May 17, 2007
JAPAN REAL ESTATE INVESTMENT CORPORATIONANNOUNCEMENT OF ELEVENTH FISCAL PERIOD RESULTS

1. Summary of Financial Results
In the 11th fiscal period (six months ended March 31, 2007), Japan Real Estate Investment
Corporation (“JRE”) recorded operating revenues of 16,960 million yen*, up 8.9% from theprevious period. Operating profits rose 17.9% to 8,304 million yen. After deducting expenses forinterest payments on loans and other costs, recurring profit increased 20.2% to 7,184 million yen
and net income climbed 20.2% to 7,183 million yen.
JRE’s policy with regard to profit appropriation is to distribute dividends of approximately
100% of taxable income in order to enjoy the tax benefit available under Article 67-15 of theSpecial Taxation Measures Law of Japan applicable to Japanese Real Estate Investment Trusts(J-REITs). For the period under review, we declared a cash dividend of 17,521 yen per unit.
Note: *Includes gain from the exchange of properties totaling 459 million yen
2. Results of Operations(1) Property Management and Acquisitions/Sales (Strengthening Portfolio Quality)
During the period under review, the Japanese economy continued to show a favorable trend,
although the household sector displayed signs of weakness attributable to such factors as a
general flattening out in consumer spending caused by a slowdown in income growth.
Capital spending increased in an environment where profits in the corporate sector rose in
response to growth in demand and an improvement in staffing conditions.
As a result of favorable corporate performance, the market for leased office space isseeing an increase in demand, which is leading to improved vacancy rates throughout thecountry. Demand is especially robust in central Tokyo, reflected in noticeably falling vacancy
rates and climbing rents for new tenants.
Under these circumstances, JRE was able to maintain a high occupancy rate of 97.8% (asof March 31, 2007) by (1) acquiring top-level properties and upgrading building facilities
through optimal refurbishment in order to maintain and improve functions; and (2)developing finely tuned building management policies from the perspective of tenants, while
undertaking vigorous sales activities. In light of the recovery in the market for leased officespace in central Tokyo, JRE has also undertaken concrete initiatives aimed at further
increasing revenues and raising rent levels.
Regarding the property market, property values rose sharply as a result of expanding
demand for residential and office properties amid the continuing economic recovery, as wellas increased investment in real estate not only by J-REITs, but also by such entities as privatefunds, pension funds and institutional investors. The official land prices announced in March
2007 saw commercial land values climb for the second consecutive year and residential land
prices rise for the first time since 1991 after a period of prolonged decline.
In this sort of market environment, JRE undertook the acquisition of a competitive
property as well as the following property exchange as part of revisions aimed at further
strengthening the quality of its portfolio. As a result, JRE’s properties as of March 31, 2007
consisted of 50 office buildings with a total acquisition amount of 441,276 million yen. Total
leasable space was 397,928 m2 (approximately 120,373 tsubo), with a total of 887 tenants.
Transferred Property
Name of Property

Mitsubishi Soken Building

Location
Type of Specified
Asset
Transfer /Acquisition Price

Otemachi, Chiyoda-ku, Tokyo
Trust beneficiary rightin trust of real estate
41,900 million yen

Acquired Property
Mitsubishi UFJ
Trust and Banking Building
Marunouchi, Chiyoda-ku, Tokyo
Real property
44,700 million yen(2) Finance Activities

For its finance activities, which are aimed at providing funds to repay loans and acquire new
specified assets, JRE decided to issue 64,600 investment units by public offering on October24, 2006. The offering raised 63,211,100,000 yen.
The amount raised by the new unit issue was used to repay ahead of schedule short-termloans of 4,500 million yen on October 31, 2006, and 58,000 million yen on November 24,
2006, respectively.
In addition to the above, as a result of converting short-term loans to long-term loans, on
March 31, 2007, JRE had total interest-bearing debt of 140,000 million yen, consisting of
85,000 million yen in long-term loans, including a 6,000 million yen current portion of
long-term loans; and outstanding investment corporation bonds with a par value of 55,000
million yen, including a 25,000 million yen current portion of investment corporation bonds.
(Short-term loans have been repaid in full.)
JRE has received the following credit ratings.
Rating Agency
Standard & Poor’s

Issuer Credit Rating
Long-term: A+; Short-term: A-1; Outlook: Stable

Moody’s Investors Service

Rating: A1; Outlook: Stable

Rating and Investment Information, Inc.

Rating: AA

3. Outlook(1) Operating Environment
Although it will be necessary to pay close attention to the impact of the U.S. economy on theJapanese market, as well as the impact of rising interest rates and increasing crude oil andraw material prices on corporate earnings performance, the stable, favorable turnabout in theJapanese economy centered on the corporate sector is expected to continue for theforeseeable future.
In the market for leased office space, both vacancy rates and rent levels aredemonstrating favorable trends, supported by the active demand for office space spurred by
the robust corporate performance.
On the other hand, when selecting buildings, tenants in this market are making
increasingly stringent demands ranging from location, building quality and features tobuilding management and value-added services. We anticipate that it will become even more
important for suppliers to provide services that correctly and promptly reflect the needs oftenants and to deliver added value that differentiates their buildings from the competition.
In the real estate market, JRE expects active real estate investment to be continued by
J-REITs, in addition to such entities as private funds, pension funds and institutional
investors. Accordingly, we expect that competition to acquire prime properties in urban
centers will become more intense.
① Property Management
In accordance with the aforementioned, while business conditions in the market for leased
office space are trending toward recovery, JRE adheres to the following management
policies in order to maintain and improve earnings.
(i)Strengthen relationships of trust with existing tenants and raise rent
levels

As of March 31, 2007, JRE had contracts with 12 property management companies.
Most of these companies were already managing their respective buildings before
JRE acquired them, and so have built relationships of trust with their tenants. JRE will
work to further strengthen these relationships by anticipating tenants’ needs andproviding tailored services in order to increase tenant satisfaction, and subsequently
uncover additional demand for office space and raise rent levels. In addition, we areendeavoring to raise rent levels for those tenants whose rents are significantly below
market value.
(ii)
Fill vacancies promptly
In cooperation with the property management companies mentioned above, JRE
actively seeks the most appropriate tenants for each property, based on location andfeatures, in order to fill current and anticipated vacancies as rapidly as possible. We arealso working to uncover additional demand for office floor space among our existing
tenants.
(iii)
Stabilize revenues
With the aim of stabilizing revenues, JRE is endeavoring to apply fixed- andlong-term leasing agreements with its large-scale tenants.
(iv)
Reduce management costs
JRE has introduced sound competitive principles for its 12 property managementcompanies to follow. These companies are also revamping their management systems
and cost structures on an ongoing basis.
② Property Acquisitions and Sales
JRE has adopted the following policies for acquiring properties.
(i)

To access important information quickly, JRE is enhancing its property
information channels, including strengthening its relationships with building
owners with whom it has previously conducted business. We are also working
to develop new channels.

(ii)

In its acquisition activities, JRE will continue to meticulously monitor andexamine economic, physical, and legal factors, including rights-related issues,
while also taking business conditions into account when selecting properties.
With regard to the structure of buildings, we require buildings to meet or
exceed new earthquake-resistance standards and are targeting properties
capable of maintaining a competitive edge in terms of the facilities they offer
over the medium to long term.

(iii)

In accordance with its acquisition policies, JRE’s general target for regional
diversity of properties is for 70% or more of properties to be located within
the Tokyo metropolitan area, with the remaining 30% or less located in otherregional urban centers.

Under these policies, JRE will continue to acquire highly competitive properties while
also considering suitable timing for the sales of properties in order to further strengthen thequality of its portfolio.
Concerning the financing of property acquisitions, JRE flexibly selects a variety offinancial instruments, including the issue of investment corporation bonds, while monitoringtrends in financial markets. When procuring a loan, our policy is to minimize funding costsby negotiating with several qualified institutional investors before settling on a lender.
(2) Performance Forecasts
For the 12th fiscal period (April 1, 2007 to September 30, 2007), JRE forecasts operating
revenues of 17,000 million yen, recurring profit of 7,000 million yen and net income of
7,000 million yen. We plan to declare a dividend of 17,090 yen per unit.
Our forecasts for the 13th fiscal period (October 1, 2007 to March 31, 2008) are
operating revenues of 17,140 million yen, recurring profit of 7,070 million yen, and net
income of 7,070 million yen and a cash dividend of 17,200 yen per unit.
The above estimates for the 12th and 13th periods are based on assumptions of theportfolio consisting of 50 properties as of March 31, 2007, and the acquisition of the 8·3
Square Kita Building on June 1, 2007. Estimates are subject to change in accordance withthe acquisition or sale of other properties. The estimates are also based on the 410,000
investment units outstanding as of March 31, 2007, and on the assumption that theloan-to-value (LTV) ratio on will be at around the 30% level on September 30, 2007 andMarch 31, 2008.
After March 31, 2007, JRE plans to acquire the office building described below.
8·3 Square Kita Building
Outline of the acquisition
Asset to be acquired:Real property*1
Scheduled acquisition date: June 1, 2007
Acquisition price:
7,100 million yen
Outline of the property
Location (Address):
Usaga:
Land area:
Building area:

Kita 8 Nishi 3 32, Kita-ku, Sapporo City, Hokkaido*2
Office, shop*2
5,541.60 m2 (Total land area for the 8･3 Square site)
16,048.59 m2 (Office building)
48.38 m2 (Multi-level parking structure)
Structure:
Steel-reinforced concrete structure, flat roof
Above ground: 11 floors Below ground: 1 floor*2
Completion date:
December 2006
Type of ownership:(Land) Ownership (4,717,000/10,000,000 in site rights)(Building) Ownership (All compartmentalized building units in theoffice building and the multi-level parking structure, and thecommon area in the project site)
Total number of tenants: 7*3

Total leasable space:
12,266 m2 *3
Total leased space:
12,078 m2 *3
Occupancy rate:
98.5% *3
Notes:*1
The asset to be acquired by JRE is land and a building of a complex, which weredeveloped together with “8・3 Square D’ Grafort Sapporo Station Tower” (residentialbuilding) under the “8･3 Square” redevelopment project. JRE will acquire the shareof co-ownership in land of 8･3 Square, the 8･3 Square Kita Building (officebuilding) and a multi-level parking structure.
*2
The location, usage and structure refer to the office building.
*3
Total number of tenants, total leasable space, total leased space and occupancy rate
are projections for the office building as of the scheduled acquisition date (June 1,2007).

Income Statement for the 11th Period(In millions of yen, except for dividend per unit）
10th Period

11th Period (182 days)
Item

Operating Revenues
Rental revenues
Non-rental revenues
Gain from transfer of properties

Existing
properties(183 days)

Change% Change

1,389

8.9%

370

7.7%

960

9.3%

983
-278

12.2%
- 27.4%

1,262
29

17.9%
380.4%

84

7.9%

Other non-operating expenses
Recurring Profits
Income before Income Taxes
Income taxes, etc.
Net Income
Retained Earnings at end of period

15,57015,066
102
400
4,829
1,766
1,198
1,271
38
513
40
10,339
2,682
8,058
1,016
653
363
7,041
7
4
3
1,072
646
376
9
39
5,977
5,977
1
5,976
5,976

1,207
1,207

20.2%
20.2%

1,207

20.2%

FFO (Net Income+Depreciation)

9,901

8,658

1,242

14.4%

Dividend per Unit

17,521

17,302

Property management expenses
Utilities expenses
Property and other taxes
Casualty insurance
Repairing expenses
Other rental expenses
NOI (excluding gain from transfer of properties)
Depreciation
Gross Operating Profits
Administrative Expenses
Asset management fees
Other administrative expenses
Operating Profits
Non-Operating Revenues
Interest income
Other non-operating revenues
Non-Operating Expenses
Interest expense
Interest expense on investment corporation bonds
Amortization of investment corporation bond issuance costs

293
291
1
0
108
47
14
0
0
39
6
184
86
98

Total

16,96016,397
103
459
5,200
1,815
1,133
1,241
38
916
54
11,300
2,717
9,042
737
452
284
8,304
37
36
1
1,157
666
376
9
104
7,184
7,184
0
7,183
7,183

Property-Related Expenses (excluding depreciation)

16,666
16,105
101
459
5,091
1,768
1,119
1,240
37
877
47
11,1152,630
8,943

New properties andadditional shares ofownership acquired* New properties and additional shares of ownership acquired: Nishiki Park Building (acquisition of initial and additional
shares of ownership), Mitsubishi UFJ Trust and Banking Building

Balance Sheet for the 11th Period（In millions of yen）
Item

11th Period-end 10th Period-end

Change(Mar 31, 07)(Sep 30, 06)

Cash and entrusted cash

13,877

21,102-7,225

Other current assets

1,764

401

1,363

15,64221,504-5,862

Buildings (including those held in trust)

144,450

136,599

7,850

Structures (including those held in trust)

1,639

1,530

109

2,206

2,151

54

Land (including that held in trust)

293,773

291,407

2,366

Accumulated depreciation-18,089-16,023-2,065

Total Property and Equipment

423,981415,666

8,314

3,032

2,941

91

3,032

2,941

91

1,272

1,004

268

Long-term prepaid expenses, etc.

24

16

8

Total Investments and Other Assets

1,297

1,021

276

428,310419,628

8,682

19

29

-9

19

29

-9

443,973441,163

2,810

Reason for change

Current Assets

Total Current Assets
Fixed Assets
Property and Equipment

Machinery and equipment(including that held in trust)Intangible Assets
Leasehold rights, etc.
(including those held in trust)

Total Intangible Assets
Investments and Other Assets
Investment securities

Total Fixed Assets
Deferred Assets
Deferred investment corporation bondissuance costs
Total Deferred Assets
Total Assets

Increased due toacquisition of properties
and capital expenditure,and decreased due totransfer of properties

（In millions of yen）
Item

11th Period-end 10th Period-end

ChangeReason for Change(Mar 31, 07)(Sep 30, 06)

064,500

6,000

6,000

0

25,00025,0000

Rent received in advance

2,102

2,425

-322

Other current liabilities

2,927

2,902

24

Total Current Liabilities

36,029100,827-64,797

Investment corporation bonds

30,00030,0000Long-term loans

79,00077,0002,000 loans to long-term loans

Deposits received from tenants

27,07525,886

1,189 transfers

Other long-term liabilities

0

0

0

Total Long-term Liabilities

136,075

132,886

3,189

172,105

233,714-61,608

Unitholders' Capital

264,683

201,472

63,211 units

Retained Earnings

7,183

5,976

1,207

Total Unitholders' Equity

271,867

207,449

64,418

Total Liabilities and Unitholders' Equity

443,973441,163

2,810

Liabilities
Current Liabilities
Short-term loans
Current portion of long-term loans
Current portion of investment corporation bonds

Decreased due to repayment of short-term loans-64,500 and conversion to long-term loans

Long-term Liabilities

Total Liabilities

Increased due to conversion from short-term
Changed due to property acquisitions andUnitholders' Equity
Increased due to issurance of investment

Property Data
(In millions of yen) (In thousands of yen)

Name

Area

23 WardsTokyo
Metropolitan
Area

10th Period
Appraisal
Value

11th Period
Book Value

Amount ofDifference(Mar 31, 07)

11th Period
Appraisal
Value-Book
Value

Acquisition
Price(Mar 31, 07)(Sep 30, 06)

Genki Medical Plaza

6,220

6,210

10

5,156

1,063

5,000,000

Kitanomaru Square

83,90082,7001,200

81,341

2,558

81,555,500

MD Kanda Bldg.

10,200

9,680

520

9,195

1,004

9,520,000

Kandabashi Park Bldg.

5,600

5,210

390

4,651

948

4,810,000

Nibancho Garden

16,400

16,100300

14,4791,920

14,700,000

Burex Kojimachi Bldg.

6,930

6,930

0

6,936

-6

7,000,000

Sanno Grand Bldg.

26,80025,1001,700

21,7805,019

20,900,000

Yurakucho Denki Bldg.

7,980

7,610

370

7,679

300

7,200,000

Kodenmacho Shin-Nihonbashi Bldg.

3,430

3,420

10

2,916

513

3,173,000

Burex Kyobashi Bldg.

6,610

6,240

370

5,137

1,472

5,250,000

Ginza Sanwa Bldg.

17,50017,300200

17,081

418

16,830,000

Ryoshin Ginza East Mirror Bldg.

4,790

4,650

140

5,438

-648

5,353,500

Aoyama Crystal Bldg.

8,900

8,770

130

7,595

1,304

7,680,000

Shiba 2Chome Daimon Bldg.

6,990

6,930

60

4,955

2,034

4,859,000

Cosmo Kanasugibashi Bldg.

3,560

3,470

90

2,610

949

2,808,000

Shinwa Bldg.

8,450

8,270

180

7,818

631

7,830,000

Tokyo Opera City Bldg.

11,60011,300

300

9,099

2,500

9,350,000

Takanawadai Bldg.

2,780

2,730

50

2,573

206

2,738,000

Higashi-Gotanda 1Chome Bldg.

6,720

6,700

20

5,361

1,358

5,500,000

Omori-Eki Higashiguchi Bldg.

5,520

5,460

60

4,613

906

5,123,000

Nippon Brunswick Bldg.

8,480

8,090

390

6,737

1,742

6,670,000

Yoyogi 1Chome Bldg.

11,80010,100

1,700

8,426

3,373

8,700,000

da Vinci Harajuku

6,090

6,080

10

4,954

1,135

4,885,000

Jingumae Media Square Bldg.

15,30015,100200

12,093

3,206

12,200,000

Shibuya Cross Tower

45,80043,3002,500

38,454

7,345

34,600,000

Ebisu Neonato

5,520

5,370

150

3,905

1,614

4,100,000

Harmony Tower

12,70011,800

900

8,645

4,054

8,500,000
3,541,000

Otsuka Higashi-Ikebukuro Bldg.

3,500

3,480

20

3,330

169

Ikebukuro 2Chome Bldg.

1,560

1,540

20

1,640

-80

1,728,000

Ikebukuro YS Bldg.

5,570

5,150

420

4,706

863

4,500,000

3,390

3,300

90

3,225

164

3,300,000

2,550

2,550

0

2,430

119

2,574,000

3,360

3,360

0

2,963

396

3,375,000

Hachioji First Square
Excluding 23
Saitama Urawa Bldg.
Wards
Kawasaki Isago Bldg.

Other Major Cities

11th Period
Appraisal
Value

Jozenji Park Bldg.

1,070

1,070

0

1,018

51

1,000,000

Sendai Honcho Honma Bldg.

3,600

3,450

150

2,909

690

3,174,000

Kanazawa Park Bldg.

6,300

5,610

690

4,354

1,945

4,580,000

Hirokoji Tokio Marine Nichido Bldg.

1,680

1,680

0

1,707

-27

1,680,000

Nagoya Hirokoji Bldg.

15,90015,9000

14,0981,801

14,533,000

Nagoya Misono Bldg.

1,890

1,890

0

1,656

233

1,865,000

Kyoto Shijo Kawaramachi Bldg.

2,140

2,140

0

2,895

-755

2,650,000

Sakaisujihonmachi Bldg.

4,700

4,610

90

4,014

685

4,164,000

Midosuji Daiwa Bldg.

16,80015,900900

13,624

3,175

14,314,000

Kobe Itomachi Bldg.

951

951

0

1,341

-390

1,436,000

5,400

5,220

180

4,588

811

4,650,000

Lit City Bldg.
NHK Hiroshima Broadcasting Center Bldg.

1,780

1,550

230

1,274

505

1,320,000

Tosei Tenjin Bldg.

1,510

1,480

30

1,406

103

1,550,000

Tenjin Crystal Bldg.

4,970

4,970

0

4,961

8

5,000,000

Hinode Tenjin Bldg.

3,640

3,580

60

3,521

118

3,657,000

448,831434,001

14,830391,31057,520391,426,000

44,700−−30,503

14,19644,700,000

5,210

−

−

5,199

10

5,150,000

498,741−−

427,01371,727441,276,000

Total (48 properties)
Properties Acquired after Mitsubishi UFJ Trust and Banking Bldg.
the 10th Period
Nishiki Park Bldg.
Total (50 properties)* Appraisal values are those determined by an institutional appraiser for the 10th and 11th periods at the end of the fiscal period.

Area

Name

Property Acquired after the 11th Period 8・3 Square Kita Bldg.

Total(In millions of yen)

(In thousands of yen)Appraisal
Value atAcquisition

Acquisition
Price

7,190

−

−

−

−

7,100,000

7,190

−

−

−

−

7,100,000