Provisional translation only March 11, 2009 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 Senior Managing Director and CFO TEL: +81-(0)92-272-3900 Fukuoka REIT to Conclude Agreement to Purchase New Office Building in Fukuoka Fukuoka REIT Corporation (FRC) announces that it will conclude an agreement for a property acquisition, as described below. 1. Outline of Acquisition (1) Acquired property: Real estate trust beneficiary interest (Trustee: Sumitomo Trust and Banking Company, Ltd.) (2) Property name: Higashi Hie Business Center (3) Acquisition price: 5,900 million yen (4) Appraisal value: 5,900 million yen (appraisal direct capitalization yield: 6.0%) (5) Acquisition CAP* 6.0% *Direct capitalization method: NCF/acquisition value of the appraisal assessment at the time of the execution of the acquisition agreement (6) Acquisition date: March 13, 2009 (7) Seller: Nomura Real Estate Development Co., Ltd. and Fukuoka Jisho Co., Ltd. (8) Funding: Borrowing and cash on hand (9) Payment method: Blanket payment upon delivery *The acquisition price does not include acquisition expenses, amounts equivalent to the settlement of property taxes and city planning taxes, consumption taxes on the building and other expenses. 2. Reason for Acquisition Fukuoka REIT Corporation invests primarily in commercial facilities with excellent design and entertainment qualities and A-class office buildings, focusing on Fukuoka and Kyushu. The property to be acquired, Higashi Hie Business Center, is an A-class building that features a location with extremely good traffic accessibility as well as excellent specifications that stand out among buildings in Fukuoka City. The property has been jointly developed by Nomura Real Estate Development Co., Ltd. and Fukuoka Jisho Co., Ltd., which is one of FRC s sponsors. It will be the first property that FRC acquires from Nomura Real Estate Development Co., Ltd. FRC valued the following points in deciding on the acquisition of the property. 1/9
(1) Location conditions The property is superbly located, directly connected to Higashi Hie Station on the subway line, which is two minutes (one station) to Hakata Station that is on the Sanyo Shinkansen, Kyushu Shinkansen and the JR Kagoshima lines, three minutes (one station) to Fukuoka Airport and eight minutes (three stations) to Tenjin Station. The property provides excellent accessibility by automobile, as it stands near the crossing of major streets including National Highway Route 3 and is near an interchange of the Fukuoka Urban Expressway No. 2. As such, the property can flexibly satisfy the needs of companies and other tenants that frequently use automobiles for their operations. (2) Building and Facilities The property is a newly built office building completed in February 2009. The office building boasts a high level of facility specifications including separate air-conditioning systems, compatibility with optical fibers, free access floors of 100mm and the ceiling height of 2,800mm. Moreover, the property has a rental room space of 429 tsubos on a standard floor, which allows it to flexibly meet the needs for a wide space by large companies as well as the needs for a smaller size by dividing the floors. The parking lot of the property can contain 112 vehicles, representing a capacity sufficient for corporate tenants that frequently use company automobiles for operations. (3) Tenants They have evaluated the property s features including high traffic accessibility and high-grade facilities, realizing a high occupancy rate immediately after completion. Moreover, the property can anticipate a stable tenant need over a long term, as it is an office building with strong competitiveness backed by its good location and the high-level facility specifications mentioned above. 3. Details of Property for Acquisition (1) Overview of Building and Land Acquired property Real estate trust beneficiary interest Location (Lot number) 3-1-1 Higashi Hie, Hakata-ku, Fukuoka-shi, Fukuoka Structure/floor Steel framed structure Area 3,815.43 m 2 with flat roof, 11 floors Built February 6, 2009 Zoning Commercial area Total floor area 20,028.04 m 2 Floor area ratio 508.57% (by special provision of the Article 59 Building Land of the Building Standards Law) Use Offices, shops and Building parking lot coverage 90 Type of Ownership Type of Leasehold ownership ownership Acquisition price 5,900 million yen Appraisal value 5,900 million yen (based on direct capitalization method; as of March 1, 2009) Appraiser Tanizawa Sogo Appraisal Co., Ltd. Collateral None Property manager Fukuoka Jisho Co., Ltd. Earthquake PML 1.3% (based on the assessment by Tokio Marine & Nichido Risk Consulting (probable maximum loss) Co., Ltd. ) Special note The trustee has the ownership of the subject property, but the land is owned by Astem Corporation. *All figures for areas are based on the indications on the registry. *The earthquake PML figure is based on the earthquake risk assessment report by the indicated appraiser. The figure is a representation of the reporter s opinion, and does not guarantee the accuracy of its content. 2/9
(2) Outline of Lease Total number and overview of tenants for leased 113(Note 1) spaces Total rental income (annual rent) 580 million yen (Note 2) Security deposits 310 million yen (Note 3) Leasable area 13,701.87 m 2 (Note 4) Total leased area 12,887.85 m 2 (Note 4) Occupancy rate 94.1 (Note 5) (Note 1) The number of tenant has been set at one since the property is leased in blanket in a master lease of pass through type. The figure in the parenthesis is the total number of the end tenants that have concluded lease agreements to date. (Note 2) The figure has been calculated by multiplying the (planned) total amount of the monthly rents and proceeds from monthly common expenses, indicated in the lease agreements concluded to date, by 12 times. The figure has been rounded to the nearest million yen. Warehouses, parking lots, machine rooms, etc. have not been included in the calculation. (Note 3) The figure is the sum of the amounts indicated in the lease agreements concluded to date. The figure has been rounded to the nearest million yen. Warehouses, parking lots, machine rooms, etc. have not been included in the calculation. (Note 4) Both the leasable area and the total leased area show the contracted figures designated in the master lease agreement. The leasable area is the sum of the areas assumed to be leasable to the end tenants that have concluded lease agreements to date, and the leased area is the sum of the contracted areas designated in the lease agreements concluded to date with end tenants. Warehouses, parking lots, machine rooms, etc. have not been included in the calculation. (Note 5) The figure indicates the rate of the leased area in the leasable area. The entered occupancy rate has been calculated based on the leasable area which is the sum of the areas assumed to be leasable to the end tenants that have concluded lease agreements to date, and the leased area which is the sum of the contracted areas designated in the lease agreements concluded to date with end tenants. The figure has been rounded to the first decimal place. Warehouses, parking lots, machine rooms, etc. have not been included in the calculation. 4. Profile of Sellers Company name Nomura Real Estate Development Fukuoka Jisho Co., Ltd. Co., Ltd. Head office address 1-26-2 Nishi Shinjuku, Shinjuku-ku, Tokyo 1-2-25 Sumiyoshi, Hakata-ku, Fukuoka-shi, Fukuoka Representative Hirohisa Suzuki Seiji Yagi Capital 2,000 million yen 2,000 million yen Principal activities Relationship with FRC or the asset management company Engaged in sale of condominiums, sale detached houses, brokerage for corporations, investment and management business, building business, construction and architecture, asset management business, etc. None 3/9 Engaged in urban development, residential development, development and operation of retail facilities and office buildings, etc. Fukuoka Jisho Co., Ltd. is a shareholder of FRC s asset management company, Fukuoka Realty Co., Ltd., with equity of 50%, and falls within the scope of parent company, etc. under the Financial Instruments and Exchange Act.
5. Profile of Previous Owners Property name Profile of previous owners Higashi Hie Business Center Previous owner/previous trust beneficiary Company name Fukuoka Jisho Co., Ltd. Relationship with special A shareholder of the asset interested parties management company (with equity of 50%) History and reasons of Newly built in February 2009 acquisition, etc. Acquisition price (including other expenses) Descriptions omitted because there is no owner before previous owner for the building Acquisition date Remarks Partial owner 6. Transaction with Interested Parties Owners before previous owner/trust beneficiaries before previous trust beneficiary (1) Fukuoka Jisho Co., Ltd., one of the sellers of the property, falls within the scope of interested parties of the asset management company. Accordingly, the asset management company has conducted discussions at and obtained approvals of its Investment Management Committee, Compliance Assessment Committee and Board of Directors concerning the acquisition price and other terms of the property, pursuant to the regulations and other rules of the asset management company. (2) FRC will conclude an Administration and Management Work Consignment Agreement with Fukuoka Jisho Co., Ltd. in order to consign the latter with administration of each tenant of the property and property management work for the property. The same processes of discussions and approvals as above (1) have been taken for concluding the agreement. 7. Sales Agent Profile No sales agent is involved. 8. Constructor, Designer and Others The constructor, designer and other agents for the property are as follows. Constructor Takenaka Corporation Designer Building design office engaged in structural engineering data Organization that authorized building construction 9. Acquisition Schedule Takenaka Corporation Takenaka Corporation Japan ERI Co., Ltd. March 11, 2009: March 13, 2009: March 13, 2009: Decision of acquisition Conclusion of agreement (planned) Delivery of the property (planned) 4/9
10. Outlook With regard to the operating forecasts for FRC s fiscal period ending August 2009 (March 1, 2009 August 31, 2009) after the acquisition of the subject property, FRC will disclose them when it announces the financial settlement of its current fiscal period, scheduled for April 9, 2009. (Attachment) Reference materials Reference 1: Outline of appraisal report on the property Reference 2: External view of the property Reference 3: Location of the property Reference 4: Map of FRC s portfolio Reference 5: List of FRC s portfolio *This document was distributed to Kabuto Club (press club within the Tokyo Stock Exchange), Press Club for the Ministry of Land, Infrastructure, Transport and Tourism, Construction Trade Paper Press Club for the Ministry of Land, Infrastructure, Transport and Tourism, Fukuoka Economic Press Club, and Fukuoka Securities Finance Press Club *Fukuoka REIT Corporation s website is http://www.fukuoka-reit.jp 5/9
Reference Materials Reference 1: Outline of appraisal report on the property Outline of appraisal report Appraiser Tanizawa Sogo Appraisal Co., Ltd. Appraisal value 5,900,000,000 yen Pricing date March 1, 2009 Direct capitalization method Figures (1) Operating revenues 584,140,323 yen Rental revenues (including proceeds for common services, etc.) Other revenues (including proceeds for added use charges) Key money and other revenues Reasons, etc. 601,880,892 yen Based on the lease agreement 19,620,000 yen Parking lot use fees Loss from vacancy 37,360,569 yen Office 6% Shop 5% (2) Operating expenses 220,950,216 yen Maintenance and management fees and utility expenses 80,662,427 yen Taxes and public charges 45,430,800 yen Damage insurance premiums 2,936,910 yen Other expenses 91,920,079 yen Land and others (3) Net operating income (NOI) 363,190,107 yen (4) Gains from management of one-time proceeds 4,116,137 yen (5) Annual deposits for large-scale repairs 13,755,000 yen (6) Net cash flow (NCF) 353,551,244 yen (7) Capitalization rate 6.0 Income through direct capitalization method ((6) (7)) 5,890,000,000 yen Value through DCF method 5,910,000,000 yen Discount rate 6.0 Terminal cap rate 6.3 Value through cost method 5,590,000,000 yen Percentage of leased land 1,660,000,000 yen 29.7 Percentage of building 3,930,000,000 yen 70.3 Appraised by considering actual amounts and other factors Appraised by setting the management return at 2% (in consideration of the deposits for the leased land) 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 6/9
Reference 2: External view of the property Reference 3: Location of the property 7/9
Reference 4: Map of FRC s portfolio Reference 5: List of FRC s portfolio Use Retail Office Residential Property Name Acquisition Date (planned) Acquisition Price (planned) (million yen) Acquisition Cap Rate (NCF basis) Investment Ratio Canal City Hakata Nov 9, 2004 32,000 6.0% 26.5% Park Place Oita Nov 9, 2004 15,700 6.6% 13.0% SunLiveCity Kokura Jul 1, 2005 6,633 6.6% 5.5% Square Mall Kagoshima Usuki Sep 28, 2006 5,300 6.3% 4.4% Kumamoto Intercommunity SC Nov 30, 2006 2,400 6.5% 2.0% Hara SATY Mar 1, 2007 5,410 6.8% 4.5% Hanahata SC Sep 3, 2007 1,130 6.4% 0.9% Kurume Higashi Kushiwara SC Feb 1, 2008 2,500 6.1% 2.1% K s Denki Kagoshima Head Office Mar 27, 2008 3,550 5.7% 2.9% Canal City Business Center Building Nov 9, 2004 14,600 6.3% 12.1% Gofukumachi Business Center Nov 9, 2004 11,200 6.3% 9.3% Sanix Hakata Building Sep 30, 2005 4,400 5.9% 3.6% Taihaku Street Business Center Mar 16, 2006 7,000 6.0% 5.8% Higashi Hie Business Center Mar 13, 2009 5,900 6.0% 4.9% City House Keyaki Dori Dec 20, 2007 1,111 5.4% 0.9% Amex Akasakamon Tower Sep 1, 2006 2,060 5.4% 1.7% Total or weighted average of all properties 124,294 6.2% 100% *All figures in the Acquisition Price (planned) column exclude charges, taxes and other expenses. *Figures in the Acquisition Cap Rate column have been calculated by dividing the NCF through direct capitalization method in the appraisal (including survey reports) by the acquisition price (planned). 8/9
Subject Investment Area Area Investment ratio Fukuoka urban sphere (Note 1) 71.0 Other area of Kyushu (Note 2) 29.0 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. In addition, the investment ratio includes the equity investment (acquisition value of 3.4 billion yen) by the preferred anonymous association for the section held by Canal City Hakata SPC. (Note 2) Other area of Kyushu indicates Yamaguchi Prefecture and the whole of Kyushu excluding the Fukuoka urban sphere. Investment Type Use Investment ratio Retail 62.8 Office 34.7 Residential 2.6 9/9