%

Square Mall
Kagoshima
Usuki

Sep. 28, 2006

5,300

6.3%

2.7%

Kumamoto
Intercommunity SC

Nov. 30, 2006

2,400

6.5%

1.2%

Hanahata SC

Sep. 3, 2007

1,130

6.4%

0.6%

Kurume Higashi
Kushiwara SC

Feb. 1, 2008

2,500

6.1%

1.3%

K’s Denki Kagoshima

Mar. 27, 2008

3,550

5.7%

1.8%

Marinoa City Fukuoka(Marina Side Building)

May 1, 2015

5,250

5.5%

2.7%

Canal City BusinessCenter Building

Nov. 9, 2004

14,600

6.3%

7.4%

Gofukumachi BusinessCenter

Nov. 9, 2004

11,200

6.3%

5.7%

Sanix Hakata Building

Sep. 30, 2005

4,400

5.9%

2.2%

Park Place Oita

RetailOfficebuildings- 15 -

Others

Taihaku Street
Business
CenterMar. 16, 2006

7,000

6.0%

3.6%

Higashi Hie BusinessCenterMar. 13, 2009

5,900

6.0%

3.0%

Tenjin Nishi-Dori
Center Building

Feb. 1, 2013

2,600

5.4%

1.3%

Tenjin North Front
Building

Mar. 28, 2013

2,800

6.1%

1.4%

Higashi Hie BusinessCenter II

Mar. 1, 2018

4,230

4.9%

2.2%

Amex Akasakamon
Tower

Sep. 1, 2006

2,060

5.4%

1.1%

City House Keyaki Dori

Dec. 20, 2007

1,111

5.5%

0.6%

Aqualia Chihaya

Mar. 1, 2012

1,280

6.8%

0.7%

D-Wing Tower

Mar. 1, 2013

2,800

5.9%

1.4%

Granfore Yakuin
MinamiNov. 4, 2014

1,100

5.6%

0.6%

Hotel FORZA Oita

Mar. 1, 2013

1,530

6.6%

0.8%

Tissage Hotel Naha

December 7, 2018

2,835

5.3%

1.4%

Tosu Logistics Center

Mar. 28, 2014

1,250

5.9%

0.6%

LOGICITY Minato
KashiiMar. 27, 2015

8,150

5.2%

4.2%

LOGICITY Hisayama

Jun. 1, 2017

5,050

－

195,979

Total or weighted average of allproperties

5.1%(Note4)5.8%

2.6%
100.0%(Note1) All figures in the Acquisition Price (planned) column indicate the acquisition price written in the sales agreement between
FRC and the seller, and exclude charges, taxes and other expenses.
(Note2) Figures in the Acquisition Cap Rate column have been calculated using the direct capitalization method: NCF/planned
acquisition value x 100 (%) of the appraisal assessment, and rounded off to the first decimal place. The Acquisition Cap Rate forPark Place Oita is calculated using the total of direct capitalization method NCFs and acquisition prices stated in the appraisal
reports for Park Place Oita acquired on November 9, 2004, the adjacent land (parking (land)) acquired on May 28, 2015, Sports
Club NAS Park Place Oita acquired on September 1, 2016 and Park Place Oita Daiichi Parking to be acquired on July 6, 2018.
(Note3) The ratio are rounded off to one decimal places.
(Note4) It does not include a solar power generating system.

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