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31st Fiscal Period Report on Performance and Management Status (Semiannual Report) Security Code 8968 September 1, 2019 to February 29, 2020 Old map of Fukuoka castle town and Hakata neighborhood (9th year of Bunka Era: 1812) Fukuoka REIT Corporation 8968 I. Overview of Fukuoka REIT Corporation I. Overview of Fukuoka REIT Corporation Profile To Our Unitholders Status of the Investment Corporation FRC is Japan's first REIT specializing in regional properties. FRC manages a portfolio centering on retail facilities featuring excel- lent design and entertainment qualities and superior office buildings throughout all of Kyushu. With a central focus on Fukuoka, First of all, we would like to extend our heartfelt sympathies to those who have been stricken with the COVID-19 infection as well and in Yamaguchi Prefecture and Okinawa Prefecture, we are utilizing our strength of knowing the local characteristics of real as to their families and related persons. estate, which is a very regional-specific business. We would like to express our sincere appreciation to all unitholders dends in a stable manner by generating stable cash flows and ongo- Overview of the Investment Corporation for your continued support of Fukuoka REIT Corporation (FRC). ing strategic initiatives. We are pleased to report on the performance results and manage- We plan to acquire two new properties (4,990 million yen) in the Name: Fukuoka REIT Corporation ment status of FRC for the thirty-first fiscal period (September 1, 32nd fiscal period. Representative: Etsuo Matsuyuki, Executive Director 2019 to February 29, 2020). In the fiscal period under review, we concluded an agreement to Asset manager: Fukuoka Realty Co., Ltd. (Fukuoka Local Finance Branch Bureau (financial instruments) No. 10) FRC was listed in June 2005 and started as Japan’s first REIT spe- acquire LOGICITY Wakamiya (Note), the fourth logistics facility for Listed date: June 21, 2005 (Tokyo Stock Exchange, and Fukuoka Stock Exchange) cializing in regional properties. Since then, we have exhibited consis- FRC, in June 2020 (the 32nd fiscal period). tent growth and achieved stable performance through the support of LOGICITY Wakamiya is located in an industrial park that is near Sponsors our unitholders and sponsor companies. Kyushu Expressway Wakamiya Interchange and has a concentration The business conditions of the Fukuoka and Kyushu area were of logistics providers’ warehouses along with Toyota Motor Kyushu’s expanding moderately but are currently on a somewhat weak note, automobile plant. mainly in terms of consumer spending as well as exports and produc- In addition, prior to the acquisition of LOGICITY Wakamiya in the tion, due to the impact of COVID-19 infection that broke out recently, 32nd fiscal period, we plan to acquire Higashi Hie Business Center III 5% 5% 5% 5% among other factors. On the other hand, the commercial land price in (completed in March 2020) from Fukuoka Jisho Co., Ltd., the main Fukuoka City, the central area of FRC’s investment targets, rose sponsor, in May 2020. Since the completion of Higashi Hie Business THE BANK OF THE NISHI-NIPPON Development Bank of Japan Inc. SAIBU GAS CO., LTD. FUKUOKA, LTD. CITY BANK, LTD. 16.5% year-on-year, according to the government’s 2020 Land Mar- Center in February 2009, the Higashi-Hie Area has been developing ket Value Publication announced in March 2020. The rate of increase a number of office buildings and hotels against the backdrop of ex- is high due to demand competition for office, store and other spaces cellent transportation infrastructure, and its competitiveness as an caused by the Tenjin Big Bang project making progress in the Tenjin office area has improved. area, which induces re-construction of buildings through deregulation Going forward, FRC will continue to exert its strengths as a REIT and creates new spaces and employment, and by the extension of specializing in regional properties and quickly respond to market % Director Outside % 50 director 10 the City Subway Nanakuma Line (scheduled for fiscal 2022) as well changes, while receiving support and cooperation from powerful FUKUOKA JISHO Fukuoka Realty Co., Ltd. Kyushu Electric Power Co., Inc. as by the launch of the Hakata Connected, a project designed to sponsors leading the Kyushu business world. We will also strive to CO., LTD. (Note) (Asset Manager) extend the bustle and vigor of Hakata Station into surrounding areas. maintain and increase the dividend per unit level through steady asset The residential land price also rose 6.8% year-on-year in the light of a management. notable increase in population. As such, the city’s land prices have We at FRC will also pursue our mission of maximizing unitholder continued rising for the eighth consecutive year both for commercial interests over the medium to long term based on our management land and residential land, marking higher rates of increase. philosophy of “Act Local, Think Global.” 5% 5% 5% 5% Occupancy remained solid, with the average period-end occupan- We greatly appreciate your continued support and cooperation. Kyudenko Corporation Nishi-Nippon Railroad Co., Ltd. Kyushu Railway Company ROYAL HOLDINGS Co., Ltd. cy rate of all properties FRC owns standing at 99.7%. FRC posted operating revenues of 9,162 million yen, operating income of 3,273 (Note) The property is currently operating under a (Note) Concluded MOU with Fukuoka REIT Corporation and Fukuoka Realty Co., Ltd. concerning pipeline support. different name, but its name will be million yen, ordinary income of 2,900 million yen and profit of 2,899 changed to “LOGICITY Wakamiya” after it is million yen for the fiscal period under review. The dividend per unit acquired by FRC. Overview of the Asset Manager came to 3,642 yen. Name: Fukuoka Realty Co., Ltd. Telephone: +81-92-272-3900 The actual dividend for the period under review decreased by 8 yen Representative: Etsuo Matsuyuki, CEO & Representative Director Established: December 26, 2003 per unit from the forecast at the time of the announcement of the fi- Address: 2-25, 1-Chome, Sumiyoshi, Hakata Ward, Fukuoka City Capital: 200,000,000 yen nancial results for the 30th fiscal period. This was mainly due to the effects of changes in inbound tourists and the impact of COVID-19 Portfolio infection. While the current situation does not allow us to predict Etsuo Matsuyuki Investment type (based on acquisition price) when the spread of the COVID-19 infection will be contained, we will Executive Director keep our endeavors going forward to maintain and increase divi- Fukuoka REIT Corporation Retail Ofce buildings Others 59.2% 26.9% 13.9% CONTENTS Investment area (based on acquisition price) I. Overview of Fukuoka REIT Corporation II. Semiannual Report .............................................................................................................. 9 Fukuoka metropolitan area Other To Our Unitholders ....................................................................................................... 1 III. Independent Auditor's Report ..................................................................................... 26 Kyushu areas Profile ........................................... .................................................................................................. 2 IV. Balance Sheet ...................................................................................................................... 27 77.2% 22.8% Trend of Growth in Asset Size of FRC / Financial Summary ........................................................ 3 V. Statement of Income ........................................................................................................ 29 Portfolio Overview ......................................................................................................................... 5 VI. Statement of Changes in Net Assets ....................................................................... 30 Total leasable floor space Occupancy rate at end of period Initiatives on Sustainability ............................................................................................................ 7 VII. Cash Flow Statement ....................................................................................................... 31 580,662.77 m2 99.7% VIII. Notes to Financial Statements .................................................................................... 32 *Figures are based on properties owned as of February 29, 2020. FUKUOKA REIT CORPORATION 1 FUKUOKA REIT CORPORATION 2 I. Overview of Fukuoka REIT Corporation I. Overview of Fukuoka REIT Corporation Trend of Growth in Asset Size of FRC FRC More than Doubled Asset Size and Diversified Investment Types Since Listing (mm yen) Retail (left axis) Ofce buildings (left axis) Residence (left axis) Logistics (left axis) Hotels (left axis) Number of investment properties (right axis) Occupancy rate (right axis) (Note) 99.6 99.7 99.6 99.7 (properties) (%) 200,000 40 100 99.8 99.7 99.6 99.6 99.6 99.8 99.6 99.4 99.4 99.4 99.2 99.1 99.3 99.3 99.5 99.5 99.4 99.0 98.8 98.8 99.0 98.6 98.8 98.1 98.1 97.0 Acquired from sponsors Sponsors 60.6% 14 29properties 118,710 *Higashi Hie Business Center, which FRC acquired in the Other than As of million yen sponsors 10th fiscal period ended August 2009, was acquired both February 29, 2020 150,000 39.4% 30 90 from an outside seller and a sponsor. Accordingly, the acqui- 195,979 sition price of the property has been evenly divided and 77,269 29 29 29 million yen million yen added to