Provisional translation only February 7, 2011 To all concerned parties Real Estate Investment Trust Unit Issuer: Fukuoka REIT Corporation 1-2-25 Sumiyoshi, Hakata Ward, Fukuoka City Masayasu Saki CEO & Representative Director (Securities Code: 8968) Asset Management Company: Fukuoka Realty Co., Ltd. 1-2-25 Sumiyoshi. Hakata Ward, Fukuoka City Masayasu Saki Chief Executive Officer Inquiries: Yoichi Nishio Managing Director and Head of Finance Department TEL: +81-(0)92-272-3900 Notice on Property Acquisition Fukuoka REIT Corporation (FRC) announces that it has concluded a basic agreement concerning property acquisition, as described below. The agreement allows FRC to acquire the property that backs the senior anonymous partnership equity interest owned by FRC. For details of the senior anonymous partnership equity interest, please refer to "Fukuoka REIT to Purchase Preferred Silent Partnership Interest dated February 27, 2006 and Fukuoka REIT to Purchase Additional Preferred Silent Partnership Interest dated March 1, 2010. 1. Details of Acquisition (1) Property to be acquired: Real estate trust beneficiary interest (Trustee: Sumitomo Trust and Banking Company, Ltd.) (2) Property name: Canal City Hakata B (3) Acquisition price (planned): 28,700 million yen (Note 1) (4) Appraisal value 28,700 million yen (appraisal direct capitalization yield: 5.3%) (5) Acquisition CAP (Note 2): 5.4% (6) Acquisition date (planned): March 2, 2011 (The next business day after the payment date described in Notice on Issuance of New Investment Units announced today) (7) Seller: CCH Bridge Y.K. (Note 3) (8) Funding Proceeds from issuance of new investment units as described in Notice on Issuance of New Investment Units announced today, borrowings and cash on hand (planned) (9) Payment method: Blanket payment upon delivery (Note 1) The acquisition price (planned) is the transaction price described in the fundamental agreement concerning property transaction between FRC and the seller, and does not include acquisition expenses and consumption tax. (Note 2) The acquisition CAP has been calculated by using the formula of NCF (net cash flow)/acquisition price (planned) x 100, which was used in the direct capitalization method in the appraisal report. (Note 3) The trust beneficiary interest in Canal City Hakata B as trust property, which FRC plans to acquire, is owned by CCH Bridge Y.K., in which FRC has senior anonymous partnership equity interest. FRC has a contract with CCH Bridge Y.K. to reserve acquisition of the trust beneficiary interest. The newly concluded basic agreement concerning transaction has confirmed that the execution of the right
to consummate the reservation based on the acquisition reservation contract should allow FRC to acquire the said trust beneficiary interest. As for the changes concerning the senior anonymous partnership equity interest FRC owns in CCH Bridge Y.K., a special purpose company, please refer to Notice on Changes Concerning Asset (Senior Anonymous Partnership Equity Interest) announced today. 2. Reason of Acquisition FRC invests primarily in retail facilities featuring excellent design and entertainment qualities but also in class A office buildings, with a geographical focus placed on Fukuoka and Kyushu. As its prime investment target, FRC categorizes retail facilities into the following three types: 1) Urban shopping center: Street front shops, department stores and large specialty stores located in shopping districts in the center of cities 2) Regional shopping centers: Large-scale shopping centers located in the suburbs and attracting customers from a wide area 3) Community shopping centers: Medium-sized shopping centers located along suburban arterial highways or residential streets and combining category killers, supermarkets specialized in perishables and daily products shops Canal City B, which FRC will acquire, is categorized as 1). Canal City Hakata B represents the section of the multi-use commercial complex, which was developed in an integrated manner by combining specialty shops, large specialty stores, cinemas, a theater, amusement facilities, hotels and office spaces, excluding the Canal City Hakata section already owned by FRC and the Canal City Theater section owned by Fukuoka Jisho Co., Ltd. With the planned acquisition, FRC will own all sections of Canal City Hakata (entire property) excluding the Canal City Theater section, etc. Canal City Hakata is located in the center of Hakata, which is expected to attract more visitors from a wide area throughout Kyushu with the start of the full-line operation of Kyushu Shinkansen Line and the completion of JR Hakata City (new Hakata Station building) scheduled in March 2011, Since the opening in April 1996, Canal City Hakata has been recognized not only in Japan but also abroad as the pioneer of multi-use large-scale retail facilities, and is also a famous sightseeing destination in Fukuoka. FRC has decided to acquire the property based on the judgment that, for Canal City Hakata (entire property) to achieve further development in the given location as the center of Hakata a major commercial zone with intensifying competition on top of its present status secured as a famous sightseeing destination, it is most appropriate to further reinforce integrated management of the facilities for reinforced competitiveness and establish a system that allows more prompt decision making as early as possible,. Upon deciding on the acquisition of the property, FRC evaluated the following points. (1) Location The property is located in the center of the Tenjin-Hakata area, approximately 600 meters southwest of Gion Station on the Fukuoka City Subway Kuko(Airport) Line, approximately 700 meters southeast of Nakasu-Kawabata Station on the same line, and approximately 900 meters west of Hakata Station on the JR Kagoshima Main Line. There are many busses frequently shuttling or circling on regular routes between the Tenjin area, Hakata Station and the property. Furthermore, the property is equipped with parking lots inside its facilities available for approximately 1,300 vehicles, making it highly convenient for customers visiting by bus or by car. (2) Property characteristics The property is a representative work of John Jerde, a famous architect for his development of Fashion Island in Los Angeles and Roppongi Hills, and is a multi-use commercial complex in which specialty shops, large specialty stores, cinemas, amusement facilities, offices and other facilities were developed in an integrated manner. It is an entertainment-type (time-spending) retail facility where about 1,300 performances and seasonal events are conducted each year under the concept of let visitors enjoy and entertain visitors. It is also a representative sightseeing destination in Fukuoka, boasting more than 10 million people it receives (as the entire facility)
annually. (3) Tenants The property consists of Grand Hyatt Fukuoka (having 370 guest rooms), one of the first-class hotels in Fukuoka, OPA (Canal City Opa) housing more than 100 specialty shops and a MUJI store which is among the largest in Kyushu, and demonstrates the ability to stably attract customers. In addition, the lease is based on fixed rents or minimum guarantee rents for most of the tenants, securing the stability of rent revenues. 3. Overview of Property to be Acquired (1) Overview of Building and Land Type of asset Real estate trust beneficiary interest Location (residential 1-2-1 and others, Sumiyoshi. Hakata Ward, Fukuoka City address) Structure/ floor (Note 1) Steel framed reinforced concrete structure with flat roof, 2 basement floors and 13 floors Area (Note 1) (Note 2) Ownership ratio of land of 524,239/1,000,000 out of 34,363.91m 2 (total land area of 5 buildings under sectional ownership) and land of 379.92m 2 outside land ownership Completion April 15, 1996 Zoning Commercial area Building (Note 1) Land Total floor 101,308.33m 2 (total of floor Floor area 500% area (Note 1) area of 5 buildings under sectional ownership) out of total floor area of 225,899.23m 2 ratio Use (Note1) Hotel, store, parking Building coverage 80% Type of Sectional ownership Type of Ownership ownership ownership Acquisition price (planned) 28,700 million yen Appraisal value 28,700 million yen (date of appraisal: January 1, 2011) Appraiser Tanizawa Sogo Appraisal Co., Ltd. Collateral None Property manager Fukuoka Jisho Co., Ltd. Earthquake PML (Note 3) (a) 8.2% (b) 6.1% (c) 11.1% (Appraiser: Takenaka Corporation) The classification of (a), (b) and (c) is due to the areas covered in the building status survey report, with (a) representing Grand Hyatt Fukuoka building, (b) representing the Theater building and (c) representing common areas. Remarks There are 2 exterior advertisement towers without certificate of inspection in the common area of the subject real estate, etc., but according to the investigation report on the compliance on Building Standards Law by Japan
Constructive Inspect Association as of January 27, 2010, the advertisement towers comply with the Building Standards Law in regards to structural strength. A contract concerning entrustment of building lease and building management and operation services has been concluded between the trustee and Fukuoka Jisho Co., Ltd. for the purpose of entrusting leases of the property to respective tenants and property management operations of the property. The contract period is 5 years from February 28, 2006, and the contract may not be terminated in principle during the period. In addition, the contract shall automatically renew for successive one year unless rejection to renewal is notified at least 6 months prior to the expiration. The trust beneficiary interest FRC plans to acquire includes pledges of CCH Bridge Y.K., the seller, for lenders. However, the pledges are planned to be released by the planned date of FRC s acquisition. A request in writing for reduced rents has been received from OPA Co., Ltd. an end tenant. (Note 1) The structure/floor, completion, total floor area and use of the building as well as the area of the land are based on the indications in the registry. (Note 2) It has bee designated in the management regulations that, of the concerned land, 379.92m 2 shall be handled in the same manner as the site of the concerned building. (Note 3) The earthquake PML figures are based on the earthquake risk assessment report by the indicated appraiser. However, the figures are nothing but a representation of the reporter s opinion, and do not guarantee the accuracy of its content. (2) Overview of Lease Total number of tenants and its overview 1 (42) (Note 1) Total rental revenues (annual rent) 2,547 million yen (Note 2) Tenant deposits and guarantee deposits 3,510 million yen (Note 3) Total leasable area 63,893.45m 2 (Note 4) Total leased area 63,794.96m 2 (Note 4) Occupancy rate 99.8% (Note 5) (Note 1) The number of tenants is entered as one, since the property is leased in a lump sum in pass-through master lease. The figure in parenthesis is the number of end tenants with which lease agreements have been concluded as of today. (Note 2) The figure has been calculated by multiplying the total value (planned) of monthly rents and monthly common area charges indicated in lease agreements concluded as of today by twelve. Furthermore, the figure has been rounded to million yen. Moreover, warehouses, parking lots, machine rooms and other facilities have not been included in the figure. (Note 3) The figure is the total of amounts indicated in lease agreements concluded as of today. Furthermore, the figure has been rounded to million yen. Moreover, storageroom, parking lots, machine rooms and other facilities have not been included in the figure. (Note 4) The total leasable area is the area that is understood to be possibly leased to the end tenants with which lease agreements have been concluded as of today, while the total leased area shows the total of contracted area that are indicated in the leased agreements concluded with the end tenants as of today. Moreover, warehouses, parking lots, machine rooms and other facilities have not been included in the figures. (Note 5) The figure is the ratio of the total leased area against the total leasable area. The entered occupancy
rate has been calculated by setting the total leasable area as the area that is understood to be possibly leased to the end tenants with which lease agreements have been concluded as of today, and the total leased area as the total of contracted area that are indicated in the leased agreements concluded with the end tenants as of today. Furthermore, the figure has been rounded to the first decimal place. Moreover, warehouses, parking lots, machine rooms and other facilities have not been included in the figures. 4. Overview of Seller (1) Name CCH Bridge Y.K. (2) c/o Tokyo Kyodo Accounting Office, 3-1-1, Marunouchi, Chiyoda Ward, Location Tokyo (3) Representative Masato Kaida, Director (4) Business description 1. Acquisition, holding and disposal of real estate trust beneficiary interest 2. Acquisition, holding and disposal of real estate 3. Lease and management of real estate 4. All services incidental to the above items (5) Paid-in capital 3 million yen (6) Date of establishment November 30, 2005 (7) Net assets Not disclosed (Note) (8) Total assets Not disclosed (Note) (9) Relationship with FRC or the asset management company Capital relationship Personnel relationship Business relationship There are no capital relationship between FRC/the asset management company and the seller requiring mention. In addition, there are no capital relationship between related parties and affiliates of FRC/the asset management company and related parties and affiliates of the seller requiring mention. There are no personnel relationship between FRC/the asset management company and the seller requiring mention. In addition, there are no personnel relationship between related parties and affiliates of FRC/the asset management company and related parties and affiliates of the seller requiring mention. FRC has senior anonymous partnership equity interest in the seller. In addition, FRC and the seller have an acquisition reservation contract concerning the Canal City Hakata SPC Section owned by the seller. There are no business relationship between the asset management company and the seller requiring mention. In addition, there are no business relationship between related parties and affiliates of FRC/the asset management company and related parties and affiliates of the seller requiring mention, except for the transaction described in 6. Transaction with Interested Parties (2). Related parties or not The seller does not fall under the category of related parties of FRC/the asset management company. In addition, related parties and affiliates of the seller do not fall under the category of related parties of FRC/the asset management company. (Note) Consent by the seller on the disclosure has not been obtained. 5. Status of Seller The acquisition of the trust beneficiary interest in the property will not be made from any party that has a special
interest relationship with FRC/the asset management company. 6. Transaction with Interested Parties (1) CCH Bridge Y.K., the seller of the trust beneficiary interest, does not fall under the category of interested parties of the asset management company. However, because FRC has senior anonymous partnership equity interest in the seller and because of other factors, the planned acquisition price and other terms and conditions concerning the property has been discussed and approved by the Investment Committee, Compliance Committee and the Board of Directors meeting of the asset management company. (2) FRC plants to conclude a contract with Fukuoka Jisho Co., Ltd. concerning entrustment of building lease and building management and operation services for the purpose of entrusting management of respective tenants and property management operations of the property. The conclusion of the contract has been discussed and approved in the same manner as described in the above (1). 7. Overview of Intermediary Party There is no intermediary party involved. 8. Contractor, Designer and Other Parties of the Property The contractor and designer of the property are as follows: Contractor Canal City Hakata New Construction Joint Venture, Takenaka Corporation Designer Fukuoka Jisho First Grade Architect Office, FJ Urban Development Takenaka Corporation Zenitaka Corporation Design Consortium (Note) Architectural firm that made the Fujita Corporation Kyushu Branch First Grade Architect Office, Shimizu structural calculation Corporation Kyushu Branch First Grade Architect Office Agency that certified the building Fukuoka City (Note) A consortium represents a design joint venture comprising designers for respective zones. 9. Acquisition Schedule February 7, 2011: March 2, 2011: Decision on acquisition and conclusion of basic agreement Conclusion of trust beneficiary interest transaction agreement and deliver of property (planned) 10. Future Outlook For the forecast of FRC s performance for the fiscal period ending August 2011 (March 1, 2011 August 31, 2011), please refer to Notice on Revision to Forecast of Performance for Fiscal Period Ending August 2011 announced today References [Reference 1] Overview of Appraisal Report of the Property [Reference 2] External View of the Property 1 [Reference 3] External View of the Property 2 [Reference 4] Location of the Property [Reference 5] Portfolio Map of FRC [Reference 6] List of FRC s Portfolio after Acquiring the Property [Reference 7] FRC s Investment Ratio by Target Area after Acquiring the Property Fukuoka REIT Corporation s website is http://www.fukuoka-reit.jp/eng/
Reference [Reference 1] Overview of Appraisal Report of the Property Real estate appraiser Appraisal value Tanizawa Sogo Appraisal Co., Ltd. 28,700,000,000 yen Pricing date January 1, 2011 Direct capitalization method Figures (1) Operating revenues (1+2+3 4) 3,309,630,716 yen 1 Rental revenues (including proceeds for common services, etc.) 2 Other revenues (including proceeds for added use charges) 2,646,456,448 yen 708,124,120 yen 3 Key money and other revenues 0 4 Loss from vacancy -44,949,852 yen (2) Operating expenses (5+6+7+8) 1,633,616,828 yen 5 Maintenance and management fees and utility expenses 6 Taxes and public charges 1,271,955,351 yen 334,592,706 yen 7 Damage insurance premiums 25,015,268 yen 8 Other expenses 2,053,503 yen (3) Net operating income (NOI) 1,676,013,888 yen (4) Gains from investments security deposits 68,388,550 yen (5) Capital expenditures 190,481,000 yen (6) Net cash flow (NCF) 1,553,921,438 yen (7) Capitalization rate 5.3% Income through direct capitalization method ((6) (7)) 29,300,000,000 yen Value through DCF method 28,400,000,000 yen Discount rate 5.4% Terminal cap rate 5.6% Value through cost method 31,100,000,000 yen Reasons, etc. Land price 19,600,000,000 yen 63.02% Building price 11,500,000,000 yen 36.98% Appraised based on the market rent levels Parking lot use fees, revenue for sales promotion use, etc. Appraised based on actual amounts for fiscal 2010 Appraised by setting the investment return at 2% Appraised based on the cap rates of other transaction cases and after considering marketability of the subject property, trends in the real estate investment market and other factors as well as taking into account the correlation with discount rates Appraised by capitalizing net cash flow at the capitalization rate
[Reference 2] External View of the Property 1 (Note) The photo includes subjects other than the properties and other assets owned by FRC and the property to be acquired by FRC. [Reference 3] External View of the Property 2
[Reference 4] Location of the Property [Reference 5] Portfolio Map of FRC
[Reference 6] List of FRC s Portfolio after Acquiring the Property Use Property Name Acquisition Date (planned) Acquisition Price (planned) (million yen) (Note 1) Acquisition Cap Rate (NCF basis) (Note 2) Investment Ratio Canal City Hakata Nov 9, 2004 32,000 6.0% 21.4% Park Place Oita Nov 9, 2004 15,700 6.6% 10.5% SunLiveCity Kokura Jul 1, 2005 6,633 6.6% 4.4% Retail Square Mall Kagoshima Usuki Sep 28, 2006 5,300 6.3% 3.5% Kumamoto Intercommunity SC Nov 30, 2006 2,400 6.5% 1.6% Hara SATY Mar 1, 2007 5,410 6.8% 3.6% Hanahata SC Sep 3, 2007 1,130 6.4% 0.8% Kurume Higashi Kushiwara SC Feb 1, 2008 2,500 6.1% 1.7% K s Denki Kagoshima Head Office Mar 27, 2008 3,550 5.7% 2.4% Canal City Hakata B (planned) March 2, 2011 28,700 5.4% 19.2% Office Others Canal City Business Center Building Nov 9, 2004 14,600 6.3% 9.8% Gofukumachi Business Center Nov 9, 2004 11,200 6.3% 7.5% Sanix Hakata Building Sep 30, 2005 4,400 5.9% 2.9% Taihaku Street Business Center Mar 16, 2006 7,000 6.0% 4.7% Higashi Hie Business Center Mar 13, 2009 5,900 6.0% 3.9% Amex Akasakamon Tower Sep 1, 2006 2,060 5.4% 1.4% City House Keyaki Dori Dec 20, 2007 1,111 5.4% 0.7% Total or weighted average of all properties - 149,594 6.1% 100.0% (Note 1) Figures in the Acquisition Price (planned) column are the transaction prices described in the transaction agreements (or basic agreement on transaction in the case of property planned to be acquired) between FRC and the sellers, and exclude charges, taxes and other expenses. (Note 2) Figures in the Acquisition Cap Rate column have been calculated by the formula: NCF through direct capitalization method in the appraisal reports / the acquisition price (planned) x 100 (%).
[Reference 7] FRC s Investment Ratio by Target Area after Acquiring the Property Area Investment ratio Fukuoka urban sphere (Note 1) 75.9% Other area of Kyushu (Note 2) 24.1% Others 0% (Note 1) Fukuoka urban sphere indicates cities, towns or villages where 10% or more of the population are attending work places or schools in Fukuoka City, according to the national census conducted in 2005 by Fukuoka City and the Static Bureau of the Ministry of Internal Affairs and Communications, which investigated the number of people at work or students aged 15 or older commuting to Fukuoka by city, town and village they permanently live in. (Note 2) Other area of Kyushu indicates Yamaguchi Prefecture and the whole of Kyushu excluding the Fukuoka urban sphere. (Note 3) The investment ratio excludes the senior anonymous partnership equity interest FRC holds in CCH Bridge Y.K., a special purpose company. The senior anonymous partnership equity interest is planned to be redeemed to FRC. [Reference 8] FRC s Investment Ratio by Investment Type after Acquiring the Property Use Investment ratio Retail 69.1% Office 28.8% Others 2.1% (Note) The investment ratio excludes the senior anonymous partnership equity interest FRC holds in CCH Bridge Y.K., a special purpose company. The senior anonymous partnership equity interest is planned to be redeemed to FRC.