April 3, 2012

S&PCORRECT: Ratings On Japan Real Estate
Investment Lowered To 'A+/A-1'; Outlook
StablePrimary Credit Analyst:
Roko Izawa, Tokyo (81) 3-4550-8674; roko_izawa@standardandpoors.com
Secondary Contact:
Yumi Oikawa, Tokyo (81) 3-4550-8775; yumi_oikawa@standardandpoors.com(Editor's Note: In the media release published on March 26, 2012, the as-of
date for JRE's property portfolio was misstated. A corrected version follows.)

OVERVIEW• JRE is a listed J-REIT that focuses on investments in office buildings.
• JRE's profitability measures remain weak amid lackluster conditions in
the office leasing market, and its ratio of debt to total assets remains
moderately high. Accordingly, we expect that the J-REIT may experience
delays in restoring its conservative financial profile.
• We have lowered to 'A+' our long-term corporate credit and unsecured debt
ratings and to 'A-1' our short-term credit rating on JRE.
• The outlook on the long-term corporate credit rating is stable,
reflecting our view that JRE is likely to generate mostly stable cash
flows, backed by its strong business position and high-quality realestate portfolio.

TOKYO (Standard & Poor's) March 26, 2012--Standard & Poor's Ratings Services
today said that it has lowered to 'A+' from 'AA-' its long-term corporate
credit and unsecured debt ratings, and to 'A-1' from 'A-1+' its short-term
credit rating, on Japan Real Estate Investment Corp. (JRE). The outlook on thelong-term corporate credit rating on JRE is stable. Prior to this action, wehad maintained a negative outlook on the long-term rating on JRE.

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S&PCORRECT: Ratings On Japan Real Estate Investment Lowered To 'A+/A-1'; Outlook Stable

We today lowered our ratings on JRE, a Japanese REIT (J-REIT), based on thefollowing factors:• JRE's profitability measures remain weak amid lackluster conditions in
the office leasing market; its debt-to-total assets ratio has beenhovering at levels that are moderately high compared with the target
range set under its conservative financial policy as well as levels
before the onset of the financial crisis in 2008; and its financial
indicators are relatively weak.
• JRE has said that it will continue to actively pursue external growth toincrease its cash flow, while ensuring that its financial profile remains
under control. As JRE pursues external growth, we believe that the J-REIT
may experience delays in restoring its conservative financial profile.
• The portfolio's unrealized gain has decreased, thereby weakening JRE'sfinancial buffer.

JRE has said that it intends to pursue a conservative financial policy,
maintaining its ratio of debt to total assets at between 30% and 40%. However,as of the end of its 20th six-month fiscal term (ended Sept. 30, 2011), JRE's
ratio of debt to total assets, which has remained relatively high in recent
years, stood at about 41.8%, and its debt-to-capital ratio [interest-bearingdebt including hoshokin liabilities/(interest-bearing debt including hoshokin
liabilities + total net assets), as defined by Standard & Poor's] was about
44.7%. Moreover, JRE's acquisition of Akasaka Park Building (Minato Ward,Tokyo; purchase price: ¥60.8 billion) in November 2011 raised the J-REIT's
ratio of debt to total assets to about 46%. We expect the ratio to decline toabout 40% because, in addition to an equity offering it launched in February
2012, JRE will conduct an equity offering in late March 2012 with a greenshoe
option that enables it to issue more investment units (equity shares) thanthat specified in its original public offering plan. Nevertheless, thedebt-to-total assets ratio is still high compared with previous levels.
Meanwhile, although the portfolio's average occupancy rate is improving,
declining rent levels continue to constrain JRE's rental revenue, and theJ-REIT's profitability measures are relatively weak.
JRE believes that real estate market prices are nearing the bottom, and thus
intends to shift the focus of its operations to external growth to increase
its cash flow, while ensuring that its financial profile remains undercontrol. As JRE pursues external growth, we believe that the J-REIT may
experience delays in restoring its conservative financial profile.
Furthermore, the unrealized gain (the difference between the appraisal value
and the book value of the portfolio at the end of a fiscal term) on JRE'sportfolio has decreased to about 1.9% as of Sept. 30, 2011, far below thelevels seen when real estate market conditions were favorable. Nevertheless,the rate of the decrease in unrealized gains has moderated.
JRE's ratings are underpinned by its strong business position in the J-REIT
market and high market recognition, backed by the strong brand recognition andcredit quality of its sponsors, Mitsubishi Estate Co. Ltd. (A+/Stable/A-1), The
Dai-ichi Life Insurance Co. Ltd. (A/Negative/--), and Mitsui & Co. Ltd.

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S&PCORRECT: Ratings On Japan Real Estate Investment Lowered To 'A+/A-1'; Outlook Stable(A+/Stable /A-1), as well as it mostly stable cash flow from its high-quality
portfolio. JRE boasts the second largest asset portfolio among the listed
J-REITs that focus on investments in office buildings. As of Feb. 29, 2012,
JRE owned a portfolio of 57 office properties throughout Japan, located mainlyin the 23 wards of Tokyo, worth about ¥718.7 billion based on total purchaseprice. The diversification and competitiveness of its portfolio have improved
as a result of its recent acquisitions. The J-REIT maintains good
relationships with multiple financial institutions and high financial
flexibility. It increased its total amount of committed credit lines in the20th fiscal term.
The outlook on the long-term corporate credit rating on JRE is stable. We may
raise our ratings on JRE if the J-REIT's profitability measures recover, its
debt-to-total assets ratio declines to around 35%, and prospects for clear
improvement in its financial indicators emerge as it pursues external growth.
On the other hand, we may consider lowering the ratings on JRE again if theJ-REIT's profitability measures and financial indicators worsen.
RELATED CRITERIA AND RESEARCH"Global Criteria For Rating Real Estate Companies," June 21, 2011
"Principles Of Credit Ratings," Feb. 16, 2011
"Rating Policy For Japanese Real Estate Investment Trusts," May 9, 2001
A Japanese-language version of this media release is available on Standard &Poor's Research Online at www.researchonline.jp, or via CreditWire Japan onBloomberg Professional at SPCJ <GO>. Complete ratings information is available
to RatingsDirect subscribers on the Global Credit Portal at
www.globalcreditportal.com and RatingsDirect subscribers at
www.ratingsdirect.com. All ratings affected by this rating action can be foundon Standard & Poor's public Web site at www.standardandpoors.com. Use theRatings search box located in the left column.

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