November 18, 2005
JAPAN REAL ESTATE INVESTMENT CORPORATIONANNOUNCEMENT OF EIGHTH FISCAL PERIOD RESULTS
1. Summary of Financial Results
In the eighth fiscal period (six months ended September 30, 2005), Japan Real Estate
Investment Corporation (“JRE”) recorded operating revenues of 13,119 million yen, up
22.1 percent from the previous period. Operating profits rose 32.4 percent to 6,226
million yen. After deducting expenses for interest payments on borrowings, fees for theissue of additional investment units and other administrative costs, recurring profit
increased 33.7 percent to 5,510 million yen and net income advanced 33.7 percent to5,509 million yen.
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. For the period under review, we declared a cash dividend of 15,951 yen per
unit.
2. Results of Operations(1) Property Management and Acquisition
During the period under review, the Japanese economy remained on track for arecovery, with inventory adjustments in IT-related fields primarily coming to afinish, strong capital investment and resilient consumer spending. A number of
uncertainties, however, including steep crude oil prices, slowed down the pace ofthe economic recovery.
The market for leased office space received support from a recovery in corporate
performance, while improved vacancy rates led to signs of an improvement in rents
at some office buildings in central Tokyo. In areas surrounding metropolitan Tokyoand in regional urban centers, however, overall business conditions remained
difficult in spite of signs of improvements in the balance of supply and demand, andtime is still needed for a full-fledged recovery.
JRE attained a record occupancy rate of 98.6% (as of September 30, 2005) by (1)acquiring top-level properties and upgrading building facilities through optimalrefurbishment in order to maintain and improve functions; and (2) developing
finely tuned building management policies from the perspective of tenants whileundertaking vigorous sales activities. JRE is working to reduce costs with a view tofurther enhancing profit stability. Our basic policy is to lower property management
fees and utility expensed 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 sixth
fiscal period (six months ended September 2004), thirty-nine properties are subject
to this cost reduction program. We have already reduced costs of those properties
by 12.9 percent per year, based on the results of our seventh and eighth fiscal
periods (October 2004 to September 2005).
Regarding the property market, bad-debt write-offs by financial institutions andthe adoption of asset-impairment accounting have helped sustain active property
sales. At the same time, in addition to Japanese Real Estate Investment Trusts(J-REITs), such entities as private funds, pension funds and institutional investors
are stepping up their acquisition of real estate, and competition to acquire prime
properties in urban centers intensified.
In this sort of market environment, JRE uses its own information network tocollect data on the sales of numerous properties. We have made acquisitions basedon meticulous examination of these data, and after determining optimal prices frommany perspectives, including profit stability of the entire company and expected
rates of return. During the period under review, JRE not only participated in fierce
bidding competitions, but also focused on leveraging its own information network
to engage in one-on-one transactions. As a result of the above factors, JRE’s assets
as of September 30, 2005 consisted of 50 office buildings with a total value of
326,560 million yen, net rentable floor area of 364,610 m2 (approximately 110,000
tsubo), and a total of 742 tenants.
(2) Finance Activities
Flexible funding procurement is important in the property acquisition business.
Raising equity and constructing a sound financial foundation helps to assure
capacity to receive loans and to further expand investment assets. While issuing
additional investment units is indispensable to JRE’s growth, it must be done after
careful consideration of financial market environments and acquisition plans, andoptimal timing and scale of the issue is essential.
During the fiscal period under review, JRE issued additional investment units
through a third follow-on. Through the issue of 85,000 additional investment units,
JRE raised 68,024 million yen on April 26, 2005. As of September 30, 2005, JRE’s
total outstanding investment units numbered 345,400, with a total unitholder capitalof 201,472 million yen.
In addition, with the aim of diversifying fund procurement methods, in July 2005
JRE registered its intention to conduct a public issue of investment corporation
bonds with a maximum limit of 100 billion yen. After this, based upon anassessment of risks related to future interest rates and further fund procurements,
and based upon the earlier registration, on September 29, 2005 JRE became the first
J-REIT to issue 20-year investment corporation bonds for a value of 10 billion yen.
Overview of Issue Registration
Maximum limit of issue

Within 100 billion yen

Date of issue registration

July 28, 2005

Planned period of issue

From August 5, 2005 to August 4, 2007

Overview of 20-Year Investment Corporation Bonds
Name of Investment Corporation BondJapan Real Estate Investment Corporation
Fourth Unsecured Bond (No finance-related
special covenants, such as negative pledge)

Total amount of the bond issue

10 billion yen

Issue date

September 29, 2005

Maturity

20 years

Coupon rate on the bond

2.56% per annum

Subscription method

Public offering

Secured mortgage or guarantee

There is no secured mortgage or guaranteeon the bond.

Through the issue of additional investment units, JRE repaid 59,000 million yen
in short-term loans in May 2005. In addition, JRE secured short-term loans of 3,000
million yen on July 29, 2005 in relation to the acquisition of the Burex Kojimachi
Building, and of 9,000 million yen on September 13, 2005 in relation to theacquisition of the Tokyo Opera City Building.
As a result of the above factors, on September 30, 2005 JRE had total interest
bearing debt of 122,000 million yen, including 16,000 million yen in short-termloans (down 47,000 million yen from the previous fiscal period), 24,000 million
yen in the current portion of long-term borrowings (up 24,000 million yen from theprevious fiscal period), 27,000 million yen in long-term loans (down 24,000 million
yen from the previous fiscal period), and outstanding investment corporation bonds
with a par value of 55,000 million yen (up 10,000 million yen from the previousfiscal period).
JRE has received the following credit ratings.
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 Rating: AA
Information, Inc.
(3) General Meeting of Investors Held
JRE held its third general unitholders’ meeting on May 10, 2005. At the meeting,
the Corporation’s proposals for amendments to the Articles of Incorporation and forthe election of executive directors and supervisory directors were passed in their
original form with a majority approval by the unitholders.
3. Outlook(1) Operating Environment
Despite expectations for a sustained recovery in the Japanese economy, uncertainties
remain concerning further increases in crude oil prices and the direction of the U.S.
and Chinese economies.
In the office building leasing market, vacancy rates in central Tokyo are improving
and a portion of office buildings have seen increases in rents, and the overall market
continues to show signs of recovery. At the same time, when the overall market isviewed on a nationwide level, property selection is evolving in terms of location,building features and management services, and trends toward a bipolarization of themarket 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 andvalue-added services. For these reasons, tenants have become more and more
discriminating when selecting buildings. It is anticipated that providing services that
correctly and promptly reflect the needs of tenants and deliver added value thatdifferentiates their buildings from the competition will become even more importantfor suppliers.
In the real estate market, properties will continue being sold to settle bad debts anddue 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.
① Property Management
In accordance with the aforementioned, we are projecting that conditions in the officebuilding leasing market will remain uncertain, despite expectation for full-fledged
recovery. JRE is adopting the following management policies in order to maintainand improve earnings.
(i) Strengthen relationships of trust with existing tenants
As of September 30, 2005, JRE had contracts with eleven property managementcompanies. Most of these companies were already managing their respective
buildings before they were acquired by JRE, and so have built relationships of trustwith their tenants. Strengthening these relationships by anticipating tenants’ needs
and providing tailored services helps increase tenant satisfaction, prevent cancellationof contracts, reduce turnover, and curb demands for reduced rents.
(ii) Fill vacancies promptly
In cooperation with the property management companies mentioned above, JRE
actively seeks the best tenants for each property, based on location and features, inorder to fill current and anticipated vacancies as rapidly as possible. We are also
working to uncover additional demand for office floor space among our existing
tenants.
(iii) Stabilize revenues
With the aim of stabilizing revenues, JRE is gradually shifting to fixed-term andlong-term leasing agreements with its large-scale tenants.
(iv) Reduce management costs
JRE has introduced sound competitive principles for its eleven property managementcompanies to follow. Those companies are also revamping their management systems
and cost structures. Regarding the properties held by JRE as of the end of the fiscal
period, our target is to reduce the sum of property management fees and utility
expenses by 5 percent within three years of acquisition.
② Property Acquisition
JRE has adopted the following policies for acquiring properties in order to improveearnings through steady asset expansion and growth.
(i) To access important information quickly, JRE is enhancing its property
information channels, including strengthening its relationship with building owners
with whom it has previously conducted business. We are also working to develop
new channels.
(ii) In its acquisition activities, JRE will continue to meticulously monitor andexamine economic, physical, and legal factors, including rights-related issues. We
will also take business conditions into account when selecting properties. With regard
to the structure of buildings, we require buildings to meet or exceed newearthquake-resistance standards, and we are targeting properties capable ofmaintaining a competitive edge over the medium and long terms.
(iii) JRE’s general target for regional diversity of property ownership, in accordancewith its acquisition policies, is for 70 percent or more of properties to be locatedwithin the Tokyo metropolitan area, with the remaining 30 percent or less located inregional urban centers.
The appropriate timing for property acquisition cannot be ascertained in advance.
When funding property acquisition, therefore, JRE's policy is to take out short-termloans at the time of purchase and later select various options for capital procurement,
including corporate unit issues, according to trends in financial markets. Whenaffecting a loan, our policy is to minimize funding costs by negotiating with several
qualified institutional investors before settling on a lender.
(2) Performance Forecasts
Based on investment conditions, in the six-month period from October 1, 2005 to
March 31, 2006 (the 9th Fiscal Period) we forecast operating revenues of 13,820
million yen, recurring profits of 5,510 million yen and net income for the period of
5,510 million yen. We plan to declare a dividend of 15,950 yen per unit.
Our forecasts for the 10th fiscal period (April 1, 2006 to September 30, 2006) are
operating revenues of 14,700 million yen, recurring profit of 5,300 million yen, net
income of 5,300 million yen, and cash dividends of 15,300 yen per unit.
The above estimates in the 9th and 10th periods are based on conservative
assumptions of the portfolio of 50 properties as of September 30, 2005, and theKitanomaru Square on February 24, 2006 and Sanno Grand Building (additional
share) on April 3, 2006. These estimates are also based on 345,000 investment units
outstanding as of September 30, 2005.
As of September 30, 2005, JRE plans to acquire the properties, as described below.

1.

Kitanomaru Square

Transaction Summary:
Asset to be acquired: Trust beneficiary right in trust of real estate
Acquisition price: 81,555.5 million yen
Scheduled date of acquisition: February 24, 2006
Property Summary
Location: 1-13-12 Kudan Kita, Chiyoda-ku, Tokyo
Use: Offices, apartment complex, shops, parking lot
Land Area: 5,821.03 m2
Floor Area: 58,969.18 m2
Structure: Steel-framed and partially steel-reinforced concrete structure, 26 floors
above ground and two floors below ground
Completion date: End of January 2006 (projected)
Tenants: Offices and shops: 5, Residences: To be determined
Leasable floor space: Offices and Shops: 25,637 m2, Residences: 11,694 m2
Leased area: Offices and shops: 25,637 m2, Residences: To be determined
Occupancy rate: Offices and shops: 100%, Residences: To be determined
Notes:
1. The figures for the total number of tenants, leasable area, leased area and occupancy rates
are projected by the acquisition date of February 24, 2006. The figures for the leasable areaand leased area are based on the plan at the time of receipt of the certificate of confirmation.
The figures are based on the data provided from the seller.
2. For the residential space, a master lease agreement will be concluded between a property
management company, which has experience in luxurious condominium rental business.

2.

Sanno Grand Building (additional share)

Transaction Summary:
Asset to be acquired: Real estate (ownership rights in land and building; share of
co-ownership for both land and building: 49%)
Acquisition Price: 10,700 million yen
Scheduled date of acquisition: April 3, 2006
Property Summary:
Location: 2-14-2 Nagatacho, Chiyoda-ku, Tokyo
Use: Offices
Land Area: 3,663.93 m2 (total land area for the building site)
Floor area: 33,875.95 m2 (total floor space for the entire building)
Structure: Steel-framed reinforced concrete structure with flat roof, 10 floors above
ground and three floors below ground
Completion date: September 1966.
Tenants: 49
Leasable area: 21,146 m2
Leased area : 20,428 m2
Occupancy rate: 96.6%
Notes:
1. As of November 18, 2005, JRE held 50% joint equity in this asset; the acquisition detailed
above will increase JRE’s holding to 99.0%.
2. The total number of tenants, leasable area and leased area are the actual figures for theentire building as of September 30, 2005.

Funds raised by JRE through the September 29, 2005 issue of 10 billion yen in
investment corporation bonds were utilized to repay short-term loans of 10 billion
yen on October 3, 2005.
In addition, in order to finance the repayment of existing short-term loans dueon October 31, 2005, JRE secured a new loan of 2 billion yen on the same date withmaturity of October 31, 2006.

Contact Information:
Haruhiko Araki
Planning Department
Japan Real Estate Asset Management Co., Ltd.
Tel: +81-3-3211-7921

Income Statement for the 8th Period

In millions of yen
7th Period

8th Period (183 days)
Item

46 existing
properties(182 days)

Change% Change

10,747
10,708
39
3,616
1,277
855
937
27
471
46
7,131
1,641
5,489
787
476
310
4,701
5
0
5
585
315
248
ー
ー
21
4,121
4,121
1
4,120
4,120

2,372

22.1%

524

14.5%

1,847

25.9%

1,472
△ 52

26.8%
△ 6.6%

1,524
6

32.4%
130.1%

142

24.3%

1,388
1,388

33.7%
33.7%

1,388

33.7%

FFO (Net Income＋Depreciation)

7,526

5,762

1,764

30.6%

Dividends per Unit

15,951

15,824

*

727
727
0
135
83
34
0
1
15
0
591
218
373

Total

13,11913,076
43
4,140
1,554
1,012
1,035
33
474
30
8,978
2,017
6,961
735
392
342
6,226
11
0
11
727
328
249
9
116
23
5,510
5,510
0
5,509
5,509

Operating Revenue
Rental revenue
Other rental revenues
Operating Expenses
Property management fees
Utility charges
Property and other taxes
Insurance expenses
Maintenance expenses
Other operating expenses
NOI
Depreciation and amortization
Operating Profit
Administrative expenses
Asset management fees
Other administrative expenses
Net Operatng Profit
Non-Operating Revenue
Interest received
Other non-operating revenues
Non-Operating Expenses
Interest expenses
Bond interest expenses
Deferred bond-issuance cost
Additional unit-issuance cost
Other non-operating expenses
Recurring Profit
Gross Income
Taxes
Net Income
Retained Earnings

12,392
12,349
43
4,005
1,471
977
1,035
31
458
30
8,387
1,798
6,588

Newly acquired
properties*

Newly acquired properties are Nibancho Garden, Tenjin Crystal Building, Burex Kojimachi Building and Tokyo Opera City Building.

Balance Sheet for the 8th Period

In millions of yen
8th Period-end

7th Period-end（Sep 30, 05)（Mar 31, 05)

Item

Reason for Change

ChangeCurrent Assets
Cash and entrusted cash
Other current assets
Total current assets

26,93929,361△ 2,422

988

657

331

27,92830,019△ 2,090108,655

90,40918,246

Fixed Assets
Property and equipment
Buildings
Structures
Machinery and equipment
Land

851

576

274

1,750

1,556

193

224,595

206,679

17,915

Accumulated depreciation△ 11,788△ 9,783△ 2,004

Total Property and equipment

324,064

289,439

34,624

Leasehold rights, etc.

2,941

1,912

1,028

Total Intangible Assets

2,941

1,912

1,028

958

956

2
△5

Increased due to acquisition offour buildings including Nibancho
Garden and capital expenditure.

Intangible Assets
Increased due to acquisition of Tokyo Opera
City Building.

Investments and Others
Investments in securities
Long-term prepaid expenses, etc.
Total Investments and Others
Total Fixed Assets

26

31

984

987

△3

327,989

292,339

35,65049−

Deferred Assets
Issuance cost of investment
corporation bonds
Total Deferred Assets
Total Assets

Increased due to issuance of investment

49 corporation bonds.

49

−

49

355,968

322,358

33,609

In millions of yen
8th Period-end

7th Period-end（Sep 30, 05)（Mar 31, 05)

Item

ChangeReason for Change

Liabilities
Current Liabilities
Short-term borrowing

16,00063,000Current portion of
long-term borrowing

24,000−Rent received in advance

2,422

2,460

△ 47,000

Decreased due to repayment of short-termborrowing.

24,000 Transfer from long-term borrowing.
△ 37

Other current liabilities

1,624

1,745

△ 121

Total Current Liabilities

44,047

67,206△ 23,159

55,00045,00010,000Long-term Liabilities
Investment Corporation Bonds
Long-term borrowing

27,00051,000

Deposits from tenants

22,64420,994△ 24,000 Transfer to short-term borrowing.
1,649

294

588

△ 294

104,938

117,582△ 12,644

148,985

184,789△ 35,803

Unitholder capital

201,472

133,448

Retained earnings

5,509

4,120

1,388

Total Unitholder Equity

206,982

137,569

69,413

Total Liabilities and Unitholder Equity

355,968

322,358

33,609Other Long-term liabilities
Total Long-term Liabilities
Total Liabilities

Increased due to issuance of investment
corporation bonds.

Unitholder Equity
68,024 Increased due to issuance of additional units.

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

Area

Name

23 WardsTokyo
Metropolitan
Area

8th Period
Book Value(Sep 30, 05)(Mar 30, 05)(Sep 30, 05)

Acquisition
Price

RentableYear Built

Area （m2）Occupancy
Rate(Sep 30, 05)

Sep 30, 05)

6,200

5,890

5,202

5,000,000

1985

4,791

100.0%MD Kanda Building

8,460

8,140

9,327

9,520,000

1998

6,269

100.0%

Kandabashi Park Building

4,920

4,890

4,725

4,810,000

1993

3,687

100.0%

Mitsubishi Soken Building

30,40030,40026,972

27,267,000

1970

18,006100.0%

Sanno Grand Building

10,90010,30010,612

10,200,000

1966

10,573

96.6%

Yurakucho Denki Building

7,230

7,030

7,580

7,200,000

1975

4,694

100.0%

Kodenmacho Shin-Nihonbashi Building

3,320

3,240

2,986

3,173,000

1991

3,897

100.0%

Burex Kyobashi Building

5,940

5,450

5,251

5,250,000

2002

4,279

100.0%

Ginza Sanwa Building

16,90016,90017,05916,830,000

1982

4,329

100.0%Ryoshin Ginza East Mirror Building

4,540

4,410

5,550

5,353,500

1998

2,875

100.0%

Aoyama Crystal Building

7,920

7,720

7,674

7,680,000

1982

4,916

100.0%

Shiba 2Chome Daimon Building

5,900

5,410

5,002

4,859,000

1984

9,643

99.1%

Cosmo Kanasugibashi Building

3,110

3,020

2,671

2,808,000

1992

4,062

100.0%

Shinwa Building

7,830

7,800

7,902

7,830,000

1989

6,197

100.0%

Takanawadai Building

2,590

2,530

2,616

2,738,000

1991

4,067

100.0%

Higashi Gotanda 1Chome Building

6,130

5,710

5,501

5,500,000

2004

5,205

100.0%JAL Travel Building

1,480

1,460

1,275

1,362,000

1991

3,383

100.0%

Omori-Eki Higashiguchi Building

5,390

5,200

4,731

5,123,000

1989

7,708

100.0%

Nippon Brunswick Building

7,570

7,180

6,688

6,670,000

1974

7,347

99.3%

Yoyogi 1Chome Building

9,300

8,850

8,660

8,700,000

2003

7,772

100.0%

5,660

5,370

4,986

4,885,000

1987

3,109

100.0%

Jingumae Media Square Building

13,48013,11012,21912,200,000

1998

5,558

100.0%

Shibuya Cross Tower

38,10035,50035,89434,600,000

1976

29,82899.5%

Ebisu Neonato

4,450

4,350

4,025

4,100,000

1994

2,462

100.0%

Harmony Tower

9,100

8,670

8,853

8,500,000

1997

10,929100.0%

Otsuka Higashi-Ikebukuro Building

3,410

3,410

3,314

3,541,000

1987

7,114

94.6%

Ikebukuro 2Chome Building

1,450

1,420

1,665

1,728,000

1990

2,186

100.0%

Ikebukuro YS Building

4,580

4,460

4,522

4,500,000

1989

5,797

100.0%

Hachioji Dai-ichi-Seimei Building

3,300

3,300

3,313

3,300,000

1996

6,336

95.3%

2,360

2,360

2,481

2,574,000

1990

4,510

100.0%

Excluding 23 Saitama Urawa Building
Wards
Shin-Yokohama First Building

1,640

1,620

2,963

3,000,000

1992

6,925

92.9%

Kawasaki Isago Building

3,210

3,150

3,071

3,375,000

1990

6,831

95.1%

Jozenji Park Building

1,040

1,000

1,047

1,000,000

1993

2,518

95.3%

Sendai Honcho Honma Building

3,030

2,930

2,724

2,924,000

1991

5,829

98.7%

729

741

1,003

1,010,000

1984

4,383

96.6%

5,420

5,420

4,537

4,580,000

1991

21,343

96.1%

985

992

1,292

1,331,000

1987

3,794

95.5%

Nagoya Hirokoji Building

15,30015,00014,258

14,533,000

1987

21,631

99.1%

Nagoya Misono Building

1,860

1,860

1,759

1,865,000

1991

3,470

100.0%

Kyoto shijo Kawaramachi Building

2,020

2,020

2,944

2,650,000

1982

6,800

100.0%

Sakaisujihonmachi Building

4,230

4,170

4,138

4,164,000

1992

11,57497.9%

14,10013,80013,844

14,314,000

1991

20,450100.0%

Niigata Ishizuecho Nishi-Bandaibashi Building

Kanazawa Park Building
Kanazawa Minamicho Building

Midosuji Daiwa Building

945

949

1,365

1,436,000

1989

3,478

92.3%

NHK Hiroshima Broadcasting Center Building

1,480

1,390

1,334

1,320,000

1994

5,477

98.6%

Tosei Tenjin Building

1,340

1,340

1,460

1,550,000

1992

4,000

98.1%

Hinode Tenjin Building

3,480

3,480

3,476

3,657,000

1987

5,860

96.5%

302,729

293,342

290,492

Kobe Itomachi Building

Subtotal

15,100-14,791

14,700,000

2004

9,316

100.0%

Burex Kojimachi Building

6,880

-

7,120

7,000,000

2005

4,495

100.0%

Tokyo Opera City Building

9,350

-

9,426

9,350,000

1996

9,244

96.0%

Tenjin Crystal Building

4,970

-

5,174

5,000,000

1993

5,640

98.7%

339,029

293,342

327,005

326,560,500

364,610

98.6%

Nibancho Garden

Properties acquired in the
8th Period

7th Period
Appraisal
Value

Genki Medical Plazada Vinci Harajuku

Other Major Cities

8th Period
Appraisal
Value

Total (50 properties)

Name

Properties to be acquired in Kitanomaru Square
the 9th and the 10th Periods Sanno Grand Building (additional share)
Total

Rentable
Area （m2）Occupancy
Rate

Appraisal
Value(beforeacquisition)
80,200--81,555,500

2006

25,637100.0%

10,700--10,700,000

1966

10,361

96.6%

35,998-90,900AcquisitionPrice

92,255,500

Year Built* The figures in the rentable areas of Nibancho Garden and Kitanomaru Square are for offices. Both properties respectively have 1,686㎡ (Occupancy rate: 100%) and 11,694㎡ (Occupancy rate: to be
determined) for the rentable areas for residence.
*The rentable area and occupancy rate of Kitanomaru Square are projections as of the acquisition date. Those of Sanno Grand building (additional share) are the actual figures as of September 30, 2005.