Strengths of FRC

• 01.Tracks of FRC
• 02.Strengths of FRC
• 03.Investment Target Area and Investment Type
• 04.Growth Strategy
• 05.Management Policy
• 06.Financial Policy

01. Tracks of FRC

As the first region-specific REIT in Japan, Fukuoka REIT Corporation (here in after "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), 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.

See more detail of FRC’s Overview.

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 is an area having further growth potential.
Fukuoka City is ranked first among Japanese cities designated by the government ordinance both in terms of the population growth rate and the ratio of the younger generation.

See more detail of Current Economic Climate in Kyushu

(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, centering on Fukuoka Jisho Co., Ltd., one of the largest developers in the Kyushu area.。

See more detail of the Sponsorship structure

(3) Payment of stable dividends continuing since listing

FRC has continued to pay dividends at a high level based on stable cash flows.

See more detail of FRC’s dividends history

(4) A portfolio of excellent properties and high occupancy rate

FRC owns excellent properties that represent the Fukuoka and Kyushu area, and keeps them operated at a high occupancy rate.
Moreover, it works to diversify the types of its investment assets in order to mitigate the risks associated with the regional concentration.

See more detail of History of Occupancy Rate by Property

See more detail of History of Active Retail Property Sales

(5) Solid financial structure established

FRC works to disperse the 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).

See more detail of Interest-bearing Debt

03.Investment Target Area and Investment Type

FRC as a rule 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 Kyushu areas (including Okinawa and Yamaguchi Prefectures) and other regions.

By investment type, it primarily invests in retail facilities, while also invests in such asset types as office buildings, residential properties, hotels and logistic facilities.

Investment Policy

Portfolio Overvew

04.Growth Strategy

J-REITs make two types of growth – external growth and internal growth.

"Act Local, Think Global" is the concept formulated and realized by FRC.
Real estate is best understood by the local people in the area where it is located. We make the best use of our ability to collect information, our familiarity with the market and our strong industry-administration-academia networks, which are our strengths as a locally-based entity. By doing so, we will realize stable and solid operations and achieve growth. At the same time, in order to achieve growth, we believe it essential to exert our accountability to the capital market in the world 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 other properties than retail properties and office buildings into its portfolio, FRC intends to pursue risk diversification within the region.。

Asset size

Grown more than 2.5 times the initial size upon 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

Fukuoka REIT as a rule limits its investment target area to Fukuoka and Kyushu. We are region-specific because we believe that, by being so, we can conduct community-based operations in an elaborate and diligent manner, as represented in our 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, we must maintain the attractiveness and quality of the properties through such measures as "contracts with highly credible tenants," "property management after move-ins," "forecast of fluctuating expenses" and "repairs and maintenance of buildings to prevent their functions from becoming obsolete." Always thinking what will please our customers and what they require us to do, we make daily endeavors to enhance the property attractiveness by proactively involving ourselves in the operations on top of conducting ordinary property management.

(3) Contribution to enhanced 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 the properties from a long-term, not short-term, perspective. With our eyes on the future, we aim to realize operations that should not only secure stable cash flows of individual properties but also contribute to the enhanced attractiveness and vitalization of the Fukuoka and Kyushu area.

06.Financial Policy

As a financial policy, Fukuoka REIT shall strive to minimize cost increases brought on by hikes in interest rates by obtaining capital primarily through long-term fixed interest loans and by conservatively managing the portfolio with a conservative LTV or low borrowing rate. Additionally, Fukuoka REIT will strive to maximize increases in earnings through the strong economy by increasing rent revenue using sales-linked rents and through external growth at appropriate prices by effectively utilizing the sponsor pipeline. These measures will be used to hedge against the risk of rising interest rates.

(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 debt (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.)