Provisional translation only August 17, 2006 Fukuoka REIT Corporation 1-2-25 Sumiyoshi, Hakata Ward, Fukuoka City Masayasu Saki Chief Executive Officer (Securities Code: 8968) Inquiries: Fukuoka Realty Co., Ltd Hisashi Okita Senior Managing Director and CFO TEL: +81-(0)92-272-3900 Notice of Asset Acquisition Fukuoka REIT Corporation hereby informs you of our decision to acquire the following assets. 1. Properties to Acquire Property name Use Location Acquisition price planned Square mall Kagoshima Usuki Commercia Usuki 2-chome, 5,300 (tentative name) l facility Kagoshima City million yen Kumamoto Intercommunity Kamizono 1-chome, 2,400 Commercia SC Kumamoto City million yen l facility (tentative name) Amex Akasakamon Tower Maizuru 2-chome, 2,060 Residence Chuo-ku, Fukuoka million yen City Acquisition date planned September 28, 2006 October 31, 2006 September 1, 2006 2. Reason for Acquisition Fukuoka REIT Corporation invests in commercial facilities and A-class office buildings that have good design and entertainment qualities, mainly in Fukuoka and Kyushu. For a part of our portfolio, Fukuoka REIT Corporation also adopts the policy of acquiring hotels, residential buildings, distribution facilities, etc. on a limited basis where that will ensure our investing advantages, by making the most of our strength that we are familiar with the local environment. In this connection, among commercial facilities, we will aggressively acquire community shopping centers (CSCs) as a major investment targets. CSCs are medium-sized commercial facilities comprised of category killers, fresh food supermarkets, sales of daily goods, that are built on suburban trunk roads and community roads. 1
Based on these investment policies, Fukuoka REIT Corporation has decided to acquire these three properties. 3. Details of Acquisitions A. Square mall Kagoshima Usuki (tentative name) 1. Outline of Acquisition (1) Acquisition Property: Real Estate Trust Beneficiary Interesting (trustee planned: Mitsubishi UFJ Trust and Banking Corporation) (2) Property name: Square mall Kagoshima Usuki (tentative name) (3) Acquisition price planned: 5,300 million yen (4) Appraisal value (survey value): 5,370 million yen (appraisal direct capitalization yield: 6.1%) (5) Acquisition CAP*(planned): 6.2% *(Direct capitalization method NCF, in the survey report as of the date concluding the acquisition agreement)/(acquisition price planned) (6) Acquisition date planned: September 28, 2006 (7) Seller: Fukuoka Jisho Co., Ltd. (8) Funding: Cash on hand *The above planned acquisition price does not include acquisition expenses, property tax, city-planning tax, other amounts needed for settlement, consumption tax on the building, etc. 2. Square mall Kagoshima Usuki (tentative name) that we will acquire is a community SC located on the trunk road No. 217 in Kagoshima City. The shopping center has leading category killers in different industries. Jon Jerde, who designed Canal City Hakata and Roppongi Hills, also designed this shopping center. We valued the following points in deciding to acquire this property. (1) Location Conditions This property, being located in an outer area from the Kagoshima City center, is blessed with traffic facilities passing through in parallel, including JR Kagoshima Line, the tramway, National Road No. 225, and Prefectural Road No. 217. In particular, Prefectural Road No. 217 is Kagoshima s trunk road with a traffic volume of 42,000 cars per 12 hours, which exceeds traffic volumes of 35,000 to 40,000 cars per 12 hours on National Road No. 3, Taihaku Street, Watanabe Street, etc. that are trunk roads in the central area of Fukuoka City (according to a fiscal 1999 survey). The property has a parking lot accommodating some 700 cars, which is very convenient for visitors by car. (2) Building facilities, etc. The building of this property was designed by Jon Jerde, who designed Canal City Hakata and Roppongi Hills. The building presents a soft commercial image of design, unlike simple box-type designs. In addition, this property is located next to Round-One (multiple leisure facilities), offering synergy, particularly for young visitors. 2
(3) Tenants This property is comprised of attractive stores of tenants which target visitors from wide market areas. Such tenants include Alpen (Sports DEPO, GOLF 5), a leading specialty store of sporting goods, and Best Denki, a leading home-electric appliance mass retailer, as core tenants, and other category killers such as Right-on (leading casual jeans clothing store), Nishimatsuya (leading store of goods for babies and kids), Honeys (leading casual clothing store for women), and ABC Mart (leading shoe store), all of which are leading companies in their industries. Concluding a long-term lease agreement (five 5 to 20 year period, no mid-term cancellation, in principle, and no reduction of rents (except for one tenant)) with these tenants of high credibility will ensure our stable rental income. 3. Description of Asset Acquisition Planned Building Type of asset Real Estate Trust Beneficiary Interesting Location (Main lot number) 314-15, Usuki 2-chome, Kagoshima City Structure/ No. of stories Completion of construction Total floor space (Location indication) 2-18, Usuki 2-chome, Kagoshima City Steel-structure, Area 13,222.88 m 2 flat-roof, three-stories building above ground September 28, 2006 Zoning Quasi-industrial area Land 27,969.09 m 2 (planned) Floor area ratio Usage Stores Building coverage Ownership Ownership Ownership type type Acquisition price Appraisal value (survey value) Appraisal method 200% 60% (70% on corner lot correction) Ownership 5,300 million yen 5,370 million yen (Earnings capitalization method. Appraisal date: July 1, 2006) Japan Real Estate Institute With/Without collateral A pledge right will be established against the trust land of this property by Alpen Co., Ltd. on its right to claim the return of security deposit (amount receivable: 168,685,769 yen) as secured credit. Property management Fukuoka Jisho Co., Ltd. (planned) company Note: The areas are described based on the indication of the construction inspection certificates. 4. Outline of Seller Trade name Location of head office Representative Fukuoka Jisho Co., Ltd. 2-25, Sumiyoshi 1-chome, Hakata-ku, Fukuoka City Seiji Yagi 3
Capital Main business Relation with Fukuoka REIT Corporation 2,000 million yen Urban development, housing development, and development and management of commercial facilities and office buildings, mainly in Fukuoka Fukuoka Jisho Co., Ltd. holds 55% of the shares of Fukuoka Realty Co., Ltd. (hereafter the Asset Management Company ) and corresponds to an interested party of the Asset Management Company. 5. Transaction with Interested Parties (1)Fukuoka Jisho Co., Ltd., the seller of this property, corresponds to an interested party of the Asset Management Company. Accordingly, pursuant to the Investment Management Committee rules and the Compliance Regulations, etc. of the Asset Management Company, the acquisition price and other conditions of this property have been examined and approved by the Investment Management Committee, Compliance Assessment Committee, and the Board of Directors of the Asset Management Company. (2)In order to contract the management of tenants of this property and the property management service of this property, we will conclude a Building Management Service Agreement with Fukuoka Jisho Co., Ltd. Concluding this agreement has also passed examinations and obtained approvals as noted in (1) above. 6. Builder, Architect, etc. The builder, architect, etc. of this property are stated below: Builder name Architect name Architect office which performed structural calculations Agency which performed construction inspection Fujita Corporation Yamashita Sekkei Inc. Yamashita Sekkei Inc. Kagoshima City B. Kumamoto Intercommunity SC (tentative name) 1. Outline of Acquisition (1)Acquisition Property planned: Real Estate Trust Beneficiary Interesting (trustee planned: Mitsubishi UFJ Trust and Banking Corporation) (2) Property name: Kumamoto Intercommunity SC (tentative name) (3) Acquisition price planned: 2,400 million yen (4) Appraisal value (survey value): 2,420 million yen (appraisal direct capitalization yield: 6.4%) (5) Acquisition CAP* (planned): 6.5% *(Direct capitalization method NCF in the survey report as of the acquisition agreement date) /(Acquisition price planned) (6) Acquisition date planned: October 31, 2006 4
(7) Seller: Fukuoka Jisho C., Ltd. (8) Funding: Cash on hand *The above planned acquisition price does not include acquisition expenses, property tax, city-planning tax, other amounts needed for settlement, consumption tax on the building, etc. 2. Kumamoto Intercommunity SC (tentative name) that we will acquire is a community SC on an eastern bypass of National Road No. 57. The SC consists of Sports DEPO and GOLF5 of Alpen (a leading sporting goods store operator), and a drive-through shop of Starbucks. We valued the following points in deciding to acquire this property. (1) Location conditions This property is located on an eastern bypass of National Road No. 57, a trunk road in Kumamoto City. The location is very convenient to access by car. National Road No. 57 is positioned as a radial belt highway in the urbanization master plan of Kumamoto City Office. The traffic volume on this national road is 39,000 cars per 12 hours, almost the same level of the traffic volume of 35,000 to 40,000 cars per 12 hours on National Road No. 3, Taihaku Street, and Watanabe Street, which are trunk roads in the central area of Fukuoka City (according to fiscal 1999 survey). (2) Building facilities, etc. Found 500 meters north of this property is Kumamoto General Sports Park, a 99.6 hectare comprehensive sports recreation site, with an athletics track field, tennis courts, rugby field, soccer field, etc. Thus, the sporting goods store of the tenant Alpen in this property can expect synergy from the sports park. (3) Tenants This property consists of two tenants, namely Alpen, a leading sporting goods specialty store operator (sports DEPO and GOLF5, its first stores of this type in Kumamoto Prefecture, having a large sales space of 6,620 m 2 ) and a Starbucks coffee shop with a drive-through function (its 2nd drive-through shop in Kumamoto Prefecture and its 4th shop in the Kyushu area). We expect that concluding a long fixed-term lease agreement (20 years, with no mid-term cancellation nor reduction of rent in principle) with highly credible tenants will ensure stable rental income. 3. Description of Acquisition Asset Planned Type of asset Location Structure/ No. of Building stories Real Estate Trust Beneficiary Interesting (Lot number) 334-1, Kamizono 1-chome, Kumamoto City Steel-structure, Area 12,281.45 m 2 flat-roof, two-stories Land building above ground 5
Completion of construction In the last ten days of October 2006 Zoning Total floor space 9,684.52 m 2 Floor area ratio Usage Store Building coverage Ownership Ownership right Ownership type type Acquisition price Appraisal value Appraisal method Quasi-industrial area, class-2 dedicated middleand high-rise building residential area, class-1 residential area 184.66% 60% Ownership 2,400 million yen 2,420 million yen (Earnings capitalization method. Appraisal date: July 1, 2006) Japan Real Estate Institute With/Without collateral The plan is to establish a pledge right against the trust land of this property by Alpen Co., Ltd. on its right to claim the return of security deposit (Debtor: trustee. Amount receivable: undecided) as secured credit. Property management company Fukuoka Jisho C., Ltd. (planned) Note: The areas are described based on the indication of the construction permit certificates. 4. Outline of Seller Trade name Location of head office Representative Capital Relation with Fukuoka REIT Corporation Fukuoka Jisho C., Ltd. 2-25, Sumiyoshi 1-chome, Hakata-ku, Fukuoka City Seigi Yagi 2,000 million yen Fukuoka Jisho Co., Ltd. holds 55% of the shares of Fukuoka Realty Co., Ltd. (hereafter the Asset Management Company ) and corresponds to an interested party of the Asset Management Company. 5. Transactions with Interested Parties (1) Fukuoka Jisho Co., Ltd., the seller of this property, corresponds to an interested party of the Asset Management Company. Accordingly, pursuant to the Investment Management Committee rules and the Compliance Regulations, etc. of the Asset Management Company, the acquisition price and other conditions of this property have been examined and approved by the Investment Management Committee, Compliance Assessment Committee, and the Board of Directors of the Asset Management Company. (2)In order to contract the management of tenants of this property and the property management service of this property, we plan to conclude a Building Management Service Agreement with Fukuoka Jisho Co., Ltd. Concluding this agreement has also passed examinations and obtained approvals as noted in (1) above. 6
6. Builder, Architect, etc. The builder, architect, etc of this property are as stated below. Builder name Architect name Architect office conducting structural calculation Agency conducting construction inspection Kajima Corporation Kajima Corporation Kajima Corporation Japan ERI Co., Ltd. C. Amex Akasakamon Tower 1. Outline of Acquisition (1) Acquisition Property planned: Real Estate Trust Beneficiary Interesting (trustee planned: Resona Bank, Limited) (2) Property name: Amex Akasakamon Tower (3) Acquisition price planned: 2,060 million yen (4) Appraisal value: 2,060 million yen (appraisal direct capitalization yield: 5.3%) (5) Acquisition CAP* (planned): 5.4% * (Direct capitalization method NCF in the survey report as of the acquisition agreement date) / (Acquisition price) (6) Acquisition date planned: September 1, 2006 (7) Seller: Well Holdings Co., Ltd. (8) Funding: Borrowing on commitment line *The above planned acquisition price does not include acquisition expenses, property tax, city-planning tax, other amounts needed for settlement, consumption tax on the building, etc. 2. Amex Akasakamon Tower that we will acquire is a tower apartment building, being located in an easy-to-access area in the vicinity of the Tenjin area, an urban core business and commercial area in Fukuoka City. Found in the neighboring area are parks, government offices, and hospitals, offering a living environment for a broad range of generations. The target generation for this property is families. The rental housing market for families in the Fukuoka area is a steady market where supply volume is limited. Thus, in our analysis, we can expect stable cash flow from the property in the future. We valued the following points in deciding the acquisition of this property. (1) Location conditions This property is located in an easy-to-access area in the vicinity of the Tenjin area. More specifically, the property is a nine-minute walk from Tenjin Station on Nishitetsu Tenjin Omuta Line and on Municipal Subway No. 1 Line in the urban core business and commercial area in Fukuoka City, and a four-minute walk from Akasaka Station on Municipal Subway Line No. 1. Found nearby within walking distance are Maizuru Park and Ohori Park. Government offices and hospitals are also found in the surrounding areas. 7
Thus, the living environment suits a broad range of generations: from singles and families, to elderly husbands and wives. (2) Building facilities, etc. The building of this property is a 19-stories tower building of rental apartments completed in July 2005. The building consists of 2LDK (55.58 m 2 ) to 4LDK (144.84 m 2 ) apartments, which are uncommon in this area. All the rooms of four apartments on the first floor (two apartments on the top floor) have a window to receive sunlight. It has excellent design, with ceilings, floors and exterior walls which are fire-resistant, sound-suppressing, and heat-insulating. These features distinguish it from others in the Fukuoka rental housing market. (3) Property management We plan to contract the management of this property and property management service to DMC Corporation, a member company of the Daio Co., Ltd., which has good performance of real estate management service in Fukuoka City. The aim is for more effective and efficient management to ensure our stable income. 8
3. Description of Acquisition Asset Planned Building Type of asset Real Estate Trust Beneficiary Interesting Location (Location indication) 4-23, Maizuru 2-chome, Chuo-ku, Fukuoka Structure/Number of stories City Steel framed reinforced concrete structure, flat-roof, 19-stories building above ground Area 877.85 m 2 July 26, 2005 Zoning Commercial area Land 400% ratio 80% Completion of construction Total floor space 6,772.72 m 2 Floor area Usage Apartment building Building coverage Ownership type Ownership Ownership type Number of rentable apartments Acquisition price Appraisal value Appraisal method With/Without collateral Property management company 66 apartments 2,060 million yen 2,060 million yen Ownership (Earnings capitalization method. Appraisal date: July 18, 2006) Daiwa Real Estate Appraisal Co., Ltd. None DMC Corporation (planned) Note 1: The areas are described based on the indication in the registry. 4. Outline of Lease Total number of apartments 66 apartments (36 apartments currently occupied) Floor plans 2LDK, 3LDK, 4LDK Total rentable space 4,755.14 m 2 (Note 2) Occupancy rate 51.8% (Note 3) Note 2: The description is based on the indication in lease agreements. Note 3: The rental space as of June end of 2006 was divided by the total rentable space. 5. Outline of Seller Trade name Location of head office Representative Capital Relation with Fukuoka REIT Corporation Well Holdings Co., Ltd. 14-8, Tenjin 2-chome, Chuo-ku, Fukuoka City Yasuhiko I 2,000 million yen None in particular 9
6. Builder, Architect, etc. The builder, architect, etc. of this property are as stated below. Builder name Architect name Architect office which performed structural calculations Agency which performed construction inspection Tada Corporation Masaki Architect and Associates S.A.I. Structural Design Co., Ltd. Japan ERI Co., Ltd. 4. Future Outlook Concerning the management performance forecast for the 4th Fiscal Period (March 1, 2006 to August 31, 2006) that covers impacts from the acquisition of this property, refer to the Notice on Corrections of the Management Performance Forecast for the Term Ending August 31, 2006 and on the Management Performance Forecast for the Term Ending February 28, 2007 that we separately announced today. Attached documents Reference documents: Outline of this property and a guide map *These documents distributed to: Kabuto Club, Press Club for the Ministry of Land, Infrastructure and Transport, Construction Trade Paper Press Club for the Ministry of Land, Infrastructure and Transport, Fukuoka Economic Press Club, and Fukuoka Securities Finance Press Club *Fukuoka REIT Corporation s web site: http://www.fukuoka-reit.jp 10
Reference Documents Square mall Kagoshima Usuku (tentative name) Location Rendering 11
Kumamoto Intercommunity SC (tentative name) Location Rendering 12
Amex Akasakamon Tower Location Appearance of the Property 13