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Presentation of Accounts for Fourth Fiscal Period (March 1, 2006 ~ August 31, 2006)
Fukuoka Realty
Table of Contents
5. Compliance ………………………………………………………………………… 35
6. Appendix ……………………………………………………………………………… 39
These materials have been specifically prepared as roadshow materials and do not constitute a prospectus as
designated in the Securities and Exchange Law. When applying to purchase investment units issued by Fukuoka
REIT Corporation, do so based on your own judgment after reading the prospectus on the issuing of new
investment units (and corrections) issued by said investment corporation.
2
REIT Overview
Profile Current Pricing
●Name Fukuoka REIT Corporation ●Unit Price JPY 864,000 yen
●Sponsors Fukuoka Jisho, Kyushu Electric Power, ●52 Week High JPY 910,000 (June 21, 2005)
Royal Holdings, The Bank of Fukuoka,
The Nishi-Nippon City Bank, Nishi- ●52 Week Low JPY 763,000 (September 15, 2005)
Nippon Railroad, Kyudenko, Saibu Gas,
Kyushu Railway Company
(as of August 31, 2006) ●Asset Types Retail 62.8%, Office 34.5% and
●Total Debt JPY 42,700 million yen Residential 2.9%
(as of August 31, 2006) ● Asset Location Fukuoka metropolitan area 71.7%,
●Debt Rating S&P A- (stable) other Kyushu 28.3%
● Properties 13
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Presentation of Accounts
for Fourth Fiscal Period
Operational period 184 days 181 days Net Income: Factors behind Fluctuation
Properties (period
8 properties 7 properties Positive Factors
end)(note)
Tenants (period end) 250 tenants 181 tenants ● The revenues of Taihaku Street Business Center were included from
the beginning of the period (contribution after depreciation)
Leaseable floor space +JPY167 million
277,580.44m2 262,979.61m2
(period end) ● Distribution from TK equity interest +JPY136 million
Occupancy (average) 99.3% 99.4% ● Increased rent from sales-linked rents resulting from strong sales
at key retail properties +JPY46 million
Occupancy (period end) 99.4% 99.0%
Negative Factors
(Note) This excludes figures for planned acquisitions and TK interests.
● Loss of extraordinary profit last period (consumption tax of tax
exempt operator) -JPY128 million
● Commencement of payment of real property and city taxes on
acquired assets -JPY71 million
● Increase in financing related costs such as initial conversion to
long-term debt costs -JPY50 million
● Increase in paid interest accompanying acquisition of new assets
-JPY38 million
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Compliance Appendix
Appendix
Cash Flow Statement for the 4th Fiscal Period (unit: thousand yen)
Forecast for the Forecast for the 4th fiscal period 3rd fiscal period
6th fiscal period 5th fiscal period results results
Category September 1, 2006 - February 28,
March 1, 2007 – August 31, 2007 March 1, 2006 – August 31, 2006 September 1, 2005 - February 28,
2007
(184 days) (184 days) 2006 (181 days)
(181 days)
Operating revenues 5,088 mm yen 4,803 mm yen 4,496 mm yen 4,050 mm yen
Operating profit - - 1,983 mm yen 1,751 mm yen
Ordinary profit 1,886 mm yen 1,822 mm yen 1,716 mm yen 1,698 mm yen
Net profit 1,884 mm yen 1,819 mm yen 1,715 mm yen 1,697 mm yen
Distribution per
17,600 yen 17,000 yen 18,632 yen 18,438 yen
unit
Premises
●Assets under management Existing AUM (10 properties + TK interest) + 2 properties to be acquired*
[Properties acquired in fifth period] Amex Akasakamon Tower, Square Mall Kagoshima Usuki
*[To be acquired in fifth period] (tentative name) Kumamoto Inter-community SC and
[to be acquired in sixth period] (tentative name) Hara Saty
● Outstanding units 107,050 after public offering (payment by September 7, 2006)
● Interest-bearing liabilities As of end of August 2007, JPY44.5 billion for an LTV of about 38%
● Operating revenues Reflects certain factors for increasing occupancy and varying sales of assets under management
● Operating expenses [Depreciation] February 2007 Period: about JPY671 million,
August 2007 Period: about JPY726 million yen
[Asset management compensation] February 2007 Period:about JPY328 million,
August 2007 Period: about JPY356 million
● Non-operating expenses [Public offering expenses] Write off after recording deferred assets and using the straight line method
[ Borrowing related expenses ] February 2007 Period: about JPY341 million,
August 2007 Period: about JPY413 million
(Note) The above forecast values were calculated based on set premises. There is the possibility that the actual operating revenues, recurring profit, net profit and distribution per unit will change and these
values are not guaranteed by being entered here.
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Appendix
Financial Accounts
Fourth Third
Item Period Period Remarks (Definitions of Indices, etc.)
Results Results
Ratio of interest-bearing debt to total assets 41.0% 35.6% Interest-bearing debt at end of period/total assets at end of period
Ratio of long-term interest-bearing liabilities 81.0% 55.2% Long-term borrowings/interest-bearing debt at end of period
*Real net assets per unit after the public offering (Total equity at end of fourth period + additional paid-in capital + (real estate appraisal amount – real estate book value))/
JPY636,696 ―
(assumed) outstanding units after public offering of 107,500 units
FFO per unit JPY25,358 JPY24,550 (Net profit + depreciation this period)/outstanding units at end of period of 92,050 units
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Property Management
Conditions
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Appendix
(Notes 1) The figure for the acquisition (planned) price excludes various expenses (commissions, public charges, etc.) in all cases. (Note 2) The acquisition CAP is calculated by dividing the direct
capitalization method NCF by the acquisition (planned) price described in the appraisal (including the investigation report). (Note 3) The appraisal CAP rate indicates the cap rate of the direct
capitalization method for the appraisal value (including the investigation report). (Note 4) Since the age of properties in the portfolio differ, figures equivalent to the weighted average of the floor area
are indicated. (Note 5) The leasable area of the Taihaku Street Business Center is the sum total of the 11,224.49m2 for the office building and 3,427.38m2 for the residential building. (Note 6) Average
age indicates weighted averaged (age of property under construction is calculated as 0) acquisition (planned) price, average acquisition (planned) price indicates simple average of the acquisition
(planned) price, average occupancy indicates a value calculated by dividing the total leased area by total leasable area of the 8 properties. (Note 7) The assumed IRR is from the Preferred Equity
Investment Profitability Value Study issued by the Japan Real Estate Institute. (Note 8) In the above list, the figures in the parentheses are not included in the figures for each total column. 13
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(million yen)
Kominedai Canal City Gofukumachi Taihaku
Canal City Park Place SunLiveCity Community Business Business Sanix Hakata Street
Hakata Oita Kokura Mall Center Center Building Business
Building Center
(Fiscal period) 4th 4th 4th 4th 4th 4th 4th 4th
(Operational period) 184 days 184 days 184 days 184 days 184 days 184 days 184 days 169 days
Total Leasing business income
① 1,387 912 290 35 674 559 205 293
Other Income 24 19 0 1 1 66 15 0
Total leasing business
651 523 105 13 327 281 92 126
expenses ②
Maintenance expenses 3 14 - 0 5 12 1 1
Other expenses 72 42 0 0 16 60 18 2
Real estate rental business
736 388 184 21 347 278 112 167
profit (loss) ③(=①-②)
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Appendix
Sales-linked Rents
Tenants Contributing to
Increased Sales
[Comme Ca Store]
Utilized external tenants to renew itself to a
lifestyle-proposing store
(Opened on December 4, 2004)
[ZARA]
Highly popular European clothes SPA opened a
shop – one of its largest in Japan
(Opened on August 12, 2005)
[Brand Off]
Attracted a popular brand shop as its first store
in Kyushu
(Opened on September 16, 2005)
[United Cinemas]
Continuous screening of such popular movies as
The Da Vinci Code and Gedo Senki attracted more
viewers
Topics
Fukuoka REIT Anticipates Additional Visitors as the Surrounding Environment Develops Further 18
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Open
Topics
【Overview of SunLive】
SunLive Sales History
Strength of Fresh Foods Sale Has Established SunLiveCity Kokura as the No. 1 Store in the Region 19
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Property Scheduled for Acquisition in Sixth Fiscal Period (tentative name) Hara SATY
Drawing Acquisition Planned for March 1, 2007
• Planned acquisition amount: JPY5,410 million
• Appraisal amount: JPY5,550 million
• Acquisition cap rate*: 6.8% (planned)
• This is the amount arrived at by dividing the direct capitalization
method (NCF) result, , which is indicated in the report issued at the
time of contracting for the acquisition by the planned acquisition
price.
Overview (planned)
• Location: 6-chome Hara, Sawara Ward, Fukuoka City
• Floor space: 27,580.75m2 (note)
• Construction period: October 26, 1976 (complete renovation
planned at acquisition)
• Property Manager: Fukuoka Jisho Co., Ltd.
(Note) The figure indicated on the registry
Store
• SATY
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Property Scheduled for Acquisition in Sixth Fiscal Period (tentative name) Hara SATY
Higashi Ward
Fukuoka City
Mycal Kyushu Corporation
5km radius
Company Profile
Hakata Ward
Fukuoka City Paid-in capital: JPY900 million
Sales: JPY44.5 billion (year ended in
3km radius
February 2006)
Shareholders: Aeon 66.6%
Kyushu Electric Power 11.1%
The Bank of Fukuoka 5.0%
1km radius
Nishi-Nippon City Bank 5.0%
Fukuoka Jisho 4.4%
Coca-Cola West Japan 3.8%
Zenrin 3.3%
(from the Japan Food Journal dated
December 26, 2003)
Nishi Ward
Sawara Ward Jonan Ward Mycal conducts the general supermarket
Fukuoka City
Fukuoka City Fukuoka City
Minami Ward business within the Aeon Group.
Fukuoka City
Although the trade area is very
Total Population dense, there are few competitors.
Materials: 2000 National Census There is also little risk of new stores
Unit: Person/1 km mesh
of competitors due to the three City
Less than 1,000
Planning Laws.
10,000 ~ less than 15,000 The stars indicate the supermarkets, food supermarkets and GMS with 5,000m2
15,000 ~ less than 30,000
or more in floor space that exist within a 5km radius with Hara SATY at its center
(market report).
※The store area of Hara SATY is about 17,000m2.
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Realize External Growth Maintaining High CAP Rates without Getting Involved in Property Acquisition Race 24
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Grand Hyatt Fukuoka Hyatt Regency Fukuoka Hyatt Residential Suites Fukuoka
Note) As of October 20, 2006, Fukuoka REIT has no plans to acquire any of these properties.
The Fukuoka Jisho Group is developing more properties in the present strong economic climate 25
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Fukuoka REIT Aims to Create the Best Portfolio for a Fukuoka/Kyushu Dedicated REIT 26
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Investment Categories
(Note) This is calculated using the acquisition (planned) prices of assets under management as of October 18, 2006 and planned acquisitions (contract base).
Fukuoka REIT intends to acquire a greater share of urban shopping centers in the medium-term 27
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Shopping centers are broadly evolving in three directions to meet the diversification of consumer needs 28
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Appendix
500,000
1,000,000
Fukuoka REIT Carefully Discerns the Scope of the Trade Area and Competitive Environment in Selecting its Strategic Focus Areas
Areas 29
Financial Strategy
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(Note) This considers repayment of JPY2 billion short-term bridge loan for acquiring Amex Akasakamon Tower.
Fukuoka REIT realized external growth by applying part of spare LTV created through the PO 32
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73.4% 6
3.9
4
2
0
(Note) The fixed includes borrowings (floating interest) that had 0
their interest fixed through an interest rate swap. 2006 2007 2008 2009 2010 2011
Repayment Maturity
February 2006 September 2006
●Weighted average ● Weighted average
interest 0.84% interest 1.50%
● Duration 1.9 years
● Duration 3.0 years
● Commenced transactions with Mizuho Corporate Bank, The Norinchukin Bank, The Dai-ichi Mutual Life Insurance,
Shinkin Central Bank, the Sumitomo Trust and Banking, etc.
● Procured a JPY10 billion non-collateral syndicate loan arranged by the Mizuho Financial Group
Fukuoka REIT has successfully fixed the interest on a greater share of our debt 33
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Appendix
Commitment Period
Type Lender Credit Limit (JPY) Description
Start End
Commitment line No collateral
The Bank of Fukuoka 3,000,000,000 2006.6.29 2007.6.29
agreement (1) (*4) No guarantee
Commitment line No collateral
The Bank of Fukuoka 5,000,000,000 2006.8.25 2007.8.23
agreement (2) (*4) No guarantee
Total 8,000,000,000
(*1) This is a floating interest loan. (*2) This is a fixed interest loan. (*3) This is a floating interest loan but a swap contract has been concluded to fix the interest and the interest rate when the
swap contract is combined has been entered. (*4) The funds will be used for working capital and facility funds (including funds to make additional acquisitions of assets).
Fukuoka REIT has reinforced its banking strategy by commencing transactions with central financial institutions 34
Compliance
Fukuoka REIT has a strict compliance system that matches the risk perception of capital markets 36
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Periodical internal audits are conducted by the Compliance Officer (active licensed lawyer) 37
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Amex
1,278,560
Akasakamon - 0 yen
thousand yen
Tower
Other Class 1
1.0 billion yen 1.0 billion yen 30,000 yen Class 2
properties
Class 3
■Measures against earthquake risks Class 4
1. Concept
2. Investment Policy
3. Portfolio Summary
4. Construction Confirmation Inspection Body
5. Property Overview
6. Prefectural Land Price Report for 2005 and 2006
7. Major Office Buildings in Central Fukuoka
8. Market Trends for Office Rents
9. Population Growth
10. Consumption Trends
11. Investment Unit Pricing History
12. Newsweek
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Appendix
Concept
1. Regional REIT
Fukuoka REIT aims to maximize
investor profit by applying the
information strength and
expertise of the asset manager,
which is well versed in the
individual and unique
circumstances of Kyushu.
Fukuoka REIT has Unique Characteristics as a Regional REIT Specialized in Fukuoka (Kyushu) 40
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Investment Policy
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(Note 1) The store names are written for the retail properties.
(Note 2) The figures are calculated using the assets under management as of October 18,
2006 and the planned acquisition properties (contract base). The properties that haven’t been
constructed yet are counted as less than five years after the completion of construction.
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Gofukumachi Business Center New construction Institute of New Architecture Inc. Takenaka Corporation Fukuoka City Fukuoka City
Fukuoka Jisho First Class Architect’s Office, Canal City Hakata New Construction
New construction and
Canal City Business Center Building FJ Urban Development First Class District 2 Construction Joint Venture, Fukuoka City Fukuoka City
renovation work
Architect’s Office Zenitaka Corporation
Super Kyowa Building New construction Shintoku Design Office Shinwa Co., Ltd. Kitakyushu City Kitakyushu City
Kominedai
Community Mall New construction and
Daiso Building Watanabe Architects & Associates Shinwa Co., Ltd. Kitakyushu City -(Note 2)
extension work
Gusto Building New construction Tesco Design Office Shinwa Co., Ltd. Kitakyushu City Kitakyushu City
Mister Donut Building New construction Shintoku Design Office Shinwa Co., Ltd. Kitakyushu City Kitakyushu City
Taihaku Street Business Center New construction Yamashita Sekkei, Inc. Takenaka Corporation Fukuoka City Fukuoka City
Square Mall Kagoshima Ushuku New construction Yamashita Sekkei, Inc. Fujita Corporation Kagoshima City Kagoshima City
-(Not constructed)
(Tentative) Kumamoto Intercommunity SC New construction Kajima Corporation Kajima Corporation Japan ERI Co., Ltd.
Amex Akasakamon Tower New construction Masaki Architect & Associates Tada Corporation Kyushu Branch Japan ERI Co., Ltd. Japan ERI Co., Ltd.
(Tentative) City House Tenjin Keyaki Dori New construction Planning Office LECS Co., Ltd. Daiho Co., Ltd. Kyushu Branch Japan ERI Co., Ltd. -(Not constructed)
(Tentative) Hara SATY New construction Pal Corporation Obayashi Corporation Fukuoka City Fukuoka City
Notes 1. The consortium is the joint design venture by the designers of each zone.
2. This building didn’t undergo a completion inspection when it was newly built and an inspection certificate has not been issued, but Japan ERI Co., Ltd. conducted a suitability study for all the regulations in the Construction Standards Law and submitted a report
that the building can be judged as suitable. 43
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Property Overview
Urban SC
Stores Overview
• Washington Hotel • Address: 1-chome, Sumiyoshi,
• Comme Ca Store Hakata Ward, Fukuoka City
• United Cinema • Total leasable area: 47,909.65m2
(cinema complex) • Built: April 15, 1996
• OPA (Canal City OPA) • Property manager: Fukuoka Jisho
• Sports Authority
• Others
Urban SC
Preferred TK Investment
Characteristics
• Acquired the preferred TK investment interest (3,400 million yen) to CCH Bridge YK, an SPC.
• A contract to reserve acquisition of “Canal City Hakata SPC owned section” of the subject real estate was also
signed simultaneously (execution of the reservation fulfillment right by Fukuoka REIT will establish the
transaction contract at a price appraised by the Tanizawa Appraisal Office or the Japan Real Estate Institute).
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Property Overview
Regional SC
Stores Overview
• Jusco • Address: 2-chome, Koen Dori
• K’s Denki Nishi, Oita City
• T Joy • Total leasable area: 100,664.83m2
• Sports Authority • Built: March 26, 2002
• Plaza Capcom April 17, 2002
• Others April 28, 2004
• Property manager: FJ Real Estate
Regional SC
SunLiveCity Kokura
Characteristics
• Lies along National Highway 10 and near the Kokura Higashi
Interchange on the Kyushu Expressway with parking for about 2,000
cars
• Leading regional mall in Kitakyushu region with about 110 specialty
stores centering on the SunLive Supermarket
• Core development in the Kami Kuzuhara Rezoning District (about
66,000m2), a large commercial zone
Overview
Store • Address: 2-chome, Kami Kuzuhara,
• SunLive Kokura Minami Ward,
Kitakyushu City
• Total leasable area: 61,450.22m2
• Built: March 17, 2005
• Property manager: Fukuoka Jisho
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Property Overview
Regional SC
Characteristics
• Located along the main thoroughfare National Highway 211 and right in
front of the Komine Interchange Exit on Kitakyushu Urban Expressway
No. 4
• The center of the about 8,000m2 site has a sufficient single level
parking lot
• Comprised of four tenants centering on a community entrenched fresh
food supermarket
Stores Overview
・Super Kyowa ・Address: 1-chome Kominedai,
・Daiso Yahatanishi Ward,
・Gusto Kitakyushu City
・Mister Donut ・Total leasable area: 3,743.12m2
・Constructed: June 3, 1972, March 15, 1997,
May 12, 1997 and June 9, 1997
・Property manager: Fukuoka Jisho
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Property Overview
Community SC
Overview (planned)
• Address: Usuki 2-chome, Kagoshima City
• Total leasable area: 14,663.41m2
• Constructed: September 28, 2006
• Property manager: Fukuoka Jisho
Community SC
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Property Overview
A Class Building
Tenants Overview
• TOTO • Address: 1-chome, Sumiyoshi,
• Bell System 24 Hakata Ward,
• USEN Corporation Fukuoka City
• Aflac Japan • Total leasable area: 23,011.85m2
• Mitsubishi Electric Building • Built: April 15, 1996
Techno-Service • Property manager: Fukuoka Jisho
• Others
A Class Building
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Property Overview
A Class Building
Tenants Overview
• Sanix • Address: Hakataeki Higashi,
• The Nishi-Nippon Hakata Ward,
City Bank Fukuoka City
• ROHM • Total leasable area: 6,293.67m2
• Idemitsu Kosan • Built: March 31, 2001
• Others • Property manager: Fukuoka Jisho
A Class Building
Tenants
• NTT Comware Overview
• Yokogawa Electric • Address: Gokushomachi, Hakata Ward,
• The Tokio Marine Nichido Fukuoka City
Outsourcing Business • Total leasable area: Office Tower: 11,244.49m2
• Fujitsu Network solutions Residential Tower:3,427.38m2
• Tokio Marine & Nichido • Built: March 7, 2002
Life • Property manager: Fukuoka Jisho
• Others
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Property Overview
Residential
Overview
• Address: Kego 2-chome, Chuo Ward, Fukuoka City
• Total floor area: 3,531.37m2
• Scheduled completion date: November 30, 2007
• Property manager: DMC (a member of the Daio Group, a giant
residential management company in the Tenjin area)
Residential
Overview
• Address: 2-chome Maizuru, Chuo Ward, Fukuoka City
• Leasable area: 4,755.14m2
• Built: July 26, 2005
• Property manager: DMC (a member of the Daio Group, a giant residential
management company in the Tenjin area)
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Fukuoka City Land Price Trends (2004 – 2005) Fukuoka City Land Price Trends (2005 - 2006)
The Land Price Survey Announced in September 2006 Shows 45 Places with Year-on-Year Price Increase 51
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Gion Gofukumachi
District
Average advertised rent: 14,567 yen/tsubo
(common expenses included)
Tenjin District
Average advertised rent: 18,287 yen/tsubo Average vacancy: 2.36%
(common expenses included)
Average vacancy: 6.47%
The office market of central Fukuoka City is divided into six districts and the main office buildings are concentrated
52
in the Tenjin District and around Hakata Station
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Compliance Appendix
Appendix
Source: "Office Building Market Report by Region" issued by Miki Shoji Co., Ltd. (Compilation and analysis of office buildings that are located in major business districts in each city and are
above certain standards in floor areas, standard floor areas and other factors)
(Note 1) Average rents do not include common service charges.
(Note 2) Figures for 2006 are as of the end of August.
Population Growth
Population including Students Continue to Flow from the Entire Kyushu into Fukuoka 54
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Compliance Appendix
Appendix
Consumption Trends
106.0
104.0
102.0
100.0 100
98.0
96.0
90.0
July 2005 Aug. 2005 Sept. 2005 Oct. 2005 Nov. 2005 Dec. 2005 Jan. 2006 Feb. 2006 Mar. 2006 Apr. 2006 May 2006
Source: Current Survey of Commerce by the Ministry of Economy, Trade and Industry
Performance on Pricing
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Property Management
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Investment Strategy
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Financial Strategy
Strategy Compliance
Compliance Appendix
Appendix
Capital of Magnet
London London’s gain is Manchester’s loss, but Brits worry
(U.K.) more about Shanghai.
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Financial Strategy
Strategy Compliance
Compliance Appendix
Appendix
POINT 1
• Capital investment in the manufacturing
industry in Kyushu has grown as fast as
52% in recent years
• Fukuoka residents refer to Kyushu as Car
Island, or Silicon Island
POINT 2
• 50% increase in containers handled at
Hakata Port, the main port of Fukuoka City,
over the past six years
• Toyota established its second manufacturing
base in Japan in Kyushu and started shipping
Lexus models to China from Hakata this year
POINT 3
• Cultural assets and festivals that attract
tourists
• 50% increase in foreign tourists over the
past six years
• Consumption propelled by Asian tourists and
young visitors from other Kyushu areas
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Investment Strategy
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Financial Strategy
Strategy Compliance
Compliance Appendix
Appendix
POINT 1 POINT 1
Large Manufacturers Reinforce Proactive Investment in Kyushu Capital Investment in Kyushu is Making Steady Progress
Oita Canon
Tokyo Electron Kyushu (Kunisaki City, Oita Prefecture)
(Tosu City, Saga Prefecture)
Automobile
IT Source: Nihon Keizai Shimbun, April 29, 2006
POINT 2 POINT 2
Port of Hakata Expands Handling of Containers Toyota Establishing Second Largest Production Base in Japan
300
Port of Tokyo
Port of Yokohama
250
Port of Nagoya
Port of Kobe
Port of Osaka
200
Port of Hakata
Japan total
150
100
50
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
POINT 3 POINT 3
Increasing Number of Foreign Tourists Fukuoka Has Strong Asian Features
No nationality
100,000
60% Oceania
South America
80,000 North America
92.7 Africa
40% Europe
60,000
68.2 Asia
40,000
20%
20,000
0 0%
2000 2001 2002 2003 2004 All of Japan Fukuoka
Source: Immigration Bureau of Japan of the Ministry of Justice
Source: Immigration Bureau of Japan of the Ministry of Justice
POINT 3
Cultural Assets and Festivals that Attract Tourists
Hakata Gion Yamagasa Festival Hakata Dontaku Festival Kyushu National Museum Kyokusui-no-en festival at Dazaifu
Tenmangu shrine