May 15, 2008
JAPAN REAL ESTATE INVESTMENT CORPORATIONANNOUNCEMENT OF THIRTEENTH FISCAL PERIOD RESULTS

1. Summary of Financial Results
In the 13th fiscal period (six months ended March 31, 2008), Japan Real Estate Investment
Corporation (“JRE”) recorded operating revenues of 25,743 million yen, up 46.9% compared tothe previous period. Operating income rose 62.7% to 14,218 million yen. After deducting
expenses for interest payments on loans and other costs, ordinary income jumped 70.7% to12,946 million yen, and net income increased by the same percentage to 12,945 million yen.
JRE’s policy with regard to profit appropriation is to distribute dividends ofapproximately 100% 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 Japanese Real Estate
Investment Trusts (J-REITs). For the period under review, we declared a cash dividend of 29,223
yen per unit.
2. Results of Operations(1) Property Management and Acquisitions/Sales(Strengthening Portfolio Quality)
During the period under review, along with the impact of destabilized global financial
markets triggered by the subprime loan crisis in the United States, and concerns of an
economic slowdown in that country, consumer confidence was low and consumer spending
was sluggish due to increased prices for energy and food articles. Although the household
sector remained in a correction phase, the corporate sector maintained a strong performance,
led by major companies, and capital expenditure was up. Despite signs of deceleration in thesecond half of the fiscal year, the economic climate held its upward momentum.
In the market for leased office space, firm demand for corporate office space mainly incentral Tokyo kept vacancy rates low and supported high rent levels for new tenants (whichindicates market rent levels).
JRE maintained a high occupancy rate of 95.9% (98.1% if the 70.9% occupancy rate at
the MM Park Building, which was completed on December 15, 2007, is excluded) at theperiod-end by (1) acquiring top-level properties and upgrading building facilities throughoptimal refurbishment in order to maintain and improve functions; and (2) developing finely
tuned building management policies from the perspective of tenants, while undertaking

vigorous activities to attract new tenants. Furthermore, JRE increased portfolio revenue by
upwardly revising rent levels, thereby narrowing the gap between rent levels of existing
tenants and market rent levels.
Turning to the property market, in the context of the prudent stance toward financing
adopted by banking facilities in response to the subprime loan crisis, some investors havebecome less willing to invest in small- and medium-sized buildings. On the other hand, when
considering competitive prime properties in central districts in Tokyo and Osaka, investment
remains robust not only from J-REITs but also private funds and domestic and overseas
institutional investors, sustaining a severe climate for conducting acquisitions.
In this market environment, JRE undertook the acquisition of competitive properties tofurther strengthen the quality of its portfolio. Specifically, JRE acquired three properties: theHarumi Center Building (in Chuo Ward, Tokyo), acquired for 26,800 million yen on
December 18, 2007; the MM Park Building (in Yokohama City), acquired for 37,400 million
yen on March 24, 2008; and a portion of the Musashi Kosugi STM Building (in KawasakiCity), acquired for 4,000 million yen on March 25, 2008. Furthermore, JRE acquired
additional share of co-ownership in two properties: the NHK Hiroshima Broadcasting
Center Building (in Hiroshima City), additional portion acquired for 1,450 million yen on
March 3, 2008; and Hachioji First Square (in Hachioji City), additional portion acquired for
2,379 million yen on March 19, 2008. As a result, JRE’s properties as of March 31, 2008
consisted of 53 office buildings with a total acquisition amount of 518,969 million yen. Total
leasable space was 479,877 m2 (approximately 145,162 tsubo), with a total of 931 tenants.
In relation to the acquisition of the Harumi Center Building, JRE recorded revenues of
7,935 million yen as dividends on its preferred capital contribution from Harumi Front
Special Purpose Company (“Harumi Front TMK”).
(2) Dividends on Preferred Capital Contribution
JRE had concluded a preferred capital contribution contract with Harumi Front TMK, fromwhom it acquired preferred capital contribution certificates on March 24, 2005. At the sametime as the contract conclusion, JRE obtained the preferential purchase right to acquire theHarumi Center Building, which was constructed by Harumi Front TMK.
JRE exercised this preferential purchase right with the acquisition of the Harumi Center
Building on December 18, 2007. As a result of this acquisition, at Harumi Front TMK’sgeneral meeting of members held on March 31, 2008, a resolution was passed for thepayment of dividends on JRE’s preferred capital contribution. In response to this resolution,
JRE recorded dividends of 7,935 million yen as operating revenues for this fiscal period.

(3) Finance Activities
For the purposes of raising funds to purchase additional specified assets and to repay a
portion of existing borrowings, JRE decided to issue 33,000 new investment units through apublic offering. At March 12, 2008, net proceeds from the offering totaled 32,917 million
yen.
On March 13, 2008, JRE used proceeds from the public offering totaling 25,000 million
yen for the prepayment of short-term loans prior to principal repayment dates.
In addition to the above, on March 24, 2008, JRE procured 10,000 million yen in
long-term loans and 23,000 million yen in short-term loans to be used for the purchases ofthe MM Park Building and the Musashi Kosugi STM Building. As a result of these financeactivities, as of March 31, 2008, JRE’s total interest-bearing debt amounted to 177,500
million yen, consisting of long-term loans of 99,500 million yen (including the current
portion of 7,000 million yen), short-term loans of 23,000 million yen, and investment
corporation bonds of 55,000 million yen (including the current portion of 10,000 millionyen).
As of March 31, 2008, JRE’s long-term, fixed-interest debt ratio1 stood at 87%, and the
LTV ratio2 was 33.6%, compared with 32.1% at the previous fiscal term-end. As these results
indicate, JRE has been able to maintain a sound and conservative financial standing.
JRE’s credit ratings as of March 31, 2008 were as follows.
Rating Agency

Credit RatingStandard & Poor’s Rating Services

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

Moody’s Investors Services, Inc.

Rating: A1; Under review for possible upgrade

Ratings and Investment Information, Inc.

Rating: AA; Outlook: Stable* On March 28, 2008, Standard & Poor’s Rating Services raised JRE’s long-term credit rating from A+ to AA-,and the short-term credit rating from A-1 to A-1+.
Notes:
1.

Long-term, fixed-interest debt ratio = Ratio of long-term, fixed-interest debt including the current portion of
long-term loans and investment corporation bonds to interest-bearing debt

2.

LTV ratio = Ratio of interest-bearing debt to total assets

3.

Outlook(1) Operating Environment
In the Japanese economy, revisions to the Building Standards Law have resulted in some
disruption, and despite a moderate recovery in housing starts and capital expenditure, thedynamic corporate earnings of late appear to be fading. Due to the weak household sector
and sluggish consumer spending resulting from rising prices for various commodities, weforesee Japan’s economic recovery remaining at a standstill. Furthermore, against the
backdrop of recessions in the U.S. and Europe’s economies arising from the subprime loan
crisis, along with fluctuating stock exchange markets and the upward trend in oil prices, wecannot disregard the possibility of an economic downturn.
Nevertheless, in the market for leased office space, vacancy rates and rent levels
continue to be favorable, especially in central Tokyo, as demand for offices has stabilized andnew office space is relatively scarce.
On the other hand, when selecting buildings, tenants in this market are making
increasingly stringent demands ranging from location, building quality and features tobuilding management and value-added services. We anticipate that it will be even more
important for suppliers to provide services that correctly and promptly reflect the needs oftenants and to deliver added value that differentiates their buildings from the competition.
In the real estate market, we anticipate severe competitive conditions in connection with theacquisition of prime office buildings in city centers—the type of properties targeted by
JRE—by J-REITS as well as private funds and domestic and overseas institutional investors
to remain unchanged. Moreover, banking facilities have adopted a more prudent stancetoward financing for the real estate sector. In this context, we believe that improving thesoundness of JRE’s financial standing and its ability to procure funds are the key strategies
for acquiring prime properties.
a. Property Management
In accordance with the aforementioned, when comparing properties in central Tokyo, where
demand continues to be tight, with suburban areas and regional cities, JRE expects the meritsof properties to become increasingly evident. Therefore, JRE adheres to the following
management policies in order to maintain and improve earnings.
(i)Strengthen relationship of trust with existing tenants and raise rent levels
As of March 31, 2008, JRE had contracts with 11 property management companies.
Most of these companies were already managing their respective buildings before
JRE acquired them, and so have built relationships of trust with their tenants. JRE
will work to further strengthen these relationships by anticipating tenants’ needs andproviding tailored services in order to increase tenant satisfaction, and subsequently
uncover additional demand for office space and raise rent levels. In addition, we areendeavoring to raise rent levels for those tenants whose rents are significantly below
market value.
(ii)

Fill vacancies promptly
In cooperation with the property management companies mentioned above, JRE
actively seeks the most appropriate tenants for each property, based on location andfeatures, in order to fill current and anticipated vacancies as rapidly as possible. We
are also working to uncover additional demand for office floor space among ourexisting tenants.

(iii)

Stabilize revenues
With the aim of stabilizing revenues, JRE is endeavoring to apply fixed- andlong-term leasing agreements with its large-scale tenants.

(iv)

Reduce management costs
JRE has introduced sound competitive principles for its multiple property
management companies to follow. These companies are also revamping their
management systems and cost structures on an ongoing basis.

b. Property Acquisitions and Sales
JRE has adopted the following policies for acquiring properties.
(i)
To access important information quickly, JRE is enhancing its property information
channels while working to develop new channels.
(ii)
In its acquisition activities, JRE will continue to meticulously monitor and examine
economic, physical, and legal factors, including rights-related issues, while also taking
business conditions into account when selecting properties. With regard to thestructure of buildings, we require buildings to meet or exceed newearthquake-resistance standards and are targeting properties capable of maintaining acompetitive edge in terms of the facilities they offer over the medium to long term.
(iii) In accordance with its acquisition policies, JRE’s general target for regional diversityof properties is for 70% or more of its properties to be located within the Tokyo
metropolitan area, with the remaining 30% or less located in other regional urban
centers.

Under these policies, JRE will continue to acquire highly competitive properties while
also considering suitable timing for the replacement of assets in order to further strengthen
the quality of its portfolio.
Concerning the financing of property acquisitions, JRE flexibly selects a variety offinancial instruments, including the issue of investment corporation bonds, while
maintaining a sound and conservative financial standing and monitoring trends in financial
markets. When procuring a loan, our policy is to minimize funding costs by negotiating withseveral qualified institutional investors before settling on a lender.
(2) Performance Forecasts
For the 14th fiscal period (April 1, 2008 to September 30, 2008), JRE forecasts operating
revenues of 19,570 million yen, operating income of 9,520 million yen, ordinary income of
8,110 million yen and net income of 8,110 million yen. We plan to declare a dividend of
18,310 yen per unit.
JRE’s forecasts for the 15th fiscal period (October 1, 2008 to March 31, 2009) are
operating revenues of 19,730 million yen, operating income of 9,680 million yen, ordinary
income of 8,240 million yen and net income of 8,240 million yen. We plan to declare a
dividend of 18,610 yen per unit.
The above estimates for the 14th and 15th periods are based on assumptions as ofMarch 31, 2008 of the portfolio consisting of 53 properties and the number of investment
units issued and outstanding amounting to 443,000 units.

Income Statement for the 13th Period(In millions of yen; Dividend per unit in yen)
Term
Actual/Forecast
Operating Revenues
Property-related Revenues
Rental Revenues
Non-rental Revenues
Gain on Transfer of Properties (*2)
Dividends Earned

12th Period(Sep 30, 2007)→ Change →(amount)

Actual13th Period(Mar 31, 2008)(%)← Change ←(amount)

Actual(%)

13th Period(Mar 31, 2008)
Initial Forecast (*1)

17,530

8,213

46.9%

25,743313

1.2%

25,43017,132675

3.9%

17,807177

1.0%

17,63017,07917,76153397

45-397 -100.0%

-

-

-

-

7,935

7,935

135

1.7%

7,800

8,791

2,733

31.1%

11,524

-395

-3.3%

11,920

5,059

550

10.9%

5,609

-460

-7.6%

6,070

Property Management Expenses

1,875

50

2.7%

1,925

Property Management Costs

1,730

1,831

145

94

11,560Operating Expenses
Property-related Expenses (*3)

Brokerage Fees, etc.
Utilities Expenses

1,177

23

2.0%

1,201

Property and Other Taxes

1,346

-7

-0.6%

1,338

Casualty Insurance

37

0

1.5%

37

Repairing Expenses

580

410

70.7%

991

Other Expenses

42

72 172.1%

114

NOI (*4)

12,073124

1.0%

12,197

637

5.5%

2,835

232

8.2%

3,068

68

2.3%

3,000

Property-related Profits and Losses (*4)

9,237

-107

-1.2%

9,129

579

6.8%

8,550

Gross Operating Income

9,635

7,430

Depreciation

Administrative Expenses
Asset Management Fees
Other Administrative Expenses
Operating Income

77.1%

17,065715

4.4%

16,350896

1,950 217.6%

2,846

16

0.6%

2,830

661

1,912 289.2%

2,574

44

1.7%

2,530

5,479

14,218708

5.2%

13,510

-87

-6.8%

1,300

756

6.2%

12,190755

6.2%

12,190

-507

-1.7%

29,730

234
8,739

272
62.7%

Non-operating Revenues

32

33

Interest Income

29

33

Other Non-operating Revenues

2

0

1,185

1,305

Non-operating Expenses
Interest Expense

695

77

11.2%

773

Interest Expense on Investment Corporation Bonds

413

24

6.0%

438

Amortization of Investment Corporation Bond Issuance Costs

16

Other Non-operating Expenses

60

Ordinary Income

7,586

Income before Income Taxes

7,586

Income Taxes

20
72
5,360

70.7%

12,946
12,946

1

0

Net Income

7,585

Retained Earnings at Period-end

7,585

FFO (*5)

10,022-1,944-19.4%

8,078

Dividend per Unit

18,50010,72358.0%

29,223

*1
*2
*3
*4
*5

5,360

70.7%

12,945
12,945The initial forecast means the 13th Period performance forecast announced on November 14, 2007.
Gain on sale of properties＋Gain on exchange of properties
Excluding Depreciation
Excluding Gain on transfer of properties and Dividends earned
Net income＋Depreciation - Gain on transfer of properties - Dividends earned

Balance Sheet for the 13th Period(In millions of yen)Item

12th Period-end 13th Period-end(Sep 30, 2007) (Mar 31, 2008)

ChangeReason for change

AssetsⅠ Current Assets
Cash and Entrusted Cash

16,41913,124-3,295

326

9,621

9,294

16,746

22,746

5,999

Buildings (including those held in trust)

149,020

182,535

33,515Structures (including those held in trust)

1,695

1,979

284

Machinery and Equipment (including those held in trust)

2,291

2,862

571

Land (including that held in trust)

296,188336,310

40,121

Accumulated Depreciation-20,763-23,832-3,068

Total Property and Equipment

428,431499,856

71,424

3,032

3,519

487

3,032

3,519

487

1,272

1,272

-

Long-term Prepaid Expenses, etc.

25

28

2

Total Investments and Other Assets

1,298

1,301

2

432,761

504,677

71,915

134

114

-20

134

114

-20

449,643

527,537

77,894

Other Current Assets
Total Current Assets

Increased due to dividends receivables from
Harumi Front SPC, etc.

Ⅱ Fixed Assets
Property and Equipment

Increased due to acquisition ofproperties and capital expenditure, etc.

Intangible Assets
Leasehold Rights, etc. (including those held in trust)
Total Intangible Assets
Investments and Other Assets
Investment Securities

Total Fixed Assets
Ⅲ Deferred Assets
Deferred Investment Corporation Bond Issuance Costs
Total Deferred Assets
Total Assets

Increased due to additional share acquisition of
NHK Hiroshima Broadcasting Center Building

(In millions of yen)Item

12th Period-end 13th Period-end(Sep 30, 2007) (Mar 31, 2008)

ChangeReason for change

Liabilities
Ⅰ Current Liabilities
Short-term Loans-

23,00023,000 Increased due to new borrowings

Current Portion of Long-term Loans

-

7,000

7,000

Current Portion of Investment Corporation Bonds

10,00010,000-Rent Received in Advance

2,195

2,239

44

Other Current Liabilities

3,107

5,767

2,659

15,30248,00732,704

Investment Corporation Bonds

45,00045,000-Long-term Loans

89,50092,5003,000 Increased due to new borrowings and refinancing

Deposits Received from Tenants

27,571

31,483

3,911 Increased due to acquisition of properties, etc.

162,071

168,983

6,911

177,374

216,990

39,616Unitholders' Capital

264,683

297,601

32,917 Increased due to issuance of investment units

Retained Earnings

7,585

12,945

5,360

Total Net Assets

272,269

310,547

38,278

Total Liabilities and Net Assets

449,643

527,537

77,894

Total Current Liabilities

Increased due to decrease of remaining periods ofloans

Ⅱ Long-term Liabilities

Total Long-term Liabilities

Total Liabilities
Net Assets

Increased due to dividends from Harumi Front
SPC, etc.

Property Data
(In millions of yen)
13th Period

12th Period

Appraisal
Value

Appraisal
Value

Amount ofDifference

13th Period

13th Period

Book Value

Appraisal
Value －

Acquisition
Price

Area

Name

(Mar 31, 08)

Book Value

Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chiyoda
Tokyo 23 Wards Chuo
Tokyo 23 Wards Chuo
Tokyo 23 Wards Chuo
Tokyo 23 Wards Chuo
Tokyo 23 Wards Minato
Tokyo 23 Wards Minato
Tokyo 23 Wards Minato
Tokyo 23 Wards Shinjuku
Tokyo 23 Wards Shinjuku
Tokyo 23 Wards Shinagawa
Tokyo 23 Wards Shinagawa
Tokyo 23 Wards Ota
Tokyo 23 Wards Shibuya
Tokyo 23 Wards Shibuya
Tokyo 23 Wards Shibuya
Tokyo 23 Wards Shibuya
Tokyo 23 Wards Shibuya
Tokyo 23 Wards Shibuya
Tokyo 23 Wards Nakano
Tokyo 23 Wards Toshima
Tokyo 23 Wards Toshima
Tokyo 23 Wards Toshima
Other Areas
Saitama
Other Areas
Kawasaki
Other Areas
SapporoOther Areas
SendaiOther Areas
SendaiOther Areas
Kanazawa
Other Areas
NagoyaOther Areas
NagoyaOther Areas
NagoyaOther Areas
NagoyaOther Areas
Kyoto
Other Areas
Osaka
Other Areas
Osaka
Other Areas
Okayama
Other Areas
Fukuoka
Other Areas
Fukuoka
Other Areas
Fukuoka
Properties held as of the endof the 12th and 13th Periods,
during which the shares ofownership remain unchanged

Genki Medical Plaza
Kitanomaru Square
MD Kanda
Kandabashi Park
Nibancho Garden
Mitsubishi UFJ Trust and Banking
Burex Kojimachi
Sanno Grand
Yurakucho Denki
Kodenmacho Shin-Nihonbashi
Burex Kyobashi
Ginza Sanwa
Ryoshin Ginza East Mirror
Aoyama Crystal
Shiba 2Chome Daimon
Cosmo Kanasugibashi
ShinwaTokyo Opera City
Takanawadai
Higashi-Gotanda 1Chome
Omori-Eki Higashiguchi
Nippon Brunswick
Yoyogi 1Chomeda Vinci Harajuku
Jingumae Media Square
Shibuya Cross Tower
Ebisu Neonato
Harmony Tower
Otsuka Higashi-Ikebukuro
Ikebukuro 2Chome
Ikebukuro YS
Saitama Urawa
Kawasaki Isago
8･3 Square Kita
Jozenji Park
Sendai Honcho Honma
Kanazawa Park
Nishiki Park
Hirokoji Sakae
Nagoya Hirokoji
Nagoya Misono
Kyoto Shijo Kawaramachi
Sakaisujihonmachi
Midosuji Daiwa
Lit City
Tosei Tenjin
Tenjin Crystal
Hinode Tenjin

6,300
88,60012,1006,520
17,60050,0007,040
30,700
8,600
4,200
7,070
18,000
5,150
9,230
7,980
3,910
9,890
12,100
2,840
7,050
6,040
9,570
13,4006,420
16,10053,0005,710
13,600
4,000
1,650
5,670
2,720
3,360
7,210
1,130
3,690
6,590
5,390
1,730
16,000
1,940
2,350
4,840
19,100
5,560
1,530
4,910
3,940

6,300
85,60011,4006,310
17,60046,5007,040
28,800
8,240
3,890
7,050
17,800
4,980
9,150
7,510
3,590
9,060
11,900
2,840
7,050
5,720
9,030
13,0006,420
15,60051,1005,620
13,600
3,920
1,630
5,630
2,720
3,360
7,210
1,130
3,690
6,590
5,390
1,730
16,000
1,940
2,350
4,800
18,900
5,550
1,530
4,980
3,870

0
3,000
700
210
0
3,500
0
1,900
360
310
20
200
170
80
470
320
830
200
0
0
320
540
400
0
500
1,900
90
0
80
20
40
0
0
0
0
0
0
0
0
0
0
0
40
200
10
0
-70
70

5,115
80,4599,111
4,601
14,27030,524
6,802
21,725
7,724
2,870
5,061
17,050
5,360
7,542
4,923
2,570
7,766
8,854
2,582
5,268
4,602
6,842
8,275
5,026
11,98838,888
3,826
8,476
3,466
1,629
4,652
2,412
2,920
7,339
1,026
2,864
4,400
5,109
1,753
14,436
1,595
2,875
3,938
13,600
4,446
1,404
4,847
3,528

1,184
8,140
2,988
1,918
3,329
19,475
237
8,974
875
1,329
2,008
949
-210
1,687
3,056
1,339
2,123
3,245
257
1,781
1,437
2,727
5,124
1,393
4,111
14,111
1,883
5,123
533
20
1,017
307
439
-129
103
825
2,189
280
-23
1,563
344
-525
901
5,499
1,113
125
62
411

5,000
81,555
9,520
4,810
14,70044,7007,000
20,900
7,200
3,173
5,250
16,830
5,353
7,680
4,859
2,808
7,830
9,350
2,738
5,500
5,123
6,670
8,700
4,885
12,20034,600
4,100
8,500
3,541
1,728
4,500
2,574
3,375
7,100
1,000
3,174
4,580
5,150
1,680
14,533
1,865
2,650
4,164
14,314
4,650
1,550
5,000
3,657

Tokyo 23 Wards

450,040

433,880

16,160347,864

102,175

361,304

Other Areas

91,99091,740250

78,50013,48981,016

Total (48 properties)

542,030

525,620

16,410426,365

115,664

442,320

26,3006,170
37,400
4,000
3,260

－
－
－
－
－

－
－
－
－
－

26,961
5,562
37,742
4,048
2,695

-661
607
-342
-48
564

26,8005,679
37,4004,000
2,770

476,340
142,820
619,160

－
－
－

－
－
－

374,826
128,550
503,376

101,513
14,269115,783

388,104
130,865
518,969(Mar 31, 08) (Sep 30, 07)

Properties acquired during the 13th PeriodTokyo 23 Wards
Other Areas
Other Areas
Other Areas
Other Areas

Chuo
Hachioji
Yokohama
Kawasaki
Hiroshima

Harumi Center
Hachioji First Square
MM ParkMusashi Kosugi STM
NHK Hiroshima Broadcasting Center

53 properties held as of the end of the 13th PeriodTokyo 23 Wards
Other Areas
Total (53 properties)※Among the properties held as of the 12th Period end, the ones with an additional share acquisition during the 13th Period are
categorized as “Properties acquired during the 13th Period”. Meanwhile, their appraisal values at the end of the 12th Period are omitted.