JREA-c1-4

2005new 05.9.26 7:11 PM ページ 1

JAPAN REAL ESTATE INVESTMENT CORPORATION

http://www.j-re.co.jp

MARCH
2005
S E M I A N N UALRE PORT
For the period from October 1, 2004 to March 31, 2005

MARCH 2005 SEMIANNUAL REPORT

Japan Real Estate Investment Corporation
Printed in Japanpdf 05.9.12 10:46 AM ページ 3

Pro f i leJapan Real Estate Investment Corporation (the “Company”) was established as oneof the f irst real estate investment corporations in Japan, following revisions to the
Law Concerning Investment Trusts and Investment Corporations of Japan, as
amended, or the Investment Trust Law. Its investments focus primarily on off ice
buildings, aiming to maintain geographical diversity while seeking stable growthand dividends in the medium to long term. The Company was listed on the Tokyo
Stock Exchange (“TSE”) on September 10, 2001. (Securities Code: 8952)
Note: Investment corporations, including Japan Real Estate Investment Corporation, are special legal entities
incorporated and operated under the Investment Trust Law. Accordingly, the “shares” of such investment
corporations, including the shares of the Company, are governed by the Investment Trust Law andrepresent the equity interests in such investment corporations, which may differ in certain material respects
from the “shares” governed by the Commercial Code of Japan and representing the equity interests inJapanese ordinary corporations incorporated and operated under the Commercial Code of Japan. Investors
and readers are specifically reminded to pay attention to such differences when reviewing this semiannual
report and making any investment decision on or in respect of the “shares” of the Company. “Shareholders”
of the Company may be construed accordingly. See “About J-REIT System” (pages 50–52) for more details.
Each of the investors and readers should consult their own legal, tax and other advisors regarding all
Japanese legal, tax and other consequences of an investment in the shares of the Company, with specificreference to their own legal, tax and other situation and any recent changes in applicable laws, guidelines ortheir interpretation.

THE STRENGTHS OF JAPAN REAL ESTATE INVESTMENT CORPORATION
•

•
•
•
•
•
•

•

Steady growth — Total amount of acquisition prices achieved the goal of ¥300 billion($2.8 billion) one year ahead of schedule with the acquisition of the Nibancho Garden on
April 1, 2005.
Revenues and profits have increased for seven consecutive periods. Gross revenues for theseventh period achieved ¥10.7 billion, and operating profits reached ¥4.7 billion.
Portfolio of 46 high-quality off ice buildings as of March 31,2005 (the Nibancho Garden
was acquired on April 1 and the Tenjin Crystal Building was acquired on June 1.)
Acquisition of preferred capital contribution certificates as the first for a J-REIT
Superior geographic and tenant diversity with a 97.6% occupancy rate (as ofMarch 31, 2005)
Collaboration with Mitsubishi Estate Co., Ltd., The Tokio Marine & Nichido Fire
Insurance Co., Ltd., The Dai-ichi Mutual Life Insurance Company, and Mitsui & Co., Ltd.
Highest issuer credit ratings of any office REIT in the world: A+ from Standard &Poor’s and A1 from Moody’s Investors Service. Moody’s Investors Service upgraded theirrating from A2 to A1 on November 11, 2004, and R&I issued an AA issuer credit ratingon December 20, 2004.
Healthy financial strategy that supports strong growth through additional
issues of shares and bonds

CONTENTS
Financial Highlights
Top 10 Shareholders
Share Price Performance
Additional Issue of Shares
Portfolio Highlights
New Portfolio Properties
History after IPO
To Our Shareholders

p. 1
p. 1
p. 1
p. 1
p. 2
p. 3
p. 8
p.10

The Portfolio of Japan Real Estate
Investment Corporation
Overview of Portfolio Properties
The Company’s Investment Policies
Financial Section
About J-REIT System
Profile of J-Rea
Corporate Data

p.16
p.19
p.25
p.33
p.50
p.53
p.54

JRE̲0907̲初校 05.9.12 10:24 AM ページ 1

Financial Highlights
For the Period from October 1, 2004 to March 31, 2005
Thousands of U.S. dollars(Note 1)Millions of yen
For the period from
October 1, 2004 to
March 31, 2005

For the period from
April 1, 2004 to
September 30, 2004

10,747
4,701
4,121
4,120

10,151
4,358
3,831
3,830

Net Operating Income (NOI) (Note 2)
Funds from Operations ( FFO) (Note 3)
FFO Multiple (Note 4)

7,131
5,762
19.7 times

Cash Distribution
Number of Shares
Dividend per Share (Yen /U.S. dollars)

4,120
260,400
15,824

Operating Revenues
Operating Prof its
Income before Income Taxes
Net Income

For the period from
October 1, 2003 to
March 31, 2004

For the period from
April 1, 2003 to
September 30, 2003

For the period from
October 1, 2004 to
March 31, 2005

9,560
4,341
3,803
3,802

8,965
3,898
3,408
3,407

100,082
43,78338,37938,3706,672
5,488
20.8 times

6,455
5,301
20.4 times

5,950
4,801
15.2 times

66,40453,655
19.7times

3,830
260,400
14,711

3,802
260,400
14,602

3,407
225,400
15,11738,370260,400
147.35

Notes: 1. Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥107.39 = US$1.00, the foreign exchange
rate on March 31, 2005, has been used for translation. The inclusion of such amounts is not intended to imply that Japanese yen has been or
could be readily converted, realized or settled into U.S. dollars at that rate or any other rate.
2. NOI = (Property-Related Revenues – Property-Related Expenses) + Depreciation
3. FFO = Net Income – Gains (Losses) from Sales of Specified Assets + Depreciation
4. FFO Multiple = Share Price at End of the Respective Term ÷ FFO per Share (Annualized)(Annualized portion of the calculation given in note 4 assumes a fiscal period of 183 days for the period ended September 30, 2003, 183 days
for the period ended March 31, 2004, 183 days for the period ended September 30, 2004 and 182 days for the period ended March 31, 2005.)

Top 10 Shareholders
Shares% of Total Shares
Outstanding

Japan Trustee Services Bank, Ltd. (Shintaku Acc.) ...............................................................................
The Master Trust Bank of Japan, Ltd. (Shintaku Acc.) .........................................................................
Mitsubishi Estate Co., Ltd. ...................................................................................................................
The Chugoku Bank, Ltd. ......................................................................................................................
The Tokio Marine & Nichido Fire Insurance Co., Ltd. .........................................................................
Trust & Custody Services Bank, Ltd. (Toshin Acc.) ..............................................................................
The Yamanashi Chuo Bank, Ltd. ..........................................................................................................
The Joyo Bank, Ltd. ..............................................................................................................................
The Dai-ichi Mutual Life Insurance Company ......................................................................................
The Bank of Ikeda, Ltd. ........................................................................................................................

16,126
11,65010,160
9,295
8,120
7,869
7,300
6,008
4,920
4,704

6.19%
4.47%
3.90%
3.57%
3.12%
3.02%
2.80%
2.31%
1.89%
1.81%

Share Price Performance

Share Price

PO Price

Company

TOPIX

180%
160%
140%
120%
100%
80%
60%

Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June

2001

2002

2003

2004

2005

Additional Issue of Shares (As of April 26, 2005)
Issuance date: ...................................................April 26, 2005
Subscription price: ................................................826,000 yen
Number of shares issued: .....................................85,000 shares

Total amounts of offering price: ..........................70,210 million yen
Starting date of thecalculation of dividends: .............................................April 1, 2005
Japan Real Estate Investment Corporation 1

JRE̲0907̲初校 05.9.12 10:24 AM ページ 2

Portfolio Highlights
TRENDS IN THE STATE OF PORTFOLIO MANAGEMENT
Number ofbuildings

September 2001
October 2001
November 2001
December 2001
January 2002
February 2002
March 2002
April 2002
May 2002
June 2002
July 2002
August 2002
September 2002
October 2002
November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004
March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005

Total numberof tenants(Note 1)

20
20
21
22
23
24
24
24
25
25
26
27
27
28
29
29
29
29
30
30
30
30
30
32
32
33
34
34
34
34
36
37
37
37
37
38
39
39
40
40
42
43
46

Total leasable
floor space

133,927m 2

198
197
248
266
269
325
328
326
329
334
333
340
339
340
347
345
348
351
359
356
356
356
362
386
384
396
400
401
403
407
444
447
448
446
447
457
466
463
471
476
534
557
609

136,381m 2
164,883m 2
171,734m 2
178,698m 2
201,934m 2
201,884m 2
201,580m 2
207,914m 2
207,914m 2
212,194m 2
215,928m 2
215,928m 2
220,720m 2
223,771m 2
223,771m 2
223,771m 2
223,771m 2
236,693m 2
236,702m 2
236,702m 2
237,897m 2
237,897m 2
246,062m 2
246,062m 2
251,631m 2
253,806m 2
260,003m 2
260,032m 2
260,211m 2
273,157m 2
281,171m 2
281,171m 2
281,155m 2
281,155m 2
286,860m 2
293,105m 2
293,116m 2
298,362m 2
298,362m 2
311,530m 2
322,429m 2
336,026m 2

Occupancy
rate

130,000

180,000

230,000

280,000

330,000

380,000

94.6%
93.9%
94.7%
93.8%
94.1%
94.0%
94.0%
93.3%
93.6%
94.4%
94.3%
95.2%
95.3%
94.8% (Note 2)
95.5%
95.3%
95.2%
95.6%
94.4%
94.4%
94.9%
94.4%
94.9%
95.3%
95.1%
95.4%
92.5%
93.2%
92.5%
93.2%
94.8%
94.7%
94.7%
91.7%
92.7%
92.8%
93.6%
93.7%
94,1%
94.6%
94.8%
95.5%
97.6%

Total leasablef loor space (m 2)
Total leasablef loor space
Occupancy rate

60.0

65.0

70.0

75.0

80.0

85.0

90.0

95.0

Occupancy rate (%)

Notes: 1. In the event that the same tenant occupies several buildings, the tenant is calculated as one tenant in the total number of tenants.
2. Occupancy rate of “Genki Medical Plaza” is not considered in the calculation of October 2002, because the property was acquiredat the end of that month, and its rent contracts started at the beginning of November 2002.

PORTFOLIO BREAKDOWN
Proper ties bygeographicr eg ion(Percentage based on
acquisition price)

Tenants byindustr yt ype
Other major cities(19.4 %)( Percentage basedon leased area)

Steel and metals 1.9%
Temporary staff agency
2.1%
Transport services/ Travel 2.1%
Ceramics 2.2%
Communications 2.6%

Others10.5%Serviceindustries
18.2%

Textiles 2.9%
Tokyo metropolitan area,
excluding 23 wards(4.2%)

Tokyo 23 wards(76.4 %)

Information
services
14.7 %

Construction 3.2%
Retail and restaurants 4.0 %Finance,insurance
12.6%

Pharmaceuticals 4.6%
Real estate 4.9%
Machinery 5.9%2 Japan Real Estate Investment Corporation

Electric devices 7.6%

JRE̲0907̲初校 05.9.12 10:24 AM ページ 3

New Portfolio Properties Properties acquired during the period ended March 31, 2005, on April 1, 2005 and June 1, 2005.
Notes: 1. In “Property summary,” concerning real estate and other assets of which the Company is partial owner through co-ownership or sectional ownership, the figures for “Sitearea”and“Floor area of building” represent total site area and total floor space for the entire building.
2. In “Leasing Conditions,” the figures represent information of the portion owned by the Company.

Higashi Gotanda 1Chome Building
Property Summary
Type of specif ied asset: Ownership
Acquisition price:¥5,500 million ($51.2 million)
Acquisition date:November 1, 2004
Location:
Shinagawa-ku, Tokyo
Intended use:
Office space, retail stores
Site area:
1,539.95m2 (16,575.87ft2)
Floor area of building: 6,460.39m2 (69,538.99ft2)
Structure:
Above ground: 8 floors
Completion:
July 2004
Leasing Conditions (As of March 31, 2005)
Number of tenants:
4 tenants
Leasable f loor space:
5,205m2 (56,026.10ft2)
Leased area:
5,205m2 (56,026.10ft2)
Occupancy rate:
100.0%

Property Acquisition Merits

Shinjuku

ShibuyaTokyo

ShinagawaThis building is located a convenientfour-minute walk from JR Gotanda
Station, next to the developing businessareas of Shinagawa and Osaki. It is abrand-new building offering OA floor,
separate air-conditioning system andample power supply. Characterized byits high-quality specifications, theHigashi Gotanda 1Chome Building
appeal to a variety of tenant needs.

Sanno Grand Building
Property Summary
Type of specified asset:
Acquisition price:
Acquisition date:
Location:
Intended use:
Site area:
Floor area of building:
Structure:
Completion:

Ownership (Note)¥10,200million ($95.0 million)
January 31, 2005
Chiyoda-ku, Tokyo
Office space
3,663.93m2 (39,438.18ft2)
33,875.95m2 (364,637.34ft2)
Above ground: 10 floors
Below ground: 3 floors
September 1966

Note: Co-ownership 50.00%

Leasing Conditions (As of March 31, 2005)
Number of tenants:
48 tenants
Leasable floor space:
10,666m2 (114,807.76ft2)
Leased area:
10,136m2 (109,102.89ft2)
Occupancy rate:
95.0%
Property Acquisition Merits

Shinjuku

ShibuyaTokyo

Located in front of AkasakaMitsuke Station, this property hasvery convenient access to several
subway lines. It is also a landmark
building in the Akasaka area. Largescale renewal work has brought thebuilding up to the latest standards
for earthquake-proof construction
and interior specifications.

ShinagawaJapan Real Estate Investment Corporation 3

JRE̲0907̲初校 05.9.12 10:25 AM ページ 4

Jozenji Park Building
Property Summary
Type of specified asset:
Acquisition price:
Acquisition date:
Location:
Intended use:
Site area:
Floor area of building:
Structure:
Completion:

Ownership (Note)¥1,000 million ($9.3 million)
January 31, 2005
Sendai, Miyagi Prefecture
Office space
1,566.68m2 (16,863.59ft2)
7,648.33m2 (82,325.86ft2)
Above ground: 8 floors
Below ground: 1 floor
January 1993

Note: Co-ownership 50.00%

Leasing Conditions (As of March 31, 2005)
Number of tenants:
18 tenants
Leasable floor space:
2,518m2 (27,103.50ft2)
Leased area:
2,343m2 (25,219.82ft2)
Occupancy rate:
93.1%
Property Acquisition Merits

SendaiTokyo

Located within three-minutewalking distance of Koutoudaikoen
Station on the Nanboku Line andfacing Jozenji-Dori, one of the main
roads in Sendai City, this property
has a high degree of convenience andvisibility. Special office demand is
expected due to its close proximity to
government and public offices.

Harmony Tower
Property Summary
Type of specified asset:
Acquisition price:
Acquisition date:
Location:
Intended use:
Site area:
Floor area of building:
Structure:
Completion:

Ownership (Note)¥8,500 million ($79.2 million)
February 28, 2005
Nakano-ku, Tokyo
Office space, retail stores
10,020.52m2 (107,859.88ft2)
72,729.31m2 (782,851.02ft2)
Above ground: 29 floors
Below ground: 2 floors
March 1997

Note: Land: Co-ownership
Building: Compartmentalized building units/
Co-ownership of compartmentalized building units*Ownership of the building: 29.253305%

Leasing Conditions (As of March 31,2005)
Number of tenants:
17 tenants
Leasable floor space:
10,929 m2 (117,638.66ft2)
Leased area:
10,929 m2 (117,638.66ft2)
Occupancy rate:
100.0%
Property Acquisition Merits

Shinjuku

ShibuyaTokyo

Shinagawa4 Japan Real Estate Investment Corporation

This tower is highly distinctive andoffers convenient transportation
access to several subway lines from
Nakano Sakaue Station. Built in
1997, this relatively new 29-story
building is located in Nakano
Sakaue, an increasingly popular
office building area adjacent toNishi-Shinjuku.

JRE̲0907̲初校 05.9.12 10:25 AM ページ 5

Ginza Sanwa Building
Property Summary
Type of specified asset:
Acquisition price:
Acquisition date:
Location:
Intended use:
Site area:
Floor area of building:
Structure:
Completion:

Ownership (Note)¥16,830 million ($156.7 million)
March 10, 2005
Chuo-ku, Tokyo
Office space, bank, retail stores
1,119.27m2 (12,047.71ft2)
8,851.00m2 (95,271.28 ft2)
Above ground: 9 floors
Below ground: 2 floors
October 1982

Note: Land: Ownership and Co-ownershipcompartmentalized building units*Ownership of the building: 70.95%

Building: Co-ownership of

Leasing Conditions (As of March 31, 2005)
Number of tenants:
12 tenants
Leasable floor space:
4,329m2 (46,596.92ft2)
Leased area:
4,204m2 (45,251.44ft2)
Occupancy rate:
97.1%
Property Acquisition Merits

Shinjuku

ShibuyaTokyo

ShinagawaThis property is located close to the
Ginza 4-chome crossing in thecenter of Japan’s famous Ginza
shopping district. Transportation is
also extremely convenient with the
subway and the JR train station
within a short walk. The property is
unique within the area, known fortightly crammed buildings, in termsof its size and scale.

Ryoshin Ginza East Mirror Building
Propert y Summary
Type of specified asset:
Acquisition price:
Acquisition date:
Location:
Intended use:
Site area:
Floor area of building:
Structure:
Completion:

Ownership¥5,353.5 million ($49.9 million)
March 15, 2005
Chuo-ku, Tokyo
Office space615.21m2 (6,622.06ft2)
4,104.71m2 (44,182.69ft2)
Above ground: 8 floors
Below ground: 1 floor
October 1998

Leasing Conditions (As of March 31, 2005)
Number of tenants:
6 tenants
Leasable floor space:
2,875m2 (30,946.21ft2)
Leased area:
2,121m2 (22,830.23ft2)
Occupancy rate:
73.8%

Property Acquisition Merits

Shinjuku

ShibuyaTokyo

Located in Ginza, this property is arelatively new office building in anarea with few large and mediumscale office buildings. It is a highgrade office building with adiscernibly sleek profile andlandmark status, complemented bya luxurious entrance and interior
facilities.

ShinagawaJapan Real Estate Investment Corporation 5

JRE̲0907̲初校 05.9.12 10:25 AM ページ 6

Hachioji Dai-ichi-Seimei Building
Proper ty Summar y
Type of specif ied asset: Ownership (Note)
Acquisition price:¥3,300 million ($30.7 million)
Acquisition date:
March 31, 2005
Location:
Hachioji, Tokyo
Intended use:
Office space, retail stores
Site area:
2,989.33m2 (32,176.85ft2)
Floor area of building: 18,329.98m2 (197,302.07ft2)
Structure:
Above ground: 12 floors
Below ground: 1 floor
Completion:
July 1996
Note: Land: Ownership and Co-ownership

Building: Co-ownership (50.6611%)

Leasing Conditions (As of March 31, 2005)
Number of tenants:
32 tenants
Leasable floor space:
6,336m2 (68,200.07ft2)
Leased area:
5,700m2 (61,354.23ft2)
Occupancy rate:
90.0%
Propert y Acquisition Merits

HachiojiSituated among a nexus oftransportation routes, this building is
strategically located within a oneminute walk of Keio Hachioji
Station and within four minutes of
JR Hachioji Station. The officebuilding features a strong balance offacility specifications and a large
parking facility.

Tokyo

Tokyo Metropolitan Area

Nibancho Garden
Property Summary
Type of specified asset:
Acquisition price:
Acquisition date:
Location:
Intended use:
Site area:
Floor area of building:
Structure:
Completion:

Ownership (Note)¥14,700 million ($136.9 million)
April 1, 2005
Chiyoda-ku, Tokyo
Office space, retail stores, residences
11,003.87m2 (118,444.56ft2)
57,031.06m2 (613,876.63ft2)
Above ground: 14 floors
Below ground: 2 floors
April 2004

Note: Land: Ownership (7 lots: 3,554.33m2 )compartmentalized building units*Ownership of the building 31.345%

Building: Co-ownership of

Leasing Conditions (As of April 1, 2005)
Number of tenants:
Off ice area: 1 tenant / Residences: 1 tenantLeasable floor space:
Office area: 9,316m2 (100,276.49ft2)
Residences: 1,686m2 (18,147.94ft2)
Leased area:
Office area: 9,316m2 (100,276.49ft2)
Residences: 1,686m2 (18,147.94ft2)
Occupancy rate:
Office area: 100.0% / Residences: 100.0%
Property Acquisition Merits

Shinjuku

ShibuyaTokyo

Shinagawa6 Japan Real Estate Investment Corporation

The Bancho area has a limited
supply of office building spacedespite strong demand from foreigncompanies, law firms andaccounting firms. Only one year
old, this property is unique for its
large scale and convenience with afour-minute walk to Yotsuya
Station and two minutes to
Kojimachi Station.

JRE̲0907̲初校 05.9.12 10:25 AM ページ 7

Tenjin Crystal Building
Proper ty Summar y
Type of specif ied asset: Ownership
Acquisition price:¥5,000 million ($46.6 million)
Acquisition date:June 1, 2005
Location:
Fukuoka, Fukuoka Prefecture
Intended use:
Off ice space, retail stores, parking area
Site area:
1,835.17m2 (19,753.59ft2)
Floor area of building: 10,432.04m2 (112,289.44ft2)
Structure:
Above ground: 14 floors
Below ground: 1 floor
Completion:
August 1993
Leasing Conditions (As of June 1, 2005)
Number of tenants:
24 tenants
Leasable f loor space:
5,640m2 (60,708.40ft2)
Leased area:
5,492m2 (59,115.34ft2)
Occupancy rate:
97.4%

Property Acquisition Merits
Situated in the Tenjin area, the mostdeveloped retail district in Fukuoka
City, this building is readily
noticeable making it ideal for
attracting customer traffic forretailers. The property has a highgrade image with open spaces andthe latest facility specifications tomeet tenant needs.

Tokyo
FukuokaAcquisition of preferred capital contribution certificates
TMK(Special Purpose Company) Harumi Front TMK

Property

Specified corporate bonds &special purpose borrowing

80%

JRE’s total contribution:¥1,270 million
JRE’ s share of preferred
capital contribution: 49.9%(Approximately 9.9% of total projectcost)

Preferred capital contribution
certificatesSpecified capital contribution

20%

SUMMARY OF PROPERTY TO BE HELD BY TMKName of development project: Harumi Center Building(tentative)
Location:
2-5-23, Harumi, Chuo-ku, Tokyo
Site area:
4,664.63 m2
Total project area:
27,494.17 m2
Leasable floor space:
20,778 m2
Intended use:
office space, retail stores,
parking area
Total project cost:¥12,821 million (planned)
Construction scheduleCommencement:
May 2005
Completion:
November 2006 (planned)*Since the Harumi Center Building (tentative name) is currently under construction, an outlook chart is shown above.
*The above overview is a plan or schedule, and is subject to change in the future.

●

First acquisition ofpreferred capital
contribution certificates by
a J-REIT●

Concurrent acquisition ofrights granting priority topurchase subject properties
after completion of
construction (preferential
purchasing rights)

SUMMARY OF
PREFERRED CAPITALCONTRIBUTION
CERTIFICATESACQUIRED
Acquisition price: ¥956 million
Acquisition date: March 29, 2005
Seller: Harumi Front TMK*Note: The Company plans tounderwrite certificates asfollows:
November 24, 2005: ¥46 million
November 24, 2006: ¥268 million

Japan Real Estate Investment Corporation 7

JRE̲0907̲初校 05.9.12 10:25 AM ページ 8

History after IPO
Since listing on the Tokyo Stock Exchange (“TSE”) as the first J-REIT in Japan, JRE hasestablished a firm track record over the past seven fiscal periods. While sustaining stable
management, JRE has realized steady growth and taken the initiative as a J-REIT pioneer.
The size of our portfolio in terms of assets had reached ¥305.2 billion as of April 1, 2005,
achieving approximately one year ahead of schedule our target of expanding asset size (totalacquisition price) to ¥300 billion ($2.8 billion) by March 2006.

Sep. 2001
Listed on TSE as first J-REIT

Sep. 2001
IPO
May 2002
First Follow-On(First for a J-REIT)
Oct. 2003
Second Follow-On
Apr. 2005
Third Follow-On
Largest additional issue of shares since listing of J-REIT(total subscription of more than ¥70 billion)
Feb. and Mar. 2002
Acquired Issuer Credit Rating (First for a J-REIT)■ Standard & Poor’s A+ (Outlook: Stable)■ Moody’s A2 (Outlook: Stable)
June 2002
First Investment Corporation Bond Issue(First credit rated issue for an investment corporation bond)
Apr. 2003
Second/Third Investment Corporation Bond Issue
Nov. 2004
Moody’s upgraded its credit rating from A2 to A1 with outlook of stable.
Dec. 2004
R & I issued an AA issuer credit rating.
Mar. 2005
Acquisition of preferred capital contribution certificates(First for a J-REIT)

8 Japan Real Estate Investment Corporation

Period Ending
Sep. 2001

Our forecasts for the seve

Period Ending
Mar. 2002
Period Ending
Sep. 2002
Period Ending
Mar. 2003

Period En
Sep.

JRE̲0907̲初校 05.9.12 10:25 AM ページ 9

94.6%
94.0%

OCCUPANCY RATE

Stable management

95.3 %(Trend in operating conditions)

94.4%
Listed on
TSE¥ 144.6¥ 92.8Billion(24)

Billion
(20)

95.1%
94.8%

¥ 164.2¥ 183.5

Billion(27)

Billion(30)¥ 192.6
Billion
(32)

93.6%

97.6%

¥218.4
Billion(36)¥305.2¥239.8Billion(39)

Billion(46+1)*TOTAL ACQUISITION PRICE(TOTAL PROPERTIES ACQUIRED)
2
133,927m
2(126,748m )198 Tenants

2
201,884m
2(189,815m )328 Tenants

2
215,928m
2(205,796m )339 Tenants

2
236,693m
2(223,410m )359 Tenants

TOTAL LEASABLE FLOOR SPACE ( LEASED AREA )2
246,062m
2(233,925m )384 Tenants

2
273,157m
2(258,885m )444 Tenants

2
293,105m
2(274,411m )466 Tenants

ing
003

2
336,026m
2(327,962m )609 Tenants

Period Ending
Sep. 2003

Steady growth(Acquisitions)

Period Ending
Mar. 2004
Listing and issuanceof shares

Period Ending
Sep. 2004
Period Ending
Mar. 2005

Credit rating,capital issue, etc.

Forward-looking initiatives( J-REIT management)＊Total acquisition price and total properties acquired for the period ended March 2005
include the Nibancho Garden, which was acquired on April 1, 2005.

Japan Real Estate Investment Corporation 9

JRE̲0907̲初校 05.9.12 10:27 AM ページ 10

To Our Shareholders“ F i r st Summit ”

10 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:27 AM ページ 11

JRE surmounted its “First Summit,” achieving a total
amount of acquisition prices in excess of ¥300 billion($2.8 billion) almost one year ahead of schedule.
Japan Real Estate Investment Corporation’s (“JRE”) seventh fiscal period, the six months
ended March 31, 2005, marked yet another stage of growth in revenues and profits. JRE
surmounted its “First Summit,” achieving a total amount of acquisition prices in excess of¥300 billion ($2.8 billion) almost one year ahead of schedule with the acquisition of the
Nibancho Garden on April 1, 2005.
During the period under review, the Japanese economy remained on track for arecovery, as capital investment was on an uptrend amid higher corporate earnings, andresilient consumer spending supported by ongoing improvement in employment conditions,despite signs of the economy heading toward a landing with inventory adjustments in ITrelated fields.
In the market for leased office space, there were signs of a decline in vacancy rates as
the balance of supply and demand turned favorable and this led to an increase in rents atsome office buildings in central Tokyo. In regional urban centers, however, despite signs ofprogress in some major cities such as Nagoya, overall business conditions remained difficult.
Regarding the property market, bad-debt write-offs by financial institutions and theadoption of asset-impairment accounting have helped sustain active property sales. At thesame time, in the face of difficult fund-management conditions stemming from low interest
rates, such entities as private funds, pension funds, and institutional investors are steppingup their acquisition of real estate, in addition to Japanese Real Estate Investment Trusts ( JREITs).
I would like to highlight some of the Company’s major achievements during theseventh period, and discuss our strategies and forecasts for the eighth period and beyond.
OVERVIEW OF THE SEVENTH PERIODJRE has enjoyed seven consecutive periods of steady growth in revenues and profits, owing to
its 4S growth strategy that emphasizes Sincerity, Stability, Soundness and Strength of will.
JRE recorded operating revenues of ¥10.7 billion ($100.1 million), up 5.9 percent fromthe previous period. Operating profits rose 7.9 percent, to ¥4.7 billion ($43.8 million). After
deducting expenses for interest payments on borrowings, asset management fees and otheradministrative costs, income before income taxes increased 7.6 percent, to ¥4.1 billion($38.4 million) and net income advanced 7.6 percent to ¥4.1 billion ($38.4 million).
JRE’s policy with regard to profit appropriation is to distribute dividends ofapproximately 100 percent of taxable income, in order to enjoy the tax benefit available
under Article 67-15 of the Special Taxation Measures Law of Japan applicable to J-REITs.

Japan Real Estate Investment Corporation 11

JRE̲0907̲初校 05.9.12 10:27 AM ページ 12

As a new framework for acquiring prime
properties, JRE acquired preferred capital
contribution certificates—a first for a J-REIT.
For the period under review, we declared a cash dividend of¥15,824 ($147.35) per share.
As of March 31, 2005, JRE’s total asset balance was¥322.4 billion ($3,001.8 million) and its net worth was ¥137.6
billion ($1,281.0 million), or ¥528,299 ($4,919.44) per share.
On its balance sheet, JRE had interest-bearing debt of ¥159.0
billion ($1,480.6 million).
ACQUISITIONS AND MANAGEMENT
CEO & President of Japan Real Estate Asset

In an increasingly competitive market, JRE uses its own
Management Co., Ltd.
RYOICHI KAKEHASHI
information network to collect data on the sales ofnumerous properties. We have made acquisitions based on meticulous examination ofthese data, and after determining optimal prices from many perspectives, including profit
stability of the entire company and expected rate of return.
D uring the period under review, JRE concentrated on leveraging its own
information network and engaging in one-on-one transactions to avoid participating infierce bidding competitions. As of March 31, 2005, JRE’s assets consisted of 46 officebuildings, with a total amount of acquisition prices of ¥290.5 billion ($2,705.2 million),net rentable floor area of 336,026 m 2 (3,616,950 ft 2 ), and a total of 609 tenants.
As a new framework for acquiring prime properties, JRE acquired preferred capital
contribution certificates—a first for a J-REIT—on March 29, 2005. The certificates were
issued by the Harumi Front Special Purpose Company for the development of theHarumi Center Building (tentative name). On March 24, 2005, JRE and Harumi Front
Special Purpose Company signed a preferred capital contribution certificates
under writing agreement for the three issues of certificates, including the acquisition of
the aforementioned certificates. In accordance with the underwriting agreement, JRE has
obtained the right (preemptive purchase right) to be the first to acquire real estate andother assets in the Harumi Center Building.
JRE maintained a high occupancy rate of 97.6 percent (as of March 31, 2005) by(1) acquiring top-level properties and upgrading building facilities through optimalrefurbishment in order to maintain and improve functions; (2) developing finely tuned
building management policies from the perspective of tenants while undertaking
vigorous sales activities; and (3) raising its emphasis on fixed-term and long-term
rent contracts.

12 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:27 AM ページ 13

JRE is working to reduce costs with a view to further enhancing profit stability. Ourbasic policy is to lower property management fees and utility expenses by 5 percent within
the first three years of new property acquisition.
Of the total number of properties acquired up to the end of the fifth fiscal period (sixmonths ended March 31, 2004), twenty-nine properties are subject to this cost reduction
program. Despite being midway through the program period, we have already reduced costsof those properties by 12.6 percent per year, based on the results of our sixth and seventh
fiscal periods (April 2004 to March 2005).
FUND-RAISING ACTIVITIES

During the fiscal period under review, JRE raised funds through borrowings to acquire
properties. The acquisition price of the eight properties JRE purchased during the fiscal
period under review and on April 1, 2005, totaled ¥65.4 billion ($608.8 million). Of thisamount, ¥55.0 billion ($512.2 million) was raised through short-term loans with theintention of repayment with funds from the additional issue of shares. On March 31, 2005,
JRE had total amount of interest-bearing debt of ¥159.0 billion ($1,480.6 million),including ¥63.0 billion ($586.6 million) in short-term loans (up ¥53.0 billion/$493.5 million
from the previous fiscal period), ¥51.0 billion ($474.9 million) in long-term loans (up ¥7.0
billion/$65.2 million from the previous fiscal period), and outstanding investment
corporation bonds balance of ¥45.0 billion ($419.0 million) (unchanged from previous fiscal
period).
CREDIT RATINGS

JRE has received the following credit ratings. On November 11, 2004, Moody’s InvestorsService raised its rating on JRE’s issuer credit rating and rating for unsecured investment
corporation bonds from A2 to A1. On December 20, 2004, JRE received a new issuer
credit rating of ‘AA’ from Rating and Investment Information, Inc.
Rating Agency

Issuer Credit RatingStandard & Poor’s

Long-term: A+; Short-term: A-1;
Outlook: Stable

Moody’s Investors Service

Rating: A1; Outlook: Stable

Rating and Investment Information, Inc.

Rating: AA

Japan Real Estate Investment Corporation 13

JRE̲0907̲初校 05.9.12 10:27 AM ページ 14

To our shareholders, I extend my sincere gratitude for yourcontinuing confidence and support.

OUTLOOK FOR EIGHTH PERIOD AND BEYOND

Operating Environment
Despite expectations for a recovery in the Japanese economy after a prolonged weak period, there
are some concerns relating to high crude oil prices and the impact on the global economy.
Accordingly, optimism is untenable at this time.
In the office building leasing market, though vacancy rates are improving in central Tokyo,
conditions remain severe in regional urban centers, except for some major cities such as Nagoya.
These trends toward a bipolarization of the market are likely to grow stronger.
Meanwhile, tenants have stringent demands not only with respect to location, building
quality, and facilities, but also for high-quality building management and value-added services.
For these reasons, tenants have become more and more discriminating when selecting buildings.
To meet these needs, suppliers must provide services that correctly and promptly reflect the needsof tenants and deliver added value that differentiates their buildings from the competition.
In the real estate market, properties will continue being sold to settle non-performing loans
and due to asset impairment accounting measures. In light of recent increases in demand, JRE
believes that competition will further intensify for the acquisition of prime properties.
NEW PROPERTY ACQUISITION

Nibancho Garden was acquired for ¥14.7 billion ($136.9 million) on April 1, 2005. Completed in
April 2004, the property offers a mixture of offices, retail stores and residences. Occupancy rates
were 100% for the offices, the retail stores and the residences at the time of acquisition.
In addition, the Tenjin Crystal Building was purchased on June 1, 2005, for ¥5.0 billion($46.6 million). Located in Fukuoka City, the building’s high-grade appearance guides a steadystream of customers to on-site retailers, who appreciate the latest in facilities. Its occupancy rate
was 97.4% at the time of acquisition.
PERFORMANCE FORECASTS

In the six-month period from April 1, 2005, to September 30, 2005, we forecast operating
revenues of ¥12.8 billion ($119.2 million), income before income taxes of ¥5.4 billion ($50.3
million), and net income of ¥5.4 billion ($50.3 million). We plan to declare a dividend of¥15,800 ($147.13) per share.
These estimates are based on conservative assumptions of the portfolio of 46 properties as ofMarch 31, 2005, and the Nibancho Garden newly acquired on April 1, 2005. These estimates arealso based on 345,400 shares outstanding, representing the 260,400 shares outstanding as of March

14 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:27 AM ページ 15

31, 2005, and the additional issue of 85,000 shares decided by the Board of Directors on April 4,
2005, to raise capital in the amount of ¥68.0 billion ($633.4 million) based on the issue price.
Under the same scenario, our forecasts for the ninth fiscal period (October 1, 2005 to March
31, 2006) are operating revenues of ¥12.8 billion ($119.2 million), income before income taxesof ¥5.4 billion ($50.3 million), net income of ¥5.4 billion ($50.3 million), and cash dividends of¥15,900 ($148.06) per share. Actual figures for operating revenues, income before income taxes,
net income and cash dividends may vary due to changes in business conditions and foreignexchange rates for dollar translations.
As I close, I would like to acknowledge the trustworthy professionals, who have committed
much of their lives to JRE. I thank you all for your continued dedication to our corporation’s
success. And to our shareholders, I extend my sincere gratitude for your continuing confidence
and support.
We have devoted all our efforts to realizing a strong financial base, targeting a “2/3” equity
to asset ratio in the 4th period, and have acquired some exciting new properties, based on thepremise of entering a new phase of “Equinox” in the 5th period. Guided by the keyword “SlowAhead” in the 6th period, we have moved steadily forward and have surmounted the “First
Summit” in the 7th period, achieving a total amount of acquisition prices in excess of ¥300
billion, one year ahead of schedule with the acquisition of the Nibancho Garden on April, 2005.
We will continue to press ahead with the aim of accomplishing our next aggressive goals,
not only in 2005, but also in all ensuing periods. JRE is committed to adopting a proactive
stance, not waiting for opportunities to present themselves.
JRE is ready for the future. We ask for your continued support and understanding as wetake significant strides forward.

Ryoichi Kakehashi
CEO & President of Japan Real Estate Asset Management Co., Ltd.

Japan Real Estate Investment Corporation 15

JRE̲0907̲初校 05.9.12 10:27 AM ページ 16

The Portfolio of Japan Real Estate Investment Corporation
As of March 31, 2005

PROPERTIES ROSTER
NumberName of building

Location

Type ofspecified asset

Acquisitiondate

Acquisition
price(¥ millions)

10/31/2002
5/31/2002
8/15/2002
9/25/2001
1/31/2005
8/1/2003
9/25/2001
7/22/2002
3/10/2005
3/15/2005
3/14/2003
9/10/2001
9/25/2001
9/1/2004
9/25/2001
11/1/2004
9/10/2001
9/10/2001
3/24/2004
4/1/2004
11/22/2002
10/9/2003
11/30/2001
11/14/2003
4/1/2004
total
2/28/2005
9/25/2001
9/25/2001
8/2/2004

5,000 (1.7%)
9,520 (3.3%)
4,810 (1.7%)
27,267 (9.4%)
10,200 (3.5%)
7,200 (2.5%)
3,173 (1.1%)
5,250 (1.8%)
16,830 (5.8%)
5,353 (1.8%)
7,680 (2.6%)
4,859 (1.7%)
2,808 (1.0%)
7,830 (2.7%)
2,738 (0.9%)5,500 (1.9%)
1,362 (0.5%)
5,123 (1.8%)
6,670 (2.3%)
8,700 (3.0%)
4,885 (1.7%)
12,200 (4.2%)
34,600 (11.9%)
3,740
360
4,100 (1.4%)
8,500 (2.9%)
3,541 (1.2%)
1,728 (0.6%)
4,500 (1.5%)

3/31/2005
9/25/2001
10/11/2001

3,300
1,232
1,342

(1.1%)

total
1/28/2002
9/25/2001

2,574
3,000
3,375

(0.9%)(1.0%)(1.2%)PowbTokyo 23 wards

I- 1
I- 2
● I- 3● I- 4● I- 5● I- 6● I- 7● I- 8● I- 9● I- 10● I- 11● I- 12● I- 13● I- 14● I- 15● I- 16● I- 17● I- 18● I- 19● I- 20● I- 21● I- 22● I- 23● I- 24

Genki Medical PlazaMD Kanda Building
Kandabashi Park Building
Mitsubishi Soken Building
Sanno Grand Building
Yurakucho Denki Building
Kodenmacho Shin-Nihonbashi Building
Burex Kyobashi Building
Ginza Sanwa Building
Ryoshin Ginza East Mirror Building
Aoyama Crystal Building
Shiba 2Chome Daimon Building
Cosmo Kanasugibashi Building
Shinwa Building
Takanawadai Building
Higashi Gotanda 1Chome Building
JAL Travel Building
Omori-Eki Higashiguchi Building
Nippon Brunswick Building
Yoyogi 1Chome Buildingda Vinci Harajuku
Jingumae Media Square Building
Shibuya Cross Tower
Ebisu Neonato

Iidabashi, Chiyoda-ku
Kandamitoshirocho, Chiyoda-ku
Kandanishikicho, Chiyoda-ku
Otemachi, Chiyoda-ku
Nagatacho, Chiyoda-ku
Yurakucho, Chiyoda-ku
Nihonbashikodenmacho, Chuo-ku
Kyobashi, Chuo-ku
Ginza, Chuo-ku
Ginza, Chuo-ku
Kita-Aoyama, Minato-ku
Shiba, Minato-ku
Shiba, Minato-ku
Nishi-Shinjuku, Shinjuku-ku
Higashi-Gotanda, Shinagawa-ku
Higashi-Gotanda, Shinagawa-ku
Shimomeguro, Meguro-ku
Omori Kita, Ota-ku
Sendagaya, Shibuya-ku
Yoyogi, Shibuya-ku
Jingumae, Shibuya-ku
Jingumae, Shibuya-ku
Shibuya, Shibuya-ku
Ebisu, Shibuya-ku

Ownership
Ownership
Ownership
Trust
Ownership
Ownership
Trust
Ownership
Ownership
Ownership
Ownership
Trust
Trust
Ownership
Trust
Ownership
Trust
Trust
Ownership
Ownership
Ownership
Ownership
Ownership
Ownership

I- 25
I- 26
● I- 27● I- 28

Harmony Tower
Otsuka Higashi-Ikebukuro Building
Ikebukuro 2Chome Building
Ikebukuro YS Building

Honcho, Nakano-ku
Higashi-Ikebukuro, Toshima-ku
Ikebukuro, Toshima-ku
Minami-Ikebukuro, Toshima-ku

Ownership
Trust
Trust
Ownership

●
●

●
●

29.

Tokyo metropolitan area excluding 23 wards

II- 1
II- 2

Hachioji Dai-ichi-Seimei Building
Saitama Urawa Building

Hachioji, Tokyo
Saitama, Saitama Prefecture

Ownership
Ownership

II- 3● II- 4Shin-Yokohama First Building
Kawasaki Isago Building

Yokohama, Kanagawa Prefecture
Kawasaki, Kanagawa Prefecture

Ownership
Trust

●
●

●

Other major cities

III-1
III-2
● III-3● III-4

Jozenji Park Building
Sendai Honcho Honma Building
Niigata Ishizuecho Nishi-Bandaibashi Building
Kanazawa Park Building

Sendai, Miyagi Prefecture
Sendai, Miyagi Prefecture
Niigata, Niigata Prefecture
Kanazawa, Ishikawa Prefecture

Ownership
Trust
Trust
Ownership

III-5
III-6
● III-7● III-8● III-9Kanazawa Minamicho Building
Nagoya Hirokoji Building
Nagoya Misono Building
Kyoto Shijo Kawaramachi Building
Sakaisujihonmachi Building

Kanazawa, Ishikawa Prefecture
Nagoya, Aichi Prefecture
Nagoya, Aichi Prefecture
Kyoto, Kyoto Prefecture
Osaka, Osaka Prefecture

Trust
Ownership
Ownership
Ownership
Ownership

●
●

●
●

III-10 Midosuji Daiwa Building

Osaka, Osaka Prefecture

III-11
III-12● III-13● III-14

Kobe, Hyogo Prefecture
Hiroshima, Hiroshima Prefecture
Fukuoka, Fukuoka Prefecture
Fukuoka, Fukuoka Prefecture●●●

Kobe Itomachi Building
NHK Hiroshima Broadcasting Center Building
Tosei Tenjin Building
Hinode Tenjin Building

16 Japan Real Estate Investment Corporation

Trust
Trust
Ownership
OwnershipTrust

1/31/2005
9/25/2001
9/25/2001
2/28/2002
3/3/2003
total
9/25/2001
9/10/2001
8/8/2003
12/20/2001
9/25/2001
12/26/2003
total
9/25/2001
2/28/2002
total
9/25/2001
3/25/2004
9/25/2001
9/10/2001
total

1,000 (0.3%)
2,924 (1.0%)
1,010 (0.3%)
2,880
1,700
4,580 (1.6%)
1,331 (0.5%)
14,533 (5.0%)
1,865 (0.6%)
2,650 (0.9%)
2,264
1,900
4,164 (1.4%)
6,934
7,380
14,314 (4.9%)
1,436 (0.5%)
1,320 (0.5%)1,550 (0.5%)
3,657 (1.3%)
290,510 (100.0%)

5JRE̲0907̲初校 05.9.12 10:27 AM ページ 17

Percentage ofownership of thebuilding (%)

Completion

Appraisal value
at the end of period(¥ millions)

%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)
%)

100
100
56.76
100
50.00
10.78
100
100
70.95
100
100
100
100
100
100
100
100
100
100
100
100
100
100

1985
1998
1993
1970
1966
1975
1991
2002
1982
1998
1982
1984
1992
1989
1991
2004
1991
1989
1974
2003
1987
1998
1976

5,890
8,140
4,890
30,40010,300
7,030
3,240
5,450
16,900
4,410
7,720
5,410
3,020
7,800
2,530
5,710
1,460
5,200
7,180
8,850
5,370
13,11035,5004,791m2
6,269m2
3,687m2
18,006m2
10,666m2
4,694m2
3,897m2
4,279m2
4,329m2
2,875m2
4,916m2
9,643m2
4,062m2
6,197m2
4,067m2
5,205m2
3,383m2
7,708m2
7,347m2
7,772m2
3,109m2
5,558m2
29,828m2(51,570ft2)(67,479ft2)(39,686ft2)(193,815ft2)(114,808 ft2)
(50,526ft2)(41,947ft2)(46,059ft2)(46,597 ft2)
(30,946ft2)(52,915ft2)(103,796ft2)(43,723ft2)(66,704ft2)(43,777ft2)(56,026 ft2)
(36,414ft2)(82,968ft2)(79,082ft2)(83,657ft2)(33,465ft2)(59,826ft2)(321,066ft2)

4,791m2
6,269m2
3,687m2
18,006m2
10,136m2
4,694m2
3,897m2
4,279m2
4,204m2
2,121m2
4,916m2
9,643m2
3,880m2
6,197m2
4,067m2
5,205m2
3,383m2
7,708m2
7,250m2
7,772m2
3,109m2
5,558m2
29,828m2(51,570ft2)(67,479ft2)(39,686ft2)(193,815ft2)(109,103 ft2)
(50,526ft2)(41,947ft2)(46,059ft2)(45,251 ft2)
(22,830ft2)(52,915ft2)(103,796ft2)(41,764ft2)(66,704ft2)(43,777ft2)(56,026 ft2)
(36,414ft2)(82,968ft2)(78,038ft2)(83,657ft2)(33,465ft2)(59,826ft2)(321,066ft2)

1
2
7
4
48
15
5
1
12
6
9
28
7
9
1
4
1
19
17
1
5
9
53

222
291
173
1,062
155
282
159
150
40
8
262
316
133
228
69
113
86
251
329
283
193
345
1,490

(2.1%)(2.7%)(1.6%)(9.9%)(1.4%)(2.6%)(1.5%)(1.4%)(0.4%)(0.1%)(2.4%)(2.9%)(1.2%)(2.1%)(0.6%)(1.1%)(0.8%)(2.3%)(3.1%)(2.6%)(1.8%)(3.2%)(13.9%)

%)
%)
%)
%)
%)

12.30
29.253305
100
100
100

1994
1997
1987
1990
1989

4,350
8,670
3,410
1,420
4,460

2,462m2
10,929 m2
7,114m2
2,186m2
5,797m2(26,501ft2)(117,639 ft2)
(76,574ft2)(23,530ft2)(62,398ft2)

2,462m2
10,929 m2
6,477m2
2,186m2
5,797m2(26,501ft2)(117,639 ft2)
(69,718ft2)(23,530ft2)(62,398ft2)

3
17
10
7
8

143
67
166
73
189

(1.3%)(0.6%)(1.6%)(0.7%)(1.8%)%)

50.6611

1996

3,300

6,336m2(68,200ft2)5,700m2(61,354ft2)

32

0(0.0%)

%)
%)
%)

100
100
100

1990
1992
1990

2,360
1,620
3,150

4,510m2
6,925m2
6,831m2(48,545ft2)(74,540ft2)(73,528ft2)

4,419m2
5,613m2
6,379m2(47,566ft2)(60,418ft2)(68,663ft2)

15
6
11

132
72
177

(1.2%)(0.7%)(1.7%)

%)
%)
%)

50.00
93.39
100

1993
1991
1984

1,000
2,930
741

2,518m2
5,829m2
4,383m2(27,104ft2)(62,743ft2)(47,178ft2)

2,343m2
5,758m2
4,234m2(25,220 ft2)
(61,979ft2)(45,574ft2)

18
15
10

21
146
83

(0.2%)(1.4%)(0.8%)

%)
%)
%)
%)
%)

89.00
100
100
100
100

1991
1987
1987
1991
1982

5,420
992
15,0001,860
2,020

21,343m2
3,782m2
21,641m2
3,470m2
6,800m2(229,734ft2)(40,709ft2)(232,942ft2)(37,351ft2)(73,195ft2)

20,126m2
3,230m2
21,641m2
3,470m2
6,800m2(216,634ft2)(34,767ft2)(232,942ft2)(37,351ft2)(73,195ft2)

66
14
32
7
33

520
73
767
103
131

(4.8%)(0.7%)(7.1%)(1.0%)(1.2%)

%)

100

1992

4,170

11,574m2(124,581ft2)

11,197m2(120,523ft2)

17

140

(1.3%)

%)
%)
%)
%)
%)
%)

100
100
27.085
100
76.18
—

1991
1989
1994
1992
1987
—

13,800
949
1,390
1,340
3,480
293,342

20,450m2
3,478m2
5,477m2
4,000m2
5,882m2
336,026m2(220,122ft2)(37,437ft2)(58,954ft2)(43,056ft2)(63,313ft2)(3,616,950ft2)

20,450m2
3,478m2
5,401m2
4,000m2
5,249m2
327,962m2(220,122ft2)(37,437ft2)(58,136ft2)(43,056ft2)(56,500ft2)(3,530,150ft2)

25
17
12
20
10
609

Total leasable
floor space

Leased area

Total
number oftenants

Revenue fromleasing operations(¥ millions)659(6.1%)
73(0.7%)
80(0.8%)
99(0.9%)
168(1.6%)
10,747 (100.0%)

Japan Real Estate Investment Corporation 17

JRE̲0907̲初校 05.9.12 10:27 AM ページ 18

MAJOR TENANTS ROSTER
Rank

1
2
3
4
5

Name of tenant

Name of building

Leased area

Mitsubishi Research Institute, Inc. (Note)
Mitsubishi Soken Building
14,529m2 (156,389ft2)
The Dai-ichi Mutual Life Insurance Company Midosuji Daiwa Building (also includes 8 other buildings) 10,824m2 (116,508ft2)
Yamano Gakuen
Yoyogi 1Chome Building
7,772m2 ( 83,657ft2)
TOTO Ltd.
Midosuji Daiwa Building (also includes 1 other building) 6,669m2 ( 71,784ft2)
Toshiba Solutions Corporation
Takanawadai Building (also includes 2 other buildings)
5,331m2 ( 57,382ft2)

Percent of totalleased area

4.4%
3.3%
2.4%
2.0%
1.6%

Note: Lease with this tenant is a fixed-term lease for the period from February 1, 2001 to March 31, 2011. This tenant has agreed not to terminate thecontract during the lease period.

LOCATIONS OF PORTFOLIO PROPERTIES
II-1-II-4:Tokyo metropolitan area
exc l uding 23 wards

III- 1 - III-14:O t her major cit ies

II-2
II-1
III-1 III-2
III-4 III-5
III-8 III-7
III-6
III-12 III-11
III-10 III-9
III-13
III-14

II-4

III-3
II-3

I - 1 - I - 2 8 : Tok yo
23 words

I-26

I-27
I-28
I-25

I-2
I-3
I-7
I-5 I-4
I-8
I-20 I-21
I-6
I-22
I-9
I-10
I-11
I-23
I-14

I-1

I-19

I-24
I-17

I-15

I-12
I-13

I-16

I-18

Tokyo Station

18 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:27 AM ページ 19

Overview of Portfolio Properties As of March 31, 2005
Note: Concerning real estate and other assets of which the Company is partial owner through co-ownership or sectional ownership, the figures for “Site area” and “Floor area ofbuilding” represent total site area and total floor space for the entire building.

Location :Site area :Floor area of building :Structure :Completion :Location :Site area :Floor area of building :Structure :Completion :Genki Medical PlazaMD Kanda Building

● I-1

● I-2

Chiyoda-ku, Tokyo
1,052.80m2 (11,332.23ft2)
6,722.02m2 (72,355.15ft2)
Above ground: 8 floors
Below ground: 1 floor
September 1985

Location :Site area :Floor area of building:
Structure :Completion :Kandabashi Park
Building

Mitsubishi Soken
Building

● I-3

● I-4

Chiyoda-ku, Tokyo
1,218.56m2 (13,116.46ft2)
9,370.25m2 (100,860.43ft2)
Above ground: 10 floors
Below ground: 1 floor
July 1993

Location :Site area :Floor area of building :Structure :Completion :Sanno Grand
Building

Completion:

Location :Site area :Floor area of building :Structure :Completion :Chiyoda-ku, Tokyo
3,663.93m2 (39,438.18 ft2)
33,875.95m2 (364,637.34 ft2)
Above ground: 10 floors
Below ground: 3 floors
September 1966

Chiyoda-ku, Tokyo
3,441.35m2 (37,042.35ft2)
26,372.92m2 (283,875.47ft2)
Above ground: 15 floors
Below ground: 2 floors
July 1970

Yurakucho Denki
Building
● I-6

● I-5

Location:
Site Area:
Floor area of building:
Structure:

Chiyoda-ku, Tokyo
1,085.83m2 (11,687.77ft2)
8,185.11m2 (88,103.71ft2)
Above ground: 10 floors
February 1998

Location :Site area :Floor area of building :Structure :Completion :Chiyoda-ku, Tokyo
5,749.91m2 (61,891.46ft2)
70,287.65m2 (756,569.24ft2)
Above ground: 20 floors
Below ground: 4 floors
September 1975

Kodenmacho ShinNihonbashi Building

Burex Kyobashi
Building

● I-7

● I-8

Chuo-ku, Tokyo
773.28m2 (8,323.51ft2)
5,822.88m2 (62,676.90ft2)
Above ground: 9 floors
Below ground: 1 floor
November 1991

Location :Site area :Floor area of building :Structure :Completion :Chuo-ku, Tokyo
756.03m2 (8,137.83ft2)
5,470.54m2 (58,884.35ft2)
Above ground: 8 floors
Below ground: 1 floor
February 2002
Japan Real Estate Investment Corporation 19

JRE̲0907̲初校 05.9.12 10:30 AM ページ 20

Location:
Site Area:
Floor area of building:
Structure:
Completion:

Location :Site area :Floor area of building :Structure :Completion :Ginza Sanwa Building

Ryoshin Ginza East
Mirror Building● I-9● I-10Chuo-ku, Tokyo
1,119.27m2 (12,047.71ft2)
8,851.00m2 (95,271.28 ft2)
Above ground: 9 floors
Below ground: 2 floors
October 1982

Location:
Site Area:
Floor area of building:
Structure:
Completion:

Aoyama Crystal
Building

Shiba 2Chome
Daimon Building● I-11● I-12

Minato-ku, Tokyo
989.30m2 (10,648.73ft2)
8,094.36m2 (87,126.88ft2)
Above ground: 10 floors
Below ground: 4 floors
December 1982

Location :Site area :Floor area of building :Structure :Completion :Cosmo Kanasugibashi
Building

Completion :Location :Site area :Floor area of building :Structure :Completion :Minato-ku, Tokyo
758.54m2 (8,164.85ft2)
5,420.93m2 (58,350.35ft2)
Above ground: 9 floors
Below ground: 1 floor
March 1992

Minato-ku, Tokyo
2,820.90m2 (30,363.89ft2)
16,235.10m2 (174,752.99ft2)
Above ground: 8 floors
Below ground: 2 floors
March 1984

Shinwa Building● I-14● I-13

Location :Site area :Floor area of building :Structure :Chuo-ku, Tokyo
615.21m2 (6,622.06ft2)
4,104.71m2 (44,182.69ft2)
Above ground: 8 floors
Below ground: 1 floor
October 1998

Location :Site area :Floor area of building :Structure :Completion :Shinjuku-ku, Tokyo
822.00m2 (8,847.93ft2)
8,291.69m2 (89,250.92ft2)
Above ground: 10 floors
Below ground: 1 floor
November 1989

Takanawadai
Building

Higashi Gotanda
1Chome Building● I-15● I-16

Shinagawa-ku, Tokyo
1,416.17m2 (15,243.51ft2)
5,762.70m2 (62,029.13ft2)
Above ground: 13 floors
January 1991

20 Japan Real Estate Investment Corporation

Location:
Site Area:
Floor area of building:
Structure:
Completion:

Shinagawa-ku, Tokyo
1,539.95m2 (16,575.87ft2)
6,460.39m2 (69,538.99ft2)
Above ground: 8 floors
July 2004

JRE̲0907̲初校 05.9.12 10:31 AM ページ 21

Location :Site area :Floor area of building :Structure :Completion :Location :Site area :Floor area of building :Structure :Completion :JAL Travel Building

Omori-Eki
Higashiguchi Building● I-17● I-18Meguro-ku, Tokyo
1,401.52m2 (15,085.82ft2)
5,269.58m2 (56,721.23ft2)
Above ground: 6 floors
Below ground: 1 floor
September 1991

Location :Site area :Floor area of building :Structure :Completion :Nippon Brunswick
Building

Yoyogi 1Chome
Building● I-19● I-20

Shibuya-ku, Tokyo
1,497.52m2 (16,119.16ft2)
11,957.38m2 (128,708.04ft2)
Above ground: 9 floors
Below ground: 2 floors
March 1974

Location :Site area :Floor area of building :Structure :Completion :● I-22● I-21

Completion :Location :Site area :Floor area of building :Structure :Completion :Shibuya-ku, Tokyo
839.66m2 (9,038.02ft2)
4,359.20m2 (46,921.99ft2)
Above ground: 7 floors
Below ground: 2 floors
December 1987

Shibuya-ku, Tokyo
1,755.75m2 (18,898.72ft2)
10,778.10m2 (116,014.39ft2)
Above ground: 14 floors
Below ground: 1 floor
October 2003

Jingumae Media
Square Buildingda Vinci Harajuku

Location :Site area :Floor area of building :Structure :Ota-ku, Tokyo
2,199.30m2 (23,673.05ft2)
14,095.34m2 (151,720.83ft2)
Above ground: 11 floors
Below ground: 2 floors
July 1989

Location :Site area :Floor area of building :Structure :Completion :Shibuya-ku, Tokyo
2,261.68m2 (24,344.50ft2)
9,420.42m2 (101,400.46ft2)
Above ground: 9 floors
Below ground: 2 floors
March 1998

Shibuya Cross Tower

Ebisu Neonato● I-23● I-24

Shibuya-ku, Tokyo
5,153.45m2 (55,471.22ft2)
61,862.33m2 (665,879.93ft2)
Above ground: 32 floors
Below ground: 3 floors
April 1976

Location :Site area :Floor area of building :Structure :Completion :Shibuya-ku, Tokyo
5,005.70m2 (53,880.85ft2)
36,598.38m2 (393,941.30ft2)
Above ground: 18 floors
Below ground: 2 floors
October 1994
Japan Real Estate Investment Corporation 21

JRE̲0907̲初校 05.9.12 10:31 AM ページ 22

Location:
Site Area:
Floor area of building:
Structure:
Completion:

Location :Site area :Floor area of building :Structure :Completion :Harmony Tower

Otsuka HigashiIkebukuro Building● I-25● I-26

Nakano-ku, Tokyo
10,020.52m2 (107,859.88 ft2)
72,729.31m2 (782,851.02ft2)
Above ground: 29 floors
Below ground: 2 floors
March 1997

Location :Site area :Floor area of building :Structure :Completion :Ikebukuro 2Chome
Building

Ikebukuro YS
Building● I-27● I-28

Toshima-ku, Tokyo
397.26m2 (4,276.07ft2)
3,157.51m2 (33,987.12ft2)
Above ground: 9 floors
Below ground: 1 floor
May 1990

Location :Site area :Floor area of building :Structure :Completion :Hachioji Dai-ichiSeimei Building

Completion:

Location :Site area :Floor area of building :Structure :Completion :Hachioji, Tokyo
2,989.33m2 (32,176.85ft2)
18,329.98m2 (197,302.07ft2)
Above ground: 12 floors
Below ground: 1 floor
July 1996

Toshima-ku, Tokyo
1,384.56m2 (14,903.27ft2)
7,464.64m2 (80,348.64ft2)
Above ground: 8 floors
Below ground: 1 floor
December 1989

Saitama Urawa
Building● II-2● II-1

Location:
Site Area:
Floor area of building:
Structure:

Toshima-ku, Tokyo
2,121.39m2 (22,834.43ft2)
9,531.28m2 (102,593.74ft2)
Above ground: 8 floors
Below ground: 1 floor
November 1987

Location :Site area :Floor area of building :Structure :Completion :Saitama, Saitama Prefecture
1,533.06m2 (16,501.70ft2)
6,258.59m2 (67,366.84ft2)
Above ground: 8 floors
March 1990

Shin-Yokohama First
Building

Kawasaki Isago
Building● II-3● II-4

Yokohama, Kanagawa Prefecture
1,528.00m2 (16,447.24ft2)
10,403.41m2 (111,981.26ft2)
Above ground: 10 floors
Below ground: 2 floors
April 1992

22 Japan Real Estate Investment Corporation

Location :Site area :Floor area of building :Structure :Completion :Kawasaki, Kanagawa Prefecture
1,594.50m2 (17,163.04ft2)
9,623.83m2 (103,589.94ft2)
Above ground: 12 floors
Below ground: 1 floor
December 1990

JRE̲0907̲初校 05.9.12 10:31 AM ページ 23

Location:
Site Area:
Floor area of building:
Structure:
Completion:

Location :Site area :Floor area of building :Structure :Completion :Jozenji Park Building

Sendai Honcho
Honma Building● III-1● III-2

Sendai, Miyagi Prefecture
1,566.68m2 (16,863.59 ft2)
7,648.33m2 (82,325.86ft2)
Above ground: 8 floors
Below ground: 1 floor
January 1993

Location :Site area :Floor area of building :Structure :Completion :Niigata Ishizuecho
Nishi-Bandaibashi
Building

Kanazawa Park
Building● III-3● III-4

Niigata, Niigata Prefecture
957.90m2 (10,310.74ft2)
6,410.33m2 (69,000.15ft2)
Above ground: 8 floors
Below ground: 1 floor
November 1984

Location :Site area :Floor area of building :Structure :Completion :Kanazawa Minamicho
Building

Kanazawa, Ishikawa Prefecture
887.17m2 (9,549.41ft2)
5,163.19m2 (55,576.06ft2)
Above ground: 9 floors
March 1987

● III-6

Location :Site area :Floor area of building :Structure :Completion :Location :Site area :Floor area of building :Structure :Completion :Kanazawa, Ishikawa Prefecture
6,642.71m2 (71,501.47ft2)
43,481.20m2 (468,027.29ft2)
Above ground: 12 floors
Below ground: 2 floors
October 1991

Nagoya Hirokoji
Building● III-5

Location :Site area :Floor area of building :Structure :Completion :Sendai, Miyagi Prefecture
1,437.47m2 (15,472.78ft2)
8,247.50m2 (88,775.27ft2)
Above ground: 11 floors
November 1991

Nagoya, Aichi Prefecture
4,095.81m2 (44,086.89ft2)
33,377.73m2 (359,274.55ft2)
Above ground: 18 floors
Below ground: 2 floors
May 1987

Nagoya Misono
Building

Kyoto Shijo
Kawaramachi Building● III-7● III-8

Nagoya, Aichi Prefecture
805.04m2 (8,665.37ft2)
5,348.00m2 (57,565.34ft2)
Above ground: 7 floors
Below ground: 1 floor
September 1991

Location :Site area :Floor area of building :Structure :Completion :Kyoto, Kyoto Prefecture
1,471.57m2 (15,839.83ft2)
9,701.04m2 (104,421.02ft2)
Above ground: 9 floors
Below ground: 1 floor
November 1982
Japan Real Estate Investment Corporation 23

JRE̲0907̲初校 05.9.12 10:31 AM ページ 24

Location :Site area :Floor area of building :Structure :Completion :Location :Site area :Floor area of building :Structure :Completion :Sakaisujihonmachi
Building

Midosuji Daiwa
Building● III-9● III-10

Osaka, Osaka Prefecture
2,036.22m2 (21,917.67ft2)
17,145.59m2 (184,553.42ft2)
Above ground: 13 floors
Below ground: 2 floors
October 1992

Location :Site area :Floor area of building :Structure :Completion :Kobe Itomachi
Building

NHK Hiroshima
Broadcasting Center
Building● III-11● III-12

Kobe, Hyogo Prefecture
808.55m2 (8,703.15ft2)
4,894.09m2 (52,679.50ft2)
Above ground: 10 floors
September 1989

Location :Site area :Floor area of building :Structure :Completion :Tosei Tenjin
Building

Fukuoka, Fukuoka Prefecture
1,221.31m2 (13,146.06ft2)
5,588.57m2 (60,154.81ft2)
Above ground: 8 floors
March 1992

● III-14

Location :Site area :Floor area of building :Structure :Completion :24 Japan Real Estate Investment Corporation

Hiroshima, Hiroshima Prefecture
3,296.46m2 (35,482.77ft2)
35,217.28m2 (379,075.28ft2)
Above ground: 23 floors
Below ground: 2 floors
August 1994

Hinode Tenjin
Building● III-13

Location :Site area :Floor area of building :Structure :Completion :Osaka, Osaka Prefecture
3,044.65m2 (32,772.31ft2)
31,213.27m2 (335,976.52ft2)
Above ground: 15 floors
Below ground: 2 floors
September 1991

Fukuoka, Fukuoka Prefecture
1,452.15m2 (15,630.80ft2)
12,527.07m2 (134,840.13ft2)
Above ground: 10 floors
Below ground: 2 floors
August 1987

JRE̲0907̲初校 05.9.12 10:31 AM ページ 25

The Company’s Investment Policies(1) I N VES TM E NT POLICIES(i) Basic investment policies
The basic investment policies of the Company shall be as follows:
q Basic policies (Article 23 of the Articles of Incorporation)
The Company shall invest primarily in specif ied assets (the “portfolio real estate assets”), consisting of certain real estate assets andreal estate related securities (as defined below) with the goals of achieving stable growth in value over a medium- to long-term period.
The terms “real estate assets” and “real estate related securities” shall mean the items listed below.
I.

Real estate assets:

1. Real estate
2. Leaseholds of real estate
3. Surface rights
4. Trust beneficiary rights in trust of real estate, leaseholds of land, and surface rights. These assets referred to herein include
benef iciary certificates of comprehensive trusts over real estate and moneys incidental thereto, but do not include marketablesecurities as defined in Article 3, Item 1 of the Cabinet Order of Law on Investment Trusts and Investment Corporations (Cabinet
Order No. 480 of 2000, as amended, the “Cabinet Order”)
5. Trust beneficiary rights in monetary trusts that are invested in real estate, leaseholds of real estate, and surface rights (except formarketable securities)
6. Equity interests in anonymous partnership relating to a contract that (i) either party makes a contribution to the other party for
purposes of management of the assets described in any of the items listed in 1. through 5. above, (ii) the other party manages thecontribution as investments principally in any of such assets, and (iii) its profits are distributed (hereinafter referred to as “anonymous
partnership equity interest”)
II. Marketable securities, value of which derives principally from real estate assets (the “real estate related securities”) are as follows:
1. Preferred Securities (as defined in Article 2, Paragraph 9 of Asset Liquidation Law, Law No. 105 of 1998, as amended, the “Asset
Liquidation Law”) issued by a special purpose company under such Law whose objective is to invest more than half of its assets
in real estate assets
2. Beneficiary certificates (as defined in Article 2, Paragraph 12 of the Investment Trust Law) issued by an investment trust whose
objective is to invest more than half of its assets in real estate assets
3. Certificates for shares (as defined in Article 2, Paragraph 22 of the Investment Trust Law) issued by an investment corporation
under such Law whose objective is to invest more than half of its assets in real estate assets
4. Beneficiary certificates of a special purpose trust (as defined in Article 2, Paragraph 13 under the Asset Liquidation Law), whose
objective is to invest more than half of its assets in real estate assets (except for the trust beneficiary rights referred to in 4. and 5.
of I. above)
w Investment attitude (Article 24 of the Articles of Incorporation)
The following is the basic policy of investment attitude of the Company, especially its policy concerning the acquisition and holdingof the Portfolio Real Estate as set forth in the Articles of Incorporation.
A. In accordance with the Ministerial Ordinance of the Ministry of Finance, the Company shall make investment so that at least 75%
of its total assets are invested in real estate, leaseholds of real estate, surface rights, trust beneficiary rights (limited to trusts in realestate, surface rights or leaseholds of land), and anonymous partner equity interests (limited to anonymous partner contracts forinvestment of received assets in real estate, surface rights, or leaseholds of real estate).
B. It is the Company’s asset investment policy to make an investment, so that the ratio (the “specified real estate ratio”) of the aggregate
value of the specified real estate to the aggregate value of the specified assets is at least 75%. The specified real estate shall mean,
among the specified assets, the real estate, leaseholds of real estate, surface rights or the trust beneficiary rights of real estate,leaseholds of land and surface rights.

Japan Real Estate Investment Corporation 25

JRE̲0907̲初校 05.9.12 10:31 AM ページ 26

C. The Company shall principally invest in office buildings which are located in Tokyo and other major metropolitan areas of Japan,
including those as such designated by the relevant Cabinet Order.
D. The Company shall make investment decisions only after it conducts thorough and sufficient due diligence investigations of therelevant real estate assets and becomes fully aware of the investment value in light of the investment climate.
E. The Company shall invest principally in real estate and trust beneficiary rights in trust of real estate, but may invest in other realestate assets (meaning any asset listed in “I. Real estate assets” above, but excluding the real estate and the trust beneficiary rights
in trust of the real estate) and real estate related securities in addition to those described above in light of investment climate atthat time and/or the size of the assets.
e Leasing of corporate assets (Article 27 of the Articles of Incorporation)
The Company may enter into leasing contracts with third parties with regard to real estate assets being specified assets, for the purposeof generating earnings, and may cause the trustees to enter into leasing contracts with third parties with regard to the underlying realestate of the trust beneficiary rights.
r Loans and corporate bonds (Article 30 of the Articles of Incorporation)
A. In order to manage the portfolio of the Company in an efficient and stable manner, the Company may make borrowings or issue
corporate bonds with a view to utilizing the proceeds thereof toward acquisitions of specified assets, capital improvements of thereal estate for lease and the underlying real estate of the trust beneficiary rights and working capital.
B. The Company shall not make total borrowings, including loans and issuance of corporate bonds, in excess of an aggregate of ¥1
trillion.
C. The Company may borrow only from qualified institutional investors (the “qualif ied institutional investors”) referred to in Article
2, Paragraph 3, Item 1 of the Securities and Exchange Law of Japan (Law No. 25 of 1948, as amended).
(ii) Guidelines for investment and management of portfolio real estate assets based on basic investment policies
The asset management company, J-Rea, has internally established the asset management guidelines (the “Asset Management
Guidelines”), as the internal guidelines with regard to investment and management by the Company of its portfolio real estate assets,based on the Basic investment policies outlined in section (i), q through r above and in accordance with the asset managementagreement (the “Asset Management Agreement”) concluded between the Company and the asset management company dated May
18, 2001, as amended on August 3, 2001 and April 1, 2003. Accordingly, the asset management company manages the portfolio realestate assets in compliance with such Asset Management Guidelines, with the aim of managing the assets of the Company in an
appropriate manner.
The Asset Management Guidelines have been formed, based on the current Japanese economic environment, real estate market
conditions, financial environment, statistics of economy, property conditions and performance of the Company, all at the time oflisting on the Tokyo Stock Exchange, or TSE, the medium- and long-term outlook for the real estate market, and experience andknow-how accumulated by the asset management company and other various complex factors then available to the investment
management company. As such, the asset management company intends to review the Asset Management Guidelines periodically todetermine whether or not they appropriately fit with the external and internal environmental factors. If the asset management company
determines that it is in the best interests of the Company and its investors to revise the Asset Management Guidelines to manage theportfolio, the Asset Management Guidelines may be revised periodically in line with the Articles of Incorporation and the asset
management agreement.
The asset management company will pursue the achievement of internal growth as well as external growth in order to enhance its
earnings and stability. Internal growth means that the Company will maximize the profitability of its own existing real estate andother assets. External growth means that the Company will acquire new portfolio real estate assets within such an appropriate pricerange as may be considered in the best interests of the Company. The asset management company shall conduct the management by
taking into account the stability of the cash flow and the expected return from a comprehensive perspective. The asset managementcompany will, in managing the assets, consider various factors, including portfolio composition in terms of geographical diversification,use, size and age as well as the capitalization rate (meaning the return obtained by dividing the cash flow, excluding capital expenditures
but after deduction of cost of repairs, by the property acquisition costs). The Company is continuously engaged in market research
activities, for the purpose of the external growth, to seek an opportunity to acquire new portfolio real estate assets. Once the Company

26 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:31 AM ページ 27

makes an acquisition decision, the Company shall promptly make a public announcement thereof.
q Guidelines for acquisition of portfolio real estate assets
To achieve the external growth, the guidelines concerning the acquisition of portfolio real estate assets are as follows:
A. Geographic portfolio composition
1. The basic geographical diversification is to make investment of approximately 60–80% of the funds in real estate located in thegreater Tokyo metropolitan area and the approximately remaining 20–40% of the funds in cities in other parts of Japan.
2. It is, however, possible that the funds are invested in different investment allocation percentages as outlined above, if a relatively
high rate of return is expected from such investment even though supply and demand are balanced and steady.
3. During the course of expansion of the asset base of the Company, the portfolio composition may tentatively deviate from theinvestment allocation percentages as outlined above.
B. Property type portfolio composition
In principle, the asset management company will recommend the Company to invest in portfolio real estate assets used for officebuildings.
While these assets may mainly be used for office buildings, they may also partially be used for commercial use or, depending on
the relevant local municipal regulations, may be used for residential use. Accordingly, the Company may acquire the office buildings
with certain portion thereof used for commercial facilities or residential areas.
C. Building size and age in portfolio composition
1. In principle, the asset management company will recommend the Company to invest in land and buildings thereon that have total
floor space or size of 3,000 square meters or more per building.
2. In principle, the asset management company will recommend the Company to invest in buildings with the latest earthquake
resistance capabilities in compliance with the earthquake resistance standards or buildings with the equivalent capabilities as statedabove.
3. In addition to the criteria referred to in 1. and 2. above, the asset management company will recommend the Company to make an
investment decision by taking into account such factors as location, building structures (including earthquake resistance standards),
facilities (including ceiling height, floor wiring, space per floor, electrical supply, and so forth), and the complexity of ownershipand other rights.
D. Due diligence conducted at the time of acquisition
1. Acquisition of the real property
To thoroughly and accurately assess the quality of properties, the asset management company will conduct a comprehensive due
diligence of the property from an economic, physical, and legal standpoint.
The asset management company will make use of analytical assessment based on real estate appraisal reports, engineering reports,and seismic reports and real estate market reports issued by independent third party professionals who possess analytical capability
and relevant experience.
The asset management company will also make an on-site inspection of the property and hold interviews with persons in chargeof property management of the building.

Japan Real Estate Investment Corporation 27

JRE̲0907̲初校 05.9.12 10:31 AM ページ 28

2. The following table shows the due diligence items based on the above.
Type of Research

Details of Research

Economic Analysis

Source Materials— Supply and demand conditions for office buildings in the location underreal estate appraisal reports,

consideration including a future outlook; analysis of market rental rates

market reports,— Frontage condition, access to major roads and public transportation

on-site inspection— Level of discount rate and capitalization rate
— Analysis of the current operating costs of the building and room forreduction— Reflection of inspection of the physical conditions of building, legal due
diligence, economic analysis of the current building operation— Evaluation of dispositions
Physical Inspection— Searching the boundary with neighboring properties and status of the overdocuments from the seller,

boundaryengineering reports,— The level of maintenance for the building and facilities and its state ofseismic report,

deterioration

on-site inspection— Medium- and long-term estimated repairs and capital expenditure— Building and facility specifications (room layout, ceiling height, heat,ventilation and air-conditioning (HVAC) systems, electrical supply, etc.)— Earthquake resistance capability of the building— Investigation for existence of toxic substances within the building or within
the property site
— Whether or not there has been any actual damage to the building as aresult of natural disasters, such as typhoons, earthquakes, etc.
Legal Research— Research into ownership and other rights and mortgages

documents from the seller,— Research into lease contracts

engineering reports,— Certification of the property boundary line, agreement regarding theon-site inspection

boundary— Research into the level of compliance with legal requirements forconstruction and management of the building— Research into management rules, agreements among the owners, andleasehold agreements in cases where the building and land are not owned by asingle owner— Research into existence and substance of any agreements with the owners
in the neighborhood regarding the countermeasures against defective
television radiation acceptance, etc.
— Investigation into the operations of the property management company

documents from the seller, on-State of Property

and compliance with building management manualsite inspection

Management— Research into whether or not there have been any suggestions and/or

Researchonthecomplaints made by tenants against the building management— Tenant composition— Research into the existence of any rules or stipulations governing building
management in cases where the property is not owned by a single owner

28 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:31 AM ページ 29

E. Targeted capitalization rate
1. The asset management company will set a certain target for its capitalization rate and make acquisition of portfolio real estate assets by
taking into account the capitalization rate set for the total portfolio.
2. The capitalization rate referred to above may be adjusted from time to time in accordance with changes in the Company’s financing
policy and/or changes in interest rates.
* The capitalization rate addressed in this section is based on the return calculated by dividing the cash flow (excluding capital expenditure and after
deduction of the cost of repairs) by the property acquisition costs.

F. Investment in real estate related securities
1. The asset management company primarily invests assets in real estate and trust beneficiary rights entrusted in real estate. However, inthe event that investment is made in real estate related securities, the following points constitute the primary criteria.
a. Real estate related securities for which the possibility of acquiring the real estate at the conclusion of the investment period has been
confirmed are assumed to be targets for investment.
b. The total value of real estate related securities to be held shall not exceed 10% of total assets.
c. Due diligence will be conducted concerning the investment schemes for investment in real estate related securities, and real estate being
considered for investment will be judged for profitability and eligibility in accordance with points A-E above.
d. Concerning investment in securities of real estate development initiatives, only development projects with high reliability will beconsidered as targets for investment. Due diligence will be conducted concerning development plans, with consideration of risks related
to project completion and handover, and risks related to securing of tenants after completion of construction.

w Guidelines for management of portfolio real estate assets
To achieve internal growth, the policy for maintenance and management of portfolio real estate assets is as follows:
A. Policy for maintenance and management
Concerning the Company’s real estate assets, for purposes of internal growth, the asset management company will ensure to makeongoing and scheduled capital expenditures and management for the existing facilities and equipment of real estate owned by theCompany with proper repairs and maintenance to enhance tenant satisfaction, the competitiveness of the property, and revenues (byincreasing rental rates over time and the occupancy rate), and at the same time minimize the relevant expenses (by reducing outsourced
maintenance costs and reduction of water, gas and electricity costs, and so forth). To achieve these goals, the asset managementcompany will outsource property management operations to the optimal property management companies suited to the particularcharacteristics of each property. In addition, the asset management company will make effective use of the multiple property
management companies by applying competitive principles as suitable.
1. Selection of property management companies
Regarding the outsourcing of maintenance services, the property management company needs close links with other companies,
including asset management companies, general administration trustees and asset custodian companies from the stage of investigating
the acquisition of a property. Property management companies will therefore be selected as trustees based upon factors including thegeneral strength and record of candidate companies, suitability to the particular features of the property, as well as their understanding
and familiarity with the Company’s management procedures.
2. Evaluation of property management companies
To promote stable operational management and to ensure appropriate supervision over assets by the property management companies,
the asset management company conducts evaluations of all trustee property management companies after the end of each fiscal period.
These evaluations work to grasp the trustees’ abilities and characteristics, and to enhance those abilities and characteristics.
External third-party institutions (evaluation consultants with specialized knowledge) are employed, and conduct evaluations in concert
with the asset management company based upon the following items.
Leasing ability
Building maintenance (cost management) ability
Repair and construction work ability
Reporting ability
External evaluation (CS evaluation, etc.)

Japan Real Estate Investment Corporation 29

JRE̲0907̲初校 05.9.12 10:31 AM ページ 30

In the event that improvements according to the asset management company’s guidance, which are based upon evaluation results,
cannot be seen, and it is judged that continued management of the subject property by the current property management trustee
company is not appropriate, changing of trustees will be investigated.
B. Insurance policy
In principle, the Company will carry comprehensive casualty and liability insurance covering all of the properties owned by theCompany to protect the properties either from damages to or reduction in revenue arising from natural causes or accidents or any
possible financial losses arising from liability claims of third parties. In connection with procuring earthquake insurance, the Company
will make a determination based on the amount of the probable maximum loss, or PML, on its properties.
*1. The Company will carry comprehensive casualty insurance to compensate for financial losses due to damages and accidents except for earthquakes,
floods, tidal waves and wars. This type of insurance can also include a special provision that compensates for corporate profits.
*2. Liability insurance covers the Company from possible financial losses arising from legal claims with regard to physical harm or financial damage tothird parties that results from possession, use, occupancy or management of the building.

e Guidelines for disposal of portfolio real estate assets
In principle, the Company seeks to hold investments over a reasonably long-time and has no particular intention to engage in short-termbuying and selling of the properties. In determining the sale of a property, the Company makes a comprehensive analysis anddetermination by taking into consideration such factors as the outlook for future profitability of that property, the amount that theproperty has changed in value and the outlook for future additional change in value, the economic outlook and stability for the region inwhich the portfolio real estate assets are located, the deterioration of the real estate and other assets and the estimate of future expenses
associated with its maintenance, and how well the particular property fits with the Company’s total portfolio of properties.
(iii) Financing guidelines
The Company has stipulated the following financial guidelines.
q In order to manage the assets of the Company in an efficient and stable manner, the Company may make borrowings or issue
corporate bonds for purposes of making acquisitions of specified assets, capital improvements for the existing portfolio realestate assets and working capital.
w The Company shall not make total borrowings, including loans and issuance of corporate bonds, in excess of an aggregate of¥1 trillion.
e The Company shall borrow only from qualified institutional investors.
r In principle, the Company shall not borrow funds (including investment corporation bonds) in excess of 65% of the total valueof its total assets (the “debt ratio”), and will seek to maintain an even lower debt ratio.
t The Company shall seek to borrow funds at the most favorable possible terms in consideration of the economic climate at the time ofborrowing, with a view to reducing the future effects of refinancing and achieving the lowest possible financing costs . The Company
will compare terms presented from several qualified institutional investors, such as ratio of fixed interest loan, borrowing periods,
requirement of collateral for borrowing and so forth, to achieve the best possible terms. However, the financing costs may fluctuate due
to changes in unforeseeable economic conditions in instances where penalties, which may arise from prepayment of borrowings, will be
determined by the interest rate environment at that time.
y The Company may establish lines of credit facility in advance, including a maximum line of credit facilities and a commitment line or
future loan agreements to finance timely in need of capital whenever it becomes necessary to acquire additional specified assets.
u The Company may use its properties as collateral for borrowing funds.
Borrowing and repayment of funds in the near term will be based on the following points.
q As a flexible response is required when borrowing funds for the additional acquisition of specific assets, short-term borrowing will be
the main means for procuring the necessary funds.
w Short-term borrowing procured for the additional acquisition of specified assets shall be converted to long-term fixed-interest
borrowing or corporate bonds as appropriate, with reference to the finance environment, to achieve low and stable fund procurement
costs.

30 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:31 AM ページ 31(2) INVESTMENT ASSETS(i) Assets in which the Company may invest are as follows:q Real estate assets and real estate related securities
w Other specified assets
1. The Company may invest in the following marketable securities:
a. Government bonds
b. Municipal government bondsc. Bonds issued by special legal entities under special law
d. Corporate bonds (except for convertible bonds, bonds with warrants and bonds with stock acquisition rights)
e. Specified corporate bonds issued by special purpose companies, as set forth in Article 2, Paragraph 1, Item 3-2 of the Securities andExchange Law
f. Commercial paper, as set forth in Article 2, Paragraph 1, Item 8 of the Securities and Exchange Law
g. Securities or certificates which fall within any of the types described in a. through f. above and which are issued by foreign
governments or foreign legal entities
h. Beneficiary certificates except for those described in section (i), q, II. 2. of (1) of the Investment Policies above
i. Certificates for shares of investment corporations except for those described in section (i), q, II. 3. of (1) of the Investment policies
above
j. Corporate bonds issued by investment corporations, as set forth in Article 2, Paragraph 25 of the Investment Trust Law
k. Shares issued by foreign investment corporations, as set forth in Article 220, Paragraph 1 of the Investment Trust Law
l. Trust beneficiary certificates of foreign loan receivables, as set forth in Article 2, Paragraph 1, Item 10 of the Securities andExchange Law
m. Securities or certificates representing options, as set forth in Article 2, Paragraph 1, Item 10-2 of the Securities and Exchange Law
n. Depositary receipts denominated in Japanese yen of the same nature as for those in a. through d. above, as described in Article 2,
Paragraph 1, Item 10-3 of the Securities and Exchange Law
o. Negotiable certificates of deposit issued by foreign entities denominated in Japanese yen
p. Trust beneficiary certificates of loan receivables, as set forth in Article 2, Paragraph 2, Item 1 of the Securities and Exchange Law
q. Rights against a foreign entity which are of the same nature as the rights in item p. above
2. The Company may invest in monetary claims, with the exception of those described in Article 3, Items 1, 12 and 14 of the Cabinet
Order.
3. The Company may invest in financial derivatives, as described in Article 3, Item 14 of the Cabinet Order.
4. The Company may invest in stocks (provided, however, investments may be made when deemed necessary or useful for the Basic
policies outlined in section (i), q of (1) of the Investment Policies above.)e The Company may invest in trademark rights under the Trademark Law (Law No. 127 of 1959), exclusive license or ordinary use rights
thereof, and the right to use sources of hot springs as set forth in the Hot Springs Law (Law No. 125 of 1948) and facilities related tosuch hot springs, as well as in the specified assets as set forth in items q and w above. This is provided, however that investments may
be made when deemed necessary or useful for the Basic policies outlined in section (i), q of (1) of the Investment Policies above.
(ii) Investment criteria and future investment plan in terms of property type, geographical location, and business sector and so forth
Please refer to (i) Basic investment policies and (ii) Guidelines for investment and management of portfolio real estate assets based on
Basic investment policies under (1) Investment Policies above.

Japan Real Estate Investment Corporation 31

JRE̲0907̲初校 05.9.12 10:31 AM ページ 32(3) DISTRIBUTION POLICYThe Company will make cash distributions subsequent to each fiscal period in accordance with the following guidelines.
(i) In connection with the total cash amount to be distributed to shareholders, accounting profits will be calculated in accordance withthe generally accepted accounting principles in Japan (Japanese GAAP).
(ii) In making cash distributions to the extent of accounting profits, the Company will distribute profits as cash distributions in excess of
90% of the taxable income as defined in Article 67-15 of the Special Taxation Measures Law of Japan.
(iii) At the appropriate discretion of the board of directors, the Company may, in accordance with Article 136, Paragraph 1 of theInvestment Trust Law, make distributions in excess of accounting profits based on the Cash Distribution Statement approved
pursuant to Article 131, Paragraph 1 of the Investment Trust Law.
(iv) The Company is allowed to make distributions in excess of accounting profits to the extent of the amount equivalent to theaggregate of the amount of depreciation for the current period and the amount of accounting profits. However, in cases where cash
distributions for the relevant period do not exceed 90% of the “distributable amount” stipulated by Article 39-32-3 of the Cabinet
Order of Enforcement of the Special Taxation Measures Law of Japan, the Company may make distributions in excess ofaccounting profits to the extent of 91% of such distributable amount.
(v) Distributions need to be made in cash in proportion to the number of shares registered on the final records of shareholders(including the records of beneficial shareholders) as of the close of each fiscal period.
(vi) In the event that the Company issues additional shares during a business period, the value of the dividends in connection with thoseshares may be calculated on a daily pro-rated basis, as determined by the board of directors.
(vii) Besides the above provisions, the Company shall comply with the rules on investment trusts and investment corporations(established on March 16, 2001, as amended) stipulated by the Investment Trusts Association of Japan.
(viii) If investors need to calculate a gain or loss upon distribution in excess of accounting profits, the Company will not make
distributions in excess of accounting profits to the shareholders. However, the Company will be able to make distributions in excessof accounting profits in the following three cases pursuant to clauses (i) through (vii) above.
1. Due to changes of the tax codes or other reasons, it becomes no longer necessary for an individual investor to calculate a gain or loss
upon distribution in excess of accounting profits for the period.
2. Due to changes of the tax codes or other reasons, the board of directors determines that it is appropriate to make distributions inexcess of accounting profits since it would become a common practice for an investor to file an individual tax return to report a gainor loss upon payouts.
3. The board of directors determines that it is necessary to make distributions in excess of accounting profits to meet the distribution
requirements.

(4) INVESTMENT RESTRICTIONSIn accordance with the Articles of Incorporation, the investment restrictions of the Company are as follows:
q The Company shall not seek to invest aggressively in the marketable securities and monetary claims described in (2) Investment Assets
above, but rather make investment to secure stability and liquidity (Article 26 of the Articles of Incorporation).
w The Company shall limit its trading activity in financial derivatives to the extent of hedging the interest rate volatility risks, with regard
to its debts and other risks (Article 26 of the Articles of Incorporation).
e In order to manage the portfolio of the Company in an efficient and stable manner, the Company may make borrowings or issue
corporate bonds (not in excess of ¥1 trillion) with a view to utilizing the proceeds thereof toward acquisitions of specified assets, capital
improvements of the real estate for lease and the underlying real estate of trust beneficiary rights and working capital (Article 30 of the
Articles of Incorporation).
r The Company shall borrow only from qualified institutional investors (Article 30 of the Articles of Incorporation).

32 Japan Real Estate Investment Corporation

JRE̲0907̲初校 05.9.12 10:32 AM ページ 33

Financial Section
Financial Overview of Japan Real Estate Investment Corporation
Balance Sheets
Statements of Income and Retained Earnings
Statements of Cash Flows
Statements of Changes in Shareholders’ Equity
Notes to Financial Statements
Report of Independent Auditors

p.34
p.38
p.40
p.41
p.42
p.42
p.49

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JRE-財務8/25M新 05.9.12 10:36 AM ページ 34

Financial Overview of Japan Real Estate Investment Corporation
1. SELECTED FINANCIAL DATA
Thousands of U.S. dollars(Note 1)Millions of yen

Operating Revenues
Operating Expenses
Operating Profits
Income before Income Taxes
Net Income
Total Assets
Interest-Bearing Liabilities
Total Shareholders’ Equity
Shareholders’ Capital
Number of Shares
Total Shareholders’ Equity per Share (Yen/U.S. dollars)
Cash Distribution
Dividend Payout Ratio
Dividend Per Share (Yen/U.S. dollars)
Net Operating Income (NOI)
Funds from Operations (FFO)
Return on Assets (ROA) (Note 2)
Return on Equity (ROE) (Note 3)
EOP Equity Ratio (Note 4)
EOP Interest-Bearing Debt Ratio on Total Assets (Note 5)
FFO Multiple
Debt Service Coverage Ratio (Note 6)

For the period from
October 1, 2004 to
March 31, 2005

For the period from
April 1, 2004 to
September 30, 2004

¥ 10,747
6,046
4,701
4,121
4,120
322,358
159,000
137,569
133,448
260,400
528,2994,120
99.9%
15,824
7,131
5,762
1.4%
(2.9% annualized)
3.0%(6.0% annualized)
42.7%
49.3%
19.7 times
11.2 times¥ 10,151
5,792
4,358
3,831
3,830
257,372
99,000137,279
133,448
260,400
527,185
3,830
99.9%
14,711
6,672
5,488
1.5%
(3.0% annualized)
2.8%(5.6% annualized)
53.3%
38.5%
20.8 times
12.7 times

For the period from
October 1, 2003 to
March 31, 2004

¥

9,560
5,219
4,341
3,803
3,802
244,523
87,000137,250
133,448
260,400
527,077
3,802
99.9%
14,602
6,455
5,301
1.6%
(3.2% annualized)
2.8%(5.7% annualized)
56.1%
35.6%
20.4 times
13.9 times

For the period from
April 1, 2003 to
September 30, 2003

¥

8,965
5,067
3,898
3,408
3,407
209,581
76,000115,559
112,152
225,400
512,6883,407
99.9%
15,117
5,950
4,801
1.7%
(3.3% annualized)
3.0%(5.9% annualized)
55.1%
36.3%
15.2 times
12.6 times

For the period from
October 1, 2004 to
March 31, 2005

$100,082
56,29943,78338,37938,3703,001,757
1,480,584
1,281,023
1,242,651
260,400
4,919.44
38,37099.9%
147.3566,40453,6551.4%(2.9% annualized)
3.0%(6.0% annualized)
42.7%
49.3%
19.7 times
11.2 times

Note 1: Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥107.39 = US$1.00, the foreign exchange rate on
March 31, 2005, has been used for translation. The inclusion of such amounts is not intended to imply that Japanese yen has been or could be readily
converted, realized or settled into U.S. dollars at that rate or any other rate.
Note 2: ROA = Income before Income Taxes ÷ Average of Total Assets during the period
Note 3: ROE = Net Income ÷ Average of Net Worth during the period(Annualized portions of the calculations given in notes 2 and 3 above assume a fiscal period of 183 days for the period ended September 30, 2003, 183
days for the period ended March 31, 2004, 183 days for the period ended September 30, 2004 and 182 days for the period ended March 31, 2005.)
Note 4: EOP Equity Ratio = (Net Worth at end of period ÷ Total Assets at end of period) x 100
Note 5: EOP Interest-Bearing Debt Ratio on Total Assets = (Interest-Bearing Debt at end of period ÷ Total Assets at end of period) x 100
Note 6: Debt Service Coverage Ratio = Net Income before Interest, Taxes, Depreciation and Amortization ÷ Interest Expenses

2. CASH DISTRIBUTION
The cash distribution for the period from October 1, 2004 to March 31, 2005 consisted of almost all taxable income for the period,
qualifying the Company for special tax treatment as stipulated in Article 67-15 of the Special Taxation Measures Law of Japan. The
dividend per share was ¥15,824 ($147.35). With 260,400 shares outstanding, the cash distribution totaled ¥4,120,569 thousand($38,370,142). Retained earnings carried forward totaled ¥110,740 ($1,031).
(From October 1, 2004 to March 31, 2005)(Thousands of yen)

(U.S. dollars)

Net income
Retained earnings brought forward
Distribution(Dividend per share : ¥15,824)
Retained earnings carried forward

4,120,591
89
4,120,569

38,370,347
827
38,370,142

110

1,031

34 Japan Real Estate Investment Corporation

JRE-財務8/25M新 05.9.12 10:36 AM ページ 35

3. PAID-IN CAPITALThe Company was established with funding from Mitsubishi Estate Co., Ltd. (160 shares), The Tokio Marine & Nichido Fire InsuranceCo., Ltd. (120 shares) and The Dai-ichi Mutual Life Insurance Company (120 shares), each share representing ¥500,000 ($4,655).
Additional 160,000 shares were issued in an initial public offering at ¥525,000 ($4,888) each (acceptance price of ¥506,625 ($4,717)). An
additional 65,000 shares were issued on May 8, 2002, at ¥490,980 ($4,571) per share (acceptance price of ¥475,268 ($4,425)) and an
additional 35,000 shares were issued on October 25, 2003, at ¥629,000 ($5,857) per share (acceptance price of ¥608,456 ($5,665)).
Common shares outstanding

Increase
Issue date

Remarks

May 11, 2001
September 8, 2001
May 8, 2002
October 25, 2003

Private placement
400
Additional share issue (Initial Public Offering) 160,000
Additional share issue
65,000Additional share issue
35,000

BalancePaid-in capital

Increase

Balance(Millions of yen) (Thousands of U.S. dollars ) (Millions of yen) (Thousands of U.S. dollars )400
160,400
225,400
260,400

200
81,06030,892
21,295

1,862
754,818
287,661
198,295

200
1,862
81,260 756,681
112,152 1,044,343
133,448 1,242,648

The Company was listed on the Tokyo Stock Exchange on September 10, 2001. Market quotations from that time are as follows:
Month

High

Low

September 2001 ¥550,000 ¥491,000(September 10, 2001 to September 28, 2001)
October 2001
¥551,000 ¥534,000
November 2001 ¥549,000 ¥536,000
December 2001 ¥542,000 ¥485,000
January 2002
¥510,000 ¥480,000
February 2002
¥531,000 ¥499,000
March 2002
¥560,000 ¥527,000
April 2002
¥524,000 ¥495,000
May 2002¥527,000 ¥497,000
June 2002¥525,000 ¥512,000
July 2002¥528,000 ¥518,000
August 2002
¥534,000 ¥520,000
September 2002 ¥540,000 ¥505,000
October 2002
¥543,000 ¥508,000

Month

High

Low

Month

High

Low

November 2002
December 2002
January 2003
February 2003
March 2003
April 2003
May 2003
June 2003
July 2003
August 2003
September 2003
October 2003
November 2003
December 2003
January 2004
February 2004

¥563,000¥609,000¥609,000¥595,000¥603,000¥641,000¥699,000¥660,000¥657,000¥665,000¥678,000¥655,000¥669,000¥678,000¥707,000¥715,000¥531,000¥552,000¥560,000¥569,000¥573,000¥591,000¥631,000¥626,000¥630,000¥640,000¥636,000¥634,000¥639,000¥656,000¥678,000¥692,000March 2004
April 2004
May 2004
June 2004
July 2004
August 2004
September 2004
October 2004
November 2004
December 2004
January 2005
February 2005
March 2005
April 2005
May 2005
June 2005¥840,000¥830,000¥771,000¥765,000¥795,000¥844,000¥882,000¥874,000¥857,000¥866,000¥880,000¥893,000¥886,000¥893,000¥878,000¥945,000¥714,000¥748,000¥702,000¥735,000¥753,000¥785,000¥832,000¥830,000¥820,000¥805,000¥840,000¥852,000¥856,000¥842,000¥862,000¥869,000

4. OVERVIEW OF BORROWINGSThe following is a list of the Company’s borrowings showing amounts and lending institutions as of March 31, 2005.
Balance
Category

Lender(Thousands of
Average(Millions of yen) U.S. dollars) interest rate (%)

Short-term The Yamanashi Chuo Bank, Ltd.
2,000
debt
The Daishi Bank, Ltd.
2,000
The Mitsubishi Trust & Banking Corporation 11,000
The Mitsubishi Trust & Banking Corporation 8,000
The Chugoku Bank, Ltd.
3,000
The Daishi Bank, Ltd.
3,000
The Hachijuni Bank, Ltd.
2,000
The Kagoshima Bank, Ltd.
2,000
The Joyo Bank, Ltd.
2,000
The Iyo Bank, Ltd.
2,000
The Mitsubishi Trust & Banking Corporation 5,000
The Chugoku Bank, Ltd.
2,000
The Hachijuni Bank, Ltd.
Shinsei Bank, Ltd.
National Mutual Insurance Federationof Agricultural Cooperatives
SubtotalDue

18,6230.42832

June 15, 2005

18,623
102,430
74,49427,93527,935
18,623
18,623
18,623
18,62346,55918,6230.26
0.325
0.3241
0.295
0.295
0.295
0.295
0.295
0.295
0.28830.2883October 29, 2005
May 31, 2005
May 11, 2005
May 18, 2005
May 18, 2005
May 18, 2005
May 18, 2005
May 18, 2005
May 18, 2005
May 11, 2005
May 24, 2005

2,000
14,0003,000

18,623130,365
27,9350.28830.28830.2883

May 24, 2005
May 11, 2005
May 18, 2005

63,000586,646

Use of funds

Remarks

Repayment of existing
short-term loans

Unsecured/Unguaranteed/
Senior/Floating rate

Purchase of real estate

Repayment of existing
short-term loans
Purchase of real estate

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JRE-財務8/25M新 05.9.12 10:36 AM ページ 36

Balance
Category

Lender(Thousands of
Average(Millions of yen) U.S. dollars) interest rate (%)

Long-term The Bank of Tokyodebt
Mitsubishi, Ltd.
Mizuho Corporate Bank, Ltd.
The Sumitomo Trust &Due

Use of funds

Remarks

Anticipated date forprincipal repayment:
June 23, 2006
Final date forPurchase of real estate
trust beneficiary rights

Secured/Unguaranteed/
Senior/Fixed rate

Purchase of real estate

Unsecured/Unguaranteed/
Senior/Fixed rate

6,000

55,871

1.12

6,000
5,200

55,871
48,421

1.12
1.12

The Mitsubishi Trust & Banking Corporation 5,200
Sompo Japan Insurance, Inc.
1,600
The Iyo Bank, Ltd.
2,000
The Dai-ichi Mutual Life
5,000
Insurance Company
The Taiyo Life Insurance Company
2,000
The Chugoku Bank, Ltd.
3,000

48,421
14,89818,62346,5591.12
1.12
1.0575
1.015

March 24, 2009
March 30, 2009

18,62327,9351.471250.90875

March 30, 2011
June 15, 2007

The Bank of Fukuoka, Ltd.
Mitsui Life Insurance Co., Ltd.
Mitsui Life Insurance Co., Ltd.

3,000
5,000
2,000

27,93546,55918,6230.78375
1.50125
1.55

August 31, 2007
August 31, 2011
October 29, 2012

National Mutual Insurance Federationof Agricultural Cooperatives
Subtotal

5,000

46,5591.33125

November 1, 2011

Banking Co., Ltd.

Total

principal repayment:
June 23, 2008

Repayment of existing
short-term loans
Purchase of real estate
Repayment of existing
short-term loans
Purchase of real estate

51,000 474,904
114,000 1,061,551

5. BONDS ISSUED BY THE COMPANY
Our past investment corporation bond issues are as follows, as of March 31, 2005.
First issue of investment corporation bonds

Total principal amount of bonds
Issue priceInterest Rate
Closing Date
Guaranty
Redemption method/date¥25 billion ($233 million)¥100 ($0.93) (par value)
1.32% annually
June 21, 2002
Unsecured/unguaranteed
Principal redeemed in full on June 21, 2007
Cancellation upon repurchase may be made at any time.

Second issue of investment corporation bonds
Total principal amount of bonds¥10 billion ($93 million)

Issue price¥100 ($0.93) (par value)Interest Rate

0.69% annually

Closing Date

April 30, 2003

Guaranty

Unsecured/unguaranteed

Redemption method/datePrincipal redeemed in full on April 30, 2008
Cancellation upon repurchase may be made at any time.

Third issue of investment corporation bonds
Total principal amount of bonds¥10 billion ($93 million)

Issue price¥100 ($0.93) (par value)Interest Rate

0.98% annually

Closing Date

April 30, 2003

Guaranty

Unsecured/unguaranteed

Redemption method/datePrincipal redeemed in full on April 30, 2010
Cancellation upon repurchase may be made at any time.

36 Japan Real Estate Investment Corporation

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6. CAPITAL EXPENDITURES FOR EXISTING PROPERTIES
a. PLANNED CAPITAL EXPENDITURES
The following table represents the main capital expenditures planned for renovations of existing properties, as of March 31, 2005. The
total expected construction amount includes portions that will be accounted for as ordinary expenses.
Expected construction amounts
Total
Property (Location)

Nagoya Hirokoji Building(Nagoya, Aichi Prefecture)
Nippon Brunswick Building(Shibuya-ku, Tokyo)
Nippon Brunswick Building(Shibuya-ku, Tokyo)
Shibuya Cross Tower(Shibuya-ku, Tokyo)
Ikebukuro YS Building(Toshima-ku, Tokyo)

Objective

Estimated duration

Functional maintenance
From November(BEMS* work)
2004 to April 2005
Improve profitability (renewal
From May 2005 toof common areas [first phase])
September 2005
Improve profitability (renewal
From November 2005
of common areas [second phase]) to March 2006
Functional maintenance (first phase
From April 2005 towork on upgrading heating equipment) March 2006
Functional maintenance (air condiFrom October 2005
tioner renewal work [first phase])to March 2006

(Millionsof yen)(Thousands of
U.S. dollars)

Planned payment
for the period
under review

Previously
paid total

187

1,741

—

—

113

1,052

—

—

90

838

—

—

482

4,488

—

—

105

977

—

—

*Building Energy Management Systemb. CAPITAL EXPENDITURES DURING THE PERIOD ENDED MARCH 31, 2005
The following table represents the main capital expenditures for acquired properties during the period under review. Capital expenditures
amounted to ¥706 million ($6,574 thousand), with repairs and maintenance adding ¥471 million ($4,385 thousand) throughout the term
for a total of ¥1,178 million ($10,969 thousand).
Capital expenditures during the fiscal period under review were mainly for upgrading rooms for rent and other facilities in the
Takanawadai Building. Other real estate and related work included regular maintenance and refurbishments of toilets and lighting.
Property (Location)

Takanawadai Building(Shinagawa-ku, Tokyo)
Other properties
Total

Objective

Upgrades rooms
for rent

Construction amounts(Millions of yen)(Thousands of U.S. dollars)

Estimated duration

From October 2004
to October 2004

23

214

683
706

6,359
6,574

c. CASH RESERVES AT END OF PERIOD (RESERVES FOR CAPITAL IMPROVEMENTS)
In order to prepare for renovation of facilities useful for maintaining the value of properties for the future, the Company accumulates cash
reserves each period for capital improvements that will be conducted based on the medium- to long-term renovation strategy formulated
for each of the properties. Cash reserves over the period under review were as follows:(Thousands of
U.S. dollars)(Millions of yen)
For the period from
October 1, 2004 to
March 31, 2005

Reserve balance at the beginning of the period
Amount accumulated
Withdrawal from reserves
Amount carried forward

225
840
734
331

For the period from
April 1, 2004 to
September 30, 2004

155
824
754
225

For the period from
October 1, 2003 to
March 31, 2004

181
729
756
155

For the period from
April 1, 2003 to
September 30, 2003

316
695
830
181

For the period from
October 1, 2004 to
March 31, 2005

2,095
7,821
6,834
3,082

Japan Real Estate Investment Corporation 37

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Balance Sheets
As of March 31, 2005 and September 30, 2004

Thousands of yen

U.S. dollars (Note1)

As of March
31, 2005

As of September
30, 2004

As of March
31, 2005

ASSETS
Current Assets:
Cash and bank deposits¥ 29,361,925¥ 16,847,448$273,413,957

Rental receivables

35,27562,552

328,475

Consumption tax refundable

422,20338,222

3,931,495

Other current assets

200,129

251,197

1,863,574

30,019,532

17,199,419

279,537,501

Land

206,679,886

167,381,398

1,924,572,918

Buildings and structures

90,980,987

77,567,710

847,201,665

Machinery and equipment

1,538,663

1,400,385

14,327,803

Tools, furniture and fixtures

18,142

17,114

168,936

Construction in progress

5,500

5,500

51,215299,233,178

246,372,107

2,786,322,537(9,783,957)(8,149,448)(91,106,779)

289,439,221

238,222,659

2,695,215,758

Investment security

956,000—

8,902,132

Deposits

14,234

14,234

132,545

Long-term prepaid expenses

17,622

24,336

164,098

1,083,390

1,083,390

10,088,372

828,095

828,095

7,711,103

599

599

5,573

¥322,358,693¥257,372,732$3,001,757,082

Total current assets
Property and Equipment, at Cost:

Less accumulated depreciation
Net property and equipment
Investments and Other Assets:

Leasehold rights
Easement
Other
Total Assets
The accompanying notes form an integral part of these financial statements

38 Japan Real Estate Investment Corporation

JRE-財務8/25M新 05.9.12 10:36 AM ページ 39

Thousands of yen

As of March
31, 2005

U.S. dollars (Note1)

As of September
30, 2004

As of March
31, 2005

LIABILITIESCurrent Liabilities:
Trade accounts payable¥

708,285¥

251,066$

6,595,448

Other payables

714,368

718,385

6,652,093

Short-term loans

63,000,000

10,000,000

586,646,801

Accrued expenses

306,935

257,7102,858,135

Accrued income taxes

998

941

9,295

Rent received in advance

2,460,927

2,195,608

22,915,790

Other current liabilities

15,177

4,836

141,324

67,206,690

13,428,546

625,818,886

Investment corporation bonds

45,000,000

45,000,000

419,033,430

Long-term loans

51,000,000

44,000,000

474,904,554

Deposits from tenants

20,994,943

16,782,973

195,501,838

588,000

882,000

5,475,370

Total long-term liabilities

117,582,943

106,664,973

1,094,915,192

Total Liabilities

184,789,633

120,093,519

1,720,734,078

Total current liabilities

Long-Term Liabilities:

Other

SHAREHOLDERS’ EQUITY
Shareholders’ capital

133,448,380

133,448,380

1,242,651,830

Retained earnings

4,120,680

3,830,833

38,371,174

Total shareholders’ equity

137,569,060

137,279,213

1,281,023,004

Total Liabilities and Shareholders’ Equity¥322,358,693¥257,372,732$3,001,757,082

The accompanying notes form an integral part of these financial statements

Japan Real Estate Investment Corporation 39

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Statements of Income and Retained Earnings
For the six months ended March 31, 2005 and September 30, 2004

Thousands of yen

U.S. dollars (Note1)

For the period from
October 1, 2004 to
March 31, 2005

For the period from
April 1, 2004 to
September 30, 2004

For the period from
October 1, 2004 to
March 31, 2005

¥10,708,353¥10,104,095$ 99,714,619

39,52247,033368,025

10,747,875

10,151,128

100,082,644

Property-related expenses

5,258,142

5,135,869

48,963,050

Asset management fees

476,958

362,571

4,441,363

Administrative service fees

176,673

194,627

1,645,156

Operating Revenues and Expenses
Operating Revenues:
Rental revenues
Non-rental revenues

Operating Expenses:

Other operating expenses

134,242

99,1991,250,037

6,046,015

5,792,266

56,299,606

4,701,860

4,358,862

43,783,038

81

84

757

5,037

2,334

46,901

Interest expense

315,062

221,578

2,933,814

Interest expense on investment corporation bonds

248,500

248,500

2,313,996

Other non-operating expenses

21,81359,554203,120

Income before Income Taxes

4,121,603

3,831,648

38,379,766

1,015

958

9,446

Operating profits
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Other non-operating revenues
Non-Operating Expenses:

Income Taxes:
Current
Deferred

(3)

3

(27)

4,120,591

3,830,687

38,370,347

Retained Earnings brought forward

89

146

827

Retained Earnings at end of period¥ 4,120,680¥ 3,830,833$ 38,371,174

Net Income

The accompanying notes form an integral part of these financial statements

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Statements of Cash Flows
For the six months ended March 31, 2005 and September 30, 2004

Thousands of yen

U.S. dollars (Note1)

For the period from
October 1, 2004 to
March 31, 2005

For the period from
April 1, 2004 to
September 30, 2004

For the period from
October 1, 2004 to
March 31, 2005

Income before income taxes¥ 4,121,603¥ 3,831,648$ 38,379,766

Depreciation and amortization

1,641,471

1,657,320

15,285,141

12,844

2,321

119,598

Interest income

(81)

(84)

(757)

Interest expense

563,562470,078

5,247,810

27,277

10,235254,001

Consumption tax refundable(383,982)

71,513(3,575,581)

Prepaid expenses(19,063)

1,737(177,515)

Cash Flows from Operating Activities

Loss on retirement of property and equipment

Change in assets and liabilities
Rental receivables and other receivables

Other current assets(21,682)—(201,897)

Trade accounts payable

457,219(706,960)

4,257,554

Other payables(4,017)

153,309(37,405)

Rent received in advance

265,319

613,4542,470,609

Other current liabilities(357,534)

877,433(3,329,305)

6,713

7,118

62,5106,309,649

6,989,122

58,754,529

81

84

756

(514,337)(455,767)(4,789,433)(957)(1,014)(8,912)

5,794,436

6,532,425

53,956,940(52,705,185)(22,531,125)(490,782,988)

—

(54)

—

Purchases of investment security(956,000)—(8,902,132)

Proceeds from lease deposits received

4,989,274

1,613,366

46,459,396

Repayment of lease deposits(777,304)(1,744,264)(7,238,144)(49,449,215)(22,662,077)(460,463,868)

Proceeds from short-term borrowings

61,000,000

6,000,000

568,023,093

Repayment of short-term borrowings(8,000,000)(5,000,000)(74,494,832)

Proceeds from long-term borrowings

7,000,000

11,000,000

65,182,978Long-term prepaid expenses
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash Flows from Investing Activities
Purchases of property and equipment
Purchases of intangible assets

Net cash used in investing activities
Cash Flows from Financing Activities

Dividends to shareholders(3,830,744)(3,802,361)(35,671,333)

Net cash provided by financing activities

56,169,256

8,197,639

523,039,906

Net Increase (decrease) in Cash and Cash Equivalents

12,514,477(7,932,013)

116,532,978Cash and Cash Equivalents at beginning of Period

16,847,448

24,779,461

156,880,979¥ 29,361,925¥ 16,847,448$ 273,413,957

Cash and Cash Equivalents at end of Period
The accompanying notes form an integral part of these financial statements

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Statements of Changes in Shareholders’ Equity
For the six months ended March 31, 2005 and September 30, 2004

SharesBalance as of March 31, 2004
Cash dividends paid
Net income

Thousands of yen

260,400

137,250,887—(3,802,361)

U.S. dollars (Note1)—

3,830,687

260,400¥137,279,213$1,278,323,990

Cash dividends paid—

(3,830,744)(35,671,333)

Net income—

4,120,591

38,370,347

260,400¥137,569,060$1,281,023,004

Balance as of September 30, 2004

Balance as of March 31, 2005
The accompanying notes form an integral part of these financial statements

Notes to Financial Statements
March 31, 2005 and September 30, 2004

1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Japan Real Estate Investment Corporation (the “Company”) is a real estate investment corporation formed to own and invest primarily in a
portfolio of office properties. The Company is externally managed by a licensed asset management company, Japan Real Estate AssetManagement Co., Ltd. (“J-Rea”). J-Rea is currently owned 36% by Mitsubishi Estate Co., Ltd. (“MEC”), 27% by The Tokio Marine &Nichido Fire Insurance Co., Ltd. (“TMN”), 27% by The Dai-ichi Mutual Life Insurance Company (“DL”) and 10% by Mitsui & Co.,Ltd.
On May 11, 2001, the Company was incorporated with ¥200 million of original capital contribution by MEC, TMN and DL under the
Law Concerning Investment Trusts and Investment Corporations of Japan, or the Investment Trust Law.
On September 10, 2001, the Company commenced operations when the Company was listed on the Tokyo Stock Exchange as one of thefirst real estate investment corporations in Japan (so-called “J-REITs”). The Company issued 160,000 shares at a price of ¥525,000,
generating gross proceeds of ¥84,000 million. The proceeds from the offering of the shares, net of underwriters’ discount, were ¥81,060
million.
On May 8, 2002, the Company completed a second offering of 65,000 shares at a price of ¥ 490,980, generating gross proceeds of ¥ 31,914
million. The proceeds from the offering of the shares, net of underwriters’ discount, were ¥30,892 million.
On June 21, 2002, the Company issued ¥25,000 million of unsecured investment corporation bond due June 2007 with an interest rate of
1.32% to the qualified investors.
On April 30, 2003, the Company issued ¥10,000 million of unsecured investment corporation bond due April 2008 with an interest rate of
0.69% to the qualified investors and ¥10,000 million of unsecured investment corporation bond due April 2010 with an interest rate of
0.98% to the qualified investors.
On October 25, 2003, the Company completed a third public offering of 35,000 shares at a price of ¥629,000, generating gross proceeds of¥22,015 million. The proceeds from the offering of the shares, net of underwriters’ discount, were ¥21,296 million. As of March 31, 2005,
September 30 and March 31, 2004, the Company had total shareholders’ equity of ¥133,448 million with 260,400 shares.
At March 31, 2005, the Company owned a portfolio of 46 office properties concerning an aggregate of approximately 336,026 square
meters of leasable area.
Basis of presenting financial statements
The Company maintains its accounting records and prepares its financial statements in accordance with accounting principles generally
accepted in Japan (“Japanese GAAP”), including provisions set forth in the Investment Trust Law, the Japanese Commercial Code, theSecurities and Exchange Law of Japan and the related regulations, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
The accompanying financial statements are a translation of the audited financial statements of the Company, which were prepared inaccordance with Japanese GAAP and were presented in the Securities Report of the Company filed with the Kanto Local Finance Bureau.
In preparing the accompanying financial statements, certain reclassifications and modifications have been made to the financial statements

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issued domestically in order to present them in a format that is more familiar to readers outside Japan. In addition, the notes to financial
statements include information that might not be required under Japanese GAAP but is presented herein as additional information.
Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥107.39=US$1.00, the foreignexchange rate on March 31, 2005, has been used for translation. The inclusion of such amounts is not intended to imply that Japanese yen
has been or could be readily converted, realized or settled into U.S. dollars at that rate or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESInvestment Security
Non-marketable security classified as other security is carried at cost. Cost of security sold is determined by the moving average method.
Property and equipment
Property and equipment is stated at cost, less accumulated depreciation. The costs of land, buildings and building improvements include
the purchase price of property, legal fees and acquisition costs. Depreciation is calculated on a straight-line basis over the estimated useful
lives of the assets ranging as stated below:
Buildings .............................................................................................................2–61 years
Structures ............................................................................................................5–49 years
Machinery and equipment...................................................................................3–18 years
Tools, furniture and fixtures ................................................................................3–15 years
Expenditures for repairs and maintenance are charged to operations as incurred. Significant renewals and betterments are capitalized.
Revenue recognition
Revenues from leasing of office space are recognized as rent accrued over the lease period.
Taxes on property and equipment
Property and equipment is subject to property taxes and city planning taxes on a calendar year basis. These taxes are generally charged to
expense during the period. The sellers of the properties were liable for property taxes for the calendar year including the period from thedate of purchase by the Company through the end of the year since the taxes are imposed on the owner registered in the record as ofJanuary 1 based on the assessment made by the local government. The Company paid the amount equivalent to the property taxes to thesellers applicable to the period since acquisition and included the amount equivalent to the taxes in the purchase price of each property andcapitalized as cost of the property.
Consumption taxes
Consumption taxes withheld and consumption taxes paid are not included in the statements of income. The consumption taxes paid are
generally offset against the balance of consumption taxes withheld. As such, the excess of payments over amounts withheld are included in
the current assets and the excess of amounts withheld over payments are included in the current liabilities.
Cash and cash equivalents
Cash and cash equivalents consists of cash on hand, deposits placed with bank and short-term investments which are highly liquid, readily
convertible to cash and with insignificant risk of price fluctuation, with original maturity of three months or less.

3. INVESTMENT SECURITY
Investment security recorded at cost at March 31, 2005 is summarized as follows:

Other securities
Non-listed stockThousands of yen

U.S. dollars

As of March
31, 2005

As of March
31, 2005¥956,000$8,902,132

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4. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2005 and September 30, 2004 consisted of the following:Thousands of yen

As of March 31, 2005
Acquisition Costs

Land

66,547,731

Accumulated depreciation

5,764,875

Machinery and equipment

894,455

Accumulated depreciation

256,051

Tools, furniture and fixtures

8,516

Accumulated depreciation

1,917

Construction in progress

Book Value¥150,012,421 ¥150,012,421

Buildings and structures

U.S. dollars

As of September 30, 2004
Acquisition Costs

As of March 31, 2005

Book Value

Acquisition Costs

Book Value¥110,713,933 ¥110,713,933 $1,396,893,761 $1,396,893,761
53,247,662

60,782,856

4,644,484

638,404

207,184

619,682,749
48,603,178

53,681,669

548,9932,384,306

756,177

8,329,035

7,488
6,599

566,001,080
5,944,729

79,296

1,391

6,097

17,86461,432

5,500

5,500

5,500

5,500

51,215

51,215Land in trust

56,667,465

56,667,465

56,667,465

56,667,465

527,679,157

527,679,157

Buildings and structures in trust

24,433,256

Accumulated depreciation

3,502,182

Machinery and equipment in trust

644,208

Accumulated depreciation

257,472

Tools, furniture and fixtures in trust

9,626

Accumulated depreciation

1,460

Total

24,320,048
20,931,074

3,071,981

386,736

223,370

227,518,916
21,248,067

32,611,804

420,838

2,397,540

644,208

5,998,768

9,626
8,166

3,601,228

89,6401,038¥289,439,221

194,907,112

8,588

13,596¥238,222,659

76,044$2,695,215,758

5. SHORT-TERM LOANS
Short-term loans at March 31, 2005 and September 30, 2004 consisted of the following:Thousands of yen

U.S. dollars

As of March
31, 2005

As of September
30, 2004—¥ 4,000,000—

4,000,000—

Unsecured loans from a bank and a trust bankwith variable interest, due on May 11, 2005

27,000,000—

251,420,058

Unsecured loans from banks and another financial institution
with variable interest, due on May 18, 2005

17,000,000—

158,301,518

Unsecured loans from banks with variable interest,
due on May 24, 2005

4,000,000—

37,247,416

Unsecured loan from a trust bank with variable interest,
due on May 31, 2005

11,000,000—

102,430,393

Unsecured loan from a bank with variable interest,
due on June 15, 2005

2,000,000

2,000,000

18,623,708

Unsecured loans from banks and trust bankswith variable interest, due on October 29, 2004
Unsecured loans from banks with variable interest,
due on March 24, 2005

Unsecured loan from a bank with variable interest,
due on October 29, 2005¥

As of March
31, 2005$—

2,000,000—

18,623,708¥63,000,000¥10,000,000$586,646,801

The weighted average interest rates applicable to the bank loans at March 31, 2005 and September 30, 2004 were 0.30442% and0.45014%, respectively, per annum.

44 Japan Real Estate Investment Corporation

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6. LONG-TERM LOANS
Long-term loans at March 31, 2005 and September 30, 2004 consisted of the following:Thousands of yen

U.S. dollars

As of March
31, 2005

As of September
30, 2004

As of March
31, 2005¥24,000,000¥24,000,000$223,484,496

0.90875% unsecured loan from a bank,due on June 15, 2007

3,000,000

3,000,000

27,935,562

0.78375% unsecured loan from a bank,due on August 31, 2007

3,000,000

3,000,000

27,935,562

1.0575% unsecured loan from a bank,due on March 24, 2009

2,000,000

2,000,000

18,623,708

1.015% unsecured loan from an insurance company,
due on March 30, 2009

5,000,000

5,000,000

46,559,270

1.47125% unsecured loan from an insurance company,
due on March 30, 2011

2,000,000

2,000,000

18,623,708

1.50125% unsecured loan from an insurance company,
due on August 31, 2011

5,000,000

5,000,000

46,559,270

1.55% unsecured loan from an insurance company,
due on October 29, 2012

2,000,000—

18,623,708

1.33125% unsecured loan from another financial institution,
due on November 1, 2011

5,000,000—

46,559,270¥51,000,000¥44,000,000$474,904,554

1.120% secured loans from banks, trust banks,
and an insurance company, due on June 23, 2006

The weighted average interest rates applicable to the loans at March 31, 2005 and September 30, 2004 were 1.136% and 1.116%,
respectively, per annum.

7. SECURED ASSETSAt March 31, 2005 and September 30, 2004, the following assets were pledged as collateral for the following loans:Thousands of yen

U.S. dollars

Pledged assets:

As of March
31, 2005

As of September
30, 2004

As of March
31, 2005

Bank deposits¥ 7,854,568¥ 8,054,808$ 73,140,588

Land and leasehold rights

47,765,093

47,765,093

444,781,573

Buildings and structures

16,398,223

16,636,468

152,697,854

Machinery and equipment

327,143356,326

3,046,306

Tools, furniture and fixtures

8,166

8,589

76,045¥72,353,193¥72,821,284$673,742,366

Total

Thousands of yen

Loans secured by the pledged assets:Long-term loans

U.S. dollars

As of March
31, 2005

As of September
30, 2004

As of March
31, 2005¥24,000,000¥24,000,000$223,484,496

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8. SHAREHOLDERS’ EQUITYThe Company is required to maintain net assets of at least ¥50 million ($465 thousand), as required pursuant to the Investment Trust
Law.

9. INCOME TAXESAt March 31, 2005, and September 30, 2004, the Company’s deferred tax assets consist mainly of the enterprise tax, which is notdeductible for tax purposes. The reconciliation of tax rate difference between the adjusted statutory tax rate and the effective tax rate forthe six months ended March 31, 2005 and September 30, 2004 were as follows:
For the period from October 1, 2004
to March 31, 2005

For the period from April 1, 2004
to September 30, 2004

Statutory tax rate ...................................................................................39.39% ............................................39.39%
Deductible dividend distribution ..........................................................(39.38%)..........................................(39.38%)
Others .....................................................................................................0.01% ..............................................0.02%
Effective tax rate......................................................................................0.02% ..............................................0.03%
The Company is subject to Japanese corporate income taxes on all of its taxable income. However, under the Special Taxation
Measures Law of Japan, or the STML, an investment corporation is allowed to deduct dividends of accounting profits, or dividend
distributions, paid to investors from its taxable income if certain tax requirements are satisfied. Such tax requirements include
dividend distributions in excess of 90% of its taxable income for the fiscal period as stipulated by Article 67-15 of the STML.
Based on the distribution policy provided by Article 32-2 of the Articles of Incorporation, the Company made a dividend
distribution of approximately 100% of retained earnings in the amount of ¥4,120 million ($38,370 thousand) subsequent to March
31, 2005 and treated it as tax deductible dividend. The Company will not distribute the dividends in excess of accounting profit
under Article 32-3 of the Articles of Incorporation.

10. PER SHARE INFORMATION
The following table summarizes information about net assets per share and net income per share at March 31, 2005 and September 30,
2004, and for the periods then ended:Yen

For the period
from October 1, 2004
to March 31, 2005

U.S. dollars

For the period
from April 1, 2004
to September 30, 2004

For the period
from October 1, 2004
to March 31, 2005

Net assets at period end per share¥528,299¥527,185$4,919Net income per share¥ 15,824¥ 14,711$ 147

In calculating the net assets per share, the amount of the net assets is adjusted for the cash distribution declared in the subsequent period.
Net income per share is computed by dividing net income by the weighted average number of shares outstanding during each period.
Diluted net income per share has not been presented since no warrants or convertible bonds were outstanding during the period.

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11. RELATED PARTY TRANSACTIONSThe Company entered into the following related party transactions with MEC and certain affiliates of MEC, TMN, and Mitsui & Co.,
Ltd.
Thousands of yen

For the period
from October 1, 2004
to March 31, 2005

Property management fees

U.S. dollars

For the period
from April 1, 2004
to September 30, 2004

For the period
from October 1, 2004
to March 31, 2005

¥657,950¥665,649$6,126,736

Utilities

65,52874,188610,188

Insurance

57,2781,133

533,365

Other operating expenses

1,889

7,385

17,587

Repair and maintenance¥198,557¥276,685$1,848,931

12. BREAKDOWN OF PROPERTY-RELATED REVENUES AND EXPENSES
For the six months ended March 31, 2005 and September 30, 2004
Thousands of yen

U.S. dollars

For the period
from October 1, 2004
to March 31, 2005

For the period
from April 1, 2004
to September 30, 2004

For the period
from October 1, 2004
to March 31, 2005

Property-Related Revenues¥10,747,875¥10,151,128$100,082,644

Rental Revenues

10,708,353

10,104,095

99,714,619

Rental revenues

7,785,264

7,315,510

72,495,236

Common area charges

1,791,597

1,695,221

16,683,091

Parking revenues

412,547

397,299

3,841,580

Other rental revenues

718,945

696,0656,694,712

39,52247,033368,025

Cancellation charges

20,54015,088191,267

Other miscellaneous revenues

18,982

31,945

176,758

5,258,142

5,135,869

48,963,050

1,277,345

1,234,174

11,894,453

Utilities expenses

855,487

878,772

7,966,171

Property and other taxes

937,696936,742

8,731,687

Casualty insurance

27,864

27,130259,463

Repairs and maintenance471,973363,595

4,394,940

1,641,471

1,657,320

15,285,141

46,30638,136431,195¥ 5,489,733¥ 5,015,259$ 51,119,594

Non-Rental Revenues

Property-Related Expenses
Property management fees

Depreciation
Other rental expenses
Profits

Japan Real Estate Investment Corporation 47

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13. LEASESThe Company owns office buildings under leases and earns rent income. As of March 31, 2005 and September 30, 2004, the future lease
revenues under the non-cancelable operating leases are as follows:
Thousands of yen

Due within one year

U.S. dollars

As of March
31, 2005

As of September
30, 2004

As of March
31, 2005¥ 6,297,045¥ 5,832,804$ 58,637,161

Due after one year

20,166,472

22,169,112

187,787,247

Total¥26,463,517¥28,001,916$246,424,408

14. SUBSEQUENT EVENTSIssuance of additional shares
Based on the approval by the Board of Directors’ meeting held on April 4, 2005, the Company completed a public offering of 85,000
additional shares on April 26, 2005, at an offer price of ¥826,000 ($7,691) per share, or ¥70,210 million ($653,785 thousand) in total. The
proceeds from the public offering, net of underwriters’ discount, were ¥68,024 million ($633,434 thousand) at an issue price of ¥800,288($7,452). As a result of the issuance of additional shares, the Company has shareholders’ capital of ¥201,472 million ($1,876,086
thousand) with 345,400 shares at April 26, 2005.
Appropriation of retained earnings
On May 18, 2005, the Board of Directors resolved to effect the payment of a cash distribution of ¥15,824 per share aggregating ¥4,120
million ($38,370 thousand) to shareholders at the record date of March 31, 2005.

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Japan Real Estate Investment Corporation 49

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About J-REIT System

J-REIT STRUCTURE AND RELATED ORGANIZATIONS
The organizational structure of the Company is shown in the diagram on the next page, but we feel it would be helpful to add a further
explanation of the role played by each of the related organizations. Understanding this relationship is the key to understanding the overall
J-REIT system. (Numbers in the diagram correspond to the numbers below.)1) Investment Corporation: A special type of entity for the specific purpose of owning and operating real estate properties
The investment corporation is a special type of entity, incorporated and operated under the Investment Trust Law, for the purpose ofowning and operating real estate properties using capital raised from investors. It has a board of directors and shareholders’ meeting justlike an ordinary corporation under the Commercial Code of Japan, but since this structure of the investment corporation is simply a vehicle
for owning and operating real estate properties, it is not permitted under its articles of incorporation to engage in any other businessactivities.
The principal responsibility of the investment corporation is custody and management of its assets, as well as issuance of equity
securities. The corporation does not, however, control its assets directly, as all management functions must be outsourced to a licensed
asset management company.
2) Tokyo Stock Exchange & 3) Investors: Buy and sell the Company’s shares, and receive dividends.
Investors provide capital for the investment corporation and receive equity securities, just as they would receive shares of stock issued by an
ordinary corporation. Dividends are also paid to shareholders of record at the end of the fiscal period. Investors may also buy and sell theequity securities on the Tokyo Stock Exchange just like shares of an ordinary corporation, and the same trading regulations apply.
4) Asset Management Company: Real estate trust fund manager
The investment corporation may not manage its assets by itself, but must outsource the investment decision and administration work to an
asset management company. The asset management company, therefore, performs a vital role for the real estate investment corporation.
The asset management company is normally involved with the investment corporation from the time of its incorporation, andafterwards performs the role of fund manager for the real estate properties on consignment from the investment corporation. The asset
management company must have a good grasp of the properties held by the investment corporation, and manage the assets to achieve
higher earnings. As necessary, it will sell off some of the assets or acquire new ones.
In this way, the asset management company performs a series of duties in accordance with the Investment Trust Law.
5) Asset Holding Company/Administration Outsourcer
The investment corporation consigns the property holding function (physical possession of the property deeds) or trust beneficiary
certificates to trust banks or similar organizations. Administrative functions such as the transfer of share certificates are also outsourced totrust banks or securities companies, just like for shares of ordinary corporations.
6) Property Management Companies
The primary responsibility of the property management companies is to manage the maintenance and leasing of buildings. Building
maintenance involves proper upkeep of the property to ensure long-term profitability for the investment corporation, and leasing services
include monthly invoicing for rents and negotiating contract renewals.

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ORGANIZATIONAL STRUCTURE OF JAPAN REAL ESTATE INVESTMENT CORPORATION

2) Tokyo Stock Exchange
4) Asset Management
Company
3) Investors

Shareholders’ Meeting
Japan Real Estate AssetManagement Co., Ltd.

Trade

Investors

Asset managementagreement
Cashdistribution

Trade

Stock
1) Investment Corporation
Investment

Investors

Instruction
Loans
Japan Real Estate Investment
Corporation

Interest
payments

Board
Property management
outsourcing
Rental revenue

Financial Institutions(Qualified institutional
investors)

Investment
Asset custodyoutsourcing
Administration
outsourcing

6) Property Management
Companies

Real estate
management

Office Buildings

5) Asset Holding
Company /Administration
Outsourcer
The Sumitomo Trust &Banking Co., Ltd.

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ROLE OF SHAREHOLDERS IN THE J-REIT SYSTEM
Set out below, in further detail, is the role shareholders of the investment corporation play in the J-REIT system. In particular, we would
like to present a description of certain principal rights of the shareholders of an investment corporation under the Investment Trust Law,
which is in effect as of March 31, 2005. This summary does not purport to be a comprehensive description of all of the rights of theshareholders under Japanese law that may be relevant to an investment decision on the shares of the Company.
Voting Rights — A shareholder with one or more shares is entitled to one vote for each share. Except as otherwise provided by law or by
the Articles of Incorporation, a resolution can be adopted at a general meeting of shareholders by a majority vote cast in writing or throughproxies who are also shareholders. Shareholders who do not attend and/or do not exercise their voting rights at the general meeting ofshareholders will be deemed to be in agreement with proposals submitted at the meeting.
Except in certain minor circumstances, the voting rights of shareholders apply to the following resolutions:Appointment and dismissal of executive director, supervisory directors and independent auditors; approval of the execution or
termination of the asset management agreement with an asset management company; consolidation of shares; mergers; dissolution;
amendment to the Articles of Incorporation; and any other matters so required by the Investment Trust Law, any other law or the
Articles of Incorporation.
Other Rights of Shareholders —In addition to the rights set out above, shareholders have the following rights:
Dividends upon resolution of the board of directors;
Derivative action;
Right to sue for annulment of resolutions;
Right to request bar on the executive director to prevent misconduct;
Right to void newly issued shares;
Right to sue for the nullification of merger;
Right to make submissions to shareholders’ meetings;
Right to convene a general meeting of shareholders;
Right to request the appointment of an inspector;
Right to request the removal of directors;
Right to request for the dissolution of an investment corporation; andRight to inspect books.
Consolidation or Split of Shares — An investment corporation may (i) consolidate shares upon resolution of the general meeting ofshareholders, or (ii) split shares into a greater number of shares upon resolution of the board of directors.
No Redemption/Repurchase of Shares — As an investment corporation is a closed-end J-REIT, shareholders are not entitled to request
for redemption/repurchase of their shares from an investment corporation.
Issue of Additional Shares and Subscription Rights — Shareholders have no pre-emptive rights with respect to issuance of additional
shares. Shares may be issued at the times and upon the terms approved by resolution of the board of directors.
Liquidation — In the event of liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be
distributed among the shareholders in proportion to the numbers of shares held.

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Profile of J-Rea (Asset Management Company)

ORGANIZATION
Shareholders’ Meeting
Auditors
Board of Directors

CEO & President

Compliance Department

Risk Management Department

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION*Duties related to compliance
DUTIES PERFORMED FOR J-Rea*Duties related to compliance

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION*Duties related to risk management
DUTIES PERFORMED FOR J-Rea*Duties related to risk management

Planning Department

Finance and Accounting Department

Real Estate Investment Department

Leasing Management Department

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Investor relations and disclosure
DUTIES PERFORMED FOR J-Rea* Planning and drafting ofmanagement strategies* General, labor and accounting
administration* In-house legal affairs* Negotiation with government
agencies and related groups* Research and analysis of realestate market

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Formulation of financing strategy* Equity financing* Debt financing* Cash management* Accounting and taxation

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION* Acquisition and disposal of realestate assets

DUTIES PERFORMED FOR JAPAN REALESTATE INVESTMENT CORPORATION
Leasing and management of realestate assets

PRINCIPAL SHAREHOLDERS

Shareholder

Address

Mitsubishi Estate Co., Ltd.

6-1, Otemachi 1chome, Chiyoda-ku, Tokyo

The Tokio Marine & Nichido Fire Insurance Co., Ltd. 2-1, Marunouchi 1chome, Chiyoda-ku, Tokyo

Numbers of Shares

Percentage

102,855

36%

77,142

27%

The Dai-ichi Mutual Life Insurance Company

13-1, Yurakucho 1chome, Chiyoda-ku, Tokyo

77,14227%

Mitsui & Co., Ltd.

2-1, Otemachi 1chome, Chiyoda-ku, Tokyo

28,571

10%

Total

285,710

100%

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Corporate Data
As of March 31, 2005

Executives (As of May 11, 2005)

Transfer Agent

Executive Director:

Taketo Yamazaki

The Sumitomo Trust & Banking Co., Ltd.

Supervisory Directors:

Kenji Kusakabe

5-33, Kitahama 4chome, Chuo-ku, Osaka 540-8639, Japan

Tomohiro Okanoya
Auditors
Paid-in Capital

Ernst & Young ShinNihon¥133,448,380,000

Hibiya Kokusai Bldg.
2-3, Uchisaiwaicho 2chome, Chiyoda-ku, Tokyo 100-0011, Japan

Number of Shares Issued
260,400

Incorporation
May 11, 2001

Number of Shareholders
15,219

Executive Office
Japan Real Estate Investment Corporation

Stock Listing

3-1, Marunouchi 3chome, Chiyoda-ku, Tokyo 100-0005, JapanTokyo Stock Exchange
For further information, please contact :Securities CodeJapan Real Estate Asset Management Co., Ltd.

8952

Planning Department, Manager
Toshiya Kobayashi
Tel: 81-3-3211-7921
Fax: 81-3-3212-8886
E-mail: toshiya-kobayashi@j-rea.co.jp

54 Japan Real Estate Investment Corporation

pdf 05.9.12 10:46 AM ページ 4

This semiannual report includes translations of documents originally filed under the Securities and Exchange Law of Japan. This report was prepared in English
solely for the convenience of readers outside Japan and should not be considered as a disclosure statement. The original Japanese documents shall take precedence
in the event of any discrepancies arising from the translations or interpretations contained in this report.
Estimates for Japan Real Estate Investment Corporation’s future operating results contained in this semiannual report are forward-looking statements and are basedon information currently available to the Company and its asset management company and are subject to risks and uncertainties. Consequently, these projections
should not be relied upon as the sole basis for evaluating Japan Real Estate Investment Corporation. Actual results may differ substantially from the projections
depending on a number of factors.

pdf 05.9.12 10:46 AM ページ 1

http://www.j-re.co.jp

Printed in Japan