Strengths of FRC
01. History of FRC
As the first region-specific REIT in Japan, Fukuoka REIT Corporation (hereinafter "FRC") became the 17th listed J-REIT on June 21, 2005. Its assets under management, which totaled 73.5 billion yen upon listing (based on acquisition price), has reached more than 200 billion yen as of today.
In 2005, when all of the listed J-REITs were headquartered in Tokyo, Japan's first region-specific REIT was born in Kyushu, ahead of Nagoya and Osaka. That J-REIT was FRC, created with the intention of drawing funds to the region by introducing regional blue-chip properties to investors around the world.
Fukuoka Realty Co., Ltd., the asset manager of FRC, is jointly sponsored by powerful companies leading the Kyushu business world, which have established a strong backup framework.
Upon listing, FRC set up its management philosophy as a region-specific REIT of "Act Local, Think Global," which has been inherited to date.
02. Strengths of FRC
The strengths of FRC primarily lie in the following five aspects.
(1) A REIT specialized in an area having further growth potential
FRC invests specifically in Fukuoka and Kyushu, which comprise an area having further growth potential.
According to the data from National Census conducted by the Ministry of Internal Affairs in 2005, Fukuoka City is ranked first among Japan's government-ordinance-designated cities in terms of ratio of younger generation.
(2) Sponsorship structure mainly comprising local business leaders
Fukuoka Realty Co., Ltd., the asset manager of FRC, is sponsored by powerful companies that lead the regional business world, in particular Fukuoka Jisho Co., Ltd., one of the largest developers in the Kyushu area.
(3) Payment of stable dividends since listing
FRC has continued to pay dividends at a high level based on stable cash flows.
(4) Portfolio with excellent properties and high occupancy rates
FRC owns excellent properties that represent the Fukuoka and Kyushu area, operating them at high occupancy rates.
Moreover, it works to diversify the types of its investment assets in order to mitigate the risks associated with the regional concentration.
(5) Solid financial structure
FRC works to disperse debt repayment dates and increase the average length of time until debt maturity. It has established good relationships with financial institutions including megabanks and regional banks in Kyushu, led by the three sponsor banks (The Bank of Fukuoka, The Nishi-Nippon City Bank and Development Bank of Japan).
03. Investment Target Area and Investment Type
As a rule, FRC limits its investment target area to Fukuoka and Kyushu. Specifically, it focuses its investments on the Fukuoka urban area (60% - 90%) that is expected to continue growing significantly into the future, while also investing in other areas of Kyushu (including Okinawa and Yamaguchi Prefectures) and other regions.
As for investment type, FRC primarily invests in retail facilities, while also investing in such asset types as office buildings, residential properties, hotels and logistic facilities.
04. Growth Strategy
J-REITs pursue two types of growth – external growth and internal growth.
- External growth
- Increase cash flows, which are the source of dividends, by expanding the asset size through additional acquisitions of real estate, etc.
- Internal growth
- Increase cash flows by enhancing the profitability of the real estate, etc. already owned in the portfolio.
"Act Local, Think Global" is the concept formulated and realized by FRC.
Real estate is best understood by the people local to the area where it is located. FRC makes the best use of its ability to collect information, familiarity with the market and strong industry-administration-academia network, which represent its strengths as a locally based entity. By doing so, FRC will realize stable and solid operations and achieve growth. At the same time, in order to achieve growth, FRC believes that it is essential to be accountable to the world's capital markets as well as always work to communicate with investors under a stringent compliance policy.
FRC realizes external growth by vigorously selecting and investing in properties that may generate stable cash flows over a long term. By incorporating properties other than retail properties and office buildings into its portfolio, FRC intends to pursue risk diversification within the region.
Grown more than 2.5 times since listing!
05. Management Policy
The management policy of FRC comprises the following three pillars.
(1) Elaborate and diligent operations peculiar to a region-specific REIT
As a rule, FRC limits its investment target area to Fukuoka and Kyushu. FRC is region-specific because it believes that, by being so, it can conduct community-based operations in an elaborate and diligent manner, as represented in its concept of "Act Local" (differentiation through information-gathering ability, good knowledge of the area and local networks).
(2) Enhancement of property attractiveness
In order to secure stable operations, FRC must maintain the attractiveness and quality of its properties through such measures as "contracts with highly credible tenants," "property management after move-ins," "forecast of fluctuating expenses" and "repair and maintenance of buildings to prevent their functions from becoming obsolete." While constantly considering what will please customers and what they seek of us, FRC works daily to enhance property attractiveness by proactively involving itself in operations on top of conducting ordinary property management.
(3) Contribution to enhancement of attractiveness and vitalization of Fukuoka and Kyushu
In view of the characteristics of real estate, which is an important asset to the local economy, it is important to maintain and improve the quality of properties from a long-term, not short-term, perspective. With its eyes on the future, FRC aims to realize operations that should not only secure stable cash flows of individual properties but also contribute to the enhancement of attractiveness and vitalization of Fukuoka and Kyushu.
As a financial policy, FRC shall strive to enhance the soundness of its financial base by realizing low financing costs while building good relationships with financial institutions and mitigating the impact of fluctuation of financial environment in the future for stable fundraising.
When borrowing funds and issuing investment corporation bonds, FRC considers individual financing conditions such as method, duration, cost, and interest type (fixed/floating) of financing, comprehensively taking into account the capital market and financial environment. In addition, FRC seeks to raise funds efficiently and effectively considering entire liabilities owed by FRC to be balanced, such as proportion of fixed and floating interest rate, dispersion of repayment dates, and financing costs.
(1) Heighten Solid Financial Structure
- Build stronger relationships with financial institutions
- Realize low financing costs
(2) Efficient and Effective Fundraising
- Consider balance of all interest-bearing liabilities (Proportion of fixed and floating interest rates, diversification of debt maturities, financing costs, etc.)
- Consider individual terms and conditions (Methods of fundraising, interest rate conditions, borrowing period, financing costs, etc.)